tandem group plc · sales and marketing – team of uk sales representatives supported by telesales...

Tandem Group plcInvestor presentation

September 2019

1

DISCLAIMERThis document does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribefor, any shares in the Company, nor shall any part of it nor the fact of its distribution form part of or be relied on in connection with any contract orinvestment decision relating thereto, nor does it constitute a recommendation regarding the securities of the Company. This document has notbeen verified, does not purport to contain all information that a prospective investor may require and is subject to updating, revision andamending. The information and opinions contained in this document are provided as at the date of this presentation and are subject to changewithout notice. In furnishing this document, the Company does not undertake or agree to any obligation to provide readers with access to anyadditional information or to update this document or to correct any inaccuracies in, or omissions from, this document that may become apparent.Recipients of this presentation should each make their own independent evaluation of the Company and should make such other investigations asthey deem necessary. No reliance may be placed for any purposes whatsoever on the information or opinions contained in this document or on itscompleteness. No representation or warranty, express or implied, is given by or on behalf of the Company its directors, officers or employees orany other person as to the accuracy or completeness of the information or opinions contained in this document and no liability whatsoever isaccepted by the Company or any of its members, directors, officers or employees nor any other person for any loss howsoever arising, directly orindirectly, from any use of such information or opinions or otherwise arising in connection therewith. This document contains forward-lookingstatements concerning the financial condition, results of operations and businesses of Tandem Group plc (“the Company”). All statements otherthan statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of futureexpectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties thatcould cause actual results, performance or events to differ materially from those expressed or implied in these statements. All forward-lookingstatements contained in this presentation are expressly qualified in their entirety by the cautionary statements contained or referred to in thissection. Readers should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date ofthis presentation. Neither the Company nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-lookingstatement as a result of new information, future events or other information. In light of these risks, results could differ materially from thosestated, implied or inferred from the forward-looking statements contained in this presentation.

2

AGENDA

1. GROUP STRUCTURE

2. OPERATIONS AND PRODUCT RANGES

3. GROUP STRATEGY

4. FINANCIALS AND TRADING UPDATE

3

1. GROUP STRUCTURE

4

GROUP STRUCTURE

5

2. OPERATIONS AND PRODUCT RANGES

6

OPERATIONS AND PRODUCT RANGES MV Sports

7

MV Sports & Leisure is our UK based sports, leisure and toy business providing sales, product development and administrative functions The MV Sports Hong

Kong office based in Kowloon provides quality assurance, quality control, factory inspections, sourcing and sales support

70,000 square foot warehouse and offices in Birmingham

40 employees based across two locations

FOB sales generally managed by the Hong Kong office

Operations

Products designed in the UK with manufacturing outsourced to the Far East

OPERATIONS AND PRODUCT RANGES MV Sports

Licences:

Avengers Infinity War 1*, Avengers*, Barbie*, Batman*, Ben 10*, Bored, Bumblebee*, Disney Pixar Cars*, Disney Pixar Finding

Dory*, Disney Princess*, Electrick, E-Moto, Fireman Sam*, Frozen*, Grow & Go, Hatchimals*, Hot Wheels*, Incredibles 2*, Jo

Jo Siwa*, Jurassic World Fallen Kingdom*, Justice League*, The Lion King*, L.O.L Surprise!*, Marvels Avengers*, Minnie

Mouse*, Miraculous*, My Little Pony*, Nella the Princess Knight*, Nerf*, Paw Patrol*, Peppa Pig*, Pikmi Pops*, PJ Masks*,

Powerpuff Girls*, Rusty Rivets*, Shopkins*, Spiderman*, Star Wars*, Stunted, Superwings*, Teletubbies*, Teenage Mutant

Ninja Turtles*, Toy Story*, Thomas & Friends*, Transformers*, Trolls*, Twista, U-Move, Wigwam, Wired, Zoomies

8

* under licence

OPERATIONS AND PRODUCT RANGES MV Sports

Products

- UK’s leading wheeled toy supplier including bicycles, scooters, trikes, ride-ons, skates, go karts, glideboards, skateboards

and accessories

- Other products include helmets, wigwams, scootin’ suitcases, dream dens, hoppers, mitts, knee & elbow pads

9

www.mvsports.com

OPERATIONS AND PRODUCT RANGESMV Sports

10

Own brand products

High specification pre-school scooters and ride-ons

Widely acknowledged as being the oldest golf company in the world

www.bensayers.co.uk

Stunt scooters and accessories

OPERATIONS AND PRODUCT RANGESMV Sports

11

Own brand products (cont.)

High specification pre-school scooters and ride-ons

Leading UK supplier of outdoor play products

Well renowned scooter, pool and multi-games table brand

www.hedstrom.co.uk

OPERATIONS AND PRODUCT RANGESMV Sports

12

Own brand products (cont.)

Scooters, electric scooters, glideboards and glidekarts

UK’s leading range of kids football training products

High quality, fun skateboards

OPERATIONS AND PRODUCT RANGESMV Sports

13

Customers include:

OPERATIONS AND PRODUCT RANGESMV Sports

Marketing

– Trade fairs (London, Nuremberg)

– TV advertising to maintain position as market leader in licensed wheeled toys

– Press advertising

– Page contributions to major retailers

– Customer specific marketing initiatives

– Website marketing and own brand online retailing

– Recognised market leader in wheeled toy innovation and product development14

OPERATIONS AND PRODUCT RANGES Tandem Group Cycles

15

Tandem Group Cycles is still based in Birmingham, more than 90 years since Dawes Cycles began

All products expertly designed and developed in the UK3rd party

warehousing used

11 employees based in the UK

Manufacturing outsourced globally

Operations

Strong focus on heritage and well established brands

OPERATIONS AND PRODUCT RANGES Tandem Group Cycles: Squish

Brands and products

– Lightweight children’s bicycles

– Independent bicycle dealers (RRP £230 - £500)

– Launched 2017, rapid growth since

– 14-26” wheel

– Exciting designs

16

www.squish.bike

OPERATIONS AND PRODUCT RANGES Tandem Group Cycles: Dawes

Brands and products

– Family cyclists and touring

– Independent bicycle dealers (RRP £70 - £1,500)

– Long established, respected heritage brand

– Launching additional ebikes in 2020

– Quality and value

17

www.dawescycles.com

OPERATIONS AND PRODUCT RANGESTandem Group Cycles: Claud Butler

Brands and products

– MTB and ‘urban’ type bicycles

– Independent bicycle dealers (RRP £250 - £1,800)

– Competitive price points

– Limited edition models with spot buying opportunities

– ebike development in 2020

18

www.claudbutler.co.uk

OPERATIONS AND PRODUCT RANGESTandem Group Cycles: Falcon

Brands and products

– Family cycles

– National Retailers (RRP £150 - £1,000)

– Long established heritage brand

– New ebikes introduced in 2019

– Strong consumer awareness

19

www.falconcycles.co.uk

OPERATIONS AND PRODUCT RANGESTandem Group Cycles: Boss

Brands and products

– Youth and adult cycles

– National Retailers (RRP £180 - £500)

– Focus on MTB

– Lifestyle brand

– Targeting a more “serious” national retailer customer

20

www.bosscycles.co.uk

OPERATIONS AND PRODUCT RANGESTandem Group Cycles: Townsend

Brands and products

– Children’s bicycles

– National Retailers (RRP £50 - £130)

– Long established, well known brand with 130 year history

– Entry level but with focus on value

– Strong brand recognition

21

www.townsendcycles.co.uk

OPERATIONS AND PRODUCT RANGESTandem Group Cycles: Elswick

Brands and products

– Heritage style bicycles for all ages

– National Retailers (RRP £75 - £800)

– Well renowned cycling brand

– Traditional with a modern edge

– Targeting leisure cyclists

22

www.elswickbikes.co.uk

OPERATIONS AND PRODUCT RANGESTandem Group Cycles: Zombie

Brands and products

– Children’s and youth BMX bikes

– National Retailers (RRP £130 - £230)

– Focus on BMX and dirt jump

– Take advantage of current market trends

– Built for strength and long life

23

www.zombiebikeco.com

OPERATIONS AND PRODUCT RANGESTandem Group Cycles

Sales and Marketing

– Team of UK sales representatives supported by telesales

– Roadshows, events and trade fairs

– Dealer support and POS

– Promotional material

– Customer specific marketing initiatives

– Strong customer service

– Website marketing

Customers

– 65% independent retailers/distributors

– 35% national retailers 24

OPERATIONS AND PRODUCT RANGES Expressco Direct

25

Located in Northampton, Expressco is our online, direct to consumer business

All products developed in the UK33,000 square foot

warehouse with additional 3rd party space utilised on an ad-hoc basis

24 employees based in the UK, supported by Hong Kong office for sourcing, QA and QC

Manufacturing outsourced globally

Operations

OPERATIONS AND PRODUCT RANGES Expressco Direct: Garden Comforts

26

Brands and products

– Focus on garden and outdoor products

– Home of own brand ‘Airwave’ gazebos and party tents

– Parasols and spas

– Garden furniture and storage

– Outdoor play

www.garden-camping.com

OPERATIONS AND PRODUCT RANGES Expressco Direct: Home Comforts

www.jackstonehouse.com www.athomecomforts.co.uk

27

Brands and products

– Indoor home, electrical and furnishings

– Own brand ‘Jack Stonehouse’ radiator covers

– Heating and cooling

– Small electrical appliances

– Furniture, lighting and mirrors

OPERATIONS AND PRODUCT RANGES Expressco Direct: Pro Rider Mobility

www.proridermobility.com

28

Brands and products

– Mobility scooters and mobility accessories

– Rise & Recline chairs

– Own brand ‘Pro Rider’

– Distributor for Drive, Freerider, Kymco,

Pride, Sunrise and TGA

– Strong aftersales and service capabilities

OPERATIONS AND PRODUCT RANGES Expressco Direct: Pro Rider Leisure

www.proriderleisure.com

29

Brands and products

– Electric and manual golf trolleys

– eBikes and manual own brand ‘British Eagle’ bikes

– Ride-ons and fitness

– Distributor for ‘Bioflow’ sports bands

– New product development for 2020

OPERATIONS AND PRODUCT RANGESSummary

Core competencies

• product design

• product development

• sourcing

• importing

• QC/QA systems

• financial controls and cost management

• distribution

• customer relations

• experienced management

Group synergies

• suppliers and terms

• customers

• shipping

• distribution

• warehousing

• banking, finance and administration

30

3. GROUP STRATEGY

31

GROUP STRATEGYMajor objectives

To enhance shareholder value by:

• generating cash

• improving the profitability of the Group and increase net asset value

• paying a regular dividend

• improving communications with investors in order that the Group’s

performance is recognised

• increasing market capitalisation

32

GROUP STRATEGYBuilding brands and licences

Our objectives are to:

• continue to invest in leading licences and remain the UK market leader in licensed

wheeled products

• explore expansion into additional licensed categories

• invest in the development of new innovative product ranges

• grow own brands and build awareness

• develop stronger relationships with key customers

• develop new accounts and industry sectors

• grow international business

• continue to invest in and grow our online businesses 33

GROUP STRATEGYAcquisitions and disposals

Whilst our focus is for organic growth we continue to have an opportunistic approach to M&A:

Acquisitions:• Complements/enhances current product ranges

• Uses common or existing supply base

• UK designed and developed

• Known brand/expertise

• Major/National account retail potential/existing customer base

• Potential for licensed derivatives

• Offers potential for group economies of scale/cost savings

Disposals:• To explore disposal value of individual sectors when maximum

potential has been reached

34

GROUP STRATEGYInfrastructure and resources

We will invest as appropriate to enable our objectives to be achieved by:

• continuing to review our warehouse/distribution requirements

• investing in, rewarding and empowering key personnel

• reviewing and supporting capex and infrastructure projects

• ensuring our IT systems adequately support our business operations

35

GROUP STRATEGYConclusions

36

To realise our strategy we:

• recognise that we operate in a highly competitive and rapidly changing retail

environment

• are aware of the need to harness the power of our brands to drive growth

• are capable of driving revenue organically, accelerated by key acquisitions if

opportunities arise

• will deliver profitability from additional revenue generated and continue to

carefully control our cost base

• will aim to achieve the very best possible results for all our stakeholders

4. FINANCIALS AND TRADING UPDATE

37

FINANCIALS AND TRADING UPDATESummary 6 months to 30 June 2019

38

Group Revenue

+ 27%

Gross Profit

+ 30%

Gross Profit %

+ 80 bps

Basic EPS

3.0p v (7.0)p

Net Profit

£155k v £(356)k

Dividend

+ 10%

FINANCIALS AND TRADING UPDATEProfit & Loss Account

39

FINANCIALS AND TRADING UPDATEProfit & Loss Account commentary

• + 27% revenue growth (£16.0m v £12.7m) significantly driven by strong licence performance

• Improved gross profit percentage (30.6% v 29.8%) through better buying, re-sourcing, new products and concentration on profitable product lines

• Continued strong control of costs by efficient people and infrastructure resource management

• Increase in finance cost reflects swing in foreign currency derivative contracts from credit to charge in the period

• Tax expense due to increased FOB business from Hong Kong

• Net profit £0.2m compared to prior year interim loss £(0.4)m

40

FINANCIALS AND TRADING UPDATEBalance sheet

41

FINANCIALS AND TRADING UPDATEBalance sheet commentary

• Tight control of inventories (£5.7m v £6.2m), stocks are clean andsaleable

• Increased trade debtors (£7.1m v £5.6m) reflecting revenuegrowth, no material bad debts

• Cash generation (£3.7m v £1.0m) and reduction in net debtposition (£(2.0)m v £(3.5)m)

• Reduced pension liability (£2.7m v £2.8m) due to contributionduring the period, full valuation to be carried out at year end

• + 17% net asset growth (£12.4m v £10.6m)42

FINANCIALS AND TRADING UPDATEOutlook

• Ongoing strong licence potential in 2020

• Further development of MV own brand products and ranges

• Squish expected to keep growing and take market share

• Continuing challenges in the overall bicycle market

• New product development in online businesses including outdoor,indoor, sports and leisure

• Macro economy and consumer spending a concern

• Downside risk of weak GBP/USD depending on Brexit outcome

43

FINANCIALS AND TRADING UPDATEDividend

• First dividend paid 2010 following share capital restructure

• Dividends paid to date £1.6 million

• Cumulative dividend growth since inception +44%

• We aim to continue with our progressive dividend policy

• Dividend strategy and amount paid continually under review

• Improving dividend cover and satisfaction of pension scheme obligations will enable further dividend growth

44