OrotonGroup : 22/09/2016 - FY16 Results Announcement

2016 FULL YEAR RESULTS ANNOUNCEMENT

22 September 2016

STRONG NET PROFIT AND DIVIDEND GROWTH AS GROUP BUILDS STABLE PLATFORM FOR FUTURE

The Board of OrotonGroup Ltd (the Company) today announced the Company's financial results for the year ended 30 July 2016 (FY16).

OrotonGroup CEO, Mark Newman, commented, "As we concluded the second year of transformational change, it is pleasing to see the Group return to a period of stability and growth in earnings, with a 31% improvement in net profit after tax. We built on the underlying EBIT growth of 8% reported in the first half, and achieved a 15% growth in underlying EBIT for the full year.

Our focus on the continued repositioning and development of the core Oroton brand remained our priority, along with further improvement in the international channel and accelerating the trading performance of the Gap brand.

Supported by strong earnings and a year-end net cash position of $2.8m, together with improved return on capital, the Board has declared a final fully franked dividend of 3.0 cents per share, +50% on the prior year.

In summary:

• Group revenue increased +3% with group like for like (LFL) sales +2%

• Group EBITDA(3) increased +19% to $12.9m through effective management of margin, currency and costs

• Underlying EBIT(1) increased +15% to $7.9m (from +8% in H116(2)), with Reported EBIT increasing +10% to

  $6.2m after prudently accounting for non-cash store asset write-downs of $1.6m

• Group NPAT increased 31% to $3.4m, which is higher than EBIT growth, due to lower financing charges from an improved cash position and a lower effective tax rate from less non-deductible losses in the International channel.

• Earnings Per Share increased +32% to 8.4 cents, whilst Underlying EPS(1) increased +22% to 11.4 cents

• The Group's balance sheet strengthened, due to improved operating results and active management of debt, with

  $2.8m net cash compared to net debt of $5.8m at the end of FY15

• The Board has declared a 50% increased final fully franked dividend of 3.0cps (FY15 2.0cps) making the full year dividend 9.0cps, +38% compared to FY15 (FY15 6.5cps)

  FY16 $m	FY15 $ m	Change %
  Revenue	136.4	132.0	+3%
  Earnings Before Interest, Tax, Depreciation, Amortisation and Impairment (EBITDA)(3)	12.9	10.9	+19%
  Earnings Before Interest and Tax (EBIT)	6.2	5.6	+10%
  Net Profit After Tax (NPAT)	3.4	2.6	+31%
  Basic Earnings Per Share (EPS) (Cents)	8.4	6.4	+32%
  Dividend Per Share (DPS) (Cents - Fully franked)	9.0	6.5	+38%
  Net Cash / (Debt)	2.8	(5.8)
  Return on Capital Employed (ROCE) (4)	14.7%	9.6%
  Underlying EBIT (1)	7.9	6.8	+15%
  Underlying NPAT (1)	4.6	3.8	+22%
  Underlying Basic EPS (Cents) (1)	11.4	9.3	+22%

  Footnotes (1) - (4) refer end of announcement

  OROTON

  We have maintained our focus on repositioning and strengthening our Core Oroton brand business as we moved away from the aggressive discounting of previous years. Our strategy to reinforce the affordable luxury positioning of the brand is underway and the investment made in our new store concept, marketing campaigns, and limited edition products led to an increase in average selling prices and transaction value. This resulted in a very strong performance in the first half of the year, which continued into the third quarter, but lower LFL sales in the fourth quarter, due to a soft retail environment and lower inventory levels of categories being exited such as apparel and shoes. Overall LFL sales for the full year were

  +1% compared to -6% in FY15.

  The Oroton.com online store growth accelerated in FY16, and now represents 12% of total sales. Our investment in improvements to navigation, product pages, checkout and live chat all enhanced the user experience and led to increased conversion. Our customers are increasingly embracing the omni channel experience with nearly 50% preferring to shop both in store and from the convenience of their mobile phone, tablet or desktop.

  The brands performance in the international channel has improved, with a significant reduction in losses from $3.7m in the prior period to $1.9m, due to closure of loss making or marginally profitable stores.

  GAP

  The good momentum that we saw in the first half of the year continued through the second half with LFL sales for the full year of +6%. This was achieved through increased brand awareness, strong sell through of core ranges such as logo, denim and kids & baby, effective promotions and visual merchandising. Losses were significantly reduced as our strategy to focus on marketing, customer engagement, supply chain and cost control, improved results.

  DIVIDENDS

  The board has declared a final fully franked dividend of 3.0cps (FY15 2.0cps), resulting in a full year fully franked dividend of 9.0cps (FY15 6.5cps). The record date for determining the dividend entitlement is 12 October 2016 to be paid on 26 October 2016.

  OUTLOOK

  Our strategy for the year ahead remains centred on strengthening the Group with further development and growth in the core Oroton brand and eliminating losses from the international channel and the Gap brand. In addition, the non-cash write-down of store assets taken in FY16 to address location issues will optimise our store portfolio and leave the group in a stronger position in FY17.

  For the Oroton brand we anticipate further earnings growth to come through:

• Continued roll out of the updated new store concept which achieves higher sales/m2 than the old concept stores

• New product categories such as jewellery, watches and fragrance created by our new head designer

• Refocusing our seasonal handbag ranges on a younger audience and updating our core classics ranges

• Expanded department store distribution to Myer and online with David Jones

• Additional enhancements to our customer experience in store, online, through Social and Client Services and developing strong brand alliances such as the Qantas Frequent Flyer program

For Gap we will have the ability to reach more Australian customers with the launch of GAP Online at David Jones, and together with further improvements in Gross Margin generation and tight cost control, we expect this brand to make a positive contribution to earnings in FY17.

Following the soft final quarter of FY16, the first 7 weeks of FY17 have been encouraging, with LFL sales positive against a strong prior year for both brands. We have planned innovative product and marketing initiatives for both brands, including the all important Christmas and New Year periods, which together with a motivated and engaged team and a strong balance sheet, allows us to continue to react to market conditions as they arise."

Non-IFRS information

The financial information provided includes non-IFRS information which have not been audited or reviewed in accordance with Australian Accounting Standards but are based on the Annual Report. This information is provided to assist readers in making appropriate comparisons with prior periods and to assess the performance of OrotonGroup.

This non-IFRS information is referenced to the following footnotes:

1. FY16 Underlying results are reconciled to IFRS audited measurements through the add back of store asset impairments totalling $1,643,000 net of the related tax effect where applicable. FY15 Underlying comparatives are reconciled to IFRS audited measurements through the add back of the onerous Hong Kong Store lease after exit ($832,000), the closure of the Singapore office ($189,000) and the trading losses ($1,827,000) and gain on exit ($1,655,000) from Brooks Brothers Australia. Underlying comparative add backs total $1,193,000.

2. Underlying HY15 comparatives were changed to be consistent with the FY15 year end presentation by adding back the trading losses from Brooks Brothers Australia joint venture ($1m) following the exit in July 2015

3. EBITDA is Earnings Before Interest, Tax, Depreciation, Amortisation and Impairments

4. Return on Capital Employed (ROCE) calculated as: EBIT / (Total Assets - Current Liabilities)

Important notice and disclaimer

This presentation includes information about the activities of OrotonGroup Limited ("OrotonGroup") which is current as at 22 September 2016. It is in summary form only and is not intended or represented to be complete. No representation, express or implied, is made as to the fairness, accuracy, completeness or correctness of information contained in this presentation.

Actual results, performance or achievements could be significantly different from any forward-looking statements expressed in, or implied by, this announcement.

To the maximum extent permitted by law, OrotonGroup and its related corporations, directors, officers, employees and agents disclaim and do not assume any obligation or undertaking to release any updates or revisions to the information in this announcement to reflect any change in expectation or assumptions, and disclaim all responsibility and liability for any loss arising from use or reliance on this announcement or its content (including, without limitation, liability for fault or negligence).

Please read this announcement in conjunction with OrotonGroup's FY16 Annual Report, the Investor Presentation dated 22 September 2016, and other periodic and continuous disclosure announcements filed with the Australian Securities Exchange. These are available at www.orotongroup.com

For further information please contact: Mark Newman, CEO/MD or Vanessa De Bono, CFO/Company Secretary, Tel: [phone]