The PAS Group Limited - FY2019 Results Briefing

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The PAS Group Limited - FY2019 Results Briefing
29 August 2019

The PAS Group Limited – FY2019 Results Briefing
                                     ABN 25 169 477 463
The PAS Group Limited - FY2019 Results Briefing
FY2019 Results Summary

                                       Financial Summary

• Total sales up by 9.2% to $272.6 million.

• Wholesale sales increased by 29.7% to $148.6 million driven by our
  Designworks business which was up 46% year on year with net sales of
  $118.5 million as the business delivered on new contracts won in FY2018
  in fashion apparel, sports equipment, footwear and accessories.
                                                                                                                  • Net Loss after Tax from the continuing business of $1.6 million was
• Online sales grew 5.7% on top of the 17.2% growth achieved in FY2018                                              an improvement of 35.8% on the prior year.
  with Loyalty membership up 37% year on year to 1.3 million members.
                                                                                                                  • The Company is taking active steps to divest the White Runway
• Retail sales reduced by 8.2% to $124 million driven by the closure of 25                                          business. The results of this business have been disclosed as part of
  marginal or unprofitable stores in line with plan and a decline in like-for-                                      discontinued operations. The Net Loss after Tax for the total
  like Retail sales of 4.1% due to the continuation of challenging trading                                          business, including White Runway, was $1.8 million.
  conditions which included reduced concession sales in Department                                                • The Group closed the year debt free with a cash surplus of $0.3m.
  Stores.

• Gross profit margin of 49.2% reflected the 9% change in mix with lower-
  margin Designworks wholesale sales making up a larger proportion of                                                                                 FY2019                FY2018
  overall sales compared to FY2018.
                                                                                                                       Total Sales Revenue           $272.6 million       $249.6 million
• A CODB decrease of 4.2% of sales due to tight cost control, economies of
  scale achieved through the expansion of Designworks and the planned
  retail portfolio rationalisation.                                                                                    Underlying EBITDA1            $8.6 million         $11.7 million

• Underlying EBITDA1 from continuing business of $8.6 million was in line                                              NPAT – Continuing             ($1.6 million)       ($2.5 million)
  with guidance and was net of $1.8 million in normalisations, including
  $0.9m relating to strategic action costs.
                                                                                                                       NPAT – Total                  ($1.8 million)       ($2.9 million)
  1 Underlying EBITDA is a non-IFRS unaudited measure defined for the purpose of this document as earnings
  before interest, tax, depreciation, amortisation, non-recurring income/expenditure and certain non-cash items
  such as share based payment expenses recognised in accordance with AASB 2 Share-based payment.
                                                                                                                                                                                            1.
The PAS Group Limited - FY2019 Results Briefing
FY2019 Results Summary

                         Operational Summary

• Whilst the success of the Designworks wholesale business in growing
  sales by 46% resulted in increased working capital usage, this was offset
  by the positive effects of exiting the Black Pepper Independent Wholesale
  market in H1 FY2019. The net benefit was a $1.4m or 3.9% decrease in
  the Group’s total working capital year on year.

• The implementation of our new Customer Data Platform was successfully
  completed in the first half and has helped deliver annual membership
  growth of 37% in our loyalty program, which now totals 1.3 million
  members contributing 78% of total Retail sales.

• The Group continued its strategic retail portfolio rationalisation which
  culminated in the closure of 25 marginal or unprofitable bricks and
  mortar stores, in line with the Company’s strategy to close stores where
  returns were sub-optimal or landlord rental expectations uneconomic.

• We have tempered our new store roll-out program in line with our
  strategy, we have continued to open new stores in strategically targeted
  locations, with 5 new stores opening during the period.

• Implementation of an international swimwear infrastructure to facilitate
  international sales growth.

                                                                              2.
The PAS Group Limited - FY2019 Results Briefing
Wholesale, Design & Distribution

FY2019 Wholesale Sales up $34.0m (29.7%) to $148.6 million                                Wholesale Sales by Division – FY2018 v FY2019

Designworks
• Designworks delivered record sales of $118.5 million which was up 46%                           21%                                              16%
                                                                                                                                                    4%
  year on year as the business delivered on new contracts won in FY2018                            8%
  in fashion apparel, sports equipment, footwear and accessories
  including:                                                                                                                                       80%
                                                                                                   71%
   Successful execution and delivery of the new Coles Women’s Mix range;
   A full year of Lonsdale in Target;
   The launch of our Suburban and Zoo York brands in Target, which                              FY2018                                           FY2019
    performed ahead of expectations;
   Continued growth in Sports Equipment following new licence                                    Designworks             Black Pepper              Other
    agreements with Dunlop and The Australian Open;
   Continued growth in Footwear, including the successful launch of                         Designworks Product Mix – FY2018 v FY2019
    Lonsdale footwear in Target; and
   The successful relaunch of Russell Athletic in Australia which has                          FY2018                                            FY2019
    performed ahead of expectations.                                                                                                                           Private
                                                                                                                Private Label,
                                                                                                                     13%                                     Label, 20%
                                                                                                                                 Sports,
Other Wholesale                                                             Sports, 44%                                           36%
• The strategic closure of Independent Wholesale and transition to Retail
  within Black Pepper was executed with final wholesale orders delivered
  in H1 and the ongoing benefits of the transition to be realised from
  FY2020.
• The Group has invested in infrastructure to support the international
  growth of JETS however the international take-up of JETS continues at a                                             Licensed
                                                                                                                                                             Licensed -
  slower rate than anticipated.                                                                                                                              Apparel &
                                                                                                                     Apparel &
                                                                                 Owned                                                                      Accessories,
                                                                                                                    Accessories,       Owned
                                                                                 Brand, 2%                                                                      39%
                                                                                                                         41%          Brand, 5%

                                                                                                                                                                      3.
The PAS Group Limited - FY2019 Results Briefing
Sales by Customer

           Sales by Customer / Channel – FY2018                              Sales by Customer / Channel – FY2019

                               Big W                                                            Myer -
                                                                                 International
                    Myer -     2.7%    Rebel                                                   Wholesale
                                                                                     2.4%                  Big W
                   Wholesale           2.2%                                      Rebel          2.3%
                                                                                                           1.0%
                    2.8%                                                          2.6%
   International
       3.2%                                                     David Jones
David Jones                                                        3.4%
   4.0%
                                                  Own Retail       Coles                                                   Own Retail
                                                   Stores          7.0%                                                     Stores
  Target
                                                   42.4%                                                                    36.4%
   6.6%                                                          Myer -
                                                               Concessions
                                                                  8.3%

  Myer -
Concessions
   9.9%                                                          Independent
                                                                  Wholesale
                                                                    10.1%
    Independent
     Wholesale                                                                                                     Kmart
                                                                               Target
       10.5%                                                                                                       13.6%
                                          Kmart                                12.8%
                                          15.7%

 • Strong growth and expansion of the Designworks wholesale business resulting in lower % contribution
   from own stores
 • FY2019 included a new wholesale sales stream through the delivery of the Coles Women’s mix range
 • Significant growth in Target through Lonsdale, Suburban and Zoo York
 • Sales to Independent Wholesale customers are expected to reduce due to Black Pepper’s planned
   strategic exit from this market in FY2019

                                                                                                                                  4.
The PAS Group Limited - FY2019 Results Briefing
Retail Segment

                               Summary                                                FY2018 to FY2019 Retail Sales Bridge ($ million)

• Retail sales reduced by 8.2% to $124.0m
• Movement was as a result of:                                                135.0             (5.4)                             1.6
                                                                                                                  1.4                         (8.7)
   o   Continued consolidation within the store portfolio with 5 new                                                                                        124.0
       stores opened during the financial year, offset by the closure of
       25 marginal or loss making stores;
   o   Negative LFL sales particularly in Myer concessions;
   o   Online sales growth of 5.7% in addition to the 17.2% growth
       achieved in FY2018;
                                                                           FY2018 Sales   LFL Growth           New Stores     Annualised   Closed Stores FY2019 Sales
   o   The annualised impact of new stores and closed stores in FY2018                                                          Stores

                               Retail Sites                                                             Total Retail Sites by Brand

• 5 new Retail sites opened in FY2019:                                                                  FY2018              Opened         Closed         FY2018
   o   Black Pepper; 1 store
                                                                             Black Pepper                 136                 1             (13)            124
   o   Review; 2 stores, 1 concession
   o   JETS; 1 store                                                            Review                    116                 3             (10)            109

• The Group’s retail brands currently operate within 69 department         New Businesses &
                                                                                                           4                  1              (2)             3
  store concessions representing 29% of the retail bricks and mortar            Other
  portfolio.
                                                                           Total Retail Sites             256                 5             (25)            236

                                                                                                                                                                        5.
The PAS Group Limited - FY2019 Results Briefing
Operational Highlights - Online & Customer Loyalty 1

• Online sales continued its positive trend now representing 14.5% of the Group’s                                               Online and Loyalty Growth 1
  total retail sales in FY2019, up from 12.6% in FY2018.                                                                            (FY2014 – FY2019)

• Total online sales growth of 5.7% was achieved in addition to the 17.2% in FY2018.
• Online revenue from email campaigns has increased by 45% using our new                                                                                              14.5%
                                                                                                                                                              12.6%
  Customer Data Platform providing highly personalised communication.
                                                                                                                                                   10.6%
• A new Russell Athletic E-Commerce site was launched in H2 FY2019.
                                                                                                                                           7.6%
• The Group continued to evolve predictive content by turning on AI-powered
                                                                                                                                  4.5%
  product recommendation and Visual Search.
                                                                                                                         2.6%
• New features and benefits are being introduced across all loyalty programs with
  the goal of growing top customer participation and encouraging new customer
  engagement.                                                                                                                             Online % of sales
                                                                                                                         FY14      FY15     FY16    FY17      FY18     FY19
• A new Black Pepper Loyalty program and the implementation of our new
  Customer Data Platform were launched during the year assisting to drive Group
  Loyalty membership up to 1.3 million members – an increase of 37% since June
                                                                                                                                                                      1,290
  2018.
• Our VIP Dress Circle membership for top tier loyalty members in Review has grown                                                                            943
  by 73% since launch and drove $4.8m in sales.
                                                                                                                                                     754
• The Review Loyalty App was upgraded in H1 FY2019 and has since grown this
                                                                                                                                            534
  revenue channel by 51% versus FY2018.
                                                                                                                                   342

                                                                                                                         108

                                                                                                                                     Loyalty ('000 members)
1 Information concerning Online and Customer Loyalty including prior period data has been amended to remove the impact
of White Runway which has been classified as a Discontinued Operation.                                                   FY14     FY15     FY16     FY17      FY18     FY19

                                                                                                                                                                              6.
The PAS Group Limited - FY2019 Results Briefing
Gross Margin and Exchange Rates

• Gross margin has continued to be well managed through foreign
  currency cycles.
• Reduction in GP % predominately due to the 9% increase in the
  total Wholesale vs Retail mix for FY2019.
• Despite the material depreciation in the $AUD over the past two
  years the Group has maintained a relatively consistent AUD/USD
  hedge rate to prior year.
• Forward US dollar currency requirements for retail businesses
  covered beyond H1 FY2020.

                   Exchange Rate and Margin

                                                                    100.0%
   $0.88                                                            90.0%

                 $0.75                     $0.76        $0.74
                                                                    80.0%
                              $0.73
                                                                    70.0%
   55.2%        54.9%        55.9%        55.7%                     60.0%
                                                        49.2%
                                                                    50.0%

                                                                    40.0%
   FY2015       FY2016       FY2017       FY2018        FY2019

                           AUD $       Gross Margin %

                                                                                7.
The PAS Group Limited - FY2019 Results Briefing
Growth Plan

                                  •   Realisation of new contract wins including the Coles Mix program, Lonsdale and Russell Athletic
                                  •   Launch of the Designworks Underwear and Accessories division
1   Product and Brand Extension
                                  •   Continued growth and expansion in Designworks Sports & Footwear divisions
                                  •   Sales from direct to consumer websites Everlast, Russell Athletic and B.O.D by Rachael Finch

                                  • Online continues to be a major growth vehicle for the business in both new and existing markets
2   Online Growth                 • New online expansion through third party online retailers
                                  • The enhanced focus on the single customer view across omnichannel driven by our newly implemented
                                    customer data analytics tool

                                  • Continued growth in international online markets
3   International Growth          • JETS international growth through Wholesale and Online
                                  • Growth of Designworks brands in New Zealand

                                  • Continued focus on mobile loyalty and segmented targeted communications utilising data analytics
4   Loyalty                       • Capitalising on the recent launch of the Android Review App continuing to increase active users,
                                    engagement and conversion

5   Licensing Opportunities       • Ongoing pipeline of exciting new license opportunities for Designworks

6   Acquisitions                  • Continuing to evaluate a broad range of value enhancing and transformational opportunities

                                                                                                                                        8.
The PAS Group Limited - FY2019 Results Briefing
Strategy and Outlook

Strategy and outlook:
Over the first eight weeks of FY20 the Group generated like for like retail sales growth of 1.4%.

The Group remains focussed on executing its strategic and operating priorities for its wholesale, online and
retail channels in both existing and new markets.

Key areas of focus include:

• Consolidation and growth in Designworks by continuing to execute and deliver new and existing brands and
  capitalising on the recently established Footwear, Underwear and Accessories division to enable significant
  multi-branded growth opportunities.

• Continued execution of both our digital and loyalty strategies to drive strong omnichannel sales growth.

• Further rationalisation of the Group’s bricks and mortar store network whilst continuing to invest in its
  digital presence to deliver a best in class holistic customer experience.

• Continuing to pursue international growth for JETS.

• Executing on the strategic exit of the Black Pepper independent wholesale market by maximising retail
  omnichannel opportunities.

• Heightening our focus with our key concession partner Myer to address the declining performance of our
  Review concession business by entering into an exclusivity agreement.

• Maintaining a tight focus on cost control and working capital management.

• Transition to CEO role ongoing with Paul Burdekin assuming more responsibilities

• New strategic hires including General Managers in JETS and Review in second half

As previously disclosed, Houlihan Lokey has been assisting PAS with its ongoing review of a range of strategic
opportunities to transform the business and position it for future growth. This process remains ongoing and
PAS will keep the market informed as appropriate.

                                                                                                                 9.
FY2019 Financials
Sales by Brand and Segment

A$ millions                        FY2019       FY2018     Var      • Review sales were negatively impacted by the
                                                                      challenging market conditions, reduced concession sales
RETAIL                                                                in department stores and the closure of 10 marginal or
                                                                      unprofitable stores.
Review                              66.1         72.5     (8.8%)
                                                                    • Black Pepper was also impacted by the closure of 13
                                                                      marginal or unprofitable stores and continues to be
Black Pepper                        53.2         58.0     (8.3%)
                                                                      challenged with aggressive discounting by competitors in
Other Businesses                    4.7          4.5       4.4%       the current environment. Gross profit % continues to be
                                                                      strong and reflects the executed shift from Wholesale to
Total Retail Sales                 124.0        135.0     (8.2%)      Retail.
                                                                    • Designworks achieved strong sales and margin growth as
WHOLESALE
                                                                      the business delivered on new contracts won in FY2018
Designworks                        118.5         81.5     45.4%       in fashion apparel, sports equipment, footwear and
                                                                      accessories. This resulted in a 9% increase in the total
Black Pepper                        5.4          9.4      (42.6%)     Wholesale vs Retail mix compared to FY2018.

Other Businesses                    24.7         23.7      4.2%

Wholesale Sales                    148.6        114.6     29.7%

Total Sales                        272.6        249.6      9.2%

Retail Sales % of Total Sales      45.5%        54.1%

Wholesale Sales % of Total Sales   54.5%        45.9%

Retail Sales Growth (%)            (8.1%)       (1.6%)

Wholesale Sales Growth (%)         29.7%        (2.3%)

                                                                                                                                 11.
Income Statement

A$ millions                                         FY2019               FY2018                Var
                                                                                                        • Sales increase driven by a 29.7% increase in wholesale sales, with the
Revenue from Sales                                   272.6                249.6               +9.2%       Designworks division up 46%.
 Gross Profit                                        134.2                137.8                         • Gross profit margin of 49.4% is reflective of the 9% increase in the
                                                                                                          Group’s wholesale vs retail customer mix.
 Gross Profit Margin (%)                             49.2%                55.2%
                                                                                                        • CODB decrease of 4.2% of sales due to tight cost control, economies of
 Cost of Doing Business (CODB)                      (125.6)              (126.1)                          scale achieved through the Designworks expansion and strategic
                                                                                                          portfolio rationalisation.
 CODB (%)                                            46.1%                50.5%
                                                                                                        • A reconciliation of underlying adjustments is detailed on page 13.
 Underlying EBITDA                                     8.6                 11.7               (26.9%)   • The Company is taking active steps to divest the White Runway
 Underlying adjustments                               (2.2)                (0.4)
                                                                                                          business. The Net Loss after Tax for the total business, including White
                                                                                                          Runway, was $1.8 million.
 EBITDA - Continuing                                   6.4                 11.3               (43.4%)

 Depreciation & Amortisation                          (7.3)                (7.4)

 Non-cash Impairment                                  (1.0)                (5.1)

 EBIT                                                 (1.9)                (1.2)              (57.8%)

 Net Finance Costs                                    (0.9)                (0.6)

 NPBT                                                 (2.8)                (1.8)              (57.1%)

 Tax Credit/(Expense)                                  1.2                 (0.7)

 NPAT – Continuing Business                           (1.6)                (2.5)              +35.8%

 NPAT – Discontinuing Business                        (0.2)                (0.4)

 NPAT – Reported                                      (1.8)                (2.9)              +39.1%
(i) See Continuing Business to Total Business Income Statement reconciliation at Appendix A

                                                                                                                                                                                     12.
Earnings Reconciliation

A$ millions                                     FY2019   FY2018    Var

Underlying EBITDA1                               8.6      11.7    (26.9%)

Depreciation & Amortisation                      (7.3)    (7.4)

Non-cash Impairment                              (1.0)    (5.1)

Underlying EBIT                                  0.3      (0.8)    n.m.

Finance Costs                                    (0.9)    (0.6)

Underlying NPBT                                  (0.6)    (1.4)   +57.1%

Underlying Adjustments                           (2.2)    (0.4)
 - Non-cash share-based payments                 (0.4)    (0.4)
 - Non-cash release of deferred consideration     0.8      2.0
 - Redundancy/termination payments               (0.2)    (0.6)
 - Corporate costs2                              (0.9)    (1.4)
 - CEO transition costs                          (0.6)     0.0
 - Designworks3                                  (0.9)     0.0

                                                                            1 Underlying EBITDA is a non-IFRS unaudited measure defined for the purpose of this document as
NPBT                                             (2.8)    (1.8)   (57.1%)   earnings before interest, tax, depreciation, amortisation, non-recurring income/expenditure and
                                                                            certain non-cash items such as impairment and share based payment expenses recognised in
                                                                            accordance with AASB 2 Share-based payment.
Tax Benefit/(Expense)                            1.2      (0.7)
                                                                            2 Corporate costs includes takeover defence costs (FY2018) and other strategic action costs of a
                                                                            non-recurring nature including strategic consulting and legal costs.
NPAT – Continuing Business                       (1.6)    (2.5)   +35.8%
                                                                            3 Designworks includes the financial impact of the collapse of a major supplier and a one-off
NPAT – Discontinuing Business                    (0.2)    (0.4)             payment associated with historical licences relating to the financial period FY14-FY18.

NPAT – Reported                                  (1.8)    (2.9)   +39.1%

                                                                                                                                                                               13.
Balance Sheet

A$ millions                               30 June 2019   30 June 2018   • Cash surplus of $0.3m and no debt.

Cash and Cash Equivalents                     0.3             -         • Prudent working capital management. Trade Debtors decreased whilst
                                                                          inventory remained consistent with prior year despite the challenging
Trade and Other Receivables                   18.0           19.3         retail sector and a significant increase in the wholesale portfolio. Trade
                                                                          and Other Payables was consistent with prior year and impacted by
Inventory                                     36.4           36.0
                                                                          timing of orders.
Property, Plant and Equipment                 9.4            12.7       • PP&E decrease was consistent with the maturity profile of stores and
                                                                          tempered rate of new store roll-outs.
Deferred Tax Assets                           8.2            6.4
                                                                        • White Runway was classified as held for sale at 30 June 2019.
Goodwill & Other Intangible Assets            83.7           84.0

Other Assets                                  6.4            7.0

Assets Classified as Held for Sale            1.1             -

Total Assets                                 163.5          165.4

Overdraft                                      -             0.7

Trade and Other Payables                      20.7           20.0

Deferred Tax Liabilities                      8.1            7.9

Other Liabilities                             13.8           14.5

Liabilities Classified as Held for Sale       0.8             -

Total Liabilities                             43.4           43.1

Net Assets                                   120.1          122.3
                                                                                                                                                       14.
Cash Flow Statement

   Statutory ($ millions)                                                   FY2019               FY2018
                                                                                                          • Positive net cash flow from operations with reduction in cash profit
   Net profit after tax     (i)                                               (1.8)              (2.9)      partially offset by strong working capital management.

   Non-cash Adjustments                                                        6.8                12.5    • Capital Expenditure in FY2019 represents targeted investment in
                                                                                                            new stores and refurbishments and the ongoing development of
   Cash profit                                                                 5.0                9.6       our online and loyalty infrastructure.
   Movement in Working Capital                                                 1.6               (0.5)    • Financing activities reflect $1.4m FY2018 tax refund partially offset
                                                                                                            by FY2019 instalments.
      Movement in Trade & Other Receivables                                    1.3                1.4
                                                                                                          • No dividend was declared or paid in FY19.
      Movement in Inventories                                                 (0.4)              (2.9)

      Movement in Trade & Other Payables                                       0.7                1.0

   Movement in provisions and prepayments                                     (2.4)              (2.7)

   Net cash flow from operations                                               4.2                6.4

   Payments for Businesses                                                       -               (0.1)

   Capital Expenditure                                                        (2.9)              (6.0)

   Net cash flow before financing activities and tax                           1.3                0.3

   Income Tax Receipts/(Payments)                                              0.6               (1.3)

   Net Interest                                                               (0.9)              (0.6)

   Dividends Paid                                                                -               (4.1)

   Net Cash Flow                                                               1.0               (5.7)

(i) NPAT includes aggregate impact of White Runway discontinued business. Refer to Appendix A.

                                                                                                                                                                                    15.
Appendices
Appendix A: Continuing to Total Business Reconciliation

The Group has announced its intention to dispose of the White Runway business and has begun marketing the business for
sale and actively engaged in discussions with potential buyers.
On this basis, the White Runway business met the criteria to be classified as a discontinued operation for the full year
ended 30 June 2019. Accordingly, the results of the discontinued operation are presented separately in the consolidated
statement of profit and loss and other comprehensive income for the comparative period 30 June 2018 in accordance with
Accounting Standards.
All prior year comparatives throughout the financial statements and notes are representative of the continuing business
only.
Whilst PAS believes that presenting continuing business profit provides a better understanding of its financial performance,
for transparency, a reconciliation between the continuing business and the total business is provided below.

                                         FY2019           FY2019          FY2019           FY2019          FY2018              FY2018   FY2018   FY2018
    ($’millions)
                                        Revenue           EBITDA           EBIT             NPAT          Revenue              EBITDA    EBIT     NPAT

    Continuing Business                   272.6             6.4            (1.8)            (1.6)           249.6               11.3    (1.2)    (2.5)

    Financial Impact:
    White Runway Discontinued               4.2            (0.2)           (0.3)            (0.2)             4.1               (0.1)   (0.6)    (0.4)
    Operation

    Total Business                        276.8             6.2            (2.1)            (1.8)           253.7               11.2    (1.8)    (2.9)

                                                                                                                                                          17.
Appendix B : Impacts of New Lease Accounting Standard

                              Adoption of AASB 16 Leases                                                                      Estimated Balance Sheet Impact as at 1 July 2019

• The Group will mandatorily adopt the new lease accounting standard
  AASB 16 Leases from 1 July 2019.                                                                                        Balance Sheet Item                        Impact                           Range

• Whilst adopting the new standard has no economic impact on the
  Group, no impact on how the business is run and no impact on actual                                                     Right of Use Asset                        Increase               $24.0 – $28.0 million
  cash flows for the Group adoption will result in the majority of (but not
  all) premises costs being reclassified as depreciation and interest                                                     Lease Liabilities                         Increase               $30.0 – $34.0 million
  expenses, thus artificially increasing the traditional measure of
  Underlying EBITDA1.                                                                                                     Lease Incentives                          Decrease               $4.0 – 5.0 million
• The Group has historically adopted Underlying EBITDA as a market
  guidance measure on the basis that the Directors believe it provides                                                    Deferred Tax Asset                        Increase               $0.4 – $0.6 million
  the most meaningful measure of the Company’s performance. As
  detailed in the notes accompanying the 30 June 2019 Financial                                                           Retained Earnings                         Decrease               $1.0 – $1.5 million
  Statements, the mandatory first-time adoption of AASB 16 Leases will
  have a material impact on the way the Group reports its results from
  FY2020 forward.                                                                                                 Notes on Estimated Impacts:
• The Group will begin presenting its results in compliance with the                                              • The Group will adopt the Modified Retrospective Approach upon
  requirements of the new standard in FY2020 and remains committed                                                  transition (comparative periods will not be restated).
  to providing transparency when reporting its results by reporting on                                            • Estimated pro forma financial impacts may differ to the estimates
  the most meaningful measure of the Company’s performance to the                                                   above due to changes in the lease portfolio (including actualised
  market.                                                                                                           rates of CPI, market valuations and potential renegotiations) and
                                                                                                                    changes in areas of judgement (including expectations concerning
                                                                                                                    the exercising of options and the cost of borrowing).

1 Underlying EBITDA is a non-IFRS unaudited measure defined for the purpose of this document as earnings before interest, tax, depreciation, amortisation, non-recurring income/expenditure and certain non-cash items
such as share based payment expenses recognised in accordance with AASB 2 Share-based payment.

                                                                                                                                                                                                                         18.
Disclaimer

Forward looking statements: This presentation contains certain            statements or the assumptions on which the forward looking
forward looking statements, including with respect to the financial       statements are based. PGR does not accept responsibility or liability
condition, results of operations and businesses of The PAS Group          arising in any way for errors in, omissions from, or information
Limited (‘PGR’) and certain plans and objectives of the management        contained in this presentation.
of PGR. Forward looking statements can generally be identified by
the use of words including but not limited to “project”, “foresee”,       PGR disclaims any obligation or undertaking to release any updates
“objectives”, “plan”, “aim”, “intend”, “anticipate”, “believe”,           or revisions to the information to reflect any new information or
“estimate”, “may”, “should”, “will”, “forecast” or similar expressions.   change in expectations or assumptions after the date of this
Indications of plans, strategies and objectives of management, sales      presentation, except as may be required under securities law.
and financial performance are also forward looking statements.
                                                                          Disclaimer and third party information: To the fullest extent
All such forward looking statements involve known and unknown             permitted by law, no representation or warranty (express or implied)
risks, significant uncertainties, assumptions, contingencies and other    is or will be made by any legal or natural person in relation to the
factors, many of which are outside the control of PGR, which may          accuracy or completeness of all or part of this document, or any
cause the actual results or performance of PGR to be materially           constituent or associated presentation, information or material
different from any future results or performance expressed or             (collectively, the Information). The Information may include
implied by such forward looking statements. Such forward looking          information derived from public or third party sources that has not
statements apply only as of the date of this presentation.                been independently verified.

Factors that cause actual results or performance to differ materially     Investment decisions: Nothing contained in the Information
include without limitation the following: risks and uncertainties with    constitutes investment, legal, tax or other advice. The Information
the Australian, New Zealand and global economic environment and           does not take into account the investment objectives, financial
capital market conditions, the cyclical nature of the retail industry,    situation or particular needs of any investor, potential investor or
the level of activity in Australian and New Zealand retail industries,    any other person. You should take independent professional advice
fluctuation in foreign currency exchange and interest rates,              before making any investment decision.
competition, PGR’s relationships with, and the financial condition of,
                                                                          All statutory numbers referred to in this presentation have been
its suppliers and customers, legislative changes or other changes in
                                                                          audited.
the laws which affect PGR’s business, including consumer law, and
operational risks. The foregoing list of important factors and risks is   Any adjustments made between statutory and pro forma results are
not exhaustive.                                                           made in accordance with ASIC Guidance Statement RG230.

No representation or warranty (express or implied) is given or made
by any person (including PGR) in relation to the accuracy, likelihood
or achievement or reasonableness of any forward looking

                                                                                                                                                  19.
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