Labels for AfricaTHE MIGRATION TO DIGITAL

WWW.L ABELSFORAFR ICA.CO.ZA0860L ABELS

The Market How big is the label market?

How big is the digital label market?

What are the expected growth trends moving forward?

HOW BIG IS THE LABEL MARKET?

North America * USDTotal label market $12.2bilion

Digital label market $1.037billion

% of market that is digital 8.5%

Number of label converters 2,000

Number of digital presses 918

South Africa (2% of the USA)** RandTotal label market R3.057billion

Digital label market R260million

% of market that is digital 8.5%

Number of label converters 200+

Number of digital presses 25

** Based on SA GDP compared to US

* Source: TLMI North American Digital Label Study 2015

MARKET TRENDS

67%

33%

PressSales2011

Conventional DigitalPress sales in the USA

48%52%

PressSales2014

Conventional Digital

Press Sales (USA)*

For the first time in 2014, Digital press sales, out paced conventional press sales

Anticipated that conventional press sales will decrease at 7% per year, while digital press sales will increase at 12.5% per year (by

2020, 3 in 4 press sales to be digital).

33%

77%

PressSales2020F.Cast

Conventional Digital

* Source: TLMI North American Digital Label Study 2015

The TechnologiesCo

mm

erci

al P

ress

Xeikon

HP

ScreenD

eskt

op P

ress

Edge 850PrimeraAnytron

THE BIG BOYSA comparison

ElectrophotographyWebwidth between 330 and 500 widePrint speed between 19m/min & 30m/minuteVC determined on substrate/tonner/parts/coverageCapital investment between R6m and R9m

InkJetWebwidth between 330 and 340 widePrint speed between 15m/min & 60m/minuteVC determined by substrate and click chargeCapital investment between R9m and R18m

InkJetWebwidth 330 widePrint speed between 30m/minuteVC determined by substrate/ink/parts/coverageCapital investment R9m

The Extra Costs Involved

Commercialpress

Finishing unit(R1,5m)

Machine operator(R0.5m)

Graphic design team

(R180k)

Building conditioning

(R0.5m)Insurance

(R50k)

IT costs(R25k)

Electricity(R50k)

Learning Curve(R?k)

Revenue break even point…….

R450k per MONTH!!

The LFA Offering What is Labels for Africa?

What benefits do I get from being part of Labels for Africa?

How much will it cost me?

What does this mean for my digital future?

What is Labels for Africa?

We supply full colour digital labels to all size organisations

Exclusive access to two Xeikon digital presses, coupled with GM finishing units

Infrastructure to support the press in place (machine operators/graphic design team etc.)

Management team with expert knowledge in digital

What are the benefits?

Central Marketing (online/radio/magazine etc.), with forwarding of leads from your area

20% discount on Spec purchases

50% on Spec graphic design fees

Use of Xeikon press technology

Personalised support through franchise co-ordinator

Free access to state of the art job tracker with which to manage open orders

Partner in getting you to digital (build your business into digital)

How much will it cost me?

• R100,000(Ex Vat)• AnnualJoining fee

• 8% of Spec purchases• MonthlyManagement fee

My Digital FutureThe migration to digital

Sign-up with LFA

Build customer base to desired level (R450kpm)

LFA to advise on press along the

way

Time to go digital

Deal structuring(Incl DTI Claims)

Benefit from lower input costs

(centralised buying)

Financial planning (flexing model)

FLEXING INPUTS Year 1Digi purchases 50 000 Business GP (LFA) 25%Business GP (current) 20% Prime LabelsSales growth rate pa (LFA) 25%Sales growth rate pa (current) 15%

Labels for Africa

Year 1 Year 2 Year 3 Year 41 2 3 4 5 6 7 8 9 10 11 12 Total Total Total Total

Joining fee (100 000) (100 000) (100 000) (100 000) (100 000)Spec purchases (50 000) (51 042) (52 105) (53 191) (54 299) (55 430) (56 585) (57 764) (58 967) (60 195) (61 450) (62 730) (673 756) (862 900) (1 105 144) (1 415 392)Marketing fee (4 000) (4 083) (4 168) (4 255) (4 344) (4 434) (4 527) (4 621) (4 717) (4 816) (4 916) (5 018) (53 900) (69 032) (88 411) (113 231)Spec Discount 10 000 10 208 10 421 10 638 10 860 11 086 11 317 11 553 11 793 12 039 12 290 12 546 134 751 172 580 221 029 283 078KS Markup 66 667 68 056 69 473 70 921 72 398 73 907 75 446 77 018 78 623 80 261 81 933 83 640 898 341 1 150 534 1 473 525 1 887 190Net profit (77 333) 23 139 23 621 24 113 24 615 25 128 25 652 26 186 26 732 27 289 27 857 28 437 205 436 291 181 400 998 541 644 Cumulative NP (77 333) (54 194) (30 573) (6 460) 18 155 43 283 68 935 95 121 121 853 149 141 176 998 205 436

ResellerYear 1 Year 2 Year 3 Year 4

1 2 3 4 5 6 7 8 9 11 12 Total Total Total Total TotalJoining fee - - - - Spec purchases (50 000) (50 625) (51 258) (51 899) (52 547) (53 204) (53 869) (54 543) (55 224) (55 915) (56 614) (57 321) (643 018) (746 386) (866 371) (1 005 644)Marketing fee - - - - Spec Discount - - - - KS Markup 62 500 63 281 64 072 64 873 65 684 66 505 67 336 68 178 69 030 69 893 70 767 71 652 803 773 932 983 1 082 964 1 257 055Net profit 12 500 12 656 12 814 12 975 13 137 13 301 13 467 13 636 13 806 13 979 14 153 14 330 160 755 186 597 216 593 251 411 Cumulative NP 12 500 25 156 37 971 50 945 64 082 77 383 90 850 104 486 118 292 132 271 146 424 160 755

Better/(Worse) (89 833) (79 351) (68 544) (57 406) (45 927) (34 100) (21 916) (9 365) 3 561 16 871 30 574 44 681 44 681 104 585 184 406 290 233Annual ROI 45% 105% 184% 290%

Inflow/(Outflow)Months

Inflow/(Outflow)Months