Investor Presentation March 2018 Disclaimer The information - - PowerPoint PPT Presentation

Investor Presentation

March 2018

The information contained herein has been prepared by Doğtaş Kelebek Mobilya Sanayi ve Ticaret A.Ş. (“Doğtaş Kelebek” or the “Company”). It is not intended that the information in the content hereof is exhaustive nor has the information been verified independently. The information used in the presentation is with discussion purposes and it is not intended in the presentation that all the necessary information is used in order to be able to evaluate the Company or its operations, financial position or future performance. The information and opinions within the scope of this document have been obtained as of the date of presentation and the changes to the same shall not be the subject of notification. The opinions presented herein are based on general information gathered at the time of writing and are subject to change without notice. The data included herein with respect to industry, market and competition has been obtained from official entities or third parties as much as possible. The publications, studies and researches of the sector in the position of third party state that the data included in said sources has generally been obtained from sources considered to be reliable; however, there is not any guarantee on accuracy or completeness of said data. Although the Company believes that every publication, study or research has been prepared by reliable sources, it has not confirmed the accuracy of such information independently. In addition to this, the data on certain industry, market and competition environment is based

• n the own internal researches and estimations of the Company on the basis of the knowledge and experience of the Company management in the markets in which the Company is operating.

Although the Company believes that such researches and estimations are favorable and reliable, such researches and estimations and the basic methodologies and assumptions in relation thereto have not been confirmed by any independent source in terms of their accuracy and completeness and the changes to the same shall not be subject of any notification. Hence, not any unnecessary meaning should be ascribed to any industry, market or competition data included herein. These materials contain statements about future events and expectations that are forward-looking

• statements. Any statement in these materials that is not a statement of historical fact is a forward-looking statement that involves known and unknown risks, uncertainties and other factors which

may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking

• statements. Further, certain forward-looking statements are based upon assumptions of future events which may not prove to be accurate and neither the Company nor any other person accepts

any responsibility for the accuracy of the opinions expressed in this document or the underlying assumptions. Except to the extent required by law, we assume no obligations to update the forward-looking statements contained herein to reflect actual results, changes in assumptions or changes in factors affecting these statements. This presentation does not constitute an offer or invitation to sell, or any solicitation of any offer to subscribe for or purchase any securities and nothing contained herein shall form the basis of any contract or commitment whatsoever. No reliance may be placed for any purposes whatsoever on the information contained in this presentation or on its completeness, accuracy or fairness. None of the Company nor any of its shareholders, directors, officers or employees nor any other person accepts any liability whatsoever for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection therewith. This presentation should be used on basis of participants for information purposes only. This presentation or any materials distributed in relation hereto cannot be taken, distributed or forwarded to any real or legal person that is the citizen or resident of jurisdictions in which they are illegal to be taken, distributed, published or they are illegal to exist or be used or in which registration or licensing is needed. This presentation cannot be reproduced in any form nor can it be divulged to any person nor can it be published either in part or in whole for any purpose. Failure to comply with this restriction shall constitute a contradiction to the relevant legislation in force. 1

Disclaimer

• I. Introduction & Overview

@ a glance

3

(1) By # of stores following Boydak Group consisting İstikbal, Bellona and Mondi brands (2) By Brand Finance, 2016 (3) Doğtaş and Kelebek were merged through a reversed merger transaction in October 2013. International Furniture B.V is owned by Turkish Private Equity Fund III

→ Doğtaş Kelebek is the #2 branded furniture

company(1) in Turkey producing and selling modern design furniture at affordable prices

Overview

Shareholding structure

→ Created through the successful merger of two strong

heritage brands:

→ Selected as the most favorite furniture

company in “Turkey’s Most Valuable Brands - Turkey 100“ (2) Doğtaş Kelebek

Free Float 50% Doğanlar Yatırım Holding* 4% Doğan Family* 46%

Employs c.1,500 people

* Doğan Family and Doğanlar Yatırım Holding are two parties acting together

4

2016

Start of current management team

First exports (Albania)

1994

Start of furniture production

1972

Extension into retail

1996

“Exclusive“ concept stores

2009

Investments in upholstery and mattress production

2005

Foundation as plywood producer

1935

IPO on Borsa Istanbul

1990

First store abroad (Germany)

1991

Acquisition of majority stake by two industrialist families

2006

Start of furniture production

1978

Incorporation into Enka Group

Acquisition of Kelebek by Doğtaş in partnership with International Furniture B.V. (3)

1981

Foundation of Doğtaş Mobilya A.Ş

1987

2012 2013-2016

81 net stores opening Post merger integration

Milestones of Doğtaş Kelebek

5

(1) As of 2017 YE, domestic stores & sales area (2) As of 2017 year end (3) Growth in 2017YE compared to 2016YE (4) 2017YE EBITDA over 2016YE EBITDA (5) 2017YE margin (6) Period between 31.12.2016 and 31.12.2017

Key metrics

600 mTL LTM revenue(2) 52% Revenue growth(3) 114 mTL LTM EBITDA 4.0x y-o-y EBITDA growth(4) 27% LFL growth(3) 318 domestic stores(1) 19% EBITDA margin(5) 383 k sqm selling space(1)

Overview

→Full scale branded furniture company with:

+24 net store

• penings(6)

Revenue breakdown (2017 YE)

By channel By product group

Domestic 90% International 10%

Snapshot

Upholstery Bedding Panel Furniture

→ Comprehensive product portfolio covering: → Retail operations through 318 domestic

and 48 international mono-brand stores(1)

→ 2 production facilities consisting 5 sub

units with a total of 108 k sqm closed area

Upholstery; 43% Panel; 41% Bedding; 5% Other; 11%

600 MTL

6

Investment Highlights

Fast growing furniture demand

1.

Higher growth in branded segment due to the shift from unbranded furniture

2.

Remarkable EBITDA growth

5. 3.Experienced management team with

proven track record in the industry Company topline continues to outgrow the branded market

4.

Per capita expenditure is still below benchmark countries Furniture demand is growing 16% per annum

7,7 19,3 2010 2016

~80

222 261 362 504 Turkey Italy France UK Germany

7

(1) Turkstat, based on 2010 – 2016 data (2) Euromonitor (3) Euromonitor, home furnishings market retail value per capita. Turkey data is based on Turkstat furniture consumption value (4) MUSIAD, 2013

Fast household formation – 2.6 mn new households by 2023 (average household size of 3.6 vs 2.4 in Western Europe) (2) Increasing per capita furniture spending on the back

• f increasing income

Shortening replacement cycle: +60% of consumers tend to replace furniture in less than 7 years vs 10+ years in the past (4) Continuing urbanization trend (59 mn people living in cities projected to reach 66 mn by 2023) (2)

Furniture consumption (TRY bn) (1) Per capita market size (USD, 2016) (1)(3)

16.4%

Western Europe average: ~350

2.8x

CAGR ($6.4 bn)

Number of households growing at a 2010-2016 CAGR

• f 2.9% (1.6% over population growth) (1)

Fast Growing Furniture Demand

8

Significant shift to branded products…

1.5x 1.0x 0.8x Branded Market Unbranded

Share of branded segment increased from 25% in 2009 capturing share from unbranded The most important criteria in choosing the furniture is brand followed by design and fashion (2)

…unbranded market is still significant

Share of branded segment is much higher in benchmark countries (65% in France and 72% in Poland) (3)

Breakdown of market size (2016) (1)

Branded 32% Unbranded 68%

Market growth (2009-2016) (1)

(1) Euromonitor, indoor living market growth is based on indexed values (2) MUSIAD, 2013 (3) Euromonitor Europe home furnishings market

Warranty, after sales service, health and safety aspects and reliability concerns increase the demand towards branded products

Higher Growth in Branded Segment

Aydın Özçelik

Business Development Director 36 years

Mahmut Serkan Şen

International Markets Director 10 years

Yılmaz Temel Seber

Design and R&D Director 21 years 20+ years experience in the industry Prior experience:

→ Yataş / Enza Home (2013 – July 2016) → İşbir Bedding → Rapsodi Furniture → İpek Furniture → Procter & Gamble

Ersin Serbes

İlhan Tunçman

Sales and Marketing Director 24 years

Ersin Balkaya

Supply Chain Director 6 years

Mustafa Karak

Retail Management Director 10 years

Industry experience:

The product:

− Panel furniture − Upholstery − Bedding / Bed

cases

− Home textile

Value chain:

− Procurement − Production − Supply chain − Retail & store

management

Industry experience:

9

Experienced Management Team with Proven Track Record

→ Well rounded expertise in:

CEO

Since July 2016

27.069 27.689 108.888 127.694 4Q16 4Q17 2016 YE 2017 YE 193 190 201 101 102 122 57 50 43 2015 2016 2017 Dogtas Kelebek Kelebek Kitchen

2.3%

10

Increasing revenues Increasing number of stores Higher number of customers

52%

(mTL)

+24

new store

• penings

(2017YE vs 2016YE)

17.3% 351 342 366

Company Topline continues to outgrow the branded segment

395,5 600,2 2016YE 2017YE

Gross Profit

11

(1) Including reversal of severance and vacation pay provisions

Economies of scale helps EBITDA growth 72% increase in gross profit in 2017 YE Increased gross profit margin by 4.3% y-o-y to 37.3% in 2017 Sustainable EBITDA margin of ~18-19%

(mTL)

• 13.0%

16.6% 5.8% 19.0% 22.2% 36.8% 32.9% 37.3%

Remarkable EBITDA growth

EBITDA (1)

(mTL)

18,2 51,9 130,3 223,6 4Q2016 4Q2017 2016 YE 2017 YE

• 10,7

23,3 22,9 114,1 4Q2016 4Q2017 2016 YE 2017 YE

• II. Business Overview

13

Key Strengths

Product driven company

Modern design furniture at affordable prices

Full control over sales channel

Broad and expanding mono-brand store network with well designed store concept

Flexible manufacturing capability

Internal manufacturing facilities and

• utsourced production

1 2 3

Upholstery 43% Panel 41% Bedding 5% Other 11%

600 mTL

(1) Total number of bedroom and dining room sets for panel furniture and living room and corner sets for upholstery

14

Share of new collection in top 10 best-selling products

Panels

24% 16% 60% 30%

with 3 products with 2 products with 5 products with 3 products

→ Doğtaş Kelebek has a wide product range with best-in-class

design

→ A team of 38 people in R&D and design closely following global

trends

→ Continuous revision of collection per consumer insight from

300+ stores

→ Full range of product categories: living room, dining room,

bedroom, kitchen

One-stop shop for home furniture

9M 2017

%

Share in number of units sold

Price points in the market

Breakdown of revenues (2017YE)

74 70

# of products (1)

Modern design furniture at affordable prices..

1

Balanced Product Portfolio

Upholstery

Upholstery 32% Panel 38% Bedding 15% Other 15%

Target Portfolio

Upholstery (TL prices)

İstikbal & Bellona Enza Alfemo Doğtaş Kelebek

Dining Room Panel Furniture (TL prices)

İstikbal & Bellona Enza Alfemo Doğtaş Kelebek

15

Kelebek Doğtaş

Signature Doğtaş Kelebek product is…

1

16

Extended product range with a strong brand …

1

Our New Mattress Brand – “Lova Sleep”

Launching a new mattress brand called “Lova Sleep” Using existing store network with “shop in shop” approach Targeting all bedroom furniture buyers at the beginning Offering different mattress options for adults, teenagers and even babies.. Increasing bedding share in total revenues (to 15%)

978 1384 2016 YE 2017 YE

Significant growth potential 383 k sqm selling area throughout the country

17

Increasing sales density (TRY/sqm)(2)

c.1.600

• c. 1.400

318 Market leader Potential Doğtaş Kelebek Current Doğtaş Kelebek

Key characteristics (3)

38

• wned

stores

280

franchise stores

~1,500 sqm

• avg. store size (4)

318

mono-brand stores

~1,300

customer facing personnel

Higher traffic Higher conversion

Nationwide delivery and assembly capability +41%

(1) Based on study by external management consultants (2) Based on total revenue/total sqm (3) 2017YE (4) Doğtaş brand stores. Kelebek brand stores are c. 1,200 sqm

(1)

→ Stores are located in

furniture clusters

→ Shopping malls are not

destined store locations

2

Broad and growing mono-brand store network

343 383 2016 YE 2017 YE

18

Working conditions and management Selection and establishment

Finding the optimal combination of price, product, concept is key in success of the sales network

→ Capital adequacy (D/E 50%) → Store ownership status (Owned vs. Rent) → Investor credit risk analysis → Reputation at store location → Experience → Store size → Store height and facade size → Suitability to network establishment plan → Clear written agreements → Store concept, # of personnel determined by the HQ → No main/regional dealers with sub dealers  all

franchise stores directly connected to the HQ

→ Sales training to all customer facing personnel → Central incentivization of “best performing” sales

personnel

→ Retailer / sales focused approach

Investor criteria Store characteristics Working conditions Management support

→ Demographics → Foot traffic → Competition analysis → Complementary product stores → Upfront cash payment eligible to 6% cash discount → Post order cash payment (secured with bank

guarantees) eligible to 5% cash discount

→ Cheques / Terms (secured with bank guarantees)

In- depth location analysis Cash cycle

2

Extensive know-how in franchise establishment & management

19

2

Best in class store concept: Selected visuals of new concept!

50% LfL growth

4,0% 1,4% 1,1% 0,9% 0,9% Boydak Group Doğtaş Kelebek Alfemo Enza Home Kilim

20

(1) Euromonitor, Indoor living market (2) SDIF: Savings and Deposits Insurance Fund (3) As of December 2017 for Doğtaş Kelebek and Enza Home.

Companies with strong brands and sales channel can capture the demand for branded products Market leader has c 5.0x more stores than Doğtaş Kelebek Dual brand strategy enables further and faster penetration in the market

Currently under SDIF(2) administration

~1,600

Substantial whitespace

Market share of major players (1) # of stores (3)

68%

Unbranded players

Share of branded companies in overall market is yet insignificant

5.0x

318 ~195 171 ~150

2

Well positioned to capture higher share of the growth in a changing competitive environment..

21

Substantial growth planned in export markets

2

Export markets

DOĞTAŞ 18 KELEBEK 5 2018 Growth Plans

# of store openings

United Kingdom - Iraq - Saudi Arabia - Azerbaijan 3 5 6 4

2 production facilities in proximity to Turkey’s furniture production hubs & high demand regions

22 → Abundant capacity for outsourced production – Average industry

CUR of 71% vs small scale producers’ CUR of 40% in 2016 (3)

→ 34.5 k furniture enterprises in 2015 (2) → Only a few branded companies, rest is no-brand family SMEs

BİGA DÜZCE

6 main cities in the furniture production of Turkey (+70% share in 2016)(1)

(1) TOBB (2) Turkstat (3) Effective production capacity at 60% designed capacity

Biga Factory Düzce Factory

İstanbul Kayseri Ankara Bursa İzmir

3

Flexibility between internal manufacturing and outsourcing

→ 212.000 sqm total area → 72.000 sqm closed area → 1,440 k sqm panel (3), 93.1 k

upholstery, 75.6 k beds annual production capacity

→ 185.000 sqm total area → 36.000 sqm closed area → 1,080 k sqm panel (3), 48.2 k

upholstery, annual production capacity

23

Manufacturing / outsourcing balance

Cost advantages Cash management Operational impacts

→ 10 - 15% lower

production costs

→ No expansion CAPEX

required

→ Efficiency → Bargaining power

• f Doğtaş Kelebek

is still in place for certain inputs (i.e. fabric)

→ Extended payment

terms to suppliers (180-240 days vs 120- 150 days to company suppliers)

→ Simpler batch

production planning

→ Lower level of

inventory In house Product Design Biga factory Düzce factory Outsourcing to 3rd party suppliers Warehouse Stores Customers 78% 68% 50% 22% 32% 50% 2015 H1 2017 2018 Internal manufacturing Outsourcing Share in revenue (%) Identify sellable products with customer insight derived from 300+ sales points Insight from manufacturing operations on cost and quality Design and R&D

Competitive edges of internal manufacturing capability

The Company works with 32 third party suppliers 9M 2017

3

Leveraging outsourced production to maximize efficiency and profitability

• III. Key financials

25 → Strong emphasis on cash collection from

franchise stores

→ Decreasing cheque days further to 90 days

from 120

→ Elimination of term payment option in long

term

UPSIDE

→ Inventory optimization → outsourcing → minimize finished goods → Increasing share of outsourced

production to 50% in 2018 – further extending terms to 180-240 days

Trade receivables:

3 payment options for franchise stores: Upfront payment, monthly payment, term payment (previously 120 days) Deferred income is the cheque balances received from franchise stores

Inventory:

c.60-90 days for panel furniture products

• c. 45 days for upholstery products (mainly work-in-progress)

Trade payables:

Payables to 3rd party producers and raw material suppliers Prepaid expenses are mainly cheques provided to 3rd party suppliers for a long term engagement 1 2 3 1 2 3

(1) Net working capital days are calculated based on balance sheet items as of 31.12.2017

2017 YE (1) Trade receivables 83 days Inventory 160 days

Trade payables (-) 172 days Deferred Income (-) 45 days Prepaid Expense 35 days Cash cycle 61 days

Path to improving working capital

1 2 3

26

Net Debt Schedule Net debt / EBITDA decreased to 2.3x at the end of 2017 (vs. 5.9x in 1H2017)

EUR based loans are mainly related to the acquisition financing loan used for Kelebek acquisition

Net Debt (2017 YE) Debt Composition (2017 YE)

TL mn 2017 YE Short term financial loans 81,1 Short term portion of long term financial loans 58,2 Long term financial loans 115,8 Total other payables to related & unrelated parties 13,2 Cash & cash equivalents (3,4)

Net Debt 264,9

Deleveraging

229,2 264,7 264,9 2016 YE 1H2017 2017 YE 85,2% 68,1% 66,9% 14,8% 31,9% 33,1% 2016 YE 1H2017 2017 YE EUR TL

• IV. Appendices

28

Income Statement 2016 Year End vs. 2017 Year End

Summary Financials: Income Statement

TL 31 December 2016 31 December 2017 Net Sales 395.471.738 600.165.348 Cost of Sales (265.166.697) (376.535.779) GROSS PROFIT 130.305.041 223.629.569 OPEX (121.445.981) (136.535.091) Other Operating Income/Exp.(Net) (2.521.320) 6.106.271 OPERATING PROFIT 6.337.740 93.200.749 Income/Expense from Investment 581.887 385.143 Financial Income/Expense Net (49.027.872) (72.669.694) EBIT (42.108.245) 20.916.198 Income Tax Expense 2.460.130

• 5.659.784

Net Income /(Loss) (39.648.115) 15.256.414 EBITDA 22.926.543 114.127.704 Gross Margin 32,9% 37,3% EBIT Margin

• 10,6%

3,5% EBITDA Margin 5,8% 19,0%

29

Balance Sheet: 2016 Year End vs. 2017 Year End

Summary Financials: Balance Sheet

TL 30 December 2016 30 December 2017 Total Assets 453.948.482 659.679.751

Cash & Cash equivalents 737.786 3.363.130 Accounts Rec. & due from related parties 84.638.653 114.103.676 Inventories 142.410.216 187.720.242 Other Current Assets 20.408.314 65.027.733 Total Current Assets 248.194.969 370.214.781 PP&E 172.078.671 254.286.863 Intangible Assets 23.054.803 23.286.776 Other non Current Assets 10.463.397 11.891.331 Deferred tax assets 156.642

• Total non-Current Assets

205.753.513 289.464.970

Total Liabilities & Equity 453.948.482 659.679.751

Short-term Debt 137.707.140 139.322.686 Accounts Payable. & due to related parties 127.260.011 228.199.406 Provisions & other current liabilities 66.930.093 64.971.189 Total Current Liabilities 331.897.244 432.493.281 Long-term Debt 91.235.372 115.772.275 Provision for Employee Benefits & Other Liab. 3.821.315 4.899.921 Deferred tax liability 1.043.194 17.284.790 Other Liabilities 38.960 39.262 Total Non-Current Liabilities 96.138.841 137.996.248 Shareholder's Equity & Minority Interest 25.912.397 89.190.222

For further Information please email Doğtaş Kelebek IR Manager, asli.kondu@dogtaskelebek.com or call at +90 216 425 1224

Istanbul Stock Exchange: DGKLB, Bloomberg: DGKLB.TI, Reuters: DGKLB.IS

Thank You