Slide 1: 4Q18 Financial Results Presentation
4Q18 FINANCIAL RESULTS PRESENTATION WARSAW 11th April 2019
Slide 2: Disclaimer
Disclaimer This presentation (the “Presentation”) was prepared by LPP SA (the “Company”) with a due care. Still, it may contain certain inconsistencies or omissions. The Presentation does not contain a complete or thorough financial analysis of the Company and does not present its standing or prospe
Slide 3: Agenda
1 . 4 Q 1 8 f i n a n cia l r e s u lts 2 . K e y c o r p ora te e v e n t s 3 . 2 0 1 9 o u t lo o k GLOBAL ASPIRATIONS 3
Slide 4: Growth on-line and off-line
Growth on-line and off-line 1,765 STORES +7.2% LFL 23 +14.5% COUNTRIES GROUP REVENUES +97% +9.1% E-COMMERCE m2 GLOBAL ASPIRATIONS 4
Slide 5: 1,765 stores in 23 countries
1,765 stores in 23 countries No. of 31.12.2018 YoY 33 @ stores 336@ 19 @ LPP GROUP 1,765 + 22 23 @ 8 Reserved 464 -4 1@ 959 @ 19 @ Cropp 373 -8 82 @ 93 House 332 -1 56@ 6 25 @ Mohito 296 +2 1 24 41@ Sinsay 272 + 39 14 18 Outlets 28 -6 xx Number of stores @ Internet stores 2 1 1 2 1 GLOBAL ASPIRATION
Slide 6: Further LFL and e-commerce growth
Further LFL and e-commerce growth LFL DYNAMICS ON-LINE SALES (local currencies) (PLN m) 252.2 +72% 15.2% 12.9% 14.6% +101% YoY YoY 9.2% +144% 146.4 YoY +28% 5.1% 4.6% 6.2% +104% YoY 3.6% 73.0 2.3% YoY 23.4 30.0 11.5 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 4Q13 4Q14 4Q15 4Q16 4Q17 4Q18 • LFLs we
Slide 7: Floorspace growth in all brands
Floorspace growth in all brands REVENUES BY BRANDS 4Q18 FLOORSPACE (PLN m) (by brands) Reserved 1,012 + 6% YoY ths m2 4Q17 4Q18 YoY Cropp 334 + 4% YoY LPP GROUP 1,000.6 1 091.3 9.1% House 290 + 11% YoY Reserved 562.3 616.7 9.7% -8% YoY Cropp 127.2 134.0 5.3% Mohito 214 House 110.6 116.2 5.1% Sinsay
Slide 8: Floorspace growth in all regions
Floorspace growth in all regions REVENUES BY REGIONS 4Q18 FLOORSPACE (PLN m) (by regions) Poland 1,271 + 5% YoY ths m2 4Q17 4Q18 YoY LPP GROUP 1,000.6 1 091.3 9.1% Europe 616 + 20% YoY Poland 514.0 529.5 3.0% CIS 481 + 15% YoY Europe 232.8 279.4 20.0% CIS 247.3 275.4 11.4% ME 5 - 21% YoY ME 6.6 7.1
Slide 9: Revenues continue to grow
Revenues continue to grow GROUP REVENUES REVENUES/ M2 (PLN m) 2,500 17.7% 16.0% 13.5% 21.8% 15.9% 16.0% 20.2% 12.8% 10.4% 25% PLN (monthly) 4Q17 4Q18 YoY 2,000 20% LPP GROUP retail 731 676 -7.6% 1,500 15% Poland 789 735 -6.8% 1,000 10% Europe 732 652 -11.0% 500 5% CIS 613 583 -4.9% 0 0% 4Q16 1Q17 2Q
Slide 10: Gross profit margin expansion
Gross profit margin expansion QUARTERLY GROSS PROFIT MARGIN AVERAGE QUARTERLY US$/PLN 4.1 FX LEVELS IMPORTANT FOR 4.1 59.7% 59.9% SETTING SS19 PRICES 58.0% 56.9% 3.8 3.8 50.8% 3.8 3.6 3.7 51.0% 3.6 3.6 49.0% 45.6% 45.1% 3.4 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2
Slide 11: Operating costs under control
Operating costs under control COSTS OF OWN STORES/ M2 SG&A COSTS/ M2 -4% YoY - 3% YoY 214 211 214 216 212 212 207 201 207 300 297 295 292 266 271 280 279 53 53 53 61 258 53 62 58 57 59 59 63 62 61 61 60 58 57 55 89 98 97 100 94 90 96 93 93 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 4Q16 1Q17 2Q17
Slide 12: Improvement on all lines
Improvement on all lines PLN m 4Q17 4Q18 YoY • Dynamic group revenue growth: Revenues 2,148.9 2,372.7 10.4% • positive LFL and floorspace increase, • on-line sales development. Gross profit margin 58.0% 59.9% 1.9pp. • Significant improvement in gross margin: favorable purchase prices, but also very
Slide 13: Over PLN 0.5bn net profit
Over PLN 0.5bn net profit PLN m 2017 2018 YoY • Dynamic group revenue growth: Revenues 7,029.4 8,046.8 14.5% • positive LFLs, • floorspace growth, entry new countries, Gross profit margin 53.0% 54.7% 1.7pp. • on-line sales increase. • Gross profit margin improvement in 2018 due to SG&A costs 3,099.9
Slide 14: Trade liabilities equalled with inventory
Trade liabilities equalled with inventory INVENTORY WORKING CAPITAL (PLN m) 1,761 PLN 2,000 1,606 1,489 1,552 PLN 33m 1,419 1,458 1,474 1,381 1,600 150m 1,600 1,275 200 156 1,200 1,639 1,200 1,482 1,587 1,475 1,590 800 1,490 1,403 800 1,557 1,590 1,164 1,251 1,475 1,325 400 400 0 0 4Q16 1Q17 2Q17 3Q
Slide 15: Net cash on the balance sheet
Net cash on the balance sheet NET DEBT AND NET DEBT/ EBITDA CAPEX (PLN m) (PLN m) 700 1.0 4Q17: 4Q18: 0.8x PLN 119.7m PLN 301.9m 400 0.3x 0.5 100 144 348 0.0x -0.7x -0.4x -0.3x -0.4x -0.5x 150.2 0.0 -11 11 -316 85.9 -200 -364 -525 15.5 0.0x -221 13.2 19.2 21.0 57.2 -0.5 10.7 13.2 -500 133.1 151.7 12
Slide 16: 2018 executive summary
2018 executive summary 1 Positive LFL dynamics. 2 Double-digit on-line sales growth. 3 Control of costs of stores. 4 Shortening of the cash cycle. 5 Increase in net cash. GLOBAL ASPIRATIONS 16
Slide 17: Agenda
1 . 4 Q 1 8 f i n a n cia l r e s u lts 2 . K e y c o r p ora te e v e n t s 3 . 2 0 1 9 o u t lo o k GLOBAL ASPIRATIONS 17
Slide 18: Key corporate events
Key corporate events November 2018 December 2018 EXPANSION IN SERBIA RESERVED AND VOGUE UK PROJECT NEW MARKET: Reserved New Year's Eve KAZAKHSTAN Opening of stores of 5 LPP NEW STORES brands in Serbia in such IN ROMANIA collection created in cities as Novi Sad, cooperation with British Pozarevac, Vr
Slide 19: Reserved „Curated by British Vogue”
Reserved „Curated by British Vogue” We make good use of the The Reserved New Year's Eve collection created in potential of our store at cooperation with British Vogue stylists was available in Oxford Street selected Reserved stores around the world and on-line on in London reserved.com from December
Slide 20: Reserved David Bowie
Reserved David Bowie We are continuing positive changes in the men's part of the Reserved brand. SS2019 contains a collection inspired by the character of David Bowie. GLOBAL ASPIRATIONS 20
Slide 21: RFID implementation
RFID implementation RFID implementation in Preparation for the process, Cropp, House, Mohito and planning of activities, Sinsay. budgets, employees’ engagement. Achieving first benefits in Reserved. 2018 2019 2020 2021 + Achieving full integrity in the supply chain and some 3% RFID implementation in
Slide 22: RFID throughout the supply chain
RFID throughout the supply chain HOW STORES BENEFIT? PLN 60m annually - cost of electronic tags that will be circulating between stores and suppliers. 60% faster delivery receipt Additional costs: 70% shorter time of product registration at the counter IT department work time, purchase of new IT too
Slide 23: Second integrated report publication
Second integrated report PUBLICATION of LPP’s second integrated report Please contact us: csr@lppsa.com GLOBAL ASPIRATIONS 23
Slide 24: A socially responsible company
A socially responsible company A safe delivery chain LPP Foundation from Asia activities audits in production facilities conducted by SGS and internal volunteering actions as well as auditors, financial and in-kind donations PLN 20.5m invested in safety and for over PLN 1.5m, 108 entities proper wor
Slide 25: Agenda
1 . 4 Q 1 8 f i n a n cia l r e s u lts 2 . K e y c o r p ora te e v e n t s 3 . 2 0 1 9 o u t lo o k GLOBAL ASPIRATIONS 25
Slide 26: Acceleration of growth in 2019
Acceleration of growth in 2019 2019 Floorspace 2018 former 2019 target YoY (ths m2) target • 11% YoY floorspace growth in 2019. • 2 new markets in 2019: Bosnia and Herzegovina and BY BRANDS Finland (own stores). Reserved 616.7 673.9 675.1 9% • As a result, at the end of 2019 Reserved brand stores Cr
Slide 27: Higher capex on stores
Higher capex on stores In 2018-2020, a Rental agreements We have decided to significant part of are signed on thoroughly renew our rental average for 8 years. existing stores. agreements expires. Why are we upgrading stores? We use modern We believe that the We invest in modern technological future
Slide 28: Investments in LPP’s future
Investments in LPP’s future PLN m 2019 2020 2021 2022 2019-2022 Stores 670 620 500 450 2,240 Stores in Poland and abroad 670 620 500 450 2,240 Offices 110 110 70 0 290 New office Gdańsk Łąkowa - building 1 50 50 New office Gdańsk Łąkowa - building 2 30 40 70 New office Gdańsk Łąkowa - building 3 70
Slide 29: PLN 1bn of e-commerce revenues
PLN 1bn of e-commerce revenues In 2019 2021 target e-commerce maintained: revenues should exceed: 20% PLN 1bn. e-commerce share in revenues. In 2H19 we plan to launch an on-line store for all EU countries and Ukraine and a distribution center in Romania. GLOBAL ASPIRATIONS 29
Slide 30: 2019 outlook
2019 outlook Target • Continuation of double-digit revenue • LPP’s stores in new • Unfavourable FX trends growth due to floorspace countries. on US$, EUR and RUB development and e-commerce. in relation to PLN. • Dynamic e-commerce • Group’s gross profit margin should be growths. • More severe ban on
Slide 31: Stabilization of floorspace in Poland
Stabilization of floorspace in Poland REGION CEE POLAND POLAND • In 2019, Poland will remain the most important market. • A mature market - focus on: 959 CZECH @ • off-line: expansion of existing stores, work on LFLs (in REPUBLIC particular Reserved men's collection and Mohito), 82 @ • further growt
Slide 32: Further development in the Balkans
Further development in the Balkans BALKANS SLOVENIA ROMANIA • Successful entry to Slovenia in 2018 i.e. the fifth 1 24 41 country in the region. @ CROATIA 14 • Entrance to Bosnia and Herzegovina in 2019. 18 B&H • Opening of a regional distribution center in Romania SERBIA BULGARIA in 2H19. BALTIC CO
Slide 33: Eastern expansion continued
Eastern expansion continued CIS RUSSIA, UKRAINE RUSSIA • Further floorspace development in Russia and Ukraine (+20 ths m2 in each of these countries). Openings of BELARUS 336 @ stores of all brands. • Dynamic on-line expansion continued: 8 WIELKA BRYTANIA • Russia – further dynamic growth, • Ukraine
Slide 34: Improving efficiency in Western Europe
Improving efficiency in Western Europe WESTERN EUROPE GERMANY AND UK FINLAND • Network stabilization in Germany (19 stores in major cities, top locations). • Concentration on efficiency of the traditional network in Germany, increasing the recognition of the UK Reserved brand and sales / m2. • UK: f
Slide 35: New openings in the Middle East
New openings in the Middle East MIDDLE EAST DEVELOPMENT THROUGH FRANCHISING ISRAEL 2 • Growth in the Middle East only through KUWAIT 1 franchise stores (no capex). • Successful entry to Israel in 2018. In 2019, we EGYPT QATAR 2 plan further store openings. 1 1 • E-commerce growth through an external
Slide 36: Change in the fiscal year from 2019
Change in the fiscal year from 2019 A/W Spring/Summer Autumn/Winter 2019/2020 SELL-OFFS FULL PRICE SELL-OFFS FULL-PRICE SELL-OFFS 1Q 2Q 3Q 4Q I II III IV V VI VII VIII IX X XI XII I 2020/2021 1Q 2Q 3Q 4Q The aim behind the planned fiscal year change is to align the fiscal The fiscal year in 2019 wil
Slide 37: IFRS16 – impact on financial statements
IFRS16 – impact on financial statements BALANCE INCOME CASH FLOW SHEET STATEMENT STATEMENT Assets higher by some Some half of rental expenses Operating cash flow: growth PLN 3 bn. will be recognised under due to higher depreciation IFRS16. charge. Liabilities higher by some PLN 3 bn. PLN 0
Slide 38: A growing dividend
A growing dividend DIVIDEND VERSUS NET PROFIT (PLN m) Dividend date 18th June 2019 505 Payment date 441 +50% YoY 351 27th June 2019 175 73 110 60 66 2015 2016 2017 2018 2015 2016 2017 2018 Group NI Dividends Dividend shown under the year from which it is paid, not under the year, in which it is paid
Slide 39: Q&A
LPP Q&A GLOBAL ASPIRATIONS
Slide 40: Back-up
B a c k -up GLOBAL ASPIRATIONS 40
Slide 41: Network development
Network development Floorspace (ths m2) 31.12.2016 31.03.2017 30.06.2017 30.09.2017 31.12.2017 31.03.2018 30.06.2018 30.09.2018 31.12.2018 Reserved 509.1 510.7 520.8 526.8 562.3 561.0 582.2 584.9 616.7 Poland 248.7 245.9 247.4 247.9 266.8 264.9 264.7 259.3 273.3 Europe 144.1 147.7 151.3 157.6 160.8
Slide 42: 2019 network development details
2019 network development details Floorspace (ths m2) 31.12.2018 31.12.2019 Nom. growth YoY growth No. of STORES 31.12.2018 31.12.2019 Nom. growth YoY growth Reserved 616.7 675.1 58.4 9% Reserved 464 452 -12 -3% Poland 273.3 272.0 -1.2 0% Poland 216 199 -17 -8% Europe 191.7 226.4 34.6 18% Europe 127
Slide 43: Changes in 4Q18 floorspace
Changes in 4Q18 floorspace CHANGE IN FLOORSPACE BY BRANDS CHANGE IN FLOORSPACE BY REGIONS (ths m2) (ths m2) +8.4 +1.2 1,091.3 1,091.3 +31.8 +7.7 +3.9 +3.1 +17.6 +16.3 -0.3 +22.3 1,035.4 1,035.4 +56 ths m2 +56 ths m2 3Q18 Reserved Cropp House Mohito Sinsay Outlets 4Q18 • Dynamic floorspace growth in
Slide 44: 4Q18 revenue growth contributors
4Q18 revenue growth contributors REVENUE GROWTH BY BRANDS PLN m 4Q17 4Q18 YoY +29 -19 +51 +106 -12 2,373 +54 +14 LPP GROUP 2,148.9 2,372.7 10.4% 2,149 PLN m Reserved PL 489.9 497.4 1.5% Reserved EX 467.4 514.2 10.0% Cropp PL 157.4 155.9 -1.0% Cropp EX 162.5 178.2 9.6% House PL 170.4 182.7 7.2% House
Slide 45: 2018 revenue growth contributors
2018 revenue growth contributors REVENUE GROWTH BY BRANDS PLN m 2017 2018 YoY +115 -47 +179 +351 -55 8,047 +419 +56 LPP GROUP 7,029.4 8,046.8 14.5% 7,029 PLN m Reserved PL 1,560.5 1,740.1 11.5% Reserved EX 1,599.0 1,838.3 15.0% Cropp PL 540.5 529.8 -2.0% Cropp EX 523.4 590.1 12.7% House PL 524.3 575
Slide 46: Revenue and COGS split
Revenue and COGS split 2018 REVENUES BY REGIONS TOP5 REVENUES BY COUNTRIES IN 2018 (PLN m) (PLN m) ME CIS 0.3% 22.0% Poland 4,274 Russia 1,405 Poland 53.1% Europe Czech Rep. 412 24.6% Ukraine 345 2018 PURCHASES BY REGION Germany 274 (PLN m) Turkey Far East 5% 47% Poland 4% Poland remains our most Ot
Slide 47: Costs of stores and HQs
Costs of stores and HQs SG&A COSTS SG&A COSTS (PLN m) (PLN m) 3,532 252 263 262 3,100 234 200 163 179 153 146 977 722 +35% YoY 596 628 620 639 636 660 546 573 581 +8% YoY 2,377 2,555 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 Costs of stores HQ & e-commerce 2017 2018 Costs of stores HQ & e-commerc
Slide 48: 4Q18 other operating and net financial lines
4Q18 other operating and net financial lines OTHER OPERATING ACTIVITY NET FINANCIAL ACTIVITY PLN m 4Q17 4Q18 PLN m 4Q17 4Q18 OTHER OPERATING REVENUES 11.8 14.7 FINANCIAL REVENUES -17.4 3.1 Inventory excess 2.9 6.3 FX gains -17.8 0.0 Gain on sale of assets. write-ups 4.8 1.0 Interest 0.4 2.9 OTHER OP
Slide 49: 2018 other operating and net financial lines
2018 other operating and net financial lines OTHER OPERATING ACTIVITY NET FINANCIAL ACTIVITY PLN m 2017 2018 PLN m 2017 2018 OTHER OPERATING REVENUES 28.6 35.6 FINANCIAL REVENUES 4.8 8.4 Inventory excess 13.4 21.3 FX gains 0.0 0.0 Gain on sale of assets. write-ups 6.5 1.7 Interest 4.5 8.1 OTHER OPER
Slide 50: Historical quarterly results
Historical quarterly results PLN m 1Q17 1Q18 2Q17 2Q18 3Q17 3Q18 4Q17 4Q18 YoY Revenues 1,362.3 1,580.4 1,705.4 2,049.7 1,812.8 2,043.9 2,148.9 2,372.7 10.4% Gross profit on sales 620.6 712.8 970.9 1,224.5 888.6 1,043.4 1,247.0 1,420.6 13.9% Gross profit margin 45.6% 45.1% 56.9% 59.7% 49.0% 51.0% 58
Slide 51: IFRS16 application details
IFRS16 application details ASSETS LIABILITIES & EQUITY (PLN ths) (PLN ths) Right to use 2,926,806 Long-term liabilities 2,466,288 Long-term fit-outs 141,980 Short-term fit-outs 34,963 Long-term key money -45,843 Current liabilities 585,322 Short-term key money -6,296 3,051,610 3,051,610 GLOBAL ASPIR
Slide 52: Cash flows
Cash flows 4Q18 CASH GENERATION 4Q18 CASH FLOWS (PLN m) (PLN m) +421 +91 415 1,045 311 -9 +236 258 851 193 -217 -302 -25 -34 -91 -65 -85 4Q17 4Q18 Operating CF Investing CF Financing CF Total CF • Operating cash flow lower QoQ usage of the supply chain financing. • Investing cash flow higher YoY
Slide 53: Balance sheet increasingly strong
Balance sheet increasingly strong PLN m 31.12.2017 31.12.2018 Non-current assets 2,041.4 2,417.8 • YoY growth in fixed assets due to network fixed assets 1,478.2 1,818.3 development and investments in logistics. intangibles (inc. goodwill) 351.2 376.7 • YoY growth intangibles due to investments in n
Slide 54: Reserved brand revenues
REVENUES CUSTOMER Women, men and children. (PLN m) YEAR OF LAUNCH 1998 957 1,012 921 918 828 763 825 728 614 An anchor brand with a broad customer base BRAND CONCEPT and wide range of collections. 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 Lack of dedicated zones allows for a smooth transition bet
Slide 55: Cropp brand revenues
REVENUES CUSTOMER Teenagers – boys and girls. (PLN m) YEAR OF LAUNCH 2004 320 334 302 287 289 269 254 189 210 BRAND CONCEPT A casual streetwear brand. 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 The shopping space is designed in the form of squat, garage and industrial halls. Stores encompass speci
Slide 56: House brand revenues
Teenagers (boys and girls) who like brave REVENUES CUSTOMER (PLN m) fashion choices. YEAR OF LAUNCH 2001 (in LPP’s Group since 4Q08). 290 245 261 237 205 223 Optimistic fashion brand for everyone who 159 181 170 BRAND CONCEPT follows the latest trends and wants to look good every day. 4Q16 1Q17 2Q17
Slide 57: Mohito brand revenues
REVENUES CUSTOMER Young women. (PLN m) YEAR OF LAUNCH 2008 (in LPP’s Group since 4Q08) 233 211 212 200 212 214 184 193 162 A brand that combines comfort and elegance BRAND CONCEPT for business and informal meetings. 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 Concept relates to elegance and beauty.
Slide 58: Sinsay brand revenues
REVENUES CUSTOMER Teenagers – girls only. (PLN m) YEAR OF LAUNCH 2013 236 202 209 184 165 135 149 142 Clothes for every day inspirations and 112 BRAND CONCEPT original party outfits. The brand stands out for original T-shirts with extraordinary prints. 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 Fr
Slide 59: Glossary
Glossary Poland Retail sales in Poland and other sales of LPP SA. CEE Region including: Czech Republic, Slovakia, Hungary. Baltic Region including: Lithuania, Latvia, Estonia. CIS Region including: Russia, Ukraine, Belarus and from 2018 also Kazakhstan. SEE Region including: Bulgaria, Romania, Croat
Slide 60: Gdańsk HQs and contact details
GDAŃSK HQs LPP SA Łąkowa 39/44 80-769 Gdańsk, Poland Tel. +48 58 76 96 900 Fax.+48 58 76 96 909 Email: lpp@lppsa.com DISTRIBUTION CENTRE LPP SA Tczewska 2 83-800 Pruszcz Gdański, Poland CONTACT FOR INVESTORS Email: LPP.investor.relations@lppsa.com CONTACT FOR MEDIA Email: media@lppsa.com CRACOW BRAN