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T O Y S “ R ” U S
T O Y S “ R ” U S
A N Z L I M I T E D
A N Z L I M I T E D
2 0 2 2
A nn u a l
r e p o r t
Contents
Contents
01 Our story
01 Our story
02 Chair’s Letter
02 Chair’s Letter
04 CEO’s Letter
04 CEO’s Letter
06 Directors’ Report
06 Directors’ Report
25 Financial Report
25 Financial Report
84 Shareholder
84 Shareholder
Information
Information
86 Corporate
86 Corporate
Directory
Directory
TOys“R”Us ANZ LimiTed
TOys“R”Us ANZ LimiTed
Annual Report 2022
Annual Report 2022
Our Our
story
story
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
Chair’s Letter
Chair’s Letter
Dear Fellow Shareholders,
As Chair and on behalf of the Board
of Directors, it is my pleasure to present
the 2022 Annual Report for Toys“R”Us
ANZ Limited (ASX:TOY) (“the Company”),
a company with a bright future in a
rapidly evolving online retail industry.
At Toys”R”Us, we believe that toys have
the power to change lives. Playing with
toys empowers children to develop their
imagination, collaborate, problem solve,
explore and create. As licensee of the
world’s most trusted children and
baby brand, we are proud to play
our part in encouraging children
to express themselves fully
and engage with play
in all its forms.
02
TOys“R”Us ANZ LimiTed
TOys“R”Us ANZ LimiTed
Annual Report 2022
Annual Report 2022
Since relaunching in 2019, the Company has
demonstrated its capacity to deliver growth
by pursuing penetration of the large and
attractive toy, baby and hobby markets in
all licensed regions. According to research
firm IBISWorld, toy, game and hobby retailing
in Australia is a billion-dollar industry
projected to grow strongly in the coming
years, with baby products adding materially
to this addressable market. We believe we
are taking on this opportunity at the right
time equipped with the right strategy, plan
and resources. Over the course of FY22, our
team has refined Toys“R”Us ANZ into a much
stronger business, with financial stability,
improving scale, strengthened leadership
and market-leading capabilities.
$26m$26m
In FY22 our e-commerce direct-to-
consumer (B2C) business grew its
revenue by 98% to $26 million
During the year, we remained focused on our
growth strategy which deliberately plays to
our competitive advantages. As custodian of
the world’s most loved and trusted children
and baby brands, Toys“R”Us and Babies“R”Us,
we are well-placed to deliver conversion and
growth in active customers by leveraging our
strong market recognition. Our product range
is expansive, specialising in toys, babies
and hobbies, and we deliver an unbroken
demographic journey – addressing the needs
of families from newborns and toddlers
through to teenagers and adults.
Our business model is future-focused
by design. We are pursuing a digital-first
strategy which aligns with how shoppers
are and will increasingly shop in the future.
This affords us a relatively low cost of doing
business, especially so as we can now
enjoy the benefits of our centralised
efficient operations which incorporate
state-of-the-art logistics technologies.
Early in FY22, the Company announced that
WHP, owner of the Toys”R”Us brand globally,
had granted Toys”R”Us ANZ a 45 year license
to expand by digitally relaunching the
Toys”R”Us and Babies”R”Us brands in the
United Kingdom. As a toy market, the UK is
more than 3 times larger than Australia and
New Zealand. It is a market that Toys“R”Us
knows well, having achieved annual UK sales
revenue of £421 million (~A$740 million) in
2016 prior to closing in late 2017.
We are well-advanced in delivering our plan
to expand in the UK. With early feedback from
our soft launch highly encouraging, we have
secured all key logistics, delivery and vendor
partnerships and are fully prepared for a
productive holiday season. Many thanks
for this progress must go to our UK senior
executive team who joined the business
over the course of FY22.
Our nascent UK expansion complements
our activities in the ANZ region. In FY22 our
e-commerce direct-to-consumer (B2C) business
grew its revenue by 98% to $26 million,
while our B2B segment, led by the Mittoni IT
importing and distribution business, delivered
annual revenue growth of 28% to $11.1 million
while more than doubling segment EBITDA to
$1.3 million. We remain committed to growing
both the B2C and B2B sides of our business,
with both arms benefiting from TOY’s core
infrastructure and capabilities.
Throughout the last financial year, Toys“R”Us
ANZ’s management, employees and industry
partners have gone above and beyond to
grasp opportunities to grow through what has
been a challenging operating environment for
online retail businesses. I would like to thank
the team for their ongoing dedication, and in
particular our CEO Louis Mittoni for leading
the successful implementation of our growth
strategy. I would also like to thank Yehuda
Shmidman, board observer on the Company’s
board, and Chair and CEO of WHP and
Global license holder Toys”R”Us Kids for his
sage guidance as we steer the Toys”R”Us
and Babies”R”Us brands into their next phase
of growth.
I would also like to thank my fellow
Board members and shareholders for their
commitment and support over the year.
As Chair of Toys”R”Us ANZ, I commit to
you that your Company and its board of
directors will work to deliver on its potential
in 2023 and beyond.
Kevin A Moore FAICD, MCIM
Chair of the Board
25 October 2022
03
CeO’s Letter
CeO’s Letter
Dear Fellow Shareholders,
Welcome to the 2022 Annual Report
for Toys“R”Us ANZ Limited (ASX:TOY)
(“the Company”). In the year to 31 July 2022
(FY22), our Company strengthened its
position as an emerging force in digital-first
e-commerce direct-to-consumer retail,
focusing on category sectors based around
families and children.
In FY22, Toys“R”Us ANZ delivered results that
reflected significant and sustained growth as
we executed our strategy to enrich the lives of
children and parents. In many ways it was a
year of two halves, as the Company benefited
from trading conditions which were seasonally
strong in the first half but which were impacted
by our pausing of shipments in February 2022
and by macroeconomic pressure in the
second half.
Despite the well-documented challenges
flowing from mixed Australian consumer
confidence, the war in Ukraine and its
attendant supply chain disruptions and
expectations of higher interest rates, we
remain well-placed to outperform in this
environment by offering compelling value
to shoppers through our world-class
e-commerce platform.
The performance of our direct-to-consumer
(B2C) business over the year is testament
to the value that Toys“R”Us ANZ offers
to consumers. Our three shopper-facing
e-commerce pillars – Toys“R”Us, Babies“R”Us
and Hobby Warehouse – experienced strong
growth in FY22, driving segment revenue
+98% year-on-year (YoY) to $26.0 million.
04
TOys“R”Us ANZ LimiTed
TOys“R”Us ANZ LimiTed
Annual Report 2022
Annual Report 2022
Several of our key success metrics show
that our B2C business is heading in the right
direction. In Q4 of FY22, the average value
of orders taken through the Toys“R”Us
e-commerce website grew by 10% YoY to
$133.50. The value of this metric has now
been growing steadily for the past two
and a half years.
Our customer acquisition – the lifeblood
of any online retail business – continues to
provide strong returns. In FY22, the Company’s
total active customers across all e-commerce
channels increased by 29% YoY to 188k.
Our engagement with these customers
continues to improve, with higher average
click-ad conversion rates contributing to
improved return on marketing investment
and customer conversion.
Our business-to-business (B2B) business
continues to perform and complement our
B2C operations very well, reflecting growth
in demand for our IT products that support
performance-oriented businesses and
gaming enthusiasts, and expanding revenue
by 28% during the year to $11.1 million.
We were particularly proud to increase our
profitability in this area, growing B2B segment
EBITDA by 110% vs FY21 to $1.3 million.
Underpinning all of this organic growth
are our deliberate efforts to implement the
back-end infrastructure and technology that
will empower us to gain global scale. A key
factor in this was our July 2021 commissioning
of the Company’s Autonomous Mobile
Robot (AMR) e-commerce logistics centre in
Dandenong South, Victoria. These facilities
have increased the capacity and efficiency of
the Company’s storage, picking and logistics
processes. Of equal significance is the
completion of our new 19,650m2 warehouse
facility in Clayton, Victoria, providing almost
4x the size of the previous interim facility and
empowering Toys“R”Us to meet its ambitious
growth plans over the next several years.
We are excited to implement our plans
to accelerate and scale our Toys“R”Us,
Babies“R”Us and Hobby Warehouse
operations in Australia, and relaunch
Toys“R”Us and Babies“R”Us in the United
Kingdom. We are now ready to scale up in
the UK, having carefully built the operational
capability to meet shoppers’ expectations
and demand from market launch right
through to the peak trading season.
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.
In July 2022 we were pleased to arrange
a senior term loan facility of up to A$15 million
to support and advance the Company’s
planned entry into the UK market and
e-commerce launch. We were encouraged
by the support we received in finalising the
loan facility and thank our existing and
incoming investors for the confidence they
have provided.
With our strategy and team in place and
funding secured, the Company enters FY23
with a strong platform for growth as we
reintroduce one of the world’s best-loved
children’s brands to Australia and the UK.
We maintain a positive outlook for continued
growth in revenue and customer engagement,
with healthy momentum developing through
strategic initiatives to drive the Company
towards its medium-term goal of 5% market
share penetration in the toys, baby and
hobby markets in all licensed regions.
I would like to sincerely thank our dedicated
employees from warehouse, customer
experience, buying and sales through to
finance, administration and senior leadership
in Australia and the UK. Their hard work,
passion and commitment to our mission is
empowering us to build a great company.
Thank you to Lian Yu our COO, Wei Si our
CFO and Company Secretary, Kevin Moore
our Chair and my fellow Board Directors
for their cohesive support throughout an
incredible year.
I’d like to thank Yehuda Shmidman, Chair
and CEO of WHP Global, for his vision and
drive, along with the entire WHP Global and
Tru Kids Inc teams for their valuable insights
and support.
I’d also like to thank you, our shareholders,
for your support and continued belief in our
vision. We will continue our focus on executing
our strategy to achieve our goals and drive
sustainable long-term value and growth for
your Company.
Yours sincerely
Louis Mittoni
Managing Director and CEO
05
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 2022.
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;
•
Louis Mittoni;
• Nicki Anderson (resigned 31 August 2022); and
•
John Tripodi.
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.
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. In October 2021, a 100% owned subsidiary UK Toys”R”Us Limited was incorporated for
the distribution of toys and baby products under the brand name Toys“R”Us® and Babies“R”Us® in the
United Kingdom.
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 from continuing operations
EBITDA from continuing operations
Profit/(Loss) before Tax from continuing operations
Net profit/(loss) after tax from continuing operations
Basic EPS (cents) from continuing operations
Dividend per share (cents)
ROE1
Net cash balance / (Net debt) ($m)
Gearing2
1. NPAT/average shareholder equity.
2. Debt/shareholder equity.
FY22
37.9
(9.1)
(25.2)
(24.9)
(2.9)
N/A
FY21 % Change
21.8
(4.4)
(5.3)
(5.1)
(0.8)
N/A
73.8
103.9
372.2
388.4
271.7
(8.48%)
(1.16%)
631.03
2.5
29%
17.3
0.0
(85.4)
n/a
The Group’s statutory loss after income tax for the year ended 31 July 2022 was $24.8 million (2021: Loss after
income tax $3.11 million).
06
Toys “R” Us ANZ Limited
Annual Report 2022
Operating review
Growth in customer activity and revenue
During FY22, Toys“R”Us achieved significant and sustained growth as the Group delivered into trading
conditions which were seasonally strong in the first half and which were impacted by the pausing of
shipments in February 2022 and by macroeconomic pressure on trading conditions in the second half.
The pause allowed completion of extensive changes to key business systems and migration of the
Company’s accounting and Enterprise Resource Planning (ERP) systems.
The Company achieved the following sales results through its Toys“R”Us Australian e-commerce website:
• Average order value (AOV) of $133.50 for Q4 FY22;
• Total number of all B2C active e-commerce customers increased to 188k as at end of July, a growth
of 30% YoY; and
• Cost of customer acquisition (CAC) for the Toys“R”Us e-commerce website was $12.45 for H2 FY22,
representing an increase from the CAC of $10.10 achieved in H1 FY22.
The Company is pleased to have delivered organic growth against a backdrop of decreased Australian toy
industry sales between October 2021 and March 2022, having overcome the effects of elevated COVID-19
cases across Australia and mixed Australian consumer confidence.
The FY22 revenue growth was led by significant expansion in the Company’s direct-to-consumer (B2C)
business, where revenue increased by 98% YoY to $26.0 million. B2B segment revenue from continuing
operations increased by 28% YoY to $11.1 million.
The primary driver of the Company’s statutory net loss after tax was the recognition of a goodwill
impairment charge valued at $14.5 million relating to the B2C segment.
United Kingdom Expansion on Track
On 27 October 2021, TOY and WHP Global announced a landmark long-term exclusive license agreement
for Toys“R”Us ANZ Limited to operate digital and physical retail commerce for Toys“R”Us and Babies“R”Us
in the United Kingdom.
Following commencement of the license, taking effect mid-December 2021, the Company announced its
senior executive team located in the UK, including highly experienced Marketing and eCommerce Director
Mike Coogan and Buying Director Diane Lee. The Company strengthened this team further in 2022,
welcoming an additional eight personnel including senior buyers, head of marketing and key support
team members.
In Q3 FY22, the Company appointed third-party logistics (3PL) specialist Amethyst Group as its warehouse
and logistics provider in the UK. Based in Warwickshire, UK, Amethyst is a specialist warehousing and
distribution business offering a range of 3PL services to manufacturers, wholesalers and distributors,
retailers and online clients. Amethyst is one of the UK’s largest third-party provider of warehousing and
distribution to the toy industry, delivering a cost-efficient supply chain with security and control over stock.
The Company’s expansion to the UK represents a significant near-term growth opportunity for Toys“R”Us.
The online share of UK toy sales grew to 60% in 2021, reinforcing that not only is the UK one of the most
advanced e-commerce markets in Europe, but this advantage is significantly more pronounced in the
toy industry.
With the key UK team in place, the Company entered the UK market, with a soft e-commerce launch in the
last week of September 2022. The unannounced soft launch generated unprompted media coverage, with
approximately 10-fold higher visitor volumes in comparison to peak Australian e-commerce website users.
A full media supported re-launch is scheduled in early October to coincide with the start of the toy buying
season. This is in line with the capital light, digital-first market entry strategy announced earlier this year,
with the objective of providing its e-commerce offering from fourth quarter of CY22, building to deliver
broader e-commerce services to UK shoppers for the holiday and new year season in late 2022.
07
Directors’ Report
(Cont.)
Minimisation of Supply Chain Disruptions
Global supply chain disruptions continued to affect suppliers and Australian industries throughout the
period, causing shortages of raw materials, labour and increased logistics delays and costs. The Company
met these challenges by strategically planning for extended lead times and collaborating closely with
vendor partners to ensure adequate inventory levels.
The Company pre-empted and proactively coordinated buying to mitigate supply disruptions in early 2021
and worked to expand its supply network. Toys“R”Us and Babies“R”Us added approximately 30 new brands
between August 2021 and January 2022, providing increased category coverage and product redundancy.
Selected ranges have also been forecast and pre-ordered in January 2022 for supply in advance of the
seasonal peak period in November 2022.
Further to the above inventory planning strategies employed during the year, TOY continues to plan
gradual increases in factory-direct commitments that help manage and ameliorate supply risks and
reduce corresponding landed costs, supporting TOY’s growth ambitions for the next several years.
The Company also eliminated its reliance on pallet availability and their associated shortage in November
2021 by shifting to a dispatch model that conveys B2C consignments and collections with its Australia Post
partnership. Further to this operational change, TOY plans to reactivate same-day delivery options for
customers located in specific Victorian delivery zones in coming months.
The Company is very pleased to report that COVID-19 has had negligible direct impact to team member
health across the organisation to date through informed management and implementation of split
warehouse shifts, diligent use of protective equipment by employees, and separation of team amenities
where possible to minimise shared use.
Business System Upgrade and Migration
TOY achieved its objective, as set out at the 2021 AGM, to refine its technologies and business systems,
completing the migration of its accounting and Enterprise Resource Planning (ERP) systems in February
2022. Toys“R”Us paused shipments between 28 January 2022 to 14 February 2022 to allow for extensive
system changes to be undertaken.
The new ERP platform is cloud-based and will enable Toys“R”Us to better integrate Warehouse
Management Systems (WMS), automated robotic facilities, multi-tenant international operations,
multi-currency and tax jurisdictions necessary for continued growth internationally. Once fully
implemented, the ERP will provide improved order processing efficiency, scalability, and will enable
enhanced analytics to expedite and augment management decisions.
Victoria, Australia E-Commerce Distribution Centre and Headquarters
On 20 July 2021, Toys“R”Us announced that it had entered into an agreement to lease a purpose built,
state-of-the-art 19,650 m2 warehouse facility located in the Victorian City of Monash. The new premises,
that will accommodate the Company’s short-term requirements for warehousing and office space, were
completed in September 2022.
The new warehouse and office facilities will enable Toys“R”Us to consolidate multiple sites to a single
premises, scale its e-commerce operations considerably, meet increased demand, improve cost efficiencies
and deliver higher levels of customer service and experiences to shoppers. The new warehouse is almost
4x the size of the previous interim facility and will empower Toys“R”Us to meet its ambitious growth plans
over the next several years. The Company also expects to realise cost savings having secured the long-term
lease prior to the recent emergence of construction material and service cost increases.
Outlook and Strategic Plan
The Company continues to pursue its aspirations of driving top line growth and deploying capital efficiently
to achieve its medium-term goal of 5% market share penetration in the toys, baby and hobby markets in all
licensed regions.
08
Toys “R” Us ANZ Limited
Annual Report 2022
The Company plans to accelerate and scale Toys“R”Us, Babies“R”Us and Hobby Warehouse operations in
Australia, and relaunch Toys“R”Us and Babies“R”Us in the UK in late CY22 with sufficient capability to meet
shopper demand during the peak trading season.
The Company continues to review strategic options to expand and realise its growth ambitions by
identifying suitable business opportunities in addition to the growth initiatives reported above.
Significant changes in the state of affairs
New UK license agreement
On 27 October 2021, the Company announced that it had signed a landmark long-term exclusive license
agreement to run digital and physical retail commerce for Toys“R”Us® and Babies“R”Us® in the United Kingdom.
This highly significant milestone is an acknowledgement of the Company’s commitment to the brands and
successful relaunch in Australia of Toys“R”Us® and Babies“R”Us®, and a testament to the collaborative
working relationship with worldwide brand owner WHP Global.
The license took effect in mid-December 2021 and the Company is planning a capital light, digital-first,
market entry strategy with the objective of providing its e-commerce offering from mid CY22, building to
deliver broader e-commerce services to UK shoppers for the holiday and new year season in late 2022.
The Company issued 13,502,326 shares during the year as follows:
Date of issue
Issued to
14/12/2021
15/12/2021
TRU Kids Inc in relation to the grant of the UK license
Kevin Moore in relation to remuneration
No. of
shares
issued
13,394,216
108,110
Issue price
$0.18
$0.185
Secured loan facility
In July 2022, the Company obtained a three-year secured loan facility of $15 million to support working
capital and capital expenditure requirements for the Company’s planned entry into the UK market and
e-commerce launch, including the acquisition of inventory. The loan is repayable at the end of July 2025
and as at the balance sheet date, the Group had utilised $10 million of the total facility limit and complied
with the loan covenant requirements.
Other than the above matters, no other significant changes in the state of affairs of the Group occurred
during the year ended 31 July 2022.
Matters subsequent to the end of the financial year
The Company has entered into to an arrangement with the landlord on 20 July 2021 for lease of office
and warehouse space in Clayton, Victoria for a period of ten years (with an option to extend for a further
two terms of five years each) with an objective to consolidate all of its office and warehouse operations.
The lease is expected to commence in October 2022, once ancillary works are completed by the landlord.
The arrangement includes a lease incentive of $10.90 million, to be offset proportionally against monthly
rental payments over the initial period of lease. The arrangement will result in recognition of right-of-use
asset of $12.30 million and an equivalent lease liability upon commencement of the lease.
No other matters or circumstance has arisen since 31 July 2022 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.
09
Directors’ Report
(Cont.)
Environmental regulations
The Group is not subject to any significant environmental regulation under Australian Commonwealth
or State law.
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:
None
Former directorships (last three years):
Chair of the Board of Raiz Invest Limited
Special responsibilities:
Chair of the Board and member of the Remuneration and Nomination
Committee and Audit and Risk Committee
Interests in shares:
3,027,462
Interest in options over shares:
3,388,293
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
Former directorships (last three years):
None
Special responsibilities:
Chief Executive Officer and member of the Remuneration and Nomination
Committee and Audit and Risk Committee
Interests in shares:
291,455,818
Interest in options over shares:
16,941,463
Louis Mittoni
Executive Director
PhD – Chemical
Engineering, BSc –
Physics, MAICD, MAIP
10
Toys “R” Us ANZ Limited
Annual Report 2022
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
(resigned 31 August 2022)
Other current directorships:
Graincorp
Independent
Non-Executive Director
B Bus, EMBA, GAICD
Former directorships (last three years):
Select Harvests Limited, Health and Plant Protein Group Limited
Special responsibilities:
Chair of the Remuneration and Nomination Committee and member of the
Audit and Risk Committee
Interests in shares:
1,075,467
Interest in service rights:
500,000
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’Oréal Group.
Other current directorships:
None
Former directorships (last three years):
None
Special responsibilities:
Chair of the Audit and Risk Committee and member of the Remuneration and
Nomination Committee
Interests in shares:
110,803
Interest in service rights:
500,000
John Tripodi
Independent
Non-Executive Director
B Com, B Bus (Hons)
‘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.
11
Directors’ Report
(Cont.)
Company Secretary
Wei Si is the Company Secretary of the Group. He has substantial experience in governance and finance
roles. Wei Si was appointed to the position of Company Secretary on 31 March 2022. Prior to Wei Si,
Patrick Raper was the Company Secretary of the Group.
Meetings of Directors
The number of meetings of the Group’s Board of Directors held during the year ended 31 July 2022 and the
number of meetings attended by each director were:
Remuneration &
Nomination Committee
Board of Directors
Audit & Risk Committee
Kevin Moore
Louis Mittoni
Nicki Anderson
John Tripodi
A
4
3
4
4
B
4
3
4
4
A
13
13
13
13
B
13
13
13
13
A
6
6
6
6
B
6
6
6
6
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).
12
Toys “R” Us ANZ Limited
Annual Report 2022
Remuneration report (audited)
The Directors present the Remuneration report for the Group and its controlled entities for the year ended
31 July 2022. 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.
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
Howard Abbey
Chief Financial Officer
Appointed 25 October 2018 –
Resigned 31 August 2022
Appointed 2 May 2018 –
Resigned 8 April 2022
Wei Si
Lian Yu
Chief Financial Officer and Company Secretary
Appointed 28 March 2022
Chief Operating Officer
Appointed 1 May 2021
Remuneration policy for directors and executives
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 & 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 & 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
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 & Nomination
Committee to ensure they remain relevant.
13
Directors’ Report
(Cont.)
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)
Basic EPS (Cents)
Diluted EPS (Cents)
Total Dividends ($’000)
Year End Share Price ($)
Shares on Issue (No.)
Year Ended
31-Jul-22
Year Ended
31-Jul-21
Year ended
31-Jul-20
Year ended
31-Jul-19
Year ended
31-Jul-18
(24,759)
(2.89)
(2.89)
Nil
0.061
(3,113)
(0.48)
(0.48)
Nil
0.160
(9,313)
(3.94)
(3.94)
Nil
0.022
7,596
28,258
3.64
3.61
Nil
0.065
32.60
31.64
Nil
0.080
861,861,184 848,358,858 240,404,075
233,176,894
96,025,827
Market Capitalisation ($’000)
52,574
135,737
5,289
15,156
7,682
14
Toys “R” Us ANZ Limited
Annual Report 2022
Remuneration of Key Management Personnel
The aggregate compensation of the key management personnel of the Group is set out below:
Short-term
employee benefits
Post-
employ-
ment
benefits
Other
long-term
employee
benefits
Share-based payments
Year ended
31 July 2022
Directors
Kevin Moore
Louis Mittoni
Nicki Anderson1
John Tripodi
Sub-Totals
Executives
Howard Abbey2
Wei Si3
Lian Yu
Sub-Totals
TOTALS
Salary
and fees
$
Cash
bonus
$
Non-
monetary
benefits
$
Superan-
nuation
$
Long
service
leave
$
Termi-
nation
Benefits
$
90,000
355,533
60,000
60,000
565,533
154,690
69,744
207,272
431,706
997,239
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9,038
27,693
6,025
6,025
–
9,947
–
–
48,781
9,947
–
–
–
–
–
18,858
7,057
20,089
46,004
94,785
–
–
9,266
9,266
19,213
30,931
–
–
30,931
30,931
Share
Appre-
ciation
Rights
$
Share
Options
$
Total
$
–
–
–
–
–
–
–
–
–
–
95,403
214,441
477,016
870,189
30,000
96,025
30,000
96,025
632,419 1,276,680
–
–
204,479
76,801
43,209
279,836
43,209
561,116
675,628 1,837,796
Shares
$
20,000
–
–
–
20,000
–
–
–
–
20,000
1. Appointed 25 October 2018, resigned 31 August 2022.
2. Appointed 2 May 2018, resigned 8 April 2022.
3. Employed and appointed Chief Financial Officer and Company Secretary 28 March 2022.
15
Directors’ Report
(Cont.)
Short-term
employee benefits
Post-
employ-
ment
benefits
Other
long-term
employee
benefits
Salary
and fees
$
Short
Term
Incentive
$
Non-
monetary
benefits
$
Superan-
nuation
$
Long
service
leave
$
Termi-
nation
Benefits
$
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
15,897
64,979
103,379
–
–
–
–
–
–
–
994
10,212
11,206
11,206
–
–
–
–
–
–
43,712
–
–
43,712
43,712
Share-based payments
Share
Appre-
ciation
Rights
$
Share
Options
$
Total
$
–
–
235,903
322,813
1,179,513 1,427,244
13,790
13,790
–
–
–
–
79,515
79,515
58,333
Shares
$
20,000
–
–
–
–
20,000
27,580
1,415,416 1,967,420
–
–
–
–
–
–
–
–
–
–
104,417
261,461
10,802
218,348
10,802
584,226
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.
Fixed remuneration
Remuneration linked
to performance*
2022
2021
2022
2021
100%
100%
100%
100%
–
–
100%
100%
100%
100%
99.1%
100%
100%
100%
100%
100%
–
78.7%
–
–
–
–
–
–
–
–
–
–
0.9%
–
–
–
–
–
–
21.3%
Directors
Kevin Moore
Louis Mittoni
John Tripodi
Nicki Anderson (resigned 31 August 2022)
Bernie Brookes (resigned 26 November 2020)
Executive Officers
David Jackson (resigned 4 September 2020)
Howard Abbey (Resigned 8 April 2022)
Wei Si (appointed as CFO 31 March 2022)
Lian Yu
* Represents short-term incentives.
16
Toys “R” Us ANZ Limited
Annual Report 2022
Short term incentives
In 2022 STI payments made were $nil (2021: $58,926).
Long term incentives
In 2022 LTI payments of $675,628 were made in the form of share options (2021: $1,426,218).
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 & 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 (resigned 31 August 2022)
• 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 (resigned 8 April 2022)
• 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.
17
Directors’ Report
(Cont.)
Wei Si – 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.
• 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 2022
Directors
Balance
at the
start of
the year
Shares
purchased
on market
Received
under the
placement
or as
acquisition
consider-
ation
Kevin Moore
2,759,352
Louis Mittoni
291,205,818
John Tripodi
110,803
Nicki Anderson
1,075,467
160,000
250,000
–
–
Sub-Total
295,151,440
410,000
Executives
Howard Abbey1
Lian Yu
Sub-Total
454,545
–
454,545
–
–
–
Grand Total
295,605,985
410,000
1. Resigned on 8 April 2022.
–
–
–
–
–
–
–
–
–
Shares
Issued as
Remuner-
ation
108,110
–
–
–
108,110
Balance at
the end of
the period
Balance
held
nominally
Other1
–
–
–
–
–
3,027,462
3,027,462
291,455,818
291,455,818
110,803
110,803
1,075,467
1,075,467
295,669,550 295,669,550
–
–
–
(454,545)
–
(454,545)
–
–
–
–
–
–
108,110
(454,545) 295,669,550 295,669,550
18
Toys “R” Us ANZ Limited
Annual Report 2022
Year ended
31 July 2021
Directors
Kevin Moore1
Louis Mittoni2
John Tripodi
Balance
at the
start of
the year
Shares
purchased
on market
Received
under the
placement
or as
acquisition
consider-
ation
Shares
Issued as
Remun-
eration
Balance
at the end
of the
period
Balance
held
nominally
Other5
–
–
–
336,733
2,232,143
190,476
–
291,205,818
110,803
–
–
–
–
–
–
–
–
–
–
–
–
–
2,759,352
2,759,352
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
–
454,545
(1,353)
(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
1. 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.
2. 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 2022
Directors
Kevin Moore1
Louis Mittoni1
Nicki Anderson
John Tripodi
Executives
Lian Yu
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
1,696,718
8,457,875
8,483,588
–
–
1,691,956
–
–
–
11,841,406
10,180,306
–
–
–
–
–
–
–
–
–
–
–
–
3,388,293
3,388,293
16,941,463
16,941,463
–
–
1,691,956
–
–
–
22,021,712
20,329,756
1.
Issue Date 14 December 2021, Vesting Date 14 December 2021, Issue Price $0.166, Expiry Date 1 November 2024.
19
Directors’ Report
(Cont.)
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.
Share Appreciation Rights
Year ended
31 July 2022
Directors
Nicki Anderson
John Tripodi
Totals
Balance at
the start
of the year
Granted
during the
year
Expired
during the
year
Cancelled
during the
year1
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. Share appreciation rights were cancelled and replaced by issue of service rights during the year.
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
–
–
–
20
Toys “R” Us ANZ Limited
Annual Report 2022
Service Rights
Year ended
31 July 2022
Directors
Nicki Anderson1
John Tripodi1
Totals
Balance at
the start
of the year
Granted
during the
year1
Expired
during the
year
Cancelled
during the
year
Balance at
the end of
the year
Vested
and
exercisable
at the end
of the year
–
–
–
500,000
500,000
1,000,000
–
–
500,000
500,000
1,000,000
–
–
–
1. Ms Anderson and Mr Tripodi were each issued 240,000 Share Appreciation Rights (SARs) under the Employee
Incentive Plan 2020 during FY 2021. These SARs were cancelled and replaced by Service Rights on 14 December 2021.
Grant Date 14 December 2021, Vesting Date 31 Jul 2023, Expiry Date 14 Dec 2036, Exercise Price is $Nil. Grant Value for
each tranche of Share Rights to be issued to Ms Anderson and Mr Tripodi is $30,000, and the number of Shares these
convert to shall be determined by the Share Price on the relevant Vesting Date. If the person ceases to hold the office
of non-executive director of the Company for any reason prior to 31 July 2023, then they will forfeit Service Rights in
the proportion that the period following the date of cessation of holding the office of NED until 31 July 2023 bears to
3 years. Any Service Rights that are not forfeited will vest.
Other statutory disclosures
Loans to key management personnel and their related parties
During FY22 and to the date of this report, the Group made no loans to directors and other KMP. As at
31 July 2022, Louis Mittoni owed the Company $16,719 (2021: $77,503) related to personal expenses incurred
on a company credit card.
Transactions with Key Management Personnel
During FY22 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.
21
Directors’ Report
(Cont.)
Unissued shares
As at the date of this report and at the reporting date, there were 22,021,712 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.
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 30 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 30 to the financial statements do not
compromise the external auditor’s independence, based on advice received from the Audit & 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 &
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
Toys “R” Us ANZ Limited
Annual Report 2022
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
25 October 2022
23
Auditor’s Independence Declaration
RSM Australia Partners
Level 21, 55 Collins Street Melbourne VIC 3000
PO Box 248 Collins Street West VIC 8007
T +61 (0) 3 9286 8000
F +61 (0) 3 9286 8199
www.rsm.com.au
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the financial report of Toys“R”Us ANZ Ltd and its controlled entities for the year
ended 31 July 2022, 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
R B MIANO
Partner
Dated: 29 September 2022
Melbourne, Victoria
THE POWER OF BEING UNDERSTOOD
AUDIT | TAX | CONSULTING
19
RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the
RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.
RSM Australia Partners ABN 36 965 185 036
Liability limited by a scheme approved under Professional Standards Legislation
24
Toys “R” Us ANZ Limited
Annual Report 2022
Consolidated Statement of Profit or
Loss and Other Comprehensive Income
for the year ended 31 July 2022
Continuing operations
Revenue
Cost of goods sold
Gross profit
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
Impairment of goodwill
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 after income taxes from discontinued operations
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 loss for the year attributable
to the members of Toys“R”Us ANZ Limited
Total comprehensive income for the year is attributable to:
Continuing operations
Discontinued operations
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 per share (cents per share)
Diluted earnings per share (cents per share)
Note
31-Jul-22
$’000
31-Jul-21
$’000
6
7
7
14
7
8
5
21
21
21
21
21
21
37,927
(29,972)
7,955
3
(2,385)
(5,974)
(6,671)
(1,985)
(9,057)
–
(14,500)
(1,594)
(25,151)
295
(24,856)
21,827
(17,696)
4,131
53
(963)
(1,567)
(3,961)
(2,134)
(4,441)
(22)
–
(863)
(5,326)
237
(5,089)
97
(24,759)
1,976
(3,113)
20
–
20
8
707
715
(24,739)
(2,398)
(24,836)
97
(24,739)
(5,089)
2,691
(2,398)
(2.89)
(2.89)
(2.90)
(2.90)
0.01
0.01
(0.48)
(0.48)
(0.78)
(0.78)
0.30
0.30
The above consolidated statement of profit or loss and other comprehensive income should be read
in conjunction with the accompanying notes.
25
Consolidated Statement
of Financial Position
as at 31 July 2022
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Tax receivable
Other current assets
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 payables
Contract liabilities/deferred revenue
Provisions
Lease liabilities
Provisions
Other current liabilities
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Deferred tax
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Accumulated losses
Reserves
Total Equity
Note
31-Jul-22
$’000
31-Jul-21
$’000
25 (a)
12,538
9
10
8 (d)
11
794
9,851
–
679
17,338
1,882
6,006
12
925
23,862
26,163
13
14
12
11
17
18
17
19
16
17
8 (f)
20
20
2,384
21,447
–
3,763
27,594
51,456
3,263
422
393
281
393
1,884
6,243
10,000
11
1,054
11,065
17,308
34,148
1,937
34,569
–
1,133
37,639
63,802
2,101
896
415
535
415
2,707
6,654
–
4
1,344
1,348
8,002
55,800
292,965
290,545
(260,958)
(236,199)
2,141
34,148
1,454
55,800
The above consolidated statement of financial position should be read in conjunction with the
accompanying notes.
26
Toys “R” Us ANZ Limited
Annual Report 2022
Consolidated Statement
of Changes in Equity
for the year ended 31 July 2022
Issued
Capital
$’000
Note
Accum-
ulated
Losses
$’000
Foreign
Currency
Translation
Reserve
$’000
Equity
settled
Employee
Benefits
Reserve
$’000
225,166
(233,086)
(715)
Balance at 31 July 2020
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 costs
Issue of share
appreciation rights
Issue of employee
share options
Balance at 31 July 2021
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 costs
Issue of share appreciation/
service rights (net)
Issue of employee options
–
–
–
20
65,379
–
–
(3,113)
–
(3,113)
–
–
–
290,545
(236,199)
–
–
–
(24,759)
–
(24,759)
20
2,420
–
–
–
–
–
Total
$’000
(8,635)
(3,113)
715
(2,398)
65,379
–
–
–
–
–
28
28
1,426
1,454
–
–
–
–
46
621
2,121
1,426
55,800
(24,759)
20
(24,739)
2,420
46
621
34,148
–
715
715
–
–
–
–
–
20
20
–
–
–
20
Balance at 31 July 2022
292,965
(260,958)
The above consolidated statement of changes in equity should be read in conjunction with the
accompanying notes.
27
Consolidated Statement of Cash Flows
for the year ended 31 July 2022
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Receipts from other income (including government grants)
Payments to suppliers (inclusive of GST)
Payments to employees
Cash utilised in operations
Income taxes refunded
Interest and other costs of finance paid
Year ended
31-Jul-22
$’000
Year ended
31-Jul-21
$’000
Note
43,746
–
42,951
363
(48,680)
(42,049)
(5,980)
(10,914)
12
–
(4,664)
(3,399)
17
(533)
Net cash outflow from operating activities
25(c)
(10,902)
(3,915)
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 intangible assets
Payments for security deposits
Proceeds from disposal of property, plant and equipment
Proceeds from sale of business
5
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)
3
–
(980)
(33)
2
289
(1,691)
–
(2,629)
(1,026)
6
–
(3,633)
10,000
(254)
–
(11)
9,735
(4,800)
17,338
12,538
–
3,169
743
(6,148)
(211)
28,450
(1,948)
20,143
16,971
367
17,338
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
28
Toys “R” Us ANZ Limited
Annual Report 2022
Notes to the Consolidated
Financial Statements
for the year ended 31 July 2022
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 31.
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
$24.86 million and cash outflows from operating activities of $10.90 million for the year ended 31 July 2022.
The Directors believe that it is reasonably foreseeable that the Group will continue as a going concern
and that it is appropriate to adopt the going concern basis in the preparation of the financial report after
consideration of the following factors:
• The Group holds cash and cash equivalents of $12.54 million as at 31 July 2022;
• The Group has an undrawn facility of $5 million on the term loan to support its working capital
and capital expenditure requirements; and
• The budget and cashflow forecast prepared by the Group for the twelve-month period from the date
of signing the financial statements, which are based on the directors’ estimates and assumptions
about certain economic factors, and the operating and trading performance of the Group, support the
directors’ assertion, and suggest that the Group has cash and other financial resources sufficient to
support its operations for the relevant period.
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
Notes to the Consolidated
Financial Statements
(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.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. 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.
Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and
non-controlling interest in the subsidiary together with any cumulative translation differences recognised in
equity. The Group recognises the fair value of the consideration received and the fair value of any investment
retained together with any gain or loss in profit or loss.
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. Unrealised losses are also eliminated
unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of
subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
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.
30
Toys “R” Us ANZ Limited
Annual Report 2022
NOTE 1: Significant accounting policies (Cont.)
Foreign currency translation (Cont.)
(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;
•
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.
31
Notes to the Consolidated
Financial Statements
(Cont.)
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.
(ii) Deferred tax
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be
applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted
or substantively enacted, except for:
• When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset
or liability in a transaction that is not a business combination and that, at the time of the transaction,
affects neither the accounting nor taxable profits; or
• When the taxable temporary difference is associated with interests in subsidiaries, associates or joint
ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference
will not reverse in the foreseeable future.
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.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting
date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future
taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred
tax assets are recognised to the extent that it is probable that there are future taxable profits available
to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current
tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they
relate to the same taxable authority on either the same taxable entity or different taxable entities which
intend to settle simultaneously.
(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.
32
Toys “R” Us ANZ Limited
Annual Report 2022
NOTE 1: Significant accounting policies (Cont.)
Income tax (Cont.)
(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.
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.
33
Notes to the Consolidated
Financial Statements
(Cont.)
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.
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.
34
Toys “R” Us ANZ Limited
Annual Report 2022
NOTE 1: Significant accounting policies (Cont.)
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; and
financial assets at fair value through profit or loss (FVPL).
Classifications are determined by both:
• The entity’s business model for managing the financial asset; and
• 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; and
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.
35
Notes to the Consolidated
Financial Statements
(Cont.)
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.
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.
36
Toys “R” Us ANZ Limited
Annual Report 2022
NOTE 1: Significant accounting policies (Cont.)
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
• Customer database
• Patents
• Trademarks
3 years
5 years
20 years
3-5 years
•
Licensed distribution agreements
1-20 years
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.
Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation
and are tested annually for impairment, or more frequently if events or changes in circumstances indicate
that they might be impaired. Other non-financial assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss
is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount.
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.
37
Notes to the Consolidated
Financial Statements
(Cont.)
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 Group’s obligation to transfer goods or services to a customer and are
recognised when a customer pays consideration, or when the Group recognises a receivable to reflect its
unconditional right to consideration (whichever is earlier) before the Group 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.
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.
38
Toys “R” Us ANZ Limited
Annual Report 2022
NOTE 1: Significant accounting policies (Cont.)
Lease liabilities (Cont.)
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.
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.
39
Notes to the Consolidated
Financial Statements
(Cont.)
(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.
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.
40
Toys “R” Us ANZ Limited
Annual Report 2022
NOTE 1: Significant accounting policies (Cont.)
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.
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.
41
Notes to the Consolidated
Financial Statements
(Cont.)
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.
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 2021.
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.
42
Toys “R” Us ANZ Limited
Annual Report 2022
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.
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 license or expected useful lives, not exceeding 3 years;
• Customer database – based on the expected churn rates;
• Patents and Trademarks – based on the contractual life of the patent/trademark, ranging from
10-20 years; and
•
Licensed distribution agreements – based on the term of the agreement or the expected Brand product
life cycle, ranging from 1-20 years.
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.
43
Notes to the Consolidated
Financial Statements
(Cont.)
(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. The allowance for expected credit losses is calculated
based on the information available at the time of preparation. The actual credit losses in future years may
be higher or lower.
(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.
(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.
(vi) Share-based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of
the equity instruments at the date at which they are granted. The fair value is determined by using either the
Binomial or Black-Scholes model taking into account the terms and conditions upon which the instruments
were granted. The accounting estimates and assumptions relating to equity-settled share-based payments
would have no impact on the carrying amounts of assets and liabilities within the next annual reporting
period but may impact profit or loss and equity.
44
Toys “R” Us ANZ Limited
Annual Report 2022
NOTE 4: Operating segments
Identification of reportable operating segments
The Group is organised into two operating segments based on differences in products sold: Business to
Consumer (B2C) and Business to Business (B2C). These operating segments are based on the internal reports
that are reviewed and used by the Board of Directors and KMP (who are identified as the Chief Operating
Decision Makers (‘CODM’)) to make strategic and operating decisions, in assessing business performance
and in determining the allocation of resources. There is no aggregation of operating segments.
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.
*
includes the revenues from the erstwhile Funtastic business (discontinued operations).
Intersegment transactions and balances are eliminated on consolidation. There were no inter-segment
transactions during the year or account balances at 31 July 2022.
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-22
Revenue
Other income
Cost of goods sold
Other expenses
EBITDA
Year ended 31-Jul-21
Revenue
Other income
Cost of goods sold
Other expenses
EBITDA
B2C
$’000
26,029
–
B2B
$’000
13,098
0
(20,585)
(10,409)
Corporate
$’000
–
3
–
(1,371)
1,318
(4,438)
(4,435)
(11,281)
(5,837)
B2C
$’000
13,145
344
(10,187)
(4,394)
(1,092)
Corporate
$’000
–
1,627
B2B
$’000
23,917
124
(16,738)
(6,675)
628
Total
$’000
39,127
3
(30,994)
(17,090)
(8,954)
Total
$’000
37,062
2,095
–
(26,925)
(2,452)
(825)
(13,521)
(1,289)
45
Notes to the Consolidated
Financial Statements
(Cont.)
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
Year ended
31-Jul-22
$’000
Year ended
31-Jul-21
$’000
(8,954)
(16,100)
–
(1,289)
(1,529)
(532)
(25,054)
(3,350)
295
(24,759)
237
(3,113)
Depreciation, amortisation and impairment expense by segment
B2C
B2B
Corporate
Year ended
31-Jul-22
$’000
Year ended
31-Jul-21
$’000
15,966
6
128
16,100
795
68
666
1,529
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.
Non-Current Assets
B2C
B2B
Total
31-Jul-22
$’000
31-Jul-21
$’000
19,764
4,067
23,831
32,169
4,337
36,506
46
Toys “R” Us ANZ Limited
Annual Report 2022
NOTE 5: Discontinued operations
Razor Distributorship
During the prior year, the Group:
(a) sold its confectionery business effective 22 January 2021;
(b) sold its Chill Factor business effective 5 July 2021;
(c) announced that its distribution agreement with Razor USA LLC would be discontinued effective
from 1 May 2021; and
(d) commenced the winding down of its overseas subsidiaries in USA and Hong Kong.
Consequent to the above, the entire business operations of the erstwhile Funtastic Limited has been
reclassified as discontinued operations in accordance with AASB 5 Non-current Assets Held for Sale
and Discontinued Operations, consistent with the prior year.
(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
Earnings before interest, taxation, depreciation and amortisation (EBITDA)
Finance costs
Depreciation and amortisation expenses
Impairment of right-of-use assets
Profit before income taxes
Income tax expense
Profit after income taxes
Profit on sale of businesses before income taxes
Income tax expense
Profit on sale of businesses after income taxes
Profit after income taxes from discontinued operations
Year ended
31 July 2022
$’000
Year ended
31 July 2021
$’000
1,200
(1,021)
179
–
(68)
–
–
(8)
103
–
(6)
–
97
–
97
–
–
–
97
15,235
(9,231)
6,004
419
(1,299)
(103)
(2,059)
(1,436)
1,526
(510)
(208)
(458)
350
–
350
1,626
–
1,626
1,976
47
Notes to the Consolidated
Financial Statements
(Cont.)
(b) Cash flow information relating to discontinued operations
Net cash from/(used in) operating activities
Net cash from investing activities
Net cash used in financing activities
Net increase in cash and cash equivalents from discontinued operations
(c) Assets relating to discontinued operations
Trade and other receivables
Inventories
Other current assets
(d) Liabilities relating to discontinued operations
Trade payables
Other current liabilities
Lease liabilities
Provisions
Year ended
31 July 2022
$’000
Year ended
31 July 2021
$’000
837
–
(254)
583
–
–
–
–
3
214
281
–
498
(1,356)
3,169
(211)
1,602
935
1,035
129
2,099
557
994
535
27
2,113
The assets and liabilities relating to discontinued operations are included in the relevant categories of assets
and liabilities respectively.
48
Toys “R” Us ANZ Limited
Annual Report 2022
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-22
$’000
Year ended
31-Jul-21
$’000
37,822
–
37,822
105
105
21,519
–
21,519
308
308
37,927
21,827
26,029
11,898
37,927
13,145
8,682
21,827
37,927
21,827
37,927
21,827
49
Notes to the Consolidated
Financial Statements
(Cont.)
NOTE 7: Profit/(loss) for the year
Profit/(loss) before income taxes from continuing operations includes the following specific expenses:
Year ended
31-Jul-22
$’000
Year ended
31-Jul-21
$’000
Note
3
–
3
2
51
53
5,625
2,314
378
668
6,671
533
1,061
1,594
193
1,454
3,961
40
823
863
13
14
Year ended
31-Jul-22
$’000
Year ended
31-Jul-21
$’000
(2,339)
(1,645)
(5)
–
(2,344)
(1,645)
2,049
(295)
1,408
(237)
(295)
–
(295)
(237)
–
(237)
Other income
Interest from bank deposits
Government subsidies related to COVID-19
Total other income
Employee benefits expense
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 & equipment
Amortisation of other intangible assets
Total depreciation and amortisation expense
NOTE 8: Income tax
(a) Income tax (benefit)/expense
Tax expense comprises:
Current tax (benefit)/expense in respect of the current year
Adjustments for prior periods
Deferred tax expense comprises:
Deferred tax (benefit)/expense relating to the origination and reversal
of temporary differences
Total income tax (benefit)/expense
Income tax (benefit)/expense is attributable to:
Loss from continuing operations
Profit/(loss) from discontinued operations
Total tax (benefit)/expense
50
Toys “R” Us ANZ Limited
Annual Report 2022
NOTE 8: Income tax (Cont.)
(b) Income tax recognised in profit or loss
The expense for the year can be reconciled to the accounting
profit as follows:
Loss before income taxes from continuing operations
Profit before income taxes from discontinued operations
Year ended
31-Jul-22
$’000
Year ended
31-Jul-21
$’000
(25,151)
97
(25,054)
(5,326)
1,976
(3,350)
Tax expense/(benefit) at the Australian tax rate of 25% (FY 2021: 27.5%)
(6,264)
(921)
Tax effect of amounts which are not deductible/(taxable)
in calculating taxable income:
Impairment of goodwill
Other 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
Adjustment for prior period
Income tax (benefit)/expense recognised in profit or loss
(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
(e) Deferred tax assets
No movements in deferred tax asset balances were recognised
in the financial year 2022 (2021: $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 25% (FY 2021: 27.5%)
3,625
552
2,087
(290)
(5)
(295)
–
–
–
–
2
919
(237)
–
(237)
–
–
12
79,436
11,023
90,459
19,859
68,290
4,973
73,263
18,780
Tax Losses and temporary differences
The Company has made losses in current and 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 2022 has not been booked as a deferred tax asset in these financial statements.
51
Notes to the Consolidated
Financial Statements
(Cont.)
(f) Deferred tax liabilities
Deferred tax liability comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Customer database intangible assets
Movement in deferred tax liabilities
Opening balance
Additions through business combinations
Credited to profit or loss
Closing balance
31-Jul-22
$’000
31-Jul-21
$’000
1,054
1,344
Year ended
31-Jul-22
$’000
Year ended
31-Jul-21
$’000
1,344
–
(290)
1,054
–
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.
(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.
52
Toys “R” Us ANZ Limited
Annual Report 2022
NOTE 9: Current assets – Trade and other receivables
Trade receivables
Allowance for expected credit losses
Other receivables
Total
Year ended
31-Jul-22
$’000
Year ended
31-Jul-21
$’000
779
(2)
777
17
794
1,799
(2)
1,797
85
1,882
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). The Group has recognised a gain of $75,340 in profit or loss in respect of the expected credit
losses for the year ended 31 July 2022 (FY 2021: loss of $33,388).
The ageing of the receivables and allowance for expected credit losses provided for above are as follows:
Expected credit loss rate
Carrying amount
Consolidated
Not overdue
1-60 days overdue
91-90 days overdue
2022
%
0%
0%
0%
2021
%
0%
0%
0%
Over 90 days overdue
100%
100%
Total
2022
$’000
667
108
2
2
779
2021
$’000
1,797
–
–
2
1,799
Allowance for
expected Credit losses
2022
$’000
2021
$’000
–
–
–
2
2
–
–
–
2
2
53
Notes to the Consolidated
Financial Statements
(Cont.)
Movement in allowances
Year ended 31 July 2022
Balance at beginning of year
Additional provisions recognised
Provisions reversed
Balance at end of the period
Year ended 31 July 2021
Balance at beginning of year
Additional provisions recognised
Provisions Acquired through business combinations
Provision released
Provision utilised/adjusted
Balance at end of the year
Rebates,
credit
notes &
settlement
discount
$’000
Allowance
for
Impairment
$’000
(2)
(1)
1
(2)
(1,915)
(76)
(2)
30
1,961
(2)
–
–
–
–
(947)
(1,090)
–
–
2,037
–
Total
$’000
(2)
(1)
1
(2)
(2,862)
(1,166)
(2)
30
3,998
(2)
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.
NOTE 10: Current assets – Inventories
Year ended
31-Jul-22
$’000
Year ended
31-Jul-21
$’000
10,324
(473)
9,851
530
–
(57)
473
6,536
(530)
6,006
904
375
(749)
530
Stock at cost
Less: Provision for obsolescence
Movement in provision for obsolescence
Balance at beginning of year
Additions on business combinations
Provisions utilised/adjusted
Balance at end of the year
54
Toys “R” Us ANZ Limited
Annual Report 2022
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 2021
Depreciation expense
Balance at 31 July 2022
Right-of-use assets – at cost
Less: Accumulated depreciation and impairment
Reconciliation
Balance at 1 August 2020
Adjustment for rent relief
Impairment expense
Depreciation expense
Balance at 31 July 2020
Year ended
31-Jul-22
$’000
Year ended
31-Jul-21
$’000
–
113
566
679
3,763
3,763
215
214
496
925
1,133
1,133
Property
31-Jul-22
$’000
Equipment
31-Jul-22
$’000
Total
31-Jul-22
$’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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)
–
There were no additions to the right-of-use assets during the current and previous years.
As at 31 July 2022, 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.
55
Notes to the Consolidated
Financial Statements
(Cont.)
NOTE 13: Non-current assets – Property, Plant and equipment
Plant and equipment – at cost
Less: accumulated depreciation
Leasehold improvements – at cost
Less: accumulated depreciation
Year ended
31-Jul-22
$’000
Year ended
31-Jul-21
$’000
2,932
(560)
2,372
16
(4)
12
2,174
(241)
1,933
4
–
4
2,384
1,937
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-22
Year ended 31-Jul-21
Plant and
equipment
$’000
Leasehold
improvements
$’000
Opening Balance
Additions during
the year
Disposals
Depreciation expense
Addition through
business combination
Closing Balance
1,933
974
(6)
(529)
–
2,372
4
12
–
(4)
–
12
Total
$’000
1,937
986
(6)
(533)
2,384
Plant and
equipment
$’000
Leasehold
Improvements
$’000
25
1,691
–
(40)
257
1,933
–
–
–
–
4
4
Total
$’000
25
1,691
–
(40)
261
1,937
56
Toys “R” Us ANZ Limited
Annual Report 2022
NOTE 14: Non-current Assets – Goodwill and Other Intangibles
Goodwill
Less: Accumulated Impairment
Software costs
Less: Accumulated amortisation
Chill Factor – Trademarks and patents
Less: Accumulated amortisation
Customer database
Less: Accumulated amortisation
Other Licenses and trademarks
Less: Accumulated amortisation
Total Goodwill and Other Intangibles
Reconciliations
Year ended
31-Jul-22
$’000
Year ended
31-Jul-21
$’000
29,695
(14,500)
15,195
29,695
–
29,695
265
(220)
45
–
–
–
5,271
(1,756)
3,515
2,786
(94)
2,692
21,447
269
(245)
24
–
–
–
5,271
(791)
4,480
375
(5)
370
34,569
Reconciliations of the carrying amounts of each class of intangibles at the beginning and end of the current
financial year are set out below:
Software
costs
$’000
Chill Factor
Trademarks
and Patents
$’000
Customer
Database
$’000
Other
Licenses and
Trademarks
$’000
Goodwill
$’000
2022
Opening Balance
Additions
Disposals
Impairment
Amortisation
Closing Balance
2021
Opening Balance
Additions through
business combinations
Additions
Disposals
Amortisation
29,695
–
–
(14,500)
–
15,195
–
29,695
–
–
–
Closing Balance
29,695
24
31
(4)
–
(6)
45
1
26
–
–
(3)
24
–
–
–
–
–
–
101
–
–
(78)
(23)
–
4,480
–
–
–
(965)
3,515
–
5,271
–
–
(791)
4,480
Total
$’000
34,569
2,443
(4)
(14,500)
(1,061)
21,447
102
34,992
375
(78)
(822)
370
2,412
–
–
(90)
2,692
–
–
375
–
(5)
370
34,569
57
Notes to the Consolidated
Financial Statements
(Cont.)
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 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.
Goodwill
Business to consumer (B2C)
Business to business (B2B)
Year ended
31-Jul-22
$’000
Year ended
31-Jul-21
$’000
11,128
4,067
15,195
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 2023 approved by the Board and extrapolated
for a further 4 years using a steady rate, together with a terminal value. As at 31 July 2022, the recoverable
value of value-in use calculation of the B2C CGU was below the carrying value of the CGU. As a result of
this analysis, the Group has recognised an impairment charge of $14.5 million in the current year against
goodwill with a carrying value of $25.628 million as at 31 July 2021. The impairment charge was recorded
as a separate line in the statement of profit or loss.
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
16%
2.4%
19.43%
3.0%
3.5%
2.4%
19.43%
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:
• an impairment charge of $14,500,000 has been applied as the carrying amount of goodwill exceeded
its recoverable amount for the B2C CGU.
•
the recoverable amount of the B2B CGU exceeded the carrying amount by $1,100,000.
58
Toys “R” Us ANZ Limited
Annual Report 2022
NOTE 14: Non-current Assets – Goodwill and Other Intangibles (Cont.)
Key assumptions (Cont.)
Sensitivity
As disclosed in Note 3, the directors have made judgements and estimates in respect of impairment testing
of goodwill.
Should these judgements and estimates not occur, the resulting goodwill carrying amount may decrease.
The sensitivities are as follows:
B2C
Any negative changes in the key assumptions on which the recoverable amount of goodwill is based,
would result in a further impairment charge for the B2C CGU’s goodwill.
B2B
• Revenue growth during the budget period would need to decrease by more than 4.5% before goodwill
would need to be impaired, with all other assumptions remaining constant.
• The pre-tax discount rate would need to increase by 2% or more before goodwill would need 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, present and future, 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
Non-current
Interest bearing liabilities
Total Non-current
Year ended
31-Jul-22
$’000
Year ended
31-Jul-21
$’000
10,000
10,000
–
–
In July 2022, the Company obtained a three-year secured loan facility of $15 million to support working
capital and capital expenditure requirements for the Company’s planned entry into the UK market and
e-commerce launch, including the acquisition of inventory. The loan is repayable at the end of July 2025
and as at the balance sheet date, the Group had utilised $10 million of the total facility limit. The facility
is secured against all assets of the Group, both present and future.
59
Notes to the Consolidated
Financial Statements
(Cont.)
NOTE 17: Provisions
Current
Employee benefits(i)(ii)
Total Current
Non-current
Employee benefits(i)
Total Non-current
Total
Year ended
31-Jul-22
$’000
Year ended
31-Jul-21
$’000
393
393
11
11
404
415
415
4
4
419
(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
Maturity analysis of lease liabilities
Year ended
31-Jul-22
$’000
Year ended
31-Jul-21
$’000
281
535
2022
Lease payments
Less: Finance charge
Discounted Lease
Liabilities
2021
Lease payments
Less: Finance charge
Discounted Lease
Liabilities
Within
1 year
$’000
294
(13)
281
581
(46)
535
1-2 years
$’000
2-3 years
$’000
3-4 years
$’000
4-5 years
$’000
After
5 years
$’000
Total
$’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
294
(13)
281
581
(46)
535
60
Toys “R” Us ANZ Limited
Annual Report 2022
NOTE 19: Other current liabilities
Accrued royalties
GST payable/(receivable) – net
Payroll accruals
Other accrued expenses
Total
NOTE 20: Equity and reserves
Share Capital
861,861,184 (2021: 848,358,858) fully paid ordinary shares
Year ended
31-Jul-22
$’000
Year ended
31-Jul-21
$’000
726
(22)
178
1,002
1,884
1,138
79
86
1,404
2,707
Year ended
31-Jul-22
$’000
Year ended
31-Jul-21
$’000
292,965
290,545
Movements in Ordinary Share Capital
Opening balance
Placement Offer,
net of transaction costs
Consideration for Acquisition
Shares issued as consideration
for conversion of borrowings
Shares issued as payment for
intangible assets
Shares issued as consideration
for remuneration
Shares issued as consideration
for remuneration
Shares issued as payment
for intangible assets
Shares issued as payment
for intangible assets (net of
transaction costs of $11,000)
Shares issued as consideration
for remuneration
Year ended 31-Jul-22
Year ended 31-Jul-21
Date
Number of
Shares
Share
Capital
$’000
Number
of Shares
Share
Capital
$’000
848,358,858
290,545 240,404,075
225,166
26-Nov-20
26-Nov-20
26-Nov-20
26-Nov-20
26-Nov-20
30-Nov-20
25-Jun-21
258,928,571
291,205,818
27,054
32,033
53,571,429
5,891
1,223,092
454,545
190,476
137
10
20
2,380,852
234
14-Dec-21
13,394,216
2,401
15-Dec-21
108,110
19
–
–
–
–
Closing balance
861,861,184
292,965 848,358,858
290,545
61
Notes to the Consolidated
Financial Statements
(Cont.)
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.
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 loss after tax for the year – continuing operations
Net profit after tax for the year – discontinued operations
Profit/(Loss) used in the calculation of total basic EPS
Weighted average number of ordinary shares (‘WANOS’) outstanding during
the year used in the calculation of basic earnings/(loss) per share
Diluted earnings per share calculation:
WANOS outstanding during the year used in the calculation of basic
earnings/(loss) per share
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
31-Jul-22
Cents per
share
31-Jul-21
Cents per
share
(2.90)
0.01
(2.89)
(2.90)
0.01
(2.89)
$’000
(24,856)
97
(24,759)
(0.78)
0.30
(0.48)
(0.78)
0.30
(0.48)
$’000
(5,089)
1,976
(3,113)
No. ’000
No. ’000
856,867
652,102
856,867
652,102
22,184
21,694
879,051
673,796
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.
62
Toys “R” Us ANZ Limited
Annual Report 2022
NOTE 22: Dividends on equity instruments
There were no dividends declared or paid during the financial year (2021: nil). The franking account balance
at 31 July 2022 is $19,318,846 (2021: $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
NOTE 24: Subsidiaries
Name of Entity
Company
Toys”R”Us ANZ Limited(i),(v),(vi)
Subsidiaries
UK Toys”R”US Limited (Donatello Limited)(iii),(v)
FUN International Limited(v)
Country of
Incorporation
Australia
United Kingdom
Hong Kong
Funtastic America Inc. (formerly My Paint Box Inc.)(v)
USA
NSR (HK) Limited(v)
Hong Kong
Fun Toy Products Consulting (Shenzhen) Company Limited(iv) China
Mittoni Pty Limited(ii),(v)
Hobby warehouse Pty Limited(ii),(v)
Toys R Us Licensee Pty Limited(ii),(v)
Australia
Australia
Australia
Year ended
31-Jul-22
$’000
Year ended
31-Jul-21
$’000
1,713
1,713
5,138
26,545
35,109
1,627
1,617
4,852
27,632
35,728
Equity Holding
Year ended
31-Jul-22
%
Year ended
31-Jul-21
%
100
100
100
100
100
–
100
100
100
100
–
100
100
100
100
100
100
100
(i) Toys”R”Us ANZ Limited is the head entity within the tax consolidated Group.
(ii) These companies are members of the tax consolidated Group.
(iii) Newly incorporated on 12 October 2021 for the Toys”R”Us business operations in United Kingdom.
(iv) This subsidiary was wound down and deregistered on April 2022.
(v) These subsidiaries are parties to a Deed of Cross Guarantee with Toys”R”Us ANZ Limited created on 15 June 2022
pursuant to ASIC Class Order 2016/785 and are relieved from the requirement to prepare and lodge an audited
Financial Report. Refer to disclosure for Consolidated Statement of Profit or Loss and Other Comprehensive Income
and Consolidated Balance Sheet of the entities who are a party to the Deed of Cross Guarantee.
(vi) These subsidiaries were in a deed of cross guarantee with Toys”R”Us ANZ limited and now being replaced by a new
Deed of Cross Guarantee created on 15 June 2022 as referred in footnote (v). Refer to disclosure for Consolidated
Statement of Profit or Loss and Other Comprehensive Income and Consolidated Balance Sheet of the entities who
are a party to the Deed of Cross Guarantee for prior year disclosure.
63
Notes to the Consolidated
Financial Statements
(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
Other income
Warehouse and distribution expenses
Marketing and Selling Expenses
Administration Expenses
Employee benefit expenses
Earnings before interest, taxation, depreciation and amortisation (EBITDA)
Finance costs (net)
Impairment of goodwill
Depreciation and amortisation expenses
Loss before income tax
Income tax (expense)/benefit
Loss for the period from continuing operations
Profit/(Loss) after income taxes from discontinued Operations
Loss for the year
Other comprehensive income/(loss) for the year (net of tax)
Total comprehensive income/(loss) for the year
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
Profit/(Loss) after income taxes from discontinued operations
Year ended
31-Jul-22
$’000
Year ended
31-Jul-21
$’000
37,927
(29,972)
7,955
3
(2,385)
(5,974)
(1,985)
(6,671)
(9,057)
–
(14,500)
(1,594)
(25,151)
295
–
–
–
26
–
–
(1,782)
(2,135)
(3,891)
–
–
(830)
(4,721)
237
(24,856)
(4,484)
97
(24,759)
(18,098)
(22,582)
20
–
(24,739)
(22,582)
$’000
1,200
(1,021)
179
–
(68)
–
(8)
–
103
–
(6)
97
–
97
–
–
–
97
$’000
15,235
(9,231)
6,004
419
(1,299)
(103)
(2,059)
(1,436)
1,526
(510)
(20,740)
(19,724)
–
(19,724)
1,626
–
1,626
(18,098)
64
Toys “R” Us ANZ Limited
Annual Report 2022
NOTE 24: Subsidiaries (Cont.)
The consolidated Statements of Financial Position of the entities party to the deed of cross guarantee are:
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
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 payables
Contract liabilities
Lease liabilities
Provisions
Other current liabilities
Total current liabilities
Non-current liabilities
Borrowings
Deferred Tax
Provisions
Total non-current liabilities
Total liabilities
Net Assets
Equity
Issued capital
Accumulated Losses
Reserves
Total Equity
Year ended
31-Jul-22
$’000
Year ended
31-Jul-21
$’000
12,538
794
9,851
679
23,862
2,384
21,447
–
3,763
27,594
51,456
16,128
699
1,035
272
18,134
1,706
33,195
–
7,014
41,915
60,049
3,263
326
422
281
393
1,884
6,243
10,000
1,054
11
11,065
17,308
535
196
1,248
2,305
–
1,344
–
1,344
3,649
34,148
56,400
292,965
290,545
(260,958)
(235,599)
2,141
34,148
1,454
56,400
65
Notes to the Consolidated
Financial Statements
(Cont.)
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
Secured Loan(i)
Reconciliation of Finance facilities
Used at Balance Date
Bank Guarantees
Secured Loan(i)
Unused at Balance Date
Bank Guarantees
Debtor finance
Secured Loan(i)
Year ended
31-Jul-22
$’000
Year ended
31-Jul-21
$’000
–
12,538
12,538
–
17,338
17,338
Year ended
31-Jul-22
$’000
Year ended
31-Jul-21
$’000
–
15,000
15,000
–
10,000
10,000
–
–
5,000
5,000
1,083
–
1,083
1,083
–
1,083
–
–
–
–
(i)
In July 2022, the Company has obtained a three-year secured loan facility of $15 million for the UK business
operations, repayable at the end of July 2025. As at 31 July 2022, the Company had utilised $10 million of the total
facility limit.
66
Toys “R” Us ANZ Limited
Annual Report 2022
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
Impairment of goodwill
(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:
Decrease in trade and other receivables
(Increase) in inventories
Decrease in prepayments and other assets
(Decrease)/Increase in trade and other payables
(Decrease) in provisions
Decrease in income tax receivable
(Decrease) in deferred tax liabilities
(Decrease) in other liabilities
Net cash outflow from operating activities
Year ended
31-Jul-22
$’000
Year ended
31-Jul-21
$’000
(24,759)
–
1,600
14,500
–
668
19
(3)
1,088
(3,845)
270
688
(16)
12
(290)
(834)
(10,902)
(3,113)
458
1,071
–
(1,626)
1,454
30
(107)
–
–
1,948
(1,615)
537
(1,141)
(97)
17
(237)
(1,494)
(3,915)
67
Notes to the Consolidated
Financial Statements
(Cont.)
NOTE 26: Financial Instruments
Capital risk management
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.
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 instruments
Financial assets
Cash and cash equivalents
Trade and other receivables
Other assets
Total non-derivative financial assets
Total derivative financial assets
Total financial assets
Financial liabilities
Non-interest bearing
Other liabilities
Fixed interest rate instruments
Total non-derivative financial liabilities
Total derivative financial liabilities
Total financial liabilities
Year ended
31-Jul-22
$’000
Year ended
31-Jul-21
$’000
12,538
794
3,763
17,095
–
17,338
1,882
1,133
20,353
–
17,095
20,353
3,263
1,906
10,000
15,169
–
15,169
2,998
2,628
5,626
–
5,626
68
Toys “R” Us ANZ Limited
Annual Report 2022
NOTE 26: Financial Instruments (Cont.)
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.
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 FY 2022, while there have been interest rate increases, 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
GBP
Liabilities
Assets
2022
$’000
1,317
304
2021
$’000
1,431
2022
$’000
78
2021
$’000
184
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.
69
Notes to the Consolidated
Financial Statements
(Cont.)
Foreign currency sensitivity
The Group is mainly exposed to the US dollar (USD) and the UK Pound Sterling (GBP). The following table
details the Group’s sensitivity to a 10% increase and 10% decrease in the Australian dollar against the
relevant foreign currencies. 10% 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 10% 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. 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.
10% increase in AUD against foreign currency
USD
GBP
10% decrease in AUD against foreign currency
USD
GBP
Impact on profit or loss
Gain/(loss)
2022
$’000
2021
$’000
132
23
155
(132)
(23)
(155)
62
–
62
(62)
–
(62)
Forward foreign exchange contracts
At 31 July 2022, there were no foreign exchange contracts (2021: Nil).
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
As at 31 July 2022, the Group has a fixed interest rate of 9.50% p.a. on its secured borrowings of $10 million
as at the balance sheet date. In an event of default payment of interest, the Group will have an additional
interest expense of $0.35 million at an incremental 3.5% interest rate. It is the Group’s policy to protect part
of the loans from exposure to increasing interest rates.
The Group does not have any variable rate borrowings as at the balance sheet date.
70
Toys “R” Us ANZ Limited
Annual Report 2022
NOTE 26: Financial Instruments (Cont.)
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.
Liquidity and interest tables – financial liabilities
The following table details 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
%
–
–
9.50%
–
–
–
–
0-3 months
$’000
3 months
to 1 year
$’000
1-5 years
$’000
5+ years
$’000
Total
$’000
3,263
1,906
–
5,169
2,998
2,628
5,626
–
–
–
–
–
–
–
–
–
10,000
10,000
–
–
–
–
–
–
–
–
–
–
3,263
1,906
10,000
15,169
2,998
2,628
5,626
2022
Non-interest bearing
Other liabilities
Fixed interest rate
instruments
2021
Non-interest bearing
Other liabilities
71
Notes to the Consolidated
Financial Statements
(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
%
0.00%
–
–
0.00%
–
–
0-3 months
$’000
3 months
to 1 year
$’000
1–5 years
$’000
5+ years
$’000
Total
$’000
12,538
794
13,332
17,338
1,882
19,220
–
–
–
–
–
–
–
–
–
–
–
–
–
3,763
3,763
–
1,133
1,133
12,538
4,557
17,095
17,338
3,015
20,353
2022
Cash
Non-interest bearing
2021
Cash
Non-interest bearing
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.
72
Toys “R” Us ANZ Limited
Annual Report 2022
NOTE 27: Share-based payments
(a) Expenses recognised
An expense of $667,543 (2021: $1,453,800) 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 2022:
Grant
date
Vesting
date
Expiry
date
Exercise
price
Balance at
the start
of the year
Granted
Exercised
23-Nov-201 23-Nov-20
1-Nov-23
$0.138
10,149,450
23-Nov-201
1-Nov-21
1-Nov-24
$0.166
10,271,244
23-Nov-201
1-Nov-22
1-Nov-25
$0.199
10,394,498
1-May-21
1-May-23
1-May-25
$0.138
1,691,956
–
(90,939)
(52,165)
–
Weighted average exercise price
32,507,148
(143,104)
$0.166
$0.178
–
–
–
–
–
–
Balance at
the end of
the year
10,149,450
10,180,305
10,342,333
1,691,956
32,507,148
$0.166
1. Of the total employee options under the employee incentive plan approved at the 2020 AGM, tranches 1 and 2 have
been granted to date. The balance at the start of the year for Tranche 2 was an estimate and has been adjusted
for the actual options issued based on the actual shares on issue at 1 November 2021. Tranche 3 will be number of
options that equal 1.2% of the total TOY shares on issue on 1 November 2022 and the previous estimate has been
adjusted in line with current and expected shares on issue at that date. 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 2022.
The weighted average remaining contractual life of options outstanding at the end of the financial year was 2.29
years (2021: 3.29 years).
73
Notes to the Consolidated
Financial Statements
(Cont.)
Set out below are the summaries of rights granted under the employee incentive plan as at 31 July 2022:
Grant
date
Vesting
date
Expiry
date
Exercise
price
Balance
at the
start of
the year Granted Exercised Cancelled
Balance
at the
end of
the year
23-Nov-20
1-Nov-21
1-Nov-21
$0.125
480,000
–
21-Sep-21
31-Jul-24
21-Sep-26
$0.180
23-Nov-20** 31-Jul-23
10-Dec-36
$0.180*
–
340,000
– 1,000,000
Weighted average exercise price
480,000 1,340,000
$0.125
$0.180
–
–
–
–
–
(480,000)
–
–
340,000
– 1,000,000
(480,000) 1,340,000
$0.125
$0.180
* Being the amount equivalent to the fee sacrificed. There is no cash payable in relation to these rights.
** The Service Rights replaced the Share Appreciation Rights (SARs) originally granted on the 23 November 2020.
The Service Rights were approved at the AGM dated 14 December 2021.
The weighted average remaining contractual life of rights outstanding at the end of the financial year was
11.78 years (2021: 0.25 years).
(d) Fair value inputs
For appreciation/service 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
21-Sep-21
23-Nov-20*
Vesting
date
31-Jul-24
31-Jul-23
Share price
at grant
date
Exercise
price
Expected
volatility
Dividend
yield
Risk-free
interest
rate
Fair value
at grant
date
$0.175
$0.180
$0.180
$0.180
76%
73%
0%
0%
0.64%
1.64%
$0.062
$0.112
* The Service Rights replaced the Share Appreciation Rights (SARs) originally granted on the 23 November 2020.
The Service Rights were approved at the AGM dated 14 December 2021.
The appreciation/service rights are effectively options with a cashless exercise feature embedded.
(e) Other information
The weighted average share price during the financial year was $0.140 (2021: $0.112).
74
Toys “R” Us ANZ Limited
Annual Report 2022
NOTE 28: 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-22
$
Year ended
31-Jul-21
$
997,239
94,785
19,213
30,931
919,551
103,379
11,206
43,712
695,628
1,473,798
1,837,796
2,551,646
NOTE 29: 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 28 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 2022, Louis Mittoni owed the Company $16,719 (31 July 2021: $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) (2021: $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 2022 and 31 July 2021, 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.
75
Notes to the Consolidated
Financial Statements
(Cont.)
NOTE 30: Remuneration of Auditors
RSM Australia Partners1
Audit Services
Audit and review of the financial reports of the entity
118,210
79,000
Year ended
31-Jul-22
$
Year ended
31-Jul-21
$
Other Services
Transaction services2
Compliance Services3
Independent Expert’s Report in relation to acquisition
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
Other Services
Preparation of tax return and general taxation services
22,000
82,644
–
222,854
–
–
–
–
25,500
–
43,255
147,755
80,700
16,600
83,700
181,000
1. TOY changed its auditors from Grant Thornton Audit Pty Ltd to RSM Australia Partners following shareholder
approval at the Extraordinary General Meeting (EGM) held on 23 June 2021.
2. FY 2022 relates to security and privacy services. For FY 2021, the fees relate to services provided prior to being
appointed as auditor.
3. Relates to services performed by network firms of RSM Australia Partners.
NOTE 31: 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
76
As at
31-Jul-22
$’000
As at
31-Jul-21
$’000
30,737
24,725
55,462
(4,192)
(10,000)
(14,192)
41,270
18,134
41,915
60,049
(2,305)
(1,344)
(3,649)
56,400
292,965
290,545
(251,900)
(235,599)
205
41,270
1,454
56,400
Toys “R” Us ANZ Limited
Annual Report 2022
NOTE 31: Parent entity disclosures (Cont.)
Financial Performance
Profit/Loss for the year – continuing operations
Profit/Loss for the year – discontinued operations
Total comprehensive loss
Year ended
31-Jul-22
$’000
Year ended
31-Jul-21
$’000
(19,067)
297
(4,484)
(18,098)
(18,770)
(22,582)
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 2022 (2021: $Nil).
Capital commitments – Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 31 July 2022 (2021: $Nil).
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.
Indicator of an impairment of the investment.
NOTE 32: Contingent liabilities and contingent assets
As at 31 July 2022, the Group had issued bank guarantees of $3.661million (2021: $1.083 million). The Group
has placed an equivalent amount of cash deposit with the banks in relation to these bank guarantees
(see note 11).
There are no contingent assets as at 31 July 2022 (2021: $Nil).
NOTE 33: Non-cash investing and financing activities
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
Year ended
31-Jul-22
$’000
Year ended
31-Jul-21
$’000
2,412
–
–
–
375
32,033
5,891
550
2,412
38,849
77
Notes to the Consolidated
Financial Statements
(Cont.)
NOTE 34: Changes in liabilities arising from financing activities
Balance at 1 August 2020
Net cash from/(used in) financing activities
Issue of equity shares
Other changes
Balance at 1 August 2021
Net cash from/(used in) financing activities
Balance at 31 July 2022
Borrowings
$’000
Lease
Liabilities
$’000
8,906
(2,356)
(6,441)
(109)
–
10,000
10,000
746
(211)
–
–
535
(254)
281
Total
$’000
9,652
(2,567)
(6,441)
(109)
535
9,746
10,281
NOTE 35: Subsequent events
The Company has entered into to an arrangement with the landlord on 20 July 2021 for lease of office
and warehouse space in Clayton, Victoria for a period of ten years (with an option to extend for a further
two terms of five years each) with an objective to consolidate all of its office and warehouse operations.
The lease is expected to commence in October 2022, once ancillary works are completed by the landlord.
The arrangement includes a lease incentive of $10.90 million, to be offset proportionally against monthly
rental payments over the initial period of lease. The arrangement will result in recognition of right-of-use
asset of $12.30 million and an equivalent lease liability upon commencement of the lease.
No other matters or circumstance has arisen since 31 July 2022 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 36: General Information
Toys”R”Us ANZ 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.
78
Toys “R” Us ANZ Limited
Annual Report 2022
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 2022 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 2022
Cairns, Queensland
79
Independent Auditor’s Report
RSM Australia Partners
Level 21, 55 Collins Street Melbourne VIC 3000
PO Box 248 Collins Street West VIC 8007
T +61 (0) 3 9286 8000
F +61 (0) 3 9286 8199
www.rsm.com.au
INDEPENDENT AUDITOR’S REPORT
To the Members of Toys“R”Us ANZ Limited
Opinion
We have audited the financial report of Toys“R”Us ANZ Limited (“the Company”) and its subsidiaries (together
referred to as “the Group”) which comprises the consolidated statement of financial position as at 31 July 2022,
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 2022 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.
THE POWER OF BEING UNDERSTOOD
AUDIT | TAX | CONSULTING
(cid:1011)(cid:1006)
RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the
RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.
RSM Australia Partners ABN 36 965 185 036
Liability limited by a scheme approved under Professional Standards Legislation
80
Toys “R” Us ANZ Limited
Annual Report 2022
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.
Key Audit Matter
Impairment assessment of goodwill
Refer to Note 14 in the financial statements
As at 31 July 2022, the Group had goodwill with a carrying
amount of $15.20 million (approximately 30% of the total
assets of the Group) relating to its acquisition of Hobby
Warehouse Group in the prior year.
As required by AASB 136 Impairment of Assets (“AASB
136”), management performed an impairment test over the
goodwill balance at 31 July 2022 by:
•
•
calculating the value-in-use (“VIU”) 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 year 5. 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 VIU of each CGU to its carrying
amount.
Management has identified that there are two CGUs for the
purpose of performing impairment testing (being B2B and
B2C businesses).
As a result of this exercise, an impairment of goodwill of
$14.50 million was recognised during the year in relation to
the B2C CGU. Management also performed a sensitivity
analysis over
the
assumptions used (growth rates, terminal growth rate and
WACC) to assess the impact on the valuations.
the VIU calculation, by varying
How our audit addressed this matter
Our audit procedures in relation to the impairment testing of
goodwill involved the assistance of our Corporate Finance
team, and included:
•
•
•
Assessing management’s determination 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;
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 models;
Verifying the mathematical accuracy of the cash flow
to supporting
model and reconciling
evidence, such as approved budgets and considering
the reasonableness of these budgets;
input data
• 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 additional impairment to be recognised;
• Reviewing management’s calculation of the impairment
loss determined at 31 July 2022; and
this
test
involves significant
We determined impairment testing of goodwill to be a Key
Audit Matter due to the materiality of the goodwill balance.
Also, because
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 and macro-economic volatility has
increased the level of difficulty in estimating future cash
flows.
• Reviewing the disclosures in Note 14 to the financial
statements
appropriateness,
assess
completeness, and compliance with the disclosure
requirements of AASB 136 and AASB 138 Intangible
Assets.
the
to
7(cid:1007)
81
Independent Auditor’s Report
(Cont.)
Key Audit Matters (continued)
Key Audit Matter
Revenue recognition
Refer to Note 6 in the financial statements
Revenue recognition is considered a Key Audit Matter
because of its significance to the Group’s reported financial
performance.
The risk is heightened due to having revenue streams
across two distinct 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.
How our audit addressed this matter
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 transactions; and
• Reviewing disclosures
to corroborate
they are
appropriate and meet the requirements of AASB 15.
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 2022; 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.
7(cid:1008)
82
Toys “R” Us ANZ Limited
Annual Report 2022
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 2022.
In our opinion, the Remuneration Report of Toys“R”Us ANZ Limited for the year ended 31 July 2022, 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
R B MIANO
Partner
Melbourne, Victoria
Dated: 29 September 2022
75
83
Shareholder Information
Distribution of equity securities as at 21 October 2022.
Analysis of numbers of equity security holders by size of holdings:
Holding Ranges
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001 and over
Fully Paid Ordinary Shares
Holders
Total Units
2,346
432,593
397
209
564
1,059,944
1,575,603
22,868,956
% Issued
Share
Capital
0.05%
0.12%
0.18%
2.65%
Options
Rights
–
–
160,000
180,000
–
–
–
–
321
837,149,578
96.99%
22,021,711
500,000
3,837 863,086,674
100.00%
22,361,711
500,000
The number of shareholders holding less than a marketable parcel of shares was 2,974 holding 3,295,741
shares (based on the closing market price on 21 October 2022).
Substantial shareholders report
Louis Mittoni and Associated Entities
Jason Sourasis and Associated Entities
Thorney Investment Group
Shares
291,205,818
116,664,553
43,593,832
%
33.74%
13.52%
5.06%
84
Toys “R” Us ANZ Limited
Annual Report 2022
Twenty largest quoted equity security holders
Louis Mittoni
Jason Sourasis
UBS Nominees Pty Ltd
Citicorp Nominees Pty Limited
Theo Andriopoulos
Mittoni Holdings Pty Ltd
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