CCC SA

WSE:CCC

Earnings Call Transcript 2024-Q1

[Dariusz Milek, executive]

Good afternoon. I'd like to welcome everybody very cordially to our conference. I'd like to thank you for your attendance, and I'd like to go ahead and give the floor to Lukasz to tell us a little bit -- tell us a little bit about our results.

[Lukasz Stelmach, executive]

Thank you very much, Mr. President. Good afternoon, ladies and gentlemen. So we'll go ahead and do a recap of the key facts, which affected the results in Q1 2024. First, we want to draw your attention to the very high like-for-like sales growth as part of CCC and HalfPrice in CCC, the sales growth was 23%. And in HalfPrice, it was 12% in that business line. Second thing is we have record high improvement in the gross margin in CCC, and we had a record-breaking margin which is nearly 61%. And so that's an improvement of nearly 8 percentage points year-on-year and HalfPrice, the improvement was even bigger because it was 11 percentage points, and we've now clearly exceeded the 50% watermark.

The third thing is that we continue this trend of having very rigorous cost discipline. And so in CCC, this is the seventh quarter in a row during which we've been able to reduce cost year-on-year. And across the group, basically, every one of the business lines has contributed to improving the operational leverage. And that means that our cost to revenue has been improved by nearly 5 percentage points year-on-year. And all of that means that we've been able to triple the EBITDA. We've exceeded, so it's nearly 3x higher. The result is -- the result is nearly 3x higher in Modivo. And so we're on the last leg of refinancing and so in the upcoming weeks, we'll be able to shore that up, close that up. And so let's go on to the specific results, and we'll begin with sales results across the group.

So as you can see, the revenue of the group is up by 9%, and we've topped the PLN 2.2 billion mark in Q1. And so we can say that HalfPrice made the biggest contribution because it's grown by some 88%. And so we have 2 engines. We have the continued expansion. That's one of the drivers. And so we've opened another 28 stores. And in the most recent quarter, so that was 6. And so we're now on the 11th market in Lithuania and Denmark. So we're continuing the expansion, but we also have like-for-like sales growth improvement and plus 12% nearly. And so if you look at CCC, we have a 12% uptick in revenue. And so this has happened even though we have some optimization of some 4%. And so this is primarily because of the off-line channel, 18%. And so we can say that we have an LFL of 23% like-for-like sales growth.

If we look at Modivo. Here, we can see a decline in revenue of some 3% primarily as a result of what's happened in Modivo, but this was a quarter in which the Modivo group was focusing on improving its profitability. But what's also important, this decline is not evenly distributed. So we had a poor or soft February and beginning of March. But as of the mid of March, we've seen revenue growth picking up quite strongly. And this is something that was visible in April. And so in Modivo, we were up by 18%, April to April.

So let's go on to a discussion of what's happening in the CCC business line. So as I said, sales are up by 12%, primarily driven by sales in the online -- in the offline channel, which is up by 18%. We have an improvement of gross margins by leaps and bounds. So it's up by 8.2 percentage points year-on-year up to nearly 61%. So the final -- this is the final margin after we look at revenues -- sorry, licensing fees and other things, impairments or write-downs because of returns. And so this is something that improves our -- this -- our margin in the store was higher.

And so as we continue to maintain our cost discipline, we can say that the EBITDA margin in the most recent quarter tops 21%. So it was up by 13 percentage points year-on-year. If we look at half pricing turn, here, you can see a 48% uptick in revenue. And this is driven both by expansion and like-for-like or comparable sales growth. And so we have a -- we've grown our gross margin by leaps and bounds, so 11.1 percentage points to 50.9% gross margin and so we can see that costs are growing less quickly than revenue. So that means we have an operational leverage effect, and this is something that we had assumed. That was our target, and this is contributing to improving the profitability of HalfPrice. So in Q1 we're at 17.5%. And so this is a pretty major improvement of 14.3 percentage points year-on-year.

So now if we look at Modivo results, as I said, we a decline in revenue of 3% year-on-year, and this is primarily because of a 9% step back in Modivo. What's also important is that the margin has been maintained at a virtually unchanged level. It was down by 0.1 percentage point, but cost to income ratio has improved. So as a result of robust work on cost savings, we've been able to improve this by 1.5 percentage points, and that means EBITDA is positive. And so the -- so EBITDA is 1.4% and the EBIT is 0.4% and EBITDA is nearly 4%. And so if we sum up the results of the group. And so we can see the 2 major contributing factors is the gross margin improvement across the group. And as a result, the margin was nearly 52% and it was higher by 5 percentage points year-on-year. And of course, then the cost discipline and so the EBIT of the group was higher by 10 percentage points.

And if we look at the details, so we've already talked about the revenue moving up by 9% the cost income. So it's down by nearly 5 percentage points, so it's at 45.5%. So that means we have a nominal reduction of costs across the group of 1%, even though sales have grown. And even though we've opened new stores with respect to HalfPrice. So the EBIT is PLN 152 million so it's up by some PLN 220 million year-on-year. EBITDA is in excess of PLN 300 million and so that means the result is up by PLN 215 million year-on-year. And that means that EBITDA in the first quarter -- and this is the most demanding quarter in our business. We can say the EBITDA margin was 13.5% in Q1.

So now let's go ahead and take a look at what the revenue looked like across the group. So in the CCC business unit as well as in Modivo despite the investments we've made in purchasing in order to grow sales in subsequent quarters, we can see that we have positive flows. So it's only PLN 60 million in CCC and in Modivo, it's PLN 63 million. So the major factor in CCC is EBITDA so it's PLN 125 million and then working on changing inventories and so -- and liabilities and so basically renegotiating conditions for purchasing, and this had positive impact and change in liabilities of PLN 41 million in Modivo, we see a major impact -- positive impact in terms of change in inventories.

So also optimizing liabilities, which is PLN 171 million improvement. And so we've been able to rationally invest in our CapEx spend. So we have in HalfPrice, that the development of HalfPrice was being funded by CCC. But in Q1 of this year, you can see that HalfPrice has been able to finance itself on its own. And so then if we look at the debt position of the group so the net debt is quite stable year-on-year. In the CCC business unit, while the EBITDA is up by 3.5x over the last 12 months. And so the utilization of working capital and the utilization of available financial resources that we've been able to do this in a much more effective manner. And so we have reverse factoring and bearing guarantees and so basically, this is to back the financing of collections for upcoming seasons. So bonds are major portion of the debt picture. And so it's under PLN 100 million. And so we have a pretty major reduction year-on-year of nearly half.

I think that's more or less it, in terms of the financial results. And now I think we can go on to a summary of the key issues.

[Dariusz Milek, executive]

So thank you very much. I don't want to talk too much about the results my colleague has put them. He's emphasized them quite well. The results are the results Q1 is a good preface for the next quarters to be even better. I'm -- after all of the things that the company has done in previous years, I'm almost certain that this will happen. And so maybe I can say for the last time, what we were successful in doing in 2023, this was an exceptional year to prepare us for our strategy execution. So we did a lot of cost optimization across all of the business loans. As you can see, we've been able to cut costs, slash costs and also reduced inventories in Modivo, that was very important.

And the size of the business in HalfPrice. And so we had the successful issuance in CCC, and we were able to reduce debt as a percentage quite successfully. And then we have a high-margin licensing model. So that means we can produce and sell products in our own channels in wholesale under well-known brands and that gives us a much higher profitability in our group. And so on the basis of this slide, what I'd like to show you -- I want to show you how we've improved our margins under the CCC business line. So the red shows the record-breaking margin that we had in 2017 when we had the highest capitalization investors put a high price -- price tag on us. And I want to show you that the margin is much higher now. And we're showing you the margin for all of the quarters in 2023. And you can see how we've been able to improve in Q1, and we anticipate certainly strong quarters. And so we can plan for a margin of some 70% in our -- so we want to be above 50%.

So these are exceptional margins unheard of in our industry, and you should be aware of that. And so people who are selling shoes -- footwear in this price range that is not able to achieve these type of margins. So what we're showing is our model, why we're successful here. If we look at licenses, the beneficiary of the license. Well, all of the channels will benefit from that. And so the supplies to CCC in the future will apply to eobuwie, the efootwear, Modivo and so we're going to produce products under well-known brands for all of our channels, business channels. I'm always missing that good word -- segmentation.

So as we move towards segmentation, so product segmentation across all of our brands. So we're in different -- produced Hunter or other well-known licenses across the various segments. We signed another 4 licensing agreements. In just a moment, I'll talk about them. They are very nice licensing agreements, and we're working on some other brand names. And I think this is something that we're going to be able to talk about in -- announced in the upcoming conferences in terms of having some pretty good contracts.

So what is enabling us, what can we do under this business model. We don't have to go to the races at first price, we don't have to offer very good discounts or hefty discounts. So if goods aren't moving quickly, we're able to move them into the HalfPrice segments that gives us shores up or backs up our -- so we have -- what sort of brands we have. We have Reebok, we have Kappa, Beverly Hills Polo Club, Nine West is good women's shoes brand, Mexx, then Shaq, we have across Europe. So Nine West, we also have across Europe. And so a lot of these brands were going to be the representative across Europe. So Roxy, Hunter, yesterday, we signed DC, Quiksilver. These are very good brands for young people, and this is going to give us a product advantage over others, so we can go on.

Here, I wanted to explain a little bit what is the profitability of the various business lines. So we have 3 categories. So we have licenses that may have our own products. So Gino Rossi, Jenny Fairy, Sprandi, those are some of our own brands that we've been advertising recently. And at the bottom, you have the margin. We're talking about the final margin.

After discounts. So it's 53% on partner brands. And here, you can show -- we've shown you on the bar graph, what is the percentage of sales with respect to our margins. So our licenses weren't warmed up, yet haven't matured yet because in the past, we had 4% in like the children's brand, then we have Q1, well, we're almost at 20% in Q1 with licensed brands with 19%. Well, this is still mixed up a little bit with our old inventories. In fact, the margin should be a little bit higher than that than the target model that we see. I'm talking about CCC here because every business line operates a little bit differently.

But in CCC, we think as the ultimate goal is to have 50% of our margin coming from licensed brands. License gives us the right to produce. Of course, we accept the types of products that we want to produce and then we produce them at production prices and then we pay the licensing fee at the very end after the sale is made. It doesn't matter which channel we're selling it through. We're selling it is where you pay the licensing fee as a margin of the sales price. And so this margin should improve by 2.5% upwards. So we're pretty confident and safe that the high margin in our full-price channels is very safe for us to be able to deliver in subsequent quarters.

Here, I wanted to show you the CCC brand that we have the 4 quarters in a row that we've been able to achieve this margin which is in excess of 20%. And so if you compare that to the first quarter of 2023. And of course, this is the most difficult quarter for us because February is, of course, we're still selling winter things. And so now that we have a channel that we can sell things that are being rotating too quickly. So we believe in upcoming quarters, we should be able to bump that margin up even higher.

So the same is true if we look at the half-price channel. Here, we should confirm that Q4 in HalfPrice is the most successful quarter. So we have presents, gifts. And so basically, sales volume doubles in December. And so in Q4, we should be much higher. So since we were starting with an EBITDA of more than 17% in Q1. We believe that this channel should be able to deliver more than 20% on a long-term basis. And let me say a few words about the Internet because we closed the HalfPrice Internet store. I think this was a very smart decision. And this means that we're going to be able to talk better with brands because HalfPrice is a model where you have relationships with brands and the products that we're selling. And the better brands you have, the more quickly you sell it. And most -- not everybody is happy to see that being sold through e-commerce and so we can show, for example, that a blouse is being sold at minus 50%.

So this is a good decision. And there are things that we don't sell in the full price channel. So that's the first thing. And the second thing, you have to be aware that something wasn't profitable. It's not only footwear, it's apparel, it's food and glass elements, home chairs, we can say that we were a little at the initial stage, and we decided to close this channel. I'm not saying that we won't return to this channel once we become a more mature organization. Today, we have to focus on store operations and expanding the HalfPrice channel. This is the most colorific business model that we can offer.

So if you look at Modivo we're aware that this is a bit of a joke, the results that have been produced here have in mind what the other channels we're able to do so in the near future, we anticipate major improvement by leaps and brand -- leaps and bounds in terms of profitability. And we've got everything together. So we have -- supports new trading conditions in the various brands. There are a lot of things that are changing. The cost side of things is being tweaked and a lot of other things, which will lead us to a good profitability for this channel. And so we would like to ask you for another 1 or 2 quarters of patience, and then we'll be able to bring this up to a very sound level of profitability.

And now as we move on to Modivo. Of course, we're making some mistakes. March was a mistake. We were less aggressive in terms of you can't act less aggressively in this channel. If you're trying to sell things, somebody is always going to be less expensive. And so we've made some changes in April is very good in Modivo. So we have improvement, growth of some 20% in efootwear for April, you know that April got a little bit cold. And so at the end of April, things changed a little bit. But across the brand names, we've been able to see some very strong vibrant growth and so we're pleased with all of the things that we've been doing here. I wanted to show this -- I want to -- there are 2 other things that I should explain. And the first one is that we had good margins, good results because we had an inexpensive U.S. dollar so in the round circle, you can see how much we've earned on the dollar.

Of course, we've invested in better purchasing, and we invested in the first price. So we were sharing a little bit with the customer, the price. But since we have lower prices by 4.5%, we are able to discount to a lower extent. So transport is not very important and a big line item is the mix of brands that we're selling more licensed goods than partnership brands where we have a lower margin. So in fact, this has moved up our mix margin so this is a very good quarter because the dollar was less expensive. Sometimes the market is struggling, is making -- it's not allowing things. The thing is that we've been acting about this swiftly ensuring so we have 97% of non-repetitive products. Only 3% of our products are actually repeating what's available in the market.

So in terms of like Adidas or some of the other shoes. But we don't have to fight by price -- on price against the competition because they don't have the same products. We have 100% totally different products. And so that's the first explanation. The second explanation it's -- so there have been a lot of questions whether or not I'm going to sell shares. I don't have any intention. I'm probably going to get old with the shares because I don't have so many shares. I have a strong team, a competent team, an ambitious team, which understands my business model and they have been infected with my visions. We have a lot of good work to do. So if somebody is asking about buying shares, this is not the address to buy them from. I haven't completed the presentation, so if you can.

Will you buy shares? Maybe it's worthwhile for you to buy some shares if -- so we'll issue a report if the CEO decides to buy the shares. So I think I've pretty much said all of the important things, I could say quite a bit more. We're going to wait for your questions. I hope you're going to have more questions than usual.

[Unknown Analyst]

I'd like to congratulate you on the results because this is an obvious thing. It's very great. These are great impressive results. I have a question about your inventories because inventories are moving up in CCC and HalfPrice. Of course, sales moved up in the segments, but inventories are up dynamically. Rotation is quite high. So I have 2 questions. What do you anticipate -- will the future entail?

So if you think about the expanding product range and so on and so forth well, could it turn out that in 6 months or in 12 months, we'll have a big challenge related to inventory?

[Unknown Executive]

I think in CCC, it's up by like 20%, but our sales volume -- sales [ turnover ] is up by 20%. We have to have Hunter or some of the other brands. What we're selling, we're calculating that the sales uptick is going to be even higher as we bring new brands to the market so we have a totally different optics. So if we have licensed brands with a margin of 75%, we're -- as opposed to partnership brands where we had a 50% margin. So it would be bigger problem and a fair if we weren't -- didn't have the products and didn't earn the money. So we have a totally different approach or optics on the inventory. So in HalfPrice. So, we're talking about good bargain purchases opportunities. So, I don't think anything has happened there in inventories and HalfPrice. So, it's very important for products to be in place prior to the season.

So, we want to have those products a little bit early. So we want to have the products in sales during the peak for 100 days as opposed to 60 days because those are mistakes which applied to Modivo that the products were delivered too late. We had fewer sales days and we have bigger discounts that led to a lower sales volume.

[Unknown Analyst]

I wanted to ask about sales in Modivo versus margin. I understand this 40%-plus margin is what we should anticipate. But having in mind how the overall e-commerce market is functioning. Do you anticipate that you're going to be able to accelerate sales growth?

Regardless of how we calculate really close to 0, it seems to be somehow flat. Are there any ideas?

[Unknown Executive]

If you don't want to compete by price. But this market is not, so we're trying to adjust our strategy in April. It's a good picture of that. Because in March, we had an unsuccessful approach. May is good. But we're not talking about margin here. We're talking about profit per unit. If we're going to have more expensive -- if we have 36% margin and if you're selling something for PLN 50 as opposed to PLN 110, inexpensive footwear is actually in CCC. Basically, we're trying to distinguish between what those channels, which each channel is supposed to be doing. Those channels aren't vying for the same customers. And so HalfPrice let me -- this is a unique model across the world.

It's very rarely the case that a network has a 50-50 breakdown in terms of off-line/online sales and at the [indiscernible] at the same time, you would have to bolster or the support, the underpinning coming from a HalfPrice model. And so this is -- we can see the goods are starting to flow the way they should flow. So Lukasz, show this slide again once again with the margins.

So if we look at inventory. Look at the margins if we have a 75% margin on licensed brands, of course, the company is called HalfPrice. And most of the things are at half price, but we're trying to make sure that we're at 40%. So they're unique products. There's no real competition. There's no comparison. We're able to sell our products in the first channel at minus 40%. And then you can take a look at what sort of margin we're able to derive on a licensed product. So you have a 56%, 58%. But foreign brands or external brands, you have a margin under 25%, 30%. So you have to sell those other brands with support. In -- well, the most important thing is through first channel, if you want to use the first price, and it gives you a big effect. So we have a partnership brand with the new cartons, new boxes. So basically, the sales rotation is 30% immediately.

If you have the full range of sizes. And so this is a complete model. And so if we add our own production underpinned by licensed brands, then we're at home. We've reached our targets. So are there any other questions you'd like to pose at this time?

So everything depends on the condition in financing our dream is to be financed by our suppliers. When we're refinancing things, we don't have the refractoring line which gives security to our suppliers. Well, this would give them safety and give us a lot of breathing room so we would pay for the products over a longer period of time. And so we've been able to get good locations in various venues and including a turnkey store. And so if things would be financed by the suppliers, then we would have a very efficient model. If all of those pieces are put in a row.

[Unknown Analyst]

[indiscernible] from the [ Bosch brokerage ] house. I wanted to talk about the ability to continue reducing costs. Do we see what you've done? Or should we anticipate additional confirmations in upcoming quarters? And how many more HalfPrice stores can we anticipate this year? And what's the target number of these stores? And what's the CapEx plan for this year? And what's the optimum level of factoring -- refactoring lines and factoring lines and banking guarantees.

[Unknown Executive]

So in the course of our history, so financing costs were always a big expense. So I think we can reduce financing costs by half. So we'll have much more opportunity. We -- a large number of opportunities have escaped us. If you don't have cash, you can't take advantage of those opportunities because these are short-term or ephemeral proposals. So we're trying to purchase products from across the world, Korea, Japan, United States, we don't have bank [indiscernible]. We don't have money. So sometimes you're not able to do that. And so that's an opportunity to buy even better products. So when we talk about expansion opportunities, I think we want to have 30-some-odd HalfPrice stores. So we have 40-some-odd stores in CCC. That's not a major [indiscernible] 70,000, 80,000 square meters.

Let me tell you that 80% of this is refinanced of the costs -- is refinanced by suppliers in terms of the space. So we're doing what we can to the extent that the factory allows us to do that to the extent that the money allows us to do that. You know what our CapEx has been in previous years, some PLN 200 million. So we weren't spoiled. I don't want to scare you. We're going to do things very reasonably on good terms. We opened a store in [indiscernible]. So it's 6% per sales volume, and we have [ lines ]. And so these are very efficient models for us.

So if we look at cost savings. Go ahead and show that attachment. We have a lot of attachments in this presentation. So we just have to open to the right slide. So if you take a look at the cost of the head office over the last 2 quarters in 2022 and '23, I'm talking about the CCC brands. We had costs at 20% now in CCC, we're down to 12.3%. So assuming that this is the worst quarter in the year for us because we always show you other costs in quarters. So we think that costs of the head office could drop below 10% up until now, they're around 15%. So if we say that we're going to add another 20% of retail business then I can show you how much the CCC brand name is generating in the offline segment.

So through the stores. Let me show you what the profitability of our stores. So April, was nearly 43% profitability, that was the EBITDA at the store level. So we cover staff, transportation, rents. So we've been able to improve margins, accelerate turnover. So it's 20% of growth. Today, that's a joke with respect to Poland. There's a lot to be done there. We have to improve things. But this should give us the great ability to improve will come through licensed brands.

So we have Lasocki. This is not a brand, that's well known in Hungary or Romania. So we can see some improvement. Other countries have even higher like-for-like sales performance than in Poland, we'll get to HalfPrice, HalfPrice is slightly different topic. So if you look at HalfPrice abroad, so we have brands or markets that blended together which are at an early stage of maturation. Others are much more advanced. Well, in Austria we closed 2 unprofitable stores.

In Poland, you don't have Sundays to sell. So if you look at the Romanian Czech markets, and I think Slovakian market. So our stores are open 7 days a week, and so the profitability per store is much higher. So we can think about developing our business in countries where they have the ability to sell in Sunday.

We understand that in Poland, there might be a change moving into 2 Sundays a month. But in Czech Republic, you're able to sell even on holidays. And so everything is beautiful in Czech Republic, but here, in Poland, we don't have anything. And so there's a major difference in HalfPrice in the weekend. So in HalfPrice Saturday is a very strong day. So people across the regions are coming in on Saturdays because there's a lot of space. And so we're able to bring in people through the doors. So as we open new stores, we might be able to reduce the cost of the base substantially. We don't need to -- we have the full amount of cost we have in the head office.

So, I think the model could be even more profitable, perpetrating for the refinancing to be completed. And we want to come forward with another strong quarter, a vibrant quarter in order to discuss with you as opposed to talking about it today. We're going to wait for the next quarter. We're not going to think of anything extraordinary. Basically, we're going to follow the pace at which we can develop [indiscernible].

[Unknown Analyst]

Having in mind all of the things that you mentioned a moment ago, what type of OpEx growth do you anticipate across the group in 2024?

[Unknown Executive]

If we look at OpEx, we want to choose the cost-to-income ratio above all. And I think we don't anticipate that, that ratio would increase. We think it would fall. We're around 45% in Q1. And so in subsequent quarters, which will be having better sales performance, we want to reduce. So we didn't respond to the question by how much will reduce costs. Well, we're going to reduce costs quite a hefty chunk. A hefty chunk of cost is still to be removed.

[Unknown Analyst]

I'm from [ Wood ]. I have a question about the licensed brands. If we look at Reebok, do I understand you will by the end of this year, all of the entities buying and selling Rebook have to buy them through you. So [indiscernible] are going to have to buy from you that can actually happen.

[Unknown Executive]

Will it happen or can it happen? That's pretty important distinction. So we have more than 20 licenses we have another 5 very good licenses that we want to add. So they have different conditions. We have a license to produce products for our own channels. So if I open a store in Ukraine or Spain or India or Dubai, I can sell those shoes in those channels and all of my own channels, I can sell. I have the right to sell those products. Even if somebody else has distribution, the right to distribute those products in India, for example. I'm just guessing, it's not the -- please don't think that I'm going to open a store in India, but there are licenses for distribution across the region. When we talk about region, we're talking about Central and Eastern Europe.

So the Baltics without the DAC countries in continental countries, then you have some licenses that are European-wide. And in each brand, we have a slightly different set of conditions. We're negotiating one good license, and we anticipate that we're going to be able to offer footwear across the world in conjunction with apparel. I don't want to say too much. We have some new ITAs, production, large-scale production. So as you know, we started with production. We started with factories. So we know that business well. We know how much it would cost us to produce something where we can produce it. So we have strong competencies in footwear. So even if our competition is selling more shoes, it doesn't produce those shoes. So we have the entire process under control. And so from production, distribution, sales on our own channels. So this is something that's underway. We're talking about Reebok that's happening.

And just as [indiscernible], everybody understands what's happening. So in the course of the year, we signed all the licenses and developed all of the market conditions so generally speaking, Zalando has Germany, so it can sell through its channels. But Polish entities, that's what you're asking about aren't going to be able to buy directly. They're going to have to buy from me. So let's say, for example, I have my own channel of selling footwear. It doesn't work that way that if I open my own stores in Italy that I'm not unable to sell them there. That's not how it works or English stores or American, they can sell Rebook, but everything, it depends. I know who you're talking about. That person is buying today from the distributor. Maybe in the future, I'll be a distributor, probably I will be.

But we have to have -- the availability is buying products more expensively. You have Hunter brand and Quiksilver, I'm doing shoes for them across Europe. That's a totally different scale. Everything has to come -- you want -- it's hard for me to understand everything. And I'm trying to renegotiate it better and better conditions. Yesterday, I came back from England. I negotiated something very specific there and very important for the company. And so people are starting to like us a lot and trust us, and we have better and better trading conditions.

[Unknown Analyst]

So Hunter and Zalando will only come through you?

[Unknown Executive]

That's what's going to happen. Any other follow-up questions? I see there's one other question here from in the room.

What does that mean? I'm doing -- does that mean other entities or just a moment ago, you said, I'm [indiscernible]. So I just -- maybe that's something -- it's not so much that I'm doing it myself. I'm saying who's going to do it? What percentage of a factory is working exclusively for factories. It doesn't matter. I understand these things are being produced in China. Yes. Are you talking about who has the exclusivity?

[Unknown Analyst]

Are these factors producing only for you? Are they producing for others and who owns these factories?

[Unknown Executive]

Well, we don't own any factories even in [indiscernible], even in Poland, and I'm very pleased last year. There are 2 years ago, we were closing things that were unprofitable. I'm pleased to see that they're operating for others. These are small quantities, sometimes invoices aren't paid. It's not an easy life to be a producer. You have 70%, 80% of your production line being used. So it's not easy. So I'm trying to avoid your question. I'm not sure what you want to hear. You want to hear that we have 100% exclusive factories. We're not asking for that because we don't need that. It's better for somebody else to come in with a nice model and produce something else. They set a factory because we can look -- we're not asking, it's not important for us to have an exclusive contract with a factory -- there are so many different entities that we'd like to produce for CCC, we can basically easily sift through those opportunities.

That's the way. That's the way the market looks. Of course, there's a lot of room to negotiate. We have to work in situation so that we don't squeeze the life out of the supplier, the factory. We're not talking about saving PLN 0.10 we want things to be produced at a certain time and in a certain quality and deliver it at a certain time. So these are all the important factors. We don't want to squeeze the life out of these suppliers. We want to have long-term relationships. I think we've exhausted all the questions. We'll ask [indiscernible] people. I guess there's any other question out there.

So we have other questions from the Internet as well. So I would like to ask about costs. I'd like to follow that topic up. You said there's a lot of potential, well, 45% cost-to-income ratio. At one point, before this development was so broad-based. I think with 40%, 42%. So times have changed. But I'd like to ask whether or not -- is that something that's realistic? Please don't tell me that you'd like to do that, is this a real focus or where are the drivers of the final results? Is it on the sales and margin side? Or is it on the OpEx side?

I want to focus on EBITDA. Well, marketing and how we approach that because we are the leader, invest in marketing or should we not do anything in the marketing. So we dropped our spend on marketing by 70% and things are better. And the question is, well, how much do we have to spend. And since we're present in 4 different channels, if we spend in one channel, we're able to have performance in multiple channels. Sometimes it's a 2-week response. So perhaps we need to allocate a budget for marketing. Well, otherwise, Coca-Cola wouldn't advertise at all because it's a leader.

So we have to summarize these things, do the calculations and then we want to anticipate better like-for-like sales and faster rotations. We're going to sell save a lot in IT. A lot of our processes are going to be in-sourced. So tens of millions financing costs should diminish quite strongly and then optimizing the investment process. So I would say that 42% is our next target. And then once we reached 42%, that we'd like to get to 40%. I'm trying to speak roughly because we're looking at every zloty and we're making decisions. Is it profitable endeavor to invest that zloty or not. So these are things that have to be connected with like-for-like sales performance with margins, with sales volume. Sometimes if you spend more on marketing, then you spend less on discounts. Here, we didn't have to invest in marketing or in discounts. So I'm not sure how long that will last. Well, if you don't spend on marketing, then you start to earn money. So that's the way I've always had things lets you spend the marketing.

Well, I guess that's something we have to stick to. But as a leader, we can't cease doing everything. While competition is active even in TV, generally speaking, I can say that the product, it's very strong. You can see the improvement in product [indiscernible] walk into our stores. You can see the products we have and what prices we're selling this product, that's the driving force in every sales company. If we spend more on marketing, both things be better, we'll give it a try, especially on those markets where we're not sufficiently well known or recognized.

So, this is a dilemma that we continue to face because prices are down by 4.5%. That's a lot. Perhaps, we would -- if we had produced marketing spend, we would have had even better returns. So we're going to try to deliver better and better EBITDA performance. We're a totally different organization from 1 or 2 years ago, where we have a smaller management team, we're more efficient, leaner, and we can say that I'm supported by professionals. They're focused on goals and we're focused on EBITDA, not on projects.

So maybe some questions from the Internet. We have a large number of questions watching the online presentation. The most popular question is whether or not are you preparing the IPO for Modivo? What sort of steps are being taken there? As I said, the result there is a joke. So we have to wait for a good market. We have to wait for a good profitability in Modivo. Modivo is an inextractable part of our group. We would never had HalfPrice had we not had Modivo. So the relationships with brands -- so based on what I know, the EBITDA in HalfPrice, is going to be twice the level that we'll see in Modivo. If we match those brands. So the EBITDA will be in the double digits in the 2 brands, we don't want to lose control of Modivo.

So as I said, Modivo will benefit from all of the changes we've made across our licenses. And so we're securing licenses that don't fit for the CCC but more for the premium Modivo side of things. So we're counting on Modivo. How should I put this? Super investment. We published our valuation of Modivo, where we see the value and will take steps if that value can be obtained.

The next question. What does the operating result in Q1 suggests for the net result of -- for the group? What does that imply? Well, I think it's quite easy to estimate what it implies. So we said clearly, at the last presentation, that we want to deliver a profit, and we anticipate that Q1 will have that profit. And the next related question. What is the strategy for dividend payments for this year and upcoming years? So [ tell ] speaking, we'll be able to advise you of dividend payments under the proper procedure, we would like to return to the practice of paying dividends.

So we want to basically follow the best practices on the market, but this is probably going to take us several quarters in order to achieve. In Q1, having in mind the results improvement, what is your ambition in terms of mushing -- pushing up the factory limits in upcoming quarters. So we want to increase the limits for factories and [indiscernible] by PLN 600 million in total. So this is going to be quite flexible. And so this is something that we'd like to achieve. So we'd like to revisit the lines that we had available historically, but they were then reduced as a result of COVID-related complications.

For what period, have you signed these new licensing agreements and what are the suspension or conditions suspending or conditions presented?

So it's related to sales limits. It's a quite safe arrangement for us, having in mind the scale of business, the business size, there should be no problems whatsoever in order to deliver those type of quantities.

On one of the slides, you showed the Mexx brand. Does that mean CCC has the right to use that brand? And what are the plans for the utilization of this brand? Footwear, bags, accessories for Central and Eastern Europe.

Will you present the results for the full year 2024 forecast?

I think we said about our ambitions for this year at the previous conference, and we uphold those ambitions. We do not plan to present any more detailed data. We want to surprised people positively as opposed to explain that we've not delivered something. But of course, we have a very positive mindset as we look at upcoming quarters. In the past, we've promised quite a bit. So we'd like to surprise people as opposed to act the same ways in the past.

If licensing agreements are so attractive, why didn't you do this earlier 5 years ago?

That's a solid question. As I said, Modivo is a breakthrough that we had the contacts made contacts and HalfPrice. We made contact with these brands in -- from the perspective of a licensor we have -- we're a complete player. We have a full shelf in Modivo and then also in efootwear, we have HalfPrice. So we can produce footwear and have apparel. So in the near future, the high licensing margins will deliver benefits to Modivo if eobuwie or efootware as well as HalfPrice will be producing. We're not producing them yet.

So our target in these brands we want in these business lines. We want our brands to have some 25% share. Right now, it's 10% and that should basically bump up the margin across the entirety of our business in those business lines. It's very difficult to earn money on brands that are available everywhere. So everybody has those brands and everybody basically is discounting that and everybody has a poor or soft performance. But here, we assume that we'll be able to deliver robust performance. Of course, we want people to click on these things, buy them and so on and so forth. That's why I have to spend money on marketing, but we're talking about premium brands here. So.

Does the company consider having an external investor for HalfPrice in order to put a real valuation on that entity?

No. We don't need it. There was a moment in time when we were looking for various solutions. We were thinking about an investor that could put a valuation -- a nice valuation -- price tag on that, and we had one, but this wasn't consumated for a number of reasons. It's not because of me. The external environment, well, there would be too big of a concentration. We were looking for licensing returns but that would have been -- this would be total stupidity, licensing fees, returns holding a warehouse. But today, we feel very good in terms of our flows that the company is going to be earning money and so we don't have to do anything today.

We don't have to do expansion on a crazy basis. So we can do this in a measured process in a measured way and focus on profit. Of course, we have to build a logistics warehouse for HalfPrice because the one we have right now is sufficient for another 2 years. So logistics are quite important but having in mind a new warehouse, so the investment should have a payback period of 3.5 years. Then we would have a scale of operations, and we wouldn't have enough people living in [ Porcoviza ]. We have to be aware, you have to accept goods. You have to take off old price tag, put a new price tax. Once we start producing our own products, then this will be done free of charge. So right now, a lot of people have to be involved in doing what we're doing.

There are things that we have to automate. The automation equipment doesn't have any sort of off-time vacation time, doesn't get sick. So the payback period is 3.5 years. We have our own plot of land where we can do this. And the question whether this will be done from a loan or a lease or using our own funds so basically, this is a project of PLN 60 million. We want to put the shovel in the ground in December. So basically, this is something that should be depreciated so the payback period within 3.5 years and a very high efficiency. So in HalfPrice, we should have logistics costs around 4.5%. That's a little bit above average, and we should be able to reduce -- drop them by half, whereas we had 13%, will be again.

So we have to remember that we have to prepare products for new stores. And so the fewer new stores you have in the cost of logistics are falling tremendously. So when you have 40 openings, to [ 130 ]. That's only some 30% when you had -- you have to pay salaries every month and stuff like that. So in the past, when we had say only 80 stores, this is a major increase. So what sort of when you set your sales prices for licensed products, what sort of ground boundaries you have?

We manage the first price ourselves. And we also do the discounts in our own region, we have full liberty. Basically for legal regulations don't allow you to be bound by anything like that.

Is there a fixed portion to the licensing team?

There's a minimum amount that we have to pay, but it's very safe. But if we don't achieve the minimum sales quantities, then we have a minimum fee that we have to pay but we're selling everything at least twice the minimum level. So if we add future development over 10 years of new trading locations, will then these minimum sales quantities become a minimum requirement.

Is that all of the questions we have? So thank you very much. I think that would be about it for today. We'd like to thank you very much, ladies and gentlemen, for your participation in today's conference. And we'll say goodbye into our next conference. Thank you very much. Bye-bye.