Breville : AGM 2017 – AGM Presentations

13 November 2017

Manager, Company Announcements ASX Limited

Level 4, 20 Bridge Street

Sydney NSW 2000

Dear Sir

Please find attached the Chairman's Address to shareholders and CEO's Review of Operations to be delivered at the Annual General Meeting of Breville Group Limited at 10am today.

Yours faithfully

Sasha Kitto Company Secretary

Breville Group Limited Telephone: + 61 2 9384 8100

13 November 2017

Good morning ladies and gentlemen and welcome to Breville Group Limited's 2017 AGM.

The 2017 financial year was another significant year of achievement for the Breville Group with continued sales and profit growth driven by transformational execution. The 2017 year also represents a significant endorsement of our evolving business model and strategy.

Transformational execution continues under the leadership of CEO Jim Clayton, resulting in the Group being well placed for further global growth under the four region structure of ANZ, North America, Europe and Rest of World.

Breville continues to launch innovation driven products to ensure that it remains relevant to its customers globally and has embraced a culture of change, which is a natural part of the transformation.

The Group delivered a 5.1% increase in revenue to $605.7m, with solid revenue growth in the core Global Product segment increasing by 9.9% to $469.6m. The Distribution segment revenue for the year of $136.2m was 8.8% lower than the previous year, though the decline rate began to flatten out in the second half.

Group EBIT for the year finished at $79.0m, 7.2% higher than the prior year with Group EBIT margins steady at 13.0% compared to 12.8% in the prior year. Net profit after tax increased by 7.3% to $53.8m.

Net cash flow generated from operating activities of $62.7m was 19.9% higher than the $52.3m generated in the prior year. In line with the Group's acceleration program, the Group continued its investment in capital projects, including product development projects, and marketing and global IT systems, with cash flows used in investing activities increasing from $13.8m in FY16 to

$19.3m. Net cash at 30 June 2017 increased to $41.3m.

Jim will take you through the numbers in more detail, and will update you on the considerable progress the team has made during the year in building the Group's global scalable platform. Jim will also talk you through the Global segment acceleration program and the Distribution segment turnaround program.

I would like to take a moment to formally thank and acknowledge the efforts of Jim and his talented management team, who delivered a number of foundational elements and key milestones in Breville's transformation journey during FY17.

I would also like to thank Breville team members around the world for the creative passion and energy that they bring to our company.

On behalf of our suppliers, customers, consumers and of course, our valued shareholders and my Board colleagues, thank you all for your continued support.

I also take this opportunity of thanking my colleague, Steven Klein, who will not be seeking re- election today as a non-executive director. Steven Klein has been on the Board since 2003 and has seen first-hand the transition of the company from a steady homewares business to one of the world's leading small appliance companies. I am sure he is proud of what Breville has achieved. On behalf of the Board and management of Breville, I would like to say thank you to Steven for his years of dedicated service to Breville.

Lastly, thank you all for your attendance this morning and I, together with my Board colleagues, look forward to having a chat with you at the conclusion of the meeting.

Prior to moving to the business of this meeting, I will now handover to our CEO, Jim Clayton to present his Review of Operations.

Thank you, Steve. I'd like to welcome everyone to Breville's AGM. Thank you for taking the time to join us.

Today I will walk you through our FY17 results, give you an update on our transformation program, and end with a discussion of the work that lies ahead. Before we get started, to the extent my discussion includes "forward-looking statements", I'd like to remind you that such statements are based on our current understanding of the overall business environment and that actual results may differ materially.

Overall, we delivered a solid result for FY17. Revenue increased 5.1% to $605.7m (which was 8.0% in constant currency); EBITDA grew 7.6%; EBIT improved 7.2% with a stable margin of 13.0%; and NPAT increased 7.3%. The differential between the EBITDA and EBIT growth rates reflects our continued investment in R&D and IT. A final dividend for the year of 15.0 cents per

share was declared, bringing the total dividends for the year to 30.5 cents per share, an increase of 7.0% on FY16.

Drilling down to the segment level, you can see two very different stories playing through in FY17. The Global segment delivered 14.3% revenue growth in constant currency, growing to $469.6m, while the Distribution segment contracted (8.8%) to $136.2m.

The Distribution segment shouldered a fair amount of volatility in FY17. While we continued to face headwinds in the mass channel, we also saw the end of the Philips distribution agreement, as well as the tailing in of the expanded Nespresso machine partnership agreement to North America. With all the puts and takes in this segment, coupled with our turnaround efforts, we anticipate FY17's $6.6m EBIT to be the bottom for this segment. As we move forward, we expect the Distribution segment to show improved EBIT performance in FY18 and beyond.

Looking at regional revenue performance in the Global segment, we saw a solid growth profile across all geographies in FY17. North America continued to deliver year-over-year performance, growing 9.8% in constant currency. ANZ led the pack with 22.0% growth, and the Rest of World region posted a constant currency growth of 18.9%, collectively resulting in 14.3% constant currency revenue growth for the Global segment as a whole.

Turning to the balance sheet, we saw a slight increase in net working capital of $5.9m. The primary driver was receivables, up $16.9m, driven by strong sales in Q4. We also saw an increase in inventory primarily as a result of (i) our expansion of the Nespresso machine partnership to North America, as we purchased the initial inventory for launch, and (ii) the front edge of our purchases for this Christmas. As we progress through FY18, we should see our inventory position revert back to our current equilibrium point of a little less than 4 turns per year. Consistent with our acceleration program, intangibles increased by a net $8.0m as we continued to investment in both R&D and IT.

With the numbers out of the way, I'd now like to update you on the progress of our acceleration program for the Global segment.

Throughout FY17, and into this year, we are continuing to improve our in-store execution. This continues to be a work in progress, but we are beginning to see some results. We installed our first build-out in the David Jones store at Bondi Junction, and we have rolled out end caps in 220 Best Buy stores in the US. Point of sale material has begun to materialise across the system; we continue to expand and improve our in-store demonstration program; and we are piloting our store associate training program in the US. On the whole, we have a tremendous amount of work