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Sports Direct International PlcAnnual Report
2021
Contents
2
5
6
11
13
16
18
28
46
65
66
102
103
108
111
Our year
Our results
Chairman and CEO’s report
Our stores
Sustainability matters
Our board
Corporate governance statement
Directors’ report
Remuneration report
Auditor’s independence declaration
Financial report
Directors’ declaration
Independent auditor’s report
Shareholder information
Corporate directory
The 2021 Baby Bunting Annual Report reflects
Baby Bunting’s performance for the 52 week
period from 29 June 2020 to 27 June 2021.
The Baby Bunting Group Limited Annual Report is
available online at babybunting.com.au/investor.
Hard copies can be obtained by contacting the
Company’s share registry.
Baby Bunting Group Limited • ABN 58 128 533 693
Baby Bunting’s vision
is to be the most loved
baby retailer for every
family, everywhere.
Notice of 2021 Annual General Meeting
10.00am (Melbourne time) Tuesday, 5 October 2021
Further details will be contained in the Notice of
Annual General Meeting that will be made available
in September 2021.
Baby Bunting Annual Report 2021
1
Our year
Though the year continued to have uncertainty, there are some
things that are almost always certain for new parents: the joy of
welcoming a little one into the family, the challenge of navigating
parenthood, and the rewards that exist in getting to know and love
our newborns.
At Baby Bunting, our core purpose is to support new and expectant
parents through the early years of parenthood – a time filled with many
firsts, milestones and new experiences. This year, we were privileged
to be able to continue supporting Australian parents and their families.
To meet their needs, we – like everyone in the broader community –
worked our way through many challenges.
We continue to be a rapidly growing team. This year, we grew
throughout Australia and have plans to expand even further, into new
neighbourhoods and across the Tasman into New Zealand to extend the
reach of our vision and core purpose.
We thank our suppliers and business partners. We appreciate
our customers and the communities in which we operate. We are
grateful for the understanding and agility they showed in adapting to
the new ways of working with us and the new ways of shopping with us.
Finally, we thank our more than 1,380 passionate team members around
Australia who continue to work hard and show incredible commitment
to supporting new and expectant parents along their parenting journey.
~300,000
The number of births in Australia each year.
On average there are around 6,000 babies born each
week in Australia.
60
The number of Baby Bunting stores around Australia.
Our stores are throughout Australia supporting
parents and parents-to-be in the early stages
of parenting.
~1.1 million
The number of members in our Baby Bunting family,
our loyalty program. We have introduced our new
loyalty program during the year and have plans
to expand it even further.
~30 million
The number of visits to our website
throughout the year. Our omni-channel
offering provides great support,
information and experiences to
parents wherever they are.
2
Baby Bunting Annual Report 2021 3
SALES ($M)
STORES
ONLINE SALES ($M)
468.4
11.3%
Comparable store sales growth %
Sales $m
362.3
8.7%
405.2
4.9%
278
6.9%
304.5
-0.2%
47
42
60
56
53
% of total sales
Online Sales $m
90.8
19.4%
58.9
42.3
14.5%
11.8%
28.9
9.5%
17.8
6.4%
FY17
FY18
FY19
FY20
FY21
FY17
FY18
FY19
FY20
FY21
FY17
FY18
FY19
FY20
FY21
4
PRIVATE LABEL &
EXCLUSIVE PRODUCTS
of total sales %
$m
$193.9
$147.9
41.4%
36.5%
$99.9
27.6%
$63.6
20.9%
$31.7
11.4%
GROSS PROFIT ($M)
PRO FORMA NPAT ($M)
173.7
37.1%
Gross Margin %
Gross Profit $m
146.9
36.2%
126.7
35%
95.3
100.9
34.3%
33.1%
$m
26.0
19.3
13.0
14.4
9.6
FY17
FY18
FY19
FY20
FY21
FY17
FY18
FY19
FY20
FY21
FY17
FY18
FY19
FY20
FY21
Our results
A continuing focus this year was on achieving sustainable financial
performance in challenging times. As an omni-channel retailer
with Australia’s leading baby goods website and 60 stores around
Australia, we delivered on a number of goals focused on online
growth. Combined with effective marketing, we saw an increase
of 54.2% in online sales through our digital channels (including
click & collect), which made up 19.4% of our total sales of the year.
Our digital platforms play a crucial role in supporting our network
of bricks and mortar stores. A key driver of our gross margin
improvement was the ongoing expansion of private label and
exclusive products, which included the addition of our new
JENGO brand. Private label and exclusive products made up 41.4%
of total sales. Importantly, our stores provide essential goods,
services and advice in both traditional and innovative ways. With
contactless click & collect, online deliveries and our personalised
Helping Hand phone service, we supported new and expectant
parents throughout Australia.
These alternative ways of shopping allowed us to continue
supporting our community by giving customers the ability to shop
safely, conveniently and in a way that suited their families and
lifestyles. The implementation of the Baby Bunting Facebook Live
Series also enabled us to provide community support when in-store
visits were restricted. From product demonstrations to parenting
advice, these episodes became an instrumental channel for our team
to share important information and expertise with parents at home.
To finish the year positively in such a challenging environment
reflects the strength of the Baby Bunting brand and the dedication
our team showed to living out our core purpose at a time when it
counted most.
Baby Bunting Annual Report 2021 5
Chairman
and CEO’s
report
There was a tremendous amount of
uncertainty during the year, but Baby
Bunting remained focused on what we
do best: supporting new and expectant
parents during the early years of
parenthood.
The Baby Bunting team responded to a number of
challenges during FY2021, while also continuing to
execute on our strategy to grow market share. We’re
incredibly proud of what our team has achieved this year.
FY2021 financial results overview
While COVID-19-related uncertainties have continued,
Baby Bunting demonstrated the ability to navigate a
rapidly changing environment.
In FY2021:
• total sales were $468.4 million, up 15.6% on the
prior year;
• the total number of transactions was up 9.7% on the
prior year;
• gross profit increased 18.3% on the prior period to
$173.7 million and gross profit as a percentage of
sales increased 83 basis points to 37.1%; and
• statutory net profit after tax was $17.5 million, up
75.5% on the prior period and the Company finished
the year with net cash of $0.9 million.
On a pro forma basis:
• pro forma earnings before interest, tax, depreciation
and amortization (EBITDA) were $43.5 million, up
29.2% on the prior corresponding period. Pro forma
EBITDA margin increased 97 basis points to 9.3%; and
• pro forma net profit after tax (NPAT) was $26.0 million,
up 34.8% on the prior corresponding period.
Consistent with previous years, pro forma results
exclude the significant costs associated with our
business transformation agenda. They also exclude the
impact of employee equity incentive expenses. This is to
better demonstrate the underlying trading performance
Ian Cornell Chairman,
Non-executive Director
Matt Spencer CEO
and Managing Director
6
of the business. Pro forma EBITDA also excludes the
impact of AASB 16 lease accounting for consistency with
previous years.
A reconciliation between the statutory and pro forma
financial results is set out in Section 2.5 on pages 32 to
33 of the Directors’ Report.
Dividends
The Board has approved a final dividend of 8.3 cents
per share fully franked. Together with the interim
dividend of 5.8 cents per share, the total dividend
payment for the year is 14.1 cents per share. This is
equivalent to approximately 70% of the Company’s
FY2021 pro forma NPAT.
The year in review
Baby Bunting did not receive any JobKeeper payments and
kept our team together and employed during the year.
COVID-19 and supporting our movement to
COVID-normal
Our number one objective continues to be keeping our
team and customers safe. Operating in a COVID-safe
way is now routine, with check-in QR codes, enhanced
cleaning and contactless click & collect all embedded.
Our policy of providing paid leave to team members
who need to isolate due to COVID-19 continued through
the year.
To support our team and the broader community in
getting vaccinated, we have introduced a policy of paid
leave to enable team members who need time off to
obtain vaccinations. We are also running a competition
for all team members who have been fully vaccinated as
recommended by the government, and on the advice of
a health practitioner. Vaccinated team members will go
into a draw to share in $10,000 worth of cash prizes.
We remain committed to doing what we can to help
Australia move to a COVID-normal setting.
Building our private label and exclusive product range
We expanded our private label and exclusive product
range during the year and finished the year with 41.4% of
all sales from these products (up from 36.5% in the prior
year). Our long term goal is to have more than 50% of
sales being exclusive to Baby Bunting.
We launched our new mid-tier private label brand, JENGO,
with a range of hard good products including a pram, travel
cot and rocker. JENGO joins 4baby and Bilbi as our range
of private labels and these brands are performing strongly.
Our private label range architecture continues to evolve.
Our categories of exclusive products have also grown
as we work with our supplier partners on bringing great
ranges to our customers. These exclusive products and
brands extend from best selling international brands to
iconic Australian household brands such as Steelcraft
and Baby Love.
Our strengthened brand
The roll-out of our new Baby Bunting brand completed
during the year. The contemporary and fresh new
look reflects our brand essence of supporting new
and expectant parents. It has been embraced by
our customers.
We have also made significant gains in the perception
of our brand, across all key brand metrics in our market.
Through our third party brand tracker research,
Baby Bunting is now number one for top of mind
awareness in relation to essential baby goods. This has
translated into strong growth in Baby Bunting being the
preferred shopping location for consumers as well as
having high conversion from store visits to purchases.
The strength of Baby Bunting’s brand awareness among
those in our market is highly beneficial as we expand our
store network and continue to grow in Australia.
Expanding store network and online fulfilment hubs
We plan to expand our store network to at least
100 stores throughout Australia. During the year, we
opened stores in Knox (Vic), Coffs Harbour (NSW),
Belconnen (ACT) and Castle Towers (NSW), and we
ended the year with 60 stores. Our pipeline of new
stores for FY2022 and FY2023 is well progressed, and
we anticipate opening 5 to 8 stores in Australia over the
coming year.
We have also established online fulfilment hubs at key
stores in NSW, Western Australia, South Australia,
Queensland and Tasmania along with multiple online
fulfilment stores throughout Australia. This network
supports our ability to efficiently fulfil online orders
where our customers need them. During the year, we
had 41% of online orders fulfilled from stores. Our long
term objective remains to fulfil 90% of online orders
same day in metro areas.
National Distribution Centre and Store Support Centre
We’re pleased to report that we successfully
commissioned our new National Distribution Centre in
March 2021, followed by the new Store Support Centre
in May 2021. These are both state-of-art facilities
located in Dandenong South, Victoria. The former
Distribution Centre and Store Support Office was also
successfully decommissioned.
At over 22,000 square metres, the National Distribution
Centre more than doubles our distribution capability
to provide better support for our stores and online
operations. We have reduced our reliance on third party
logistics and increased the range of products moving
through our Distribution Centre, providing efficiencies
and cost benefits. Our Store Support Centre will
accommodate our growing support teams and has been
designed for modern ways of working.
Baby Bunting Annual Report 2021 7
Chairman
and CEO’s
report
(cont.)
Our digital transformation
journey progresses and we
continue to make investments
in this area.
We provide an omni-channel
experience across our online
store and our network of
bricks and mortar stores.
In line with our supply chain strategy, work will commence
in the coming 12 months in establishing our medium-term
objective of establishing a second distribution centre in
either New South Wales or Queensland as our network
of stores expands further in the future.
Our digital journey
Our strategy of delivering a consistent and
complementary customer experience across all
channels continues.
Services
Our car seat installation business performs well, with
nearly 4 out of every 10 car seats sold at Baby Bunting
installed by the Baby on Board team. We continue to
expand this coverage and build our team of car seat
installer specialists. Our priority is to lift the level of
safely fitted car seats in the community, as research
shows that this is a big issue in Australia.
During the year, we added car seat hire services and are
also moving into breast pump hire. Furthermore, we have
commenced car seat repairs and have been appointed
authorised repairers for a number of the leading car seat
brands in these categories.
We believe we can continue to leverage our store
network and expertise to deliver a greater range of
complementary services.
8
For Baby Bunting, our digital investment complements
our bricks and mortar store operations, and we
continue to make investments in this area. Online sales
in catchments increase following the opening of a Baby
Bunting store in that catchment.
Online sales of $90.8 million were up 54.2%, and now
make up 19.4% of total sales (up from 14.5% in FY2020).
The click and collect portion of our onlines sales were
particularly strong growing 110% to be 8.8% of all sales
(4.7% in FY2020).
We have continued our investment in the transition to a
headless architecture as the technology foundation for
online and digital commerce experiences. This approach
is enabling Baby Bunting to adopt best-of-breed cloud
native, API-first digital services that will continuously
evolve and be improved to support our future digital
customer experiences, products and services. The new
architecture is already being used to support our online
experience and transactions within New Zealand and
will continue to be extended to support our Australian
online channel.
New Zealand
FY2021 has been a milestone year as Baby Bunting
commenced its first operations in a market outside
Australia. In July 2020, we commenced sales to
New Zealand customers from our Australian website.
In February 2021, we announced that the Board had
endorsed plans for Baby Bunting to establish a multi-
channel offering in New Zealand with a store network
of 10 plus stores. This includes an investment in our
online presence.
We have various teams working on property,
merchandise, supply chain and people and culture
aspects of our new operations and while travel
restrictions have presented some challenges, we have
plans for our first store opening later in this financial year.
Some specific events during the year
In addition to the ongoing challenges of COVID-19, the
business responded to some unexpected events during
the year.
In November 2020, we responded to an interception
of insects that had been imported in a contaminated
shipping container affecting the packaging of a shipment
of high chairs. We worked with the Department of
Agriculture, Water and the Environment and, with its
assistance, treated our Distribution Centre and back-
of-house storerooms while also working with affected
customers. While this was a disruption to our operations,
the effect was mitigated by the extraordinary efforts of
our team and considerable support and co-ordination
with the Department of Agriculture, Water and the
Environment and others.
During the year, we also responded to an eligible
data breach that occurred on our website, which
was identified within a few hours. In our response, we
identified 870 customers that may have been affected.
We promptly notified them and informed the Office of
the Australian Information Commissioner. Cyber security
is universally recognised as a risk and it remains a key
focus for us. We have expanded our cyber security
resources (both internal and external) and will continue
to invest in this area.
Sustainability
We recognise the responsibilities we have to our team,
customers and the communities in which we operate, as
well as our various suppliers, and shareholders. We also
engage with regulators and various industry bodies,
in particular those responsible for product safety
standards.
The Board and the management team have worked on
identifying the material issues for Baby Bunting from an
environmental, social and governance perspective. Later
in the year, we will be releasing our first Sustainability
Report which will include Baby Bunting’s ESG strategy and
road map. This will formalise activities that are currently
underway and also set specific goals (and metrics) that
we wish to pursue to ensure Baby Bunting continues to
operate on a sustainable basis for the long term.
Some highlights for the year include:
• finishing the year with a rolling 12-month lost time
injury (LTI) frequency rate of less than 10. We define
an LTI as any injury that results in a team member
being unable to attend their next shift. This is a very
high standard;
• conducting our 6th annual employee share plan gift
offer, which provides eligible team members with
up to $1,000 worth of Baby Bunting shares. With
this plan, we now have more than 50% of our Team
Members who are shareholders of Baby Bunting;
• expanding our community partner programs,
which this year saw us support Perinatal Anxiety
& Depression Australia (PANDA) for the first time
and continue our support for Life’s Little Treasures
Foundation. Our programs raised over $260,000 for
these organisations;
• commissioning our new National Distribution Centre
and Store Support Centre, which will see us achieve
energy efficiencies in our operations through a 5-star
energy rating and solar panels that support electrical
charging stations for our fleet of forklifts and manual
handling vehicles;
• continuing our investments in cyber security as we
respond to growing threats in this space; and
• continuing the roll-out of our ethical sourcing
procedures with suppliers of goods for re-sale.
You can read more about these matters (and others) on
pages 13 to 15 of this Annual Report.
Board changes
Earlier this year, Ian Cornell announced that he would
not be seeking re-election at the 2021 Annual General
Meeting. Ian has been with us since prior to our IPO and
in 2016 he became chair of Baby Bunting. We thank Ian
for his contributions and guidance over the years.
The Board selected Melanie Wilson to succeed Ian as
chair. Melanie has been a director since 2016 and brings a
range of retailing and commercial experience to the role.
As part of the Board renewal process, we are pleased
to announce that Francine Ereira and Stephen Roche
will be joining the Company as Non-executive Directors.
As experienced executives, with significant retail and
digital experience, they will complement the skills and
experience of our Board.
Our Team
We say it every year, but it remains true: our Team
Members are at the foundation of growing our business.
They provide excellent service and helpful advice to
parents and parents-to-be at an incredibly important
time in their lives. We thank every Team Member for their
dedication and everything they do to support new and
expectant parents in the early years of parenthood.
Ian Cornell
Matt Spencer
Baby Bunting Annual Report 2021 9
+7,000
The number of products available in our
stores. We are Australia’s largest specialty maternity
and baby goods retailer with the biggest range.
~3.6m
The number of transactions during the year.
Our Australia-wide store network provides a place for
new parents to come and get advice and support as they
make their way in their parenting journey.
57%
The percentage of online sales that are click
& collect in the areas our stores are located.
Our growing store network means we can easily support
parents close to where they are.
SA
4
WA
6
60 stores throughout
Australia and growing
VIC
16
10
QLD
12
NSW/ACT
21
TAS
1
Our stores
Our stores are at the heart of us supporting new and
expectant parents in the early years of parenthood.
There are parents across all parts of Australia and our purpose is to
support them all. Each year, as our store network grows, we are privileged
to be able to support more and more parents.
We have a store network plan of over 100 stores throughout Australia.
Our plan looks at how we can best support parents in the communities
they are located in. Our plans for the years ahead will see us opening
stores in a number of regional communities. These stores will not only
support parents and parents-to-be, but they will also help in supporting
those communities as we grow our team.
NSW/ACT
VIC
Albury
Auburn
Belconnen
(ACT)
Belrose
Bankstown
Blacktown
Campbelltown
Camperdown
Castle Towers
Casula
Ballarat
Bendigo
Frankston
Geelong
Hawthorn
Hoppers
Crossing
Knox
Chatswood
Maribyrnong
Coffs Harbour
Narre Warren
Fyshwick (ACT)
Preston
Moore Park
Ringwood
Penrith
Taylors Lakes
Rutherford
Thomastown
Shellharbour
Taren Point
Warners Bay
West Gosford
Wetherill Park
QLD
Aspley
Booval
WA
Baldivis
SA
TAS
Gepps Cross
Hobart
Cannington
Melrose Park
Chadstone
Browns Plains
Joondalup
Mile End
Doncaster
Burleigh Waters
Midland
Munno Para
East Bentleigh
Capalaba
Myaree
Fortitude Valley
Osborne Park
Helensvale
Kawana
Macgregor
North Lakes
Toowoomba
Townsville
We work very hard at
selecting the best locations to
provide the best support to
families throughout Australia.
In the years ahead, we have
big plans to get more stores
in places where Australian
families can receive the
products, support and advice
that our team can provide.
Baby Bunting Annual Report 2021
11
During the year, we have
worked on identifying what we
consider to be the material
issues for Baby Bunting from
an environmental, social and
governance perspective.
We will be setting ourselves
sustainability goals and
objectives for future periods.
12
Sustainability
matters
Baby Bunting and sustainability
Our purpose is to support new and expectant parents
in the early years of parenthood. How we go about
achieving our purpose is just as important as the
purpose itself.
During the year, the Board and the management team
have worked on identifying what they consider to be the
material issues for Baby Bunting from an environmental,
social and governance perspective. Later in the year, we
will be releasing our first Sustainability Report which will
include Baby Bunting’s ESG strategy and road map.
Our ESG strategy will be based around three pillars:
• our people
• our communities
• our impact
These pillars – and their related specific goals and
targets – will be underpinned by ESG governance
arrangements that seek to embed ESG considerations in
the way we operate and the way we plan for the future.
Our people
Safety
We want our team to come to work safe and go home
safe at the end of each day. All Team Members have a
responsibility for contributing to their own safety and
the safety of colleagues and customers. We encourage
our Team to Think Safe, Act Safe and Be Safe.
As part of our Safety Management System, we have
programs in place to ensure that our team are aware of
safe work practices in all parts of our business. A key
health and safety risk at Baby Bunting relates to the
risk of injuries from manual handling of goods. We seek
to minimise the risk of injury through specifying weight
limits, requiring two-person lifts and providing manual
handling equipment.
We track our safety record through a number of
measures. A key measure is the rolling 12-month lost
time injury frequency rate (LTIFR). We define a lost time
injury to be any injury that results in a team member
being unable to attend their next shift. This is a very
high standard. There were 16 individual lost time injuries
(LTIs) during FY2021, the majority of which involved a
team member missing three days or less. No LTIs involved
periods of missed shifts greater than seven days.
We finished the year with a LTIFR of less than 10, which
continues a trend of improving our LTIFR results. We aim
to better that rate in the year ahead.
COVID-19 and our team
To support our team during the ongoing COVID-19
pandemic, we have introduced a number of policies to
help our team and to support them in the community:
• COVID-19 paid leave to provide team members who
are unable to work due to self-isolation measures
or the unanticipated closure of schools or childcare
with paid leave. The policy applies to full and part-
time employees and casual employees and provides
the leave to cover the equivalent of two weeks of
rostered work;
• we have introduced a policy of paid leave to enable
team members to obtain vaccinations, where those
team members work at least 25 hours per week and
require time off from work to attend a scheduled
vaccination appointment. The policy applies for the
first and second vaccination appointments; and
• we are also running a competition for all team
members who have been fully vaccinated as
recommended by the Government, and on the advice
of a health practitioner. Vaccinated team members
will go into a draw to share in $10,000 worth of
cash prizes.
The right behaviour
At Baby Bunting, how we conduct ourselves is
fundamental to our business.
Baby Bunting has a number of policies in place designed
to ensure team members act in accordance with
Baby Bunting’s legal obligations and in an ethical manner.
These policies include:
• Code of Conduct
• Business Conduct Compliance Policy
• Anti-Bribery and Corruption Policy
• Whistleblower Protection Policy.
Copies of these policies are available at
babybunting.com.au/investor.
Material breaches of, or matters reported under, these
policies must be promptly reported to the Board.
During the year, there were no material matters arising
under these policies.
Baby Bunting Annual Report 2021
13
wq
Sustainability
matters
(cont.)
Message from the CEO
and Managing Director
At Baby Bunting we treasure our
Team of wonderful people.
As a Leadership Team, we commit to
having a diverse workplace free from
discrimination and bias.
As a business, we will not tolerate or
accept behaviour that discriminates on
race, gender, religion, sexual orientation,
identity or difference.
As the CEO and Managing Director, I am
committed to having a diverse workplace
that is free from bullying, harassment
and discrimination and where the health
and wellbeing of all Baby Bunting Team
Members is our number one priority.
Together, we reaffirm the commitment
to foster a Baby Bunting culture that
celebrates diversity, uniqueness and the
differences in people.
Baby Bunting’s commitment is to
contribute to a society which sees
everyone as equal, where everyone
is treated fairly, where diversity and
difference is embraced and celebrated,
and where workplaces are free of
discrimination and harassment.
1414
Encouraging employee share ownership
Baby Bunting operates a General Employee Share
Plan designed to provide team members with the
ability to accumulate shares in Baby Bunting.
In FY2021, Baby Bunting again operated the share
plan and provided 801 eligible employees with
207 shares each (being $1,000 worth of shares).
This is the sixth consecutive year in which the plan
has operated and we now have more than 50% of
our team members who own Baby Bunting shares.
For team members who have participated in all
of the offers, they have received 2,382 shares.
Using the share price at the end of the year, this
represents around $13,640 of value (including the
dividends that have been paid on those shares).
Further details are set out in Section 6.5 of the
Remuneration Report.
Diversity
Baby Bunting recognises that diversity not only
includes gender diversity, but also includes matters
of age, ethnicity, religion, cultural background,
physical ability and sexual orientation. Baby Bunting
sets out our commitment to recognising the
importance of diversity for the business through our
Diversity Policy. The policy includes 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.
Baby Bunting achieved its measurable objective
in relation to the Company’s Area Managers and
Regional Manager, with 50% being women.
Further details are included in the Corporate
Governance Statement.
wq
Our communities
Support for our communities
Supporting parents
Now, more than ever, we want to support parents and
parents-to-be.
In 2020, we started our Facebook Live series. It is
now a key feature of the way we provide support with
information about a range of topics and issues.
During the year, we presented 34 Baby Bunting
Facebook Live shows which had more than 300,000
views. The topics ranged from mental health issues for
new and expectant parents to baby monitors and baby
safety as well as safe ways of travelling with children and
safe sleeping. Our Facebook Live series enables subject
matter experts from inside and outside Baby Bunting to
speak directly to parents and parents-to-be who want
information and advice about topics that are important
to them.
Life’s Little Treasure Foundation
Baby Bunting has continued as the presenting partner
for the Life’s Little Treasures Foundation, a foundation
which provides support to parents and families of
premature and sick 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.
During the year Baby Bunting helped raise $170,000 for
Life’s Little Treasure Foundation (up from $100,000 in
the prior year).
Perinatal Anxiety and Depression Australia (PANDA)
PANDA is an organisation committed to reducing the
impact of perinatal anxiety and depression. Its roles
include providing services, support and information and
raising awareness.
Baby Bunting partnered with PANDA for the first time
during the year to assist it to raise funds to expand its
programs. We were pleased to be able to raise $90,000
for PANDA and look forward to supporting PANDA in
the future.
The privacy of our customers
We recognise that when we collect the personal
information of our customers, we have an absolute
obligation to respect it and to secure it from
unauthorised access or disclosure.
We do not provide the personal information of our
customers to third parties for their marketing purposes.
We have training in place to ensure our team understand
that they should treat the personal information of our
customers as if it were their own; they need to respect
it, only use it for the purpose for which it has been given
and protect it.
During the year, we responded to an eligible data breach
that occurred on our website (for a very short duration).
In our response, we identified that 870 customers
may have been affected. We promptly notified those
customers and informed the Office of the Australian
Information Commissioner.
We are committed to continually investing in our systems
to ensure that cyber security is maintained and we work
hard to protect against attacks seeking our information
or the information of our customers.
Baby Bunting Annual Report 2021
15
Our board
Details of the qualifications, experience
and special responsibilities of each
current director are as follows:
Gary Levin Non-executive Director
B.Comm, LLB, MAICD
Chairman of the Audit and Risk Committee
Gary has over 40 years’ management, executive and non-
executive experience in public and private companies
including in the retail, investment and online industries.
As a founder, Gary has built and grown many successful
retail businesses, and as a non-executive director he has
been closely involved in the transformation and growth
of retail and digital businesses. These businesses include
Rabbit Photo (former joint managing director), JB Hi-Fi
(former non-executive director), Catch Group (former
Chairman), Cheap as Chips (a discount variety retailer)
(current Chairman), Mwave Australia (an e-commerce
computer retailer) (current Chairman) as well as his role
at Baby Bunting since 2015.
Gary Kent Non-executive Director
BEc, GAICD
Member of the Audit and Risk Committee
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.
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.
16
Melanie Wilson Non-executive Director
MBA, B.Comm (Hons), GAICD
Chairman of the Remuneration and
Nomination Committee
Member of the Audit and Risk Committee
Melanie has more than 15 years’ retail experience in
senior management roles. Her appointments included
Limited Brands (Victoria’s Secret, Bath & Bodyworks –
New York), Starwood Hotels (New York), Woolworths
and Diva/Lovisa and have covered a wide spectrum of
retail including store operations, merchandise systems,
online e-commerce, marketing, brand development
and logistics/fulfilment. In her most recent position,
Melanie was Head of Online at BIG W. 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), EML Payments Limited
(appointed in February 2018) and JB Hi-Fi Limited
(appointed in June 2020). She was a non executive
director of Shaver Shop Group Limited (June 2016 to
May 2020).
Donna Player Non-executive Director
BA, GAICD
Member of the Remuneration and
Nomination Committee
Donna has over 35 years’ experience in retail, marketing
and product development gained in both retail and
wholesale industries. Currently she is 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).
Ian Cornell Chairman, Non-executive Director
FAIM, FAHRI
Member of the Remuneration and Nomination Committee
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 was a non-executive director of Myer Holdings Limited from
February 2014 to October 2019.
Baby Bunting Annual Report 2021
17
Corporate
governance
statement
This Corporate Governance
Statement describes the corporate
governance practices of Baby Bunting
Group Limited (Baby Bunting or the
Company) for the financial year ended
27 June 2021 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
(4th edition) (ASX Principles and Recommendations).
Copies of a number of the charters and policies
referred to in this Statement are available under the
“Governance” section of the Company’s corporate
website babybunting.com.au/investor.
Developments during FY2021
During the 2021 financial year, the Company has updated
certain of its governance practices in advance of
reporting against the 4th edition of the ASX Principles
and Recommendations.
Developments during the year included:
• updates to the Board Charter, including elements
dealing with reporting to the Board of material
breaches of Company policies; and
• the Board adopting a Risk Appetite Statement.
On 17 May 2021, the Company announced that Ian Cornell
will not seek re-election as a director at the AGM in
October 2021, and that Melanie Wilson will become
Chairman upon the retirement of Ian Cornell.
During the year, the Remuneration & Nomination
Committee and the Board has considered the chairman
succession as well as identifying candidates for
appointment to the Board.
In August 2021, the Board announced the appointment
of Francine Ereira and Stephen Roche as independent
Non-executive Directors. They will seek election at the
2021 Annual General Meeting.
Our governance structures
and practices seek to ensure
that the Board provides
appropriate guidance and
supervision to management,
while ensuring that there
is the right culture in place
throughout the organisation.
•
18
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 Board’s composition, its role and responsibilities,
including that the Board is responsible for approving
and monitoring the Company’s strategy, business
performance objectives, financial performance
objectives, and overseeing and monitoring the
establishment of systems of risk management and
internal controls;
• the roles and responsibilities of the Chairman and the
Company Secretary;
• the division of authority between the Board, 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.
The Charter was updated during the year to make it
clear that material breaches of the Company’s key
policies (including the Code of Conduct, the Securities
Trading Policy, the Anti-Bribery and Corruption Policy,
the Business Conduct Policy and the Tax Governance
Policy), along with material incidents reported under
the Company’s whistleblowing framework, are promptly
reported to the Chairman and the Board.
Delegation of Authority Policy
The Company’s Delegation of Authority Policy sets out
in detail the authority that has been delegated to the
CEO and Managing Director and other executives and
Team Members. The policy has been reviewed during the
year having regard to the growth of the Company since
it was initially adopted. While the Board is responsible for
approving the annual budget prepared by management,
executives are delegated responsibility for the budgets
that apply to their functions and departments. The
Delegation of Authority Policy also specifies the
processes for review and approval of contracts and
other commitments.
Director and senior executive
appointments – conducting appropriate
checks
Potential new directors are subject to appropriate
screening and background checks prior, including police
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.
When appointing senior executives, in addition to
screening and background checks, police checks are
also undertaken.
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 as company secretary,
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 and Company Secretary.
Diversity
The Board has adopted a Diversity Policy which sets
out Baby Bunting’s commitment to recognising the
importance of diversity for its business. The policy
is available on Baby Bunting’s corporate website
(babybunting.com.au/investor).
Baby Bunting Annual Report 2021
19
•
Corporate
governance
statement
(cont.)
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 directors, the current mix of tenure on the Board and the time required to identify and attract
appropriate candidates.
The Board measurable objectives for achieving gender diversity at the Company are:
Objectives
Progress
That women and men be
equally represented on the
Board by 2025 (ie 50%)
That at least a third of the
Company’s senior executives
be women in the medium
term
That 50% of the Company’s
Area Managers and Regional
Managers be women in the
medium term
Gender diversity
At the end of the year, the Board comprised two women (33%)
and four men (66%).
Women comprised 25% (3 out of 12) of the Company’s senior
executives. This is a decrease from 27% at the end of FY2020
(3 out of 11).
Over the medium term, the objective is that the senior executive
team reflect an increased degree of gender diversity.
The “senior executive” team comprise the CEO and those
executives reporting to the CEO, plus the GM Merchandise,
GM Store Operations, GM Supply Chain, GM Digital and GM IT
and Transformation.
In our retail operations, Regional Managers, Area Managers and
Store Managers are the leadership roles. Across this group,
approximately 71% are female. (FY2020:70%)
At the Regional Manager and Area Manager level there are ten
Team Members and 50% are female. This is an increase from 44%
in FY2020.
The table below shows the level of gender diversity within the Company and changes from the prior year:
Status
Ongoing
Ongoing
Achieved ü
Number of
females in
category at
27 June 2021
Total
number in
category at
27 June 2021
% of
females
Number of
females in
category at
28 June 2020
Total
number in
category at
28 June 2020
% of
females
Board (incl. CEO & MD)
Senior executives (incl. CEO & MD)
Regional, Area and Store Managers
2
3
50
6
12
70
33%
25%
71%
2
3
48
6
11
69
All Team Members
1,082
1,383
78%
1,000
1,279
33%
27%
70%
78%
In August 2021, the Company lodged its Workforce Profile report with the Workplace Gender Equality Agency (WGEA).
2020
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. The Board also sought the views of executives
by way of an anonymous survey to seek additional
perspectives on the Board and Committee processes
and interactions between the Board and management.
PRINCIPLE 2: STRUCTURE THE BOARD
TO BE EFFECTIVE AND 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
Director
Senior executive performance evaluation
Chairman
Melanie Wilson
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.
Members
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 42 of the Directors’ Report. Directors who are not
members of the Committee may attend any meeting.
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).
Baby Bunting Annual Report 2021 21
Corporate
governance
statement
(cont.)
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.
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 current 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
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
3
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.
2222
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
6 years 8 months
Gary Levin
Independent Non-executive Director
25 August 2014
7 years
Melanie Wilson
Independent Non-executive Director
15 February 2016
5 years 6 months
Donna Player
Independent Non-executive Director
16 January 2017
4 years 7 months
Gary Kent
Independent Non-executive Director
12 December 2018
2 year 8 months
Executive Director
Matt Spencer
CEO and Managing Director
23 April 2012
9 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.
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.
For FY2022, each Director has confirmed 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 executive 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 executives have adopted processes
to ensure that the Board is briefed on developments
relevant to the Company and the markets in which it
operates.
PRINCIPLE 3: INSTILL A CULTURE OF
ACTING LAWFULLY, ETHICALLY AND
RESPONSIBLY
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;
Baby Bunting Annual Report 2021 23
Corporate
governance
statement
(cont.)
• Being focused: think big, but get on with doing the
small things that make a big difference; and
• Being bold: never be afraid to evolve – encourage a
culture of adventure and creativity.
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 (babybunting.com.au/investor).
Whistleblower Protection Policy
The Company has adopted a Whistleblower Protection
Policy. A copy of the policy is available on Baby Bunting’s
corporate website (babybunting.com.au/investor).
The Group Legal Counsel has been appointed the
Whistleblower Investigations Officer and the General
Manager People & Culture has been appointed the
Whistleblower Protection Officer, for the purposes of
the Policy. When they arise, the Board is informed of all
whistleblower reports in a manner consistent with the
confidentiality and security requirements of the Policy.
No such matters were reported in the financial year.
Anti-Bribery and Corruption Policy
The Company has adopted an Anti-Bribery
and Corruption Policy. A copy of the policy is
available on Baby Bunting’s corporate website
(babybunting.com.au/investor).
2424
To support the Policy, the Company has adopted
Acceptable Monetary Limits and Reporting Requirements
which set out when an instance of a gift, entertainment
or hospitality may be accepted by Baby Bunting Team
Members. Generally, they must relate to general
relationship building activities where it cannot reasonably
be construed as an attempt to improperly influence
the performance of the role or function of the
recipient. Team Members must report instances of gifts,
entertainment or hospitality other than where the value is
immaterial. Where the estimated value exceeds specified
limits, prior approval must be sought and obtained.
The Board must be informed of material breaches of the
Anti-Bribery and Corruption Policy. No such incidents or
breaches were reported in the financial year.
PRINCIPLE 4: SAFEGUARD THE
REPORTING OF CORPORATE REPORTS
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
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 42 of the Directors’ Report. Directors
who are not members of the Committee may attend
Committee meetings.
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 27 December
2020 and the full year ended 27 June 2021, received
from the CEO and Managing Director and the Chief
Financial Officer a declaration. The declaration was, in
their opinion, that 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.
Corporate reporting
In addition to the CEO and CFO Declarations (described
above), the Company has processes that seek to
ensure that its annual reports, half yearly reports and
other reports prepared for the benefit of investors are
not misleading or deceptive and do not omit material
information. These processes include:
• a process of confirming pro forma non-statutory
numbers against appropriate supporting files, along
with review and verification by the appropriate
individuals;
• verifying key statements against appropriate source
material; and
• allocating relevant parts of the report or document
for review and sign-off to an appropriate approver.
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.
PRINCIPLE 6: RESPECT THE RIGHTS
OF SECURITY HOLDERS
The Company’s website
The Company’s corporate website (babybunting.com.au
/investor) 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.
Baby Bunting Annual Report 2021 25
Corporate
governance
statement
(cont.)
Shareholder participation at meetings
The Company’s annual general meeting for the financial
year ended 27 June 2021 will be held on 5 October 2021.
In previous years, the annual general meeting has been
held in either Melbourne or Sydney. Last year, the annual
general meeting was held virtually and in 2019 the annual
general meeting was held in Sydney.
Shareholders are provided with notice of the meeting
(either electronically 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.
2626
Details of the Committee are contained on page 24
above (see “Audit and Risk Committee”) and details of
the meetings of the Committee and the attendance of
members are set out on page 42 of the Directors’ Report.
Risk management framework
The Board is responsible for overseeing the
establishment of and approving risk management
strategies, policies, procedures and systems of the
Company, and is supported in this area by the Audit
and Risk Committee. The Company’s management
is responsible for establishing the Company’s risk
management framework.
The objectives of the risk management framework
include:
• identifying the key risks associated with
Baby Bunting’s business;
• raising the profile of risk within Baby Bunting and
helping to 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”; and
• 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
exist to identify, assess, monitor and review the
Company’s key risks and to document and monitor
the Company’s other 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.
A review of the risk management framework occurred
during the year. Following the review, a Risk Appetite
Statement was developed and adopted by the Board
(see below).
Risk appetite statement
The Board has adopted a Risk Appetite Statement. The
statement provides guidance as to the type and degree
of risk that the Board is willing to accept in pursuing the
Company’s strategy and conducting its business. Risk
appetite is the amount of risk that Baby Bunting is willing
to accept or retain to pursue its strategy and conduct
its business. It seeks to balance the benefits of an
activity or new opportunity with the risk that the activity
or opportunity might bring.
The Risk Appetite Statement identifies a number of
risk types (eg operational risk, people and culture risk,
financial risk, legal and compliance risk, strategic risk)
and states a risk appetite rating or tolerance for each.
Risk appetite ratings range from zero appetite through
to high appetite. Instances where a risk tolerance has
been exceeded must be reported to the Audit and Risk
Committee or Board, along with details of any proposed
corrective actions.
The statement forms parts of the Company’s risk
management framework.
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.
In the financial year ahead, the Company intends to
initiate a program of targeted reviews of specific
activities (eg accounts payable, payroll, delegations, etc).
The reviews will be conducted by an external assurance
firm (not the external auditor) with the results reported
to the Audit and Risk Committee.
Environmental and social sustainability
risks
The Company is exposed to a number of risks, details
of which are included in the Directors’ Report on pages
38 to 41. These 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.
As a retailer, the Company is exposed to environmental
and social risks, including risks relating to supply
chains, sustainable packaging and sustainable product
development and sustainable operating practices.
The Company will publish its first Sustainability
Report later in FY2022, setting out the Company’s
goals, practices and targets in respect of its social,
environmental and governance performance.
The Company has also published its second Modern
Slavery Statement. The statement describes the modern
slavery risks that exist in the Company’s supply chains.
A copy of the statement is available on the Company’s
website (babybunting.com.au/investor).
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 21
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 42 of the
Directors’ Report. Directors who are not members of the
Committee may attend Committee meetings.
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
executives) must not engage in transactions designed
to hedge their exposure to the Company’s shares. In
addition, designated persons must only trade during
designated trading windows and must seek approval
under the Policy before doing so.
Baby Bunting Annual Report 2021 27
Directors’
report
The Directors of
Baby Bunting Group
Limited (the Company or
Baby Bunting) submit the
financial report of the
Company and its controlled
entities (“the consolidated
entity”) for the financial year
ended 27 June 2021.
2828
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 27 June 2021.
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
maternity and baby goods, primarily catering to parents
with children from newborn to three years of age
and parents-to-be. Baby Bunting’s core purpose is to
support new and expectant parents in the early years of
parenthood.
The Company’s principal product categories include
prams, cots and nursery furniture, car safety, toys,
babywear, feeding, nappies, manchester and associated
accessories. Baby Bunting also provides services that are
complementary to the products it sells, including car seat
installation and car seat hire services.
2. Operating and financial review
2.1 The Company’s business model
The Company’s business model centres around the sale
of baby goods through its store network and digital
channel, as well as product services offered to parents
and parents-to-be.
Products sold by Baby Bunting include third-party
produced and branded baby goods (many of which are sold
exclusively by Baby Bunting) and private label products.
Baby Bunting’s private label products include products
sold under the “4baby”, “Bilbi” and “JENGO” brands.
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).
Historically, exclusive supply arrangements have been
arranged with suppliers in relation to selected products
and for varying lengths of time.
Baby product services is an expanding part of
Baby Bunting’s business model. The Company offers car
seat installation services at all of its stores throughout
Australia. A car seat hire service is also available at
selected stores around Australia.
During the year, the Company commenced sales of product online to New Zealand customers. The Company also
announced its intention to establish a store network in New Zealand and the first store is expected to open in FY2022.
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 maternity and baby goods retailer with a multi-state presence in Australia.
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 60 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
Consistent retail
format
Baby Bunting has a dedicated team of well trained and knowledgeable staff to service
customers’ individual needs.
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 catchments (with populations
greater than 200,000) 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.
Baby Bunting has a number of stores located in shopping centres, where the format
incorporates the key elements of the standard destination store format.
In regional centres (with populations of less than 200,000), 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 our destination stores and all stores have parcel pick-up facilities
allowing for easy loading of bulky items into customers’ vehicles as well as enabling car
seat installation services.
Widest product
offering, in-stock and
available
Baby Bunting offers what it believes to be the widest range of products, with over
7,000 products available. Through its store network and approximately 22,000 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.
Competitively priced
Comprehensive range
of ancillary services
Baby Bunting’s approach to pricing is centred on offering customers value every day,
every visit.
Baby Bunting’s “Our Price Promise” means that if a customer finds a lower price at
a competitor (including GST and delivery charges) on an identical in-stock product,
Baby Bunting will beat it by 5%.
Baby Bunting has a “Best Buy” range, with everyday low prices. The Best Buy range
includes the 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,
parenting rooms which include baby weigh scales, and an in-store/online gift registry.
Car seat installation services are provided (under the Baby On Board brand) at all
Baby Bunting stores. Car seat hire services are also available at selected stores.
Baby Bunting Annual Report 2021 29
Directors’
report
(cont.)
Drivers of
competitive advantage
Comment
Cost effective
marketing
The Company considers that its most successful marketing tool is word of mouth and
it considers that it has a high unprompted brand awareness. 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 60 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 1,383 employees throughout Australia with the majority
employed at the Company’s stores, and others located at the Company’s Store Support Centre 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 FY2021 included:
• successfully commissioning in March 2021 the new National Distribution Centre at Dandenong South, which
replaces the former distribution centre in Dandenong South and doubles the size of the Company’s distribution
centre facilities. In addition, the attached Store Support Centre was commissioned in May 2021 providing updated
facilities to accommodate the growth of team members in central support functions;
• opening four new stores, being Knox (Vic), Coffs Harbour (NSW), Belconnen (ACT) and Castle Towers (NSW),
bringing the store network to 60 stores;
• commencing sales from the Australian website to New Zealand customers as the first step in the Company’s plans
to open retail operations in New Zealand;
• expanding the number of stores performing online fulfilment throughout the existing store network as the
Company works towards its long term objective to fulfil 90% of online orders same day in metro areas;
• launching the first phase of the Company’s new loyalty program, “Baby Bunting family”, and finishing the year with
over 1 million members. The second phase of the loyalty program, with expanded benefits and offers is scheduled
to be implemented in FY2022;
• launching a new private label, “JENGO”, to complement the “4baby” and “Bilbi” private labels. Sales of private label
and exclusive products made up 41.4% of sales for the year;
• completing the final deployment of the Company’s demand planning and replenishment system to be utilised by the
merchandising team (the first stage was completed in FY2020). This system, through automation and integration
with other inventory management systems, improves stock availability in stores, reduces excess inventory and
reduces administrative effort. The Company also deployed a new merchandise financial planning system which
assists the merchandise team with forecasting and planning; and
• expanding the Company’s support for community partners through the support for fundraising efforts for
Perinatal Anxiety & Depression Australia (PANDA) and Life’s Little Treasures Foundation (a foundation that
provides support, friendship and information, specifically tailored for families of premature or sick babies).
Through customer giving programs and other direct contributions, the Company raised over $260,000 for
these causes.
3030
The effects of the COVID-19 pandemic continued to effect the environment in which the Company operated, with
lock downs in effect throughout Australia in different places and at different times during FY2021. The changes in
operations that were introduced in FY2020 continued in FY2021, including:
• introducing additional health and safety measures in stores and other operations, including physical distancing,
QR check-in codes, customer number management in stores and expanded cleaning regimes as well as the
introduction of contactless click & collect; and
• moving all Store Support Centre team members to remote working environments.
The Company continued its policy of paid COVID-19 leave, to provide team members who were unable to work due to
self-isolation measures or the unanticipated closure of schools or childcare with paid leave. This policy provides paid
leave to cover an affected team member for up to two weeks. The policy applies to full and part-time employees and
casual employees.
Refer to the Chairman and CEO’s Report on page 6 of this Annual Report for more information on the Company’s
operations during the 2021 financial year.
2.5 Review of the Company’s financial performance
The full year statutory results for the 52 week period ended 27 June 2021 (FY2020: 52 week period ended
28 June 2020) are summarised below:
• Total sales up 15.6% to $468.4 million, with comparable store sales growth of 11.3% for the year;
• Gross profit of $173.7 million up 18.3%;
• Statutory net profit after tax (NPAT) of $17.5 million, an increase of 76% on the prior year;
• Statutory basic earnings per share (EPS) of 13.6 cents; and
• Cash and cash equivalents less borrowings (net cash) of $0.9 million (versus net cash of $13.3 million at the end
of FY2020).
In relation to the 2021 and 2020 financial years, the underlying operating results (as measured by pro forma earnings)
are best demonstrated with the following exclusions or adjustments:
• employee equity incentive expenses: the primary economic impact is issued capital dilution if and when shares
are issued;
• business transformation project expenses: non-recurring project related expenses associated with significant
one-off projects for business review, improvement and transformation;
• brand modernisation project costs: this project included a non-cash impairment of old store branding assets
which are in the process of being replaced;
• impairment of digital assets: the impairment of the carrying value of the Company’s investment in its digital
commerce technologies;
• the recovery of monies from the supplier of certain digital assets that had an impairment to their carrying value;
and
• pro forma earnings before interest, tax, depreciation and amortisation exclude the impact of AASB 16 lease
accounting.
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 FY2021 financial results were:
• pro forma earnings before interest, tax, depreciation and amortisation (EBITDA) was $43.5 million, up 29.2% on the
prior corresponding period;
• gross margin was 37.1%;
• pro forma NPAT of $26.0 million, up 34.8% on the prior corresponding period;
• pro forma costs of doing business (CODB) (excluding the impact of AASB 16 lease accounting) were $130.2 million or
27.8% of sales, a decrease of 14 basis points on the prior corresponding period (CODB of 27.9% of sales in FY2020).
Baby Bunting Annual Report 2021 31
Directors’
report
(cont.)
A reconciliation between statutory and pro forma financial results is below.
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
Cost of doing business
(CODB)
Includes store, administrative, marketing and warehousing expenses (excluding pre
AASB 16 depreciation and amortisation).
EBIT
Operating EBIT
Pro Forma EBITDA
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.
Earnings before interest, tax, depreciation and amortisation expense (excluding the
impact of AASB 16 lease accounting) and excludes pro forma adjustments included in
the financial results below.
Pro forma financial results
In relation to the 2020 and 2021 financial years, the pro forma financial results have been calculated to exclude the
impact of employee equity incentive expenses, business transformation project expenses, brand modernisation
project, the impairment of digital assets and related recovery of monies for these impaired assets. This has been done
to more clearly represent the consolidated entity’s underlying earnings.
Year ended 27 June 2021
$’000
Statutory results
Employee equity incentive expenses1,2,3
Transformation project expense4,5,6
Other operating income7
Tax impact from pro forma adjustments8
Pro forma results
Sales
NPAT
468,377
17,532
—
—
—
—
8,170
7,574
(2,400)
(4,872)
468,377
26,004
1. Expense includes the non-cash cost amortisation of performance rights (LTI) on issue in the current reporting period ($4.601 million).
2. The Company issued 165,221 shares (207 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 ($0.795 million).
3. The Company made a $2.774 million cash settled long term incentive payment to participating executives in connection with EPS
performance rights (assessed over the period FY16 to FY20) granted by the Company in October 2015 as part of the Company’s Long
Term Incentive Plan. This plan involves the issue of shares, however due to a timing difference between the $3.215 million impairment of
certain digital assets in June 2020 and the receipt of a $2.400 million settlement payment from the vendor of those assets (refer Note (7)
below), the original performance rights lapsed. If not for this timing difference, the compound annual growth rate of the Company’s EPS
measured over the FY16 to FY20 performance period would have been 16.2% which would have resulted in 25.5% of the EPS performance
3232
rights vesting. The Board had regard to the significant earnings per share growth achieved since the Company’s IPO, as well as the direct
connection between the impairment of the digital assets and the settlement payment recovered by the Company shortly after the end
of the performance period. On this basis, the Board determined to provide a benefit to participating executives calculated by reference
to the EPS performance rights that would have vested if the recovery were received during FY20. A share price of $4.09 was used to
calculate the cash payments (based on 678,438 rights that would have otherwise vested). The share price was determined by reference
to a VWAP of the Company’s shares in the period 1 July to 30 September 2020.
4. The Company is currently undertaking a process of assessment and when necessary, replacement of its core information technology
systems. During the year, the Company incurred ($2.9 million) non-capital costs associated with the implementation of a new online store,
merchandise demand planning and replenishment system, order fulfilment systems, Loyalty system, People systems and assessment of
digital technology assets.
5. The Company incurred $2.5 million in relation to the setup of the new National Distribution Centre including $1.265 million for the
accelerated depreciation and make good of existing Distribution Centre.
6. Other transformation project expenses ($2.149 million) include external consultant costs associated with project management
($1.375million) to deliver the transformation projects described in 5 above. The non-capital costs of external consultants associated
with running the selection and planning for the integration of new systems are significant and not related to the operation or financial
performance of the business on a day-to-day basis. They cease at project completion.
7. The Company received a cash payment ($2.400 million) from the vendor of certain digital commerce technology assets that were impaired
in FY20 following settlement of a dispute relating to those assets.
8. Tax impact from pro forma adjustments includes income tax benefit relating to performance rights vesting under the Company’s Long Term
Incentive Plan ($2.249 million).
The following table reconciles the statutory to pro forma financial results for the year ended 28 June 2020
(noting that this financial information has not been audited in accordance with Australian Auditing Standards):
Year ended 27 June 2020
$’000
Statutory results
Employee equity incentive expenses1,2
Digital assets writedown3
Branding assets writedown4
Transformation project expenses5,6,7
Tax impact from pro forma adjustments
Pro forma results
Sales
NPAT
405,173
—
—
—
—
—
405,173
9,986
2,630
3,215
2,610
3,988
(3,138)
19,291
1. Expense includes the non-cash cost amortisation of performance rights (LTI) on issue in the current reporting period ($1.978 million).
2. The Company issued 185,134 shares (284 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 ($0.652 million).
3. The Company recognised a non-cash impairment of $3.215 million to the carrying value of its investment in digital commerce technology
assets. This arose from the decision (in May 2020) to move away from a monolithic e-commerce architecture to a headless digital
architecture structure. This new structure will enable Baby Bunting to leverage best of breed applications to deliver a world class
customer experience through its digital channels.
4. During the year the Company introduced its new corporate branding, our first major brand change in the Company’s 40 year history. As a
result of this change, the Company recognised a non-cash impairment of $2.610 million to the carrying value of its old corporate branding.
5. The Company is currently undertaking a process of assessment and when necessary, replacement of its core information and
merchandising technology systems. In FY20 the Company incurred ($1.266 million) non-capital costs associated with the implementation
of a merchandise forecasting and replenishment system, order fulfilment systems and assessment of digital technology assets. The
Company’s review of core systems will continue through FY21.
6. The Company incurred ($0.587 million) costs in relation to scoping and building a new loyalty program aimed at increasing engagement and
lifetime spend of its customers. After further completion works, the new loyalty program is expected to be launched in FY21.
7. Other transformation project expenses ($2.135 million) include external consultant costs associated with the selection and establishment
of a new National Distribution Centre ($0.160 million) which is expected to be completed in FY21, and project management and
establishment costs ($1.456 million) to deliver the transformation projects. 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 and not related to the operation or
financial performance of the business on a day-to-day basis. They cease at project completion.
Baby Bunting Annual Report 2021 33
Directors’
report
(cont.)
Revenue
The FY2021 sales for the year ended 27 June 2021 of $468.4 million represented an increase of 15.6% on FY2020.
This sales growth was achieved through:
• growth from existing stores;
• growth in online sales;
• growth from the opening of four new stores during FY2021; and
• the annualising benefit of three stores opened in FY2020, trading for a full financial year in FY2021.
Comparable store sales growth for the year was 11.3% 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. Stores not included in the comparable stores sales growth calculations
in FY2021 were the four stores opened in FY2021 and the three stores opened in FY2020.
Sales from private label and exclusive products grew by 31.1% on the prior year, and were 41.4% of total sales in
FY2021, up from 36.5% in FY2020. This growth has come 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). In addition, Baby Bunting has
expanded the products sold under its “4baby” and “Bilbi” private labels as well as introducing new private label for
hardgoods, known as “JENGO”.
Online sales continued to see strong annual growth. Total online sales (including click & collect) grew 54.2% on the
prior financial year and click & collect sales grew 109.7%. Online sales now represent 19.4% of total sales, up from
14.5% in FY2020. Baby Bunting’s online channel and store networks are complementary. Online sales in a market
catchment have consistently increased following the establishment of a Baby Bunting store in that area.
Expenses
Pro forma costs of doing business (CODB) expenses (excluding the impact of AASB 16 lease accounting) as a
percentage of sales improved to be 14 basis points lower year-on-year at 27.8% of sales (27.9% of sales in FY2020).
In FY2021, pro forma CODB expenses were $130.2 million, up 15.0% on the prior year pro forma CODB expenses of
$113.2 million. The increased investment in operating expenditure was driven by:
• three stores opened in FY2020 trading for a full financial year in FY2021;
• four new stores opened in FY2021;
• the continued investment in the Store Support Centre 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;
• an allowance of $2.5 million in relation to short term incentives paid or payable to store management, store
support team members and the executives (this was $0.3 million in FY2020);
• costs associated with COVID-19 of $1.1 million were incurred during the year arising from increased hygiene
routines, customer communications, additional cleaning and personal protective equipment; and
• costs associated with responding to a biosecurity event during the year of $1.1 million (this is described further on
the following page).
2.6 Review of the Company’s financial position
The Company finished the financial year in a net cash position of $0.9 million, a change of ($12.4) million on the prior
year net cash position of $13.3 million. This movement was driven primarily by a recovery in the inventory position.
The restocking of stores was necessitated by unprecedented variability in demand patterns in Q4 FY2020 driven by
the initial national lockdown that occurred as a result of COVID-19.
3434
Other financial highlights included:
• payment of $15.7 million in dividends, relating to the FY2020 final dividend of $8.2 million (paid on 11 September
2020) and the FY2021 interim dividend of $7.5 million (paid on 12 March 2021);
• lease payments of $26.3 million in relation to the Company’s retail store network, distribution centre, material
handling equipment and motor vehicles for area management;
• capital expenditure of $12.1 million in FY2021, including $3.6 million in branding assets and $2.9 million investment in
core systems; and
• net cash inflows of $10.0 million in relation to increased borrowings.
Dividends
The Board has determined to pay a final dividend of 8.3 cents per share fully franked. Together with the interim
dividend of 5.8 cents per share, the total dividend to be paid in respect of FY2021 is 14.1 cents per share, equivalent
to approximately 70% of the Company’s FY2021 pro forma NPAT. The dividend payment date for the final dividend is
10 September 2021.
Settlement of dispute in relation to certain digital commerce technologies
During the first half of the financial year, the Company received a cash payment of $2.4 million from the vendor of
certain digital commerce technology assets following settlement of a dispute relating to those assets that had been
impaired in the previous year.
This cash payment has been recognised as other income. See also section 3.4 of the Remuneration Report which
discusses the effect of that payment on the Company’s earnings per share compound annual growth rate for the
purpose of the Company’s incentive plans.
Biosecurity event
During the first half of the year, the Company responded to an interception of insects found in packaging of goods
in an imported shipping container. The Company worked closely with the Federal Department of Agriculture, Water
and the Environment and implemented a number of actions in accordance with Departmental requirements, including
the treatment of all store rooms where the affected stock was held and the Distribution Centre and fumigation of
some inventory. This resulted in some short term increases to supply chain costs and one-off costs of treatment and
fumigation costs and customer remediation costs. The issues have been resolved. The Company has submitted claims
under its insurance policies to recover costs and losses associated with the matter.
3. Business strategies and future developments
The Company’s strategy has remained constant during the year and is focused on growing its market share and
continuing to improve its execution and financial performance.
This strategy has the following key elements:
3.1 Invest in digital to deliver the best possible retailing experience across channels and enable new business models
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.
Investments in digital marketing and loyalty continue to be made to increase the utilisation of marketing automation
and the Customer Relationship Management (CRM) system. Digital marketing initiatives and personalised electronic
marketing campaigns assist in providing a better customer experience and more effective engagement with
customers. These applications are expected to enhance customer experience online and ultimately improve
conversion rates.
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, including contactless click & collect introduced during the
second half of the year.
Baby Bunting Annual Report 2021 35
Directors’
report
(cont.)
The Company now has five store-based fulfilment hubs and has enabled store-based fulfilment of online orders at a
number of other stores with further expansion of this capability planned for FY2022. These hubs and stores enable
online orders to be fulfilled from selected stores supporting the long-term target of being able to fulfil 90% of online
metro orders same day.
At the start of the year, the Company launched deliveries to New Zealand consumers through its website. This is the
first step in the Company’s plan to establish a retail store network in New Zealand, with the first store expected to
open later in FY2022.
During the year, the Company progressed the migration from its former e-commerce site to a new headless
e-commerce architecture. This architecture enables Baby Bunting to leverage best of breed applications to delivery
a world class customer experience through the digital channel.
3.2 Investment to grow market share from Baby Bunting’s core business, including the roll out of new stores and
formats, enhanced fulfilment, and new services to existing customers
Baby Bunting’s key strategies to grow market share from its core business 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;
• performing targeted and effective marketing campaigns. The Company’s CRM system and automated marketing
software, plus its loyalty program with its personalised marketing messages, enables the Company to develop
marketing for customers, having regard to customer preferences and product affinities; and
• leveraging the store network to grow the services offered to customers. Baby Bunting’s national car seat
installation business — conducted under the Baby On Board brand — grew significantly through the year. This is
complemented by the Company’s car seat hire services and the Company has plans to progressively expand the
range of services for customers.
Growth from existing stores
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 22% of stores less than three years old.
The Company’s click & collect service is a key feature and click & collect sales grew 109.7% during the year.
Click & collect sales are fulfilled in store, providing very convenient fulfilment times for customers.
Store network plan
Growing market share through the roll out of new stores is a key part of the Company’s growth strategy.
The Company has a store network plan and is looking to continue to grow its network of stores to over 100 stores
in Australia.
This long-term network plan is predicated on the availability of suitable store locations that meet Baby Bunting’s
rigorous return on investment hurdles. In assessing potential new stores, regard is had to site factors, the
demographic profile of the target catchment, existing market share and the estimated effect of any sales re-
direction on existing Baby Bunting stores.
In pursuing this network plan, regard is also had to anticipated changes in future consumer behaviour and retail
trends. The retail store sales have continued to grow year-on-year in addition to exceptional growth in online sales.
This continues to highlight the complementary nature of Baby Bunting’s bricks and mortar stores and its online
store. That is, online sales in a catchment without a store, increase following the opening of a Baby Bunting store in
that same catchment. This highlights the very tactile nature of the industry in which Baby Bunting operates, where
first time parents, in particular, like to visit stores to touch, feel and visually assess products as part of the product
selection process.
During the financial year ahead, Baby Bunting expects to continue to open new stores as it pursues its store
network plan.
3636
3.3 Growth from new markets leveraging Baby Bunting’s core competencies and data into adjacent categories,
entering new geographies and expanding the value chain
The Company’s core competencies include, among other things, large format retailing, merchandising, baby and
maternity products, operating a network at scale and private label and product-led retailing. The Company also has
an expanding range of insights about baby goods consumers.
During the year, the Board approved a strategy for the Company to establish operations and a store network in
New Zealand with aspirations of a network of more than ten stores.
Opportunities might also exist to apply Baby Bunting’s skills in adjacent retail categories, where the ability to leverage
existing customer insights could greatly expand the potential market opportunities.
While the immediate focus is on growing market share from Baby Bunting’s core business, consideration will be given
to exploring opportunities that will provide growth in future periods.
3.4 Profit margin improvement by increasing scale, developing private label and exclusive products and leveraging
infrastructure to reduce the cost of doing business
The Company improved its pro forma EBITDA margin from 8.3% in FY2020 to 9.3%. This was delivered through full year
gross margin of 37.1% an improvement of 83 basis points from the prior year. The pro forma cost of doing business
improved year-on-year, reducing by 14 basis points in FY2021. EBITDA margin improved throughout the year, and in the
second half of FY2021 Baby Bunting achieved its long term target of a pro forma EBITDA margin of 10.0%
A key driver to grow margin improvement is the growth in private label and exclusive product offerings. The Company
offers private label products in strollers, pram, change tables, manchester, babywear, portacots, rockers, 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 continue to facilitate further margin
improvement in future periods.
During the year, private label and exclusive products grew to represent 41.4% of sales, an increase of 31.1% 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.
The Company also launched an additional private label brand in hard goods, known as “JENGO”.
In FY2021, work was completed on a new merchandise financial forecasting system. This system, along with the
demand planning and replenishment system commissioned in FY2020 are transforming the way in which the Company
forecasts, plans merchandise and replenishes stores. This is delivering significant benefits for the business through
improved availability of stock, reduced excess inventory and reduced administrative effort.
Another element of the Company’s strategy for profit margin improvement is the investment made in the Company’s
new National Distribution Centre in Dandenong South. This was commissioned in March 2021, and replaced the former
distribution centre. The Company has committed to a 12 year lease for the new 22,000 square metre distribution
centre, which is located approximately 1.5 kilometres from its former distribution centre in Dandenong South.
The Store Support Centre was also relocated to the new facilities. By expanding the Distribution Centre, Baby Bunting
can support its growing store network and online store and also improve the efficiency and flow of product from
source to customer.
In addition, the use of store-based fulfilment hubs will continue to play a critical role in facilitating prompt 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.
Baby Bunting Annual Report 2021 37
Directors’
report
(cont.)
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.
4.1 COVID-19 pandemic
The COVID-19 pandemic continues to give rise to significant uncertainties for the Company and its operations.
An extensive lockdown was in effect in Victoria during the first half of the year and governments throughout Australia
have continued to introduce public health measures to meet the dangers posed by the COVID-19 pandemic, including
lockdowns which are often implemented on short notice. While the public health danger persists, the potential for
ongoing public health measures, or the introduction of additional public health measures, remains.
The COVID-19 pandemic created challenges across a number of aspects of the Company’s operations. To date these
risks have been addressed through business continuity planning and rapid operational changes. Rates of vaccination
are below government targets, and uncertainty remains about the potential impacts of the COVID-19 pandemic on
the Company’s operations over the coming periods. The risk exists that public health restrictions could be introduced
which significantly curtail the Company’s ability to operate its stores in an area or a number of areas or to establish
new stores. If these restrictions affect a number of the Company’s stores and/or extend for a significant period of
time, the Company’s sales could reduce and its costs of operating could increase, with the effect that its financial
performance could be adversely affected.
Specific matters and risks that relate to COVID-19 include:
• health and safety risks for team members and customers: Baby Bunting operates a network of stores throughout
Australia. The risk exists for the transmission of COVID-19 infection from people interacting in stores. To address
this risk, operational requirements have been introduced into stores, including expanded cleaning regimes,
QR check-in codes, hand sanitising, physical distancing measures, the temporary closure of some features
of stores (eg parents rooms) and encouraging cash-less payments.
Given the large format of the Company’s stores, all stores were able to continue to operate during FY2021 within the
scope of the social distancing requirements imposed by Australian governments. Nevertheless, limits on customer
numbers within stores (and within parts of stores) have applied in stores at various times of the year.
The risk exists that a Baby Bunting store may need to close temporarily if it is identified as an exposure site.
The Company has developed plans to respond to that event and believes it can continue to provide goods and
services to customers in the affected area through other nearby stores or its online store.
• operational changes: The Company has measures to ensure parents and parents-to-be can continue to obtain
the essential products they require without coming into stores. Contactless click & collect enables customers
to collect goods from stores with minimal contact with team members. Baby Bunting’s online store ensures
customers can continue to purchase goods. To support the ongoing operations of the online store, Baby Bunting
has expanded its online fulfilment capacity (through expanding the number of fulfilment hubs and stores).
• risks associated with the supply chain: Events like the COVID-19 pandemic have the potential to adversely
affect Baby Bunting’s supply chains and disrupt the supply of stock from offshore suppliers. To manage this risk,
Baby Bunting seeks to hold stock at its Distribution Centre as well at third party logistics depots around Australia.
The Company operates a single Distribution Centre at Dandenong South. Contingency plans have been developed to
address the risk of a localised government lock-down (or some other COVID-19 event) affecting operations at the
Distribution Centre, which include altering supply chains and re-directing stock. However, if the Distribution Centre
(which includes the principal part of the Company’s online fulfilment operations) is unable to operate for an extended
period of time, and alternative arrangements could not be implemented, that event would have a material adverse
effect on the Company’s financial performance.
Risks also exist in relation to outbound order fulfilment. Online orders are delivered to customers via parcel and
courier service providers. Disruptions to those services can cause delays in delivery times of goods to consumers.
To the extent that the delays are extensive or ongoing, the experience for consumers will be adversely affected.
3838
Accordingly, there is a risk that customer sentiment and the Company’s financial performance could be adversely
affected:
• store development: Restrictions on movement between states and territories and within cities or regions can
disrupt store site selection and new store development activities. To the extent these restrictions are ongoing,
the Company’s store roll-out activities may be delayed.
• external economic risks: The public health measures have had a significant effect on many parts of the Australian
community. While governments have provided economic support and stimulus measures, the risk exists that retail
conditions and the general economic environment are substantially reduced in future periods. 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.
4.2 Other key risks
The Company has a structured risk management framework and internal control systems in place to manage material
risks (see page 26 for further information on the Company’s risk management framework). In addition to the risks
associated with the COVID-19 pandemic noted above, some of the other 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.
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 focusing 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.
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. As noted above in relation to COVID-19 risks, 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.
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.
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.
Baby Bunting Annual Report 2021 39
Directors’
report
(cont.)
Supply chain risks
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 events of global significance that disrupt global
supply chains, 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. While the Company’s new National
Distribution Centre has reduced the need for third party logistics facilities, they remain available to assist in managing
supply chain risks by carrying additional inventory.
The Company’s goods for resale are either imported directly or are sourced from local suppliers who have imported
the goods. While goods imported for re-sale are generally low risk, biosecurity risks can exist in the supply chain;
for example, in the shipping containers used to carry the goods. During the year, the Company responded to an
interception of insects in an imported shipping container which affected the packaging of goods being imported.
Working closely with the Federal Department of Agriculture, Water and the Environment, the Company implemented a
number of actions, including the treatment of all store rooms where the affected stock was held and the Distribution
Centre and the fumigation of some inventory. If the Company’s goods and internal supply chains are the subject of
a significant biosecurity incursion, the potential exists for significant disruption to the Company’s operations in its
Distribution Centre and its stores.
Compliance risks
Baby Bunting is subject to government laws and regulations, including competition and consumer laws 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, among
other things, 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. Investments in the Company’s quality assurance and compliance team continue to ensure that product
compliance remains a key focus. The Company also engages an external compliance advisory company that performs
periodic audits of product compliance and provides training and advice on particular compliance matters.
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.
Technology and information risks
In common with other retailers, the Company faces a range of cyber risks. This is a broad concept and encompasses
a variety of risks that could impact computer systems and that could result in unauthorised access or disclosure of
information held by the Company (including the personal information of our customers), the commission of fraud or
theft, 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.
4040
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 also has systems and processes in place designed to appropriately use and secure 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.
Business transformation risks
The Company has a plan to continue making investments in new technology systems, including its e-commerce
platform, some core system enhancements and other technology projects. The Company is also undertaking a range
of business transformation 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 in the Company’s technology
systems could have an adverse impact on consumers’ experience with Baby Bunting. The Company seeks to manage
this risk through appropriate project management and resourcing.
5. Significant changes in the state of affairs in FY2021
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 27 June 2021, no matter or
circumstance has arisen since the end of the financial year which has not been dealt with in this Directors’ Report or
the Financial Report, and which has significantly affected, or may significantly affect:
• the Company’s operations in future financial years;
• the results of those operations in future financial years; or
• the Company’s state of affairs in future financial years.
7. Dividends
The following dividends have been paid to shareholders during the financial year:
Dividend
Final dividend in respect of the financial year ended 28 June 2020
(6.4 cents per share fully franked)
Interim dividend in respect of the half year ended 27 December 2020
(5.8 cents per share fully franked)
$’000
8,164
7,497
The Board has determined to pay a final dividend in respect of the financial year ended 27 June 2021 of 8.3 cents
per share.
This dividend is franked to 100% at the 30% corporate income tax rate. The record date for this final dividend is
27 August 2021 and the dividend payment date is 10 September 2021. The final dividend of 8.3 cents per share, when
combined with the interim dividend of 5.8 cents per share, represents a payout ratio of approximately 70% of the full
year pro forma NPAT.
Baby Bunting Annual Report 2021 41
Directors’
report
(cont.)
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
Ian Cornell
Matt Spencer
Gary Levin
Melanie Wilson
Donna Player
Gary Kent
Position
Date appointed
Date retired
Chairman (from 21 November 2016)
1 January 2015
CEO and Managing Director
23 April 2012*
Non-executive Director
25 August 2014
Non-executive Director
15 February 2016
Non-executive Director
16 January 2017
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.
On 17 May 2021, the Company announced that Ian Cornell would not seek re-election at the 2021 AGM and would step
down as Chairman. The Board has selected Melanie Wilson to succeed Ian Cornell as Chairman from the conclusion of
the 2021 AGM.
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 27 June 2021 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 Committee
Remuneration and
Nomination Committee
Attended
Held
Attended
Held
Attended
Held
12
12
12
12
12
12
12
12
12
12
12
12
—
—
6
6
—
6
—
—
6
6
—
6
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.
4242
10. Directors’ relevant interest 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
600,000
nil
1,232,989
1,613,000
150,000
20,000
36,000
20,000
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 a national law firm. 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 53 to 57 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 2,660,000 performance rights under the LTI Plan. In addition, 1,525,380
performance rights vested and were exercised and no performance rights were forfeited 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 53
and 54 of the Remuneration Report for more details).
Performance right event
Opening balance (29 June 2020)
Vesting of rights (23 October 2020)
Grant of rights under the LTI Plan — FY2020 to FY2023 award (24 December 2020)
Closing balance
Issue price
n/a
nil
Number of
performance
rights
6,904,380
(1,525,380)
2,660,000
8,039,000
Since the end of the financial year, 530,000 Retention Rights have vested and been exercised. In addition, the EPS and
TSR Rights granted under the LTI Plan — FY2018 to FY2021 award will be assessed by the Board in October 2021. If all
of those 2,504,000 rights vest and are exercised, and taking into account the Retention Rights that have vested, the
closing balance of performance rights would be 5,005,000.
Baby Bunting Annual Report 2021 43
Directors’
report
(cont.)
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 46.
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.
4444
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 services ($173,400)
(FY20: $167,300) and for non-audit services ($26,624) (FY2020: $73,355) provided during the year are set out
in the Financial Statements (at Note 30). The major element of non-audit services during the year related to
taxation services.
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 65.
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
13 August 2021
Baby Bunting Annual Report 2021 45
Remuneration report
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 27 June 2021. The information provided in this
Remuneration Report (other than in section 3.1) 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
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
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 babybunting.com.au/investor. 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 42 of the
Directors’ Report.
4646
3. Remuneration outcomes for FY2021
3.1 Actual remuneration received
This section 3.1 has been included in the Remuneration Report to show the “take home” remuneration of the disclosed
executives.
The table in this section 3.1 supplements, and is different to, the statutory remuneration tables (see section 8) which
presents the accounting expenses for both vested and unvested performance rights in accordance with Australian
Accounting Standards.
The tables shows the remuneration the CEO and Managing Director and the Chief Financial Officer actually received in
relation to the 2021 financial year as cash, or in the case of prior equity awards, the value which vested in 2021.
FY21 STI
variable
cash
remuner-
ation2
$
LTI linked
remun
-er ation
(FY16-
FY20)3
$
Fixed
remun-
eration1
$
Long term
incentives
which
vested
during the
year4
$
Other
share
benefits5
$
Long term
incentives
which lapsed/
forfeited
during the
year6
$
Actual
remun
-er ation
received
$
Total
cash
$
Disclosed executives
Matt
Spencer
Darin
Hoekman
2021
581,754
214,610 1,033,325 1,829,689
2,311,075
— 4,140,764
—
2020
557,389
—
—
557,389
1,345,420
— 1,902,809
(3,269,828)
2021
411,675
150,840
411,909
974,424
974,692
2020
384,398
—
— 384,398
502,372
999
999
1,950,115
—
887,769
(1,303,437)
The point in time value of previously deferred remuneration granted as performance rights is based on the closing price of the Company’s
shares traded on the ASX on the date of exercise of the rights or lapsing/forfeiture multiplied by the number of rights.
1. Fixed remuneration includes superannuation contributions.
2. FY21 STI variable cash remuneration has been accrued in respect of the FY2021, but will be paid in FY2022 (see section 6.2 below).
3. LTI linked remuneration represents cash payments made in December 2020 in connection with the long term incentive payments related to
EPS rights (FY2016 to FY2020) (see section 3.4 below).
4. The vested performance rights were the performance rights granted under the FY2016 to FY2020 award that were assessed against the
TSR CAGR performance condition.
5. Other share benefits relate to shares provided under the General Employee Share Plan and are valued using that acquisition price under
that plan.
6. The performance rights that lapsed were the performance rights granted under the FY2016 to FY2020 award that were assessed against
the EPS CAGR performance condition.
Shares provided to Darin Hoekman upon vesting of the Retention Rights (which occurred in July 2021) are not included in the above table. They
will be included in 2022 Remuneration Report.
Baby Bunting Annual Report 2021 47
Remuneration
report
(cont.)
3.2 FY2021 short term incentive payments
The Company’s short term incentive plan operated again for the 2021 financial year. For the 2021 financial year, pro
forma NPAT growth was 34.8%. This was above the “threshold” growth target level of 25% pro forma NPAT year-on-
year growth set by the Board. Accordingly, participants became eligible for short term incentive payments, subject to
satisfying the other individual qualifying and performance requirements.
See Section 6.1 for details of the extent to which the disclosed executives became eligible for awards under the short
term incentive plan.
3.3 FY2016 to FY2020 performance rights – vesting of TSR rights
On 26 October 2020, the Company issued a total of 1,525,380 ordinary shares to eligible participants in the Company’s
Long Term Incentive Plan upon vesting of the TSR Rights that had been provided under the FY2016 to FY2020 grant.
The CEO and Managing Director received 517,019 shares and the Chief Financial Officer received 218,052 shares.
These rights vested following satisfaction of the TSR compound annual growth performance hurdle; the compound
annual growth rate of the Company’s total shareholder return in the period from its 2015 IPO to the end of the 2020
VWAP period (ie 1 July 2020 to 30 September 2020) was 27.7% (including dividends reinvested).
This reflected the significant growth that has been achieved in shareholder returns in the period from the IPO to
late 2020.
With the vesting of these performance rights, there are no further rights outstanding granted under the FY2016 to
FY2020 award.
3.4 FY2016 to FY2020 performance rights – long term incentive payment relating to EPS rights
During the year, the Company made a $2.774 million cash incentive payment to seven participating executives
(including the CEO and Managing Director ($1,033,325) and the Chief Financial Officer ($411,909)) in connection with
EPS performance rights (assessed over the period FY2016 to FY2020) granted by the Company in October 2015 as
part of the Company’s Long Term Incentive Plan.
This plan involved the issue of shares, however due to a timing difference between the $3.215 million impairment
of certain digital assets in June 2020 and the recovery of a $2.400 million settlement payment from the vendor of
those assets shortly after the end of the performance period, the original EPS performance rights lapsed. If not
for this timing difference, the compound annual growth rate of the Company’s EPS measured over the FY2016 to
FY2020 performance period would have been 16.2% (and not 13.7%) which would have resulted in 25.5% of the EPS
performance rights vesting.
The Board had regard to the significant earnings per share growth achieved since the Company’s IPO, as well as
the direct connection between the impairment of the digital assets and the settlement payment recovered by the
Company shortly after the end of the performance period. On this basis, the Board determined to provide a benefit
to participating executives calculated by reference to the EPS performance rights that would have vested if the
recovery were received in FY2020. A share price of $4.09 was used to calculate the cash payments (based on 678,438
rights that would have otherwise vested: 252,688 rights for the CEO and Managing Director and 100,728 rights for
the Chief Financial Officer). The share price was determined by reference to a VWAP of the Company’s shares in the
period 1 July 2020 to 30 September 2020.
3.5 Vesting of retention rights
After the end of the 2021 financial year, in July 2021, the Board assessed the conditions attached to the retention
rights and determined that the vesting conditions had been satisfied and 530,000 rights vested in July 2021, with
165,000 rights received by the Chief Financial Officer. Those rights were exercised by the six participants and 530,000
ordinary shares were issued in early August 2021 (the CEO and Managing Director did not receive any Retention
Rights). A further 34,000 retention rights remain outstanding and are held by one participant. The relevant three year
testing period for these 34,000 rights ends in March 2022.
See Section 6.3.5 for further information on the retention rights.
4848
3.6 Grant of performance rights (FY2020 to FY2023 grant)
Following shareholder approval at the 2020 AGM, the Company granted the CEO and Managing Director,
480,000 performance rights under the FY2020 to FY2023 grant. Approval for the grant was obtained under
ASX Listing Rule 10.14. An additional 2,180,000 performance rights were granted on the same terms to eleven
other executives (including the Chief Financial Officer who was granted 350,000) participating in the Company’s
Long Term Incentive Plan.
Details of the terms and conditions of this grant are contained in Section 6.3.1 below.
3.7 6th Employee Share Plan Gift Offer
The Company conducted its 6th Employee Share Plan Gift Offer in October 2020 and provided over 801 team
members $1,000 of Baby Bunting shares. The Company has operated this gift share program for each year since
its IPO in 2015 and as a result 52% of team members are shareholders. See Section 6.4 below.
4. Key developments and future changes
Changing the way EPS is calculated for future long term incentive awards
Having regard to feedback from some shareholders, the Board has decided to adjust the manner in which pro forma
earnings per share is calculated for future grants under the Company’s Long Term Incentive Plan. Pro forma NPAT
will include statutory employee equity incentive expenses, with the denominator determined by using the average
weighted number of ordinary shares on issue for the period. This change has the effect of recognising share-based
payment expenses in the definition of earnings per share used for long term incentive purposes for future grants.
Changing the remuneration mix and reducing the proportion of performance rights
As indicated in the 2020 Remuneration Report, changes are being implemented to the Company’s remuneration
philosophy, including seeking to adjust, over time, the mix of executive remuneration to reduce the proportion of
“at-risk” remuneration represented by long term incentives. This will be achieved by gradually reducing the number
of rights granted annually to executives participating in the Company’s Long Term Incentive Plan.
In addition, the Board is reducing, over time, the proportion of performance rights outstanding relative to the
Company’s total issued capital. With the vesting of the retention rights and with the vesting or lapse of the rights
outstanding under the FY2018 to FY2021 grant (which is expected to occur in October 2021), the number of rights
outstanding will represent around 3.7% of the Company’s issued capital. (At the end of FY2020, the number of rights
outstanding represented approximately 5.4% of the Company’s issued capital.)
FY2022 STI plan
The FY2022 short-term incentive plan will operate on a similar basis to the prior years: there will be no eligibility to
receive any payments until the Board’s earnings growth target has been achieved and the participant has achieved
satisfactory ratings in respect of their performance and values. The maximum amount of any short-term incentive
payment will be 60% of base remuneration with the actual amount to be payable having regard to the achievement
of the Company’s earnings growth target and additional individual KPIs.
Long term incentive plan – FY2021 to FY2024 grant
The Board intends to grant the CEO and Managing Director 185,000 performance rights, subject to approval by
shareholders at the 2021 AGM. In addition, a further 11 executives will participate in the proposed grant, with the
total number of rights to be granted not exceeding 1.375 million rights with 175,000 of those to be granted to the
Chief Financial Officer. If granted these rights, when added to the rights outstanding under the Company’s Long
Term Incentive Plans, will represent around 5% of issued capital.
Generally, the terms of the grant will be similar to the grant made last year (the FY2020 to FY2023 grant – see
section 6.3.1 below), noting that 40% of the rights will be subject to an EPS CAGR performance condition and the
remaining 60% will be subject to a TSR CAGR performance condition. The Board has adjusted this mix having regard
to the growth initiatives and the Company’s expansion plans currently being implemented to ensure that there is an
appropriate weighting to target long term shareholder value growth. These performance conditions will be measured
over a 3 year period. There will be no retesting.
Baby Bunting Annual Report 2021 49
Remuneration
report
(cont.)
5. Relationship between remuneration and the Company’s performance
The following table shows key performance indicators for the Company over the last five years.
EBITDA (statutory) $’000
22,138
17,549
46,281
46,119
56,903
2017
2018
20191
2020
2021
12,247
8,686
11,646
9,986
17,532
Growth in
2021
CAGR last
5 years
23%
76%
27%
9%
Net profit after tax
(statutory) $’000
Net profit after tax
(pro forma) $’000
Dividends per share
– ordinary (cents)
Basic earnings per share
(cents) (statutory)
Earnings per share (cents)
(pro forma)
Share price at the end of
the financial year
12,957
9,607
14,388
19,291
26,004
35%
19%
7.2
9.7
10.3
5.3
6.9
7.6
8.4
9.2
10.5
14.1
34%
18%
7.8
13.6
74%
9%
11.4
15.2
20.2
33%
18%
$1.92
$1.36
$2.16
$3.30
$5.42
64%
30%
1. At the end of FY2020, the results for FY2019 were restated to reflect the full retrospective adoption of the lease accounting standard
AASB 16. Refer to Note 2(x) in the Financial Report for the year ended 28 June 2020.
6. 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 incentives.
For disclosed executives, the Board has a philosophy of supporting a smaller proportion of fixed remuneration
(relative to comparable ASX companies) and a large proportion of “at-risk” remuneration. A focus for future years
is to progressively adjust the overall remuneration mix towards an increased proportion of fixed pay aligned to other
comparable ASX companies). However, “at-risk” remuneration will continue to represent a significant proportion of
an executive’s remuneration mix.
6.1 Fixed remuneration
Fixed remuneration for employees is determined according to industry standards, relevant laws, labour market
conditions and the profitability of the Company. It consists of base remuneration and superannuation. Base
remuneration includes cash salary and any salary sacrifice items.
The Company provides employer superannuation contributions at Government legislated rates, capped at the
relevant contribution limit unless part of a salary sacrifice election by an employee.
Fixed remuneration is reviewed annually and adjusted where appropriate. There is no guaranteed or automatic
entitlement to an increase in fixed remuneration (other than to comply with any applicable legal requirements).
5050
6.2 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 FY2021
For participants to become eligible to receive a payment under the STI plans in FY2021, there were the following
gateways:
• the participant’s performance evaluation rating for the year must exceed an acceptable rating for both
performance and values, as assessed by the participant’s manager or, in the case of the CEO and Managing
Director, the Board; and
• the Company’s pro forma NPAT (inclusive of payments to be made under the STI plans) must be at least 25% higher
than the prior year (this is known as “threshold” growth).
Potential STI payments for FY2021
For FY2021, the CEO and Managing Director and the Chief Financial Officer had the opportunity to earn a maximum
short term incentive payment of an amount equal to 60% of their base remuneration. At “threshold” growth, the
opportunity was equal to 30% of base remuneration. Where pro forma NPAT growth exceeds “threshold” growth of
25%, the potential STI payment increases on a scale up to 60% of base remuneration. This scaling is to encourage and
reward performance in achieving extraordinary NPAT growth.
Performance conditions for FY2021
Having regard to the conditions prevailing in the broader market during FY2020 and at the start of FY2021, including
the potential uncertainty that continued to prevail due to the COVID-19 pandemic, the key performance condition
for FY2021 related to achievement of the Company’s target of growing pro forma NPAT. This was selected to ensure
management continued to prioritise the Company’s financial strength and its financial performance during anticipated
challenging economic and trading conditions due to the COVID-19 pandemic.
Once “threshold” growth has been met (and the other gateways for eligibility have been satisfied), any actual STI
payment is based on the extent of the pro forma NPAT growth and the satisfaction of other specific additional
performance criteria.
Minimum potential STI
Maximum potential STI
Potential STI for FY2021
If pro forma NPAT growth
of 25% is achieved
If pro forma NPAT growth
of 44.6% is achieved
Pro forma NPAT growth
of 34.8%
Achievement of pro
forma NPAT condition
26.4% of base remuneration
becomes payable
47.4% of base remuneration
becomes payable
34.7% of base remuneration
becomes payable
Achievement of all
additional performance
criteria (KPIs)
Total STI potential
STI payment
3.6% of base remuneration
becomes payable
12.6% of base remuneration
becomes payable
7.1% of base remuneration
becomes payable
30% of base remuneration
60% of base remuneration
41.8% of base remuneration
The pro forma NPAT growth against the prior year was 34.8%. At this level, each participant had the opportunity to
receive an STI payment equal to 41.8% of their base remuneration.
Baby Bunting Annual Report 2021 51
Remuneration
report
(cont.)
Achievement of the full amount was subject to achievement of the additional performance criteria described below:
Disclosed executives Additional criteria
Comment
Matt Spencer and Darin Hoekman
KPI #1
Achievement of a Net Promoter Score
improvement and a reduction in the
Lost Time Injury Frequency Rate
This was achieved as NPS improved above levels
achieved in the prior year to be 87 and LTIFR was
below the prior year level at less than 10
KPI #2
Improvements in gross margin
KPI #3
KPI #4
Implementation of an expanded
customer loyalty scheme during FY2021
Successful transition to the new
National Distribution Centre and Store
Support Centre on time and on budget
This was achieved
Gross margin improvement of 83 basis points was
achieved. However, this was below the target
level and was therefore not achieved
This was not achieved. Stage 1 of the updated
loyalty scheme was introduced during FY2021.
Further elements of the scheme are now
expected to occur in FY2022
Matt Spencer (alone)
KPI #5
KPI #6
NZ operating model determined and
plan in place for establishment of New
Zealand operations in FY2022
This was achieved
Strategic growth project (not disclosed
due to commercial sensitivities)
This was not achieved
Darin Hoekman (alone)
KPI #5
KPI #6
Progression of property strategy
initiatives (not disclosed due to
commercial sensitivities)
This was not achieved
Execution of property pipeline activities
beyond FY2021 (not disclosed due to
commercial sensitivities)
This was achieved
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.
For the disclosed executives, when assessed against the maximum STI potential payment of 60% of base
remuneration, 64% of the maximum STI payment was awarded and 36% of the maximum STI payment was forfeited.
STI plan benefits are paid in cash and reflect amounts earned during the financial year and are provided for in the
annual financial statements.
5252
6.3 Long term incentives
The Long Term Incentive Plan (LTI Plan) is designed to align the interests of disclosed 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 is, 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 2021 financial year, a single grant was made under the LTI Plan and details of that grant are provided in
Section 5.3.1.
Information on grants made in previous years that remain outstanding are also contained in this section. As at
27 June 2021, the number of performance rights outstanding was:
Long Term Incentive Plan grant
EPS Rights
TSR Rights
Performance rights
FY2020 to FY2023 grant
FY2019 to FY2022 grant
FY2018 to FY2021 grant1
Retention rights
1,330,000
1,330,000
1,155,500
1,155,500
1,252,000
1,252,000
Retention rights (FY2021) grant
564,0002
1. The Board will determine in October 2021 whether the FY2018 to FY2021 grant of EPS Rights and TSR Rights have vested having regard to
the compound annual growth rate in EPS and TSR.
2. After the end of the financial year in July 2021, 530,000 retention rights vested and were exercised and 530,000 ordinary shares were
issued, with 165,000 to the Chief Financial Officer. As at the date of this report, there are 34,000 outstanding retention rights held by one
participant. The relevant three year testing period for these 34,000 remaining rights ends in March 2022.
6.3.1 FY2020 to FY2023 performance rights grant
During the 2021 financial year, the Board made a grant under the Long Term Incentive Plan for the period FY2020 to
FY2023. This grant is referred to as the FY2020 to FY2023 grant.
Under this grant, the Board granted 2,660,000 performance rights (in total) to the CEO and Managing Director,
the Chief Financial Officer and ten other participating executives. The grant to the CEO and Managing Director was
approved by shareholders at the Company’s 2020 AGM.
Baby Bunting Annual Report 2021 53
Remuneration
report
(cont.)
Terms and conditions of the FY2020 to FY2023 performance rights grant
Performance
conditions and
performance
periods
EPS growth
performance
condition
The number of rights that vest will be determined by reference to two performance conditions:
• earnings per share (EPS) growth; and
• total shareholder return (TSR) growth.
Half of the rights granted are subject to the EPS growth performance condition (EPS Rights). The
other half of the rights granted are subject to the TSR growth condition (TSR Rights).
Both of these conditions are expressed as a compound annual growth rate (CAGR) percentage.
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 pro forma EPS in FY2020 (being 15.2 cents per share). This base level EPS was
calculated by dividing the Company’s pro forma NPAT for the financial year ended 28 June 2020
(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 28 June 2020.
TSR growth
performance
condition
Broadly, TSR is a measure of the increase in the Company’s share price (assuming dividends are
reinvested).
The TSR growth performance condition is a measure of the compound annual growth of the
Company’s TSR measured over the relevant performance period with $4.09 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 2020 to 30 September 2020).
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 2023
(inclusive) or such other period as the Board considers appropriate.
Performance
periods
The performance period ends after the conclusion of FY2023.
If a performance right does not vest at the end of this performance period it lapses. There is no
retesting.
Vesting
schedule
• 30% of the EPS Rights will vest if the minimum
EPS growth hurdle condition of 10% EPS CAGR
is achieved;
• 30% of the TSR Rights will vest if the
minimum TSR growth hurdle condition of
10% TSR CAGR is achieved;
• 100% of the EPS Rights will vest if the EPS
• 100% of the TSR Rights will vest if the
growth hurdle of 20% EPS CAGR is achieved;
and
TSR growth hurdle of 20% TSR CAGR is
achieved; and
• if the EPS CAGR is within the range of 10% to
• if the TSR CAGR is within the range of 10%
20% 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.
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.
Post-vesting
disposal
restriction
Once the performance right has vested, the participant will have two years in which to exercise
the vested right and be provided with a share.
To ensure ongoing alignment with shareholders, any shares that are issued to a participant upon
vesting and exercise of a right will be subject to a 12 months disposal restriction.
6.3.2 FY2019 to FY2022 performance rights grant (historical)
During the 2020 financial year, the Board made a grant under the Long Term Incentive Plan for the period FY2019 to
FY2022. This grant is referred to as the FY2019 to FY2022 grant.
5454
Under this grant, the Board granted 2,311,000 performance rights (in total) to the CEO and Managing Director, the
Chief Financial Officer and six other participating executives. The grant to the CEO and Managing Director was
approved by shareholders at the Company’s 2019 AGM.
Performance
conditions and
performance
periods
EPS growth
performance
condition
TSR growth
performance
condition
The number of rights that vest will be determined by reference to two performance conditions:
• earnings per share (EPS) growth; and
• total shareholder return (TSR) growth.
Half of the rights granted are subject to the EPS growth performance condition (EPS Rights).
The other half of the rights granted are subject to the TSR growth condition (TSR Rights).
Both of these conditions are expressed as a compound annual growth rate (CAGR) percentage.
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 (calculated before the application of AASB 16) from a base level of pro forma EPS in FY2019
(being 12.0 cents per share – calculated before the application of AASB 16). This base level EPS
was calculated by dividing the Company’s pro forma NPAT for the financial year ended 30 June 2019
(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 30 June 2019.
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 $2.95 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 2019 to 30 September 2019).
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 2022
(inclusive) or such other period as the Board considers appropriate.
Performance
periods
The performance period ends after the conclusion of FY2022.
If a performance right does not vest at the end of this performance period it lapses. There is no
retesting.
Vesting
schedule
• 30% of the EPS Rights will vest if the minimum
EPS growth hurdle condition of 10% EPS CAGR
is achieved;
• 30% of the TSR Rights will vest if the
minimum TSR growth hurdle condition of
10% TSR CAGR is achieved;
• 100% of the EPS Rights will vest if the EPS
• 100% of the TSR Rights will vest if the
growth hurdle of 20% EPS CAGR is achieved;
and
TSR growth hurdle of 20% TSR CAGR is
achieved; and
• if the EPS CAGR is within the range of 10%
• if the TSR CAGR is within the range of 10%
to 20% 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.
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.
Post-vesting
disposal
restriction
Once the performance right has vested, the participant will have two years in which to exercise
the vested right and be provided with a share.
To ensure ongoing alignment with shareholders, half of any shares that are issued to a participant
upon vesting and exercise of a right will be subject to a 12 months disposal restriction.
Baby Bunting Annual Report 2021 55
Remuneration
report
(cont.)
6.3.3 FY2018 to FY2021 performance rights grant (historical)
During the 2019 financial year, the Board made 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 2,704,000 performance rights (in total) to the CEO and Managing Director, the
Chief Financial Officer and seven other participating executives (200,000 rights lapsed in a prior year). 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
EPS growth
performance
condition
TSR growth
performance
condition
The number of rights that vest will be determined by reference to two performance conditions:
• earnings per share (EPS) growth; and
• total shareholder return (TSR) growth.
Half of the rights granted are subject to the EPS growth performance condition (EPS Rights).
The other half of the rights granted are subject to the TSR growth condition (TSR Rights).
Both of these conditions are expressed as a compound annual growth rate (CAGR) percentage.
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
(calculated before the application of AASB 16) from a base level of 7.6 cents per share. This base
level EPS was calculated by dividing the Company’s pro forma NPAT (calculated before the
application of AASB 16) 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.
Vesting
schedule
• 30% of the EPS Rights will vest if the minimum
EPS growth hurdle condition of 10% EPS CAGR
is achieved;
• 30% of the TSR Rights will vest if the
minimum TSR growth hurdle condition of
10% TSR CAGR is achieved;
• 100% of the EPS Rights will vest if the EPS
• 100% of the TSR Rights will vest if the
growth hurdle of 25% EPS CAGR is achieved;
and
TSR growth hurdle of 20% TSR CAGR is
achieved; and
• if the EPS CAGR is within the range of 10%
• if the TSR 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.
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.
5656
LTI outcomes to date under the FY2018 to FY2021 grant
TSR performance rights
The TSR compound annual growth rate for the FY2018 to FY2021 grant TSR rights (being 1,252,000 rights) will be
assessed by reference to volume weighted average sale price on ASX of the Company’s shares in the period from
1 July 2021 to 30 September 2021. The Board expects to assess whether the TSR CAGR performance condition has
been satisfied in October 2021.
EPS performance rights
For the FY2018 to FY2021 grant, the Board has determined that EPS will be determined on the basis of pro forma
NPAT for FY2021 and on the basis consistent with that used for reporting of the Company’s pro forma NPAT with two
exceptions: pro forma NPAT will include the $2.400 million settlement payment received from a vendor of certain digital
assets (as other income) as well as the cost of the $2.774 million payment being a cash incentive payment relating to
certain EPS rights (see Section 3.4).
The compound annual growth rate in the Company’s EPS measured over the period from the end of the 2018 financial
year to the end of 2021 financial year was greater than 25%. On this basis, all of the EPS rights in the FY2018 to FY2021
grant, being 1,252,000 rights, are expected to vest and be able to be exercised. A formal decision on vesting will be
made by the Board in October 2021 (at the same time as it undertakes its assessment of the TSR rights performance).
6.3.4 FY2016 to FY2020 performance rights grant (historical)
The Company has previously made grants of performance rights under the FY2016 to FY2020 grant. At the end of
the 2020 financial year, all EPS rights had lapsed. 1,525,380 TSR rights remained outstanding and were to be assessed
against the compound annual growth rate of the Company’s total shareholder return measured from a share price
of $1.40 at the time of the 2015 IPO, to the end of the 2020 VWAP period (ie 1 July 2020 to 30 September 2020).
Details of the terms of the rights have been disclosed in the 2020 Remuneration Report and prior year reports.
During the 2021 financial year, the final tranche of TSR rights were assessed in October 2020. Having regard to the
volume weighted average price of the Company’s shares in the final testing period ended 30 September 2020, and
dividends paid during the performance period, the compound annual growth rate in total shareholder return was
27.7%. At this level, all of the outstanding TSR Rights vested.
With the vesting of these performance rights, there are no further rights outstanding granted under the FY2016 to
FY2020 award.
6.3.5 FY2021 retention rights grant (historical)
During the 2019 financial year, the Board made a one-off grant of retention rights to participating eligible executives,
including the Chief Financial Officer. At the end of the financial year, there were 564,000 retention rights granted in
total. The Chief Financial Officer received 165,000. The CEO and Managing Director was not granted retention rights.
In July 2021, 530,000 retention rights vested and were exercised and 530,000 ordinary shares were subsequently
issued. As at the date of this report, there are 34,000 outstanding retention rights held by one participant.
The relevant three year testing period for these 34,000 rights ends in March 2022.
The grant that occurred in FY2019 was a one-off and 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 assisted to ensure stability and that executives remain engaged in
the business, in what has been a period with dynamic conditions and challenges and was critical for the execution of
the Company’s growth strategy.
The terms of the retention rights provide that each right will vest shortly after the conclusion of the 2021 financial
year. 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.
A participant may elect to exercise a vested 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.
Baby Bunting Annual Report 2021 57
Remuneration
report
(cont.)
6.4 General comments on rights
Calculation of vesting of EPS Rights
In determining whether an EPS growth hurdle has been met, the Board has regard to the number of shares that are
to be newly issued upon vesting of the EPS Rights. This has the effect of taking into account any dilution impact at
the time of vesting. While reducing the number of EPS Rights that would otherwise vest, the Board considers this
approach preferable as it reflects the dilution impact to shareholders arising where new shares are issued.
Having regard to the views of some shareholders, after the end of the 2021 financial year, the Board has adjusted
the manner in which it calculates EPS growth for new grants of EPS Rights. The Company has always presented its
earnings on a pro forma basis, in addition to on a statutory basis. The Directors consider that pro forma earnings are
appropriate as they better represent the underlying financial performance of the business. One of the pro forma
adjustments applied to show earnings is the exclusion of the non-cash impact of employee equity incentive expenses.
While this expense will be excluded from the Company’s presentation of pro forma earnings, it will be included in pro
forma earnings used to calculate EPS growth in the context of the Company’s Long Term Incentive Plan. The change
has been chosen to ensure that the measure of EPS growth used has regard to the full impact of the accounting
expense of employee equity incentives. This will ensure that earnings calculations for equity incentive purposes
have regard to the accounting expense of those equity incentives. The denominator for EPS calculations will be the
weighted average number of ordinary shares during the year.
Malus and clawback
For the FY2020 to FY2023 grant and future grants, the terms of the Long Term Incentive Plan provide for malus to be
applied to unvested awards and for clawback provision to be applied for vested awards. This is to ensure that in the
event of serious misconduct or the identification of a serious adverse subsequent event, the relevant participant does
not inappropriately benefit in those circumstances.
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 and further
approval is being sought at 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.
5858
6.5 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, more than 50% of the Company’s employees were shareholders of the
Company (an increase from 47% in the prior year), the vast majority of whom acquired their shares because of the
GES Plan.
During the financial year, the Company made its sixth offer under this plan and issued 165,221 shares to 801 eligible
employees who each received approximately $1,000 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 employed for approximately 12 months before the date of the offer. Directors, including the CEO and Managing
Director, are not eligible to participate in this plan.
To illustrate the benefits provided to participating team members under the GES Plan, an employee who has
participated in each of the six share offers under the GES Plan (since 2015) has received 2,382 Baby Bunting shares.
This represents around $13,640 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).
Details of the six employee share plan offers are below:
First employee gift offer (October 2015)
Second employee gift offer (September 2016)
Third employee gift offer (October 2017)
Fourth employee gift offer (October 2018)
Fifth employee gift offer (October 2019)
Sixth employee gift offer (October 2020)
Aggregate value (including dividends)
Value of
shares offered
Number of
shares provided
$1,000
$1,000
$1,000
$750
$1,000
$1,000
714
334
546
297
284
207
$13,640
2,382
Note: value of shares determined using the volume weighted average share price at the time of the offer and, in the case of the total amount,
using the share price on 25 June 2021. Cumulative dividends of $730 have been paid on the Gift Shares over the relevant period.
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.
Baby Bunting Annual Report 2021 59
Remuneration
report
(cont.)
7. 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.
Non-executive Directors’ fees
Similar to executive remuneration, the Committee undertakes reviews of Non-executive Director remuneration to
ensure it is market competitive. A review was undertaken by the Committee in November 2018 with fees last adjusted
on 1 January 2019. No changes have been since that time to Non-executive Director remuneration.
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
Non-executive
Director fees
$
135,000
80,000
15,000
7,500
For the financial year ended 27 June 2021, the fees paid and superannuation contributions to all Non-executive
Directors were approximately $515,000 in aggregate.
6060
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—
,
6
8
3
6
3
5
0
2
0
2
0
4
8
0
5
1
,
,
1
8
9
9
8
3
1
2
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m
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o
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n
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—
5
9
3
3
6
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5
4
5
6
3
,
,
1
6
3
0
2
4
,
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—
1
0
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0
7
3
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N
Baby Bunting Annual Report 2021 61
Remuneration
report
(cont.)
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 165,221 shares under its General Employee Share Plan in the current reporting period with no monetary consideration
payable by participating eligible employees who each received approximately $1,000 worth of shares. In the prior reporting period, the
Company issued 185,134 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. The cash incentive payment related to long term incentives for the period FY2016 to FY2020, as described in Section 3.4.
6. There were no termination benefits paid or payable during the current financial year.
9. 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.
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
Change
Balance at the
end of the year
900,000
(300,000)
600,000
200,000
(50,000)
150,000
20,000
36,000
20,000
—
—
—
20,000
36,000
20,000
Balance at
start of the year
Received upon
vesting of
performance
rights
Received
upon issue of
Gift Shares
Sale of
Shares
Balance at the
end of the year
1,365,970
215,390
517,019
218,052
—
207
(650,000)
1,232,989
(431,377)
2,272
Darin Hoekman holds an additional 165,000 shares which were received after the end of the year following the vesting
of 165,000 retention rights in July 2021.
6262
Performance rights granted to disclosed executives
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
lapsed
during
the year
Number of
rights held
at end of
year (all
unvested)
—
—
—
—
—
—
—
—
—
—
480,000
$3.43 $1,644,000
218,052
165,000
400,000
374,500
—
—
—
—
—
—
—
—
—
—
—
—
—
350,000
$3.43
$1,198,750
517,019 $1,033,325
—
—
—
—
—
—
218,052
$459,310
—
—
—
—
—
—
—
—
—
—
—
—
—
—
600,000
533,000
480,000
—
—
165,0002
—
—
—
400,000
374,500
350,000
Balance
at start of
the year
517,019
600,000
533,000
Disclosed
executives
Matt Spencer
FY2016 to
FY2020 rights
FY2018 to
FY2021 rights
FY2019 to
FY2022 rights
FY2020 to
FY2023 rights1
Darin Hoekman
FY2016 to
FY2020 rights
Retention
rights (FY2021)
FY2018 to
FY2021 rights
FY2019 to
FY2022 rights
FY2020 to
FY2023 rights1
Notes:
1.
In respect of the FY2020 to FY2023 rights, Matt Spencer was granted performance rights pursuant to shareholder approval granted at
the 2020 AGM on 6 October 2020. During the year, Darin Hoekman was granted the rights detailed above on 24 December 2020.
2. Darin Hoekman’s retention rights vested in July 2021 after the end of the 2021 financial year.
Details of the performance conditions and performance periods for those rights are set out in Section 6.3 (Long term
incentive plan) above.
Options
There are no options over shares on issue as at the date of this Directors’ Report.
Baby Bunting Annual Report 2021 63
Remuneration
report
(cont.)
10. 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 by notice
Termination – notice by
Company or payment in lieu
12 months
6 months
12 months
6 months
11. Other KMP disclosures
Other than as 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.
6464
Auditor’s independence declaration
Baby Bunting Annual Report 2021 65
A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards LegislationErnst & Young8 Exhibition Street Melbourne VIC 3000 AustraliaGPO Box 67 Melbourne VIC 3001Tel: +61 3 9288 8000Fax: +61 3 8650 7777ey.com/auAuditor’s Independence Declaration to the Directors of Baby BuntingGroup LimitedAs lead auditor for the audit of Baby Bunting Group Limited for the financial year ended 27June2021, I declare to the best of my knowledge and belief, there have been:(a)no contraventions of the auditor independence requirements of the Corporations Act 2001 inrelation to the audit;and(b)no contraventions of any applicable code of professional conduct in relation to the audit.This declaration is in respect of Baby Bunting Group Limited and the entities it controlled during the financial year.Ernst & YoungTony MorsePartner13 August 2021 Financial report
for the year ended 27 June 2021
Contents
65 Auditor’s independence declaration
67 Consolidated statement of profit or loss and other comprehensive income
68 Consolidated statement of financial position
69 Consolidated statement of changes in equity
70 Consolidated statement of cash flows
71
Note 1: Reporting entity
Note 2: Summary of significant accounting policies
Notes to the consolidated financial statements
71
71
80 Note 3: Revenue from contracts with customers
80 Note 4: Other operating income
81 Note 5: Profit for the year
82 Note 6: Income tax
83 Note 7: Other receivables
83 Note 8: Inventory
83 Note 9: Other assets
84 Note 10: Plant and equipment
85 Note 11: Intangible assets and goodwill
85 Note 12: Leases
87 Note 13: Deferred tax assets
88 Note 14: Payables
88 Note 15: Other liabilities
89 Note 16: Loans and borrowings
89 Note 17: Provisions
89 Note 18: Issued capital
90 Note 19: Dividends
90 Note 20: Retained earnings
91 Note 21: Segment information
92 Note 22: Reserves
94 Note 23: Related party transactions
94 Note 24: Commitments for expenditure
94 Note 25: Financial instruments – fair values and risk management
98 Note 26: Notes to the statement of cash flows
99 Note 27: Parent entity disclosures
99 Note 28: Group entities
100 Note 29: Earnings per share
101 Note 30: Remuneration of auditors
101 Note 31: Events after balance sheet date
102 Directors’ declaration
6666
Consolidated statement of profit or loss and other comprehensive income
for the year ended 27 June 2021
Revenue
Cost of sales
Gross profit
Other operating income
Store expenses
Marketing expenses
Warehousing expenses
Administrative expenses
Project expenses
Impairment of Assets
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:
Note
3
4
5
5
5
5
5
5
6
2021
$’000
2020
$’000
468,377
405,173
(294,711)
(258,313)
173,666
146,860
2,466
7
(90,520)
(81,437)
(7,044)
(6,594)
(6,552)
(5,367)
(35,535)
(22,823)
(7,574)
(3,988)
—
(5,825)
(5,650)
(5,756)
23,257
15,077
(5,725)
(5,091)
17,532
9,986
—
17,532
9,986
Equity holders of Baby Bunting Group Limited
17,532
9,986
Earnings per share
From continuing operations
Basic (cents per share)
Diluted (cents per share)
Notes to the consolidated financial statements are included in pages 71 to 101.
29(a)
29(b)
13.6
13.0
7.8
7.3
Baby Bunting Annual Report 2021 67
Consolidated statement of financial position
as at 27 June 2021
Current Assets
Cash and cash equivalents
Other receivables
Inventories
Current tax assets
Other assets
Total Current Assets
Non-Current Assets
Plant and equipment
Intangibles
Goodwill
Right-of-use asset
Deferred tax assets
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and other payables
Other liabilities
Current tax liabilities
Lease liability
Provisions
Total Current Liabilities
Non-Current Liabilities
Borrowings
Lease liability
Provisions
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Issued capital
Reserves
Retained earnings
Total Equity
Notes to the consolidated financial statements are included in pages 71 to 101.
6868
Note
27 Jun 2021
$’000
28 Jun 2020
$’000
26(b)
7
8
9
10
11
11
12
13
14
15
12
17
16
12
17
18
22
20
10,884
5,865
13,337
5,122
79,987
65,094
1,056
3,019
—
2,516
100,811
86,069
27,229
22,482
4,430
45,321
3,690
45,321
112,058
93,504
11,568
7,195
200,606
172,192
301,417
258,261
48,812
49,950
3,112
—
1,957
1,305
25,521
24,895
5,804
5,137
83,249
83,244
9,950
99,768
691
—
81,083
565
110,409
81,648
193,658
164,892
107,759
93,369
87,153
13,149
7,457
86,358
4,380
2,631
107,759
93,369
Consolidated statement of changes in equity
for the year ended 27 June 2021
Issued
Capital
$’000
Share-based
Payments
Reserve
$’000
Share-based
Payments
Tax Reserve
$’000
Retained
Earnings
$’000
Total Equity
$’000
Balance at 30 June 2019
Profit for the period
Other comprehensive income
Total comprehensive income for the period
Issue of shares (Note 18)
Dividends (Note 19)
Share-based payment expense (Note 22)
85,706
2,515
—
—
—
652
—
—
—
—
—
—
—
1,865
4,380
Balance at 28 June 2020
86,358
Balance at 28 June 2020
86,358
4,380
Profit for the period
Other comprehensive income
Total comprehensive income for the period
Issue of shares (Note 18)
Dividends (Note 19)
Share-based payment expense (Note 22)
Tax effect of share-based payment
(Note 22)
Transfer to retained earnings (Note 22)
—
—
—
795
—
—
—
—
—
—
—
—
—
4,574
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
7,150
(2,955)
Balance at 27 June 2021
87,153
8,954
4,195
Notes to the consolidated financial statements are included in pages 71 to 101.
4,323
9,986
—
9,986
—
92,544
9,986
—
9,986
652
(11,678)
(11,678)
—
1,865
2,631
93,369
2,631
93,369
17,532
17,532
—
—
17,532
17,532
—
795
(15,661)
(15,661)
—
—
4,574
7,150
2,955
7,457
—
107,759
Baby Bunting Annual Report 2021 69
Consolidated statement of cash flows
for the year ended 27 June 2021
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Income tax paid
Interest received
Finance costs paid
Note
2021
$’000
2020
$’000
515,670
445,104
(467,999)
(382,462)
(5,307)
(7,187)
—
7
(5,448)
(5,615)
Net cash from operating activities
26(a)
36,916
49,847
10
11
(10,816)
(5,457)
(1,291)
(2,859)
(12,107)
(8,316)
19
(15,661)
(11,678)
9,950
(3,133)
(21,551)
(19,224)
(27,262)
(34,035)
(2,453)
13,337
10,884
7,496
5,841
13,337
Cash flows from investing activities
Payments for plant and equipment
Payments for intangibles
Net cash used in investing activities
Cash flows from financing activities
Dividends paid
Net borrowings/(repayments)
Payments of principal portion of lease liability
Net cash used in financing activities
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 71 to 101.
7070
Notes to the consolidated
financial statements
for the year ended 27 June 2021
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 153 National Drive, Dandenong South, Victoria 3175, Australia.
The consolidated financial statements of the Company as at and for the year ended 27 June 2021 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 52 week retail calendar for financial reporting purposes which ended 27 June 2021.
The prior year was a 52 week retail calendar ending on 28 June 2020.
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 13 August 2021.
b. Basis of Preparation
The consolidated financial statements have been prepared on the basis of historical cost, except for certain financial
assets measured at fair value, 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 value 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 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 Company is 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.
Baby Bunting Annual Report 2021 71
Notes to the consolidated financial statements
for the year ended 27 June 2021
Note 2: Summary of significant accounting policies (cont.)
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
The Company’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 (2020: 3.0%)
Terminal sales growth rate
3.0% (2020: 3.0%)
Forecasted gross margin
Forecasted retail store expenses
Average gross margin 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
12.05% (2020: 12.05%)
The pre-tax weighted average cost of capital (WACC) calculated for the current period includes consideration of lease
liabilities as part of the capital structure when determining debt/equity assumptions in the WACC.
Goodwill is allocated to Baby Bunting Group Limited, as a group of cash generating units for the purpose of
impairment testing.
The recoverable amount of the consolidated entity’s CGU 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.
Lease term of contracts with renewal options and incremental borrowing rate for leases
Refer to Note 2(y) for significant judgements required for lease term of contracts with renewal options and
determining the incremental borrowing rate for leases.
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 in
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.
7272
e. Fair value measurement
The Company measures financial instruments such as derivatives at fair value at each balance sheet date.
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. The fair value measurement is based on the presumption that
the transaction to sell the asset or transfer the liability takes place either:
• in the principal market for the asset or liability; or
• in the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when
pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate
economic benefit by using the asset in its highest and best use or by selling it to another market participant that would
use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data
are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of
unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statement are categorised within
the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value
measurement as a whole:
• Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities
• Level 2 – Techniques for which the lowest level input that is significant to the fair value measurement is directly
or indirectly observable
• Level 3 – Valuation techniques for which the lowest level input that is significant to the fair value measurement
is unobservable
For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Company
determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation
(based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each
reporting period.
For the purpose of fair value disclosure, the Company has determined classes of assets and liabilities on the basis of
the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
f. Business combinations
Business combinations are accounted for using the purchase acquisition 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.
g. 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).
Baby Bunting Annual Report 2021 73
Notes to the consolidated financial statements
for the year ended 27 June 2021
Note 2: Summary of significant accounting policies (cont.)
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.
Deferred tax is recognised on share-based payments for the tax deduction that will be available to the Company on
vesting of the LTI share-based payment plan. The deferred tax is measured based on the share price at reporting
date. The income tax benefit is recognised through income tax expense up to the amount relating to the cumulative
share-based payment expense. Any tax benefit in excess of the amount relating to the cumulative share-based
payment expense is recognised in the share-based payment tax reserve within equity. Refer to Note 22.
h. 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 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 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.
7474
i. 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
j. 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. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related
expenditure is reflected in profit or loss in the period in which the expenditure is incurred.
Class of intangible asset
Computer software
Useful Life
5 years
k. 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.
l. 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.
m. 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 Company expects to be entitled in exchange for
those goods or services. This is generally instore when the customer purchases the goods or services, on delivery to
the customer for online sales and on customer pickup for click and collect.
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 sundry 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 Revenue from Contracts with Customers 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 and recorded at cost value.
Contract assets
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the
Company 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.
Baby Bunting Annual Report 2021 75
Notes to the consolidated financial statements
for the year ended 27 June 2021
Note 2: Summary of significant accounting policies (cont.)
Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Company has received
consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the
Company 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 Company performs
under the contract. The Company sells gift cards which can be redeemed instore or online. When gift cards are sold,
the Company considers the likelihood of their redemption. The portion of the gift cards for which redemption is
unlikely is known as “breakage”. The Company estimates breakage based on redemption history and expiry dates of
the gift cards. Breakage is recognised as revenue in proportion to the customers’ redemption pattern. Gift cards not
yet redeemed by the customers are recorded as contract liability,
The Company offers loyalty vouchers upon customers joining the loyalty program, which can be redeemed in store or
online. When the loyalty vouchers are issued, the Company estimates the “breakage” rate based on redemption history
and expiry dates of the loyalty vouchers. The Company records the contract liability based on the breakage rate for
unspent and unexpired vouchers. Refer to Note 15.
n. 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.
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 Company is amortised cost and fair
value through profit or loss.
Financial assets at amortised cost (debt instruments)
The Company 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 method (EIR) and are
subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified
or impaired.
The Company’s financial assets at amortised cost includes trade and other receivables and cash and cash equivalents.
7676
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with
net changes in fair value recognised in the statement of profit or loss.
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 (i.e., removed from the Company’s consolidated statement of financial position) when:
• the rights to receive cash flows from the asset have expired; or
• the Company 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 Company has transferred substantially all the risks and rewards of the asset, or (b) the Company 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
Company’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, 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 Company’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 Company. After initial recognition, interest-bearing loans and borrowings are
subsequently measured at amortised cost using the effective interest (EIR) method. Gains and losses are recognised
in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.
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.
Baby Bunting Annual Report 2021 77
Notes to the consolidated financial statements
for the year ended 27 June 2021
Note 2: Summary of significant accounting policies (cont.)
t. Borrowing costs
Borrowing costs are recognised as expenses using the effective interest method 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 EIR method.
v. Share-based payment arrangements
Employees (including senior executives) of the Company receive remuneration in the form of share-based payments,
whereby employees render services as consideration for equity instruments (equity settled transactions).
Equity-settled transactions
The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an
appropriate valuation model, further details of which are given in Note 22.
The cost is recognised employee benefits expense, together with a corresponding increase in equity (share-based
payment reserve), over the period in which the service and, where applicable, the performance conditions are fulfilled
(the vesting period). The cumulative expense recognised for equity-settled transactions at each reporting date until
the vesting date reflects the extent to which the vesting period has expired and the Company’s best estimate of the
number of equity instruments that will ultimately vest. The expense or credit in the statement of profit or loss for a
period represents the movement in cumulative expense recognised as at the beginning and end of that period.
Service and non-market performance conditions are not taken into account when determining the grant date fair
value of awards, but the likelihood of the conditions being met is assessed as part of the Company’s best estimate of
the number of equity instruments that will ultimately vest. Market performance conditions are reflected within the
grant date fair value.
No expense is recognised for awards that do not ultimately vest because non-market performance and/or service
conditions have not been met. Where awards include a market condition, the transactions are treated as vested
irrespective of whether the market condition is satisfied, provided that all other performance and/or service
conditions are satisfied.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted
earnings per share (further details are given in Note 29).
w. Comparative amounts
The comparative figures are for the period 1 July 2019 to 28 June 2020. Where appropriate, comparative information
has been reformatted to allow comparison with current year information.
x. Impairment of non-financial assets
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any
indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset’s
recoverable amount. An asset’s recoverable amount is the higher of an asset’s fair value less costs of disposal and
its value in use. The recoverable amount is determined for an individual asset. When the carrying amount of an asset
exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the
asset. For the purpose of impairment for non-financial assets other than goodwill, the Company bases its impairment
calculation on most recent budgets and projection calculations, which are prepared separately for each of the
Company’s individual assets.
y. Leases
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract coveys
the right to control the use of an identified asset for a period of time in exchange for consideration.
Company as a lessee
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and
lease of low-value assets. The Company recognises lease liabilities to make lease payments and right-of-use assets
representing the right-of-use the underlying assets.
7878
Right-of-use assets
The Company recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying
asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and
impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes
the amount of lease liabilities recognised and lease payments made at or before the commencement date less any
lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease
term and the estimated useful lives of the assets, as follows:
• Property
5 to 12 years
• Motor vehicles and material handling equipment
1 to 6 years
The right-of-use assets are also subject to impairment. Refer to the accounting policies in section (w) Impairment of
non-financial assets
Lease liabilities
At the commencement date of the lease, the Company recognises lease liabilities measured at the present value of
lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance
fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and
amounts expected to be paid under residual value guarantees.
Variable lease payments that do not depend on an index or a rate are recognised as expenses in the period in which
the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the
lease commencement date because the interest rate implicit in the lease is not readily determinable. After the
commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for
the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a
change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in
an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the
underlying asset.
Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its short-term leases of material handling
equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not
contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office
equipment that are considered to be low value. Lease payments on short-term leases and leases of low value assets
are recognised as expense on a straight-line basis over the lease term.
Significant judgement is required in determining the lease term of contracts with renewal options
The Company determines the lease term as the non-cancellable term of the lease, together with any periods covered
by an option to extend the lease if it is reasonably certain to be exercised.
The Company has the option, under some of its leases, to lease the assets for additional terms of mostly five year
options. The Company applies judgement in evaluating whether it is reasonably certain to exercise the option to
renew. That is, it considers all relevant factors that create an economic incentive for it to exercise the renewal.
After the commencement date, the Company reassesses the lease term if there is a significant event or change in
circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew
(i.e. a change in business strategy).
Significant judgement in determining the incremental borrowing rate for each lease
The Company calculates the incremental borrowing rate for each lease determined using inputs including the
Company’s three-year multi option facility lending margin (adjusted for tenure) and the government bond rate
applicable at the time of entering into the lease if the interest rate implicit in the lease is not readily determinable.
z. Capital management
For the purpose of the Company’s capital management, capital includes issued capital, borrowings and all other equity
reserve attributable to the equity holder of the parent. The primary objective of the Company’s capital management is
to maximise the shareholder value.
The Company manages its capital structure and make adjustments in light of changes in economic conditions and
the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the
dividend payment to shareholders, return capital to shareholders or issue new shares. The Company’s has a dividend
payout ratio of approximately 70% of full year pro forma NPAT.
Baby Bunting Annual Report 2021 79
Notes to the consolidated financial statements
for the year ended 27 June 2021
Note 2: Summary of significant accounting policies (cont.)
aa. Changes in accounting policies and disclosures
New and amended standards and interpretations
The following new and amended Australian Accounting Standards and AASB interpretations apply for the first time
during the reporting period ended 27 June 2021. The impact of these new standards and amendments were not
material to the consolidated financial statements of the Company.
Reference
Title
AASB 2018-6
Amendments to AASs — Definition of a Business
AASB 2019-3
Amendments to Australian Accounting Standards (AASs)
— Interest Rate Benchmark Reform [Phase 1]
AASB 2018-7
Amendments to AASs — Definition of Material
AASB 2019-1
Amendments to AASs — References to the Conceptual Framework
AASB 2020-4
Amendments to AASs — Covid—19 Related Rent Concessions
Application
29 June 2020
29 June 2020
29 June 2020
29 June 2020
29 June 2020
Other Australian accounting standards and interpretations that have been recently been issued or amended but are
not yet effective have not been adopted by the consolidated entity for the reporting period ended 27 June 2021.
IFRS Interpretations Committee agenda decision
Configuration or Customisation Costs in a Cloud Computing Arrangement
In April 2021, the IFRS Interpretations Committee (IFRIC) published an agenda decision for configuration and
customisation costs incurred related to implementing Software as a Service (SaaS) arrangements. The Company is
currently assessing the impact of the agenda decision on its current accounting policy, which may result in previously
capitalised costs needing to be recognised as an expense.
The process to quantify the impact of the decision is ongoing, due to the effort required in obtaining the underlying
information from historical records. This process covers multiple projects and assesses the nature of each of
the costs.
At the date of this report, the impact of the IFRIC agenda decision on the Company is not reasonably estimable as the
project is currently being undertaken. The impact of adopting the change in accounting policy will be finalised during
the 2022 financial year.
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
Note 4: Other operating income
Interest income
Other income
Gain on derivative instruments at fair value through profit or loss
2021
$’000
2020
$’000
468,377
405,173
—
2,400
66
2,466
7
—
—
7
The Company received a cash settlement payment ($2.400 million) from the vendor of certain digital commerce
technology assets that were impaired in FY20 following a dispute in relation to the performance of those assets.
The Company entered into foreign exchange forward contracts during the financial year for inventory purchases that
settled in foreign currency. The Company measures the derivative instrument at fair value through profit or loss and
recorded a gain of $0.066 million.
8080
Note 5: Profit for the year
Profit before income tax expense includes the following expenses:
Interest and finance charges paid/payable
Interest on lease liabilities
Interest on borrowings
Depreciation and amortisation
Depreciation on right-of-use assets
Employee benefits expense
2021
$’000
2020
$’000
4,729
921
6,594
22,308
84,038
4,947
809
5,307
19,986
67,498
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 27 June 2021
Store expenses
Warehousing expenses
Administrative expenses
Project expenses
Total
For the year ended 28 June 2020
Store expenses
Warehousing expenses
Administrative expenses
Project expenses
Total
Project expenses include the following:
Project related expensesi, ii, iii
Depreciation and
amortisation on
PPE and Intangibles
$’000
Depreciation on
Right-of-use Asset
$’000
Excluding
Depreciation and
Amortisation
$’000
As reported
$’000
(90,520)
(6,552)
(35,535)
(7,574)
(140,181)
(81,437)
(5,367)
(22,823)
(3,988)
(113,615)
4,819
163
896
716
6,594
4,462
186
659
—
5,307
21,059
964
95
190
22,308
18,926
870
190
—
19,986
(64,642)
(5,425)
(34,544)
(6,668)
(111,279)
(58,049)
(4,311)
(21,974)
(3,988)
(88,322)
2021
$’000
7,574
2020
$’000
3,988
i. The Company is currently undertaking a process of assessment and when necessary, replacement of its core information technology
systems. During the year, the Company incurred ($2.889 million) non-capital costs associated with the implementation of a new online
store, merchandise demand planning and replenishment system, order fulfilment systems, Loyalty system, People systems and assessment
of digital technology assets.
ii. The Company incurred $2.536 million in relation to the setup of the new National Distribution Centre including $1.265 million for the
accelerated depreciation and make good of the former Distribution Centre.
iii. Other transformation project expenses ($2.149 million) include external consultant costs associated with project management
($1.375 million) to deliver the transformation project. The non-capital cost of external consultants are associated with running the
selection and planning for the integration of the new systems are significant and not related to operations or financial performance of the
business on the day-to-day basis. They cease at project completion.
Baby Bunting Annual Report 2021 81
Notes to the consolidated financial statements
for the year ended 27 June 2021
Note 5: Profit for the year (cont.)
Impairment of Assets includes the following:
Digital asset writedowni
Branding asset writedownii
Total impairment
2021
$’000
2020
$’000
—
—
—
3,215
2,610
5,825
i.
ii.
In FY20, an impairment provision of $3.215 million had been taken up against capitalised costs of its existing digital assets as the Company
planned to move from a monolithic digital architecture structure to a headless digital architecture structure. This was primarily to address
performance issues and ensure future opportunities with regard to our various digital opportunities are optimised.
In FY20, the Company introduced its new corporate branding which reflects a fresh and modern way of communicating with the
Company’s customers across all channels. The Company incurred a non-cash expense of $2.610 million to write down the value of its
old corporate branding.
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
2021
$’000
5,493
410
(178)
5,725
2020
$’000
5,286
—
(195)
5,091
In addition, $4.195 million (2020: nil) was recognised in share-based payment tax reserves for income tax benefits in
excess of amounts relating to the cumulative share-based payment expense recognised in profit or loss.
The 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% (2020: 30%)
Non-deductible expenditure
Over/under from prior year
Share-based payments
Income tax expense recognised in profit or loss
23,257
15,077
(6,977)
(4,523)
(25)
410
867
(627)
59
–
(5,725)
(5,091)
The tax rate used for financial year 2021 and 2020 in the above reconciliation is the corporate tax rate of 30% payable
by large Australian corporate entities on taxable profits under Australian tax law.
8282
Note 7: Other receivables
Current
Trade receivables
Other receivables
2021
$’000
2020
$’000
219
5,646
5,865
200
4,922
5,122
There are no material receivables past due date. The receivables are expected to be settled within 30-90 days, subject
to the terms of the relevant agreement.
Note 8: Inventory
Finished goods
Less: Provision for shrinkage, obsolescence and mark-down
2021
$’000
2020
$’000
80,961
65,766
(974)
(672)
79,987
65,094
The cost of inventories recognised as an expense during the current reporting period in respect of continuing
operations was $294.711 million (2020: $258.313 million). During the financial year, $0.302 million expense was
recognised for inventories carried at net realisable value (2020: $0.380 million credit). This is recognised in cost
of sales.
Note 9: Other assets
Prepayments
Right of return
2021
$’000
2,385
634
3,019
2020
$’000
1,929
587
2,516
Baby Bunting Annual Report 2021 83
Leasehold
improvements
$’000
Plant and
equipment
$’000
Total
$’000
7,182
43,270
50,452
4
10,812
10,816
(800)
(3,166)
(3,966)
6,386
50,916
57,302
(4,186)
(23,784)
(27,970)
(816)
800
(5,227)
(6,043)
3,140
3,940
(4,202)
(25,871)
(30,073)
2,184
25,045
27,229
Leasehold
improvements
$’000
Plant and
equipment
$’000
7,307
2
42,166
5,455
Total
$’000
49,473
5,457
(127)
(4,351)
(4,478)
7,182
43,270
50,452
(3,620)
(21,401)
(25,021)
(627)
(4,190)
(4,817)
61
1,807
1,868
(4,186)
(23,784)
(27,970)
2,996
19,486
22,482
Notes to the consolidated financial statements
for the year ended 27 June 2021
Note 10: Plant and equipment
Cost
Balance at 28 June 2020
Additions
Disposals
Balance at 27 June 2021
Accumulated depreciation
Balance at 28 June 2020
Depreciation
Disposals
Balance at 27 June 2021
Carrying amount as at 27 June 2021
Cost
Balance at 30 June 2019
Additions
Disposals
Balance at 28 June 2020
Accumulated depreciation
Balance at 30 June 2019
Depreciation
Disposals
Balance at 28 June 2020
Carrying amount as at 28 June 2020
8484
Note 11: Intangible assets and goodwill
Cost
Balance at 28 June 2020
Additions
Disposals
Balance at 27 June 2021
Amortisation and impairment losses
Balance at 28 June 2020
Amortisation
Disposals
Balance at 27 June 2021
Carrying amount as at 27 June 2021
Cost
Balance at 30 June 2019
Additions
Impairment write-down
Balance at 28 June 2020
Amortisation and impairment losses
Balance at 30 June 2019
Amortisation
Balance at 28 June 2020
Carrying amount as at 28 June 2020
Goodwill
$’000
Intangibles
$’000
45,321
—
—
5,816
1,291
(7)
45,321
7,100
—
—
—
(2,126)
(551)
7
(2,670)
45,321
4,430
Goodwill
$’000
Intangibles
$’000
45,321
—
—
6,172
2,859
(3,215)
45,321
5,816
—
—
—
45,321
(1,637)
(489)
(2,126)
3,690
Refer to Note 2(c) for detail on the inputs used in the impairment calculation of goodwill.
Note 12: Leases
The Company has lease contracts for various items of property, motor vehicles and material handling equipment used
in its operations. Leases of buildings generally have lease terms between 5 and 12 years, while motor vehicles and
material handling equipment generally have lease terms between 1 and 6 years. The Company’s obligations under its
leases are secured by the lessor’s title to the leased assets. Generally, the Company is restricted from assigning and
subleasing the leased assets.
There are several lease contracts that include extension options and variable lease payments. Relevant factors the
Company considers in determining the likelihood to exercise a lease renewal, to the point of reasonable certainty,
include the Company’s overall property strategy, the importance of the leased asset to the Company, the existence of
renewal options and their pricing, whether the market is a new market or an existing market, the costs of returning the
leased asset in a contractually specified condition and the existence of alternate sites within the relevant catchment
and the associated costs of a relocation, and any broader trends generally shaping the retail industry. The Company’s
lease portfolio contains option periods averaging around 5 years that are not considered reasonably certain options
to be exercised. However, these options provide the Company flexibility in managing the leased asset portfolio.
The present value of the lease payments to be made under options considered reasonably certain to be exercised
has been included in the lease liability balance as at 27 June 2021.
Baby Bunting Annual Report 2021 85
Notes to the consolidated financial statements
for the year ended 27 June 2021
Note 12: Leases (cont.)
The Company has several lease contracts that include extension options. These options are negotiated to provide
flexibility in managing the leased-asset portfolio and align with the Company’s business needs. The undiscounted
potential future payments at current rental rates under options that are not considered reasonably certain to be
exercised is $264.325 million, which includes potential lease payments within the next five years of $30.845 million
should those options be exercised.
The Company also has certain leases of material handling equipment with lease terms of 12 months or less and leases
of office equipment that are low in value. The Company applies the ‘short-term lease’ and ‘lease of low-value assets’
recognition exemptions for these leases.
Set out below, are the carrying amounts of the Company’s right-of-use assets and lease liabilities and the movements
during the period:
As at 30 June 2019
Additions
Remeasurements1
Depreciation expense
As at 28 June 2020
Additions
Remeasurements1
Depreciation expense
As at 27 June 2021
Right-of-use Asset
Motor
Vehicles
$’000
Material
Handling
equipment
$’000
—
311
—
1,520
433
—
TOTAL
$’000
95,674
16,927
889
(141)
(551)
(19,986)
170
210
—
(149)
231
1,402
1,433
24
93,504
39,254
1,608
(578)
(22,308)
2,281
112,058
Property
$’000
94,154
16,183
889
(19,294)
91,932
37,611
1,584
(21,581)
109,546
1. Remeasurements of right-of-use assets primarily represents lease extensions of stores.
2021
$’000
2020
$’000
105,978
107,489
39,254
4,729
1,608
16,927
4,947
786
(26,280)
(24,171)
125,289
105,978
25,521
99,768
24,895
81,083
125,289
105,978
Lease Liabilities
Opening balance
Additions
Accretion of interest
Remeasurements1
Payments
Closing balance
Current
Non-current
Total lease liabilities
1. Remeasurements of lease liabilities primarily represents lease extensions of stores.
The maturity analyses of lease liabilities are disclosed in Note 25 Financial Instruments.
8686
The following are the amounts recognised in profit and loss:
Depreciation expense of right-of-use asset
Interest expense on lease liabilities
Rent expenses — short-term leases
Rent expenses — leases of low-value assets
(included in stores, administration and warehouse)
Rent expenses — variable lease payments
Total
2021
$’000
22,308
4,729
51
584
2020
$’000
19,986
4,947
7
286
2,814
2,711
30,486
27,937
The Company had total cash outflows for leases of $29.729 million in 2021 ($27.175 million in 2020). The Company also
had non-cash additions to right-of-use assets and lease liabilities of $39.254 million in 2021 ($16.927 million in 2020).
Note 13: Deferred tax assets
Deferred tax balances are presented in the consolidated statement of financial position as follows:
Deferred tax assets
2021 – Consolidated $’000
Employee benefits
Non-deductible accruals
Non-refundable layby income
Inventories
Gift vouchers
Right of return
Right-of-use asset
Lease liability
Property, plant and equipment
Share-based payments
Total
2021
$’000
11,568
2020
$’000
7,195
Opening
balance
Recognised
in profit or
loss
Recognised
in equity
1,711
144
834
353
314
97
239
21
129
(131)
306
26
(28,051)
(5,566)
31,793
—
—
7,195
5,795
(2,890)
2,249
178
—
—
—
—
—
—
—
—
—
4,195
4,195
Closing
balance
1,950
165
963
222
620
123
(33,617)
37,588
(2,890)
6,444
11,568
Baby Bunting Annual Report 2021 87
Notes to the consolidated financial statements
for the year ended 27 June 2021
Note 13: Deferred tax assets (cont.)
2020 – Consolidated $’000
Employee benefits
Non-deductible accruals
Non-refundable layby income
Inventories
Gift vouchers
IPO transaction costs — listing
IPO transaction costs — issuance of new shares
Right of return
Right-of-use asset
Lease liability
Total
Note 14: Payables
Current
Trade payables
Sundry payables
Opening
balance
1,362
535
707
495
350
112
105
—
(28,848)
32,182
7,000
Recognised
in profit
or loss
Recognised
in equity
Closing
balance
349
(391)
127
(142)
(36)
(112)
(105)
97
797
(389)
195
—
—
—
—
—
—
—
—
—
—
—
1,711
144
834
353
314
—
—
97
(28,051)
31,793
7,195
2021
$’000
2020
$’000
30,195
18,617
36,110
13,840
48,812
49,950
Terms and conditions of the above financial liabilities:
• Trade payables are non-interest bearing and are normally settled on 30-day terms.
• Sundry payable includes $6.113 million (2020: $5.699 million) of deposit and instalment payments received by the
Company in relation to layby sales taken out by customers.
• Sundry payables are non-interest bearing and have an average term of three months.
• For explanations on the Company’s liquidity risk management processes, refer to Note 25(b).
Note 15: Other liabilities
Unredeemed gift cards
Refund liability
2021
$’000
2,068
1,044
3,112
2020
$’000
1,048
909
1,957
The unredeemed gift cards are expected to be redeemed within three years. Loyalty vouchers are expected to be
redeemed within 30 days.
8888
Note 16: Loans and borrowings
Non-current - Secured
Bank loan
2021
$’000
2020
$’000
9,950
—
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 23 July 2020, this facility was increased from
$58,000,000 to $78,000,000. 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 $78,000,000, consisting of $70,000,000 Corporate Market Loan (‘CML’)
facility and $8,000,000 bank guarantee facility. The CML facility can be drawn to the lesser of $70,000,000 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 27 June 2021. The current facility does not
require the consolidated entity to amortise borrowings.
Note 17: Provisions
Current
Employee benefits
Non-current
Employee benefits
Note 18: Issued capital
2021
$’000
2020
$’000
5,804
5,137
691
565
27 June 2021
28 June 2020
No. of
shares
$’000
No. of
shares
$’000
Fully paid ordinary shares
Balance at beginning of the year
127,564,474
86,358 126,441,237
85,706
Issue of shares:
- Employee Gift Offer
- LTI vesting
165,221
1,525,380
795
—
185,134
938,103
652
—
Balance at end of the year
129,255,075
87,153 127,564,474
86,358
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
Baby Bunting Annual Report 2021 89
Notes to the consolidated financial statements
for the year ended 27 June 2021
Note 19: Dividends
Recognised amounts
Final 2020 dividend
Interim 2021 dividend
2021
2020
$ per
ordinary
share
0.064
0.058
$ per
ordinary
share
0.051
0.041
$’000
8,164
7,497
$’000
6,448
5,230
On 14 August 2020, the Directors determined to pay a fully franked final dividend of 6.4 cents per share to the holders
of fully paid ordinary shares in respect of the financial year ended 28 June 2020. The dividend was subsequently paid
to shareholders on 11 September 2020 totalling $8.164 million.
On 12 February 2021, the Directors determined to pay an interim fully franked dividend of 5.8 cents per share to
the holders of fully paid ordinary shares in respect of the half-year ended 27 December 2020. The dividend was
subsequently paid to shareholders on 12 March 2021 totalling $7.497 million.
On 13 August 2021, the Directors determined to pay a fully franked final dividend of 8.3 cents per share to the
holders of fully paid ordinary shares in respect of the financial year ended 27 June 2021, to be paid to shareholders
on 10 September 2021. The dividend has not been included as a liability in these consolidated financial statements.
The record date for determining entitlements to the dividend is 27 August 2021. The total estimated dividend to be
paid is $10.772 million.
Adjusted franking account balance
Franking credits that will arise from the payment of income tax payable
as at the end of the financial year
Franking debits that will arise from the payment of income tax receivable
as at the end of the financial year
Franking debits that will arise from the payment of final dividend
in respect of the financial year
Company
2021
$’000
7,757
—
2020
$’000
9,162
1,305
(1,056)
—
(4,597)
(3,499)
There are no income tax consequence attached to the payment of dividends in either 2021 or 2020 by the Company to
its shareholders.
Note 20: Retained earnings
Retained earnings
Balance at beginning of year
Profit attributable to owners of the Company
Payment of dividends
Share-based paymentsi
Balance at end of year
2021
$’000
2020
$’000
2,631
17,532
4,323
9,986
(15,661)
(11,678)
2,955
7,457
—
2,631
i.
In FY21, 1,525,380 performance rights vested under the Company’s Long Term Incentive Plan (market value of $7.339 million). This vesting
resulted in an income tax benefit of $0.266 million and an increase to the share-based payment tax reserve of $2.955 million. The vested
portion of $2.955 million was transferred to retained earnings.
9090
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. During
the year, the Company commenced sales of products online to New Zealand customers. New Zealand online sales is
reported as part of Australia segment. On this basis, management has identified one reportable segment, Australia.
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
Australia
2021
$’000
2020
$’000
Total
2021
$’000
2020
$’000
468,377
405,173
468,377
405,173
34,611
23,456
34,611
23,456
301,417
258,261
301,417
258,261
Additions to plant and equipment and intangibles
12,107
8,316
12,107
8,316
Depreciation and amortisation
28,902
25,293
28,902
25,293
Total non-current assets1
Total segment liabilities
189,038
164,997
189,038
164,997
193,658
164,892
193,658
164,892
1. Non-current assets exclude deferred tax assets.
Revenue reported above represents revenue generated from external customers. There were no inter-segment sales
in the current reporting period (2020: 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 measurement basis excludes the effects of interest revenue, other operating income,
finance costs, income tax and employee equity expenses.
Operating EBIT
A reconciliation of operating EBIT to profit before tax is provided as follows:
Operating EBIT
Interest revenue
Other operating income
Finance expenses
Employee equity expenses
Profit before tax
Segment assets and liabilities
2021
$’000
2020
$’000
34,611
23,456
-
2,466
7
-
(5,650)
(5,756)
(8,170)
(2,630)
23,257
15,077
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
2021
$’000
2020
$’000
301,417
258,261
193,658
164,892
Baby Bunting Annual Report 2021 91
Notes to the consolidated financial statements
for the year ended 27 June 2021
Note 22: Reserves
a. Share-based payments
Share-based payments reserve
Balance at beginning of period
Performance rights – expense (Note 22(b))
Balance at end of period
2021
$’000
2020
$’000
4,380
4,574
8,954
2,515
1,865
4,380
b. 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, EPS, TSR).
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 $2.18 (2020: $1.67). 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
2020 (TSR CAGR)
2020 (EPS CAGR)
2021 (TSR CAGR)
2021 (EPS CAGR)
25 October 2019
25 October 2019
24 December 2020
24 December 2020
Grant date
fair value
Exercise
price
Expiry date
$1.67
$3.79
$2.18
$4.67
nil
nil
nil
nil
(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.
2021
(TSR CAGR)
2020
(TSR CAGR)
$4.67
$3.79
nil
52%
2.8
3.22%
0.15%
nil
55%
2.6
2.21%
1.35%
Grant date share price
Exercise price
Expected volatility
Expected life (years)
Dividend yield
Risk-free interest rate
9292
Movements in performance rights during the year
The consolidated entity recorded a Share-based payments expense for performance rights of $4.574 million
(2020: $1.865 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:
52 weeks ended 27 June 2021
52 weeks ended 28 June 2020
TSR
Number of
rights
EPS
Number of
rights
Retention
Number of
rights
TSR
Number of
rights
EPS
Number of
rights
Retention
Number of
rights
3,932,880
2,407,500
564,000
3,942,223
4,219,334
614,000
Balance at beginning
of the period
Granted during the period
1,330,000
1,330,000
Forfeited during the period
—
Exercised during the period
(1,525,380)
Lapsed during the period
—
—
—
—
—
—
—
—
1,155,500
1,155,500
—
(226,740)
(257,000)
(50,000)
(938,103)
—
—
(2,710,334)
—
—
Balance at end of period
3,737,500
3,737,500
564,000
3,932,880
2,407,500
564,000
Exercisable at end of period
—
—
—
—
—
—
c. 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 165,221 shares (2020: 185,134 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 $0.795 million
(2020: $0.652 million) was fully expensed at the time of granting, as there are no performance or service conditions.
d. Share-based payments tax reserve
Share-based payments tax reserve
Balance at beginning of period
Tax effect of share-based payments1
Transfer to retained earnings2
Balance at end of period
27 Jun 2021
$’000
28 Jun 2020
$’000
—
7,150
(2,955)
4,195
—
—
—
1. $7.150 million represents income tax benefit recognised in share-based payment tax reserve that is in excess of amounts relating to the
cumulative share-based payment expense recognised in profit or loss.
2. In FY21, 1,525,380 performance rights vested under the Company’s Long Term Incentive Plan (market value of $7.339 million). The balance
transferred to retained earnings represents the income tax benefit recorded in the reserves associated with share-based payments that
vested in the current period.
Baby Bunting Annual Report 2021 93
Notes to the consolidated financial statements
for the year ended 27 June 2021
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 (2020: 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
Cash incentive payment
2021
$
2020
$
1,803,857
1,388,059
88,068
86,686
26,823
30,221
1,652,687
759,313
1,445,234
—
5,016,669
2,264,279
Note 24: Commitments for expenditure
Capital commitments
The consolidated entity has capital commitments totalling nil (2020: nil).
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
Derivative assets
Financial liabilities
Trade and other payables
Other liabilities
Borrowings
Lease liability
9494
2021
$’000
2020
$’000
10,884
5,865
66
13,337
5,122
—
16,815
18,459
48,812
44,251
1,044
9,950
909
—
125,289
105,978
185,095
151,138
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
and are therefore exposure to foreign exchange risk is limited to around 10% of goods which are purchased in a
foreign currency.
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of
changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates
primarily to the Company’s operating activities (when revenue or expense is denominated in a foreign currency).
The Company uses foreign exchange forward contracts to manage its exposure to foreign currency transactions.
The foreign exchange forward contracts are not designated as cash flow hedge and are entered into for periods
consistent with foreign currency exposure of the underlying transaction, generally up to 3 months. Although the
derivatives have not been designated in a hedge relationship, they act as an economic hedge and will offset the
underlying transactions when they occur.
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.
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 28 June 2020
Financial liabilities
Borrowings – CML Facility
Total increase/(decrease)
At 27 June 2021
Financial liabilities
Borrowings – CML Facility
Total increase/(decrease)
Interest rate risk
Carrying
amount
$’000
-50bps
+50 bps
Profit
$’000
Profit
$’000
—
—
—
—
Interest rate risk
—
—
Carrying
amount
$’000
9,950
9,950
-50bps
+50 bps
Profit
$’000
Profit
$’000
50
50
(50)
(50)
Baby Bunting Annual Report 2021 95
Notes to the consolidated financial statements
for the year ended 27 June 2021
Note 25: Financial instruments – fair values and risk management (cont.)
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
2021
2020
Limit
$’000
70,000
8,000
Utilised
$’000
9,950
3,471
Limit
$’000
50,000
8,000
78,000
13,421
58,000
Utilised
$’000
—
3,729
3,729
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 27 June 2021
Financial assets
—
—
—
—
—
—
Cash and cash equivalents
10,884
Other receivables
Derivative assets
5,865
66
16,815
Financial liabilities
Trade and other payables
48,812
Other liabilities
Lease liability
1,044
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
10,884
5,865
66
16,815
48,812
1,044
14,063
12,238
43,106
36,585
40,758
146,750
Borrowings – CML facility
—
—
9,950
—
—
9,950
1.58%
63,919
12,238
53,056
36,585
40,758
206,556
9696
Maturity
Less than
6 months
$’000
6-12
months
Between
1 and 2
years
Between
2 and 5
years
Over
5 years
Total
At 28 June 2020
Financial assets
Cash and cash equivalents
13,337
Other receivables
Derivative assets
5,122
—
18,459
Financial liabilities
Trade and other payables
44,251
Other liabilities
Lease liability
909
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
13,337
5,122
—
18,459
44,251
909
Weighted
average
effective
interest
rate %
0.23%
—
—
—
—
—
12,567
12,387
21,168
33,804
42,200
122,126
Borrowings – CML facility
—
—
—
—
—
—
2.75%
57,727
12,387
21,168
33,804
42,200
167,286
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.
Baby Bunting Annual Report 2021 97
Notes to the consolidated financial statements
for the year ended 27 June 2021
Note 26: Notes to the statement of cash flows
a. Reconciliation of profit 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
Digital asset writedown
Branding asset writedown
Changes in assets and liabilities:
Decrease/(Increase) in other receivables
Decrease/(Increase) in other assets
Decrease/(Increase) in inventories
Decrease/(Increase) in deferred tax assets
Increase/(Decrease) in trade and other payables
Increase/(Decrease) in provisions
Increase/(Decrease) in income tax assets/liability
Increase/(Decrease) in other financial liabilities
2021
$’000
17,532
2020
$’000
9,986
28,902
25,293
5,396
—
—
(743)
(503)
(14,893)
(178)
(1,094)
793
549
1,155
2,630
3,215
2,610
(1,026)
(1,005)
3,110
(195)
5,461
1,161
(1,423)
30
Net cash provided by operating activities
36,916
49,847
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:
2021
$’000
79
10,805
10,884
2020
$’000
73
13,264
13,337
Cash on hand
Cash at bank
9898
Note 27: Parent entity disclosures
As at, and throughout, the 52 weeks ended 27 June 2021 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
2021
$’000
14,487
—
2020
$’000
9,900
—
14,487
9,900
—
—
98,485
96,704
98,485
96,704
1,304
1,304
—
—
1,304
1,304
86,357
86,357
—
10,824
451
8,592
97,181
95,400
The Company does not have any contractual commitments for the acquisition of property, plant and equipment
(28 June 2020: nil). The Company does not have any contingent liabilities (28 June 2020: nil).
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
lodgement 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.
Baby Bunting Annual Report 2021 99
Notes to the consolidated financial statements
for the year ended 27 June 2021
Note 28: Group entities (cont.)
Subsidiaries listing
Name of subsidiary
Principal activity
Baby Bunting Pty Ltd1
Retailing of baby merchandise
Baby Bunting EST Pty Ltd2
Trustee of the trust established
in connection with the Company’s
employee share plans
Proportion of ownership
interest and voting power
held by the Company
June 2021
June 2020
100%
100%
100%
100%
Place of
incorporation
and operation
Australia
Australia
1. This wholly-owned subsidiary has entered into a deed of cross guarantee with Baby Bunting Group Limited. Baby Bunting Pty Ltd became a
party to the deed of cross guarantee on 19 June 2008.
2. Baby Bunting EST Pty Ltd has no material net assets or profit and the financial information disclosed in this report represents the financial
information for the group entities that are party to the deed of cross guarantee.
Note 29: Earnings per share
Basic earnings per share from continuing operations1
Diluted earnings per share from continuing operations1
2021
cents
per share
2020
cents
per share
13.6
13.0
7.8
7.3
1.
In the current and comparative reporting periods there were no discontinued operations.
a. Basic earnings per share
Basic earnings per share is calculated by dividing the profit for the year attributable to members of the ordinary equity
holders of the parent by the weighted average number of ordinary shares outstanding during the year.
The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are
as follows:
Earnings used in the calculation of basic earnings per share
from continuing operations1
Weighted average number of ordinary shares for the purposes of
basic earnings per share
1.
In the current and comparative reporting periods there were no discontinued operations.
2021
$’000
17,532
2020
$’000
9,986
Number
Number
128,708,525 127,244,428
100100
b. Diluted earnings per share
Diluted earnings per share is calculated by dividing the profit attributable to members of the ordinary equity holders
of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted
average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into
ordinary shares.
The earnings used in the calculation of diluted earnings per share are as follows:
Earnings used in the calculation of diluted earnings per share
from continuing operations1
2021
$’000
17,532
2020
$’000
9,986
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 diluted earnings per share2
Number
Number
134,896,637
135,922,008
1.
In the current and comparative reporting periods there were no discontinued operations.
2. The weighted average number of shares takes into account the weighted average effect of performance rights exercised and granted
during the year.
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
Remuneration advisory services
2021
$
2020
$
38,350
135,050
173,400
18,950
7,674
26,624
30,500
136,800
167,300
34,524
38,831
73,355
Total remuneration
200,024
240,655
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 8.3 cents per fully paid ordinary shares has been determined for the year ended 27 June 2021 -
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 27 June 2021.
Baby Bunting Annual Report 2021
101
Directors’ declaration
The Directors declare that:
a. in their opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when
they become due and payable;
b. in their opinion, the attached financial statements are in compliance with International Financial Reporting
Standards, as stated in Note 2 to the financial statements;
c. in their opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act
2001, including compliance with accounting standards and giving a true and fair view of the financial position and
performance of the consolidated entity; and
d. the Directors have been given the declarations required by s.295A of the Corporations Act 2001.
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
13 August 2021
102102
Independent auditor’s report
Baby Bunting Annual Report 2021
103
A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards LegislationErnst & Young8 Exhibition StreetMelbourne VIC 3000 AustraliaGPO Box 67 Melbourne VIC 3001 Tel: +61 3 9288 8000Fax: +61 3 8650 7777ey.com/auIndependent Auditor's Report to the Members of Baby Bunting GroupLimitedReport on the Audit of the Financial ReportOpinionWe 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 at27 June 2021, 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 yearthen 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 theCorporationsAct 2001, including:(a)giving a true and fair view of the consolidated financial position of the Group as at 27 June 2021and of its consolidated financial performance for the year ended on that date; and(b)complying with Australian Accounting Standards and theCorporations Regulations 2001.Basis for OpinionWe conducted our audit in accordance with Australian Auditing Standards. Our responsibilities underthose standards are further described in theAuditor’s Responsibilities for the Audit of the FinancialReport section of our report. We are independent of the Group in accordance with the auditorindependence requirements of theCorporations Act 2001 and the ethical requirements of theAccounting Professional and Ethical Standards Board’s APES 110Code of Ethics for ProfessionalAccountants(including Independence Standards) (the Code) that are relevant to our audit of thefinancial report in Australia. We have also fulfilled our other ethical responsibilities in accordance withthe Code.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our opinion.Key Audit MattersKey audit matters are those matters that, in our professional judgement, were of most significance inour audit of the financial report of the current year. These matters were addressed in the context ofour audit of the financial report as a whole, and in forming our opinion thereon, but we do not providea separate opinion on these matters. For each matter below, our description of how our auditaddressed the matter is provided in that context.We have fulfilled the responsibilities described in theAuditor’s Responsibilities for the Audit of theFinancial Report section of our report, including in relation to these matters. Accordingly, our auditincluded the performance of procedures designed to respond to our assessment of the risks ofmaterial misstatement of the financial report. The results of our audit procedures, including theprocedures performed to address the matters below, provide the basis for our audit opinion on theaccompanying financial report. Independent auditor’s report
104104
A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards Legislation2Accounting for supplier rebatesWhy significantHow our audit addressed the key audit matterAs detailed in Note 2(h) of the financial report,volume and promotional rebates received by theGroup from suppliers are recognised as areduction to the carrying value of inventory oras a direct reduction in the cost of goods sold.This was a key audit matter due to the quantumof rebates recognised during the year and thejudgement required to be exercised by the Groupin relation to a number of factors, including:►The nature, complexity and commercialterms of each individual rebate;►The appropriate timing of recognition, inparticular, rebates recorded at the reportingdate; and►Consideration of whether the rebate amountshould be applied against the carrying valueof inventory or recognised in the incomestatement as a reduction in cost of goodssold.Our audit procedures included the following:►Assessed the appropriateness of the Group’saccounting policies in relation to volume rebatesand promotional rebates in accordance withAustralian Accounting Standards.►Assessed the effectiveness of controls in placerelating to the recognition and measurement ofrebate amounts.►Compared recorded amounts for a sample ofsignificant rebate arrangements with amountsrecorded for the same arrangements in the prioryear and where material variances wereidentified, obtained supporting evidence.►For a sample of individual supplier agreements,recalculated the rebate entitlements anddetermined whether these were correctlyrecorded in accordance with the terms of theagreement and Australian Accounting Standards.►Assessed the Group’s year end rebate receivableby considering the key assumptions, havingregard to past claims experience and the Group’sclaim documentation prepared after balancedate. Where available, we agreed the receivableto the amount settled subsequent to year end.Carrying value of inventoriesWhy significantHow our audit addressed the key audit matterAs at 27 June 2021, the Group held $79.9million in inventories representing 27% of totalassets of the Group.As detailed in Note 2(h) of the financial report,inventories are valued at the lower of cost andnet realisable value.The cost of inventory is determined using aweighted average cost approach adjusted forvolume rebates and settlements discounts.Our audit procedures included the following:►Assessed the design and operating effectivenessof relevant controls used by the Group to recordthe cost of inventories and tested the cost priceof inventory recorded for a sample of inventoryitems to supplier invoices.►Assessed the basis for inventory provisionsrecorded by the Group for slow movinginventories and stock losses. In doing so, weexamined the Group’s process for identifyingslow moving inventories, negative margin,historical stock loss rate trends and expectedcosts to sell. Baby Bunting Annual Report 2021
105
A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards Legislation3Why significantHow our audit addressed the key audit matterJudgement was required to be exercised by theGroup to determine the net realisable value foritems which may be ultimately sold below cost.These judgements include consideration ofexpectations for future sales based on historicalexperience.Given the process and judgement involved indetermining the cost and carrying value ofinventories, this was considered a key auditmatter.►Considered the impact of sales subsequent toyear end on the value of inventories at balancedate by comparing the actual selling prices to thecarrying value for a sample of inventories.Information Other than the Financial Report and Auditor’s Report ThereonThe directors are responsible for the other information. The other information comprises theinformation included in the Company’s 2021 Annual Report, but does not include the financial reportand our auditor’s report thereon.Our opinion on the financial report does not cover the other information and accordingly we do notexpress any form of assurance conclusion thereon, with the exception of the Remuneration Reportand our related assurance opinion.In connection with our audit of the financial report, our responsibility is to read the other informationand, in doing so, consider whether the other information is materially inconsistent with the financialreport 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 thisother information, we are required to report that fact. We have nothing to report in this regard.Responsibilities of the Directors for the Financial ReportThe directors of the Company are responsible for the preparation of the financial report that gives atrue and fair view in accordance with Australian Accounting Standards and theCorporations Act 2001and for such internal control as the directors determine is necessary to enable the preparation of thefinancial report that gives a true and fair view and is free from material misstatement, whether due tofraud or error.In preparing the financial report, the directors are responsible for assessing the Group’s ability tocontinue as a going concern, disclosing, as applicable, matters relating to going concern and using thegoing concern basis of accounting unless the directors either intend to liquidate the Group or to ceaseoperations, or have no realistic alternative but to do so. Independent auditor’s report
106106
A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards Legislation4Auditor's Responsibilities for the Audit of the Financial ReportOur objectives are to obtain reasonable assurance about whether the financial report as a whole isfree from material misstatement, whether due to fraud or error, and to issue an auditor’s report thatincludes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that anaudit conducted in accordance with the Australian Auditing Standards will always detect a materialmisstatement when it exists. Misstatements can arise from fraud or error and are considered materialif, individually or in the aggregate, they could reasonably be expected to influence the economicdecisions of users taken on the basis of this financial report.As part of an audit in accordance with the Australian Auditing Standards, we exercise professionaljudgement and maintain professional scepticism throughout the audit. We also:Identify and assess the risks of material misstatement of the financial report, whether due tofraud or error, design and perform audit procedures responsive to those risks, and obtain auditevidence that is sufficient and appropriate to provide a basis for our opinion. The risk of notdetecting a material misstatement resulting from fraud is higher than for one resulting fromerror, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or theoverride of internal control.Obtain an understanding of internal control relevant to the audit in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Group’s internal control.Evaluate the appropriateness of accounting policies used and the reasonableness of accountingestimates and related disclosures made by the directors.Conclude on the appropriateness of the directors’ use of the going concern basis of accountingand, based on the audit evidence obtained, whether a material uncertainty exists related toevents or conditions that may cast significant doubt on the Group’s ability to continue as a goingconcern. If we conclude that a material uncertainty exists, we are required to draw attention inour auditor’s report to the related disclosures in the financial report or, if such disclosures areinadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained upto the date of our auditor’s report. However, future events or conditions may cause the Groupto cease to continue as a going concern.Evaluate the overall presentation, structure and content of the financial report, including thedisclosures, and whether the financial report represents the underlying transactions and eventsin a manner that achieves fair presentation.Obtain sufficient appropriate audit evidence regarding the financial information of the entitiesor business activities within the Group to express an opinion on the financial report. We areresponsible for the direction, supervision and performance of the Group audit. We remain solelyresponsible for our audit opinion.We communicate with the directors regarding, among other matters, the planned scope and timing ofthe audit and significant audit findings, including any significant deficiencies in internal control that weidentify during our audit. Baby Bunting Annual Report 2021
107
A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards Legislation5We also provide the directors with a statement that we have complied with relevant ethicalrequirements regarding independence, and to communicate with them all relationships and othermatters that may reasonably be thought to bear on our independence, and where applicable, actionstaken to eliminate threats or safeguards applied.From the matters communicated to the directors, we determine those matters that were of mostsignificance in the audit of the financial report of the current year and are therefore the key auditmatters. We describe these matters in our auditor’s report unless law or regulation precludes publicdisclosure about the matter or when, in extremely rare circumstances, we determine that a mattershould not be communicated in our report because the adverse consequences of doing so wouldreasonably be expected to outweigh the public interest benefits of such communication.Report on the Audit of the Remuneration ReportOpinion on the Remuneration ReportWe have audited the Remuneration Report included in pages 46 to 64 of the directors' report for theyear ended 27 June 2021.In our opinion, the Remuneration Report of Baby Bunting Group Limited for the year ended27 June 2021, complies with section 300A of theCorporations Act 2001.ResponsibilitiesThe directors of the Company are responsible for the preparation and presentation of theRemuneration Report in accordance with section 300A of theCorporations Act 2001. Ourresponsibility is to express an opinion on the Remuneration Report, based on our audit conducted inaccordance with Australian Auditing Standards.Ernst & YoungTony MorsePartnerMelbourne13 August 2021 Shareholder information
as at 9 July 2021
Baby Bunting Group Limited has one class of shares on issue (being fully paid ordinary shares). There are 129,255,075
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
Citicorp Nominees Pty Limited
J P Morgan Nominees Australia Pty Limited
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
BNP Paribas Nominees Pty Ltd
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