IVE GROUP LIMITED — Interim / Quarterly Report 2020

Feb 25, 2020

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IVE Group Limited FY20 H1 Results Presentation

ASX : IGL 26 February 2020

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We are forever seeking

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new ways to navigate
the marketing maze
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4 Business 7 Financials
overview
10 Business 12 Outlook
update statement
13
Appendices
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Contents

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Our
integrated
Creative Data-Driven
Services Communications
service
Integrated
offering
Marketing
Founded in 1921, we are Australia’s
leading holistic marketing company.
With an unmatched breadth and depth of
offering, we guide our clients from idea to
execution. We help brands navigate the Production
& Distribution
complex marketing maze, and connect our
clients with customers wherever, whenever.
Specialising in creative, data-driven
communications, integrated marketing,
production and distribution, we bring
together the capabilities, specialists and
technology needed to make customer
connection seamless.
IVE Group Limited FY20 H1 Results Presentation | 4
gofurther, so our clientscanto
We o.
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IVE Group Limited FY20 H1 Results Presentation | 4

Creative Data-Driven Services Communications Visual CX data and insights Motion Marketing technology Digital Omni-channel deployment Personalised Retrieval and enrichment Structural Tele-fundraising Production Integrated & Distribution Marketing Print Resource management Retail display Supply chain Premiums and merchandising Reporting Integrated logistics

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IVE Group Limited FY20 H1 Results Presentation | 5

Financial performance dashboard

(pro forma and pre AASB16)

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REVENUE EBITDA NPAT
$360.2m $40.1m $17.6m
down 4.1% on PCP down 7.8% on PCP down 7.3% on PCP
EBITDA MARGIN INTERIM DIVIDEND
Gross profit
margin consistent
11.1% 8.6c
with FY19 full year
consistent with per share
FY19 full year fully franked
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• The Pro Forma financial results are on a non IFRS basis and are not audited or reviewed

• The Pro Forma results exclude all restructuring and acquisition expenses (refer Appendix C)

• The interim dividend of 8.6c is within the board’s stated policy 65-75% of Pro Forma NPAT

IVE Group Limited FY20 H1 Results Presentation | 6

F I N A N C I A L S

Profit & Loss (pre AASB16)

● Revenue decrease of 4.1%

• Impacted by softer macro- economic conditions, particularly in retail sector

• Strong momentum on new customers secured

• A number of key contract renewals/extensions

• No customer losses of note

● Gross profit margin of 47.8% (48.2% in PCP & 47.9% FY19 full year)

• Paper cost increases during FY19 in our web offset business continued to negatively impact, however the global paper market is less volatile with pricing more stable relative to the past year

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Pro Forma (ex restructure & acquistion)
Post AASB16 Pre AASB16
Actual Impact Actual Actual
Variance Variance
H1 H1 H1 H1
$M %
FY2020 FY2020 FY2020 FY2019
Revenue 360.2 0.0 360.2 375.6 —15.5 —4.1%
Gross Profit 173.4 1.4 172.0 180.9 —8.9 —4.9%
% of Revenue 48.2% 47.8% 48.2% —0.9%
EBITDA 51.1 11.1 40.1 43.4 —3.4 —7.8%
% of Revenue 14.2% 11.1% 11.6% —3.8%
EBIT 29.2 0.5 28.7 32.1 —3.4 —10.6%
% of Revenue 8.1% 8.0% 8.5% —6.8%
Profit before tax 24.0 —1.4 25.3 27.4 —2.1 —7.7%
NPAT 16.6 —0.9 17.6 19.0 —1.4 —7.3%
NPATA 18.5 —0.9 19.5 20.8 —1.4 —6.7%
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• The Pro Forma financial results are on a non IFRS basis and are not audited or reviewed.

• The Pro Forma results exclude all restructuring and acquisition expenses (refer Appendix C).

• NPATA excluding amortisation of customer contracts.

● EBITDA of $40.1M ($43.4M in PCP)

• Primarily driven by reduced revenue offset by cost base efficiencies

● EBITDA margin of 11.1% (11.6% in PCP & 11.1% in FY19 full year)

• Reduced revenue

• Gross profit stable

• Continued focus on productivity and cost management

● NPAT of $17.6M (7.3% decline on PCP) impacted by reduced EBITDA on PCP

• On adoption of AASB16, the Group’s EBITDA result has increased significantly compared to prior year. The new accounting standard requires operating leases previously expensed within EBITDA to be brought on to the balance sheet as a right-of-use asset and lease liability. These balances reduce over the lease term as depreciation and interest expense.

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IVE Group Limited FY20 H1 Results Presentation | 7

F I N A N C I A L S

Net debt, capital expenditure and balance sheet

• Net debt increase from June 2019 reflects seasonal increase in working capital. Working capital is forecast to decrease for H2 in line with previous years.

• $5.0M reduction in inventory from June 2019, with further reduction expected in H2

• H1 capital expenditure of $6.3M excluding ERP/MIS enhancement. Full year expected to be circa $10.0M as communicated in August 2019

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Pre AASB16
Dec 19 Jun 19
$M $M
Borrowings — short term 7.2 6.3
Borrowings — long term 166.6 168.9
Borrowings — Sub Total 173.8 175.2
Cash —23.7 —31.5
Net Debt 150.1 143.7
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*Loans & borrowings are gross of facility establishment costs

• *Excludes right of use liabilities impacts from adopting AASB16

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IVE Group Limited FY20 H1 Results Presentation | 8

F I N A N C I A L S

Cashflow and dividend

• Pro forma free cash conversion of 67.4%

• Operating cash flow impacted by seasonal increase in working capital

• Pro forma EPS of 11.9c

• Interim dividend of 8.6 cents per share, fully franked with payout ratio of 72.4% pro forma NPAT

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Pre AASB16
Pro Forma IFRS
H1 FY2020 H1 FY2020
$M $M
EBITDA 40.1 34.2
Movement in NWC/ —13.1 —10.8
non cash items in EBITDA
Free Cash Flow 27.0 23.4
Capital expenditure (net) —6.2 —6.2
Net cash flow 20.8 17.2
before financing and taxation
Tax —8.5 —7.4
Payment of finance lease liabilities —3.2 —3.2
Dividends paid —11.4 —11.4
Interest paid —3.1 —3.1
Net cash flow —5.4 —7.9
Free cash conversion to EBITDA 67.4% 68.5%
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• Cash flow based on pre AASB16

• The Pro Forma financial results are on a non IFRS basis and are not audited or reviewed

• The Pro Forma results exclude all restructuring and acquisition expenses (refer Appendix C)

IVE Group Limited FY20 H1 Results Presentation | 9

B U S I N E S S U P D AT E

Salmat Marketing Solutions & Reach Media New Zealand

The acquisition of Salmat Marketing Solutions and Reach Media New Zealand was completed on January 1, 2020 for a purchase consideration of $25.4 million. The acquisitions were fully debt funded and are expected to be accretive to earnings in H2FY20.

The acquisition will be bolstered by a $25-30M capital investment program in FY21 to automate the Marketing Solutions catalogue collation process prior to letterbox delivery for the existing 12,000 strong national (Australian) walker network.

Transaction rationale

• these acquisitions complete the final phase of our strategic roadmap over recent years to further expand and strengthen our offer to retail clients

• the combination of Australia’s largest letterbox distribution business with IVE’s broader print, data analytics and marketing services offer provides an exciting opportunity for our clients to enhance returns on their marketing spend through our highly integrated offer

• our commitment to a significant capital investment program over the next 18 months to automate catalogue collation will enhance the ongoing sustainability of the national walker network resulting in a stronger distribution channel delivering improved ROI for IVE’s retail clients

• The acquisition also provides a significant opportunity to market our compelling value proposition, particularly our powerful print and national distribution offer, to SME’s

• Marketing Solutions and Reach Media will continue to operate as standalone businesses

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IVE Group Limited FY20 H1 Results Presentation | 10

B U S I N E S S U P D AT E

Salmat Marketing Solutions & Reach Media New Zealand — cont.

Update since completion

• The acquisition has been extremely well received by all Salmat/Reach customers, many of whom were existing IVE customers

• Salmat and Reach staff have responded very positively

• The acquisition has been broadly recognised as an ideal fit to IVE’s existing powerful retail offer

• The foreshadowed capital investment program to strengthen the national walker network and deliver a superior product has been welcomed by the sector as an important step in enhancing the catalogue channel

• The capital investment business plan will be complete by the end of February 2020

• 12 month business plan under IVE ownership near complete

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IVE Group Limited FY20 H1 Results Presentation | 11

O U T L O O K S TAT E M E N T

Outlook

• Full year FY20 Pro Forma EBITDA[1] guidance is in the range of $75-79M

• Continuing softer macro-economic conditions impacting revenue, particularly in retail sector

• The impacts of the COVID-19 virus on our Asian supply chain and broader customer base remain uncertain

• Gross profit margin expected to remain stable

• Key inputs cost of paper and energy have stabilised, albeit remain elevated

Strategic Focus

• Continue to unlock value from the strategic investment program over the last 3 years

• Communicate effectively under one brand our diversified powerful value proposition and reaffirm the strength of our market leading position across the sectors we operate in

• The successful integration of the recent acquisitions of Salmat Marketing Solutions and Reach Media NZ

• Finalise integration plans

• Commit to ‘industry changing’ catalogue collation investment. Estimated cost of $25-30M funded through a combination of cash reserves and existing facilities

• Medium term:

• The continued solid and stable performance of the business will generate strong free cashflow over the years ahead

• Capital expenditure (excluding FY21 catalogue collation equipment) over the next 2 years expected to reduce significantly on prior years

• No deferred consideration remains payable on prior acquisitions

• No expected change to dividend policy with resulting solid dividend profile to continue

• The Pro Forma guidance number is on a non IFRS basis and pre AASB16 The Pro Forma guidance number excludes all restructuring and acquisition expenses

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IVE Group Limited FY20 H1 Results Presentation | 12

A P P E N D I C E S

Appendix A

Non-IFRS financial information

In this Results Presentation, certain non-IFRS financial information has also been included to allow investors to understand the underlying performance of IVE.

The Directors believe that the results before adoption of AASB16, restructuring and acquisitions costs, and Pro Forma comparisons, better reflect the underlying operating performance and is consistent with full year guidance, which differs from the Statutory presentation.

The non-IFRS Pro Forma financial information for the half year ended 31 December 2019 and the pre AASB16 information have not been audited or reviewed.

Financial information in this results presentation is expressed in millions and has been rounded to one decimal place. This differs from the interim financial report where numbers are expressed in thousands. As a result, some minor rounding discrepancies occur.

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IVE Group Limited FY20 H1 Results Presentation | 13

Appendix B

IFRS balance sheet

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Post AASB16 AASB16 Impact Pre AASB16 Pre AASB16
Dec 19 Dec 19 Dec 19 Jun 19
$M $M $M $M
Current Assets
Cash and cash equivalents 23.7 0.0 23.7 31.5
Trade receivables, prepayments and others 120.8 0.0 120.8 120.6
Inventories 61.0 0.0 61.0 66.0
Total Current Assets 205.5 0.0 205.5 218.1
Non Current Assets
Deferred tax assets 14.3 2.7 11.6 13.5
Property, plant and equipment 114.7 —19.7 134.4 135.3
Property, plant and equipment (ROUA) 111.2 111.2 0.0 0.0
Intangible assets and goodwill 161.5 0.0 161.5 163.6
Other (lease receivable) 0.5 0.5 0.0 0.0
Total Non Current Assets 402.2 94.7 307.5 312.4
Total Assets 607.7 94.7 513.0 530.5
Current Liabilities
Trade payables and provisions 107.5 —5.2 112.7 128.5
Loans and borrowings 3.0 —4.0 7.0 6.2
Lease liability (ROUA) 30.2 30.2 0.0 0.0
Current tax payable 0.7 0.0 0.7 2.9
Total Current Liabilities 141.4 21.0 120.4 137.6
Non Current Liabilities
Trade payables and provisions 9.4 —10.5 19.9 19.8
Loans and borrowings 153.2 —12.0 165.2 167.3
Lease liability (ROUA) 110.3 110.3 0.0 0.0
Total Non Current Liabilities 272.9 87.8 185.1 187.1
Total Liabilities 414.3 108.8 305.5 324.7
Net Assets 193.4 —14.1 207.5 205.8
Equity
Share Capital 156.5 0.0 156.5 156.5
Other reserves —0.7 0.0 —0.7 —0.5
Retained Earnings 37.6 —14.1 51.7 49.8
Total Equity 193.4 —14.1 207.5 205.8
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IVE Group Limited FY20 H1 Results Presentation | 14

Appendix C

IFRS profit and loss

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Post AASB16 Pre AASB16
AASB16
Actual Actual Actual Variance Variance
Impact H1
H1 FY2020 H1 FY2020 FY2019 $M %
FY2020
Revenue 360.2 0.0 360.2 375.6 —15.5 —4.1%
Gross Profit 173.4 1.4 172.0 180.9 —8.9 —4.9%
% of Revenue 48.2% 47.8% 48.2% —0.9%
EBITDA 45.4 11.1 34.3 42.6 —8.3 —19.4%
% of Revenue 12.6% 9.5% 11.3% —16.0%
EBIT 23.4 0.5 22.9 31.2 —8.3 —26.6%
% of Revenue 6.5% 6.4% 8.3% —23.5%
Profit before tax 18.2 —1.4 19.5 26.6 —7.0 —26.4%
NPAT 12.4 —1.0 13.3 18.4 —5.1 —27.5%
NPATA 14.2 —0.9 15.2 20.2 —5.1 —25.0%
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IFRS to pro forma NPAT reconciliation

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Post AASB16 Pre AASB16
H1 FY20 Actual H1 FY20 Actual
$M $M
IFRS NPAT 12.4 13.3
Restructure costs 2.8 2.8
Acquistion costs 2.9 2.9
Tax effect of adjustments —1.4 —1.4
Pro forma NPAT 16.6 17.6
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IVE Group Limited FY20 H1 Results Presentation | 15

Appendix D

Disclaimer

No recommendation, offer, invitation or advice

This presentation contains general information about the activities of IVE Group Limited (IVE) which is current as at 31 December 2019. It is in summary form and does not purport to be complete. It presents financial information on both a statutory basis (prepared in accordance with Australian accounting standards which comply with International Financial Reporting Standards (IFRS) as well as information provided on a non-IFRS basis. This presentation is not a recommendation or advice in relation to IVE or any product or service offered by IVE’s subsidiaries.

This presentation is not intended to be relied upon as advice to investors or potential investors, and does not contain all information relevant or necessary for an investment decision. It should be read in conjunction with IVE’s other periodic and continuous disclosure announcements filed with the Australian Securities Exchange, and in particular the half year to 31 December 2019. These are also available at www.ivegroup.com.au. Investors and potential investors should make their own independent assessment of the information in this presentation and obtain their own independent advice from a qualified adviser having regard to their objectives, financial situation and needs before taking any action.

Disclaimer

No representation or warranty, express or implied, is made as to the accuracy, adequacy or reliability of any statements, estimates or opinions or other information contained in this presentation. To the maximum extent permitted by law, IVE, its subsidiaries and their respective directors, officers, employees and agents disclaim all liability and responsibility for any direct or indirect loss or damage which may be suffered by any recipient through use of or reliance on anything contained in or omitted from this presentation. No recommendation is made as to how investors should make an investment decision. Investors must rely on their own examination of IVE, including the merits and risks involved.

Investors and potential investors should consult with their own professional advisors in connection with any investment decision in relation to IVE securities.

Forward looking statements

The information in this presentation is for general information only. To the extent that certain statements contained in this presentation may constitute “forwardlooking statements” or statements about “future matters”, the information reflects IVE’s intent, belief or expectations at the date of this presentation. Subject to any continuing obligations under applicable law or any relevant listing rules of the Australian Securities Exchange, IVE disclaims any obligation or undertaking to disseminate any updates or revisions to this information

over time. Any forward-looking statements, including projections, guidance on future revenues, earnings and estimates, are provided as a general guide only and should not be relied upon as an indication or guarantee of future performance.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause IVE’s actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements.

Investment risk

Any investment in IVE securities is subject to investment and other known and unknown risks, some of which are beyond the control of IVE. Any forward-looking statements, opinions and estimates in this presentation are based on assumptions and contingencies which are subject to change without notice, as are statements about market and industry trends, which are based on interpretations of current market conditions. For example, the factors that are likely to affect the results of IVE include, but are not limited to, general economic conditions in Australia, exchange rates, competition in the markets in which IVE operates or may operate and the inherent regulatory risks in the businesses of IVE. Neither IVE, nor any other person, gives any representation, assurance or guarantee that the occurrence of the events expressed or

implied in any forward-looking statements in this presentation will actually occur. In addition, please note that past performance is no guarantee or indication of future performance.

Jurisdiction

This presentation does not constitute an offer to issue or sell, or solicitation of an offer to buy, any securities or other financial products in any jurisdiction. The distribution of this presentation outside Australia may be restricted by law. Any recipient of this presentation outside Australia must seek advice on and observe any such restrictions. This presentation may not be reproduced or published, in whole or in part, for any purpose without the prior written permission of IVE.

This presentation does not constitute an offer to sell, or a solicitation of an offer to buy, any securities in the United States. Any such securities have not been, and will not be, registered under the U.S. Securities Act of 1933 (Securities Act), or the securities laws of any state or other jurisdiction of the United States and may not be offered or sold, directly or indirectly, in the United States or to, or for the account or benefit of, persons in the United States, except in a transaction exempt from, or not subject to, registration under the Securities Act and applicable US state securities laws.

IVE Group Limited FY20 H1 Results Presentation | 16

IVE Group Limited ABN 62 606 252 644

Level 3, 35 Clarence Street Sydney NSW 2000

+61 2 8020 4400

Geoff Selig Executive Chairman

Matt Aitken

Chief Executive Officer

Darren Dunkley Chief Financial Officer

ivegroup.com.au

Authorised by the IVE Board

Contact:

Richard Nelson Investor Relations richard.nelson@ivegroup.com.au +61 2 8064 5425