Super Cheap Auto Group

Market Update

The Stuff we will talk about today….

Super Cheap Auto

Our Dream

The NEW CONCEPT

Our Plans

Our Team

The Numbers

So what about SCA?

Despite a tough retail market, earnings are still expected to be in line with market expectations.

Our Goal

To achieve and maintain the position as the leading retailer of automotive products, handyman items, tools and equipment in Australasia

To operate 300 + stores across Australia and New Zealand

To achieve this position as quickly as possible depending upon the availability of suitable sites.

Our Team

Store Merchandising & OperationsProduct Development and Brand ManagementMarketing & PromotionsImport ManagementBusiness Systems and TechnologySupply ChainProperty ManagementFinance Human Resources

In the past that we have spoken about new concepts whereby we can leverage our core competencies.

Our Core Competencies

We have a dream…

February 2003 Strategic workshop on the future of Super Cheap Auto

One of the categories identified was Camping and associated products as being a strong retail opportunity

Assessment of the market completed by Core Economics

Concept model developed in 2004

Assessed how SCA core skills could be utilised

Decision made to acquire CampMart

Acquisition of CampMart - OverviewSE Queensland based camping and leisure products retailer

Founded in 1982 by Ron & Rita Liekari4 stores in the greater Brisbane area

LawntonCapalabaSpringwoodKeperra

Acquisition created a low risk entry and information into a new market

SUL plans to develop and grow the business organically

Business and trading assets acquired for $6.4m (4.9 x ’04 EBIT)

Acquired February 2005

The Market

Our concept is much bigger than just camping On the categories that we will stock, the market is worth - $1.8Bn to $2.0Bn in 2005 – increasing by 3.5% per year.

Household expenditure on our categories of $350 to $900 per year, varies dependant on income, family type and recreational pursuit. Non capital city expenditure is higher per household.

Accounts for 2.8% to 4.0% of typical household expenditure.

Top end of the market (mainly active family) spend $5,000 to $8,000 per year.

Core Economics Board Presentation

The outdoor recreation market has been growing steadily for a number of years. From 1999-2000 to 2003-2004, growth per year averaged 5.65%.

Boating, camping and fishing have traditionally been strong in Australia.

Have benefited enormously from the increased interest in an outdoor lifestyle and Baby Boomers.

Stores catering to the boating, fishing and camping markets have by and large been specialised and fragmented.

Research identified a link between boating, camping and fishing but no major retailer specialised in all three combined categories.

No retailer offered extensive ranging across all the three categories.

The Market

Current Players

Boating

Bias - 15 stores across QLD, NSW, WA

Whitworths - 12 stores across QLD, NSW, VIC, WA, SA

Anaconda - 1 store

Specialist boating stores Australia wide mainly linked to boat dealerships

Current PlayersCamping

Rays Outdoors - 17 stores

Downunder - 4 stores in Brisbane

Aussie Disposals - 37 Stores

Kangaroo Tent City - 4 Stores in Sydney

Boots/Great Outdoors - 41 stores across Australia

Kmart - 167 stores

Big W - 120 stores

Camping World/Independents. General buying group of 55 stores.

Anaconda - 1 store

Amart All Sports - 26

Current Players

FishingKmart - 167 stores

Big W - 120 stores

Amart All Sports - 26 stores

Tackle World - 35 store buying group

Rays Outdoors - 17 stores

Anaconda - 1

Boat dealers

Bait shops

Generalists – Big W, Kmart

Specialists – Amart All Sports, Mossops

Other – sports, bait and tackle

- Service/ advice - Price

- Range - Location

- QualityFishing

Generalists – Big W, Kmart

Specialists – Rays Outdoors, CampMart, Tentworld (considered to be the main store)

Other – sports, top end specialists and disposals

- Service/ advice - Location- Range- Price

- QualityCamping

Generalists – Big W, Kmart

Specialists – Whitworths, Bias (considered to be the main store)

Other – all other marine outlets

- Advice/ service - Parking

- Quality - Opening hours

- Range

- Availability

Boating

Leading shopsDriversArea

Our assessment of the market

Our Creative Partners - IdeaWorks

Established 1980

Australia’s only true specialist retail marketing communicationscompany

Offices in Sydney, Melbourne, Brisbane, Auckland

90 staff

Besides CampMart, broad range of retail clients, and brand clients focused on the retail channel

Experience in planning and developing new concepts

Strategic Development ProcessTried and tested process

Starts with an analysis of Category, Competitors, Customer & Company

Identifies trends and issues

Aligns with business vision and objectives

Details statements of intent around ‘7 P’s’Product

Place

Price

Promotion

Presentation

People

Process

The Dream is about to become a R E A L I T Y

Meet Simon… our customerMarried to Colleen with three kids

Finance guy and good bloke

Drives a Pajero (that actually gets used outside of the city)

Lives in a house that is constantly under construction(and he must finish that bathroom one day)

Likes a good red and brews his own beer

Rides a bike on the weekend to keep fit(and has gone in the Sydney to Woollongong bike ride)

Would lay down his life for the Roosters

Must find room in the garage one day for the car (there is plenty of room though for the camping gear, fishing gear, kayaks etc.)

Favours shorts and bare feet on weekends(even in the middle of winter)

NOTE: while Simon is a ‘pen picture’ of the BCF customer, the BCF target is necessarily broad and takes in the full spectrum of middle Australia – what they all share is a ‘Simon-type’ attitude

Attitude/Purchase DriversOne stop shop – boating, camping, fishing

Value-for-money important – won’t pay over the odds

First timers want base package (solution selling)

Experienced customers want the latest, greatest – one-up-manship

Recognised brands provide a comfort factor/credibility

Requirement for safety/security in boating and technical advice in boating and camping

Need to feel they can trust the team-member’s expertise; don’t want the Bunnings-style salesperson

Don’t want a hard-sell environment

Want to be able to browse, but don’t want to feel abandoned (service needs to be close-by)

Strongest attraction – unique product offering (width and depth, category integration and ‘top end’ inspiration)

Biggest turn-off – team-members who don’t know their stuff

Simon values...Clean, non-cluttered, well-organised environment

Non-intimidating sales process

A place to browse and gather information

Extensive, but well-edited range

Known brands

One stop boating, fishing and camping shop

Service (personal and information) in-store

Knowledgeable, passionate staff

Guarantees and warranties

Fairness in pricing

Brand Essence

Bloke’s Heaven(Bloke can be male or female)

Customer Value Proposition

It’s like a mate with the most awesome shed I’ve ever

seen…well-organised with everything I need for my

boating, camping or fishing experience.

BCF: What It Is, What It Isn’t

Is outdoor enthusiast

Isn’t outdoor extremist

Is suburban

Isn’t urban

Is Pajero

Isn’t Range Rover

Isn’t Metrosexual

Is Retrosexual

Is Natural

Isn’t Greenie

Is Service (personal or information)

Is relaxed professionals

Is quality product

Isn’t crap

Is all the gear for gadget freaks

Is knowledgeable

Isn’t superficial

Is efficient

Isn’t sloppy

Is simple

Isn’t complicated

Isn’t Rex Hunt

Isn’t Steve Irwin

It’s the journey

Isn’t JUST the destination

The BCF PromiseThe quality you demand

At BCF, we only sell quality brands from trusted manufacturers. We are committed to offering the widest range - from the tried and true to the latest and greatest. But if a product doesn’t measure up, it doesn’t make it into our store.

The price you deserveWhen you shop at BCF, you know you’ll always get a fair price. We regularly check the competition to make sure we are competitive and, wherever we can, we add extra value to give you an even better deal.

The advice you depend onAt BCF, our people love boating, camping and fishing as much as you do. They are passionate about their pastime and if they can’t give you an answer on the spot, they’ll find a team member who can.

If you’re not totally happy, we’re not happyIf you’re not 100% satisfied with your purchase, just let us know. We’ll either sort out the problem or give you your money back.

Product Statement of IntentBCF will deliver a comprehensive and complete product offer across boating, camping and fishing to meet the needs of its target audience (first timers through to passionates) and exceed expectations in both depth and width.

Pricing Statement of IntentBCF will offer a fair and consistent pricing policy.

We intend to be competitive in the market place, but not a discounter.

Place Statement of IntentBCF will secure sites that are destination retail, prominent in location, building and signage.

They are to be located wherever possible in multiple clusters within metropolitan or regional centres, recognising the benefits of marketing umbrellas (media markets).

Store sizes will be 1500 to 2000 sq metres

Promotional Statement of IntentBCF will engage customers from day one by explaining what the brand is all about and showcasing its personality.

The promotion of BCF will be clear, consistent and persistent and communicate in an informative and knowledgeable way, while dominating events to generate traffic and sales.

BCF will be the most dominate advertiser in this market

Presentation Statement of IntentBCF is a well-organised, uncluttered, cleverly signposted (using BCF speak) and easily navigable environment where product is king.

Our intention is always to inform the customer and encourage interaction and purchase.

The stores will be bright and orderly but not sterile and will focus on the product.

The hero categories will be positioned around the perimeter of the store with tents displayed at the rear of the store or on a mezzanine where possible.

People Statement of IntentBCF will be represented through its team-members’ knowledge, skills, passion and desire to provide real solutions for real people.

They will project trust, reliability, honesty and be informative, believable and comfortable to deal with. (BCF is my mate).

Our Team Framework principles are based around:Passion for what we do

Open communication and clear objectives

Enthusiasm - we fight the fish all the way to the net

Integrity - you can trust what we say

Bringing the Brand to Life

What categories of Product will we offer?Boating

Navigation & CommunicationBoatWatersportsBy the Metre

ApparelFootwearBottomsTopsSun ProtectionThermal UnderwearSocksGlovesHeadwear

FishingRods Reels Terminal Tackle Accessories

MediaMaps & GuidesBooksMagazines & NewspapersElectronic

Tools & MaintenanceToolsLubes & Chemicals

Trailer/4x44x4Trailer

CampingShelterToilet & ShowerBeddingFurniture CookingGas & Fuel AppliancesFridges & CoolersTablewareSafety + ProtectionGroceryEntertainmentLuggageStorage

Electrical & PowerElectricalPower

What are some of the things that will impact our customer ? Our HERO categories….

Marine Electronics (sounders and GPS) 66 different models

Rope (over 20 kilometres in store)

Tents - 60 in store (we could sleep 240 people)

Coolers and Fridges - we can hold approx 18,500 litres in our fridge & coolers range

Fishing Rods - over 1000 in store

Fishing Reels - over 600 in store

Lures - over 12000 in store

How will we market our brand ?

Extensive range catalogues

Television

Press

Radio

Mail order

Internet

CRM initiatives

‘BCF Speak’

One of the things that will distinguish BCF communications is a unique tone of voice

If BCF is like your mate, BCF should speak like a mate

BCF speak should be conversational, straightforward, funny and a bit blokey

But, like a good mate, it can also be knowledgeable, practical and trusted – especially when we are talking about serious subjects like safety

Here are the stores

Stores opening in 2nd Quarter 2005-06Lawnton

Springwood

Capalaba

Keperra

Labrador

Maroochydore

Browns Plains

Toowoomba

Townsville

Mackay

Cairns

Lawnton- CampMart

Lawnton- BCF

Springwood- CampMart

Springwood- BCF

Capalaba- CampMart

Capalaba- BCF

Keperra- CampMart

Keperra- BCF

Labrador- BCF under construction now

Labrador- BCF under construction now

Maroochydore site

Maroochydore- BCF

Browns Plains site

Browns Plains- BCF

Future Store opening

Another three stores to open in the 3rd

Quarter.

Taking the total to 14 by June of 05-06

Potential stores numbers in excess of 60 across Australia and New Zealand

Progressively expanding from Queensland into other states

What’s been done?

Management team recruited

Vendors have received their first order for a model store

Set up teams have been created

Store designs and layouts are complete

First new BCF is being created now

The refurb program for the four Campmart stores is already under way

The marketing plan is in place

Team members are being recruited and training has commenced

Steve Doyle – General Manager BCFSteve has 17 years of retail experience in Australia and overseas, with Woolworths prior to joining the Super Cheap Auto in 2002.

Steve won the Queensland Retail Association's Young Retail Executive of the Year Award in 1991

Won the Australian Supermarket Industry Scholarship Award in 1994.

Won the Australian Institute of Management Young Manager of the Year Award for Brisbane in 2004.

In Super Cheap Auto Steve held the roles of:

Marketing Manager

Retail Operations Manager & General Manager Retail

General Manager Merchandising

Steve led the project team for the acquisition of Marlows and also the launch of SCA into New Zealand.

Tom Panic – Merchandise ManagerTom has over 30 years in the Australian retail industry.

Super Cheap Auto for 6 years as Merchandise Manager.

Franklins supermarkets for 12 years as:

General Merchandise Buyer

State Retail Operations Manager

State Merchandise Manager in QLD

Tom’s responsibilities at BCF are merchandising, procurement and inventory.

Jason Wolff – Marketing ManagerJason has 8 years experience with Super Cheap Auto

Retail management, New Store Set Up Manager, most recently Promotions Manager of Super Cheap Auto.

Jason has been involved in the management team that handled the conversion of the Marlows & Rocca Bros chain of stores in WA, SA & VIC and also worked and managed many areas of Super Cheap Auto’s move into New Zealand from product ranging to the opening of many of the initial stores.

More recently Jason has been involved with the Super Cheap Auto sponsorship of the Bathurst Round of the V8 Supercars and the new relationship with leading V8 Supercar Team PWR now known as Super Cheap Auto Racing.

Terri Greentree – HR ManagerTerri has 16 years experience in Human Resources, in a range of generalist and specialist roles.

She joined Super Cheap Auto in 2004 as Team Development Manager.

Terri has previously worked with Telstra and semi-government organisations focusing on HR, communications and change management programs.

Terri holds a Bachelor of Business (HR) and Masters of Management (HR), and is a Member of the Australian Human Resources Institute.

Wayne Faulkner – Area ManagerWayne has 27 years of retail experience in Coles Myer. Prior to joining Super Cheap Auto, Wayne held several management positions within Kmart.

Wayne joined Super Cheap Auto in July 2000.

Wayne’s career has been in Store Management and Area Management with Super Cheap Auto

Wayne is responsible for the day-to-day store operations and set up of new stores

Anna Chipperfield – Administration Manager

Anna has recently returned from overseas, after having spent 3 years in London and 2 years in the Middle East working in the interior construction and design industry.

She is experienced with establishing operational procedures and business expansion projects.

Anna has been the Merchandise co-ordinator for Super Cheap Auto, coordinating the operations of a team of 50 people.

So what about the numbers that really count….

BCF Financials - Sales

Sales anticipated to be circa $5m to $6m at maturity

Sales will take 3 years to reach maturity achieving 75% to 80% of mature sales in year one

Sales in 3 of the 4 stores acquired from CampMart will be lower due to smaller size

Like for like sales post maturity anticipated at 4% to 5% - slightly ahead of market growth due to brand strength

BCF Financials – Gross Profit and Expenses

Gross Margin initially anticipated at 34% to 35% in year 1 lifting to around 37% to 38% by year 3 reflecting relatively small scale and very limited own brand and import at start up

New product development will be a key focus to drive margin improvement but will require marketing investment support

Opportunities exist to leverage Super Cheap Auto’s import procurement capabilities to improve margin

Increased scale and expertise will improve margin over time

Ongoing store expenses (incl. advertising) expected to run at around 24% of sales in year 1, declining to around 22% in year 3.

BCF Financials – Investment per store

Capital Store Fit-out - $500,000

Net Stock Investment - $1,200,000

Store Set Up Costs - $100,000

Launch Advertising - $160,000

Store Set Up costs and Launch advertising will be expensed as incurred

Total investment in each new BCF store will be circa $2m

BCF Financials – Store Cash Flow

-514

588

-241

-24

853

Yr 3

101-1,102-1,544Cumulative Cash Flow

615442-1,544Net Cash Flow

-252-178-46Tax

-24-24-1,960Set Up and ongoing Investment

891644462Store Contribution (pre depreciation)

Yr 4Yr 2Yr 1

Store contribution excludes head office support costs

Stores pay back initial investment over a 4 year period

BCF Set Up Costs – 2005/06

Total BCF Store Investment - $26,140,000Including store conversionsFixed Assets - $8,000,000Working Capital - $14,500,000Revenue Costs - $3,640,000 (Initial brand launch $2.2M)

BCF Concept Development - $1,360,000All costs expensedProject Team - $1,130,000Expenses - $230,000

Total Set Up Costs – $27,500,000Capital Costs - $22,500,000Revenue Costs - $5,000,000

BCF will expense $5m of set up costs in the 2005/06 year.

BCF Financials – Overall Impact in 2005/06

Store sales and profit contribution depending on store opening schedule

Sales anticipated to be around $40m

Store contribution expected to be around 10.5% of sales

Support costs anticipated at around $3m

Revenue set up costs anticipated at around $5m

Set up costs will result in a negative EBITDA contribution to Group results in 2005/06