Lpp S.a. · GPW:LPP
Lpp — Investor Presentation (May 2019)
112 slides from Lpp's investor presentation, May 2019
Slide 1: LPP Equity Story: Global Aspirations
LPP EQUITY STORY GLOBAL ASPIRATIONS MAY 2019 GLOBAL ASPIRATIONS 1
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: Table of contents
Table of contents 4 OVERVIEW 42 BACK-UP 12 INVESTMENT CASE 43 BRANDS 14 NEW MARKETS DEVELOPMENT 53 LFLs 57 FLOORSPACE 23 DYNAMIC E-COMMERCE GROWTH 60 REGIONS 29 EFFICIENT BUSINESS MODEL 73 GROWTH DRIVERS 35 FREE CASH FLOW GENERATION 77 BUSINESS MODEL DETAILS 38 A RESPONSIBLE COMPANY 95 CORPORATE MIL
Slide 4: Overview
0 1 . O v e r v ie w 0 2 . I n v e stme nt c a se 0 3 . B a c k -up GLOBAL ASPIRATIONS 4
Slide 5: PLN 14.5bn: the largest clothing retailer on WSE
The largest clothing retailer on WSE 1,765 23 PLN 8.0bn STORES COUNTRIES REVENUES PLN 14.5bn MARKET CAPITALISATION 69% MSCI POLAND FREE FLOAT WIG 20 MEMBER Data as of 31.12.2018 GLOBAL ASPIRATIONS 5
Slide 6: A diversified brand portfolio
A diversified brand portfolio … GLOBAL ASPIRATIONS 6
Slide 7: …with varied but modern store concepts
…with varied but modern store concepts GLOBAL ASPIRATIONS 7
Slide 8: 2 growth pillars: stores and e-commerce
2 growth pillars: stores and e-commerce 31.12.2018 No. of stores YoY 23 countries off-line LPP GROUP 1,765 + 22 Reserved 464 - 4 Cropp 373 -8 11 countries on-line House 332 -1 (own e-stores) Mohito 296 +2 Sinsay 272 + 39 2 pillars of growth Outlets 28 -6 GLOBAL ASPIRATIONS 8
Slide 9: 1,765 stores on 3 continents
1,765 stores on 3 continents GDAŃSK LPP’s headquarters Design centres of Reserved, Cropp, Sinsay brands Back-office Distribution centre 33 @ 336@ 19 @ 23 @ 8 1@ 959 @ 19 @ 19 @ 82 @ 56@ 93 6 1 25 @ 1 24 41 @ 14 Reserved London flagship 18 WARSAW SHANGHAI, CHINA Reserved design centre Loc
Slide 10: A lean retail oriented business model
A lean retail oriented business model Design Production Logistics Stores Customers capacity to send up to 1,765 250+ 90% 212m designers 1.5m stores goods sourced products daily to stores pieces of clothing from Asia 23 and accessories sold 750+ 3 distribution centres countries total number of people
Slide 11: Eyeing the international giants
Eyeing the international giants LEADER ON THE DOMESTIC AMBITIONS TO BE AMONG RETAIL MARKET THE INTERNATIONAL LEADERS REVENUES (EUR m) REVENUES (EUR m) 1,886 46,826 1,108 26,145 20,569 14,131 13,776 12,125 189 141 58 59 36 36 30 1,886 Note: Data based on 2018 revenues or equivalent annual if availabl
Slide 12: Investment case
0 1 . O v e r v ie w 0 2 . I n v e stme nt c a se 0 3 . B a c k -up GLOBAL ASPIRATIONS 12
Slide 13: Investment case
Investment case New markets development with 5 mainstream 1 brands 11% YoY floorspace growth targeted for 2019 2 Dynamic e-commerce growth PLN 1bn e-commerce revenues targeted for 2019 3 Efficient business model + 9% EBIT margin, benefiting from operating leverage 4 Free cash flow generation, divide
Slide 14: Portfolio of 5 mainstream brands
Portfolio of 5 mainstream brands WE FOCUS ON MAINSTREAM-PRICED BRANDS Streetwear brand Comfort and elegance Clothes for every day KEY BRAND Anchor brand with broad An optimistic fashion influenced by hip-hop for business and informal inspirations and original FEATURES customer base brand and pop-cul
Slide 15: Reserved remains our most important brand
Reserved remains our most important brand GROUP REVENUES BY BRANDS GROUP REVENUES BY BRANDS (PLN m) 8,047 7,029 PLN m 2014 2015 2016 2017 2018 6,019 5,130 LPP GROUP 4,769 5,130 6,019 7,029 8,047 4,769 Reserved 2,311 2,434 2,693 3,160 3,578 Cropp 771 790 915 1,064 1,120 House 634 673 767 805 920 Mohi
Slide 16: International growth opportunities
International growth opportunities DEVELOPMENT STAGE MATURITY DEVELOPING EARLY STAGE CEE BALTIC SEE CIS WE ME Poland, Czech Bulgaria, Romania, COUNTRIES Lithuania, Latvia, Russia, Ukraine, Egypt, Kuwait, Republic, Hungary, Croatia, Serbia, Germany, UK PRESENT Estonia Belarus, Kazakhstan Qatar, UAE,
Slide 17: Entry into high growth potential markets
Entry into high growth potential markets GROWTH POTENTIAL OF COUNTRIES DEVELOPED GDP6% Positive 2019F growth GDP growth in all (2019F) countries present 5% and targeted. Poland 4% Serbia Slovakia Bulgaria Israel B&H Slovenia 3% Hungary Kazakhstan Romania Czech Rep. Croatia 2% Ukraine Finland UK Bela
Slide 18: New countries fuel revenue growth
New countries fuel revenue growth GROUP REVENUES BY REGIONS GROUP REVENUES BY REGIONS (PLN m) 8,047 7,029 PLN m 2014 2015 2016 2017 2018 6,019 5,130 LPP GROUP 4,769 5,130 6,019 7,029 8,047 4,769 CEE 3,414 3,634 4,039 4,572 5,115 Baltic 200 222 256 295 358 SEE 65 134 230 317 463 71% 67% 65% 64% 72% C
Slide 19: Adding at least one new country each year
Adding at least one new country each year EXPANSION BY COUNTRIES + Belarus + Egypt + Kazakhstan + Serbia + Qatar + Israel + B&H + UK + Kuwait + Slovenia + Finland - S. Arabia + Germany + S. Arabia + ZEA + Croatia 20 23 25 17 18 countries countries 11 13 countries countries countries countries countr
Slide 20: 25 countries off-line in 2019
25 countries off-line in 2019 Eop 2018 - 23 countries Eop 2019 - 25 countries GLOBAL ASPIRATIONS 20
Slide 21: Double-digit floorspace growth
Double-digit floorspace growth FLOORSPACE GROWTH TARGETS FLOORSPACE TARGETS BY REGIONS (ths m2) +11% +11% YoY 2014 -18 CAGR ths m2 2018 YoY 2019 YoY 1,210.0 1,091.3 LPP GROUP 1,091.3 9% 1,210.1 11% 1,000.6 920.7 843.5 722.5 Poland 529.5 3% 532.6 1% Europe 279.4 20% 351.3 26% CIS 275.4 11% 316.7 15%
Slide 22: Store upgrades behind floorspace growth
Store upgrades behind floorspace growth 26 48 48 51 66 PRICE TAG (PLN) 4,000 m2 (CURRENT AVERAGE, TARGET AND MAX) 2,500m2 STORE SIZE 900 m2 1,000 m2 1,000 m2 900 m2 450m2 450m2 450m2 450m2 1,329m2 379m2 350m2 359m2 370m2 We plan to continue to gradually enlarge the average size of stores of all our
Slide 23: Dynamic on-line sales growth
Dynamic on-line sales growth 1,000 712.0 360.8 2019 TARGET 2018 173.1 2017 2019 target: PLN 1bn 79.3 2016 of e-commerce revenues. 2015 64.8 ON-LINE SALES (PLN m) 2014 GLOBAL ASPIRATIONS 23
Slide 24: Acceleration of e-commerce roll-out
Acceleration of e-commerce roll-out CZECH REP., GERMANY RUSSIA (Cropp), SLOVAKIA POLAND HUNGARY, ROMANIA, UK 5 ME countries SLOVAKIA, GERMANY (Reserved via franchise partner) on-line store on-line store on-line store on-line stores on-line store on-line stores 07.2014 10.2015 02.2016 12.2016 09.2017
Slide 25: A more ambitious target for e-commerce
A more ambitious target for e-commerce In 2019 2021 target maintained: e-commerce 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 centre in Romania. We have been successful on every on
Slide 26: E-commerce in 35 countries in 2019
E-commerce in 35 countries in 2019 @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ 2H19 @ @ @ E-commerce @ @ @ in all EU countries. A new distribution @ @ centre in Romania. E-commerce 2017 - 11 countries @ E-commerce 2018 - 16 countries (11 via own e-stores and 5 via franchise partner) Namshi.com – @
Slide 27: Focus on own on-line stores
Focus on own on-line stores EASY TO LOSE ACCESS TO END CUSTOMER INTERMEDIARY EG. THIRD PARTY PLATFORM LPP Retail consumer own on-line stores DIRECT ACCESS TO CUSTOMER KEY BENEFITS Direct contact and knowledge of the Control over inventory retail customer No intermediaries Ability to obtain r
Slide 28: We believe in omnichannel
We believe in omnichannel 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 implementat
Slide 29: 2019 outlook
2019 outlook (calendar year, no IFRS16) Target • Continuation of double-digit revenue • LPP’s stores in new • Unfavourable FX trends growth due to floorspace countries. on US$, EUR and RUB development and e-commerce. in relation to PLN. • Dynamic e-commerce • Group’s gross profit margin should be gr
Slide 30: LFLs should continue to grow
LFLs should continue to grow LFLs (local currencies) AVERAGE MONTHLY REVENUES/ M2 10.1% PLN m 2014 2015 2016 2017 2018 7.2% 6.4% LPP GROUP 589 548 575 628 662 Poland 647 598 595 654 693 Export 503 454 516 593 619 Reserved 547 483 475 514 527 0.6% Cropp 647 591 653 732 729 House 612 579 621 639 689 M
Slide 31: RFID to support sales/m2
RFID to support sales/ m2 HOW STORES BENEFIT? PLN 60m annually - cost of electronic tags that will be circulating between stores and suppliers. 60% faster delivery receipt Additional costs: 70% shorter time of product registration at the counter IT department work time, purchase of new IT tools, inv
Slide 32: Gross profit margin on the rise
Gross profit margin on the rise SOURCES OF GROSS PROFIT MARGIN IMPROVEMENT Sell-off policy – current inventory FX – 90% of purchases are Quality of collections – we have management policy is aimed at made in the Far East and introduced far reaching changes selling goods to a maximum indexed to US$.
Slide 33: High operating leverage business
High operating leverage business AVERAGE MONTHLY SG&A COSTS/ M2 (PLN) SG&A COSTS Variable HQs PLN costs 28% costs 29% 43% 274 280 291 234 251 Fixed Costs of FX costs stores costs 71% 72% 57% 2018 2018 2018 2014 2015 2016 2017 2018 Note: SG&A relations based on group 2018 data. More than 70% of our
Slide 34: ROE levels should continue to rebound
ROE levels should continue to rebound LPP’S ROE CONTRIBUTORS Operating cost A lean Moderate usage discipline business model of debt NET INCOME OPERATING FINANCIAL PROFITABILITY EFFICIENCY LEVERAGE NET INCOME REVENUES ASSETS ROE REVENUES ASSETS EQUITY NI margin Asset Turnover Equity Multiplier ROE 20
Slide 35: We focus on FCFF generation
We focus on FCFF generation NOPAT We focus on positive LFLs on all brands. FCFF GENERATION Positive LFLs trigger the operating leverage to work in our favour. PLN m 2014 2015 2016 2017 2018 Strong growths in the higher margin e-commerce FCFF 154 -64 454 405 204 should additionally support EBIT
Slide 36: Strong FCFF allows us to revamp stores
Strong FCFF allows us to revamp 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 techn
Slide 37: Net cash supports dividends
Net cash supports dividends NET DEBT VS NET DEBT/EBITDA DIVIDENDS VS NET EARNINGS (PLN m) (PLN m) 0.5 0.9 0.3 -0.4 -0.7 480 505 800 1.0 0.8 441 600 0.6 400 351 0.4 200 399 621 0.2 0 144 0.0 -200 -316 -0.2 175 -400 -0.4 110 -753 -0.6 58 60 66 73 -600 -0.8 -800 -1.0 -1000 -1.2 2014 2015 2016 2017 2018
Slide 38: 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 39: A socially responsible Polish family company
A socially responsible Polish family 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 entit
Slide 40: Company managed by founders
Company managed by founders Index of Success awarded by Deloitte Most effective CEO by Harvard Digital Excellence Awards for Store and Rzeczpospolita newswire in 2016 Business Review (2013) Vision (2018) for the last 10-year performance Polish company - International Top Investor Relations by Parkie
Slide 41: LPP – an investment opportunity
LPP – an investment opportunity Company actively pursuing international expansion. Stock benefiting High quality growth from liquidity and company with a recognition from successful track WIG20 and MSCI record. Poland membership. GLOBAL ASPIRATIONS 41
Slide 42: Back-up
0 1 . O v e r v ie w 0 2 . I n v e stme nt c a se 0 3 . B a c k -up GLOBAL ASPIRATIONS 42
Slide 43: Reserved: key brand features
KEY BRAND Anchor brand with broad FEATURES customer base TARGET Women, men, children CUSTOMERS YEAR OF 1998 LAUNCH # STORES 464 # MARKETS 23 STORE SIZE 1,329 m2 International stars like Cindy Crawford, Kate Moss, Georgia ADVERTISING May Jagger and Polish stars GLOBAL ASPIRATIONS like Joanna Kulig. C
Slide 44: Reserved key data
Key data 2014 2015 2016 2017 2018 REVENUES (PLN m) Revenues (PLN m) 2,311.3 2,433.8 2,692.9 3,159.5 3,578.4 3,578 3,160 No. of stores 425 449 461 468 464 2,693 2,311 2,434 Store size (m2) 917 1,027 1,104 1,202 1,329 Floorspace (ths, m2) 389.7 461.3 509.1 562.3 616.7 Sales/ m2 monthly 547 483 475 514
Slide 45: Cropp: key brand features
KEY BRAND Streetwear brand influenced FEATURES by hip-hop and pop-culture TARGET Teenagers CUSTOMERS (boys and girls) YEAR OF 2004 LAUNCH # STORES 373 # MARKETS 15 STORE SIZE 359 m2 Partner of artistic and street ADVERTISING art events GLOBAL ASPIRATIONS 45
Slide 46: Cropp key data
Key data 2014 2015 2016 2017 2018 REVENUES (PLN m) Revenues (PLN m) 770.9 789.9 914.9 1,063.9 1,119.9 1,120 1,064 915 No. of stores 366 372 379 381 373 771 790 Store size (m2) 288 308 318 334 359 Floorspace (ths, m2) 105.4 114.5 120.4 127.2 134.0 Sales/ m2 monthly 647 591 653 732 729 % of floorspace
Slide 47: House: key brand features
KEY BRAND An optimistic fashion brand FEATURES TARGET Teenagers CUSTOMERS (boys and girls) YEAR OF 2001 LAUNCH (at LPP since 4Q08) # STORES 332 # MARKETS 15 STORE SIZE 350 m2 Artistic events partner and ADVERTISING music sponsor GLOBAL ASPIRATIONS 47
Slide 48: House key data
Key data 2014 2015 2016 2017 2018 REVENUES (PLN m) Revenues (PLN m) 633.6 673.2 767.1 805.3 920.0 920 767 805 No. of stores 308 319 330 333 332 634 673 Store size (m2) 291 313 320 332 350 Floorspace (ths, m2) 89.6 99.7 105.7 110.6 116.2 Sales/ m2 monthly 612 579 621 639 689 % of floorspace in PL 64%
Slide 49: Mohito: key brand features
KEY BRAND Comfort and elegance; FEATURES business and casual TARGET Young women CUSTOMERS YEAR OF 2008 LAUNCH (at LPP since 4Q08) # STORES 296 # MARKETS 15 STORE SIZE 370 m2 Super models (Anna ADVERTISING Jagodzińska, Anja Rubik, Zuzanna Bijoch) GLOBAL ASPIRATIONS 49
Slide 50: Mohito key data
Key data 2014 2015 2016 2017 2018 REVENUES (PLN m) Revenues (PLN m) 522.9 586.5 736.8 828.6 781.6 829 782 737 No. of stores 256 280 290 294 296 586 523 Store size (m2) 323 337 342 353 370 Floorspace (ths, m2) 82.8 94.5 99.1 103.8 109.4 Sales/ m2 monthly 583 549 636 696 620 % of floorspace in PL 56%
Slide 51: Sinsay: key brand features
KEY BRAND Every day clothes and original FEATURES party outfits TARGET Teenagers (girls only) CUSTOMERS YEAR OF 2013 LAUNCH # STORES 272 # MARKETS 15 STORE SIZE 379 m2 ADVERTISING Social media GLOBAL ASPIRATIONS 51
Slide 52: Sinsay key data
Key data 2014 2015 2016 2017 2018 REVENUES (PLN m) Revenues (PLN m) 224.7 328.9 460.9 610.2 788.9 789 No. of stores 129 170 198 233 272 610 Store size (m2) 338 351 352 363 379 461 329 Floorspace (ths, m2) 43.7 59.7 69.8 84.6 103.0 225 Sales/ m2 monthly 584 531 607 690 719 % of floorspace in PL 75% 7
Slide 53: LFL growth to continue
LFL growth to continue LFLs DEFINITION ACTIONS TAKEN TO BOOST LFLs Stores that have been the same as a year before (have not changed their floorspace, have not undergone upgrades) and New collections Price have been in operation for the past 12 months (without a break longer than 7 days). Ca
Slide 54: International stars promote our brands
International stars promote our brands Cara Delevingne Georgia May Jagger Kate Moss Cindy Crawford Anja Rubik Anna Jagodzińska Zuzanna Bijoch Joanna Kulig GLOBAL ASPIRATIONS 54
Slide 55: We focus on flagships
We focus on flagships Reserved in London, UK Reserved in Berlin, Germany Reserved in Moscow, Russia 3,000 m2 2,000 m2 2,500 m2 Reserved in Riga, Latvia Reserved in Warsaw, Poland Reserved in B e l g r a d e , Serbia 1,635 m2 2,500 m2 3,500 m2 GLOBAL ASPIRATIONS 55
Slide 56: New Reserved store concept
New Reserved store concept Modern LED lamps Lack of dedicated Wide, open and and LED screens Furniture made of Comfortable, large zones allows for a transparent storefront illuminate the straight profiles, and spacious fitting smooth transition allows for a deep view collections in a better flexible
Slide 57: 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 58: 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 59: 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 60: CEE region
CEE region CENTRAL EASTERN EUROPE COUNTRIES Poland, Czech Republic, PRESENT Slovakia, Hungary GROWTH STAGE Maturity TRADITIONAL Reserved, Cropp, House, Mohito, POLAND STORES Sinsay in all countries 959 @ CZECH REP. Reserved, Cropp, House, Mohito, ON-LINE STORES 82 @ Sinsay in all countries SLOVAKIA
Slide 61: Established position domestically
Established position domestically Key data Poland 2014 2015 2016 2017 2018 Focus set on network optimisation Revenues (PLN m) 3,080 3,228 3,511 3,906 4,274 in Poland. % of group revenues 65% 63% 58% 56% 53% No. of stores 943 986 1,017 990 959 Floorspace (ths m2) 413.6 465.0 496.6 514.0 529.5 Polan
Slide 62: Strong presence in other CEE countries
Strong presence in other CEE countries Key data of other CEE 2014 2015 2016 2017 2018 Strong presence in other CEE Revenues (PLN m) 334 406 527 666 840 countries. % of group revenues 7% 8% 9% 9% 10% No. of stores 132 158 160 159 163 All five mainstream brands are now in Floorspace (ths, m2) 61.9 7
Slide 63: Baltic region
Baltic region BALTIC COUNTRIES COUNTRIES Lithuania, Latvia, Estonia PRESENT GROWTH STAGE Maturity 33 @ ESTONIA TRADITIONAL Reserved, Cropp, House, Mohito, STORES Sinsay 19 @ LATVIA Reserved, Cropp, House, Mohito, ON-LINE STORES Sinsay 23 @ LITHUANIA # STORES 75 FLOORSPACE 43.5 ths m2 XX NUMBER OF ST
Slide 64: Strong presence in Baltic countries
Strong presence in Baltic countries Key data 2014 2015 2016 2017 2018 On-line stores now in all Baltic Revenues (PLN m) 200 222 256 295 358 countries. % of group revenues 4% 4% 4% 4% 4% No. of stores 70 71 73 79 75 Five mainstream brands present in Floorspace (ths, m2) 36.4 38.2 39.5 43.0 43.5 Lit
Slide 65: SEE region
SEE region SOUTH EASTERN EUROPE COUNTRIES Bulgaria, Romania, Croatia, PRESENT Serbia, Slovenia GROWTH STAGE Developing Reserved (all countries), Cropp, SLOVENIA TRADITIONAL SERBIA ROMANIA House, Mohito, Sinsay (all 1 STORES 24 countries except Slovenia) 41 @ CROATIA 14 Reserved, Cropp, House, Mohito
Slide 66: Developing presence in SEE countries
Developing presence in SEE countries Key data 2014 2015 2016 2017 2018 We see development potential Revenues (PLN m) 65 134 230 317 463 in the SEE region . % of group revenues 1% 3% 4% 4% 5% No. of stores 31 47 63 69 98 Late SEE entry (2008) due to: 1) priority given to CIS and 2) limited appropri
Slide 67: CIS region
CIS region CIS REGION COUNTRIES Russia, Ukraine, Belarus, PRESENT Kazakhstan GROWTH STAGE Developing TRADITIONAL Reserved, Cropp, House, Mohito, RUSSIA STORES Sinsay 336@ BELARUS Reserved, Cropp, House, Mohito, ON-LINE STORES 8 Sinsay in Russia 93 UKRAINE KAZAKHSTAN 6 # STORES 443 FLOORSPACE 275.4 t
Slide 68: More opportunities in the CIS region
More opportunities in the CIS region Key data 2014 2015 2016 2017 2018 Revenues (PLN m) 1,076 1,025 1,269 1,542 1,770 We see growth opportunities. % of group revenues 23% 20% 21% 22% 22% CIS is the second most important market No. of stores 336 349 368 420 443 after Poland, responsible for 22% of
Slide 69: Western Europe
Western Europe WESTERN EUROPE COUNTRIES Germany, the UK PRESENT GROWTH STAGE Early stage TRADITIONAL FINLAND Reserved STORES Reserved, Cropp, House, Mohito, UK ON-LINE STORES Sinsay in Germany, Reserved on- line in UK 1@ 19 @ GERMANY # STORES 20 FLOORSPACE 49.0 ths m2 XX NUMBER OF STORES, END 2018 T
Slide 70: Western Europe as a new growth pillar
Western Europe as a new growth pillar Key data 2014 2015 2016 2017 2018 Revenues (PLN m) 15 94 194 279 320 We focus on BEP in Germany . % of group revenues 0% 2% 3% 4% 4% Germany was the first Western European No. of stores 4 12 16 20 20 country entered. In July 2014 we Floorspace (ths, m2) 7.6 27
Slide 71: Middle East
Middle East MIDDLE EAST COUNTRIES Egypt, Kuwait, Qatar, UAE, Israel PRESENT GROWTH STAGE Early stage 2 ISRAEL EGYPT TRADITIONAL 1 KUWAIT Reserved STORES No own stores; Reserved on 1 2 ON-LINE STORES 1 Namshi.com from July 2018 QATAR UAE # STORES 7 FLOORSPACE 7.1 ths m2 TYPE OF STORES Franchise XX NU
Slide 72: ME – foothold on the third continent
ME – foothold on the third continent Key data 2014 2015 2016 2017 2018 We develop ME via franchise Revenues (PLN m) 0 23 31 24 22 stores. % of group revenues 0% 0% 1% 0% 0% Development via franchise stores opened No. of stores 0 4 6 6 7 by franchisee Azadea since 1Q15. Floorspace (ths, m2) 0 5.5 7
Slide 73: Reserved dominated floorspace growth
Reserved dominated floorspace growth FLOORSPACE GROWTH BY BRANDS FLOORSPACE BY BRANDS ths m2 2014 2015 2016 2017 2018 LPP GROUP 722.5 843.5 920.7 1,000.6 1,091.3 Reserved PL 209.2 232.5 248.7 266.8 273.3 ths m2 58 0 1 1,091.3 29 27 27 Reserved EX 180.5 228.8 260.4 295.5 343.4 227 Cropp PL 58.3 63.0
Slide 74: New regions fuel floorspace growth
New regions fuel floorspace growth FLOORSPACE GROWTH BY REGIONS FLOORSPACE BY REGIONS ths m2 2014 2015 2016 2017 2018 LPP GROUP 722.5 843.5 920.7 1,000.6 1,091.3 ths m2 1,091.3 CEE 475.5 544.7 580.6 602.1 635.4 44 7 58 96 41 7 116 Poland 413.6 465.0 496.6 514.0 529.5 722.5 Other CEE 61.9 79.7 84.0 8
Slide 75: Reserved an important revenue growth driver
Reserved an important revenue growth driver REVENUE GROWTH BY BRANDS REVENUES BY BRANDS PLN m 2014 2015 2016 2017 2018 LPP GROUP 4,769.3 5,130.3 6,019.0 7,029.4 8,046.8 Reserved PL 1,425.7 1,421.5 1,407.0 1,560.5 1,740.1 PLN m Reserved EX 885.6 1,012.3 1,285.9 1,599.0 1,838.3 286 259 564 0 552 8,047
Slide 76: New regions fuel revenue growth
New regions fuel revenue growth REVENUE GROWTH BY REGIONS REVENUES BY REGIONS PLN m 2014 2015 2016 2017 2018 LPP GROUP 4,769.3 5,130.4 6,019.0 7,029.4 8,046.8 PLN m 694 305 22 8,047 CEE 3,413.6 3,633.8 4,038.6 4,572.1 5,114.6 158 398 506 Poland 3,079.6 3,227.7 3,511.4 3,906.0 4,274.5 1,195 4,769 Oth
Slide 77: Gross profit margin on the upward trend
Gross profit margin on the upward trend QUARTERLY GROSS PROFIT MARGIN 2018 PURCHASES Gross profit margin (%) BY REGION NEW INVENTORY Turkey MANAGEMENT POLICY Far East 5% 59.9% 47% 59.7% Poland 54.8% 58.0% 4% 56.9% 52.1% Other 54.2% 49.9% 51.0% 50.8% 1% 52.6% 49.0% 47.1% 46.1% 45.6% 45.1% China 43% 1
Slide 78: Inventory write-offs model (from 4Q16)
Inventory write-offs model (from 4Q16) c. PLN 80m of goods sold in outlets Annually, we (write-off equal to 10% The policy of write-offs for unsold of their value). goods was introduced in purchase goods December 2016. worth PLN 4bn. From 2017 sell-offs of inventories are equally split between a
Slide 79: Costs of own stores depend on rentals
Costs of own stores depend on rentals COSTS OF OWN STORES/ m2 2018 COSTS OF OWN -1% (PLN monthly) STORES SPLIT 2014-18 CAGR Other costs 218 189 200 214 207 28% Rental costs 45% 57 55 58 49 49 56 56 62 57 49 106 91 94 97 93 HR costs 27% 2014 2015 2016 2017 2018 Rental costs HR costs Other costs Ren
Slide 80: We control SG&A/m2
We control SG&A/ m2 SG&A/ m2 SG&A COSTS (PLN monthly) (PLN m) +2% 2014-18 CAGR 2,148 2,192 2,609 3,100 3,532 280 291 274 251 234 2,555 2,377 2,080 1,731 1,781 723 977 417 411 528 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 HQ Costs of all stores Costs of stores YoY growth in 2016-18 due to
Slide 81: Store capex reduced by fit-outs
Store capex reduced by fit-outs CAPEX SPLIT 2018 CAPEX SPLIT (PLN m) (PLN m) 551 491 271 442 799 Other 16% 128 65 67 61 Logistics Centre 37 489 386 392 376 23% 230 Stores 61% 2014 2015 2016 2017 2018 Store capex Logistics capex Other We are now in a process of upgrading our traditional stores. Alo
Slide 82: Further logistics development
Further logistics development AT PRESENT FUTURE POLAND RUSSIA Brześć Kujawski Pruszcz Gdański Moscow, stores 100 ths m2 66 ths m2 14 ths m2 own own rented Slovakia e-commerce 25 ths m2 rented Stryków, e-commerce Moscow, e-commerce 46 ths m2 8 ths m2 Rumunia e-commerce rented rented 22 ths m2 rented
Slide 83: 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 84: Freeing up working capital
Freeing up working capital CASH CYCLE WORKING CAPITAL (days) (PLN m) PLN PLN 33m 165 176 150m 153 156 147 146 200 144 122 108 102 95 1,475 1,557 1,590 1,325 13 10 9 9 8 2014 2015 2016 2017 2018 4Q17 4Q17 4Q18 4Q18 Receivables (days) Inventory (days) Liabilities (days) Inventory Trade receivables Tra
Slide 85: Optimisation of NWC
Optimisation of NWC SUPPLY CHAIN FINANCE - SCF (SUPPLIER FINANCING PROGRAMME) BENEFITS FOR LPP BENEFITS FOR SUPPLIERS Extended payment periods Possibility to discount invoices on invoices for goods BANKING for LPP before the payment purchased. deadline (low discount rate based PLATFORM on LPP’s
Slide 86: Stages of the designing and supply process
Stages of the designing and supply process STAGE 1: Preparation of project STAGE 4: Analysis of previous STAGE 2: STAGE 3: 1 models and sending seasons and Inspirational meeting Preparation of projects Projects sent to documentation to suppliers determination of demand suppliers STAGE 8: STAGE 5: ST
Slide 87: Strengthening the designing teams
Strengthening the designing teams DESIGN CENTRES IN TOP3 CITIES IN POLAND. GDANSK • LPP’s largest design centre. • The centre is responsible for Reserved, Cropp and Sinsay brands. CRACOW • Design centre for House and Mohito brands. • Cooperation with designing schools. WARSAW • A new design centre r
Slide 88: Group FX exposure
Group FX exposure (excluding IFRS16) REVENUES COSTS 86% US$ STORES IN POLAND PLN 10% EUR MANUFACTURERS & WHOLESALE 53% PLN REVENUES 4% PLN 47% FX REVENUES Stores in Czech Rep., Hungary, Bulgaria, Romania, LC/PLN Croatia, Serbia, UK LPP Stores in Slovakia, Lithuania, (Parent company) EUR/PLN Latvia,
Slide 89: First hedging transactions
First hedging transactions 1 Stage 2 Stage 3 Stage Lowering the level of indebtedness Increase in self-financing of Hedging to minimise the level of FX of subsidiaries towards the parent subsidiaries along with their gains/losses in the net financials company (conversion of debt into improved financ
Slide 90: 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 91: Record high earnings in 2018
Record high earnings in 2018 PLN m 2014 2015 2016 2017 2018 YoY Revenues 4,769.3 5,130.4 6,019.0 7,029.4 8,046.8 14.5% Gross profit on sales 2,792.5 2,742.8 2,933.8 3,720.0 4,401.3 18.1% Gross profit margin 58.6% 53.5% 48.7% 52.9% 54.7% 1.7pp. SG&A costs 2,148.3 2,191.7 2,608.8 3,099.9 3,532.2 13.9%
Slide 92: Balance sheet increasingly strong
Balance sheet increasingly strong PLN m 31.12.2014 31.12.2015 31.12.2016 31.12.2017 31.12.2018 Non-current assets 1,516.4 1,797.0 1,838.7 2,041.4 2,417.8 fixed assets 315.9 324.4 1,291.3 1,478.2 1,818.3 intangibles (inc. goodwill) 1,038.8 1,258.8 330.6 351.2 376.7 Current assets 1,417.3 1,768.2 1,83
Slide 93: Strong operating cash flows
Strong operating cash flows PLN m 2014 2015 2016 2017 2018 Pre-tax profit 459.9 414.4 194.1 563.7 723.7 D&A 193.7 223.6 267.4 293.4 349.2 NWC -127.3 -223.4 255.9 101.3 125.2 Operating CF 492.9 253.9 718.2 893.2 1,212.0 Capex -550.5 -490.6 -271.8 -441.6 -798.9 Investing CF -476.0 -415.5 -181.4 -383.9
Slide 94: 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 95: LPP's success story
LPP’s success story CORPORATE MILESTONES No. of stores 1991 Creation of Mistral company by Marek Piechocki and Jerzy Lubianiec 1995 Mistral transformed into LPP 10 1997 Opening offices in Shanghai 1998 Launch of Reserved – first retail store opened 2001 IPO on the Warsaw Stock Exchange 50 2002 Start
Slide 96: Key corporate events of 2018
Key corporate events of 2018 September 2018 December 2018 NEW COUNTRY: RESERVED AND VOGUE SLOVENIA UK PROJECT NEW MARKET: Reserved New Year's Eve NEW COUNTRY: Reserved store on the 22nd KAZAKHSTAN collection created in ISRAEL market in the City Center cooperation with British shopping mall in Celje.
Slide 97: Corporate governance
Corporate governance GENERAL • appoints Supervisory Board members SHAREHOLDER • approves annual financial statements MEETING • grants discharge to the Management and Supervisory Board members appoints • review of the financial statements • 5 to 6 members • assessment of the financial standing SUPERV
Slide 98: LPP's founders
Founders actively involved in the business MAREK PIECHOCKI JERZY LUBIANIEC CHIEF EXECUTIVE OFFICER CHAIRMAN of SUPERVISORY BOARD LPP’s FOUNDERS Present in the retail business since 1989. • 1991 - 1997 ran Mistral company as a sole trader • In 1991 together with Jerzy Lubianiec, founded a (LPP’s pr
Slide 99: Management with long-term vision
Management with long-term vision Since 1989 in the retail business. MAREK PIECHOCKI (58) Founded LPP in 1991. CEO of LPP since 2000. CEO & FOUNDER Responsible for LPP’s strategy and development of all brands. At LPP since 2008. PRZEMYSŁAW LUTKIEWICZ (47) Since 2015 LPP’s CFO. Initially Hea
Slide 100: Co-founder sits on the Supervisory Board
Co-founder sits on the Supervisory Board Since 2000 Chairman of the Supervisory Board of LPP. JERZY LUBIANIEC (58) CHAIRMAN 1995 – 2000 CEO of LPP. 1991 – 1997 ran Mistral company (LPP’s predecessor). Since 1999 member of the Supervisory Board of LPP. WOJCIECH OLEJNICZAK (63) 1996 – 1997 LPP
Slide 101: LPP – a family company
LPP – a family company LPP’s founders transferred their shares to foundations to ensure the family From the moment of transfer of status of the Company, continuation shares to foundations, the of activities in the long-term and to founders ceased to be the avoid fragmentation of capital. owners of L
Slide 102: Company controlled by its founders
Company controlled by its founders SHAREHOLDERS BY EQUITY SHAREHOLDERS BY VOTES total no of shares: 1,852,423 total no of votes: 3,233,562 Semper Simul Foundation Free-float 17.2% 39.8% Semper Simul Foundation 31.5% Sky Foundation 12.2% Treasury shares Treasury shares 0.0% Free-float 1.0% 69.5% Sky
Slide 103: Integrated reporting initiated in 2018
Integrated reporting initiated in 2018 Second ACCORD agreement Establishing of First integrated factory report 2013 audit division 2015 2017 Resignation from Resignation from Launch of Eco angora natural furs Aware collection Joining the ACCORD Setting up offices in Stronger supervision alliance Dha
Slide 104: Safety in Asian factories is our goal
Safety in Asian factories is our goal PLN 20.5m outlays for audits of working conditions in Bangladesh PLN 20.5m factories, especially for costs of on-site inspections, audits of working conditions and membership fees for ACCORD and Rana Plaza Trust Fund. ACCORD control results: 110 SGS inspections
Slide 105: Safety in factories matters to us
Safety in factories matters to us Over 190 retail companies and Co-operation was signed for 5 NGOs joined ACCORD in years. October 2013. LPP was the only Polish retail company to join ACCORD (Accord on Fire and Building Safety in Bangladesh). Since April 2017 we In January 2018 LPP signed cooperate
Slide 106: A Polish socially responsible company
A Polish socially responsible company POLISH COMPANY Our roots are in Poland All strategic decisions are taken in Poland FAMILY-RUN COMPANY All our concepts are designed in Poland Our brand concepts have been made in Poland Created and managed by Polish We pay all due taxes in Poland ent
Slide 107: Presence in key indices
Presence in key indices POLAND The most important index of the MSCI Poland is a key index for WIG20 MSCI WSE international institutions investing in Poland Member since March 2014 LPP member since August 2014 INTERNATIONAL INDICES c. 4.9% LPP’s weight The sole clothing retailer in the in
Slide 108: Double-digit share price growth
Double-digit share price growth LPP’S SHARE PRICE RELATIVE TO WIG 20 INDEX 12,000 10,000 8,000 6,000 4,000 2,000 0 LPP WIG20 relative TICKERS PERFORMANCE MARKET DATA WSE LPP 1Y -12% Price (31.12.18) PLN 7,850 Bloomberg LPP PW 3Y +41% Min 1Y PLN 7,535 Reuters LPPP.WA 5Y -13% Max 1Y PLN 10,170 GLOBAL
Slide 109: Broad analytical coverage
Broad analytical coverage INSTITUTION ANALYST E-MAIL BDM Adrian Górniak [email protected] BGŻ BNP Paribas BM Michał Krajczewski [email protected] BofA/ML Ilya Ogorodnikov [email protected] BOŚ DM Sylwia Jaśkiewicz [email protected] Centralny Dom Maklerski Pekao SA Natalia
Slide 110: Investor relations' calendar
Investor relations’ calendar KEY DATES IR CONTACT 28.05.2019 1Q19 results publication Person: Magdalena Kopaczewska IR Manager 01.07.2019 2Q19 trading update E-mail: [email protected] [email protected] 12.09.2019 2Q19 results publication Phone: + 48 693 904 337 01.10.201
Slide 111: Glossary
Glossary Poland Retail sales in Poland and other sales of LPP SA. CEE Region including: Czech Republic, Slovakia, Hungary and Poland unless otherwise stated. Baltic Region including: Lithuania, Latvia, Estonia. CIS Region including: Russia, Ukraine, from 2017 Belarus and from 2018 also Kazakhstan. S
Slide 112: Contact details
CONTACT DETAILS GDANSK HEADQUARTERS LPP SA Łąkowa 39/44 Street 80-769 Gdansk, Poland Tel. +48 58 76 96 900 Fax.+48 58 76 96 909 Email: [email protected] CRACOW BRANCH LPP SA Bagrowa 7 Street 30-733 Cracow, Poland Tel. +48 12 39 25 000 DISTRIBUTION CENTRE LPP SA Tczewska 2 Street 83-800 Pruszcz Gdański,