Slide 1: 2019 Full Year Result Presentation
MCPHERSON’S LIMITED 2019 FULL YEAR RESULT PRESENTATION 15 August 2019 Presented by: • Laurie McAllister, Managing Director • Paul Witheridge, Chief Financial Officer • Donna Chan, Marketing Director • Lori Pirozzi, National Sales Director • Brett Owers, Commercial Finance Business Director • David F
Slide 2: Refocus our business purely on Health, Wellness and Beauty
1 Refocus our business purely on Health, Wellness and Beauty 2 Revitalise our own McPherson’s brands 3 Ensure a healthy balance sheet 4 Move from transactional to strategic partnerships with our top six customers 5 Integrate and grow acquired skincare brands; Dr. LeWinn’s and A’kin 6 Create a China
Slide 3: Refocus our business purely on Health, Wellness and Beauty
1 Refocus our business purely on Health, Wellness and Beauty 2 Revitalise our own McPherson’s brands 3 Ensure a healthy balance sheet 4 Move from transactional to strategic partnerships with our top six customers 5 Integrate and grow acquired skincare brands; Dr. LeWinn’s and A’kin 6 Create a China
Slide 4: Management team
Laurence McAllister Paul Witheridge Donna Chan David Fielding Managing Director Chief Financial Officer Marketing Director Strategy, Planning & Innovation Director Lori Pirozzi Brett Owers Commercial Finance Mary Pearce Mark Brady Sarah Tully International Sales Director R&D Director Supply chain Di
Slide 5: Board of directors
Graham Cubbin Jane McKellar Grant Peck Chairman Non-Executive Director Non-Executive Director Geoffrey Pearce Alison Mew Laurence McAllister Non-Executive Director Non-Executive Director Managing Director 6
Slide 6: Financials
FINANCIALS Paul Witheridge
Slide 7: Sales revenue from continuing operations increased by 7%
Sales revenue from continuing operations increased by 7%, excluding Coty Fine Fragrances Owned brands: FY19 $m FY18 $m % change Comments • Strong export and domestic grow in Dr. LeWinn’s Skin, Hair and Body 40.0 23.1 72% • Domestic growth in A’kin • 2% growth in Manicare offset by 2% decline in Lady
Slide 8: Bridge of underlying PBT FY18 to FY19
Sam 20 18 16 14 12 10 FY18PBT 19.0 BRIDGE OF UNDER Increase in contribution from Owned Brands 4.0 Decrease in contribution Decrease in from Agency contribution Brands from Private -0.5 Label -0.9 Loss of Fine Fragrances distribution -3.1 \ ~a Increase in advertising expense -11 ING PBT — FY18 to FY1
Slide 9: Net debt has reduced over the last 12 months
❑ Net debt has reduced from $9.8m to $7.5m over $m the last 12 months NET DEBT ($M - 30 JUNE) 90 ❑ Key investments in display fixtures ($3m), Kotia 80 venture ($2.9m) and Aware convertible note 70 ($3.0m) made over last 12 months 60 ❑ Gearing modest at 7% 50 Gearing % (30 June) 40 77.2 50% 44% 30 40
Slide 10: Strong cash conversion and operating cashflow
$m OPERATING CASHFLOW BEFORE INTEREST ❑ Strong 117% cash conversion due to favourable AND TAX ($M) 40 sales mix and inventory reduction 35 ❑ Continued focus on working capital management 30 25 Cash Conversion 20 140% 118% 113% 117% 34.2 120% 15 30.8 100% 82% 25.8 77% 80% 10 19.5 60% 15.3 40% 5 20% 0
Slide 11: Final ordinary dividend of 6.0 cents per share
❑ Final ordinary dividend of 6.0 cents per share (cps) fully franked (FY18 2.5 cps). Final dividend payable 26 September 2019 ❑ Total ordinary dividends of 10.0 cps fully franked (FY18: 8.5 cps) ❑ Special dividend of 2.0 cps fully franked – paid 21 March 2019 ❑ Objective to increase the return of fr
Slide 12: High quality of FY19 earnings
High quality of FY19 earnings indicated by: ❑ Increase in proportion of “owned brand” sales from 69% in FY18 to 76% in FY19 ❑ Reduction in proportion of sales in Grocery, increase in Pharmacy ❑ Absence of “significant items” in FY19 ❑ Very strong operating cash conversion – 117% ❑ Key strategic inve
Slide 13: Marketing & Sales
MARKETING & SALES Donna Chan & Lori Pirozzi
Slide 14: China export demand for natural solutions
CHINA SUSTAINABLE DEMAND FOR NATURAL PROACTIVE CARE EXPORT SOLUTIONS China middle-class population Global Organic Personal Care Renew | Reuse | Recycle Global Face Mask Market projected to exceed 600M by Market projected to reach $25B Remove expected to reach $8.8B in 2021 2022 by 2025 Consumers vot
Slide 15: Partnerships, execution, innovation, expansion
INNOVATION EXECUTION PARTNERSHIPS EXPANSION • +80% increased R&D • +45% increase in • Strategic alignment • 12 New Countries in FY19 investment to fuel merchandising investment differentiation • Trading Terms optimisation • +10% increase in A&P • Building category solutions in • Segment Expansion: •
Slide 16: Australia Pharmacy dollars growth
Australia Pharmacy Dollars Growth % YA Total Defined Pharmacy Total McP Core brands 14.0 11.9 12.0 10.8 9.6 10.0 9.0 8.0 6.0 4.0 3.1 2.7 2.0 1.2 0.4 0.0 Qtr To 16/09/18 Qtr To 16/12/18 Qtr To 17/03/19 Qtr To 16/06/19 17 Source: IRI Pharmacy Scan 6mm to 24/02/2019
Slide 17: Australia Pharmacy units growth
Australia Pharmacy Units Growth % YA Total Defined Pharmacy Total McP Core brands 12.0 11.1 10.0 9.5 8.0 6.4 6.0 5.0 4.0 2.0 0.3 0.3 0.0 -0.6 -1.3 -2.0 Qtr To 16/09/18 Qtr To 16/12/18 Qtr To 17/03/19 Qtr To 16/06/19 18 Source: IRI Pharmacy Scan 6mm to 24/02/2019
Slide 18: National dollars growth
National Dollars Growth % YA Total Grocery excl. Tobacco Mcphersons Cons Prod 12.0 10.0 9.7 8.0 6.0 6.6 5.7 4.0 1.9 2.0 1.4 2.2 0.9 0.0 -2.0 -4.0 -5.7 -6.0 -8.0 Qtr To 01/07/18 Qtr To 30/09/18 Qtr To 30/12/18 Qtr To 31/03/19 19 Source: IRI Grocery Scan Qtr to 06.01.19
Slide 19: National units growth
National Units Growth % YA Total Grocery excl. Tobacco Mcphersons Cons Prod 20.0 15.0 13.9 12.6 10.0 9.7 5.0 1.7 1.1 1.5 0.5 0.0 -5.0 -7.5 -10.0 Qtr To 01/07/18 Qtr To 30/09/18 Qtr To 30/12/18 Qtr To 31/03/19 20 Source: IRI Grocery Scan Qtr to 06.01.19
Slide 20: #1 Australian Cosmeceutical Brand
#1 Australian Cosmeceutical Brand Facial Skincare Pharmacy Channel 125% Revenue Growth FY19 21 Source: IRI Market Measurement – Scan, Data to: MAT Value To 23/06/19 Australian Pharmacy: FY19 ex. Factory Sales Revenue
Slide 21: Accelerating growth
Accelerating Growth +26% (outpacing the category 4x) The most successful Anti-aging Core Rejuvenation The #1 NPD mask launch Reversaderm range Facial Skincare Launch 6 Masks sold every minute since launch Sales 7x versus prior relaunch +60% R4 Growth Contributing 30% to Dr. LeWinn’s growth 22 Source
Slide 22: China facing business
Create L I NaEChina S Mfacing O O T business HING AUSTRALIA COMPLEX 澳大利亚 Dr. LeWinn’s Domestic vs Export Domestic Export #1 range for Dr.LeWinn’s driven by FY17 FY18 FY19 China demand 排名#1 莱文医生系列 CHINA 23 中国 Source: MCP Ex. Factory Sales Revenue
Slide 23: Access China's forecast secured for $5m
Access China’s Forecast Secured for $5m by year end HAIR CARE SKIN CARE PERSONAL CARE 100,000 LSC 3pk Masks 7,000 Ageless Trinity Packs 15% Domestic Revenue Growth FY19 2424 Source: Ex. Factory FY19
Slide 24: Growth through innovation & proven clinical trials
GROWTH THROUGH INNOVATION & PROVEN CLINICAL TRIALS Core Rejuvenation Category Expansion High Growth Mask Category Clinically proven Age Defy range Clinically proven Natural Deodorant 100% Natural Eucalyptus Fibres +182% vs YA +241% vs YA Australian Ingredients 2525 Source: IRI Market Edge Pharmacy S
Slide 25: Beauty accessories growth
#1 BEAUTY ACCESSORIES #2 BEAUTY ACCESSORIES #1 HAIR ACCESSORIES +$2.5M retail sales growth #1 Lash Brand during Party Season Extending Pharmacy leadership to 48% Extending market leadership to 25.2% +$808K incremental retail sales +4915 distribution points 26 Source: IRI Market Measurement – Scan, D
Slide 26: Bags, wraps & foil market share
NO. 1 BAGS WRAPS & FOIL 34% MARKET SHARE $135M +12% #1 54% MAT Value Growth Aluminium Foil, Kitchen Tidy, of Australian Households Retail Sales Value Outpacing Category Growth 5% Garbage Bags, Baking Paper have purchased a Multix product within and Freezer Bags the last year 27 Source: IRI Market Me
Slide 27: Invested over $2.5M to build brand equity
INVESTED OVER $2.5MTO BUILD BRAND EQUIT Y IN FY19 • CHOOSE WISELY CHOOSE MULTIX TV & Digital Campaign August 2018 • Alfoil TVC | Greener TVC | 3 x Digital Executions • Increased consumer perceptions for Multix as the smart choice and better quality products • Prompted Awareness increased from 54% to
Slide 28: Leading sustainability growth through consumer insights
L E A D I N G S U STA I N A B I L I T Y G ROW T H T H RO U G H C O N S U M E R , M A R K E T A N D E N V I RO N M E N TA L I N S I G H T S MULTIX SUSTAINABILITY SWISSPERS #1 COTTON Remove | Renew | Reuse | Renew 57% Market Share 90% market share; growing +142% +11% quarter growth in cotton tips/buds
Slide 29: Engage, amplify, optimise
ENGAGE AMPLIFY OPTIMISE 18M consumers reached on owned social media 3M consumers reached via influencer activity 45M Ad Impressions 901 Products live on SKULibrary 30 Source: Facebook, Instagram, 3rd Party Ad Servers, Google Adwords, SKU Library
Slide 30: Strategic customer partnership
STRATEGIC CUSTOMER PARTNERSHIP +65% increased participation +48000 incremental distribution points + 92 New Doors FY18/19 • Top to top meetings • Joint Business Planning • Trading Terms • Customer partnerships • Event Participation 31
Slide 31: Promotional differentiation
Unique In Promotional store Differentiation Experiences Customer Strategy Alignment Promotional Exclusives Vehicle and First to Effectiveness market 32
Slide 32: In-store activation
Ambassador and Catalogue Instore Training Premium Off Location Sampling Stands opportunities Store Takeovers Online Integration Aligned field comms & targets
Slide 33: Source: IRI MarketEdge Facial Skincare 6mm to 21/07/19
Source: IRI MarketEdge Facial Skincare 6mm to 21/07/19
Slide 34: Priceline, Manicare and Multix activation
Fresh reaching 3.1M consumers Off location in 360 stores PRICELINE/MANICARE SPRING BEAUTY PRICELINE / GLAM MAGNETIC LASHES +2.5 share points +1.2 Share points since NPD launch MULTIX XMAS ACTIVATION Top 3 Lash NPD launched in last 6 months +3.2 share points gain Top 5 NPD (out of 586 products) 35 So
Slide 35: In store real estate investment
In Store Real Estate Investment +45% INVESTMENT IN REAL ESTATE CHEMIST WAREHOUSE : REAL ESTATE OPTIMISATION NEW PRODUCT LAUNCHES 689 Stand in 281 Stores Assist shopper navigation High impact in high traffic areas +16% GROWTH 36
Slide 36: New Business Development
NEW BUSINESS DEVELOPMENT Brett Owers & David Fielding
Slide 37: Health, wellness, beauty
HEALTH WELLNESS BEAUTY ($4.9 Billion, +3.9% vs YA) ($5.7 Billion, +3.8% vs YA) ($6.5 Billion, +2.8% vs YA) The intent of enhancing and restoring Maintain the state of good health by The subjective enhancement of health via symptomatic treatment. pro-actively seeking to prevent the physical perceptio
Slide 38: M&A growth remains a strategic priority
M&A M&A growth remains a strategic priority GROWTH Health, Wellness & Beauty focussed ORGANIC GROWTH Strong balance sheet to fund acquisitions Rigorous process and criteria MCPHERSON’S BASE Have been actively approaching targets Kōtia, Soulful and Sugarbaby ventures signed 39
Slide 39: Strategic investments and acquisitions
Non-Controlling Smaller Bolt On Strategic Investments Joint Ventures Significant M&A Deal Acquisition • Enhance MCP’s capacity • Access to early stage • Smaller uncomplicated deals • Well positioned to complete a and capabilities brand/technology opportunities significant M&A transaction • Leverage
Slide 40: New business opportunities
• Anti-Aging Skincare • NZ Deer Milk Hero Ingredient • China & European potential • Tanning and Skincare • Targeting fast growing, high-spending Millennial consumers • Recruiting young consumers to MCP portfolio • E-Commerce • Health and Wellness focused • Target fast growing gut health market (Aus
Slide 41: Export
EXPORT David Fielding
Slide 42: Continue to expand our presence geographically
Continue to expand our presence geographically with a focus on Asia China sales 119% Singapore sales 11% New Zealand sales 18% 43
Slide 43: Geographic brand presence
Continue to expand our presence geographically with a focus on Asia Country A’kin Dr Lewinn’s Manicare Lady Jayne Swisspers Multix Brunei p p p p p Cambodia p China p p HK p p p India p p p p Indonesia p p p Japan p p Korea p Lebanon p p p p Libya p Malaysia p p p p p Singapore p p p p p p Taiwan p
Slide 44: NPD, capabilities, people and global coverage
CAPABILITIES PEOPLE GLOBAL COVERAGE INNOVATION Strong Partnerships 30 NPD Dedicated Headcount for MCP Driven by Southeast Asian Expansion Asian beauty trends EXECUTION DISTRIBUTION IN MARKET EXPANSION 2500+ 100+ 12 Distribution Points in Southeast Merchandising Units Across NEW Southeast Asian Asia
Slide 45: Middle East, China, UK and Southeast Asia
• Establish distribution and • Strong growth achieved in FY19 demand in new markets with aggressive plans for FY20 • Develop strategic expansion • More than 1M ABM resellers plans across brands in key in the network categories • Expanding capabilities in export team MIDDLE CHINA EAST UK/ SOUTHEAST E
Slide 46: Supply Chain
SUPPLY CHAIN
Slide 47: Adaptable and available capacity
ADAPTABLE & AVAILABLE CAPACITY DAILY DELIVERIES STAFF RETENTION FLEXIBLE +40% 5,000+ 80+ SIGNIFICANT HEADROOM 1,600 Australian Postcodes Tenure > 18 Years EFFICIENCY SUPPLY CHAIN COSTS HARD SAVINGS WORKING CAPITAL -40% -56% $7.5 Mill Last 2 Years Last 5 Years FUTURE TRUSTED PARTNERS ADAPTING ANNUAL
Slide 48: Hamond Road facility - Dandenong
Hamond Road Facility - Dandenong • Dedicated output • One of the largest (22,000 sqm) manufacturing plants in Australia. With significant excess manufacturing • Prioritised work capacity • Confidence in supply/DIFOT • Largest and quickest laundry powder line in Australia • Shorter lead times • Inclu
Slide 49: Summary and Outlook
SUMMARY AND OUTLOOK Laurie McAllister
Slide 50: Refocus our business
Refocus our Business Revitalise own Brands Ensure Healthy Balance Sheet Move from Transactional to Grow Acquired Skin Care Brands Create a China Facing Business Team Fit for the Future Strategic Partner +107% +11% Stop the Bleeding in NZ and Efficiencies and Savings across Create a New Business Team
Slide 51: High quality of FY19 earnings
High quality of FY19 earnings indicated by: ❑ Increase in proportion of “owned brand” sales from 69% in FY18 to 76% in FY19 ❑ Reduction in proportion of sales in Grocery, increase in Pharmacy ❑ Absence of “significant items” in FY19 ❑ Very strong operating cash conversion – 117% ❑ Key strategic inve
Slide 52: Q&A
Q&A