BEACON LIGHTING GROUP LIMITED — Annual Report 2014

Aug 21, 2014

Beacon Lighting Group Limited RESULTS PRESENTATION F Y 20 14

==> picture [150 x 71] intentionally omitted <==

==> picture [204 x 87] intentionally omitted <==

AGENDA

==> picture [263 x 354] intentionally omitted <==

==> picture [98 x 49] intentionally omitted <==

1. BACKGROUND

2. RESULTS OVERVIEW

3. TRADING PERFORMANCE

4. CASH FLOW, BALANCE SHEET, DIVIDEND

5. GROWTH STRATEGY UPDATE

6. FY2015 OUTLOOK

7. QUESTIONS

2

BACKGROUND

• Beacon Lighting Group is the leading specialist lighting retailer in Australia.

• From a single store in Melbourne in 1967, Beacon Lighting has grown to now operate 85 stores nationally with scope for significant additional expansion.

• The business has continued to experience growth through the difficult retail environment of recent years.

• Trading conditions are stronger this year than in recent years with key indicators such as housing starts and auction clearance rates strengthening.

• We are in the early stage of a dynamic period of change in lighting.

• We successfully listed on the ASX in April 2014.

==> picture [98 x 49] intentionally omitted <==

==> picture [263 x 355] intentionally omitted <==

3

RESULTS OVERVIEW

4

PLEASE NOTE

• In the Annual Report 2014, please note the following:

• FY2014 was for the 52 weeks ending 29 June 2014

• FY2013 was for the 53 weeks ending 30 June 2013

• For the purposes of this presentation, FY2013 will be presented on a 52 week basis

• The 52 week FY2013 Pro Forma Historical result in the Prospectus is used for comparison purposes

5

HIGHLIGHTS

• Successful IPO on April 15th 2014

• Prospectus forecast achieved

• Record sales and profit results

• Sales increased by $17.4m, 13.1% ahead of last year

• Designed and developed 440 exclusive new products

• Opened six new stores, plus purchased one franchise store

• Company store comparative sales increase of 5.7%

• Operating expenses down 0.7% of sales compared to last year

• EBITDA increased $3.5m, 20.9% ahead of last year

• NPAT increased $2.3m, 24.8% ahead of last year

==> picture [98 x 49] intentionally omitted <==

==> picture [243 x 327] intentionally omitted <==

6

YEAR-ON-YEAR RESULT

==> picture [98 x 49] intentionally omitted <==

==> picture [544 x 360] intentionally omitted <==

----- Start of picture text -----

$ Inc / Dec % Inc / Dec
$ ‘000 FY2013 [(1)] FY2014
on Last Year on Last Year
Sales 132,932 150,338 17,406 13.1%
Gross Profit 85,599 96,660 11,061 12.9%
Gross Profit Margin 64.4% 64.3%
Other Income 4,575 5,521 946 20.7%
% of Sales 3.4% 3.7%
Operating Expenses [(2)] (73,559) (82,095) (8,536) 11.6%
% of Sales 55.3% 54.6%
EBITDA 16,615 20,086 3,471 20.9%
EBITDA Margin % 12.5% 13.4%
EBIT 14,511 18,066 3,555 24.5%
EBIT Margin % 10.9% 12.0%
Net Profit After Tax 9,456 11,797 2,341 24.8%
NPAT Margin % 7.1% 7.8%
----- End of picture text -----

(1) Based on the 52 Week FY2013 Pro Forma Historical result in the Prospectus dated 12 March 2014

(2) Operating Expenses exclude depreciation, amortisation and financing costs

7

PROSPECTUS FORECAST

==> picture [98 x 49] intentionally omitted <==

==> picture [545 x 361] intentionally omitted <==

----- Start of picture text -----

Prospectus Actual $ Inc / Dec % Inc / Dec
$ ‘000
FY2014 [(1)] FY2014 Prospectus Prospectus
Sales 150,261 150,338 77 0.1%
Gross Profit 96,611 96,660 49 0.1%
Gross Profit Margin 64.3% 64.3%
Other Income 5,503 5,521 18 0.3%
% of Sales 3.7% 3.7%
Operating Expenses [(2)] (82,823) (82,095) 728 (0.9%)
% of Sales 55.1% 54.6%
EBITDA 19,291 20,086 795 4.1%
EBITDA Margin % 12.8% 13.4%
EBIT 17,229 18,066 837 4.9%
EBIT Margin % 11.5% 12.0%
Net Profit After Tax 11,480 11,797 317 2.8%
NPAT Margin % 7.6% 7.8%
----- End of picture text -----

(1) Based on the FY2014 Statutory Forecast in the Prospectus dated 12 March 2014

(2) Operating Expenses exclude depreciation, amortisation and financing costs

8

HALF-YEAR SPLIT YEAR ON YEAR

==> picture [98 x 49] intentionally omitted <==

==> picture [714 x 333] intentionally omitted <==

----- Start of picture text -----

$ Inc / Dec % Inc / Dec $ Inc / Dec % Inc / Dec
$ ‘000 H1 FY2013 [(1)] H1 FY2014 [(2)] H2 FY2013 [(3)] H2 FY2014 [(4)]
on Last Year on Last Year on Last Year on Last Year
Sales 66,061 74,497 8,436 12.8% 66,871 75,841 8,970 13.4%
Gross Profit 42,222 49,145 6,923 16.4% 43,377 47,515 4,138 9.5%
Gross Profit Margin 63.9% 66.0% 64.9% 62.7%
Other Income 2,264 3,202 938 41.4% 2,311 2,319 8 0.3%
% of Sales 3.4% 4.3% 3.5% 3.1%
Operating Expenses [(5) ] (36,230) (41,335) (5,105) 14.1% (37,329) (40,760) (3,431) 9.2%
% of Sales 54.8% 55.5% 55.8% 53.7%
EBITDA 8,256 11,012 2,756 33.4% 8,359 9,074 715 8.6%
EBITDA Margin % 12.5% 14.8% 12.5% 12.0%
EBIT 7,233 10,081 2,848 39.4% 7,278 7,985 707 9.7%
EBIT Margin % 10.9% 13.5% 10.9% 10.5%
Net Profit After Tax 4,659 6,717 2,058 44.2% 4,797 5,080 283 5.9%
NPAT Margin % 7.1% 9.0% 7.2% 6.7%
----- End of picture text -----

(1) Based on the H1 Pro Forma Historical results in the Prospectus dated 12 March 2014

(2) H1 FY2014 Statutory result in the Reviewed Half Year Accounts 31 Dec 2013 - Beacon Lighting Corporation Pty Ltd

(3) FY2013 Pro Forma Historical result in the Prospectus less H1 FY2013 Pro Forma Historical result in the Prospectus

(4) FY2014 Statutory result less H1 FY2014 statutory result in the Prospectus

(5) Operating Expenses exclude depreciation, amortisation and financing costs

9

TRADING PERFORMANCE

10

SALES

==> picture [98 x 49] intentionally omitted <==

SALES: +13.1% to $150.3m

• Sales increase in H1 +12.8% and H2 +13.4%.

• Record sales exceeding $150m.

• Strong company stores comparative sales throughout FY2014 of 5.7%

• Online sales grew by 41%

• Sales to trade customers strengthened by 21%

==> picture [315 x 174] intentionally omitted <==

----- Start of picture text -----

Total Sales $m
150.3
132.9
120.6
109.5
99.3
FY2010 FY2011 FY2012 FY2013 FY2014
----- End of picture text -----

==> picture [256 x 174] intentionally omitted <==

----- Start of picture text -----

Comp Store Sales Growth [(1)]
6.9%
5.7%
5.1%
H1 FY14 H2 FY14 FY14
----- End of picture text -----

(1) Company Stores Comparative Sales Growth

11

GROSS MARGIN

==> picture [98 x 49] intentionally omitted <==

Gross Margin: 64.3%

• Gross Margin 64.3% in line with last year

• H1 FY2014: 66.0% strong AUD and retail price management

• H2 FY2014: 62.7% AUD fall and promotions impact

==> picture [285 x 205] intentionally omitted <==

----- Start of picture text -----

Gross Profit Margins
66.0%
64.3%
62.7%
H1 FY14 H2 FY14 FY14
----- End of picture text -----

==> picture [245 x 329] intentionally omitted <==

12

OTHER INCOME

Other Income: + 20.7% to $5.5m

• Other income increased as a result of customs import duty refunds by $1.2m

• Core other income (royalties & marketing contribution) fell as franchise stores were purchased.

==> picture [260 x 200] intentionally omitted <==

==> picture [98 x 49] intentionally omitted <==

==> picture [259 x 350] intentionally omitted <==

13

OPERATING EXPENSES

==> picture [98 x 49] intentionally omitted <==

Operating Expenses: Down 0.73% of sales to $82.1m

• Operating expenses decreased by 0.73% of sales on previous year

• Productivity gains realised in distribution and marketing

• General and Admin productivity gain (excl. significant items)

	56.3% 55.3% 54.6% Opex % of Sales FY2012 FY2013 FY2014

==> picture [462 x 171] intentionally omitted <==

----- Start of picture text -----

$ ‘000 FY2013 [(1)] % to Sales FY2014 % to Sales
Sales 132,932 150,338
Operating Expenses
- Marketing Expenses 8,966 6.7% 9,629 6.4%
- Selling and Distribution 52,337 39.4% 58,560 39.0%
- General and Admin [(2)] 12,256 9.2% 13,906 9.2%
Total 73,559 55.3% 82,095 54.6%
----- End of picture text -----

(1) Based on the 52 Week FY2013 Pro Forma Historical result in the Prospectus dated 12 March 2014

(2) Includes significant items: Warranty provision expense and import duty refunded collection fees $1.3 million

14

EARNINGS

EBITDA: + 20.9% to $20.1m EBIT: + 24.5% to $18.1m NPAT: + 24.8% to $11.8m

==> picture [216 x 171] intentionally omitted <==

----- Start of picture text -----

EBIT $m
18.1
14.0 14.5
FY2012 FY2013 FY2014
----- End of picture text -----

==> picture [216 x 171] intentionally omitted <==

----- Start of picture text -----

EBIT Margin
12.0%
11.6%
10.9%
FY2012 FY2013 FY2014
----- End of picture text -----

==> picture [98 x 49] intentionally omitted <==

==> picture [216 x 171] intentionally omitted <==

----- Start of picture text -----

EBITDA $m
20.1
16.6
15.9
FY2012 FY2013 FY2014
----- End of picture text -----

==> picture [216 x 171] intentionally omitted <==

----- Start of picture text -----

NPAT $m
11.8
9.5
9.3
FY2012 FY2013 FY2014
----- End of picture text -----

15

CASH FLOW, BALANCE SHEET, DIVIDENDS

16

CASH FLOW

Capital Expenditure $5.0m

• New Stores Capex $2.5m • Relocation $0.4m • Exist Store Capex $1.4m

==> picture [98 x 49] intentionally omitted <==

==> picture [383 x 156] intentionally omitted <==

----- Start of picture text -----

$ ‘000 FY2013 FY2014
Cash flow from Operations
Receipts from customers 154,777 167,236
Payment to suppliers & employees (135,378) (144,612)
Other (836) (892)
Income Tax Paid (4,990) (6,026)
Net Operating Cash Flow 13,573 15,706
----- End of picture text -----

• Motor Vehicles $0.4m

==> picture [383 x 113] intentionally omitted <==

----- Start of picture text -----

$ ‘000 FY2013 FY2014
Other Items
Capital Expenditure (3,018) (4,962)
Acquisitions (1,748) (790)
Lease Funding 161 1,341
----- End of picture text -----

17

BALANCE SHEET

Receivables

• Franchise $3.3m

• Commercial $4.1m

Payables

• Creditors $6.8m

• • Trade Finance $16.1m

FX Position

• Purchases to Nov 2014

• Gearing Ratio[(1)] : 13.5%

(1) Net Debt / (Net Debt + Equity) at balance date

==> picture [98 x 49] intentionally omitted <==

==> picture [350 x 398] intentionally omitted <==

----- Start of picture text -----

$ ‘000 FY2013 FY2014
Cash 7,602 11,427
Receivables 15,207 8,217
Inventories 29,073 32,194
Other 673 365
Total Current Assets 52,555 52,203
PPE 14,025 16,818
Intangible 3,356 4,125
Other 2,467 3,832
Total Non Current Assets 19,848 24,775
Total Assets 72,403 76,978
Payables 22,892 29,594
Borrowings 639 564
Other 4,036 5,621
Total Current Liabilities 27,567 35,779
Borrowings 267 774
Other 2,056 2,221
Total Non Current Liabilities 2,323 2,995
Total Liabilities 29,890 38,774
Net Assets 42,513 38,204
----- End of picture text -----

18

DIVIDENDS

• 1.4 cents per share for H2 FY2014

• Record date 4[th] September 2014

• Payment date 26[th] September 2014

• Payout ratio in the future expected to be 50% to 60% of NPAT

==> picture [98 x 49] intentionally omitted <==

==> picture [314 x 355] intentionally omitted <==

19

GROWTH STRATEGY UPDATE

20

GROWTH STRATEGY UPDATE

==> picture [98 x 49] intentionally omitted <==

==> picture [700 x 350] intentionally omitted <==

----- Start of picture text -----

GROWTH STRATEGY DETAIL UPDATE
NEW STORE ROLLOUT Target 6 new stores per year • Committed to 6 net new stores
• Opened Mittagong (NSW) in July 2014
• Small store formats and regional store success enables expansion to new locations
• Independent analysis conducted showing growth for additional locations for
the foreseeable future
• Closure of Hawthorn (VIC) in FY2015, will open Camberwell (VIC) in FY2015
OPTIMISING STORE Optimise store size, fit out, • 2 major refurbishments at Moorabbin (VIC) and Taren Point (NSW)
PORTFOLIO merchandising and operations • Drive increased sales and profit from the existing store network
AND OPERATIONS • Continue to grow trade sales by catering to their product and service requirements
NEW PRODUCTS AND Refresh the range with new • Introduce the latest fashion orientated products, developed by our own internal
RANGES fashion, technical and energy team exclusively for Beacon Lighting
efficient items • Increase the breadth and depth of our exclusive globe range
• Introduce new LED products and the latest advancements in that technology
• Continue to build awareness of our internal product brand ‘Lucci’
• Increase the range of trade lighting, globes and ceiling fans to better cater to that market
ONLINE Optimise customer experience • Better functionality within our core website
across our online assets • Introduce social media to drive traffic and brand awareness
• Introduce potential new websites to capture additional sales opportunities
----- End of picture text -----

21

GROWTH STRATEGY UPDATE

==> picture [98 x 49] intentionally omitted <==

==> picture [709 x 185] intentionally omitted <==

----- Start of picture text -----

GROWTH STRATEGY DETAIL UPDATE
ACQUISITIONS Businesses that have synergies • Consider acquisitions of existing lighting retail stores in Australia
with the core Beacon business • Consider acquisitions of Franchise operated Beacon Lighting stores
• Acquisitions need to meet strict financial parameters
EMERGING Beacon Solar and Beacon • Continue to support the emerging business as they continue to have synergies with the core business
BUSINESSES International
EFFICIENCY GAINS Improve productivity throughout • Further efficiency gains can be realised by better control of the cost base as the business grows,
the business this includes evaluating processes, systems and technology to make better use of resources
within the business
----- End of picture text -----

22

FY2015 OUTLOOK

23

FY2015 OUTLOOK

==> picture [98 x 49] intentionally omitted <==

Beacon Lighting

• Company store comparative sales have made a positive start to the year

• Store roll out is on track for 6 new stores. Mittagong (NSW) opened in July 2014. Further confirmed new stores at Port Macquarie (NSW), Pakenham (VIC), Maribyrnong (VIC), North Lakes (QLD), Coburg (VIC) and Camberwell (VIC). Hawthorn (VIC) store will close in FY2015

• Need for greater energy efficiency continues to drive rapid innovation in lighting technology

• Operating efficiencies remain a focus throughout the business

• A solid pipeline of fashion, technical lighting and ceiling fan releases for FY2015

Market Conditions

• General market conditions remain supportive of Beacon Lighting and the lighting industry in Australia

Summary

• Beacon Lighting expects the current growth strategies to continue to drive improved sales and profits in FY2015

24