GALE PACIFIC LIMITED — AGM Information 2017

Oct 26, 2017

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ASX: GAP

2017 Annual General Meeting 27 October 2017

Chairman’s address: David Allman

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Chairman’s address: David Allman

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Revenue $A million

NPAT $A million

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200 20%
173.2 175.3
150 148.0 15%
137.3
100 10%
90.8 92.7
76.4 80.6
50 5%
0 60.9 67.4 82.4 82.6 0%
2014 2015 2016 2017
H1 H2 Growth
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12
10.2 10.1
10
8.2
8
6.9
6
4 4.7 7.0 6.8
2
5.8
0 3.5 1.1 3.2 3.4
2014 2015 2016 2017
H1 H2 Underlying
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Chairman’s address: David Allman

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Group Managing Director’s presentation: Nick Pritchard

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GALE: A fabrics technology company

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A leader in the development, manufacture and marketing of shade solutions for the retail market and of high performance technical textiles for the commercial sector

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Retail shade products

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High performance technical textiles

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Building a platform for growth

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Exiting non-core categories

• ½ Exited most non-core categories over three years

Pool fencing

Mirrors

• ½ June 2017: exited unprofitable EVERTON glass business

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• ½ Product portfolio now more aligned with fabrics technology strategy

Towel racks

Door stops

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Soap dispensers

Bath mats

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Splashbacks

Balustrade

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Cable
Pet kennels
management
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Hammocks

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Building a platform for growth

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Rationalised brand portfolio

½ Rationalised brand portfolio so can invest in smaller number of brands

• ½ Upgraded marketing materials including packaging, merchandising and websites

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CHILAX
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• ½ Aligned branding across all regions

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Retail products Commercial products
Shade & screening Window furnishings Technical textiles
products (global) (Australia) (global)
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Building a platform for growth

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Rationalising distribution

½ Rationalised distribution to improve efficiency and service

½ Four warehouses closed; the remainder upgraded

Dandenong South Distribution Centre, Melbourne, Australia

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Building a platform for growth

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Upgrading China manufacturing

• ½ Upgraded facilities and invested in new plant and equipment

• ½ Capacity increased; quality, service and cost improved

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Building a platform for growth

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Strengthening balance sheet and infrastructure

• ½ IT systems aligned and strengthened

• ½ Inventory reduced

• ½ Service improved

• ½ Safety performance improved

• ½ Team capability increased and values-based culture created

• ½ Balance sheet strengthened, with strong cash generation paying down debt; net cash at 30/6/17

Operating Cash Flow $A million

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20.5
20 200
16.3
13.4
10 8.2 100
1.5
0 0
(0.7)
(4.0)
-10 -100
(9.0)
-20 -200
2014 2015 2016 2017
H1 H2 as a % of EBITDA
Net Debt $A million
30 40%
26.2
25
30%
20 20.0
16.7
20%
15 13.6 13.7
11.2
10 8.2 10%
5
0%
0
-5 (1.3) -10%
2014 2015 2016 2017
H1 H2 as a % of Equity
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Delivering growth whilst transforming

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During the transformation process GALE has achieved:

• ½ compound annual revenue growth of 8.5%

• ½ compound underlying earnings growth of 10%

10.0%

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8.5%
Compound
underlying
earnings
Compound growth
annual
revenue
growth
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Transforming our product mix

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13%
2015
Revenue
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½ Non-core products created complexity, cost, a distraction from core categories and a drain on profitability

½ Moving to fabric products and categories where GALE has greater expertise and market strength

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87%
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4%
2018
Revenue
(forecast)
96%
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Fabric Non-fabric
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19.6
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(1.4)

2015 Underlying EBITDA

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Our core business

• ½ Core business today is the development and manufacturing of high performance technical textiles

• ½ GALE has world-leading coating adhesion technology

• ½ Developing fabrics with the right combination of weight, strength, life, stretch, adhesion, porosity, feel etc.

• ½ Innovative technical fabrics for both commercial and retail sectors

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Where we are

• ½ Developing a more global business, with an increasing percentage of revenue from outside Australia

• ½ Focused on building a bigger business in North America

• ½ In MENA and Eurasia, focusing on a smaller number of countries

• ½ Have established strong infrastructure to support global growth

• ½ Low-cost manufacturing operations in China for knitted fabrics and value-added products

• ½ High performance waterproof fabrics manufactured at Braeside, Victoria facility

• ½ Small-scale custom window shade production facilities in USA

• ½ Distribution centres in key markets and distribution partnerships with some of the world’s largest retailers

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Where we are

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Los Angeles Orlando Dubai Ningbo Australia and
New Zealand
Revenue: A$92.4m
Underlying EBITDA:
A$2.9m
Americas
Revenue: A$62.0m
EBITDA: A$6.5m
Eurasia
Revenue: A$8.2m
MENA
Revenue: A$12.8m
EBITDA: A$2.5m
China
EBITDA: A$11.5m
(includes Eurasia)
Manufacturing
Perth Melbourne Brisbane Auckland
Distribution
Custom window shades assembly
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Australia and New Zealand

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Retail business

• ½ Distribution through leading home improvement retailers

• ½ Product range more focused following exit of non-core products

• ½ Coolaroo – market leader in DIY shade and screening

• ½ Investing in developing new shade solutions and in building the Coolaroo brand

Our retail brands

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Distributed through leading retailers

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General public

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Australia and New Zealand

Commercial business

• ½ Distribution through specialised wholesalers and fabricators which manufacture products from GALE fabrics

• ½ Focus on agricultural, architectural and horticultural sectors where there is strong demand and the cost of product failure is high

• ½ Advanced product range coupled with local R&D and manufacturing provides competitive advantage

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Wholesalers

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Converters End users

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Australia and New Zealand

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Outlook for FY2018

• ½ Core product categories expected to grow, although coated commercial fabric sales likely to be lower due to weaker grain harvest

½ Confident of opportunities in the commercial sector and new coating line to be commissioned in late 2018 will enable product development and further growth

• New extrusion coating line to be located in Melbourne, Australia

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Americas

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Retail business

• ½ Very pleased with progress and foresee tremendous opportunities

• ½ Customers include some of the world’s largest retailers

• ½ Great potential to accelerate growth in the retail shade category through existing customers

• ½ Have secured additional product ranging, including Coolaroo window shade program in all Lowe’s stores

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Lowe’s window shade planogram

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Americas

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Commercial business

• ½ Commercial business currently small and focused on architectural shade fabric

• ½ Significant opportunities for growth

½ Planning expansion based on new architectural shade products and coated fabrics which have competitive advantage

• Architectural shade is the largest commercial sector usage currently

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Americas

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Outlook for 2018

• ½ Strong growth expected in FY2018, driven by retail and online sales, despite impact of hurricanes in Texas and Florida

• ½ Focus on servicing new ranging wins effectively

• ½ Pursuing further ranging with existing and new customers

• ½ New, larger warehouse in California to become operational in December 2017, increasing efficiency and service

• ½ Investing in additional sales and marketing resources to take advantage of opportunities

• New Fontana, California, warehouse will become operational in December 2017

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Middle East/North Africa

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Business and outlook for FY2018

• ½ Small signs of market improvement

• ½ Continuing to invest in new sales resources, while adopting a conservative approach to credit

• New Commercial Heavy 430 architectural shade fabric

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Eurasia

Business and outlook for FY2018

• ½ Pivoting business from low value, low margin retail products towards higher value, higher margin commercial products

• ½ Opportunity for growth through targeted approach to customers and categories

• ½ Bunnings’ UK/Ireland pilot stores stocking range of GALE garden-related products

• ½ Seeking additional distribution for core products

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Bunnings UK
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China manufacturing

• ½ Substantial improvements to plant, equipment and amenities in FY2017 to support growth and improve service, quality and safety

• ½ Strong performance across most key metrics, and further improvement expected in FY2018

• ½ Investment continuing in FY2018: transitioning to global IT system, acquiring new equipment, and further facility upgrades

• ½ GALE’s vertically integrated model provides competitive advantage in manufacturing key product categories

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Increasing investment in research & development

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• ½ Investment increasing to develop innovative technical fabrics and shade products

• ½ In addition to internal R&D resources, building technical alliances with universities, etc to secure additional expertise and technologies

• ½ Already a leader in technical fabrics; now also focused on innovation in DIY shade category

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Research and testing
facility, Ningbo, China
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Our growth objective

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Goal to be recognised as a global developer, manufacturer and marketer of shade solutions for the retail market and high performance technical textiles for the commercial sector

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Melbourne research and testing facility
adjoining Manufacturing operations
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Our growth strategy

Key elements of the strategy:

• ½ Accelerate growth of the Americas business, focusing on shade and screening products, while expanding the commercial products business

• ½ In Australia and New Zealand, extend marketleading shading and screening business in retail sector and build a larger commercial business, underpinned by new coating line

• ½ In the Middle East and Eurasia, focus on both commercial and retail shading products and develop a coated fabrics business as production capacity increases

• ½ Continue to invest in differentiated technologies and technical partnerships to develop innovative products to meet customers’ needs

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