Slide 1: 2019 Half Year Result Presentation
MCPHERSON’S LIMITED 2019 HALF YEAR RESULT PRESENTATION 20 FEBRUARY 2019 Presented by: • Laurie McAllister, Managing Director • Paul Witheridge, Chief Financial Officer • Donna Chan, Marketing Director • Lori Pirozzi, National Sales Director
Slide 2: Strategic Enablers
Explore new FOCUS ON CORE 6 OWNED product growth BRANDS platforms DRIVE VALUE FROM GEOGRAPHIC Move to strategic FOOTPRINT customer and supplier partnerships S T R AT E G I C E N A B L E R S End to end capability and capacity - Strong agency partners complement portfolio, supply chain, route to marke
Slide 3: Business priorities set and 1H19 results on pcp
At the beginning of 2019, we set our business priorities: At the end of 1H 19, I’m pleased to report on pcp: ❑ Grow in $13B Health, Wellness & Beauty categories ❑ 11% increase in owned brands sales revenue and 14% growth in sales revenue of the core six brands ❑ Accelerate MCP growth brands & agency
Slide 4: Macro Indices
MACRO INDICES CONSUMER SENTIMENT CPI HOUSEHOLD DEBT 103.8 +1.8% 200% Not Particularly Strong Year Through to Dec ’18 HH Debt To Income 2X …last 20 Years Source: Westpac MI Consumer Sentiment Index Feb’19 Source: ABS, Dec 18 Source: ABS, Jan, ‘18 TRADING INDICES Pharmacy GROCERY COMMODITY PRESSURE Fr
Slide 5: Management team
Laurence McAllister Paul Witheridge David Fielding Donna Chan Managing Director Chief Financial Officer Strategy, Planning & Innovation Director Marketing Director Sarah Tully Brett Owers Mary Pearce Lori Pirozzi Mark Brady HR Director Commercial Finance Business Director R&D Director International
Slide 6: 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 7: Sales revenue from continuing operations increased by 12%, excluding Coty Fine Fragrances
Sales revenue from continuing operations increased by 12%, excluding Coty Fine FRAGRANCES Owned brands: 1H19 $m 1H18 $m % change Comments • Strong export and domestic sales of Dr. LeWinn's and export Skin, Hair and Body 15.1 9.9 55% growth in A'kin • Growth in Manicare and Lady Jayne offset by de-st
Slide 8: PBT movement 1H18 to 1H19
Sam Increase in Branded contribution ex Decrease in n Loss of Fine commodity, Agency Fragrances currency contribution istribution 2.3 03 18 —— Decrease in —— expense conmoaity Adverse FX : 13 ir impact Decrease in Decrease in impact vps Other 08 : employee 7 Increase in expense Co-operative 0.4 adve
Slide 9: Net debt has reduced from $30.4 to $19.5m over the last 12 months
❑ Net debt has reduced from $30.4 to $19.5m over the last 12 months 100 NET DEBT ($M - 31 DECEMBER) ❑ Divestment of Home Appliances 28 February 2018 90 generated $28m 80 ❑ Key investments in display fixtures ($3m) and Kotia 70 venture made over last 6 months 60 ❑ Gearing modest at 17% 50 92.8 Gearin
Slide 10: Low cash conversion of 22%
❑ Low cash conversion of 22% due to necessary build in skincare inventory to support future OPERATING CASHFLOW BEFORE INTEREST AND TAX ($M) growth in export sales and higher safety stock 18 levels for Multix product to maximise sales 16 opportunities ❑ Continued focus on working capital management 1
Slide 11: Interim ordinary dividend of 4.0 cents per share fully franked
❑ Interim ordinary dividend of 4.0 cents per share fully franked (1H18 6.0 cents per share) ❑ Special dividend of 2.0 cents per share fully franked ❑ Objective to increase the return of franking credits ❑ Interim dividends payable 21 March 2019 ❑ Dividend reinvestment plan retained, 2.5% discount to
Slide 12: China export demand for natural
CHINA SUSTAINABLE SOLUTIONS PROACTIVE CARE DEMAND FOR NATURAL EXPORT China middle-class Global Organic Personal Care Renew | Reuse | Recycle Global Face Mask Market population projected to Market projected to reach Remove expected to reach $8.8B in exceed 600M by 2022 $25B by 2025 2021 Consumers vot
Slide 13: Health & Wellness
HEALTH & WELLNESS 13 Source: IRI Market Moves 2018
Slide 14: Australia Grocery: growth driven by Multix Greener launch
Growth driven by Multix Australia Grocery Greener launch, Dollars Growth % YA incremental ranging and Total Grocery excl. Tobacco Mcphersons Cons Prod Ban the Bag 8.0 6.0 5.8 4.0 2.0 2.1 2.2 1.8 1.5 0.0 -2.0 -4.0 -6.0 -5.3 -5.7 -8.0 -6.8 Qtr To 31/12/17 Qtr To 01/04/18 Qtr To 01/07/18 Qtr To 30/09/1
Slide 15: Australia Pharmacy: growth driven by share gains in core brands
Australia Pharmacy Growth driven by share Dollars Growth % YA gains across core brand NPD and leveraging Total Defined Pharmacy Total McP Core brands retailer media assets 12.0 10.0 10.2 9.6 8.0 6.8 6.0 6.2 3.8 4.0 2.4 3.2 1.9 2.0 0.0 Qtr to 01/04/18 Qtr to 01/07/18 Qtr to 30/09/18 Qtr to 30/12/18 1
Slide 16: Accelerating Growth +18% (outpacing the category)
Accelerating Growth +18% (outpacing the category) Core Rejuvenation Unique Innovation Virtuous Cycle Reversaderm range Vitamin Enriched Private Formula Line Smoothing Complex range Sales 8x versus prior relaunch range +20% growth +33% growth 16 Source: IRI Market Measurement – Scan, Data to: FYTD Va
Slide 17: Innovating in High Growth Segment
Innovating in High Growth Segment 2016 CAGR To 2021 Global Face Mask Market $5.7B +9.1% China Face Mask Market $2.7B +11.7% Dollars $000 Australia Pharmacy Total Treatments Masks Dr LeWinn's 400.0 Ranked 350.0 top 10 of 300.0 all Anti-aging Masks 250.0 200.0 150.0 100.0 50.0 0.0 Quarter To 08/04/18
Slide 18: Outpacing Category Growth
Outpacing Category Growth NATURAL HAIRCARE NATURAL SKINCARE DISTRIBUTION EXPANSION A’kin +17% growth A’kin +30% growth Additional shelf in Priceline Ranked #2 in pharmacy Award Winning Products 9 international markets 18 Source: IRI Market Measurement – Scan, Data to: MAT Value To 06/01/19 Australia
Slide 19: #1 Hair Accessories, #1 Beauty Accessories, #2 Beauty Accessories
#1 HAIR ACCESSORIES #1 BEAUTY ACCESSORIES #2 BEAUTY ACCESSORIES Extending Pharmacy leadership to 31.4% +$1.5M retail sales growth #1 Lash Brand during Party Season +4915 distribution points Extending market leadership to 29.0% +$750K incremental retail sales 19 Source: IRI Market Measurement – Scan,
Slide 20: Multix #1 Bags, Wraps & Foil; Swisspers #1 Cotton
MULTIX #1 BAGS, WRAPS & FOIL SWISSPERS #1 COTTON 33.3% market share, up +2.5 share points 54% Market Share +14% Multix brand growth +4.2 share point gain in Woolworth Cotton Tips 20 Source: IRI Market Measurement – Scan, Data to: FYTD Value To 20/01/19 Australian Grocery
Slide 21: Category Leadership Merchandising
CATEGORY LEADERSHIP MERCHANDISING • 335 high impact merchandising stands in 130 stores • Front of store high traffic areas • Ease of shopper shelf navigation • Fuelling the path to purchase with interactive screens • Accelerating sales growth to +16% 21 Source: IRI Market Measurement – Scan, Data in
Slide 22: #1 Australian Beauty Supplier in Pharmacy
#1 AUSTRALIAN BEAUTY SUPPLIER IN PHARMACY Fresh reaching 3.1M consumers Off location in 360 stores PRICELINE/MANICARE SPRING BEAUTY CHEMIST WAREHOUSE DR. LEWINN’S MULTIX XMAS ACTIVATION +2.0 share points +1.7 share points +2.9 share points gain Top 5 NPD (out of 250 products) R4 range grew +166% +15
Slide 23: Expanding Digital Footprint, Customer Partnership Success
Expanding Digital Footprint • 1.5M video views • 26M ad impressions • 2.5M consumers reached via influencer activity • 10M consumers reached on owned social media Customer Partnership Success • 15M ad impressions • MCP online sales over +70% • MCP brand hubs in Priceline 200k visits • Sonic Mini Soc
Slide 24: 2H Superior Innovation
2H Superior Innovation NEW NATURAL ROLL ON DEODORANT 24 HOUR Clinical Protection 24
Slide 25: 2H Category Growth Innovation
2H Category Growth Innovation NEW CONSUMER SEGMENT SALON INSPIRED INNOVATION FASHION COLLABORATION 25
Slide 26: 2H Expanding our Sustainable Footprint
2H Expanding our Sustainable Footprint INCREASE ACCESSIBILITY LAUNCH NEW FORMATS INVESTIGATE NEW MATERIALS New Formats +2400 Distribution Points +2648 Incremental Distribution Next Generation 26
Slide 27: 2H Real Estate Investment
2H Real Estate Investment +45% INVESTMENT IN REAL ESTATE, ROI IN 12 MONTHS MASK DESTINATION NEW PRODUCT LAUNCHES CHEMIST WAREHOUSE PHASE 2: REAL ESTATE OPTIMISATION High impact in high traffic areas 255 Stand in 165 Stores Assist shopper navigation 27
Slide 28: 2H Strategic Customer Partnership Innovation
2H STRATEGIC CUSTOMER PARTNERSHIP INNOVATION +65% increased participation +28,000 incremental distribution points in 2H +Category Captaincy PARTNERSHIPS • Top to top meetings • Joint Business Planning • New Trading Terms to increase customer participation • Strategic investment plans • Strategic cus
Slide 29: Grocery and Pharmacy skincare growth
GROCERY PHARMACY Skincare 2nd largest growth category in both Grocery and Pharmacy $M Growth Actual vs YA $M Growth Actual vs YA Infant Formula 16 Infant Formula Dietary Supps 45 Vitamins Health & Beauty 4 24 Skincare Skincare Skincare +$105M Skincare Analgesics 3 Analgesics Cough & Cold 15 Cough &
Slide 30: The Criteria, The Process
THE CRITERIA • Health, Wellness • Emerging growth • Aligned with key • Uniqueness of brand • High category margins • Regulatory challenges Beauty categories categories within sector customers & channels proposition • Low levels of discounting • Strong IP ownership focus • Strong innovation • Strong
Slide 31: Day 1: Majority Owned Trusted Partner
Day 1: Trusted Partner Unique Majority Owned Win Domestically New Venture Co. Pre-Agreed Buyout Export (China) Facing 31
Slide 32: Kotia
kotia UNIQUE SKIN NOURISHMENT FROM THE PUREST PLACE ON EARTH Introducing kétia, the first skincare made with pure deer milk from the pristine pastures of Queenstown, New Zealand. By combining deer milk’s naturally regenerative ingredients with scientifically proven actives, kdtia delivers a pure yet
Slide 33: Kotia is generating a groundswell of media interest
KOTIA IS GENERATING A GROUNDSWELL OF MEDIA INTEREST Queenstown entrepreneur launches world first deer milk beauty product Qtown man launches world S t u ff first deer milk beauty product — Pioneer deer milker launches novel skincare range eoe0e@e Bn oe The Aew Zealand Herald Entrepreneur launches sk
Slide 34: Kotia launch plan
LAUNCH EVENT NZ LAUNCH – MARCH ‘19 AUSTRALIAN LAUNCH – APR ‘19 70+ MEDIA, KOL’S & CUSTOMERS EXCLUSIVE DRIVING LIKES SHARES COMMENTS STRONG IN STORE ACTIVATION WINNING WITH PRICELINE EARNED MEDIA WINNING WITH CUSTOMERS ANNUAL INVESTMENT • Launch 100 Doors • 350 Doors Target (Unichem/Life) – Target 35
Slide 35: Current Focus: Drive value from geographic footprint
CURRENT FOCUS MEDIUM TERM: <3 YEARS DRIVE VALUE FROM GEOGRAPHIC NORTH ASIA FOOTPRINT UNITED KINGDOM CHINA SOUTH-EAST ASIA AUSTRALIA NEW ZEALAND 35
Slide 36: China
• Middle class to grow by more than 850M by 2030 • MCP sales $1M in FY17, $6M in FY18 and expected $11M FY19 • More than 650 thousand ABM resellers • Establish distribution and demand in new launch • Mandarin speakers in MCP export markets team • Capture new export markets in the region CHINA • Leve
Slide 37: Australia China
Trusted partnerships AUSTRALIA Speed to market 澳大利亚 Agreed business model Flexibility to react to change Appropriate pricing corridors Rigorous processes Continuity of supply CHINA Adaptable to market dynamics 中国 37
Slide 38: Dr. LeWinn's Line Smoothing Complex growth
Total Pharmacy Total Dr. LeWinn's Line Smoothing Complex Growth % YA 40% 36% 30% Dr. LeWinn's Growth Ex Factory 20% 10% 0% -1% -10% -20% -20% -30% MAT To 08/01/17 MAT To 07/01/18 MAT To 06/01/19 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2016 2017 2018 2018 Source: IRI Market Measurement – Pharmacy S
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Slide 40: Supply chain efficiency and investment
ADAPTABLE & AVAILABLE CAPACITY DAILY DELIVERIES STAFF RETENTION FLEXIBLE +40% 5,000+ 80+ SIGNIFICNAT HEADROOM 1,600 Australian Postcodes Tenure > 18 Years EFFICIENCY SUPPLY CHAIN COSTS HARD SAVINGS WORKING CAPITAL -40% -56% $7.5 Mill Last 2 Years FUTURE TRUSTED PARTNERS ADAPTING ANNUAL INVESTMENT PR
Slide 41: Summary of 1H19 highlights
❑ 11% increase in owned brands sales revenue and 14% growth in sales revenue of the core six brands vs 1H 2018 ▪ 80% growth in Dr.LeWinn’s sales revenue ▪ 11% growth in A’kin sales revenue ▪ 14% growth in Multix sales revenue ❑ Strong financial position leveraged to make strategic investments in par
Slide 42: Priorities: brands, customers, export, supply chain, agency
❑ BRANDS: ▪ Innovation - Masks Expansion, Dr. LeWinn's Pearl Technology NPD, Next Phase Sustainability & Manicare Sonic range extensions ▪ Real Estate - merchandising investment, in-store activation, incremental ranging ❑ CUSTOMERS: ▪ Strategic partnerships - Optimised investment strategy, 360 launc
Slide 43: Investor Day 2019
43 INVESTOR DAY 2019
Slide 44: Non-IFRS measures Disclaimer
• Non-IFRS measures The non-IFRS measures used by the Company are relevant because they are consistent with measures used internally by management to assess the operating performance of the business. The non-IFRS measures have not been subject to audit or review. • Disclaimer Statements contained in