1Q15 RESULTS PRESENTATION GLOBAL ASPIRATIONS WARSAW, 12th MAY 2015
DISCLAIMER This presentation (the “Presentation”) was prepared by LPP S.A. (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 prospects in a comprehensive or in-depth manner. Therefore, anyone who intends to make an investment decision with respect to the Company should rely on the information disclosed in the official reports of the Company, published in accordance with the laws applicable to the Company. This Presentation was prepared for information purposes only and does not constitute an offer to buy or to sell any financial instruments. The Presentation may contain 'forward‐looking statements'. However, such statements cannot be treated as assurances or projections of any expected future results of the Company. Any statements concerning expectations of future financial results cannot be understood as guarantees that any such results will actually be achieved in future. The expectations of the Management Board are based on their current knowledge and depend on many factors due to which the actual results achieved by the Company may differ materially from the results presented in this document. Many of those factors are beyond the awareness and control of the Company or the Company’s ability to foresee them. Neither the Company, nor its directors, officers, advisors, nor representatives of any such persons are liable on account of any reason resulting from any use of this Presentation. Additionally, no information contained in this Presentation constitutes any representation or warranty of the Company, its officers or directors, advisors or representatives of any of the above persons. The Presentation and the forward‐looking statements speak only as at the date of this Presentation. These may not be indicative of results or developments in future periods. The Company does not undertake any obligation to review, to confirm or to release publicly any revisions to any forward‐looking statements to reflect events that occur or circumstances that arise after the date of this Presentation. 2
AGENDA 1Q15 executive summary 1Q15 financial results Key corporate events 2015 outlook Q&A 3
Over PLN 1 bn revenues in 1Q15 1,528 -0.7% PLN 1,003 m STORES LFLs REVENUES +23.5% 14 +6% +6 SPACE m2 COUNTRIES -12% - 2.7 ppt PLN24 m EBIT SG SG&A / / m2 m2 GROSS PROFIT > > consensus MARGIN 4
Key 1Q15 achievements NEW OPENINGS CSR Cair iro Muenchengladbach Doha Code of Conduct (Egypt) ) (G (Germany) (Qatar) RESERVED RESERVED RESERVED Tighter Franchise store Own store Franchise store requirements for 1,500 m2 2,125 m2 1,100 m2 suppliers February 2015 March 2015 April 2015 April 2015 5
Already 1,528 stores on 3 continents N U M B E R o f L P P ’s S TO R E S NUMBER of of STORES 31.03.2 31.0 .2015 274 26 LPP GROUP 1,528 19 RESERVED 426 25 Cropp 361 937 House 304 6 65 MOHITO 263 78 50 SiNSAY 141 11 12 Outlets 33 9 15 EGYPT 1 6
AGENDA 1Q15 executive summary 1Q15 financial results Key corporate events 2015 outlook Q&A 7
LFL dynamics mildly below zero GROUP L FL s A new improved LFLs definition: Stores that: 20% 15.3% have been the same as a year 15% before (have not changed their 10% floorspace, have not undergone 4.6% -0,7% upgrades) and 5% -0.7% have been in operation for the past 0% 12 months (without a break longer -5% -2.3% than 7 days). -10% Calculations are conducted without taking into account changes in currencies in countries in which LPP’s stores are run. In 1Q15 like-for-like sales reached -0.7%. Lower YoY LFL dynamics in Poland resulted from falls in traffic in shopping malls and unfavourable weather. Despite political issues, LFLs in Russia and Ukraine were double-digit positive. The teenage-oriented brands (Cropp and House) positively stood out in terms of LFLs. 8
Growth in floorspace per regions FLOORS PAC E GROWTH 1Q15 FLOORSPAC E by reg i on s by reg i on s ths m2 748 1 3 m2 m2 1Q 1Q14 14 1Q 1Q15 15 YoY 750 11 LPP GROUP 605.5 747.7 23.5% 740 10 Poland 376.3 423.5 12.5% 723 730 EU 80.3 139.6 73.7% 720 CIS 148.8 183.1 23.0% 710 +25 ths m2 ME 0.0 1.5 N/M 700 Poland dominated the new openings in terms of countries. YoY growth in EU floorspace partially resulted from taking over the Slovak franchisee in 2Q14 (32 stores with 12 ths m2 of floorspace). Within the EU, floorspace in Croatia grew 3 ths m2, while in Germany 4.4 ths m2, in 1Q15. Slower development in Russia and Ukraine. 9
New openings across all brands FLO O RS PAC E G ROWT H 1Q15 FLOORSPAC E by bra nds by b ra n d s ths m2 748 0.5 4.5 m2 m2 1Q 1Q14 14 1Q15 1Q 15 YoY 750 4 1 1 LPP GROUP 605.5 747.7 23.5% 14 740 RESERVED 327.1 403.9 23.5% 730 723 Cropp 91.8 106.4 16.0% 720 House 82.3 90.4 9.8% +25 ths m2 710 MOHITO 69.3 86.8 25.3% 700 SiNSAY 25.8 48.4 88.0% Outlets 9.3 11.8 27.3% Dynamic development of RESERVED with focus on Germany. Fast growth of SiNSAY in Poland and abroad in 1Q15. Foreign floorspace already constitutes 27%. The majority of MOHITO openings took place outside of Poland. Lower dynamics in Cropp and House due to franchise store closures in Poland. 10
Growth in group revenues GROUP REVEN U ES GROUP REVEN U ES by reg i on s by b ra n d s i n 1Q15 PLN m Other 10.9% 31.7% 1,600 40% SiNSAY 35.6% 19.6% 30.4%31.3% 7% 31.4% 6% 11.4% 21.9% 25.9% 6.1% 1,200 30% 31.0% MOHITO 14.1% 800 20% 11% RESERVED 400 10% 49% House 13% 0 0% Cropp 14% Poland EU CIS Sales growth Group revenues grew 6% due to higher floorspace. Poland added the most to revenue growth despite unfavourable weather and scale of inventories. Minor YoY fall in revenues in Russia and Ukraine, due to depreciation of local currencies. SiNSAY and House were the largest revenue growth contributors by brands. 11
Growth in floorspace lowers sales/m2 SAL ES / m2 RETAI L SAL ES/ m2 avera ge p er mo nt h PLN / m2 PLN PLN/m /m2 (mon onth) 1Q14 1Q14 1Q15 1Q15 YoY 1,000 30% 632 695 721 784 697 724 755 LPP GROUP 501 439 -12.4% 800 20% 536 610 608 663 570 Poland 549 509 -7.2% 600 10% 461 EU 416 378 -9.1% 400 0% CIS 446 357 -19.9% 200 -10% 0 -20% Sales/m2 (PLN) YoY % growth Sales/m2 in Poland remain higher than abroad due to superior brand awareness. Falls in sales /m2 in PLN in Russia and Ukraine result from local currencies’ depreciation versus zloty. In 1Q15, in local currencies, sales/m2 grew 12% YoY in Russia while 48% YoY in Ukraine. Situation in Russia and Ukraine affects also the revenues from the Baltic countries. 12
Dynamic e-commerce development E - COM M ERC E re s erved.com PLN m +45% YoY No 1 single brand e-store in fashion No 23.4 category (Rzeczpospolita daily dated 25 2.0% 14.04.2015) 20 18.0 12.4 16.1 1.5% 12.8 11.5 15 1.2 m m unique users per month 1.0% 6.6 6.9 10 ~26 m ~2 m page views per month 1.7 0.5% 5 330 ths s customers 0 0.0% E-commerce revenues % of group sales On-line sales constituted 1.8% of group revenues in 1Q15 versus 1.3% on average in 2014. Each of the 5 brands has its own internet store. On top, RESERVED has an internet store in Germany. At the beginning of May, we opened an internet store for RESERVED in Czech Republic. In 2H15 we plan to launch RESERVED on-line store in Slovakia. 13
Stronger US$ increases COGS GROSS PROFI T M ARGI N versus P L N/USD 1Q15 PURCHASES by reg i o n s PLN/USD 0.35 65% Poland 3% Other 3% 52.1% 55.8% 56.9% 0.34 Turkey 54.2% 60% 0.33 5% 0.32 55% 0.31 0.30 50% Far East China 31% 58% PLN/USD rate (T-2 quarters) Gross profit margin (%) The majority of purchases is conducted in the Far East and indexed to US$. Depreciation of zloty to US$ increases costs of purchases from Asia. Lower-than-planned LFLs caused stronger YoY mid-season discounts. Depreciation of ruble and hryvnia to US$ and zloty forced sizeable price increases in local currencies in Russia and Ukraine. 14
Lower costs of own stores COSTS of OWN STORES / M 2 SP L I T of COSTS of OWN STORES i n 1Q15 PLN / m2 -14% YoY 243 238 233 234 238 239 235 220 250 224 222 220 202 189 Other costs 69 59 63 62 61 61 66 200 56 54 57 24% 57 52 46 150 61 59 58 56 57 59 53 58 56 Rental costs 57 56 53 50 50% 100 116 116 118 117 118 115 115 111 110 108 107 50 HR costs 97 93 26% 0 Rental costs HR costs Other costs Fall in rental charges successful rental renegotiations domestically, in Russia and Ukraine. Fall in personnel costs continuous headcount optimisation. Fall in other costs of stores depreciation of ruble and hryvnia against US$ and zloty. Costs of own stores have reached the 2010 level. 15
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