BEACON LIGHTING GROUP LIMITED — Interim / Quarterly Report 2017

Feb 22, 2017

Beacon Lighting Group Limited RESULTS PRESENTATION

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DISCLAIMER

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The Presentation contains “forward-looking statements”. All statements other than those of historical facts included in the Presentation are forward-looking statements. Where the Company expresses or implies an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed, projected or implied by such forward-looking statements. The Company will not necessarily release publicly any revisions to any such forward-looking statement.

The Presentation contains general background information about the Company and its activities current as at the date of this presentation. The information in this Presentation is in summary form only and does not contain all the information necessary to fully evaluate whether or not to buy or sell shares in the Company. It should be read in conjunction with the Company’s other periodic and continuous disclosure announcements lodged with the ASX, which are available at www.asx.com.au.

This Presentation is not a prospectus, disclosure document or other offering document. It is for information purposes only and does not constitute an offer, invitation or recommendation to subscribe for or purchase any security and does not form the basis of any contract or commitment.

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RESULTS PRESENTATION H1 FY2017

CONTENTS

1 RESULTS OVERVIEW

2 TRADING PERFORMANCE

3 CASH FLOW, BALANCE SHEET, DIVIDENDS

4 GROWTH STRATEGIES 5 H2 FY2017 OUTLOOK

6 QUESTIONS

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RESULTS PRESENTATION H1 FY2017

PLEASE NOTE

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For the purposes of this presentation, please note the following:

• H1 FY2017 was for the 26 weeks ending 25 December 2016

• H1 FY2016 was for the 26 weeks ending 27 December 2015

• H1 FY2015 was for the 26 weeks ending 28 December 2014

• • H1 FY2014 based on the pro forma historical results presented in the Prospectus

• • H1 FY2013 based on the pro forma historical results presented in the Prospectus

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RESULTS PRESENTATION H1 FY2017

1 RESULTS OVERVIEW

1 H1 FY2017 HIGHLIGHTS

• In FY2017, Beacon Lighting celebrates 50 Years of

• Living Brighter

• Achieved record sales up $10.7m, an increase of 10.9%

• Strong value promotions to compete against the national

• withdrawal of the Masters home improvement stores

• Company store comparative sales increased by 1.2%

• Purchased the Jindalee, Moonah and Frankston franchise

• stores and converted them into company stores

• Opened the South Melbourne, Marsden Park, Brookvale and

• Claremont company stores

• Acquired the Masson for Lights business in Richmond

• Designed and developed 278 exclusive new products

• Strong growth for the Beacon Lighting Commercial and

• Beacon Solar businesses

• Established international businesses in the USA and Germany

• Encouraging finish to H1 FY2017

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RESULTS PRESENTATION H1 FY2017

1 H1 FY2017 RESULT

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$’000 H1 FY2016 H1 FY2017 Change $ Change %
Sales 98,514 109,245 10,731 10.9%
Gross Profit 64,934 67,803 2,869 4.4%
Gross Profit Margin 65.9% 62.1%
Other Income 1,763 1,766 3 0.2%
% of Sales 1.8% 1.6%
Operating Expenses [(1)] (49,143) (54,432) (5,289) 10.8%
% of Sales 49.9% 49.8%
EBITDA 17,554 15,137 (2,417) (13.8%)
EBITDA Margin % 17.8% 13.9%
EBIT 16,316 13,727 (2,589) (15.9%)
EBIT Margin % 16.6% 12.6%
Net Profit After Tax 11,098 9,428 (1,670) (15.0%)
NPAT Margin % 11.3% 8.6%
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(1) Operating Expenses exclude depreciation, amortisation and financing costs

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RESULTS PRESENTATION H1 FY2017

2 TRADING PERFORMANCE

2 SALES

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SALES: $109.2m increased by 10.9%

• Record first half year sales

• Company store sales increased by 9.2%

• Commercial Offices sales increased by 23.5%

• Beacon Solar sales have increased by 222.4%

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Total Sales $m
109.2
98.5
90.8
74.5
66.1
H1 FY13 H1 FY14 H1 FY15 H1 FY16 H1 FY17
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Sales Increase %
21.9%
12.7%
10.9%
8.5%
H1 FY14 H1 FY15 H1 FY16 H1 FY17
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RESULTS PRESENTATION H1 FY2017

2 COMPANY STORE COMPARATIVE SALES

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COMPARATIVE SALES: Increased by 1.2%

• Operating in a unique competitive environment with a national competitor in Masters closing down

• Good comparative sales growth in NSW and SA

• December 2016 comparative sales growth was encouraging

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Company Store Comparative Sales Growth
11.7%
5.1% 5.1%
1.2%
H1 FY14 H1 FY15 H1 FY16 H1 FY17
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RESULTS PRESENTATION H1 FY2017

2 GROSS PROFIT

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Gross Profit Dollars: Increased by 4.4% to $67.8m

• Strong value promotional pricing was necessary in order to maintain market share

• Margin mix is changing with the growth in emerging businesses

• FX benefits in H1 FY16 gross margin were not repeated in H1 FY17

• Gross profit dollars increased by $2.9m

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Gross Profit $m
67.8
64.9
58.2
49.1
42.2
H1 FY13 H1 FY14 H1 FY15 H1 FY16 H1 FY17
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Gross Profit Margin
66.0%
65.9%
64.1%
63.9%
62.1%
H1 FY13 H1 FY14 H1 FY15 H1 FY16 H1 FY17
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RESULTS PRESENTATION H1 FY2017

2 OTHER INCOME

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Other Income: Increased by 0.2% to $1.8m

• Selling licence fees for the right to use the Group Intellectual Property

• Marketing and royalty income continues to decline as franchise stores are acquired

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Other Income $m
2.3
2.1
2.0
1.8 1.8
H1 FY13 H1 FY14 H1 FY15 H1 FY16 H1 FY17
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RESULTS PRESENTATION H1 FY2017

2 OPERATING EXPENSES

Opex: Decreased by 0.1% of Sales

• Operating expense decrease of 0.1% of sales to $54.4m

• Productivity gains realised in relation to Marketing and General and Administration expenses

• Continued to invest in the Selling and Distribution activities to protect market share

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Opex % of Sales
54.8% 54.1%
50.4%
49.9% 49.8%
H1 FY13 H1 FY14 H1 FY15 H1 FY16 H1 FY17
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$’000 H1 FY2016 H1 FY2017 Chg $ Chg %
Marketing 6,003 6,298 295 4.9%
% of Sales 6.1% 5.8%
Selling and Distribution 34,839 39,578 4,739 13.6%
% of Sales 35.4% 36.2%
General and Admin. 8,302 8,557 225 3.1%
% of Sales 8.4% 7.8%
Operating Expenses [(1)] 49,143 54,432 5,289 10.8%
% of Sales 49.9% 49.8%
Depreciation 1,238 1,410 172 13.9%
% of Sales 1.3% 1.3%
Finance Costs 531 581 50 9.4%
% of Sales 0.5% 0.5%
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(1) Operating Expenses exclude depreciation, amortisation and financing costs

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RESULTS PRESENTATION H1 FY2017

2 EARNINGS

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EBITDA: -13.8% to $15.1m

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EBITDA $m
17.5
15.1
14.5
11.0
8.2
H1 FY13 H1 FY14 H1 FY15 H1 FY16 H1 FY17
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NPAT: -15.0% to $9.4m

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NPAT $m
11.1
9.1 9.4
6.7
4.7
H1 FY13 H1 FY14 H1 FY15 H1 FY16 H1 FY17
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EBIT: -15.9% to $13.7m

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EBIT $m
16.3
13.4 13.7
10.0
7.2
H1 FY13 H1 FY14 H1 FY15 H1 FY16 H1 FY17
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EBITDA Margin: 13.9%

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EBITDA Margin
17.8%
15.9%
14.7%
12.5% 13.9%
H1 FY13 H1 FY14 H1 FY15 H1 FY16 H1 FY17
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RESULTS PRESENTATION H1 FY2017

3 CASH FLOW, BALANCE SHEET & DIVIDENDS

3 CASH FLOW

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$4.6m

Capital Expenditure

• New Stores Capex $3.2m • Information Tech. $0.5m • Major Refits $0.3m

• Major Refits

$0.3m

• Motor Vehicles

$0.3m

• Other

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$ ‘000 H1 FY2016 H1 FY2017
Cash Flow from Operations
Receipts from Customers 105,935 122,079
Payments to Suppliers & Employees (94,869) (108,096)
Other (499) (557)
Income Tax Paid (3,379) (3,701)
Net Operating Cash Flow 7,188 9,725
Net Cash (Outflow) from Investing (4,110) (7,303)
Net Cash (Outflow) from Financing (1,750) (3,407)
Net Increase (Decrease) Cash 1,328 (985)
$ ‘000 H1 FY2016 H1 FY2017
Other Details
Capital Expenditure / Acquisitions (3,698) (7,343)
Dividends Paid (5,164) (5,166)
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RESULTS PRESENTATION H1 FY2017

3 BALANCE SHEET

Debtors

• Commercial $5.3m

• • Franchise $2.0m

• • Solar $1.6m

Borrowings

• Trade Finance $21.1m

• • Other $2.8m

Gearing Ratio[(1)] 20.0%

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

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$ ‘000 H1 FY2016 H1 FY2017
Cash 13,107 8,270
Receivables 8,317 9,334
Inventories 52,251 53,616
Other 837 1,793
Total Current Assets 74,512 73,013
PPE 20,526 25,216
Intangible 6,073 8,008
Other 6,225 5,680
Total Non Current Assets 32,824 38,904
Total Assets 107,336 111,918
Payables 17,742 16,579
Borrowings 21,932 22,702
Other 9,236 5,911
Total Current Liabilities 48,910 45,192
Borrowings 849 1,216
Other 2,629 2,911
Total Non Current Liabilities 3,478 4,127
Total Liabilities 52,388 49,319
Net Assets 54,948 62,598
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RESULTS PRESENTATION H1 FY2017

3 DIVIDENDS

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• Fully franked dividend of 2.35 cents per share for H1 FY2017 (2.30 cents per share in H1 FY2016)

• Record date 3rd March 2017

• Payment date 24th March 2016

• Annual payout ratio expected to be 50% to

• 60% of NPAT

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RESULTS PRESENTATION H1 FY2017

4 GROWTH STRATEGIES

4 NEW STORE ROLLOUT

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Beacon Lighting will continue to target the opening of six new company operated stores in Australia each year

• Opened four new company stores at South Melbourne (VIC), Marsden Park (NSW), Brookvale (NSW) and Claremont (WA)

• Closed the South Wharf (VIC) store after the opening of the South Melbourne (VIC) store

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99
Current Stores 99 91 96
8
Potential New Stores 47 85 11
79 13 91
74
71 14 85
66 15 78
61
59 16 71
53 17 64
18
48
58
19 54
21
48
42
24
21
38
29
27
FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2016
Company Stores Franchise Stores
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Excludes the four Commercial State Offices.

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RESULTS PRESENTATION H1 FY2017

4 OPTIMISE EXISTING STORES

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Beacon Lighting believes it is able to grow sales and profit through the continued investment in the existing stores network

• Strong value promotional pricing was necessary to maintain to our market share

• Launched the Premium Beacon Design Service including accredited Lighting Designers and developed a Lighting Design Software Solution

• Expanded the Bunbury (WA) store

• Now have 239 Lighting Design Consultants

• Rolled out 20 installations of Solar Systems on Beacon Lighting locations including stores and the DC

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RESULTS PRESENTATION H1 FY2017

4 NEW PRODUCT RANGES

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Beacon Lighting will offer an extensive range of the latest fashion, trend and energy efficient products to our customers

• Designed and developed 278 exclusive new products for our customers

• Introduced 89 new technically advanced LED Light Globes

• for the GE business

• Developing architectural lighting products with the Masson For Light team

• Introduced new trends across lighting and ceiling fans

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RESULTS PRESENTATION H1 FY2017

4 ONLINE AND SOCIAL MEDIA

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Beacon Lighting will continue to enhance our online presence in order to drive incremental sales

• Online sales increased by 48.4% over H1 FY2016

• Launched Afterpay on the Beacon Lighting website to provide extended payment options for our customers

• Offering exclusive benefits to 187,000 VIP customers

• Continue to grow and monitor strong relationships with social influencers who engage and endorse Beacon Lighting

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RESULTS PRESENTATION H1 FY2017

4 EMERGING BUSINESSES

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Beacon Lighting will continue to grow our emerging businesses: Beacon International, Light Source Solutions, Beacon Solar and Masson for Light

• Beacon Solar has had an outstanding half year in terms of sales and profitability

• Beacon International has continued to successfully licence the Group Intellectual Property to more international customers

• Opened new companies in the USA and Europe to operate E-Commerce and Wholesale businesses in those markets

• Market share for the Light Source Solutions business continues to grow

• Masson for Light is in its early stages of development into the architectural lighting market

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COMMERCIAL SOLAR SPECIALISTS MMERCIAL ENERGY
EFFICIENCY SPECIALISTS
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I N T E R N A T I O N A L
L I G H T & FA N S O U R C I N G
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RESULTS PRESENTATION H1 FY2017

4 ACQUISITIONS

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Beacon Lighting intends to investigate and pursue local and international business opportunities that complement the core activities of the Group

• Purchased the Jindalee (QLD), Moonah (TAS) and Frankston (VIC) franchise stores and converted them into company stores

• Acquired the Masson for Light architecture lighting design store in Richmond (VIC)

• Continued to investigate a variety of different but complementary business opportunities

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RESULTS PRESENTATION H1 FY2017

4 EFFICIENCY GAINS

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Beacon Lighting will continue to target expense efficiency gains and manage the growth of expenses

• Continue to maintain customer service levels within our

• stores in order to grow market share

• Continue to invest in the emerging businesses ahead of the revenue generation of these businesses

• Continued with a cost conscious approach to all operating expenses in the Group

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RESULTS PRESENTATION H1 FY2017

5 H2 FY2017 OUTLOOK

5 H2 FY2017 OUTLOOK

Beacon Lighting

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

• Looking forward to advancing our market share in the retail lighting market

• Celebrating the opening of the 100th Beacon Lighting store in North Lakes (QLD)

• Four new stores, North Lakes (QLD), Burwood (VIC), Balwyn North (VIC) and Gladesville (NSW) are expected to open in the second half

• Agreed to acquire the Lights For You stores at Crows Nest (NSW), Killara (NSW) and Carlton (NSW) and will convert them into Beacon Lighting stores

• The Midland (WA) franchise store was purchased and converted into a company store in January 2017

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RESULTS PRESENTATION H1 FY2017

5 H2 FY2017 OUTLOOK CONTINUED

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• Opportunities for new Beacon Lighting stores at ex Masters store locations will continue to be investigated

• Acquired Masson Manufacturing business to develop bespoke lighting products

• Beacon International in the USA and Germany will generate their first sales

• Beacon Solar remains an exciting opportunity for the Group

Summary

• Record number of new company stores in FY2017. 10 net new stores and 4 franchise store conversions

• Beacon Lighting expects the current growth strategies to continue to drive improved sales and profits in H2 FY2017

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RESULTS PRESENTATION H1 FY2017

6 QUESTIONS