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ANNUAL REPORT
Baby Bunting Group Limited
ABN 58 128 533 693
CONTENTS
Chairman and CEO’s Report
4
Financial Highlights
10
16 Board of Directors
20 Our People and Community
22 Corporate Governance Statement
31 Directors’ Report
44 Remuneration Report
56 Auditor’s Independence Declaration
57 Consolidated Financial Statements
93 Directors’ Declaration
94
99 Shareholder Information
IBC Corporate Directory
Independent Auditor’s Report
The 2019 Baby Bunting Annual Report reflects
Baby Bunting’s performance for the 53 week period
from 25 June 2018 to 30 June 2019.
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 2019 Annual General Meeting
10.00am (Sydney time)
Tuesday, 8 October 2019
Level 11, 5 Martin Place
Sydney NSW 2000
Baby Bunting Group Limited
ABN 58 128 533 693
Baby Bunting Group Limited Annual Report 2019 Baby Bunting’s vision is to be
the most loved baby retailer
for every family, everywhere.
1
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION CELEBRATING 40 YEARS
Baby Bunting was founded in 1979 as a family business and has grown to be
Australia’s largest speciality retailer of baby goods with 53 stores nation-wide. It’s been
a pleasure to support Australian families in the early years of parenthood for 40 years!
1979
2002
2008
Baby Bunting was
founded in 1979
by Arnold and Gail
Nadelman, who had
a desire to provide
parents with great
products, great service
and great advice.
The first store was in
Camberwell, Melbourne
1979
Baby Bunting opened
its first superstore in
Bentleigh East
The Baby Bunting
online store was
established
6 Baby Bunting
stores, including a
store at Thomastown
supporting parents in
the northern suburbs
of Melbourne
2008-10
Baby Bunting
stores opened in
South Australia,
New South Wales
and the ACT
2 stores in Adelaide
First store in New South
Wales at Moore Park,
Sydney and first
store in Canberra at
Fyshwick
12 Baby Bunting stores
2
Baby Bunting Group Limited Annual Report 2019 CELEBRATING 40 YEARS
Baby Bunting begins
supporting parents in
Queensland from the
new store at Helensvale
and in Western
Australia at Myaree
New Store Support
Office and Distribution
Centre opens at
Dandenong South,
Victoria
15 Baby Bunting stores
Baby Bunting opens its
first regional stores at
Ballarat and Bendigo
in Victoria
33 Baby Bunting stores
50th store and the first
Tasmanian store opens
in Hobart
First shopping centre
format store opens at
Chadstone, Melbourne
in Australia’s largest
shopping centre
Baby Bunting listed
on the Australian
Securities Exchange
Over 1,000 Team
Members around
Australia
Celebrates
40 years since
its establishment
53 Baby Bunting
stores, including
5 regional stores
Over 1,250 Team
members around
Australia
2011
2015
2018
2019
3
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION We are very proud of what the team at Baby Bunting has achieved.
The year saw Baby Bunting truly establish itself as the go to
destination for baby goods in Australia. We started the 2019
financial year in unsettled trading times. There was a number
of competitor closures in the prior year and in the early part
of this year, which had an adverse effect on Baby Bunting’s
sales and gross margin performance in 2018. In response, the
management team focussed on a number of actions to grow
market share and build profitability, including:
• continued focus on customer service;
• capitalising on available market share opportunities;
• securing prime sites for our store network;
• stabilising gross margin without compromising value;
• driving our private label and exclusive product expansion
program; and
FY2019 financial results overview
The 2019 financial year was a 53 week trading period.
Baby Bunting achieved some strong financial results for the year.
In FY2019:
• total sales were $368.0 million, up 20.9% on the prior year;
• gross profit increased 27.3% on the prior period to
$128.4 million; and
• statutory net profit after tax was $12.4 million, up 43.3% on the
prior period and the Company finished the year with net cash
of $2.7 million.
Presented on a 52 week basis (to enable comparisons with prior
52 week trading periods) and excluding some significant one-
off project and acquisition related expenses and the non-cash
impact of employee equity incentive expenses:
• investing in people and systems to support growth.
• pro forma sales of $362.3 million, up 19.0% on the prior
With great discipline, the team achieved what it needed to do.
At the end of the year we have seen strong market share growth
and a recovery in gross margin back to levels that support
Baby Bunting’s ongoing strategy. Our Net Promoter Score (NPS)
finished the year around 75, which shows we have strong
customer advocates for the business.
corresponding period;
• total transactions were up 16.6% and comparable store sales
transactions were up 6.4%;
• comparable store sales were 8.7% up on the prior
corresponding period;
• pro forma gross profit as a percentage of sales increased
190 basis points to 35.0%;
• pro forma earnings before interest, tax, depreciation and
amortisation (EBITDA) were $27.1 million, up 45.9% on
the prior corresponding period. Pro forma EBITDA margin
increased 140 basis points to 7.5%; and
• pro forma net profit after tax (NPAT) was $15.1 million,
up 58.2% on the prior corresponding period.
4
Baby Bunting Group Limited Annual Report 2019CHAIRMAN AND CEO’S REPORT A reconciliation between the statutory and pro forma financial
results is set out in Section 2.5 on pages 33 to 34 of the
Directors’ Report.
Dividends
The Board has approved a final dividend of 5.1 cents per share
fully franked. Together with the interim dividend of 3.3 cents per
share, the total dividend payment for the year is 8.4 cents per
share. This is equivalent to approximately 70% of the Company’s
FY2019 pro forma NPAT.
Operational highlights
The year’s financial results came about through the focussed
execution of the Company’s strategy combined with operational
excellence. During the year there were a number of highlights.
Store network growth
There are now 53 Baby Bunting stores throughout Australia.
We opened stores at Toowoomba (Qld), Chatswood (NSW),
Hobart (Tas), Chadstone (Vic), Bankstown (NSW) and
Shellharbour (NSW). We also relocated our Cannington (WA) store
to a more prominent location within the Cannington catchment.
With the addition of the Toowoomba store, there are now
5 regional stores in the Baby Bunting store network with more
planned for the years ahead.
We now have three store models to ensure that we can best
service the customer in particular catchments. In addition to
our large format store and our regional format store, we have
developed a shopping centre format, with our store at Chadstone
Shopping Centre being our first store of this type. Chadstone
is Australia’s premier retail destination and our Chadstone store
is a 1,500 square metre store with all the service attributes of
our large format destination stores. It has dedicated car seat
fitting bays, a dedicated parcel pick up area, as well as parenting
amenities within the store. Since opening, we have obtained
insights into the design and operation of a shopping centre
format store and we have plans to deploy the format into other
shopping centres as appropriate opportunities arise. Our next
shopping centre store at Westfield Doncaster (Vic) is expected to
open later in 2019.
EBITDA margin improvement
We continue to target EBITDA margin improvement. Pro forma
EBITDA margin for the year was 7.5%, an improvement of
140 basis points on the prior corresponding period.
There were a number of factors driving this performance.
Pro forma gross profit percentage was 35.0% an improvement
of 190 basis points on the prior year. This was achieved without
compromising the focus on value for the customer.
Sales of private label and exclusive products across the year
were at 27.6% of total sales, an increase of 56.5% on the prior
year and we are well on our way of achieving our long term target
of 50% of sales. This highlight reflects the work our merchandise
team continues to undertake with our supplier partners to deliver
exclusive products for our customers throughout our store
network and online.
Considerable progress was made during the year to achieve
efficiencies in the supply chain, through increasing the volumes
of inventory coming direct to Baby Bunting from source and
also expanding capacity in our Dandenong South Distribution
Centre and third party logistics (3PL) distribution centres. Supply
chain investments will continue to be a focus in the periods
ahead as we seek to extract value from the flow of products
from source through to store shelves, which will support ongoing
margin improvement.
5
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION Investments in digital providing growth
Digital remains a very important part of Baby Bunting’s business
with total online sales growing 46%, including click and collect
sales growing 55% on the prior financial year. Online sales
represented 11.8% of total sales. The trends observed in the past
continue with online sales in relevant catchments consistently
increasing following the opening of a Baby Bunting store in that
catchment. The growth in the store network complements the
growth in online sales.
The 2019 financial year has been another big year for investments
in digital and this will be an area where we continue to focus our
efforts as a driver of market share growth.
Our website re-platform project was a key project during the
year. The new e-commerce platform and website was initiated in
July 2019 and work continues on establishing and optimising the
platform. It is part of our efforts to deliver engaging content and
experiences for our customers at every stage of their journey as
parents or parents-to-be.
Other developments during the year include:
• continuing our investments in digital marketing and increasing
our utilisation of marketing automation and Customer
Relationship Management (CRM) technologies. We have
appointed a new digital marketing specialist as well as a
loyalty manager to continue to optimise our engagement
with customers;
• commissioning the first of our store-based online fulfilment
hubs. We have a plan to leverage stores to facilitate fulfilment
of online metro orders throughout Australia to support our long
term target of being able to fulfil 90% of online metro orders with
a same day delivery service. The Tasmanian online fulfilment
hub commenced in July 2019.
We also commenced work on a significant project to improve our
merchandise and planning and forecasting systems in the final
quarter of the financial year. We expect this project will continue
through the 2020 financial year and into the 2021 financial year.
Once implemented this project will transform the manner in
which we forecast, plan merchandise and replenish our stores.
This is expected to deliver significant benefits for the business.
Building the best Team
We have undertaken a significant investment in our Team
to develop our leaders at the store and area management
level. We have also invested in additional in-store technology
and communications systems to facilitate a better customer
experience and sales process. This kind of investment continues
to improve the customer experience and our Net Promoter Score
(NPS) finished the year at around 75. This is just one measure
and we remain focussed on ensuring that we have a well-trained
and knowledgeable team to provide great service and advice to
our customers.
Growing our services offer – Baby On Board
Baby Bunting has for a number of years provided car seat
installation services to our customers. Historically, this service
has been provided through various third party businesses around
Australia. In the last quarter of the year, Baby Bunting acquired
the car seat installation businesses of some of our partners in
Victoria, New South Wales, Queensland and South Australia.
Our national car seat installation service has been consolidated
under a single brand – Baby On Board – which we commenced
promoting in July 2019. This single brand strategy has enabled
us to take a consistent approach to child car seat safety
throughout Australia. We have adopted installation principles
intended to enhance child safety in cars. For example, we believe
infants should be in rear-facing child restraints for as long as
possible and our installers will not install a child restraint in
forward facing mode until the child is over 12 months old.
Our strategy for car seat installations has been supported by
additional investments to improve the way car seat installation
bookings are made, through initiating an online booking system
providing greater convenience to our customers and more
accurate information about the availability of car seat fitting
appointments throughout our store network.
The investment in the installation service business also lays the
platform for Baby Bunting to enter into the nursery hire market
with a focus initially on the hiring out of car seat and baby
capsules. We expect this business to grow organically and it will
further differentiate us from others in the market, in particular
those online only retailers who are unable to facilitate this
complete service offering.
The Board
During the year, Gary Kent joined the Board as a Non-executive
Director and a member of the Audit and Risk Committee. Gary
has brought strong retail, financial and operational experience to
the Board and complements the existing skills and experience
that is represented on the Board.
In considering its composition during the year, the Board reflected
on the gender diversity among its members. As a result, the
Board has adopted a new measurable objective to have the
Board comprise 50% of women and 50% of men by 2025.
Currently, one third of the Board comprises women. The Board
intends to work towards this objective over the coming years as it
manages director succession.
6
Baby Bunting Group Limited Annual Report 2019CHAIRMAN AND CEO’S REPORT We are very proud of what the Team has
achieved in our 40th year of supporting
new and expectant parents
40 years young
In July 2019, Baby Bunting celebrated its 40th birthday.
From a business started by Arnold and Gail Nadelman
in a single store in the Melbourne suburb of Camberwell,
Baby Bunting has grown to be Australia’s leading specialist
baby goods retailer with a network of over 50 stores
throughout Australia and a leading online store. With the
Company’s listing on ASX in October 2015, growth has
accelerated with twenty new Baby Bunting stores added
since that time.
The baby goods market has changed a lot since 1979.
Retailing has evolved and has been transformed by the
introduction of technology and online shopping. The choice
of products available to parents and parents-to-be has
expanded dramatically and there has been considerable
improvements in nursery product safety standards.
The Australian baby goods market has always been
competitive with a variety of retailers operating throughout
Australia. Today consumers can choose from traditional
speciality retailers, department stores and discount department
stores and the newer online players and marketplaces.
From the start, Baby Bunting has worked hard to help new
and expectant parents during the early years of parenthood.
This is a purpose that we remain committed to today.
Each year the number of Baby Bunting Team Members has
increased as we expand our store network to reach more
parents and parents-to-be throughout Australia. We would
like to thank our more than 1,250 Team Members for their
commitment and efforts during the year. It is through our
combined efforts that we believe we will make Baby Bunting
the most loved baby retailer for every family, everywhere.
Ian Cornell
Chairman
Matt Spencer
CEO and
Managing Director
7
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION
OUR STRATEGY
Our core purpose is to support new and expectant parents during the
early years of parenthood. We seek to have that guide everything we do
at Baby Bunting. Our strategy is intended to help us fulfil that purpose
today and tomorrow.
Our strategy continues to be to grow market share through
concentrating on four key elements.
Investing in digital to deliver the best possible
customer experience across all channels
Our investments in this area aim to engage and retain the
customer through the customer journey and lifecycle. We have
been making specific investments in this area in our new website
and e-commerce platform, marketing automation and customer
insights. A priority in the year ahead will be investing in our
loyalty strategy.
We have a long term target of same day online fulfilment for
major metro markets, leveraging our store network. Investments
in store fulfilment hubs were made in the 2019 financial year and
will continue to be rolled out in FY20 and beyond.
To provide even greater choice to our customers, we are
exploring endless aisle opportunities enabling customers the
ability to shop from a range of products online and beyond
the range held in-store.
Investments to grow sales from
existing stores
We are focussed on delivering a leading service offering
supported by well-trained team members with great product
knowledge. We continually target improving our systems and
processes to enable operational evolution with savings reinvested
back into customer service. Expanding our services offer and
related businesses is a key elements in our investments to
grow sales from existing stores. The expansion of our car seat
installation business – Baby on Board – is a key part of this.
Growth from new markets
Baby Bunting is looking to continue to grow its network of stores
to over 80 stores throughout Australia. Baby Bunting aims to
open between four and eight new stores a year and at 53 stores
presently, there remains considerable scope to grow from
new markets.
We intend to continue with our major market large store format
and the variation deployed in regional store markets. This will be
complemented by the shopping centre format that has recently
been developed.
Achieving EBITDA margin improvement
EBITDA margin improvement continues to be a priority for the
Company. This will be pursued through gross margin expansion
by increases in scale, supply chain improvements, improved
sourcing and the expansion of our private label and exclusive
products offering (where we have a target of 50% of total sales).
We are also pursuing cost of doing business leverage through
scale as well as improvements in procurement arrangements
and processes.
8
Baby Bunting Group Limited Annual Report 2019 “Our vision is to be the most loved baby
retailer for every family, everywhere.”
9
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION In the 2019 financial year, Baby Bunting experienced improved growth
momentum after the challenging trading conditions in the prior financial
year. Baby Bunting achieved substantial growth in sales and market share.
Comparable store sales grew at 8.7%, which is above our long term historical
average of 6.2%. Online sales continued to grow and now represent 11.8% of
sales, an increase of 46%.
Pro forma gross margin percentage improved significantly over the prior year
finishing up 190 basis points to be 35.0%. All up, it was a strong year and we
are well-placed to continue to build on this financial performance.
PRO FORMA
SALES OF
$362.3M
UP 19.0%
COMPARABLE
STORE SALES
GROWTH
8.7%
PRO FORMA
NPAT $15.1M,
UP 58.2%
Pro Forma Sales ($m)
Comparable store
sales growth (%)
$362.3
$303.1
$278.0
$236.8
12.5%
6.9%
FY16
FY17
-0.2%
FY18
8.7%
FY19
60
50
40
30
20
10
0
Stores
Number of stores at year end
Pro Forma Online Sales ($m)
% total of sales
53
47
42
36
FY16
FY17
FY18
FY19
$42.3
11.8%
$28.9
9.5%
$17.8
6.4%
$10.1
4.2%
FY19 results are presented on a pro forma basis. Refer to section 2.5 of the Directors’ Report for a reconciliation to statutory results. In respect of pro forma sales, the results of
week 53 in FY19 have been excluded to enable a comparison to prior 52 week periods.
400
350
300
250
200
150
100
50
0
10
Baby Bunting Group Limited Annual Report 2019OUR STATS Pro Forma Gross Profit ($m)
Pro Forma NPAT ($m)
gross margin (%)
Private label &
exclusive products
% total of sales
27.6%
20.9%
$100.9
$95.3
$81.2
11.4%
10.0%
34.3%
34.3%
33.1%
30
25
20
15
10
5
0
$15.1
$13.0
$10.6
$9.6
$126.7
35.0%
15
12
9
6
3
0
11
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION Our stores are at the heart of enabling us to help new and expectant parents
in the early years of parenthood.
Apart from enabling parents to touch and feel products, our store network
provides a platform to provide our expanding range of services including
car seat installation services and same day fulfilment. Our store network
complements our online offering, with online sales in catchments where we
have a store consistently increasing following the establishment of a Baby
Bunting store in that area.
During the year, we opened 6 new stores at Toowoomba (Qld), Chatswood
(NSW), Hobart (Tas), Chadstone (Vic), Bankstown (NSW) and Shellharbour
(NSW). We also relocated our Cannington (WA) store to a more prominent
location within the Cannington catchment.
We continue to target between four and eight new
stores each year.
WA
Baldivis
Cannington
Joondalup
Midland
Myaree
Osborne Park
SA
Gepps Cross
Melrose Park
Mile End
Munno Para
WA
6
SA
4
12
Baby Bunting Group Limited Annual Report 2019OUR STORES Our stores are at the heart of enabling us to help
new and expectant parents in the early years of
parenthood. With 53 stores today, we have a plan
to open more than 80 stores around Australia to
expand the areas where we have an opportunity to
meet, serve and advise parents and parents-to-be.
12
QLD
NSW
/ACT
16
VIC
14
1
TAS
TAS
Hobart
QLD
Aspley
Booval
Browns Plains
Burleigh Waters
Capalaba
Fortitude Valley
Helensvale
Kawana
Macgregor
North Lakes
Toowoomba
Townsville
NSW/ACT
Albury
Auburn
Belrose
Bankstown
Blacktown
Campbelltown
Camperdown
Chatswood
Fyshwick (ACT)
Moore Park
Penrith
Rutherford
Shellharbour
Taren Point
Warners Bay
West Gosford
VIC
Ballarat
Bendigo
Chadstone
East Bentleigh
Frankston
Geelong
Hawthorn
Hoppers Crossing
Maribyrnong
Narre Warren
Preston
Ringwood
Taylors Lakes
Thomastown
13
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION
OUR SERVICES
Baby Bunting took some key steps during the year to expand the services we
have available for our customers in store. We have consolidated a number of
separate car seat installer businesses that were operating for Baby Bunting
around Australia under the Baby on Board brand. We have plans to expand the
services available for parents and parents-to-be, initially around car seats, to
provide even more ways to support them in the early years of parenthood.
For a number of years, Baby Bunting has provided car seat
installation services to our customers. During the year, Baby
Bunting brought together the car seat installation businesses of
some of our partners in Victoria, New South Wales, Queensland
and South Australia under a single brand. Our Baby On Board
team consists of accredited car seat installers working at our
stores. We have made investments to expand our car seat
installer coverage across our store network – including into
Tasmania and Western Australia. We have also made more
fitting times available to ensure parents can conveniently have
their child’s car seat restraint fitted correctly to assist in keeping
children safe when travelling in cars.
We have around 30 installers working across our store network
with plans to expand this number.
To provide even more convenience, our online car seat
appointment booking service commenced in July 2019 and will
make it even easier for parents to book an appointment at a time
and a store that is convenient for them.
The next stage of our services strategy is car seat and capsule
hire. This service will provide parents with a choice of hiring a
car seat or capsule appropriate for their child’s age and stage
of development. It will also provide short term hire for parents
travelling interstate or when families come to visit from overseas.
14
Baby Bunting Group Limited Annual Report 2019 15
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION Details of the qualifications, experience and special responsibilities of each current director are as follows:
MATT SPENCER
CEO and Managing Director
B.Bus
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 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.
GARY LEVIN
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.
IAN CORNELL
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).
16
Baby Bunting Group Limited Annual Report 2019OUR BOARD MELANIE WILSON
Non-executive Director
MBA, B.Comm (Hons), GAICD
DONNA PLAYER
Non-executive Director
BA, GAICD
GARY KENT
Non-executive Director
BEc, 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.
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).
Member of the Remuneration
and Nomination Committee
Member of the Audit and Risk
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).
Gary was appointed as a Non-executive
Director during the year.
Gary has an extensive background
in the retail and services sector, with
considerable experience in corporate
finance transactions. He had a career
of 18 years with Coles Myer and the
Coles Group, during which time his
roles included Chief Financial Officer of
the Coles Group and Group General
Manager for Finance at Kmart and Myer.
More recently, Gary has served as the
Chief Executive Officer of the Western
Bulldogs AFL club, where he has also
served as a non-executive director
and as chair of the club’s audit and
risk committee.
Gary holds an economics degree,
is a chartered accountant and a
graduate of the Harvard advanced
management program.
17
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION 18
Baby Bunting Group Limited Annual Report 2019 OUR VALUES
From humble beginnings with a single store in suburban Camberwell,
Baby Bunting now employs more than 1,250 people across its 53 national
superstores and 10,000sqm warehouse in Melbourne.
We pride ourselves on providing our customers with excellence in service,
expert advice, a range of great quality products, and value.
Being Passionate
be passionate about providing our
customers with great products and
services, advice and value every day
Being Considerate
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 Focussed
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
19
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION People
Safety
We want our Team to come to work safe and go home safe at
the end of the day. A constant focus is safety at work and on
having all of our Team Members follow safe work practices.
All Team Members have a responsibility for contributing to their
own safety and the safety of those around them. A number of
initiatives were undertaken during the year to minimise injuries
to Team Members and ensure they return to work (on the same
or modified duties) as soon as practicable.
Training and opportunities
Building the best Team is a key goal at Baby Bunting – not only
to ensure that our 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.
During the year we have undertaken a significant investment
in our Team to improve leadership at the store and area
management level. We have also invested in additional in-store
technology and communications systems to facilitate an easier
customer experience and sales process.
Considerable time is spent on training our team on new products
in courses developed and deployed by Baby Bunting’s Learning
and Development Team.
In terms of providing opportunities for growth and development
for our Team, a priority for us is promoting from among our
existing Team where appropriate opportunities arise. During the
year, around 50% of key opportunities that arose were filled by
internal candidates.
Employee Share Plan
For the fourth year in a row, offers of Baby Bunting shares were
made under the Company’s General Employee Share Plan.
This plan provides employees with an opportunity to acquire
Baby Bunting shares at no cash cost so that they can participate
in the benefits of share ownership. At the end of the year, around
42% of Baby Bunting Team Members are shareholders.
Diversity
Baby Bunting has a Diversity 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 address in the policy include
a commitment to diversifying sources of recruitment and merit-
based appointments, as well as recognition that Baby Bunting
will not tolerate unlawful discrimination, bullying, harassment
or victimisation.
During the year the Board adopted new measurable objectives
for gender diversity (details are included in the Corporate
Governance Statement on page 22).
20
Community
Life’s Little Treasures Foundation
Baby Bunting continues to be a Major Partner for the Life’s Little
Treasures Foundation. 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 in Australia, over 48,000 babies are
admitted into neonatal intensive and special care units.
Baby Bunting will continue as a presenting partner for the Life’s
Little Treasures Foundation annual “Walk for Prems” event.
During 2018, Baby Bunting raised and contributed just under
$100,000 for this event. This year, the walk will be held on
Sunday, 27 October 2019 at locations around Australia. Further
information about the Foundation and how to contribute is
available at lifeslittletreasures.org.au. People can also support
the 2019 “Walk for Prems” event by making donations at Baby
Bunting stores.
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 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 2020.
Baby Bunting Group Limited Annual Report 2019OUR PEOPLE AND OUR COMMUNITY 21
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION This Corporate Governance Statement describes the corporate governance practices of Baby Bunting Group Limited (Baby Bunting
or the Company) for the financial year ended 30 June 2019 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).
During the 2020 financial year, the Company intends to review and, where necessary, modify its governance practices in advance
of reporting against the 4th edition of the Corporate Governance Principles and Recommendations. These updated principles and
recommendations were released earlier in 2019 and will first apply to the Company in the financial year commencing on 1 July 2020.
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
During the year, the Board adopted an updated Diversity Policy which sets out Baby Bunting’s commitment to recognising
the importance of diversity and inclusion for its business. The policy is available on Baby Bunting’s corporate website
(babybuntingcorporate.com.au).
22
Baby Bunting Group Limited Annual Report 2019CORPORATE GOVERNANCE STATEMENT Currently, there are two female directors out of a total number of six directors (33%). The Board has a target that women and men be
equally represented on the Board by 2025. A time frame to 2025 has been chosen as it has regard to the ideal number of the directors,
the current mix of tenure on the Board and the time required to identify and attract appropriate candidates.
In addition, the Board has adopted two new measurable objectives for achieving gender diversity at the Company:
Objectives
Progress
That at least a third of the
Company’s senior executives
be women in the medium term
Currently, women comprise 22% (2 out of 9) of the Company’s senior executives.
Over the medium term, the objective is that the Senior Executive team reflect an increased degree
of gender diversity.
The “Senior Executive” team comprise those executives reporting to the CEO, plus the CEO.
That 50% of the Company’s Area
Managers and Regional Managers
be women in the medium term
In our retail operations, Regional Managers, Area Managers and Store Managers are the leadership
roles. Across this group, approximately 58% are female. However, at the Regional Manager and
Area Manager level only 22% are female. The objective is to increase this proportion to 50%,
including by drawing on our talent within the business.
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
30 June 2019
Total
number in
category at
30 June 2019
Number of
females in
category at
24 June 2018
Total
number in
category at
24 June 2018
% of
females
% of
females
Board
(including CEO and Managing Director)
Senior Executives
(including CEO and Managing Director)
Regional, Store and Area Managers
2
2
38
6
9
65
All Team Members
1,002
1,272
33%
22%
58%
79%
2
2
35
775
5
9
53
971
40%
22%
66%
80%
In July 2019, the Company lodged its Workforce Profile report with the Workplace Gender Equality Agency (WGEA).
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.
23
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION 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 pages 16 and 17. 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).
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. During
the year, Gary Kent was appointed as a new Non-executive Director, bringing the number of Non-executive Directors to five. He will
seek election at the Company’s 2019 annual general meeting.
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 five Non-executive
Directors, are set out below:
Skill or experience
Retail
Experience at a customer/retail business obtained through an executive or leadership position
Logistics
Knowledge and experience in retail logistics and distribution
Number of
Non-executive Directors
5
3
24
Baby Bunting Group Limited Annual Report 2019CORPORATE GOVERNANCE STATEMENT Skill or experience
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 a non-executive director of an ASX listed company, including an ability to articulate the
expected views of all categories of investors
Number of
Non-executive Directors
5
4
5
5
4
3
5
The Board intends to review the skills matrix annually to ensure that it remains appropriate for the Company, its circumstances and
its strategies.
Independent Directors
At the date of this Statement, the Board comprises six directors. A majority of the Board are independent Non-executive Directors.
Name
Position
Independent Directors
Appointed
Approximate
length of service
Ian Cornell
Chairman, Independent Non-executive Director
1 January 2015
4 years 8 months
Gary Levin
Independent Non-executive Director
25 August 2014
5 years
Melanie Wilson
Independent Non-executive Director
15 February 2016
3 years 6 months
Donna Player
Independent Non-executive Director
16 January 2017
2 year 7 months
Gary Kent
Independent Non-executive Director
12 December 2018
8 months
Executive Director
Matt Spencer
CEO and Managing Director
23 April 2012
7 years 4 months
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.
25
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION 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
Code of Conduct
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).
Whistleblower Policy
During the 2019 financial year, the Company adopted a Whistleblower Policy. A copy of the policy is available on Baby Bunting’s
corporate website (babybuntingcorporate.com.au).
Baby Bunting’s Values
Baby Bunting’s vision is to be the most loved baby retailer for every family, everywhere. The Company sees its core purpose as
supporting new and expectant parents in the early years of parenthood. The Board has endorsed the following set of values developed
for Baby Bunting:
• Being passionate: be passionate about providing our customers with great products and services, advice and value every day;
• Being considerate: 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 focussed: 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.
26
Baby Bunting Group Limited Annual Report 2019CORPORATE GOVERNANCE STATEMENT 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
Gary Kent (appointed 12 December 2018)
Ian Cornell (appointed 16 July 2018
– stepped down from the Committee on 12 December 2018)
Details of the qualifications and experience of Committee members are set out on pages 16 and 17.
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 30 December 2018 and the full year ended
30 June 2019, 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 8 October 2019.
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 Board receives copies of all material market announcements promptly after they have been lodged with ASX. In addition, a copy of
any new and substantive investor or analyst presentation is released to ASX in advance of the presentation.
27
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION 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.
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 30 June 2019 will be held on 8 October 2019. In previous years the
annual general meeting has been held in Melbourne. This year, the annual general meeting will be held in Sydney, in order to provide
shareholders based in Sydney an opportunity to attend the meeting.
Generally, the Board aims to hold general meetings 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.
It is the Company’s practice that all voting on substantive resolutions at shareholder meetings is conducted by way of a poll.
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.
28
Baby Bunting Group Limited Annual Report 2019CORPORATE GOVERNANCE STATEMENT 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.
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 38 and 39. 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.
29
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION 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.
Non-executive Directors are not entitled to participate in the Company’s short term or long term incentive plans.
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.
30
Baby Bunting Group Limited Annual Report 2019CORPORATE GOVERNANCE STATEMENT 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 30 June 2019.
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 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 53 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. A shopping centre format has been developed which incorporates the key elements of
the standard destination store format.
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.
31
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATIONDIRECTORS’ REPORT Drivers of competitive advantage
Comment
Competitively priced
Comprehensive range of ancillary
services
Baby Bunting’s approach to pricing is centred on offering customers value every day, every visit.
As the customer journey evolves in a digital world, transparency on pricing is very important.
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.
Cost effective marketing
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 under 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 53 stores across all Australian states and territories, except Northern Territory.
The location and layout of stores is designed to deliver customers a consistent retail experience across the network.
2.3 People
At the end of the financial year, the Company employed 1,272 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 FY2019 included:
• finishing the year with a Net Promoter Score at 75;
• opening six new stores, being Toowoomba (Qld), Chatswood (NSW), Hobart (Tas), Chadstone (Vic), Bankstown (NSW)
and Shellharbour (NSW). The Company also relocated the Cannington (WA) store to a more prominent location within the
Cannington catchment;
• opened the first shopping centre format store at Chadstone Shopping Centre, Australia’s premier retail destination;
• continuing to expand the range of private label and exclusive products – together these categories made up 27.6% of sales.
This is a demonstration of the work undertaken by Baby Bunting’s merchandise team in building and enhancing relationships with
key suppliers;
• work undertaken on the website re-platform project to establish a new e-commerce platform and website.
Refer to the Chairman and CEO’s Report on page 4 of this Annual Report for more information on the Company’s operations during the
2019 financial year.
32
Baby Bunting Group Limited Annual Report 2019DIRECTORS’ REPORT 2.5 Review of the Company’s financial performance
The full year statutory results for the 53 week period ended 30 June 2019 (FY18: 52 week period ended 24 June 2018) are
summarised below:
• Total sales up 20.9% to $368.0 million, with comparable store sales growth of 8.7% for the year;
• Gross profit of $128.4 million up 27.3%;
• Statutory net profit after tax (NPAT) of $12.4 million, an increase of 43.3% on the prior year;
• Statutory basic earnings per share (EPS) of 9.8 cents; and
• Net cash of $2.7 million (versus net debt of $3.5 million at the end of FY2018).
In relation to the 2019 and 2018 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. In addition, the 2019 financial year results
are shown excluding the revenues and expenses incurred during the 53rd week of the period and some other pro forma adjustments
related to significant/one-off items. The Directors consider that these adjustments are appropriate to better represent the underlying
financial performance of the business and to facilitate comparisons with prior periods.
On a pro forma basis, the FY2019 financial results were:
• pro forma earnings before interest, tax, depreciation and amortisation (EBITDA) was $27.1 million, up 45.9% on the prior
corresponding period;
• pro forma gross margin was 35.0%;
• pro forma NPAT of $15.1 million, up 58.2% on the prior corresponding period;
• pro forma costs of doing business (CODB) were $99.5 million or 27.5% of sales, an increase of 50 basis points on the prior
corresponding period (CODB of 27.0% of sales in FY2018).
A reconciliation between statutory and pro forma financial results is on the next page.
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.
33
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION 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. Pro forma financial results
for the year ended 30 June 2019 also exclude the revenues and expenses incurred during the 53rd week of the period; acquisition
related expense for the purchase of four car seat installation businesses in the last quarter of the year, and non-recurring project
related expenses associated with significant one-off projects related to business review and improvement, business transformation and
brand modernisation.
The following table reconciles the statutory to pro forma financial results for the year ended 30 June 2019 (noting that this financial
information has not been audited in accordance with Australian Auditing Standards):
Year ended 30 June 2019
Statutory results
Employee equity expenses1,2
Impact of week 533
Acquisition related expenses4
Project related expenses5,6,7
Tax impact from pro forma adjustments
Sales
($’000)
EBITDA
($’000)
EBIT
($’000)
NPAT
($’000)
368,006
24,065
18,944
12,407
–
2,227
2,227
2,227
(5,674)
–
–
–
35
248
540
–
135
248
540
–
93
248
540
(366)
Pro forma results (52 weeks to 23 June 2019)
362,332
27,115
22,094
15,149
1. Expense reflects the cost amortisation of performance rights (LTI) granted and outstanding in the current reporting period.
2. The Company issued 163,944 shares (297 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 $750 worth of shares. In total this expense was $400,000.
3. FY2019 was a 53 week retail financial year. Week 53 revenues and expenses have been excluded to enable comparison to the FY2018 full year financial period (52 weeks) and
prior years.
4. The Company acquired four car seat installation businesses during the year – one in each of Victoria, New South Wales, Queensland and South Australia. These businesses
previously provided car seat installation services to Baby Bunting on a fee per service basis. The costs identified relate to due diligence costs and integration costs of the
acquisitions (but not the acquisition consideration) which were finalised during the last quarter of FY2019.
5. The Company is currently undertaking a process of assessment and, where necessary, replacement of its core information and merchandising technology systems. The non-
capital costs of external consultants associated with running the selection and planning for the integration of new systems into the business are significant, but one-off in
nature and not related to the operation or financial performance of the business on a day-to-day basis. We anticipate this project will continue through FY2020 and FY2021.
6. The Company currently receives over 1.5 million phone calls directly to its stores each year. A business review and improvement project was undertaken during the year for
the purpose of better managing those calls and to improve customer service within stores. Costs were incurred with external consultants in relation to this project.
7. In FY2020 the Company will undertake brand modernisation. Costs were incurred during the year in relation to this project that will be announced in FY2020.
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
Restated1
Statutory results
Employee equity expenses2, 3
Tax impact from pro forma adjustments
Sales
($’000)
EBITDA
($’000)
EBIT
($’000)
304,459
17,513
13,150
–
–
1,071
1,071
–
–
Pro forma results
304,459
18,584
14,221
NPAT
($’000)
8,657
1,071
(150)
9,578
1. AASB 15 Revenue from contracts with customers restatement. Refer to Note 2(x).
2. Expense reflects the cost amortisation of performance rights (LTI) granted and outstanding in the current reporting period.
3. 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.
34
Baby Bunting Group Limited Annual Report 2019DIRECTORS’ REPORT Revenue
The FY2019 sales for the year ended 30 June 2019 of $368.0 million represented an increase of 20.9% on FY2018. This sales growth
was achieved through:
• growth from existing stores;
• growth in online sales;
• growth from the opening of six new stores during FY2019;
• the annualising benefit of five stores opened in FY2018, trading for a full financial year in FY2019.
Comparable store sales growth for the year was 8.7% up on the prior year. 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.
Sales from private label and exclusive products grew by 56.5% on the prior year, and were 27.6% of total sales in FY2019, up from
20.9% in FY2018. 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 includes
the core range of car seats.
Online sales continued to see strong annual growth. Total online sales (including click & collect) grew 46.3% on the prior financial
year and click & collect sales grew 54.6%. Online sales now represent 11.8% 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 50 basis points to be 27.5% of sales
(versus 27.0% of sales in FY2018). In FY2019, pro forma CODB expenses were $99.5 million, up 21.0% on the prior year pro forma
CODB expenses of $82.3 million. The increase in business expenses was driven by:
• five stores opened in FY2018 trading for a full financial year in FY2019;
• six new stores opened in FY2019; 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.
2.6 Review of the Company’s financial position
The Company finished the financial year in a net cash position of $2.7 million, up $6.2 million on the prior year net debt position of
$3.5 million. The $6.2 million movement was driven by $14.9 million additional of cash generated from operations less the following
significant cash outflows:
• payment of $7.3 million in dividends, relating to the FY2018 final dividend of $3.2 million (paid on 14 September 2018) and the
FY2019 interim dividend of $4.2 million (paid on 15 March 2019);
• capital expenditure of $11.8 million in FY2019, including $1.3 million relating to the acquisition of the car seat installation
businesses; and
• cash outflows of $7.6 million relating to debt repayments.
Maintaining appropriate inventory levels to fulfil customer needs continues to be a key focus of the business. In FY2019, inventory
increased by $5.2 million to be $68.2 million at the end of FY2019. The increase was driven by a combination of six new stores opened
in FY2019 (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.
Trade and other payables increased from $36.5 million in FY2018 to $44.3 million in FY2019, 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 5.1 cents per share fully franked. Together with the interim dividend of 3.3 cents
per share, the total dividend to be paid in respect of FY2019 is 8.4 cents per share, equivalent to approximately 70% of the Company’s
FY2019 pro forma NPAT. The dividend payment date for the final dividend is 13 September 2019.
35
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION 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 has a multi-channel approach to grow market share.
Baby Bunting’s goal is to create a seamless shopping experience across all channels. The website re-platform project progressed
during the year with the new website launched in July 2019. We continue to work on fully establishing and optimising the website.
Investments in digital marketing and loyalty continue to be made to increase the utilisation of marketing automation and the Customer
Relationship Management (CRM) system.
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. During the year, the first of the Company’s store-based fulfilment hubs was commissioned.
These enable online orders to be fulfilled from selected stores supporting the long term target of being able to fulfil 90% of online metro
orders with a same day delivery service.
In the year ahead, work will be undertaken on a significant project to improve the Company’s merchandise and planning and forecasting
systems. This project will continue through the 2020 financial year and into the 2021 financial year. Once implemented this project will
transform the manner in which the Company forecasts, plans merchandise and replenishes stores. This is expected to deliver significant
benefits for the business.
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 an extensive product range and great 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 75.
• 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.
• leveraging the store network to grow the services offered to customers which currently include services like car seat fittings (see below).
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 32% of stores less
than three years old.
The Company’s “click & collect” service is a key feature and click & collect sales grew 54.6 % during the year. Click & collect sales are
fulfilled in store, providing very convenient fulfilment times for customers.
Historically, car seat installation services have been provided for the Company’s customers through third party installers. During the
year, the Company acquired the businesses of some of the existing third party installers and has brought these services in-house.
The national car seat installation business has been consolidated under a single brand – Baby On Board. Over time, the Company
intends to expand into more services for customers including car seat hire services.
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. During the year, the Company opened six new stores and now operates 53 stores around Australia. The Company will
continue to focus on new store openings only where its rigorous selection criteria are met.
36
Baby Bunting Group Limited Annual Report 2019DIRECTORS’ REPORT The Company evaluates potential new store locations on a range of criteria including demographic profile, site factors and anticipated
store economics.
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.
During the financial year ahead, Baby Bunting opened a store at Chadstone Shopping Centre in Melbourne, its first shopping centre
format. The circa 1,500 square metre store has enabled Baby Bunting to showcase a range of brands and products at Australia’s premier
retail destination, while still providing services customers expect such as a car seat fitting service and convenient bulky goods collection.
The Company plans to open its next shopping centre format store at Westfield Doncaster in Melbourne in the first half of FY2020.
EBITDA margin improvement
The Company improved its pro forma EBITDA margin from 6.1% in FY2018 to 7.5%. This is approaching the rates seen in previous
financial years (7.9% in FY2016 and 8.3% in FY2017). Full year pro forma gross margin was 35.0% an improvement of 190 basis points
from the prior year. The pro forma cost of doing business increased by 50 basis points in FY2019.
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 27.6% of sales, an
increase of 56.5% 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. In the year ahead, the Company intends to launch additional private label brands in soft goods
and hard goods.
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.
Following on from completion of the supply chain review in FY2018, maximising efficiencies in all elements of its supply chain to improve
the efficiency and flow of product from source to customer remains a focus. New outbound freight and international freight service
providers have been appointed. As stated earlier, the Company’s first store-based fulfilment hubs opened at the end of the year and
more will be added during the year to facilitate delivery of online orders.
Other areas of focus continue to be 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.
37
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION 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 29
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 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 consumer confidence generally may cause consumers to reduce the size or extent of purchases with the
Company, which could have an adverse effect on sales and the Company’s financial performance.
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 and
technology 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. The Company also engages an external compliance advisory company that performs periodic audits
of product compliance as well as providing training and advice on particular compliance matters.
38
Baby Bunting Group Limited Annual Report 2019DIRECTORS’ REPORT During the year, the Company entered into an enforceable undertaking with the Australian Competition and Consumer Commission
(ACCC) and paid two infringement notices. This related to the sale of certain models of convertible tricycles which did not comply
with the mandatory standard that applies to strollers and prams. The enforceable undertaking provides that the Company will not sell
convertible tricycle products unless they meet all relevant mandatory safety standards. In addition, the Company has undertaken to
strengthen its internal consumer law compliance programs.
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 Technology, information and transformation 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 (including personal information of our customers), 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.
The Company has a plan to continue making investments in new technology systems, including the new website and e-commerce
platform, some core system enhancements and other technology projects. A failure to implement technology changes effectively or
to manage and complete projects successfully could have an adverse effect on the Company’s financial performance where new
technology or projects cost more, take more time to implement and/or fail to achieve anticipated business benefits. In addition, a failure
of technology could have an adverse impact on consumers’ experience with Baby Bunting. The Company seeks to manage this risk
through appropriate project management and resourcing.
The Company also has systems and processes in place designed to appropriately use and secure our customers’ personal information.
Unauthorised disclosure of, or unauthorised access to, personal information under the control of the Company could have an adverse
effect on the Company’s reputation and ultimately the Company’s financial performance.
5. Significant changes in the state of affairs in FY2019
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 30 June 2019, 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.
39
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION 7. Dividends
The following dividends have been paid to shareholders during the financial year:
Dividend
Final dividend in respect of the financial year ended 24 June 2018 (2.5 cents per share fully franked)
Interim dividend in respect of the half year ended 30 December 2018 (3.3 cents per share fully franked)
$’000
3,150
4,172
The Board has determined to pay a final dividend in respect of the financial year ended 30 June 2019 of 5.1 cents per share.
This dividend is franked to 100% at the 30% corporate income tax rate. The record date for this final dividend is 30 August 2019 and
the dividend payment date is 13 September 2019. The final dividend of 5.1 cents per share, when combined with the interim dividend of
3.3 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:
Director
Position
Date appointed
Date retired
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
Gary Kent
Non-executive Director
12 December 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 pages 16 and 17 of the
Annual Report.
9. Meetings of Directors and Board Committees
The number of meetings of the Board and each Board Committee held during the period ended 30 June 2019 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
Gary Kent
Meetings of directors
Audit and Risk Committee1
Remuneration and
Nomination Committee
Attended
Held
Attended
Held
Attended
Held
12
12
12
12
12
7
12
12
12
12
12
7
3
–
5
5
–
2
3
–
5
5
–
2
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. Ian Cornell was a member of the Audit and Risk Committee until 12 December 2018 at which time Gary Kent was appointed a member of the Audit and Risk Committee.
40
Baby Bunting Group Limited Annual Report 2019DIRECTORS’ REPORT 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
Gary Kent
Ordinary
shares
Performance
Rights
900,000
nil
1,310,978
2,462,868
200,000
20,000
36,000
–
nil
nil
nil
nil
11. Company secretaries
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.
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 47 to 51 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 3,818,000 performance rights under the LTI Plan. In addition, 296,697 performance
rights vested and were exercised and 207,031 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 performance conditions (see pages 47 to 51 of the
Remuneration Report for more details).
Performance rights event
Opening balance (25 June 2018)
Grant of rights under the LTI Plan – FY16 to FY20 award (3 September 2018)
Vesting of rights (18 October 2018)
Lapse of rights (19 October 2018)
Grant of rights under the LTI Plan – FY16 to FY20 award (30 November 2018)
Grant of rights under the LTI Plan – retention award (30 November 2018)
Grant of rights under the LTI Plan – FY18 to FY21 award (30 November 2018)
Grant of rights under the LTI Plan – FY18 to FY21 award (31 May 2019)
Grant of rights under the LTI Plan – retention award (31 May 2019)
Closing balance
Issue price
Number of
performance
rights
5,461,285
nil
n/a
n/a
nil
nil
nil
nil
nil
200,000
(296,697)
(207,031)
300,000
580,000
2,500,000
204,000
34,000
8,775,557
41
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION 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 indemnify 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.
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 ($115,500) (FY2018: $110,000) and
($45,100) (FY2018: nil) services provided during the year are set out in the Financial Statements (at Note 30).
42
Baby Bunting Group Limited Annual Report 2019DIRECTORS’ REPORT The Board has considered the position and in accordance with advice received from the Audit and Risk Committee, is satisfied that
the provision of non-audit services is compatible with the general standard of independence imposed on auditors by the Corporations
Act. The Directors are satisfied that the provision of non-audit services by the auditor did not compromise the auditor independence
requirements of the Corporations Act for the following reasons:
• all non-audit services have been reviewed by the Audit and Risk Committee to ensure that they do not impact on the impartiality and
objectivity of the auditor; and
• none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for
Professional Accountants.
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 56.
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 instrument 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: 16 August 2019
43
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION
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 30 June 2019.
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
Gary Kent (appointed 12 December 2018)
Disclosed executives
Matt Spencer
Darin Hoekman
Non-executive Chairman
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
CEO and Managing Director
Chief Financial Officer
In the 2018 financial year, Stephen Roche was a Non-executive Director (retired 24 June 2018).
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 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. Key developments during FY2019
Key developments during the 2019 financial year in respect of the Company’s remuneration practices and arrangements were:
• Salary benchmarking review: A review was undertaking during the year in relation to business critical roles and key employees,
having regard to various factors including industry remuneration benchmarks. The focus was on non-key management personnel
management and specialist roles. Following that review, some adjustments were undertaken to ensure that Baby Bunting continued
to provide market appropriate remuneration and remained able to attract and retain great talent.
• Incentive and retention arrangements: The 2018 financial year saw some unprecedented changes in the baby goods sector.
Those changes created some short term challenging market conditions for Baby Bunting which impeded earnings in that financial
year. Despite those challenges, the management team delivered on improving the execution of the retail experience for customers
and strengthened and consolidated the Company’s market leading position as the largest speciality baby goods retailer in Australia.
The performance rights provided under the first grant under the long term incentive plan at the time of the Company’s IPO (ie the
FY2016 to FY2020 grant) have performance conditions that assess compound annual growth rates in earnings and total shareholder
returns over a five year performance period. The performance rights were awarded as part of the Board’s remuneration philosophy,
which is to favour a smaller proportion of fixed remuneration (relative to comparable ASX companies) and a larger proportion of
“at-risk” remuneration.
44
Baby Bunting Group Limited Annual Report 2019REMUNERATION REPORT Throughout the 2019 financial year, the Company’s earnings have recovered with growth rates at levels consistent with the Company’s
strategy. For example, the pro forma NPAT for the 2019 financial year is approximately 42.6% above the pro forma NPAT for the
2016 financial year. However, the exceptional nature of the 2018 financial year had, and will continue to have, an outsized adverse
effect on the calculation of compound growth rates for earnings and total shareholder return during the relevant performance period.
Modelling undertaken by the Board indicated that even if the Company achieved exceptional earnings and share price performance
for the balance of the period, the unusual performance in the 2018 financial year would mean that the EPS and TSR performance
hurdles at the end of FY2020 are unlikely to be met in a manner that would provide a meaningful reward for strong performance.
The Board assessed this outcome against the need to provide real incentives for the participating executives and to minimise the risk
that the Company’s remuneration practices ceased to be appropriately attractive (for example, relative to other opportunities that may
be available in the market). Having regard to these matters, the Board determined to provide additional grants during the year in the
form of performance rights (under the FY2016 to FY2020 grant) and a one-off award of retention rights. The terms of these additional
incentive and retention arrangements are described in sections 5.3.1 and 5.3.2 below.
• New Long Term Incentive Plan grants: The Board made grants of performance rights to eligible executives with a three year
performance period from the end of FY2018 to FY2021. These grants provide an incentive beyond the existing grant under the long
term incentive plan (which measures performance to after the end of FY2020). The grant of the FY2018 to FY2021 performance
rights to the CEO and Managing Director, Matt Spencer, was approved by shareholders at the 2018 AGM (see section 5.3.3 below).
• Fees for Non-executive Directors: The fees for Non-Executive Directors were last reviewed prior to the Company’s 2015 IPO.
Directors’ fees were reviewed during the year, with the Board approving an increase in the fees that took effect on 1 January 2019.
The fee increase is described further at section 6 below.
4. Relationship between remuneration and the Company’s performance
The following table shows key performance indicators for the Company over the last five years.
2015
2016
2017
EBITDA (statutory) $’000
11,982
15,743
Net profit after tax (statutory) $’000
Net profit after tax (pro forma) $’000
Dividends per share – ordinary (cps)
Dividends per share – special (cps)
Basic earnings per share (cents) (statutory)
Earnings per share (cents) (pro forma)
6,040
–
–
–
6.2
–
8,334
10,627
6.3
15.0
7.0
8.4
22,138
12,247
12,957
7.2
–
9.7
10.3
2018
17,549
8,686
9,607
5.3
–
6.9
7.6
2019
24,065
12,407
15,149
8.4
–
9.8
12.0
5. Remuneration policy and practices
The Company’s remuneration policy seeks to appropriately reward, incentivise and retain key employees, by providing a link between
remuneration outcomes and both the Company’s and an individual’s performance.
The remuneration practices adopted by the Company include the use of fixed and variable remuneration, and short term and long term
performance based indicators.
For executives, the Board has a philosophy of favouring a smaller proportion of fixed remuneration (relative to comparable ASX
companies) and a large proportion of “at-risk” remuneration.
5.1 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.
45
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION 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).
5.2 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 principle 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.
STI outcome for FY2019
For the 2019 financial year, pro forma EBIT growth relative to the prior year pro forma EBIT was 55.4% as determined and approved by
the Board.
This exceeded the “threshold” growth requirement and resulted in a potential STI payment for participating executives equal to 35.0%
of their base remuneration.
The size of each participating executive’s actual STI payment was determined by applying financial and non-financial criteria.
Achievement of the financial criteria will provide a participating executive with 70% of the potential STI payment. Achievement of the
remaining 30% is subject to achievement of specified non-financial criteria.
Achievement of year on year pro forma EBIT growth of 55.4% (and after allowing for the payments to be made under the STI plans)
meant that the financial criteria was satisfied in its entirety.
The non-financial criteria for the disclosed executives (collectively) consisted of:
• achieving a reduction in the Company’s lost time injury frequency rate;
• achieving margin expansion targets;
• a significant improvement in the “Net Promotor Score” provided throughout the financial year by the Company’s customers;
• successfully implementing projects and operational initiatives, including projects related to core systems and fulfilment processes; and
• new store and future property pipeline 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.
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.
46
Baby Bunting Group Limited Annual Report 2019REMUNERATION REPORT For the disclosed executives, the extent to which the financial and non-financial criteria were achieved and the resulting STI award for
the 2019 financial year was:
Disclosed executives
Matt Spencer
Darin Hoekman
% of
financial
criteria
achieved
% of non-
financial
criteria
achieved
% of
maximum
STI awarded
100%
100%
33%
50%
80%
85%
% of STI
forfeited
20%
15%
STI plan benefits are paid in cash and reflect amounts earned during the financial year and are provided for in the annual financial
statements. Any STI plan payments are payable in September.
5.3 Long Term Incentive Plan
The Long Term Incentive Plan (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 “rights”. Upon vesting, each right entitles the participant to one fully paid ordinary share in the Company.
Participation in a grant under the LTI Plan is by invitation. The Board may determine which executives or other employees are eligible.
For grants of performance rights, whether a right vests depends upon the achievement of performance conditions. For this purpose,
the Board has selected two performance conditions being:
• growth in the Company’s profit (as measured by earnings per share growth); and
• growth in returns to shareholders (as measured by total shareholder return).
The conditions are measured on an absolute basis – that it, growth is measured having regard to the Company’s earnings or share price
from a prior period. The Board considers this to be appropriate given the current stage of the Company’s development and the desire to
ensure that management seek sustainable and profitable growth. On this basis, rewards to participating executives are firmly linked to
the performance of the Company.
During the 2019 financial year, different grants were made under the LTI Plan and details of those grants are provided in this section.
5.3.1 FY2016 to FY2020 performance rights grant
At the time of the Company’s 2015 IPO, performance rights were granted to executives providing an incentive that would be measured
over performance periods ending after the conclusion of FY2020.
Grants to new executive during the year
During the financial year, performance rights under this grant were provided to an eligible executive who joined during the year (this
did not include any disclosed executive). The rights granted are to be assessed against the second and third performance periods
for the FY2016 to FY2020 grant and the number granted was adjusted down to reflect the relatively shorter performance periods for
this participant.
Additional grants to participating executives during the year
The Board’s remuneration philosophy is to provide executives with sufficient incentives to grow shareholder value over time (long term) by
providing participating executives with the opportunity to earn rewards from shares provided to them, combined with a base salary and
short-term incentive package that is lower than their peers who do not have the same level of upside in a long term incentive package.
As discussed at section 3 above, having regard to the developments during the 2018 financial year, participating executives may no
longer have the potential incentive opportunity as originally planned across the FY2016 to FY2020 performance periods. To ensure that
the performance rights under this aspect of the LTI Plan continued to provide an incentive through to the end of FY2020, the Board
determined to provide additional grants of these performance rights (300,000 in aggregate under this plan). These rights were allocated
among the Chief Financial Officer and other participating executives. The CEO and Managing Director did not participate in this grant.
These performance rights will be assessed against the EPS growth and TSR growth performance conditions (described below) and in
respect of the performance period from FY2016 to the end of FY2020.
47
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION Terms and conditions of the FY2016 to FY2020 award
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.
EPS growth
performance
condition
TSR growth
performance
condition
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.
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.
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).
The compound annual growth rate in the Company’s TSR is measured at the end of the relevant
performance period, 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.
Performance periods
Three separate performance periods apply to the rights:
EPS Rights
TSR Rights
• 20% of the EPS Rights were initially assessed
against EPS growth for 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 for 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 for the four year period from the end
of FY2016 to the end of FY2020.
• 20% of the TSR Rights were initially assessed
against the TSR growth in the period from the
Company’s listing on ASX to the period ended 30
September 2018;
• 30% of the TSR Rights will be assessed against
TSR growth measured in the period from the
Company’s listing on ASX to the period ending 30
September 2019; and
• 50% of the TSR Rights will be assessed against
TSR growth measured in the period from the
Company’s listing on ASX to the period ending 30
September 2020.
If a 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 right has not vested at
the end of the third performance period, it will lapse. There is no further retesting after the third performance
period.
Vesting schedule
• 15% of the EPS Rights will vest if the minimum
• 15% of the TSR Rights will vest if the minimum
EPS growth hurdle condition of 15% EPS CAGR is
achieved over the relevant performance period;
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
• 100% of the TSR Rights will vest if the TSR
growth hurdle of 25% EPS CAGR is achieved over
the relevant performance period; and
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 CAGR, the number of EPS
Rights that will vest will be pro-rated on a straight-
line basis.
• if the TSR CAGR is within the range of 15%
to 25% TSR CAGR, the number of TSR
Rights that will vest will be pro-rated on a straight-
line basis.
48
Baby Bunting Group Limited Annual Report 2019REMUNERATION REPORT Additional comment on performance conditions and performance periods
The terms of the FY2016 to FY2020 grant also provide 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
decisions or investments (as occurred in the 2018 financial year) 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.
LTI outcomes to date
The 2019 financial year was the second year that the rights have been (or will be) assessed against the relevant performance conditions.
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 2019 financial year was 12.3%. On this basis, none of the second tranche of EPS rights (or the first tranche that did not vest in the
prior year) will vest. These rights do not lapse but will remain available for vesting at the end of the third and final performance period.
After the end of the 2018 financial year, 12% of participating executives’ TSR rights vested, as the TSR compound growth rate
was 20.3%
First performance period
(FY16 to FY18)
Second performance period
(FY16 to FY19)
Third performance period/(FY16 to FY20)
Measured performance
Proportion of Rights
available for vesting
Proportion of available
Rights that vested
The compound annual growth
rate of EPS over the period
was negative 5.1%
The compound annual growth
rate of EPS over the period
was 12.3%
EPS Rights
20%
50%
0%
0%
First performance period
(IPO to the determination of the 2018 VWAP)
The compound annual growth
rate of TSR over the period
was 20.3%
Second performance period (IPO to
the determination of the 2019 VWAP)
The 2019 VWAP will
be calculated after
30 September 2019
Third performance period
(IPO to the determination of the 2020 VWAP)
TSR Rights
20%
60% of the 20%
(This equated to 12% of
the disclosed executives’
total TSR Rights)
38%
Yet to be determined
Notes:
• Following the vesting of some of the TSR Rights after the conclusion of the first performance period, 296,697 shares were issued to participating executives on 18 October 2018.
• The 2019 VWAP and 2020 VWAP is the volume weighted average share price on ASX of the Company’s shares (as determined by the Board) in the period from 1 July to
30 September (inclusive) for 2019 and 2020, respectively (or such other period as the Board considers appropriate).
49
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION 5.3.2 FY2021 retention rights grant
During the 2019 financial year, the Board made a one-off grant of retention rights to participating eligible executives, including the Chief
Financial Officer. There were 580,000 retention rights granted in total. The CEO and Managing Director was not granted retention rights.
The grant was made as part of the Board’s remuneration strategy to ensure that participating executives continued to have an
appropriate incentive to remain with the business under the Company’s current remuneration philosophy. It also assists to ensure
stability and that executives remain engaged in the business. The Board considers this is critical to the long term success of the
organisation.
The terms of the retention rights provide that each right will vest shortly after the conclusion of FY2021. For vesting to occur:
• the participant must remain employed at the time of vesting (and not otherwise be serving out a period of notice in advance of
cessation of employment, unless otherwise determined by the Board); and
• the participant’s performance evaluation rating in the period up to the assessment of vesting must exceed an acceptable rating.
If the retention rights vest, a participant may elect to exercise the right and receive a fully paid ordinary share. A vested right may be
exercised at any time during the two year period following vesting of the right.
5.3.3 FY2018 to FY2021 performance rights grant
To provide a long term incentive in relation to future periods beyond the IPO grant (the FY2016 to FY2020 period), the Board has
decided to make awards of long term incentives on an annual basis (subject to shareholder approval where required) in relation to three
year periods.
During the 2019 financial year, the Board decided to make a grant under the Long Term Incentive Plan for the period FY2018 to
FY2021. This grant is referred to as the FY2018 to FY2021 grant.
Under this grant, the Board granted 2,500,000 performance rights (in total) to the CEO and Managing Director, the Chief Financial
Officer and other participating executives. The grant to the CEO and Managing Director was approved by shareholders at the
Company’s 2018 AGM.
Terms and conditions of the FY2018 to FY2021 performance rights grant
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.
EPS growth
performance
condition
TSR growth
performance
condition
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.
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 7.6 cents per share. This base level EPS was calculated by dividing the Company’s pro forma
NPAT for the financial year ended 24 June 2018 (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 24
June 2018.
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 $2.22 used as the base level. (This number was the
volume weighted average price of the Company’s shares on ASX in the period 1 July 2018 to 30 September
2018).
The compound annual growth rate in the Company’s TSR is measured at the end of the relevant
performance period, 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 2021 (inclusive) or such other
period as the Board considers appropriate.
Performance periods
The performance period ends after the conclusion of FY2021.
If a performance right does not vest at the end of this performance period it lapses. There is no retesting.
50
Baby Bunting Group Limited Annual Report 2019REMUNERATION REPORT Vesting schedule
• 30% of the EPS Rights will vest if the minimum
EPS growth hurdle condition of 10% EPS CAGR
is achieved;
• 100% of the EPS Rights will vest if the EPS
growth hurdle of 25% EPS CAGR is achieved; and
• if the EPS CAGR is within the range of 10% to
25% EPS CAGR, the number of EPS Rights that
will vest will be pro-rated on a straight-line basis
for between 30% and 100% of the EPS Rights.
•
•
•
30% of the TSR Rights will vest if the minimum
TSR growth hurdle condition of 10% TSR
CAGR is achieved;
100% of the TSR Rights will vest if the TSR
growth hurdle of 20% TSR CAGR is achieved;
and
if the TSR CAGR is within the range of 10% to
20% TSR CAGR, the number of TSR Rights
that will vest will be pro-rated on a straight-
line basis for between 30% and 100% of the
TSR Rights.
5.3.4 General comments on rights Treatment on cessation of employment
Upon resignation or in instances where a participant’s employment was terminated for cause or as a result of unsatisfactory
performance, their 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 2021 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.
5.4 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 42% 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 fourth offer under this plan and issued 163,944 shares to eligible employees who each
received approximately $750 worth of Baby Bunting shares for no monetary consideration. (Eligible employees are generally those full-
time or part-time employees (or long term casual employees) who have been employee for approximately 12 months before the date of
the offer.)
To illustrate the benefits provided to participating team members under the GES Plan, an employee who has participated in each of the
four share offers under the GES Plan (since 2015) has received 1,891 Baby Bunting shares. This represents around $4,300 worth of
value (using the share price at the end of the financial year and including the dividends that have been paid on those shares).
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.
51
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION 6. Non-executive Directors
Remuneration Policy
Under the Company’s Constitution, Non-executive Directors’ remuneration for their services as a Director 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).
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. Non-executive Directors may be reimbursed
for travel and other reasonable expenses incurred in on the business of the Company or in carrying out duties as a director. A director
may be paid additional or special remuneration where a director performs extra services or makes special exertions.
Review of Non-executive Directors’ fees
The Board recognises the need to remain competitive in the market in order to continue to attract and retain talented directors.
Non-executive Director fees were last reviewed in preparation for the Company’s 2015 IPO. During the year, the Committee assessed
the fees paid to Non-executive Directors and recommended to the Board that the fees be increased. In adopting this recommendation,
the Board had regard to the Chairman’s and the Committees’ workloads and benchmarking against comparable publicly listed
companies operating in the retail industry.
The fee increase took effect on 1 January 2019 and the former and the current per annum fees (inclusive of superannuation
contributions provided by the Company) are set out below:
Role
Chairman
Non-executive Director
Chairman of a Board Committee
Member of a Board Committee
Fees before
1 January
2019
$ per annum
Fees from
1 January
2019
$ per annum
120,000
135,000
65,000
15,000
5,000
80,000
15,000
7,500
For the financial year ended 30 June 2019, the fees paid and superannuation contributions to all Non-executive Directors were
approximately $450,143 in aggregate.
52
Baby Bunting Group Limited Annual Report 2019REMUNERATION REPORT 7. 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 table.
Short term
employee benefits
Post-
employment
benefits
Long
term
benefits
Share based
payment2
Salary &
fees1
$
STI and
other
fees
$
Non-
monetary
benefits
$
Super-
annuation
$
Long
service
leave
$
Year
LTI Plan
rights3
$
Employee
share plan4
$
TOTAL5
$
Performance
related
%
Non-executive Directors
Ian Cornell
2019
126,608
2018
114,155
Gary Levin
2019
81,261
Melanie
Wilson
2018
73,086
2019
2018
87,047
77,625
Donna Player 2019
73,085
2018
63,927
2019
43,089
Gary Kent
(appointed 12
December 2018)
Former Non-executive Directors
Stephen
Roche (retired
24 June 2018)
2019
–
2018
63,926
Disclosed executives
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
12,028
10,845
7,719
6,914
8,270
7,374
6,943
6,073
4,093
–
6,072
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
138,636
125,000
88,980
80,000
95,317
84,999
80,028
70,000
47,182
–
69,998
–
–
–
–
–
–
–
–
–
–
–
Matt
Spencer
Darin
Hoekman
2019
520,295
143,000
9,500
20,531
18,046 450,999
– 1,162,371
2018
475,209
–
10,878
20,047
21,998 158,041
–
686,173
2019
361,804
104,390
2018
295,658
–
7,500
7,500
20,531
10,480 239,994
20,047
9,766
61,909
750
999
745,449
395,879
51.1%
23.0%
46.2%
15.6%
Total
2019 1,293,189
247,390
17,000
80,115
28,526 690,993
750 2,357,963
2018 1,163,586
–
18,378
77,372
31,764 219,950
999 1,512,049
1. Amount includes the value of annual leave accrued during the financial year and salary sacrifice arrangements.
2. The value of share based payments has been calculated in accordance with applicable accounting standards.
3. 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.
4. The Company issued 163,944 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 $750 worth of shares. In the prior reporting period, the Company issued 260,108 shares under its General Employee Share Plan
with no monetary consideration payment by participating eligible employees who each received approximately $1,000 worth of shares.
5. There were no termination benefits paid or payable during the current financial year.
53
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION 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.
Disclosed
Non-executive Directors
Ian Cornell
Gary Levin
Melanie Wilson
Donna Player
Gary Kent
Disclosed executives
Matt Spencer
Darin Hoekman
Balance at
start of
the year
Net change
Balance at
the end of
the year
900,000
–
900,000
388,000
(188,000)
200,000
20,000
16,000
–
–
20,000
–
20,000
36,000
–
1,387,132
(76,154)
1,310,978
337,000
44,377
381,377
Performance rights granted to disclosed executives
Balance
at start of
the year
Number of rights
granted as
compensation
during the year
Fair value
per right at
grant date
Value of
rights
granted
during the
year
Number
of rights
exercised
during the
year
Value of
the rights
exercised
during the
year
Number of
rights held at
end of year
(all unvested)
Disclosed executives
Matt Spencer
FY2016 to FY2020 rights 1,981,714
–
–
–
118,846
$14,262
1,862,868
FY2018 to FY2021 rights
–
600,000
$1.53
$918,000
–
–
600,000
Darin Hoekman
FY2016 to FY2020 rights
739,962
50,000
$1.53
$76,500
44,377
$5,325
745,585
Retention rights (FY2021)
FY2018 to FY2021 rights
–
–
165,000
400,000
$2.32
$382,800
$1.53
$612,000
–
–
–
–
165,000
400,000
Matt Spencer was granted performance rights pursuant to shareholder approval granted at the 2018 AGM on 30 November 2018.
During the year, Darin Hoekman was granted the rights detailed above on 30 November 2018.
Details of the performance conditions and performance periods for those rights are set out in section 5.3 (Long term incentive plan) above.
Options
There are no options over shares on issue as at the date of this Directors’ Report.
54
Baby Bunting Group Limited Annual Report 2019REMUNERATION REPORT 9. 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 executives
Matt Spencer
Darin Hoekman
Termination
– notice by
Executive
Termination
– notice by
Company or
payment in lieu
12 months
12 months
6 months
6 months
10. Other KMP disclosures
Other than disclosed in this Remuneration Report, no member of the Company’s key management personnel (or their respective close
family members or an entity over which they have control or significant influence) has entered into any transaction with the Company or
a subsidiary during the reporting period, other than transactions that occur within a normal employee, customer or supplier relationship,
on arms-length terms and that are trivial or domestic in nature.
There are no loans to key management personnel.
This is the end of the Remuneration Report.
55
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION 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
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
Report on t he Audit of t he Financial Report
Opinion
Audit or’s Independence Declarat ion t o t he Dir ect ors of Baby Bunt ing
Group Limit ed
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 30 June
2019, the consolidated statement of profit or loss and other comprehensive income, consolidated
As lead auditor for the audit of Baby Bunting Group Limited for the financial year ended 30 June 2019, I
statement of changes in equity and consolidated statement of cash flows for the year then ended, notes
declare to the best of my knowledge and belief, there have been:
to the financial statements, including a summary of significant accounting policies, and the directors'
declaration.
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act
2001, including:
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
a)
financial year.
giving a t rue and fair view of the consolidated financial position of the Group as at 30 June 2019
and of its consolidated financial performance for the year ended on that date; and
b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Ernst & Young
Basis for Opinion
We conducted our audit in accordance with Aust ralian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting
Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the
Code) that are relevant to our audit of the financial report in Aust ralia. We have also fulfilled our other
et hical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Glenn Carmody
Partner
16 August 2019
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 thereon, but we do not provide a separate
opinion on these matters. For each matter below, our description of how our audit addressed the matter
is provided in that context.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
56
A member firm of Ernst & Young Global Limited
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Liability limited by a scheme approved under Professional Standards Legislation
Baby Bunting Group Limited Annual Report 2019AUDITOR’S INDEPENDENCE DECLARATION CONSOLIDATED FINANCIAL STATEMENTS
Baby Bunting Group Limited for the year ended 30 June 2019
CONTENTS
58
59
60
61
62
62
62
72
72
73
74
74
74
75
75
76
77
77
78
78
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
Notes to the Consolidated Financial Statements
Note 1: Reporting entity
Note 2: Summary of significant accounting policies
Note 3: Revenue from contracts with customers
Note 4: Finance income
Note 5: Profit for the year
Note 6: Income Tax
Note 7: Other receivables
Note 8: Inventory
Note 9: Other assets
Note 10: Plant and equipment
Note 11: Intangible assets and goodwill
Note 12: Acquisition of businesses
Note 13: Deferred tax assets
Note 14: Payables
Note 15: Other Liabilities
79
79
79
80
80
80
82
84
84
85
88
89
90
91
92
92
93
94
99
Note 16: Loans and Borrowings
Note 17: Provisions
Note 18: Issued capital
Note 19: Dividends
Note 20: Retained earnings
Note 21: Segment information
Note 22: Share based payments
Note 23: Related Party Transactions
Note 24: Commitments for expenditure
Note 25: Financial instruments – Fair values and
risk management
Note 26: Notes to the statement of cash flows
Note 27: Parent entity disclosures
Note 28: Group entities
Note 29: Earnings per share
Note 30: Remuneration of auditors
Note 31: Events after balance sheet date
Directors’ Declaration
Independent Auditor’s Report
Shareholder Information
C
H
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A
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E
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A
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N
A
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57
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Revenue
Cost of sales
Gross profit
Finance income
Store expenses
Marketing expenses
Warehousing expenses
Administrative expenses
Project and acquisition related expenses
Finance expenses
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 62 to 92.
2019
$’000
2018
$’000
Restated
Note
3
368,006
304,459
(239,576)
(203,605)
128,430
100,854
4
5
5
5
5
5
6
17
17
(78,785)
(64,788)
(6,040)
(5,606)
(5,240)
(4,319)
(18,632)
(12,990)
(788)
(710)
–
(651)
18,252
12,517
(5,845)
(3,860)
12,407
8,657
–
–
12,407
8,657
12,407
8,657
29(a)
29(b)
9.8
9.8
6.9
6.9
58
Baby Bunting Group Limited Annual Report 2019CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFOR THE 53 WEEKS ENDED 30 JUNE 2019 Consolidated Statement of Financial Position
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
Other liabilities
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 62 to 92.
Note
30 Jun 2019
$’000
24 Jun 2018
$’000
Restated
26(b)
7
8
9
10
11
11
13
14
15
17
16
17
18
22
20
5,841
4,095
7,233
3,805
68,204
62,974
1,511
1,677
79,651
75,689
24,452
21,030
4,535
2,554
45,321
44,180
4,953
4,526
79,261
72,290
158,912
147,979
44,273
36,462
1,928
2,651
4,902
1,614
889
3,256
53,754
42,221
3,133
3,922
7,055
60,809
98,103
10,770
3,987
14,757
56,978
91,001
85,706
85,292
2,515
9,882
912
4,797
98,103
91,001
C
H
A
I
R
M
A
N
A
N
D
C
E
O
’
S
R
E
P
O
R
T
O
U
R
S
T
R
A
T
E
G
Y
O
U
R
S
T
A
T
I
S
T
I
C
S
O
U
R
S
T
O
R
E
S
O
U
R
S
E
R
V
I
C
E
S
B
O
A
R
D
O
F
D
I
R
E
C
T
O
R
S
O
U
R
V
A
L
U
E
S
S
U
S
T
A
I
N
A
B
I
L
I
T
Y
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
S
T
A
T
E
M
E
N
T
A
N
N
U
A
L
F
I
N
A
N
C
I
A
L
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
59
CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAS AT 30 JUNE 2019
Consolidated Statement of Changes in Equity
Balance at 25 June 2017
Effects of adoption of new accounting standards
As at 26 June 2017 (restated)
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Issue of shares (Note 18, 22)
Dividends (Note 19)
Share based payment (Note 22)
Balance at 24 June 2018
Balance at 24 June 2018
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Issue of shares (Note 18, 22)
Dividends (Note 19)
Share based payment (Note 22)
Balance at 30 June 2019
Notes to the consolidated financial statements are included in pages 62 to 92.
Issued
Capital
$’000
84,816
–
84,816
–
–
–
476
–
–
85,292
85,292
–
–
–
414
–
–
85,706
Share Based
Payments
Reserve
$’000
Retained
Earnings
$’000
Restated
Total Equity
$’000
Restated
451
–
451
–
–
–
–
–
461
912
912
–
–
–
–
–
1,603
2,515
8,861
(3,788)
5,073
8,657
–
8,657
–
94,128
(3,788)
90,340
8,657
–
8,657
476
(8,933)
(8,933)
–
461
4,797
91,001
4,797
12,407
–
91,001
12,407
–
12,407
12,407
–
(7,322)
–
414
(7,322)
1,603
9,882
98,103
60
Baby Bunting Group Limited Annual Report 2019CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 30 JUNE 2019 Consolidated Statement of Cash Flows
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Income tax paid
Interest received
Finance costs paid
Note
2019
$’000
2018
$’000
Restated
401,917
332,894
(371,601)
(317,845)
(4,108)
(4,010)
17
(871)
17
(567)
Net cash from operating activities
26(a)
25,354
10,489
Cash flows from investing activities
Payments for plant and equipment
Payments for intangibles
Acquisition of new business
Net cash (used in) investing activities
Cash flows from financing activities
Dividends paid
Net (Repayment of)/Proceeds from borrowings
Net cash (used in) financing activities
10
11
12
19
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the period
26(b)
Notes to the consolidated financial statements are included in pages 62 to 92.
(8,080)
(2,442)
(1,265)
(4,987)
(1,731)
–
(11,787)
(6,718)
(7,322)
(7,637)
(8,933)
5,970
(14,959)
(2,963)
(1,392)
7,233
5,841
808
6,425
7,233
61
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATIONCONSOLIDATED STATEMENT OF CASH FLOWSFOR THE 53 WEEKS ENDED 30 JUNE 2019 Notes to the Consolidated Financial Statements
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 30 June 2019 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’.
The Company has adopted a 53 week retail calendar for financial reporting purposes which ended 30 June 2019. The prior year was a
52 week retail calendar ending on 24 June 2018.
Note 2: Summary of 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 16 August 2019.
(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 instrument 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.
62
Baby Bunting Group Limited Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2019 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.
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 estimates the future cash flows expected to arise from the cash generating unit and a
pre-tax 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
Forecasted gross margin
Forecasted retail store expenses
3.0%
Average gross margins achieved in the period immediately before the forecast period
Forecast increases correlate to the consumer price indices. The values assigned to
the key assumption are consistent with external sources of information
Pre-tax weighted average cost of capital
15.7%
Baby Bunting Group Limited as a whole is considered its own cash generating unit.
The recoverable amount of the consolidated entity’s cash generating unit to which goodwill is allocated 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.
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
Businesses combinations are accounted for using the purchase aquisition 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.
63
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION
Note 2: Summary of significant accounting policies (continued)
(f) Income 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.
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.
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.
64
Baby Bunting Group Limited Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2019 (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
Plant and equipment
Leasehold improvements
Useful Life
3 – 10 years
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.
Class of Intagible assets
Computer software
Useful life
5 years
(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 from contracts with customers
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an
amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. This is
generally instore when the customer purchases the goods or services or on delivery to the customer for online sales.
For layby, revenue is recognised when customers make the final payment and goods have been collected. The initial layby deposit paid
and subsequent instalment payments are recorded as unearned income in the balance sheet and included in trade and other payables.
Rights of return
Certain contracts provide a customer with a right to return the goods within a specified period. The Company uses the expected value
method (historical return rates provide a basis for the expected value) to estimate the goods that will not be returned because this method
best predicts the amount of variable consideration to which the Company will be entitled. The requirements in AASB 15 on constraining
estimates of variable consideration are also applied in order to determine the amount of variable consideration that can be included in the
transaction price. For goods that are expected to be returned, instead of revenue, the Company recognises a refund liability. A right of
return asset (and corresponding adjustment to cost of sales) is also recognised for the right to recover products from a customer.
65
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION Note 2: Summary of significant accounting policies (continued)
Contract assets
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Group performs by
transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is
recognised for the earned consideration that is conditional.
Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Group has received consideration (or an
amount of consideration is due) from the customer. If a customer pays consideration before the Group transfers goods or services to
the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities
are recognised as revenue when the Group performs under the contract. The Group sells gift cards which can be redeemed in store or
online. The unspent funds are recorded as a contract liability, refer to Note 15.
(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, at initial recognition, as subsequently measured at amortised cost, fair value through other
comprehensive income (OCI), and fair value through profit or loss.
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. The most applicable category for the Group is amortised cost.
66
Baby Bunting Group Limited Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2019 Financial assets at amortised cost (debt instruments)
This category is the most relevant to the Group. The Group measures financial assets at amortised cost if both of the following
conditions are met:
• the financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows
and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding; and
• financial assets at amortised cost are subsequently measured using the effective interest rate (EIR) method and are subject to
impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.
The Group’s financial assets at amortised cost includes trade and other receivables.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised
(ie, removed from the Group’s consolidated statement of financial position) when:
• the rights to receive cash flows from the asset have expired; or
• the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows
in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Group has transferred substantially
all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the
asset, but has transferred control of the asset.
(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
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings
or payables.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly
attributable transaction costs.
The Group’s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Loans and borrowings
This is the category most relevant to the Group. After initial recognition, interest-bearing loans and borrowings are subsequently
measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are
derecognised as well as through the EIR amortisation process.
67
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION Note 2: Summary of significant accounting policies (continued)
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial
liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially
modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability.
The difference in the respective carrying amounts is recognised in the statement of profit or loss.
(t) Borrowing costs
Borrowing costs are recognised as expenses using the effective interest rate menthod as described below.
(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 22.
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 26 June 2017 to 24 June 2018. Where appropriate, comparative information has been
reformatted to allow comparison with current year information.
(x) Changes in accounting policies and disclosures
New and amended Standards and Interpretations adopted
The Company applied AASB 15 Revenue from Contracts with Customers for the first time. This new accounting standard supersedes
all previous revenue recognition requirements under Australian Accounting Standards. AASB 15 establishes a five-step model to
account for revenue arising from contracts with customers. Under AASB 15, revenue is recognised at an amount that reflects the
consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The standard
requires entities to exercise judgement, taking into consideration all the relevant facts and circumstances when applying each step
of the model to contracts with their customers. The standard also specifies the accounting for the incremental costs of obtaining a
contract and the costs directly related to fulfilling a contract.
The Company adopted AASB 15 using the full retrospective approach which resulted in an adjustment to opening retained earnings
as at 26 June 2017 of $3.788 million and which resulted in restatement of previous financial statements. The nature and effect of the
changes as a result of adoption of this new accounting standard are described below.
AASB 9 Financial Instruments and other amendments to other standards apply for the first time in the current reporting period, but
do not have a material impact on the consolidated financial statements of the Company. The Company has not early adopted any
standards, interpretations or amendments that have been issued, but are not yet effective.
68
Baby Bunting Group Limited Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2019 AASB 15 Revenue from Contracts with Customers
For retail sales other than layby sales, adoption of AASB 15 does not have a material impact on the Company’s revenue and profit or
loss. Revenue recognition occurs at the point in time when control of the asset is transferred to the customer, generally at the point of
sale or on delivery of the goods. Adoption of AASB 15 also does not have any impact on gift card sales, where revenue is recognised
only on redemption. Under AASB 15, the Company will recognise revenue from estimated unredeemed gift cards over the expected
customer redemption period, which is substantially within 12 months rather than on issue of the gift card or on expiry. The gift card
redemption rates have been determined based on historical rates of issued and redeemed gift cards. The change in policy does not
have any impact on the Company’s gift card revenue recognition on transition to AASB 15.
The impact of change in AASB 15 has been noted in layby sales, customers right to return goods and delivery service revenue.
Please refer to accounting policy below for further discussion.
Set out on the following page are the amounts by which each financial statement line item is affected as at 24 June 2018 as a result
of the adoption of AASB 15. The adoption of AASB 15 did not have a material impact on Other Comprehensive Income (OCI) or the
Company’s operating, investing and financial cash flows. The first column shows amounts prepared under AASB 15 and the second
column represents figures if AASB 15 had not been adopted.
Impact on the Statement of Profit or Loss and Other Comprehensive Income increase/(decrease)
for the full year ended 24 June 2018
Revenue
Cost of sales
Gross profit
Interest income
Store expenses
Marketing expenses
Warehousing expenses
Administrative expenses
Finance costs
Profit before tax
Income tax expense
Profit after tax
Other comprehensive income for the period
Total comprehensive income for the period
Profit for the period attributable to:
Reference
AASB 15
$’000
Previous
AASB
$’000
Increase/
(decrease)
$’000
(i), (iii)
(i), (iii)
304,459
303,093
(203,605)
(202,203)
1,366
(1,402)
100,854
100,890
(36)
17
17
(64,788)
(64,788)
(5,606)
(4,319)
(5,606)
(4,319)
(12,990)
(12,990)
(651)
(651)
12,517
12,553
(3,860)
8,657
–
(3,867)
8,686
–
8,657
8,686
–
–
–
–
–
–
(36)
7
(29)
–
(29)
Equity holders of Baby Bunting Group Limited
8,657
8,686
(29)
Earnings per share
From continuing operations
Basic (cents per share)
Diluted (cents per share)
6.9
6.9
6.9
6.9
–
–
69
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION Note 2: Summary of significant accounting policies (continued)
Condensed Consolidated Statement of Financial Position as at 24 June 2018
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
Other liabilities
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
Reference
AASB 15
$’000
Previous
AASB
$’000
Increase/
(decrease)
$’000
(i)
(i)
(ii)
7,233
3,805
62,974
1,677
7,233
11,091
54,584
1,277
75,689
74,185
21,030
21,030
2,554
2,554
44,180
44,180
(i)
4,526
3,640
72,290
71,404
–
(7,286)
8,390
400
1,504
–
–
–
886
886
147,979
145,589
2,390
(i)
(ii)
(i)
36,462
30,831
5,631
1,614
889
3,256
1,014
914
3,256
600
(25)
–
42,221
36,015
6,206
10,770
10,770
3,987
14,757
56,978
91,001
3,987
14,757
50,772
94,817
85,292
85,292
912
4,797
912
8,613
91,001
94,817
–
–
–
6,206
(3,816)
–
–
(3,816)
(3,816)
(i), (ii)
The nature of the adjustments and the reasons for the significant changes in the statement of financial position as at 24 June 2018 and
the statement of financial performance for the year ended 24 June 2018 are described below.
70
Baby Bunting Group Limited Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2019 (i) Layby sales (change in recognition point resulting from adoption of AASB 15)
Prior to FY2019, the Company recognised layby sales in full upon initiation of the layby by the customer. When a layby sale was initiated
by a customer this included a minimum 25% deposit. At this point, the Company recorded 100% of the sale, took up a receivable to the
value of 75%, reduced inventory (now committed to the customer) and increased cash (25% deposit).
Under AASB 15, the recognition point of layby sales now occurs upon the collection of goods by the customer. Relative to the
Company’s previous accounting revenue recognition policy for layby sales, this has the effect of deferring revenue recognition by around
three months (being the average duration from layby initiation to layby completion). Under AASB 15, as the recognition point for a
layby sale is now at the point of final payment and collection of goods by the customer, a receivable is no longer recorded, inventory
continues to be owned by the Company (until customer collection) and all deposits and layby instalment payments received from
customers are recorded as unearned income.
On adoption of AASB 15, an adjustment was made to opening retained earnings on 26 June 2017 for $3.581 million relating to
adjustment to layby sales described below.
The prior year Statement of Financial Performance has been restated to adjust for the change in the timing of the recognition of layby
sales. The impact on the financial performance for the period ended 24 June 2018 resulting from the change in recognition of layby
sales is to increase sales by $0.207 million, increase cost of sales by $0.243 million and increase income tax expense by $0.07 million.
The Statement of Financial Position as at 24 June 2018 and at 26 June 2017 transition date has been restated to adjust for the change
in timing of the recognition of layby sales as follows:
• The Company recognised additional inventory of $8.389 million (26 June 2017: $8.632 million) to reflect that ownership is retained by
the Company until collection of the goods;
• Layby receivables decreased by $7.287 million (26 June 2017: $7.550 million);
• Deferred tax asset increased by $0.886 million (26 June 2017: $0.910 million), reflecting that income tax is payable on customer
deposits received for layby sales, before the layby sale is recognised as income, and tax expense recorded, for accounting purposes;
• Trade and other payables increased by a net $5.630 million (26 June 2017: $5.574 million), representing an increase in unearned
income of $6.922 million (26 June 2017: $6.887 million) (being the quantum of deposits and instalment payments received by the
Company from customers at that point) less a decrease in GST payable of $1.292 million (26 June 2017: $1.312 million) (GST
reduces as it is not payable until the sale is finalised by the customer);
• Retained earnings as at 24 June 2018 decreased by $3.616 million (26 June 2017: $3.581 million), being the net change resulting
from the restatement of account balances contained within the statement of financial position.
(ii) Right of Return (creation of liability for sales returns as a result of adoption of AASB 15)
Under AASB 15, the Company estimates the value of expected customer sales returns that will arise as a result of the Company’s
change of mind return policy which entitles customers to refund unused goods after purchase. Prior to adopting AASB 15, no right of
return provision was recognised by the Company. The impact of this change to opening retained earnings as at 26 June 2017 and on
the statement of financial position as at 24 June 2018 is as follows:
• Recognise a refund liability of $0.600 million, recorded in other liabilities, being the Company’s estimate of refunds it will make to
customers post period end in relation to sales made during the relevant reporting period, equating to 14 days of sales at the historical
return rate.
• Recognise a right of return asset being the goods the Company expects to be returned by customers as a result of its change of
mind returns policy. This asset amounts to $0.400 million, recorded in other assets in the Statement of Financial Position. The asset
is measured at the former carrying amount of the inventory, less any expected costs to recover the goods. As a result of these
adjustments, retained earnings decreased by $0.200 million.
(iii) Delivery service revenue (change in disclosure resulting from adoption of AASB 15)
The Company provides delivery services to customers for a fee. Predominantly these service fees are freight cost recoveries for online
deliveries. Historically it has been allowable to record these fees against the associated delivery service expense (as a component
of cost of goods sold). AASB 15 considers that monies received in relation to a performance obligation (in this instance delivery of
goods) are to be considered as revenue. The impact of this disclosure change on the statement of profit or loss for the period ended
24 June 2018 is an increase in revenue by $1.159 million and an increase cost of sales by $1.159 million. Net impact on profit is nil.
No other changes to revenue recognition were identified under AASB 15.
71
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION Note 2: Summary of significant accounting policies (continued)
(y) Standards and Interpretations in issue not yet adopted
Australian Accounting Standards and Interpretations that are issued, but not yet effective, up to the date of issuance of the Group’s
financial statements are disclosed below. The Company intends to adopt these new standards and interpretations, if applicable, when
they become effective.
AASB 16 Leases – Effective date: 1 January 2019 (Application date: 1 July 2019)
AASB 16 Leases sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to
account for all leases under a single on-balance sheet model similar to the accounting for finance leases under AASB 117.
Under AASB 16 Leases the Company will account for operating leases as a lessee by recognising a right-of-use (ROU) asset and an
associated lease liability on the Consolidated Statement of Financial Position. The lease liability represents the present value of future
lease payments and the corresponding right-of-use asset represents the right to use the underyling asset during the lease term. The
standard includes two recognition exemptions for the lessee being low value assets and short-term leases. Lessees will be required to
recognise an interest expense on the lease liability and a depreciation charge for the right of use asset.
The Company is currently continuing to assess the impact of the change in the standard which it expects to be material.
Transition to AASB 16
The Company is going to adopt AASB 16 on 1 July 2019.
In applying AASB 16 to leases previously classified as operating leases under AASB 117, the Company is also permitted to use a
number of practical expedients to operating leases on a lease-by-lease basis.
The Company is continuing its assessment of the estimated impact that AASB 16 has on its Consolidated Financial Statements as at
30 June 2019:
Estimated impact on consolidated statement of financial position as at 30 June 2019:
New lease liabilities
$80 million to $100 million
The method of retrospective application is currently being finalised. Depending on the method applied the net effect of the new lease
liabilities and right of use assets, adjusted for deferred tax and the reversal of the existing straight line leasing and incentive liability may
have an impact on opening retained earnings.
The actual impact of applying AASB 16 on the financial statements in the period of initial application will depend on the composition of
the Company’s lease portfolio, the extent to which the Company chooses to use practical expedients and recognition exemptions, final
discount rates used in calculating the lease liability, final determination of reasonably certain renewal options and the new accounting
policies which are subject to change until the Company presents its financial statements that include the date of initial application.
Note 3: Revenue from contracts with customers
An analysis of the consolidated entity’s revenue for the year, is as follows:
Revenue from contracts with customers
368,006
304,459
2019
$’000
2018
$’000
Restated
Note 4: Finance income
Interest income
72
2019
$’000
17
2018
$’000
Restated
17
Baby Bunting Group Limited Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2019
Note 5: 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
2019
$’000
710
5,121
2018
$’000
Restated
651
4,362
24,133
59,158
20,452
46,015
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 24 June 2018
Store expenses
Warehousing expenses
Administrative expenses
Total
For the year ended 30 June 2019
Store expenses
Warehousing expenses
Administrative expenses
Total
Project and acquisition related expenses includes the following:
Acquisition related expenses(i)
Project related expenses(ii)
Total expenses
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)
Depreciation
and
Amortisation
$’000
Excluding
Depreciation
and
Amortisation
$’000
As reported
$’000
(78,785)
4,389
(74,396)
(5,240)
(18,632)
173
559
(5,067)
(18,073)
(102,657)
5,121
(97,536)
2019
$’000
2018
$’000
248
540
788
–
–
–
(i) Acquisition related expenses relate to four car seat installation businesses purchased during the year – one in each of Victoria, New South Wales, Queensland and
South Australia. These businesses previously provided car seat installation services to Baby Bunting on a fee per service basis. The costs identified relate to due diligence
costs and integration costs of the acquisitions (but not the acquisition consideration) which were finalised during the last quarter of FY2019.
(ii) Project related expenses relate to replacement of its core information and merchandising technology systems, business improvement and brand modernisation projects.
73
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION Note 6: Income Tax
Current tax in respect of the current year
Current tax in respect of the prior year
Deferred tax
Total tax expense
2019
$’000
6,036
–
(191)
5,845
2018
$’000
Restated
4,156
(91)
(205)
3,860
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
Other income tax expenses
Income tax expense recognised in profit or loss
2019
$’000
2018
$’000
Restated
18,251
12,517
(5,475)
(3,755)
(561)
191
(196)
91
(5,845)
(3,860)
The tax rate used for 2019 and 2018 in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities
on taxable profits under Australian tax law.
Note 7: Other receivables
Current
Trade receivables
Other receivables
2019
$’000
150
3,945
4,095
2018
$’000
Restated
475
3,330
3,805
There are no material receivables past due date. Other receivables include rebate receivables and finance receivables. The receivables
are expected to be settled within 30 to 90 days.
Note 8: Inventory
Finished goods
Less: Provision for shrinkage, obsolescence and mark-down
2019
$’000
2018
$’000
Restated
69,256
63,545
(1,052)
(571)
68,204
62,974
The cost of inventories recognised as an expense during the current reporting period in respect of continuing operations was
$239.576 million (2018 Restated: $203.605 million).
74
Baby Bunting Group Limited Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2019 Note 9: Other assets
Prepayments
Right of Return
Note 10: Plant and equipment
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
Cost
Balance at 24 June 2018
Additions
Acquisition (Refer Note 12)
Disposals
Transfers
Balance at 30 June 2019
Accumulated depreciation
Balance at 24 June 2018
Depreciation
Disposals
Transfers
Balance at 30 June 2019
Carrying amount as at 30 June 2019
2019
$’000
1,014
497
1,511
2018
$’000
Restated
1,277
400
1,677
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
7,249
34,144
41,393
58
7,927
7,985
–
–
–
95
–
–
95
–
–
7,307
42,166
49,473
(2,871)
(17,492)
(20,363)
(749)
(3,909)
(4,658)
–
–
–
–
–
–
(3,620)
(21,401)
(25,021)
3,687
20,765
24,452
75
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION Note 11: Intangible assets and goodwill
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
Cost
Balance at 24 June 2018
Additions
Acquisition (Refer Note 12)
Transfers
Balance at 30 June 2019
Amortisation and impairment losses
Balance at 24 June 2018
Amortisation
Transfers
Balance at 30 June 2019
Carrying amount as at 30 June 2019
Refer to Note 2 for detail on the inputs used in the impairment calculation of goodwill.
Goodwill
$’000
Intangibles
$’000
44,180
–
–
1,997
1,731
–
44,180
3,728
–
–
–
–
44,180
44,180
–
1,141
–
(773)
(401)
–
(1,174)
2,554
3,728
2,444
–
–
45,321
6,172
–
–
–
–
45,321
(1,174)
(463)
–
(1,637)
4,535
76
Baby Bunting Group Limited Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2019 Note 12: Acquisition of businesses
The Company acquired four car seat installation businesses during the year – one in each of Victoria, New South Wales, Queensland
and South Australia. These businesses previously provided car seat installation services to Baby Bunting on a fee per service basis. As
part of this acquisition we acquired key management personnel and their team of installers providing expertise in car seat installation
services. The goodwill of $1,141,000 comprises the value of expected synergies arising from the acquisition of key management
personnel and team, which is not separately recognised. Transaction costs of $248,000 were expensed and are included in acquisition
expenses (Refer Note 5), and included in the payments to the suppliers and employees cash flow in the statement of cash flow.
Acquisition of New Business
Assets
Property, plant and equipment
Inventory
Liabilities
Provisions
Total identifiable net assets at fair value
Goodwill arising on acquisition
Purchase consideration transferred
Note 13: Deferred tax assets
Deferred tax balances are presented in the consolidated statement of financial position as follows:
Fair value recognised
on acquisition
$’000
95
70
165
(41)
124
1,141
1,265
2019
$’000
2018
$’000
Restated
4,953
4,526
Deferred tax assets
2018 – Consolidated
Restated
$’000
Employee benefits
Non-deductible accruals
Non-refundable layby income
Inventories
Gift vouchers
Operating lease
IPO transaction costs – listing
IPO transaction costs – issuance of new shares
Total
Opening
balance
Recognised
in profit
or loss
893
374
790
502
204
928
337
316
4,344
175
(16)
(13)
(24)
100
178
(113)
(105)
182
Closing
balance
1,068
358
777
478
304
1,106
224
211
4,526
77
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION Note 13: Deferred tax assets (continued)
2019 – Consolidated
$’000
Employee benefits
Non-deductible accruals
Non-refundable layby income
Inventories
Gift vouchers
Operating lease
IPO transaction costs – listing
IPO transaction costs – issuance of new shares
Total
Note 14: Payables
Current
Trade payables
Sundry payables
Opening
balance
1,068
358
777
478
304
1,106
224
211
4,526
Recognised
in profit
or loss
294
177
(70)
17
46
181
(112)
(106)
427
Closing
balance
1,362
535
707
495
350
1,287
112
105
4,953
2019
$’000
2018
$’000
Restated
30,398
13,875
44,273
25,808
10,654
36,462
Terms and conditions of the above financial liabilities:
Trade payables are non-interest bearing and are normally settled on 30-day terms.
Sundry payables includes $4,924,000 (2018: $5,629,000) of deposit and instalment payments received by the Company in relation to
layby sales taken out by customers.
Other payables are non-interest bearing and have an average term of three months.
For explanations on the Group’s liquidity risk management processes, refer to Note 25(b).
Note 15: Other Liabilities
Unredeemed gift cards
Refund liability
The unredeemed gift cards are expected to be redeemed within a year.
2019
$’000
1,169
759
1,928
2018
$’000
Restated
1,014
600
1,614
78
Baby Bunting Group Limited Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2019 Note 16: Loans and Borrowings
Non-current – Secured
Bank loan
2019
$’000
2018
$’000
3,133
10,770
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 2022. On 19 June 2019, this facility was increased from $36,00,000 to $58,00,000. 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 $58,000,000, consisting of $50,000,000 Corporate Market Loan (“CML”) facility and
$8,000,000 bank guarantee facility. The CML facility can be drawn to the lesser of $50,000,000 or 2.25 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 30 June 2019. The current facility does not require the
consolidated entity to amortise borrowings.
Note 17: Provisions
Current
Employee benefits
Operating lease provision
Non-current
Employee benefits
Operating lease provision
2019
$’000
4,111
791
4,902
427
3,495
3,922
2018
$’000
3,206
50
3,256
353
3,634
3,987
The operating lease provision reflects the recognition of rental expenses and lease incentives on a straight-line basis over the lease term.
Note 18: Issued capital
Fully paid ordinary shares
Balance at beginning of the year
Issue of shares:
– Employee Gift Offer
– LTI vesting
Balance at end of the year
30 June 2019
24 June 2018
No. of shares
$’000 No. of shares
$’000
125,980,596
85,292
125,720,488
84,816
163,944
296,697
414
–
260,108
–
476
–
126,441,237
85,706
125,980,596
85,292
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
79
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION Note 19: Dividends
Recognised amounts
Final 2018 dividend
Interim 2019 dividend
2019
2018
$ per
ordinary
share
0.025
0.033
$ per
ordinary
share
0.043
0.028
$’000
3,150
4,172
$’000
5,406
3,527
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. The dividend was subsequently paid to shareholders
on 14 September 2018 totalling $3.150 million.
On 15 February 2019, the Directors determined to pay an interim fully franked dividend of 3.3 cents per share to the holders of fully
paid ordinary shares in respect of the half-year ended 30 December 2018. The dividend was subsequently paid to shareholders on
15 March 2019 totalling $4.172 million.
On 16 August 2019, the directors determined to pay a fully franked final dividend of 5.1 cents per share to the holders of fully paid
ordinary shares in respect of the financial year ended 30 June 2019, to be paid to shareholders on 13 September 2019. The dividend
has not been included as a liability in these consolidated financial statements. The record date for determining entitlements to the
dividend is 30 August 2019. The total estimated dividend to be paid is $6.432 million.
Adjusted franking account balance
Note 20: Retained earnings
Retained earnings
Balance at beginning of year
Profit attributable to owners of the Company
Payment of dividends
Balance at end of year
Company
2019
$’000
7,310
2018
$’000
5,970
2019
$’000
2018
$’000
Restated
4,797
12,407
(7,322)
9,882
5,073
8,657
(8,933)
4,797
Note 21: Segment information
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.
80
Baby Bunting Group Limited Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2019 The following is an analysis of the consolidated entity’s revenue and results from continuing operations by reportable segment:
Revenue
Operating EBIT
Total segment assets
Additions to plant and equipment and intangibles
Depreciation and amortisation
Total non-current assets1
Total segment liabilities
1. Non-current assets exclude deferred tax assets.
Australia
2018
$’000
Restated
2019
$’000
Total
2018
$’000
Restated
2019
$’000
368,006
304,459
368,006
304,459
21,172
14,222
21,172
14,222
158,912
147,979
158,912
147,979
10,524
5,121
74,308
60,809
6,718
4,362
67,764
56,978
10,524
5,121
74,308
60,808
6,718
4,362
67,764
56,978
Revenue reported above represents revenue generated from external customers. There were no inter-segment sales in the current
reporting period (2018: 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.
Operating EBIT
A reconciliation of operating EBIT to profit before tax is provided as follows:
Operating EBIT
Interest revenue
Finance expenses
Employee equity expenses
Profit before tax
2019
$’000
2018
$’000
Restated
21,172
14,222
17
(710)
17
(651)
(2,227)
(1,071)
18,252
12,517
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:
Total segment assets
Total segment liabilities
30 June 2019
$’000
24 June 2018
$’000
Restated
158,912
147,979
60,809
56,978
81
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION Note 22: Share based payments
Share based payments reserve
Balance at beginning of period
Performance rights – expense (Note 22(a))
Balance at end of period
2019
$’000
912
1,603
2,515
2018
$’000
451
461
912
(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 that vest, across various grants, will be determined by reference
to certain performance conditions that include some or all of the following:
• Earnings per share (EPS) growth;
• Total shareholder return (TSR) growth; and
• Service condition (Retention rights).
Fair value of performance rights granted
The weighted average fair value of the performance rights TSR component granted during the reporting period under the LTI Plan
is $0.80 (2018: $0.34). 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
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
2019 – Series 1 (TSR CAGR)
3 September 2018
2019 – Series 1 (EPS CAGR)
3 September 2018
2019 – Series 2 (TSR CAGR)
30 November 2018
2019 – Series 2 (EPS CAGR)
30 November 2018
2019 – Series 3 (TSR CAGR)
30 November 2018
2019 – Series 3 (EPS CAGR)
30 November 2018
2019 – Series 3 (Retention)
30 November 2018
2019 – Series 4 (TSR CAGR)
2019 – Series 4 (EPS CAGR)
2019 – Series 4 (Retention)
31 May 2019
31 May 2019
31 May 2019
Grant date
fair value
Exercise
price
Expiry
date
$0.54
$1.72
$0.30
$1.45
$1.36
$2.39
$2.19
$2.32
$0.74
$2.32
$2.32
$1.14
$2.45
$2.45
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
1. These performance rights vest and can be exercised at the end of the relevant performance and service period, subject to meeting the relevant performance and/or service
conditions. The Board determines whether vesting occurs. Any performance rights that have not vested following the final applicable performance period lapse.
82
Baby Bunting Group Limited Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2019 Grant date share price
Exercise price
Expected volatility
Expected life (years)
Dividend yield
Risk-free interest rate (p.a.)
2018
Series 1
TSR
2018
Series 2
TSR
2019
Series 1
TSR
2019
Series 2
TSR
2019
Series 3
TSR
2019
Series 4
TSR
$1.72
nil
39%
$1.45
nil
45%
$2.39
nil
45%
1.8, 2.8
1.1, 2.1
0.8, 1.8
4.50%
2.15%
4.50%
2.05%
4.50%
1.96%
$2.32
$2.32
$2.45
nil
45%
1.6
3.70%
2.11%
nil
45%
2.6
3.70%
2.11%
nil
45%
2.6
3.70%
2.11%
Movements in performance rights during the year
The consolidated entity recorded a share based payments expense for performance rights of $1.603 million (2018: $0.461 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:
53 weeks ended
30 June 2019
52 weeks ended
24 June 2018
TSR
Number
of rights
EPS
Number
of rights
Retention
Number
of rights
TSR
Number
of rights
EPS
Number
of rights
Balance at beginning of the period
2,730,641
2,730,644
–
2,647,950
2,647,954
Granted during the period
Forfeited during the period
Exercised during the period
Lapsed during the period
Balance at end of period
1,602,000
1,602,000
614,000
257,000
257,000
–
(296,697)
–
–
(93,721)
(113,310)
–
–
–
–
–
–
–
(174,309)
(174,310)
3,942,223
4,219,334
614,000
2,730,641
2,730,644
Exercisable at end of period
–
–
–
–
–
(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 163,944 shares (2018: 260,108 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 $0.414 million (2018: $0.476 million) was fully expensed at the time of granting,
as there are no performance or service conditions.
83
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION Note 23: 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, no loans were outstanding to or from key management personnel or directors of the
consolidated entity (2018: nil).
(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
Share-based payments
Note 24: 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
2019
$
2018
$
1,557,579
1,181,965
80,115
28,526
77,372
31,763
691,743
220,949
2,357,963
1,512,049
2019
$’000
22,459
63,618
27,936
114,013
2018
$’000
18,817
56,761
21,999
97,577
The consolidated entity enters into operating leases for its retail outlets and related equipment such as forklifts. The operating lease
commitments in the table above do not include extension options.
Capital commitments
The consolidated entity has capital commitments totalling nil (2018: nil).
84
Baby Bunting Group Limited Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2019 Note 25: 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
2019
$’000
2018
$’000
Restated
5,841
4,095
9,936
39,349
3,133
42,482
7,233
3,805
11,038
30,833
10,770
41,603
(a) Market risk
(i) Foreign exchange risk management
The majority of the consolidated entity’s operations are transacted in the functional currency (AUD) of the group. Therefore the foreign
currency exchange risk is limited to less than 10% of goods being the amount which is purchased in foreign currency.
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.
(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.
85
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION Note 25: Financial instruments – Fair values and risk management (continued)
(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 24 June 2018
Financial liabilities
Borrowings – CML Facility
Total increase/(decrease)
At 30 June 2019
Financial liabilities
Borrowings – CML Facility
Total increase/(decrease)
Interest rate risk
–50bps
+50 bps
Carrying
amount
$’000
10,770
10,770
Profit
$’000
Profit
$’000
54
54
(54)
(54)
Interest rate risk
–50bps
+50 bps
Carrying
amount
$’000
Profit
$’000
Profit
$’000
3,133
3,133
16
16
(16)
(16)
(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
2019
2018
Limit
$’000
50,000
8,000
58,000
Utilised
$’000
3,133
3,662
6,795
Limit
$’000
Utilised
$’000
30,000
10,770
6,000
3,766
36,000
14,536
86
Baby Bunting Group Limited Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2019 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
Total
Weighted average
effective interest
rate
%
At 24 June 2018
Restated
Financial assets
Cash and cash equivalents
Other receivables
7,233
3,805
11,038
Financial liabilities
Trade and other payables
30,833
Borrowings – CML Facility
-
30,833
At 30 June 2019
Financial assets
Cash and cash equivalents
Other receivables
5,841
4,095
9,936
Financial liabilities
Trade and other payables
39,349
Borrowings – CML Facility
–
39,349
Less than
6 months
$’000
6 – 12
months
Between
1 and 2
years
Between
2 and 5
years
Over
5 years
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
10,770
10,770
Maturity
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,133
3,133
–
–
–
–
–
–
0.21%
–
–
3.40%
Weighted average
effective interest
rate
%
0.25%
–
–
2.75%
7,233
3,805
11,038
30,833
10,770
41,603
Total
5,841
4,095
9,936
39,349
3,133
42,482
(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.
87
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION Note 26: 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
Net cash provided by operating activities
2019
$’000
2018
$’000
Restated
12,407
8,657
5,121
2,227
(291)
166
(5,230)
(427)
7,723
1,286
1,760
313
299
4,362
1,071
(1,405)
(507)
(6,462)
(1,092)
3,722
279
38
933
894
25,354
10,490
(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:
2019
$’000
73
5,768
5,841
2018
$’000
66
7,167
7,233
Cash on hand
Cash at bank
88
Baby Bunting Group Limited Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2019 Note 27: Parent entity disclosures
As at, and throughout, the 53 weeks ended 30 June 2019 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
2019
$’000
10,200
–
2018
$’000
8,527
–
10,200
8,527
–
99,090
99,090
2,649
–
2,649
–
94,064
94,064
914
–
914
85,705
85,292
451
10,285
96,441
451
7,407
93,150
The Company does not have any contractual commitments for the acquisition of property, plant and equipment.
89
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION Note 28: 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.
Subsidiaries listing
Proportion of ownership
interest and voting power
held by the Company
Name of subsidiary
Principal activity
Place of incorporation
and operation
June 2019
June 2018
Baby Bunting Pty Ltd1
Retailing of baby merchandise
Australia
100%
100%
Baby Bunting EST Pty Ltd2
Trustee of the trust established in connection with
the Company’s employee share plans
Australia
100%
100%
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.
90
Baby Bunting Group Limited Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2019 Note 29: 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.
2019
cents per
share
9.8
9.8
2018
Restated
cents per
share
6.9
6.9
(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:
2019
$’000
2018
$’000
Restated
Earnings used in the calculation of basic earnings per share from continuing operations1
12,407
8,657
Weighted average number of ordinary shares for the purposes of basic earnings per share
126,144,540 125,980,596
Number
Number
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:
2019
$’000
2018
$’000
Restated
Earnings used in the calculation of basic earnings per share from continuing operations1
12,407
8,657
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
126,144,540 125,980,596
Shares deemed to be issued for no consideration in respect of:
– Performance rights
296,697
–
Weighted average number of ordinary shares used in the calculation of diluted earnings per share
126,441,237 125,980,596
1. In the current and comparative reporting periods there were no discontinued operations.
Number
Number
91
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION Note 30: 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
2019
$
2018
$
26,250
89,250
30,000
80,000
115,500
110,000
45,100
–
45,100
–
–
–
160,600
110,000
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.
Note 31: Events after balance sheet date
Dividends on the Company’s ordinary shares
A final dividend of 5.1 cents per fully paid ordinary shares has been determined for the year ended 30 June 2019 – refer Note 19.
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 30 June 2019.
92
Baby Bunting Group Limited Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2019 Directors’ Declaration
The Directors declare that:
a.
b.
c.
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;
in their opinion, the attached financial statements are in compliance with International Financial Reporting Standards, as stated in
Note 2 to the financial statements;
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.
In the Directors’ opinion, there are reasonable grounds to believe that the Company and its subsidiary which have entered into the Deed
of Cross Guarantee, as detailed in Note 28 to the financial statements will be able to meet any obligations or liabilities to which they are,
or may become, subject by virtue of the deed of cross guarantee.
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:
16 August 2019
93
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATIONDIRECTORS’ DECLARATION 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 30 June
2019, the consolidated statement of profit or loss and other comprehensive income, consolidated
statement of changes in equity and consolidated statement of cash flows for the year then ended, notes
to the financial statements, including a summary of significant accounting policies, and the directors'
declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act
2001, including:
a)
giving a t rue and fair view of the consolidated financial position of the Group as at 30 June 2019
and of its consolidated financial performance for the year ended on that date; and
b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Aust ralian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting
Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the
Code) that are relevant to our audit of the financial report in Aust ralia. We have also fulfilled our other
et hical responsibilities in accordance with the 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 thereon, but we do not provide a separate
opinion on these matters. For each matter below, our description of how our audit addressed the matter
is provided in that context.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
94
Baby Bunting Group Limited Annual Report 2019INDEPENDENT AUDITOR’S REPORT 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 the performance of procedures designed to respond to our assessment of the risks of material
misstatement of the financial report. The results of our audit procedures, including the procedures
performed to address the matters below, provide the basis for our audit opinion on the 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 rebates
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 matter due to the quantum
of rebates recognised during the year and the
judgement required to be exercised in relation to
a number of factors, including:
► The nature, complexit y and commercial
terms of each individual rebate.
► The appropriate timing of recognition, in
particular, rebates recorded at the reporting
date
► Consideration of whether the rebate and
whether the amount should be applied
against the carrying value of inventory or
recognised in the income statement as a
reduction in cost of goods sold.
Disclosure relating to the measurement and
recognition of rebates can be found in Note 2(g).
Our audit procedures included the following:
► Assessed the appropriateness of the Group’s
accounting policies in relation to volume rebates
and supplier incentives in accordance with
Australian Accounting Standards.
► Assessed the effectiveness of cont rols in place
relating to the recognition and measurement of
rebate amounts.
► Compared recorded amounts for a sample of
significant rebate arrangements with amounts
recorded for the same arrangements in the prior
year and where material variances were
identified, obtained supporting evidence.
► For a sample of individual supplier agreements,
we recalculated the rebate entitlements and
determined whether these were correctly
recorded in accordance with the terms of the
agreement and Aust ralian Accounting Standards.
► We assessed the Group’s year end rebate
receivable at year end by considering the key
assumptions, having regard to past claims
experience and the Group’s claim documentation
prepared after balance date. Where available, we
agreed the receivable to the amount settled
subsequent to year end.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
95
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION 3
Carrying value of invent ories
Why significant
How our audit addressed t he key audit mat t er
As at 30 June 2019, the Group held $68.2
million in inventories representing 43% of total
assets of the 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 controls used by the Group to 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 to determine the net realisable value for
items which may be ultimately sold below cost.
These judgements include consideration of
expectations for future sales based on historical
experience.
► Assessed the basis for inventory 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 inventories, negative margin and
historical stock loss rate trends.
► Considered the impact of sales subsequent to
year end on the value of inventories at balance
date by comparing the actual selling prices to the
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 2019 Annual Report, but does not include the financial report and our
auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon, with the exception of the 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 whether the other information is materially inconsistent with the financial report or
our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilit ies of t he Direct ors 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 Accounting Standards and the Corporations Act 2001 and for
such internal control as the directors determine is necessary to enable the preparation of the financial
report that gives a 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
96
Baby Bunting Group Limited Annual Report 2019INDEPENDENT AUDITOR’S REPORT 4
In preparing the financial report, the directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters relating to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or 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 to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of this financial report.
As part of an audit in accordance wit h the Aust ralian Auditing Standards, we exercise professional
judgment and maintain professional scepticism throughout the audit . We also:
·
·
·
·
·
·
Ident ify and assess the risks of material misstatement of the financial report, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud
may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
Obtain an understanding of internal control relevant to t he audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group’s abilit y to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the financial report or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the Group to cease to continue as
a going concern.
Evaluate the overall presentation, st ructure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events in a
manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group 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
97
CHAIRMAN AND CEO’S REPORTOUR STRATEGYOUR STATISTICSOUR STORESOUR SERVICESBOARD OF DIRECTORSOUR VALUESSUSTAINABILITYCORPORATE GOVERNANCE STATEMENTANNUAL FINANCIAL REPORTSHAREHOLDER INFORMATION 5
We communicate wit h the directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should
not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
Report on 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 55 of the directors' report for the year
ended 30 June 2019.
In our opinion, the Remuneration Report of Baby Bunting Group Limited for the year ended 30 June
2019, complies wit h section 300A of the Corporations Act 2001.
Responsibilit ies
The directors of the Company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the Remuneration Report, based on our audit conducted in accordance with Aust ralian
Audit ing Standards.
Ernst & Young
Glenn Carmody
Partner
Melbourne
16 August 2019
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
98
Baby Bunting Group Limited Annual Report 2019INDEPENDENT AUDITOR’S REPORT Shareholder Information
Baby Bunting Group Limited has one class of shares on issue (being fully paid ordinary shares). There are 126,441,237 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
1 J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
2 NATIONAL NOMINEES LIMITED
3 CITICORP NOMINEES PTY LIMITED
4 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
5 BNP PARIBAS NOMINEES PTY LTD
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