Briscoe Group Limited — Annual Report 2018

Oct 2, 2017

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October 2017

Contents

01	Overview of Briscoe Group	2
02	Key strengths	5
03	Financial performance	11
04	Briscoe Group strategy	13
05	Sector benchmarking	20
A	Board and management	22

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01 Overview of Briscoe Group

CAGR 8%

CAGR 5%

Briscoe Grou overview p

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Briscoe Group is New Zealand’s leading homeware and sporting goods retailer. BGP listed on the NZX in December 2001 and the ASX in July 2017.

Retail brands

Homeware

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Sporting goods

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• Supplies quality and competitively priced homeware

• Large format stores with a wide range of products — 45 stores nationwide

• Online store at www.briscoes.co.nz

• Supplies fashionable and affordable gifts and homeware — Two small format stores in Auckland and Christchurch — Online store at www.livingandgiving.co.nz

• Dominant specialty sporting goods retailer in New Zealand — Sports ‘superstores’ with a wide range of well known brands — 36 stores in selected cities nationwide — Online store at www.rebelsport.co.nz

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Sales history
583
553
507
484
453 210
438 195
170
157
146
144
373
358
327 337
294 307
FY12 FY13 FY14 FY15 FY16 FY17
Homeware Sporting goods
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1. Market capitalisation as at 28 September 2017

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Stron track record g

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Briscoe Group’s experienced management team and Board of Directors have achieved a track record of delivering strong returns to shareholders

Aggregate total shareholder return over the last five years (August 2012 to September 2017)

History of delivering consistent earnings growth Solid same store sales growth from FY12 to FY17 are a result of a strong value proposition, effective stock management and a focussed marketing strategy

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250% result of a strong value proposition, effective stock
management and a focussed marketing strategy
200%
Briscoe
Group Briscoe Group EBIT - FY12 – FY17 (NZ$m)
139%
150%
124%
100%
NZ50 Gross Index
68%
79.8
50%
ASX 200
65.9
Accumulation
Index 53.1
45.2
41.0
0% 36.7
Briscoe Group NZ50 Gross Index ASX 200 Accumulation Index FY12 FY13 FY14 FY15 FY16 FY17
Aug 12 Feb 13 Aug 13 Feb 14 Aug 14 Feb 15 Aug 15 Feb 16 Aug 16 Feb 17 Aug 17
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Source: IRESS. Total Shareholder Return is the capital appreciation of the company's share price on NZX, adjusted for capital management (such as share splits or consolidations), assuming reinvestment of dividends at the declared dividend rate per share, up to and including 27 September 2017

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02 Key strengths

Qualit of roduct ran es y p g

Homeware

• ‘Good-better-best’ product strategy

• Ability to offer true value across a number of price points

Sporting goods

• Close relationships with supply partners to build desirable product ranges, both online and in-store

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Selected brands stocked by Briscoes Homeware include:

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Selected brands stocked by Rebel Sport include:

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Focus on customer en a ement g g

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Customer service and engagement is a priority

• Introducing programmes that will improve customer engagement and enhance service at the checkouts

• Process reviews across all service areas have resulted in improved order-picking accuracy and speed, reduced backorders, and faster dispatch times for online orders

• Additional fulfilment centres planned to ensure an even quicker and more efficient service

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Nationwide store foot rint p

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Expertise in ‘big box’ retail

Extensive store network

• Coverage across all of New Zealand’s main centres

• Continued investment in development, upgrading and refurbishing the store network to improve customers’ in-store experience

Consistent same store sales growth (%)

	FY11	FY12	FY13	FY14	FY15	FY16	FY17	1H18
Homeware	2.0	7.4	3.6	4.6	3.5	3.8	3.8	5.0
Sporting Goods	3.3	9.3	0.5	6.6	7.9	8.7	7.0	3.4
Total	2.4	8.0	2.6	5.2	4.9	5.4	4.9	4.4

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Auckland
Hamilton
North
Island
New Plymouth
Napier
Palmerston North
Nelson Wellington
South
Island
Christchurch
Timaru
Oamaru
Dunedin
Invercargill Rebel Sport
Briscoes
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Si nificant rowth in online sales channel g g

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Online sales now >7% of Group sales

Online sales as a % of Group sales

 Part of the Group’s omni-channel strategy

• 40% growth per annum for the last two years, 1H18 +41%

• Strong growth expected for the foreseeable future

• Trialling a ‘click and collect’ initiative later in the year

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7.2
6.1
4.5
3.4
2.4
1.3
0.3
0.0
FY11 FY12 FY13 FY14 FY15 FY16 FY17 1H18
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Proven o erational a roach p pp

• Core strategy to focus on effective retailing

• Brand selection and management

• Inventory control

• Gross Profit management

• Wage and expense control

• Simplified operational and organisational structures

• ‘Profit Centre’ driven with focus on annual incremental improvements

• Strong and experienced management team

• Strong balance sheet provides flexibility

• 8 years of consistent growth in EBIT

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03 Financial performance

Financial erformance overview p

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Briscoe Group has a history of earnings growth over the last six years with EBIT growing from $37m in FY12 to $80m in FY17

Briscoe Group financial performance FY12 – FY17

As reported NZ$m, year ending January Sales	FY12 438.0	FY13 452.7	FY14 483.6	FY15 507.1	FY16 552.9	FY17 582.8	CAGR 12-171 5.9%
Gross profit	168.5	175.9	186.2	197.2	223.9	239.4	7.3%
Gross margin %	38.5%	38.9%	38.5%	38.9%	40.5%	41.1%	n/a
EBIT	36.7	41.0	45.2	53.1	65.9	79.8	16.8%
EBIT %	8.4%	9.1%	9.4%	10.5%	11.9%	13.7%	n/a
NPAT	27.5	30.5	33.6	39.3	47.1	59.4	16.6%
EPS	12.9	14.3	15.6	18.2	21.7	27.1	16.0%
DPS (declared)	10.0	21.02	12.5	14.0	15.5	18.0	12.5%
Inventory turnover	4.2x	4.3x	4.4x	4.3x	4.3x	4.3x

Briscoe Group financial performance overview

• Solid same store sales growth year on year

• Growth generated by a combination of:

• strong value proposition through stocking wellknown global and local brands,

• a focus on stock management, and

• a co-ordinated and effective marketing strategy

• Continued refurbishment and expansion programmes are expected to drive revenue and earnings growth over the medium term

• Stable gross margin reflective of strong supplier relationships and FX management

• Strong growth in EBIT a result of focussed cost management

• Compound Annual Growth Rate, 2. Included a special dividend of 10cps

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04 Briscoe Group strategy

Ke strate ies y g

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Be the first choice for customers considering purchasing homeware or sporting goods

Doing things better 1

• Understanding our customer

• Improve website and digital communication

Growth initiatives

 Store network expansion

 Acquisition – Aus/NZ

2

• Enhance bricks and mortar shopping experience

• Maintain best ranges of brands

• Improve operations and systems

• Build rewarding careers for our people

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Ke strate ies y g

Doing things better

• Understanding our customer

• Research and insights

• Marketing tests

• Tokenised data

• Loyalty

• Improve website and digital communication

• Platform review and replacement

• Routing enhancement

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1

• Click & Collect

• Social Media

• Enhance bricks and mortar shopping experience

• Directional signage

• Checkout service and greetings

• Rebel Sport city centre model

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Ke strate ies y g

Doing things better

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1

• Maintain best ranges of brands

• Exclusivity

• Good/better/best strategy

 Improve operations and systems

• Product availability

• Conversion rate

• Store management structure

• Build rewarding careers for our people

• Clear and appealing career paths

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Ke strate ies y g

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Growth initiatives

2

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• Store network expansion

• Where return justifies investment

• Strategic property investment

• Acquisition – Aus/NZ

• Kathmandu (July 2015)

• Strategic 19.8% purchase

• • Largest single shareholder

• Significant ROI

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NZ / Australia retail environment – ke themes y

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Fragmentation of media

Changing the way retailers engage with consumers

Amazon

Entrance into the Australian market

NZ economic conditions

Recent conditions driving consumer spending

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Online and social media

Growth of online channel and importance of social media

International retailers

Increasing presence of international retailers

Experience based spending

Shift to experience based spending and access over ownership

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Briscoe Grou tradin u date 1H18 p g p

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Total Sales $280.3m (+4.4%)

• Homeware +4.6%

• Sporting Goods +4.2%

Same-Store-Sales growth (+4.4%)

• Homeware +5.0%

• Sporting Goods +3.4%

Gross Profit +2.3%

• Homeware +1.2%

• Sporting Goods +4.3%

EBIT $39.1m (+3.3%)

NPAT $28.6m (+4.8%)

Interim Dividend 7.5cps (+7.1%)

Online sales growth +41%, 7.2% of Group Sales

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Sales and EBIT 1H12 – 1H18 (NZ$m)
400 45
42
350 39
40
38 38
300
35
250
28 30
200
25 25 28
23 24 25
150
20
20
100 18
14 15
50
0 10
Sales (LHS) EBIT (RHS)
314
309
280
276
266 268
244 248 244
232
217
205
194
1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17 2H17 1H18
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05 Sector benchmarking

Sector benchmarkin – sales rowth and EBIT mar in g g g

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Briscoe Group has delivered consistent same-store sales growth and expanded its EBIT margin over time

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Same store sales growth (%) EBIT margin
10% 16%
14%
8% 13.7%
8.0%
12%
11.9%
6%
10% 10.5%
5.4%
5.2%
4.9% 4.9% 9.4%
4.7% 9.0%
4% 8% 8.4%
7.8%
7.2%
6%
2.6%
2% 2.4%
4%
0%
2%
-2% 0%
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
Briscoe Group Peer median Briscoe Group Peer median
SSS growth (%) EBIT margin (%)
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Source: Annual reports and presentations. Peer median consists of Kathmandu, Premier Investments (retail), Michael Hill, Oroton, JB Hi-Fi, Adairs. Super Retail and Warehouse (retail) for EBIT margin only

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APPENDIX Board and management [A]

Board of Directors

Director and Chairman

Dame Rosanne Meo

• Appointed Chairman in 2001

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• Extensive governance experience of over 25 years, mostly in New Zealand but also in Australia

• Current appointments include; Real Estate Institute of NZ, AMP (NZ) Staff Superannuation Scheme, Director of Overland Footwear and Patron of the Auckland Philharmonia

• Knighted for Services to Business in 2011

Managing Director and Deputy Chairman

Rodney Duke

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• Worked in the retail sector for his entire working life

• Former NSW manager of Homecraft/Eric Anderson stores and senior merchandise manager for Grace Brothers

• Former Managing Director of Norman Ross Australia

• Appointed Managing Director of Briscoe Group[1] in 1988

• Purchased 100% of Briscoe Group[1] in 1990

Non-Executive Director

Mary Devine

• Appointed in 2013

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• Extensive experience in corporate strategy, brand marketing and retailing

• Former CEO roles with department store J.Ballantyne, multichannel retailer EziBuy and outdoor company Arthur Ellis

• Director of Meridian Energy, IAG New Zealand and Top Retail

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Tony Batterton Non-Executive Director

• Appointed in 2016

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• Partner and Executive Director of Evergreen Partners

• More than 20 years of private equity and investment banking experience in New Zealand and London

• Qualified Chartered Accountant

Non-Executive Director

Andy Coupe

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• Appointed in 2016

• Chairman of Farmright, Solid Energy and the New Zealand Takeovers Panel

• Director of Gentrack Group and investment companies Kingfish, Barramundi and Marlin Global

• More than 30 years’ experience in investment banking

• Chartered member of the NZ Institute of Directors

• Made an Officer of the New Zealand Order of Merit for services to business

• Predecessor entity

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Senior Mana ement g

Chief Financial Officer

Geoff Scowcroft

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• Joined Briscoe Group as Chief Financial Officer in 2002 with responsibility for finance, IT, and administration

• Began finance career in accounting with Associated Wholesalers

• 15 years with Woolworths (NZ), including last position as Financial Controller

Chief Operating Officer

Peter Burilin

• Joined Briscoe Group in 1998 and was appointed Chief Operating Officer in 2004

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• Held Senior operational management positions with Gateway Foodmarkets (now Somerfield) in England, with responsibility for 630 stores

• Held General Management roles at Levenes and Progressive Enterprises in New Zealand

• Former positions at Briscoe Group include General Manager of Rebel Sport and General Manager of Briscoes Homewares

General Manager – Supply Chain

Dave Hughes

• 15 year career in the retail sector

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• Experience in support, IT, merchandise planning, customer insights, warehousing and distribution, logistics, and e- commerce at EziBuy

• Former General Manager Supply Chain at Ezibuy

• Joined Briscoe Group as General Manager Supply Chain in 2013

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Stephen Jones Group General Manager – Operations

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• Joined Briscoe Group in 2017

• Over 25 years of multi-national retail management experience gained across a rich variety of sectors

• Since moving to New Zealand in 2007 Stephen has held senior roles with Mitre 10, Placemakers and The Warehouse

Group General Manager – Merchandise

Fraser Collins

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• Joined Briscoe Group as the manager of Christchurch in 1984

• Appointed Project Manager in 1988 with responsibility of opening all Briscoe Group’s stores until 1999

• Also held position of South Island Operations Manager and National Operations Manager

• Appointed to General Manager Merchandise in 2008

Group General Manager – Human Resources

Aston Moss

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• Joined Briscoe Group in 2015

• Experience working for a wide range of organisations including SkyCity, Woolworths Limited (Australia), Progressive Enterprises, Manukau Institute of Technology, NZ Post and Fonterra in a variety of operational and human resource roles

General Manager – Store Development

Nick Turner

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• Joined Briscoe Group in 2002

• Experience across a variety of roles in retail management, planning and management of large scale projects including new stores and refurbishments

• Has led the Non-Trade Services team since it was established in 2013 and appointed General Manager Store Development in 2017

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