ENERO GROUP LIMITED — Earnings Release 2016

Aug 9, 2016

10 August 2016

==> picture [121 x 32] intentionally omitted <==

ASX ANNOUNCEMENT

Results for year ended 30 June 2016

Enero Group Limited (ASX: EGG) today announced its results for the year ended 30 June 2016.

Summary:

• Net Revenue up 3% and Operating EBITDA up 44% on prior period.

• Improved Operating EBITDA margin to 11.6%.

• Net profit after tax to equity holders $6.6m.

• Improvement in earnings highlights more consistent business performance in line with “Reliable” phase of Group strategy.

Enero Group CEO, Matthew Melhuish said: “We have delivered revenue, Operating EBITDA and margin growth this year which is a result of the focus around new business conversion and sensibly managing our cost base. Despite more uncertainty in trading conditions, our bigger businesses continue to lead the way for the Group and our international market exposure in the UK, Europe and USA provides more diverse revenue opportunities. Our focus for the coming year will be maintaining our margin, our new Sydney hub office and USA expansion”.

Financial performance:

cial performance:
A$ million	FY2016	FY2015	Variance
Net Revenue	113.5	110.3	3%
Operating EBITDA1	13.2	9.2	44%
Net profit after tax to equity holders²	6.6	(2.8)	336%
Operating EBITDA Margin	11.6%	8.3%

Notes:

1. Operating EBITDA is net profit before interest, tax, depreciation, amortisation, impairment, loss on sale 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. In the prior reporting period, net profit after tax includes significant items of $4.3m. Refer to attached results presentation for detailed analysis.

3. The results announcement and attached presentation includes the following measures used by the Directors and management in assessing the on-going performance and position of the Group: Operating EBITDA, NPAT before significant items and NPATA before significant items. These measures are non-IFRS and have not been audited or reviewed.

Business operating performance:

Net Revenue was up 3% and Operating EBITDA was up 44% on the prior year. The Operating EBITDA margin increased to 11.6% due to a more stable revenue base and appropriate cost control. International markets now represent 59% of the Group’s net revenue and 67% of the Group’s Operating EBITDA. Refer to the results presentation for further details on operating business performance.

Contact:

Brendan York Group Finance Director +61 2 8213 3084

==> picture [466 x 39] intentionally omitted <==

==> picture [183 x 130] intentionally omitted <==

Enero Group Limited FY16 Full Year Results

10 August 2016

Enero Group Limited

Disclaimer

==> picture [86 x 61] intentionally omitted <==

This document has been prepared by Enero Group Limited (Enero) and comprises written materials/slides for a presentation concerning Enero. This is not a prospectus, disclosure document or offering document.

This document is for information purposes only and does not constitute or form part of any offer or invitation to acquire, sell or otherwise dispose of, or issue, or any solicitation of any offer to sell or otherwise dispose of, purchase or subscribe for, any securities, nor does it constitute investment advice, nor shall it or any part of it nor the fact of its distribution form the basis of, or be relied on in connection with, any contract or investment decision.

Certain statements in this presentation are forward looking statements. You can identify these statements by the fact that they use words such as “anticipate”, “estimate”, “expect”, “project”, “intend”, “plan”, “believe”, “target”, “may”, “assume” and words of similar import. These forward looking statements speak only as at the date of this presentation. These statements are based on current expectations and beliefs and, by their nature, are subject to a number of known and unknown risks and uncertainties that could cause the actual results, performances and achievements to differ materially from any expected future results, performance or achievements expressed or implied by such forward looking statements.

No representation, warranty or assurance (express or implied) is given or made by Enero that the forward looking statements contained in this presentation are accurate, complete, reliable or adequate or that they will be achieved or prove to be correct. Except for any statutory liability which cannot be excluded, each of Enero, its related companies and their respective officers, employees and advisers expressly disclaim any responsibility for the accuracy or completeness of the forward looking statements and exclude all liability whatsoever (including negligence) for any direct or indirect loss or damage which may be suffered by any person as a consequence of any information in this presentation or any error or omission therefrom.

Subject to any continuing obligation under applicable law or any relevant listing rules of the ASX, Enero disclaims any obligation or undertaking to disseminate any updates or revisions to any forward looking statements in these materials to reflect any change in expectations in relation to any forward looking statements or any change in events, conditions or circumstances on which any statement is based. Nothing in these materials shall under any circumstances create an implication that there has been no change in the affairs of Enero since the date of this presentation.

Non-IFRS Performance measures

This results presentation uses non-IFRS performance measures which have not been audited or reviewed. The Company believes that, in addition to the conventional measures reported under IFRS, the Company and investors use this information to evaluate the Company’s performance. Non-IFRS performance measures include Operating EBITDA which is defined in the presentation.

2

Enero Group Limited

Group Financial Performance

==> picture [86 x 61] intentionally omitted <==

Financial summary

• Operating EBITDA up 44% on the prior reporting period.

• Net revenue up 3% on the prior reporting period.

• Operating EBITDA margin improvement from 8.3% to 11.6% generated from a more stable revenue base and appropriate cost control.

• EPS of 8.0cps.

• Strong cash conversion.

• Improvement in earnings highlights more consistent business performance in line with “Reliable” phase of Group strategy.

3

Enero Group Limited

Group Financial Performance

==> picture [86 x 61] intentionally omitted <==

Revenue and Operating EBITDA

YEAR ENDED 30 JUNE ($M)	2016	2015	CHANGE
NET REVENUE
Operating Companies	113.5	110.3	2.9%
Net Revenue	113.5	110.3	2.9%
OPERATING EBITDA
Operating Companies	19.9	16.3	22.1%
Support office	(5.9)	(6.0)	1.7%
Share based payments charge	(0.8)	(1.1)	27.3%
Operating EBITDA	13.2	9.2	43.5%
Operating EBITDA Margin³	11.6%	8.3%	3.3bp

1. Operating EBITDA is net profit before interest, tax, depreciation, amortisation, impairment, loss on sale and restructure costs. Refer to slide 12 for detailed analysis of costs.

2. Operating EBITDA Margin is Operating EBITDA / Net Revenue.

4

Enero Group Limited

Group Financial Performance

==> picture [86 x 61] intentionally omitted <==

Results ratio analysis

YEAR ENDED 30 JUNE ($M)	2016	2015
Net Revenue	113.5	110.3
Staff costs	79.1	79.4
Staff costs %	69.7%	72.0%
Operating costs	21.4	21.9
Operating costs %	18.9%	19.9%
Operating EBITDA	13.2	9.2
Operating EBITDA Margin	11.6%	8.3%

• Staff costs ratio trending down to 69.7% and heading towards the benchmark targets. A $0.3m reduction in overall staff costs despite $3.2m increase in net revenue. Improved resourcing on projects and better collaboration between business units led to the reduction in the ratio.

• Operating costs were down $0.5m year on year from operating cost efficiencies contributing to the 1% reduction in the ratio.

Staff costs includes all full time and freelance/casual employees and contractors.

5

Enero Group Limited

Group Financial Performance

==> picture [86 x 61] intentionally omitted <==

Revenue By Industry

==> picture [370 x 220] intentionally omitted <==

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

Property &
Telecommunications3% Health Care3% Construction1% Energy, Oil & Mining1%
Banking, Finance & Media
Insurance
16%
6%
Transportation, Airlines
& Automotive
8%
Manufacturing / FMCG
Information 16%
Technology
14%
Retailing
Services 16%
16%
----- End of picture text -----

• Strong mix of clients across market industry and sector groups demonstrates diversification of revenue.

• Largest client represents 9.9% of group net revenue.

• Top 10 clients represent 39% of total revenue across > 650 client relationships.

6

Enero Group Limited

Operating Performance

==> picture [86 x 61] intentionally omitted <==

Geographical Contribution from operating companies

==> picture [253 x 330] intentionally omitted <==

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

Net Revenue Net Revenue
FY2016 FY2015
14% 11%
41%
49%
40%
45%
Operating EBITDA Operating EBITDA
FY2016 FY2015
10% 7%
33%
40%
53%
57%
Enero Group Limited
----- End of picture text -----

==> picture [83 x 53] intentionally omitted <==

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

Australasia
UK and Europe
USA
----- End of picture text -----

• Geographical contribution to revenue now more heavily weighted to UK and Europe. USA, while improving in 2HFY16, continues to be undersized.

• Geographical contribution to Operating EBITDA reflects higher margin businesses in the UK and Europe. International operations accounted for 67% of the Operating Companies EBITDA in FY16.

7

Operating Performance

==> picture [86 x 61] intentionally omitted <==

Geographical Results from operating companies

YEAR ENDED 30 JUNE ($M)	2016	2015	CHANGE	CONSTANT CURRENCY CHANGE	• •
NET REVENUE
Australasia	46.0	53.4	(13.9%)	(13.9%)
UK and Europe	51.2	44.4	15.3%	6.7%
USA	16.3	12.5	30.4%	12.3%
Total	113.5	110.3	2.9%
OPERATING EBITDA
Australasia	6.6	6.5	1.5%	1.5%
UK and Europe	11.4	8.7	31.0%	21.4%
USA	1.9	1.1	72.7%	54.8%
Total	19.9	16.3	26.8%

Currency impact: weaker Australian dollar lifted reported net revenue by $5.6m and Operating EBITDA $0.7m.

On a constant currency basis, revenue and Operating EBITDA growth achieved for both international hub markets.

8

Enero Group Limited

Operating Performance

==> picture [86 x 61] intentionally omitted <==

Australasia
				CONSTANT
YEAR ENDED 30 JUNE ($M)	2016	2015	CHANGE	CURRENCY
				CHANGE
Net Revenue	46.0	53.4	(13.9%)	-
Operating EBITDA	6.6	6.5	1.5%	-
Operating EBITDA margin	14.3%	12.2%	2.1bp	-

==> picture [64 x 9] intentionally omitted <==

==> picture [64 x 9] intentionally omitted <==

Key highlights:

==> picture [64 x 8] intentionally omitted <==

==> picture [80 x 12] intentionally omitted <==

==> picture [64 x 9] intentionally omitted <==

• Revenue decline year on year however improved EBITDA and margin as a result of focus on managing cost base.

==> picture [80 x 13] intentionally omitted <==

==> picture [70 x 28] intentionally omitted <==

==> picture [83 x 57] intentionally omitted <==

• 1HFY16 and 2HFY16 revenue and EBITDA consistent demonstrating stability in base revenue.

==> picture [70 x 28] intentionally omitted <==

• BMF performing well, retaining a number of clients, achieving new business wins and confirming its excellent creative reputation.

==> picture [69 x 37] intentionally omitted <==

• Smaller agencies continue to face difficult trading conditions and have had mixed results for the year.

==> picture [72 x 47] intentionally omitted <==

==> picture [69 x 37] intentionally omitted <==

• Moving to new Sydney hub office (100 Harris St, Pyrmont) in early 2017.

9

Enero Group Limited

Operating Performance

==> picture [86 x 61] intentionally omitted <==

UK and Europe

UK and Europe
YEAR ENDED 30 JUNE ($M)	2016	2015	CHANGE	CONSTANT CURRENCY CHANGE
Net Revenue	51.2	44.4	15.3%	6.7%
Operating EBITDA	11.4	8.7	31.0%	21.4%
Operating EBITDA margin	22.3%	19.6%	2.7bp	-

Key highlights:

==> picture [130 x 113] intentionally omitted <==

• Improvement in revenue (7% growth year on year on constant currency basis).

• Hotwire and Frank PR continue to trade well with above average margin achievement showing consistency of PR businesses.

• 2HFY16 results lower than 1HFY16.

• Hotwire Labs offering opening up new revenue streams in digital builds, SEO and analytics.

• Uncertain economic outlook following Brexit.

==> picture [123 x 86] intentionally omitted <==

10

Enero Group Limited

Operating Performance

==> picture [86 x 61] intentionally omitted <==

USA

USA
YEAR ENDED 30 JUNE ($M)	2016	2015	CHANGE	CONSTANT CURRENCY CHANGE
Net Revenue	16.3	12.5	30.4%	12.3%
Operating EBITDA	1.9	1.1	72.7%	54.8%
Operating EBITDA margin	11.7%	8.8%	2.9bp	-

Key highlights:

• Revenue improvement in all businesses (12% up year on year on constant currency basis). EBITDA and margin improvement from client wins.

• While the businesses lack scale in the market, continue to open up bigger revenue opportunities.

• Assessing plans to achieve scale and access to larger revenue opportunities in the short and medium term.

==> picture [81 x 81] intentionally omitted <==

==> picture [130 x 90] intentionally omitted <==

==> picture [113 x 47] intentionally omitted <==

11

Enero Group Limited

Group Financial Performance

==> picture [86 x 61] intentionally omitted <==

Profit & Loss Summary

YEAR ENDED 30 JUNE ($M)	2016	2015
Net Revenue	113.5	110.3
Other revenue	0.2	0.2
Staff Costs	(79.1)	(79.4)
Operating Expenses	(21.4)	(21.9)
Operating EBITDA¹	13.2	9.2
Operating EBITDA Margin	11.6%	8.3%
Depreciation & Amortisation	(3.1)	(4.2)
Net Interest earned	0.2	0.1
Tax	(2.2)	(2.3)
Minority interests	(1.5)	(1.2)
NPAT before significant items²	6.6	1.5
Significant items³	-	(4.3)
Net profit after tax to equity owners	6.6	(2.8)

1. Operating EBITDA provides meaningful information on the group’s cash flow generation excluding significant transactions and non cash items which are not representative of the group’s on-going operations.

2. NPAT before significant items represents net profit after tax before the impact of significant, non-recurring and non operational impacting items. 3. Significant items in FY15 included Restructure costs of $1.7m and Loss on deregistration of dormant subsidiaries of $2.6m.

12

Enero Group Limited

Group Financial Performance

==> picture [86 x 61] intentionally omitted <==

Balance Sheet

Balance Sheet
($M)	30 Jun 2016	30 Jun 2015
Cash	37.6	25.8
Net Working Capital	(3.4)	0.5
Other Assets	2.2	2.5
Fixed Assets	4.9	7.0
Intangibles	75.5	84.5
Total Assets	116.8	120.3
Provisions & Other Liabilities	5.5	4.8
Net Assets	111.3	115.5

• Contingent deferred consideration liability (Tranche 3A&3B liabilities) of $17.4m not recognised at 30 June 2016. Target EBITDA hurdles to trigger payments are $53.7m and $63.7m respectively. Final contingent liability expires in 2018.

• Dividend and share buy back restriction continues until the Tranche 3A&3B liabilities are either paid, cancelled or expired.

• $21.8m in franking credits.

• Refer to slide 14 for analysis on cash conversion and working capital.

• Decrease in intangibles relating only to foreign currency translation.

13

Enero Group Limited

Group Financial Performance

==> picture [86 x 61] intentionally omitted <==

Cash Flow & Working Capital Management

YEAR ENDED 30 JUNE ($M)	2016	2015	• Cash conversion was significantly in excess of Operating EBITDA in FY16. • Working capital balance reduction in the period through continued rigour in cash flow management however expectation of some unwind in 1HFY17 as net working capital currently negative. • Tax payments made in relation to overseas tax jurisdictions. • Reduced capex for FY16 in preparation for heavier capex requirements in FY17 relating to new Sydney hub office.
Operating EBITDA	13.2	9.2
Movement in Working Capital	4.2	-
Restructure costs	-	(1.7)
Equity Incentive Expense	0.8	1.1
Gross Cash Flow	18.2	8.6
Net Interest Received	0.2	0.1
Tax paid	(1.4)	(1.7)
Operating Cash Flow	17.0	7.0
Capex	(1.1)	(2.6)
Free Cash Flow	15.9	4.4

14

Enero Group Limited