Annual Report 2019
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Our Brands
Chairman and Chief Executive Officers’ Report
Directors’ Report
Auditor’s Independence Declaration
Statement of Profit or Loss and Other
Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Shareholder Information
Corporate Directory
JOB NAME
MRKTG_SP19_W_ENERGY_COAT_24x42_V1
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Skechers Printer
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MRKTG_SP19_W_ENERGY_COAT_24x42_V1.psb (CMYK; 300 ppi; 100%)
Accent Group
Limited (AX1) is
a leading retailer
and distributor
of performance
and lifestyle
footwear.
With 479 stores across 10 different retail banners and
exclusive distribution rights for 10 international brands
across Australia and New Zealand, we are a market
leader and well positioned for future growth.
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Accent Group Limited Annual Report 2019 Our Brands
JOB NAME
ITG34195_ALPINE_SPORT_UNISEX_MRKTG_SHOE_SWAPS_36X18
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ITG34195
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ITG34195_ALPINE_SPORT_UNISEX_MRKTG_SHOE_
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Sabrina L.
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Darren Huang
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Skechers is a global leader in lifestyle
and performance footwear. We
operate 99 Skechers stores across
Australia and New Zealand.
Hype DC is a retailer of premium,
exclusive and limited edition sneakers,
curated from the world’s leading
brands. We operate 65 stores
across Australia.
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With 118 stores across Australia
and New Zealand, Platypus is the
region’s largest multi-branded sneaker
destination, offering a wide range of
iconic sneakers from around the world.
Cat Footwear and apparel has been
designed and engineered to live up
to the hard-working reputation of
the Caterpillar brand. Made with
uncompromising toughness and style.
Accent Group Limited Annual Report 2019 Our Brands
Merrell is the world’s leading
brand of performance outdoor and
adventure footwear. We operate
17 Merrell stores.
The Dr Martens range of footwear was
born in 1960 and is a representation of
rebellion and free-thinking youth culture.
We operate 4 Dr Martens stores.
The Vans brand has been connecting
with youth culture to promote creative
self-expression, authenticity and
progression for over 50 years, while
linking the brand’s deep roots in action
sports with art, music and street
culture. We operate 23 Vans stores.
3
Offering a range of fashionable
footwear for the urban explorer,
Palladium combines authenticity
with cutting-edge style.
Accent Group Limited Annual Report 2019 Our Brands
With 143 stores across Australia
and New Zealand, The Athlete’s
Foot is the region’s largest specialty
athletic footwear retailer, known for
its exceptional in-store customer
service experience.
Inspired by the company’s New
England heritage, Timberland is a
brand true to the outdoor lifestyle.
We operate 7 Timberland stores.
4
Sperry Top-Sider is the original and
authentic boat shoe brand, and is for
people drawn to the surf, sun and
soul of the ocean.
Stance have turned socks into one of
the world’s most exciting accessories.
They have ignited a movement of art
and self-expression that has drawn
athletes, performers, and iconic cultural
influencers to the brand. Stance have
underpinned their creative roots with a
relentless focus on technical innovation.
Accent Group Limited Annual Report 2019 Our Brands
Saucony exists for runners.
This focus and passion drives
Saucony to create the world’s
best running shoes and
apparel.
SUBTYPE is the future of retail.
SUBTYPE’s unique, conceptual
stores are a cultural hub as well as
a destination for curated sneakers
and contemporary apparel.
The Trybe is about making kids footwear
fun! With a collection from Nike, Vans,
Mini Melissa and more, The Trybe has
the very best global brands. We currently
have 4 stores with more to follow.
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Accent Group Limited Annual Report 2019 Chairman and Chief Executive Officers’ Report
Another year of
record profit growth
and innovation
Left:
David Gordon
Chairman
Right:
Daniel Agostinelli
Chief Executive Officer
Underlying EBITDA
Underlying NPAT
Underlying EPS
$108.9m
$53.9m
10.02c
Dear fellow Shareholders
We are delighted to report that Accent Group has had
another record year of trading and profit growth, delivering
net profit after tax of $53.9 million, an increase of 22.5%
over the prior year.
Your Board has declared a final fully franked dividend of
3.75 cents per share, which brings the total dividends declared
during the year to 8.25 cents per share. This is an increase
of 22.2% on the prior year and represents an 82% payout
ratio for the year.
We take a long-term view on growing shareholder value.
It continues to be a great testament to the strength and
quality of the Accent Group team that we have been able to
consistently deliver excellent results. Over the last 10 years,
Accent Group has delivered a compound annual growth in
earnings per share of 14.4% per annum.
The Group continues to deliver against its growth plan
objectives with a focus on innovation driving investment
in digital capability, store environment, store formats
and new business development that will ensure that we
are well positioned to continue to deliver a world class
customer experience and growth in shareholder value.
OVERVIEW OF OPERATIONS
During the year, the team at Accent Group has implemented
many initiatives, both within our existing business as well as
some new growth opportunities.
Our retail business continues to go from strength to strength
with an uncompromising focus on the customer experience
across all banners. During the year, we implemented a
number of exciting new in-store customer experience
elements, including shoe cleaning and monogramming/
personalisation services, digital screens and permanent
DJ booths in the Platypus megastores. The Athlete’s Foot
(TAF) has started the rollout of MyFIT 3D, the latest foot
scanning technology that scans a customer’s foot and delivers
real-time product recommendations based on the best fit
solution for that customer.
We completed the rollout of endless aisle and same day
delivery, giving our customers a market leading omnichannel
experience. Customer take-up and our performance for express
delivery has been ahead of expectations with most same day
deliveries fulfilled in under 3 hours from purchase.
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Accent Group Limited Annual Report 2019 Chairman and Chief Executive Officers’ Report
Financials1
($ millions)
Total Sales (incl. TAF)2
Accent Group Sales (company owned)
Gross Profit %
EBITDA
EBIT
NPAT
EPS (cents per share)
Dividends (cents per share)
FY19
Full-year
FY18
Full-year
935.3
772.5
56.1%
108.9
80.6
53.9
10.02
8.25
860.8
Up 8.7%
675.6
Up 14.3%
54.8%
+130bp
88.8
64.7
44.0
8.23
6.75
Up 22.5%
Up 24.6%
Up 22.5%
Up 21.7%
Up 22.2%
1
2
All financials in this Chairman and Chief Executive Officer’s Report, other then total sales, are presented on a statutory reported basis with no adjustments.
Includes The Athlete’s Foot franchise store sales.
7
Accent Group Limited Annual Report 2019 Chairman and Chief Executive Officers’ Report
We also expanded into new market
segments, with the acquisition of
Subtype and the launch of The Trybe
in FY19. In FY20, we will be launching a
new brand, PIVOT, focused on servicing
the sport and street inspired value
conscious consumer through the best
global brands in both the sporting goods
and lifestyle market segments.
Retail
Company owned retail sales grew
strongly to $656.2 million, which was
15.8% up on the prior year. This was
driven by digital sales nearly doubling,
new store rollouts and an increase in
like for like retail sales of 2.3% over the
prior year.
We opened 54 new stores and closed
21 stores during the year and now
have a total of 479 stores and online
sites in the Group. The targeted
investment in store concepts and
business development continued with
the opening of a Platypus Megastore in
Pitt Street Sydney, a flagship Subtype
store in Melbourne, the first Australian
CAT concept store, a flagship TAF CBD
store in Melbourne and 4 The Trybe
stores across Melbourne and Sydney.
The performance of new stores has been
ahead of expectations with a strong
return on investment.
In the retail banners, Skechers, Platypus,
Vans, Dr. Martens, Timberland and
Merrell all traded strongly during
the year, with sales in TAF, Hype and
Subtype in line with expectations.
TAF sales performance in both corporate
and franchise stores was ahead of last
year on both a total and like for like basis
and digital sales increased by more than
87%. During the year, 32 stores were
opened and acquired, and we now have
49 corporate TAF stores in the Group.
In FY19, total digital sales, including click-
and-collect and click-and-dispatch, grew
by 93%. A range of new initiatives were
implemented, including new websites
launched for Subtype, The Trybe and
Vans NZ and the rollout of endless aisle
and same day delivery.
The profitability of our digital channel
continues to grow and is now equivalent
to the profitability rate of stores. The
integrated inventory model, enabled
through click- and-collect, click-and-
dispatch and endless aisle, provides
customers access to our entire inventory
base. This capability enables a flexible
customer fulfilment model and has
the added benefit of accelerating the
clearance of aging and slower moving
inventory, reducing the discount required
to clear this stock and driving gross
margin improvement.
Wholesale
Wholesale sales for the year increased
by 7% to $116.3 million, with strong
performances in Vans, Dr. Martens,
Merrell and CAT and Stance. Skechers
wholesale sales were below prior year,
consistent with our expectations as we
execute our strategy of growing our
Skechers store network.
Wholesale gross profit margins
were up on the prior year due to
cleaner inventories and improved
exchange rates.
GROWTH PLAN UPDATE
The Board and management team
are excited about the year ahead, in
light of the strong pipeline of growth
opportunities that are in progress.
New Stores
Based on the continued strength of new
store performance and the attractive
deals available in the market, we plan
to open more than 40 new stores in
FY20 across Hype, Platypus, Skechers,
Dr Martens, Cat, Merrell, TAF and
Vans. Going forward, there is potential
for a further 30-40 new stores across
the Group in these banners over the
next 2-3 years. The quality of the deals
available in the market means that
in many cases, the upfront landlord
contributions make the new stores
cashflow positive in the first month.
The Athlete’s Foot corporate (owned)
stores
We continue to build a strong network
of TAF corporate stores with 49
corporate stores currently and we
expect to have at least 65 corporate
stores by the end of FY20. On average,
each new/acquired TAF corporate store
adds around $1.5m in sales at an EBIT
margin of 13-15% (pre support costs)
and we also expect EBIT margin growth
over time from the acquired stores,
arising from an increased mix of Accent
vertical product and brands and other
network efficiencies.
Retail Banner Differentiation:
Hype and Platypus
The Group plans to dial up its focus
on the consumer proposition in both
Hype and Platypus by evolving the
product assortments to best represent
the target consumer segments of each
of these banners.
In discussion with some of the Group’s
largest brand partners, including Nike
and adidas, Hype will extend its focus on
the sneaker obsessed teen, working with
the brands to launch new innovations,
more quick-to-market product
and the introduction of expanded
assortments. This will be supported by
further investment in new emerging
global brands like Veja, Golden Wolfe
and Superga to service the fashion
conscious consumer.
Platypus will strengthen its appeal with
the street & fast fashion consumer,
extending the product offering in brands
including adidas, New Balance, Dr
Martens, Tommy Hilfiger and Skechers.
The Platypus range will also include
investment in a stronger mix of global
vertical brands and products along with
brands breaking into new trends. The
investment in street fast fashion will
be supported by the emergence of an
ever-growing action sports consumer,
underpinned by distributed brand Vans
and supported with increased focus and
partnership with Nike on the SB range.
The Trybe
In October 2018, we launched The
Trybe, a kids focused online site to
target a new growth segment for Accent
Group. Based on the success of this
launch, we have now opened 4 The
Trybe stores in Victoria and NSW and
the performance of these stores has
been well ahead of expectations. The
Trybe stores incorporate innovative
customer experience elements, including
contemporary fitting spaces, digital
screens and interactive play zones.
Based on market analysis and results to
date, there is an opportunity for at least
40 The Trybe stores in Australia and NZ
over time and we are planning to open
up to 12 stores by June 2020.
New Footwear Concept – PIVOT
Following a market segment review and
extensive consultation with our global
brand partners, we identified that there
is a value segment of lifestyle footwear
product available in international markets
that is not currently available in Australia.
8
Accent Group Limited Annual Report 2019 Chairman and Chief Executive Officers’ Report
We have decided to respond to this
demand by launching and trialling a new
lifestyle footwear concept called PIVOT.
The new concept will focus on servicing
the sport and street inspired value
conscious consumer through the best
global brands in both the sporting goods
and lifestyle market segments. With
a focus on providing the entire family
with their footwear solution, the PIVOT
brand will carry a wide range of branded
offerings from Nike, adidas, Puma,
Converse, Skechers, Vans, CAT, New
Balance and more, covering categories
including lifestyle, casual, street, sport
and training. The first stores and a PIVOT
website are planned to open in the
second half of FY20.
Vertical products
In November 2018, we launched a range
of Hype, Platypus and TAF branded
socks, accessories, shoe cleaners and
custom laces. These product ranges have
performed well ahead of expectations,
demonstrating the strength and
customer trust in our core retail banners.
This program generated $4.5m of sales
in FY19 and is expected to grow to at
least $15m of sales in FY20, at gross
margins over 70%.
International
We continue to monitor opportunities
internationally but have not found any
that meet our minimum investment
criteria. The domestic expansion
opportunities that we have identified are
more attractive and so we expect growth
initiatives in the near term to be largely
domestic.
OUTLOOK
Like for like retail sales for the first 7
weeks of this financial year are up 2.7%.
The Group is targeting profit growth in
FY20, expected to be achieved through
low single digit like for like store growth,
continued strong digital growth, 40
new stores, 54 stores annualising from
FY19 and 65 current and new TAF
corporate stores. Both gross profit
margin percentage and cost of doing
business percentage are expected to be
in line with the prior year. The underlying
gross margin percentage is expected to
grow as a result of increased vertical
brand and product penetration and TAF
margin expansion, offset by the currency
impact of a lower AUD. We expect the
profit impact of The Trybe and PIVOT to
be broadly neutral in FY20 (inclusive of
implementation costs).
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Accent Group Limited Annual Report 2019 Chairman and Chief Executive Officers’ Report
CONCLUSION
Your Board is delighted with the
performance of the Company and would
like to thank the Accent Group team,
franchisees and suppliers for their hard
work and results delivered in FY19.
The increased final dividend and strong
payout ratio reinforce the confidence
of the Board in the performance and
financial strength of the company.
The Group is well positioned for
growth in FY20 and beyond, with a
core focus on our customers and a
strong pipeline of current and mid-term
growth initiatives. Sustainable margin
improvement remains a key focus,
including avoiding “lazy” discount fuelled
retailing, increasing vertical brand and
product mix and operating efficiencies.
Accent Group continues to be defined
by strong cash conversion and the
consistent strong returns it delivers
on shareholders’ funds.
The Board remains committed to
returning excess cash to shareholders
and to growing dividends over time.
Future dividend payments will continue
to align to net profit after tax, cashflow
generated in the relevant period and the
cash requirements of the business as we
continue to invest in growth.
COMMUNITY
As a business, we are incredibly proud
of our continued support for a number
of community organisations over the
last year.
In 2018, TAF joined forces with the
McGrath Foundation to launch “The
Perfect Fit to Make a Difference”
campaign. This initiative saw TAF stores
turn pink to raise funds and awareness
for the McGrath Foundation. From
28 August 2018 to the 10 September
2018, $5 from the sale of every pair of
women’s running styles sold in store
or online was donated to the McGrath
Foundation. Over the 2-week period,
we raised over $75,000 which will be
used to help place McGrath Breast Care
Nurses in communities across Australia.
The partnership is set to continue in
2019, with the launch of the “We Give a
Fit About Breasts” campaign in August.
In August, we also collaborated with
Guide Dogs Australia for the ‘Pawgust’
campaign, challenging all Aussies and
their dogs to walk 30 minutes a day for
30 days. This coincides with the launch
of the Skechers GoWalk5 campaign
across retail, wholesale, outdoor, media
and digital channels.
Platypus sponsored ‘Videos for Change’,
a video challenge that provides a
platform for teenagers to channel their
passion and creativity into effecting
positive social change. It calls on high
school students to create a one-
minute video on a social issue they feel
passionate about, with the chance to win
great prizes and for the winning entry
to be broadcast on the The Project on
Channel Ten. Past entries have covered
a range of important issues, including
domestic violence, positive body- image,
bullying and social inclusion. We are
passionate about supporting the next
generation of leaders – encouraging
them to dream big, make a difference
and giving them the platform to
be heard.
This year we also continued our Platypus
Discover Series, offering emerging
talent the opportunity to win a trip of a
lifetime and be mentored by their idols
in the categories of Art, Dance & Music.
We partnered with three incredible
ambassadors to tell their stories to
inspire young talent to keep going,
remain focused and push the boundaries
of what’s possible. The campaign
reached over 14 million people and had
over 1,400 entries. We will now roll into
the next phase where we showcase the
talent discovered through the series and
celebrate the talent of today’s youth.
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Accent Group Limited Annual Report 2019 Accent
Group
Financial
Report
2019
The directors present their report, together with the financial
statements, on the consolidated entity (referred to hereafter
as the ‘Consolidated Entity’ or ‘Group’) consisting of Accent
Group Limited (referred to hereafter as the ‘Company’ or
‘Accent Group’) and the entities it controlled at the end of,
or during, the year ended 30 June 2019.
11
Accent Group Limited Annual Report 2019 Directors’ Report
DIRECTORS
The following persons were directors of Accent Group during the whole of the financial year and up to the date of this report, unless
otherwise stated:
David Gordon - Chairman
Daniel Agostinelli - Chief Executive Officer
Brett Blundy
Stephen Goddard
Michael Hapgood
Stephen Kulmar
Donna Player
Nico van der Merwe – alternate director for Brett Blundy (appointed effective 10 August 2018)
COMPANY SECRETARIES
The following persons were Company Secretaries of Accent Group during the whole of the financial year and up to the date of this
report, unless otherwise stated:
Matthew Durbin
Celesti Harmse
PRINCIPAL ACTIVITIES
Accent Group is a regional leader in the retail and distribution sectors of branded performance and lifestyle footwear, with
462 stores and 17 websites across 11 different retail banners and exclusive distribution rights for 12 international brands across
Australia and New Zealand.
The combined Group’s brands include The Athlete’s Foot (‘TAF’), Platypus Shoes, Hype DC, Skechers, Merrell, CAT, Vans,
Dr.Martens, Saucony, Timberland, Sperry, Palladium, Stance, Supra, Subtype and The Trybe.
DIVIDENDS
Dividends paid during the financial year were as follows:
Final dividend for the year ended 1 July 2018 of 3.75 cents (2017: 3.00 cents) per ordinary share
Interim dividend for the year ended 30 June 2019 of 4.50 cents (2018: 3.00 cents) per ordinary share
Dividends paid to non-controlling interests
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
20,297
24,356
89
16,269
16,269
81
44,742
32,619
In respect of the financial year ended 30 June 2019, the directors recommended the payment of a final fully franked dividend of
3.75 cents per share to be paid on 26 September 2019 to the registered holders of fully paid ordinary shares as at 12 September 2019.
REVIEW OF OPERATIONS
Profit for the year attributable to the owners of the Group amounted to $53,869,000 (1 July 2018: $43,957,000).
The Operating and Financial Review of the Group for the financial year ended 30 June 2019 is provided in the Chairman and
Chief Executive Officer’s Report on page 6 and forms part of the Directors Report.
12
Accent Group Limited Annual Report 2019for the year ended 30 June 2019 SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
During the year, the Group completed the acquisition of 30 TAF stores. This included the reacquisition of the New Zealand Master
Franchise License, representing 6 Corporate stores, 2 Franchise Stores and 1 Online store. In addition to this, the Group acquired
the Subtype business, a sneaker and fashion boutique from Zanerobe Global Holdings Pty Ltd.
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
Apart from the dividend declared as disclosed in Note 32, no other matter or circumstance has arisen since 30 June 2019 that has
significantly affected, or may significantly affect the Group's operations, the results of those operations, or the Group's state of
affairs in future financial years.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
All relevant future developments are outlined in the Chairman and Chief Executive Officer’s Report on page 6.
ENVIRONMENTAL REGULATION
The Group operates primarily within the retail and wholesale sectors and conducts its business activities with respect for the
environment while continuing to meet the expectations of shareholders, customers, employees and suppliers.
During the year under review, the Directors are not aware of any particular or significant environmental issues which have been
raised in relation to the Group’s operations.
The Group is not subject to any significant environmental regulation under Australian Commonwealth or State law.
INFORMATION ON DIRECTORS
The names and particulars of the directors of the Company during or since the end of the financial year are:
Name:
Title:
David Gordon
Non-Executive Chairman
Qualifications:
BCom, LLB
Experience and expertise:
David was a former Mergers and Acquisitions partner at Freehills and corporate advisory firm
Wentworth Associates. He is also the founder of Lexicon Partners, an independent advisory
and investment firm. He has over 30 years’ experience advising companies, funds and high net
worth individuals on complex corporate transactions. David is also Chairman of the Advisory
Board of the Winning Group and Chairman and Director of a number of private companies.
He has been a Non-Executive Director of Accent Group since October 2006 and was appointed
Non-Executive Chairman in November 2017.
Special responsibilities:
Chairman of the Board and member of the Audit and Risk Committee and Remuneration and
Nomination Committee.
Name:
Title:
Experience and expertise:
Daniel Agostinelli
Chief Executive Officer
Daniel oversees the day to day operations of Accent Group. He has over 30 years of retail
experience and was formerly the CEO of Sanity Music and part owner of the Ghetto Shoes
sneaker business. Daniel has been with Accent Group since 2006 and CEO of Accent Group
since March 2015.
Special responsibilities:
None
Name:
Title:
Experience and expertise:
Brett Blundy
Non-Executive Director
Brett is one of Australia’s best known and most successful retailers and entrepreneurs. He is
the Chairman and Founder of BBRC, a private investment group with diverse global interests
across retail, capital management, retail property, beef, and other innovative ventures. BBRC’s
Retail presence extends to over 800 stores across more than 15 countries, and its Capital
Management business has offices in Sydney & New York. Brett was appointed Non-Executive
Director in December 2017.
Special responsibilities:
Member of the Audit and Risk Committee.
13
Accent Group Limited Annual Report 2019Directors’ Reportfor the year ended 30 June 2019 Name:
Title:
Experience and expertise:
Stephen Goddard
Non-Executive Director
Stephen is currently a non-executive director and Chair of the Audit and Risk Committee of
GWA Group Limited and a non-executive director of JB Hi-Fi Limited and Nick Scali Limited.
Stephen is a former non-executive director and Chair of the Audit and Risk Committee of
both Pacific Brands Limited and Surfstitch Group Limited. He was also formerly the Finance
Director and Operations Director for David Jones Limited and the founding Managing Director
of Officeworks. Stephen is the Chairman of the Audit and Risk Committee and has extensive
retail, finance, and board experience. Stephen was appointed Non-Executive Director in
November 2017.
Special responsibilities:
Chairman of the Audit and Risk Committee.
Name:
Title:
Experience and expertise:
Michael Hapgood
Co-Founder and Non-Executive Director
A founding director and shareholder of Accent Group, Michael has extensive knowledge of
the processes required to effectively launch, source and manage global brands within the
Australasian market. From Accent Group’s inception, Michael has been intimately involved in the
development of all major strategic initiatives for the business initially from 1988 as marketing
director before becoming CEO in 1998 until the sale to RCG Group in May 2015. Michael then
became Accent Group’s Chairman until August 2016 when all ongoing executive roles were
relinquished. He continues as a Non-Executive Director and shareholder of Accent Group.
Special responsibilities:
None
Name:
Title:
Experience and expertise:
Stephen Kulmar
Non-Executive Director
Stephen is the former CEO of IdeaWorks and is currently the CEO of Retail Oasis, a retail marketing
consultancy business. Stephen has over 40 years’ experience in advertising and has extensive
experience in retail strategy, brand strategy, channel to market strategy, business re-engineering
and new retail business development. Stephen sits on a number of boards as a Non-Executive
Director, including Thorn Group Limited. He has been a director since August 2007.
Special responsibilities:
Chairman of the Remuneration and Nomination Committee.
Name:
Title:
Experience and expertise:
Donna Player
Non-Executive Director
Donna has over 35 years’ experience in retail including senior executive positions in
merchandising, planning and marketing with Big W and David Jones. Donna is currently a
non-executive director of Baby Bunting Group Limited, a member of The Iconic advisory board
and Merchandise Director of Camilla, Australia. Donna has a proven track record in developing
and delivering retail strategy and business transformation. Donna was appointed Non-Executive
Director in November 2017.
Special responsibilities:
Member of the Remuneration and Nomination Committee.
Name:
Title:
Experience and expertise:
Nico van der Merwe
Alternate Director for Brett Blundy (appointed 10 August 2018)
Nico originally joined BBRC in 1997. He has held a number of senior finance roles across
BBRC and is currently the Group Chief Financial Officer. Nico has over 30 years’ experience in
commercial roles across the retail, real estate and cattle industry sectors. He holds a Bachelor of
Accounting Science (Hons) and Bachelor of Commerce degrees and is a member of the Institute
of Chartered Accountants in Australia. Nico was appointed alternate director for Brett Blundy
on 10 August 2018.
Special responsibilities:
None
14
Accent Group Limited Annual Report 2019for the year ended 30 June 2019Directors’ Report INFORMATION ON COMPANY SECRETARIES
Matthew Durbin
Matthew is Group Chief Financial Officer and joint Company Secretary. Matthew is a qualified accountant (FCPA) with 30 years’
experience in retail. Prior to joining Accent Group he was the CFO and COO of The PAS Group and has also held executive roles
with David Jones in strategy, financial services and merchandise planning.
Celesti Harmse
Celesti is General Counsel and joint Company Secretary with over 16 years’ experience practicing law across a range of industries.
Celesti started her career at Minter Ellison and, prior to joining Accent Group, she held senior legal positions in the retail, distribution
and technology industries.
MEETINGS OF DIRECTORS
The following table sets out the number of directors' meetings (including meetings of Committees of directors) held during the year
ended 30 June 2019 and the number of meetings attended by the members of the Board or the relevant committee. During the
financial year, 8 Board Meetings, 6 Audit and Risk Committee meetings and 3 Remuneration and Nomination Committee meetings
were held.
Of the 8 Board Meetings held during the financial year, there were 4 scheduled Board Meetings and a further 4 Board Meetings
called at short notice to consider specific matters. All directors attended the 4 scheduled Board Meetings.
Directors have a standing invitation to attend meetings of Board Committees of which they are not members. All Directors receive
copies of the agendas, minutes and papers of each Board Committee meeting.
David Gordon
Daniel Agostinelli
Brett Blundy
Stephen Goddard
Michael Hapgood
Stephen Kulmar
Donna Player
Nico van der Merwe
Full Board
Audit and Risk
Committee
Attended
Held
Attended
Held
Remuneration and
Nomination Committee
Attended
Held
8
8
5
8
8
8
8
–
8
8
8
8
8
8
8
–
6
–
–*
6
–
–
–
6*
6
–
6
6
–
–
–
6
3
–
–
–
–
3
3
–
3
–
–
–
–
3
3
–
Held: represents the number of meetings held during the time the director held office.
* Audit and Risk Committee meetings were attended by Nico van der Merwe, alternate director for Brett Blundy.
REMUNERATION REPORT (AUDITED)
The remuneration report details the key management personnel remuneration arrangements for the Group, in accordance with the
requirements of the Corporations Act 2001 and its Regulations.
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities
of the entity, directly or indirectly, including all directors.
The key management personnel of the Group consisted of the following directors of Accent Group Limited:
– David Gordon
– Daniel Agostinelli
– Brett Blundy
– Stephen Goddard
– Michael Hapgood
– Stephen Kulmar
– Donna Player
– Nico van der Merwe – alternate director for Brett Blundy (appointed effective 10 August 2018)
And the following person:
– Matthew Durbin – Chief Financial Officer
15
Accent Group Limited Annual Report 2019Directors’ Reportfor the year ended 30 June 2019 The remuneration report is set out under the following main headings:
– Principles used to determine the nature and amount of remuneration
– Details of remuneration
– Service agreements
– Share-based compensation
– Additional information
– Additional disclosures relating to key management personnel
Principles used to determine the nature and amount of remuneration
Remuneration policy
Remuneration policy is determined and executed on behalf of the Board by the Remuneration and Nomination Committee
(‘RNC’). The RNC consists of Stephen Kulmar (Chairman), David Gordon and Donna Player, all non-executive directors. The RNC
makes recommendations to the Board on matters relating to remuneration for the entities within the Group. The RNC considers
recruitment, retention and termination policies and procedures, non-executive directors’ remuneration, executive directors and
senior management remuneration and incentive policy and awards, and contractual arrangements with senior managers and
executives. More detail on the Company’s remuneration policy is provided in the Corporate Governance Statement.
The Group’s remuneration reviews take place within three months of the end of each financial year. Prior to these reviews, the
Chief Executive Officer makes recommendations to the RNC regarding the remuneration of each of his direct reports and the overall
remuneration framework for all employees. The RNC meets to discuss the remuneration of the Chief Executive Officer.
The Group’s remuneration policy is designed to attract, motivate and retain high quality and high performing employees, while
ensuring that the interests of employees are in line with the interests of shareholders. The Board recognises that the success of
the Group hinges on the performance and abilities of its employees. Therefore, as a matter of policy, employees of the Group are
remunerated on the following basis:
Base remuneration
Base remuneration is set with reference to prevailing market rates for similar positions, adjusted to account for the experience, ability
and productivity of the individual employee. Base remuneration provides fixed remuneration on a total cost-to-company basis, which
includes any fringe benefits to the employee as well as superannuation at 9.50% of the base remuneration up to the statutory cap.
Salary packaging options are available for some employees.
Short Term Incentives (STI)
The Board believes that well designed STI plans are essential elements of remuneration as they provide tangible incentives for
employees to strive for excellence. Relevant employees are eligible to earn STIs if certain pre-determined measurable financial
targets are achieved. The STIs for all non-store employees are linked to base remuneration and the maximum amount that can be
earned is a fixed percentage of that base remuneration. Senior Executives are eligible for bonuses of between 20% and 100% of
their base remuneration, based on the same pre-determined measurable financial targets.
Senior executives have a significant proportion of their STI tied directly to the achievement of pre-determined profit targets, either
for the Group as a whole or a relevant business unit or both (as the case may be) and aged inventory targets. The RNC signs off all
bonuses paid to senior executives. This STI drives a contribution to the short-term performance of the Company by being tied to
the annual profit targets.
Long Term Incentives (LTI)
The Company has implemented LTI under the Employee Share Scheme ('ESS') and the Performance Rights Plan ('PRP'). The purpose
of these plans is to encourage employees to share in the ownership of the Company in order to promote the long-term success of
the Company as a goal shared by the employees and to align employees’ interest to that of shareholders.
The ESS, which was implemented during the 2013 financial year, is part of the Company’s long-term retention and corporate
alignment strategy. As at 30 June 2019, 2,756,670 shares issued under the ESS were outstanding.
The PRP operates under the rules approved by shareholders at the Company's 2016 Annual General Meeting, held on 25 November
2016. The Board intends for the PRP to replace the ESS. As at 30 June 2019, 24,876,154 rights issued under the plan were outstanding.
Performance rights
The objective of the PRP is to align the interests of employees of the Group with those of the shareholders and provide employees of
the Group who are considered to be key to the future success of the Group with an opportunity to receive shares in order to reward and
retain the services of those persons and recognise the employees of the Group for their contribution to the future success of the Group.
Eligibility and grant of performance rights
The Board may, from time to time, grant performance rights to an employee of the Group who the Board determines to be eligible to
participate in the PRP. Eligibility criteria include influence over the Group’s long-term growth objectives and maximising shareholder
value. The performance rights granted are under the terms and conditions of the PRP and may include additional terms and
conditions, including any performance conditions, as the Board determine.
Performance rights carry no dividend or voting rights.
16
Accent Group Limited Annual Report 2019for the year ended 30 June 2019Directors’ Report Remuneration of non-executive directors
On an annual basis, the RNC considers the fees payable to non-executive directors. When considering the level of fees, the
Committee undertakes a review of benchmark fees paid by similar organisations and may access independent advice as well as
drawing on the knowledge and experience of its members. The remuneration committee makes recommendations on non-executive
director fees to the Board. Non-executive directors can choose, subject to certain restrictions, the amount of their fees allotted to
superannuation.
In summary, the Board believes that the remuneration policies in place align the interests of all employees with those of the
Company’s shareholders while at the same time enabling the Group to retain a high-quality team of executives.
Use of remuneration consultants
During the year, the Company did not engage independent consultants to provide information on remuneration matters.
Voting and comments made at the Company's 2018 Annual General Meeting ('AGM') held on 23 November 2018
At the 2018 AGM, 76.31% of the votes received supported the adoption of the remuneration report for the year ended 1 July 2018.
This excludes key management personnel, representing 36.53% of the total issued capital. The Company did not receive any specific
feedback at the AGM regarding its remuneration practices.
Details of remuneration
Amounts of remuneration
The compensation for each member of the key management personnel of the Group is set out below.
Short-term benefits
Cash salary
and fees
$
Cash
bonus
$
Other
monetary
$
Leave
benefits
$
Post-
employment
benefits
Super-
annuation
$
Share-based
payments
Equity-
settled
$
228,311
100,000
98,174
98,663
98,174
100,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
21,690
–
9,327
–
9,327
–
–
–
–
–
–
–
–
–
Total
$
250,001
100,000
107,501
98,663
107,501
100,000
–
30 Jun 2019
Non-Executive Directors:
D Gordon**
B Blundy
S Goddard
M Hapgood
S Kulmar
D Player
N van der Merwe
Executive Directors:
D Agostinelli*
1,063,643
1,200,000
33,057
111,357
25,000
758,201
3,191,258
Other Key Management
Personnel:
M Durbin*
459,979
397,831
–
15,021
25,000
310,396
1,208,227
2,246,944
1,597,831
33,057
126,378
90,344
1,068,597
5,163,151
*
Cash bonuses relate to the STI bonus issued on the basis of the achievement of relevant performance measures for the year ended 30 June 2019 and
were approved by the Remuneration and Nomination Committee in August 2019. Share based payments represent performance rights. The fair value of
performance rights is measured at grant date and progressively allocated to profit and loss over the vesting period. The amount included in remuneration
above may not be indicative of the benefit (if any) that key management personnel may ultimately realise should the performance rights vest.
** The Chairman’s total remuneration for the year ended 30 June 2019 relates to him being in that role for the full year (part year for the year ended 1 July
2018, appointed Non-Executive Chairman in November 2017) and does not reflect any underlying increase in remuneration.
17
Accent Group Limited Annual Report 2019Directors’ Reportfor the year ended 30 June 2019 Short-term benefits
Cash salary
and fees
$
Cash
bonus
$
Other
monetary**
$
Leave
benefits
$
Post-
employment
benefits
Super-
annuation
$
Share-based
payments
Equity-
settled
$
1 Jul 2018
Non-Executive Directors:
D Gordon
B Blundy
S Goddard
M Hapgood
S Kulmar
D Player
I Hammerschlag***
C Thompson***
D Gilbert***
Executive Directors:
177,044
56,720
59,499
96,813
98,174
58,331
117,349
83,220
68,493
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
$
193,863
56,720
65,151
96,813
107,501
58,331
117,349
83,220
75,000
–
–
–
–
–
–
–
–
–
369,942
2,283,053
–
1,033,613
(24,479)
2,329,682
16,819
–
5,652
–
9,327
–
–
–
6,507
25,000
18,854
18,750
D Agostinelli*
916,190
900,000
36,444
M Hirschowitz***
288,472
–
702,093
H Brett***
593,382
675,000
1,011,661
35,477
24,194
55,368
Other Key Management
Personnel:
M Durbin*
253,308
218,750
–
5,714
10,820
241,233
729,825
2,866,995
1,793,750
1,750,198
120,753
111,729
586,696
7,230,121
*
Cash bonuses relate to STI bonuses issued on the basis of the achievement of relevant performance measures for the year ended 1 July 2018 and were
approved by the Remuneration and Nomination Committee in August 2018.
** Other monetary short term benefits represents payments and entitlements upon retirement from the Group.
*** Resigned during the year ended 1 July 2018.
The proportion of the cash bonus paid/payable or forfeited is as follows:
Maximum
potential STI
30 Jun 2019
Maximum
potential STI
1 Jul 2018
STI Cash bonus paid/payable
1 Jul 2018
30 Jun 2019
STI Cash bonus
forfeited
30 Jun 2019
STI Cash bonus
forfeited
1 Jul 2018
Name
Executive Directors:
Daniel Agostinelli
Hilton Brett*
Other Key Management Personnel:
100%
–
100%
100%
100%
–
100%
75%
–
–
–
–
–
–
Matthew Durbin*
75%
75%
75%
75%
* For the year ended 1 July 2018, STI cash bonus payable have been prorated based on length of employment.
STI achievement was subject to financial and non-financial performance conditions (all of which were achieved) as set out below:
– Group profit target improvement of 10%;
– Group aged inventory target of 3%; and
– Other qualitative measures as assessed by the Board. Qualitative measures are individual non-financial performance measures
related to strategy implementation, leadership and behaviours consistent with the Group’s values and corporate philosophy.
All bonuses are paid in the financial year following the year in which they were earned.
18
Accent Group Limited Annual Report 2019for the year ended 30 June 2019Directors’ Report CEO Remuneration
In May 2018, following the transition of Daniel Agostinelli to the role of sole CEO of the Group and the associated increase in the
scope and responsibilities of his role, the Board undertook a benchmark review of CEO salaries in both the listed retail and listed
consumer discretionary sectors. Following this review, and in consideration of the ongoing performance of the CEO, the findings
of the benchmark review and the Group’s remuneration objectives to attract and retain strong CEO talent, the Board approved an
increase to the CEO’s base compensation to $1,200,000. This increase in base remuneration, along with the achievement of all relevant
performance measures for the current financial year, including profit growth of 22.5%, resulted in the achievement of the CEO’s STI at
the maximum 100% of base salary. The share-based payments amount of $758,201 reflects the non-cash accounting charge for the
fair value of performance rights for the 2017-2019 and the 2018-2022 PRP tranches which are progressively allocated to profit and
loss over the vesting period. No tangible financial benefit is received until the relevant performance conditions of each tranche are met.
Service agreements
The remuneration and other terms of employment for key management personnel are set out in individual Company employment
agreements that are not fixed term contracts.
Termination of Daniel Agostinelli is subject to 12 months' notice in writing provided by either party and termination of Matthew
Durbin is subject to 6 months’ notice in writing provided by either party.
Share-based compensation
Issue of shares
There were no shares issued to directors or other key management personnel as part of compensation during the year ended
30 June 2019.
Options
There were no options over ordinary shares granted to or vested in directors and other key management personnel as part of
compensation during the year ended 30 June 2019.
Performance rights
No performance rights were granted to directors or other key management personnel in this financial year.
Vesting of performance rights are subject to prescribed performance conditions. The performance conditions are as follows:
– Performance rights granted in 2017 are subject to an earnings per share (‘EPS’) performance condition (50%) and a total
shareholder return (‘TSR’) performance condition (50%). The 2017 performance rights are measured over a 3-year period.
– Performance rights granted in 2018 are all subject to an EPS performance condition measured over a 5-year period. For the
performance rights to vest, the Company’s compound annual growth in adjusted diluted earnings per share (‘ADEPS’) must
equal or exceed 10% p.a. over a five-year period. If the performance condition is met, 100% of the performance rights vest at
the end of the five-year period. If the performance condition is not met, none of the performance rights vest unless the Board
determines otherwise.
Additional information
The following tables show the gross revenue, profits and dividends for the last five years for the listed entity, as well as the share
price capitalisation at the end of the respective financial years.
The earnings of the Group for the five years to 30 June 2019 are summarised below:
2019
$'000
2018
$'000
2017
$'000
2016
$'000
2015
$'000
Revenue
796,263
702,377
636,153
442,723
135,872
Net profit from continuing operations
Net profit attributable to owners of the company
Dividends
Share price at financial year end ($)
Shares on issue ('000)
53,886
53,869
44,742
2019
1.39
44,000
43,957
32,619
2018
1.65
29,352
29,157
32,561
2017
0.86
30,183
29,924
23,513
2016
1.48
10,549
10,323
11,963
2015
1.21
541,241
541,791
542,291
490,304
436,265
The tables above show that there has been a general trend of increasing net profit from continuing operations. The share price is
subject to share market volatility and is influenced by external factors.
The Board is of the opinion that these results can be attributed in part to the previously described remuneration policy and is
satisfied that it has contributed to increasing shareholder wealth over the past five years.
19
Accent Group Limited Annual Report 2019Directors’ Reportfor the year ended 30 June 2019 Additional disclosures relating to key management personnel
Shareholding
The number of shares in the Company held during the financial year by each director and other members of key management
personnel of the Group, including their personally related parties, is set out below:
Ordinary shares
David Gordon
Daniel Agostinelli
Brett Blundy
Stephen Goddard
Michael Hapgood
Stephen Kulmar
Donna Player
Nico van der Merwe
Matthew Durbin
Balance at
the start of
the year
Received
as part of
remuneration
Additions
Disposals/
other
Balance at
the end of
the year
6,599,034
16,388,712
97,539,693
50,000
14,571,425
900,000
–
–
–
136,048,864
–
–
–
–
–
–
–
–
–
–
–
(4,000,000)
2,599,034
930,000
–
–
–
–
50,000
–
50,000
–
–
–
17,318,712
97,539,693
50,000
(571,425) 14,000,000
–
–
–
–
900,000
50,000
–
50,000
1,030,000
(4,571,425) 132,507,439
Option holding
There were no options in the Company held during the financial year by a director or other members of key management personnel
of the Group, including their personally related parties.
Performance rights holding
The number of performance rights over ordinary shares in the Company held during the financial year by each director and other
members of key management personnel of the Group, including their personally related parties, is set out below:
Performance rights over ordinary shares
Daniel Agostinelli
Matthew Durbin
Balance at
the start of
the year
5,871,526
3,000,000
8,871,526
Granted
Vested
Expired/
forfeited/
other
Balance at
the end of
the year
–
–
–
–
–
–
–
–
–
5,871,526
3,000,000
8,871,526
Loans to key management personnel and their related parties
The following loans were held by key management personnel at the beginning and end of the year:
Loans to/(from) key management personnel:
– Daniel Gilbert (interest at 6% per annum)*
* Relates to vendor finance component of Hype DC acquisition which was repaid on 13 July 2018.
Transactions with related parties
The following transactions occurred with related parties:
Consolidated
2019
$
2018
$
–
(4,593,750)
Placed Pty Ltd, a company associated with Brett Blundy, provided recruitment services to the Group amounting to $709,737. These
services were provided on an arm’s length basis.
Aventus Kotara South Pty Ltd, a company associated with Brett Blundy, is the landlord of the Skechers Kotara outlet, with lease
terms at arm’s length.
This concludes the remuneration report, which has been audited.
20
Accent Group Limited Annual Report 2019for the year ended 30 June 2019Directors’ Report SHARES UNDER OPTION AND ISSUED UNDER THE EMPLOYEE SHARE SCHEME AND OTHER TREASURY SHARES
There were no unissued ordinary shares of Accent Group under option. Unvested ordinary shares of Accent Group Limited under
the ESS at the date of this report are as follows:
Grant date
02/10/2014
30/03/2015
27/05/2015
27/05/2015
28/08/2015
13/05/2016
Expiry date
30/03/2020
30/09/2020
30/09/2020
30/09/2020
30/08/2020
28/02/2021
Exercise price
Number under
option
$0.590
$0.730
466,668
73,334
$0.730
933,334
$1.010
333,333
$1.140
550,001
$1.490
400,000
2,756,670
No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue of the
Company or of any other body corporate.
SHARES UNDER PERFORMANCE RIGHTS
Unissued ordinary shares of Accent Group under performance rights at the date of this report are as follows:
Grant date
11/01/2017
03/10/2017
27/12/2017
20/06/2018
Expiry date
09/11/2019
30/10/2022
30/10/2022
30/10/2022
Number under
rights
1,076,154
16,700,000
6,700,000
400,000
24,876,154
No person entitled to exercise the performance rights had or has any right by virtue of the performance right to participate in any
share issue of the Company or of any other body corporate.
SHARES ISSUED ON THE EXERCISE OF OPTIONS
There were no ordinary shares of Accent Group issued on the exercise of options during the year ended 30 June 2019 and up to the
date of this report.
SHARES ISSUED ON THE EXERCISE OF PERFORMANCE RIGHTS
There were no ordinary shares of Accent Group issued on the exercise of performance rights during the year ended 30 June 2019 and
up to the date of this report.
INDEMNITY AND INSURANCE OF OFFICERS
The Company has indemnified the directors and executives of the Company for costs incurred, in their capacity as a director or
executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the Company paid a premium in respect of a contract to insure the directors and executives of the Company
against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of
the liability and the amount of the premium.
INDEMNITY AND INSURANCE OF AUDITOR
The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the Company or
any related entity against a liability incurred by the auditor.
During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the Company or any
related entity.
21
Accent Group Limited Annual Report 2019Directors’ Reportfor the year ended 30 June 2019 PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the
Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the
Company for all or part of those proceedings.
During the year no proceedings were brought or intervened in on behalf of the Company with leave of the Court under section 237
of the Corporations Act 2001.
NON-AUDIT SERVICES
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year are outlined in Note 36
to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another person or firm
on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in Note 36 to the financial statements do not compromise the external
auditor's independence requirements of the Corporations Act 2001 for the following reasons:
– all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the
auditor; and
– none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for
Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the
auditor's own work, acting in a management or decision-making capacity for the Company, acting as advocate for the Company
or jointly sharing economic risks and rewards.
OFFICERS OF THE COMPANY WHO ARE FORMER PARTNERS OF DELOITTE TOUCHE TOHMATSU
There are no officers of the Company who are former partners of Deloitte Touche Tohmatsu.
ROUNDING OF AMOUNTS
The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments
Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that Corporations
Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
AUDITOR'S INDEPENDENCE DECLARATION
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out immediately
after this directors' report.
AUDITOR
Deloitte Touche Tohmatsu continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001.
On behalf of the directors
David Gordon
Chairman
22 August 2019
Melbourne
22
Accent Group Limited Annual Report 2019for the year ended 30 June 2019Directors’ Report
Auditor’s Independence Declaration
Deloitte Touche Tohmatsu
ABN 74 490 121 060
550 Bourke Street
Melbourne VIC 3000
Tel: +61 3 9671 7000
Fax: +61 3 9671 7001
www.deloitte.com.au
The Board of Directors
Accent Group Limited
2/64 Balmain Street
Richmond, Victoria 3121
22 August 2019
Dear Board Members,
Auditor’s Independence Declaration to Accent Group Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
declaration of independence to the directors of Accent Group Limited.
As lead audit partner for the audit of the financial report of Accent Group Limited for the year ended
30 June 2019, I declare that to the best of my knowledge and belief, there have been no contraventions
of:
(i) the auditor independence requirements of the Corporations Act 2001 in relation to the
audit; and
(ii) any applicable code of professional conduct in relation to the audit.
Yours faithfully
DELOITTE TOUCHE TOHMATSU
David White
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network.
19
23
Accent Group Limited Annual Report 2019
Statement of Profit or Loss and Other Comprehensive Income
for the year ended 30 June 2019
Revenue
Other income
Interest revenue
Expenses
Cost of sales
Distribution
Marketing
Occupancy
Employee expenses
Other
Depreciation and amortisation
Finance costs
Profit before income tax expense
Income tax expense
Profit after income tax expense for the year
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Net change in the fair value of cash flow hedges taken to equity, net of tax
Foreign currency translation
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Profit for the year is attributable to:
Non-controlling interest
Owners of Accent Group Limited
Total comprehensive income for the year is attributable to:
Non-controlling interest
Owners of Accent Group Limited
Basic earnings per share
Diluted earnings per share
Note
6
7
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
796,263
702,377
116
469
2
804
(339,341)
(305,490)
(27,495)
(28,011)
(92,746)
(22,107)
(24,425)
(81,644)
(162,192)
(145,508)
(37,741)
(34,377)
(28,268)
(24,133)
(4,034)
77,020
(23,134)
53,886
(1,408)
(579)
(1,987)
51,899
17
53,869
53,886
17
51,882
51,899
Cents
10.02
9.54
(4,581)
60,918
(16,918)
44,000
7,434
(440)
6,994
50,994
43
43,957
44,000
43
50,951
50,994
Cents
8.23
8.20
8
8
9
45
45
The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes
24
Accent Group Limited Annual Report 2019 Statement of Financial Position
as at 30 June 2019
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Other current assets
Total current assets
Non-current assets
Receivables
Derivative financial instruments
Property, plant and equipment
Intangibles
Deferred tax
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Deferred revenue
Provisions
Borrowings
Derivative financial instruments
Provision for income tax
Deferred lease incentives
Total current liabilities
Non-current liabilities
Provisions
Borrowings
Derivative financial instruments
Deferred tax
Deferred lease incentives
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained profits/(accumulated losses)
Equity attributable to the owners of Accent Group Limited
Non-controlling interest
Total equity
Consolidated
Note
30 Jun 2019
$'000
1 Jul 2018
$'000
Restated
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
36,698
29,797
131,470
3,769
2,023
38,772
18,370
98,556
4,614
1,367
203,757
161,679
–
–
341
676
86,167
74,664
352,893
346,091
26,782
465,842
669,599
22,310
444,082
605,761
99,459
2,628
13,389
30,000
925
11,808
8,895
74,929
1,999
10,144
22,625
251
10,497
7,174
167,104
127,619
2,465
56,125
–
13,546
27,022
99,158
64
51,000
184
16,487
18,494
86,229
266,262
403,337
213,848
391,913
388,756
386,973
13,147
1,434
12,151
(8,184)
403,337
390,940
–
973
403,337
391,913
Refer to Note 4 for detailed information on Restatement of comparatives.
The above statement of financial position should be read in conjunction with the accompanying notes
25
Accent Group Limited Annual Report 2019 Statement of Changes in Equity
for the year ended 30 June 2019
Consolidated
Issued capital
$'000
Foreign
currency
translation
reserve
$'000
Hedging
reserve - cash
flow
hedges
$'000
Share-based
payments
reserve
$'000
Accumulated
losses/
Retained
earnings
$'000
Non-
controlling
interest
$'000
Total equity
$'000
Balance at 3 July 2017
385,310
3,178
(4,035)
4,065
(19,603)
1,737
370,652
Profit after income tax
expense for the year
Other comprehensive
income for the year, net
of tax
Total comprehensive
income for the year
Transactions with owners in
their capacity as owners:
Share-based payments
–
–
–
–
Treasury share payments
1,663
Non-controlling interest
on disposals
Dividends paid (Note 32)
–
–
–
–
(440)
7,434
(440)
7,434
–
–
–
–
–
–
–
–
–
–
–
1,949
–
–
–
Balance at 1 July 2018
386,973
2,738
3,399
6,014
43,957
43
44,000
–
43,957
–
–
–
(32,538)
(8,184)
–
43
–
–
(726)
(81)
973
6,994
50,994
1,949
1,663
(726)
(32,619)
391,913
Consolidated
Foreign
currency
translation
reserve
$'000
Hedging
reserve - cash
flow hedges
$'000
Share-based
payments
reserve
$'000
Accumulated
losses/
Retained
earnings
$'000
Non-
controlling
interest
$'000
Issued
capital
$'000
Total equity
$'000
Balance at 2 July 2018
386,973
2,738
3,399
6,014
(8,184)
973
391,913
Profit after income tax
expense for the year
Other comprehensive
income for the year, net
of tax
Total comprehensive
income for the year
Transactions with owners in
their capacity as owners:
Share-based payments
–
–
–
–
Treasury share payments
1,783
Buy-back of non-
controlling interest
Dividends paid (Note 32)
–
–
–
–
(579)
(1,408)
(579)
(1,408)
–
–
–
–
–
–
–
–
–
–
–
2,983
–
–
–
Balance at 30 June 2019
388,756
2,159
1,991
8,997
53,869
–
53,869
–
–
402
(44,653)
1,434
17
–
17
–
–
(901)
(89)
–
53,886
(1,987)
51,899
2,983
1,783
(499)
(44,742)
403,337
The above statement of changes in equity should be read in conjunction with the accompanying notes
26
Accent Group Limited Annual Report 2019 Statement of Cash Flows
for the year ended 30 June 2019
Consolidated
Note
30 Jun 2019
$'000
1 Jul 2018
$'000
Cash flows from operating activities
Receipts from customers and franchisees (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Interest and other finance costs paid
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Net acquisition of franchise stores
Payments for property, plant and equipment
Proceeds from disposal of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares, net of transaction costs
Proceeds from borrowings
Repayment of loans from option recipients
Repayment of borrowings
Dividends paid
Net cash used in financing activities
Net decrease in cash and cash equivalents
44
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the financial year
10
The above statement of cash flows should be read in conjunction with the accompanying notes
865,374
782,723
(766,944)
(689,233)
469
(4,580)
(28,632)
65,687
(11,804)
(24,840)
–
804
(4,581)
(19,645)
70,068
(424)
(15,927)
33
(36,644)
(16,318)
1,783
35,125
–
(22,625)
(44,742)
(30,459)
(1,416)
38,772
(658)
36,698
1,663
–
184
(29,500)
(32,619)
(60,272)
(6,522)
45,682
(388)
38,772
27
Accent Group Limited Annual Report 2019 Notes to the Financial Statements
NOTE 1. GENERAL INFORMATION
The financial statements cover Accent Group Limited
('Company', 'parent entity' or 'Accent') as a Group consisting
of Accent Group Limited and the entities it controlled at the
end of, or during, the year ('Group'). The financial statements
are presented in Australian dollars, which is Accent's
functional and presentation currency.
Accent is a listed public company limited by shares, listed on
the Australian Securities Exchange (‘ASX’), incorporated and
domiciled in Australia. Its registered office and principal place
of business is:
2/64 Balmain Street
Richmond VIC 3121
A description of the nature of the Group's operations and its
principal activities are included in the Directors' Report, which
is not part of the financial statements.
The financial statements were authorised for issue, in
accordance with a resolution of directors, on 22 August
2019. The directors have the power to amend and reissue
the financial statements.
NOTE 2. BASIS OF PREPARATION
These general purpose financial statements have been prepared
in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards
Board ('AASB') and the Corporations Act 2001, as appropriate
for for-profit oriented entities. These financial statements also
comply with International Financial Reporting Standards as
issued by the International Accounting Standards Board ('IASB').
Historical cost convention
The financial statements have been prepared under the
historical cost convention, except for, where applicable,
derivative financial instruments and share-based payments
which have been measured at fair value at grant date.
Critical accounting estimates
The preparation of consolidated financial statements requires
the Group to make estimates and judgements that affect the
application of policies and reported amounts. The estimates
which could cause a significant risk of causing a material
adjustment to the carrying amount of assets and liabilities
within the next 12 months are disclosed in the following notes:
– Note 12 Current assets – inventories
– Note 18 Non-current assets – intangibles
– Note 41 Business combinations
– Note 46 Share based payments
NOTE 3. SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of
the financial statements are set out below. These policies have
been consistently applied to all the years presented, unless
otherwise stated.
New or amended Accounting Standards and Interpretations
adopted
In the current year, the Group has adopted all of the following
new and revised Accounting Standards and Interpretations
issued by the Australian Accounting Standards Board ('AASB')
that are relevant to its operations and mandatory for the
current annual reporting period.
Any new or amended Accounting Standards or Interpretations
that are not yet mandatory have not been early adopted.
The following Accounting Standards and Interpretations are
most relevant to the Group:
AASB 9 'Financial Instruments'
The Group has adopted AASB 9 from 2 July 2018 which
replaces AASB 139 ‘Financial Instruments: Recognition and
Measurement’. The Group has applied the AASB 9 changes
prospectively from the date of initial application. The standard
introduces changes to three key areas:
– New requirements for the classification and measurement
of financial instruments.
– A new impairment model based on expected credit losses
for recognising provisions.
– Simplified hedge accounting through closer alignment with
an entity’s risk management methodology.
The Group has elected to apply the simplified approach to
measuring expected credit losses, which uses the lifetime
expected loss allowance for all trade receivables. To measure
the expected credit losses, trade receivables have been
grouped based on shared credit risk characteristics and the
days past due. On this basis, the impact of the expected loss
allowance under AASB 9 against the loss incurred under
AASB 139 is not considered material to the Group.
The adoption of AASB 9 has not had an impact on the Groups
transactions that are subject to hedge accounting. Accordingly,
there has been no impact on the hedging reserve from the
adoption of AASB 9.
AASB 15 ‘Revenue from Contracts with Customers'
The Group has adopted AASB 15 from 2 July 2018 which
replaces AASB 118 ‘Revenue’. The standard establishes a
principles-based approach for revenue recognition and is
based on the concept of recognising revenue for performance
obligations only when they are satisfied and the control of
goods or services is transferred. In doing so, the standard
applies a five-step approach to the timing of revenue
recognition and applies to all contracts with customers,
except those in the scope of other standards. Due to the
straightforward nature of the Group’s revenue streams with
the recognition of revenue at the point of sale and the absence
of significant judgement required in determining the timing
of transfer of control, the adoption of AASB 15 has not had a
material impact on the timing or nature of the Group’s revenue
recognition. The Group’s revenue is principally generated on a
‘point in time’ basis. The amount of revenue recognised by the
Group on an ‘over time’ basis is $2,051,000 and not material in
the context of the Group’s total revenue.
Under AASB 15 a right of return is not a separate performance
obligation and the Group is required to recognise revenue net
of estimated returns. A refund liability and a corresponding
asset representing the right to recover products from the
customer is also recognised. As at 30 June 2019, the potential
refund liability is $418,380.
The Group has adopted AASB 15 using the modified transition
approach and has therefore not restated the prior period
comparatives for the separate recognition of the refund asset
and the increase in the refund provision.
28
for the year ended 30 June 2019Accent Group Limited Annual Report 2019 NOTE 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Parent entity information
In accordance with the Corporations Act 2001, these
financial statements present the results of the Group only.
Supplementary information about the parent entity is disclosed
in Note 40.
Gift cards are considered a prepayment for goods to be delivered
in the future. The Group has an obligation to transfer the goods
in the future, creating a performance obligation. The Group
recognises deferred revenue when the gift card is purchased and
recognises revenue when the customer redeems the gift card and
the Group fulfills the performance obligation.
Principles of consolidation
The consolidated financial statements comprise the financial
statements of the Group. A list of controlled entities
(subsidiaries) at year-end is contained in Note 42.
Royalties and other franchise related income
Franchise royalty fee income is generally earned based upon a
percentage of sales that has occurred and is recognised on an
accrual basis.
The financial statements of subsidiaries are prepared for the
same reporting period as the parent company, using consistent
accounting policies. Adjustments are made to bring into line any
dissimilar accounting policies that may exist.
In preparing the consolidated financial statements, all inter-
company balances and transactions, income and expenses and
profits and losses resulting from intra-Group transactions have
been eliminated. Subsidiaries are consolidated from the date
on which control is obtained to the date on which control is
disposed. The acquisition of subsidiaries is accounted for using
the acquisition method of accounting.
Non-controlling interest in the results and equity of subsidiaries
are shown separately in the statement of profit or loss and
other comprehensive income, statement of financial position
and statement of changes in equity of the Group. Losses
incurred by the Group are attributed to the non-controlling
interest in full, even if that results in a deficit balance.
Foreign currency translation
Foreign currency transactions
Foreign currency transactions are translated into Australian
dollars using the exchange rates prevailing at the dates of
the transactions. Foreign exchange gains and losses resulting
from the settlement of such transactions are recognised in the
income statement.
Foreign operations
The assets and liabilities of overseas subsidiaries are translated
into Australian dollars at the rate as at reporting date and the
income statements are translated at the average exchange
rates for the year. The exchange differences arising on the
retranslation are taken directly to a separate component
of equity.
The foreign currency reserve is recognised in profit or loss
when the overseas subsidiary or net investment is disposed of.
Revenue recognition
The major sources of the Group’s revenue are from sales to
customers, royalties and other franchise related income and
marketing levies received from TAF stores. The Group’s revenue
is principally generated on a ‘point in time’ basis.
Sales to customers
Sales to customers of goods comprise sale of branded
performance and lifestyle footwear to customers outside the
Group less discounts, markdowns, loyalty scheme vouchers and
an appropriate deduction for actual and expected returns. Sales
to customers is stated net of tax. Revenue is recognised when
performance obligations are satisfied and goods are delivered
to the customer and the control of goods is transferred to
the buyer.
29
Franchise establishment fees are recognised as income over the
term of the Franchise Agreement. Franchise establishment fees
are recognised on an over time basis.
Marketing levies
Marketing levies are recognised in the period the sales are
recorded by TAF stores. Marketing levies are collected by the
Group for specific use within the TAF Marketing Fund, which is
operated on behalf of the TAF stores. Expenses in relation to
the marketing of TAF stores are recorded within advertising and
promotion expenses in profit or loss. In any given year, a deficit
in the marketing fund will need to be recouped in the following
year and any surplus in the marketing fund will need to be spent
in the subsequent year.
Income tax
Current tax
Current tax assets and liabilities are measured at the amount
expected to be recovered from or paid to taxation authorities at
the tax rates and tax laws enacted or substantively enacted by
the balance sheet date.
Deferred tax
Deferred tax is accounted for using the balance sheet liability
method, providing for temporary differences between the
carrying amounts of assets and liabilities under financial
reporting and taxation purposes. Deferred tax is measured at
the rates that are expected to apply in the period in which the
liability is settled or asset realised, based on tax rates enacted or
substantively enacted at the reporting date.
Deferred tax assets and liabilities are not recognised if the
temporary difference arises from the initial recognition (other
than in a business combination) of assets and liabilities in a
transaction that affects neither the taxable profit nor the
accounting profit or in relation to the initial recognition of
goodwill.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the deductible temporary differences or unused tax
losses and tax offsets can be utilised. Deferred tax assets are
reduced to the extent that it is no longer probable that the
related tax benefit will be realised.
Deferred tax assets and liabilities are offset when they relate
to income taxes levied by the same taxation authority and the
Group intends to settle its current tax assets and liabilities on
a net basis.
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019 Other receivables includes rebates receivable from suppliers
which is considered fully recoverable and therefore no
allowance has been made.
Inventories
Finished goods are stated at the lower of cost and net realisable
value on an average costing basis. Cost comprises of the
purchase price and other attributable costs incurred in bringing
inventories to their present location.
Net realisable value is the estimated selling price in the ordinary
course of business. Determining the net realisable value of
inventories relies on key assumptions that require the use of
management judgement. An inventory provision is booked for
cases where the realisable value from sale of the inventory is
estimated to be lower than the inventory carrying value.
Management has estimated the inventory provision based on
various factors, including reviewing historical transactional data
of inventory sold below cost, reviewing transactional shrinkage
data over a 12 month period and analysing inventory that has
not been picked or packed in over 270 days.
Derivative financial instruments
The Group enters into a variety of derivative financial
instruments to manage its exposure to interest rate and foreign
exchange risk, including foreign exchange forward contracts and
interest rate swaps. Derivatives are initially recognised at fair
value on the date a derivative contract is entered into and are
subsequently remeasured to their fair value at each reporting
date. The method of recognising the resulting gain or loss is
dependent on whether the derivative is designated as a hedging
instrument and the nature of the item being hedged.
At the inception of a hedging relationship, the hedging
instrument and the hedged item are documented, along with
the risk management objectives and strategy for undertaking
various hedge transactions and prospective effectiveness
testing is performed. Prior to 2 July 2018, both prospective
and retrospective tests were required to ensure the instrument
remains an effective hedge of the transaction. Changes in the
fair value of derivative financial instruments that do not qualify
for hedge accounting are recognised in the income statement
as they arise.
Cash flow hedges
Changes in the fair value of derivative financial instruments
that are designated and effective as hedges of future cash
flows are recognised in other comprehensive income with
the remaining change in fair value recognised in the hedging
reserve. Any ineffective portion is recognised immediately in
the statement of profit and loss. If the forecast transaction that
is the subject of a cash flow hedge results in the recognition
of a non-financial asset or liability, then, at the time the asset
or liability is recognised, the associated gains or losses on
the derivative that had previously been recognised in other
comprehensive income are included in the initial measurement
of the asset or liability.
When a cash flow hedge is discontinued, any cumulative
gain or loss on the hedging instrument recognised in other
comprehensive income is retained in equity until the forecast
transaction occurs.
NOTE 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Tax consolidation
Accent Group Limited (the 'head entity') and its wholly-owned
Australian subsidiaries have formed an income tax consolidated
group under the tax consolidation regime. The head entity
and each subsidiary in the tax consolidated group continue to
account for their own current and deferred tax amounts. The
tax consolidated group has applied the 'separate taxpayer within
group' approach in determining the appropriate amount of taxes
to allocate to members of the tax consolidated group.
In addition to its own current and deferred tax amounts, the
head entity also recognises the current tax liabilities (or assets)
and the deferred tax assets arising from unused tax losses and
unused tax credits assumed from each subsidiary in the tax
consolidated group.
Assets or liabilities arising under tax funding agreements
with the tax consolidated entities are recognised as amounts
receivable from or payable to other entities in the tax
consolidated group. The tax funding arrangement ensures
that the intercompany charge equals the current tax liability
or benefit of each tax consolidated group member, resulting
in neither a contribution by the head entity to the subsidiaries
nor a distribution by the subsidiaries to the head entity.
Current and non-current classification
Assets and liabilities are presented in the statement of financial
position based on current and non-current classification.
An asset is classified as current when: it is either expected to
be realised or intended to be sold or consumed in the Group's
normal operating cycle; it is held primarily for the purpose of
trading; it is expected to be realised within 12 months after the
reporting period; or the asset is cash or cash equivalent unless
restricted from being exchanged or used to settle a liability for
at least 12 months after the reporting period. All other assets
are classified as non-current.
A liability is classified as current when: it is either expected
to be settled in the Group's normal operating cycle; it is held
primarily for the purpose of trading; it is due to be settled
within 12 months after the reporting period; or there is no
unconditional right to defer the settlement of the liability for at
least 12 months after the reporting period. All other liabilities
are classified as non-current.
Deferred tax assets and liabilities are always classified as non-
current.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held
at call with financial institutions, other short-term, highly liquid
investments with original maturities of three months or less that
are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value.
Trade and other receivables
Trade receivables are recognised at amortised cost less
allowance for expected credit losses. The average credit period
is 30 to 60 days.
The allowance for expected credit losses was recognised under
an ‘incurred loss’ model until 2 July 2018 and therefore it was
dependent upon the existence of an impairment event. From
2 July 2018, the expected credit loss is recognised based on
management’s expectation of losses without regard to whether
an impairment trigger happened or not.
30
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019 NOTE 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property, plant and equipment
The carrying value of property, plant and equipment is
measured as the cost of the asset, minus depreciation and
impairment.
Items of property, plant and equipment are depreciated on a
straight-line basis over their expected useful lives as follows:
Plant and equipment
Assets under construction
5 to 8 years
Not depreciated
Leasehold improvements are amortised over the period of
the lease.
An impairment loss is recognised for the amount by which the
asset’s carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s fair value less
cost to sell and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash inflows which are largely
dependent of the cash inflows from other assets or group of
assets (cash generating units).
An item of property, plant and equipment is derecognised upon
disposal or when there is no future economic benefit to the
Group. Gains and losses between the carrying amount and the
disposal proceeds are taken to profit or loss.
Intangible assets
Goodwill
Goodwill acquired in a business combination is initially
measured at cost. Cost is measured as the cost of the business
combination minus the net fair value of the acquired and
identifiable assets, liabilities and contingent liabilities. Following
initial recognition, goodwill is measured at cost less any
accumulated impairment losses. Goodwill is tested annually
for impairment, or more frequently if events or changes in
circumstances indicate that it might be impaired.
Brands and trademarks
Brands and trademarks are recognised at cost in a business
combination. Brands and trademarks have indefinite useful lives
and are carried at cost less any accumulated impairment loss.
Brands and trademarks are tested for impairment annually and
wherever there is an indication that they may be impaired. Any
impairment is recognised immediately in profit or loss.
Licence fees
The TAF Licence Fee intangible asset arose on the acquisition of
a 249 year royalty-free licence for the use of the TAF branding
and trademarks. This intangible is being amortised on a straight
line basis over the license term.
Distribution rights
Distribution rights arising on the acquisition of Accent Group
are being amortised on a straight line basis over the remaining
term of the respective distribution agreements. The term
remaining is 2.5 years.
Reacquired rights
Reacquired rights are recognised at fair value in a business
combination. Reacquired rights have arisen as part of the
acquisition of a number of TAF franchisee stores. Reacquired
rights are being amortised over the remaining term of the
franchise agreement.
Trade and other payables
Trade payables and other creditors and accruals represent
liabilities for goods and services provided to the Group prior
to the end of financial year which are unpaid. Trade and
other payables are stated at amortised cost. The amounts are
unsecured and are usually settled within 30 days of recognition.
Borrowings
Loans and borrowings are initially recognised at the fair value of
the consideration received, net of transaction costs. They are
subsequently measured at amortised cost using the effective
interest method.
Finance costs
Finance costs are expensed in the period in which they are
incurred.
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries and other employee benefits
expected to be settled wholly within 12 months of the
reporting date are measured at the amounts expected to be
paid when the liabilities are settled.
Other long-term employee benefits
Employee benefits not expected to be settled within 12 months
of the reporting date are measured at the present value of
expected future payments to be made in respect of services
provided by employees up to the reporting date. Consideration
is given to expected future wage and salary levels, experience
of employee departures and periods of service. Expected future
payments are discounted using market yields at the reporting
date on high quality corporate bonds with terms to maturity and
currency that match, as closely as possible, the estimated future
cash outflows.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are
expensed in the period in which they are incurred.
Share-based payments
Equity-settled share-based compensation benefits are provided
to employees.
Equity-settled transactions are awards of shares, or options
over shares, that are provided to employees in exchange for the
rendering of services.
31
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019
For recurring and non-recurring fair value measurements,
external valuers may be used when internal expertise is either
not available or when the valuation is deemed to be significant.
External valuers are selected based on market knowledge
and reputation. Where there is a significant change in fair
value of an asset or liability from one period to another, an
analysis is undertaken, which includes a verification of the
major inputs applied in the latest valuation and a comparison,
where applicable, with external sources of data.
Issued capital
Ordinary shares are classified as equity.
Dividends
Dividends are recognised when declared during the
financial year.
Business combinations
The acquisition method of accounting is used to account
for business combinations regardless of whether equity
instruments or other assets are acquired.
The consideration transferred is the sum of the acquisition date
fair values of the assets transferred, equity instruments issued
or liabilities incurred by the acquirer to former owners of the
acquiree and the amount of any non-controlling interest in the
acquiree. For each business combination, the non-controlling
interest in the acquiree is measured at either fair value or at the
proportionate share of the acquiree's identifiable net assets. All
acquisition costs are expensed as incurred to profit or loss.
On the acquisition of a business, the Group assesses the
financial assets acquired and liabilities assumed for appropriate
classification and designation in accordance with the
contractual terms, economic conditions, the Group's operating
or accounting policies and other pertinent conditions in
existence at the acquisition date.
Where the business combination is achieved in stages, the
Group remeasures its previously held equity interest in the
acquiree at the acquisition date fair value and the difference
between the fair value and the previous carrying amount is
recognised in profit or loss.
Contingent consideration to be transferred by the acquirer
is recognised at the acquisition date fair value. Subsequent
changes in the fair value of the contingent consideration
classified as an asset or liability is recognised in profit or loss.
Contingent consideration classified as equity is not remeasured
and its subsequent settlement is accounted for within equity.
The difference between the acquisition date fair value of assets
acquired, liabilities assumed and any non-controlling interest in
the acquiree and the fair value of the consideration transferred
and the fair value of any pre-existing investment in the acquiree
is recognised as goodwill. If the consideration transferred and
the pre-existing fair value is less than the fair value of the
identifiable net assets acquired, being a bargain purchase to the
acquirer, the difference is recognised as a gain directly in profit
or loss by the acquirer on the acquisition date, but only after a
reassessment of the identification and measurement of the net
assets acquired, the non-controlling interest in the acquiree, if
any, the consideration transferred and the acquirer's previously
held equity interest in the acquirer.
NOTE 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The cost of equity-settled transactions is measured at fair
value on grant date. Fair value is independently determined
using either a Monte Carlo simulation or the Black-Scholes
option pricing model, as appropriate, that takes into account the
exercise price, the term of the option, the impact of dilution,
the share price at grant date and expected price volatility of
the underlying share, the expected dividend yield and the risk
free interest rate for the term of the option, together with
any market-based performance conditions and non-vesting
conditions that do not determine whether the Group receives
the services that entitle the employees to receive payment.
The cost of equity-settled transactions is recognised as an
expense with a corresponding increase in equity over the
vesting period. The cumulative charge to profit or loss is
calculated based on the grant date fair value of the award, the
best estimate of the number of awards that are likely to vest
and the expired portion of the vesting period. The amount
recognised in profit or loss for the period is the cumulative
amount calculated at each reporting date less amounts already
recognised in previous periods.
If equity-settled awards are modified, as a minimum an expense
is recognised as if the modification has not been made. An
additional expense is recognised, over the remaining vesting
period, for any modification that increases the total fair value
of the share-based compensation benefit as at the date of
modification.
If the non-vesting condition is within the control of the Group
or employee, the failure to satisfy the condition is treated
as a cancellation. If the condition is not within the control of
the Group or employee and is not satisfied during the vesting
period, any remaining expense for the award is recognised over
the remaining vesting period, unless the award is forfeited.
If equity-settled awards are cancelled, they are treated as if it
they had vested on the date of cancellation, and any remaining
expense is recognised immediately. If a new replacement award
is substituted for the cancelled award, the cancelled and new
award is treated as if they were a modification.
Fair value measurement
When an asset or liability, financial or non-financial, is measured
at fair value for recognition or disclosure purposes, the fair
value is based on the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date; and
assumes that the transaction will take place either: in the
principal market, or in the absence of a principal market, in the
most advantageous market.
Fair value is measured using the assumptions that market
participants would use when pricing the asset or liability,
assuming they act in their economic best interests. For non-
financial assets, the fair value measurement is based on its
highest and best use. Valuation techniques that are appropriate
in the circumstances and for which sufficient data are available
to measure fair value, are used, maximising the use of relevant
observable inputs and minimising the use of unobservable
inputs.
Assets and liabilities measured at fair value are classified
into three levels, using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements.
Classifications are reviewed at each reporting date and transfers
between levels are determined based on a reassessment of
the lowest level of input that is significant to the fair value
measurement.
32
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019 NOTE 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
If the initial accounting for a business contribution is incomplete by the end of the reporting period in which the combination occurs,
the Group reports provisional amounts for items for which the accounting is incomplete.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Accent Group Limited, excluding any costs
of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial
year, adjusted for bonus elements in ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after
income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average
number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from
the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from,
or payable to, the tax authority is included in other receivables or other payables in the statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are
recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.
Rounding of amounts
The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments
Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that Corporations
Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
Comparative information
Comparatives have been reclassified where appropriate to ensure consistency and comparability with the current period.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have
not been early adopted by the Group for the annual reporting period ended 30 June 2019. The Group's assessment of the impact of
these new or amended Accounting Standards and Interpretations, most relevant to the Group, are set out below.
AASB 16 Leases
AASB 16 ‘Leases’ is effective for periods beginning on or after 1 January 2019 and therefore will be effective in the Group financial
statements in the year ended on or around 28 June 2020. The application of AASB 16 will result in almost all leases being recognised
on the Statement of Financial Position, as the distinction between operating and finance leases is removed. Practically, this will result in
an asset (the right to use the leased item) and a corresponding liability for future lease payables. The Group has elected not to recognise
right of use assets and lease liabilities for leases of low value assets and short-term leases. The Group will make use of the practical
expedient available on transition to AASB 16 not to reassess whether a contract is or contains a lease. Accordingly, the definition of a
lease in accordance with AASB 117 and Interpretation 4 will continue to apply to those leases entered or modified before 1 July 2019.
Transition
The Group has chosen the modified retrospective approach. Under this approach, the Group will recognise a lease asset calculated
as if AASB 16 had always applied, and the liability will represent the present value of the remaining lease payments discounted
using the incremental borrowing rate at date of transition. The difference between the asset and liability, adjusted for deferred tax,
is recognised as an adjustment to opening retained earnings on 1 July 2019 with no restatement of comparative information. The
Group has assessed the estimated impact that AASB 16 would have had on its Consolidated Statements as at 30 June 2019:
Estimated impact on the Statement of financial position
Recognition of right of use asset
Recognition of lease receivable (TAF franchisee agreements)
Recognition of lease liability
De-recognition of lease accrual / incentives
33
$m
$228.8 – $252.9
$27.4 – $30.3
($315.9) – ($349.1)
$42.0
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019 NOTE 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The net effect of the lease liabilities and lease assets adjusted for deferred tax will be recognised in opening retained earnings.
Estimated impact on the Statement of profit and loss
Increase in EBITDA
Increase in EBIT
Reduction in net profit before tax
$m
$72.3 – $79.5
$6.9 – $9.5
($1.0) – ($3.5)
The application of AASB 16 will result in a shift of payments previously associated with operating leases to the financing category.
Whilst there will be no impact to net cash flow, cash inflow from operations and financing activity outflows will both increase.
The impact above predominantly relates to the Group’s property leases for retail premises and support offices.
The actual impact of applying AASB 16 on the financial statements in the period of initial application will depend on various factors,
including the Group’s borrowing rate at 1 July 2019, the composition of the Group’s lease portfolio and the treatment of leases in
holdover and leases with options and the new accounting policies, which are subject to change until the Group presents its first
financial statements that include the date of initial application.
New Conceptual Framework for Financial Reporting
A revised Conceptual Framework for Financial Reporting has been issued by the AASB and is applicable for annual reporting periods
beginning on or after 1 January 2020. This release impacts for-profit private sector entities that have public accountability that are
required by legislation to comply with Australian Accounting Standards and other for-profit entities that voluntarily elect to apply
the Conceptual Framework. Phase 2 of the framework is yet to be released which will impact for-profit private sector entities.
The application of new definition and recognition criteria as well as new guidance on measurement will result in amendments to
several accounting standards. The issue of AASB 2019-1 Amendments to Australian Accounting Standards – References to the
Conceptual Framework, also applicable from 1 January 2020, includes such amendments. Where the Group has relied on the
conceptual framework in determining its accounting policies for transactions, events or conditions that are not otherwise dealt with
under Australian Accounting Standards, the Group may need to revisit such policies. The Group will apply the revised conceptual
framework from 1 July 2020 and is yet to assess its impact.
NOTE 4. RESTATEMENT OF COMPARATIVES
Change in accounting policy
At the time of TAF's business combination, the Group did not recognise a deferred tax liability on the basis that indefinite life
intangibles were considered non-depreciable and accordingly could not be calculated on the assumption of use but rather on sale.
In November 2016, The International Financial Reporting Interpretation Committee ('IFRIC') published a summary of its discussions
which clarified that indefinite life assets are subject to consumption by an entity and concluded that the assumption of sale could not
be presumed in calculating the deferred tax on indefinite life intangibles.
The Group has now recognised a deferred tax liability on indefinite life intangibles acquired as part of TAF's business combination.
The change in accounting policy on TAF's business combination has now been applied retrospectively and results in a restatement
of the consolidated Statement of Financial Position. The impact on the financial statements of prior periods is noted below.
Statement of profit or loss and other comprehensive income
When there is a restatement of comparatives, it is mandatory to provide a statement of profit or loss and other comprehensive
income for the year ended 1 July 2018. However, as there were no adjustments made, the Group has elected not to show the
statement of profit or loss and other comprehensive income.
Statement of financial position at the beginning of the earliest comparative period
When there is a restatement of comparatives, it is mandatory to provide a third statement of financial position at the beginning of
the earliest comparative period, being 3 July 2017. However, as there were no adjustments made as at 3 July 2017, the Group has
elected not to show the 3 July 2017 statement of financial position.
34
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019 NOTE 4. RESTATEMENT OF COMPARATIVES (CONTINUED)
Statement of financial position at the end of the earliest comparative period
Extract
Assets
Non-current assets
Intangibles
Total non-current assets
Total assets
Liabilities
Non-current liabilities
Deferred tax
Total non-current liabilities
Total liabilities
Net assets
1 Jul 2018
$'000
Reported
Consolidated
$'000
Adjustment
1 Jul 2018
$'000
Restated
345,051
443,042
604,721
15,447
86,482
212,808
391,913
1,040
1,040
1,040
1,040
1,040
1,040
–
346,091
444,082
605,761
16,487
87,522
213,848
391,913
NOTE 5. OPERATING SEGMENTS
The Group is required to determine and present its operating segments based on the way in which financial information is organised
and reported to the chief operating decision-makers (CODM’s). The CODM’s have been identified as the Board of Directors on the
basis they make the key operating decisions of the Group and are responsible for allocating resources and assessing performance.
Key internal reports received by the CODM’s, primarily the management accounts, focus on the performance of the Group as a
whole. The performance of the operations is based on EBIT (earnings before interest and tax). The accounting policies adopted for
internal reporting to the CODM’s are consistent with those adopted in the financial statements.
The Group has considered its internal reporting framework, management and operating structure and the Directors’ conclusion is
that the Group has one operating segment.
NOTE 6. REVENUE
Sales revenue
Sales to customers
Royalties and other franchise related income
Other revenue
Marketing levies received from TAF stores
Other revenue
Revenue
NOTE 7. OTHER INCOME
Net foreign exchange gain
35
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
772,466
675,571
14,364
16,269
786,830
691,840
7,610
1,823
9,433
7,487
3,050
10,537
796,263
702,377
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
116
2
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019 NOTE 8. EXPENSES
Profit before income tax includes the following specific expenses:
Depreciation
Plant and equipment
Amortisation
Licence fee
Distribution rights
Re-acquired rights
Other intangible assets
Total amortisation
Total depreciation and amortisation
Write-off of assets
Instride brand
Finance costs
Interest and finance charges paid/payable
Superannuation expense
Defined contribution superannuation expense
Share-based payments expense
Share-based payments expense
Impairment of property, plant and equipment
Impairment charge
Provision for onerous leases
Onerous leases
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
25,552
21,491
31
2,323
74
288
2,716
28,268
31
2,323
–
288
2,642
24,133
–
65
4,034
4,581
11,625
10,558
2,983
1,949
1,050
1,800
–
–
36
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019 NOTE 9. INCOME TAX EXPENSE
Income tax expense
Current tax
Deferred tax – origination and reversal of temporary differences
Adjustment recognised for prior periods
Aggregate income tax expense
Deferred tax included in income tax expense comprises:
Increase in deferred tax assets (Note 19)
(Decrease)/increase in deferred tax liabilities (Note 28)
Deferred tax – origination and reversal of temporary differences
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit before income tax expense
Tax at the statutory tax rate of 30%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Entertainment expenses
Share-based payments
Sundry items
Adjustment recognised for prior periods
Difference in overseas tax rates
Income tax expense
Amounts charged/(credited) directly to equity
Deferred tax assets (Note 19)
Deferred tax liabilities (Note 28)
Deferred tax assets not recognised
Deferred tax assets not recognised comprises temporary differences attributable to:
Capital losses
Total deferred tax assets not recognised
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
29,367
(6,706)
473
23,134
(4,369)
(2,337)
(6,706)
23,345
(5,275)
(1,152)
16,918
(5,580)
305
(5,275)
77,020
60,918
23,106
18,275
61
226
(484)
64
585
(677)
22,909
18,247
473
(248)
(1,152)
(177)
23,134
16,918
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
–
(604)
(604)
1,771
1,457
3,228
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
7,199
7,199
7,199
7,199
The above potential tax benefit, which excludes tax losses, for deductible temporary differences has not been recognised in the
statement of financial position as the recovery of this benefit is uncertain.
37
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019
NOTE 10. CURRENT ASSETS – CASH AND CASH EQUIVALENTS
Cash on hand
Cash at bank
NOTE 11. CURRENT ASSETS – TRADE AND OTHER RECEIVABLES
Trade receivables
Less: Allowance for expected credit losses
Other receivables
Refer to Note 33 for further information on financial instruments.
NOTE 12. CURRENT ASSETS – INVENTORIES
Finished goods held at lower of cost or net realisable value
Goods in transit
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
206
36,492
36,698
186
38,586
38,772
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
27,851
(584)
27,267
2,530
29,797
18,960
(1,229)
17,731
639
18,370
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
109,921
21,549
131,470
82,634
15,922
98,556
Provision for write-down of inventories to net realisable value amounted to $5,700,000 at 30 June 2019.
NOTE 13. CURRENT ASSETS – DERIVATIVE FINANCIAL INSTRUMENTS
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
3,769
4,614
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
1,995
28
2,023
1,217
150
1,367
Forward foreign exchange contracts – cash flow hedges
Refer to Note 34 for further information on fair value measurement.
NOTE 14. CURRENT ASSETS – OTHER CURRENT ASSETS
Prepayments
Other current assets
38
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019 NOTE 15. NON-CURRENT ASSETS – RECEIVABLES
Loans to outside shareholders in TAF Partnership stores
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
–
341
The loans to outside shareholders in TAF Partnership stores are secured over the minority shareholders’ share in the underlying TAF
Partnership store entities. As at 30 June 2019, ownership interest of all TAF partnership stores is 100%. Refer to Note 42 for further
information.
NOTE 16. NON-CURRENT ASSETS – DERIVATIVE FINANCIAL INSTRUMENTS
Forward foreign exchange contracts – cash flow hedges
Refer to Note 34 for further information on fair value measurement.
NOTE 17. NON-CURRENT ASSETS – PROPERTY, PLANT AND EQUIPMENT
Plant and equipment – at cost
Less: Accumulated depreciation
Assets under construction – at cost
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
–
676
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
182,183
150,071
(98,935)
83,248
2,919
86,167
(77,084)
72,987
1,677
74,664
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
Consolidated
Balance at 3 July 2017
Additions*
Transfer
Disposals
Exchange differences
Depreciation expense
Balance at 1 July 2018
Additions*
Transfer
Additions through business combinations (Note 41)
Disposals
Exchange differences
Impairment charge
Depreciation expense
Balance at 30 June 2019
Plant and
equipment
$'000
Assets under
construction
$'000
73,498
21,469
1,302
(1,740)
(51)
(21,491)
72,987
35,010
1,677
256
(273)
193
(1,050)
(25,552)
83,248
1,302
1,677
(1,302)
–
–
–
1,677
2,919
(1,677)
–
–
–
–
–
2,919
Total
$'000
74,800
23,146
–
(1,740)
(51)
(21,491)
74,664
37,929
–
256
(273)
193
(1,050)
(25,552)
86,167
* Contributions to store fit-out costs have been received from landlords and these amounts have been netted off against actual fit-out costs incurred by the
Group for cash flow disclosure purposes.
39
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019 NOTE 18. NON-CURRENT ASSETS – INTANGIBLES
Goodwill – at cost
Brands and trademarks – at cost
Less: Accumulated impairment
Licence fees – The Athlete's Foot – at cost
Less: Accumulated amortisation
Distribution rights – at cost
Less: Accumulated amortisation
Re-acquired rights
Less: Accumulated amortisation
Other intangible assets – The Athlete's Foot – at cost
Less: Accumulated amortisation
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
Restated
304,154
295,015
44,825
44,825
(9,714)
35,111
7,832
(296)
7,536
(9,714)
35,111
7,832
(265)
7,567
16,800
16,800
(11,013)
5,787
(8,690)
8,110
379
(74)
305
720
(720)
–
–
–
–
720
(432)
288
352,893
346,091
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
Consolidated
Goodwill
$'000
Brands and
trademarks
$'000
Licence
fees
$'000
Distribution
rights
$'000
Re-acquired
rights
$'000
Balance at 3 July 2017
294,328
35,111
7,598
10,433
Restatement
Write off of assets
Other
Amortisation expense
1,040
(65)
(288)
–
–
–
–
–
–
–
–
–
–
–
(31)
(2,323)
Balance at 1 July 2018
295,015
35,111
7,567
8,110
Additions through business
combinations (Note 41)
Amortisation expense
9,139
–
–
–
–
(31)
Balance at 30 June 2019
304,154
35,111
7,536
–
(2,323)
5,787
–
–
–
–
–
–
379
(74)
305
Other
intangible
assets
$'000
Total
$'000
288
347,758
–
–
288
(288)
1,040
(65)
–
(2,642)
288
346,091
–
(288)
9,518
(2,716)
–
352,893
Recognition and measurement
Goodwill represents the excess of the cost of an acquisition over the fair value of the Company's share of the net identifiable assets
acquired at the date of acquisition.
Brands and trademarks are assessed as having indefinite useful lives. This assessment reflects management's intention to continue to
utilise these intangible assets in the foreseeable future. Each period, the useful life of these assets is reviewed to determine whether
events and circumstances continue to support an indefinite useful life assessment for the assets.
40
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019 NOTE 18. NON-CURRENT ASSETS – INTANGIBLES (CONTINUED)
Impairment testing of goodwill
Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment or more
frequently if events or changes in circumstances indicate that they might be impaired.
Management conduct impairment tests annually (or more frequently if impairment indicators exist) to assess the recoverability of the
carrying value of goodwill and indefinite useful life intangible assets.
The impairment test at 30 June 2019 was carried out based on value in use calculations. The recoverable amount was determined
using estimated cash flows that were based on the Groups five-year strategic plan which was presented to the Board of Directors
on 16 May 2019. The strategic plan included calculations and assumptions on sales growth, gross margin and cost of doing business
('CODB'). The assumptions were based on past experience and the Company's forecast operating and financial performance taking
into account current market and economic conditions, risks, uncertainties and opportunities for improvement for the Group's one
operating segment. The cash flows beyond the five-year period have been extrapolated using a steady state 3.0% long term growth
rate (2018: 3.0%). Cash flows were discounted to present value using a mid-point after-tax discount rate of 12.4%. The discount rate
was derived from the Group's weighted average cost of capital.
Management has performed sensitivity analysis on the key assumptions used in the impairment model. Management has considered
possible changes in key assumptions that would cause the carrying amount of goodwill to exceed the value in use.
There is no indication of impairment at balance date.
Brand names and trademarks
The Group recognises the following brands and trademarks as indefinite life intangible assets:
Carrying amount of brand names and trademarks:
The Athlete's Foot
Platypus
Hype DC
Brands and trademarks
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
3,466
11,100
20,545
35,111
3,466
11,100
20,545
35,111
Impairment testing of brands and trademarks
Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment or more
frequently if events or changes in circumstances indicate that they might be impaired.
An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The
recoverable amount was determined independently using the Relief from Royalty ('RFR') valuation method at acquisition date. The
calculations reflect a five-year revenue forecast and requires the use of assumptions, including estimated royalty rates, tax rate,
estimated discount rates and expected useful life.
The five-year revenue forecast was based on the Group's five-year strategic plan which was presented to the Board of Directors
on 16 May 2019. The five-year strategic plan was based on past experience and the Company's forecast operating and financial
performance, taking into account current market and economic conditions, risks, uncertainties and opportunities for improvement
for each brand. As part of the impairment test, management assessed the reasonableness of growth rate assumptions by reviewing
revenue projections against actual revenue. Revenue beyond the five-year period applied a distinct terminal growth rate to bricks
and mortar and digital revenue growth in order to align forecasts with projected consumer behaviour.
The royalty rates used in the valuation model were brand specific and based on rates observed in the market. The royalty rates
across all brands ranged between 3.5% to 5.25%. The TAF brands royalty rate was in line with current franchise agreements.
The tax rate applied in the valuation model is based on the corporate tax rate in Australia of 30.0%. The after tax discount rate of
12.4% is derived from the Group's weighted average cost of capital.
Management has performed sensitivity analysis on the key assumptions in the impairment model using possible changes in these key
assumptions, both individually and in combination.
The Group has concluded that no impairment is required based on expected performance and current market and economic
conditions. A material change in market and economic conditions may increase the risk of impairment for Hype DC in future periods,
however there is no reasonably possible change in key assumptions that could result in an impairment for the other brands.
41
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019 NOTE 19. NON-CURRENT ASSETS – DEFERRED TAX
Deferred tax asset comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Tax losses
Allowance for expected credit losses
Provision for shrinkage and stock obsolescence
Provision for employee entitlements
Other provisions and accrued expenses
Business capital expenditure
Difference in accounting and tax depreciation
Borrowing costs
Landlord and supplier contributions
Other
Deferred tax asset
Movements:
Opening balance
Credited to profit or loss (Note 9)
Charged to equity (Note 9)
Additions through business combinations (Note 41)
Closing balance
NOTE 20. CURRENT LIABILITIES – TRADE AND OTHER PAYABLES
Trade payables
Goods and services tax payable
Accrued expenses
Other payables
Refer to Note 33 for further information on financial instruments.
NOTE 21. CURRENT LIABILITIES – DEFERRED REVENUE
Gift cards
42
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
41
170
1,717
3,873
683
61
8,071
38
11,147
981
152
346
2,290
3,531
238
177
6,696
79
7,945
856
26,782
22,310
22,310
4,369
–
103
18,501
5,580
(1,771)
–
26,782
22,310
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
57,081
4,340
24,615
13,423
99,459
39,720
3,138
23,471
8,600
74,929
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
2,628
1,999
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019
NOTE 22. CURRENT LIABILITIES – PROVISION
Employee benefits
Other provisions
NOTE 23. CURRENT LIABILITIES – BORROWINGS
Bank loans
Working capital facility
Vendor loan notes
Movements in borrowings
Movements in current borrowings during the current financial year is set out below:
Carrying amount at start of the year
Repayments
Additional loans
Amounts transferred from non-current (Note 26)
Carrying amount at end of the year
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
11,168
2,221
13,389
10,144
–
10,144
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
10,000
20,000
–
30,000
9,500
–
13,125
22,625
Borrowings
$'000
22,625
(22,625)
20,000
10,000
30,000
Vendor loan notes
As part of the purchase consideration for Hype DC, the Company issued vendor loan notes to each of the vendors in proportion to
their shareholding in Hype DC. The vendor loan notes of $13,125,000 were repaid in full on 13 July 2018.
Refer to Note 26 for further information on assets pledged as security and financing arrangements.
Refer to Note 33 for further information on financial instruments.
NOTE 24. CURRENT LIABILITIES – DERIVATIVE FINANCIAL INSTRUMENTS
Forward foreign exchange contracts – cash flow hedges
Interest rate swap contracts – cash flow hedges
Refer to Note 33 for further information on financial instruments.
Refer to Note 34 for further information on fair value measurement.
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
417
508
925
–
251
251
43
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019 NOTE 25. NON-CURRENT LIABILITIES – PROVISION
Employee benefits
Other provisions
NOTE 26. NON-CURRENT LIABILITIES – BORROWINGS
Bank loans
Movements in borrowings
Movements in non-current borrowings during the current financial year is set out below:
Carrying amount at start of the year
Additional loans
Amounts transferred to current (Note 23)
Carrying amount at end of the year
Refer to Note 33 for further information on financial instruments.
Total secured liabilities
The total secured liabilities (current and non-current) are as follows:
Bank loans
Working capital facility
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
580
1,885
2,465
64
–
64
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
56,125
51,000
Borrowings
$'000
51,000
15,125
(10,000)
56,125
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
66,125
60,500
20,000
–
86,125
60,500
Assets pledged as security
The senior bank debt made available by National Australia Bank ('NAB') and HSBC is secured by cross-guarantees and all assets of
Accent Group Limited and each of its wholly-owned subsidiaries, excluding Subtype Pty Ltd and TAF Partnership Stores Pty Limited
(refer to Note 42 for a list of wholly-owned subsidiaries). Total secured assets amounted to $669,048,000 at 30 June 2019 (1 July
2018: $602,683,000).
44
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019 NOTE 26. NON-CURRENT LIABILITIES – BORROWINGS (CONTINUED)
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Total facilities
Bank overdraft
Bank loans
Working capital facility
Capex facility
Bank guarantee and letters of credit
Used at the reporting date
Bank overdraft
Bank loans
Working capital facility
Capex facility
Bank guarantee and letters of credit
Unused at the reporting date
Bank overdraft
Bank loans
Working capital facility
Capex facility
Bank guarantee and letters of credit
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
8,800
66,125
35,000
–
13,800
10,600
61,000
30,000
15,000
33,300
123,725
149,900
–
66,125
20,000
–
11,375
97,500
–
60,500
–
–
9,401
69,901
8,800
10,600
–
15,000
–
2,425
26,225
500
30,000
15,000
23,899
79,999
The Company refinanced its existing NAB debt facilities on 16 August 2018, in advance of their maturity, to take advantage of
favourable loan market conditions. The new facilities provided by NAB and HSBC have tenures of three and five years maturing in
August 2021 and August 2023.
NOTE 27. NON-CURRENT LIABILITIES – DERIVATIVE FINANCIAL INSTRUMENTS
Interest rate swap contracts – cash flow hedges
Refer to Note 33 for further information on financial instruments.
Refer to Note 34 for further information on fair value measurement.
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
–
184
45
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019
NOTE 28. NON-CURRENT LIABILITIES – DEFERRED TAX
Deferred tax liability comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Unrealised foreign currency exchange
Difference in accounting and tax depreciation
Trademarks, brand names and distribution rights
Amounts recognised in equity:
Derivative financial instruments
Deferred tax liability
Movements:
Opening balance
Charged/(credited) to profit or loss (Note 9)
Charged/(credited) to equity (Note 9)
Change in accounting policy
Closing balance
NOTE 29. EQUITY – ISSUED CAPITAL
Ordinary shares – fully paid
Less: Treasury shares
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
Restated
–
423
9
2,054
12,270
12,967
12,693
15,030
853
1,457
13,546
16,487
16,487
13,685
(2,337)
(604)
–
305
1,457
1,040
13,546
16,487
Consolidated
30 Jun 2019
Shares
1 Jul 2018
Shares
30 Jun 2019
$'000
1 Jul 2018
$'000
541,241,224
541,791,224
391,338
391,896
(2,756,670)
(6,040,000)
(2,582)
(4,923)
538,484,554
535,751,224
388,756
386,973
46
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019
NOTE 29. EQUITY – ISSUED CAPITAL (CONTINUED)
Movements in ordinary share capital
Details
Balance
Employee Share Scheme – loans repaid
Employee Share Scheme – loans repaid
Employee Share Scheme – loans repaid
Employee Share Scheme – loans repaid
Treasury shares – loans repaid
Employee Share Scheme – loans repaid
Employee Share Scheme – loans repaid
Treasury shares – loans repaid
Employee Share Scheme – loans repaid
Employee Share Scheme – loans repaid
Employee Share Scheme – loans repaid
Employee Share Scheme – loans repaid
Employee Share Scheme – loans repaid
Treasury shares – loans repaid
Balance
Employee Share Scheme – loans repaid
Employee Share Scheme – loans repaid
Employee Share Scheme – loans repaid
Employee Share Scheme – loans repaid
Employee Share Scheme – loans repaid
Employee Share Scheme – loans repaid
Employee Share Scheme – loans repaid
Employee Share Scheme – loans repaid
Employee Share Scheme – loans repaid
Employee Share Scheme – loans repaid
Employee Share Scheme – loans repaid
Employee Share Scheme – loans repaid
Employee Share Scheme – loans repaid
Employee Share Scheme – loans repaid
Employee Share Scheme – loans repaid
Employee Share Scheme – loans repaid
Employee Share Scheme – loans repaid
Employee Share Scheme – loans repaid
Employee Share Scheme – loans repaid
Employee Share Scheme – loans repaid
Employee Share Scheme – loans repaid
Employee Share Scheme – loans repaid
Balance
Date
Shares
Issue price
$'000
3 July 2017
532,789,559
385,310
466,667
500,000
868,332
83,333
100,000
73,333
10,000
200,000
50,000
160,000
66,667
83,333
50,000
250,000
$0.490
$0.730
$0.490
$0.590
$0.520
$0.730
$0.590
$0.600
$0.590
$0.490
$0.690
$0.590
$0.590
$0.520
229
365
425
49
52
54
6
120
30
78
46
49
30
130
535,751,224
386,973
166,667
150,000
400,000
150,000
130,000
66,666
220,000
26,666
33,333
50,000
50,000
66,666
83,333
250,000
100,000
250,000
33,333
66,667
73,333
250,000
33,333
83,333
$0.490
$0.490
$0.490
$0.490
$0.590
$1.140
$0.590
$0.490
$1.140
$0.590
$0.590
$0.690
$0.590
$0.730
$1.010
$0.730
$0.730
$1.010
$0.730
$0.730
$0.730
$0.590
82
74
196
74
77
76
130
13
38
30
30
46
49
183
101
183
24
67
54
183
24
49
538,484,554
388,756
24 August 2017
06 February 2018
02 March 2018
02 March 2018
02 March 2018
27 March 2018
27 March 2018
12 May 2018
18 May 2018
29 May 2018
29 May 2018
29 May 2018
29 May 2018
29 May 2018
1 July 2018
3 July 2018
9 August 2018
21 August 2018
24 August 2018
30 August 2018
30 August 2018
6 September 2018
7 September 2018
24 September 2018
5 October 2018
10 October 2018
11 January 2019
11 January 2019
25 February 2019
27 February 2019
28 February 2019
4 March 2019
11 March 2019
4 April 2019
4 April 2019
30 May 2019
12 June 2019
30 June 2019
47
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019 NOTE 29. EQUITY – ISSUED CAPITAL (CONTINUED)
Ordinary shares
Ordinary shares are classified as equity and entitle the holder to participate in dividends and the proceeds on the winding up of
the Company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par
value and the Company does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share
shall have one vote.
Treasury shares
No shares were issued to employees under the Employee Share Scheme (1 July 2018: nil). During the year, employee loan
repayments reduced the number of treasury shares under the Employee Share Scheme. Details of the scheme are set out
in Note 46.
Share buy-back
There is no current on-market share buy-back.
Capital risk management
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated
as total borrowings less cash and cash equivalents.
NOTE 30. EQUITY – RESERVES
Foreign currency translation reserve
Hedging reserve – cash flow hedges
Share-based payments reserve
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
2,159
1,991
8,997
2,738
3,399
6,014
13,147
12,151
Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial
statements of foreign subsidiaries.
Hedging reserve – cash flow hedges
Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows are
recognised in other comprehensive income with the remaining change in fair value recognised in the hedging reserve. Any ineffective
portion is recognised immediately in the statement of profit and loss.
Share-based payments reserve
The share-based payments reserve is used to recognise the value of equity-settled share-based payments provided to employees,
including key management personnel, as part of their remuneration.
NOTE 31. EQUITY – NON-CONTROLLING INTEREST
Issued capital
Retained earnings
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
–
–
–
499
474
973
As at 30 June 2019, ownership interest of all TAF partnerships stores is 100%. Refer to Note 42 for further information.
48
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019 NOTE 32. EQUITY – DIVIDENDS
Dividends
Dividends paid during the financial year were as follows:
Final dividend for the year ended 1 July 2018 of 3.75 cents (2017: 3.00 cents) per ordinary share
Interim dividend for the year ended 30 June 2019 of 4.50 cents (2018: 3.00 cents) per ordinary share
Dividends paid to non-controlling interests
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
20,297
24,356
89
16,269
16,269
81
44,742
32,619
In respect of the financial year ended 30 June 2019, the directors recommended the payment of a final fully franked dividend of
3.75 cents per share to be paid on 26 September 2019 to the registered holders of fully paid ordinary shares as at 12 September 2019.
Franking credits
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
Franking credits available for subsequent financial years based on a tax rate of 30%
30,138
29,824
New Zealand imputation credits available to New Zealand residential shareholders amount to NZ$1,863,000 (1 July 2018: NZ$1,819,000).
NOTE 33. FINANCIAL INSTRUMENTS
Financial risk management objectives
The Group's activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk and interest rate
risk), credit risk and liquidity risk. The Group's overall risk management program focuses on the unpredictability of financial markets
and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses derivative financial
instruments such as forward foreign exchange contracts to hedge foreign currency exposures and interest rate swaps to hedge
interest rate exposures. Derivatives are exclusively used for hedging purposes, i.e. not as trading or other speculative instruments.
The Group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity
analysis in the case of interest rate, foreign exchange and other price risks and ageing analysis for credit risk.
Risk management is carried out by senior finance executives ('finance') under policies approved by the Board of Directors ('the
Board'). These policies include identification and analysis of the risk exposure of the Group and appropriate procedures, controls and
risk limits. Finance identifies, evaluates and hedges financial risks within the Group's operating units. Finance reports to the Board on
a periodic basis.
Market risk
Foreign currency risk
The Group has transactional foreign currency exposures arising from the purchase of inventory denominated in US dollars. To
minimise the impact of changes in the Australian Dollar / US Dollar exchange rate on profit and loss, the Group enters into forward
exchange contracts in accordance with its Board-approved foreign exchange hedging policy.
The Group's exposure to foreign currency risk as at the end of the reporting period, expressed in Australian dollars, is shown below:
Consolidated
Forward contracts
Foreign currency trade payables
Foreign currency cash
Transactional foreign exchange risk
30 Jun 2019
01 Jul 2018
US dollar
transactional
exposure
$'000
Australian
dollar
equivalent
$'000
US dollar
transactional
exposure
$'000
Australian
dollar
equivalent
$'000
102,909
142,787
20,966
29,895
–
–
95,797
19,189
325
124,214
25,963
440
123,875
172,682
115,311
150,617
49
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019 NOTE 33. FINANCIAL INSTRUMENTS (CONTINUED)
The sensitivity of the Group's transactional foreign currency risk exposure is estimated by assessing the impact that a 10%
increase and 10% decrease in the Australian Dollar / US Dollar exchange rate would have on profit and equity of the Group
at the reporting date.
30 Jun 2019
01 Jul 2018
Movement
in Australian
dollar US dollar
exchange rate
%
Increase/
(decrease) in
profit or loss
$'000
Increase/
(decrease)
in other
comprehensive
income
$'000
Movement
in Australian
dollar US dollar
exchange rate
%
Increase/
(decrease) in
profit or loss
$'000
Increase/
(decrease)
in other
comprehensive
income
$'000
10%
(10%)
10%
(10%)
10%
(10%)
–
–
287
(351)
–
–
(6,570)
14,181
2,431
(2,971)
–
–
10%
(10%)
10%
(10%)
10%
(10%)
–
–
182
(222)
(40)
49
(4,543)
12,784
2,179
(2,663)
–
–
Forward Contracts
Trade Payables
Cash
In management's opinion, the above sensitivity analysis is not fully representative of the inherent foreign exchange risk as the year
end exposure does not necessarily reflect the exposure during the course of the year.
As noted above the Group manages its foreign currency risk through forward currency contracts.
The maturity, settlement amounts and the average contractual exchange rates of the Group's outstanding forward foreign exchange
contracts at the reporting date were as follows:
Buy US dollars
Maturity:
0 – 3 months
3 – 6 months
6 – 12 months
Over 12 months
Sell Australian dollars
Average exchange rates
30 Jun 2019
$'000
1 Jul 2018
$'000
30 Jun 2019
1 Jul 2018
42,597
37,346
62,845
41,929
36,063
33,419
–
12,804
0.7374
0.7230
0.7081
–
0.7585
0.7765
0.7781
0.7810
Translational Foreign Currency Risk
The Group includes certain subsidiaries whose functional currencies are different to the Group's presentation currency of Australian
Dollars. As stated in the Group's Accounting Policies in Note 3, on consolidation the assets and liabilities of these entities are
translated into Australian dollars at exchange rates prevailing on the balance date. The income and expenses of these entities are
translated at the average exchange rates for the year. Exchange differences arising are classified as equity and are transferred to
a foreign exchange translation reserve. The main operating entities outside of Australia are based in New Zealand. The Group's
future reported profits could therefore be impacted by changes in rates of exchange between the Australian Dollar and the
New Zealand Dollar.
50
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019 NOTE 33. FINANCIAL INSTRUMENTS (CONTINUED)
30 Jun 2019
1 Jul 2018
NZ dollar
translational
exposure
$'000
Australian
dollar
equivalent
$'000
NZ dollar
translational
exposure
$'000
Australian
dollar
equivalent
$'000
New Zealand dollar net assets
19,471
18,610
36,993
33,929
The sensitivity of the Group's translational foreign currency risk exposure is estimated by assessing the impact that a 10%
increase and 10% decrease in the Australian Dollar / NZ Dollar exchange rate would have on profit and equity of the Group
at the reporting date.
30 Jun 2019
1 Jul 2018
Movement
in Australian
dollar NZ
dollar
exchange rate
%
Increase/
(decrease)
in other
comprehensive
income
$'000
Movement
in Australian
dollar NZ
dollar
exchange rate
%
Increase/
(decrease)
in other
comprehensive
income
$'000
10%
(10%)
(1,692)
2,068
10%
(10%)
(3,084)
3,770
New Zealand dollar net assets
Price risk
The Group is not exposed to any significant price risk.
Interest rate risk
The Group's main interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Group
to interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The Group maintains
approximately 50% of long-term borrowings at fixed rates using interest rate swaps to achieve this when necessary.
As at the reporting date, the Group had the following cash and cash equivalents, variable rate borrowings and interest rate swap
contracts outstanding:
Consolidated
Bank loans
Interest rate swap*
Net exposure to cash flow interest rate risk
* For the interest rate swaps outstanding at 30 June 2019:
30 Jun 2019
1 Jul 2018
Weighted
average
interest rate
%
2.78%
4.31%
Weighted
average
interest rate
%
3.81%
4.42%
Balance
$'000
(86,125)
32,750
(53,375)
Balance
$'000
(60,500)
35,250
(25,250)
– Outstanding interest rate swap contracts maturity is May 2020
– Average contracted fixed interest rate of 4.31% is inclusive of the margin applicable to the variable rate borrowings
– Notional principal value is $32,750,000
– Fair value at 30 June 2019 is $508,000 (liability) (1 July 2018 is $435,000 (liability))
Sensitivity impact of interest rate changes has not been shown as a 0.5% change in interest rates would have an immaterial profit
or loss impact based on the net exposure to cash flow interest rate risk at balance date.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The
Group has a strict code of credit, including obtaining agency credit information, confirming references and setting appropriate credit
limits. The Group obtains guarantees where appropriate to mitigate credit risk. The maximum exposure to credit risk at the reporting
date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the
statement of financial position and notes to the financial statements. The Group does not hold any collateral.
51
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019
NOTE 33. FINANCIAL INSTRUMENTS (CONTINUED)
Estimated expected credit losses were recognised under an 'incurred loss' model until 2 July 2018 and therefore it was dependent
upon the existence of an impairment event. From 2 July 2018, expected credit losses are recognised based on management's
expectation of losses without regard to whether an impairment trigger happened or not (an 'expected credit loss' model). Trade
receivables are written off against the allowance account where there is no reasonable expectation of recovery.
The amount of the expected credit loss is recognised in profit and loss within other expenses.
AASB 9 was adopted using the transitional rules not to restate comparatives. As such, no analysis of expected credit losses
is disclosed for the year ended 1 July 2018.
The ageing of the receivables as at 30 June 2019 are as follows:
Consolidated
Not overdue
0 to 30 days overdue
31 to 60 days overdue
61 to 90 days overdue
Over 120 days overdue
Movements in the allowance for expected credit losses is as follows:
Opening balance
Additional provisions recognised
Expected credit loss movement recognised
Closing balance
Carrying
amount
30 Jun 2019
$'000
24,093
2,174
539
346
699
27,851
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
1,229
90
(735)
584
1,180
194
(145)
1,229
Liquidity risk
Vigilant liquidity risk management requires the Group to maintain sufficient liquid assets (mainly cash and cash equivalents) and
available borrowing facilities to be able to pay debts as and when they become due and payable.
The Group manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by continuously
monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities.
Financing arrangements
Unused borrowing facilities at the reporting date:
Bank overdraft
Bank loans
Working capital facility
Capex facility
Bank guarantee and letters of credit
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
8,800
10,600
–
15,000
–
2,425
26,225
500
30,000
15,000
23,899
79,999
52
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019
NOTE 33. FINANCIAL INSTRUMENTS (CONTINUED)
Remaining contractual maturities
The following tables detail the Group's remaining contractual maturity for its financial instrument liabilities. The tables have been
drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are
required to be paid, and therefore these totals may differ from their carrying amount in the statement of financial position.
Weighted
average
interest rate
%
1 year or less
$'000
Between
1 and 2 years
$'000
Between
2 and 5 years
$'000
Over 5 years
$'000
Remaining
contractual
maturities
$'000
Consolidated – 30 Jun 2019
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing – variable
Term loans
Working capital facility
Total non-derivatives
Derivatives
Consolidated – 1 Jul 2018
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing – variable
Term loans
Interest-bearing – fixed rate
Vendor loan notes
Total non-derivatives
Derivatives
Interest rate swaps net settled
4.31%
508
Forward foreign exchange contracts net
settled
Total derivatives
–
(3,352)
(2,844)
–
–
–
Weighted
average
interest rate
%
1 year
or less
$'000
Between
1 and 2 years
$'000
Between
2 and 5 years
$'000
Over
5 years
$'000
Remaining
contractual
maturities
$'000
–
–
57,081
13,423
–
–
2.76%
2.86%
10,000
20,000
56,125
–
100,504
56,125
–
–
39,720
8,600
–
–
3.81%
11,677
52,721
6.00%
13,153
73,150
–
52,721
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
57,081
13,423
66,125
20,000
156,629
508
(3,352)
(2,844)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
39,720
8,600
64,398
13,153
125,871
435
(5,442)
(5,007)
Interest rate swaps net settled
4.42%
251
184
Forward foreign exchange contracts net
settled
Total derivatives
–
(4,712)
(4,461)
(730)
(546)
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above.
53
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019 NOTE 33. FINANCIAL INSTRUMENTS (CONTINUED)
Capital risk management
The Group manages its capital to ensure that all the entities within the Group are able to continue as going concerns while
maximising the return to stakeholders through the optimisation of the debt and equity balance.
The capital structure of the Group consists of cash and cash equivalents, trade and other receivables, inventories, intangibles and
net working capital. The equity attributable to equity holders of the parent entity comprises issued capital, reserves and accumulated
losses.
Management effectively manage the Group's capital by assessing the Group's financial risks and adjusting the Group's capital
structure in response to changes in these risks and in the market. These responses include the management of debt levels,
distributions to shareholders and share issues.
None of the Group entities are subject to externally-imposed capital requirements.
The capital risk management policy has not changed since the 1 July 2018 year.
NOTE 34. FAIR VALUE MEASUREMENT
The only financial assets or financial liabilities carried at fair value are interest rate swaps and foreign currency forward contracts.
All these instruments are Level 2 financial instruments because, unlike Level 1 financial instruments, their measurement is derived
from inputs other than quoted prices that are observable for the assets or liabilities, either directly or indirectly.
Consolidated – 30 Jun 2019
Assets
Forward foreign exchange contracts – cash flow hedges
Total assets
Liabilities
Forward foreign exchange contracts – cash flow hedges
Interest rate swap contracts – cash flow hedges
Total liabilities
Consolidated – 1 Jul 2018
Assets
Forward foreign exchange contracts – cash flow hedges
Total assets
Liabilities
Interest rate swap contracts – cash flow hedges
Total liabilities
There were no transfers between levels during the year.
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
–
–
–
–
–
3,769
3,769
417
508
925
–
–
–
–
–
3,769
3,769
417
508
925
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
–
–
–
–
5,290
5,290
435
435
–
–
–
–
5,290
5,290
435
435
Valuation techniques for fair value measurements categorised within level 2
The fair values of the above financial assets and financial liabilities are determined using the valuation techniques below.
The fair value was obtained from third party valuations.
Forward foreign exchange contracts
Future cash flows are estimated based on forward exchange rates (from observable forward exchange rates at the end of
the reporting period) and contract forward rates, discounted at a rate that reflects the credit risk of various counterparties.
Interest rate swap contracts
Future cash flows are estimated based on forward interest rates (from observable yield curves at the end of the reporting period)
and contract interest rates, discounted at a rate that reflects the credit risk of various counterparties.
The carrying amount of other financial assets and financial liabilities recorded in the financial statements approximate their
fair values.
54
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019 NOTE 35. KEY MANAGEMENT PERSONNEL DISCLOSURES
Compensation
The aggregate compensation made to directors and other members of key management personnel of the Group is set out below:
Short-term employee benefits
Post-employment benefits
Share-based payments
Consolidated
30 Jun 2019
$
1 Jul 2018
$
4,004,210
6,531,696
90,344
111,729
1,068,597
586,696
5,163,151
7,230,121
NOTE 36. REMUNERATION OF AUDITORS
During the financial year the following fees were paid or payable for services provided by Deloitte Touche Tohmatsu, the auditor
of the Company:
Audit services – Deloitte Touche Tohmatsu
Audit or review of the financial statements
Other services – Deloitte Touche Tohmatsu
Other consulting services
Consolidated
30 Jun 2019
$
1 Jul 2018
$
473,000
453,200
69,190
–
542,190
453,200
NOTE 37. CONTINGENT LIABILITIES
The Group has bank guarantees outstanding as at 30 June 2019 of $1,393,974 (1 July 2018: $1,959,874). The Group also has open
letters of credit of $9,981,463 (1 July 2018: $7,441,483). These guarantees and letters of credit entered into are in relation to the
debts of its subsidiaries.
The Athletes Foot ('TAF') has entered into operating lease commitments with landlords in its capacity as head lessor for stores
operated by the franchisees. However, the franchisees have simultaneously undertaken to meet the rental commitments through
back-to-back licence agreements. In addition, some franchisees have provided bank guarantees (generally for a maximum period of
three months' rent) and in some instances personal guarantees to the landlords of the properties. The Company and its subsidiaries
would become liable in the event of a default by any franchisee. The maximum possible exposure would be $36,026,343 (1 July
2018: $55,291,644) and comprises:
Default by franchisee
Maximum possible exposure comprising:
Less than one year
Between one and five years
More than five years
Total maximum exposure
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
10,426
23,971
1,629
36,026
14,405
36,418
4,469
55,292
This cumulative above amount would arise only in the event that all franchisees defaulted at the same time.
55
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019 NOTE 38. COMMITMENTS
Capital commitments
Committed at the reporting date but not recognised as liabilities, payable:
Property, plant and equipment
Lease commitments – operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
More than five years
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
12,970
8,260
96,982
69,876
267,712
193,248
43,215
27,109
407,909
290,233
Operating lease commitments includes contracted amounts for various retail outlets and corporate headquarters under non-
cancellable operating leases expiring within one to five years with, in some cases, options to extend. The leases have various
escalation clauses. On renewal, the terms of the leases are renegotiated.
NOTE 39. RELATED PARTY TRANSACTIONS
Parent entity
Accent Group Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in Note 42.
Key management personnel
Disclosures relating to key management personnel are set out in Note 35 and the remuneration report included in the directors'
report.
Entities associated with key management personnel
Rivan Pty Limited, a shareholder, is a company associated with David Gordon. 2 Como Pty Ltd, a shareholder, is a company
associated with Daniel Agostinelli. Retail Oasis Pty Limited, a company associated with Stephen Kulmar. BBRC International Pte Ltd,
a shareholder, is a company associated with Brett Blundy. Placed Pty Ltd, a company associated with Brett Blundy. Aventus Kotara
South Pty Ltd, a company associated with Brett Blundy.
Transactions with related parties
The following transactions occurred with related parties:
Placed Pty Ltd, a company associated with Brett Blundy, provided recruitment services to the Group amounting to $709,737. These
services were provided on an arm's length basis.
Aventus Kotara South Pty Ltd, a company associated with Brett Blundy, is the landlord of the Skechers Kotara outlet, with lease
terms at arm's length.
Loans to/from related parties
The following balances are outstanding at the reporting date in relation to loans with related parties:
Loans to/(from) key management personnel:
– Daniel Gilbert (interest at 6% per annum)*
* Relates to vendor finance component of Hype DC acquisition which was repaid on 13 July 2018.
Consolidated
30 Jun 2019
$
1 Jul 2018
$
–
(4,593,750)
56
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019
NOTE 40. PARENT ENTITY INFORMATION
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Profit after income tax
Other comprehensive income for the year, net of tax
Total comprehensive income
Statement of financial position
Total current assets
Total non-current assets
Total assets
Total current liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Share-based payments reserve
Accumulated losses
Total equity
Parent
30 Jun 2019
$'000
1 Jul 2018
$'000
52,397
36,744
–
–
52,397
36,744
Parent
30 Jun 2019
$'000
1 Jul 2018
$'000
71,381
60,989
375,733
377,759
447,114
438,748
23,911
69,669
93,580
34,770
62,954
97,724
353,534
341,024
388,756
386,973
8,997
6,014
(44,219)
(51,963)
353,534
341,024
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2019 and 1 July 2018, other than those disclosed in Note 37, which
apply to Accent Group Limited as parent of the Group.
Capital commitments – Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2019 and 1 July 2018.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in Note 3, except for the following:
– Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
– Investments in associates are accounted for at cost, less any impairment, in the parent entity.
– Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an indicator
of an impairment of the investment.
NOTE 41. BUSINESS COMBINATIONS
During the year to 30 June 2019, the Group completed the acquisition of 30 TAF stores. This included the reacquisition of the
New Zealand Master Franchise License, representing 6 Corporate stores, 2 Franchise Stores and 1 Online store. In addition to
this, the Group acquired the Subtype business, a sneaker and fashion boutique from Zanerobe Global Holdings Pty Ltd. The total
consideration transferred for these acquisitions was $12,124,057. Goodwill of $9,138,571 was recognised on acquisition and
represents the expected synergies to be realised from merging this business into the existing Group.
57
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019
NOTE 41. BUSINESS COMBINATIONS (CONTINUED)
Details of the provisional net assets acquired are as follows:
Cash and cash equivalents
Inventories
Other current assets
Re-acquired right
Property, plant and equipment
Deferred tax asset
Trade and other payables
Employee benefits
Other current liabilities
Lease liability
Net assets acquired
Goodwill
Acquisition date fair value of the total consideration transferred
Representing:
Cash paid or payable to vendor
Outstanding debt/loans forgiven
Details of the cash flow movement relating to the acquisition are as follows:
Cash used to acquire business, net of cash acquired:
Acquisition date fair value of the total consideration transferred
Less: cash and cash equivalents
Less: outstanding debt/loans forgiven
Net cash used
Fair value
$'000
9
4,146
119
379
256
103
(21)
(285)
(1,047)
(674)
2,985
9,139
12,124
11,813
311
12,124
Fair value
$'000
12,124
(9)
(311)
11,804
The fair value of assets acquired, liabilities and contingent liabilities assumed are initially estimated by the Group taking into
consideration all available information at the reporting date. Fair value adjustments on the finalisation of the business combination
accounting is retrospective, where applicable, to the period the combination occurred and may have an impact on the assets and
liabilities, depreciation and amortisation reported.
58
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019 NOTE 42. INTERESTS IN SUBSIDIARIES
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with
the accounting policy described in Note 3:
Name
Principal place of business/Country of incorporation
Ownership interest
30 Jun 2019
%
1 Jul 2018
%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
80%
80%
60%
80%
80%
60%
100%
100%
100%
100%
–
100%
100%
100%
100%
100%
100%
–
–
The Athlete's Foot Australia Pty Ltd
TAF Constructions Pty Ltd (a)
RCG Brands Pty Ltd
RCG Retail Pty Ltd
TAF eStore Pty Ltd (a)
TAF Partnership Stores Pty Ltd (a)
TAF Rockhampton Pty Ltd (b)
TAF Eastland Pty Ltd (b)
TAF The Glen Pty Ltd (b)
TAF Hornsby Pty Ltd (b)
TAF Hobart Pty Ltd (b)
TAF Booragoon Pty Ltd (b)
Accent Group Ltd (c)
Platypus Shoes Ltd (d)
Accent Footwear Ltd (d)
Hype DC Ltd (d)
TAF New Zealand Ltd (d)
Accent Brands Pty Ltd (c)
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
Australia
Platypus Shoes (Australia) Pty Ltd (c)
Australia
42K Pty Ltd (e)
RCG Grounded Pty Ltd
Australia
Australia
RCG Accent Group Holdings Pty Ltd
Australia
Hype DC Pty Ltd
Subtype Pty Ltd
Accent Group Pte Ltd
Australia
Australia
Singapore
(a) Indirectly held through The Athlete's Foot Australia Pty Ltd
(b) Indirectly held through TAF Partnership Stores Pty Ltd
(c) Indirectly held through RCG Accent Group Holdings Pty Ltd
(d) Indirectly held through Accent Group Ltd (New Zealand)
(e) Indirectly held through Accent Brands Pty Ltd
59
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019 NOTE 43. DEED OF CROSS GUARANTEE
The following entities are party to a deed of cross guarantee, entered into on 23 February 2017, under which each company
guarantees the debts of the others:
Accent Group Ltd (formerly known as RCG Corporation Ltd)
RCG Brands Pty Ltd
The Athlete's Foot Australia Pty Ltd
RCG Retail Pty Ltd
RCG Accent Group Holdings Pty Ltd
Hype DC Pty Limited
TAF Partnership Stores Pty Ltd
TAF eStore Pty Ltd
T.A.F Constructions Pty Ltd
Accent Group Pty Ltd
Platypus Shoes (Australia) Pty Ltd
42K Pty Ltd
RCG Grounded Pty Ltd
Subtype Pty Ltd
(ACN 108 096 251)
(ACN 125 433 972)
(ACN 001 777 582)
(ACN 144 955 117)
(ACN 613 017 422)
(ACN 081 432 313)
(ACN 164 791 048)
(ACN 158 031 040)
(ACN 097 684 430)
(ACN 001 742 552)
(ACN 122 726 907)
(ACN 169 043 145)
(ACN 611 621 482)
(ACN 628 866 419)
By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare financial statements and
directors' report under Corporations Instrument 2016/785 issued by the Australian Securities and Investments Commission.
The above companies represent a 'Closed Group' for the purposes of the Corporations Instrument, and as there are no other parties
to the deed of cross guarantee that are controlled by Accent Group Limited, they also represent the 'Extended Closed Group'.
Set out below is a consolidated statement of profit or loss and other comprehensive income and statement of financial position of
the 'Closed Group'.
Statement of profit or loss and other comprehensive income
Revenue
Other income
Interest revenue
Cost of sales
Distribution
Marketing
Occupancy
Employee expenses
Other
Depreciation and amortisation
Finance costs
Profit before income tax expense
Income tax expense
Profit after income tax expense
Other comprehensive income
Net change in the fair value of cash flow hedges taken to equity, net of tax
Foreign currency translation
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
60
30 Jun 2019
$’000
1 Jul 2018
$’000
716,204
633,496
26,089
463
2
788
(307,251)
(276,964)
(25,024)
(18,885)
(85,322)
(20,167)
(15,592)
(75,257)
(153,617)
(137,863)
(31,006)
(26,953)
(4,025)
90,673
(19,451)
71,222
(1,408)
(1,614)
(3,022)
(29,934)
(22,105)
(4,566)
51,838
(14,349)
37,489
7,434
(979)
6,455
68,200
43,944
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019 NOTE 43. DEED OF CROSS GUARANTEE (CONTINUED)
Statement of financial position
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Other current assets
Non-current assets
Receivables
Derivative financial instruments
Property, plant and equipment
Intangibles
Deferred tax
Total assets
Current liabilities
Trade and other payables
Deferred revenue
Provisions
Borrowings
Derivative financial instruments
Provision for income tax
Deferred lease incentives
Non-current liabilities
Provisions
Borrowings
Derivative financial instruments
Deferred tax
Deferred lease incentives
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
61
30 Jun 2019
$’000
1 Jul 2018
$’000
24,417
30,800
112,595
3,769
1,769
29,959
–
91,728
4,614
1,162
173,350
127,463
–
–
78,288
353,918
25,650
457,856
631,206
83,219
2,498
13,032
30,000
925
9,807
8,152
341
676
69,798
347,649
20,841
439,305
566,768
70,622
1,926
9,942
22,625
251
9,757
6,874
147,633
121,997
2,466
56,125
–
13,548
23,520
95,659
243,292
387,914
64
51,000
184
16,486
17,436
85,170
207,167
359,601
388,756
386,973
11,903
(12,745)
11,942
(39,314)
387,914
359,601
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019 NOTE 44. CASH FLOW INFORMATION
Reconciliation of profit after income tax to net cash from operating activities
Profit after income tax expense for the year
Adjustments for:
Depreciation and amortisation
Write-off of assets
Share-based payments
Provision for store impairment
Foreign exchange differences
Rental expenses
Change in assets and liabilities:
Receivables
Inventories
Trade creditors and provisions
Tax assets and liabilities
Net cash from operating activities
NOTE 45. EARNINGS PER SHARE
Profit after income tax
Non-controlling interest
Profit after income tax attributable to the owners of Accent Group Limited
Consolidated
30 Jun 2019
$’000
1 Jul 2018
$’000
53,886
44,000
28,268
24,133
–
2,983
1,050
(78)
(9,094)
(11,741)
(32,914)
38,826
(5,499)
65,687
65
1,949
–
51
(7,314)
3,740
13,390
(7,219)
(2,727)
70,068
Consolidated
30 Jun 2019
$'000
1 Jul 2018
$'000
53,886
44,000
(17)
(43)
53,869
43,957
Number
Number
Weighted average number of ordinary shares used as the denominator in calculating basic
earnings per share
537,379,873 533,847,841
Adjustments for calculation of diluted earnings per share:
Options and loan funded shares
Performance rights
2,356,670
2,215,583
24,876,154
–
Weighted average number of ordinary shares used as the denominator in calculating diluted
earnings per share
564,612,697 536,063,424
Basic earnings per share
Diluted earnings per share
Cents
10.02
9.54
Cents
8.23
8.20
62
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019 NOTE 46. SHARE-BASED PAYMENTS
Option Plans
Employee Share Scheme
Shares have been issued under the Accent Group Employee Share Scheme ('ESS') and are held in escrow until certain vesting
conditions are met. The shares were issued at fair value at the date of the offer and the Company has provided employees with a
limited recourse loan to acquire the shares. Interest on the loan is equivalent to the value of franked dividends paid in respect of the
shares. The shares are treated in substance as options and accounted for as share-based payments.
Set out below are summaries of options granted under the plans:
30 Jun 2019
Grant date
Expiry date
Exercise price
28/02/2013
28/08/2018
03/12/2013
03/06/2019
$0.490
$0.690
Balance at
the start of
the year
993,333
66,666
02/10/2014
30/03/2020
$0.590
1,083,334
30/03/2015
30/09/2020
$0.730
146,667
27/05/2015
30/09/2020
$0.730
1,750,000
27/05/2015
30/09/2020
$1.010
500,000
28/08/2015
30/08/2020
$1.140
1,100,000
13/05/2016
28/02/2021
$1.490
400,000
6,040,000
Granted
Exercised
Expired/
forfeited/other
(893,333)
(100,000)
(66,666)
(616,666)
(73,333)
(816,666)
(166,667)
–
–
–
–
–
(99,999)
(450,000)
Balance at
the end of
the year
–
–
466,668
73,334
933,334
333,333
550,001
–
–
400,000
(2,733,330)
(550,000)
2,756,670
–
–
–
–
–
–
–
–
–
1 Jul 2018
Grant date
Expiry date
Exercise price
Balance at the
start of the year
Granted
Exercised
Expired/
forfeited/other
Balance at the
end of the year
27/08/2015
27/08/2018
27/08/2015
27/08/2018
$0.400
$0.589
350,000
200,000
28/02/2013
28/08/2018
$0.490
2,488,332
03/12/2013
03/06/2019
$0.690
133,333
02/10/2014
30/03/2020
$0.590
1,360,000
30/03/2015
30/09/2020
$0.730
220,000
27/05/2015
30/09/2020
$0.730
2,250,000
27/05/2015
30/09/2020
$1.010
500,000
28/08/2015
30/08/2020
$1.140
1,600,000
13/05/2016
28/02/2021
$1.490
400,000
9,501,665
–
–
–
–
–
–
–
–
–
–
–
(1,494,999)
(66,667)
(276,666)
(73,333)
(500,000)
–
–
–
–
–
(350,000)
(200,000)
–
–
993,333
66,666
1,083,334
146,667
1,750,000
500,000
–
–
–
–
–
–
(500,000)
1,100,000
–
400,000
(2,411,665)
(1,050,000)
6,040,000
The weighted average share price during the financial year was $1.395 (1 July 2018: $1.092).
The weighted average remaining contractual life of options outstanding at the end of the financial year was 1.2 years (2018: 1.8 years).
Performance rights
On 14 October 2016, the Board approved a performance rights plan called the RCG Performance Rights Plan ('PRP'). The PRP was
introduced following a review by the Board of the existing remuneration arrangements of the Company. The Board intends for the PRP
to replace the ESS.
The objective of the PRP is to align the interests of employees of the Group with those of the shareholders and provide employees
of the Group who are considered to be key to the future success of the Company with an opportunity to receive shares in order
to reward and retain the services of those persons and recognise the employees of the Group for their contribution to the future
success of the Company.
63
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019 NOTE 46. SHARE-BASED PAYMENTS (CONTINUED)
Eligibility and grant of performance rights
The Board may, from time to time, grant performance rights to an employee of the Group who the Board determines to be eligible
to participate in the PRP. This may include an executive director of the Company, but may not include a non-executive director of
the Company. The performance rights granted are under the terms and conditions of the PRP and may include additional terms
and conditions, including any performance conditions, as the Board determine. The Board may only grant performance rights where
an employee continues to satisfy any relevant conditions imposed by the Board.
Vesting of performance rights
Vesting of performance rights are subject to prescribed performance conditions. The performance conditions are as follows:
– Performance rights granted in 2017 are subject to an earnings per share (‘EPS’) performance condition (50%) and a total
shareholder return (‘TSR’) performance condition (50%). The 2017 performance rights are measured over a 3-year period.
– Performance rights granted in 2018 are all subject to an EPS performance condition measured over a 5-year period. For the
performance rights to vest, the Company’s compound annual growth in adjusted diluted earnings per share (‘ADEPS’) must equal
or exceed 10% p.a. over a five-year period. If the performance condition is met, 100% of the performance rights vest at the
end of the five-year period. If the performance condition is not met, none of the performance rights vest unless the Board
determines otherwise.
The Group recognises the fair value at the grant date of equity settled shares as an employee benefit expense proportionally over
the vesting periods with a corresponding increase in equity. Fair value is measured at grant date using Monte-Carlo simulation and
Binomial option pricing models where applicable. Vesting is also subject to the recipients of the performance rights remaining in
employment with the Company.
Lapsing of performance rights
An unvested performance right will lapse in various prescribed circumstances, unless the Board determines otherwise. Such
circumstances include:
– the circumstances specified by the Board on or before the grant of the performance right;
– if a participant ceases to be an employee and/or director of a Group company for any reason or they cease to satisfy any other
relevant conditions imposed by the Board at the time of the grant of the performance rights;
– failure to meet the performance conditions attaching to the performance right or any performance condition no longer, in the
opinion of the Board, being capable of being satisfied in accordance with their terms; and
– if in the opinion of the Board a participant acts fraudulently or dishonestly, is in breach of their material duties or obligations to
any Group company, has committed an act of harassment or discrimination or has done any act which has brought the Group
or any Group company into disrepute.
Key inputs to the pricing models include:
Share price at grant date
Volatility
Dividend yield
Risk-free interest rate
Share price at grant date
Volatility
Dividend yield
Risk-free interest rate
30 June 2019
$0.78 - $1.61
25.0%
3.7% - 7.7%
1.50%
1 July 2018
$0.80
25.0%
7.5%
1.50%
64
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019 NOTE 46. SHARE-BASED PAYMENTS (CONTINUED)
Set out below are summaries of the performance rights granted:
30 Jun 2019
Grant date
11/01/2017
03/10/2017
27/12/2017
20/06/2018
1 Jul 2018
Grant date
11/01/2017
03/10/2017
27/12/2017
20/06/2018
Expiry date
Balance at the
start of the year
Granted
Exercised
Expired/
forfeited/other
Balance at the
end of the year
09/11/2019
1,210,552
30/10/2022
16,950,000
30/10/2022
6,700,000
30/10/2022
400,000
25,260,552
–
–
–
–
–
–
–
–
–
–
(134,398)
1,076,154
(250,000)
16,700,000
–
–
6,700,000
400,000
(384,398)
24,876,154
Expiry date
Balance at the
start of the year
Granted
Exercised
Expired/
forfeited/other
Balance at the
end of the year
09/11/2019
2,119,315
–
30/10/2022
30/10/2022
30/10/2022
–
–
–
19,450,000
12,200,000
400,000
2,119,315
32,050,000
–
–
–
–
–
(908,763)
1,210,552
(2,500,000)
16,950,000
(5,500,000)
6,700,000
–
400,000
(8,908,763)
25,260,552
The weighted average remaining contractual life of performance rights outstanding at the end of the financial year was 3.2 years
(2018: 4.2 years).
NOTE 47. EVENTS AFTER THE REPORTING PERIOD
Apart from the dividend declared as disclosed in Note 32, no other matter or circumstance has arisen since 30 June 2019 that has
significantly affected, or may significantly affect the Group's operations, the results of those operations, or the Group's state of
affairs in future financial years.
65
Notes to the Financial Statementsfor the year ended 30 June 2019Accent Group Limited Annual Report 2019 Directors' Declaration
In the directors' opinion:
– the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations
Regulations 2001 and other mandatory professional reporting requirements;
– the attached financial statements and notes comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board as described in Note 3 to the financial statements;
– the attached financial statements and notes give a true and fair view of the Group's financial position as at 30 June 2019 and of
its performance for the financial year ended on that date;
– there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable; and
– at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed
Group will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross
guarantee described in Note 43 to the financial statements.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001. On behalf of
the directors
David Gordon
Chairman
22 August 2019
Melbourne
66
for the year ended 30 June 2019Accent Group Limited Annual Report 2019
Independent Auditor’s Report
`
Deloitte Touche Tohmatsu
ABN 74 490 121 060
550 Bourke Street
Melbourne VIC 3000
Australia
Tel: +61 3 9671 7000
Fax: +61 3 9671 7001
www.deloitte.com.au
Independent Auditor’s Report
to the Members of Accent Group Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Accent Group Limited (the “Company”) and its subsidiaries
(the “Group”) which comprises the consolidated statement of financial position as at 30 June 2019,
the consolidated statement of profit or loss and other comprehensive income, the consolidated
statement of changes in equity and the consolidated statement of cash flows for the year then ended,
and notes to the financial statements, including a summary of significant accounting policies, and
the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:
(i)
giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its
financial performance for the year then ended; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have
also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has
been given to the directors of the Company, would be in the same terms if given to the directors as
at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network.
71
67
Accent Group Limited Annual Report 2019
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance
in our audit of the financial report for the current period. These matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Key Audit Matter
How the scope of our audit responded to the
Key Audit Matter
Carrying value of goodwill and
indefinite useful life intangible assets
Goodwill and indefinite useful life intangible
assets (principally brand names) totaling
$352.9m have been recognised in the
consolidated statement of financial position
as a consequence of acquisitions undertaken
in the current and past periods.
Management conducts impairment tests
annually (or more frequently if impairment
indicators exist) to assess the recoverability
of the carrying value of goodwill and
indefinite useful life intangible assets. This is
performed through value-in-use discounted
cash flow model for goodwill and the fair
value less cost to sell valuation method for
other indefinite useful life intangible assets.
As disclosed in Note 3, there are a number
of key estimates made which require
significant judgement in determining the
inputs into these models, which include:
•
•
Revenue growth;
Royalty rates (used in the Relief from
Royalty brand valuation model); and
• Discount rates applied to the projected
future cash flows.
Our audit procedures included, but were not limited
to:
Evaluated the principles and integrity of the
model used by management to calculate
value-in-use of the Group and fair value for
other indefinite useful life intangible assets to
ensure it complies with the relevant accounting
standards;
Challenged management with respect to the
revenue growth rates underlying the cash flow
forecasts to determine whether they are
reasonable and supportable based on historical
performance, management’s strategic growth
plans for the Group, and other known industry
factors;
Engaged valuation specialists to assess the
reasonableness of the basis adopted by
management in determining the other key
inputs and assumptions underlying
the
calculations in the models including:
o
o
Evaluated the royalty rates used by
comparison to market data on similar
brands’ royalty rates; and
Evaluated the discount rate used by
assessing the cost of capital of the Group
in comparison to market data
Performed sensitivity analysis on the key
model inputs and assumptions; and
Assessed
disclosures
statements.
appropriateness
the
in Note 18 to the
of
the
financial
•
•
•
•
•
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Independent Auditor’s ReportAccent Group Limited Annual Report 2019
Key Audit Matter
How the scope of our audit responded to the
Key Audit Matter
Provision for impairment of inventories
The Group has recognised $131.5m in
inventories on the statement of financial
position as at 30 June 2019.
Inventories are recognised net of a provision
for impairment where the net realisable
value of inventories is less than cost. As
disclosed
in Note 3, this assessment
requires a degree of estimation and
judgement. The level of the provision is
assessed by
the
anticipated level of sales and margins based
on recent historical performance, the quality
of inventory held at balance sheet date and
the broader market conditions.
into account
taking
To the extent that these judgements and
estimates prove incorrect, the Group may be
exposed to potential additional inventory
write-downs or reversals in future periods.
AASB 16 Leases: Presentation and
disclosure
is required
The Group
the
requirements of AASB 16 Leases from 1 July
2019, being the start of the financial year
ending 29 June 2020.
to apply
As set out in Note 3, management has
identified that the adoption of AASB 16 will
have a
the
financial
presentation of
statements.
the Group’s
impact on
significant
The expected impact of adoption is reliant
upon a number of key estimates and
judgements as set out
in Note 3.
Additionally, there is risk that the lease data
is incomplete or inaccurate.
Our audit procedures included, but were not limited
to:
•
•
•
•
Challenged management’s estimate of the
provision by considering, amongst others, the
following sources of information to assess net
realisable value:
o
o
o
Actual losses incurred in the previous 12
months due to inventory being sold below
cost and inventory written off;
Inventory not sold during the period; and
The likelihood of current inventory to
become impaired in the future based on
internal and external factors.
Reviewed and assessed the reasonableness of
the basis adopted by management
in
determining the provision calculations;
Recalculated the inventory provision to test
compliance with the Group’s accounting policy
and accounting standards; and
Assessed
disclosures
statements.
appropriateness
the
in Note 12 to the
of
the
financial
Our audit procedures included, but were not limited
to:
• On a sample basis, tested the completeness of
the lease data captured by management by
agreeing rent expenses in the ledger to the
lease data;
• On a sample basis, tested the accuracy of the
lease data captured by management, by
agreeing
lease
documentation;
the underlying
to
it
Engaged our specialists
incremental borrowing
management to calculate the lease liability;
the
rates used by
to assess
Evaluated
judgement
the estimates and
applied by management in determining the
lease period for each lease on a sample test
basis, including the probability of exercising
options;
Recalculated the lease liability and right of use
asset, on a sample basis, to test the
mathematical accuracy of management’s
calculations; and
Assessed the appropriateness of the disclosure
in Note 3 to the financial statements.
•
•
•
•
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Independent Auditor’s ReportAccent Group Limited Annual Report 2019
Other Information
The directors are responsible for the other information. The other information comprises the
Directors’ Report and Shareholder Information which we obtained prior to the date of this auditor’s
report. The annual report will also include the Chairman and Chief Executive Officer’s Report which
is expected to be made available to us after that date (but does not include the financial report and
our auditor’s report thereon).
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If,
based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
When we read the Chairman and Chief Executive Officer Report, if we conclude that there is a
material misstatement therein, we are required to communicate the matter to the directors and use
our professional judgement to determine the appropriate action.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of
the financial report that gives a true and fair view and is free from material misstatement, whether
due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group
to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to liquidate the Group or to
cease operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as
intentional omissions,
involve collusion,
fraud may
misrepresentations, or the override of internal control.
forgery,
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Group’s internal control.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the directors.
74
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Independent Auditor’s ReportAccent Group Limited Annual Report 2019
•
•
Conclude on the appropriateness of the directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the financial
report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and
events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the Group to express an opinion on the financial report.
We are responsible for the direction, supervision and performance of the Group’s audit. We
remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 15 to 20 of the Directors’ Report for
the year ended 30 June 2019.
In our opinion, the Remuneration Report of Accent Group Limited, for the year ended 30 June 2019,
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
DELOITTE TOUCHE TOHMATSU
David White
Partner
Chartered Accountants
Melbourne, 22 August 2019
75
71
Independent Auditor’s ReportAccent Group Limited Annual Report 2019 Shareholder Information
The shareholder information set out below was applicable as at 14 August 2019.
DISTRIBUTION OF EQUITABLE SECURITIES
Analysis of number of equitable security holders by size of holding:
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel
EQUITY SECURITY HOLDERS
Number
of holders
of ordinary
shares
1,194
2,370
1,346
1,916
168
6,994
184
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
Ordinary shares
BBRC INTERNATIONAL PTE LTD
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