Accent : Chairman and CEO Address to Shareholders

ASX release 20 November 2020

Accent Group Limited

Annual General Meeting

Chairman and CEO address to shareholders

Slide 1 - Cover slide

CHAIRMAN, DAVID GORDON

Good morning ladies and gentlemen. My name is David Gordon and, on behalf of the Board, it is my pleasure as Chairman to welcome you to the 2020 Annual General Meeting of Accent Group Limited.

I am advised that a quorum is present and I now declare the meeting open.

Today's meeting is our first virtual AGM and is being held online via the Lumi platform. This allows shareholders, proxies and guests to attend the meeting virtually. All attendees can watch a live webcast of the meeting. In addition, shareholders and proxies have the ability to ask questions and submit their votes.

Slide 2 - Questions Process

Questions can be submitted at any time. To ask a question, press on the speech bubble icon and this will open a new screen. At the bottom of that screen there is a section for you to type your question. Once you have finished typing, please hit the arrow symbol to send.

Please note that while you can submit questions from now on, I will only allow them at the time when the relevant item of business is discussed. Please also note that your questions may be moderated or, if we receive multiple questions on the same topic, amalgamated together.

Slide 3 - Voting Process

Voting today will be conducted by way of a poll on all items of business. In order to provide you with enough time to vote, I will shortly open the voting for the resolutions in Items 2 to 5.

The resolution in Item 6 is a conditional item which will only be put to the Meeting if at least 25% of the votes validly cast on the resolution proposed in Item 2 are cast against that resolution. If the resolution in Item 6 is required to be put to the meeting, I will separately open the poll on that item and give you sufficient time to vote.

When I open the poll on the resolutions in Items 2 to 5, if you are eligible to vote at this meeting, a new polling icon will appear. Selecting this icon will bring up the resolutions being voted on and present you with voting options. You may need to scroll down on the right-hand side to see all the resolutions. To cast your vote, simply select one of the options. There is no need to hit a submit or enter button as the vote is automatically recorded.

You have the ability to change your vote up until the time I declare voting closed.

I now declare voting open on the resolutions in Items 2 to 5. The polling icon will soon appear, so please submit your votes at any time. I will give you plenty of time and a warning at the end of these items of business before I move to close voting.

Slide 4 - The Board

Joining me today on this virtual meeting is Daniel Agostinelli, our Chief Executive Officer, and our non-executive directors Donna Player, Joshua Lowcock, Michael Hapgood and Stephen Goddard.

Slide 5 - Other attendees

We are also joined by our Group CFO and Joint Company Secretary, Matthew Durbin, and our General Counsel and Joint Company Secretary, Celesti Harmse as well as the Company's auditor, Deloitte, represented by partner David White.

Slide 6 - Agenda

At today's meeting, we will be considering a number of matters set out in the Notice of Meeting dated 20 October 2020.

Before we address the resolutions set out in that Notice, I will make some introductory remarks and provide an overview of our FY20 results and how we are continuing to create value for our shareholders, before passing over to our CEO, Daniel Agostinelli, to give his address.

Slide 7 - Chairman's review

I think it is fair to say that this has been a year like no other.

On behalf of the Board, I would like to acknowledge the challenges and hardship faced by the broader community, and to thank our customers, suppliers, team members and shareholders for their support through this difficult time.

Notwithstanding the significant headwinds we faced as a result of the COVID-19 pandemic, the results that the Group has delivered are a testament to the strength, resilience and talent of the Accent Group team and culture.

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With the onset of the COVID-19 pandemic in March this year, in order to safeguard the health and safety our team and customers, all of the Group's stores were closed from 25 March for a then unknown duration, and this resulted in a sales decline of 58% in March and April.

It also resulted in an acceleration of digital sales, leveraging the Group's best in class omnichannel capability, to offset the impact of store closures and reduced customer foot traffic in shopping centres. The management team also implemented a range of cost out measures and inventory initiatives to right size the Company's costs and inventory.

Given the collapse in sales, the Company qualified for Government wage subsidies in Australia and New Zealand. Subsidy payments were passed directly through to team members who were not working or did not work sufficient hours to be paid more than the subsidy. The balance of these subsidies was deployed to accelerate the full employment of team members and to reopen the Accent business through May, including standing up all permanent team members from 1 June to full hours and full pay.

Across the Group, we also achieved agreement for rent relief with more than 80% of our landlords, following good faith negotiations and in the spirit of the Government code of conduct. And I am pleased to say that the Company's relationships with landlords are as strong as ever.

The Group finished the FY20 year with a strong cash position of $54.9 million and total available liquidity of $152 million. In making the decision to pay both a final dividend and management bonuses, the Board considered the impact of the wage subsidies on the profit and cash position of the Company, and determined that the net subsidy payments received were not required or used for the payment of management incentives or the final dividend.

The Company has not applied for wage subsidies beyond the end of September and, notwithstanding the hard lockdowns in Melbourne and Auckland between July and end of October which resulted in more than 20% of Accent's stores being closed, all permanent team members continued to be stood up on full pay through this period, including the month of October post the completion of the JobKeeper payments at the end of September. We will do the same in the recently announced Adelaide lockdown.

The Accent Group Board recognises the dedication, resilience and performance of the entire Accent team over the year. The demonstrated leadership capability to adapt quickly to the challenging new environment has been key to the results achieved during a confronting final quarter. Our business objectives have been achieved with the safety of our team and our customers front of mind, with a strong focus on safety protocols since reopening in May.

Slide 8 - FY20 financial performance

Turning now to the results, and it is my pleasure to report that the Company once again delivered a record profit in FY20, with EBITDA increasing by 11.8% to reach $121.7 million, while at the same time improving the inventory and net debt position of the Group.

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This record result was an outcome of the both the strong digital growth of 69% and the contribution from 57 new stores that opened during the year. The vertical brand and product program that the team is delivering ensured that gross margins remained strong, despite currency headwinds and significant discounting in the final quarter of the year. The cost of doing business was another highlight, with effective cost management in particular through Q4 supporting the profit result.

Slide 9 - Shareholder value creation

These results continue to translate into value creation for our shareholders, delivering a full year dividend of 9.25 cents per share, up 12.1% on the prior year. On a longer-term view, the Company's total shareholder return has significantly outperformed the ASX300 over the last 10 years, as demonstrated in the chart of the screen. We are very proud of all of these results.

I will now hand over to Daniel, our Chief Executive Officer, to address the meeting.

Slide 10 - VIP Virtual Vertical

CHIEF EXECUTIVE OFFICER, DANIEL AGOSTINELLI

Thank you David, and good morning everyone.

Given the challenging environment in the second half of this year, I am delighted that we were able to deliver another record year. I couldn't be more proud of the outstanding efforts of our team who had to adapt quickly to a fast-changing environment. Key to our result was the integrated digital capability the Company has built over the last 3-4 years, which enabled us to connect with our customers and shift our channel mix from stores to digital when all stores were closed during various periods of lockdown.

Slide 11 - Accent Group - VIP Virtual Vertical

The pace of innovation and new initiatives accelerated through the COVID impacted period. Looking ahead, during the presentation I will outline our key focus on what we are calling the 3 Vs - VIP, Virtual and Vertical.

You can see in the chart on the slide the acceleration of our business over the last 18 months and that we have big goals in all these areas, some of which have been delivered already and will continue into the future.

Slide 12 - Seismic growth in digital sales continues

This year, we have seen a clear shift in consumer behaviour to shopping online and it has delivered strong results across all digital KPIs of the business.

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