FY2019 CITY CHIC COLLECTIVE ANNUAL REPORT 1ANNUAL REPORT 2019City Chic Collective Contents
04
06
08
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18
Overview
Message from Our Chairman and CEO
Board of Directors
City Chic Annual Recap
2020 Outlook
Diversity
Corporate Social Responsibility
Annual Financial Report 2019
City Chic Collective Overview
City Chic Collective
City Chic Collective is a leading omni-channel retailer specialising in plus size women’s apparel,
accessories and footwear. Our customer-led offering, which appeals to fashion-forward women,
has a strong following in Australia and New Zealand with a rapidly-growing international presence.
O U R V I S I O N
LE A D I N G A WO R LD O F CU RV E S
Our customers are at the heart
of everything we do, and our
commitment is to deliver on-
trend garments and accessories
that make her feel bold, sexy,
glam and chic.
BOLD
We Are Fearless
SEXY
We Fit for Confidence
GLAM
We Are a Sisterhood
CHIC
We Create Unique Experiences
Leading Omni-Channel Retailer
6%
6%
FY19
ONLINE MARKETPLACES
STORES
Partners throughout USA
104 stores across Australia
including Macy's, Nordstrom,
and New Zealand
38%
50%
CoEdition, Belk and Lord &
5%
5%
FY18
Taylor
WE PUT THE
CUSTOMER
AT THE CENTRE
OF EVERYTHING
WE DO!
ONLINE WEBSITE
WHOLESALE
City Chic websites with
Partners throughout USA
31%
59%
expanded product offerings in
and Europe including Macy's,
Australia, New Zealand, and
Nordstrom, Zalando, Amazon,
USA. Hips & Curves in USA.
ASOS, Stitch Fix, Dia & Co.
Stores
Online Marketplaces
Online Website
Wholesale
Global Expansion Underway
Southern Hemisphere
Northern Hemisphere
20%
80%
16%
84%
FY19
FY18
Positioned for Success
• We have an emotional connection with and deep
understanding of our customer
• Longstanding executive team with a proven track record
• Leading position in an under-serviced segment
• Reactive customer-led supply chain
• Majority of sales are made at full-price with limited
in-store discounting
• Omni-channel customer touchpoint strategy
• Agile organisational structure, ready for growth in
domestic and international markets
FY2019 CITY CHIC COLLECTIVE ANNUAL REPORT 5
Comments by our Chairman and CEO
Message from Our Chairman and CEO
The 2019 financial year was an important year for City Chic, the first as a standalone business, in which we
delivered a strong result and laid the foundation for ongoing growth.
• Underlying EBITDA of $24.9m vs $19.9m pcp (25%
growth), EBITDA margin of 16.8% vs 15.1% pcp
• Continuing Operations Reported Profit Before Tax
(PBT) of $19.2m
• Continuing Operations Reported Net Profit After Tax
(NPAT) of $14.3m (EPS of 7.4 cents)
• Group Reported NPAT of $16.0m (EPS of 8.3 cents)
• Net cash of $23.2m vs net cash of $16.1m at 1 July 2018
• Nil debt; debt facility undrawn throughout the year
• Fully franked final ordinary dividend of 1.5cps
• Fully franked full year FY19 dividend totals 6.5cps /
$12.5m (includes 2.5cps ordinary and 2.5cps special
paid in March 2019) This represents the maximum
dividend payout to the extent the dividend is fully
franked.
We accomplished a lot during our first year as a
standalone business executing on our strategic priorities
to grow our Australian and international businesses
across multiple channels.
Here are some of our operational execution highlights:
• The online channel continues to be a success story
for us. As a percentage of sales, it has increased from
36% in FY2018 to 44% in FY2019 with strong growth
in both Australia and the USA. Online is our highest
margin channel.
• We opened nine stores, including three larger format
stores. These large format stores have all performed
ahead of expectations.
• The delivery of on-trend, well-fitting garments has
enhanced the company’s brand reputation and
allowed us to minimise sales and discounting. This
drove our profitable growth and meant we finished the
year in a clean stock position.
• We acquired ‘Hips & Curves’, a small USA online
retailer of plus size intimates for US$2 million. Not only
can we cross-sell into the Hips & Curves database
Chairman Michael Kay
The 2019 financial year was a new beginning for City
Chic Collective and its people. The completion of the
sale of the five Specialty Fashion brands transformed the
company from a retail conglomerate to a pure play on the
women’s plus size apparel market. This market is large
and estimated to be worth over $1 billion in Australia, $30
billion in the USA and around $50 billion globally.
Our vision is to ‘lead a world of curves’ by providing
this under-served market with fashionable, on-trend
apparel that fits well and is at a price point that gives our
customers a pleasant surprise.
In terms of financial results and the execution of our
strategy, FY2019 was a pleasing year.
Here are some of our financial highlights:
• Comparable sales growth of 12.2% and top line sales
growth of 12.6%
FY2019 CITY CHIC COLLECTIVE ANNUAL REPORT 7CEO & Managing Director Phil Ryanbut we will bring a far more efficient value chain to the manufacture and delivery of its products.• We announced a new partnership in the USA with Belk.• We introduced 24-hour live chat functionality to our website.• Following the sale of the Specialty Fashion brands, our business operating systems were moved to a new standalone platform and we have re-engineered our internal processes. This was achieved on time and on budget and with minimal disruption to the business. • The cost of doing business reduced from 44.1% to 41.3%.Looking forward to FY2020 and beyond, we will be working hard to continue to drive high margin growth through the online channel in Australia, the USA and other international markets. To assist us in this task, we are improving our marketing and CRM capability as well as our service delivery. The infinite ‘store size’ of the online channel will allow us to trial new plus size segments to determine whether we can achieve a greater share of wallet from existing customers and offer our extended lifestyle segments to new customers. Customer acquisition remains a priority for our direct website in the United States and we will allocate the appropriate resources to drive this initiative. Our USA online activity will also be supplemented by further enhancements to our partnership arrangements. In Europe, we will be trialling more partnerships as we seek to replicate the model that built our business and brand awareness in the USA. In Australia, we will continue to open new stores where it makes economic sense and upgrade stores to the larger format wherever suitable sites and rental deals are available. The success of City Chic over the years has been due to its unremitting focus on the needs of the plus size customer. Most of our management team have been together for a decade or more, indeed some have been with us since the company’s inception. As a result, they have an intimate understanding of our customer from the design and delivery of what she wants, to when she wants it, and at what price. City Chic’s ability to provide this consistently has engendered an emotional connection between the brand and its customers. This creates loyalty, repeat purchases and recommendations to friends and family which drive sales and reduces the need to discount stock. On behalf of the Board, we would like to express our sincere thanks to the wonderful people and customers of City Chic. Our hard-working team are tireless in serving and valuing our customers. It is our customer’s decision to buy from City Chic that gets us up every morning, that sustains our business and makes it possible to imagine a successful future. Respect for the plus size customer’s needs and an obsession with fulfilling them is what lies behind our history of profitable growth. And it is what will drive our future success as we take City Chic to the world and pursue our vision of ‘leading a world of curves’.Michael KayChairmanPhil RyanCEO & Managing Director Board of
Directors
Chairman and Non-Executive Director
MICHAEL KAY
Non-Executive Director
MICHAEL HARDWICK
Michael Kay joined the Board in October 2018
Michael Hardwick joined the Board in May
as an independent non-executive director
2012. Mr. Hardwick is an independent, non-
and was subsequently appointed Chairman
executive director. Mr. Hardwick is also the
on 9 November 2018. Mr. Kay is a member of
Chair of the Audit and Risk Committee and
the Audit and Risk Committee and member of
member of the Nomination and
the Nomination and Remuneration Committee.
Remuneration Committee.
Mr. Kay has significant listed company Board
Mr. Hardwick is a Chartered Accountant and
experience including Chairman of IMF
currently the CFO of the CottonOn Group.
Bentham and Chairman of Lovisa. Mr. Kay has
Mr. Hardwick was previously a partner with
also held a number of senior executive roles
the New York-based private equity firm
during his career including CEO of McMillan
Hudson Valley Capital Partners and has
Shakespeare and CEO of AAMI.
worked at PricewaterhouseCoopers in both
Melbourne and New York.
Non-Executive Director
MEGAN QUINN
Chief Executive Officer and Managing Director
PHIL RYAN
Megan Quinn joined the Board in October
Phil Ryan was announced CEO of City Chic
2012 as an independent non-executive
Collective in September 2018 and joined
director. She is the Chair of the Nomination
the Board in February 2019 as an executive
and Remuneration Committee and a member
director.
of the Audit and Risk Committee.
Ms. Quinn is a specialist consultant working
City Chic. In 2006 Mr. Ryan led a team of six
across a broad range of industries including
people that created the City Chic brand. He
financial and professional services,
healthcare, consumer and digital, and is
an international speaker. Ms Quinn was a
is responsible for the strategic direction and
operational leadership that has seen City Chic
take a market leading position in the global
Mr. Ryan is the original Brand Director of
co-founder of NET-A-PORTER and is a non-
plus size industry.
executive director at Reece and InvoCare.
FY2019 CITY CHIC COLLECTIVE ANNUAL REPORT 9
City Chic Annual Recap
City Chic Annual Recap
FY2019 was a transformative year for City Chic as it transitioned to a standalone business focused on the plus
size customer. At the same time, we delivered strong financial results and recommenced the payment of fully
franked dividends to our shareholders.
STRONG TOP LINE GROWTH, HIGHER MARGINS
Sales revenue rose by 12.6% on the previous
corresponding period (pcp) to $148.4m and comparable
sales growth was 12.2%. The underlying EBITDA margin
was 16.8% in FY2019 compared to 15.1% in the prior year
due to tighter cost controls and the ongoing shift in
business mix to the higher profit margin online channel.
STORE ROLLOUT AND ENHANCEMENT
Our stores remain the largest touchpoint with our
customers. At 30 June, we had 104 stores in Australia
and New Zealand after opening nine new stores and
converting three to larger format during the year.
Our four larger format stores, which offer a wider range,
have been well received by our customers and are
trading ahead of expectations.
City Chic reported 25% growth in underlying EBITDA
as strong trade delivered top line and comparable
sales growth. Our business continued to shift towards
online, our most profitable channel, which now
represents 44% of global sales. FY2019 was also a
strong year for our northern hemisphere business
which contributed 20% of sales compared to 16% in
the prior year.
FY2019 marked the recommencement of dividends
reflecting our net cash position, earnings momentum
and solid cash flow generation. The Board declared
a fully franked full year ordinary dividend of 4 cents
per share and a fully franked special dividend of 2.5
cents per share.
New concept store at Fountain Gate, Victoria.
CUSTOMER LOYALTY
City Chic has 385,000 active customers across
Australia, NZ and the USA.
These customers interact with the brand on a
regular basis and across all touchpoints – stores,
online and social media.
385,000
ACTIVE CUSTOMERS
$148m
SALES FY19
E-COMMERCE
City Chic continued to enhance the customer
experience online with the launch of 24-hour live
chat, as well as improved packaging and fulfilment
capabilities during the year.
City Chic is launching a new customer relationship
management system to enhance customer insights and
predictive modelling. Our new email platform is
underway to achieve more targeted communication
with our customer and improve the customer journey.
USA EXPANSION
City Chic has continued its successful expansion in the
USA market through growing its customer base and new
partnerships in our marketplace and wholesale channels.
We have seen strong growth in our website as we invest
SOCIAL
in our customer experience and tailored approach for
City Chic’s social media channels enable our
the USA operations.
customers to connect with the brand and with
each other.
In April 2019, City Chic acquired Hips & Curves, an
online plus size intimates retailer with a large customer
Their deep connection to the brand is shown by
following in the USA. The Hips & Curves website
the high proportion of user-generated content that
operates independently and reflects our strategy
is shared on these sites.
to grow our USA customer base and international
presence.
FY2019 CITY CHIC COLLECTIVE ANNUAL REPORT 11
2020 Outlook
2020 Outlook
Store roll-out across Australia and New Zealand
Conversion of stores to larger format
Expansion of lifestyles and categories
Expansion into new segments within plus size market
Growing customer base in the USA
Integration and expansion of Hips & Curves
Adding new partners in the northern hemisphere
Ongoing investment to enhance customer touchpoints
FY2019 CITY CHIC COLLECTIVE ANNUAL REPORT 13
DiversityWorkplace diversity recognises and values the contribution of people from different backgrounds, experiences and perspectives. It is the Group's aim to ensure that all team members have equal opportunity to participate and advance in their careers.The Group values and recognises the diversity of our Team Members and the added value diversity provides to achieving the Group's overall objectives. The Group's diversity policy outlines the Group's diversity objectives in relation to gender, age, ethnicity, cultural background, disability, religion, gender identity, sexual orientation and professional background. It includes requirements for the Board to establish measurable objectives for achieving diversity, and for the Board to assess annually both the objectives, and the Group's progress in achieving them.Diversity1 IN 4Board members is a woman FY2019 CITY CHIC COLLECTIVE ANNUAL REPORT 15Objectives established for achieving gender diversity and progress towards achieving them during the year ended 30 June 2019 are set out below:Objective 1 and 2 were not completed due to change in strategy on engagement which was prioritised over this. These objectives have been incorporated into our plan for FY2020.Objectives established for achieving gender diversity and targeted progress to the end of June 2020 are set out below:CCX's ongoing commitment to reporting on Diversity is in line with the Workplace Gender Equality Act 2012 (WGE Act 2012). The proportion of women employed at different levels across CCX was as follows:1 of 4 Board members is a woman;63% of the Executive Team are women;85% of our Managers are women;100% of our Team Leaders are women;97% of our workforce are women.Conduct Diversity Survey with all Support Office Team MembersNot completedPropose revised Diversity Strategy as results from surveyNot completedSubmit the Workplace Gender Equality ReportCompletedTraining for Team Member on applicable policies and topicsCompletedReview Diversity Policy, ensuring it is robust and currentCompleted Conduct a Diversity Survey for a new CCX baselineDevelop Diversity strategy for FY2021Submit the Workplace Gender Equality ReportImplement feedback collected from team through engagement survey process around career & developmentReview Diversity Policy, ensuring it is robust and currentOBJECTIVEOBJECTIVEACHIEVEMENTFY2019 Diversity StrategyFY2020 Diversity StrategyGender Balance Corporate Social Responsibility
Corportate Social Responsibility
WE PROMISE TO SOURCE PRODUCT IN A
WORKING TOGETHER TO EMPOWER OUR
RECOGNISED, RESPONSIBLE AND TRANSPARENT
WORKERS AND TO GIVE THEM A VOICE IN THE
SUPPLY CHAIN.
SUPPLY CHAIN.
Our Transparency Journey continues by being open
We rolled out our Grievance Hotline across the factories
and transparent about our vendor partnerships and by
we source from, so all workers have a voice.
giving our customers visibility on our ethical sourcing
policies, allowing our customer to make more informed
• Hotlines, email address and Wechat set up is now in
purchasing decisions.
place for workers
We publish our:
• Vendor Terms and Conditions
• Code of Conduct
• Vendor Rules of Engagement
• Ethical Sourcing Policies (including our Human
• Training and info cards are provided to factory workers
• We train and audit factory management to help spread
the worker voice message
• We encourage workers to set up their worker
appointed safety committees within the factory
rights, Environmental and Animal welfare policies)
We believe that worker voice is essential in running
• Our Factory List
a transparent supply chain and plan to conduct worker
Survey’s as another avenue for workers to have their say.
Over the year we continued to develop our factory
onboarding to communicate our ethical trade policies
along with educating vendors on the importance in:
• Living Wage
• Gender Equality
• Eradicating Modern Slavery and Child Labour
We believe the success to embedding these policies
is to encourage our vendors to drive these Ethical
Sourcing Policies within their factories and throughout
their own supplier base and supply chains.
With training and open dialogue, our vendors partner
with us to improve working conditions and safety of
all their workers. We are confident in our relationships
with our vendors as we work together to ensure we
are doing everything possible to work in a transparent
supply chain.
WE CARE FOR THE ENVIRONMENT AND THE
MANAGEMENT OF WASTE IN OUR SUPPLY CHAIN
As part of our audit programme we also ensure
that all textile processing and waste management
is in line with the legislation of the manufacturing
country. We have introduced mandatory reporting for
all our factories in China to register and provide an
Environmental Impact Assessment (EIA) on their factory.
We audit against this EIA and put in place corrective
action which is monitored to ensure progress and
remediation has been completed.
IT IS A RIGHT OF EVERY WORKER IN OUR SUPPLY
CHAIN TO ENJOY SAFE AND HEALTHY WORKING
CONDITIONS IN AN ENVIRONMENT WHERE THEY
ARE NOT EXPLOITED
We continue to conduct factory audits both internally and
via independent auditors on a regular basis to ensure all
our worker human rights and safety policies are adhered
to. We check that working conditions are clean and safe
and that workers are not performing any unsafe work.
We also monitor that all factories are clear on our rules of
engagement and operate within those guidelines.
We welcome both the NSW Modern Slavery Bill and the
Federal Modern Slavery Bill. Our team is already working
towards mapping our Supply Chain through all its tiers,
as well as key strategies to empower worker voice and a
slave free supply chain.
We are committed to educating our business, and
suppliers, on modern slavery and providing practical tools
to identify and remediate issues. We recognise that we
need to map all tiers of our supply chain from Factory to
Farm. Our Audits will now go beyond Tier 1 factories as we
follow the chain of custody right back to farm.
FACTORY
FABRIC MILL
DYING &
PRINTING
YARN &
SPINNING
FARM
ACCESSORIES
Understanding there are challenges and complexity in
mapping beyond our relationships that exist in Tier 1, our
focus will be to prioritise where risk could exist.
Our Ethical Trade
Scorecard FY19
Achieved B+ in the Ethical Fashion Report
Green Light in Oxfam’s Living Wage
Company Tracker
Rolled out our Grievance Hotline across Tier 1
Strengthened our Zero Tolerance policies
to continue to fight for a safer and slave free
supply chain
Published our roadmap to Living Wage
FY2019 CITY CHIC COLLECTIVE ANNUAL REPORT 17
Annual
Financial
Report
2019
20
21
27
38
39
46
53
Corporate Directory
Directors' Report
Remuneration Report
Auditor's Independence Declaration
Independent Auditor's Report to the
Members of City Chic Collective Limited
Corporate Governance Statement
Annual Financial Statements
FY2019 CITY CHIC COLLECTIVE ANNUAL REPORT 19
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Corporate directory
30 June 2019
Directors
Michael Kay
Michael Hardwick
Megan Quinn
Phil Ryan
Anne McDonald
Ashley Hardwick
Daniel Bracken
Chairman (appointed 9
November 2018)
Chief Executive Officer
(appointed 1 October 2018)
Former Chairperson
Former Chief Executive
Officer
Non-executive director (appointed 1
October 2018)
Non-executive director
Non-executive director
Managing Director (appointed 12
February 2019)
Former non-executive director
(resigned 9 November 2018)
Former non-executive director
(resigned 9 November 2018)
Former Managing Director (resigned
30 September 2018)
Company secretary
Mark Ohlsson (appointed 10 May 2019)
Claudine Tarabay (resigned 10 May 2019)
Notice of annual general meeting
The Annual General Meeting of City Chic Collective Limited will be held at:
Pullman Sydney Hyde Park Hotel
36 College St
Sydney, NSW 2000
Time: 10:00 am
Date: Thursday, 21 November 2019
Registered office
Principal place of business
Share register
Auditor
Solicitors
Bankers
151-163 Wyndham Street
Alexandria, NSW 2015
Telephone: (02) 9059 4300
151-163 Wyndham Street
Alexandria, NSW 2015
Link Market Services Limited
Level 12, 680 George Street
Sydney, NSW 2000
Telephone: (02) 8280 7111
Facsimile: (02) 9287 0303
Deloitte Touche Tohmatsu
Chartered Accountants
60 Station Street
Parramatta, NSW 2150
Arnold Bloch Leibler
Level 24, Chifley Tower
2 Chifley Square
Sydney, NSW 2000
National Australia Bank
255 George Street
Sydney, NSW 2000
Stock exchange listing
City Chic Collective Limited shares are listed on the Australian Securities Exchange
(ASX code: CCX)
Website
http://www.citychiccollective.com.au/
Corporate Governance Statement
https://www.citychiccollective.com.au/corporate-governance
ABN
43 057 569 169
20
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Directors' report
30 June 2019
The directors present their report, together with the financial statements, on the consolidated entity (referred
to hereafter as the 'Group' or 'consolidated entity') consisting of City Chic Collective Limited (referred to
hereafter as the 'Company' or 'parent entity') and the entities it controlled at the end of, or during, the 52 week
period ended 30 June 2019.
Directors
The following persons were directors of City Chic Collective Limited during the whole of the financial period and
up to the date of this report, unless otherwise stated:
Michael Kay (appointed 1 October 2018)
Michael Hardwick
Megan Quinn
Phil Ryan (appointed 12 February 2019)
Anne McDonald (resigned 9 November 2018)
Ashley Hardwick (resigned 9 November 2018)
Daniel Bracken (resigned 30 September 2018)
Principal activities
City Chic Collective Limited operates within the women's fashion retail sector in Australia, New Zealand, USA,
Germany and the UK. The Southern Hemisphere, which comprises Australia and New Zealand, represented 80%
of revenue with the balance in the Northern Hemisphere markets of USA, UK and Germany.
Dividends
Dividends paid during the financial period were as follows:
Interim ordinary dividend for the period ended 30 June 2019 (2019: 2.5 cents per ordinary share
(2018: nil))
Special dividend for the period ended 30 June 2019 (2019: 2.5 cents per ordinary share (2018: nil))
Consolidated
2019
$'000
2018
$'000
4,806
4,806
9,612
-
-
-
Since the end of the period, the directors have declared the payment of a fully franked final ordinary dividend
of 1.5 cents per ordinary share (2018: nil). Record date is 16 September 2019 and payment date is 30
September 2019 for the final ordinary dividend. The aggregate amount of the dividends expected to be paid
on 30 September 2019 out of retained earnings at 30 June 2019, but not recognised as a liability at the end of
the period is $2.9 m.
21
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Directors' report
30 June 2019
Operating and financial review
City Chic continues to be a market leader in the plus size women’s apparel market with 385,000 active
customers globally. The Group has a strong multi-channel offering including 104 stores in Australia and New
Zealand, a market leading online platform with sales penetration of 44%, and a growing partner business in
North America and Europe. At the annual general meeting (AGM) on 9 November 2018, the Company changed
its name from Specialty Fashion Group Limited to City Chic Collective Limited.
The net profit after tax for continuing operations was $14.3 m (1 July 2018: $15.0 m) and for the Group was $16.0
m (1 July 2018: $9.3 m loss). The Group achieved sales revenue from continuing operations of $148.4 m (1 July
2018: $131.9 m) and Underlying EBITDA from continuing operations of $24.9 m (1 July 2018: $19.9 m).
The Group ended the year with net cash of $23.2 m at 30 June 2019 (1 July 2018: $16.1 m). The Group had a
$15.0 m debt facility to February 2021, which was unutilised as at 30 June 2019.
In August 2019, the Group amended its external finance facilities from a working capital facility of $15.0 m to a
general corporate purpose facility of $5.0 m.
The reported operating cash flow used for the year was $(3.8 m) (1 July 2018: $18.9 m). The normalised operating
cash flow was $21.5 m, adjusted for outflows associated with the divested brands, the transaction and the
transition, as well as the impact of earlier settlement for select suppliers on more favourable pricing terms.
Divestment related outflows include settlement of select retained supplier and employee liabilities, GST related
balances, advisor fees and redundancies, which were provided for at 1 July 2018 or underlying adjustments in
FY2019.
Due to adoption of a retail trading weeks calendar, results in prior period comparatives have two additional
trading days.
Outlook
During FY2020, the Group’s focus will be on the execution of various initiatives to drive growth including:
• Ongoing store roll-out across Australia and New Zealand;
• Conversion of existing high performing stores to larger format;
• Ongoing expansion of lifestyles and categories;
• Expansion into new segments within plus-size;
• Growing the customer base in the USA;
• Adding new partners in the Northern Hemisphere;
• Ongoing investment to enhance customer touchpoints.
Material business risks
City Chic Collective Limited operates in an environment of change and uncertainty. There are a range of factors,
both specific to the Group and general in nature which may impact the operating and financial performance of
the Group. The impact of these risks are regularly reviewed for their possible impact.
Competition and consumer discretionary spending
The Group operates in a retail environment where quality and value for money are critical to the customers it
services. The retail fashion market continues to consolidate and feel the effects of globalisation. City Chic is in
a unique situation of having high Online penetration, a global outlook and a nimble and fast supply chain that
adapts to changes within customer buying patterns.
Exchange rates and duties
The Group relies significantly on imported products and as a result the cost of the product may be subject to
movements in the exchange rate of the Australian dollar and/or duties on imported goods in respective markets.
The Group’s operations in the USA provide a natural hedge against currency movements.
Workplace Health and Safety (WHS)
The continuing business has over 700 employees as well as the customers who visit its stores. The Group has a
high focus on WHS with investment in training and development of its employees a high priority.
22
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Directors' report
30 June 2019
Significant changes in the state of affairs
On 2 July 2018, the Group divested five of its brands to Noni B Limited (ASX:NBL) for cash consideration of
$31.0 m (before post completion adjustments, transaction and separation costs). The Group retained ownership
of the brand City Chic.
There were no other significant changes in the state of affairs of the Group during the financial period.
Matters subsequent to the end of the financial period
During the financial period on 2 July 2018, the Group completed the sale of the businesses associated with the
operations and brands of Millers, Katies, Rivers, Autograph and Crossroads to Noni B Limited. The agreement
was to sell these brands for consideration of $31.0 m (plus or minus post completion adjustment). Independent
experts were appointed to determine the outcome of the completion adjustment and other aspects of the
Business Sale Agreement. As announced by the Group to the ASX on 24 June 2019, those disputes were
determined by independent experts in the Group’s favour. On 31 July 2019, Noni B Limited filed proceedings in
the Supreme Court of New South Wales seeking orders setting aside the independent experts’ determination.
Notwithstanding that City Chic received a favourable expert determination, given the subsequent proceedings
filed by Noni B, the Group has been prudent and provisioned accordingly.
In August 2019, the Group amended its external finance facilities from a working capital facility of $15.0 m to a
general corporate purpose facility of $5.0 m.
Other than the above, no other matter or circumstance has arisen since 30 June 2019 that has significantly
affected, or may significantly affect the consolidated entity's operations, the results of those operations, or the
consolidated entity's state of affairs in future financial years.
Likely developments and expected results of operations
Certain likely developments in the operations of the consolidated entity and the expected results of operations
in financial years subsequent to the period ended 30 June 2019 are referred to in the preceding operating and
financial review and outlook.
Environmental regulation
The consolidated entity is not subject to any significant environmental regulation under Australian
Commonwealth or State law.
Information on directors
Michael Kay (appointed 1 October 2018)
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
Interests in rights:
Chairman and non-executive director
B.LLB
Michael Kay joined the City Chic Collective Limited Board on 1 October 2018 as an independent
non-executive director and was subsequently appointed Chairman on 9 November 2018.
A qualified lawyer, Mr. Kay brings a broad range of commercial experience to the Board. Mr. Kay
was Chief Executive Officer and Managing Director of McMillan Shakespeare Limited (ASX:MMS)
for six years and previously held a number of senior executive roles at AAMI including Chief
Executive Officer. He also spent 12 years in private legal practice specialising in commercial law
during his executive career.
Mr. Kay is currently Chairman of IMF Bentham Limited (ASX:IMF) and a non-executive director of
Royal Automobile Club Insurance (WA).
Mr. Kay was Chairman of Lovisa Holdings Limited (ASX:LOV) until his retirement on 30 October
2018, where he led the Board during a period of substantial growth. He was previously a non-
executive director of Quintis Ltd (ASX:QIN) until 18 June 2018 and Chairman and non-executive
director of ApplyDirect Limited (ASX: AD1) until 19 March 2019.
Chairman of the Board (appointed 9 November 2019); Member of the Audit and Risk Committee
(ARC) (appointed 1 October 2018); Member of the Nomination and Remuneration Committee
(NRC) (appointed 1 October 2018)
509,914 ordinary shares
None
None
23
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Directors' report
30 June 2019
Michael Hardwick
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
Interests in rights:
Megan Quinn
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
Interests in rights:
Non-executive director
B.Comm
Michael Hardwick joined the City Chic Collective Limited Board in May 2012. He is an independent,
non-executive director.
Mr. Hardwick is a director and the Chief Financial Officer of the Cotton On Group, and a director
of the Cotton On Foundation.
Mr. Hardwick is also a non-executive director of the Grill’d Group of Companies which includes
Australia’s largest privately-owned chain of Burger Restaurants and also Koko Black, a premium
branded Australian chocolatier. Mr. Hardwick is also a member of the Finance and Risk Committee
of the Geelong Football Club.
Mr. Hardwick
is a Chartered Accountant by training and has previously worked at
PricewaterhouseCoopers in both Melbourne and New York in the transaction advisory practice.
He also spent 10 years as a partner with the New York-based private equity firm Hudson Valley
Capital Partners.
Mr. Hardwick does not hold any other listed company directorships.
Mr. Hardwick has not held any other listed company directorships in the last three years.
Chairman of the ARC; Member of the NRC
495,000 ordinary shares
None
None
Non-executive director
GAICD
Megan Quinn joined the City Chic Collective Limited Board in October 2012 as an independent
non-executive director. She is a specialist consultant working across a broad range of industries
including financial and professional services, healthcare, consumer and digital, and is an
international speaker. Ms. Quinn has more than 25 years’ experience working internationally with
organisations including Harrods, Dell, Westpac and UNICEF. Her strong strategic, operational,
supply chain and financial expertise is complemented by her capabilities around brand, marketing,
innovation, transformation, digital, and customer service and experience across all channels. She
is recognised as a global brand expert for her game-changing role as a co-founder of NET-A-
PORTER. Known for her creative, energetic and disruptive thinking, Ms. Quinn has the unique
ability to define gaps in the market and develop market-leading business strategies for
commercial and creative outcomes.
Ms. Quinn is currently a non-executive director at Reece Limited (ASX:REH) and InvoCare Limited
(ASX:IVC) (appointed 1 September 2018).
Ms. Quinn retired as non-executive director at zipMoney Limited (ASX:Z1P) on 1 November 2017
and was a former Board and National Committee member of UNICEF Australia.
Chair of the NRC; Member of the ARC
None
None
None
Phil Ryan (appointed 12 February 2019)
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
Interests in rights:
Chief Executive Officer and Managing Director
MBA, B.Bus
Phil Ryan is the original Brand Director of City Chic. In 2006 Mr. Ryan led a team of six people
that created the brand. He is responsible for the strategic direction and operational leadership
that has seen City Chic take a market leading position in the global plus size industry.
Under Mr. Ryan's leadership City Chic has opened more than 100 stores in Australia and New
Zealand. The digital footprint is now over 40% of the turnover globally and in the UK and Europe
City Chic trades in a digital capacity. He has driven successful partnerships with Nordstrom,
Macy’s and Bloomingdale’s in the USA; ASOS in the UK and Zalando in Germany.
Mr. Ryan is a global authority in the plus size consumer. He has over 25 years’ experience in senior
and strategic retail apparel management. Mr. Ryan's family had a fashion manufacturing,
wholesale and retail business called Ambition in the 1980’s and 1990’s and from this he knows all
areas of a ragtrade business; from the cutting table to the retail shop floor.
Mr. Ryan does not hold any other listed company directorships.
Mr. Ryan has not held any other listed company directorships in the last three years.
Chief Executive Officer (appointed 1 October 2018); Managing Director (appointed 12 February
2019)
124,000 ordinary shares
None
2,640,740 performance rights over ordinary shares
24
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Directors' report
30 June 2019
Anne McDonald (resigned 9 November 2018)
Title:
Qualifications:
Experience and expertise:
Former Chairperson and non-executive director
B.Ec, FCA, GAICD
Anne McDonald joined the Specialty Fashion Group Board in April 2007 as an independent non-
executive director. An experienced non-executive director, Ms. McDonald brings business,
finance, accounting, risk management and governance skills. A Chartered Accountant by training,
Ms. McDonald was a partner with Ernst & Young for 15 years until 2005, working with large
multinational and domestic companies. During that time she served as a member of the Board of
Ernst & Young Australia for seven years.
Ms. McDonald is a non-executive director of the following listed and unlisted entities: Spark
Infrastructure Group and its associated entity, Victoria Power Networks (2009 – present),
WaterNSW (2016 – present, also Chairperson), Link Administration Holdings Ltd (2016 – present)
and St Vincent’s Healthcare (2017 – present).
Ms. McDonald stepped down from the Board of The GPT Group on 4 May 2016 and Sydney Water
Corporation on 24 March 2016. Ms McDonald also stepped down from the Board of Westpac's
Life and General Insurance Businesses in May 2015.
Former Chairperson of the Board; Former member of the ARC; Former member of the NRC
Not applicable as no longer a director
Not applicable as no longer a director
Not applicable as no longer a director
Former non-executive director
Ashley Hardwick joined the Specialty Fashion Group Board in May 2012 as a non-independent
director. Mr. Hardwick is a director and shareholder of the Cotton On Group and has over 20
years of retail experience. He also oversees the property function of the Cotton On Group.
Mr. Hardwick does not hold any other listed company directorships.
Mr. Hardwick has not held any other listed company directorships in the last three years.
Former member of the ARC; Former member of the NRC
Not applicable as no longer a director
Not applicable as no longer a director
Not applicable as no longer a director
Former Chief Executive Officer and Managing Director
B.Comm
Daniel Bracken has more than 25 years’ experience in retailing, fashion, and brand development
in Australia and international markets. He has held executive and Chief Executive roles across
strategy, marketing, and merchandise among others. Prior to joining Specialty Fashion Group he
was Deputy CEO and Chief Merchandise & Customer Officer at Myer. Previously, Mr. Bracken was
CEO of The Apparel Group and performed a range of roles at Burberry London.
Mr. Bracken does not hold any other listed company directorships.
Mr. Bracken has not held any other listed company directorships in the last three years.
Former Chief Executive Officer and Managing Director
Not applicable as no longer a director
Not applicable as no longer a director
Not applicable as no longer a director
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
Interests in rights:
Ashley Hardwick (resigned 9 November 2018)
Title:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
Interests in rights:
Daniel Bracken (resigned 30 September 2018)
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
Interests in rights:
'Other current directorships' quoted above are current directorships for listed entities only and excludes
directorships of all other types of entities, unless otherwise stated.
'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities
only and excludes directorships of all other types of entities, unless otherwise stated.
Company secretary
The Company Secretary is Mark Ohlsson, FCPA. Mr. Ohlsson was appointed to the position of Company
Secretary on 10 May 2019. Mr. Ohlsson has been involved in business management and venture capital for over
35 years. His particular expertise is in governance, assessing venture capital and business proposals, all aspects
of contractual negotiations, finance and management reporting requirements, board consultation and
representation and accounting services. He is a Fellow of CPA Australia and a Registered Tax Agent.
The former Company Secretary was Claudine Tarabay, B.Economics, CA. Ms. Tarabay was appointed to the
position of Company Secretary in October 2016 and resigned on 10 May 2019. Prior to this, Ms. Tarabay worked
at PricewaterhouseCoopers in Audit and Assurance and has more than 15 years of commercial experience.
25
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Directors' report
30 June 2019
Meetings of directors
The number of meetings of the Company's Board of Directors (the ‘Board') held during the period ended 30
June 2019, and the number of meetings attended by each director were:
Michael Kay1
Michael Hardwick
Megan Quinn
Phil Ryan2
Anne McDonald3
Ashley Hardwick4
Daniel Bracken5
Full Board
NRC
ARC
Attended
Held
Attended
Held
Attended
Held
10
12
12
6
4
3
2
10
12
12
6
4
4
2
3
7
7
-
4
-
-
3
7
7
-
4
-
-
4
6
6
1
2
-
-
4
6
6
1
2
-
-
Held: represents the number of meetings held during the time the director held office.
1 Michael Kay appointed as non-executive director on 1 October 2018 and Chairman on 9 November 2018.
2 Phil Ryan appointed as Chief Executive Officer on 1 October 2018 and Managing Director on 12 February 2019.
3 Anne McDonald resigned 9 November 2018.
4 Ashley Hardwick resigned 9 November 2018.
5 Daniel Bracken was appointed 12 February 2018 and resigned 30 September 2018.
26
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Directors' report
30 June 2019
Remuneration report (audited)
The remuneration report, which has been audited as required by section 308(3C) of the Corporations Act 2001,
outlines the key management personnel remuneration arrangements for the Group, in accordance with the
requirements of the Corporations Act 2001 and its Regulations.
The remuneration report is set out under the following main headings:
1.
2.
3.
4.
5.
6.
7.
Introduction
Remuneration strategy and policy
Remuneration framework
Remuneration outcomes for key management personnel
Service agreements
Disclosures relating to share, options, and performance rights
Additional disclosures relating to key management personnel
1. Introduction
This report outlines the remuneration strategy, framework and other conditions of employment for key
management personnel and details the role and accountabilities of the Board and relevant Committees that
support the Board on these matters. Key management personnel (KMP) are those persons having authority and
responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including
all directors.
Key management personnel of the consolidated entity were also the key management personnel of City Chic
Collective Limited (the parent entity) for the years ended 30 June 2019 and 1 July 2018. The key management
personnel consisted of the following directors and senior executives of City Chic Collective Limited:
Name
Role
Non-executive directors:
Michael Kay
Michael Hardwick
Megan Quinn
Anne McDonald
Ashley Hardwick
Executive directors:
Phil Ryan
Daniel Bracken
Other key management personnel1:
Munraj Dhaliwal
Tim Fawaz
2. Remuneration strategy and policy
Chairman (appointed 9 November 2018) and non-executive director (appointed 1
October 2018)
Non-executive director
Non-executive director
Former Chairperson and non-executive director (resigned 9 November 2018)
Former non-executive director (resigned 9 November 2018)
Chief Executive Officer (appointed 1 October 2018) and Managing Director
(appointed 12 February 2019); previously General Manager City Chic
Former Chief Executive Officer and Managing Director (resigned 30 September
2018)
Chief Financial Officer (appointed 14 February 2019)
Former Chief Financial and Operations Officer (resigned 14 February 2019)
The Nomination and Remuneration Committee (referred to hereafter as the “NRC” or the ‘Committee’) is
responsible for determining and reviewing remuneration arrangements for its directors and executives. The
performance of the consolidated entity depends on the quality of its directors and executives. The remuneration
philosophy is to attract and retain talented and motivated executives who can enhance the Group’s
performance through their contributions and leadership.
1 Sonia Moura was determined to be a KMP in prior years however after the FY2018 divestment, the role is no longer considered to qualify as KMP.
27
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Directors' report
30 June 2019
Principles used to determine the nature and amount of remuneration
The objectives of the Group’s executive remuneration framework are as follows:
●
●
●
●
competitiveness and sustainability;
acceptability to the Group's strategic and business objectives and the creation of shareholder value;
performance linkage/alignment of executive compensation; and
transparency and acceptability to shareholders.
The reward framework is designed to align executive reward to shareholders' interests. The Board have
considered that it should seek to enhance shareholders' interests by:
●
●
including economic profit as a core component of plan design;
focusing on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and
delivering constant or increasing return on assets; and
attracting and retaining high calibre executives.
●
Alignment to program participants' interests:
●
rewards capability and experience
●
reflects competitive reward for contribution to growth in shareholder wealth; and
●
provides a clear structure for earning rewards.
Remuneration policies are developed to provide market competitive remuneration arrangements that support
the attraction, engagement and retention of talented team members, and that are aligned with shareholders’
interests.
3. Remuneration framework
In accordance with best practice corporate governance, the structures of non-executive directors and executive
remuneration are separate.
Non-executive directors’ remuneration
Non-executive directors receive fees and do not receive share-based payments or other incentives. The
Chairman's fees are determined independently to the fees of other non-executive directors and are based on
comparable roles in the external market. The Chairman is not present at any discussions relating to
determination of his own remuneration. The NRC review non-executive directors’ fees and payments annually.
The NRC may, from time to time, receive advice from independent remuneration consultants to ensure non-
executive directors' fees and payments are appropriate and in line with the market.
ASX listing rules require the aggregate non-executive directors' remuneration be determined periodically by a
general meeting. The most recent determination was at the Annual General Meeting held on 8 November 2012,
where the shareholders approved a maximum annual aggregate remuneration of $600,000. The NRC has
reviewed the fee and deemed the maximum annual aggregate remuneration is still appropriate.
Executive directors and other key management personnel
The Group aims to reward executives based on their position and responsibility, with a level and mix of
remuneration that has both fixed and variable components, as well as a blend of short and long-term incentives.
Executive remuneration comprises base pay and benefits, short-term incentives, long-term incentives, and
superannuation contributions.
(i) Fixed Remuneration
Executives receive a base pay and benefits which reflect their roles, experience and level of responsibility. This
is reviewed annually to ensure the executive’s pay is competitive with the market. Other benefits include car
allowances.
28
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Directors' report
30 June 2019
(ii) Short-term Incentives
The NRC reviews the short-term incentives (STI) for executives and employees annually. If the NRC determines
that STI should be made available for executives and/or employees, the cash incentives (bonuses) are payable
should the Group achieve pre-determined targets following finalisation and announcement of the full year
audited results. Using value creation targets ensures variable awards are only available when value has been
created for shareholders and when profit is consistent with the business plan.
The NRC considers the appropriate targets and KPIs to link the STI plan and the level of payout if targets are
met. This includes setting any maximum payout under the STI plan, and minimum levels of performance to
trigger payment of STI.
For the year ended 30 June 2019, the KPIs linked to the STI plan were based on achieving budgeted EBITDA
(80%), capital expenditure within guidance (10%) and establishing engagement benchmarks for the business
(10%). The STI payments are adjusted in line with the degree of achievement against the target performance
levels. For the year ended 30 June 2019, the STI hurdles were achieved.
(iii) Long-term Incentives
The Group’s remuneration framework aims to align long-term incentives for executives with the delivery of
sustainable value to shareholders. This is important in ensuring that key management personnel and other
executives are focused on delivering sustainable returns to shareholders, whilst allowing the Group to attract
and retain high calibre executives.
In the year ended 30 June 2019, the NRC conducted a review of the long-term incentive plan (LTIP) with the
assistance of remuneration consultants, PricewaterhouseCoopers. Under the LTIP, the Group issued
performance rights during the year ended 30 June 2019. The LTIP rewards executives for high performance and
ongoing commitment over a three to five year horizon and recognises the important role executives play in
delivering the long term growth of the Group. Details of the LTIP grant in the year ended 30 June 2019 are set
out below.
Tranche 1
Vesting Condition 1
Vesting Condition 2
EPS CAGR across the Tranche 1
Performance Period
Below 5%
5%
5% ≤ EPS CAGR ≤ 20%
Tranche 2A
Continued service to August 2021, with no holding lock on resulting shares;
Compound annual growth rate (CAGR) in the Group's earnings per share before tax (EPS) during the
three years to June 2021 in accordance with the following schedule:
Proportion of Tranche 1 Performance Rights held that will satisfy
Vesting Condition 2
Nil
25%
Straight line pro-rata vesting between 25% and 100% (inclusive)
Vesting Condition
Continued service to August 2021, with no holding lock on resulting shares.
Tranche 2B
Vesting Condition 1
Vesting Condition 2
Continued service to August 2021, with no holding lock on resulting shares;
Group EPS performance in accordance with the following schedule:
Group EPS for the year to 30 June 2021
Below $0.0975 (1.3 x FY2018 EPS)
$0.0975 ≤ EPS < $0.1050 (1.4 x FY2018 EPS)
EPS ≥ $0.1050
Proportion of Tranche 2B Performance Rights held that will satisfy
Vesting Condition 2
Nil
50%
100%
29
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Directors' report
30 June 2019
Tranche 2C
Vesting Condition 1
Vesting Condition 2
Continued service to August 2023, with no holding lock on resulting shares;
Group EPS performance in accordance with the following schedule:
Group EPS for the year to 30 June 2023
Below $0.1125 (1.5 x FY2018 EPS)
$0.1250 ≤ EPS < $0.1200 (1.6 x FY2018 EPS)
$0.1200 ≤ EPS < $0.1275 (1.7 x FY2018 EPS)
EPS ≥ $0.1275
Proportion of Tranche 2C Performance Rights held that will satisfy
Vesting Condition 2
Nil
50%
75%
100%
Use of remuneration consultants
During the financial period ended 30 June 2019, the consolidated entity, through the NRC, engaged
PricewaterhouseCoopers, remuneration consultants, to review its existing remuneration policies and provide
recommendations on how to improve both the STI and LTIP programs. This has resulted in share-based
payments remuneration in the form of performance rights being implemented. PricewaterhouseCoopers was
paid $69,998 for these services.
An agreed set of protocols were put in place to ensure that the remuneration recommendations would be free
from undue influence from key management personnel. These protocols include requiring that the consultant
not communicate with affected key management personnel without a member of the NRC being present, and
that the consultant not provide any information relating to the outcome of the engagement with the affected
key management personnel. The Board is also required to make inquiries of the consultant's processes at the
conclusion of the engagement to ensure that they are satisfied that any recommendations made have been free
from undue influence. The Board is satisfied that these protocols were followed and as such there was no undue
influence.
Voting and comments made at the company's 9 November 2018 Annual General Meeting (AGM)
At the 9 November 2018 AGM, 99.28% of the votes received supported the adoption of the remuneration report
for the year ended 1 July 2018. The Company did not receive any specific feedback at the AGM regarding its
remuneration practices.
30
City Chic Collective Limited (Formerly known as Specialty Fashion Group Limited) Directors' report 30 June 2019 31 4. Remuneration outcomes for key management personnel (a) Payments and benefits Amounts of remuneration Details of the remuneration of key management personnel of the consolidated entity are set out in the following tables. Short-term Post-employment Other long-term Termination benefit Share-based payments Total Proportion of performance related remuneration Cash salary & fees Bonus Allowances Total superannuation leave benefits performance rights (A) (B) (C) (D) 2019 $ $ $ $ $ $ $ $ $ % Non-executive directors Michael Kay1 116,790 - - 116,790 11,095 - - - 127,885 0% Michael Hardwick 75,000 - - 75,000 7,125 - - - 82,125 0% Megan Quinn 75,000 - - 75,000 7,125 - - - 82,125 0% Anne McDonald2 48,077 - - 48,077 4,567 - - - 52,644 0% Ashley Hardwick3 28,846 - - 28,846 2,740 - - - 31,586 0% Executive directors Phil Ryan4 527,500 195,000 11,002 733,502 24,351 151,2575 - 508,692 1,417,802 50% Daniel Bracken6 294,228 - - 294,228 5,133 - 20,023 - 319,384 0% Other key management personnel Munraj Dhaliwal7 130,154 108,000 - 238,154 6,350 6,106 - 96,797 347,407 59% Tim Fawaz8 249,789 112,0009 16,346 378,135 15,399 40,615 - - 434,149 N/A Total 1,545,384 415,000 27,348 1,987,732 83,885 197,978 20,023 605,489 2,895,107 (A) The short-term incentive bonus in relation to Phil Ryan and Munraj Dhaliwal is for performance during the respective financial year using the criteria set out on pages 29 – 30. The amount was finally determined at a Board meeting held on 26 August 2019 and expected to be paid in January 2020, subject to serviceability. (B) This comprises car and travel allowances. (C) In accordance with AASB 119 Employee Benefits, annual leave is classified as other long-term employee benefit. Balance also includes long service leave and annual leave accrued in the period. (D) The cost of equity-settled transactions is recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award multiplied by probability of vesting. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods. 1 Michael Kay appointed as non-executive director on 1 October 2018 and Chairman on 9 November 2018. 2 Anne McDonald resigned on 9 November 2018. 3 Ashley Hardwick resigned on 9 November 2018. 4 Phil Ryan appointed as Chief Executive Officer on 1 October 2018 and Managing Director on 12 February 2019. 5 Other long-term leave benefits in FY2019 include long service leave and annual leave accrued in the period, as well as adjustment for opening leave liability balances to reflect current annual salary. 6 Daniel Bracken was appointed on 12 February and resigned 30 September 2018. 7 Munraj Dhaliwal was appointed on 14 February 2019. 8 Tim Fawaz was appointed on 1 July 2017 and resigned on 14 February 2019. 9 Cash bonus paid in relation to service during transition after the divestment on 2 July 2018. City Chic Collective Limited (Formerly known as Specialty Fashion Group Limited) Directors' report 30 June 2019 32 Short-term Post-employment Other long-term Termination benefit Total Proportion of performance related remuneration Cash salary & fees Bonus1 Allowances2 Total superannuation leave benefits 2018 $ $ $ $ $ $ $ $ % Non-executive directors Anne McDonald 116,667 - - 116,667 11,083 - - 127,750 0% Michael Hardwick 75,000 - - 75,000 7,125 - - 82,125 0% Ashley Hardwick 75,000 - - 75,000 7,125 - - 82,125 0% Megan Quinn 75,000 - - 75,000 7,125 - - 82,125 0% Executive directors Daniel Bracken3 319,314 250,000 100,000 669,314 11,766 414,0004 1,095,080 23% Gary Perlstein5 686,853 - 45,100 731,953 15,036 330,193 312,3136 1,389,495 0% Other key management personnel Tim Fawaz7 413,077 350,000 25,000 788,077 20,898 - - 808,975 43% Sonia Moura8 304,458 50,000 25,000 379,458 20,655 5,124 - 405,237 12% Phil Ryan 460,000 295,0009 35,250 790,250 33,250 7,678 - 831,178 36% Tony Karp10 163,710 - 10,923 174,633 10,024 - - 184,657 0% Total 2,689,079 945,000 241,273 3,875,352 144,087 342,995 726,313 5,088,747 The proportion of remuneration linked to performance and the fixed proportion assuming full STI is received and that the LTI fully vests are as follows: Fixed Remuneration At risk - STI At risk - LTI Cash bonus paid/payable Cash bonus forfeited Name 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 Executive director: Phil Ryan 47% 72% 14% 28% 39% - 100% 100% 0% 0% Other key management personnel: Munraj Dhaliwal 63% N/A 19% N/A 18% N/A 100% N/A 0% N/A Tim Fawaz 100% 57% N/A 43% N/A - N/A 100% 0% 0% 1 Bonus in relation to announced sale of the discontinued businesses payable post 2018 financial year end. 2 Includes car, travel and accommodation allowances. 3 Daniel Bracken was appointed on 12 February and resigned 30 September 2018. 4 This represents an accrued charge for contractual notice period to be paid out in the 2019 financial year. 5 Gary Perlstein resigned 15 November 2017. 6 This statutory entitlement was a cash payout in the 2018 financial period. 7 Tim Fawaz was appointed on 1 July 2017 and resigned on 14 February 2019. 8 Sonia Moura was determined to be a KMP in prior years however after the FY2018 divestment, the role is no longer considered to qualify as KMP. 9 This represents a cash payment in the 2018 financial period. 10 Tony Karp resigned 10 November 2017. City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Directors' report
30 June 2019
5. Service agreements
Remuneration and other terms of employment for key management personnel are formalised in service
agreements. Details of these agreements are as follows
Name:
Title:
Term of agreement:
Details:
Name:
Title:
Term of agreement:
Details:
Name:
Title:
Term of agreement:
Details:
Phil Ryan
Chief Executive Officer (appointed 1 October 2018) and Managing Director (appointed 12
February 2019)
None
• Notice period of 6 months • Remuneration review at Board discretion • Eligible for short-term
incentives • Eligible for long-term incentives • No severance period • No termination benefits
(except for statutory entitlements) • No other benefits
Munraj Dhaliwal
Chief Financial Officer (appointed 14 February 2019)
None
• Notice period of 3 months • Remuneration review at Board discretion • Eligible for short-term
incentives • Eligible for long-term incentives • No severance period • No termination benefits
(except for statutory entitlements) • No other benefits
Tim Fawaz
Former Chief Financial and Operations Officer (resigned 14 February 2019)
None
• Notice period of 3 months • Remuneration review period every 12 months • Eligible for short-
term incentives • Eligible for long-term incentives • No severance period • No termination benefits
(except for statutory entitlements) • No other benefits
All non-executive directors stand for re-election at least every 3 years and have no notice period, no annual
remuneration review, no eligibility for short-term incentives, no eligibility for long-term incentives, no severance
period, no termination benefits and no other benefits.
6. Disclosures relating to share, options, and performance rights
Issue of shares and options
There were no shares or options issued to key management personnel as part of compensation during the
period ended 30 June 2019.
Issue of performance rights
There were performance rights over ordinary shares issued to key management personnel as part of
compensation as at 30 June 2019.
The details of each grant of performance rights over ordinary shares affecting remuneration of key
management personnel in this financial period or future reporting years are as follows:
Tranche
Grant date
1
2A
2B
2C
13/11/2018
13/11/2018
13/11/2018
13/11/2018
Performance
period end date
30/06/2021
30/06/2021
30/06/2021
30/06/2023
Share price at
grant date
Expected
volatility
Dividend yield Risk-free rate
Fair value
$1.17
$1.17
$1.17
$1.17
35.00%
35.00%
35.00%
35.00%
3.50%
3.50%
3.50%
3.50%
2.12%
2.12%
2.12%
2.12%
$1.07
$1.07
$1.07
$0.99
The number of performance rights over ordinary shares granted to and vested by key management personnel
as part of compensation during the period ended 30 June 2019 are set out below:
Phil Ryan
Munraj Dhaliwal
Total
Number of
rights granted
during the
period 2019
2,640,740
483,333
3,124,073
Number of
rights vested
during the
period 2019
-
-
-
33
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Directors' report
30 June 2019
The fair value of performance rights over ordinary shares granted, vested and lapsed for key management
personnel as part of compensation during the period ended 30 June 2019 are set out below:
Phil Ryan
Munraj Dhaliwal
Total
531,108
102,578
633,686
Value of rights
granted during the
period 2019
$
Value of rights lapsed
during the period 2019
$
-
-
-
The number of performance rights over ordinary shares granted to key management personnel as part of
compensation during the period ended 30 June 2019 are set out below:
Name
Phil Ryan
Munraj Dhaliwal
Total
Tranche 1
Tranche 2A
Tranche 2B
Tranche 2C
Total Performance Rights
240,740
133,333
374,073
600,000
87,500
687,500
600,000
87,500
687,500
1,200,000
175,000
1,375,000
2,640,740
483,333
3,124,073
There were no performance rights over ordinary shares granted, vested or lapsed for key management
personnel during the period ended 1 July 2018.
Additional information
The following information has been provided to reflect the financial hurdles considered in measuring executive
performance in delivering long term growth of the Group:
Profit/(loss) before income tax for continuing underlying operations
EPS (underlying, before income tax)
2019
$21.3 m
11.1 cents per share
2018
$14.4 m
7.5 cents per share
7. Additional disclosures relating to key management personnel
Shareholding
The number of shares in the company held during the financial period by each key management personnel of
the consolidated entity, including their personally related parties, is set out below:
Balance at
the start of
the period
Received as
part of
remuneration
Additions
during the
period
Disposals
during the
period
Other
movements1
Balance at
the end of the
period
Directors’ shareholding
Michael Kay
Michael Hardwick
Phil Ryan
Anne McDonald
Ashley Hardwick2
Subtotal
-
395,000
124,000
35,000
39,801,811
40,355,811
Other key management personnel shareholding
Munraj Dhaliwal
Tim Fawaz
-
400,000
Subtotal
Total KMP shareholdings
400,000
40,755,811
-
-
-
-
-
-
-
-
-
-
509,914
100,000
-
-
-
609,914
-
202,387
202,387
812,301
-
-
-
-
-
-
-
-
-
-
-
-
-
(35,000)
(39,801,811)
509,914
495,000
124,000
-
-
(39,836,811)
1,128,914
80,0003
(602,387)
80,000
-
(522,387)
(40,359,198)
80,000
1,208,914
1 Balance at the end of the period has been reduced to nil for KMP who have resigned from the consolidated entity.
2 Beneficial interest held through NAAH Pty Ltd and NAAH Investments Pty Ltd.
3 Balance represents shareholdings held prior to appointment as KMP.
34
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Directors' report
30 June 2019
Performance rights holding
The number of performance rights over ordinary shares in the Company held during the financial period by
each key management personnel of the consolidated entity, including their personally related parties, is set out
below:
Balance at the start
of the period
Granted
Vested
Expired/
forfeited/other
Balance at the
end of the
period
Performance rights over ordinary shares
Phil Ryan
Munraj Dhaliwal
Total
-
-
-
2,640,740
483,333
3,124,073
-
-
-
-
-
-
2,640,740
483,333
3,124,073
Non-executive directors do not hold any performance rights over ordinary shares in the Company.
As at 30 June 2019, there were no outstanding loans made to or received from directors of City Chic Collective
Limited and other key management personnel of the consolidated entity, including their personally related
parties (2018: nil).
The following transactions occurred with key management personnel and their personally related parties:
Payment for other expenses:
Lease of business premises in which Gary Perlstein a former director of the consolidated entity, has an
interest
Services provided by Southern Cross Shopfitting, a company that is associated with NAAH Pty Ltd and
NAAH Investments Pty Ltd1
Share registry and Annual General Meeting fees paid to Link Market services. Anne McDonald is a
former non-executive director of Link Administrative Holding Limited (Link Group)
Consolidated
2019
$'000
2018
$'000
-
125,087
965,129
210,5082
12,928
52,931
978,057
388,526
All transactions were made on normal commercial terms and conditions and at market rates.
This concludes the remuneration report, which has been audited.
1 Michael Hardwick was not involved in decision making relating to Southern Cross Shopfitting and its dealings with the Group.
2 Services provided from March 2018 to June 2018 in FY2018.
35
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Directors' report
30 June 2019
Shares under performance rights
There were no unissued ordinary shares of City Chic Collective Limited under performance rights outstanding
at the date of this report.
Shares issued on the exercise of performance rights
There were no ordinary shares of City Chic Collective Limited issued on the exercise of performance rights
during the period ended 30 June 2019 and up to the date of this report.
Indemnity 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 period, the Company paid a premium in respect of a contract to insure the directors and
executives of the company 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
The Company has not, during or since the end of the financial period, indemnified or agreed to indemnify the
auditor of the Company or any related entity against a liability incurred by the auditor.
During the financial period, the Company has not paid a premium in respect of a contract to insure the auditor
of the Company or any related entity.
Proceedings on behalf of the company
No person has applied to the Court under section 237 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 the amounts paid or payable to the auditor for non-audit services provided during the financial period
by the auditor are outlined in note 29 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial period, 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.
Officers of the company who are former partners of Deloitte Touche Tohmatsu
There are no officers of the Company who are former partners of Deloitte Touche Tohmatsu.
Rounding of amounts
The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities
and Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in
accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest
dollar.
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 immediately after this directors' report.
Auditor
Deloitte Touche Tohmatsu continues in office in accordance with section 327 of the Corporations Act 2001.
36
City Chic Collective Limited (Formerly known as Specialty Fashion Group Limited) Directors’ report 37 This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001. On behalf of the directors Michael Kay Phil Ryan Chairman Chief Executive Officer and Managing Director 27 August 2019 Sydney Deloitte Touche Tohmatsu
A.B.N. 74 490 121 060
Eclipse Tower
Level 19, 60 Station Street
Parramatta NSW 2145
Tel: +61 (0) 2 9840 7000
www.deloitte.com.au
The Board of Directors
City Chic Collective Limited
151-163 Wyndham Street
Alexandria, NSW, 2015
27 August 2019
Dear Board Members,
City Chic Collective Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
declaration of independence to the directors of City Chic Collective Limited and its subsidiaries.
As lead audit partner for the audit of the financial statements of City Chic Collective Limited and its
subsidiaries for the 52 week period ended 30 June 2019, 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.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
Annalisa Amiradakis
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network.
38
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Eclipse Tower
60 Station Street
Parramatta
Sydney, NSW, 2150
Australia
Phone: +61 2 9840 7000
www.deloitte.com.au
Independent Auditor’s Report
to the Members of City Chic Collective Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of City Chic Collective Limited (the “Company”) and its subsidiaries
(the “Group”) which comprises the consolidated statement of financial position as at 30 June 2019, 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 52 week period then ended,
and notes to the financial statements, including a summary of significant accounting policies and other
explanatory information, 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 30 June 2019 and of its financial
performance for the 52 week period 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.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network.
39
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 for 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
How the scope of our audit responded to
the Key Audit Matter
Gain or loss on divestment of brands and the
related tax
On 2 July 2018, the Company completed the sale
of the businesses associated with the operations
and brands of Millers, Katies, Rivers, Autograph
and Crossroads to Noni B Limited. The agreement
was to sell these brands for consideration of
$31.0 million (plus or minus post completion
adjustment).
Experts were appointed in accordance with the
Business Sales Agreement to determine the
outcome of the completion adjustment. On 31st
July 2019, Noni B Limited applied to the Supreme
Court to have the expert determination reviewed.
Both qualitative and quantitative impacts of the
divestment to the financial performance of the
discontinued
considered
operation were
significant during the course of the financial year
given the complexity of the divestment, expert
involvement, pending
the
Supreme Court and
judgements that were
applied, during the year and at year end, over the
valuation of the liabilities associated with the
divestment and net completion adjustment.
legal review by
Our procedures included, but were not limited to:
Reviewing the sale transaction to understand
the Business Sale Agreement with Noni B
Limited including reference to the sale
consideration, the assets and liabilities being
sold, mechanism for the working capital
(“completion”) adjustment and the dispute
resolution process;
Reviewing the expert determination and
subsequent application of relief sought by
NBL, to assess the application of the rulings
in the gain/loss computation prepared and
valuation of the completion adjustment
raised,
Testing the validity of claims owing by and to
the Group to supporting documentation,
Evaluating managements estimate of the
recoverability of any claims raised in favour
of the group,
Discussions were
legal
representatives of the Group to gain an
independent understanding of the matters
subject to uncertainty.
held with
Recalculating the mathematical accuracy of
the gain/loss on divestment in light of the
assets classified as held for sale as at 1 July
2018 and any associated adjustments
required as a
the expert
determination and subsequent relief sought
by the court review,
result of
Recalculating the mathematical accuracy of
the current and deferred taxation impacts
associated with the transaction giving due
consideration to the revised proceeds after
expert determination but subject to pending
legal finalisation.
We also assessed the appropriateness of the
disclosures in Notes 2, 6, 7, 15, 16, 33 and 36 to
the financial statements.
40
Key Audit Matter
How the scope of our audit responded to
the Key Audit Matter
Revenue recognition impact of the Vendor
Funded Mark Down Rebate and the valuation
of the associated contract liability at year
end
The Group has arrangements with key customers
(vendors) in the wholesale and dropship revenue
streams that act as a rebate against revenue.
During the year, revenue of $28.9 million was
earned in the Northern Hemisphere, net of vendor
funded markdown rebates, as disclosed in the
revenue Note 4. The liability for vendor funded
markdowns is included in other payables as
disclosed in Note 16.
The liability is determined by reference to an
agreed percentage against revenue earned over
a specified period of time as well as estimated
claw back percentages, based on the sell through
of product at specific margins and the claw back
of margin in the event certain thresholds are not
met by the vendor.
The timing of retail events, discount strategies
and historical evidence of key metrics such as
margin and sell through are considered to
forecast the liability required at year end. As a
result, there is significant judgement applied in
determining the appropriate vendor
funded
markdown liability and the impact on revenue in
profit or loss.
Our procedures included, but were not limited to:
Meetings were held with the Chief Executive
Officer to understand the arrangements with
key customers (vendors),
Obtaining and testing the reconciliation over
the revenue earned, net of such rebates and
discounts, to the cash received from and
paid to these vendors,
the key assumptions
Evaluating
(the
expected vendor discounting required and
likelihood of the vendor achieving their
by
guaranteed
management to forecast the claw back
vendor funded markdown liability at year
end,
margins)
applied
received
Testing the supporting evidence (rebate
claim)
vendors
subsequent to year end requiring settlement
and supporting the liability raised at year
end,
from
the
Recalculating the mathematical accuracy of
the vendor funded markdown liability based
on our understanding of the arrangement
and assumptions applied.
We also assessed the appropriateness of the
disclosures and classification in Notes 1, 2, 4 and
16 to the financial statements.
41
Key Audit Matter
How the scope of our audit responded to
the Key Audit Matter
Valuation of inventory at net realisable
value and determination of the inventory
obsolescence allowance for City Chic
As at 30 June 2019 the carrying value of
inventory totalled $19.4 million, as disclosed in
Note 10.
The Group values its inventory on a weighted
average cost method at the lower of cost and net
realisable value. The Group establishes an
obsolescence allowance against its inventory
determined by reference to the inventory’s ageing
by season and consideration of historical
inventory losses, selling prices net of mark
downs, and market conditions. As a result, there
is significant judgement applied in determining
the
obsolescence
allowance.
appropriate
inventory
Our procedures included, but were not limited to:
Meetings were held with the Chief Executive
Officer to validate the assumptions applied
in
and
the
understanding the current market conditions
and strategy of the brand that impacts the
inventory on hand available to sell,
estimating
allowance
Assessing the performance of the City Chic
brand relative to each season in the financial
year and performing a retrospective review
of the allowance balance from FY18 to FY19
to assess
the historical accuracy of
management’s ability to determine the
inventory obsolescence allowance.
Recalculating the mathematical accuracy of
the inventory obsolescence allowance,
Testing the completeness and valuation of
the specific allowance against terminal
inventory and understanding the rationale of
such terminal inventory,
Challenging management’s estimates and
judgements by formulating a number of
independent estimates of the inventory
obsolescence, including:
actual inventory losses incurred in the
current financial year, and
the net realisable value with reference
to the last selling price of inventory on
hand.
consideration of aged inventory.
We also assessed the appropriateness of the
disclosures in Notes 1, 2 and 10 to the financial
statements.
42
Key Audit Matter
How the scope of our audit responded to
the Key Audit Matter
Impact assessment of AASB 16 Leases and
related disclosures
AASB 16 Leases will be adopted by the group
from the effective date of 1 July 2019. The
estimated impact has been disclosed in note 1.
The estimated impact is a right of use assets
within a range of $28.0m and $32.0m and
associated lease liabilities within a range of
$30.0m and $35.0m.
The Group has a retail store portfolio of 104
stores. The determination of the right of use asset
and associated lease liability is impacted by
judgements made over various assumptions and
the use of practical expedients on transition
within AASB 16 Leases.
The areas of estimation,
judgement and
application of the standard include consideration
of renewal options to be exercised, leases on
holdover (also known as leases which operate on
a month to month basis whilst renegotiation is
pending), incremental borrowing rate, lease
incentives, variable cost considerations, low value
assets and duration of leases on transition. As a
result, there is significant judgement applied in
estimating the impact of AASB 16.
Our procedures included, but were not limited to:
Obtaining and understanding the AASB 16
impact assessment computation reconciling
the lease portfolio data within the calculation
to the lease portfolio information and open
stores trading,
Obtaining the AASB 16 impact assessment
computation and testing a sample of leases
the
to source documents
accuracy of the data,
to validate
Obtaining and understanding management’s
assessment of the incremental borrowing
rate to be applied to the assets within the
portfolio and performing a benchmarking
analysis to the market,
Obtaining and understanding management’s
assessment of the treatment of leases with
incentives, leases on holdover, make good
provisions contained within the lease and
renewal options,
Challenging and assessing the adequacy of
the judgements applied to the lease
portfolio,
Challenging and assessing the adequacy of
the practical expedients applied to the lease
portfolio,
Recalculating the mathematical accuracy of
the impact assessment.
We also assessed the appropriateness of the
disclosures in Note 1 to the financial statements.
Other Information
The directors are responsible for the other information. The other information comprises the Corporate
Directory, Directors’ Report, Corporate Governance Statement and Shareholder information which we
obtained prior to the date of this auditor’s report, and also includes the following information which will
be included in the Group’s annual report (but does not include the financial report and our auditor’s
report thereon): Overview; Message from Our Chairman and CEO; Board of Directors; City Chic Annual
Recap; 2020 Outlook; Diversity; and Corporate Social Responsibility, which is expected to be made
available to us after that date.
Our opinion on the financial report does not cover the other information and 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
identified above 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 on the other information that we obtained prior to
the date of this auditor’s report, 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.
43
When we read the Overview; Message from Our Chairman and CEO; Board of Directors; City Chic
Annual Recap; 2020 Outlook; Diversity; and Corporate Social Responsibility, if we conclude that there
is a material misstatement therein, we are required to communicate the matter to the directors and
use our professional judgement to determine the appropriate action.
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 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 has no realistic alternative but to do so.
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.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or
the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s ability to continue as a
going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the financial report or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events
in a manner that achieves fair presentation.
44
Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group’s audit. We remain
solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 27 to 35 of the Directors’ Report for the
52 week period ended 30 June 2019.
In our opinion, the Remuneration Report of City Chic Collective Limited, for the 52-week period ended
30 June 2019, 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.
DELOITTE TOUCHE TOHMATSU
Annalisa Amiradakis
Partner
Chartered Accountants
Parramatta, 27 August 2019
45
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Corporate Governance Statement
30 June 2019
The directors are committed to the principles underpinning best practice in corporate governance, applied in a
manner which is best suited to the Group and its controlled entities and to best addressing the directors'
accountability to shareholders and other stakeholders.
In formulating the governance principles that guide the operations of the Group, the directors have taken into
account the ASX Corporate Governance Council’s Principles of Good and Best Practice Recommendations (3rd
edition). This is supported by an overriding organisation wide commitment to the highest standards of legislative
compliance and financial and ethical behaviour.
This corporate governance statement outlines the Group's main corporate governance practices and policies in
place during the 52 week period ended 30 June 2019, except where indicated otherwise.
This statement and other related information is available from the Corporate Governance section of the Group’s
website at http://citychiccollective.com.au/corporate-governance.
PRINCIPLE 1 – LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT
The role of the Board is to provide effective governance over the Group’s affairs to ensure the interest of
shareholders are protected and enhanced and the confidence of the investment market is maintained whilst
having regard for the interests of all stakeholders, including customers, employees, suppliers and local
communities.
The functions of the Board of Directors are clearly defined in the Group's Board of Directors Charter which
includes responsibility for:
• Approval of corporate strategies and the annual budget;
• Monitoring financial performance including approval of the annual and half-year financial reports and liaison
with the Group’s auditors;
• Monitoring managerial performance; and
• Ensuring the significant risks facing the Group and its controlled entities have been identified and appropriate
and adequate control, monitoring and reporting mechanisms are in place.
The Board of Directors
The Board of Directors Charter prescribes the structure of the Board and its committees, the framework for
independence and director obligations.
Board membership is reviewed to ensure an appropriate skill mix, personal qualities, expertise and diversity to
meet the Board’s responsibilities and objectives. When a vacancy exists or there is a need for particular skills, the
selection criteria based on the skills deemed necessary are identified. The Nomination and Remuneration
Committee (NRC) reviews potential candidates for Board appointment and assesses retiring directors standing
for re-election, considering a number of factors including skills, experience, expertise and personal qualities to
enhance Board effectiveness, as well as any potential conflicts of interest and independence. The Board also
undertakes appropriate checks and/or seeks confirmation of key matters in relation to any potential candidates
before a person is appointed by the Board or out forward to shareholders as a candidate for election as a director.
In its recommendation to shareholders in relation to the election or re-election of a director, the Notice of Meeting
for an Annual General Meeting (AGM) sets out material information that would be relevant to the shareholder’s
decision.
The Group provides a letter of appointment to all directors, which sets out the Group’s expectations, their duties,
the terms and conditions of their appointment, remuneration and forms part of the induction program for
directors.
The Board currently comprises three non-executive directors and one executive director who is, the Chief
Executive Officer and Managing Director. Michael Hardwick, Michael Kay and Megan Quinn are considered by
the Board to be independent directors. Michael Kay and Michael Hardwick own shares in the Group however are
not substantial shareholders. Michael Hardwick was previously not regarded as an independent director by the
Board by virtue of his role as Chief Financial Officer of the Cotton On Group, an entity associated with NAAH Pty
46
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Corporate Governance Statement
30 June 2019
Ltd and NAAH Investments Pty Ltd, which was a substantial shareholder in City Chic Collective Limited. The
Group also engages the services of Southern Cross Shopfitting, a company that is associated with NAAH Pty Ltd
and NAAH Investments Pty Ltd. Given that NAAH Pty Ltd and NAAH Investments Pty Ltd are no longer
substantial shareholders in the Group, the Board has re-assessed Michael Hardwick’s independence and now
considers him to be an independent director. Michael Hardwick is not involved in decision making relating to
Southern Cross Shopfitting and its dealings with the Group.
The Chairman and the Chief Executive Officer are not the same person. The Board is chaired by Michael Kay,
who is an independent director. The Chairman is responsible for leading the Board, ensuring directors are
properly briefed in all matters relevant to their role and responsibilities, facilitating Board discussions and
managing the Board’s relationship with the Group’s senior executives. The Chief Executive Officer is responsible
for implementing group strategies and policies. The Board of Directors Charter specifies that these are separate
roles to be undertaken by separate people.
Directors and Board committees have the right, in connection with their duties and responsibilities, to seek
independent professional advice at the Group's expense. Prior written approvals of the Chairman is required, but
this will not be unreasonably withheld.
Details of the members of the Board, their experience, expertise, qualifications, term of office and independent
status are set out in the directors' report on pages 23 to 25 under the heading ''Information on directors''.
Directors’ Independence
Any past or present relationship with the Group is reviewed to assess the likely impact on a director’s ability to
be objective and exercise independent judgement. The Board reviews any transactions between the organisation
and the directors, or any interest associated with the directors, to ensure the structure and the terms of the
transaction is in compliance with the Corporations Act 2001 and is appropriately disclosed. The Board is confident
that suitable processes are in place, as outlined in its Board of Directors Charter, to satisfy expectations and
requirements in relation to decision making and the management of conflicts of interest. The directors on the
Board of City Chic Collective Limited contribute significant knowledge across a range of areas. Regardless of
whether directors are defined as independent, all directors are expected to provide independent judgements
and views to Board discussions.
Performance Evaluation
The Board undertakes periodic self-assessments of its collective performance, the performance of the Chairman
and its committees. Management are invited to contribute to this appraisal process. The results and any action
plans are documented together with specific performance goals which are agreed for the coming year. There is
also an evaluation process of the senior executives that occurs on an annual basis. Given Board and executive
team changes during the reporting period, the Board determined it appropriate to undertake performance
evaluations of the Board and senior executives from FY2020 onwards.
Company Secretary
The Board appointed Mark Ohlsson, FCPA, as Company Secretary on 10 May 2019. Prior to this, Claudine Tarabay,
B.Economics, CA, was the Company Secretary until her resignation on 10 May 2019. All directors have access to
the services and advice of the Company Secretary. Details of the skills, experience and expertise of the Company
Secretary for the reporting period are set out in the directors’ report. The Company Secretary is accountable
directly to the Board, through the Chair, on all matters to do with the proper functioning of the Board and Board
Committees.
47
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Corporate Governance Statement
30 June 2019
Diversity
Workplace diversity recognises and values the contribution of people from different backgrounds, experiences
and perspectives. It is the Group's aim to ensure that all team members have equal opportunity to participate
and advance in their careers.
The Group values and recognises the diversity of our Team Members and the added value diversity provides to
achieving the Group's overall objectives. The Group's diversity policy outlines the Group's diversity objectives in
relation to gender, age, ethnicity, cultural background, disability, religion, gender identity, sexual orientation and
professional background. It includes requirements for the Board to establish measurable objectives for achieving
diversity, and for the Board to assess annually both the objectives, and the Group's progress in achieving them.
Objectives established for achieving gender diversity and progress towards achieving them during the year
ended 30 June 2019 are set out below:
FY2019 Diversity Strategy
Objective
1. Conduct Diversity Survey with all Support Office Team Members
2. Propose revised Diversity Strategy as results from survey
3. Submit the Workplace Gender Equality Report
4. Training for Team Member on applicable policies and topics
5. Review Diversity Policy, ensuring it is robust and current
Achievement
Not completed
Not completed
Completed
Completed
Completed
Objective 1 and 2 were not completed due to change in strategy on engagement which was prioritised over this.
These objectives have been incorporated into FY2020 where it will be more appropriate.
Objectives established for achieving gender diversity and progress towards achieving them during the year
ended 30 June 2020 are set out below:
FY2020 Diversity Strategy
Objective
1. Conduct a Diversity Survey for a new CCX baseline
2. Develop Diversity strategy for FY2021
3. Submit the Workplace Gender Equality Report
4.
Implement feedback collected from team through engagement survey process around career & development
Gender Balance
CCX's ongoing commitment to reporting on Diversity is in line with the Workplace Gender Equality Act
2012 (WGE Act 2012). The proportion of women employed at different levels across CCX was as follows:
•
1 of 4 Board members is a woman;
• 63% of the Executive Team are women;
• 85% of our Managers are women;
•
• 97% of our workforce are women.
100% of our Team Leaders are women;
48
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Corporate Governance Statement
30 June 2019
PRINCIPLE 2 – STRUCTURE THE BOARD TO ADD VALUE
Nomination and Remuneration Committee
The Nomination and Remuneration Committee (NRC) consists of the following non-executive directors:
• Megan Quinn (Chair)
• Michael Kay
• Michael Hardwick
The NRC comprises three non-executive directors, a majority of whom are independent. The Chair of the
Committee is Megan Quinn, an independent non-executive director. Details of the Committee with regards to
remuneration policies and practices are detailed in “Principle 8 – Remunerate fairly and responsibly”. The number
of meetings held by the Nomination and Remuneration Committee is set out in the directors’ report. Mr. Kay is
excluded from meetings where his remuneration is being decided.
The NRC Charter prescribes the structure and responsibilities of the Committee which can be found on the
Group’s website.
The Board has been structured such that its composition and size will enable it to effectively discharge its
responsibilities and duties. Each director has the relevant industry experience and specific expertise relevant to
the Group’s business and level of operations. The Board considers that its structure is, and will continue to be,
appropriate in the context of the Company’s activities and does not consider it necessary at this stage of its
development to have a matrix setting out the mix of skills of the directors.
The Board seeks to ensure that the combination of its members provides an appropriate range of experience,
skills, diversity, personal qualities and expertise to enable it to carry out its obligations and responsibilities. The
Board believes that having a range of different skills, backgrounds, experience and gender ensures a diversity of
viewpoints which facilitate effective governance and decision making.
The Group believes that the skills and experience in the areas listed below are desirable for the Board to perform
its role effectively. The Board considers that its current composition possesses an effective blend of these skills
and experience which enables it and its Committees to effectively govern the business, operate effectively and
add value in the context of the Group’s strategy:
• Governance expertise and experience;
• Risk management expertise and experience;
• Financial and legal experience;
• Corporate advisory expertise;
• Executive/management experience;
• Operational management expertise and experience;
• Global expansion and international business dealings experience;
• Technology, innovation and transformation experience;
• Retail knowledge and experience;
• Property expertise; and
• Listed Group Board experience.
PRINCIPLE 3 – ACT ETHICALLY AND RESPONSIBLY
Code of Conduct
The Group has developed a statement of values and a Code of Conduct (the “Code”) which has been fully
endorsed by the Board and applies to all directors and employees. The Code is reviewed and updated as
necessary to ensure it reflects the highest standards of behaviour and professionalism and the practices
necessary to maintain confidence in the Group's integrity and to take into account legal obligations and
reasonable expectations of the Group's stakeholders.
49
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Corporate Governance Statement
30 June 2019
In summary, the Code requires that at all times the Group's personnel act with the utmost integrity, objectivity
and in compliance with the letter and spirit of the law and Group policies.
Trading in City Chic Collective Limited Shares
The Group has a Securities Trading Policy which stipulates it is contrary to Group policy for employees to be
engaged in short-term trading of the Group’s securities. Directors and senior executives of the Group are subject
to the Corporations Act 2001, which prohibits buying, selling or subscribing for shares in the Group if they are in
possession of inside information.
Appropriate time for directors and employees to acquire or sell the Group’s shares is when they are not in
possession of price sensitive information which is not generally available to the market. Under the policy,
directors and employees must not deal in the Group’s shares during the period between 1 January and 24 hours
after the release of the consolidated entity’s half-yearly results or the period between 1 July and 24 hours after
the release of the consolidated entity’s annual results.
It is contrary to Group policy for directors and employees to deal in a derivative, the value of which is determined
by reference to any unvested security held, until that security has fully and unconditionally vested.
The Code and the Securities Trading Policy is discussed with each new employee as part of their induction
training. All employees are asked to sign a declaration confirming their understanding and compliance with the
Code and the Securities Trading Policy. A copy of the Code and the Securities Trading Policy is available on the
Group's website.
PRINCIPLE 4 – SAFEGUARD INTEGRITY IN CORPORATE REPORTING
Audit and Risk Committee
The Audit and Risk Committee (ARC) consists of the following non-executive directors:
• Michael Hardwick (Chairman)
• Michael Kay
• Megan Quinn
The ARC comprises of three non-executive directors, a majority of whom are independent. The Chairman of the
Committee is Michael Hardwick, an independent non-executive director.
The Board and the ARC, at all times, act in a manner designed to ensure they safeguard the integrity of the
Group’s corporate reporting.
The functions of the ARC are clearly defined in the Group’s ARC Charter (available on the Group’s website) which
includes responsibility for:
• Review and report to the Board on the annual and half-year report and financial statements; and
• Assist the Board in reviewing the effectiveness and adequacy of the organisation's internal financial control
environment to enable them to provide the Board with up to date and reliable financial information.
The Committee is also charged with the responsibilities of recommending to the Board the appointment, removal
and remuneration of the external auditors, and reviewing the terms of their engagement, and the scope and
quality of the audit and non-audit services.
In fulfilling its responsibilities, the Committee receives regular reports from management and external auditors.
It also meets in private with the external auditors at least twice a year, more frequently if necessary. The external
auditors have a clear line of direct communication at any time to either the Chairman of the ARC or the Chairman
of the Board.
The Committee has authority, within the scope of its responsibilities, to seek any information it requires from any
employee or external party and obtain external legal or other independent professional advice.
50
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Corporate Governance Statement
30 June 2019
The Committee reports to the full Board after each committee meeting and relevant papers and minutes are
provided to all directors. The number of meetings held by the ARC is set out in the directors’ report.
Financial Report Accountability
The Chief Executive Officer and the Chief Financial Officer who are present for Board discussion of financial
matters are required to certify to the Board that the consolidated entity’s financial statements comply with
Accounting Standards, give a true and fair view, of the financial position and performance of the Group and
consolidated entity; the financial statements and notes thereto are in accordance with the Corporations Act 2001
and this statement is founded on a sound system of risk management and internal compliance and control
systems which, in all material respects, implement the policies adopted by the Board of Directors.
Auditor Attendance at the Annual General Meeting
The external audit firm partner in charge of the City Chic Collective Limited audit is available to answer
shareholder questions at the Group’s Annual General Meeting.
PRINCIPLE 5 – MAKE TIMELY AND BALANCED DISCLOSURE
The Group satisfies its continuous disclosure obligations as required by the Listing Rules of the Australian
Securities Exchange and the Corporations Law by adhering to its External Communications Policy (available on
the Group’s website) which requires information to be disclosed in a full and timely manner to enable all
shareholders and the market to have an equal opportunity to obtain and review information about the Group.
The Group’s annual and half-yearly reports, investor presentations, press releases and other information disclosed
to
the Group’s website
(www.citychiccollective.com.au).
the Group’s Code of Conduct are posted on
the ASX and
PRINCIPLE 6 – RESPECT THE RIGHTS OF SECURITY HOLDERS
Information about City Chic Collective Limited and its governance is available via its website. The Group aims to
facilitate effective communication with investors to ensure all information in relation to significant matters is
communicated in a timely, clear and objective manner.
Information is provided to the Group’s shareholders through:
• The City Chic Collective Limited Annual and Half-yearly Reports;
• The Annual General Meeting;
• Results announcements and ASX releases;
• The Group’s website, which has a dedicated Investor Relations section.
The Group hosts briefing sessions for investors and analysts on its half and full year results and other times, as
deemed necessary. All material information and presentations are lodged with the ASX and are made available
on the Group’s website.
Shareholders are encouraged to attend the Annual General Meeting and ask questions of the Chairman and the
Board. The Group adopts best practice in drafting of notices for general meetings and other communications to
help ensure that they are honest, accurate, informative and not misleading. All Annual General Meeting material
is made available in the Investor Relations section area of our website.
The share registry offers shareholders the option to receive communications electronically.
51
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Corporate Governance Statement
30 June 2019
PRINCIPLE 7 – RECOGNISE AND MANAGE RISK
The Board, through the ARC, is responsible for ensuring there are adequate policies in relation to risk
management, compliance and internal control systems. The Group's policies are designed to ensure strategic,
operational, legal, reputational and financial risks are identified, assessed, effectively and efficiently managed and
monitored to enable achievement of the Group's business objectives. The Group’s exposure to economic,
environmental and social sustainability risks are set out in the directors’ report.
Considerable importance is placed on maintaining a strong control environment. There is an organisation
structure with clearly drawn lines of accountability and delegation of authority. Adherence to the Code of
Conduct is required at all times and the Board proactively promotes a culture of quality and integrity.
The Group’s risk management policy and the operation of the risk management and compliance system is
managed by the Group Risk Management Committee which consists of senior executives. The Board receives
regular reports from this group as to the effectiveness of the Group's management of material risks that may
impede meeting business objectives. A review of the Group’s risk management framework was completed during
the reporting period.
Risk Management Accountability
As part of the process of approving the financial statements, at each reporting date the Chief Executive Officer
and Chief Financial Officer provide statements in writing to the Board on the quality and effectiveness of the
Group’s risk management and internal compliance and control systems.
In the absence of a dedicated internal audit team, the Group employs the services of professional third parties
from time to time to review and make recommendations on the Group’s internal control processes. The Audit
and Risk Committee is satisfied that the activities undertaken by management and the internal loss prevention
teams are sufficient in assessing and monitoring the Group’s risk profile and internal control processes.
PRINCIPLE 8 – REMUNERATE FAIRLY AND RESPONSIBLY
The Group has a NRC, as disclosed earlier in “Principle 2 – Structure the Board to add value”.
The Committee considers remuneration policies and practices generally and makes specific recommendations
on remuneration packages and other terms of employment for executive directors and other senior executives.
The Committee, having regard to performance, relevant comparative information and independent expert
advice, reviews executive remuneration and other terms of employment annually. As well as a base salary,
remuneration packages include superannuation and performance related bonuses. Remuneration packages are
set at levels that are intended to attract and retain executives capable of managing the consolidated entity's
operations.
Remuneration of non-executive directors is determined by the Committee within the maximum amount
approved by the shareholders from time to time.
Further information on directors’ and executives’ remuneration is set out in the directors’ report under the
heading ''Remuneration report''.
52
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Contents
30 June 2019
Consolidated statement of profit or loss and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the financial statements
Directors' declaration
Shareholder information
General information
54
56
57
58
59
100
101
The financial statements cover City Chic Collective Limited as a consolidated entity consisting of City Chic
Collective Limited and the entities it controlled at the end of, or during, the period. The financial statements are
presented in Australian dollars, which is City Chic Collective Limited's functional and presentation currency.
City Chic Collective Limited is a listed public company limited by shares, incorporated and domiciled in Australia.
Its registered office and principal place of business is:
151-163 Wyndham Street
Alexandria, NSW 2015
Telephone: (02) 9059 4300
A description of the nature of the consolidated entity's operations and its principal activities are included in the
directors' report, which is not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 27 August
2019. The directors have the power to amend and reissue the financial statements.
53
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Consolidated statement of profit or loss and other comprehensive income
For the period ended 30 June 2019
Revenue from continuing operations
Interest and other revenue
Expenses from continuing operations
Cost of sales
Employee benefits expense
Depreciation, amortisation and impairment expense
Rental expense
Other expenses
Finance costs
Profit before income tax from continuing operations
Income tax (expense)/benefit
Profit after income tax from continuing operations
Profit/(loss) after income tax expense from discontinued operations
Profit/(loss) after income tax for the period attributable to the owners of
City Chic Collective Limited
Other comprehensive income
Note
4
4
Consolidated
2019
$'000
2018
$'000
148,432
131,870
841
284
5
5
5
5
5
6
7
(62,568)
(31,011)
(3,942)
(14,886)
(17,403)
(218)
(54,102)
(27,000)
(3,862)
(16,913)
(17,224)
(1,576)
19,245
11,477
(4,980)
3,482
14,265
14,959
1,713
(24,265)
15,978
(9,306)
Items that may be reclassified subsequently to profit or loss
Cash flow hedges transferred to profit or loss, net of tax
Change in the fair value of cash flow hedges taken to equity
Foreign currency translation
Income tax benefit/(expense) relating to the components of other
comprehensive income
-
(126)
(193)
24
24
1,715
3,478
(1,303)
24
38
(1,558)
Other comprehensive income for the period, net of tax
(281)
2,332
Total comprehensive income for the period attributable to the owners of
City Chic Collective Limited
15,697
(6,974)
Total comprehensive income for the period is attributable to:
Continuing operations
Discontinued operations
13,984
1,713
7
17,291
(24,265)
15,697
(6,974)
The above consolidated statement of profit or loss and other comprehensive income should be read in
conjunction with the accompanying notes.
54
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Consolidated statement of profit or loss and other comprehensive income
For the period ended 30 June 2019
Note
Consolidated
2019
Cents
2018
Cents
Earnings per share for profit from continuing operations attributable to the
owners of City Chic Collective Limited
Basic earnings per share
Diluted earnings per share
38
38
Earnings per share for profit/(loss) from discontinued operations
attributable to the owners of City Chic Collective Limited
Basic earnings per share
Diluted earnings per share
38
38
Earnings per share for profit/(loss) attributable to the owners of City Chic
Collective Limited
Basic earnings per share
Diluted earnings per share
38
38
7.4
7.4
0.9
0.9
8.3
8.3
7.8
7.8
(12.6)
(12.6)
(4.8)
(4.8)
The above consolidated statement of profit or loss and other comprehensive income should be read in
conjunction with the accompanying notes.
55
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Consolidated statement of financial position
As at 30 June 2019
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Other
Income tax receivable
Assets of disposal groups classified as held for sale
Total current assets
Non-current assets
Plant and equipment
Intangibles
Deferred tax
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Provisions
Income tax payable
Other
Liabilities directly associated with assets classified as held for sale
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Other
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
Note
Consolidated
2019
$'000
2018
$'000
8
9
10
11
12
7
13
14
15
16
17
18
19
7
20
21
22
23,214
4,574
19,353
-
1,323
-
48,464
-
48,464
9,306
15,153
12,057
36,516
28,929
4,025
15,819
126
-
15
48,914
125,063
173,977
6,684
10,095
5,349
22,128
84,980
196,105
25,522
5,071
5,544
761
36,898
-
36,898
-
1,941
1,875
3,816
44,277
7,395
-
491
52,163
91,791
143,954
12,860
1,784
406
15,050
40,714
159,004
44,266
37,101
23
24
25
49,139
(248)
(4,625)
49,139
(1,047)
(10,991)
44,266
37,101
The above consolidated statement of financial position should be read in conjunction with the accompanying
notes.
56
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Consolidated statement of changes in equity
For the period ended 30 June 2019
Consolidated
Issued capital
$'000
Share-based
payments
reserve
$'000
Hedging
reserve
$'000
Foreign
currency
translation
reserve
$'000
Accumulated
losses
$'000
Total equity
$'000
Balance at 1 July 2017
134,497
61
(3,547)
107
(87,043)
44,075
Loss after income tax benefit for
the period
Other comprehensive income for
the period, net of tax
Total comprehensive income for the
period
Capital reduction1
Balance at 1 July 2018
-
-
-
(85,358)
49,139
-
-
-
-
61
-
-
(9,306)
(9,306)
3,635
(1,303)
-
2,332
3,635
(1,303)
(9,306)
(6,974)
-
88
-
85,358
-
(1,196)
(10,991)
37,101
Consolidated
Issued capital
$'000
Share-based
payments
reserve
$'000
Hedging
reserve
$'000
Foreign
currency
translation
reserve
$'000
Accumulated
losses
$'000
Total equity
$'000
Balance at 2 July 2018
49,139
61
88
(1,196)
(10,991)
37,101
Profit after income tax benefit for
the period
Other comprehensive income for
the period, net of tax
Total comprehensive income for the
period
Transactions with owners in their
capacity as owners:
Share-based payments (note 39)
Dividends paid (note 26)
-
-
-
-
-
Balance at 30 June 2019
49,139
-
-
-
1,080
-
1,141
-
(88)
-
15,978
15,978
(193)
-
(281)
(88)
(193)
15,978
15,697
-
-
-
-
-
-
(9,612)
1,080
(9,612)
(1,389)
(4,625)
44,266
The above consolidated statement of changes in equity should be read in conjunction with the accompanying
notes.
1 During FY2018, the parent entity undertook a capital reduction to reduce its share capital by $85.4 m to $49.1 m, in accordance with section 258F of the
Corporations Act 2001. The reduction was allocated in full to the prior period accumulated losses account in the parent entity with no impact on the net assets
of either the parent entity of the Group. On consolidation, the share capital of the Group also reduced by $85.4 m to $49.1 m.
57
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Consolidated statement of cash flows
For the period ended 30 June 2019
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers (inclusive of GST)
Interest received
Other revenue
Interest and other finance costs paid
Income taxes paid
Note
Consolidated
2019
$'000
2018
$'000
Restated
163,351
(165,875)
591
250
(218)
(1,933)
148,325
(129,364)
53
809
(814)
(141)
Net cash (used in)/from operating activities
37
(3,834)
18,868
Cash flows from investing activities
Payments for plant and equipment
Payments for intangibles
Proceeds from sale of plant and equipment
Proceeds from sale of discontinued operations
Net cash from/(used in) investing activities
Cash flows from financing activities
Repayment of borrowings
Payment of dividends
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial period
Effects of exchange rate changes on cash and cash equivalents
Net cash used in discontinued operations
Cash and cash equivalents at the end of the financial period
13
14
7
8
(4,936)
(5,692)
-
31,099
(2,206)
(1,290)
368
-
20,471
(3,128)
(12,860)
(9,612)
(1,671)
-
(22,472)
(1,671)
(5,835)
28,929
120
-
14,069
17,431
-
(2,571)
23,214
28,929
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
58
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 1. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These
policies have been consistently applied to all the periods presented, unless otherwise stated.
New or amended Accounting Standards and Interpretations adopted
The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued
by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early
adopted.
The adoption of these Accounting Standards and Interpretations did not have any significant impact on the
financial performance or position of the consolidated entity.
The following Accounting Standards and Interpretations are most relevant to the consolidated entity:
AASB 9 Financial Instruments
The consolidated entity has adopted AASB 9 from 2 July 2018. The standard introduced new classification and
measurement models for financial assets. A financial asset shall be measured at amortised cost if it is held within
a business model whose objective is to hold assets in order to collect contractual cash flows which arise on
specified dates and that are solely principal and interest. A debt investment shall be measured at fair value
through other comprehensive income if it is held within a business model whose objective is to both hold assets
in order to collect contractual cash flows which arise on specified dates that are solely principal and interest as
well as selling the asset on the basis of its fair value. All other financial assets are classified and measured at fair
value through profit or loss unless the entity makes an irrevocable election on initial recognition to present gains
and losses on equity instruments (that are not held-for-trading or contingent consideration recognised in a
business combination) in other comprehensive income ('OCI'). Despite these requirements, a financial asset may
be irrevocably designated as measured at fair value through profit or loss to reduce the effect of, or eliminate,
an accounting mismatch. For financial liabilities designated at fair value through profit or loss, the standard
requires the portion of the change in fair value that relates to the entity's own credit risk to be presented in OCI
(unless it would create an accounting mismatch). New simpler hedge accounting requirements are intended to
more closely align the accounting treatment with the risk management activities of the entity. New impairment
requirements use an 'expected credit loss' ('ECL') model to recognise an allowance. Impairment is measured
using a 12-month ECL method unless the credit risk on a financial instrument has increased significantly since
initial recognition in which case the lifetime ECL method is adopted. For receivables, a simplified approach to
measuring expected credit losses using a lifetime expected loss allowance is available. There was no material
adjustment in the current year arising as a result of adoption.
AASB 15 Revenue from Contracts with Customers
The consolidated entity has adopted AASB 15 from 2 July 2018. The standard provides a single comprehensive
model for revenue recognition. The core principle of the standard is that an entity shall recognise revenue to
depict the transfer of promised goods or services to customers at an amount that reflects the consideration to
which the entity expects to be entitled in exchange for those goods or services. The standard introduced a new
contract-based revenue recognition model with a measurement approach that is based on an allocation of the
transaction price. This is described further in the accounting policies below. Credit risk is presented separately
as an expense rather than adjusted against revenue. Contracts with customers are presented in an entity's
statement of financial position as a contract liability, a contract asset, or a receivable, depending on the
relationship between the entity's performance and the customer's payment. Customer acquisition costs and
costs to fulfil a contract can, subject to certain criteria, be capitalised as an asset and amortised over the contract
period. There was no material adjustment in the current year arising as a result of adoption.
59
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 1. Significant accounting policies (continued)
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting
Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') and the
Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply
with International Financial Reporting Standards as issued by the International Accounting Standards Board
('IASB').
Historical cost convention
The financial statements have been prepared under the historical cost convention, except for, where applicable,
the revaluation of financial assets and liabilities at fair value through profit or loss, financial assets at fair value
through other comprehensive income, investment properties, certain classes of, plant and equipment and
derivative financial instruments.
Offsetting financial assets and liabilities
Financial assets and financial liabilities have been offset and the net amount presented in the statement of
financial position where the consolidated entity currently has a legally enforceable right to set off the recognised
amounts and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of applying the consolidated entity's accounting
policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and
estimates are significant to the financial statements, are disclosed in note 2.
Restatement of comparatives
The comparatives on the consolidated statement of cash flow statement and related notes have been restated
to present cash flows from continuing activities, which aligns with current year disclosures for continuing and
discontinued operations. Information on discontinued operations is included in Note 7. Discontinued Operations.
The comparatives for the consolidated statement of financial performance and consolidated statement of
financial position have not been restated.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated
entity only. Supplementary information about the parent entity is disclosed in note 33.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of City Chic
Collective Limited ('Company' or 'parent entity') as at 30 June 2019 and the results of all subsidiaries for the
period then ended. City Chic Collective Limited and its subsidiaries together are referred to in these financial
statements as the 'consolidated entity'.
Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls
an entity when the consolidated entity is exposed to, or has rights to, variable returns from its involvement with
the entity and has the ability to affect those returns through its power to direct the activities of the entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the consolidated entity. They
are de-consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated
entity are eliminated. 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 consolidated entity.
60
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 1. Significant accounting policies (continued)
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in
ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference
between the consideration transferred and the book value of the share of the non-controlling interest acquired
is recognised directly in equity attributable to the parent.
Where the consolidated entity 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 consolidated entity 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.
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
The financial statements are presented in Australian dollars, which is City Chic Collective Limited's functional and
presentation currency.
Foreign currency transactions
Foreign currency transactions are translated into Australian dollars 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 financial period-end exchange rates of monetary assets and liabilities denominated
in foreign currencies are recognised in profit or loss.
Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at
the reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using
the average exchange rates, which approximate the rates at the dates of the transactions, for the period. All
resulting foreign exchange differences are recognised in other comprehensive income through the foreign
currency reserve in equity.
The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is
disposed of.
Revenue recognition
The consolidated entity recognises revenue as follows:
Revenue from contracts with customers
When recognising revenue in relation to the sale of goods to customers, the key performance obligation of the
consolidated entity is considered to be the point of delivery of the goods to the customer, as this is deemed to
be the time that the customer obtains control of the promised goods and therefore the benefits of unimpeded
access.
For each contract with a customer, the consolidated entity: identifies the contract with a customer; identifies the
performance obligations in the contract; determines the transaction price which takes into account estimates of
variable consideration and the time value of money; allocates the transaction price to the separate performance
obligations on the basis of the relative stand-alone selling price of each distinct good or service to be delivered;
and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer
to the customer of the goods or services promised.
61
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 1. Significant accounting policies (continued)
Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as
discounts, rebates and refunds, any potential bonuses receivable from the customer and any other contingent
events. Such estimates are determined using either the 'expected value' or 'most likely amount' method. The
measurement of variable consideration is subject to a constraining principle whereby revenue will only be
recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue
recognised will not occur. The measurement constraint continues until the uncertainty associated with the
variable consideration is subsequently resolved. Amounts received that are subject to the constraining principle
are initially recognised as deferred revenue in the form of a separate refund liability. Refer to Note 2 on
consideration of Contract liabilities for vendor funded markdown provision.
Sale of goods
Revenue from the sale of goods is recognised at the point in time when the customer obtains control of the
goods, which is generally at the time of delivery.
Retail sales
Revenue is recognised at the point of sale, which is where the customer has taken delivery of the goods. Amounts
disclosed as revenue are net of sales returns, trade discounts and commission paid.
Wholesale revenue
Revenue is recognised at time of delivery less an allowance for estimated customer returns, rebates and other
similar allowances.
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of
calculating the amortised cost of a financial asset and allocating the interest income over the relevant period
using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through
the expected life of the financial asset to the net carrying amount of the financial asset.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
Income 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.
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.
62
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 1. Significant accounting policies (continued)
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.
City Chic Collective Limited (the 'head entity') and its wholly-owned Australian subsidiaries have formed an
income tax consolidated group under the tax consolidation regime. The head entity and each subsidiary in the
tax consolidated group continue to account for their own current and deferred tax amounts. The tax consolidated
group has applied the 'separate taxpayer within group' approach in determining the appropriate amount of taxes
to allocate to members of the tax consolidated group.
In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities
(or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from each
subsidiary in the tax consolidated group.
The amount receivable/payable under the tax funding agreement is due upon receipt of the funding advice from
the head entity, which is issued as soon as practicable after the end of each financial year. The head entity may
also require payment of interim funding amounts to assist with its obligations to pay tax instalments.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as
amounts receivable from or payable to other entities in the tax consolidated group. The tax funding arrangement
ensures that the intercompany charge equals the current tax liability or benefit of each tax consolidated group
member, resulting in neither a contribution by the head entity to the subsidiaries nor a distribution by the
subsidiaries to the head entity.
Discontinued operations
A discontinued operation is a component of the consolidated entity that has been disposed of or is classified as
held for sale and that represents a separate major line of business or geographical area of operations, is part of
a single co-ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired
exclusively with a view to resale. The results of discontinued operations are presented separately on the face of
the statement of profit or loss and other comprehensive income.
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 consolidated entity'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 consolidated entity's normal
operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the
reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months
after the reporting period. All other liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held 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 which are subject to an insignificant risk of changes in value.
63
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 1. Significant accounting policies (continued)
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 allowance for expected credit losses. Trade receivables are generally due for
settlement within 30 days.
The consolidated entity has applied the simplified approach to measuring 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.
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 makes assumptions to allocate an
overall expected credit loss rate for each group. These assumptions include recent sales experience and historical
collection rates.
Right of return assets
Right of return assets represents the right to recover inventory sold to customers and is based on an estimate
of customers who may exercise their right to return the goods and claim a refund. Such rights are measured at
the value at which the inventory was previously carried prior to sale, less expected recovery costs and any
impairment.
Inventories
Finished goods are stated at the lower of cost and net realisable value on a 'first in first out' basis. Cost comprises
of purchase and delivery costs, net of rebates and discounts received or receivable.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of
completion and the estimated costs necessary to make the sale.
Non-current assets held for sale
Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a
sale transaction rather than through continued use. They are measured at the lower of their carrying amount and
fair value less costs of disposal. For non-current assets be classified as held for sale, they must be available for
immediate sale in their present condition and their sale must be highly probable.
An impairment loss is recognised for any initial or subsequent write down of the non-current assets to fair value
less costs of disposal. A gain is recognised for any subsequent increases in fair value less costs of disposal of
non-current assets, but not in excess of any cumulative impairment loss previously recognised.
Non-current assets are not depreciated or amortised while they are classified as held for sale. Interest and other
expenses attributable to the liabilities of assets held for sale continue to be recognised.
Non-current assets classified as held for sale are presented separately on the face of the statement of financial
position, in current assets. The liabilities classified as held for sale are presented separately on the face of the
statement of financial position, in current liabilities.
Financial assets
Financial assets are initially measured at fair value. Transaction costs are included as part of the initial
measurement, except for financial assets at fair value through profit or loss. Such assets are subsequently
measured at either amortised cost or fair value depending on their classification. Classification is determined
based on both the business model within which such assets are held and the contractual cash flow characteristics
of the financial asset unless, an accounting mismatch is being avoided.
64
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 1. Significant accounting policies (continued)
Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred
and the consolidated entity has transferred substantially all the risks and rewards of ownership. When there is
no reasonable expectation of recovering part or all of a financial asset, it's carrying value is written off.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. They are carried at amortised cost using the effective interest rate method. Gains
and losses are recognised in profit or loss when the asset is derecognised or impaired.
Impairment of financial assets
The consolidated entity recognises an allowance based on an 'expected credit loss' ('ECL') model. Impairment is
measured using a 12-month ECL method unless the credit risk on a financial instrument has increased significantly
since initial recognition in which case the lifetime ECL method is adopted. For receivables, a simplified approach
to measuring expected credit losses using a lifetime expected loss allowance is available.
For financial assets measured at fair value through other comprehensive income, the loss allowance is recognised
within other comprehensive income. In all other cases, the loss allowance is recognised in profit or loss.
Plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost
includes expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of plant and equipment
over their expected useful lives which ranges from 2 to 10 years.
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each
reporting date.
The consolidated entity determines the estimated useful lives and related depreciation and amortisation charges
for its plant and equipment. The useful lives could change significantly as a result of technical innovations or
some other event. The depreciation and amortisation charge will increase where the useful lives are less than
previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will
be written off or written down.
An item of 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.
Intangible assets
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their
fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost.
Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment.
Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. The gains
or losses recognised in profit or loss arising from the derecognition of intangible assets are measured as the
difference between net disposal proceeds and the carrying amount of the intangible asset. The method and
useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption
or useful life are accounted for prospectively by changing the amortisation method or period.
Goodwill
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.
65
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 1. Significant accounting policies (continued)
Brand
Brand is recognised on acquisition of brand assets. Brand assets have been determined to be indefinite life
intangibles and is not amortised. Brand 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 brand are taken to profit or loss and are not subsequently reversed.
Other intangible assets
Significant costs associated with the development of the revenue generating aspects of the website, including
the capacity of placing orders, are deferred and amortised on a straight-line basis over the period of their
expected benefit, being their finite life of 4 years.
Significant costs associated with software are deferred and amortised on a diminishing value basis over the
period of their expected benefit, being their finite life of 2-4 years.
Impairment of non-financial assets
Goodwill and brand valuation have an indefinite useful life and 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 an asset's fair value less costs of disposal and value-in-use. The value-in-use
is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific
to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows
are grouped together to form a cash-generating unit.
Trade and other payables
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end
of the financial period and which are unpaid. Due to their short-term nature they are measured at amortised cost
and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition.
Borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction
costs. They are subsequently measured at amortised cost using the effective interest method.
Where there is an unconditional right to defer settlement of the liability for at least 12 months after the reporting
date, the loans or borrowings are classified as non-current.
Finance costs
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are
expensed in the period in which they are incurred.
Provisions
Lease make good provision
A provision has been made for the present value of anticipated costs for future restoration of leased premises.
The provision includes future cost estimates associated with closure of the premises. The calculation of this
provision requires assumptions such as application of closure dates and cost estimates. The provision recognised
for each site is periodically reviewed and updated based on the facts and circumstances available at the time.
Changes to the estimated future costs for sites are recognised in the statement of financial position by adjusting
the asset and the provision. Reductions in the provision that exceed the carrying amount of the asset will be
recognised in profit or loss.
66
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 1. Significant accounting policies (continued)
Onerous lease provision
A provision has been made for onerous lease contracts. The provision is calculated based on an estimate of the
lease space under contract that is surplus to requirements, less any amounts receivable under a sub-lease
agreement.
Sales return provision
In determining the level of provision required for sales return the consolidated entity has made judgements in
respect of the expected return rate of products based on customer type. The provision is based on estimates
made from historical return data.
Employee Benefits
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred.
Share-based payments
Performance rights issued have been accounted for as equity-settled transactions. The consolidated entity
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 the Binomial 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.
The cost of equity-settled transactions is measured at fair value on grant date. Fair value is independently
determined using the Binomial model that takes into account the exercise price, the term of the option, the
impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected
dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that
do not determine whether the consolidated entity receives the services that entitle the employees to receive
payment. No account is taken of any other vesting conditions.
The cost of equity-settled transactions is recognised as an expense with a corresponding increase in equity over
the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the
award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting
period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each
reporting date less amounts already recognised in previous periods.
Market conditions are taken into consideration in determining fair value. Therefore, any awards subject to market
conditions are considered to vest irrespective of whether or not that market condition has been met, provided
all other conditions are satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been
made. An additional expense is recognised, over the remaining vesting period, for any modification that increases
the total fair value of the share-based compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the consolidated entity or employee, the failure to satisfy the
condition is treated as a cancellation. If the condition is not within the control of the consolidated entity or
employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over
the remaining vesting period, unless the award is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any
remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award,
the cancelled and new award is treated as if they were a modification.
67
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 1. Significant accounting policies (continued)
Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure
purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date; and assumes that the
transaction will take place either: in the principal market; or in the absence of a principal market, in the most
advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or
liability, assuming they act in their economic best interests. For non-financial assets, the fair value measurement
is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for
which sufficient data are available to measure fair value, are used, maximising the use of relevant observable
inputs and minimising the use of unobservable inputs.
Issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction,
net of tax, from the proceeds.
Dividends
Dividends are recognised when declared during the financial period and no longer at the discretion of the
Company.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of City Chic Collective
Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of
ordinary shares outstanding during the financial period, adjusted for bonus elements in ordinary shares issued
during the financial period.
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 ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is
not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the
asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of
GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the
statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the
tax authority.
68
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 1. Significant accounting policies (continued)
Rounding of amounts
The company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance
with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet
mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 30
June 2019. The consolidated entity's assessment of the impact of these new or amended Accounting Standards
and Interpretations, most relevant to the consolidated entity, are set out below.
AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The standard
replaces AASB 117 'Leases' and for lessees will eliminate the classifications of operating leases and finance leases.
Subject to exceptions, a 'right-of-use' (ROU) asset will be capitalised in the statement of financial position,
measured at the present value of the unavoidable future lease payments to be made over the lease term. The
exceptions relate to short-term leases of 12 months or less and leases of low-value assets (such as personal
computers and small office furniture) where an accounting policy choice exists whereby either a 'right-of-use'
asset is recognised or lease payments are expensed to profit or loss as incurred.
A liability corresponding to the capitalised lease will also be recognised, adjusted for lease prepayments, lease
incentives received, initial direct costs incurred and an estimate of any future restoration, removal or dismantling
costs.
Straight-line operating lease expense recognition will be replaced with a depreciation charge for the leased asset
(included in operating costs) and an interest expense on the recognised lease liability (included in finance costs).
In the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher when
compared to lease expenses under AASB 117. However, EBITDA (Earnings Before Interest, Tax, Depreciation and
Amortisation) results will be improved as the operating expense is replaced by interest expense and depreciation
in profit or loss under AASB 16.
For classification within the statement of cash flows, the lease payments will be separated into both a principal
(financing activities) and interest (either operating or financing activities) component.
The consolidated entity will adopt this standard from 1 July 2019. The consolidated entity is implementing
processes to capture all leases in scope and performing the accounting entries in compliance with the new
standard.
The consolidated entity plans to apply AASB 16 initially on 1 July 2019, using a hybrid model by lease approach
which includes simplified and modified retrospective. Therefore, the cumulative effect of adopting AASB 16 will
be recognised as an adjustment to opening balance of retained earnings at 1 July 2019, with no restatement of
comparative information.
The consolidated entity plans to apply the practical expedient to apply AASB 16 on contracts that were
previously identified as leases under AASB 117 and Interpretation 4 which will result in the consolidated entity
recognising new ROU assets and lease liabilities for its store leases and head office lease. The consolidated entity
store portfolio consists of a high number of stores where leases have expired and are currently on holdover as
well as leases due to expire in the next 12 months. While the lease commitments on these leases will be minimal
under AASB 117 reporting, the consolidated entity has considered the likelihood of renewal options or staying on
past lease expiry based on historical data to reassess the lease term.
69
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 1. Significant accounting policies (continued)
Based on the above assessment, estimated impact on consolidated statement of financial position as at 1 July
2019:
Lease liabilities $30.0 m - $35.0 m
ROU assets $28.0 m – $32.0 m
The net effect of the new lease liabilities and ROU assets adjusted for deferred tax will be recognised in retained
earnings.
Note 2. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates, judgement in
accounting policy and assumptions that affect the reported amounts in the financial statements. Management
continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue
and expenses. Management bases its judgements, estimates and assumptions on historical experience and on
other various factors, including expectations of future events, management believes to be reasonable under the
circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results.
The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are
discussed below.
Gain or loss on divestment of brands and the related tax
On 2 July 2018, the Group completed the sale of the businesses associated with the operations and brands of
Millers, Katies, Rivers, Autograph and Crossroads to Noni B Limited. The agreement was to sell these brands for
consideration of $31.0 m (plus or minus post completion adjustment). Independent experts were appointed to
determine the outcome of the completion adjustment and other aspects of the Business Sale Agreement. As
announced by the Group to the ASX on 24 June 2019, those disputes were determined by independent experts
in the Group’s favour. On 31 July 2019, Noni B Limited filed proceedings in the Supreme Court of New South
Wales seeking orders setting aside the independent experts’ determination. Notwithstanding that City Chic
received a favourable expert determination, given the subsequent proceedings filed by Noni B, the Group has
been prudent and provisioned accordingly.
A discontinued operation is a component of the Group that represents a separate major line of business that is
part of a disposal plan. The result of the sale is considered a discontinued operation, and the results are presented
separately in the Consolidated statement of profit and loss. In the prior year the assets and liabilities held for sale
were classified accordingly in the balance sheet. Judgement and estimation was applied by management over
impairment of discontinued operations assets and allocation of associated costs. It involved a high degree of
complexity and a risk of a potential material adjustment to the carrying amounts of assets and liabilities within
subsequent periods.
In the current year, adjustments to the assets and liabilities held for sale have been realised and presented in the
discontinued operations as part of the gain or loss on disposal. Furthermore, management has applied judgement
to the post completion adjustment under dispute and provided adequately by taking into account both
qualitative and quantitative impacts of the divestment such as the complexity, expert involvement and pending
legal review by the Supreme Court. The financial performance of the discontinued operation has been impacted
by these judgements applied, during the year. At year end, similar judgement was applied over the valuation of
the liabilities associated with the divestment and the post completion adjustment.
Given the finalisation of the completion adjustment is yet to be determined and as a consequence the divestment
proceeds is still uncertain, any changes to the completion adjustment and liabilities associated with the
divestment will impact the Group’s future profit or loss as part of discontinued operations. Furthermore the
calculation of the associated tax impact of the discontinued operations for the current financial year is complex
and includes an estimated taxable capital gain on the sale as well as the recognition of deferred tax assets on
previously unrecognised capital losses which are expected to be available to the Group in relation to capital
assets sold. The calculations included the use of estimation and judgement.
70
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 2. Critical accounting judgements, estimates and assumptions (continued)
Contract liabilities for vendor funded markdown provision
In determining the level of vendor funded markdown provision required the consolidated entity has made
judgements in respect of expected vendor discounting and likelihood of vendor achieving their guaranteed
margin. The provision is based on estimates from historical margin achieved by the vendor.
Provision for impairment of inventories
The provision for impairment of inventories assessment requires a degree of estimation and judgement. The
level of the provision is assessed by taking into account the recent sales experience, the ageing of inventories
and other factors that affect inventory obsolescence.
Goodwill and other indefinite life intangible assets
The consolidated entity tests annually, or more frequently if events or changes in circumstances indicate
impairment, whether goodwill and other indefinite life intangible assets have suffered any impairment, in
accordance with the accounting policy stated in note 1. 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.
Impairment of plant and equipment
The consolidated entity assesses impairment of plant and equipment at each reporting date by evaluating
conditions specific to the consolidated entity and to the particular asset that may lead to impairment. If an
impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs
of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions.
Income tax
The consolidated entity is subject to income taxes in the jurisdictions in which it operates. Significant judgement
is required in determining the provision for income tax. There are many transactions and calculations undertaken
during the ordinary course of business for which the ultimate tax determination is uncertain. The consolidated
entity recognises liabilities for anticipated tax audit issues based on the consolidated entity's current
understanding of the tax law. Where the final tax outcome of these matters is different from the carrying
amounts, such differences will impact the current and deferred tax provisions in the period in which such
determination is made.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences only if the consolidated entity
considers it is probable that future taxable amounts will be available to utilise those temporary differences and
losses.
Note 3. Operating segments
Identification of reportable operating segments
The consolidated entity is organised into one operating segment, being fashion retail. The operating segment is
based on the internal reports that are reviewed and used by the Chief Executive Officer (who is identified as the
Chief Operating Decision Maker ('CODM')) in assessing performance and in determining the allocation of
resources.
The CODM assesses the performance of the operating segments based on a measure of Underlying Earnings
Before Interest, Tax, Depreciation and Amortisation (EBITDA). 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 at least a monthly basis, including weekly reporting on key metrics.
Major customers
There is no revenue that is significant from any particular customer. Segment revenue from external parties,
assets and liabilities are all reported to the CODM in a manner consistent with the financial statements.
71
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 3. Operating segments (continued)
Revenue by geographical area
The Group operates in the following geographical areas:
•
Southern hemisphere – includes Australia and New Zealand; both regions serviced by stores and website.
• Northern hemisphere – includes US and Europe. US sales are comprised of online (website and marketplace)
and wholesale; Europe business is solely wholesale.
Refer to Note 4. Revenue for details on revenue by geographical area.
Reconciliation of operating profit before income tax to underlying EBITDA (Earnings before interest, taxation,
depreciation, amortisation and impairment, and other adjustments) from continuing operations is provided as
follows:
Net profit after tax from continuing operations
Net interest (income)/expense
Tax expense/(benefit)
Depreciation, amortisation and impairment expense
Release of store exit costs1
Gain on hedging contract2
Restructuring costs3
Provision for onerous lease and contract4
Transition costs5
Consolidated
2019
$'000
2018
$'000
14,265
(373)
4,980
3,942
(289)
-
-
(272)
2,625
14,959
1,576
(3,482)
3,862
(1,109)
(1,715)
1,872
3,910
-
Underlying EBITDA from continuing operations
24,878
19,873
Note 4. Revenue
From continuing operations
Sales of goods
Interest revenue
Other revenue
Revenue from ordinary activities
Consolidated
2019
$'000
2018
$'000
148,432
131,870
591
250
14
270
149,273
132,154
1 Writeback of USA provision for onerous lease.
2 Related to close out of cash flow hedges following the divestment of 5 brands to Noni B Limited (NBL).
3 Restructuring cost includes redundancies and retention payments to employees in relation to divestment of 5 brands to NBL and renewal of corporate bank
facility and associated fees.
4 Related to provision for head office unutilised space and onerous contract from the Transition Service Agreement (divestment of brands) – agreement whereby
provision of transition service from NBL to the Group is indicated. FY2019 related to provision on store identified as impaired.
5 Transition costs related to costs incurred to implement the separation of the divested brands and the organisational transformation.
72
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 4. Revenue (continued)
Disaggregation of revenue
The disaggregation of revenue from contracts with customers is as follows:
Timing of revenue recognition
Goods transferred at a point in time
Geographical regions
Southern hemisphere
Northern hemisphere
Channel
Stores
Online website
Online marketplace
Wholesale
Note 5. Expenses
Profit before income tax from continuing operations includes the following specific expenses:
Cost of sales
Depreciation, amortisation and impairment expense
Rental expense relating to operating leases1
Defined contribution superannuation expense
Share-based payments expense
Employee benefits expense excluding superannuation and share based-payment expense
Subtotal
Other expenses
Utility and maintenance expenses
Professional and consulting fees
Transactional fees and charges
Other
Subtotal
Total
Consolidated
2019
$'000
2018
$'000
148,432
131,870
119,466
28,966
148,432
74,588
55,571
9,162
9,111
148,432
110,975
20,895
131,870
78,077
41,210
6,395
6,188
131,870
Consolidated
2019
$'000
2018
$'000
62,568
3,942
14,886
1,934
1,080
27,997
112,407
3,228
3,051
2,304
8,820
17,403
129,810
54,102
3,862
16,913
1,816
-
25,184
101,877
2,667
3,368
1,509
9,680
17,224
119,101
1 FY2018 period includes release of store exit costs of $1.1 m and provision for onerous lease at Alexandria head office of $3.3 m. FY2019 period includes reversal
of onerous lease provisions of $0.3 m for Alexandria support office and $0.3 m for USA.
73
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 6. Income tax expense/(benefit)
a) Income tax expense/(benefit)
Current tax
Deferred tax - origination and reversal of temporary differences
Prior year overprovisions
Adjustment on prior year estimated capital gains tax
Deferred tax asset released to income tax expense relating to discontinued operations
Aggregate income tax expense/(benefit)
Deferred tax included in income tax expense/(benefit) comprises:
Increase/(decrease) in deferred tax assets (note 15)
b) Numerical reconciliation of income tax expense/(benefit) and tax at the
statutory rate
Profit/(loss) before income tax expense
Tax at the statutory tax rate of 30%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Entertainment expenses
CFC income
Sundry items
Prior year overprovisions
Adjustment on prior year estimated capital gains tax
Difference in overseas tax rates
Foreign currency differences
Tax loss not recognised/utilised
Trading day adjustment
Deferred tax recognised on prior year tax losses
Income tax expense/(benefit)
Income tax expense/(benefit) related to continuing operations
Income tax (benefit)/expense related to discontinued operations
c) Amounts charged directly to equity
Deferred tax assets (note 15)
d) Income tax losses not recognised
Unused income tax losses for which no deferred tax asset has been recognised
Potential income tax benefit at tax rate of 30%
Consolidated
2019
$'000
2018
$'000
4,490
255
(2,230)
(7,078)
(1,123) -
3,843 -
5,096
(1,727)
-
4,980
2,230
(2,006)
19,245
(11,033)
5,774
(3,310)
2
55
441
6,272
(1,123)
3,843
25
-
-
-
(4,037)
3
117
2,701
(489)
-
-
(1)
1
469
2
(1,710)
4,980
(1,727)
4,980
(4,012)
(3,482)
1,755
(38)
1,558
-
-
1,563
469
The above potential tax benefit for income tax losses has not been recognised in the statement of financial
position as at 1 July 2018.
74
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 6. Income tax expense/(benefit) (continued)
e) Capital losses
Unused tax losses related to capital losses of $147.0 m (2018: $131.5 m) carried forward to which no deferred
tax asset has been recognised. These tax losses can only be utilised in the future if the continuity of ownership
test is passed, or failing that, the same business test is passed.
The agreement to sell the Brands’ businesses to Noni B Limited resulted in a crystallised capital gain of $10.6 m
in the current year. In the prior year this was previously estimated as $23.4 m. Notwithstanding the final sale
was completed in this financial year on 2 July 2018, the capital gain arose in the prior year due to the contractual
conditions precedent satisfied prior to 1 July 2018. Apportionment of proceeds between revenue generating
assets and capital assets sold and appropriate consideration of the cost bases resulted in a considerable change
in estimated capital gains.
The Group estimated capital gains tax on the disposal group of $3.2 m (2018: $7.0 m) and recognised this within
the tax benefit/expense in discontinued operations. Further, as a result of the above, the Group also recognised
a deferred tax asset of $3.2 m (2018: $7.0 m) in respect to the first-time recognition of previous capital losses
incurred by the Group. These have been recognised as part of the tax benefit/expense in the results from
continuing operations. As the capital losses will offset the capital gains there is no impact on the consolidated
statement of financial position.
Due to the reversal of $3.8 m of explained tax payable and associated deferred tax asset, the relevant
adjustments have been passed within the respective continuing and discontinued business results this year.
f) Income tax losses
As at 30 June 2019, the consolidated entity had carried forward income tax losses of $20.8 m (2018: $12.4 m).
These losses were fully recognised as a deferred tax asset for the year ended 30 June 2019 and partially
recognised for the year ended 1 July 2018.
g) Tax consolidation legislation
City Chic Collective Limited and its wholly-owned Australian controlled entities implemented the tax
consolidation legislation as of 1 July 2003. The accounting policy in relation to this legislation is set out in note
1.
Note 7. Discontinued operations
Description
On 2 July 2018, the Group divested five of its brands to Noni B Limited (ASX:NBL) for cash consideration of
$31.0 m (before post completion adjustments, transaction and separation costs). The Group retained ownership
of the brand City Chic. Refer to note 36. Events after the reporting period for further information.
The divestment of the five brands took effect from 2 July 2018 and is reported as a discontinued operation.
Refer below for financial information relating to the discontinued operations.
75
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 7. Discontinued operations (continued)
Financial performance information
Revenue1
Expenses
Loss before income tax from discontinued operations
Income tax benefit/(expense)2
Profit/(Loss) after income tax from discontinued operations
Gain on measurement of disposal group to fair value less cost to sell
Gain on disposal of disposal group
Profit/(Loss) after income tax from discontinued operations
Consolidated
2019
$'000
2018
$'000
-
(3,366)
(3,366)
620,650
(643,560)
(22,910)
4,012
(1,755)
646
(24,665)
-
1,067
1,713
400
-
(24,265)
Cash flow information
The results of cash flows used in the discontinued operations during the period are set out below:
Net cash from operating activities
Net cash used in investing activities
Net cash used in financing activities
Net decrease in cash and cash equivalents from discontinued operations
Details of the disposal
Breakdown – gain/loss on disposal
Net assets held for sale - reported
Adjustments to assets held for sale
Net assets held for sale - adjusted
Proceeds from sale
Carrying amount of net assets disposed
Loss on disposal of net assets
Note 8. Current assets - cash and cash equivalents
Cash at bank
Term deposit
Consolidated
2019
$'000
2018
$'000
-
-
-
-
20,206
(11,594)
(11,183)
(2,571)
2019
$'000
Consolidated
Adjusted
2018
$'000
Reported
2018
$'000
-
-
-
-
-
-
33,272
(1,535)
31,737
31,000
(31,737)
33,272
-
33,272
31,000
(33,272)
(737)
(2,272)
Consolidated
2019
$'000
2018
$'000
10,214
13,000
23,214
28,929
-
28,929
1 Revenue includes sales and other revenue.
2 In FY2018, the divestment of brands resulted in crystallisation of capital gains of $23.4 m and estimated the capital gains tax on the disposal group of $7.0 m
(recognised through income tax expense in discontinued operations). As a result of appropriate consideration of the revenue generating assets sold and the
capital assets sold, the capital gain has been estimated to be $3.2 m. A reversal of $3.8 m has been passed within the discontinued business results.
76
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 9. Current assets - trade and other receivables
Trade receivables
Prepayments
Other receivables
Refer to note 27 for further information on financial instruments.
Note 10. Current assets - inventories
Inventories on hand at lower of cost and net realisable value
Note 11. Current assets - derivative financial instruments
Forward foreign exchange contracts - cash flow hedges
Note 12. Current assets - other
Prepayments
Right of return assets
Note 13. Non-current assets - plant and equipment
Plant and equipment - at cost
Less: Accumulated depreciation
Consolidated
2019
$'000
2018
$'000
4,181
-
393
4,574
3,174
646
205
4,025
Consolidated
2019
$'000
2018
$'000
19,353
15,819
Consolidated
2019
$'000
2018
$'000
-
126
Consolidated
2019
$'000
2018
$'000
859
464
1,323
-
-
-
Consolidated
2019
$'000
2018
$'000
23,766
(14,460)
22,888
(16,204)
9,306
6,684
77
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 13. Non-current assets - plant and equipment (continued)
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial period
are set out below:
Consolidated
Balance at 1 July 2017
Additions
Disposals
Exchange differences
Transfer to assets held for sale
Depreciation expense
Balance at 1 July 2018
Transfer to intangibles
Adjustment to assets held for sale
Additions
Depreciation expense
Impairment write-back
Exchange differences
Balance at 30 June 2019
Note 14. Non-current assets - intangibles
Goodwill - at cost
Brand – at cost
Other intangible assets - at cost
Less: Accumulated amortisation
Plant and
equipment
$'000
Total
$'000
57,299
1,478
(3,098)
(88)
(45,067)
(3,840)
6,684
(110)
992
4,936
(3,149)
82
(129)
57,299
1,478
(3,098)
(88)
(45,067)
(3,840)
6,684
(110)
992
4,936
(3,149)
82
(129)
9,306
9,306
Consolidated
2019
$'000
2018
$'000
10,095
2,547
3,855
(1,344)
15,153
10,095
-
-
-
10,095
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial period
are set out below:
Consolidated
Balance at 1 July 2017
Additions
Transfer to assets held for sale
Amortisation expense
Balance at 1 July 2018
Transfer from plant and equipment
Additions
Amortisation expense
Exchange differences
Balance at 30 June 2019
Goodwill
$'000
Brand
$'000
Other
intangibles
$'000
Total
$'000
10,095
-
-
-
10,095
-
-
-
-
10,095
8,505
-
(8,505)
-
-
-
2,547
-
-
2,547
4,383
100
(4,461)
(22)
-
110
3,145
(875)
131
2,511
22,983
100
(12,966)
(22)
10,095
110
5,692
(875)
131
15,153
78
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 14. Non-current assets - intangibles (continued)
Goodwill
Determining whether goodwill is impaired requires an estimation of the value-in-use of the cash-generating units
(CGUs) to which goodwill has been allocated. These calculations reflect an estimated cash flow projection based
on a five-year forecast and requires the use of assumptions, including estimated discount rates; growth rates of
estimated future cash flows; and terminal growth rates.
The value-in-use method used in determining the recoverable amount of the CGUs is affected by management's
assumptions used in the calculation.
Growth rates of estimated future cash flows are based on a budget that has been approved by the Board, and
projected for a further four years based on an estimated growth rate of 2.5% (2018: 2.25%). The growth rate has
been determined with reference to industry trends. As part of the annual impairment test for goodwill,
management assesses the reasonableness of growth rate assumptions by reviewing historical cash flow
projections against actual cash flows.
The discount rates used in the value-in-use calculations are pre-tax and reflect management's estimate of the
time value of money, as well as the risks specific to the CGUs. The discount rates have been determined using
the average weighted cost of capital and the current market risk-free rate, adjusted for relevant business risks.
Discount rate applied in the current year value-in-use model: 10.1% (2018: 10.9%). A terminal growth rate of 2.5%
(2018: 2.5%) has been assumed in the value-in-use calculation and reflects the long-term growth expectations
beyond the five-year forecast horizon.
No sensitivity analysis was performed given the significant excess headroom at reporting date. There has been
no impairment loss recognised in relation to goodwill (2018: nil).
Brand
On 29 April 2019, the Group acquired select assets of CMI Enterprises LLC trading as Hips & Curves, a US based
plus-size online retailer, for cash consideration of US$2.0 m. Brand value of A$2.5 m was recognised per
management assessment. There was no impairment recognised in relation to brand at 30 June 2019.
Determining whether brand is impaired requires an estimation of the value-in-use of the CGUs to which the
brand has been allocated. These calculations reflect an estimated cash flow projection based on a five-year
forecast and requires the use of assumptions, including estimated discount rates; growth rates of estimated
future cash flows; and terminal growth rates.
The value-in-use method used in determining the recoverable amount of the CGUs is affected by management's
assumptions used in the calculation.
Growth rates of estimated future cash flows are based on a conservative view of sales around time of acquisition
and projected for a further four years based on an estimated growth rate of 3.0%.
The discount rates used in the value-in-use calculations are pre-tax and reflect management's estimate of the
time value of money, as well as the risks specific to the CGUs. The discount rates have been determined using
the average weighted cost of capital and the current market risk-free rate, adjusted for relevant business risks.
Discount rate applied in the current year value-in-use model: 10.1%. A terminal growth rate of 3.0% has been
assumed in the value-in-use calculation and reflects the long-term growth expectations beyond the five year
forecast horizon.
No sensitivity analysis was performed given the significant excess headroom at reporting date. There has been
no impairment loss recognised in relation to brand.
79
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 15. Non-current assets - deferred tax
Deferred tax asset comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Tax losses1
Plant and equipment
Employee benefits
Other provisions and accruals
Deferred lease incentives
Inventories
Other
Amounts recognised in equity:
Derivative financial instruments
Deferred tax asset
Movements:
Opening balance
Credited to profit or loss - continuing (note 6)
Credited to profit or loss – discontinued (note 7)
Charged to equity (note 6)
Closing balance
Note 16. Current liabilities - trade and other payables
Trade payables
Other payables
Refer to note 27 for further information on financial instruments.
Note 17. Current liabilities - provisions
Provisions – employee benefits
Other provisions
Consolidated
2019
$'000
2018
$'000
5,822
(1,101)
773
5,841
728
(144)
138
12,057
-
12,057
5,349
2,230
4,440
38
12,057
1,766
(3,596)
833
4,355
1,263
705
61
5,387
(38)
5,349
4,901
2,006
-
(1,558)
5,349
Consolidated
2019
$'000
2018
$'000
10,622
14,900
25,522
6,957
37,320
44,277
Consolidated
2019
$'000
2018
$'000
2,285
2,786
5,071
1,401
5,994
7,395
1 Includes tax losses related to City Chic USA operation not previously recognised.
80
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 17. Current liabilities - provisions (continued)
Lease make good
The provision represents the present value of the estimated costs to make good the premises leased by the
consolidated entity at the end of the respective lease terms.
Onerous lease
The provision represents the present value of the estimated costs for unutilised space at the head office
premises.
Sales return provision
The sales return provision represents managements' best estimate of the future outflow of economic benefits
in respect of products sold. The provision is estimated based on historical sales claim information, sales levels
and any recent trends that may suggest future claims could differ from historical amounts.
Stepped lease provision
The stepped lease provision represents the difference between the contract rental charge and that paid over
the lease term.
Movements in provisions
Movements in each class of provision during the current financial period, other than employee benefits, are set
out below:
Consolidated - 2019
Carrying amount at the start of the period
Additional provisions recognised
Amounts transferred to non-current
Amounts used
Carrying amount at the end of the period
Note 18. Current liabilities – income tax
Provision for income tax
Note 19. Current liabilities - other
Deferred lease incentives
$'000
5,994
1,495
(1,987)
(2,716)
2,786
Consolidated
2019
$'000
2018
$'000
5,544
-
Consolidated
2019
$'000
2018
$'000
761
491
Deferred lease incentives
The provision represents lease incentives received. The incentives are allocated to profit or loss in such a manner
that the rent expense is recognised on a straight-line basis over the lease term.
81
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 20. Non-current liabilities - borrowings
Bank loans
Refer to note 27 for further information on financial instruments.
Total secured liabilities
The total secured liabilities (current and non-current) are as follows:
Bank loans
Consolidated
2019
$'000
2018
$'000
-
12,860
Consolidated
2019
$'000
2018
$'000
-
12,860
Assets pledged as security
The bank loans are secured by first mortgages over the consolidated entity's land and buildings.
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Total facilities
Bank loans
Bank guarantee
Corporate credit card
Used at the reporting date
Bank loans1
Bank guarantee
Corporate credit card
Unused at the reporting date
Bank loans
Bank guarantee
Corporate credit card
Consolidated
2019
$'000
2018
$'000
15,000
96
1,500
16,596
-
96
243
339
15,000
-
1,257
16,257
15,000
-
500
15,500
13,114
-
394
13,508
1,886
-
106
1,992
External borrowings at 30 June 2019 was nil (1 July 2018: $12.8 m). On 29 June 2018 the Group renewed its
external finance facilities such that their maturity date was extended to 28 February 2021.
At balance date, bank loan facilities totalling $15.0 m were available to the Group (1 July 2018: $15.0 m). Of these
facilities, $15.0 m was unused (1 July 2018: $1.9 m).
In August 2019, the Group amended its external finance facilities from a working capital facility of $15.0 m to a
general corporate purpose facility of $5.0 m.
1 Includes letter of credit of $0.3 m as at 1 July 2018.
82
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 21. Non-current liabilities - provisions
Provisions – Employee benefits
Other
Consolidated
2019
$'000
2018
$'000
297
1,644
1,941
1,448
336
1,784
Movements in provisions
Movements in each class of provision during the current financial period, other than employee benefits, are set
out below:
Consolidated - 2019
Carrying amount at the start of the period
Additional provisions recognised
Amounts transferred from current
Amounts used
Carrying amount at the end of the period
Note 22. Non-current liabilities - other
Deferred lease incentives
Note 23. Equity - issued capital
$'000
336
84
1,987
(763)
1,644
Consolidated
2019
$'000
2018
$'000
1,875
406
2019
Shares
2018
Shares
2019
$'000
2018
$'000
Consolidated
Ordinary shares - fully paid
192,236,121
192,236,121
49,139
49,1391
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the
company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares
have no par value and the company does not have a limited amount of authorised capital.
Capital risk management
The consolidated entity's objectives when managing capital is to safeguard its ability to continue as a going
concern, so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an
optimum capital structure to reduce the cost of capital.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt
is calculated as total borrowings less cash and cash equivalents.
1 During FY2018, the parent entity undertook a capital reduction to reduce its share capital by $85.4 m to $49.1 m, in accordance with section 258F of the
Corporations Act 2001. The reduction was allocated in full to the prior period accumulated losses account in the parent entity with no impact on the net assets
of either the parent entity of the Group. On consolidation, the share capital of the Group also reduced by $85.4 m to $49.1 m.
83
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 23. Equity - issued capital (continued)
In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends
paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The consolidated entity would look to raise capital when an opportunity to invest in a business or company was
seen as value adding relative to the current company's share price at the time of the investment. The
consolidated entity is not actively pursuing additional investments in the short term.
The consolidated entity is subject to certain financing arrangements covenants and meeting these is given
priority in all capital risk management decisions. There have been no events of default on the financing
arrangements during the financial period.
Note 24. Equity - reserves
Foreign currency reserve
Hedging reserve - cash flow hedges
Share-based payments reserve
Consolidated
2019
$'000
2018
$'000
(1,389)
-
1,141
(248)
(1,196)
88
61
(1,047)
Foreign currency reserve
The reserve is used to recognise exchange differences arising from the translation of the financial statements
of foreign operations to Australian dollars. It is also used to recognise gains and losses on hedges of the net
investments in foreign operations.
Hedging reserve - cash flow hedges
The reserve is used to recognise the effective portion of the gain or loss of cash flow hedge instruments that is
determined to be an effective hedge.
Share-based payments reserve
The reserve is used to recognise the value of equity benefits provided to employees and directors as part of
their remuneration, and other parties as part of their compensation for services.
84
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 24. Equity – reserves (continued)
Movements in reserves
Movements in each class of reserve during the current and previous financial period are set out below:
Consolidated
Balance at 1 July 2017
Revaluation - gross
Deferred tax
Foreign currency translation
Gain on hedges closed out relating to discontinued operations -
recycled to profit and loss
Balance at 1 July 2018
Revaluation - gross
Deferred tax
Foreign currency translation
Share-based payments expense
Balance at 30 June 2019
Share-based
payments
reserve
$'000
Hedging
reserve
$'000
Foreign
currency
translation
reserve
$'000
Total
$'000
61
-
-
-
-
61
-
-
-
1,080
1,141
(3,547)
3,478
(1,558)
107
-
-
(3,379)
3,478
(1,558)
-
(1,303)
(1,303)
1,715
-
1,715
88
(126)
38
-
-
(1,196)
(1,047)
-
-
(193)
-
(126)
38
(193)
1,080
-
(1,389)
(248)
Note 25. Equity – retained earnings / (accumulated losses)
Accumulated losses at the beginning of the financial period
Capital reduction1
Profit/(loss) after income tax for the period
Dividends paid (note 26)
Retained earnings at the end of the financial period2
Retained earnings/(accumulated losses) at the end of the financial period comprises
Loss reserve
Retained earnings
Consolidated
2019
$'000
2018
$'000
(10,991)
-
15,978
(9,612)
(87,043)
85,358
(9,306)
-
(4,625)
(10,991)
(10,991)
6,366
(4,625)
(10,991)
-
(10,991)
1 During FY2018, the parent entity undertook a capital reduction to reduce its share capital by $85.4 m to $49.1 m, in accordance with section 258F of the
Corporations Act 2001. The reduction was allocated in full to the prior period accumulated losses account in the parent entity with no impact on the net assets
of either the parent entity of the Group. On consolidation, the share capital of the Group also reduced by $85.4 m to $49.1 m.
2 Subsequent to the share capital reduction in FY2018, accumulated losses as at 1 July 2018 of $(11.0 m) were transferred to a Loss reserve. Balance as at 30 June
2019 comprises Loss reserve of $(11.0 m) and Retained earnings of $6.4 m.
85
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 26. Equity - dividends
Dividends
Dividends paid during the financial period were as follows:
Interim ordinary dividend for the period ended 30 June 2019 (2019: 2.5 cents per ordinary share (2018:
nil))
Special dividend for the period ended 30 June 2019 (2019: 2.5 cents per ordinary share (2018: nil))
Consolidated
2019
$'000
2018
$'000
4,806
4,806
9,612
-
-
-
Since the end of the period, the directors have declared the payment of a fully franked final ordinary dividend
of 1.5 cents per ordinary share (2018: nil). Record date is 16 September 2019 and payment date is 30
September 2019 for the final ordinary dividend. The aggregate amount of the dividends expected to be paid
on 30 September 2019 out of retained earnings at 30 June 2019, but not recognised as a liability at the end of
the period is $2.9 m.
Franking credits
Franking credits available at the reporting date based on a tax rate of 30%
43,849
45,984
Franking credits that will arise from the payment of the amount of the provision for income tax at the
reporting date based on a tax rate of 30%
Franking credits available for subsequent financial years based on a tax rate of 30%
5,544
-
49,393
45,984
Consolidated
2019
$'000
2018
$'000
The above amounts represent the balance of the franking account as at the end of the financial period, adjusted
for:
●
franking credits that will arise from the payment of the amount of the provision for income tax at the
reporting date
franking debits that will arise from the payment of dividends recognised as a liability at the reporting date
franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date
●
●
Note 27. Financial instruments
Financial risk management objectives
The consolidated entity's activities expose it to a variety of financial risks: market risk (including foreign currency
risk, price risk and interest rate risk), credit risk and liquidity risk. The consolidated entity's overall risk
management program focuses on the unpredictability of financial markets and seeks to minimise potential
adverse effects on the financial performance of the consolidated entity. The consolidated entity uses derivative
financial instruments such as forward foreign exchange contracts where necessary to hedge certain risk
exposures. Derivatives are exclusively used for hedging purposes, i.e. not as trading or other speculative
instruments. In the year ended 30 June 2019, the consolidated entity did not require to use any new derivative
financial instruments with the last cash flow hedge closed out in January 2019. The consolidated entity uses
different methods to measure different types of risk to which it is exposed. These methods include sensitivity
analysis in the case of interest rate, foreign exchange and other price risks, ageing analysis for credit risk and
beta analysis in respect of investment portfolios to determine market risk.
86
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 27. Financial instruments (continued)
Risk management is carried out by senior finance executives ('finance') under policies approved by the Board.
These policies include identification and analysis of the risk exposure of the consolidated entity and appropriate
procedures, controls and risk limits. Finance identifies, evaluates and hedges financial risks within the
consolidated entity's operating units where necessary. Finance reports to the Board on a monthly basis.
Capital risk management
The consolidated entity's objectives when managing capital is to safeguard its ability to continue as a going
concern, so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an
optimum capital structure to reduce the cost of capital. The capital risk management policy remains unchanged
from the 2018 Annual Report.
In order to maintain or adjust the capital structure, the consolidated entity manages the level of debt that is
prudent, facilitates the execution of the operational plan and provides flexibility for growth while managing the
amount of equity and expectation of return for dividends.
The consolidated entity is subject to certain financing arrangement covenants and meeting these is given
priority in all capital risk management decisions. There have been no events of default on the financing
arrangements during the financial year. Formal notification of this compliance is confirmed on a quarterly basis.
The capital structure of the consolidated entity consists of net debt (borrowings as detailed in note 20 offset
by cash and cash equivalents as detailed in note 8) and equity of the consolidated entity (comprising issued
capital, reserves and accumulated losses as detailed in notes 23 to 25).
Financial assets
Cash and cash equivalents
Trade and other receivables
Derivative financial instruments
Financial liabilities
Trade and other payables
Borrowings
Market risk
Consolidated
2019
$'000
2018
$'000
23,214
4,574
-
27,788
25,522
-
25,522
28,929
4,025
126
33,080
44,277
12,860
57,137
Foreign currency risk
The consolidated entity undertakes certain transactions denominated in foreign currency and is exposed to
foreign currency risk through foreign exchange rate fluctuations.
Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial
liabilities denominated in a currency that is not the entity's functional currency. The risk is measured using
sensitivity analysis and cash flow forecasting.
In order to protect against exchange rate movements, the consolidated entity has historically entered into
forward foreign exchange contracts. These contracts are hedging highly probable forecasted cash flows for the
ensuing financial year. Following the divestment of five brands on 2 July 2018 with City Chic as the remaining
brand, the consolidated entity has not required to hedge its foreign exchange exposure given the natural hedge
that is provided from its USA operations. Management monitors this natural hedge on an ongoing basis to
ensure that the exposure to foreign exchange is acceptable. The consolidated entity closed out all cash flow
hedges in January 2019.
87
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 27. Financial instruments (continued)
The maturity, settlement amounts and the average contractual exchange rates of the consolidated entity's
outstanding forward foreign exchange contracts at the reporting date were as follows:
Buy US dollars
Sell Australian dollars
Future hedge rate
2019
$'000
2018
$'000
2019
$'000
2018
$'000
2019
$
2018
$
Buy US dollars
Maturity:
Less than 1 year
-
3,513
-
4,627
-
0.7601
The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge was
recognised directly in other comprehensive income.
Price risk
The consolidated entity is not exposed to any significant price risk.
Interest rate risk
The Group did not have any exposure to interest rate risk in the period to 30 June 2019 as the long-term
borrowings were undrawn for the entirety of the period. Historically, the Group's main interest rate risk arises
from long-term borrowings. Borrowings issued at variable rates expose the Group to interest rate risk.
Borrowings issued at fixed rates expose the Group to fair value interest rate risk.
As at the reporting date, the consolidated entity had the following variable rate borrowings and interest rate
swap contracts outstanding:
Consolidated
Cash and cash equivalents
Borrowings
Net exposure to cash flow interest rate risk
2019
2018
Weighted
average
interest rate
%
Weighted
average
interest rate
%
Balance
$'000
Balance
$'000
1.6%
-
23,214
-
23,214
1.2%
3.5%
28,929
(12,860)
16,069
88
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 27. Financial instruments (continued)
An analysis by remaining contractual maturities is shown in ‘remaining contractual maturities’ below.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial
loss to the consolidated entity. The consolidated entity has a strict code of credit, including obtaining agency
credit information, confirming references and setting appropriate credit limits. The consolidated entity obtains
guarantees where appropriate to mitigate credit risk. The maximum exposure to credit risk at the reporting date
to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as
disclosed in the statement of financial position and notes to the financial statements. The consolidated entity
does not hold any collateral.
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 makes assumptions to allocate an
overall expected credit loss rate for each group. These assumptions include recent sales experience and
historical collection rates.
The consolidated entity has a credit risk exposure with trade debtors, which as at 30 June 2019 owed the
consolidated entity $4.2 m (2018: $3.2 m). There are no guarantees against this receivable but management
closely monitors the receivable balance on a monthly basis and is in regular contact with its customers to
mitigate risk.
Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of
this include the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure
to make contractual payments for a period greater than 1 year.
Allowance for expected credit losses
The consolidated entity has recognised a loss of $0.1 m in profit or loss in respect of the expected credit losses
for the year ended 30 June 2019.
Liquidity risk
Prudent liquidity risk management requires the consolidated entity to maintain sufficient liquid assets (mainly
cash and cash equivalents) and available borrowing facilities to be able to pay debts as and when they become
due and payable. The consolidated entity manages liquidity risk by maintaining adequate cash reserves and
available borrowing facilities by continuously monitoring actual and forecast cash flows and matching the
maturity profiles of financial assets and liabilities. Inventory management methods and established supplier
relationships assist management to prepare rolling forecasts of the consolidated entity's cash flow requirements
to monitor the liquidity position and optimise its cash return on investments. Typically the consolidated entity
ensures that it has sufficient cash on demand to meet expected operational expenses for the period of 12
months, including the servicing of financial obligations; this excludes the potential impact of extreme
circumstances that cannot reasonably be predicted, such as natural disasters. In addition, the consolidated
entity maintains the following lines of credit:
At balance date, bank loan facilities totalling $15.0 m was available to the Group (1 July 2018: $15.0 m). In August
2019, the Group amended its external finance facilities from a working capital facility of $15.0 m to a general
corporate purpose facility of $5.0 m. Management monitors rolling forecasts of the consolidated entity’s
liquidity reserve (comprising the undrawn borrowing facilities below) and cash and cash equivalents on the
basis of expected cash flows. This is generally carried out at local level in the operating companies of the
consolidated entity in accordance with practice and limits set by the consolidated entity. These limits vary by
location to consider the liquidity of the market in which the entity operates. In addition, the consolidated entity’s
liquidity management policy involves projecting cash flows in major currencies and considering the level of
liquid assets necessary to meet these, monitoring balance sheet liquidity ratios against internal and external
regulatory requirements and maintaining debt financing plans.
89
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 27. Financial instruments (continued)
Financing arrangements
Unused borrowing facilities at the reporting date:
Bank loans1
Corporate credit card
Consolidated
2019
$'000
2018
$'000
15,000
1,257
16,257
1,886
106
1,992
Remaining contractual maturities
The following tables detail the consolidated entity's remaining contractual maturity for its financial instrument
liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on
the earliest date on which the financial liabilities are required to be paid. The tables include both interest and
principal cash flows disclosed as remaining contractual maturities and therefore these totals may differ from
their carrying amount in the statement of financial position.
Consolidated - 2019
Non-derivatives
Non-interest bearing
Trade and other payables
Interest-bearing - fixed rate
Bank loans
Total non-derivatives
Consolidated - 2018
Non-derivatives
Non-interest bearing
Trade and other payables
Interest-bearing - variable
Bank loans
Total non-derivatives
Derivatives
Forward foreign exchange
contracts inflow
Total derivatives
Weighted
average
interest rate
%
1 year or less
$'000
Between 1 and
2 years
$'000
Between 2 and
5 years
$'000
Over 5 years
$'000
Remaining
contractual
maturities
$'000
-
25,522
-
-
25,522
-
-
-
-
-
-
-
-
-
25,522
-
25,522
Weighted
average
interest rate
%
1 year or less
$'000
Between 1 and
2 years
$'000
Between 2 and
5 years
$'000
Over 5 years
$'000
Remaining
contractual
maturities
$'000
-
44,277
3.5%
-
44,277
-
126
126
-
-
-
-
-
-
12,860
12,860
-
-
-
-
-
-
-
44,277
12,860
57,137
126
126
1 Includes letter of credit of $0.3 m as at 1 July 2018.
90
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 27. Financial instruments (continued)
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually
disclosed above.
Fair value of financial instruments
This note provides information about how the consolidated entity determines fair values of various financial
assets and financial liabilities.
Fair values of financial instruments are categorised by the following levels:
- Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities
- Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability,
either directly (as prices) or indirectly (derived from prices)
- Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs)
The consolidated entity has financial assets and liabilities which are measured at fair value at the end of each
reporting period. Forward foreign exchange contracts are measured at fair value using level 2 inputs.
The fair values of the financial assets and financial liabilities included in the level 2 fair value hierarchy have been
determined in accordance with generally accepted pricing models based on a discounted cash flow analysis,
with the most significant inputs being the discount rate that reflects the credit risk of counterparties. There
were no transfers between levels during the financial year.
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value. The carrying
amounts of receivables, trade and other payables are assumed to approximate their fair values due to their
short-term nature. The fair value of financial liabilities is estimated by discounting the remaining contractual
maturities at the current market interest rate that is available for similar financial instruments.
91
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 28. Key management personnel disclosures
Directors
The following persons were directors of City Chic Collective Limited during the financial period:
Michael Kay
Michael Hardwick
Megan Quinn
Phil Ryan
Anne McDonald
Ashley Hardwick
Daniel Bracken
Chairman (appointed 9 November 2018)
Non-executive director (appointed 1 October 2018)
Non-executive director
Non-executive director
Chief Executive Officer (appointed 1 October 2018) Managing Director (appointed 12 February 2019)
Former Chairperson
Former non-executive director (resigned 9 November 2018)
Former non-executive director (resigned 9 November 2018)
Former Managing Director (resigned 30 September 2018)
Former Chief Executive Officer
Other key management personnel1
The following persons also had the authority and responsibility for planning, directing and controlling the major
activities of the consolidated entity, directly or indirectly, during the financial period:
Munraj Dhaliwal
Tim Fawaz
Chief Financial Officer (appointed 14 February 2019)
Former Chief Financial and Operations Officer (resigned 14 February 2019)
Compensation
The aggregate compensation made to directors and other members of key management personnel of the
consolidated entity is set out below:
Short-term employee benefits
Post-employment benefits
Long-term benefits
Termination benefits
Share-based payments
Consolidated
2019
$
2018
$
1,987,732
83,885
197,978
20,023
605,489
2,895,107
3,875,352
144,087
342,995
726,313
-
5,088,747
Shareholding
The number of shares in the company held during the financial period by each key management personnel of
the consolidated entity, including their personally related parties, is set out below:
Balance at
the start of
the period
Received as
part of
remuneration
Additions
during the
period
Disposals
during the
period
Other
movements2
Balance at
the end of the
period
Directors’ shareholding
Michael Kay
Michael Hardwick
Phil Ryan
Anne McDonald
Ashley Hardwick3
Subtotal
-
395,000
124,000
35,000
39,801,811
40,355,811
Other key management personnel shareholding
Munraj Dhaliwal
Tim Fawaz
-
400,000
Subtotal
Total KMP shareholdings
400,000
40,755,811
-
-
-
-
-
-
-
-
-
-
509,914
100,000
-
-
-
609,914
-
202,387
202,387
812,301
-
-
-
-
-
-
-
-
-
-
-
-
-
(35,000)
(39,801,811)
509,914
495,000
124,000
-
-
(39,836,811)
1,128,914
80,0004
(602,387)
80,000
-
(522,387)
(40,359,198)
80,000
1,208,914
1 Sonia Moura was determined to be a KMP in prior years however after the FY2018 divestment, the role is no longer considered to qualify as KMP.
2 Balance at the end of the period has been reduced to nil for KMP who have resigned from the consolidated entity.
3 Beneficial interest held through NAAH Pty Ltd and NAAH Investments Pty Ltd.
4 Balance represents shareholdings held prior to appointment as KMP.
92
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 29. Remuneration of auditors
During the financial period the following fees were paid or payable for services provided by Deloitte Touche
Tohmatsu, the auditor of the company, and its network firms:
Auditor of the parent entity
Audit services - Deloitte Touche Tohmatsu
Audit or review of the financial statements
Other services - Deloitte Touche Tohmatsu
Tax compliance services including review of company income tax returns
Tax advisory services
Total remuneration – auditor of parent entity
Network firms of the parent entity auditor
Audit services – network firms
Audit or review of the financial statements
Other services - network firms
Tax compliance services including review of company income tax returns
Tax advisory services
Total remuneration – network firms of the parent entity auditor
Total remuneration
Consolidated
2019
$
2018
$
323,807
429,900
20,000
104,460
30,000
-
448,267
459,900
7,885
-
56,199
32,335
37,099
92,194
96,419
129,293
544,686
589,193
It is the consolidated entity's policy to employ Deloitte on assignments additional to their statutory audit duties
where Deloitte's expertise and experience with the consolidated entity are important. These assignments are
principally tax advice and other advisory services, or where Deloitte is awarded assignments on a competitive
basis. It is the consolidated entity's policy to seek competitive tenders for all major consulting projects.
Note 30. Contingent liabilities
The consolidated entity had contingent liabilities at 30 June 2019 in respect of:
Cross guarantees by and between City Chic Collective Limited and Specialty Fashion Group No.5 Pty Limited.
These are described in Note 35. Deed of cross guarantees. No deficiencies of assets exist in any of these
companies.
No material losses are anticipated in respect of any of the above contingent liabilities.
93
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 31. Commitments
Capital commitments
Committed at the reporting date but not recognised as liabilities, payable:
Plant and equipment
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
Beyond five years
Consolidated
2019
$'000
2018
$'000
-
240
7,824
10,013
211
9,452
10,239
-
18,048
19,691
The above commitments do not include leases which have expired and are currently on holdover or any rental
payments which may arise in the event that sales revenue exceeds a pre-determined amount.
Lease commitments includes contracted amounts for various retail outlets under non-cancellable operating
leases expiring within 1 to 7 years with, in some cases, options to extend. The leases have various escalation
clauses. On renewal, the terms of the leases are renegotiated.
Note 32. Related party transactions
Parent entity
City Chic Collective Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 34.
Key management personnel
Disclosures relating to key management personnel are set out in note 28 and the remuneration report included
in the directors' report.
Transactions with related parties
The following transactions occurred with related parties:
Payment for other expenses:
Lease of business premises in which Gary Perlstein, a former director of the consolidated entity had an
interest
Services provided by Southern Cross Shopfitting, a company that is associated with NAAH Pty Ltd and
NAAH Investments Pty Ltd, a related party of Michael Hardwick.1
Share registry and Annual General Meeting fees paid to Link Market services. Anne McDonald is a
former non-executive director of Link Administrative Holding Limited (Link Group)
Consolidated
2019
$
2018
$
-
125,087
965,129
210,5082
12,928
52,931
978,057
388,526
Receivable from and payable to related parties
There were no trade receivables from or trade payables to related parties at the current and previous reporting
date.
Loans to/from related parties
There were no loans to or from related parties at the current and previous reporting date.
1 Michael Hardwick was not involved in decision making relating to Southern Cross Shopfitting and its dealings with the Group.
2 Services provided from March 2018 to June 2018 in FY2018.
94
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 32. Related party transactions (continued)
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
Note 33. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Revenue
Expenses
Profit before income tax
Income tax expense
Profit after income tax from continuing operations
Profit after income tax from discontinued operations
Total profit after income tax for the year from parent entity
Other comprehensive (loss)/income
Total comprehensive income/(loss) from parent entity
Statement of financial position
Total current assets1
Total assets1
Total current liabilities2
Total liabilities2
Equity
Issued capital3
Foreign currency reserve
Hedging reserve - cash flow hedges
Share-based payments reserve
Dividends paid
Retained profits/(accumulated losses)
Total equity
Parent
2019
$'000
2018
$'000
114,636
(94,554)
20,082
(9,505)
10,577
2,050
12,627
(581)
12,046
111,095
(87,613)
23,482
(4,139)
19,343
(27,159)
(7,816)
3,635
(4,181)
Parent
2019
$'000
2018
$'000
34,335
167,223
81,786
198,947
31,269
142,459
34,914
157,476
49,139
(493)
-
1,141
(9,612)
6,697
49,139
-
88
61
-
(7,817)
46,872
41,471
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The same guarantee disclosure applies to both parent and consolidated accounts, refer to Note 35. Deed of
cross guarantee.
1 FY2018 balance included assts held for sale of $122.4 m.
2 FY2018 balance included liabilities associated to asset held for sale of $91.2 m.
3 During FY2018, the parent entity undertook a capital reduction to reduce its share capital by $85.4 m to $49.1 m, in accordance with section 258F of the
Corporations Act 2001. The reduction was allocated in full to the prior period accumulated losses account in the parent entity with no impact on the net assets
of either the parent entity of the Group. On consolidation, the share capital of the Group also reduced by $85.4 m to $49.1 m.
95
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 33. Parent entity information (continued)
Contingent liabilities
The above disclosure does not include contingent rental payments which may arise in the event that sales
revenue exceeds a predetermined amount.
Capital commitments - Plant and equipment
The parent entity had no capital commitments for plant and equipment as at 30 June 2019.
Committed at the reporting date but not recognised as liabilities, payable:
Plant and equipment
Parent
2019
$'000
2018
$'000
-
240
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.
Investments in associates are accounted for at cost, less any impairment, in the parent entity.
Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt
may be an indicator of an impairment of the investment.
Note 34. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries
in accordance with the accounting policy described in note 1:
Name
Principal place of
Ownership interest
business / Country
of incorporation
2019
%
2018
%
Specialty Fashion Group No. 5 Pty Limited
City Chic Collective No. 1 Pty Limited (formerly known as Specialty Fashion Group No. 1 Pty Limited)
City Chic Collective No. 2 Pty Ltd (formerly known as Specialty Fashion Group No. 2 Pty Limited)
Specialty Fashion Group No. 6 Pty Limited
City Chic International Pty Limited
City Chic Collective New Zealand Limited (formerly known as Specialty Fashion Group New
Zealand Limited)
Specialty Fashion Group (Shanghai) Limited Company
Specialty Fashion Group South Africa (Pty) Ltd
City Chic Collective USA Incorporated (formerly known as Specialty Fashion Group USA
Incorporated)
Australia
Australia
Australia
Australia
Australia
New Zealand
China
South Africa
100.00%
80.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
80.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
United States
100.00%
100.00%
Note 35. Deed of cross guarantee
The following entities are party to a deed of cross guarantee under which each company guarantees the debts
of the others:
• City Chic Collective Limited
• Specialty Fashion Group No.5 Pty Limited
By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare
financial statements and directors' report under Corporations Instrument 2016/785 issued by the Australian
Securities and Investments Commission.
96
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 35. Deed of cross guarantee (continued)
The above companies represent a 'Closed Group' for the purposes of the Corporations Instrument, and as there
are no other parties to the deed of cross guarantee that are controlled by City Chic Collective Limited, they also
represent the 'Extended Closed Group'. All companies in the Closed Group are dormant, except for City Chic
Collective Limited.
The statement of profit or loss and other comprehensive income and statement of financial position are
substantially the same as the consolidated entity and therefore have not been separately disclosed. The financial
results of the Closed Group are the same as the financial results of the parent entity which are disclosed in Note
33. Parent entity information.
Note 36. Events after the reporting period
During the reporting period on 2 July 2018, the Group completed the sale of the businesses associated with the
operations and brands of Millers, Katies, Rivers, Autograph and Crossroads to Noni B Limited. The agreement
was to sell these brands for consideration of $31.0 m (plus or minus post completion adjustment). Independent
experts were appointed to determine the outcome of the completion adjustment and other aspects of the
Business Sale Agreement. As announced by the Group to the ASX on 24 June 2019, those disputes were
determined by independent experts in the Group’s favour. On 31 July 2019, Noni B Limited filed proceedings in
the Supreme Court of New South Wales seeking orders setting aside the
independent experts’
determination. Notwithstanding that City Chic received a favourable expert determination, given the
subsequent proceedings filed by Noni B, the Group has been prudent and provisioned accordingly.
In August 2019, the Group amended its external finance facilities from a working capital facility of $15.0 m to a
general corporate purpose facility of $5.0 m.
Other than the above, no other matter or circumstance has arisen since 30 June 2019 that has significantly
affected, or may significantly affect the consolidated entity's operations, the results of those operations, or the
consolidated entity's state of affairs in future financial years.
Note 37. Reconciliation of profit after tax to net cash from operating activities
Profit after tax from continuing operations
Adjustments for:
Depreciation, amortisation and impairment
Net (gain)/loss on disposal of plant and equipment
Share-based payments
Adjustments for discontinued operations
Foreign exchange and other differences
Change in operating assets and liabilities:
(Increase)/decrease in trade and other receivables and prepayments
(Increase)/decrease in inventories
Decrease in income tax refund due
Increase in deferred tax assets
Decrease in derivative assets
Decrease in trade and other payables
Increase/(decrease) in provision for income tax
Decrease in provisions
Increase/(decrease) in other liabilities
Consolidated
2019
$'000
2018
$'000
Restated
14,265 14,959
3,942
(851)
1,080
1,181
926
(549)
(3,534)
15
(6,670)
-
(18,755)
5,544
(2,167)
1,739
3,862
658
-
-
(1,291)
4,423
75,021
20
(1,999)
3
(51,304)
(33)
(22,457)
(2,994)
Net cash from operating activities for continuing operations
(3,834)
18,868
97
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 38. Earnings per share
Profit/(loss) after income tax attributable to the owners of City Chic Collective Limited
Continuing operations
Discontinued operations
Weighted average number of ordinary shares used in calculating basic earnings per share
Adjustments for performance rights
Consolidated
2019
$'000
2018
$'000
14,265
1,713
15,978
14,959
(24,265)
(9,306)
2019
Number
2018
Number
192,236,121
1,084,487
192,236,121
-
Weighted average number of ordinary shares used in calculating diluted earnings per share
193,320,608
192,236,121
Basic earnings per share
Continuing operations
Discontinued operations
Diluted earnings per share
Continuing operations
Discontinued operations
Note 39. Share-based payments
2019
Cents
2018
Cents
7.4
0.9
8.3
7.4
0.9
8.3
7.8
(12.6)
(4.8)
7.8
(12.6)
(4.8)
Tranche
Grant date Performance
period end
date
13/11/2018 30/06/2021
13/11/2018 30/06/2021
13/11/2018 30/06/2021
13/11/2018 30/06/2023
1
2A
2B
2C
Share price
at grant
date
$1.17
$1.17
$1.17
$1.17
Expected
volatility
%
35.00%
35.00%
35.00%
35.00%
Dividend
yield
%
Risk-free
interest rate
%
Balance at
the start of
the period
Granted
Vested
Expired/
forfeited/
other
Balance at
the end of
the period
3.50%
3.50%
3.50%
3.50%
2.12%
2.12%
2.12%
2.12%
-
-
-
-
-
895,552
1,237,500
1,237,500
2,475,000
5,845,552
-
-
-
-
-
-
-
-
-
-
895,552
1,237,500
1,237,500
2,475,000
5,845,552
Vesting conditions of the grants are set out below.
Tranche 1
Vesting Condition 1
Vesting Condition 2
EPS CAGR across the Tranche 1
Performance Period
Below 5%
5%
5% ≤ EPS CAGR ≤ 20%
Tranche 2A
Continued service to August 2021, with no holding lock on resulting shares;
Compound annual growth rate (CAGR) in the Group's earnings per share before tax (EPS) during the
three years to June 2021 in accordance with the following schedule:
Proportion of Tranche 1 Performance Rights held that will satisfy
Vesting Condition 2
Nil
25%
Straight line pro-rata vesting between 25% and 100% (inclusive)
Vesting Condition
Continued service to August 2021, with no holding lock on resulting shares.
98
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Notes to the financial statements
30 June 2019
Note 39. Share-based payments (continued)
Tranche 2B
Vesting Condition 1
Vesting Condition 2
Continued service to August 2021, with no holding lock on resulting shares;
Group EPS performance in accordance with the following schedule:
Group EPS for the year to 30 June 2021
Below $0.0975 (1.3 x FY2018 EPS)
$0.0975 ≤ EPS < $0.1050 (1.4 x FY2018 EPS)
EPS ≥ $0.1050
Tranche 2C
Proportion of Tranche 2B Performance Rights held that will satisfy
Vesting Condition 2
Nil
50%
100%
Vesting Condition 1
Vesting Condition 2
Continued service to August 2023, with no holding lock on resulting shares.
Group EPS performance in accordance with the following schedule:
Group EPS for the year to 30 June 2023
Below $0.1125 (1.5 x FY2018 EPS)
$0.1250 ≤ EPS < $0.1200 (1.6 x FY2018 EPS)
$0.1200 ≤ EPS < $0.1275 (1.7 x FY2018 EPS)
EPS ≥ $0.1275
Proportion of Tranche 2C Performance Rights held that will satisfy
Vesting Condition 2
Nil
50%
75%
100%
Total expenses arising from share-based payment transactions recognised during the period as part of employee
benefit expense were as follows:
Performance rights issued under LTIP
Consolidated
2019
$’000
2018
$’000
1,080
1,080
-
-
99
City Chic Collective Limited (Formerly known as Specialty Fashion Group Limited) Directors' declaration 30 June 2019 100 In the directors' opinion: ● the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; ● the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in note 1 to the financial statements; ● the attached financial statements and notes give a true and fair view of the consolidated entity's financial position as at 30 June 2019 and of its performance for the financial period ended on that date; ● there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and ● at the date of this declaration, there are reasonable grounds to believe that the members of the Closed Group will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee described in note 35 to the financial statements. The directors have been given the declarations required by section 295A of the Corporations Act 2001. Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001. On behalf of the directors Michael Kay Phil Ryan Chairman Chief Executive Officer and Managing Director 27 August 2019 Sydney City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Shareholder information
30 June 2019
The shareholder information set out below was applicable as at 9 August 2019.
Distribution of equitable securities
Analysis of number of ordinary share holders by size of holding:
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
Number
of holders
of ordinary
shares
964
1,509
414
401
70
3,358
150
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
NATIONAL NOMINEES LIMITED
MR GARY PERLSTEIN AND CONTROLLED ENTITIES1
MR IAN MILLER AND CONTROLLED ENTITIES2
BNP PARIBAS NOMS PTY LTD
T BATSAKIS PTY LTD
NAAH PTY LTD / NAAH INVESTMENTS PTY LTD
CITICORP NOMINEES PTY LIMITED
HENOCH INVESTMENTS PTY LTD
CITICORP NOMINEES PTY LIMITED
GRAHGER RETAIL SECURITIES PTY LTD
ONE MANAGED INVT FUNDS LTD
UBS NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
BNP PARIBAS NOMINEES PTY LTD
NCH PTY LTD
GDL INVESTMENTS PTY LTD
MR DAVID MCSEVENY
TDA SECURITIES PTY LTD
Ordinary shares
Number held
% of total
shares issued
42,017,533
31,961,701
19,057,150
17,862,728
9,044,906
8,278,498
7,000,000
6,571,811
4,061,532
4,000,000
2,724,000
1,800,000
1,781,795
1,669,819
1,150,337
894,252
734,755
715,564
707,363
630,000
21.86
16.63
9.91
9.29
4.71
4.31
3.64
3.42
2.11
2.08
1.42
0.94
0.93
0.87
0.60
0.47
0.38
0.37
0.37
0.37
162,663,744
84.68
1 Beneficial interest in City Chic Collective Limited through Icestorm Pty Ltd and Snowglaze Investments Pty Ltd.
2 Beneficial interest in City Chic Collective Limited through Landpeak Pty Ltd and Landcharm Pty Ltd.
101
City Chic Collective Limited
(Formerly known as Specialty Fashion Group Limited)
Shareholder information
30 June 2019
Unquoted equity securities
There are no unquoted equity securities.
Substantial holders
Substantial holders in the company are set out below:
SPHERIA ASSET MANAGEMENT
MR GARY PERLSTEIN AND CONTROLLED ENTITIES1
QVG CAPITAL
WILSON ASSET MANAGEMENT
Voting rights
The voting rights attached to ordinary shares are set out below:
Ordinary shares
Number held
% of total
shares issued
18,299,351
17,862,728
14,847,265
12,057,177
9.52
9.29
7.72
6.27
Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a
poll each share shall have one vote.
There are no other classes of equity securities.
1 Beneficial interest in City Chic Collective Limited through Icestorm Pty Ltd and Snowglaze Investments Pty Ltd.
102
CITY CHIC COLLECTIVE151–163 Wyndham Street,Alexandria NSW 2015AustraliaABN 43 057 569 169P 02 9059 4300