LPP SA (LPP) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. My name is Przemyslaw Lutkiewicz, and I'm Deputy Chairman of LPP for Financial Affairs. With me today is Marek Piechocki, the Founder and Chairman of the Board at LPP. As Marek Piechocki is protecting his image and privacy, he will not be visible for you today, but he is sitting physically right next to me, then he will be hosting the conference. So you'll hear his voice. First and foremost, we would like to thank you for accepting our invitation. I know that there are numerous people on the call now, over 1,000 persons have logged in. So initially, we had some technical delay, but I believe that now everything is going smoothly. Ladies and gentlemen, we are meeting here today in the emergency mode in order to clarify all the doubts and explain the situation related to LPP's withdrawing from the Russian market and presenting to you our situation and this meeting has resulted from the fact that the Hindenburg company on Friday published its report concerning our company. In today's presentation, we are going to address any doubts that have appeared. We will explain all the events that took place when the Russian business was sold. And we will answer numerous questions that have been submitted over the weekend. Throughout the presentation, we will respond to all these queries. You will also have the possibility to submit your questions using the chat box option. Our employees are going to [ throw ] the questions, group them and towards the end of the presentation, we will try to address them all. Ladies and gentlemen, now I would like to give the floor to Marek Piechocki who will run the presentation. Chairman of the Board, over to you.

Good morning, ladies and gentlemen. Welcome, and I apologize for not making my image public, but you know that this allows my family and me live like any of you normally without publicity. For 30 years, I've been building this business, delivering solid returns to investors and benefiting the Polish state through taxes and thousands of jobs. This year, we paid PLN 400 million in corporate income tax itself and over PLN 2 billion in other taxes. This company is made of people, people from Poland who created it, and now someone wants to slander us with false claims from which not only the company's image suffers, but above all our investors' capital. Together, we have been through the biggest storms such as the global financial crisis, COVID, the war in Ukraine, and those of us who have been with us for many years know that we have come out of each one of these crisis stronger. We are one of the few private companies in Poland, which after many audits, has been awarded the title of a Reliable Public Trust Company by National Revenue Administration, and this applies both to the payment of taxes and the structures in which our subsidiaries operate. These audits were carried out over nearly 2 years. We were awarded this title only a few months ago, and it all happened because we invited the auditors. As a company, we have repeatedly received awards from investors for our transparency and communication. And this makes me all the more sorry to find someone in our midst, who, at the cost of his profits has shaken [ this trust ], putting our good name and investors' capital at risk. This is why I'm anxious to address today in an honest manner, the false accusations made in the Friday's report. LPP, contrary to what the report claims, has no operations in Russia. It does not sell, manage, own directly or indirectly any of the companies mentioned in the Hindenburg research report. Also the foundation I have established, either directly or indirectly, has any connection with the sale of the Russian company, this concerns the [ companies ] related nor did it incur any liabilities in connection with it. We have enjoyed a lot of trust and credibility in the capital market so far. So I'm sorry particularly that we have to face this kind of slander. But I believe that anyone who lost out on this manipulation will quickly make up of this because the company has very strong foundations and growth prospects, which will also be the topic of our meeting today. Now I will try to explain in detail in this presentation; how it was, how it is and how it will be. The agenda of the meeting goes as follows: the first item, transaction to sell the business in Russia, then accounting treatment of the sale transaction. estimated results for Q4 '23, that will go to Przemek and then we will show you the outlook for 2024. Let us start perhaps once again with the first and most important statement, LPP has no operating or trading activities in Russia. We do not trade in Russia. LPP sold the Russian business in June 2022. LPP does not own the Russian company, has no control over it and does not manage the structures. The Russian company in its own name and on its own account sales goods in Russia, including inter alia goods purchased under the transition agreement. Ladies and gentlemen, now maybe a few words about the history, but it actually matters. The situation before the war, one of the accusations, the false claims that we find in the report shows that particularly high growth in income resulted from us developing the Russian business. Expansion there, and there are even false accusations that there has been a transit of $750 million through Kazakhstan. Let me go back to 2019. That is for you to pay attention to the fact that back then, we created a new concept that of Sinsay. That might have gone unnoticed because Sinsay is a brand that we had started building in 2013. But the Sinsay that you know between 2013 and 2019 was something completely different. The new brand concept was adjusted to small allocations. We started opening stores in small towns only and the previous concept was prepared for big shopping malls in large cities. You see that, I will show you this later on, that those particularly high increases in income revenue result from the fact that we had a chance to develop exponentially the new Sinsay brand concept. Then comes to 2020, we see COVID and the return to expansion in 2021. You'll see how that went in consecutive slides. But in 2022, there was the outbreak of war. And unfortunately, we had to change the company's strategy. Of course, we also plan to develop and expand not only in Central Europe, but also in Eastern Europe, the Sinsay concept, particularly with very competitive prices is a concept that relies on the value for many rules. So low prices, we knew that the Central and Eastern Europe would be a great market for such a concept to develop. Unfortunately, the outbreak of war made us change our strategy, our mindset. But the attack of Russia on Ukraine and our willingness to develop the expansion of the Sinsay brand, well, these plans were first interrupted by COVID then by the war. We had to focus on something different. In the first place, we try to support our colleagues and friends in Ukraine. And you know that we had to close all the stores. But in Kraków, Warsaw almost 300 people were hosted. We provided the employees with hotels, food and means for living. The entire 2020 was not a year in which we were able to think about developing but we were very strongly into all the activities related to counteract the horrific effects of war. So altogether, we needed over PLN 28 million to help Ukraine. And in March because we have also another element to the war. On the one hand, there is Ukraine that needs to be supported. On the other hand, we have the Russian company in which, back then, we had around 20% of our revenue. And actually, we faced a very difficult decision, we had to sell the company or we had to withdraw from Russia altogether. You need to be aware of the fact that it is not just about business, not just about 20% of our revenue, but it's also about people. This decision was very demanding for us. You know that many companies until today have continued their activities in Russia. We have some Italian or French companies, some Polish companies still operating there. For us, the decision was particularly difficult because our business in Russia had been built for years and by people whom we trusted and whom we had supported, we started looking for a decision of withdrawing from Russia. But we wanted to recover some of the capital invested in the Russian market. We, of course, knew that it would not be possible to recover everything. But also, we wanted to make sure that we provide security and stability to employees who built the business with us. LPP is a family company, we care for people. We treat them equally regardless of their nationality, of their convictions. We simply believe that people are good. Even in Russia, there are people like Navalny, not all the Russians are evil. That is what we had in mind when we were searching for a solution, we had 3 options. One of them said that we would write-off goods for PLN 1 billion, and we then, till the end of the war would [ bear ] PLN 50 million of the cost until the end of the war, not knowing when the war comes to an end. The other option was that we close everything and then the result would be PLN 2 billion write-offs and laying off all the people. That did not seem reasonable from the human point of view and also from the investors' point of view. The third option was the sale of the company, a part of the business, possibility to recover part of the invested amount and at the same time to preserve the jobs. We need to bear in mind that the Russian company was a huge transatlantic ship and finding someone who would buy around 500 stores from us on a short notice was not all that easy. Those who wanted anything from us, those who came as bidders did not really form a cue from which we could pick up the best bidder. We worked under pressure of time and social expectations for the company from Russia. And as you can see, we had 4 offers: one; swap of LPP stores in Russia for stores of a Russian company outside Russia. There were Russian companies that had their stores in Europe, but this number of stores was not significant. And this swap would really be only partial. Somebody else offered us purchase solely of LPP inventory in Russia, but then we would have some other obligations resulting from the agreements that had been signed earlier on, that would -- the ideas of acquisition of selected lease agreements for premises in shopping malls, but you know that always, well, everybody would be interested in taking over a few good agreements. And then the last offer came in. The acquisition of the whole business with payments split in tranches. And this option emerged when our former Director of the company, of Re Trading, [indiscernible] came to us and she said that she could do a sort of management buyout with a Chinese consortium. She knew Chinese investors and together with them, she was ready to do that. And that appeared to be the most reasonable option, the most friendly and resulting with lowest possible losses for our investors and for the people employed. And it made it possible for LPP to withdraw from the Russian market quickly to recover most of the invested resources and also sustaining the employment. This transaction relied on 3 basic components; the price for the stores, that was $135 million; the price for inventory about $1.200 billion and a transition period during which the new investor gradually takes over additional operations, so design, the purchase of goods, logistics and so on. You must be aware of the fact as we communicated it earlier on, but LPP reported around [ PLN 6 million ] loss in PLN, PLN 300 million loss and PLN 300 million sale price write-off. The transition period that I'm talking about resulted in various obligations, both for the buyer and for the seller. On the one hand, the buyer obligated themselves to rebrand the stores, not to use our logo types and that they would promptly start selling. You must be aware of the fact that prior to the war, we also placed orders for goods that were meant not only for the Russian stores but also for the stores that were too open in Russia in the future. So there was a lot of inventory. And those who followed our results knew that by the end of 2022, around the beginning of 2023, you could read in Bangladesh Times, for example, that we had issues with our goods being picked up. That our inventories were cluttering the warehouses and so on. That all resulted from the war-related issues. We also had to pay -- the buyer had to pay for the goods, and they simply had to start the operational activity. Our obligations included transferring of business operations and providing information on factories and similar activities. Now let us move on to what has already happened and what the Russian company is doing on its own at the moment. Management of budgets and financial performance of the business, we completely don't know. We have no information whatsoever. The company does not report to us on its financial results or budgetary assumptions contrary to what happens with all the LPP subsidiaries with Czech one, the Romanian one, any other one. All the relations with local banks and sourcing of financing, this is all done by the Russian company. LPP has no insight into the accounts, has no cash [ pulling ]. Twice a week, all our companies regardless of which country they are located, give us access to their accounts and we take money from them and so on. So no financial transactions are carried out in relation to the Russian company. Complete inventory management for all warehouses and stores in Russia has been taken over by the Russian company. Pricing, discounts and sell-ups management is all on them. Store revenue management, coupled with profitability measurement, personnel and all store cost management. It's all on them. Creation of purchasing department and independent purchases of collections and factories, proprietary collections created by own design offices and migration of IT systems to support sales, all that has happened. Everything that you can see here, all the items from 1 to 7 or 8 actually, we are not migrating IT systems between the companies. But anyhow, for any company that belongs to the LPP Group, all these activities are run from the headquarter in Gdansk. They are managed, controlled. We know how much each store is selling. We know what losses it has in terms of inventories. We know its cost. We simply have separate report concerning every particular entity. There is nothing like that concerning the Russian company. What else has happened? Partial repayment of debt has happened. And as you can see in terms of stores, the first tranche, first installment was paid and that is $13 million. Still to be paid is PLN 540 million. As for the stock sale inventory out of PLN 1.280 billion, PLN 646 million have been recovered. So that means that altogether, over PLN 700 million from the total debt of around PLN 2 billion has already been repaid. Now an important thing. One of the claims of -- at least this is my understanding of one of the claims of the report is that a big expansion of LPP in previous years resulted from the fact that you could assume or anticipate there to be using some backdoor practices. Through Kazakhstan, we sold $755 million worth of goods to Russia and we had this growth actually happening exponentially there in Russia. Now what you can see is the sales structure in consecutive years, 2021, 2022, 2023. And you can say in the position in Russia that in 2021, we had 19% but the Russian company, you have trade agents below, the Russian company started purchasing through trade agents. This is a model that resembles what, for example, Pepco is doing today. When you look at Pepco reports, you can see that it is a common model used in our industry. The company does not want to get involved into design processes, logistic processes and so on. So for that, it has its trade agents. Pepco, for example, has one; American Gap has one. There is a big Li & Fung company that serves many American companies, Gap, Target and others in terms of purchasing processes. When you look at, for example, the local market, Makro Cash & Carry uses a trade agent in Hong Kong. [ Gammex ] is the name of the company. And most of the trading activity purchases are made via [ Gammex ]. I would like you to pay attention to the fact that these trade agents via which the Russian company is purchasing, the FGT and AFIE, there is a significant drop in the revenue from the sales. And when investors are looking at it, actually, this share in the sales in 2023 is 6.8%, and the forecast for 2024 is 3% because it has already been communicated to us that they will not be purchasing so much from us as they become gradually more and more independent. But bear in mind that there is part of the goods in Bangladesh that have to be picked up when -- if you wish, look at Bangladesh Daily and there's picked up and you'll find articles on that topic. We are planning that in the Q4 2024, we'll stop selling to FGT. We believe that we'll be successful in that. And it's important for you to know that we have no financial gains from selling to FGT or AFIE. No profit sale. I would like to debunk another myth. Again, similarly, namely that our increases in our results are the effect of our activities in Russia. Just look at this juxtaposition. What would happen if we did not sell to the agents? And in 2022, this increase would be of 30% because actually, this revenue is something that we owe to the increase in Sinsay sales. Look at 2023 without selling to the trade agents, our return would have been greater than what we sell to, including FGT and AFIE. LPP is not returning to Russia. Let me confirm that. The Russian business was sold in 2022 to an unrelated investor, the entity's [ First services ], general consulting services. So the owners of the Russian company and FGT and Asia Fashion Import Export. So the trade agents through which the Russian company owner purchases are not controlled by LPP in any way. The sale transaction of the company was a real and definite one. There are no options for LPP to repurchase the business, no call option. LPP lost control over the Russian business. I told you about that extensively, the finances and operations are not managed by us at all. The repayment of receivables for the goods and stores has been put into installments. And you know that we communicated that well in advance, neither LPP nor individuals of the company's management Board have planned or plan to return to business operations on the Russian market. LPP has not, in any way, financed the transactions of share purchase. The purchase of goods through loans secured by a pledge on LPP shares. The Russian company has a POS store system, they have their own bar codes and the entity made an independent coding decision to modify the bar codes according to their specific needs. Ladies and gentlemen, let me refer to another suggestion, namely the foundation took out loans and it is behind the entire transaction. This is something that slanders me in person because that would be an accusation of me operating against the company, and this is something that I would have never done. I have never even thought about doing that. So the first bank loan granted in 2020 to Semper Simul Foundation was used to finance purchase of LPP shares. The loan was restructured in 2023, and there are documents proving that there is a bank. We can clearly show you that this was the case. Back then, it was ceded. It is the 120,000 shares. This is the same loan, same money, the goal of it is controlled by the bank. Another loan is the one from 2021. It was used to finance investments in hotels and retail parks. Again, the banks know precisely what it is about. So I can clearly state that neither the Semper Simul Foundation nor the foundation subsidiaries, nor beneficiaries have ever financed or supported the purchase of the Russian company. Now I will give the floor to Przemek because these are now the slides concerning issues related to the change of audited and finance. Przemek, the floor is yours.

Thank you. Yes, ladies and gentlemen, I will refer to the change of auditor and untrue information that was provided by Hindenburg. Our auditor from 2004 to 2016 was Grant Thornton. We had a good cooperation with this company, we think very highly of it. But there are also new regulations on changing -- on mandatory rotation of audit companies. So from 2017 to 2021, we had EY as our auditor. So then it was also mandatory to have this rotation. This is very healthy for the company. So we had a competition before selling the Russian part of our business. That was the beginning of the war and the turmoil in March, we provided an offer. We received a response from that. So we received 3 offers from 3 companies. You know why after the change of regulations company from the Big Four, if they provide consultancy services for companies, they cannot be auditors at the same time. So this division of services makes this list really short or limited, so to say. So we received 3 offers. The best offer was from Grant Thornton. And indeed, the Management Board selected this company and signed an agreement in July 2022. And Grant Thornton is our auditor from that time. So we have an agreement for 3 years '22, '23 and '24. The auditor was verifying the information. We had print out, the books are very reliable. But if there is a need, if there are motions like that, we can employ other audit companies to go deeper into these finances. In the report, there is also an information as for the restrictions on the part of auditor. You remember when the war broke out in February 2022. We complete our financial year in January. So looking at this potential danger, we had write-offs into '21 for any potential loss that we might have in the Russian and Ukrainian market. So we included that in '21. And the auditor did not agree with that. So that was a qualified opinion from the auditor. So that should have been done in '22. Then we received another recommendation from a financial institution to do so. So this reservation was not related to selling the Russian business. Grant Thornton also included the same reservation in their audit opinion from '22 statements. So these accusations from the Hindenburg are false. There was also information that LPP is selling or that this is a transit market for Kazakhstan. We don't know where do they have this information from. Yes, we have a company in Kazakhstan. We send goods over there. But this is around PLN 15 million a year. We haven't sent any significant volumes to Kazakhstan, the credit agency was talking about. This is around PLN 3 billion. So the greatest sales from the Russian market in '21, historically, the highest that was PLN 2.7 billion together with the margin. So I don't know why we would sell PLN 3 billion somewhere. This is unreasonable. We are operating in Kazakhstan. We have 23 stores in Kazakhstan. You saw in the previous slides, the participation in the overall turnover. This is 0.6%. And another element, a mistake on our part, I would like to apologize for that differences in 2 versions. The Polish version and the English version of the report. Where did it come from? These are PLN 3 billion, so in other -- on the list. When we are working on the annual report. We usually work on the Polish version. At some point, we need to prepare the English version. So this goes to translators. So the wording is translated, the tables are not yet verified. The numbers are not yet verified, they are not final. So we send this preliminary version of the report -- of the Polish report to be translated. This was done, came back to us. One table included an incorrect information. In the presentation, you can see at the bottom, the amount of the difference to other, that is PLN 2.9 billion. This is the turnover in stationary stores. So our off-line sale in the fourth quarter, and that was not in the English version distributed to particular brands. So online was divided already into brands. Offline has not been done at that point yet. And this table was sent already for translation. This is our mistake. I'm sorry about that. You can see the new English version. Both versions are available on our website. The English version is corrected. So the correct is [ PLN 270 million ]. So this PLN 3 billion, this is not an income from the Russian market. This is just an accounting mistake, the correct number is in the Polish version. Now this is corrected in the English version. So it does not refer to the Russian market. I wanted to move on to financial results we published today. So these are estimated financial results as for the fourth Q '23. This was a very good quarter and a very good year. You remember that we had to focus on savings in terms of costs in the first 3 quarters, hoping that we need to repair the sales, small or low dynamics of the sales in the third quarter. And then in the fourth quarter, it's much, much better. You can see in the table on the right, the increase in the sales in the fourth quarter are 15%. I have more detailed data; online increased by 9%; stationary shops 18% increase. So we go back to good situation, the margin 52.5%. The cost was slightly higher than a year before because in the fourth quarter of last year, we started savings in relation to costs. So the increase of cost that was much slower than the increase of sales and margin. Therefore, we have very good operating results, PLN 600 million and very good net results, almost PLN 500 million net profit. So this is 160% year-over-year. And EBITDA compared to 2016, that was an increase by PLN 1 billion compared to the fourth quarter. Very good results is PLN 17 million. The increase in margin more than 1 percentage point year-over-year, and SG&A costs dropped by 2%. So very good operating income -- operating profit over PLN 2 billion, and net profit record [ PLN 1.006 billion ]. So we still keep the dividends PLN 570 million. This was information already provided to you. And I would like to ensure that our financial situation is very stable. When you see here, we have over PLN 800 million in cash when we compared to IAS 17. The cash that we are having is covering our credit, our loans. We have also deposits over PLN 500 million. We can use them at any point if there is a need. So the situation is very stable. And then good prospects for the future. So Marek is going to move on.

I would like to add that you were saying PLN 570 per share in terms of dividends, yes, that was PLN 570 per share. I believe that we made sure that these accusations were false. We are not doing any business in Russia. We are not selling, not managing, we are not owning any companies mentioned in the report. The foundation that I established has no relations with the Russian entities, did not take any, incur any liabilities. LPP left the Russian market and is not going to come back there. The increase of sales did not come from our activity in the Russian market, but from a very fast development of Sinsay brand. We will refer to that in a moment. And I believe that what Przemek said about Kazakhstan. This is a complete false information. So the Russian company did not sell that volume at any time. So we have evidence to prove that we sold goods for PLN 15 million to Kazakhstan. So I believe this part is behind us already. So I would like to talk to you about what happened in the development strategy of our company, what we focus on. After the Eastern market stopped being a potential market for us, so we know we are not going to come back. We cannot go back there. You know this is not possible at any time. We focus in the increased value for money in Sinsay market, we can see the potential in this brand for very quick development. And in '21, '22 that was not possible. But when you see on the numbers in open stores, you will see that, that was a really large number compared to our previous businesses. As for the dividend, as Przemek said, we are paying that. We consider a buyback, but that will be a decision of the general shareholders. So we don't want to have any such situations in the future. So we want to make sure there is none of these. Please look at 2016 right now. And in this year, we had 1,703 stores and in '18, 1,742. So we just had 40 more stores. At that time, we saw that as for big cities, our development was limited. But when you look at 2019, 1,740 and then you have the development of 20 stores. So you could see the first evidence when Sinsay was speeding up. In '22, we sold over 400 stores in Russia, but we opened 270 stores in other countries despite the war, despite difficult situation, we had some issues with what was happening in Ukraine and in transactions with the Russian company. We opened 274 new stores in other countries. In '23, we opened 350 new stores. I want to pay -- to draw your attention to Sinsay development. In 2024, we plan to open 700 stores, not just Sinsay, but in general, as the entire company. But the number -- [ thinks ] whether this is really possible. But in 2001, when we started to be listed company, people were thinking whether this is possible for having more stores. So let's move on to another slide, the development of Sinsay. I would like to explain its potential or possibilities for such dynamic growth. This results from the fact that I believe 95% of these stores are open in smaller cities, in towns of 40,000 or 30,000 inhabitants. We know how many of these are in Poland compared to big shopping malls with 150,000 inhabitants. This is a significant potential for this concept in a large number of small cities. Sinsay has its advantage because it's a wide offer, attractive price and we have e-commerce sales and in stationary stores. So this is a security for the customers. They can return the goods, whether they prefer to buy in person, visiting the store or during weekends online when the stores are closed, they do it with via Internet. Therefore, we are planning in '24 to open 620 Sinsay stores. And we can ask a question whether this is possible? I believe that we all realize that to open the stores till the end of the year, till June, we need to have a shortlisted number until we need -- design the construction of the stores. It takes time. So we believe we have some agreements already signed. We have 500 stores right now. So we believe this is possible. The amount of -- the increase of the number of stores of Sinsay is one thing, but we believe that the increase of Sinsay is also possible in e-commerce. We can see that this offer from Sinsay is equally attractive than biggest players, SHEIN and Temu that has been developing very, very dynamically. Those who observe the market, they see that Temu increased 100% year-over-year. We've been observing that very precisely. We don't want to give you the information that we will continue to do the same, but such a significant increase as in Sinsay is possible. The offer of Sinsay is much better if we compare that with the Asian entities because in terms of prices, just download the app of Sinsay and compare the prices, and we provide the security. The goods are of higher quality than in other entities and the customers can return the goods. It's not that Sinsay is going to develop only LPP, other brands will develop as well, but it will be around 15%, maybe 20%. But with Sinsay, it's [ 50% -- 70% ] year-over-year. So we focus on significant development of Sinsay. This is going to draw our company further. We maintain our conservative guidance as for 2024. And as you saw in '23, we focused on the costs, we realized the slowdown on the market, and this resulted in good financial results. But this year will intensify our sales. So we maintain our guidance for '24 for PLN 20 billion for the group. It can be higher, but let's focus on PLN 20 billion. As for the margin, gross margin, the entire capital market, we will not go back to gross margin, 50%, 56%, 57% because of the significant contribution of Sinsay that is going to grow. So maintaining this margin will be an effort for us. On the one hand, Sinsay is purchasing at low cost, is using very low margins, but also low cost. One of the main factors in Sinsay affecting the costs like the lease of the area, like the shopping mall in big cities. This is maybe EUR 20, perhaps in Sinsay stores, this is between EUR 9 or EUR 10. So this is half the amount. When we look at the cost of the construction of the store, which is 50% lower than building the shops of other brands, we can see that Sinsay with such low margin is really profitable. We can say today that Sinsay is one of the main contributors into our profits and this is the largest part in the entire LPP profit. Now the beginning of '24, what do we start with? From the 1st to 15 March, this is the sale in our stationary shops compared to e-commerce. In Sinsay, we have almost 30,000 -- a 30% increase and in commerce 60%. We believe that the first quarter will also be good for us. We believe that the sales are going to be larger than last year. And I believe this is everything in terms of our presentation. Now let's move on to Q&A.

Hi. This is Marek. There are a few questions that were submitted and probably there are going to be more coming in. So I'm going to be asking questions, would you please answer. The first question, ladies and gentlemen, why did you react so late, given that as you have announced yourself for 5 months, you had known about the planned attack of Hindenburg. Why did you fail to inform the stakeholders? When did Hindenburg contact you? Ladies and gentlemen, Hindenburg actually never -- has never contacted us. Gradually, we got information from our former and current employees who informed us that over the private channels, they got questions concerning the operational activity of the company. And these people who asked the questions, introduced themselves as the former Reuters and CNN correspondents. These were just attempts at getting information. Initially, it was just about getting information about LPP, but then the question started escalating and the financial aspects set in. The alleged journalist started offering money for giving confidential information about the company. That started causing concerns and usually investigative journalist would not offer money. So that made us think that it had to be about something else. And we decided that it was necessary to get the Ministry of Foreign Affairs and National Revenue Administration involved because we simply decided that something was wrong here. However, excessive reaction from us would cause concerns in the market. And this is not what we would like to do because we shouldn't really cause panic. We are subject to various attacks. The company is a big entity, and there have been situations in which one of the Chinese portals actually kept attacking us by stealing our clients, redirecting them from our websites to their own website. And well, of course, we do counteract that. This is something that we have already tackled. But this is not the reason to inform you about that. Question number two, what actions does the company plan to take up in order to limit the reputation and imagery losses related to the situation? One of such activities as our meeting today with you, we care very much to clearly and in detail, respond to the claims that had found their way to the Friday report. We wanted to debunk them. This action, this information activity has a clear goal of share price loss. You know that it happened on purpose on that very Friday when the contracts matured as planned, that the company also went short in order to make a financial gain on the share price loss, but it certainly did not believe that it would be attainable because it did not report its commitment to the financial supervision authority. You know that over a certain threshold you should report to the Financial Supervisory Authority that was not done. I hope that our today's explanation makes it clear to you that LPP does not run operational activity in Russia or commercial activity. We sold our Russian business. We do not manage the structures of the company that bought it. Another question concerns the call option. Could you explain what that option involves and that concerns buying back the Russian company that brought the shares from LPP? Actually, the agreement has the option only on the buyer side, making it possible to sell the company back to LPP by the end of 2026. If the investor decides that the conditions for running an economic activity in Russia do not make it possible for the buyer to continue their activity in a profitable way. That was one of the requirements from the lawyer of the other party. I can, of course, assure you that we do not have any plans whatsoever to return to the Russian market if it comes to this, we, of course, will close the company and make write-offs. You know that now the sentiments between our countries make it clear that we will never return there. Another question. What are your plans concerning Belarus. We have 23 stores in Belarus now. We are not planning to make any changes in that market. We do not have any developmental plans there either. They function the way they function. And actually, they have no greater significance. They are not crucial. We do not want to close them because we do not think that, that is necessary. Another question, somewhat strange, but let me read it. Isn't there any role of Semper Simul behind the share price losses because maybe Semper Simul would like to buy the shares? Well, I hope that we made it clear in the presentation so but let me refer back to that again. In the past, Semper Simul did purchase LPP shares. In the presentation, we showed you that the foundation took share secured loans. So surely, the foundation would not care for the share price to drop because the share price is the security of the loan. So certainly, the foundation cares for the price to stay strong. Okay. We have another question. Will LPP employ an independent forensic auditor to prove its version of the events? Well, we have a Supervisory Board meeting today, we are going to discuss that. And probably, yes, we might discuss also the necessity to employ such an independent forensic auditor. The clause concerning selling back the company back to LPP. The question is, is it possible to prolong this option beyond 2026, the clause enabling selling back the company, the Russian company [ sale ] to LPP. Let me just read that back again. So it's a clause about the agreement, the buyer has a chance to resell? No, such a possibility does not exist as far as I remember. But anyhow we do not assume that we could ever rebuy the company. It doesn't matter what the data is because I cannot see any prospect whatsoever for LPP to return to the Russian market. Certainly, this will not happen, not with this company and not ever. What conditions will have to be made for the investor to use this option, what price of this transaction would it be? These parameters have not been set. So no price, no parameters have been decided on. When the investor decides that the business does not bring the expected results. It's not profitable, then they might want to use this option. But as I say, as of today, it does not seem that this is possible at all. There is another question concerning the communication about the Friday event. Why on Friday, I mean, it's 3 communications, every few hours, you had expected the attack from Hindenburg, so you -- shouldn't you issue a single communication encompassing all the crucial pieces of information. I don't think that any of us would have expected that, that would be this kind of attack. As I mentioned, you saw that there were some investigative journalist or [ an alleged ] journalist asking for this or that, but nobody actually could have guessed that, that would be such an extensive attack. And the attacking party would be spreading so much false accusations. In order to respond to that, we had -- we needed time. We needed all these hours. And I assume that if you consider this to be a mistake on our side, and yes, we admit to the fact that we had not been prepared 100% for the attack, but I'm not sure that there's anybody who actually possibly could be ready for that. So we wanted to make it clear that our investors in market gets clear response. We wanted to address the claims in the right way. And the question do you have any suspicions as to who is behind actually sharing information with Hindenburg? We do not want to run an internal investigation on who spreads what kind of information. The information that you have there also concerns some presentations or information concerning 2021 or 2022. So far back in time when we started the process of our projects of actually shifting of our activities to the Russian company. So these are old pieces of information. There is a question, another one, I think that I am the one to take it perhaps. An answer was given here, but let's read the question again. What was the transfer of money between LPP and investor? What tranches have already been paid back? And how much there is left to pay back until '26? The table that we showed you in one of the slides actually showed that around PLN 600 million is the sale price, and that is 4 tranches. The first 10% of the value, it was paid in December 2023. So to pay, we still have 90% of the total sum. Once a year, these installments will be paid back. Apart from the one from the installment for the stores, there are also those installments that we get for the sale. Did any other transfers occurred concerning the support of the new investor and the purchasing processes? No. There were no other financial transactions, apart from payments for the stores and the stock sale, no other transfers. Was investor obligated to issue any payment for additional support? No, no such payments took place. And last question in this set. What is the estimated cost of LPP of the support for the years 2022 and '23 in this process? Well, this would be the cost of well, not significant compared to the amounts that we expect to regain, to recover. It's about a few hundred thousand or a few small millions, but to recover, there is around PLN 1 billion.

We seem to have no other questions, so thank you very much for your participation in this conference. We hope that we debunked all the myths, clarified all the doubts, you will assess the material we have shared with you and you will be able to assess the transaction of the sales to the Russian market. As Marek mentioned, the business has been sold. We do not run any activity in the Russian market. We have no control of the company. This chapter has been closed. Thank you very much. I would also like to thank you. I believe that we have clarified everything. And I also believe that there is bright future and developmental perspectives ahead. I think that LPP is in this moment, a similar moment that we were in, in 2001, the strong potential. Sinsay makes us believe that in the span of 3 years, we can double the size of the company. Thank you very much. Thank you. Goodbye. [Statements in English on this transcript were spoken by an interpreter present on the live call.]