Full Year Result to 31 March 2016 Trilogy International Overview - - PowerPoint PPT Presentation

Full Year Result to 31 March 2016

Trilogy International Overview

2

Distribution Consumer Product Brands

TIL - Trilogy International Limited (NZX:TIL) is a cultivator of essential natural products and home fragrance brands: Trilogy, ECOYA and Goodness in New Zealand and around the world. It’s subsidiary CS&Co distributes international cosmetics, fragrances, skincare and haircare brands in New Zealand.

Notes:

• 1. Includes 7.5

months of trading since acquisition to 31 March 2016

TIL Segment Overview

3 Natural Products Home Fragrance & Bodycare Distribution Brands

Trilogy Goodness ECOYA CS&Co

Products

Certified natural and

• rganic rosehip oil based

skincare range Certified organic chia seed oil skincare range Soy based home fragrance (candles, diffusers, bodycare) Third party premium beauty products distribution

Target Market

Affordable luxury / premium self-select Mass market / cost conscious consumers – developed specifically for the grocery channel House proud, fashion conscious consumer New Zealand retailers

Channels

+3500 stores

• Pharmacies / health

stores

• Department stores
• Online

+1600 stores

• Grocery
• Farmers
• Priceline
• Chemist Warehouse

+400 stores

• Department stores
• Independent gift and homeware

stores +1900 stores

• Pharmacies
• Department stores
• Grocery
• Salon

Geographies

• New Zealand & Australia
• UK
• Asia
• US
• New Zealand & Australia
• New Zealand & Australia
• New Zealand

Established

2002 2015 2006 1976

FY16 Revenue EBITDA EBITDA Margin

$34.4M $11.5M 33.3% $20.1M $2.5M 12.4% $28.6M1 $4.8M1 16.8%

FY16 Performance

TIL’s Year in Review

5

$83.1m $16.3m $0.15 5.45

cents per share

Revenue

+127%

EBITDA

+208%

Dividend

+51%

EPS (diluted)

MARKET REVENUE & EBITDA

EBITDA REVENUE

Australia New Zealand US UK & Ireland Asia Other

SEGMENT REVENUE & EBITDA

EBITDA

($M)

REVENUE

($M)

Home Fragrance, Body & Bath Natural Products Distribution

FY12 FY13 FY14 FY15 FY16

EBITDA ($m) EBITDA Margin

4.7% 5.0% 7.2%

19.7%

14.5% 5.3 16.3 2.1 1.3 1.1 FY12 FY13 FY14 FY15 FY16 22.6 26.7 29.8 36.6 83.1

REVENUE ($m) EBITDA

Key Drivers of Record Result

6

GROWING MARKET SHARE IN KEY GROWTH CATEGORIES

Trilogy #11 natural skincare brand in New Zealand. ECOYA leads the New Zealand home fragrance market and #22 in Australia.

INCREASED INTERNATIONAL PENETRATION

Combined revenue growth

• f 67% across the US,

UK/Ireland and Asia. Launched Trilogy into Wholefoods retail in the US which performed better than expected.

EMERGING MARKETS AND NEW PRODUCTS SOLIDIFY FUTURE GROWTH

Revenue in Asia exceeded $5m for the first time.

ACQUISITION OF CS&Co

Completed in August 2015. Delivering $28.6m in revenue and $4.8m EBITDA in its first 7.5 months.

• 1. Aztec data as at 20/03/16 NZ

Pharmacy Facial Skincare

• 2. Aztec data as at 06/03/16

AU Pharmacy Facial Skincare

• 3. Aztec data MAT to 27/03/16

NZ Grocery Facial Skincare

EXPANDED RETAIL CHANNELS

Launch of Goodness, a natural skincare range targeting a different demographic through mass market grocery channel. Very early days for Goodness range but has already achieved 4.8%3 share in the New Zealand natural skincare grocery segment.

FY16 Results Snapshot

7

• Strong revenue growth in Trilogy, Goodness

and ECOYA brands.

• Momentum maintained in key New Zealand (+78%) and

Australia (+29%) markets.

• Successful marketing driving total revenue growth in the US

(+231%), UK/Ireland (+54%) and Asia (+42%).

• Disciplined gross margin management.
• Moderate raw material cost increases, being managed

through Trilogy's global supply network.

• Significant increase in EBITDA margins.
• Increased profitability across all brands and all markets while

continuing to invest to support expansion of business and drive future sales growth.

• While growing, distribution subsidiary CS&Co, contributes

lower margins compared to the TIL product business, but in line with distribution category.

NZ$ m millions FY FY15 FY FY16 Yo YoY Sa Sales

36.6 83.1 127%

Gross p ss profit

22.8 44.8 97%

% % margin

62.2% 53.9%

EB EBITDA

5.3 16.3 208%

% % margin

14.5% 19.7%

EB EBIT

5.0 14.9 221%

% % margin

13.5% 19.1%

NP NPAT AT

4.5 9.4 108%

EP EPS

0.07 0.15

13.1 16.1 16.3 20.3 34.4 9.5 10.6 13.5 16.3 20.1 28.6 FY12 FY13 FY14 FY15 FY16

FY16 Results by Segment

8

4.1 4.9 3.6 5.3 11.5 (2.1) (2.5) (0.4) 1.3 2.5 4.8 FY12 FY13 FY14 FY15 FY16

REVENUE (NZ$M) EBITDA1 (NZ$M)

• Natural Products segment capitalised on increased global recognition of rosehip oil, with revenue growth of 69% in FY16

and EBITDA growth of 116%.

• Continued momentum in Home Fragrance & Bodycare division, achieving 24% revenue growth and 93% EBITDA growth.
• Strong EBITDA margin increases achieved across all brands and geographic markets.

Natural Products Home Fragrance & Bodycare CS&Co

Cashflow Statement

9

• Operating business produced $5.7m net cash,

up 21 % YoY.

• Capital expenditure increased in FY16.
• Purchases of PPE required to support CS&Co

integration into Trilogy group.

• Increased spend on in store display assets to

support expansion across Trilogy and ECOYA brands.

• Investment in head office and website development.
• Net financing cashflows increased to $30.5m due to debt

funded acquisition of CS&Co.

NZ NZ$m FY FY15 FY FY16 Ca Cash h flow from operations ns Receipts from customers (incl. GST) 39.6 89.6 Payments to suppliers / employees (incl. GST) (34.0) (79.2) Interest received 0.0 0.0 Interest paid (0.4) (1.8) Tax (paid) / received (0.5) (2.9) Net cash inflow / (outflow) from operating activities 4.7 5.7 Ca Cash h flow from inv nvesting ng activities Payment for PPE (0.1) (1.3) Sale of PPE 0.0 0.0 Payment for intangible assets (0.2) (0.3) Acquisitions, net of cash acquired 0.0 (33.9) Net cash inflow / (outflow) from investing activities (0.3) (35.5) Ca Cash h flow from fina nanc ncing ng activities Proceeds from borrowings 1.9 40.9 Repayment of borrowings (4.8) (8.2) Net proceeds from issue of shares (0.0) 0.1 Dividends paid 0.0 (2.3) Net cash inflow / (outflow) from financing activities (2.9) 30.5 Net cash flo low 1. 1.5 0. 0.7

Balance Sheet

10

• Increase in total interest-bearing liabilities to $35m

from debt-funded acquisition of CS&Co.

• Net debt / EBITDA rises to 1.9x for FY16, but

remains comfortably within existing debt covenants.

• Increase in intangible assets made up of $32.6m

goodwill arising from CS&Co acquisition.

• Working capital increase driven by rising inventory

and trade receivables associated with acquisition

• f CS&Co.

NZ NZ$m FY FY15 FY FY16 Cash and cash equivalents 2.7 4.4 Trade and other receivables 5.9 14.4 Derivative financial instruments 0.2 0.1 Inventories 5.0 21.0 To Total current assets 14 14.8 39 39.9 Plant and equipment 1.0 2.7 Intangible assets 17.5 50.4 Deferred tax asset 0.9 0.4 To Total non-cu current assets 19 19.4 53 53.5 .5 To Total assets 34 34.2 93 93.4 Trade and other payables 4.9 12.1 Provision for tax 0.5 1.2 Deferred and contingent consideration

• 1.5

Interest bearing liabilities

• 4.8

Derivative financial instruments

• 0.0

To Total current liabilities 5.4 5.4 19 19.0 Interest bearing liabilities 1.6 30.4 Deferred and contingent consideration

• 8.0

To Total non-cu current liabilities 1. 1.6 38 38.4 To Total liabilities 7. 7.0 58 58.0 .0 Contributed equity 32.4 32.6 Reserves (1.2) (0.3) (Accumulated losses)/retained earnings (4.0) 3.1 To Total equity 27 27.2 2 35 35.4

11

Dividend

• TIL's dividend policy is to pay 45-55% of business earnings

excluding CS&Co and after interest and tax.

• Allows adequate earnings to be retained to fund initiatives that

drive capital growth for Trilogy shareholders and allow for debt repayment.

• Full year dividend of 5.45 cents per share, up 51% on FY15.
• Dividend fully imputed
• Equivalent to 50% of 2016 business earnings excluding CS&Co

earnings and after interest and tax.

DIVIDEND PAYMENT (CENTS PER SHARE)

FY15 FY16 3.60 5.45

CS&Co FY16 Highlights & Performance

12

Notes:

• 1. Pro Forma (PF) figures are based on management accounts and adjust for the 4.5 months of

the twelve month period to 31 March 2016 that CS&Co was not part of Trilogy International

REVENUE (NZ$M) EBITDA (NZ$M)

6.4 4.8 4.8 6.7 1.9 FY 15 FY 16A (7.5 months) Pro Forma adj (4.5 Months) FY 16 PF

+5.5%

40.2 28.6 42.2 13.6 FY 15 FY 16A (7.5 months) Pro Forma adj (4.5 Months) FY 16 PF

+5.0%

• Acquired by Trilogy International in Aug 2015
• Will commence distribution of Trilogy and Goodness

ranges throughout New Zealand from July 2016.

• Achieved 5.0% revenue and 5.5% EBITDA growth 1
• Benefits include:
• Synergy benefits
• Earnings accretive (contributed 7.5 months of

earnings to Trilogy International in FY16)

• Scale
• Export logistics service to the group
• International distribution contacts

Chilean Joint Venture

ACQUISITION OF A 25 PERCENT STAKE IN SOCIEDAD AGRICOLA Y FORESTAL CASINO SPA (“FORESTAL CASINO”), THE LARGEST CHILEAN BASED ROSEHIP PRODUCER

13

Ov Overview The acquisition delivers future supply certainty of certified organic rosehip oil for TIL while also providing access to their deep knowledge and experience of the rosehip industry. The partnership enables Forestal Casino to expand at a faster rate which also supports TIL’s growth strategy. Transaction is expected to settle on 30 June 2016, subject to customary closing conditions. Fo Forestal Ca Casino Forestal Casino is a family owned business first established in Chile in

• 1975. It has a long history in organic rosehip production and has

supplied TIL with high quality rosehip oil since 2010. The business specialises in the production of high quality rosehip products for the rosehip tea industry and the pressing of rosehip seed into oil for the skincare market. TI TIL - Fo Forestal Ca Casino Transaction Details Under the terms of the agreement, TIL will pay USD 8.0 million, comprising of; USD 2.0 million payable in cash and USD 6.0 million funded through the issue

• f 2,615,181 new ordinary shares.

The shares are subject to a lock-up arrangement whereby the shares cannot be traded by Forestal Casino for a period of two years from the transaction closing date of 30 June. As part of the acquisition Forestal Casino will grant Trilogy a long term supply agreement for rosehip oil which is a core ingredient in a number of skincare products produced by Trilogy. TIL management expects the acquisition to be earnings accretive. However, there is no expectation for a dividend to be received in relation to the investment in the short term, as surplus cash will be utilised to invest in growth.

Strategic Priorities

14

• Natural Products and Home Fragrance & Bodycare –

continue to grow in Australia and New Zealand, while identifying and developing opportunities to expand globally.

• Product development and innovation – increase our

investment in new product development to increase value of basket per customer and market penetration.

• CS&Co - maximise the opportunity for Natural Products from

strong domestic retail environment through channel expansion, and increased product offering, while maximising existing brands.

• Supply Chain – invest in further strengthening and expanding

TIL’s supply chain network and distribution channels to drive efficiencies and maximise global growth opportunities.

Future Outlook

15

• As we look to the future, Trilogy International will take

confident strides in dynamic consumer sectors of Natural Products and Home Fragrance to increase revenue and profitability in Australia and New Zealand to support meaningful opportunities in other markets.

• We expect growth will continue to out-perform market

growth in FY17. Leveraging that growth, we will expand our investments in new business opportunities and markets to sustain future growth.

• During FY17 Trilogy International will support its future

focused growth through investment in brand and marketing, product innovation, working capital, technology, internal functionality, and people. This will enable us to be fit for the future, continuing to provide our consumers with quality products and grow our business.

Natural Products

T R I L O G Y & G O O D N E S S

Natural Products Overview & Strategy

17

1Aztec data as at 20/03/16 NZ Pharmacy Facial Skincare 2Aztec data as at 06/03/16 AU Pharmacy Facial Skincare 6.5 7.2 2.8 2.2 0.7 0.9 13.3 10.5 4.0 3.1 2.5 1.0 New Zealand Australia Asia UK & Ireland US Other

NATURAL PRODUCTS REVENUE BY MARKET

• Natural Products account for a fast growing share
• f total skincare spend. In pharmacy alone, the

Natural/Organic Skincare segment grew over 21%1 in New Zealand and over 26%2 in Australia.

• Trilogy is the #11 New Zealand natural skincare

brand in pharmacy.

• Expect to continue market share gains in the

home markets of New Zealand and Australia by increasing brand recognition, product development and innovation.

• The aspiration is to establish Trilogy as the global

leading authority in natural skincare by building

• n our leadership in rosehip oil products.
• Focus on deepening and strengthening

distribution networks, particularly in Asia, the US and UK.

• Continue to secure high quality rosehip oil supply

through our global supply network to meet growing demand.

FY15 FY16

FY16 Highlights & Performance

18

• Natural Products produced record revenue growth
• f 69%.
• EBITDA growth of 116%, with margins expanding

from 26.3% to 33.5%.

• Investment in people, office move and international.
• Modest gross margin compression due to raw

materials pricing pressure (rosehip oil)

• 45% increase in new product development value.
• Launched Goodness brand, TIL’s Chia based

skincare range into 1600+ doors across New Zealand and Australia.

• Launched Trilogy into Wholefoods retail in the US

which has performed better than expected.

Aztec data MAT to 27/03/16 NZ Grocery Facial Skincare

REVENUE (NZ$m) EBITDA

EBITDA ($m) EBITDA Margin

4.1 4.9 3.6 5.3 11.5 31.3% 30.2% 22.0% 26.3% 33.5%

• 1

4 9 14 FY12 FY13 FY14 FY15 FY16 13.1 16.1 16.3 20.3 34.4 FY12 FY13 FY14 FY15 FY16

19

Natural Products Geomap

Home Fragrance & Bodycare

3.8 10.8 0.8 0.2 0.1 0.0 5.0 12.7 1.1 0.6 0.1 0.6 New Zealand Australia Asia UK & Ireland US Other

Home Fragrance Overview & Strategy

21 HOME FRAGRANCE & BODYCARE FY16 REVENUE BY MARKET HOME FRAGRANCE MARKET SHARE

Source: TNS (May 2016)

• ECOYA has built it’s global reputation on the

ECOYA Collection, the brand’s signature range.

• Strong market share in home markets;
• ECOYA leads the New Zealand home

fragrance market with 24% share.

• #2 in the Australian market with 7% share.
• Focused on product development and seasonal

editions to grow the home fragrance segment and its share in home markets.

• The aspiration is to establish ECOYA’s position as

the #1 Australasian home fragrance brand in targeted international markets.

New Zealand Australia

ECOYA The Aromatherapy Co The Body Shop Crabtree & Evelyn L’Occitane en Province Linden Leaves Glasshouse Yankee Candles Jo Malone Ashley & Co Other 24% 16% 9% 5% 4% 4% 4% 3% 2% 28% 2% Glasshouse ECOYA L’Occitane en Province Crabtree & Evelyn Yankee Candles In Essence The Aromatherapy Co Mor Salt & Pepper Woodwick Other 16% 7% 7% 6% 5% 5% 4% 3% 3% 39% 5%

FY15 FY16

(2.1) (2.5) (0.4) 1.3 2.5

• 21.6%
• 24.0%
• 3.1%

7.7% 12.5%

• 35.0%
• 25.0%
• 15.0%
• 5.0%

5.0% 15.0% 25.0% 35.0% 45.0% (4) (2)

• 2

4 6 FY12 FY13 FY14 FY15 FY16 9.5 10.6 13.5 16.3 20.1 FY12 FY13 FY14 FY15 FY16

FY16 Highlights & Performance

22 REVENUE (NZ$m) EBITDA

• ECOYA produced record revenue growth of 24%

driven by continued strong profitable retail relationships and driving the depth of distribution in both the Australian and New Zealand markets.

• Continued success from the development

and launch of limited edition scents for Christmas, summer and winter which delivered 20% more in value.

• EBITDA margin expansion from 8.0% to 12.5%.
• In the UK, ECOYA has seen category and brand

growth through new display investment in new retail partnerships.

EBITDA ($m) EBITDA Margin

23

Home Fragrance & Bodycare Geomap

CS Company

CS&Co

TRILOGY ACQUIRED CS&CO IN AUGUST 2015, NEW ZEALAND’S LARGEST INDEPENDENT IMPORTER AND DISTRIBUTOR OF FRAGRANCES, HAIRCARE, SKINCARE AND TOILETRIES

25

PRODUCTS

Third party premium beauty products distribution

TARGET MARKET

New Zealand retailers

• Largest distributer of fragrance in NZ with 33%¹ share
• 13%¹ share of make up distribution in NZ

CHANNELS

+1900 stores

• Pharmacies
• Department stores
• Grocery
• Salon

GEOGRAPHIES

• New Zealand

ESTABLISHED

1976

¹ CTFA annual survey statistics

KEY FRAGRANCE BRANDS

Calvin Klein, Gucci, Marc Jacobs & Dolce & Gabbana.

KEY COSMETIC BRANDS

Max Factor, Natio & OPI.

60+ BRANDS

Fragrance, Cosmetics & Salon.

26

CS&Co Annualised Impact

Notes:

• 1. Pro forma contribution adjusts CS&Co figures to include the 4.5 month period of

trading in FY16 prior to CS&Co being acquired by Trilogy

PRO FORMA REVENUE CONTRIBUTION1 PRO FORMA EBITDA CONTRIBUTION1

Natural Products Home Fragrance & Bodycare CS&Co

43% 21% 36% 57% 31% 12%

Natural Products Home Fragrance & Bodycare CS&Co

• CS&Co acquisition announced in August 2015
• FY16 results include 7.5 months

post-acquisition contribution.

• The pro forma numbers are included to

demonstrate the annualised impact of the CS&Co contribution.

• CS&Co accounted for 43% of revenue and 31% of

EBITDA on a pro forma basis in FY16.

• Estimate FY16 CS&CO revenue of $42.2m and

EBITDA of 6.7m.

• CS&Co provides strong revenue and EBITDA

contribution, however is a lower margin business compared to our Natural Products and Home Fragrance & Bodycare.

Appendix

Trilogy Management Team

28

Kristy Macgregor Operations Manager Claire Barnes ECOYA General Manager Lindsay Render CFO Sonya Fynmore Investor Relations Consultant Louise Clayton Trilogy Sales Manager Angela Buglass CEO

15 years' of skincare and cosmetics experience in the International markets. More than 20 years' experience in leading health and beauty teams in NZ. Chartered Accountant with over 15 years commercial experience. Background in project management and business development in the UK retail industry, Operations Manager with Trilogy International since 2011. Over 10 years of sales and marketing experience centred around fashion, advertising and media. Over 10 years’ experience in the financial markets across multiple jurisdictions.

Grant Baker Director The Business Bakery Representative

Board of Directors

29 29

Stephen Sinclair Executive Director The Business Bakery Representative Mandy Sigaloff Independent Director Jack Matthews Independent Director Geoff Ross Chairman The Business Bakery Representative

Disclaimer

30

This presentation is given on behalf of Trilogy International Limited (Company number NZ 2090514, NZX: TIL). Information in this presentation: Is for general information purposes only and is not an offer or invitation for subscription or recommendation for purchase of securities in Trilogy International Limited; Should be read in conjunction with, and is subject to, Trilogy International Limited’s Annual Report, market releases, and information published on (www.trilogyproducts.com/investors); Includes forward-looking statements about Trilogy International Limited and the environment in which Trilogy International Limited

• perates, which are subject to uncertainties and contingencies outside of Trilogy International Limited’s control – Trilogy

International Limited’s actual results or performance may differ materially from these statements; Includes statements relating to past performance, which should not be regarded as a reliable indicator of future performance; and may contain information from third parties believed to be reliable; however, no representations or warranties are made as to the accuracy or completeness of such information. All information in this presentation is current as at the date of this presentation, unless otherwise stated. All currency amounts are in NZ dollars unless stated otherwise.