1H FY16 RESULTS PRESENTATION March 2016 Contents 1 Results Overview 2 Key Line Items 3 Country Results 4 Cash Flow, Balance Sheet, Dividend 5 Growth Strategy Update 6 FY16 Outlook 7 Questions A Appendices 2 Results Overview 1 Results Overview: Highlights Key Points • Top line sales growth • Gross margin improvement • Cost efficiencies implemented and delivering operating leverage Sales and Margin • Sales growth $16.6m (+7.2% at constant exchange rates, +9.3% at actual exchange rates) • Same store sales growth 3.8% at constant exchange rates (+5.8% at actual exchange rates) • Gross margin 62.8%, 350 bps higher than 1H FY15 Operating Costs • Operating expenses decreased 380 bps as a % of sales to 51.7% Profit • EBITDA $21.9m, up $15.1m YOY • NPAT $9.4m, up $11.2m YOY 4 1 Results Overview: Year-on-Year NZD $m*1 1H FY16 1H FY15 Var $ Var % SALES 196.0 179.4 16.6 9.3% GROSS PROFIT 123.1 106.3 16.8 15.8% Gross margin 62.8% 59.3% OPERATING EXPENSES (100.8) (99.5) (1.3) 1.3% % of Sales 51.4% 55.5% UK store exit costs (net) (0.5) - (0.5) EBITDA 21.9 6.8 15.1 11.2% 3.8% EBIT 15.1 0.6 EBIT margin % 7.7% 0.3% NPAT 9.4 (1.8) 11.2 Permanent Open Stores*2 163 157 6 EBITDA margin % 1. 2. 3. 222.1% 14.5 1H FY16 NZD/AUD conversion rate 0.920 (1H FY15: 0.944), 1H FY16 NZD/GBP conversion rate 0.425 (1H FY15: 0.498). Excludes Online store. Rounding differences may arise in totals, both $ and %. 5 Sales 2 Group Sales (NZD $m)*1 SALES: +9.3% to $196.0m • Sales growth year on year:*2 AU 8.9%, NZ 4.6%, UK 1.6% • At constant exchange rates sales growth $12.9m / 7.2% • Online sales growth 23.5%, 6.6% of total sales $146.7 $57.0 1H FY11 1. 2. 3. 4. $67.3 1H FY12 $81.8 1H FY13 1H FY14 1H FY15 1H FY13 1H FY14 $179.4 $196.0 1H FY12 1H FY15 1H FY16 New Zealand (NZD $m) Australia (AUD $m) $104.9 $167.6 $127.1 1H FY11 $93.9 $165.9 $114.2 1H FY16 $54.7 $59.0 $62.3 $65.2 $68.2 $48.1 1H FY11 1H FY12 1H FY13 1H FY14 1H FY15 1H FY16 UK Sales: £1,548k 1H FY16 vs £1,523k 1H FY15. Calculated on local currency sales results (not affected by year-on-year exchange rate variation). Country sales totals exclude inter-company sales. Rounding differences may arise in totals, both $ and %. 7 Same Store Sales Growth 2 AU NZ • Same store measurement period 26 weeks ending 31 Jan 2016 • One fewer week of promotional activity vs comparable period • Cycling high clearance activity Q1 last year • Same store sales: *1 +5.8% actual exchange rates +3.8% constant currency: • Stores only +2.8% • Online only +20.7% • UK same store sales +1.5% (1H FY15 +26.8%) 12.7% 12.4% 9.6% 6.6% 6.4% 6.5% 4.8% 4.3% 3.2% 1.3% 0.9% 1H FY11 3.1% 1H FY12 1H FY13 GROUP - Actual Rates 1H FY14 1H FY15 1H FY16 GROUP - Constant Rates 12.1% 9.5% 8.0% 7.8% 6.1% 5.8% 3.7% 5.4% 3.8% 2.7% 0.6% -3.5% 1H FY11 1. 1H FY12 1H FY13 1H FY14 1H FY15 1H FY16 Same store sales measurement includes Online and all stores from their 53rd week of trading. 8 Gross Margin % 2 AU 68.1% NZ UK GROUP 67.4% 66.1% 66.1% 64.7% 64.6% 63.9% 62.8% 62.7% 62.7% 61.4% 60.2% 59.9% 57.7% 57.3% 58.6% 59.3% 58.4% 56.0% 55.6% 53.1% 50.4% 50.7% 50.4% 1H FY11 1H FY12 1H FY13 • 1H gross margin increased 350 bps YOY • Average selling price improvement through increased full price sell through • c. 20% fewer clearance units sold 1H FY14 1H FY15 1H FY16 1H FY16 SHARE OF BUSINESS*1 (GROSS PROFIT $) UK 1.5% NZ 33.3% • Favourable hedging profile year on year (NZ) AU 65.2% 1. Rounding differences may arise in totals, both $ and %. 9 2 Cost of Doing Business OPERATING EXPENSES: +1.8% to $101.3m NZD $m • Total operating expenses decreased YOY 380 bps / 3.8% of sales Rent Rent expenses include flagship stores opened in Melbourne and Adelaide Other operating expenses • • Other operating expenses decreased 480 bps / 4.8% of sales with efficiencies achieved in advertising and distribution • Total operating expenses include $1.0m non-recurring items relating to net cost of UK store exit ($0.5m) and support office restructuring ($0.5m) 1. 2. % of Sales % of Sales UK store exit costs (net) 1H FY16 1H FY15 Var $ Var % 29.0 25.3 3.7 14.6% 14.8% 14.1% 71.8 74.2 (2.4) (3.2)% 36.6% 41.4% 0.5 - 0.5 1.8 1.8% 0.5 8.1% 2.3 2.2% % of Sales 0.3% Total operating expenses*1 101.3 99.5 % of Sales 51.7% 55.5% 6.7 6.2 % of Sales 3.4% 3.5% Cost of doing business 108.0 105.7 % of Sales 55.1% 58.9% Depreciation 1H FY16 total operating expense increase attributable to year-on-year exchange rate movement $2.1m. Rounding differences may arise in totals, both $ and %. 10 Earnings Summary 2 EBIT $15.1m EBITDA $21.9m 23.2 20.9 22.6 21.9 19.9 17.0 12.7 15.8 NPAT $9.4m 17.6 15.1 10.5 10.3 11.4 6.8 0.6 1H 1H 1H 1H 1H 1H FY11 FY12 FY13 FY14 FY15 FY16 1H FY11 18.3% 11.6% 12.6% 13.5% 3.8% 11.2% EBITDA % 15.7% 8.7% 1. 9.4 6.0 1H FY12 -1.8 1H FY15 1H FY16 1H FY11 1H FY12 1H FY13 9.5% 10.5% 0.3% EBIT % 7.7% 8.3% 4.1% 6.2% 6.8% NPAT % 1H FY13 1H FY14 1H FY14 1H FY15 1H FY16 4.8% Rounding differences may arise in totals, both $ and %. 11 A A A Country Results Australia 3 SALES: +8.9% to $114.2m • 5 new stores: • 2H FY15 • • • • Sydney (Wetherill Park) Adelaide (Glenelg) AUD $m*1 1H FY16 1H FY15 Var % Sales 114.2 104.9 8.9% Same store sales growth 4.3% 0.9% EBITDA (trading result)*2 9.3 3.1 8.1% 3.0% 113 108 1H FY16 • • Melbourne (Eastland, Werribee) Adelaide (Rundle Mall) Refurbishments / Relocations: • EBITDA margin % 200.0% Relocated: Melbourne CBD • Gross margin improvement 3.2% points • Total operating expenses (excl. depreciation): • 1H FY16 56.5% of sales • 1H FY15 58.4% of sales Permanent Open Stores EBITDA AUD $m 11.5 10.5 9.3 9.0 6.1 3.1 1H FY11 1. 2. 1H FY12 Rounding differences may arise in totals, both $ and %. A reconciliation of EBITDA (trading result) to the financial statements is included in Appendix 2. 1H FY13 1H FY14 1H FY15 1H FY16 13 New Zealand 3 SALES: +4.6% to $68.2m • Same store sales growth 3.1% • One new store open: Bayfair (Tauranga) • Gross margin improvement 4.2% points • Total operating expenses (excl. depreciation): • 1H FY16 38.5% of sales • 1H FY15 44.5% of sales NZD $m*1 1H FY16 1H FY15 Var % Sales 68.2 65.2 4.6% Same store sales growth 3.1% 4.8% EBITDA (trading result)*2 14.8 7.5 21.7% 11.5% 47 45 EBITDA margin % Permanent Open Stores*3 EBITDA 97.3% NZD $m 14.8 11.2 10.8 11.1 12.2 7.5 1H FY11 1. 2. 3. 1H FY12 Rounding differences may arise in totals, both $ and %. A reconciliation of EBITDA (trading result) to the financial statements is included in Appendix 2. Cashel St Re-Start (Christchurch) reclassified as a permanent store. 1H FY13 1H FY14 1H FY15 1H FY16 14 United Kingdom 3 SALES: +1.6% to £1.5m • Covent Garden store closed • Bristol, Spitalfields to close Q3 • Same store sales growth 1.5% (incl. Online) • Total operating expenses (excl. depreciation): • 1H FY16 92.7% of sales • 1H FY15 137.0% of sales • Trading result includes £0.2m (NZ$0.5m) net cost of exiting UK stores (lease exit costs and asset impairment provision) GBP £m*1 1H FY16 1H FY15 Var % 1.5 1.5 1.6% Same store sales growth*2 0.2% 16.2% Online sales growth 5.6% 92.9% EBITDA (trading result)*3 (0.7) (1.3) (42.3)% (86.3)% 3 4 Sales EBITDA margin % Permanent Open Stores EBITDA 1H FY11 -0.4 1H FY12 -0.5 1H FY13 GBP £m 1H FY14 1H FY15 1H FY16 -0.4 -0.6 -0.7 -1.3 1. 2. 3. Rounding differences may arise in totals, both $ and %. Excludes Online (below). A reconciliation of EBITDA (trading result) to the financial statements is included in Appendix 2. 15 Cash Flow 4 Capital expenditure $12.9m (LY $9.8m): NZD $m • New stores capex $5.3m (LY $3.8m): • 4 new stores • 1 relocations • Existing stores capex $0.4m (LY $2.1m) • IT capex $0.6m (LY $2.7m) 1H FY16 1H FY15 NPAT 9.4 (1.8) Change in working capital 7.3 (10.1) Change in non-cash items 7.5 6.1 Operating cash flow 24.2 (5.8) Net interest paid (including facility fees) (1.8) (2.7) Income taxes paid (7.0) (9.3) Capital expenditure (12.9) (9.8) Dividends paid (10.1) (18.1) 0.7 26.1 Key Line items: • Other capex $6.6m (LY $1.2m), primarily new Australian DC (scheduled Aug 2016 opening) Increase/(Decrease) in net debt 1. Rounding differences may arise in totals, both $ and %. 17 4 Balance Sheet NZ $m Stock Per Store *1 1H FY16 1H FY15 103.3 97.3 59.5 50.5 237.3 236.3 21.6 26.6 421.7 410.7 66.8 85.5 0.5 0.5 48.6 31.1 115.9 117.1 305.8 293.6 Inventories Property, plant and equipment $0.732 $0.651 $0.640 $0.616 $0.634 $0.544 Intangible assets Other assets Total assets (excl. cash) Net interest bearing liabilities and cash 1H FY11 • 1H FY12 1H FY13 1H FY14 1H FY15 1H FY16 Other non-current liabilities Current liabilities Year on year increase in stock per store +1.2% Total liabilities (net of cash) at constant exchange rates (+2.9% at actual exchange rates) • c. 9% less total units on hand year on year • c. 35% less clearance units on hand year on year Net assets Key Ratios 1H FY16 1H FY15 Gearing *2 17.9% 22.6% 1.6 1.6 Stock Turns *3 1. 2. 3. 4. Each year includes permanent and temporary stores. Net Debt / (Net Debt + Equity) at balance date. COGS (rolling 12 months) / Average Inventories (YOY). Rounding differences may arise in totals, both $ and %. 18 4 Dividend • NZ 3.0 cents per share interim dividend • Dividend will be fully imputed for New Zealand shareholders • Dividend will be unfranked for Australian shareholders • Supplementary dividend of NZ 0.529 cents is payable to non-NZ shareholders • Record date 03 June 2016 • Payment date 17 June 2016 • Final dividend is expected to be fully franked and fully imputed • Future interim dividends will continue to be imputed where possible 19 0 A .C?rowth tegy Update I a 5 Growth Strategy Update Australasia (profitable growth leveraging existing assets) • Brand and social Store optimisation Pricing and promotion • • Leverage brand distinctiveness and build enhanced loyalty and engagement with Summit Club members Leverage existing store network to drive gross profit density Optimise pricing and promotional model • Continued focus on brand equity, inspiring our customers, social media engagement • Personalised communication, rewards and recognition through enhanced digital marketing and CRM capability • Leverage CRM / BI investments to provide analytics on purchase information, to drive category range optimisation • Enhance the customer service experience and staff knowledge, particularly in regards to product benefits and brand attributes • Improve visual merchandising and stock presentation in stores, reinforcing expertise in adventure travel products • Optimise store labour • Optimise space allocation to maximise gross profit contribution • Continue to invest in relocations / refurbishments to deliver return on capital • Improve clarity of promotions for our customers • Structure promotions to activate increased foot traffic and basket size • Continual refinement/review of promotional calendar to ensure customer centric and avoid sales fatigue/dependency • Refresh Summit Club offer 21 5 Growth Strategy Update Australasia (profitable growth leveraging existing assets) Store network expansion • • Omni-channel • Cost efficiency Footprint expansion in Australasia Create a seamless shopping experience for our customers across all sales channels Improve cost structure and drive margin expansion • Target 180 stores across Australasia • New store footprint expansion where return on capital investment justifies • Targeted to increase market share in Australia • Invest in online platform to enhance useability and functionality • Maximise customer conversion by leveraging integration of online platform in store • Expand click and collect functionality • Improve online conversion and visitation • Ongoing focus area • Protect profit margin through enhanced supplier partnerships and lower cost sourcing locations • Efficient advertising spend, optimising mix of media channels • Distribution cost efficiencies leveraging investment in core systems • Optimise resource allocation across the business with clear metrics and ROI 22 5 Growth Strategy Update International (capital light expansion) • Blended model for international expansion to include wholesale, online and franchise partnerships • Dedicated resource with international wholesale experience has been recruited • Requirements between current vertical retail model and wholesale being assessed • Ongoing analysis of countries / channels / margins and costs • Go to market planning based on in-market customer research • UK physical store network closure expected to be completed in FY16 • UK / Europe online channels to continue 23 4- . mph?! A FY16 Outlook 6 FY16 Outlook • Customer focus supported by increased membership base and associated data analytics • Higher priority given to product with a reorganised product team • Focus on increasing market penetration in Australia while sustaining position in New Zealand • International to become step by step a stronger focus • Increasing competition from value driven retailers and brands • Gross margin pressure increasing • Continued focus on cost control and efficiencies • Remain committed to FY16 NPAT of $30.2m 25 A Questions Appendix 1 – Historical Store count Permanent Open Stores 90 97 100 110 114 120 129 136 139 149 157 160 163 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H FY10 FY10 FY11 FY11 FY12 FY12 FY13 FY13 FY14 FY14 FY15 FY15 FY16 27 Appendix 2 – Reconciliation of Country Trading Results 1H FY16 ($’000) Australia New Zealand United Kingdom Other Total EBITDA per Interim Report (NZD) 7,790 15,789 (212) (1,504) 21,863 Internal charges not trading related*1 (NZD) 2,333 (1,003) (1,330) - - EBITDA (trading result) (NZD) 10,123 14,786 (1,542) (1,504) 21,863 EBITDA (trading result) (Local currency) 9,313 14,786 (655) (1,504) Australia New Zealand United Kingdom Other Total EBITDA per Interim Report (NZD) 1,915 8,794 (2,641) (1,268) 6,800 Internal charges not trading related*1 (NZD) 1,342 (1,342) - - - EBITDA (trading result) (NZD) 3,257 7,452 (2,641) (1,268) 6,800 EBITDA (trading result) (Local currency) 3,075 7,452 (1,315) (1,268) 1H FY15 ($’000) 1. Internal charges not trading related include intercompany charges for depreciation of core systems, and arm’s length margins charged for internal services. 28