Current report No. 15/2020

Legal basis: Article 17 sect. 1 of the MAR - Confidential information

Subject: Information on the impact of coronavirus effects on the Issuer's Capital Group.

VRG S.A. with its registered office in Kraków (hereinafter referred to as "the Issuer"), in relation to the published recommendation of the European Securities and Markets Authority (ESMA) of 12 March 2020, informs about the possible impact of the coronavirus epidemic on the activity of the Issuer's Capital Group.

According to the current assessment as of March 16th, 2020, the Issuer predicts that the effects related to the coronavirus epidemic will have a significant negative impact on the Issuer's future financial results. In particular, the Issuer points out that the restrictions imposed by the Minister of Health on the operation of retail facilities housing the Vistula, W.KRUK, Bytom, Wólczanka and Deni Cler brands, which have been introduced by the Minister of Health, create a very high risk of a negative impact on the Issuer Group's financial performance in the first quarter and, depending on the duration of the restrictions related to the coronavirus epidemic, also in the subsequent period. In the Issuer's opinion, the closure of shopping centres related to the coronavirus epidemic will reduce the consolidated income in the first quarter of 2020, which should amount to about 190 million PLN, i.e. 11% less than in the previous year.

In this situation, the Issuer’s Capital Group concentrates its actions on intensifying sales at online shops of the aforementioned brands. The revenues from sales in the e-commerce channel in the first quarter of 2019 amounted to 15.5%, while the Issuer estimates that in the first quarter of 2020 they will amount to about 24% of total sales revenues of the Issuer's Capital Group.

The Issuer assesses the risk related to the possible negative impact of the coronavirus epidemic on the current state of the stores stock replenishment and availability of the offer at online shops as low. In the Issuer's opinion, the Capital Group's inventories in the clothing segment (Vistula, Bytom, Wólczanka and Deni Cler brands) and in the jewellery segment (W.KRUK brand) enable the Issuer to ensure full availability of its product range at online shops and at stores (after lifting the restrictions on shopping malls) by the end of the current half-year. As at the date of publication of this report, the Issuer has not identified any significant risks in terms of breaching the supply chain of the clothing and jewellery segment on the domestic and foreign markets. The Issuer performs actions in the field of optimisation of the volume of orders for the second half of the current year and in the field of minimising the costs of its activity, in particular, it has undertaken actions related to renegotiation of lease rents of commercial areas.

The above Issuer’s assessment results from the best knowledge of the Issuer as at the date of this current report. As of today, a precise estimation of the impact of the sales limitation of the Issuer’s Capital Group as a result of temporary closure of stores in shopping malls is impossible in a long-term perspective. The influence of coronovirus spread in the conditions of the epidemic on the financial results of the Issuer’s Capital Group depends on a number of factors, which are beyond the direct influence and control of the Issuer.

The Issuer's Management Board will analyse on an ongoing basis the situation of the Issuer and its Capital Group in relation to the spread of coronavirus and the possible impact on the current operations and results of the Issuer's Capital Group. New circumstances and events, which in the opinion of the Issuer's Management Board will have a particularly significant impact on the generated financial results and the current operating situation of the Issuer, will be announced to the public in current reports in the mode provided for by the applicable regulations on the implementation of information obligations of public companies.