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Contents
03 Chair’s Report
04 Ceo’s Letter
07 directors’ Report
24 Auditor’s independence
declaration
25 Consolidated statement
of Profit or Loss and other
Comprehensive income
26 Consolidated statement
of Financial Position
27 Consolidated statement
of Changes in equity
28 Consolidated statement
of Cash Flows
29 Notes to the Consolidated
Financial statements
90 directors’ declaration
91
independent Auditor’s Report
96 shareholder information
iBC Corporate directory
O u r
Our Our
s to ry
s tory
s tory
At Toys”R”Us, we believe that toys have
the power to change lives. Play enables
children to develop their imagination,
collaborate, problem solve, explore, create
or simply express themselves spontaneously.
Our mission at Toys”R”Us is to encourage
children to engage with as many forms of
play as we possibly can.
We have relaunched in 2019, as a new
company, to bring play back into the lives
of children of all ages.
01
toys“R”us AnZ limited Annual Report 2021
02
Chair’s
Report
Fellow Shareholders, on 26th
November 2020 your company
raised $29 million via an
institutional placement in order to
acquire Louis Mittoni’s privately
held Hobby Warehouse Group
and implement an existing plan,
“Project Play” to accelerate the
growth of three shopper facing
ecommerce pillars; Toys”R”Us,
Babies”R”Us and Hobby Warehouse.
“Project Play” was based upon
connecting shoppers to the best
emotions of the physical world
with the convenience and range
of a digital space. A “phygital”
experience that would have more
shoppers visiting, lingering longer,
buying more, re‑visiting and bringing
their friends and family to the site.
From the $29 Million raised, net of
agreed Jaszac, HWG and FUN debt
repayment and fees, a balance
of c.$20 million was committed to
invest in accelerating the growth of
these direct to shopper ecommerce
pillars via investment in increasing
warehousing capacity, pick & pack
automation, digital awareness
and increased inventory.
By 31st July 2021 your company
had achieved consolidated
Proforma Revenue of $48.2m, and
broken even at the EBITDA line.
Due to the freeing up of capital in
non‑core lines of business, including
sales of the confectionery division
and Chill Factor, realising c.$2.45m,
Toys”R”Us ANZ closed the financial
year with a higher cash balance
than planned at $17.3 million,
even after the implementation of
all planned capital expenditure.
New interim additional warehousing
of 5,500sqm supported by
state‑of‑the‑art Autonomous
Mobile Robots (AMRs) became
fully operational in early August
2021 and has significantly
increased your company’s sales
revenue capacity, with head room
on the supply side to support
$120million in annual sales via
this additional warehousing and
automation investment.
In July 2021 we announced
the lease for a new 19,650sqm
purpose‑built warehousing, head
office and experiential retail
centre in Clayton, Victoria within
60 minutes’ drive of the majority
of Melbourne’s urban population.
Ecommerce “platform play”
businesses have significant growth
potential and future value due to
their ability to quickly and cost
effectively expand their software,
processes, partner relationships
and brands into new countries.
As we finalised this annual report,
we announced that WHP, owner
of the Toys”R”Us brand globally,
had chosen Toys”R”Us ANZ to
hold a 45 year licence to digitally
phoenix the Toys”R”Us and
Babies”R”Us brands in the
United Kingdom. As a Toy
market, the UK is c. 3 times
larger than ANZ. Toys“R”Us
UK achieved sales revenues of
£421million ($780 million) in 2016
prior to closing in late 2017.
On behalf of all shareholders,
I’d like to thank our CEO Louis
Mittoni for leading the successful
implementation of the agreed
plan, faster and more cost
03
effectively than previously
envisaged. I’d like to thank my
fellow Directors Nicki Anderson
and John Tripodi for working
alongside Louis to facilitate
the implementation of the
plan in ANZ. I would also like to
thank Yehuda Shmidman, board
observer on the TRU ANZ board,
and Chair and CEO of WHP and
Global licence holder Toys”R”Us
Kids for his invaluable input
into our digital phoenixing of
the Toys”R”Us and Babies”R”Us
brands in ANZ. Finally, I’d like
to thank our shareholders who
supported the placement and
those who have joined the
register over the course of the
past 9 months, assisting your
company achieve the growth
to date.
As Chair of Toys”R”Us ANZ,
I again commit to you that
your board of directors will
work to make this next digital
chapter, the longest and most
successful chapter in your
company’s history.
Kevin A Moore FAICD, MCIM
Chair of the Board
8 November 2021
toys“R”us AnZ limited Annual Report 2021
CEO’s
Letter
It also heralded an era of
closer cooperation with WHP
as together we progress
opportunities associated with
these brands in Australia and
in late October 2021 we proudly
announced that WHP has further
entrusted Toys“R”Us ANZ with
the opportunity to operate the
Toys“R”Us and Babies“R”Us
brands in the United Kingdom.
Tailoring our successful
Australian relaunch plan to the
UK echoes the success of other
e‑commerce ‘platform play’
businesses that have delivered
growth and value due to their
ability to quickly and cost
effectively expand their software,
processes, partner relationships
and brands into new countries.
The UK has one of the most
advanced e‑commerce markets
in Europe and the total
addressable market for toys and
games for 2020 was £3.3 billion,
representing the largest toy
market in Europe and the fourth
largest globally. The opportunity
in the Babies“R”Us addressable
market is similar, if not greater,
in its strategic significance.
This additional territory
opportunity, very importantly,
consolidates the company’s
growth trajectory for the
foreseeable future.
Dear Fellow Shareholders,
What an incredible year it has
been for our Company during
such extraordinary times.
Commencing with the acquisition
of the Hobby Warehouse Group on
26 November 2020 and supported
by investor funding via a $29 million
placement, the Company realised
its long‑stated strategy to seek
business growth opportunities
and pivot toward direct‑to‑
consumer channels in a category
sector based around families and
children. The acquisition included
licenses to operate iconic brands
Toys“R”Us and Babies“R”Us,
alongside the Hobby Warehouse
retail pillar plus the B2B logistics
and distribution business Mittoni.
In the ensuing months, our
Company actively and rigorously
streamlined product lines and
processes, reduced a number of
costs and restructured selected
operations. The decision to sell
non‑core assets, including the
confectionery business and
Chill Factor intellectual property,
supported alignment with the
long‑term strategy and has
rendered additional capital
that will be reinvested elsewhere
in the business. In addition,
high overheads associated with
third party services and toy
distribution operations have
been progressively restructured.
In March, we announced plans for
a new interim 5,500 sqm
warehouse facility which will see
us through our anticipated growth
needs in Australia for at least
twelve months.
The facility has enabled us to
consolidate our operations into a
larger location and implement a
highly scalable state‑of‑the‑art
Autonomous Mobile Robot (AMR)
picking system. This technology in
combination with new warehouse
management systems has
assisted us to accumulate further
knowledge and expertise on
how we can optimise operations
and build foundations for a
low‑overhead business as the
Company continues to grow.
Following from this interim
facility, in June 2021 we secured
an agreement to lease new
purpose‑built premises in the
suburb of Clayton, Victoria
that we expect will be ready to
occupy in the second half of 2022.
These new premises are being
specifically configured as our
company headquarters to house
the Toys“R”Us ANZ immediate
requirements for warehousing,
office space and an experiential
retail store. The total space
occupied will be approximately
19,258 sqm.
In June this year, with the
approval and support of WHP
Global (WHP) (the global
Toys“R”Us and Babies“R”Us
brand IP owners), shareholders
overwhelmingly voted in favour
of a change in company name
to Toys“R”Us ANZ Limited.
This is a key moment in the
Company’s history as it marks
the transition from predominantly
B2B to a Business with direct‑to‑
consumer channels.
04
We will work
diligently to
execute our
strategy and
achieve the
goals we have
set to achieve
that will lead
to sustainable
long-term value
and growth for
your company.
I’d like to thank Yehuda
Shmidman, Chair and CEO
of WHP Global, for his vision
and confidence in us; the
WHP Global and Tru Kids Inc
teams for their incredibly
invaluable insights and aid
over the past two years.
I’d also like to thank you, our
shareholders, for your trust,
support and belief in our vision.
We will work diligently to
execute our strategy and
achieve the goals we have
set to achieve that will lead to
sustainable long‑term value
and growth for your company.
Yours sincerely
Louis Mittoni
Managing Director
and CEO
Toys“R”Us ANZ Limited
8 November 2021
As we look and plan ahead,
we do anticipate a number
of challenges in the areas of
supply chain disruption, the
need to safely manage the
lingering effects of COVID‑19
including the interim absence
of staff and disruptions to
operations from time to time
due to isolation requirements,
and customer delivery delays.
We are carefully planning and
managing these situations
and expect them to improve
over the coming year.
Finally, I would like to
express my sincere thanks
to our dedicated employees
from warehouse, customer
experience, buying and
sales through to finance,
administration and senior
leaders. It’s their hard work,
passion and commitment to
our mission that’s enabling
us to build a great company.
Thank you, Lian Yu our COO,
Howard Abbey our CFO,
Kevin Moore our Chair,
fellow Directors Nicki Anderson
and John Tripodi and
Patrick Raper our Company
Secretary for their cohesive
support throughout an
event‑packed year.
05
toys“R”us AnZ limited Annual Report 2021
06
Directors’ Report
The directors present their report, together with the consolidated financial statements, on the consolidated
entity (referred to hereafter as the ‘Group’) consisting of Toys“R”Us ANZ Limited (referred to hereafter as
‘Toys“R”Us ANZ’, ‘TOY’, the ‘Company’ or ‘parent entity’) and the entities it controlled at the end of, or during,
the year ended 31 July 2021.
Directors
The following persons were directors of Toys“R”Us ANZ Limited during the whole of the financial year and
up to the date of this report unless otherwise stated:
• Kevin Moore (appointed 26 November 2020)
•
Louis Mittoni (appointed 26 November 2020)
• Nicki Anderson
•
John Tripodi
• Bernie Brookes (resigned 26 November 2020)
Principal activities
Toys“R”Us ANZ Limited is an Australian based listed company with a mission to enrich the lives of people
by encouraging exploration, creativity and living life more fully through the enjoyment of toys and hobbies.
In addition to distributing leading products throughout Australia for key partners via its trading business
Funtastic, the Company acquired 100% of the Hobby Warehouse Group in November 2020, including Australian
e‑commerce websites Toys“R”Us, Babies“R”Us and Hobby Warehouse and the distribution business Mittoni Pty
Ltd. The Company changed its name from Funtastic Limited to Toys“R”Us ANZ Limited on the 24 June 2021.
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Financial and operational review
Financial results
Key Financials AUD ‘m
Revenue
EBITDA
Profit/(Loss) before Tax
Net profit/(loss) after tax
Basic EPS (cents) from continuing operations
Dividend per share (cents)
ROE1
Cash balance/(Net Debt) ($m)
Gearing2
1 NPAT/average shareholder equity;
2 Net debt/shareholder equity;
3
FY20 has been restated to reflect operations discontinued in FY21.
07
FY21
21.8
(4.4)
(5.3)
(5.1)
(0.8)
N/A
FY203 % Change
0.0
(1.8)
(1.9)
(1.9)
(0.8)
N/A
100.0%
(148.0%)
(183.6%)
(171.0%)
(1.6%)
3.2%
n/a
n/a
(1.16%)
(4.13%)
17.3
0.0
(8.1)
(0.93)
toys“R”us AnZ limited Annual Report 2021
Directors’ Report
(Cont.)
The Group’s statutory loss after income tax for the year ended 31 July 2021 was $5.1 million (2020: restated
loss after income tax of $1.9 million).
The statutory results above are based on continuing operations only. During the period the Company
acquired the Hobby Warehouse Group (HWG) which includes e‑commerce businesses Hobby Warehouse,
Toys“R”Us and Babies“R”Us and IT distributor Mittoni.
The following results are based on unaudited management account proforma figures for the consolidated
businesses for the 2021 financial year ending on 31 July 2021:
• Consolidated Proforma Annual Revenue of $48.2m.
• Consolidated Proforma Annual Gross Profit of $11.1m.
• Consolidated Proforma Annual EBITDA of $0.0m.
• Year End Cash at bank $17.3m.
• Year End Net Assets $55.8m.
The above figures include contributions from the Hobby Warehouse Group on a proforma basis from the
1st August 2020, in addition to significant items such as the operation and sale of discontinued businesses.
Operating review
Acquisition of the Hobby Warehouse Group
At the 2020 Annual General Meeting, held on 26 November 2020, shareholders approved a number of
resolutions relating to the acquisition of the Hobby Warehouse Group (HWG) which includes e‑commerce
businesses Hobby Warehouse, Toys“R”Us and Babies“R”Us and IT distributor Mittoni. The acquisition
was accompanied by a capital raising of $35.0m, the repayment of all debt in the Company and the
commencement of a mission to gain significant market share in the toys and hobbies industries through
enriching the lives of people by encouraging exploration, creativity and living life more fully through the
enjoyment of hobbies and toys.
Change of Company Name
Following the acquisition of HWG, the Group held an Extraordinary General Meeting of shareholders on
23 June 2021 to consider (amongst other things) the change of the name of the holding company of the
Group from Funtastic Limited to Toys“R“Us ANZ Limited. Shareholders overwhelmingly approved this change
and the ASX code was changed from “FUN to TOY shortly thereafter. The name change, accompanied
by a change of logo, has signalled a new culture and a new more vibrant image for the Company and
has enhanced the marketing base from which to pursue the Company’s significant growth targets.
Product Line rationalisation
In the period following the acquisition of HWG, the Company reviewed the suitability of its portfolio of brands.
Following the review, the Group embarked upon the sale of non‑core businesses. Sale of the Confectionery
business was finalised in February 2021 for $1.3m and sale of the Chill Factor business was finalised in July
2021 for $1.75m. The Group also wound down the distribution relationships of Moochies and Razor products.
Relaunch of Babies”R”Us
Babies“R”Us re‑entered the Australian market on 11 August 2021 with the deliberate soft launch of a newly
created web site. The relaunch focused on “ease of shopping” through intelligent product categorisation
and an expert understanding of the needs of parents and carers. The new website initially features more
than 3,000 products and 62 market leading brands such as Bugaboo, Bonds, Baby Jogger, Philips Avent,
Tommee Tippee and many more. The range is on track to grow strongly over coming weeks to a customer
08
offering of more than 5,000 products including exclusive and limited release items. The forthcoming
strategically planned marketing and awareness campaign, through social platforms, direct marketing
and media, is set to generate a high degree of interest and traffic to the site as Babies“R”Us looks to gain
presence in the market. This online market growth will provide a solid platform to merge into a physical
experiential environment, focused on expert advice, in 2022.
Warehouse Facilities Relocation
The acquisition and integration of HWG combined with the achieved and planned growth of the Company has
provided both the opportunity and requirement to secure larger and more efficient distribution capabilities.
The Company moved to larger temporary premises in Dandenong South and simultaneously implemented
both a state‑of‑the‑art warehouse management system and Autonomous Mobile Robots (AMRs) that have
increased the capacity and efficiency of logistics processes. These facilities have the capabilities to service
the growth ambitions of the Company for the next 6‑ 12 months, including the upcoming peak toy trading
season.
In July 2021 the Company secured a lease in relation to a purpose built, state‑of‑the‑art warehouse
distribution and adjoining head office facility located in the suburb of Clayton, within the Victorian City
of Monash. The new premises have been specifically designed and configured to house the Toys“R”Us
ANZ headquarters and to accommodate the Company’s medium‑term requirements for warehousing,
office space and an ancillary experience centre.
Key aspects of the new facility are:
• Total facility building size: ~ 19,650 m2.
•
Location: Clayton, Victoria.
• Target date for completion and lease commencement: ~ June 2022.
• Developer and Lessor: ESR Australia.
The initial lease is for a 10‑year period and includes two further 5‑year extension periods at the option of
the Company. Development of the facility, including installation of state‑of‑the‑art logistics technology
and fit out of all offices, is expected to be completed in time for occupancy and lease commencement in
approximately June 2022.
Significant changes in the state of affairs
On 23 October 2020 the Company announced a significant acquisition and refinancing of the Group.
The transaction included the acquisition of all the issued capital in the Hobby Warehouse Pty Ltd,
Toys”R”Us Licensee Pty Ltd and Mittoni Pty Ltd, which together comprise the Hobby Warehouse Group
(HWG). HWG owns one of Australia’s largest baby, toy and hobby databases, with more than 1 million
subscribers and generated unaudited revenue of $28.6 million for FY20. Toys“R”Us re‑entered the Australian
market in June 2019 following HWG’s execution of a license agreement (TRUK License) with TRU Kids Inc.,
the US‑based owners of the Toys“R”Us and Babies“R”Us brands for the exclusive rights to use the Toys“R”Us
and Babies“R”Us brands in Australia and New Zealand.
Consideration for the acquisition was the issue of 291.2 million fully paid ordinary shares issued at a
market price $0.11 per share ($32.0 million), representing approximately 1.1x HWG FY20 unaudited revenue.
In addition, 1,223,092 shares were issued to TRU Kids Inc. as consideration for the extension of the TRUK
License by 12 years to 31 May 2041. The transaction completed on 26 November 2020 and since that date
the HWG entities have been wholly owned subsidiaries of Funtastic Limited.
Concurrent with the above transaction, the Company completed a fully underwritten institutional
placement of 258.9 million shares at an issue price of $0.112 per share to raise $29 million. Canaccord
Genuity (Australia) Limited was the underwriter and lead manager of the placement.
09
toys“R”us AnZ limited Annual Report 2021
Directors’ Report
(Cont.)
The Company also converted $6 million of its debt facility with major shareholder Jaszac Investments
Pty Ltd (Jaszac) to shares issued at the placement price of $0.112 and further agreed with Jaszac that the
balance of approximately $3 million of Jaszac debt was to be repaid from the proceeds of the placement.
The following table sets out the shares on issue at the beginning and at the conclusion of the period.
Item Description
Shares on issue at 31 July 2020
HWG Consideration shares
Underwritten placement
$6m Debt conversion
TRUK License extension by 12 years to 31 May 2041
Other shares issued during the period not related to the transaction
Total Shares on issue at 31 July 2021
Number of
Fully Paid
Ordinary
Shares
240,404,075
291,205,818
258,928,571
53,571,429
1,223,092
3,025,873
848,358,858
On 22 January 2021 the Company announced the sale of its confectionery business. Revenue of the
confectionery business for the year ended 31 July 2020 was approximately $4.2m which represents 17%
of the Group audited total revenue for the year ended 31 July 2020. Loss for the period for the confectionery
business for the year ended 31 July 2020 was approximately $0.7m which represents 8% of the Group
audited total loss for the year. The confectionery business was sold for $0.7m and the consideration
was settled in cash.
On 5 July 2021 the Company announced the sale of its chill factor business. Revenue of the chill factor
business for the year ended 31 July 2020 was approximately $1.5m which represents 6% of the Group
audited total revenue for the year ended 31 July 2020. Loss for the period for the chill factor business for
the year ended 31 July 2020 was approximately $0.1m which represents 1% of the Group audited total loss
for the year. The chill factor business was sold for $1.75m and the consideration was settled in cash.
Other than the above matters, no other significant changes in the state of affairs of the Group occurred
during the year ended 31 July 2021.
Matters subsequent to the end of the financial year
On 13 August 2021, the Company paid $2.549 million to Westpac Banking Corporation as security for
a bank guarantee related to the new warehousing and head office facility currently being developed
in Clayton, Victoria.
No other matters or circumstance has arisen since 31 July 2021 that has significantly affected, or may
significantly affect, the Group’s operations, the results of these operations, or the Group’s state of affairs
in future years.
Environmental regulations
The Group is not subject to any significant environmental regulation under Australian Commonwealth
or State law.
10
Information on Directors
Experience and expertise:
Kevin has multinational board and governance experience, specialising in
digital marketing, and is a growth director with a focus on $10 to $100 million
businesses. He has a corporate career with director level marketing and general
management experience across 30 countries, with success in launching and
growing Australian and Global brands. His private company career saw him
build a small technology based retail marketing business into the sector leader
with 2,500 team members in ANZ, and clients that include Apple, Amazon,
Bunnings, Coles and Woolworths.
Kevin Moore
Independent
Non‑Executive Director
and Chair of the Board
FAICD, MCIM
Other current directorships:
Chair of the Board of Raiz Invest Limited
Former directorships (last three years):
None
Special responsibilities:
Chair of the Board
Interests in shares:
2,759,352
Interest in options over shares:
1,691,575
Experience and expertise:
Louis is the founder of the Mittoni and Hobby Warehouse businesses.
He has over 20 years’ experience in operating and managing Australian
retail businesses in both distributor and online channels. As a qualified
physicist and engineer, Louis has intimate knowledge of process optimisation,
programming and artificial intelligence.
Other current directorships:
None
Louis Mittoni
Executive Director
Former directorships (last three years):
None
PhD – Chemical
Engineering, BSc
– Physics, MAICD, MAIP
Special responsibilities:
Chief Executive Officer
Interests in shares:
291,205,818
Interest in options over shares:
8,457,875
11
toys“R”us AnZ limited Annual Report 2021
Directors’ Report
(Cont.)
Experience and expertise:
Nicki is an accomplished leader and director with broad experience in strategy,
sales, marketing, licensing and innovation within branded food, beverage and
consumer goods businesses both in Australia and internationally. Nicki is a true
global citizen having lived in Denmark, Canada and the United States, where
she was Vice President Innovation for Cadbury Schweppes Americas Beverages
based in New York. Nicki has strong links to Australia’s e‑commerce,
manufacturing and agricultural sectors.
Nicki Anderson
Independent
Non‑Executive director
B Bus, EMBA, GAICD
Other current directorships:
Select Harvests Limited
Former directorships (last three years):
Health and Plant Protein Group Limited
Special responsibilities:
Chair of the Remuneration and Nomination Committee
Interests in shares:
1,075,467
Interest in share appreciation rights:
240,000
Experience and expertise:
John is a business leader with extensive multinational FMCG experience in various
strategic and operational roles with a track record of championing innovative
brand strategies that deliver successful commercial outcomes. He is currently
the CEO of the diversified sport, entertainment and consumer lifestyle agency,
Twenty3 Group. Prior to co‑founding the Twenty3 Group, John held senior sales
and marketing roles with Mars Inc. before moving into general management with
the L’Oreal Group.
John Tripodi
Independent
Non‑Executive Director
B Com, B Bus (Hons)
Other current directorships:
None
Former directorships (last three years):
None
Special responsibilities:
Chair of the Audit and Risk Committee
Interests in shares:
110,803
Interest in share appreciation rights:
240,000
‘Other current directorships’ quoted above are current directorships for listed entities only and exclude
directorships of all other types of entities unless otherwise stated.
‘Former directorships (last three years)’ quoted above are directorships held in the last three years for listed
entities only and exclude directorships of all other types of entities unless otherwise stated.
12
Company Secretary
Patrick Raper is Company Secretary the Group. He has substantial experience in governance and finance roles
and is currently Company Secretary of Star Combo Pharma Limited and CFO and Company Secretary of
DataDot Technology Limited. Patrick was appointed to the position of Company Secretary on 4 January 2021.
Meetings of Directors
The number of meetings of the Group’s Board of Directors held during the year ended 31 July 2021 and the
number of meetings attended by each director were:
Remuneration and
Nomination Committee
Board of Directors
Audit and Risk Committee
Kevin Moore
Louis Mittoni
Nicki Anderson
John Tripodi
Bernie Brookes
A
3
–
3
3
–
B
3
–
3
3
–
A
9
9
17
17
8
B
9
9
17
17
8
A
1
–
2
2
1
B
1
–
2
2
1
Note:
A Number of meetings attended during the year the director was a member of the Board and/or Committee(s).
B Number of meetings eligible to attend during the year the director was a member of the Board and/or Committee(s).
Remuneration report (audited)
The Directors present the Remuneration report for the Group and its controlled entities for the year ended
31 July 2021. The Remuneration report forms a part of the Directors report and has been prepared in
accordance with section 300A of the Corporations Act 2001. The information provided in the Remuneration
report has been audited by the company auditors as required by section 308(3C) of the Corporations Act 2001.
The Remuneration report outlines the remuneration policies and arrangements for the Company’s Key
Management Personnel (KMP) including Directors and Executives who have authority and responsibility
for planning, directing and controlling the activities of the Group.
13
toys“R”us AnZ limited Annual Report 2021
Directors’ Report
(Cont.)
Details of key management personnel
The directors and key management personnel of the Group during or since the end of the financial year were:
Name
Position
Period in position during the year
Kevin Moore
Chair and Independent Non‑Executive Director
Appointed 26 November 2020
Louis Mittoni
Managing Director
Appointed 26 November 2020
John Tripodi
Independent Non‑Executive Director
Appointed 25 October 2018
Nicki Anderson
Independent Non‑Executive Director
Appointed 25 October 2018
Bernie Brookes
Chair and Independent Non‑Executive Director
David Jackson
Chief Executive Officer
Howard Abbey
Acting Chief Executive Officer
Company Secretary
Chief Financial Officer
Lian Yu
Chief Operating Officer
Remuneration policy for directors and executives
Appointed 1 August 2019 –
Resigned 26 November 2020
Appointed 2 May 2019 –
Resigned 4 September 2020
Appointed 4 September 2020 –
Resigned 26 November 2020
Appointed 31 May 2018 –
Resigned 4 January 2021
Appointed 2 May 2018
Appointed 1 May 2021
The objective of the Toys“R”Us ANZ remuneration policy is to attract, retain and motivate the people
required to sustainably manage and grow the business. Executive remuneration packages include a balance
of fixed remuneration, short term cash incentives and long‑term equity incentives. The framework endeavours
to align executive reward with market conditions and shareholders’ interests.
Principles of Compensation
The Remuneration and Nomination Committee makes specific recommendations to the Board on compensation
packages and other terms of employment for directors and other senior executives. The Board then
considers these recommendations and makes appropriate determinations, with compensation packages
set at a level that is intended to attract and retain directors and executives capable of managing the
consolidated entity’s diverse operations.
Compensation of the senior executives is reviewed on an annual basis by the Remuneration and Nomination
Committee having regard to personal and corporate performance and relevant comparative information.
Compensation for senior executives comprises both fixed compensation and an “at risk” component. The “at risk”
component comprises a short‑term incentive payment based on a combination of the company’s results and
individual performance levels, and a long‑term incentive component pursuant to the Employee Incentive Plan.
The payment of short‑term incentives is dependent on the achievement of operating and financial targets
set at the beginning of each year and assessed on an annual basis by the Board.
Compensation and other terms of employment for senior executives are formalised in service agreements.
The Group’s executive remuneration is directly related to the performance of the Group through the linking
of short and long‑term incentives to certain financial performance measures. These performance measures,
as described below, are selected by the Board of Directors and considered relevant to the management of
14
the operations of the Group and to effectively align the long‑term interests of the directors, executives and
shareholders. The performance conditions are assessed periodically by the Remuneration and Nomination
Committee to ensure they remain relevant.
Compensation and company performance
Toys“R”Us ANZ Limited’s Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) has been
the key performance measure for the Company’s incentive plan for executives, linked to individual key
performance objectives.
Components of Compensation
Fixed Compensation
The terms of employment for all executive management contain a fixed compensation component, which is
expressed in local currency. This fixed component is set in accordance with the market rate for a comparable role
by reference to appropriate external benchmark information and having regard to an individual’s responsibilities,
performance, qualifications, experience and location. An executive’s compensation is also reviewed on promotion.
Fixed compensation includes contributions to superannuation and pension plans in accordance with relevant
legislation or as contractually required. Fixed compensation is structured as a total employment cost
package which may be delivered to the executive as a mix of cash and prescribed non‑financial benefits
at the executive’s discretion. There are no guaranteed pay increases in any senior executive’s contract.
Benefits for termination of employment may be payable subject to the circumstances of the termination
and within the terms of the employment contract.
At risk Compensation
Short‑Term Incentives
• The Short‑Term Incentive (STI) plan is linked to specific targets (predominantly financial) with the
opportunity to earn incentives based on a percentage of fixed compensation.
• Performance measurements have been applied to each component of STI and accordingly, entitlements were
determined with consideration to the executive’s level and area of responsibility. Performance against the
objectives was determined and incentives and entitlements assessed against the audited financial results.
The table below shows the Group’s earnings in the reporting period and the previous four financial periods/
years as well as an indication of the Group’s value over the corresponding period:
Post Share Consolidation
NPAT ($’000)
EPS Basic (Cents)
Diluted EPS (Cents)
Total Dividends ($’000)
Year Ended
31-Jul-21
Year ended
31-Jul-20
Year ended
31-Jul-19
Year ended
31-Jul-18
Year ended
31-Jul-17
(3,113)
(9,313)
7,596
28,258
(33,466)
(0.48)
(0.48)
Nil
(3.94)
(3.94)
Nil
3.64
3.61
Nil
32.60
31.64
Nil
0.080
(115.75)
(115.75)
Nil
0.150
Year End Share Price ($)
0.160
0.022
0.065
Shares on Issue (No.) (i)
848,358,858 240,404,075 233,176,894
96,025,827
28,931,456
Market Capitalisation ($’000)
135,737
5,289
15,156
7,682
4,557
(i) In December 2017 the Company completed a 1:25 share consolidation. Shares on Issue (No.) shown in the above table
for the year ended 31 July 2017 is the actual shares on issue divided by 25 to provide a valid comparative.
15
toys“R”us AnZ limited Annual Report 2021
Directors’ Report
(Cont.)
Remuneration of Key Management Personnel
The aggregate compensation of the key management personnel of the Group is set out below:
Other
long-
term
empl-
oyee
benefits
Post-
employ-
ment
benefits
Short-term
employee benefits
Share-based payments
Salary
and fees
$
Short
Term
Incentive
$
Non-
mone
–tary
benefits
$
Super-
annua-
tion
$
Long
service
leave
$
Termi-
nation
Benefits
$
Shares
$
Share
Appre-
ciation
Rights
$
Share
Options
$
Total
$
Year ended
31 July 2021
Directors
Kevin Moore
61,071
–
Louis Mittoni
219,255
12,426
Nicki Anderson
John Tripodi
Bernie Brookes1
60,000
60,000
53,272
–
–
–
Sub-Totals
453,598
12,426
Executives
David Jackson2
36,555
Howard Abbey
235,535
–
–
Lian Yu3
134,937
46,500
Sub-Totals
407,027
46,500
TOTALS
860,625
58,926
–
–
–
–
–
–
–
–
–
–
–
5,839
16,050
5,725
5,725
5,061
38,400
24,150
24,932
–
–
–
–
–
–
–
994
15,897
10,212
–
–
–
–
–
–
20,000
–
235,903
322,813
–
–
–
–
– 1,179,513 1,427,244
13,790
13,790
–
–
–
–
79,515
79,515
58,333
20,000
27,580 1,415,416 1,967,420
43,712
–
–
–
–
–
–
–
–
–
–
–
–
–
104,417
261,461
10,802
218,348
10,802
584,226
64,979
11,206
43,712
103,379
11,206
43,712
20,000
27,580 1,426,218 2,551,646
1 Appointed 1 August 2019, resigned 26 November 2020.
2 Appointed 2 May 2019, resigned 4 September 2020.
3
Employed 26 November 2020, appointed Chief Operating Officer 1 May 2021.
16
Short-term employee
benefits
Post-
employ-
ment
benefits
Other
long-term
employee
benefits
Salary
and fees
$
Short
Term
Incentive
$
Non-
monetary
benefits
$
Superan-
nuatio
$
Long
service
leave
$
Termi-
nation
Benefits
$
Year ended
31 July 2020
Directors
Share-based
payments
Share
Appre-
ciation
Rights
$
Share
Options
$
Total
$
Bernie Brookes1
157,733
John Tripodi
Nicki Anderson
Sub-Totals
Executives
59,000
59,000
275,733
David Jackson2
407,599
Howard Abbey
265,000
Sub-Totals
TOTALS
672,599
948,332
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
14,985
5,605
5,605
26,195
42,424
25,000
67,424
93,619
–
–
–
–
569
787
1,356
1,356
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
172,718
64,605
64,605
301,928
450,592
290,787
741,379
– 1,043,307
1 Appointed 1 August 2019, resigned 26 November 2020.
2 Appointed 2 May 2019, resigned 4 September 2020.
3
Employed 26 November 2020, appointed Chief Operating Officer 1 May 2021.
Fixed remuneration
Remuneration linked
to performance*
2021
2020
2021
2020
100%
99.1%
100%
100%
n/a
n/a
100%
100%
100%
100%
100%
100%
100%
78.7%
100%
n/a
–
0.9%
n/a
n/a
–
–
–
–
–
–
–
–
–
–
21.3%
n/a
Directors
Kevin Moore (appointed 26 November 2020)
Louis Mittoni (appointed 26 November 2020)
John Tripodi
Nicki Anderson
Bernie Brookes (appointed 1 August 2019,
resigned 26 November 2020)
Executive Officers
David Jackson (appointed CEO 2 May 2019,
resigned 4 September 2020)
Howard Abbey (appointed CFO 2 May 2018 and
was Acting CEO from 4 September 2020 until
26 November 2020)
Lian Yu (appointed 26 November 2020)
* Represents short‑term incentives.
17
toys“R”us AnZ limited Annual Report 2021
Directors’ Report
(Cont.)
Short term incentives
In 2021 STI payments made were $58,926 (2020 nil).
Long term incentives
In 2021 LTI payments of $1,426,218 were made in the form of share options (2020 nil).
Service Agreements
Remuneration and other terms of employment for the Chair, Executive Director, Non‑Executive Directors and
the other executives are formalised in service agreements/employment letters. In the case of the Executive
Director and other executives, these allow for the provision of performance‑related short‑term incentives
and, where eligible, participation in the Toys“R”Us ANZ Limited Employee Incentive Plan. Additionally, other
benefits including car allowances can be provided to all Key Management Personnel.
Other major provisions of the service agreements relating to the remuneration of Directors and Executives
are set out below:
Kevin Moore – Chair and Independent Non-Executive Director
• Term of the agreement – Full‑Time permanent and no specific term.
• Payment of a termination benefit on early termination by the employer is not applicable.
John Tripodi – Non-executive Director
• Term of the agreement – full‑time permanent and no specific term.
• Payment of a termination benefit on early termination by the employer is not applicable.
Nicki Anderson – Non-executive Director
• Term of the agreement – full‑time permanent and no specific term.
• Payment of a termination benefit on early termination by the employer is not applicable.
Louis Mittoni – Executive Director and Chief Executive Officer
• Term of the agreement – full‑time permanent and no specific term.
• Payment of a termination benefit on early termination by the employer, other than for gross misconduct,
equal to six months base salary.
• Notice period six months.
Howard Abbey – Chief Financial Officer
• Term of the agreement – full‑time permanent and no specific term.
• Payment of a termination benefit on early termination by the employer, other than for gross misconduct,
equal to three months base salary.
• Notice period three months.
Lian Yu – Chief Operating Officer
• Term of the agreement – full‑time permanent and no specific term.
18
• Payment of a termination benefit on early termination by the employer, other than for gross misconduct,
equal to three months base salary.
• Notice period six months.
Key management personnel equity holdings
The number of ordinary shares and options/rights over ordinary shares in the company held during the
financial year by each director of Toys”R”Us ANZ Limited and each of the key management personnel of
the consolidated entity, including their related entities, are set out below.
Ordinary shares
Year ended
31 July 2021
Directors
Kevin Moore1
Louis Mittoni2
John Tripodi
Received
under the
placement
or as
acquisition
consid-
eration
Shares
Issued as
Remuner-
ation
Balance at
the start of
the year
Shares
purchased
on market
Balance at
the end of
the period
Balance
held
nominally
Other5
–
–
–
336,733
2,232,143
190,476
–
2,759,352
2,759,352
– 291,205,818
110,803
–
–
–
–
–
–
–
–
–
– 291,205,818 291,205,818
–
–
110,803
110,803
1,075,467
1,075,467
(900,000)
–
–
Nicki Anderson
1,075,467
Bernie Brookes3
900,000
Sub-Total
1,975,467
447,536 293,437,961
190,476
(900,000) 295,151,440 295,151,440
Executives
Howard Abbey
David Jackson4
Sub-Total
–
1,353
1,353
–
–
–
–
–
–
454,545
–
454,545
454,545
–
(1,353)
–
–
454,545
(1,353)
454,545
454,545
Grand Total
1,976,820
447,536 293,437,961
645,021
(901,353) 295,605,985 295,605,985
19
toys“R”us AnZ limited Annual Report 2021
Directors’ Report
(Cont.)
Balance at
the start of
the year
Shares
purchased
during the
year
Received
under the
placement
or as
acquisition
consid-
eration
Shares
Issued as
Remuner-
ation
Shares
sold
Balance at
the end of
the period
Balance
held
nominally
Year ended
31 July 2020
Directors
Bernie Brookes3
300,000
600,000
Nicki Anderson
1,075,467
–
Sub-Total
1,375,467
600,000
Executives
Howard Abbey
David Jackson4
Sub-Total
–
1,353
1,353
–
–
–
Grand Total
1,376,820
600,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
900,000
900,000
1,075,467
1,075,467
1,975,467
1,975,467
–
1,353
1,353
–
1,353
1,353
1,976,820
1,976,820
1
2
Placement Shares were issued under the same terms as shares issued to the investors under the November 2020
placement including the issue price of $0.112 per share. Remuneration shares were issued under the Employee
Incentive Plan 2020.
Shares issued as consideration for the acquisition of the Hobby Warehouse Group as approved by shareholders
at the 2020 Annual General Meeting of the Company.
3 Appointed 1 August 2019, resigned 26 November 2020.
4 Appointed 2 May 2019, resigned 4 September 2020.
5 Resigned during the period.
Share options
The tables below include balances for unlisted options.
Year ended
31 July 2021
Directors
Kevin Moore1
Louis Mittoni1
Nicki Anderson
John Tripodi
Executives
Lian Yu2
Totals
Balance at
the start of
the year
Granted
during the
year
Expired
during the
year
Forfeited
during the
year
Balance at
the end of
the year
Vested and
exercisable
at the end
of the year
–
–
–
–
–
–
1,691,575
8,457,875
–
–
1,691,956
11,841,406
–
–
–
–
–
–
–
–
–
–
–
–
1,691,575
1,691,575
8,457,875
8,457,875
–
–
1,691,956
–
–
–
11,841,406
10,149,450
1
2
Issue Date 23 November 2020, Vesting Date 23 November 2020, Issue Price $0.138, Expiry Date 1 November 2023.
Issue Date 1 May 2021, Vesting Date 1 May 2023, Issue Price $0.138, Expiry Date 1 May 2025.
20
Options Issue Details:
No Share options were on hand, granted, vested, expired, forfeited, exercised or exercisable during FY20.
Share Appreciation Rights
Year ended
31 July 2021
Directors
Nicki Anderson
John Tripodi
Totals
Balance at
the start of
the year
Granted
during the
year1
Expired
during the
year
Forfeited
during the
year
Balance at
the end of
the year
Vested and
exercisable
at the end
of the year
–
–
–
240,000
240,000
480,000
–
–
–
–
–
–
240,000
240,000
480,000
–
–
–
1 Grant Date 23 November 2020, Vesting Date 1 November 2021, Consideration $Nil. Number of Shares to be issued:
((5 day VWAP at Vesting Date less 5 day VWAP at Grant Date) x Number of Share Appreciation Rights)
No Share Appreciation Rights were on hand, granted, vested, expired, forfeited, exercised or exercisable
during FY20.
Other statutory disclosures
Loans to key management personnel and their related parties
During FY21 and to the date of this report, the Group made no loans to directors and other KMP. As at
31 July 2021, Louis Mittoni owed the Company $77,503 related to personal expenses incurred on a company
credit card. As at the date of this report, the balance outstanding was $16,719.
Transactions with Key Management Personnel
During FY21 there were no other reportable transactions between the Group and its directors, KMP, or their
personally related entities (Related Parties).
This concludes the Remuneration report which has been audited.
Unissued shares
As at the date of this report and at the reporting date, there were 11,841,406 unissued ordinary shares
under options. The number of options and rights over ordinary shares in the Company held during and after
the end of the financial year by each director of Toys“R”Us ANZ Limited and each of the key management
personnel (KMP) of the Group, including their related entities, are set out in the remuneration report.
Shares issued on the exercise of options
During the financial year, there were no employees or executives that exercised options to acquire ordinary
shares in the Company (refer to Note 28).
21
toys“R”us AnZ limited Annual Report 2021
Directors’ Report
(Cont.)
Indemnity of and insurance of officers
The Company has indemnified the directors and executives of the Company for costs incurred, in their
capacity as a director or executive, for which they may be held personally liable, except where there is
a lack of good faith.
During the financial year the Company paid a premium in respect of a contract to insure the directors and
executives of the Company and of any related body corporate against a liability to the extent permitted
by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability
and the amount of the premium.
Indemnity and insurance of auditor
To the extent permitted by law, the Company has agreed to indemnify its auditors, RSM Australia Partners,
as a part of its audit engagement agreement against claims by third parties arising from the audit (for an
unspecified amount), other than a loss arising from RSM Australia Partners negligent, wrongful or wilful
acts or omissions. No payment has been made to indemnify RSM Australia Partners during the financial
year or up to the date of this report.
Proceedings on behalf of the Company
No person has applied to the Court under section 327 of the corporations Act 2001 for leave to bring
proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party
for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings.
Non-audit services
Details of amounts paid or payable to the auditor for non‑audit services provided during the year by the
auditor are outlined in Note 31 to the financial statements. The directors are satisfied that the provision of
non‑audit services, during the year, by the auditor (or by another person or firm on the auditor’s behalf) is
compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.
The Directors are of the opinion that the services as disclosed in Note 31 to the financial statements do
not compromise the external auditor’s independence, based on advice received from the Audit and Risk
Committee, for the following reasons:
• all non‑audit services have been reviewed and approved to ensure that they do not impact the integrity
and objectivity of the auditor; and
• none of the services undermine the general principles relating to auditor independence as set out
in Code of Conduct APES 110 Code of Ethics for Professional Accountants issued by the Accounting
Professional and Ethical Standards Board, including reviewing or auditing the auditor’s own work,
acting in a management or decision‑making capacity for the Company, acting as advocate for the
Company or jointly sharing economic risks and rewards.
22
Officers of the Company who are former partners of RSM Australia Partners
There are no officers of the Company who are former partners of RSM Australia Partners.
Rounding of amounts
The company is a company of the kind referred to in ASIC Corporations (Rounding in Financials/Directors’
Reports) Instrument 2016/191, dated 24 March 2016, and in accordance with that Corporations Instrument
amounts in the directors’ report and the financial statements are rounded off to the nearest thousand
dollars, unless otherwise indicated.
Auditor’s independence declaration
A copy of the Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001
is set out on the following page.
Auditor
RSM Australia Partners continues in office in accordance with section 327 of the Corporations Act 2001.
This directors’ report is signed in accordance with a resolution of directors made pursuant to s.298(2) of
the Corporations Act 2001.
On behalf of the directors,
Kevin A Moore, FAICD, MCIM
Chair of the Board
29 September 2021
23
toys“R”us AnZ limited Annual Report 2021
toys“R”us AnZ limited Annual Report 2021
Auditor’s Independence Declaration
24
17 AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the financial report of Toys“R”Us ANZ Ltd (formerly Funtastic Limited) and its controlled entities for the year ended 31 July 2021, I declare that, to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. RSM AUSTRALIA PARTNERS J S CROALL Partner Dated: 29 September 2021 Melbourne, Victoria Consolidated Statement of Profit or Loss
and other Comprehensive Income
for the year ended 31 July 2021
Note
31-Jul-21
$’000
31-Jul-20
$’000
Continuing operations
Revenue
Cost of goods sold
Gross profit
Investment income
Other income
Warehouse and distribution expenses
Marketing and selling expenses
Employee benefits expenses
Administration expenses
Earnings before interest, taxation, depreciation and
amortisation (EBITDA)
Finance costs
Depreciation and amortisation expenses
Loss before income tax expense from continuing operations
Income tax (expense)/benefit
Loss after income taxes from continuing operations
Discontinued operations
Profit/(loss) after income taxes from discontinued operations
Profit/(loss) for the year
Other comprehensive income (net of tax)
Items that may be reclassified subsequently to profit or loss
Exchange differences on translating foreign operations
Derecognition of foreign currency translation reserve
Other comprehensive income for the year (net of tax)
Total comprehensive income/(loss) for the year attributable
to the members of Toys“R”Us ANZ Limited
Earnings per share
Basic earnings/(loss) per share (cents per share)
Diluted earnings/(loss) per share (cents per share)
Earnings per share – continuing operations
Basic earnings/(loss) per share (cents per share)
Diluted earnings/(loss) per share (cents per share)
Earnings per share – discontinued operations
Basic earnings/(loss) per share (cents per share)
Diluted earnings/(loss) per share (cents per share)
6
7
7
7
7
8
5
21
21
21
21
21
21
21,827
(17,696)
4,131
2
51
(963)
(1,567)
(3,961)
(2,134)
–
–
–
3
19
(1)
–
(440)
(1,372)
(4,441)
(1,791)
(22)
(863)
–
(88)
(5,326)
(1,879)
237
–
(5,089)
(1,879)
1,976
(3,113)
(7,434)
(9,313)
8
707
715
886
–
886
(2,398)
(8,427)
(0.48)
(0.48)
(0.78)
(0.78)
0.30
0.30
(3.94)
(3.94)
(0.79)
(0.79)
(3.15)
(3.15)
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with
the accompanying notes.
25
toys“R”us AnZ limited Annual Report 2021
Consolidated Statement
of Financial Position
as at 31 July 2021
Current Assets
Cash
Trade and other Receivables
Inventories
Tax receivable
Other Current Assets
Assets relating to discontinued operations
Total Current Assets
Non-Current Assets
Property, Plant and Equipment
Goodwill and Other Intangibles
Right‑of‑Use Assets
Other Non‑Current Assets
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and Other Payables
Contract liabilities
Borrowings
Provisions
Lease Liabilities
Other Liabilities
Liabilities directly associated with assets relating
to discontinued operations
Total Current Liabilities
Non-Current Liabilities
Borrowings
Provisions
Deferred Tax
Lease Liabilities
Total Non-Current Liabilities
Total Liabilities
Net Assets/(Liabilities)
Equity
Issued capital
Accumulated Losses
Reserves
Total Equity/(Deficiency)
Note
25 (a)
9
10
8 (d)
11
5
13
14
12
11
16
17
18
19
5
16
17
8 (f)
18
20
20
31-Jul-21
$’000
31-Jul-20
$’000
17,338
947
4,971
12
796
24,064
2,099
26,163
1,937
34,569
–
1,133
37,639
63,802
367
1,809
1,373
–
590
4,139
–
4,139
25
102
691
50
868
5,007
1,544
1,325
896
–
388
–
1,713
4,541
2,113
6,654
–
4
1,344
–
1,348
8,002
55,800
–
478
241
211
2,411
4,666
–
4,666
8,428
13
–
535
8,976
13,642
(8,635)
290,545
225,166
(236,199)
(233,086)
1,454
55,800
(715)
(8,635)
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
26
Consolidated Statement
of Changes in Equity
for the year ended 31 July 2021
Accum-
ulated
Losses
$’000
Foreign
Currency
Translation
Reserve
$’000
Equity
settled
Employee
Benefits
Reserve
$’000
Issued
Capital
$’000
Balance at 1 August 2019
224,848
(223,773)
(1,601)
205
Loss after income taxes for the year
Other comprehensive income for the
year, net of taxes
Total comprehensive income/(loss)
Issue of ordinary shares
Transfer of share‑based payments
–
–
–
113
205
(9,313)
–
(9,313)
–
–
Balance at 31 July 2020
225,166
(233,086)
Loss after income taxes for the year
Other comprehensive income for the
year, net of taxes
Total comprehensive income/(loss)
Issue of ordinary shares, net of
transaction costs1
Issue of share appreciation rights
Issue of employee share options
–
–
–
65,379
–
–
(3,113)
–
(3,113)
–
–
–
Balance at 31 July 2021
290,545
(236,199)
1 Refer to Note 20.
–
886
886
–
–
(715)
–
715
715
–
–
–
–
–
–
–
–
(205)
–
–
–
–
–
28
1,426
1,454
Total
$’000
(321)
(9,313)
886
(8,427)
113
–
(8,635)
(3,113)
715
(2,398)
65,379
28
1,426
55,800
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
27
toys“R”us AnZ limited Annual Report 2021
Consolidated Statement of Cash Flows
for the year ended 31 July 2021
Cash Flows from Operating Activities
Receipts from customers
Receipts from other income (including government grants)
Payments to suppliers
Payments to employees
Cash (utilised)/generated from operations
Income taxes refunded/(paid)
Interest and other costs of finance paid
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
Note
42,951
27,741
363
300
(42,049)
(25,785)
(4,664)
(3,399)
17
(533)
(4,656)
(2,400)
19
(341)
Net cash outflow from operating activities
25(c)
(3,915)
(2,722)
7
27
13
5
Cash Flows from Investing Activities
Interest and other investment income received
Net cash acquired on purchase of business
Payments for plant and equipment
Payments for security deposits
Payments for other intangible assets
Proceeds from sale of business
Net cash inflow/(outflow) from investing activities
Cash Flows from Financing Activities
(Repayment of)/Proceeds from borrowings – net
Repayment of Lease Liabilities
Proceeds from share issue
Costs from share issue
Net cash inflow from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
25(a)
2
289
(1,691)
(1,026)
–
3,169
743
(6,148)
(211)
28,450
(1,948)
20,143
16,971
367
17,338
3
–
(35)
–
(42)
–
(74)
2,763
(178)
132
(19)
2,698
(98)
465
367
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
28
Notes to the Consolidated
Financial Statements
for the year ended 31 July 2021
NOTE 1: Significant accounting policies
Statement of compliance
These financial statements are general purpose financial statements which have been prepared in
accordance with the Corporations Act 2001, Accounting Standards and Interpretations, and comply with
other requirements of the law. The financial statements comprise the consolidated financial statements
of the Group.
For the purpose of preparing the consolidated financial statements the Company is a for profit entity.
Accounting Standards include Australian Accounting Standards (AASB). Compliance with Australian
Accounting Standards ensures that the financial statements and notes comply with International Financial
Reporting Standards (IFRS).
Basis of preparation
The financial report has been prepared on the basis of historical cost, except for derivative financial
instruments that have been measured at fair value. Cost is based on the fair values of the consideration
given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise stated.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the Group
only. Supplementary information about the parent entity is disclosed in Note 32.
Going concern basis of accounting
The financial report has been prepared on the going concern basis which contemplates the continuity of
normal business activities and the realisation of assets and the payment of liabilities in the normal course
of business.
As disclosed in the financial statements, the Group has incurred a loss from continuing operations of
$5.089 million and cash outflows from operating activities of $3.915 million for the year ended 31 July 2021.
During the year, the Group successfully completed a capital raising and used a portion of the funds to pay
out in full all loans and debt facilities and as at the reporting date, has a cash balance of $17.3 million.
The acquisition of Hobby Warehouse Group (HWG) during the year (refer Note 27 for further details)
and the capital raising has given the Group the opportunity to grow its revenues and, after a period of
reorganisation and investment in efficiencies and logistics, to secure profits and positive cash from
operating activity.
The Directors believe that the Group will be able to achieve the improved results and deliver the strategic
initiatives and are satisfied that the Group will continue as a going concern. Accordingly, the financial
report has been prepared on a going concern basis.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities
controlled by the Company (its subsidiaries), together referred to as “the Group” in these financial
statements. Control is achieved when the Company:
• Has the power over the investee;
•
is exposed, or has rights, to variable returns from its involvement with the investee; and
• has the ability to use its power to affect its returns.
29
toys“R”us AnZ limited Annual Report 2021
Notes to the Consolidated Financial Statements
(Cont.)
NOTE 1: Significant accounting policies (cont.)
Basis of consolidation (cont.)
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that
there are changes to one or more of the three elements of control listed above.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases
when the Company losses control of the subsidiary. Specifically, income and expenses of a subsidiary
acquired or disposed of during the year are included in the consolidated statement of profit or loss and
other comprehensive income from the date the Company gains control until the date the Company ceases
to control the subsidiary.
Profit or loss and each component of other comprehensive income are attributed to the owners of the
Company and to the non‑controlling interests. Total comprehensive income of subsidiaries is attributed to
the owners of the Company and to the non‑controlling interests even if this results in the non‑controlling
interest having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their
accounting policies into line with the Group’s accounting policies.
All intra‑Group assets and liabilities, equity, income and expenses and cash flows relating to transactions
between members of the Group are eliminated in full on consolidation.
Operating segments
Operating segments are presented using the ‘management approach’, where the information presented is on
the same basis as the internal reports provided to the Chief Operating Decision Makers (‘CODM’). The CODM
is responsible for the allocation of resources to operating segments and assessing their performance.
Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency
of the primary economic environment in which the entity operates. Financial statements are presented in
Australian dollars, which is Toys“R”Us ANZ Limited’s functional and presentation currency.
(ii) Transactions and balances
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 year‑end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the income statement, except when deferred in equity
as qualifying cash flow hedges and qualifying net investment hedges.
Translation differences on non‑monetary items, such as equities held at fair value through profit or loss,
are reported as part of the fair value gain or loss.
(iii) Group companies
The results and financial position of all the Group entities, (none of which has the currency of a
hyperinflationary economy), that have a functional currency different from the presentation currency,
are translated into the presentation currency as follows:
• assets and liabilities for each balance sheet presented are translated at the closing rate at the date
of that balance sheet;
30
NOTE 1: Significant accounting policies (cont.)
Foreign currency translation (cont.)
•
income and expenses for each profit or loss presented are translated at the rates prevailing
on the transaction dates, in which case income and expenses are translated at the dates of the
transactions); and
• all resulting exchange differences are recognised as a separate component of equity.
On consolidation, exchange differences arising from the translation of any net investment in foreign
entities, and of borrowings and other currency instruments designated as hedges of such investments,
are taken to equity. When a foreign operation is sold or borrowings repaid, a proportionate share of such
exchange differences are recognised in the profit or loss as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets
and liabilities of the foreign entity and translated at the closing rate.
Revenue recognition
Revenue is recognised at an amount that reflects the consideration to which the consolidated entity is
expected to be entitled in exchange for transferring goods to a customer. Revenue arises mainly from the
sale of goods to customers.
To determine whether to recognise revenue, the Group follows a 5‑step process:
1.
Identifying the contract with a customer
2.
Identifying the performance obligations
3. Determining the transaction price
4. Allocating the transaction price to the performance obligations
5. Recognising revenue when/as performance obligation(s) are satisfied
(i) Sale of Goods
The Group generates the majority of its revenue from the sales of goods. Sale of goods is recognised when
the customer obtains control of the goods. Revenue from the sale of goods is recognised on delivery of goods
to the customer.
(ii) Government Grants
Government grants relating to costs are deferred and recognised in profit and loss over the period
necessary to match them with the costs that they are intended to compensate. Government payments
received in relation to COVID‑19 have been recognised under other income.
(iii) Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
Income tax
(i) Current tax
The income tax expense or benefit for the period is the tax payable on that period’s taxable income based
on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and
liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior
periods, where applicable.
31
toys“R”us AnZ limited Annual Report 2021
Notes to the Consolidated Financial Statements
(Cont.)
NOTE 1: Significant accounting policies (cont.)
Income tax (cont.)
(ii) Deferred tax
Deferred tax is accounted for using the balance sheet liability method. Assets and liabilities are recognised
for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities
are settled, based on those tax rates which are enacted, or substantively enacted, for each jurisdiction.
The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary
differences to measure the deferred tax asset or liability.
An exception is made for certain temporary differences arising from the initial recognition of an asset or
a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they
arose in a transaction, other than a business combination, that at the time of the transaction did not affect
either accounting profit or taxable profit or loss.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to
the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part
of the asset to be recovered.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying
amount and tax bases of investments in controlled entities where the parent entity is able to control the
timing of the reversal of the temporary differences and it is probable that the differences will not reverse
in the foreseeable future.
(iii) Current and deferred tax for the period
Current and deferred tax balances attributable to amounts recognised directly in equity are also
recognised directly in equity.
(iv) Tax Losses
A deferred tax asset in respect to tax losses is only recognised where there is a reasonable certainty that
future taxable profits will be guaranteed. Management assesses continuity of ownership test and same
business test hurdles bi‑annually.
(v) Tax Consolidation
The company and its wholly‑owned Australian resident entities are part of a tax‑consolidated Group
under Australian taxation law. Toys“R”Us ANZ Limited is the head entity in the tax‑consolidated Group.
Tax expense/revenue, deferred tax liabilities and deferred tax assets arising from temporary differences
of the members of the tax‑consolidated Group are recognised in the separate financial statements of the
members of the tax‑consolidated Group using the “separate taxpayer within Group” approach by reference
to the carrying amounts in the separate financial statements of each entity and the tax values applying
under tax consolidation.
Due to the existence of a tax funding arrangement between the entities in the tax‑consolidated Group,
amounts are recognised as payable to or receivable by the company and each member of the Group in
relation to the tax contribution amounts paid or payable between the parent entity and the other members
of the tax‑consolidated Group in accordance with the arrangement. Further information about the tax
funding arrangement is detailed in Note 8 to the financial statements.
32
NOTE 1: Significant accounting policies (cont.)
Discontinued operations
A discontinued operation is a component of the Group’s business, the operations and cash flows of which
can be clearly distinguished from the rest of the Group and which:
•
•
•
represents a separate major line of business or geographical area of operations;
is part of a single co‑ordinated plan to dispose of a separate major line of business or geographical
area of operations; or
is a subsidiary acquired exclusively with a view to re‑sell.
Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria
to be classified as held‑for‑sale, if earlier. When an operation is classified as a discontinued operation, the
comparative statement of profit or loss and other comprehensive income is re‑presented as if the operation
had been discontinued from the start of the comparative year.
The assets or disposal group are measured at the lower of their carrying amount and fair value less
costs to sell. Any impairment loss on a disposal group, is first allocated to goodwill, and then to remaining
assets and liabilities on a pro‑rata basis, except that no loss is allocated to inventories, financial assets
and deferred tax assets which continue to be measured in accordance with the Group’s other accounting
policies. Gains or losses on disposal are recognised in profit or loss.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non‑current
classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed
in the Group’s normal operating cycle; it is held primarily for the purpose of trading; it is expected to be
realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless
restricted from being exchanged or used to settle a liability for at least 12 months after the reporting
period. All other assets are classified as non‑current.
A liability is classified as current when: it is either expected to be settled in the Group’s normal operating
cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the
reporting period; or there is no unconditional right to defer the settlement of the liability for at least
12 months after the reporting period. All other liabilities are classified as non‑current.
Deferred tax assets and liabilities are always classified as non‑current.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits at call with financial institutions, other short‑term,
highly liquid investments with original maturities of three months or less that are readily convertible to
known amounts of cash and are subject to an insignificant risk of changes in value. Bank overdrafts are
shown within borrowings in current liabilities in the statement of financial position.
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost
using the effective interest method less any allowances for expected credit losses. Trade receivables are
generally due for settlement within 30‑60 days. The Group has applied the simplified approach to measure
expected credit losses which uses a lifetime expected loss allowance. To measure the expected credit
losses, trade receivables have been grouped based on days overdue.
Other receivables are recognised at amortised cost less any allowance for expected credit losses.
33
toys“R”us AnZ limited Annual Report 2021
Notes to the Consolidated Financial Statements
(Cont.)
NOTE 1: Significant accounting policies (cont.)
Inventories
Inventories are stated at the lower of cost and net realisable value. Costs are assigned to individual items
of stock on the basis of weighted average costs. Cost comprises of direct materials and delivery costs,
import duties and other taxes. Costs of purchased inventory are determined after deducting rebates and
discounts received or receivable. Net realisable value represents the estimated selling price less the
carrying value of inventory and costs necessary to make the sale.
Stock write downs occur where the estimated selling price of stock, in the ordinary course of business,
is less than the estimated costs of completion and costs necessary to make the sale. Excess stock levels
are reviewed on a regular basis, where discussions with the sales teams are undertaken.
Derivative financial instruments
The Group enters into derivative financial instruments to manage its exposure to foreign exchange rate risk,
including forward contracts comprising foreign exchange forward contracts and options. Further details of
derivative financial instruments are disclosed in Note 26 to the financial statements.
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are
subsequently re‑measured to their fair value at each reporting date. The resulting gain or loss is recognised
in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in
which event, the timing of the recognition in profit or loss depends on the nature of the hedge relationship.
The Group designates certain derivatives as either hedges of the fair value of recognised assets or liabilities
or firm commitments (fair value hedges), or hedges of highly probable forecast transactions or hedges of
foreign currency risk of firm commitments (cash flow hedges).
The fair value of hedging derivatives is classified as a current asset or current liability if the remaining
maturity of the hedge relationship is less than 12 months and as a non‑current asset or a non‑current
liability if the remaining maturity of the hedge relationship is more than 12 months.
Financial assets
(i) Recognition and derecognition
Financial assets and financial liabilities are recognised when the Group becomes a party to the
contractual provisions of the financial instrument and are measured initially at fair value adjusted by
transactions costs, except for those carried at fair value through profit or loss, which are measured initially
at fair value. Subsequent measurement of financial assets and financial liabilities are described below.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset
expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial
liability is derecognised when it is extinguished, discharged, cancelled or expires.
(ii) Classification and initial measurement of financial assets
Except for those trade receivables that do not contain a significant financing component and are measured
at the transaction price in accordance with AASB 15, all financial assets are initially measured at fair
value adjusted for transaction costs (where applicable).
(iii) Subsequent measurement of financial assets
For the purpose of subsequent measurement, financial assets, other than those designated and effective
as hedging instruments, are classified into the following categories upon initial recognition:
•
•
financial assets at amortised cost
financial assets at fair value through profit or loss (FVPL)
34
NOTE 1: Significant accounting policies (cont.)
Financial assets (cont.)
Classifications are determined by both:
• The entity’s business model for managing the financial asset
• The contractual cash flow characteristics of the financial assets
All income and expenses relating to financial assets that are recognised in profit or loss are presented
within finance costs, finance income or other financial items, except for impairment of trade receivables
which is presented within other expenses.
(iv) Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet the following conditions (and are not
designated as FVPL):
•
•
they are held within a business model whose objective is to hold the financial assets and collect its
contractual cash flows
the contractual terms of the financial assets give rise to cash flows that are solely payments of
principal and interest on the principal amount outstanding
After initial recognition, these are measured at amortised cost using the effective interest method.
Discounting is omitted where the effect of discounting is immaterial. The Group’s cash and cash equivalents,
trade and most other receivables fall into this category of financial instruments.
(v) Impairment of financial assets
AASB 9’s impairment model uses more forward‑looking information to recognize expected credit losses –
the ‘expected credit losses (ECL) model’. The application of the new impairment model depends on whether
there has been a significant increase in credit risk.
The Group considers a broader range of information when assessing credit risk and measuring expected
credit losses, including past events, current conditions, reasonable and supportable forecasts that affect
the expected collectability of the future cash flows of the instrument.
In applying this forward‑looking approach, a distinction is made between:
•
•
financial instruments that have not deteriorated significantly in credit quality since initial recognition
or that have low credit risk (‘Stage 1’) and
financial instruments that have deteriorated significantly in credit quality since initial recognition and
whose credit risk is not low (‘Stage 2’).
‘Stage 3’ would cover financial assets that have objective evidence of impairment at the reporting date.
‘12‑month expected credit losses’ are recognised for the first category while ‘lifetime expected credit losses’
are recognised for the second category.
Measurement of the expected credit losses is determined by a probability‑weighted estimate of credit
losses over the expected life of the financial instrument.
Plant and Equipment
Plant and equipment are stated at cost less accumulated depreciation and impairment. Cost includes
expenditure that is directly attributable to the acquisition of the item.
Depreciation is calculated on a straight‑line basis to write off the net cost of each item of plant and
equipment over the shorter of its expected useful life and the lease term. Estimates of remaining useful
lives are made on a regular basis for all assets, with annual reassessments for major items.
35
toys“R”us AnZ limited Annual Report 2021
Notes to the Consolidated Financial Statements
(Cont.)
NOTE 1: Significant accounting policies (cont.)
Plant and Equipment (cont.)
The cost of improvements to or on leasehold properties is amortised over the estimated useful life of the
improvement to the Group. The expected useful lives are as follows:
Plant and equipment:
2.5–10 years
Leasehold improvements:
3–5 Years
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic
benefit to the consolidated entity. Gains and losses between the carrying amount and the disposal
proceeds are taken to profit or loss.
Right-of-use Assets
A right‑of‑use asset is recognised at the commencement of a lease. The right‑of‑use asset is measured
at cost, which comprises the initial amount of the lease liability adjusted for, as applicable, any lease
payments made at or before the commencement date net of any lease incentives received, any initial direct
costs incurred and, except where included in the cost of inventories, an estimate of costs expected to be
incurred for dismantling and removing the underlying asset and restoring the site or asset.
Right‑of‑use assets are depreciated on a straight‑line basis over the unexpired period of the lease or the
estimated useful life of the asset, whichever is the shorter. Where the Group expects to obtain ownership of
the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right‑of‑use
assets are subject to impairment or adjusted for any remeasurement of lease liabilities.
The Group has elected not to recognise a right‑of‑use asset and corresponding lease liability for short‑term
leases with terms of 12 months or less and leases of low‑value assets. Lease payments on these assets are
expensed to profit and loss as incurred.
Intangible assets
Intangible assets acquired separately or in a business combination are initially measured at cost. The cost
of an intangible asset acquired in a business combination is its fair value as at the date of acquisition.
Following initial recognition, intangible assets are carried at cost less any accumulated amortisation
and any accumulated impairment losses. Internally generated intangible assets, excluding capitalised
development costs, are not capitalised and expenditure is recognised in profit or loss in the year in which
the expenditure is incurred. Amortisation of the Group’s intangible assets is recognised on a straight‑line
basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at
the end of each annual reporting period, with the effect of any changes in estimate being accounted for
on a prospective basis.
Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested
annually for impairment, or more frequently if events or changes in circumstances indicate that it might
be impaired and is carried at cost less accumulated impairment losses. Impairment losses on goodwill
are taken to profit or loss and are not subsequently reversed.
Intangible assets are amortised, based on the useful live assessed by management, as follows:
• Software
• Patents
• Trademarks
3 years
20 years
3–5 years
•
Licensed distribution agreements 1–20 years
36
NOTE 1: Significant accounting policies (cont.)
Impairment of tangible and intangible assets
At each reporting date, the Group reviews the carrying amounts of its tangible and intangible assets to
determine whether there is any indication that those assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the
impairment loss (if any). Where the asset does not generate cash flows that are independent from other
assets, the Group estimates the recoverable amount of the CGU to which the asset belongs. Where a
reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to
individual CGU, or otherwise they are allocated to the smallest group of CGU for which a reasonable and
consistent allocation basis can be identified.
Recoverable amount is the higher of fair value less cost to sell and value in use. In assessing value in use,
the estimated future cash flows are discounted to their present value using a pre‑tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset for which
the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or CGU)
is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to
its recoverable amount. An impairment loss is recognised immediately in the profit and loss.
Where an impairment loss subsequently reverses, the carrying amount of the asset (CGU) is increased to the
revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does
not exceed the carrying amount that would have been determined had no impairment loss been recognised
for the asset (CGU) in prior years.
Trade payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the
financial year for which an invoice has been processed through the Group’s payables system and the
amount remains unpaid.
The amounts are unsecured and usually paid within 30 to 90 days of recognition. The average credit period
on purchases of certain goods from international supplier’s ranges from 4 weeks to 4 months. There is no
interest charged on trade payables. The Group has financial risk management policies in place to ensure
that, as often as possible, all payables are paid within a reasonable timeframe.
Contract liabilities
Contract liabilities represent the consolidated entity’s obligation to transfer goods or services to a
customer and are recognised when a customer pays consideration, or when the consolidated entity
recognises a receivable to reflect its unconditional right to consideration (whichever is earlier) before the
consolidated entity has transferred the goods or services to the customer.
License guarantee commitments
The Group enters into royalty agreements. The terms of the royalty agreements require minimum levels
of royalty payments to be offset against the minimum guarantees received at the start of the agreement.
If, after calculating the net contribution relating to the products sold under the specific agreement, there
is a shortfall between the minimum guarantee and the actual royalty derived (or forecast to be derived
in future periods) from the reported sales the agreement is impaired. Net contribution is calculated after
taking into account net sales revenue, cost of goods sold, applicable royalties and direct selling costs. If the
royalty shortfall cannot be recovered from the resulting net contribution a provision is made through profit
or loss.
37
toys“R”us AnZ limited Annual Report 2021
Notes to the Consolidated Financial Statements
(Cont.)
NOTE 1: Significant accounting policies (cont.)
Borrowings
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.
Other financial liabilities are subsequently measured at amortised cost using the effective interest method,
with interest expense recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of
allocating interest expense over the relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash payments through the expected life of the financial liability, or, where
appropriate, a shorter period.
Borrowing costs
Borrowing costs are recognised as expenses in the period in which they are incurred. Borrowing costs include:
•
•
•
interest on bank overdrafts and short‑term and long‑term borrowings;
finance lease charges; and
certain exchange differences arising from foreign currency borrowings.
Lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially
recognised at the present value of the lease payments to be made over the term of the lease, discounted
using the interest rate implicit in the lease or, if that rate cannot be readily determined, the consolidated
entity’s incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives
receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under
residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably
certain to occur, and any anticipated termination penalties. The variable lease payments that do not
depend on an index or a rate are expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts
are remeasured if there is a change in the following: future lease payments arising from a change in an
index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination
penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right‑of use
asset, or to profit or loss if the carrying amount of the right‑of‑use asset is fully written down.
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a
past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate
can be made of the amount of the obligation.
The amount recognised as a provision is a best estimate of the consideration required to settle the present
obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation.
Where a provision is measured using the cash flows estimated to settle the present obligations, its carrying
amount is the present value of those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from
a third party, the receivable is recognised as an asset if it is virtually certain that recovery will be received
and the amount of the receivable can be measured reliably.
38
NOTE 1: Significant accounting policies (cont.)
Employee benefits
(i) Wages and salaries annual leave and long service leave
A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave
and long service leave where it is probable that settlement will be required and they are capable of being
measured reliably.
Liabilities recognised in respect of short‑term employee benefits expected to be settled within 12 months, are
measured at their nominal values using the remuneration rate expected to apply at the time of settlement.
Liabilities recognised in respect of employee benefits which are not expected to be settled within 12 months
are measured at the present value of the estimated future cash outflows to be made by the Group in
respect of services provided by employees up to reporting date. Consideration is given to expected future
wage and salary levels, experience of employee departures and periods of service. Expected future
payments are discounted using market yields at the reporting date on corporate bonds with terms to
maturity and currency that match, as closely as possible, the estimated future cash outflows.
(ii) Defined contribution plans
Contributions to defined contribution superannuation plans are expensed when incurred.
(iii) Profit sharing and bonus plans
Liabilities for profit sharing and bonus plans are expected to be settled within 12 months and are measured
at the amounts expected to be paid when they are settled.
(iv) Employee benefit on‑costs
Employee benefit on‑costs, including payroll tax, are recognised and included in employee benefit liabilities
and costs, when the employee benefits to which they relate are recognised as liabilities.
(v) Share‑based payments
Share‑based compensation benefits are provided to employees via the Company Employee Incentive Plan.
The fair value of options and performance and service share rights granted under the Company Employee
Incentive Plan is recognised as an employee benefit expense with a corresponding increase in equity.
The fair value is measured at grant date and recognised over the period during which the employees
become unconditionally entitled to the options (vesting period).
The fair value at grant date is independently determined using an appropriate option pricing model that
takes into account the exercise price, the term of the option, the vesting and performance criteria, the
impact of dilution, the non‑tradeable nature of the option, the share price at grant date and expected
price volatility of the underlying share, the expected dividend yield, total shareholder performance hurdles
and the risk‑free interest rate for the term of the option.
The fair value of the options, performance and service share rights and schemes granted excludes the
impact of any non‑market vesting conditions (for example, profitability and sales growth targets).
Non‑market vesting conditions are included in assumptions about the number of options that are expected
to become exercisable. At each balance sheet date, the entity revises its estimate of the number of options
that are expected to become exercisable. The employee benefit expense recognised each period takes into
account the most recent estimate.
Upon the exercise of options or performance and service share rights, the balance of the share‑based
payments reserve relating to those options is transferred within equity. The market value of shares issued
to employees for no cash consideration under the employee incentive plan is recognised as an employee
benefits expense with a corresponding increase in equity when the employees become entitled to the shares.
39
toys“R”us AnZ limited Annual Report 2021
Notes to the Consolidated Financial Statements
(Cont.)
NOTE 1: Significant accounting policies (cont.)
Determination of fair values
A number of the Group’s accounting policies and disclosures require the determination of fair value, for both
financial and non‑financial assets and liabilities. Fair values have been determined for measurement and/
or disclosure purposes, based on the methods as stated below. When applicable, further information about
the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
In estimating the fair value of an asset or liability, the Group uses market observable data to the extent
it is available. Where it is not available, the Group engages third party qualified valuers to perform the
valuation. The fair value of the asset or liability is the price that would be received to sell the asset or paid
to transfer the liability in an orderly transaction between market participants at measurement date.
The Group shall use valuation techniques that are appropriate in the circumstances and for which sufficient
data are available to measure fair value, maximising the use of relevant observable inputs and minimising
the use of unobservable inputs.
To increase consistency and comparability in fair value measurements and related disclosures, the Group
has adopted the fair value hierarchy established in AASB 13 ‘Fair Value Measurement’ that categorises
fair value measurement into three levels:
•
•
•
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets
for identical assets or liabilities.
Level 2 fair value measurements are those derived from inputs other than quoted prices included
within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly
(i.e. derived from prices).
Level 3 fair value measurements are those derived from valuation techniques that include inputs for
the asset or liability that are not based on observable market data (unobservable inputs).
Valuation techniques used to measure fair value shall be applied consistently. However, a change in a
valuation technique or its application (e.g. a change in its weighting when multiple valuation techniques
are used or a change in an adjustment applied to a valuation technique) is appropriate if the change
results in a measurement that is equally or more representative of fair value in the circumstances.
Financial instruments issued by the Group
(i) Equity instruments
Equity instruments are classified as either financial liabilities or as equity in accordance with the
substance of the contractual arrangement. Transaction costs arising on the issue of equity instruments
are recognised directly in contributed equity.
(ii) Other financial liabilities
Other financial liabilities, including borrowings, are initially measured at fair value net of transaction
costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest
method, with interest expense recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and
of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash payments through the expected life of the financial liability, or, where
appropriate, a shorter period.
40
NOTE 1: Significant accounting policies (cont.)
Business combinations
The acquisition method of accounting is used to account for business combinations regardless of whether
equity instruments or other assets are acquired.
The consideration transferred is the sum of the acquisition‑date fair values of the assets transferred,
equity instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the
amount of any non‑controlling interest in the acquiree. For each business combination, the non‑controlling
interest in the acquiree is measured at either fair value or at the proportionate share of the acquiree’s
identifiable net assets. All acquisition costs are expensed as incurred to profit or loss. On the acquisition
of a business, the Group assesses the financial assets acquired and liabilities assumed for appropriate
classification and designation in accordance with the contractual terms, economic conditions, the Group’s
operating or accounting policies and other pertinent conditions in existence at the acquisition‑date.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition‑date fair
value. Subsequent changes in the fair value of the contingent consideration classified as an asset or
liability is recognised in profit or loss. Contingent consideration classified as equity is not remeasured
and its subsequent settlement is accounted for within equity.
The difference between the acquisition‑date fair value of assets acquired, liabilities assumed and
any non‑controlling interest in the acquiree and the fair value of the consideration transferred and the
fair value of any pre‑existing investment in the acquiree is recognised as goodwill. If the consideration
transferred and the pre‑existing fair value is less than the fair value of the identifiable net assets acquired,
being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by
the acquirer on the acquisition‑date, but only after a reassessment of the identification and measurement
of the net assets acquired, the non‑controlling interest in the acquiree, if any, the consideration transferred
and the acquirer’s previously held equity interest in the acquirer.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively
adjusts the provisional amounts recognised and also recognises additional assets or liabilities during
the measurement period, based on new
information obtained about the facts and circumstances that existed at the acquisition‑date.
The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition
or (ii) when the acquirer receives all the information possible to determine fair value.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Toys “R” Us
ANZ Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average
number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary
shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to
take into account the after income tax effect of interest and other financing costs associated with dilutive
potential ordinary shares and the weighted average number of shares assumed to have been issued for
no consideration in relation to dilutive potential ordinary shares.
41
toys“R”us AnZ limited Annual Report 2021
Notes to the Consolidated Financial Statements
(Cont.)
NOTE 1: Significant accounting policies (cont.)
Goods and services tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:
• where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part
of the cost of acquisition of an asset or as part of an item of expense; or
•
for receivables and payables which are recognised inclusive of GST.
The net amount of GST recoverable from, or payable to, the tax authority is included as a current asset
or liability in the balance sheet.
Cash flows are included in the cash flow statement on a gross basis. The GST components of cash flows
arising from investing and financing activities which are recoverable from, or payable to, the tax authority
are classified as operating cash flows.
Rounding of amounts
The company is a company of the kind referred to in ASIC Corporations (Rounding in Financials/Directors’
Reports) Instrument 2016/191, dated 24 March 2016, and in accordance with that Corporations Instrument
amounts in the directors’ report and the financial statements are rounded off to the nearest thousand
dollars, unless otherwise indicated.
NOTE 2: Application of new and revised Accounting Standards
2.1 Amendments to AASBs and the new Interpretation that are mandatorily effective for the current year
In the current year, the Group has applied all amendments to AASBs issued by the Australian Accounting Standards
Board (AASB) that are mandatorily effective for an accounting period that begins on or after 1 August 2020.
2.2 Accounting Standards issued but not yet effective and not early adopted
Any new or amended Accounting Standard or Interpretations that are not yet mandatory have not been
early adopted.
Other amending accounting standards
Other amending accounting standards issued are not considered to have a significant impact on the
financial statement of the Group as the amendments provide either clarification of existing accounting
treatment or editorial amendments.
NOTE 3: Critical accounting judgments and key sources of
estimation uncertainty
In the application of the Group’s accounting policies, which are described in Note 1, the directors are
required to make judgements, estimates and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The estimates and associated assumptions
are based on historical experience and other factors that are considered to be relevant. Actual results
may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised if the revision affects only that period
or in the period of the revision and future periods if the revision affects both current and future periods.
42
NOTE 3: Critical accounting judgments and key sources of
estimation uncertainty (cont.)
Key sources of estimation uncertainty
In addition to the key sources of estimation uncertainty on the going concern basis as disclosed in Note 1, the
following are the key assumptions concerning the future, and other key sources of estimation uncertainty at
the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year.
(i) Useful life and impairment of intangible assets
Management has assessed the useful life of intangibles on the following basis:
• Software – based on the licence or expected
• Patents and Trademarks – based on the contractual life of the patent
•
Licensed distribution agreements – based on the term of the agreement or the expected Brand product
life cycle
Whilst the current useful lives are management’s best estimate, a periodic review is undertaken to ensure
that these remain appropriate.
The Group tests annually for intangibles assets with indefinite useful lives or when impairment indicators
are identified, whether intangible assets have suffered any impairment, in accordance with the accounting
policy. The recoverable amounts of cash‑generating units have been determined based on value‑in‑use
calculations. These calculations require the use of assumptions, including estimated discount rates based
on the current cost of capital and growth rates of the estimated future cash flows. The recoverable amounts
of the other intangible assets have been determined on a relief from royalty basis. These calculations require
the use of assumptions. A significant change to the assumptions affects the recoverable amount of the other
intangible assets.
(ii) Recoverability of inventory
The Group periodically assesses whether the net realisable value (NRV) of its inventories is reasonable
in light of changing market conditions within the retail sector and the Group’s reassessment of brand
portfolio. Whilst the Group has provided to recognise the best estimate for the amount for which its
inventory will be realised, the final amounts will be subject to the prevailing market conditions and may
differ from the amounts provided for.
(iii) Allowance for expected credit losses
The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is
based on the lifetime expected credit loss grouped based on days overdue and industry type and makes
assumptions to allocate an overall expected credit loss rate for each group. These assumptions include
recent sales experience and historical collection rates.
(iv) Taxation timing differences recognised as asset and deferral of tax liability
The amount of deferred tax asset in respect of revenue tax losses is determined based upon expected future
taxable income, and judgement as to the loss availability under the “continuity of ownership test”, and
where applicable the “similar business test”. Based on the current assessment, determined using budget
forecasts for FY2022, the Group has continued to not recognise an amount within the deferred tax asset
for temporary differences. Refer to Note 8 for details.
43
toys“R”us AnZ limited Annual Report 2021
Notes to the Consolidated Financial Statements
(Cont.)
NOTE 3: Critical accounting judgments and key sources of
estimation uncertainty (cont.)
Key sources of estimation uncertainty (cont.)
(v) Coronavirus (COVID‑19) pandemic
Events related to the coronavirus pandemic (COVID‑19) have resulted in continued uncertainty as to
ongoing and future response of governments and authorities globally, as well as a likelihood of an
Australian economic recession of unknown duration or severity. As such, the full impact of COVID‑19 to
consumer behaviour, suppliers, employees and the Group are not fully known. Given this, the impact of
COVID‑19 could potentially be materially adverse to the Group’s financial and operational performance.
Further, any government or industry measures may adversely affect the Group’s operations and are
likely to be beyond the control of the Group. The longer‑term impacts of COVID‑19 on the operations
of the Group remain uncertain and cannot be quantified at this time.
NOTE 4: Operating segments
Identification of reportable operating segments
Subsequent to the acquisition of the Hobby Warehouse Group on 26 November 2020 (refer Note 27 for further
details), and based on the internal reports reviewed by the Board of Directors and KMP (who are identified
as the Chief Operating Decision Makers (‘CODM’) to make strategic and operating decisions, assess
business performance and in determining the allocation of resources, management has determined that
the Group has two operating segments, being Business to Consumer (B2C) and Business to Business (B2B).
The CODM reviews EBITDA (earnings before interest, tax, depreciation and amortisation). The accounting
policies adopted for internal reporting to the CODM are consistent with those adopted in the financial
statements. The information reported to the CODM is on a monthly basis.
Information about products and services
The principal products of each of these operating segments are as follows:
• B2C – direct‑to‑consumer sale of consumer products (toys, hobby and baby goods) and
• B2B – wholesaling and distribution of IT products.
Intersegment transactions and balances are eliminated on consolidation. There were no inter‑segment
transactions during the year or account balances at 31 July 2021.
The directors have assessed that there are no major customers.
Operating segment Information
The Group’s operating segment information is as follows:
Year ended 31-Jul-21
Revenue
Other income
Cost of goods sold
Other expenses
EBITDA
B2C
$’000
B2B
$’000
13,145
23,917
Other
$’000
–
344
124
1,627
Total
$’000
37,062
2,095
(10,187)
(16,738)
–
(26,925)
(4,394)
(1,092)
(6,675)
(2,452)
(13,521)
628
(825)
(1,289)
44
NOTE 4: Operating segments (cont.)
Year ended 31-Jul-20
Revenue
Other income
Cost of goods sold
Other expenses
EBITDA
B2C
$’000
–
–
–
–
–
B2B
$’000
24,597
300
(21,067)
(10,892)
(7,062)
Other
$’000
–
3
–
(781)
(778)
Total
$’000
24,597
303
(21,067)
(11,673)
(7,840)
Reconciliation from segment reporting to net profit/(loss) after tax
EBITDA
Depreciation, amortisation and impairment expenses
Finance costs (net)
Loss before income tax expenses
Income tax benefit/(expense)
Loss after income tax expense
Depreciation, amortisation and impairment expense by segment
B2C
B2B
Other
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
(1,289)
(1,529)
(532)
(3,350)
237
(7,840)
(321)
(1,152)
(9,313)
–
(3,113)
(9,313)
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
795
68
666
1,529
–
88
232
320
Geographical information
The Group operates in one principal geographical area – Australia/NZ. The Group’s non‑current assets are
situated in Australia. The geographical non‑current assets below are exclusive of, where applicable,
financial instruments.
45
toys“R”us AnZ limited Annual Report 2021
Notes to the Consolidated Financial Statements
(Cont.)
NOTE 4: Operating segments (cont.)
Non-Current Assets
B2C
B2B
Total
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
32,169
4,337
36,506
–
818
818
NOTE 5: Discontinued operations
Sale of confectionary business
On 22 January 2021, the Group announced the sale of its confectionery business. Revenue of the
confectionery business for the year ended 31 July 2020 was approximately $4.2m which represents 17%
of the Group audited total revenue for the year ended 31 July 2020. Loss for the period for the confectionery
business for the year ended 31 July 2020 was approximately $0.7m which represents 8% of the Group
audited total loss for the year. The confectionery business was sold for $0.7m and the consideration was
settled in cash.
Sale of Chill Factor business
On 5 July 2021, the Group announced the sale of its chill factor business. Revenue of the chill factor
business for the year ended 31 July 2020 was approximately $1.5m which represents 6% of the Group
audited total revenue for the year ended 31 July 2020. Loss for the period for the chill factor business for
the year ended 31 July 2020 was approximately $0.1m which represents 1% of the Group audited total
loss for the year. The chill factor business was sold for $1.75m and the consideration was settled in cash.
Razor Distributorship
On 10 March 2021, the Group announced that its distribution agreement with Razor USA LLC would be
discontinued effective from 1 May 2021.
Consequent to the above, the entire business operations of the erstwhile Funtastic business have been
reclassified as discontinued operations and the assets and liabilities pertaining to the businesses have
been reclassified to “assets relating to discontinued operations“ and “liabilities directly associated with
assets classified as discontinued operations“ respectively, in accordance with AASB 5 Non‑current Assets
Held for Sale and Discontinued Operations.
46
NOTE 5: Discontinued operations (cont.)
(a) Financial performance of discontinued operations
Revenue
Cost of Goods Sold
Other Income (including government grants)
Warehouse and Distribution Expenses
Marketing and Selling Expenses
Employee benefits Expenses
Administration Expenses
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
15,235
24,597
(9,231)
(21,067)
6,004
419
(1,299)
(103)
(2,059)
(1,436)
3,530
281
(2,204)
(1,027)
(4,222)
(2,407)
Earnings before interest, taxation, depreciation and amortisation (EBITDA)
1,526
(6,049)
Finance costs
Depreciation expenses – right‑of‑use assets
Impairment of right‑of‑use assets
Profit/(Loss) before income taxes
Income tax expense
Profit/(Loss) after income taxes
Profit on sale of businesses before income taxes
Income tax expense
Profit on sale of businesses after income taxes
Profit/(Loss) after income taxes from discontinued operations
(510)
(208)
(458)
350
–
350
1,626
–
1,626
1,976
(1,152)
(233)
–
(7,434)
–
(7,434)
–
–
–
(7,434)
47
toys“R”us AnZ limited Annual Report 2021
Notes to the Consolidated Financial Statements
(Cont.)
NOTE 5: Discontinued operations (cont.)
(b) Cash flow information relating to discontinued operations
Net cash from/(used in) operating activities
Net cash from/(used in) investing activities
Net cash from/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents from discontinued
operations
(c) Assets relating to discontinued operations
Trade and other receivables
Inventories
Other current assets
(d) Liabilities directly associated with assets classified as discontinued
operations
Trade payables
Other current liabilities
Lease liabilities
Provisions
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
(1,356)
(1,960)
3,169
(211)
–
(178)
1,602
(2,138)
935
1,035
129
2,099
557
994
535
27
2,113
–
–
–
–
–
–
–
–
–
48
NOTE 5: Discontinued operations (cont.)
Sale of Businesses
Toys“R”Us ANZ Limited disposed of two businesses during the period:
(i) Confectionery business on 16 February 2021
Total sale consideration (including relating to inventory)
Carrying amount of net assets disposed
Profit on disposal before income taxes (i)
(ii) Chill Factor business on 21 July 2021
Total sale consideration
Carrying amount of net assets disposed
Disposal costs
Profit on Disposal before income taxes (ii)
(iii) Derecognition of foreign currency translation reserve
Total profit on disposal of businesses before income taxes (i)+(ii)+(iii)
Year ended
31-Jul-21
$’000
1,412
(715)
697
1,757
(87)
(34)
1,636
(707)
1,626
49
toys“R”us AnZ limited Annual Report 2021
Notes to the Consolidated Financial Statements
(Cont.)
NOTE 6: Revenue
From continuing operations
Revenues from contracts with customers
Gross revenue from the sale of goods
Less: settlement discounts and rebates
Total revenue from the sale of goods
Other Revenue
Total other revenue
Total revenue
Disaggregation of revenues
The disaggregation of revenue from contracts with customers from continuing
operations is as follows:
Operating segments
B2C
B2B
Timing of revenue recognition
Goods transferred at a point in time
Geographical regions
Australia
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
21,519
–
21,519
308
308
21,827
13,145
8,682
21,827
21,827
21,827
–
–
–
–
–
–
–
–
–
–
–
50
NOTE 7: Profit/(loss) for the year
Profit/(loss) before income taxes from continuing operations includes the following specific expenses:
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
Note
Investment income
Interest from bank deposits
Total investment income
Other income
Government subsidies related to COVID‑19
Total other income
Employee benefits expense
Short‑term and other employee benefits
Post‑employment benefits – Defined contribution
superannuation plans
Share‑based payments
Total employee benefits expense
Depreciation and amortisation expense
Depreciation of property, plant and equipment
Amortisation of other intangible assets
Total depreciation and amortisation expense
2
2
51
51
2,314
193
1,454
3,961
40
823
863
3
3
19
19
349
91
–
440
30
57
87
13
14
51
toys“R”us AnZ limited Annual Report 2021
Notes to the Consolidated Financial Statements
(Cont.)
NOTE 8: Income tax
(a) Income tax (benefit)/expense
Tax expense comprises:
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
Current tax (benefit)/expense in respect of the current year
(1,645)
(2,121)
Adjustments recognised in the current year in relation to the current tax
expense of prior years
–
–
(1,645)
(2,121)
Deferred tax expense comprises:
Deferred tax (benefit)/ expense relating to the origination and reversal of
temporary differences
1,408
2,121
Total tax (benefit)/expense
Income tax expense is attributable to:
Loss from continuing operations
Profit/(loss) from discontinued operations
Total tax (benefit)/expense
(b) Income tax recognised in profit or loss
The expense for the year can be reconciled to the accounting profit as follows:
Profit/(Loss) before income taxes from continuing operations
Profit/(Loss) before income taxes from discontinued operations
(237)
(237)
–
(237)
–
–
–
–
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
(5,326)
1,976
(3,350)
(1,879)
(7,434)
(9,313)
Tax expense/(benefit) at the Australian tax rate of 27.5% (FY 2020: 27.5%)
(921)
(2,561)
Tax effect of amounts which are not deductible/(taxable) in calculating
taxable income:
Expenses that are not deductible in determining taxable loss
Effect of current year’s unrecognised and unused tax losses
Effect of reversal of deferred tax liabilities
Effect of different tax rates of subsidiaries operating in other jurisdictions
Income tax (benefit)/expense recognised in profit or loss
2
919
(237)
–
(237)
7
2,524
–
30
–
52
NOTE 8: Income tax (cont.)
(c) Income tax recognised directly in equity
Deferred Tax
Relating to share issue expenses deductible over 5 years
(d) Current tax balances
Current tax liabilities and assets
Income tax (payable)/receivable
Other – overseas subsidiaries
(e) Deferred tax assets
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
–
–
–
–
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
12
–
–
–
No movements in deferred tax asset balances were recognised in the financial year 2021 (2020: $0).
The following deferred tax assets relating to tax losses have not been brought to account as assets:
Tax losses – Revenue (gross)
Tax losses – Capital (gross)
Potential tax benefit on revenue losses at 27.5% (FY2020: 27.5%)
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
68,290
4,973
73,263
18,780
62,475
7,004
69,479
17,181
Tax Losses and temporary differences
The Company has made losses in previous reporting periods. Following the assessment of the probability
of recovery, having considered forecast future taxable income and current tax legislation with respect to
carrying forward tax losses and temporary differences, the full balance of tax losses available at
31 July 2021 has not been booked as a deferred tax asset in these financial statements.
53
toys“R”us AnZ limited Annual Report 2021
Notes to the Consolidated Financial Statements
(Cont.)
NOTE 8: Income tax (cont.)
(f) Deferred tax liabilities
Deferred tax liability comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Customer database intangible assets
1,344
–
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
Movement in deferred tax liabilities
Opening balance
Additions through business combinations (Note 27)
Charged/(credited) to profit or loss
Closing balance
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
–
1,581
(237)
1,344
–
–
–
–
Unrecognised taxable temporary differences associated with investments and interests in subsidiaries
Under the tax law, the taxable profit made by a tax‑consolidated group in relation to an entity leaving
the group depends on a range of factors, including the tax values and/or carrying values of the assets
and liabilities of the leaving entities, which vary in line with the transactions and events recognised in
each entity. The taxable profit or loss ultimately made on any disposal of the investments within the
tax‑consolidated group will therefore depend upon when each entity leaves the tax‑consolidated group
and the assets and liabilities that the leaving entity holds at that time.
The Group considers the effects of entities entering or leaving the tax‑consolidated group to be a change
of tax status that is only recognised when those events occur. As a result, temporary differences and
deferred tax liabilities have not been measured or recognised in relation to investments remaining within
the tax‑consolidated group.
Tax consolidation
(i) Relevance of tax consolidation to the Group
The Company and its wholly owned Australian resident entities formed a tax‑consolidated Group with
effect from 1 January 2003 and are therefore taxed as a single entity from that date. The head entity
within the tax‑consolidated Group is Toys”R”Us ANZ Limited. The members of the tax‑consolidated Group
are identified in Note 24.
54
NOTE 8: Income tax (cont.)
Tax consolidation (cont.)
(ii) Nature of tax funding arrangement and tax sharing agreement
Entities within the tax‑consolidated Group have entered into a tax funding arrangement and a tax sharing
agreement with the head entity. Under the terms of the tax funding arrangement, Toys”R”Us ANZ Limited
and each of the entities in the tax‑consolidated Group have agreed to pay a tax equivalent payment to or
from the head entity, based on the current tax liability or current tax asset of the entity. Such amounts are
reflected in amounts receivable from or payable to the other entities in the tax consolidated Group.
The tax sharing agreement entered into between members of the tax‑consolidated Group provide for the
determination of the allocation of income tax liabilities between the entities should the head entity default
on its tax payment obligations or if an entity should leave the tax consolidated Group. The effect of the tax
sharing agreement is that each member’s liability for tax payable by the tax consolidated Group is limited
to the amount payable to the head entity under the tax funding arrangement.
NOTE 9: Current assets – Trade and other receivables
Trade receivables
Allowance for impairment
Allowance for credit notes, rebates and settlement discounts
Other receivables
Total
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
865
(2)
–
863
84
947
4,671
(1,915)
(947)
1,809
–
1,809
The Group does not hold any collateral over these balances. The Group’s trade and other receivables
have been reviewed for indicators of impairment and include an allowance for expected credit losses as
described in Note 3 (iii).
55
toys“R”us AnZ limited Annual Report 2021
Notes to the Consolidated Financial Statements
(Cont.)
NOTE 9: Current assets – Trade and other receivables (cont.)
Movement in allowances
12 months ended 31 July 2021
Balance at beginning of year
Additional provisions recognised
Provisions acquired through business combinations
Provisions reversed
Provisions utilised/adjusted
Balance at end of the period
12 months ended 31 July 2020
Balance at beginning of year
Additional provisions recognised
Provisions utilised
Balance at end of the year
Allowance
for
Impairment
$’000
Rebates,
credit notes
and
settlement
discount
$’000
(1,915)
(76)
(2)
30
(947)
(1,090)
–
–
Total
$’000
(2,862)
(1,166)
(2)
30
1,961
2,037
3,998
(2)
–
(2)
(1,863)
(51)
(1)
(866)
(2,774)
2,693
(2,729)
(2,825)
2,692
(1,915)
(947)
(2,862)
In determining the recoverability of a trade receivable, the Group considers any change in the credit quality
of the trade receivable from the date credit was initially granted up to the reporting date. The concentration
of credit risk is limited due to the customer base being large and unrelated. Accordingly, the directors believe
that there is no further credit provision required in excess of the allowance for impairment.
Age of receivables that are past due but not impaired
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
–
–
–
–
–
520
–
–
520
2
0‑60 days
61‑90 days
91‑120 days
Total
Average days past due
56
NOTE 10: Current assets – Inventories
Stock at cost
Less: Provision for obsolescence
NOTE 11: Other assets
Current
Prepaid royalties
Prepaid expenses
Prepaid deposits for purchase of inventory
non‑current
Bonds and security deposits
NOTE 12: Right-of-use assets
Right‑of‑use assets – at cost
Less: Accumulated depreciation and impairment
Reconciliation
Balance at 1 August 2020
Adjustment for rent relief
Impairment expense (refer Note 5)
Depreciation expense (refer Note 5)
Balance at 31 July 2021
57
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
5,346
(375)
4,971
2,277
(904)
1,373
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
125
191
480
796
1,133
1,133
114
68
408
590
50
50
Property
31-Jul-21
$’000
Equipment
31-Jul-21
$’000
Total
31-Jul-21
$’000
904
(904)
–
681
(25)
(458)
(198)
–
20
(20)
–
10
–
–
(10)
–
924
(924)
–
691
(25)
(458)
(208)
–
toys“R”us AnZ limited Annual Report 2021
Notes to the Consolidated Financial Statements
(Cont.)
NOTE 12: Right-of-use assets (cont.)
Right‑of‑use assets – at cost
Less: Accumulated depreciation and impairment
Reconciliation
Balance at 1 August 2019 (upon adoption of AASB 16 Leases)
Depreciation expense
Balance at 31 July 2020
Property
31-Jul-20
$’000
Equipment
31-Jul-20
$’000
Total
31-Jul-20
$’000
904
(223)
681
904
(223)
681
20
(10)
10
20
(10)
10
924
(233)
691
924
(233)
691
There were no additions to the right‑of‑use assets during the current and previous years.
Following the acquisition of the Hobby Warehouse Group, the Group has no requirement for its leased
office premises in Mount Waverley and has unsuccessfully been seeking a tenant to sub lease the premises.
As the Group expects no future economic benefit from this right‑of‑use asset, it has been fully impaired.
As at 31 July 2021, the Group leased office and warehouse premises under agreements of less than
one year. These leases are either short‑term or low‑value, so have been expensed as incurred and not
capitalised as right‑of‑use assets.
NOTE 13: Non-current assets – Plant and equipment
Plant and equipment – at cost
Less: accumulated depreciation
Leasehold improvements – at cost
Less: accumulated depreciation
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
2,174
(241)
1,933
4
–
4
1,937
1,182
(1,157)
25
–
–
–
25
58
NOTE 13: Non-current assets – Plant and equipment (cont.)
Reconciliations
Reconciliations of the carrying amounts of each class of plant and equipment at the beginning and end
of the current financial year are set out below:
Year ended 31-Jul-21
Year ended 31-Jul-20
Plant and
equipment
$’000
Leasehold
improve-
ments
$’000
Opening Balance
Additions during
the year
Additions through
business combinations
(Note 27)
Disposals
Depreciation expense
25
1,691
257
–
(40)
Closing Balance
1,933
–
–
4
–
–
4
Plant and
equipment
$’000
Leasehold
improve-
ments
$’000
40
35
–
(19)
(31)
25
–
–
–
–
–
–
Total
$’000
25
1,691
261
–
(40)
1,937
Total
$’000
40
35
–
(19)
(31)
25
59
toys“R”us AnZ limited Annual Report 2021
Notes to the Consolidated Financial Statements
(Cont.)
NOTE 14: Non-current Assets – Goodwill and Other Intangibles
Goodwill
Less: Impairment
Brand names
Less: Accumulated amortisation and impairment
Software costs
Less: Accumulated amortisation and impairment
Chill Factor – Trademarks and patents
Less: Accumulated amortisation and impairment
Customer database
Less: Accumulated amortisation
Licenses, trademarks, distribution agreements and supplier relationships
Less: Accumulated amortisation and impairment
Total Goodwill and Other Intangibles
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
29,695
–
29,695
–
–
–
269
(245)
24
–
–
–
5,271
(791)
4,480
375
(5)
370
34,569
–
–
–
1,015
(1,015)
–
2,841
(2,840)
1
10,495
(10,394)
101
–
–
–
11,164
(11,164)
–
102
60
NOTE 14: Non-current Assets – Goodwill and Other Intangibles (cont.)
Reconciliations
Reconciliations of the carrying amounts of each class of intangibles at the beginning and end of the current
financial year are set out below:
2021
Goodwill
$’000
Software
costs
$’000
Chill Factor
Trademarks
and Patents
$’000
Customer
Database
$’000
Other
Licences
and
Trademarks
$’000
Opening Balance
–
1
101
–
–
Additions through
business combinations
(Note 27)
Additions
Disposals
Amortisation
29,695
–
–
–
Closing Balance
29,695
26
–
(3)
24
–
–
(78)
(23)
–
5,271
–
–
(791)
4,480
Total
$’000
102
34,992
375
(78)
(822)
–
375
–
(5)
370
34,569
2020
Opening Balance
Additions
Disposals
Amortisation
Closing Balance
Software
Costs
$’000
Chill Factor
Trademarks
and Patents
$’000
Other
Licences
and
Trademarks
$’000
86
41
(94)
(32)
1
126
–
–
(25)
101
–
–
–
–
–
Total
$’000
212
41
(94)
(57)
102
Impairment testing – Intangible Assets
Recoverability of software and licenses has been assessed at the time of creation/subscription based
on their useful life and is then amortised accordingly. All software and licenses are reviewed for their
usefulness and validity annually and impaired if required.
The remaining intangible assets have arisen on the acquisition of the Hobby Warehouse Group (HWG).
The fair values of these assets have been assessed as shown in Note 27.
The Group has identified that there are two cash‑generating units which are aligned with the operating
segments disclosed in Note 4 and against which goodwill and other intangible assets are allocated and tested.
61
toys“R”us AnZ limited Annual Report 2021
Notes to the Consolidated Financial Statements
(Cont.)
NOTE 14: Non-current Assets – Goodwill and Other Intangibles (cont.)
Impairment testing – Intangible Assets (cont.)
Goodwill
Business to consumer (B2C)
Business to business (B2B)
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
25,628
4,067
29,695
–
–
–
The recoverable amount of the Group’s goodwill has been determined by a value‑in‑use calculation using a
discounted cash flow model, based on budgets for FY 2022 approved by the Board and extrapolated for a
further 4 years using a steady rate, together with a terminal value.
Key assumptions
Key assumptions are those to which the recoverable amount of the cash‑generating units is most sensitive.
The following key assumptions were used in the discounted cash flow model for the CGUs:
Key assumptions
Revenue and expenses for FY 2022
Projected revenue and cost of sales growth rate per annum after budget period
Projected operating costs and overheads increase after budget period
Pre‑tax discount rate
Long‑term growth rate
B2C
B2B
Based on
approved
budgets
Based on
approved
budgets
10%
2.4%
17.1%
3.0%
3.5%
2.4%
20.7%
2.0%
The pre‑tax discount rates reflect management’s estimate of the time value of money and the Group’s weighted
average cost of capital, the risk‑free rate and the volatility of the share price relative to market movements.
Management believes the projected revenue growth rates are prudent and justified, based on historical
performance of the businesses.
Outcome of impairment assessment
Based on the above:
•
•
the recoverable amount of B2C CGU exceeded the carrying amount by $8.1 million
the recoverable amount of B2B CGU exceeded the carrying amount by $6.5 million.
Sensitivity
As disclosed in Note 3, the directors have made judgements and estimates in respect of impairment testing
of goodwill.
62
NOTE 14: Non-current Assets – Goodwill and Other Intangibles (cont.)
Impairment testing – Intangible Assets (cont.)
Should these judgements and estimates not occur, the resulting goodwill carrying amount may decrease.
The sensitivities are as follows:
B2C
• Revenue during the budget period would need to be 10% lower for goodwill to be impaired, with all other
assumptions remaining constant.
• Revenue and cost of sales growth after budget period would need to be 5.7% or less for goodwill would
need to be impaired, with all other assumptions remaining constant.
• The pre‑tax discount rate should be 20.3% or more for goodwill to be impaired, with all other
assumptions remaining constant.
B2B
• Revenue during the budget period would need to be 27% lower for goodwill to be impaired, with all other
assumptions remaining constant.
• Revenue and cost of sales after budget period would need to decrease by more than 9.1% for goodwill
to be impaired, with all other assumptions remaining constant.
• The pre‑tax discount rate should be 40.7% or more for goodwill to be impaired, with all other
assumptions remaining constant.
Management believes that other reasonable changes in the key assumptions on which the recoverable
amount of both the CGUs’ goodwill is based would not cause the CGUs’ carrying amount to exceed its
recoverable amount.
NOTE 15: Assets pledged as security
In accordance with the security arrangements of liabilities as disclosed in Note 16 to the financial
statements, all assets of the Group have been pledged as security. The Group does not have the right
to sell or re‑pledge the assets.
NOTE 16: Borrowings
Secured – at amortised cost
Current
Debtor finance
Total Current
Non-current
Interest bearing liabilities
Total Non-current
63
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
–
–
–
–
478
478
8,428
8,428
toys“R”us AnZ limited Annual Report 2021
Notes to the Consolidated Financial Statements
(Cont.)
NOTE 16: Borrowings (cont.)
During the year, the company undertook a capital raising of $35.0 million (including $6.5 million of which
was used to convert existing debt to equity) and used a portion of the proceeds from the capital raise
($2.3 million) to repay the debt with JASZAC Investments in full. The Group also cancelled its debtor
factoring facilities with Scottish Pacific.
NOTE 17: Provisions
Current
Employee benefits(i) (ii)
Total Current
Non-current
Employee benefits(i)
Total Non-current
Total
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
388
388
4
4
392
241
241
13
13
254
(i) The provision for employee benefits represents annual leave and long service leave entitlements accrued.
(ii) The current provision for employee benefits includes all unconditional entitlements where employees have completed
the required period of service and also those where employees are entitled to pro‑rata payments in certain
circumstances. The entire amount is presented as current, since the Group does not have an unconditional right
to defer settlement. However, based on past experience, the Group does not expect all employees to take the full
amount of accrued leave or require payment within the next 12 months.
NOTE 18: Lease liabilities
Current
Non-current
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
–
–
–
–
–
211
211
535
535
746
64
1-2 years
$’000
2-3 years
$’000
3-4 years
$’000
4-5 years
$’000
After
5 years
$’000
Total
$’000
NOTE 18: Lease liabilities (cont.)
Maturity analysis of lease liabilities
2021
Lease payments
Finance charge
Discounted Lease
Liabilities
2020
Lease payments
Finance charge
Discounted Lease
Liabilities
Within
1 year
$’000
–
–
–
Within
1 year
$’000
289
(78)
–
–
–
–
–
–
–
–
–
–
–
–
1-2 years
$’000
2-3 years
$’000
3-4 years
$’000
4-5 years
$’000
287
(52)
296
(21)
211
235
275
25
–
25
–
–
–
–
–
–
After
5 years
$’000
–
–
–
–
–
–
Total
$’000
897
(151)
746
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
972
79
60
–
602
1,713
177
37
73
38
2,086
2,411
NOTE 19: Other current liabilities
Accrued royalties
GST payable
Payroll accruals
Currency hedges
Other accrued expenses
Total
65
toys“R”us AnZ limited Annual Report 2021
Notes to the Consolidated Financial Statements
(Cont.)
NOTE 20: Equity and reserves
Share Capital
848,358,858 (2020: 240,404,075) fully paid ordinary shares
290,545
225,166
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
Year ended 31-Jul-21
Year ended 31-Jul-20
Number of
Shares
Share
Capital
$’000
Number of
Shares
Share
Capital
$’000
Movements in Ordinary Share Capital
Opening balance
240,404,075
225,166 233,176,894
224,848
Share Purchase Plan (19 December 2019)
Conversion of Service Rights (18 June 2020)
–
–
–
–
5,583,345
1,643,836
113
205
Placement Offer, net of transaction costs
(26 November 2020)1
258,928,571
Consideration for Acquisition (26 November 2020)
291,205,818
27,054
32,033
Shares issued as consideration for conversion
of borrowings (26 November 2020)
53,571,429
5,891
Shares issued as payment for intangible assets
(26 November 2020)
1,223,092
137
Shares issued as consideration for remuneration
(26 November 2020)
Shares issued as consideration for remuneration
(30 November 2020)
454,545
190,476
10
20
Shares issued as payment for intangible assets
(25 June 2021)
2,380,852
234
–
–
–
–
–
–
–
–
–
–
–
–
Closing balance
848,358,858
290,545 240,404,075
225,166
1
Included in the placement offer is an amount of $550,000, payment for which was adjusted against loan repayable
to JASZAC Investments.
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the parent
entity in proportion to the number of members’ shares held. At members’ meetings, each fully paid ordinary
share is entitled to vote when ta poll is called, otherwise each shareholder has one vote on a show of
hands. The fully paid ordinary shares have no par value and the company does not have a limited amount
of authorised capital.
66
NOTE 20: Equity and reserves (cont.)
Foreign currency translation reserve
The foreign translation reserve account accumulates exchange differences arising on translation of foreign
controlled entities which are recognised in other comprehensive income. The carrying amount is reclassified
to profit or loss when the net investment is disposed of.
Equity-settled employee benefits reserve
Movements in the reserve are detailed in the consolidated statement of changes in equity. The reserve
records amount for the fair value of options granted and recognised as an employee benefits expense
but not exercised.
NOTE 21: Earnings per share
Basic earnings/(loss) per share
From continuing operations
From discontinued operations
Total Basic Earnings/(loss) per share
Diluted earnings/(loss) per share
From continuing operations
From discontinued operations
Total Diluted Earnings/(loss) per share
Basic earnings per share calculation:
Net profit/(loss) after tax for the year – continuing operations
Net profit/(loss) after tax for the year – discontinued operations
Profit/(Loss) used in the calculation of total basic EPS
31-Jul-21
Cents per
share
31-Jul-20
Cents per
share
(0.78)
0.30
(0.48)
(0.78)
0.30
(0.48)
(0.79)
(3.15)
(3.94)
(0.79)
(3.15)
(3.94)
$’000
$’000
(5,089)
1,976
(3,113)
(1,879)
(7,434)
(9,313)
67
toys“R”us AnZ limited Annual Report 2021
Notes to the Consolidated Financial Statements
(Cont.)
NOTE 21: Earnings per share (cont.)
No. ’000
No. ’000
Weighted average number of ordinary shares (‘WANOS’) outstanding during
the year used in the calculation of basic earnings/(loss) per share
652,102
236,802
Diluted earnings per share calculation:
WANOS outstanding during the year used in the calculation of basic earnings/
(loss) per share
652,102
236,802
Add: Shares deemed to be issued for no consideration in respect of:
Performance and service rights1
WANOS and potential ordinary shares used as the denominator in
calculating diluted earnings per share
21,694
–
673,796
236,802
1
Potential shares comprising performance and service rights have not been considered in the calculation of WANOS
for diluted earnings per share as they are anti‑dilutive in nature, due to the losses incurred.
NOTE 22: Dividends on equity instruments
There were no dividends declared or paid during the financial year (2020: nil). The franking account balance
at 31 July 2021 is $19,301,903 (2020: $19,301,903).
NOTE 23: License guarantee commitments
Under the terms of various License Agreements, the company guarantees the minimum level of license
payments. The commitment in relation to these guarantees not already recognised is as follows:
Not later than one year
Later than one year but not later than two years
Later than two years but not later than five years
Later than five years
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
1,627
1,617
4,852
27,632
35,728
75
10
–
–
85
68
NOTE 24: Subsidiaries
Name of Entity
Company
Equity Holding
Country of
Incorporation
Year ended
31-Jul-21
%
Year ended
31-Jul-20
%
Toys”R”Us ANZ Limited(i), (iii), (iv)
Australia
100
100
Subsidiaries
FUN International Limited
Hong Kong
Funtastic America Inc. (formerly My Paint Box Inc.)
USA
NSR (HK) Limited(iii)
Chill Factor Global Pty Limited(ii), (iii), (vi)
Hong Kong
Australia
Fun Toy Products Consulting (Shenzhen) Company Limited
China
Mittoni Pty Limited(ii), (v)
Hobby warehouse Pty Limited(ii), (v)
Toys”R”Us Licensee Pty Limited(ii), (v)
Australia
Australia
Australia
100
100
100
–
100
100
100
100
100
100
100
100
100
–
–
–
(i) Toys”R”Us ANZ Limited (formerly Funtastic Limited) is the head entity within the tax consolidated Group.
(ii) These companies are members of the tax consolidated Group.
(iii) These wholly owned subsidiaries have entered into a deed of cross guarantee with Toys”R”Us ANZ Limited pursuant
to ASIC Class Order 2016/785 and are relieved from the requirement to prepare and lodge an audited financial
report. The subsidiaries became a party to the deed of cross guarantee on 23 July 2008.
(iv) On 24 June 2021 Funtastic Limited changed its name to Toys”R”Us ANZ Limited.
(v) These companies were acquired on 26 November 2020.
(vi) The company was sold on 21 July 2021.
69
toys“R”us AnZ limited Annual Report 2021
Notes to the Consolidated Financial Statements
(Cont.)
NOTE 24: Subsidiaries (cont.)
The consolidated Statements of Profit or Loss and Other Comprehensive Income of the entities party to the
deed of cross guarantee are:
Revenue
Cost of Goods Sold
Gross profit
Investment income
Other Income
Administration Expenses
Employee benefit expenses
Earnings before interest, taxation, depreciation and amortisation (EBITDA)
Finance costs (net)
Depreciation and amortisation expenses
Profit/(Loss) before income tax
Income tax (expense)/benefit
Profit/(Loss) for the period from continuing operations
Profit/(Loss) after income taxes from discontinued Operations
Profit/(Loss) for the year
Other comprehensive income/(loss) for the year (net of tax)
Total comprehensive income/(loss) for the year
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
–
–
–
2
24
(1,782)
(2,135)
(3,891)
–
(830)
–
–
–
3
19
(1,315)
(390)
(1,683)
–
(88)
(4,721)
(1,771)
237
–
(4,484)
(1,771)
(18,098)
(22,582)
(7,434)
(9,205)
–
–
(22,582)
(9,205)
70
NOTE 24: Subsidiaries (cont.)
Financial performance of discontinued operations
Revenue
Cost of Goods Sold
Gross Profit
Other Income (including government grants)
Warehouse and Distribution Expenses
Marketing and Selling Expenses
Employee benefits Expenses
Administration Expenses
Earnings before interest, taxation, depreciation and amortisation (EBITDA)
Finance costs
Depreciation, amortisation and impairment expenses
Profit/(Loss) before income taxes
Income tax expense
Profit/(Loss) after income taxes
Profit on sale of businesses before income taxes
Income tax expense
Profit on sale of businesses after income taxes
$’000
$’000
15,235
24,597
(9,231)
(21,067)
6,004
419
(1,299)
(103)
(2,059)
(1,436)
1,526
3,530
281
(2,204)
(1,027)
(4,222)
(2,407)
(6,049)
(510)
(1,152)
(20,740)
(19,724)
–
(233)
(7,434)
–
(19,724)
(7,434)
1,626
–
1,626
–
–
–
Profit/(Loss) after income taxes from discontinued operations
(18,098)
(7,434)
71
toys“R”us AnZ limited Annual Report 2021
Notes to the Consolidated Financial Statements
(Cont.)
NOTE 24: Subsidiaries (cont.)
The consolidated Statements of Financial Position of the entities party to the deed of cross guarantee are:
Current Assets
Cash
Receivables
Inventories
Other Assets
Total Current Assets
Non-Current Assets
Property, Plant and Equipment
Other Intangibles
Right of Use Assets
Other Assets
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and other payables
Borrowings
Provisions
Lease Liabilities
Other Liabilities
Total Current Liabilities
Non-Current Liabilities
Borrowings
Deferred Tax
Provisions
Lease Liabilities
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Issued capital
Accumulated Losses
Reserves
Total Equity
72
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
16,128
699
1,035
272
18,134
1,706
33,195
–
7,014
41,915
60,049
326
–
196
535
1,248
2,305
–
1,344
–
–
1,344
3,649
56,400
354
1,809
1,373
586
4,122
25
102
691
20,673
21,491
25,613
1,325
478
241
211
2,371
4,626
8,428
–
13
535
8,976
13,602
12,011
290,545
225,160
(235,599)
(213,149)
1,454
56,400
–
12,011
NOTE 25: Notes to the cash flow statements
(a) Reconciliation of cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents includes cash on hand and in
banks and investments in money market instruments, net of outstanding bank overdrafts. Cash and cash
equivalents at the end of the financial year as shown in the cash flow statement is reconciled to the related
items in the Statement of Financial Position as follows:
Cash
Cash equivalents
(b) Financing facilities
Total Financing Facilities
Bank Guarantees
Debtor finance
Loan
Reconciliation of Finance facilities
Used at Balance Date
Bank Guarantees
Debtor finance
Loan
Unused at Balance Date
Bank Guarantees
Debtor finance
Loan
73
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
–
17,338
17,338
–
367
367
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
1,083
156
–
–
11,776
10,375
1,083
22,307
1,083
–
–
1,083
–
–
–
–
156
478
8,428
9,062
–
11,298
1,947
13,245
toys“R”us AnZ limited Annual Report 2021
Notes to the Consolidated Financial Statements
(Cont.)
NOTE 25: Notes to the cash flow statements (cont.)
(c) Reconciliation of Profit after Income Tax to Net Cash Inflow from Operating Activities
Profit/(Loss) after income tax
Impairment of right‑of‑use assets
Depreciation and amortisation
(Profit)/loss on sale of business/assets – net
Share‑based payments expense
Shares issued as consideration for salaries and bonus
Other revenue
Unrealised FX loss on revaluation of intercompany loans
Finance costs
Changes in net assets and liabilities, net of effects from acquisition
and disposal of businesses:
(Increase)/Decrease in trade and other receivables
(Increase)/Decrease in inventories
(Increase)/Decrease in prepayments and other assets
(Decrease)/Increase in trade creditors
(Decrease) in provisions
Increase/(decrease) in income taxes
(Decrease) in deferred tax liabilities
(Decrease)/increase in other liabilities
Net cash outflow from operating activities
NOTE 26: Financial Instruments
Capital risk management
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
(3,113)
(9,313)
458
1,071
(1,626)
1,454
30
(107)
–
–
1,948
(1,615)
537
(1,141)
(97)
17
(237)
(1,494)
(3,915)
–
320
114
–
–
(41)
924
811
1,651
3,663
964
(2,916)
(236)
19
–
1,318
(2,722)
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern
while maximising the return to stakeholders through the optimisation of the debt and equity balance.
The capital structure of the Group consists of debt, which comprises the borrowings detailed in Note 16,
cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued
capital, accumulated losses and reserves as disclosed in the Statement of Changes in Equity.
The Board reviews the capital structure on a regular basis. As part of this review the cost of capital and the
risks associated with each class of capital is considered. The Group balances its overall capital structure
through the payment of dividends, new share issues and share buy‑backs as well as the issue of new debt
and the repayment of debt.
74
NOTE 26: Financial Instruments (cont.)
Significant accounting policies
Details of significant accounting policies and methods adopted, including the criteria for recognition, the
basis of measurement and the basis on which income and expenses are recognised, in respect of each class
of financial asset, financial liability and equity instrument are disclosed in Note 1 to the financial
statements. These policies were consistent throughout the current year and the previous year.
Categories of financial instruments1
Financial assets
Cash and cash equivalents
Trade and other receivables
Non-derivative financial assets
Financial liabilities
Non‑interest bearing
Other liabilities
Total non-derivative financial liabilities
Variable interest rate instruments
Fixed interest rate instruments
Total derivative financial liabilities
Total financial liabilities
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
17,338
1,882
19,220
2,998
2,628
5,626
–
–
–
5,626
367
1,809
2,176
1,325
2,263
3,588
481
12,702
13,183
16,771
1
Figures Include financial instruments pertaining to discontinued operations (assets and liabilities directly associated
with classified as held for sale) as well.
Financial risk management objectives
The Group’s finance function provides services to the business, co‑ordinates access to domestic and
international financial markets, monitors and manages the financial risks relating to the operations of the
Group through internal risk reports which analyse exposures by degree and magnitude of risk. These risks
include market risk (including currency risk, interest rate risk), credit risk and liquidity risk.
The Group seeks to minimise the effects of these risks, by using various financial instruments to hedge these
exposures. The use of financial instruments is governed by the Group’s policies approved by the Board of
Directors, who provide written principles on foreign exchange risk, interest rate risk, credit risk, the use of
financial derivatives and non‑derivative financial instruments and the investment of excess liquidity.
Compliance with policies and exposure limits is reviewed on a continual basis. The Group does not enter
into any trade financial instruments, including derivative financial instruments, for speculative purposes.
75
toys“R”us AnZ limited Annual Report 2021
Notes to the Consolidated Financial Statements
(Cont.)
NOTE 26: Financial Instruments (cont.)
Market risk
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange
rates and interest rates. The Group enters into a variety of derivative financial instruments to manage its
exposure to interest rate risk and foreign currency risk, including:
• Foreign exchange forward contracts to hedge the exchange rate risk arising on the import of goods
denominated in US dollars; and
•
Interest rate swaps to mitigate the risk of rising interest rates.
At a Group level, market risk exposures are measured through sensitivity analysis and stress scenario analysis.
In 2021, while there has been a recent stabilisation of low variable interest rates there has been no material
change to the Group’s exposure to market risk or the manner in which it manages and measures the risk.
Foreign currency risk management
Foreign currency risk refers to the risk that the fair value of future cash flows of a financial instrument will
fluctuate because of changes in foreign exchange rates. The Group’s exposure to foreign exchange risk
arises from the net investment in the United States operations and the undertaking of certain transactions
denominated in foreign currencies.
The carrying amount of the Group’s foreign currency denominated monetary assets and monetary liabilities
at the reporting date is as follows:
US Dollars
Hong Kong Dollars
Liabilities
Assets
2021
$’000
1,431
–
2020
$’000
353
–
2021
$’000
184
–
2020
$’000
557
14
The Group undertakes certain transactions denominated in foreign currency and is exposed to foreign
currency risk through foreign exchange rates fluctuations.
Foreign exchange risk arises from future commercial transactions and recognised financial assets and
financial liabilities denominated in a currency that is not the Group’s functional currency. This is measured
using sensitivity and cash flow forecasting.
In order to protect against exchange rate movements, the Group has entered into forward foreign exchange
contracts. Management hedges between 50% and 100% of anticipated foreign currency transaction for the
subsequent six months.
Foreign currency sensitivity
The Group is mainly exposed to the US dollar and the HK dollar. The following table details the Group’s
sensitivity to a 5% increase and 5% decrease in the Australian dollar against the relevant foreign
currencies. 5% is the sensitivity rate which represents management’s assessment of the possible change
in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated
monetary items and adjusts their translation at the period end for a 5% change in foreign currency rates.
A positive number indicates an increase in profit or loss where the Australian dollar strengthens against the
respective currency. For a weakening of the Australian dollar against the respective currency there would
be an equal and opposite impact on profit or loss and the balances below would be equal and opposite.
76
NOTE 26: Financial Instruments (cont.)
Foreign currency sensitivity (cont.)
A positive number indicates an increase in other equity where the Australian dollar weakens against the
respective currency. For a strengthening of the Australian dollar against the respective currency there
would be an equal and opposite impact on other equity and the balances below would be negative.
5% increase in AUD against foreign currency
Profit or Loss(i)
5% decrease in AUD against foreign currency
Profit or Loss(i)
USD Impact
2021
$’000
2020
$’000
62
10
(62)
(10)
(i) This is mainly attributable to the exposure outstanding in USD receivables and payables at year end.
Forward foreign exchange contracts
At balance date, there were foreign exchange contracts outstanding with an equivalent AUD value of $Nil
(2020: asset of $1,145,311).
During the year ended 31 July 2021 a loss on hedging instruments for the Group of $Nil (31 July 2020: loss
$38,000) has been brought to account.
Interest rate risk management
Interest rate risk refers to the risk that the fair value of future cash flows of a financial instrument will
fluctuate because of changes in market interest rates. The Group is exposed to interest rate risk as it borrows
funds at both fixed and floating interest rates. The risk is managed by the use of interest rate swap contracts.
Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite, ensuring
optimal hedging strategies are applied, by either positioning the statement of financial position or protecting
interest expense through different interest rate cycles.
The Group’s exposure to interest rates on financial assets and financial liabilities are detailed in the
liquidity risk management section below.
Interest rate sensitivity
The sensitivity analyses below have been determined based on the exposure to interest rates to the Group at
the reporting date and the stipulated change taking place at the beginning of the financial year and held
constant throughout the reporting period. The Group considers the likelihood of a 25‑basis point increase or
a 25‑basis point decrease to be reasonable when reporting interest rate risk internally to key management
personnel, as this represents management’s best estimate of the possible change in interest rates.
77
toys“R”us AnZ limited Annual Report 2021
Notes to the Consolidated Financial Statements
(Cont.)
NOTE 26: Financial Instruments (cont.)
Interest rate risk management (cont.)
25‑basis point increase in Interest rates
Profit or Loss(i)
25‑basis point decrease in Interest rates
Profit or Loss(i)
Interest Impact
2021
$’000
2020
$’000
–
–
(22)
22
(i) This is mainly due to the Group’s exposure to interest rates on its variable rate borrowings
Loans of the Group
The Group has no loans at 31 July 2021. In the prior period, loans had an average variable interest rate of
7.14% and a fixed interest rate of 12%. It is the Group’s policy to protect part of the loans from exposure to
increasing interest rates. However due to the current low risk to interest rate increases, the Group has not
currently purchased any swaps.
Credit risk management
Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in a
financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties.
The Group’s exposure and the credit ratings of its counterparties are monitored continuously and the
aggregate value of transactions concluded is spread amongst approved counterparties.
Trade receivables consist of a large number of customers spread across diverse industries. Ongoing credit
evaluation is performed on the financial condition of accounts receivable and, where appropriate, credit
guarantee insurance is purchased.
The Group has a credit risk exposure to a small number of major ASX listed corporations for which credit
guarantee insurance is not purchased. Ongoing credit evaluation is performed on the financial condition
of these accounts receivable.
The carrying amount of financial assets recorded in the financial statements, net of any allowance for
losses, represents the Group’s maximum exposure to credit risk.
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, who have built an
appropriate liquidity risk management framework for the management of the Group’s short, medium and
long‑term funding and liquidity management requirements. The Group manages liquidity risk by maintaining
adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast
and actual cash flows and matching the maturity profiles of financial assets and liabilities.
78
NOTE 26: Financial Instruments (cont.)
Liquidity and interest tables – financial liabilities
The following table detail the Group’s remaining contractual maturity for its non‑derivative financial
liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities based
on the earliest date on which the Group can be required to pay.
Weighted
average
effective
interest rate
0–3
months
3 months
to 1 year
1–5
years
5+
years
%
$’000
$’000
$’000
$’000
2021
Non‑interest bearing
Other liabilities
2020
Non‑interest bearing
Other liabilities
Variable interest rate
instruments
Fixed interest rate
instruments
–
–
–
–
2,998
2,628
5,626
1,325
2,263
7.20%
481
12.00%
–
4,069
–
–
–
–
–
–
–
–
–
–
–
–
–
–
12,702
12,702
–
–
–
–
–
–
–
–
The above figures Include financial liabilities pertaining to discontinued operations as well.
Total
$’000
2,998
2,628
5,626
1,325
2,263
481
12,702
16,771
79
toys“R”us AnZ limited Annual Report 2021
Notes to the Consolidated Financial Statements
(Cont.)
NOTE 26: Financial Instruments (cont.)
Liquidity and interest tables – financial assets
The following table details the Group’s expected maturity for its non‑derivative financial assets. The table
below has been drawn up based on the understood contractual maturities of the financial assets including
interest that will be earned on those assets except where the Group anticipates that the cash flow will
occur in a different period.
Weighted
average
effective
interest rate
0–3
months
3 months
to 1 year
1–5
years
5+
years
%
$’000
$’000
$’000
$’000
0.00%
–
0.00%
–
17,338
1,882
19,220
367
1,809
2,176
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
$’000
17,338
1,882
19,220
367
1,809
2,176
2021
Cash
Non‑interest bearing
2020
Cash
Non‑interest bearing
The above figures Include financial instruments pertaining to discontinued operations (assets classified
as held for sale) as well.
Fair value of financial instruments
The fair values of financial assets and financial liabilities are determined as follows:
• The fair value of other financial assets and financial liabilities (excluding derivative instruments) are
determined in accordance with generally accepted pricing models based on discounted cash flow
analysis using prices from observable current market transactions; and
• The fair value of derivative instruments are calculated using quoted prices. Where such prices are
not available, discounted cash flow analysis using the applicable yield curve for the duration of the
instruments for non‑optional derivatives and option pricing models for optional derivatives is used.
The directors consider that the carrying amounts of financial assets and financial liabilities recorded
at amortised cost in the financial statements approximates their fair values.
Fair value measurements recognised in the consolidated statement of financial position
Fair value measurements are discussed in Note 1 and in the notes specific to that asset or liability.
80
NOTE 27: Business combinations
On 23 October 2020 the Company announced a significant acquisition and refinancing of the Group.
The transaction included the acquisition of all the issued capital in the Hobby Warehouse Pty Ltd, Toys”R”Us
Licensee Pty Ltd and Mittoni Pty Ltd, which together comprise the Hobby Warehouse Group (HWG).
HWG owns one of Australia’s largest baby, toy and hobby databases, with more than 1 million subscribers
and generated unaudited revenue of $28.6 million for FY20. Toys“R”Us re‑entered the Australian market in
June 2019 following HWG’s execution of a license agreement (TRUK License) with TRU Kids Inc., the US‑based
owners of the Toys“R”Us and Babies“R”Us brands for the exclusive rights to use the Toys“R”Us and
Babies“R”Us brands in Australia and New Zealand.
Details of the business combination are provided below and the values identified in relation to the
acquisition of HWG are final as at 31 July 2021.
The fair values of the identifiable assets and liabilities of the business combination at the date of acquisition were:
Assets
Cash
Trade and other receivables (net of expected credit losses of $2,000)
Inventories
Tax receivable
Other current assets
Property, plant and equipment
Intangible assets
Customer databases
Total Assets
Liabilities
Trade payables
Borrowings
Provisions
Other current liabilities
Deferred tax
Total Liabilities
Total identifiable net assets at fair value
Goodwill arising on acquisition
Acquisition date fair value of total consideration transferred
Representing
Equity shares issued to the vendor
Cash used to acquire business, net of cash acquired:
Acquisition date fair value of total consideration transferred
Less: Cash and cash equivalents acquired
Less: Equity shares issued
Net cash used/(acquired)
81
As at
25-Nov-20
$’000
289
2,017
3,751
29
933
261
26
5,271
12,577
2,814
3,792
262
1,790
1,581
10,239
2,338
29,695
32,033
32,033
32,033
(289)
(32,033)
(289)
toys“R”us AnZ limited Annual Report 2021
Notes to the Consolidated Financial Statements
(Cont.)
NOTE 27: Business combinations (cont.)
The consideration transferred to purchase the Hobby Warehouse Group was 291,205,818 fully paid ordinary
shares in Funtastic Limited at a value of $0.11, being the closing price on 25 November 2020, indicating a
fair value consideration for the transaction of $32.033 million. Transaction costs of the acquisition (included
in cash flows from operating activities) were $0.691 million, which have been expensed to the profit and loss.
From the date of acquisition to 31 July 2021, the HWG acquisition contributed $21.8 million of revenue and
$0.6 million of loss before tax to the Group. Had HWG been owned for the full reporting period, HWG would
have contributed $33.1 million of revenue and $0.5 million of profit to profit before tax to the Group.
NOTE 28: Share-based payments
(a) Expenses recognised
An expense of $1,453,800 ($2020: Nil) has been recognised in the profit and loss in relation to share‑based
payments granted during the period.
(b) Share options and share appreciation rights
An employee incentive plan has been established by the Group and approved by shareholders at a general
meeting whereby the Group may, at the discretion of the Remuneration and Nomination Committee, grant
options and rights over ordinary shares in the company to directors and employees. The grant of options and
rights forms a part of the Company’s long term incentive objectives to encourage directors and employees to
have a greater involvement in the achievement of the Company’s objectives. Options and rights provide an
incentive to strive to that end by participating in the future growth and prosperity of the Company through
share ownership. The options and rights are issued for nil consideration and are only subject to a vesting
condition relating to the participant’s continued employment with the Company. The options and rights must
be exercised before their expiry date, or they will lapse. On the exercise of an option, the holder must pay to
the Company the relevant exercise price multiplied by the number of options being exercised by the holder.
The Company will issue the holder with a share for each option or right that the participant validly exercises.
(c) Reconciliation
Set out below are the summaries of options granted under the employee incentive plan as at 31 July 2021:
Grant
date
Vesting
date
Expiry
date
23‑Nov‑201
23‑Nov‑20
1‑Nov‑23
23‑Nov‑201
1‑Nov‑21
1‑Nov‑24
23‑Nov‑201
1‑Nov‑22
1‑Nov‑25
1‑May‑21
1‑May‑23
1‑May‑25
Weighted average exercise price
Exercise
price
Balance at
the start of
the year
Granted
Exercised
$0.138
$0.166
$0.199
$0.138
–
–
–
–
–
–
10,149,450
10,271,244
10,394,498
1,691,956
32,507,148
$0.166
–
–
–
–
–
–
Balance at
the end of
the year
10,149,450
10,271,244
10,394,498
1,691,956
32,507,148
$0.166
1 Of the total employee options under the employee incentive plan approved at the 2020 AGM, only tranche 1
have been granted during the year. Options Tranche 2 and Tranche 3 will be number of options that equal 1.2%
of the total TOY shares on issue on 1 November 2021 and 1 November 2022, respectively. Option numbers have
been estimated and related expenses have been recognised for the current year, based on the expected number
of TOY shares on issue at 1 November 2021 and 1 November 2022.
82
NOTE 28: Share-based payments (cont.)
There were no options granted under the employee incentive plan as at 31 July 2020.
The weighted average remaining contractual life of employee options outstanding at the end of the
financial year was 3.29 years (2020: Nil).
Set out below are the summaries of rights granted under the employee incentive plan as at 31 July 2021:
Grant
date
Vesting
date
Expiry
date
Exercise
price
Balance at
the start of
the year
Granted
Exercised
23‑Nov‑20
1‑Nov‑21
1‑Nov‑21
$0.125
23‑Nov‑20
1‑Nov‑22
1‑Nov‑22
23‑Nov‑20
1‑Nov‑23
1‑Nov‑23
*
*
Weighted average exercise price
–
–
–
–
–
480,000
**
**
480,000
$0.125
–
–
–
–
–
Balance at
the end of
the year
480,000
–
–
480,000
$0.125
* 5‑day VWAP of TOY shares on the latter of first vesting date or the date of the annual general meeting.
** $60,000 divided by the 5‑day VWAP of TOY shares on the latter of first vesting date or the date of the annual
general meeting.
The weighted average remaining contractual life of rights outstanding at the end of the financial year was
0.25 years (2020: 0.42 years).
Set out below are the summaries of rights granted under the employee incentive plan as at 31 July 2020:
Grant
date
Vesting
date
Expiry
date
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Balance at
the end of
the year
26‑Oct‑17
31‑Oct‑18
31‑Dec‑21
–
1,643,836
Weighted average exercise price
(d) Fair value inputs
1,643,836
–
–
–
–
(1,643,836)
(1,643,836)
–
–
–
–
For options granted during the current financial year, the valuation model inputs used to determine the fair
value at the grant date, are as follows:
Grant
date
Vesting
date
23‑Nov‑20
23‑Nov‑20
23‑Nov‑20
1‑Nov‑21
23‑Nov‑20
1‑Nov‑22
1‑May‑21
1‑May‑23
Share price
at grant
date
Exercise
price
Expected
volatility
Dividend
yield
$0.135
$0.135
$0.135
$0.100
$0.138
$0.166
$0.199
$0.138
85%
85%
85%
80%
0%
0%
0%
0%
Risk-free
interest
rate
Fair value
at grant
date
0.07%
0.28%
0.28%
0.70%
$0.064
$0.067
$0.072
$0.051
83
toys“R”us AnZ limited Annual Report 2021
Notes to the Consolidated Financial Statements
(Cont.)
NOTE 28: Share-based payments (cont.)
For appreciation rights granted during the current financial year, the valuation model inputs used to
determine the fair value at the grant date, are as follows:
Grant
date
Vesting
date
23‑Nov‑20
1‑Nov‑21
23‑Nov‑20
1‑Nov‑22
23‑Nov‑20
1‑Nov‑23
Share price
at grant
date
Exercise
price
Expected
volatility
Dividend
yield
Risk-free
interest
rate
Fair value
at grant
date
$0.135
$0.135
$0.135
$0.125
*
*
85%
85%
85%
0%
0%
0%
0.07%
0.07%
0.28%
$0.039
n/a
n/a
* 5‑day VWAP of TOY shares on the latter of first vesting date or the date of the annual general meeting.
The appreciation rights are effectively options with a cashless exercise feature embedded.
(e) Other information
The weighted average share price during the financial year was $0.112 (2020: $0.024).
NOTE 29: Key management personnel compensation
Details of key management compensation
The aggregate compensation made to key management personnel of the Group is set out below:
Short‑term employee benefits
Post‑employment benefits
Other long‑term benefits
Termination benefits
Share‑based payments
Year ended
31-Jul-21
$
Year ended
31-Jul-20
$
919,551
948,332
103,379
11,206
43,712
1,473,798
93,619
1,356
–
–
2,551,646
1,043,307
84
NOTE 30: Related party transactions
(a) Equity interests in related parties
Equity interests in subsidiaries
Details of the percentage of ordinary shares held in subsidiaries are disclosed in Note 24 to the financial
statements.
(b) Transactions with Key Management Personnel
Key management personnel compensation
Details of key management personnel compensation are disclosed in Note 29 to the financial statements.
Loans to key management personnel and their related parties
During the financial year and to the date of this report, the Group made no loans to directors and other
KMP. As at 31 July 2021, Louis Mittoni owed the Company $77,503 related to personal expenses incurred
on a company credit card. As at the date of this report, the balance outstanding was $16,719.
During the financial year, there were no other reportable transactions between the Group and its directors,
KMP, or their personally related entities (Related Parties) (2020: $Nil).
(c) Transactions with other related parties
Transactions between Toys”R”Us ANZ Limited and other entities in the wholly owned Group during the
financial years ended 31 July 2021 and 31 July 2020, which were eliminated on consolidation, consist of:
•
loans advanced by Toys”R”Us ANZ Limited;
• management services provided by Toys”R”Us ANZ Limited;
• management services provided to Toys”R”Us ANZ Limited; and
• payment to/from Toys”R”Us ANZ Limited for the above services.
85
toys“R”us AnZ limited Annual Report 2021
Notes to the Consolidated Financial Statements
(Cont.)
NOTE 31: Remuneration of Auditors
Grant Thornton Audit Pty Ltd
Audit Services
Audit and review of the financial reports of the entity
Audit of the financial report of overseas subsidiary(1)
Other Services
Preparation of tax return and general taxation services(1)
RSM Australia Partners(2)
Audit Services
Audit and review of the financial reports of the entity
Other Services(3)
Transaction services
Independent Expert’s Report in relation to acquisition
Year ended
31-Jul-21
$
Year ended
31-Jul-20
$
80,700
150,000
16,600
15,000
83,700
38,500
181,000
203,500
79,000
25,500
43,255
147,755
–
–
–
–
(1) Related practice of parent entity auditor.
(2) TOY changed its auditors following shareholder approval at the Extraordinary General Meeting (EGM) held on 23 June 2021.
(3) Services provided prior to being appointed as auditor
86
NOTE 32: Parent entity disclosures
Financial Position
Assets
Current assets
Non‑current assets
Liabilities
Current liabilities
Non‑current liabilities
Net Assets
Issued capital
Accumulated losses
Equity‑settled employee benefits reserve
Total Equity
Financial Performance
Loss for the year – continuing operations
Loss for the year – discontinued operations
Total comprehensive loss
As at
31-Jul-21
$’000
As at
31-Jul-20
$’000
18,134
41,915
60,049
4,122
21,491
25,613
(2,305)
(1,344)
(4,626)
(8,976)
(3,649)
(13,602)
56,400
12,011
290,545
225,160
(235,599)
(213,149)
1,454
–
56,400
12,011
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
(4,484)
(18,098)
(22,582)
(1,771)
(7,434)
(9,205)
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity and some of its subsidiaries are party to a deed of cross guarantee under which each
company guarantees the debts of the others. No deficiencies of assets exist in any of these subsidiaries.
Contingent liabilities
The parent entity had no contingent liabilities as at 31 July 2021 and 31 July 2020.
Capital commitments – Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 31 July 2021
and 31 July 2020.
87
toys“R”us AnZ limited Annual Report 2021
Notes to the Consolidated Financial Statements
(Cont.)
NOTE 32: Parent entity disclosures (cont.)
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the consolidated entity,
as disclosed in Note 1, except for the following:
•
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
• Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt
may be an indicator of an impairment of the investment.
NOTE 33: Contingent liabilities and contingent assets
As at 31 July 2021, the Group had issued bank guarantees of $1.083 million (2020: $0.156 million).
There are no contingent assets as at 31 July 2021 (2020: $Nil).
NOTE 34: Non-cash investing and financing activities
Year ended
31-Jul-21
$’000
Year ended
31-Jul-20
$’000
Shares issued as consideration for intangible assets
Shares issued as consideration for acquisition of business
Shares issued as consideration for conversion of borrowings
Shares issued as consideration for repayment of borrowings
375
32,033
5,891
550
38,849
NOTE 35: Changes in liabilities arising from financing activities
Balance at 1 August 2019
Net cash from/(used in) financing activities
Acquisition of leases
Other changes
Balance at 1 August 2020
Net cash from/(used in) financing activities
Issue of equity shares
Other changes
Balance at 31 July 2021
1 Relates to discontinued operations
88
Borrowings
$’000
Lease
Liabilities
$’000
5,333
2,763
–
810
8,906
(2,356)
(6,441)
(109)
–
(178)
924
–
746
(211)
–
–
–
5351
–
–
–
–
–
Total
$’000
5,333
2,585
924
810
9,652
(2,567)
(6,441)
(109)
535
NOTE 36: Subsequent events
On 13 August 2021, the Company paid $2.549 million to Westpac Banking Corporation as security for
a bank guarantee related to the new warehousing and head office facility currently being developed
in Clayton, Victoria.
No other matters or circumstance has arisen since 31 July 2021 that has significantly affected, or may
significantly affect, the Group’s operations, the results of these operations, or the Group’s state of affairs
in future years.
NOTE 37: General Information
Toys”R”Us ANZ Limited (formerly Funtastic Limited) (“the Company”) is a limited company incorporated
in Australia. The addresses of its registered office and principal place of business are disclosed in the
Corporate Directory. The principal activities of the Company and its subsidiaries (the Group) are described
in Note 4.
89
toys“R”us AnZ limited Annual Report 2021
Directors’ Declaration
The directors declare that, in the directors’ opinion:
(a) the attached financial statements and notes comply with the Corporations Act 2001, the Accounting
Standards, the Corporations Regulations 2001 and other mandatory professional reporting standards;
(b) the attached financial statements and notes comply with International Financial Reporting
Standards, as issued by the International Accounting Standards Board as stated in Note 1 to the
financial statements;
(c) the attached financial statements and notes give a true and fair view of the Group’s financial position
as at 31 July 2021 and of its performance for the year ended on that date; and
(d) there are reasonable grounds to believe that the Company will be able to pay its debts as and when
they become due and payable;
At the date of this declaration, the Company is within the class of companies affected by ASIC Legislative
Instrument 2016/785 and has entered into a deed of cross guarantee as contemplated in that order.
The nature of the deed of cross guarantee is such that each company which is party to the deed guarantees
to each creditor payment in full of any debt in accordance with the deed of cross guarantee.
In the directors’ opinion, there are reasonable grounds to believe that the Company and the companies to
which the ASIC Class Order applies, as detailed in Note 24 to the financial statements will, as a Group, be
able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed
of cross guarantee.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of the directors made pursuant to section 295(5) of the Corporations
Act 2001.
On behalf of the Directors,
Kevin A Moore, FAICD, MCIM
Chair of the Board
29 September 2021
90
Independent Auditor’s Report
INDEPENDENT AUDITOR’S REPORT
To the Members of Toys“R”Us ANZ Limited (formerly Funtastic Limited)
Opinion
We have audited the financial report of Toys“R”Us ANZ Limited (formerly Funtastic Limited) (“the Company”) and
its subsidiaries (together referred to as “the Group”) which comprises the consolidated statement of financial
position as at 31 July 2021, the consolidated statement of profit or loss and other comprehensive income, the
consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended,
and notes to the financial statements, including a summary of significant accounting policies, and the directors'
declaration.
In our opinion the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
including:
(i)
giving a true and fair view of the Group’s financial position as at 31 July 2021 and of its financial
performance for the year then ended; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of
our report. We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial
report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to
the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's
report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the financial report of the current period. These matters were addressed in the context of our audit of the financial
report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
70
91
toys“R”us AnZ limited Annual Report 2021
Independent Auditor’s Report
(Cont.)
Key Audit Matters (continued)
Key Audit Matter
How our audit addressed this matter
Accounting for business combinations
Refer to Note 27 in the financial statements
On 26 November 2020, the Group acquired a 100% interest
in Hobby Warehouse Pty Ltd, Toys R Us Licensee Pty Ltd
and Mittoni Pty Ltd, together referred to as the Hobby
Warehouse Group (HWG) under a share purchase
agreement, for a consideration paid in shares.
This transaction was treated as a business combination in
accordance with AASB 3 Business Combinations. As a
result of the provisional Purchase Price Allocation (“PPA”)
exercise, net assets were measured at a fair value of $2.34
million and a resultant goodwill of $29.69 Million was
recognised.
The accounting for business combination was considered a
Key Audit Matter as the accounting for the transaction is
complex and involves significant judgements in applying
the accounting standards.
These matters include the identification of the acquirer,
recognition and valuation of consideration paid,
the
determination of the fair value of the assets acquired and
liabilities assumed and the identification and valuation of
intangible assets not previously recognised by the business
acquired.
Our audit procedures included, among others:
• Obtaining the share purchase agreement and other
associated documents and ensuring that the transaction
had been accounted for in compliance with AASB 3;
•
Testing the values of the share consideration to the
signed share purchase agreement;
• Reviewing management’s process for the identification
of the accounting acquirer, calculation of purchase
consideration, acquisition date, determinations of fair
values of identified assets acquired and liabilities
assumed,
reasonableness of any underlying
assumptions and the resultant goodwill;
the
• Assessing the valuation models prepared by the
management to value the intangible assets identified in
the acquired business, and engaging our internal
valuation specialists to challenge the assumptions and
methodology used by management; and
• Reviewing the adequacy of the relevant disclosures in
the financial report in compliance with the requirements
of AASB 3.
Revenue recognition
Refer to Note 6 in the financial statements
Whilst the Group’s revenue recognition does not involve
significant management estimates or judgements, it is
considered a Key Audit Matter because of its significance
to the Group’s reported financial performance.
The risk is heightened due to having distinct revenue
streams across two segments.
Revenue recognition can be impacted by a failure to
correctly measure revenue in accordance with applicable
accounting standards and/or by applying an incorrect
approach to period end cut-off.
Our audit procedures in relation to revenue recognition
included:
• Assessing whether the Group’s revenue recognition
policies were in compliance with the requirements of
AASB 15 Revenues from Contracts with Customers;
• Evaluating and testing the operating effectiveness of key
controls related to revenue recognition;
• Reviewing any large or unusual transactions close to the
end of the financial year;
• Performing cut-off testing over transactions recorded
either side of the period end, to ensure that revenues
were recorded in the appropriate period;
• Conducting a combination of
tests of controls,
substantive analytical procedures and tests of details in
respect of revenue related transactions; and
• Reviewing disclosures in relation to the impact on
adoption of AASB 15 and the disaggregation of
revenues in the financial statements.
71
92
Key Audit Matters (continued)
Key Audit Matter
How our audit addressed this matter
Impairment assessment of goodwill
Refer to Note 14 in the financial statements
As at 31 July 2021, the Group has goodwill with a
carrying amount of $29.69 million (approximately 46% of
the total assets of the Group) relating to its acquisition of
Hobby Warehouse Group during the current year.
As required by AASB 136 Impairment of Assets (“AASB
136”), management performed an impairment testing
over the goodwill balance as at 31 July 2021 by:
•
•
calculating the value-in-use for each identified cash
generating unit (“CGU”) using a discounted cash flow
model. This model used cash flows projections for
the CGUs for 5 years, with a terminal growth rate
applied to the 5th year. These cash flows were then
discounted to their net present value using the
Group’s weighted average cost of capital (WACC);
and
comparing the resulting value-in-use of each CGU to
its carrying amount.
Management has identified that there are two CGUs for
testing.
the purpose of performing
Management also performed a sensitivity analysis over
the VIU calculation, by varying the assumptions used to
assess the impact on the valuations.
impairment
We determined impairment testing of goodwill to be a Key
Audit Matter due to the size of the goodwill balance. Also,
this exercise involves significant level of management
judgements and estimates such as the determination of
the existing CGUs, the estimation of future cash flows of
the business, including the growth rates and the discount
rates applied to the estimated cash flows. We note that
the impact and uncertainties resulted from the COVID-19
pandemic has
in
estimating future cash flows.
level of difficulty
increased
the
Our audit procedures in relation to the impairment testing
of goodwill involved the assistance of our Corporate
Finance team, and included:
• Assessing management’s
that
goodwill should be allocated to two CGUs based on
the Group’s business and the manner in which the
results are monitored and reported;
determination
• Assessing and challenging the reasonableness of
key assumptions used in the discounted cash flow
model, including the cash flow projections, future
growth rates, discount rate applied and terminal
value. We also assessed whether
the key
assumptions adopted were applied on a consistent
basis across the model;
• Verifying the mathematical accuracy of the cash flow
model and reconciling input data to supporting
evidence, such as approved budgets;
• Reviewing management’s sensitivity analysis over
the key assumptions in the model and assessing the
reasonableness of the changes in key assumptions
used in the analysis to determine when those
changes would cause an
to be
recognised; and
impairment
• Reviewing the disclosures in Note 14 to the financial
statements
the appropriateness,
completeness, and compliance with the disclosure
requirements of AASB 136.
to assess
72
93
toys“R”us AnZ limited Annual Report 2021
Independent Auditor’s Report
(Cont.)
Key Audit Matters (continued)
Key Audit Matter
How our audit addressed this matter
Accounting for discontinued Operations
Refer to Note 5 in the financial statements
During the year, the Group has completed the sale of its
Confectionary and Chill Factor businesses, as part of the
Group-wide transformation program.
for Sale and
AASB 5 Non-current Assets Held
Discontinued Operations requires specific recognition,
measurement and disclosure requirements relating to
assets,
revenues and expenses of
discontinued operations.
liabilities,
This was identified as a Key Audit Matter as this
involves management estimates and
transaction
judgements
identification of account balances,
in
revenue and expenses relating to the discontinued
operations and related Note disclosures in the financial
statements.
Our audit procedures in relation to accounting and
disclosure of Discontinued Operations included:
• Obtaining and reviewing the sale agreements to
understand the key terms and conditions;
• Assessing the calculations and accounting for the
sale of businesses to ensure assets, liabilities,
revenues and expenses relating to the discontinued
operations are accurately identified and reported;
• Assessing management’s determination of
the
impairment of assets relating to the discontinued
operations; and
• Assessing accounting policy, account balance
classifications and Note disclosures to ensure that
they are in accordance with the requirements of
AASB 5.
Other Information
The directors of the Company are responsible for the other information. The other information comprises the
information included in the Group's annual report for the year ended 31 July 2021; but does not include the
financial report and the auditor's report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial report, or our knowledge
obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal
control as the directors determine is necessary to enable the preparation of the financial report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group 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.
73
94
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is 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 the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and
Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar2_2020.pdf. This
description forms part of our auditor's report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the directors' report for the year ended 31 July 2021.
In our opinion, the Remuneration Report of Toys“R”Us ANZ Limited (formerly Funtastic Limited), for the year
ended 31 July 2021, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report
in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
RSM AUSTRALIA PARTNERS
J S CROALL
Partner
Dated: 29 September 2021
Melbourne, Victoria
74
95
toys“R”us AnZ limited Annual Report 2021
Shareholder Information
Distribution of equity securities as at 6th October 2021.
Analysis of numbers of equity security holders by size of holdings:
Range
1‑1,000
1,001‑5,000
5,001‑10,000
10,001‑100,000
100,001 and over
Fully Paid Ordinary Shares
Holders
Securities
%
Options
Rights
2,408
450,493
400
179
1,033,543
1,346,183
405
16,471,870
0.20%
0.33%
0.37%
4.23%
–
–
–
–
–
–
–
–
273 829,056,769
94.87% 11,841,406
480,000
3,665 848,358,858
100.00% 11,841,406
480,000
The number of shareholders holding less than a marketable parcel of shares was 2,887 holding 843,224
shares (based on the closing market price on 6 October 2021).
Substantial shareholders report
Louis Mittoni and Associated Entities
Jason Sourasis and Associated Entities
Regal Funds Management
Shares
%
291,205,818
34.33%
109,733,159
12.93%
61,259,729
7.22%
96
Twenty largest quoted equity security holders
Louis Mittoni
Jason Sourasis
UBS Nominees Pty Ltd
Theo Andriopoulos
National Nominees Limited
HSBC Custody Nominees (Australia) Limited
Apes With Wings Pty Ltd
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