Baby Bunting Group Limited Full year ended 25 June 2017 Results presentation 11 August 2017 Matt Spencer Chief Executive Officer & Managing Director Darin Hoekman Chief Financial Officer
Important Notice and Disclaimer This document is a presentation of general background information about the activities of Baby Bunting Group Limited (Baby Bunting) current at the date of the presentation (11 August 2017). The information contained in this presentation is for general background information and does not purport to be complete. It is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. These should be considered, with or without professional advice, when deciding if an investment is appropriate. To the maximum extent permitted by law, Baby Bunting, its related bodies corporate and their respective officers, directors and employees, do not warrant the accuracy or reliability of this information, and do not accept any liability to any person, organisation or entity for any loss or damage suffered as a result of reliance on this document. Forward looking statements This document contains certain forward looking statements and comments about future events, including Baby Bunting’s expectations about the performance of its business. Forward looking statements can generally be identified by the use of forward looking words such as ‘expect’, ‘anticipate’, ‘likely’, ‘intend’, ‘should’, ‘could’, ‘may’, ‘predict’, ‘plan’, ‘propose’, ‘will’, ‘believe’, ‘forecast’, ‘estimate’, ‘target’ and other similar expressions within the meaning of securities laws or applicable jurisdictions. Indications of, and guidance on, future earnings or financial position or performance are also forward looking statements. Forward looking statements involve inherent risks and uncertainties, both general and specific, and there is a risk that such predictions, forecasts, projections and other forward looking statements will not be achieved. The Baby Bunting Annual Report 2017 which includes the Directors’ Report (dated 11 August 2017) contains details of the number of material risks associated with an investment in Baby Bunting. Forward looking statements are provided as a general guide only, and should not be relied on as an indication or guarantee of future performance. Forward looking statements involve known and unknown risks, uncertainty and other factors which can cause Baby Bunting’s actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward looking statements and many of these factors are outside the control of Baby Bunting. As such, undue reliance should not be placed on any forward looking statement. Past performance is not necessarily a guide to future performance and no representation or warranty is made by any person as to the likelihood of achievement or reasonableness of promise, representation, warranty or guarantee as to the past, present or the future performance of Baby Bunting. Pro forma financial information Baby Bunting uses certain measures to manage and report on its business that are not recognised under Australian Accounting Standards. These measures are referred to as non-IFRS financial information. Baby Bunting considers that this non-IFRS financial information is important to assist in evaluating Baby Bunting’s performance. The information is presented to assist in making appropriate comparisons with prior periods and to assess the operating performance of the business. For a reconciliation of the non-IFRS financial information contained in this presentation to IFRS-compliant comparative information, refer to the Appendix to this presentation. All dollar values are in Australian dollars (A$) unless otherwise stated. 2
Agenda 1 Results highlights 2 Baby goods market and category dynamics 3 Operating review Invest to grow 4 5 Financial information 6 Outlook 7 Appendices 3
1. Results highlights
FY2017 Results highlights 1 • Sales of $278.0 million , up 17.4% on the prior corresponding period • Comparable store sales growth of 6.9% Trading (1) • Gross profit income up 17.4%, gross margin of 34.3% • Cost of doing business (pro forma) improved by 37 bps from FY2016, to 26.0% of sales • EBITDA (pro forma) of $23.0 million , up 23.0% on the prior corresponding period 2 • EBIT (pro forma) of $18.9 million , up 22.3% on the prior corresponding period Earnings (2) • NPAT (pro forma) of $13.0 million , up 21.9% on the prior corresponding period • Final dividend of 4.3 cents per share (fully franked) 3 • $6.4 million of cash at end of FY2017, plus $25.2 million available in the borrowing facility Capital • Net cash flow from operating activities of $13.2 million Structure • Capital expenditure of $7.4 million 4 • EBITDA (pro forma) margin growth of 38 bps on the prior corresponding period, to 8.3% of sales • Investment in customer experience in-store & online and our people culture programs. NPS finished the year at 63 Growth • 6 stores opened – Camperdown, Belrose and Blacktown in NSW, Preston in VIC, Baldivis in WA, and Mile End in SA 5 • We expect to open 5 to 8 new stores in FY2018, with 3 new stores opening in 1H FY2018 Outlook • FY2018 EBITDA expected to be in the range of $25.3 – $27.0 million, excluding employee equity incentive expenses Note: 1. Pro forma financial results have been calculated by excluding employee equity incentive expenses for the current financial year and the prior financial year. In addition, the results for FY2016 have been calculated to reflect the results of the consolidated entity as if the Company was publicly listed for the entire financial year. Refer to page 37 for a reconciliation 5 2. Refer to page 37 for a reconciliation of the non-IFRS financial information contained in this presentation to the IFRS-compliant information
2. Baby goods market and category dynamics
Baby Bunting is well positioned for future growth Clear leader in a large and highly fragmented baby goods market Baby goods is a unique retail category in Australia Meaningful / highly valued relationships with customers Baby goods demand customer service Customer insights and data represent significant opportunity Business model compares favourably to competitors Competitively positioned on range and price Long term established relationships with our suppliers 7
Large addressable baby goods market Baby Bunting’s addressable market is a component of the larger baby goods market The baby goods market is a $5.1bn market in Australia (1) Baby Bunting $2.4bn estimated addressable market breakdown by category Other Cots, mattresses $0.2 billion and nursery furniture $0.9Bn $0.6 billion Food Food Other $1 billion $0.2 billion Prams, bassinets, dummies, bottles Food, Nappies, Clothing Cots, mattresses $0.7 billion $0.3billion $0.9Bn and nursery furniture $0.6 billion Apparel ~$2.4Bn Baby Buntings Toys Car seats $0.3 billion Addressable market $0.3 billion $0.9Bn Nappies Car seats $1 billion Nappies $0.3 billion Toys Prams, bassinets, $0.3 billion dummies, bottles $0.7 billion Clothing $1 billion To arrive at Baby Bunting’s addressable market we discount the food, apparel and nappies categories which are a smaller component of our broad product offering Notes: 1. IBIS World estimates 8
Fragmented competitive landscape Large number of small, Strict Australian mandatory Baby goods is a $5.1bn BBN estimated addressable specialty players & product safety standards market in Australia market is $2.4bn department stores provide barriers to entry SPECIALTY BABY GOODS RETAILERS IN AUSTRALIA DEPARTMENT STORES IN AUSTRALIA +7 Number of Stores Number of Stores 43 306 Department stores where baby goods are a component of the + 250 across overall offer 200 Australia +1 186 -2 18 13 +1 +1 -2 63 8 42 43 4 3 3 3 3 2 1 Target Kmart Big W Myer David Baby Jones Bunting Notes: 1. Toys"R"Us has an additional 21 stores that sell a limited range of baby goods Note : Store change numbers are changes since 1 July 2016 PURE PLAY ONLINE RETAILERS & MARKET PLACES IN AUSTRALIA WITH A BABY GOODS COMPONENT 9
Baby Bunting is a clear leader Low market share in a leading position with significant scope to grow in a $5.1 billion market Online is 11% of $2.4bn Our online presence continues to 1 2 3 Total baby goods market $5.1bn (1) BBN addressable market evolve and grow Online market BBN addressable BBN online ~$0.3bn or 11% (2) market $2.4bn market share ~$18m or 7% 48% Other $2.6bn 52% Bricks and mortar Other $2.1bn or 89% ~$242m BBN’s share of 93% addressable market ~12% Total online market $0.3bn (2) BBN opportunity is significant in a large and Bricks and mortar is critical to success fragmented market Biggest national footprint of bricks and 4 5 6 BBN already #1 specialty retailer We are leading the way online mortar stores Google Trends (3) Number of Stores 120 43 45 100 Long and fragmented tail of subscale operators 80 9 Baby Bunting 30 60 6 Baby Bounce / Baby Warehouse 4 40 15 Babies”R”Us 11 20 Baby Kingdom 0 13 0 Bubs Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Notes: 1. IBIS World estimates 2. Roy Morgan research (excludes nappies) 3. Google trends for Australia only 10
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