Press 1q 2014 english by Nueva Polar

Earnings Release First Quarter 2014

Earnings Release First Quarter

2014

Earnings Release First Quarter 2014

Index

1Q 2014 Highlights

Recent Events

Consolidated Income Statements

Retail Business Indicators

Stores

Retail Business Financial Indicators

EBITDA

Financial Statements La Polar S.A. - IFRS

Consolidated Income Statements

Consolidated Balance Sheet

Cash Flow

Annex

Notes:  Quarters are named as: 1Q, 2Q, 3Q, 4QQ accordingly.  Semesters are named as: 1H, 2H accordingly and 9M for the first nine months of the year.  Calendar years are named LTM (Last twelve months).  Currency symbols: CLP$ Chilean Pesos, US$ U.S. dollars, M millions, B billions.  Exchange rate used in this 1Q report: 1USD$ = CLP$ 550.53 Source: Internal Revenues Service ( Servicio de Impuestos Interno – SII – Chile).

Earnings Release First Quarter 2014

1Q 2014 HIGHLIGHTS



Same Store Sales 1Q 2014, grows 5% compared to 1Q 2013. Following the positive trend of the last quarters, Same Store Sales (SSS) increased during the first quarter of 2014 by 5% compared to the same period last year.



Increase in financial revenues. Financial revenues in the 1Q presented a growth of 40.3% compared to the same period last year. This is mainly due to the growth of 46% of the portfolio between 1Q 2013 and the current period. It is noteworthy to mention that despite the increase in financial revenue together with the growth in the loans portfolio, they represent 28% of retail sales.



Risk Rate of 9.1% The risk rate at the first quarter of 2014 was 9.1%, this represents a decrease of 3.8 percentage points over the same period last year.



EBITDA growth in the last 12 months. On the first quarter of 2014 the Company had a negative EBITDA of CLP$ B 1.8, presenting an improvement of CLP$ B 1 compared to 1Q 2013. This is mainly due to the increase in the financial revenues that is explained by a sustained portfolio growth and better margin that was obtained from a decrease in the risk rate compared to 1Q 2013. This results in an increase in the LTM EBITDA.



Colombia Exit On 27th of February, the Board of Directors of the company agreed the prompt exit of Colombia. This will allow us to dedicate all of the resources to La Polar Chile, to continue improving and growing for the retail and financial business. This essential fact was reported to the Securities and Insurance Supervisor on 28th of February. At the reporting date of these financial statements, agreements were reached with a 100% of the landlords of the retail stores, including la Floresta whose contract had a guarantee of Empresas La Polar S.A., to terminate lease contracts, allowing us to advance on an early closing of the operation. Additionally 4 stores have already been closed:    

Carabobo Yopal Cacique Centro Mayor

Earnings Release First Quarter 2014

RECENT EVENTS Shareholders Meeting On April 30th of 2014, at the offices of La Polar, it was held the Shareholders Meeting where the following matters were held:  The entire board was renewed with the election of Pedro Pellegrini who replaced Georges De Bourguignon, who resigned in February of 2014. 

Alberto Marraccini was elected as an independent Director



Ernst & Young was replaced as the external audit firm for Deloitte for the year 2014.

 ICR Compañía Clasificadora de Riesgo Limitada and Clasificadora de Riesgo Humphreys Limitada were chosen as the risk rating agencies.



DEBT RENEGOTIATION On April 10th of 2014, the Board of La Polar communicated the decision to initiate the process of renegotiating the debt with various creditors.

Earnings Release First Quarter 2014

3. CONSOLIDATED INCOME STATEMENTS CLP B$ Revenues Cost of Sales Margin

1Q 14 92.0 (60.9) 31.1

% Income

SGA (w/o depreciation) Operating Income EBITDA Depreciation Non - Operating Profit Profit (loss) before taxes Benefits (expenses) income tax Profit (loss) Chile

(33.0) (3.7) (1.8) (1.7) (6.5) (10.2) 0.6 (9.6)

-36% -4% -2%

Profit (loss) Colombia Profit (loss) Consolidated

-66% 34%

-11%

1Q 13 83.4 (57.4) 26.0

% Income

(29.6) (5.2) (2.8) (1.6) (5.5) (10.6) 2.5 (8.1)

-35% -6% -3%

0.0

(3.5)

(9.6)

(11.6)

-69% 31%

-13%

The Ebitda Margin1 of the first quarter of 2014 reaches -2.0%, while in the same period of last year, this reached -3.3%. This improvement is due to the significant increase in the margin that is partly explained by the consolidation of the financial business and an increase in the revenues. In this period there was a loss before taxes of CLP $ B 10.2, this is an improvement over the CLP$ B 10.6 of 1Q 2013.

EBITDA margin: Ebitda/Revenues

Earnings Release First Quarter 2014

4. RETAIL BUSINESS INDICATORS 1Q´13

2Q´13

3Q´13

4Q´13

1Q´14

68,673

81,818

75,169

104,489

72,942

1Q´13

1Q´14

68,673

72,942

Retail Revenues (CLP $ M)

LTM 1Q13

LTM 1Q14

Retail Revenues (CLP $ M) 306,266

334,418

Retail revenues during the first quarter of 2014 compared to the same period last year, increased by 6%, reaching CLP$ B 73. Also there was an accumulative growth of 9% in the last twelve months.

Retail Revenues LTM CLP$ B

298

4Q 12

306

1Q 13

317

2Q 13

324

3Q 13

330

334

4Q 13

1Q14

Revenues

Earnings Release First Quarter 2014

Retail Margin % LTM

26%

27%

4Q 13

1Q14

25% 24%

4Q 12

24%

1Q 13

2Q 13

3Q 13

The margin of the last twelve months has also grown and remains constant in the first quarter of 2014. As for the contribution we can see an increase of 29% Sales UF/sqm2

2013

6.2

7.4

6.8

9.3

2014

6.4

Var %

During the first quarter of 2014 the sales in UF/sqm reaches 6.4 which means an increase of 3% over the same period last year.

UF/sqm: (Retail Sales /UF monthly closing)/ Square meters (sales room, hallway, fitting room, storage). This is a monthly indicator, but reported on a quarterly basis.

Earnings Release First Quarter 2014

5. STORES 2013

Number of Stores Sales Surface ( Thousands sqm ) Retail Quarter Revenues ( Th.$)/sqm)

2014

160,700

160,300

160,500

161,300

161,500

427

510

468

648

452

At the end of the first quarter of 2014, La Polar maintains the same number of stores compared to the 1Q 2013.

By the end of the first quarter of 2014, La Polar has 161,500 sqm of sales area. This is mainly due to an increase in the sqm in the store of Colina for a tent that was installed for the period of school sale.

6. RETAIL BUSINESS FINANCIAL INDICATORS

1Q´13

2Q´13

3Q´13

4Q´13

1Q´14

14,318

15,858

17,578

20,208

20,087

1Q´13

1Q´14

14,318

20,087

40%

Financial Revenues (CLP $ M)

LTM 1Q13

LTM 1Q14

Financial Revenues (CLP $ M) 53,969

73,732

37%

The Financial revenues during the first quarter of 2014 reached CLP$ M 20,087, this is an increase of 40% over the same period of last year. Comparing this with the same period of the last twelve months it was 37%. This is mainly due to the increase in the financial revenues that is explained by the sustained growth of the loans portfolio and a better margin that is obtained from a low risk rate. It is noteworthy to mention that despite the increase in financial revenue together with the growth in the loans portfolio, they represent 28% of retail sales.

Earnings Release First Quarter 2014

Financial Revenues LTM CLP$ B -1%

10%

12%

4Q 12

1Q 13

2Q 13

Revenues

3Q 13

4Q 13

1Q14

Financial Margin % LTM

63%

4Q 12

69%

1Q 13

75%

78%

77%

75%

2Q 13

3Q 13

4Q 13

1Q14

Earnings Release First Quarter 2014

Financial Indicators

CHILE Financial Business

1Q´13

Credit Card Loan Stock ( CLP Billion $) Provision for loan losses (CLP Billion $)

112

2013 2Q´13 3Q´13 121

139

4Q´13

2014 1Q´14

179

163

12.9%

10.8%

8.3%

7.9%

9.1%

Open Accounts w/ balance (Th.)

453

461

464

519

508

Average debt ( CLP Th.$)

247

263

299

344

322

% of sales with Credit Card

45%

50%

52%

51%

49%

% Provision for loan losses Net loan losses ( CLP Billion $)

Credit Card Loans3 (CLP $ B)

Credit Card Loan Portfolio (CLP $ B)

Total Stock $ 163 Total Stock $ 112

19 140

1Q´ 2013

MAR´13

2014

Normal

MAR´14 Renegotiated

In the first semester of 2014, gross loans reached CLP B $ 163, which means an increase of 46% compared to the same period last year, emphasizing an increase in the normal portfolio ( not renegotiated) by 52%.

Credit card loans with credit card La Polar includes: Cash Advances, Super Advances, and use in Associated Business and finance in La Polar Retail stores. Includes VAT.

Earnings Release First Quarter 2014

Risk Rate

26,2%

22,6%

19,1%

16,1%

12,4%

12,9%

10,8%

8,3%

7,9%

9,1%

DEC´11 MAR´12 JUN´12 SEP´12 DEC´12 MAR´13 JUN´13 SEP´13 DEC´13 MAR´13

Risk rate for the first quarter is 9.1%, this represents a decrease of 3.8 percentage points over the same period last year.

Loan Portfolio Indicators – Gross Loans (%)

44%

56%

37%

63%

17%

15%

13%

14%

29%

19%

12%

24%

83%

85%

87%

86%

71%

81%

88%

76%

DIC´11 MAR´12 JUN´12 SEP´12

DIC´12 MAR´13 JUN´13 SEP´13

Normal

DIC´13 MAR´14

Renegotiated

In the composition of the portfolio, it stands out the improvement between same periods. For the first quarter of 2014 we can see an increase of 3 percentage points in the normal portfolio. While there is an increase in the renegotiated portfolio between the end of December 2013 and March 2014, because of seasonal factors and a decreased in the portfolio, renegotiated clients are below 15%, a level that is suitable for the segment where the Company is involved. 11

Earnings Release First Quarter 2014

Loan Portfolio Indicators – Portfolio by aging segments

6% 8%

5% 9%

14%

13% [91 to 180] [31 to 90]

73%

72%

MAR´13

Mar´14

[01 to 30] Current

By comparing March 2013 with March 2014, we can observe a composition in the segments of similar behavior.

Earnings Release First Quarter 2014

7. EBITDA EBITDA Chile CLP$ B Revenues Costs Gross Margin

1Q 2014 72.9 (54.9) 18.1 % Revenues

SG&A (w/o depreciation)

6% 4%

24.8%

(22.1)

% Revenues

-30.2%

% Revenues

(4.0) -5.5%

EBITDA

Retail Growth

12%

1Q 2013 68.7 (51.4) 17.3

1Q 2014 20.1 (6.0) 14.1

25.2%

70.1%

(19.7) -28.7% (2.4) -3.5%

(12.0)

Financial Growth 36% 62% 22%

-59.8%

2.2 11.1%

1Q 2013 14.7 (6.1) 8.7

1Q 2014 92.0 (60.9) 31.1

58.9%

33.8%

(9.9) -67.0% (0.4) -2.7%

(33.0) -35.9%

Consolidated Growth 1Q 2013 10.3% 83.4 (57.4) 19.7% 26.0 31.2% 11.6%

(29.6) -35.5%

(1.8)

(2.8)

-1.9%

-3.3%

The EBITDA of the 1Q had a negative result of CLP $ B 1.8, which show us an improvement of CLP$ B 1, compared with the same period last year. This was due to an increase in the financial business, which offset higher losses in the retail business.

EBITDA MARGIN EVOLUTION

EBITDA MARGIN LTM 1Q´13

2Q´13

3Q´13

01%

4Q´13

1Q´14 02%

2,2%

-01% -04%

The EBITDA margin of the last twelve months continues to show us a growth trend. This leads La Polar to obtain positive results for the operation, equivalent to 2.4%.

Earnings Release First Quarter 2014

8. FINANCIAL STATEMENTS OF La Polar S.A. - IFRS

Complete Financial Statements of Empresas La Polar S.A are available on the website of the Securities and Insurance Supervisor (www.svs.cl) and the website of Empresas La Polar, www.nuevapolar.cl

a. Consolidated Income Statements4

Revenues Cost of sales Gross Profit Distribution costs Administrative expenses Other profit (loss) Financial income Financial costs Foreign currency exchange differences

31-mar-14

31-mar-13

MM$

MM$ 91,975

83,409

(60,861)

(57,418)

31,113

25,991

(446)

(343)

(34,316)

(30,795)

153

(83)

371

1,781

(6,626)

(7,293)

(44)

146

(364)

(34)

Profit (loss) before taxes

(10,159)

(10,630)

Profit (loss) income taxes

553

2,490

(9,607)

(8,141)

(3,482)

Profit (loss) from inflation - indexed assets and liabilities

Profit (loss)

Profit (loss) of the discontinues operations of the period Profit (loss) attributable to: Owners of parent company Non - controlling interests Profit (loss)

(9,607)

(11,620)

(2)

(9,607)

(11,622)

In 2014 and 2013 it was added the Profit (loss) from the discontinued operations of the period, referring to the decision by the Board to put on sale La Polar S.A.S.

Earnings Release First Quarter 2014

a. Consolidated Balance Sheet 5 31-mar-14

31-dic-13

31-mar-13

CLP MM $

13,476 117,084 63,198 33,240 240,141

21,403 839 7,599 128,520 51,026 32,956 242,342

5,795 109,087 12,841 95,881 61,586 18,987 304,177

44,190 404 19,210 60,875 2,969 127,649

48,710 437 19,333 61,173 2,865 132,518

16,405 288 19,489 69,615 9,009 114,807

Current Assets Cash and cash equivalents

13,143

Other current financial assets Other current non financial assets Current trade and accounts receivables Inventory Tax assets Total current assets

Non-Current Assets Fees Receivable Other non-current financial assets Intangible assets other than goodwill Properties, plant and equipment Deferred tax assets Total non-current assets Non-Current Assets held for sale Total Assets

15,158

20,146

382,947

395,007

418,984

Other current financial liabilities

20,976

28,206

17,754

Other trade and other accounts payable

82,807

72,292

Current Liabilities

Current accounts payable to related parties

74,637

Other current provisions

3,644

3,987

17,100

Current tax liabilities

5,242

4,039

1,467

Employee benefits provisions

3,396

5,961

5,552

Other current non-financial liabilities

1,777

3,145

760

117,842

117,629

117,270

183,415

178,778

178,682

2,351

3,059

Deferred tax liabilities

43,281

44,941

40,266

Total non-current liabilities

229,046

226,779

218,948

Total current liabilities Non-current Liabilities Other non-current financial liabilities Other long term provisions

Liabilities directly associated w ith non-current assets held for sale

Total Liabilities

15,165

20,631

362,054

365,039

336,218

Equity Issues capital Retained earnings Other reserves

302,678

(300,729)

(289,937)

(239,388)

18,809

17,227

19,477

Equity attributable to: Owner of the parent company

20,893

Non-controlling interest

29,967 -

82,766 -

Total Equity

20,893

29,967

82,766

Total Liabilities and Equity

382,947

395,007

418,984

For 2013 and 2014 it is added Non-current assets held for sale and liabilities directly associated with noncurrent assets held for sale, referring to the decision by the Board to put on sale La Polar S.A.S.

Earnings Release First Quarter 2014

Indicators Indicators Current ratio Acid ratio

Unit Times Times

Mar´14 2.04 1.50

Dec´13 2.03 1.61

Sep´13 2.34 1.75

Jun´13 2.51 1.99

Mar´13 2.50 2.00

The current ratio decreases in March 2014 compared to March 2013 due to the decrease in cash and equivalents. As for the Acid ratio, it decreased mainly for the increased in the inventory by 3% compared to march 2013. Indicators Inventory turnover Inventory turnover

Unit Times Days

Mar´14 4 97

Dec´13 5 78

Sep´13 4 88

Jun´13 5 84

Mar´13 4 89

Comparing 1Q 2014 with 1Q 2013, it is observed that the number of days of inventory increases in 8 days, mainly because the inventory increased by 3% compared to march 2013. Indicators Average payment method

Unit Days

Mar´14 80

Dec´13 70

Sep´13 51

Jun´13 59

Mar´13 73

The increase in the average payment method in 7 days is due to an increase of the trade payables and other accounts payable. Indicators Current liabilities Non-Current liabilities

Unit % %

Mar´14 32.5% 67.5%

Dec´13 32.6% 67.4%

Sep´13 30.4% 69.6%

Jun´13 33.1% 66.9%

Mar´13 34.9% 65.1%

Jun´13 -11.9

Mar´13 -7.5

Current liabilities, in March of 2014, represent 32.5% of total liabilities.

DF / EBITDA Financial Debt to EBITDA

Mar´14 20.7

Dec´13 23.3

Sep´13 -22.9

We can see a great improvement in this indicator, due to the improvement in the EBITDA between March 2014 and March 2013. Indicadores Periodo Promedio de cobro

Unidades Días

Mar´14 172

Dic´13 189

Sep´13 177

Jun´13 178

Mar´13 175

The average collection period decreased 8 days compared to December 2012, due to an increase in the sale of La Polar Card.

Earnings Release First Quarter 2014

Financial Debt Structure Below is a table with the annual accrual of interest related to the debt originated on preventive legal agreement of 2011. On the basis of discount rates which were used to reevaluate accounting debts to 16 of October 2012 ( 14,1% for Senior debt ( Bond F), 18,1% for the Junior Debt ( Bond G) and 9% for tranche C)6, and to the payment structure for each of these tranches, you can project an estimate of the interest accrued on an annual basis In this way, for example, it is expected that the financial expenditure for 2014, related with this debt, will be approximately CLP B$26. On the other hand this year the payment in cash the company realized, was of approximately CLP B$ 9.

CLP B$

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032

Annual Financial Expenses Interest Bond F Bond G Tranch C Total 20 21 23 23 23 22 21 19 15 4

2 3 3 4 5 6 7 8 9 11 13 16 18 22 26 31 36 43 51 34

2 2 2 2 2 2 2 2 1 1 1 0

24 26 28 29 30 30 30 29 25 17 14 16 18 22 26 31 36 43 51 34

Payment Flows Capital Interest Total 0 0 2 4 6 10 22 22 43 102 5 5 0 0 0 0 0 0 0 326

8 9 13 21 20 20 18 16 14 8 1 0 0 0 0 0 0 0 0 0

8 9 15 25 26 30 41 38 57 110 6 5

326

Projection of future interest for Bond G considers an annual inflation rate of 3% and does not consider possible future amortization from 50% of the revenue from the UNI1 portfolio.

Paid

Earnings Release First Quarter 2014

b. Cash Flow Statements

Cash Flow Statements

31-mar-14

31-mar-13

CLP M$

Cash flow from (used in) operating activities Proceeds from sales of goods providing services

145,166

98,781

(111,738)

(87,368)

Payment to and account of empolyees

(16,115)

(13,480)

Other payments for operating activities

(15,089)

(16,315)

Payment to suppliers for supplying goods and services

Received Interest

116

1,289

Income taxes refunded (paid)

(3,678)

(3,131)

Net cash flow from operating activities

(1,336)

(20,224)

Cash flows used to obtain control of subsidiaries or other businesses

Loan to related entities

Proceeds from disposal of property, plant and equipment

(1,537)

(1,671)

Cash flow (used in) investing activities

Addittions to property, plant and equipment Addittions to intangible assets

(30)

Other cash flow

4,929

(1,537)

3,228

Proceeds from issuance of shares

(148)

(2,121)

Proceeds from short term loans

(410)

(276)

Flujos de efectivo netos procedentes de (utilizados en) actividades de inversi贸n Cash Flow (used in) financing activities

Interest Paid

(4,829)

Net cash flow from (used in) financing activities

(5,388)

(2,398)

Net decrease in cash and cash equivalents

(8,260)

(19,393)

Cash and cash equivalents at the beginning of the period

21,403

135,935

Cash and cash equivalents at the end of the period

13,143

116,542

Net decrease in cash and cash equivalents

(914)

(3,344)

Cash and cash equivalents at the beginning of the period

2,799

1,685

Cash and cash equivalents at the end of the period

1,885

(1,659)

Cash Flow of Discontinued Operations

Earnings Release First Quarter 2014

During the period the net cash flow equivalent was a negative CLP $ M $ -8.280, this amount breaks down as follows:

Operating activities generated a negative cash flow of CLP$ M 1.336 that was lower than the negative flow of the same period in 2013 for CLP$ M 20.224. Investing activities generated a negative cash flow of CLP$ M 1.537, was due to improvements in stores that were realized in this period. Financing activities generated a negative cash flow of CLP$ M5.388. Of these, CLP$ M 4.800 were due to the F bond interest payment and CLP$ M 148 were to pay capital of the G bond.

Earnings Release First Quarter 2014

9. Annex CLP$ M

Retail Business Revenues Costs Gross Margin % Revenues

SG&A (w/o depreciation) EBITDA % Revenues

Financial Business Revenues Costs Gross Margin % Revenues

SG&A (w/o depreciation) EBITDA % Revenues

Consolidated Revenues Costs Gross Margin % Revenues

SG&A (w/o depreciation) EBITDA % Revenues

1Q 2013

2Q 2013

3Q 2013

4Q 2013

1Q 2014

68,673 (51,361) 17,312

81,818 (57,406) 24,412

75,169 (56,428) 18,741

104,489 (75,849) 28,640

72,942 (54,865) 18,078

25.2%

29.8%

24.9%

27.4%

24.8%

(19,704) (2,392)

(21,305) 3,107

(20,010) (1,269)

(27,507) 1,133

(22,061) (3,983)

-3.5%

3.8%

-1.7%

1.1%

-5.5%

14,736 (6,056) 8,679

15,858 (3,258) 12,600

17,578 (2,545) 15,034

20,208 (6,417) 13,792

20,087 (5,997) 14,090

60.6%

79.5%

85.5%

68.2%

70.1%

(9,880) (395)

(9,055) 4,044

(12,437) 3,101

(12,899) 1,533

(12,028) 2,227

-2.8%

25.5%

17.6%

7.6%

11.1%

83,409 (57,418) 25,991

97,676 (60,664) 37,012

92,747 (58,973) 33,774

124,698 (82,266) 42,432

91,975 (60,861) 31,113

31.3%

37.9%

36.4%

34.0%

33.8%

(29,584) (2,787)

(30,360) 7,151

(32,447) 1,832

(40,406) 2,667

(33,017) (1,756)

-3.4%

7.3%

2.0%

2.1%

-1.9%