Annual Report 2010 For personal use only For personal use only 2 Premier Investments Limited Chairman’s Report The Directors of Premier Investments Limited (‘Premier’) have pleasure in submitting to shareholders the Company’s Annual Report for the year ended 31 July 2010. The 2010 Premier full year result reflects the ongoing transformation and growth plans for following principal themes: Premier as an owner and operator of retail • A relatively strong consolidated profit in and wholesale related businesses. a challenging environment, Just Group delivered a credible result in 2010 • Maintenance of a robust balance sheet with notwithstanding a challenging environment no net debt and substantial cash reserves for the Australian retail industry. As other thereby providing a platform for investment retailers have noted, 2010 was a year of two in growth, distinct halves. A strong first half was supported by the continuing effects of • A continued focus on rewarding substantial government economic stimulus shareholders through strong dividends. measures. However, the second half was The Premier Board believes that the successful impacted by the cycling of the stimulus achievement of these outcomes is consistent effects, abnormal weather, extensive industry with our core objective – the prudent discounting and successive interest rate rises management of shareholder funds to deliver which served to exacerbate already fragile strong investment returns and grow consumer sentiment. The overall Just Group sustainable long term shareholder value. performance was also distorted by a larger than anticipated loss by the Portmans brand The Premier result is highly contingent on the as management undertook a substantial performance of Just Group, the company’s transformation process. As a consequence main operating business. Just Group – the Premier Board provided earnings Australia’s largest specialty retailer with over guidance to the market in early August. 1,000 stores in Australia, New Zealand and The final result was in line with that guidance. South Africa – was acquired by Premier in 2008 and is a 100% owned subsidiary. It is I am pleased by the positive market reaction now fully consolidated in the Premier to the Just Group 2010 result. This reflects a accounts and operates very effectively under market understanding of both the growth the Just Group Board, within the broader potential and resilience of the Just Group Premier structure. business model of an efficient and scalable For personal use only operational platform which is able to be Your Directors continue to be very satisfied leveraged by a suite of strong, differentiated with the Just Group acquisition and its brands with segmented core customer bases operational and strategic importance in the and demographics. Annual Report 2010 1 Chairman’s Report continued Just Group management also focussed on The Premier Board fully understands that our efficiencies and sustainable cost savings which shareholders are the owners of the company will benefit future earnings performance. who have entrusted to us at risk capital Moreover, the turnaround in Portmans which they expect to be managed prudently represents significant upside opportunity to achieve strong investment returns and long together with the potential of our growth term wealth creation. The Board’s shareholder brands – Peter Alexander, Dotti and Smiggle. focus is again evident in 2010. The Directors The Just Group and Premier Boards also believe declared total fully franked dividends of that significant organic growth opportunities 66 cents per share, comprising 36 cents exist with the core brands – Just Jeans and per share in fully franked ordinary dividends Jay Jays. and 30 cents per share fully franked special dividends. The Premier Directors would like to express appreciation to the Just Group Board, the 2010 is the eighth consecutive year in which senior management team led by Jason Murray Premier’s ordinary dividend per share has and the more than 6,000 Just Group team increased. Special dividends represent an added members for their contribution to the return to shareholders, subject to the Board’s Premier result. consideration of capital management or special circumstances. Over the past eight years Breville Group also made a very pleasing ordinary dividends have grown on a year by contribution to the 2010 Premier result. year average by over 40%. Premier has been a long term shareholder in the company and is the largest shareholder. Also during the 2010 financial year Breville increased its dividend payment in 2010 Dr David Crean and Mr Tim Antonie joined and the increase in share price resulted in the the Premier Board. Both Directors have already value of Premier’s available for sale financial made strong contributions to the work of the assets increasing by over 150%, contributing to Board and we are delighted that these highly Premier’s already very strong balance sheet. credentialed Directors have made their skills and experience available to the benefit of our At financial year end Premier had $317 million shareholders. Dr Crean is now the Chairman of cash on hand. This places Premier in a strong of the Audit and Risk Committee as an position relative to other potential buyers of independent director. I would also like to retail related assets in Australia. The Premier express my appreciation to all of my Board Board is acutely aware of the benefits of colleagues for their considerable contribution in growth enhancing acquisitions, including overseeing the Company over the past year. international licences. To that end a number of potential opportunities have been closely In conclusion, on behalf of all of your Directors, assessed during the year. None satisfied the I thank all of our shareholders for your very disciplined criteria we have applied to continued support. I encourage all shareholders ensure value and wealth creation for our to attend the Annual General Meeting on shareholders. As Europe and the USA deal with 26 November. very strong economic headwinds, I believe it likely that there will be increased opportunities For personal use only and more favourable commercial arrangements to bring international brands to this market. Solomon Lew Chairman & Non-Executive Director 2 Premier Investments Limited The Directors Solomon Lew Frank W. Jones FCA, CPA, ACIS Tim Antonie Chairman and Deputy Chairman and (appointed 1 December 2009) Non-Executive Director Non-Executive Director Non-Executive Director David M. Crean Lindsay E. Fox AC Henry D. Lanzer B. COM., LLB (Melb) (appointed 1 December 2009) Non-Executive Director Non-Executive Director Non-Executive Director For personal use only Michael R.I. McLeod Gary H. Weiss LLM, J.S.D. Non-Executive Director Non-Executive Director Annual Report 2010 3 The Directors continued Solomon Lew Administrators. Mr Jones has extensive experience as Mr Lew was appointed a Non-Executive Director and a financial and general advisor to some of Australia’s Chairman of Premier on 31 March 2008. For many leading manufacturing and retailing companies. years, Mr Lew has been a director of Century Plaza Mr Jones served as Chairman of Premier from Investments Pty Ltd, the largest shareholder in 1999 to 2002 and, more recently, from 2007 to Premier and was previously Chairman of Premier 2008. He is a member of the Audit and Risk from 1987 to 1994. Committee of Premier and was the Committee’s Mr Lew has over 40 years’ experience in the Chairman until 31 July 2010. manufacture, importation, wholesaling and retailing Tim Antonie (appointed 1 December 2009) of textiles, apparel and general merchandise. Mr Lew’s success in the clothing industry has been Mr Antonie was appointed to the Board of Directors largely due to his ability to read fashion trends and on 1 December 2009. He holds a Bachelor of interpret them in the Australian market and to Economics degree from Monash University and efficiently and cost-effectively produce quality qualified as a Chartered Accountant with Price garments. Property development and the acquisition Waterhouse. He has 20 years’ experience in and disposal of equity investments have proven to investment banking and formerly held positions of be a profitable and consistent activity for Mr Lew’s Managing Director from 2004 to 2008 and Senior family entities. Advisor in 2009 at UBS Investment Banking, with particular focus on large scale mergers and He has, through those family entities, made a acquisitions and capital raisings in the Australian number of investments in publicly listed companies retail, consumer, media and entertainment sectors. over the years, including investments in Coles Myer Limited, Colorado Group Limited and Country Road David M. Crean (appointed 1 December 2009) Limited to name a few. Where these investments Dr Crean was appointed Chairman of the Hydro have been sold, it has resulted in substantial profits. Electric Corporation (Hydro Tasmania) in September He is the Chairman of the Mount Scopus College 2004. He is also Chairman of the Business Risk Foundation, a member of the Board of Trustees of Committee at Hydro Tasmania, member of the Audit the Sport and Tourism Youth Foundation, a life Committee and Chairman of the Corporate member of The Duke of Edinburgh’s Award World Governance Committee. David was Tasmania’s State Fellowship, a Patron of Opera Australia and a Treasurer from August 1998 to his retirement from chairman or director of several philanthropic the position in February 2004. He was also Minister organisations. for Employment from July 2002 to February 2004. He was a Member for Buckingham in the Legislative Mr Lew was a Director of Coles Myer Limited from Council from 1992 to February 1999, and then for 1985 to 2002, serving as Vice Chairman from 1989, Elwick until May 2004. From 1989 to 1992 he was Chairman from 1991 to 1995, Executive Chairman in the member for Denison in the House of Assembly. 1995 and Vice Chairman in 1995 and 1996. He was also a director of the Reserve Bank of Australia from From 1993-1998 he held shadow portfolios of State 1992 to 1997.