MCPHERSON'S LIMITED — AGM Information 2021

Nov 22, 2021

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ANNUAL GENERAL MEETING PRESENTATION 23 NOVEMBER 2021

DISCLAIMER

The following provisions apply to this presentation. Please consider its contents carefully.

Currency of information

The information contained in this presentation is current as at the date of this presentation or such earlier date as specified in this presentation.

Summary information

The information in this presentation is of a general nature only. It does not purport to be complete.

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The information contained in this presentation is not investment or financial product advice or any recommendation to acquire securities in McPherson's Limited (ASX: MCP). This presentation has been prepared without taking into account your investment objectives, financial situation or particular needs.

Company information

MCP's historical information in this presentation is, or is based on, information that has been released to ASX. This presentation should be read in conjunction with MCP's other periodic and continuous disclosure information lodged with ASX, which are available at www.asx.com.au.

Third party information

Certain market and industry data used in connection with this presentation may have been obtained from research, surveys or studies conducted by third parties, including industry or general publications. Neither MCP nor any of its related bodies corporate, directors, employees, agents or advisers have independently verified such market or industry data.

Historical information

Past performance information in this presentation is given for illustrative purposes only and should not be relied upon as, and is not, an indication of future performance.

Forward looking information

This presentation contains certain forward-looking statements that involve risks and uncertainties. MCP can give no assurance that these expectations will prove to be correct. You are cautioned not to place undue reliance on any forward-looking statements. Actual results may differ materially from those anticipated in these forward-looking statements due to many important factors, risks and uncertainties including, without limitation, risks associated with future capital needs, general economic uncertainty and other risks detailed from time to time in MCP's announcements to ASX. MCP does not undertake any obligation to release publicly any revisions to any “forward-looking statement” to reflect events or circumstances after the date of this presentation, except as may be required under applicable laws.

Disclaimer

No representation or warranty, whether express or implied, is made by any person as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this presentation. You should carry out your own investigations and analysis of MCP and verify the accuracy, reliability and completeness of the information contained in this presentation.

Neither MCP nor any of its related bodies corporate, directors, employees, agents and advisers accept any responsibility for any loss arising from anyone acting or refraining from acting in reliance on the contents of this presentation.

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ARI MERVIS
CHAIRMAN
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MCP 2021 AGM

OUR BOARD

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ARI MERVIS Independent Non-Executive Director and Chairman

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GEOFFREY R. PEARCE Non-Independent

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JANE M. McKELLAR Independent Non-Executive Director

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ALISON J. COOK Independent Non-Executive Director

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GRAHAM A. CUBBIN Independent Non-Executive Director

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GRANT PECK CEO & Managing Director

Non-Executive Director

MCP 2021 AGM

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AGENDA

1. CHAIRMAN’S ADDRESS

2. CEO & MANAGING DIRECTOR’S ADDRESS

3. FORMAL BUSINESS

3.1 FINANCIAL STATEMENTS AND OTHER REPORTS 3.2 REMUNERATION REPORT 3.3 ELECTION OF A DIRECTOR – ARI MERVIS 3.4 RE-ELECTION OF A DIRECTOR – ALISON COOK 3.5 RE-ELECTION OF A DIRECTOR – GEOFFREY PEARCE 3.6 APPROVAL OF ISSUE OF PERFORMANCE RIGHTS TO MANAGING DIRECTOR – GRANT PECK

4. SHAREHOLDER QUESTIONS

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ONLINE ATTENDEES – VOTING

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123-456-789
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When open, the vote will be accessible by selecting the voting tab at the top of the screen

To vote simply select the direction in which you would like to cast your vote. The selected option will change colour For Against Abstain

There is no submit or send button, your selection is automatically recorded. You can change your mind or cancel your vote any time before the poll is closed

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ONLINE ATTENDEES – TEXT QUESTION PROCESS

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When the question function is available, the messaging tab will appear at the top of the screen

To submit a question, type your question in the “Ask a question” box and press the send arrow

Your question will be sent immediately for review Received

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123-456-789
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ONLINE ATTENDEES – AUDIO QUESTION PROCESS

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123-456-789

When the audio questions line is available, a link will appear on the home tab titled Asking Audio Questions

If you would like to ask an audio question, pause the meeting broadcast and click on the link

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You will be prompted to enter your name and the topic of your question before being placed in the audio questions queue

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PROXIES AND VOTING

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AGENDA

1. CHAIRMAN’S ADDRESS

1. CEO & MANAGING DIRECTOR’S ADDRESS

2. FORMAL BUSINESS

3. SHAREHOLDER QUESTIONS

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GRANT PECK
CEO &
MANAGING
DIRECTOR
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MCP 2021 AGM

FY21 RESULTS SUMMARY

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TOTAL SALES REVENUE SALES EXCLUDING CHINA
$200.5m $193.8m
FY20: $222.2m FY20: $185.0m
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STRONG CASH CONVERSION

UNDERLYING EBIT

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$11.3m
108%
FY20: $25.1m
FY20: 88%
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FULL YEAR DIVIDEND 5.0cps fully franked

ROBUST BALANCE SHEET

$8.4m in debt Gearing 6.8%

HIGHLIGHTS

• ✓ Resilient domestic performance offset by lower international sales of Dr. LeWinn's and one-off items

• ✓ Sales revenue excluding China increased 5% to $193.8 million

• ✓ 9% increase in domestic sales of company owned brands v FY20

• ✓ Underlying EBIT of $11.3 million

• ✓ Strong balance sheet with low debt and gearing

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CHINA MARKET UPDATE

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2017 – 2020

• Dr. LeWinn’s experienced stellar growth from 2017 – 2020 fueled by the diagou phenomenon

• Extremely successful in key Chinese consumer promotional periods

• Inventory positions built in anticipation of continued strong demand

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2021

• Significant change in the fundamentals of cross-border e- commerce for skincare products

• Diagou demand for Australian products materially reduced

• Stronger domestic Chinese skincare offerings

• Vulnerability of overreliance on one channel in one country became clear

• Moderation of opportunity for Dr. LeWinn’s in China

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2022 and beyond

• Expected rebound in demand from China in FY22 has not occurred

• Announced decision to incur $8 million - $10 million provision in 1H22 in relation to excess Dr. LeWinn's inventory

• Revised strategy involving broader distribution, avoiding over-reliance on one channel in one country

• Measured and self-funding approach to international expansion

• First US sales recorded in September 2021

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HEALTH, WELLNESS & BEAUTY – A GROWING MARKET

WE’RE OPERATING IN A $15.2 BILLION MARKET (AUD)

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HEALTH & WELLNESS [1] BEAUTY [1]
($7.5 Billion, +5.7% vs Year Ago) ($7.7 Billion, +4.6% vs Year Ago)
HEALTHY SKIN &
NATURAL HEALTH
BEAUTY
Immunity & Protection Cosmeceutical
Sleep & Mood Australian Natural
Joint & Movement Essential Beauty
Digestive Health Clean Beauty
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LEVERAGED TO POSITIVE MACRO TRENDS

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PRO-ACTIVE AUSTRALIAN BEAUTY AT SUSTAINABLE
BEAUTY BEAUTY HOME LIVING
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1. Health & Wellness, Beauty Market size defined using IRI MarketEdge based on Health, Wellness & Beauty definitions provided by McPherson’s Consumer Products IRI Big Picture: Pharmacy Moving Annual Total (MAT) 02/08/2020, plus Grocery MAT 03/01/2021 Vs MAT Year Ago

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OPERATIONAL REVIEW

Target $300 million sales and $50 million EBIT in FY26

6 CORE OWNED-BRANDS & KEY CHANNELS

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INITIATIVES TARGETED TO DELIVER $230 MILLION SALES AND $29 MILLION EBIT BY FY26

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HEALTH & WELLNESS SELECTIVELY EXPAND
A NEW GROWTH PLATFORM INTERNATIONAL FOOTPRINT
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INITIATIVES TARGETED TO DELIVER
$40 MILLION SALES AND $8 MILLION
EBIT BY FY26
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INITIATIVES TARGETED TO DELIVER $30 MILLION SALES AND $7 MILLION EBIT BY FY26

COST OPTIMISATION INITIATIVES TARGETED TO DELIVER $6 MILLION EBIT BY FY26

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Restructured team to drive results
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6 CORE OWNED BRANDS & KEY CHANNELS

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6 CORE

OWNED-BRANDS

PLANNED INITIATIVES

• Expand core brands via better ranging, customer and channel expansion

• • Tap into adjacencies and focus on innovation

ACHIEVEMENTS

& KEY

CHANNELS

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Core brand growth

• Core owned-brands recorded 9% growth YTD up to 30 October 2021 vs pcp

• Significant growth in Pharmacy channel, up 11% YTD to 30 October 2021 vs pcp

• Gaining share in Manicare, Lady Jayne, Swisspers and A’kin haircare

• Multix Greener pioneer in sustainable offering with 79% of sustainable buyers purchasing Multix Greener

• Channel expansion

• Increase of 60,000 distribution points*, on track to reach FY22 target of 1.2 million

• Launched in Kogan Group, The Iconic, Pretty Green Australian Eco-Friendly Online Supermarket

• Customer collaboration

• Strong collaborative activity driving key Beauty Essential brands and skincare including CWH and Priceline TVCs

Expand into adjacencies through innovation

• Innovation continues to fuel growth with incremental sales from 163 active and planned projects in the NPD pipeline

• Expansion into attractive adjacent categories including beauty supplements, Baby and Men's Grooming

* Individual stock keeping unit in an individual retail outlet

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HEALTH & WELLNESS – A NEW GROWTH PLATFORM

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HEALTH & WELLNESS A NEW GROWTH PLATFORM

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HIGHLIGHTS

• Acquired Global Therapeutics' Fusion Health and Oriental Botanical brands in December 2020, establishing a new platform for growth – McPherson’s Health & Wellness Division.

• Health category represents a key adjacency that our core skill sets, broad customer base, and logistics capability are uniquely positioned to support.

• Successful integration into MCP, including IT and financial systems, and stock now being distributed from MCP Kingsgrove warehouse. Service offering alignment and go to market distribution review underway.

• Recorded $9.5 million in sales in FY21 with brands contributing from 1 December 2020 (7 months).

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HEALTH & WELLNESS – A NEW GROWTH PLATFORM

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HEALTH & WELLNESS A NEW GROWTH PLATFORM

PLANNED INITIATIVES

• Access ranging upside in Australian pharmacy channel, reset in New Zealand

• • Accelerate New Product Development (NPD)

ACHIEVEMENTS

Stock shortages addressed

• Stock shortages addressed with availability now over 95%

• On target to deliver planned sales and EBIT for FY22 despite key health store channel impacted by COVID lockdowns

Channel expansion

• Achieved incremental distribution of A'kin in to 129 health stores

NPD

• NPD to deliver 7.5% of sales in FY22 as consumers continue to seek natural solutions to immunity.

Increased consumer engagement

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• Refreshed Fusion brand identity to appeal to consumers

• Successful Wintering Well campaign

• Increased Fusion Health website traffic by 48% and new users by 44%, Over 23 million ad impressions and 2 million video views across Google and Facebook, over 115,000 click through to Fusion Healths’ website

• eCommerce sale revenue up 58% YOY

Efficiencies

• Swift progress on operational efficiency initiatives including new WA go-to-market distribution strategy, which creates improved customer insights. This strategy will be cost neutral in FY22 and on track to deliver 10% improvement in Health EBIT in FY23.

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INTERNATIONAL FOOTPRINT

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SELECTIVELY EXPAND

INTERNATIONAL FOOTPRINT

PLANNED INITIATIVES

• Build on Dr. LeWinn’s success but de-risk approach

• Progress entry into targeted non-China markets

ACHIEVEMENTS

China

• Announced decision to incur a one-off provision in the range of $8 million - $10 million in relation to excess Dr. LeWinn's inventory

• USA

• Contracted Boston Distribution & Sales Factory to commence sales in USA e-commerce market, on a self-funding basis

• • Distribution commenced in the US with first sales recorded in September 2021; live on Amazon

• Dr. LeWinn's Global Brand IP

• Registered Dr. LeWinn’s trademark in key markets: UK, EU, USA, UAE

Fusion Health

• Fusion Health international market entry assessment in FY22

Middle East & South-East Asia

• A'Kin launching on Look Fantastic in H2'22

• Dr LeWinn's available at Watson's in Saudi Arabia, Kuwait and targeting Singapore in 2H22

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COST OPTIMISATION

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OUR APPROACH

Drive efficiencies in our business and optimise our supply chain and distribution process to best support our growth initiatives

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COST
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OPTIMISATION
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KEY ACTIVITIES

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Realigning Business in
Reduced Senior
Three Commercial Business Exiting Joint Ventures
Leadership Team
Units
Business will be centered • Removes unnecessary • Leadership focused on
around three units: complexity three key business units,
▪
Core Range – ANZ with accountability
▪ Health
▪ International
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Cost base recalibration resulted in annualised cost reductions of $3.5 million in line with operational review

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TRADING UPDATE AND GUIDANCE

• No short-term material improvement in sales into China with no expectation of a material profit from trading in China in FY22.

• Continuing improvement in domestic operations (Manicare up 18%, Swisspers up 30%)

• Momentum challenged by supply chain pressure; closely monitoring and managing supply instability

• Cost pressures in commodities and international freight are being addressed

GUIDANCE

• Total sales growth expected between 8% - 10%

• Underlying profit before tax expected between $0.4 million and $0.7 million below 1H21, excluding non-

• 1H22 recurring, significant items

• Including non-recurring, significant items, statutory loss before tax forecast between $2.5 million to $4.5 million

• Total sales growth between 6% - 8%

FY22

• Underlying profit before tax between $1 million and $2 million above FY2021, excluding non-recurring, significant items

• 2H22 projected to be positively impacted by FX hedging and various cost initiatives

• Including non-recurring, significant items, underlying profit before tax forecast between $1 million - $2 million

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CASH AND DIVIDENDS

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Bank debt supports Balance sheet remains Underlying cash maintenance of dividend strong – net bank debt conversation forecast to policy to pay at least 60% $8.4 million be 85% to 90% in FY22 of underlying profit after tax as dividends (subject to appropriate approvals)

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UNIQUE CAPABILITIES

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Innovation driving Supply chain and
Strong demand for
additional ranging and warehouse capacity offers
core products
value opportunities
Rejuvenated team
Strong balance
driving execution of
sheet
strategy
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MCP 2021 AGM

FORMAL RESOLUTIONS

• 1 FINANCIAL STATEMENTS AND OTHER REPORTS

• 2 REMUNERATION REPORT

• 3 ELECTION OF A DIRECTOR – ARI MERVIS

• 4 RE-ELECTION OF A DIRECTOR – ALISON COOK

• 5 RE-ELECTION OF A DIRECTOR – GEOFFREY PEARCE 6 APPROVAL OF ISSUE OF PERFORMANCE RIGHTS TO MANAGING DIRECTOR – GRANT PECK

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AGENDA ITEM 1 – FINANCIAL STATEMENTS AND OTHER REPORTS

• To consider the financial statements and reports for year ended 30 June 2021

• Shareholders are not required to vote or formally approve or adopt the financial reports

• Shareholders can, however, submit questions regarding the financial reports and the company

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AGENDA ITEM 2 – REMUNERATION REPORT

To adopt the remuneration report for the financial year ended 30 June 2021

In accordance with the Corporations Act, this resolution is advisory only and does not bind the company or the directors. The directors will consider the outcome of the vote and comments made by shareholders on the remuneration report at the meeting when reviewing the company’s remuneration policies

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ITEM 2 – PROXY VOTES

PROXY VOTES RECEIVED (MILLIONS) ITEM 2 FOR FOR AGAINST AGAINST OPEN OPEN NO. % NO. % NO. % REMUNERATION REPORT 35.5 76.8% 10.1 21.9% 0.6 1.3%

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AGENDA ITEM 3 –ELECTION OF A DIRECTOR – MR. ARI MERVIS

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To consider and, if thought fit, to pass the following resolution as an ordinary resolution:

“To elect as a director of the company, Mr. Ari Mervis, who having been appointed a director of MCP on 16 February 2021 in accordance with the company's constitution, offers himself for election as a director of MCP”

Relevant information about Mr. Mervis is set out in the explanatory notes to the notice of annual general meeting

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ITEM 3 – PROXY VOTES

	PROXY VOTESRECEIVED(MILLIONS)	PROXY VOTESRECEIVED(MILLIONS)	PROXY VOTESRECEIVED(MILLIONS)
ITEM 3	FOR FOR	AGAINST AGAINST	OPEN OPEN
	NO. %	NO. %	NO. %
ELECT ARI MERVIS	45.8 96.7%	1.0 2.0%	0.6 1.3%

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AGENDA ITEM 4 – RE-ELECTION OF A DIRECTOR – MS. ALISON COOK

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To pass the following resolution as an ordinary resolution:

“To elect, as a director of the company, Ms. Alison cook, who retires by rotation as a director in accordance with the company's constitution and the ASX listing rules and offers herself for re-election”

Relevant information about Ms. Cook is set out in the explanatory notes to the notice of annual general meeting

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ITEM 4 – PROXY VOTES

	PROXY VOTESRECEIVED(MILLIONS)	PROXY VOTESRECEIVED(MILLIONS)	PROXY VOTESRECEIVED(MILLIONS)
ITEM 4	FOR FOR	AGAINST AGAINST	OPEN OPEN
	NO. %	NO. %	NO. %
RE-ELECT ALISON COOK	38.1 80.3%	8.7 18.4%	0.6 1.3%

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AGENDA ITEM 5 – RE-ELECTION OF A DIRECTOR – MR. GEOFFREY PEARCE

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To the resolution as an resolution : pass following ordinary

“To elect, as a director of the company, Mr. Geoff Pearce, who retires by rotation as a director in accordance with the company's constitution and the ASX listing rules and offers himself for re-election”

Relevant information about Mr. Pearce is set out in the explanatory notes to the notice of annual general meeting

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ITEM 5 – PROXY VOTES

	PROXY VOTESRECEIVED(MILLIONS)	PROXY VOTESRECEIVED(MILLIONS)	PROXY VOTESRECEIVED(MILLIONS)
ITEM 5	FOR FOR	AGAINST AGAINST	OPEN OPEN
	NO. %	NO. %	NO. %
RE-ELECT GOEFFREY PEARCE	37.4 80.0%	8.6 18.4%	0.8 1.6%

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AGENDA ITEM 6 –

APPROVAL OF ISSUE OF PERFORMANCE RIGHTS TO THE MANAGING DIRECTOR, MR. GRANT PECK, UNDER THE MCPHERSON'S LIMITED PERFORMANCE RIGHTS PLAN

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To consider and, if thought fit, to pass the following resolution as an ordinary resolution:

“That for the purposes of part 2e.1 of the Corporations Act and ASX listing rule 10.14, and for all other purposes, the grant of performance rights and shares on exercise of such performance rights to Mr. Grant Peck, the managing director of the company, under the McPherson’s Limited performance rights plan and his employment agreement with the company, is approved on the terms set out in the explanatory notes to the notice of annual general meeting ”

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ITEM 6 – PROXY VOTES

	PROXY VOTESRECEIVED(MILLIONS)	PROXY VOTESRECEIVED(MILLIONS)	PROXY VOTESRECEIVED(MILLIONS)
ITEM 6	FOR FOR	AGAINST AGAINST	OPEN OPEN
	NO. %	NO. %	NO. %
APPROVAL OF PERFORMANCE RIGHTS GRANT PECK	22.9 48.6%	23.7 50.1%	0.6 1.3%

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Q & A SESSION
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THANK YOU

A’KIN Natural Deodorant

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MCP 2021 AGM