Ann: Company Update-SRF.AX, page-100

Operations
JUNE 20, 2016
Sydney, Australia – June 20th, 2016: SurfStitch Group Limited today announced that following a strategic review of operations in the US (SurfStitch USA, Inc.), its workforce would be reduced by approximately 40 positions by the end of October 2016.

The review included an assessment of the Group’s long term strategy and operations in the US and extensive analysis around future sustainable and profitable growth which identified significant EBITDA synergies.

“The decision to restructure the US operations is part of our focus on returning to profitability and being cash-flow positive during FY17. Where required, we can support US customers from both our UK and Australian operations, with a much lighter local presence and without compromising on service. This was not an easy decision to make, but we need to remain competitive in an extremely challenging North American environment, that has been particularly impacted by margin compression,” SurfStitch Group CEO Mike Sonand said.

“We remain confident in the potential of the US market and this restructure will allow us to become a leaner, more efficient and more agile organization that does not have to compete on margins. Instead we can focus on providing customers with an enriched online experience,” Lex Pedersen, Director of Business Development and President of North American Operations said.

The restructure is not expected to result in any business disruption and customers and vendors will receive continuous operation and order fulfilment through the transition. The workforce reduction will be achieved through voluntary and involuntary layoffs.