Slide 1: 1Q18 Financial Results Presentation
1Q18 FINANCIAL RESULTS PRESENTATION W A R S A W , 17 TH MAY 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. 1Q18 financial results 2. Key corp orate events 3. 2018 outl ook GLOBAL ASPIRATIONS 3
Slide 4: Million square metres of floorspace
Million square metres of floorspace 1,728 STORES +9% LFLs 20 +16% COUNTRIES REVENUES +139% +9.5% E-COMMERCE m2 GLOBAL ASPIRATIONS 4
Slide 5: Over 1,700 stores, 20 countries
Over 1,700 stores, 20 countries 30 @ 329@ 31.03.2018 No. of stores YoY 19 @ LPP GROUP 1,728 + 57 28 @ Reserved 458 +3 7 Cropp 377 +1 House 332 + 11 1@ 977 @ 19 @ 86 Mohito 291 +6 Sinsay 236 + 38 78 @ 56 @ Outlets 34 -2 18 @ 35 @ 18 1 3 18 1 3 1 xx Number of stores @ Internet stores GLOBAL ASPIRATION
Slide 6: LFL and e-commerce growths
LFL and e-commerce growths LFL DYNAMICS ON-LINE SALES (local currencies) (PLN m) +139% +100% YoY 130.9 15.2% YoY 12.9% +53% 9.2% YoY 9.2% +45% 6.6% YoY 54.9 5.1% 6.2% +636% 4.2% 4.6% YoY 27.4 18.0 12.4 1.7 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 1Q13 1Q14 1Q15 1Q16 1Q17 1Q18 • LFLs were in the
Slide 7: Floorspace growths in all brands
Floorspace growths in all brands REVENUES BY BRANDS 1Q18 FLOORSPACE (PLN m) (by brands) Reserved 728 + 18% YoY ths m2 1Q17 1Q18 YoY Cropp 210 + 11% YoY LPP GROUP 913.9 1,000.9 9.5% House + 7% YoY Reserved 510.7 561.0 9.9% 170 Cropp 120.1 127.7 6.3% Mohito 162 -12% YoY House 102.9 110.9 7.7% Sinsay 1
Slide 8: Growths in key regions
Growths in key regions REVENUES BY REGIONS 1Q18 FLOORSPACE (PLN m) (by regions) Poland 867 + 16% YoY ths m2 1Q17 1Q18 YoY LPP GROUP 913.9 1,000.9 9.5% Europe 367 + 30% YoY Poland 485.3 511.5 5.4% CIS 342 + 6% YoY Europe 212.8 235.0 10.4% CIS 208.2 247.8 19.0% ME 4 -45% YoY ME 7.6 6.6 -13.3% • Revenu
Slide 9: High sales/m2 dynamics
High sales/ m2 dynamics GROUP REVENUES REVENUES/ M2 (PLN m) 2,500 17.2% 16.4% 18.0% 17.7% 16.0% 13.5% 21.8% 15.9% 16.0% 25% PLN (monthly) 1Q17 1Q18 YoY 2,000 20% LPP GROUP (retail) 492 521 6.0% 1,500 15% Poland 500 562 12.2% 1,000 10% Europe 451 520 15.4% 500 5% 0 0% CIS 514 444 -13.6% 1Q16 2Q16 3Q1
Slide 10: Stable gross profit margin
Stable gross profit margin QUARTERLY GROSS PROFIT MARGIN AVERAGE QUARTERLY US$/PLN NEW INVENTORY FX LEVELS IMPORTANT FOR MANAGEMENT POLICY 65% SETTING SS18 PRICES 60% 4.1 56.5% 4.0 4.1 58.0% 55% 3.9 3.9 3.8 49.9% 50.8% 50% 3.6 49.0% 3.6 45% 47.1% 45.6% 46.1% 45.1% 3.4 3.4 40% 1Q16 2Q16 3Q16 4Q16 1Q1
Slide 11: Stable costs of stores/m2
Stable costs of stores/ m2 COSTS OF OWN STORES/ M2 SG&A COSTS/ M2 -1% YoY +5% YoY 205 214 211 214 216 212 280 300 202 201 258 266 271 279 191 237 254 254 48 49 53 53 53 53 61 62 46 52 56 57 59 63 62 61 61 60 93 98 99 89 98 97 100 94 90 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 1Q16 2Q16 3Q16 4Q16
Slide 12: Stable results
Stable results PLN m 1Q17 1Q18 YoY • Dynamic group revenue growth: Revenues 1,362.3 1,580.4 16.0% • positive LFLs and floorspace growth, • on-line sales increase. Gross profit margin 45.6% 45.1% -0.5p.p. • Stable gross profit margin: favourable FX trends but SG&A costs 719.2 820.5 14.1% unfavorable
Slide 13: Freeing up working capital even further
Freeing up working capital even further INVENTORY WORKING CAPITAL (PLN m) 1,759 PLN 107 m 2,000 1,669 1,634 1,604 1,487 1,381 1,419 1,600 PLN 370 m 1,600 1,621 1,275 175 155 1,200 1,200 1,403 1,438 1,637 1,480 1,374 1,444 1,473 800 1,403 1,251 800 1,251 1,296 1,164 882 400 400 0 0 1Q17 1Q17 1Q18 1Q1
Slide 14: Net cash on the balance sheet
Net cash on the balance sheet NET DEBT VS NET DEBT/EBITDA CAPEX (PLN m) (PLN m) 1Q17: 1Q18: 1,000 1.3x 1.5 1.0x 1.2x PLN 112.2m PLN 148.6m 750 0.8x 1.0 15.5 500 835 0.3x 640 0.0x 13.2 19.2 21.0 250 647 0.0x -0.4x 0.5 -0.3x 11.9 10.7 13.2 -11 11 0 133.1 11.0 101.1 144 -221 0.0 99.0 98.7 -316 77.5 73.
Slide 15: 1Q18 executive summary
1Q18 executive summary 1 Successful restructuring of the Reserved brand - success of the collections. 2 E-stores in 11 countries – triple-digit e-commerce growth continues. 3 SG&A costs under control. 4 Stabilisation of inventories / m2. 5 Net cash. GLOBAL ASPIRATIONS 15
Slide 16: Agenda
1. 1Q18 financial results 2. Key corp orate events 3. 2018 outl ook GLOBAL ASPIRATIONS 16
Slide 17: Key corporate events
Key corporate events CROPP E-STORE ACCELERATION CAMPAIGN WITH FIRST INTEGRATED IN RUSSIA IN BULGARIA CINDY CRAWFORD REPORT Launch of the fifth e-store 5 new stores in Bulgaria, Another global star promotes „LPP MORE" is LPP’s in Russia for the Cropp including first Sinsay store. Reserved collection.
Slide 18: Stars promote Reserved
Stars promote Reserved TOP-MODELS AND FASHION INFLUENCERS PROMOTE RESERVED PRODUCTS. CINDY CRAWFORD CAJMEL MAFFASHION GLOBAL ASPIRATIONS 18
Slide 19: History of our CSR activities
History of our CSR activities second ACCORD establishing of factory agreement 2013 audit division 2015 resignation from 2017 natural furs first integrated resignation from report angora joining the ACCORD setting up offices in stronger supervision alliance Dhaka (Bangladesh) over factories in Asia 2
Slide 20: LPP MORE
LPP MORE LPP integrated report 2017 KOMPLEKSOWY - zintegrowany Raport zintegrowany LPP za rok 2017 PORÓWNYWALNY - Stworzony o międzynarodowe standardy – GRI Standards created based on GRI Standards (Global Reporting Initiative) WIARYGODNY – zweryfikowany zewnętrznie Anna Miazga CSR Coordinator SOCIA
Slide 21: Social responsibility
Social responsibility SOCIALLY RESPONSIBLE 21 A simplified split based on 2017 data.
Slide 22: LPP MORE - Sustainable Development Strategy
LPP MORE - Sustainable Development Strategy 4 PILLARS OF LPP’S SUSTAINABLE DEVELOPMENT STRATEGY FOR 2017–2019 MORE SAFE MORE CARE MORE MINDFUL MORE ETHICAL OUR PRODUCTS OUR EMPLOYEES OUR ENVIRONMENT OUR PRINCIPLES covers our practices includes our practices covers our practices includes our manageme
Slide 23: Agenda
1. 1Q18 financial results 2. Key corp orate events 3. 2018 outl ook GLOBAL ASPIRATIONS 23
Slide 24: Further floorspace growth
Further floorspace growth Floorspace 2018 former 2018 2017 YoY (ths m2) target target • 11% YoY floorspace growth in 2018. • Reserved stores in 23 countries at the end of 2018. BY BRANDS • 3 new markets in 2018: Reserved 562.3 628.9 632.3 12% • Kazakhstan and Slovenia (own stores), Cropp 127.2 132.7
Slide 25: Store upgrades to continue
Store upgrades to continue 28 49 52 52 71 PRICE TAG (PLN) 4,000 m2 STORE SIZE (CURRENT,TARGETED 2,500m2 1,000 m2 1,000 m2 AND MAX) 900 m2 900 m2 450m2 450m2 450m2 450m2 1,225m2 364m2 334m2 339m2 355m2 We plan to continue to gradually enlarge the average size of stores of all our brands so as to acco
Slide 26: Continuation of e-commerce growth
Continuation of e-commerce growth E-commerce in Ukraine in 2H18. 2018 target: 100% YoY revenue growth. PLN 720m e-commerce revenues in 2018. GLOBAL ASPIRATIONS 26
Slide 27: 2018 outlook
2018 outlook 2018 TARGETS OPPORTUNITIES • LPP’s stores in new countries. • Continuation of double-digit • Dynamic e-commerce growths. revenue growth due to floorspace development and e-commerce. • Group’s gross profit margin should be between 54-55% (higher YoY). RISKS • Net cash to continue. • Unfa
Slide 28: A growing dividend
A growing dividend DIVIDEND VERSUS NET PROFIT (PLN m) Dividend date 24 August 2018 480 441 Payment date 351 +12% YoY 14 September 2018 175 58 60 66 73 2014 2015 2016 2017 2014 2015 2016 2017 Group NI Dividends Dividend shown under the year from which it is paid, not under the year, in which it is pa
Slide 29: Change in fiscal year
Change in fiscal year AW Spring/Summer Autumn/Winter FISCAL YEAR 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 CALENDAR YEAR 1Q 2Q 3Q 4Q The aim behind the planned fiscal year change is to align the fiscal First 12-month fiscal year 2019 fisc
Slide 30: Q&A
RESERVED | GLOBAL ASPIRATIONS
Slide 31: Back-up
Back-up GLOBAL ASPIRATIONS 31
Slide 32: Network development
Network development Floorspace (ths m2) 31.03.2016 30.06.2016 30.09.2016 31.12.2016 31.03.2017 30.06.2017 30.09.2017 31.12.2017 31.03.2018 Reserved 467.1 473.8 487.2 509.1 510.7 520.8 526.8 562.3 561.0 Poland 230.9 235.1 232.0 248.7 245.9 247.4 247.9 266.8 264.9 Europe 124.0 127.2 140.0 144.1 147.7
Slide 33: 2018 network development details
2018 network development details Floorspace (ths m2) 31.12.2017 31.12.2018 Nom. growth YoY growth No. of STORES 31.12.2017 31.12.2018 Nom. growth YoY growth Reserved 562.3 632.3 70.1 12% Reserved 468 471 3 1% Poland 266.8 275.8 9.0 3% Poland 232 218 -14 -6% Europe 160.8 200.3 39.5 25% Europe 119 131
Slide 34: Changes in 1Q18 floorspace
Changes in 1Q18 floorspace CHANGE IN FLOORSPACE BY BRANDS CHANGE IN FLOORSPACE BY REGIONS (ths m2) (ths m2) 1,000.9 +0.5 0.0 1,000.9 +0.4 +0.2 -0.4 +1.2 +0.0 1,000.6 +2.2 1,000.6 -1.2 -2.5 +0.3 ths m2 +0.3 ths m2 4Q17 Reserved Cropp House Mohito Sinsay Outlets 1Q18 4Q17 Poland Europe CIS ME 1Q18 • F
Slide 35: 1Q18 revenue growth contributors
1Q18 revenue growth contributors REVENUE GROWTH BY BRANDS PLN m 1Q17 1Q18 YoY +11 -21 +30 +76 -13 1,580 +113 +22 LPP GROUP 1,362.3 1,580.4 16.0% 1,362 PLN m Reserved PL 295.9 367.9 24.3% Reserved EX 318.4 359.6 12.9% Cropp PL 93.8 104.1 10.9% Cropp EX 94.7 106.1 12.1% House PL 101.6 107.1 5.4% House
Slide 36: Impact of closed Sunday stores on revenues
Impact of closed Sunday stores on revenues DAYS OF THE WEEK REVENUE SPLIT DAYS OF THE WEEK SPLIT IN 2018 WEEKS FEBRUARY – SEPTEMBER 2017 WHEN STORES ARE CLOSED ON SUNDAY Monday 0% 18% 13% 20% Tuesday 29% Wednesday 13% 11% 15% Thursday Friday 11% 17% 14% 13% 12% Saturday 14% Sunday In weeks when stor
Slide 37: Revenue and COGS split
Revenue and COGS split 1Q18 REVENUES BY REGIONS TOP5 REVENUES BY COUNTRIES IN 1Q18 (PLN m) (PLN m) ME Poland 867 CIS 0% 22% Russia 279 Poland Czech Rep. 79 Europe 55% 23% Ukraine 59 1Q18 PURCHASES BY REGIONS Germany 54 (PLN m) Turkey Far East 4% 40% Poland 5% Poland remains our most Other 2% importa
Slide 38: Costs of stores and HQs
Costs of stores and HQs SG&A COSTS SG&A COSTS (PLN m) (PLN m) 821 234 200 719 179 125 153 146 163 +37% 200 131 146 119 YoY 521 537 546 573 581 596 628 620 +8% 620 476 573 YoY 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 1Q17 1Q18 Costs of stores HQ Costs of stores HQ • Costs of stores encompass cost
Slide 39: 1Q18 other operating and net financial lines
1Q18 other operating and net financial lines OTHER OPERATING ACTIVITY NET FINANCIAL ACTIVITY PLN m 1Q17 1Q18 PLN m 1Q17 1Q18 OTHER OPERATING REVENUES 7.8 6.2 FINANCIAL REVENUES 1.7 17.1 Inventory excess 3.6 4.6 FX gains 0.4 16.2 Gain on sale of assets, write-ups 4.1 0.2 Interest 1.3 0.9 OTHER OPERAT
Slide 40: Historical quarterly numbers
Historical quarterly numbers PLN m 2Q16 2Q17 3Q16 3Q17 4Q16 4Q17 1Q17 1Q18 YoY Revenues 1,502.4 1,705.4 1,488.4 1,812.8 1,853.4 2,148.9 1,362.3 1,580.4 16.0% Gross profit on sales 749.7 964.4 700.6 888.7 941.7 1,246.3 620.6 712.8 14.9% Gross profit margin 49.9% 56.5% 47.1% 49.0% 50.8% 58.0% 45.6% 45
Slide 41: Cash flows
Cash flows 1Q18 CASH GENERATION 1Q18 CASH FLOWS (PLN m) (PLN m) +112 115 515 +84 441 51 +21 20 -15 -149 -26 -103 -75 -93 -106 -85 -146 1Q17 1Q18 Operating CF Investing CF Financing CF Total CF • Operating cash flow freeing up inventory in the quarter and conversion of receivables into cash (from c
Slide 42: Balance sheet increasingly strong
Balance sheet increasingly strong PLN m 31.03.2017 31.12.2017 31.03.2018 Non-current assets 1,874.6 2,036.7 2,043.8 • YoY growth in fixed assets due to network fixed assets 1,338.0 1,471.9 1,480.1 development and investments in HQs. • Higher YoY intangibles, due to investments in concept intangibles
Slide 43: Reserved brand
REVENUES CUSTOMER Women, men and children. (PLN m) 957 YEAR OF LAUNCH 1998 828 763 825 666 728 661 614 538 An anchor brand with a broad customer BRAND CONCEPT base and wide range of collections. 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 Lack of dedicated zones allows for a smooth transition betwe
Slide 44: Cropp brand
REVENUES CUSTOMER Teenagers – boys and girls. (PLN m) YEAR OF LAUNCH 2004 320 302 246 269 254 232 210 167 189 BRAND CONCEPT A casual streetwear brand. The shopping space is designed in the 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 form of squat, garage and industrial halls. Stores encompass speci
Slide 45: 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). 245 261 189 189 205 181 170 144 159 Urban fashion brand with folk and BRAND CONCEPT vintage elements. 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 The interior of the
Slide 46: Mohito brand
REVENUES CUSTOMER Young women. (PLN m) YEAR OF LAUNCH 2008 (in LPP’s Group since 4Q08) 233 211 212 200 183 192 184 150 162 A brand that combines comfort and elegance BRAND CONCEPT for business and informal meetings. 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 Concept relates to elegance and beauty.
Slide 47: Sinsay brand
REVENUES CUSTOMER Teenagers – girls only. (PLN m) YEAR OF LAUNCH 2013 184 165 135 149 142 Clothes for every day inspirations and 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
Slide 48: 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 49: Headquarters, branch and contacts
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