Lpp S.a. · GPW:LPP
Lpp — Q3 2015 Earnings Presentation
55 slides from Lpp's earnings presentation, Nov 12, 2015
Slide 1: Financial Results for 3Q15
FINANCIAL RESULTS FOR 3Q15 GLOBAL ASPIRATIONS WARSAW, 12th NOVEMBER 2015 RESERVED CROPP (i)nouwe MOHITO sinsay
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
AGENDA Executive summary 3Q15 financial results Key corporate events 2015 and 2016 outlook Q&A 3
Slide 4: Over PLN 3.5bn revenues in 9M15
Over PLN 3.5bn revenues in 9M15 1,574 -0.2% STORES LFLs PLN 3,555m 17 +17% R EVENUES + 5 . 7% COU NTRI ES S PAC E m2 53% -16% GROSS P ROFI T SG&A / m2 PLN 267m EBIT MARGI N 4
Slide 5: Key 3Q15 achievements
Key 3Q15 achievements Openings in Czech First store Largest flagship On-line store Rep. and Slovakia in Saudi Arabia in Germany in Slovakia New stores in RESERVED franchise store RESERVED own store Fourth country with Czech Rep. (4) and Slovakia (5) in Saudi Arabia in Stuttgart RESERVED 6,700m2 1,59
Slide 6: 1,574 stores on 3 continents
1,574 stores on 3 continents As at NO OF LPP STORES 26 270 No of stores y/y change 30.09.2015 19 LPP GROUP 1,574 +121 23 RESERVED 437 +24 960 Cropp 362 +6 10 69 House 311 +9 82 55 MOHITO 271 +25 10 21 SiNSAY 157 +44 10 Outlets 36 +13 KUWAIT 1 15 1 QATAR 1 1 1 EGYPT SAUDI 1 ARABIA 6
Slide 7: Agenda
AGENDA Executive summary 3Q15 financial results Key corporate events 2015 and 2016 outlook Q&A 7
Slide 8: LFL dynamics slightly below zero
LFL dynamics slightly below zero L F L s i n C O N S TA N T C U R R E N C I E S L F L s i n C O N S TA N T C U R R E N C I E S (data for the group) (data for the group) 20% 15.3% 13.7% 14.3% 15% 11.7% 10% 4.6% 6.7% -0.2% 4.8% 5.1% 5% 1.5% 0% positive LFLs -0.8% in July -5% -2.3% -1.7% -1.5% -3.5% -6
Slide 9: Growth in floorspace by regions
Growth in floorspace by regions F L O O R S PA C E G R O W T H 3 Q 1 5 F L O O R S PA C E ths m2 by regions by regions 810 ths m2 3Q14 3Q15 YoY 4.4 1.6 798.8 14.0 LPP GROUP 681.1 798.8 17.3% 790 778.4 0.4 Poland 400.0 443.9 11.0% EU 107.9 161.7 49.8% 770 +20.4 ths m2 CIS 173.2 187.7 8.4% ME 0.0 5.5
Slide 10: RESERVED the key floorspace driver
RESERVED the key floorspace driver F L O O R S PA C E G R O W T H 3 Q 1 5 F L O O R S PA C E ths m2 by brands by brands ths m2 3Q14 3Q15 YoY 810 19.4 -2.4 2.4 1.2 798.8 LPP GROUP 681.1 798.8 17.3% -1.5 1.3 RESERVED 367.4 435.7 18.6% 790 778.4 Cropp 101.2 109.1 7.8% House 87.3 95.2 9.0% 770 MOHITO 78
Slide 11: Growth in group revenues
Growth in group revenues GROUP REVENUES GROUP REVENUES PLN m by regions PLN m by brands in 3Q15 1,600 35.6% 31.3% 19.6% 10.9% 40% 31.7% 9.0% RESERVED 560 21.9% 30.4% 11.4% 2.2% 1,200 25.9% 6.1% 30% Cropp 217 14.1% 800 20% House 170 400 10% MOHITO 151 SiNSAY 83 0 0% Other 80 Poland EU CIS ME Sales gr
Slide 12: Growth in floorspace lowers sales / m2
Growth in floorspace lowers sales / m2 SALES/ m2 R E TA I L S A L E S / m 2 PLN/ m2 average per month 1,000 20% PLN (m-c) 3Q14 3Q15 YoY 721 784 755 800 697 724 LPP GROUP 571 504 -11.7% 570 610 608 663 567 535 10% 600 536 462 Poland 594 544 -8.6% 0% 400 EU 494 456 -7.8% 200 -10% CIS 572 463 -19.0% 0
Slide 13: E-commerce development continues
E-commerce development continues ON-LINE SALES REGISTERED USERS eop 3Q15 PLN m SiNSAY 25 23.4 18.0 2.0% 5% MOHITO Cropp 20 12.4 16.1 17.4 1.5% 13% 16% 12.8 11.5 13.9 15 6.9 6.6 1.0% 10 5 1.7 0.5% House 0 0.0% 22% RESERVED 44% E-commerce revenues % of group sales On-line sales constituted 1.1% of g
Slide 14: Stronger US$ increases COGS
Stronger US$ increases COGS GROSS PROFIT MARGIN vs PLN/US$ 9M15 PURCHASES PLN/USD by regions 0.40 65% Poland Other 55.3% 57.5% 56.7% 52.6% 2% 3% Turkey 0.35 60% 5% 0.30 55% Far East China 0.25 50% 30% 60% PLN/USD rate (T-2 quarters) Gross profit margin (%) Fall in 3Q15 gross profit margin due to s
Slide 15: Lower costs of own stores
Lower costs of own stores COSTS of OWN STORES/ m2 9M15 COSTS SPLIT PLN/ m2 monthly PLN 187/ m2 -16% r/r -16% r/r 234 243 238 239 238 235 220 222 220 202 Other 61 69 59 63 62 66 189 187 186 54 57 57 costs 52 46 47 48 57 59 61 59 58 58 56 57 56 25% 53 50 48 47 Rental costs 116 115 118 117 118 111 110
Slide 16: Fall in SG&A costs
Fall in SG&A costs SG&A/ m2 3Q15 SG&A COSTS PLN/m2 PLN m monthly -15% r/r 312 -2% r/r 299 296 297 299 296 274 558 547 270 274 271 236 230 232 107 103 451 444 3Q14 3Q15 Costs of all stores Costs of headquarters Fall in nominal levels of SG&A costs lower costs of headquarters (cut in marketing bud
Slide 17: Deceleration of net earnings falls
Deceleration of net earnings falls PLN m 3Q14 3Q15 YoY Lower gross profit margin, but deceleration of falls QoQ: Revenues 1,234.2 1,261.5 2.2% sell-offs of excessive inventory finished in Gross profit on sales 699.6 663.2 -5.2% August Gross profit margin 56.7% 52.6% -4.1 p.p. higher margins on
Slide 18: 9M15 supported by cost reductions
9M15 supported by cost reductions PLN m 9M14 9M15 r/r Lower gross profit margin: Revenues 3,364.4 3,555.3 5.7% weaker consumer demand and traffic less favorable FX trends Gross profit on sales 1,963.4 1,880.1 -4.2% EBIT on a high level: Gross profit margin 58.4% 52.9% -5.5 p.p. SG&A costs
Slide 19: Inventory remains under control
Inventory remains under control INVENTORY LOGISTICS PLN m PLN/ m2 CENTRES 1,643 1,516 1,684 1,600 1,665 1,578 1,383 1,527 1,507 1,600 Centre in Pruszcz Gdanski 1,368 1,443 1,355 1,511 1,652 1,336 (Poland, own) 1,131 1,167 1,200 1,200 963 1,037 979 820 845 805 838 66,000 m2 800 658 656 716 800 400 40
Slide 20: A stable cash cycle
A stable cash cycle W O R K I N G C A P I TA L v s C A S H C Y C L E CASH CYCLE ELEMENTS PLN m days days 80 days 97 days 109 days 225 1,700 88 days 150 180 201 174 200 188 197 195 198 170 166 1,037 155 149 159 1,200 845 1,336 658 150 134 100 109 97 120 700 97 113 107 102 103 100 101 108 102 200 159
Slide 21: Indebtedness at a safe level
Indebtedness at a safe level C A P E X v s N E T D E B T/ E B I T D A NET DEBT PLN m (x) PLN m (x) 250 1.2 PLN 787m 1,050 PLN 561m 1.5 194 1.1 200 172 160 750 102 132 0.8 0.7 586 1.0 150 114 117 125 102 101 104 109 450 53 483 100 0.4 0.5 150 196 320 50 -117 -120 0 0.0 -150 0.0 3Q14 3Q15 Short-term d
Slide 22: Seasonal cash flow worsening
Seasonal cash flow worsening 3 Q 1 5 C A S H F L O W G E N E R AT I O N 3Q15 CASH FLOW PLN m PLN m 500 150 104 400 +55.8 -26.1 52 +92.5 -159.3 14 300 0 165.8 -55.7 200 155.7 -108.8 119.9 -27 -39 -36 100 -92 -100 -150 0 3Q14 3Q15 Operating CF Investing CF Financing CF Total CF Operating cash flow
Slide 23: Balance sheet remains stable
Balance sheet remains stable PLN m 30.09.2014 31.12.2014 30.09.2015 Higher YoY fixed assets due to investments in Non-current assets 1,426.2 1,516.4 1,664.3 stores. intangibles (including 313.4 315.9 323.3 goodwill) Growth in intangibles due to investments in fixed assets 1,039.2 1,038.8 1,149.0
Slide 24: Agenda
AGENDA Executive summary 3Q15 financial results Key corporate events 2015 and 2016 outlook Q&A 24
Slide 25: MOHITO – a new concept store
MOHITO – a new concept store B Elegant interior Displays for limited Emphasis on Gold & Comfortable waiting design collections Exclusive Line room Bright centre of the store Separate display area for Highly fashionable clothing A new comfortable zone surrounded by darker new and exclusive and access
Slide 26: The new brand – launch in 1Q16 maintained
The new brand – launch in 1Q16 maintained First 7 stores to be opened in March 2016. Key brand Modern elegance Launch of internet store in 1Q16. features Target group: Target: 30 stores in Men and women over 35 years old # stores Poland Citizens of large towns # markets Launch in Poland
Slide 27: Germany – flagship in Stuttgart
Germany – flagship in Stuttgart G E R M A N Y: F U R T H E R DEVELOPMENT LPP stores Planned openings City m2 Opening Stuttgart (highstreet location) – the largest RESERVED Aachen 2,371 OCT 2015 store. 137 ths products sold on 3,910 m2. 80 Mannheim 2,423 OCT 2015 employees. Essen 1,879 MAR 2016 A
Slide 28: Fourth country in the Middle East
Fourth country in the Middle East M I D D L E E A S T: R E V E N U E S (PLN m) 14.5 EGIPT ARABIA SAUDYJSKA 9.1 3.5 1Q15 1H15 9M15 We have 4 franchise stores in the Middle East region. All stores are located in shopping malls. 3Q15 wholesale revenues reached PLN 5.4m, while PLN 14.5m in 9M15. 2
Slide 29: Strengthening of the management board
Strengthening of the management board NEW MANAGEMENT BOARD MEMBER Sławomir Łoboda (50) Appointed: 14 October 2015 Responsibility: legal issues, new retail space and store development. Cooperated with LPP since 1997 Selected projects: setting up franchise network LPP’s WSE listing mer
Slide 30: Open communication with investors
Open communication with investors N E W M AT E R I A L S NEW BRAND P R E S E N TAT I O N 15 October – Factbook publication February 2016 – new brand presentation at Materials available on LPP’s Chmielna showroom (Warsaw, Poland). www.lppsa.com 30
Slide 31: Agenda
AGENDA Executive summary 3Q15 financial results Key corporate events 2015 and 2016 outlook Q&A 31
Slide 32: Floorspace growth to continue
Floorspace growth to continue Floorspace 2015 PREVIOUS 2015 Y 17% YoY floorspace growth in 2015 maintained. 31.12.2014 CURRENT YoY o (ths m2) TARGET RESERVED 389.7 460.6 TARGET 460.8 18% Y We plan to open 45 ths m2 of new floorspace in Poland EU 209.2 83.9 231.5 121.7 231.9 122.0 11% 45% 4Q15, o
Slide 33: 2015 targets
2015 targets Group revenue growth should come between 5% to 10%. 2015 Gross profit margin fall should be between 4-6 ppt TARGETS SG&A costs/m2 should fall by more than 10% YoY. Improved sales dynamics versus 3Q15. PLANS FOR Plans for lower sell-offs than in 9M15 and transferring increased
Slide 34: E-commerce targets
E-commerce targets LONG-TERM TARGETS Internet stores of all brands in majority of countries where brick-and-mortar stores are present. Development only through own internet stores. 4Q15 PLANS 2016 PLANS On-line RESERVED store in Slovakia opened 1Q16: start of RESERVED on-line store in on 1 O
Slide 35: RESERVED target: LFLs improvement
RESERVED target: LFLs improvement NEW D E TA I L S I N I T I AT I V E S 50% pick-up in numer of styles in RESERVED SS16 collection (adjusting the Increased offer to growing average store size). number of Store offering is to be differentiated based on location and store size. styles More style
Slide 36: Germany – further growth potential
Germany – further growth potential C U R R E N T S TAT U S DEVELOPMENT PLANS 30% lower traffic/m2 EUR 4m marketing outlays than in Poland. in 2015 and in 2016. Average price of one piece 25% More inventory in stores, wider higher than in Poland. range of expensive products. 20% more ticket items 30
Slide 37: Middle East – high growth potential
Middle East – high growth potential Two-way development: M I D D L E E A S T: D E V E L O P M E N T P L A N S New countries: UAE, Lebanon, Jordan, Oman and Bahrain. LEBANON JORDAN KUWAIT New brands: MOHITO and SiNSAY (on top of RESERVED development). SAUDI EGYPT ARABIA QATAR UAE Target: 70 f
Slide 38: Floorspace growth to continue in 2016
Floorspace growth to continue in 2016 Floorspace 2015 2016 (ths m2) Target Target YoY growth 15% YoY floorspace growth planned for 2016. RESERVED Poland 460.8 231.9 533.4 251.8 16% 9% From the planned 125 new ths m2 only 10 ths m2 EU 122.0 151.1 24% is not booked. CIS 101.4 108.7 7% ME franchise 5
Slide 39: Agenda
AGENDA Executive summary 3Q15 financial results Key corporate events 2015 and 2016 outlook Q&A 39
Slide 40: Back-up
Back-up 40
Slide 41: An upgraded LFLs definition
An upgraded LFLs definition A new improved LFLs definition: Former LFLs definition: Stores that Revenues from stores that have been in have been the same as a year before (have operation for 12 months. not changed their floorspace, have not Calculations were conducted without undergone upgra
Slide 42: E-commerce development
E-commerce development U N I Q U E U S E R S o f L P P ’s O N - L I N E S T O R E S REGISTERED USERS 881,557 3,000 1,000,000 2,500 + 53% YoY 750,000 2,000 574,564 1,500 500,000 1,000 250,000 500 0 Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Jan-10 Jan-11 Jan-1
Slide 43: Network development
Network development Floorspace (ths m2) 30.09.2013 31.12.2013 31.03.2014 30.06.2014 30.09.2014 31.12.2014 31.03.2015 30.06.2015 30.09.2015 RESERVED 288.1 322.3 327.1 358.9 367.4 389.7 403.8 416.3 435.7 Poland 169.7 188.9 193.7 202.8 204.7 209.2 215.2 219.0 223.4 EU 48.8 52.4 52.4 64.6 69.6 83.9 91.2
Slide 44: Group 3Q15 revenue growth contributors
Group 3Q15 revenue growth contributors REVENUE GROWTH REVENUES by regions by brands PLN m + 42 -47 PLN m 3Q14 3Q15 YoY 1,300 +5 1,261 + 27 1,234 LPP GROUP 1,234.2 1,261.5 2.2% RESERVED PL 339.4 314.5 -7.3% 1,200 RESERVED EX 240.4 245.4 2.1% Cropp PL 133.5 131.2 -1.7% 1,100 Cropp EX 87.4 86.2 -1.4% 3
Slide 45: Group 9M15 revenue growth contributors
Group 9M15 revenue growth contributors REVENUE GROWTH REVENUES by regions by brands PLN m 3,750 + 142 - 60 + 15 3,555 PLN m 9M14 9M15 YoY 3,500 + 94 3,364 LPP GROUP 3,364.4 3,555.3 5.7% RESERVED PL 995.8 985.0 -1.1% 3,250 RESERVED EX 639.2 694.5 8.7% Cropp PL 331.7 330.6 -0.3% 3,000 Cropp EX 219.5 2
Slide 46: Historical quarterly numbers
Historical quarterly numbers PLN m 1Q14 1Q15 YoY 2Q14 2Q15 YoY 3Q14 3Q15 YoY Revenues 945.0 1,002.6 6.1% 1,185.1 1,291.3 9.0% 1,234.2 1,261.5 2.2% Gross profit on sales 537.6 543.3 1.1% 726.2 673.4 -7.3% 699.6 663.2 -5.2% Gross profit margin 56.9% 54.2% -2.7 p.p. 61.3% 52.1% - 9.2 p.p. 56.7% 52.6% -
Slide 47: RESERVED brand overview
A fast fashion brand with a broad customer base; PLN m REVENUES wide range of collections. 800 676 635 627 Target customers: women, men and children. 600 505 501 544 576 580 493 560 479 427 371 411 393 Established in 1999. 400 200 First LPP’s brand present in Germany and the 0 Middle East. 2
Slide 48: Cropp brand overview
A casual streetwear brand. PLN m REVENUES Target customers: teenagers (boys and girls). 300 221 220 217 Established in 2004. 200 160 170 170 193 199 194 196 139 136 142 111 125 Partner of many events addressed to artists and 100 street art. 0 Offers also international labels (eg. New Balan
Slide 49: House brand overview
Urban fashion brand with folk and vintage PLN m REVENUES elements. 300 Target customers: teenagers (boys and girls) who 200 175 158 165 200 160 170 like brave fashion choices. 139 133 145 127 104 114 93 111 80 100 Established in 2001 (in LPP Group since 4Q08). 0 Participates in multiple arti
Slide 50: MOHITO brand overview
A brand that combines comfort and elegance for PLN m REVENUES business and informal meetings. 200 144 146 146 151 Target customer: young women. 150 108 122 112 132 134 115 90 83 100 Established in 2008 (in LPP’s Group since 4Q08). 41 59 69 50 Anja Rubik created a limited collection for 0 AW2
Slide 51: SiNSAY brand overview
Clothes for every day inspirations and original PLN m REVENUES party outfits. 100 83 83 Target customers: teenagers – girls only. 77 55 59 58 Established in 2013. 50 37 33 22 13 The brand stands out for original T-shirts with 2 0 extraordinary prints. 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14
Slide 52: Other operating activity and net financials in 3Q15
Other operating activity and net financials in 3Q15 O T H E R O P E R AT I N G R E V E N U E S FINANCIAL REVENUES PLN m 3Q14 3Q15 PLN m 3Q14 3Q15 Inventory excess 3.4 2.6 FX gains -1.4 0.0 Gain on sale of assets 1.8 2.1 Interest 1.6 0.7 Other operating revenues 7.4 6.0 Financial revenues 0.4 0.7 O T
Slide 53: Other operating activity and net financials in 9M15
Other operating activity and net financials in 9M15 O T H E R O P E R AT I N G R E V E N U E S FINANCIAL REVENUES PLN m 9M14 9M15 PLN m 9M14 9M15 Inventory excess 9.1 9.3 FX gains 0.0 0.0 Gain on sale of assets 11.4 4.4 Interest 1.8 1.7 Other operating revenues 27.0 16.5 Financial revenues 2.0 1.9 O
Slide 54: 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. SEE Region including: Bulgaria, Romania, Croatia. WE Region including Germany. ME Reg
Slide 55: Contact Information
CONTACT INFORMATION GDANSK HEADQUARTERS CRACOW BRANCH LOGISTICS CENTRE MEDIA CONTACT INVESTOR RELATIONS CONTACT RESERVED — GROPP (hynowe WOHI TI sinsay