Slide 1: 4Q17 Financial Results Presentation
4Q17 FINANCIAL RESULTS PRESENTATION W A R S A W , 14th MARCH 2018
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 7 f i n a n cia l r e su lts 2 . K e y c o r p ora te e v e n t s 3 . 2 0 1 8 o u t lo o k GLOBAL ASPIRATIONS 3
Slide 4: Over PLN 7bn revenues in 2017
Over PLN 7bn revenues in 2017 1,743 STORES +10% LFLs 20 +17% COUNTRIES REVENUES +108% +9% E-COMMERCE m2 GLOBAL ASPIRATIONS 4
Slide 5: 20 countries, 3 continents
20 countries, 3 continents 32 @ 327 @ 31.12.2017 No. of stores YoY 19 @ LPP GROUP 1,743 +40 28 @ Reserved 468 +7 5 Cropp 381 +2 House 333 +3 1@ 990 @ 19 @ 88 Mohito 294 +4 Sinsay 233 +35 83 @ 57 @ Tallinder 0 -9 19 @ Outlets 34 -2 35 @ 18 1 3 13 1 3 1 xx Number of stores @ Internet stores GLOBAL ASP
Slide 6: LFL and e-commerce growths
LFL and e-commerce growths LFL DYNAMICS ON-LINE SALES (local currencies) (PLN m) 146.4 +101% 15.2% YoY 12.9% +144% YoY 9.2% +28% 73.0 YoY 6.6% 6.2% +104% 5.1% YoY 4.2% 4.6% 30.0 23.4 11.5 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 4Q13 4Q14 4Q15 4Q16 4Q17 • LFLs were positive in each month and for each
Slide 7: Floorspace growths in all brands
Floorspace growths in all brands REVENUES BY BRANDS 4Q17 FLOORSPACE (PLN m) (by brands) Reserved 957 + 16% YoY ths m2 4Q16 4Q17 YoY Cropp 320 + 19% YoY LPP GROUP 920.7 1,000.6 8.7% House 261 Reserved 509.1 562.3 10.5% + 6% YoY Cropp 120.4 127.2 5.7% Mohito 233 +10% YoY House 105.7 110.6 4.7% Sinsay
Slide 8: Growths in key regions
Growths in key regions REVENUES BY REGIONS 4Q17 FLOORSPACE (PLN m) (by regions) Poland 1,214 + 12% YoY ths m2 4Q16 4Q17 YoY LPP GROUP 920.7 1,000.6 8.7% Europe 511 + 26% YoY Poland 496.6 514.0 3.5% CIS 417 + 17% YoY Europe 209.5 232.8 11.1% CIS 207.0 247.3 19.4% ME 6 +24% YoY ME 7.6 6.6 -13.3% • Rev
Slide 9: High sales/m2 dynamics
High sales/ m2 dynamics GROUP REVENUES REVENUES/ M2 (PLN m) 2,500 17.2% 16.4% 18.0% 17.8% 16.0% 13.5% 21.8% 15.9% 25% PLN (monthly) 4Q16 4Q17 YoY 2,000 20% LPP GROUP (retail) 659 731 11.0% 1,500 15% Poland 718 789 9.9% 1,000 10% Europe 649 732 12.9% 500 5% 0 0% CIS 543 613 12.9% 1Q16 2Q16 3Q16 4Q16
Slide 10: Gross profit margin improvement continues
Gross profit margin improvement continues QUARTERLY GROSS PROFIT MARGIN AVERAGE QUARTERLY US$/PLN NEW INVENTORY FX LEVELS IMPORTANT FOR MANAGEMENT POLICY SETTING SS18 PRICES 58.0% 4.1 56.5% 4.0 4.1 54.2% 52.6% 54.8% 3.9 3.9 3.8 49.9% 52.1% 50.8% 3.6 47.1% 3.6 46.1% 49.0% 45.6% 3.4 1Q15 2Q15 3Q15 4Q1
Slide 11: Higher costs/m2
Higher costs/ m2 COSTS OF OWN STORES/ M2 SG&A COSTS/ M2 +8% YoY +16% YoY 300 205 214 211 214 216 266 271 280 202 201 254 254 258 191 237 48 49 53 53 53 53 61 46 52 56 57 59 63 62 61 61 93 98 99 89 98 97 100 94 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 Rental cos
Slide 12: PLN 300m of net income in 4Q17
PLN 300m of net income in 4Q17 PLN m 4Q16 4Q17 YoY • Dynamic group revenue growth: Revenues 1,853.4 2,148.9 15.9% • positive LFLs and floorspace growth, • on-line sales increase. Gross profit margin 50.8% 58.0% 7.2p.p. • Sizeable gross profit margin growth, due to improved collections, more favourab
Slide 13: Triple-digit earnings growth in 2017
Triple-digit earnings growth in 2017 PLN m 2016 2017 YoY • Dynamic group revenue growth due to favourable Revenues 6,019.0 7,029.4 16.8% developments in both business lines: traditional stores (positive changes in Reserved) and in e-commerce. Gross profit margin 48.7% 52.9% 4.2p.p. • Gross profit ma
Slide 14: Freeing up working capital even further
Freeing up working capital even further INVENTORY WORKING CAPITAL (PLN m) 1,759 PLN 2,000 1,621 1,669 1,634 1,604 1,487 150m 200 1,381 1,600 1,600 1,275 PLN 165 1,200 283m 1,200 1,438 1,637 1,480 1,374 1,444 1,473 1,251 800 1,473 800 1,164 1,323 1,164 400 400 881 0 0 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q
Slide 15: Sizeable net debt reduction
Sizeable net debt reduction NET DEBT VS NET DEBT/EBITDA CAPEX (PLN m) (PLN m) 4Q16: 4Q17: 1.3x 1,000 1.0x 1.2x 1.5 PLN 84.4m PLN 119.7m 750 0.8 1.0 13.2 19.2 21.0 500 835 0.3 x 0.0 -0.4x 640 x 0.0 11.9 10.7 13.2 250 x 0.5 647 x 348 -11 11 11.0 99.0 101.1 98.7 0 77.5 144 73.7 76.0 0.0 8.6 51.1 -250 -
Slide 16: 2017 executive summary
2017 executive summary 1 Stores in 20 countries – entry into Belarus, Serbia and United Kingdom. 2 E-stores in 11 countries – triple-digit e-commerce growth continues. 3 High LFLs (success of Reserved collection). 4 Gross profit margin continues to rise YoY. 5 Net cash at the end of 2017. GLOBAL ASP
Slide 17: Agenda
1 . 4 Q 1 7 f i n a n cia l r e su lts 2 . K e y c o r p ora te e v e n t s 3 . 2 0 1 8 o u t lo o k GLOBAL ASPIRATIONS 17
Slide 18: Key corporate events
Key corporate events 2 NEW ACCELERATION NEW RESERVED LPP AMONG FAMILY E-COMMERCE LCs IN THE EAST IN WARSAW COMPANIES Opening of stores of all New Reserved store in Open Arvato e-commerce logistics to Public concept in Zlote LPP joined the Family brands in the East. New centre in Strykow (central Tar
Slide 19: Successful launch of two new logistics centers
Successful launch of two new logistics centers EXISTING FUTURE POLAND RUSSIA Pruszcz Gdanski Moscow stores We are considering renting 66 ths m2 9.5 ths m2 a warehouse owned rented in the UK. Strykow Moscow We are considering e-commerce 30 ths m2 renting (possibility of extending a warehouse to 60 th
Slide 20: Acceleration development in the East in 4Q17
Acceleration development in the East in 4Q17 ROSTOW, RUSSIA KIEV, UKRAINE MINSK, BELARUS • In 4Q17 we opened 60.7 ths m2 i.e. c. 75% of all • Openings took place in big cities and smaller towns. 2017 openings. Geographical expansion of all brands. • The CIS region had the largest share in openings.
Slide 21: Reserved Open to Public in Warsaw
Reserved Open to Public in Warsaw • New Reserved store in Open to Public concept in Zlote Tarasy shopping mall in Warsaw. • Modern LED screens, moving mannequins, automated changing rooms and the entire collection within the sight of the customer. • Area: 2,500 m2. • Two floors: ground floor with wo
Slide 22: A socially responsible Polish family company
A socially responsible Polish family company Created and managed by Polish entrepreneurs SGS ACCORD Member of the Family Business Network Poland First Fitting LPP’s Ambassador Programme LPP TEAM for Kids. GLOBAL ASPIRATIONS 22
Slide 23: Agenda
1 . 4 Q 1 7 f i n a n cia l r e su lts 2 . K e y c o r p ora te e v e n t s 3 . 2 0 1 8 o u t lo o k GLOBAL ASPIRATIONS 23
Slide 24: One million m2 of retail floorspace
One million m2 of retail floorspace Floorspace 2018 former 2018 2017 YoY (ths m2) target target • 10% YoY floorspace growth in 2018. • Reserved stores in 23 countries at the end of 2018. BY BRANDS • 3 new markets in 2018: Reserved 562.3 627.5 628.9 12% • Kazakhstan and Slovenia (own stores), Cropp 1
Slide 25: Triple-digit on-line sales growth
Triple-digit on-line sales growth ON-LINE SALES (PLN m) 720 360.8 173.1 64.8 79.3 26.7 2013 2014 2015 2016 2017 2018 TARGET 2018 target: 100% YoY on-line sales We plan to launch e-commerce in Ukraine growth. in 2H18 GLOBAL ASPIRATIONS 25
Slide 26: Further investments in logistics and HQs
Further investments in logistics and HQs 2 SOURCES OFCAPEX (EXCL. STORES) FURTHER EXPANSION LOGISTICS OFFICES GDANSK PRUSZCZ GDANSKI PLN 720m in 2018-20 CRACOW CENTRAL POLAND GLOBAL ASPIRATIONS 26
Slide 27: 2018 outlook
2018 outlook 2018 TARGETS OPPORTUNITIES RISKS LPP’s stores in new Continuation of double-digit revenue Ban on trade on Sundays countries. growth due to floorspace development (18% of Polish revenues). and e-commerce. Group’s gross profit margin should be Unfavorable FX trends E-commerce in new betwe
Slide 28: Poland is the most important country in CEE
Poland is the most important country in CEE POLAND CENTRAL AND EASTERN EUROPE • Poland will remain the most important market in 2018. POLAND • Mature market - focus on: • increasing LFL (emphasis on RESERVED), 990 • modernizations of stores and openings of Reserved CZECH @ and Sinsay (higher 2018 fl
Slide 29: Further development in SEE
Further development in SEE SOUTH EASTERN EUROPE ROMANIA, BULGARIA, CROATIA, SERBIA, SLOVENIA • Successful entry into Serbia in 2017. Potential to SLOVENIA ROMANIA open more stores. 18 35 3 @ • In 2018, entry into the fifth country in the region - CROATIA Slovenia. 13 SERBIA BULGARIA • E-commerce in
Slide 30: Continuation of development in the East
Continuation of development in the East RUSSIA, UKRAINE • Further development in Russia and Ukraine (+12 ths DEVELOPMENT IN THE EAST m2 in each of these countries). Opening of stores of all RUSSIA brands. 327 @ • Dynamic on-line development: BELARUS • Russia - launch of Cropp on-line in 1Q18; now al
Slide 31: Efficiency improvement in Western Europe
Efficiency improvement in Western Europe GERMANY • 20th Reserved store in Germany (in Frankfurt am Main) WESTERN EUROPE to be opened by year end. • Focus on traditional network efficiency, increasing Reserved brand recognition and sales per m2. GERMANY • Acceleration of e-commerce development. 1 the
Slide 32: New country in the Middle East
New country in the Middle East MIDDLE EAST FRANCHISE-BASED DEVELOPMENT ISRAEL • Growth in the Middle East only through franchise stores (no capex). KUWAIT • We plan to enter Israel in 2018. 1 EGYPT QATAR • First two Reserved stores in 2H18. 3 1 1 UAE xx Number of stores, end-2017 Planned countries G
Slide 33: 23 countries at the end of 2018
23 countries at the end of 2018 End-2017 - 20 countries End-2018 - 23 countries GLOBAL ASPIRATIONS 33
Slide 34: Changes in information policy
Changes in information policy 2018 2019 From 2018, no more monthly trading updates. From 2019, IFRS 16 enters into force and with it a Our European competitors do not share such change in the presentation of leases of retail space. data. 3 areas of changes: Instead, quarterly data with prelimina
Slide 35: Q&A
RESERVED GLOBAL ASPIRATIONS 35
Slide 36: Back-up
Back-up GLOBAL ASPIRATIONS 36
Slide 37: Network development
Network development Floorspace (ths m2) 31.12.2015 31.03.2016 30.06.2016 30.09.2016 31.12.2016 31.03.2017 30.06.2017 30.09.2017 31.12.2017 Reserved 461.3 467.1 473.8 487.2 509.1 510.7 520.8 526.8 562.3 Poland 232.5 230.9 235.1 232.0 248.7 245.9 247.4 247.9 266.8 Europe 120.2 124.0 127.2 140.0 144.1
Slide 38: 2017 network development details
2017 network development details Floorspace (ths m2) 31.12.2016 31.12.2017 Nom. growth YoY No. of STORES 31.12.2016 31.12.2017 Nom. growth. YoY Reserved 509.1 562.3 53.2 10% Reserved 461 468 7 2% Poland 248.7 266.8 18.1 7% Poland 236 232 -4 -2% Europe 144.1 160.8 16.7 12% Europe 116 119 3 3% CIS 108
Slide 39: Infrastructure spending plan for 2018-20
Infrastructure spending plan for 2018-20 PLN m 2018 2019 2020 2018-2020 HQs 96 90 140 326 New offices, Gdansk Łakowa - Building 1 60 20 80 New offices, Gdansk Łakowa - Building 2 70 70 New offices, Gdansk Łakowa - Building 3 70 70 New offices, Gdansk Łakowa - Building 4 70 70 New offices in Cracow 3
Slide 40: IFRS16 – financial statements impact
IFRS16 – financial statements impact BALANCE INCOME CASH FLOW SHEET STATEMENT STATEMENT Assets higher by some Above EBIT: PLN 0.8 bn Operating cash flow: growth PLN 5 bn. depreciation pick-up, but lack due to higher depreciation of PLN 1 bn rentals. charge. Liabilities higher by some PLN 5 b
Slide 41: Changes in 4Q17 floorspace
Changes in 4Q17 floorspace CHANGE IN FLOORSPACE BY BRANDS CHANGE IN FLOORSPACE BY REGIONS (ths m2) (ths m2) 1,000.6 +28.6 0.0 1,000.6 +5.2 +8.6 +0.4 +8.6 +5.1 +35.5 +5.9 +23.5 939.9 939.9 +60.7 ths m2 +60.7 ths m2 3Q17 Reserved Cropp House Mohito Sinsay Outlets 4Q17 • Reserved development in 4Q17 re
Slide 42: 4Q17 revenue growth contributors
4Q17 revenue growth contributors REVENUE GROWTH BY BRANDS PLN m 4Q16 4Q17 YoY +16 +21 +49 +73 -44 2,149 +129 +51 LPP GROUP 1,853.4 2,148.9 15.9% 1,853 PLN m Reserved PL 435.6 489.9 12.5% Reserved EX 392.4 467.4 19.1% Cropp PL 142.1 157.4 10.8% Cropp EX 126.6 162.5 28.4% House PL 163.9 170.4 3.9% Hou
Slide 43: 2017 revenue growth contributors
2017 revenue growth contributors REVENUE GROWTH BY BRANDS PLN m 2016 2017 YoY +92 +149 +188 -72 7,029 +149 +38 LPP GROUP 6,019.0 7,029.4 16.8% +467 PLN m 6,019 Reserved PL 1,407.0 1,560.5 10.9% Reserved EX 1,285.9 1,599.0 24.3% Cropp PL 497.4 540.5 8.7% Cropp EX 417.5 523.4 25.4% House PL 517.3 524.
Slide 44: Revenue and COGS split
Revenue and COGS split 2017 REVENUES BY REGIONS TOP5 COUNTRIES BY REVENUES IN 2017 (PLN m) (PLN m) ME CIS 0% 22% Poland 3,906 Russia 1,262 Poland Europe 56% Czech Rep. 343 22% Ukraine 270 2017 PURCHASES BY REGIONS Germany 262 (PLN m) Far East Turkey 39.2% 4.7% Poland 1% Poland remains our most Other
Slide 45: Costs of stores and HQs
Costs of stores and HQs SG&A COSTS SG&A COSTS (PLN m) (PLN m) 3,100 2,609 234 722 179 125 153 146 163 528 +37% YoY 131 119 581 596 628 2,080 +14% YoY 2,377 521 537 546 573 476 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 2016 2017 Costs of stores HQ Costs of stores HQ • Costs of stores encompass costs of
Slide 46: 4Q17 other operating and net financial lines
4Q17 other operating and net financial lines OTHER OPERATING ACTIVITY NET FINANCIAL ACTIVITY PLN m 4Q16 4Q17 PLN m 4Q16 4Q17 OTHER OPERATING REVENUES 7.5 12.4 FINANCIAL REVENUES -8,0 -17.4 Inventory excess, insurance 6.1 2.9 FX gains -8.7 -17.8 Gain on sale of assets, write-ups -0.1 5.5 Interest 0.4
Slide 47: 2017 other operating and net financial lines
2107 other operating and net financial lines OTHER OPERATING ACTIVITY NET FINANCIAL ACTIVITY PLN m 2016 2017 PLN m 2016 2017 OTHER OPERATING REVENUES 25.4 35.8 FINANCIAL REVENUES 1.3 4.8 Inventory excess, insurance 18.2 13.4 FX gains 0.0 0.0 Gain on sale of assets, write-ups 2.7 13.7 Interest 0.9 4.
Slide 48: Historical quarterly numbers
Historical quarterly numbers PLN m 1Q16 1Q17 2Q16 2Q17 3Q16 3Q17 4Q16 4Q17 YoY Revenues 1,174.8 1,362.3 1,502.4 1,705.4 1,488.4 1,812.8 1,853.4 2,148.9 15.9% Gross profit on sales 541.8 620.6 749.7 964.4 700.6 888.7 941.7 1,246.3 32.4% Gross profit margin 46.1% 45.6% 49.9% 56.5% 47.1% 49.0% 50.8% 58
Slide 49: Cash flows
Cash flows 4Q17 CASH GENERATION 4Q17 CASH FLOWS (PLN m) (PLN m) +74 539 415 +352 +39 515 258 -27 101 -20 256 -120 -37 -39 -91 -65 -399 4Q16 4Q17 Operating CF Investing CF Financing CF Total CF • Operating cash flow freeing up inventory in the quarter but lower level of supply chain financing QoQ.
Slide 50: Balance sheet increasingly strong
Balance sheet increasingly strong PLN m 31.12.2016 31.12.2017 Non-current assets 1,838.7 1,919.7 • YoY growth in fixed assets due to network fixed assets 1,291.3 1,347.6 development and investments in HQs. intangibles (inc. goodwill) 330.6 351.2 • Higher YoY intangibles, due to investments in concep
Slide 51: Reserved brand
REVENUES CUSTOMER Women, men and children. (PLN m) 957 YEAR OF LAUNCH 1998 828 825 763 666 661 614 538 An anchor brand with a broad customer BRAND CONCEPT base and wide range of collections. 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 Lack of dedicated zones allows for a smooth transition between women,
Slide 52: Cropp brand
REVENUES CUSTOMER Teenagers – boys and girls. (PLN m) YEAR OF LAUNCH 2004 302 320 246 269 254 232 167 189 BRAND CONCEPT A casual streetwear brand. The shopping space is designed in the 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 form of squat, garage and industrial halls. Stores encompass special relax
Slide 53: House brand
Teenagers (boys and girls) who like brave REVENUES CUSTOMER (PLN m) fashion choices. YEAR OF LAUNCH 2001 (in LPP’s Group since 4Q08). 245 261 189 189 205 181 144 159 Urban fashion brand with folk and BRAND CONCEPT vintage elements. 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 The interior of the store is
Slide 54: Mohito brand
REVENUES CUSTOMER Young women. (PLN m) YEAR OF LAUNCH 2008 (in LPP’s Group since 4Q08) 233 211 212 200 183 192 184 A brand that combines comfort and 150 BRAND CONCEPT elegance for business and informal meetings. 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 Concept relates to elegance and beauty. STORE CO
Slide 55: Sinsay brand
REVENUES CUSTOMER Teenagers – girls only. (PLN m) YEAR OF LAUNCH 2013 184 165 149 Clothes for every day inspirations and 135 117 120 112 original party outfits. The brand stands 88 BRAND CONCEPT out for original T-shirts with extraordinary prints. Fresh and edgy interiors yet 1Q16 2Q16 3Q16 4Q16 1Q1
Slide 56: 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 57: Headquarters, Cracow branch, logistics centre
GDANSK HEADQUATERS CRACOW BRANCH LOGISTICS CENTRE LPP SA LPP SA LPP SA ul. Łąkowa 39/44 ul. Bagrowa 7 ul. Tczewska 2 80-769 Gdansk, Poland 30-733 Cracow, Poland 83-800 Pruszcz Gdanski, Poland Tel. +48 58 76 96 900 Tel. +48 12 39 25 000 Fax.+48 58 76 96 909 Email: lpp@lppsa.com MEDIA CONTACT IR CONTA