Briscoe Group Limited Annual Report 2021

Plain-text annual report

Annual Report 2021 RETAIL IS OUR WORLD. 2 Briscoe Group Limited Annual Report 2021 Contents Briscoe Group Limited Annual Report 2021 Contents 3 Contents 4 6 8 Stronger Together At a Glance Board of Directors’ Review 12 Highlights 14 Managing Director’s Review of Operations 18 Strength in Our Brands 22 Our Customers 24 Growing Together • Our People • Our Community • Our Environment 28 Winning Moving Forward 32 Consolidated Financial Statements 75 Independent Auditor’s Report 80 Corporate Governance Statement 94 General Disclosures 97 Top 20 Shareholders 98 Directory 4 Briscoe Group Limited Annual Report 2021 Stronger Together Stronger Together “From operating dark stores to navigating through the challenges of a disrupted global supply chain, it’s certainly been an unexpected year, that together, we’ve come out stronger.” Rod Duke Group Managing Director Briscoe Group Limited Annual Report 2021 Stronger Together 5 6 6 Briscoe Group Limited Annual Report 2021 Briscoe Group Limited Annual Report 2021 At a Glance Corporate Governance Statement At a Glance We are a leading New Zealand retailer with a blend of bricks and mortar and online shopping channels, offering our customers the best range of brands at great prices. Over 500,000 units sold per week More than 90,000 product choices available $686,000 raised for Cure Kids More than 2,000 Team Members 46 million website visits Briscoe Group Limited Annual Report 2021 Briscoe Group Limited Annual Report 2021 At a Glance Corporate Governance Statement 7 7 46 Briscoes Homeware Stores 1 Living & Giving Store 41 Rebel Sport Stores RETAIL IS OUR WORLD. 88Stores Nationwide 88 stores with online fulfilment capability providing delivery for pickup options Purpose-built Support Office and Customer Contact Centre in Auckland Distribution Centre in South Auckland BRISCOES HOMEWARE STORES REBEL SPORT STORES DISTRIBUTION CENTRE Plus, our online stores briscoes.co.nz livingandgiving.co.nz rebelsport.co.nz 8 Briscoe Group Limited Annual Report 2021 Board of Directors’ Review Board of Directors’ Review The year under review tested the Company – our business model, our strategy and our capacity to respond to changes in the operating environment – in ways that could not have been foreseen. Our operating and financial performance for the year was Given the certainty of a collapse in revenue over a remarkably strong. We emerged from this period a more significant period of time, we were eligible for and received robust and resilient company – with an enhanced business the first round of government wage subsidy. This was of platform and a new sense of the strength and growth considerable assistance in meeting our commitments to potential inherent in the business. employees, although there remained a significant gap In this report we obviously intend to focus on our results for the particularly pleasing that we were eventually in a position to 2020/21 year but also want to emphasise with you a number of repay the subsidy in full, in October 2020, being one of the initiatives and developments that the business has underway. first major retailers to do so. that the Company funded from its own resources. It was These are already impacting the way we do business and whilst some were based on strategic work already underway leading into 2020/21, others are more recent. It was apparent with the onset of Covid-19 that the way we were all living had to change and similarly, what our customers and our employees required would alter too. We quickly saw that the pandemic was offering us a great opportunity to change the way we were operating, and the progress and success of these initiatives continue to illustrate this. Our first priority with the onset of the Covid-19 pandemic was to ensure the health and wellbeing of our employees and customers. This involved protecting them from the virus itself and, in the case of employees, from the resulting threats to job and income security. In an environment that mandated the closure of our entire store network for several weeks, with the ultimate duration being uncertain, that was no small undertaking. We committed to continue paying our people their full salaries and we set an objective, which was duly achieved, of getting through this period without making any staff redundant. “ Our greatest strength is the combination of our people, our customers, our suppliers and our business partners. ” Briscoe Group Limited Annual Report 2021 Board of Directors’ Review 9 Our trading performance recovered from the effects of the national lockdown more quickly than could have been expected. This was a rebound in two parts – pent- up consumer demand resulting from closure in our store network lasting 50 days and a jump in online sales. The completion of our revamped online platform earlier in the 2020/21 year, along with the completion of our Click-and- Collect fulfilment network, proved very timely. The pandemic has reinforced the importance of continually reviewing our systems, processes and assumptions that help to drive our business – starting with the ways in which we communicate and work together and continuing through the supply chain, inventory management and sales and fulfilment processes. There have been meaningful benefits and improvements, as described in the commentary below. While protecting and adapting the business was a matter of urgency, management had made significant progress on implementing a number of strategic and growth initiatives pre-Covid. The ability our leadership team has demonstrated to balance and move forward on these very different imperatives during a period of intense pressure is highly valued and appreciated by the Board. Financial Performance Briscoe Group’s sales revenue grew by 7.47% to a record The Group’s balance sheet remains strong, with cash and $701.8 million for the year. Gross margin dollars increased bank balances of $100.4 million as at 31 January 2021 by 19.27% to $307.1 million, while gross margin percentage and no term debt. Inventory is always a key area of focus increased from 39.43% to 43.76%. Both sales and gross – despite widely reported supply issues the Company’s profit set new benchmarks for the Company’s performance. inventories closed at a higher level than in the previous year, ensuring a healthy stock position for the beginning Net profit after tax (NPAT) was up by 16.96% to $73.2 of the new financial year. million – a remarkable result given an erratic trading year heavily affected by Covid-19 and also considering the Group received no dividend this year from its investment in Kathmandu Holdings Limited (KMD). The previous year’s result included $9.5 million of rights entitlements benefits and dividends from KMD. We remain supportive of the Kathmandu business and continue to monitor its progress through this difficult trading environment. $ 701.8M SALES REVENUE 7.47%. 10 Briscoe Group Limited Annual Report 2021 Board of Directors’ Review Dividend The directors have resolved to pay a final dividend of 13.5 cents per share (cps). The dividend is fully imputed and, when added to the interim dividend of 9.0cps and the special dividend paid in January of 6.0cps, brings the total dividend for the year to 28.5cps. The final dividend was paid on 31 March 2021. The share register closed to determine entitlements to the dividend at 5pm on 24 March 2021. We were delighted to be able to provide an additional return to our shareholders in the form of the 6cps special dividend paid during January 2021, and also to be in a position to increase both the interim and final dividend payments. “ Briscoe Group is committed to the highest standards of governance and management, based on implementing best practice structures and policies. ” 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 the Company that the Board and Executive teams work effectively together and are aligned around the business objectives. The Board recognises that corporate governance encompasses a broad spectrum of policies, processes and practices from how a company values its stakeholders through to impact on the community and environment. As well as the usual company policies available on our website, Briscoe Group has a number of initiatives in relation to its involvement in the community as well as proactively ensuring a positive environmental impact. These are expanded further on pages 25 and 26 of this Annual Report. to appoint Mark Callaghan as an independent, non-executive director of Briscoe Group, effective 1 January 2021. Mark is an experienced business leader with demonstrated commercial abilities in strategy and operations gained across a number of notable FMCG organisations, including Frucor Beverages and Cadbury Schweppes. He has held a variety of positions from marketing management to CEO to Board Director. Mark is currently Chief Executive Officer of Phytomed Medicinal Herbs Ltd, an Independent Non- Executive Chairman of Office Products Depot Ltd and a member of the New Zealand Institute of Directors. A key feature of good governance is for boards to challenge themselves consistently to ensure the highest level of service to the companies they serve. With Mark’s appointment we are confident that the Briscoe Group Board of Directors has an excellent balance of the attributes required to meet the future needs of the business. The Board recently made its annual determination as to the independence of directors. It was determined that all directors other than the Managing Director continue to be independent. As part of the determination, the tenure of the Chair was considered carefully. While the Board acknowledged that the tenure was significant, it agreed unanimously that it did not compromise in any way the Chair’s ability to bring an independent view, act in the best interests of the issuer and represent the best interests of all shareholders. Equity-based Remuneration Scheme The Board is of the view that all shareholders benefit from the participation of key senior executives in long-term, appropriately-priced, equity-based remuneration that crystallises only on delivery of increased shareholder value. As previously reported, the Board approved in March 2019 the Senior Executive Incentive Plan designed to replace the previous Executive Share Option Plan. Under this new plan, selected senior employees could be granted Performance Rights which, upon vesting, would reward the employees with ordinary shares in the Company. Performance Rights vest after three years subject to the Company’s achievement against Total Shareholder Return and Earnings Per Share growth targets. We continue to be of the view that this is an appropriate long-term incentive scheme and to date three tranches of Performance Rights have been issued under this Plan. In the last Annual Report we advised that we had commenced a search for an additional director. That search was delayed as a result of the disruption caused by Covid-19, but we were delighted to announce in December that the Board intended Further details in relation to equity-based remuneration can be found in Note 6.2 (page 70) of the financial statements within this Annual Report. Briscoe Group Limited Annual Report 2021 Board of Directors’ Review 11 Conclusion The Board is extremely proud of the performance of the norms that applied before the arrival of Covid-19. Just as the whole Briscoe Group team, the financial results and the way business responded brilliantly to the unique circumstances of the Company has endeavoured to balance the interests of the past year, we have every confidence it will continue to all stakeholder groups – the team, customers, suppliers and do so. shareholders alike. No matter how successful we have been at navigating the our customers, our suppliers and our business partners unique circumstances during 2021, we are acutely aware and the Board want to thank all of them for their enormous that the current year could prove equally challenging. efforts during this most difficult year. We fully recognise the Nevertheless we are confident that the robust response of commitment that they make to the success of this company people and organisations across the country, along with the and we are sure, share in our excitement for 2021 and beyond. Our greatest strength is the combination of our people, anticipated vaccination programme, will eventually bring us back to a position where trading conditions resemble the On behalf of the Board: Dame Rosanne Meo (Chair) Rod Duke Andy Coupe Tony Batterton Mark Callaghan From left: Mark Callaghan, Tony Batterton, Dame Rosanne Meo (Chair), Rod Duke and Andy Coupe. 12 Briscoe Group Limited Annual Report 2021 Highlights Highlights All team members paid in full during lockdowns A proactive and united response to COVID-19 $11.5 million wage subsidy repaid in full 2.5 million tonnes mixed recycling Increased customer satisfaction (NPS) across our brands Black Friday promotions produced record sales Click & Collect rolled out to all stores New online platform launched Established strategic partnership with KPMG Briscoe Group Limited Annual Report 2021 Highlights 13 “ In a year which produced so many highlights, both financial and non-financial, the ability of the business to be proactive and decisive meant we could offer reassurance to our stakeholders and ultimately protect the Group’s strong balance sheet position to support our future growth.” - Geoff Scowcroft Chief Financial Officer 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% 7.5% 701.8 10.1% 10.1% 10.0% 10.4% 73.2 9.6% 8.5% 63.4 62.6 61.3 59.4 653.0 631.9 605.1 18.8% 11.3% 10.0% 585.9 555.5 47.1 8.2% 6.1% 4.5% 2016 2017 2018 2019 2020 2021 2016 2017 2018 2019 2020 2021 2016 2017 2018 2019 2020 2021 Growth of 7.5% includes online Record net profit after tax (NPAT) The new online platform and growth of 79.7% and a slight decline of 1.7% in bricks and mortar stores despite imposed alert-level shutdowns. despite the challenges of Covid-19. nationwide roll-out of Click and *Values for 2020 and 2021 shown inclusive of impact of NZ IFRS16 Collect provided the capability to successfully manage the step- change in online volume. GROSS PROFIT MARGIN % FREE CASH FLOW $M EARNINGS PER SHARE* CENTS 43.8% 75.0 81.1 32.9 55.5 43.5 46.7 28.7 28.2 27.8 27.2 40.6% 40.1% 40.0% 40.1% 2016 2017 2018 2019 2020 2021 39.4% 21.7 2016 2017 2018 2019 2020 2021 -41.9 2016 2017 2018 2019 2020 2021 Focus on margin enhancement across all stages of product life cycle has produced significant margin improvement. Solid positive free cash flow (defined as net cash from operating activities less net cash used in investing activities) helps to maintain the Group’s strong balance sheet. Strong increase in earnings per share on the back of record earnings and profit. *Values for 2020 and 2021 shown inclusive of impact of NZ IFRS16 14 Briscoe Group Limited Annual Report 2021 Managing Director’s Review of Operations Managing Director’s Review of Operations The latest year was truly remarkable – the Covid-19 pandemic made extraordinary demands on the resilience and adaptability of the business. Our response highlighted the capability of teams in all parts of the Company. Our senior leadership team continued to demonstrate Sales of both homewares and sporting goods remained the highest level of strategic awareness and flexibility. The high for the rest of the year despite our stores in Auckland commitment and dedication of our teams – instore, in distribution and in online fulfilment – once again provided the foundations on which a strong operational performance could be built. being closed again during the regional Level 3 lockdown, for just under two weeks in August 2020. Across the full year, homeware sales rose by 6.89% to $439.2 million and those for sporting goods by 8.45% to $262.6 million. Had the operating context been known in advance I doubt anyone would have predicted the results achieved – strong increases in revenue and earnings for the year, a substantial shift upward in margins and the restoration of dividend payments just a few months after they were suspended in highly uncertain trading conditions. Results The cornerstone of our performance was a rapid and agile response to the national Level 4 lockdown, which closed all stores in our network with five weeks remaining in the first quarter. A steep decline in sales from that point onward was inevitable. Our stores remained closed for 50 days, but the impact on our performance was overtaken by a rapid increase in online trading and then strong pent-up demand when store trading resumed. It is clear that our customers are increasingly comfortable shopping in both our store and online channels, moving between them according to the needs of the moment. The results incorporate an additional week’s trading, 53 weeks compared to 52 in the previous year. The Group operates on a weekly trading and reporting cycle that requires a 53- week year every five-to-six years to realign the financial and calendar year-ends. The significant increase in gross margin, in both raw dollar and percentage terms, is perhaps the most encouraging feature of the year’s results. The massive disruptions to trading from Covid-19 accelerated our strategic plans to optimise margin. This includes; enhancing pre-season planning and buying processes, use of improved data analytics to maximise our seasonal trading events, improving inventory flow and reducing the level of clearance product. Our work to improve margins is ongoing as part of the supply chain improvement stream in our strategy programme. While every year’s trading is different, we do believe that changes made to date and others still to come will have significance for the way we operate going forward. Briscoe Group Limited Annual Report 2021 Managing Director’s Review of Operations 15 Inventories were $91.5 million at the end of the year – up As part of the refreshed Rebel Sport branding programme $4.1 million due predominantly to early landings of some our Rebel Sport stores are being converted progressively to homeware stock to avoid delays ahead of Chinese New Year. feature new signage and a modernised exterior profile. Given the impact of the pandemic on product sourcing, our strong relationships with suppliers have been incredibly Our store development programme reflects the ongoing valuable to us in securing reliable and consistent supply. We re-examination of our retail footprint – stores, online platform are very grateful to our supply partners for their collaboration and distribution centre capacity – with a view to ensuring and co-operation through this extraordinary year. we understand the optimal size and location mix to take the Company into the future. The Group invested $27.4 million in capital projects during the year, of which $18.3 million was for the development of property owned by the Group in Auckland, Silverdale and Invercargill. The balance was for the fit-out of relocated stores, online platform improvements, security system upgrades and enhancements to system software and hardware. Store Network Despite the disruptions created by Covid-19 the Group progressed a number of store development projects during the year. The Briscoes Homeware and Rebel Sport stores in Nelson were relocated in May, to a new dual site with more carparking and better access for customers. The new stores are bigger and brighter, with the Rebel Sport store featuring our new generation fit-out. The former Group-owned Rebel Sport premises were sold. The refurbishment of the Briscoes Homeware and Rebel Sport stores in Tauranga was completed in July. The new configuration features a bigger Briscoes Homeware store and new back-of-house and common team facilities. Work also continued on a number of refurbishment projects at Group-owned properties. The re-roofing of Briscoes Invercargill was completed in October 2020. The construction of a new concept Briscoes Homeware store at 36 Taylors Road, Auckland has been completed and the store is now trading. This allows us to introduce a new Rebel Sport store in the retail space on the ground floor of the Support Office building at 1 Taylors Road. The Silverdale development is still progressing well and the construction phase is well over halfway to completion. The opening of these new concept Briscoes Homeware and Rebel Sport stores in October 2021 will make it easier for our customers in Silverdale, Orewa, the Hibiscus Coast and surrounding areas to shop with us. 16 Briscoe Group Limited Annual Report 2021 Managing Director’s Review of Operations Online Our online business experienced extraordinary growth experiences. Our unique value proposition continues to with the move to a national lockdown in March 2020 and resonate strongly with customers. Our focus on driving continued to perform at higher levels through the rest of high levels of customer service in-store is measured against the year. Online sales for the full year were 79.65% above a standard retail metric – Net Promoter Score, which those for the previous year. They were 18.82% of total sales, indicates how likely customers are to recommend a store compared with 11.30% in the previous year. While the mix to friends or colleagues. Based on over 200,000 individual was clearly influenced by the closure of stores during the two pieces of feedback received during the year, both Briscoes lockdowns, we are confident that the online proportion of our Homeware and Rebel Sport continued to make business is experiencing a significant step-change upward. progress on this aspect of the business. Our online platform had been revamped in a major project We also monitor online traffic and conversion with a view to completed early in the year as part of our shift towards an understanding and improving the experience of customers online customer targeting strategy. We moved successfully using that platform. We also actively monitor social to increase the capacity of the new platform in response to sentiment on retail brands, finding that in regard to Briscoe the closure of the store network during the national lockdown. Group this is improving consistently in comparison with The implementation of online fulfilment centres throughout other retailers. our network was also crucial in dealing with the surge in online trading. The strategic initiatives established at the start of calendar 2020 have laid the foundations for a range of plans to We also completed the roll-out of Click and Collect facilities sustain and build the business over the next three to five across all stores – a great example of the speed with which years. These plans have three key dimensions: our teams can respond to accelerate plans when required. The Click and Collect facilities were invaluable during the lockdowns, proving extremely popular with shoppers and accounting for more than 30% of all our online orders during the second half of the year. It is important to note that our digital strategy also includes a significant in-store dimension – the development of digital tools for our store teams to free up time that is then available to be invested in providing advice and service to our customers. Looking Ahead The factors that underpinned our strong performance in the latest year remain in place. Our leadership team continues to act decisively to protect and improve earnings in the short-term while also ensuring that we develop strategic options and programmes that will facilitate longer-term growth. Our business is run via a lean and flat management structure in which roles are clearly defined and value driven, information and decisions travel efficiently and quick decision-making and implementation are encouraged. Our ultimate focus remains on offering our customers compelling brand propositions and enjoyable shopping • Significantly enhancing the shopping experience our customers enjoy. • An end-to-end review and redesign of our supply chain, from source to customer. • Developing new streams of revenue. We have partnered with KPMG in regard to identifying and implementing supply chain improvements and we have already realised some benefits from this exercise. We continue to see significant opportunity for growth in our existing stores and in online trading, and through further improvement in our internal systems and disciplines. Your Board is confident that, whatever conditions prevail in the current year, the Company will continue to maintain a high standard of operating and financial performance. Rod Duke Group Managing Director Briscoe Group Limited Annual Report 2021 Managing Director’s Review of Operations 17 18 Briscoe Group Limited Annual Report 2021 Strength in Our Brands Strength in Our Brands Helping Kiwi’s Live for Better Briscoes Homeware is New Zealand’s leading homewares retailer. We deliver quality you can trust through leading brands, sourced both locally and from throughout the world. Briscoes Homeware Part of New Zealand’s popular culture, led by the Briscoes Lady and our love of a sale, New Zealand has a strong connection with the Briscoes brand. Briscoes Homeware resonates strongly with New Zealanders. When surveyed 71%* of customers responded with Briscoes as their first choice. *TRA Brand Edge Research 2020 At the core of Briscoes DNA is living better. We believe that our home is an active participant in shaping who we are and how we live as individuals and as families. We don’t just fill our homes for functional or stylistic reasons, we choose the things we put in them because of the role they play in our lives. Every day, through our product ranging, our promotional foundation and our customer engagement we are helping Kiwi’s get more out of life by providing quality homeware products at great prices. We are embracing digital media and technology to engage and appeal to existing and new audiences. In 2020 we introduced Augmented Reality technology to promote our outdoor range. This allowed our customers to visualise the outdoor setting in their own space. We will continue to trial new technologies to enhance customer experience and attract new customer groups. Our social media platforms continue to grow as we focus on communicating different aspects of our brand and product range. Allowing us to build a conversation with our customers, the content we create is based on their interests, and provides useful tips and tricks, inspiration, and opportunities to engage. A highly responsive channel, metrics for engagement, intent to purchase, and revenue achieved from social media activity continue to perform strongly. Briscoe Group Limited Annual Report 2021 Strength in Our Brands 19 For our 2020/21 year our customers across NZ bought from us: 920,000 Pillows 2,000,000 Towels 68,000 Vacuum cleaners 1,700,000 Pieces of dinnerware 600,000 Glasses Living & Giving An established Kiwi brand, Living & Giving continues to grow its omnichannel presence with 63% of its sales now online. The home of premium brands such as Ecoya, Le Creuset and Jamie Oliver, if you’re looking for the perfect gift for yourself or your home, look no further. 20 Briscoe Group Limited Annual Report 2021 Strength in Our Brands Strength in Our Brands Kiwi’s love Rebel Sport. A one stop shop for all sporting gear, Rebel Sport is home of the world’s leading brands of apparel and equipment. Briscoe Group Limited Annual Report 2021 Strength in Our Brands 21 For our 2020/21 year our customers across NZ bought from us: 1,780,000 Pairs of shoes 380,000 Pairs of socks 60,000 Basketballs 998,000 Items of mens clothing 132,000 Pairs of tights Rebel Sport opened its first store in 1996 with the vision of making the world’s leading sports brands accessible to all New Zealanders. A unique, cool and innovative brand, it disrupted the conventional and pioneered the concept of big box sports retail in New Zealand. Today, Rebel Sport’s ambitions are just as lofty; to make sport happen for more New Zealanders, more often. For the first timers, the tryers, and the winners, be it Olympic gold or that first walk around the block. We have a purpose to drive the sporting environment both as a retailer selling products and as a community to drive sports participation. Delivering to this ambition, we are committed to working with sports bodies to make grass roots more accessible for all New Zealanders encouraging participation at all levels. Rebel Sport works with a number of sports associations including Basketball, Cricket, Rugby, Netball, Tennis, Volleyball, Golf and via partnerships with Weetbix Tryathlon and Round the Bays. We believe in encouraging Kiwi’s to get out there and give it a go. Why play only one sport when there’s so much more fun to be had? Moving forward our focus for Rebel Sport is to ensure we stay relevant to a passionate and dynamic sports shopper base. Investment in content and technology enables Rebel Sport to leverage sports ambassador relationships and engage sports lovers on and off the field. 22 Briscoe Group Limited Annual Report 2021 Our Customers Our Customers With the breadth of product range across Briscoes Homeware and Rebel Sport we know our brands appeal to a broad group of shoppers. During 2020, Briscoe Group undertook two significant research projects; Customer Journey mapping and defining our Customer Segmentation. These will help us to better understand our customers and their shopping habits. For both Briscoes Homeware and Rebel Sport, we mapped our customers purchase journey instore and online. The combined initiatives mapped the process our customers This year Briscoes Group has bedded in the new eCommerce platform Episerver. This allows us to concentrate on the online customer experience, with a laser focus on creating frictionless experiences for our online shoppers through user experience enhancements, personalisation and stronger online storytelling. We have also introduced a marketing automation tool, Emarsys, to start to have 1:1 conversations with our customers both through email and using data to personalise their online browsing experiences. We are investing in strenghtening our in house digital and data capability, with the objective of delivering a digitally go through to make their purchase decision informing connected online and instore experience for our customers. where we should invest to enhance customer experience. The deeper understanding of the customer journey has increased the speed of development for experience enhancements both in store and online including informing our new store concept design. Customer segmentation analytics for both brands, identified the value and behavioural habits of our shopper base. This in turn will allow us to develop more targeted marketing activations to grow our loyal shopper base beyond 2021. We now have better capability to measure the effectiveness of marketing spend and drive stronger shopper engagement. “ Knowing our customer behavior and value through segmentation will drive creative and greater relevancy in how we engage with them. It allows the business to gain visibility of our investment to ensure we have long term strategic growth with the NZ shopper. ” - Fiona Stewart GM Marketing “ We continue to focus on our omni experience and using digital to enhance the instore as well as connecting all the ways our shoppers interact with us. ” - Isabel Campbell GM Online and Digital Briscoe Group is continuously measuring customer satisfaction through Net Promoter Score (NPS). NPS is a metric used globally to measure customer engagement and advocacy levels. Continuous improvement of our NPS metrics is a focus for both brands, and we are extremely encouraged by the results, with both brands continuing to lift year on year, now sitting significantly above industry benchmarks. Briscoe Group Limited Annual Report 2021 Our Customers 23 75 NPS 2.2% I N C R E A S E O N 2 0 1 9 63NPS 6.85% I N C R E A S E O N 2 0 1 9 129K 19.03% F E E D B A C K I N C R E A S E O N 2 0 1 9 P I E C E S O F F E E D B A C K F O R F Y ‘ 2 0 ( 1 2 9 4 2 3 ) 9.2 9.2 AV E R A G E R AT I N G P E R V I S I T 2 0 2 0 AV E R A G E R AT I N G P E R V I S I T 2 0 1 9 P I E C E S O F F E E D B A C K F O R F Y ‘ 2 0 ( 8 2 3 2 3 ) 82K 47.90% F E E D B A C K I N C R E A S E O N 2 0 1 9 9.0 8.9 AV E R A G E R AT I N G P E R V I S I T 2 0 2 0 AV E R A G E R AT I N G P E R V I S I T 2 0 1 9 Brand health tracking over 2020 also shows incredible Rebel Sport’s brand health has also lifted by 4%, leading the improvements for both brands. In this highly competitive NZ sport retail category. retail market, Briscoes Homeware’s brand health metric has lifted 3% leading the marketing in homewares. In a year in which we saw customer shopping behavior significantly change, both brands grew their total customer and loyalist bases. Total active shopper base + 9% YoY. Loyalist shopper segments average spend +16% Total active shopper base + 6% YoY. Loyalist shopper segments average spend +9% Average frequency of shops - total shoppers 4.1x Average frequency of shops - loyalists 7.0x Average frequency of shops - total shoppers 3.3x Average frequency of shops - loyalists 5.2x 24 Briscoe Group Limited Annual Report 2021 Growing Together Growing Together Our People Our decision to ensure our team were paid in full throughout our work to ensure unbiased recruitment, selection and the period of the lockdown, despite uncertainty as to the form development of our people, along with ensuring we develop of government support, alongside clear communication as to and maintain an inclusive culture. The fruits of these efforts what the company would be doing to support them proved are evident: our most recent talent assessment within the to be a successful formula. business shows that almost 40% of those identified as high impact or high potential are female. From a business perspective, it also meant we laid the foundation to resume trade with the goodwill of our team To support our key business initiatives which will make and the confidence of our customers as the alert levels our team members’ jobs easier and further enhance our were lowered. customers’ shopping experience we have enhanced and leveraged our skills and expertise in internal communications, Leveraging our learning management system as a conduit training and development and change management. for communications, both to and from our team, saw engagement with the platform climb to 98%. Critical Health and Safety continues to be a priority. Encouragingly, Covid-19 related training was able to be deployed, for the journey we are on with our team through the promise example the appropriate use of masks and gloves as well of ‘Safe Home Every Day’ was validated and rewarded with as daily company updates helping to support and inform confirmation of a discount to our Experience Rating through all of our team. ACC. Our work on traffic management plans stands out as an example of how we develop and implement safe processes and behaviours as part of our overall approach. “ As much as 2020 was a year of disrupted trade and interrupted supply of products, above all else, it was a year of people. I am proud of the way in which our Company responded to the challenges, whether they were team on the frontline or working in support roles throughout the business.” - Aston Moss Group General Manager Human Resources Alongside supporting our team members through what proved to be a tumultuous and uncertain year, we increased our investment through creation of our new Management and Leadership programme. This programme is critical to our continued capability building, ensuring we set both new and existing managers up for success. Just as we are building organisational capability throughout our retail leadership team, so too we continue to build the capabilities of our team members in our support roles. Gender, as just one lens through which we evaluate our progress on diversity, has been positively impacted by “ I’m very proud of the way our team rose to meet the challenges and uncertainty of 2020. Pivoting rapidly to scale up our fulfilment network, roll out click and collect and operate dark stores, each challenge was met efficiently and with resounding positivity from the team. With Covid as a backdrop, it’s a true credit to the team to see customer service levels continuing to improve and witness many new initiatives taking flight to ensure sustainable growth.” - Nick Turner General Manager Retail Operations & Property Briscoe Group Limited Annual Report 2021 Growing Together 25 Our Community Briscoe Group Scholarship Programme Briscoe Group has been a proud First Foundation Partner since 2013. With the generous support of the RA Duke Trust, we help fulfil the First Foundation mission of providing students access to higher education through the Briscoe Group-First Foundation Scholarship. Each year, applications are opened to Briscoe Group team members and immediate family members currently enrolled at a NZ Secondary school in Year twelve or thirteen. Successful applicants receive a three-year scholarship that includes significant financial support, mentorship, and paid work experience. Twenty three scholarships have been awarded to date, with 14 scholars currently progressing with their studies and supported by the programme. The start of 2021 saw the award of a further three scholarships from within the Group. We were delighted to recognise a scholar (Jarod Goodwin, pictured below) who has completed both his tertiary study and the scholarship programme, made all the more exciting in seeing him move to full time employment in one of our support teams. Cure Kids Partnership At a charitable level, since 2004 Briscoe Group Limited has been a key partner of Cure Kids, a charity set up to find cures and better treatments for serious illnesses and diseases that affect thousands of children in New Zealand. Our generous customers, staff and suppliers support the Group’s efforts to raise funds for this wonderful charity and we’re proud to say that in 16 years of partnership we have raised over $8.1 million dollars together. In 2020, a year of such significant disruption for our customers and stores, we were proud to raise $686,000 for Cure Kids health research. “ Briscoe Group is a huge part of our DNA, our relationship teed off with the very first fundraising Golf Day, moving on to become a regular annual event for Cure Kids. The team at Cure Kids are inspired by the enthusiasm and passion of all the team at Briscoe Group fundraising nationwide.” - Frances Benge CEO Cure Kids Pass It Forward Rebel Sport’s key community partnership, Pass It Forward was born from a collaboration with a key supplier with the objective of giving every child the opportunity to play sport. The Pass It Forward initiative provides sporting gear to under-funded schools. In the past 5 years Rebel Sport and Pass It Forward have given away over 40,000 pieces of equipment, equating to more than $1 million in value. Grassroots Sports Partnerships In 2020 we also continued our support for a number of Within NZ there is a renewed focus on youth sports, with employees furthering their education at tertiary level through a shift in emphasis from performance to participation. MBA’s and other post- graduate studies. In 2021 we have Through partnerships with sporting associations such as the managers progressing their studies through the University of Basketball New Zealand 3x3 and the Sanitarium Weetbix Auckland and Auckland University of Technology. Tryathlon, we are working hard to make sport accessible and fun for New Zealand’s youth. Rebel Sport is proud to partner with a large range of sporting organisations. 26 Briscoe Group Limited Annual Report 2021 Growing Together Our Environment Briscoe Group remains committed to reducing its impact on the environment. We continue to work with suppliers on a range of initiatives. Last year our supplier of Cloud 9 pillows, moved to compostable packing removing around 500,000 plastic bags annually from landfill. This year we have continued to introduce improvements; replacing the Cloud 9 plastic shower curtain sleeves with cardboard, plastic packaging has been removed from our Hampton & Mason frypans, and Simple Clean has reduced the plastic in their cleaning cloths packaging. Many of the Briscoes Homeware and Rebel Sport brand partners have developed sustainable ranges such as Adidas Parley Green & Parley Blue made from recycled materials and the Just Home recycled range. We are proud to introduce the ecostore range within Briscoes, a brand established for its environmental purpose. “ As well as developing our own plans, we embrace those developments being made by our supplier partners to produce more environmentally responsible products and packaging.” - Fraser Collins Group GM - Mechandise We have compliance agreements in place with our partners to ensure products are produced ethically. We have always been committed to the highest standards of social responsibility and work with international organisations to uphold this. Operational improvements have also delivered waste reduction. Briscoe Group has three waste streams; • Clear Plastics • Cardboard • General We work closely with EnviroWaste, our waste management partner to better educate our stores on waste management and disposal. Operational improvement such as the implementation of digital fulfilment has also delivered waste reduction. In the coming year we are forecasting to remove over 2 million pieces of paper from our in-store processes. This year, as part of our LED light program, we have introduced lighting wellness for each of our stores. In addition to our new store builds we have six stores planned for refurbishment in 2021. From this initiative we estimate a reduction of 15-30% power consumption per store. This work will also deliver improved lux output, greater uniformity of lighting and brighter stores for an enhanced customer experience. Briscoe Group is actively working with Retail NZ on sustainability issues that may impact the broader retail industry in New Zealand. We have a desire to work with like minded retailers on how we might reduce our environmental footprint and do the right thing by New Zealanders. We will release more on this initiative in the coming year. Recycling 2.545m tonnes of mixed recycling Plastic Packaging Reduction Over 134,000 units Online Fulfilment Paper usage targeted saving of 60% for 2021/22 LED light initiative Up to 30% reduction in consumption Briscoe Group Limited Annual Report 2021 Growing Together 27 28 Briscoe Group Limited Annual Report 2021 Winning Moving Forward Winning Moving Forward Our Strategic Progress From the strategy formulated in early 2020 to create sustainable growth over the next 3-5 years solid progress has been made. We successfully managed to trade the business strongly whilst laying the foundations for future growth. In the first year of our strategic plan we have focused heavily on customer and supply chain improvements. “ Although 2020 was a challenging year due to the Covid-19 pandemic, our strategic programme has continued at pace due to the high level of engagement and ownership from our team. We have created the foundations to deliver sustainable growth over the coming years. ” - Andrew Scott COO 2020/21 Achievement Attract Customer Grow Retain • Completion of online replatform. • Nationwide roll out of Click and Collect. • Creation of customer segmentation analytics providing a • deeper understanding of customer behaviour and value. Increased customer satisfaction levels, Briscoes up to 75 (up 1.2 on last year) and Rebel Sport 63 (up 3.8 on last year). • Active customer base increase of over 20%. Future Supply Chain • Further nationwide expansion of our Online order fulfilment sites – delivering 1.5m customer parcels. • Optimisation of our online picking process to increase efficiencies. • Enhanced data analytics capability to increase product availability. • Enhancing pre-season planning and buying processes. • Use of improved data analytics to maximise our seasonal trading • events. Improving inventory flow and reducing the level of clearance product. • Embedded the strategic partnership with KPMG. New Revenues • Completed the software development for extended online product ranging. • Optimised online delivery fee profile. Briscoe Group Limited Annual Report 2021 Winning Moving Forward 29 Over 30 analytical processes and products have been created to support the way we buy, how we move and store inventory, how we plan, and how we manage inventory within our 88 Stores. These processes also connect to our suppliers, at the start of the value chain, and most importantly, deliver value to our customers at the end of the chain. In the year ahead we will have completed our network “KPMG New Zealand is proud to continue supporting Briscoe Group throughout 2020 and 2021 to improve their supply chain and operations. The program is making great progress, having established a new data and analytics capability that services the rest of the business ” modelling. This will provide the business with a comprehensive - Ian Williamson, development plan on the required supply chain infrastructure KPMG Partner - Management Consulting to achieve our future growth. 2021/22 Key focus areas Attract • Deliver mobile solutions for store team members and reinvest • time to increase customer service levels. Increase speed of development for customer experience enhancements both in store and online. Customer • Leverage customer segmentation to drive increased visit frequency. Grow Retain • Launch new email CRM automation tool to drive relevancy and customer engagement. Future Supply Chain • Optimise supply chain efficiency to reduce split parcels and optimise online profitability. • Optimise all stages of the merchandise process, including seasonal and promotional buy process, allocation and replenishment. • Increase on shelf availability through new analytical tools. • Complete future DC network modelling analysis. New Revenues • Roll out extended online ranging of new products, including premium homewares and sporting goods. • Trial new product categories online and in store. • Proactively review new retail opportunities. 30 Briscoe Group Limited Annual Report 2021 Winning Moving Forward 32 Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements Consolidated Financial Statements For the period ended 31 January 2021 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 blue font for easier identification. For the 53 week period ended 31 January 2021Table 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 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 Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 33 35 36 37 38 39 41 42 42 42 44 44 46 47 47 48 49 50 51 51 51 51 52 52 53 5 4 56 56 57 57 58 58 58 34 Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements Table of Contents 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 controlling company 6.1.2 Key management personnel 6.1.3 Directors’ fees and dividends 6.2 Employee Equity-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 Impact of Covid-19 6.5 Events After Balance Date 6.6 New Accounting Standards 59 59 60 60 60 60 61 61 61 63 64 66 66 66 67 67 68 68 68 68 69 70 70 71 73 73 73 74 74 For the 53 week period ended 31 January 2021Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 35 Directors’ Approval of Consolidated Financial Statements Authorisation for Issue The Board of Directors authorised the issue of these Consolidated Financial Statements on 16 March 2021. Approval by Directors The Directors are pleased to present the Consolidated Financial Statements for Briscoe Group Limited for the 53 week period ended 31 January 2021. (Comparative period is for the 52 week period ended 26 January 2020). Dame Rosanne Meo CHAIRMAN 16 March 2021 For and on behalf of the Board of Directors Rod Duke GROUP MANAGING DIRECTOR For the 53 week period ended 31 January 2021 36 Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements Consolidated Income Statement Sales revenue Cost of goods sold Gross profit Other operating income Store expenses Administration expenses Notes 2.2 Period ended 31 January 2021 $000 Period ended 26 January 2020 $000 701,797 (394,681) 307,116 139 (110,845) (80,524) 653,017 (395,515) 257,502 9,661 (100,342) (69,598) Earnings before interest and tax 115,886 97,223 Finance income Finance costs Net finance cost 421 724 (14,888) (13,635) 5.1 (14,467) (12,911) Profit before income tax 101,419 84,312 Income tax expense 2.3.1 (28,220) (21,729) Net profit attributable to shareholders 73,199 62,583 Earnings per share for profit attributable to shareholders: Basic earnings per share (cents) Diluted earnings per share (cents) 2.4 2.4 32.9 32.8 28.2 28.0 The above consolidated income statement should be read in conjunction with the accompanying notes. For the 53 week period ended 31 January 2021Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 37 Consolidated Statement of Comprehensive Income Notes Period ended 31 January 2021 $000 Period ended 26 January 2020 $000 73,199 62,583 Net Profit attributable to shareholders Other comprehensive income: Items that will not be subsequently reclassified to profit or loss: Change in value of investment in equity securities 4.1 (92,174) 38,513 Items that may be subsequently reclassified to profit or loss: Fair value gain recycled to income statement from cashflow hedge reserve Fair value (loss)/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 loss/(gain) taken to cashflow hedge reserve Total other comprehensive (loss)/income Total comprehensive (loss)/income attributable to shareholders 2.3.2 2.3.2 (608) (2,084) (4,077) 3,022 170 1,142 584 (94,112) (846) 37,754 (20,913) 100,337 The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes. For the 53 week period ended 31 January 202138 Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements Consolidated Balance Sheet As at 31 January 2021 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 Notes 31 January 2021 $000 26 January 2020 $000 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 5.3.4 100,417 3,534 91,473 - 32 195,456 117,397 3,608 255,850 14,750 61,930 453,535 648,991 80,952 19,277 12,413 3,378 116,020 930 272,994 273,924 389,944 259,047 61,839 (2,457) 444 (25,923) 225,144 259,047 67,414 3,533 87,414 5,408 269 164,038 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 The above consolidated balance sheet should be read in conjunction with the accompanying notes. Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 39 Consolidated Statement of Cash Flows Notes Period ended 31 January 2021 $000 Period ended 26 January 2020 $000 701,574 15 3 - 450 22 702,064 652,701 12 6,832 2,720 850 97 663,212 (450,182) (450,085) (80,006) (14,889) (27,508) (22,913) (595,498) (75,593) (13,631) (20,310) (24,085) (583,704) 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 106,566 79,508 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 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 3.3 4.1 5.3.2 1,996 1,996 11 11 (25,540) (17,410) (1,889) - (27,429) (25,433) 919 - 919 (1,768) (13,602) (32,780) (32,769) 1,620 - 1,620 5.3.3 (33,370) (45,494) (15,588) (48,958) (48,039) 33,094 67,414 (91) (16,264) (61,758) (60,138) (13,399) 80,777 36 Cash and cash equivalents at period end 3.1.1 100,417 67,414 For the 53 week period ended 31 January 202140 Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements Consolidated Statement of Cash Flows (continued) RECONCILIATION OF NET CASH FLOWS FROM OPERATING ACTIVITIES TO REPORTED NET PROFIT Reported net profit attributable to shareholders 73,199 62,583 Period ended 31 January 2021 $000 Period ended 26 January 2020 $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/surrender of assets Impact of changes in working capital items 31,845 - (40) 1,563 183 501 34,052 27,326 (790) 95 510 273 148 27,562 Decrease (increase) in trade and other receivables 39 (806) 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 NET DEBT RECONCILIATION Cash and cash equivalents Cash and cash equivalents at beginning of period Net increase in cash and cash equivalents Effect of exchange rate changes Cash and cash equivalents at period end Lease liabilities Opening value Movement on transition Cash flows Lease acquisitions Lease surrenders Total lease liabilities at period end Net debt reconciliation (5,622) 7,518 (9,974) 7,354 (685) 106,566 (6,907) (1,935) 2,925 (3,914) (10,637) 79,508 Period ended 31 January 2021 $000 Period ended 26 January 2020 $000 67,414 33,094 (91) 100,417 (296,408) - 15,588 (13,126) 1,675 (292,271) (191,854) 80,777 (13,399) 36 67,414 - (259,462) 16,264 (53,210) - (296,408) (228,994) The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. For the 53 week period ended 31 January 2021Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 41 Consolidated Statement of Changes in Equity Notes Share Capital $000 Cashflow Hedge Reserve $000 Equity-Based Remuneration Reserve $000 Other Reserves $000 Retained Earnings $000 Total Equity $000 Balance at 27 January 2019 Impact of adopting NZ IFRS 16 58,929 240 1,097 27,738 185,537 273,541 - - - - (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 4.1 Net fair value loss taken through cashflow hedge reserve Total comprehensive (loss)/income for the period Transactions with owners: Dividends paid Share options charged to income statement Performance rights charged to income statement 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 6.2.3 Deferred tax on equity-based remuneration 2.3.2/6.2.3 - - - - (759) (759) - - - - - - Balance at 26 January 2020 60,752 (519) Net profit attributable to shareholders for the period Other comprehensive income: Change in value of investment in equity securities 4.1 Net fair value loss taken through cashflow hedge reserve Total comprehensive (loss)/income for the period Transactions with owners: Dividends paid Share options charged to income statement Performance rights charged to income statement 5.3.3 6.2.1 6.2.2 - - - - - - - Share options exercised 5.3.2/6.2 1,087 Transfer for share options lapsed and forfeited 6.2.3 Deferred tax on equity-based remuneration 2.3.2/6.2.3 - - - - (1,938) (1,938) - - - - - - - - - - - 168 105 (203) (373) 47 841 - - - - - - 183 (168) (521) 109 - 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 66,251 184,794 312,119 - 73,199 73,199 (92,174) - - - (92,174) (1,938) (92,174) 73,199 (20,913) - - - - - - (33,370) (33,370) - - - 521 - - 183 919 - 109 Balance at 31 January 2021 61,839 (2,457) 444 (25,923) 225,144 259,047 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. For the 53 week period ended 31 January 2021 42 Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 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 2021. 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 53-week period 27 January 2020 to 31 January 2021 and provide a balance sheet as at 31 January 2021. The comparative period is in respect of the 52-week period 28 January 2019 to 26 January 2020. 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. For the 53 week period ended 31 January 2021Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 43 1. Basis of Preparation Subsidiaries Activity 2021 Interest 2020 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. For the 53 week period ended 31 January 202144 Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 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 (2020: 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 (New Zealand) 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. This measure should not be viewed in isolation, nor considered as a substitute for measures reported in accordance with NZ IFRS. This non-GAAP financial measure may not be comparable to similarly titled amounts reported by other companies. For the period ended 31 January 2021 INCOME STATEMENT Total sales revenue Gross profit Homeware $000 Sporting goods $000 Eliminations/ Unallocated Total Group $000 $000 439,234 262,563 192,293 114,823 - - 701,797 307,116 Earnings before interest and tax 66,979 46,495 2,412 115,886 Finance income Finance costs Net finance cost Income tax expense Net profit after tax BALANCE SHEET ITEMS: Assets Liabilities 72 (9,851) 333 16 (4,925) (112) 421 (14,888) (9,779) (4,592) (96) (14,467) (15,821) (11,736) (663) (28,220) 41,379 30,167 1,653 73,199 363,231 217,358 68,4021. 648,991 254,506 135,178 260 389,944 OTHER SEGMENTAL ITEMS: Acquisitions of property, plant and equipment, intangibles and investments 23,497 3,931 Depreciation and amortisation expense 20,333 11,512 - - 27,428 31,845 1. Investment in equity securities Intercompany eliminations Other balances $000 61,930 (2,193) 8,665 68,402 For the 53 week period ended 31 January 2021Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 45 2. Performance 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) 28,990 337,014 257,717 15,332 17,309 95,205 36,447 515 (4,560) (4,045) (9,075) 23,327 220,417 145,045 3,846 10,017 - - 11,386 24 (131) (107) (1,013) 10,266 653,017 257,502 97,223 724 (13,635) (12,911) (21,729) 62,583 139,1171. (18,333) 696,548 384,429 13,602 - 32,780 27,326 For the period ended 26 January 2020 INCOME STATEMENT Total sales revenue Gross profit Earnings before interest and tax Finance income Finance costs Net finance cost 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 For the 53 week period ended 31 January 202146 Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 2. Performance 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. Profit before income tax includes the following specific income and expenses: Income Rental income Dividends received Premium from KMD rights issue Insurance recovery Gain on lease surrender 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: 1. Statutory Audit Half year review Other services 1. Refer to Note 6.1.1 in relation to tax services performed by PwC in relation to RA Duke Trust. Period ended 31 January 2021 Period ended 26 January 2020 $000 $000 15 3 - 22 99 8,400 1,745 21,700 14,772 27 85,352 183 108 26 - 12 6,832 2,720 97 - 6,594 824 19,908 13,504 1,215 73,712 273 108 26 - For the 53 week period ended 31 January 2021Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 47 2. Performance 2.3 Taxation Current and deferred income tax The income tax expense for the period is the tax payable on the current period’s taxable income based on the income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in New Zealand, being the country where the Group operates and generates taxable income. The Group periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is provided in full, using the liability method, on temporary differences arising between tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and liabilities are offset when the entity has a legal enforceable right to offset and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. Goods and Services Tax (GST) The income statement, statement of comprehensive income and statement of cash flows have been prepared so that all components are stated exclusive of GST. All items in the balance sheet are stated net of GST, with the exception of trade receivables and trade payables, which include GST invoiced. 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: Period ended 31 January 2021 Period ended 26 January 2020 $000 $000 30,311 21,994 120 156 30,431 22,150 Decrease in future tax benefit current period (1,408) (294) Tax effect of disposal of buildings Tax effect of legislative changes Adjustments for prior periods (203) (478) (122) - - (127) (2,211) (421) Total income tax expense 28,220 21,729 For the 53 week period ended 31 January 202148 Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 2. Performance (b) Reconciliation of income tax expense to tax rate applicable to profits Profit before income tax expense Tax at the corporate rate of 28% (2020: 28%) Tax effect of amounts which are either non-deductible or non-assessable in calculating taxable income Tax effect of disposal of buildings Tax effect of legislative changes Prior period adjustments Total income tax expense Period ended 31 January 2021 Period ended 26 January 2020 $000 $000 101,419 28,397 506 (203) (478) (2) 28,220 84,312 23,607 (1,906) - - 28 21,729 The Group has no tax losses (2020: Nil) and no unrecognised temporary differences (2020: Nil). 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: At 27 January 2019 Impact of adopting NZ IFRS 16 Credited / (charged) to the income statement Credited to equity Net credited to other comprehensive income At 26 January 2020 Credited to the income statement Credited to equity Net credited to other comprehensive income Depreciation $000 Provisions $000 Derivative financial instruments $000 Net lease liability $000 (162) 3,674 (94) - 64 - - (98) 188 - - - (663) 47 - - - - 2961. 3,058 202 339 109 - - - 7541. - 7,494 1,020 - - 8,514 1,684 - - Total $000 3,418 7,494 421 47 296 11,676 2,211 109 754 At 31 January 2021 90 3,506 956 10,198 14,750 1. Net credited to other comprehensive income comprises deferred tax on fair value gain taken to income statement of $170,211 (2020: deferred tax on fair value gain of $1,141,574) and deferred tax on fair value loss taken to cash flow hedge reserve of $583,545 (2020: deferred tax on fair value gain of $846,031). For the 53 week period ended 31 January 2021Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 49 2. Performance (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) Period ended 31 January 2021 $000 Period ended 26 January 2020 $000 (4,895) (6,830) (30,431) (22,150) 22,675 23,761 238 324 Balance at end of period (12,413) (4,895) 2.3.3 Imputation credits Imputation credits available for use in subsequent accounting periods: Period ended 31 January 2021 $000 Period ended 26 January 2020 $000 107,174 92,284 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. For the 53 week period ended 31 January 202150 Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 2. Performance 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 and performance rights. 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 and performance rights to issue ordinary shares were exercised and converted into shares. Net profit attributable to shareholders $000 Basic Weighted average number of ordinary shares on issue (thousands) Basic earnings per share Diluted Period ended 31 January 2021 Period ended 26 January 2020 73,199 62,583 222,340 221,998 32.9 cents 28.2 cents Weighted average number of ordinary shares on issue adjusted for share options and performance rights issued but not exercised (thousands) Diluted earnings per share 223,142 223,872 32.8 cents 28.0 cents For the 53 week period ended 31 January 2021 Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 51 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. Period ended 31 January 2021 $000 Period ended 26 January 2020 $000 Cash at bank or on hand 100,417 67,414 As at 31 January 2021 the Group held foreign currency equivalent to NZ$0.735 million (2020: NZ$2.372 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. Trade receivables Prepayments Other receivables Period ended 31 January 2021 $000 Period ended 26 January 2020 $000 431 611 1,937 2,198 1,166 724 Total trade and other receivables 3,534 3,533 No interest is charged on trade receivables. For the 53 week period ended 31 January 2021 52 Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 3. Operating Assets and Liabilities 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 31 January 2021 $000 Period ended 26 January 2020 $000 Finished goods 96,027 90,204 Inventory provisions and adjustments (4,554) (2,790) Net inventories 91,473 87,414 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. For the 53 week period ended 31 January 2021Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 53 3. Operating Assets and Liabilities Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions relate to returns in relation to sales of goods directly imported by the Group and are expected to be fully utilised within the next twelve months. Provisions relating to inventory, receivables and employee benefits have been treated as part of those specific balances. There are no other provisions relating to these financial statements. Trade payables Employee entitlements Period ended 31 January 2021 $000 Period ended 26 January 2020 $000 50,460 60,434 15,809 10,463 Other payables and accruals 15,516 11,107 Provisions 97 108 Total trade and other payables 81,882 82,112 Shown in balance sheet as: Current liabilities Non-current liabilities 80,952 81,260 930 852 Total trade and other payables 81,882 82,112 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 31 January 2021 $000 Period ended 26 January 2020 $000 For the 53 week period ended 31 January 202154 Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 3. Operating Assets and Liabilities 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. For the 53 week period ended 31 January 2021Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 55 3. Operating Assets and Liabilities Land and buildings $000 Plant and equipment $000 Total $000 At 27 January 2019 Cost 77,115 79,556 156,671 Accumulated depreciation (5,702) (58,953) (64,655) Net book value 71,413 20,603 92,016 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 Period ended 31 January 2021 Opening net book value Additions Disposals Reclassified as held-for-sale asset Depreciation charge Closing net book value At 31 January 2021 Cost Accumulated depreciation 71,413 4,671 - (5,408) 20,603 12,739 (159) - 92,016 17,410 (159) (5,408) (1,426) (5,168) (6,594) 69,250 28,015 97,265 74,853 (5,603) 85,857 (57,842) 160,710 (63,445) 69,250 28,015 97,265 69,250 18,504 (263) 3,410 28,015 7,036 (155) - 97,265 25,540 (418) 3,410 (1,842) (6,558) (8,400) 89,059 28,338 117,397 96,010 (6,951) 89,175 (60,837) 185,185 (67,788) Net book value 89,059 28,338 117,397 Capital commitments Capital commitments in relation to property, plant and equipment at balance date not provided for in the financial statements Period ended 31 January 2021 Period ended 26 January 2020 $000 $000 7,4581. 22,740 1. $6.5 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 (2020: $22.1 million). For the 53 week period ended 31 January 202156 Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 3. Operating Assets and Liabilities 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. 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. For the 53 week period ended 31 January 20213.5.1 Right-of-use assets: Period ended 26 January 2020 Movements on transition Additions Depreciation for the period Closing carrying amount At 26 January 2020 Cost Accumulated depreciation Carrying amount Period ended 31 January 2021 Opening carrying amount Additions Surrender Depreciation for the period Closing carrying amount At 31 January 2021 Cost Accumulated depreciation Carrying amount 3.5.2 Lease liabilities: Opening value Movements on transition Additions Surrender Interest for the period Lease payments made Total lease liabilities Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 57 3. Operating Assets and Liabilities Land and Buildings $000 232,699 53,210 (19,908) 266,001 285,909 (19,908) 266,001 266,001 13,126 (1,577) (21,700) 255,850 296,491 (40,641) 255,850 As at 31 January 2021 $000 As at 26 January 2020 $000 296,408 - 13,126 (1,675) 14,772 (30,360) 292,271 - 259,462 53,210 - 13,504 (29,768) 296,408 For the 53 week period ended 31 January 202158 Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 3. Operating Assets and Liabilities 3.5.3 Lease liabilities maturity analysis: Within one year One to five years Beyond five years Total Current Non-current Total Minimum lease payments $000 33,170 124,032 263,211 420,413 Interest $000 (13,893) (47,128) (67,121) (128,142) Present Value $000 19,277 76,904 196,090 292,271 19,277 272,994 292,271 3.5.4 Lease related expenses included in the income statement: Depreciation Short-term leases Interest on leases Total 3.5.5 Lease payments included in the cashflow statement: Total cash outflow in relation to leases Period ended 31 January 2021 $000 Period ended 26 January 2020 $000 21,700 27 14,772 36,499 19,908 1,215 13,504 34,627 Period ended 31 January 2021 $000 Period ended 26 January 2020 $000 30,360 29,768 For the 53 week period ended 31 January 2021Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 59 4. Investments This section explains how the Group records investments made in listed securities. 4.1 Investment in Equity Securities During 2015, 2018 and 2019 Briscoe Group Limited acquired a total of 48,007,465 shares in Kathmandu Holdings Limited (KMD) for a cost of $87,853,048. This holding represented a 6.77% ownership in KMD as at 31 January 2021. 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 31 January 20211. . At 27 January 2019 Additions Change in fair value credited to other reserves At 26 January 2020 Additions Change in fair value credited to other reserves At 31 January 2021 $000 101,989 13,602 38,513 154,104 - (92,174) 61,930 1. Fair value determined to be $1.29 per share as per NZX closing price of Kathmandu Holdings Limited as at 29 January 2021 (2020: $3.21) (Level 1 in the fair value hierarchy). For the 53 week period ended 31 January 202160 Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 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 2021. 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 facility was not drawn down during the period. 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 31 January 2021. (2020: Nil). Net finance income / (costs) Interest income Interest expense - leases Interest expense – other Other finance costs Net finance cost Period ended 31 January 2021 $000 Period ended 26 January 2020 $000 421 724 (14,772) (13,504) (4) (11) (112) (120) (14,467) (12,911) 5.2 Financial Risk Management The Group’s activities expose it to various financial risks including credit risk, liquidity 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). For the 53 week period ended 31 January 2021Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 61 5. Financing and Capital Structure 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. 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 drawdowns of established funding facilities and placements of short term deposits, as operating cash flows necessitate. The Group’s short to medium term liquidity position is monitored daily and reported to the Board monthly. 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. For the 53 week period ended 31 January 202162 Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 5. Financing and Capital Structure The table below analyses the Group’s financial liabilities and gross-settled forward foreign exchange contracts into relevant maturity groupings based on the remaining period from the balance sheet date to the contractual maturity date. The cash flow hedge ‘outflow’ amounts disclosed in the table are the contractual undiscounted cash flows liable for payment by the Group in relation to all forward foreign exchange contracts in place at balance date. The cash flow hedge ‘inflow’ amounts represent the corresponding injection of foreign currency back to the Group as a result of the gross settlement on those contracts, converted using the forward rate at balance date. The carrying value shown is the net amount of derivative financial liabilities and assets as shown in the balance sheet. Changes in the carrying value affect profit when the underlying inventory to which the derivatives relate, is sold. Trade and other payables are shown at carrying value in the table. No discounting has been applied as the impact of discounting is not significant. An analysis detailing remaining contractual maturities for lease liabilities is shown in Note 3.5.3. As at 31 January 2021 Trade and other payables (63,195) - - - (63,195) (63,195) 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 26 January 2020 Trade and other payables Forward foreign exchange contracts Cash flow hedges: - outflow - inflow - Net (22,359) (17,787) (19,481) (1,739) (61,366) 20,971 16,777 18,524 1,748 58,020 (1,388) (1,010) (957) 9 (3,346) (3,346) 3 months or less $000 (69,233) 3 – 6 months $000 6 – 9 months $000 9 - 12 months $000 Total $000 Carrying Value $000 - - - (69,233) (69,233) (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) The cash flow hedges inflow amounts use the forward rate at balance date. For the 53 week period ended 31 January 2021Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 63 5. Financing and Capital Structure 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: 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 31 January 2021 $000 Period ended 26 January 2020 $000 32 32 3,378 3,378 269 269 1,014 1,014 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. For the 53 week period ended 31 January 2021 64 Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 5. Financing and Capital Structure At balance date these contracts are represented by assets of $32,361 (2020: $269,484) and liabilities of $3,378,483 (2020: $1,014,488) and together are included in equity as part of the cash flow hedge reserve, net of deferred tax, as a net loss of $2,409,208 (2020: net loss $536,403). The cash flow hedge reserve also consists of gains and losses, net of deferred tax, from foreign currencies used as hedges, as a net loss of $47,826 (2020: net gain of $17,341). The total of these net gains and losses amount to a net loss of $2,457,034 (2020: net loss $519,062). 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 (2020: 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% / +10% (2020: -10% / +5%) in the NZD against the USD, from the period-end rate of 0.7168 (2020: 0.6617), • A shift of -0.25% / +0.25% (2020: -0.25% / +0.25%) in market interest rates from the period-end weighted average deposit rate of 0.35% (2020: 1.51%). • A shift of -10% / +20% (2020: -10% / +20%) in the NZX share price of Kathmandu Holdings Ltd from the period-end closing share price of $1.29 (2020: $3.21) 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. As at 31 January 2021 Financial Assets: Interest rate Foreign exchange rate Equity price Carrying -0.25% +0.25% -10% +10% -10% +20% amount Profit Equity Profit Equity Equity Equity Equity Equity $000 $000 $000 $000 $000 $000 $000 $000 $000 Cash and cash equivalents1. 100,417 (179) (179) 179 179 59 (48) Derivatives – designated as cashflow hedges (Forward foreign exchange contracts)2. 32 Investment in equity securities3. 61,930 Financial Liabilities: Derivatives – designated as cashflow hedges (Forward foreign exchange contracts)2. 3,378 - - - - - - - - - - - - - - - - 306 (254) - - (6,193) 12,386 4,296 (3,579) - - Total increase / (decrease) (179) (179) 179 179 4,661 (3,881) (6,193) 12,386 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. For the 53 week period ended 31 January 2021 Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 65 5. Financing and Capital Structure 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) 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. 1,014 - - - - - - - - - - - - - - - - 1,899 (813) - - (15,410) 30,821 3,221 (1,383) - - Total increase / (decrease) (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. 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. For the 53 week period ended 31 January 2021 66 Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 5. Financing and Capital Structure 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 31 January 2021 Period ended 26 January 2020 Period ended 31 January 2021 Period ended 26 January 2020 Shares Shares $000 $000 Opening ordinary shares 222,188,500 221,599,500 60,752 58,929 Issue of ordinary shares arising from the exercise of options 277,500 589,000 1,0871. 1,8231. Balance at end of period 222,466,000 222,188,500 61,839 60,752 1. When share 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 277,500 shares issued during the period ended 31 January 2021 were $168,415 and $918,525 respectively (2020: $202,970 and $1,619,750 respectively for the 589,000 shares issued). For the 53 week period ended 31 January 2021 Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 67 5. Financing and Capital Structure 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. Special dividend for the period ended 31 January 2021 Interim dividend for the period ended 31 January 2021 Final dividend for the period ended 26 January 20201. Interim dividend for the period ended 26 January 2020 Final dividend for the period ended 27 January 2019 Period ended 31 January 2021 Cents per share Period ended 26 January 2020 Cents per share Period ended 31 January 2021 $000 Period ended 26 January 2020 $000 6.00 9.00 - - - - - - 8.50 12.00 13,348 20,022 - - - - - - 18,881 26,613 15.00 20.50 33,370 45,494 1. The final dividend of 12.50 cps for year ended 26 January 2020 announced on 16 March 2020 was cancelled on 23 March 2020 as a result of potential impact of Covid-19. 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 $238,416 (2020: $323,716) were provided to shareholders not tax resident in New Zealand, for which the Group received a Foreign Investor Tax Credit entitlement. On 16 March 2021 the Directors resolved to provide for a final dividend to be paid in respect of the period ended 31 January 2021. The dividend will be paid at a rate of 13.50 cents per share for all shares on issue as at 24 March 2021, 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). For the 53 week period ended 31 January 202168 Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 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 (net of rental relief) of $613,663 (2020: $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 (net of rental relief) of $520,001 (2020: $564,598) 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 (including RA Duke Limited) received dividends of $25,714,289 (2020: $35,035,134). • P Duke, spouse of RA Duke, received payments of $65,000 (2020: $65,000) in relation to her employment as an overseas buying specialist with Briscoe Group Limited, and rental payments (net of rental relief) of $918,570 (2020: $825,000) as owner of the Briscoes Homeware premises at Panmure, Auckland under an agreement to lease premises to Briscoes (NZ) Limited. • The RA Duke Trust paid PwC $24,950 for tax services performed in relation to shareholder continuity as a result of changes made to the RA Duke Trust Deed. 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: Period ended 31 January 2021 Period ended 26 January 2020 $000 $000 Salaries and other short-term employee benefits 2,854 2,274 Equity-based remuneration Directors’ fees Total benefits 100 293 79 295 3,247 2,648 Key management did not receive any termination benefits during the period (2020: Nil). Key management did not receive and are not entitled to receive any post-employment or long-term benefits (2020: Nil). Executives included in key management received dividends of $143,151 (2020: $239,766) in relation to Briscoe Group shares held. For the 53 week period ended 31 January 2021 Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 69 6. Other Notes 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 HJM Callaghan2. Period ended 31 January 2021 Period ended 26 January 2020 Directors’ fees Dividends Directors’ fees Dividends $000 $000 $000 $000 - 132 - 78 77 6 293 - - - - 2 - 2 - 132 12 74 77 - 295 - - 1 - 2 - 3 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 HJM Callaghan2. 1. Mary Devine resigned as a Director effective from 31 March 2019. 2. Mark Callaghan was appointed by the Board as a Director effective from 1 January 2021. Period ended 31 January 2021 Period ended 26 January 2020 $000 $000 25,714 35,035 15 - 3 - - 21 - 4 - - For the 53 week period ended 31 January 202170 Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 6. Other Notes 6.2 Employee Equity-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 $Nil (2020: $167,910) 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 31 January 2021 Period ended 26 January 2020 Weighted average exercise price Options Weighted average exercise price Options $ per share 3.31 - - 3.31 3.31 - 000 1,135 - - (277) (858) - $ per share 3.09 - 3.25 2.75 2.75 3.31 000 2,472 - (435) (589) (313) 1,135 The weighted average share price for options exercised during the period was $3.43 (2020: $3.46). There were no outstanding options at balance date (2020: 1,135,000 of which 1,135,000 were exercisable). Share options outstanding at the end of the period have the following expiry dates, exercise dates and exercise prices: Expiry month August 2020 Total share options outstanding Exercise month Exercise price August 2019 $3.31 Period ended 31 January 2021 000 Period ended 26 January 2020 000 - - 1,135 1,135 The weighted average remaining contractual life of options outstanding at the end of the period was 0.00 years (2020: 0.50). For the 53 week period ended 31 January 2021 Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 71 6. Other Notes 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 is 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. The third tranche of performance rights were issued under this programme during the period. Performance rights granted are summarised below: Tranche Grant Date 1 2 3 15 Apr 2019 26 Jun 2019 30 Jul 2020 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 - - 136,218 136,218 - - - - (15,480) (14,881) - (30,361) 90,300 89,286 136,218 315,804 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 3 Grant Date 15 Apr 2019 26 Jun 2019 30 Jul 2020 TSR Weighting EPS Weighting 50% 50% 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 Tranche 3 < 12.4% CAGR = 12.4% CAGR 51% - 99% (Straight-line prorata) > 9.0%, < 13.0% CAGR > 10.1%, < 13.0% CAGR > 12.4%, < 16.0% CAGR 100% => 13.0% CAGR => 13.0% CAGR => 16.0% CAGR For the 53 week period ended 31 January 202172 Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 6. Other Notes The TSR performance is calculated across the following periods: Tranche Performance Period 1 2 3 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 Announcement date of FY 2019/20 Result to announcement date of FY 2022/23 Result 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%1. Tranche 2 $22,813 $3.30 1.71% 2.8 16%1. Tranche 3 $47,200 $3.37 0.30% 2.6 24%2. 1. Volatility represents the volatility of the Briscoe Group (BGP) NZD share price over the two-year period to February 2019. 2.Volatility represents the volatility of the Briscoe Group (BGP) NZD share price over a five-year period to July 2020. 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 Tranche 3 < 1.8% CAGR = 1.8% CAGR 51% - 99% (Straight-line prorata) > 1.9%, < 3.0% CAGR > 0.8%, < 2.6% CAGR > 1.8%, < 4.6% CAGR 100% => 3.0% CAGR => 2.6% CAGR => 4.6% CAGR The EPS performance is calculated across the following periods: Tranche Performance Period 1 2 3 FY 2020/21 EPS relative to FY 2017/18 EPS FY 2021/22 EPS relative to FY 2018/19 EPS FY 2022/23 EPS relative to FY 2019/20 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, $2.79 and $2.76 for tranche 1, tranche 2 and tranche 3, 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 requires the employee to remain in employment with the Company during the performance period. The Company has expensed in the income statement $182,969 (2020: $104,820) in relation to performance rights. For the 53 week period ended 31 January 2021 Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 73 6. Other Notes Period ended 31 January 2021 Period ended 26 January 2020 $000 841 183 (521) (168) 109 444 $000 1,097 273 (373) (203) 47 841 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 6.3 Contingent Liabilities There were no contingent liabilities as at 31 January 2021 (2020: Nil). 6.4 Impact of Covid-19 On 11 March 2020, the World Health Organisation declared COVID-19 a global pandemic. COVID-19 has brought disruptions and uncertainties to businesses and economies globally. These disruptions impacted on the operations of Briscoe Group predominantly during the first half of the financial year. The Level 4 lockdown from 26 March 2020 saw all bricks and mortar stores cease trading. Essential goods were sold online across both Briscoes Homeware and Rebel Sport during Level 4 and full online trading resumed when New Zealand moved to Level 3 on 28 April 2020. On 14 May 2020 New Zealand moved to Level 2 and full trading operations recommenced. As previously reported, the impact on the first quarter trading was significant resulting in a decline in sales of 35.6% compared to the same period last year. However, consumer demand since New Zealand came out of the nationwide lockdown, has been strong for the Group which has seen this increased demand sustained throughout the year. The Group reported increased sales of 28.2% for the second quarter with the half-year sales closing only 3.5% down on the same period for the previous year. The Group’s online platform and ‘Click and Collect’ capability has been outstanding and enabled the Group to serve the increased level of online demand, especially during the subsequent Level 3 lockdowns imposed in Auckland during August 2020, February 2021 and March 2021. The resurgence in consumer demand since the end of nationwide lockdown has assisted in the record profit produced by the Group for the year ended 31 January 2021. An assessment of the impact of Covid-19 on the Briscoe Group financial statements is summarised below. • On 23 March 2020 the Board cancelled the final dividend for the year ended 26 January 2020 of 12.5 cents per share(cps) as a result of the potential impact of Covid-19. On 1 October 2020 an interim dividend of 9.00 cps was paid by the Group and then on 20 January 2021 a special dividend of 6.00cps was paid. • In April 2020 the Group was eligible for and received $11.5 million of New Zealand Government wage subsidy. This was repaid in full in October 2020. • The Group engaged with landlords for rent relief, however there is no significant impact on the financial statements from the rent relief. • The reintroduction of depreciation allowances for commercial buildings by the New Zealand Government has led to the need to adjust deferred tax balances (refer Note 2.3). • Other than minor immaterial inventory adjustments for a few impacted categories, there are no other provisions in these financial statements for the period ended 31 January 2021 for financial impacts of Covid-19. For the 53 week period ended 31 January 202174 Briscoe Group Limited Annual Report 2021 Consolidated Financial Statements 6. Other Notes The Board note the high level of business uncertainty that continues to exist in relation to the impacts of the Covid-19 pandemic. The risks and uncertainties faced by the Group include (and are not limited to): • Further government-imposed lockdowns, • the possibility of supply chain disruption around the ability to obtain stock or where stock delivery may be delayed. This may negatively affect revenue and inventory provisioning, and • erosion of consumer spending negatively affecting revenue. 6.5 Events After Balance Date On 16 March 2021 the Directors resolved to provide for a final dividend to be paid in respect of the period ended 31 January 2021. The dividend will be paid at a rate of 13.50 cents per share for all shares on issue as at 24 March 2021, with full imputation credits attached. (Note 5.3.3) 6.6 New Accounting Standards There were no new standards applied during the period. For the 53 week period ended 31 January 202175 Independent auditor’s report To the Shareholders of Briscoe Group Limited Our opinion In our opinion, the accompanying consolidated financial statements of Briscoe Group Limited (the Company), including its subsidiaries (the Group), present fairly, in all material respects, the financial position of the Group as at 31 January 2021, its financial performance and its cash flows for the period then ended in accordance with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) and International Financial Reporting Standards (IFRS). What we have audited The Group's consolidated financial statements comprise: the consolidated balance sheet as at 31 January 2021; the consolidated income statement for the period then ended; the consolidated statement of comprehensive income for the period then ended; the consolidated statement of changes in equity for the period then ended; the consolidated statement of cash flows for the period then ended; and the notes to the consolidated financial statements, which include significant accounting policies and other explanatory information. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs (NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with Professional and Ethical Standard 1 International Code of Ethics for Assurance Practitioners (including International Independence Standards) (New Zealand) (PES 1) issued by the New Zealand Auditing and Assurance Standards Board and the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements. Our firm provided tax services to entities related to the Briscoes Group, specifically in relation to shareholder continuity. The provision of these other services has not impaired our independence as auditor of the Group. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. PricewaterhouseCoopers, PwC Tower, 15 Customs Street West, Private Bag 92162, Auckland 1142 New Zealand T: +64 9 355 8000, www.pwc.co.nz Briscoe Group Limited Annual Report 2021 Independent Auditor’s Report76 Briscoe Group Limited Annual Report 2021 Independent Auditor’s Report Description of the key audit matter How our audit addressed the key audit matter Inventory existence and valuation Our audit procedures included: At 31 January 2021, the Group held inventories of $91.5 million. Given the value of inventories relative to the total assets of the Group, and the judgements applied in provisioning against inventory shrinkage, slow moving and obsolete inventory, this has been considered a key audit matter. As described in note 3.1.3 to the consolidated financial statements, inventories are stated at the lower of cost and net realisable value. The Group has sophisticated inventory systems in place to accurately record and report inventory movements and the value of inventory on hand. Cyclical counts of inventories are performed at various times throughout the period which includes an assessment of slow moving and obsolete stock. The cyclical counts provide management with evidence over quantity and quality of inventory on hand. Management applies judgement in determining inventory valuation, in particular the level of provisions for inventory which is expected to sell for less than cost due to obsolescence or damage, adjustments for unearned rebate income and inventory shrinkage since the last stock count. gaining an understanding of inventory processes and assessing the design and implementation of relevant inventory controls, particularly controls over the cyclical counting process. observing management’s stocktake process at selected locations throughout the period and undertaking our own test counts. For those locations not visited, on a sample basis, inspecting the results of stock counts and confirming stock count variances were appropriately adjusted. on a sample basis, testing the cost of inventory to supplier invoices and contracts providing evidence to support the accuracy of inventory costing. we corroborated our understanding of the inventory provisioning process with merchandising personnel outside of the finance function. testing that period-end inventory is carried at lower of cost and net realisable value by testing a sample of inventory items to the most recent retail price less costs to sell. on a sample basis, testing unearned rebate income to supplier contracts. assessing the shrinkage provision by testing the shrinkage rate used to calculate the provision since the last store stock counts. This includes comparing the rate used to the actual shrinkage rates previously observed and reviewing the level of actual inventory shrinkage recorded during the current period. performing substantive analytical procedures over all material inventory provisions to assess adequacy. From the procedures performed we have no matters to report. PwC 77 Our audit approach Overview Overall group materiality: $5,070,000, which represents approximately 5% of profit before tax. We chose profit before tax as the benchmark because, in our view, it is a key financial metric used in assessing the performance of the Group. We chose 5% based on our professional judgement, noting that it is also within the range of commonly accepted thresholds for entities where profit before tax is considered the appropriate benchmark. We performed a full scope audit over the consolidated financial information of the Group. As reported above, we have one key audit matter, being: Inventory existence and valuation As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the consolidated financial statements. In particular, we considered where management made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud. Materiality The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements. Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall Group materiality for the consolidated financial statements as a whole as set out above. These, together with qualitative considerations, helped us to determine the scope of our audit, the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate, on the consolidated financial statements as a whole. PwC Briscoe Group Limited Annual Report 2021 Independent Auditor’s Report78 Briscoe Group Limited Annual Report 2021 Independent Auditor’s Report How we tailored our group audit scope We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the Group operates. Other information The Directors are responsible for the other information. The other information comprises the information included in the Annual report, but does not include the consolidated financial statements and our auditor's report thereon. The Annual report is expected to be made available to us after the date of this auditor's report. Our opinion on the consolidated financial statements does not cover the other information and we will not express any form of audit opinion or assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. When we read the other information not yet received, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the Directors and use our professional judgement to determine the appropriate action to take. Responsibilities of the Directors for the consolidated financial statements The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of the consolidated financial statements in accordance with NZ IFRS and IFRS, and for such internal control as the Directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, the Directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the consolidated financial statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements, as a whole, are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (NZ) and ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. A further description of our responsibilities for the audit of the consolidated financial statements is located at the External Reporting Board’s website at: https://www.xrb.govt.nz/assurance-standards/auditors-responsibilities/audit-report-1/ This description forms part of our auditor’s report. PwC 79 Who we report to This report is made solely to the Company’s Shareholders, as a body. Our audit work has been undertaken so that we might state those matters which we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s Shareholders, as a body, for our audit work, for this report or for the opinions we have formed. The engagement partner on the audit resulting in this independent auditor’s report is Indumin Senaratne (Indy Sena). For and on behalf of: Chartered Accountants 16 March 2021 Auckland PwC Briscoe Group Limited Annual Report 2021 Independent Auditor’s Report80 Briscoe Group Limited Annual Report 2021 Corporate Governance Statement 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) 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. Briscoe Group Limited Annual Report 2021 Corporate Governance Statement 81 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. The Code of Conduct is reviewed annually and was last reviewed in March 2021. All Directors and employees must provide acknowledgement that they have read and understood the content. To ensure that our expectations are known and understood, both training and reinforcement are delivered via our online learning platform as part of initial and ongoing training. 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, employees or independent contractors can trade shares if they are in possession of price sensitive information that is not publicly available. 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. 82 Briscoe Group Limited Annual Report 2021 Corporate Governance Statement 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 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 five Directors; four 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 31 January 2021, four Directors are independent, 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 Mark Callaghan Independent Independent Independent Appointed in June 2016 Appointed in October 2016 Appointed in January 2021 The directors (other than Dame Rosanne Meo) have carefully considered her tenure as a director and as Chair, and whether it leads to any influence or perceived influence, in a material way, affecting her capacity to bring an independent view, to act in the best interests of Briscoe Group, or to represent shareholders. They have observed the robust and critical approach that she brings in challenging management and strategic priorities, while clearly facilitating open and constructive dialogue both between members of the Board, and also between the management and the other members of the Board. As such, they have determined that Dame Rosanne Meo continues to qualify as an independent Director. A profile of experience for each Director is available on Briscoe Group’s website. Directors disclosed the following relevant interests in shares as at 31 January 2021: Director Dame Rosanne Meo Rod Duke Tony Batterton Andy Coupe Number of shares in which a relevant interest is held 100,000 shares 171,566,383 shares 20,000 shares 10,000 shares Briscoe Group Limited Annual Report 2021 Corporate Governance Statement 83 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 or physical), economic background, language(s) spoken, marital/partnered status, physical appearance, race, religious beliefs and gender identity or 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 traditionally the retail sector has had high representation of women in its operations and yet has been underrepresented in senior management. We would note that in our recent assessment of high talent in our organisation, 37% are female. 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 workplace balance through long term part-time participation. Education is fundamental and we are pleased with the developments in this area in recent years. During 2020 we continued our support for a number of employees furthering their education at tertiary level through MBAs and other post-graduate studies. 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 internal applicants for jobs with the Group. We do however agree with a recent Institute of Directors commentary which stated that diversity should be approached through the lens of demonstrated competence. Briscoe Group has partnered with a number of external organisations to develop and deliver educational materials in this important area, all of which are available through our online training platform. We acknowledge that traditonally 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. A breakdown of the gender composition of Directors and officers as at the Company’s balance date, including comparative figures, is shown below: 31 January 2021 26 January 2020 Female Male Female Male Directors Officers1,2. Other Senior Management3. 1 - 2 4 3 2 1 - 1 3 3 2 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. 3. General Manager positions not reporting directly to the Group Managing Director. 84 Briscoe Group Limited Annual Report 2021 Corporate Governance Statement 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 (informal or formal) 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 of five Directors; four 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 currently comprises Tony Batterton (Chair), Dame Rosanne Meo and Andy Coupe and it met three 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. Recommendation 3.2: Employees should only attend Audit Committee meetings at the invitation of the Audit Committee. The Managing Director, Chief Financial Officer, Chief Operating 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. Briscoe Group Limited Annual Report 2021 Corporate Governance Statement 85 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 Mark Callaghan. It met five 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. 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. Attendance at Board and Committee Meetings for the Year Ended 31 January 2021 Board Audit and Risk Human Resources Number of meetings held1. 17 3 5 Attended Attended Attended Dame Rosanne Meo Rod Duke2. Tony Batterton3. Andy Coupe Mark Callaghan4. 17 16 17 17 0 3 2 3 3 0 5 4 3 5 0 1. Additional Board meetings were held across April and May to regularly assess the impacts of Covid-19. 2. Rod Duke resigned from the Audit and Risk and HR committees 1 July 2020. 3. Tony Batterton was appointed as a member of the HR Committee effective from 1 July 2020. 4. Mark Callaghan was appointed by the Board as a Director effective from 1 January 2021. 86 Briscoe Group Limited Annual Report 2021 Corporate Governance Statement 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. Briscoe Group Limited Annual Report 2021 Corporate Governance Statement 87 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 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 lifecycle of the building. Operationally, comparing energy use on a site by site basis enables us to compare similarly sized stores and target potential future savings through investment in heating, ventilation, air-conditioning and lighting systems. In addition to the above initiatives, we are working in collaboration with Retail New Zealand and other likeminded retailers to identify opportunities to decrease our environmental footprint. This will be research driven and will enable us to focus on the issues that are important to New Zealanders. It is likely to cover areas such as carbon reduction, increasing recycling levels across the business and targeting packaging for online parcels. 88 Briscoe Group Limited Annual Report 2021 Corporate Governance Statement 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.1. 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 Duke2. Tony Batterton3. Andy Coupe Mark Callaghan4. - $62,500 $62,500 $5,208 - $12,000 $6,000 $500 - $3,500 $8,500 $500 - $1,035,052 $1,035,052 $78,000 $77,000 $6,208 - - $78,000 $77,000 $6,208 Total $250,208 $24,500 $18,500 $293,208 $1,035,052 $1,328,260 1. The Board intends to seek an increase to the Directors’ fee pool at the next Annual Meeting to be held in May 2021. 2. No Directors’ fees are paid to Executive Directors. For more information in relation to Executive Director remuneration refer to “Managing Director Remuneration” below. 3. Tony Batterton was appointed to the HR committee effective from 1 July 2020. 4. Mark Callaghan was appointed by the Board as a Director effective from 1 January 2021. 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, which is reviewed annually, 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 Briscoe Group Limited Annual Report 2021 Corporate Governance Statement 89 objectives are key considerations in all remuneration-based decisions, balanced by the organisational context. Remuneration 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. During 2019 the Board introduced the Briscoe Group Senior Executive Incentive Plan to grant performance rights to key senior management personnel as a long-term incentive (LTI) programme. Vesting is dependent upon achievement of Earnings per Share (EPS) and Absolute Total Shareholder Return (aTSR) growth targets at the end of a three-year term. Three tranches of performance rights have been issued under this programme. This replaced the existing Share Option Scheme which had been in place since 2003. A medium-term incentive (MTI) scheme was also introduced for other selected senior management. This plan vests in cash rather than equity over a two-year period, using the same measures of EPS and aTSR as the LTI. Periodically the Human Resources Committee, on behalf of the Board, seeks independent external advice to ensure that remuneration for senior executives is appropriate and fulfils the objectives of attraction, retention and motivation. This exercise was repeated in 2021. 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 53-week period ending 31 January 2021 is set out in the table below: Remuneration Number of Employees Remuneration Number of Employees $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 12 11 2 13 9 1 6 1 3 5 3 $220,000 - $229,999 $230,000 - $239,999 $240,000 - $249,999 $310,000 - $319,999 $320,000 - $329,999 $390,000 - $399,999 $440,000 - $449,999 $470,000 - $479,999 $520,000 - $529,999 $640,000 - $649,999 $790,000 - $799,999 $1,030,000 - $1,039,999 1 3 1 3 1 1 1 1 1 1 1 1 90 Briscoe Group Limited Annual Report 2021 Corporate Governance Statement Managing Director Remuneration Recommendation 5.3: An issuer should disclose the remuneration arrangements in place for the Managing Director 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 31 January 2021 was: Base Salary Other Benefits STI Subtotal LTI Total Remuneration Period Ended 31 January 2021 $716,930 $84,581 $233,541 $1,035,052 - $1,035,052 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 $233,541. 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 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 their 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. Briscoe Group Limited Annual Report 2021 Corporate Governance Statement 91 Long Term Incentive Payments 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 occurs after three years and is subject to the achievement of certain performance hurdles, relating to the Company’s achievement against Total Shareholder Return and Earnings Per Share growth targets. This plan replaced the Share Option Scheme which had been in place since 2003. Three tranches of Performance Rights have been issued under this Plan. 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 has carried out a robust risk assessment process. Principally 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. 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. The matrix incorporates mental wellness in addition to physical safety. 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. 92 Briscoe Group Limited Annual Report 2021 Corporate Governance Statement 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. 2020 saw continued progress with development and implementation of traffic management across our sites. In addition, significant attention was paid to the mental health and wellbeing of our team, both generally and as a specific initiative within our wider pandemic response. Through the invaluable combination of our online platforms for learning (Axonify) and Health & Safety (ecoPortal), we were able to proactively engage our team throughout the pandemic. Our efforts ensured that they had all of the necessary information in relation to good hygiene practices, use of personal protective equipment and our processes for maintaining healthy and hygienic workplaces. In addition, our focus on the wellbeing of our people was complemented through resources on encouraging and maintaining good mental health, which was encouragingly reinforced through the innovative use of many of the valued brand and company ambassadors that we are fortunate to have supporting Briscoe Group. Healthy eating, exercising and staying fit were themes reinforced throughout our response and feedback was that these were greatly appreciated. Our managers and other leaders were proactive in engaging with their teams, understanding and accommodating individual circumstances while supporting the continued performance of the business. We did not underestimate the importance of providing assurance to our team that they were being listened to, that we shared and managed concerns as they arose and that our broad and deep approach to health and safety was as important a consideration as was the managing of our trading performance. Monthly updates are provided to the senior management and Board on our safety performance. We have previously referred to assessment of actual Health and Safety performance using independent information provided by ACC. In 2020, we continued to see tangible evidence of our progress in this area with confirmation that Briscoe Group would receive a discount rather than a loading based on our Experience Rating. Such an outcome maintains our confidence in the systems and processes we have in place, the commitment of our people from the frontline to senior management and the Board, and encourages continued focus in this vital area of business performance. Using our Saas platform ecoPortal, management and the Board are able to proactively view preventative efforts and to review safety related incidents (including those without injuries) in order to prevent incidents that pose risk to our people. 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 Auditor 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 Chair and Chair 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 31 January 2021 were $108,000 (2020: 108,000). Total fees paid to PricewaterhouseCoopers for other professional services for the period ended 31 January 2021 were $26,000 (2020: $26,000). 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. Briscoe Group Limited Annual Report 2021 Corporate Governance Statement 93 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 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. 94 Briscoe Group Limited Annual Report 2021 General Disclosures General Disclosures Board of Directors Dame Rosanne Meo, DNZM, OBE, BA, Dip BIA: Chairman (Non-Executive) Chairman of AMP Staff Superannuation. Director of AMP Administration (NZ) Ltd 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 and RD Golf Investments 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, Direct Capital IV Investments Ltd, Direct Capital IV Management Ltd, Direct Capital IV Partners Ltd, Direct Capital IV GP 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 Partners GP Ltd. Andy Coupe, LLB: Director (Non-Executive) Chairman of Television New Zealand Ltd and the New Zealand Takeovers Panel. Director of Kingfish Ltd, Barramundi Ltd, Marlin Global Ltd. Chartered Member of Institute of Directors. Mark Callaghan, BCA (Hons): Director (Non-Executive) Director of OPD Holdings Ltd, Office Products Depot Ltd, Hepstore Ltd and Callaghan Associates Ltd. Member of Institute of Directors. 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 31 January 2021, 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 89). The persons who held office as Directors of subsidiary companies at 31 January 2021 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 Briscoe Group Limited Annual Report 2021 General Disclosures 95 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 19 March 2021 Number of shares 10,000 As at 19 March 2021 Number of shares 171,566,383 100,000 20,000 For further details refer to Substantial Product Holders information (page 96). B. Share dealings During the 53 week period ended 31 January 2021 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: 20 March 2020 6 May 2020 21 October 2020 216,077 200,000 229,650 $681,077 $620,000 $916,786 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. 96 Briscoe Group Limited Annual Report 2021 General Disclosures D. Interests in contracts During the 53-week period ended 31 January 2021 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 is a trustee, as owner of the Rebel Sport premises at Panmure, Auckland, received rental payments of $613,663 (2020: $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 $520,000 (2020: $564,598), under an agreement to lease premises to Briscoes (NZ) Limited. (Refer to Note 6.1.1 of the financial statements). • The RA Duke Trust paid PWC $24,950 for tax services performed in relation to shareholder continuity as a result of changes made to the RA Duke Trust Deed. 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 19 March 2021 1 – 1000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total No. Investors Total Holdings 1,100 1,694 620 486 36 701,663 4,940,983 4,878,927 11,580,577 200,490,150 3,936 222,556,300 % 0.32 2.20 2.19 5.20 90.09 100% Substantial Product Holders The following information is given pursuant to section 293 of the Financial Markets Conduct Act 2013. As at 31 January 2021, 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 31 January 20211 171,566,383 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 31 January 2021 this interest was in respect of 171,566,383 ordinary shares. The total number of ordinary shares on issue (being all of the voting shares of the company) as at 31 January 2021 was 222,466,000. Briscoe Group Limited Annual Report 2021 Top 20 Shareholders 97 Top 20 Shareholders As at 19 March 2021 Rank Holder’s Name* Total % JB Were (NZ) Nominees Limited ** 173,512,707 77.96 1 2= 2= 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Gerald Harvey Harvey Norman Properties (NZ) Ltd FNZ Custodians Limited Forsyth Barr 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 Stuart Hamilton Johnstone and Lorraine Rose Johnstone HSBC Nominees (New Zealand) Limited Accident Compensation Corporation Manhattan Trustee Limited Custodial Services Limited Peter William Burilin Shu Wen Chiang New Zealand Permanent Trustees Ltd New Zealand Depository Nominee Citibank Nominess (NZ) Ltd Carla Ingrid Brockman Gemscott Limited Shih Ting Huang 20 Geoffrey Peter Scowcroft * A number of the registered holders listed below hold shares as nominees for, or on behalf of, other parties. ** Includes 171,566,383 shares in relation to holdings associated with R A Duke. 5,250,000 5,250,000 2,8 8 9,316 1,2 4 3 ,621 2.36 2.36 1.30 0.56 1,230,000 0.55 1,000,000 955,038 734,9 1 3 6 8 3 ,000 568,283 540,839 534,861 408,821 390,062 364,337 336,300 335,000 306, 719 273,299 0.45 0.43 0.33 0.31 0.26 0.24 0.24 0.18 0.18 0.16 0.15 0.15 0.14 0.12 98 Briscoe Group Limited Annual Report 2021 Directory Directory Directors Dame Rosanne PO’L Meo (Chairman) Rodney A. Duke Anthony (Tony) D. Batterton Richard A. (Andy) Coupe Hugh J. M. (Mark) Callaghan 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 Briscoe Group Limited Annual Report 2021 Notes 99 Notes briscoegroup.co.nz

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