Slide 1: 2Q20/21 Results Presentation
2Q20/21 RESULTS PRESENTATION GDAŃSK OCTOBER 9, 2020
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. 2Q20/21 financial results 2. Key corporate events 3. 2020/21 and 2021/22 outlook GLOBAL ASPIRATIONS 3
Slide 4: Towards omnichannel
Towards omnichannel OFF-LINE 1,779 stores 38 +14.9% m2 COUNTRIES -45.9% LFLs 28 countries -20.6% 25 countries ON-LINE +123.1% sales GROUP REVENUES GLOBAL ASPIRATIONS 4
Slide 5: Results impacted by COVID-19
Results impacted by COVID-19 Shopping malls closed in majority Opening of shopping Restructuring of countries, in which malls on selected in Germany LPP has traditional markets stores beginning of mid-March beginning of end of June end of August February 2020 2020 May 2020 2020 2020 Growing uncertai
Slide 6: LPP present in 38 countries
LPP present in 38 countries 5 30 18 356 23 1 As at No. of Open as at 866 YoY 19 31.07.2020 stores 31.07.2020 88 106 57 10 LPP GROUP 1 779 +34 95% 33 9 66 30 Poland 866 -50 95% 5 23 Europe 433 +42 99% 26 CIS 472 +42 90% ME 8 0 100% 3 on-line + off-line on-line off-line 1 1 2 1 G L O B A L NAES P A IS
Slide 7: A shifted fiscal year
A shifted fiscal year 2020/21 will include 2Q20/21 is the 2Q20/21 encompasses 12 months and second 3-month-long period from encompass period quarter of the shifted 1st May 2020 till from 1st February fiscal year. 31st July 2020. 2020 until 31st January 2021. YoY dynamics are presented in relation to
Slide 8: Lower traffic, higher conversion
Lower traffic, higher conversion LFL DYNAMICS LFL OF OPEN STORES (local currencies) (local currencies) 8.5% 1.7% 4.9% 0.9% 5.9% 0.7% -13.3% -7.5% -23.9% -36.5% -57.3% -74.7% II III IV V VI VII 1Q19/20 2Q19/20 3Q19/20 4Q19/20 1Q20/21 2Q20/21 (3M) • Negative LFLs in each month of 2Q20/21, especially i
Slide 9: Triple-digit e-commerce dynamics
Triple-digit e-commerce dynamics ON-LINE SALES ON-LINE BY REGIONS (PLN m) (PLN m) PLN 621.2 621.2m PLN 96.3 390.7 384.0 276.3m 227.8 276.3 239.5 29.0 +125% 174.2 91.9 297.0 155.5 1Q19/20 2Q19/20 3Q19/20 4Q19/20 (3M) 1Q20/21 2Q20/21 2Q19/20 2Q20/21 Poland Europe CIS • Triple-digit on-line sales growt
Slide 10: Foreign revenues exceed Polish ones
Foreign revenues exceed Polish ones REVENUES BY REGIONS IN 2Q20/21 2Q20/21 FLOORSPACE (PLN m) (by regions) Poland 962 -15% YoY ths m2 2Q19/20 2Q20/21 YoY LPP GROUP 1,135.8 1,304.9 14.9% Europe 737 +15% YoY Poland 521.0 534.0 2.5% CIS 428 Europe 327.6 403.6 23.2% -25% YoY CIS 278.9 358.8 28.7% ME 2 -
Slide 11: Growth on-line, fall off-line
Growth on-line, fall off-line GROUP REVENUES OMNICHANNEL REVENUES (PLN m) PLN m 2Q19/20 2Q20/21 YoY 3000.0 2,724.2 3 000.0 2,344.8 2,332.0 LPP GROUP 2,344.8 2,129.3 -9.2% 2500.0 390.7 2,129.3 2 500.0 1,820.7 276.3 239.5 Reserved 1,119.7 938.9 -16.1% 2000.0 2 000.0 174.2 621.2 Cropp 340.7 256.6 -24.7
Slide 12: Effective inventory reductions
Effective inventory reductions QUARTERLY GROSS PROFIT MARGIN PLN/USD 58.8% COVID-19 54.9% 4.0 4.0 50.1% 3.9 3.9 49.3% 3.8 3.8 48.2% 47.6% 1Q19/20 2Q19/20 3Q19/20 4Q19/20 (3M) 1Q20/21 2Q20/21 1Q19/20 2Q19/20 3Q19/20 4Q19/20 1Q20/21 2Q20/21 (3M) • Gross profit margin in 2Q20/21 was lower YoY due to le
Slide 13: Rental costs recognition
Rental costs recognition RENTALS UNDER IFRS16 UNDER IAS17 In 2Q20/21 51% of rentals were recognised In 2Q20/21 49% of rentals were recognised under IFRS16. under IAS17. The right-of-use asset was amortised despite Rents in Poland for the period when shopping rental renegotiations. malls were closed
Slide 14: Double-digit operating costs reductions
Double-digit operating costs reductions COSTS OF OWN STORES/ M2 SG&A COSTS/ M2 (IAS17) (IFRS16) -26% YoY -11% YoY 201 204 201 195 148 59 59 61 56 150 48 44 53 55 51 53 286 289 297 285 40 38 257 223 89 90 89 86 60 69 1Q19/20 2Q19/20 3Q19/20 4Q19/20 1Q20/21 2Q20/21 1Q19/20 2Q19/20 3Q19/20 4Q19/20 1Q20
Slide 15: EBIT in the black in 2Q20
EBIT in the black in 2Q20 2Q19/20 2Q20/21 Single-digit revenue drops due to opening of shopping PLN m YoY IFRS16 IFRS16 malls in majority of countries where LPP’s stores are Revenues 2,344.8 2,129.3 -9.2% located coupled with continuation of fast on-line growth. Gross profit margin 49.3% 47.6% -1.7p
Slide 16: 1H20/21 results impacted by COVID-19
1H20/21 results impacted by COVID-19 1H19/20 1H20/21 Double-digit revenue drops due to shopping malls PLN m YoY IFRS16 IFRS16 being closed in 1Q20/21 in majority of countries Revenues 4,165.4 3,307.9 -20.6% where LPP’s stores are located. Triple-digit on-line sales growth. Gross profit margin 51.8%
Slide 17: Trade liabilities finance inventory
Trade liabilities finance inventory INVENTORY WORKING CAPITAL (PLN m) 2,500 1,743 2,000 -PLN -PLN 1,400 1,570 1,572 1,614 324m 605m 2,000 1,600 1,266 146 1,500 1,200 155 1,992 1,642 1,921 1,000 800 2,283 2,247 1,959 1,857 1,959 1,518 1,642 500 400 0 0 1Q19/20 2Q19/20 3Q19/20 4Q19/20 1Q20/21 2Q20/21
Slide 18: Net cash on the balance sheet (IAS17)
Net cash on the balance sheet (IAS17) NET DEBT CAPEX (PLN m, IAS17) (PLN m) 2Q19/20: 2Q20/21: PLN 187m PLN 162m 112.6 33.3 48.8 - 268.5 46.1 80.7 69.8 199.7 195.6 181.3 - 561.0 - 541.5 145.6 - 666.3 106.7 91.8 - 727.3 - 780.8 1Q19/20 2Q19/20 3Q19/20 4Q19/20 1Q20/21 2Q20/21 1Q19/20 2Q19/20 3Q19/20 4Q
Slide 19: 2Q20/21 executive summary
2Q20/21 executive summary Rebound in revenues after reopening 1 of traditional stores. 2 Triple-digit on-line sales growth. 3 Operating costs under control. 4 Trade liabilities exceed inventory. 5 Growing net cash (IAS17). GLOBAL ASPIRATIONS 19
Slide 20: Key corporate events
1. 2Q20/21 financial results 2. Key corporate events 3. 2020/21 and 2021/22 outlook GLOBAL ASPIRATIONS 20
Slide 21: Key corporate events
Key corporate events August 2020 September 2020 COMPLETION OF RESTRUCTURING LPP’s ANNUAL GENERAL IN GERMANY SHAREHOLDER MEETING Completion FINALISATION of reorganization OF NEGOTIATIONS MORE SUSTAINABLE proceedings and Shareholders decided not WITH LANDLORDS restoration of normal to pay dividends fr
Slide 22: Rental negotiations completed successfully
Rental negotiations completed successfully Key achievements: ► lower base rentals per m2 ► higher share of turnover rentals ► a base for LPP’s profitable growth in upcoming years. Cost: closing down of 14 stores in Poland. MAY – AUGUST MAY 2020 SEPTEMBER – OCTOBER withdrawal from lease agreements ne
Slide 23: Successful restructuring in Germany
Successful restructuring in Germany On August 28, 2020, court in Hamburg approved LPP Deutschland GmbH request to close reorganization proceedings, terminate protection against creditors and restore the company's normal operations (without initiating further restructuring procedures). Key achievemen
Slide 24: Fewer chemicals, safer clothes
Fewer chemicals, safer clothes As a Friend of ZDHC, we are committed to urging our suppliers In August 2020, LPP joined to completely eliminate harmful substances from production. the Zero Discharge of Hazardous Chemicals We have also pledged to support Initiative (ZDHC). our suppliers in optimizing
Slide 25: Less plastic, emphasis on circular economy
Less plastic, emphasis on circular economy LPP joined the Polish Plastic Pact established on September 10, 2020. This is the next step towards implementation of sustainable development strategy. LPP is deepening its commitment to rational plastic management and elimination of plastic waste. One of l
Slide 26: Annual General Meeting decisions
Annual General Meeting decisions Buy-back No dividend payout from 2019/20 profits Possibility to buy-back up to 15% of equity for PLN 2.1 billion in 5 years Approved price range is between PLN 3,000 - 8,000 Plan to return to paying per share dividends from 2021/22 GLOBAL ASPIRATIONS 26
Slide 27: 2020/21 and 2021/22 outlook
1. 2Q20/21 financial results 2. Key corporate events 3. 2020/21 and 2021/22 outlook GLOBAL ASPIRATIONS 27
Slide 28: LPP collections are a response to new trends
LPP collections are a response to new trends More basic collections; Casual more customers increasing than formal conscious in their purchases Fewer formal dressing occasions Athleisure: the trend of wearing sports clothes every day; merging these with casual elements; sportswear for everyday activi
Slide 29: Growth acceleration in 2020/21
Growth acceleration in 2020/21 I.2021 Floorspace I.2021 I.2020 former YoY (ths m2) target target • Continuation of floorspace growths in 2020/21: +11% YoY. BY REGIONS • At the end of 2020/21 Reserved traditional stores Poland 530.0 542.9 551.8 4% should be present in 25 countries (return to Belarus
Slide 30: Dynamic on-line sales growth to continue
Dynamic on-line sales growth to continue 2,000+ 1,174.1 712.0 360.8 2020/21 target: 173.1 79.3 64.8 over PLN 2bn e-commerce revenues, 2014 2015 2016 2017 2018 2019/20 2020/21 TARGET doubling of revenues YoY. ON-LINE SALES (PLN m) GLOBAL ASPIRATIONS 30
Slide 31: Omnichannel as the future of retail
Omnichannel as the future of retail ON-LINE OFF-LINE dispatch of on-line orders from possibility of ordering missing 160 Reserved stores in Poland goods in store with home delivery thanks to RFiD greater role of on-line greater role in medium-sized cities in larger cities and smaller towns support f
Slide 32: Investments in further development
Investments in further development PLN m 2020/21 2021/22 2022/23 Stores 500 840 750 Back to space expansion, new Stores domestically and abroad 500 840 750 larger showrooms, Cropp, House and Sinsay expansion Offices 90 50 50 New offices Gdańsk Łąkowa – 30 0 0 Building 1 New offices Gdańsk Łąkowa – 0
Slide 33: Targets for 2020/21
Targets for 2020/21 Challenges Targets for 2020/21 Opportunities A new model of customer Revenue fall not exceeding Successful collections of all behavior after COVID-19. 15% YoY. brands - favorable price-to- Second wave of infections. Gross margin in the range quality ratio. Changes in
Slide 34: Key trends in 2021/22
Key trends in 2021/22 double-digit floorspace dynamic on-line Targets for 2021/22 growth continued sales growth RFiD implementation further investments in maintaining a safe at other brands logistics and supply chain balance sheet COVID-19 Continuation of the End of the pandemic Opportunities Threat
Slide 35: Q&A
Q&A GLOBAL ASPIRATIONS 35
Slide 36: Back-up
B a c k -up GLOBAL ASPIRATIONS 36
Slide 37: Network development
Network development Floorspace (ths m2) 31.01.2019 30.04.2019 31.07.2019 30.10.2019 31.01.2020 30.04.2020 31.07.2020 Reserved 605.0 616.6 634.3 655.0 664.8 657.1 669.7 Poland 268.7 263.5 267.6 272.0 270.3 262.9 262.5 Europe 188.0 204.4 215.1 218.4 225.3 223.7 232.2 CIS 141.2 141.6 143.2 156.1 160.8
Slide 38: Network development details as at I.2021
Network development details as at I.2021 Floorspace (ths m2) 31.01.2020 31.01.2021 Nom. growth. YoY growth No. of STORES 31.01.2020 31.01.2021 Nom. growth YoY growth Reserved 664.8 673.3 8.5 1.3% Reserved 454 443 -11 -2% Poland 270.3 264.8 -5.6 -2.1% Poland 200 180 -20 -10% Europe 225.3 233.2 7.9 3.
Slide 39: Changes in group 2Q20/21 floorspace
Changes in group 2Q20/21 floorspace CHANGE IN FLOORSPACE BY BRANDS CHANGE IN FLOORSPACE BY REGIONS (ths m2) (ths m2) +32.7 -1.2 1,304.9 +27.7 +22.1 +0.0 1,304.9 +8.1 +8.6 +1.3 +12.4 1,242.7 1,242.7 +12.6 +62.1 ths m2 +62.1 ths m2 1Q20/21 Reserved Cropp House Mohito Sinsay Outlets 2Q20/21 1Q20/21 Pol
Slide 40: Store opening details
Store opening details Start of End of Comment lockdown lockdown Poland 14.03.2020 04.05.2020 opening of those stores for which there were no rentals renegotiation gradual opening of increasingly larger amount of stores; openings dependent on the region, important opening dates on June 1, 2020, June
Slide 41: Geographical revenue split in 2Q20/21
Geographical revenue split in 2Q20/21 TOP5 REVENUES BY COUNTRIES IN 2Q20/21 PLN m 2Q19/20 2Q20/21 YoY (PLN m) LPP GROUP 2,344.8 2,129.3 -9.2% Poland 962 Reserved PL 501.7 386.8 -22.9% Russia 284 Reserved EX 618.0 552.1 -10.7% Cropp PL 148.5 108.4 -27.0% Ukraine 140 Cropp EX 192.2 148.2 -22.9% Romani
Slide 42: Geographical revenue split in 1H20/21
Geographical revenue split in 1H20/21 TOP5 REVENUES BY COUNTRIES IN 1H20/21 PLN m 1H19/20 1H20/21 YoY (PLN m) LPP GROUP 4,165.4 3,307.9 -20.6% Poland 1,498 Reserved PL 922.5 619.0 -32.9% Reserved EX 1,101.7 874.1 -20.7% Russia 505 Cropp PL 258.8 161.0 -37.8% Ukraine 206 Cropp EX 328.4 230.2 -29.9% H
Slide 43: Revenue and COGS split
Revenue and COGS split 2Q20/21 REVENUES BY REGIONS 1H20/21 REVENUES BY REGIONS (PLN m) (PLN m) ME ME CIS 0% CIS 0% 20% 22% Poland Poland 45% 45% Europe Europe 35% 33% 2Q20/21 PURCHASES BY REGION 1H20/21 PURCHASES BY REGION (PLN m) (PLN m) Poland Other Poland Turkey 1% Other 1% 2% 4% 2% Turkey 7% Chi
Slide 44: Costs of stores and HQs & e-commerce
Costs of stores and HQs & e-commerce SG&A COSTS SG&A COSTS (PLN m, IFRS16) (PLN m, IFRS16) 913 964 1,021 1,040 956 1,877 1,772 816 324 322 279 550 271 383 +21% YoY 663 279 717 642 685 696 537 573 1327 -16% YoY 1110 1Q19/20 2Q19/20 3Q19/20 4Q19/20 (3M) 1Q20/21 2Q20/21 1H19/20 1H20/21 Costs of stores
Slide 45: Results under IAS17
Results under IAS17 2Q19/20 2Q20/21 1H19/20 1H20/21 PLN m YoY PLN m YoY IAS17 IAS17 IAS17 IAS17 Revenues 2,344.8 2,129.3 -9.2% Revenues 4,165.4 3,307.9 -20.6% Gross profit margin 49.3% 47.6% -1.7pp. Gross profit margin 5.8% 47.8% -4.0pp. SG&A costs 954.3 898.0 -5.9% SG&A costs 1,870.4 1,711.9 -8.5%
Slide 46: IFRS16 1H20/21 impact summary
IFRS16 1H20/21 impact summary EBITDA EBITDA PLN 155.2m additional amortisation PLN 325.3m additional amortisation of right of use asset. of right of use asset. 2Q20/21 1H20/21 EBIT 51% rentals under IFRS16 EBIT 60% rentals under IFRS16 (PLN 86.4m). These are replaced (PLN 254.6m). These are replaced
Slide 47: FX and government grant details
FX and government grant details 2Q20/21 1H20/21 PLN 11.3m gains PLN 109.1m losses on FX differences, on FX differences, including including PLN 36.1m losses on rubble and hryvnia, PLN 54.7m losses on rubble and hryvnia, PLN 23.6m gains on US$, PLN 11.8m gains on US$, PLN 10.3m losses on other curren
Slide 48: Historical quarterly results
Historical quarterly results 1Q19/20 3Q19/20 4Q19/20 2019/20 1Q20/21 2Q19/20 2Q20/21 IFRS16 IFRS16 IFRS16 IFRS16 IFRS16 PLN m IFRS16 IFRS16 (February-April (August-October (November 2019- (February 2019 (February-April (May–July 2019) (May-July 2020) 2019) 2019) January 2020) -January 2020) 2020) Re
Slide 49: Cash flows
Cash flows 2Q20/21 CASH GENERATION 2Q20/21 CASH FLOWS (PLN m) (PLN m) 756 +276 +425 1,764 572 1,639 +66 209 -23 12 -147 -162 -310 -157 -118 -403 -429 1Q19/20 1Q20/21 Operating CF Investing CF Financing CF Total CF • Operating cash flow growing positive levels due to lengthening of payment terms. •
Slide 50: A strong balance sheet despite pandemic
A strong balance sheet despite pandemic PLN m 2Q19/20 4Q19/20 2Q20/21 Non-current assets 5,438,5 5,870,7 5,664,0 • IFRS16: right-of-use asset and lease finance liability. fixed assets 2,039,7 2,312,4 2,294,7 • YoY increase in fixed assets due to network intangibles (incl. goodwill) 396,2 413,3 417,1
Slide 51: Brands' summary
Brands’ summary WE FOCUS ON AVERAGE PRICE LEVEL A brand that combines An anchor brand with a A streetwear brand Clothes for everyday BRAND comfort and elegance for broad customer base inspired by hip-hop and Optimistic fashion brand inspirations and original DESCRIPTION business and informal offerin
Slide 52: 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 53: Gdańsk HQs 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 83-000 Pruszcz Gdański, Poland CONTACT FOR INVESTORS Email: LPP.investor.relations@lppsa.com CONTACT FOR MEDIA Email: media@lppsa.com CRACOW BRAN