hgl limited - australian securities exchange · hgl limited (asx: hng) another transformative year...

HGL Limited Annual General Meeting

16 February 2017

Computershare Offices 60 Carrington Street, Sydney

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CEO Presentation Henrik Thorup 16 February 2017 F

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AGENDA

HGL Limited (ASX: HNG)

CORPORATE HIGHLIGHTS

FY16 FINANCIAL REVIEW

OPERATIONAL PRIORITIES

FY17 TRADING UPDATE AND OUTLOOK

GPS STRATEGY PLAN

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CORPORATE PROFILE


Another transformative year for HGL advancing towards our strategic objectives HGL is a product marketing and supply chain business of market leading brands in diversified

specialist markets.

Deploys an active management philosophy driving our portfolio development activities.

Board and management team aligned to the Growth, Profit and Sustainability (GPS) Strategy. Improving financial performance underpinned by the implementation of the GPS Plan.

Strong balance sheet to pursue growth opportunities and strategic acquisition.

Increasing shareholder returns driven by earnings growth.

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GPS STRATEGY PLAN 2020

REBUILD FOUNDATIONS GROW AND DEVELOP EXPAND & SUSTAIN

Arrest Sales Decline Create Operational Efficiency Reduce Working Capital Levels Build Employee Capability

Expand Product Portfolio Superior Sales Execution Reduce Operational Complexity Develop Intellectual Property Integrate Business Technology Increase Employee Engagement

Elevate Organic Growth Invest in Growth Industries Acquire Larger Businesses with IP Sustain Performance Levels

$105m $90m $75m $60m

Targ

et M

etric

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Organic Revenue Growth 10% CAGR

Underlying EBIT Ratio 10% p.a.

ROCE 20% p.a.

Reve

nue

Obj

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Road

map

Phase One Phase Two Phase Three

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HGL ACQUISITION STRATEGY

Invest in growth markets & leverage industry position;

Building Products ( Lighting + Property control systems )

Personal Care ( Health, Beauty & Wellness )

Healthcare Equipment ( Medical Devices )

Home Improvement ( Soft furnishings & homewares )

Retail Marketing ( Point-of-sale solutions )

GPS 2020 Objective Acquisition Strategy

Acquisition Criteria Acquire larger strategic companies with protected IP; - Target: $25-50m revenue

Funding platform; - Own funds, borrowings and capital injection Return on Investment; - 20% ROI


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FINANCIAL HIGHLIGHTS FY16


up 5%

$68.1m 2015: $65.2m

up 3%

$29.9m 2015: $29.1m

stable

$25.2m 2015: $24.9m

up 10%

$4.7m 2015: $4.2m

up 11%

$5.8m 2015: $5.2m

up 15%

$9.1m 2015: $7.9m

down 4%

$8.3m 2015: $8.8m

down 23%

$3.8m 2015: $4.7m

Focus on profitable growth underpinned by managed working capital levels

Group Revenue*

Gross Margin*

Operating Expenses*

Underlying EBIT*

Inventory

Trade Debtors

Trade Creditors

Net Cash

* Group Profit & Loss figures include 100% of Mountcastle result.

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FINANCIALS HIGHLIGHTS FY16


Increased shareholder returns supported by continued improved earnings

FY13 FY14 FY15 FY16 FY13 FY14 FY15 FY16 FY13 FY14 FY15 FY16

Underlying Profit ($m) Underlying Earnings per share (c) Fully Franked Dividend (c)

(0.4)

0.5

2.6 3.0

(0.8)

1.0

4.8

5.4 4.0

2.0 1.5

2.5

Underlying profit up 15% to $3.0m in FY16

Underlying EPS up 12% to 5.4 cents in FY16 Well managed working capital and low gearing supporting a healthy balance sheet position

Fully franked dividend of 2.5 cents per share in relation to improving underlying profits

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Group Benchmarks

Expand Product Portfolio 10% revenue growth p.a.

Superior Sales Execution $600k sales per employee

Reduce Operational Complexity 33% expense ratio

Develop Intellectual Property 50/50 Own vs Agency product mix

Integrate Business Technology 50% of business processes are automated

Increase Employee Engagement +95% staff retention

SIX FOCUS AREA: “Must Win Battles”

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EXPAND PRODUCT PORTFOLIO


Over the past three years HGL has introduced 14 new exclusive complimentary brands.

During FY16 we secured exclusive distribution rights to several new brands in various business units. In addition we have developed several new brands, where HGL owns the IP rights. All business units are actively working on their individual product portfolio’s to support their growth strategy. JSB Lighting, Leutenegger, and BLC Cosmetics are introducing new brands in early FY17.

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SUPERIOR SALES EXECUTION


Avg. sales ($) per employee By Business Unit FY16 1,000,000 900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 ……..

Avg. sales ($) per employee Total HGL per annum (Like-For-Like 7 Business Units) 1,000,000 900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 ……..

Group Benchmark

* Mountcastle

FY14 FY15 FY16

435,000

504,000

410,000

Leutenegger Nido BLC SPOS MC* JSB Biante

Number of staff employed in client facing positions increased to 59% compared to 48% in FY15 Sales per employee in business units dependent on business model and geographical reach

Increasing sales per employee highlighting enhanced productivity gains.

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DEVELOP INTELLECTUAL PROPERTY


Target benchmark is 50/50 own IP vs agency product sales Currently 30% of HGL sales on own IP products

Pct of own brand sales vs total sales (FY16) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

Group Benchmark

* Mountcastle

Strategic Orientation: JSB to develop specialty product lines

Leuts to develop own designs and ranges

Nido to extend One-Duck-Two product range

Biante to develop more Aussie cars

MC to continue focus on own Trutex products

SPOS to develop ‘shop-in-a-box” concepts

IP strategy in BLC Cosmetics under review

Product portfolio plans incorporate the development of IP, where appropriate.

Total HGL BLC JSB Leuts Nido SPOS Biante MC*

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REDUCE OPERATIONAL COMPLEXITY AND INTRODUCE TECHNOLOGY


Group benchmark is 33% expense to sales ratio Currently performing ratio in HGL is 37% in FY16

HGL Expense to Sales Ratio (Like-For-Like 7 Business Units)

50% 40% 30% 20% 10% 0%

Group Benchmark

Examples of Current Synergy Projects: Move Biante onto Netsuite IT platform

Relocate Biante warehouse to Macquarie Park

Move Leutenegger to Netsuite

Further consolidate accounting functions

Move BLC from Adept to Netsuite (TBD)

Expense reduction projects and technology upgrades are implemented in the business units.

FY14 FY15 FY16

38.5% 41.5%

37.0%

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INCREASE EMPLOYEE ENGAGEMENT


Dedicated Employee Development Programs are rolled out across the organisation.

Employee Net Promotor Score* (Net Average of 2015 & 2016)

* Employee Net Promotor score (e-NPS) measure staff engagement based on a score system on 40 questions surveyed annually

JSB Lighting 74%

Biante 58%

BLC Cosmetics 47%

SPOS 39%

Leutenegger 39%

Mountcastle n.a.

Nido Interiors n.a. For

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Performance progress against targets

Expand Product Portfolio 10%

revenue growth p.a.

Superior Sales Execution $600k

sales per employee

Reduce Operational Complexity 33%

expense ratio

Develop Intellectual Property 50/50

Own-Agency mix

Integrate Business Technology 50% of business

processes are automated

Increase Employee Engagement +95% staff

retention

FOCUS AREA: “Must Win Battles”

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FY17 TRADING UPDATE AND OUTLOOK


HGL continues to gain momentum delivering increased revenue growth in Q1-FY17. Market conditions expected to remain challenging with ongoing fluctuation of the Australian dollar.

JSB Lighting, Mountcastle, SPOS, Leutenegger, Biante and Nido expected to achieve revenue growth in FY17

Strong order book in JSB Lighting significantly above last year Nido has received forward orders delivering solid revenue growth in FY17 Gross margin expected to be slightly down due to volume growth

Stringent management control of expenditure and working capital levels

Focus on generating positive operating cash flow despite growth investments

Increased management focus on pursuing strategic acquisitions

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DISCLAIMER: This presentation is provided for information purposes only. The information contained in this presentation is not intended to be relied upon as advice to investors and does not take into account investment objectives, financial situation or needs of any particular investor. Statements contained in this presentation, particularly those regarding possible or assumed future performance and outcomes, projected growth of the company, industry growth or other trend projections are or may be forward looking statements. Such statements relate to future events and expectations and therefore involve risks and uncertainties. Actual results may differ materially from those expressed or implied by these forward looking statements.

THANK YOU

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hgl limited - australian securities exchange · hgl limited (asx: hng) another transformative year...

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