Current report no. 12/2023

Legal basis: Article 17 par. 1 MAR - confidential information.

Subject: Adoption by the Management Board of the Capital Group's strategy for 2023-2025

Management Board of VRG S.A. with its registered office in Kraków (hereinafter: the "Issuer") informs that today it has adopted the Strategy of the Capital Group for 2023-2025 (hereinafter: the "Strategy"), which was positively reviewed by the Supervisory Board and posted on the website www.vrg. pl in the "For Investors" tab. The strategy assumes an increase in the Group's value through the development of the business scale, an increase in the operating margin in the clothing and jewelery segment, as well as an increase in the Group's net profit.


The Strategy adopted by the Management Board contains the following important assumptions grouped in five key areas:

1) Modern brands

Double-digit sales growth in each year of implementation of the Strategy thanks to the development of each brand, e.g. by expanding the target group of customers and stronger entry into fashion for women. As a result, at the end of 2025, the Group's revenues should approach PLN 1.9 billion.

2) Omnichannel

Modernization and development of the area of own stores in both segments as well as own e-shops and sales on marketplaces. At the end of 2025, the Capital Group's fixed-line network should have an area close to 62.7 thousand square meters. m2. In addition, the Capital Group should have 6 own e-shops, and the Group's brands will be present on a larger scale on marketplace platforms, which should translate into a minimum 14% on-line share in the Group's revenues in 2025.

3) Potential to increase profitability

The goal is to improve the gross margin in each of the segments, e.g. thanks to the optimization of the pricing and promotion policy, changes in collections and consolidation of supply sources, so that at the end of 2025 the Group's gross margin on sales would be between 56-57%. The Management Board assumes an increase in SG&A/m2 costs slower than the increase in sales and gross profit on sales, which should translate into a minimum 12% operating margin in 2025.

4) Efficient capital allocation

The development of the Group's space will be based on showrooms in new concepts and the modernization of existing showrooms, which will require approx. PLN 43 million of average annual capital expenditure in 2023-25. At the same time, the Management Board's goal is to shorten the cash turnover cycle to approx. 250-260 days in 2025, mainly due to the inventory turnover cycle being lower by approx. 30 days. As a result, the Capital Group should not show net debt while continuing to share profits with shareholders in accordance with its dividend policy.

5) Sustainable development

The strategy takes into account climate risks and opportunities as well as social and corporate governance issues. As part of the changes in the products, at least 25% of the collection is to come from more responsible fabrics, confirmed by certificates. With regard to diversity issues, the target is a minimum of 33% of the underrepresented gender in the management and supervisory boards combined. As far as environmental issues are concerned, the goal is to continue activities aimed at minimizing the Group's impact on the environment, i.a. replacement of company cars with hybrid versions or wider use of energy from renewable sources.

The priority is the profitable organic growth of the Capital Group in Poland, where the Management Board sees opportunities for further development. At the same time, the years 2023-25 will be the beginning of the road to building brand recognition of the Capital Group in the CEE region, which will be carried out taking into account the cost side.

Disclaimer: The Issuer informs that the information presented in this current report concerning the strategic directions of development of the Capital Group, including financial goals, does not constitute a forecast or estimate of financial results. Instead, they illustrate the planned activities and development directions in 2023-25.