Unbound Group Plc — Investor Presentation 2021

Sep 16, 2021

UNBOUND

Accelerating our Digital Future
Capital Markets Day
15th September 2021

UNBOUND GROUP

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UNBOUND GROUP

Disclaimer

IMPORTANT NOTICE

This presentation has been prepared by Electra Private Equity PLC ("Electra"). The information and opinions contained in the presentation and any other material discussed verbally (collectively, the "presentation") are provided as at the date of this presentation and are subject to change without notice.

This presentation has been made to you solely for information purposes in connection with the proposed transfer of Electra's listing from the premium segment of the Official List of the Financial Conduct Authority (the "FCA") and the Main Market of the London Stock Exchange to admission to trading to AIM and being renamed Unbound Group PLC in conjunction with such transfer (the "Listing Transfer") subsequent to Electra's proposed demerger of Hostmore plc ("Hostmore"). This presentation may be amended and supplemented as Electra sees fit, may not be relied upon for the purpose of entering into any transaction and should not be construed as, nor be relied on in connection with, any offer, invitation or inducement to purchase or subscribe for, underwrite or otherwise acquire, hold or dispose of any securities of Electra or Hostmore and shall not be regarded as a recommendation in relation to any such transaction whatsoever. This presentation is not a prospectus for the purposes of the Prospectus Regulation Rules of the Financial Conduct Authority (the "FCA") nor is it an Admission Document for the purposes of the AIM Rules of the London Stock Exchange. Any investment in the securities of Electra following the Listing Transfer may only be made on the basis of an Admission Document which may be published by Electra in connection with the Listing Transfer.

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Certain industry and market data used in this presentation has been obtained from publications and studies conducted by third parties and estimates prepared on certain assumptions. While the industry and market data from external sources is believed to be accurate and correct, none of the Relevant Parties have independently verified such data or sought to verify that the information remains accurate as of the date of this presentation and the Relevant Parties do not make any representation as to the accuracy of such information.

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Today's Presenters

Ian Watson
Chief Executive Officer
- CEO at Hotter shoes since March 2019
- Previously CEO at Start-Rite Shoes
- European Managing Director at Britax Childcare
- Senior Vice President at Newell Brands

Daniel Lampard
Chief Finance Officer
- Joined Hotter August 2021
- Previously CFO D2C Glanbia Performance Nutrition and FD at AO World Plc
- 11 years at Manchester Airport Group

Neil Johnson
Chairman of the Board
- Appointed as Executive Chairman of Electra Private Equity in March 2018 after joining the company as Non-Executive Chairman and Director in May 2016
- Neil is currently a Non-Executive Director of QinetiQ Group plc and SID of the Business Growth Fund
- Formerly CEO of the RAC

UNBOUND GROUP

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Agenda for Today

1	Transaction Overview	Neil Johnson
2	The Hotter Business - A profitable foundation for growth	Ian Watson
3	Introduction to Unbound	Ian Watson
4	Financial Framework	Dan Lampard
5	Closing Remarks	Ian Watson
6	Q&A

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Transaction Overview

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Background to Electra's Transition into Unbound Group

Transforming Hotter

• Electra acquired Hotter in 2014 based on its long heritage as a direct to consumer brand that designed, manufactured and retailed comfort footwear to the 55+ demographic. At the time of acquisition, growth was primarily driven through an extensive store roll-out program
• From 2017 challenging high street conditions led to a loss of focus on the brand's core demographic and the business suffered margin pressure across all channels as a result of retail discounting
• A new management team led by Ian Watson, was appointed in 2019 to focus on 1) product differentiation, 2) core consumer demographic, 3) developing the direct to consumer digital channel, and 4) reducing seasonality
• Hotter's revenue is now 81% direct to consumer with LFL sales growth of 28% in 6 months to July 2021 and gross margin up from 53% to 64%

Unbound Group

• Rapid growth in the brand's digital footprint within its core customer demographic, driven by its direct to consumer model has resulted in Hotter now serving 29% of the UK's female population over the age of 55 and 17% of the total population over 55
• The success in the last 2 years in re-pivoting Hotter to a digital first proposition provides an opportunity to build on the continued rapid growth of the brand by cross selling to its existing and target consumer demographic further products and services
• Unbound Group will work with partner businesses and brands focused on the same demographic as Hotter, to provide a range of products and services that support active lifestyles with health and wellbeing at the core – allowing our customers to do more of what they love

Background to AIM relisting

• Electra is in the final stage of its portfolio realisation strategy, having returned over £2 billion to shareholders since launching this strategy in October 2016
• Following the proposed demerger of Fridays / Hostmore in Q4 2021, Hotter / Unbound will be Electra's only remaining corporate investment
• Transitioning Electra onto AIM as the parent company of the Unbound Group allows Electra's shareholders to benefit from the growth opportunity through Unbound Group and its foundation business, Hotter
• Electra remains focused on ensuring that Unbound has the appropriate balance sheet to maximise its future potential and value as a growing and standalone, publicly listed company

UNBOUND GROUP

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Unbound Group Board of Directors

Neil Johnson

Chairman of the Board

• Appointed as Executive Chairman of Electra Private Equity in March 2018 after joining the company as Non-Executive Chairman and Director in May 2016
• Neil is currently a Non-Executive Director of QinetiQ Group plc and SID of the Business Growth Fund
• He was formerly CEO of the RAC

Ian Watson

Chief Executive Officer

• CEO at Hotter shoes since March 2019
• Previously CEO at Start-Rite Shoes
• European Managing Director at Britax Childcare
• Senior Vice President at Newell Brands

Daniel Lampard

Chief Finance Officer

• Joined Hotter August 2021
• Previously CFO D2C Glanbia Performance Nutrition and FD at AO World Plc
• 11 years at Manchester Airport Group

Linda Wilding*

Non-Executive Director, Chair of Audit Committee

• Appointed as Director at Electra December 2016
• Former Managing Director of Mercury Asset Management
• Non-executive director of UDG Healthcare Plc and BMO Commercial Property Trust Limited
• Previously a Non-Executive Director and latterly chair of Corin plc from 2006 to 2012
• Non-executive director of Touchstone Innovations plc until 2017.

Paul Goodson

Non-Executive Director, Chair Remuneration Committee

• Previously executive chairman of Great Bear Distribution, a leading independent third-party logistics business which provides a range of warehousing, distribution and added value services to blue chip organisations
• 13 years with Barclay Private Equity, latterly serving as MD of the UK business.

Gavin Manson

Non-Executive Director

• Currently Chief Financial and Operating Officer of Electra Private Equity
• Previously Finance Director at Thomas Cook Group and Finance Director at Premier Farnell (5 years)
• Gavin began his career with KPMG and is a chartered accountant

UNBOUND GROUP

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UNBOUND GROUP

UNBOUND

Introducing the Management Team

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Management team

Highly experienced management team with breadth and depth

Ian Watson
Chief Executive Officer

Dan Lampard
Chief Finance Officer

• CEO at Hotter shoes since March 2019
• Previously CEO at Start-Rite Shoes
• European Managing Director at Britax Childcare

• Senior Vice President at Newell Brands

• Joined Hotter in August 2021

• Previously CFO D2C Glanbia Performance Nutrition and FD at AO World Plc
• 11 years at Manchester Airport Group

Victoria Betts
Chief Commercial Officer

Claire Pearl
Chief Product Officer

Paul Harnetty
Operations Director

Will Rose
Head of Ecommerce & Technology

• Joined Hotter in 2016
• Over 19 years experience at key brands including The Very Group

• Previously Marketing and Trading Director at Missguided

• Joined Hotter in September 2019

• Previously Buying and Merchandising Director at Hobbs, previous experience at Phase 8 and the White Company

• Joined Hotter in July 2020

• 34 years experience within key Manufacturing businesses, including Smith, Kline & French, SmithKline Beecham, Princes Foods, Lyndale Foods and The Authentic Food Company.

• Joined Hotter in December 2020

• Previously Group Programme Manager at DFS
• 6 Years at software house Wunderman Thompson Commerce where he delivered large scale eCommerce re-platforms for the likes of DFS, and Yoox Net-a-Porter group

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The Hotter Business - A profitable foundation for growth

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Business Transformation

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Retail-led

Store roll-out driving growth

Lack of product vision & brand alignment

Omni-channel driving complexity not focus

Upskill for changing business model

2019 Transformation Strategy

1. Alignment and refocus of brand and product
2. Drive to best cost
3. Optimal route to Consumer
4. People, Processes and Systems

Digitally-led direct to consumer model, with a growing, loyal database

Repurposed profitable retail proposition

Product range with sustainable competitive advantage - anchored in comfort

Brand re-anchored in comfort

Technology enabled to aid the consumer experience

Supply chain flexibility at best cost

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Transformation timeline to a digitally-led business

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Financial Performance Six months to July 2018 vs July 2021

	Six Months to July 2018				Six Months to July 2021
		Revenue		EBITDA		Revenue		EBITDA
		Share	Growth	£	Margin %	Share	£	Growth £	Margin %
UK Direct	Online					54%
	Offline					17%
		35%	-5%	3.4	21%	71%	4.8	1.4	27%
Retail		45%	-8%	0.2	1%	12%	0.5	0.4	17%
US		14%	-22%	-0.8	-12%	10%	0.0	0.8	0.0
Digital Partnerships & Wholesale		6%		0.5	22%	7%	0.4	-0.1	22%
Head Office Costs				-3.1			-3.3	-0.1
Company		100%	-8%	0.1	0.20%	100%	2.5	2.4	10%
Fixed costs		£16.8m				£6.2m
Operating cashflow		£-1.2m				£3.2m

Performance in H1 2018, prior to arrival of the new management team:

• Hotter was retail focussed
• Revenue was in decline across all channels
• Breaking even at EBITDA level - loss making overall
• US business was rapidly shrinking and loss making
• High fixed costs
• Negative operating cash flow

Note: EBITDA as per management accounts

Following the transformation activities before and during lockdown:

• Hotter is a direct to consumer focussed business with growth coming from its rapidly developing e-commerce channel
• All channels / segments profitable at EBITDA level
• US business no longer loss making - with investment minimised to focus on UK growth in short term
• Fixed costs halved
• Positive operating cashflow with strong EBITDA conversion
• Overall EBITDA margin of 10% with fast growing direct to consumer EBITDA margin of 27%

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Comfort footwear

Hotter is extremely well positioned within the fastest growing segment

Women's footwear is the largest sector, forecast to grow by 2024 to over £3.9bn...

... supported by Comfort and Fit as significant purchase drivers in the category ...

... represented key growth segments within the market

UK Women's footwear market size (in £bn)

% of UK consumers who identified factors as key purchase drivers

Comfort
■ Yes ■ No

% of UK consumers who purchased based on key purchase drivers

Source: Euromonitor 2020, OC&C Survey with Hotter and target 55+ females Q3 2020

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Hotter Brand Proposition

Anchored in Comfort

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OUR PURPOSE

We're here to deliver the ultimate comfort, so people can do more of what they love.

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OUR DNA

CUSTOMISED COMFORT. LIMITLESS POSSIBILITIES.

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OUR BEHAVIOURS

EVERY FOOT MATTERS	START AND END WITH COMFORT	EXPERT TECH, EXPERT PEOPLE
We can't make great shoes without obsessing about feet. We go further to understand every size, shape and type of foot - so we can create the perfect shoe for each of them.	Every design brief starts with the kind of comfort we want to deliver. Every piece of consumer research focuses on how our shoes feel in action. All that we do starts and ends with comfort.	From our tech to our people, we do all we can to constantly expand our skills and deepen our knowledge. If it enhances the comfort of a shoe then we make sure we know about it.

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OUR PRODUCT PILLARS

PRECISION FIT	TAILORED COMFORT	TIMELESS STYLE
• Footprint 3D fit technology
• UK whole and half sizes
• Four width options from Slim to Extra Wide	• Cushion+
• Stability+
• Freesole	• Clear Hotter design handwriting
• Iconic, timeless silhouettes
• Visible, meaningful comfort features

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Strong brand awareness and perception

Awareness

Hotter benefits from a strong and improving brand awareness within its core demographic

Perception

No.1 Position in Comfort

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Product Technology

Differentiated products anchored in comfort

Cushion+

Using Freesole, Cushion+ designs are crafted from a PU compound to return some of the energy you put in every stride and invest it into the next. This makes for some excellent energy returns and an ultra flexible, super lightweight shoe.

Stability+

Our Stability+ designs benefit from a balance bar and are fitted with an OrthoLite® insole, making the shoe both super secure and extra breathable. We've also included adjustability points on every shoe which means they can be tailored to fit the shape of your foot (and nobody else's).

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Product Development Process

Driving improvement in working capital and gross margin

• A clearly defined, scalable process
• Fast paced/ multi-drop to anticipate consumer needs
• Continuous product refreshment resulting in lower working capital and higher gross margin

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Channels of distribution and our consumer base

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Channels of distribution

The Hotter business model has transformed from being retail-centric to a digital first, direct to consumer omni-channel brand

UK D2C

Full D2C proposition across digital and mobile, which has undergone a significant transformation to a 75% digital mix and is now core to the proposition

Retail

Digital first approach supported by a right sized UK store portfolio of 17 Technology Centres and 6 concessions, providing in-store experience through technology that stimulates data acquisition to fuel D2C growth

U.S.

U.S. Business is a direct to consumer model, no longer loss making & ready for next phase of growth

Digital Partnerships and International markets

Digital Partnerships - selling Hotter products on partner sites such as Next, The Very Group & Amazon International markets outside of U.S.

H1 FY22 Product sales by channel

Source: July Management Accounts

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UK Direct Digital sales continue to accelerate

Shift to digital with growth in visits, increased conversion rates

UK Direct Digital Revenue £

Direct Sales Mix
Digital Revenue Mix H1
Analogue Revenue Mix H1

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Customer Database

A large and growing customer database with an increasing focus on digital channels

In thousands

4.6m Consumer database

846k Email database +8.5% CAGR

• Consumer database is a direct driver of value, with 4.6m identifiable contacts
• 29% of UK 55+ females are currently registered within our database
• Driving email database growth, both organically and through converting analogue and physical retail customers to digital, accelerated through:
• Cultural shift to digital
• Technology to identify anonymous site visitors, stimulating on-site email capture
• Footprint data capture
• App downloads

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The Hotter Consumer

Existing consumer is deeply anchored in the 55+ market

• New
• Total Existing Database

Core audience of 55+ consumers account for 78% of the database.

The highest portion of new customers are within 55-79 age group, followed by the 45-55 sector

Source: Hotter consumer database, CACI Fresco

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Brand specialists in 55+ market

Hotter is significantly more focused on the over 55-year-old cohort than other brands and retailers

Source: Digital metrics (Jellyfish)

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App Download Growth

• Customer conversion amongst app users is 2x more than website users
• Improved app launched in February 21, with high trajectory of downloads
• Augmented reality try-on feature, with further innovation to launch in Q4

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Differentiated retail experience

Leveraging technology to create a personalised customer experience and stimulate email data capture

Footprint 3D foot scanning:
Scans the foot to provide exact foot measurements and customised product recommendations to the user.

Digital touch screen kiosks:
For content display, browsing the website and self-serve purchasing

Interactive projection mapping table
To create retail theatre, brand engagement and present product technology in an interactive way.

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Hotter Growth Plan

DIGITAL GROWTH

• Mobile commerce
• Digital marketplace expansion
• Mobile commerce, new payment methods
• Provide credit proposition to stretch appeal

CHANNEL SHIFT TO DIGITAL DIRECT

• Customer migration online through Personalisation and targeting
• New customer acquisition fuelled by digital marketing and Loyalty programme

PRODUCT IMPROVEMENT SUPPORTED BY SCIENCE

• Increased volume with existing & new customers
• Leverage ASP with reduced discounting and "worth-more"

MULTI-DROP STRATEGY

• Accelerate and capitalise on 10 drops PA
• Strong and tight inventory management through trial and online exclusives

DEVELOP MEN'S PROPOSITION

• Development of men's category to reflect appropriate market weighting

OCCUPATIONAL FOOTWEAR RANGE

• Launch occupational styles in AW21, building into a specialist range in AW22
• Focussed on consumers shopping through existing channels
• Designs to support specific specialist requirements

INTERNATIONAL EXPANSION

• Leverage existing, proven playbook to grow US presence
• Mature and expand into new geographies

RANGE AND STYLE BREADTH

• Adjacent opportunities exist in active lifestyle and sustainable product ranges
• Opportunity exists to create customized comfort outside of PU construction

UK AND INTERNATIONAL DIGITAL PARTNERSHIPS

• Headroom for partnership distribution growth internationally, new and existing markets
• UK opportunities for growth and expansion driven by strategic specialist partners

APP

• App enhancing consumer journey

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Introduction to Unbound

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Market Drivers

Cultural and demographic shifts provide a robust and supportive market backdrop for an ecommerce proposition targeted at the over 55 demographic

1. Ageing population
2. An ageing population combined with increasing life expectancy will continue to increase Unbound's addressable market and the proportion of population with acute comfort needs

3. Older demographic is the fastest growing demographic of the UK population

4. High concentration of UK wealth with 55+

5. The UK's wealth is concentrated in the 55+ demographic with approximately 57% of household wealth within this group against a population composition of 38%

6. Increase in discretionary spend for 50+ demographic is 3x that of under 50s

7. Increasing digital literacy and online penetration

8. Older generations have rapidly become digitally literate with the COVID pandemic accelerating this trend
9. Over 30% of internet users in the UK are over 55, broadly in line with their proportion of the UK demographic

10. Online shopping participation amongst over 65s has increased 20 percentage points since 2017, the largest increase of any age group

11. Increasing focus on health and wellbeing in older demographic

12. Older generations are increasingly becoming more active with largest percentage increase in exercise participation coming from the over 55 segment

13. This will be further boosted by more active older generations who are increasingly likely to seek more comfort-oriented products

14. Materially underserved online

15. The majority of ecommerce businesses are focused on younger demographics with a product suite and marketing campaigns that are inappropriate for 55+
16. When combined with the retrenchment of department stores this is resulting in a materially underserved demographic with an opportunity to build a targeted business

UNBOUND GROUP

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The Unbound Group Strategy

Leverage
Proven Hotter proposition and capabilities, anchored in enabling version of comfort

To
Tap into broader opportunities amplified by recent cultural and demographic shifts

By
Creating a group that understands, connects with and sells to the 55+ target consumer on a broader and deeper basis

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Unbound Group strategy

From

A single brand footwear business serving mainly 55+ women

To

A multi brand, multi category group serving 55+ women and men with an own brand and third-party offer

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Vision & Mission

Vision

"To help people move better, feel better and do more of what they love."

Mission

"Develop technologies, products, experiences and partnerships rooted in digital excellence and unrivalled insight – to give people in their 50s and beyond the comfort and confidence to go further."

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Personalisation through customer insight

SELL

Anchored in connected commerce

UNDERSTAND

Anchored in deep insight

CONNECT

Anchored in community and content

Purchase behaviour and demographics

• Retail / catalogue / digital channels
• Ongoing customer feedback via 4m customer database
• Ongoing concept testing

Foot types and comfort needs

• Footprint 3D scan
• Biomechanical research programmes

Lifestyle, behavioural and attitudinal

• Unbound Insight – annual study into UK 55+ consumers
• Qualitative and quantitative research

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Unbound Group partner brand strategy

CORE CATEGORIES			ADJACENT CATEGORIES
FIT PROPOSITION & / OR
ENABLING COMFORT PROPOSITION			PROVIDE OR ENABLE 'MORE OF WHAT YOU LOVE'
FOOTWEAR	APPAREL	WELLNESS	Detailed categories and partner brand offer being explored and refined as part of proprietary Unbound Insight Programme
OVER-ARCHING CRITERIA FOR BRAND SELECTION
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RELEVANCY	DESIRE	SPECIALISM	SUSTAINABILITY
Relevant category and brand for 55+ comfort-driven male/female consumer	Aspirational / desirable brand with halo effect on Unbound	Bring expertise or specialism that adds to Unbound own-brand offering	Strong environmental credentials that amplify Unbound's sustainability story

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3 Phased Approach

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Financials

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Hotter Revenue Mix

The transformation of the Hotter business from H1 FY20 to H1 FY22 is apparent from the structural changes across sales channels. Investment and revenues are now focused on the online growth opportunity with an increasingly flexible cost base driving improving EBIT margins.

£'000	H1 20	H2 20	H1 21	H2 21	H1 22
Direct to Consumer - On-line	10,206	9,974	10,090	12,714	13,365
Direct to Consumer - Off-line	6,539	4,810	2,751	4,333	4,462
Direct to Consumer - Total	16,744	14,784	12,841	17,047	17,827
Retail - Retained	6,625	6,671	1,327	2,389	2,944
US Direct to consumer	4,652	5,090	2,674	2,581	2,389
Digital partnerships	1,090	1,332	963	1,588	1,234
Wholesale & other	1,922	1,617	837	790	633
Other revenue	3,012	2,949	1,800	2,378	1,867
Total Revenue	31,034	29,495	18,642	24,395	25,028
Retail - Closed	12,666	12,333	1,384	64	0
Reported Revenue	43,700	41,828	20,026	24,459	25,028
Var H1 22 vs H1 20
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£	%
3,160	31%
(2,077)	-32%
1,083	6%
(3,681)	-56%
(2,263)	-49%
144	13%
(1,289)	-67%
(1,145)	-38%
(6,007)	-19%
(12,666)	-100%
(18,673)	-43%

• Significant growth online as consumers have switched coupled with database growth
• Offline to online transition accelerated through covid with variable cost base able to flex with demand
• Gradual recovery of retained retail to pre covid levels – Q2 22 run-rate is c63% of pre covid levels. Entire residual estate profitable.
• US investment minimized as focus on UK online growth
• Growth in digital partnerships as new partner agreements have been established
• Wholesale reduction as shift away from independents to digital partnerships

Source: Management accounts, statutory accounts

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Hotter P&L

Significant growth in EBIT, both in absolute terms and as percentage of revenue

£'000	H1 20	H2 20	H1 21	H2 21	H1 22	Var H1 22 vs H1 20
						±	%
Revenue	43,700	41,828	20,026	24,459	25,028	(18,673)	-43%
Gross profit	27,012	26,448	10,149	13,060	15,418	(11,595)	-43%
	62%	63%	51%	53%	62%
Semi variable costs	(10,933)	(9,927)	(6,777)	(8,605)	(7,631)	3,302	-30%
	25%	24%	34%	35%	30%
Fixed costs	(14,825)	(15,637)	(8,213)	(5,078)	(6,198)	8,628	-58%
	34%	37%	41%	21%	25%
EBIT - IFRS	1,254	884	(4,841)	(623)	1,589	335	27%
	3%	2%	-24%	-3%	6%
EBITDA - FRS	2,394	1,603	(3,711)	848	2,519	125	5%
	5%	4%	-19%	3%	10%

• Over 27% growth in EBIT and doubling of margin percentage from 3% to 6% with the shift to online and right sizing of the retail estate
• Semi-variable costs increasing as a % of revenue over the two year period driven from increasing marketing spend as channels shift to online, with a positive downward trajectory occurring in H1 22.
• The reduction in fixed costs in both absolute numbers and as percentage of revenue reflecting the closure of unprofitable retail outlets and restructuring of the cost base reflecting the channel shift.
• Note for comparative purposes the EBITDA under FRS has been included

Source: Management accounts, with IFRS overlay, statutory accounts

UNBOUND GROUP

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Hotter Medium Term Guidance

Continued growth within on-line and off-line channels, with Retail stores recovering to pre-COVID levels by the end of 2022. Improved gross margin and continued management of costs driving improving EBITDA margin over medium term.

| UK Direct to Consumer | On-line: Mid teen % annual growth expected
Off-line: Mid single digit % annual growth expected |
| --- | --- |
| UK Retail | Recovers to FY20 levels by end of FY23 and then stable |
| US Direct to Consumer | Undergoing strategic review, short term maintained at current levels |
| Hotter Digital Partnerships | Double digit % annual growth |
| Wholesale | Maintained at current levels |
| Gross Margin | Approximately 2% above pre-covid levels from FY23 as covid disruption diminishes and positive impact of differentiated product drives margin |
| EBIT Margin | Levels to reach mid teen % over medium term |
| Cash Conversion | Operating cashflow (pre-exceptionals) in line with EBITDA |
| Capital Expenditure | Annual capital expenditure spend of c£2.5m. No material one-off spends required in the medium term with plan spend exceeding current depreciation levels |
| Working capital | No structural change with stable conversion of EBITDA to cash |
| Net Debt/(Cash) | Targeted to be maintained below 2x maintainable EBITDA in short term, in the medium term a net cash position without future strategic spend |

UNBOUND GROUP

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Unbound Group Financial Development

Digital growth building on the profitable Hotter platform

	Strategy	Framework
Unbound Partnership Model	· Unbound will add digital partnerships to build on and further develop the focussed consumer database already in place through Hotter
· Developing on the digital platform already in place for Hotter, building in a scalable manner	· Commission based partnership model for non-Hotter sales
· First revenues from H1 calendar 2022
· Profit generated from non-Hotter revenues targeted at 25% of group profit in 3 years and 50% in 5 years
· Unbound partnerships will be EBITDA and cash generative from the outset but with reinvestment in growth in short term
· No investment required in inventory in the short / medium term

UNBOUND GROUP

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Unbound Capital allocation framework

Reinvestment in the business to drive future growth

	Strategy	Framework
Capital Expenditure	• Re-invest in the business to drive long term growth
• Focus on scaling the digital platform	• Hotter capital expenditure of c.£2.5m per year
• Unbound capital expenditure of £3m by end of calendar year 2022
Dividend Policy	• No dividends planned in medium term	• Focus on capital appreciation
Net Debt	• Focus on investment for growth	• Targeted to be below 2x EBITDA in short term, in medium term a net cash position without future strategic spend

UNBOUND GROUP

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Closing Remarks

1. The base Hotter Business is a digitally focused growth business, anchored in comfort, focused on its 55+ core demographic with a deep penetration within its database
2. Significant macro tailwinds are present and for future years
3. Opportunity exists in the model to become a true specialist in this demographic, enabling consumers to do more of what they love
4. New partnerships being put in place to sell other products and services to 55+ demographic, with a focus on active lifestyles, health and wellbeing
5. Medium term ambition to generate over 50% of EBIT from non-Hotter products
6. Multi-award winning digital and transformation leadership team in place

UNBOUND GROUP

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Q&A

UNBOUND GROUP

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Appendix

1. Key investment highlights
2. Additional Financial Information
3. CVA
4. The over 55 opportunity
5. ESG Strategy

UNBOUND GROUP

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Key Investment Highlights

The power, strength and customer loyalty of the Hotter brand provides a significant opportunity to support a broader digitally led multi brand, multi category proposition

1. Online e-commerce platform, based on the foundations of Hotter as a trusted brand, cloud based digital infrastructure, and strong customer personalisation through data insight
2. Multi-award winning leadership team in place with specialist skills in digital innovation and business transformation
3. The core Hotter brand has an attractive financial profile focused on cash generation and profitable growth
4. Cultural and demographic shifts provide a robust and supportive market backdrop for the development of an e-commerce proposition targeting the over 55 demographic
5. Strong, existing base for future growth as a digitally led, omni-channel proposition, already serving 29% of the target demographic
6. New partnerships being put in place to sell other products and services to 55+ demographic, with a focus on active lifestyles, health and wellbeing, allowing our consumers to do more of what they love
7. Medium term ambition to generate over 50% of EBIT from non-Hotter products

UNBOUND GROUP

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Additional Financial Information

Business Overview

• Following the proposed demerger of Hostmore, Hotter will be Electra's only corporate investment
• Subject to shareholder approval, in Q4, 2021 Electra will:
• cease to be an Investment Trust,
• be renamed Unbound Group Plc
• be relisted on AIM
• become the parent company for the Unbound Group
• The corporate structure below Unbound Group Plc will be simplified with Hotter as the sole trading company
• Hotter will continue to grow as a digitally led, comfort footwear brand selling direct to consumer in the UK, US and Europe
• The Unbound Group will work with partners to sell products and services to the 55+ demographic (initially in the UK)
• The focus of the group as a whole will be promoting an active lifestyle as well as enhanced health and well being of our consumers, allowing them to do more of what they love
• The group has a highly experienced management team in place, led by Ian Watson (CEO) and Dan Lampard (CFO)
• The Electra / Unbound Non-Executive Board will transition between relisting and an AGM in April/ May
• The current Electra Executive Directors will provide continuity on the Unbound Board as Non-Executives at least until the April / May AGM

Value being retained

• On transition to AIM the principal investment retained within Unbound Group will be a 100% shareholding in the equity and value of Hotter. This compares to a 97.5% interest in Hotter reflected in the March 2021 valuation
• Through the relisting process there will be dilution of existing Electra shareholdings by single-digit percentage (subject to market capitalisation)
• In addition to Hotter, Unbound Group will:
• Receive approx. £1m cash in Q1 2022, on expiry of escrow period relating to the disposal of SPC in 2018
• Retain the ongoing benefit of rental income from a leasehold investment currently generating approx. £0.3m pa, until 2032
• There are no known liabilities or contingent liabilities retained within Electra other than those disclosed in its published accounts
• Electra will extend its current accounting period to coincide with the transition to AIM. The date of the transition will be adopted by the group as it's period end

UNBOUND GROUP

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Additional Financial Information

Hotter Net Assets

Net assets	Jan-20	Jan-21	Jul-21
PPE	7,484	7,347	6,717
Lease assets	19,865	4,978	4,437
Inventory	11,169	5,972	4,583
Debtors	3,774	2,158	2,092
Creditors	(10,848)	(10,112)	(9,220)
Cash	8,590	4,321	3,425
Lease liabilities	(20,421)	(5,361)	(4,881)
Other long term assets/liabilities	(839)	688	687
Net assets before financing	18,774	9,991	7,840

• Property, plant and equipment broadly static with no major investment required
• Lease assets and liabilities reduction driven from the reduction in the retail stores
• Inventory reduction driven from both exiting retail stores and tighter stock management
• Stable debtor position
• Improved payment terms secured with key suppliers during H1 21

Source: Management accounts, with IFRS overlay, statutory accounts

UNBOUND GROUP

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Additional Financial Information

Hotter Operating Cashflow

Cash flow	H1 21	H2 21	H1 22
EBIT before exceptionals - IFRS	(4,841)	(623)	1,589
IFRS 16 non cash adjustments	(414)	604	(186)
EBIT before exceptionals - FRS	(5,255)	(18)	1,404
Depreciation	1,545	866	1,114
Working capital	2,992	911	599
Taxation	685	0	55
Operating cash flow pre Capital Expenditure, Financing & Exceptionals	(33)	1,759	3,171
Capex	(1,892)	(331)	(468)
Financing - repayment			(2,000)
Financing	(575)	412	(536)
Exceptionals	(838)	(2,772)	(1,063)
Net cash flow	(3,338)	(931)	(896)

• Positive operating cashflow driven from improved EBIT and positive working capital
• Operating cash conversion >125% in H1 22
• Capital expenditure driven from ongoing renewals spend
• Financing cost in H1 22 includes £2m funding repayment
• Exceptional costs are non-recurring costs related to restructuring costs, advisor cost and covid related factory closures not covered by government relief

Source: Management accounts, with IFRS overlay;

UNBOUND GROUP

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CVA

In 2020, a successful CVA process reduced the Hotter retail portfolio and secured significant fixed cost savings

Store Type	2021	Change to Q1 2020	Cost Saving Impact
Standalone Full Priced branded stores	17	(74%) fewer doors
47 stores closed	Cost Saving £15m PA vs FY20. Combination of closure, rent negotiation and reduced staffing.
Garden Centre concessions	6	No change	No change
Standalone Outlet branded stores	0	Was 6.100% exit	£1.7m cost, delivering EBITDA loss of £0.7m FY20
Clearance concession Boundary Mills	0	Was 5.100% exit	£300k commission PA. Breakeven EBITDA
Total Estate	23	(72%) reduction
58 doors closed	£17m cost saving PA

UNBOUND GROUP

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The over 55 opportunity

Ageing population

An ageing UK population is leading to growth in the over 55 demographic that is twice as fast as the under 55 group

Large and attractive demographic growing faster than UK total

Significant market share for key target group of female and 55+

• An ageing population combined with increasing life expectancy will continue to increase Unbound Group's addressable market and the proportion of population with acute comfort needs
• Hotter already has almost 30% of female, 55+ consumers on its database representing a significant opportunity for Unbound Group to cross sell additional products and services
• Unbound intends to further increase its penetration amongst the 55+ category across both males and females

Source: ONS, UK Only

UNBOUND GROUP

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The over 55 opportunity

Health and Wellness

Health and Wellness is increasingly in focus for the target demographic alongside a wider trend towards casualisation and comfort

Source: Active England Study 2019, OC&C Commercial Review 2021 and Craft Media – Hotter Channel Planning 2020

UNBOUND GROUP

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The over 55 opportunity

Increased Digital literacy

Rising participation rates for online shopping among 55+ age group, with further room to grow

Over 30% of online users are over 55

% of consumers shopping online by age group

• Significant portion of over 55s are now online and digitally literate, with online participation for 65 to 74 year olds approximately 80%, up from 52% in 2011. This generation are also becoming more comfortable shopping online resulting in the largest increase for 65+ in online shopping participation
• Growth opportunity continues to exist with 35% of 65+ and 21% of 55-64 yet to shop online. In addition to higher participation rates, purchase frequency should increase as they become more comfortable with ecommerce

Source: OFCOM Online Nation Report 2020, ONS

UNBOUND GROUP

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The over 55 opportunity

Concentration of wealth

Household wealth is overwhelmingly concentrated within older demographics and this is starting to produce faster increases in discretionary spending

Household wealth distribution in the UK by age of lead household member

In thousands GBP
859
+50%
Over 50's account for over half of consumer spending in the UK

Spending Big
367bn
50+ spending on discretionary items

3x
Household disposable income for 55+ has increased 3 fold compared to under 55's increasing 2 fold

• Household wealth distributed by age of the lead household member is highly concentrated in the over 55 demographic, accounting for 57% total household wealth and over 50% of discretionary spend
• Discretionary spending in this group has increased at a significantly faster rate than younger cohorts

Source: ONS, Craft Media, UK Only

UNBOUND GROUP

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The over 55 opportunity

Leveraging Hotter's penetration of the over 55 market

| | HOTTER
Growth anchored in three core drivers | UNBOUND GROUP
Growth drivers leveraged across broader opportunities |
| --- | --- | --- |
| Unlocking the digital potential of the 55+ audience | Investment in technology across website, app, 3D foot scan and augmented reality – driving customer acquisition, margins and insight | A digitally powered, data driven proposition |
| The appeal of a positive, enabling version of comfort | Reframed comfort from ‘need’ to ‘want’ – positioned as an enabler of doing more
Resonating with 55+ life stage of increased freedom and decreased responsibility | Anchored in products and services that help our targeted demographic feel good, move well and do more of what they love |
| The appeal of products targeted to clearly defined needs | Differentiated comfort technologies anchored in expertly targeted solutions for targeted needs | Leveraging our deep customer insight to create and curate products and services that are tailored to their needs |

UNBOUND GROUP

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ENG Strategy

Environmental

SUSTAINABLE PACKAGING

We have completed a review of all materials used in packaging with a view to reducing excess waste

SUSTAINABLE SHOE BOX We will be changing our shoe box to a sustainable option for Spring/Summer 2022 rollout. We are targeting UK producers who will recycle our returns packaging

ROLL OUT SUSTAINABLE MATERIAL OPTIONS We are working across our entire material supply chain to introduce sustainable alternatives, looking to introduce replacements from Spring/summer 2022 onwards

RECYCLED MATERIALS

The majority of our footbeds use premium Ortholite foam which contains 5% recycled rubber and is machine washable designed to be long-lasting

INTRODUCTION OF ORGANIC TEXTILES

We have introduced organic cotton canvas into our summer deck ranges

Social

OUR CUSTOMERS

Fundamental principle of allowing our consumers to do more of what they love

CHARITABLE PARTNERSHIPS

Long standing relationship with Marie Curie

DATA PROTECTION

Clear Privacy Policy in place, in accordance with GDPR, commitment to protect and safeguard consumer data

GLOBAL SOURCING PRINCIPLES

All of our suppliers must sign up to our supplier manual including our Global Sourcing Principles which are in line with the 9-point base code of the Ethical Trade Initiative

ESTABLISHED SUPPLY CHAIN MAPPING

Our Indian factories which supply the majority of our product have mapped and reported their supply chains to tier 3 level

WORLD CLASS STAFF TRAINING

As part of our commitment to best practice we engage in regular training all key staff members engaged with supply chain management, using the services of SGS, the world leading testing, inspection and certification company

Governance

BOARD COMMITTEES

In addition to our Audit, Nomination and Remuneration Committees, we have established a monthly ESG Committee chaired by the CEO, to monitor, control and report on key actions

BEST IN CLASS TANNERY CONTROLS

We are members of the Leather Working Group (LWG) and all of our Indian suppliers are using tanneries which are gold rated approved by the LWG

IN COUNTRY CONTROLS

We have local based staff in India under the direction of an in country manager who visit all key factories on a weekly basis, conducting audits as required to ensure compliance with our Global Sourcing Principles

UNBOUND GROUP