DUSK GROUP LIMITED — Interim / Quarterly Report 2021

Feb 24, 2021

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1H FY21 RESULTS PRESENTATION

25 February 2021 Peter King (CEO) & Kate Sundquist (CFO)

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1H FY21 Summary

RECORD PERFORMANCE

• Sales of $90.9m +55%

• Total LFL[1] sales +49%

• Store LFL sales +44%

OMNI-CHANNEL STRATEGY DELIVERING

▪ Online sales +120%

• Represents 8.3% of total sales

EXCEPTIONAL GROSS MARGIN

• Gross margin $ up 63% to $61.6m (up 300bps to 67.7%)

PRO FORMA EBIT[2] +194% TO $28.3m

▪ Driven by:

• Operating leverage from LFL sales growth and higher GM%

• Excludes net JobKeeper benefit of $2.8m, to be repaid

• Statutory EBIT +152% to $25.0m incl JobKeeper and IPO costs

OUTSTANDING CASHFLOW GENERATION

• Net cash position of $34.9m at period end

• Fully franked interim dividend of 15 cents per share

1

1. LFL sales calculation excludes stores closed for refurbishment or COVID – 19 related closures. 2. Proforma EBIT excludes IPO related costs, the net benefit of JobKeeper and is pre-AASB 16.

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Profit and Loss

▪Total sales +55% ▪LFL sales growth of +49% ▪Significant period of 20 store closures in Melbourne incurred during the period ▪Six new stores opened during the period ▪Gross profit up 63% with gross profit margin up +300bps driven by careful management of pricing and promotional strategies ▪Strong operating leverage delivered through disciplined cost management ▪Statutory NPAT of $16.9m ▪Pro forma NPAT1 of $19.8m (presented opposite) ▪Pro forma EBIT up by $18.7m, +194% ▪Pro forma NPAT up by $13.1m, +193% RECORD SALES AND PROFIT		PRO FORMA RESULTS
		$M 1H FY20 1H FY21 % Change Revenue 58.6 90.9 55.2% Gross profit 37.9 61.6 62.5% Gross profit % 64.7% 67.7% +300 bps CODB (26.8) (31.6) 18.0% CODB % 45.7% 34.7% -1,100 bps EBITDA 11.1 30.0 169.7% EBITDA % 19.0% 33.0% +1,400 bps EBIT 9.6 28.3 194.1% EBIT % 16.4% 31.1% +1,470 bps NPAT 6.7 19.8 193.2% NPAT % 11.5% 21.7% +1,020 bps

2

1. See Appendix for pro forma adjustments and reconciliation to statutory NPAT.

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Sales

Record sales underpinned by strong LFL sales growth and new stores opened and annualising

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SALES ($M) AND LFL SALES GROWTH
5.3% 11.1% 8.5% 8.1% 49.3%
90.9
58.6
50.9
44.1
39.2
1H FY17 1H FY18 1H FY19 1H FY20 1H FY21
Instore ($m) Online ($m) LFL Sales Growth (%)
GROWING STORE NETWORK [1]
118
111
101
94
90
Dec-16 Dec-17 Dec-18 Dec-19 Dec-20
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COMMENTARY

• Outstanding LFL sales growth

• +44% store LFL sales growth

• +120% online sales growth

• +49% total LFL sales growth

• Approximately two-thirds of LFL sales growth was driven by increasing transaction numbers, whilst pleasingly average transaction value (ATV) grew the balance

• Dusk Rewards members remain the ‘engine room’ of both our total sales and sales

growth

• New stores performing well

• Pipeline for new store opportunities is healthy

• Payback and ROCE metrics remain compelling

• Store count includes online store.

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Sales Growth by Category

dusk is growing across all categories and increasing mix towards high-margin ‘consumable products’

SALES BY CATEGORY

SALES GROWTH BY CATEGORY

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40.00
66% 54% 68% 25% 24% 95%
non-candle sales 35.00 30.6
9.5% 30.00 27.8
25.00 19.8
14.9% 33.6% 20.00 16.6
11.5% 15.00 10.4 13.5
10.00 8.4 6.9 8.6 6.9
5.00
30.6% -
Candles Diffusers & Homewares Mood Reeds Other
Candles Diffusers and Consumables Consumables
Homewares Other
H1 FY20 Sales H1 FY21 Sales Growth
Mood Reeds
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GROWTH IN ESSENTIAL OIL AND MOODMIST FRAGRANCE (CONSUMABLE) LTM SALES

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20
15
$17.8m
10
LTM sales
and 13.2%
of Total
5
Sales
--
Q2 FY20 Q3 FY20 Q4 FY20 Q1 FY21
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▪ Growth in diffusers and scented consumable refills, fast becoming another ‘famous for’ category

▪ Scented consumable refills are becoming a key driver of repeat customer visitation

Q2 FY21

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Online Channel

Step change in the performance of dusk’s online channel – sales +120% on pcp

ROLLING LTM ONLINE SALES ($M)

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143%
growth
12.9
10.9
8.8
8
6.1
5.3
6 4.0 4.2 4.5 4.7
4
2
0
Q2 FY19 Q3 FY19 Q4 FY19 Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 Q1 FY21 Q2 FY21
ONLINE PENETRATION (% OF SALES)
14.0% 12.8%
12.0%
10.0% 8.3%
8.0% 5.8% Inflated by
6.0% 5.1% 5.4% significant
4.6% period of
3.9%
4.0% physical store closures
2.0%
1H FY18 2H FY18 1H FY19 2H FY19 1H FY20 2H FY20 1H FY21
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COMMENTARY

• Online sales rapidly approaching $13m p.a.

• Strong growth in online channel contribution to total sales

• Key initiatives underway and upcoming:

• Web replatforming go-live in April. New web platform will be faster, more flexible, and more engaging

• Replatforming will enable a number of key initiatives including subscription, C&C, C&D, more payment options

• Significant enhancement in data analytics, segmentation and personalisation

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Loyalty Rewards Membership Growth

Significant growth in dusk Rewards membership, transactions and sales

- ’ DUSK REWARDS SIGN UPS/RENEWALS (000 S)[1]

DUSK REWARDS SALES ($M)

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~630k 53% growth
249
members 250
at period
end 200
162
150
100
50
Total
1H FY20 1H FY21
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63%
60 growth 54
50
40
33
30
20
10
0
1H FY20 Total 1H FY21
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DUSK REWARDS TRANSACTIONS (000’S)

COMMENTARY

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29%
growth
1,096
849
1H FY20 Total 1H FY21
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▪ ‘Active’ database now over 630k members

• Dusk Rewards members now account for 59% of total sales, up from 55% in pcp

• Pre-existing members are renewing at strong rates

• New member sign-ups also growing strongly

• Frequency and ATV of members metric sharply higher

• Omni-channel engagement (customers who shop both

channels) continues to grow in importance

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1. Includes new and renewal signups.

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Gross Margin and Gross Margin Drivers

dusk is generating more transactions at higher values with stronger gross margins

COMMENTARY

Gross margin drivers include:

• Our ability to control pricing and promotional strategy, and manage COGS due to the vertical business model

• 17% increase in ATV vs FY20, driven by reduced promotional discounting activities and growth in the Home Fragrance (electronic diffuser category)

• Strong growth of higher margin product categories

• Managing frequency, duration and depth of promotional discounting remains a key strategy for management

AVERAGE TRANSACTION VALUE (ATV) ($)

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Growth driven by dusk Rewards
and the introduction of the
higher price point Diffusers and
54
Consumables product category
46
41
39
FY18 FY19 FY20 1H FY21
INCREASED GROSS MARGIN [1]
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• AUD appreciation has been a relatively small contributor to earnings growth in 1H due to hedging and timing of AUD appreciation

• We expect AUD appreciation will provide a more material tailwind to GP$ growth in 2H

66.6% 64.5% 65.1% 67.7% $0.78 $0.72 $0.72 $0.67 ¥5.0 ¥4.9 ¥4.7 ¥4.9 FY18 FY19 FY20 1H FY21 Gross Margin % AUD / USD AUD / RMB

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1. Reserve Bank of Australia historical Exchange Rates – Financial Period Averages.

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Cost of Doing Business

Track record of improving operating leverage

COMMENTARY

PRO FORMA COST OF DOING BUSINESS (CODB) (% OF SALES)

• CODB% decreased, reflecting strong sales growth achieved and benefits of fixed cost leverage

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CODB% decreased, reflecting strong 45.7%
sales growth achieved and benefits 45.0%
of fixed cost leverage 8.7%
40.0%
Employee costs set out opposite are
34.7%
normalised for the net benefit of the 35.0%
JobKeeper wage subsidy received in 7.3%
30.0% 13.3%
the period (which will be repaid)
25.0%
8.7%
20.0%
15.0%
23.6%
10.0%
18.7%
5.0%
0.0%
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• Employee costs set out opposite are normalised for the net benefit of the 35.0%

1H FY20 1H FY21 Employee Expenses Occupancy Costs Other Expenses Total CODB %

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Capital Management

CASH FLOW

• Cash conversion of earnings since IPO has been strong

• Stock turns and terms of trade with suppliers continue to be refined

• Repayment of $2.8m of JobKeeper will be booked in 2H

• Transaction costs, pre-IPO dividend and option buyback

• economically funded from pre-IPO cash reserves

STRONG BALANCE SHEET

• Inventory position clean

• Stock turns and GMROI materially improved

• Net cash at year end of $34.9m

• Balance sheet provides flexibility to respond to growth opportunities

• Bank facilities also available to support liquidity

• Post-IPO dividend reflects board confidence in cash flow and

balance sheet

CAPEX

• ‘Capital lite’ business model with measured pace of store roll out and ‘lite infrastructure’ approach to distribution

• We continue to see significant landlord contribution to new sites

• FY21 capex includes website replatforming of approximately

• $0.4m

• Ongoing opportunity to convert 36 legacy stores to the Glow format with attractive and proven ROI

DIVIDEND

• A fully franked interim dividend of 15 cents per share has been declared and payable on March 26.

• The current intention of the Board is to target a payout ratio of 60% to 80% of annual NPAT[1] and for dividends to be fully franked (subject to franking credit availability)

• We expect annual dividends to be split approximately 50/50 between interim and final dividends

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1. Subject to the availability of profits and the financial position of the Company

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Generating Sustainable Future Growth

Targeting long-term growth by leveraging core competencies to grow market share

KEY DRIVER	COMMENTARY
PAY-TO-JOIN LOYALTY MODEL ▪634,000 active dusk Rewards members with more than 141,000 added in 1H FY21 ▪Members contribution approaching 60% of sales ▪Increased frequency and monetisation ▪Transaction history delivering insights into purchase intent and cross sell/upsell opportunities ▪Enhancing our data analytics of our data base to utilise our data asset more effectively
OMNI-CHANNEL ▪Digital sales channel increased +120% in 1H FY21 ▪Channel contribution approaching $13m p.a. and 10% of sales ▪Management expertise added ▪Replatformed website to go live in April 2021 ▪First steps executed for customised communications ▪Opportunities for recurring revenue models from growing consumables ▪New platform is a key enabler to accelerating our omni-channel capabilities
EXPANDING STORE NETWORK ▪Management track record for disciplined store rollout ▪Six new stores opened in 1H FY21 despite COVID – 19 disruption ▪All Stores profitable with increased store contribution from rental negotiations ▪Targeting outer suburban/super regional areas ▪ROCE < 12 months through increased landlord contributions to new stores ▪Focus upon converting remaining 36 legacy stores to new Glow 2.0 format
DUSK PROPRIETARY PRODUCT ▪Creating innovative products designed to enhance our customers’ sensory experience ▪Bringing ‘affordable’ products to market (current ATV of $54) ▪Increasing the growth of scented consumables to drive customer visitations

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Trading Update and FY21 Outlook

TRADING UPDATE

First six weeks of 2H FY21

• Continued strong comp growth - LFL sales +50% and LFL GM$ +60%

• Includes continued online sales growth of +59%

• Disciplined promotional strategy continues

• Four new stores committed to be opened prior to Mothers Day

OUTLOOK

• While the half has started well and the board is optimistic about a pleasing result for FY21, given the uncertainty that persists, the

• Board cannot give FY21 earnings guidance at this time

• The repayment of the net JobKeeper benefit will be booked in our statutory accounts in 2H, however we note that this benefit has not been included in the 1H pro forma results (i.e. underlying EBIT)

• 2H is typically much less profitable than 1H

• Our inventory is currently well-balanced to meet demand

• Currency tail winds will be more significant than 1H FY21

• In April and early May we cycle a period of national store closures in prior year

• From ~8 May we cycle a strong Mothers Day trading event in FY20 and the commencement of a period of elevated sales thereafter

• Our strategy and focus on strong execution and remaining nimble is unchanged

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Questions ?

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Appendix

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National Store Network

STORE NETWORK

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118
Stores
1
28
1
17
7
32
3
26
Physical stores
3
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Online store

• Opened six new stores in 1H FY21 - two in WA, one in QLD,

NET STORE OPENINGS

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11
10
9
6
(1) (1)
(3) (3)
FY17 FY18 FY19 FY20 1H FY21
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and one in NSW, VIC and SA

• Secured four new stores for 2H FY21 – two in QLD, one in

Openings Closures

NSW and one in TAS

• Management has resumed scoping the NZ opportunity

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Like for Like Sales Performance

duskhas delivered 15 consecutive quarters of LFL sales growth

– – QUARTERLY LFL SALES Q1 FY18 Q2 FY21

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FY18 FY19 FY20 1H FY21
12.7% 7.9% 17.5% 49.3%
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Average quarterly LFL sales growth of 9.6% across 11 quarters (pre-COVID-19)

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70.8%
64.8%
43.2%
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16.9%
13.1% 13.7%
10.9%
8.6% 8.5% 8.6%
6.7% 6.8% 7.3%
4.6%
Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY18 Q1 FY19 Q2 FY19 Q3 FY19 Q4 FY19 Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 Q1 FY21 Q2 FY21
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Pro Forma Profit and Loss

PRO FORMA RESULTS

$M	1H FY20	1H FY21
Revenue	58.6	90.9
Cost of sales	(20.7)	(29.4)
Gross profit 37.9 61.6
Employee expenses	(13.8)	(17.0)
Occupancy expenses	(7.8)	(8.0)
Other expenses	(5.1)	(6.6)
Cost of doing business (CODB)	(26.7)	(31.6)
EBITDA	11.2	30.0
Depreciation (1.5) (1.5)
Amortisation	(0.1)	(0.1)
EBIT	9.6	28.4
Net finance expense	0.0	(0.1)
Profit before tax	9.6	28.3
Income tax expense	(2.9)	(8.5)
Net profit after tax	6.7	19.8

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Balance Sheet

BALANCE SHEET AS AT 27 DECEMBER 2020

$M	Dec-201	Pro Forma Jun-20
Current assets Cash 34.9 5.0 Trade and other receivables 0.7 2.9 Inventories 18.7 11.2 Right of return assets 0.3 0.3 Prepayments 3.9 0.7
Total current assets 58.5 20.1 Non-current assets Property, plant and equipment 8.4 8.2 Right of use assets 32.1 31.0 Intangibles 1.8 1.8 Deferred tax assets 7.5 6.4
Total non-current assets 49.8 47.4 Current liabilities Trade and other payables 23.5 14.3 Provisions 3.1 3.1 Employee benefit liabilities 1.2 0.9 Lease liabilities 12.0 10.2 Income taxpayable 7.7 3.0
Total current liabilities 47.5 31.4 Non-current liabilities Provisions 0.9 0.6 Employee benefit liabilities 0.4 0.3 Lease liability 24.9 24.8
Total non-current liabilities 26.2 25.7
Net assets 34.6 10.4

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1. Statutory basis.

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Disclaimer

Dusk Group Limited (‘dusk’) advises that the information in this presentation contains general background information about dusk’s activities as at the date of the presentation. It is information given in summary form and is based on information available to dusk that has not been independently verified. Some of the information in the presentation contains ‘forward-looking statements’ which may not directly or exclusively relate to historical facts.

These forward-looking statements reflect dusks’ current intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors, many of which are outside the control of dusk. Important factors that could cause actual results to differ materially from the expectations expressed or implied in the forward-looking statements include known and unknown risks.

Financial data

All figures in the presentation are Australian dollars ($ or A$) unless stated otherwise.

A number of figures, amounts, percentages, estimates, calculations of value and fractions in this presentation are subject to the effect of rounding. Accordingly, the actual calculation of these figures may differ from the figures set out in this presentation.

Financial Information

The pro forma and forecast financial information provided in this presentation is for illustrative purposes only and does not represent a forecast or expectation as to dusk’s future financial condition and/or performance. This document has been prepared at a time where the review of financial information contained in this presentation has not been completed and accordingly, you should only relay on any forecast or expectation as to dusk’s future financial condition and/or performance that is contained in a prospectus or other offering document which may be issued by dusk in connection with any offer of dusk securities.

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