Briscoe Group Limited Annual Report 2020

Plain-text annual report

Annual Report 2020 “We take great confidence from the quality of our retail and product brands, our systems, the improvements we have underway and the capabilities of our teams. For that reason, and notwithstanding the economic headwinds, we are confident that we will continue to grow the business and deliver the value our customers have come to expect from New Zealand’s pre-eminent homeware and sporting brands”. Rod Duke Group Managing Director Contents At a glance 4 Chairman’s Review 6 Highlights 12 Managing Director’s Review 14 Preparing for the Future of Retail 20 Growing Together 24 Consolidated Financial Statements 30 Independent Auditor’s Report 73 Corporate Governance Statement 79 General Disclosures 93 Top 20 Shareholders 96 Directory 97 4 Briscoe Group Limited Annual Report 2020 At a Glance At a Glance We’re New Zealand’s leading homeware and sporting goods retailer offering our customers great products to enhance every room in their home and for every sporting occasion. We focus on style, quality and value and are always working hard to help our customers create a home they love and to play the sport of their choice. 90,000 We have over 90,000 products available in store or online 800,000 We have over 800,000 visits to either our physical or online stores every week Home delivery and Click & Collect services Biggest range of homewares and sporting goods available in New Zealand We’re a leading New Zealand multichannel retailer with national coverage through our bricoes.co.nz, livingandgiving.co.nz, rebelsport.co.nz websites and store network. Delivery or pick-up options New purpose-built Support Office and Customer Contact Centre in Auckland 32 stores providing online fulfilment capability and 51 stores “Click and Collect” service Distribution Centre in South Auckland 87 stores Briscoe Group Limited Annual Report 2020 At a Glance 5 BRISCOES HOMEWARE STORES REBEL SPORT STORES DISTRIBUTION CENTRE 6 Briscoe Group Limited Annual Report 2020 Chairman’s Review Chairman’s Review I am pleased to be able to say that our story is not all about the day-to-day contest for revenue in this tough environment. We remain very focused on opportunity – in the short, medium and long term. We are determined to remain at the forefront of the retail scene in New Zealand, in terms of both performance and adaptation to the changing environment. Briscoe Group Limited Annual Report 2020 Chairman’s Review 7 The complementarity of the roles of our Executive and Management teams and their compatibility enables the agility and effectiveness that so effectively drive our organisation. It is exciting for us as a Board to see the diversity of thinking and experience increasingly demonstrated in the teams at all levels of the company and to acknowledge how this is contributing to changing attitudes and performance. We are determined to remain at the forefront of the retail scene in New Zealand and have several workstreams underway to increase profitability through internal process improvement and growth. We are excited by the development and review of the Group’s strategy for the coming 3-4 years. This will take account of the ongoing change in the retail environment and in particular customers’ priorities but at the same time acknowledge the shorter term economic challenges both domestically and internationally in the current 2020/21 year. As a Board and Executive team, we believe that this also provides us with significant opportunities ahead and that we are well placed to deliver sustainable growth. Overview Our highlights well illustrate that Briscoe Group has once again demonstrated its ability to navigate the competitive challenges that are increasingly prevalent in our retail environment. Retail has always needed agility, an ability to move quickly and the foresight to predict when and how to respond, but the impact of dramatically changing lifestyles, demands and preferences of our customers has increased the pressure on all retailers. It is simplistic to place all the emphasis on the impact of social media in relation to our changes in lifestyle. It’s more complex than that but it certainly emphasises that our ability to report increased revenue and operating earnings whilst responding to this changing marketplace is all the more significant. As a Board we are proud of the continuing and heightened efforts of our people across all parts of the company and the results they continue to achieve in driving continued growth and profitability. We openly acknowledge their hard work and commitment. Last year was one of significant change in our leadership team. It demonstrated the Company’s ability to both attract and promote from within, high achieving and committed individuals, whilst accentuating the significant ongoing contribution of established critical team members. Dame Rosanne Meo Chairman 8 Briscoe Group Limited Annual Report 2020 Chairman’s Review This annual report includes, as a separate section, a summary Our investment in Kathmandu continued to perform well of our views on the changing retail environment and the during our 2019/20 year, returning an increased dividend for work we are undertaking to ensure that we respond in ways the year. that not only maximise our competitive advantage but are the right decisions for our business and our stakeholders. A We also note Kathmandu’s market release at the end of more detailed update on this will be presented at the annual March 2020 in relation to their response to the COVID-19 meeting. situation and also their subsequent equity raising, which as a Board, we decided to not participate in. The Managing Director’s review of operations (below) summarises our work programmes and performance over the As Rod Duke commented at the time, we are obviously 2019-20 year and provides an insight into the trading outlook supportive of the Kathmandu business and would like for 2020-21. Financial Performance Briscoe Group’s sales revenue grew by 3.34% to a record $653.0 million in the year ended 26 January 2020. Gross margin dollars increased by 1.64% to $257.5 million, while gross margin percentage decreased to 39.43%. to see them successfully alleviate their balance sheet pressures. However, our immediate priority in this period of unprecedented uncertainty surrounding the potential impact of COVID-19, is to our shareholders and employees to continue to ensure the strength of our own business both in the short-term and for the future. NZ IFRS 16 Net profit after tax (NPAT) before the impact of accounting As previously indicated the Group adopted the accounting standard NZ IFRS 16 (see below) was up by 2.54% to $65.0 standard NZ IFRS 16: Leases on 28 January 2019 and this is million. NPAT included dividends received totalling $6.8 thus the first year of reporting under this new standard. million from our investment in Kathmandu Holdings Limited, as well as $2.7 million received for rights entitlements not Like a number of other retailers, we lease many of our store exercised in that company’s capital raising for its acquisition properties. The new standard requires lessees to recognise of the Rip Curl business. NPAT after the impact of NZ IFRS 16 nearly all leases on the balance sheet, which will reflect their was $62.6 million. right to use the asset for a period of time and the associated liability for payments. The new standard has changed the The Group’s balance sheet remains strong, with cash and presentation of the balance sheet and the statement of cash bank balances of $67.4 million as at 26 January 2020 and no flows, as well as affecting the amounts shown in the income term debt. Approximately $25 million of creditor payments statement. Rent expense in the income statement has been included in the trade payables balance were subsequently replaced by depreciation and interest. paid on or before 31 January 2020. $ 653M SALES REVENUE 3.34%. Briscoe Group Limited Annual Report 2020 Chairman’s Review 9 The Group has elected to apply the modified retrospective made the decision to cancel the final dividend in the best transition method. Under this method the Group has interests of the company. There is no doubt in our minds not restated comparatives for this reporting period. given the rapid deterioration of the operating environment “Briscoe Group is committed to the highest standards of governance and management, based on implementing best practice structures and policies.” since then, that this was the right decision. We will however continue to assess our ability to pay a dividend as is practicable and prudent. Corporate Governance Briscoe Group is committed to the highest standards of governance and management, based on implementing best practice structures and policies. It has always been a strong feature of this company that the Board and Executive teams work effectively together and are aligned around the business objectives. We have, in recent months, been in search of an additional independent, non-executive director. We also undertook a comprehensive, external assessment of our capabilities in the Reclassifications and adjustments are therefore recognised latter part of 2019 and used this as a component of both our in the opening balance sheet. Reported net profit after tax governance strategic planning and in determining what we (NPAT) includes a $2.4 million impact from the introduction need in our next director. That review identified the benefit of NZ IFRS 16. Due to its January balance date, Briscoe we could derive for additional e-commerce and international Group is one of the first companies to adopt the new leasing experience and we are progressing an appointment process. standard, which will significantly affect all businesses with sizeable portfolios of leased properties. It is important to note that the changes have no cash effect on the Group and the change is for financial reporting purposes only. Further details can be found in Note 6.5 (page 70) of the financial statements within this Annual Report, including tables outlining the impacts of the new standard on the consolidated income statement and consolidated balance sheet. Dividend Equity-Based Remuneration Schemes The Board is of the view that all shareholders benefit from the participation of key senior executives in long-term, appropri- ately-priced, equity-based remuneration that crystallises only on delivery of increased shareholder value. The Group established an Executive Share Option Plan in 2003 to issue options to selected senior executives and, subject to shareholder approval, to Executive Directors. No options have been issued under this plan since 2016. The total number of share options still exercisable represents 0.5% We were, of course disappointed to have to take the difficult of the current issued share capital. decision to cancel the final dividend which had been announced with our full year result (refer Notes 5.3.3 and 6.4 Subsequent to a review conducted in 2018 with independent of the financial statements). external advisors engaged by the Board, a new long-term In light of the uncertainty surrounding the impact of incentive plan was established to replace the Executive Share COVID-19 and the rapid escalation to Alert level 4 Option Plan. Under this new plan, performance rights subject implemented by the New Zealand Government, the Board 10 Briscoe Group Limited Annual Report 2020 Chairman’s Review Briscoe Group Limited Annual Report 2020 Chairman’s Review 10 to performance hurdles measured over a three-year period On behalf of my fellow directors, I thank you all for your are granted to selected senior executives. There were two continued support as shareholders in the Briscoe Group. tranches of performance rights issued during the 2019-20 financial year. Further details in relation to equity-based remuneration can be found in Note 6.2 (page 66) of the financial statements within this Annual Report. The 2020/21 year has already clearly demonstrated that it will be the most economically, socially and operationally challenging period that any of us have faced. However we remain excited by the significant opportunities that lie ahead for our Group. The response of our team in these recent weeks has clearly demonstrated the agility of which we spoke earlier in this report to you. Dame Rosanne Meo Chairman On behalf of the Board: Rod Duke Andy Coupe Tony Batterton Unpredictability and uncertainty abound, but we remain confident that we are well-placed to maintain our position as the leading homeware and sporting goods retailer in New Zealand. Andy Coupe Independent Director Tony Batterton Independent Director 12 Briscoe Group Limited Annual Report 2020 Highlights Highlights Briscoe Group Limited Annual Report 2020 Highlights 13 Key performance indicators (KPIs) are used by the Board and throughout the Group to monitor business performance TOTAL REVENUE $M AND GROWTH % NET PROFIT AFTER TAX* $M AND % SALES ONLINE MIX OF SALES % 9.2% 5.5% 4.4% 3.3% 3.3% 653.0 631.9 605.1 585.9 555.5 8.5% 47.1 10.1% 10.1% 10.0% 63.4 61.3 59.4 10.0% 65.0 11.3% 10.0% 8.2% 6.1% 4.5% 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 Growth of 3.3% includes same-store Net profit after tax* (NPAT) continues Online continues to grow with growth of 2.0% in stores and online to grow in a challenging retail additional fulfilment stores and the and 3 new store openings. environment and despite significant launch of Click and Collect. wage and other cost pressures. * Net proﬁt after tax is presented before the impact of the introduction of NZ IFRS 16. GROSS PROFIT MARGIN % FREE CASH FLOW $M EARNINGS PER SHARE* CENTS 40.6% 40.1% 40.0% 40.1% 75.0 39.4% 55.5 46.7 43.5 2017 2018 2019 2020 2016 -41.9 2016 2017 2018 2019 2020 29.3 28.7 27.8 27.2 21.7 2016 2017 2018 2019 2020 The competitive retail environment Solid positive free cash flow (defined as Earnings per share increasing continues to keep margins under net cash from operating activities less reflecting the steady increase in profit pressure. net cash used in investing activities) performance. since the 2015/16 investment in Kathmandu Holdings Limited. * Earnings per share is presented using earnings before the impact of the introduction of NZ IFRS 16. 14 Briscoe Group Limited Annual Report 2020 Managing Director’s Review of Operations Managing Director’s Review of Operations We look forward to expanding revenues from our existing store network and online platform, new revenue streams and increased profitability through improvements in key facets of our business. Briscoe Group Limited Annual Report 2020 Managing Director’s Review of Operations 15 In the year to January 2020 our performance was and declines in consumer and business confidence both in commendable with sales at a record level. Net profit after New Zealand and internationally. In particular the challenges tax was also a record before the extra impact of the new of the COVID-19 environment have just highlighted the accounting standard on leases. importance and value of our high performing and dedicated executive team and their leadership that permeates right As Managing Director, I cannot emphasise enough the through the organisation. effectiveness of our people in achieving such results. My direct reports of Geoff Scowcroft (CFO), Andrew Scott (COO) Margins were under pressure, especially in the second half and Aston Moss (GM Human Resources), supported by great of the year with a late start to winter having a significant teams in every part of the Group, continue to demonstrate impact on demand in relevant product categories. While the values and energy that make us successful and passionate Gross Margin dollars increased for the year, the equivalent about our company. percentage was lower. Due to this commitment, we were and continue to be Due to this commitment, we were and continue to be well-placed to take on the intense competition across the well-placed to take on the intense competition across the retail environment, including wage and general cost increases retail environment, including wage and general cost increases Rod Duke Group Managing Director Group Managing Director 16 Briscoe Group Limited Annual Report 2020 Managing Director’s Review of Operations Despite being faced by changing consumer spending • Building a deeper understanding of our customers patterns – growth in online shopping, the focus on mega wants and needs. shopping events at the expense of ‘normal’ trading and the later start of Christmas, both the homeware and sporting goods segments continue to perform well operationally. These disciplines will remain at the core of our business and go hand in hand with initiatives that will help us retain our strong competitive position as we evolve and grow. On a same-store basis – adjusted for store openings and closures – Group sales were 2.04% ahead of those for the previous corresponding period. Our online channels continued to experience strong growth with sales 16% higher than the previous years. Online sales now represent just over 11% of our total sales and continue to grow. We made $19.2 million of capital investment, with $10.1 million going toward development of Group owned property and the balance for the fit-out of new and relocated stores, online platform improvements, security system upgrades and enhancements to system software and hardware. Inventories were $87.4 million at year end, $6.4 million higher than the $81.0 million for 2018-19. The increase reflected three new store openings during the year, the increased demand for online shopping and a higher mix of imported inventory. Our strong performance was built on basic disciplines – • Investing in our people, their growth and performance. • Improving productivity – in particular managing inventory better. • Optimising our store network and growing our online platform Our Store Network The store development programme progressed well throughout the year. The Briscoes Homeware and Rebel Sport stores in New Plymouth were fully refurbished during the first half, following earthquake strengthening works. Projects continued at pace during the second half, led by the completion of the new Support Office at 1 Taylors Road, Auckland. The full support team was relocated by the end of August. The Briscoes Homeware store at 36 Taylors Road was relocated in September to retail space on the ground floor of the new Support Office building. This allowed for a complete rebuild on the previous site, for which siteworks have since commenced. September also saw the opening of a new Rebel Sport store in Newmarket, Auckland as part of the Westfield retail redevelopment. This store reflects a contemporary fit-out and design, parts of which will be replicated in future new and refurbished Rebel Sport stores. 11.3 % ONLINE MIX OF SALES Briscoe Group Limited Annual Report 2020 Managing Director’s Review of Operations 17 New Briscoes Homeware and Rebel Sport stores, including We will enhance our store network through new openings, online fulfilment centres, opened in Mt Roskill in October – refurbishments and upgrades in new and existing locations. welcome additions to the Group’s Auckland network. The Our store development programme will include the opening Briscoes Homeware store at Riccarton, Christchurch was of bigger and better Briscoes Homeware and Rebel Sport relocated to a new site on Riccarton Road. The extension stores in Nelson, a new Briscoes Homeware at 36 Taylors and full refurbishment of the Briscoes Homeware store in Road, Auckland and the conversion of our site at 1 Taylors Tauranga was completed, along with the creation of an Road to a flagship Rebel Sport store. We will also be working enlarged common back-of-house facility. on developments in Napier to open in 2021 and Silverdale By the end of the year the homewares segment had 47 likely in early 2022. bricks and mortar stores including 24 fulfilment hubs, There will be further improvement in internal processes, and there were 40 stores in the sporting goods segment including the launch of a notable project to enhance our including 20 fulfilment hubs. supply chain management by enhancing logistics, inventory Our Ongoing Online Mission and store processes, combining our own expertise with specialised external assistance. We will launch a review of the way we engage with customers The last year has seen considerable investment in our with a view to optimising our marketing spend and cost online platform with the full launch of our new websites in control will remain a key focus. February. The addition of fulfilment hubs as part of the store refurbishment programme and continuing work to improve We take great confidence from the quality of our retail and the way we deliver orders to customers, are essential product brands, our systems, the improvements we have to our future online development. We are committed underway and the capabilities of our teams. For that reason, to increasing our capacity, capability and customer and notwithstanding the economic headwinds, we are understanding in this area. confident that we will continue to grow the business and deliver the value our customers have come to expect from Our Click and Collect offering allowing shoppers to order New Zealand’s pre-eminent homeware and sporting brands. Rod Duke Group Managing Director online and pick up in-store, was launched after an extended trial and is now available to customers at 51 stores. Our intention is to have this service available at all stores by the end of this year. The Year Ahead Although New Zealand retailing continues to remain highly competitive, our dominant perspective is one of opportunity. We look forward to expanding revenues from our existing store network and online platform, new revenue streams and increased profitability through improvements in key facets of our business. We will continue to enhance our customer offering through both online channels and physical stores with the roll-out of Click and Collect and other customer engagement initiatives. 20 Briscoe Group Limited Annual Report 2020 Preparing for the Future of Retail Preparing for the Future of Retail Retailing has never been simple. It requires a strange alchemy of foresight, ambition, risk-taking, innovation and disciplined execution to achieve survival and growth. Briscoe Group Limited Annual Report 2020 Preparing for the Future of Retail 21 Briscoe Group was founded on the recognition of those basic We see the most significant changes within the requirements and our willingness to meet them day-by-day following areas: and year-by-year. Years later we are still here, with a national footprint and a clear position as New Zealand’s leading retailer 1. COVID-19: of homewares and sporting goods. Our position has been built on a strategy that places customers at the centre of our business – offering customers the best range of brands at the best prices and making it easy for them to do business with us. In all likelihood, that will never change. What does change is the shape and structure of the retail environment. For most of our lifespan change has been gradual – an evolution of the bricks and mortar retail platform. In recent years it has become more rapid and fundamental – rearranging the competitive structure of markets through global forces such as the spread of major international retail brands, the rise of e-commerce including the introduction of online trading platforms with global reach, and a revolution in marketing and advertising based on far-reaching changes in the media landscape. The result is a potent mix of evolving trends that underline the Darwinian nature of retail success – that it is predicated not on size, strength or intelligence but rather on the ability to adapt to change. “The strength of our balance sheet provides a solid foundation for future growth” Geoﬀ Scowcroft CFO First and foremost is the global crisis that is COVID-19. We have yet to see the full scope of the national health response or the economic implications but it’s obvious that retail will undoubtedly be impacted. While this may not be a long-term market change it still presents the most disruptive force to retail in New Zealand this year. Purchase patterns have radically shifted from the impact of enforced isolation and this should be a solid test of our online and offline fulfilment options and experiences. 2. Customer behaviours and preferences: Multi-channel purchasing opportunities, online research and comparison, new technologies, readily available global information and shifts in spending patterns (like the recent concentration of promotional activity, and thus consumer demand, around major event-based campaigns such as Singles Day (‘11/11’), Black Friday and Boxing Day) all highlight the extent to which it will be our understanding of our customer that keeps us relevant and reliable. 3. The role of the physical store: So much more than a fulfilment centre, the physical store is increasingly the hub of the ‘brand experience’ – used to inspire, demonstrate, educate and connect with customers. Such multifunctional spaces need radical rethinking that moves away from ‘rows of racks’ and leans into desirable destinations. 4. Erosion of the traditional media landscape: The decline in dominance of traditional media (television, print and radio) and increased relevance of a range of options including digital platforms, subscription television and social networks makes putting national brand and sales messages in front of customers more challenging and expensive; but, on the other hand, offers ever-greater potential for personalised targeting. 22 Briscoe Group Limited Annual Report 2020 Preparing for the Future of Retail “We have a strong base to build on with our store and fulfilment network in a continual process of growth and renewal” Andrew Scott COO 5. Operational cost pressures: Continuing cost increases along with minimal opportunity for retail price inflation put increased pressure on the bottom line and highlights the need for the business to run as smartly as possible with business intelligence technology and systems leading the charge. These, and other unforeseen, challenges present both opportunities and risks and retailers need to plan to deal with both. Some have adapted better than others. In what is essentially a mirror of the international experience, a number of retailers in New Zealand and Australia have been placed in some form of voluntary or involuntary administration over recent years. These changes in the operating environment, as well as the competitive forces, are clear and present. Briscoe Group is determined to be one of the retailers that confronts both the challenges and the opportunities. We have a strong base to build on with our store network in a continual process of growth and renewal; the recent upgrade of our online shopping experience, including Click and Collect options at stores throughout the country; and the excellent capabilities of our individual employees and teams. Beyond that base we have a range of plans in place to build the strength of our position. We see three key areas of opportunity to drive growth: • Improving the experience our customers have with us – through interactions with our people, the store environment, the online platform and in responding to promotions. We aim to offer a relevant and reliable experience that differentiates us in the marketplace. • Overhauling our supply chain to improve distribution efficiency, improving the ‘speed-to-floor,’ and optimising online fulfilment and stock levels. • Developing new streams of revenue by identifying opportunities for start-ups and acquisitions, and by building strategic partnerships. These plans reflect our existing knowledge base and capabilities, reflection on those needed for continuing growth and study of the changes made successfully by our peers in overseas markets. They will be implemented progressively in the coming years, and will be supplemented by further reflection, learning and insights. Most importantly, we are confident that they will enable the company to seize the opportunities that exist now, and will emerge, in a competitive retail environment. “Collaboration and partnerships represent huge opportunity for retailers to engage with stakeholders and data and digitalisation will be key enablers to unlocking this opportunity.” Geoﬀ Scowcroft & Andrew Scott CFO COO 24 Briscoe Group Limited Annual Report 2020 Growing Together Growing Together Going beyond the expected, new initiatives are being introduced across the business to ensure that our team are not only led in the right direction, but continually challenged to create a successful and sustainable future. Briscoe Group Limited Annual Report 2020 Growing Together 25 Our People Briscoe Group Scholarship We continue to invest in education to grow management and leadership capability and to enhance product knowledge and service skills. We have established educational pathways for staff to study at a range of levels, from certificates and diplomas through to degrees. We are particularly excited that a number of our managers have enrolled in MBA degrees. Both store and support teams are being trained on product knowledge, job skills, cybersecurity and health & safety. Recruitment is co-ordinated and managed by a centralised platform enabling visibility of talent and ensuring robust selection and appointment processes. The opportunities these provide for collective and individual development are wide ranging and we’re pleased with the way our teams have embraced these systems. A number of Zone Business Manager appointments were made during the year. This role enhances our lean operating model by providing career opportunities, sharpening focus on the management of our retail network and supporting good operating practice. We implemented our online Health & Safety reporting and recording system Ecoportal during 2019. This is an invaluable tool in our relentless focus on good health and safety practices across our business. Complementing this was the introduction of internal and external traffic management plans for every site across our network to assist us in providing a safe working and shopping environment for team members and customers alike. “With around 2000 employees all over New Zealand, it’s important to us as a Group that we not only create enduring relationships with our staff and partners, but also with our communities.” Aston Moss Group GM – Human Resources The Briscoe Group Education Foundation was established to provide employees and their children the opportunity to up-skill and fulfil their education ambitions. Offering a helping hand that can make an amazing difference to our staff’s ability to contribute to family, community and the wider society. In 2013, thanks to the generosity of the RA Duke Trust, the Group began a partnership with First Foundation, bringing together sponsors, schools and talented young people with limited financial resources into a proven four-year programme that includes paid work experience, financial support and personal guidance from mentors. 22 scholarships have been awarded to date and in February, we had the privilege of awarding four scholarships as well as celebrating two recipients who have recently completed the First Foundation programme. We continue to support other staff engaged in tertiary education and have established relationships with Massey University and Auckland University of Technology. “Our uniquely structured retail operations team embodies a high performing, committed and adaptable force of Zone and Business Managers. They embrace the challenge of fundamentally shifting traditional bricks and mortar to the complexities of omni-channel retailing.” Nick Turner Group GM Retail Operations 26 Briscoe Group Limited Annual Report 2020 Growing Together Sustainability Last year we recycled 2,100 tonnes of recyclable materials including 1,920 tonnes of cardboard, the weight of the Whilst we realise we still have a way to go, Briscoe Group structural steel in the Sky Tower. Limited is committed to reducing its business footprint on the environment. This is a key focus for our company and we already have a number of initiatives underway. We now have ten waste diversion options to apply to sites – paper, cardboard, commingle recycling, wood, metal, compost, secure destruction, clear plastic film, batteries and We are in the process of measuring our carbon footprint to used electronics. Which means in 2020 GWP (Good waste better understand the amount of greenhouse gas emissions practices) has started across all group sites. produced by our company. From there we can start to consider sensible targets for future reduction. We also have Community Sponsorship compliance agreements in place with our partners to ensure products are produced ethically. We are committed to the At a charitable level, since 2004 Briscoe Group Limited has highest standards of social responsibility and work with been a key partner of Cure Kids, a charity set up to find cures international organisations to uphold this. and better treatments for serious illnesses and diseases that affect thousands of children in New Zealand. Making our buildings as energy efficient as possible is another key area of focus and building specification reviews are Our generous customers, staff and suppliers support the underway to enable us to set new benchmarks in energy and Group’s efforts to raise funds for this wonderful charity and water use efficiency. Over the last year, Cloud 9 pillows moved to home compostable packaging – removing 400,000 bags. we’re proud to say that in 15 years of partnership we have raised over $7.5 million dollars together. We provide funding to the Westpac Rescue Helicopter and Fieldcrest, KAS, Royal Doulton and Design Plus moved to support the fund-raising activities of a wide variety of local cotton self-pack bags – removing 314,000 bags and John community-based charities, sports clubs and others. Cotton duvet inners moved to calico bags and cardboard boxes – that’s 18,000 bags fewer. Last year also saw the launch of our continuing make-over campaign to support local communities, with the first Combined with the legislative changes early last year recipients being Marlborough Hospice in Blenheim and the restricting single-use plastic bags at counters, we have Rotorua school for young parents. removed in excess of 6,100,000 plastic bags from landfill and will continue to identify opportunities for further reductions. “As a Group, we’re on a journey to reduce our impact on the environment and working with our partners is just one of the ways to help make that happen.” Fraser Collins Group GM Merchandise “As a marketing team, it’s initiatives like these that can really make a difference at a grass roots level.” Fiona Stewart GM Marketing and Strategy Briscoe Group Limited Annual Report 2020 Growing Together 27 28 Briscoe Group Limited Annual Report 2020 Our Brands Briscoe Group Limited Annual Report 2020 Our Brands 29 Papanui Christchurch New Store set up. 30 Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements Consolidated Financial Statements For the 52 week period ended 26 January 2020 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 for easier identiﬁcation. Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements 31 Introduction and Table of Contents For the 52 week period ended 26 January 2020 Table of Contents Consolidated Financial Statements Directors’ Approval of Consolidated Financial Statements Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Balance Sheet Consolidated Statement of Cash Flows Consolidated Statement of Changes in Equity Notes to the Consolidated Financial Statements: 1. Basis of Preparation 1.1 General Information 1.2 General Accounting Policies 2. Performance 2.1 Segment Information 2.2 Income and Expenses 2.3 Taxation 2.3.1 Taxation – Income Statement 2.3.2 Taxation – Balance Sheet 2.3.3 Imputation Credits 2.4 Earnings Per Share 3. Operating Assets and Liabilities 3.1 Working Capital 3.1.1 Cash and Cash Equivalents 3.1.2 Trade and Other Receivables 3.1.3 Inventories 3.1.4 Trade and Other Payables 3.2 Held-for-sale Assets 3.3 Property Plant and Equipment 3.4 Intangible Assets 33 34 35 36 37 39 40 40 40 42 42 43 44 45 46 47 47 48 48 48 48 49 49 50 5 1 53 32 Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements Introduction and Table of Contents For the 52 week period ended 26 January 2020 3.5 Leases 3.5.1 Right-of-use Assets 3.5.2 Lease Liabilities 3.5.3 Lease Liabilities Maturity Analysis 3.5.4 Lease Related Expenses Included in the Income Statement 3.5.5 Lease Payments Included in the Cashflow Statement 3.5.6 Sensitivity Analysis 4. Investments 4.1 Investment in Equity Securities 5. Financing and Capital Structure 5.1 Interest Bearing Liabilities 5.2 Financial Risk Management 5.2.1 Derivative Financial Instruments 5.2.2 Credit Risk 5.2.3 Interest Rate Risk 5.2.4 Liquidity Risk 5.2.5 Market Risk 5.2.6 Sensitivity Analysis 5.3 Equity 5.3.1 Capital Risk Management 5.3.2 Share Capital 5.3.3 Dividends 5.3.4 Reserves and Retained Earnings 6. Other Notes 6.1 Related Party Transactions 6.1.1 Parent and Ultimate Holding Company 6.1.2 Key Management Personnel 6.1.3 Directors’ Fees and Dividends 6.2 Employee Share-Based Remuneration 6.2.1 Equity Settled Share Options 6.2.2 Equity Settled Performance Rights 6.2.3 Equity-Based Remuneration Reserve 6.3 Contingent Liabilities 6.4 Events After Balance Date 6.5 New Accounting Standards 53 53 54 54 54 55 55 56 56 57 57 57 57 58 58 58 59 60 62 62 62 63 63 64 64 64 64 65 66 66 67 69 69 69 70 Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements 33 Directors’ Approval of Consolidated Financial Statements For the 52 week period ended 26 January 2020 Authorisation for Issue The Board of Directors authorised the issue of these Consolidated Financial Statements on 16 March 2020. Approval by Directors The Directors are pleased to present the Consolidated Financial Statements for Briscoe Group Limited for the 52 week period ended 26 January 2020. (Comparative period is for the 52 week period ended 27 January 2019). Dame Rosanne Meo CHAIRMAN 16 March 2020 For and on behalf of the Board of Directors Rod Duke GROUP MANAGING DIRECTOR 34 Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements Consolidated Income Statement For the 52 week period ended 26 January 2020 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 / (costs) 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) Notes 2.2 5.1 2.3.1 2.4 2.4 Period ended 26 January 2020 $000 Period ended 27 January 2019 $000 653,017 (395,515) 257,502 9,661 (100,342) (69,598) 97,223 724 (13,635) (12,911) 84,312 (21,729) 62,583 631,919 (378,564) 253,355 6,994 (103,202) (71,152) 85,995 754 (142) 612 86,607 (23,214) 63,393 28.2 28.0 28.7 28.3 The above consolidated income statement should be read in conjunction with the accompanying notes. In relation to NZ IFRS 16 the modified transition method has been applied as explained in Note 6.5. Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements 35 Consolidated Statement of Comprehensive Income For the 52 week period ended 26 January 2020 Net Profit attributable to shareholders Other comprehensive income: Items that will not be subsequently reclassified to profit or loss: Notes Period ended 26 January 2020 $000 Period ended 27 January 2019 $000 62,583 63,393 Change in value of investment in equity securities 4.1 38,513 994 Items that may be subsequently reclassified to profit or loss: Fair value gain recycled to income statement from cashflow hedge reserve Fair value gain taken to the cashflow hedge reserve Deferred tax on fair value gain taken to income statement from cashflow hedge reserve Deferred tax on fair value gain taken to cashflow hedge reserve Total other comprehensive income Total comprehensive income attributable to shareholders 2.3.2 2.3.2 (4,077) (3,904) 3,022 1,142 (846) 37,754 5,509 1,093 (1,543) 2,149 100,337 65,542 The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes. In relation to NZ IFRS 16 the modified transition method has been applied as explained in Note 6.5. 36 Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements Consolidated Balance Sheet As at 26 January 2020 Notes 26 January 2020 $000 27 January 2019 $000 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 Right-of-use assets Deferred tax Investment in equity securities Total non-current assets TOTAL ASSETS LIABILITIES Current liabilities Trade and other payables Lease liabilities Taxation payable Derivative financial instruments Total current liabilities Non-current liabilities Trade and other payables Lease liabilities Total non-current liabilities TOTAL LIABILITIES NET ASSETS EQUITY Share capital Cashflow hedge reserve Equity-based remuneration reserve Other reserves Retained earnings TOTAL EQUITY 3.1.1 3.1.2 3.1.3 3.2 5.2.5 3.3 3.4 3.5.1 2.3.2 4.1 3.1.4 3.5.3 2.3.2 5.2.5 3.1.4 3.5.3 5.3.2 5.2.5 6.2.3 5.3.4 67,414 3,533 87,414 5,408 269 80,777 2,822 81,017 - 793 164,038 165,409 97,265 3,464 266,001 11,676 154,104 532,510 92,016 2,520 - 3,418 101,989 199,943 696,548 365,352 81,260 17,744 4,895 1,014 104,913 852 278,664 279,516 384,429 312,119 60,752 (519) 841 66,251 184,794 312,119 83,754 - 6,830 448 91,032 779 - 779 91,811 273,541 58,929 240 1,097 27,738 185,537 273,541 The above consolidated balance sheet should be read in conjunction with the accompanying notes. In relation to NZ IFRS 16 the modified transition method has been applied as explained in Note 6.5. Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements 37 Consolidated Statement of Cash Flows For the 52 week period ended 26 January 2020 Notes Period ended 26 January 2020 $000 Period ended 27 January 2019 $000 652,701 12 6,832 2,720 850 97 631,881 589 6,405 - 748 - 663,212 639,623 (450,085) (75,593) (13,631) (20,310) (24,085) (583,704) 79,508 11 11 (17,410) (1,768) (13,602) (32,780) (32,769) 1,620 - 1,620 (45,494) (16,264) (61,758) (60,138) (13,399) 80,777 36 67,414 (458,458) (70,649) (142) (20,405) (24,249) (573,903) 65,720 4,905 4,905 (19,632) (1,959) (5,568) (27,159) (22,254) 2,178 - 2,178 (43,090) - (43,090) (40,912) 2,554 78,193 30 80,777 OPERATING ACTIVITIES Cash was provided from Receipts from customers Rent received Dividends received Premium received from KMD rights issue Interest received Insurance recovery 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 Investment in equity securities Net cash outflows from investing activities FINANCING ACTIVITIES Cash was provided from Issue of new shares Net proceeds from borrowings Cash was applied to Dividends paid Lease liability payments 3.3 4.1 5.3.2 5.3.3 Net cash outflows from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of period Effect of exchange rate changes on cash and cash equivalents Cash and cash equivalents at period end 3.1.1 38 Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements Consolidated Statement of Cash Flows (continued) For the 52 week period ended 26 January 2020 RECONCILIATION OF NET CASH FLOWS FROM OPERATING ACTIVITIES TO REPORTED NET PROFIT Reported net profit attributable to shareholders 62,583 63,393 Period ended 26 January 2020 $000 Period ended 27 January 2019 $000 Items not involving cash flows Depreciation and amortisation expense Adjustment for fixed increase leases / inducements Bad debts and movement in doubtful debts Inventory adjustments Amortisation of equity-based remuneration 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 27,326 (790) 95 510 273 148 27,562 (806) (6,907) (1,935) 2,925 (3,914) (10,637) 79,508 6,784 13 128 (435) 483 56 7,029 (213) (6,088) (150) (350) 2,099 (4,702) 65,720 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. In relation to NZ IFRS 16 the modified transition method has been applied as explained in Note 6.5. Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements 39 Consolidated Statement of Changes in Equity For the 52 week period ended 26 January 2020 Notes Share Capital $000 Cashflow Hedge Reserve $000 Equity-Based Remuneration Reserve $000 Other Reserves Retained Earnings Total Equity $000 $000 $000 Balance at 28 January 2018 56,467 (915) 1,045 26,744 165,087 248,428 Net profit attributable to shareholders for the period Other comprehensive income: Change in value of investment in equity securities Net fair value gain taken through cashflow hedge reserve Total comprehensive income for the period Transactions with owners: Dividends paid Share options charged to income statement 4.1 5.3.3 6.2.1 - - - - - - Share options exercised 5.3.2,6.2 2,462 Transfer for share options lapsed and forfeited 6.2.3 - - - 1,155 1,155 - - - - - - - - - 483 (284) (147) - 63,393 63,393 994 - - - 994 1,155 994 63,393 65,542 - - - - (43,090) (43,090) - - 483 2,178 147 - Balance at 27 January 2019 58,929 240 1,097 27,738 185,537 273,541 Impact of adopting NZ IFRS 16 - - - - (18,205) (18,205) Adjusted balance as at 28 January 2019 58,929 240 1,097 27,738 167,332 255,336 Net profit attributable to shareholders for the period Other comprehensive income: Change in value of investment in equity securities Net fair value loss taken through cashflow hedge reserve Total comprehensive income for the period Transactions with owners: Dividends paid Share options charged to income statement Performance rights charged to income statement 4.1 5.3.3 6.2.1 6.2.2 - - - - - - - Share options exercised 5.3.2,6.2 1,823 Transfer for share options lapsed and forfeited Deferred tax on equity-based remuneration 6.2.3 2.3.2,6.2.3 - - - - (759) (759) - - - - - - - - - - - 168 105 (203) (373) 47 - 62,583 62,583 38,513 - - - 38,513 (759) 38,513 62,583 100,337 - - - - - - (45,494) (45,494) - - - 373 - 168 105 1,620 - 47 Balance at 26 January 2020 60,752 (519) 841 66,251 184,794 312,119 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. In relation to NZ IFRS 16 the modified transition method has been applied as explained in Note 6.5. 40 Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements Basis of Preparation For the 52 week period ended 26 January 2020 1. Basis of Preparation This section presents a summary of information considered relevant and material to assist the reader in understanding 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 and is listed on the New Zealand Stock Exchange (NZX). 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 1 Taylors Road, Morningside, Auckland. The Company is registered in Australia as a foreign company under the name Briscoe Group Australasia Limited and is listed on the Australian Securities Exchange as a foreign exempt entity. (NZX / ASX code: BGP). 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 Main Board Listing Rules. These audited consolidated ﬁnancial statements have been approved for issue by the Board of Directors on 16 March 2020. 1.2 General Accounting Policies These consolidated ﬁnancial statements have been prepared in accordance with Generally Accepted Accounting Practice (GAAP). They comply with New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) and other applicable Financial Reporting Standards, as appropriate for for-proﬁt entities. The consolidated ﬁnancial statements also comply with International Financial Reporting Standards (IFRS). The consolidated 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 consolidated 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 for-proﬁt entity for the purposes of complying with GAAP. Reporting period These consolidated ﬁnancial statements are in respect of the 52 week period 28 January 2019 to 26 January 2020 and provide a balance sheet as at 26 January 2020. The comparative period is in respect of the 52 week period 29 January 2018 to 27 January 2019. The Group operates on a weekly trading and reporting cycle resulting in 52 weeks for most years with a 53 week period 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 Company. 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. Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements 41 Basis of Preparation For the 52 week period ended 26 January 2020 Subsidiaries Activity 2020 Interest 2019 Interest Briscoes (New Zealand) Limited Homeware retail The Sports Authority Limited (trading as Rebel Sport) 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 judgements and 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 period 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 judgement and estimation Inventories Leases Note 3.1.3 3.5 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. 42 Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements Performance For the 52 week period ended 26 January 2020 2. Performance 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 (2019: 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 26 January 2020 Homeware $000 Sporting goods $000 Eliminations/ Unallocated Total Group $000 $000 410,908 242,109 162,297 49,390 185 (8,944) (8,759) (11,641) 28,990 95,205 36,447 515 (4,560) (4,045) (9,075) 23,327 - - 653,017 257,502 11,386 97,223 24 (131) 724 (13,635) (107) (12,911) (1,013) (21,729) 10,266 62,583 337,014 257,717 220,417 145,045 139,1171. 696,548 (18,333) 384,429 15,332 17,309 3,846 10,017 13,602 32,780 - 27,326 INCOME STATEMENT Total sales revenue Gross proﬁt Earnings before interest and tax Finance income Finance costs Net ﬁnance income / (costs) 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 $000 156,887 (23,159) 5,389 139,117 Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements 43 Performance For the 52 week period ended 26 January 2020 Homeware Sporting goods Eliminations/ Unallocated Total Group $000 $000 $000 $000 403,159 162,170 46,689 177 - 177 (13,256) 33,610 155,031 56,287 19,443 4,720 228,760 91,185 31,062 537 - 537 (8,849) 22,750 107,444 39,399 2,148 2,064 - - 631,919 253,355 8,244 85,995 40 (142) (102) 754 (142) 612 (1,109) (23,214) 7,033 63,393 102,8771. 365,352 (3,875) 91,811 5,568 27,159 - 6,784 For the period ended 27 January 2019 INCOME STATEMENT Total sales revenue Gross proﬁt Earnings before interest and tax Finance income Finance costs Net ﬁnance income / (costs) 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 $000 101,989 (812) 1,700 102,877 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), and discounts and after eliminating sales within the Group. Revenue is recognised as follows: Sales of goods - retail For all sales, control is considered to pass to the customer at the point when the customer can use or otherwise beneﬁt from the goods and services. For in-store sales, control passes to the customer at point of sale. For online sales, the order along with delivery to the customer are considered to comprise a single performance obligation, therefore control is considered to pass to the customer on delivery of the goods. 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. 44 Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements Performance For the 52 week period ended 26 January 2020 Proﬁt before income tax includes the following speciﬁc income and expenses: Income Rental income Dividends received Premium from KMD rights issue Insurance recovery Expenses Depreciation of property, plant and equipment Amortisation of software costs Depreciation of right-of-use assets Interest on leases Operating lease rental expense Wages, salaries and other short-term beneﬁts Equity-based remuneration (refer also Note 6.2) Amounts paid to auditors: Statutory Audit Half year review Other services 2.3 Taxation Period ended 26 January 2020 Period ended 27 January 2019 $000 $000 12 6,832 2,720 97 6,594 824 19,908 13,504 1,215 73,712 273 108 26 - 589 6,405 - - 5,981 803 - - 29,903 72,905 483 128 26 134 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. Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements 45 Performance For the 52 week period ended 26 January 2020 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. 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 periods Deferred tax expense: Decrease in future tax beneﬁt current period Adjustments for prior periods 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% (2019: 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 26 January 2020 Period ended 27 January 2019 $000 $000 21,994 156 22,150 (294) (127) (421) 21,729 84,312 23,607 (1,906) - 28 21,729 23,376 723 24,099 (142) (743) (885) 23,214 86,607 24,250 (1,016) - (20) 23,214 The Group has no tax losses (2019: Nil) and no unrecognised temporary diﬀerences (2019: Nil). 46 Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements Performance For the 52 week period ended 26 January 2020 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 period: Depreciation $000 Provisions $000 Derivative ﬁnancial instruments $000 Net lease liability $000 Total $000 2,983 885 (450) At 28 January 2018 Credited to the income statement Net charged to other comprehensive income At 27 January 2019 Impact of adopting NZ IFRS 16 Credited / (charged) to the income statement Credited to equity Net charged to other comprehensive income (194) 32 - (162) - 64 - - 2,821 853 356 - - (450)1. - - - 3,674 - (663) 47 - (94) - 3,418 - - - 2961. 7,494 7,494 1,020 - - 421 47 296 At 26 January 2020 (98) 3,058 202 8,514 11,676 1. Net credited to other comprehensive income comprises deferred tax on fair value gain taken to income statement of $1,141,574 (2019: deferred tax on fair value gain of $1,093,249) and deferred tax on fair value gain taken to cash ﬂow hedge reserve of $846,031 (2019: deferred tax on fair value gain of $1,542,469) (b) Taxation payable The following is the analysis of the movements in the taxation payable balance during the current and prior period: Movements: Balance at beginning of period Current tax Tax paid Foreign investor tax credit (FITC) Balance at end of period Period ended 26 January 2020 $000 Period ended 27 January 2019 $000 (6,830) (22,150) 23,761 324 (4,895) (6,980) (24,099) 23,932 317 (6,830) Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements 47 Performance For the 52 week period ended 26 January 2020 2.3.3 Imputation credits Imputation credits available for use in subsequent accounting periods: Period ended 26 January 2020 $000 Period ended 27 January 2019 $000 92,284 85,445 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. 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. These are 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. Period ended 26 January 2020 Period ended 27 January 2019 Net proﬁt attributable to shareholders $000 62,583 63,393 Basic Weighted average number of ordinary shares on issue (thousands) Basic earnings per share Diluted 221,998 28.2 cents 221,130 28.7 cents Weighted average number of ordinary shares on issue adjusted for share options issued but not exercised (thousands) Diluted earnings per share 223,872 224,207 28.0 cents 28.3 cents 48 Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements Operating Assets and Liabilities For the 52 week period ended 26 January 2020 3. Operating Assets and Liabilities 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 67,414 80,777 Period ended 26 January 2020 $000 Period ended 27 January 2019 $000 As at 26 January 2020 the Group held foreign currency equivalent to NZ$2.372 million (2019: NZ$1.820 million) which is included in the table above. The foreign currency in which the Group deals primarily is the US Dollar. 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 (fair value) and subsequently at the amounts considered recoverable (amortised cost). Trade receivable balances are reviewed on an on-going basis. Period ended 26 January 2020 $000 Period ended 27 January 2019 $000 611 2,198 724 3,533 513 1,612 697 2,822 Trade receivables Prepayments Other receivables Total trade and other receivables No interest is charged on trade receivables. Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements 49 Operating Assets and Liabilities For the 52 week period ended 26 January 2020 3.1.3 Inventories 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. Period ended 26 January 2020 $000 Period ended 27 January 2019 $000 Finished goods Inventory provisions and adjustments Net inventories 90,204 (2,790) 87,414 84,816 (3,799) 81,017 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 (fair value). 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. 50 Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements Operating Assets and Liabilities For the 52 week period ended 26 January 2020 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. Period ended 26 January 2020 $000 Period ended 27 January 2019 $000 60,434 10,463 11,107 108 82,112 81,260 852 82,112 57,509 12,344 14,562 118 84,533 83,754 779 84,533 Trade payables Employee entitlements Other payables and accruals Provisions Total trade and other payables Shown in balance sheet as: Current liabilities Non-current liabilities Total trade and other payables 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 5,408 - Period ended 26 January 2020 $000 Period ended 27 January 2019 $000 The held-for-sale assets at balance date related to Group owned property in Nelson and Napier. A sale and purchase agreement for the Nelson property was signed on 11 July 2018 and management have approved the sale of the Napier property for which settlement within twelve months is highly probable. Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements 51 Operating Assets and Liabilities For the 52 week period ended 26 January 2020 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 33 years - Plant and equipment 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. 52 Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements Operating Assets and Liabilities For the 52 week period ended 26 January 2020 At 28 January 2018 Cost Accumulated depreciation Accumulated impairment Net book value Period ended 27 January 2019 Opening net book value Additions Disposals Depreciation charge Closing net book value At 27 January 2019 Cost Accumulated depreciation Net book value Period ended 26 January 2020 Opening net book value Additions Disposals Reclassified as held-for-sale asset Depreciation charge Closing net book value At 26 January 2020 Cost Accumulated depreciation Net book value Capital commitments Land and buildings $000 Plant and equipment $000 66,047 (4,778) - 61,269 61,269 16,113 (4,894) (1,075) 71,413 77,115 (5,702) 71,413 71,413 4,671 - (5,408) (1,426) 69,250 74,853 (5,603) 69,250 78,582 (56,523) (2) 22,057 22,057 3,519 (67) (4,906) 20,603 79,556 (58,953) 20,603 20,603 12,739 (159) - (5,168) 28,015 85,857 (57,842) 28,015 Total $000 144,629 (61,301) (2) 83,326 83,326 19,632 (4,961) (5,981) 92,016 156,671 (64,655) 92,016 92,016 17,410 (159) (5,408) (6,594) 97,265 160,710 (63,445) 97,265 Period ended 26 January 2020 $000 Period ended 27 January 2019 $000 Capital commitments in relation to property, plant and equipment at balance date not provided for in the financial statements 22,7401. 7,830 1. $22.1 million relates to building contracts for the development and construction of new retail premises at 36 Taylors Road, Auckland and also at Silverdale, North Auckland. Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements 53 Operating Assets and Liabilities For the 52 week period ended 26 January 2020 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. 3.5 Leases Right-of-use assets and lease liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the remaining lease payments. Lease payments to be made under reasonably certain extension options are also included in the measurement of the liabilities. Right-of-use assets are initially recognised on commencement of lease at cost, comprising the initial amount of the lease liabilities less any lease incentives received. Right-of-use assets are subsequently depreciated using the straight-line method from the commencement date to the end of the lease term. In considering the lease term, the Group applies judgement in determining whether it is reasonably certain that an extension or termination option will be exercised. Both right-of-use assets and lease liabilities are discounted applying interest rate implicit in the lease, or if this cannot be determined, the incremental borrowing rate at the commencement of the lease. To determine the incremental borrowing rate the Group have applied a blended secured and unsecured borrowing rate. For the secured rate the Group have utilised third party ﬁnancing options and adjusted for an appropriate credit spread. The unsecured rate has been based on a typical Loan-to-Value ratio for property lending. Extension options are included in a number of property leases across the Group. These are used to maximise operational ﬂexibility in terms of managing the assets used in the Group’s operation. Extension options held are exercisable only by the Group and not by the respective lessor. The following tables show the movements and analysis in relation to the right-of-use assets and lease liabilities, created on the adoption of NZ IFRS 16. 3.5.1 Right-of-use assets: Opening net book value 28 January 2019 Movements on transition Additions Depreciation for the period Carrying amount 26 January 2020 Cost Accumulated depreciation Carrying amount 26 January 2020 Land and Buildings $000 232,699 53,210 (19,908) 266,001 285,909 (19,908) 266,001 54 Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements Operating Assets and Liabilities For the 52 week period ended 26 January 2020 3.5.2 Lease liabilities: Operating lease commitment at 27 January 2019 as disclosed in the Group’s financial statements Above discounted using the incremental borrowing rate at 28 January 2019 Recognition exemption for: Short-term leases Lease contracts committed to but not yet available for use Adjustments as a result of different treatment of extension and termination options Opening lease liabilities recognised 28 January 2019 Additions Interest for the period Lease payments made Lease liabilities 26 January 2020 3.5.3 Lease liabilities maturity analysis: Minimum lease payments $000 32,267 124,075 274,733 431,075 Interest $000 (14,523) (48,549) (71,595) (134,667) Within one year One to five years Beyond five years Total Current Non-current Total 3.5.4 Lease related expenses included in the income statement: Depreciation Short-term leases Interest on leases Total As at 26 January 2020 $000 141,395 117,133 (1,339) (9,063) 152,731 259,462 53,210 13,504 (29,768) 296,408 Present Value $000 17,744 75,526 203,138 296,408 17,744 278,664 296,408 Period ended 26 January 2020 $000 19,908 1,215 13,504 34,627 Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements 55 Operating Assets and Liabilities For the 52 week period ended 26 January 2020 Period ended 26 January 2020 $000 29,768 3.5.5 Lease payments included in the cashﬂow statement: Total cash outﬂow in relation to leases 3.5.6 Sensitivity analysis In the process of adopting NZ IFRS 16 Leases a number of judgements and estimates have been made. The Group has assumed that virtually all extension options on leases will be exercised which is consistent with the business model and past practice as the Group has consistently exercised rights of renewal on proﬁt-making stores. This judgement has been applied unless a store closure or a decision to relocate a store is known at the time of adoption. The most signiﬁcant components of the Group’s incremental borrowing rates are the base interest rates seen in the New Zealand market and the adjustment for the Group’s credit risk. These assumptions were set by considering market observed corporate borrowing costs aligned to the credit standing of the Group as at the date of adoption. The eﬀect on the opening consolidated balance sheet as at 28 January 2019 from an increase or decrease in the incremental borrowing rate is as follows: Incremental borrowing rate movement Weighted Average Right-of-use assets Lease liabilities Net increase / (decrease) diﬀerence right-of-use assets and lease liabilities 5.17% Opening carrying amount $000 232,699 -1% 4.17% -0.5% 4.67% +0.5% 5.67% +1% 6.17% $000 19,005 $000 9,207 $000 $000 (8,660) (16,813) (259,462) (16,327) (7,953) 7,558 14,747 (26,763) 2,678 1,254 (1,102) (2,066) The eﬀect on the consolidated income statement for the period ended 26 January 2020 from an increase or decrease in the incremental borrowing rate is as follows: Incremental borrowing rate movement Net proﬁt attributable to shareholders -1% $000 210 -0.5% $000 99 +0.5% $000 +1% $000 (88) (167) 56 Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements Investments For the 52 week period ended 26 January 2020 4. Investments This section explains how the Group records investments made in listed securities. 4.1 Investment in Equity Securities During 2015 and 2018 Briscoe Group Limited acquired a total of 42,673,302 shares in Kathmandu Holdings Limited (Kathmandu) for a cost of $74,250,932. In October 2019, as part of the capital raising programmes initiated by Kathmandu in relation to their acquisition of the Rip Curl business, Briscoe Group Limited acquired a further 5,334,163 shares for a cost of $13,602,116. This increased holding represented a 16.27% ownership in Kathmandu Holdings Limited as at 26 January 2020. These shares are equity investments, quoted in the active market, which the Group has elected to designate as a ﬁnancial asset at fair value through other comprehensive income (FVOCI). An adjustment was made at period end to reﬂect the fair value of these shares as at 26 January 20201.. At 28 January 2018 Additions Change in fair value credited to other reserves At 27 January 2019 Additions Change in fair value credited to other reserves At 26 January 2020 $000 95,427 5,568 994 101,989 13,602 38,513 154,104 1. Fair value determined to be $3.21 per share as per NZX closing price of Kathmandu Holdings Limited as at 24 January 2020 (2019: $2.39) (Level 1 in the fair value hierarchy). Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements 57 Financing and Capital Structure For the 52 week period ended 26 January 2020 5. Financing and Capital Structure 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 an unsecured facility with the Bank of New Zealand for $30 million. Any drawdowns are repayable in full on expiry date of the facility being 20 September 2020. Interest is payable based on the BKBM rate plus applicable margin. 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 $15 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 period. 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 26 January 2020. (2019: Nil) Net ﬁnance income / (costs) Interest income Interest expense - leases Interest expense – other Other ﬁnance costs Net ﬁnance income / (costs) Period ended 26 January 2020 $000 Period ended 27 January 2019 $000 724 (13,504) (11) (120) (12,911) 754 - (10) (132) 612 5.2 Financial Risk Management The Group’s activities expose it to various ﬁnancial risks including credit risk, liquidity risk, interest rate risk and market risk (such as currency risk and equity price 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 economic 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. 58 Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements Financing and Capital Structure For the 52 week period ended 26 January 2020 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 within cost of goods sold. 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 within cost of goods sold. 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 within administration expenses. 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 draw- downs 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. 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 period, being strongest immediately after the end of the 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. Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements 59 Financing and Capital Structure For the 52 week period ended 26 January 2020 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. An analysis detailing remaining contractual maturities for lease liabilities is shown in Note 3.5.3. As at 26 January 2020 Trade and other payables (69,233) - - - (69,233) (69,233) 3 months or less $000 3 – 6 months $000 6 – 9 months $000 9 – 12 months $000 Total $000 Carrying Value $000 Forward foreign exchange contracts Cash ﬂow hedges: - outﬂow - inﬂow - Net As at 27 January 2019 Trade and other payables Forward foreign exchange contracts Cash ﬂow hedges: - outﬂow - inﬂow - Net (17,779) (16,768) (27,323) (2,998) (64,868) 17,746 16,600 26,763 3,014 64,123 (33) (168) (560) 16 (745) (745) 3 months or less $000 (69,583) 3 – 6 months $000 6 – 9 months $000 9 - 12 months $000 Total $000 Carrying Value $000 - - - (69,583) (69,583) (16,808) (14,538) (22,450) 17,338 14,367 22,434 530 (171) (16) (365) 367 2 (54,161) 54,506 345 345 The cash ﬂow hedges inﬂow amounts use the forward rate at balance date. 5.2.5 Market risk Equity price risk The Group is exposed to equity price risk arising from the investment held in Kathmandu Holdings Limited, classiﬁed in the balance sheet as investment in equity securities. (Refer note 4.1). 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. 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. 60 Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements Financing and Capital Structure For the 52 week period ended 26 January 2020 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 26 January 2020 $000 Period ended 27 January 2019 $000 269 269 1,014 1,014 793 793 448 448 The contracts are subject to an enforceable master netting arrangement, which allows for net settlement of the relevant assets and liabilities. For ﬁnancial reporting purposes these are not oﬀset. 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 period 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. These derivatives have been determined to be within level 2 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 period. 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. At balance date these contracts are represented by assets of $269,484 (2019: $793,395) and liabilities of $1,014,488 (2019: $448,000) and together are included in equity as part of the cash ﬂow hedge reserve, net of deferred tax, as a net loss of $536,403 (2019: net gain $248,677). The cash ﬂow hedge reserve also consists of gains and losses, net of deferred tax, from foreign currencies used as hedges, as a net gain of $17,341 (2019: net loss of $8,543). The total of these net gains and losses amount to a net loss of $519,062 (2019: net gain $240,134). 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 (2019: 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% (2019: -10% / +5%) in the NZD against the USD, from the period-end rate of 0.6617 (2019: 0.6761), • A shift of -0.25% / +0.25% (2019: -0.25% / +0.25%) in market interest rates from the period-end weighted average deposit rate of 1.51% (2019: 2.27%). • A shift of -10% / +20% (2019: -10% / +20%) in the NZX share price of Kathmandu Holdings Ltd from the period-end closing share price of $3.21 (2019: $2.39) If these movements were to occur, the positive / (negative) impact on consolidated proﬁt after tax and consolidated equity for each category of ﬁnancial instrument held at balance date is presented below. Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements 61 Financing and Capital Structure For the 52 week period ended 26 January 2020 As at 26 January 2020 Interest rate Foreign exchange rate Equity price Carrying -0.25% +0.25% -10% +5% -10% +20% amount Proﬁt Equity Proﬁt Equity Equity Equity Equity Equity $000 $000 $000 $000 $000 $000 $000 $000 $000 Financial Assets: Cash and cash equivalents1. 67,414 (117) (117) 117 117 190 (81) - - - - - - - - - - - - 1,899 (813) - - - - - - (15,410) 30,821 3,221 (1,383) - - Derivatives – designated as cashﬂow hedges (Forward foreign exchange contracts)2. 269 Investment in equity securities3. 154,104 Financial Liabilities: Derivatives – designated as cashﬂow hedges (Forward foreign exchange contracts)2. Total increase / (decrease) 1,014 (117) (117) 117 117 5,310 (2,277) (15,410) 30,821 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. As at 27 January 2019 Interest rate Foreign exchange rate Equity price Carrying -0.25% +0.25% -10% +5% -10% +20% amount Proﬁt Equity Proﬁt Equity Equity Equity Equity Equity $000 $000 $000 $000 $000 $000 $000 $000 $000 Financial Assets: Cash and cash equivalents1. Derivatives – designated as cashﬂow hedges (Forward foreign exchange contracts)2. Investment in equity securities3. 101,989 Financial Liabilities: Derivatives – designated as cashﬂow hedges (Forward foreign exchange contracts)2. Total increase / (decrease) 448 80,777 (142) (142) 142 142 146 (62) 793 2,565 (1,050) - - - - - - - - - - - - - - - - - - (10,199) 20,398 1,844 (761) - - (142) (142) 142 142 4,555 (1,873) (10,199) 20,398 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 used to hedge against the NZD:USD foreign exchange risk arising from foreign denominated future purchases. There is no proﬁt or loss sensitivity as the hedges are 100% eﬀective. 3. Investment in equity securities represents shares held in Kathmandu Holdings Ltd. There is no proﬁt or loss sensitivity as impacts from changes in KMD’s share price are accounted for through equity. 62 Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements Financing and Capital Structure For the 52 week period ended 26 January 2020 5.3 Equity 5.3.1 Capital risk management 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. Contributed equity – ordinary shares No. of authorised shares Share capital Period ended 26 January 2020 Period ended 27 January 2019 Period ended 26 January 2020 Period ended 27 January 2019 Shares Shares $000 $000 Opening ordinary shares 221,599,500 220,794,500 58,929 56,467 Issue of ordinary shares arising from the exercise of options 589,000 805,000 1,8231. 2,4621. Balance at end of period 222,188,500 221,599,500 60,752 58,929 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 589,000 shares issued during the period ended 26 January 2020 were $202,970 and $1,619,750 respectively (2019: $284,059 and $2,178,550 respectively for the 805,000 shares issued). Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements 63 Financing and Capital Structure For the 52 week period ended 26 January 2020 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. Period ended 26 January 2020 Cents per share Period ended 27 January 2019 Cents per share Period ended 26 January 2020 $000 Period ended 27 January 2019 $000 Interim dividend for the period ended 26 January 2020 Final dividend for the period ended 27 January 2019 Interim dividend for the period ended 27 January 2019 Final dividend for the period ended 28 January 2018 8.50 12.00 - - Balance at end of period 20.50 - - 8.00 11.50 19.50 18,881 26,613 - - - - 17,689 25,401 45,494 43,090 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 $323,716 (2019: $316,690) were provided to shareholders not tax resident in New Zealand, for which the Group received a Foreign Investor Tax Credit entitlement. On 16 March 2020 the Directors resolved to provide for a ﬁnal dividend to be paid in respect of the period ended 26 January 2020. The dividend will be paid at a rate of 12.50 cents per share for all shares on issue as at 23 March 2020, 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 or loss when the associated hedged transaction aﬀects proﬁt or loss. (Refer also to the consolidated statement of changes in equity). Equity-based remuneration reserve The equity-based remuneration reserve is used to recognise the fair value of share options and performance rights granted but not exercised, lapsed or forfeited. Amounts are transferred to share capital when vested share options or performance rights are exercised. (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. (Refer also to the consolidated statement of changes in equity and note 4.1). 64 Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements Other Notes For the 52 week period ended 26 January 2020 6. Other Notes 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 is a trustee, as owner of the Rebel Sport premises at Panmure, Auckland, received rental payments of $645,000 (2019: $645,000) 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 $564,598 (2019: $535,164) 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 $35,035,134 (2019: $33,283,012). • P Duke, spouse of the Managing Director, received payments of $65,000 (2019: $65,000) in relation to her employment as an overseas buying specialist with Briscoe Group Limited, and rental payments of $825,000 (2019: $825,000) as owner of the Briscoes Homeware premises at Panmure, Auckland under an agreement to lease premises to Briscoes (NZ) Limited. 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 Equity-based remuneration Directors’ fees Total beneﬁts Period ended 26 January 2020 Period ended 27 January 2019 $000 2,274 79 295 2,648 $000 2,748 117 357 3,222 Key management did not receive any termination beneﬁts during the period (2019: Nil). Key management did not receive and are not entitled to receive any post-employment or long-term beneﬁts (2019: Nil). Executives included in key management received dividends of $239,766 (2019: $250,812) in relation to Briscoe Group shares held. Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements 65 Other Notes For the 52 week period ended 26 January 2020 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 Non-Executive Directors RPO’L Meo MM Devine1. AD Batterton RAB Coupe Period ended 26 January 2020 Period ended 27 January 2019 Directors’ fees Dividends Directors’ fees Dividends $000 $000 $000 $000 - 132 12 74 77 295 - - 1 - 2 3 - 128 75 78 76 357 - - 2 - 2 4 The following directors received dividends in relation to their non-beneﬁcially held shares as detailed below: Executive Director RA Duke Non-Executive Directors RPO’L Meo MM Devine1. AD Batterton RAB Coupe 1. Mary Devine resigned as a Director eﬀective from 31 March 2019 Period ended 26 January 2020 Period ended 27 January 2019 $000 $000 35,035 33,283 21 - 4 - 19 - 3 - 66 Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements Other Notes For the 52 week period ended 26 January 2020 6.2 Employee Share-Based Remuneration 6.2.1 Equity settled share options 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 equity-based payment reserve. The fair value is measured at grant date and amortised 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 equity-based payment reserve relating to those options, together with the exercise price paid by an employee, is transferred to share capital. When any share options lapse upon employee termination, the amount in the share-based payments reserve relating to those rights is transferred to retained earnings. 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. 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. The Company does not intend to issue any further options under this plan and the ﬁnal tranche was issued on 23 August 2016. The estimated fair value for each tranche of options issued is expensed over the vesting period of three years, from the grant date. The Company has expensed in the income statement $167,910 (2019: $482,575) in relation to share options. Movements in the number of share options outstanding and their related weighted average exercise prices are as follows: Opening balance Issued Forfeited Exercised Lapsed Closing balance Period ended 26 January 2020 Period ended 27 January 2019 Weighted average exercise price $ per share Options $000 3.09 - 3.25 2.75 2.75 3.31 2,472 - (435) (589) (313) 1,135 Weighted average exercise price Options $ per share 2.98 - 3.10 2.71 2.64 3.09 $000 3,547 - (40) (805) (230) 2,472 The weighted average share price for options exercised during the period was $3.46 (2019: $3.41). Of the 1,135,000 outstanding options at balance date (2019: 2,472,000), 1,135,000 were exercisable (2019: 952,000). Share options outstanding at the end of the period have the following expiry dates, exercise dates and exercise prices: Expiry month Exercise month Exercise price November 2019 August 2020 November 2018 August 2019 $2.75 $3.31 Total share options outstanding Period ended 26 January 2020 000 Period ended 27 January 2019 000 - 1,135 1,135 952 1,520 2,472 The weighted average remaining contractual life of options outstanding at the end of the period was 0.50 years (2019: 1.21) Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements 67 Other Notes For the 52 week period ended 26 January 2020 6.2.2 Equity settled performance rights The Senior Executive Incentive Plan grants Group employees performance rights subject to performance hurdles being met. The fair value of rights granted is recognised as an employee expense in the income statement with a corresponding increase in the employee share-based payment reserve. The fair value is measured at grant date and amortised over the vesting periods. When performance rights vest, the amount in the share-based payments reserve relating to those rights are transferred to share capital. There is no exercise price for these performance rights and there is no right to dividends during the vesting periods. On 26 March 2019 the Board approved the Briscoe Group Senior Executive Incentive Plan to grant performance rights to key senior management personnel as a long-term incentive programme. Two tranches of performance rights have been issued under this programme during the period. Performance rights granted are summarised below: Tranche Grant Date 1 2 15 Apr 2019 26 Jun 2019 Balance at start of period (number) Granted during the period (number) Vested during the period (number) Lapsed during the period (number) Balance at the end of period (number) - - - 105,780 104,167 209,947 - - - - - - 105,780 104,167 209,947 In each tranche the performance rights are subject to a combination of an absolute Total Shareholder Return (TSR) growth hurdle and/or an EPS growth hurdle. EPS growth hurdle is considered a non-market condition. The relative hurdle weighting for each tranche is shown in the table below: Tranche 1 2 Grant Date 15 Apr 2019 26 Jun 2019 TSR Weighting EPS Weighting 50% 50% 50% 50% The proportion of performance rights subject to the absolute TSR growth hurdle which may vest is dependent on Briscoe Group Limited’s TSR compound annual growth rate (CAGR) across a 3-year measurement period. For each tranche that vests the rights are awarded on a straight-line basis dependent on the TSR CAGR achieved. The percentage of TSR related performance rights vest according to the following performance criteria: % Vesting 0% 50% Tranche 1 < 9.0% CAGR = 9.0% CAGR Tranche 2 < 10.1% CAGR = 10.1% CAGR 51% - 99% (Straight-line prorata) > 9.0%, < 13.0% CAGR > 10.1%, < 13.0% CAGR 100% => 13.0% CAGR => 13.0% CAGR The TSR performance is calculated across the following periods: Tranche Performance Period 1 2 Announcement date of FY 2017/18 Result to announcement date of FY 2020/21 Result Announcement date of FY 2018/19 Result to announcement date of FY 2021/22 Result 68 Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements Other Notes For the 52 week period ended 26 January 2020 The fair value of the TSR performance rights have been valued under a variant of the dividend adjusted Binomial Options Pricing Model (BOPM). The fair value of TSR performance rights, along with the assumptions used to simulate the future share prices are shown below: Fair value of TSR performance rights Current price at grant date Risk free interest rate Expected life (years) Expected share volatility1. Tranche 1 $18,617 $3.34 1.71% 1.9 16% Tranche 2 $22,813 $3.30 1.71% 2.8 16% 1. Volatility represents the volatility of the Briscoe Group (BGP) NZD share price over the two-year period to 28 February 2019 The estimated fair value for each tranche of performance rights issued is amortised over the vesting period from the grant date. The proportion of performance rights subject to the EPS growth hurdle which may vest is dependent on Briscoe Group Limited’s EPS compound annual growth rate (CAGR) across a 3-year measurement period. For each tranche that vests the rights are awarded on a straight-line basis dependent on the EPS CAGR achieved. The percentage of EPS related performance rights vest according to the following performance criteria: % Vesting 0% 50% Tranche 1 < 1.9% CAGR = 1.9% CAGR Tranche 2 < 0.8% CAGR = 0.8% CAGR 51% - 99% (Straight-line prorata) > 1.9%, < 3.0% CAGR > 0.8%, < 2.6% CAGR 100% => 3.0% CAGR => 2.6% CAGR The EPS performance is calculated across the following periods: Tranche Performance Period 1 2 FY 2020/21 EPS relative to FY 2017/18 EPS FY 2021/22 EPS relative to FY 2018/19 EPS The fair value of the EPS performance rights have been assessed as the Briscoe Group Limited’s share price as at grant date less the present value of the dividends forecast to be paid prior to each vesting date. The fair value of each EPS performance right has been calculated to be $3.05 and $2.79 for tranche 1 and tranche 2, respectively. The estimated fair value for each tranche of performance rights issued is amortised over the vesting period from grant date. Vesting of performance rights also require the employee to remain in employment with the Company during the performance period. The Company has expensed in the income statement $104,820 (2019: Nil) in relation to performance rights. 6.2.3 Equity-based remuneration reserve Balance at beginning of period Current period amortisation Options forfeited and lapsed transferred to retained earnings Options exercised transferred to share capital Deferred tax on performance rights Balance at end of period Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements 69 Other Notes For the 52 week period ended 26 January 2020 Period ended 26 January 2020 Period ended 27 January 2019 $000 1,097 273 (373) (203) 47 841 $000 1,045 483 (147) (284) - 1,097 Since balance date and up to the date of these ﬁnancial statements a further 30,000 ordinary shares have been issued under the Executive Share Option Plan as a result of executives exercising share options. 6.3 Contingent Liabilities There were no contingent liabilities as at 26 January 2020 (2019: Nil). 6.4 Events After Balance Date On 16 March 2020 the Directors resolved to provide for a ﬁnal dividend to be paid in respect of the period ended 26 January 2020. The dividend will be paid at a rate of 12.50 cents per share for all shares on issue as at 23 March 2020, with full imputation credits attached. (Note 5.3.3) Since balance date and up to the date of these ﬁnancial statements a further 30,000 ordinary shares have been issued under the Executive Share Option Plan as a result of executives exercising share options issued to them in 2016 (refer Note 6.2). Since balance date and up to the date of these ﬁnancial statements the Kathmandu Holdings Limited (KMD) share price has decreased from $3.21 per share to $1.88 per share (per NZX closing price). At the date of these ﬁnancial statements the Group’s investment in KMD would be $90.3 million The Directors note the increased signiﬁcance of the COVID-19 (Coronavirus) issue since balance date. While there is no speciﬁc provision in these statements for the period ended 26 January 2020 for ﬁnancial impacts in relation to COVID-19, the Group continues to monitor the situation closely. These ﬁnancial statements are those that were issued and approved on 16 March 2020. Subsequent to their issue, on 23 March 2020 Briscoe Group announced it had cancelled payment of the ﬁnal dividend. 70 Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements Other Notes For the 52 week period ended 26 January 2020 6.5 New Accounting Standards There was one new standard applied during the period which had a material impact. • 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. The Group adopted NZ IFRS 16 Leases on 28 January 2019 and the impacts of this adoption were disclosed in the interim ﬁnancial statements of the Group for the period ended 28 July 2019. Following the adoption there has been signiﬁcant change in market practice in deriving the incremental borrowing rates. In preparing the ﬁnancial statements for the period ended 26 January 2020, incremental borrowing rates have been adopted which better align to current market practice. The comparatives presented in the interim ﬁnancial statements of the Group for the period ending 26 July 2020 will be restated to reﬂect the transition note included in these accounts. Transition For reporting period commencing 28 January 2019 the Group has elected to apply the modiﬁed retrospective transition method. Under this method the Group has not restated comparatives therefore reclassiﬁcations and adjustments are recognised in the opening balance sheet. Lease liabilities are measured at the present value of remaining lease payments. The weighted average incremental borrowing rate applied to the lease liabilities on 28 January 2019 was 5.17%. Leases entered into and identiﬁed by the Group are all property leases. The associated right-of-use assets for property leases were measured on a retrospective basis as if the new rules had always been applied. There were no other adjustments required to the right-of-use assets at date of initial application. On transition, the Group applied the following practical expedients: • The use of hindsight, in relation to stores’ previous performance, to determine the lease term where the lease contains options to exercise rights of renewal out to the ﬁnal term of the lease; and • Non-capitalisation of leases that expire within twelve months from adoption date. Costs relating to these leases have been recognised in the income statement within store expenses and administration expenses. The Group has not recognised any right-of-use assets or liabilities for leases that it was committed to but were not yet available for use by the Group. In addition to the opening balance sheet lease liabilities and right-of-use assets impact on transition disclosed below, the Group has recognised $7,494,192 of deferred tax assets and a cumulative net impact to retained earnings of $18,204,939 as a result of the accounting standard adoption. Included in the net impact of retained earnings is a $1,065,842 reduction of ﬁxed lease increases and incentives that have been derecognised. For comparative period analysis purposes, the adoption of the accounting standard has aﬀected the following items of the income statement and statement of cash ﬂows: • In the income statement ‘ﬁnance costs’ includes interest expense associated with lease liabilities and ‘store expenses’ and ‘administration expenses’ includes depreciation associated with right-of-use assets. • In the statement of cash ﬂows lease payments are now split between principal repayments classiﬁed within ‘ﬁnancing activities’ and interest repayments classiﬁed within ‘operating activities’. Previously lease payments were included within ‘payments to suppliers’ within operating activities. Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements 71 Other Notes For the 52 week period ended 26 January 2020 The tables below provide further detail in relation to the impacts of NZ IFRS 16 on the consolidated income statement and consolidated balance sheet: TABLE 1: CONSOLIDATED INCOME STATEMENT – IMPACTS OF NZ IFRS 16 PERIOD ENDED 26 JANUARY 2020 ACTUAL PERIOD ENDED 27 JANUARY 2019 ACTUAL VARIANCE January 2020 vs January 2019 Previous classiﬁcation Adjustments under NZ IFRS 16 NZ IFRS 16 classiﬁcation Previous classiﬁcation NZ IFRS 16 classiﬁcation Back out rental expense Include lease depreciation Include lease ﬁnance cost $000 $000 $000 $000 $000 Sales revenue 653,017 Cost of goods sold Gross proﬁt Other income (395,515) 257,502 9,661 - - - - - - - - Store expenses (109,916) 28,813 (19,239) (70,161) 1,232 (669) 87,086 30,045 (19,908) 724 (131) 593 - - - - - - 653,017 $000 631,919 $000 21,098 $000 21,098 (395,515) (378,564) (16,951) (16,951) 257,502 9,661 253,355 6,994 4,147 2,667 4,147 2,667 (100,342) (103,202) (6,714) 2,860 (69,598) (71,152) 991 1,554 97,223 85,995 1,091 11,228 - - - - - - - - 724 (13,504) (13,635) (13,504) (12,911) 754 (142) 612 (30) 11 (30) (13,493) (19) (13,523) 87,679 30,045 (19,908) (13,504) 84,312 86,607 1,072 (2,295) (22,672) (8,412) 5,574 3,781 (21,729) (23,214) 542 1,485 65,007 21,633 (14,334) (9,723) 62,583 63,393 1,614 (810) Administration expenses Earnings before interest and tax Finance income Finance costs Net ﬁnance income / (costs) Proﬁt before income tax Income tax expense Net proﬁt attributable to shareholders 72 Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements TABLE 2: CONSOLIDATED BALANCE SHEET – IMPACTS OF NZ IFRS 16 FULL YEAR AS AT 26 JANUARY 2020 Previous classification $000 NZ IFRS 16 classification $000 Difference $000 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 Right-of-use assets Deferred tax Investment in equity securities Total non-current assets TOTAL ASSETS LIABILITIES Current liabilities Trade and other payables Lease liabilities Taxation payable Derivative financial instruments Total current liabilities Non-current liabilities Trade and other payables Lease liabilities Total non-current liabilities TOTAL LIABILITIES NET ASSETS EQUITY Share capital Cashflow hedge reserve Equity-based remuneration reserve Other reserves Retained earnings TOTAL EQUITY 67,414 3,533 87,414 5,408 269 67,414 3,533 87,414 5,408 269 164,038 164,038 97,265 3,464 - 3,240 154,104 258,073 422,111 82,601 - 4,895 1,014 88,510 852 - 852 89,362 332,749 60,752 (519) 841 66,251 205,424 332,749 97,265 3,464 266,001 11,676 154,104 532,510 696,548 81,260 17,744 4,895 1,014 104,913 852 278,664 279,516 384,429 312,119 60,752 (519) 841 66,251 184,794 312,119 - - - - - - - - 266,001 8,436 - 274,437 274,437 (1,341) 17,744 - - 16,403 - 278,664 278,664 295,067 (20,630) - - - - (20,630) (20,630) 73 Briscoe Group Limited Annual Report 2020 Independent Auditor’s Report74 Briscoe Group Limited Annual Report 2020 Independent Auditor’s Report 75 Briscoe Group Limited Annual Report 2020 Independent Auditor’s Report76 Briscoe Group Limited Annual Report 2020 Independent Auditor’s Report 77 Briscoe Group Limited Annual Report 2020 Independent Auditor’s Report78 Briscoe Group Limited Annual Report 2020 Independent Auditor’s Report Briscoe Group Limited Annual Report 2020 Corporate Governance Statement 79 Corporate Governance Statement Corporate Governance Briscoe Group is committed to maintaining the highest standards of governance by implementing best practice structures and policies. This Corporate Governance Statement sets out the corporate governance polices, practices and processes adopted or followed by Briscoe Group (including the guiding principles, authority, responsibilities, membership and operation of the Board of Directors) as at 26 January 2020 and has been approved by the Board. The best practice principles (and underlying recommendations) which Briscoe Group has had regard to in determining its governance approach, are the principles set out in the NZX Corporate Governance Code (‘NZX Code’). The Board’s view is that Briscoe Group’s corporate governance policies, practices and processes generally follow the recommendations set by the NZX Code. This Corporate Governance Statement includes disclosure of the extent to which Briscoe Group has followed each of the recommendations in the NZX Code (or, if applicable, an explanation of why a recommendation was not followed and any alternative practices followed in lieu of the recommendation). Briscoe Group Limited is a company incorporated in New Zealand and is also registered in Australia as a foreign company under the name Briscoe Group Australasia Limited. It is listed on the NZX and also, as a foreign exempt entity, on the Australian Securities Exchange (ASX). As such Briscoe Group is exempt from complying with most of the ASX’s Listing Rules and must undertake to comply with the listing rules of its home exchange (NZX). Briscoe Group also supports the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations. Further information about Briscoe Group’s corporate governance framework (including the Board and Board committee charters, and codes and selected policies referred to in this section) is available to view at www.briscoegroup.co.nz. 80 Briscoe Group Limited Annual Report 2020 Corporate Governance Statement Principle 1 – Code of Ethical Behaviour Directors should set high standards of ethical behaviour, model this behaviour and hold management accountable for these standards being followed throughout the organisation. Code of Values and Conduct and Related Policies Recommendation 1.1: The Board should document minimum standards of ethical behaviour to which the issuer’s Directors and employees are expected to adhere (a code of ethics) and comply with the other requirements of Recommendation 1.1 of the NZX Code. Briscoe Group expects its Directors, senior management and employees to maintain the highest standards of honesty, integrity and ethical conduct in day to day behaviour and decision making. The Board has adopted a Code of Conduct which incorporates the requirements set out in Recommendation 1.1, forms part of the induction process for all new employees and is available on Briscoe Group’s website. All Directors and employees must provide acknowledgement that they have read and understood the content. In addition, it is the intention of the Company to incorporate training in relation to the Code of Conduct into its online training modules. Trading in Company Securities Policy Recommendation 1.2: An issuer should have a ﬁnancial product dealing policy which applies to employees and Directors. The Trading in Company Securities Policy sets out Briscoe Group’s requirements for all Directors and employees in relation to trading Briscoe Group shares, and is available on Briscoe Group’s website. In general, Directors and employees are allowed to trade in Briscoe Group shares during two ‘trading windows’. Trading windows commence on the day after the half-year and full- year results are announced to the market and run for a period of 60 days. Trading outside these windows is generally prohibited. Proposed transactions by Directors and employees during the trading windows require approval. The policy also provides that no Directors or employees can trade shares if they are in possession of price sensitive information that is not publicly available. The policy also outlines the requirements around the exercise of share options issued by the Company. Principle 2 – Board Composition and Performance To ensure an eﬀective Board, there should be a balance of independence, skills, knowledge, experience and perspectives. Board Charter Recommendation 2.1: The Board of an issuer should operate under a written charter which sets out the roles and responsibilities of the Board. The Board charter should clearly distinguish and disclose the respective roles and responsibilities of the Board and management. The Board has adopted a formal Board Charter which sets out the respective roles, responsibilities, composition and structure of the Board and senior management, and this is available on Briscoe Group’s website. The Board is responsible for overseeing the management of the Company and its subsidiaries and to direct performance by optimising the short-term and long-term best interests of the Company and its Shareholders. This includes approving the Company’s objectives, reviewing the major strategies for achieving them and monitoring the Company’s performance. The focus of the Board is the creation of company and shareholder value and ensuring the Company is committed to best practice. Responsibility for the day-to-day management of Briscoe Group has been delegated to the Managing Director and other senior management. Management are responsible for implementing the objectives and strategies approved by the Board, within the ambit of risk set by the Board. The Company Secretary provides company secretarial services to the Board and is accountable to the Board through the Chair. Briscoe Group Limited Annual Report 2020 Corporate Governance Statement 81 Nomination and Appointment of Directors Recommendation 2.2 and 2.3: Every issuer should have a procedure for the nomination and appointment of Directors to the Board. An issuer should enter into written agreements with each newly appointed Director establishing the terms of their appointment. The Board collectively considers the nomination of Directors. In doing this, the Board’s procedure involves careful consideration of the composition of the Board in relation to the Company’s needs and operating environment to ensure relevant skills and experience. This also applies to the consideration of additional or replacement Directors, subject to the constitutional limitation of the number of Directors. In so doing, as noted above, the priority must be on ensuring the skills, experience and diversity on the Board, and the skills that are necessary or desirable for the Board to fulﬁl its governance role and to contribute to the long-term strategic direction of the company. The Board may engage consultants to assist in the identiﬁcation, recruitment and appointment of suitable candidates. When appointing new Directors, the Board ensures that the constitutional requirements in respect of Directors will continue to be satisﬁed. There must be at least three and no more than ﬁve Directors, at least two of whom are resident in New Zealand and also at least two Directors must be determined by the Board to be independent (as deﬁned in the NZX Listing Rules). The Board also takes into consideration recommendation 2.8 - a majority of the Board should be independent Directors. The constitution provides that all Directors are elected by Shareholders. Directors may be appointed by the Board to ﬁll vacancies, but they are then subject to re-election at the next annual Shareholder meeting. In addition to Directors retiring by rotation and being eligible for re-election, nominations may be made by Shareholders. All new Directors enter into a written agreement with Briscoe Group setting out the terms of their appointment. Directors Recommendation 2.4: Every issuer should disclose information about each Director in its Annual Report or on its website, including a proﬁle of experience, length of service, independence and ownership interests. The Board currently comprises four Directors; three independent and one Executive Director. The Board has considered which of its Directors are deemed to be independent for the purposes of the NZX Listing Rules and has determined that as at 26 January 2020, three Directors are independent Directors, including the Chair and the Chair of the Audit and Risk Committee. As at the date of this Annual Report, the Directors are: Dame Rosanne Meo Chair, Independent Appointed in May 2001 Rod Duke Executive Director Appointed in March 1992 Tony Batterton Andy Coupe Independent Independent Appointed in June 2016 Appointed in October 2016 A proﬁle of experience for each Director is available on Briscoe Group’s website. Directors disclosed the following relevant interests in shares as at 26 January 2020: Director Dame Rosanne Meo Rod Duke Tony Batterton Andy Coupe Number of shares in which a relevant interest is held 100,000 shares 170,920,656 shares 20,000 shares 10,000 shares 82 Briscoe Group Limited Annual Report 2020 Corporate Governance Statement Diversity Recommendation 2.5: An issuer should have a written Diversity Policy which includes requirements for the Board or a relevant committee of the Board to set measurable objectives for achieving diversity (which, at a minimum, should address gender diversity) and to assess annually both the objectives and the entity’s progress in achieving them. The issuer should disclose the policy or a summary of it. We appreciate that our workforce, including potential employees, come from all walks of life. Every individual is unique, having diﬀerent skills and experiences including but not limited to educational opportunity and achievement. People come from many cultures and backgrounds, along with a wide range of other personal attributes including gender, age, disability (mental, learning, physical), economic background, language(s) spoken, marital/partnered status, physical appearance, race, religious beliefs and gender identity, or sexual orientation. Briscoe Group has a commitment to attracting, selecting, developing and retaining the most suitable employees from this diverse range of attributes. The Group’s Diversity and Inclusiveness Policy is available on Briscoe Group’s website. We have a very high level of long term employees and a strong “sense of belonging within the Briscoes family”. We acknowledge that the retail sector has traditionally had high representation of women in its operations and yet has been poorly represented in senior management. Similarly, there has been an inadequate retail speciﬁc tertiary educational focus, although it has, as a sector, provided a working environment with good opportunities for family-oriented work place balance through long term part-time participation. Education is fundamental and we are pleased with the developments in this area in recent years with a number of employees having recently commenced tertiary study to support their continued development. The Board and management recognise that diversity without inclusiveness does not result in the balanced workforce desired in the business. Briscoe Group has in place policies and procedures to encourage and support equitable treatment for all employees and includes consideration of applicants for jobs with the Group. We acknowledge that any narrowness in diversity is not sustainable and believe that an increased emphasis on a collaborative and inclusive culture and focus on developing talent will secure this realignment. Ensuring that all employees at all levels and in all workplace environments feel secure and safe, conﬁdent and appreciated through understanding the importance of diversity is most important to us. At Board level, diversity across the spectrum of gender, age, experience and education has been well achieved and well demonstrates our commitment. A breakdown of the gender composition of Directors and oﬃcers as at the Company’s balance date, including comparative ﬁgures, is shown below: 26 January 2020 27 January 2019 Female Male Female Male Directors Oﬃcers1,2. 1 - 3 3 2 - 3 3 1. Excludes 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. Briscoe Group Limited Annual Report 2020 Corporate Governance Statement 83 Director Training Recommendation 2.6: Directors should undertake appropriate training to remain current on how to best perform their duties as Directors of an issuer. The Board expects all Directors to undertake continuous education to remain current on how to best perform their responsibilities and keep abreast of changes and trends in economic, political, social, ﬁnancial and legal climates and governance practices. The Board also ensures that new Directors are appropriately introduced to management and the business, that all Directors are updated on relevant industry and company issues and receive copies of appropriate company documents to enable them to perform their roles. The expectation that Directors undergo ongoing training and education is reinforced in the Board Charter. Board Evaluation Recommendation 2.7: The Board should have a procedure to regularly assess director, Board and committee performance. The Chair of the Board leads an annual performance review and evaluation of the performance of Directors, the Board as a whole, and of the Board committees against the Board and committee charters, including seeking Director’s views relating to Board and committee process, eﬃciency and eﬀectiveness. The Chair of the Board also engages with individual Directors to evaluate and discuss performance and professional development. Independent Directors Recommendation 2.8: A majority of the Board should be independent directors. The Board currently comprises four Directors; three independent and one executive Director. Further details of the Board composition are above at Recommendation 2.4. Separation of Board Chair and CEO Recommendation 2.9: The Chair and the CEO should be diﬀerent people. The Board Charter makes explicit that the Chairman and the Managing Director roles are separate. Principle 3 – Board Committees The Board should use committees where this will enhance its eﬀectiveness in key areas, while still retaining Board responsibility. Audit and Risk Committee Recommendation 3.1: An issuer’s audit committee should operate under a written charter. Membership on the audit committee should be majority independent and comprise solely of non-executive directors of the issuer. The chair of the audit committee should not also be the Chair of the Board. The Audit and Risk Committee operates under a written Charter, and this is available on Briscoe Group’s website. The Audit and Risk Committee comprises Tony Batterton (Chair), Dame Rosanne Meo, Andy Coupe and Rod Duke and met two times during the year. The Audit and Risk Committee advises and assists the Board in discharging its responsibilities with respect to ﬁnancial reporting, compliance and risk management practices of Briscoe Group. The Board considers that the inclusion of the Group Managing Director as a member of the Committee provides relevant operational insight which greatly assists the Committee. Recommendation 3.2: Employees should only attend Audit Committee meetings at the invitation of the Audit Committee. The Chief Financial Oﬃcer, Finance Manager and Internal Audit Manager attend Audit and Risk Committee meetings at the invitation of the Audit and Risk Committee. Briscoe Group’s external auditor also attends meetings at the committee’s invitation. The Audit and Risk Committee receives reports from the external auditor without management present, concerning any matters that arise in connection with the performance of management’s role and otherwise as necessary to protect the independence of the Audit and Risk Committee from undue inﬂuence. 84 Briscoe Group Limited Annual Report 2020 Corporate Governance Statement Remuneration Committee Recommendation 3.3: An issuer should have a Remuneration Committee which operates under a written charter (unless this is carried out by the whole Board). At least a majority of the Remuneration Committee should be independent directors. Management should only attend Remuneration Committee meetings at the invitation of the Remuneration Committee. The Board operates a Human Resources Committee which incorporates remuneration. The Human Resources Committee currently comprises Andy Coupe (Chair), Dame Rosanne Meo, and Rod Duke and met three times during the year. It assists the Board in discharging its responsibilities with respect to the remuneration and performance of the Group Managing Director and other senior executives, remuneration of Directors and human resources policy and strategy. The Human Resources Committee operates under the Human Resources Committee Charter, and this is available on Briscoe Group’s website. As for the Audit and Risk Committee, the Board considers the inclusion of the Managing Director as a member of the Human Resources Committee provides essential operational insight but also critical insight to executive performance and human resources strategy. The Managing Director does not participate in discussion of his own performance and remuneration. Other selected management only attend Human Resource Committee meetings at the invitation of the Human Resources Committee. Nomination Committee Recommendation 3.4: An issuer should establish a nomination Committee to recommend Director appointments to the Board (unless this is carried out by the whole Board), which should operate under a written charter. At least a majority of the Nomination Committee should be independent Directors. The Board does not operate a separate Nomination Committee as Director appointments are considered by the Board as a whole. The Board’s procedure for the nomination and appointment of Directors is summarised under Principle 2 above (under the heading “Nomination and Appointment of Directors”). Overview of Board Committees Recommendation 3.5: An issuer should consider whether it is appropriate to have any other Board committees as standing Board committees. All committees should operate under written charters. An issuer should identify the members of each of its committees, and periodically report member attendance. The Board does not operate any other committees apart from the Audit and Risk Committee and the Human Resources Committee. Briscoe Group has considered whether any other standing Board committees are appropriate and has determined not. Each committee operates under a charter which is available on Briscoe Group’s website. Committee members are appointed from members of the Board and membership is reviewed on an annual basis. Any recommendations made by the committees are submitted to the full Board for formal approval. Apart from the Managing Director, relevant key executives are invited to attend Board committee meetings as appropriate. Attendance at Board and Committee Meetings for the Year Ended 26 January 2020 Board Audit and Risk Human Resources Number of meetings held 12 2 3 Attended Attended Attended Dame Rosanne Meo Rod Duke Mary Devine1. Tony Batterton Andy Coupe 12 11 1 12 12 1. Mary Devine resigned as a Director eﬀective from 31 March 2019 2 2 1 2 2 2 3 - - 3 Briscoe Group Limited Annual Report 2020 Corporate Governance Statement 85 Takeover Protocols Recommendation 3.6: The Board should establish appropriate protocols that set out the procedure to be followed if there is a takeover oﬀer for the issuer (amongst other matters). Given Briscoe Group’s shareholding structure, with the largest Shareholder being a member of the Board, the Board considers the likelihood of an unanticipated takeover to be low, and so the Board does not consider this recommendation to be necessary. However, in the event of a takeover oﬀer, the Board has already agreed that a Takeover Response Committee would be convened comprised of Independent Directors. That committee would consider the Company’s actions in relation to the takeover oﬀer, including seeking appropriate legal, ﬁnancial and strategic advice, complying with takeover regulation (including the appointment of an independent advisor under the Takeovers Code and the preparation of a Target Company Statement) and determining what additional information (if any) would be provided by the Company to the bidder. Principle 4 – Reporting and Disclosure The Board should demand integrity in ﬁnancial and non-ﬁnancial reporting, and in the timeliness and balance of corporate disclosures. Continuous Disclosure Recommendation 4.1: An issuer’s Board should have a written Continuous Disclosure Policy. As a listed company there is an imperative to ensure the market is informed, and the listed securities are being fairly valued by the market. In addition to statutory disclosures, the company provides ongoing updates of its operations. This material is made publicly available through releases to the NZX and ASX, in accordance with the relevant Listing Rules. Briscoe Group has a Continuous Disclosure Policy, and this is available on Briscoe Group’s website. The purpose of this policy is to: ensure Briscoe Group complies with its continuous disclosure obligations; ensure timely, accurate and complete information is provided to all Shareholders and market participants; and outline the responsibilities in relation to the identiﬁcation, reporting, review and disclosure of material information relevant to Briscoe Group. Charters and Policies Recommendation 4.2: An issuer should make its code of ethics, Board and committee charters and the policies recommended by NZX Code, together with any other key governance documents, available on its website. Information about Briscoe Group’s corporate governance framework (including Code of Conduct, Board and Board committee charters, and other selected key governance codes and policies) is available to view on Briscoe Group’s website. Financial and Non-Financial Reporting Recommendation 4.3: Financial reporting should be balanced, clear and objective. An issuer should provide non-ﬁnancial disclosure at least annually, including considering environmental, economic and social sustainability factors and practices. It should explain how operational or non-ﬁnancial targets are measured. Non-ﬁnancial reporting should be informative, include forward looking assessments, and align with key strategies and metrics monitored by the Board. Financial Reporting The Audit and Risk Committee oversees the quality and integrity of external ﬁnancial reporting including the accuracy, completeness and timeliness of ﬁnancial statements, and ensuring that ﬁnancial reporting is balanced, clear and objective. It reviews annual and half year ﬁnancial statements and makes recommendations to the Board concerning the application of accounting policies and practice, areas of judgement, compliance with accounting standards, stock exchange and legal requirements, and the results of the external audit. Management’s accountability for Briscoe Group’s ﬁnancial reporting is reinforced by the written conﬁrmation from the Managing Director and Chief Financial Oﬃcer that, in their opinion, ﬁnancial records have been properly maintained and that the ﬁnancial statements comply with the appropriate accounting standards and give a true and fair view of the ﬁnancial position and performance of Briscoe Group. Such representations are given on the basis of a sound system of risk management and internal control which is operating eﬀectively in all material respects in relation to ﬁnancial reporting risk. 86 Briscoe Group Limited Annual Report 2020 Corporate Governance Statement Non-Financial Reporting - Sustainability Briscoe Group assesses its exposure to environmental, economic and social sustainability as part of the overall framework for managing risk (see Principle 6 – Risk Management). Briscoe Group is committed to improving standards of environmental performance to enable a more eﬃcient and sustainable future. Accordingly, we have the following initiatives which are incorporated into regular management reporting to the Board. Being one of New Zealand’s leading retailers encompassing multiple large-format retail outlets, there are many ways we look to improve our environmental performance. Currently the Group’s sustainability initiatives cover: • Waste Management • Energy Eﬃciency, and • Carbon Footprint reporting WASTE MANAGEMENT The Group’s waste management strategy recognises that product sourcing is the ﬁrst step in the supply chain and the best opportunity in minimising unnecessary packaging. Initiatives have been implemented to: • work with suppliers to reduce packaging and specify recyclable packaging types at source, • ensure that the Group is using recyclable packaging materials in eﬃcient quantities, and • ensure that stores have the adequate tools and services to enable eﬀective landﬁll minimisation. ENERGY EFFICIENCY Specifying energy eﬃcient elements within our building documentation for new stores ensures a high level of energy eﬃciency for the entire life-cycle of the building. Operationally, comparing energy use on a site by site basis enables us to compare similarly sized stores and identify potential future savings through investment in heating, ventilation, air-conditioning and lighting systems. CARBON FOOTPRINT Our current focus is to identify areas of improvement across the business to minimise waste and power consumption. Briscoe Group Limited Annual Report 2020 Corporate Governance Statement 87 Principle 5 – Remuneration The remuneration of Directors and executives should be transparent, fair and reasonable. Directors’ Remuneration Recommendation 5.1: An issuer should recommend director remuneration to shareholders for approval in a transparent manner. Actual director remuneration should be clearly disclosed in the issuer’s Annual Report. In accordance with the Constitution, Shareholder approval is sought for any increase in the pool available to pay Directors’ fees. Approval was last sought in 2016, when the pool limit was set at $380,000 per annum. The Board has determined the following allocation from the pool. Board of Directors Audit and Risk Committee Human Resources Committee Position Fees (per annum) Chair $120,000 Member $62,500 Chair $12,000 Member Chair Member $6,000 $8,500 $6,000 Remuneration of Directors in the reporting period is tabulated below: Board Fee Audit and Risk Committee Human Resources Committee Total Fees Other Payments/ Beneﬁts Total Remuneration Dame Rosanne Meo $120,000 $6,000 $6,000 $132,000 - $132,000 Rod Duke 1. Mary Devine 2. Tony Batterton Andy Coupe Total - $10,417 $62,500 $62,500 - $1,000 $12,000 $6,000 - $500 - $8,500 - $912,038 $912,038 $11,917 $74,500 $77,000 - - - $11,917 $74,500 $77,000 $255,417 $25,000 $15,000 $295,417 $912,038 $1,207,455 1. No Directors’ fees are paid to Executive Directors. For more information in relation to Executive Director remuneration refer to “Chief Executive Remuneration” below. 2. Mary Devine resigned from Human Resources Committee 20 February 2019 and as a Director eﬀective from 31 March 2019. Remuneration Policy Recommendation 5.2: An issuer should have a Remuneration Policy for remuneration of directors and oﬃcers, which outlines the relative weightings of remuneration components and relevant performance criteria. Briscoe Group has adopted a Remuneration Policy which sets out the remuneration principles that apply to all Non-Executive Directors and all employees including senior management, to ensure that remuneration practices are fair and appropriate, and that there is a clear link between remuneration and performance. A copy of the Remuneration Policy is available on Briscoe Group’s website. Briscoe Group is committed to applying fair and equitable remuneration and reward practices in the workplace, taking into account internal and external relativity, the commercial environment, the ability to achieve Briscoe Group’s business objectives and the creation of Shareholder value. Under Briscoe Group’s remuneration framework, job size relative to the relevant competitive market for talent as well as individual performance against deﬁned key performance objectives are key considerations in all remuneration based decisions, balanced by the organisational context. Remuneration 88 Briscoe Group Limited Annual Report 2020 Corporate Governance Statement for senior management includes a mix of ﬁxed and variable components. Criteria for performance payments which comprise short, medium and long-term incentives are regularly appraised to ensure they incorporate changing market conditions as well as the Company’s performance in relation to strategic initiatives that are deemed by the Board to be most relevant in driving Shareholder value. Non-Executive Directors are paid fees in accordance with the table provided under 5.1. The levels at which fees are set reﬂects the time commitment and responsibilities of the roles of Non-Executive Directors and the ﬁgures shown under 5.1 do not include any performance based payments. The Board uses various sources to inform its decision making on fees and consults with expert independent advisors where appropriate. Subsequent to a review conducted with independent external advisors, engaged by the Board, with specialist expertise in remuneration, changes were recommended in relation to the Company’s short, medium and long-term incentives. This has resulted in extensive changes to the long-term incentive (LTI) scheme including a change in vehicle (performance rights), quantum and participation. The ﬁrst two grants of performance rights under the updated LTI scheme were made during the 2019/20 ﬁnancial year. A new medium-term incentive scheme has been introduced for senior management who will no longer participate in the new LTI scheme. In this manner, the various components of remuneration maintain alignment with the interests of Shareholders, the Company and the individual. Employee Remuneration The number of employees and former employees within Briscoe Group (including the Managing Director but excluding any other Director) receiving remuneration and beneﬁts above $100,000, relating to the 52 week period ending 26 January 2020 is set out in the table below: Remuneration $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 $230,000 - $239,999 $240,000 - $249,999 $260,000 - $269,999 $270,000 - $279,999 $300,000 - $309,999 $350,000 - $359,999 $390,000 - $399,999 $420,000 - $429,999 $450,000 - $459,999 $680,000 - $689,999 $910,000 - $919,999 Number of Employees 12 7 7 10 4 4 2 3 3 2 1 1 1 1 1 1 1 1 1 1 1 1 1 Briscoe Group Limited Annual Report 2020 Corporate Governance Statement 89 Chief Executive Oﬃcer Remuneration Recommendation 5.3: An issuer should disclose the remuneration arrangements in place for the CEO in its Annual Report. This should include disclosure of the base salary, short-term incentives and long-term incentives and the performance criteria used to determine performance based payments. The remuneration of the Managing Director for the year ended 26 January 2020 was: Base Salary Other Beneﬁts STI Subtotal LTI Total Remuneration Period Ended 26 January 2020 $727,245 $91,293 $93,500 $912,038 - $912,038 The remuneration of the Managing Director comprises ﬁxed and performance payments. Fixed remuneration includes a base salary and other beneﬁts comprising; contributions to superannuation, life insurance, health insurance and a fuel card. The Managing Director received a short-term incentive of $93,500. The target value of a STI payment is recommended by the Human Resources Committee, approved by the Board and linked strongly to company ﬁnancial performance and performance against strategic initiatives. Given his shareholding in the Company, the Managing Director does not participate in any Company Long Term Incentive Scheme. Senior Management Briscoe Group’s senior management are appointed by the Managing Director and their key performance indicators (‘KPIs’) are comprised of speciﬁc Briscoe Group ﬁnancial objectives along with business related individual objectives. Establishing and monitoring these KPIs is done annually by the Managing Director recommending the KPIs to the Human Resources Committee, which in turn, makes recommendations to the Board for approval. The performance of the senior management against these KPIs is evaluated annually and serves as a key determinant of any short-term incentive scheme values and payments. Short Term Incentive Payments Short term incentive (STI) payments are at risk cash payments designed to motivate and reward for short term (within each ﬁnancial year) performance. The target value of a STI payment is set by the Managing Director with a speciﬁed dollar potential available to each participant in the scheme. The target areas for all employees who are entitled to a STI payment are set based on a combination of company ﬁnancial performance, speciﬁc ﬁnancial performance relative to the employee’s areas of responsibility and individual goals. The weightings applied to each of the target areas will be largely consistent throughout the company for roles entitled to a STI payment, but may vary depending on speciﬁc areas of focus as determined by the Managing Director. The Board approves the STI payments to be made to senior management at the end of the ﬁnancial year, and approves the senior manager targets for the following year. Medium Term Incentive Payments Medium term incentive (MTI) payments are at risk cash payments designed to motivate and reward for medium term (crossing two ﬁnancial years) performance. A two-year term provides for evaluation of performance over a longer term than used for purposes of STI and ensures a degree of impact or sustainability thereby avoiding or reducing the risk of “short-termism”. MTI participants are members of the senior management team who signiﬁcantly inﬂuence achievement of the Company’s performance. The target value of an MTI payment is recommended by the Managing Director for approval by the Board, with a speciﬁed dollar amount potentially available to each participant in the scheme. Performance is assessed at Company rather than individual level with measures aligned to those of the LTI scheme, albeit over a slightly lesser timeframe. The Board will review performance and approve any MTI payments to be made to senior management at the end of the ﬁnancial year and approve objectives for the following year. 90 Briscoe Group Limited Annual Report 2020 Corporate Governance Statement Long Term Incentive Payments 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 on payment of the exercise price. 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. During the ﬁnancial year the Company did not issue any further share options to employees. (2019: Nil). The only options on issue are those issued in August 2016. Option holders have until 21 August 2020 to exercise these options, at which time, if they are not exercised, will lapse. On 26 March 2019 the Board approved a Senior Executive Incentive Plan under which selected senior employees could be granted Performance Rights which upon vesting would reward the employees with ordinary shares in the Company. Vesting of the Performance Rights is subject to the achievement of certain performance hurdles. Two tranches of Performance Rights were issued during 2019-20. The Performance Rights vest after three years subject to the Company’s achievement against Total Shareholder Return and Earnings Per Share growth targets. Principle 6 – Risk Management Directors should have a sound understanding of the material risks faced by the issuer and how to manage them. The Board should regularly verify that the issuer has appropriate processes that identify and manage potential and material risks. Risk Management Recommendation 6.1: An issuer should have a risk management framework for its business and the issuer’s Board should receive and review regular reports. A framework should also be put in place to manage any existing risks and to report the material risks facing the business and how these are being managed. The Board is responsible for Briscoe Group’s risk assessment, management and internal control and it believes has carried out a robust risk assessment process. Through the Audit and Risk Committee, the Board monitors policies and processes that identify signiﬁcant business risks and implements procedures to monitor these risks. A management risk committee comprising the Managing Director, Chief Financial Oﬃcer, Chief Operating Oﬃcer and Internal Audit Manager meets every quarter to identify and assess the major risks aﬀecting the business by maintaining a risk matrix which is used to develop strategies to monitor and mitigate these risks. Risks are assessed against the impact of the risk and the likelihood of it eventuating. The risk matrix is provided to the Board six monthly. The management risk committee reports to the Audit and Risk Committee. Signiﬁcant risks are discussed at Board meetings, or as required. Briscoe Group maintains insurance policies that it considers adequate to meet insurable risks. Health and Safety Recommendation 6.2: An issuer should disclose how it manages its health and safety risks and should report on their health and safety risks, performance and management. The Human Resources Committee, the General Manager Human Resources and specialist team members in the Human Resource function assist the Board in meeting its responsibilities under the Health and Safety at Work Act 2015, other regulations and policies. The Human Resources Committee, along with management is responsible for ensuring that Health and Safety has appropriate focus and is suﬃciently resourced to achieve its objectives within Briscoe Group. Company performance across a range of measures of Health and Safety are a consistent and priority agenda item at all Board meetings. The Board and senior management are apprised of all notiﬁable incidents and injuries and the actions taken to ensure the health and wellbeing of injured persons. Actions taken to prevent incident recurrence are also advised. Briscoe Group Limited Annual Report 2020 Corporate Governance Statement 91 Management operates and assesses the eﬀectiveness of risk assessment and mitigation, safety processes and systems, capability of staﬀ and the general culture of the business in relation to safety. Briscoe Group has implemented a Health and Safety Risk Matrix to identify speciﬁc hazards and risks, assess their severity of impact and likelihood of occurrence, document mitigation strategies and determine the level of residual risk. This matrix is reviewed at least annually by the Board and annual Health and Safety objectives and KPIs are set for the business based on the signiﬁcant risks identiﬁed. The Company operates a continuous system of hazard identiﬁcation and management along with monthly reviews of performance to ensure that opportunities for improvement are identiﬁed and progressed. In 2019 we continued our focus on traﬃc management across our sites along with ensuring that risks of poor customer/shoplifter behaviour were monitored and managed. The peace of mind provided by the presence of our Loss Prevention Specialists in stores is signiﬁcant and alongside our online training in this area goes some way to maintaining a healthy and safe place of work. Along with monthly updates on safety related incidents as part of regular Board reporting, the Board is apprised of quarterly performance on a range of measures sourced directly from ACC. Signiﬁcant measures which contribute to the Briscoe Group’s Experience Rating continue to show improvement. A wide range of actions across the Group have been part of our journey to ensuring our team and others go home from work safe each day. Leader led discussions around safety regularly occur throughout the business alongside inclusion of team member wellbeing and safety as an item in discussions relating to planned business change. Board and senior management visits to our sites include discussions with team members as to their knowledge and perspectives on health and safety, further reinforcing the importance of health and safety to the Group. The Group continually assesses its actual Health and Safety performance rates against independent information provided by ACC to ensure that improvement in safety outcomes rather than outputs are used in determining true eﬀectiveness. We continue to see improvements in the number of work-related claims and the number of days of earnings-related compensation. Reporting of safety related incidents (including those without injuries) continue to serve as opportunities to prevent incidents that pose risk to our people. We are well progressed with Group implementation of our chosen Saas health and safety recording, reporting and risk management system, Ecoportal. In 2020 our focus will be on completing implementation with the Contractor Management module and using the new capabilities in the system to aid in the sustained reduction of injuries across the business. Principle 7 – Auditors The Board should ensure the quality and independence of the external audit process. External Audit Recommendation 7.1 and 7.2: The Board should establish a framework for the issuer’s relationship with its external auditors. This should include procedures prescribed in the NZX Code. The external auditor should attend the issuer’s annual shareholders meeting to answer questions from shareholders in relation to the audit. The Audit and Risk Committee is responsible for the oversight of Briscoe Group’s external audit arrangements. These arrangements include procedures for the matters described in Recommendation 7.1 of the NZX Code. The Audit and Risk Committee is committed to ensuring Briscoe Group’s external auditor is able to carry out its work independently so that ﬁnancial reporting is reliable and credible. Briscoe Group has an External Auditor Independence policy, which is available on Briscoe Group’s website. The External Audit Independence policy implements the procedures set out in the NZX Code. The policy sets out the work that the external auditor is required to do and speciﬁes the services that the external auditor is not permitted to do unless authorised by the both the Chairman and Chairman of the Audit and Risk Committee and so advised to the Board. This is so the ability of the auditor to carry out its work is not impaired and could not reasonably be perceived to be impaired. Briscoe Group’s external auditor is PricewaterhouseCoopers. Total fees paid to PricewaterhouseCoopers in its capacity as auditor for period ended 26 January 2020 were $108,000 (2019: 128,000). Total fees paid to PricewaterhouseCoopers for other professional services for the period ended 26 January 2020 were $26,000 (2019: $160,000). The other service fees comprise a half yearly review. PricewaterhouseCoopers has historically attended the Annual Shareholders’ Meeting, and the lead audit partner is available to answer relevant questions from Shareholders at that meeting. 92 Briscoe Group Limited Annual Report 2020 Corporate Governance Statement Internal Audit Recommendation 7.3: Internal audit functions should be disclosed. Briscoe Group has an internal audit team that performs assurance and compliance reviews across company operations as part of a risk-based programme of work approved by the Audit and Risk Committee. In scope are all aspects of the Group’s store and non-store operations. In addition to the assurance and compliance work, the internal audit team provide advice to improve both established systems and processes, and during the design and implementation phase of new systems and processes. The Internal Audit Manager reports functionally to the Audit and Risk Committee and administratively to the Chief Financial Oﬃcer. The Internal Audit Manager provides regular reporting to management as well as to the Board and Audit and Risk Committee. Principle 8 – Shareholder Rights and Relations The Board should respect the rights of shareholders and foster constructive relationships with shareholders that encourage them to engage with the issuer. Information for Shareholders Recommendation 8.1: An issuer should have a website where investors and interested stakeholders can access ﬁnancial and operational information and key corporate governance information about the issuer. Briscoe Group is committed to an open and transparent relationship with Shareholders. The Board aims to ensure that all Shareholders are provided with all information necessary to assess Briscoe Group’s direction and performance. This is done through a range of communication methods including periodic and continuous disclosures to NZX and ASX, half year and annual reports and the Annual Shareholders’ Meeting. Briscoe Group’s website provides ﬁnancial and operational information, information about its Directors and senior management and copies of its governance documents, for investors and interested stakeholders to access at any time. Communicating with Shareholders Recommendation 8.2: An issuer should allow investors the ability to easily communicate with the issuer, including providing the option to receive communications from the issuer electronically. Shareholders have the option of receiving their communications electronically, including by email or through Briscoe Group’s investor centre. Briscoe Group’s website includes a section for Shareholder communications and the Board has always been committed to having an open dialogue with Shareholders and welcomes investor enquiries. Shareholder Voting Rights Recommendation 8.3 Shareholders should have the right to vote on major decisions which may change the nature of the company in which they are invested in. In accordance with the Companies Act 1993, the Company’s Constitution, and the NZX and ASX Listing Rules, Briscoe Group refers any signiﬁcant matters to Shareholders for approval at a Shareholder meeting. Further Capital Recommendation 8.4: If seeking additional equity capital, an issuer should oﬀer further equity securities to existing shareholders of the same class on a pro rata basis, and on no less favourable terms, before further equity securities are oﬀered to other investors. If the Company seeks additional equity capital, the Board will ensure it considers the interests of existing shareholders and, where that is reasonable and in the best interests of the Company, permit shareholders to participate on a pro-rata basis. Notice of Annual Shareholders meeting Recommendation 8.5: The Board should ensure that the annual shareholders notice of meeting is posted on the issuer’s website as soon as possible and at least 20 working days prior to the meeting. Briscoe Group posts any Notices of Shareholder meetings on its website as soon as these are available. The general practice is to make these available not less than four weeks prior to the Shareholder meeting. Briscoe Group Limited Annual Report 2020 General Disclosures 93 General Disclosures Board of Directors Dame Rosanne Meo, DNZM, OBE, BA, Dip BIA: Chairman (Non-Executive) Chairman of AMP Staﬀ Superannuation. Director of realestate.co.nz and Rosanne Meo Consulting. Chartered Fellow of Institute of Directors. Rod Duke: Group Managing Director and Deputy Chairman Group Managing Director since 1991. Director of Kein Geld (NZ) Limited, RA Duke Limited, Briscoe Share Plan Trustee Limited, RD Golf Investments Limited and New Zealand Golf Masters Limited. Tony Batterton, BCom, C.A: Director (Non-Executive) Partner and Executive Director of Evergreen Partners Ltd. Non-Executive 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, NZ Fine Touring Group and Evergreen GP Ltd. Andy Coupe, LLB: Director (Non-Executive) Chairman of Television New Zealand Ltd and the New Zealand Takeovers Panel. Director of Gentrack Group Ltd, Kingﬁsh Ltd, Barramundi Ltd, Marlin Global Ltd. Chartered Member of Institute of Directors. Mary Devine resigned as a Director eﬀective from 31 March 2019. Subsidiary Companies No employee of the Group appointed as a Director of Briscoe Group Limited or its subsidiaries receives or retains any remuneration or other benefits in their capacity as a Director. The remuneration and other benefits of such employees (received as employees) totalling $100,000 or more during the year ended 26 January 2020, are included in the relevant bandings for remuneration disclosed as part of the “Remuneration” section of the Corporate Governance Statement included in this Annual Report (page 90). The persons who held oﬃce as Directors of subsidiary companies at 26 January 2020 are as follows: Briscoes (New Zealand) Limited Rod Duke, Geoﬀ Scowcroft, Alaister Wall The Sports Authority Limited Rod Duke, Geoﬀ Scowcroft, Alaister Wall Rebel Sport Limited Rod Duke, Alaister Wall Living & Giving Limited Rod Duke, Alaister Wall 94 Briscoe Group Limited Annual Report 2020 General Disclosures Principal Activities of the Group 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. During the period there were no changes to the nature of Briscoe Group Limited’s business or that of its subsidiaries. There were also no changes to company structure. Directors A. Shareholdings Beneﬁcially Held RAB Coupe Non-Beneﬁcially Held RA Duke as Trustee of the RA Duke Trust RPO’L Meo AD Batterton As at 20 March 2020 Number of shares 10,000 As at 20 March 2020 Number of shares 170,920,656 100,000 20,000 For further details refer to Substantial Product Holders information below. B. Share dealings During the 52 week period ended 26 January 2020 the following directors acquired shares in the Company: Date of transaction Number of shares acquired Consideration R A Duke as trustee of the R A Duke Trust: 25 March 2019 7 May 2019 12,000 30,000 $40,800 $96,000 There were no other changes to Directors’ interests in Briscoe Group Limited during the period. C. 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. Briscoe Group Limited Annual Report 2020 General Disclosures 95 D. Interests in contracts During the 52 week period ended 26 January 2020 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: • 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 $645,000 (2019: $645,000), under an agreement to lease premises to The Sports Authority Limited (trading as Rebel Sport). (Refer to Note 6.1.1 of the ﬁnancial statements). • Kein Geld (NZ) Limited, an entity associated with RA Duke, received rental payments of $564,598 (2019: $535,164), under an agreement to lease premises to Briscoes (NZ) Limited. (Refer to Note 6.1.1. of the ﬁnancial statements). E. 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. Shareholders Information Holding Range at 20 March 2020 1 – 1000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total No. Investors Total Holdings 991 1,667 624 508 34 655,932 4,845,221 4,948,415 12,273,134 199,495,798 % 0.30 2.18 2.23 5.52 89.77 3,824 222,218,500 100% Substantial Product Holders The following information is given pursuant to section 293 of the Financial Markets Conduct Act 2013. As at 26 January 2020, 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 Duke2. Holding as at 26 January 20201 170,920,656 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 ordinary shares. As at 26 January 2020 this interest was in respect of 170,920,656 ordinary shares. The total number of ordinary shares on issue (being all of the voting shares of the company) as at 26 January 2020 was 222,188,500 96 Briscoe Group Limited Annual Report 2020 Top 20 Shareholders Top 20 Shareholders As at 20 March 2020 Rank Holder’s Name* Total % 1 2= 2= 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 JB Were (NZ) Nominees Limited ** 173,043,998 77.87 Gerald Harvey Harvey Norman Properties (NZ) Ltd FNZ Custodians Limited Alaister John Wall, Beverley Ann Wall and Benedict Dougles Tauber as Trustees of Tunusa Trust established for the benefit of the family of AJ and BA Wall 5,250,000 5,250,000 3,7 6 1 ,654 2.36 2.36 1.69 1,230,000 0.55 Stuart Hamilton Johnstone and Lorraine Rose Johnstone 1,000,000 Forsyth Barr Custodians Limited Manhattan Trustee Limited Citibank Nominees (NZ) Ltd Peter William Burilin HSBC Nominees (New Zealand) Limited Custodial Services Limited Accident Compensation Corporation Shu Wen Chiang 789,386 683,000 610,1 8 6 540,839 538,1 8 1 5 1 7,232 512,307 484,592 0.45 0.36 0.31 0.27 0.24 0.24 0.23 0.23 0.22 Investment Custodial Services Limited 446,407 0.20 National Nominees New Zealand Limited Keith Arthur William Brunt Carla Ingrid Brockman Gemscott Limited 400,000 365,000 336,300 335,000 306, 719 0.18 0.16 0.15 0.15 0.14 20 Shih Ting Huang * A number of the registerd holders listed below hold shares as nominees for, or on behalf of, other parties. ** Includes 170,920,656 shares in relation to holdings associated with R A Duke. Briscoe Group Limited Annual Report 2020 Directory 97 Directory Directors Dame Rosanne PO’L Meo (Chairman) Rodney A. Duke Anthony (Tony) D. Batterton Richard A. (Andy) Coupe Registered Oﬃce 1 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 PwC Share Registrar 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 98 Briscoe Group Limited Annual Report 2020 Notes Notes Briscoe Group Limited Annual Report 2020 Notes 99 Notes Briscoe Group Limited Annual Report 2020 Consolidated Financial Statements 100 briscoegroup.co.nz

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