Pacific Brands Posts 4.5% H1 Sales Increase

Pacific Brands Limited posted record sales of A$834.3 million ($627.6 mm) for the fiscal first half, a 4.5% increase over the same period last year. Branded sales increased during the half by 7.0% to A$772.1 million ($580.8 mm), including results from the acquisitions of both Sheridan and the Arthur Ellis Bedwares and Everwarm businesses.

Pacific Brands generated earnings before interest, tax, depreciation and amortisation (EBITDA) of
A$97.5 million, which was consistent with the previous corresponding half year period and earnings
before interest, tax and amortisation (EBITA) of A$88.1 million, which was a 2.0% decrease over the
previous half year. The slight decrease in EBITA was predominantly a result of a difficult trading
environment for the Underwear & Hosiery division.

Net profit after tax was A$50.7 million, which was below the net profit for the same period last year by
4.8%. Net profit was impacted by the reduction in EBITA as well as an increase in interest expense
as a result of funding the acquisitions. This has resulted in earnings per share of 10.1 cents.

Commenting on the result, Chief Executive Officer, Mr Paul Moore said it was a satisfactory interim
result given the patchy start to the half and a challenging retail environment. “We have seen improved
momentum in November and December, which continued in January. Unfortunately the first quarter
was very slow, and despite the improvement, there was insufficient time to make up the July to
September shortfall.”

“Pacific Brands’ achievement of an overall 4.5% increase in sales was supported by the Sheridan and
Arthur Ellis business acquisitions. Acquisitions continue to be a significant driver of Pacific Brands’
growth.”

“One highlight of the half was the acquisition of the Sheridan business. Integration is going to plan
and we have identified additional upside since acquisition.”

“Retail market conditions were challenging in the first half. There continued to be an environment of
heavy retailer discounting, a shift to greater replenishment ordering, the emergence of the value
driven consumer and price deflation, with the women’s underwear market particularly tough.”

“The women’s underwear market was affected by a number of one off impacts. These included
additional imported stock in the market resulting in oversupply, high levels of discounting and the
impact of rising oil prices on consumer confidence. The impact of price deflation of about 2% is still
relevant in this market.”

“In such an environment – the power of brands is even more important and we remain committed to
building “Everyday Essential Brands” across all our categories. Our business fundamentals are in
place to deliver on our branded strategy.”

“Another highlight was the generation of A$15.1 million in net operating cash flow for the half, a A$50.5
million improvement over the same time last year. This was the result of the continued focus on
working capital and inventory management, which is essential in a challenging market. It also reflects
the elimination of last year’s planned inventory build ahead of China’s entry into the World Trade
Organisation (WTO).”

“We will continue to invest in our icon brands and develop stronger positions in our core categories to
enable profitable growth.”

Sourcing

Pacific Brands opened an additional sourcing hub in Southern China during the half and now has 130
people in Asia dedicated to sourcing, allowing Pacific Brands to further expand its strong sourcing
capability across the region. Throughout the half, it has continued to leverage its substantial scale
and is working to rationalise its offshore suppliers by up to 50%.

There has been an increased use of off-shore “pick and pack” and delivery consolidation. The
company is working closely with its major customers on collaborative forecasting programmes to
reduce lead times. This is being supported by the roll out of a new web based purchasing system.
Whilst improved forecasting procedures are necessary for the changing environment they have
contributed to some short term supply problems.

These initiatives add increased flexibility and efficiencies throughout the supply chain.

Acquisitions

The integration of Sheridan and the Arthur Ellis businesses are moving according to plan.

The Sheridan acquisition provides a leading position in the bed linen category and together with
Tontine and Sleepmaker further reinforces Pacific Brands’ position in the bedroom category. To
improve sourcing, quality and supply capability in bed linen, Pacific Brands have entered into a
strategic partnership with leading international trading and sourcing group Li & Fung.

Acquisition of the Arthur Ellis bedwares and thermal wear businesses further enhances the existing
positions in the New Zealand market.

Cashflow

Pacific Brands generated a strong A$15.1 million positive net operating cashflow1 in the half year. This
was an improvement of A$50.5 million over the previous corresponding period. The improvement was
the result of a significant change in working capital compared to the same period last year. The
strong cash flow generated by the company provides the foundation for Pacific Brands’ acquisition
strategy.

Acquisitions of A$76.5 million and repayment of borrowings of A$28.7 million (assumed as part of the
acquisitions) during the period impacted net cash flow. These acquisitions included Sheridan
announced on the 26 September 2005 and the Arthur Ellis businesses announced on
21 November 2005.

The increase in trade receivables reflects the impact of the Sheridan and Arthur Ellis acquisitions
together with the continued trend for retailers buying closer to their actual requirements.

Trade creditors also increased as a result of the above acquisitions, the benefits of supply chain
initiatives and renegotiated terms with overseas suppliers.

Tax

The effective tax rate on earnings was 27.2%, which was consistent with the half year ended
31 December 2004.

Balance Sheet

There was no significant change in the net assets of Pacific Brands over the half. The debt to equity
ratio at 31 December 2005 was 40.1%, up from 31.7% at 30 June 2005. It was 35.3% at
31 December 2004.

The increase in the debt to equity ratio was the result of the Sheridan and Arthur Ellis business
acquisitions. Pacific Brands remains well placed to fund future acquisitions.

Interest cover (EBITA/Interest) at 5.0 times is slightly down from 5.1 times at 31 December 2004.

Net tangible assets decreased due to the impact of acquisitions where the Group acquired $71 million
of intangible assets.

AIFRS

From 1 July 2005, the consolidated entity was required to comply with Australian equivalents to
International Financial Reporting Standards “AIFRS” issued by the Australian Accounting Standards
Board.

Significant changes under these standards, which are applicable to Pacific Brands, include:

• Goodwill is no longer amortised but continues to be tested annually for impairment;
• The fair value of performance rights granted must be recognised and expensed as an employee
  benefit;
• Where leases have fixed rental increases, these increases must be expensed on a straight line
  basis over the term of the lease and;
• Software assets developed for internal use are capable of recognition as intangible assets
  (previously classified as plant and equipment).

All comparative financial information for the half year ended 31 December 2004 and the full year
ended 30 June 2005 have been restated in the Appendix 4D notice to the ASX. These adjustments
have not affected cash flows for the half year ended 31 December 2005.

Dividends

The achievement of solid profit numbers has allowed Pacific Brands to maintain an interim dividend of
7.5 cents, representing a payout of 74.4% of NPAT.

Pacific Brands’ strong cashflow supports its strategy of maintaining a high dividend payout ratio.
Dividends paid will be fully franked for Australian shareholders at a 30% tax rate.

Review of Operating Groups

Each of the four major operating groups has contributed to Pacific Brands’ results.

Outerwear & Sport

1. Financial information restated from 1 July 2004 to show transfer of Dunlop Footwear from Outerwear & Sport to Footwear.
The positive earnings turnaround generated an EBITA of A$14.6 million, up 13.2% on the previous
corresponding half year. This is consistent with the operating group’s strategy to focus on profitable,
branded sales. The casual outerwear market remains competitive.

The Everlast brand has continued to show growth, with sales up strongly from the previous half year.
This has been the result of successful ranges and the continued support for the advertising campaign
“Nothing Soft comes out of the Bronx”.

The sporting equipment market remains tight although there was a strong improvement in both bike
and helmet sales, particularly through the discount department store channel.

KingGee performed well and has several product initiatives in the pipeline for the second half
including work cool clothing and new steel capped work boots.

This operating group is reviewing its supplier base and has several sourcing and warehousing
initiatives underway.

Continuation of the brand development strategy focusing and supporting core brands in the
categories of workwear, surfwear and sporting apparel will drive future growth.

Footwear

1. Financial information restated from 1 July 2004 to show transfer of Dunlop Footwear from Outerwear & Sport to Footwear.
The Footwear group had another strong half with the branded strategy continuing to deliver improved
results. Sales were up 4.8% and EBITA up 14.3%. All categories experienced growth over the
period. Sales improvements were recorded by the Hush Puppies, Clarks, Grosby, Dunlop, Pierre
Fontaine, Naturalizer and Merrell brands.

Sales across department and speciality stores were strong over the six month period. Concept stores
have continued to be developed in these channels, with more expected to be opened over the
remainder of the financial year.

Strong sales for Dunlop Volley led canvas category growth.

The operating group will continue its branded product strategy and has launched its Spring/Summer
ranges in January and February. The Clarks “back to school” campaign was launched with a
television commercial (TVC) in January. It builds on the Clarks brand heritage of the best fit and
highlights the durability of the school shoe range.

Continuing the success of the Grosby “fluffy boot” from Winter 05, Grosby will launch the “faux fur”
boot next month.

Outlook

The impact of steeply increased petrol prices in the first quarter of FY 2006 appears to have impacted
sales across many consumer categories and Pacific Brands’ offering was not immune. Pacific Brands’
sales in the first half of FY 2006, particularly in the Underwear & Hosiery operating group were also
impacted by a number of one off factors, as outlined in this release.

However sales performance regained some momentum during November and December 2005 and
this has continued into January. Sales and margin performance in recent months provides Pacific
Brands with confidence as to the remainder of the financial year, albeit in a subdued retail
environment.

The business will continue to focus on Everyday Essential Brands to drive growth – through targeted
advertising, product development and relevant acquisitions.