20
20
ANNUAL REPORT
city chic collective
FY2020 CITY CHIC COLLECTIVE ANNUAL REPORT 2
Contents
04
08
12
14
18
Overview
Message from our Chairman and CEO
Board of Directors
City Chic Annual Recap
2021 Outlook
20
Diversity
22
24
Corporate Social Responsibility
Annual Financial Report 2020
FY2020 CITY CHIC COLLECTIVE ANNUAL REPORT 3
City Chic Collective Overview
City Chic Collective
A G L O B A L C O L L E C T I V E O F P L U S - S I Z E B R A N D S
City Chic Collective is a global retailer
specialising in plus-size women’s apparel,
footwear, and accessories.
Our customer-led offering, which appeals
to fashion-forward women, has a strong
following in Australia, USA and New Zealand
with a rapidly-growing presence in Europe
and the United Kingdom.
Our omni-channel model comprises of
multiple websites in Australasia and the USA,
marketplace and wholesale partnerships
with major US retailers and wholesale
partners in Europe and the United Kingdom.
O U R V I S I O N
L E A D I N G A W O R L D O F C U R V E S
FY2020 CITY CHIC COLLECTIVE ANNUAL REPORT 4
City Chic Collective Overview
FIERCELY FASHIONABLE
EVERYDAY ESSENTIAL FASHION
LUSTFUL LINGERIE
SERIOUS STREET STYLE
FY2020 CITY CHIC COLLECTIVE ANNUAL REPORT 5
City Chic Collective Overview
Growing into a Global Digital Retailer
CONTRIBUTION BY CHANNEL
CONTRIBUTION BY REGION
4%
4%
61%
6%
6%
38%
31%
FY20
42%
FY20
58%
20%
FY19
50%
FY19
80%
Stores
Online Marketplaces
Online Website
Wholesale
Northern Hemisphere
Southern Hemisphere
FY2020 CITY CHIC COLLECTIVE ANNUAL REPORT 6
City Chic Collective Overview
Customer-
Centric
Operating
Model
O
m
t
o
ni-
c
h
u
c
h
p
a
n
n
oin
el
c
t s
tr
u
s
t
o
a
t
e
m
g
y.
e
r
Highly-engaged and
gro wing custo m er base.
R
e
a
le
c
tiv
d
s
u
p
c
u
e,
ply
s
t
o
c
h
m
e
r-
ain.
OUR
CUSTOMERS
ARE AT THE HEART
OF EVERYTHING
WE DO!
Longstanding
Executive Tea m.
6
6
3k Active Cust o m e r
ally
b
s G l o
FY2020 CITY CHIC COLLECTIVE ANNUAL REPORT 7
Comments by our Chairman and CEO
Message from Our
Chairman and CEO
The 2020 financial year was an eventful year during which we grew our business and traded
profitably through the challenges faced from COVID-19. With a strengthened balance sheet,
we are well positioned to accelerate our global growth strategy.
Chairman Michael Kay
CEO & Managing Director Phil Ryan
It is an understatement to say the 2020 financial year
We are pleased with the way City Chic performed under
was eventful. After a strong first half which included the
these challenging circumstances. Here are some of the
acquisition of the Avenue business in the United States,
financial highlights:
COVID-19 burst onto the world stage early in the second
half, impacting supply lines, health and mortality rates,
sapping consumer confidence and putting enormous
pressure on businesses, governments and the world
economy. Retail was particularly hard-hit and quite a
number of businesses have not survived. We expect
to see more failures, particularly companies reliant on
large store footprints with lease terms that are no longer
commercially viable in a world where malls and ‘bricks
and mortar’ stores were already under pressure before
the advent of COVID-19.
•
FY2020 sales revenue of $194.5m, this represents
31.0% year on year total sales growth and 0.4%
comparable sales growth (6.4% excluding the period
of store closures and partial closures).
Southern hemisphere sales declined 4.8% for the full
year; with growth of 9.9% in 1H, and a decline of 21.5%
in 2H reflecting the impact of COVID-19 and store
closures. There has been an improvement in sales
since the initial hit of COVID-19 in April. Total southern
hemisphere sales (stores and online) were down 47%
in April, down 37% in May and down in 26% in June
versus the prior year. ANZ online was strong at 57%
FY2020 CITY CHIC COLLECTIVE ANNUAL REPORT 8
Comments by our Chairman and CEO
YoY growth whilst stores were closed.
Northern hemisphere sales grew by 166% in 2H
and 179% for the full year. This growth was driven
principally by the expanded US customer base
following the acquisition of Avenue. Strong growth
for CC US website in 1H and positive growth for
CC US website in 2H but aided by discounting and
promotional activity.
However, one of the lessons learned from COVID-19
is that companies should diversify their sources of
production to mitigate the risk of those sources being
shut down, unavailable or impacted with delays. While
City Chic was not unduly impacted on the supply side
during the current pandemic, the current environment has
highlighted the importance of flexibility in our operations
and we believe it is prudent to mitigate future risk, with
the growth in our business allowing us to do this without
• Underlying EBITDA of $26.5m (pre-AASB 16,
materially impacting our current suppliers.
includes share-based payments expense of $2.8m),
representing 6.6% YoY growth and an EBITDA margin
of 13.6%.
Gross Profit Margin of 48.1% (vs 57.8% in FY19) driven
by a shift in mix to lower GM% (but more profitable)
online channels including Avenue, as well as
discounting during the COVID-19 period.
Underlying CODB as a percentage of sales dropped
from 41.3% in FY19 to 34.4% in FY2020, reflecting the
lower cost online model and the relatively low fixed
cost base. We implemented early action to realise
cost efficiencies including rental reductions through
COVID-19.
• Normalised operating cash flows of $20.9m for
FY2020
The Board and management have absolute clarity about
our strategy and what we think will make our company
successful. Our vision is to ‘Lead a World of Curves’ and
our focus remains solely on the $50bn plus-size market.
Our three strategic pillars for profitable growth are:
• Curvy is all we do. We continue to expand our
categories and lifestyle coverage for the plus-size
customer and now have expanded beyond City Chic’s
‘bold, sexy and glamorous’ products to offerings in
other parts of our customers’ lives, namely:
• conservative and value-conscious through Avenue
• playwear and intimates through Fox and Royal
launched in Australia
• footwear through Cloudwalker with specialty wide-
fit shoes
• Relatively low ongoing capital requirements ($3.7m of
• expanding the breadth of our product offering
capital expenditure for FY2020)
production to over 800 items a month.
• Net cash of $3.9m at June 2020 with significant
• Global Digital expansion
headroom from a $40m finance facility (noting $4.7m
• Online penetration is now 65%, up from 44% last
of deferred tax payments). We also announced
year
an equity capital raise in July 2020 to support
• Northern hemisphere now represents 42% of sales
future growth including opportunities arising from
up from 20% last year, with the USA comprising the
businesses under pressure as a result of the
majority of sales.
pandemic.
In navigating through the significant disruptions from
COVID-19, our omni-channel model put us in an
advantageous position, particularly during periods of
store closures. Our business is geographically diversified
and more than half our business is sold online. Our focus
and emotional connection with our plus-size customers
means our loyal customer base trust the consistent quality
and fit of our products when buying from us online.
• Customer acquisition and enhanced customer service
• Customer numbers globally have increased by 72%
to 663k, up from 385k last year
• The online channel provides an ‘infinite’ store
through which we can leverage our intimate
knowledge of the plus-size segment from
our deep, longstanding engagement with our
customers. Our efficient production process and
logistics capabilities allow us to give our customer
what she wants, when she wants it and ensure the
right quality, fit and price point.
FY2020 CITY CHIC COLLECTIVE ANNUAL REPORT 9
Comments by our Chairman and CEO
Our key operational highlights for FY2020:
• Acquisition and integration of Avenue.
• There has been a material increase in our online
range, providing more choice for our customers.
This diversification of our product range increases
In September 2019 Avenue was placed into Chapter
sales opportunities and also mitigates the risks from
11 bankruptcy in the USA. This gave us the opportunity
fluctuations in fashion. We increased our intimates and
to bid for a strong brand in our segment with a large
sleepwear offerings, which was an important part of
customer base and a solid online presence, however,
managing our performance through COVID-19 when
one that had been commercially undermined by legacy
demand weakened for party and occasion apparel.
store and leasing issues. We acquired the online
business, brand and customer base for US$16.5m in
October 2019. Avenue is well known in the north/north-
east of the USA and has garnered a loyal customer
following for over thirty years. The Avenue brand is
more conservative than City Chic and appeals to a
more mature, value conscious customer.
We have now completed the integration of Avenue
into our operations and supply chain. We are pleased
with this acquisition which has been materially
accretive in its first year of operation in our collective
and has exceeded our expectations. It proved to be
an important addition to our business, offsetting the
COVID-19 store closures in Australia and New Zealand
and contributing valuable sales and cash-flow in the
midst of the pandemic. The success of the transition
and integration of Avenue has given us the confidence
to continue to invest in growth outside Australia,
including inorganic opportunities. The success and the
learnings from this acquisition have also provided a
blueprint for future acquisitions to be integrated within
our business.
• We continue to employ talented people to facilitate
our profitable growth and to ensure our organisational
capability remains ahead of the growth curve. Building
our team bench strength will again be a key priority in
FY2021.
• We continued to conduct trials in Europe and the UK
to give us insights into those markets. We grew our
partnership with Zalando in Europe 51% (off a small
base) and launched on Amazon Europe. We will also
consider sensibly priced inorganic opportunities that
align with our strategic objectives to advance our
foothold in Europe/UK.
• During COVID-19 we worked closely with landlords to
put in place rent deals that ensure the economics of
our store portfolio is appropriate for the future. This is
an important part of ensuring we have a sustainable
business model as the balance between stores and
online continues to adjust. Through this process, we
closed 14 stores in holdover and continue to regularly
assess our portfolio and review new opportunities
against our required returns.
• We successfully launched our new global eCommerce
• In July 2020, after financial year end, we announced
platform which provides enhanced functionality and
scalability for new brands. It enables us to have all the
collective’s brands operating on the same platform
providing efficiencies and support and reinforcement
across the portfolio from both a cross-sell and search
engine optimisation (SEO) perspective.
• The launch of a new customer relationship
management (CRM) platform allows us to gain further
customer insights and predictive modelling. Our new
email platform is underway to achieve more targeted
communication with our customer and improve the
customer journey.
• Inventory has been carefully managed through the
pandemic with a clean stock position as we enter the
new financial year.
that we had been chosen as ‘stalking horse’ bidder
for the brand and online assets of Catherines, a plus-
size brand owned by the Ascena Group in the USA
which recently went into Chapter 11 bankruptcy. Whilst
being stalking horse does not guarantee that we
will ultimately acquire Catherines, it does give us an
advantage over other potential bidders. Catherines is
in a similar segment to Avenue but is geographically
diversified, being predominantly in the southern and
mid-western states of the USA.
• In conjunction with the Catherines bid, we announced
an equity raise by way of an $80m institutional
placement and a share purchase plan which raised a
further $31m. We were very pleased with the success
of the equity raising and the support of our existing and
new shareholders.
FY2020 CITY CHIC COLLECTIVE ANNUAL REPORT 10
Comments by our Chairman and CEO
Throughout the peak of the COVID-19 pandemic, the
Accordingly, whilst being mindful of the risks COVID-19
Board of Directors and the executive management team
poses, we must balance those risks with the taking
met weekly to ensure all reasonable and sensible steps
of sensible opportunities to meaningfully change the
were taken to mitigate the impact of COVID-19 on the
scope and scale of our business. As a result of the
business, our team and our customers. In particular:
current environment and the accelerating shift from
• We prioritised the health and safety of our team
members – we closed all stores by end of March and
set head office team members up to work from home
in mid-March.
• We did not stand any team members down without pay
in stores or head office.
• We assisted casual team members not covered by
JobKeeper to navigate the changes and provided
guidance to other avenues of support.
• We offered training and development opportunities
while stores were closed.
physical stores to online, inorganic opportunities such as
Catherines are emerging. We believe we are well placed
to take advantage of them.
We wish to express our gratitude to the wonderful team
members at City Chic. Their ongoing commitment to the
company and its customers is the bedrock of our success.
In the face of COVID-19, whether working from home, in
the office, or in stores, our people simply got on with the
job of serving our customers and doing it well.
We also express our sincere thanks to our customers for
continuing to support City Chic throughout this global
• We provided programs, and offered support, to
crisis, ensuring our business can continue and our people
maintain the mental health of our team including
stay safe and employed.
dealing with the stresses of COVID-19 and associated
restrictions.
• After restrictions eased, we trained store team
members on COVID-19 safety measures to take in
store. We also trialled select stores to learn and
improve before opening the broader portfolio of stores.
City Chic was eligible for the JobKeeper payment subsidy
in Australia and Wage Subsidy Scheme in New Zealand.
In relation to the reporting period, City Chic received
JobKeeper and Wage Subsidy payments totalling
A$3.9m. These were passed through in their entirety to
team members. The majority of the payments to team
members represented the period stores were closed and
top-up amounts above actual hours worked.
At the time of writing, the state of Victoria is in stage 4
lockdown and there is great uncertainty around the world
as to the ongoing impact of the COVID-19 virus medically,
socially and economically. As such, it is difficult to predict
how our business will be affected. As can be seen from
the foregoing, we have taken steps to strengthen our
balance sheet, improve cash generation, diversify our
geographical footprint and broaden our product offering.
We believe our deep understanding of the niche market
in which we operate, and the growing volume of our
business sold online, will hold us in good stead should
COVID-19 persist through FY2021.
Whether economic conditions normalise or not during
FY2021 and into FY2022, we believe City Chic has
demonstrated the resilience of its business model. The
journey to ‘Lead a World of Curves’ has just begun and by
delivering on our promises and taking opportunities, we
believe we can continue to prosper and grow for many
years to come.
Michael Kay
Chairman
Phil Ryan
CEO & Managing Director
FY2020 CITY CHIC COLLECTIVE ANNUAL REPORT 11
Directors
Board of Directors
Michael Kay joined the Board in October 2018 as an
independent non-executive director and was subsequently
appointed Chairman on 9 November 2018. Mr. Kay is a
member of the Audit and Risk Committee and member of the
Nomination and Remuneration Committee.
Mr. Kay has significant listed company Board experience;
he is the Chairman of Omni Bridgeway, and was previously
Chairman of Lovisa. Mr. Kay has also held a number of senior
executive roles during his career including CEO of McMillan
Shakespeare and CEO of AAMI.
Michael Hardwick joined the Board in May 2012. Mr. Hardwick
is an independent non-executive director. Mr. Hardwick is also
the Chair of the Audit and Risk Committee and member of the
Nomination and Remuneration Committee.
Mr. Hardwick is a Chartered Accountant, Graduate member of
the AICD and currently a director and the CFO of the CottonOn
Group. Mr. Hardwick was previously a partner with the New
York- based private equity firm Hudson Valley Capital Partners
and has worked at PwC in both Melbourne and New York.
FY2020 CITY CHIC COLLECTIVE ANNUAL REPORT 12
Chairman and Non-Executive Director
MICHAEL KAY
Non-Executive Director
MICHAEL HARDWICK
Directors
Board of Directors (continued)
Non-Executive Director
MEGAN QUINN
Megan Quinn joined the Board in October 2012 as an
independent non-executive director. She is the Chair of the
Nomination and Remuneration Committee and a member of
the Audit and Risk Committee.
Ms. Quinn 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 was a co-founder of NET-
A-PORTER and is a non-executive director at Reece and
InvoCare.
Phil Ryan was announced CEO of City Chic Collective in
September 2018 and joined the Board in February 2019 as
an executive director.
Mr. Ryan is the original Brand Director of City Chic. In 2006
Mr. Ryan led a team of six people that created the City Chic
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.
Chief Executive Officer and Managing Director
PHIL RYAN
FY2020 CITY CHIC COLLECTIVE ANNUAL REPORT 13
City Chic Annual Recap
City Chic Annual Recap
FY2020
FY2020 was another transformative year for City Chic, delivering excellent top line sales growth with a
solid financial result and strong balance sheet. As part of our growth strategy, we acquired US based
plus-size brand Avenue in October 2019 and this has been successfully integrated into our operating
model and supply chain with strong growth in our global customer base of 278,000 in FY2020.
USA EXPANSION
City Chic has continued its successful expansion
into the USA market through growing its
customer base.
In October 2019, City Chic acquired the
eCommerce assets of Avenue in the US, a
plus-size retailer with a large, loyal customer
following throughout the USA. Avenue has been
successfully integrated into our operating model
and supply chain and reflects our strategy to
grow our global customer base and international
presence, exceeding expectations for FY2020.
We have also seen solid growth in the City Chic
and Hips & Curves websites as we invest in our
customer experience and tailored approach for
the USA operations. We have entered into new
partnerships with Dillard’s and Bare Necessities,
expanding our northern hemisphere touchpoints
and driving brand awareness.
FY2020 CITY CHIC COLLECTIVE ANNUAL REPORT 14
City Chic Annual Recap
EXPANSION OF PRODUCT OFFERING
ENHANCED CUSTOMER EXPERIENCE
City Chic has further expanded its product
City Chic launched a new customer relationship
offerings across its online websites, now
management system to gain further customer
offering 3.5x the range available in stores.
insights and allow predictive modelling. Our
new email platform is underway to achieve
The expanded range includes the launch of
more targeted communication with our
Fox and Royal in the southern hemisphere, a
customer and improve the customer journey.
plus-sized intimates and sleepwear brand, and
segment expansion with Avenue in the northern
Our new global eCommerce platform also
hemisphere which is everyday fashion at a mid-
provides the customer with an enhanced online
market price point.
experience when navigating our sites, and
flexibility to expand with new brands, partners
The collective expanded into the more
and geographies.
conservative, mid-market segment through the
acquisition of Avenue. There is now opportunity
24-hour live chat is available across our global
to take this segment into other regions in which
websites and we have improved our packaging
the collective operates.
and fulfilment capabilities.
FY2020 CITY CHIC COLLECTIVE ANNUAL REPORT 15
City Chic Annual Recap
NAVIGATING THE PANDEMIC
COVID-19 had a substantial impact on operations in
FY2020. With the safety of our staff and customers at
the forefront, City Chic has focused on managing the
City Chic has maintained a lean operating model and
strong cash management with normalised cash flow of
$20.9m for FY2020. City Chic ended the year with net
cash of $3.9m, with significant headroom in the $40m
risk and disruption from the pandemic.
debt facility.
Current market conditions are favourable to explore
opportunities to expand the global customer base. City
Chic believes it is well positioned to leverage its lean,
customer-centric operating model to drive scale as it
continues to grow its global online footprint.
Store closures across Australia and New Zealand came
into effect at the end of March 2020 to suitably comply
with Government directives around distancing and
imposed restrictions, with a staged re-opening from May
2020 onwards, including assessment of store layouts
and heightened hygiene measures.
City Chic successfully negotiated with landlords for
reduced rents during the period of store closures and
have put in place appropriate go-forward rents to reflect
the changing retail landscape. With a portfolio of 93
stores after closure of 14 stores in holdover, City Chic
continues to assess sites for new stores or larger store
conversions where the rent structure is economically
suitable. City Chic was eligible for the JobKeeper
payment in Australia and Wage Subsidy Scheme in New
Zealand.
During the period of disruption, City Chic was more
promotional in order to manage cash flow and inventory
in our online channels, and in response to changed
customer buying habits, however it continued to trade
profitably. City Chic’s long-standing partnerships with
a supportive supply chain have facilitated flexibility in
stock purchases to ensure commercial levels of stock
were maintained globally, with a clean inventory position
at year end, while remaining responsive and true to our
customer-centric model.
FY2020 CITY CHIC COLLECTIVE ANNUAL REPORT 16
City Chic Annual Recap
STRONG TOP LINE GROWTH & FINANCIAL RESULT
Sales revenue grew by 31.0% on the previous corresponding period (pcp) to $194.5m while achieving
comparable sales growth. City Chic reported 6.6% growth in underlying EBITDA and our business
continued to shift towards online, our most profitable channel, which now represents 65% of global
sales. FY2020 was also a strong year for our northern hemisphere business which contributed 42% of
sales compared to 20% in the prior year.
CUSTOMER LOYALTY
City Chic has 663,000 active customers that
shopped on our websites and in our stores in
FY2020 across Australia, NZ and the USA.
These customers interact with the brand on a
regular basis across a number of touchpoints
663,000
ACTIVE CUSTOMERS
$194m
SALES FY20
FY2020 CITY CHIC COLLECTIVE ANNUAL REPORT 17
2021 Outlook
2021 Outlook
Optimise and further expand US customer base
Drive ANZ sales growth through category and segment expansion
Build on trial in Europe and the UK
Select store roll-out across ANZ and conversion to larger format
Explore expansion of collective of brands
Ongoing investment to enhance customer touchpoints
FY2020 CITY CHIC COLLECTIVE ANNUAL REPORT 18
2021 Outlook
FY2020 CITY CHIC COLLECTIVE ANNUAL REPORT 19
Diversity
Diversity
Workplace diversity recognises and values the
INCLUSIVITY METRIC
contribution of people from different backgrounds,
experiences and perspectives. It is City Chic’s aim to
ensure that all team members have equal opportunity
to participate and advance in their careers.
City Chic values and recognises the diversity of our
Team Members and the added value diversity provides
to achieving our overall objectives. City Chic’s Diversity
Policy outlines our diversity objectives in relation to
gender, age, race, cultural background, disability,
religion, gender identity, sexual orientation and
professional background.
City Chic’s Diversity Policy is underpinned and
supported by a suite of processes and practices that
are applicable to all who work for City Chic and seek
to create an environment that promotes inclusivity and
attracts, retains and provides opportunities for well
qualified employees, senior management and Board
candidates, regardless of gender identity or minority
In the 2020 Engagement Survey 78% of our workforce
said they felt part of an inclusive team and culture. This
is a 5% increase on the 2019 results.
GENDER BALANCE
Our 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 City Chic was as follows:
• 1 of 3 non-executive directors is a woman and 1 of
4 Board members (including executive and non-
executive directors) is a woman;
• 63% of the Executive Team (CEO, KMP and Other
Executives/General Managers) are women;
• 85% of our Managers (Senior Managers and Other
Managers) are women and 98% of our workforce are
women.
group membership, and is reflective of diversity of
FLEXIBLE WORKING CONDITIONS
thought and experience.
63%
of the Executive Team
is female
We offer employees flexible working conditions. Access
to these entitlements increased due to the business
impact of COVID-19 and we had 100% uptake in our
Head Office when we entered the new financial year.
In regard to our FY2020 return rate from parental leave,
we sit at 100% for head office employees and 73% for
retail employees. We attribute this to our commitment
to keeping them engaged and connected through their
leave and offer a variety of flexible work arrangements
to ensure they return on flexible terms that balance their
needs and those of the business.
FY2020 CITY CHIC COLLECTIVE ANNUAL REPORT 20
Diversity
Objectives established for achieving gender diversity and progress towards achieving them during the year ended
28 June 2020 are set out below:
FY2020 Diversity Strategy
OBJECTIVE
Conduct a Diversity Survey for a new CCX baseline
Develop Diversity strategy for FY2021
Submit the Workplace Gender Equality Report
Implement feedback collected from team through engagement survey process around
career & development
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 the impact that COVID-19 had on HR objectives and company resources.
These objectives have been incorporated into our plan for FY2021.
Objectives established for achieving gender diversity and targeted progress to the end of June 2021 are set out below:
FY2021 Diversity Strategy
OBJECTIVE
Conduct a Diversity Survey for a new CCX baseline
Develop Diversity strategy and associated metrics for FY2021
Review Diversity Policy to ensure it aligns with Diversity Strategy
Rollout a workplace volunteering program that partners with NFP organisations that share our Diversity
Policy objectives
Use FY2021 WGEA Report to set gender-related diversity objectives for FY2022
FY2020 CITY CHIC COLLECTIVE ANNUAL REPORT 21
Corporate Social Responsibility
Corporate Social Responsibility
SOURCING PRODUCT IN A RECOGNISED, RESPONSIBLE
WORKING TOGETHER TO EMPOWER OUR WORKERS
AND TRANSPARENT SUPPLY CHAIN.
AND TO GIVE THEM A VOICE IN THE SUPPLY CHAIN.
Our transparency journey continues by seeking to be
Our grievance mechanism and worker voice hotline
open and transparent about our vendor partnerships
remain a key tool for seeking to empower factory
and by giving our customers visibility on our ethical
workers to have a voice via:
sourcing policies, allowing our customers to make more
informed purchasing decisions.
We publish our:
• Vendor Code of Conduct
• Vendor Rules of Engagement
• Ethical Sourcing Policies (including our human rights,
environmental and animal welfare policies and
commitments)
• Our Factory List
Over the year we continued to develop our factory
onboarding process to help communicate our ethical
sourcing policies along with educating vendors on the
importance of:
• Living Wage
• Gender Equality
• Hotlines, email and WeChat
• Training and information cards which are provided to
factory workers
• We train and audit factory management to help
spread the worker voice message
• We encourage workers to set up worker appointed
safety committees within the factory
We believe that worker voice is an important part of
developing a transparent supply chain and the next
phase of our work will be to conduct worker surveys as
another avenue for workers to have their say.
WE CARE FOR THE ENVIRONMENT AND THE
MANAGEMENT OF WASTE IN OUR SUPPLY CHAIN.
• Eradicating Modern Slavery and Child Labour
As part of our audit program we seek to ensure that all
textile processing and waste management is in line with
We believe the success to embedding these policies
the legislation of the manufacturing country. We require
is to encourage our vendors to drive these ethical
all our factories in China to register and provide an
sourcing policies within their factories and throughout
Environmental Impact Assessment (EIA) on their factory.
their own supplier base and supply chains.
With training and open dialogue, we seek to partner
environmental piece to audit against this EIA and put
with our vendors to improve the working conditions
in place corrective action where required, which is
and safety of workers and improve transparency in the
monitored to track progress and remediation actions.
Our factory social audits also encompass an
supply chain.
These audits include Environmental and Waste
This year, with the acquisition of a new brand, we have
Management checks for
focused on choosing and onboarding a select group of
1.
Legal Authorisations – such as the EIA
new factories and vendors into our supply chain and into
2. Solid & Hazardous wastes
our ethical trade framework. Our onboarding of these
3. Waste water, Air Emissions and Noise
new factories and vendors will continue into the FY2021
4. Energy & Water reductions
reporting period.
FY2020 CITY CHIC COLLECTIVE ANNUAL REPORT 22
Corporate Social Responsibility
IMPACTS OF COVID-19 IN OUR SUPPLY CHAIN.
We believe we have an important role to play in our
one, we recognise the challenges in getting access or
supply chain, so that workers enjoy a safe and healthy
visibility down to the lowest levels of the chain.
working environment free of any form of exploitation.
We also recognise that there is heightened risk of
As we navigate through this global pandemic, we
of this global pandemic. As a result, we are working
continue to place great importance on all our ethical
on adapting our modern slavery risk assessments to
trade policies and responsible sourcing practices. We
include a focus on understanding any new or hidden
believe that all workers have a right to a decent working
risks as we work towards seeking to eradicate modern
life that pays them a fair and liveable wage, and we want
slavery in the supply chain.
modern slavery or worker exploitation as a direct impact
to give all workers, no matter how deep they are in the
supply chain, the opportunity to have a voice.
In support of the COVID-19 Fashion Commitments, we
endorse the following six commitments within our supply
chain:
1. Support workers’ wages by honouring supplier
commitments
2.
Identify and support the workers at greatest risk
3. Listen to the voices and experience of workers
4. Ensure workers’ rights and safety are respected
5. Collaborate with others to protect vulnerable
workers
6. Build back better for workers and the world
We remain committed to being transparent and working
responsibly with all our partners and factories.
We acknowledge that to influence real systemic change,
throughout the layers of our supply chain, we need to
collaborate with our stakeholders including our partners,
community, and other businesses to drive sustainable
change.
We will continue to enhance, communicate, and embed
our core policies throughout our supply chain to help
deliver on these fashion commitments.
As we continue to map our supply chain beyond Tier
FACTORY
FABRIC MILL
DYING &
PRINTING
YARN &
SPINNING
FARM
ACCESSORIES
WE BELIEVE IT IS THE RIGHT OF EVERY WORKER IN
OUR SUPPLY CHAIN TO ENJOY SAFE AND HEALTHY
WORKING CONDITIONS IN AN ENVIRONMENT
WHERE THEY ARE NOT EXPLOITED.
As part of the audits and factory visits conducted by our
team and our third-party auditors, we check that working
conditions are clean and safe and workers are not
performing any unsafe work. We monitor that factories
are clear on our rules of engagement and operate within
those guidelines.
With this global pandemic comes increased risks of poor
labour practices in the supply chain. We are working
on adapting our audits and how we assess our modern
slavery risks in order to understand how we can best
support the most vulnerable in our supply chain.
FY2020 CITY CHIC COLLECTIVE ANNUAL REPORT 23
Annual
Financial
Report
2020
25
32
44
45
52
105
106
108
Directors' Report
Remuneration Report
Auditor's Independence Declaration
Independent Auditor's Report to the
Members of City Chic Collective Limited
Annual Financial Statements
Corporate Governance Statement
Shareholder Information
Corporate Directory
FY2020 CITY CHIC COLLECTIVE ANNUAL REPORT 24
City Chic Collective Limited
Directors' report
28 June 2020
The directors present their report, together with the financial statements, on the consolidated entity (referred
to hereafter as the 'Group', 'consolidated entity' or ‘City Chic’) consisting of City Chic Collective Limited (referred
to hereafter as the 'company', 'parent entity', or 'CCX') and the entities it controlled at the end of, or during, the
52 week period ended 28 June 2020.
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:
Michael Kay
Michael Hardwick
Megan Quinn
Phil Ryan
Company Secretary and Other Key Management Personnel
Marta Kielich (Company Secretary, appointed 7 July 2020)
Mark Ohlsson (Company Secretary, resigned 6 July 2020)
Munraj Dhaliwal (Chief Financial Officer)
Principal activities
The principal activity of the Group during the financial year was the retail sale of plus-size woman’s apparel,
footwear, and accessories through a variety of customer-led brands. At 28 June 2020, the business has 93 retail
stores in operation across Australasia, multiple websites operating in Australasia and the USA and marketplace
and wholesale partnerships in the USA, Europe and UK.
There was no significant change in the nature of the activities of the Group during the period.
Dividends
Fully franked dividends paid during the financial period and the previous period were as follows:
Interim ordinary dividend for the period (2019: 2.5 cents per ordinary share)
Special dividend for the period (2019: 2.5 cents per ordinary share)
Final dividend for the period (2019: 1.5 cents per ordinary share)
Total dividends
Operating and financial review
Consolidated
2020
$'000
2019
$'000
-
-
2,884
2,884
4,806
4,806
-
9,612
The Group achieved revenue from continuing operations of $194.5m (30 June 2019: $148.4m). Net profit after
tax for continuing operations was $9.2m (30 June 2019: $14.3m).
The Group ended the year with net cash of $3.9m at 28 June 2020 (30 June 2019: net cash of $23.2m).
The reported operating cash flow generated for the year is $25.2m (30 June 2019: cash used $(3.8m)).
The Underlying EBITDA from continuing operations was $26.5m (30 June 2019: $24.9m).
On 16 October 2019, the Group acquired the eCommerce assets of Avenue Stores LLC through a new subsidiary
Avenue Online LLC (Avenue) for cash consideration of US$16.5m (AU$24.6m). The acquisition is part of the
Group’s strategy to accelerate US customer growth and expand across plus size segments. Avenue traded
profitably throughout the period.
On 23 August 2019, the Group amended its external finance facilities from a working capital facility of $15.0m to
a general corporate purpose facility of $5.0m. On 11 October 2019 in order to fund the acquisition of Avenue, the
Group secured an additional “Acquisition Facility” of $12.5m to be repaid over a 12-month period.
25
City Chic Collective Limited
Directors' report
28 June 2020
In February 2020, the Group refinanced the $5.0m general corporate purpose facility and the $12.5m Acquisition
Facility with a $35.0m 3-year facility. In May 2020, the Group executed on an $5.0m accordion, taking the total
facility to $40.0m, expiring in February 2023.
In February 2020, the Group and Mosaic Brands Limited (formerly Noni B Limited) reached a confidential
settlement in relation to the post completion working capital adjustment associated with the divestment of
brands in July 2018.
At the time of announcing the interim results in February 2020, the impact of COVID-19 was limited to potential
supply disruption in China. At that point in time, the company’s expectations were for the sales growth
momentum in the first half to continue into the second half of the financial year.
On 19 March 2020, City Chic flagged the ongoing spread of COVID-19 and the escalation of government
containment measures globally were impacting consumer spending and sales. On 27 March 2020, City Chic
announced the temporary closure of Australian and New Zealand (ANZ) stores and the implementation of
various cost reduction and working capital management initiatives.
On 25 May 2020, City Chic advised of a staged reopening of stores and profitable trading during store closures
driven by 57% ANZ online sales growth and a resilient Avenue customer base. On 15 June 2020, City Chic finalised
negotiations with landlords on reduced rents during store closures and market appropriate go-forward rents. As
part of the process, City Chic decided to close 14 holdover stores where it was unable to reach agreement on
appropriate post COVID-19 rents. The impact of these store closures to the Group’s future earnings is expected
to be minimal as customers are redirected to nearby stores and the online channel.
The closure of ANZ stores in April and May resulted in total sales in ANZ being 47% down in April and 37% down
in May. As restrictions eased in June and stores re-opened, sales in ANZ recovered from the April lows, to be
down 26% in June. ANZ sales growth was 9.9% in the first half, followed by a 21.5% fall in the second half driven
by the impact of COVID-19 and the store closures.
The strong growth momentum experienced by City Chic USA website in the first half slowed and gross margins
heavily affected in the second half with the impact of COVID-19 and the drop in demand for City Chic’s major
dress category in the US. Sales via the Avenue website were resilient throughout the second half but showed
some weakness versus the momentum achieved in January and February 2020.
The Group implemented a number of measures to reduce costs in response to COVID-19 in the second half.
Activity driven by stores was reduced, as well as more broadly across the head office. City Chic negotiated
reduced rents with landlords, which is reflected in the reduction in rent paid from $7.6m in the first half, to $6.3m
in the second half. The Group received $3.9m relating to FY2020 for the JobKeeper subsidy in Australia and the
Wage Subsidy Scheme in New Zealand, which was paid in its entirety to team members. However, the majority
of the payments to team members covered the period in which stores were closed and therefore represented
top-up amounts above actual hours work. As such, these subsidies were pass-through in nature rather than
savings for the Group.
Subsequent to year-end, the Group completed a fully underwritten $80.0m equity raise and a non-underwritten
Share Purchase Plan (SPP), which raised $31.1m and closed on 18 August 2020. See ‘Matters subsequent to the
end of the financial period’ below for full details.
Outlook
In the early part of FY2021, City Chic is pleased to advise the Group has continued to deliver positive comparable
sales growth and the Avenue customer base in the US continues to be resilient. However, City Chic acknowledges
the economic impact caused by COVID-19 globally and the uncertain outlook for consumer demand.
The Group is very well capitalised and remains focused on the execution of various initiatives to drive growth
including:
• Potential acquisition and integration of the Catherines brand;
•
Improve engagement with and customer experience of the Avenue customer base, and migrate store
customers to the online channel;
26
City Chic Collective Limited
Directors' report
28 June 2020
• Ongoing review of store portfolio with roll-out of new stores and conversion to larger format stores,
where store economics are appropriate;
• Continuing expansion of lifestyles and categories online;
• Expand into Everyday Fashion product stream in the southern hemisphere;
• Customer acquisition and driving brand awareness in the northern hemisphere, including adding new
partners and building on trial in the UK and Europe; and
• Ongoing investment to enhance customer touchpoints.
Material business risks
The Group 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 is regularly reviewed for their possible impact.
COVID-19 pandemic
The ongoing COVID-19 pandemic has had a significant impact on the global and Australian economy and the
ability of businesses, individuals and governments to operate. Emergency powers and restrictions have been
enacted which, amongst other things, has restricted travel and the ability of many individuals to leave their homes
and travel to places of work.
City Chic has already experienced an adverse impact on its sales and supply chain, borne out of ongoing
international and domestic travel restrictions, government lock down measures, and broader global uncertainty
around a recovery of business activity.
COVID-19 has already increased unemployment in City Chic’s key markets Australia, New Zealand and the United
States and could reduce further consumer and business discretionary spending and demand for City Chic's
products, particularly after the various fiscal stimulus measures are brought to an end by respective
governments. Given the high degree of uncertainty surrounding the extent and duration of COVID-19, it is not
currently possible to assess the full impact of COVID-19 on City Chic’s business. COVID-19 forced City Chic to
close its stores during April and May 2020 and again its Victorian stores in July 2020 and some New Zealand
stores in August 2020. There is a risk that further store closures may occur in other locations if the COVID-19
outbreak cannot be adequately contained.
A number of aspects of City Chic's business may be directly or indirectly affected by government, regulatory or
health authority actions, work stoppages, lockdowns, quarantines and travel restrictions associated with COVID-
19, including disruption to City Chic’s supply chain and workforce, particularly the availability of products and
logistics (including shipping of products) and government-imposed shut downs of manufacturing and
distribution centres affecting the supply of products to customers.
Having been able to navigate the pandemic to-date and trade profitably even at the height of restrictions,
management is confident in being able to manage these risks. This will be done through the strength of the
Group’s business model, with high online penetration and geographic diversity, and the flexibility of its supply
chain, helping manage stock levels and production times. In addition, having significant liquidity headroom and
a strong balance sheet gives flexibility to continue operating the business, maintaining key relationships with
suppliers, and ensuring the right, long term strategic decisions are being made.
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 footprint 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 (directly sourced or via local or overseas wholesalers) and
as a result the cost of the product may be subject to movements in the exchange rate of the Australian dollar.
The Group also has significant operations in the USA which provide a natural hedge against currency movements
27
City Chic Collective Limited
Directors' report
28 June 2020
on purchases. Any additional risk in exchange rate movement is monitored and can be mitigated through the
use of forward hedging. However, it is noted that no hedges have been put in place in FY2020.
Workplace Health and Safety (WHS)
The Group has over 640 employees as well as the customers who visit its physical stores across ANZ. The Group
has a high focus on Occupational Health and Safety (OHS) with investment in training and development of its
employees a high priority.
Environmental changes
The Group is exposed to risks arising from environmental changes, scarcity of natural resources and the
continuing global development of legislation and regulations in this area. Many of these risks are greatest in the
Group’s supply chain activities and these activities and the related risks are largely managed through the
principals laid out in the Corporate Social Responsibility report. The Group manages environmental risks, such as
droughts and floods by diversifying its vendors and material sourcing. The Group has dedicated resources to
ensure continued compliance across all regulatory requirements in the markets operated in by the Group.
Significant changes in the state of affairs
On 16 October 2019, the Group acquired the eCommerce assets of Avenue Stores LLC for cash consideration of
US$16.5m (AU$24.6m), excluding net working capital adjustments. The acquisition is part of the Group’s strategy
to accelerate US customer growth and expand across plus-size segments. Please refer to details in Note 33.
Business combinations.
As noted above, in early 2020, there was an outbreak of COVID-19 in China which subsequently evolved into a
global pandemic. The Group was initially impacted from a supply perspective as the Chinese Government
imposed restrictions across the country. The spread of the virus across the globe resulted in restrictions imposed
by governments in all countries in which the Group does business. This resulted in a material reduction in
consumer confidence and spending globally, as well as stores being closed in Australia and New Zealand for all
of April 2020 and the majority of May 2020.
There were no other significant changes in the state of affairs of the consolidated entity during the financial
period.
Matters subsequent to the end of the financial period
The impact of COVID-19 on economic conditions and the heightened level of uncertainty is likely to have a near-
to-medium term impact on the level of business activity and sales for the Group. As at the date these financial
statements are authorised for issue, the Directors consider that the financial effects of any potential changes
cannot be reasonably estimated for future financial periods. However, there is confidence that the measures put
in place to drive cash flow generation in the last four months of FY2020 provide a strong foundation to manage
future disruption and uncertainty. There is a potential that the lower levels of forecast activity may impact the
future recoverability of the Group's assets, including debtors, inventory, plant and equipment and intangible
assets.
The Directors continue to monitor COVID-19 related developments and are closely working with management to
assess and navigate the potential implications for team members, suppliers, customers, and operations. The focus
is to maintain production and supply of products and services whilst minimising the risk of spread of COVID-19
amongst our team members, our customers, and the societies in which the Group operates.
In early July, the Victorian State Government reinstated restrictions in relation to COVID-19 in metropolitan
Melbourne. To protect the health and safety of the team and customers, City Chic temporarily closed 20 stores
in Melbourne. In early August, following the escalation of the spread of the COVID-19 virus in Victoria, the
remaining four stores in regional Victoria were also temporarily closed.
In mid-August 2020, an increase in the number of COVID-19 cases resulted in the New Zealand government
imposing restrictions in Auckland. City Chic has temporarily closed its four stores in Auckland.
The remainder of the store portfolio in ANZ remain open and traded well in July and August. City Chic’s online
channel continues to operate without disruption in all geographies. The health and safety of the team and
customers, as well as the guidelines provided by the government, will drive any decision on reopening of stores.
28
City Chic Collective Limited
Directors' report
28 June 2020
On 24 July 2020, City Chic was selected as Stalking Horse Bidder and signed an asset purchase agreement (APA)
for the eCommerce assets of the US-based brand Catherines, owned by Ascena Retail Group Inc (Ascena), which
filed for bankruptcy on the same day. City Chic’s Stalking Horse Bid includes upfront cash consideration of
US$16.0m, subject to an inventory adjustment. The APA is subject to conditions precedent, including City Chic
being the highest bidder through the US bankruptcy auction process and approval by a US Bankruptcy Court.
There is therefore no guarantee City Chic will be successful in its bid and the auction process may result in the
purchase price being higher. If City Chic is the successful acquirer, the expected date of completion would be
late in the third quarter or early fourth quarter of 2020. Further details on the Catherines business and the US
bankruptcy process are included in the announcement and investor presentation released to the Australian
Securities Exchange on 24 July 2020.
In combination with the announcement of the potential acquisition of the eCommerce assets of Catherines on
24 July 2020, City Chic completed a fully underwritten $80.0m Placement of new fully paid ordinary shares to
eligible professional and sophisticated institutional investors. The Placement was conducted at $3.05 per share,
resulting in 26.2 million new shares being issued, representing 13.1% of City Chic’s existing issued capital. New
shares issued under the Placement settled on 30 July 2020 and commenced trading on 31 July 2020.
Following the completion of the Placement, City Chic offered all eligible shareholders the opportunity to
participate in a non-underwritten Share Purchase Plan (SPP). City Chic raised $31.1m through the SPP, which
closed on 18 August 2020. The SPP was conducted at $3.05 per share, resulting in 10.2 million new shares being
issued. The Placement and SPP together raised $111.1m and resulted in 36.4 million new shares being issued.
Subsequent to year-end the Group has repaid its $17.5m of debt in full, with the $40.0m available debt facility
maturing in February 2023.
No other matter or circumstance has arisen since 28 June 2020 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 28 June 2020 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.
29
City Chic Collective Limited
Directors' report
28 June 2020
Information on directors
Michael Kay
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
Interests in rights:
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:
Chairman and non-executive director
B.LLB
Michael Kay joined the City Chic Collective Board on 1 October 2018 as an independent non-
executive director and was subsequently appointed Chairman on 9 November 2018. Mr Kay has
significant listed company experience, as detailed more fully below, and is also a non-executive
director of Royal Automobile Club Insurance (WA). 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 Omni Bridgeway Ltd (ASX: OBL) (formerly called IMF Bentham
Limited (ASX:IMF)).
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; Member of the Audit and Risk Committee (ARC); Member of the
Nomination and Remuneration Committee (NRC)
609,914 ordinary shares
None
None
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 a Chartered Accountant and Graduate member of the AICD. He spent 10 years at
PwC in both Melbourne and New York in the transaction advisory practice and 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, and Westpac. Ms Quinn was also a Board and National
Committee member of UNICEF Australia. 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).
Ms. Quinn retired as non-executive director at zipMoney Limited (ASX:Z1P) on 1 November 2017.
Chair of the NRC; Member of the ARC
None
None
None
30
City Chic Collective Limited
Directors' report
28 June 2020
Phil Ryan
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, with a
collective of customer-led brands including City Chic, Avenue and Hips & Curves. Under Mr.
Ryan's leadership City Chic now has more than 90 stores in Australia and New Zealand. Online
sales represent ~65% of total sales globally and in the US, UK, and Europe City Chic trades
exclusively in a digital capacity. Mr Ryan 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 rag trade
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; Managing Director
124,000 ordinary shares
2,161,235 ordinary shares issued under CCX's 2019 Employee Share Plan and escrow provisions
2,640,740 performance rights over ordinary shares
'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
Marta Kielich joined City Chic as General Counsel and Company Secretary on 7 July 2020. Ms. Kielich has held
company secretarial and senior legal positions for several ASX-listed companies. Ms. Kielich also has broad
international experience across various sectors.
The former Company Secretary was Mark Ohlsson, FCPA. Mr. Ohlsson was appointed to the position of Company
Secretary on 10 May 2019 and resigned on 6 July 2020. Mr. Ohlsson has been involved in business management
and venture capital for over 35 years. He is a Fellow of CPA Australia and a Registered Tax Agent.
Meetings of directors
The number of meetings of the company's Board of Directors ('the Board') and of each Board committee held
during the period ended 28 June 2020, and the number of meetings attended by each director were:
Full Board
NRC
ARC
Attended
Held
Attended
Held
Attended
Held
Michael Kay
Michael Hardwick
Megan Quinn
Phil Ryan
27
26
24
26
27
27
27
27
2
2
2
N/A
2
2
2
N/A
4
4
4
N/A
4
4
4
N/A
Held: represents the number of meetings held during the time the director held office or was a member of the
relevant committee.
In the context of the spread and impact of COVID-19 on the Group, the Board elected to hold a Board meeting
weekly from March 2020, where it monitored the financial performance, financial position and cash flow of the
business, as well as assess opportunities to capitalise on the market environment.
Retirement, election, and continuation in office of directors
At the 21 November 2019 Annual General Meeting (“AGM”), 99.86% of the votes received supported the re-
election of director Michael Hardwick as part of the company's constitution that specifies all directors must stand
for re-election every three years.
31
City Chic Collective Limited
Directors' report
28 June 2020
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:
(a) Introduction
(b) Remuneration strategy and policy
(c) Remuneration framework
(d) Remuneration outcomes for key management personnel
(e) Service agreements
(f) Disclosures relating to share options and performance rights
(g) Additional disclosures relating to key management personnel
a. 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 28 June 2020 and 30 June 2019. 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
Executive directors:
Phil Ryan
Other key management personnel:
Munraj Dhaliwal
b. Remuneration strategy and policy
Chairman and non-executive director
Non-executive director
Non-executive director
Chief Executive Officer and Managing Director
Chief Financial Officer
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.
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;
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.
●
32
City Chic Collective Limited
Directors' report
28 June 2020
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.
c. 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 21 November 2019,
where the shareholders approved a maximum annual aggregate remuneration of $1,000,000. 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
and travel allowances.
(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 28 June 2020, the NRC determined that executives will not be eligible for the STI plan, as
their incentives would be solely in relation to the long-term incentives, detailed below.
33
City Chic Collective Limited
Directors' report
28 June 2020
(iii) Long-term Incentives
The Group’s long-term incentives 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.
The Group’s long-term incentives are comprised of the Long-Term Incentive Plan (LTIP) and the Loan Funded
Share Plan (LFSP). The following share-based payment arrangements were in existence during the current year:
Tranche
Grant date Performance
period end
date
1
2A
2B
2C
Total Performance Rights
13/11/2018 30/06/2021
13/11/2018 30/06/2021
13/11/2018 30/06/2021
13/11/2018 30/06/2023
3
3
Total Loan Funded Shares
21/11/2019 30/06/2024
03/03/2020 30/06/2024
LTIP Tranches
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
%
3.50%
3.50%
3.50%
3.50%
Risk-free
interest rate
%
2.12%
2.12%
2.12%
2.12%
Balance at
the start of
the period
895,552
1,237,500
1,237,500
2,475,000
5,845,552
-
-
-
-
-
Granted
Vested
$2.68
$2.79
35.00%
35.00%
N/A
N/A
2.12%
2.12%
-
-
-
7,533,448
667,464
8,200,912
Expired/
forfeited
(113,704)
-
-
-
(113,704)
Balance at
the end of
the period
781,848
1,237,500
1,237,500
2,475,000
5,731,848
-
-
-
7,533,448
667,464
8,200,912
-
-
-
-
-
-
-
-
Vesting conditions of the LTIP tranches are set out below.
Tranche 1
Vesting Condition 1
Vesting Condition 2
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:
EPS CAGR across the Tranche 1
Performance Period
Below 5.0%
5.0%
5.0% ≤ EPS CAGR ≤ 20.0%
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)
Tranche 2A
Vesting Condition
Tranche 2B
Vesting Condition 1
Vesting Condition 2
Continued service to August 2021, with no holding lock on resulting shares.
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 FY202018 EPS)
$0.0975 ≤ EPS < $0.1050 (1.4 x FY202018 EPS)
EPS ≥ $0.1050
Proportion of Tranche 2B Performance Rights held that will satisfy
Vesting Condition 2
Nil
50%
100%
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 FY202018 EPS)
$0.1250 ≤ EPS < $0.1200 (1.6 x FY202018 EPS)
$0.1200 ≤ EPS < $0.1275 (1.7 x FY202018 EPS)
EPS ≥ $0.1275
Proportion of Tranche 2C Performance Rights held that will satisfy
Vesting Condition 2
Nil
50%
75%
100%
34
City Chic Collective Limited
Directors' report
28 June 2020
LFSP Tranche
During the current year, the Group established the 2019 Employee Share Plan approved by shareholders at
the Annual General Meeting on 21 November 2019.
The plan was introduced following a review of existing remuneration arrangements of the Group. The purpose
of the plan is to further align the incentive arrangements for the executive team and the Group's success.
The key terms of the LFSP are listed as follows:
●
●
●
●
●
●
Loan funded (LF) shares are issued at the Company's share price on the ASX at the time of issue.
The Company advances money to pay for the subscription price of the LF Shares (Loan).
The Loan has an interest payable of 1.9% and is repayable on the earlier of cessation of employment (6 or
12 month grace periods may be applied) or 7 years from the agreement by the Board to issue LF Shares
under the Plan (Vesting period is 5 years to 30 June 2024).
The Company's recourse in the event it seeks to recover the Loan is limited to the LF Shares. Where a
Participant does not repay the Loan by the repayment date, the Participant is deemed to have agreed to
sell to the Company pursuant to an employee share scheme buy-back, that number of LF shares required
to repay the Loan to the Company.
The Company will apply the after-tax amount of any dividends payable in respect of a Participant's LF
Shares towards repayment of the outstanding balance of the Loan.
The LF Shares offered are subject to Vesting Conditions, which if not met, the unvested LF Shares will be
forfeited and bought back by the Company at the issue price and the Loan will be deemed repaid.
Vesting conditions of the LF Shares are set out below:
Tranche 3
Vesting Condition 1
Vesting Condition 2
Continued service to 30 June 2024.
Compound annual growth rate (CAGR) in the Group’s earnings per share after tax (AEPS) prescribed
by the Board over the 3 year period commencing on 1 July 2019, in which case (subject to satisfaction
of Vesting Period Condition) the LF shares held will vest in accordance with the following vesting scale:
AEPS 3-year CAGR from 1 July 2019
12.5%
20.0%
12.5% ≤ AEPS CAGR ≤ 20.0%
Proportion of Tranche 3 LF Shares that will satisfy Vesting Condition 2
25%
100%
Straight-line pro rata vesting between 25% and 100% (inclusive)
The LF shares issued under the Plan have been treated as 'in substance options' which have been valued using
a Modified Binomial Lattice option pricing model which allows for varying exercise price. The resulting value is
amortised over the vesting period on a probability adjusted basis. The probability is assessed with consideration
of management’s expectation of future earnings and the financial hurdles for vesting. The total expense
recorded for the period was $0.8m.
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 resulted in share-based payments
remuneration in the form of performance rights being implemented. PricewaterhouseCoopers was paid $69,998
for these services. During the financial period ended 28 June 2020, Lonergan Edwards and Arnold Block Leibler
were engaged to advise and establish the LFSP. Lonergan Edwards and Arnold Block Leibler were paid
$107,400 for these services.
Voting and comments made at the company's 21 November 2019 AGM
At the 21 November 2019 AGM, 99.80% of the votes received supported the adoption of the remuneration report
for the year ended 30 June 2019. The Company did not receive any specific feedback at the AGM regarding its
remuneration practices.
35
2020
Non-executive directors
$
Michael Kay
Michael Hardwick
Megan Quinn
Executive directors
Phil Ryan
Other key management personnel
Munraj Dhaliwal
Total
(A)
(B)
(C)
City Chic Collective Limited
Directors' report
28 June 2020
d. 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
Cash salary & fees
Allowances
Total short-term
Post-employment
superannuation
Other long-term leave
benefits
Share-based
payments
(A)
$
$
$
(B)
$
(C)
$
150,598
70,673
70,673
-
-
-
150,598
70,673
70,673
14,307
6,714
6,714
-
-
-
-
-
-
164,905
77,387
77,387
Total
$
Proportion of
performance related
remuneration
%
0%
0%
0%
699,039
6,300
705,339
21,003
59,984
1,037,153
1,823,478
57%
399,231
1,390,213
4,500
10,800
403,731
1,401,013
21,003
69,741
30,850
90,834
277,829
1,314,982
733,413
38%
2,876,570
This comprises car and travel allowances.
In accordance with AASB 119 Employee Benefits, accrued annual leave and long service leave is classified as other long-term employee benefit.
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.
36
City Chic Collective Limited
Directors' report
28 June 2020
Cash salary &
fees
Short-term
Bonus
Allowances
Total
Post-employment
superannuation
Other long-
term leave
benefits
Termination benefit
Share-based
payments
Total
Proportion of
performance related
remuneration
2019
Non-executive directors
$
(A)
$
(B)
$
$
$
(C)
$
$
(D)
$
Michael Kay1
Michael Hardwick
Megan Quinn
Anne McDonald2
Ashley Hardwick3
Executive directors
Phil Ryan4
116,790
75,000
75,000
48,077
28,846
-
-
-
-
-
-
-
-
-
-
527,500
195,000
11,002
Daniel Bracken6
294,228
-
Other key management personnel
Munraj Dhaliwal7
130,154
108,000
-
-
Tim Fawaz8
249,789
112,0009
16,346
116,790
75,000
75,000
48,077
28,846
733,502
294,228
238,154
378,135
11,095
7,125
7,125
4,567
2,740
-
-
-
-
-
24,351
151,2575
-
-
-
-
-
-
$
127,885
82,125
82,125
52,644
31,586
-
-
-
-
-
508,692
1,417,802
5,133
-
20,023
-
319,384
6,350
15,399
6,106
40,615
-
-
96,797
-
347,407
434,149
%
0%
0%
0%
0%
0%
50%
0%
59%
N/A
Total
(A)
(B)
(C)
(D)
1,545,384
415,000
27,348
1,987,732
83,885
197,978
20,023
605,489
2,895,107
The short-term incentive bonus in relation to Phil Ryan and Munraj Dhaliwal is for performance during the respective financial year. The amount was finally determined at a Board meeting held on 26
August 2019 and was paid in January 2020.
This comprises car and travel allowances.
In accordance with AASB 119 Employee Benefits, accrued annual leave and long service leave expensed in the period, is classified as other long-term employee benefit
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.
37
City Chic Collective Limited
Directors' report
28 June 2020
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:
Name
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Fixed Remuneration
At risk - STI
At risk - LTI
Cash bonus paid/payable
Cash bonus forfeited
Executive director:
Phil Ryan
38%
47%
N/A
14%
62%
39%
N/A
100%
N/A
0%
Other key management personnel:
Munraj Dhaliwal
Tim Fawaz
55%
N/A
63%
100%
N/A
N/A
19%
N/A
45%
N/A
18%
N/A
N/A
N/A
100%
N/A
N/A
N/A
0%
N/A
38
City Chic Collective Limited
Directors' report
28 June 2020
e. Service agreements
Remuneration and other terms of employment for key management personnel are formalised in service
agreements. Details of these agreements are as follows:
Phil Ryan
Title:
Term of agreement:
Details:
Munraj Dhaliwal
Title:
Term of agreement:
Details:
Chief Executive Officer and Managing Director
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
Chief Financial Officer
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.
Key management personnel have no entitlement to termination payments in the event of removal for
misconduct.
f. Disclosures relating to share options and performance rights
Issue of share options and performance rights
There were no options issued to key management personnel as part of compensation during the period ended
28 June 2020.
There were no performance rights issued to key management personnel as part of compensation during the
period ended 28 June 2020.
The number of loan funded shares issued as part of the Company’s 2019 Employee Share Plan to key
management personnel as part of compensation during the period ended 28 June 2020 and performance rights
over ordinary shares granted during period ended 30 June 2019 are set out below:
Loan funded shares
Performance rights
Granted during the
period
Vested during the period
Granted during the
period
Name
Phil Ryan
Munraj Dhaliwal
Total
2020
2,161,235
1,234,991
3,396,226
2019
2020
2019
2020
-
-
-
-
-
-
-
-
-
2019
2,640,740
483,333
3,124,073
-
-
-
Vested during the period
2020
2019
-
-
-
-
-
-
The number of performance rights over ordinary shares and loan funded shares held by key management
personnel as at 28 June 2020 are shown below:
Tranche
Name
Phil Ryan
Munraj Dhaliwal
Total
1
2A
2B
2C
Total
Performance rights
Loan funded
shares
3
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
2,161,235
1,234,991
3,396,226
39
City Chic Collective Limited
Directors' report
28 June 2020
Additional information
The following earnings information reflects the basis for which financial hurdles are considered for the share-
based payments and measure executive performance in delivering long term growth of the Group:
2020
2019
Profit/(loss) before income tax for continuing underlying operations
EPS (underlying before income tax) - Tranche 1
$20.1m
10.5 cents per share
$21.3m
11.1 cents per share
Profit/(loss) before income tax for continuing underlying operations (before share-
based payments)
EPS (underlying before income tax and share-based payments) - Tranche 2B and 2C
$22.9m
$22.4m
11.9 cents per share
11.6 cents per share
Profit/(loss) after income tax for continuing underlying operations
EPS (underlying after income tax) - Tranche 3
$11.6m
6.0 cents per share
$15.7m
8.2 cents per share
g. Additional disclosures relating to key management personnel
Shareholding
The number of shares in the company held during the financial period by each director and other members of
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
Disposals/
other
Balance at
the end of
the period
Directors' shareholding
Michael Kay
Michael Hardwick
Phil Ryan
Other key management personnel shareholding
Munraj Dhaliwal
Total
509,914
495,000
124,000
-
80,000
1,208,914
-
-
-
-
-
-
100,000
-
-
-
-
-
-
-
-
-
-
-
609,914
495,000
124,000
-
80,000
1,308,914
Performance rights holding
The number of performance rights over ordinary shares in the company held during the financial period by each
director and other members of key management personnel of the consolidated entity, including their personally
related parties, is set out below:
Performance rights over ordinary shares
Phil Ryan
Munraj Dhaliwal
Total
the start of
the period
2,640,740
483,333
3,124,073
Balance at
Granted
Vested
Expired/
forfeited
Balance at
the end of
the period
-
-
-
-
-
-
-
-
-
2,640,740
483,333
3,124,073
Loan funded shareholding
The number of loan funded shares in the company held during the financial period by each director and other
members of key management personnel of the consolidated entity, including their personally related parties, is
set out below:
Loan funded shares
Phil Ryan
Munraj Dhaliwal
Total
Balance at
Granted
Vested
the start of
the period
Expired/
forfeited
Balance at
the end of
the period
-
-
-
2,161,235
1,234,991
3,396,226
-
-
-
-
-
-
2,161,235
1,234,991
3,396,226
40
City Chic Collective Limited
Directors' report
28 June 2020
The following transactions occurred with key management personnel and their personally related parties:
Payment for other expenses:
Services provided by Southern Cross Shopfitting, a company that is associated with the Cotton On
Group, of which Michael Hardwick is a Director and the CFO1
Services provided by Southern Cross Shopfitting (NZ), a company that is associated with the Cotton
On Group, of which Michael Hardwick is a Director and the CFO2
Total related party transactions
Consolidated
2020
$'000
2019
$'000
2,552,160
965,129
67,386
332,249
2,619,546
1,297,378
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 Michael Hardwick was not involved in decision making relating to Southern Cross Shopfitting (NZ) and its dealings with the Group.
41
City Chic Collective Limited
Directors' report
28 June 2020
Shares under option
There were no unissued ordinary shares of City Chic Collective Limited under option outstanding at the date of
this report.
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 options
There were no ordinary shares of City Chic Collective Limited issued on the exercise of options during the period
ended 28 June 2020 and up to 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 28 June 2020 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 28 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.
42
City Chic Collective Limited
Directors' report
28 June 2020
Auditor
Deloitte Touche Tohmatsu continues in office in accordance with section 327 of the Corporations Act 2001.
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
Chairman
27 August 2020
Sydney
Phil Ryan
Chief Executive Officer and Managing Director
43
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
The Board of Directors
City Chic Collective limited
151-163 Wyndham Street
Alexandria, NSW 2015
27 August 2020
Dear Board Members
Auditor’s Independence Declaration to 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 report of City Chic Collective Limited and its
subsidiaries for the 52 week period ended 28 June 2020, 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 faithfully
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 organisation.
44
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 statement of financial position as at 28 June 2020,
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 28 June 2020 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 (including Independence Standards) (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance
with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has
been given to the directors of the Company, would be in the same terms if given to the directors as
at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance
in our audit of the financial report 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.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte organisation.
45
Key Audit Matter
Avenue Acquisition
As set out in Note 33, on 16 October 2019, CCX
acquired the distressed e-commerce business of
Avenue Stores LLC (Avenue) based in the USA for
US$16.55 million (AUD $25.7 million).
finalised.
During the 52-week period ending 28 June 2020,
the accounting for the acquisition of Avenue
In accordance with
assets was
Australian Accounting Standards the assets and
liabilities of the acquired business are initially
recognised at fair value. The fair value of the net
assets acquired is $13.1 million with a residual
goodwill balance identified of $12.6 million.
Accounting for the acquisition of a business
includes the determination of whether the
transaction is the acquisition of a business or the
acquisition of assets in accordance with AASB 3
the accounting
Business Combinations
as
consequences are different.
Identifying and
determining the fair value of acquired assets,
particularly intangible assets, can be complex and
involves the significant use of assumptions. In
finalising
the business
combination, management engaged an external
valuation expert to assist.
the accounting
for
Management’s accounting for the acquisition
included:
·
·
·
·
·
Determining that the transaction is the
acquisition of a business
Identification of all assets acquired, and
liabilities assumed.
Appropriate measurement at fair value of
the assets acquired, and liabilities assumed
at acquisition.
The appropriate recognition of deferred tax
consequences relating to the assets acquired
and liabilities assumed.
The
expensing
of
transaction
costs
associated with the business combination.
How the scope of our audit responded to the
Key Audit Matter
Our procedures included, but were not limited to:
·
Reading the Purchase Agreement with Avenue LLC
to understand the terms and conditions of the
transaction and identify the date that CCX acquired
control of Avenue.
·
Evaluating management's assessment that the
acquisition should be accounted
for as
the
acquisition of a business in accordance with the
requirements of the accounting standards
·
Assessing the completeness of the assets acquired
·
·
·
and liabilities assumed in management’s workings,
including the recognition of assets and liabilities that
had not previously been recognised by Avenue,
the competence,
including customer relationships and brands.
Assessing
independence and
objectivity of the external valuation expert engaged
by management.
Obtaining, reading and understanding the finalised
Purchase Price Allocation (PPA) report as prepared
by management’s external valuation expert.
In conjunction with our own internal valuation
specialists, assessing management's procedures and
assumptions in determining the fair value of the
assets acquired and liabilities assumed. This was
done by performing a benchmark analysis over
assumptions including discount rate, long term
growth rates, contributory asset charges and royalty
relief
rates
by
comparing management’s
assumptions to data from other independent sources
to assess the appropriateness of key financial
assumptions applied in the PPA. This permitted an
independent challenge to the assumptions in the
PPA.
·
Considering the tax consequences of the various
assets acquired and
liabilities assumed and
recalculating the deferred tax balances as part of the
net assets acquired.
·
Recalculating the goodwill recognised as the residual
balance, being
the difference between
the
consideration paid and the fair value of the net
assets acquired; and
·
Testing
the acquisition costs
incurred were
appropriately expensed and valid by selecting a
sample of invoices.
We also assessed the appropriateness of the disclosures
in Notes 1, 2, 13 and 33 to the financial statements.
46
Key Audit Matter
How the scope of our audit responded to the
Key Audit Matter
Goodwill impairment assessment
Our procedures included, but were not limited to:
As set out in Note 13, as at 28 June 2020, the
carrying value of goodwill totalled $22.5 million.
·
In determining the appropriate CGU:
In accordance with accounting standards goodwill
must be assessed for impairment at least on an
annual basis. To perform the impairment test
goodwill is allocated to the cash-generating units
(CGUs) which are expected to benefit from the
synergies of the business combination and the
goodwill is tested for impairment at that level.
Further, the accounting standards require that
the CGUs to which goodwill is allocated are the
lowest level at which management monitor the
goodwill and that the CGUs are not larger than
in
the
segments.
of
determining
management’s determination of the CGU’s to
which goodwill is allocated we were also required
to consider management’s determination of
operating segments. As set out in Note 3, there
is one operating segment, fashion retail.
appropriateness
Therefore,
operating
the
Once the appropriate CGU is established, the
recoverable value of the CGU is determined.
Management has used a discounted cash flow
model to determine the value in use of goodwill
balances. This process is complex and requires
the significant use of a number of key
assumptions and
including the
estimated future cash flows, long-term growth
rates, profitability levels and discount rates.
judgements,
o
o
o
Obtaining, understanding and assessing
management reports and board reports for
an understanding of the level of information
used in decision making,
Holding discussions with the Chief Executive
Officer, Chief Financial Officer and the Board
to understand the business strategy and
business model;
Understanding who the customer is for each
brand, how the products are distributed
through different channels as an omni-
retailer, how the centralisation of decision
making impacts the running of the business
and who the Chief Operating Decision
Makers are and how the business is
monitored;
o
Applying our understanding of the above
against
the criteria
in
the Australian
Accounting
Standards
to
evaluate
management’s determination of the cash
generating unit in consultation with subject
matter experts in technical accounting;
Evaluating management’s determination
that there is one operating segment, being
fashion retail; and
Considering
both
supporting
and
contradictory
information
in applying
judgement to the determination of the CGU.
o
o
·
In assessing the recoverable value of the cash
generating unit, our audit procedures then
included, amongst others:
o
Assessing
the
reasonableness
of
o
o
management’s ability to forecast accurately
by comparing historical pre-covid actual
results to pre covid-budgets as well as
comparing actual results from April 2020
onwards to covid-adjusted forecasts from
April 2020 to year end;
Agreeing inputs in the model for FY21 to
board approved budgets for that year;
For the cash flow periods FY21 to FY25,
assessing
the assumptions used by
management such as the sales growth
rates, margins, inflation rates against our
understanding of the historical performance
of the business but also forward looking
independent sources of information for any
supporting or contradictory information;
47
Key Audit Matter
How the scope of our audit responded to the
Key Audit Matter
Goodwill impairment assessment (cont)
o
o
o
o
Understanding
the sensitivity analysis
performed by management by stressing the
assumptions used to simulate the impact of
alternative scenarios;
Performing independent assessments of the
recoverable value by challenging
the
robustness of the key assumptions used
such as the discount rate, the sales growth
rates, margins and long-term growth rates
based on our understanding of
the
commercial prospects of the CGU;
Evaluating the mathematical accuracy of the
model,
Involving our corporate finance specialists
to evaluate the model and reasonability of
the assumptions by considering both
internal and external
supporting or
contradictory evidence.
Valuation of inventory obsolescence
allowance
Our procedures for all inventory unless stated otherwise,
included but were not limited to:
We also assessed the appropriateness of the disclosures
in Notes 1, 2, and 13 to the financial statements.
As at 28 June 2020, the carrying value of
inventory totalled $38 million and represents 26%
of total assets. Inventory is located in retail stores
and also at central warehouses for distribution
through online commerce channels, dropship and
wholesale. Inventory
is subject to risk of
obsolescence and/or theft.
establishes
Management
obsolescence
allowance by reference to recent sales, ageing of
inventories, seasonal ageing and other factors
such as product category.
an
to
Of particular attention in the current year was
understanding the sell through of the inventory
acquired with the Avenue business as well as the
post-acquisition inventory for this brand. Given
the distressed nature of the acquired business,
management has had
identify obsolete
inventory which it has been either unable to sell
since acquisition or only sell at significant
discounts. This, in conjunction with the limited
sales data history available and the discounting
strategies being applied during a volatile retail
environment, resulted in significant judgement
and estimation being required to assess the
appropriateness
for
obsolescence at year end.
allowance
the
of
·
·
·
·
·
·
·
Understanding the processes and controls relating
to inventory existence and valuation.
Performing tests to evaluate the design and
effectiveness of controls for the existence and
valuation of inventory and testing the operating
effectiveness of controls over the pricing of
inventory.
Assessing the performance of each brand relative
to each season in the financial year by inspecting
sales listing and margin analysis per month.
Evaluating the completeness and valuation of the
specific allowances against inventory which has
reached end of life and is no longer sellable
(terminal inventory). Discussions were held and
audit evidence
inspected to understand the
categorisation of such inventory as terminal
inventory.
Meetings were held with the Chief Executive
Officer, finance team and product planners to
validate the assumptions applied in estimating the
allowances and in understanding the current
market conditions and strategy of the relevant
brands that impacts the inventory on hand
available to sell. Where possible supporting
evidence was inspected to validate explanations
regarding sell through, discounting and decisions
taken by management.
Recalculating the mathematical accuracy of the
inventory obsolescence and net realisable value
allowances.
For all inventory, excluding Avenue products:
o
o
the
Performing a retrospective review of the
allowance balance from FY19 to FY20 to
assess
of
historical
management’s ability to determine the
inventory obsolescence allowance.
Developing independent estimates of the
inventory
allowance,
obsolescence
including:
accuracy
48
Key Audit Matter
Valuation of inventory obsolescence
allowance (cont)
§
inventory
the
How the scope of our audit responded to
the Key Audit Matter
actual
incurred
in
financial year,
the net realisable value with
reference to the last selling
price of inventory on hand,
and
consideration
inventory.
losses
current
aged
of
§
§
·
In respect of Avenue related inventory:
o
o
o
o
o
Obtaining an understanding of the various
categories of at-acquisition and post-
acquisition inventory.
Evaluating management’s scenario analysis
over the ageing of the inventory and
challenging the inputs and assumptions
used to further support and justify the
allowance percentages used.
Understanding the sell through of the at-
acquisition inventory since acquisition and
the clearance rates of inventory which can
no longer be sold online.
Selecting a sample of items for testing and
understanding the discount rates applied to
sale prices; and
Performing a sensitivity analysis over the
allowance and comparing to managements
estimate.
We also assessed the appropriateness of the disclosures
in Notes 1, 2 and 10 to the financial statements.
Other Information
The directors are responsible for the other information. The other information comprises the
information included in the Group’s annual report for the 52-week period ended but does not include
the financial report and our auditor’s report thereon. Included in other information is the Corporate
Directory, the Directors’ Report, the Corporate Governance Statement and Shareholder information
and also includes the following information which will be included in the Group’s annual report: The
Overview; Message from Our Chairman and CEO; Board of Directors; City Chic Annual Recap; 2021
Outlook; Diversity and Corporate Social Responsibility.
Our opinion on the financial report does not cover the other information and we do not and will 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.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of
the financial report that gives a true and fair view and is free from material misstatement, whether
due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group
to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to liquidate the Group or to
cease operations, or has no realistic alternative but to do so.
49
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
intentional omissions,
involve collusion,
fraud may
misrepresentations, or the override of internal control.
forgery,
· 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.
· 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, actions
taken to eliminate threats or safeguards applied.
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.
50
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 31 to 40 of the Directors’ Report for
the 52-week period ended 28 June 2020.
In our opinion, the Remuneration Report of City Chic Collective Limited for the 52-week period ended
28 June 2020, 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 2020
51
City Chic Collective Limited
Consolidated statement of profit or loss and other comprehensive income
For the period ended 28 June 2020
Note
Consolidated
2020
$'000
2019
$'000
Revenue from continuing operations
4
194,492
148,432
Interest and other revenue
934
841
Expenses
Cost of sales
Employee benefits expense
Depreciation, amortisation, and impairment expense
Rental-related recoveries, concessions, and expenses
Other expenses
Finance costs
5
5
5
5,14
5
16,19
(101,019)
(30,340)
(17,568)
(1,173)
(27,298)
(1,336)
(62,568)
(31,011)
(3,942)
(14,886)
(17,403)
(218)
Profit before income tax expense from continuing operations
16,692
19,245
Income tax expense
6
(7,532)
(4,980)
Profit after income tax expense from continuing operations
9,160
14,265
Profit after income tax (expense)/benefit from discontinued operations
7
497
1,713
Profit after income tax (expense)/benefit for the period attributable to
the owners of City Chic Collective Limited
23
9,657
15,978
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
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
Other comprehensive income for the period, net of tax
Total comprehensive income for the period attributable to the owners of
City Chic Collective Limited
Total comprehensive income for the period is attributable to:
Continuing operations
Discontinued operations
-
(369)
(126)
(193)
-
38
(369)
(281)
9,288
15,697
8,791
497
13,984
1,713
9,288
15,697
The above consolidated statement of profit or loss and other comprehensive income should be read in
conjunction with the accompanying notes
52
City Chic Collective Limited
Consolidated statement of profit or loss and other comprehensive income
For the period ended 28 June 2020
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
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
Earnings per share for profit attributable to the owners of City Chic
Collective Limited
Basic earnings per share
Diluted earnings per share
24
24
24
24
24
24
Cents
Cents
4.8
4.7
0.3
0.3
5.1
5.0
7.4
7.4
0.9
0.9
8.3
8.3
The above consolidated statement of profit or loss and other comprehensive income should be read in
conjunction with the accompanying notes
53
City Chic Collective Limited
Consolidated statement of financial position
As at 28 June 2020
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other
Total current assets
Non-current assets
Plant and equipment
Right-of-use assets
Intangibles
Deferred tax
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Lease liabilities
Income tax
Provisions
Other
Total current liabilities
Non-current liabilities
Provisions
Lease liabilities
Borrowings
Other
Total non-current liabilities
Total liabilities
Net assets
Note
Consolidated
2020
$'000
2019
$'000
8
9
10
11
12
14
13
6
15
14
6
17
18
17
14
16
18
21,382
5,073
38,073
2,262
66,790
8,944
22,252
39,193
8,661
79,050
23,214
4,574
19,353
1,323
48,464
9,306
-
15,153
12,057
36,516
145,840
84,980
37,528
9,193
2,530
6,350
77
55,678
775
17,998
17,500
-
36,273
25,522
-
5,544
5,071
761
36,898
1,941
-
-
1,875
3,816
91,951
40,714
53,889
44,266
Equity
Issued capital
Reserves
Retained profits/(accumulated losses)
Total equity
21
22
23
49,139
2,189
2,561
49,139
(248)
(4,625)
53,889
44,266
The above consolidated statement of financial position should be read in conjunction with the accompanying
notes.
54
City Chic Collective Limited
Consolidated statement of changes in equity
For the period ended 28 June 2020
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 expense 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 20)
Dividends paid (note 25)
-
-
-
-
-
Balance at 30 June 2019
49,139
-
-
-
1,080
-
1,141
Consolidated
Issued capital
$'000
Share-based
payments
reserve
$'000
Hedging
reserve
$'000
Balance at 1 July 2019
49,139
1,141
Adjustment for change in
accounting policy (AASB 16) (note
1)
-
-
Balance at 1 July 2019 - restated
49,139
1,141
Profit after income tax expense 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 20)
Issue of loan funded shares (note
21)
Loan funded shares held in trading
lock (note 21)
Dividends paid (note 25)
-
-
-
-
-
-
-
2,806
22,052
(22,052)
-
-
-
-
Balance at 28 June 2020
49,139
3,947
-
(88)
(88)
-
15,978
15,978
(193)
-
(281)
(193)
15,978
15,697
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(9,612)
1,080
(9,612)
(1,389)
(4,625)
44,266
Foreign
currency
translation
reserve
$'000
Retained
earnings/
(Accumulated
losses)
$'000
Total equity
$'000
(1,389)
(4,625)
44,266
-
413
413
(1,389)
(4,212)
44,679
-
9,657
(369)
-
9,657
(369)
(369)
9,657
9,288
-
-
-
-
-
-
-
(2,884)
2,806
22,052
(22,052)
(2,884)
(1,758)
2,561
53,889
Note reference
21
22
22
22
23
The above consolidated statement of changes in equity should be read in conjunction with the accompanying
notes.
55
City Chic Collective Limited
Consolidated statement of cash flows
For the period ended 28 June 2020
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Other revenue
Government grants received
Interest and other finance costs paid
Income taxes paid
Net cash from/(used in) operating activities
Cash flows from investing activities
Payments for plant and equipment
Payments for intangibles
Proceeds from disposal of business
Payment for purchase of business
Net cash (used in)/from investing activities
Cash flows from financing activities
Repayment of lease liabilities
Dividends paid
Proceeds from borrowings
Repayment of borrowings
Net cash from/(used in) financing activities
Net decrease in cash and cash equivalents from continuing operations
Net increase in cash and cash equivalents from discontinued operations
Cash and cash equivalents at the beginning of the financial period
Effects of exchange rate changes on cash and cash equivalents
Note
Consolidated
2020
$'000
2019
$'000
19
12
13
33
25
208,984
(181,540)
55
246
2,510
(590)
(4,440)
163,351
(165,875)
591
250
-
(218)
(1,933)
25,225
(3,834)
(3,283)
(2,247)
-
(25,658)
(4,936)
(5,692)
31,099
-
(31,188)
20,471
(11,588)
(2,884)
22,500
(5,000)
-
(9,612)
-
(12,860)
3,028
(22,472)
(2,935)
1,072
23,214
31
(5,835)
-
28,929
120
Cash and cash equivalents at the end of the financial period
8
21,382
23,214
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
56
City Chic Collective Limited
General Information
28 June 2020
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
2020. The directors have the power to amend and reissue the financial statements.
57
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 1. Significant accounting policies
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 valuation of financial assets and liabilities at fair value through profit or loss, financial assets at fair value
through other comprehensive income.
Critical accounting estimates and judgements
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. Critical accounting judgements,
estimates and assumptions.
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.
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 32. Parent entity disclosures.
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 28 June 2020 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.
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.
58
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 1. Significant accounting policies (continued)
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.
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.
Financial assets
Financial assets are initially measured at fair value. Financial assets and financial liabilities are recognised in the
Group’s statement of financial position when the Group becomes a party to the contractual provisions of the
instrument. 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.
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, its carrying value is written off.
59
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 1. Significant accounting policies (continued)
Financial assets at amortised cost
A financial asset is measured at amortised cost only if both of the following conditions are met: (i) it is held
within a business model whose objective is to hold assets in order to collect contractual cash flows; and (ii) the
contractual terms of the financial asset represent contractual cash flows that are solely payments of principal
and interest. The amortised cost of a financial asset is the amount at which the financial asset is measured at
initial recognition minus the principal repayments, plus the cumulative amortisation using the effective interest
method of any difference between that initial amount and the maturity amount, adjusted for any loss allowance.
The gross carrying amount of a financial asset is the amortised cost of a financial asset before adjusting for any
loss allowance.
Impairment of financial assets
The consolidated entity recognises a loss allowance for expected credit losses on financial assets which are
either measured at amortised cost or fair value through other comprehensive income. The measurement of the
loss allowance depends upon the consolidated entity's assessment at the end of each reporting period as to
whether the financial instrument's credit risk has increased significantly since initial recognition, based on
reasonable and supportable information that is available, without undue cost or effort to obtain. Refer to Note
9. Trade and other receivables for detail.
Impairment of non-financial assets
Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are
tested annually for impairment, or more frequently if events or changes in circumstances indicate that they
might be impaired. Other non-financial assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for
the amount by which the asset's carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of 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.
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.
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.
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.
60
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 1. Significant accounting policies (continued)
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards (AASs) 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 28 June 2020. The consolidated entity has made a preliminary assessment of the impact of these new
or amended Accounting Standards and Interpretations and does not expect a significant impact to the financial
statements.
Standards in issue but not yet effective:
New or revised requirement
AASB 2014
Assets between an investor and its Associate or Joint Venture
‐
AASB 2018
6 Amendments to AASs– Definition of a Business
10 Amendments to AASs – Sale or Contribution of
7 Amendment to AASs – Definition of Material
1 Amendments to AASs – References to the
‐
AASB 2018
AASB 2019
‐
Conceptual Framework
‐
AASB 2019
Reform
AASB 2019-5 Amendments to AASs – Disclosure of the Effect of
New IFRS Standards Not Yet Issued in Australia
AASB 2020-1 Amendments to AASs – Classification of Liabilities
as Current or Non-current
3 Amendments to AASs – Interest Rate Benchmark
‐
When effective
Applicable to annual reporting periods beginning on or after 1
January 2022
Effective for business combinations for which the acquisition date
is on or after the beginning of the first annual reporting period
beginning on or after 1 January 2020
Effective for annual periods beginning on or after 1 January 2020
Effective for annual reporting periods beginning on or after 1
January 2020
Effective for annual reporting periods beginning on or after 1
January 2020
Effective for annual reporting periods beginning on or after 1
January 2020
Effective for annual reporting periods beginning on or after 1
January 2022
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 following Accounting Standards and Interpretations adopted for the year are most relevant to the
consolidated entity:
AASB Interpretation 23 Uncertainty over Income Tax Treatment
Upon adoption of the Interpretation, the Group considered whether it has any uncertain tax positions,
particularly those relating to transfer pricing. The Company’s and the subsidiaries’ tax filings in different
jurisdictions include deductions related to transfer pricing and the taxation authorities may challenge
those tax treatments. The Group determined, based on its tax compliance and transfer pricing study, that it is
probable that its tax treatments (including those for the subsidiaries) will be accepted by the taxation
authorities. The Interpretation did not have an impact on the consolidated financial statements of the Group.
AASB 16 Leases (AASB 16) on the Group as a lessee
The Group has adopted AASB 16 from 1 July 2019 as a lessee. The standard replaces AASB 117 Leases (AASB
117) and for lessees eliminated the distinction between operating leases and finance leases. Except for short-
term leases and leases of low-value assets, right-of-use (ROU) assets and corresponding lease liabilities are
recognised in the statement of financial position for all leases. Straight-line operating lease expense recognition
is replaced with a depreciation charge for the ROU assets (included in operating costs) and an interest expense
on the recognised lease liabilities (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. For
classification within the statement of cash flows, the interest portion is disclosed in operating activities and the
principal portion of the lease payments are separately disclosed in financing activities.
61
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 1. Significant accounting policies (continued)
Impact of adoption as a lessee
AASB 16 was adopted using a hybrid model by lease approach which included modified retrospective
approach and as such the comparatives have not been restated. Lease liabilities were measured at the present
value of the remaining lease payments, discounted at the Group's incremental borrowing rate as at 1 July 2019.
ROU assets were measured at either:
●
●
Their carrying amount as if AASB 16 had been applied since the commencement date, discounted using
the Group's incremental borrowing rate at the date of initial application - the Group applied this approach
to leases which have not expired.
An amount equal to the lease liability where leases have expired and are currently on holdover as well as
leases due to expire in the next 12 months. The Group has considered the likelihood of renewal options or
staying on past lease expiry based on historical data to reassess the lease term.
Refer below for reconciliation of operating lease commitments to lease liabilities recognised:
Operating lease commitments disclosed as at 30 June 2019
Less: short-term leases recognised on a straight-line basis as expense
Add: adjustments as a result of a different treatment of extension and termination options (holdover leases – refer to
Note 2)
Add: adjustments as a result of different rental increase estimates
Less: discounting using the incremental borrowing rate at 1 July 2019
Lease liabilities recognised at 1 July 2019
2020
$’000
18,048
(33)
17,419
211
(804)
34,841
The weighted average lessees incremental borrowing rate of 3.00% was applied to lease liabilities
recognised on 1 July 2019.
The following table shows balances at 30 June 2019 and balances adopted at transition on 1 July 2019:
Balance sheet line item
Right-of-use assets
Lease liabilities – current
Lease liabilities – non-current
Provisions – current
Provisions – non-current
Other liabilities – current
Other liabilities – non-current
Tax entry on transition
Total
30 June 2019
$’000
1 July 2019
$’000
Movement
$’000
-
-
-
(1,487)
(1,644)
(761)
(1,875)
(5,767)
30,120
(12,123)
(22,718)
(465)
-
-
-
(168)
(5,354)
(30,120)
12,123
22,718
(1,022)
(1,644)
(761)
(1,875)
168
(413)
Impact on AASB 16 adoption has been recognised in retained earnings.
62
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 1. Significant accounting policies (continued)
Practical expedients applied on transition
On transition, the Group has applied the practical expedient to grandfather the assessment of which contracts
are leases. AASB 16 has only been applied to contracts entered into before 1 July 2019 that were identified as
leases in accordance with AASB 117 and Interpretation 4 which has resulted in the recognition of new ROU
assets and lease liabilities for its store leases and head office lease. The Group 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 were minimal under AASB 117 reporting, the Group
has considered the likelihood of renewal options or staying on past lease expiry based on historical data to
reassess the lease term.
The Group has elected to apply practical expedients in AASB 16 C10 which includes the following:
●
●
●
The use of a single discount rate to a portfolio of leases with reasonably similar characteristics;
Reliance on previous assessments on whether leases are onerous;
Not to recognise ROU assets and lease liabilities for short-term leases that have a lease term or 12 months
or less and leases of low-value assets. The lease payments associated with these leases is recognised as an
expense on a straight-line basis over the lease term;
The exclusion of initial direct costs for the measure of the ROU asset at the date of initial application; and
The use of hindsight, in determining the lease term, if the contract contains options to extend or terminate
the lease.
●
●
ROU assets
A ROU asset is recognised at the commencement date of a lease. The ROU asset is measured at cost, which
comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or
before the commencement date net of any lease incentives received, any initial direct costs incurred, and,
except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling
and removing the underlying asset, and restoring the site or asset.
ROU assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated
useful life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain ownership of
the leased asset at the end of the lease term, the depreciation is over its estimated useful life. ROU assets are
subject to impairment and adjusted for any remeasurement of lease liabilities.
Lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at
the present value of the lease payments to be made over the term of the lease, discounted using the interest
rate implicit in the lease or, if that rate cannot be readily determined, the consolidated entity's incremental
borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease
payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees,
exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any
anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are
expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are
remeasured if there is a change in the following: future lease payments arising from a change in an index or a
rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease
liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the
carrying amount of the ROU asset is fully written down.
Please refer to Note 5. Expenses and Note 14. Leases on additional current year considerations in light of
COVID-19 developments.
63
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
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.
Additional considerations have been made at 28 June 2020, surrounding the impact of the COVID-19 on all areas
of critical accounting judgements, estimates and assumptions by considering conservative scenarios to assess
sensitivity of judgements and estimations. These have been incorporated into all of the below areas and the
corresponding notes to the financial statements
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 considering the recent sales experience, the ageing of inventories and other
factors such as end of life or terminal inventory, that affect inventory obsolescence. Refer to Note 10. Inventories
for further information.
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. Refer to Note 13. Intangibles for further information.
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.
Determining the lease term of contracts with renewal options
The Group determines the lease term as the non-cancellable term of the lease, together with any periods
covered by an option to extend the lease or the ability of staying on past lease expiry date (in holdover) if it is
reasonably certain to be exercised. The Group has historically always had several lease contracts in holdover.
The Group applies judgement in evaluating whether it is reasonably certain whether leases will be extended
beyond the contracted period. Refer to Note 14. Leases for further information.
Holdover leases
The Group has historically always had several lease contracts in holdover. The Group applies judgement in
evaluating whether it is reasonably certain whether leases will be extended beyond the contracted period. A
range of 2 to 5 years extension is estimated based on average lease terms. Refer to Note 14. Leases for further
information.
64
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 3. Operating segments
Identification of reportable operating segments
The Group’s overall strategy remains to operate as a global omni-channel retailer, focused on the plus-size
market and as such the consolidated entity is organised into one operating segment, being fashion retail.
Despite having numerous brands and geographies, the Chief Executive Officer (who is identified as the Chief
Operating Decision Makers ('CODM')) assesses the performance and determines the allocation of resources at
a single segment, consolidated level with each part of the business exhibiting similar long-term financial
performance and economic characteristics.
The CODM assess the performance of the operating segment based on a measure of EBITDA (Earnings before
interest, tax, depreciation, amortisation and impairment, and other adjustments). 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.
Revenue by geographical area
The Group operates in the following geographical regions:
• Southern hemisphere – includes Australia and New Zealand; both regions serviced by stores and website
• Northern hemisphere – includes US, Europe, and UK. US sales are comprised of online (website and
marketplace) and wholesale; European and UK business is solely wholesale.
Refer to Note 4. Revenue for details on revenue by geographical area.
Reconciliation of net profit to Underlying EBITDA
Reconciliation of net profit after income tax from continuing operations to Underlying EBITDA (Earnings before
interest, taxation, depreciation, amortisation, impairment, and other adjustments) from continuing operations is
provided as follows:
Net profit after tax from continuing operations
Net interest (income)/expense (excluding AASB 16 impact)
Tax expense from continuing operations
Depreciation, amortisation, and impairment expense (excluding AASB 16 impact)
Transition costs1
US logistics consolidation2
Transaction costs3
Release of store exit costs
Provision for onerous lease and contract
Net AASB 16 impact
Consolidated
2020
$'000
2019
$'000
9,160
535
7,532
5,845
778
921
1,599
-
-
149
14,265
(373)
4,980
3,942
2,625
-
-
(289)
(272)
-
Underlying EBITDA from continuing operations
26,519
24,878
AASB 16 accounts
Depreciation on ROU assets
Interest expense on lease liabilities and make good provisions
Redemption/repayment of lease liabilities
Net AASB 16 impact
Consolidated
2020
$'000
2019
$'000
11,723
746
(12,320)
149
-
-
-
-
1 FY2020 Transition costs related to costs to integrate Avenue. FY2019 Transition costs related to costs incurred to implement the separation of the divested
brands to Noni B Limited (now Mosaic Brands Limited) and the organisational transformation.
2 Costs in relation to consolidation of US logistics operations.
3 FY2020 Transaction costs related to executing the acquisition of Avenue.
65
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 4. Revenue
From continuing operations
Sale of goods
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
Consolidated
2020
$'000
2019
$'000
194,492
148,432
Consolidated
2020
$'000
2019
$'000
194,492
148,432
113,685
80,807
194,492
60,232
118,671
7,970
7,619
194,492
119,466
28,966
148,432
74,588
55,571
9,162
9,111
148,432
Accounting policy for revenue recognition
The consolidated entity recognises revenue as follows:
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which the consolidated entity is expected
to be entitled in exchange for transferring goods to a customer. 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.
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 recognised as a refund liability.
66
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 4. Revenue (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. Based on what is
known at the time of this report including the current volatility in economic conditions, management believes
that any reasonably possible change in the key assumptions used in the calculations, would not cause any
significant change to this estimate.
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. Return policy on
sale of goods range from 30 to 90 days and provision is made based on historical return percentage. Please
refer to Note 17. Provisions on sales return raised and Note 11. Other assets on corresponding right-of-return
assets recognised.
Wholesale revenue
Revenue is recognised at time of delivery less an allowance for estimated customer returns, rebates, and other
similar allowances.
67
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 5. Expenses
Profit before income tax from continuing operations includes the following specific expenses:
Cost of sales
Depreciation, amortisation, and impairment expense (excluding AASB 16 charges)
Depreciation on ROU assets (AASB 16)
Rental-related expenses
Rent concessions
Defined contribution superannuation expense
Share-based payments expense
Employee benefits expense excluding superannuation
Government grants
Subtotal
Other expenses
Utility and maintenance expenses
Transactional fees and charges
Marketing expenses
Professional, consulting and insurance
Other
Subtotal
Total
Accounting policy for government grants
Consolidated
2020
$'000
2019
$'000
101,019
5,845
11,723
2,495
(1,322)
2,026
2,805
29,441
(3,932)
150,100
5,470
4,172
7,515
4,412
5,729
27,298
177,398
62,568
3,942
-
14,866
-
1,934
1,080
27,997
-
112,407
3,228
2,304
4,576
4,165
3,130
17,403
129,810
Government grants that become receivable as compensation for expenses or losses already incurred or for the
purpose of giving immediate financial support to the entity with no future related costs are recognised in profit
or loss of the period in which it becomes receivable, on a systematic basis over the periods in which the Group
recognises as expenses the related costs for which the grants are intended to compensate.
During FY2020 the Group has received Government grants from the Australian and New Zealand Governments
relating to employee expense subsidies as a result of the COVID-19 pandemic. The grants have been deducted
in the reporting against the employee benefits expense. The New Zealand Wage Subsidy was paid in advance
for the 12-week period leading up to 28 June 2020. The Australian JobKeeper was paid monthly, in arrears, for
the last three months of FY2020. As such there is a receivable balance related to the June payment on the
balance sheet for $1.4m. The New Zealand wage subsidy concluded at 28 June 2020 however the eligibility for
JobKeeper is expected to continue till 27 September 2020. For the period thereafter management will need to
assess eligibility.
Accounting policy for rent concessions
Refer to Note 14. Leases.
68
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 6. Income tax
a) Income tax expense
Current tax
Deferred tax - origination and reversal of temporary differences
Prior year current tax over/(under) provisions
Adjustment on prior year estimated capital gains tax
Foreign exchange
Aggregate income tax expense
Income tax expense/(benefit) is attributable to:
Profit from continuing operations
Profit/(Loss) from discontinued operations
Aggregate income tax expense
b) Numerical reconciliation of income tax expense and tax at the statutory rate
Profit before income tax from continuing operations
Tax at the statutory tax rate of 30%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Entertainment expenses
CFC income
LTIP and LFSP
Sundry items
Prior year deferred tax over/(under) provisions
Adjustment on prior year estimated capital gains tax
Difference in overseas tax rates
Adjustment in US effective tax rate (see note d)
Deferred tax recognised on prior year tax losses
Income tax expense from continuing operations
Consolidated
2020
$'000
2019
$'000
2,152
5,261
46
-
73
7,532
7,532
2,143
9,675
4,490
(2,230)
(1,123)
3,843
-
4,980
4,980
(4,012)
968
16,692
19,245
5,007
5,774
2
-
841
264
6,114
46
-
(489)
1,861
-
7,532
2
55
323
118
6,272
(1,123)
3,843
25
-
(4,037)
4,980
c) Capital losses
Unused tax losses related to capital losses of $147.2m (2019: $147.0m) 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 settlement of the NBL divestment in the current
year has crystalized the revenue and capital gains from a taxation perspective. The true-up of the tax impact
has been considered in Note 7.
d) Income tax losses
As at 28 June 2020, the consolidated entity had carried forward income tax losses of $12.3m from its US and
New Zealand businesses (2019: $20.8m).
At 30 June 2019 the Group had a blended state and federal US effective tax rate of 27.98%, resulting in the
losses being recognised as a deferred tax asset of $5.3m. At 28 June 2020, the Group had a blended state and
federal US effective tax rate of 21.0% in calculating value of its deferred tax asset. The reason for the change in
effective tax rate is that the Group is unlikely to have a taxable presence in California beyond FY2021. This
reduced the deferred tax asset from tax losses by $1.9m.
69
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 6. Income tax (continued)
e) 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.
f) Deferred tax assets
Deferred tax asset comprises temporary differences attributable to:
Tax losses
Plant and equipment
Employee benefits
Other provisions and accruals
Leases
Deferred lease incentives
Inventories
Other
Deferred tax asset
Movements:
Opening balance
Foreign exchange on opening balance
(Charged)/Credited to profit or loss - continuing
(Charged)/Credited to profit or loss – discontinued (note 7)
(Charged)/Credited to Business Combination and Retained Earnings
Closing balance
Provision for income tax
Consolidated
2020
$'000
2019
$'000
2,733
(630)
857
4,144
1,543
-
(3)
17
8,661
5,822
(1,101)
773
5,841
-
728
(144)
138
12,057
8,661
12,057
12,057
111
(5,261)
(836)
2,590
8,661
5,349
-
2,230
4,440
38
12,057
Consolidated
2020
$'000
2019
$'000
2,530
5,544
Accounting policy for 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.
●
70
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 6. Income tax (continued)
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date.
Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits
will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are
recognised to the extent that it is probable that there are future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax
assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the
same taxable authority on either the same taxable entity or different taxable entities which intend to settle
simultaneously.
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.
71
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 7. Discontinued operations
Description
On 2 July 2018, the Group divested five of its brands to Noni B Limited (now Mosaic Brands Limited) for cash
consideration of $31.0m (before post completion adjustments, transaction, and separation costs). The Group
retained ownership of the brand City Chic.
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. In
February 2020, the parties reached a confidential settlement. The profit for discontinued operations reflects the
terms of the settlement.
Financial performance information
Expenses
Loss before income tax (expense)/benefit from discontinued operations
Income tax (expense)/benefit
(Loss)/profit after income tax (expense)/benefit
Gain on disposal of disposal group
Profit after income tax (expense)/benefit from discontinued operations
Details of the disposal
Consolidated
2020
$'000
2019
$'000
(162)
(162)
(2,143)
(2,305)
2,802
497
(3,366)
(3,366)
4,012
646
1,067
1,713
The following table shows the comparison of balance updates made based on best estimate at FY2020 and
the final FY2020 position based on settlement in February 2020.
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
Adjustments to proceeds
Proceeds from sale - adjusted
Gain/(Loss) on disposal of net assets
Consolidated
Adjusted
FY2020 2018
$'000
Adjusted
FY2019 2018
$'000
31,737
639
32,376
31,000
3,441
34,441
2,065
33,272
(1,535)
31,737
31,000
-
31,000
(737)
72
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 8. Cash and cash equivalents
Current assets
Cash at bank
Term deposit
Total cash and cash equivalents
Consolidated
2020
$'000
2019
$'000
21,382
-
21,382
10,214
13,000
23,214
Accounting policy for cash and cash equivalents
Cash and cash equivalents includes 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.
Note 9. Trade and other receivables
Current assets
Trade receivables
Less: Allowance for expected credit losses
Other receivables
Total trade and other receivables
Consolidated
2020
$'000
2019
$'000
2,670
(354)
2,757
5,073
4,263
(82)
393
4,574
Past due but not impaired
As at 28 June 2020, trade receivables of $0.6m (2019: $0.4m) were past due but not impaired. These relate to
a number of independent customers for whom there is no recent history of default.
The ageing analysis of these trade receivables is as follows:
30 to 60 days
60 to 90 days
90 days and over
Trade receivables – past due but not impaired
Current
Total trade receivables
Consolidated
2020
$'000
2019
$'000
278
300
60
638
2,032
2,670
310
80
13
403
3,860
4,263
73
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 9. Trade and other receivables (continued)
Allowance for expected credit losses
The Group has recognised a loss of $0.3m (2019: $0.1m) in profit of loss in respect of the expected credit losses
for the year ended 28 June 2020. The recoverability of trade and other receivables at 28 June 2020 has been
assessed to consider the impact of the COVID-19 pandemic and no material recoverability issues were noted.
The Group determines the expected credit losses on these items by using a provision matrix, estimated based
on historical credit loss experience based on the past due status of the debtors, adjusted as appropriate to
reflect current conditions and estimates of future economic conditions.
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.
Current
30 to 60 days
60 to 90 days
90 days and over
Allowance for expected credit loss
Movement of allowance for expected credit loss
Allowance for expected credit loss
Carrying amount at the start of the period
Additional allowance recognised
Amount used
Carrying amount at the end of the period
Consolidated
2020
$'000
2019
$'000
12
30
252
60
354
-
-
69
13
82
2020
$'000
2019
$'000
82
324
(52)
354
133
220
(271)
82
Accounting policy for 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. Other receivables are recognised at amortised cost, less any allowance for expected
credit losses.
74
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 10. Inventories
Current assets
Inventories on hand at lower of cost and net realisable value
Consolidated
2020
$'000
2019
$'000
38,073
19,353
Accounting policy for inventories
Finished goods are stated at the lower of cost and net realisable value. Cost is determined on a weighted
average cost method and include 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.
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. The allowances against inventory are
recognised to account for obsolescence, the expected sales below cost and inventory expected to be lost
through shrinkage. In recognising the allowance for inventory, judgement has been applied by considering a
range of factors including historical loss-making sales, historical inventory shrinkage trends, inventory ageing,
seasonality, and product lifecycle.
Note 11. Other assets
Current assets
Prepayments
Right of return assets
Total other assets
Consolidated
2020
$'000
2019
$'000
800
1,462
2,262
859
464
1,323
Accounting policy for 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.
Note 12. Plant and equipment
Non-current assets
Plant and equipment - at cost
Less: Accumulated depreciation
Total plant and equipment
Consolidated
2020
$'000
2019
$'000
23,070
(14,126)
23,766
(14,460)
8,944
9,306
75
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 12. 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 2 July 2018
Transfer between asset classes - prior year
Adjustment to assets held for sale
Additions
Depreciation expense
Impairment write-back
Exchange differences
Balance at 1 July 2019
Additions
Depreciation expense
Accelerated depreciation
Impairment write-back
Exchange differences
Balance at 28 June 2020
Total plant and
equipment
$'000
6,684
(110)
992
4,936
(3,149)
82
(129)
9,306
3,283
(2,966)
(948)
283
(14)
8,944
Accelerated depreciation
During the current period, the Group closed a number of stores. The carrying value of these stores was
extinguished to nil through accelerated depreciation.
Accounting policy for plant and equipment
Plant and equipment are 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 (excluding land) over their
expected useful lives, which range from 2 to 10 years.
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each
reporting date.
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.
Impairment of assets
Plant and equipment is 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. The recoverable amount is the higher of an asset’s
fair value less costs of disposal and value in use.
Numerous stores were selected for testing at year-end and the calculations confirmed that there was no
impairment (2019: nil).
76
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 13. Intangibles
Non-current assets
Goodwill - at cost
Brand Value - at cost
Other intangible assets - at cost
Less: Other intangibles - accumulated amortisation
Customer relationships – at cost
Less: Customer relationships - accumulated amortisation
Total intangibles
Consolidated
2020
$'000
2019
$'000
22,466
12,691
6,085
(3,154)
2,931
1,453
(348)
1,105
10,095
2,547
3,855
(1,344)
2,511
-
-
-
39,193
15,153
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial period
are set out below:
Goodwill
$'000
Brand Value
$'000
Other
intangibles
$'000
Customer
relationships
$'000
Total
intangibles
$'000
Consolidated
Balance at 2 July 2018
Transfer between asset classes
Additions
Exchange differences
Amortisation expense
Balance at 1 July 2019
Additions through business combinations (note 33)
Additions
Amortisation expense
Exchange differences
10,095
-
-
-
-
10,095
12,601
-
-
(230)
-
-
2,547
-
-
2,547
10,319
-
-
(175)
-
110
3,145
131
(875)
2,511
-
2,247
(1,867)
40
Balance at 28 June 2020
22,466
12,691
2,931
-
-
-
-
-
-
1,453
-
(348)
-
1,105
10,095
110
5,692
131
(875)
15,153
24,373
2,247
(2,215)
(365)
39,193
Accounting policy for 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.
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.
77
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 13. Intangibles (continued)
Customer relationships
Acquired customer relationships are carried at original cost based on independent valuation obtained at the
date of acquisition less accumulated amortisation. They are amortised on a straight-line basis over a useful life
of 3 years. The estimated useful life and amortisation period is reviewed at the end of each annual reporting
period.
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
Intangible assets are reviewed for impairment when events or changes in circumstances indicate that the
carrying amount may not be recoverable. Intangible assets that have an indefinite useful life, including goodwill,
are not subject to amortisation and are tested annually for impairment irrespective of whether there are any
indicators of impairment. An impairment loss is recognised for the amount by which the asset’s carrying amount
exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of
disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for
which there are separately identifiable cash generating units.
Goodwill assessment
Determining whether goodwill is impaired requires an estimation of the value-in-use of the cash-generating
units (CGUs) to which the 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 CGU for goodwill is assessed
at a consolidated Group level, in line with the one operating segment used in its reporting. This is consistent
with the prior year assessment.
The discounted cash flow valuations were calculated using projected five-year future cash flows based on Board
approved business plans. Business plans are modelled assuming like for like sales growth based on historical
performance considering changing market conditions.
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: 9.7% (2019: 10.1%). A terminal growth rate of 2.0%
(2019: 2.0%) has been assumed in the value-in-use calculation and reflects the long-term growth expectations
beyond the five-year forecast horizon.
The calculations confirmed that there was no impairment of goodwill (2019: nil), with excess headroom
remaining when performing sensitivity analysis. In performing the sensitivity analysis, management considered
a stressed scenario due to the uncertainty of COVID, and no impairment was identified. Based on what is known
at the time of this report including the current volatility in economic conditions, management believes that any
reasonably possible change in the key assumptions used in the calculations, would not cause the carrying
amount to exceed its recoverable amount.
Brand assessment
The recoverable amount of the Avenue Brand was determined independently using the Relief from Royalty
(‘RFR’) valuation method at acquisition date. The calculations reflect a five-year revenue forecast and requires
the use of assumptions, including estimated royalty rates, tax rate, estimated discount rates and expected useful
life.
78
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 13. Intangibles (continued)
The five-year revenue forecast was based on Board approved business plans. Business plans are modelled
assuming like for like sales growth based on historical performance taking into account changing market
conditions. The royalty rates used in the valuation model were based on rates observed in the market.
The discount rates used in the 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 model: 9.7%. A terminal growth rate of 2.0% has been assumed in the calculation and
reflects the long-term growth expectations beyond the five-year forecast horizon. The royalty rate applied
ranged from 1.5% to 3.0%, taking into account the range observed in the market.
The other Brand intangible is related to Hips & Curves. In FY2019 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$2.0m. Brand value of A$2.5m was recognised per management assessment.
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 discounted cash flow valuations were calculated using projected five-year future cash flows based on Board
approved business plans. Business plans are modelled assuming like for like sales growth based on historical
performance taking into account changing market conditions.
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: 9.7% (2019: 10.1%). A terminal growth rate of 2.0%
(2019: 3.0%) has been assumed in the value-in-use calculation and reflects the long-term growth expectations
beyond the five-year forecast horizon.
The calculation confirmed that there was no impairment of either Brand (2019: nil), with excess headroom
remaining when performing sensitivity analysis. In performing the sensitivity analysis, management considered
a stressed scenario due to the uncertainty of COVID-19, and no impairment was identified. Based on what is
known at the time of this report including the current volatility in economic conditions, management believes
that any reasonably possible change in the key assumptions used in the calculations, would not cause the
carrying amount to exceed its recoverable amount. The expected continued promotion and marketing of the
various brands supports the assumption that the brand has an indefinite life.
79
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 14. Leases
Non-current assets
ROU assets
Less: Accumulated depreciation
Total ROU assets
Current liabilities
Lease liabilities
Non-current liabilities
Lease liabilities
Total lease liabilities
Consolidated
2020
$'000
2019
$'000
31,535
(9,283)
22,252
9,193
17,998
27,191
-
-
-
-
-
-
The consolidated entity leases land and buildings for its office and retail outlets under agreements of between
1 to 10 years with, in some cases, options to extend. The leases have various escalation clauses. On renewal, the
terms of the leases are renegotiated.
The Group has applied practical expedient per COVID-19-Related Rent Concessions (Amendment to AASB 16)
and recognised the effect of the rent concession in the profit and loss statement where applicable and have not
accounted for COVID-19 related rent concessions as lease modifications.
The lease liability recognised by the Group represents the present value of future lease payments owing to the
lessor.
The Group leases office equipment under agreements of less than 5 years. These leases are either short-term
or low value, so have been expensed as incurred and not capitalised as ROU assets.
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 30 June 2019
ROU assets recognised at 1 July 2019
Balance at 1 July 2019
Additions
Disposals
Depreciation expense
Accumulated depreciation on disposals
Balance at 28 June 2020
Amounts recognised in profit and loss
Depreciation expense on ROU assets
Interest expense on lease liabilities
Total ROU
assets
$'000
-
30,129
30,129
6,638
(5,232)
(11,723)
2,440
22,252
Consolidated
2020
$'000
2019
$'000
11,723
733
-
-
Some of the property leases in which the Group is the lessee contain variable lease payment terms that are
linked to sales generated from the leased stores. Variable payment terms are used to link rental payments to
store cash flows and reduce fixed cost.
80
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 14. Leases (continued)
Accounting policy for ROU assets
Refer to description of accounting policy in Note 1. Significant accounting policies (New or amended Accounting
Standards and Interpretations adopted).
Accounting policy for lease liabilities
Refer to description of accounting policy in Note 1. Significant accounting policies (New or amended Accounting
Standards and Interpretations adopted).
Note 15. Trade and other payables
Current liabilities
Trade payables
Other payables
Total trade and other payables
Consolidated
2020
$'000
2019
$'000
15,737
21,791
10,622
14,900
37,528
25,522
Refer to Note 26 for further information on financial instruments.
Accounting policy for 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.
Note 16. Borrowings
Non-current liabilities
Bank loans
Finance costs
Interest expense on bank loans
Consolidated
2020
$'000
2019
$'000
17,500
590
-
-
Refer to Note 26. Financial Instruments for further information.
At 28 June 2020, the Group had non-current outstanding borrowings of $17.5m with maturity in February 2023
(30 June 2019: nil).
81
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 16. Borrowings (continued)
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Total facilities
Corporate credit card
Bank loans
Bank guarantee
Used at the reporting date
Corporate credit card
Bank loans
Bank guarantee
Unused at the reporting date
Corporate credit card
Bank loans
Bank guarantee
Consolidated
2020
$'000
2019
$'000
1,007
40,000
-
41,007
72
17,500
-
17,572
935
22,500
-
23,434
1,500
15,000
96
16,596
243
-
96
339
1,257
15,000
-
16,257
Accounting policy for 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.
Note 17. Provisions
Current liabilities
Employee benefits
Lease make good
Onerous contracts
Sales return provision
Stepped lease provision
Total provisions - current
Non-current liabilities
Employee benefits
Onerous contracts
Stepped lease provision
Total provisions – non-current
Total provisions
Consolidated
2020
$'000
2019
$'000
2,203
501
559
3,087
-
6,350
339
436
-
775
7,125
2,285
372
777
1,299
338
5,071
297
1,560
84
1,941
7,012
82
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 17. Provisions (continued)
Movements in provisions
Movements of provision during the current financial period, other than employee benefits, are set out below:
Consolidated – 2020
Lease
makegood
$'000
Onerous
contracts
$'000
Sales return
provision
$'000
Stepped lease
provision
$'000
Total
$'000
Current provisions
Carrying amount at the start of the period
Amounts derecognised on adoption of AASB 16
Recognised on business combinations (note 33)
Additional provisions recognised
Amounts used
Carrying amount at the end of the period
Non-current provisions
Carrying amount at the start of the period
Amounts derecognised on adoption of AASB 16
Recognised on business combinations (note 33)
Additional provisions recognised
Amounts used
Carrying amount at the end of the period
372
-
-
602
(473)
501
-
-
-
-
-
-
777
(777)
1,266
-
(707)
559
1,560
(1,560)
436
-
-
436
1,299
-
2,634
19,343
(20,189)
3,087
-
-
-
-
-
-
338
(338)
-
-
-
-
84
(84)
-
-
-
-
2,786
(1,115)
3,900
19,945
(21,369)
4,147
1,644
(1,644)
436
-
-
436
Accounting policy for provisions
Provisions are recognised when the consolidated entity has a present (legal or constructive) obligation as a
result of a past event, it is probable the consolidated entity will be required to settle the obligation, and a reliable
estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate
of the consideration required to settle the present obligation at the reporting date, taking into account the risks
and uncertainties surrounding the obligation. If the time value of money is material, provisions are discounted
using a current pre-tax rate specific to the liability. The increase in the provision resulting from the passage of
time is recognised as a finance cost.
Lease makegood
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 contracts
Current year balance represents onerous contracts entered into on acquisition of Avenue online assets.
Prior year balance represented the present value of the estimated costs for unutilised space at the head office
premises. Refer to Note 14. Leases impact of AASB 16 adoption.
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. Refer to Note 14. Leases impact of AASB 16 adoption.
Accounting policy for employee benefits provisions
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected
to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid
when the liabilities are settled.
83
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 17. Provisions (continued)
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting
date are measured at the present value of expected future payments to be made in respect of services provided
by employees up to the reporting date using the projected unit credit method. Consideration is given to
expected future wage and salary levels, experience of employee departures and periods of service. Expected
future payments are discounted using market yields at the reporting date on high quality corporate bonds with
terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are
incurred.
Note 18. Other liabilities
Current liabilities
Deferred lease incentives
Contract liabilities - customer loyalty points
Non-current liabilities
Deferred lease incentives
Total other liabilities
Consolidated
2020
$'000
2019
$'000
-
77
77
-
77
761
-
761
1,875
2,636
Accounting policy for contract liabilities – customer loyalty points
The Group operates a loyalty programme where retail customers accumulate points for purchases made which
entitle them to convert points into gift certificates to use on future purchases. A contract liability for the award
points is recognised at the time of the sale. Revenue is recognised when the points are redeemed when they
expire after 12 months.
Accounting policy for deferred lease incentives
Deferred lease incentives were derecognised on adoption of AASB 16, refer description of accounting policy in
Note 1. Significant accounting policies (New or amended Accounting Standards and Interpretations adopted).
84
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 19. Cash flow information
Reconciliation of profit after income tax to net cash used in continuing operating activities
Profit after income tax (expense)/benefit from continuing operations
9,160
14,265
Consolidated
2020
$'000
2019
$'000
Adjustments for:
Depreciation, amortisation, and impairment
Net gain on disposal of plant and equipment
Share-based payments
Discontinued operations
Finance costs on lease liabilities and make good provision
Business combinations
Foreign exchange and other differences
Change in operating assets and liabilities:
Increase in trade and other receivables
Increase in inventories
Increase in other assets
Decrease in income tax refund due
Decrease/(increase) in deferred tax assets
Increase/(decrease) in trade and other payables
(Decrease)/increase in provision for income tax
Increase/(decrease) in other provisions
(Decrease)/increase in other liabilities
Net cash from continuing operating activities
17,568
-
2,805
3,102
746
1,285
774
(499)
(18,720)
(939)
-
3,396
12,007
(3,014)
113
(2,559)
3,942
(851)
1,080
1,181
-
-
926
(549)
(3,534)
-
15
(6,670)
(18,755)
5,544
(2,167)
1,739
25,225
(3,834)
Reconciliation of liabilities arising from financing activities
Long-term borrowings
Lease liabilities
Total liabilities from financing activities
2019
Cash flows
Non-cash changes
2020
Acquisitions
New leases
-
-
-
17,500
(11,588)
-
-
-
38,779
17,500
27,191
5,912
-
38,779
44,691
Note 20. Share-based payments
The Group’s long-term incentives 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.
The Group’s long-term incentives are comprised of the Long-Term Incentive Plan (LTIP) and the Loan Funded
Share Plan (LFSP). The following share-based payment arrangements were in existence during the current year:
Tranche
Grant date Performance
period end
date
1
2A
2B
2C
Total Performance Rights
13/11/2018 30/06/2021
13/11/2018 30/06/2021
13/11/2018 30/06/2021
13/11/2018 30/06/2023
3
3
Total Loan Funded Shares
21/11/2019 30/06/2024
03/03/2020 30/06/2024
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
%
3.50%
3.50%
3.50%
3.50%
Risk-free
interest rate
%
2.12%
2.12%
2.12%
2.12%
Balance at
the start of
the period
895,552
1,237,500
1,237,500
2,475,000
5,845,552
-
-
-
-
-
Granted
Vested
$2.68
$2.79
35.00%
35.00%
N/A
N/A
2.12%
2.12%
-
-
-
7,533,448
667,464
8,200,912
-
-
-
-
-
-
-
-
Expired/
forfeited/
other
(113,704)
-
-
-
(113,704)
Balance at
the end of
the period
781,848
1,237,500
1,237,500
2,475,000
5,731,848
-
-
-
7,533,448
667,464
8,200,912
85
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 20. Share-based payments (continued)
LTIP Tranches
Vesting conditions of the LTIP tranches are set out below.
Tranche 1
Vesting Condition 1
Vesting Condition 2
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:
EPS CAGR across the Tranche 1
Performance Period
Below 5.0%
5.0%
5.0% ≤ EPS CAGR ≤ 20.0%
Tranche 2A
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 FY202018 EPS)
$0.0975 ≤ EPS < $0.1050 (1.4 x FY202018 EPS)
EPS ≥ $0.1050
Proportion of Tranche 2B Performance Rights held that will satisfy
Vesting Condition 2
Nil
50%
100%
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 FY202018 EPS)
$0.1250 ≤ EPS < $0.1200 (1.6 x FY202018 EPS)
$0.1200 ≤ EPS < $0.1275 (1.7 x FY202018 EPS)
EPS ≥ $0.1275
LFSP Tranche
Proportion of Tranche 2C Performance Rights held that will satisfy
Vesting Condition 2
Nil
50%
75%
100%
During the current year, the Group established the 2019 Employee Share Plan approved by shareholders at the
Annual General Meeting on 21 November 2019.
The plan was introduced following a review of existing remuneration arrangements of the Group. The purpose
of the plan is to further align the incentive arrangements for the executive team and the Group's success.
86
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 20. Share-based payments (continued)
The key terms of the LFSP are listed as follows:
●
●
●
●
●
●
Loan funded (LF) shares are issued at the Company's share price on the ASX at the time of issue.
The Company advances money to pay for the subscription price of the LF Shares (Loan).
The Loan has an interest payable of 1.9% and is repayable on the earlier of cessation of employment (6 or
12 month grace periods may be applied) or 7 years from the agreement by the Board to issue LF Shares
under the Plan (Vesting period is 5 years to 30 June 2024).
The Company's recourse in the event it seeks to recover the Loan is limited to the LF Shares. Where a
Participant does not repay the Loan by the repayment date, the Participant is deemed to have agreed to
sell to the Company pursuant to an employee share scheme buy-back, that number of LF shares required
to repay the Loan to the Company.
The Company will apply the after-tax amount of any dividends payable in respect of a Participant's LF
Shares towards repayment of the outstanding balance of the Loan.
The LF Shares offered are subject to Vesting Conditions, which if not met, the unvested LF Shares will be
forfeited and bought back by the Company at the issue price and the Loan will be deemed repaid.
Vesting conditions of the LF Shares are set out below:
Tranche 3
Vesting Condition 1
Vesting Condition 2
Continued service to 30 June 2024.
Compound annual growth rate (CAGR) in the Group’s earnings per share after tax (AEPS) prescribed
by the Board over the 3 year period commencing on 1 July 2019, in which case (subject to satisfaction
of Vesting Period Condition) the LF shares held will vest in accordance with the following vesting scale:
AEPS 3-year CAGR from 1 July 2019
12.5%
20.0%
12.5% ≤ AEPS CAGR ≤ 20.0%
Proportion of Tranche 3 LF Shares that will satisfy Vesting Condition 2
25%
100%
Straight-line pro rata vesting between 25% and 100% (inclusive)
The LF shares issued under the Plan have been treated as 'in substance options' which have been valued using
a Modified Binomial Lattice option pricing model which allows for varying exercise price. The resulting value is
amortised over the vesting period on a probability adjusted basis. The total expense recorded for the period
was $0.8m.
Accounting policy for share-based payments
Equity-settled share-based compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in
exchange for the rendering of services.
The cost of equity-settled transactions is measured at fair value on grant date. Fair value is independently
determined using either 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 probability is assessed with consideration of management’s expectation of future earnings
and the financial hurdles for 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.
87
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 20. Share-based payments (continued)
Market conditions are taken into consideration in determining fair value. Therefore, any awards subject to
market conditions are considered to vest irrespective of whether 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.
Note 21. Issued capital
Ordinary shares - fully paid
Less: Loan funded shares
Total issued capital
Movements in ordinary share capital
Details
Balance at 2 July 2018
Balance at 30 June 2019
Issue of Loan funded share plan at $2.68 per share
Issue of Loan funded share plan at $2.79 per share
Loan funded shares
Balance at 28 June 2020
2020
Shares
2019
Shares
2020
$'000
2019
$'000
Consolidated
200,437,033
(8,200,912)
192,236,121
-
71,191
(22,052)
49,139
-
192,236,121
192,236,121
49,139
49,139
Issue Date
Shares
Issue price
$'000
21 November 2019
3 March 2020
192,236,121
192,236,121
7,533,448
667,464
(8,200,912)
192,236,121
$2.68
$2.79
49,139
49,139
20,190
1,862
(22,052)
49,139
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.
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.
88
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 21. Issued capital (continued)
Loan funded shares
During the current financial period, 8,200,912 loan funded shares were issued as part of the Company’s 2019
Employee Share Plan approved by shareholders at the Annual General Meeting on 21 November 2019. The
participants are granted a loan by the company to purchase the beneficial interest in shares. These are limited
recourse loans to the participants and any dividends received in respect of the loan funded shares are used to
reduce the loan balance net of tax payable. Participants are required to meet service requirements and
performance conditions before being entitled to acquire full title to these shares and are required to repay the
loan in order to do so. The shares held by the company have been deducted from equity as shares are held in
trading lock until vesting in line with accounting standards.
Share buy-back
There is no current on-market share buy-back.
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.
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 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.
Accounting policy for issued capital
Ordinary shares are classified as equity.
Note 22. Reserves
Foreign currency reserve
Share-based payments reserve
Total reserves
Consolidated
2020
$'000
2019
$'000
(1,758)
3,947
2,189
(1,389)
1,141
(248)
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.
Share-based payments reserve
The reserve is used to recognise the cost of share-based payments on the Group's employee incentive schemes.
89
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 22. 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 2 July 2018
Revaluation - gross
Share-based payments expense
Balance at 1 July 2019
Foreign currency translation
Share-based payments expense
Balance at 28 June 2020
Note 23. Retained earnings/(accumulated losses)
Share-based
payments
reserve
$'000
Hedging
reserve
$'000
Foreign
currency
translation
reserve
$'000
Total
$'000
61
-
1,080
1,141
-
2,806
3,947
88
(88)
-
-
-
-
-
(1,196)
(193)
-
(1,389)
(369)
-
(1,758)
(1,047)
(281)
1,080
(248)
(369)
2,806
2,189
Accumulated losses at the beginning of the financial period
Adjustment for implementation of AASB 16 (note 1)
Accumulated losses at the beginning of the financial period - adjusted for the impact of adoption of
AASB 16
Profit after income tax (expense)/benefit for the period
Dividends paid (note 25)
Retained earnings/(accumulated losses) at the end of the financial period
Retained earnings at the end of the financial period comprises
Loss reserve1
Retained earnings
Note 24. Earnings per share
Earnings per share for profit from continuing operations
Profit after income tax attributable to the owners of City Chic Collective Limited
Basic earnings per share
Diluted earnings per share
Consolidated
2020
$'000
2019
$'000
(4,625)
413
(4,212)
9,657
(2,884)
2,561
(10,991)
-
(10,991)
15,978
(9,612)
(4,625)
Consolidated
2020
$'000
2019
$'000
(10,991)
13,552
(10,991)
6,366
2,561
(4,625)
Consolidated
2020
$'000
2019
$'000
9,160
14,265
Cents
Cents
4.8
4.7
7.4
7.4
1 Accumulated losses as at 1 July 2018 of $(11.0m) were transferred to a Loss reserve.
90
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 24. Earnings per share (continued)
Earnings per share for profit/(loss) from discontinued operations
Profit/(loss) after income tax attributable to the owners of City Chic Collective Limited
Basic earnings per share
Diluted earnings per share
Earnings per share for profit
Profit after income tax attributable to the owners of City Chic Collective Limited
Basic earnings per share
Diluted earnings per share
Weighted average number of ordinary shares
Weighted average number of ordinary shares used in calculating basic earnings per share
Adjustments for calculation of diluted earnings per share:
Adjustments for performance rights
Consolidated
2020
$'000
2019
$'000
497
1,713
Cents
Cents
0.3
0.3
0.9
0.9
Consolidated
2020
$'000
2019
$'000
9,657
15,978
Cents
Cents
5.1
5.0
8.3
8.3
Number
Number
192,236,121
192,236,121
2,812,659
-
Weighted average number of ordinary shares used in calculating diluted earnings per share
195,048,780
192,236,121
Accounting policy for 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.
Note 25. Dividends
Dividends
Dividends paid during the financial period and prior period were as follows:
Interim ordinary dividend for the period (2019: 2.5 cents per ordinary share)
Special dividend for the period (2019: 2.5 cents per ordinary share)
Final dividend for the period (2019: 1.5 cents per ordinary share)
Total dividends
Consolidated
2020
$'000
2019
$'000
-
-
2,884
2,884
4,806
4,806
-
9,612
91
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 25. Dividends (continued)
Franking credits
Franking credits available at the reporting date based on a tax rate of 30%
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%
Consolidated
2020
$'000
2019
$'000
49,083
43,849
2,464
5,544
51,547
49,393
Consolidated
2020
$'000
2019
$'000
Franking credits available for subsequent financial years based on a tax rate of 30%
51,547
49,393
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
●
●
Accounting policy for dividends
Dividends are recognised when declared during the financial period and no longer at the discretion of the
company.
Note 26. Financial instruments
Financial Assets and Liabilities:
Amounts are accounted for at amortised cost and shown at approximate fair values below:
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
Borrowings
Lease liabilities
Consolidated
2020
$'000
2019
$'000
21,382
5,073
26,455
37,528
17,500
27,191
82,219
23,214
4,574
27,788
25,522
-
-
25,522
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 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 and ageing analysis for credit risk.
The current disruptions to the market caused by the COVID-19 outbreak have also been taken into while
assessing these risks.
92
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 26. 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 2019 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 cash (cash and cash equivalents as detailed in
Note 8. Cash and cash equivalents, less borrowings as detailed in Note 16. Borrowings) and equity of the
consolidated entity (comprising issued capital, reserves and accumulated losses as detailed in Notes 21. Issued
Capital, Note 22. Reserves and Note 23. Retained earnings/(accumulated losses)).
Market risk
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 FY2020 approximately 40% of Group revenue was in USD from its US operations and the consolidated entity
was able to source a similar corresponding amount of its inventory also in USD. This natural hedge meant the
Group was not required to hedge its foreign exchange exposure. Management monitors this natural hedge on
an ongoing basis to ensure that the exposure to foreign exchange is acceptable.
At 28 June 2020, if AUD to foreign currency rates had changed by +/- 10% from the year-end rates with all
other variables held constant, the impact on pre-tax profit for the year would have been $0.6m lower/higher.
(2019: $0.4m lower/higher).
Price risk
The consolidated entity is not exposed to any significant price risk.
Interest rate risk
The Group has exposure to interest rate risk on the 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.
93
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 26. Financial instruments (continued)
As at the reporting date, the consolidated entity had the following variable rate borrowings:
Consolidated
Cash and cash equivalents
Borrowings
Net exposure to cash flow interest rate risk
2020
2019
Weighted
average
interest rate
%
0.790%
2.886%
Weighted
average
interest rate
%
Balance
$'000
Balance
$'000
21,382
(17,500)
3,882
1.650%
-
23,214
-
23,214
At 28 June 2020, if interest rates had changed by +/- 100 basis points from the year-end rates with all other
variables held constant, the impact on post-tax profit for the year would have been $0.1m higher/lower (2019:
$0.02m higher/lower).
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 receivables, which as at 28 June 2020 owed the
consolidated entity $2.7m (2019: $4.3m). There are no guarantees against this receivable, but management
closely monitors the receivable balance monthly and is in regular contact with its customers to mitigate risk.
The Group has recognised a loss of $0.3m (2019: $0.1m) in profit of loss in respect of the expected credit losses
for the year ended 28 June 2020. The recoverability of trade and other receivables at 28 June 2020 has been
assessed to consider the impact of the COVID-19 pandemic and no material recoverability issues were noted.
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.
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.
94
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 26. Financial instruments (continued)
At balance date, bank loan facilities totalling $40.0m was available to the Group (30 June 2019: $15.0m).
Management monitors rolling forecasts of the consolidated entity’s liquidity reserve (comprising the undrawn
borrowing facilities below) and cash and cash equivalents based on 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.
Financing arrangements
Unused borrowing facilities at the reporting date:
Corporate credit card
Bank loans
Consolidated
2020
$'000
2019
$'000
935
22,500
23,435
1,257
15,000
16,257
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 - 2020
Non-derivatives
Non-interest bearing
Trade and other payables
Interest-bearing - variable
Bank loans
Undiscounted lease liabilities
Total non-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
-
37,528
-
-
-
37,528
2.886%
3.000%
-
9,310
46,838
-
7,364
7,364
17,500
10,669
28,169
-
1,072
1,072
17,500
28,415
83,443
The lease liabilities include holdover assumptions in addition to contractually obligated periods, as disclosed in
Note 14. Leases.
Consolidated - 2019
Non-derivatives
Non-interest bearing
Trade payables
Total non-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
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually
disclosed above.
95
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 26. Financial instruments (continued)
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.
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.
Note 27. 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
Chairman and non-executive director
Non-executive director
Non-executive director
Chief Executive Officer and Managing Director
Other key management personnel
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
Chief Financial Officer
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
Total compensation
Consolidated
2020
$
2019
$
1,401,013
69,741
90,834
-
1,314,982
1,987,732
83,885
197,978
20,023
605,489
2,876,570
2,895,107
96
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 27. Key management personnel disclosures (continued)
Shareholding
The number of shares in the parent entity held during the financial year by each director and other members of
key management personnel of the consolidated entity, including their personally related parties, is set out below:
Balance at the
start of the
period
Additions
during the
period
Disposals
during the
period
Other
movements
Balance at the
end of the
period
509,914
495,000
124,000
1,128,914
100,000
-
-
100,000
80,000
80,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
609,914
495,000
124,000
1,228,914
80,000
80,000
Directors' shareholding
Ordinary shares:
Michael Kay
Michael Hardwick
Phil Ryan
Total
Other key management personnel shareholding
Ordinary shares:
Munraj Dhaliwal
Total
Note 28. 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
Agreed upon procedures including review of covenant calculations
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
2020
$
2019
$
390,044
318,607
10,920
-
-
5,200
20,000
104,460
400,964
448,267
-
7,885
8,260
8,740
56,199
32,335
17,000
96,419
417,964
544,686
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.
97
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 29. Contingent liabilities
The consolidated entity had contingent liabilities at 28 June 2020 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.
Note 30. Commitments
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
More than five years
Total commitments
Consolidated
2020
$'000
2019
$'000
-
-
-
-
7,824
10,013
211
18,048
FY2019 commitments do not include 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 10 years with, in some cases, options to extend. The leases
have various escalation clauses. On renewal, the terms of the leases are renegotiated.
From 1 July 2019, the Group has recognised ROU assets for these leases, refer to Note 14. Leases for further
information.
Note 31. Related party transactions
Parent entity
City Chic Collective Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in Note 34. Interest in subsidiaries.
Key management personnel
Disclosures relating to key management personnel are set out in Note 27. Key management personnel
disclosures and the remuneration report included in the directors' report.
Transactions with related parties
The following transactions occurred with related parties:
Payment for other expenses:
Services provided by Southern Cross Shopfitting, a company that is associated with the Cotton On
Group, of which Michael Hardwick is a Director and the CFO1
Services provided by Southern Cross Shopfitting (NZ), a company that is associated with the Cotton
On Group, of which Michael Hardwick is a Director and the CFO 2
Total related party transactions
Consolidated
2020
$'000
2019
$'000
2,552,160
965,129
67,386
332,249
2,619,546
1,297,378
1 Michael Hardwick was not involved in decision making relating to Southern Cross Shopfitting and its dealings with the Group.
2 Michael Hardwick was not involved in decision making relating to Southern Cross Shopfitting (NZ) and its dealings with the Group.
98
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 31. Related party transactions (continued)
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.
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
Note 32. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Parent
2020
$'000
2019
$'000
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 assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Foreign currency reserve
Share-based payments reserve
Dividends paid
Retained profits/(accumulated losses)
Total equity
105,877
(100,164)
5,713
114,636
(94,554)
20,082
(9,505)
(2,712)
3,001 10,577
369
3,370
(369)
3,001
2,050
12,627
(581)
12,046
Parent
2020
$'000
2019
$'000
19,307
34,335
120,847
81,786
33,770
31,269
69,151
34,914
49,139
(7)
3,947
(2,884)
1,502
49,139
(493)
1,141
(9,612)
6,697
51,697
46,872
99
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 32. Parent entity information (continued)
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.
As at 28 June 2020, the parent entity has net current liabilities of $14.5m (2019: net current assets of $3.1m).
This has arisen due to the classification of intercompany receivables/payables as current/non-current with
whole-owned subsidiaries of the parent entity in accordance with AASB 132 Financial Instruments: Presentation.
These intercompany balances eliminate on consolidation. Notwithstanding the classification of these balances,
the parent entity is able to control the timing of the payment of these balances by virtue of its control of the
respective subsidiary entities. In addition, the parent entity has raised an additional $80m in capital subsequent
to year-end (Refer to Note 36. Events after reporting period). The directors believe that the Company can meet
its debts as and when they fall due.
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 28 June 2020 and 30 June 2019.
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 33. Business combinations
There were no business combinations in the 52-week period ending 30 June 2019.
On 16 October 2019, the Group acquired the eCommerce assets of Avenue Stores LLC for cash consideration
of US$16.5m (AU$24.6m) (excluding net working capital adjustments). The acquisition is part of the Group’s
strategy to accelerate US customer growth and expand across plus size segments. The acquisition was funded
through cash and cash equivalents and a new Acquisition Facility of $12.5m.
During the 52-week period ending 28 June 2020, the provisional accounting for the acquisition of Avenue assets
was finalised.
100
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 33. Business combinations (continued)
Details of the purchase consideration, and finalised fair values of the net assets acquired and goodwill at the
date of acquisition are as follows:
Inventory
Customer relationships
Brand
Other assets
Deferred tax asset
Trade and other payables
Onerous contracts
Sales return provisions
Gift cards and customer loyalty liabilities
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Representing:
Amount settled in cash on acquisition
Acquisition costs included in the consolidated statement of comprehensive income for the reporting period
The goodwill is attributable to the profitability of the acquired business.
Fair value
$'000
6,049
1,453
10,319
1,149
2,800
(1,061)
(1,702)
(2,634)
(3,316)
13,057
12,601
25,658
25,658
1,599
Revenue and profit contributions
The acquired business contributed revenues of $47.6m to the Group for the period from 16 October 2019 to 28
June 2020.
Accounting policy for business combinations
The acquisition method of accounting is used to account for business combinations regardless of whether
equity instruments or other assets are acquired.
The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity
instruments issued, or liabilities incurred by the acquirer to former owners of the acquiree and the amount of
any non-controlling interest in the acquiree. For each business combination, the non-controlling interest in the
acquiree is measured at either fair value or at the proportionate share of the acquiree's identifiable net assets.
All acquisition costs are expensed as incurred to profit or loss.
On the acquisition of a business, the consolidated entity assesses the financial assets acquired and liabilities
assumed for appropriate classification and designation in accordance with the contractual terms, economic
conditions, the consolidated entity's operating or accounting policies and other pertinent conditions in existence
at the acquisition-date.
Business combinations were initially accounted for on a provisional basis and subsequently finalised for the 52-
week period ended 28 June 2020. The acquirer retrospectively adjusts the provisional amounts recognised and
also recognises additional assets or liabilities during the measurement period, based on new information
obtained about the facts and circumstances that existed at the acquisition-date. The measurement period ends
on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the
information possible to determine fair value.
101
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 34. Interest 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 business /
Country of incorporation
Ownership interest
2019
%
2020
%
Specialty Fashion Group No. 5 Pty Limited
City Chic Collective No. 1 Pty Limited
City Chic Collective No. 2 Pty Limited
Specialty Fashion Group No. 6 Pty Limited
City Chic International Pty Limited
City Chic Collective New Zealand Limited
Specialty Fashion Group (Shanghai) Limited Company
Specialty Fashion Group South Africa (Pty) Ltd
City Chic Collective USA Incorporated
Avenue Online LLC
Australia
Australia
Australia
Australia
Australia
New Zealand
China1
South Africa
United States
United States
Note 35. Deed of cross guarantee
100.0
80.0
100.0
100.0
100.0
100.0
-
100.0
100.0
100.0
100.0
80.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
-
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
The above companies (where incorporated in Australia) 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 financial results of
the Closed Group are the same as the financial results of the parent entity which are disclosed in Note 32. Parent
entity information.
Note 36. Events after the reporting period
The impact of COVID-19 on economic conditions and the heightened level of uncertainty is likely to have a near-
to-medium term impact on the level of business activity and sales for the Group. As at the date these financial
statements are authorised for issue, the Directors consider that the financial effects of any potential changes
cannot be reasonably estimated for future financial periods. However, there is confidence that the measures put
in place to drive cash flow generation in the last four months of FY2020 provide a strong foundation to manage
future disruption and uncertainty. There is a potential that the lower levels of forecast activity may impact the
future recoverability of the Group's assets, including debtors, inventory, plant and equipment and intangible
assets.
While as at the date these financial statements are authorised for issue, the Directors consider that the financial
effects of any potential changes cannot be reasonably estimated for future financial periods, there is confidence
that the measures put in place to drive cash flow generation in the last four months of FY2020, provide a strong
foundation to manage future disruption and uncertainty. There is a potential that the lower levels of forecast
activity may impact the future recoverability of the group's assets, including debtors, inventory, plant and
equipment and intangible assets.
The Directors continue to monitor COVID-19 related developments and are closely working with management to
assess and navigate the potential implications for team members, suppliers, customers, and operations. The focus
is to maintain production and supply of products and services whilst minimising the risk of spread of COVID-19
amongst our team members, our customers, and the societies in which the Group operates.
1 Entity was dormant and deregistered during the year.
102
City Chic Collective Limited
Notes to the consolidated financial statements
28 June 2020
Note 36. Events after the reporting period (continued)
In early July, the Victorian State Government reinstated restrictions in relation to COVID-19 in metropolitan
Melbourne. To protect the health and safety of the team and customers, City Chic temporarily closed 20 stores
in Melbourne. In early August, following the escalation of the spread of the COVID-19 virus in Victoria, the
remaining four stores in regional Victoria were also temporarily closed.
In mid-August 2020, an increase in the number of COVID-19 cases resulted in the New Zealand government
imposing restrictions in Auckland. City Chic has temporarily closed its four stores in Auckland.
The remainder of the store portfolio in ANZ remain open and traded well in July and August. City Chic’s online
channel continues to operate without disruption in all geographies. The health and safety of the team and
customers, as well as the guidelines provided by the government, will drive any decision on reopening of stores.
On 24 July 2020, City Chic was selected as Stalking Horse Bidder and signed an asset purchase agreement (APA)
for the eCommerce assets of the US-based brand Catherines, owned by Ascena Retail Group Inc (Ascena), which
filed for bankruptcy on the same day. City Chic’s Stalking Horse Bid includes upfront cash consideration of
US$16.0m, subject to an inventory adjustment. The APA is subject to conditions precedent, including City Chic
being the highest bidder through the US bankruptcy auction process and approval by a US Bankruptcy Court.
There is therefore no guarantee City Chic will be successful in its bid and the auction process may result in the
purchase price being higher. If City Chic is the successful acquirer, the expected date of completion would be
late in the third quarter or early fourth quarter of 2020. Further details on the Catherines business and the US
bankruptcy process are included in the announcement and investor presentation released to the Australian
Securities Exchange on 24 July 2020.
In combination with the announcement of the potential acquisition of the eCommerce assets of Catherines on
24 July 2020, City Chic completed a fully underwritten $80.0m Placement of new fully paid ordinary shares to
eligible professional and sophisticated institutional investors. The Placement was conducted at $3.05 per share,
resulting in 26.2 million new shares being issued, representing 13.1% of City Chic’s existing issued capital. New
shares issued under the Placement settled on 30 July 2020 and commenced trading on 31 July 2020.
Following the completion of the Placement, City Chic offered all eligible shareholders the opportunity to
participate in a non-underwritten Share Purchase Plan (SPP). City Chic raised $31.1m through the SPP, which
closed on 18 August 2020. The SPP was conducted at $3.05 per share, resulting in 10.2 million new shares being
issued. The Placement and SPP together raised $111.1m and resulted in 36.4 million new shares being issued.
Subsequent to year-end the Group has repaid its $17.5m of debt in full, with the $40.0m available debt facility
maturing in February 2023.
No other matter or circumstance has arisen since 28 June 2020 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.
103
City Chic Collective Limited
Directors' declaration
28 June 2020
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 28 June 2020 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
Chairman
27 August 2020
Sydney
Phil Ryan
Chief Executive Officer and Managing Director
104
City Chic Collective Limited
Corporate Governance Statement
28 June 2020
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 Corporate Governance 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.
the Board
Details of the Group’s Corporate Governance Statement as well as key policies and practices and the charters
for
the Group’s website
(https://www.citychiccollective.com.au/corporate-governance), including performance against measurable
objectives. The Corporate Governance Statement will be lodged with ASX at the same time that this Annual
Report is lodged with ASX.
available on
committees
each of
and
are
its
The Corporate Governance Statement outlines the Group's main corporate governance practices and policies
in place during the 52-week period ended 28 June 2020 (unless otherwise stated) and are current as at 27
August 2020 and have been approved by the Board. The Board is comfortable that the practices are
appropriate for a Company of City Chic Collective Limited’s size.
105
City Chic Collective Limited
Shareholder information
28 June 2020
The shareholder information set out below was applicable as at 20 August 2020.
Distribution of equitable securities
Analysis of the number of ordinary shareholders 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
Number of
holders of
ordinary
shares
% of equity
securities in
this class
Number of
securities
1,737
1,912
494
417
63
4,623
153
876,777
4,811,645
3,733,645
10,522,062
198,521,501
218,465,630
0.40
2.20
1.71
4.82
90.87
100.00
0.00
Analysis of the number of shareholders, holding restricted and unquoted fully Loan Funded (LF) paid ordinary
shares issued pursuant to an employee incentive scheme, 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
Number of
holders of
unquoted
ordinary
shares
% of equity
securities in
this class
Number of
securities
-
-
-
-
8
8
-
-
-
-
100.00
100.00
-
-
-
-
8,200,912
8,200,912
Analysis of the number of holders, holding restricted and unquoted performance rights issued under an employee
incentive scheme, 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
Number of
holders of
performance
rights
% of equity
securities in
this class
Number of
securities
-
-
-
1
6
7
-
-
-
0.97
99.03
100.00
-
-
-
55,556
5,676,296
5,731,852
106
City Chic Collective Limited
Shareholder information
28 June 2020
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMS PTY LTD
CITICORP NOMINEES PTY LIMITED
T BATSAKIS PTY LTD
BNP PARIBAS NOMINEES PTY LTD
NAAH PTY LTD
LANDPEAK PTY LTD
HENOCH INVESTMENTS PTY LTD
ICESTORM PTY LTD
CITICORP NOMINEES PTY LIMITED
ONE MANAGED INVT FUNDS LTD
UBS NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
NAAH INVESTMENTS PTY LTD
CS THIRD NOMINEES PTY LIMITED
SANDHURST TRUSTEES LTD
BNP PARIBAS NOMINEES PTY LTD
BRISPOT NOMINEES PTY LTD
Ordinary shares
Number held
% of total
shares issued
52,879,859
42,324,040
28,539,053
7,477,656
7,392,660
7,230,000
6,026,832
5,804,536
4,354,872
4,000,000
3,745,288
2,772,660
1,987,286
1,954,335
1,573,882
1,533,215
1,476,639
1,111,502
1,043,384
926,994
24.21
19.37
13.06
3.42
3.38
3.31
2.76
2.66
1.99
1.83
1.71
1.27
0.91
0.89
0.72
0.70
0.68
0.51
0.48
0.42
Unquoted equity securities
The Company has unquoted fully paid ordinary shares issued pursuant to an employee incentive scheme, and
unquoted performance rights on issue, as detailed more fully above.
184,154,693
84.29
Substantial holders
Substantial holders in the company are set out below:
SPHERIA ASSET MANAGEMENT
PENDAL GROUP LIMITED
Voting rights
The voting rights attached to ordinary shares are set out below:
Ordinary shares
Number held
16,198,366
12,837,896
% of total
shares issued
8.08
6.40
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.
Performance Rights
Performance rights carry no voting rights.
There are no other classes of equity securities.
107
City Chic Collective Limited
Corporate directory
28 June 2020
Directors
Michael Kay - Chairman and non-executive director
Michael Hardwick - Non-executive director
Megan Quinn - Non-executive director
Phil Ryan - Chief Executive Officer and Managing Director
Company secretary
Marta Kielich (appointed 7 July 2020)
Mark Ohlsson (resigned 6 July 2020)
Notice of annual general
meeting
The Annual General Meeting of City Chic Collective Limited will be held on:
Registered office
Principal place of business
Share register
Auditor
Bankers
Date: Friday, 20 November 2020
Time: 10:00 am
151-163 Wyndham Street
Alexandria, NSW 2015
Telephone: (02) 9059 4300
151-163 Wyndham Street
Alexandria, NSW 2015
Telephone: (02) 9059 4300
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
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
https://www.citychiccollective.com.au
Corporate Governance
Statement
https://www.citychiccollective.com.au/corporate-governance
ABN
43 057 569 169
108
CITY CHIC COLLECTIVE
151–163 Wyndham Street,
Alexandria NSW 2015
Australia
ABN 43 057 569 169
P +61 2 9059 4300