Chair and Group CEO’s Presentation 2018 Annual Meeting

AnnualShareholders’
Meeting
The Warehouse Group Limited
23 November 2018

Board of Directors
Joan Withers
Chair
Keith Smith
Deputy Chair
Tony Balfour
Robbie Tindall
Julia Raue
John Journee
Will Easton
Vena Crawley
Future Director

Group Executives on stage
Jonathan Oram
Group CFO
Mark Yeoman
Group COO
Nick Grayston
Group CEO

Order of Business
1.Welcome and Chair’s AddressJoan Withers
2.Group CEO PresentationNick Grayston
3.Business of MeetingJoan Withers
•Election and Re-election of Directors
•Auditor Fees
•General Business
4.Q&AAll
5.Refreshments

Chair’s Address

Chair’s Introduction
FY18 Overview
•FY18 was a year of significant change for the Group.
We operationally integrated the Red and Blue Sheds, and Noel Leemingand T7 businesses together.
Created Centres of Excellence (COEs) for Marketing, Finance, Information Systems and People Support and moved to a
‘matrix management’ operating model which allows us to remove duplication and take advantage of our comparative size
and scale.
•We transitioned to ‘Every Day Low Price’ (EDLP) in The Warehouse.
•Launched an enterprise wide transformation partnering with an international advisory firm to fix our retail fundamentals.
Transformation update
•The transformation was officially kicked-off in November 2017 and started with an independent assessment by transformation
partners.
•Assembled team of 200+ team members to create detailed transformation plan through a ‘bottom up planning process’.
•Creation of 12 work streams and 250+ transformation initiatives.
•Areas of focus: store performance, merchandising, logistics, non-trade spend, central functions, capital management, information
systems, and most importantly, culture.

Chair’s Introduction
Share price
•The share price has remained stable compared to last year.
Integrated Reporting and our ‘social license to operate’
•This year we moved towards adopting Integrated Reporting. This means taking a more transparent and proactive approach to the
way we communicate, and how we create value for our customers, shareholders, and wider community stakeholders.
•Moving towards Integrated Reporting means telling our story in the context of our value creation through the lens of ‘six capitals’,
which are: Network capital, Intellectual capital, Human capital, Stakeholder capital, Environmental capital and Financial capital.
Board update
•Focus has been to ensure that the Board have the right mix of skills and experience to help drive the strategy of the Group.
•In October 2018 the Board appointed Will Easton as Non-Executive Director.
•Sir Stephen Tindall has extended his sabbatical from the Board for another 12 months. Robbie Tindall will continue to serve as Sir
Stephen’s Alternate Director.
•We farewell Vena Crawley our Future Director who joined as part of the Institute of Directors Future Directors Programme. We
will kick-off our search for our next candidate early next year.
•We recently completed a Board skills and diversity assessment. The results show we have good coverage of the skills required to
drive Group strategy over the next 3-5 years.
•We are focussed on increasing diversity of thought around the Board table to achieve best decision making and outcomes.

Chair’s Introduction
Management team
•We’re proud of the high calibre of local and international talent we have attracted over the last year.
•In FY18 we welcomed Jonathan Oram (Group Chief Financial Officer), Evelyn Ross (Chief People Officer), Jonathan Waecker (Chief
Marketing Officer), Scott Newton (Chief Transformation Officer), Chris Foord (Chief Logistics Officer), and Keryn McKenzie (Head
of Group Insights & Data Science).
Short Term Incentive (STI)
•We paid $20.1m in Short Term Incentives in FY18. Over 6,000 team members across the Group received incentive payments.
•The STI was purposely set up to ensure the right behaviours were being modelled, driven and rewarded at a critical time of
change in The Warehouse as we moved to EDLP, as well as during the transformation.
Other matters
•Audit Partner rotation at PwC.
•This year we established a new Health, Safety and Wellbeing Committee to ensure we take a true governance view of health,
safety and wellbeing. The Directors have taken a number of visits across stores and distribution centres.
The bottom line
•The financial performance is not where we want to be long term but we are pleased that it was above guidance and a 12%
increase in Net Profit After Tax from the previous year.

Chair’s Introduction
Dividend Policy
•FY18 Dividend Payment was 16 cents per share which reflects a total dividend pay-out of 94% of Group Adjusted NPAT and was
above our dividend policy.
•The decision to pay above dividend target ratio was intended to reflect the Board’s confidence in Group strategy, the trajectory
that we are on and the removal of the fiscal drag from the previous Financial Services business. It also recognised that the Short
Term Incentive payments distorted an underlying above-prior year profit result.
•After careful evaluation of our near-term capex investment requirements, improved operating cash flow, and on-going reduction
of long term debt, we will hold our Dividend Policy as-is at this stage.
•The total dividend for FY19 will be dependent on the ever-critical trading period in Q2 and other transformation deliverables
planned in FY19.

Group CEO Performance Overview

Transformation

Every Day Low Price

Noel LeemingTech Services and our “MASSIVE” retail campaign

We’re ON!
This year we launched our new
Group shared values.
Our purpose is helping Kiwis live
better every day
“We’re ON for each other,
ON for customers, ON for our
Shareholders, ON for our
communities and ultimately
ON for New Zealand”
Revitalised Values
Take the leadCreate the way
Be the
experience
Here for good
Helping Kiwis live better every day
Our shared purpose
Our shared values
14

Competitive Landscape
•Each year sees new and strong competitive challenges to our business.
•It is not just Amazon we need to be mindful of, other e-commerce players are also present in the New Zealand market. We
also see traditional competitors such as Kmart expanding retail footprint domestically, along with the arrival of the best
international apparel retailers such as Zara and H&M.
•We remain focussed on our customers and ensuring that we can deliver the right products at the right time and place that
best suit customer needs.
•We are focussed on improving our supply chain performance and ensuring our distribution and fulfilment capabilities are fit
for purpose.
•This year we made significant investment into our Warehouse Management System, which optimises the way we receive,
distribute and replenish inventory.

Our Strategy

FY18 Annual Result
Year ended 29 July 2018
•Group sales up 0.5% with Noel Leeming delivering a
strong result and The Warehouse transitioning well
under EDLP.
•Group Gross Profit up 2.0% influenced by Noel
Leeming’s performance and positive Gross Profit
Margin lift in The Warehouse under EDLP.
•Cost of Doing Business increased 4.1% reflecting
higher costs in Noel Leeming, Torpedo7 and The
Warehouse.
•Reported Continuing NPAT of $27.3m, down
significantly due to a number of one-off items
including restructuring costs, non-cash impairment of
goodwill and a gain on property disposals.
•Adjusted NPAT from continuing operations (excluding
Financial Services) was $59.0m, which is less than last
year but above guidance.
•NPAT Attributable to Shareholders increased 12.0%
from $20.4m to $22.9m.
$ million20182017Variance
Retail Sales2,994.6 2,980.8 0.5%
Retail Gross Profit991.2 971.9 2.0%
Gross Margin %33.1%32.6%50bps
Retail CODB899.7 864.1 4.1%
CODB %30.0%29.0%100bps
Retail Operating Profit91.4 107.8 (15.2)%
Operating Margin %3.1%3.6%(50)bps
Continuing NPAT (Reported)27.3 70.7 (61.4)%
Continuing NPAT (Adjusted)59.0 68.2 (13.4)%
NPAT (Attributable to Shareholders)22.9 20.4 12.0%
Operating Cash Flow107.9 128.1 (15.8)%
Ordinary Dividend (cents per share)16.0 cps 16.0 cps(0)cps
TotalDividend55.555.50.0%

Group H1 vs H2
FY18 was a period of significant internal change. The stability of Retail Sales and increase of Retail Gross Profit of
$468.7m from $452.9m during a challenging H2 is a very pleasing result in the context of internal changes made.
For the Year ended 29 July 2018
$ millionsH2H1
20182017Variance20182017Variance
Retail Sales1,396.5 1,406.9 (0.7)%1,598.1 1,573.9 1.5%
Retail Gross Profit468.7 452.9 3.5%522.5 519.0 0.7%
Gross Margin %33.6%32.2%140bps 32.7%33.0%(30)bps
Retail CODB435.7 415.0 5.0%464.1 449.1 3.3%
CODB %31.2%29.5%170bps 29.0%28.6%40bps
Retail Operating Profit33.0 37.9 (12.9)%58.4 69.9 (16.5)%
Operating Margin %2.4%2.7%(30)bps3.7%4.4%(70)bps
Continuing NPAT (Adjusted)21.3 23.2 (7.8)%37.7 45.0 (16.4)%

Red Sheds
•From a ‘front-of-house’ perspective, customers saw changes to our range, assortment and pricing under EDLP.
•We made range reductions and improved the overall quality of products.
•We are testing new store formats and are prioritising floor space to improve profitability and customer experience.
•Invested in specialist in-house design capability and direct sourcing capability to improve product quality and our speed to
market.
•In August 2018 we opened a new concept store in Albany. The store has moved from high-racking to having low fixtures
which are also 100% moveable, providing flexibility to test new store layouts.
•Growth of Click and Collect service across all stores in our network and lockers installed in two stores to improve customer
experience for online shoppers.
•Introduction of “Red Rack”, ‘off-price’ retailing of high-end fashion brands across 47 stores nationwide.
•Investment in Warehouse Management System to improve distribution, fulfilment and transport.
•Expanded our operations in India and officially opened a sourcing office in New Delhi in February 2018.

New Albany Concept Store

New Albany Concept Store

Red Rack

Homeware Campaigns

Blue Sheds
•We’re proud to remain number one in the ‘Back to School’ category.
•In Blue we are continuing our trial of Store within a Store to optimise footprint.
•We learnt a lot during the internal systems integration of Blue and Red to take into further store roll outs.
No 1. in the
Back to
School
category
Optimise
store
footprint
Internal
Systems
Integration
Complete

Blue Sheds

Noel Leeming
•Noel Leeminghad a stand out year and continues to benefit from advantages of scale in volume and store footprint.
•Revenue growth of 8.6% in FY18 achieved through expertise offered through the assisted sales model by passionate tech
experts.
61.8%
operating profit
Growth of
Tech Solutions
B2B Expansion

T7
•Unfortunately it wasn’t a great year for T7.
•We believe T7 has potential to thrive in a market like NZ where the brand has a deep affinity with the Kiwi psyche of
adventure and ‘the great outdoors’.
•We have streamlined the business with the disposal of Shotgun and integration of Number 1 Fitness.
•We will continue to make targeted investments to drive the scale the business needs.
Drive scale
& increase
store
footprint
Deep brand
affinity with
Kiwis
Streamline
the
business

T7 Campaigns

T7 Bike hire

Online Performance
Sales
6.6% YOY
Improved CX, UX
& site
performance
‘Mobile first’
approach
Personalisation
Top rated app
4.7 iTunes
275%
Revenue on app

Senior Executive Team
Evelyn Ross
Jonathan
Waecker
Chief People
Officer
Chief Marketing Officer
Pejman
Okhovat
Chief Operating Officer
CEO
The Warehouse
& Warehouse Stationery
Tim
Edwards
CEO
Noel Leeming
& T7
Nick
Grayston
Scott
Newton
Chief Transformation
Officer
Group CEO
Jonathan
Oram
Chief Financial
Officer

Business of Meeting

Resolution 1 –Election of William Easton
•Independent Non-Executive Director
•First appointed 3 October 2018
•Managing Director of Facebook Australia & New Zealand
•Proxy voting in respect of this resolution is:
A total of 189,085,446 proxy votes received, 187,526,698 votes for, 86,544
votes against, votes undirected 1,396,372 and 75,832 votes abstain giving a
result of 99.2% votes cast in favour of the resolution.
Will Easton

Resolution 2 –Re-election of Antony (Tony) Balfour
•Independent Non-Executive Director
•First appointed 15 October 2012
•Chair of People and Remuneration Committee, Member of Health,
Safety & Wellbeing Committee, Corporate Governance and
Nominations Committee.
•Proxy voting in respect of this resolution is:
A total of 189,085,446 proxy votes received, 187,409,227 votes for,
132,339 votes against, votes undirected 1,486,971 and 56,909 votes
abstain giving a result of 99.1% votes cast in favour of the resolution.
Tony Balfour

Resolution 3 –Re-election of John Journee
•Independent Non-Executive Director
•First appointed 17 October 2013
•Member of Audit and Risk Committee, Member of Health, Safety and
Wellbeing Committee.
•Proxy voting in respect of this resolution is:
•A total of 189,085,446 proxy votes received, 187,366,644 votes for,
173,751 votes against, votes undirected 1,461,153 and 83,898 votes
abstain giving a result of 99.1% votes cast in favour of the resolution.
John Journee

•That the Directors are authorised to fix the fees and expenses of PricewaterhouseCoopers as auditors for the ensuing
year.
•Proxy voting in respect of this resolution is:
A total of 189,085,446 proxy votes received, 187,334,832 votes for, 104,433 against, votes undirected 1,557,218 and
88,963 votes abstain giving a result of 99.1% votes cast in favour of the resolution.
Resolution 4 –Auditor Fees

Voting Procedure
To cast your vote please tick one box either for, against or abstain alongside each resolution on the voting paper.
Undirected Votes held by Directors
•William Easton 624,337
•Anthony (Tony) Balfour 712,936
•John Journee 687,118
•Audit Fees 785,896

General Business

Q&A

Thank you