Annual Report 2012 Mark McInnes Solomon Lew CEO Premier Retail Chairman and Non-Executive Director FRONT COVER: Features Abbey Lee Kershaw for Portmans. Abbey is one of the world’s most in demand models. Chairman’s Report The Directors of Premier Investments Limited (‘Premier’) have pleasure in submitting to shareholders the Annual Report for the year ended 28 July, 2012. The retail environment in Australia continues to be The upswing in profit Premier has achieved this challenging and it is likely to remain so in the financial year demonstrates the effectiveness of short term. Macro pressures on retailers, combined these initiatives. Moving forward, management’s with the structural changes taking place in the core focus will be to ensure that the business is industry, will continue to test all participants in the prepared to meet market conditions while retail industry. effectively managing our growth opportunities. The benefits from this approach will be leveraged as In this context, we are particularly pleased to general market conditions normalise and improve. present a strongly improved financial result to our shareholders for the 2012 financial year. Highlights of this year’s result include: While Premier Retail’s sales figures underline the » Successful implementation of strategic review difficult trading environment, Premier’s financial initiatives is delivering strong profit results discipline and operational efficiency has delivered despite tough retail environment shareholders a comparatively strong result in spite » Premier consolidated net profit after tax of the tough conditions. This, in our view, is what (NPAT) of $68.2 million, up 68 per cent on sets Premier Investments apart from our peers. previous year Premier’s results for the 2012 financial year once » Premier Retail (The Just Group) underlying EBIT again demonstrate our unique position with solid $80.4 million, up 23 per cent earnings growth, significant organic growth » Strong contributions from online and opportunities from existing businesses and a strong Peter Alexander and Smiggle balance sheet. Together, this provides Premier with » Smiggle expansion into Asia enormously the financial strength to take advantage of new successful, expansion into Malaysia and growth opportunities whilst continuing to seek to Japan announced maximise returns from existing businesses. » Cost-out program has delivered $27.8 million Well-run businesses will deliver value for in cost reductions1 shareholders in every cycle, and full credit is due to » Strong balance sheet maintained with the team at Premier Retail, under Mark McInnes’ $294.2 million cash on hand leadership, for delivering the FY12 result in the continued testing environment. Further, Premier Retail’s implementation of the six key EBIT performance initiatives identified in Premier was early in identifying the challenges the July 2011 Strategic Review continues to facing the business and we moved quickly to put in progress well. place a strategic framework to address each issue and opportunity. Part of this was putting the right The reinvigoration of Premier Retail’s core apparel team in place that could work effectively to brands has been enhanced by extending the maximise efficiencies in a tighter cost control management focus on individual brand ownership. environment. The management team has worked hard to implement initiatives that effectively address each specific challenge the business faces. 1 Excluding rent, depreciation and borrowing costs Annual Report 2012 1 Chairman’s Report continued. With action taken simultaneously to accelerate the We recognise there is a great deal of potential in cost-out program in response to trading conditions, Premier’s existing portfolio of iconic brands and we this formed a key part of Premier’s profit result this are committed to realising the inherent value that year. At the same time, Premier Retail’s gross exists across Premier’s retail portfolio. To support margin improved 99 bps this financial year and this, Premier continues to invest where it will bring further margin gains are expected over the next profitable growth and realise value for shareholders. two years. The Directors have declared total fully franked We have been delighted with the immediate and dividends of 36 cents per share for 2012. The very impressive success the strategic expansion into dividends declared demonstrates the Board’s Asia has realised to date, and recognise the major continued confidence in Premier’s future growth and unique growth opportunity this represents for potential and commitment to providing strong Premier Retail. We will continue to invest returns to shareholders. strategically to realise the growth potential this The Premier Board has been strengthened by two opportunity represents for our business. new key appointments. The Directors were pleased We have also invested strategically in our online to formally welcome Ms Sally Herman to the Board sales channel and have used international best as non-executive director in December 2011. practice sites as our benchmark. The immediate Further, it is with great pleasure the Directors of success achieved in the Dotti business through our Premier Investments have invited the CEO of world class site and logistical support has resulted Premier Retail, Mr Mark McInnes, to join the in the platform being rolled out for each of our Premier Board. This appointment will be effective other brands across FY13. from mid-December 2012. I encourage all Our improved profit result was further underpinned shareholders to attend the Annual General by a 26 per cent increase in Premier’s investment Meeting on 4 December and join us in welcoming income on the prior year, including strong dividend Sally and Mark to the Premier Board. income from Breville Group Limited, interest and In conclusion, on behalf of all Directors, I would income from other investments. like to thank each of Premier’s 6,000 strong team Premier has also maintained its strong balance members for their commitment and hard work sheet with $294.2 million cash on hand. throughout the year. We also thank all of our shareholders for your continued support. As part of our overall strategy, Premier continues to consider opportunities that may arise in the market That being said, while our cash reserves leave us well placed to pursue the right opportunities should they arise, Premier will maintain its disciplined fiscal approach and will only pursue opportunities that are in the best interests of shareholders. Solomon Lew Chairman and Non-Executive Director 2 Premier Investments Limited The Directors Solomon Lew Frank W. Jones FCA, CPA, ACIS Tim Antonie Chairman and Deputy Chairman and Non-Executive Director Non-Executive Director Non-Executive Director David M. Crean Lindsay E. Fox AC Sally Herman Non-Executive Director Non-Executive Director Non-Executive Director Henry D. Lanzer B. COM., LLB (Melb) Michael R.I. McLeod Gary H. Weiss LLM, J.S.D. Non-Executive Director Non-Executive Director Non-Executive Director Annual Report 2012 3 The Directors continued. Solomon Lew an Associate of the Australian Society Mr. Lew was appointed a Non-Executive of Certified Practising Accountants director and Chairman of Premier on and the Institute of Chartered 31 March 2008. For many years, Secretaries & Administrators. Mr. Jones Mr. Lew has been a director of has extensive experience as a financial Century Plaza Investments Pty. Ltd., and general advisor to some of the largest shareholder in Premier and Australia’s leading importing and was previously Chairman of Premier retailing companies. from 1987 to 1994. Mr. Jones served as Chairman of Premier Mr. Lew has over 40 years experience in from 1999 to 2002 and, more recently, the manufacture, importation, from 2007 to 2008. He is a member of wholesaling and retailing of textiles, the Audit and Risk Committee of apparel and general merchandise. Mr. Premier and was the Committee’s Lew’s success in the clothing industry chairman until 31 July 2010. has been largely due to his ability to Timothy Antonie read fashion trends and interpret them Mr. Antonie was appointed to the Board in the Australian market and to of Directors on 1 December 2009. He efficiently and cost-effectively produce holds a Bachelor of Economics degree quality garments. Property development from Monash University and qualified as and the acquisition and disposal of a Chartered Accountant with Price equity investments have proven to be a Waterhouse. He has 20 years experience profitable and consistent activity for Mr. in investment banking and formerly held Lew’s family entities. He has, through positions of Managing Director from those family entities, made a number of 2004 to 2008 and Senior Advisor in investments in publicly listed companies 2009 at UBS Investment Banking, with over the years, including investments in particular focus on large scale mergers Coles Myer Limited, Colorado Group and acquisitions and capital raisings in Limited and Country Road Limited to the Australian retail, consumer, media name a few. Where these investments and entertainment sectors. Mr. Antonie have been sold, it has resulted in was also appointed as a Non-Executive substantial profits. director of Village Roadshow Limited He is the Chairman of the Mount on 1 December 2010. Scopus College Foundation, a David Crean member of the Board of Trustees of Dr. Crean was appointed Chairman of the Sport and Tourism Youth the Hydro Electric Corporation (Hydro Foundation, a life member of The Duke Tasmania) in September 2004. He is also of Edinburgh’s Award World Fellowship, Chairman of the Business Risk a Patron of Opera Australia and a Committee at Hydro Tasmania, member Chairman or director of several of the Audit Committee and Chairman philanthropic organisations. of the Corporate Governance Mr. Lew was a director of Coles Myer Committee. David was Tasmania’s State Limited from 1985 to 2002, serving as Treasurer from August 1998 to his Vice Chairman from 1989, Chairman retirement from the position in from 1991 to 1995, Executive Chairman February 2004.