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Project Delta Confidential Information Memorandum | December 2021 Strictly private and confidential IFC 1Table of contents Section Page I Executive summary 2 II Key investment highlights 10 III Business model overview 23 IV Financial overview 53 V Appendix 70 IFC I. Executive summary IFC 3DeFacto : Leading innovative fast -fashion retailer with a global vision Overview Financial performance1At a glance Key figures EBITDA margin1 excl.IFRS 16 (2021B)c.14% Net sales1 (2021B)c.TL 7.3 bn Total net selling space2427k sqm # of stores2495 Annual online visitors toDefacto.com115+ mn →Founded bytwo shareholders with complementary backgrounds infast-fashion retailing and textile production, DeFacto (the “Company ”)isaleading Turkish fast- fashion retailer with presence inover 90countries -495 stores globally ;301 stores inTurkey, 168 stores in18international markets, and 26franchise stores inover 10countries -Sales from stores account forc.75%ofNet sales in2021 B,while remaining c.25% arerealized through online and other channels ;established omnichannel model →DeFacto operates with abalanced strategy ofTurkey and international sales -Turkey sales (55%ofNetsales ):DeFacto stores arewidespread inalmost every city inTurkey athigh traffic locations both inmain streets and shopping malls, registering yearly footfall of300+mnvisitors3 -International sales (45%ofNet sales ):International stores are currently located mainly inMENA and CIS, while the strategy toramp -uppresence indeveloped countries with a“more online, lessphysical ”model isattheimplementation stage →The Company has become atrue omnichannel retailer with continuous investments, adapting tochanging trends and customer needs, resulting instrong sales growth especially through online channels →Asone ofthe“love brands” inTurkey, DeFacto boasts ahigh brand awareness score among itscompetitors, and commands thesecond highest market share4inTurkey →DeFacto places operational excellence attheheart ofitsoperations, with itsfocus on HR, anagile store management strategy, best -inclass automated warehouse investments, in-house ERP system and continuous technological investments →Ozon Tekstil (“Ozon ”),DeFacto’s wholly owned -subsidiary, brings in-house supply arrangement capability aswell asexposure toglobal best practices, through its relationships with leading multinational brands →Solid financial performance with real topline growth and c.14%EBITDA margin ; excluding IFRS 1614.4% 10.4% 15.2% 16.0% (1) Big 4 audited IFRS financials for the historical period of 2019 -2020, excluding IFRS 16 effect (2) As of October 2021, for 469 stores excluding franchise s(3) Pre -Covid -19 figures (4) Apparel retail market share as of Q2 2021 (5) Calculated excluding Defacto.com operations in international markets ,which areat ramp -upstages , both at Net sales and EBITDA levels Source: Company, Euromonitor, IPSOS, TUIKOnline sales (2021B)c.20% International sales (2021B)c.45% Turkey sales (2021B)c.55% 2022E 2019 2020 2021B 2026E39,429 4,564 4,2237,34413,067+27%+40%14.6% 14.3% 10.3% 13.8% 15.2% 13.8% Net sales (TL mn)EBITDA margin5 excl. IFRS 16CAGR EBITDA margin excl. IFRS 1617% vs CPI IFC 4 DeFacto penetrated high -growth emerging markets through timely and effective execution, expanding to more than 10 countries within a three -year time frame It took only 6 years for DeFacto to become the second largest apparel retailer in TurkeyExecutive summary Distinguished player with unique operational DNA forgrowth and innovation Established as a male only retailer by native entrepreneurs with vast experience in retail and textile production First store opened in IstanbulCategory expansion Aggressive land grabbing strategy with strong execution Store expansion in Turkey through organic store roll -out and store acquisitionsContinuous investment to improve operations with fully automated warehouse investments New category launched: Baby and athleisure International sales reached up to 20% of Net sales Internationalization milestone: 100thstore in Morocco Launch of DeFacto AcademyNew category launched: Denim Cooperation with Solvoyo2to implement algorithmic replenishment system and other machine learning - based modules Professionals being assigned top management rolesNew category launched: Studio collectio n Internationalization milestone: Expansion to East Asia with Malaysia and first EU store in Romania Reached 450+ storesFirst stores openings in Macedonia and Montenegro Berlin flagship store opening in Q4 2021 Internationalization journey and brand investment strategy continue…Investing in fully integrated omnichannel capabilities Globalizing brand with continuous omnichannel expansion Launch of e -commerce websites in Germany and the UK, and surge in online sales, testaments to DeFacto’s adaptable modelSwift expansion inTurkey Applying expertise garnered inTurkey tohigh -growth emerging markets New category launched: Kids New international markets: Iraq, Egypt, Belarus Minority investment from Franklin Templeton1Internationalization journey start edwith first international store opened in Kazakhstan Design office inaugurated in Barcelona with respected designers 2005 2011 2012 2013 2014 2016 2017 2018 2020 2021 -… 2019 2,649 3,531 4,564 4,223 Net sales (TL mn)7,344First e -commerce sales in Kazakhstan, Egypt, Morocco and Iraq Turkey’s first Smartest Digital Fashion store in Akasya Mall Istanbul # of stores in Turkey3 # of stores in international markets3 (1) Executed in 2015 (2) Third -party s ystem provider (3) Excluding franchise stores ( 4) As of October 2021 Source: Company3014299 153 307 146 332 141 325 98 2,033 323 642 133163 238 4 20 1684 IFC 5Executive summary Brand of the future: DeFacto making the right moves in an ever -changing landscape Source: CompanyDeFacto is always one -step ahead to welcome fashion’s new trends and opportunities Embracing new norms of fashion at all capacity Digital transformation Online penetration and digital infrastructure investments are multiplying 1 Omnichannel transformation Agile operati onal model mix enabling “Buy online; Pick - up in store” 2 Experience stores Stores are meant tobefor beyond shopping 3 Casual fashion Homewear has gained momentum with work -from - home becoming the new norm 4 Sustainability It is not an option but a priority 5Precise focus on to gearing up online channel through continuous investments in operational infrastructure, technology and company culture DeFacto follows multi -platform approach to support its online presence via Defacto.com and marketplaces Responsiveness to customer needs represents the fulcrum of DeFacto’s operating model Omnichannel solutions such as Pay-at-store and Buy online; Pick -up in store options areavailable across markets Strategic allocation of channel mix to fuel further growth and profitability with optimal resource allocation Online sales facilitate access to international markets by promoting brand awareness with limited initial investments One-stop shop approach to capture emerging trends with flexible and agile operational maneuver Key pillars of DeFacto’s philosophy for happy customers: Fashion -forwardness, Dynamism, Consciousness, Empathy Sustainability is a core value deeply embedded in DeFacto’s operations and fully subscribed by management Emerging trends in fashion… …opening new horizons for DeFacto 1% c.20% 2015 2021BSurging online share in total sales IFC 6Executive summary Expansion -led strategy playbook customized for each sales channel Other2Turkey International3Financial
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customer needs represents the fulcrum of DeFacto’s operating model Omnichannel solutions such as Pay-at-store and Buy online; Pick -up in store options areavailable across markets Strategic allocation of channel mix to fuel further growth and profitability with optimal resource allocation Online sales facilitate access to international markets by promoting brand awareness with limited initial investments One-stop shop approach to capture emerging trends with flexible and agile operational maneuver Key pillars of DeFacto’s philosophy for happy customers: Fashion -forwardness, Dynamism, Consciousness, Empathy Sustainability is a core value deeply embedded in DeFacto’s operations and fully subscribed by management Emerging trends in fashion… …opening new horizons for DeFacto 1% c.20% 2015 2021BSurging online share in total sales IFC 6Executive summary Expansion -led strategy playbook customized for each sales channel Other2Turkey International3Financial performance (TL mn)Stores Online →301 stores ;foothold inalmost every city →Attracts 300+mn1footfall annually →Strong brand investment and category extension and optimization strategy →Captured strategic locations infrequented venues with high consumer traffic →Land grabbing strategy completed after years ofexpansion -ledstrategy execution ;always opportunistic forattractive locations→Initiated with the establishment of Defacto .com platform in2012 →Constant improvement with beter inventory management techniques →Increased partnerships with marketplaces to fuel further growth inonline channel →Enhanced omnichannel capabilities by streamlining the processes across channels tofulfill customer needs with Pay-at-store and Buy online and Pick-upinstore options→Covering allareas ofretail through wholesale channel, inaddition tostore network in Turkeyc.75% c.20% c.5% →Replicating proven success inTurkey with rapid expansion inattractive emerging markets such asMENA and CISregions →Reached 168 stores (in 18 countries) internationally inadecade →Ongoing expansion inattractive markets →Flagship store openings in developed markets starting from 2021 ;“more online, lessphysical”→Bolstered the market presence with the launch of Defacto.com platform in 2019 in key international markets →Continuous collaboration with global/local marketplaces to boost online presence →Strategic gateway in penetrating developed markets ahead of offline, to promote brand awareness and gain traction via marketplaces followed byDefacto.com→Franchise system to support store roll -out strategy in international markets is key for growth (currently 26 stores ), especially where local expertise is crucial to overcome regulatory and operational hurdles →Well -established supplier relationships of Ozon with international retailers, primarily Primark and C&A, contributing to DeFacto sales through exports 2026E 2022E 2019 2021B 20204,063 3,2625,5559,55717,052 +17%+25% 2022E 2019 2020 2026E 2021B233 707 1,4012,81019,726+145%+70% 2026E 2022E 2021B 2019 20202673882547002,651 +20%+47% # of effective stores % share in Netsales % share in 2021B Net sales318 300 308 340 146 149 160 2664% 11% 10% 20% 1% 6% 9% 30%Strategy 316 18111% 11%c.55% c.45% % share in 2021B Netsales (1) Pre -Covid -19 figures (2) Other category consists of Wholesale, Franchise and Ozon sales to third -partie s (3) Consists of Developing markets and Developed markets Source: Company IFC 7 Source: CompanyExecutive summary Offering broad assortment of products for the whole family, centered around one -stop shop strategy Men Core segment , unique know -how and experienceWomen Key segment targeting the broad wardrobe with focus on fashionBaby & kids Fast growing category, key to complementing all family needsAccessories Support category to drive frequency of visits and boost sales transactionsFootwear Complementary category to enable complete outfit building Homewear Sportswear Expansion category to respond to changing customer needsCore segments Complementary segments c.80% c.20% New category Global brand with agile portfolio management strategy and customer responsiveness built on the key brand pillars o f: Fashion -forwardness; Dynamism; Consciousness; Empathy Focusing on more value -added SKUs and kids' category to ensure profitable growthTrusted brand, offering high quality standards at affordable pricesSeason range styling and tailor -made offerings to suit local preferences Addressing consumer needs with dynamic product portfolio % share in 2021B Net sales IFC 8 Source: CompanyExecutive summary Brand house of DeFacto : Enjoy/Embrace the new you DeFacto’s key features… …attracting customers with different characteristics Enjoy/Embrace the new youDynamic and bold Trendy and forward thinker Conscious Selfexplorer Global mindedPromises to bring “ feel good ” factor with comfortable products Unique design capability Aims to be the best friend of its customer by offering quality at value prices Embraces differences with different sub -brands for each customer type Tailor -made offerings befitting diverse lifestyle preferences All communicated within the marketing tagline of “The Joy of Refreshing Life”Strong brand portfolio led by DeFacto umbrella brand enriched with distinguished sub -brands DeFacto FIT DeFacto Coool DeFacto Modest DeFacto Studio DeFacto Plus IFC 9Executive summary Transaction structure →Project Delta refers tothe contemplated minority stake sale of10.67%treasury shares ofDeFacto owned bytheCompany (“Proposed Transaction ”) →Staying true totheir ambition ofbuilding alisted global fast-fashion brand, DeFacto shareholders continuously channel their efforts into establishing astructure with well-invested operations and visionary corporate culture .Inthis respect, the shareholders sold 10.67%minority stake toagroup offinancial investors ledby Franklin Templeton (“FT”)in2015 ,tosupport theCompany foritsfuture IPO →Having reached theend ofitsinvestment horizon, DeFacto isbuying back itsshares with aview toplacing these shares with anew investor that will support the Company’s growth and realize itsIPOplans inthemedium term -The buy back ofshares ismostly completed and targeted tobefinalized in January 2022 →Inthis respect, DeFacto has appointed ÜNLÜ &Cotoactasitsexclusive financial advisor intheProposed TransactionTransaction scope Transaction timeline Shareholding structure1 DeFacto Ozon Tekstil100%NDA CIM distributionLimited Q&A & MMIndicative Offer due dateBinding bidsSigning Initiation of due diligencePhase II Phase I January 27th, 2022 →Due diligence period for a limited number of selected potential investors →Virtual dataroom access along with Q&A process →Management presentations and site/store visits →Exact timetable for Phase II to be circulated in a separate process letter for short -listed potential investorsPhase I details →Distribution of the CIM →Limited Q&A process for key questions and clarification requests →A meeting with the management (“ MM”) to be arranged upon request of the potential investors →Non-binding terms & conditions for Indicative Offer due by January 27th, 2022 →Selected potential investors will be granted access to a virtual dataroom Phase II detailsFounding shareholders2 ShareholdingDeFacto Teknoloji100% Int. subsidiaries3100%The Company 89.33% 10.67% (1) Presents the target as of January 2022 (2) Zeki Cemal Özen with 66.5% shareholding, İhsan Ateş with 13.7%, İdris Özçelik with 4.6%, Şahin Demir with 4.6% (3) Consists of wholly owned subsidiaries in international markets Source: Company IFC II. Key investment highlights IFC 11Key investment highlights Strategic positioning of DeFacto Innovative fast - fashion retailer, meeting global quality standards, at affordable pricesVision
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I details →Distribution of the CIM →Limited Q&A process for key questions and clarification requests →A meeting with the management (“ MM”) to be arranged upon request of the potential investors →Non-binding terms & conditions for Indicative Offer due by January 27th, 2022 →Selected potential investors will be granted access to a virtual dataroom Phase II detailsFounding shareholders2 ShareholdingDeFacto Teknoloji100% Int. subsidiaries3100%The Company 89.33% 10.67% (1) Presents the target as of January 2022 (2) Zeki Cemal Özen with 66.5% shareholding, İhsan Ateş with 13.7%, İdris Özçelik with 4.6%, Şahin Demir with 4.6% (3) Consists of wholly owned subsidiaries in international markets Source: Company IFC II. Key investment highlights IFC 11Key investment highlights Strategic positioning of DeFacto Innovative fast - fashion retailer, meeting global quality standards, at affordable pricesVision to become a global retail brand 1 Well -balanced internationalization strategy; benefiting from its omnichannel model 2 Multi -platform/diversified approach to online sales 3 One-stop shop approach offering a broad assortment of products addressing the whole family 4 Unique brand, well -positioned to benefit from attractive global trends 5 Strategic production base as a check and balance for the supply chain 6 Operational excellence constantly nurtured by technology investments 7 Strong professional management and rooted corporate culture 8 Strict commitment to sustainability guidelines 9 Robust financial performance backed by outstanding growth prospects ;system well- managed during Covid -19 pandemic10 IFC 12 2005 2011 2012 2017 2018 2020from 2021 onwardsInternationalization lies at the heart of DeFacto’s vision since its inception First steps of building tomorrow’s global fast -fashion brand Finding new avenues for growth in achieving the globalization vision of DeFacto →DeFacto was established bytwo visionary founders that came together with thecommon goal ofbuilding atruly global brand →Opening itsfirst store in2005 ,DeFacto quickly expanded its network inTurkey through organic store roll-outs and store acquisitions, and became thesecond largest brand bymarket share asearly asin2011→DeFacto replicated itssuccessful expansion -ledstrategy ininternational markets and grew its footprint to18countries inamere five years, starting offwith MENA and the CIS, tobe followed bydeveloped countries →The Company transformed itself byleveraging in-house technology toexecute asuccessful omnichannel strategy, with growing online sales and improving supply chain infrastructure ; both inTurkey and ininternational markets1Vision to become a global retail brand Unique combination offast-fashion retailing and production know -howEstablishing strong Turkish market presence with increased penetrationStepping into international markets with attractive fundamentals followed by rapid expansionInitiating online strategy + leveraging online channels to tap into developed marketsExpedited omnichannel growth and expansion into new international markets with optimized resource allocation strategy First international store Establishment of online presenceFirst store in TurkeyReaching more than 130 storesReaching the milestone of c.100 stores in international marketsReaching c.150 stores by expanding to more than 15 countries in international marketsFirst physical presence in Europe with flagship store opening1in Berlin, Germany (1) Expected opening in Q4 2021 Source: CompanyExpansion to Asia with Malaysia storeMore online, less physical IFC 13 (1) Store count as of October 2021 , excluding franchise stores Source: Company, World Bank2Well -balanced internationalization strategy; benefiting from its omnichannel model Bringing online and offline format together under omnichannel strategy… …with room for further growth to exploreTurkey c.80 mnpopulationMENA & CIS c.700 mnpopulationEurope c.750 mnpopulation Flagship stores in selected countries, starting from Q4 2021 with Germany, to be followed by Austria, the Netherlands and the UKLand grabbing strategy paid off by capturing prime locations… … and further growth lies in underpenetrated MENA & CIS regions with already established DeFacto operations…… as well as Europe, a new territory for DeFacto to step in, enroute to realizing its vision of becoming a global brand Internationalization strategy: Entry into developed markets “ more online, less physical ”Expand presence built on marketplaces with own Defacto.com platform and then flagship stores Become the brand of tourist shoppingCities with DeFacto stores301 stores1 168 int. stores1 70in MENA; 98in CIS, CEE, Balkan and East Asian countries IFC 14 Source: Company3Multi -platform/diversified approach to online sales Key pillars of online strategy Sustained technology investments for enhanced consumer experienceTargeted marketing efforts to promote Defacto.com Increasing partnerships with global/local marketplacesExpanding product variety and fulfillment options2MarketplacesIDefacto.com platform A truly omnichannel platformOnline strategy Clear omnichannel strategyDeFacto has been steadily focusing its efforts towards diversifying and expanding its online presence with… Multi -platform online strategy enables Accessing new territories with limited initial investmentEstablishing brand awarenessGaining valuable market insights and learning customer behavior IFC 15 (1) As of October 2021, there is one phygital store in Istanbul, Turkey Source: Company4One -stop shop approach offering a broad assortment of products addressing the whole family Product assortments with broad consumer appeal delivered through… Key category 02Men Women Core category 01Baby & kids Homewear / Sportswear Footwear Accessories Expansion category Complementary categorySupport category Growth category 06 05 04 03Key category 02 … reinvented and customized “One -stop shop” store concept to address a broader fashion spectrumTrendy and comfortable Broad offerings at value prices Serves the whole family →DeFacto stores are designed with one-stop shop concept, allowing customers toenjoy a convenient shopping experience .Going forward, DeFacto plans toopen new concept stores with niche sub-brands toappeal toawider consumer base →DeFacto Fit, anexample ofconcept stores aspreviously mentioned, was launched bythe Company, with itsfirst store opening inBursa, Turkey, in2020 →DeFacto also concentrates itsefforts onreinventing in-store experience through unique in-store activities .Phygital stores1allow customers toenjoy easier product assessment through smart screen sand afaster checkout process c.80% c.20% % share in 2021B Netsales IFC 16 (1) Individual shops’ share in total apparel market as of Q2 2021 in Turkey Source: Company, Euromonitor, IPSOS, market research1,1259201,525 2020500 630 920 895 2015 2024E2,045 1,420+1%+8% Emerging markets OthersDeFacto , ideally positioned to gain leverage from… Growing target market DeFacto operates in the most strategic segment of the apparel sector, with flexible price points enabling the Company to leverage trade up/down opportunities in the market In addition, market growth is further enhanced with the ongoing shift from unorganized individual brands/shops (still currently at c.40%1) to organized market , especially for Turkey and emerging countries where DeFacto is well -positioned to capture this growth Agile global growth strategy (i)Expanding to underpenetrated markets with relatively lower share of organized retail, signaling strong growth prospects (ii) Opening flagship stores in highly visited, tourist attracting cities
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total apparel market as of Q2 2021 in Turkey Source: Company, Euromonitor, IPSOS, market research1,1259201,525 2020500 630 920 895 2015 2024E2,045 1,420+1%+8% Emerging markets OthersDeFacto , ideally positioned to gain leverage from… Growing target market DeFacto operates in the most strategic segment of the apparel sector, with flexible price points enabling the Company to leverage trade up/down opportunities in the market In addition, market growth is further enhanced with the ongoing shift from unorganized individual brands/shops (still currently at c.40%1) to organized market , especially for Turkey and emerging countries where DeFacto is well -positioned to capture this growth Agile global growth strategy (i)Expanding to underpenetrated markets with relatively lower share of organized retail, signaling strong growth prospects (ii) Opening flagship stores in highly visited, tourist attracting cities carrying DeFacto brand to the next level in the international arena One step ahead for technological investments Omnichannel: Integration of physical stores and online Supply chain: Fast and flexible delivery optionsShopping experience: Seamless and inspiring in every channelDeFacto’s strategically built store network enables the Company to capture different growth dynamics that each market offers ; DeFacto has two distinctive strategies : DeFacto was well -prepared torespond tochanges , as shopping rapidly shifted to online with the outbreak of the Covid -19 pandemic The Company’s long -running investments paid off, as the pandemic speededup changes already underway in fashion sectorGlobal apparel market size (USD bn) 10% 6% CAGR5% -1% CAGR…attractive fundamentals in global landscape Following the increasing prices globally, consumers tend to seek out products with good price/performance ratio, using quality and value as their guides Global apparel market is set to grow at a higher pace, rebounding from the slump caused by Covid -19. Growth is estimated to come from emerging markets as shown below Online sales are seen as a silver lining, presenting the biggest opportunity for the fashion industry, going forward. Digital channels are envisaged as the primary growth driver in the coming years Online sales’ share in global apparel sales <5% 2005c.20% 202030+% 2024E 5Unique brand, well -positioned to benefit from attractive global trends Ongoing shift from unorganized individual brands toorganized markets , especially in Turkey and in emerging countries IFC 17 6Strategic production base as a check and balance for the supply chain Ozon in a nutshellA leading textile producer in Turkey, active in tricot, woven and knitwear groups Acting as an important supplier for DeFacto across categories, constituting c.12% of DeFacto’s total purchases in 2021B. Ozon is fully outsourcing DeFacto products to third -party workshops and factories across Turkey and controlling their production process from raw material sourcing to final products Strategic ownership critical for key capabilitiesOzon Tekstil enabling flexibility and favorable cost base for DeFacto Access to market intelligence and know -how via strategic suppliers →Proactive cost control through market intelligence →Best practice transferStrategic tool to benchmark and control costs of third - party suppliers→Platform to control cost base and leverage price negotiations with suppliers →Strategic production base enabling check and balance for the supply chainThird -party sourcing, benefiting from Ozon’s sector expertise→Strategic partnerships with key raw material suppliers enabling proper planning →Advantageous sourcing from carefully selected third -party suppliersDedicated capability providing sourcing security and flexibility→Optimal sourcing strategy to maximize capacity and profitability →Rapid response to fashion trends, with shorter lead timesI IVII III Source: Company IFC 18 (1) Artificial intelligence Source: Company7Operational excellence constantly nurtured by technology investments Professional management with hands -on approach, controlling day -to-day businessIn-house technology powerhouse: DeFacto TeknolojiOmnichannel native warehouse management systemCentralized logistics/warehouse management networkKey pillars behind DeFacto’s operational excellenceOnline operations1 Store operations2 Distribution/logistics3Agile management vision encouraging continuous excellence aiming highest customer satisfaction DeFacto has invested heavily in operations to serve convenient and seamless shopping experience for its customers →The Company looks tocontinuously invest, together with DeFacto Teknoloji ,toimprove its online infrastructure, and dedicates itsefforts toproviding the most convenient online shopping experience, emulating thequality offered atDeFacto stores →DeFacto seeks toextend itsfashion experience to make itavailable anytime, anywhere via mobile devices, with the added convenience ofcustomers being able pick uptheir products ataconvenient DeFacto store→DeFacto isconsistently improving its in-store experience foritscustomers, with agile store staff management and incentive tools supported bybig data analysis and AI1 →Omnichannel integration started in2015 with Pay- at-store and Buy online ;Pick-upinstore options, now available across Turkey →As part of DeFacto’s constant improvement principle, theCompany invested in: -Fully digitized hand terminal software that tracks important operational information such as shipping, shift schedules, stock keeping, etc. -Smart camera systems tracking customer decisions with variables such asgender, age, etc.→DeFacto invested inafully automated warehouse at itsmain distribution center inTurkey, enabling centralized control over supply chain processes and KPIs →Warehouse investment paved the way forefficient and swift integration ofDeFacto’s store and online operations throughout storage, transport and distribution processes →In tandem with the rapid proliferation of international operations, the Company built a network of local distribution centers across countries, toallow transfer ofmerchandise within stores IFC 19 (1) Only board member with an executive role (2) Chief growth officer (3) Chief supply chain officer (4) Board consisti ng of Zeki Cemal Özen , İhsan Ateş, İdris Özçelik, Şahin Demir, Erman Kalkandelen representing FT and Cengiz Solakoğlu , independent board member. Plus, Yılmaz Argüden is acting as advisor to the board with his extensive experience as board member roles across local and global companies Source: CompanyÖnder Şenol CFO/Online Operations 25+ years of work experienceCenk Karapınar CSCO3 years of work experience 20+Strong professional management dedicated to deliver DeFacto’s vision to become a global brand Serdar Ersoy COO/CGO2 years of work experience 20+ İhsan Ateş1 CEO 30+ years of work experience Quality and innovation driven professional management……committed to delivering sustainable growth across markets…supported by fully -equipped and visionary board4of non -executive shareholders…8Strong professional management and rooted corporate culture… Board member IFC 20 9… with strict commitment to sustainability guidelines Environmental Social Governance a member of committed to delivering the best combination of fashion , quality , price and sustainability→Viewing the environment as an integral stakeholder, DeFacto prioritizes reducing its environmental footprint by focusing on innovation and using more environmentally friendly materials, as well as developing efficient production processes with lower levels of production waste →Focusing on long -term sustainable outcomes, DeFacto
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professional management dedicated to deliver DeFacto’s vision to become a global brand Serdar Ersoy COO/CGO2 years of work experience 20+ İhsan Ateş1 CEO 30+ years of work experience Quality and innovation driven professional management……committed to delivering sustainable growth across markets…supported by fully -equipped and visionary board4of non -executive shareholders…8Strong professional management and rooted corporate culture… Board member IFC 20 9… with strict commitment to sustainability guidelines Environmental Social Governance a member of committed to delivering the best combination of fashion , quality , price and sustainability→Viewing the environment as an integral stakeholder, DeFacto prioritizes reducing its environmental footprint by focusing on innovation and using more environmentally friendly materials, as well as developing efficient production processes with lower levels of production waste →Focusing on long -term sustainable outcomes, DeFacto management works to increase social welfare through various efforts, with participation from different departments of theCompany →DeFacto employees volunteered for over 60 events, devoting more than 8,500 hours to several campaigns. Efforts were channeled mostly to raising awareness for women’s empowerment and promoting equal opportunities in education, health and child raising →DeFacto management assumes a collaborative approach, adapting sustainability measures to corporate governance and decision -making processes. DeFacto’s governance model is equipped with secure mechanisms, aligned to value creation for all stakeholders →As the highest authority in the Company, the Board runs the governance through C -suite and director level management. The CEO, the highest managerial role overseeing the full set of business functions at DeFacto , is appointed by the Board, to which the CEO reports 10-15% of the product assortment is made from regenerated yarn Recycled 4 mn1parcels and 3.6k1tons of paperAdoption of zero waste target of waste managementReduced avg. yearly per sqm electricity consumption in stores by c.37%1,2compared to 20157.7k1tons water saved for 770k products1.2k1tons scraps reused for 4.3 mn1products (1) 2020 figures (2) Turkey stores (2017 -2019) Source: Company IFC 21 Robust financial performance backed by outstanding growth prospects ;… 10 Key remarks Net sales1(TL mn) EBITDA4(TL mn)Sustained investment in technology and human resources enabling steady growth and profitabilityTargeting around 55% international sales and around 50% online sales by 2026E (1) Represents store and online operations foreach market. Others constitute thetotal sales forWholesale , Franchise and Ozon sales tothird -parties (2) Consists of MENA, CIS, Balkan and East Asian countries (3) Consists of Western European countries (4) Excluding IFRS 16 effect Source: Company, TUIKOperational excellence and close monitoring of cost items facilitating margin improvement 14.3% 10.3% 13.8% 13.8% 13.8% 14.0% 14.4% 15.2%4,0267,0749,344 11,44814,03216,960 1,341 1,423 2,5254,5866,4418,80211,43813,969 147 4057063,8515,849 267254 3887009311,3271,902 2,931 2022E 2020A 2019A 2024E1,572 2023E 2021B18,288 2,500 2025E2,651 2026E7,344 2,399254,564 4,22313,06724,07631,22339,429 +27%+40%5% 17% 19% 22% 30% 37% 44% 50% % share of onlineTopline growth across geographies and channels; focusing on further internationalization and online conversion Focusing on recently added categories such as kids and continuous shift to more value -added productsCovid -19 Covid -19 Robust EBITDA margin despite Defacto.com’s international operations still at ramp -up stage contributing negative to EBITDA during the projection period EBITDA %14.4% 10.4% 14.6% 15.2% 15.9% 16.4% 16.1% 16.0% 1,0141,7992,5313,3734,507474,599 2021B 2019A65514344 2020A 2023E1,061309 2024E 2022E92 -338 2025E5,978 141 2026E656 4391,9402,7983,6825,640 267 EBITDA exc. Defacto.com international EBITDA EBITDA % exc. Defacto.com internationalInternational operationsDeveloped markets3Turkey Developing markets2Others17% vs CPI IFC 22 (1) Please refer to Appendix section for country specific details (2) Excluding IFRS 16 effect and Defacto.com international Source: CompanyStrong negative impact of Covid -19 on the global retail industry Physical store and mall closures during lockdown dampening fashion retail sales volume and value Drastic shift in consumer behavior Major hurdles in manufacturing and supply chain DeFacto : Success story in turning threats into opportunities Widespread and diverse customer portfolio providing a natural hedge against anybusiness downturns Operational excellence due toin-house technology powerhouse and well-invested talent pool Well -managed eco-system enabling continuous goods and services flow and effective cost management formain cost items including rent and others Rapid decision making, swift implementation, and continuous monitoring tointroduce modifications, ifneeded4,564 4,2237,344 2019A 2021B 2020A 656 4391,061 2019A 2020A 2021B10.4% 14.6% 14.4%Net sales (TL mn) EBITDA2(TL mn)Region Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 13.0% 47.3% 0.1% 7.9% 21.6% 33.1% 0.1% 9.4% 44.3% 13.4% 4.1% 7.4% 4.3% 3.9%Turkey Developing markets1Turbulence caused by forced store closures due to Covid -19 pandemic in many of DeFacto’s operational markets in 2020 and 2021 EBITDA % exc. Defacto.com international…system well-managed during Covid -19 pandemic 10 Ratio of non -operational days of stores due to Covid -19 per country ≤1% ≤20% ≤50% Challenges compelled DeFacto to devise alternatives which served to bolster its financial performance Swiftly adjusting to shifts in trends and customer behavior such as online shopping , leveraging DeFacto team’s agility and flexibility Hands -onmanagement and day-to-day control ofthe business onallrevenue and cost aspects , limiting theimpacts caused bysudden external factors such asCovid -19 IFC III. Business model overview -Operational flow -Key business functions IFC 24 Source: CompanyDeFacto’s unique business operations are ideal to quickly respond to fast -fashion needs Excellence enabled by key business functions lying at the center of operations Key business functionsProcurement & Production → Experienced innovative design team, composed of 71 product designers & 31 graphic designers → Step -by-step design process based on calendar year, including in -depth analysis of micro/macro & seasonal trends, review of fabrics → Working with 200+ top suppliers for design samples and market intelligence→ Procurements made through c.500 local and international suppliers → Around 15% of procurements go through Ozon, wholly owned subsidiary of DeFacto → Local production support enabling favorable cost base, checks & balances system controlled by Ozon → Optimal sourcing in each product category due to its strategic partnership with around 25+ key suppliers→ Well -established logistics network both in Turkey and international markets, securing fast and reliable supply chain operations → Fully automated, best -in class distribution center in Turkey → International operations supported through 22 local warehouses in selected markets → AI backed inventory management provided by strategic partner, Solvoyo DeFacto Teknoloji → One-stop shop strategy executed at global standards across all countries → Omnichannel integration to fulfill customer needs for various occasions → 495 stores globally; 301 stores in Turkey,
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local and international suppliers → Around 15% of procurements go through Ozon, wholly owned subsidiary of DeFacto → Local production support enabling favorable cost base, checks & balances system controlled by Ozon → Optimal sourcing in each product category due to its strategic partnership with around 25+ key suppliers→ Well -established logistics network both in Turkey and international markets, securing fast and reliable supply chain operations → Fully automated, best -in class distribution center in Turkey → International operations supported through 22 local warehouses in selected markets → AI backed inventory management provided by strategic partner, Solvoyo DeFacto Teknoloji → One-stop shop strategy executed at global standards across all countries → Omnichannel integration to fulfill customer needs for various occasions → 495 stores globally; 301 stores in Turkey, 168 stores in 18 international markets and 26 franchise stores → Online existence in over 90 countriesLogistics & Distribution Sales/store operations Design Human resources Sustainability Business model overview Unique business model built on innovation, continuous improvement and agility Marketing IFC 25 Source: CompanyBusiness model overview Fast retail and value -driven strategy characterized by flexibility Customer -centric company culture supported by technology to timely meet specific customer demands →DeFacto implements a “ Fast Retail” and “ Cluster” strategy to address its customers’ needs. DeFacto management’s unique experience in production/supply chain and retailing lays a reliable foundation for the implementation and proper execution of this strategy →The Company forecasts fashion trends, makes quick changes to the product mix and efficiently manages store inventory due to i ts distinctive operational edge. Complementing this, the cluster strategy through constant feedback from customers and use of big data analytics, can make the right product reach the right location at the right time →Forecasting →Supporting trends →Brainstorming →Every idea through the “grinder” →Letting the best ideas winFast thinking →Establishing guiding principles →Removing bureaucracy →Shuffling portfolios →Constantly repackaging →Track recordFast decision making→Competitive advantage →Faster suppliers →Efficient process →Scalability →Institutionalizing innovationFast to market →Simplicity →Without boundaries →Growth mentality →Financial flexibility →Business process managementSustaining speed IFC III. Business model overview -Operational flow -Key business functions IFC 27Highly structured and efficient process built on unique design know -how Design Production Procurement Distribution & Logistics Sales operations Source: Company →Offering 6 main collections and 12 lines with 6 well - balanced product phases →Product lines prepared based on calendar; small quantities lined up to address additional sales opportunities →Design team has weekly milestones to roll out new lines every 2 months, with weekly deliveries to storesAnalysis Design Order →Following global trends and reviewing product design performance →Evaluating new seasonal products, including competitors →Hands -on review of fabrics and accessories from start to finish, together with Ozon Tekstil→Product development throughout the year; focus on creating new designs for current core products and updating existing designs →Product development performed by both in -house and strategic external designers, providing diversity to DeFacto’s product rangeStep -by-step design process based on →Macro/micro trends →Historical product performance review →Customer behavior Repeat →Early -order -placement mostly for “basics” and partially for “updated basics” categories, as most of the products are repeated →Up to 80% of allocated capacity ordered in advance, reducing cost and supply risk Balanced mix of designers, optimizing fashion risk and enabling differentiationLeveraging critical supplier relationships to bring external know -how to the processComprehensive detailed design process based on a wealth of data pointsEfficient order strategy capitalizing on quick response production capabilitiesRepeat or new design created by Internal designers External designersInternal designers New50% 50%Orders consist of →40% early orders with up to 8 months delivery time →40% in season orders with; c.3 months delivery time →20% open -to-buy ordersTransition TransitionWinter Fall & WinterSpring SummerCollection offeringStore operations IFC 28Favorable cost base with unique strategic partnerships % share in 2021B total purchasesDeFacto mitigates potential risks in supply chain through… Flexible sourcing decision - making abilityCost -effective approach Secured capacity→ DeFacto leverages Ozon Tekstil’s know -how inoptimizing delivery times and sourcing costs → For DeFacto purchases, Ozon outsources production tothird -party suppliers and coordinates production byguiding suppliers starting from raw material purchasing −Ozon remains thelargest supplier ofDeFacto ,with c.12%share ofthe Company’s overall purchases in2021 → Ozon plays acritical role inthevalue chain bycoordinating other suppliers via benchmarking their quality/costs with its own metrics .Ozon participates inDeFacto’s order tenders and allocates the production to relevant suppliers with desired capability and quality → Ozon’s market intelligence and production know -how stirupcompetition inthetender process, enabling DeFacto tobenefit from favorable rates → DeFacto and Ozon teams come together tocritically assess order specifications indetail, which allows DeFacto toprevent any errors or misalignments from thestart, thereby averting risks tothefinal product Shorter lead times Source: Company→ DeFacto isworking with amix ofdedicated and outsourced workshops across Turkey aswell asEast Asian countries, ranging insize and capability → The Company works with more than 500 suppliers individually −c.85%ofthesuppliers arelocated inTurkey −International suppliers are mostly used for the procurement of accessories orspecific merchandise that cannot bebought within Turkey .Purchases from international suppliers make upc.10%oftotal procurements in2021 B → 70+international suppliers enable global reach and proximity to operational markets → DeFacto hasbuilt aspecial partnership model with around 25keysuppliers tofurther optimize itssourcing ineach ofitsproduct categories .DeFacto makes capacity arrangements with these producers and guarantees the majority ofitsannual procurement need satthebeginning oftheyear −Annual capacity arrangements enable clear visibility onsourcing and production scheduleDesign Production Procurement Distribution & Logistics Sales operations c.88% c.12% Strategic suppliers (Third -party) Ozon TekstilFlexible and well -linked sourcing model enables cost optimization through unique market intelligence and know -howStore operations IFC 29Ozon Tekstil : DeFacto’s strategic ownership driving key achievements SivasHQ Istanbul 2 Source: CompanyOzon Tekstil enabling flexibility and favorable cost base throughout production→Established in2000 ,Ozon isaleading textile producer in Turkey ;producing tricot, woven and knitwear groups -Ozon Tekstil has two facilities with atotal ofc.20ksqm closed area .Factory 1inSivas produces jersey wear, while Factory 2inSivas isaprint house →Acting asakeysupplier forDeFacto across categories, Ozon is constituting c.12%ofDeFacto’s total purchases in2021 B →Ozon isfully outsourcing DeFacto products tothird -party workshops and factories across Turkey and controlling their production process from raw material sourcing tofinal products -Some factories arededicated only toDeFacto’s production →Ozon acts aschecks and balances mechanism, controlling the supply base forDeFacto ,thanks toitsrooted relationships with raw material suppliers
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enables cost optimization through unique market intelligence and know -howStore operations IFC 29Ozon Tekstil : DeFacto’s strategic ownership driving key achievements SivasHQ Istanbul 2 Source: CompanyOzon Tekstil enabling flexibility and favorable cost base throughout production→Established in2000 ,Ozon isaleading textile producer in Turkey ;producing tricot, woven and knitwear groups -Ozon Tekstil has two facilities with atotal ofc.20ksqm closed area .Factory 1inSivas produces jersey wear, while Factory 2inSivas isaprint house →Acting asakeysupplier forDeFacto across categories, Ozon is constituting c.12%ofDeFacto’s total purchases in2021 B →Ozon isfully outsourcing DeFacto products tothird -party workshops and factories across Turkey and controlling their production process from raw material sourcing tofinal products -Some factories arededicated only toDeFacto’s production →Ozon acts aschecks and balances mechanism, controlling the supply base forDeFacto ,thanks toitsrooted relationships with raw material suppliers and outsourced producers →Ozon sells c.80%ofitsproducts toDeFacto ,outsourcing the orders tosuppliers across Turkey .The remaining 20%is comprised ofexports mostly toEuropean retailers, mainly Primark and C&A -Ozon’s own production sold only toexport customersDesign Production Procurement Distribution & Logistics Sales operations Ozon Tekstil at a glance Location overview Flexible/visible production capabilitySelected blue -chip customer portfolio Shorter lead -time Product intelligence Pricing architecture# of facility 2 Total open area c.60k sqm Capacity per month 30 mnpieces Cutting per month 2 mn Total Employees c.440 Total suppliers c.650Store operations Ozon applies best practices from multinational brands inboth production technique and design variety IFC 30 Source: CompanyProduction facilities at global quality standards Design Production Procurement Distribution & Logistics Sales operations →Opened in 2005 →Total capacity is 30 mnpieces per annum with the breakdown of 70% jersey wear, 20% flat knit and 10% woven —2 mnpcs cutting / month —350k pcs garment / month …adhering to sustainability guidelines Sivas facility I (Jersey wear) 1 Sivas facility II (Print house) 2 →Opened in 2016 →1 mnpcs / month →Equipped with latest technology →Capable of various print techniques 15k sqm Closed area280 # of employees30 mnpieces capacity per annum5k sqm Closed area160 # of employees1 mnpieces capacity per annumBest in class production facilities with significant capacity…Store operations IFC 31 Integrated supply chain iskey to fast -fashion deliveryDesign Production Procurement Distribution & LogisticsEffective management of merchandise flow through DC network Sales operations Source: CompanyOrder initiated by DeFactoProduct flow from suppliersMain warehouse in ÇerkezköyStores/online consumers (Turkey) International distribution center (“DC”)Stores/online consumers (International) Products are stored inthe main warehouse, located inÇerkezköy orin international DCs, tobedistributed toB2BorB2Cclients ForTurkey warehouse, in-house Enterprise Resource Planning (ERP) system, provided byDeFacto Teknoloji ,isused .International DCs employ third -party systems Inresponse tothe Covid -19outbreak, the Company opted formulti -usage, dedicating selected stores partly towarehousing .Usage ofsuch stores aslocal hubs paved theway foramore efficient and effective distribution systemThe Company works with Solvoyo torunoperations smoothly throughout its supply chain processes .Solvoyo system, which employs analgorithmic replenishment system covering DeFacto store network, forecasts customer demand via machine learning capability and provides recommendations regarding product dispatchments onastore basis DeFacto optimizes its shipping network through applying region -specific strategies. The Company works with over 10 logistics providers to deliver goods to customers on a timely and efficient basisProduct preparation and production phase Warehousing and product delivery to sales channels/end customersStore operations IFC 32 Centralized logistics with fully -automated warehouse, supported by… Design Production Procurement Distribution & Logistics Sales operations (1) Artificial intelligence Source: CompanyInternal ITpowerhouse Omnichannel integrationFully automated best in -class warehouseAIbacked inventory managementOperational excellence and agility secured byMain DC in Istanbul→The Company centralized itsoperations inTurkey ,conducting them through thedistribution center located inTekirdağ ,Çerkezköy with atotal ofc.100ksqm area -Distribution center hasastock capacity ofc.32mnunits →Products delivered bysuppliers arereceived and dispatched tosales points through thedistribution center →Distribution center hasfour main sections ;automated warehouse, manual warehouse, storehouse and warehouse -to-warehouse →Amajor part oftheoperations inTurkey and half ofthee-commerce operations arehandled atthe distribution center →Fully automated, best-inclass distribution center inTurkey enables shorter lead -times and faster delivery from warehouse tocustomers -International operations aresupported through 22local warehouses ininternational markets →DeFacto utilizes AI2backed inventory management provided bystrategic partners, torun efficient omnichannel operations across itsstore network and centralized warehouse, ensuring the right product store allocation attheright time →Wholly -owned subsidiary, DeFacto Teknoloji with its60engineers, provides aunique competitive edge with thein-house ERP system tailored -made forthespecific needs oftheCompanyDCOpening yearArea (sqm k)Storage Capacity (unit m n) Movement Capacity (unit m n) Turkey B2B 2014 15.0 18.0 700.0 Turkey Manual 2009 18.7 5.0 150.0 Turkey Bonded 2017 7.5 3.0 60.0 Turkey Transfer 2012 4.0 2.7 30.0 Turkey B2C 2017 2.0 1.2 34.3 Turkey B2C -2 2019 6.0 2.0 54.6 Total 53.2 31.9 1,028.9Fully automated, best -in-class integrated distribution centerStore operations IFC 33 …international DC network enabling store/merchandise connectivity Source: CompanyWidespread DC network Key in achieving…Proximity to each operational marketEase of transfer and flow of merchandise across marketsCentralized approach for the inventory managementDC Opening yearArea (sqm k)Storage Capacity (unit mn)Movement capacity (unit mn) B2B Egypt 2017 1.0 0.5 15.2 Morocco 2017 1.2 0.6 20.6 North Iraq 2016 3.6 0.8 4.2 South Iraq 2017 1.2 0.4 6.2 Albania 2019 0.3 0.1 0.0 Moldova 2021 0.2 0.1 0.0 Serbia 2021 0.4 0.1 0.0 Georgia 2019 0.4 0.2 0.0 Belarus 2017 1.4 0.3 4.2 Belarus 2021 1.1 0.3 4.2 Russia 2020 1.5 0.3 13.0 Kazakhstan 2014 1.7 0.6 15.1 Kazakhstan 2020 0.9 0.2 0.4 Kazakhstan 2021 2.3 0.6 6.3 Ukraine 2021 1.1 0.3 9.4 Total 18.3 5.3 98.8 B2C Kazakhstan 2019 0.8 0.1 1.0 Egypt 2020 1.0 0.3 2.1 Morocco 2020 1.0 0.1 1.0 Ukraine 2021 0.5 0.1 1.2 Poland 2021 6.5 0.4 1.4 UK 2021 0.9 0.0 1.8 Russia 2021 0.4 0.0 0.8 Total 11.0 1.0 9.3 B2B & B2C Total 29.3 6.3 108.1Both B2B # of DCs B2CDesign Production Procurement Distribution & Logistics Sales operations Store operations IFC 34 Source: CompanyLeveraging in -house production experience and capability DeFacto’s strategic partner, Solvoyo , brings an important edge by leveraging artificial intelligence in supply chain →DeFacto started tocooperate with Solvoyo ,aglobal digital service provider specialized intheretail industry .The working relationship developed through theyears, as theCompany added more advanced supply chain modules toitssystem, and reaped thebenefits ofefficient forecasting and inventory management techniques Proven results of technology in supply chain Lower lost sales Reduced stock -outs by c.25% On time sourcingIncreased on shelf availability of products from c.65% to c.85%c.95% demand forecast success rateOn time
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2021 0.9 0.0 1.8 Russia 2021 0.4 0.0 0.8 Total 11.0 1.0 9.3 B2B & B2C Total 29.3 6.3 108.1Both B2B # of DCs B2CDesign Production Procurement Distribution & Logistics Sales operations Store operations IFC 34 Source: CompanyLeveraging in -house production experience and capability DeFacto’s strategic partner, Solvoyo , brings an important edge by leveraging artificial intelligence in supply chain →DeFacto started tocooperate with Solvoyo ,aglobal digital service provider specialized intheretail industry .The working relationship developed through theyears, as theCompany added more advanced supply chain modules toitssystem, and reaped thebenefits ofefficient forecasting and inventory management techniques Proven results of technology in supply chain Lower lost sales Reduced stock -outs by c.25% On time sourcingIncreased on shelf availability of products from c.65% to c.85%c.95% demand forecast success rateOn time delivery of right product to the right store→Predictive analytics for discount pricingPricing →Product allocations to individual stores →On time stock replenishment →Store to store transfer →Markdown optimization →Predictive analytics and machine learning →Product grading by store to optimize allocationIn-season →Demand forecasts of different attribute clusters such as color, size, fit and climate →Dynamic store clustering based on demographics →Assortment planning based on store clusters →Life-cycle estimation →Merchandise financial planningPre-season 1 2 3Design Production Procurement Distribution & Logistics Sales operations Store operations IFC 35 (1) Remaining 5% belongs to Wholesale, Franchise and Ozon sales to 3rdparties (2) Includes 26 franchise stores (3) Excludes franchise stores (4) Excludes Pay-at-store with c.4% share Source: CompanyRoute -to-market strategy shaped with multiple customer touchpoints Omnichannel model: DeFacto’s route -to-market strategy is shaped via integrating physical stores with online channel 1 Stores2 Online DeFacto aims to offer holistic shopping experience for their customers by integrating offline and online worlds Design Production Procurement Distribution & Logistics Sales operations One-stop shop designed stores located at prime locations… Turkey 301 Stores in Turkey with c.2 85k sqm net effective selling spaceInternational markets 1942 Stores in int. markets with c.143k sqm3net effective selling space c.20%Defacto.com -originated sales’ share in total Online sales4(2021B)…capturing footfall across occasionsMulti -platform strategy executed across markets… Own platformMarketplaces Marketplace -originated sales’ share in total Online sales4(2021B) …with sales derived from c.53% Turkey -originated online sales’ share in total Online sales (2021B)International markets -originated online sales’ share in total Online sales (2021B)c.47%Store operations 123178 31137 Street mix Mall mixc.75%1c.20%1 c.76% % share in 2021B Net sales IFC 36 (1) As of October 2021 Source: Company, TUIKBringing DeFacto quality through well -established store network in Turkey… İstanbul DeFacto stores: 77 DeFacto’s effective space per 1,000 people (sqm): 5.4Marmara DeFacto stores: 46 DeFacto’s effective space per 1,000 people (sqm): 4.0Black Sea DeFacto stores: 24 DeFacto’s effective space per 1,000 people (sqm): 2.4Eastern Anatolia DeFacto stores: 11 DeFacto’s effective space per 1,000 people (sqm): 1.5 Aegean DeFacto stores: 47 DeFacto’s effective space per 1,000 people (sqm): 3.9Mediterranean DeFacto stores: 37 DeFacto’s effective space per 1,000 people (sqm): 2.9Central Anatolia DeFacto stores: 43 DeFacto’s effective space per 1,000 people (sqm): 3.3Southeastern Anatolia DeFacto stores: 16 DeFacto’s effective space per 1,000 people (sqm): 1.6DeFacto’s wide store1network commands an extensive catchment area to attract its target market of Turkey’s total GDPc.95% c.90% of Turkey’s population store network covers DeFacto has successfully completed its landgrabbing strategy and secured its foothold in high -traffic locations in almost every city in TurkeyDesign Production Procurement Distribution & Logistics Sales operations 77 4624 43 47 371611Store operations IFC 37 (1) Excluding franchise stores Source: Company…and expanding international footprint from emerging to developed markets Design Production Procurement Distribution & Logistics Sales operations Number of stores of top 6 countries by revenue in international market2012 - Q4/2021: First flagship store in Berlin, Germany 168 international stores1 70 in MENA; 98 in CIS, CEE , Balkans and East Asian countries Planned expansion to developed countries with flagship stores NEW MARKETSPlanned expansion in already penetrated marketsFirst wave: Internationalization through emerging countries Second wave: Expansion to developed markets with limited flagship stores Internationalization journey continues…Expected store openings in 2022 in Germany, the UK, the Netherlands and Austria Established presence in emerging countries... … planned expansion in emerging countries as well as in developed countries DeFacto steps up its internationalization drive by expanding into developed markets, at the tailwind of growing online sales 2021 -Store operations # of stores planned to be opened in 2022 # of stores as of October 20215 3 38 2 Ukraine Russia Egypt Other MENAOther CIS21 1 1 Germany Austria UK the Netherlands33 29 24 1715 11 Kazakhstan Russia Morocco Iraq Egypt Belarus IFC 38 Source: CompanyInternational footprint of DeFacto Online -only Online & Offline Offline -only FranchiseGlobal presence in over 90 countries through diverse operational models with its 2022 target to enter the UK, Austria and the Netherlands offline 14 13 68 4 # of countriesDesign Production Procurement Distribution & Logistics Sales operations Store operations IFC 39 Pay-at-storeMulti -platform approach in online sales to maximize reach Source: CompanyDesign Production Procurement Distribution & Logistics Sales operations →DeFacto leverages itsstrong relationships with marketplaces togain easier access tonew markets, aspart ofitsinternational expansion strategy →Online sales through marketplaces enable DeFacto tocollect valuable customer data ;identify market potential ;gain insights into customer habits and preferences ;and adapt tolocal conditions, before contemplating the costlier option oflaunching itsDefacto .con site and opening physical stores inanew market →DeFacto follows this asitsmain online strategy tofacilitate market penetration and establish brand awareness, which also serves asatool toincrease Defacto .com sales over medium/long term →The Company hired account managers with local language and market skills, aspart ofitsone-year expansion plan comprising 90countries .Recently, DeFacto started tocollaborate with marketplaces inIndia and Latam region→DeFacto has evolved into atrue omnichannel retailer through sustained investments, adapting itself tochanging trends and customer needs, thereby attaining robust sales growth, especially viaitsown platform →DeFacto invested heavily initsonline platform over the years, collaborating with itstechnology subsidiary, DeFacto Teknoloji →Defacto .com platform aims toprovide users with aseamless customer journey through personalized offers ,click and collect experience and top-notch recommendation tool →Distinctive omnichannel features such asPay-at-store, click and collect and ship from store arealso executed through Defacto .com platform →Throughout the years, DeFacto increased itssocial media footprint vialocal celebrities and influencers, inorder toattract more customers and support the growth oftheplatformMarketplace 76% 4% →The Company encourages customers
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account managers with local language and market skills, aspart ofitsone-year expansion plan comprising 90countries .Recently, DeFacto started tocollaborate with marketplaces inIndia and Latam region→DeFacto has evolved into atrue omnichannel retailer through sustained investments, adapting itself tochanging trends and customer needs, thereby attaining robust sales growth, especially viaitsown platform →DeFacto invested heavily initsonline platform over the years, collaborating with itstechnology subsidiary, DeFacto Teknoloji →Defacto .com platform aims toprovide users with aseamless customer journey through personalized offers ,click and collect experience and top-notch recommendation tool →Distinctive omnichannel features such asPay-at-store, click and collect and ship from store arealso executed through Defacto .com platform →Throughout the years, DeFacto increased itssocial media footprint vialocal celebrities and influencers, inorder toattract more customers and support the growth oftheplatformMarketplace 76% 4% →The Company encourages customers toenjoy the convenience ofinnovative features such asPay-at-store, Click and Collect thanks toitsdeveloped omnichannel infrastructure →Pay-at-store and Click and Collect areavailable atevery store inTurkey and hasgrowing availability ininternational marketsDefacto.com platform 20% 18+ % share in 2021B Online sales # of countriesOnline sales through… Select list of strategic partner marketplaces →Platform isalso designed toprovide the same unique shopping experience from each device, facilitating shopping ateach occasion Multi -device availability90+Store operations IFC 40 2026DeFacto’s online journey over the years →Set up online presence →Provided basic information to customers →Offloaded excess merchandise from previous seasons →Limited product variety →No substantial growth→Focus on clearing out stock from previous seasons →Product variety limited with outlet products only →Tested “ click and collect ” in 2016 →Initiated selling products on marketplaces→Appointed new team →Changed product mix from outlet to current stock →Increased product variety, exceeding offline −Exclusive product lines updated weekly →Increased inventory levels and size availability →In-store ordering in pilot phase in Istanbul →“Ship from Store” launched in 2018→Mobile application relaunched →Online website r edesigned →Online catalog styling enhanced →First online sales in Kazakhstan, Egypt, Morocco and Iraq →Launch of Defacto.com in Germany and in the UK and surge in online sales →Improving shopping experience initiatives: −Launch of Astrafit −Launch of Snap -by →“Ship from Store” expanded to 15 countries within 2018Step 1 –Launch Step 2 –First steps Step 3 –Strategy shift Step 4 –Growth →Expansion of online presence in 90+ countries through marketplaces →Initiated collaborations with strong local players in new geographies such Latam , India and East Asia →Started working with locally -based account managers to gain deeper insights into customer demand and improve communication →Defacto.com platform constantly streamlined to support growthFuture is here Source: Company2% % share of Online sales in Net sales17% c.50%2021 -Onwards 2018 -2020 2017 -2018 2012 2013 -2016 Being one of the early adopters of digital transformation in the fashion industry, DeFacto is well -equipped to deliver a seamless online shopping experience to its customers Management’s target for online sales by 2026 2018 2020Design Production Procurement Distribution & Logistics Sales operations Store operations c.20%2021 IFC 41 April 2020 Source: Company, Zalando websiteCase study: DeFacto’s exemplary success with Zalando Impressive expansion success with Zalando Partnership Two-tiered market expansion Strong partnership continues… DeFacto live in 4 marketsDeFacto live in an additional 8 marketsContinuous expansion in Europe1stphase 2ndphase March 2020 October 2020 → In March 2020, DeFacto joined Zalando via Partner Program, under the concept of reaching the widest fashion customer base possible → The program enables DeFacto to readily access a large and diverse, previously untapped customer potential→ Based on data forecasts provided by the Partner Program, DeFacto went live in four markets → Testing its offer in these markets first, DeFacto became acclimated to this platform, especially with respect to assessing the right level of assortment depth and width to meet demand → DeFacto ensured a solid stock flow to Zalando Fulfillment Solutions warehouses → DeFacto went live in an additional eight markets in May, paving the way for an incremental net merchandise value (NMV) growth of 9,700+% from March to October 2020→ DeFacto leveraged its Partner’s logistical infrastructure in Europe, saving both time and money → Internationalization drive remains under way, to continue with other European countries → Increasing assortment width through new category additions → Integration process in new markets facilitated by integrator partner, ChannelAdvisor 12 markets in less than 4 months4x sales in less than 4 months9,700 +% NMV growth in less than 4 monthsMay 2020 IFC 42 Source: CompanyDiligent evaluation on store opening process Site identificationSite evaluation Go / No Go decision by Head of ExpansionTerm negotiationFit out and recruitmentOpening →Search criteria →Agent relationship →Regular contact→Site visits →Feasibility analysis →Business case →Letter of intent→Legal review by lawyers →Lease agreed →Pre-exchange check list→Handover to technical team →Capex deployment →Store fitted out by store development team →Virtual merchandising team handling final pre-opening phase →Marketing activities Up to 2 years before openingc.8 weeks c.2 weeks c.10 weeks Design Production Procurement Distribution & Logistics Sales operations Store operations The whole process is managed by a dedicated team of 11 employees IFC 43One -stop shop concept promises pleasant in -store shopping experience… ENTRANCE ENTRANCEENTRANCEFASHIONWOMEN YOUNG MEN YOUNGKIDS BOYDENIMMEN ACTIVEWEARWOMEN ACTIVEWEAR DENIMKIDS F.R. KIDS ACCKIDS GIRLWOMEN CASUALWOMEN ACC MEN ACC MEN CASUALCASH ACC[CHINO]SMARTCASH DESKDEPOTMEN F.R. MEN HOMEWEAR1 2 3 4 5 6 7 HOMEWEAR LINGERIEWOMEN [ ]1 2 3 4 5 678MATERNITYIndividual sections for each product category Store sections suited to target customers Store design of one -stop shop concept … …offering visitors an enjoyable shopping experience Source: Company c.950 sqmAverage store sizeTurkey c.850 sqmInternationalComfortable and easy shopping experience Visually appealing store designs More light and more space Employee incentivization at the register to promote cross -selling opportunities Tailor -made employee ranking system creating a fair ground and visibility for high -performing staff Smart fitting rooms equipped with a call staff button for customers requiring a different size or colored itemDesign Production Procurement Distribution & Logistics Sales operations Store operations Sample DeFacto store layout IFC 44 Source: Company…as well as displaying DeFacto’s popular product assortment to customers 30% of product range are repeat styles, while 65% are re -orders of successful test stylesBasics Repeated and updated styleTrendy basic Repeated and updated styleAcceptable fashion Proven and reorderedNew fashion New offering →Value for money →Quality →Always in style→Broad appeal →Fashion details →Innovation→New trend →Easily adopted →Commercial details→Variety →Question mark →Test
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appealing store designs More light and more space Employee incentivization at the register to promote cross -selling opportunities Tailor -made employee ranking system creating a fair ground and visibility for high -performing staff Smart fitting rooms equipped with a call staff button for customers requiring a different size or colored itemDesign Production Procurement Distribution & Logistics Sales operations Store operations Sample DeFacto store layout IFC 44 Source: Company…as well as displaying DeFacto’s popular product assortment to customers 30% of product range are repeat styles, while 65% are re -orders of successful test stylesBasics Repeated and updated styleTrendy basic Repeated and updated styleAcceptable fashion Proven and reorderedNew fashion New offering →Value for money →Quality →Always in style→Broad appeal →Fashion details →Innovation→New trend →Easily adopted →Commercial details→Variety →Question mark →Test productc.20% c.25% c.53% c.2% % share in 2021B Net sales 10-15% of the product assortment is made from regenerated yarnDesign Production Procurement Distribution & Logistics Sales operations Store operations IFC 45 Source: CompanySupportive franchise model to foster international expansion efforts DeFacto ’s franchise model is based on supporting its franchisees at allaspects toensure thesame quality of service with its own storesOperational support Global best practiceIT Integrated technology with DeFacto HQMarketing Traditional and new -ageTraining model Alignment with DeFacto staff training programConstruction Cost effective build DeFacto’s franchise opening criteria Supporting franchisees in every step of the way Well -defined franchise pre -qualification criteria Continuously monitoring franchises according to key performance criteria Long -term business relationships with operational franchisees Global thinking and local approach for effectively penetrating markets with high barriers to entry No inventory and consignment agreement risk Integrated IT system enabling seamless monitoring of DeFactoKosova franchiseDesign Production Procurement Distribution & Logistics Sales operations Store operations Tajikistan franchise Azerbaijan franchiseModel No royalty in place DeFacto sells products to franchisees IFC III. Business model overview -Operational flow -Key business functions A. Sustainability B. HR C. Marketing D. Technology IFC 47 (1) 2020 figures (2) Turkey stores (2017 -2019) Source: CompanySustainability is central to the strategy 01 Supplier code of conduct →DeFacto suppliers DeFacto are required to comply with certain conditions, such as UNGC Principles, Universal Declaration of Human Rights, ILO and DeFacto’s social values →Supplier audits are conducted regularly by the Company in order to examine the capabilities →Key supplier audits include child labor (not accepted under any circumstances), fire and safety, use of personal protective equipment →Physical and analytical testing laboratories, in accordance with European Union Accreditation standards, analyze; —Product quality —Non-fire safety—Baby and kids apparel safety —Ecological standards and hazardous chemicals02 Testing 04 Environmental and social responsibility initiatives →Committed member of Global Compact Alliance, as well as local initiatives →Management of impacts arising from activities and products with awareness is DeFacto’s responsibility to the environment, employees and society03 Sustainability Recycled 4 mn1parcels and 3.6k1tons of paperAdoption of zero waste target of waste managementReduced avg. yearly per sqm electricity consumption in stores by c.37%1,2compared to 20157.7k1tons water saved for 770k products Sustainability at the heart of operations… 1.2k1tons scraps reused for 4.3 mn1products 10-15% of the product assortment is made from regenerated yarn IFC 48 (1) Since 2014 (2) Since 2015 Source: CompanyEthical and sustainable retailer compliant with ESG standards …aimed at generating the best combination of fashion and sustainability →DeFacto hasaclear mission todeliver fashionable products atgood quality and atvalue prices bymeeting exemplary sustainability criteriaSustainability is embedded in DeFacto’s operations … Environmental 1 →DeFacto’s main priorities are —Reducing raw material consumption —Preventing water and energy waste in production —Efficient energy usage in stores Sustainability at coreEnvironmental Social Governance Social 2 →DeFacto administers stringent audit measures toitssuppliers, ascertaining that good practices areapplied throughout thesupply chain —DeFacto audited more than 500 suppliers in 2020 →The Company tests allofitsproducts’ compliance byStandard 100 Oeko - Tex,certifying thehighest quality and safety product standards →DeFacto organizes special days every year toevaluate creations and exchange ideas with itssuppliers Governance 3 →DeFacto established sound corporate governance principles (independent board, separation ofownership and management) and haswell-operating audit and riskcommittees inplace toprevent internal/external riskfactors that could pose athreat tobusiness →C-suite responsible forleadership and oversight ofsustainability efforts DeFacto is a committed Global Compact1and Women Empowerement Principles2signatory since 2014, and uses Global Reporting Initiative (GRI) standards as a guide… and central to DeFacto’s strategy IFC 49 Source: Company2020 -2021 2023 2030 →Use of parcels made from recycled paper has been started. 4 mnwaste parcels and 3.6k tons of wastepaper were recycled annually →7.7k tons of water saved for 770k sustainable products →Prevented waste generation by reusing 1 .2k tons of scrap in 4.3 mnproducts →Conducted more than 5 00supplier audits →Upholding environmental values, while creating fashion : With 3.5 mnrecycled products and 260,000 tons of water savings, DeFacto has met the clean water needs of 4 -member 11,682 households for one month →More than 500,000 people received seed tags →Maintain cooperation with civil society organizations and associations to support sustainability →DoğaKalpBen collection constitutes 35% of total goods sold →100% zero waste in main stores and logistics →100% Green to Pack →100% plastic -free disposable materials →Eco-friendly stores →100% sustainable cotton →100% recycled polyester →100% sustainable linen →100% renewable energy consumption at own locationsSustainability is a core component of DeFacto’s long -term vision, with key targets scheduled for implementation Achievements Goals for the future Social awareness campaign in back to school period to inspire social awareness at early ages 2.1 mnviews 400k likesDeFacto strongly committed to achieving sustainability goals IFC 50Strong HR culture dedicated to promoting best in class work environment CFO CGO1CMO (1) Chief Growth Officer (2) Chief Supply Chain Officer Source: CompanyC-suite on charge of key departments… CEO CSCO2 Finance and e-commerceMarketingExpansion and offline operationsSupply chain, audit and project management …managing a dedicated workforce of 13,000 people Headquarters Warehouses Stores c.2,000 c.10,000 c.1,000 # of employees Like-minded talent pool connecting with DeFacto’s consumer base… …retained and recruited through visionary corporate initiatives →Attheforefront ofDeFacto’s success liesitsdesire tounderstand itscustomer base, starting from itsown employees →DeFacto’s young talent pool, 97%ofwhich pertains toGeneration Zand Y, enables theCompany toconnect with itscustomer base →Taking cues from itsemployees, DeFacto excels innew designs, delineating seasonal trends and next generation clothing ideas→Cognizant ofthefact that itsyounger generation employees setitapart from competition, DeFacto iskeen tomaintain afriendly and joyful workplace
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culture dedicated to promoting best in class work environment CFO CGO1CMO (1) Chief Growth Officer (2) Chief Supply Chain Officer Source: CompanyC-suite on charge of key departments… CEO CSCO2 Finance and e-commerceMarketingExpansion and offline operationsSupply chain, audit and project management …managing a dedicated workforce of 13,000 people Headquarters Warehouses Stores c.2,000 c.10,000 c.1,000 # of employees Like-minded talent pool connecting with DeFacto’s consumer base… …retained and recruited through visionary corporate initiatives →Attheforefront ofDeFacto’s success liesitsdesire tounderstand itscustomer base, starting from itsown employees →DeFacto’s young talent pool, 97%ofwhich pertains toGeneration Zand Y, enables theCompany toconnect with itscustomer base →Taking cues from itsemployees, DeFacto excels innew designs, delineating seasonal trends and next generation clothing ideas→Cognizant ofthefact that itsyounger generation employees setitapart from competition, DeFacto iskeen tomaintain afriendly and joyful workplace −DeFacto employs a Happiness Director overseeing employee morale −DeFacto encourages its employees to broaden their horizons through its own online learning system, DeFacto Academy →DeFacto conducts management trainee programs toattract new talent from reputable universities −c.65% of DeFacto employees are university graduates IFC 51 Source: Company360˚marketing with focused messaging across multiple customer points Effective use of both traditional and digital media marketing 1. One -stop Shop Strategy Effective use of all available communication media TV ads are key to sustaining brand awareness, both in Turkey and international markets For Women : Support “fashion” perception among women and promote women customers’ potential with continuous interaction For Men : Communicate seasons, Father’s Day, holiday periods For Kids : Special advertisements and collaborations and license collaborations to widen brand reach and to convert one -time shoppers to loyal customers 2. 365 -Day Digital Support Enhanced collaboration with local influencers to reinforce bonds with customers both in Turkey and international markets Close interaction with customer base with professional social media account management Specialized discount campaigns for social media followers, to promote mobile application usage and brand awareness5. Content Marketing Available throughout the year to support all campaigns Theme -based campaigns to promote social awareness 4. In -Store and Event Marketing 52-week new product and pricing communication Occasional event sponsorships 3. Online and Offline, Integrated Projects 360 Support Continuous communication with customers to bridge online and in - store shopping experiences, and drive omnichannel capabilities Loyalty card initiative launched to collect valuable customer data Plans include tailored shopping recommendations to customers, based on their past preferences Effective use of search engine optimization (SEO) marketing to attract traffic to Defacto.com Printed Media Magazines, NewspapersVideo All Video Content Platforms Yotube etc.TV TVC, Scenario, Integrations, Garment Sponsorships Radio National, Regional Digital Media Web pages, All Other Platforms Social Media Proactive Social Media, e -dictionary DeFacto Channels Defacto.com.trSearch Engines Targeting, SEO and TrafficBlogs Bloggers, Mass Web PagesMobile Platforms Apps, SMS and Other Mobile Digital Media ChannelsE-mailing Mailing and NewsletterEvents All Instore and Mall Events1 2 345Marketing efforts are scattered across the brand calendar, including those marking traditions and celebrations (Christmas, Ra mad an, etc.) DeFacto’s “Back to School ” campaign to promote sustainability ideas among students Ratio of marketing expenses over net sales of c.1.5% in the historical period increased to c.2.5% in 2021B which is estimated to increase to c.3.5% in 2022 and gradually to c.6.5% by 2026; continuous brand investment to fuel growth, increase geographical footprint and increase online presence IFC 52 Source: CompanyLeveraging in -house production experience and capability In-house IT capabilities secured by DeFacto Teknoloji E-Commerce →E-Commerce and Omnichannel Platforms (in-house ) →Mobile app & mobile web IT Business Services →ERP applications (in-house ) →3rdparty applications →Application integrations →B2B, web & mobile applications Business Intelligence →Data warehouse →Reporting & analytics services →Big data platformIT Infrastructure Services →Datacenter (Main & disaster recovery) →Server and storage →Network →Database management →Monitoring (availability and capacity & performance) →Backup and replication services Information Security →IT governance →Information security →Access & identity management →Security monitoring & intervention Service Desk →Incident management →Request fulfillment for all DeFacto ecosystem with defined service -level agreements→Employing 60engineers, wholly -owned subsidiary DeFacto Teknoloji provides aunique competitive edge, with in-house ERP system tailored toDeFacto’s specific needs IFC IV. Financial overview IFC 54 Source: Company, IMFBasis of preparation Proposed Transaction scope includes minority stake sale of 10.67% treasury shares of DeFacto owned by the Company, as described in Executive Summary →DeFacto prepares three sets of consolidated financial information with fiscal year being the 12 -month period as of January 1 of the cal endar year, ending on December 31 of the calendar year (i.e. ,01.01.2020 –31.12.2020) −Statutory accounts :DeFacto’s statutory accounts areprepared inaccordance with theTurkish Commercial Code fortaxfiling purposes −Management accounts :DeFacto keeps itsmanagement accounts IFRS-like inTLonaconsolidated basis, and issues monthly accounts detailed atgeography and channel level -Compatible with IFRS financials except for2applications :(i)IFRS 16implementation and (ii)recording ofsome merch andise costs under COGS ,asopposed tounder OPEX inIFRS accounts (Please refer toAppendix forfurther details ) −IFRS financials :DeFacto’s consolidated IFRS financials issued onaquarterly basis areaudited byDeloitte since 2020 and byKPMG theretofore Historical financials presented in this section are based on the consolidated Management accounts of DeFacto →DeFacto management tracks its consolidated operational performance under 4 main segments; (i) Turkey operations, (ii) Developing markets, (iii) Developed markets and (iv) Others including Wholesale operations, Franchise operations and Ozon sales to third -parties →For main segments; namely Turkey, Developing markets and Developed markets; the management follows both holistic and channel -based performance reporting, analyzing the segments under 2 main channels, covering Store operations and Online operations which include performance of De facto.com, Marketplace operations as well as Pay -at-store operations −Although Pay-at-store operations arecovered and reported under Online channel performance, management periodically reviews effective selling space performance and direct costs forStore and Pay-at-store operations combined, foreffective and efficient growth and profitability analysis →Management reports for segments and channels go up to the contribution level which comprises cost of goods sold as well as ch annel-based direct costs including personnel, building, marketing and other operational expenses 2021 Budget and forecast period (2022 -2026) presented in this section are prepared by DeFacto management, on a consolidated basis ,as per below →2021B –2026 Efigures are on the same basis with Management accounts as explained above, presenting management estimates for the forecast period →c.15% of price and cost correction ha vebeen incorporated
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De facto.com, Marketplace operations as well as Pay -at-store operations −Although Pay-at-store operations arecovered and reported under Online channel performance, management periodically reviews effective selling space performance and direct costs forStore and Pay-at-store operations combined, foreffective and efficient growth and profitability analysis →Management reports for segments and channels go up to the contribution level which comprises cost of goods sold as well as ch annel-based direct costs including personnel, building, marketing and other operational expenses 2021 Budget and forecast period (2022 -2026) presented in this section are prepared by DeFacto management, on a consolidated basis ,as per below →2021B –2026 Efigures are on the same basis with Management accounts as explained above, presenting management estimates for the forecast period →c.15% of price and cost correction ha vebeen incorporated to the 2022E business plan by the management considering recent sharp devaluation of TL and increasing inflationary environment; a portion of thiscorrection has already been applied for prices as we ll as costs Management prepared forecast period Management accounts as perthemacro assumptions below 2019A 2020A 2021B 2022E 2023E 2024E 2025E 2026E Inflation (TL) 11.8% 14.6% 20.0% 18.0% 15.0% 15.0% 15.0% 15.0% USD / TL (Avg) 5.68 7.02 8.90 14.42 16.17 18.60 21.39 24.59 USD / TL (EoP) 5.95 7.35 13.80 15.04 17.30 19.89 22.88 26.31 EUR / TL (Avg) 6.35 8.03 10.50 16.30 18.27 21.01 24.17 27.79 EUR / TL ( EoP) 6.66 9.02 15.59 17.00 19.55 22.48 25.85 29.73 IFC 55Financial overview onDeFacto as a whole Key remarks Net sales1(TL mn) EBITDA4(TL mn)Sustained investment in technology and human resources enabling steady growth and profitabilityTargeting around 55% international sales and around 50% online sales by 2026E (1) Represents store and online operations foreach market. Others constitute thetotal sales forWholesale , Franchise and Ozon sales tothird -parties (2) Consists of MENA, CIS, Balkan and East Asian countries (3) Consists of Western European countries (4) Excluding IFRS 16 effect Source: Company, TUIKOperational excellence and close monitoring of cost items facilitating margin improvement 14.3% 10.3% 13.8% 13.8% 13.8% 14.0% 14.4% 15.2%4,0267,0749,344 11,44814,03216,960 1,341 1,423 2,5254,5866,4418,80211,43813,969 147 4057063,8515,849 267254 3887009311,3271,902 2025E4,223 2019A2539,429 2,931 2023E2,399 2020A1,572 2022E2,500 2026E 2024E 2021B2,651 18,288 4,5647,34413,06724,07631,223 +27%+40%5% 17% 19% 22% 30% 37% 44% 50% % share of onlineTopline growth across geographies and channels; focusing on further internationalization and online conversion Focusing on recently added categories such as kids and continuous shift to more value -added productsCovid -19 Covid -19 Robust EBITDA margin despite Defacto.com’s international operations still at ramp -up stage contributing negative to EBITDA during the projection period EBITDA %14.4% 10.4% 14.6% 15.2% 15.9% 16.4% 16.1% 16.0% 1,0141,7992,5313,3734,50747 -338 2019A6554 2020A 2024E 2025E 2021B141 2022E439 2023E26730992 5,978 4341,0612,798 1 2026E5,640 6561,9403,6824,599 EBITDA EBITDA exc. Defacto.com international EBITDA % exc. Defacto.com internationalInternational operationsDeveloping markets2Turkey Developed markets3Others17% vs CPI IFC 56 Source: CompanyDeFacto , a success story for profitable growth with a global vision from Day 1 →Focus ononline ;enter with marketplace, establish brand awareness and continue with Defacto .com →Increase global presence with less capital and resource incentive strategy ;mainly focusing onEuropean countries and US →Physical entry toGermany in2021 willbefollowed with theUK,Austria and theNetherlands in2022 →Extending itsglobal footprint, willseek tobecome the“sought after brand” bytourists inDeveloped markets→Focus onDefacto .com and marketplaces ;online isakeypocket todeep -dive inTurkey →Continuously explore growth opportunities both for new marketplaces, aswell asshifts toDefacto .com from marketplaces →Enhance inventory management ;avoid stock -outs and integrate effective AIsystem into online operations →Opportunistic new store openings ;focus onenhancing efficiency atexisting stores interms ofcost and sqm usage →Continuous brand investment Developed marketsTurkey operations “Key milestone for globalization with more online, less physical strategy”“Focus on further enhancing brand positioning, consumer acquisition and market share” →Grow inexisting markets and explore new markets forgeographical expansion (such asLatam, India ,etc.) →Heavily invest inonline growth (Egypt ispriority), focusing onboth Defacto .com and marketplaces ;China ismedium - term target foronline growth →Store openings are still important strategy where the shift from unorganized toorganized retail isakey trend in Developing markets ;growth supported byincreasing brand awareness and experience instore strategies →Opportunistically explore growth viafranchises, especially formarkets where local presence and know -how arekey“Replicate the success in Turkey for continuous expansion and profitable growth across channels”Developing marketsShift towards more profitable products Be opportunistic and explore growth opportunities across geographies and channelsMaintain keener focus on baby and kids segment Better inventory management and SKU optimizationPlace emphasis on online, technology and HR Big data analysisClosely monitor consumer trends and be a leaderDeFacto’s key strategies… …enriched with regional strategies for agility and flexibility IFC 57 Source: CompanyOverview of store and online operations →The figures on the left pertain to DeFacto’s Turkey operations, comprising DeFacto stores and online operations →Management tracks Turkey operations under two main sales channels, stores and online, which account for c.82% and c.18% of 2021B Turkey net sales, respectively →As clearly denoted by historical figures, a shift to online operations is evident, as DeFacto management has adapted its business strategy over the years in parallel with the changing global retail landscape and trends →With the Covid -19 pandemic having upended the retail industry with forced store closures, DeFacto has successfully pivoted its operations to serve its customers through the online channel −Online sales’ share increased to 19% in 2020, as DeFacto quickly responded to the changing realities of the retail sector, thanks to its well -invested online infrastructure −Going forward, the weight of the online channel in Turkey net sales is projected to rise towards c.50% as of 2026E →DeFacto showed strong resilience against the uncertainties and disruptions caused by Covid -19 by closely controlling its cost base and store operations through constant efficiency improvements and monitoring of day -to-day operations −Gross profit margin improved in 2021B due to a longer inventory days as well as DeFacto’s substantial efforts towards managing demand fluctuations through Ozon’s supplier management expertise, ongoing supplier optimization and improved inventory management techniques; later 3 estimated to have permanent impact on gross profit margin →As a result of management’s cost -control approach, operational cost increases were kept at a minimum in 2020, despite store closures due to Covid -19 →Contribution margin is projected to improve to 26% from 24% over the next five years, due to improving category & brand mix, maturing
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of 2026E →DeFacto showed strong resilience against the uncertainties and disruptions caused by Covid -19 by closely controlling its cost base and store operations through constant efficiency improvements and monitoring of day -to-day operations −Gross profit margin improved in 2021B due to a longer inventory days as well as DeFacto’s substantial efforts towards managing demand fluctuations through Ozon’s supplier management expertise, ongoing supplier optimization and improved inventory management techniques; later 3 estimated to have permanent impact on gross profit margin →As a result of management’s cost -control approach, operational cost increases were kept at a minimum in 2020, despite store closures due to Covid -19 →Contribution margin is projected to improve to 26% from 24% over the next five years, due to improving category & brand mix, maturing online sales and scale impactRemarksTurkey operations Developing markets Developed markets Others CAGR Unit 2019A 2020A 2021B 2022E 2023E 2024E 2025E 2026E 19-21 21-26 # of effective stores # 318 300 308 316 325 330 335 340 Turkey net sales TL mn 2,931 2,399 4,026 7,074 9,344 11,448 14,032 16,960 17.2% 33.3% growth % -18.1% 67.8% 75.7% 32.1% 22.5% 22.6% 20.9% Store % 2,734 1,938 3,289 5,639 6,920 7,606 8,225 8,884 9.7% 22.0% % of net sales % 93.3% 80.8% 81.7% 79.7% 74.1% 66.4% 58.6% 52.4% Online % 197 461 737 1,435 2,425 3,842 5,807 8,076 93.6% 61.4% % of net sales % 6.7% 19.2% 18.3% 20.3% 25.9% 33.6% 41.4% 47.6% Gross profit TL mn 1,341 1,057 1,965 3,319 4,449 5,497 6,738 8,127 21.1% 32.8% margin % 45.8% 44.1% 48.8% 46.9% 47.6% 48.0% 48.0% 47.9% Operational costs TL mn 773 684 1,000 1,683 2,144 2,544 3,095 3,742 13.7% 30.2% % of net sales % 26.4% 28.5% 24.8% 23.8% 22.9% 22.2% 22.1% 22.1% Personnel expenses TL mn 285 234 352 580 727 880 1,054 1,269 11.1% 29.3% Building expenses TL mn 326 248 360 570 696 734 790 851 5.0% 18.8% Marketing expensesTL mn 18 28 42 100 127 162 243 352 52.3% 52.8% Operational expensesTL mn 144 174 246 434 595 768 1,007 1,270 30.8% 38.9% Contribution TL mn 568 373 965 1,636 2,305 2,953 3,643 4,385 30.4% 35.3% margin % 19.4% 15.6% 24.0% 23.1% 24.7% 25.8% 26.0% 25.9% IFC 58 (1) Pay -at-store sales are sales to store customers whereby payment is made at store and merchandise is shipped to customer (2 ) Calculated using effective net selling space presented in thispage Source: CompanyOverview of store operations →In Turkey, DeFacto has implemented an effective land grab bing strategy over the years, capturing strategic locations in frequented venues with high consumer traffic −Store network across Turkey reached more than 300 stores →After having taken DeFacto brand to almost every city in Turkey, the Company decided to adapt store optimization and efficiency strategy →Pursuing an opportunistic approach to new store openings and being constantly on the lookout for new prime locations across Turkey, management targets 340 stores by 2026E −Sub-brand store openings such as DeFacto Fit are included in the targets →Store sales’ share isexpected to gradually decrease to c. 50% from c.80% in 2021B with an accelerating shift to online →Despite this demand shift, management plans to increase sales per sqm in 2022 and 2023 through improved category mix, more effective sqm usage and implementation of technological tools in stores →Gross profit margin improved in 2021B mainly due to slower inventory turnover and is expected to decrease in 2022 to c.47%, with slight improvements envisaged thereafter due to shift towards value -added products and supplier optimization; tactical moves by the management creating lasting margin improvements →Improvements in operational costs are mainly due to effective personnel and rental expense strategies, and better inventory management with omnichannel integration −Leveraging its anchor store status in malls, DeFacto exerts its bargaining power in rental term negotiations →As part of their holistic omnichannel strategy, management monitors the effect of Pay -at-store sales’ efficiency on sales per sqm and contribution, as denoted by figures on the leftRemarksTurkey operations Developing markets Developed markets Others Additional analysis with Pay -at-store performance1CAGR Unit 2019A 2020A 2021B 2022E 2023E 2024E 2025E 2026E 19-21 21-26 # of effective stores # 318 300 308 316 325 330 335 340 Effective net selling space sqm k 279 223 241 292 300 307 313 319 Sales per sqm TL/sqm 9,799 8,675 13,662 19,342 23,034 24,772 26,264 27,845 18.1% 15.3% growth % -11.5% 57.5% 41.6% 19.1% 7.5% 6.0% 6.0% Store n et sales TL mn 2,734 1,938 3,289 5,639 6,920 7,606 8,225 8,884 9.7% 22.0% growth % -29.1% 69.7% 71.5% 22.7% 9.9% 8.1% 8.0% Gross profit TL mn 1,265 867 1,640 2,663 3,330 3,712 4,030 4,353 13.8% 21.6% margin % 46.3% 44.8% 49.9% 47.2% 48.1% 48.8% 49.0% 49.0% Operational costs TL mn 712 560 805 1,291 1,565 1,678 1,802 1,945 6.3% 19.3% % of store net sales % 26.0% 28.9% 24.5% 22.9% 22.6% 22.1% 21.9% 21.9% Contribution TL mn 554 307 835 1,372 1,766 2,034 2,228 2,408 22.8% 23.6% margin % 20.3% 15.9% 25.4% 24.3% 25.5% 26.7% 27.1% 27.1% CAGR Unit 2019A 2020A 2021B 2022E 2023E 2024E 2025E 2026E 19-21 21-26 Store netsales TL mn 2,734 1,938 3,289 5,639 6,920 7,606 8,225 8,884 9.7% 22.0% Pay-at-store sales TL mn 17 43 64 226 538 951 1,448 2,034 94.0% 100.0% Total TL mn 2,751 1,981 3,353 5,864 7,457 8,557 9,673 10,919 10.4% 26.6% Sales per sqm2 TL/sqm 9,859 8,869 13,927 20,116 24,824 27,868 30,886 34,222 growth % -10.0% 57.0% 44.4% 23.4% 12.3% 10.8% 10.8% Contribution TL mn 557 315 848 1,447 1,953 2,370 2,743 3,132 23.5% 29.9% margin % 20.2% 15.9% 25.3% 24.7% 26.2% 27.7% 28.4% 28.7% IFC 59 Source: Company→For online business, management tracks the performance under three main sub -channels: Own online platform “Defacto.com”; 3rdparty marketplaces such as Trendyol and Hepsiburada ; and omnichannel feature of Pay -at-store option →Online sales posted massive growth in 2020, accounting for c.19% of total Turkey net sales, taking leverage from increasing online shopping habit during Covid -19 −The Company was able to handle the spike in online sales, thanks to its well -established tech infrastructure →Marketplaces, where DeFacto’s sales doubled year over year, were the main growth driver of online sales in 2020 and
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growth % -10.0% 57.0% 44.4% 23.4% 12.3% 10.8% 10.8% Contribution TL mn 557 315 848 1,447 1,953 2,370 2,743 3,132 23.5% 29.9% margin % 20.2% 15.9% 25.3% 24.7% 26.2% 27.7% 28.4% 28.7% IFC 59 Source: Company→For online business, management tracks the performance under three main sub -channels: Own online platform “Defacto.com”; 3rdparty marketplaces such as Trendyol and Hepsiburada ; and omnichannel feature of Pay -at-store option →Online sales posted massive growth in 2020, accounting for c.19% of total Turkey net sales, taking leverage from increasing online shopping habit during Covid -19 −The Company was able to handle the spike in online sales, thanks to its well -established tech infrastructure →Marketplaces, where DeFacto’s sales doubled year over year, were the main growth driver of online sales in 2020 and 2021B, surpassing Defacto.com →Capitalizing on its strong online infrastructure and supply chain, the Company focused on boosting itsonline existence viamarketplace s and g oing forward, DeFacto seeks greater shift to Defacto.com from marketplaces →Operational costs are expected to increase in 2022 mainly as a result of new marketplaces being introduced to the system, driving marketing expenses to Turkey online sales up by c.1% −Marketing expenses decrease over time and normalize at c.4% of Turkey online sales →Personnel expenses grow in tandem with a larger account management team to cover a wider marketplace network →Management has identified several improvement areas to increase contribution margin by gaining further efficiencies in operational costs mainly through −Reducing logistics costs by distribution of merchandise from fewer stores, deepening inventory and integrating smaller warehouses into the main DC in Çerkezköy →DeFacto aims to quickly replicate the profit ramp -up captured in the contribution margin in Turkey to international markets, which are currently at a slightly earlier stageRemarksOverview of online operations Turkey operations Developing markets Developed markets Others CAGR Unit 2019A 2020A 2021B 2022E 2023E 2024E 2025E 2026E 19-21 21-26 Online n et sales TL mn 197 461 737 1,435 2,425 3,842 5,807 8,076 93.6% 61.4% growth % 134.3% 59.9% 94.6% 69.0% 58.4% 51.2% 39.1% Defacto.com TL mn 99 179 203 426 738 1,210 1,933 2,843 42.8% 69.6% % of online net sales% 50.5% 38.7% 27.5% 29.7% 30.5% 31.5% 33.3% 35.2% Marketplace TL mn 81 239 471 784 1,149 1,681 2,426 3,198 141.8% 46.7% % of online net sales% 41.0% 51.9% 63.9% 54.6% 47.4% 43.8% 41.8% 39.6% Pay-at-store TL mn 17 43 64 226 538 951 1,448 2,034 94.0% 100.0% % of online net sales% 8.6% 9.4% 8.6% 15.7% 22.2% 24.7% 24.9% 25.2% Gross profit TL mn 76 190 325 656 1,118 1,785 2,707 3,774 107.1% 63.3% margin % 38.5% 41.1% 44.1% 45.7% 46.1% 46.5% 46.6% 46.7% Operational costs TL mn 61 124 195 393 580 866 1,293 1,797 78.1% 55.9% % of online net sales% 31.2% 26.8% 26.4% 27.4% 23.9% 22.5% 22.3% 22.3% Contribution TL mn 14 66 130 263 539 919 1,415 1,976 201.4% 72.3% margin % 7.3% 14.3% 17.6% 18.4% 22.2% 23.9% 24.4% 24.5% IFC 60Overview of store and online operations →On top of its growth in Turkey, DeFacto focused on establishing a sound market presence by investing heavily in brand equity in Developing markets over the years →The Company first targeted MENA and CIS regions due to their attractive fundamentals and growth potential on the back of i) young and growing populations ii) low level of global brand penetration and iii) ample room for online penetration →The Company later penetrated to Malaysia and CEE region as part of its globalization journey, reaching 168 stores as of October 2021 →Store sales, which constitute c.90% of Developing market sales as of 2021B, are estimated to post 2 6% CAGR over the next five years, underpinned by solid store openings in MENA and CIS regions and organic growth forexisting stores →Online channel, on the other hand, is projected to generate 92% CAGR, capturing further share within Developing market operations −Online sales in Developing markets are forecast edto constitute c.50% of Developing markets net sales in 2026E, up from c.10% levels in 2021B, on the back of growing partnerships with several marketplaces in the region with extensive local market knowledge →Gross profit margin is projected to edge up c.1.5% through the forecast period, supported by DeFacto’s established know - how in textiles and supplier optimisation →Operational costs increase along with higher marketing and operational expenses to support market penetration in both physical and online worlds →Contribution margin1, stabilizing at c.26% over the years, is to be analyzed excluding Defacto.com which is at ramp -up stageRemarks (1) Excluding Defacto.com at ramp -up stage Source: CompanyTurkey operations Developing markets Developed markets Others CAGR Unit 2019A 2020A 2021B 2022E 2023E 2024E 2025E 2026E 19-21 21-26 # of effective stores # 146 149 160 179 198 217 233 245 Developing net salesTL mn 1,341 1,423 2,525 4,586 6,441 8,802 11,438 13,969 37.2% 40.8% growth % 6.1% 77.5% 81.6% 40.4% 36.7% 30.0% 22.1% Store TL mn 1,329 1,324 2,264 3,852 4,744 5,701 6,609 7,188 30.5% 26.0% % of net sales % 99.2% 93.1% 89.6% 84.0% 73.7% 64.8% 57.8% 51.5% Online TL mn 11 99 261 734 1,696 3,101 4,830 6,781 n.m. 91.8% % of net sales % 0.8% 6.9% 10.4% 16.0% 26.3% 35.2% 42.2% 48.5% Gross profit TL mn 706 718 1,323 2,388 3,409 4,685 6,094 7,461 36.9% 41.3% margin % 52.7% 50.4% 52.4% 52.1% 52.9% 53.2% 53.3% 53.4% Operational costs TL mn 351 414 748 1,244 1,846 2,598 3,372 4,128 46.0% 40.7% % of net sales % 26.2% 29.1% 29.6% 27.1% 28.7% 29.5% 29.5% 29.5% Personnel expenses TL mn 105 105 184 315 423 587 787 986 32.1% 39.9% Building expenses TL mn 176 187 309 485 580 682 792 861 32.7% 22.7% Marketing expensesTL mn 5 8 24 51 166 313 364 438 111.0% 78.3% Operational expensesTL mn 64 114 231 393 678 1,016 1,429 1,843 89.3% 51.5% Contribution TL mn 355 304 575 1,144 1,563 2,086 2,722 3,333 27.2% 42.1% margin % 26.5% 21.3% 22.8% 24.9% 24.3% 23.7% 23.8% 23.9% Contribution1 TL mn 357 305 576 1,139 1,588 2,130 2,656 3,181 27.1% 40.7% margin1 % 26.6% 21.8% 23.3% 25.8% 26.3% 26.6% 26.2% 26.0% IFC 61Overview of store operations →Following an aggressive land grab bing strategy
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4,128 46.0% 40.7% % of net sales % 26.2% 29.1% 29.6% 27.1% 28.7% 29.5% 29.5% 29.5% Personnel expenses TL mn 105 105 184 315 423 587 787 986 32.1% 39.9% Building expenses TL mn 176 187 309 485 580 682 792 861 32.7% 22.7% Marketing expensesTL mn 5 8 24 51 166 313 364 438 111.0% 78.3% Operational expensesTL mn 64 114 231 393 678 1,016 1,429 1,843 89.3% 51.5% Contribution TL mn 355 304 575 1,144 1,563 2,086 2,722 3,333 27.2% 42.1% margin % 26.5% 21.3% 22.8% 24.9% 24.3% 23.7% 23.8% 23.9% Contribution1 TL mn 357 305 576 1,139 1,588 2,130 2,656 3,181 27.1% 40.7% margin1 % 26.6% 21.8% 23.3% 25.8% 26.3% 26.6% 26.2% 26.0% IFC 61Overview of store operations →Following an aggressive land grab bing strategy pursued in Turkey, the Company’s international expansion started with Kazakhstan, where its debut store was launched in 2012. The Company quickly expanded its international presence over the past two years, penetrating 10+ countries →As of October 2021, DeFacto has 168 stores in Developing markets; top 5 countries on store count are Kazakhstan (33), Morocco (29), Iraq (24), Egypt (17) and Russia (15) −In Q3 2021, the Company solidified its presence in CEE by expanding into two new countries, Macedonia and Montenegro, alongside existing ones like Serbia, Romania, Bulgaria, Bosnia, and Albania, hence reaching 14 stores →Strong store sales growth was interrupted by forced store closures due to Covid -19 in 2020. With stores starting to operate at higher capacity in 2021B, store sales are expected to achieve 71% growth and reach sales of c.TL 2.3 bn →DeFacto aims to open more than 80 stores over the next 5 years, with 75% of openings envisaged in the CIS region −DeFacto’s agile management strategy enables the Company to adjust to shifts in competitive landscape and macroeconomic conditions. To reach the intended topline, management can modify growth plans by interchanging country specific targets →Gross profit is expected to be slightly higher on better inventory management, going forward →Operational costs are estimated to decrease on the back of better rental terms, as DeFacto’s pricing power increases in line with an expanding presence and store count, and more efficient personnel utilizationRemarksTurkey operations Developing markets Developed markets Others (1) Calculated using effective net selling space presented in this page Source: CompanyCAGR Unit 2019A 2020A 2021B 2022E 2023E 2024E 2025E 2026E 19-21 21-26 # of effective stores # 146 149 160 179 198 217 233 245 Effective net selling space sqm k 119 97 132 161 186 212 232 247 Sales per sqm TL/sqm 11,138 13,660 17,193 23,978 25,444 26,931 28,538 29,150 24.2% 11.1% growth % 22.6% 25.9% 39.5% 6.1% 5.8% 6.0% 2.1% Store net sales TL mn 1,329 1,324 2,264 3,852 4,744 5,701 6,609 7,188 30.5% 26.0% growth % -0.4% 71.0% 70.2% 23.2% 20.2% 15.9% 8.8% Gross profit TL mn 701 662 1,169 1,985 2,478 3,005 3,483 3,788 29.1% 26.5% margin % 52.7% 50.0% 51.6% 51.5% 52.2% 52.7% 52.7% 52.7% Operational costs TL mn 348 363 592 928 1,115 1,317 1,524 1,652 30.4% 22.8% % of net sales % 26.2% 27.4% 26.2% 24.1% 23.5% 23.1% 23.1% 23.0% Contribution TL mn 353 298 577 1,057 1,363 1,687 1,958 2,136 27.9% 29.9% margin % 26.6% 22.5% 25.5% 27.4% 28.7% 29.6% 29.6% 29.7% CAGR Unit 2019A 2020A 2021B 2022E 2023E 2024E 2025E 2026E 19-21 21-26 Store net sales TL mn 1,329 1,324 2,264 3,852 4,744 5,701 6,609 7,188 30.5% 26.0% Pay-at-store sales TL mn 0 0 0 83 226 562 892 1,331 n.a. n.a. Total TL mn 1,329 1,324 2,264 3,935 4,970 6,264 7,501 8,519 30.5% 30.4% Sales per sqm1 TL/sqm 11,138 13,660 17,193 24,495 26,655 29,586 32,390 34,549 growth % 22.6% 25.9% 42.5% 8.8% 11.0% 9.5% 6.7% Contribution TL mn 353 298 566 1,077 1,417 1,836 2,205 2,520 26.7% 34.8% margin % 26.6% 22.5% 25.0% 27.4% 28.5% 29.3% 29.4% 29.6%Additional analysis with Pay -at-store performance IFC 62Overview of online operations →Online operations presented on the left include marketplace and Pay -at-store, but exclude Defacto.com figures due to its early operational stage ; presented separately below →Online operations are heavily managed through marketplaces to establish familiarity and awareness with customers and support DeFacto’s online brand visibility, alongside established physical operations with stores →DeFacto mainly works with leading marketplaces in MENA including Jumia, Souq, Noon and Lamoda , Wildberries in CIS −In 2022E, DeFacto plans to build partnerships with strong marketplaces in new regions such as Latam and India →Following 2021B, the Company plans to sharpen its focus on Defacto.com and developing Defacto.com operations first at a pilot country (Egypt )and thereafter extending to other countries building on its accumulated experience →Management plans to designate Egypt as its center focus for Defacto.com operations, given its growing consumption base and established DeFacto presence −Modest and kids' categories carry strategic importance to drive sales growth −As the next step, Defacto.com operations are planned to be expanded to other countries in MENA & CIS regions −As of October 2021, DeFacto is present in Morocco, Egypt, Russia, Kazakhstan, Ukraine and Iraq through Defacto.com →Pay-at-store is also expected to play a significant role with increasing omnichannel integration →Gross profit margin1is projected to drop c.5% over the next five years, with increasing volume and related pricing strategy →Operational costs1are expected to stabilize following 2021B, driving contribution margin1up to c.20% as of 2024E →Contribution margin of Defacto.com will slowly ramp -up, as economies of scale start to kick in , turning topositive in 2025ERemarks (1) Excluding Defacto.com at ramp -up stage Source: CompanyTurkey operations Developing markets Developed markets Others CAGR Unit 2019A 2020A 2021B 2022E 2023E 2024E 2025E 2026E 19-21 21-26 Online n et sales1 TL mn 11 78 211 555 1,303 2,300 3,533 5,056 n.m. 88.8% growth % 633.5% 169.6% 163.2% 134.8% 76.6% 53.6% 43.1% Marketplace TL mn 11 78 211 472 1,077 1,738 2,641 3,725 n.m. 77.6% % of online sales % 100.0% 100.0% 100.0% 85.0% 82.7% 75.6% 74.8% 73.7% Pay-at-store TL mn 0 0 0 83 226 562 892 1,331 n.a. n.a. % of online sales % 0.0% 0.0% 0.0% 15.0% 17.3% 24.4% 25.2% 26.3% Gross profit1 TL mn 5 47 130 317 740 1,290 1,979 2,826 404.7% 85.0% margin
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start to kick in , turning topositive in 2025ERemarks (1) Excluding Defacto.com at ramp -up stage Source: CompanyTurkey operations Developing markets Developed markets Others CAGR Unit 2019A 2020A 2021B 2022E 2023E 2024E 2025E 2026E 19-21 21-26 Online n et sales1 TL mn 11 78 211 555 1,303 2,300 3,533 5,056 n.m. 88.8% growth % 633.5% 169.6% 163.2% 134.8% 76.6% 53.6% 43.1% Marketplace TL mn 11 78 211 472 1,077 1,738 2,641 3,725 n.m. 77.6% % of online sales % 100.0% 100.0% 100.0% 85.0% 82.7% 75.6% 74.8% 73.7% Pay-at-store TL mn 0 0 0 83 226 562 892 1,331 n.a. n.a. % of online sales % 0.0% 0.0% 0.0% 15.0% 17.3% 24.4% 25.2% 26.3% Gross profit1 TL mn 5 47 130 317 740 1,290 1,979 2,826 404.7% 85.0% margin % 48.0% 59.7% 61.8% 57.1% 56.8% 56.1% 56.0% 55.9% Operational costs1 TL mn 1 40 131 235 514 848 1,282 1,781 n.m. 68.5% % of online sales % 13.7% 51.0% 62.2% 42.3% 39.5% 36.9% 36.3% 35.2% Contribution1 TL mn 4 7 -1 82 225 442 697 1,045 n.a. -507% margin % 34.3% 8.7% -0.4% 14.7% 17.3% 19.2% 19.7% 20.7% CAGR Defacto.com Unit 2019A 2020A 2021B 2022E 2023E 2024E 2025E 2026E 19-21 21-26 Net sales TL mn 1 21 51 179 394 801 1,297 1,725 n.m. 102.6% Gross profit TL mn 0 9 24 87 192 390 633 847 n.m. 104.7% margin % 11.0% 45.1% 46.7% 48.4% 48.7% 48.7% 48.8% 49.1% Operational cost TL mn 2 11 25 81 217 433 566 695 n.m.93.9% % of net sales % 215.4% 53.1% 50.1% 45.4% 55.0% 54.1% 43.7% 40.3% Contribution TL mn -1 -2 -2 5 -25 -43 67 152 9.5% -344.7 % margin % -204% -8.0% -3.4% 3.0% -6.3% -5.4% 5.2% 8.8% IFC 63 CAGR Unit 2019A 2020A 2021B 2022E 2023E 2024E 2025E 2026E 19-21 21-26 # of effective stores # 0 0 0 2 9 13 17 21 Developed net sales TL mn 25 147 405 706 1,572 2,500 3,851 5,849 299.6% 70.6% growth % 479.6% 175.4% 74.5% 122.6% 59.0% 54.1% 51.9% Store TL mn 0 0 3 65 284 476 703 980 n.a. 230.1% % of net sales % 0.0% 0.0% 0.6% 9.3% 18.1% 19.0% 18.2% 16.8% Online TL mn 25 147 402 641 1,288 2,024 3,148 4,869 298.3% 64.7% % of net sales % 100.0% 100.0% 99.4% 90.7% 81.9% 81.0% 81.8% 83.2% Gross profit TL mn 12 88 250 408 898 1,431 2,225 3,419 353.5% 68.7% margin % 48.0% 59.7% 61.8% 57.7% 57.1% 57.2% 57.8% 58.5% Operational costs TL mn 3 78 275 472 946 1,387 1,919 2,549 789.6% 56.1% % of net sales % 13.7% 52.9% 67.9% 66.9% 60.2% 55.5% 49.8% 43.6% Personnel expenses TL mn 0 3 23 67 169 264 369 527 n.m. 86.8% Building expenses TL mn 0 3 9 25 85 115 149 193 n.m. 84.4% Marketing expenses TL mn 0 4 57 152 311 496 674 893 n.m. 73.6% Operational expensesTL mn 3 67 186 228 382 512 727 937 n.m. 38.2% Contribution TL mn 9 10 -25 -65 -49 43 306 870 n.a. n.m. margin % 34.3% 6.8% -6.1% -9.1% -3.1% 1.7% 7.9% 14.9% Contribution1 TL mn 9 13 20 82 194 309 465 684 53.4% 101.8% margin1 % 34.3% 8.7% 5.3% 13.6% 15.6% 17.8% 18.9% 19.8%Overview of store and online operations →DeFacto has targeted Europe in line with its vision of becoming a global brand, as the next major step in its internationalization strategy −Turning Covid -19 pandemic into an opportunity, the Company leaned towards online channels thanks to its agile management and infrastructure →As part of this strategy, DeFacto has been forging strong relations with multiple marketplaces to create brand awareness, so as to enable easier market access when contemplating physical presence →DeFacto aims to expand presence built on marketplaces with own Defacto.com platform and subsequently flagship stores →DeFacto works with leading marketplaces in Europe such as Zalando, Amazon and Aliexpress →Along with its first store in Berlin, DeFacto aims to become a brand of choice for tourists in selected cities across Europe −New entries into Developed market s; Germany will be followed by the UK , Austria and theNetherlands by 2022 E →In line with DeFacto’s “more online, less physical” strategy, Developed markets store sales are expected to stall at c.17% of sales ,with a bounce in 2022 Eand 2023 E on new store openings →Online sales in Developed markets through marketplaces are expected to constitute c.85% of Developed market sales →Gross profit margin is expected to normalize around 58-59% →Operational costs are expected todecline along with operational efficiencies gained through economies of scale −Personnel and marketing expenses are projected to increase in 2022E, due to expanding physical presence and heavier advertising spending to generate brand awareness →Contribution margin1, which increases with scaling operations in 2022E, is projected to climb up to c. 20% Remarks (1) Excluding Defacto.com at ramp -up stage Source: CompanyTurkey operations Developing markets Developed markets Others IFC 64Overview of store operations →DeFacto stepped into Europe by opening its first store in Berlin, Germany, expected to be operational before end of the year 2021 −The store is designed as a flagship store located at a prime location with high traffic to act as an attraction center to promote DeFacto brand →The Company aims to replicate this strategy across selected cities in Europe with popular tourist attractions, to lift DeFacto brand recognition to a higher level →Following the launch in Germany, management aims to expand DeFacto brand to other major European countries including the UK, the Netherlands and Austria −DeFacto forecasts c.20 store openings over the next five - year period →Gross profit margin in Developed market store operations is expected to be higher vs. Developing markets, due to higher priced products −Delivery and return costs incorporated into prices are typically higher compared to other markets →Contribution margin improves after 2023 with positive mix effect of new flagship stores and scale impact →No pay -at-store assumed for Developed markets during the projection periodRemarksTurkey operations Developing markets Developed markets Others Source: CompanyCAGR Unit 2019A 2020A 2021B 2022E 2023E 2024E 2025E 2026E 19-21 21-26 # of effective stores # 2 9 13 17 21 Effective
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level →Following the launch in Germany, management aims to expand DeFacto brand to other major European countries including the UK, the Netherlands and Austria −DeFacto forecasts c.20 store openings over the next five - year period →Gross profit margin in Developed market store operations is expected to be higher vs. Developing markets, due to higher priced products −Delivery and return costs incorporated into prices are typically higher compared to other markets →Contribution margin improves after 2023 with positive mix effect of new flagship stores and scale impact →No pay -at-store assumed for Developed markets during the projection periodRemarksTurkey operations Developing markets Developed markets Others Source: CompanyCAGR Unit 2019A 2020A 2021B 2022E 2023E 2024E 2025E 2026E 19-21 21-26 # of effective stores # 2 9 13 17 21 Effective net selling space sqm k 3 13 18 23 28 Sales per sqm TL/sqm 21,198 22,599 26,115 30,267 34,737 n.a. 2.3% growth % -31.7% 6.6% 15.6% 15.9% 14.8% Store net sales TL mn 65 284 476 703 980 n.a. 230.1% growth % n.m. n.m. 67.2% 47.7% 39.5% Gross profit TL mn 36 155 261 390 544 n.a. 193.4% margin % 54.3% 54.6% 54.9% 55.5% 55.5% Operational costs TL mn 24 113 165 226 300 n.a. 369.9% % of net sales % 36.6% 39.6% 34.7% 32.2% 30.6% Contribution TL mn 12 43 96 164 244 n.a. 152.6% margin % 17.7% 15.0% 20.2% 23.3% 24.9% IFC 65 (1) Excluding Defacto.com at ramp -up stage Source: CompanyOverview of online operations →DeFacto pursues a multi -platform online strategy, enabling easier access with limited initial investments, while establishing brand awareness as well as gaining valuable market insights and learning customer behavior →The Company first entered Germany with its strategic partner Zalando in 2020 via Partner Program to reach awide and established fashion customer base →DeFacto expanded to 12 other markets in less than four months while ensuring a steady merchandise flow and increasing level of assortment depth (Please refer toZalando case study onpage 41 for further details) →The Company plans to increasingly incorporate new countries as well as new marketplaces across countries →Gross profit margin1expected to normalize in 2022 Etrends at 58% going forward →Improvement in contribution margin is mainly due to; −Profit -oriented strategy for Zalando, with merchandise portfolio optimized, keeping higher priced items in focus −UK warehouse becoming operational, with positive ramifications in terms of logistics and distribution costs →DeFacto also contemplates focusing on its Defacto.com operations by investing heavily in branding and marketing. The Company expects to achieve ramp -up level by 2026 E →The Company will focus on channeling a growing number of customers from marketplaces to its own Defacto.com platform, with a view to creating a loyal customer base, and achieving significant scale to help it attain ramp -up stageRemarksTurkey operations Developing markets Developed markets Others CAGR Defacto.com Unit 2019A 2020A 2021B 2022E 2023E 2024E 2025E 2026E 19-21 21-26 Net sales TL mn 0 0 22 104 333 766 1,387 2,386 n.a. 154.2% Gross profit TL mn 0 0 13 59 185 437 811 1,434 n.a. 156.3% margin % n.a. 62.9% 57.6% 56.1% 55.6% 57.0% 58.5% 60.1% Operational cost TL mn 0 3 58 205 427 702 969 1,248 n.a. 84.6% % of net sales % n.a. n.m. n.m. n.m. n.m. 91.7% 69.9% 52.3% Contribution TL mn 0 -3 -45 -146 -242 -266 -158 186 n.a. -232.7% margin % n.a. n.m. n.m. n.m. -72.9% -34.7% -11.4% 7.8%CAGR Unit 2019A 2020A 2021B 2022E 2023E 2024E 2025E 2026E 19-21 21-26 Online n et sales1 TL mn 25 146 380 536 955 1,258 1,761 2,483 287.0% 45.6% growth % n.m. 159.2% 41.2% 78.0% 31.8% 39.9% 41.0% Marketplace TL mn 25 146 380 536 955 1,258 1,761 2,483 n.m. 45.6% Gross profit1 TL mn 12 87 235 314 557 733 1,024 1,442 339.2% 43.8% margin % 48.0% 59.7% 61.8% 58.5% 58.4% 58.3% 58.2% 58.1% Operational costs1 TL mn 3 75 217 243 406 520 724 1,001 689.6% 35.8% % of online sales % 13.7% 51.0% 57.0% 45.4% 42.5% 41.4% 41.1% 40.3% Contribution1 TL mn 9 13 18 70 151 213 301 441 44.2% 89.4% margin % 34.3% 8.7% 4.8% 13.1% 15.8% 16.9% 17.1% 17.8% IFC 66 Source: CompanyOthers →Others include sales excluding store sales and online; i.e. Wholesale, Franchise and Ozon sales to 3rdparties →Others’ share in total sales is forecast to pick up from c.5% of total sales in 2021B to c.7% in 2026E →Wholesale channel, which represents DeFacto’s sales to local department stores in Turkey, is expected to trend at c.1% of total sales going forward →The Company leverages franchises as a strategic tool in selected international markets, where local expertise entails significant advantages. Franchising acts as an additional mechanism to drum up growth, helping DeFacto in its bid to expand its presence globally −Franchising also allows the Company to expand with limited financial, operational risk and CAPEX →Franchise sales, which stand at c.2% of total sales in 2021B, are expected to gradually increase to c.4% in 2026E →The figures presented on the left for Ozon represent Ozon sales to 3rdparties and account for c.1% of total sales in 2021B −Ozon sales are forecast edas stable over the next five years −Ozon exports predominantly to European retailers, such as C&A and Primark →Gross profit margin is estimated to increase from 24 .2% in 2021B to 28.5% in 2026E, due to the mix effect →A modest improvement in contribution margin is projected within the forecast period, along with growing operational efficiency and mix effect RemarksTurkey operations Developing markets Developed markets Others CAGR Unit 2019A 2020A 2021B 2022E 2023E 2024E 2025E 2026E 19-21 21-26 Others net sales TL mn 267 254 388 700 931 1,327 1,902 2,651 20.5% 46.9% growth % -5.1% 52.8% 80.5% 33.0% 42.5% 43.3% 39.4% Wholesale TL mn 128 140 165 204 239 279 326 380 13.4% 18.2% growth % 9.7% 17.2% 23.8% 17.1% 17.0% 16.8% 16.6% Franchise TL mn 99 69 115 264 374 618 1,008 1,533 8.1% 67.8% growth % -29.7% 66.3% 129.2% 41.5% 65.1% 63.2% 52.1% Ozon TL mn 41 44 108 232 319 430 568 738 62.8% 46.9% growth % 8.1% 145.2% 115.0% 37.3% 35.0% 32.0% 30.0% Gross profit TL mn 81 82
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projected within the forecast period, along with growing operational efficiency and mix effect RemarksTurkey operations Developing markets Developed markets Others CAGR Unit 2019A 2020A 2021B 2022E 2023E 2024E 2025E 2026E 19-21 21-26 Others net sales TL mn 267 254 388 700 931 1,327 1,902 2,651 20.5% 46.9% growth % -5.1% 52.8% 80.5% 33.0% 42.5% 43.3% 39.4% Wholesale TL mn 128 140 165 204 239 279 326 380 13.4% 18.2% growth % 9.7% 17.2% 23.8% 17.1% 17.0% 16.8% 16.6% Franchise TL mn 99 69 115 264 374 618 1,008 1,533 8.1% 67.8% growth % -29.7% 66.3% 129.2% 41.5% 65.1% 63.2% 52.1% Ozon TL mn 41 44 108 232 319 430 568 738 62.8% 46.9% growth % 8.1% 145.2% 115.0% 37.3% 35.0% 32.0% 30.0% Gross profit TL mn 81 82 94 186 255 368 535 756 8.0% 51.7% margin % 30.1% 32.1% 24.2% 26.6% 27.4% 27.8% 28.1% 28.5% Operational costs TL mn 7 4 5 11 15 21 29 39 -19.7% 51.8% % of net sales % 2.8% 1.4% 1.2% 1.6% 1.6% 1.6% 1.5% 1.5% Personnel expenses TL mn 3 3 3 7 9 13 17 23 0.2% 45.8% Marketing expensesTL mn 3 0 0 0 0 0 0 0-93.7% 42.2% Operational expensesTL mn 1 1 1 4 6 8 11 16 -1.6% 63.9% Contribution TL mn 73 78 89 175 241 348 507 718 10.5% 51.7% margin % 27.3% 30.7% 23.0% 25.0% 25.8% 26.2% 26.6% 27.1% IFC 67 Source: CompanyCentral costs →All HQ -related costs are followed within central costs, where share in net sales is forecast edat around 8.5% →Central costs excluding marketing expenses, which stood at 7.1% of net sales in 2019, saw Covid -19 related increases in 2020 and 2021B. Those are expected to gradually decrease to 6.2% of net sales by 2026 Edue to increasing net sales, operational efficiencies and economies of scale →The Company is planning to invest heavily in marketing to build brand awareness across geographies during 2022E - 2026E; especially in new countries −Marketing expenses include advertising costs, digital advertising, marketing research expenses and agency service expenses −Marketing expenses over net sales is estimated to settle at around 2-2.5% in the long -term when DeFacto reaches saturation in terms of global footprint →Other than marketing expenses, central costs mainly consist of personnel, building ,operating expenses a ndopex for Ozon −The largest item in central costs, personnel expenses, include HQ and warehouse staff which is estimated to decrease to 4.5% of net sales in 2026E, from 5.1% as of 2021B −Building expenses comprise HQ’s rental expenses −Operational expenses consist mainly of licence fees, outsourced services, domestic & overseas travelling, vehicles expenses, cleaning, security expenses, mail, shipping cost, communication and utility expenses -This item isestimated todecrease to1.2%ofnetsales in2026 E,from 1.5%asof2021 B −Ozon opex includes Ozon’s 3rdparty sales related operational expensesRemarksCAGR Unit 2019A 2020A 2021B 2022E 2023E 2024E 2025E 2026E 19-21 21-26 Total central costs TL mn 359 360 615 1,116 1,558 2,092 2,713 3,379 30.8% 40.6% % of net sales % 7.9% 8.5% 8.4% 8.5% 8.5% 8.7% 8.7% 8.6% % of net sales exc. marketing exp.% 7.1% 7.7% 7.5% 7.3% 6.7% 6.5% 6.3% 6.2% Personnel expenses TL mn 216 207 374 669 900 1,136 1,443 1,782 31.8% 36.6% % of net sales % 4.7% 4.9% 5.1% 5.1% 4.9% 4.7% 4.6% 4.5% Building expenses TL mn 16 17 24 35 46 55 66 75 24.3% 25.6% % of net sales % 0.3% 0.4% 0.3% 0.3% 0.3% 0.2% 0.2% 0.2% Marketing expensesTL mn 36 34 63 163 329 539 749 946 32.5% 71.8% % of net sales % 0.8% 0.8% 0.9% 1.3% 1.8% 2.2% 2.4% 2.4% Operational expensesTL mn 73 67 112 193 219 289 375 473 23.8% 33.3% % of net sales % 1.6% 1.6% 1.5% 1.5% 1.2% 1.2% 1.2% 1.2% Ozon opex TL mn 19 34 41 55 64 72 81 103 47.4% 19.9% % of net sales % 0.4% 0.8% 0.6% 0.4% 0.4% 0.3% 0.3% 0.3% IFC 68 Source: CompanyNet working capital (“NWC”) →The Company’s NWC ratio of 6.8% in 2019 deteriorating to 12.5% in 2021 is estimated to gradually improve to around 2% of net sales by 2026E →Collection period of around 6 days increased to 11 -14 days partially due to Covid -19 pandemic and partially due to increasing share of online sales / marketplace sales →Collection period is estimated to slightly decrease to 12.5 days in 2022, mainly eliminating Covid -19 impacts which is estimated to gradually increase to 16.5 days by 2026E mainly on the back of increase share of online sales in overall DeFacto sales →Inventory turnover of 145 days in 2019 increased to around 200 days due to Covid -19. Inve ntory turnover is estimated to reach its 2019 levels in 2023 and further improve over years and reach to 130 days by 2026 mainly driven by SKU optimization and technological investments to better inventory management as well as eliminating stock outs →For payment terms, the Company foresees an improvement of c.15 days over the projection period mainly due to its ongoing supplier optimization strategy and increasing scaleRemarks Unit 2019A 2020A 2021B 2022E 2023E 2024E 2025E 2026E Trade receivables TL mn 94 152 321 528 798 1,129 1,565 2,103 Inventory TL mn 964 1,291 2,008 2,873 3,685 4,640 5,781 7,004 Trade payables TL mn 815 1,210 1,620 3,062 4,319 5,748 7,530 9,600 Trade working capitalTL mn 243 234 709 339 165 20 -184 -493 share of net sales % 5.3% 5.5% 9.7% 2.6% 0.9% 0.1% -0.6% -1.2% Other current assets TL mn 210 282 446 794 1,111 1,463 1,897 2,396 Other current liabilitiesTL mn 142 159 231 410 574 756 981 1,238 Other working capitalTL mn 68 123 216 384 537 707 917 1,157 Net working capital TL mn 311 357 925 723 702 726 733 665 share of net sales % 6.8% 8.4% 12.6% 5.5% 3.8% 3.0% 2.3% 1.7% Trade receivables days 6 11 14 13 14 15 16 17 Inventory days 145 207 198 155 145 140 135 130 Trade payables days 104 164 135 140 144 147 149 151 Cash conversion cycledays 47 54 76 28 15 8 2 -5 IFC 69 Source: CompanyCapital expenditures (“CAPEX”) and Net debt CAPEX
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of net sales % 5.3% 5.5% 9.7% 2.6% 0.9% 0.1% -0.6% -1.2% Other current assets TL mn 210 282 446 794 1,111 1,463 1,897 2,396 Other current liabilitiesTL mn 142 159 231 410 574 756 981 1,238 Other working capitalTL mn 68 123 216 384 537 707 917 1,157 Net working capital TL mn 311 357 925 723 702 726 733 665 share of net sales % 6.8% 8.4% 12.6% 5.5% 3.8% 3.0% 2.3% 1.7% Trade receivables days 6 11 14 13 14 15 16 17 Inventory days 145 207 198 155 145 140 135 130 Trade payables days 104 164 135 140 144 147 149 151 Cash conversion cycledays 47 54 76 28 15 8 2 -5 IFC 69 Source: CompanyCapital expenditures (“CAPEX”) and Net debt CAPEX →Main CAPEX items for DeFacto are (i) store CAPEX, (ii) CAPEX spent for online activities, (iii) CAPEX for warehouse and (iv) other CAPEX →Store CAPEX includes CAPEX for new stores, as per new openings during the business plan period in Turkey, Developing markets and Developed markets; as well as renewal and maintenance CAPEX for existing stores →Online CAPEX is key to ensuring robust growth at DeFacto’s online operations across regions. Considering the existing well -invested nature of the technology investments of DeFacto and its alliances with 3rdparty service providers, Online CAPEX is estimated at c.0.3% of Online net sales in 2022E, edging back to 0.1% as of 2026E →Warehouse CAPEX includes CAPEX of warehouse -related requirements of DeFacto to ensure seamless supply chain systems for the operations, both for store network and for online operations including Defacto.com and marketplace globally →Other CAPEX, which is forecasted to enhance the business plan in terms of store experience and operational excellence, is estimated to be around 0.2% of net sales in 2021B, goes up to 0.5% -0.6% in 2022E -2024E. For the remaining years, it is estimated to be around 0.1% of net sales →Terminal CAPEX of 2% once projection period CAPEX is completed enabling the projected expansion and growth Net debt →Financial debt summary presented on the left excludes IFRS 16 effect →c.55% of the financial debt is short -term (including short -term portion of the long -term debt) and the rest is long -term →Estimated cash balance of c.TL 2 bnas of year end 2021BRemarks CAPEX Unit 2019A 2020A 2021B 2022E 2023E 2024E 2025E 2026E New store openings # 0 0 0 37 29 28 21 21 Turkey # 11 5 5 5 5 Developing markets# 21 19 19 12 12 Developed markets# 5 5 4 4 4 Store TL mn 116 93 150 395 488 625 851 1,028 New TL mn 286 348 440 434 574 Renewal TL mn 109 140 186 416 454 Online TL mn 5 6 9 8 11 14 18 24 Warehouse TL mn 4 2 6 60 100 150 250 350 Others TL mn 16 16 16 73 110 120 31 20 CAPEX TL mn 141 116 181 535 708 910 1,150 1,421 share of net sales % 3.1% 2.8% 2.5% 4.1% 3.9% 3.8% 3.7% 3.6% Financial debt (mn) 2021B TL 972 EUR 91 USD 104 KZT 2,100 MAD 29 IFC V. Appendix IFC 71 (1) Countries penetrated in 2021 areexcluded foranalysis purposes Source: CompanyStore closures due to Covid -19 DeFacto proved resilient in both 2020 and 2021, despite challenges posed by forced store closures due to Covid -19 in many operating mar kets Region / Country1 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 13.0% 47.3% 0.1% 7.9% 21.6% 33.1% 0.1% 9.4% 44.3% 13.4% 4.1% 7.4% 4.3% 3.9%MENA5.4% 15.3% 0.0% 0.2% 0.0% 0.0% 0.0% 13.4% 15.3% 0.9% 0.0% 0.0% 1.1% 1.1% 19.2% 35.6% 6.4% 0.0% 2.2% 2.1% 0.7% 20.5% 79.3% 25.5% 0.9% 24.1% 9.3% 1.6%CIS & Others11.5% 29.4% 0.0% 3.0% 31.1% 35.2% 50.5%7.7% 54.7% 56.8% 14.3% 9.5% 7.4% 13.0%21.2% 45.9% 0.0% 0.0% 1.1% 0.0% 1.1% 5.9% 27.5% 0.0% 4.3% 0.7% 0.7% 0.0%17.6% 50.0% 0.5% 0.5% 4.4% 1.1% 0.5%0.3% 0.3% 0.6% 0.1% 0.6% 0.2% 0.0% 12.1% 57.5% 0.5% 20.2% 31.0% 0.0% 0.0%n.a. 0.0% 0.0% 37.0% 45.6% 16.5% 0.0% 2.9% 56.3% 2.9% 0.0% 0.3% 0.0% 0.6%12.5% 54.2% 0.0% 0.0% 3.3% 0.4% 0.0% 3.8% 13.4% 0.0% 2.5% 12.2% 12.2% 0.0%Turkey Developing markets Egypt Morocco North Iraq South Iraq Malaysia Kazakhstan Albania Romania Bosnia Belarus Georgia Bulgaria Russia Moldova Ukraine Serbia 12.4% 32.1% 0.0% 4.9% 11.7% 3.8% 0.0% Ratio of non -operational days of stores due to Covid -19 per country ≤1% ≤20% ≤50% >50% IFC 72 Source: Company, Deloitte IFRS audit reportIncome statement 2019 -2020 from IFRS audit report and rest as per Management accounts (TL mn) 2019A 2020A 2021B 2022E 2023E 2024E 2025E 2026ECAGR 19-21CAGR 21-26 Net sales 4,564 4,223 7,344 13,067 18,288 24,076 31,223 39,429 26.8% 40.0% COGS 2,424 2,278 3,712 6,766 9,277 12,096 15,631 19,666 Gross Profit ex. DA 2,140 1,944 3,632 6,301 9,011 11,980 15,592 19,763 30.3% 40.3% %of net sales 46.9% 46.0% 49.5% 48.2% 49.3% 49.8% 49.9% 50.1% Personnel expenses 394 345 562 969 1,329 1,744 2,227 2,804 Building expenses 502 438 678 1,079 1,361 1,532 1,732 1,905 Marketing expenses 27 40 123 303 603 971 1,281 1,683 Operational expenses 213 356 664 1,059 1,660 2,304 3,175 4,065 Total operational costs 1,135 1,180 2,028 3,411 4,952 6,550 8,414 10,458 Contribution 1,005 765 1,604 2,890 4,060 5,430 7,178 9,306 26.3% 42.1% %of net sales 22.0% 18.1% 21.8% 22.1% 22.2% 22.6% 23.0% 23.6% Personnel expenses 216 207 374 669 900 1,136 1,443 1,782 Building expenses 16 17 24 35 46 55 66 75 Marketing expenses 36 34 63 163 329 539 749 946 Operational expenses 73 67 112 193 219 289 375 473 Ozon opex 19 34 41 55 64 72 81 103 Total central costs 359 360 615 1,116 1,558 2,092 2,713 3,379 Other income ( Turquality ) 9 30 25 25 30 36 43 51 EBITDA 655 434 1,014 1,799 2,531 3,373 4,507 5,978 24.4% 42.6% EBITDA margin 14.3% 10.3% 13.8% 13.8% 13.8% 14.0% 14.4% 15.2% Depreciation expenses 144 161 256 309 380 471 568 710 Other income 12 4 - - - - - - Other expense 38 18 - - - - - - EBIT 484 260 758 1,490 2,151
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207 374 669 900 1,136 1,443 1,782 Building expenses 16 17 24 35 46 55 66 75 Marketing expenses 36 34 63 163 329 539 749 946 Operational expenses 73 67 112 193 219 289 375 473 Ozon opex 19 34 41 55 64 72 81 103 Total central costs 359 360 615 1,116 1,558 2,092 2,713 3,379 Other income ( Turquality ) 9 30 25 25 30 36 43 51 EBITDA 655 434 1,014 1,799 2,531 3,373 4,507 5,978 24.4% 42.6% EBITDA margin 14.3% 10.3% 13.8% 13.8% 13.8% 14.0% 14.4% 15.2% Depreciation expenses 144 161 256 309 380 471 568 710 Other income 12 4 - - - - - - Other expense 38 18 - - - - - - EBIT 484 260 758 1,490 2,151 2,903 3,939 5,267 EBIT margin 10.6% 6.2% 10.3% 11.4% 11.8% 12.1% 12.6% 13.4% Total financial income/(expense) (362) (306) Other financial income/(expense) 7 109 PBT 129 63 Tax expense/(income) 34 15 Net income 95 48 Net income margin 2.1% 1.1% EBITDA -IFRS 16 1,051 778 EBITDA margin 23.0% 18.4%1 2 3 4 5 IFC 73 (1) Income statement converted to USD (for convenience purposes) using the USD/TL averages (as provided on page 54) for each corresponding year Source: CompanyConvenience conversion of Income statement in US Dollars1 2019 -2020 from IFRS audit report and rest as per Management accounts (USD mn) 2019A 2020A 2021B 2022E 2023E 2024E 2025E 2026ECAGR 19-21CAGR 21-26 Net sales 804 602 825 906 1,131 1,295 1,460 1,603 1.3% 14.2% COGS 427 325 417 469 574 650 731 800 Gross Profit ex. DA 377 277 408 437 557 644 729 804 4.0% 14.5% %of net sales 46.9% 46.0% 49.5% 48.2% 49.3% 49.8% 49.9% 50.1% Personnel expenses 69 49 63 67 82 94 104 114 Building expenses 88 62 76 75 84 82 81 77 Marketing expenses 5 6 14 21 37 52 60 68 Operational expenses 37 51 75 73 103 124 148 165 Total operational costs 200 168 228 237 306 352 393 425 Contribution 177 109 180 200 251 292 336 378 0.9% 16.0% %of net sales 22.0% 18.1% 21.8% 22.1% 22.2% 22.6% 23.0% 23.6% Personnel expenses 38 30 42 46 56 61 67 72 Building expenses 3 2 3 2 3 3 3 3 Marketing expenses 6 5 7 11 20 29 35 38 Operational expenses 13 10 13 13 14 16 18 19 Ozon opex 3 5 5 4 4 4 4 4 Total central costs 63 51 69 77 96 113 127 137 Other income ( Turquality ) 2 4 3 2 2 2 2 2 EBITDA 115 62 114 125 157 181 211 243 -0.6% 16.4% EBITDA margin 14.3% 10.3% 13.8% 13.8% 13.8% 14.0% 14.4% 15.2% Depreciation expenses 25 23 29 21 24 25 27 29 Other income 2 1 - - - - - - Other expense 7 3 - - - - - - EBIT 85 37 85 103 133 156 184 214 EBIT margin 10.6% 6.2% 10.3% 11.4% 11.8% 12.1% 12.6% 13.4% Total financial income/(expense) (64) (44) Other financial income/(expense) 1 16 PBT 23 9 Tax expense/(income) 6 2 Net income 17 7 Net income margin 2.1% 1.1% EBITDA -IFRS 16 185 111 EBITDA margin 23.0% 18.4% IFC 74 (1) Balance sheet converted to USD (for convenience purposes) using the USD/TL year -end figures (as provided on page 54) for eac h corresponding year Source: Company, Deloitte IFRS audit reportBalance sheet in TL as reported and in USD1converted for convenience 2019 -2020 from IFRS audit report and rest as per Management accounts (TL mn) 2019A 2020A Cash and cash equivalents 623 922 Trade receivables 94 152 Inventory 964 1,291 Other current assets 210 282 Others 23 106 Short term assets 1,914 2,753 Tangible assets 767 1,004 Intangible assets 53 72 Other non -current assets 74 98 Long term assets 894 1,174 Total assets 2,808 3,927 Short -term borrowings 785 1,280 Trade payables 815 1,210 Other current liabilities 142 159 Others 18 11 Short term liabilities 1,760 2,660 Long -term borrowings 723 856 Other non -current liabilities 15 71 Long term liabilities 738 928 Total liabilities 2,498 3,587 Paid in capital 213 213 Reserves, share prem., reval. ofFA (143) (131) Retained earnings 145 211 Net income/loss for the period 95 48 Equity 309 340 Total liabilities & SH equity 2,808 3,927 IFRS 16 impact to liabilities 1,482 1,6316 7 8 57(USD mn) 2019A 2020A Cash and cash equivalents 105 126 Trade receivables 16 21 Inventory 162 176 Other current assets 35 38 Others 4 14 Short term assets 322 375 Tangible assets 129 137 Intangible assets 9 10 Other non -current assets 12 13 Long term assets 150 160 Total assets 472 535 Short -term borrowings 132 174 Trade payables 137 165 Other current liabilities 24 22 Others 3 1 Short term liabilities 296 362 Long -term borrowings 122 117 Other non -current liabilities 2 10 Long term liabilities 124 126 Total liabilities 420 488 Paid in capital 36 29 Reserves, share prem., reval. ofFA (24) (18) Retained earnings 24 29 Net income/loss for the period 17 7 Currency translation adjustment (1) (0) Equity 52 46 Total liabilities & SH equity 472 535 IFC 75Additional notes for Income statement and Balance sheet Some merchandise costs are recorded under COGS in Management accounts as they are directly related to COGS (Recorded under OPEX in IFRS accounts; TL 16.1 mn in 2019, TL 22.5 mn in 2020)1 Other income , which has non -recurring nature, comprises gain on sale of property and equipment, insurance reimbursements and some other smaller items Other expense , which has non -recurring nature, consists of loss on sale of property and equipment, some provision expenses, other taxes and duties2 3 Other financial income includes net gain on unrealized firm commitments, net gain on financial instruments at fair value through profit or loss, effective interest income on financial assets and liabilities other than bank borrowings and revaluation of fixed assets4 5 Other current assets comprise primally prepayments related to rent, insurance and advances given to suppliers; VAT receivables, receivable from Turquality program, current tax asset, advances given to personnel, job advances, deposits and guarantees given6
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2019, TL 22.5 mn in 2020)1 Other income , which has non -recurring nature, comprises gain on sale of property and equipment, insurance reimbursements and some other smaller items Other expense , which has non -recurring nature, consists of loss on sale of property and equipment, some provision expenses, other taxes and duties2 3 Other financial income includes net gain on unrealized firm commitments, net gain on financial instruments at fair value through profit or loss, effective interest income on financial assets and liabilities other than bank borrowings and revaluation of fixed assets4 5 Other current assets comprise primally prepayments related to rent, insurance and advances given to suppliers; VAT receivables, receivable from Turquality program, current tax asset, advances given to personnel, job advances, deposits and guarantees given6 Others consist of derivative financial asset and liabilities such as cross currency swaps and forward exchange contracts on both sides of thebalance sheet 7 Other current liabilities predominantly comprise employee benefits, expense accruals, payable to employees and social security premiums payable 8 Source: Company, Deloitte IFRS audit reportIFRS 16 impact on EBITDA Unit 2019A 2020A Reported EBITDA exc. IFRS 16 TL mn 655 434 IFRS 16 impact TL mn 396 344 Cost of sales TL mn 1 - S&M exc. D&A TL mn 383 332 G&A exc. D&A TL mn 12 12 Reported EBITDA with IFRS 16 TL mn 1,051 778IFRS 16 impact on total debt Unit 2019A 2020A Loans and financial liabilities exc. IFRS 16 impact TL mn 1,508 2,136 LT loans and borrowings TL mn - - LT lease liabilities TL mn 1,305 1,370 ST loans and borrowings TL mn -1 -5 ST lease liabilities TL mn 178 265 Loans and financial liabilities with IFRS 16 impact TL mn 2,990 3,767 Unit 2019A 2020A Interest income on installment TL mn 32 11 Interest expense on credit purchases TL mn -75 -36 Bank commissons TL mn -70 -56 Interest income/(expense) & FX gain/(loss), net TL mn -250 -225 Total financial income/(expense) TL mn -362 -306 IFC 76 Simge Ündüz Managing Director [email protected] +90 (533) 283 8113Information, opinions and projections inthis document have been compiled orarrived atbyÜNLÜ Yatırım Holding A.Ş.(“ÜNLÜ &Co”)from thedata provided bythe Company and itsshareholder, and publicly available information, without ourown separate verification .The Company and itsshareholder have been consulted about and have confirmed theappropriateness ofthebasic principles and assumptions used byÜNLÜ &Cotoperform theanalyses /projections . However, norepresentation orwarranty, expressed orimplied, ismade astotheaccuracy orcompleteness oftheinformation contained inthis document .Itshould be noted that wehave notsought independent verification oftheinformation .This document isnottoberelied upon asauthoritative ortaken insubstitution fortheexercise ofjudgment bytheRecipient and ÜNLÜ &Coaccepts noliability whatsoever foranydirect orconsequential loss arising from theuseofthisdocument oritscontents .This document and theopinions, projections and conclusions contained inthis document arefortheexclusive useoftheRecipient and itsofficers and employees .Distribution ordisclosure thereof toany parties issubject totheprior written permission ofÜNLÜ &Co.The information, comments and opinions contained inthis document fall outside ofthescope ofTurkish Capital Markets legislation and donotinclude apersonal recommendation .This document does notinclude apersonal recommendation and does notconstitute anoffer, orthesolicitation ofanoffer forthesale orpurchase ofanyfinancial product, service, investment orsecurity . Allcommunications, inquiries and/or requests relating tothisdocument and/or thepossible process contemplated should only beaddressed toÜNLÜ &Co. Forfurther information please contact : Zeynep Koçak Director [email protected] +90 (532) 242 5378İbrahim Romano Head of Investment Banking [email protected] +90 (533) 960 0122Can Ölger Vice President [email protected] +90 (536) 209 5566Disclaimer IFC
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Project Knight Confidential Information Memorandum February 2022 Strictly private and confidential Türk Tuborg 1Table of contents Section Page I Executive summary 2 II Key investment highlights 9 III Business overview 27 IV Financial overview 44 Türk Tuborg I. Executive summary Türk Tuborg 3Executive summary The leading kitchen consumables company in Turkey →Established 40years ago, Koroplast (the “Company ”)isthe undisputed leader ofTurkish kitchen consumables (“KC”) market with a47%market share1,drawing onarich brand heritage, anextensive distribution network, and adiverse portfolio ofinnovative, premium quality products −Turkish kitchen consumables ,ahigh -growth and underpenetrated sub-segment ofFMCG market, generated 39%CAGR invalue through 2017 –2020 →The Company offers awide portfolio ofgarbage bags, storage products, cooking products and the newly launched cleaning products, addressing everyday household needs →Being thefirst company tointroduce garbage and freezer bags toTurkish consumers inthe1980 ’s, Koroplast isacknowledged asamarket -leading innovator and trendsetter inKCmarket −Koroplast has introduced anumber ofinnovative solutions tothe market, such asodor -block technology, fresh keeping storage bags, and scented garbage bags −Alongside anexemplary commitment toenvironmental sustainability, theCompany also sets the barhigh with powerful social awareness campaigns →Inaddition toitsmain brand “Koroplast ”and sub-brand targeting price sensitive consumers “Ideal ”, theCompany also serves discounters and retailers with private label (“PL”)production −Branded product sales account forc.85%ofnetsales in2022B −Koroplast isthesole brand with continuous listing indiscount stores →The Company sells itsproducts through national chains, local chains, discount stores, traditional stores and out-of-home markets, reaching more than c.69ksales points nationwide −Koroplast recently started tooffer itsproducts infast-growing online groceries →Additionally, exports, mainly toEurope, account for6%ofnetsales .Expansion toexport markets is reserved asanimportant upside going forward →Located inIstanbul and dedicated exclusively toKoroplast products, the production facility has c.15.5ktons ofextrusion and c.2.6ktons ofwrapping capacity −Fully integrated production process enables in-house production ofmain products, namely, garbage, fridge and freezer bags, providing cost competitiveness →Koroplast hasdelivered asolid financial performance through 2018 -2022B,with 46%and 51%CAGR insales and EBITDA, respectively →The Company budgets TL730 mninrevenue for2022B,with anEBITDA margin of25% →Koroplast has313employees2with anaverage tenure of6.6years (1) 2020 revenue market share excluding discount markets. Nielsen Kitchen Consumables Reports include garbage bags, storage bags, baki ng sheets, oven bags, ice bags, microwave bags (2) As of February 2022 Source: Koroplast , Nielsen market intelligence, PwC Financial VDD report100+ SKUs Garbage bags Storage products Cooking products Cleaning productsMain brand Tactical brand İdeal EBITDA margin (%)4 main categoriesCompany overview Product portfolio overview Key figures (TL mn)Reputable brands CAGR22.1% 23.8% 25.6% 26.9 % 24.8% 202035 2022B730 2019 2018 2021281 2026F458 159200 48 72410 1061811,705 +46%+24% EBITDA Net sales25.9% Türk Tuborg 4 Source: KoroplastExecutive summary Leadership journey: Innovation at the heart of Koroplast brand DNA 1973Korozo Group established 1981Koroplast brand introducedFirst to produce freezer bag s and garbage bagsin Turkey 1997 2014 Introduced zipper and double zipper bags 2020 Launched cleaning category in the last quarter of 2020 2004First biodegradable garbage bagFirst to produce recyclable garbage bags in Turkey 2004 2015 Participated in Turkish Waste Management Committee 2019 Trashtag Turkey campaign 2009Introduced the first microwave cooking bag in Turkey 2017 Parent group Korozo acquired by Actera, a leading PE fund in Turkey 2021 Continued profitable growth & innovation 2018 Kidzania Recycling and Waste Management Project Introduced cling wrap, aluminum foil and zip -lock freezer bags Türk Tuborg 5 (1) 2020 revenue market share excluding discount markets. Nielsen Kitchen Consumables Reports include garbage bags, storage b ags, baking sheets, oven bags, ice bags, microwave bags (2) Basket products sales (bundled promotional items) and other sales (scrap, raw material and semi -finished goods sales) are not shown on this page ;i.e. 2.6% of Net sales in 202 2B Source: Koroplast , PwC Financial VDD report, Nielsen market intelligenceExecutive summary Wide range of product offering sunder 4 main categories Garbage bags Storage products Cooking products Cleaning products →Market leader with c.42% market share1 in Turkey→Market leader with c.55% market share1 in Turkey→Market leader with c.49% market share1 in Turkey →Significant room for further growth in local market→New product category, introduced in 2020 →New and Growing: Benefits from the brand power of other categories Offers a variety of top-quality… % of 202 2BNet sales2Branded Offers freezer bags, storage bags… Offers cooking bags and cooking paperOffers microfiber & nonwoven cleaning cloths and dish sponges 2026F 2019 2018 2020 2021 2022B81730 97 119190309+40%+24%… and innovative garbage bags … and aluminum foil, cling film, zipper bags Overview Brands Product portfolio Net sales2 (TL mn) 42.3% 33.4% 15.5 % 6.2% PL Branded PL Branded PL Branded 30% 70% 96% 4% 89% 11% 100% % of 202 2BBranded and PL in respective category Net sales2018515 202051 2022B 2021 2019 2026F61 86131244+48%+21% 2022B 2019 2020113 2021 2018 2026F21 2342 52297+53%+27% 2018 2021 2019 2020 2022B 2026F7 1345118+27% CAGR New category Türk Tuborg 6 (1) Other sales are not shown on this page Source: Koroplast, PwC Financial VDD reportExecutive summary Well -established sales network with strong nationwide coverage Retailers Distributors Discounters Out-of-home Export →Koroplast’s main channel. Established relation ships with prominent national chains over the years →Growing sales from online retailers→Accessing local chains and traditional shops (e.g. grocery stores, mom -and-pop shops, etc.) through 45 distributors in 6 regions, ensuring wide coverage and accessibility→Established presence in major discounters through Koroplast as well as PL products→Working with large wholesalers selling Koroplast products to major Horeca chains and other institutions such as municipalities →Sale of branded and PL products to 11 countries, mainly in Europe Through 45 distributors in 6 regions 32.7% 42.3 % 14.6% 3.3% 6.1% 2020 2021 2018 2022B 2019 2026F66 4985133239550+49%+23%National chainsLocal chains and traditional shopsDiscounters Horeca Major distributors Cash & carry Online retailersKey clients Overview Net sales1 (TL mn) Corporate 694 2020 2018 2019 2021 2022B164 2026F66 74 97309+47%+22% 2022B 2019 2018 2020 2021 2026F17 2360 52106288+59%+28% 2020 2022B 2018 201916 2021 2026F128122457+11%+24% 2019 2018 2022B 2021 2020 2026F16 17 173345104+29%+23%PL Branded 23% 77% Branded 100% PL Branded 20% 80% PL Branded 86% 14% % of 202 2B Net sales CAGR % of 202 2B Branded and PL in respective channel Net salesBranded 100% Historically, Koroplast did not focus on growth in out -of-home and export markets as a business strategy Türk Tuborg 7 (1) 2020 revenue market share. Nielsen Kitchen Consumables Reports include garbage bags, storage bags, baking sheets, oven ba gs,ice bags, microwave bags (2)
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4985133239550+49%+23%National chainsLocal chains and traditional shopsDiscounters Horeca Major distributors Cash & carry Online retailersKey clients Overview Net sales1 (TL mn) Corporate 694 2020 2018 2019 2021 2022B164 2026F66 74 97309+47%+22% 2022B 2019 2018 2020 2021 2026F17 2360 52106288+59%+28% 2020 2022B 2018 201916 2021 2026F128122457+11%+24% 2019 2018 2022B 2021 2020 2026F16 17 173345104+29%+23%PL Branded 23% 77% Branded 100% PL Branded 20% 80% PL Branded 86% 14% % of 202 2B Net sales CAGR % of 202 2B Branded and PL in respective channel Net salesBranded 100% Historically, Koroplast did not focus on growth in out -of-home and export markets as a business strategy Türk Tuborg 7 (1) 2020 revenue market share. Nielsen Kitchen Consumables Reports include garbage bags, storage bags, baking sheets, oven ba gs,ice bags, microwave bags (2) Includes national chains, local chains and discount stores, c.38k points Source: KoroplastSustainable market leadership position ensured by purpose -led brand and rooted management culture Purpose -led brand Rooted management culture Agile responsiveness Trend -driven portfolio, swiftly responding to changing customer needs Impactful innovation Committed to improving people’s wellbeing and creating quality time A strong and responsible brand Actively engaged in addressing today’s most urgent and deep - seated social and environmental challengesExecutive summary Key pillars differentiating Koroplast Leading market position Highest market share1in all key categories, beating its closest competitor Has access to largest points of sale to consumers with extensive physical availability 42% 15% Koroplast Comp.155% 16% Koroplast Comp.149% 20% Koroplast Comp.1Garbage bags Storage products Cooking products 60%Dominates physical shelf space in national chains with 60% shelf space share95%Covers c.95% of points of sale of organized retail universe2,reaching more than 36k pointsFMCG -oriented mindset Innovation skills complemented by strong marketing capabilities Consumer first approach Spearheading a culture of listening to and acting on feedback from consumers and building a community Brand -focused company culture Utilizing the power of employees to drive continuous brand improvement Türk Tuborg 8 Source: KoroplastExecutive summary Transaction overview →Project Knight refers tothe contemplated sale of100%stake inKoroplast (the “Proposed Transaction ”) →Koroplast isawholly -owned subsidiary ofKorozo ,leading flexible packaging group inTurkey .Korozo isconsidering apotential divestment ofKoroplast , with aview tostrengthening itspresence inflexible packaging inEurope →Koroplast represents aunique opportunity forpotential investors with its leading market position, pioneer brand image, premium product quality and further growth potential →Korozo hasappointed ÜNLÜ &Cotoactastheexclusive financial advisor in theProposed Transaction →Korozo Group consolidated all of its KC operations under Koroplast between 2017 -2019, and transformed Koroplast into an operationally stand -alone companyEnvisaged transaction timeline Transaction scope NDA IM distributionLimited Q&ANon- binding offersBinding bidsSigning Initiation of due diligencePhase II Phase I →Due diligence period for a limited number of selected potential investors →Virtual dataroom access along with Q&A process →Access to PwC Financial Vendor Due Diligence Report (“ PwC Financial VDD Report ”), covering years 2018 -2020 and PwC Tax Vendor Due Diligence Report (“ PwC Tax VDD Report ”), covering years 2016 -2020 →Management presentations and site visits →Exact timetable for Phase II to be circulated in a separate process letter for short -listed potential investorsPhase I details →Distribution of the IM →Limited Q&A process for key questions and clarification requests →Selected potential investors will be granted access to a virtual dataroom Phase II detailsShareholding structure ShareholdingKoroplastKorozo 100% Türk Tuborg II. Key investment highlights Türk Tuborg 10Strategic positioning of Koroplast Key investment highlights Market leading producer of kitchen consumables in Turkey 1Sizeable and high -growth domestic market with ample growth prospects on attractive fundamentals 2Undisputed market leader with solid market share, targeting continuous growth across categories with diversification strategy 3Broad product portfolio catering to everyday household needs with deep -rooted innovation culture 4Reputable and high -quality brand image cemented by growing customer awareness 5Strong nationwide coverage and growing export base with multi -faceted go -to-market strategy 6Largest production facility with vertical integration in key product lines 7Competent professional management delivering solid financials with strong growth strategy and vision 8Multiple untapped value enhancers beyond the business plan Türk Tuborg 11 (1) Percentage of households that purchase a product more than once in a year (2) Storage products data include only freeze r bags (3) Cooking category data include cooking paper and oven bag data Source: Koroplast, Nielsen market intelligence (Market size data, provided by Nielsen, account for approximately 70% of the t otal market), IPSOS, EuropanelSizeable and high -growth domestic market… 1 1,092 2017 2020 2018 20191,0161,4272,010 +26%Garbage bag market size (mn pieces) 2,930 2017 2019 2018 20202,6632,9883,607+11% 2018 2017 2019 20202733 3447+21% 2020Seasonal buyers during the Eid al - Adha bringing in significant volumes 2020Turkey is relatively underpenetrated when compared with developed countriesStorage products2 Storage category market size (mn pieces) Storage category2penetration Cooking products3 Cooking category market size (mn pieces) Cooking category3penetrationGarbage bags category posted 26%CAGR, reaching 2,010 mnpieces in2020 Turkish consumers have alower repeat rate1(c.3/4ofEU) and amount per purchase, implying significant growth potential Despite its strong growth, cooking category remains highly underpenetrated, with annual sales of47mn pieces (1.9 piece perhousehold) in2020 Repeat rate, despite the increase from 31%to44%between 2017 and 2020 ,is stillbelow EUbenchmarksGarbage bag penetration Target in the next five years Storage category market size reached 3,607 mnpieces, growing steadily with 11% CAGR 43% c.53%1.6x 1.6x…offering further growth potential Strong growth in Turkish KC market… Garbage bags 60% 30% 2020 CAGR2017 202032%50%80% 2025Retailers’ free distribution ofplastic bags, which were used inlieu ofgarbage bags by consumers, was banned in2019 , contributing tothecategory’s growth Base penetration rate offrequent users stands atc.30%,while conversion of seasonal users willbeacrucial driver57% 2020 Türk Tuborg 12 … with ample growth prospects on attractive fundamentals 1 (1) Inception year of the ban on free plastic bags in stores Source: Koroplast , IPSOS, Turkstat , World Bank, IMF, Fitch Ratings, European Commission, ÜNLÜ & Co estimates Increasing sizeable population c.84 mn c.95 mn 1 Growing GDP (2020 GDP at current prices)c.USD 650 bn c.USD 962 bn 2 Continuing urbanization (share in total population)c.76% c.80% 3 Declining average household size (# of people per household)c.3.5 c.3.0 4 Expanding female workforce participation (share in females aged 15 -65)c.38% c.40+% 5Growth drivers 2020 2030F CAGR →As of 2019, Turkey initiated a regulation imposing charges on plastic bags, reflected to retail consumers Plastic bag consumption per person, annually (unit)
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atc.30%,while conversion of seasonal users willbeacrucial driver57% 2020 Türk Tuborg 12 … with ample growth prospects on attractive fundamentals 1 (1) Inception year of the ban on free plastic bags in stores Source: Koroplast , IPSOS, Turkstat , World Bank, IMF, Fitch Ratings, European Commission, ÜNLÜ & Co estimates Increasing sizeable population c.84 mn c.95 mn 1 Growing GDP (2020 GDP at current prices)c.USD 650 bn c.USD 962 bn 2 Continuing urbanization (share in total population)c.76% c.80% 3 Declining average household size (# of people per household)c.3.5 c.3.0 4 Expanding female workforce participation (share in females aged 15 -65)c.38% c.40+% 5Growth drivers 2020 2030F CAGR →As of 2019, Turkey initiated a regulation imposing charges on plastic bags, reflected to retail consumers Plastic bag consumption per person, annually (unit) 3.5x420 120 201912020 Garbage bag penetration 45% 50%→The decline in plastic bag usage in shopping supported household garbage bag penetration 2019 20205% →Plastic bag usage is expected to further decrease to EU level 2020 2025120 40 3.0xPlastic bag consumption per person, annually (unit)Strong country fundamentals Impact of free plastic bag ban c.1.2% c.4.0% Türk Tuborg 13 Ownership Kitchen Consumables market share2 Provel Sedat Tahir Korozo Established 2011 1984 1981 Product categories Garbage bagsStorage productsCooking productsCleaning products 47.3% 202016.5% 20208.7% 20203.8% 2020 (1) Shelf space in national chains (2) 2020 revenue market share excluding discount markets. Nielsen Kitchen Consumables Re ports include garbage bags, storage bags, baking sheets, oven bags, ice bags, microwave bags (3) Mostly outsources its production Source: Koroplast , Nielsen market intelligence, company websitesUndisputed market leader with solid market share… Extrusion Capacity5-6k tons Gözde Girişim 1993 <3k tonsSultanlar Grup 1980’s <2k tons3c.8k tons 15k tons2 Koroplast’s superior market position over its closest competitor 3.1% 2020Shelf space share1 c.5-10% <5% <5% c.20% c.60% 3x market share42% 55% 49% x% Kitchen Consumables market share2 Türk Tuborg 14 Source: KoroplastKoroplast aims to grow its customer base through … 1 2Growing market share by attracting new consumers and increasing penetration & frequency Gaining share of wallet by introducing value - added productsStrategic guidance on competitive yet profitable pricing to regularly position Koroplast products as achievable for a wide customer base Addressing a more diverse customer base through tactical brand and PL production, to increase profitable sales volume Value -added and innovative product development strategy to accommodate diverse customer needs -Fresh keeping storage bags, scented and odor blocking garbage bags are recent examples of innovative products by Koroplast Introducing new categories leveraging Koroplast’s brand image and quality -Expanding presence in kitchen consumables aisle with recently launched cleaning category Pricing strategy project with Simon Kucher , 2019 … targeting continuous growth across categories with diversification strategy2 Continuous marketing activities across channels to increase penetration and frequency Private label production Türk Tuborg 15 3 44 SKUs Garbage bags9SKUs Cooking products 35 SKUs Storage products13 SKUs Cleaning productsBroad product portfolio catering to everyday household needs… 7.5 42% 2022B Sales volume1(k tons) % of 202 2B Net sales1Wide product portfolio with 100+ SKUs comprising top-quality productsInnovative products enriching the categoryBecoming a cleaning expert, capitalizing on brand awareness and image (1) Basket products sales (bundled promotional items) and other sales (scrap, raw material and semi -finished goods sales) are no t shown on this page; i.e.2.6% of Net sales in 202 2B Source: Koroplast , PwC Financial VDD report4.5 33%1.8 16% 0.4 6% New category launched in Q4 2020 Environmentally friendly and sustainable product base 309 244113 45 2022B Net sales (TL mn) Türk Tuborg 16 Source: Koroplast1980 -90s Early 2000s Present 1981 First to produce garbage bags 1981 First to produce freezer bags 1997 Introduced zip -bags to the market 2008 First to release biodegradable garbage bag 2009 First to produce microwave bags 2014 Lemon scented garbage bags received best product of the year award 2017 Fresh keeping storage bags introduced to the market 2017 First to release odor blocking garbage bags 2021 and beyond Prospective new products: →Cleaning gloves →Antibacterial wipes →Single use food containers Ability to develop new products with proven experienceDeveloping existing products with new features and technologiesProducts tailored to consumer needs, yet to be released to the marketLeading brand with innovative product releases throughout the years3… with deep -rooted innovation culture Türk Tuborg 17 (1) 2020 December revenue market share excluding discount markets. Market data include sponges and cleaning cloths Source: Koroplast, Nielsen market intelligence, PwC Financial VDD report Success of cleaning category is an example of how Koroplast can capitalize on its brand power in new categoriesCase Study: Koroplast’s successful new category strategy Positioning “Quality” Procurement “Supply security”Pricing “Value for money” Distribution “Visible and available”Marketing “Cares about the family”Key pillars Key considerations Targeting market leadership in the next 2 years, capturing market share from the main competitorIncreasing net sales through sustained expansion and growing presence 202012022F6.2% 15+%2021 2026FTL 117.9 mn55% CAGR→Competitive pricing at the beginning →Continuous monitoring including sales volume, market share, competitors, etc. →Focus group study demonstrated strong affinity between Koroplast and cleaning category consumers →Introduced cleaning clothes and sponges in Q4 2020 →Planning to introduce additional products, e.g.cleaning mops in 2021 →Diversified supplier base with 5 main suppliers both in Turkey and abroad to ensure supply security →Benefiting from Company’s existing brand heritage to build strong branding in cleaning category →Dedicated advertisements in traditional and social mediaExpanding category with products tailored to consumer needs TL 13.3 mn →Acquired shelf space to secure consumer reach →Secured availability in every national and local chain Koroplast reaches Türk Tuborg 18 Source: KoroplastReputable and high -quality brand image… 4 Proven quality Trusted brand with high quality standards “Food safety is Koroplast’s ultimate priority” Pioneer brand First to introduce kitchen consumable products to Turkish consumers in the 1980’s Distinguished name for the category Leading brand with highest brand recognition and awareness scores Innovation ingrained in brand DNA Functional and innovative products developed for diverse customer needs High customer responsiveness Addressing customers needs with different brands and evolving product portfolio Türk Tuborg 19 Source: Koroplast, SOR research 90% Koroplast88% Koroplast7%80% Comp.1 Koroplast54%99% Koroplast Comp.1 High quality brand imageTrusted brand perceptionTop-of-mind awarenessEstablished brand with top recognitionKoroplast continues to improve its leading brand image among consumers and… Koroplast: The brand that introduced kitchen consumable
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national and local chain Koroplast reaches Türk Tuborg 18 Source: KoroplastReputable and high -quality brand image… 4 Proven quality Trusted brand with high quality standards “Food safety is Koroplast’s ultimate priority” Pioneer brand First to introduce kitchen consumable products to Turkish consumers in the 1980’s Distinguished name for the category Leading brand with highest brand recognition and awareness scores Innovation ingrained in brand DNA Functional and innovative products developed for diverse customer needs High customer responsiveness Addressing customers needs with different brands and evolving product portfolio Türk Tuborg 19 Source: Koroplast, SOR research 90% Koroplast88% Koroplast7%80% Comp.1 Koroplast54%99% Koroplast Comp.1 High quality brand imageTrusted brand perceptionTop-of-mind awarenessEstablished brand with top recognitionKoroplast continues to improve its leading brand image among consumers and… Koroplast: The brand that introduced kitchen consumable products to Turkish consumers#1 ...stands out from close competitors with a well -established brand heritage Competitor 1 Competitor 2 6 780748599 Competitor 1 Competitor 2 “Innovative at heart” “Makes life easier” “Premium quality” “Thinks green”Customer perceptions of Koroplast “Truly a Pioneer”…cemented by growing customer awareness 4 “Healthy”The first brand that comes to mind Assisted brand awarenessSolid consumer perception scores (2020) Türk Tuborg 20 (1) Regular medium -size garbage bag including 15 pieces, except for Sera and Piknik , packages of which contain 20 pieces each (2) 30 pieces Source: Koroplast , Nielsen market intelligenceCase study: Premium pricing strategy secured by brand equity and quality Koroplast successfully reflected high quality and trusted brand image to its prices Koroplast price index versus competitors based on average monthly prices Garbage bags1 Freezer bags2 Cooking paper 2020 2020 2020 100% 100% 100% 87% 85% 83% 74% 92% 75% 72% 51%96% 92% 72% 64% Türk Tuborg 21 In export marketsIn the domestic market5 Source: Koroplast, PwC Financial VDD reportRetailers 4.9 239 Distributors 5.6 309 Discounters 1.9 106 Out-of-home 0.7 24Long -tenured relationships with major retailers, reaching c.83% of national chains; strong consumption base Multi -brand offering along with PL production to leading national chains, including Migros Adaptation to emerging online channels : Partnering with top online groceries, expanding online presenceExtensive reach across Turkey via wide distributor network of 45 in 6 regions, accessing c.33k points c.95% of distributors offer Koroplast products exclusively in kitchen consumables categoryReaches local chains through distributor channel Strategic partner for discounters : Offers both branded and PL products to top 2 leading discounters in Turkey Only premium brand listed continuously on discounter shelves Aims to increase share of branded sales in discounters Diverse set of clients Works with large restaurant chains Utilizes distributor network to reach international customersExports to 11 countries, mainly in EuropeStorage products and garbage bags focused sales Strong nationwide coverage and growing export base… Participates in tender processes of sizeable municipalities13.1 679 1.4 45 2022B Sales volume (k tons)Has the highest visibility and availability , dominating physical shelf space with c.60% share in national chains 3%33% 15%42% 6% 2022B Share in Net sales (%)94% 2022B Net sales (TL mn)Maintains selective customer portfolio with profit -oriented mindset Türk Tuborg 22 (1) Other sales (scrap, raw material and semi -finished goods sales) are not shown on this page ;i.e.1.0% of Net sales in 202 2B (2) 2020 revenue market share excluding discount markets. Nielsen Kitchen Consumables Reports include garbage bags, storage bags, baking sheets, oven bags, ice bags, microwave bags Source: Koroplast , PwC Financial VDD report, Nielsen market intelligenceBranded sales championed by Koroplast Strong PL business connections with major retailers/discounters 15.8% % of 202 2B Net sales1 Market leader brand with premium positioningTactical brand offering value for money with high quality5… with multi -faceted go -to-market strategy Strategic and trusted business partner of the largest national chain in Turkey, Migros, as well as largest discounters A101 and BİM since their establishment Positioning Categories Key highlights ✓Higher portion of PL business generated via major retailers ✓Accumulated working know -how with major local discounters ✓Penetrates entire market and each customer segment ✓Offers its PL products to customers in export markets as well✓High product quality compared to pricing ✓Positioned to capture price sensitive consumers ✓Lower level of customer interaction and marketing communication✓Well -known kitchen consumables brand in Turkey ✓Widely available in each category ✓Premium pricing power ✓Easy to penetrate other categories due to reputation and brand recognition Garbage bagsStorage productsCooking productsCleaning productsKoroplast can address diverse customer categories with different go -to-market strategies through branded and private label sales 83.2% 47% x% Kitchen Consumables market share2 In addition to PL, continuous listing of Koroplast branded products, underpinned by solid relationships forged with local discounters Türk Tuborg 23 (1) Including warehouse areas Source: Koroplast Largest production capacity in kitchen consumables market in TurkeyHigh quality machinery and equipment from leading global brandsFlexibility to handle multiple SKUsSkilled and experienced workforce focused on quality c.2.6k tons/annum Wrapping capacityc.23.4k sqm Total area1c.12k pallet Storage capacity Key machinery and equipment suppliersLargest production facility with vertical integration in key product lines 6 Production facility c.15.5k tons/annum Extrusion capacityAmple area available for capacity increase Fully integrated production for key products, providing cost competitiveness Istanbul Türk Tuborg 24 Source: Koroplast Oğuz Arıkan Head of Sales 29years of work experience Previous experience Nestle ColgateErgün Geçkin Head of R&D and Quality Previous experience Bostik -ArkemaÖzlem Mesutoğlu Head of Finance Previous experience Saica Pack Garanti BBVA Quality and innovation driven managementFocus on sustainable growthImproved brand perception & sustained market leadershipyears of work experience21 years of work experience217Competent professional management… Gülsün Mersin Head of Marketing 23years of work experience Previous experience Eczacıbaşı Holding Hayat KimyaAmbitious management team with proven experience in FMCG sector Previous experience KoçHolding Bekir Türkoğlu CEO 29 years of work experienceSince 2004 with Koroplast Banu Dirlik Head of Production Previous experience Korozoyears of work experience22 Türk Tuborg 25 (1) Excluding Others sales volume (2) Others includes PwC Financial VDD adjustments for 2018 -2020 Source: Koroplast… delivering solid financials with strong growth strategy and vision 7 42 971911,423 2019 2026F81410 -5 2018611,705 119 20201901311,165 24413 202130927 11396 2022B399306515 15116 2023F73021 496118 36977 281 2024F608441241 2025F730297 159 200941 +46%+24%Key remarks Net sales (TL mn) EBITDA (TL mn) 2025F 2021 2018372.2 2019 2024F 2020 2022B 2023F 2026F35.1 47.671.9106.2181.1234.6298.4457.8 +51%+26% EBITDA margin (%)22.1% 23.8% 26.9% 25.6% 24.9% 24.8 % 25.9 % 25.6%Sales volume1(k
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Marketing 23years of work experience Previous experience Eczacıbaşı Holding Hayat KimyaAmbitious management team with proven experience in FMCG sector Previous experience KoçHolding Bekir Türkoğlu CEO 29 years of work experienceSince 2004 with Koroplast Banu Dirlik Head of Production Previous experience Korozoyears of work experience22 Türk Tuborg 25 (1) Excluding Others sales volume (2) Others includes PwC Financial VDD adjustments for 2018 -2020 Source: Koroplast… delivering solid financials with strong growth strategy and vision 7 42 971911,423 2019 2026F81410 -5 2018611,705 119 20201901311,165 24413 202130927 11396 2022B399306515 15116 2023F73021 496118 36977 281 2024F608441241 2025F730297 159 200941 +46%+24%Key remarks Net sales (TL mn) EBITDA (TL mn) 2025F 2021 2018372.2 2019 2024F 2020 2022B 2023F 2026F35.1 47.671.9106.2181.1234.6298.4457.8 +51%+26% EBITDA margin (%)22.1% 23.8% 26.9% 25.6% 24.9% 24.8 % 25.9 % 25.6%Sales volume1(k tons)11.0 10.5 20.7 17.4 15.9 14.5 13.3 12.9 Net sales growth between 2022 and 202 6mainly fueled by volume growth Unit prices mainly raised in line with inflation, with limited real price increases and limited product mix impact during business plan period Increasing EBITDA with growing salesGarbage bags Storage Cleaning Cooking Basket Others2Strong volume growth boosted by rising penetration of kitchen consumables categories19.0 26.2% Türk Tuborg 26 Above bullets are additional streams of growth not reflected in business plan8Multiple untapped value enhancers beyond the business plan I Offering new cleaning category products, targeting market leadership II III IV Cleaning mops, cleaning gloves and wet cleaning towels Plastic food containersOther household and homecare productsNew distributorship agreements in new geographiesAdditional product offerings in existing categoriesLaunch of new adjacent categoriesGrowth in export markets Source: Koroplast Türk Tuborg III. Business overview Türk Tuborg 28 Support functions (1) Low -density polyethylene (2) High -density polyethylene Source: Koroplast Koroplast: Business overview Procurement Production Sales & Distribution → Main raw materials are LDPE1and HDPE2 as well as other raw materials such as masterbatches, additives and packaging materials → Koroplast diversifies its supplier base in key categories to create competitive edge on purchase prices → 7.6k tons of raw PE supplied in 2020, comprised of 3.2k tons of LDPE and 4.4k tons of HDPE→ Garbage, fridge and freezer bags entail vertically integrated in -house production from extrusion to final packaging stage → Cooking paper, aluminum foil, and PVC film are procured as semi -finished goods and undergo converting processes involving cutting and packaging → Cleaning products are purchased as final products, packaged in -house, and sold directly to customers → Koroplast sells its products to retailers, discounters, out -of-home and export market customers via its own sales team of 35-40employees → Koroplast also reaches a wide network of traditional shops and local chains via 45 distributors, covering every region in Turkey → With an on -the-ground team of more than 70 merchandisers , Koroplast carries out its in -store marketing and listing activities Information TechnologiesHuman ResourcesValue chain overview Research & DevelopmentHealth & Safety Türk Tuborg 29 Source: KoroplastEffective procurement process enabling seamless operations →The Company has anestablished supplier base ofreputable local and international names foreach raw material, toensure supply security and competitive pricing -Sixmain procurement items arePEraw materials (HDPE &LDPE), cooking paper, aluminum foil, PVC film, cleaning and packaging products →Koroplast sources allraw material needs directly from itssuppliers →Suppliers forbranded and PLproducts differ, depending oncustomer needs and pricing/quality differences →Procurement costs aremainly based oncommodity prices, which arequoted inEUR/USD -Locally sourced packaging materials arepurchased inTL →Cooking paper, aluminum foiland PVC film are procured assemi -finished goods →Cleaning products areprocured asfinal products from 8different suppliers from Turkey and abroad, and sold byKoroplast →Koroplast works with 3rdparty logistics provider .Products arecarried from Koroplast facility tocustomers’ warehouses Koroplast works with multiple suppliers to ensure better pricing terms and supply security in all key material purchasesShare in total procurement (2020) PEraw materials Cooking paper Aluminum foil / PVC film Cleaning products Packaging productsProcurement Sales & marketing Production Support functions Supply chain overview 44% 7% 16%11% 3% Suppliers 5 main suppliers 2 main suppliers3 main suppliers 5 main suppliers4 main suppliers Türk Tuborg 30 (1) Koroplast shares the corporate office area with Korozo Source: KoroplastModern production facility with the largest production capacity in Turkey… Modern production facility (“ Facility ”) located in a single area, strategically located in Istanbul, easy access to key regions, domestic and export customers Ample area Facility & HQ Main storage unit Open area High quality machinery and continuous investments to increase production capacityLocated on 23.4k sqm with an area for potential capacity increase Corporate office1located on 3rdand 4thfloors of production facility, enabling close monitoring in every step of productionArea (sqm) Description Facility & HQ 15.7kProduction area and HQ are in the same establishment Open area 2.6k Raw materials are stored in an open area Main storage unit 5k Warehouse with 12,000 pallet capacityProcurement Sales & marketing Production Support functions 15.5k tons/annum Extrusion capacity 2.6k tons/annum Wrapping capacityKoroplast production facility Koroplast has a long -term rental agreement for facility and storage area Türk Tuborg 31 Source: Koroplast…equipped with high quality machinery and infrastructure Procurement Sales & marketing Production →Brands: 5 Mam, 1 Alpine, 1 Kiefel , 1 Wenzhou −7 Coex -3, 1 mono production −Extrusion range between 250 –410 and 850 –1,800 mm −6 HDPE / LDPE and 2 LDPE processing →Brands (Garbage bag cutting ): 3 Mobert , 3 Lemo , 1 Coemter , 1 CMD −3 drawstring −1 drawstring + interleave + regular −2 star seal 3 ban d, 1 star seal 2 ban d −1 regular →Brands (Fridge & freezer bag cutting): 3 De Bernardi , 3 Lemo −1 bellowless, 5 with bellow →Boxing brands (Fridge & freezer bags): 4 Lead →Boxing brands (Cooking and ice bags): 2 Lead →Rewinding brands: 2 Rotomac, 1 Bragernes →Both cutting and boxing brands: 2 De Bernardi , 1 Wenzhou, 1 Yağmur MakineExtrusion Cutting Boxing / WrappingSupport functions Well -maintained high -quality machinery and equipment base Türk Tuborg 32 Quality control throughout the process (1) In -line production refers to a seamless manufacturing process executed in one line, without switching to another production line Source: KoroplastProven production process experience with stringent control measures… Procurement Sales & marketing Production Extrusion Cutting Boxing / Wrapping Products Garbage bags Garbage bags Storage products Fridge & freezer bags Cling wraps Aluminum
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regular →Brands (Fridge & freezer bag cutting): 3 De Bernardi , 3 Lemo −1 bellowless, 5 with bellow →Boxing brands (Fridge & freezer bags): 4 Lead →Boxing brands (Cooking and ice bags): 2 Lead →Rewinding brands: 2 Rotomac, 1 Bragernes →Both cutting and boxing brands: 2 De Bernardi , 1 Wenzhou, 1 Yağmur MakineExtrusion Cutting Boxing / WrappingSupport functions Well -maintained high -quality machinery and equipment base Türk Tuborg 32 Quality control throughout the process (1) In -line production refers to a seamless manufacturing process executed in one line, without switching to another production line Source: KoroplastProven production process experience with stringent control measures… Procurement Sales & marketing Production Extrusion Cutting Boxing / Wrapping Products Garbage bags Garbage bags Storage products Fridge & freezer bags Cling wraps Aluminum foils Ice bags Cooking products Cooking papers Cooking bags In-line productionGarbage bag, cling wrap, aluminum foil and cooking paper production are carried out in -line1 Cleaning products are purchased as final products from both abroad and Turkey (Toll manufacturing)→Color, filler and additive masterbatch production →Extruders can process both PE and aluminum →8 machines with high and low density PEprocessing capability (2 of the machines are focused on low density PE processing) →Supplements such as scents are added into the process to add different characteristics to products→8 Garbage bag cutting machines allow production of regular, star seal and bucket products →6 fridge & freezer bag cutting machines allowing both small, medium and large size fridge & freezer bag production→4 fridge & freezer bag boxing machines, 1 cooking paper and 2 ice bag boxing machines →3 rewinding machines, 1 machine devoted to cooking paper wrapping →4 cutting and boxing machines allowing in -line production for resealable, zippered, regular bags and bags with adhesive tapes →Promotion products go through additional shrinking processSupport functions The Company pays close attention to production process, from using top-quality raw materials to manufacturing Türk Tuborg 33 Source: Koroplast, SOR research, TNS researchTop ranking on a continuum of customer preference for kitchen consumables Food safety and general quality standardsEnvironmental standards and organic productionDietary standards Brand image associated with environmental protection and sustainabilityProcurement Sales & marketing Production Support functions…and quality certificates Founding member of ÇEVKO, a non -profit foundation devoted to environmental protection ,and packaging waste recovery and recycling Koroplast’s high quality products certified by… 90% overall customer trust score Vegan packaging product certificationHalal certificate Türk Tuborg 34 … and manages export operations…Well -established sales organization managing a wide distributor network (1) Including 4 distributors serving only out -of-home customers, and 1 distributor serving only online groceries Source: Koroplast , PwC Financial VDD reportSales channels Coverage area3 Key account managers 15 Key accounts 5 Regional directors 5 RegionsHands -on in -house sales team of 38 people Widespread network of 451distributors Key account teams manage large national chains, discounters and online groceries totaling c.30k points Distributor network enables access to a wide network of local chains and grocery stores totaling c.40k points, with a focus on Turkey’s highly populated regionsOutsourced on -the-ground merchandise team of 70+ people carry out in - store marketing and listing activities Koroplast sales team closely supervises distributors with regular visits Koroplast also serves out -of-home and export markets, which consist mainly of B2B customers, with its own dedicated sales team Multi -distributor model ensures operational sustainability and distribution security Daily route of the merchandise team is optimized regularly to reach maximum amount of high -turnover stores ✓Distributors grant product category exclusivity while working with 100% warranty, providing security in receivables collection for Koroplast✓ 98 77 14# of distributors in each regionProcurement Sales & marketing Production Support functions % of 202 2B Net salesKoroplast reaches the domestic market via… 94% 6%National chains Discounters Out-of-home Online retailers … through well -connected distributors in each market, accessing c.10 countries in EMEA and CIS regions Each color represents a different region46% 54% % of 202 2B domestic net sales % of 202 2B domestic net sales (exc. distributors)29% 6% 1% 64% Türk Tuborg 35Customer network in the domestic market Turkish retail sector landscapeProcurement Sales & marketing Production Support functions Source: Koroplast, PwC VDD reportRetailers Discounters Local chains and traditional shops Online retailers c.129ksales points across Turkey Koroplast sales concentration –Top 10 customers revenue share→Migros and CarrefourSA ,theonly two national chains with c.3ksales points inthe modern channel, have been Koroplast’s long -standing customers→Traditional channel consists ofsmall local chains and traditional stores , making upaconsiderable portion of Turkish retail universe→Rapidly growing channel with theshift inconsumers’ shopping habits →Koroplast sells itsproducts through top 3leading online retailers inTurkey→BİM, A-101 and ŞOK arethetopthree discounters with c.26.5kstores →Koroplast increased availability in discounters with itsown brand over theyears ;working with BİM and A101 2018 2020 201930%32% 19%39% 10% 22%10% 20%20% 2018 2020 201941%43%49% 10% 19%11% 22%10%11% 20%20%10% 20%14% 201810% 2019 202067%62% 25%10%69% 12% 27%10%10% 24%20%16%Top 3 customers Top 5 customers Top 10 customers Discounters Retailers Others Distributors Türk Tuborg 36 Key highlights Example practices Increasing brand awareness and customer perceptionGrowing household penetration in categoryHigher turnover through targeted communicationCreating public awareness on sustainabilityMarketing channels Source: KoroplastTo expand usage of kitchen consumables, Koroplast focuses its marketing communication on interactions with a diverse consumer base through various occasions and channels with the aim of … →Attractive and informative content underlining Koroplast products’ usage areas and benefits →Seasonal advertising strategy →Advertorial campaigns with leading TV program Masterchef TurkeyTraditional media →Over 200 cooking videos on the top food website sponsored by Koroplast →Highly active social media usage with influencers →Joint campaign with e -commerce siteDigital & social media →Point of sale displays →Basket promotional items at register →Focus on high visibility at retail shelves Points of sale →Initiated # Trashtag Turkey in 2019, collecting c.17k bags of trash →“Tips for making life easier” book, authored by a record c.9k women in Turkey →Aims to increase public awareness on sustainabilitySocial responsibilityProcurement Sales & marketing Production Support functionsAcross channel marketing activities… % % of 2021B Fair & Advertising expensesc.54% c.38% c.5% c.3% Türk Tuborg 37 Source: KoroplastUse of popular figures as brand ambassadors to promote usage of Koroplast productsCost -effective marketing strategy enabling continued marketing activities and visibilityConstantly optimizing marketing methods with trackable and measurable results→Leading YouTube channel (“ Hayatı
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