ENERO GROUP LIMITED — AGM Information 2013

Oct 30, 2013

31 October 2013

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ASX ANNOUNCEMENT

2013 Annual General Meeting Chairman address and Trading Update

Good morning Ladies and Gentlemen,

I am your Chairman, John Porter, and I would like to welcome you all here today.

Before we start the formal business of the Meeting, let me introduce my fellow directors, Chief Executive Officer Matthew Melhuish, Susan McIntosh, Roger Amos and Max Johnston.

Seated in the front row we have members of the Enero executive team, Company Secretary Eleni North and Group Finance Director Brendan York.

Our external auditors KPMG are here today and are available to answer any shareholder questions on the audit or Enero Group’s 2013 Financial Statements.

I am pleased to stand before you at this Annual General Meeting as chairman of Enero Group. This past financial year has seen some significant progress in reshaping the fundamentals of Enero’s businesses and in implementing our strategy of creating a more collaborative operating Group, despite a disappointing financial result.

Enero’s key focus this year has been on overhauling the strategy, direction and operations of both the holding company and Enero’s individual brands, continuing our journey from a remote holding company structure to a more cohesive and better networked operating Group. This is no easy task, particularly given the distinct cultures of the operating businesses which have been built up over many years and the varying operational and systems requirements across businesses and geographies. The benefits of this remedial, behind the scenes work takes time to filter through as tangible results but they are necessary steps in rebuilding and will provide the longer-term successful foundations of a well-balanced Group.

While the Group reported a net loss after tax of $82.2 million, this does not adequately reflect the underlying cash flow position, with a non-cash impairment charge of $75.9 million on intangible asset balances being recognised. The pro forma continuing business Operating EBITDA for the Group was $3.5m, and while that was 75% down on the prior reporting period, we are realistic that there were significant headwinds facing not only the Group, but the whole sector in 2013.

Trading performance for the first quarter of financial year 2014 improved 15% on a pro forma Operating EBITDA basis compared to the prior reporting period, not-withstanding a 12% reduction of pro forma net revenue. While we are not providing any forecast guidance for financial year 2014 as we continue through our transformation we are cautiously optimistic that the steps outlined by myself and Matthew will lead to a Group capable of delivering more profitable results.

At this point in our journey, the two financial measures which I see as extremely important in the longer-term success of the Group are being unleveraged and generating positive operating cash flows. Enero continues to achieve both of these measures – we remain debt free with a targeted focus on efficient working capital management. From this footing Enero is in a good position for organic growth and new revenue opportunities, while continuing to be cautious with its capital to enhance shareholder returns and maximise the value extracted from specific investment projects.

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Enero’s group of operating businesses cover the spectrum of marketing services. Each business operates at the forefront of its field - doing innovative, world-class work for major clients. The size of the Group also plays to our advantage, reducing the bureaucracy common in larger group structures and allowing Enero and its businesses to adapt quickly to changing client demands, wherever clients are based.

The Board remains very supportive of the executive team who have worked tirelessly to ensure the Group is built on a foundation of strong client relationships, a positive culture and investment back into the Group’s most prized assets – its people. While this focus on internal restructuring and systems is often painstaking, it is absolutely essential to ensure a path to growth.

Thank you my fellow Board members, your experience, knowledge and understanding of the marketing and communications sector have been invaluable and I look forward to continuing our strong working relationship.

On behalf of the Board, I extend my gratitude to the executive team and all the employees of Enero’s group businesses; I am constantly inspired by your ability to deliver outstanding solutions to our clients’ marketing problems. Finally, thank you to our shareholders for your continued support of Enero.

I will now hand over to our Matt to speak in more detail about the Company’s strategic approach and operating position as well as some of the great work the people in our Group have been doing over the past twelve months.

Contact:

Brendan York Group Finance Director +612 8213 3084

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Enero Group trading update

Financial Performance for three months ended 30 September 2013 (unaudited)

	YTD	YTD	Variance
A$ million	30 Sept 2013	30 Sept 2012
Net Revenue	29.5	35.4	(17%)
Operating EBITDA1	1.5	1.5	-
**_Pro forma (continuing businesses)_2 **
Net Revenue	29.5	33.4	(12%)
Operating EBITDA1	1.5	1.3	15%
EBITDA margin	5.1%	3.9%	1.2bp

Notes:

1. Operating EBITDA is earnings before interest, tax, depreciation, amortisation, impairment, loss on sale, fair value adjustments to deferred consideration, and restructuring costs. Operating EBITDA is the primary measure used by management and the directors in assessing the performance of the Group. It provides information on the Group’s cash turnover excluding significant transactions and non-cash items which are not representative of the Group’s on-going operations or cash flow.

2. Pro forma excludes the contribution of BWM sold in August 2012 and City PR closed in September 2012. Pro forma revenue and Operating EBITDA are presented to provide an accurate representation of the Group’s current year operations compared to the same operations in the prior period.

3. This presentation includes the following measures used by the Directors and management in assessing the on-going performance and position of the Group: Operating EBITDA, Pro forma net revenue and Pro forma Operating EBITDA. These measures are non-IFRS and have not been audited or reviewed.