Annual Report 2020
Accent Group Limited 2020 Annual Report
Contents
2 Our Brands
6
Chairman and Chief Executive Officers’ Report
10 Directors’ Report
33 Auditor’s Independence Declaration
34
Statement of Profit or Loss and
Other Comprehensive Income
35 Statement of Financial Position
36 Statement of Changes in Equity
37 Statement of Cash Flows
38 Notes to the Financial Statements
74 Directors’ Declaration
75
Independent Auditor’s Report
82 Shareholder Information
84 Corporate Directory
Accent Group Limited
(AX1) is a market leading
digitally integrated retail
and distribution business
in the performance and
lifestyle market sectors.
With over 500 stores and 19 websites across 14 different
retail banners, exclusive distribution rights for 12
international brands and a growing portfolio of owned
brands across Australia and New Zealand, the Group
is well positioned for future growth.
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Accent Group Limited Annual Report 2020 Our Brands
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Skechers Printer
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JOB NAME
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MRKTG_SP_FALL20_W_SKX_UNO_STOOL_24X42_V1.psd (CMYK; 294 ppi; 102%)
Skechers is a global leader in lifestyle and performance
footwear. We operate 112 Skechers stores across Australia
and New Zealand.
2nd Comp Date
A/R Date
Custom Techs
Paper Stock
None
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With 125+ 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.
Hype DC is the premium destination for the latest exclusive
footwear in Australia and New Zealand.
Having opened our first store in Mosman in June 1998, Hype
DC is now the longest-standing, Australian-owned footwear
retailer with over 65 locations and a thriving e-commerce
business. Representing a curated selection of multi-brand
footwear from leading and unique global brands, our team
continues to search worldwide for the latest footwear styles
and be the first to bring it to our market – before anyone else.
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.We
recently opened our first CAT retail store in Werribee.
2
Accent Group Limited Annual Report 2020 Our Brands
Merrell is the world’s leading brand of performance outdoor
and adventure footwear. We operate 15 Merrell stores.
The Dr Martens range of footwear was born in 1960 and
is a representation of rebellion and free-thinking youth
culture. We currently operate 5 stores with more due to
open very soon.
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 22 Vans stores.
PIVOT provides the best international brands at the best
value prices for families who love sport, lifestyle and
workwear footwear and apparel. We opened our first store
in Shellharbour, NSW and an additional three launching in
Victoria later this year.
3
Accent Group Limited Annual Report 2020 Our Brands
With 142 stores across Australia and New Zealand, The
Athlete’s Foot is the region’s largest speciality athletic
footwear retailer, known for its exceptional in-store customer
service experience and fitting technology.
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.
Inspired by the company’s New England heritage, Timberland
is a brand true to the outdoor lifestyle. We operate 5
Timberland stores.
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.
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Accent Group Limited Annual Report 2020 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 of footwear and accessories from Nike, Vans,
adidas and more, The Trybe is a key kids destination for the
very best global brands. The Trybe currently has 7 stores
with more to follow.
Launched in 2012, Stylerunner is a cult online destination for
women’s multi-branded activewear and sneakers. With over 70
brands and a social media following of over 600k, Stylerunner
will launch its first brick and mortar stores in 2020.
5
Accent Group Limited Annual Report 2020 Chairman and Chief Executive Officers’ Report
Another year of record
profit despite the extremely
challenging operating
environment in the second half.
These events required an immediate
range of actions by the management
team to both manage the impacts and to
continue to drive financial performance,
including:
– the implementation of hard cost out
measures and inventory initiatives to
right size the Company’s costs and
inventory;
– a proposal brought to the Board by
Management to take an 80% cut in
their remuneration if required;
– the acceleration of digital sales,
leveraging the Group’s best in class
omnichannel capability, to offset the
impact of store closures and reduced
customer foot traffic in shopping
centres;
– the development of COVID safe
operating protocols including PPE
(personal protective equipment),
training and relevant signage and
in store fittings;
– good faith negotiation of rental
abatements with landlords to cover
the reduced foot traffic in shopping
centres, anticipated for the period
from April 2020 until at least
December 2020; and
– securing additional liquidity
through an additional debt
facility of $30 million with the
Company’s existing banking group.
This additional facility was not
drawn and remains undrawn.
Given the collapse in sales, the
Company qualified for $23.9 million
in Government wage subsidies across
Australia and New Zealand from April to
June. These subsidies were announced
after the Company’s decision to shut
down its stores. In accordance with the
Government requirements, $10.7 million
of these subsidies were passed directly
through to team members while they
were not working or did not work
sufficient hours to be otherwise paid
more than the subsidy received.
Dear fellow Shareholders
This has been a year like no other.
The results that the Group has delivered,
notwithstanding the significant
headwinds we faced as a result of the
COVID-19 pandemic, are a testament to
the strength, resilience and talent of the
Accent Group team and culture.
The Board acknowledges the remarkable
persistence, flexibility and agility of the
entire Accent team which, along with the
support of our loyal customers, landlords
and supplier partners, enabled the
Group to continue to operate and deliver
another year of record profit, despite
the extremely challenging operating
environment in the second half.
FINANCIAL REVIEW
The Group’s net profit after tax for FY20
was $58 million, an increase of 7.50%
over the prior year. Your Board has
declared a final fully franked dividend
of 4.0 cents per share, which brings the
total dividends declared during the year
to 9.25 cents per share which represents
an 86% payout ratio for the year.
COVID-19 UPDATE
With the onset of COVID-19, the
operating environment in H2 became
extremely challenging and, in this
context, the Board considers that
the strong results delivered were a
direct outcome of the response of
the management team in successfully
navigating a raft of complex issues and
implementing new initiatives to drive
the business through this period.
COVID-19 had a significant impact
on the business, including:
– in order to safeguard the health and
safety our team and customers, a
Company-wide operations shutdown
implemented from 25 March for
a then unknown duration; and
– all Group owned stores closing to
customers for the month of April and
part of May and a resultant decline
in total sales in March and April of
$55.7 million (or –58%) compared
to the prior year.
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Accent Group Limited Annual Report 2020 Chairman and Chief Executive Officers’ Report
The subsidies also allowed the Company
to retain the team through the period
of shutdown.
Once it was safe to reopen stores,
the balance of the wage subsidies
supported the return to full employment
for permanent team members and
the reopening of the Accent Group
business through May and June,
including standing up all permanent team
members from 1 June to full hours and
full pay. Sales in May and June recovered
strongly, driven by digital growth.
Given the improved performance of
the business, we do not expect to apply
for wage subsidies from September.
We remain committed to our team,
and they will continue to be fully
remunerated notwithstanding the
ongoing second round of Melbourne
and Auckland lockdowns in August 2020
which has resulted in the temporary
closure to customers of more than 20%
of the Company’s owned stores.
OPERATING REVIEW
Digital
The most significant driver of the
Group’s outstanding financial results
in FY20 was the rapid acceleration
of digital sales during the period of
extreme retail turbulence.
Digital sales grew 100% in the second
half and were up 69% for the full year
with a run rate of more than 20% of
retail sales. This digital growth was
facilitated by the infrastructure that
Accent Group had built over the
last three years, which ensured that
a record number of customers and
deliveries could be managed from our
digital platform with significant additional
capacity and scalability still available.
During the last quarter of FY20, more
than 50% of customers shopping with
us online were new customers and we
believe that there has been a seismic and
most likely enduring shift in consumer
behaviour to shopping online.
Financials1
($ millions)
Total Sales (incl. TAF)2
Accent Group Sales (company owned)
EBITDA
EBIT
NPAT
EPS (cents per share)
Dividends (cents per share)
FY20
(Statutory)
FY20
(pre
AASB 16)
FY19
(pre
AASB 16)
948.9
807.1
203.4
94.8
55.7
10.31
9.25
948.9
807.1
121.7
87.2
58.0
10.73
9.25
Growth
(pre
AASB 16)
Up 1.5%
Up 4.5%
935.3
772.5
108.9
Up 11.8%
80.6
53.9
Up 8.2%
Up 7.5%
10.02
Up 7.1%
8.25
Up 12.1%
1. Due to the material impact of the adoption of AASB 16, all financials in this Chairman and Chief Executive Officers Report are presented on a pre AASB 16
basis (unless stated otherwise) which adjusts for the impact of the AASB 16 and subsequently presents the financials on the most comparable basis with
the prior year reported results also pre AASB16. A reconciliation of the impact of AASB 16 is provided in the appendix to Accent Group’s full year results
presentation released on 26 August 2020.
2. Includes The Athlete’s Foot franchise store sales.
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Accent Group Limited Annual Report 2020 Chairman and Chief Executive Officers’ Report
CONCLUSION
Your Board acknowledges the resilience
and performance of the entire Accent
Group team through what has been and
remains a very challenging environment.
The dividend is in line with the growth in
profits and signals the confidence of the
Board in the performance and financial
strength of the Company.
We remain committed to our team
and will continue to invest in them
and their well-being.
Accent Group investors are part of
a market leading digitally integrated
consumer business and this has
translated into compelling shareholders
returns with EPS growth of 12.3%
per annum over the past 10 years and
compound dividend per share growth
of 14% per annum since FY16.
And with the exciting and meaningful
future growth initiatives outlined above,
the Board is confident that Accent
Group will continue to be defined
by strong cash conversion and the
consistently strong returns it delivers
on shareholders’ funds.
David Gordon
Chairman
Daniel Agostinelli
Chief Executive Officer
Accent Group is well placed to capitalise
on this trend with its market leading
digitally integrated consumer business
comprising 19 websites, 16 owned
and distributed brands, more than 500
points of distribution and nearly 7 million
contactable customers.
The Group is aiming to drive digital sales
to be at least 30% of total retail sales, by
leveraging its existing best in class digital
capability and continuing to invest in
digital initiatives, including virtual sales
channels, CRM tools, express delivery
capability and loyalty programs.
Core retail
Accent Group remains committed
to a long-term strategy of delivering
customers a best in class integrated
digital and instore experience. Store sales
in Platypus, Hype DC, Skechers, Vans
and Dr Martens continued to grow in
FY20, and the Group’s margin expansion
is expected to continue through driving
a higher mix of distributed brands and
growth in vertical brands and products.
During the second half, in line with
the Government code of conduct for
commercial leasing arrangements, the
Group reached agreement with the
vast majority of its landlords on rent
abatements that cover the period
from April 2020 to December 2020,
and the Board acknowledges the spirit
of partnership in which landlords
approached these negotiations.
In FY21, the Company will continue to
open and renew store leases where its
targeted return on investment can be
achieved, taking into account the shift
to the digital channel and projected
lower foot traffic in shopping centres.
The Group plans to open 30 to 50
new stores next year across Skechers,
Platypus, Hype DC, Dr Martens, Vans,
Merrell, CAT and The Trybe.
Accent Performance
In order to capitalise on the market
trend to active and performance wear,
management of The Athlete’s Foot
(TAF), Stylerunner and Saucony have
been consolidated under a dedicated
group executive. TAF and Stylerunner
experienced strong growth in sales and
gross margin, benefiting from consumer
demand in these categories which
accelerated in the last 3 months of
the year.
The TAF business is focussed on
accelerating digital sales through a
new endless aisle initiative offering
a full range of products, including the
introduction of apparel. TAF will also
grow its existing and new distributed,
exclusive and vertical brands including
Saucony, On Running, MBT and Alpha
to deliver continued margin expansion.
In November 2019, Accent Group
acquired Stylerunner, the cult online
destination for women’s multi-
branded activewear and sneakers.
This business presents a great
opportunity for the Group to get a
foothold in the activewear market in
Australia and New Zealand, which is
estimated to be valued at more than
$4 billion. The first bricks and mortar
store is scheduled to open in Armadale
(VIC) in November 2020 with up to
5 stores and significant growth in
digital sales planned for FY21.
Wholesale
Wholesale had a strong start to the
FY20 financial year and, whilst sales
were impacted in April and May
consistent with broader retail demand,
it bounced back strongly in June. The
forward sales pipeline for wholesale
is strong with Skechers, Vans and
Dr Martens all completing record
sell-ins for the second half of FY21.
Vertical brands and products
Sales of the Group’s vertical products
and brands continued to gain
momentum, more than doubling in
FY20 to $13 million and delivering
strong gross profit margin.
In FY21, the Company will continue
its focus on margin expansion through
driving a higher mix of distributed
brands and growth in vertical brands and
products, including the launch of a new
vertical brand, ITNO (“In The Name Of”)
in Platypus in the first half of FY21.
New business
The Group’s new sports and lifestyle
banner, PIVOT, opened its first store in
Shellharbour (NSW) in May 2020 with
performance to date ahead of plan. Up
to 12 stores are planned for FY21 along
with the launch of the PIVOT website.
PIVOT operates in the value sports and
lifestyle market, with an estimated size
of more than $4 billion, representing
a significant market share growth
opportunity for Accent Group through
a store network of up to 100 stores
and rapid digital sales growth.
8
Accent Group Limited Annual Report 2020 Accent Group
Financial Report
2020
The Directors present their report, together with the financial
statements of the consolidated entity (the ‘Consolidated
Entity’ or ‘Group’) consisting of Accent Group Limited (the
‘Company’ or ‘Accent Group’) and its controlled entities for
the year ended 28 June 2020.
9
Accent Group Limited Annual Report 2020 Directors’ Report
1. DIRECTORS
The following persons were Directors of Accent Group during the whole of the financial year and up to the date of this report,
unless otherwise stated:
– David Gordon – Chairman
– Daniel Agostinelli – Chief Executive Officer
– Stephen Goddard
– Michael Hapgood
– Donna Player
– Joshua Lowcock (appointed 28 November 2019)
– Brett Blundy (resigned 12 May 2020)
– Nico van der Merwe – alternate Director for Brett Blundy (resigned 12 May 2020)
– Stephen Kulmar (resigned 28 November 2019)
2. PRINCIPAL ACTIVITIES
Accent Group is a leading digitally integrated consumer business in the retail and distribution sectors of branded performance and
lifestyle footwear, with over 500 stores and 19 websites across 14 different retail banners and exclusive distribution rights for
12 international brands across Australia and New Zealand.
The combined Group’s brands include The Athlete’s Foot (‘TAF’), Platypus Shoes, Hype DC, Skechers, Merrell, CAT, Vans,
Dr. Martens, Saucony, Timberland, Sperry, Palladium, Stance, Supra, Subtype, The Trybe, PIVOT and Stylerunner.
3. DIVIDENDS
Dividends paid or declared by the Company during, and since the end of, the financial year are set out in Note 25 to the Financial
Statements and summarised below:
Cents per ordinary share
Total amount ($’000)
4.00
21,675
5.25
28,464
3.75
20,297
4.50
24,356
Payment date
24 September 2020
19 March 2020
26 September 2019
21 March 2019
FY20 final
FY20 interim
FY19 final
FY19 interim
The total dividend for the financial year ended 28 June 2020 of 9.25 cents per share is an increase of 12.1% on the previous year.
4. OPERATING AND FINANCIAL REVIEW
The Operating and Financial Review of the Group for the financial year ended 28 June 2020 is provided in the Chairman and Chief
Executive Officer’s Report on page 6 and forms part of this Directors’ Report.
IMPACT OF COVID-19
5.
With the onset of COVID-19 in early 2020, the operating environment in H2 became extremely challenging. In this context, the
Board considers that the strong results delivered were a direct outcome of the response of the management team in successfully
navigating a raft of complex issues and implementing new initiatives to drive the business through this period.
COVID-19 had a significant impact on the business, including:
– In order to safeguard the health and safety of our team and customers, a Company-wide operations shutdown was implemented
from 25 March for a then unknown duration.
– All Group owned stores closed to customers for the month of April and part of May with a resultant decline in total sales in
March and April of $55.7 million (or –58%) compared to the prior year.
– These events required an immediate range of actions by the management team to both manage the impacts and to continue
to drive financial performance, including:
– the implementation of hard cost out measures and inventory initiatives to right size the Company’s costs and inventory;
– a proposal brought to the Board by Management to take an 80% cut in their remuneration if required;
– the acceleration of digital sales, leveraging the Group’s best in class omnichannel capability, to offset the impact of store
closures and reduced customer foot traffic in shopping centres;
– the development of COVID safe operating protocols including PPE (personal protective equipment), training and relevant
signage and in store fittings;
– good faith negotiation of rental abatements with landlords to cover the reduced foot traffic in shopping centres,
anticipated for the period from April 2020 until at least December 2020; and
– securing additional liquidity through an additional debt facility of $30 million with the Company’s existing banking group.
This additional facility was not drawn and remains undrawn.
10
Accent Group Limited Annual Report 2020for the year ended 28 June 2020 – Given the collapse in sales, the Company qualified for $23.9 million in Government wage subsidies across Australia and New
Zealand from April to June. These subsidies were announced after the Company’s decision to shut down its stores.
– In accordance with the Government requirements, $10.7 million of these subsidies were passed directly through to team
members while they were not working or did not work sufficient hours to be otherwise paid more than the subsidy received.
The subsidies also allowed the Company to retain the team through the period of shutdown.
– Once it was safe to reopen stores, the balance of the wage subsidies supported the return to full employment for permanent
team members and the reopening of the Accent Group business through May and June, including standing up all permanent
team members from 1 June to full hours and full pay. Sales in May and June recovered strongly, driven by digital growth.
– Given the improved performance of the business, the Company does not expect to apply for wage subsidies from September.
We remain committed to our team, and they will continue to be fully remunerated notwithstanding the ongoing second round
of Melbourne and Auckland lockdowns in August 2020 which has resulted in the temporary closure to customers of more than
20% of the Company’s owned stores.
The Company expects that COVID-19 will continue to impact its operations and consumer sentiment and behaviour for the
foreseeable future and has strong contingency plans to mitigate the potential risks of ongoing store closures and subdued
customer sentiment.
6. PEOPLE AND SAFETY
We recognise that our team members are our most valuable asset. During the year, the Company invested in a number of areas of
employee engagement and support to ensure that the Group attracts, develops and retains the best team members in the industry.
Accent Group’s comprehensive employee benefits program includes:
– A retail incentive program
– An employee referral program
– An employee assistance program
– Novated leasing
– Affiliation program with BUPA Health insurance
– Corporate gym membership affiliation program
– Paid parental leave scheme
The Company has also developed improved systems of reporting on key metrics via a ‘People Dashboard’ that provides regular
updates to the Board and senior management team in relation to headcount, gender diversity, recruitment and workplace health and
safety. The implementation of a new Human Resources Information System will provide a world class people experience, designed to
positively influence all elements of the employee life cycle.
We are committed to creating a culture within the workplace that is diverse and inclusive, enables employees to feel safe and
supported to excel in their roles, and this is reflected in the Company’s Diversity Policy and Code of Conduct. Employees are
encouraged to speak up about conduct that is inconsistent with the Accent Group policies, including under Whistleblower Policy
which is aimed at ensuring that individuals feel supported to come forward if they have information about serious misconduct as
it relates to Accent Group.
The Company is focussed on promoting and improving workplace gender equality. The current breakdown of gender representation
in the Group, as reported in accordance with the Workplace Gender Equality Act 2012 during the year, is as follows:
Level
Board
Senior managers*
Other managers
Other employees
Total
Total number
% of women
% of men
6
71
513
4,609
5,199
17%
61%
64%
53%
55%
83%
39%
36%
47%
45%
*
Senior managers are those individuals who collectively participate in determining and implementing major operational and strategic initiatives at the
business unit level and who are responsible for the results of their respective business units.
11
Accent Group Limited Annual Report 2020Directors’ Reportfor the year ended 28 June 2020 During the year, the Company continued its focus on providing a healthy and safe work environment for all its team members,
contractors, customers and visitors. In FY20, the Group’s recorded Lost Time Injury Frequency Rate (LTIFR) was 3.75, and we have
an ongoing target for continuous improvement of this measure year on year.
During FY20, we focused on building a holistic end to end safety plan, with a key aim of reducing ladder related incidents. A ladder
audit was conducted across our entire store portfolio, resulting in 112 ladders being replaced, an improvement in compliance and
a 50% reduction in the number of ladder related incidents compared to the previous year.
We also implemented a number of initiatives to support mental health and wellbeing, including the introduction of an Employee
Assistance Program and Critical Incident support. Mental health will continue to be a key priority for the Group in FY21.
7. SUPPLY CHAIN
Accent Group is committed to operating responsibly and ensuring that no person who is involved in our operations (including
employees, customers and community members) are subject to any situation of exploitation were that person cannot refuse or leave
work because of threats, violence, coercion, abuse of power or deception. We recognise that Australia is not immune from such
modern slavery practices, and we are in the process of developing and implementing a system for engaging with our suppliers to
identify and manage the risks of such practices in our supply chain. Further details of this program will be set out in Accent Group’s
modern slavery statement that will be published later this year.
8. COMMUNITY
In a year where many communities and businesses were impacted by major events such as the bushfires and COVID-19, we are
incredibly proud to have continued our support for a number of causes over the last year.
In January 2020, following the devastating impact of the bushfires across Australia, Accent Group partnered with the Australian
Red Cross and donated $100,000 to their Disaster Relief and Recovery fund as well as setting up a Go Fund Me Page where team
members contributed a further $8,500. We are delighted that these funds will contribute to the Red Cross’ activities to help the
affected communities.
In August this year, Skechers partnered again with Guide Dogs Australia for their annual ‘Pawgust’ campaign, challenging all
Aussies and their dogs to walk 30 minutes a day for 30 days, with the event aligning with the launch of the new Skechers GOwalk
Smart shoes.
Platypus was once again the proud sponsor of Videos for Change, a powerful platform for young people to share their voice and
drive social change. Students from grades 7-12 were invited to submit a one-minute video on a social issue they feel passionate
about. Bullying, domestic violence, body issues and racism are some of the many issues faced by young people today and Videos for
Change provides a platform for them to amplify their voices to a global audience. Platypus donated cash prizes for the competition
and also awarded a very special prize for one entrant to spend a day with the creative team on a shoot.
TAF has been a proud partner of Parkrun Australia for the last three years and now in New Zealand as well. The partnership aligns
with our values of supporting the community by encouraging people to keep healthy, fit and active through free weekly events that
are easily accessible to all.
TAF also continues its partnership with Netfit supporting netballers of all ages in Australia and New Zealand. With TAF’s support,
Netfit provides weekly fitness videos, plans and coaching drills and also engages with local communities by running empowering
events and workshops.
12
Accent Group Limited Annual Report 2020for the year ended 28 June 2020Directors’ Report 9.
INFORMATION ON DIRECTORS
Name
Particulars
David Gordon
Non-Executive Chairman
Daniel Agostinelli
Chief Executive Officer
Stephen Goddard
Non-Executive Director
Michael Hapgood
Co-Founder and
Non-Executive Director
Donna Player
Non-Executive Director
Joshua Lowcock
Non-Executive Director
David has over 20 years’ experience as a director of both public and private companies and has
spent more than 30 years working in corporate advisory roles to Australian and international
organisations. He brings extensive knowledge of mergers and acquisitions, as well as capital
raisings, IPOs and joint ventures.
David also has a proven track record in guiding businesses to harness their digital asset
capability to successfully explore and grow new markets.
David has held a number of senior roles with Freehills (Partner) and boutique investment bank
Wentworth Associates (acquired by Investec in 2001). In addition, he founded independent
corporate advisory and investment firm, Lexicon Partners in 2001, where he still serves as
Founding Principal.
David is a non-executive Director of nib Holdings Limited and its health fund subsidiary, nib
Health Funds Limited.
He is also the Chairman of Ordermentum Pty Ltd and General Homecare Holdings Pty Ltd and
a Non-Executive Director of Genesis Capital Investment Management Pty Ltd, General Medical
Holdings Pty Ltd, Stilmark Holdings Pty Ltd and international not-for-profit organisation, High
Resolves Pty Ltd.
David has been a Non-Executive Director of Accent Group since October 2006 and was
appointed Non-Executive Chairman in November 2017.
David is also the Chairman of Remuneration and Nomination Committee and a member of the
Audit and Risk Committee.
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.
Stephen is currently the Chairman of the Board and the Remuneration and Nomination
Committee of JB Hi-Fi Limited and a non-executive Director and Chairman of the Audit and
Risk Committee of both GWA Group Limited and Nick Scali Limited. Stephen was 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 a member of the Remuneration
and Nomination Committee and he has extensive retail, finance, and board experience. Stephen
was appointed Non-Executive Director in November 2017.
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.
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 and the 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 and
is a member of the Remuneration and Nomination Committee.
Joshua is the New York based Chief Digital Officer for Universal McCann, a global media and
advertising agency. Joshua brings Accent Group proven retail expertise in the intersection of
digital, data and privacy. His retail experience includes Woolworths (Australia), Walmart and
CVS Health as well as companies such as P&G, Sony and Coca Cola. In his career, Joshua has
lived and worked in Australia, China and the USA in senior roles and was named as one of the
50 most indispensable people in media in the US by AdWeek (2018). Joshua was appointed
Non-Executive Director in November 2019 and is a member of the Audit and Risk Committee.
13
Accent Group Limited Annual Report 2020Directors’ Reportfor the year ended 28 June 2020 10. 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:
Name
Particulars
Matthew Durbin
Celesti Harmse
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. Matthew joined Accent Group in November 2017
and was appointed as the joint Company Secretary in January 2018.
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. Celesti joined Accent Group and was appointed as the joint Company Secretary in
May 2018.
11. BOARD COMPOSITION AND INDEPENDENCE
The Board recognises the importance of having Directors who possess the combined skills, expertise and experience to facilitate
constructive decision making and follow good governance processes and procedures.
The table below outlines the mix of skills and experience considered by the Board to be important for its Directors to collectively
possess. The Board considers that collectively it has an effective blend of these skills to enable it to discharge its duties and
effectively govern the business and add value in driving the Group’s strategy.
Skill
Description
Strategy and planning
Ability to think strategically and identify and critically assess opportunities and threats and
develop effective strategies in the context of changing market conditions.
Operations
A broad range of commercial and business experience in business systems, practices,
improvements, risk and compliance, sales, technology and human resources.
Capital markets and M&A
Expertise in considering and implementing efficient capital management including alternative
capital sources and distributions, yields and markets.
Finance
Sales and marketing
Retail experience
(physical and digital)
People and performance
Experience in all aspects of the negotiation, structuring, risk management and assessment of
both acquisitions and divestments.
The ability to analyse financial statements and reporting, critically assess the financial performance
of the group, contribute to budget planning and efficient use of capital and resources.
Clear understanding of retail selling and marketing, developing and implementing sales and
marketing teams and strategies, recruiting, running and incentivising sales teams, and setting
sales budgets and targets.
Experience and broad understanding of the physical and online retail footwear and apparel
industry, including market drivers, risks and trends including policies, competitors, end users,
regulatory policy and framework.
Appreciation for the best practices in HR planning and management with familiarity in
employment legislation and labour relations, recruitment, compensation, performance reviews
and conflict management.
Technology, data and privacy
Expertise in the area of technology that the group should be aware of and utilising, including
keeping abreast of new and emerging technology.
Governance, compliance and risk
management
Ability to identify key risks to the group in a wide range of areas including legal and regulatory
compliance and monitor risk and compliance management frameworks and systems.
Knowledge and experience in best practice ASX and Corporations Act, governance structures,
policies and processes.
14
Accent Group Limited Annual Report 2020for the year ended 28 June 2020Directors’ Report Director independence
Daniel Agostinelli is a full-time executive and therefore not considered independent.
Of the remaining five non-executive Directors, four are considered by the Board to be independent – David Gordon, Donna Player,
Stephen Goddard and Joshua Lowcock.
Notwithstanding the tenure of Mr Gordon, the Board considers him to be independent and the Company is well served by Mr
Gordan’s deep understanding of Accent Group and its business as a result of his longer tenure. Given Mr Gordon’s tenure of over
10 years, the Board regularly assesses whether he has become too close to management to be considered independent. The Board
recently conducted such an assessment and reconfirmed Mr Gordon’s independence, on the basis that he is non-executive, not a
substantial shareholder, conducts himself at arm’s length in his engagement with the Company and brings his considerable skills
and knowledge to bear on matters before the Board. Mr Gordon’s approach to matters of the Board is always independent in both
appearance and in fact.
Mr Hapgood is a substantial shareholder in the Company and is therefore not considered to be independent. In addition, he is related
to two of the senior executives of the Company. However, as a non-executive director, Mr Hapgood is completely independent from
the day to day operations of the business and therefore able to bring clarity and independent thought to matters before the Board.
Due to his familial links, Mr Hapgood does not participate in any Board matters relating to management remuneration other than
the CEO.
12. MEETINGS OF DIRECTORS
The following table sets out the number of Directors' meetings (committee meetings) held during the year ended 28 June 2020
and the number of meetings attended by the members of the Board or the relevant committee. During the financial year, 13 Board
Meetings, 9 Audit and Risk Committee meetings and 5 Remuneration and Nomination Committee meetings were held.
Directors have a standing invitation to attend meetings of Board committees of which they are not members. All Directors receive
copies of the agendas, papers and minutes of each Board committee meeting.
David Gordon
Daniel Agostinelli
Stephen Goddard
Michael Hapgood
Donna Player
Joshua Lowcock
Brett Blundy
Nico van der Merwe
Stephen Kulmar
Full Board
Audit and Risk
Committee
Remuneration and
Nomination Committee
Held
Attended
Held
Attended
Held
Attended
13
13
13
13
13
11
11
–
2
13
13
13
13
13
11
10
–
2
9
–
9
–
–
2
7
7
–
9
–
9
–
–
2
6*
6*
–
5
–
3
–
5
–
–
–
2
5
–
3
–
5
–
–
–
2
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 as alternate Director for Brett Blundy
During the second half of the financial year, the Company’s operations were significantly impacted by the COVID-19 outbreak and
the unprecedented and uncertain market conditions it created. During the COVID-19 impacted period, the commitment from the
Directors increased significantly with a number of additional Board meetings scheduled to enable the Board to guide the Company
and management with decision making during that uncertain period.
13. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
In the Directors’ opinion, there have been no significant changes in the state of affairs of the Group during the year.
14. MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
On 5 August 2020, per the Victorian Government directive, the Company closed all its Melbourne metropolitan stores to customers
for a minimum period of six weeks. These stores continue operating as ‘dark stores’, fulfilling online orders.
The New Zealand Government re-introduced level 3 restrictions in Auckland resulting in stores temporarily closing for a period of
two weeks from 12 August 2020. These stores continue operating as ‘dark stores’, fulfilling online orders.
The health and wellbeing of our team and customers remains paramount, and the Company will continue to follow Government
health guidelines over the coming weeks and months. This could involve further restrictions in Australia and New Zealand impacting
the Group’s operations.
15
Accent Group Limited Annual Report 2020Directors’ Reportfor the year ended 28 June 2020 There remains significant ongoing environmental uncertainty due to COVID-19, increasing risk and volatility and making future
outcomes hard to predict. Whilst the Company is well placed to respond to a range of potential COVID-related circumstances and
impacts, the extent and duration of these impacts is unknown.
Apart from the dividend declared as disclosed in Note 25, no other matter or circumstance has arisen since 28 June 2020 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.
15. 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.
16. ENVIRONMENTAL REGULATION
The Group is not involved in any activities that have a significant influence on the environment within which it operates. The
Directors are not aware of any material breaches of any particular or significant environmental regulation affecting the Group’s
operations during the financial year.
17. 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.
18. PROCEEDINGS ON BEHALF OF THE COMPANY
No proceedings have been brought or intervened in on behalf of the Company with the leave of the court under section 237 of
the Corporations Act 2001. 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.
19. AUDITOR
Deloitte Touche Tohmatsu continues in office in accordance with section 327 of the Corporations Act 2001.
20. 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. NON-AUDIT SERVICES
As set out in Note 29 to the financial statements, the auditor did not provide any non-audit services to the Company during the
financial year.
22. 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.
23. 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.
24. 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 on page 33.
16
Accent Group Limited Annual Report 2020for the year ended 28 June 2020Directors’ Report FY20 REMUNERATION REPORT
Letter from the Chair of the Remuneration and Nomination Committee
Dear Shareholders,
On behalf of Accent Group, I am pleased to present the FY20 remuneration report outlining the Group’s remuneration strategy and
framework. This report sets out how the Board has approached remuneration in light of the challenging operating and economic
conditions resulting from the COVID-19 pandemic.
Over the past five years, Accent Group has gone through significant growth and transformation to become a regional leader in the retail
and distribution of performance and lifestyle footwear. The Group operates over 500 stores across 14 different retail banners with
exclusive distribution rights for 12 international brands across Australia and New Zealand. Over this period, EPS has grown by 11.1%
per annum compounding, and dividends have grown by 68% from 5.5 to 9.25 cents per share.
As discussed earlier in the Annual Report, the second half of the past financial year was impacted by the health, social and economic
consequences of the COVID-19 pandemic. The pandemic significantly altered the market conditions and business environment.
While the Group was on track to achieve the performance targets set at the start of the year, the impacts of the pandemic were
almost immediately reflected in our revenues and other financial indicators, particularly in the months of February to April.
The Board acknowledges the persistence and rapid and effective response by management which has enabled the Group to continue
to operate and report above budget results for the financial year, despite the extremely challenging operating environment.
These efforts resulted in underlying EBIT1 growing to $90 million, up 11.7% on the prior year along with strong progress on our
strategic objectives including the launch of our first PIVOT store during COVID, opening 57 new stores, digital growth of 69% over
the prior year and growth in The Trybe.
These strong results have also translated into shareholder returns, with total dividends for the year increasing by 12.1% to 9.25 cents
per share. In addition to the strong dividend growth, share price growth was also achieved. The share price grew from an opening price
of $1.39 at the start of FY20 to peak at over $2.00 in February 2020 before falling rapidly after the COVID-19 pandemic hit to a low
of $0.56 in March 2020 as the whole market tumbled due to the panic created by COVID-19. The efforts of the management team
to manage the impact and to drive financial performance has seen the market respond with a share price recovery to close the FY20
financial year at $1.47.
The vesting of STI and LTI awards resulting from these strong results, is discussed further in sections 2.4 and 2.5 of this Report.
Response to first strike
At the 2019 AGM, 62.05% of the votes received supported the adoption of the remuneration report for the year ended 30 June
2019. This excluded key management personnel, which represented 34.44% of the total issued capital.
The Company received important feedback from investors and proxy advisors regarding more specific disclosures on the
performance measures of the STI and LTI programs and the remuneration outcomes against those measures. The Board has
considered the concerns raised by investors and proxy advisors and has taken action to increase the level of detail and transparency
provided in the Remuneration Report for FY20 and going forward. Specifically:
– Enhanced disclosure regarding the objectives and structure of the Company’s remuneration strategy and the nexus between
remuneration outcomes and shareholder value creation;
– Enhanced disclosure regarding remuneration, particularly around the STI KPIs and how these are measured, with reviews
resulting in the introduction of strategic non-financial KPIs (20% of award) for FY21;
– Reviewed the appropriateness of cliff-vesting, with the Board introducing scaled vesting for the STI award in FY21, with scaled
vesting for the next LTI grant also under consideration;
– The Board continues to review the LTI plan annually and considers alternative metrics and structures each year in order to best
align the Company’s performance with shareholder value creation; and
– With regard to the effectiveness of the current EPS measure in driving performance and the Company’s strategic objectives over
the last 3 years, the Board still considers the EPS measure as the best applicable performance hurdle for aligning management
performance with shareholder value creation.
The Board will continue to review executive remuneration to ensure that it aligns with our strategy, motivate management, reflect
market best practice and support the delivery of sustainable long-term returns to shareholders. As part of the review process, we
will continue to engage with major shareholders and proxy advisors.
1. Underlying EBIT excludes a $2.8 million one off non-cash impairment relating to the revaluation of certain assets due to the future uncertainty arising from
COVID-19
17
Accent Group Limited Annual Report 2020Directors’ Reportfor the year ended 28 June 2020 FY21 Remuneration
For FY21, there will be no increases in fixed annual remuneration for the CEO or CFO and the fees for Non-Executive Directors
will remain at the levels set from 1 December 2019.
The structure of the FY21 STI incentive scheme has been substantively changed to reflect feedback received from stakeholders.
The Board determined to introduce strategic non-financial KPIs, as well as scaled vesting of the financial KPI as follows:
– The introduction of strategic non-financial KPIs to account for 20% of the award achievement; and
– The remaining 80% to be linked to financial performance measures with a sliding scale of vesting.
Further disclosure on the strategic non-financial KPIs will be disclosed in the FY21 Remuneration Report, detailing the level of
achievement against these metrics.
In conclusion, we are pleased to present the Company’s FY20 Remuneration Report which includes significant additional disclosure
to prior years. The results the Company has achieved in the last 12 months are outstanding and the executive remuneration set
out in this report is considered by the Board to be reflective of this performance.
Regards
David Gordon
Chairman of the Remuneration and Nomination Committee
26 August 2020
18
Accent Group Limited Annual Report 2020for the year ended 28 June 2020Directors’ Report
FY20 REMUNERATION REPORT
1.
REMUNERATION OVERVIEW
1.1. Details of Management personnel (KMP)
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities
of the entire entity, directly or indirectly, including all Directors.
Executive Director
Daniel Agostinelli
Senior Executives
Matthew Durbin
Non-Executive Directors
David Gordon
Michael Hapgood
Stephen Goddard
Donna Player
Group Chief Executive Officer
Chief Financial Officer
Chairman
Director
Director
Director
Joshua Lowcock
Director (appointed 28 November 2019)
Brett Blundy
Director (resigned 12 May 2020)
Nico van der Merwe
Alternate Director – alternate Director for Brett Blundy (resigned 12 May 2020)
Stephen Kulmar
Director (resigned 28 November 2019)
1.2. Remuneration and Nomination Committee
The Board has an established a Remuneration and Nomination Committee (RNC) which operates under the delegated authority
of the Board of Directors. The following Non-Executive Directors are members of the RNC:
Mr D Gordon
Independent Non-Executive Committee Chair
Mr S Goddard
Independent Non-Executive Director
Ms D Player
Independent Non-Executive Director
The RNC is authorised by the Board to obtain external professional advice, and to secure the attendance of advisers with relevant
experience and expertise when it considers this necessary.
The Group’s remuneration strategy is designed and implemented on behalf of the Board by the RNC. 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.
1.3. Use of Remuneration Consultants
Where the RNC determines it may benefit from external advice, it may engage directly with a remuneration consultant, who
reports directly to the Committee. In selecting a suitable consultant, the Committee considers potential conflicts of interest
and requires independence from the Group’s KMP as part of their terms of engagement.
The Company did not engage independent consultants to provide information on remuneration matters during the year.
19
Accent Group Limited Annual Report 2020Directors’ Reportfor the year ended 28 June 2020 1.4. Board Policies for Determining Remuneration
The Board understands that the performance of the Group is driven through the quality and motivation of its people, including
the CEO and executive team and the approximately 5,000 team members of the Group across Australia and New Zealand. The
Group’s remuneration strategy 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. Our strategy is guided by our vision to be
the leader in the performance and lifestyle footwear market across Australia and New Zealand, by delivering world-class customer
experiences, harnessing the power of our people, brands and products. The Board aims to achieve this by setting market competitive
remuneration packages that consist of a mix of fixed remuneration, short term incentives to reward annual performance and long-
term incentives that align to long term financial performance and shareholder value creation.
Our remuneration framework is guided by the key principles of alignment with:
– Delivery of long-term returns to shareholders through the delivery of sustainable sales and profit growth across the business
– Delivery of sustainable and growth in dividends flowing from the strong cash flows from its defensible and desirable business
– Maintaining a strong, conservatively geared balance sheet
– Adherence to the Group’s code of conduct and company values
The Group’s remuneration reviews take place within three months of the end of each financial year. Prior to these reviews, the
CEO 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.
REMUNERATION COMPONENTS
2.
The key features of the Executive remuneration structure are outlined below:
Type of remuneration
Fixed remuneration
Short term incentive
Long term incentive
Total executive remuneration
Fixed
At risk
How is it set
Fixed remuneration is
set with reference to
market competitive rates
in comparative ASX listed
companies for similar
positions, adjusted to
account for the experience,
ability and productivity of
the individual employee
Senior executives
participate in the Group’s
STI plan which is tied
directly to the achievement
of profit growth, either for
the Group as a whole or a
relevant business unit or
both (as the case may be).
Refer to section 2.4 for
further details
The Company has
established a Performance
Rights Plan. There have
been a number of tranches
of performance rights
issued under the plan, each
requiring the achievement
of 10% compounding
earnings per share
growth over the relevant
performance period.
How is it delivered
– Base salary
– Superannuation
– Other benefits (eg
motor vehicle)
– 100% cash
What is the objective
– Attract and retain key
– Drive annual
talent
– Be competitive
profit growth and
shareholder returns
– Reward value creation
over a one-year period
whilst supporting the
long-term strategy
– Incentivise desired
behaviours in line
with the Groups’ risk
appetite
Refer to section 2.5 for
further details.
– Performance rights
that vest at the end
of the performance
period if vesting
conditions are met
– Support delivery of the
business strategy and
growth objectives
– Incentivise long-term
value creation
– Drive alignment
of employee and
shareholder interests
20
Accent Group Limited Annual Report 2020for the year ended 28 June 2020Directors’ Report 2.1. Link between financial performance, shareholder wealth and remuneration
The Group’s executive remuneration is directly related to the performance of the Group, through the linking of incentives to certain
financial measures as detailed previously and shown below.
The financial performance of the Group and shareholder value creation over the last 5 years is summarised in the table below.
FY16
FY17
FY18
FY19
FY20
(pre
AASB 16)2
Growth
YoY3
CAGR Last
5 years
FY20
(post
AASB 16)
Revenues ($'m)
(inc Franchisees and
Other Income)
EBITDA ($'m)
EBIT ($'m)
Net profit attributable
to the owners of the
Company ($'m)
EPS (cents)
Shareholder value
created:
Market capitalisation ($'m)
Enterprise value4
Movement in enterprise
value during the financial
year
Dividends paid during
the financial year
Closing Share Price
DPS (cents)
Shareholder value
creation:
Per annum
Cumulative
442.9
636.1
703.2
59.7
45.4
29.9
6.45
75.9
44.5
29.2
5.54
88.8
64.7
44.0
8.23
796.8
108.9
80.6
53.9
10.02
712.7
718.4
466.4
524.0
894.8
929.7
749.6
799.1
99.6
(194.4)
405.7
(130.6)
23.5
1.42
5.5
32.6
0.86
6.00
32.6
1.65
6.75
44.7
1.39
8.25
830.1
121.7
87.2
58.0
10.73
797.0
828.2
29.1
48.8
1.47
9.25
4.2%
11.8%
8.2%
7.6%
7.1%
6.3%
3.6%
9.0%
6.1%
12.1%
17.0%
19.5%
17.7%
18.0%
13.6%
2.8%
3.6%
20.0%
1.0%
13.9%
830.1
203.4
94.8
55.7
10.31
797.0
828.2
123.1
123.1
(161.9)
438.3
(85.9)
(38.8)
399.5
313.7
77.9
391.6
24.8%
33.5%
2. Due to the material impact of the adoption of AASB16, these results are presented on a pre AASB 16 basis which adjusts for the impact of the AASB 16
and subsequently presents the results on the most comparable basis with the prior year reported results also Pre AASB16.
3. Variance YoY represents variance% between FY20 and FY19
4. Enterprise value is measured as the sum of market capitalisation and net debt
21
Accent Group Limited Annual Report 2020Directors’ Reportfor the year ended 28 June 2020
KMP remuneration and EPS over the last
5 financial years
The graph below shows the relationship between total
KMP remuneration and EPS over the past 5 years and the
relationship between KMP remuneration and Company
performance.
)
m
$
(
n
o
ti
a
r
e
n
u
m
e
R
M
P
K
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
)
s
t
n
e
c
(
S
P
E
11
10
9
8
7
6
5
4
3
2
1
0
FY16
FY17
FY18
FY19
FY20
Fixed
STI
LTI
EPS
Notes:
–
The graph shows the aggregate total remuneration of the KMP team for
each year from FY16 to FY20, as set out in the Remuneration Report
each year (excluding payments made in FY18 in relation to one-off
retirement payments to a former CEO and CFO Group).
EPS in FY20 is presented on a pre AASB 16 basis in order to present it
on a comparable basis with prior years.
–
Company financial performance and share price
The effectiveness of the Company’s performance related
remuneration strategy is demonstrated by the strong compound
annual growth delivered in revenue, profit, EPS and dividends
over the last 5 years, and the relative outperformance of the
Company’s share price over the last 10 years, as shown below.
FY16 to FY20 Revenues ($m)
CAGR
17.0%
830
797
703
636
443
1000
800
600
400
200
0
FY16 to FY20 EBITDA ($m)
203
CAGR 19.5%
(calculated on
pre AASB 16
financials)
89
76
60
122
109
FY16
FY17
FY18
FY19
FY20
FY20
(pre
AASB 16)
(post
AASB 16)
FY16 to FY20 EPS (Cents)
10.73
10.31
10.02
CAGR 13.6%
(calculated on
pre AASB 16
financials)
8.23
6.45
5.54
FY16
FY17
FY18
FY19
FY20
FY20
(pre
AASB 16)
(post
AASB 16)
FY16 to FY20 DPS (Cents)
9.25
8.25
CAGR
13.9%
6.75
6.00
5.50
250
200
150
100
50
0
12
10
8
6
4
2
0
10
8
6
4
2
0
FY16
FY17
FY18
FY19
FY20
FY16
FY17
FY18
FY19
FY20
22
Accent Group Limited Annual Report 2020for the year ended 28 June 2020Directors’ Report
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23
Accent Group Limited Annual Report 2020Directors’ Reportfor the year ended 28 June 2020
2.3. Fixed Remuneration
Fixed remuneration is set with reference to market competitive rates in comparative ASX listed companies for similar positions,
adjusted to account for the experience, ability and productivity of the individual employee. Fixed remuneration includes base salary
along with any fringe benefits to the employee and statutory superannuation contributions.
To ensure appropriate and competitive remuneration for the FY20 year, the RNC considered the remuneration levels and structures
for the CEO and CFO with reference to external remuneration benchmarks from comparative listed companies along with the
surrounding market conditions and sentiment, the trajectory of the company's growth, strategic objectives, competency and skillset
of the individuals, scarcity of talent, changes in role complexities and geographical spread of the Company. Consideration was given
to the significant growth experienced by the Group in FY19 which delivered a 22% increase in earnings per share.
As a result of the review, fixed remuneration for the CEO increased by 6.7% and 10% for the CFO. The CFO also had added
accountability for the IT and supply chain functions of the business effective from the beginning of the 2020 calendar year.
There will be no increases in fixed annual remuneration for the CEO or CFO for FY21.
2.4. STI Plan
Purpose and Objectives
The Group’s STI program is designed to drive the Company’s objective of delivering profit growth and shareholder returns, whilst
ensuring satisfaction of strategic objectives are aligned with the success of profit growth. Senior executives have a significant
proportion of their STI tied directly to the achievement of profit growth, either for the Group as a whole or a relevant business unit
or both (as the case may be). All STI payments are also subject to an assessment by the RNC of individual non-financial performance
measures related to strategy implementation, leadership and behaviours consistent with the Group’s values and corporate
philosophy.
The Group believes that by implementing the STI program, KMP are best positioned to effectively carry out their duties in achieving
the strategic objectives of the company. The Group also expects KMP to continue to drive the values engrained within our culture,
acting in the best interests of shareholders and in turn resulting in greater success for the Group and aligning Group and shareholder
value creation moving forward.
Structure
The STI program in FY20 was structured as follows:
FY20 STI Plan Structure
Performance period
12 months
Opportunity
CEO – 100% of fixed remuneration
CFO – 75% of fixed remuneration
How the STI is paid
Cash
Performance measures/KPIs
1. Underlying EBIT growth – 100%
2. Aged inventory – downward modifier
3. Non-financial strategic objectives – downward modifier
Performance conditions
The Group’s EBIT growth for the year must be above 10% for the STI awards to vest.
How is STI assessed?
What happens when a senior executive
ceases employment?
The STI award is also subject to achieving aged inventory of less than 3% and
achievement of non-financial strategic objectives. A negative multiplier is applied
depending on the extent of the final results for these two metrics.
The Chairman of the Board reviews the CEO’s performance against the performance
targets and objectives set for that year. The CEO assesses the performance of the
senior executive team, with the CEO having oversight of his direct reports and the day
to day functions of the Company.
The performance assessment of the CEO and other senior executives are reviewed by
the RNC and then recommended for Board approval.
If the senior executive’s employment is terminated for cause, no STI will be paid.
If the senior executive resigns or is considered a good leaver prior to the completion of
the performance period, the STI may be granted on a pro rata basis in relation to the
period of service completed, subject to the discretion of the Board and conditional upon
the individual performance of the senior executive.
24
Accent Group Limited Annual Report 2020for the year ended 28 June 2020Directors’ Report Malus and Clawback
Is there any STI deferral?
FY20 STI Plan Structure
In the event of serious misconduct or a material misstatement in the Group’s financial
statements, the Board may cancel the STI payment and may also claw back STI
payments paid in previous financial years, to the extent this can be done in accordance
with the law.
The STI awards are currently delivered fully in cash and vest at the end of the one-year
period, subject to the achievement of the performance conditions. The Board reviewed
the appropriateness of a deferral of a portion of the STI into equity during the year. The
Board determined that a deferral is currently not appropriate for the Group in light of
the size of the Group and the KMP team, as well as the CEO’s current equity ownership
in the Company consisting of 17,838,224 shares which represent 3.3% of issued capital
and an interest in a further 6,295,031 performance rights through the PRP.
The Board is of the view the that objectives of a deferral (i.e. retention and risk
management) are currently satisfied through the KMPs’ participation in the PRP which
vests progressively between FY22-FY24 and existing share ownership.
STI outcomes FY205
Despite the challenging market conditions, the FY20 financial year has been a successful year for the Group with management
delivering record revenue (up 4.5%), EBITDA (up 11.8%), underlying EBIT (up 11.7%)6 and EPS (up 10.7%).
The underlying EBIT growth achieved of 11.7% was in excess of the 10% growth required for the payment of 100% of the STI
award, and in assessing the payment of STIs, the Board also considered the impact of COVID-19.
With the onset of COVID-19, the operating environment in H2 became extremely challenging and, in this context, the Board
considers that the strong results delivered were a direct outcome of the response of the management team in successfully navigating
a raft of complex issues and implementing new initiatives to drive the business through this period.
COVID-19 had a significant impact on the business, including:
– in order to safeguard the health and safety our team and customers, a Company-wide operations shutdown implemented from
25 March for a then unknown duration; and
– all Group owned stores closing to customers for the month of April and part of May and a resultant decline in total sales in
March and April of $55.7 million (or –58%) compared to the prior year.
These events required an immediate range of actions by the management team to both manage the impacts and to continue to drive
financial performance, including:
– the implementation of hard cost out measures and inventory initiatives to right size the Company’s costs and inventory;
– a proposal brought to the Board by Management to take an 80% cut in their remuneration if required;
– the acceleration of digital sales, leveraging the Group’s best in class omnichannel capability, to offset the impact of store closures
and reduced customer foot traffic in shopping centres;
– the development of COVID safe operating protocols including PPE (personal protective equipment), training and relevant signage
and in store fittings;
– good faith negotiation of rental abatements with landlords to cover the reduced foot traffic in shopping centres, anticipated for
the period from April 2020 until at least December 2020; and
– securing additional liquidity through an additional debt facility of $30 million with the Company’s existing banking group. This
additional facility was not drawn and remains undrawn.
Given the collapse in sales, the Company qualified for $23.9 million in Government wage subsidies across Australia and New Zealand
from April to June. These subsidies were announced after the Company’s decision to shut down its stores. In accordance with
the Government requirements, $10.7 million of these subsidies were passed directly through to team members while they were
not working or did not work sufficient hours to be otherwise paid more than the subsidy received. The subsidies also allowed the
Company to retain the team through the period of shutdown.
Once it was safe to reopen stores, the balance of the wage subsidies supported the return to full employment for permanent
team members and the reopening of the Accent Group business through May and June, including standing up all permanent
team members from 1 June to full hours and full pay. Sales in May and June recovered strongly, driven by digital growth.
Given the improved performance of the business, the Company does not expect to apply for wage subsidies from September.
We remain committed to our team. Permanent team members will continue to be fully remunerated notwithstanding the ongoing
second round of Melbourne and Auckland lockdowns in August 2020 which has resulted in the temporary closure to customers
of more than 20% of the Company’s owned stores.
5. Financial results presented on a comparable Pre AASB16 basis consistent with the approved FY20 budgets used to measure FY20 financial performance.
6. Underlying EBIT used for the purpose of measuring operating performance, excludes a $2.8 million one off non-cash impairment relating to the revaluation
of certain assets due to the future uncertainty arising from COVID-19.
25
Accent Group Limited Annual Report 2020Directors’ Reportfor the year ended 28 June 2020 Management’s efforts (as detailed above) enabled the business to recover from the impact of closing stores, retain jobs, continue
trading and ultimately deliver a record financial result and an increased dividend on the prior year.
On this basis, the Board determined that the payment of STI relating to the achieved performance measures was appropriate,
resulting in a payment of 100% of the award.
The table below sets out the performance of the CEO and CFO in relation to the STI program:
CEO – Daniel Agostinelli
CFO – Matthew Durbin
Performance target
Target underlying
Group EBIT Growth
>10%
Target underlying
Group EBIT Growth
>10%
Performance
outcome
Maximum STI
available
Achievement*
FY19
FY20
Underlying EBIT
growth of 11.9%
100% of fixed
remuneration
Underlying EBIT
growth of 11.9%
75% of fixed
remuneration
100%
100%
100%
100%
* Achievement represents the amount achieved as a percentage of the maximum available
In FY20, there were also two downward modifiers applicable to the STI award as follows:
1. Aged inventory less than 3%; aged inventory for FY20 was 1.3%
2. Achievement of the non-financial strategic objectives (all achieved):
a. Successful launch of PIVOT
b. Growth in The Trybe
c. Opened 57 new stores against a target of 54, all achieving required sales targets
d. Digital sales growth of 69% against a target of 30%
In addition, the Group delivered shareholder value in the following areas:
– Growth on every key performance metric, including sales, NPAT and EPS as outlined above.
– Growth in dividends of 12.1% on the previous year for the financial year ended 28 June 2020. Total FY20 dividends 9.25 cents
per share fully franked.
– Management successfully secured additional finance facilities of $30 million which, whilst it was not required to be drawn,
provided significant incremental liquidity and a buffer against the then unknown duration and impact of COVID-19.
Based on the achievement of the applicable performance measures for the FY20 year and shareholder value created, there was
no modification of the STI awards by the Board in FY20, and the CEO and CFO earned 100% of the of the potential STI reward
in FY20.
2.5. LTI Plan
Purpose and Objectives
The Company has implemented an LTI program through the Performance Rights Plan (PRP). The objectives of this plan are:
– to drive long term value creation for shareholders and ensure KMP continues to deliver on commitments made to shareholders; and
– to attract, motivate and retain key employees, and for them to share in the ownership of the Company.
The PRP operates under the rules approved by shareholders at the Company's 2016 Annual General Meeting. As at 28 June 2020,
29,062,116 rights issued under the PRP were outstanding.
The current Tranches 2-4 of the PRP have a single performance measure and require the achievement of 10% compounding
earnings per share growth over the relevant performance period. The Board periodically evaluates the impact and relevance of this
performance measure and considers it to be effective in achieving the stated objectives since the plan has been successful in driving
outstanding performance since its inception in FY17, with compounding EPS growth p.a. of 13.6% achieved over the last 4 years.
26
Accent Group Limited Annual Report 2020for the year ended 28 June 2020Directors’ Report
Structure
During FY20, a new issue of Performance Rights was made (Tranche 4) with the structure set out below:
FY20 LTI Plan (Tranche 4) Structure
Performance/vesting period
4 years from FY20-FY23 plus a one-year retention period to the end of FY24 following
the completion of the performance period
Opportunity
Instrument
Performance metric
Vesting condition
Rationale for the performance metric
and condition
What happens when a KMP ceases
employment?
Malus and clawback
Dividends and voting rights
Re-testing
Change of Control provision
LTI Outcomes FY20
CEO – 100% of fixed remuneration
CFO – 100% of fixed remuneration
Performance Rights
Compound earnings per share growth over 4 years
No portion of an award will vest if compound EPS growth is less than 10%.
Awards are also subject to a service condition requiring the participant to remain
employed by the Group until the end of the vesting period (five years in total).
In consultation with shareholders, advisors and other market participants and based on
a benchmark review of relevant ASX listed companies, the Board has determined that
ESP growth is a widely used and well understood indicator of company performance
and a long term driver of shareholder value creation through the link to share price and
dividend growth.
Earnings per share growth represents a transparent and well understood metric for
both shareholders and management that is not subject to market outcomes but rather is
a direct outcome of the strategic and operational efforts of the management team over
time. EPS also incorporates all the aspects of the Company’s financial performance that
is withing management’s control.
The Board has further determined that long term EPS growth above 10% is in the top quartile
of historic performance for ASX200/300 companies over the last 10 years and is likely to be
a strong proxy for top quartile company performance for comparable companies.
If the KMP’s employment is terminated for cause, or due to resignation, all unvested
Performance Rights will lapse, unless the Board determines otherwise. In all other
circumstances, unless the Board decides otherwise, a pro-rata portion of the KMP’s,
calculated in accordance with the proportion of the performance period that has
elapsed, will remain on foot, subject to the performance condition as set by the Board.
If and when the Performance Rights vest, shares will be allocated in accordance with
the plan rules and any other condition of the grant.
In the event of fraud, dishonesty, gross misconduct, acts of harassment or
discrimination or a material misstatement or omission in the Company’s financial
statements, the Board may deem any unvested Performance Rights and/or any vested
and unexercised Performance Rights of the participant to have lapsed.
Performance rights do not confer on the holder any entitlement to any dividends or
other distributions by the Group or any right to attend or vote at any general meeting
of the Group.
Awards are tested once, at the end of the performance period of four years. There is no
further retesting of the performance conditions.
In the event of a Change of Control (including a takeover scheme or arrangement or
winding up of the company), Performance Rights automatically and immediately vest
from the date of the event in proportion that the Group’s share price has increased
since the date of grant of the Performance Rights.
The Board may determine that all or a specified amount of the participant’s remaining
unvested Performance Rights automatically and immediately vest.
CEO & CFO FY20 Remuneration Packages
The RNC recommended the issuance of Performance Rights under the PRP to the CEO and CFO with a performance date of
September 2023 and a retention condition to September 2024 (Tranche 4 detailed above). This new issuance of Performance Rights
to the CEO was approved by Shareholders at the company’s Annual General meeting on 28 November 2019.
27
Accent Group Limited Annual Report 2020Directors’ Reportfor the year ended 28 June 2020 CEO and CFO Long Term Incentive
Tranche 1 FY17-FY19 of the PRP
The FY17 -FY19 Tranche 1 Performance Rights issue was tested on 9 September 2019 after the release of the FY19 annual results.
This plan had 2 components:
50% of the Performance Rights were subject to an Earning per share (“EPS”) performance condition with a
straight-line sliding scale as follows:
Below threshold
Threshold
Target
Stretch
Compound EPS
growth
% of Performance
Rights to vest
Result for
FY17-FY19
Vesting
Less than 15%
15%
16.5%
18%
0%
25%
50%
100%
18%
100%
The other 50% of the Performance Rights were subject to a Total Shareholder Return (“TSR”) performance against
a specified comparator group, with a straight-line sliding scale of vesting as follows:
TSR Ranking
Less than 50th percentile
Equal to 50th percentile
Greater than 50th and up to 75th percentile
% of Performance
Rights to vest
Result for
FY17-FY19
0% 61st percentile of
the comparator
group
50%
Straight line pro
rate vesting from
50% to 100%
Vesting
72%
At or above 75th percentile
100%
For the CEO, the vesting of the Tranche 1 Performance Rights based on the performance outcomes outlined above resulted
in the issuance of 86% of the total potential award or 319,512 Accent Group shares being issued out of a total opportunity of
371,526 shares. This issuance was announced to the ASX on 10 October 2019.
The CFO commenced with the Company in December 2017 after the establishment of the Tranche 1 Performance Rights offer and
therefore did not participate in Tranche 1.
Tranche 2 FY18-FY22 of the PRP
The FY18-FY22 rights plan (Tranche 2, issued in December 2017), included the following performance and retention conditions:
– a performance condition that at least 10% compound EPS growth per annum be achieved over the performance period FY18-
FY22; and
– a retention condition that the participant had to be employed at the testing date immediately post release of the FY22 financial
results.
The Tranche 2 PRP allocation has been extremely effective to date in driving shareholder value over the period FY18-FY22 with
the company achieving 20.8% compound EPS growth over the first 2.5 years of the plan.
With the impact of COIVD-19, as part of its annual review of the ongoing effectiveness of the Company’s LTI plans in achieving
the stated objectives, the RNC reviewed the performance and vesting conditions of Tranche 2. The factors outlined below were
considered as part of this review:
– the financial performance of the Company for the first 2.5 years of the plan;
– achievement of the plan objectives in FY22 given the ongoing uncertainty surrounding the short and long-term impact of the
COVID-19 pandemic;
– alignment with the creation of long-term shareholder value;
– the broader objectives to retain and incentivise KMP to achieve long term performance that rewards shareholders; and
– concerns raised by stakeholders in relation to cliff vesting.
The compound EPS growth per annum achieved for the first 2.5 years of Tranche 2 to 29 December 2019 was 20.8%. This was
significantly ahead of the required growth of 10% representing a considerable achievement by KMP in reaching this level of growth
over this period. In addition, based on management accounts for the 2019 calendar year, the business had achieved EPS equal to the
level required to trigger vesting in 2022.
In consideration of this, along with the unknown future impacts arising from the COVID-19 pandemic and in response to concerns
around cliff vesting, the Board exercised its discretion and determined that the EPS performance condition for 50% of the Tranche 2
Performance Rights had been deemed as met. These Performance Rights are still subject to all the relevant plan rules including malus
and clawback and a retention condition that requires participants in the plan to be employed with the Company when the full year
FY22 results are approved and released to the market and subsequently when the Performance Rights vest.
28
Accent Group Limited Annual Report 2020for the year ended 28 June 2020Directors’ Report The remaining 50% of the Tranche 2 Performance Rights still require the achievement of 10% compounding EPS growth over the
5-year performance period to the end of FY22 which the Board considers to be an achievable objective albeit with some remaining
uncertainty in relation to the impacts of COVID-19.
The Board determined that deeming that the performance measure for 50% of the Performance Rights had been met was a
powerful retention incentive in an uncertain environment to encourage retention of the management team along with the additional
outcome of mitigating the risk for cliff vesting of 100% of the Performance Rights. The Board considers the value of the Tranche
2 rights to be still at risk through until FY22. This is due to 50% of the rights remaining subject to the 10% EPS condition, and 100%
of the value of the rights fluctuating based on the share price, providing sufficient incentive for management to continue to drive EPS
growth for the remainder of the 5 year performance period.
The impact of the performance condition change for Tranche 2 is outlined in the table below:
Executive KMP
Daniel Agostinelli
Matthew Durbin
Total
Tranche 2 –
Performance
Rights
(Issued
December 2017)
50% of
Tranche 2
rights –
performance
condition met;
retention
hurdle still
on foot until
August 2022
50% of
Tranche 2
rights –
performance
conditions &
retention
hurdle still
on foot until
August 2022
5,500,000
3,000,000
2,750,000
1,500,000
2,750,000
1,500,000
Employee Share Scheme (ESS)
The PRP replaced the Employee Share Scheme (ESS), which was implemented during the 2013 financial year. As at 28 June 2020,
1,350,002 shares issued under the ESS were outstanding.
2.6. Other Information
Key terms of executive employment contracts
The remuneration and other terms of employment of the CEO and CFO are set out in individual employment contracts that are not
fixed term contracts.
Name
Notice period/termination payment
Daniel Agostinelli
Matthew Durbin
12 months’ notice by either party (or payment in lieu)
6 months’ notice by either party (or payment in lieu)
2.7. Non-Executive Directors Remuneration
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 RNC 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.
Directors fees were renewed by the RNC in August 2019 and a 10% increase in Directors fees was awarded effective from
1 December 2019. The increase was considered appropriate and awarded within the approved non-executive Directors fee pool.
The aggregate fee limit of $1,200,000 was approved by shareholders at the 2019 AGM. This was based on a market review of
Directors’ fees in comparative listed companies and the significant growth in the size of the Group since the last Director fee
increase, which was 4 years ago in FY2016. During the period since the last increase, Accent Group’s revenue grew by 87.4%
and EPS by 66.4%.
During the COVID 19-impacted period (April 2020 to May 2020) the Directors elected to reduce their fees by 25% for these
months.
There will be no increase to Non-Executive Directors’ remuneration in FY21 and the fees will remain at the levels set from
1 December 2019.
29
Accent Group Limited Annual Report 2020Directors’ Reportfor the year ended 28 June 2020 3.
REMUNERATION OF KEY MANAGEMENT PERSONNEL
3.1. Table of remuneration to KMP
Short–term benefits
Post
employment
benefits
Share–based
payments
Cash salary
and fees
$
Cash
bonuses*
$
Other
monetary
$
Leave
benefits
$
Super–
annuation
$
Equity–
settled**
$
Year
Total
$
Non-executive Directors
D Gordon
S Goddard
M Hapgood
D Player
J Lowcock
(appointed
28 November 2019)
Former non-executive
Directors
B Blundy
(resigned 12 May
2020)
S Kulmar
(resigned 28 November
2019)
Executive Directors and
other KMP
D Agostinelli
M Durbin
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
231,164
228,311
99,401
98,174
99,382
98,663
96,802
100,000
59,583
–
78,333
100,000
40,906
98,174
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
21,961
21,690
9,443
9,327
–
–
4,446
–
–
–
–
–
3,886
9,327
–
–
–
–
–
–
–
–
–
–
–
–
–
–
253,125
250,000
108,844
107,500
99,382
98,663
101,248
100,000
59,583
–
78,333
100,000
44,792
107,500
1,063,322 1,280,0007
1,063,643
1,200,000
31,946
33,057
475,221
412,5008
459,979
397,831
–
–
191,678
111,357
49,779
15,021
25,000
629,237
3,221,183
25,000
758,201
3,191,258
25,000
25,000
310,666
1,273,166
310,396
1,208,227
*
Cash bonuses relate to STI bonuses issued on the basis of the achievement of relevant performance measures for the year ended 28 June 2020 and were
approved by the Remuneration and Nomination Committee in August 2020.
** 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.
Mr Agostinelli’s cash bonus is equal to 100% of his fixed pay, comprising cash salary and fees, superannuation and leave benefits
7.
8. Mr Durbin’s cash bonus is equal to 75% of his fixed pay, comprising cash salary and fees, superannuation and leave benefits
30
Accent Group Limited Annual Report 2020for the year ended 28 June 2020Directors’ Report 3.2. Performance Rights Plan (PRP)
The table below sets out the details of all Performance Rights issued under the Company’s PRP:
Issue
Number of
Rights
Grant Date Vesting Date
condition % Achieved
Vesting
Number
of rights
exercised
Number
of rights
cancelled
Current
balance
Tranche 1 (TSR)
1,059,664
Tranche 1 (EPS)
1,059,651
Tranche 2
32,050,000
11 January
2017
9 November
2019
11 January
2017
9 November
2019
TSR hurdle1
72%
387,419
672,2455
EPS hurdle2
100%
538,072
521,5796
0
0
3 October
2017 to
20 June 2018
30 October
2022
EPS hurdle3
To be
determined
– 8,250,0006 23,800,000
Tranche 3
Tranche 4
1,684,863 30 November
2019
30 November
2022
EPS hurdle4
3,577,253 30 November
2019
30 November
2024
EPS hurdle3
To be
determined
To be
determined
–
–
Total
39,431,431
–
–
1,684,863
3,577,253
29,062,116
1. The TSR hurdle for Tranche 1 was measured over a 3-year period
2. The EPS hurdle for Tranche 1 was measured over a 3-year period
3. The EPS hurdle for Tranches 2 and 4 is an annual growth in adjusted diluted earnings per share of at least 10% p.a. over the relevant performance period
4. Tranche 3 was issued in FY20 and did not include any rights issued to KMPs. Tranche 3 participants were not included in Tranche 2, and the EPS hurdles
and vesting of these two tranches are aligned.
5. Number of rights cancelled includes unvested portion and rights of departed employees
6. Number of rights cancelled represents rights of departed employees
Performance rights of the CEO and CFO
The Performance Rights of the CEO and CFO under the PRP are set below:
CEO – Daniel Agostinelli
Tranche 1
Tranche 2
Tranche 3
Tranche 4
TOTAL
CFO – Matthew Durbin
Tranche 1
Tranche 2
Tranche 3
Tranche 4
TOTAL
Balance as at
1 July 2019
Granted
during the
year
Vested
during the
year
Forfeited
during the
year
Balance as at
28 June 2020
Value at
grant date
371,526
5,500,000
–
–
–
3,000,000
–
–
–
–
–
795,031
–
–
–
341,615
8,871,526
1,136,646
319,512
52,014
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5,500,000
$3,060,156
–
795,031
$1,056,119
6,295,031
$4,116,275
–
3,000,000
$1,583,750
–
341,615
$453,801
3,341,615
$2,037,551
Refer to section 2.2 above for the proportion of the CEO and CFO’s remuneration that represents the PRP allocation for the year
ended 28 June 2020.
31
Accent Group Limited Annual Report 2020Directors’ Reportfor the year ended 28 June 2020 3.3. Employee Share Scheme (ESS)
Unvested ordinary shares of Accent Group Limited under the ESS at the date of this report are as follows:
Grant date
27/05/2015
27/05/2015
28/08/2015
13/05/2016
Expiry date
30/09/2020
30/09/2020
30/08/2020
28/02/2021
Exercise
price
Number
under option
$0.73
$1.01
$1.14
$1.49
666,667
166,666
316,669
200,000
1,350,002
SHAREHOLDINGS OF KMP
4.
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 related parties, is set out below:
Name
Daniel Agostinelli
Matthew Durbin
David Gordon
Stephen Goddard
Donna Player
Michael Hapgood
Joshua Lowcock
TOTAL
Balance at
start of year*
Additions
Disposals
Balance at
end of year
17,838,224
90,000
2,599,034
50,000
50,000
–
–
–
–
–
17,318,712
50,000
2,599,034
50,000
50,000
14,000,000
3,105
519,512
40,000
–
–
–
–
–
(4,000,000) 10,000,000
–
3,105
34,070,851
559,512
(4,000,000) 30,630,363
*
'Balance at the start of the year' is balance as at date of appointment for Directors appointed during the financial year and excludes the balance of Directors
who resigned during the year (see below).
Stephen Kulmar resigned from the Board effective 28 November 2019. Mr Kulmar held 900,000 shares at the start of the financial year and did not dispose of
any shares prior to his resignation.
Brett Blundy resigned from the Board effective 12 May 2020. Mr Blundy held 97,539,693 shares at the start of the financial year, acquired 1,003,058 shares
during the year, and held 98,452,751 shares when he resigned.
This Directors’ Report and Remuneration 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
26 August 2020
Melbourne
32
Accent Group Limited Annual Report 2020for the year ended 28 June 2020Directors’ Report
Auditor’s Independence Declaration
Deloitte Touche Tohmatsu
ABN 74 490 121 060
477 Collins 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
26 August 2020
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
28 June 2020, 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.
28
33
Auditor’s Independence DeclarationAccent Group Limited Annual Report 2020
Statement of Profit or Loss and Other Comprehensive Income
for the year ended 28 June 2020
Revenue
Other income
Interest revenue
Expenses
Cost of sales
Distribution
Marketing
Occupancy
Employee expenses
Other
Depreciation, amortisation and impairment
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/(loss) 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
Consolidated
28 Jun 2020
$'000
30 Jun 2019
$'000
829,805
796,263
–
1,251
116
469
(356,419)
(339,341)
(31,085)
(27,495)
(32,615)
(28,011)
(13,349)
(92,746)
(153,103)
(162,192)
(39,853)
(37,741)
(108,608)
(28,268)
(15,696)
80,328
(4,034)
77,020
(24,646)
(23,134)
55,682
53,886
2,692
628
3,320
(1,408)
(579)
(1,987)
59,002
51,899
–
55,682
55,682
–
59,002
59,002
Cents
10.31
9.93
17
53,869
53,886
17
51,882
51,899
Cents
10.02
9.54
7
7
7
7
8
38
38
The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes
34
Statement of Profit or Loss and Other Comprehensive IncomeAccent Group Limited Annual Report 2020 Statement of Financial Position
as at 28 June 2020
Consolidated
Note
28 Jun 2020
$'000
30 Jun 2019
$'000
9
10
11
12
13
14
15
11
16
17
18
19
20
21
22
12
20
19
21
22
23
24
54,912
33,264
36,698
29,797
129,106
131,470
8,811
–
4,507
–
3,769
2,023
230,600
203,757
97,732
232,998
17,074
86,167
–
–
358,583
352,893
19,248
725,635
956,235
13,236
452,296
656,053
93,735
4,228
14,217
15,000
78,461
3,627
25,311
–
99,459
3,633
13,389
30,000
–
925
11,808
7,890
234,579
167,104
1,575
2,864
71,125
236,882
–
312,446
547,025
409,210
2,465
2,683
56,125
–
24,339
85,612
252,716
403,337
389,600
388,756
18,472
1,138
13,147
1,434
409,210
403,337
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Lease receivable
Derivative financial instruments
Other current assets
Total current assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Lease receivable
Intangibles
Net deferred tax
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Deferred revenue
Provisions
Borrowings
Lease liabilities
Derivative financial instruments
Provision for income tax
Deferred lease incentives
Total current liabilities
Non-current liabilities
Provisions
Deferred revenue
Borrowings
Lease liabilities
Deferred lease incentives
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
The above statement of financial position should be read in conjunction with the accompanying notes
35
Statement of Financial Position Accent Group Limited Annual Report 2020 Statement of Changes in Equity
for the year ended 28 June 2020
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 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 25)
–
–
–
–
(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
–
–
53,886
(1,987)
51,899
2,983
1,783
(901)
(89)
(499)
(44,742)
–
403,337
Consolidated
Foreign
currency
translation
reserve
$'000
Issued
capital
$'000
Hedging
reserve - cash
flow hedges
$'000
Share-based
payments
reserve
$'000
Retained
earnings
$'000
Non-
controlling
interest
$'000
Balance at 1 July 2019
388,756
2,159
1,991
8,997
1,434
Total equity
$'000
403,337
(7,217)
396,120
55,682
3,320
59,002
2,005
844
–
(48,761)
409,210
–
–
–
–
–
–
–
–
–
–
–
Transition adjustment
on adoption of AASB 16
(Note 4)
Balance at 1 July 2019 -
restated
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
844
Buy-back of non-
controlling interest
Dividends paid (Note 25)
–
–
–
–
–
–
(7,217)
388,756
2,159
1,991
8,997
(5,783)
–
–
–
–
–
–
628
628
–
–
–
–
2,692
2,692
–
–
–
–
–
–
–
2,005
–
–
–
55,682
–
55,682
–
–
–
(48,761)
1,138
Balance at 28 June 2020
389,600
2,787
4,683
11,002
The above statement of changes in equity should be read in conjunction with the accompanying notes
36
Statement of Changes in EquityAccent Group Limited Annual Report 2020 Statement of Cash Flows
for the year ended 28 June 2020
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
Cash received from settlement of derivative financial instruments
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Payment for purchase of businesses, net of cash acquired
Payments for 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 borrowings
Repayment of lease liabilities
Dividends paid
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
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
Consolidated
Note
28 Jun 2020
$'000
30 Jun 2019
$'000
899,704
865,374
(733,194)
(766,944)
37
34
258
(4,834)
17,061
(12,323)
166,672
(8,953)
(23,836)
(32,789)
844
115,000
(115,000)
(67,307)
(48,761)
(115,224)
18,659
36,698
(445)
54,912
469
(4,580)
–
(28,632)
65,687
(11,804)
(24,840)
(36,644)
1,783
35,125
(22,625)
–
(44,742)
(30,459)
(1,416)
38,772
(658)
36,698
The above statement of cash flows should be read in conjunction with the accompanying notes
37
Statement of Cash FlowsAccent Group Limited Annual Report 2020 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 26 August 2020. 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').
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.
Net current liabilities
As at 28 June 2020, the Group has net current liabilities of $3,978,457 (30 June 2019: net current assets of $36,653,000).
This is primarily due to the adoption of AASB16 Leases from 1 July 2019 onwards which has resulted in the recognition of
$315,343,566 of lease liabilities, of which $78,461,275 has been classified within current liabilities based on the timing of
future lease payments. If the Group had not adopted AASB16 in the current financial period it would be in a net current
asset position of $55,439,400. The financial statements have been prepared on the going concern basis, which contemplates
the continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course
of business. The Group's cash position as at 28 June is $54,911,914. In addition, the Group has undrawn finance facilities of
$95,700,000 as disclosed in Note 21. The Group generated net cash from operating activities of $166,672,047 and net profit
after taxation of $55,681,669 for the year ended 28 June 2020. Taking into account all of the above factors, the directors are
confident that the Group will be able meet its liabilities as they fall due.
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 10
– Note 15
– Note 16
– Note 34
– Note 39
Inventories
Right-of-use-assets
Intangibles
Business combinations
Share based payments
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Accent Group Limited as at
28 June 2020 and the results of all subsidiaries for the year then ended. A list of subsidiaries at year end is contained in Note 35.
Supplementary information about the parent entity is disclosed in Note 33.
In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profits and
losses resulting from intragroup 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.
If the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in
the subsidiary together with any cumulative translation differences recognised in equity. The Group recognises the fair value of
the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss.
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 and from the translation
at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the
income statement.
38
Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020
NOTE 2. BASIS OF PREPARATION (CONTINUED)
Foreign operations
The functional currencies of overseas subsidiaries are listed in Note 35. 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.
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.
Comparatives have been reclassified where appropriate to ensure consistency and comparability with the current period.
NOTE 3. ACCOUNTING POLICIES
Significant and other accounting policies adopted in the preparation of the financial statements are provided throughout the notes.
These policies have been consistently applied to all the years presented, unless otherwise stated.
NOTE 4. 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 16 Leases
The Group applied AASB 16 Leases for the first time in the year ended 28 June 2020. The nature and effect of the changes as
a result of adoption of this new accounting standard is described below.
The Group adopted AASB 16 using the modified retrospective approach and therefore comparative information has not been restated
and continues to be reported under the previous accounting standards AASB 117 Leases and Interpretation 4 Determining whether an
Arrangement contains a Lease. The new standard had a material impact on the Group’s financial statements.
On adoption of AASB 16, the Group recognised lease liabilities in relation to leases which had previously been classified as operating
leases under the principals of AASB 117. These liabilities were measured at the present value of the remaining lease payments,
discounted using the Groups incremental borrowing rate. After the commencement date, the amount of lease liabilities is increased
to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is
remeasured if there is a modification, a change in the lease term or a change in the lease payments (e.g. changes to future payments
resulting from a change in an index rate).
The associated right-of-use assets (‘ROU’) for property leases were measured on a retrospective basis as if the new rules had always
been applied. Adjustments to the ROU asset were made for any lease accrual or incentive on the balance sheet as at 1 July 2019. The
ROU asset is depreciated over the lease term on a straight-line basis. In determining the lease term, management considered all facts
and circumstances that create an economic incentive to exercise an extension option. Extension options are only included in the lease
term if the lease is reasonably certain to be extended. Most of the Groups leases do not contain renewal or extension options.
The Athlete’s Foot (‘TAF’) has operating lease commitments with landlords in its capacity as head lessor for stores operated by franchisees.
The franchisees have simultaneously undertaken to meet the rental commitments through back-to-back licence agreements. These license
agreements are classified as finance leases. Consequently, the ROU assets for these leases were derecognised and replaced with a lease
receivable. The lease receivable is measured at amortised cost, with interest income arising in the profit and loss.
In applying AASB 16 for the first time, the Group has used the following practical expedients permitted by the standard where
applicable:
– The use of a single discount rate to a portfolio of leases with reasonably similar characteristics;
– The accounting for operating leases for lease terms of 12 months or less;
– The accounting for operating leases for leases that are in holdover; and
– Applying the Groups onerous lease assessment under AASB 137 Provisions, Contingent Liabilities and Contingent Assets as an
alternative to performing an impairment review.
The Group has elected to present right-of-use assets separately from property, plant and equipment in the statement of financial
position.
At the date of adoption, the Group had 421 property leases for retail outlets and head offices. The Group recognised an additional
$254,218,075 of right-of-use assets and $331,840,190 of lease liabilities, recognising the difference in retained earnings.
The effect of adoption of AASB 16 is as follows:
39
Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020 NOTE 4. NEW OR AMENDED ACCOUNTING STANDARDS AND INTERPRETATIONS ADOPTED (CONTINUED)
Reconciliation of Operating Lease Commitments at 30 June 2019 to Lease Liabilities at 1 July 2019
Operating lease commitment at 30 June 2019 as disclosed in the Group’s financial statements
Add: Finance lease liabilities recognised as at 30 June 2019
Discounted using the incremental borrowing rate at 1 July 2019
Recognition exemption for:
– Short-term leases, holdover leases and outgoings not included in lease liability
Lease liabilities recognised at 1 July 2019
Of which are:
Current lease liabilities
Non-current lease liabilities
1 July 2019
$’000
371,883
36,026
368,572
(36,732)
331,840
87,617
244,223
COVID-19 related rent concessions
During the year, the Group received COVID-19 related rental concessions. The Group has adopted the practical expedient for rental
concessions allowing the Group to elect not to account for changes in leases payments as a lease modification where the following
conditions were met:
– The change in lease payments were substantially the same or less than the payments prior to the rental concession;
– The reductions only affect payments which fall due before 30 June 2021; and
– There has been no substantive change in the terms and conditions of the lease.
The practical expedient has been applied to leases that have executed agreements in place as at 28 June 2020. For independent
landlords, the Group has applied the practical expedient to written agreements in conjunction with the lessor’s acceptance of a
lower rent payment. The Group considers the amendment to the lease contract as enforceable as both parties were committed to
performing their obligations as at 28 June 2020.
The treatment of the rental concessions was dependent on the events that trigger the concession. The Group had rent concessions
which were entirely unconditional and rent concessions which remained conditional on other factors, predominantly future sales.
For unconditional rent concessions, the Group recognised the present value of the rent concession in the profit and loss on the date
the change in terms was agreed. For conditional rent concessions the group recognised the benefit in the profit and loss and the
corresponding reduction in the lease liability on the date the trigger for the conditional rent concession occurred.
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 CODM’s assess the performance of the Group based on a measure of EBIT (earnings before interest and tax) prior to
the impact of AASB 16 Leases and non-operating intercompany charges.
The Group has considered its internal reporting framework, management and operating structure and the Directors’ conclusion is
that the Group has one operating segment.
During the year, the Group’s New Zealand operations generated revenue in excess of 10% of the total Groups revenue. As a result,
the Group now recognises two geographical areas, Australia and New Zealand.
As the Group now has two geographical areas, the comparative information has been restated.
The following is an analysis of the Group’s revenue and non-current assets. The geographical split for intangible assets is not
available and has not been disclosed.
Sales to customers
720,504
86,588
807,092
702,983
69,483
772,466
28 June 2020
30 June 2019
Australia
$'000
New Zealand
$'000
Group
$'000
Australia
$'000
New Zealand
$'000
Group
$'000
Other geographical information
Additions to property, plant and
equipment
32,908
8,191
41,099
32,889
5,296
38,185
40
Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020 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
Consolidated
28 Jun 2020
$'000
30 Jun 2019
$'000
807,092
772,466
12,200
14,364
819,292
786,830
7,620
2,893
10,513
7,610
1,823
9,433
829,805
796,263
Recognition and measurement
The major sources of the Group’s revenue are from sales to customers, royalties and other franchise related income 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 the 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, goods are delivered to the customer and the
control of goods is transferred to the buyer.
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.
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.
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 network. 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.
41
Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020 NOTE 7. EXPENSES
Profit before income tax includes the following specific expenses:
Depreciation
Right of use assets
Plant and equipment
Total depreciation
Amortisation
Licence fee
Distribution rights
Re-acquired rights
Other intangible assets
Total amortisation
Impairment of assets
Impairment charge – right of use assets
Impairment charge – property, plant and equipment*
Consolidated
28 Jun 2020
$'000
30 Jun 2019
$'000
74,169
29,062
103,231
32
2,323
258
–
2,613
2,584
180
2,764
–
25,552
25,552
31
2,323
74
288
2,716
–
–
–
Total depreciation, amortisation and impairment
108,608
28,268
Finance costs
Interest and finance charges paid/payable on borrowings
Interest and finance charges paid/payable on lease liabilities
Finance costs expensed
Leases
Variable lease payments
3,920
11,776
15,696
4,034
–
4,034
23,833
–
During the year, the Group recognised $7,630,788 of COVID-19 related rental concessions from
landlords. These concessions are included as a reduction in occupancy expense in the statement
of profit or loss.
Share-based payments expense
2,005
2,983
*
In the prior year, other expenses includes impairment of assets on the statement of profit or loss.
Employee expenses
During the year, the Group was eligible for Government wage subsidies across Australia and New Zealand as a direct result of
COVID-19. In order to safeguard the health and safety of team members and customers on 25 March 2020, the Group announced
the shut-down of all its physical stores and support offices. With all stores closed from the 27 March 2020, the company qualified
for the wage subsidy programs in Australia and New Zealand. Total group sales across March and April were down $55,684,496 or
58.2% on the prior year.
In Australia, the Group was eligible for $21,358,014 of which $13,720,000 was received by 28 June 2020. In respect of the
New Zealand wage subsidy, the Group received a 12-week lump sum payment of $2,543,050.
Of the total amount claimed across Australia and New Zealand, $10,713,756 was passed directly to employees who were either not
working or did not work sufficient hours to be otherwise remunerated more than the subsidy. The remaining $13,187,308 was paid
to employees who were otherwise remunerated up to or more than the subsidy. The wage subsidies supported the return to full
employment for permanent team members and the reopening of the Accent Group business during the months of May and June.
The Government wage subsidies are recorded as a reduction in employee expenses on the statement of profit or loss.
42
Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020 NOTE 8.
INCOME TAX EXPENSE
Income tax expense
Current tax
Deferred tax
Adjustment recognised for prior periods
Aggregate income tax expense
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
Impairment
Sundry items
Adjustment recognised for prior periods
Difference in overseas tax rates
Income tax expense
Amounts recognised directly to equity
Adoption of AASB 16 Leases
Tax effect of hedges in reserves
Deferred tax assets not recognised
Deferred tax assets not recognised comprises temporary differences attributable to:
Capital losses
Total deferred tax assets not recognised
Consolidated
28 Jun 2020
$'000
30 Jun 2019
$'000
29,752
(4,523)
(583)
29,367
(6,706)
473
24,646
23,134
80,328
24,098
77,020
23,106
35
601
723
30
61
226
–
(484)
25,487
22,909
(583)
(258)
473
(248)
24,646
23,134
3,145
1,941
5,086
–
(604)
(604)
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.
Recognition and measurement
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.
43
Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020 INCOME TAX EXPENSE (CONTINUED)
NOTE 8.
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.
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.
NOTE 9. TRADE AND OTHER RECEIVABLES
Trade receivables
Less: Allowance for expected credit losses
Other receivables
Movement in the allowance for credit losses were as follows:
Carrying value at beginning of year
Allowance for credit losses recognised
Receivables written of during the year as uncollectable
Unused amount reversed
Allowances for expected credit losses at year end
Consolidated
28 Jun 2020
$'000
30 Jun 2019
$'000
23,828
(1,101)
22,727
10,537
33,264
27,851
(584)
27,267
2,530
29,797
Consolidated
28 Jun 2020
$'000
30 Jun 2019
$'000
(584)
(637)
120
–
(1,229)
(90)
50
685
(1,101)
(584)
44
Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020 NOTE 9. TRADE AND OTHER RECEIVABLES (CONTINUED)
Set out below is the information about the credit risk exposure on the Group’s trade receivables.
Current
Under one month
One to two months
Two to three months
Over three months
Carrying
amount
$'000
20,002
1,380
791
588
1,067
23,828
Expected
credit
loss rate
%
Expected
credit loss
$'000
2%
4%
11%
17%
43%
400
55
87
100
459
1,101
Recognition and measurement
Trade receivables
Trade receivables generally have terms of between 30 to 60 days. They are recognised at amortised cost less allowance for expected
credit losses (‘ECL’). Customers who wish to trade on credit terms are subject to extensive credit verification procedures. Receivable
balances are monitored on an ongoing basis and the ECL recognised is based on management’s expectation of losses without regard
to whether an impairment event exists.
Other receivables
Other receivables include rebates receivable from suppliers, fit-out contributions from landlords and Government wage subsidy
grants which are considered fully recoverable and therefore no allowance has been made.
Impairment of trade receivables
Collectability and impairment of trade receivables is assessed on an ongoing basis at an individual customer level by a centralised accounts
receivable function. The Group has established a provision matrix that is based on average write-offs as a proportion of average debt over
a period of 24 months. The historical loss rates are adjusted for current and forward-looking information where significant.
NOTE 10. INVENTORIES
Finished goods (net of provision for obsolescence)
Goods in transit
Consolidated
28 Jun 2020
$'000
30 Jun 2019
$'000
115,979
13,127
129,106
109,921
21,549
131,470
Recognition and measurement
Finished goods are valued at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the
ordinary course of business. Cost comprises of the purchase price on a weighted average basis and logistic expenses incurred
in bringing the inventories to their present location and condition.
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 the sale of inventory is estimated to be lower than
the inventory carrying value. Management’s estimate of the inventory provision is based on historical finished goods sold below
cost over a 24 month period and inventory write-off transactional data over a 12 month period. In the current year, management
considered the impacts of COVID-19, taking into account the period of trading disruption, current sales and optimal stock holding
levels. The review concluded that there was no need to provide for an incremental write down of inventory due to strong digital
sales, an increase in mark down activity in the last quarter enabling seasonal product to be sold and the cancellation of inventory
purchases permitting the Group to right size its inventory levels at year end.
The provision for write-down of inventories to net realisable value amounted to $5,963,211 (2019: $5,700,000) at 28 June 2020.
NOTE 11. LEASE RECEIVABLE
Current
Lease receivable
Non-Current
Lease receivable
45
Consolidated
28 Jun 2020
$'000
30 Jun 2019
$'000
8,811
17,074
–
–
Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020
NOTE 11. LEASE RECEIVABLE (CONTINUED)
The group sub-leases property leases to TAF franchises. The Group has classified these sub-leases as a finance lease, because
the sub-lease is substantially on the same terms as the head lease.
The following table sets out the maturity analysis of lease receivables, showing the undiscounted lease payments to be received
after the reporting date.
Consolidated
Less than one year
One to five years
More than five years
Total undiscounted lease payments
Discounted using the Group’s incremental borrowing rate
Total lease receivable
Of which are:
Current lease receivables
Non-current lease receivables
NOTE 12. DERIVATIVE FINANCIAL INSTRUMENTS
Forward foreign exchange contracts – receivable
Forward foreign exchange contracts – payable
Interest rate swap contracts – payable
$'000
10,285
17,633
195
28,113
(2,228)
25,885
8,811
17,074
Consolidated
28 Jun 2020
$'000
30 Jun 2019
$'000
–
3,769
3,627
–
3,627
417
508
925
Foreign exchange forward contracts are held as hedging instruments against forecast purchases in USD. The notional amount for
the contracts held at 28 June 2020 totalled $USD63,500,000. The average rate of the forward contracts is 0.66 (2019: 0.72).
The net gain or loss recognised as other comprehensive income is equal to the change in fair value of the hedging instruments.
There is no ineffectiveness recognised in profit or loss.
On 31 March 2020, the Group settled all outstanding foreign exchange forward contracts of $USD93,876,465. The average rate
of these forward contracts was 0.69. The cash received from the settlement of these contracts was $17,061,462.
Recognition and measurement
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. Derivatives are carried
as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
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 13. OTHER CURRENT ASSETS
Prepayments
Other current assets
Consolidated
28 Jun 2020
$'000
30 Jun 2019
$'000
4,304
203
4,507
1,995
28
2,023
Prepayments represent general prepaid expenses, largely insurance premiums and license fees for the Group’s eCommerce
platforms.
46
Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020 NOTE 14. PROPERTY, PLANT AND EQUIPMENT
Plant and equipment - at cost
Less: Accumulated depreciation
Assets under construction - at cost
Consolidated
28 Jun 2020
$'000
30 Jun 2019
$'000
220,683
182,183
(126,589)
(98,935)
94,094
3,638
97,732
83,248
2,919
86,167
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 2 July 2018
Additions
Transfer
Additions through business combinations (Note 34)
Disposals
Exchange differences
Impairment charge
Depreciation expense
Balance at 30 June 2019
Additions1
Transfer
Additions through business combinations (Note 34)
Disposals
Exchange differences
Impairment charge
Depreciation expense
Balance at 28 June 2020
Plant and
equipment
$'000
Assets under
construction
$'000
72,987
35,010
1,677
256
(273)
193
(1,050)
(25,552)
83,248
37,357
2,919
104
(117)
(175)
(180)
(29,062)
94,094
1,677
2,919
(1,677)
–
–
–
–
–
2,919
3,638
(2,919)
–
–
–
–
–
3,638
Total
$'000
74,664
37,929
–
256
(273)
193
(1,050)
(25,552)
86,167
40,995
–
104
(117)
(175)
(180)
(29,062)
97,732
1 Landlord contributions to store fit-out costs have been netted off against actual fit-out costs incurred for cash flow disclosure purposes.
Recognition and measurement
The carrying value of property, plant and equipment is measured as the cost of the asset, less accumulated depreciation, and
impairment.
Depreciation and amortisation
Items of property, plant and equipment are depreciated on a straight-line basis over the expected useful lives. Most of the property,
plant and equipment represents leasehold improvements which are amortised over the period of the lease. As at 28 June 2020, the
average lease term is 5 years. Assets under construction are not depreciated.
Derecognition
An item of property, plant and equipment is derecognised when it is sold or otherwise disposed of, or when its use is expected to
bring no future economic benefits. Any gain or loss between the carrying amount and the disposal proceeds are included in the
income statement in the period the item is derecognised.
Impairment
Refer to Note 15 for details on impairment testing.
47
Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020 NOTE 15. RIGHT-OF-USE ASSETS
Buildings – right-of-use
Less: Accumulated depreciation
Consolidated
28 Jun 2020
$'000
30 Jun 2019
$'000
307,045
(74,047)
232,998
–
–
–
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 2 July 2018
Balance at 30 June 2019
Recognised as assets on first-time adoption of AASB 16
Additions
Additions through business combinations (Note 34)
Disposals
Exchange differences
Impairment of assets
Depreciation expense
Balance at 28 June 2020
Buildings
$'000
–
–
254,218
55,439
7,222
(6,563)
(565)
(2,584)
(74,169)
232,998
Recognition and measurement
A right-of-use asset is recognised at the commencement date of a lease. The Group leases land and buildings for its offices and retail
stores under agreements with an average term of 5 years. The right-of-use asset is measured initially at cost based on the value of
the associated lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any
lease incentives received and any initial direct costs incurred.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease. Right-of use assets are subject
to impairment or adjusted for any remeasurement of lease liabilities.
The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of
12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred within
occupancy expense.
Impairment of property, plant and equipment and right-of-use assets
For impairment testing purposes the Group has determined that each store is a separate CGU. Click and collect and click and
dispatch sales are included in the cash flows of the relevant CGU. Each CGU is tested for impairment at the balance sheet date if
any indicators of impairment have been identified with the exception of Outlet stores which are used for the predominant purpose
of clearing aged inventory. For this reason, management anticipate that Outlet stores may be loss making.
The value in use of each CGU is calculated based on the Group’s latest Board approved half year forecast which reflected a
significant impact on the 2020/21 store generated revenue and associated profit as a result of the COVID-19 pandemic. Cash flows
beyond year one is a combination of the Groups five-year strategy which was presented to the Board on 24 June 2020 and the
CGU’s financial performance prior to any trading disruption (12 months rolling financial data up to February 2020).
The key assumptions in the value in use calculations are the growth rates of store generated sales and growth rates of click and
dispatch and click and collect sales. Gross profit margins were assumed to remain in line with 2019/20 reported margins and
all operating expenses of each CGU were considered variable to sales. The value in use calculations make no assumptions for
government assistance and rental concessions. Cash flows were discounted to present value using a mid-point pre-tax discount
rate of 8.0%.
The assumptions adopted in the value in use calculations reflect an appropriate balance between the Groups experience to date
and the uncertainty associated with the COVID-19 pandemic. Temporary store closures arising from Government restrictions
may impact short term results, however, these closures are not expected to impact the long-term performance of each CGU.
The Group has recognised an impairment charge of $2,764,324 as at 28 June 2020. Management has performed sensitivity analysis
on the key assumptions in the impairment model using reasonably possible changes in these key assumptions. Reasonable possible
changes do not lead to a significant increase in the impairment charge.
48
Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020 NOTE 16. 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
28 Jun 2020
$'000
30 Jun 2019
$'000
311,227
304,154
44,825
44,825
(9,714)
35,111
7,832
(328)
7,504
(9,714)
35,111
7,832
(296)
7,536
16,800
16,800
(13,336)
(11,013)
3,464
1,610
(333)
1,277
720
(720)
–
5,787
379
(74)
305
720
(720)
–
358,583
352,893
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
Other
intangible
assets
$'000
Total
$'000
Balance at 2 July 2018
295,015
35,111
7,567
8,110
–
288
346,091
Additions through business
combinations (Note 34)
Amortisation expense
9,139
–
–
–
–
(31)
–
(2,323)
Balance at 30 June 2019
304,154
35,111
7,536
5,787
379
(74)
305
–
1,230
–
–
–
–
(288)
–
–
–
–
–
–
–
–
9,518
(2,716)
352,893
–
8,303
–
–
–
(2,613)
358,583
–
–
–
–
–
–
–
–
–
–
(32)
7,504
(2,323)
3,464
(258)
1,277
Additions
Additions through business
combinations (Note 34)
Disposals
Exchange differences
Impairment charge
Amortisation expense
–
7,073
–
–
–
–
–
–
–
–
–
–
Balance at 28 June 2020
311,227
35,111
Recognition and measurement
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.
49
Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020 NOTE 16. INTANGIBLES (CONTINUED)
Brands and trademarks
Brands and trademarks are recognised at cost in a business combination. Brands and trademarks have 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.
Other intangible assets
Intangible assets with finite lives are amortised on a straight-line basis over their useful lives and tested for impairment whenever
there is an indication that they may be impaired. The amortisation period and method is reviewed at each financial year-end.
A summary of the useful lives of other intangible assets is as follows:
Other intangible assets
License fees
Distribution rights
Re-acquired rights
Useful life
Finite (up to 249 years)
Finite (up to 7 years)
Finite (up to 8 years)
Impairment testing of goodwill
Goodwill is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired.
The impairment test at 28 June 2020 was carried out based on value in use calculations for the Group’s one operating segment.
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 24 June 2020. 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 and placing caution on
the recovery of the Australian economy given the global uncertainty resulting from COVID-19. The cash flows beyond the five-year
period have been extrapolated using a steady state 2.0% long term growth rate (2019: 3.0%). Cash flows were discounted to present
value using a mid-point after-tax discount rate of 10.5% (2019: 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
28 Jun 2020
$'000
30 Jun 2019
$'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 24 June 2020. 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. As part of the impairment test, management has considered
the shift in consumer behaviour to digital and online shopping as a consequence of COVID-19, anticipating that the current trend of
greater online demand will continue to be embedded into consumer spending patterns going forward. Consequently, revenue beyond
the five-year period applied a terminal growth rate to bricks and mortar and a terminal growth rate to digital revenue.
50
Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020 NOTE 16. INTANGIBLES (CONTINUED)
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
13.0% (2019: 12.4%) is derived from the Group’s weighted average cost of capital.
The Hype DC brand is most sensitive to changes in key assumptions. The Group assessed the impact of the following changes to key
assumptions (all other assumptions were held constant):
– Sensitivity analysis on store generated sales from years 2 to 4 indicates that head room continues to be present if the sales
growth rate was reduced by 2%.
– Sensitivity analysis on online growth rates indicates that head room continues to be present. Changes to online growth rates
does not result in a significant decrease in the recoverable amount calculated.
– Sensitivity analysis on changes to the royalty rate indicates a potential impairment when the rate drops by 30 basis points.
The rate applied as at 28 June 2020 is consistent with the prior year and in line with rates adopted by other market participants.
The assumptions adopted in the value in use calculations for each brand reflect an appropriate balance between the Group's
experience to date and the uncertainty associated with the COVID-19 pandemic.
Accordingly, the Group has concluded that no impairment is required however a material change in market and economic conditions
may increase the risk of impairment for the Hype DC brand carrying value in future periods.
NOTE 17. NET DEFERRED TAX
Net deferred tax 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
Net lease liability/(right-of-use asset)
Trademarks, brand names and distribution rights
Other
Amounts recognised directly to equity
Adoption of AASB 16 Leases
Tax effect of hedges in reserves
Net Deferred tax asset
51
Consolidated
28 Jun 2020
$'000
30 Jun 2019
$'000
–
309
1,837
4,144
2,025
–
5,641
–
41
170
1,717
3,873
683
61
7,648
38
11,632
11,147
1,153
–
(11,784)
(12,270)
58
981
15,015
14,089
3,145
1,088
4,233
–
(853)
(853)
19,248
13,236
Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020
NOTE 18. TRADE AND OTHER PAYABLES
Trade payables
Goods and services tax payable
Accrued expenses
Other payables
Consolidated
28 Jun 2020
$'000
30 Jun 2019
$'000
24,504
7,171
44,939
17,121
93,735
57,081
4,340
24,615
13,423
99,459
Trade payables and accruals represent liabilities for goods and services provided to the Group prior to the end of financial year which
are unpaid. Other payables represent goods receipted that have not been invoiced as at 28 June 2020. Trade and other payables are
stated at amortised cost. The amounts are unsecured and are usually settled within 30 to 60 days of recognition.
NOTE 19. DEFERRED REVENUE
Current
Gift cards
Other deferred revenue
Non-current
Other deferred revenue
Consolidated
28 Jun 2020
$'000
30 Jun 2019
$'000
3,121
1,107
4,228
2,864
7,092
2,628
1,005
3,633
2,683
6,316
Deferred revenue relates to unredeemed gift cards and unused supplier contributions for fixtures, fittings and point of purchase.
These contributions will be utilised for future store openings and refurbishments.
NOTE 20. PROVISIONS
Current
Employee benefits
Other provisions
Non-Current
Employee benefits
Other provisions
Consolidated
28 Jun 2020
$'000
30 Jun 2019
$'000
12,027
2,190
14,217
664
911
1,575
15,792
11,168
2,221
13,389
580
1,885
2,465
15,854
52
Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020 NOTE 20. PROVISIONS (CONTINUED)
Recognition and measurement
Employee benefits
Liabilities for annual leave, bonuses 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.
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.
Provisions
Provisions are recognised when the Group has a present (legal or constructive) obligation as a result of a past event, it is probable
the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount
recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date.
NOTE 21. BORROWINGS
Current
Secured
Bank loans
Working capital facility
Non-Current
Secured
Bank loans
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
Carrying amount at end of the year
Consolidated
28 Jun 2020
$'000
30 Jun 2019
$'000
5,000
10,000
15,000
10,000
20,000
30,000
71,125
86,125
56,125
86,125
Borrowings
$'000
86,125
(115,000)
115,000
86,125
The majority of the Group’s financing facilities with National Australia Bank (‘NAB’) and Hongkong and Shanghai Banking Corporation
(‘HSBC’) were extended to mature in August 2023 (previously a combination of August 2021 and August 2023 maturity dates). The
weighted average interest rate on these financing facilities is 2.02%.
On the 18 August 2020, the Group entered into an interest rate swap contract to mitigate the risk of changing interest rates
on the variable rate debt held. The interest rate swap contract matures in line with the Group’s financing facilities.
Recognition and measurement
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured
at amortised cost.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability
for at least 12 months after the reporting date and intends to do so.
The Group monitors compliance with its financial covenants on a monthly basis and reports compliance on a monthly basis
to the banks. The Group has complied with all such requirements.
53
Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020 NOTE 21. BORROWINGS (CONTINUED)
Assets pledged as security
The senior bank debt made available by NAB and HSBC is secured by cross-guarantees and all assets of Accent Group Limited
and each of its wholly-owned subsidiaries. Total secured assets amounted to $694,276,904 at 28 June 2020 (30 June 2019:
$669,048,000). Total secured assets exclude the impact of the adoption of AASB 16 Leases.
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Consolidated
28 Jun 2020
$'000
30 Jun 2019
$'000
5,700
76,125
100,000
16,900
8,800
66,125
35,000
13,800
198,725
123,725
–
76,125
10,000
15,200
101,325
–
66,125
20,000
11,375
97,500
5,700
8,800
–
–
90,000
15,000
1,700
97,400
2,425
26,225
Consolidated
28 Jun 2020
$'000
30 Jun 2019
$'000
78,461
236,882
–
–
Total facilities
Bank overdraft
Bank loans
Working capital facility
Bank guarantee and letters of credit
Used at the reporting date
Bank overdraft
Bank loans
Working capital facility
Bank guarantee and letters of credit
Unused at the reporting date
Bank overdraft
Bank loans
Working capital facility
Bank guarantee and letters of credit
NOTE 22. LEASE LIABILITIES
Current
Lease liability
Non-current
Lease liability
54
Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020
NOTE 22. LEASE LIABILITIES (CONTINUED)
Consolidated
Less than one year
One to five years
More than five years
Total undiscounted lease liabilities
Total Liabilities included in the statement of financial position
Current lease liabilities
Non-current lease liabilities
$'000
95,374
238,204
21,773
355,351
315,343
78,461
236,882
Recognition and measurement
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of
the lease payments to be made over the term of the lease, discounted using the Group's incremental borrowing rate. Leases are
entered into for varying terms and rent reviews are based on CPI increases or fixed increases. Variable lease payments are expensed
in the period in which they are incurred.
The carrying amount of a lease liability is remeasured if there is a change in the lease payments arising from a change in an index or
a rate used and a change in lease term. Most of the Groups leases do not contain renewal or extension options. When a lease liability
is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the
right-of-use asset is fully written down.
NOTE 23. EQUITY – ISSUED CAPITAL
Ordinary shares – fully paid
Less: Treasury shares
Consolidated
28 Jun 2020
Shares
30 Jun 2019
Shares
28 Jun 2020
$'000
30 Jun 2019
$'000
541,866,715
541,241,224
390,926
391,338
(1,350,002)
(2,756,670)
(1,326)
(2,582)
540,516,713
538,484,554
389,600
388,756
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 (30 June 2019: 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 39.
Share buy-back
There is no current on-market share buy-back.
55
Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020 NOTE 23. 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
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
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
Shares issued during the period (i)
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
2 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
27 August 2019
29 August 2019
05 September 2019
10 September 2019
2 October 2019
3 October 2019
3 October 2019
8 October 2019
9 October 2019
15 October 2019
24 December 2019
24 December 2019
20 February 2020
20 February 2020
20 February 2020
15 May 2020
28 June 2020
Shares
Issue price
$'000
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
538,484,554
250,000
100,000
33,333
66,666
50,000
83,334
83,334
50,000
925,491
66,667
16,667
33,333
66,667
66,667
66,667
73,333
$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
$0.730
$1.010
$1.140
$1.140
$0.590
$0.590
$0.590
$0.590
$0.000
$1.010
$0.730
$1.140
$0.590
$0.590
$0.590
$0.730
82
74
196
74
77
76
130
13
38
30
30
46
49
183
101
183
24
67
54
183
24
49
388,756
183
101
38
76
30
49
49
30
–
67
12
38
39
39
39
54
540,516,713
389,600
(i) A total of 925,491 ordinary shares were issued in relation to the performance rights plan.
56
Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020 NOTE 24. EQUITY – RESERVES
Foreign currency translation reserve
Hedging reserve – cash flow hedges
Share-based payments reserve
Consolidated
28 Jun 2020
$'000
30 Jun 2019
$'000
2,787
4,683
11,002
18,472
2,159
1,991
8,997
13,147
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 25. EQUITY – DIVIDENDS
Dividends
Dividends paid during the financial year were as follows:
Final dividend for the year ended 30 June 2019 of 3.75 cents (2018: 3.75 cents) per ordinary share
Interim dividend for the year ended 28 June 2020 of 5.25 cents (2019: 4.5 cents) per ordinary share
Dividends paid to non-controlling interests
Consolidated
28 Jun 2020
$'000
30 Jun 2019
$'000
20,297
28,464
–
20,297
24,356
89
48,761
44,742
In respect of the financial year ended 28 June 2020, the directors recommended the payment of a final fully franked dividend of
4.00 cents per share to be paid on 24 September 2020 to the registered holders of fully paid ordinary shares as at 10 September 2020.
Franking credits
Consolidated
28 Jun 2020
$'000
30 Jun 2019
$'000
Franking credits available for subsequent financial years based on a tax rate of 30%
17,067
30,138
New Zealand imputation credits available to New Zealand residential shareholders amount to NZ$5,381,585 (30 June 2019:
NZ$1,863,000).
57
Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020 NOTE 26. 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
Transactional foreign exchange risk
28 Jun 2020
30 Jun 2019
US dollar
transactional
exposure
$'000
Australian
dollar
equivalent
$'000
US dollar
transactional
exposure
$'000
Australian
dollar
equivalent
$'000
63,500
8,896
72,396
96,098
12,554
108,652
102,909
20,966
123,875
142,787
29,895
172,682
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.
28 Jun 2020
30 Jun 2019
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%)
–
–
210
(256)
(9,066)
3,867
932
(1,139)
10%
(10%)
10%
(10%)
–
–
287
(351)
(6,570)
14,181
2,431
(2,971)
Forward Contracts
Trade Payables
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
Sell Australian dollars
Average exchange rates
28 Jun 2020
$'000
30 Jun 2019
$'000
28 Jun 2020
30 Jun 2019
37,338
17,601
41,159
42,597
37,346
62,845
0.6562
0.6534
0.6681
0.7374
0.7230
0.7081
58
Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020 NOTE 26. FINANCIAL INSTRUMENTS (CONTINUED)
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 Note 2, 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.
28 Jun 2020
30 Jun 2019
NZ dollar
translational
exposure
$'000
Australian
dollar
equivalent
$'000
NZ dollar
translational
exposure
$'000
Australian
dollar
equivalent
$'000
New Zealand dollar net assets
17,570
16,354
19,471
18,610
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.
28 Jun 2020
30 Jun 2019
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%)
(1,414)
1,906
10%
(10%)
(1,692)
2,068
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. On the 18 August 2020, the
Group entered into an interest rate swap contract to mitigate the risk of changing interest rates on the variable rate debt held.
The interest rate swap contract matures in line with the Group’s financing facilities.
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
28 Jun 2020
30 Jun 2019
Weighted
average
interest rate
%
Weighted
average
interest rate
%
Balance
$'000
2.02%
(86,125)
–
–
(86,125)
2.78%
4.31%
Balance
$'000
(86,125)
32,750
(53,375)
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
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.
59
Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020 NOTE 26. FINANCIAL INSTRUMENTS (CONTINUED)
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
Working capital facility
Bank guarantee and letters of credit
Consolidated
28 Jun 2020
$'000
30 Jun 2019
$'000
5,700
90,000
1,700
97,400
8,800
15,000
2,425
26,225
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.
Consolidated - 28 Jun 2020
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Lease liabilities
Interest-bearing – variable
Term loans
Working capital facility
Total non-derivatives
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
–
–
–
24,504
17,121
95,374
–
–
–
–
–
–
24,504
17,121
84,091
154,113
21,773
355,351
2.02%
1.96%
5,000
10,000
10,000
61,125
–
–
–
–
76,125
10,000
151,999
94,091
215,238
21,773
483,101
Derivatives
Interest rate swaps net settled
Forward foreign exchange contracts net
settled
Total derivatives
–
–
–
(3,627)
(3,627)
–
–
–
–
–
–
–
–
–
–
(3,627)
(3,627)
60
Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020 NOTE 26. FINANCIAL INSTRUMENTS (CONTINUED)
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
–
–
57,081
13,423
–
–
2.76%
2.86%
10,000
20,000
56,125
–
100,504
56,125
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
57,081
13,423
66,125
20,000
156,629
508
(3,352)
(2,844)
Interest rate swaps net settled
4.31%
508
Forward foreign exchange contracts net
settled
Total derivatives
–
(3,352)
(2,844)
–
–
–
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above.
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 30 June 2019 year.
61
Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020 NOTE 27. FAIR VALUE MEASUREMENT
The only financial assets or financial liabilities carried at fair value in the current year are 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.
The fair value was obtained from third party valuations derived from discounted cash flow forecasts of forward exchange rates
at the end of the reporting period and contract exchange rates.
The interest rate swaps presented in the prior year was obtained from third party valuations derived from discounted cash flow
forecasts of interest rates from observable yield curves at the end of the reporting period and contract interest rates.
There were no transfers between levels during the year.
The carrying amount of other financial assets and financial liabilities recorded in the financial statements approximate their
fair values.
NOTE 28. KEY MANAGEMENT PERSONNEL DISCLOSURES
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
28 Jun 2020
$
30 Jun 2019
$
4,210,018
4,004,210
89,735
90,344
939,903
1,068,597
5,239,656
5,163,151
NOTE 29. 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
28 Jun 2020
$
30 Jun 2019
$
540,010
473,000
–
69,190
540,010
542,190
NOTE 30. CONTINGENT LIABILITIES
The Group has bank guarantees outstanding as at 28 June 2020 of $2,757,387 (30 June 2019: $1,393,974). The Group also
has open letters of credit of $12,501,817 (30 June 2019: $9,981,463). These guarantees and letters of credit are in favour of
international stock suppliers and landlords where parent guarantees cannot be negotiated.
NOTE 31. COMMITMENTS
Consolidated
28 Jun 2020
$'000
30 Jun 2019
$'000
Capital commitments
Committed at the reporting date but not recognised as liabilities, payable:
Property, plant and equipment
10,295
12,970
62
Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020 NOTE 32. RELATED PARTY TRANSACTIONS
Parent entity
Accent Group Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in Note 35.
Key management personnel
Disclosures relating to key management personnel are set out in Note 28 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 Daniel Agostinelli.
Aventus Kotara South Pty Ltd, a company associated with Brett Blundy.
Musician Pty Ltd, a shareholder, is a company associated with Matthew Durbin.
Transactions with related parties
The following transactions occurred with related parties:
Placed Pty Ltd, a company associated with Daniel Agostinelli, provided recruitment services to the Group amounting to $241,684
(30 June 2019: $706,356).
Aventus Kotara South Pty Ltd, a company associated with Brett Blundy, is the landlord of the Skechers Kotara outlet.
Retail Oasis Pty Limited, a company associated with Stephen Kulmar, provided business strategy & planning services to the Group
amounting to $117,416.
Retail Reality Pty Ltd, a company associated with Daniel Agostinelli, provided mystery shopping services to the Group amounting
to $196,369 (30 June 2019: $229,032).
Loans to/from related parties
There were no loans to/from related parties outstanding at the reporting date.
NOTE 33. 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
Parent
28 Jun 2020
$'000
30 Jun 2019
$'000
57,666
52,397
–
–
57,666
52,397
63
Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020 NOTE 33. PARENT ENTITY INFORMATION (CONTINUED)
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
28 Jun 2020
$'000
30 Jun 2019
$'000
107,445
376,074
483,519
35,413
82,817
118,230
365,289
71,381
375,733
447,114
23,911
69,669
93,580
353,534
389,600
388,756
11,002
(35,313)
8,997
(44,219)
365,289
353,534
The financial information for the parent entity has been prepared on the same basis as the consolidated financial statements, except
as set out below.
– Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
– Dividends received from subsidiaries are recognised in the parent entity's profit or loss.
NOTE 34. BUSINESS COMBINATIONS
28 June 2020
During the year to 28 June 2020, the Group completed the acquisition of 14 TAF stores. In addition to this, the Group acquired the
assets of the Stylerunner business, a premium digital business in the fast-growing women's athleisure segment, out of administration.
The total consideration transferred for these acquisitions was $8,887,201. Goodwill of $7,072,803 was recognised on acquisition.
Details of the provisional assets and liabilities acquired are as follows:
Cash and cash equivalents
Inventories
Other current assets
Property, plant and equipment
Right-of-use assets
Net deferred tax
Provisions
Deferred revenue
Other current liabilities
Lease liability
Net assets acquired
Reacquired rights
Goodwill
Acquisition-date fair value of the total consideration transferred
Representing:
Cash paid or payable to vendor
Outstanding debts
64
Fair value
$'000
3
2,197
9
104
7,222
(264)
(170)
(836)
(85)
(7,596)
584
1,230
7,073
8,887
8,818
69
8,887
Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020
NOTE 34. BUSINESS COMBINATIONS (CONTINUED)
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
Add: outstanding debts
Less: cash and cash equivalents
Net cash used
Fair value
$'000
8,887
69
(3)
8,953
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.
30 June 2019
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.
Details of the business combination are as follows:
Cash and cash equivalents
Inventories
Other current assets
Property, plant and equipment
Deferred tax asset
Trade and other payables
Employee benefits
Other current liabilities
Lease liability
Net assets acquired
Re-acquired right
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
65
Fair value
$'000
9
4,146
119
256
103
(21)
(285)
(1,047)
(674)
2,606
379
9,139
12,124
11,813
311
12,124
Fair value
$'000
12,124
(9)
(311)
11,804
Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020 NOTE 35. 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 2:
Name
Principal place of business/Country of incorporation
Ownership interest
28 Jun 2020
%
30 Jun 2019
%
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%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
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)
Platypus Shoes (Australia) Pty Ltd(c)
42K Pty Ltd(e)
RCG Grounded Pty Ltd
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
Australia
Australia
Australia
Australia
RCG Accent Group Holdings Pty Ltd
Australia
Hype DC Pty Ltd
Subtype Pty Ltd
Pivot Store Pty Ltd
Cremm Pty Ltd
Accent Stylerunner Pty Ltd
Subtype Limited(d)
Accent Group Pte Ltd
Australia
Australia
Australia
Australia
Australia
New Zealand
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
66
Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020 NOTE 36. DEED OF CROSS GUARANTEE
The following entities are party to a deed of cross guarantee under which each company guarantees the debts of the others:
Accent Group 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
Pivot Store Pty Ltd
Cremm Pty Ltd
Accent Stylerunner 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)
(ACN 634 893 691)
(ACN 636 815 284)
(ACN 637 053 028)
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 subsidiaries and Accent Group Limited together referred to as the 'Closed Group' either originally entered the Deed
on 23 February 2017 or have subsequently joined the Deed.
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, amortisation and impairment
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/(loss) for the year, net of tax
Total comprehensive income for the year
67
28 Jun 2020
$'000
30 Jun 2019
$'000
742,458
716,204
9,902
1,250
26,089
463
(317,987)
(307,251)
(27,564)
(28,697)
(12,592)
(25,024)
(18,885)
(85,322)
(144,150)
(153,617)
(32,021)
(99,103)
(14,311)
77,185
(21,035)
56,150
2,692
484
3,176
(31,006)
(26,953)
(4,025)
90,673
(19,451)
71,222
(1,408)
(1,614)
(3,022)
59,326
68,200
Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020 NOTE 36. DEED OF CROSS GUARANTEE (CONTINUED)
Statement of financial position
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Lease receivable
Derivative financial instruments
Other current assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Lease receivable
Intangibles
Net deferred tax
Total assets
Current liabilities
Trade and other payables
Deferred revenue
Provisions
Borrowings
Lease liabilities
Derivative financial instruments
Provision for income tax
Deferred lease incentives
Non-current liabilities
Provisions
Deferred revenue
Borrowings
Lease liabilities
Deferred lease incentives
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
68
28 Jun 2020
$'000
30 Jun 2019
$'000
39,405
50,516
24,417
30,800
112,404
112,595
8,811
–
4,204
–
3,769
1,769
215,340
173,350
83,695
201,351
17,074
358,779
17,096
677,995
893,335
89,348
3,295
13,439
15,000
70,560
3,627
23,390
–
78,288
–
–
353,918
12,102
444,308
617,658
83,219
2,498
13,032
30,000
–
925
9,807
8,152
218,659
147,633
1,451
2,864
71,125
203,959
–
279,399
498,058
395,277
2,466
56,125
–
23,520
82,111
229,744
387,914
389,600
388,756
18,328
(12,651)
11,903
(12,745)
395,277
387,914
Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020 NOTE 37. 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
Share-based payments
Provision for asset impairment
Foreign exchange differences
Employee expenses
Other expenses
Occupancy expenses
Change in assets and liabilities, net of the effect from acquisition of businesses
Receivables
Inventories
Trade creditors and provisions
Tax assets and liabilities
Net cash from operating activities
NOTE 38. EARNINGS PER SHARE
Profit after income tax
Non-controlling interest
Profit after income tax attributable to the owners of Accent Group Limited
Consolidated
28 Jun 2020
$'000
30 Jun 2019
$'000
55,682
53,886
105,843
28,268
2,005
2,764
175
(2,616)
(1,334)
(6,084)
(5,943)
4,562
4,391
7,227
166,672
2,983
1,050
(78)
–
–
(9,094)
(11,741)
(32,914)
38,826
(5,499)
65,687
Consolidated
28 Jun 2020
$'000
30 Jun 2019
$'000
55,682
53,886
–
(17)
55,682
53,869
Number
Number
Weighted average number of ordinary shares used as the denominator in calculating basic earnings
per share
539,880,461
537,379,873
Adjustments for calculation of diluted earnings per share:
Options and loan funded shares
Performance rights
1,150,002
2,356,670
19,900,000
24,876,154
Weighted average number of ordinary shares used as the denominator in calculating diluted earnings
per share
560,930,463 564,612,697
Basic earnings per share
Diluted earnings per share
Recognition and measurement
Cents
10.31
9.93
Cents
10.02
9.54
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.
69
Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020 NOTE 38. EARNINGS PER SHARE (CONTINUED)
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.
NOTE 39. SHARE-BASED PAYMENTS
Option Plans
Employee Share Scheme
Shares under the Accent Group Employee Share Scheme ('ESS') are held in escrow until certain vesting conditions are met. The
shares were issued at market 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 as in substance options and accounted for as share-based payments.
Set out below are the outstanding options granted under each plan.
28 Jun 2020
Grant date
Expiry date
Exercise price
02/10/2014
30/03/2020
30/03/2015
30/09/2020
27/05/2015
30/09/2020
27/05/2015
30/09/2020
28/08/2015
30/08/2020
13/05/2016
28/02/2021
$0.590
$0.730
$0.730
$1.010
$1.140
$1.490
Balance at
the start of
the year
466,668
73,334
933,334
333,333
550,001
400,000
2,756,670
Granted
Exercised
Expired/
forfeited/other
(466,668)
(73,334)
(266,667)
(166,667)
(133,332)
–
–
–
–
–
(100,000)
(200,000)
–
–
–
–
–
–
–
Balance at
the end of
the year
–
–
666,667
166,666
316,669
200,000
(1,106,668)
(300,000)
1,350,002
30 Jun 2019
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
28/02/2013
28/08/2018
03/12/2013
03/06/2019
$0.490
$0.690
993,333
66,666
02/10/2014
30/03/2020
$0.590
1,083,334
30/03/2015
30/09/2020
27/05/2015
30/09/2020
27/05/2015
30/09/2020
28/08/2015
30/08/2020
13/05/2016
28/02/2021
$0.730
$0.730
$1.010
$1.140
$1.490
146,667
1,750,000
500,000
1,100,000
400,000
6,040,000
–
–
–
–
–
–
–
–
–
(893,333)
(100,000)
(66,666)
(616,666)
(73,333)
(816,666)
(166,667)
–
–
–
–
–
(99,999)
(450,000)
–
–
–
–
466,668
73,334
933,334
333,333
550,001
400,000
(2,733,330)
(550,000)
2,756,670
The weighted average share price during the financial year was $0.973 (30 June 2019: $1.395).
The weighted average remaining contractual life of options outstanding at the end of the financial year was 0.3 years (2019: 1.2 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 PRP replaces 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.
70
Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020 NOTE 39. 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 remaining 29,062,116 performance rights
are all subject to an EPS performance condition. For the performance rights to vest, the Company's compound annual growth in
adjusted diluted earnings per share must equal or exceed 10% p.a. over the vesting period. If the performance condition is met,
100% of the performance rights vest. If the performance condition is not met, none of the performance rights vest unless the
Board determines otherwise.
Recognition and measurement
The Group recognises the fair value at the grant date of equity settled shares as an expense with a corresponding increase in equity
over the vesting period. 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. 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.
Set out below are summaries of the performance rights granted:
28 Jun 2020
Grant date
Expiry date
09/11/2019
30/10/2022
30/10/2022
30/10/2022
30/11/2022
30/11/2024
11/01/2017
03/10/2017
27/12/2017
20/06/2018
30/11/2019
30/11/2019
30 Jun 2019
Grant date
Expiry date
11/01/2017
03/10/2017
27/12/2017
20/06/2018
09/11/2019
30/10/2022
30/10/2022
30/10/2022
Balance at
the start of
the year
1,076,154
16,700,000
6,700,000
400,000
Granted
Exercised
Expired/
forfeited/other
Balance at
the end of
the year
-
-
-
-
1,684,863
3,577,253
(925,491)
(150,663)
-
-
-
-
-
-
-
-
-
16,700,000
6,700,000
400,000
1,684,863
3,577,253
24,876,154
5,262,116
(925,491)
(150,663)
29,062,116
Balance at the
start of the
year
1,210,552
16,950,000
6,700,000
400,000
25,260,552
Granted
Exercised
Expired/
forfeited/other
Balance at the
end of the year
–
–
–
–
–
–
–
–
–
–
(134,398)
1,076,154
(250,000)
16,700,000
–
–
6,700,000
400,000
(384,398)
24,876,154
The weighted average remaining contractual life of performance rights outstanding at the end of the financial year was 2.6 years
(2019: 3.2 years).
71
Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020 NOTE 40. SUMMARY OF OTHER SIGNIFICANT ACCOUNTING POLICIES
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.
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.
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.
Government grants
Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions
will be complied with. When the grant relates to an expense item, it is recognised as a reduction of the expense to which it relates.
Dividends
Dividends are recognised when declared during the financial year.
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.
72
Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020 NOTE 41. EVENTS AFTER THE REPORTING PERIOD
On 5 August 2020, per the Victorian Government directive, the Company closed all its Melbourne metropolitan stores to customers
for a minimum period of six weeks. These stores continue operating as 'dark stores', fulfilling online orders.
The New Zealand Government re-introduced level 3 restrictions in Auckland resulting in stores temporarily closing for a period of
two weeks from 12 August 2020. These stores continue operating as 'dark stores', fulfilling online orders.
The health and wellbeing of our team and customers remains paramount, and the Company will continue to follow Government
health guidelines over the coming weeks and months. This could involve further restrictions in Australia and New Zealand impacting
the Group's operations.
There remains significant ongoing environmental uncertainty due to COVID-19, increasing risk and volatility and making future
outcomes hard to predict. Whilst the Company is well placed to respond to a range of potential COVID-related circumstances and
impacts, the extent and duration of these impacts is unknown.
Apart from the dividend declared as disclosed in Note 25, no other matter or circumstance has arisen since 28 June 2020 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.
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Notes to the Financial StatementsAccent Group Limited Annual Report 2020for the year ended 28 June 2020 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 2 to the financial statements;
– the attached financial statements and notes give a true and fair view of the Group's financial position as at 28 June 2020 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 36 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
26 August 2020
Melbourne
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Directors' DeclarationAccent Group Limited Annual Report 2020for the year ended 28 June 2020
Independent Auditor's Report
`
Deloitte Touche Tohmatsu
ABN 74 490 121 060
477 Collins Street
Melbourne VIC 3000
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 28 June 2020,
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 28 June 2020 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 & Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) (the Code) that are relevant to our audit of the
financial reports 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.
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Independent Auditor’s ReportAccent Group Limited Annual Report 2020
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
$358.6m have been recognised in the
consolidated statement of financial position
as a consequence of acquisitions undertaken
in the current and past periods.
•
Our audit procedures included, but were not limited
to:
Evaluating the principles and integrity of the
discounted cash
flow models used by
management to calculate value-in-use of the
Group to ensure it complies with the relevant
accounting standards;
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 models.
As disclosed in Note 16, there are a number
of key estimates made which require
significant judgement in determining the
inputs into these discounted cash flow
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.
• Challenging 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;
•
•
Evaluating the impact of COVID-19 on the
Group’s future trading performance and the
increased level of uncertainty; and
Engaging our 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 Evaluating the royalty rates used by
comparison to the market data on similar
brand’s royalty rates; and
o Evaluating the discount rate used by
assessing the cost of capital of the Group
comparison to market data.
•
Performing sensitivity analysis on the key
model inputs and assumptions.
We also assessed the appropriateness of the
disclosures in Note 16 to the financial statements.
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Independent Auditor’s ReportAccent Group Limited Annual Report 2020
Key Audit Matter
How the scope of our audit responded to the
Key Audit Matter
Provision for impairment of inventories
As at 28 June 2020, the Group has
recognised $129.1m in inventories in the
consolidated statement of financial position
as disclosed in Note 10.
Inventories are recognised net of a provision
for impairment where the net realisable
value of inventories is less than cost. The
level of the provision is assessed by taking
into account 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.
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.
Our audit procedures included, but were not limited
to:
• Understanding the Group’s processes and
relevant controls related to the determination
of the provision for inventory;
• Challenging management’s estimate of the
provision by considering, amongst others, the
following sources of information to assess net
realisable value:
o Actual losses incurred in the previous 12
months due to inventory being sold below
cost and inventory written off;
o
o The
Inventory not sold during the period; and
likelihood of current
inventory
becoming impaired in the future based on
internal and external factors, including the
impact of COVID-19.
• Assessing the reasonableness of the basis
adopted by management in determining the
provision calculations;
• Recalculating the inventory provision to test
compliance with the Group’s accounting policy.
We also assessed the appropriateness of the
disclosures in Note 10 to the financial statements.
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Independent Auditor’s ReportAccent Group Limited Annual Report 2020
Key Audit Matter
How the scope of our audit responded to the
Key Audit Matter
Adoption of AASB 16 Leases
As disclosed in Note 4, the Group adopted
AASB 16 Leases from 1 July 2019. Under the
relevant accounting standard, an entity
must recognise a right of use asset and a
lease liability arising from leases (with some
exceptions), in the consolidated statement
of financial position as disclosed in Note 15
and 22 respectively.
the modified
The Group has applied
retrospective approach to adoption. Under
the modified retrospective approach, the
Group recognised a right of use asset of
$254.2m and a lease liability of $331.8m in
the balance sheet on 1 July 2019 with no
restatement of
financial
periods.
comparative
Our audit procedures included, but were not limited
to:
• Understanding the Group’s processes and
controls related to the adoption of the new
accounting standard;
•
•
Testing, on a sample basis, the calculation of
the right of use asset and lease liability as at 1
July 2019;
Testing the accuracy of the lease data in the
Group’s
lease management system, by
agreeing on a sample bases, the data recorded
to the underlying lease agreements;
• Assessing the completeness of leases included
in the determination of the right of use asset
and lease liabilities recognised;
Upon adoption, the Group has been required
to make a number of judgements and
estimates, including:
• Determining the lease term including
whether renewal options should be
incorporated into the determination of
lease term; and
•
•
Evaluating the estimates and judgements
applied by management in determining key
including the probability of
assumptions,
exercising options on lease extensions;
In conjunction with our Treasury specialists,
assessing the incremental borrowing rates
used by management;
• Determining an appropriate incremental
borrowing rate to be applied in the
calculation of right of use assets and
lease liabilities.
• Assessing
the mathematical accuracy of
management’s calculations by recalculating
the expected lease liability and right of use
asset; and
•
Testing, on a sample basis, movements in the
right of use asset and lease liability balances
during the year to 28 June 2020 and
recalculating the interest and depreciation
charges
the consolidated
statement of profit or loss for the year then
ended.
recognised
in
We also assessed the appropriateness of the
disclosures included in Note 15 and Note 22 to the
financial statements.
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Independent Auditor’s ReportAccent Group Limited Annual Report 2020
Key Audit Matter
How the scope of our audit responded to the
Key Audit Matter
COVID-19 Rent concessions
As disclosed in Notes 4 and 7 to the financial
statements, the Group has negotiated rent
concessions with its landlords. Of these
negotiated rent concessions, $7.6m has
been recognised as a reduction of occupancy
expenses in the consolidated statement of
profit or loss and other comprehensive
income.
recognition
The
concessions is significant because:
of COVID-19
rent
•
•
•
The rent concessions have a significant
impact on profit or loss and, in certain
circumstances, lease liabilities;
The Group entered into a number of
agreements, each with different terms
and conditions; and
The timing of when the agreements
were reached could have a significant
impact on the profit or loss.
Our audit procedures included, but were not
limited:
• Understanding
the Group’s process and
relevant controls related to the identification
and accounting for rent concessions;
• Reviewing agreements and other relevant
documentation between the Group and its
landlords to identify the terms and conditions
of the amended lease agreement and the date
at which agreement was reached between the
two parties;
• Assessing whether any conditions contained
within the agreements with the Group’s
landlords had been met as at 28 June 2020;
•
Testing on sample basis, the accounting
treatment of
the
underlying agreements; and
rent abatements
to
• Obtaining direct confirmation from a sample of
landlords of the timing, nature and amount of
rent abatements provided to the Group where
agreements had been reached with landlords
outside of
lease
agreements.
formal amendments to
We also assessed the appropriateness of the
disclosures included in Notes 4 and 7 to the
financial statements.
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
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Independent Auditor’s ReportAccent Group Limited Annual Report 2020
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.
• 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, actions
taken to eliminate threats or safeguards applied.
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Independent Auditor’s ReportAccent Group Limited Annual Report 2020
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 17 to 32 of the Directors’ Report for
the year ended 28 June 2020.
In our opinion, the Remuneration Report of Accent Group Limited, for the year ended 28 June 2020,
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, 26 August 2020
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Independent Auditor’s ReportAccent Group Limited Annual Report 2020 Shareholder Information
The shareholder information set out below was applicable as at 12 August 2020.
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
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
BBRC INTERNATIONAL
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
CITICORP NOMINEES PTY LIMITED
CRAIG JOHN THOMPSON
BNP PARIBAS NOMS PTY LTD
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