ANNUAL REPORT
for the period ended 29 January 2017
2
Contents
Key Facts ..................................................... 5
Chairman’s Review ....................................... 6
Managing Director’s Review
of Operations ............................................... 9
Group Financial Statements
Introduction ................................................................... 12
Contents ........................................................................ 13
Directors’ Approval .......................................................... 14
Consolidated Income Statement ........................................ 15
Consolidated Statement of Comprehensive Income ............. 15
Consolidated Balance Sheet ............................................. 16
Consolidated Statement of Cash Flows ............................... 17
Consolidated Statement of Changes in Equity ...................... 19
Notes to the Group Financial Statements ............................ 20
Independent Auditors’ Report ...................... 47
Corporate Governance ................................ 52
General Disclosures ................................... 56
Top 20 Holder List ....................................... 59
Directory ................................................... 62
Calendar ................................................... 62
3
4
Key Facts
Audited
period ending
29 January
2017
$000
Audited
period ending
31 January
2016
$000
Audited
period ending
25 January
2015
$000
Audited
period ending
26 January
2014
$000
Audited
period ending
27 January
2013
$000
Trading Results
Sales Revenue
Gross profit margin
Earnings before interest and tax (EBIT)1.
Net profit after tax (NPAT)
Net cash flows from operating activities
Financial Position and Statistics
Shareholders’ funds
Total assets
EBIT per share
NPAT per share
Operating cashflow per share
Current ratio
Shareholders’ funds to total assets
Store Numbers
Homeware
Sporting Goods
Briscoe Group
Total Store Area (m2)
Homeware
Sporting Goods
Briscoe Group
582,840
41.1%
79,827
59,420
85,984
205,153
298,238
36.4c
27.1c
39.2c
1.5:1
68.8%
47
36
83
104,122
57,490
161,612
552,892
40.5%
65,935
47,137
39,898
164,424
235,418
30.3c
21.7c
18.3c
1.5:1
69.8%
47
35
82
507,063
38.9%
53,122
39,302
45,051
155,559
234,754
24.5c
18.2c
20.8c
2.2:1
66.3%
46
33
79
483,566
38.5%
45,222
33,575
46,092
140,648
215,384
21.0c
15.6c
21.4c
2.1:1
65.3%
46
32
78
452,702
38.9%
40,970
30,468
31,406
128,581
191,831
19.2c
14.3c
14.7c
2.3:1
67.0%
48
32
80
100,085
56,394
156,479
95,787
53,993
94,402
51,884
93,014
51,884
149,780
146,286
144,898
IT) is a non-GAAP measure. Refer to the Income Statement on Page 15.
1. Earning before interest and tax (EBIT) is a non-GAAP measure. Refer to the Income Statement on Page 15.
5
5
Chairman’s Review
In a year during which much of the commentary on the retail sector
was given over to dire predications, and with well-known names on
both sides of the Tasman suffering significant reversals, the Board
of Briscoe Group Ltd is proud to report another record profit for the
year ended 29 January 2017. This continues a trend of strong growth
in net profit after tax (NPAT), with a compound annual growth rate
of 21% for the past three years.
Several factors underpin this performance, including a strong
emphasis on inventory management and cost control, and a constant
focus on the relationship we have with our customers – both in-store
and, increasingly, online.
Perhaps the most important element is the commitment and
dedication of our staff, and the Board fully endorses the Managing
Director’s decision to once again pay a special bonus to all staff who
are not part of a formal bonus scheme.
In his report last year, our Managing Director warned that it was
inevitable that importers’ margins would be adversely affected as
foreign exchange cover taken at higher levels matured. Despite
the ongoing volatility of the New Zealand dollar against its US
counterpart, we were able to again record an improved gross profit
margin. This highlights the excellent work done on inventory and
promotion management, the ongoing refinement of our product
ranges, and the careful management of our foreign exchange trading.
Both Briscoes Homeware and Rebel Sport returned pleasing results
for the year, with growth in earnings before interest and tax (EBIT) of
14% and 11% respectively. The improvement in our online business
was even more noteworthy, with sales growth exceeding 40% for
the second consecutive year. More than 6% of Group sales are
now made online, and we expect continued strong growth for the
foreseeable future.
With a market capitalisation close to $1 billion, Briscoe Group is
widely recognised as one of New Zealand’s best and largest listed
retailers and we continue to actively seek new ways to further
develop our business and enhance the returns to our shareholders.
I have already noted the continued growth of our online business;
we are also investing in developing, upgrading and refurbishing
our physical stores to ensure an improved in-store experience, and
regularly review opportunities to extend our network or to add to
our portfolio of companies.
Financial performance
Sales revenue increased by 5.42% to $582.84 million, compared with
$552.89 million previously. On a same store basis, and adjusting
for the additional week included in last year’s 53 week period, sales
increased for the year by 4.94%.
6
The Group’s gross profit margin for the year increased from 40.49%
to 41.07%, a satisfying result in the current economic climate.
Net profit after tax (NPAT) was $59.42 million compared to $47.14
million for last year, an improvement of 26.06%. The result includes
a $2.03 million gain from the sale of property in Hastings and the
associated reversal of the $0.79 million deferred tax liability, which
was created in 2011 following changes to the legislation governing
the tax deductibility of depreciation on buildings. Excluding these
adjustments, NPAT for the full year was $56.70 million or 20.28%
higher than the full year result reported for last year.
Inventories totaled $78.93 million at year-end, being $1.27 million
lower than the $80.20 million reported for last year, reflecting the
importance management places on inventory control.
During the year, $18.28 million of capital investment was made
by the Group. Of this, $11.45 million represents development of
three properties owned by the Group: in Wellington at Taranaki
Street and in Petone, and in Auckland at Taylors Road. The balance of
capital investment was primarily for the fit-out of two new stores,
the relocation of two stores, the refurbishment of five stores and
enhancements to system software and hardware.
The profit result includes dividends received of $4.41 million from
the Group’s 19.9% shareholding in Kathmandu Holdings Limited. We
continue to monitor Kathmandu’s performance closely as they seek
to restore profitability to previous levels.
The Group remains in a strong financial position with a cash balance
of $60.07 million reported at year-end and no interest-bearing
liabilities. This figure includes approximately $22 million of creditor
payments, which were subsequently paid by 31 January 2017.
Management has commenced preliminary work on assessing the
impact of the new leasing accounting standard, (NZ IFRS 16), which
will take effect for periods beginning on or after 1 January 2019. We
believe this will have a significant impact on the Group’s balance
sheet and income statement and while this impact is still more than
two years away we recognise the importance of ensuring the new
standard is accurately reflected in our financial statements and that
shareholders remain fully informed.
Board Membership
The past year saw the retirement of two Directors, Stuart Johnstone
and Alaister Wall. In June, Tony Batterton was appointed to replace
Stuart, while Andy Coupe joined the Board in October, following
Alaister’s retirement. Both Tony and Andy are Independent Directors:
with Mary Devine and me as Chairman, the Board now contains four
Independent Non-Executive Directors, alongside Managing Director
and major shareholder Rod Duke.
Both Stuart and Alaister played an important part in Briscoe’s growth
and development during their time on the Board, with Stuart’s
investment banking background being of particular value when
Briscoe Group joined the NZX in 2001.
Alaister’s 15 years as a director is only one element of the significant
contribution he has made to the company over the past 47 years.
As Deputy Managing Director he was recognised not only for his
professionalism and experience but also for his empathy with people
and their families within the Company and also across the wider
supplier network. We thank them both for all they have done.
With Andy and Tony joining the Board, Briscoe Group has an
excellent balance of the attributes required to meet the future needs
of the business.
Executive Share Option Plan
The Board is of the view that all shareholders benefit from the issue
to key senior executives of long-term, appropriately-priced share
options that crystallise only on delivery of increased shareholder
value. In 2003, the Group established an Executive Share Option
Plan to issue options to selected senior executives and, subject to
shareholder approval, to Executive Directors. The Board intends
to issue up to a further 1,700,000 options in the current 2017-
18 financial year. Including this new issue and previously issued
but unexercised options, the total number of share options still
exercisable would represent 3% of the current issued share capital.
Further details of the Executive Share Options Plan can be found in
Note 6.2 (page 44) of the financial statements contained within this
Annual Report.
Dividend
The directors resolved to pay a final dividend of 11.00 cents per
share (cps), fully imputed. This compares to last year’s final dividend
of 9.50 cps. When added to the interim dividend of 7.00 cps, the
total dividend for the year is 18.00 cps, an increase of 16.13% over
last year’s total dividend of 15.50 cps.
The share register closed to determine entitlements to the final
dividend at 5 pm on 28 March 2017 and the dividend was paid on
31 March 2017.
Community Sponsorship
Since 2004, Briscoe Group has been a key partner of Cure Kids, a
charity set up to find cures and better treatments for the serious
illnesses and diseases that affect thousands of children in New
Zealand.
During that time, we have raised more than $5.6 million for Cure Kids,
including some $765,000 in the past year. In supporting their vision
of a healthy childhood for everyone, we are also realising our shared
values and strengthening our own team culture.
7
We also provide funding to the Westpac Rescue Helicopter and the
NZME Special Children’s Christmas Parties, and support the fund-
raising activities of a wide variety of local community-based charities,
sports clubs and others.
Briscoe Group Scholarship
The Briscoe Group Education Foundation was established to provide
employees and their children the opportunity to up-skill and fulfil
their education ambitions - a helping hand that can make an
amazing difference to someone’s ability to contribute to their family,
their community and wider society.
In 2013, the Group partnered with First Foundation, an organisation
that brings together sponsors, schools, and talented young scholars
with limited financial resources in a proven four-year programme
that includes paid work experience, financial support and advice, and
guidance from personal mentors and allows recipients to achieve
their goals and aspirations.
Eleven scholarships have been awarded to date. In addition to
these scholarships we have assisted a number of our support staff
to complete their Graduate Certificate in Retail through Auckland
University of Technology.
It is our intention to continue to support our staff to further
their tertiary and post-tertiary education. We have established
relationships with Massey University and Auckland University of
Technology to provide a pathway for staff to study for a Bachelor of
Retail and Business Management. We recognise the benefits derived
from encouraging team members from all parts of the organisation
to pursue education. Through the generosity of the RA Duke Trust we
are now looking to extend support to selected employees who want
to develop or extend their tertiary education.
On behalf of my fellow directors, we thank you all for your continued
support as shareholders in Briscoe Group. We will continue to ensure
your interests are well represented.
Dame Rosanne Meo
Chairman
8
Managing Director’s Review of Operations
Introduction
Our focus on continual improvement in all areas of the business
has continued to drive profitable growth for Briscoe Group. The year
certainly created some challenges for the team, who responded
quickly and effectively.
As the Chairman noted in her report, effective inventory
management is central to our strategy. The relatively late start
to summer and unsettled weather patterns in most parts of the
country made the selling of seasonal products a little tougher this
year however, by identifying the issues quickly we have sold through
seasonal stocks at an acceptable rate, protecting both margin and
closing inventory position.
During the second half of the year we improved our ability to assess
product availability both online and in bricks and mortar stores,
and we continue to test and evaluate enhanced stock management
processes that will improve product availability for customers and
increase sales.
Providing improved service and engagement for our customers
remains a priority. Service levels as measured by a Net Promoter
Score have improved during the year, but we believe we can still
do better, and are presently working on introducing programmes
that will improve customer engagement and enhance service at the
checkouts.
This commitment applies equally to our online customers. The online
business continued to grow significantly and process reviews across
all service areas have resulted in improved order-picking accuracy
and speed, reduced backorders, and faster dispatch times. We will
continue to improve the online service we offer, with additional
fulfilment centres planned to ensure an even quicker and more
efficient service.
The fragmentation of media continues to disrupt conventional
methods of marketing and we constantly look to evolve
communication strategies to maximise their effectiveness while
controlling costs. We anticipate that rapid change in this area will
continue and understand the importance of successfully optimising
the increasingly varied methods by which we are able to connect
with the customer.
The Kaikoura earthquake in November affected Briscoe Group stores
in the Wellington region and the upper South Island, in particular
the Living & Giving store at Queensgate Shopping Centre, which
has been unable to reopen. The subsequent disruption to road and
rail networks created challenges across the supply chain but we
worked closely with our supply partners to minimise the effects
on customers. We are thankful none of our staff were injured, and
appreciate the work put in by our experienced store and support
teams to get us back in business as soon as possible.
Our Store Network
2016 was another very full year of store development, upgrades
and refurbishments.
Briscoes Homeware and Rebel Sport stores were opened in March
as part of the new Northwest shopping centre at Westgate
in Auckland. This development will grow in popularity as the
remaining stages are completed and population in the surrounding
catchment increases.
In May our Briscoes Homeware store at Wairau Park in Auckland
closed temporarily due to fire damage. We took the opportunity to
completely re-fit the store, which reopened in July and has traded
strongly since.
A stockroom extension was undertaken during June at The Base in
Te Rapa, Hamilton delivering improved stock flow. Additional space
was also secured adjacent to the Dunedin profit centre allowing
us to expand its retail area, improve storage capacity and add an
online fulfilment centre for both Briscoes Homeware and Rebel
Sport.
Later in the year, our Briscoes Homeware and Rebel Sport stores
in Hastings were relocated to an improved site with appropriately-
sized retail stores sharing back-of-house facilities.
A number of Group-owned property projects were also progressed
during the year. Our Briscoes Homeware store at Taranaki Street in
Wellington was extended, earthquake strengthened and re-roofed
and now offers a larger retail area and a much improved shopping
environment.
Demolition, site works and construction are well underway at our
Petone property, with new Briscoes Homeware and Rebel Sport
stores on track to open during the first half of this year. These
stores will replace the existing Briscoes Homeware stores at Petone
and Lower Hutt as well as the Lower Hutt Rebel Sport store.
Demolition and site works have begun at 1-5 Taylors Road,
Auckland. This site, which is very close to the existing Briscoes
Homeware store and the Group’s Support Office, will be the
location for a new Support Office and a temporary Briscoes
Homeware store as we demolish and rebuild the existing Briscoes
Homeware store. On completion of the rebuild, a new Rebel Sport
store will open beneath the new Support Office. We expect this
major project to be completed during 2018.
Planning is also underway in relation to developing property owned
in Silverdale with the view of establishing new Briscoes Homeware
and Rebel Sport stores during 2018.
9
Homeware
We have continued to improve the quality of product ranges we
offer our customers. In a market which has become even more
competitive, we know that our ability to offer true value across a
number of price points is critical for us to maintain our position as
the first choice for homeware.
Showcasing the best brands available has underpinned performance
over recent years and we remain committed to sourcing and
developing brands to fit all positions in our ‘good-better-best’
product strategy. With increased competition, the merchandise
team is focused on ensuring that our entry level products across
all categories are attractively priced to offer excellent value while
continuing to compete aggressively.
The push to improve customer engagement has been well accepted
by our store teams, who are focused on creating happy customers.
As noted above, we will continue to trial new initiatives to further
improve customer service, with programmes underway covering
areas such as improved checkout service and enhanced directional
signage tailored for different store sizes, which will be implemented
gradually as stores are refurbished.
We expect the coming year to remain challenging for the
homeware sector. While consumer confidence remains positive
and population growth is continuing, high house prices and rents
will apply pressure to disposable income. We believe that our
proven strategy of offering the best product ranges at great prices
supported by effective marketing is the best way to generate
continued sales growth.
Sporting Goods
Rebel Sport continued to deliver strong growth throughout the year,
despite following an outstanding year in 2015, which included both
the Rugby and Cricket World Cups.
While the ‘athleisure’ trend continues to grow, the number of
competitors in this sector also increased dramatically, with extensive
offerings from competitors outside of the traditional sporting sector
both here and overseas. Working closely with supply partners to build
desirable product ranges has helped us to counter this increased
competition – and resulted in large increases in business for most
of our major supply partners. We will continue to work closely with
our key trading partners to ensure that the product offer from Rebel
Sport, both online and in-store, is the best available in Australasia.
Rebel Sport is a seller of branded sportswear and equipment,
meaning the vast majority of our inventory is supplied directly by
vendors. By improving the way in which we manage the ordering and
delivery process we can improve the availability of product for our
customers without increasing inventory; as noted earlier, our logistics
and merchandise teams are trialling a number of initiatives to better
our performance in this area.
Marketing campaigns such as “What’s my why?”, featuring All Black
Malakai Fekitoa and Paralympian Sophie Pascoe, have kept Rebel
Sport front of mind for our target customers; further developments
of the campaign featuring other athletes and sporting codes will roll
out throughout this year.
10
The work that we completed last year to enhance the inventory
allocation process will continue. Inventories are in good shape as we
commence this new financial year and the team is excited about
the opportunities in place to improve sales and profitability. Online
growth has continued at pace and we will support further growth
by continuing to streamline all processes and by trialling a ‘click and
collect’ initiative later in the year.
We are confident we have the focus, people and initiatives in place to
continue to strengthen our position as New Zealand’s leading retailer
of homeware and sporting goods.
Rod Duke
Group Managing Director
Priorities and Outlook for 2017/18
We will continue to drive positive change through a number of
initiatives during the coming year.
As signalled in last year’s report, we have focused resource
and attention on improving performance in health and safety,
recruitment, talent management and training. Good progress has
been made and we are confident of further improvements as the
programmes and initiatives continue.
We continue to measure our performance using the “Smart
Feedback” tool which consolidates customer feedback into a Net
Promoter Score. We are confident that the plans we have in place
will drive customer engagement and further improve our rating, and
that this will be reflected in sales growth.
The store development team’s schedule for the coming year is
highly influenced by the continuation of the major property projects
outlined earlier in this report. Three new fulfilment sites will be added
during the year to ease the pressure on existing sites and to build
capacity for expected further online growth, while a new Briscoes
Homeware store at Rangiora, Christchurch is planned to open before
the end of 2017.
The merchandise, operations and marketing teams will continue to
focus on protecting gross profit margin percentage while driving sales
growth across every category and every store.
11
Group Financial Statements
Introduction
These financial statements have been presented in a style which
attempts to make them less complex and more relevant to
shareholders.
We have grouped the note disclosures into six sections:
1. Basis of Preparation
2. Performance
3. Operating Assets and Liabilities
4. Investments
5. Financing and Capital Structure
6. Other Notes
Each section sets out the accounting policies applied to the
relevant notes.
The purpose of this format is to provide readers with a clearer
understanding of the financial affairs of the Group.
Accounting policies have been shown in shaded
areas and in italics for easier identification.
1212
Contents Consolidated Financial Statements
Group Financial Statements
5. Financing and Capital Structure
Directors’ Approval of Consolidated Financial Statements .. 14
Consolidated Income Statement ......................................... 15
Consolidated Statement of Comprehensive Income ............. 15
Consolidated Balance Sheet ............................................. 16
Consolidated Statement of Cash Flows ............................... 17
Consolidated Statement of Changes in Equity ...................... 19
Notes to the Group Financial Statements
1. Basis of Preparation
1.1
1.2
General Information ........................................................20
General Accounting Policies ............................................20
2. Performance
5.1
5.2
Interest Bearing Liabilities ..............................................35
Financial Risk Management ............................................36
5.2.1
5.2.2
5.2.3
5.2.4
Derivative Financial Instruments ........................36
Credit Risk ........................................................36
Interest rate Risk ...............................................36
Liquidity Risk ....................................................37
5.2.5 Market Risk .......................................................38
5.2.6
Sensitivity Analysis ............................................39
5.3
Equity ............................................................................40
5.3.1 Capital Risk Management ..................................40
5.3.2 Share Capital ....................................................40
5.3.3 Dividends ..........................................................41
5.3.4 Reserves and Retained Earnings ........................41
6. Other Notes
6.1
Related Party Transactions .............................................42
6.1.1
Parent and Ultimate Holding Company ...............42
2.1
2.2
2.3
Segment Information .....................................................22
6.1.2 Key Management Personnel...............................42
Income and Expenses ....................................................24
6.1.3 Directors’ Fees and Dividends ............................43
Taxation ........................................................................25
6.2 Executive Share options ..................................................44
2.3.1
2.3.2
2.3.3
Taxation – Income Statement ............................26
6.3 Contingent Liabilities ......................................................45
Taxation – Balance Sheet ..................................27
6.4 Events After Balance Date ...............................................45
Imputation Credits ............................................27
6.5 New Accounting Standards .............................................46
2.4
Earnings Per Share ........................................................28
3. Operating Assets and Liabilities
3.1 Working Capital ..............................................................29
3.1.1
3.1.2
3.1.3
3.1.4
Cash and Cash Equivalents ................................29
Trade and Other Receivables ..............................30
Inventories ........................................................30
Trade and Other Payables ..................................31
3.2
3.3
3.4
Held-for-Sale Assets ......................................................32
Property Plant and Equipment ........................................32
Intangible Assets ............................................................33
4. Investments
4.1
Investment in equity securities .......................................34
1313
Directors’ Approval of Consolidated Financial Statements
Authorisation for Issue
The Board of Directors authorised the issue of these Consolidated Financial Statements on 14 March 2017.
Approval by Directors
The Directors are pleased to present the Consolidated Financial Statements for Briscoe Group Limited for the 52 week period ended
29 January 2017. (Comparative period is for the 53 week period ended 31 January 2016).
Rod Duke
GROUP MANAGING DIRECTOR
Dame Rosanne Meo
CHAIRMAN
14 March 2017
For and on behalf of the Board of Directors
14
Consolidated Income Statement
For the 52 week period ended 29 January 2017
Sales revenue
Cost of goods sold
Gross profit
Other operating income
Store expenses
Administration expenses
Earnings before interest and tax
Finance income
Finance costs
Net finance income
Profit before income tax
Income tax expense
Net profit attributable to shareholders
Earnings per share for profit attributable to shareholders:
Basic earnings per share (cents)
Diluted earnings per share (cents)
Period ended
29 January 2017
$000
Period ended
31 January 2016
$000
Notes
582,840
( 343,483 )
239,357
7,457
( 100,461 )
(66,526 )
79,827
237
(369 )
(132)
79,695
(20,275 )
59,420
27.2
26.5
552,892
(329,021 )
223,871
2,881
(94,758)
(66,059)
65,935
1,007
( 650 )
357
66,292
(19,155 )
47,137
21.7
21.2
2.2
5.1
2.3.1
2.4
2.4
The above consolidated income statement should be read in conjunction with the accompanying notes.
Consolidated Statement of Comprehensive Income
For the 52 week period ended 29 January 2017
Period ended
29 January 2017
$000
Period ended
31 January 2016
$000
Notes
Net Profit attributable to shareholders
59,420
47,137
Other comprehensive income:
Items that may be subsequently reclassified to profit or loss:
Change in value of investment in equity securities
Fair value loss/(gain) recycled to income statement
Fair value (loss)/gain taken to the cashflow hedge reserve
Deferred tax on fair value (loss)/gain taken to income statement
Deferred tax on fair value loss/(gain) taken to cashflow hedge reserve
4.1
2.3.2
2.3.2
Total other comprehensive income
Total comprehensive income attributable to shareholders
15,637
3,726
(7,375)
(1,043)
2,065
13,010
72,430
(7,738)
(14,950)
13,480
4,186
(3,775)
(8,797)
38,340
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
15
Consolidated Balance Sheet
As at 29 January 2017
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Held-for-sale assets
Derivative financial instruments
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax
Investment in equity securities
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Taxation payable
Derivative financial instruments
Total current liabilities
Non-current liabilities
Trade and other payables
Total non-current liabilities
TOTAL LIABILITIES
Net assets
EQUITY
Share capital
Cashflow hedge reserve
Share options reserve
Other reserves
Retained earnings
TOTAL EQUITY
Notes
29 January 2017
$000
31 January 2016
$000
3.1.1
3.1.2
3.1.3
3.2
5.2.5
3.3
2.3.2
4.1
3.1.4
2.3.2
5.2.5
3.1.4
5.3.2
3.1.1,5.2.5
6.2
60,066
2,559
78,931
-
44
141,600
76,081
960
3,015
76,582
156,638
298,238
84,970
6,284
1,112
92,366
719
719
93,085
205,153
52,756
(816)
957
7,899
144,357
205,153
17,554
2,334
80,204
5,375
2,620
108,087
63,527
1,538
1,321
60,945
127,331
235,418
63,261
6,810
210
70,281
713
713
70,994
164,424
48,242
1,811
1,291
(7,738)
120,818
164,424
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
16
Consolidated Statement of Cash Flows
For the 52 week period ended 29 January 2017
Period ended
29 January 2017
$000
Period ended
31 January 2016
$000
Notes
OPERATING ACTIVITIES
Cash was provided from
Receipts from customers
Rent received
Dividends received
Interest received
Insurance recovery
Net GST received
Cash was applied to
Payments to suppliers
Payments to employees
Interest paid
Net GST paid
Income tax paid
Net cash inflows from operating activities
INVESTING ACTIVITIES
Cash was provided from
Proceeds from sale of property, plant and equipment
Cash was applied to
Purchase of property, plant and equipment
Purchase of intangible assets
Purchase of investment in equity securities
Net cash outflows from investing activities
FINANCING ACTIVITIES
Cash was provided from
Net proceeds from borrowings
Issue of new shares
Cash was applied to
Dividends paid
3.3
4.1
5.1
5.3.2
5.3.3
Net cash outflows from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Foreign cash balance cash flow hedge adjustment
Cash and cash equivalents at period end
3.1.1
582,579
792
4,414
179
220
-
588,184
(395,888)
(64,105)
(361)
(20,373)
(21,473)
(502,200)
85,984
7,315
7,315
(17,661)
(615)
-
(18,276)
(10,961)
-
3,713
3,713
(36,051)
(36,051)
(32,338)
42,685
17,554
(173)
60,066
553,839
874
2,008
1,349
-
-
558,070
(419,479)
(59,685)
(683)
(21,857)
(16,468)
(518,172)
39,898
28
28
(12,097)
(1,080)
(68,683)
(81,860)
(81,832)
-
1,418
1,418
(31,475)
(31,475)
(30,057)
(71,991)
89,690
(145)
17,554
17
Consolidated Statement of Cash Flows
For the 52 week period ended 29 January 2017
Period ended
29 January 2017
$000
Period ended
31 January 2016
$000
RECONCILIATION OF NET CASH FLOWS FROM
OPERATING ACTIVITIES TO REPORTED NET PROFIT
Reported net profit attributable to shareholders
59,420
47,137
Items not involving cash flows
Depreciation and amortisation expense
Adjustment for fixed increase leases
Bad debts and movement in doubtful debts
Inventory adjustments
Amortisation of executive share options cost
(Gain)/loss on disposal of assets
Impact of changes in working capital items
Decrease (increase) in trade and other receivables
Decrease (increase) in inventories
Increase (decrease) in taxation payable
Increase (decrease) in trade payables
Increase (decrease) in other payables and accruals
Net cash inflow from operating activities
5,988
277
98
227
637
(1,627)
5,600
(323)
1,046
(526)
21,112
(345)
20,964
85,984
5,665
255
108
2,152
582
116
8,878
1,377
(8,849)
2,668
(10,713)
(600 )
(16,117)
39,898
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
18
Consolidated Statement of Changes in Equity
For the 52 week period ended 29 January 2017
Notes
Capital
Share Cashflow
Hedge
Reserve
$000
$000
Share
Options
Reserve
$000
Other
Reserves
Retained
Earnings
Total
Equity
$000
$000
$000
Balance at 25 January 2015
46,550
2,870
1,058
Net profit attributable to shareholders for the period
Other comprehensive income:
Change in value of investment in equity securities
4.1
Fair value gain recycled to income statement
Fair value gain taken to cashflow hedge reserve
Deferred tax on fair value gain taken to income statement
2.3.2
Deferred tax on fair value gain to cashflow hedge reserve
2.3.2
Total comprehensive income for the period
Transactions with owners:
Dividends paid
Share options charged to income statement
Share options exercised
Transfer for share options lapsed and forfeited
5.3.3
6.2
5.3.2,6.2
1,692
6.2
-
-
-
(14,950)
13,480
4,186
(3,775)
(1,059)
-
-
-
-
-
-
-
-
-
-
-
-
582
(274)
(75)
-
-
105,081
155,559
47,137
47,137
(7,738)
-
-
-
-
-
-
-
-
-
(7,738)
(14,950)
13,480
4,186
(3,775)
(7,738)
47,137
38,340
-
-
-
-
(31,475)
(31,475)
-
-
75
582
1,418
-
Balance at 31 January 2016
48,242
1,811
1,291
(7,738)
120,818
164,424
Net profit attributable to shareholders for the period
Other comprehensive income:
Change in value of investment equity securities
4.1
Fair value loss recycled to income statement
Fair value loss taken to cashflow hedge reserve
Deferred tax on fair value loss taken to income statement
2.3.2
Deferred tax on fair value loss to cashflow hedge reserve
2.3.2
Total comprehensive income for the period
Transactions with owners:
Dividends paid
Share options charged to income statement
Share options exercised
Transfer for share options lapsed and forfeited
5.3.3
6.2
5.3.2,6.2
4,514
6.2
-
-
-
3,726
(7,375)
(1,043)
2,065
(2,627)
-
-
-
-
-
-
-
-
-
-
-
-
637
(801)
(170)
-
59,420
59,420
15,637
-
-
-
-
-
-
-
-
-
15,637
3,726
(7,375)
(1,043)
2,065
15,637
59,420
72,430
-
-
-
-
(36,051)
(36,051)
-
-
170
637
3,713
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Balance at 29 January 2017
52,756
(816)
957
7,899
144,357
205,153
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
19
1. Basis of Preparation
For the 52 week period ended 29 January 2017
This section presents a summary of information considered relevant and material to assist the reader in under-
standing the foundations on which the financial statements as a whole have been compiled. Accounting policies
specific to notes shown in other sections are included as part of that particular note.
1.1 General Information
Briscoe Group Limited (the Company) and its subsidiaries (together the Group) is a retailer of homeware and sporting goods. The Company
is a limited liability company incorporated and domiciled in New Zealand. Briscoe Group Limited is registered under the Companies Act 1993
and is an FMC Reporting Entity under Part 7 of the Financial Markets Conduct Act 2013. The address of its registered office is 36 Taylors Road,
Morningside, Auckland. The Company is listed on the New Zealand Stock Exchange (NZX).
The financial statements of the Group have been prepared in accordance with the requirements of Part 7 of the Financial Markets Conduct Act
2013 and the NZX Listing Rules. In accordance with the Financial Markets Conduct Act 2013 because group financial statements are prepared
and presented for Briscoe Group Limited and its subsidiaries, separate financial statements for Briscoe Group Limited are not required to be
prepared and presented.
These audited consolidated financial statements have been approved for issue by the Board of Directors on 14 March 2017.
1.2 General Accounting Policies
These consolidated financial statements have been prepared in accordance with New Zealand Generally Accepted Accounting Practice (NZ GAAP).
They comply with New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) and other applicable Financial Reporting
Standards, as appropriate for profit-oriented entities. The financial statements also comply with International Financial Reporting Standards (IFRS).
The financial statements are presented in New Zealand dollars which is the Company’s functional currency and the Group’s presentation currency.
All financial information has been presented in thousands, unless otherwise stated.
The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently
applied to all the periods presented, unless otherwise stated.
Entities reporting
The financial statements reported are for the consolidated Group which is the economic entity comprising Briscoe Group Limited and its
subsidiaries. The Group is designated as a profit-oriented entity for financial reporting purposes.
Reporting period
These financial statements are in respect of the 52 week period 1 February 2016 to 29 January 2017 and provide a balance sheet as at 29 January
2017. The comparative period is in respect of the 53 week period 26 January 2015 to 31 January 2016. The Group operates on a weekly trading
and reporting cycle resulting in 52 weeks for most years with a 53 week year occurring once every 5-6 years.
Principles of consolidation
Subsidiaries are all entities over which the Company has control. The Company controls an entity when the Company is exposed to, or has rights to,
variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains or losses on transactions between Group companies are eliminated. Accounting policies
of subsidiaries are changed when necessary to ensure consistency with the policies adopted by the Company.
20
1. Basis of Preparation
For the 52 week period ended 29 January 2017
Subsidiaries
Activity
2017 Interest
2016 Interest
Briscoes (New Zealand) Limited
The Sports Authority Limited (trading as Rebel Sport)
Homeware retail
Sporting goods retail
Rebel Sport Limited
Living and Giving Limited
Name protection
Name protection
100%
100%
100%
100%
100%
100%
100%
100%
All companies above are incorporated in New Zealand and have a balance date consistent with that of the Company as outlined in the
accounting policies.
Historical cost convention
These financial statements have been prepared under the historical cost convention, as modified by the revaluation of certain assets as identified
in specific accounting policies detailed throughout these financial statements.
Critical accounting estimates
In the process of applying the Group’s accounting policies and the application of accounting standards, a number of estimates and judgements
have been made. The estimates and underlying assumptions are based on historical experience and adjusted for current market conditions and
other factors, including expectations of future events that are considered to be reasonable under the circumstances. If outcomes within the next
financial year are significantly different from assumptions, this could result in adjustments to carrying amounts of the asset or liability affected.
Further explanation as to estimates and assumptions made by the Group can be found in the notes to the financial statements:
Areas of Estimation
Inventory
Executive share options
Note
3.1.3
6.2
Foreign currency translation
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of
monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in which case
they are recognised in other comprehensive income as qualifying cash flow hedges.
21
2. Performance
For the 52 week period ended 29 January 2017
This section reports on the results and performance of the Group, providing additional information about individual
items, including performance by operating segment, revenue, expenses, taxation and earnings per share.
2.1 Segment Information
An operating segment is a component of an entity that engages in business activities which earns revenue and incurs expenses and for which the
chief operating decision maker (CODM) reviews the operating results on a regular basis and makes decisions on resource allocation. The Group has
determined its CODM to be the group of executives comprising the Managing Director, Chief Operating Officer and Chief Financial Officer.
The Group is organised into two reportable operating segments, namely homeware and sporting goods, reflecting the different retail sectors within
which the Group operates. The Company is considered not to be a reportable operating segment. Eliminations and unallocated amounts as shown
below are primarily attributable to the Company. There were no inter-segment sales in the period (2016: Nil).
Information regarding the operations of each reportable operating segment is included below. Segment profit represents the profit earned by
each segment and is extracted from the income statements associated with the two trading subsidiary companies, Briscoes (NZ) Limited and The
Sports Authority Limited (trading as Rebel Sport). Earnings before interest and tax (EBIT) is a non-GAAP measure and used by CODM to assess the
performance of the operating segments.
For the period ended 29 January 2017
INCOME STATEMENT
Total sales revenue
Gross profit
Earnings before interest and tax
Net finance income
Income tax expense
Net profit after tax
BALANCE SHEET ITEMS:
Assets
Liabilities
OTHER SEGMENTAL ITEMS:
Acquisitions of property, plant and equipment,
intangibles and investments
Depreciation and amortisation
1. Investment in equity securities
Intercompany eliminations
Other balances
Total
22
Homeware
Sporting goods
Eliminations/
Unallocated
Total Group
$000
$000
$000
$000
372,507
210,333
154,826
46,381
45
(11,846)
34,580
84,531
27,747
159
(7,815)
20,091
-
-
5,699
(336)
(614)
4,749
582,840
239,357
79,827
(132)
(20,275)
59,420
149,026
51,456
78,036
37,627
71,1761.
4,002
298,238
93,085
2,485
1,932
-
-
18,276
5,988
15,791
4,056
$000
76,582
(15,136)
9,730
71,176
2. Performance
For the 52 week period ended 29 January 2017
For the period ended 31 January 2016
INCOME STATEMENT
Total sales revenue
Gross profit
Earnings before interest and tax
Net finance income
Income tax expense
Net profit after tax
BALANCE SHEET ITEMS:
Assets
Liabilities
OTHER SEGMENTAL ITEMS:
Acquisitions of property, plant and equipment,
intangibles and investments
Depreciation and amortisation expense
1. Investment in equity securities
Intercompany eliminations
Other balances
Total
Homeware
Sporting goods
Eliminations/
Unallocated
Total Group
$000
$000
$000
$000
357,875
195,017
144,065
40,449
(3)
79,806
24,962
304
(11,387)
(7,077)
29,059
18,189
-
-
524
56
(691)
(111)
552,892
223,871
65,935
357
(19,155)
47,137
65,621
27,302
1,835
1,822
45,7861.
3,301
235,418
70,994
68,683
-
81,860
5,666
124,011
40,391
11,342
3,844
$000
60,945
( 17,625 )
2,466
45,786
23
2. Performance
For the 52 week period ended 29 January 2017
2.2 Income and Expenses
Revenue recognition
Revenue comprises the fair value of consideration received or receivable for the sale of goods and services, net of Goods and Services Tax (GST),
rebates and discounts and after eliminating sales within the Group. Revenue is recognised as follows:
Sales of goods - retail
Sales of goods are recognised at point of sale for in-store customers and when product is despatched to the customer for online sales.
Retail sales are predominantly by credit card, debit card or in cash.
Rental income
Rental income (net of any incentives given to lessees) is recognised on a straight line basis over the period of the lease.
Interest income
Interest income is recognised on a time-proportionate basis using the effective interest method.
Dividend income
Dividend income is recognised when the right to receive the dividend is established.
Rental and operating leases expense
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments
made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over
the period of the lease.
The Group leases various retail outlets under non-cancellable operating lease agreements. The leases reflect normal commercial arrangements
with varying terms, escalation clauses and renewal rights.
The future rental commitments on these leases are as follows:
Lease commitments expire as follows:
Within one year
One to two years
Two to five years
Beyond five years
Total operating lease rental commitments
Period ended
29 January 2017
$000
Period ended
31 January 2016
$000
27,833
25,747
47,233
27,438
128,251
26,255
22,314
42,793
25,615
116,977
24
2. Performance
For the 52 week period ended 29 January 2017
Profit before income tax includes the following specific income and expenses:
Period ended
29 January 2017
$000
Period ended
31 January 2016
$000
Income
Rental income
Dividends received
Gain on sale of held-for-sale asset
Insurance recovery
Expenses
Operating lease rental expense
Wages, salaries and other short term benefits
Share options expense (refer also Note 6.2)
Depreciation of property, plant and equipment
Amortisation of software costs
Takeover expenses incurred directly
Amounts paid to auditors:
Statutory Audit
Half year review
Other services1.
792
4,414
2,031
220
31,243
64,637
637
4,997
991
-
100
26
8
874
2,008
-
-
29,341
61,948
582
4,672
994
1,069
116
26
21
1. Other services relates to general accounting advice and remuneration benchmarking (2016: General tax advice and remuneration benchmarking)
2.3 Taxation
Current and deferred income tax
The income tax expense for the period is the tax payable on the current period’s taxable income based on the income tax rate adjusted by
changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their
carrying amounts in the financial statements.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in New
Zealand, being the country where the Group operates and generates taxable income. The Group periodically evaluates positions taken in tax
returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on
the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between tax bases of assets and liabilities
and their carrying amounts in the consolidated financial statements. Deferred income tax is determined using tax rates (and laws) that have
been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is
realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the
temporary differences can be utilised.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the
deferred tax balances relate to the same taxation authority. Current tax assets and liabilities are offset when the entity has a legal enforceable
right to offset and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.
Goods and Services Tax (GST)
The income statement, statement of comprehensive income and statement of cash flows have been prepared so that all components are stated
exclusive of GST. All items in the balance sheet are stated net of GST, with the exception of trade receivables and trade payables, which include
GST invoiced.
25
2. Performance
For the 52 week period ended 29 January 2017
2.3.1 Taxation – Income statement
The total taxation charge in the income statement is analysed as follows:
(a) Income tax expense
Current tax expense:
Current tax
Adjustments for prior years
Deferred tax expense:
Decrease in future tax benefit current year
Tax effect of disposal of buildings
Adjustments for prior years
Total income tax expense
(b) Reconciliation of income tax expense to tax rate applicable to profits
Profit before income tax expense
Tax at the corporate rate of 28% (2016: 28%)
Tax effect of amounts which are either non-deductible or non-
assessable in calculating taxable income:
Tax effect of disposal of buildings
Prior period adjustments
Total income tax expense
Period ended
29 January 2017
$000
Period ended
31 January 2016
$000
20,185
762
20,947
891
(792)
(771)
(672)
20,275
79,695
22,315
(1,239)
(792)
(9 )
20,275
18,588
548
19,136
571
-
(552)
19
19,155
66,292
18,562
597
-
(4 )
19,155
The Group has no tax losses (2016: Nil) and no unrecognised temporary differences (2016: Nil).
26
2. Performance
For the 52 week period ended 29 January 2017
2.3.2 Taxation – Balance sheet
(a) Deferred Taxation
The following are the major deferred taxation liabilities and assets recognised by the Group and movements thereon during the
current and prior year:
Depreciation
$000
Provisions
$000
Derivative
financial
instruments
$000
Total
$000
At 25 January 2015
(Charged) / credited to the income statement
( 640)
(30)
2,684
11
( 1,115)
929
-
(19)
Net credited to other comprehensive income
-
-
4111.
411
At 31 January 2016
( 670)
2,695
(704)
1,321
(Charged) / credited to the income statement
773
(101)
-
672
Net credited to other comprehensive income
-
-
1,0221.
1,022
At 29 January 2017
103
2,594
318
3,015
1. Net charged to other comprehensive income comprises deferred tax on fair value loss taken to income statement of $1,043,329 (2016: deferred
tax on fair value gain of $4,186,056) and deferred tax on fair value loss taken to cash flow hedge reserve of $2,065,228 (2016: deferred tax on fair
value gain of $3,774,615)
(b) Taxation payable
The following is the analysis of the movements in the taxation payable balance during the current and prior year:
Movements:
Balance at beginning of period
Current tax
Tax paid
Foreign investor tax credit (FITC)
Balance at end of period
2.3.3 Imputation credits
Imputation credits available for use in subsequent accounting periods
Period ended
29 January 2017
$000
(6,810)
(20,947)
21,209
264
(6,284)
Period ended
29 January 2017
$000
67,888
Period ended
31 January 2016
$000
(4,142)
(19,136 )
16,241
227
(6,810)
Period ended
31 January 2016
$000
59,262
The above amounts represent the balance of the imputation account as at the end of the reporting period, adjusted for:
•
•
•
Imputation credits that will arise from the payment of the provision for income tax,
Imputation debits that will arise from the payment of dividends recognised as liabilities at the reporting date and
Imputation credits that will arise from the receipt of dividends recognised as receivables at the reporting date.
The consolidated amounts include imputation credits that would be available to the Company if subsidiaries paid dividends.
27
2. Performance
For the 52 week period ended 29 January 2017
2.4 Earnings per share
Earnings per share (EPS) is the amount of post-tax profit attributable to each share.
Basic EPS is computed by dividing the net profit attributable to shareholders by the weighted average number of ordinary shares on issue during
the period.
Diluted EPS adjusts for any commitments the Group has to issue shares in the future that would decrease the Basic EPS. In 2016 and 2017 these
were in the form of share options. Diluted EPS is therefore computed by dividing the net profit attributable to shareholders by the weighted
average number of ordinary shares on issue during the period, adjusted to include the potentially dilutive effect if share options to issue ordinary
shares were exercised and converted into shares.
Net profit attributable to shareholders $000
Basic
Period ended
29 January 2017
Period ended
31 January 2016
59,420
47,137
Weighted average number of ordinary shares on issue (thousands)
218,677
217,233
Basic earnings per share
27.2 cents
21.7 cents
Diluted
Weighted average number of ordinary shares on issue adjusted for share
options issued but not exercised (thousands)
Diluted earnings per share
224,048
222,385
26.5 cents
21.2 cents
28
3. Operating Assets and Liabilities
For the 52 week period ended 29 January 2017
This section reports the assets used to generate the Group’s trading performance and the liabilities incurred as
a result. Liabilities relating to the Group’s financing activities are addressed in note 5. Assets and liabilities in
relation to deferred taxation and taxation payable are shown in note 2.3. The carrying amounts of financial assets
and liabilities are equivalent to their fair value unless otherwise stated.
3.1 Working Capital
Working capital represents the assets and liabilities the Group generates through its trading activity. The Group therefore defines working
capital as cash, trade and other receivables, inventories and trade and other payables.
3.1.1 Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held at call with financial institutions and other short-term, highly liquid investments
with original maturities of three months or less, that are readily convertible to known amounts of cash and that are subject to an insignificant risk of
changes in value.
Cash at bank or in hand
Period ended
29 January 2017
$000
60,066
Period ended
31 January 2016
$000
17,554
As at 29 January 2017 the Group held foreign currency equivalent to NZ$1.967 million (2016: NZ$2.752 million) which is included in the table
above. The foreign currency in which the Group deals primarily is the US Dollar.
Foreign currency cash – cash flow hedges (cash flow hedge reserve)
In respect of foreign currency balances that have been designated and tested as an effective hedge, the portion of the gain or loss on the hedging
instrument that is determined to be an effective hedge is recognised directly in other comprehensive income. These gains or losses are released to
the income statement at various dates over the subsequent financial year as the inventory for which the hedge exists, is sold.
Foreign currency cash balances are used for hedging committed or highly probable forecast purchases of inventory for the ensuing financial
year. The foreign currency purchases are held and allocated by calendar quarter to the highly probable forecast purchases which are timed to
mature when major shipments of inventory are scheduled to be dispatched and the liability settled. The cash flows are expected to occur at
various dates within one year from balance date.
At balance date a foreign currency loss of $66,645 (2016: gains of $106,120) in relation to foreign currency balances, were included in equity as
part of the cash flow hedge reserve, net of deferred tax, as a net loss of $47,984 (2016: net gain of $76,406). The cash flow hedge reserve, net
of deferred tax, from forward foreign exchange contracts used as hedges, represents a net loss of $768,508 (2016: net gain of $1,734,843), refer
note 5.2. The total of these amount to a net loss of $816,492 (2016: net gain of $1,811,249).
In respect of foreign currency balances that are not designated and tested as an effective hedge, the gain or loss as at balance date is recognised in
the income statement.
At balance date there are no such balances (2016: Nil).
29
3. Operating Assets and Liabilities
For the 52 week period ended 29 January 2017
3.1.2 Trade and other receivables
Trade receivables arise from sales made to customers on credit or through the collection of purchasing rebates from suppliers not otherwise
deducted from suppliers’ payable accounts. Trade receivables are recognised initially at the value of the invoice sent to the customer and
subsequently at the amounts considered recoverable (amortised cost). Trade receivable balances are reviewed on an on-going basis.
Trade receivables
Prepayments
Other receivables
Total trade and other receivables
No interest is charged on trade receivables.
3.1.3 Inventories
Period ended
29 January 2017
$000
547
1,260
752
2,559
Period ended
31 January 2016
$000
517
1,304
513
2,334
Inventories are stated at the lower of cost and net realisable value. Cost is determined using a weighted average method and includes expenditure
incurred in acquiring the inventories and bringing them to their existing location and condition. Net realisable value is the estimated selling price in
the ordinary course of business, less applicable variable selling expenses.
The Group assesses the likely residual value of inventory. Stock provisions are recognised for inventory which is expected to sell for less than cost
and also for the value of inventory likely to have been lost to the business through shrinkage between the date of the last applicable stocktake and
balance date. In recognising the provision for inventory, judgement has been applied by considering a range of factors including historical results,
current trends and specific product information from buyers.
Finished goods
Inventory adjustments
Net inventories
Period ended
29 January 2017
$000
83,554
(4,623)
78,931
Period ended
31 January 2016
$000
84,550
(4,346)
80,204
30
3. Operating Assets and Liabilities
For the 52 week period ended 29 January 2017
3.1.4 Trade and other payables
Trade and other payable amounts represent liabilities for goods and services provided to the Group prior to the end of a financial period, which are
unpaid.
Trade payables
Trade payables are recognised at the value of the invoice received from a supplier. The carrying value of trade payables is considered to approximate
fair value as the amounts are unsecured and are usually paid within 60 days of recognition.
Employee entitlements
Wages and salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of
the reporting date are recognised in other payables in respect of employees’ services up to the reporting date and are measured at the amounts expected to
be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and measured at the rates paid or
payable. The liability for employee entitlements is carried at the present value of the estimated future cash flows.
Bonus plans
A liability is recognised for bonuses payable to employees where a contractual obligation arises for an agreed level of payment dependent on both
company and individual performance criteria.
Long service leave
The liability for long service leave is recognised as a non-current liability and measured as the present value of expected future payments to be made in
respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage
and salary levels, history of employee departure rates and periods of service. Expected future payments are discounted using market yields at the reporting
date on government bonds with terms to maturity that match, as closely as possible, the estimated future cash outflows.
Provisions
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it
is probable that an outflow of economic benefits will be required to settle the obligation.
Provisions relate to returns in relation to sales of goods directly imported by the Group and are expected to be fully utilised within the next
twelve months. Provisions relating to inventory, receivables and employee benefits have been treated as part of those specific balances. There
are no other provisions relating to these financial statements.
Trade payables
Employee entitlements
Other payables and accruals
Provisions
Period ended
29 January 2017
$000
57,900
12,009
15,627
153
Period ended
31 January 2016
$000
36,788
11,476
15,556
154
Total trade and other payables
85,689
63,974
Shown in balance sheet as:
Current liabilities
Non-current liabilities
84,970
719
63,261
713
Total trade and other payables
85,689
63,974
31
3. Operating Assets and Liabilities
For the 52 week period ended 29 January 2017
3.2 Held-for-Sale Assets
Held-for-sale assets are assets that are available for immediate sale in their present condition, subject only to normal sale terms, and for which there
is a high probability that they will be offered for sale or sold. The Group measures a held-for-sale asset at the lower of carrying value and fair value
less costs to sell.
Held-for-sale assets were:
Property
Period ended
29 January 2017
$000
-
Period ended
31 January 2016
$000
5,375
The held-for-sale asset balance at the previous year end date relates to a property in Hastings which was subject to an unconditional sale and
purchase agreement. The sale of the property was settled on 30 November 2016.
3.3 Property, Plant and Equipment
All property, plant and equipment is stated at historical cost less depreciation and any impairment adjustments. Historical cost includes
expenditure that is directly attributable to the acquisition of property, plant and equipment. Costs are included in an asset’s carrying amount or
recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with an item will flow to the Group
and the cost of an item can be measured reliably.
Assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance date.
An asset’s carrying amount is written down immediately to its recoverable amount if its carrying amount is greater than its estimated recoverable
amount.
Gains and losses on disposals of assets are determined by comparing proceeds with carrying amounts. These gains and losses are included in the
income statement.
Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost, net of their estimated
residual values, over their estimated useful lives, as follows:
- Freehold buildings
- Plant and equipment
33 years
3 - 15 years
Property, plant and equipment is reviewed whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which an asset’s carrying amount exceeds its recoverable amount. The recoverable amount is
the higher of an asset’s fair value less costs to sell, or value in use.
The Group assesses whether there are indications, for example loss-making stores, for certain trigger events which may indicate that an impairment
in property, plant and equipment values exist at balance date.
32
3. Operating Assets and Liabilities
For the 52 week period ended 29 January 2017
Land and
buildings
$000
49,648
(4,603)
-
45,045
45,045
6,582
-
(5,375)
(595)
45,657
49,187
(3,530)
-
45,657
45,657
11,447
-
-
(463)
56,641
60,636
(3,995)
-
56,641
Plant and
equipment
$000
77,738
(61,145)
(17)
16,576
16,576
5,515
(144)
-
(4,077)
17,870
79,034
(61,158)
(6)
17,870
17,870
6,214
(222)
-
(4,422)
19,440
76,846
(57,402)
(4)
19,440
Total
$000
127,386
(65,748)
(17)
61,621
61,621
12,097
(144)
(5,375)
(4,672)
63,527
128,221
(64,688)
(6)
63,527
63,527
17,661
(222)
-
(4,885)
76,081
137,482
(61,397)
(4)
76,081
At 25 January 2015
Cost
Accumulated depreciation
Accumulated impairment
Net book value
Period ended 31 January 2016
Opening net book value
Additions
Disposals
Reclassified as held-for-sale asset
Depreciation charge
Closing net book value
At 31 January 2016
Cost
Accumulated depreciation
Accumulated impairment
Net book value
Period ended 29 January 2017
Opening net book value
Additions
Disposals
Reclassified as held-for-sale asset
Depreciation charge
Closing net book value
At 29 January 2017
Cost
Accumulated depreciation
Accumulated impairment
Net book value
Capital commitments
Capital commitments in relation to property, plant and equipment at
balance date not provided for in the financial statements
4,092
1,706
Period ended
29 January 2017
$000
Period ended
31 January 2016
$000
3.4 Intangible Assets
Intangible assets are non-physical assets used by the Group to operate the business. Software costs have a finite useful life. Software costs are
capitalised and amortised on a straight-line basis over the estimated useful economic life of 2 to 5 years.
Software is the only intangible asset recorded in the financial statements. All software has been acquired externally.
33
4. Investments
For the 52 week period ended 29 January 2017
This section explains how the Group records investments made in listed securities.
4.1 Investment in equity securities
Between 17 June 2015 and 30 June 2015 Briscoe Group Limited acquired 40,095,432 shares in Kathmandu Holdings Limited for a value of
$68,682,734. The holding represents a 19.9% ownership in Kathmandu Holdings Limited as at 29 January 2017. An adjustment was made at
period end to reflect the fair value of these shares as at 29 January 2017.1. These shares are equity investments quoted in the active market and
are defined by NZ IAS 39 as available-for-sale financial assets.
Available-for-sale financial assets are investments that do not have fixed maturities and fixed or determinable payments, and that are intended to
be held for the medium to long-term.
Available-for-sale financial assets are initially recognised at fair value and are also subsequently carried at fair value. Changes in the fair value of
available-for-sale financial assets are recognised in other comprehensive income. To determine if an available-for-sale financial asset is impaired,
the Group evaluates the duration and extent to which the fair value of the asset is less than its cost, and the financial health of and short-term
outlook for the business (including factors such as industry and sector performance, changes in technology, operational and financing cash flows,
public disclosures by the business and published independent external analysis). When available-for-sale financial assets are sold or impaired, the
accumulated fair value adjustments recognised in equity are included as gains or losses in the income statement. Dividends on available-for-sale
financial assets are recognised in the income statement as part of ‘Other operating income’ when the right to receive the payment is established.
At 25 January 2015
Additions
Change in value charged to other reserves
At 31 January 2016
Additions
Change in value credited to other reserves
At 29 January 2017
1. Fair value determined to be $1.91 per share as per NZX closing price of Kathmandu Holdings Limited as at 29 January 2017 (2016: $1.52)
$000
-
68,683
(7,738)
60,945
-
15,637
76,582
34
5. Financing and Capital Structure
For the 52 week period ended 29 January 2017
This section reports on the Group’s funding sources and capital structure, including its balance sheet liquidity and
access to capital markets.
5.1 Interest Bearing Liabilities
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 income statement over the period of
the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to
defer settlement of the liability for at least 12 months after the balance sheet date.
The Group has a facility agreement with the Bank of New Zealand for $60 million. Any drawdowns are repayable in full on expiry date of the
facility being 25 June 2017. Interest is payable based on the BKBM rate plus applicable margin. The facility is secured against the assets of the
Group and its subsidiaries. The facility is sufficiently flexible that the amounts can be drawn down and repaid to accommodate fluctuations in
operating cash flows within overall limits, without the need for prior approval of the bank. The maximum drawdown made under the facility
during the period was $28 million.
The covenants entered into by the Group require specified calculations of Group’s earnings before interest, tax, depreciation and amortisation
(EBITDA) plus lease rental costs to exceed total fixed charges (net interest expense and lease rental costs) at the end of each half during
the financial year. Similarly EBITDA must be no less than a specified proportion of total net debt at the end of each half. The Group was in
compliance with the covenants throughout the period.
There were no amounts repayable under the facility as at 29 January 2017.
Finance costs
Interest income
Interest expense
Other finance costs
Total finance costs
Period ended
29 January 2017
$000
(237)
164
205
132
Period ended
31 January 2016
$000
(1,007)
524
126
(357)
35
5. Financing and Capital Structure
For the 52 week period ended 29 January 2017
5.2 Financial Risk Management
The Group’s activities expose it to various financial risks including credit risk, liquidity risk, credit risk and market risk (such as currency risk
and cash flow interest rate risk). The Group’s overall risk management programme seeks to minimise potential adverse effects on the Group’s
financial performance. The Group uses certain derivative financial instruments to hedge certain risk exposures.
5.2.1 Derivative financial instruments
Derivatives are recognised initially at fair value on the date a derivative contract is entered into and are subsequently re-measured to their fair value.
The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature
of the item being hedged. The Group designates certain derivatives as hedges of highly probable forecast transactions (cash flow hedges).
At the inception of a transaction the relationship between hedging instruments and hedged items, and the risk management objective and strategy
for undertaking various hedge transactions, are documented. An assessment is also documented, both at hedge inception and on an on-going
basis, of whether the derivatives that are used in hedging transactions have been and will continue to be effective in offsetting changes in fair values
or cash flows of hedged items.
Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges, is recognised in other
comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in the income statement.
Amounts accumulated in other comprehensive income are recycled in the income statement in the periods when the hedged item will affect
profit or loss (for instance when the forecast purchase that is hedged takes place). However, when a forecast transaction that is hedged results
in the recognition of a non-financial asset (for example, inventory) or a non-financial liability, the gains and losses previously deferred in other
comprehensive income are transferred from other comprehensive income and included in the measurement of the initial cost or carrying amount of
the asset or liability.
When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative
gain or loss existing in other comprehensive income at that time remains in other comprehensive income and is recognised when the forecast
transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or
loss that was reported in other comprehensive income is immediately transferred to the income statement.
Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of these derivative instruments are recognised
immediately in the income statement.
5.2.2 Credit risk
Credit risk refers to the risk of a counterparty failing to discharge an obligation. In the normal course of its business, Briscoe Group incurs
credit risk from trade receivables and transactions with financial institutions. The Group places its cash, short-term investments and
derivative financial instruments with only high-credit-rated, Board-approved financial institutions. Sales to retail customers are settled
predominantly in cash or by using major credit cards. Less than 1% of reported sales give rise to trade receivables. The Group holds no
collateral over its trade receivables.
5.2.3 Interest rate risk
The Group has no long-term interest-bearing liabilities but does have interest rate risk exposure from periodic short-term drawdowns of
established funding facilities and placements of short-term deposits, as operating cash flows necessitate. The Group’s short to medium
term liquidity position is monitored daily and reported to the Board monthly. Surplus funds are placed on call or short-term deposit with
high-credit-rated, Board-approved financial institutions.
36
5. Financing and Capital Structure
For the 52 week period ended 29 January 2017
5.2.4 Liquidity risk
Liquidity risk is the risk that an unforeseen event or miscalculation in the required liquidity level will result in the Group foregoing
investment opportunities or not being able to meet its obligations in a timely manner, and therefore gives rise to lower investment
income or to higher borrowing costs than otherwise. Prudent liquidity risk management includes maintaining sufficient cash, and
ensuring the availability of adequate amounts of funding from credit facilities.
The Group’s liquidity exposure is managed by ensuring sufficient levels of liquid assets and committed facilities are maintained based on
regular monitoring of a rolling 3-month daily cash requirement forecast. The Group’s liquidity position fluctuates throughout the year,
being strongest immediately after the end of year trading period. The months leading up to Christmas trading put the greatest strain on
Group cash flows due to the build-up of inventory as well as the interim dividend payment. The Group operates well within its available
funding facilities.
The table below analyses the Group’s financial liabilities and gross-settled forward foreign exchange contracts into relevant maturity
groupings based on the remaining period from the balance sheet date to the contractual maturity date. The cash flow hedge ‘outflow’
amounts disclosed in the table are the contractual undiscounted cash flows liable for payment by the Group in relation to all forward
foreign exchange contracts in place at balance date. The cash flow hedge ‘inflow’ amounts represent the corresponding injection of
foreign currency back to the Group as a result of the gross settlement on those contracts, converted using the forward rate at balance
date. The carrying value shown is the net amount of derivative financial liabilities and assets as shown in the balance sheet. Changes in
the carrying value affect profit when the underlying inventory to which the derivatives relate, is sold.
Trade and other payables are shown at carrying value in the table. No discounting has been applied as the impact of discounting is not significant.
As at 29 January 2017
3 months
or less
$000
3 – 6
months
$000
6 – 9
months
$000
9 – 12
months
$000
Total
$000
Carrying
Value
$000
Trade and other payables
(84,970)
-
-
-
(84,970)
(84,970)
Forward foreign exchange contracts
Cash flow hedges:
- outflow
- inflow
- Net
As at 31 January 2016
(17,974)
(10,513)
17,267
(707)
10,383
(130)
(18,534)
18,395
(139)
(5,659)
5,567
(92)
(52,680)
51,612
(1,068)
(1,068)
3 months
or less
$000
3 – 6
months
$000
6 – 9
months
$000
9 – 12
months
$000
Total
$000
Carrying
Value
$000
Trade and other payables
(63,261)
-
-
-
(63,261)
(63,261)
Forward foreign exchange contracts
Cash flow hedges:
- outflow
- inflow
- Net
(20,016)
(14,862)
(16,008)
(388)
(51,274)
22,300
2,284
14,690
16,305
(172)
297
389
1
53,684
2,410
2,410
37
5. Financing and Capital Structure
For the 52 week period ended 29 January 2017
5.2.5 Market risk
Foreign exchange risk
The Group is exposed to foreign exchange risk arising from currency exposures primarily to the US dollar, in respect of purchases of inventory
directly from overseas suppliers. (Refer also to note 3.1.1).
The Group’s foreign exchange risk is managed in accordance with Board-approved Group Treasury Risk Management Policies. The current policy
requires hedging of both committed and forecasted foreign currency payment levels across the current and subsequent three calendar quarters.
The policy is to cover 100% of committed purchases and lower levels of forecasted purchases depending on which quarter the forecasted
exposure relates to. Hedging is reviewed regularly and reported to the Board monthly.
The Group uses forward foreign exchange contracts and maintains short-term holdings of foreign currencies in foreign denominated currency
bank accounts, with major financial institutions only, to hedge its foreign exchange risk in anticipation of future purchases.
The following table shows the fair value of forward foreign exchange contracts held by the Group as derivative financial instruments at balance date:
Current assets
Forward foreign exchange contracts
Total current derivative financial instrument assets
Current liabilities
Forward foreign exchange contracts
Total current derivative financial instrument liabilities
Period ended
29 January 2017
$000
Period ended
31 January 2016
$000
44
44
1,112
1,112
2,620
2,620
210
210
The contracts are subject to an enforceable master netting arrangement, which allows for net settlement of the relevant assets and liabilities.
Forward foreign exchange contracts – cash flow hedges
Where forward foreign exchange contracts have been designated and tested as an effective hedge the portion of the gain or loss on the hedging
instrument that is determined to be an effective hedge is recognised directly in other comprehensive income. These gains or losses are released to
the income statement at various dates over the subsequent financial year as the inventory for which the hedge exists, is sold.
The fair value of these contracts is determined by using valuation techniques as they are not traded in an active market. The valuation techniques
maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. The fair value is
determined by mark-to-market valuations using forward exchange market rates at balance date. These derivatives have been determined to
be within level 2 (for the purposes on NZ IFRS 13) of the fair value hierarchy as all significant inputs required to ascertain their fair value are
observable.
Forward foreign exchange contracts are used for hedging committed or highly probable forecast purchases of inventory for the ensuing
financial year. The contracts are timed to mature when major shipments of inventory are scheduled to be dispatched and the liability settled.
The cash flows are expected to occur at various dates within one year from balance date.
38
5. Financing and Capital Structure
For the 52 week period ended 29 January 2017
At balance date these contracts are represented by assets of $44,271 (2016: $2,619,904) and liabilities of $1,111,643 (2016: $210,400)
and together are included in equity as part of the cash flow hedge reserve, net of deferred tax, as a net loss of $768,508 (2016: net gain
$1,734,843). The cash flow hedge reserve also consists of gains and losses, net of deferred tax, from foreign currencies used as hedges, as a net
loss of $47,984 (2016: net gain of $76,406), refer Note 3.1.1. The total of these net gains and losses amount to a net loss of $816,492 (2016:
net gain $1,811,249).
When forward foreign exchange contracts are not designated and tested as an effective hedge, the gain or loss on the forward foreign exchange
contract is recognised in the income statement.
At balance date there are no such contracts in place (2016: Nil).
5.2.6 Sensitivity analysis
Based on historical movements and volatilities and review of current economic commentary the following movements are considered
reasonably possible over the next 12 month period:
• A shift of -10% / +5% (2016:-10% / +10%) in the NZD against the USD, from the year-end rate of 0.7266 (2016: 0.6482),
• A shift of -0.25% / +0.50% (2016: -0.5% / +0.25%) in market interest rates from the year-end weighted average deposit rate of
1.75% (2016: 2.50%).
If these movements were to occur, the positive / (negative) impact on consolidated profit and consolidated equity for each category of
financial instrument held at balance date is presented below.
As at 29 January 2017
Interest rate
Foreign exchange rate
-0.25%
+0.50%
-10%
+5%
Profit
$000
Equity
$000
Profit
$000
Equity
$000
Profit
$000
Equity
$000
Profit
$000
Equity
$000
Carrying
amount
$000
Financial assets:
Cash and cash equivalents1.
Derivatives – designated as
cashflow hedges (Forward
foreign exchange contracts)2.
Financial liabilities:
Derivatives – designated as.
cashflow hedges (Forward
foreign exchange contracts)2.
60,066
(105)
(105)
209
209
44
1,112
-
-
-
-
-
-
-
-
Total increase /(decrease)
(105)
(105)
209
209
-
-
-
-
157
635
3,453
4,245
-
-
-
-
(67)
(283)
(1,551)
(1,901)
Receivables and payables have not been included above as they are denominated in NZD and are non-interest bearing and therefore not
subject to market risk.
1. Cash and cash equivalents include deposits at call which are at floating interest rates.
2. Derivatives designated as cashflow hedges are foreign exchange contracts and foreign currencies used to hedge against the NZD:USD foreign
exchange risk arising from foreign denominated future purchases. There is no profit and loss sensitivity as the hedges are 100% effective.
39
5. Financing and Capital Structure
For the 52 week period ended 29 January 2017
As at 31 January 2016
Financial assets:
Cash and cash equivalents1.
Derivatives – designated as
cashflow hedges (Forward
foreign exchange contracts)2.
Financial liabilities:
Derivatives – designated as.
cashflow hedges (Forward
foreign exchange contracts)2.
Interest rate
Foreign exchange rate
-0.5%
+0.25%
-10%
+10%
Profit
$000
Equity
$000
Profit
$000
Equity
$000
Profit
$000
Equity
$000
Profit
$000
Equity
$000
Carrying
amount
$000
17,554
(54)
(54)
27
27
2,620
210
-
-
-
-
-
-
-
27
-
27
-
-
-
-
97
3,532
1,061
4,690
-
-
-
-
(79)
(2,557)
(766)
(3,402)
Total increase /(decrease)
(54)
(54)
Receivables and payables have not been included above as they are denominated in NZD and are non-interest bearing and therefore not
subject to market risk.
1. Cash and cash equivalents include deposits at call which are at floating interest rates.
2. Derivatives designated as cashflow hedges are foreign exchange contracts and foreign currencies used to hedge against the NZD:USD foreign
exchange risk arising from foreign denominated future purchases. There is no profit and loss sensitivity as the hedges are 100% effective.
5.3 Equity
5.3.1 Capital risk management
Capital is defined by the Group to be Total Equity as shown in the balance sheet.
The Group’s capital comprises contributed equity, reserves and retained earnings. The Group’s objective when managing capital is to achieve a
balance between maximising shareholder wealth and ensuring the Group is able to operate competitively with the flexibility to take advantage
of growth opportunities as they arise. In order to meet these objectives the Group may adjust the amount of dividend payments made to
shareholders and/or seek to raise capital through debt and/or equity. There are no specific banking or other arrangements which require the
Group to maintain specified equity levels.
5.3.2 Share Capital
Share capital comprises ordinary shares only. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds.
All shares on issue are fully paid. All ordinary shares rank equally with one vote attached to each fully paid ordinary share and have equal
dividend rights and no par value.
40
5. Financing and Capital Structure
For the 52 week period ended 29 January 2017
Contributed equity – ordinary shares
No. of authorised shares
Share capital
Period ended
29 January 2017
Shares
Period ended
31 January 2016
Shares
Period ended
29 January 2017
$000
Period ended
31 January 2016
$000
Opening ordinary shares
217,597,500
216,592,500
48,242
46,550
Issue of ordinary shares arising
from the exercise of options
1,919,000
1,005,000
4,5141.
1,6921.
Balance at end of period
219,516,500
217,597,500
52,756
48,242
1. When options are exercised the amount in the share options reserve relating to those options exercised, together with the exercise price paid by the
employee, is transferred to share capital. The amounts transferred for the 1,919,000 shares issued during the period ended 29 January 2017 were
$801,155 and $3,712,770 respectively (2016: $274,000 and $1,417,500 respectively for the 1,005,000 shares issued).
5.3.3 Dividends
Provision is made for the amount of any dividend declared on or before the balance date but not distributed at balance date.
Interim dividend for the period ended 29 January 2017
Final dividend for the period ended 31 January 2016
Interim dividend for the period ended 31 January 2016
Final dividend for the period ended 25 January 2015
Period ended
29 January 2017
Cents per share
Period ended
31 January 2016
Cents per share
Period ended
29 January 2017
$000
Period ended
31 January 2016
$000
7.00
9.50
-
-
16.50
-
-
6.00
8.50
14.50
15,352
20,699
-
-
36,051
-
-
13,040
18,435
31,475
All dividends paid were fully imputed (refer also to Note 2.3.3 for imputation credits available for use in subsequent periods). Supplementary
dividends of $263,843 (2016: $227,190) were provided to shareholders not tax resident in New Zealand, for which the Group received a
Foreign Investor Tax Credit entitlement.
On 14 March 2017 the Directors resolved to provide for a final dividend to be paid in respect of the year ended 29 January 2017. The dividend
will be paid at a rate of 11.00 cents per share for all shares on issue as at 28 March 2017, with full imputation credits attached.
5.3.4 Reserves and Retained Earnings
Cashflow hedge reserve
The hedging reserve is used to record gains and losses on a hedging instrument in a cash flow hedge that are recognised directly in other
comprehensive income, as described in the accounting policy in section 5.2. The amounts are recognised as profit and loss when the associated
hedged transaction affects profit and loss. (Refer also to the consolidated statement of changes in equity).
Share options reserve
The share options reserve is used to recognise the fair value of share options granted but not exercised, lapsed or forfeited. Amounts are
transferred to share capital when vested share options are exercised by an option holder. (Refer also to the consolidated statement of changes
in equity, and note 6.2).
Other reserves
Other reserves represents the adjustment made at balance date to reflect the fair value of the investment in Kathmandu Holdings Limited
which has been classified as investment in equity securities in these financial statements. (Refer also to the consolidated statement of changes
in equity, note 4.1).
41
6. Other Notes
For the 52 week period ended 29 January 2017
6.1 Related Party Transactions
6.1.1 Parent and Ultimate Controlling Party
Briscoe Group Limited is the immediate parent, ultimate parent and controlling party for all companies in the Group.
During the period the Company advanced and repaid loans to its subsidiaries by way of internal current accounts. In presenting the
financial statements of the Group, the effect of transactions and balances between fellow subsidiaries and those with the Company have
been eliminated. No interest is charged on internal current accounts. All transactions with related parties were in the normal course of
business and were provided on normal commercial terms.
The Group undertook transactions with the following related parties as detailed below:
•
•
The RA Duke Trust, of which RA Duke and AJ Wall are trustees, as owner of the Rebel Sport premises at Panmure, Auckland, received
rental payments of $616,000 (2016: $616,000) from the Group, under an agreement to lease premises to The Sports Authority Limited
(trading as Rebel Sport).
Kein Geld (NZ) Limited, an entity associated with RA Duke, received rental payments of $356,776 (2016: Nil) as owner of the Briscoes
Homeware premises at Wairau Park, Auckland, under an agreement to lease premises to Briscoes (NZ) Limited.
• The RA Duke Trust received dividends of $28,040,194 (2016: $24,593,170).
• P Duke, spouse of the Managing Director, received payments of $65,000 (2016: $65,000) in relation to her employment as an overseas
buying specialist with Briscoe Group Limited, and rental payments of $797,875 (2016: $716,500) as owner of the Briscoes Homeware
premises at Panmure, Auckland under an agreement to lease premises to Briscoes (NZ) Limited.
Material amounts outstanding between the Company and subsidiaries at year end were:
•
•
Loan to the Company from Briscoes (NZ) Limited $13,999,933 (2016: Loan from the Company $948,147).
Loan from the Company to The Sports Authority Limited (trading as Rebel Sport) $1,746,915 (2016: Loan to the Company $15,105,431)
6.1.2 Key Management Personnel
Key management includes the directors of the Company and those employees who the Company has deemed to have disclosure
obligations under subpart 6 of the Financial Markets Conduct Act 2013, namely the Chief Financial Officer, the Chief Operating Officer
and the General Manager Human Resources.
Key management compensation was as follows:
Salaries and other short term employee benefits
Share options benefit
Directors’ fees
Total benefits
Period ended
29 January 2017
$000
3,372
142
271
3,785
Period ended
31 January 2016
$000
3,100
140
274
3,514
Key management did not receive any termination benefits during the period (2016: Nil). In addition key management did not receive and
are not entitled to receive any post-employment or long-term benefits (2016: Nil).
42
6. Other Notes
For the 52 week period ended 29 January 2017
6.1.3 Directors’ Fees and Dividends
Directors received directors’ fees and dividends in relation to their personally held shares as detailed below:
Executive Director
RA Duke
AJ Wall1.
Non-Executive Directors
SH Johnstone2.
RPO’L Meo
MM Devine
AD Batterton3.
RAB Coupe4.
Period ended
29 January 2017
Period ended
31 January 2016
Directors’ fees
$000
Dividends
$000
Directors’ fees
$000
Dividends
$000
-
-
22
103
70
51
25
271
-
21
95
-
5
-
-
121
-
-
85
115
74
-
-
274
-
32
146
-
4
-
-
182
The following Directors received dividends in relation to their non-beneficially held shares as detailed below:
Executive Director
RA Duke5.
AJ Wall1.,5.,6.
Non-Executive Directors
SH Johnstone2.
RPO’L Meo
MM Devine
AD Batterton3.
RAB Coupe4.
Period ended
29 January 2017
$000
Period ended
31 January 2016
$000
28,040
16,257
-
17
-
-
-
24,593
24,771
-
15
-
-
-
1. Alaister Wall retired from the Board of Directors on 30 September 2016.
2. Stuart Johnstone retired from the Board of Directors on 31 May 2016.
3. Tony Batterton was appointed to the Board of Directors as an Independent Non-Executive Director on 1 June 2016.
4. Andy Coupe was appointed to the Board of Directors as an Independent Non-Executive Director on 1 October 2016.
5. The RA Duke Trust, of which RA Duke and AJ Wall are trustees, received dividends of $28,040,194 during the period (2016: $24,593,170).
6. The Tunusa Trust, of which AJ Wall is a trustee, received dividends of $116,850 during the period (2016: $178,350).
43
6. Other Notes
For the 52 week period ended 29 January 2017
6.2 Executive Share Options
Equity-settled, share-based compensation
The Executive Share Option Plan allows Group employees to be granted options to acquire shares of the Company. The fair value of options
granted is recognised as an employee expense in the income statement with a corresponding increase in the share options reserve. The fair
value is measured at grant date and spread over the vesting periods. The fair value of the options granted is measured using the Black Scholes
valuation model, taking into account the terms and conditions upon which the options are granted. When options are exercised the amount
in the share options reserve relating to those options, together with the exercise price paid by an employee, is transferred to share capital.
On 25 July 2003 the Board approved an Executive Share Option Plan to issue options to selected senior executives and, subject to
shareholder approval, to Executive Directors. Options may be exercised in part or in full by the holder three years after the date of issue,
and lapse after four years if not exercised or if the employee is no longer employed by the Company. Each option entitles the holder to
one ordinary share in the capital of the Company. The exercise price is determined by the Board but is generally set by reference to the
weighted average market price of ordinary shares in the Company for the period of five business days before and five business days after,
as the Board in its discretion sees fit, either:
(a) the date on which allocations are decided by the Board; or
(b) the date on which allocations are made.
Payment must be made in full for all options exercised within 5 days of the date they are exercised.
During the financial year the Company issued 1,660,000 options (2016: 1,700,000) to senior executives.
The fair value of these options is estimated at $1,007,454 (2016: $585,820) under the Black Scholes valuation model using the following
inputs and assumptions:
Risk free interest rate
Expected dividend yield
Expected life (years)
Share price at grant date
Exercise price
Expected share volatility
1.82%
4.53%
3.61
$3.75
$3.31
25.00%
(2016: 2.72%)
(2016: 5.24%)
(2016: 3.84)
(2016: $2.86)
(2016: $2.75)
(2016: 21.70%)
The expected share volatility is derived by analysing the historic volatility over a recent historical period similar to the term of the options.
The estimated fair value for each tranche of options issued is amortised over the vesting period of three years, from the grant date. The
Company has recognised a compensatory expense in the income statement of $636,534 (2016: $582,298) which represents this amortisation.
Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:
Period ended
29 January 2017
Period ended
31 January 2016
Average
exercise price
$ per share
2.41
3.31
2.70
1.93
1.55
2.86
Options
000
5,927
1,660
(568)
(1,919)
(65)
Average
exercise price
$ per share
2.09
2.75
2.24
1.41
1.38
Options
000
5,476
1,700
(142)
(1,005)
(102)
5,035
2.41
5,927
Balance at beginning of year
Issued
Forfeited
Exercised
Lapsed
Balance at end of year
Weighted average share price for options exercised during the period $3.48 (2016: $2.88).
Of the 5,035,000 outstanding options at balance date (2016: 5,927,000), 513,000 were exercisable (2016: 1,165,000).
44
6. Other Notes
For the 52 week period ended 29 January 2017
Share options outstanding at the end of the year have the following expiry dates, exercise dates and exercise prices:
Expiry month
Exercise month
Exercise price
October 2016
October 2015
July 2017
July 2016
July 2018
July 2017
November 2019
November 2018
August 2020
August 2019
Total share options outstanding
$2.43
$2.64
$2.75
$3.31
Period ended
29 January 2017
000
-
513
1,445
1,497
1,580
Period ended
31 January 2016
000
1,165
1,447
1,615
1,700
-
5,035
5,927
The weighted average remaining contractual life of options outstanding at the end of the period was 2.40 years (2016: 2.27)
Share options reserve
Balance at beginning of year
Current year amortisation
Options forfeited and lapsed transferred to retained earnings
Options exercised transferred to share capital
Balance at end of year
Period ended
29 January 2017
$000
Period ended
31 January 2016
000
1,291
637
(170)
(801)
957
1,058
582
(75)
(274)
1,291
Since balance date and up to the date of these financial statements a further 15,000 ordinary shares have been issued under the
Executive Share Option Plan as a result of executives exercising share options.
6.3 Contingent Liabilities
As previously disclosed, the Group is party to legal proceedings with Kathmandu Holdings Limited (Kathmandu) relating to an outstanding
claim of $2.6 million for costs incurred with respect to the Group’s 2015 takeover offer for Kathmandu. No material contingent liability is
assessed as existing in relation to this claim or other matters as at 29 January 2017. (2016: Nil).
6.4 Events After Balance Date
On 14 March 2017 the Directors resolved to provide for a final dividend to be paid in respect of the year ended 29 January 2017. The dividend
will be paid at a rate of 11.00 cents per share for all shares on issue as at 28 March 2017, with full imputation credits attached. (Note 5.3.3)
Since balance date and up to the date of these financial statements a further 15,000 ordinary shares have been issued under the Executive
Share Option Plan as a result of executives exercising share options. (Note 6.2)
45
6. Other Notes
For the 52 week period ended 29 January 2017
6.5 New Accounting Standards
There were no new standards or amendments to standards applied during the period.
Certain new standards, amendments and interpretations of existing standards have been published that are mandatory for later periods and
which the Group has not early adopted. These will be applied by the Group in the mandatory periods listed below. The key items applicable to
the Group are:
• NZ IFRS 9: Financial Instruments (effective from annual periods beginning on or after 1 January 2018)
This standard addresses the classification, measurement and recognition of financial assets and liabilities. It replaces the guidance
in NZ IAS 39 Financial Instruments: Recognition and Measurement that relates to the classification and measurement of financial
instruments. It retains but simplifies the mixed measurement model and establishes three primary measurement categories for
financial assets; amortised cost, fair value through other comprehensive income and fair value through profit or loss. The basis
of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset.
Investments in equity are required to be measured at fair value through profit or loss with the irrecoverable option at inception to
present changes in fair value in other comprehensive income not recycling. There is now a new expected credit losses model that
replaces the incurred loss impairment model used in NZ IAS39.
For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit
risk in other comprehensive income, for liabilities designated at fair value through profit or loss. NZ IFRS 9 relaxes the requirements
for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the
hedged item and hedging instrument and for the ‘hedged ratio’ to be the same as the one actually used for risk management
purposes. Contemporaneous documentation is still required but is different to that currently prepared under NZ IAS 39.
The Group intends to apply this standard in the 2018/19 financial year and is yet to assess its full impact.
• NZ IFRS 15: Revenue from contracts with customers (effective from annual periods beginning on or after 1 January 2018)
This standard addresses recognition of revenue and establishes principles for reporting useful information to users of financial
statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with
customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use
and obtain the benefits from the good or service. It replaces the current revenue recognition guidance in NZ IAS 18 Revenue and
NZ IAS 11 Construction Contracts. The standard is not expected to materially impact the Group.
• NZ IFRS 16: Leases (effective from annual periods beginning on or after 1 January 2019)
This standard replaces the current guidance in NZ IAS 17. Under NZ IFRS 16, a contract is, or contains, a lease if the contract
conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Under NZ IAS 17, a
lessee was required to make a distinction between a finance lease (on balance sheet) and an operating lease (off balance sheet).
NZ IFRS 16 now requires a lessee to recognise a lease liability reflecting future lease payments and a ‘right-of-use asset’ for
virtually all lease contracts.
The Group currently intends to adopt NZ IFRS 16 on its effective date being for the year ended January 2020, and has yet
to assess its full impact, however based on preliminary assessments the Group has determined that NZ IFRS 16 will have a
significant impact on the Group’s balance sheet and income statement disclosures. The balance sheet will be impacted by the
recognition of a right of use asset and a corresponding lease liability. The income statement will be impacted by the recognition
of an interest expense and an amortisation expense and the removal of the current rental expense. The full impact on these
statements has yet to be finalised.
46
(cid:44)(cid:81)(cid:71)(cid:72)(cid:83)(cid:72)(cid:81)(cid:71)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:82)(cid:85)(cid:182)(cid:86)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3)
To the shareholders of Briscoe Group Limited
Our opinion
In our opinion, the consolidated financial statements of Briscoe Group Limited (the Company),
including its subsidiaries (the Group), present fairly, in all material respects, the financial position of
the Group as at 29 January 2017, its financial performance and its cash flows for the period then ended
in accordance with New Zealand Equivalents to International Financial Reporting Standards (NZ
IFRS) and International Financial Reporting Standards (IFRS).
What we have audited
The consolidated financial statements comprise:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
the balance sheet as at 29 January 2017;
the income statement for the period then ended;
the statement of comprehensive income for the period then ended;
the statement of changes in equity for the period then ended;
the statement of cash flows for the period then ended; and
the notes to the financial statements, which include significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
NZ) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the consolidated financial
statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised)
Code of Ethics for Assurance Practitioners (PES 1) issued by the New Zealand Auditing and Assurance
Standards Board and the International Ethics Standards Board for Accountants’ Code of Ethics for
Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
Our firm carries out other services for the Group in the areas of a half year review, general accounting
advice on a new accounting standard and remuneration benchmarking services. The provision of these
other services has not impaired our independence as auditor of the Group.
PricewaterhouseCoopers, 188 Quay Street, Private Bag 92162, Auckland 1142, New Zealand
T: +64 (9) 355 8000, F: +64 (9) 355 8001, www.pwc.com/nz
47
Our audit approach
Overview
An audit is designed to obtain reasonable assurance whether the financial
statements are free from material misstatement.
For the purposes of our audit, we applied overall group materiality of $4
million, which represents 5% of profit before tax.
We chose profit before tax as the benchmark because, in our view, it is the
benchmark against which the performance of the Group is most commonly
measured by users, and is a generally accepted benchmark.
We believe 5% of profit before tax provides a dollar value that would influence
the users of the financial statements in assessing the performance of the Group.
We have one key audit matter being: Inventory Existence and Valuation.
Materiality
The scope of our audit was influenced by our application of materiality.
Based on our professional judgement, we determined certain quantitative thresholds for materiality,
including the overall Group materiality for the consolidated financial statements as a whole as set out
above. These, together with qualitative considerations, helped us to determine the scope of our audit,
the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both
individually and in aggregate on the consolidated financial statements as a whole.
Audit scope
We designed our audit by assessing the risks of material misstatement in the consolidated financial
statements and our application of materiality. As in all of our audits, we also addressed the risk of
management override of internal controls including among other matters, consideration of whether
there was evidence of bias that represented a risk of material misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an
opinion on the consolidated financial statements as a whole, taking into account the structure of the
Group, the accounting processes and controls, and the industry in which the Group operates. The
Group includes the operations of Briscoes Homeware and Rebel Sport which are audited on a
consolidated basis.
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48
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the consolidated financial statements of the current period. These matters were addressed
in the context of our audit of the consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
(cid:46)(cid:72)(cid:92)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:80)(cid:68)(cid:87)(cid:87)(cid:72)(cid:85)(cid:3)
(cid:43)(cid:82)(cid:90)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:68)(cid:71)(cid:71)(cid:85)(cid:72)(cid:86)(cid:86)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:78)(cid:72)(cid:92)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:80)(cid:68)(cid:87)(cid:87)(cid:72)(cid:85)(cid:3)
Inventory Existence and Valuation
At 29 January 2017, the Group held
inventories of $79 million. Given the size of
inventory relative to the total assets of the
Group, the number of stores and judgement
applied in valuation, inventory is a key
audit matter.
As described in note 3.1.3 of the financial
statements, inventories are carried at the
lower of cost and net realisable value.
The Group has sophisticated systems and
processes including an inventory scanning
system to accurately record inventory
movement and costing.
Cyclical counts of inventory are performed
at various times throughout the period
ensuring that all inventory at stores are
counted twice a year.
Management pay particular attention in
ensuring the Group has the right levels of
inventory as well as applying judgement
over the level of provisions for stock
obsolescence and inventory shrinkage
losses arising since the last stocktake.
We performed a number of audit procedures to
address inventory existence and valuation:
(cid:120) Observed management’s stocktake process at
selected locations near period end and undertook
our own test counts. For those locations not
visited, on a sample basis, inspected the results of
stock counts and confirmed stock count variances
were correctly accounted for. We also validated all
stores had been counted twice a year.
(cid:120) Tested the effectiveness of key inventory controls
over inventory movement and costing processes.
(cid:120) On a sample basis tested inventory costs to
supplier invoices and contracts.
(cid:120) Held discussions with management, including
merchandising personnel, to understand and
corroborate the assumptions applied in
estimating inventory provisions.
(cid:120) Assessed the stock shrinkage provision by
reviewing the level of inventory write downs
during the period. We tested the shrinkage rate
used to calculate the provision for each store since
the last stocktake by comparing it to the actual
shrinkage rate previously achieved.
(cid:120) Tested the aging of inventory based on purchase
date to supplier invoices to ensure slow moving
inventory has been adequately identified. We
evaluated the assumptions made by management
in assessing stock obsolescence provisions
through an analysis of inventory items by
category and age and the level of inventory write
downs in these categories during the period.
(cid:120) Tested that period-end inventory is carried at
lower of cost and net realisable value by testing a
sample of inventory items to the most recent
retail price less costs to sell.
(cid:120) Compared all inventory provisions as a
percentage of gross inventory to the prior period.
From the procedures performed we have no matters
to report.
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49
Information other than the financial statements and auditor’s report
The Directors are responsible for the annual report. Our opinion on the consolidated financial
statements does not cover the other information included in the annual report and we do not express
any form of assurance conclusion on the other information. At the time of our audit, there was no
other information available to us.
In connection with our audit of the consolidated financial statements, if other information is included
in the annual report, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the consolidated financial statements or
our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the
work we have performed on the other information that we obtained prior to the date of our auditor’s
report, we conclude that there is a material misstatement of this other information, we are required to
report that fact.
Responsibilities of the Directors for the consolidated financial statements
The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of
the consolidated financial statements in accordance with NZ IFRS and IFRS, and for such internal
control as the Directors determine is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Directors are responsible for assessing the
Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the Directors either intend to liquidate
the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements, as a whole, are free from material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs NZ and ISAs will always detect
a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.
A further description of our responsibilities for the audit of the financial statements is located at the
External Reporting Board’s website at:
https://xrb.govt.nz/Site/Auditing_Assurance_Standards/Current_Standards/Page1.aspx
This description forms part of our auditor’s report.
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50
Who we report to
This report is made solely to the Company’s shareholders, as a body. Our audit work has been
undertaken so that we might state those matters which we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s shareholders, as a body, for our
audit work, for this report or for the opinions we have formed.
The engagement partner on the audit resulting in this independent auditor’s report is Jonathan
Freeman.
For and on behalf of:
Chartered Accountants
14 March 2017
Auckland
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51
Corporate Governance
Corporate Governance
Role of the Board
TThe Board of Directors (“the Board”) of Briscoe Group Limited (“the
Company”) is elected by shareholders to oversee the management
of the Company and its subsidiaries and to direct performance in
the long-term best interests of the Company and its shareholders.
The focus of the Board is the creation of company and shareholder
value and ensuring the Company is managed in accordance with best
practice. Corporate governance is regularly reviewed and updated in
accordance with good business practice.
The principal responsibilities of the Board are to:
• establish the Company’s objectives and regularly review the
effectiveness of strategies for achieving these objectives;
• establish an overall policy framework within which the Company
conducts its business and receive regular reporting from
management on performance and compliance in respect of these
policies;
• regularly review the Company’s performance including approval of
and monitoring against budget and ensure appropriate disclosure
to the market;
• ensure that Group financial statements are prepared and
presented to give a true and fair view of the Group’s financial
position, financial performance and cash flows;
• review performance of senior executives against approved
objectives and key performance indicators;
• ensure effective policies and procedures are in place to safeguard
the integrity of the Company’s financial reporting;
• ensure that any significant risks facing the Company are identified
and that appropriate risk management programmes are in place to
control and report on these risks;
• ensure that the Group operates in accordance with New Zealand
laws, regulations, the Rules (including the continuous disclosure
regime), professional standards and contractual obligations; and
• report to shareholders and other key stakeholders.
The Board has delegated day-to-day management of the
Company to the Group Managing Director and other executives
of the Company. Operational and administrative policies relevant
to the Company’s business are in place and the Company has an
internal audit system for monitoring the Company’s operational
policies and practices.
52
52
Board Committees
There are two formally constituted committees to provide specific
input and guidance to particular areas of corporate governance; the
Audit Committee and the Human Resources Committee.
The committees meet as required and operate under specific charters
which are reviewed and approved by the Board annually, setting
out the committees’ roles and responsibilities. In order to fulfil its
responsibilities, each committee is empowered to seek any information
it requires from employees and to obtain such independent legal or
other professional advice it may deem necessary. The proceedings
of the committees are reported to the Board. These charters are
published on our website at www.briscoegroup.co.nz.
Audit Committee
The Audit Committee is chaired by Tony Batterton and is comprised
of all independent directors, as well as the Group Managing
Director, Rod Duke. The Committee assists the Board in fulfilling
its responsibilities for Company financial statements and external
financial reporting. The Group Managing Director is a member of the
Committee to provide operational insight to assist the Committee.
The Audit Committee is responsible to the Board for reviewing the
Company’s accounting policies and financial statements, promoting
integrity in financial reporting, reviewing the adequacy and
effectiveness of the Company’s internal controls and recommending
the appointment of, as well as reviewing the performance and
recommendations of the external auditors. In turn, the Company’s
management team makes representations to the Audit Committee
and the Board, as to the completeness and accuracy of the
Company’s financial statements.
The Audit Committee is also responsible for determining whether
potential engagements of the auditors are appropriate in the context
of seeking to prevent audit independence from being impaired (or
being seen to be impaired).
The Chief Financial Officer is responsible for the Company’s day-to-
day relationship with the auditors, including for ensuring that the
Company’s business divisions provide the auditors with timely and
accurate information and full access to the Company’s records. In
addition, the auditors are able to communicate directly with the
chairman of the Audit Committee at any time.
The Chairman and Managing Director determine the agenda for
Board meetings. On a monthly basis, the Board receives operational
reports summarising the Company’s activities including key
performance indicators. In addition, the Board receives regular
briefings from the management team on key strategic and
performance issues either as part of regular Board meetings or in
specific briefing sessions.
Board Membership
The Company’s constitution sets out policies and procedures on the
operation of the Board including the appointment and removal of
directors. The NZX Main Board Listing Rules (the “Rules”) and the
Company’s constitution provide that a minimum of three directors is
required, of whom at least two must be independent. Currently the
Board comprises five directors, being an independent Non-Executive
Chairman, the Group Managing Director, and three independent
Non-Executive Directors.
The Board acknowledges the importance of independent directors in
ensuring an optimal balance between Board members who are able
to bring a wide range of business experience and skills and those with
direct company knowledge and operational responsibility. The Board
notes the appointment of two new, independent directors during
the course of the 2016/17 financial year and the retirement of one
independent and one executive director in the same period.
Under the constitution, one third of directors must retire by
rotation at the annual meeting each year but, if eligible, may offer
themselves for re-election. The Group Managing Director, in his
capacity as an Executive Director, is exempt from the requirement
to retire by rotation.
Pursuant to Rule 3.3.5, the Company is required to make an
announcement to the market advising the closing date for director
nominations. That announcement must be no less than 10 business
days prior to the closing date and the closing date must be not more
than two months prior to the annual meeting.
The Board undertakes to meet at least ten times during the
financial year. For the year ending 29 January 2017 the Board met
twelve times.
Profiles of the current Directors appear on page 56 of this report.
Board Review
The Board annually reviews its performance, and that of Board
committees, to ensure that the Board and its committees are
performing satisfactorily and meeting their respective objectives. In
addition, the performance of individual directors is also subject to
review with a particular emphasis on those Board members who are
due to retire by rotation and wish to seek re-election. The review
process also assists with the process of identifying the training needs,
if any, of Board members to ensure that they remain current on how
to best perform their duties as a director.
53
Human Resources Committee
The Human Resources Committee is chaired by Dame Rosanne Meo
and is comprised of all independent, as well as the Group Managing
Director, Rod Duke.
The Human Resources Committee is responsible for ensuring the
Company has a sound employment policy framework, that there
is an effective and stimulating workplace and that there is an
environment within which management talent and potential can be
identified, assessed and developed.
Nominations and Governance
The Company does not have a formally constituted Nominations and
Governance Committee. The Board views the responsibilities usually
associated with this committee as a collective responsibility and
those matters are included as part of its primary role of overseeing
the management and performance of the Company. Each director
undertakes to ensure they have the necessary time and resources
required to enable them to meet the responsibilities associated with
their directorship. Specific requirements of governance are addressed
at Board meetings during the course of the year. These specific
requirements include ensuring the Board contains an appropriate
mix of skills and experience, making recommendations to the Board
on new directors for nomination, determining the independence
of directors, and ensuring the Company maintains a high level of
corporate governance. Directors may seek their own independent
advice to assist with their responsibilities.
Board Remuneration
Shareholders are asked to approve the level of directors’ fees from
time to time. In keeping with its views in relation to nominations,
rather than have a separate Remuneration Committee (governed by
a charter), the Board as a whole takes responsibility for monitoring
developments in the New Zealand market and recommending
remuneration packages for directors to the Company’s shareholders.
Fees are established to be in line with those of New Zealand based
organisations of a similar scope and size to the Company.
Diversity
A breakdown of the gender composition of directors and officers
as at the Company’s balance date, including comparative figures, is
shown below:
29 January 2017
31 January 2016
Female
Male
Female
Male
Directors
Officers1.,2.
2
-
3
4
2
-
3
3
1. Excludes Managing Director and Deputy Managing Director (included in
breakdown of directors).
2. Officers is defined as the members of the senior management team,
who report either directly to the Board or to the Group Managing
Director.
The Company does not have a formal diversity policy.
Code of Conduct
The Board has adopted a corporate Code of Conduct, available
on our website www.briscoegroup.co.nz. The Code of Conduct
defines the levels of ethical business practice expected of the
Board and within the Company (including employees and
contractors). The Company ensures that all new employees are
aware of the Code of Conduct and are provided with relevant
training. In addition, the Code of Conduct addresses compliance
standards and procedures, provides mechanisms for reporting
unethical behaviour and ensures that disciplinary measures are
available to address any violations. It covers:
• Conflicts of interest;
• Confidentiality;
• Payments, gifts and entertainment;
• Trading in company securities;
• Workplace principles;
• Use of company information and assets;
• Obligations to act honestly and in the best interests of the
Company as required by law;
• Delegation of authority;
• Accuracy of records;
• Compliance with any applicable laws, regulations and rules; and
• Fair dealing with customers, employees, suppliers and competitors.
The Board is responsible for reviewing the Code of Conduct and
adherence to it.
Risk Management
As an integral part of its role of overseeing the management of the
Company and its subsidiaries, the Board approves the Company’s risk
management policies and receives regular reports to monitor the
Company’s risk management performance relative to these policies,
with particular emphasis on:
•
•
•
•
Operational Risks: risks associated with the Company’s
normal business operations, including normal day-to-day
exposures relating to customers, stores, employees, systems,
suppliers and regulatory bodies;
Funding Risks: risks associated with the funding of the
Company’s operations, including exposures relating to
investment of surplus cash, and to interest rate and exchange
movements;
Environmental Risks: risks associated with the
environment in which the Company operates that are
outside the Company’s control, including exposures to
natural disasters and to changes in social trends, economic
conditions and customer preferences; and
Strategic Risks: risks associated with Company initiatives
that are outside the normal course of business, including
exposures relating to initiatives to expand into new brands,
markets, regions and business activities, and to adopt new
systems.
54
Board and Committee Composition as at 29 January 2017
Director
Classification
Committee membership
Audit committee
Human Resources committee
Dame Rosanne Meo
Rod Duke
Mary Devine
Tony Batterton
Andy Coupe
Independent (Chair)
Executive
Independent
Independent
Independent
Member
Member
Member
Chair
Member
Chair
Member
Member
Member
Member
NZX Corporate Governance Best Practice Code
The Company’s corporate governance practices conform with the
guidelines set down in the NZX Corporate Governance Best Practice
Code in almost all respects. The areas in which the Company’s
practices depart from that Code are confined to the absence of
specific training requirements for directors, the inclusion of the
Group Managing Director on the Audit Committee, the lack of a
Nominations Committee and a Remuneration Committee, and
the absence of director remuneration by means of a performance-
based equity remuneration plan. The Board as a whole takes
responsibility for monitoring developments in the New Zealand
market and recommending remuneration packages for directors to
the Company’s shareholders rather than delegating this function to a
Remuneration Committee pursuant to a written charter.
Independent Directors
Under Rule 3.3.2, a listed company must identify which of its
directors are determined by the Board to be independent.
Rule 10.4.5(l) requires the annual report to include a statement as to
which of its directors are Independent Directors and which are not
Independent Directors as at the balance date.
The board and committee memberships as at the balance date
are detailed above together with the independence classification
as determined by the Board, in accordance with the Rules. As a
relatively small board, there is a clear understanding of the required
roles and expectations of the Independent Directors.
Trading in Briscoe Group Securities
The Company has adopted a formal procedure governing the
sale and purchase of the Company’s quoted financial products by
directors and employees. All directors and employees must act
in accordance with this procedure and the requirements of the
Financial Markets Conduct Act 2013.
The procedure requires employees to obtain the written consent of
a director, or in the case of a director, of the Chairman of the Board,
prior to trading in the Company’s shares. Generally, this consent will
only be given in respect of trading in the 60 day period following the
announcement of the Company’s half year and annual results.
Effective Communication
The Board places great importance on effective communications
to the Company’s shareholders and employees and the market
generally. The Company has internal procedures in place to ensure
that key financial and material information is communicated to the
market in a clear and timely manner. In addition to its disclosure
obligations under the Rules (including making the required release of
annual and half-yearly results), the Company makes quarterly sales
releases. This information is made available to the NZX and also to
a variety of media, including by means of the Company’s website.
The Company regularly reviews its practices to ensure it clearly
communicates its goals, strategies and performance.
The Board encourages shareholder attendance at the Company’s
annual meeting and welcomes shareholder debate on all matters of
significance affecting the Company and its business.
55
General Disclosures
Board of Directors
Principal Activities of the Group
Dame Rosanne Meo, OBE: Chairman (Non-Executive)
Chairman of AMP Staff Superannuation and The Real Estate Institute
of New Zealand. Director of AMP (NZ) Administration Ltd and
Rosanne Meo & Associates Limited.
Rod Duke: Group Managing Director and Deputy Chairman
Group Managing Director since 1991. Director of Kein Geld (NZ)
Limited, RA Duke Limited and RD Golf Investments Limited.
Mary Devine, ONZM, BCom, MBA: Director
(Non-Executive)
Professional Non-Executive Director and corporate adviser. Director
of Meridian Energy Limited, IAG New Zealand Limited, IAG (NZ)
Holdings Limited, Top Retail Limited and Devine Consultancy
(2014) Limited.
Tony Batterton, BCom, C.A: Director (Non-Executive)
Partner and Executive Director of Evergreen Partners Ltd. Director
of Direct Capital Investments Ltd & Subsidiaries, Direct Capital IV
Investments Ltd & Subsidiaries, Direct Capital IV Management Ltd
& Subsdiaries, Direct Capital IV Partners Ltd, Direct Capital IV GP Ltd,
Tiger Ventures NZ Ltd, George H Investments Ltd, P F Olsen Group
Ltd, PF Olsen Ltd, Siplow Nominees Ltd, Wright Loan Ltd, Direct
Capital Partners Ltd, and Evergreen GP Ltd.
Andy Coupe, LLB: Director (Non-Executive)
Chairman of Farmright Ltd, Solid Energy New Zealand Ltd and
the New Zealand Takeovers Panel. Director of Gentrack Group
Ltd, Kingfish Ltd, Barramundi Ltd and Marlin Global Ltd. Chartered
member of Institute of Directors.
Subsidiary Companies
Rod Duke is a director of the following subsidiaries: Briscoes (NZ)
Limited, The Sports Authority Limited (trading as Rebel Sport), Rebel
Sport Limited and Living & Giving Limited.
Financial Statements
The financial statements for the Parent and Group for the 52 week
period ended 29 January 2017 are shown on pages 12 to 46 in this
report.
Changes in Accounting Policies
In preparing these financial statements the accounting policies
outlined in the financial statements have been applied.
There were no significant changes in accounting policies
during the year.
Briscoe Group Limited is a non-trading holding company, but
provides management services to its subsidiaries.
The principal trading subsidiaries are Briscoes (New Zealand) Limited,
a specialist homeware retailer selling leading branded products, and
The Sports Authority Limited, (trading as Rebel Sport), New Zealand’s
largest retailer of most leading brands of sporting goods. The
subsidiaries are 100% owned by Briscoe Group Limited.
There were no changes in company structure during the year.
Review of Operations
A. Results for the 52 Week Period Ended 29 January 2017
Sales Revenue
Profit Before Income Tax
Income Tax
Profit After Income Tax
$000
582,840
79,695
(20,275)
59,420
B. Dividends
Subsequent to balance date, the directors have declared a final
dividend of 11.00 cents per share payable 31 March 2017. Non-
resident shareholders of the Group will also receive a supplementary
dividend of 1.9412 cents per share. Dividends are fully imputed to
New Zealand resident shareholders.
Directors
A. Remuneration and all other benefits relating to the
52 week period ending 29 January 2017 ($000)
Non-Executive Directors
RPO’L Meo
SH Johnstone(1)
MM Devine
AD Batterton(2)
RAB Coupe(3)
Executive Directors
RA Duke (Managing Director)
AJ Wall (Deputy Managing Director)(4)
Executive Directors do not receive directors’ fees
103
22
70
51
25
1,038
276
(1) Stuart Johnstone retired as a director effective from 31 May 2016
(2) Tony Batterton was appointed as a director on 1 June 2016
(3) Andy Coupe was appointed as a director on 1 October 2016
(4) Alaister John Wall resigned as a director effective from 30 September
2016
56
B. Shareholdings
Beneficially Held
MM Devine
D. Interests in contracts
As at 17 March 2017
30,000
During the year the following Directors have declared pursuant to
Section 140 (1) of the Companies Act 1993 that they be regarded as
having an interest in the following transactions:
Non-Beneficially Held
As at 17 March 2017
RA Duke as Trustee of the RA Duke Trust
170,345,140
RPO’L Meo
100,000
For further details refer to Substantial Product Holders information
on page 58 of this report
C. Share dealings
During the 52 week period ended 29 January 2017 the following direc-
tors acquired shares in the Company:
R A Duke and A J Wall each as trustees of the R A Duke Trust:
Date of
transactions
15 March 2016
12 April 2016
22 September 2016
23 September 2016
26 September 2016
28 September 2016
29 September 2016
Number of
shares acquired
Consideration
32,000
10,000
2,434
22,600
4,966
51,000
22,739
$66,880
$29,200
$9,420
$87,756
$19,218
$197,130
$86,910
R A Duke as trustees of the R A Duke Trust:
•
•
Payment of rental of $616,000 (2016: $616,000) on the retail
property of which the RA Duke Trust is the owner. (Refer to Note
6.1.1 of the financial statements).
Payment of rental of $356,776 (2016: Nil) on the retail property
owed by Kein Geld (NZ) Ltd, an entity associated with RA Duke
(refer to Note 6.1.1. of the financial statements).
E. Directors’ Insurance
As provided by the Group’s Constitution and in accordance with
Section 162 of the Companies Act 1993 the Group has arranged
Directors’ and Officers’ Liability Insurance which ensures Directors
will incur no monetary loss as a result of actions undertaken by them
as Directors provided they act within the law.
F. Directors’ and Officers’ use of Company Information
During the period the Board received no notices pursuant to
Section 145 of the Companies Act 1993 relating to use of Company
information.
State of Affairs
The Directors are of the opinion that the state of affairs of the Group
is satisfactory. Details of the period under review are included in the
Chairman’s Review, the Managing Director’s Review of Operations
and the audited financial statements.
Date of
transactions
6 October 2016
7 October 2016
10 October 2016
11 October 2016
12 October 2016
13 October 2016
18 October 2016
20 October 2016
25 October 2016
2 November 2016
4 November 2016
11 November 2016
14 November 2016
15 November 2016
17 November 2016
18 November 2016
Number of
shares acquired
Consideration
Remuneration to Auditors
The fee for the audit of the Group and subsidiaries paid to
PricewaterhouseCoopers was $100,000 (2016: $116,000). Fees paid
to the auditors for other services provided, including a half yearly
review, amounted to $34,000 (2016: $47,000).
15,000
2,884
14,700
5,000
42,687
9,508
13,067
122,000
23,605
395
8,000
20,000
33,752
6,248
21,740
500
$57,450
$10,469
$53,017
$18,000
$155,652
$34,419
$47,303
$441,640
$85,214
$1,426
$28,873
$74,000
$123,532
$22,868
$79,786
$1,835
57
Shareholders Information
Holding Range at 17 March 2017
No.
Investors
Total Holdings
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001 and over
895
1,499
552
415
32
622,678
4,418,361
4,391,465
9,905,620
%
0.29
2.01
2.00
4.51
200,193,376
91.19
3,393
219,531,500
100%
Substantial Product Holders
The following information is given pursuant to section 293 of the
Financial Markets Conduct Act 2013. As at 29 January 2017, details
of the Substantial Product Holders in the company and their relevant
interests in the company’s shares are as follows:
Substantial Product Holder
R A Duke (2)
Holding as at
29 January 2017(1)
170,345,140
(1) This information reflects the company’s records and disclosures made
under section 280(1)(b) of the Financial Markets Conduct Act 2013.
(2) R A Duke has a relevant interest as a trustee of the R A Duke Trust
which was disclosed in the SSH notice dated 13 October 2016, in
respect of 170,081,138 shares. As at 29 January 2017 this interest was
in respect of 170,345,140 shares.
Total number of voting shares in the company
as at 29 January 2017 was 219,516,500
Employee Remuneration
The number of employees within the Group (other than directors)
receiving remuneration and benefits above $100,000, relating to
the 52 week period ending 29 January 2017, are indicated in the
following table:
$100,000 – 109,999
$110,000 – 119,999
$120,000 – 129,999
$130,000 – 139,999
$140,000 – 149,999
$150,000 – 159,999
$160,000 – 169,999
$170,000 – 179,999
$180,000 – 189,999
$190,000 – 199,999
$200,000 – 209,999
$210,000 – 219,999
$220,000 – 229,999
$230,000 – 239,999
$240,000 – 249,999
$280,000 – 289,999
$310,000 – 319,999
$320,000 – 329,999
$400,000 – 409,999
$430,000 – 439,999
$450,000 – 459,999
$470,000 – 479,999
$770,000 – 779,999
$800,000 – 809,999
Number of Employees
10
4
7
7
4
5
3
6
3
2
1
1
1
2
1
1
2
1
1
1
1
1
1
1
58
Top 20 Holder List
As at 17 March 2017
Rank
Holder’s Name*
Total
%
1
2=
2=
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
*
**
JB Were (NZ) Nominees Limited** ................................................................. 172,498,758 .......................................... 78.58
Gerald Harvey ...............................................................................................................5,250,000 ..............................................2.39
Harvey Norman Properties (NZ) Ltd ....................................................................5,250,000 ..............................................2.39
New Zealand Central Securities Depository Limited ......................................4,108,400 ..............................................1.87
FNZ Custodians Limited ...........................................................................................2,368,685 ..............................................1.08
Alaister John Wall, Beverley Ann Wall and Benedict Douglas Tauber
as Trustees of the Tunusa Trust established for the benefit of the
family of AJ and BA Wall ............................................................................................1,230,000 ..............................................0.56
Stuart Hamilton Johnstone and Lorraine Rose Johnstone ..............................1,000,000 ..............................................0.46
Graham John Paull and Owen Brent Ennor ........................................................... 800,000 ..............................................0.36
Forsyth Barr Custodians Limited ............................................................................... 766,346 ..............................................0.35
Shu-Wen Chiang ............................................................................................................ 723,631 ..............................................0.33
Manhattan Trustee Limited ........................................................................................ 683,000 ..............................................0.31
Investment Custodial Services Limited .................................................................. 566,337 ..............................................0.26
Custodial Services Limited .......................................................................................... 512,095 ..............................................0.23
Custodial Services Limited .......................................................................................... 390,020 ..............................................0.18
Keith Arthur William Brunt ......................................................................................... 365,000 ..............................................0.17
Gemscott Limited .......................................................................................................... 362,234 ..............................................0.17
Geoffrey Peter Scowcroft ............................................................................................ 340,000 ..............................................0.15
Carla Ingrid Brockman ................................................................................................... 336,300 ..............................................0.15
Custodial Services Limited .......................................................................................... 333,124 ..............................................0.15
Peter William Burilin ..................................................................................................... 303,473 ..............................................0.14
A number of the registered holders listed below hold shares as nominees for, or on behalf of, other parties.
Includes 170,345,140 shares in relation to holdings associated with R A Duke.
59
Notes
60
Notes
61
Directory
Calendar
Annual Balance Date ...................................................January
Preliminary Profit Announcement ................................March
Annual Report Published ................................................. April
Final Dividend ................................................... 31 March 2017
Annual Meeting ..................................................... 23 May 2017
Half Year Results ....................................................September
Interim Dividend .......................................................... October
Directors
Dame Rosanne PO’L Meo (Chairman)
Rodney A Duke
Mary M Devine
Anthony (Tony) D Batterton
Richard A (Andy) Coupe
Registered Office
36 Taylors Road Morningside
Auckland
Telephone (09) 815 3737
Facsimile (09) 815 3738
Postal Address
PO Box 884
Auckland Mail Centre
Auckland
Solicitors
Simpson Grierson
Bankers
Bank of New Zealand
Auditors
PricewaterhouseCoopers
Share Registrars
Link Market Services Limited
Deloitte Centre
Level II
80 Queen Street
Auckland 1010
Telephone +64 9 375 5998
Websites
www.briscoegroup.co.nz
www.briscoes.co.nz
www.rebelsport.co.nz
www.livingandgiving.co.nz
62
63
64