The PAS Group Limited H1 FY2018 Results Briefing ABN 25 169 477 463 - PowerPoint PPT Presentation

22 February 2018 The PAS Group Limited – H1 FY2018 Results Briefing ABN 25 169 477 463

H1 FY2018 Results Summary Financial Summary (i) Operational Summary • Sales down 3.2% to $131.4 million • Sales growth driven by online, new stores, and  Retail sales up 0.4% the annualisation of stores opened in FY2017  Wholesale sales down 7.1% • Continued strong growth in loyalty programs • Negative like-for-like Retail sales due to challenging trading with total membership up 82,000 (11%) to conditions and significant promotional activity across the industry, 836,000 and now representing 75% of total particularly for the first 8 weeks of the half and over the Christmas Retail sales trade period • Whilst we have tempered our new store roll- • Reduced concession sales and lower foot traffic at Myer out program in line with our strategy, we have continued to open new stores in targeted • Online sales grew 25.5% on top of the 41.0% growth achieved in locations including 8 Review concession stores FY2017 in David Jones • Clean inventory levels ensuring no requirement • $5.1m of low margin Wholesale sales discontinued in Designworks for excessive late season clearance • Gross profit of 57.2% well managed, up 1.2% on H1 FY2017 • EBITDA from continuing business of $8.4 million (inclusive of $1.0m of non-recurring costs), down 28.0% on H1 FY2017 H1 FY2018 H1 FY2017 • EBITDA was impacted by the tougher retail trading environment, delays to Wholesale orders in Designworks, reduced Independent Sales $131.4 million $135.7 million Wholesale sales and a higher cost base from investment in new and annualised stores EBITDA $8.4 million $11.6 million • Debt free with net cash on hand of $5.7 million • EPS of 2.2 cents per share, Interim dividend declared of 1.5 cents NPAT – Continuing $3.0 million $5.4 million per share fully franked, funded from free cash flow NPAT – Total Business $3.0 million $4.8 million (i ) All statutory financials are presented on a “Continuing” business basis unless otherwise noted. See Continuing to “Total Business” reconciliation at Appendix A 1.

Retail Segment Summary H1 FY2017 to H1 FY2018 Retail Sales Bridge ($ million) • Retail sales grew by 0.4% to $72.3m (2.4) 4.6 • Growth due to: 72.3 71.9 (3.4) 1.6  Online sales growth of 25.5% in addition to the 41% growth achieved in FY2017;  The impact of the 11 new stores opened in H1 including 8 Review concessions in David Jones;  The annualised impact of new stores and closed stores in FY2017; offset by H1 FY2017 LFL Growth New Stores Annualised Closed Stores H1 FY2018  Negative LFL sales particularly in Myer concessions Sales Stores Sales Retail Sites Total Retail Sites by Brand • 11 new Retail sites opened in H1: FY2017 Opened Closed H1 FY2018  Black Pepper; 1 store  Review; 1 store, 8 concessions Black Pepper 144 1 (4) 141  Bondi Bather; 1 store (acquired) Review 111 9 (0) 120 • Successful execution of new store concepts in Melbourne New Businesses & Central and Booragoon with both trading ahead of 3 1 (1) 3 Other expectations • Active renewal and rationalisation of our store portfolio, with Total Retail Sites 258 11 (5) 264 5 stores closed at lease end 2.

Operational Highlights - Online & Customer Loyalty • H1 Online sales now represent 14.0% of Group Retail sales across the group, up from 11.2% in H1 FY2017 Online Growth (H1 FY2014 – H1 FY2018) • Launched Review on the Alibaba Tmall platform in January 2018. Review are the first Australian apparel business to launch on Tmall and with over 300 million registered users, this has opened up a significant opportunity in an exciting market. Tmall are dedicated to providing a premium shopping experience for increasingly sophisticated Chinese customers in search for top quality branded merchandise 14.0% • Access to key Retail partners’ online customer base continued to be achieved with the launch of David Jones Dropship for Review and The Iconic Marketplace for 11.2% JETS • Successful launch of B.O.D by Rachael Finch website in November 2017 8.6% • Launch of Everlast Australia website in December 2017, providing a direct to customer opportunity for the business 4.5% 2.6% Online % of sales H1FY14 H1FY15 H1FY16 H1FY17 H1FY18 3.

Operational Highlights - Online & Customer Loyalty • Loyalty membership grew by a further 82,000 members (+11%) in H1 2018 to Loyalty Growth (H1 FY2014 – H1 FY2018) 836,000 members • Loyalty program sales now represent c.75% of sales and continues to provide improved consumer insights, enable tailored communication and drive traffic to our Retail stores 836 • Upcoming launch of the new Review website in H2 on the Salesforce Commerce Cloud platform, which is expected to provide an improved customer experience and greater conversion • Launched Alipay in selected Review stores, enabling the business to easily accept 652 non-cash payments from Chinese customers in store • Launch of Review on Amazon Marketplace and the launch of Everlast on Amazon 534 planned for H2 342 108 Loyalty ('000 members) H1FY14 H1FY15 H1FY16 H1FY17 H1FY18 4.

Wholesale, Design & Distribution • Wholesale sales in H1 were $59.1m, down 7.1% on the same period last year Wholesale Sales by Brand – H1 FY2017 v H1 FY2018 • Designworks sales reflect the discontinuation of $5.1m of low margin sales • Sales were down on prior year due to order movements from 23% 24% Designworks Department Store customers and reduced 9% 8% Independent Wholesale sales • Strong increase in gross profit due to improved gross margins 68% 68% driven by continued growth in the Sport Division DESIGNWORKS H1 FY2017 H1 FY2018 • H1 sales down 8.9% to $43.6 million due to delays in orders, Designworks Black Pepper Other however impact largely offset by improved margin • 89% of sales now from Licensed business and Sport, continuing Designworks Product Mix – H1 FY2017 v H1 FY2018 to de-risk and reduce reliance on Private Label sales • Increased sales in H1 in the Sport Division driven by growth in H1 FY2018 H1 FY2017 new Footwear ranges and Sports Equipment • Launch of Everlast Australia online Private Label, Private Label, 11% 9% • Business well positioned for moderate growth in H2 and major growth in FY2019 due to:  Growth of Lonsdale; Sports, 39% Sports, 50%  Coles Supermarkets Mix program;  Continued growth of Footwear; Licensed  Sales from direct to consumer websites (Everlast and B.O.D Apparel & Licensed - by Rachael Finch); Accessories, Apparel & 39%  The launch of Suburban as a major brand with Target; and Accessories, Owned Owned Brand, 48% Brand, 2% 2%  The addition of a new international sports brand 5.

Wholesale, Design & Distribution (continued) OTHER WHOLESALE • Further investment in JETS infrastructure to drive growth; • Continued strong performance in Yarra Trail Wholesale; and • Continued shift from Wholesale to Retail in Black Pepper Wholesale Sales by Brand – H1 FY2017 v H1 FY2018 23% 24% 9% 8% 68% 68% H1 FY2017 H1 FY2018 Designworks Black Pepper Other 6.

Sales by Customer Sales by Customer / Channel – H1 FY2017 Sales by Customer / Channel – H1 FY2018 International Kmart International Kmart 3.7% 14.5% 4.1% 14.8% Target Target 6.0% 6.8% Rebel 2.7% Rebel 1.7% Big W Big W 2.9% 2.0% Own Retail Own Retail Stores Stores 40.9% 44.9% Myer - Myer – Concessions Concessions 10.0% 10.8% Myer - Myer - Wholesale Independent Wholesale Independent David Jones David Jones 3.8% 2.6% Wholesale Wholesale 4.5% 2.4% 7.3% 11.4% • Investment in own Retail and International channels has reduced reliance on Private Label sales in local Discount Department stores • Continued growth in Sport through Rebel and Independents • Increase in David Jones due to 8 new Review concession stores opened during H1 7.

Gross Margin and Exchange Rates • Gross margin has continued to be well managed through the currency cycle despite current market conditions and significant promotional activity in the industry • H1 FY2018 Gross profit % 115bps higher than prior half year driven by increased Retail mix and continued growth in the Designworks Sport division • Forward US dollar currency requirements for Retail businesses covered to the end of FY2018 Exchange Rate and Margin $0.90 $0.78 $0.75 $0.72 57.2% 56.1% 55.7% 56.0% H1 FY2015 H1 FY2016 H1 FY2017 H1 FY2018 AUD $ Gross Margin % 8.