GWA GROUP LIMITED. — AGM Information 2017

Oct 26, 2017

th Annual General Meeting

th October 2017

Managing Director's Address

Workplace Health and Safety

• Continued focus on providing safe workplace for employees, contractors, visitors and customers
• Key initiatives in FY17:
• ‒ Safety Interactions Program to develop and drive safety behaviour engagement between employees and business 'safety' leaders
• ‒ Due Diligence and Awareness training program to drive safety focus throughout the business
• ‒ "Move 4 Life" manual handling program to address physical and movement behaviour
• ‒ Re-launched the SafetyOne online site to enhance ease of reporting and recording data
• Despite not achieving the Safety LAG target for FY17, substantial progress was made to improve the Group's safety culture

GWA – a strong and growing business

Continuing Operations excluding Brivis Climate Systems, Dux Hot Water and Gliderol Garage Doors divested in FY15/FY16.

FY17 result - continued improvement across key metrics

Result consistent with market guidance

Solid result in FY17 while continuing to build strong platform for future growth

Solid full year result – continued growth in top and bottom line

• Continued focus on top line growth and cost control to support margin management delivers earnings and market share growth
• Strengthening market position with improved market share in B&K core focus segments
• Solid NPD pipeline into FY18 focused on Renovations & Replacements and Commercial segments
• Refocused Door & Access Systems business to address short–term performance and strengthen for medium to long term

"Back to Basics" strategy delivers stronger platform to win through the cycle

• Improved customer engagement joint business planning and NPD with top customers
• Supply chain improvements: dual sourcing progressing, Integrated Business Planning drives working capital improvement in 2H17
• Ahead of target to reduce \$13-15m in costs by FY19 enables re-investment in growth initiatives and margin resilience

Strong financial position supports re-investment & growth for shareholder value creation

• Continued increase in Group EBIT Margin and ROFE
• Robust credit metrics and financial flexibility net debt of \$79.8m
• Strong EPS growth up 7 per cent to 20.3 cents per share
• Final dividend 9 cents fully-franked brings FY17 dividend to 16.5 cents per share, fully-franked in line with dividend policy

Continued strong cashflow generation

Cash flow from Operations A\$M	FY16	FY17
EBITDA	84.3	86.2
Net movement in Working Capital	6.3	2.4
Other	1.1	0.2
Cash Flow from Operations	91.7	88.8
Capital Expenditure	(3.5)	(4.9)
Restructuring / Other costs	(11.4)	(11.5)
Net Interest Paid	(6.2)	(5.3)
Tax Paid	(19.8)	(14.8)
Other Non-operating Cash flow	0.0	0.0
Free Cash Flow from Continuing Operations	50.8	52.3
Discontinued Operations	4.1	0.0
Free Cash Flow	54.9	52.3

• Continue to generate strong cashflow across the business
• Working capital improvement in 2H from inventory management and integrated business planning initiative
• Capital expenditure of \$4.9m up from \$3.5m reflects:
• investments in NPD
• investments in tooling
• IT spend re integrated business planning
• Cash restructuring costs of \$11.5m reflects exit of Norwood factory and D&A restructuring (no P&L impact)
• Continuing Operations free cash flow up 3%

Strong financial position supports growth and re-investment through the cycle

Metric	30 June 2015	30 June 2016	30 June 2017
Net Debt	94.8	88.4	79.8
Leverage Ratio Net Debt / EBITDA	1.1	1.1	0.9
Interest Cover EBITDA / Net Interest	12.8	14.3	17.1
Gearing Net Debt / (Net Debt + Equity)	24%	22%	20%

• GWA remains in strong financial position credit metrics continue to be consistent with investment grade
• Net debt \$80m reflects strong cash generation
• Substantial headroom within \$225m syndicated banking facility maturing October 2020
• \$113m in undrawn facilities
• Provides enhanced financial flexibility to invest in strategic growth initiatives through the cycle

Bathrooms & Kitchens – continued growth ahead of market and margin resilience

Continuing Operations A\$m	FY16	FY17	% Change
Revenue	342.0	350.4	2.5%
EBITDA	86.6	89.4	3.2%
EBIT	84.6	87.6	3.5%
EBIT Margin %	24.7%	25.0%	0.3pp
ROFE %	24.1%	25.2%	1.1pp

• Revenue up 2.5% ahead of market growth of 1.3%
• continued share growth in core segments R&R, commercial, detached houses
• strong growth ahead of market in eastern seaboard NSW (+11%), VIC (+5%), QLD (+3%) partially offset by weak WA market (-17%)
• sanitaryware sales up 6% assisted by strong market response to Caroma Cleanflush launch
• continued growth with most major customers
• EBIT up 3.5% focus on premium mix in core segments and margin to offset cost and FX impacts
• EBIT margin up 0.3 ppts continued focus on margin management
• ROFE up 1.1 ppts continued effective use of capital across the business

Door & Access Systems – addressing short term performance and strengthening for medium term

Continuing Operations A\$m	FY16	FY17	% Change
Revenue	97.7	95.9	-1.8%
EBITDA	8.7	7.7	-11.5%
EBIT	7.3	6.3	-13.7%
EBIT Margin %	7.5%	6.6%	-0.9pp
ROFE %	13.7%	12.3%	-1.4pp

• Revenue down 2%
• growth in eastern states VIC (+2%), QLD (+2%) more than offset by weak WA market (-27%)
• Refocusing D&A business to address short term performance and reposition for growth drives EBIT improvement in 2H vs 1HFY17:
• refocused sales team to improve sales effectiveness focused on core segments
• simplified structure (easier for customers to deal with us)
• rationalisation of API branch network in Victoria
• new API team structure

Continued progress on our strategy

Leverage and build on core assets & brands to drive revenue and market share growth

Add value to customers through improved insights, analytics and processes

Build "fit for future" culture, engagement and capability

Build an advantaged Supply Chain to deliver superior NPD, Quality and Service at best cost

Drive cost out in SG&A and Supply Chain to improve profitability and allow selective reinvestment

Strategic priority Progress against priorities

• Growing share consistently in core segments
• Strong new product and breakthrough innovation pipeline in FY18
• Consumer engagement concept centres opening (Adelaide and Sydney); digital presence enhanced
• Clear portfolio direction on core brands: Caroma, Clark and Dorf
• Joint business plans with major merchants driving agreed targets / initiatives
• Specific customer plans for R&R re product ranging, improved showroom presence
• Initiatives in place to unlock untapped growth areas Aged Care, Commercial R&R
• Employee alignment on values and behaviours to drive strategy
• Employee engagement strategy Get, Grow, Keep
• Sales and Marketing capability build implemented
• Dual-sourcing progressing for continuity of supply
• First Asian consolidation hub complete direct shipping to port
• Integrated Business Planning focused on inventory management to drive working capital improvement
• Ahead of target to reduce costs by \$13-15m by FY19
• Corporate costs down a further 2%

FY18 outlook

Update on market activity

Update on first quarter FY18 trading conditions

Key priorities for FY18

Next market Update

Key area FY18 commentary

• Renovations & Replacement segment expected to remain relatively stable
• Expect slow-down in residential construction markets however, lag between approvals and completions supports continued demand. Multi-Residential not a core focus segment
• Commercial forward order book remains solid
• Group sales and EBIT in line with prior corresponding period
• Bathroom & Kitchens sales slightly ahead of prior corresponding period
• Door & Access Systems sales slightly behind prior corresponding period
  • Focus on performance improvement
• Innovation roll-out / pricing in Q2 FY18
• Consumer Engagement Initiatives targeting R&R segment (consumer engagement and brand building, merchant support)
• Category Leadership implement customer business plans (ranging, category leadership, service / delivery)
• Business efficiency Supply chain improvement focused on inventory management and service supported by new warehouse implementation
• Update provided at Interim Results 19 February 2018

Formal Business

Financial statements

Financial Statements for the year ended 30 June 2017

Resolution 1 – Re-election of John Mulcahy

That Mr John Mulcahy, who retires as a director of the Company in accordance with clause 10.3 of the Company's Constitution, be re-elected as a director of the Company

Resolution 2 – Re-election of Richard Thornton

That Mr Richard Thornton, who retires as a director of the Company in accordance with clause 10.3 of the Company's Constitution, be re-elected as a director of the Company.

Resolution 3 – Election of Jane McKellar

That Ms Jane McKellar, who retires as a director of the Company in accordance with clause 10.11 of the Company's Constitution, be re-elected as a director of the Company.

Resolution 4 – Election of Stephen Goddard

That Mr Stephen Goddard, who retires as a director of the Company in accordance with clause 10.11 of the Company's Constitution, be re-elected as a director of the Company.

Resolution 5 - Adoption of Remuneration Report

That the Remuneration Report for the year ended 30 June 2017 be adopted.

Resolution 6 – Approval of Performance Rights

That for the purposes of ASX Listing Rule 10.14, and for all other purposes, approval is hereby given for the grant of up to 250,000 Performance Rights (incorporating the right to acquire shares in the Company) to the Managing Director, Mr Tim Salt, on the terms set out in the accompanying Explanatory Memorandum and under the GWA Group Limited Long Term Incentive Plan (LTIP) which is constituted and administered in accordance with the Rules of the LTIP.

Resolution 7 – Approval of Performance Rights

That for the purposes of ASX Listing Rule 10.14, and for all other purposes, approval is hereby given for the grant of up to 50,000 Performance Rights (incorporating the right to acquire shares in the Company) to the Executive Director, Mr Richard Thornton, on the terms set out in the accompanying Explanatory Memorandum and under the GWA Group Limited Long Term Incentive Plan (LTIP) which is constituted and administered in accordance with the Rules of the LTIP.

th Annual General Meeting

th October 2017