Australia s Automotive Aftermarket Parts Professionals

Morgan Stanley 014 Emerging Companies Conference Australia s Automotive Aftermarket Parts Professionals Darryl Abotomey Chief Executive Officer

Airport West, VIC Browns Plains, QLD Caloundra, QLD Moorabbin, VIC Eltham, VIC Geelong, VIC Bendigo, VIC Mornington, VIC Holden Hill, SA Lismore, NSW Ballarat, VIC Bairnsdale, VIC Lonsdale, SA *NEW* Redcliffe, QLD

1 INTRODUCTION INDUSTRY OVERVIEW BURSON OVERVIEW 4 CONCLUSION

Introduction to Burson Australia s leading trade focused automotive aftermarket parts distributor Core focus on distribution of auto parts to mechanic workshops throughout Australia Distributes over 500,000 stock keeping units from in excess of 1,000 suppliers to 0,000 customers via 116 stores Operates an extensive distribution network unique scale of inventory range and extensive distribution network is difficult to replicate Strong industry position in Victoria, Tasmania, South Australia and Northern Territory, with major growth opportunities in New South Wales, Queensland, Western Australia and ACT Generate revenue of approx $40 million in FY014 ASX listed on 4 April 014 previously PE and privately owned. Commenced 1971.

Burson s Key Strengths Burson is a leader in a resilient industry with attractive growth prospects 1 Growing industry with resilient demand growth underpinned by population growth, the number of vehicles per person, and the age mix of vehicles; demand for car servicing and parts is resilient Burson is the leading trade focused distributor unique scale owing to the size and complexity of inventory distributed, extensive store network, and customer service offering of part availability, delivery speed and knowledgeable staff Significant store growth opportunity in a consolidating industry where the number of independent distributors is reducing. Burson has expanded its store network from 80 (start of FY11) to 116 currently and believes it can expand its network up to 175 over the next five years 4 Well positioned to drive earnings growth via a number of ongoing initiatives including product range expansion, increasing sales to large chain workshops, private label, direct sourcing, electronic ordering, internet sales and walk-in sales 5

1 INTRODUCTION INDUSTRY OVERVIEW BURSON OVERVIEW 4 CONCLUSION 6

Australian Automotive Aftermarket Parts Industry Burson operates in the trade distribution segment of the automotive parts industry where it is one of the largest distributors Parts Manufacturer Parts Wholesaler Parts and Components Distributor Vehicle Manufacturer (Passenger and Light Commercial) Trade Parts Installer End Vehicle Owner OEM Dealer Workshops Burson s Value chain Trade Distributors Chain Workshops Do-it-for-me (DIFM) Parts Manufacturer (Branded, Genuine, Private Label) Wholesaler and Distributor Retail Distributors Independent Workshops Do-it-yourself (DIY) Observations 17. million vehicles in Australia, with 15.7 million passenger + light commercial vehicles 68 brands and 41 vehicle models in Australia >1,000 part suppliers Burson estimates the total industry generates annual revenue of $1.7 billion of which trade distribution generates $4.4 billion and retail generates $6.7 billion Fragmented industry, with a large number of independent operators, and a small number of large national franchises, and two company owned chains Within the trade segment, Burson focuses on the nondealer trade repair industry for passenger and light commercial vehicles which it estimates to generate $ billion in annual revenues 7

Key Features of Trade Distribution Growing industry with resilient demand, extensive distribution networks and consolidating number of distributors 1 Trade Distribution is a Growing Industry Population growth, number of vehicles per person, age of vehicle and value of parts sold driving industry growth Drivers support ~% p.a. industry growth over short to medium term Parts are critical to vehicle servicing Resilient Demand for Parts Vehicle servicing and average kilometres driven per passenger and light commercial vehicle not significantly impacted by economic conditions. Any short term delay in servicing leads to large and more significant service requirements in the future Demand not impacted by volatility of new vehicle sales (as largest demand for aftermarket parts is for vehicles four years or older) nor location of vehicle manufacturer Multiple Benefits of Scale Extensive distribution network to source 500,000+ stock keeping units and deliver just-in-time to 0,000+ customers Multiple competitive advantages from scale 4 Distributors are Consolidating Industry leaders are operating more stores whilst number of independent stores is reducing Driven by requirement to hold and distribute wider range of parts as range of vehicle makes and models has increased Australia has the largest range of vehicle makes and models (68 brands and 41 models) 8

Key Aspects of Competition Burson enjoys multiple benefits of scale in competing in the trade distribution industry What is Important to Large and Small Mechanics? Range and Reliability of Parts 1 Broad range of parts critical increasing range of vehicles means workshops need greater range of parts Reliability of parts critical to workshops traditional preference for top brands but growing demand for private label products + Customer Service Store manager and staff expertise is critical need to know their parts and what is required (mechanics do not have to explain their needs) Store location close to workshop determines speed and frequency of delivery Customer online and electronic ordering needs to be efficient, intuitive and accurate (e.g. Burson s EzyParts, electronic ordering system) Electronic catalogue to find right part + Part Availability + 4 Relationships Parts required on just-in-time basis (i.e. within an hour) Customer loyalty and relationships are strong Systems to ensure right parts are located in right stores are critical Track record of service, availability and on-time delivery critical to mechanics + 5 Price Reasonable price but service is more important poor part reliability or poor service creates biggest issues Larger mechanics more sophisticated in passing on price to vehicle owner Average order size $60. Burson s core focus is on skilled staff, systems and logistics that deliver on these key customer requirements 11

1 INTRODUCTION INDUSTRY OVERVIEW BURSON OVERVIEW 4 CONCLUSION 1

Integrated Distribution Business Model Sophisticated distribution network that supports Burson s strong industry position Part Procurement Distribution and Logistics Distribution of 500,000 stock keeping units from 1,000+ suppliers 95%+ products sourced within Australia ~80% of stock sourced from top 0 suppliers Bearing Clutch % % Other Filters 11% 9% Spark Plugs 5% Accessories % Fuel % Key Gaskets %Car Care Parts (1) Oil 9% Sophisticated warehouse management system with automated re-ordering and barcode scanning Large and Small Workshops 116 store network in close proximity to workshop target within 5km radius Talent pool of store manager expertise Strategy to hold more stock in stores Electrical 9% ~0,000 active individual customers Orders made via phone, electronically and in-store as well as by a mobile sales representative incentivised on commission structure Investment made in IT platform for customer ordering lowering cost to serve Daily deliveries to Burson store network via third party logistic providers Orders delivered by fleet of Burson delivery vehicle from Burson store Stores Average order size $60 9Stores (4 Hub Stores) 0 Stores 1 Stores (1 Hub Store) % Ignition % Parts 5% Engine Parts Cooling 6% Equipment 6% 6% 15,000m distribution centre in Melbourne supported by 8 hub stores in other states Store Network Brake 9% Suspension 5% Tools 4% 4 Stores ( Hub Stores) 44Stores 4 Stores (1 Hub Store) A sophisticated supply chain that is difficult to replicate Note: 1. FY1 sales by product 15

Trade Focused Store Network Store network of 116 stores that provides proximity, part availability and frequent delivery for trade customers and also has a walk-in section for cash and DIY sales Store Location ~80% of trade customers located within 5km of store Proximity to customers is critical to providing delivery speed and frequency Target prominent positions near its trade customer base and avoid more expensive high street high rent locations Typically provide some parking at front or rear of store Store Set-Up ~80% of FY1 sales from deliveries to customers, with remaining ~0% from walk-in cash sales Store designed with ~70% of floor space dedicated to warehouse and ~0% to showroom at front Ideally stores have an area between 400-600m Store Orders Burson issues ~6.5 million invoices annually computer systems are critical Average trade order is ~$60 in value and 1.7 line items Orders received via phone (~50%), sales reps (~0%), electronically (~10%) and walk-in (~0%) electronic has grown strongly since launching one year ago 5km Burson store 16

Diversified Customer Base Burson serves approximately 0,000 active customers with no single customer representing more than 1% of total revenue in FY01 Chain Workshops Customer Base All are franchise / banner groups (except Kmart Tyre & Auto and Lube Mobile which are corporate owned) who represent 1,600+ workshops throughout Australia Number of workshops is growing as individual workshops join franchised or supported, authorised repairer banners Why Do They Choose Burson? Specialised part knowledge Comprehensive range of parts Store proximity and speed of delivery Historically chains have not been a focus for Burson due to its geographic spread but as store network expands, it is a significant opportunity Electronic platform Burson implemented national sales and marketing function to better service large chains Customer loyalty Independent Workshops Represents majority of Burson sales The number of independent workshops has declined as competition has increased from dealers and large chains A significant proportion of independent workshops belong to a co-operative called Capricorn that establishes credit and payment terms for its members limits credit risk for Burson 17

1 INTRODUCTION INDUSTRY OVERVIEW BURSON OVERVIEW 4 CONCLUSION 1

Conclusion 1 Burson is Australia s leading trade focused automotive aftermarket parts distributor Burson operates in a growing industry with resilient demand Burson is well positioned to continue expanding its store network in a consolidating industry 4 The scale of Burson s trade focused distribution network provides competitive advantage and is difficult to replicate; Locations, Availability of parts, Speed of delivery, Knowledgeable staff, Electronic catalogues and systems, Relationships National supply.

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