HGL is a dynamic product marketing and supply chain business of market leading brands in diversified specialist markets.

Transcription

1 CORPORATE PROFILE 2016

2 HGL Limited Corporate Profile 2016 CONTENTS HGL is a dynamic product marketing and supply chain business of market leading brands in diversified specialist markets Highlights 2 A Message from the Chairman and CEO 4 GPS Strategy Plan 5 Operational Priorities Must Win Battles 6 Corporate Structure 7 Business Unit Review 13 Corporate Information

3 HGL Limited Corporate Profile HIGHLIGHTS 5.0% Organic Growth $ 68.0 million Group Revenue* 15.0% Profit Growth $ 3.0 million Underlying Net Profit after Tax 66.7% Dividend Increase Nido Interiors New Operating Business Unit 7.9 cents Underlying Earnings per Share 45 exclusive brands Product Portfolio Brisbane, Christchurch and Auckland Additional Sales Offices 59% total workforce Staff employed in Sales & Marketing Functions * Group sales include 100% of Mountcastle sales

4 2 HGL Limited Corporate Profile 2016 A MESSAGE FROM THE CHAIRMAN AND CEO Peter G Miller Chairman Henrik Thorup Chief Executive Officer It has been another transformative year for HGL with the company continuing to advance towards our strategic plan objectives, delivering a second consecutive year of earnings growth. As an evolving company, we have worked hard over the last few years to harness our strengths in product marketing and supply chain management and are now better positioned as a dynamic business providing market leading brands into diversified specialist markets. The journey has involved the strategic repositioning and rebuild of operational foundations in our underperforming businesses, whilst further enhancing the capabilities of our higher performing businesses. Our talented management teams and employees continue to deliver encouraging results with the Group now heading into a new stage fully focussed on growth and capability development. We are pleased to report Group revenue growth of 5% to $68.0 million for the year. Underlying net profit was $3.0 million, up by 15% and we were delighted to declare fully franked dividends of 2.5 cents per share in relation to the 2016 financial year.

5 HGL Limited Corporate Profile Corporate Strategy and Operational Priorities All established business units are now positive contributors to Group earnings. Additionally, our newly established venture Nido Interiors was added to our portfolio. With the progress made, the Group has transitioned into Phase 2 of our Growth, Profit & Sustainability (GPS) Plan with operational activity plans designed to deliver against six operational priorities, or our Must Win Battles : Expand product portfolio In the past 12 months, 3 new brands were introduced contributing to revenue growth. Exclusive rights for four additional brands have already been secured and will be launched in late Superior sales execution Ongoing training and development programs are currently underway to increase the effectiveness of our field sales operations. We have increased the number of client facing positions with 59% of our staff now employed in sales and marketing roles. Our objective is to increase this ratio on a continuous basis. Develop intellectual property HGL s goal is to achieve a 50/50 split between agency and owned IP products sold by the Group, with ~30% of Group sales currently derived from owned IP products. Our new product development platform varies in each business unit according to its business model. Leutenegger, Nido Interiors, Biante, Mountcastle and SPOS Group have high concentrations of owned brands, whereas JSB Lighting and BLC Cosmetics predominantly promote exclusive agency brands in their product portfolio. Reduce operational complexity Throughout the year, several optimisation projects resulted in increased efficiency and reduced operating expenditure. Our Macquarie Park facility has provided further opportunities for integrated warehouse operations, and Biante s warehouse relocated from Perth to Macquarie Park in October The previously announced relocation and restructure of HGL s head office generated operational cost savings of $0.6 million in Integrate business technology Where possible, we incorporate business process redesign and implement uniform information technology and systems as part of our efforts for continuous improvement. Over the past twelve months Nido Interiors and Biante transferred to the Netsuite enterprise resource planning system, with Leutenegger to also transition. It is intended that four of our seven business units will operate on the Netsuite platform in Increase employee engagement Employee satisfaction and workplace welfare are important elements in delivering a sustained improvement in business unit performance. Employee net promoter scores are measured each year to develop staff retention strategies and talent development activities. Positively, we have seen improved engagement scores directly related to dedicated development programs rolled out this year. As we continue to work diligently towards achieving our Must Win Battles and make progress in Phase 2 of our GPS Plan, we anticipate the business units will deliver performance results that will position the Group for stronger, sustainable revenue growth to enhance future earnings. Outlook It has been another transformative year for HGL with the company continuing to advance towards our strategic plan objectives, delivering a second consecutive year of earnings growth. We remain confident that all the building blocks are in place for sustained revenue and earnings growth and continued improvement in shareholder returns. On behalf of the Company we would like to thank HGL s stakeholders including our shareholders, customers, employees and suppliers for their continued support over the past twelve months. Yours sincerely, Peter G Miller Chairman Henrik Thorup Chief Executive Officer

6 4 HGL Limited Corporate Profile 2016 GPS STRATEGY PLAN Portfolio Development Plan PHASE ONE REBUILD FOUNDATIONS PHASE TWO GROW AND DEVELOP PHASE THREE EXPAND & SUSTAIN Arrest Sales Decline Create Operational Efficiency Reduce Working Capital Levels Build Employee Capability Industry Platform Development Plan Expand Product Portfolio Superior Sales Execution Reduce Operational Complexity Develop Intellectual Property Integrate Business Technology Increase Employee Engagement Elevate Organic Growth Expand Selected Industries Make Strategic Acquisitions Sustain Performance Levels REBUILD FOUNDATIONS LEVERAGE INDUSTRY PLATFORM Assess Industry Outlook Divest Lower Prospect Businesses Develop Core Business Units Invest in Growth Industries Acquire Larger Businesses with Protected IP HGL Performance Objectives Revenues 10% Revenue growth of 10% CAGR 10% Underlying EBIT ratio moving from 5% to 10% p.a. 20% Return on Capital Employed (ROCE) of 20% p.a. PHASE ONE PHASE TWO PHASE THREE FY15 FY16 FY17 FY18 FY19 FY20

7 HGL Limited Corporate Profile OPERATIONAL PRIORITIES Operational Priorities Must Win Battles Performance Progress against targets EXPAND BRAND PORTFOLIO 10% revenue growth p.a. SUPERIOR SALES EXECUTION $600k sales per employee REDUCE OPERATIONAL COMPLEXITY 33% expense ratio DEVELOP INTELLECTUAL PROPERTY 50/50 Own-Agency mix INTEGRATE BUSINESS TECHNOLOGY 50% of business processes are automated INCREASE EMPLOYEE ENGAGEMENT +95% staff retention We continue to work diligently towards achieving our Must Win Battles and make progress in Phase 2 of our GPS Plan.

8 6 HGL Limited Corporate Profile 2016 CORPORATE STRUCTURE Corporate Structure Company Industry Ownership Biante Model Cars 100% BLC Cosmetics Health & Beauty 100% JBS Lighting Commercial Lighting 100% Leutenegger Contemporary Craft 100% Nido Interiors Homewares 100% SPOS Point of Sale 100% Mountcastle Apparel & Uniforms 50% We build superior brand value and develop long-term partnerships with our corporate clients and retail networks through our dedicated business units.

9 HGL Limited Corporate Profile BUSINESS UNIT REVIEW Biante Model Cars Products and Main Markets Based in Western Australia and run by a team of passionate car enthusiasts, Biante supplies model replica cars and accessories to motoring enthusiasts, supercar fans, classic car collectors and the general public, both online and via a network of 130 authorised dealers in Australia and New Zealand. Biante produces, imports and distributes scale model replica cars in diecast and resin. Reflecting the passion of its founders who established the company in 1992, Biante s genuine scale models are distinguishable from a toy, with each comprising on average, over 200 individual parts, separately painted then assembled, before an array of prints and decals are applied to reflect the livery of the racing car being replicated. Biante s exceptional quality is the result of an intensive research and development process, and this in combination with the exclusivity of its limited-edition releases ensures its dedicated fan base continues to grow. Biante enjoys an ongoing relationship with ambassadors and motorsport legends Allan Moffat OBE, Dick Johnson, Jim Richards, Larry Perkins and well-known industry expert, Aaron Noonan. Performance and Significant events Biante achieved a solid increase in revenue with the successful delivery of over 45,000 units according to its planned annual production schedule. A new exclusive partnership agreement has been signed with V8 Supercar team DJR Team Penske, allowing production of selected Ford models in special liveries used in races during the 2016 season. In October 2016, the Tekno Racing Team won the Bathurst 1000, meaning for the first time in many years, Biante will release a Bathurst winner in 2017, across 4 different scale sizes.

10 8 HGL Limited Corporate Profile 2016 BUSINESS UNIT REVIEW continued BLC Cosmetics Products and Main Markets Established over 25 years ago, BLC Cosmetics imports and distributes high quality beauty and skin care products across a comprehensive range of brands. It supplies skincare treatments, equipment, devices and nutritional supplements to beauty salons, spa and wellness centres, medical clinics and specialised retailers in Australia. The company s vision is to be the best salon and spa supplier in Australia. Its stable of core premium brands include: Thalgo, a premium marine based skincare brand and M-Ceutic, a cosmeceutical range, both renowned for their effective results; Alpha-H, an award-winning Australian cosmeceutical brand committed to generating real results of replenishment and rejuvenation for over 20 years; LightStim, supplier of professional devices utilising LED light energy to energise cells and stimulate the body s natural process to build new proteins and regenerate cells; Comfort Zone, an Italian brand targeting hydration and anti-ageing with its awardwinning organic range; and Kerstin Florian, producer of over 100 retail and professional products and over 25 treatments across a range of spa traditions and therapies. BLC Cosmetics range includes cosmetics and dedicated treatment brands offering mineral make-up, mesotheraphy, waxing, foot care and tanning. Performance and Significant Events BLC Cosmetics continues to optimise its brand portfolio and business model, recently securing the exclusive distribution rights to the Comfort Zone brand, which was launched in March In October 2016, BLC Cosmetics was pleased to welcome Nikki Somerset as new General Manager for the business. Nikki brings a wealth of retail and wholesale experience in the cosmetics and skincare industry and has previously held senior executive positions with Clarins in the UK and Jurlique in Australia.

11 HGL Limited Corporate Profile JSB Lighting Products and Main Markets JSB Lighting is a specialist supplier of indoor and outdoor commercial lighting solutions to the interior design and architectural lighting markets. Serving customers in Australia and New Zealand, JSB Lighting represents some of the world s most innovative and technically advanced lighting brands and has sales offices in Sydney, Melbourne, Brisbane, Adelaide, Perth, Auckland and Christchurch. With over 25 years in the Australian market, JSB has a significant presence and has delivered a wide range of projects with many of Australia s leading design practices, including for clients Amazon, Canon, CBA, Fitness First, NAB, Qantas Chairman s Lounge, Samsung, Stockland, Tiffany & Co, Vodafone, Westpac, Zurich and more. Performance and Significant events JSB Lighting continues to increase its market share in Australia and New Zealand with solid growth this year on the back of a record performance in The company continues to develop its product range, with the addition of new brand Lumio complementing its existing architectural lighting portfolio. To expand its New Zealand presence, additional sales executives have joined the business with new sales offices in Auckland and Christchurch established. The additional business development investment is expected to contribute positively to the continued expansion of JSB Lighting in

12 10 HGL Limited Corporate Profile 2016 BUSINESS UNIT REVIEW continued Leutenegger & Nido Interiors Products and Main Markets Leutenegger is a leading supplier of arts and crafts products in Australia and New Zealand. The business designs, manufactures and promotes a world-renowned portfolio of fabrics, needlecraft, contemporary craft and haberdashery brands, such as DMC, Zweigart, Windham, Camelot and its own Leutenegger brand and is sold to specialist craft stores and major retail chains. Nido Interiors designs and sells interior and exterior homewares and products from its One-Duck-Two brand and other private labels to major homewares, specialist and department stores and online retailers worldwide. Performance and Significant Events Leutenegger continues to secure new business development opportunities underpinning expected revenue growth in The company recently delivered a new design and merchandising solution for needlecraft products in Spotlight stores around the country. Furthermore, Leutenegger has obtained exclusive rights to the Florence Broadhurst craft fabric designs and other fabric ranges made by renowned Australian quilt designers. During its twelve-month start-up period, Nido interiors successfully launched its dedicated One-Duck-Two cushion and bedding collections by renowned interior designer Greg Natale across the Myer department store chain. Seasonal One- Duck-Two ranges were also launched across Harvey Norman and Domayne stores nationally and a dedicated private label project was secured with Aldi supermarket.

13 HGL Limited Corporate Profile SPOS Group Products and Main Markets SPOS Group is a retail marketing product business, which develops tailored retail display solutions for retailers and brands in Australia and New Zealand. Working across many channels, SPOS Group offers a range of point of purchase solutions and bespoke display concepts to help its customers achieve and exceed their marketing objectives whilst delivering outstanding shopper experiences. SPOS Group s own design company, icandy Creative, is one of the leading marketing agencies in Australia and New Zealand, and is recognised in the industry as a leader in design and execution. icandy Creative provides customised creative marketing displays and concepts for its retailer and brand owner client base. icandy Creative s offering includes the provision of customer experience advice, industrial and graphic design, strategic procurement and supply, production, project management, installation and delivery. In partnership with our clients, SPOS Group and icandy Creative have been involved in creating world-class retail design solutions for a broad range of clients, including Coles, Woolworths, Aldi, Foodstuffs, Skins, Red Bull, KitchenAid, Price Attack, Dyson, Nestle, Foxtel, Merial and Made to Match. Performance and Significant Events SPOS Group continues to execute its refocused business strategy, selling standard and custom product display solutions to brand owners and national retailers. SPOS Group won a number of display solution projects with Coles, Aldi and Seven-Eleven convenience stores in Australia. Its New Zealand subsidiary continues to expand its pipeline of work and is expected to contribute to incremental revenue growth in Julian Pidcock, previously the Chief Operating Officer of HGL, was appointed CEO of SPOS Group in February 2016 to lead the continuing execution of SPOS Group s new business strategy. by

14 12 HGL Limited Corporate Profile 2016 BUSINESS UNIT REVIEW continued Mountcastle (Joint Venture 50% owned by HGL) Products and Main Markets Mountcastle is a manufacturer and distributor of uniforms, headwear and bags to public and private schools, government, military, corporate clients and specialised retailers in Australia and overseas. The company is based in Brisbane and owns manufacturing facilities in Sri Lanka and Vietnam. Established in 1835, Mountcastle is a 50/50 joint venture between HGL and Mountcastle s management team and is Australia s oldest hat manufacturer. Performance and Significant Events Mountcastle continued its strong sales growth performance, increasing its market share in the private school uniform and bag market during the year. The partnership with The School Locker specialist retail chain for which Mountcastle is exclusive uniform supplier, contributed to a significant uplift in public school uniform sales. To meet the increased demand and sales volumes in both private and public school uniforms, Mountcastle expanded its manufacturing facility in Vietnam, increasing capacity in order to produce The School Locker partnership product range.

15 HGL Limited Corporate Profile CORPORATE INFORMATION ABN Directors Peter Miller Dr Frank Wolf Kevin Eley Julian Constable Cheryl Hayman Chief Executive Officer Henrik Thorup Company Secretary & Chief Financial Officer Iain Thompson Chief People Officer Robin Elliott Registered Office and Principle Place of Business Level 2, Waterloo Road Macquarie Park NSW 2113 Australia Phone: Fax: Share Register Computershare Investor Services Pty Ltd Level 4, 60 Carrington Street Sydney NSW 2000 Phone: Fax: HGL Limited shares are listed on the Australian Stock Exchange (ASX: HNG) Bankers ANZ Banking Group Limited Auditors Deloitte Touche Tomatsu

16 HGL Limited ASX CODE: HNG ABN Incorporated in Queensland Level 2, Waterloo Rd Macquarie Park NSW 2113 PO Box 1445 Macquarie Centre NSW 2113 P F E info@hgl.com.au W