The PAS Group Limited – H1 FY2018 Results Briefing

ABN 25 169 477 463

22 February 2018

H1 FY2018 Results Summary

Financial Summary (i)

H1 FY2018 H1 FY2017

Sales $131.4 million $135.7 million

EBITDA $8.4 million $11.6 million

NPAT – Continuing $3.0 million $5.4 million

NPAT – Total Business $3.0 million $4.8 million

• Sales growth driven by online, new stores, and the annualisation of stores opened in FY2017

• Continued strong growth in loyalty programs with total membership up 82,000 (11%) to 836,000 and now representing 75% of total Retail sales

• Whilst we have tempered our new store roll-out program in line with our strategy, we have continued to open new stores in targeted locations including 8 Review concession stores in David Jones

• Clean inventory levels ensuring no requirement for excessive late season clearance

• Sales down 3.2% to $131.4 million

Retail sales up 0.4%

Wholesale sales down 7.1%

• Negative like-for-like Retail sales due to challenging trading conditions and significant promotional activity across the industry, particularly for the first 8 weeks of the half and over the Christmas trade period

• Reduced concession sales and lower foot traffic at Myer

• Online sales grew 25.5% on top of the 41.0% growth achieved in

FY2017

• $5.1m of low margin Wholesale sales discontinued in Designworks

• Gross profit of 57.2% well managed, up 1.2% on H1 FY2017

• EBITDA from continuing business of $8.4 million (inclusive of $1.0m of non-recurring costs), down 28.0% on H1 FY2017

• EBITDA was impacted by the tougher retail trading environment, delays to Wholesale orders in Designworks, reduced Independent Wholesale sales and a higher cost base from investment in new and annualised stores

• Debt free with net cash on hand of $5.7 million

• EPS of 2.2 cents per share, Interim dividend declared of 1.5 cents per share fully franked, funded from free cash flow

(i) All statutory financials are presented on a “Continuing” business basis unless otherwise noted.

See Continuing to “Total Business” reconciliation at Appendix A

Operational Summary

1.

Retail Segment

H1 FY2017 to H1 FY2018 Retail Sales Bridge ($ million)

• 11 new Retail sites opened in H1:

Black Pepper; 1 store

Review; 1 store, 8 concessions

Bondi Bather; 1 store (acquired)

• Successful execution of new store concepts in Melbourne Central and Booragoon with both trading ahead of expectations

• Active renewal and rationalisation of our store portfolio, with 5 stores closed at lease end

FY2017 Opened Closed H1 FY2018

Black Pepper 144 1 (4) 141

Review 111 9 (0) 120

New Businesses & Other

3 1 (1) 3

Total Retail Sites 258 11 (5) 264

• Retail sales grew by 0.4% to $72.3m

• Growth due to:

Online sales growth of 25.5% in addition to the 41% growth achieved in FY2017;

The impact of the 11 new stores opened in H1 including 8 Review concessions in David Jones;

The annualised impact of new stores and closed stores in FY2017; offset by

Negative LFL sales particularly in Myer concessions

71.9 (3.4)

1.6

4.6 (2.4)

72.3

H1 FY2017Sales

LFL Growth New Stores AnnualisedStores

Closed Stores H1 FY2018Sales

Summary

Retail Sites

Total Retail Sites by Brand

2.

• H1 Online sales now represent 14.0% of Group Retail sales across the group, up from 11.2% in H1 FY2017

• Launched Review on the Alibaba Tmall platform in January 2018. Review are the first Australian apparel business to launch on Tmall and with over 300 million registered users, this has opened up a significant opportunity in an exciting market. Tmall are dedicated to providing a premium shopping experience for increasingly sophisticated Chinese customers in search for top quality branded merchandise

• Access to key Retail partners’ online customer base continued to be achieved with the launch of David Jones Dropship for Review and The Iconic Marketplace for JETS

• Successful launch of B.O.D by Rachael Finch website in November 2017

• Launch of Everlast Australia website in December 2017, providing a direct to customer opportunity for the business

Online Growth (H1 FY2014 – H1 FY2018)

2.6%

4.5%

8.6%

11.2%

14.0%

Online % of sales

H1FY14 H1FY15 H1FY16 H1FY17 H1FY18

Operational Highlights - Online & Customer Loyalty

3.

• Loyalty membership grew by a further 82,000 members (+11%) in H1 2018 to 836,000 members

• Loyalty program sales now represent c.75% of sales and continues to provide improved consumer insights, enable tailored communication and drive traffic to our Retail stores

• Upcoming launch of the new Review website in H2 on the Salesforce Commerce Cloud platform, which is expected to provide an improved customer experience and greater conversion

• Launched Alipay in selected Review stores, enabling the business to easily accept non-cash payments from Chinese customers in store

• Launch of Review on Amazon Marketplace and the launch of Everlast on Amazon

planned for H2

108

342

534

652

836

Loyalty ('000 members)

H1FY14 H1FY15 H1FY16 H1FY17 H1FY18

Loyalty Growth (H1 FY2014 – H1 FY2018)

Operational Highlights - Online & Customer Loyalty

4.

• Wholesale sales in H1 were $59.1m, down 7.1% on the same period last year

• Designworks sales reflect the discontinuation of $5.1m of low margin sales

• Sales were down on prior year due to order movements from Designworks Department Store customers and reduced Independent Wholesale sales

• Strong increase in gross profit due to improved gross margins driven by continued growth in the Sport Division

DESIGNWORKS

• H1 sales down 8.9% to $43.6 million due to delays in orders, however impact largely offset by improved margin

• 89% of sales now from Licensed business and Sport, continuing to de-risk and reduce reliance on Private Label sales

• Increased sales in H1 in the Sport Division driven by growth in new Footwear ranges and Sports Equipment

• Launch of Everlast Australia online

• Business well positioned for moderate growth in H2 and major growth in FY2019 due to:

Growth of Lonsdale;

Coles Supermarkets Mix program;

Continued growth of Footwear;

Sales from direct to consumer websites (Everlast and B.O.D by Rachael Finch);

The launch of Suburban as a major brand with Target; and

The addition of a new international sports brand

H1 FY2018 H1 FY2017

68% 68%

9% 8%

23% 24%

H1 FY2017 H1 FY2018

Designworks Black Pepper Other

Private Label, 9%

Licensed Apparel &

Accessories, 39%

Owned Brand, 2%

Sports, 50%

Private Label, 11%

Licensed - Apparel &

Accessories, 48%

Owned Brand, 2%

Sports, 39%

Wholesale, Design & Distribution

Wholesale Sales by Brand – H1 FY2017 v H1 FY2018

Designworks Product Mix – H1 FY2017 v H1 FY2018

5.

OTHER WHOLESALE

• Further investment in JETS infrastructure to drive growth;

• Continued strong performance in Yarra Trail Wholesale; and

• Continued shift from Wholesale to Retail in Black Pepper

68% 68%

9% 8%

23% 24%

H1 FY2017 H1 FY2018

Designworks Black Pepper Other

Wholesale, Design & Distribution (continued)

Wholesale Sales by Brand – H1 FY2017 v H1 FY2018

6.

• Investment in own Retail and International channels has reduced reliance on Private Label sales in local Discount Department stores

• Continued growth in Sport through Rebel and Independents

• Increase in David Jones due to 8 new Review concession stores opened during H1

Sales by Customer / Channel – H1 FY2017 Sales by Customer / Channel – H1 FY2018

Kmart 14.5%

Target 6.0%

Rebel 2.7%

Big W 2.9%

Myer - Concessions

10.8%

Myer - Wholesale

2.6% David Jones

4.5%

Independent Wholesale

7.3%

Own Retail Stores 44.9%

International 3.7%

Kmart 14.8%

Target 6.8%

Rebel 1.7%

Big W 2.0%

Myer - Wholesale

3.8% David Jones

2.4%

Independent Wholesale

11.4%

Own Retail Stores 40.9%

International 4.1%

Myer – Concessions

10.0%

Sales by Customer

7.

• Gross margin has continued to be well managed through the currency cycle despite current market conditions and significant promotional activity in the industry

• H1 FY2018 Gross profit % 115bps higher than prior half year driven by increased Retail mix and continued growth in the Designworks Sport division

• Forward US dollar currency requirements for Retail businesses covered to the end of FY2018

$0.90

$0.78

$0.72 $0.75

55.7% 56.0% 56.1% 57.2%

H1 FY2015 H1 FY2016 H1 FY2017 H1 FY2018

AUD $ Gross Margin %

Exchange Rate and Margin

Gross Margin and Exchange Rates

8.

01. 02. 03. 04.

New Store Roll Out

• Tempered new store roll-out

program with emphasis on

opening new stores in targeted

locations (including opening an

additional 3 David Jones

concessions in addition to the

8 opened in H1 FY2018)

• Continued implementation of

the new store concept for

Review, following the success

of Melbourne Central and

Booragoon

• Opening of JETS Port Douglas

in Q3 2018

Store Enhancement

• Continued enhancement of

customer experience via a total

of 26 refurbishments planned for

completion in FY2018

• New store concept planned for

selected Review concessions in

Myer and David Jones

• New store concept for the

upcoming JETS Port Douglas store

as well as selected David Jones

locations

Product and Brand Extension Licensing Opportunities

• Continued growth in

Designworks Sports &

Footwear divisions

• Realisation of new contract

wins including Coles

Supermarket Mix program,

Lonsdale and a new

International sports brand

• Sales from direct to consumer

websites Everlast and B.O.D

by Rachael Finch

• The launch of Suburban as a

major brand with Target

• Opportunities with strong

portfolio of licences and an

ongoing pipeline of new

licensed opportunities

Future Growth Plan

9.

05.

Online Growth

06.

Loyalty

07.

International Growth

08.

Acquisitions

• Online continues to be a major

growth vehicle for the business

both in existing markets and new

channels

• Enhanced focus on single

customer view across

omnichannel

• New website planned for Review

on the Salesforce Commerce

Cloud Platform

• Planned launch of Review on

Amazon Marketplace

• Launch of Review on the Alibaba

Tmall global platform with

potential to add other brands

• Launch of Everlast online and

B.O.D by Rachael Finch

• Launch of new Review and

Black Pepper loyalty programs

• Continued focus on mobile

loyalty and segmented,

targeted communications

• JETS international growth through

Wholesale and online – with a

particular focus on the US and

Europe

• Review China and Asia entry

through Alibaba platforms

• Bondi Bather acquired in

August 2017 as a strategic

addition to the Swimwear

division

• Continuing to evaluate a

broad range of value

enhancing opportunities

Future Growth Plan

10.

• In spite of challenging trading conditions in H1 FY2018 performance

was driven by:

Strong online growth of 25.5%;

New stores and annualisation of stores opened in FY17

which included expansion into 8 David Jones concessions;

Continuation of the strong growth in the Designworks

Sport division; and

A 1.2% increase in overall gross profit margin

• Growth strategy execution according to plan:

Digital and loyalty strategy driving omnichannel sales;

Designworks growth from the new Sport Division including new licence

acquisitions and new categories in Footwear and Equipment;

Selected store openings and targeted refurbishment continues; and

Continued progress on the Swimwear growth strategy

• Strong cash generation with no debt and a flexible banking deal to cost

effectively accommodate growth

• Continuing to explore potential strategic opportunities whilst

maintaining a tight cost control focus

• Trading conditions for the first six weeks of H2 FY2018 continue to be

tough; however, the business is well advanced in the development of

plans to drive further efficiencies.

• Despite the trading environment, PAS remains long term debt free, has a

strong balance sheet and continues to evaluate potential strategic

opportunities.

Conclusion and Outlook

11.

H1 FY2018 Financials

Actual ($ millions) H1 FY2018 H1 FY2017 Var

RETAIL

Review 38.9 39.2 -0.8%

Black Pepper 29.0 29.4 -1.4%

New Businesses and Other 4.4 3.4 +29.4%

Total Retail Sales 72.3 71.9 +0.4%

WHOLESALE

Designworks 40.4 43.6 -7.3%

Black Pepper 4.7 5.9 -20.3%

New Businesses and Other 14.0 14.2 -1.4%

Wholesale Sales 59.1 63.7 -7.1%

Total Sales 131.4 135.6 -3.2%

Retail Sales % of Total Sales 55.0% 53.1%

Wholesale Sales % of Total Sales 45.0% 46.9%

Retail Sales Growth (%) 0.4% 7.3%

Wholesale Sales Growth (%) -7.1% 1.6%

• Review sales impacted by challenging market conditions,

offset by growth driven by a strong online result and

David Jones concession stores opening during the period

• Black Pepper also challenged with aggressive discounting

by competitors in the current environment. Gross profit

% continues to be strong and reflects the planned shift

from Wholesale to Retail

• New business driven by JETS Retail including online and

White Runway

• Continued growth in Designworks Sports sales was offset

by delays in licensed Wholesale orders from the major

Department Stores

• Designworks sales reflect the discontinuation of $5.1m

of low margin sales

Sales by Brand and Segment

13.

• Gross profit margin up 115 basis points reflecting half on half increase

to Retail mix, increased sales in the Designworks Sport Division and

effective management of FX outcomes

• CODB increase on prior year of 330 basis points predominantly due to:

$1.0m of non-recurring costs relating to the on-market takeover

offer, strategic consulting costs and an unfavourable NZ Customs

duty ruling

Continued investment in digital marketing to drive sales growth

Property and employment costs associated with new stores in

H12018 and full year impact of stores rolled out in FY2017

(i) See Continuing Business to Total Business Income Statement reconciliation at Appendix A

Continuing Business ($ millions)(i) H1 FY2018 H1 FY2017 Var

Revenue from Sales 131.4 135.7 -3.2%

Gross Profit 75.1 76.0

Gross Profit Margin (%) 57.2% 56.1%

Cost of Doing Business (CODB) (66.7) (64.4)

CODB (%) 50.8% 47.5%

EBITDA 8.4 11.6 -28.0%

Depreciation & Amortisation (3.8) (3.9)

EBIT 4.6 7.7 -40.3%

Net Finance Costs (0.3) (0.4)

PBT 4.3 7.3 -41.3%

Tax Expense (1.3) (1.9)

NPAT – Continuing Business 3.0 5.4 -45.0%

NPAT – Discontinued Business - (0.6)

NPAT – Reported 3.0 4.8 -38.3%

Income Statement

14.

• No debt

• Net cash of $5.7 million (as at 31 December 2017)

• Inventory and Trade and Other Payables decrease due to prudent stock

management and timing of shipments with Chinese New Year falling later

than prior year

• PP&E decreased due to reduction in new stores

• Goodwill and other intangible increase represents goodwill upon

acquisition of the Bondi Bather business, in addition to investment in

software and web development.

Statutory ($ millions) 31 December 2017 30 June 2017

Cash and Cash Equivalents 5.7 4.9

Trade and Other Receivables 17.9 20.3

Inventory 31.8 33.1

Property, Plant and Equipment 14.3 15.6

Deferred Tax Assets 7.0 7.4

Goodwill & Other Intangible Assets

88.2 85.5

Other Assets 4.8 3.9

Total Assets 169.7 170.7

Trade and Other Payables 16.1 18.5

Deferred Tax Liabilities 7.5 7.5

Other Liabilities 18.6 18.1

Total Liabilities 42.2 44.1

Net Assets 127.5 126.6

Balance Sheet

15.

Statutory ($ millions) H1 FY2018 H1 FY2017

Net profit after tax (i) 3.0 4.8

Non-cash Adjustments 4.5 4.8

Cash profit 7.5 9.6

Movement in Working Capital 1.3 0.3

Movement in Trade & Other Receivables 2.5 (1.8)

Movement in Inventories 1.4 (1.0)

Movement in Trade & Other Payables (2.6) 3.1

Movement in provisions and prepayments (0.6) (0.6)

Net cash flow from operations 8.2 9.3

Cash Flow Conversion (%) 109.3% 96.9%

Receipts/(Payments) for Businesses (0.1) 3.0

Capital Expenditure (3.9) (5.4)

Lease Incentives 0.2 0.7

Net cash flow before financing activities and tax 4.4 7.6

Income Tax Payments (1.2) (1.4)

Net Interest (0.3) (0.3)

Dividends Paid (2.1) (3.6)

Net Cash Flow 0.8 2.3

• Positive net cash flow

• Net cash flow from operations predominately reflects the

reduction in NPAT from H1 FY2018 to H1 FY2017

• Capital Expenditure in H1 FY2018 represents the continual store

roll out program of David Jones concession stores, targeted

investment in refurbishments and ongoing development of our

online and loyalty infrastructure

• Receipts / (Payments) for Businesses represents the net cash

inflow upon disposal of Metalicus in H1 FY2017 and outflows for

the acquisition of the Bondi Bather business in H1 FY2018

• Dividends paid reflect the payment of the Final Dividend for

FY2017 & FY2016

(i) NPAT in H1 FY2017 includes aggregate impact of Metalicus discontinued business. Refer to Appendix A

Cash Flow Statement

16.

Actual Underlying ($ millions) H1 FY2018 H1 FY2017

EBITDA

Retail 9.1 9.5

Margin (%) 12.6% 13.2%

Wholesale 6.2 6.9

Margin (%) 10.5% 10.8%

Unallocated / Corporate (6.9) (4.8)

Total EBITDA 8.4 11.6

Margin (%) 6.4% 8.5%

EBIT

Retail 6.6 6.8

Margin (%) 9.1% 9.5%

Wholesale 5.8 6.6

Margin (%) 9.8% 10.4%

Unallocated / Corporate (7.8) (5.7)

Total EBIT 4.6 7.7

Margin (%) 3.5% 5.7%

• Retail EBITDA $0.4m below prior year due to challenging trading conditions

in Review and Black Pepper. The business remains well supported by a

strong performance in online sales (25.5% sales growth).

• Wholesale EBITDA below prior half year predominantly due to delayed

Department Store and Discount Department Store orders, partially offset

by a 115 bps increase in gross margin, driven in part by increased sales in

Designworks Sports Division

• Unallocated and Corporate underlying EBITDA has been impacted by $1.0m

of non-recurring costs relating to the on-market takeover offer, strategic

consulting costs and an unfavourable NZ Customs duty ruling and the

continued investment in digital growth

Earnings by Segment

17.

Appendices

On 27 July 2016 The PAS Group Ltd (‘PAS’) announced that it had signed an agreement for the sale of its loss making Metalicus business to the General Pants Group. This transaction was successfully completed on 30 September 2016.

On this basis, the Metalicus business met the criteria to be classified as a discontinued operation for the half year ended 31 December 2016. Accordingly, the results of the discontinued operation are presented separately in the consolidated statement of profit and loss and other comprehensive income for the comparative period 31 December 2016 in accordance with Accounting Standards.

All prior year comparatives throughout the financial statements and notes are representative of the continuing business only.

Whilst PAS believes that presenting continuing business profit provides a better understanding of its financial performance, for transparency, a reconciliation between the continuing business and the Total Business incorporating the Metalicus Discontinued Operation is provided below.

($’millions) H1 FY2018 Revenue

H1 FY2018 EBITDA

H1 FY2018 EBIT

H1 FY2018 NPAT

H1 FY2017 Revenue

H1 FY2017 EBITDA

H1 FY2017 EBIT

H1 FY2017 NPAT

Continuing Business 131.4 8.4 4.6 3.0 135.7 11.6 7.7 5.4

Financial Impact: Metalicus Discontinued Operation(i)

- - - - 5.3 (0.8) (1.6) (0.6)

Total Business 131.4 8.4 4.6 3.0 141.0 10.8 6.1 4.8

(i) The H1 FY2017 financial information presented reflects the operations for the three month ownership period ended 30 September 2016.

Appendix A: Continuing to Total Business Reconciliation

19.

Disclaimer

Forward looking statements: This presentation contains certain

forward looking statements, including with respect to the financial

condition, results of operations and businesses of The PAS Group

Limited (‘PGR’) and certain plans and objectives of the management

of PGR. Forward looking statements can generally be identified by

the use of words including but not limited to “project”, “foresee”,

“objectives”, “plan”, “aim”, “intend”, “anticipate”, “believe”,

“estimate”, “may”, “should”, “will”, “forecast” or similar expressions.

Indications of plans, strategies and objectives of management, sales

and financial performance are also forward looking statements.

All such forward looking statements involve known and unknown

risks, significant uncertainties, assumptions, contingencies and other

factors, many of which are outside the control of PGR, which may

cause the actual results or performance of PGR to be materially

different from any future results or performance expressed or

implied by such forward looking statements. Such forward looking

statements apply only as of the date of this presentation.

Factors that cause actual results or performance to differ materially

include without limitation the following: risks and uncertainties with

the Australian, New Zealand and global economic environment and

capital market conditions, the cyclical nature of the retail industry,

the level of activity in Australian and New Zealand retail industries,

fluctuation in foreign currency exchange and interest rates,

competition, PGR’s relationships with, and the financial condition of,

its suppliers and customers, legislative changes or other changes in

the laws which affect PGR’s business, including consumer law, and

operational risks. The foregoing list of important factors and risks is

not exhaustive.

No representation or warranty (express or implied) is given or made

by any person (including PGR) in relation to the accuracy, likelihood

or achievement or reasonableness of any forward looking

statements or the assumptions on which the forward looking

statements are based. PGR does not accept responsibility or liability

arising in any way for errors in, omissions from, or information

contained in this presentation.

PGR disclaims any obligation or undertaking to release any updates

or revisions to the information to reflect any new information or

change in expectations or assumptions after the date of this

presentation, except as may be required under securities law.

Disclaimer and third party information: To the fullest extent

permitted by law, no representation or warranty (express or implied)

is or will be made by any legal or natural person in relation to the

accuracy or completeness of all or part of this document, or any

constituent or associated presentation, information or material

(collectively, the Information). The Information may include

information derived from public or third party sources that has not

been independently verified.

Investment decisions: Nothing contained in the Information

constitutes investment, legal, tax or other advice. The Information

does not take into account the investment objectives, financial

situation or particular needs of any investor, potential investor or

any other person. You should take independent professional advice

before making any investment decision.

All statutory numbers referred to in this presentation have been

audited.

Any adjustments made between statutory and pro forma results are

made in accordance with ASIC Guidance Statement RG230.

20.