Appendix 4E
(Rule 4.3A)
Baby Bunting Group Limited
ABN 58 128 533 693
For the year ended:
52 weeks ended 24 June 2018
Previous corresponding period:
52 weeks ended 25 June 2017
Results for announcement to the market
Statutory Financial Results
Revenue from ordinary activities
Net profit from ordinary activities after tax attributable to members
Net profit attributable to members
2018
$’000
2017
$’000
Mvmt
$’000
up/(down)
%
303,093
278,027
25,066
9.0%
8,686
8,686
12,247
12,247
(3,561)
(3,561)
(29.1%)
(29.1%)
Earnings before interest, tax, depreciation and amortisation
17,549
22,138
(4,589)
(20.7%)
Pro Forma Financial Results
Revenue from ordinary activities
Net profit from ordinary activities after tax attributable to members
Net profit attributable to members
Earnings before interest, tax, depreciation and amortisation
2018
$’000
2017
$’000
Mvmt
$’000
up/(down)
%
303,093
278,027
25,066
9.0%
9,607
9,607
18,620
12,957
12,957
22,972
(3,350)
(3,350)
(4,352)
(25.9%)
(25.9%)
(18.9%)
Pro forma financial results have been calculated to exclude employee equity incentive expenses for the current and previous reporting
periods. Equity incentive expenses have been excluded to more clearly represent the consolidated entity’s underlying earnings given
this is a non-cash item whose primary economic impact is issued capital dilution if and when shares are issued.
The following table reconciles the statutory to pro forma financial results for the year ended 24 June 2018 (noting that this financial
information has not been audited in accordance with Australian Auditing Standards):
Year ended 24 June 2018
$’000
Statutory results
Performance rights1
Employee share plan offer2
Tax impact from pro forma adjustments
Underlying statutory results
Pro forma results
Sales
EBITDA
EBIT
303,093
17,549
13,186
–
–
–
303,093
303,093
572
499
–
18,620
18,620
572
499
–
14,257
14,257
NPAT
8,686
572
499
(150)
9,607
9,607
1. Expense reflects the cost amortisation of performance rights (LTI) granted and outstanding in the current reporting period.
2. The Company issued 260,108 shares (546 shares per eligible employee) under its General Employee Share Plan in the current reporting period
with no monetary consideration payable by participating eligible employees who each received approximately $1,000 worth of shares.
ii
ANNUAL REPORT 2018ANNUAL REPORT 2018 Results for announcement to the market (continued)
Pro Forma Financial Results (continued)
The following table reconciles the statutory to pro forma financial results for the year ended 25 June 2017 (noting that this financial
information has not been audited in accordance with Australian Auditing Standards):
Year ended 25 June 2017
$’000
Statutory results
Performance rights1
Employee share plan offer2
Tax impact from pro forma adjustments
Underlying statutory results
Pro forma results
Sales
EBITDA
EBIT
NPAT
278,027
22,138
18,110
12,247
–
–
–
278,027
278,027
419
415
–
22,972
22,972
419
415
–
18,944
18,944
419
415
(124)
12,957
12,957
1. Expense reflects the cost amortisation of performance rights (LTI) granted and outstanding in the reporting period.
2. The Company issued 132,368 shares (334 shares per eligible employee) under its General Employee Share Plan in the reporting period
with no monetary consideration payable by participating eligible employees who each received approximately $1,000 worth of shares.
Dividends
Dividends paid
Final 2017 dividend – paid 15 September 2017
Interim dividend – current period
Dividends determined
Final 2018 dividend
Amount per
security (cps)
Franked
amount
4.3
2.8
100%
100%
2.5
100%
Record date for determining entitlements to the dividend
Date dividend is payable
24 August 2018
14 September 2018
The Company does not currently offer a dividend reinvestment plan.
Commentary on results for the period
For further explanation of the statutory figures above refer to the accompanying financial report for the year ended 24 June 2018,
which includes the Directors’ Report. The Full Year Results Presentation released in conjunction with this Results Announcement
provides further analysis of the results.
Adjustments from statutory to pro forma financial results have been made to exclude employee equity incentive expenses.
Pro forma financial results have been prepared on a consistent basis with previously issued guidance for FY2018. Equity incentive
expenses have been excluded to more clearly represent the consolidated entity’s underlying earnings given this is a non-cash item
whose primary economic impact is issued capital dilution if and when shares are issued.
Net tangible assets per ordinary share
Net tangible asset per ordinary share
Net tangible asset per ordinary share
Other information
Independent Audit by Auditor
This report is based on the consolidated financial statements which have been audited by Ernst & Young.
iiii
2018
$
0.35
2017
$
0.36
Appendix 4E(Rule 4.3A)BABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED ANNUAL
REPORT
2018
Baby Bunting Group Limited
ABN 58 128 533 693
Chairman and CEO’s Report
2
14 Board of Directors
18 Sustainability
22 Corporate Governance Statement
30 Annual Financial Report
31 Directors’ Report
43 Remuneration Report
52 Auditor’s Independence Declaration
53 Consolidated Financial Statements
85 Directors’ Declaration
86 Independent Auditor’s Report
91 Shareholder Information
ibc Corporate Directory
The 2018 Baby Bunting
Annual Report reflects Baby Bunting’s
performance for the 52 week period
from 26 June 2017 to 24 June 2018.
The Baby Bunting Group Limited
Annual Report is available online at
babybuntingcorporate.com.au/reports.
Hard copies can be obtained by contacting
the Company’s share registry.
Notice of 2018 Annual General Meeting
10.00am (Melbourne time)
Monday, 19 November 2018
Level 26, 181 William Street
Melbourne VIC 3000
Baby Bunting Group Limited
ABN 58 128 533 693
BABY BUNTING’S
VISION IS TO BE
THE MOST LOVED
BABY RETAILER
FOR EVERY FAMILY,
EVERYWHERE
1
ANNUAL REPORT 2018 Chairman and CEO’s Report
The 2018 financial year saw Baby Bunting strengthen and consolidate
its market leading position as the largest specialty baby goods retailer
in Australia. In an ever changing retail environment, Baby Bunting has
remained focused on providing the best products, services and advice
as well as making investments in its strategies to deliver ongoing
market share growth.
Baby Bunting was able to grow sales and transaction volumes
in a difficult retailing environment characterised by significant price
deflation that resulted from unprecedented sector consolidation
during the year.
The focus for the year ahead is to grow our business by continuing
to deliver to our customers the broadest range, at the best value,
conveniently across multiple channels while providing excellent service
and advice. By doing this we will be well placed to generate future growth
and profitability for our shareholders.
This strategy is underpinned by the dedication of our passionate Team
Members across the entire organisation who are all committed to making
Baby Bunting the most loved baby retailer for every family, everywhere.
WELL-
POSITIONED
FOR
FUTURE
GROWTH
AUSTRALIA’S
LARGEST
SPECIALTY
BABY GOODS
RETAILER
OUR
YEAR
2
BABY BUNTING GROUP LIMITED The 2018 financial year saw some
unprecedented changes in the
baby goods sector. These changes
created some short term challenging
market conditions for Baby Bunting,
which impeded earnings in the financial
year but bode well for Baby Bunting’s
growth strategy in the years ahead.
With these sector changes, Baby Bunting’s
strategy is evolving to meet these changes
(see below). We believe that to continue
to be a successful specialty baby goods
retailer, Baby Bunting must remain
focused on providing our customers with
a seamless shopping experience across
our physical store and online channels.
Dividends
The Board has approved a final dividend
of 2.5 cents per share fully franked.
Together with the interim dividend of
2.8 cents per share, the total dividend
payment for the year is 5.3 cents
per share.
Despite the challenges, the business
delivered another year of good revenue
growth. It has been a year of significant
achievement for the business. Baby
Bunting expanded our store network
to almost 50 stores, grew private label
and exclusive products to be over 20%
of sales, grew online sales by more
than 63% and click and collect sales by
66%. Baby Bunting’s focus on customer
service has seen customer satisfaction
measured by Net Promoter Score (NPS)
increase to 70. Finally, important executive
appointments have been made in the key
growth areas of digital, marketing and
loyalty, and supply chain.
Industry consolidation
Baby Bunting’s four largest specialty
baby goods competitors entered external
administration during the year and have
either ceased trading or are expected to
shortly cease trading. The largest of these
competitors was Babies R Us/Toys R Us,
with a network of 45 stores across
Australia. A large number of its stores
are located in the same catchment as
a Baby Bunting store. The external
administrations of Bubs Baby Stores,
Baby Bounce and Baby Savings also saw
a number of specialty baby goods stores
close, in particular in New South Wales,
Queensland and Western Australia.
These closures had an effect on
Baby Bunting’s sales and gross margin
performance during the year, as distressed
retailers in the market lowered retail
prices to generate sales and clear
inventory. In maintaining our focus on
providing great value to our customers,
Baby Bunting’s pricing took account of
external conditions.
During the year, Amazon commenced
operations in Australia. It joined a number
of other online marketplaces offering an
assortment of baby goods. The growth
of online marketplaces has been a key
development in Australian retail over
the last few years.
FY2018 financial results
overview
This is equivalent to approximately 70% of
the Company’s FY2018 pro forma NPAT.
The sector consolidation created
a challenging trading environment.
Baby Bunting grew its market share,
as evidenced by both its total sales and
transaction volume growth. However, price
deflation through market discounting
affected margins and, ultimately, resulted
in earnings and profit ending the year
below the levels that were targeted.
In FY2018:
• total sales were $303.1 million, up 9.0%
on the prior corresponding period;
• total number of transactions was up
12.5% and comparable store sales
transactions were up 2.6%;
• comparable store sales were flat on
the prior corresponding period;
• gross profit increased 5.9% on the prior
corresponding period to $100.9 million;
• gross profit as a percentage of sales
declined 100 basis points to 33.3%,
reflecting the price deflation in
the period.
Statutory NPAT was $8.7 million, down
29.1% on the prior corresponding period
and the Company finished the financial
year with net debt of $3.5 million.
On a pro forma basis excluding the
non-cash impact of employee equity
incentive expenses:
• pro forma earnings before interest, tax,
depreciation, and amortisation (EBITDA)
were $18.6 million, down 18.9% on the
prior corresponding period. Pro forma
EBITDA margin decreased by 210 basis
points to 6.1%; and
• pro forma net profit after tax (NPAT) was
$9.6 million, down 25.9% on the prior
corresponding period.
A reconciliation between the statutory
and pro forma financial results is set out
in Section 2.5 on pages 33-34 of the
Directors’ Report.
Operational highlights
FY2018 was a year when the Company
continued to focus on improving the
execution of the retail experience for our
customers as well as working to give
effect to the Company’s broader strategy.
Growing the store network
During the year, new Baby Bunting stores
were opened in Munno Para (SA), Albury
(NSW), Aspley (Qld), Rutherford (NSW) and
Browns Plains (Qld). A further store was
opened in Toowoomba (Qld) in July 2018,
bringing Baby Bunting’s store network to
forty-eight stores.
In the financial year ahead, Baby Bunting
will be opening a number of exciting new
stores in strategic markets, including in
Chatswood in Sydney and our first store
in Tasmania at Hobart.
Towards the end of the first half,
Baby Bunting also expects to open a
store at Chadstone Shopping Centre in
Melbourne, its first in a major shopping
centre. The circa 1,500 square metre store
will enable Baby Bunting to showcase
a range of brands and products at
Australia’s premier retail destination, while
still providing services our customers
expect such as a car seat fitting service
and convenient bulky goods collection.
Digital and online
In FY2018, a focus was on enhancing the
existing digital offering while also looking
to prepare for future expansion and
investment. Total online sales grew 63%,
and click and collect sales grew 66%, on
the prior financial year. Online sales now
represent 9.5% of total sales. The growth
of the store network has complemented
the growth in online sales, with online
sales in relevant catchments consistently
increasing following the establishment of
a Baby Bunting store in that area.
3
ANNUAL REPORT 2018 An exciting and significant achievement
during the year was the launch of the
Baby Bunting gift registry app for mobile
devices. The gift registry app enables
parents and parents-to-be to create
gift registries consisting of products
selected from Baby Bunting’s range.
The gift registry can be easily shared
with family and friends and provides a very
convenient way for gifts to be selected
and purchased.
The website re-platform project
commenced in the second half of
FY2018 with the objective of deploying
a new e-commerce platform, to provide
a step change in Baby Bunting’s digital
channel and to deliver engaging content
and experiences for our customers at
every stage of their journey as parents or
parents-to-be. The deployment of the new
e-commerce platform is expected to be
complete towards the end of the first half
of FY2019.
Merchandise and private label
The expansion of Baby Bunting’s range
of private label and exclusive products
continued during the year, with sales
increasing by 100% and sales of these
products now representing 20.9% of total
sales. This growth has come primarily from
the support of key suppliers expanding the
range of their products sold exclusively
through Baby Bunting in particular in the
prams and strollers, cots and furniture and
the car safety categories.
In July 2017, Baby Bunting commenced
offering everyday low prices for our
Best Buy range of products. In conjunction
with this, the Best Buy range was
expanded to cover our core range of car
seats. This was a market leading move in
what turned out to be a year of significant
change in the market.
Supply chain strategy
In the second half of FY2018, the
Company finalised its supply chain
strategy, which consists of a number of
projects and initiatives with the objective
of improving both the efficiency and flow
of product from source to customer.
Marcus Robinson was appointed as
General Manager of Supply Chain in
December 2017 to lead this strategy.
4
Chairman and CEO’s ReportBABY BUNTING GROUP LIMITED To date, completed initiatives include
consolidation of outbound transport
services providers into a single national
provider, improvements in upstream supply
arrangements as well as greater efficiency
in online store fulfilment. Work has also
commenced on planning for future
distribution arrangements recognising
the future growth in the Company’s store
network throughout Australia.
Other achievements
Other achievements and highlights for the
year include:
• delivering a high level of customer
satisfaction and building loyalty to the
Baby Bunting brand, as measured by
a Net Promoter Store for the year of 70;
• achieving EBITDA margin improvement
including through expanding the range of
private label and exclusive products and
building a more efficient supply chain
from source to the customer.
The Board believes these elements will
assist in growing market share and in
generating future growth and profitability
for our shareholders.
Further information on the Company’s
strategy is in the Operating and
Financial Review.
The Board
At the end of the year, Stephen Roche
retired as Non-executive Director. The
Board has commenced a process to identify
appropriate candidates for appointment
as a Non-executive Director. In doing
so, the Board is focused to ensure that it
collectively reflects the mix of skills and
diversity appropriate for the Company’s
stage of development and having regard
to the Board skills matrix.
You can read more about the Board and
the Board’s mix of skills and diversity in the
Corporate Governance Statement included
in this Annual Report.
To close, we would like to thank all
of Baby Bunting’s nearly 1,000 Team
Members for their continuing commitment
to make Baby Bunting the most loved baby
retailer for every family, everywhere.
• introducing buy now, pay later products
such as Afterpay, zipMoney and zipPay,
to provide customers with increased
payment and finance flexibility;
• appointing Sue Dawson, as General
Manager of Marketing, to lead and
enhance Baby Bunting’s marketing,
brand, loyalty and customer engagement
efforts, across all channels.
Evolving Baby Bunting’s
strategy
Our core purpose is to support new and
expectant parents in navigating the early
years of parenthood. We aim to do this by
providing a range of services, great advice,
the widest selection of products and at low
prices every day.
These are all key elements that will help
us work towards our vision of being the
most loved baby retailer for every family,
everywhere.
The Board is continually reviewing
the Company’s strategy. As a result,
Baby Bunting’s growth strategy to grow
market share has been refined to reflect the
changing circumstances in the Australian
baby goods retail market.
The key elements of the strategy are:
• to invest in digital to deliver the best
possible customer experience across
all channels;
• to invest to grow sales from existing
stores;
• to be more accessible to our customers
by opening stores in new markets, with a
store roll-out plan that targets a network
of more than 80 stores (with between
four to eight new stores a year); and
Ian Cornell
Chairman
Matt Spencer
CEO and Managing Director
5
ANNUAL REPORT 2018 Baby Bunting’s strategy is to grow market share through
investing in digital to deliver the best possible customer
experience across all channels, investing to grow sales from
existing stores, to grow from opening new stores in new markets
and achieving EBITDA margin improvement.
These elements are supported by building the Best Team,
investing in cloud-based business systems and customer-led
business processes and establishing best in class supply chain
and customer fulfilment processes.
By pursuing this strategy, Baby Bunting aims to achieve its vision
to be the most loved baby retailer for every family, everywhere.
OUR
STRATEGY
OUR CORE
PURPOSE IS TO
SUPPORT NEW AND
EXPECTANT PARENTS
IN NAVIGATING THE
EARLY YEARS OF
PARENTHOOD.
6
BABY BUNTING GROUP LIMITED 7
ANNUAL REPORT 2018 SALES ($m)
Comparable store sales growth (%)
$303.1
$278.0
$236.8
$180.2
12.5%
7.6%
FY
15
16
6.9%
17
-0.2%
18
ONLINE SALES ($m)
0.2%
% Total sales
Margin
$28.9
$17.8
9.5%
$10.1
6.4%
$5.9
4.2%
3.2%
STORES
Number of stores at year end
47
42
36
31
FY
15
16
17
18
PRIVATE LABEL &
EXCLUSIVE PRODUCTS
% of Total Sales
20.9%
11.4%
10.0%
7.2%
FY
15
16
17
18
FY
15
16
17
18
GROSS PROFIT ($m)
PRO FORMA NPAT ($m)
Gross margin (%)
$100.9
$95.3
$81.2
$61.8
34.3%
34.3%
34.3%
33.3%
$13.0
$10.6
$9.6
$6.8
FY
15
16
17
18
FY
15
16
17
18
8
BABY BUNTING GROUP LIMITED The financial year saw unprecedented industry changes
with Baby Bunting’s four largest specialty baby goods
competitors either ceasing to trade or announcing that they
will shortly exit the market.
This industry consolidation adversely affected Baby Bunting’s
financial results for the year. There was significant price deflation
as a result of market discounting which affected margins and
ultimately resulted in earnings and profit ending the year below
the levels targeted at the start of the year.
Notwithstanding these conditions, Baby Bunting was able
to grow sales and transaction volumes and gross profit.
SALES,
TRANSACTIONS
AND MARKET
SHARE GROWTH
OUR
STATS
99
SALES OF $303.1MUP 9.0%ANNUAL REPORT 2018ANNUAL REPORT 2018 This year we grew our network through the addition of new stores in
Munno Para (SA), Albury (NSW), Aspley (Qld), Rutherford (NSW) and
Browns Plains (Qld). The first store for FY19 has recently opened at
Toowoomba (Qld). With our 48 stores, Baby Bunting is Australia’s
largest specialty baby goods retailer.
Baby Bunting aims to grow from opening stores in new markets, with
a store roll-out plan that targets a network of more than 80 stores
(with between four and eight new stores a year).
In the year ahead, Baby Bunting will be opening exciting new stores in
strategic markets. Among others, these include a new store at Chatswood
in Sydney, our first store in Tasmania at Hobart and a new store at
Chadstone Shopping Centre in Melbourne.
As part of our store strategy, our nearly 1,000 passionate Team Members
are committed to delivering the best products, service and advice in our
stores to achieve our vision to be the most loved baby retailer for every
family, everywhere.
48 STORES
ACROSS
AUSTRALIA
OUR
STORES
ROLL-OUT
TO OVER
80 STORES
1010
BABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED QLD
Aspley
Booval
Browns Plains
Burleigh Waters
Capalaba
Fortitude Valley
Helensvale
Kawana
Macgregor
North Lakes
Toowoomba
Townsville
NSW/ACT
Albury
Auburn
Belrose
Blacktown
Campbelltown
Camperdown
Fyshwick (ACT)
Moore Park
Penrith
Rutherford
Taren Point
Warners Bay
West Gosford
VIC
Ballarat
Bendigo
East Bentleigh
Frankston
Geelong
Hawthorn
Hoppers Crossing
Maribyrnong
Narre Warren
Preston
Ringwood
Taylors Lakes
Thomastown
SA
Gepps Cross
Melrose Park
Mile End
Munno Para
WA
Baldivis
Cannington
Joondalup
Midland
Myaree
Osborne Park
WA
6
OPENING
NEW STORES
IN STRATEGIC
MARKETS
QLD
12
NSW
13
VIC
13
SA
4
1111
ANNUAL REPORT 2018ANNUAL REPORT 2018
BABY BUNTING GROUP LIMITED
MAKES
CREATING AND
MANAGING A
GIFT REGISTRY
EASY
12
Our new Baby Bunting Gift Registry App has launched. It enables
parents-to-be and new parents to help family and friends
choose the perfect gift for their baby shower, birthday or
any other special occasion.
Gift registries can be created with the app by scanning items
in store, or browsing online from Baby Bunting’s extensive range
of prams, car seats, carriers, furniture, babywear, toys, feeding
and much more.
Baby Bunting gift registries work seamlessly across our website and
in-store and can be shared easily via social media, email
and sms. It allows customers to track items that have been
purchased for them.
An exciting new initiative delivered as part of Baby Bunting’s
digital road map to bring together our customers’ online and
in-store experience.
AVAILABLE
FROM THE APP
STORE AND
GOOGLE PLAY
OUR
APP
DOWNLOAD
NOW
13
ANNUAL REPORT 2018 OUR
BOARD
1
2
3
4
5
STRONG AND
EXPERIENCED
TEAM
14
BABY BUNTING GROUP LIMITED Details of the qualifications, experience and special responsibilities of each current director are as follows:
Donna Player
5
Non-executive Director
BA, GAICD
Member of the Remuneration
and Nomination Committee
Donna has over 35 years’ experience
in retail, marketing and product
development gained in both retail and
wholesale industries. Currently, Director
of Merchandise for Camilla Australia. In
the four years to May 2016, Donna was
the Group Executive of Merchandise for
Fashion, Beauty, Footwear, Accessories
and Home for David Jones. Prior to her
role at David Jones, Donna was General
Manager, Merchandise and Planning for
BIG W.
During her career, Donna has had
executive responsibilities for merchandise,
planning, branding, sourcing and supplier
strategies.
Donna holds a Bachelor of Arts from the
University of NSW and is a graduate of the
Australian Institute of Company Directors.
She is currently a non-executive director
of Accent Group Limited (appointed in
November 2017).
Stephen Roche
Non-Executive Director
BBus, FAICD
Stephen was a Non-executive Director
during the year. He retired as a director on
24 June 2018. Stephen was a member of
the Audit and Risk Committee.
From August 2006 to February 2017,
Stephen was Managing Director and
Chief Executive Officer of Australian
Pharmaceutical Industries Limited (API).
Before joining API, he was Group General
Manager, Health Services for Mayne
Group Limited. He has also had held
senior management roles at FH Faulding
& Co Limited and CSR Limited.
Ian Cornell
1
Chairman, Non-executive Director
FAIM, FAHRI
Member of the Remuneration and
Nomination Committee
Member of the Audit and Risk Committee
(from 16 July 2018)
Ian has extensive experience in the
retailing and property industries in
Australia. He most recently held senior
executive corporate roles with the
Westfield Group until 2012, including
responsibility for all HR functions and the
overall management of retail relations of
the Group.
Prior to joining Westfield, Ian had a 23 year
career with Woolworths. His roles included
Chief General Manager of Woolworths’
Supermarket division and as a key
member of the management team that
implemented successful growth strategies
such as “The Fresh Food People” and the
establishment of the Dan Murphy’s chain.
Ian has also been Chairman and CEO
of Franklins.
Ian is currently a non-executive director
of Myer Holdings Limited (appointed in
February 2014). Ian was a non-executive
director of Goodman Fielder Limited
(appointed February 2014 and ceasing
in March 2015).
Matt Spencer
2
CEO and Managing Director
B.Bus
Gary Levin
3
Non-executive Director
B.Comm, LLB, MAICD
Chairman of the Audit and Risk Committee
Gary has over 30 years’ management,
executive and non-executive experience
in public and private companies including
in the retail, investment and property
industries.
Gary was previously the founder and
managing director of TLC Dry Cleaners
Pty Limited and joint managing director
of Rabbit Photo Holdings Limited.
He was a non-executive director of
JB Hi-Fi Limited from November 2000
until October 2016.
Melanie Wilson
4
Non-executive Director
MBA, B.Comm (Hons), GAICD
Chairman of the Remuneration
and Nomination Committee
Member of the Audit and Risk Committee
Melanie has more than 15 years’ retail
experience in senior management roles.
Her appointments included Limited Brands
(Victoria’s Secret, Bath & Bodyworks
– New York), Starwood Hotels (New
York), Woolworths and Diva/Lovisa and
have covered a wide spectrum of retail
including store operations, merchandise
systems, online e-commerce, marketing,
brand development and logistics/
fulfilment. In her most recent position,
Melanie was Head of Online at BIG W.
Matt joined Baby Bunting as CEO and
Managing Director in February 2012
(he was appointed as a Director of the
Company on 23 April 2012).
Prior to her retail experience, Melanie
performed roles at Bain and Company
(Boston) and Goldman Sachs (Hong Kong
and Sydney).
Melanie has an MBA from the Harvard
Business School and is a graduate of the
Australian Institute of Company Directors.
She is currently a non-executive director of
iSelect Limited (appointed in April 2016),
Shaver Shop Group Limited (appointed in
June 2016) and EML Payments Limited
(appointed in February 2018).
Prior to Baby Bunting, Matt was General
Manager Retail – Australia, New Zealand
and the UK at Kathmandu from 2007 to
2012 where he was responsible for over
110 stores, including network planning,
store design and store development.
Matt’s previous roles include Operations,
Strategy and Development Manager
of Coles Express as well as various
management roles at Shell Australia.
He was a key contributor to the
establishment and roll-out of the Coles
Express brand.
15
ANNUAL REPORT 2018 BABY BUNTING GROUP LIMITED
16
Being Passionate
Being Considerate
be passionate about providing our
customers with great products and services,
advice and value every day
be considerate and respectful of others and
think about how our decisions and actions
impact others
Being Honest
act with integrity and use good judgement
Being Positive
be positive and enjoy doing the things that
contribute to a great team spirit
Being Focused
think big, but get on with doing the small
things that make a big difference
Being Bold
never be afraid to evolve – encourage a
culture of adventure and creativity
OUR
VALUES
1717
ANNUAL REPORT 2018OURVALUES PEOPLE
Passionate Team
Baby Bunting is committed to investing
in developing and retaining talented and
passionate Team Members. This involves
building capabilities to provide training
and leadership to Team Members in stores
to grow and nurture talent.
During the year, 35 Team Members were
promoted into store management and key
Store Support Office positions. This meant
41% of key opportunities that arose during
the year were filled by internal candidates.
In the financial year, Team Members’
completed over 45,000 hours of training
in courses developed and deployed by
Baby Bunting’s Learning and Development
Team. These courses included training on
new products to ensure Team Members’
product knowledge remains high, as
well as courses on leadership, safety
and compliance.
Building the best team is a key goal at
Baby Bunting – not only to ensure that
customers are provided with great service
and advice, but to ensure that all Team
Members enjoy and are satisfied with
what they do at Baby Bunting. In 2016,
Baby Bunting conducted its first employee
engagement survey. A second employee
engagement survey was conducted
during the year. Both surveys revealed
high levels of engagement and alignment
among Baby Bunting Team Members and
highlighted areas for further development.
Around 47% of Baby Bunting Team
Members are shareholders (up from 43%
in the prior year). This is largely due to
the operation of the Company’s General
Employee Share Plan. This plan provides
employees with an opportunity to own
Baby Bunting shares and participate in
the benefits of share ownership.
ENVIRONMENT
Our focus is on targeting ways to
conserve energy, reduce waste and lower
our environmental footprint across our
network of stores and our Store Support
Office and Distribution Centre, in order
to operate on a sustainable basis.
Some of our environmental sustainability
initiatives include:
Store lighting upgrade project
The Company has continued with a
program of replacing and upgrading
lighting in Baby Bunting’s stores.
This project has seen Baby Bunting
replacing existing store lighting with
energy efficient LED lighting. The program
has recently been extended to
Baby Bunting’s Store Support Office.
This project has reduced significantly
the electricity consumed by lighting in
the Company’s stores.
Solar powered extraction vents
Baby Bunting has continued with its
program of installing solar powered
extraction vents in some of our stores
for use in the “back-of-house” parts of
the store. These vents are designed to
reduce the temperatures for our teams
in store during the warmer months, while
also reducing the amount of warm air
that might circulate throughout the store
– which can result in increased energy
consumption through air conditioning use.
Store standard scope of works
Baby Bunting has a standard scope of
works for its stores to be used for the
development of a new store. Our standard
scope of works stipulates:
• energy efficient LED lighting (as
described above);
• lighting control systems to ensure that
all non-essential lighting is switched
off when not required. Simply put, when
a store alarm is turned on at night,
all non-essential lighting circuits are
switched off;
• motion-sensor lighting to non-retail
areas in our stores;
• rain water harvesting for use in store
toilets to reduce the amount of mains
water that is used in store.
Sustainability
Waste packaging harvesting
We operate a “harvest recycling program”
at our stores. This program significantly
reduces the amount of waste from stores
going to landfill. This program involves
collecting cardboard, paper, plastic
film, pallet shrink wrap and polystyrene.
Waste products in these bins are then
collected for recycling.
Australian packaging covenant
Baby Bunting is a signatory to the
Australian Packaging Covenant.
This is a voluntary program involving both
Government and industry to ensure the
environmental impact from packaging
is reduced, measured and understood.
Each signatory to the Australian
Packaging Covenant is required to have
an action plan which sets out what the
signatory proposes to do to contribute
to the Australian Packaging Covenant’s
objectives and goals.
CUSTOMERS
Providing our customers with great
products, service and advice is critical
to ensuring Baby Bunting’s business is
sustainable.
Measuring customer satisfaction can
be done in many ways. Baby Bunting
has processes for customers to provide
feedback following each transaction.
This feedback includes Net Promoter
Score feedback, where customers are
categorised as “promoters”, “passives”
or “detractors” based on how likely they
would be to recommend Baby Bunting to
a friend or colleague. The Net Promoter
Score is measured by subtracting the
percentage of detractors from the
percentage of promoters.
For the 2018 financial year, Baby Bunting’s
overall NPS was 70. This was a very
pleasing result. However, Baby Bunting
does not merely consider the overall
NPS score. Qualitative feedback
is assessed with a view to always
continuing to improve the quality of
the service and advice provided to
Baby Bunting customers.
18
BABY BUNTING GROUP LIMITED 19
ANNUAL REPORT 2018 Diversity and Inclusion
The Company has a Diversity and
Inclusion Policy. The Policy sets out
Baby Bunting’s commitment to recognising
the importance of diversity and inclusion
for its business. The policy recognises
that diversity not only includes gender
diversity but also includes matters of age,
ethnicity, religion, cultural background,
physical ability or sexual orientation. Other
matters addressed in the policy include
a commitment to diversifying sources of
recruitment and merit-based appointments,
as well as recognition that the Company
will not tolerate unlawful discrimination,
bullying, harassment or victimisation.
(See the Corporate Governance Statement
for further information.)
Safety
Safety is a key focus for Baby Bunting.
During the FY2018 year, the number
of employees increased by 8%. At the
same time, the Company’s lost time injury
frequency rate reduced by 33% on the
previous year. Baby Bunting has programs
and procedures intended to ensure that all
employees are aware of the importance of
safety and of safe ways of working.
COMMUNITY
Life’s Little Treasures Foundation
Baby Bunting has been a Major
Corporate Partner of the Life’s Little
Treasures Foundation for the past two
years. In 2018, Baby Bunting renewed
its commitment for a further two years.
Life’s Little Treasures Foundation provides
support to parents and families of
premature babies to assist them during
what can be an uncertain and emotional
journey. Life’s Little Treasures Foundation
has grown into Australia’s leading charity
dedicated to supporting premature babies
and their families. Each year over 48,000
babies are admitted to neonatal intensive
care units and special care nurseries.
Baby Bunting will continue as the
presenting partner for the Life’s Little
Treasures Foundation annual “Walk
for Prems” event. This year, the event
will be held on 28 October 2018
at locations throughout Australia.
Further information about the Foundation
and how to contribute is available at
lifeslittletreasures.org.au.
As part of its commitment to corporate
volunteering, Baby Bunting supported
Team Members who wished to volunteer
at Life’s Little Treasures Foundation during
the year. This provided valuable assistance
to the Foundation in the lead up to the
“Walk for Prems” event.
Maternal and child health nursery
equipment program
The Victorian Department of Education
and Training provides support for the
Victorian Maternal and Child Health
Service nursery equipment program.
The program is administered by
EACH Limited, a provider of an integrated
range of health, disability, counselling
and community mental health services
across Australia.
Under the program, Baby Bunting supplies
nursery products, such as car seats,
cots and mattresses, to eligible families
identified by the Maternal and Child
Health Service. Baby Bunting has been
assisting with the program since 2011
and is committed to the program through
to 2020.
Support for not-for-profit
organisations
Baby Bunting supports not-for-profit
organisations involved in providing new
and pre-loved baby goods and nursery
equipment to families in need. This is an
area that the Company will be building
upon in future years. We recognise that
this not only assists families and children,
but can also result in more efficient use
of resources through ensuring products
have continued use throughout their
effective life.
20
SustainabilityBABY BUNTING GROUP LIMITED 21
ANNUAL REPORT 2018 Corporate Governance Statement
This Corporate Governance Statement describes the corporate governance practices of Baby Bunting Group Limited (Baby Bunting
or the Company) for the financial year ended 24 June 2018 and it is current as at that date. This Statement has been approved by
the Board.
This Statement reports the Company’s compliance with the ASX Corporate Governance Council’s Corporate Governance Principles
and Recommendations (3rd edition) (ASX Principles and Recommendations). Copies of a number of the charters and policies referred
to in this Statement are available under the “Governance” section of the Company’s corporate website babybuntingcorporate.com.au.
Principle 1: Lay solid foundations for management and oversight
Responsibilities of the board and management
The Board has adopted a written charter to provide a framework for the effective operation of the Board, which sets out:
• the composition, role and responsibilities of the Board, including that the Board is responsible for approving and monitoring the
Company’s strategy, business performance objectives and financial performance objectives, and overseeing and monitoring the
establishment of systems of risk management and systems of internal controls;
• the roles and responsibilities of the Chairman and the Company Secretary;
• the division of authority between the Board and the CEO and Managing Director and management;
• the ability of Directors to seek independent advice; and
• the process for periodic performance evaluations of the Board, each Director and Board committees.
Director appointments – conducting appropriate checks
Potential new directors are subject to appropriate screening and background checks prior to appointment as a director by the Board.
In addition, the Company provides shareholders with all material information in its possession relevant to a decision on whether or not
to elect or re-elect a Director.
Written appointments
The Company has entered into written agreements with each of its Directors and senior executives setting out the terms of their
appointment. The material terms of all employment, service or consultancy agreements with Directors or other related parties have
been disclosed, to the extent required, in accordance with ASX Listing Rule 3.16.4.
The Company’s Remuneration Report contains additional details on the remuneration of each Non-executive Director and summaries
of the employment contracts of each other member of the Company’s key management personnel.
Role of the Company Secretary
Corey Lewis is the Group Legal Counsel and Company Secretary. As part of his role, he is responsible for day to day operations of
company secretarial matters, including the administration of Board and committee meetings, overseeing the Company’s relationship
with its share registrar and lodgements with the ASX and other regulators. The company secretary is accountable to the Board,
through the Chairman, on all matters to do with the proper functioning of the Board.
Darin Hoekman, the Chief Financial Officer, is also a company secretary of the Company. He has responsibility for the above matters in
the absence of the Group Legal Counsel.
Diversity and inclusion
The Board has adopted a Diversity and Inclusion Policy which sets out Baby Bunting’s commitment to recognising the importance of
diversity and inclusion for its business. This is described on page 20.
2222
BABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED Measurable objectives
The Board has adopted the following measurable objectives in respect of gender diversity and inclusion:
Objectives
Progress
Develop training for Leaders in the Company to ensure we
continue to build capability at the top to drive a culture of
supporting diversity and inclusion goals
Increase the proportion of female managers in Regional or
Area Managers roles
Further integrate diversity and inclusion into our regular
business activities
Maintain contact with Team Members on parental leave
Continuing development during FY2019
An additional female Area Manager was promoted from a Store
Manager role during the year bringing the proportion of female
Area Managers to 33%
Progress made with leaders valuing diversity as demonstrated
through managing workplace flexibility and ensuring a focus on
a diverse team
Promote keeping in touch program for employees on parental
leave, with relevant managers required to regularly keep in
touch with Team Members on parental leave
Achieve and maintain a high return rate for Team Members
returning from parental leave
96% of Team Members who went on parental leave returned to
work at the end of their parental leave
Develop diversity educational framework to provide management
with capability to lead and manage diversity and diverse teams
Continuing development during FY2019
Gender diversity
The table below shows the level of gender diversity within the Company and changes from the prior year:
Number of
females in
category at
24 June 2018
Total
number in
category at
24 June 2018
Number of
females in
category at
25 June 2017
Total
number in
category at
25 June 2017
% of
females
Board (including CEO
and Managing Director)
Senior Executives
Regional, Store and Area Managers
All Team Members
2
2
35
775
5
8
53
971
40%
25%
66%
80%
2
2
35
715
6
7
47
897
In May 2018, the Company lodged its Workforce Profile report with the Workplace Gender Equality Agency (WGEA).
% of
females
33%
29%
74%
80%
2323
ANNUAL REPORT 2018ANNUAL REPORT 2018 Board performance evaluation
The Remuneration and Nomination Committee Charter provides that the Remuneration and Nomination Committee will assist the
Board to assess Board performance, and the performance of Board committees and individual Directors.
During the financial year, the Board assessed its own performance, and considered the performance of the Board committees and
individual Directors. The performance reviews were undertaken by way of questionnaires as well as discussions on how the Board and
each committee’s processes could be improved or modified.
Senior executive performance evaluation
The Remuneration and Nomination Committee Charter provides that the Committee will oversee the processes for the performance
evaluation of the executives reporting to the CEO and Managing Director and review the results of that performance evaluation
process. The Board is responsible for reviewing the performance of the CEO and Managing Director.
In relation to the performance of senior executives, after the end of the reporting period, the Remuneration and Nomination Committee
received reports of the outcome of the executive performance evaluation processes. These were subsequently considered by the
Board. The executive evaluation processes involved, among other things, assessing the performance of executives against their
specific performance objectives as well as the Company’s overall performance on a range of measures (including financial and specific
key performance indicators). For the performance assessment of the CEO and Managing Director, the Board considered the CEO
and Managing Director’s performance for the year having regard to, among other things, his specific performance objectives and the
Company’s performance. The Chairman was responsible for engaging with the CEO and Managing Director in relation to the Board’s
assessment of his performance.
Principle 2: Structure the Board to add value
Nomination – Remuneration and Nomination Committee
The Board has established the Remuneration and Nomination Committee. Its role is to review and make recommendations to the
Board on remuneration policies and practices related to the Directors and senior management and to ensure that the remuneration
policies and practices are consistent with the strategic goals of the Board.
The Committee comprises the following three Non-executive Directors:
Position
Chairman
Members
Director
Melanie Wilson
Ian Cornell
Donna Player
Details of the qualifications and experience of Committee members are set out on page 15. The number of meetings of the Committee
and attendances by members during the reporting period are set out on page 40 of the Directors’ Report.
The Remuneration and Nomination Committee Charter sets out:
• the composition of the Committee, including that the Committee must comprise only Non-executive Directors, a majority of whom
are independent and that the Chairman of the Committee is not to be the Chairman of the Board;
• the Committee’s ability to have access to Company records and employees and the external auditor for the purpose of carrying
out its responsibilities. The Charter also provides that the Committee may seek the advice of independent advisors on any matter
relating to the duties or responsibilities of the Committee; and
• the specific responsibilities of the Committee in respect of the areas of nomination (including in respect of matters going to
the composition of the Board, the Board’s skills matrix and succession planning for the Board) and remuneration (including
responsibilities to review and make recommendations to the Board on executive and Non-executive Director remuneration,
reviewing the Company’s remuneration policies, overseeing employee equity incentive plans and responsibility for reviewing
the Company’s remuneration report).
2424
Corporate Governance StatementBABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED Board skills matrix
The Board, having regard to the current size of the Company and its current strategies, has adopted a skills matrix setting out the mix
of skills and diversity that the Board is looking to achieve in its membership at this time. The Board also has regard to the attributes
and personal qualities of Directors, including the ability of individual Directors to contribute effectively to the functioning of the
Board and a commitment to the Company’s values and its Code of Conduct. For persons being considered for appointment to the
Board, the Board will seek to identify whether the person has a demonstrated or assessed ability to work in a collegiate environment
along with the ability, where necessary, to express a dissenting view objectively and constructively. The Board considers that each
Non-executive Director possesses these attributes.
Given the Company’s size, the Board considers that the Board should be comprised of five to seven Non-executive Directors.
Following the retirement of Stephen Roche at the end of the financial year, the Board has commenced a process to identify candidates
to be considered for appointment to the Board.
Collectively, the Board has those skills and other relevant experience that it considers is appropriate for the effective governance of
the Company. The matrix, and the extent to which those skills are represented on the Board collectively among the four Non-executive
Directors, are set out below:
Number of
Non-executive Directors
Skill or experience
Retail
Experience at a customer/retail business obtained through an executive or leadership role
Logistics
Knowledge and experience in retail logistics and distribution
Information technology
Knowledge and experience in the use and governance of information technology and applications in a retail
environment
Digital disruption
Current experience with digital and online retailing, including a familiarity with changes in technology, applications and
changing consumer habits
Executive leadership
Demonstrated success at CEO or senior executive level in a major business
Commercial and financial acumen
Demonstrated success in sustainably managing the financial performance of a large retail business or commercial
undertaking
People
Experience with managing people and teams, including the ability to appoint and evaluate senior executives, manage
talent development and oversee organisational change
Consumer advocacy
Recent consumer experience in the retail baby goods sector (eg, as a parent or grandparent to small children) with an
ability to bring the perspectives of parents or grandparents to deliberations (being among some of the Company’s most
important stakeholders)
ASX board experience and investor advocacy
Experience as either a non-executive director of an ASX listed company, including an ability to articulate the expected
views of all categories of investors
4
2
4
3
4
4
3
2
4
The Board intends to review the skills matrix annually to ensure that it remains appropriate for the Company, its circumstances and its
strategies.
2525
ANNUAL REPORT 2018ANNUAL REPORT 2018 Independent Directors
At the date of this Statement, the Board comprises five directors. A majority of the Board are independent Non-executive Directors.
Name
Position
Independent Directors
Appointed
Approximate length of service
Ian Cornell
Gary Levin
Chairman, Independent Non-executive Director
1 January 2015
3 years 8 months
Independent Non-executive Director
25 August 2014
4 years
Melanie Wilson
Independent Non-executive Director
15 February 2016
2 year 6 months
Donna Player
Independent Non-executive Director
16 January 2017
1 year 7 months
Executive Director
Matt Spencer
CEO and Managing Director
23 April 2012
6 years 4 months
Stephen Roche, who retired as a director on 24 June 2018, had been appointed on 1 May 2017. He was assessed to be an
independent director.
The Board considers an independent Director to be a Non-executive Director who is free of any interest, position, association or
relationship that might influence, or reasonably be perceived to influence, in a material respect, his or her capacity to bring an
independent judgement to bear on issues before the Board and to act in the best interests of the Company. The materiality of the
interest, position, association or relationship will be assessed to determine whether it might interfere, or might reasonably be seen to
interfere, with the Director’s characterisation as an independent Director.
The Board has assessed each Non-executive Director to be independent. In assessing independence, the Board has had regard to the
factors set out in the ASX Principles and Recommendations.
Each Director has confirmed to the Company that they anticipate being available to perform their duties as a Non-executive Director
or executive Director without constraint from other commitments.
Director induction and training
The Board Charter contemplates that new Directors will be provided with an induction programme to assist them in becoming familiar
with the Company, its managers and its business following their appointment. The induction programme involves, among other things,
meetings with members of the Board and the Executive Team and briefings on the Company’s operations and relevant business matters.
Directors may, with the approval of the Chairman, undertake appropriate professional development opportunities (at the expense of
the Company) to maintain their skills and knowledge needed to perform their role.
The Board and the Executive Team have adopted processes to ensure that the Board is briefed on developments relevant to the
Company and the markets in which it operates in.
Principle 3: Act ethically and responsibly
The Board has approved the adoption by the Company of a formal Code of Conduct which outlines how Baby Bunting expects
its employees to behave and conduct business in the workplace. The Code of Conduct applies to all employees, regardless of
employment status or work location. In addition, the Directors, in the Board Charter, have committed to abiding by the Code of
Conduct as it applies to the Board.
The Code of Conduct is designed to:
• provide a benchmark for ethical and professional behaviour throughout Baby Bunting;
• promote a healthy, respectful and positive workplace and environment for all Team Members;
• ensure that there is compliance with laws, regulations, policies and procedures relevant to Baby Bunting’s operations, including
workplace health and safety, privacy, fair trading and conflicts of interest;
• ensure that there is an appropriate mechanism for Team Members to report conduct which breaches the Code of Conduct; and
• ensure that Team Members are aware of the consequences they face if they breach the Code of Conduct.
The Code of Conduct is available on Baby Bunting’s corporate website (babybuntingcorporate.com.au).
2626
Corporate Governance StatementBABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED Principle 4: Safeguard integrity in financial reporting
Audit and Risk Committee
The Board has established the Audit and Risk Committee. Its role is to assist the Board in fulfilling its responsibilities for corporate
governance and oversight of the Company’s financial and corporate reporting, risk management and compliance structures and
external audit functions.
The Committee comprises the following three Non-executive Directors:
Position
Chairman
Members
Director
Gary Levin
Melanie Wilson
Stephen Roche (retired 24 June 2018)
Ian Cornell (appointed 16 July 2018)
Details of the qualifications and experience of Committee members are set out in the Company’s Annual Report.
The number of meetings of the Committee and attendances by members during the reporting period are set out on page 40 of the
Directors’ Report.
The Audit and Risk Committee Charter sets out:
• the composition of the Committee, including that the Committee must comprise only Non-executive Directors, a majority of whom
are independent and that the Chairman of the Committee is not to be the Chairman of the Board;
• the Committee’s ability to have access to Company records and employees and the external auditor for the purpose of carrying
out its responsibilities. The Charter also provides that the Committee may seek the advice of independent advisors on any matter
relating to the duties or responsibilities of the Committee; and
• the specific responsibilities of the Committee in respect of the areas of risk management and compliance, financial and corporate
reporting and external audit matters. With respect to external audit matters, the Committee has responsibility for developing and
overseeing implementation of the Company’s policy on the engagement of the external auditor to supply non-audit services (noting
that the Committee is required to advise the Board as to whether it is satisfied that the provision of any non-audit services is
compatible with the general standard of independence for auditors).
CEO and CFO Declarations
The Board, before it approved the Company’s financial statements for the half year ended 31 December 2017 and the full year ended
24 June 2018, received from the CEO and Managing Director and the Chief Financial Officer a declaration that, in their opinion, the
financial records of the entity have been properly maintained and that the financial statements comply with the appropriate accounting
standards and give a true and fair view of the financial position and performance of the entity and that the opinion has been formed on
the basis of a sound system of risk management and internal control which is operating effectively in all material respects in relation to
financial reporting risks.
Auditor’s attendance at the AGM
A representative of the Company’s external auditor will attend the Company’s annual general meetings. The Company’s annual general
meeting will be held on 19 November 2018.
Principle 5: Make timely and balanced disclosure
The Company has adopted a Continuous Disclosure Policy. The Continuous Disclosure Policy establishes procedures to ensure the
Company complies with its continuous disclosure obligations under the Corporations Act 2001 and the ASX Listing Rules.
The Company has also adopted a Securities Trading Policy that imposes certain restrictions on officers, employees and related
persons trading in the Company’s securities.
Principle 6: Respect the rights of security holders
The Company’s website
The Company’s corporate website (babybuntingcorporate.com.au) has information about the Company and its governance.
Investor relations programme
The Board’s aim is to ensure that shareholders are provided with sufficient information to assess the performance of the Company and
that they are informed of all major developments affecting the affairs of the Company.
2727
ANNUAL REPORT 2018ANNUAL REPORT 2018 The Company is required by law to communicate to shareholders through the lodgement of all relevant financial and other information
with ASX and, in some instances, mailing information to shareholders. Information (including information released to ASX) is published
on the Company’s website. The Company’s website also contains information about it, including media releases, key policies and the
charters of the Board committees.
In addition, from time to time, the Company conducts ad-hoc briefings with institutional and large private investors, as well as financial
media. In some instances, that can involve site visits to stores or the Company’s Distribution Centre. It is the Company’s policy not to
hold briefings with investors or analysts from 1 June until the release of the full year results in August and from 1 December until the
release of the half year results in February.
Shareholder participation at meetings
The Company’s annual general meeting for the financial year ended 24 June 2018 will be held on 19 November 2018. The Board
intends that general meetings be held in or near either the Melbourne or Sydney central business district. This is to ensure that the
venue is convenient for those shareholders who wish to attend the meeting who travel by public transport.
Shareholders are provided with notice of the meeting (either electronic or by hard copy) in advance of the scheduled meeting time.
Shareholders have an opportunity to ask questions at the meeting. In addition, shareholders can submit questions electronically in
advance of a meeting via the share registrar’s website.
Electronic shareholder communications
The Company encourages shareholders to receive communications from it and its share registrar electronically and provides details
for shareholders to send electronic communications and to have them actioned appropriately.
Principle 7: Recognise and manage risk
Risk – Audit and Risk Committee
The role of the Audit and Risk Committee is to assist the Board in fulfilling its responsibilities for corporate governance and overseeing
the Company’s financial reporting, internal control structure, risk management systems and internal and external audit functions.
This includes considering the quality and reliability of the financial information prepared by the Company, working with the external
auditor on behalf of the Board and reviewing non-audit services provided by the external auditor to confirm they are consistent with
maintaining external audit independence.
The Audit and Risk Committee provides advice to the Board and reports on the status and management of the risks to the Company.
The purpose of the Committee’s risk management process is to assist the Board in relation to risk management policies, procedures
and systems and ensure that risks are identified, assessed and appropriately managed.
Details of the Committee are contained on page 27 above (see “Audit and Risk Committee”) and details of the meetings of the
Committee and the attendance of members are set out on page 40 of the Directors’ Report.
Risk management framework
The Board is responsible for overseeing the establishment of and approving risk management strategies, policies, procedures and
systems of the Company, and is supported in this area by the Audit and Risk Committee. The Company’s management is responsible
for establishing the Company’s risk management framework.
The objectives of the risk management framework include:
• identifying the key risks associated with Baby Bunting’s business;
• raising the profile of risk within Baby Bunting and helping embed a risk-aware culture within Baby Bunting;
• assisting management and the Board to ensure that the Company has a sound risk management framework;
• supporting the declarations by the CEO and Managing Director and the Chief Financial Officer that their opinions on the Company’s
financial statements are based on a “sound system of risk management and internal control which is operating effectively”;
• where appropriate, having controls, policies and procedures to manage certain specific business risks – eg an insurance
programme, regular financial budgeting and reporting, business plans, strategic plans, etc – so as to mitigate the likelihood, or
consequence, of certain specific business risks.
As part of the risk management framework, processes have been introduced to identify, assess, monitor and review the Company’s
key risks and to document and monitor the Company’s other risks. In addition, regular processes have been introduced involving the
senior executives and other Team Members to help identify, assess, monitor and review the Company’s key risks. In connection with
its responsibilities for risk management, the Audit and Risk Committee receives reports from management on the risk management
system, key risks and the related risk treatment plans as well as information on critical events that may arise throughout the year.
The Audit and Risk Committee considers and reviews the risk management framework during the year.
2828
Corporate Governance StatementBABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED Internal audit function
The Company does not have a formalised internal audit function, but has processes for evaluating and continually improving the
effectiveness of risk management and internal financial control processes.
To evaluate and continually improve the effectiveness of the Company’s risk management and internal control processes, the Board
relies on ongoing reporting and discussion of the management of material business risks. These processes are implemented,
overseen and assessed by the management team, the Chief Financial Officer and CEO and Managing Director and the Audit and
Risk Committee.
Economic, environmental and social sustainability risks
Economic sustainability risks are risks to the Company’s ability to continue operating at a particular level of economic production over
the long term. Environmental sustainability risks are risks to the Company’s ability to continue to operate in a manner that does not
compromise the health of the ecosystems in which it operates over the long term. Social sustainability risks are risks to the Company’s
ability to continue operating in a manner that meets accepted social norms and needs over the long term.
Having regard to the definition in the ASX Principles and Recommendations, the Company understands “material exposure” to mean
a real possibility that the risk in question could substantively impact the Company’s ability to create or preserve value for shareholders
over the short, medium or long term. This is a broad and, in some sense, imprecise definition. Nevertheless, the Company considers
that it does not, at this time, have a material exposure to environmental or social sustainability risks. The Company is exposed to a
number of economic and operating risks, details of which are included in the Directors’ Report on pages 37 and 38. These economic
and operating risks could have a material impact on the Company, its strategies and future financial performance. These risks were
identified as part of the Company’s risk management framework (described above). Management is responsible for developing
strategies to manage identified risks.
Economic, environmental and social sustainability risks are likely to change over time. For example, significant increases in the rate
of disruption and innovation in online retail and distribution networks, combined with the entry of significant and well-resourced
competitors in the Australian baby goods market could result in a change to the extent of the Company’s exposure to economic
sustainability risks. Accordingly, the Company will continue to consider potential sustainability risks as part of its risk management
framework and strategy development.
Principle 8: Remunerate fairly and responsibly
Remuneration – Remuneration and Nomination Committee
The Board has established the Remuneration and Nomination Committee with specific responsibility for remuneration matters.
The Committee comprises the following three Non-executive Directors:
Position
Chairman
Members
Director
Melanie Wilson
Ian Cornell
Donna Player
Details of the Committee are contained on page 24 above (see “Nomination – Remuneration and Nomination Committee”) and details
of the meetings of the Committee and attendances by members during the reporting period are set out on page 40 of the Directors’
Report.
Remuneration for Non-executive Directors and Executives
The Company’s Remuneration Report, included as part of its Directors’ Report, describes the Company’s remuneration policies
and practices as well as providing details for each Director and those executives considered to be members of the Company’s key
management personnel.
Securities Trading Policy and hedging
The Company’s Securities Trading Policy provides that persons subject to that policy (including Directors and Executive Team
Members) must not engage in transactions designed to hedge their exposure to the Company’s shares.
2929
ANNUAL REPORT 2018ANNUAL REPORT 2018 Annual
Financial
Report
for the year ended 24 June 2018
Directors’ Report
Remuneration Report
Auditor’s Independence Declaration
Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
31
43
52
53
85
86
3030
30
BABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED Directors’ Report
The Directors of Baby Bunting Group Limited (“the Company” or “Baby Bunting”) submit the financial report of the Company and its
controlled entities (“the consolidated entity”) for the financial year ended 24 June 2018.
1. Principal activities
During the financial period, the principal activity of the Company and its consolidated entities was the operation of Baby Bunting retail
stores and its online store babybunting.com.au.
Baby Bunting is Australia’s largest specialty retailer of baby goods, primarily catering to parents with children from newborn to three
years of age and parents-to-be. The Company’s principal product categories include prams, cots and nursery furniture, car safety,
toys, babywear, feeding, nappies, manchester and associated accessories. Baby Bunting’s core purpose is to support new and
expectant parents in navigating the early years of parenthood.
2. Operating and financial review
2.1 The Company’s business model
The Company’s business model centres around the sale of third party produced and branded baby goods through its store
network and digital channel. The Company also sells private label and exclusive products. Private label products are products sold
by the Company under its own brand (the Company currently markets its private label products under the 4Baby brand name).
Exclusive products are products sourced by the Company for sale on an exclusive basis (so that those products can only be
purchased in Australia from Baby Bunting stores). Historically, exclusive supply arrangements have been arranged with suppliers
in relation to selected products and for varying lengths of time.
Baby Bunting’s business model leverages several core competitive advantages, as summarised in the table below.
Drivers of competitive advantage
Comment
Scale
Baby Bunting is the largest specialty retailer in the Australian baby goods market and the only
specialty baby goods retailer with a multi-state presence. Its industry position and continued
growth has enabled the Company to invest in its people, technology, brand, inventory levels,
prices and customer experience.
Convenient network of stores
and a leading digital channel
The Company currently operates 48 stores across Australia. The Company’s website,
babybunting.com.au, continues to be Australia’s leading specialty baby goods website as
measured by number of visits. The Company is focused on delivering customers the best
possible retail experience across all channels, in store, online or on mobile.
Customer centric team culture
Baby Bunting has a dedicated team of well trained and knowledgeable staff to service
customers’ individual needs.
Consistent retail format
Widest product offering,
in-stock and available
Insights gained from customer preferences are enabling Baby Bunting to tailor its offering to
focus on the steps in the customer journey of first time parents.
Baby Bunting is focused on providing customers with a consistent retail experience across its
network. The Company’s stores in major market catchment range in size from approximately
1,500 to 2,000 square metres and are typically located in either bulky goods centres or at
stand-alone sites.
In regional centres, the Company typically operates a smaller store format of approximately
1,000 to 1,200 square metres, without compromising product range or customer service.
Store formats and layout are largely consistent across the network, with customer-friendly
navigation and clear demarcation of categories. Convenient parking is available directly outside all
stores with parcel pick-up facilities allowing for easy loading of bulky items into customers’ vehicles.
Baby Bunting offers what it believes to be the widest range of products, with over 6,000 products
available. Through its store network and approximately 10,000 square metre Distribution Centre
and through the use of interstate third party logistics, Baby Bunting aims to have its product
range in-stock and available at the time of the customer’s purchase.
3131
ANNUAL REPORT 2018ANNUAL REPORT 2018 Drivers of competitive advantage
Comment
Competitively priced
Baby Bunting’s approach to pricing is centred on offering customers value every visit, every day.
As the customer journey evolves in a digital world, transparency on pricing is very important.
Comprehensive range of
ancillary services
Cost effective marketing
Baby Bunting’s scale enables it to maintain low prices and deliver value to customers with
a national pricing policy backed by a pricing guarantee. In particular, Baby Bunting’s range
of private label products (sold under the brand 4Baby) are sold at entry level prices across a
number of categories.
Baby Bunting also has a “Best Buy” range, with everyday low prices. The Best Buy range
includes our core range of car seats.
Across its entire store network, Baby Bunting provides additional services to its customers,
including “click & collect” services, lay-by, consumer payment services (including Afterpay,
zipMoney and zipPay), car seat fitting, parenting rooms which include baby weigh scales, and an
in-store/online gift registry.
The Company considers that its most successful marketing tool is word of mouth. This is a
critical factor in allowing the Company to limit its marketing expenditure to approximately 2%
of sales.
Baby Bunting’s marketing is further supported by traditional channels (regional TV, print media,
catalogue and radio), online (email, search and digital) as well as social media. Baby Bunting also
participates actively in baby expos.
2.2 Store network
The Company currently operates a network of 48 stores across all Australian states and territories, except Northern Territory and
Tasmania. The location and layout of stores is designed to deliver customers a consistent retail experience across the network.
The Company opened its forty-eighth store at Toowoomba, Queensland in July 2018. Toowoomba is the first of between five and eight
stores the Company plans to open in FY2019.
2.3 People
At the end of the financial year, the Company employed 971 employees throughout Australia with the majority employed at the
Company’s stores, and others located at the Company’s Support Office and Distribution Centre at Dandenong South (Vic).
2.4 Review of the Company’s operations
During the financial year, the Company continued to implement its strategy of growth from existing stores and its online store as well
as growing its network of stores.
Key operational achievements for the Company in FY2018 included:
• finishing the year with a Net Promoter Score at 70;
• opening five new stores, being Munno Para (SA), Albury (NSW), Aspley (Qld), Browns Plains (Qld) and Rutherford (NSW);
• undertaking the second annual employee engagement survey, showing continuing high levels of employee engagement and
alignment;
• continuing to expand the range of private label and exclusive products – together these categories made up 20.9% of sales (23.2%
in the second half). This is a demonstration of the work undertaken by Baby Bunting’s merchandise team in building and enhancing
relationships with key suppliers;
• investing in systems to deliver better information and operational efficiencies in stores, including third party logistics integration; and
• providing customers with flexible payment solutions via Afterpay, zipMoney and zipPay.
2.5 Review of the Company’s financial performance
Summary
• Total sales up 9.0% to $303.1 million, with comparable store sales growth flat for the year;
• Gross profit of $100.9 million up 5.9%. Gross profit as a percentage of sales was 33.3%, a reduction from 34.3%;
• Statutory net profit after tax (NPAT) of $8.7 million, a decrease of 29.1% on the prior financial year;
• Statutory basic earnings per share (EPS) of 6.9 cents; and
• Net debt of $3.5 million (versus net cash of $1.6 million at the end of FY2017).
3232
Directors’ ReportBABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED In relation to the 2018 and 2017 financial years, the results are also shown excluding the non-cash impact of employee equity
incentive expenses. This has been done to more clearly represent the consolidated entity’s underlying earnings given this is a non-
cash item whose primary economic impact is issued capital dilution if and when shares are issued.
On a pro forma basis, the FY2018 financial results were:
• pro forma* earnings before interest, tax, depreciation, and amortisation (EBITDA) of $18.6 million down 18.9% on the prior year;
• pro forma* earnings before interest and tax (EBIT) of $14.3 million, down 24.7% on the prior year;
• pro forma* NPAT of $9.6 million, down 25.9% on the prior year; and
• pro forma* costs of doing business (CODB) were $82.3 million or 27.1% of sales, an increase of 113 basis points on the prior year
(CODB of 26.0% of sales in FY2017).
* Pro forma financial results exclude the impact of employee equity incentive expenses for FY2018 and for FY2017.
Non-IFRS financial measures
The consolidated entity uses certain measures to manage and report on its business that are not recognised under Australian
Accounting Standards. These measures are collectively referred to as “non-IFRS financial measures”. Non-IFRS financial measures
are intended to supplement the measures calculated in accordance with Australian Accounting Standards and are not a substitute for
those measures. Underlying statutory and pro forma results and non-IFRS financial measures are intended to provide shareholders
additional information to enhance their understanding of the performance of the consolidated entity. Non-IFRS financial measures that
are referred to in this report are as follows:
Non-IFRS financial measure
Definition
EBITDA
EBIT
Operating EBIT
Earnings before interest, tax, depreciation and amortisation expenses. Eliminates non-cash
charges for depreciation and amortisation.
Earnings before interest and tax. EBIT eliminates the impact of the consolidated entity’s capital
structure and historical tax position when assessing profitability.
Excludes the effects of interest revenue, finance costs, income tax and other non-operating
costs.
The CEO and Managing Director assesses the performance of the only operating segment
(Australia) based on a measure of Operating EBIT.
Pro forma financial results
Pro forma financial results have been calculated to exclude the non-cash impact of employee equity incentive expenses, given this is
a non-cash item whose primary economic impact is issued capital dilution if and when shares are issued.
The following table reconciles the statutory to pro forma financial results for the year ended 24 June 2018 (noting that this financial
information has not been audited in accordance with Australian Auditing Standards):
Year ended 24 June 2018
Statutory results
Performance rights1
Employee share plan offer2
Tax impact from pro forma adjustments
Underlying statutory results
Pro forma results
Sales
EBITDA
EBIT
303,093
17,549
13,186
–
–
–
303,093
303,093
572
499
–
18,620
18,620
572
499
–
14,257
14,257
NPAT
8,686
572
499
(150)
9,607
9,607
1. Expense reflects the cost amortisation of performance rights (LTI) granted and outstanding in the current reporting period.
2. The Company issued 260,108 shares (546 shares per eligible employee) under its General Employee Share Plan in the current reporting period with no
monetary consideration payable by participating eligible employees who each received approximately $1,000 worth of shares.
3333
ANNUAL REPORT 2018ANNUAL REPORT 2018 The following table reconciles the statutory to pro forma financial results for the year ended 25 June 2017 (noting that this financial
information has not been audited in accordance with Australian Auditing Standards):
Year ended 25 June 2017
Statutory results
Performance rights1
Employee share plan offer2
Tax impact from pro forma adjustments
Underlying statutory results
Pro forma results
Sales
EBITDA
EBIT
NPAT
278,027
22,138
18,110
12,247
–
–
–
278,027
278,027
419
415
–
22,972
22,972
419
415
–
18,944
18,944
419
415
(124)
12,957
12,957
1. Expense reflects the cost amortisation of performance rights (LTI) granted and outstanding in the reporting period.
2. The Company issued 132,368 shares (334 shares per eligible employee) under its General Employee Share Plan in the reporting period with
no monetary consideration payable by participating eligible employees who each received approximately $1,000 worth of shares.
Revenue
The FY2018 sales of $303.1 million represented an increase of 9.0% on FY2017. This sales growth was achieved through:
• growth from the opening of five new stores during FY2018;
• the annualising benefit of six stores opened in FY2017, trading for a full financial year in FY2018.
Comparable store sales growth for the year was flat. Comparable store sales growth is calculated having regard to the growth of
stores that have been open for all of the prior financial year and includes click & collect sales fulfilled from the store. Price deflation
of 3.6% acted to constrain comparable stores sales growth. (Price deflation is a measure of change in average sale price of all items
(excluding clearance and new items)). The price deflation primarily arose due to significant price discounting across the year by
distressed retailers, a large number of whom either ceased trading or have announced that they will shortly exit the market. These
competitors included Babies R Us/Toys R Us with a network of 45 stores across Australia, Baby Bounce (stores in New South Wales
and Queensland), Baby Savings (stores in New South Wales) and Bubs Baby Stores (stores in Queensland and New South Wales).
Sales from private label and exclusive products grew by 100% on the prior year, and were 20.9% of total sales in FY2018, up from
11.4% in FY2017. This growth has come primarily from the support of key suppliers expanding the range of their products sold
exclusively through Baby Bunting. Categories where exclusive product ranges have expanded significantly include prams and
strollers, cots and furniture and car safety (ie car seats).
Baby Bunting continues to expand its Best Buy range and in July 2017 it introduced everyday low pricing for Best Buys, which was
expanded to include the core range of car seats in July 2017.
Online sales continued to see strong annual growth. Total online sales (including click & collect) grew 63% on the prior financial year
and click & collect sales grew 66%. Online sales now represent 9.5% of total sales. Baby Bunting’s online channel and store networks
are complementary. Online sales in a relevant catchment consistently increase following the establishment of a Baby Bunting store in
that area.
Expenses
Pro forma costs of doing business (CODB) expenses as a percentage of sales increased 113 basis points to be 27.1% of sales (versus
26.0% of sales in FY2017). In FY2018, pro forma CODB expenses were $82.3 million, up 13.8% on the prior year pro forma CODB
expenses of $72.3 million. The increase in business expenses was driven by:
• six stores opened in FY2017 trading for a full financial year in FY2018;
• five new stores opened in FY2018; and
• the continued investment in the Support Office team, business processes and business systems to support the expanding store
network and to improve the customer experience both in stores and online. Ensuring the business is appropriately sized for future
growth continues to be a priority.
3434
Directors’ ReportBABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED 2.6 Review of the Company’s financial position
The Company finished the financial year in a net debt position of $3.5 million, down $5.1 million on the prior year net cash position
of $1.6 million. The $5.1 million movement was driven by $2.7 million less of cash generated from operations less the following
significant cash outflows:
• payment of $8.9 million in dividends, relating to the FY2017 final dividend of $5.4 million (paid on 15 September 2017) and the
FY2018 interim dividend of $3.5 million (paid on 16 March 2018); and
• capital expenditure of $6.7 million in FY2018,
less cash inflows of $6.0 million from debt draw-down.
Maintaining appropriate inventory levels to fulfil customer needs continues to be a key focus of the business. In FY2018, inventory
increased by $6.7 million to be $54.6 million at the end of FY2018. The increase was driven by a combination of five new stores
opened in FY2018 plus the Toowoomba store that opened shortly after the year end (each new store requires an inventory investment
of approximately $0.8 million), and the need for further investment in inventory to support the increase in transaction volumes
experienced by the existing store network. Inventory turn-over for FY2018 was 4.0 times per annum, consistent with the prior year at
4.1 times per annum.
Trade and other payables increased from $28.0 million in FY2017 to $31.8 million in FY2018, which has increased in line with
increased inventory holdings and the expanded store network relative to the prior year.
Dividends
The Board has determined to pay a final dividend of 2.5 cents per share fully franked. Together with the interim dividend of 2.8 cents
per share, the total dividend to be paid in respect of FY2018 is 5.3 cents per share, equivalent to approximately 70% of the
Company’s FY2018 pro forma NPAT. The dividend payment date for the final dividend is 14 September 2018.
3. Business strategies and future development
The Company’s strategy is focussed on growing its existing business and continuing to improve its execution and financial performance.
This strategy has the following key elements:
Invest in digital to deliver the best possible retailing experience across channels
Baby Bunting believes that the online experience and store experience for customers is complementary. This understanding has
been confirmed by customer journey mapping undertaken during the year. Baby Bunting’s website is an extension of the in-store
experience. Successful execution requires engaging and retaining the customer through their journey as a parent.
Baby Bunting’s goal is to create a seamless shopping experience across all channels. The website re-platform project commenced in
the year and involves replacing existing Baby Bunting’s e-commerce platform with the Sitecore Experience Commerce™ 9 platform.
This platform was chosen to allow delivery of expanded content and more engaging experiences for customers at every stage of
their journey as parents and parents-to-be. The project will involve creating a new website platform and is expected to be complete
towards the end of the first half of FY2019.
Following the investments made during FY2017 in the Customer Relationship Management (CRM) system, considerable progress has
been made in building and refining processes to provide a single view of the customer and their shopping preferences across the store
network and online.
The Baby Bunting gift registry mobile app (available for iOS and Android devices) was launched during the year. It enables parents
and parents-to-be to create gift registries which can be easily shared with family and friends to provide a convenient way for gifts to
be selected and purchased. Over time, the mobile app will be enhanced to improve the customer experience and provide additional
features and services.
Continually improving online fulfilment is a key part of this strategy. Customers can transact online and have goods delivered directly
or obtain the goods via click & collect. A focus will be on making investments in fulfilment to improve stock availability and delivery
times for customers, recognising that hard goods and bulky items represent a large proportion of goods purchased online.
3535
ANNUAL REPORT 2018ANNUAL REPORT 2018 Investment to grow sales from existing stores
Baby Bunting’s key strategies to grow sales from existing stores and capture greater market share include:
• improving customer experience. In this regard, Baby Bunting aims to be the leading place for parents and parents-to-be to come to
for service, advice and guidance. Customers have the opportunity to give feedback via a Net Promoter Score (NPS) following each
transaction. At the end of the year, NPS was 70.
• performing targeted and effective marketing campaigns. In conjunction with implementing a CRM system, the Company has also
introduced marketing automation software. This has assisted to create new personalised marketing programs for customers, having
regard to customer preferences and product affinities, all leading to improvements in customer experience and engagement with
the brand.
• focus on building brand awareness. During the year, a new role of General Manager of Marketing was created. Sue Dawson was
appointed to that role and commenced in the second half to lead and enhance Baby Bunting’s marketing and branding efforts,
across all channels of the business.
• leveraging the store network to grow the services offered to customers which currently include services like car seat fittings.
The Company’s stores historically take an average of four years to mature and generally have stronger comparable store sales growth
in the first four years of operation. As a result, the maturity of newer stores should support further growth in comparable store sales.
As at the report date, the Company’s store network includes a significant proportion of “immature” stores, with 34% of stores less
than three years old.
The Company’s “click & collect” service is a key feature and click & collect sales grew 66% during the year. Click & collect sales are
fulfilled in store, providing very convenient fulfilment times for customers. During the year, Baby Bunting also implement a “click &
collect” service for purchases made on the Company’s eBay store, enabling customers who purchase Baby Bunting goods on eBay
to collect those goods in a Baby Bunting store.
Growth from new markets
The Company is looking to continue to grow the network of stores to over 80 stores and the Company plans to open four to eight new
stores per year. In July 2018, the Company opened its forty-eighth store in Toowoomba, Queensland. The Company will continue to
focus on new store openings only where its rigorous selection criteria are met.
The Company evaluates potential new store locations on the following criteria:
• local market size;
• proximity to existing stores (cannibalisation is assessed using postcode analysis of sales at existing stores);
• demographic profile;
• site type (assessed by convenience, visibility, parking availability, parcel pick-up and other factors);
• store size and layout (the Company targets a store size of approximately 1,500 to 2,000 square metres, or 1,000 to 1,200 square
metres in regional areas);
• available lease term;
• required upfront capital expenditure;
• relevant market conditions; and
• expected return on investment performance.
Any analysis of potential new store locations also has regard to anticipated changes in future consumer behaviours and retail trends.
While the focus continues to be on large format stores, alternative store formats may be considered in unique and attractive locations.
In the financial year ahead, Baby Bunting will be opening a number of exciting new stores in strategic markets. A store at Chatswood
in Sydney will be opened in the first half, in a strategically significant catchment where large format retail opportunities are limited.
In the first half, Baby Bunting’s first store in Tasmania (location Hobart) will be opened. This will be a milestone store, as it will be the
50th store in the Baby Bunting network.
Towards the end of the first half, Baby Bunting also expects to open a store at Chadstone Shopping Centre in Melbourne, its first in
a major shopping centre. The circa 1,500 square metre store will enable Baby Bunting to showcase a range of brands and products
at Australia’s premier retail destination, while still providing services our customers expect such as a car seat fitting service and
convenient bulky goods collection.
3636
Directors’ ReportBABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED EBITDA margin improvement
In the prior period, the Company improved its pro forma EBITDA margin from 7.9% in FY2016 to 8.3% in FY2017. However, due to
sales and earnings levels being lower than expected for the year (due to market conditions), pro forma EBITDA margin for FY2018 was
6.1%. In the current year, full year gross margin declined to 33.3% from 34.3% in the prior year. This decline was a consequence of
the price deflation experienced during the year. The pro forma cost of doing business increased by 113 basis points in FY2018.
The Company will continue to grow private label and exclusive product offerings. The Company offers private label products in
strollers, change tables, manchester, babywear, portacots, plastics, toys, consumables and highchair categories. While gross profit
margin on private label and exclusive products varies by product, the Company believes that increased sales in these categories will
facilitate further margin improvement in future periods. During the year, private label and exclusive products grew to represent 20.9%
of sales, an increase of 100% over the previous year. This was largely driven by the support of key suppliers expanding the range of
their products sold exclusively through Baby Bunting.
Another element of the Company’s strategy for EBITDA margin improvement is the continued leverage of the investment that the
Company has made in its Support Office and Distribution Centre.
During FY2018, a supply chain review was undertaken, to ensure that Baby Bunting is over the years ahead maximising efficiencies
in all elements of its supply chain and to improve the efficiency and flow of product from source to customer. Marcus Robinson was
appointed as General Manager of Supply Chain to lead this strategy. This strategy will involve pursuing the benefits of the Company’s
investments in its Distribution Centre. Towards the end of the year, a single national outbound freight services provider was appointed.
Previously, these services were provided by a range of providers. Targeted investments will also be made to improve online fulfilment.
The supply chain strategy will also target upstream supplier efficiencies and savings. In addition, looking ahead into the future as our
store network expands in Queensland and New South Wales, establishing a new store fulfilment distribution centre located to service
these stores will be assessed. This is expected to eliminate significant line haul distances from the existing Distribution Centre located
in Dandenong South (Vic).
Investments will continue to be made in the customer contact centre to deliver a better customer experience across all channels.
Other areas of focus include core IT systems replacement work, digital investments and upgrades of selected store elements and
store refurbishments.
Further information on likely developments in the Company’s operations and the expected results of those operations has not been
included in this Directors’ Report. The Directors believe that the disclosure of such information, including certain business strategies,
projects, and prospects would be likely to result in unreasonable prejudice to the Company’s interests.
4. Key risks and uncertainties
The Company’s strategies take into account the expected operating and retail market conditions, together with general economic
conditions, which are inherently uncertain.
The Company has a structured risk management framework and internal control systems in place to manage material risks (see
page 28 for further information on the Company’s risk management framework). Some of the key risks and uncertainties that may
have an effect on the Company’s ability to execute its business strategies and the Company’s future growth prospects and how the
Company manages these risks are set out below.
4.1 Competitive and digital disruption risks
The Company faces competition from specialty retailers as well as department stores, discount department stores and online only
retailers. International online retailers and market places operating in Australia are also sources of current and future competition.
Second hand or buy, swap, sell markets, which facilitate the exchange of used baby goods, are also a source of competition for
the Company. In addition, direct to consumer operators (without a physical store network) compete with the Company in specific
product categories. Competition is based on a variety of factors including price, merchandise range, advertising, store location, store
presentation, product presentation, new store roll-out and customer service. The Company seeks to address competitive risks by
focussing on providing customers with low prices, every day. In addition, the Company is focused on providing an excellent customer
experience – regardless of whether the customer is visiting a Baby Bunting physical store or the online store. Product differentiation
through exclusive access to key brands is a key strategy to mitigate this risk. Elements of this experience include quality advice, high
service levels and a very wide product range.
4.2 External economic risks
Although the purchase of baby goods may be considered less discretionary compared with other consumer goods categories,
Baby Bunting’s performance is sensitive to the current state of, and future changes in, the retail environment and general economic
conditions in Australia. A deterioration in the retail environment may cause consumers to reduce their level of consumption of
discretionary items.
3737
ANNUAL REPORT 2018ANNUAL REPORT 2018 4.3 Property and operational risks
The Company’s new store roll-out strategy depends upon securing properties that meet the Company’s rigorous selection criteria, at
financially viable rents. A failure to secure appropriate sites could impact the Company’s financial performance and position. As the
Company’s stores are leased the ability to continue in a store is subject to negotiation at the end of each lease term. The Company
actively manages its property portfolio to ensure appropriate sites continue to be available for its stores.
The Company’s supply chain is important to ensuring that products are available in-store and online for customers. The key risks
associated with Baby Bunting’s supply chain include operational disruption due to catastrophic events such as fire or flood, delays
in product delivery or complete failure to receive products ordered. Poor supply chain management could adversely affect the
Company’s financial performance and customers’ experience of shopping with Baby Bunting. The Company continues to focus on
logistics initiatives to ensure that this risk is managed appropriately.
An element of the Company’s strategy involves growing its private label and exclusive product offerings. The ability of the Company
to continue to offer exclusive products depends upon the relationships it has with suppliers. Any deterioration of those relationships
could adversely impact the Company’s ability to supply exclusive products or, more generally, to successfully provide customers with
a wide range of products at competitive prices. The Company continues to invest in its merchandising team to continue to ensure that
it is appropriately managing relationships with its suppliers.
4.4 Compliance risks
Baby Bunting is subject to government laws and regulations, including competition and consumer law and trade, taxation and
workplace health and safety laws.
Many of the products sold in Baby Bunting’s stores or online must comply with Australian mandatory product safety standards. In
addition, products Baby Bunting sells must comply with general product safety requirements under Australian law and also meet the
expectations of our consumers. Failure to do so may require the Company to undertake a recall of products or other actions. This may
adversely affect the Company’s reputation and performance and result in significant financial penalties. The Company has procedures
to assess compliance issues of the products that it supplies, as well as procedures to respond to and investigate reports of product
safety incidents that it receives.
During the year, the Australian Competition and Consumer Commission (ACCC) has been investigating a possible contravention of the
Australian Consumer Law arising from the sale of convertible tricycles. These products have been widely sold by specialty baby goods
and toy retailers as well as discount department stores. The Company has withdrawn the products from sale. The Company has co-
operated, and continues to co-operate, with the ACCC’s investigation.
4.5 Workplace and people management risks
Workplace health and safety is a priority at Baby Bunting. Failure to manage health and safety risks could have a negative effect on
the Company’s reputation and performance. The Company has a Safety Management System, which includes a Health, Safety and
Injury Management Policy, with the aim of identifying and assessing workplace health and safety risks as well as educating employees
in stores, at the Support Office and at the Distribution Centre about safe ways of working.
The Company’s future performance depends to a significant degree on its key personnel, and its ability to attract and retain
experienced and high performing personnel. The Company’s remuneration policies and practices seek to ensure that executives and
managers are provided with appropriate incentives and rewards to support their retention. In addition, the Company continues to
make investments in training and development to further expand the skills of the Company’s employees.
4.6 Cyber and technology risks
In common with other e-commerce retailers, the Company faces a range of cyber risks. This is a broad concept and encompasses a
variety of risks that use or impact computer systems and that can result in unauthorised access or disclosure of information held by
the Company, the commission of frauds or thefts, or the disruption of normal business operations.
The Company relies on its IT systems, retail point of sale and inventory management systems, networks and backup systems, and
those of its external service providers, such as communication carriers and data providers, to process transactions (including online
transactions), manage inventory, report financial results and manage its business. A malfunction of IT systems or a cybersecurity
violation, could adversely impact Baby Bunting’s ability to trade and to meet the needs of its customers.
The Company has a continuing focus on IT systems and security, with the aim of ensuring that the IT systems are available to support
the Company’s operations and that steps are being taken to protect against adverse IT and cyber related events. IT infrastructure and
data assets have been migrated to an external data centre and the Company remains focused on constantly improving its ability to
prepare and respond to a cyber attack or other adverse event.
3838
Directors’ ReportBABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED 5. Significant changes in the state of affairs in FY2018
There were no significant changes in the state of affairs of the Group during the financial year.
6. Matters subsequent to the end of the financial year
Apart from the determination to pay a final dividend in respect of the financial year ended 24 June 2018, no matter or circumstance
has arisen since the end of the financial year which has not been dealt with in this Directors’ Report or the Financial Report, and which
has significantly affected, or may significantly affect:
• the Company’s operations in future financial years;
• the results of those operations in future financial years; or
• the Company’s state of affairs in future financial years.
7. Dividends
The following dividends have been paid to shareholders during the financial year:
Dividend
Final dividend in respect of the financial year ended 25 June 2017 (4.3 cents per share fully franked)
Interim dividend in respect of the half year ended 31 December 2017 (2.8 cents per share fully franked)
$’000
5,406
3,527
The Board has determined to pay a final dividend in respect of the financial year ended 24 June 2018 of 2.5 cents per share.
This dividend is franked to 100% at the 30% corporate income tax rate. The record date for this final dividend is 24 August 2018
and the dividend payment date is 14 September 2018. The final dividend of 2.5 cents per share, when combined with the interim
dividend of 2.8 cents per share, represents a payout ratio of approximately 70% of the full year pro forma NPAT.
8. Directors
The following persons were Directors of the Company during the financial period and/or up to the date of this Directors’ Report:
Position
Date appointed
Date retired
Director
Ian Cornell
Chairman (from 21 November 2016)
1 January 2015
Matt Spencer
CEO and Managing Director
23 April 2012*
Gary Levin
Non-executive Director
Melanie Wilson
Non-executive Director
Donna Player
Non-executive Director
25 August 2014
15 February 2016
16 January 2017
–
–
–
–
–
Stephen Roche
Non-executive Director
1 May 2017
24 June 2018
* Matt Spencer joined the Company in February 2012 as CEO. He was appointed a Director on 23 April 2012.
Details of the qualifications, experience and special responsibilities of each current director are set out on page 15 of the
Annual Report.
3939
ANNUAL REPORT 2018ANNUAL REPORT 2018 9. Meetings of Directors and Board Committees
The number of meetings of the Board and each Board Committee held during the period ended 24 June 2018 are set out below.
All directors are invited to attend Board Committee meetings and most Board Committee meetings are attended by all directors.
However, only attendance by directors who are members of the relevant Board Committee is shown in the table below.
Director
Ian Cornell
Matt Spencer
Gary Levin
Melanie Wilson
Donna Player
Stephen Roche1
Meetings of directors
Audit and Risk Committee
Remuneration and
Nomination Committee
Attended
Held
Attended
Held
Attended
Held
12
12
12
12
11
12
12
12
12
12
12
12
–
–
5
5
–
5
–
–
5
5
–
5
4
–
–
4
4
–
4
–
–
4
4
–
Attended = Number of meetings attended by the director.
Held = Number of meetings held during the time the director held office or was a member of the committee during the year.
1 = Stephen Roche retired on 24 June 2018.
10. Directors’ relevant interests in shares
The following table sets out the relevant interests that each director has in the Company’s ordinary shares or other securities as at the
date of this Directors’ Report.
Director
Ian Cornell
Matt Spencer
Gary Levin
Melanie Wilson
Donna Player
Stephen Roche (retired 24 June 2018)
11. Company secretaries
Ordinary
shares
Performance
Rights
900,000
nil
1,387,132
1,981,714
388,000
20,000
16,000
35,000
nil
nil
nil
nil
Corey Lewis is the Group Legal Counsel and Company Secretary. He commenced employment with the Company in February 2016
and was appointed company secretary in March 2016. Before joining Baby Bunting, Corey worked as a corporate lawyer at the
law firm Ashurst. He holds a Bachelor of Laws (Honours) and a Bachelor of Arts. He is also a graduate of the Australian Institute of
Company Directors.
Darin Hoekman, the Company’s Chief Financial Officer, is also a company secretary having been appointed in January 2014. Darin is a
Chartered Accountant and holds a Bachelor of Commerce.
4040
Directors’ ReportBABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED 12. Details of performance rights
The CEO and Managing Director was the only Director eligible to participate in the Company’s long term incentive plan (LTI Plan).
Further details of the LTI Plan are set out on pages 46 to 48 of the Remuneration Report. Each performance right entitles the holder to
receive one fully paid share in the Company, subject to the satisfaction of the applicable performance conditions.
During the financial year, the Company granted 514,000 performance rights under the LTI Plan. In addition, 348,620 performance
rights lapsed in accordance with the rules of the LTI Plan.
All of the performance rights granted during the financial year are subject to the same performance conditions (see pages 46 to 48 of
the Remuneration Report for more details).
Performance rights event
Opening balance (26 June 2017)
Grant of rights under the LTI Plan (20 September 2017)
Grant of rights under the LTI Plan (21 May 2018)
Lapse of rights (28 July 2017)
Closing balance
Number of
performance
rights
Issue price
nil
nil
n/a
5,295,904
214,000
300,000
(348,619)
5,461,285
The Board will determine whether the relevant performance conditions have been satisfied. Any performance rights that have not
vested at the end of the third performance period (which occurs following the release of the Company’s financial results for the
2020 financial year), will lapse.
Since the end of the financial year, the Company has agreed to grant 200,000 performance rights under the LTI Plan to a recently
appointed executive reporting to the CEO and Managing Director. Having regard to these movements, the total number of
performance rights granted and outstanding will be 5,661,285.
13. Details of options
There are no options over shares on issue as at the date of this Directors’ Report and no shares were issued during the year as a result
of the exercise of options.
14. Remuneration Report
The Remuneration Report, which forms part of this Directors’ Report, is presented separately from page 44.
15. Indemnification and insurance of directors and officers and the auditor
Under the Company’s Constitution, to the fullest extent permitted by law, the Company must indemnify every officer of the Company
and its wholly-owned subsidiaries, and may indemnify its auditor against any liability incurred as such an officer or auditor to a person
(other than the Company or a related body corporate).
The Company has entered into a deed of access, indemnity and insurance with each Non-executive Director and the CEO and
Managing Director which confirms each person’s right of access to certain books and records of the Company while they are a
Director and after they cease to be a Director. The deed also requires the Company to provide an indemnity for liability incurred as
an officer of the Company and its subsidiaries, to the maximum extent permitted by law.
The Constitution also allows the Company to enter into and pay premiums on contracts of insurance, insuring any liability incurred by
a current or former Director and officer of the Company. The deed of access, indemnity and insurance requires the Company to use its
best endeavours to maintain an insurance policy, which insures the Director against liability as a Director and officer of the Company
from the date of the deed until the date which is seven years after the Director ceases to hold office as a Director.
During the financial year, the Company paid insurance premiums for a directors’ and officers’ liability insurance contract that
provides cover for the current and former directors, secretaries, executive officers and officers of the Company and its subsidiaries.
The Directors have not included details of the nature of the liabilities covered in this contract or the amount of the premium paid, as
disclosure is prohibited under the terms of the contract.
To the extent permitted by law, the Company has agreed to identify its auditors, Ernst & Young, as part of the terms of its audit
engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made
to indemnify Ernst & Young during or since the financial year.
4141
ANNUAL REPORT 2018ANNUAL REPORT 2018 16. 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. No person has applied to the court under section 237 of the Corporations Act for leave to bring proceedings on
behalf of the Company, or to intervene in any proceedings to which the Company is a party.
17. Environmental regulation
The Company is not involved in activities that have a marked influence on the environment within its area of operation. As such, the
Directors do not consider that the Company’s operations are subject to any particular and significant environmental regulation in
Australia.
18. Non-audit services
The Company may decide to employ its external auditor on assignments additional to its statutory audit duties where the auditor’s
expertise and experience with the Company are important.
Details of the amounts paid or payable to the auditor (Ernst & Young) for audit and assurance ($110,000) and non-audit ($nil) services
provided during the year are set out in the Financial Statements (at Note 27).
As no non-audit services were provided during the year, the Board has not needed to consider whether the provision of non-audit
services was compatible with the general standard of auditor independence for auditors imposed by the Corporations Act.
19. Auditor’s Independence Declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act is attached to this Directors’
Report on page 52.
20. Rounding of amounts
The Company has taken advantage of ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 relating to
the “rounding off” of amounts in the Directors’ Report and Financial Statements. Amounts in these reports have been rounded off in
accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar.
The Directors’ Report is made in accordance with a resolution of Directors.
On behalf of the Directors
Ian Cornell
Chairman
Melbourne: 10 August 2018
4242
Directors’ ReportBABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED
Remuneration Report
Dear shareholders
On behalf of your Board, I am pleased to present Baby Bunting’s 2018 Remuneration Report.
The Company’s remuneration strategy seeks to recognise performance and appropriately reward, incentivise and retain key
employees. The Board aims to achieve this by setting competitive remuneration packages that include a mix of fixed, short term
and long term incentives.
Recognising the responsibility of the disclosed executives and other executives for the Company’s operating and financial
performance, their remuneration continues to be structured to provide (relative to comparable organisations) for a lower level of base
salary combined with a higher proportion of “at-risk” remuneration. The “at-risk” remuneration consists of short term incentives and
performance rights granted under the LTI Plan (described further in the Remuneration Report).
We regularly review the remuneration framework to ensure that it appropriately balances shareholder outcomes, executive
performance and our ability to attract and retain key employees. There were no significant changes to the Company’s remuneration
policies and practices during the year. However this year I am delighted to report that we have continued to strengthen the skills and
the experience of the executive group with the addition of executives in the areas of digital, marketing and loyalty, and supply chain.
These are areas that are critical to delivering our strategy and meeting the challenges of the evolving retail industry.
External market conditions in FY2018 were challenging. Earlier in this Annual Report, the Chairman and the CEO and Managing
Director described the unprecedented industry consolidation that has occurred and the immediate effect this had. The Company’s
financial performance and earnings and profitability for FY2018 were below the targets set by the Board. Consequently, the variable
remuneration of disclosed executives and other executives and Team Members was affected.
In relation to the Company’s short term incentives, while non-financial key performance indicators were achieved, no STI payments
were paid as the year on year pro forma EBIT growth was below the threshold required. This reflects the principle that there must be
a relationship between performance and reward and that no significant benefit is to be paid where the Company’s financial results do
not justify it.
For the Company’s Long Term Incentive Plan (LTI Plan), the conclusion of FY2018 marked the end of the first of the three performance
periods that apply to performance rights granted to participating executives. At the end of the first performance period, 20% of
each participating executive’s performance rights are tested to assess whether the two performance conditions have been satisfied.
Based on the earnings per share achieved for FY2018, the absolute EPS compound annual growth rate hurdle will not be achieved
for the first testing period (although the relevant rights do not lapse and remain available for vesting if the condition is met in future
periods). The Remuneration and Nomination Committee will meet in October 2018 to assess whether the absolute TSR condition has
been satisfied for the first performance period. Further details are contained in the Remuneration Report.
The Company has operated the General Employee Share Plan (GES Plan) since it was first listed in 2015. The GES Plan is part of the
Company’s employee alignment strategy as it provides employees with an opportunity to own a part of Baby Bunting and receive
financial benefits as shareholders. During the year, the Company made its third offer under this plan, providing eligible employees
with $1,000 worth of Baby Bunting shares for no monetary consideration. At the end of the financial year, around 47% of the
Company’s employees were shareholders. The Board intends making grants under the GES Plan in the future to eligible employees to
reward sustainable financial performance.
The Board reviews its remuneration policy annually and it remains confident that the Company’s remuneration policies and practices
are well designed and serve to attract, retain and motivate our Team Members to grow long term shareholder value.
Melanie Wilson
Chairman of the Remuneration and Nomination Committee
4343
ANNUAL REPORT 2018ANNUAL REPORT 2018 The Remuneration Report sets out remuneration information for the Company’s Non-executive Directors and other key management
personnel (disclosed executives) for the year ended 24 June 2018.
The information provided in this Remuneration Report has been audited as required by section 308(3C) of the Corporations Act 2001.
1. Key management personnel
The Company’s key management personnel are its Non-executive Directors and those executives who have been identified as having
the greatest authority for planning, directing and controlling the activities of the Group.
Non-executive Directors
Ian Cornell
Gary Levin
Melanie Wilson
Donna Player
Former Non-executive Directors
Non-executive Chairman
Non-executive Director
Non-executive Director
Non-executive Director
Stephen Roche (retired 24 June 2018)
Non-executive Director
Disclosed Executives
Matt Spencer
Darin Hoekman
CEO and Managing Director
Chief Financial Officer
In the 2017 financial year, Barry Saunders was Non-executive Chairman (retired 21 November 2016) and Tom Cowan was a Non-
executive Director (retired 21 March 2017).
2. Remuneration Governance
Ultimately, the Board is responsible for the Company’s remuneration policy and practices. To assist the Board with this, it has
established the Remuneration and Nomination Committee (Committee). The Committee’s role is to review and make recommendations
to the Board on remuneration policies and practices and to ensure that the remuneration policies and practices are consistent with the
strategic goal of the Board to build and deliver value to shareholders over the long term.
A copy of the Committee’s Charter is available on the Company’s website at babybuntingcorporate.com.au. It sets out further details
of the Committee’s specific responsibilities and functions.
Details of the composition of the Committee and the meetings held during the year are set out on page 40 of the Directors’ Report.
3. Remuneration policy and practices
The Company’s remuneration policy seeks to appropriately reward, incentivise and retain key employees. The remuneration practices
adopted by the Company include the use of fixed and variable remuneration, and short term and long term performance based
indicators.
3.1 Fixed remuneration
Fixed remuneration for employees is determined according to industry standards, relevant laws, labour market conditions and the
profitability of the Company. It consists of base remuneration and superannuation. Base remuneration includes cash salary and any
salary sacrifice items.
The Company provides employer superannuation contributions at Government legislated rates, capped at the relevant contribution
limit unless part of a salary sacrifice election by an employee.
Fixed remuneration is reviewed annually and adjusted where appropriate. There is no guaranteed or automatic entitlement to an
increase in fixed remuneration (other than to comply with any applicable legal requirements).
4444
Remuneration ReportBABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED 3.2 Short term incentives
The Company operates short term incentive plans for eligible employees, including executives and employees in other management or
specialist roles.
Under the Company’s principal short term incentive plans (STI plans), a cash bonus can be paid to an eligible employee, subject to
the achievement of a range of financial and non-financial key performance indicators for the relevant financial year. Participation in,
and payments under, the STI plans for a financial year are at the discretion of the Board. The annual key performance indicators for
participants and related targets are also reviewed annually.
Gateway for short term incentive payments
For participants to become eligible to receive a payment under the STI plans, the Company must achieve certain EBIT growth targets
for the financial year (with the result inclusive of payments under the STI plans). The amount of the payment (if any) received depends
upon the employee satisfactorily achieving previously agreed key performance criteria and the employee’s overall performance for the
year meeting the required standard.
For the executives participating in the STI plan, the size of any potential STI payment is determined having regard to achieving year on
year pro forma EBIT growth. Accordingly:
• if “threshold” year on year pro forma EBIT growth is not achieved, no STI payment is to be made. This reflects the principles that no
significant benefit is to be provided where the Company’s financial results do not justify providing any payment and also that there
must be a relationship between performance and reward;
• if “threshold” year on year pro forma EBIT growth is achieved, the maximum potential STI payment is 20% of the participating
executive’s base remuneration; and
• if year on year pro forma EBIT growth exceeds “threshold” growth, the size of the maximum potential STI payment increases
proportionally and is not limited. This is to encourage and reward participants for extraordinary performance in achieving EBIT growth.
Performance criteria
The size of each participating executive’s actual STI payment is determined by applying financial and non-financial criteria. For the
disclosed executives, the weighting of the performance criteria was:
Disclosed executive
Matt Spencer
Darin Hoekman
Financial
criteria
weighting
Non-financial
criteria
weighting
70%
70%
30%
30%
The non-financial criteria for the disclosed executives (collectively) consisted of:
• employee engagement initiatives and achievement of reductions in lost time injury frequency rates;
• a significant improvement in the “Net Promotor Score” provided throughout the financial year by the Company’s customers;
• enhancement of internal reporting and business processes, including risk management processes; and
• property and supply chain related initiatives.
These performance criteria were selected to provide an incentive to participating executives to achieve specific targets relevant to
the business as well as contributing to the overall financial performance of the Company. There is a large weighting to the Company’s
financial result (70%), reflecting the principle that benefits under the STI Plan are to be provided primarily when the Company has
performed well.
Assessment of whether the performance criteria have been satisfied for participating executives is undertaken by the CEO and
Managing Director with any decision to award a payment approved by the Board. In relation to the CEO and Managing Director, the
Board assesses the relevant performance criteria and approves any STI payment.
4545
ANNUAL REPORT 2018ANNUAL REPORT 2018 STI outcome for the 2018 financial year
For the 2018 financial year, non-financial performance criteria were achieved. However, pro forma EBIT declined 24.7% from the
level achieved in the 2017 financial year. This was below the “threshold” year on year pro form EBIT growth target. Consequently,
the gateway for STI payments was not met and participating executives did not become eligible for an STI payment and no STI
payment was made.
For the disclosed executives, the extent to which the financial criteria and non-financial criteria were achieved and the resulting STI
award for the 2018 financial year was:
Disclosed executive
Matt Spencer
Darin Hoekman
% of
financial
criteria
achieved
% of non-
financial
criteria
achieved
% of
maximum
STI awarded
0%
0%
0%
0%
0%
0%
% of STI
forfeited
100%
100%
3.3 Long Term Incentive Plan
Introduction
The LTI Plan is designed to align the interests of executives and participating employees more closely with the interests of the
Company’s shareholders by providing an opportunity for eligible employees to receive an equity interest in the Company through
the grant of “performance rights”. Upon vesting, each performance right entitles the participant to one fully paid ordinary share in
the Company. Participation in the LTI Plan is by invitation. The Board may determine which executives or other employees are eligible.
In the first three years of its operation, the number of rights to be granted and outstanding will be limited to a maximum of 5% of the
number of the Company’s shares on issue upon completion of the IPO.
Performance conditions and performance periods
The number of rights that vest will be determined by reference to two performance conditions:
• earnings per share (EPS) growth; and
• total shareholder return (TSR) growth.
Half of the rights granted are subject to the EPS growth performance condition (EPS Rights). The other half of the rights granted
are subject to the TSR growth condition (TSR Rights). Both of these conditions are expressed as a compound annual growth rate
(CAGR) percentage.
EPS growth performance condition
The EPS growth performance condition is a measure of the compound annual growth rate in the Company’s EPS measured over the
relevant performance period.
EPS growth will be measured as the annual compound percentage increase in the Company’s EPS from a base level of 8.4 cents
per share. This base level EPS was calculated by dividing the Company’s pro forma NPAT for the financial year ended 26 June 2016
(excluding the expense of the LTI Plan recognised in the Company’s statutory financial statements and any unusual items) by the
number of shares on issue as at 26 June 2016.
TSR growth performance condition
Broadly, TSR is a measure of the increase in the Company’s share price (assuming dividends are reinvested).
The TSR growth performance condition is a measure of the compound annual growth of the Company’s TSR measured over the
relevant performance period with $1.40 (being the price at which shares were issued in the Company’s IPO) used as the base level
(and with no allowance for the “pre-IPO dividend” paid by the Company at the time of the IPO).
4646
Remuneration ReportBABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED In relation to the rights that have previously been granted to the CEO and Managing Director, the Chief Financial Officer and certain
other participating executives, the performance periods and the number of rights that vest if the relevant performance condition is
satisfied are as follows:
EPS Rights
TSR Rights
Performance periods
Three separate performance periods apply to the EPS Rights:
Three separate performance periods apply to the TSR Rights:
• 20% of the EPS Rights will be assessed against EPS growth
measured in the two year period from the end of FY2016 to
the end of FY2018;
• 30% of the EPS Rights will be assessed against EPS growth
measured in the three year period from the end of FY2016 to
the end of FY2019; and
• 50% of the EPS Rights will be assessed against EPS growth
measured in the four year period from the end of FY2016 to
the end of FY2020.
If an EPS Right does not vest at the end of the first and/or
second performance period, it does not lapse but remains
available for vesting at the end of the next applicable
performance period. If an EPS Right has not vested at the end
of the third performance period, it will lapse. There is no further
re-testing after the third performance period.
• 20% of the TSR Rights will be assessed against TSR growth
measured in the period from the Company’s listing on ASX
to a period following the release of the Company’s financial
results for FY2018;
• 30% of the TSR Rights will be assessed against TSR growth
measured in the period from the Company’s listing on ASX
to a period following the release of the Company’s financial
results for FY2019; and
• 50% of the TSR Rights will be assessed against TSR growth
measured in the period from the Company’s listing on ASX
to a period following the release of the Company’s financial
results for FY2020.
If a TSR Right does not vest at the end of the first and/or
second performance period, it does not lapse but remains
available for vesting at the end of the next applicable
performance period. If a TSR Right has not vested at the end
of the third performance period, it will lapse. There is no further
re-testing after the third performance period.
Number of rights to vest
• 15% of the EPS Rights will vest if the minimum EPS growth
hurdle condition of 15% EPS CAGR is achieved over the
relevant performance period;
• 15% of the TSR Rights will vest if the minimum TSR growth
hurdle condition of 15% TSR CAGR is achieved over the
relevant performance period;
• 100% of the EPS Rights will vest if the EPS growth hurdle of
25% EPS CAGR is achieved over the relevant performance
period; and
• 100% of the TSR Rights will vest if the TSR growth hurdle of
25% TSR CAGR is achieved over the relevant performance
period; and
• if the EPS CAGR is within the range of 15% to 25% EPS
• if the TSR CAGR is within the range of 15% to 25% TSR
CAGR, the number of EPS Rights that will vest will be pro-
rated on a straight-line basis.
CAGR, the number of TSR Rights that will vest will be pro-
rated on a straight-line basis.
LTI outcome for the 2018 financial year
For participating executives, up to 20% of the EPS Rights held by them were eligible to vest after the end of FY2018.
The compound annual growth rate in the Company’s EPS measured over the period from the end of the 2016 financial year to the end
of the 2018 financial year was negative 5.1%. On this basis, none of the first tranche of EPS Rights held by participating executives
will vest. These rights do not lapse but will remain available for vesting at the end of the next subsequent performance period.
For participating executives, up to 20% of the TSR Rights held by them are eligible to vest after the end of FY2018.
The compound annual growth rate in the Company’s TSR will be measured in October 2018, having regard to the volume weighted
average sale price on ASX of the Company’s shares (as determined by the Board) in the period from 1 July to 30 September (inclusive)
or such other period as the Board considers appropriate. If any of the TSR Rights vest at that time, shares will be provided to
participating executives.
4747
ANNUAL REPORT 2018ANNUAL REPORT 2018 Additional comment on performance conditions and performance periods
Performance rights were first granted in the 2016 financial year. The first performance period concludes after the end of the 2018
financial year. This presents participants with an opportunity to have a small proportion of their rights vest (ie up to 20% only).
Given its philosophy of favouring a smaller proportion of fixed remuneration (relative to comparable ASX companies) and a large
proportion of “at-risk” remuneration, the Board considers it appropriate that participating executives have the potential to earn a small
part of their LTI benefit in the first period ending after FY2018, especially where EPS CAGR or TSR CAGR of at least 15% has been
achieved over that period.
The LTI Plan also provides that if any rights at the end of the first and/or second performance period have not vested, they do not
lapse but remain available for vesting at the end of the next subsequent performance period. The Board considers this to be in the
interests of shareholders as it ensures participating executives are not penalised for making short term investments that may dampen
near term growth but lead to higher overall growth in the long term. It is important to note as the performance conditions look to
compound annual growth rates, the longer the period for testing, the harder the test. So, if 25% CAGR for TSR or EPS growth is not
achieved in the period to the end of FY2018, then achieving 25% CAGR over a longer period to the end of FY2019 and FY2020 will
be an even more challenging target for participants.
Treatment on cessation of employment
Upon resignation, a participant’s unvested rights will lapse. In addition, in instances where the participant’s employment was
terminated for cause or as a result of unsatisfactory performance, unvested rights will lapse. In other circumstances, a person ceasing
employment may retain unvested rights with vesting to be tested at the end of the relevant performance period. However, in all cases,
the Board has discretion to permit a participant to retain unvested Rights, including a discretion to reduce the number of retained
unvested Rights to reflect the part of the performance period for which the participant was employed. Shareholder approval has been
obtained for the purposes of sections 200B and 200E of the Corporations Act to permit the Company to give a benefit to a participant
who holds a managerial or executive office in these circumstances. This approval was expressed to be for the period up to the 2018
annual general meeting.
Treatment on change of control
Generally, in the event of a change of control of the Company, unvested rights will vest on a pro rata basis having regard to the
proportion of the performance period that has passed and after testing the relevant performance conditions at that time. The Board
has discretion to determine whether a change in control has occurred and the treatment of the rights at that time.
Other conditions
Subject to the ASX Listing Rules (where relevant), a participant may only participate in new issues of shares or other securities if the
right has been exercised in accordance with its terms and shares are issued or transferred and registered in respect of the right on or
before the record date for determining entitlements to the issue. Participants will also be entitled to receive an allocation of additional
shares as an adjustment for bonus issues.
3.4 General Employee Share Plan
The General Employee Share Plan (GES Plan) is part of the Company’s overall remuneration policy to reward Baby Bunting employees,
from time to time. By providing share ownership to employees, Baby Bunting is committed to creating a high performance culture and
aligning employees to the creation of long term value for the Company.
The GES Plan provides for grants of shares to eligible employees of the Company up to a value determined by the Board. At the
end of the financial year, around 47% of the Company’s employees were shareholders of the Company, the vast majority of whom
acquired their shares because of the GES Plan.
During the financial year, the Company made its third offer under this plan and issued 260,108 shares to 477 eligible employees who
each received $1,000 worth of Baby Bunting shares for no monetary consideration.
Shares acquired under the GES Plan are subject to disposal restrictions having regard to applicable Australian tax legislation (currently,
shares granted cannot be dealt with by a participant until the earlier of three years after the date of grant or the day after the day the
participant ceases to be an employee).
The Board intends making grants under the GES Plan in the future to eligible employees to reward sustainable financial performance.
4848
Remuneration ReportBABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED 4. Relationship between remuneration and the Company’s performance
The following table shows key performance indicators for the Company over the last five years.
EBITDA (statutory)
Net profit after tax (statutory)
Net profit after tax (pro forma)
Dividends per share – ordinary (cps)
Dividends per share – special (cps)
Basic earnings per share (cents) (statutory)
Earnings per share (cents) (pro forma)
5. Non-executive Director
2018
$’000
17,549
8,686
9,607
5.3
–
6.9
7.6
2017
$’000
22,138
12,247
12,957
7.2
–
9.7
10.3
2016
$’000
2015
$’000
15,743
11,982
8,334
10,627
6.3
15.0
7.0
8.4
6,040
–
–
–
6.2
–
2014
$’000
8,573
4,064
–
–
–
4.2
–
Remuneration Policy
Under the Company’s Constitution, the Directors decide the total amount paid to all Non-executive Directors as remuneration for their
services as a Director, but the total amount paid to all Non-executive Directors must not exceed in aggregate in any financial year
$1,000,000 (being the amount specified in the Constitution) or any other amount fixed by the Company in general meeting. Currently,
the aggregate fee cap is $1,000,000 (inclusive of superannuation contributions).
Annual Non-executive Directors’ fees (inclusive of superannuation contributions) currently agreed to be paid by the Company are
$120,000 to the Chairman and $65,000 to each of the remaining Non-executive Directors. In addition, chairmen of the two Board
committees each receive $15,000 annually. Other committee members receive $5,000 per annum for their role as a committee
member. Superannuation contributions provided by the Company are included in these amounts.
For the financial year ended 24 June 2018, the fees paid and superannuation contributions to all Non-executive Directors were
approximately $430,000 in aggregate.
Non-executive Directors’ remuneration must not include a commission on, or a percentage of, operating revenue. Non-executive
Directors are not entitled to participate in any of the Company’s employee incentive plans.
4949
ANNUAL REPORT 2018ANNUAL REPORT 2018 6. Details of remuneration for Non-executive Directors and disclosed Executives
Details of the remuneration of the Non-executive Directors and other key management personnel of the Company are set out in the
following tables.
Short term employee benefits
Post-
employment
benefits
Long term
benefits
Share based payments3
Salary &
fees2
$
STI and
other
fees
$
Non-
monetary
benefits
$
Super-
annuation
$
Long
service
leave
$
LTI Plan
rights4
$
Historical
share
options
$
Year
Employee
share plan5
$
TOTAL6
$
Performance
related
%
Non-executive Directors
Ian Cornell
2018 114,155
2017
96,839
Gary Levin
2018
73,086
2017
73,860
Melanie Wilson
2018
77,625
2017
63,225
Donna Player
2018
63,927
2017
27,046
Former Non-executive Directors
Stephen Roche
(retired 24 June 2018)
Barry Saunders
(retired 21 November 2016)
Tom Cowan1
(retired 21 March 2017)
2018
63,926
2017
9,385
2018
–
2017
46,540
2018
–
2017
61,153
Disclosed executives
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
10,845
9,200
6,914
6,140
7,374
6,006
6,073
2,539
6,072
934
–
4,421
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Matt Spencer
2018 475,209
–
10,878
20,047
21,998 158,041
2017 450,538 93,255
5,905
19,615
12,630 115,289
Darin Hoekman
2018 295,658
–
7,500
20,047
9,766
61,909
2017 280,638 60,202
7,500
19,615
3,198
42,273
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
125,000
106,039
80,000
80,000
84,999
69,231
70,000
29,585
69,998
10,769
–
50,961
–
61,153
–
–
–
–
–
–
–
–
–
–
–
686,173
23.0%
697,232
29.9%
999
395,879
15.6%
999
414,425
24.7%
1. Fees payable to Tom Cowan were paid to TDM Asset Management Pty Ltd. Accordingly, Tom was responsible for his own superannuation arrangements.
2. Amount includes the value of annual leave accrued during the financial year and salary sacrifice arrangements.
3. The value of share based payments has been calculated in accordance with applicable accounting standards.
4. There were no LTI plan rights awarded during FY2018. The value of the LTI plan rights included as remuneration in the table is an accounting value and
represents the aggregate of amounts determined for both market based and non-market based performance hurdles.
5. The Company issued 260,108 shares under its General Employee Share Plan in the current reporting period with no monetary consideration payable
by participating eligible employees who each received approximately $1,000 worth of shares.
6. There were no termination benefits paid or payable during the current financial year.
5050
Remuneration ReportBABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED 7. Employment contracts
Each executive has an employment contract specifying, among other things, remuneration arrangements, benefits, notice periods and
other terms and conditions. The contracts provide that participation in the STI and LTI arrangements are at the Board’s discretion.
The employment contracts do not have a fixed term. Employment may be terminated by the executive with notice, or by the Company
with notice or by payment in lieu of notice, or with immediate effect in circumstances including serious or wilful misconduct.
Disclosed executive
Matt Spencer
Darin Hoekman
Termination
– notice by
Executive
Termination – notice
by Company or
payment in lieu
12 months
6 months
12 months
6 months
8. Equity instruments held by key management personnel
The tables below show the number of shares, performance rights and options in the Company that were held during the financial year
by key management personnel, including close members of their family and entities related to them. No amounts remain unpaid in
respect of the ordinary shares at the end of the financial year.
Ordinary shares
Shares held by key management personnel, including close members of their family and entities related to them.
Director
Non-executive Directors
Ian Cornell
Gary Levin
Melanie Wilson
Donna Player
Former Non-executive Director
Stephen Roche (retired 24 June 2018)
Disclosed executives
Matt Spencer
Darin Hoekman
Balance at
start of
the year
Net
change
Balance at
the end
of year
900,000
388,000
20,000
–
–
–
–
16,000
35,000
1,387,132
337,000
–
–
–
900,000
388,000
20,000
16,000
35,000
1,387,132
337,000
Performance rights
Neither, Matt Spencer and Darin Hoekman were granted performance rights during the year.
Disclosed executive
Matt Spencer
Darin Hoekman
Value of rights
granted during
the year
Number of rights
granted as
compensation
Number of rights
held at end of year
(all unvested)
–
–
–
–
1,981,714
739,962
Details of the performance conditions and performance periods for those rights are set out in section 3.3 (Long term incentive plan) above.
Options
There are no options over shares on issue as at the date of this Directors’ Report.
9. Loans to key management personnel
There are no loans to key management personnel.
This is the end of the Remuneration Report.
5151
ANNUAL REPORT 2018ANNUAL REPORT 2018 Auditor’s Independence Declaration
8 Exhibit ion St reet
Melbourne VIC 3000 Aust ralia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Audit or’s Independence Declarat ion t o t he Direct ors of Baby Bunt ing
Group Limit ed
As lead auditor for the audit of Baby Bunting Group Limited for the financial year ended 24 June 2018, I
declare to t he best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporat ions Act 2001 in
relation to t he audit ; and
b) no contraventions of any applicable code of professional conduct in relation to the audit .
This declaration is in respect of Baby Bunting Group Limited and the entities it controlled during the
financial year.
Ernst & Young
Glenn Carmody
Part ner
10 August 2018
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
5252
BABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED ANNUAL REPORT 2018
Consolidated
Financial
Statements
Baby Bunting Group Limited
for the year ended 24 June 2018
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Income tax
Notes to the Consolidated Financial Statements
Note 1: Reporting entity
Note 2: Significant accounting policies
Note 3: Revenue
Note 4: Profit for the year
Note 5:
Note 6: Other receivables
Note 7:
Inventory
Note 8: Other assets
Note 9: Plant and equipment
Note 10: Intangible assets and goodwill
Note 11: Deferred tax assets
Note 12: Payables
Note 13: Loans and borrowings
54
55
56
57
58
58
58
66
67
68
68
68
68
69
70
70
72
72
Note 14: Provisions
Note 15: Issued capital
Note 16: Dividends
Note 17: Retained earnings
Note 18: Segment information
Note 19: Share based payments
Note 20: Related party transactions
Note 21: Commitments for expenditure
Note 22: Financial instruments
– Fair values and risk management
Note 23: Notes to the statement of cash flows
Note 24: Parent entity disclosures
Note 25: Group entities
Note 26: Earnings per share
Note 27: Remuneration of auditors
Note 28: Contingent liabilities
Note 29: Subsequent events
Directors’ Declaration
Independent Auditor’s Report
72
73
73
74
74
75
77
78
78
81
82
82
83
84
84
84
85
86
53
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
for the year ended 24 June 2018
Revenue
Cost of sales
Gross profit
Other revenue
Store expenses
Marketing expenses
Warehousing expenses
Administrative expenses
Finance costs
Profit before tax
Income tax expense
Profit after tax
Other comprehensive income for the year
Total comprehensive income for the year
Profit for the year attributable to:
Equity holders of Baby Bunting Group Limited
Earnings per share
From continuing operations
Basic (cents per share)
Diluted (cents per share)
Notes to the consolidated financial statements are included in pages 58 to 84.
Note
2018
$’000
2017
$’000
3
3
4
4
4
4
5
303,093
278,027
(202,203)
(182,735)
100,890
95,292
17
17
(64,788)
(56,762)
(5,606)
(4,319)
(4,919)
(3,748)
(12,990)
(11,753)
(651)
(432)
12,553
17,695
(3,867)
(5,448)
8,686
12,247
–
8,686
12,247
8,686
12,247
26(a)
26(b)
6.9
6.9
9.7
9.6
5454
BABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED
Consolidated Statement of Financial Position
as at 24 June 2018
Note
24 June 2018
$’000
25 June 2017
$’000
23(b)
6
7
8
9
10
10
11
12
14
13
14
15
19
17
7,233
11,091
54,584
1,277
6,425
9,559
47,882
1,169
74,185
65,035
21,030
20,006
2,554
1,224
44,180
44,180
3,640
3,434
71,404
68,844
145,589
133,879
31,845
28,031
914
3,256
851
2,755
36,015
31,637
10,770
3,987
14,757
50,772
94,817
4,800
3,314
8,114
39,751
94,128
85,292
84,816
912
8,613
451
8,861
94,817
94,128
Current Assets
Cash and cash equivalents
Other receivables
Inventories
Other assets
Total Current Assets
Non-Current Assets
Plant and equipment
Intangibles
Goodwill
Deferred tax assets
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and other payables
Current tax liabilities
Provisions
Total Current Liabilities
Non-Current Liabilities
Borrowings
Provisions
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Issued capital
Share based payments reserve
Retained earnings
Total Equity
Notes to the consolidated financial statements are included in pages 58 to 84.
5555
ANNUAL REPORT 2018ANNUAL REPORT 2018
Consolidated Statement of Changes in Equity
for the year ended 24 June 2018
Balance at 26 June 2016
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Issue of shares (Note 15,19)
Dividends (Note 16)
Share based payment (Note 19)
Balance at 25 June 2017
Balance at 25 June 2017
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Issue of shares (Note 15,19)
Dividends (Note 16)
Share based payment (Note 19)
Balance at 24 June 2018
Notes to the consolidated financial statements are included in pages 58 to 84.
Issued
Capital
$’000
84,420
Share Based
Payments
Reserve
$’000
132
–
–
–
396
–
–
84,816
–
–
–
–
–
319
451
84,816
451
–
–
–
476
–
–
85,292
–
–
–
–
–
461
912
Retained
Earnings
$’000
8,172
12,247
–
Total
Equity
$’000
92,724
12,247
–
12,247
12,247
–
396
(11,558)
(11,558)
–
319
8,861
94,128
8,861
8,686
–
8,686
–
94,128
8,686
–
8,686
476
(8,933)
(8,933)
–
461
8,613
94,818
5656
BABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED
Consolidated Statement of Cash Flows
for the year ended 24 June 2018
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Income tax paid
Interest received
Finance costs paid
Note
2018
$’000
2017
$’000
332,203
304,090
(317,154)
(285,017)
(4,010)
(5,513)
17
(567)
17
(406)
Net cash from operating activities
23(a)
10,489
13,171
Cash flows from investing activities
Payments for plant and equipment and intangibles
9,10
(6,718)
(7,352)
Proceeds on sale of plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Transaction costs for issue of shares
Dividends paid
Proceeds from/(Repayment of) borrowings
Net cash (used in)/provided by financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of the financial year
–
1
(6,718)
(7,351)
15,19
–
–
–
–
16
(8,933)
(11,558)
5,970
4,800
(2,963)
(6,758)
808
6,425
7,233
(938)
7,363
6,425
Cash and cash equivalents at end of the financial year
23(b)
Notes to the consolidated financial statements are included in pages 58 to 84.
5757
ANNUAL REPORT 2018ANNUAL REPORT 2018
Notes to the Consolidated Financial Statements
for the year ended 24 June 2018
Note 1: Reporting entity
Baby Bunting Group Limited (the Company) is a company domiciled in Australia. The address of the Company’s registered office and
its principal place of business is 955 Taylors Road, Dandenong South, Victoria 3175, Australia.
The consolidated financial statements of the Company as at and for the year ended 24 June 2018 comprise the Company and
its subsidiaries (together referred to as the “consolidated entity”). The consolidated entity is primarily involved in the retailing of
baby merchandise.
The Company was admitted to the official list of the Australian Securities Exchange (ASX) on 14 October 2015 under the
ASX code ‘BBN’.
Note 2: Significant accounting policies
The following significant accounting policies have been adopted in the preparation and presentation of the financial report.
a. Statement of compliance
These financial statements are general purpose financial statements which have been prepared in accordance with the Corporations
Act 2001, Accounting Standards and Interpretations, and comply with other requirements of the law.
The financial statements comprise the consolidated financial statements of the consolidated entity. Accounting Standards include
Australian Accounting Standards. Compliance with Australian Accounting Standards ensures that the financial statements and notes
of the Company and the consolidated entity comply with International Financial Reporting Standards (IFRS). For the purposes of
preparing the Consolidated Financial Statements, the Company is a for-profit entity.
The financial statements were authorised for issue by the directors on 10 August 2018.
b. Basis of Preparation
The consolidated financial statements have been prepared on the basis of historical cost, except for certain properties and financial
instruments that are measured at revalued amounts or fair values at the end of each reporting period, as explained in the accounting
policies below. All amounts are presented in Australian dollars, unless otherwise noted.
Historical cost is generally based on the fair values of the consideration given in exchange for goods and services. Fair value is
the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique.
In estimating the fair value of an asset or a liability, the consolidated entity takes into account the characteristics of the asset or
liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date.
Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis,
except for share-based payment transactions that are within the scope of AASB 2, leasing transactions that are within the scope of
AASB 117, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in AASB 102
‘Inventories’ or value in use in AASB 136 ‘Impairment of Assets’.
The Company is a company of the kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191, and in accordance with that Class Order amounts in the financial report are rounded off to the nearest thousand dollars,
unless otherwise indicated.
c. Critical accounting judgements and key sources of estimation uncertainty
In the application of the consolidated entity’s accounting policies, the directors are required to make judgments, estimates and
assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may
differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods
if the revision affects both current and future periods.
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the
reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within
the next financial year.
5858
BABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED Determination of inventory provision for shrinkage, obsolescence and mark-down
Management’s judgement is applied in determining the inventory provision for shrinkage, obsolescence and mark-down.
Estimates of shrinkage trends based on historical observations have been applied against inventory held at year end and where
the estimated selling price of inventory is lower than the cost to sell, the difference is recognised in the provision.
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating units to which goodwill
has been allocated. The value in use calculation requires the directors to estimate the future cash flows expected to arise from the
cash generating unit and a suitable discount rate in order to calculate present value. The key assumptions used in the value in use
calculations are as follows:
Forecasted sales growth of existing stores: 3.0% for comparable store growth over a 5 year period
Terminal sales growth rate: 3.0%
Forecasted gross margin: Average gross margins achieved in the period immediately before the forecast period
Forecasted retail store expenses: Forecast increases correlate to the consumer price indices. The values assigned to the key
assumption are consistent with external sources of information
Post-tax weighted average cost of capital: 11.8%
Baby Bunting Group Limited as a whole is considered its own cash generating unit. The recoverable amount of the consolidated
entity’s goodwill currently exceeds its carrying value. Reasonably possible changes that may occur to the assumptions used would
not result in impairment.
d. Basis of Consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities (including structured entities)
controlled by the Company and its subsidiaries. Control is achieved when the Company:
• has power over the investee;
• is exposed, or has rights, to variable returns from its involvement with the investee; and
• has the ability to use its power to affect its returns.
Baby Bunting Group Limited as a whole is considered its own cash generating unit. The Company reassesses whether or not it
controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed
above.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses
control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in
the consolidated statement of profit or loss and other comprehensive income from the date the Company gains control until the date
when the Company ceases to control the subsidiary.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the
consolidated entity’s accounting policies. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to
transactions between members of the consolidated entity are eliminated in full on consolidation.
e. Business combinations
Acquisitions of subsidiaries and businesses are accounted for using the purchase method. The consideration of the business
combination is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed,
and equity instruments issued by the consolidated entity in exchange for control of the business acquired. Acquisition related costs
are recognised in the statement of profit or loss and other comprehensive income as incurred. The acquiree’s identifiable assets,
liabilities and contingent liabilities that meet the conditions for recognition under AASB 3 ‘Business Combinations’ are recognised at
their fair values at the acquisition date.
Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the consideration of the
business combination over the consolidated entity’s interest in the net fair value of the identifiable assets, liabilities and contingent
liabilities recognised. If, after reassessment, the consolidated entity’s interest in the net fair value of the acquiree’s identifiable assets,
liabilities and contingent liabilities exceeds the consideration of the business combination, the excess is recognised immediately in the
statement of profit or loss and other comprehensive income.
5959
ANNUAL REPORT 2018ANNUAL REPORT 2018 Note 2: Significant accounting policies (continued)
f. Income tax
Income tax expense represents the sum of the tax currently payable and deferred tax.
The Company is part of a tax consolidated group under Australian taxation law, of which the Company is the head entity. As a result
the Company is subject to income tax through its membership of the tax consolidated group. Tax expense/income, deferred tax
liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated group are recognised
in the separate financial statements of the members of the tax-consolidated group using the ‘separate taxpayer within group’
approach by reference to the carrying amounts in the separate financial statements of each entity and the tax values applying under
tax consolidation. Current tax liabilities and assets and deferred tax assets arising from unused tax losses and relevant tax credits of
the members of the tax-consolidated group (if any) are recognised by the Company (as head entity in the tax-consolidated group).
Nature of tax funding arrangements and tax sharing agreements
Entities within the tax-consolidated group have entered into a tax funding arrangement and a tax sharing agreement with the head entity.
Under the terms of the tax funding arrangement, Baby Bunting Group Limited and the other entity in the tax-consolidated group have
agreed to pay a tax equivalent payment to or from the head entity, based on the current tax liability or current tax asset of the entity.
The tax sharing agreement entered into between members of the tax-consolidated group provides for the determination of the
allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations or if an entity
should leave the tax-consolidated group. The effect of the tax sharing agreement is that each member’s liability for tax payable by
the tax consolidated group is limited to the amount payable to the head entity under the tax funding arrangement.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the
consolidated statement of profit or loss and other comprehensive income because of items of income or expense that are taxable or
deductible in other years and items that are never taxable or deductible. The consolidated entity’s current tax is calculated using tax
rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated
financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally
recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences
to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be
utilised. Such 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.
In addition, deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill.
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates,
and interests in joint ventures, except where the consolidated entity is able to control the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary
differences associated with such investments and interests are only recognised to the extent that it is probable that there will be
sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the
foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no
longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or
the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the
consolidated entity expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax liabilities and assets are offset when there is a legally enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation authority and the consolidated entity intends to settle its
current tax assets and liabilities on a net basis.
6060
Notes to the Consolidated Financial Statementsfor the year ended 24 June 2018BABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED Current and deferred tax for the year
Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive
income or directly in equity, in which case the current and deferred tax are also recognised in other comprehensive income or directly
in equity, respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is
included in the accounting for the business combination.
g. Inventories
Inventories are stated at the lower of cost and net realisable value. Costs are assigned to inventory on hand by the method
most appropriate to each particular class of inventory, with the majority being valued on a weighted average cost formula basis.
Net realisable value represents the estimated selling price less all estimated costs of completion and costs necessary to make
the sale. Volume rebates and supplier promotional rebates are recognised as a reduction in the cost of inventory and are recorded
as a reduction in the cost of goods sold when the inventory is sold. Supplier promotional and marketing rebates that arise upon sale
of inventory have been brought to account as a direct deduction in costs of goods sold.
h. Plant and Equipment
Each class of plant and equipment is carried at cost less, where applicable, any accumulated depreciation. The depreciable amount
of all fixed assets, are depreciated over their estimated useful lives. The estimated useful lives and depreciation methods are
reviewed at the end of each annual reporting period, with the effect of any changes recognised on a prospective basis. Leasehold
improvements are depreciated over the period of the lease or estimated useful life, whichever is the shorter, using the straight-line
method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual reporting period,
with the effect of any changes recognised on a prospective basis. The useful life for each class of asset is:
Class of fixed asset
Useful Life
Plant and equipment
3 – 10 years
Leasehold improvements
5 – 10 years
i. Intangibles – computer software
Intangible assets with finite lives that are acquired separately or internally generated are carried at cost less accumulated
amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives.
The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes
in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are
carried at cost less accumulated impairment losses.
j. Employee benefits
A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave and long service leave when
it is probable that settlement will be required and they are capable of being measured reliably.
Liabilities recognised in respect of employee benefits expected to be settled within 12 months, are measured at their nominal values
using the remuneration rate expected to apply at the time of settlement. Liabilities recognised in respect of employee benefits which
are not expected to be settled within 12 months are measured as the present value of the estimated future cash outflows to be made
by the Company in respect of services provided by employees up to reporting date.
k. Cash and cash equivalents
Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily
convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
l. Revenue
Revenue from the sale of goods is recognised at the point of sale. All revenue is stated net of the amount of goods and services
tax (GST), returns and discounts. Revenue from layby sales is recognised at the point of sale. This approach is taken as experience
indicates that most layby sales are consummated, the customer has paid a significant deposit and the goods are on hand, identified
and ready for delivery to the customer. The balance owing on outstanding layby sales is recognised as a receivable at balance date.
Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.
6161
ANNUAL REPORT 2018ANNUAL REPORT 2018 Note 2: Significant accounting policies (continued)
m. Goods and services tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:
• where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition
of an asset or as part of an item of expense; or
• for receivables and payables which are recognised inclusive of GST.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables.
Cash flows are included in the statement of cash flows on a gross basis. The GST component of cash flows arising from investing
and financing activities which is recoverable from, or payable to, the taxation authority is classified as operating cash flows.
n. Leases
Leases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards incidental to
ownership of the leased asset to the lessee. All other leases are classified as operating leases.
Operating lease payments are recognised as an expense on a straight-line basis over the lease term. Contingent rentals arising under
operating leases are recognised as an expense in the period in which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability.
The aggregate benefits of incentives are recognised as a reduction of rental expense on a straight-line basis, except where another
systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
o. Goodwill
Goodwill acquired in a business combination is initially measured at its cost, being the excess of the cost of the business combination
over the consolidated entity’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised at the
date of the acquisition.
Goodwill is subsequently measured at its cost less any accumulated impairment losses. For the purpose of impairment testing,
goodwill is allocated to each of the consolidated entity’s cash-generating units, or groups of cash-generating units, expected to
benefit from the synergies of the business combination. Cash-generating units or groups of cash-generating units to which goodwill
has been allocated are tested for impairment annually, or more frequently if events or changes in circumstances indicate that goodwill
might be impaired.
If the recoverable amount of the cash-generating unit (or groups of cash-generating units) is less than the carrying amount of the
cash-generating unit (or groups of cash-generating units), the impairment loss is allocated first to reduce the carrying amount of any
goodwill allocated to the cash-generating unit (or groups of cash-generating units) and then to the other assets of the cash generating
units pro-rata on the basis of the carrying amount of each asset in the cash-generating unit (or groups of cash-generating units).
An impairment loss recognised for goodwill is recognised immediately in the statement of profit or loss and other comprehensive
income and is not reversed in a subsequent period.
p. Financial assets
Financial assets are classified as follows depending on the nature and purpose of the financial assets and are determined at the time
of initial recognition.
Loans and receivables
Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are
classified as ‘loans and receivables’. Loans and receivables are measured at amortised cost using the effective interest method less
impairment. Interest is recognised by applying the effective interest rate.
Investments in subsidiaries
Investments in subsidiaries are measured at cost less impairment.
6262
Notes to the Consolidated Financial Statementsfor the year ended 24 June 2018BABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED q. Trade payables
Trade payables and other accounts payable are recognised when the Company becomes obliged to make future payments resulting
from the purchase of goods and services.
r. Provisions
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable
that the Company 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 end of
the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using
the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect
of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable
is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured
reliably.
Warranties
Provisions for the expected cost of warranty obligations under applicable consumer law are recognised at the date of sale of the
relevant products, at the directors’ best estimate of the expenditure required to settle the Group’s obligation.
s. Financial liabilities
Financial liabilities are classified as either financial liabilities at fair value through profit and loss (FVTPL) or ‘other financial liabilities’.
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is designated as at FVTPL.
A financial liability is classified as held for trading if:
• it has been acquired principally for the purpose of repurchasing it in the near term; or
• on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent
actual pattern of short-term profit-taking; or
• it is a derivative that is not designated and effective as a hedging instrument.
A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if:
• such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
• the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance
is evaluated on a fair value basis, in accordance with the Company’s documented risk management or investment strategy, and
information about the grouping is provided internally on that basis; or
• it forms part of a contract containing one or more embedded derivatives, and AASB 139 ‘Financial Instruments: Recognition and
Measurement’ permits the entire combined contract (asset or liability) to be designated as at FVTPL.
Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in profit or loss.
The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability and is included in the ‘other
gains and losses’ line item in the statement of profit or loss and other comprehensive income.
Other financial liabilities
Other financial liabilities, including borrowings and trade and other payables, are initially measured at fair value, net of transaction costs.
Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense
recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense
over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the
expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
6363
ANNUAL REPORT 2018ANNUAL REPORT 2018 Note 2: Significant accounting policies (continued)
Derecognition of financial liabilities
The consolidated entity derecognises financial liabilities when, and only when, the consolidated entity’s obligations are discharged,
cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid
and payable is recognised in profit or loss.
t. Borrowing costs
Borrowing costs are recognised as expenses in the period in which they are incurred.
u. Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised
cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the statement of
profit or loss and other comprehensive income over the period of the borrowings using the effective interest rate.
v. Share-based payment arrangements
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity
instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-based transactions are set
out in Note 19.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the
vesting period, based on the Group’s estimate of equity instruments that will eventually vest, with a corresponding increase in equity.
At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest. The impact
of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised
estimate, with a corresponding adjustment to the equity-settled employee benefits reserve.
w. Comparative amounts
The comparative figures are for the period 27 June 2016 to 25 June 2017. Where appropriate, comparative information has been
reformatted to allow comparison with current year information.
x. New and amended Standards and Interpretations adopted
The Group has applied for the first time certain amendments to the standards, which are effective for annual periods beginning on or
after 1 January 2017. The Group has not early adopted any standards, interpretations or amendments that have been issued but not
yet effective.
The nature and the impact of each amendment is described below:
Amendments to AASB 107 – Statement of Cash Flows: Disclosure Initiatives
This amendment requires entities to provide disclosure of changes in their liabilities from financing activities, including both changes
arising from cash flows and non-cash changes. All changes in financial liabilities arising from financing activities during the year relate
to the borrowings as shown in the Consolidated Statement of Cash Flows.
Other new and amended Standards and Interpretations effective for the current reporting period did not have any financial impact on
the current reporting period or the prior comparative reporting period.
6464
Notes to the Consolidated Financial Statementsfor the year ended 24 June 2018BABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED y. Standards and Interpretations in issue not yet adopted
At the date of authorisation of the financial statements, the Standards and Interpretations listed below which may be relevant to the
consolidated entity were in issue but not yet effective.
Standard/Interpretation
Effective for annual
reporting periods
beginning on or after
Expected to be
initially applied in the
financial year ending
AASB 9 ‘Financial Instruments’, and the relevant amending standards
1 January 2018
AASB 15 ‘Revenue from Contracts with Customers’ and the relevant
amending standards
AASB 16 ‘Leases’
AASB 2016-5 ‘Amendments to Australian Accounting Standards
– Classification and Measurement of Share-based Payment Transactions’
1 January 2018
1 January 2019
1 January 2018
Interpretation 22 ‘Foreign Currency Transactions and Advance Consideration’
1 January 2018
Interpretation 23 ‘Uncertainty over Income Tax Treatments
1 January 2019
June 2019
June 2019
June 2020
June 2019
June 2019
June 2020
The impact of AASB 15, AASB 9 and AASB 16 is discussed below. The Group is currently assessing the impact of the application of
the other revised new standards/interpretations. Based on an initial assessment, the Group does not anticipate a material impact to
the financial position or performance of the Group.
AASB 9 Financial Instruments – Effective date: 1 January 2018 (Application date: 1 July 2018)
AASB 9 replaces AASB 139 Financial Instruments: Recognition and Measurement.
AASB 9 includes a single approach for the classification and measurement of financial assets, based on cash flow characteristics and
the business model used for the management of the financial instruments. It introduces the expected credit loss model for impairment
of financial assets which replaces the incurred loss model used in AASB 139. The standard also amends the rules on hedge
accounting to align the accounting treatment with the risk management practices of the Group.
The Group is currently assessing the impact of the application of the new standard. Based on an initial assessment, the Group does
not anticipate a material impact to the financial position or performance of the Group.
AASB 15 Revenue from Contracts with Customers – Effective date: 1 January 2018 (Application date: 1 July 2018)
AASB 15 replaces all existing revenue requirements in Australian Accounting Standards (AASB 111 Construction Contracts, AASB
118 Revenue, AASB Interpretation 13 Customer Loyalty Programmes, AASB Interpretation 15 Agreements for the Construction of
Real Estate, AASB Interpretation 18 Transfers of Assets from Customers and AASB Interpretation 131 Revenue – Barter Transactions
Involving Advertising Services) and applies to all revenue arising from contracts with customers, unless the contracts are in the scope
of other standards, such as AASB 117 Leases (or AASB 16 Leases, once applied).
The core principle of AASB 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers
in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. An
entity recognises revenue in accordance with the core principle by applying the following steps:
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation.
6565
ANNUAL REPORT 2018ANNUAL REPORT 2018 Note 2: Significant accounting policies (continued)
The Group is currently finalising its assessment to determine the impact of adopting AASB 15. The assessment performed to date has
identified key areas of the business that may have potential risk of impact and may require a greater level of work effort to quantify the
financial impact of AASB 15. This includes identifying changes to accounting policies, reporting requirements, business processes and
associated internal controls with the objective of quantifying the expected first time adoption impacts as well as supporting ongoing
compliance with the new accounting requirements.
As a result of the assessment performed to date, the Group is focusing on the Layby sales revenue recognition and is continuing to
complete a detailed impact assessment. The ongoing detailed impact assessment will further establish the transition approach and to
ensure readiness to quantify any impacts of AASB 15 in the 30 December 2018 interim financial statements.
AASB 16 Leases – Effective date: 1 January 2019 (Application date: 1 July 2019)
AASB 16 replaces existing lease requirements in Australian Accounting Standards (AASB 117 Leases, Interpretation 4 Determining
whether an Arrangement contains a Leases, SIC – 15 Operating Leases – Incentives, SIC – 27 Evaluating the Substance of
Transactions Involving the Legal Form of a Lease).
AASB 16 requires lessees to account for all leases under a single on-balance sheet model in a similar way to finance leases under
AASB 117. The standard includes two recognition exemptions for lessees – leases of ’low-value’ assets (eg, personal computers) and
short-term leases (ie, leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will recognise a
liability to make lease payments (ie, the lease liability) and an asset representing the right to use the underlying asset during the lease
term (ie, the right-of-use asset).
Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-
of-use asset. Lessees will be required to re-measure the lease liability upon the occurrence of certain events (eg, a change in the
lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The
lessee will generally recognise the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset.
The Group is currently continuing to assess the impact of the change in standard which it expects to be material. The new standard is
expected to result in an increase in assets and liabilities, change in the timing in which lease expenses are recognised, a classification
shift in earnings categories from operating expense to depreciation and interest expense, and an increase in gearing levels.
Note 3: Revenue
An analysis of the consolidated entity’s revenue for the year, is as follows:
Revenue from sale of goods
Other revenue
Interest revenue
Profit on sale of equipment
Total other revenue
Total revenue
2018
$’000
2017
$’000
303,093
278,027
17
–
17
17
–
17
303,110
278,044
6666
Notes to the Consolidated Financial Statementsfor the year ended 24 June 2018BABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED Note 4: Profit for the year
Profit before income tax expense includes the following expenses:
Interest and finance charges paid/payable
Depreciation and amortisation
Rental expenses relating to operating leases:
Minimum lease payments
Employee benefits expense
2018
$’000
651
4,362
2017
$’000
432
4,028
20,452
46,015
17,409
40,874
Depreciation and amortisation
Depreciation and amortisation is disclosed in the Consolidated Statement of Profit or Loss and Other Comprehensive Income under
“Store expenses”, “Warehousing expenses” and “Administrative expenses” as detailed below:
For the year ended 25 June 2017
Store expenses
Warehousing expenses
Administrative expenses
Total
For the year ended 24 June 2018
Store expenses
Warehousing expenses
Administrative expenses
Total
Depreciation
and
amortisation
$’000
Excluding
depreciation
and
amortisation
$’000
As reported
$’000
(56,762)
3,452
(53,310)
(3,748)
(11,753)
183
393
(3,565)
(11,360)
(72,263)
4,028
(68,235)
Depreciation
and
amortisation
$’000
Excluding
depreciation
and
amortisation
$’000
As reported
$’000
(64,788)
3,732
(61,056)
(4,319)
(12,990)
176
454
(4,143)
(12,536)
(82,097)
4,362
(77,735)
6767
ANNUAL REPORT 2018ANNUAL REPORT 2018 Note 5: Income tax
Current tax in respect of the current year
Current tax in respect of the prior year
Deferred tax
Total tax expense
2018
$’000
4,163
(91)
(205)
2017
$’000
5,521
–
(73)
3,867
5,448
The prima facie income tax expense on pre-tax accounting profit from operations reconciles to the income tax (expense)/benefit in the
financial statements as follows:
Profit before tax from continuing operations
Income tax expense calculated at 30% (2018: 30%)
Non-deductible expenditure
Income tax in respect of the prior year
Income tax expense recognised in profit or loss
12,553
17,695
(3,766)
(5,308)
(192)
91
(140)
–
(3,867)
(5,448)
The tax rate used for 2018 and 2017 in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate
entities on taxable profits under Australian tax law.
Note 6: Other receivables
Current
Layby receivables
Other receivables
7,762
3,329
11,091
7,448
2,111
9,559
The average layby period is 3 months. No interest is charged on layby accounts. There are no customers who represent more than 5%
of the total balance of receivables. There are no material receivables past due date.
Note 7: Inventory
Finished goods
Less: Provision for shrinkage, obsolescence and mark-down
55,155
48,536
(571)
(654)
54,584
47,882
The cost of inventories recognised as an expense during the current reporting period in respect of continuing operations was
$202.203 million (2017: $182.735 million).
Note 8: Other assets
Prepayments
1,277
1,169
6868
Notes to the Consolidated Financial Statementsfor the year ended 24 June 2018BABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED Note 9: Plant and equipment
Cost
Balance at 26 June 2016
Additions
Disposals
Transfers
Balance at 25 June 2017
Accumulated depreciation
Balance at 26 June 2016
Depreciation
Disposals
Transfers
Balance at 25 June 2017
Carrying amount as at 25 June 2017
Cost
Balance at 25 June 2017
Additions
Disposals
Transfers
Balance at 24 June 2018
Accumulated depreciation
Balance at 25 June 2017
Depreciation
Disposals
Transfers
Balance at 24 June 2018
Carrying amount as at 24 June 2018
Leasehold
improvements
$’000
Plant and
equipment
$’000
Total
$’000
4,661
1,801
–
–
25,031
29,692
4,915
6,716
(2)
–
(2)
–
6,462
29,944
36,406
(1,596)
(11,091)
(12,687)
(612)
(3,101)
(3,714)
–
–
–
–
–
–
(2,208)
(14,192)
(16,400)
4,254
15,752
20,006
Leasehold
improvements
$’000
Plant and
equipment
$’000
Total
$’000
6,462
787
–
–
29,944
36,406
4,200
4,987
–
–
–
–
7,249
34,144
41,393
(2,208)
(14,192)
(16,400)
(663)
(3,300)
(3,963)
–
–
–
–
–
–
(2,871)
(17,492)
(20,363)
4,378
16,652
21,030
6969
ANNUAL REPORT 2018ANNUAL REPORT 2018 Note 10: Intangible assets and goodwill
Cost
Balance at 26 June 2016
Additions
Transfers
Balance at 25 June 2017
Amortisation and impairment losses
Balance at 26 June 2016
Amortisation
Transfers
Balance at 25 June 2017
Carrying amount as at 25 June 2017
Cost
Balance at 25 June 2017
Additions
Transfers
Balance at 24 June 2018
Amortisation and impairment losses
Balance at 25 June 2017
Amortisation
Transfers
Balance at 24 June 2018
Carrying amount as at 24 June 2018
Refer to Note 2 for detail on the inputs used in the impairment calculation of goodwill.
Note 11: Deferred tax assets
Deferred tax balances are presented in the consolidated statement of financial position as follows:
Deferred tax assets
Deferred tax liability
7070
Goodwill
$’000
Computer
Software
$’000
44,180
1,361
–
–
636
–
44,180
1,997
–
–
–
–
44,180
Goodwill
$’000
44,180
–
–
(458)
(315)
–
(773)
1,224
Computer
Software
$’000
1,997
1,731
–
44,180
3,728
–
–
–
–
44,180
(773)
(401)
–
(1,174)
2,554
2018
$’000
3,640
–
2017
$’000
3,437
(3)
3,640
3,434
Notes to the Consolidated Financial Statementsfor the year ended 24 June 2018BABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED 2017 – Consolidated
Employee benefits
Non-deductible
accruals
Non-assessable
layby gross profit
Inventories
Gift vouchers
Operating lease
provision
Interest rate swap
IPO transaction
costs – listing
IPO transaction costs –
issuance of new shares
Total
2018 – Consolidated
Employee benefits
Non-deductible
accruals
Non-assessable layby
gross profit
Inventories
Gift vouchers
Operating lease
provision
Interest rate swap
IPO transaction costs
– listing
IPO transaction costs –
issuance of new shares
Total
Opening
balance
($’000)
Recognised
in profit
or loss
($’000)
Recognised
in other
comprehensive
income
($’000)
Recognised
directly
in equity
($’000)
Reclassified
from equity
to profit
or loss
($’000)
Acquisitions/
disposals
($’000)
Other
($’000)
Closing
balance
($’000)
893
374
(120)
502
204
928
–
337
316
3,434
Closing
balance
($’000)
1,068
361
(112)
478
304
1,106
–
224
211
3,640
758
267
(161)
476
299
851
–
450
421
3,361
135
107
41
26
(95)
77
–
(113)
(105)
73
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Opening
balance
($’000)
Recognised
in profit
or loss
($’000)
Recognised
in other
comprehensive
income
($’000)
Recognised
directly
in equity
($’000)
Reclassified
from equity
to profit
or loss
($’000)
Acquisitions/
disposals
($’000)
Other
($’000)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
893
374
(120)
502
204
928
–
337
316
3,434
175
(13)
8
(24)
100
178
–
(113)
(105)
206
–
–
–
–
–
–
–
–
–
–
7171
ANNUAL REPORT 2018ANNUAL REPORT 2018 Note 12: Payables
Current
Trade payables
Gift voucher payables
Sundry payables and accruals
Note 13: Loans and borrowings
Non-current – Secured
Bank Loan
2018
$’000
2017
$’000
25,807
22,333
1,014
5,024
682
5,016
31,845
28,031
2018
$’000
2017
$’000
10,770
4,800
The ongoing funding requirements of the consolidated entity are provided by the National Australia Bank (“NAB”). The secured multi
option facility matures on 31 July 2020. Security consists of a Deed of Charge over the assets of Baby Bunting Pty Ltd. The Company
is a guarantor to the facility.
The total facility limit at balance date was $36,000,000, consisting of $30,000,000 Corporate Market Loan (“CML”) facility and
$6,000,000 bank guarantee facility. The CML facility can be drawn to the lesser of $30,000,000 or 2.00 times the last 12 months
historical rolling EBITDA. Interest on the facility is charged at a variable rate.
The consolidated entity was in compliance with the facility agreement at 24 June 2018. The current facility does not require the
consolidated entity to amortise borrowings.
Note 14: Provisions
Current
Employee benefits
Operating lease provision
Non-current
Employee benefits
Operating lease provision
2018
$’000
3,206
50
3,256
353
3,634
3,987
2017
$’000
2,636
119
2,755
341
2,973
3,314
The operating lease provision reflects the recognition of rental expenses and lease incentives on a straight-line basis over the
lease term.
7272
Notes to the Consolidated Financial Statementsfor the year ended 24 June 2018BABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED Note 15: Issued capital
Fully paid ordinary shares
Balance at beginning of the year
Issue of shares:
– Employee Gift Offer
Balance at end of the year
24 June 2018
25 June 2017
No.
$’000
No.
$’000
125,720,488
84,816 125,588,120
84,420
260,108
476
132,368
396
125,980,596
85,292 125,720,488
84,816
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
Note 16: Dividends
Recognised amounts
Final 2017 dividend
Interim 2018 dividend
2018
2017
$
per ordinary
share
0.043
0.028
$ per
ordinary
share
0.063
0.029
$’000
5,406
3,527
$’000
7,912
3,646
On 11 August 2017, the Directors determined to pay a fully franked final dividend of 4.3 cents per share to the holders of fully
paid ordinary shares in respect of the financial year ended 25 June 2017. The dividend was subsequently paid to shareholders on
15 September 2017 totalling $5.406 million.
On 16 February 2018, the Directors determined to pay an interim fully franked dividend of 2.8 cents per share to the holders of fully
paid ordinary shares in respect of the half-year ended 31 December 2017. The dividend was subsequently paid to shareholders on
16 March 2018 totalling $3.527 million.
On 10 August 2018, the Directors determined to pay a fully franked final dividend of 2.5 cents per share to the holders of fully paid
ordinary shares in respect of the financial year ended 24 June 2018, to be paid to shareholders on 14 September 2018. The dividend
has not been included as a liability in these consolidated financial statements. The record date for determining entitlements to the
dividend is 24 August 2018. The total estimated dividend to be paid is $3.150 million.
Adjusted franking account balance
Company
2018
$’000
5,970
2017
$’000
5,786
7373
ANNUAL REPORT 2018ANNUAL REPORT 2018 Note 17: Retained earnings
Retained earnings
Balance at beginning of year
Profit attributable to owners of the Company
Payment of dividends
Balance at end of year
Note 18: Segment information
2018
$’000
8,861
8,685
2017
$’000
8,172
12,247
(8,933)
(11,558)
8,613
8,861
Management has determined the operating segments based on the reports reviewed by the CEO and Managing Director (the chief
operating decision maker as defined under AASB 8) that are used to make strategic and operating decisions. The CEO and Managing
Director considers the business primarily from a geographic perspective. On this basis management has identified one reportable
segment, Australia. The consolidated entity does not operate in any other geographic segment.
The following is an analysis of the consolidated entity’s revenue and results from continuing operations by reportable segment:
Revenue
Profit before tax
Total segment assets
Additions to plant and equipment and intangibles
Depreciation and amortisation
Total non-current assets1
Total segment liabilities
Australia
Total
2018
$’000
2017
$’000
2018
$’000
2017
$’000
303,093
278,027
303,093
278,027
12,553
17,695
12,553
17,695
145,589
133,879
145,589
133,879
6,718
4,362
67,765
50,772
7,352
4,028
65,410
39,751
6,718
4,362
67,765
50,772
7,352
4,028
65,410
39,751
1. Non-current assets exclude financial instruments, deferred tax assets and deferred tax liabilities.
Revenue reported above represents revenue generated from external customers. There were no inter-segment sales in the current
reporting period (2017: nil).
The accounting policies of the reportable segment are the same as the consolidated entity’s accounting policies described in
Note 2. The CEO and Managing Director assesses the performance of the operating segment based on a measure of Operating EBIT.
This measure basis excludes the effects of interest revenue, finance costs, income tax, change in fair value of interest rate swap,
other non-operating costs and associated indirect tax costs.
7474
Notes to the Consolidated Financial Statementsfor the year ended 24 June 2018BABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED Segment assets and liabilities
The amounts provided to the CEO and Managing Director with respect to total assets and liabilities are measured in a manner
consistent with that of the financial statements. Reportable segments’ assets and liabilities are reconciled to total assets as follows:
Segment assets
Total assets as per the balance sheet
Segment liabilities
Total liabilities as per the balance sheet
Note 19: Share based payments
Share based payments reserve
Balance at beginning of year
Historical share options – expense (Note 19(c))
Historical share options – exercised
Performance rights – expense (Note 19(a))
Balance at end of year
24 June 2018
$’000
25 June 2017
$’000
145,589
133,879
145,589
133,879
50,772
50,772
39,751
39,751
2018
$’000
2017
$’000
451
132
–
–
461
912
–
–
319
451
The total share based payment expense recorded in the Consolidated Statement of Profit or Loss and Other Comprehensive Income
is $0.572 million (2017: $0.419 million).
7575
ANNUAL REPORT 2018ANNUAL REPORT 2018 Note 19: Share based payments (continued)
a. Performance rights
The consolidated entity has previously established a Long Term Incentive Plan (LTI Plan) involving the grant of performance rights.
Upon vesting, each right entitles the participant to one fully paid ordinary share in the Company. No dividends or voting rights
are attached to performance rights prior to vesting. The number of rights in a grant that vest will be determined by reference to
two performance conditions. Half of the rights granted are subject to an earnings per share (EPS) growth performance condition
(EPS Rights). The other half of the rights granted are subject to a total shareholder return (TSR) growth performance condition
(TSR Rights).
Fair value of performance rights granted during the year
The weighted average fair value of the performance rights TSR component granted during the reporting period under the LTI Plan
is $0.34 (2017: $1.26). The fair value of the TSR component of performance rights is determined at grant date using a Monte-Carlo
simulation. For the non-market component (EPS CAGR), the fair value is determined with reference to the share price of ordinary
shares at grant date.
Performance rights series
Grant date
2016 – Series 1 (TSR CAGR)
14 October 2015
2016 – Series 1 (EPS CAGR)
14 October 2015
2016 – Series 2 (TSR CAGR)
2016 – Series 2 (EPS CAGR)
10 June 2016
10 June 2016
2017 – Series 1 (TSR CAGR)
24 November 2016
2017 – Series 1 (EPS CAGR)
24 November 2016
2018 – Series 1 (TSR CAGR)
20 September 2017
2018 – Series 1 (EPS CAGR)
20 September 2017
2018 – Series 2 (TSR CAGR)
2018 – Series 2 (EPS CAGR)
21 May 2018
21 May 2018
Grant date
fair value
Exercise
price
Expiry date
$0.12
$1.40
$1.03
$2.45
$1.26
$2.65
$0.54
$1.72
$0.30
$1.45
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
1. These performance rights vest and are automatically exercised at the end of the relevant service and performance period, subject to meeting the
relevant performance condition. The Board will determine whether the relevant performance conditions have been satisfied. Any performance rights
that have not vested at the end of the third performance period (which occurs following the release of the Company’s financial results for the 2020
financial year), will lapse.
Grant date share price
Exercise price
Expected volatility
Expected life
Dividend yield
Risk-free interest rate (p.a.)
2017 – Series 1
TSR CAGR
2018 – Series 1
TSR CAGR
2018 – Series 2
TSR CAGR
$2.65
nil
25%
$1.72
Nil
39%
$1.45
Nil
45%
1.6, 2.6, 3.6 years
1.8, 2.8 years
1.1, 2.1 years
4.50%
1.60%
4.50%
2.15%
4.50%
2.05%
7676
Notes to the Consolidated Financial Statementsfor the year ended 24 June 2018BABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED
a. Performance rights
Movements in performance rights during the year
The consolidated entity recorded a share based payments expense for performance rights of $0.461 million (2017: $0.319 million)
disclosed in the Consolidated Statement of Profit or Loss and Other Comprehensive Income under “Administrative expenses”.
The following reconciles the performance rights outstanding at the beginning and end of the year:
Balance at beginning of year
2,647,950
2,647,954
2,811,259
2,811,264
June 2018
June 2017
TSR
Number
of rights
EPS
Number
of rights
TSR
Number
of rights
EPS
Number
of rights
Granted during the year
Forfeited during the year
Exercised during the year
Lapsed during the year
Balance at end of year
Exercisable at end of year
257,000
257,000
–
–
–
–
–
–
–
–
–
–
(174,309)
(174,310)
(163,309)
(163,310)
2,730,641
2,730,644
2,647,950
2,647,954
–
–
–
–
b. General Employee Share Plan (“GESP”)
The consolidated entity has previously established the GESP which is intended to be part of the consolidated entity’s overall
remuneration policy to reward Baby Bunting employees, from time to time. The GESP provides for grants of Shares to eligible
employees of the consolidated entity up to a value determined by the Board.
During the reporting period, the Board issued a total of 260,108 shares (2017: 132,368 shares) in the Employee Gift Offer with no
monetary consideration payable by participating eligible employees. Shares issued are subject to a disposal restriction in accordance
with current Australian tax legislation. The fair value of $0.476 million (2017: $0.396 million) was fully expensed at the time of granting,
as there are no performance or service conditions.
Note 20: Related party transactions
The immediate parent and ultimate controlling party of the consolidated entity is Baby Bunting Group Limited (incorporated
in Australia).
Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated
on consolidation and are not disclosed in this note. Details of transactions between the consolidated entity and other related parties
are disclosed below.
a. Loans to and from key management personnel and Directors
As at the end of the current reporting period (2017: nil), no loans were outstanding to or from key management personnel or Directors
of the consolidated entity.
b. Key management personnel compensation
The aggregate compensation made to Directors and KMP of the Company and the consolidated entity is set out below:
Short-term employment benefits
Post-employment benefits
Other long-term benefits
Termination benefits
Share-based payments
7777
2018
$
2017
$
1,181,965
1,276,536
77,372
31,763
–
68,470
15,828
–
220,949
158,561
1,512,049
1,519,395
ANNUAL REPORT 2018ANNUAL REPORT 2018 Note 21: Commitments for expenditure
Operating lease commitments
Non-cancellable operating leases contracted for but not capitalised in the financial statements:
Not later than one year
Later than one year and not later than five years
Later than five years
2018
$’000
18,817
56,761
21,999
97,577
2017
$’000
16,763
51,145
24,157
92,065
The consolidated entity enters into operating leases for its retail outlets and related equipment such as forklifts.
Capital commitments
The consolidated entity has capital commitments totalling nil (2017: nil).
Note 22: Financial instruments – Fair values and risk management
The consolidated entity’s activities expose it to a variety of financial risks, including market risk (foreign currency and interest rate risk),
liquidity risk and credit risk.
The consolidated entity does not enter into or trade financial instruments, including derivative financial instruments, for speculative
purposes. There have been no changes to the consolidated entity’s exposure to financial risks or the manner in which it manages and
measures these risks from the previous period.
The consolidated entity holds the following financial assets and liabilities at reporting date:
Financial assets
Cash and cash equivalents
Other receivables
Financial liabilities
Trade and other payables
Borrowings
a. Market risk
i. Foreign exchange risk management
2018
$’000
2017
$’000
7,233
11,091
18,324
31,845
10,770
42,615
6,425
9,559
15,984
28,031
4,800
32,831
The majority of the consolidated entity’s operations are transacted in the functional currency of the country of operation and are
therefore not significantly exposed to foreign currency risk. Less than 10% of goods sourced by the consolidated entity are purchased
directly in a foreign currency. However, the consolidated entity’s Australian-based suppliers have exposure to foreign currency, most
notably the USD, providing the consolidated entity with a secondary currency exposure.
A decrease in the exchange rate of AUD relative to the USD could result in increased costs of goods imported. Consequently, the
consolidated entity is exposed to movements in the AUD/USD exchange rate should suppliers pass through to the consolidated entity
movements in cost of goods attributed to foreign exchange.
The consolidated entity has historically elected to pass on changes to the cost of goods from foreign exchange movements without
adversely impacting sales or gross profit margin.
7878
Notes to the Consolidated Financial Statementsfor the year ended 24 June 2018BABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED ii. Cash flow and fair value interest rate risk
The consolidated entity is exposed to interest rate risk as it borrows funds at floating interest rates. Any increase in interest rates will
impact the consolidated entity’s costs of servicing these borrowings, which may adversely impact its financial position.
iii. Summarised sensitivity analysis
The following table summarises the sensitivity of the consolidated entity’s financial assets and financial liabilities to interest rate risk.
The consolidated entity is using a sensitivity of 50 basis points as management considers this to be reasonable having regard to
historic movements in interest rates. A positive number represents an increase in profit and a negative number a decrease in profit.
At 25 June 2017
Financial liabilities
Borrowings – CML Facility
Total increase/(decrease)
At 25 June 2018
Financial liabilities
Borrowings – CML Facility
Total increase/(decrease)
Interest rate risk
-50bps
+50 bps
Profit
$’000
Profit
$’000
24
24
(24)
(24)
Interest rate risk
-50bps
+50 bps
Profit
$’000
Profit
$’000
54
54
(54)
(54)
Carrying
amount
$’000
4,800
Carrying
amount
$’000
10,770
b. Liquidity risk
Ultimate responsibility for liquidity risk management rests with the Board, who assess the consolidated entity’s short, medium and
long term funding and liquidity management requirements. The consolidated entity manages liquidity risk by maintaining adequate
reserves, banking facilities and reserve borrowing facilities and by continuously monitoring forecast and actual cash flows.
Financing arrangements
The consolidated entity has access to the following undrawn borrowing facilities at the end of the reporting period:
CML Facility
Bank Guarantee Facility
Total Facility
2018
2017
Limit
$’000
Utilised
$’000
30,000
10,770
6,000
3,766
36,000
14,536
Limit
$’000
30,000
6,000
36,000
Utilised
$’000
4,800
3,668
8,468
7979
ANNUAL REPORT 2018ANNUAL REPORT 2018 Note 22: Financial instruments – Fair values and risk management (continued)
Maturities of financial assets and financial liabilities
The following tables detail the consolidated entity’s remaining contractual maturity for its financial assets and liabilities. The tables
have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the consolidated
entity can be required to pay. The table includes both principal and estimated interest cash flows. Cash flows for financial assets and
liabilities without fixed amount or timing are based on the conditions existing at the reporting date.
Maturity
Less than
6 months
$’000
6 – 12
months
Between
1 and 2
years
Between
2 and 5
years
Over
5 years
–
–
–
–
–
–
–
–
–
–
4,800
4,800
–
–
–
–
–
–
Maturity
–
–
–
–
–
–
Weighted
average
effective
interest rate
%
0.17%
–
–
Total
6,425
9,559
15,984
28,031
4,800
3.40%
32,831
Less than
6 months
$’000
6 – 12
months
Between
1 and 2
years
Between
2 and 5
years
Over
5 years
Total
Weighted
average
effective
interest rate
%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
10,770
10,770
–
–
–
–
–
–
7,233
0.21%
11,091
18,324
31,845
10,770
42,615
–
–
3.44%
At 25 June 2017
Financial assets
Cash and cash equivalents
Other receivables
Financial liabilities
Trade and other payables
28,031
Borrowings – CML Facility
–
28,031
At 24 June 2018
Financial assets
Cash and cash equivalents
Other receivables
Financial liabilities
Trade and other payables
31,847
Borrowings – CML Facility
–
31,847
6,425
9,559
15,984
7,233
11,091
18,324
c. Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the consolidated
entity. The consolidated entity has endeavoured to minimise its credit risk by dealing with creditworthy counterparties and use of
counterparty account based credit limits which are regularly reviewed against historical spending patterns for appropriateness.
The consolidated entity does not have any significant credit risk exposure to any single counterparty or any group of counterparties
having similar characteristics. The carrying amount of financial assets recorded in the financial statements, net of any allowance for
impairment, represents the consolidated entity’s maximum exposure to credit risk.
d. Fair value of financial instruments
The carrying amount of financial assets and financial liabilities recorded in the financial statements approximate their fair values.
8080
Notes to the Consolidated Financial Statementsfor the year ended 24 June 2018BABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED Note 23: Notes to the statement of cash flows
a. Reconciliation of profit/(loss) for the year to net cash flows from ordinary activities
Profit after income tax
Non-cash expenses and other adjustments:
Depreciation and amortisation
Share based payments
Changes in assets and liabilities:
Decrease/(Increase) in other receivables
Decrease/(Increase) in prepayments
Decrease/(Increase) in inventories
Decrease/(Increase) in tax assets
Increase/(Decrease) in trade and other payables
Increase/(Decrease) in provisions
Increase/(Decrease) in income tax liability
Increase/(Decrease) in other financial liabilities
Increase/(Decrease) in operating lease provision
2018
$
2017
$
8,686
12,247
4,362
938
4,028
715
(1,533)
(1,424)
(107)
(398)
(6,702)
(6,839)
(205)
3,815
580
63
–
592
(73)
4,203
450
7
–
255
Net cash provided by operating activities
10,489
13,171
b. Reconciliation of cash and cash equivalents
For the purposes of the statement cash flows, cash at the end of the financial year as shown in the statement of cash flows is
reconciled to the related items in the statement of financial position as follows:
Cash on hand
Cash at bank
2018
$’000
66
7,167
7,233
2017
$’000
60
6,365
6,425
8181
ANNUAL REPORT 2018ANNUAL REPORT 2018 Note 24: Parent entity disclosures
As at, and throughout, the financial year ended 24 June 2018 the parent entity of the consolidated entity was Baby Bunting Group
Limited.
Result of parent entity:
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Financial position of parent entity at year end:
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Total equity of the parent entity comprising of:
Issued capital
Reserves
Retained earnings
Total equity
Parent Entity
2018
$’000
2017
$’000
8,527
13,246
–
–
8,527
13,246
–
94,064
94,064
914
–
914
–
93,931
93,931
851
–
851
85,292
84,816
451
7,407
451
7,813
93,150
93,080
The company does not have any contractual commitments for the acquisition of property, plant and equipment.
Note 25: Group entities
Baby Bunting Group Limited has two 100% owned subsidiaries, Baby Bunting Pty Ltd and Baby Bunting EST Pty Ltd. The investment
in Baby Bunting Pty Ltd is $8,891,700 which represents the issued capital of the entity, together with the value of non cash costs
associated with the acquisition of the business.
The Company and Baby Bunting Pty Ltd have entered into a Deed of Cross Guarantee.
Pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785, the wholly-owned subsidiary (Baby Bunting Pty Ltd)
is relieved from the Corporations Act 2001 requirements for the preparation, audit and lodgment of Financial Reports.
The effect of the deed is that the Company guarantees to each creditor payment in full of any debt in the event of winding up of
the subsidiary under certain provisions of the Corporations Act 2001. If a winding up occurs under other provisions of the Act, the
Company will only be liable in the event that after six months any creditor has not been paid in full.
The Consolidated Statement of Profit and Loss and Other Comprehensive Income and Consolidated Statement of Financial Position
of the consolidated entity approximates the forementioned statements comprising the company and subsidiary which are party to the
deed as at the reporting date and therefore additional company and subsidiary financial statements are not presented.
8282
Notes to the Consolidated Financial Statementsfor the year ended 24 June 2018BABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED Subsidiaries listing
Name of subsidiary
Principal activity
Baby Bunting Pty Ltd1
Retailing of baby merchandise
Baby Bunting EST Pty Ltd2
Trustee of the trust established in connection
with the Company’s employee share plans
Proportion of ownership
interest and voting power
held by the Company
June 2018
June 2017
100%
100%
100%
100%
Place of incorporation
and operation
Australia
Australia
1. This wholly-owned subsidiary has entered into a deed of cross guarantee with Baby Bunting Group Limited. Baby Bunting Pty Ltd became a party to
the deed of cross guarantee on 19 June 2008.
2. Baby Bunting EST Pty Ltd has no material net assets or profit and the financial information disclosed in this report represents the financial information
for the group entities that are party to the deed of cross guarantee.
Note 26: Earnings per share
Basic earnings per share from continuing operations1
Diluted earnings per share from continuing operations1
1. In the current and comparative reporting periods there were no discontinued operations.
2018 cents
per share
2017 cents
per share
6.9
6.9
9.7
9.6
a. Basic earnings per share
The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:
Earnings used in the calculation of basic earnings per share from continuing operations1
2018
$’000
8,686
2017
$’000
12,247
Number
Number
Weighted average number of ordinary shares for the purposes of basic earnings per share
125,980,596 125,720,488
1. In the current and comparative reporting periods there were no discontinued operations.
b. Diluted earnings per share
The earnings used in the calculation of diluted earnings per share are as follows:
Earnings used in the calculation of basic earnings per share from continuing operations1
2018
$’000
8,686
2017
$’000
12,247
The weighted average number of ordinary shares for the purposes of diluted earnings per share reconciles to the weighted average
number of ordinary shares used in the calculation of basic earnings per share as follows:
Weighted average number of ordinary shares for the purposes of basic earnings per share
125,980,596 125,720,488
Shares deemed to be issued for no consideration in respect of:
– Performance rights
–
1,375,040
Weighted average number of ordinary shares used in the calculation of diluted earnings per share
125,980,596 127,095,528
Number
Number
1. In the current and comparative reporting periods there were no discontinued operations.
8383
ANNUAL REPORT 2018ANNUAL REPORT 2018 Note 27: Remuneration of auditors
Assurance Services
Review of the financial report for the half-year
Audit of the year-end financial report
Tax and Consulting Services
Taxation services
Other advisory services
Total remuneration
2018
$
2017
$
30,000
80,000
30,000
95,000
110,000
125,000
–
–
–
14,420
4,000
18,420
110,000
143,420
The auditors of the consolidated entity and the Company are Ernst & Young. From time to time, Ernst & Young provides other services
to the consolidated entity and the Company, which are subject to the corporate governance procedures adopted by the Company.
Prior year (FY2017) auditors of the consolidated entity and the Company were Deloitte Touche Tohmatsu.
Note 28: Contingent liabilities
During the year, the Australian Competition and Consumer Commission (ACCC) has been investigating a possible contravention of
the Australian Consumer Law arising from the sale of convertible tricycles. These products have been widely sold by specialty baby
goods and toy retailers as well as discount department stores. The Company has withdrawn the products from sale. The Company
has co-operated and continues to co-operate with the ACCC’s investigation.
Note 29: Subsequent events
Dividends on the Company’s ordinary shares
A final dividend of 2.5 cents per fully paid ordinary shares has been determined for the year ended 24 June 2018 – refer Note 16.
There have been no events subsequent to the date of this report which would have a material effect on the financial report of the
consolidated entity at 24 June 2018.
8484
Notes to the Consolidated Financial Statementsfor the year ended 24 June 2018BABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED Directors’ Declaration
The Directors declare that:
a. in their opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become
due and payable;
b. in their opinion, the attached financial statements are in compliance with International Financial Reporting Standards, as stated in
Note 2 to the financial statements;
c. in their opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including
compliance with accounting standards and giving a true and fair view of the financial position and performance of the consolidated
entity; and
d. the Directors have been given the declarations required by s.295A of the Corporations Act 2001.
At the date of this declaration, the Company is within the class of companies affected by ASIC Corporations (Wholly-Owned
Companies) Instrument 2016/785 (“Instrument”). The nature of the deed of cross guarantee is such that each company which is party
to the deed guarantees to each creditor payment in full of any debt in accordance with the deed of cross guarantee.
In the Directors’ opinion, there are reasonable grounds to believe that the Company and the company to which the Instrument applies,
as detailed in Note 25 to the financial statements will, as a consolidated entity, be able to meet any obligations or liabilities to which
they are, or may become, subject by virtue of the deed of cross guarantee.
Signed in accordance with a resolution of the Directors made pursuant to s.295(5) of the Corporations Act 2001.
On behalf of the Directors
Ian Cornell
Chairman
Melbourne: 10 August 2018
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ANNUAL REPORT 2018ANNUAL REPORT 2018 Independent Auditor’s Report
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Independent Audit or's Report t o t he Members of Baby Bunt ing Group
Limit ed
Report on t he Audit of t he Financial Report
Opinion
We have audited the financial report of Baby Bunting Group Limited (the Company) and its subsidiaries
(collectively the Group), which comprises the consolidated statement of financial position as at 24 June
2018, the consolidated statement of comprehensive income, consolidated statement of changes in equity
and consolidat ed statement of cash flows for the year t hen ended, notes t o t he financial statement s,
including a summary of significant accounting policies, and the directors' declaration.
In our opinion, the accompanying financial report of the Group is in accordance wit h t he Corporations Act
2001, including:
a)
giving a t rue and fair view of the consolidated financial position of the Group as at 24 June 2018
and of its consolidated financial performance for the year ended on that date; and
b)
complying wit h Aust ralian Account ing Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Aust ralian Auditing Standards. Our responsibilities under
t hose st andards are furt her described in t he Auditor’s Responsibilit ies for t he Audit of t he Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirement s of t he Corporations Act 2001 and the ethical requirements of the Accounting
Professional and Ethical Standards Board’s APES 110 Code of Et hics for Professional Account ant s (the
Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other
et hical responsibilities in accordance wit h t he Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Key Audit Mat t ers
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial report of the current year. These matters were addressed in the context of our audit
of the financial report as a whole, and in forming our opinion t hereon, but we do not provide a separat e
opinion on t hese mat ters. For each matt er below, our descript ion of how our audit addressed t he mat ter
is provided in t hat context .
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
8686
BABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED
2
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included t he performance of procedures designed t o respond t o our assessment of the risks of mat erial
misstatement of the financial report. The results of our audit procedures, including the procedures
performed to address the matters below, provide t he basis for our audit opinion on t he accompanying
financial report .
Account ing for supplier rebat es
Why significant
How our audit addressed t he key audit mat t er
As detailed in Note 2(g) of the financial report,
volume rebates and promotional rebat es
received by the Group from suppliers are
recognised as a reduction in the cost of
inventory or as a direct reduction from the cost
of goods sold.
This was a key audit mat ter due t o the quant um
of rebates recognised during the year and the
judgement required to be exercised in relation to
a number of factors, including:
► The nat ure, complexit y and commercial
t erms of each individual rebat e.
► The appropriate timing of recognit ion, in
particular, rebates recorded at the reporting
dat e
► Considerat ion of whether t he rebate and
whether t he amount should be applied
against the carrying value of invent ory or
recognised in the income stat ement as a
reduction in cost of goods sold.
Disclosure relat ing t o the measurement and
recognition of rebates can be found in Note 2(g).
Our audit procedures included the following:
► Assessed the appropriateness of t he Group’s
accounting policies in relation to volume rebates
and supplier incentives in accordance with
Aust ralian Accounting St andards.
► Assessed the effectiveness of controls in place
relating to t he recognit ion and measurement of
rebate amount s.
► Compared recorded amounts for a sample of
significant rebat e arrangement s with amount s
recorded for the same arrangements in the prior
year and where mat erial variances were
identified, obt ained supporting evidence.
► For a sample of individual supplier agreement s,
we recalculat ed the rebat e ent it lement s and
det ermined whether t hese were correct ly
recorded in accordance with the terms of the
agreement and Aust ralian Accounting St andards.
► We assessed the Group’s year end rebat e
receivable at year end by considering the key
assumpt ions, having regard to past claims
experience and the Group’s claim documentat ion
prepared after balance date. Where available, we
agreed t he receivable t o t he amount set tled
subsequent t o year end.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
8787
ANNUAL REPORT 2018ANNUAL REPORT 2018 3
Carrying value of invent ories
Why significant
How our audit addressed t he key audit mat t er
As at 24 June 2018, the Group held $54.6
million in inventories representing 38% of total
asset s of t he Group.
As detailed in Note 2(g) of the financial report,
inventories are valued at the lower of cost and
net realisable value.
Our audit procedures included the following:
► Assessed the design and operating effectiveness
of relevant cont rols used by t he Group t o record
the cost of inventories and tested the cost price
of inventory recorded for a sample of inventory
lines to supplier invoices.
Judgement was required to be exercised by the
Group t o determine t he net realisable value for
items which may be ultimat ely sold below cost .
These judgements include consideration of
expectations for future sales based on historical
experience.
► Assessed the basis for invent ory provisions
recorded by the Group for slow moving
inventories and stock losses. In doing so, we
examined the Group’s process for identifying
slow moving invent ories, negat ive margin and
hist orical st ock loss rat e t rends.
► Considered t he impact of sales subsequent t o
year end on the value of inventories at balance
dat e by comparing the act ual selling prices t o t he
carrying value for a sample of inventory.
Informat ion Ot her t han t he Financial Report and Audit or’s Report Thereon
The directors are responsible for the other information. The other information comprises the information
included in the Company’s 2018 Annual Report, but does not include the financial report and our
audit or’s report thereon.
Our opinion on t he financial report does not cover t he ot her information and accordingly we do not
express any form of assurance conclusion t hereon, wit h t he exception of t he Remuneration Report and
our related assurance opinion.
In connection wit h our audit of the financial report, our responsibility is to read the other information and,
in doing so, consider whet her the other informat ion is mat erially inconsist ent wit h t he financial report or
our knowledge obtained in the audit or ot herwise appears t o be materially misst at ed.
If, based on t he work we have performed, we conclude that there is a mat erial misst at ement of t his other
information, we are required to report t hat fact . We have not hing to report in t his regard.
Responsibilit ies of t he Direct or s for t he 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 Aust ralian Account ing St andards and t he Corporations Act 2001 and for
such internal cont rol as t he direct ors determine is necessary t o enable the preparat ion of the financial
report that gives a t rue and fair view and is free from material misstatement, whether due to fraud or
error.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
8888
Independent Auditor’s ReportBABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED 4
In preparing t he financial report , t he direct ors are responsible for assessing t he Group’s abilit y to
continue as a going concern, disclosing, as applicable, mat ters relating t o going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Audit or 's Responsibilit ies for t he Audit of t he Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement , whet her due t o fraud or error, and t o issue an audit or’s report t hat includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee t hat an audit
conducted in accordance with t he Aust ralian Auditing St andards will always detect a material
misst at ement when it exist s. Misst at ements can arise from fraud or error and are considered mat erial if,
individually or in t he aggregate, they could reasonably be expected t o influence t he economic decisions of
users t aken on t he basis of t his financial report .
As part of an audit in accordance wit h the Aust ralian Audit ing Standards, we exercise professional
judgment and maint ain professional scepticism t hroughout 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 t hose risks, and obt ain 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 fraud
may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal cont rol.
Obt ain an understanding of int ernal cont rol relevant to t he audit in order to design audit
procedures t hat are appropriat e in t he circumstances, but not for t he purpose of expressing an
opinion on t he effectiveness of t he Group’s int ernal cont rol.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
est imat es and relat ed disclosures made by t he directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on t he audit evidence obtained, whet her a material uncert aint y exists relat ed t o events or
condit ions t hat may cast significant doubt on t he Group’s abilit y t o continue as a going concern. If
we conclude t hat a mat erial uncertaint y exists, we are required to draw at tent ion in our audit or’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 act ivit ies wit hin t he Group t o express an opinion on t he financial report . We are
responsible for the direction, supervision and performance of the Group audit . We remain solely
responsible for our audit opinion.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
8989
ANNUAL REPORT 2018ANNUAL REPORT 2018 5
We communicat e wit h the direct ors regarding, among ot her mat ters, t he planned scope and t iming of t he
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 t o communicate with t hem all relationships and other mat ters that may
reasonably be t hought t o bear on our independence, and where applicable, related safeguards.
From t he mat ters communicated to t he direct ors, we det ermine t hose mat ters t hat were of most
significance in the audit of the financial report of t he current year and are t herefore t he key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about t he mat ter or when, in ext remely rare circumstances, we det ermine t hat a mat ter should
not be communicated in our report because the adverse consequences of doing so would reasonably be
expect ed to outweigh t he public int erest benefits of such communicat ion.
Report on t he Audit of t he Remunerat ion Report
Opinion on t he Remunerat ion Report
We have audited the Remuneration Report included in pages 44 to 51 of the directors' report for the year
ended 24 June 2018.
In our opinion, the Remuneration Report of Baby Bunting Group Limited for the year ended 24 June
2018, complies with section 300A of the Corporations Act 2001.
Responsibilit ies
The directors of t he Company are responsible for the preparat ion and present at ion of t he Remuneration
Report in accordance with section 300A of the Corporat ions Act 2001. Our responsibilit y is t o express an
opinion on t he Remuneration Report, based on our audit conducted in accordance with Aust ralian
Audit ing Standards.
Ernst & Young
Glenn Carmody
Partner
Melbourne
10 August 2018
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
9090
Independent Auditor’s ReportBABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED Shareholder Information
as at 18 July 2018
Baby Bunting Group Limited has one class of shares on issue (being fully paid ordinary shares). There are 125,980,596 shares on
issue. All of the Company’s shares are listed on the Australian Securities Exchange. There is no current on-market buy-back.
TWENTY LARGEST SHAREHOLDERS
Name
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMINEES PTY LTD
BNP PARIBAS NOMS PTY LTD
OAKLEYTOWER PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED – A/C 2
CITICORP NOMINEES PTY LIMITED
1
2
3
4
5
6
7
8
9
10 MATTHEW SPENCER
11 MR GRAEME JOHN HAINES + MRS SHARNI GAY HAINES
12 COOLUM OAK PTY LTD
13 AUSTRALIAN EXECUTOR TRUSTEES LIMITED
14 AUST EXECUTOR TRUSTEES LTD
15 MR RICHARD MARTIN HAINES + MRS TUULA SINIKKA HAINES
16
17
FIDDIAN TEAL NOMINEES PTY LTD
FERGUS & CO PTY LTD
17 KARALIA PTY LTD
19 BNP PARIBAS NOMINEES PTY LTD
20
EVERCITY PTY KTD
Number
of shares
%
of shares
26,037,805
24,428,692
13,988,133
10,605,980
4,655,397
4,598,987
2,658,781
2,232,471
1,441,000
1,372,848
1,049,364
900,000
814,517
762,023
570,000
529,948
496,974
496,974
469,040
445,838
20.67
19.39
11.10
8.42
3.70
3.65
2.11
1.77
1.14
1.09
0.83
0.71
0.65
0.60
0.45
0.42
0.39
0.39
0.37
0.35
Total
98,554,772
78.23
UNMARKETABLE PARCELS
There were 265 holdings of less than a marketable parcel (less than $500 in value or less than 339 shares) based on the closing
market price of $1.475 per share at 18 July 2018.
9191
Shareholder Informationas at 18 July 2018ANNUAL REPORT 2018ANNUAL REPORT 2018 DISTRIBUTION OF SHAREHOLDERS AND SHAREHOLDINGS
Range
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
Total
holders
765
1,022
488
524
59
% of
holders
Number of
shares
% of
shares
26.8
35.8
17.1
377,770
2,877,670
3,794,818
18.3
13,078,095
2.1 105,852,243
0.30
2.28
3.01
10.38
84.02
100.0
2,858
100.0 125,980,596
SUBSTANTIAL SHAREHOLDERS
As at 18 July 2018, the substantial holders (as disclosed in substantial holdings notices given to the Company) are:
Name
AustralianSuper Pty Ltd
TDM Asset Management Pty Limited
Commonwealth Bank of Australia
Copia Investment Partners Ltd
Date of most recent notice
8 May 2018
18 August 2016
4 June 2018
8 May 2017
Number of
shares
Relevant
interest
13,186,199
10.47%
13,020,496
10.37%
9,186,251
7,175,364
7.29%
5.71%
VOTING RIGHTS OF ORDINARY SHARES
The Company’s Constitution sets out the voting rights attached to ordinary shares. In summary, shareholders may vote at a meeting
of shareholders in person, directly or by proxy or attorney and, in the case of a shareholder that is a company, also by representative.
On a show of hands, a shareholder has one vote. On a poll, a shareholder has one vote for every fully paid share held.
PERFORMANCE RIGHTS
The Company has unquoted performance rights on issue. As at 18 July 2018, there were 8 holders of performance rights. There are no
voting rights attached to performance rights.
9292
Shareholder Informationas at 18 July 2018BABY BUNTING GROUP LIMITEDBABY BUNTING GROUP LIMITED Corporate Directory
REGISTERED OFFICE
Baby Bunting Group Limited
955 Taylors Road
Dandenong South VIC 3175
(03) 8795 8100
DIRECTORS
Ian Cornell
Gary Levin
Donna Player
Matt Spencer
Melanie Wilson
COMPANY SECRETARY
Corey Lewis
Group Legal Counsel and Company Secretary
(03) 8795 8169
INVESTOR RELATIONS
Darin Hoekman
Chief Financial Officer
(03) 8795 8113
SHAREHOLDER ENQUIRIES
Share Registry
Computershare Investor Services Pty Ltd
GPO Box 2975
Melbourne VIC 3001
1300 850 505 (within Australia)
+61 3 9415 4000 (outside Australia)
AUDITOR
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000
SECURITIES EXCHANGE LISTING
Baby Bunting Group Limited shares are listed on the Australian
Securities Exchange (ASX)
(ASX Code: BBN).
INVESTOR WEBSITE
babybuntingcorporate.com.au
ONLINE STORE
babybunting.com.au
RM-BBN18001ANNUAL REPORT 2018ANNUAL REPORT 2018 the one stop baby shop
babybunting.com.au