23 Nov

AGM Presentation 2021

ANNUAL GENERAL MEETING PRESENTATION 23 NOVEMBER 2021 The following provisions apply to this presentation. Please consider its contents carefully. Currency of information The information contained in this presentation is current as at the date of this presentation or such earlier date as specifi ed in this presentation. Summary information The information in this presentation is of a general nature only. It does not purport to be complete. Not investment advice The information contained in this presentation is not investment or financial product advice or any recommendation to acquire se curities in McPherson's Limited (ASX: MCP). This presentation has been prepared without taking into account your investment objectives, financial situation or particular needs . Company information MCP's historical information in this presentation is, or is based on, information that has been released to ASX. This present ati on should be read in conjunction with MCP's other periodic and continuous disclosure information lodged with ASX, which are available at www.asx.com.au . Third party information Certain market and industry data used in connection with this presentation may have been obtained from research, surveys or s tud ies conducted by third parties, including industry or general publications. Neither MCP nor any of its related bodies corporate, directors, employees, agents or advisers have independently verified suc h m arket or industry data. Historical information Past performance information in this presentation is given for illustrative purposes only and should not be relied upon as, a nd is not, an indication of future performance. Forward looking information This presentation contains certain forward - looking statements that involve risks and uncertainties. MCP can give no assurance th at these expectations will prove to be correct. You are cautioned not to place undue reliance on any forward - looking statements. Actual results may differ materially from those anticipated in these fo rward - looking statements due to many important factors, risks and uncertainties including, without limitation, risks associated with future capital needs, general economic uncertainty and oth er risks detailed from time to time in MCP's announcements to ASX. MCP does not undertake any obligation to release publicly any revisions to any “forward - looking statement” to reflect events or circumsta nces after the date of this presentation, except as may be required under applicable laws. Disclaimer No representation or warranty, whether express or implied, is made by any person as to the fairness, accuracy, completeness o r c orrectness of the information, opinions and conclusions contained in this presentation. You should carry out your own investigations and analysis of MCP and verify the accuracy, reliability and compl ete ness of the information contained in this presentation. Neither MCP nor any of its related bodies corporate, directors, employees, agents and advisers accept any responsibility for any loss arising from anyone acting or refraining from acting in reliance on the contents of this presentation. DISCLAIMER MCP 2021 AGM 2 MCP 2021 AGM 3 ARI MERVIS CHAIRMAN ARI MERVIS Independent Non - Executive Director and Chairman GRANT PECK CEO & Managing Director GRAHAM A. CUBBIN Independent Non - Executive Director JANE M. McKELLAR Independent Non - Executive Director GEOFFREY R. PEARCE Non - Independent Non - Executive Director ALISON J. COOK Independent Non - Executive Director OUR BOARD 4 MCP 2021 AGM 5 AGENDA MCP 2021 AGM 5 1. CHAIRMAN’S ADDRESS 2. CEO & MANAGING DIRECTOR’S ADDRESS 3. FORMAL BUSINESS 3.1 FINANCIAL STATEMENTS AND OTHER REPORTS 3.2 REMUNERATION REPORT 3.3 ELECTION OF A DIRECTOR – ARI MERVIS 3.4 RE - ELECTION OF A DIRECTOR – ALISON COOK 3.5 RE - ELECTION OF A DIRECTOR – GEOFFREY PEARCE 3.6 APPROVAL OF ISSUE OF PERFORMANCE RIGHTS TO MANAGING DIRECTOR – GRANT PECK 4. SHAREHOLDER QUESTIONS 123 - 456 - 789 When open, the vote will be accessible by selecting the voting tab at the top of the screen To vote simply select the direction in which you would like to cast your vote. The selected option will change colour For Against Abstain ONLINE ATTENDEES – VOTING There is no submit or send button, your selection is automatically recorded. You can change your mind or cancel your vote any time before the poll is closed MCP 2021 AGM 6 ONLINE ATTENDEES – TEXT QUESTION PROCESS When the question function is available, the messaging tab will appear at the top of the screen To submit a question, type your question in the “Ask a question” box and press the send arrow Your question will be sent immediately for review Received 123 - 456 - 789 MCP 2021 AGM 7 ONLINE ATTENDEES – AUDIO QUESTION PROCESS When the audio questions line is available, a link will appear on the home tab titled Asking Audio Questions You will be prompted to enter your name and the topic of your question before being placed in the audio questions queue 123 - 456 - 789 If you would like to ask an audio question, pause the meeting broadcast and click on the link MCP 2021 AGM 8 9 PROXIES AND VOTING MCP 2021 AGM 10 AGENDA MCP 2021 AGM 10 1. CHAIRMAN’S ADDRESS 2. CEO & MANAGING DIRECTOR’S ADDRESS 3. FORMAL BUSINESS 4. SHAREHOLDER QUESTIONS MCP 2021 AGM 11 GRANT PECK CEO & MANAGING DIRECTOR FY21 RESULTS SUMMARY TOTAL SALES REVENUE $200.5m FY20: $222.2m SALES EXCLUDING CHINA UNDERLYING EBIT STRONG CASH CONVERSION ROBUST BALANCE SHEET FULL YEAR DIVIDEND $193.8m FY20: $185.0m $11.3m FY20: $25.1m 108% FY20: 88% $8.4m in debt Gearing 6.8% 5.0cps fully franked ? Resilient domestic performance offset by lower international sales of Dr. LeWinn's and one - off items ? Sales revenue excluding China increased 5% to $ 193.8 million ? 9% increase in domestic sales of company owned brands v FY20 ? Underlying EBIT of $11.3 million ? Strong balance sheet with low debt and gearing MCP 2021 AGM 12 HIGHLIGHTS CHINA MARKET UPDATE MCP 2021 AGM 13 • Dr. LeWinn’s experienced stellar growth from 2017 – 2020 fueled by the diagou phenomenon • Extremely successful in key Chinese consumer promotional periods • Inventory positions built in anticipation of continued strong demand 2017 – 2020 • Significant change in the fundamentals of cross - border e - commerce for skincare products • Diagou demand for Australian products materially reduced • Stronger domestic Chinese skincare offerings • Vulnerability of overreliance on one channel in one country became clear • Moderation of opportunity for Dr. LeWinn’s in China 2021 • Expected rebound in demand from China in FY22 has not occurred • Announced decision to incur $8 million - $10 million provision in 1H22 in relation to excess Dr. LeWinn's inventory • Revised strategy involving broader distribution, avoiding over - reliance on one channel in one country • Measured and self - funding approach to international expansion • First US sales recorded in September 2021 2022 and beyond W E’ RE O P E RATI NG I N A $ 15 .2 BILLION MARKET (AUD) HEALTH, WELLNESS & BEAUT Y – A GROWING MARKET 1. Health & Wellness, Beauty Market size defined using IRI MarketEdge based on Health, Wellness & Beauty definitions provided by McPherson’s Consumer Products IRI Big Picture: Pharmacy Moving Annual Total (MAT) 02/08/2020, plus Grocery MAT 03/01/2021 Vs MAT Year Ago HEALTH & WELLNESS 1 ($7.5 Billion, +5.7% vs Year Ago) BEAUT Y 1 ($7.7 Billion, +4.6% vs Year Ago) NATURAL HEALTH Immunity & Protection Sleep & Mood Joint & Movement Digestive Health HEALTHY SKIN & BEAUT Y Cosmeceutical Australian Natural Essential Beauty Clean Beauty PRO - ACTIVE BEAUT Y AUSTRALIAN BEAUT Y SUSTAINABLE LIVING BEAUT Y AT HOME L EV ERAG ED TO P O S I TI VE M AC RO T R EN D S MCP 2021 AGM 14 OPERATIONAL REVIEW INITIATIVES TARGETED TO DELIVER $40 MILLION SALES AND $8 MILLION EBIT BY FY26 SELECTIVELY EXPAND INTERNATIONAL FOOTPRINT 6 CORE OWNED - BRANDS & KEY CHANNELS INITIATIVES TARGETED TO DELIVER $230 MILLION SALES AND $29 MILLION EBIT BY FY26 HEALTH & WELLNESS A NEW GROWTH PLATFORM INITIATIVES TARGETED TO DELIVER $30 MILLION SALES AND $7 MILLION EBIT BY FY26 COST OPTIMISATION INITIATIVES TARGETED TO DELIVER $6 MILLION EBIT BY FY26 Target $300 million sales and $50 million EBIT in FY26 Restructured team to drive results MCP 2021 AGM 15 6 CORE OWNED BRANDS & KEY CHANNELS MCP 2021 AGM 16 6 CORE OWNED - BRANDS & KEY CHANNELS Core brand growth • Core owned - brands recorded 9% growth YTD up to 30 October 2021 vs pcp • Significant growth in Pharmacy channel, up 11% YTD to 30 October 2021 vs pcp • Gaining share in Manicare, Lady Jayne, Swisspers and A’kin haircare • Multix Greener pioneer in sustainable offering with 79% of sustainable buyers purchasing Multix Greener Channel expansion • Increase of 60,000 distribution points*, on track to reach FY22 target of 1.2 million • Launched in Kogan Group, The Iconic , Pretty Green Australian Eco - Friendly Online Supermarket Customer collaboration • Strong collaborative activity driving key Beauty Essential brands and skincare including CWH and Priceline TVCs Expand into adjacencies through innovation • Innovation continues to fuel growth with incremental sales from 163 active and planned projects in the NPD pipeline • Expansion into attractive adjacent categories including beauty supplements, Baby and Men's Grooming ACHIEVEMENTS • Expand core brands via better ranging, customer and channel expansion • Tap into adjacencies and focus on innovation PLANNED INITIATIVES * Individual stock keeping unit in an individual retail outlet HEALTH & WELLNESS – A NEW GROWTH PLATFORM MCP 2021 AGM 17 HEALTH & WELLNESS A NEW GROWTH PLATFORM • Acquired Global Therapeutics' Fusion Health and Oriental Botanical brands in December 2020, establishing a new platform for growth – McPherson’s Health & Wellness Division. • Health category represents a key adjacency that our core skill sets, broad customer base, and logistics capability are uniquely positioned to support. • Successful integration into MCP, including IT and financial systems, and stock now being distributed from MCP Kingsgrove warehouse. Service offering alignment and go to market distribution review underway. • Recorded $9.5 million in sales in FY21 with brands contributing from 1 December 2020 (7 months). HIGHLIGHTS HEALTH & WELLNESS – A NEW GROWTH PLATFORM MCP 2021 AGM 18 Stock shortages addressed • Stock shortages addressed with availability now over 95% • On target to deliver planned sales and EBIT for FY22 despite key health store channel impacted by COVID lockdowns Channel expansion • Achieved incremental distribution of A'kin in to 129 health stores NPD • NPD to deliver 7.5% of sales in FY22 as consumers continue to seek natural solutions to immunity. Increased consumer engagement • Refreshed Fusion brand identity to appeal to consumers • Successful Wintering Well campaign • Increased Fusion Health website traffic by 48% and new users by 44%, Over 23 million ad impressions and 2 million video views across Google and Facebook, over 115,000 click through to Fusion Healths’ website • eCommerce sale revenue up 58% YOY Efficiencies • Swift progress on operational efficiency initiatives including new WA go - to - market distribution strategy, which creates improved customer insights. This strategy will be cost neutral in FY22 and on track to deliver 10% improvement in Health EBIT in FY23. • Access ranging upside in Australian pharmacy channel, reset in New Zealand • Accelerate New Product Development (NPD) ACHIEVEMENTS HEALTH & WELLNESS A NEW GROWTH PLATFORM PLANNED INITIATIVES INTERNATIONAL FOOTPRINT MCP 2021 AGM 19 SELECTIVELY EXPAND INTERNATIONAL FOOTPRINT China • Announced decision to incur a one - off provision in the range of $8 million - $10 million in relation to excess Dr. LeWinn's inventory USA • Contracted Boston Distribution & Sales Factory to commence sales in USA e - commerce market, on a self - funding basis • Distribution commenced in the US with first sales recorded in September 2021; live on Amazon Dr. LeWinn's Global Brand IP • Registered Dr. LeWinn’s trademark in key markets: UK, EU, USA, UAE Fusion Health • Fusion Health international market entry assessment in FY22 Middle East & South - East Asia • A'Kin launching on Look Fantastic in H2'22 • Dr LeWinn's available at Watson's in Saudi Arabia, Kuwait and targeting Singapore in 2H22 • Build on Dr. LeWinn’s success but de - risk approach • Progress entry into targeted non - China markets ACHIEVEMENTS PLANNED INITIATIVES COST OPTIMISATION MCP 2021 AGM 20 KEY ACTIVITIES COST OPTIMISATION • Leadership focused on three key business units, with accountability Drive efficiencies in our business and optimise our supply chain and distribution process to best support our growth initiatives Realigning Business in Three Commercial Business Units Exiting Joint Ventures Reduced Senior Leadership Team • Removes unnecessary complexity OUR APPROACH Business will be centered around three units: ? Core Range – ANZ ? Health ? International Cost base recalibration resulted in annualised cost reductions of $3.5 million in line with operational review 21 TRADING UPDATE AND GUIDANCE • No short - term material improvement in sales into China with no expectation of a material profit from trading in China in FY22. • Continuing improvement in domestic operations (Manicare up 18%, Swisspers up 30%) • Momentum challenged by supply chain pressure; closely monitoring and managing supply instability • Cost pressures in commodities and international freight are being addressed • Total sales growth expected between 8% - 10 % • Underlying profit before tax expected between $0.4 million and $0.7 million below 1H21, excluding non - recurring, significant items • Including non - recurring, significant items, statutory loss before tax forecast between $ 2.5 million to $ 4.5 million • Total sales growth between 6% - 8% • Underlying profit before tax between $1 million and $2 million above FY2021, excluding non - recurring, significant items • 2H22 projected to be positively impacted by FX hedging and various cost initiatives • Including non - recurring, significant items, underlying profit before tax forecast between $1 million - $2 million MCP 2021 AGM 21 1H22 GUIDANCE FY22 CASH AND DIVIDENDS • MCP 2021 AGM 22 Balance sheet remains strong – net bank debt $8.4 million Underlying cash conversation forecast to be 85% to 90% in FY22 Bank debt supports maintenance of dividend policy to pay at least 60% of underlying profit after tax as dividends (subject to appropriate approvals) Strong demand for core products UNIQUE CAPABILITIES Supply chain and warehouse capacity offers opportunities Innovation driving additional ranging and value Rejuvenated team driving execution of strategy Strong balance sheet MCP 2021 AGM 23 FORMAL RESOLUTIONS MCP 2021 AGM 24 1 FINANCIAL STATEMENTS AND OTHER REPORTS 2 REMUNERATION REPORT 3 ELECTION OF A DIRECTOR – ARI MERVIS 4 RE - ELECTION OF A DIRECTOR – ALISON COOK 5 RE - ELECTION OF A DIRECTOR – GEOFFREY PEARCE 6 APPROVAL OF ISSUE OF PERFORMANCE RIGHTS TO MANAGING DIRECTOR – GRANT PECK AGENDA ITEM 1 – FINANCIAL STATEMENTS AND OTHER REPORTS To consider the financial statements and reports for year ended 30 June 2021 • Shareholders are not required to vote or formally approve or adopt the financial reports • Shareholders can, however, submit questions regarding the financial reports and the company MCP 2021 AGM 25 AGENDA ITEM 2 – REMUNERATION REPORT To adopt the remuneration report for the financial year ended 30 June 2021 In accordance with the Corporations Act , this resolution is advisory only and does not bind the company or the directors. The directors will consider the outcome of the vote and comments made by shareholders on the remuneration report at the meeting when reviewing the company’s remuneration policies MCP 2021 AGM 26 P ROXY VOT ES R E C EI VED ( MI LLIONS) I T EM 2 FO R FO R AG AI NST AG AI NST O P EN O P EN N O. % N O. % N O. % R E MU NERATI ON R E P ORT 3 5 . 5 76 . 8% 10 .1 21. 9% 0 . 6 1 . 3 % ITEM 2 – PROXY VOTES MCP 2021 AGM 27 AGENDA ITEM 3 – ELECTION OF A DIRECTOR – MR. ARI MERVIS To consider and, if thought fit, to pass the following resolution as an ordinary resolution: “To elect as a director of the company, Mr. Ari Mervis, who having been appointed a director of MCP on 16 February 2021 in accordance with the company's constitution, offers himself for election as a director of MCP” Relevant information about Mr. Mervis is set out in the explanatory notes to the notice of annual general meeting MCP 2021 AGM 28 P ROXY VOT ES R E C EI VED ( MI LLIONS) I T EM 3 FO R FO R AG AI NST AG AI NST O P EN O P EN N O. % N O. % N O. % E L ECT A R I M E RV IS 4 5 . 8 9 6 . 7% 1 . 0 2 . 0 % 0 . 6 1 . 3 % ITEM 3 – PROXY VOTES MCP 2021 AGM 29 To pass the following resolution as an ordinary resolution: “ To elect, as a director of the company, Ms. Alison cook, who retires by rotation as a director in accordance with the company's constitution and the ASX listing rules and offers herself for re - election” Relevant information about Ms. Cook is set out in the explanatory notes to the notice of annual general meeting AGENDA ITEM 4 – RE - ELECTION OF A DIRECTOR – MS. ALISON COOK MCP 2021 AGM 30 P ROXY VOT ES R E C EI VED ( MI LLIONS) I T EM 4 FO R FO R AG AI NST AG AI NST O P EN O P EN N O. % N O. % N O. % RE - ELECT A L I S ON C O OK 3 8 .1 8 0 . 3% 8 . 7 1 8 . 4% 0 . 6 1 . 3 % ITEM 4 – PROXY VOTES MCP 2021 AGM 31 AGENDA ITEM 5 – RE - ELECTION OF A DIRECTOR – MR. GEOFFREY PEARCE To pass the following resolution as an ordinary resolution : “ To elect, as a director of the company, Mr. Geoff Pearce, who retires by rotation as a director in accordance with the company's constitution and the ASX listing rules and offers himself for re - election” Relevant information about Mr. Pearce is set out in the explanatory notes to the notice of annual general meeting MCP 2021 AGM 32 P ROXY VOT ES R E C EI VED ( MI LLIONS) I T EM 5 FO R FO R AG AI NST AG AI NST O P EN O P EN N O. % N O. % N O. % RE - ELECT G O EF FREY P E A RCE 37.4 8 0 . 0% 8 . 6 1 8 . 4% 0 . 8 1 . 6 % ITEM 5 – PROXY VOTES MCP 2021 AGM 33 AGENDA ITEM 6 – A P P ROVAL O F I S S UE O F P E R FORMANCE R I G HT S TO T H E M A N AG ING D I RECTOR, M R. G R ANT P E C K , U N D ER T H E M C PHERSON'S L I MIT ED P E RFORMANC E R I G HTS P L AN To consider and, if thought fit, to pass the following resolution as an ordinary resolution : “ That for the purposes of part 2e.1 of the Corporations Act and ASX listing rule 10.14, and for all other purposes, the grant of performance rights and shares on exercise of such performance rights to Mr. Grant Peck, the managing director of the company, under the McPherson’s Limited performance rights plan and his employment agreement with the company, is approved on the terms set out in the explanatory notes to the notice of annual general meeting ” MCP 2021 AGM 34 P ROXY VOT ES R E C EI VED ( MI LLIONS) I T EM 6 FO R FO R AG AI NST AG AI NST O P EN O P EN N O. % N O. % N O. % A P P ROVAL O F P E RFORMANC E R I G HT S G R ANT P E C K 2 2 . 9 4 8 . 6% 2 3 . 7 5 0 .1 % 0 . 6 1 . 3 % ITEM 6 – PROXY VOTES MCP 2021 AGM 35 36 Q & A SESSION Natural Deodorant A ’ K I N THANK YOU MCP 2021 AGM 37
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