PREMIER INVESTMENTS LTD 2018 Half Year results overview 16 March 2018 For personal use only X0 Agenda 1 Premier Investments 1H18 overview 2 Premier Investments 1H18 consolidated financial results 3 Premier Retail delivers record sales and EBIT 4 Premier Retail 1H18 EBIT 5 Premier Retail investing in growth 6 Smiggle global expansion driving growth 7 Peter Alexander performing strongly 8 Online – now expects to deliver $100 million annual sales two years ahead of original 2020 plan 9 Premier Retail summary For personal use only 10 Dividends X1 For personal use only X2 1 Premier Investments 1H18 overview • Group profit – Underlying net profit before tax $110.5 million, up 9.9% on 1H171 – Reported net profit after tax $78.6 million, up 9.4% on 1H17 – Increased record ordinary interim dividend of 29 cps fully franked, up 11.5% or 3 cps on 1H17 (1H17: 26 cps) • Premier consolidated balance sheet remains strong – Cash on hand of $185.5 million at end of 1H18 – Inventories clean at half year end – Balance sheet at end of 1H18 shows investment in associate (Breville Group Limited) as $221.3 million. The current market value of this investment $447.4 million2 – Investment in Myer Holdings Limited of $54.8 million – Franking credit pool of $221.2 million Note: 1. PMV 1H18 underlying EBIT and underlying NPBT excludes costs incurred in relation to its investment in Myer Holdings Limited ($0.9m) including preparation for legal action; costs incurred regarding the Melbourne Head Office move of Premier Retail to Premier Investments owned property scheduled for April 2018 of $2.0m (Premier Investments $1.8m; Premier For personal use only Retail $0.2m) and one-off costs investing in Smiggle Europe Expansion of $0.3m, all included within ‘Total expenses’ in the statutory accounts. PMV 1H17 underlying EBIT and underlying NPBT excludes non-recurring costs of $3.0m regarding the finalisation of the one-off litigation matter previously reported 2. Based on share price of $12.51 on 14 March 2018. 3 1 Premier Investments 1H18 overview • Premier Retail contribution to Premier Investments performance: – Record 1st Half sales of $630.1 million, up 7.0% on 1H17 – Record 1st Half Underlying EBIT of $102.5 million, up 10.2% on 1H171 – Record 1st Half Underlying EBIT % to Sales of 16.3%, up 47 bps on 1H171 – Record Underlying Net profit before tax of $100.2 million, up 10.2% on 1H171 – 1H18 LFL sales up 2.4% on 1H17 on a constant currency basis – Smiggle sales up 26.7% on a previous record 1H17 and up 60% over 2 years – Peter Alexander sales up 15.0% on a previous record 1H17 – Online sales up 71.2% on 1H17, now exceeding 10% of the respective markets’ total sales – Original 2020 Online Sales target of $100 million expected to be achieved in calendar year 2018, two years ahead of original plan – Targeted capital investment program continues to drive future growth Note: 1. Premier Retail 1H18 underlying EBIT and underlying NPBT excludes costs incurred regarding the Melbourne Head Office move of Premier Retail to Premier Investments owned For personal use only property scheduled for April 2018 of $0.2m and one-off costs investing in Smiggle Europe Expansion of $0.3m, both included within ‘Total expenses’ in the statutory accounts. Premier Retail 1H17 underlying EBIT and underlying NPBT excludes non-recurring costs of $3.0m regarding the finalisation of the one-off litigation matter previously reported. 4 2 Premier Investments summarised consolidated income statement $m 1H18 1H17 Premier Retail EBIT – underlying 102.5 93.0 Premier Investments income from associate (BRG) 10.0 9.3 Premier Investments other revenue (Interest, Dividends, Rent & Other) 3.9 3.9 Premier Investments expenses (ex Premier Retail) (3.2) (3.0) Underlying finance costs (2.7) (2.6) Underlying net profit before tax 110.5 100.6 Expenses incurred on future head office property ‒ Depreciation, relocation to date and other (1.0) - ‒ Finance costs (1.0) - Expenses incurred in relation to investment in Myer Holdings Limited (0.9) - including preparation for legal action Non-recurring costs (before tax) ‒ Litigation matter - (3.0) ‒ Smiggle Europe expansion (0.3) - Reported net profit before tax 107.3 97.6 Income tax expense (28.7) (25.7) For personal use only Reported net profit after tax 78.6 71.9 5 2 Premier Investments summarised consolidated balance sheet $m 27 Jan 2018 29 Jul 2017 Assets Cash and cash equivalents 185.5 170.6 Inventories 140.1 140.8 Property, plant and equipment 223.2 214.4 Other assets 33.0 35.4 Deferred tax assets 36.7 35.8 Listed investment at fair value 54.8 67.7 Investment in associate 221.3 216.9 Intangible assets 855.4 855.1 Total assets 1,750.0 1,736.7 Liabilities Interest bearing loans and borrowings 146.6 173.5 Deferred tax liabilities 59.9 58.8 Trade payables, provisions and other liabilities 169.6 168.7 Total liabilities 376.1 401.0 Equity Contributed equity 608.6 608.6 Reserves (27.8) (30.1) Retained earnings 793.1 757.2 For personal use only Total equity 1,373.9 1,335.7 6 For personal use only 7 3 Premier Retail delivers record sales and EBIT • Record 1st Half sales of $630.1 million, up 7.0% on 1H17 • Record 1st Half Underlying EBIT of $102.5 million, up 10.2% on 1H171 • Record 1st Half Underlying EBIT % to Sales of 16.3%, up 47 bps on 1H171 • Record 1st Half Underlying Net profit before tax of $100.2 million, up 10.2% on 1H171 • 1H18 LFL sales up 2.4% on a constant currency basis • All key growth initiatives continue to deliver – Smiggle global sales up 26.7% to $170.7 million delivering highest sales revenue of all brands within Premier Retail – Strong global LFL growth – 35 new stores opened globally in 1H18 – Peter Alexander delivered a 15.0% increase in sales with strong LFL growth and the opening of 12 new stores during 1H18 – Online sales up 71.2% on 1H17, now exceeding 10% of the respective markets’ total sales. Original 2020 Online Sales target of $100 million expected to be achieved in calendar year 2018, two years ahead of original plan • Targeted capital investment program continues, with 331 capital investment initiatives across all brands and markets during 1H18, including 53 new stores For personal use only Note: 1. Premier Retail 1H18 underlying EBIT and underlying NPBT excludes costs incurred regarding the Melbourne Head Office move of Premier Retail to Premier Investments owned property scheduled for April 2018 of $0.2m and one-off costs investing in Smiggle Europe Expansion of $0.3m, both included within ‘Total expenses’ in the statutory accounts. Premier Retail 1H17 underlying EBIT and underlying NPBT excludes non-recurring costs of $3.0m regarding the finalisation of the one-off litigation matter previously reported. 8 3 Premier Retail performance 26 weeks 26 Weeks $000 to 27 Jan 2018 to 28 Jan 2017 Var LY Sales 630,073 588,613 +7.0% LFL sales (constant currency) +2.4% +2.1% Gross Profit 397,925 376,863 +5.6% Gross margin (%) 63.2% 64.0% -87 bps 1 Employee Expenses (143,360) (141,151) +1.6% % sales 22.8% 24.0% -123 bps Rent1 (113,838) (108,321) +5.1% % sales 18.1% 18.4% -34 bps Advertising & Direct Marketing1 (8,546) (7,535) +13.4% % sales 1.4% 1.3% +8 bps Depreciation, Amortisation & Impairment1 (13,054) (12,767) +2.3% % sales 2.1% 2.2% -10 bps Other Costs of Doing Business1 (17,384) (15,381) +13.0% % sales 2.8% 2.6% +15 bps Other income 781 1,309 Underlying EBIT 102,524 93,017 +10.2% % sales 16.3% 15.8% +47 bps Borrowing costs (2,316) (2,072) Underlying Profit before tax 100,208 90,945 +10.2% Note: 1. 1H18 total cost of doing business equates to 47.0% of sales (1H17 48.4%) excludes costs incurred regarding the Melbourne Head Office move of Premier Retail to Premier For personal use only Investments owned property scheduled for April 2018 incurred during 1H18 of $0.2m and one-off costs investing in Smiggle Europe Expansion incurred during 1H18 of $0.3m, both included within ‘Total expenses’ in the statutory accounts. Premier Retail 1H17 underlying EBIT and underlying NPBT excludes non-recurring costs of $3.0m regarding the finalisation of the one-off litigation matter previously reported. 9 4 Premier Retail 1H18 EBIT: strong growth continues • 6 consecutive years of first half EBIT growth in the critical summer season • 1H18 Underlying EBIT % to Sales up 47 bps on 1H17 • Key Gross Margin and CODB strategies delivering Underlying EBIT – 6 Year History 120.0 17.0% 16.3% 15.8% 110.0 16.0% 15.3% 102.5 100.0 93.0 15.0% 14.3% 90.0 84.1 14.0% 80.0 13.1% 12.7% 70.0 13.0% 70.0 61.5 60.0 12.0% 56.3 50.0 11.0% 1H13 1H14 1H15 1H16 1H17 1H18 (Note 1) For personal use only Underlying EBIT $'M Underlying EBIT % Sales Notes: 1. 1H16 excludes non-comparable 27th week which contributed $6.6m in EBIT 10 4 Premier Retail 1H18 EBIT: strong growth continues Gross Margin Strategies continue to deliver • 1H18 results were achieved notwithstanding significant external headwinds in the apparel sector, with retailers continuing to discount deeper and for longer to remain competitive • Key long term foreign currency hedging policies allowing for merchandise planning • Direct sourcing initiatives continued to deliver benefits from new and existing suppliers • Sourcing from new geographies continues • Investing in better merchants, delivering better product • Significant growth from higher margin brands Smiggle and Peter Alexander • Ongoing focus on disciplined execution of markdown management to keep clean inventory position at end of 1H18 CODB Focus continues to deliver • CODB decreased by 144 bps as a percentage of sales to 47.0% in 1H181 • Costs continue to be well controlled despite structural inflationary pressure • Investment will continue in strategic growth initiatives, including Smiggle’s international growth markets (Europe and Asia), Peter Alexander and Online For personal use only Note: 1.