CANADA S FURNITURE RETAILER

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Richard Walton
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1 CANADA S FURNITURE RETAILER INVESTOR PRESENTATION JUNE 2016 LEON'S FURNITURE LIMITED 1

2 FORWARD LOOKING STATEMENTS Certain statements in this document and in Leon s Furniture Limited ( the Company s ) oral and written public communications may constitute forward-looking statements that reflect management s expectations regarding the Company s future growth, results of operations, performance and business prospects and opportunities as of the date of this presentation. Generally, these forwardlooking statements can be identified by the use of forward-looking terminology such as anticipate, believe, plan, forecast, expect, intend, would, could, if, may and similar expressions. All such statements are made pursuant to the safe harbour provisions of applicable Canadian securities legislation. These statements reflect current expectations of management regarding future events and operating performance, and speak only as of the date of this presentation. In addition, forward-looking statements are provided for the purpose of providing information about management s current expectations and plans relating to the future. Readers are cautioned that reliance on such information for other purposes may not be appropriate. By their very nature, forward-looking statements require management to make assumptions and are subject to inherent risks and uncertainties. There is a significant risk that predictions, forecasts, conclusions or projections will not prove to be accurate, that management s assumptions may not be accurate and that actual results, performance or achievements may differ significantly from such predictions, forecasts, conclusions or projections expressed or implied by such forward-looking statements. We caution readers not to place undue reliance on the forward-looking statements in this presentation as a number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, outlooks, expectations, goals, estimates or intentions expressed in the forward-looking statements. LEON'S FURNITURE LIMITED 2

3 100 YEARS YOUNG managing the company for the next 100 years LEON'S FURNITURE LIMITED 3

4 $10+ Billion ANNUAL FURNITURE AND APPLIANCE MARKET IN CANADA LEON'S FURNITURE LIMITED 4

5 $2.4 Billion 2015 system sales 10% CAGR book value per share since banners spanning customer segments 11 million ft 2 retail & distribution portfolio 16% ROE since % CAGR dividend since 2003 LEON'S FURNITURE LIMITED 5

NATIONAL SALES & DISTRIBUTION FOOTPRINT 1 Yukon 1 Northwest Territories Unmatched fulfillment capabilities significant competitive advantage over regional competitors and online retailers 307 Total

6 NATIONAL SALES & DISTRIBUTION FOOTPRINT 1 Yukon 1 Northwest Territories Unmatched fulfillment capabilities significant competitive advantage over regional competitors and online retailers 307 Total stores nationwide Leon s Furniture stores The Brick stores British Columbia Alberta United Furniture Warehouse stores Appliance Canada stores Saskatchewan 7 2 Manitoba Midnorthern Appliance stores Ontario Quebec 4 4 New Brunswick 5 3 Nova Scotia 3 Newfoundland 1 1 Prince Edward Island LEON'S FURNITURE LIMITED 6

7 COMPREHENSIVE COVERAGE ACROSS CONSUMER SPECTRUM Something for everyone CONSUMER SPECTRUM LEON'S FURNITURE LIMITED 7

8 DOMINANT SHARE ACROSS MULTIPLE PRODUCT SEGMENTS Drives more frequent visits and larger baskets LEON'S FURNITURE LIMITED 8

9 MATTRESS: FASTEST GROWING PRODUCT SEGMENT LEON'S FURNITURE LIMITED 9

10 RECOGNIZED MARKET DRIVERS URBANIZATION IMMIGRATION 100 years of staying on top of trends TECHNOLOGY VALUE LEON'S FURNITURE LIMITED 10

11 UNDERSTANDING THE NEEDS OF NEW MARKETS: CONDOS LEON'S FURNITURE LIMITED 11

12 ENDLESS AISLES LEON'S FURNITURE LIMITED 12

13 MULTIPLE OPPORTUNITIES WITHIN M&A ONLINE VERTICALS Track record of accretive acquisitions REGIONAL COMPETITORS GEOGRAPHIC LEON'S FURNITURE LIMITED 13

14 Completed IT Integration OF LEON S AND THE BRICK LEON'S FURNITURE LIMITED 14

15 FINANCIALS LEON'S FURNITURE LIMITED 15

16 FINANCIAL SUMMARY System Sales & EBITDA ($000) $2,039,428 $2,383,324 $2,407,512 $2,443,689 Effective expense management and top line growth in mature market $907,497 $879,561 $880,240 $106,341 $92,433 $78,569 $143,759 $162,613 $163,189 $165, LTM LEON'S FURNITURE LIMITED 16

17 OPTIMIZING SG&A EXPENSES 40.0% SG&A as a percentage of revenue excluding M-T-M 37.0% 37.7% 37.8% 37.4% 1% REDUCTION IS $20 M SG&A SAVINGS 35.0% 30.0% 29.9% 31.3% 32.7% 25.0% LTM LEON'S FURNITURE LIMITED 17

18 DELEVERAGING THE BALANCE SHEET AT ACQUISITION (Mar 28, 2013) TODAY (Q1 2016) BRICK DEBENTURES $35 $0 LFL TERM LOAN $400 $290 $435 $290 $145 M REDUCTION ALREADY $50 M PER YEAR SCHEDULED Debt to EBITDA 3.19 : : 1.0 Adj debt to EBITDAR 4.49 : : 1.0 LEON'S FURNITURE LIMITED 18

19 FINANCIAL SUMMARY Book Value Per Share Dividends Paid $7.74 $8.43 $0.48 $0.51 $5.31 $5.00 $ % CAGR $6.46 $5.83 $6.08 $0.20 $0.38 $0.38 $0.13 $0.27 $0.10 $0.20 $0.30 $0.15 $0.40 $0.40 $0.40$0.40 $4.55 $0.36 $4.06 $3.62 $0.25 $0.28 $ Dividend Special dividend LEON'S FURNITURE LIMITED 19

20 AN ICONIC FORMULA Be true to yourself FURNITURE Stay RELEVANT FOCUS Bottom-line growth Maintain healthy margins Integration Innovation Be CONSERVATIVE Pay a DIVIDEND LEON'S FURNITURE LIMITED 20

21 THANK YOU LEON'S FURNITURE LIMITED 21

22 CORPORATE OVERVIEW TSX symbol Shares o/s Market cap LNF 71.6 M $1.11 B Insider ownership 67% Net debt $380 M LEON'S FURNITURE LIMITED 22

Federal and Provincial/Territorial Tax Rates for Income Earned

Federal and Provincial/Territorial Tax Rates for Income Earned by a CCPC Effective January 1, 2015 and 2016 by a CCPC Effective January 1, 2015 1 Federal rates General corporate rate 38.0% 38.0% 38.0% Federal abatement (10.0) (10.0) (10.0) 28.0 28.0 28.0 business