Vita Group (VTG) Results Presentation First half FY14
Group highlights Sustained trend of strong profit, dividend growth Underlying EBITDA 1 +18%, underlying NPAT 2 +56%, dividend +66% Areas of strategic investment performing well Telstra-branded stores, business channel New-format APR Next Byte stores improving Strengthened alignment with Telstra Product consistency, portfolio expansion Greater capability and product offering for businesses Camelon I.T. a springboard for expanded product range $19.4m non-cash impairment of Next Byte Reducing scale of Next Byte aspiration Redirecting some investment into telecoms, I.T. and business 1 Earnings before interest, tax, depreciation, amortisation, and impairment 2 Excludes $19.4m impairment to Next Byte 2
Highlights Telecommunications Strong earnings performance Greater partnership alignment Underlying EBITDA 1 up 22% Robust growth from Telstra portfolio Non-strategic retail brands consolidating Shifting to more profitable revenue mix Connectivity, broadband, value-added products Customer advocacy Productivity improvements Costs contained despite growth People strategy working Substantial growth potential in business channel Alignment on products Vita to sell Telstra s swap/replace/restore services Retired proprietary swap/warranty product (ESP) Non-cash earnings benefit Amortisation of deferred ESP revenue $6.2m H2 FY14, $8.5m FY15, $2.5m FY16 Expansion of Telstra-branded portfolio 12-14 new stores calendar 2014 Work ongoing to determine business footprint 1 Earnings before interest, tax, depreciation, amortisation, and impairment 3
Highlights Next Byte Improving performance from new-format (V2) stores Revising ambitions for Next Byte brand Continued portfolio transformation 9 V2 stores, only 6 V1 stores at period end New leadership team Operating disciplines Sales culture Underlying EBITDA 1 loss $0.8m including $0.4m one-off costs Losses on stores closed prior to November Underlying EBITDA 1 uplift toward period end Smaller, more focused portfolio No longer targeting 20-25 Next Byte stores Focus on consistent performance Timely to write down remaining goodwill 1 Earnings before interest, tax, depreciation, amortisation, and impairment 4
Portfolio transformation Camelon IT Points of Presence Telstra Business Centres Telstra Stores 5
Income Statement Strong growth in underlying EBITDA 1, dividends ($m unless otherwise stated) H1 FY14 H1 FY13 Revenue 215.8 222.2-3% Gross Profit 70.2 69.3 +1% Underlying EBITDA 1 Next Byte Impairment 12.1 10.2 +18% (19.4) - EBIT (12.5) 4.9 NPAT (15.2) 2.7 Dividend 1.91 cps 1.15 cps 66% 1 Earnings before interest, tax, depreciation, amortisation, and impairment Areas of strategic importance driving growth Telstra stores, business channel Lower contribution from Fone Zone, Next Byte impacting reported revenue growth Strong underlying earnings growth: Underlying EPS* +56% ($m) H1 FY14 v H1 FY13 Underlying EBIT* +41% Underlying NPAT* +56% * Excludes $19.4m impairment to Next Byte Significant increase in interim dividend Up 66%, 65% payout ratio Leveraging off lean cost base Group expenses down 1.6%; lower interest 6
Balance Sheet Debt repayment accelerated, low net debt ($m) 31 Dec 13 31 Dec 12 Cash 11.2 24.9 Current assets (exc. cash) 45.0 40.2 Non-current assets 72.0 90.6 Total Assets 128.2 155.7 Current liabilities (82.5) (90.0) Healthy debt position Gross debt $13.6m at period end vs $23.8m prior year Net debt moderate at $2.4m Prior year cash balance temporarily inflated Inventory and debtors up Strong December trading Impairment to Next Byte Goodwill $19.4m Impacts non-current assets No operational impact on the business Current liabilities down Lower creditors (timing); lower current debt Non-current liabilities Lower non-current gross debt Warranty sales strong up until cessation Reflected in unearned (deferred) revenue will benefit future periods Non-current liabilities (22.8) (27.1) Total Liabilities (105.3) (117.1) NET ASSETS 22.9 38.6 ($m) H1 FY14 FY13 Current 18.6 17.6 Non-Current 10.6 10.4 Total 29.2 28.0 7
Cash Flows Applied to growth initiatives, dividends, lower debt ($m) H1 FY14 H1 FY13 Operating cash flows 8.6 19.9 Investing cash flows (5.7) (8.0) Financing cash flows (4.5) (0.3) Net cash movement (1.6) 11.6 Opening cash balance 12.8 13.3 Operating cash flow Solid cash conversion Strong prior year comparative reflects one-off working capital benefits from sale of Apple devices late in the period Investing cash flows Lower store capex; includes Camelon IT ($3.7m) Financing cash flows Debt repayment, dividends Closing cash balance 11.2 24.9 8
Telecommunications Telstra stores, productivity driving earnings ($m) H1 FY14 H1 FY13 Investment in Telstra stores driving growth; other retail brands consolidating Operating revenue 173.8 172.7 +1% Gross profit 63.3 60.5 +5% Expenses (50.4) (49.9) -1% Underlying EBITDA 1 12.9 10.6 +22% Business channel sub-scale, but growing Underlying EBITDA 1 +38% Mix shift from devices to fixed, broadband, advocacy, digital business Underlying EBITDA 1 +1.4 percentage points Underlying EBITDA 1 +22%; productivity gains 1 Earnings before interest, tax, depreciation, amortisation, and impairment 9
Next Byte Improving performance trend ($m) H1 FY14 H1 FY13 Operating revenue 42.1 49.5-15% Gross profit 6.9 8.8-22% Underlying EBITDA 1 (0.8) (0.4) Subdued revenue, underlying EBITDA 1 performance Fewer stores Like-for-like softness in V1 stores Benefiting from new management Operating disciplines across business Strong back end of the period Nov Jan underlying EBITDA 1 positive Continued focus on capturing opportunity Apple brand remains strong V2 store performance improving Business and education market delivering growth Impairment reflects lower future growth aspirations for the brand 1 Earnings before interest, tax, depreciation, amortisation, and impairment 10
Great leaders deliver great results Results Profit per team member FY14 v FY13 +21% Actions & behaviours Sales leadership expectations defined through our CARE program Frequency and quality of interactions measured to improve individual and team performance Mindset Building a culture of great place to be through Getting the right people, Growing, and Keeping them 11
Growing the internal talent pool increases productivity Growing and Keeping our people increases talent pool Internally sourced candidates Externally sourced candidates FY12 45% 55% FY13 50% 50% FY14 60% 40% Through our Get, Grow, Keep program, internal bench strength is improved, leading to a stronger internal talent pool Proportion of roles filled internally increasing Productivity higher, costs lower Execution of Get, Grow, Keep strategy reduces cost of doing business 12
Significant growth potential in retail and business channels Telecommunications Retail Telecommunications Business Next Byte Expect further earnings growth Portfolio expansion 2014 Mix change fixed, broadband, media, risk products Advocacy focus Strong mid term growth potential Multiple distribution channels o Telstra stores o Telstra Business Centres o Business Consultants o Enterprise Camelon IT leverage o Expertise in NAS, IT complements Vita s telecoms competency o A channel in its own right Improved execution Focused footprint Facilities in place Financially positioned to exploit opportunities Low net debt Improving cash profits Growing dividends 13
Questions Results Presentation First half FY14 14
Disclaimer The material in this presentation is a summary of Vita Group Limited s (Vita) activities and results, and is current at the date of preparation, 28 February 2014. Further details are provided in the Company s full year accounts and results announcement released on 28 February 2014. No representation, express or implied, is made as to the fairness, accuracy, completeness or correctness of information contained in this presentation, including the accuracy, likelihood of achievement or reasonableness of any forecasts, prospects, returns or statements in relation to future matters contained in the presentation ( forward-looking statements ). Such forward-looking statements are by their nature subject to significant uncertainties and contingencies and are based on a number of estimates and assumptions that are subject to change (and in many cases are outside the control of Vita and its Directors) which may cause the actual results or performance of Vita to be materially different from any future results or performance expressed or implied by such forward-looking statements. Undue reliance should not be placed on forward-looking statements and except as required by law or regulation, Vita assumes no obligation to update these forward-looking statements. To the maximum extent permitted by law, Vita and its related corporations, Directors, officers, employees and agents disclaim any obligations or undertaking to release any updates or revisions to the information in this presentation to reflect any change in expectation or assumptions and disclaim all responsibility and liability for these forward-looking statements (including without limitation, liability for fault or negligence). This presentation provides information in summary form only and is not intended 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. Due care and consideration should be undertaken when considering and analysing Vita s financial performance. All references to dollars are to Australian Dollars unless otherwise stated. To the maximum extent permitted by law, neither Vita nor its related corporations, Directors, officers, employees or agents, nor any other person, accepts any liability, including, without limitation, any liability arising from fault or negligence, for any loss arising from the use of this presentation or its contents or otherwise arising in connection with it. Certain financial data included in this presentation may be "non-ifrs financial information" under Regulatory Guide 230 Disclosing non-ifrs financial information published by ASIC. [The non-ifrs financial information in this presentation may include underlying profit after tax]. Vita believes this non-ifrs financial information, where included, provides useful information to users in measuring the financial performance and conditions of Vita. The non-ifrs financial information measures do not have standardized meanings prescribed by International Financial Reporting Standards and, therefore, may not be comparable to similarly titled measures presented by other entities, nor should they be considered as an alternative to other financial measures determined in accordance with International Financial Reporting Standards. Undue reliance should not be placed on any non-ifrs financial information. This presentation is not and should not be considered as an offer or an invitation to acquire shares in Vita or any other financial product and does not and will not form any part of any contract for the acquisition of shares. This presentation should be read in conjunction with other publicly available material. Further information including historical results and a description of the activities of Vita is available on our website, www.vitagroup.com.au 15