SIMONDS GROUP LIMITED — Investor Presentation 2016

Feb 24, 2016

Simonds Group 1H2016 Results Presentation

Robert Stubbs – Acting Chief Executive Officer & Chief Financial Officer Gerard Healy – CEO Builders Academy Australia Chris Troman – CEO Simonds Homes Australia

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25[th] February 2016

Contents

• 1H16 Headlines

• Financial Performance

• Simonds Homes Australia

• Builders Academy Australia

• Discover Developments

• Madisson Projects

• Group Outlook

Appendix: Financial Statements

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1H16 Group Headlines

Challenging half-year… significant investment in east coast expansion continues

• Revenue growth of 6.7% pcp for Group

• Simonds Homes Australia (SHA) up 9.1% to $281.7m

• Builders Academy Australia (BAA) up 6.2% to $11.6m

• New Group CEO Matthew Chun commences 1 Apr ‘16

• Simonds Homes east coast expansion continues with solid revenue growth in Qld, NSW and SA

• Land development division, Discover Developments Land Syndicate #1 fully subscribed ($6m)

• Continued investment in IT systems & capability

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• 25 Jan ‘16 Announcement of orderly closure of lossmaking Madisson Projects business (focussed on B2B, medium-density including apartments)

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Statutory to Pro Forma Reconciliation

	Statutory reconciliation ($m)	1H16 Revenue	1H16 EBITDA	1H16 NPAT	1H15 Revenue	1H15 EBITDA	1H15 NPAT
	Statutory result(1)	318.2	(0.4)	(2.2)	299.2	(17.1)	(22.3)
	IPO Share-based Payments(non-cash) (2)	-	-	-	-	28.2	28.2
	IPO Restructure / Non-recurring costs	-	0.1	0.1	-	4.7	3.2
	Madisson Projects division(3)	(23.9)	9.2	6.5	(23.4)	0.8	0.7
	Pro forma result	294.3	8.9	4.4	275.8	16.6	9.9

1. Statutory result for 1H15 has been restated to reflect adjustment to IPO share based payments. Net impact of $1.4m to statutory profit with nil impact to pro forma result.

2. Non-cash IPO share-based payments. No cash impact on Group.

3. ASX Announcement 21 Jan ’16 confirming orderly closure of Madisson Projects division.

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Pro-Forma Financials

Revenue growth in regions offset by reduced margins & overheads investment

	**Pro forma ***	1H16	1H15	Change
	Revenue	294.3	275.8	+6.7%
	Gross Profit	65.3	65.3	+0%
		22.2%	23.7%	(1.5)pts
	EBITDA NPAT	8.9 4.4	16.6 9.9	NPAT (46.4)% (55.6)%
	EPS (cents)	3.0	6.4

• Revenue growth in both Simonds Homes and BAA:  Simonds Homes Qld, NSW & SA: +66.5% pcp  Simonds Homes Vic up 3.7% pcp  BAA revenue up 6.2% pcp

• Softening in gross margin in both SHA and BAA through:  Increased competition & promotional discounts in Vic impacted SHA’s 1H16 margins

• Increased revenue from SHA’s lower margin expansion states of Qld & NSW

• Further investment in student engagement, on-going compliance controls and course expansion reduced BAA gross margin

* Refer to Statutory to Pro forma Reconciliation removing Madisson Projects (Page 4)

• No interim dividend will be paid for 1H16

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Pro-Forma Financials

Committed to investing in expansion regions, improving systems & on-going compliance

• Invested in new Qld and NSW sales galleries and colour selection centres to deliver increased margins

• Significant investment in display homes in Qld, NSW & SA growing from 10 homes to 26 homes in past 18 months

Display Home Investment in expanding regions of Qld, NSW & SA

26

7

• This increased investment in retail presence will drive sales growth & revenue in FY17 and beyond

• On-going costs embedded in upgrading existing systems & processes for both SHA and BAA to underpin quality building outcomes and training

14 5 10 5 NPAT 5 9 14 5 1H15 FY15 1H16 QLD NSW SA

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Simonds Homes Australia (SHA)

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Simonds Homes Australia

Building a strong platform on the East Coast

Simonds Homes Site Starts

• Revenue of $281.7m up 9.1% pcp

• Site starts of 1,252 homes, up 2.9% on pcp

• All states profitable

• Significant investment in interstate growth impacted overall margins (displays, pre-site staffing, office / gallery)

• Increased display home footprint to 112 display homes across 59 locations as at Dec ‘16.

• Option to acquire W.A. homebuilder Gemmill Homes will not be exercised

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1,113
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1H14
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1,252
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1,217
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1H15 1H16
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Simonds Homes Australia

Revenue growth and diversification of geographical earnings and risk

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1H12 1H14 1H16
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Site starts: 961

Site starts: 1,113

Site starts: 1,252

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Simonds Homes - Victoria Sustained success as Victoria’s No.1 builder

• Site starts of 980 down (4.4%) pcp

• • Delays in land titling caused lower starts in first half – majority of which have been resolved – leading to increased site starts in 2H16

• • Increase in sales accepts by 13.8% pcp • Very strong pipeline of work in second half • Stable and mature display home program with 91 display homes across 49 locations

• • Metropolitan region knock down & rebuild business continues to progress

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Simonds Homes - Queensland

Well positioned in a rising market

• Significant expansion in South East Queensland

• Site starts of 105 up 26.5% pcp

• Increase in sales accepts by 54.5% pcp

• Expanding display home program with 20 display homes to be open by June 2016 across 12 locations

• New state-of-the-art Gallery opened in November 2015

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Queensland Head Office and Gallery, Loganholme – Opened November 2015

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Simonds Homes – South Australia Continued solid results in a steady market

• Site starts of 94 up 27.0% pcp

• Increase in sales accepts by 5.6% pcp

• Expanding display home program with 7 homes across 3 centres

• Further 3 homes across 2 centres under construction in St Clair and Gawler

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Simonds Homes – New South Wales Retail segment the key to second phase of growth

• Site starts of 73 up 108.6% pcp

• Increase in sales accepts by 17.9% pcp

• Evolution of business as we migrate to a mix of retail and investor sales

• Display home program now established with

• 9 homes currently open across 3 locations

• House and Land centres opened in Wagga, Kellyville and Hunter Valley to support growth

• Retail sales will contribute to FY17 site starts & revenue

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NSW Marsden Park Display opened 20 February 2016

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Builders Academy Australia (BAA)

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BAA’s market environment

Building a sustainable business

• Investment in student experience and retention

• Investment in management system to streamline and automate systems and processes

• Industry ‘correction’ currently underway is welcomed

• Speculated ‘Federal Takeover’ of VET sector is welcomed – will facilitate efficiencies across jurisdictions

• Rationalisation of providers is welcomed – reduces competition – provides opportunities

• BAA is building a sustainable business that will withstand potential future reforms and provide operating margins sufficient to reinvest in quality outcomes and ongoing compliance

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1H16 1H15 Change
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BAA highlights Quality training, compliance & growth in a changing environment

• $11.6m revenue up from $10.9m in 1H15

• EBITDA of $4.0m (down 20.6% pcp), which reflects investment in operating platform

• VET FEE-HELP provider approval in Dec ‘15 will contribute towards FY17 revenue growth

• Regulatory changes and reforms will benefit quality training providers such as BAA

1H16 1H15 Change Revenue 11.6 10.9 +6.2% EBITDA 4.0 5.1 (20.6)%

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BAA highlights Delivering quality training outcomes in Skills Shortage sector

• Average course registrations increased to 697 per month, against 544 pcp

• Course enrolments for 1H16 of 1,855, against 1,968 pcp

• Average registrations 51% in-house (i.e. nonbroker)

• 1,966 graduates during 1H16

• VIC completion rates:

• 78% Cert IV B&C (Building) (State av.: 50%)

• 70% Diploma B&C (Building) (State av.: 30%)

• 61% Cert IV WHS (State av.: 53%)

Student Completion Rates for BAA primary courses

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78%
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70%
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61%
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53%
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50%
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30%
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Cert IV B&C Diploma Cert IV WHS B&C

BAA Vic State Average

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Skills Victoria Training System report 8 Feb 2016

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Discover Developments

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Discover Developments New profitable division to support SHA

• Small lot sub-divisions providing alternate land sources for SHA without competing with major land developers

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• Land fund established to reduce capital requirements to

• ~25% with first syndicate fully subscribed ($6m)

Portland, Vic

30 lots with construction complete in March ‘16 / Titles issue in April ’16.

Mernda, Vic

35 lots with planning approve. Construction commences July ‘16 / Titles issue July ‘16.

Officer, Vic

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41 lots with approval expected by June ‘16.

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Madisson Projects

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Madisson Projects

Mixed profitability, increased margin pressures led to independent review

• Acquired in 2002, focused on medium-density apartments and townhouses

• Predominantly building developers’ own concepts, designs and specifications

• Mixed profitability over the past few years

• Increased competitive margin pressures in heated industry with high demand on trades people

• Estimating and contract letting deficiencies identified

• Strategy and investment in this business assessed

• Nov ’15 independent strategic review announced

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Madisson Projects

Orderly closure with existing five projects to be completed by Oct 2016

• During Sep – Dec ’15, completed and handed over six projects totalling $42.1m.

• Unsuccessful in winning a number of tenders at appropriate margins

• Announcement of orderly closure on 21 Jan ’16

• $6.5m after tax loss for 1H16

• Full after tax closure costs expected to be $8.5m – all brought to account in FY16

• Independent report reviewed and identified full costs to complete for each remaining project

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• Pro-forma results remove impact from Madisson

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Outlook

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Operational outlook

Simonds Homes well positioned to deliver sustainable growth into FY17

2,959 Simonds Sales Pipeline FY16 and FY17

• Simonds Homes Australia’s solid sales pipeline provides support for 2H16 and FY17

• Growth driven by:

• market share gains in Qld and SA

• continuing market leader in Vic

• rapidly expanding retail presence in NSW

• Qld and SA current display home footprint expansion on track – providing good FY17 sales pipeline

• NSW grown from zero to 9 displays in 18 months as we evolve into a full retail operation in 2H16 - FY17

• Victoria regional expansion and increased product range, including knock down & rebuild, continues

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90
375
2,700
1,242
1,020
1,252
229
424
367
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As at 31 Dec '15 FY16 F'cst Site FY17 Pipeline Starts Already Site Started Contract signed Sales accepts Deposits

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Operational outlook

BAA well positioned for the future

Current Course Enrolments as at 20 Feb ‘16

4,381

• Enrolments at 20 Feb ‘16 of 4,381 comprising students currently studying having commenced during:

FY14:	127
FY 15:	1,675
1H16:	1,600
Jan-Feb ‘16:	979

• 4,381 current enrolments comprises 2,899 students (~ 41% undertaking double courses)

• NSW acquisition has taken longer than anticipated to contribute but is positioned well for FY17

• Industry reforms are reducing competition and will present opportunities in FY17 and beyond

• Existing Simonds supply chain provides significant jobs potential

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979
1,600
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1,675
127
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Current Active Enrolments FY14 FY15 1H16 Jan/Feb '16

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Thank you

Appendix Balance Sheet Movement in Net Assets Cash flows

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Balance sheet

• Share buy-back and Madisson Projects loss has impacted net asset position

• Share buy-back of 5% of issued capital ($7.9m) completed in Dec ‘15

• Goodwill increase relates to acquisition of BAA Qld/NSW completed July ’15 ($3.5m)

• Payables reduction resulting from seasonal Christmas period (compares to $62.5m 1H15)

• Debt increase to fund buy-back, BAA acquisition and trade payables

• Available headroom of $18.6m as at 31 Dec ’15

• All banking financial covenants comfortably met

	Balance Sheet ($m) 31 Dec ‘15 30 Jun ‘15

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Movement in net assets

• Acquired 7.6m ordinary shares in share buy-back for ~$7.9m

• Shares on issue post buy-back: 143,841,655

• Dividend payment of 5.3 cents per share (fully franked) for 7 months trading since listing to 30 Jun ’15

	Movement in net assets ($m) 31 Dec ‘15 30 Jun ’15

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Cash flows

Summary Cash Flows (pro-forma) ($m) 1H16 1H15

Cash flows from operating activities

• Cash flow from operations $7.4m (after tax payments of $12.2m)

• Net activity in Display Home investment of $6.3m for 6 month period

• On-market share buy-back of $7.9m

• FY15 Final dividend of $8.0m

* Pro forma summary reflects proceeds (investment) in Display Homes separately

Receipts from customers	318.4	293.2
Payments to suppliers/employees *	(298.2)	(299.5)
Interest paid	(0.6)	(0.5)
Income taxes paid	(12.2)	(5.4)
Net cash generated from operating activities	7.4	(12.2)
Net cash from Display Homes activities *	(6.3)	(0.8)
Net cash from investing activities	(3.5)	(1.2)
Net cash from financing activities
Proceeds from borrowings	14.1	(0.7)
Issue of share capital/(buy-back)	(7.9)	12.8
Dividends paid	(8.0)	(19.4)
Other	(0.9)	17.0
Net cash from financing activities	(2.7)	9.7
Net increase(decrease) in cash	(5.1)	(3.7)
Cash/ Equivalents at end of theperiod	0.4	12.2

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Disclaimer

While every effort is made to provide accurate and complete information, Simonds Group does not warrant or represent that the information in this presentation is free from errors or omissions or is suitable for your intended use. The information provided in this presentation may not be suitable for your specific situation or needs and should not be relied upon by you in substitution of you obtaining independent advice. Subject to any terms implied by law and which cannot be excluded, Simonds Group accepts no responsibility for any loss, damage, cost or expense (whether direct or indirect) incurred by you as a result of any error, omission or misrepresentation in information in this presentation. All information in this presentation is subject to change without notice.

The material contained in this presentation is for information purposes only and does not constitute financial product advice. The information contained in this presentation has been prepared without taking into account the investment objectives, financial situation or particular needs of any particular person. Before making any investment decision, you should consider, with or without the assistance of a financial advisor, whether an investment is appropriate in light of your particular investment needs, objectives and financial circumstances. Nothing in this presentation is a promise or a representation as to the future. Statements or assumptions in this presentation as to future matters may prove to be incorrect and the differences may be material.

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