City Chic Collective
Annual Report 2021

Plain-text annual report

2021 A N N U A L R E P O R T Contents Overview Message from our Chairman and CEO Board of Directors City Chic Annual Recap 2022 Outlook Diversity Corporate Social Responsibility Annual Financial Report 2021 References FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 3 0426162820321232425Annual Financial Report 2021 | City Chic Collective Overview Global Plus-size Customer led Omni Channel FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 5 We areAnnual Financial Report 2021 | City Chic Collective Overview EVERYDAY ESSENTIAL FASHION FIERCELY FASHIONABLE FASHION FOR YOUR SHAPE 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 and footwear. Our customer-led offering, which appeals to fashion- forward women, has a strong following in Australia, USA, UK, Europe and New Zealand. Our omni-channel model comprises of multiple websites in Australasia, USA, UK and Europe. The collective of brands are also available through marketplace and wholesale partners in the US, Canada, UK and Europe. SERIOUS STREET STYLE LUSTFUL LINGERIE PREMIUM WIDE-FIT FOOTWEAR FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 7 Annual Financial Report 2021 | 2021 Snapshot 2021 SNAPSHOT SALES $258m 1.07m ACTIVE CUSTOMERS 73% ONLINE PENETRATION 58m ANNUAL ONLINE TRAFFIC 3 KEY REGIONS GLOBALLY FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 9 Annual Financial Report 2021 | City Chic Collective Overview Growing into a Global Digital Retailer Customer-Centric Operating Model CONTRIBUTION BY CHANNEL 4% 4% 31% FY20 61% 1% 2% 26% FY21 71% Online Website Stores Online Marketplaces Wholesale 1% 6% 40% FY20 59% 38% FY21 56% ANZ Americas EMEA CONTRIBUTION BY REGION le Highly-engaged and gro wing custo m er base. R e a 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! 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 Longstanding Executive Tea m. 1.0 7 m Active Cust o m e r ally b G l o s FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 11 Annual Financial Report 2021 | City Chic Collective Overview Global Business Overview AMERICAS $100M REVENUE EMEA $14M REVENUE4 AUSTRALIA & NEW ZEALAND $144M REVENUE Wholesale 2% Marketplace 4% Wholesale 6% Marketplace 1% Stores 46% Online Websites 94% • 522k Active Customers1 • 32m Annual Traffic2 • A$180 Avg Annual Spend3 Online Websites 94% Online Websites 54% 120k Active Customers1,4 • • 7m Evans Traffic Since Acquisition2,4 • A$110 Avg Spend Since Acquisiton3,4 • This does not yet include Navabi acquired in July 2021 • 428k Active Customers1 19m Annual Traffic2 • • A$337 Avg Annual Spend USA fulfilment site in Dallas Canada fulfilment site in Ontario Office in New Jersey UK fulfilment site in Gateshead European fulfilment site in NW Germany Office in London ANZ fulfilment site in Sydney 89 stores at end of June Head office in Sydney Please refer to page 123 FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 13 Annual Financial Report 2021 | City Chic Collective Overview Financial Performance SALES GROWTH SALES $M EARNINGS GROWTH UNDERLYING EBITDA1 $M $258.5 $139.5 $194.5 $89.7 $104.8 $119.0 $131.9 $61.4 $148.4 $73.0 $70.4 $75.4 $42.4 $19.1 $26.5 $7.4 $19.1 $23.3 $19.9 $6.9 $24.9 $9.1 $13.0 $15.8 FY18 FY19 FY20 FY21 FY18 FY19 FY20 FY21 1H 2H 1H 2H GLOBAL CUSTOMER BASE GROWTH INCREASED ONLINE PENETRATION CUSTOMER NUMBERS2 '000 ROLLING 12-MONTH GLOBAL ONLINE SALES3 $M +61% growth +72% growth 385 515 1,070 801 663 53% online sales 44% online sales 93 65 73% online sales 73% online sales 65% online sales 127 151 189 JUN 19 DEC 19 JUN 20 DEC 20 JUN 21 JUN 19 DEC 19 JUN 20 DEC 20 JUN 21 Please refer to page 123 FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 15 Annual Financial Report 2021 | Comments by our Chairman and CEO Message from Our Chairman and CEO The COVID-19 pandemic continued throughout the 2021 financial year requiring the Company to adapt and innovate its business model to ensure ongoing sustainability and profitable growth. In circumstances where planning and anticipating the future was almost impossible, a lot was asked of City Chic team members. Under the calm, yet determined, leadership of the executive team, our people performed superbly. The Company not only recorded strong profitable growth but also materially diversified its geographic footprint, expanded its range, invested in the future and made good progress towards our vision of leading a world of curves. Here are some of the highlights: • Sales Revenue grew by 32.9% and comparable sales growth (CSG) was 31.6% • Underlying EBITDA grew by 59.8% to $42.4m Pre-AASB16 (16.4% margin) and $50.2m Post- AASB16 Statutory NPAT from continuing operations was $21.6m (135.3% growth) and Underlying NPAT (Pre-AASB16) was $24.9m (80.6% growth) • • Normalised operating cash flow of $24.2m (FY20: $20.9m) • Global customer base growth of 61% YoY to 1.07m active customers • Global customer website traffic growth of 68% YoY to 58.1m visits • Online sales growth of 49.3%, with 73% online penetration Sales outside of ANZ totalled 44.1% of group revenue Signed new partnerships with Next, Curvissa, Freemans, HBC, Debenhams, Very, Zalando, Amazon, Walmart, Target, Ebay, David Jones and The Iconic Strong balance sheet with net cash of $71.5m • • • at 27 June 2021 and undrawn debt facility of $40.0m; completed $111.1m equity raise in July- August 2020 • Completed strategic acquisitions of plus-size brand Evans in the UK in December 2020 and European plus-size online marketplace Navabi in July 2021Commenced the process of diversifying our supply chain to offset the concentration risk in China. We are now sourcing from Bangladesh, Vietnam, Cambodia and Morocco • Developed and trialled new product segment and lifestyle ranges using brands that include Refinity, Arna York, Societie+, Zim & Zoe and Aveology • Continued to develop and trail the online “world of curves” marketplace for plus size, for all our brands in our four key regions Further development of our ESG /Ethical Trade program, including the roll out of worker surveys and strengthening of our cotton regions ban • As can be seen, notwithstanding the complexity posed by the pandemic, FY21 was a very busy and productive year for City Chic. Management has succeeded in simultaneously preserving and expanding the core of the business whilst also investing in future income streams. Importantly, these new developments have the double benefit of adhering to our strategy of operating purely within the plus-size market and, at the same time, diversifying risk, both geographically and from a product perspective. COVID-19 demonstrated the benefits of this innovation and adaptability. Our geographical scope protected us from rolling lockdowns and economic disruption as timings were different between Northern and Southern Hemispheres and as between individual countries and states. Our increased CHAIRMAN MICHAEL KAY CEO & MANAGING DIRECTOR PHIL RYAN range and efficient supply chain allowed us to pivot between the products our customers were seeking at various times during the pandemic. In lockdowns we could move away from party dresses and work wear to casual, intimates and “zoom-wear”. Australian stores suffered during the rolling lockdowns, particularly in Victoria and later in NSW. However, each time they reopened, the response from customers was very strong. In the meantime, our customers were buying online and our expanded range allowed us to deliver what she wanted, when she wanted it and at the right price point. Avenue has proved to be a very good acquisition. Not only has it given us a higher profile in our biggest market, but it has also allowed us to introduce our other product segments to US customers. This has been extremely well received and has driven our strategy to give her the choice of assortment and offer all of our product streams to all of our customers globally. We are delighted with the way our business is developing in the USA. We have only just begun and we see a substantial runway of growth opportunities in this USD$49bn market. Continuing to develop our US business both organically and inorganically are key priorities for us. FY21 saw another important milestone in our journey to lead a world of curves. In December 2020, we purchased the Evans business in the UK. Evans has been a retailer of plus sized women’s wear for almost 100 years, both through high street shops and more recently online. We only acquired the Evans brand, eCommerce and wholesale businesses, and Evans stores were closed. The business was somewhat run-down when we acquired it, having been part of the Arcadia Group which slid into administration in November 2020. The second half of FY21 was spent transitioning the business from Arcadia systems and warehousing into our City Chic systems and a new warehouse. We also had to build back inventory and increase the range available to customers. In this sense, the task has been very similar to that in Avenue. The early signs for Evans are promising, and our success in revitalizing Avenue and getting customers to accept it as online-only, gives us confidence we can restore Evans to its former position and establish ourselves as a leader in the UK plus size market. We have introduced all of our product streams and brands to the UK customer through the Evans ‘world of curves’ website/ marketplace. Evans also had distribution channels through Europe and the Middle East and we see an opportunity to grow our business meaningfully in those locations. In July 2021 we acquired Navabi, a marketplace business in Europe, domiciled in Germany and serving mostly German customers. The Navabi integration is proceeding ahead of plan and the initial reads on the loyalty of this customer to the marketplace have been pleasing. Inventory levels will take time to rebuild and in the short term we will re-position global inventory to Europe. Navabi’s loyal customer base is focused on size, fit and quality. Navabi’s websites had 5.8m customer visits in 2020, generating €10.4m (A$16.6m) in sales revenue, and pre-pandemic annual traffic exceeded 10m visits. Navabi is an important beachhead for us into Europe and growing the European business, both organically and inorganically, is a priority for us. We plan to further develop this marketplace with all our brand offerings and seek to expand its predominantly German geographical scope to cover the rest of Europe. FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 17 Annual Financial Report 2021 | Comments by our Chairman and CEO We now have strong traffic driving digital store fronts in our 4 key markets. In Australia we have citychic. com.au, Avenue.com in the USA, Evans.co.uk in the UK and our most recent addition, Navabi.de in Europe. Together these drive around 70 million annual visits globally and give us a strong position in terms of global digital reach in the USD$180bn plus size market. This has created a platform for us to continue to increase market share by delivering our complete product range to the plus size customer globally or a “world of curves”. COVID-19 UPDATE In FY21, the ANZ store network was impacted by several periods of closures in response to government direction. Over the financial year, there were approximately 3,655 equivalent store days closed (over 10% of total equivalent store days in FY21) including 2,910 in Victoria, 177 in NSW, 176 in Queensland, 147 in Western Australia, 49 days in Northern Territory, 34 in South Australia, 12 in ACT, 7 in Tasmania and 143 in New Zealand. Following the end of the financial year, the ANZ store network continued to be impacted by varying periods of temporary closures. During the first 8 weeks of FY22, there were approximately 1,646 equivalent store days closed (c.33% of total equivalent store days over the period) including 764 in NSW, 565 in Victoria, 178 in Queensland, 40 in Western Australia, 32 in South Australia, 20 in ACT, 7 in Northern Territory and 40 in New Zealand. Stores in NSW (15), Victoria (18), ACT (2) and New Zealand (4) remain temporarily closed as of the date of this report. Throughout FY21 the US experienced significant waves of COVID-19 and various extended government directed restrictions, which caused disruption to labour, logistics and consumer spending during the period. There was significant disruption to labour in warehousing and fulfilment and large surcharges imposed by freight carriers, in particular during peak seasonal trade in November 2020 to January 2021. Aligned with the acceleration of the vaccine roll-out in early 2021, restrictions were eased which resulted in a rebound in consumer spending from March 2021 onwards. At the time of the acquisition of Evans, the UK was in heavy government-imposed lockdowns. An acceleration in vaccinations resulted in an easing of restrictions from May 2021 and an improvement in consumer spending. There has been an impact on logistics and labour in the UK, but less severe than that experienced in the US in 1H FY21. COVID-19 continues to cause disruption to logistics globally and to stores in Australia, as well as causing uncertainty and volatility in consumer confidence and spending. Further to this there have been international shipping delays and price increases that have impacted global supply chains. With an increased lead time from the initial COVID-19 supply issues and higher production volumes we have been able to offset these delays and costs increases. With geographic and channel diversification, a strong cash position, loyal customers who like to buy online, and a focus on executing on the long-term plans for the business, we believe City Chic is well positioned to navigate the conditions and capitalise on the recovery. Financial Position and Dividend City Chic’s net cash position at 27 June 2021 was $71.5m with no debt drawn under the existing $40m debt facility which matures in February 2023. City Chic completed an equity raising of $111.1m in the first quarter to strengthen the balance sheet and accelerate the Company’s global growth ambitions. This comprised of, in July 2020, a fully underwritten $80.0m Placement of new fully paid ordinary shares to eligible institutional investors conducted at $3.05 per share. Following the completion of the Placement, in August 2020 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, also conducted at $3.05 per share. A total of 36.4 million new shares were issued through the Placement and SPP. A cash payment of $40.2m was made for the acquisition of Evans on 23 December 2020. The cash payment of $9.6m for the acquisition of Navabi on 23 July 2021, was post FY21 year end and therefore not reflected in the ending cash balance of $71.5m. City Chic is well capitalised to deliver on its strong organic growth pipeline and well positioned for future value-adding inorganic opportunities that expand the global customer base. Given the opportunities to accelerate the growth of the business, as well as the ongoing uncertainty caused by COVID-19 around the world, the Board decided not to declare a dividend. The decision whether to pay a dividend will be reviewed at the interim FY22 results. In view of the opportunities, City Chic will remain focussed on sensibly deploying capital to achieve its strategic intent of gaining a strong global market position in a sector that, at least for now, is under-served. • • store experiences and store environments Further develop the World of Curves social community Pursue inorganic growth opportunities that add economic value to the collective. FY22 OUTLOOK Australia has been impacted by temporary store closures with 33% of trading days lost till the end of August at a cost of $1 million a month in contribution. However, stores which have been open and the online channel, have to date delivered growth on the prior corresponding period and total sales above last year for ANZ. We are hoping vaccination levels in Australia are such that stores will be open for the critical run through Black Friday, Cyber Monday and into Christmas. Avenue and Evans are trading strongly above pre-acquisition levels. Navabi is trading ahead of expectations and above FY21 levels, although we note the limited period since acquisition. In September 2021, a number of marketplace partnerships went live including Walmart (US) and Ebay (AU) Marketplace integrations are underway for Debenhams (UK), Very (UK), Zalando (Germany), Amazon (UK), Target (US) and The Iconic (AU), which are all expected to be live in 1H FY22. City Chic has signed a partnership with David Jones for a concession in 14 stores and their online marketplace and has signed a franchise partnership for over 20 Debenhams stores in the Middle East. In FY22 City Chic is focused on the execution of various initiatives including: • Drive market share growth and customer acquisition in the US • Gain market share in ANZ through the introduction of our conservative value product stream (Evans and Avenue) Introduce the collective’s full assortment to the Evans customer base, building on the initial deliveries in 2H FY21, to drive greater market penetration Integrate Navabi and introduce the collective’s brands to the customer base, as well as to further develop the current product and lifestyle offering Expand and execute on marketplace partnerships in all regions • • • • Rotate store portfolio into new fit-outs and conversion to larger format stores; enhance in- FY21 was a difficult but satisfying year for City Chic. The Company and its people demonstrated adaptability, innovation, strategic intent, operational execution and resilience in a world beset with a virus that prevented travel, limited social interaction and impaired the ability to do business. We suspect the effects of the virus will be ongoing for some time, even after vaccination rates achieve the required levels. Nevertheless, we believe we can continue to grow profitably, invest for the future and further progress towards leading a world of curves. This would not be possible without the wonderful City Chic Collective team and the customers we serve. Our sincere thanks for their extraordinary and ongoing support. It gives us energy and makes us even more determined to make this Company a global success. Michael Kay Chairman Phil Ryan CEO & Managing Director FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 19 Annual Financial Report 2021 | Directors Board of Directors Chairman and Non-Executive Director MICHAEL KAY 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 People, Culture 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. Non-Executive Director MICHAEL HARDWICK 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 People, Culture and Remuneration Committee. Mr. Hardwick is a Chartered Accountant, a 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. 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 People, Culture 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. Chief Executive Officer and Managing Director PHIL RYAN 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. FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 21 Annual Financial Report 2021 | Directors Board of Directors Introducing in FY2022 The following new members have been appointed to the Board on 5 August 2021 Non-Executive Director (appointed after the reporting period) NATALIE MCLEAN Natalie McLean joined the Board in August 2021 as an independent, non-executive director. She is a member of the Audit and Risk Committee and a member of the People, Culture and Remuneration Committee. Ms. McLean has significant retail experience having worked in senior positions domestically in Australia and internationally with companies including Giordano, Rip Curl and the Cotton On Group. Ms. McLean is currently a director and the Chief Retail Officer of the Cotton On Group and a director of the Cotton On Foundation. Non-Executive Director (appointed after the reporting period) NEIL THOMPSON Neil Thompson joined the Board in August 2021 as an independent, non-executive director. He is a member of the Audit and Risk Committee and a member of the People, Culture and Remuneration Committee. Mr. Thompson has significant financial, operational and strategic experience from a broad range of senior roles and industries, including in the freight and logistics, industrial products and technology sectors. Mr. Thompson was previously Chief Financial Officer of Ascender HCM (a payroll software and services company), has worked at Alesco, Amatek, TNT and Elders IXL, and is currently a director of the Australian World Orchestra. FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 23 Annual Financial Report 2021 | City Chic Annual Recap Annual Financial Report 2021 | 2022 Outlook City Chic Annual Recap 2022 Outlook Entry into the UK market with acquisition of Evans; integration complete and growth strategy launched Drive market share growth and customer acquisition in the US; execute on the re-engagement strategy of the Avenue customer base Implemented strategy to re-engage the Avenue customer base and drive market share growth in the US Gain market share in ANZ through the introduction of our conservative value product stream (Evans and Avenue) Expanded online offering including casual, basics and sleepwear. New lifestyles developed and being trialled including Refinity, Arna York, Societie+, Zim & Zoe and Aveology Introduced greater assortment to all websites; additional City Chic product on Avenue.com, and City Chic and Avenue product on Evans.co.uk Enhanced store environments Agreed acquisition of Navabi online marketplace (completed post year end July 2021), marking entry into the European market. Launched new marketplace partnerships with leading retailers in the UK, USA and Canada and commenced wholesale partnership in the Middle East as a channel to deliver our assortment to a new customer base Successfully navigated pandemic challenges; product mix adapted, stock managed across global operations, overcame logistics challenges, and ongoing store lockdowns Published our first 2020 Modern Slavery Act Statement, achieved 'Green' rating in the COVID-19 Fashion Report, rolled out to worker surveys and strengthened our cotton regions ban Completed Equity Raise of $111m to support global growth opportunities Gain market share in the UK through the introduction of the collective’s full assortment to the Evans customer base, building on the initial deliveries in 2H FY21 Integration of Navabi and introduction of wider product range to the European customer base Expand and execute on marketplace partnerships in all regions Continue rotation of store portfolio into new fit-outs & conversion to larger format stores Further develop the World of Curves social community Continue to review inorganic opportunities to accelerate global customer growth FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 25 DIVERSITY SURVEY AND STRATEGY Objectives established for achieving diversity and progress towards achieving them during the year ended Annual Financial Report 2021 | Diversity Diversity Leading a world of curves means putting her first, and creating experiences that makes her feel courageous; feel proud to identify as female; feel empowered to embrace her individuality; and to respect and love the skin she is in. She is our customer, she is a member of our team, and she is our leader. We listen to her. We value the learnings we gain from her coming from different backgrounds, experiences, and perspectives. These learnings enable us to develop beautiful products and create exceptional customer and work experiences that understand, respect and meet the diverse needs, preferences and goals she has. We endeavour to make her feel good at every touchpoint and we are committed to continuing to deliver on this promise, at all levels of our business, as our global footprint expands. These commitments also extend beyond her. We are a boundaryless organisation that ensures all team members, regardless of gender identity or minority group membership, have equal opportunity to enter, learn and develop within our business. The CCX Diversity Policy is underpinned by a suite of policies and practices that provide the support and structure needed to facilitate these opportunities for each individual that enters our workforce. In FY21 we conducted our first Diversity Survey and achieved a Sense of Belonging Score of 76%which is equal to the Culture Amp Global Inclusivity Benchmark. Our goal is to ensure all gender identities and minority group members have the same experience in the workplace. The survey results identified the LGBTQI+ group (13% of workforce) and those that identify as having a disability or impairment group (15% of workforce) were areas of opportunity to improve. We incorporated initiatives into our Culture and Connection calendar that focused on awareness and inclusion for these groups, we expanded our EAP offering to offer specialist hotlines that target the specific support needs of these groups and our FY22 volunteering program aligns with NGOs that provide services to these groups. GENDER BALANCE AND STRATEGY CCX has an ongoing commitment to reporting on Diversity in line with the Workplace Gender Equality Act 2012 (WGE Act 2012). In FY21, the proportion of women employed at different levels across CCX was as follows: • • 1 of 4 Board members is a woman; 1 in 3 C suite leaders is a woman (CEO, KMP and Head of Business); 67% of the Leadership Team (Other Executives and General Managers) are women; 84% of our Managers (Senior Managers and Other Managers) are women and; 97% of our workforce are women. • • 1 in 4 Board members is a woman 1 in 3 C-Suite leaders is a woman Following the end of the reporting period, two new non-executive directors joined our Board. As at the date of this Annual Report, 2 of 6 Board members (including non-executive and executive directors) are women. In FY21 we recognised the underrepresentation of males in middle management and professional positions in our support office. Those that identify as male had a Sense of Belong Score of 95%. While this gives us the confidence they felt valued in the workplace, we wanted to increase gender diversity in these workforce segments. Our FY21 objective was to increase male headcount by 25% in these areas, and we overachieved by increasing male headcount by 45%. We aim to see male headcount increase in these workforce segments 30 June 2021 are set out below: FY2021 Diversity Strategy OBJECTIVE Conduct a Diversity Survey for a new CCX baseline Develop a FY21 Diversity Strategy underpinned by survey findings Review Diversity Policy to ensure it aligns with Diversity Strategy Develop and rollout a workplace volunteering program ACHIEVEMENT Completed Completed Completed FY22 Rollout (due to pandemic) Use FY20 WGEA Report to set gender-related diversity objectives for FY21 Completed FY2022 Diversity Strategy OBJECTIVE Seek to achieve and maintain gender diversity in the composition of the Board and the C-Suite Leadership Team of no less than 30% of each gender. Conduct CCX Annual Diversity Survey Achieve a Sense of Belonging Score of 75% or above for all groups within the next two years. Launch Diversity and Inclusivity Committee to lead diversity and inclusivity awareness, process improvement, education, and initiatives. Launch FY22 workplace volunteering program. Reposition employment brand and recruitment activity to increase the attractiveness of the company to males. FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 27 Annual Financial Report 2021 | Corporate Social Responsibility Corporate Social Responsibility We believe that creating safe and respectful working environments for all workers in our WE COMMIT TO SOURCE PRODUCT IN A WORKING TOGETHER TO EMPOWER OUR supply chain is the number one priority. Following the acquisition of new brands and with the diversification of our sourcing regions, we have sought to partner with, and on-board, select new factories and vendors into our supply chain and our ethical trade policies. We welcome the new opportunities and challenges that come with the growth of brands and the diversification of our supply chain. Our goal is to work together with all our global partners for a more positive impact to people and planet. People continue to be a focus for our organisation as we aim to improve the lives of workers in our supply chain. We consider every worker in our supply chain an extension of our own business and we are working together with our factories to try and ensure safe and fair working conditions for all workers. We believe our ethical trade programme holds us to account when it comes to human rights impacts associated with producing our products. As we continue to broaden our sourcing regions and reach out to new countries to manufacture our product, we have taken steps to strengthen our ethical trade policies. Regardless of location, all suppliers are strictly required to implement and adhere to our high ethical sourcing standards. Our FY2021 Highlights 1. Published our first 2020 Modern Slavery Act Statement 2. Acheieved ‘Green’ rating in the Covid-19 Fashion Report 3. Rolled out Worker Surveys – Top 24 factories 4. Tracing of tier 2 & 3 suppliers in progress 5. Updated and strengthened our Cotton Region ban RECOGNISED, RESPONSIBLE, AND TRANSPARENT WORKERS AND GIVE THEM A VOICE IN THE SUPPLY CHAIN SUPPLY CHAIN The UN predicts there are up to 45.8 million people As part of our Worker Voice Program, we were entrapped in slavery, with more slaves today than excited to launch our worker survey tool out to in any other time in history. In 2018, the Australian factory workers as a pilot along side our factory Government legislated the Modern Slavery Act, which social audits. requires business to report on modern slavery risks in their supply chain. The survey is in addition to our worker hotline and grievance mechanism as another channel to talk to This year we published our first Modern Slavery Act factory workers. Statement (for the prior reporting period) in which we define the risks and highlight the steps we are taking Phase 1: The survey was rolled out across 24 to help eradicate modern slavery in the supply chain. factories and touched 4300 workers to seek their We are committed to educating our business, and suppliers, on modern slavery and providing practical tools to identify and remediate issues. feedback across the following: WORKER SURVEY SCORECARD ✓ Modern Day Slavery - 93% positive We continue to act on key issues such as the known ✓ Labour Practices – 89% positive forced labour risks associated with certain cotton farming regions. ✓ Health & Safety - 95% positive ✓ Worker Satisfaction – 89% positive CCX is committing to take steps to try and ensure our supply chain does not source directly or indirectly from known regions that openly engage in the use of forced labour, in line with our responsibilities under the UN Guiding Principles on Business and Human Rights. Enhancing our worker voice tools is a key initiative to help support us in gaining a more direct line to workers. It gives us the ability to contact workers by sending them surveys, training materials, and information to empower workers to have a voice about their individual working conditions. FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 29 Annual Financial Report 2021 | Corporate Social Responsibility RESPONDING TO COVID-19 LIVING WAGE WORKING WITH FACTORIES TO RECOGNIZE THAT A MINIMUM WAGE DOES NOT ALWAYS EQUAL A THE RIGHT OF EVERY WORKER IN OUR SUPPLY CHAIN TO ENJOY SAFE AND HEALTHY WORKING CONDITIONS IN AN ENVIRONMENT WHERE THEY WE CARE FOR THE ENVIRONMENT AND THE ARE NOT EXPLOITED MANAGEMENT OF WASTE IN OUR SUPPLY CHAIN “As we navigate through the global COVID-19 We partner with our factories to implement a plan to Through our third-party auditors and our own team’s At source we ask vendors, as part of our code of pandemic, we continue to place great importance on work towards paying a living wage, so that workers factory visits, we check that working conditions are conduct, to manage their waste, water and energy in all our ethical trade policies and responsible sourcing practices” are on a path to earning an income that covers their basic family living expenses which for many is higher than what a minimum wage can afford. Through our internal review process we train and then ask the factories to establish a living wage calculation. clean and safe and workers are not performing any a responsible manner. unsafe work. Following the acquisition of Avenue and along with all textile processing and waste management is in line the diversification of sourcing regions, the focus has with the legislation of the manufacturing country. been to embed selected new factories and vendors into our supply chain and our ethical trade policies. Our audits include Environmental and Waste As part of our audit program, we seek to ensure that Our COVID-19 Fashion Commitment Scorecard: This year CCX was rated as part of the COVID-19 Fashion Report published in October 2020 as GREEN, as evidence of actions in all areas were covered as part of the COVID-19 Fashion Commitments. We believe these commitments are an extension to the Human Rights and Ethical Trade policies we already have in place, however, we know we still have so much more to do, and we are always reviewing our policies and how we should act and respond in the future. Despite the impacts of COVID-19, we continued to engage and work closely with our factories to ensure the workers in our supply chain were able to keep working and to produce our product in safe conditions. We believe this empowers factory owners in All new suppliers have been onboarded into our Management checks for: understanding what a living wage is made up of and ethical trade program and as we audit the factories, 1. Legal Authorisations – such as the EIA how the wages paid compare. we assign a risk rating to help prioritise factory 2. Solid & Hazardous wastes We also record progress of factories. corrective actions required. We understand that not all factories will be at the 3. Wastewater, Air Emissions and Noise 4. Energy & Water reductions With the introduction of new factories and regions, we same stage in their ethical trade journey, however we As we widen our sourcing base, we will continue know that there is a greater challenge for factories to pay a living wage due to the wider gap that exists when comparing back to the legal minimum wage. are committed to partnering with factories who also to audit factories against local regulations and the are committed in coming on this journey with us. equivalent standards to the EIA in their locations. We work with factories to help them develop a roadmap to improving conditions by providing: • Worker hotlines and Grievance Mechanisms • Supporting factories to proactively adopt freedom of association policy Promoting a gender equality policy To respect the rights of workers to collective • • bargaining MANAGING & REDUCING OUR FOOTPRINT The efficient use of resources and minimising negative impacts on the environment needs to be part of our day to day thinking. We have started this process by assessing areas of risk to help us construct medium- and long-term strategies by priority. We have started working on the following key areas which we believe can help us to have a more positive impact: • More sustainable packaging options, • Sourcing more sustainable / preferred fibres that can be used in our product • Reviewing options to extend the life of garments to work towards a more circular economy. • Providing options to reduce micro plastics in our oceans. FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 31 Annual Financial Report 2021 Directors' 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 Directors Report 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 27 June 2021. 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 The following persons were appointed as directors of City Chic Collective Limited after the financial period but prior to the date of this report: Neil Thompson (appointed 5 August 2021) Natalie McLean (appointed 5 August 2021) Company Secretary and Other Key Management Personnel Marta Kielich (Company Secretary, appointed 7 July 2020) Mark Ohlsson (Company Secretary, appointed 10 May 2019 and resigned 6 July 2020) Munraj Dhaliwal (Chief Financial Officer) Principal activities City Chic Collective is a global omni-channel retailer specialising in plus-size women’s apparel, footwear and accessories. It is a collective of customer-led brands including City Chic, Avenue, Evans, CCX, Hips & Curves and Fox & Royal. City Chic and CCX appeal to fashion forward women and its omni-channel model comprises of a network of 89 stores across Australia and New Zealand (ANZ) and websites operating in ANZ, the US and the UK. Avenue (US- based) and Evans (UK-based) target a broad customer base across conservative and fashion segments, both with a long history and significant online customer following. Hips & Curves in the US, and Fox & Royal in ANZ and the UK are online intimates brands. City Chic Collective owns European-based online marketplace Navabi (as outlined in the matters subsequent to the end of the financial period section), and also sells its collective of brands through third- party marketplace and wholesale partners in the US, Canada, UK and Europe. There was no significant change in the nature of the activities of the Group during the period. FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 33 33122120119575864Annual Financial Report 2021 | Directors' Report Dividends There were no dividends paid, recommended or declared with respect to the current financial period. In the previous corresponding financial period (in September 2019), a final fully franked ordinary dividend of 1.5 cents per ordinary share was paid for the 2019 financial year; the total amount paid was $2.9m. Operating and financial review The Group achieved revenue from continuing operations of $258.5m (28 June 2020: $194.5m), representing growth of 32.9%. Net profit after tax for continuing operations was $21.6m (28 June 2020: $9.2m), representing growth of 135.3%. OTHER On 24 July 2020, in combination with the equity raise, City Chic also informed the market that it had been nominated as the Stalking Horse Bidder for the eCommerce assets of Catherines, which was subject to the completion of an auction process. On 16 September 2020, that auction took place in the United States, and City Chic was not the highest bidder and therefore unsuccessful in the acquisition. Notwithstanding the strategic merits of the transaction, the winning bid of US$40.8m (A$55.5m) was above City Chic's assessment of the value of the assets. During the reporting period, the Group repaid its $17.5m of debt in full, with the $40.0m available debt facility maturing in February 2023. FY22 Outlook The Group ended the year with net cash of $71.5m at 27 June 2021 (28 June 2020: net cash of $3.9m). The cash In the early part of FY22, City Chic is pleased to advise that the company has continued to deliver strong positive balance includes the proceeds from the July-August 2020 equity raise net of payment for the acquisition of Evans, top-line and comparable sales growth. both as detailed below. • Australia has been impacted by temporary store closures, however stores which have been open and the online channel have delivered growth on the prior corresponding period. There continues to be uncertainty relating to The normalised operating cash flow generated for the year is $24.2m (28 June 2020: $20.9m). the duration of the lockdowns in Australia and the aggregate impact on FY22 Normalisation adjustments of $9.1m include the reclassification of rental payments to financing cash flows in relation • Avenue continues to trade strongly, materially above pre-acquisition levels to AASB 16, JobKeeper grant received relating to the prior year, repayment of deferred tax from the prior year, cash • Evans has rebounded strongly and is now trading above pre-acquisition levels outflows relating to transaction costs incurred for the July-August 2020 equity raise as well as costs incurred for the • Navabi is trading ahead of expectations and above FY21 levels, although noting the limited period since Evans acquisition, working capital adjustments and finalisation of income tax associated with the 2018 divestment acquisition. and cash outflows for building Evans’ working capital to commercial levels. The Underlying EBITDA from continuing operations post-AASB 16 was $50.2m (28 June 2020: $38.8m) and pre- plus-size market through its global digital and physical storefronts. The strategy includes the execution of various AASB 16 was $42.4m (28 June 2020: $26.5m). The Underlying EBIT from continuing operations post-AASB 16 was initiatives: $35.8m (28 June 2020: $21.3m) and pre-AASB 16 was $36.0m (28 June 2020: $20.7m). The Underlying NPAT from • Drive market share growth and customer acquisition in the US continuing operations post-AASB 16 was $24.0m (28 June 2020: $13.7m) and pre-AASB 16 was $24.9m (28 June • Gain market share in ANZ through the introduction of our conservative value product stream (Evans and Avenue) Heading into FY22, City Chic is focused on the strategy of delivering its significant product range to the global 2020: $13.8m). EQUITY RAISE • Introduce the collective’s full assortment to the Evans customer base, building on the initial deliveries in 2H FY21, to drive greater market penetration • Integrate Navabi (as outlined in the matters subsequent to the end of the financial period section) and introduce On 24 July 2020, City Chic completed a fully underwritten $80.0m Placement of new fully paid ordinary shares to the collective’s brands to the customer base, as well as to further develop the current product and lifestyle eligible institutional investors. The Placement was conducted at $3.05 per share, resulting in 26.2 million new shares offering being issued, representing 13.1% of City Chic's existing issued capital. New shares issued under the Placement settled • Expand and execute on marketplace partnerships in all regions on 30 July 2020 and commenced trading on 31 July 2020. • Rotate store portfolio into new fit-outs and conversion to larger format stores; enhance in-store experiences and Following the completion of the Placement, City Chic offered all eligible shareholders the opportunity to participate • Further develop the World of Curves social community. store environments 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 shares being issued. The Placement and the SPP together raised $111.1m and resulted in 36.4 million new shares being issued. EVANS ACQUISITION On 23 December 2020, the Group completed the acquisition of the Evans brand, and the eCommerce and wholesale businesses for £22.7m (A$40.2m) in cash. Evans is a UK-based retailer of women's plus-size clothing with a longstanding customer base and strong market position. The acquisition gives the Group an excellent foundation in a new geography and is part of the Group's strategy to expand the global customer base through the digital channel. FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 35 Annual Financial Report 2021 | Directors' Report 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 continues to have 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. A number of aspects of City Chic’s business may continue to 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 shutdowns of manufacturing and distribution centres affecting the supply of products to customers. Management takes confidence in its ability to trade profitably during the height of the pandemic in 2020, but continues to closely manage the ongoing uncertainty with lockdowns in Australia and supply chain impacts globally. This is further supported by 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 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 FY2021. WORKPLACE HEALTH AND SAFETY (WHS) The Group has over 640 employees as well as the customers who visit physical stores across ANZ. The Group has a high focus on WHS 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 COVID-19 PANDEMIC During the reporting period, the pandemic has had a significant and broad impact across the Group’s global operations. The health crisis and government-directed restrictions caused disruption to labour, logistics and consumer spending. The timing of restrictions being eased and the recovery in mobility and activity has varied by region, but broadly ANZ rebounded in late 2020, the US in early 2021 and the UK in mid-2021. Specific impacts of the pandemic on operations include: • In FY21, the ANZ store network was impacted by several periods of closures in response to government direction. Over the financial year, there were approximately 3,655 equivalent store days closed (over 10% of total equivalent store days in FY21) including 2,910 in Victoria, 177 in NSW, 176 in Queensland, 147 in Western Australia, 49 days in Northern Territory, 34 in South Australia, 12 in ACT, 7 in Tasmania and 143 in New Zealand. The Group also received $3.5m relating to JobKeeper subsidy in Australia for the first three months of the reporting period, which was paid in its entirety to team members • Significant disruption to labour in US warehousing and fulfilment and large surcharges imposed by freight carriers, in particular during peak seasonal trade in November 2020 to January 2021. Aligned with the acceleration of the vaccine roll-out in early 2021, restrictions were eased which resulted in a rebound in consumer spending from March 2021 onwards • At the time of the acquisition of Evans, the UK was in heavy government-imposed lockdowns. There has been an impact on logistics and labour, but less severe than that experienced in the US in 1H FY21 • Wholesale and marketplace business was largely paused throughout the period while partners addressed their own challenges caused by the pandemic. During the financial reporting period, the Directors continued to monitor COVID-19 related developments and worked closely with management to assess and navigate through the potential implications for team members, suppliers, customers and operations. EVANS ACQUISITION As noted in the Operating and Financial review section, on 23 December 2020, the Group completed the acquisition of the Evans brand, and the eCommerce and wholesale businesses for £22.7m (A$40.2m) in cash. Evans is a UK- based retailer of women's plus-size clothing with a longstanding customer base and strong market position. The acquisition gives the Group an excellent foundation in a new geography and is part of the Group's strategy to expand the global customer base through the digital channel. There were no other significant changes in the state of affairs of the consolidated entity during the financial period. FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 37 Annual Financial Report 2021 | Directors' Report Matters subsequent to the end of the financial period COVID-19 RELATED MATTERS The COVID-19 pandemic continues to have an impact globally in the new financial period. The Directors continue to monitor COVID-19 related developments and are closely working with management to assess and navigate through 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. Subsequent to the end of the financial year, the Australian store network was impacted by varying periods of temporary closures in response to government direction on restrictions and lockdowns. During the first 8 weeks of FY22, there were approximately 1,646 equivalent store days closed (c.33% of total equivalent store days over the period) including 764 in NSW, 565 in Victoria, 178 in Queensland, 40 in Western Australia, 32 in South Australia, 20 in ACT, 7 in Northern Territory and 40 in New Zealand. Stores in NSW (18), Victoria (21), ACT (2) and New Zealand (8) remain temporarily closed as of the date of this report. However, the Group continues to trade profitably with the Information on directors MICHAEL KAY TITLE: Chairman and non-executive director QUALIFICATIONS: B.LLB EXPERIENCE AND EXPERTISE: 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) and a non-executive director of the Pharmacy Guild of Australia (and its various subsidiaries). 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. OTHER CURRENT DIRECTORSHIPS: Mr. Kay is currently Chairman of Omni Bridgeway Ltd (ASX: OBL) (formerly called IMF benefit of the geographic and channel diversification. City Chic is well capitalised to deliver on its strong organic Betham Limited (ASX: IMF). growth pipeline and well positioned for future inorganic opportunities to expand the global customer base. NAVABI ACQUISITION On 23 July 2021, the Group signed and completed a share purchase agreement to acquire 100% of the shares in JPC United GmbH (“Navabi’) for €6.0m (A$9.6m) in cash, from the co-founders of Navabi. Navabi's assets include €2.1m of cash net of tax liabilities, as well as inventory and immaterial other working capital. In 2009, Navabi was established as an online marketplace selling hundreds of third-party women’s plus-size brands. Navabi has also developed its own brands exclusively sold on the marketplace, which have grown to become the majority of sales in recent years. Navabi’s loyal customer base are focused on size, fit and quality, and are based predominantly in Germany. Navabi’s websites had 5.8m customer visits in 2020, generating €10.4m (A$16.6m) in sales revenue, and pre-pandemic traffic exceeded 10m visits. FORMER DIRECTORSHIPS (LAST 3 YEARS): SPECIAL RESPONSIBILITIES: 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 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 People, Culture and Remuneration Committee (PCRC) INTERESTS IN SHARES: 700,000 ordinary shares INTERESTS IN OPTIONS: INTERESTS IN RIGHTS: None None MICHAEL HARDWICK No other matter or circumstance has arisen since 27 June 2021 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 TITLE: Non-executive director QUALIFICATIONS: B.Comm in future financial years. EXPERIENCE AND EXPERTISE: 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 27 June 2021 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. The Group has dedicated resources to ensure continued compliance across all regulatory requirements in the markets operated in by the Group. 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 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. OTHER CURRENT DIRECTORSHIPS: Mr. Hardwick does not hold any other listed company directorships. FORMER DIRECTORSHIPS (LAST 3 YEARS): Mr. Hardwick has not held any other listed company directorships in the last three years. SPECIAL RESPONSIBILITIES: Chairman of the ARC; Member of the PCRC INTERESTS IN SHARES: 504,836 ordinary shares INTERESTS IN OPTIONS: INTERESTS IN RIGHTS: None None FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 39 Annual Financial Report 2021 | Directors' Report MEGAN QUINN TITLE: Non-executive director QUALIFICATIONS: GAICD EXPERIENCE AND EXPERTISE: 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. OTHER CURRENT DIRECTORSHIPS: Ms. Quinn is currently a non-executive director at Reece Limited (ASX:REH) and InvoCare Limited (ASX:IVC). FORMER DIRECTORSHIPS (LAST 3 YEARS): None SPECIAL RESPONSIBILITIES: Chair of the PCRC; Member of the ARC INTERESTS IN SHARES: INTERESTS IN OPTIONS: INTERESTS IN RIGHTS: None None None NEIL THOMPSON TITLE: Non-executive director (appointed 5 August 2021) QUALIFICATIONS: B.Ec EXPERIENCE AND EXPERTISE: Neil Thompson joined the City Chic Collective Limited Board on xx August 2021 as an independent, non-executive director. Mr. Thompson has over thirty years of financial, operational and strategic experience from a broad range of roles and industries with global reach, including freight and logistics, industrial products and software sectors. Mr. Thompson was most recently Chief Financial Officer of Ascender HCM (a payroll software and services company) and is a director of the Australian World Orchestra. He has previously worked at Alesco, Amatek, TNT and Elders IXL. OTHER CURRENT DIRECTORSHIPS: Mr. Thompson does not hold any other listed company directorships. FORMER DIRECTORSHIPS (LAST 3 YEARS): Mr. Thompson has not held any other listed company directorships in the last three years. SPECIAL RESPONSIBILITIES: Member of the ARC; Member of the PCRC INTERESTS IN SHARES: 1000 ordinary shares INTERESTS IN OPTIONS: INTERESTS IN RIGHTS: None None NATALIE MCLEAN TITLE: Non-executive director (appointed 5 August 2021) QUALIFICATIONS: B.Bus EXPERIENCE AND EXPERTISE: Natalie McLean joined the City Chic Collective Limited Board on xx August 2021 as an independent, non-executive director. Mrs. McLean has over 25 years of retail experience having worked in senior positions domestically in Australia and internationally with companies including Giordano, Rip Curl and the Cotton On Group. Mrs. McLean has extensive experience across operations, product, marketing and commercial areas of the retail sector including partnership strategies and geographic growth. Mrs. McLean is currently a director and the Chief Retail Officer of the Cotton On Group, a director of the Cotton On Foundation and is a board member of the Geelong Racing Club. OTHER CURRENT DIRECTORSHIPS: Mrs. McLean does not hold any other listed company directorships. FORMER DIRECTORSHIPS (LAST 3 YEARS): Mrs. McLean has not held any other listed company directorships in the last three years. SPECIAL RESPONSIBILITIES: Member of the ARC; Member of the PCRC INTERESTS IN SHARES: 10,900 ordinary shares INTERESTS IN OPTIONS: INTERESTS IN RIGHTS: None None PHIL RYAN TITLE: Chief Executive Officer and Managing Director QUALIFICATIONS: MBA, B.Bus EXPERIENCE AND EXPERTISE: Phil 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 CCX take a market leading position in the global plus size industry, with a collective of customer-led brands including City Chic, Avenue, Hips & Curves and Evans. Under Mr. Ryan's leadership, CCX now has more than 85 stores in Australia and New Zealand with online sales representing more than 70% of total sales globally and in the US, UK and Europe, CCX 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, Alshaya in the Middle East 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. OTHER CURRENT DIRECTORSHIPS: None FORMER DIRECTORSHIPS (LAST 3 YEARS): None SPECIAL RESPONSIBILITIES: Chief Executive Officer; Managing Director INTERESTS IN SHARES: 133,836 ordinary shares INTERESTS IN OPTIONS: 2,161,235 ordinary shares issued under CCX's 2019 Employee Share Plan and escrow provisions INTERESTS IN RIGHTS: 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. FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 41 Annual Financial Report 2021 | Directors' Report 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. 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 27 June 2021, and the number of meetings attended by each director were: Full Board PCRC ARC Attended Held Attended Held Attended Held Michael Kay Michael Hardwick Megan Quinn Phil Ryan1 28 28 28 28 28 28 28 28 4 4 4 4 4 4 4 4 4 4 4 4 N/A N/A N/A N/A Held: represents the number of meetings held during the time the director held office or was a member of the relevant committee. Neil Thompson and Natalie McLean joined the Board after the end of the reporting period. Retirement, election and continuation in office of directors At the 20 November 2020 Annual General Meeting ("AGM"), 99.88% of the votes received supported the re-election of director Megan Quinn as part of the company's constitution that specifies all directors must stand for re-election every three years. 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) (b) (c) (d) (e) (f) (g) Introduction Remuneration strategy and policy Remuneration framework Remuneration outcomes for key management personnel Service agreements Disclosures relating to share options and performance rights Additional disclosures relating to key management personnel 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 27 June 2021 and 28 June 2020. 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 Chairman and non-executive director Non-executive director Non-executive director Chief Executive Officer and Managing Director Other key management personnel: Munraj Dhaliwal Chief Financial Officer 1 Phil Ryan is not a member of either the PCRC or the ARC, but was invited to attend these meetings and his attendance was noted in the minutes. FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 43 Annual Financial Report 2021 | Directors' Report b. Remuneration strategy and policy The People, Culture and Remuneration Committee (referred to hereafter as the “PCRC” or the ‘Committee’) is responsible for assisting and advising the Board in relation to 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 PRINCIPLE 1 PRINCIPLE 2 PRINCIPLE 3 The objectives of the Group’s The reward framework is Alignment to program executive remuneration designed to align executive participants' interests: framework are as follows: reward with the Company's • rewards capability and • competitiveness and interests. The Board have experience sustainability; considered that it should • reflects competitive • acceptability to the seek to enhance the reward for profitable Group's strategic and Company's interests by: growth; and business objectives and the creation of shareholder value; • including economic profit • provides a clear structure as a core component of for earning rewards. plan design; and • performance linkage/ • attracting and retaining alignment of executive high calibre executives. compensation; • transparency and acceptability to shareholders. c. Remuneration framework In accordance with best practice corporate governance, the structures of non-executive directors and executive remuneration are separate. (i) 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 does not participate in any discussions relating to determination of his own remuneration. The PCRC review non-executive directors’ fees and payments annually. The PCRC 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 PCRC has reviewed the fee and deemed the maximum annual aggregate remuneration is still appropriate. Non-executive chairman and non-executive directors’ fees increased with effect from 1 April 2021 as reflected below: Role Base fee for Non-Executive Chairman Base fee for Non-Executive Director Additional fee for Chair of the ARC Additional fee for Chair of the PCRC Remuneration (per annum, exclusive of superannuation) $ 240,000 120,000 20,000 10,000 Remuneration policies are developed to provide market competitive remuneration arrangements that support the commitment required, scale, complexity and growth of the business and was undertaken in conjunction with attraction, engagement and retention of talented team members, and that are aligned with the Company's interests. the search for new non-executive directors in order to attract the appropriate calibre of candidates. The increase followed a review of benchmarking data and considered a range of factors including the time (ii) 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. 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. FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 45 Annual Financial Report 2021 | Directors' Report SHORT-TERM INCENTIVES The PCRC reviews the short-term incentives (STI) for executives and employees annually. If the PCRC 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 PCRC 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 27 June 2021, the PCRC 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. LTIP TRANCHES Vesting conditions of the LTIP tranches are set out below. Tranche 1 Vesting Condition 1 Continued service to 27 August 2021, with no holding lock on resulting shares; Vesting Condition 2 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 Proportion of Tranche 1 Performance Rights held that will Performance Period satisfy Vesting Condition 2 Below 5.0% 5.0% Nil 25% 5.0% ≤ EPS CAGR ≤ 20.0% Straight line pro-rata vesting between 25% and 100% (inclusive) LONG-TERM INCENTIVES Tranche 2A 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. LONG TERM INCENTIVES 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 Share price at grant date Expected volatility % Dividend yield % Risk-free interest rate % Balance at the start of the period Granted Vested Expired/ forfeited 1 2A 2B 2C 13/11/2018 13/11/2018 13/11/2018 13/11/2018 30/06/2021 30/06/2021 30/06/2021 30/06/2023 $1.17 $1.17 $1.17 $1.17 35.00% 35.00% 35.00% 35.00% 3.50% 3.50% 3.50% 3.50% 781,848 2.12% 1,237,500 2.12% 1,237,500 2.12% 2.12% 2,475,000 Total Performance Rights 5,731,848 - - - - - 3 3 3 21/11/2019 03/03/2020 16/09/2020 30/06/2024 30/06/2024 30/06/2024 $2.68 $2.79 $3.33 35.00% 35.00% 35.00% N/A N/A N/A 2.12% 2.12% 2.12% 7,533,448 667,464 - - - 474,576 Total Loan Funded Shares 8,200,912 474,576 - - - - - - - - - - - - - - - - - - Balance at the end of the period 781,848 1,237,500 1,237,500 2,475,000 5,731,848 7,533,448 667,464 474,576 8,675,488 Vesting Condition Continued service to 27 August 2021, with no holding lock on resulting shares. Tranche 2B Vesting Condition 1 Continued service to 27 August 2021, with no holding lock on resulting shares. Vesting Condition 2 Group EPS performance in accordance with the following schedule: Group EPS for the year to 30 June 2021 Proportion of Tranche 2B Performance Rights held that will satisfy Vesting Condition 2 Below $0.0975 (1.3 x FY202018 EPS) $0.0975 ≤ EPS < $0.1050 (1.4 x FY202018 EPS) EPS ≥ $0.1050 Nil 50% 100% Tranche 2C Vesting Condition 1 Continued service to August 2023, with no holding lock on resulting shares. Vesting Condition 2 Group EPS performance in accordance with the following schedule: Group EPS for the year to 30 June 2023 Proportion of Tranche 2C Performance Rights held that will satisfy Vesting Condition 2 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 Nil 50% 75% 100% FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 47 Annual Financial Report 2021 | Directors' Report LFSP TRANCHE 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 Continued service to 30 June 2024. Vesting Condition 2 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 scale: AEPS 3-year CAGR from 1 July 2019 Proportion of Tranche 3 LF shares that will satisfy Vesting Condition 2 12.5% 20% 25% 100% 12.5% ≤ EPS CAGR ≤ 20.0% 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. Use of remuneration consultants There were no remuneration consultants engaged by the Group during the financial period, through the PCRC, to review existing remuneration policies for the current reporting period. Voting and comments made at the company's 20 November 2020 AGM At the 20 November 2020 AGM, 99.00% of the votes received supported the adoption of the remuneration report for the year ended 28 June 2020. The Company did not receive any specific feedback at the AGM regarding its remuneration practices. . l s e b a t i g n w o l l o f e h t n i t u o t e s e r a y t i t n e d e t a d i l o s n o c e h t f o l e n n o s r e p t n e m e g a n a m y e k f o n o i t a r e n u m e r e h t f o s l i a t e D I N O T A R E N U M E R F O S T N U O M A s t fi e n e b d n a s t n e m y a P ) a ( l e n n o s r e p t n e m e g a n a m y e k r o f s e m o c t u o n o i t a r e n u m e R . d % % 0 % 0 % 0 % 9 5 % 8 3 n o i t a r e n u m e r d e t a e r l e c n a m r o f r e p f o n o i t r o p o r P l a t o T d e s a b - e r a h S ) B ( s t n e m y a p e v a e l m r e t - g n o l r e h t O l t n e m y o p m e - t s o P m r e t - t r o h s l a t o T s e c n a w o l l A l & y r a a s h s a C $ , 6 4 3 4 0 2 7 6 4 2 0 1 , 7 6 0 0 0 1 , $ - - - $ - - - ) A ( s t fi e n e b n o i t a u n n a r e p u s $ 9 2 7 7 1 , 0 9 8 8 , 2 8 6 8 , $ , 7 1 6 6 8 1 7 7 5 3 9 , 5 8 3 , 1 9 , 5 4 2 3 0 9 , 1 9 6 6 4 1 1 , 1 , 8 2 5 6 6 , 4 9 6 , 1 2 , 4 5 3 0 0 7 , 1 3 3 5 4 7 , 8 5 4 5 8 2 7 4 5 8 3 , 4 9 6 , 1 2 2 3 6 9 9 3 , , 6 5 4 5 5 0 3 , 7 2 1 , 0 0 4 , 1 5 7 0 5 0 1 , 9 8 6 8 7 , 5 6 5 , 1 7 4 , 1 $ - - - - - - 5 6 5 , 1 7 4 , 1 $ , 7 1 6 6 8 1 7 7 5 3 9 , 5 8 3 , 1 9 , 4 5 3 0 0 7 s e e f 1 2 0 2 s r o t c e r i d e v i t u c e x e - n o N i k c w d r a H l e a h c M i i n n u Q n a g e M y a K l e a h c M i s r o t c e r i d e v i t u c e x E n a y R l i h P 2 3 6 9 9 3 , l a w i l a h D j a r n u M l e n n o s r e p t n e m e g a n a m y e k r e h t O s s o l r o t fi o r p o t e g r a h c l e v i t a u m u c e h T . d o i r e p g n i t s e v e h t r e v o y t i u q e n i e s a e r c n i i g n d n o p s e r r o c a h t i w e s n e p x e n a s a i d e s n g o c e r s i s n o i t c a s n a r t d e l t t e s - y t i u q e f o t s o c e h T ) B ( t n u o m a l e v i t a u m u c e h t s i d o i r e p e h t r o f s s o l r o t fi o r p n i i d e s n g o c e r t n u o m a e h T . g n i t s e v f o y t i l i b a b o r p y b d e i l p i t l u m d r a w a e h t f o e u a v l r i a f e t a d t n a r g e h t n o d e s a b . s d o i r e p s u o v e r p n i i i d e s n g o c e r y d a e r l a s t n u o m a s s e l e t a d g n i t r o p e r h c a e l d e t a u c a c l s i t a d e t a u c a c l l FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 49 l . t fi e n e b e e y o p m e m r e t - g n o l r e h t o s a d e fi s s a c l i s i e v a e l i e c v r e s g n o l d n a e v a e l l a u n n a d e u r c c a , l s t fi e n e B e e y o p m E 9 1 1 B S A A h t i w e c n a d r o c c a n I ) A ( Annual Financial Report 2021 | Directors' Report % 0 % 0 % 0 % 7 5 % 8 3 e c n a m r o f r e p f o n o i t r o p o r P n o i t a r e n u m e r d e t a e r l $ l a t o T $ d e s a b - e r a h S m r e t - g n o l r e h t O s t n e m y a p s t fi e n e b e v a e l ) C ( $ ) B ( l t n e m y o p m e t s o P n o i t a u n n a r e p u S m r e t - t r o h s l a t o T $ $ s e c n a w o l l A ) A ( $ 7 8 3 7 7 , 7 8 3 7 7 , 5 0 9 4 6 1 , - - - - - - 4 1 7 6 , 4 1 7 6 , 7 0 3 4 1 , 3 7 6 0 7 , 3 7 6 0 7 , 8 9 5 0 5 1 , - - - 3 7 6 0 7 , 3 7 6 0 7 , 8 9 5 0 5 1 , $ s e e f & y r a a s h s a C l s r o t c e r i d e v i t u c e x e - n o N 0 2 0 2 i k c w d r a H l e a h c M i i n n u Q n a g e M y a K l e a h c M i s r o t c e r i d e v i t u c e x E n a y R l i h P s i s s o l r o t fi o r p o t e g r a h c l e v i t a u m u c e h T . d o i r e p g n i t s e v e h t r e v o y t i u q e n i e s a e r c n i i g n d n o p s e r r o c a h t i w e s n e p x e n a s a i d e s n g o c e r s i s n o i t c a s n a r t d e l t t e s - y t i u q e f o t s o c e h T ) C ( l l d e t a u c a c t n u o m a e v i t a u m u c e h t l s i d o i r e p e h t r o f s s o l r o t fi o r p n i i d e s n g o c e r t n u o m a e h T . g n i t s e v f o y t i l i b a b o r p y b d e i l p i t l u m d r a w a e h t f l o e u a v r i a f e t a d t n a r g e h t n o d e s a b d e t a u c a c l l : s w o l l o f s a e r a s t s e v y l l u f I T L e h t t a h t d n a d e v e c e r i s i I T S l l u f i g n m u s s a n o i t r o p o r p d e x fi e h t d n a e c n a m r o f r e p o t d e k n i l n o i t a r e n u m e r f o n o i t r o p o r p e h T . s d o i r e p s u o v e r p n i i i d e s n g o c e r y d a e r l a s t n u o m a s s e l e t a d d o i r e p g n i t r o p e r h c a e t a l . t fi e n e b e e y o p m e m r e t - g n o l r e h t o s a d e fi s s a c l i s i e v a e l i e c v r e s g n o l d n a e v a e l l a u n n a d e u r c c a , l s t fi e n e B e e y o p m E 9 1 1 B S A A h t i w e c n a d r o c c a n I ) B ( d e t i e f r o f s u n o b h s a C i l e b a y a p / d a p s u n o b h s a C I T L - k s i r t A I T S - k s i r t A n o i t a r e n u m e R d e x i F / A N / A N / A N / A N / A N / A N / A N / A N % 2 6 % 5 4 % 3 6 % 6 4 / A N / A N % 8 3 % 7 3 : r o t c e r i d e v i t u c e x E n a y R l i h P / A N / A N % 5 5 % 4 5 l a w i l a h D j a r n u M : l e n n o s r e p t n e m e g a n a m y e k r e h t O 0 2 0 2 1 2 0 2 0 2 0 2 1 2 0 2 0 2 0 2 1 2 0 2 0 2 0 2 1 2 0 2 0 2 0 2 1 2 0 2 e m a N 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: Chief Executive Officer and Managing Director Term of agreement: None Details: • Notice period of 6 months • Remuneration review at board discretion • Eligible for short- term incentives • Eligible for long-term incentives • No severance period • No termination benefits (except for statutory entitlements) • No other benefits Munraj Dhaliwal Title: Chief Financial Officer Term of agreement: None Details: • 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 27 June 2021. There were no performance rights issued to key management personnel as part of compensation during the periods ended 28 June 2020 and 27 June 2021. There were no loan funded shares issued to key management personnel as part of compensation during the periods ended 27 June 2021. 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 is set out below: Name Phil Ryan Munraj Dhaliwal Total LOAN FUNDED SHARES Granted during the period Vested during the period 2021 2020 2021 2020 - - - 2,161,235 1,234,991 3,396,226 - - - - - - FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 51 , 0 7 5 6 7 8 2 , , 2 8 9 4 1 3 , 1 4 3 8 0 9 , 1 4 7 9 6 , 4 1 0 , 1 0 4 , 1 0 0 8 0 1 , , 4 1 2 0 9 3 , 1 . s e c n a w o l l a l e v a r t d n a r a c s e s i r p m o c i s h T ) A ( , 8 7 4 3 2 8 , 1 3 5 1 , 7 3 0 , 1 4 8 9 9 5 , 3 0 0 , 1 2 , 9 3 3 5 0 7 0 0 3 6 , 9 3 0 9 9 6 , , 3 1 4 3 3 7 9 2 8 7 7 2 , 0 5 8 0 3 , 3 0 0 , 1 2 , 1 3 7 3 0 4 0 0 5 4 , , 1 3 2 9 9 3 l a w i l a h D j a r n u M l e n n o s r e p t n e m e g a n a m y e k r e h t O Annual Financial Report 2021 | Directors' Report The number of performance rights over ordinary shares and loan funded shares held by key management personnel PERFORMANCE RIGHTS HOLDING as at 27 June 2021 are shown below: 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 Performance rights Loan funded shares related parties, is set out below: Tranche Name 1 2A 2B 2C Total 3 Phil Ryan Munraj Dhaliwal Total 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 ADDITIONAL INFOMATION 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: Phil Ryan Munraj Dhaliwal Total Balance at the start of the period 2,640,740 483,333 3,124,073 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 Profit before income tax for continuing underlying operations $35.6m $20.1m $21.3m $14.4m EPS (underlying before income tax) - Tranche 1 15.8 cents 10.5 cents 11.1 cents 7.5 cents 2021 2020 2019 2018 out below: Profit before income tax for continuing underlying operations $38.8m $22.9m $22.4m (before share-based payments) EPS (underlying before income tax and share-based payments) 17.3 cents 11.9 cents 11.6 cents - Tranches 2B and 2C Profit after income tax for continuing underlying operations $24.9m $11.6m $15.7m EPS (underlying after income tax) - Tranche 3 11.1 cents 7.2 cents 8.2 cents 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: Directors Michael Kay Michael Hardwick Phil Ryan Other key management personnel Munraj Dhaliwal Total Balance at the start of the period Received as part of renumeration Net Additions Balance at the end of the period 609,914 495,000 124,000 80,000 1,308,914 - - - - - 90,086 9,836 9,836 700,000 504,836 133,836 19,672 99,672 129,430 1,438,344 Phil Ryan Munraj Dhaliwal Total Balance at the start of the period 2,161,235 1,234,991 3,396,226 Granted Vested Expired/ forfeited Balance at the end of the period - - - - - - - - - 2,161,235 1,234,991 3,396,226 Other transactions with key management personnel and their related parties 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 CFO2 Services provided by International Southern Cross Shopfitting (NZ), a company that is associated with the Cotton On Group, of which Michael Hardwick is a Director and the CFO3 Consolidated 2021 $'000 2020 $'000 2,356,173 2,552,160 9,360 67,386 Total related party transactions 2,365,533 2,619,546 All transactions were made on normal commercial terms and conditions and at market rates. 2 Michael Hardwick was not involved in the decision making relating to Southern Cross Shopfitting and its dealings with the Group. 3 Michael Hardwick was not involved in the decision making relating to International Southern Cross Shopfitting (NZ) and its dealings with the Group. FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 53 Annual Financial Report 2021 | Directors' Report RECEIVABLE FROM AND PAYABLE TO RELATED PARTIES The following balances are outstanding at the reporting date in relation to transactions with related parties: Current payables Trade payables to Southern Cross Shopfitting, a company that is associated with the Cotton Group, of which Michael Hardwick is a Director and the CFO2 Consolidated 2021 $'000 2020 $'000 841,580 - This concludes the remuneration report, which has been audited. 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 27 June 2021 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 27 June 2021 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. 2 Michael Hardwick was not involved in the decision making relating to Southern Cross Shopfitting and its dealings with the Group. FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 55 Annual Financial Report 2021 | Directors' Report 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 27 to the financial statements. The directors are satisfied that the provision of non-audit services during the financial period, by the auditor (or by another person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. Officers of the company who are former partners of Deloitte Touche Tohmatsu There are no officers of the company who are former partners of Deloitte Touche Tohmatsu. Rounding of amounts The company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar. Auditor's independence declaration A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out immediately after this directors' report. Auditor's independence declaration 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 26 August 2021 Sydney 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 26 August 2021 Dear Board Members AAuuddiittoorr’’ss IInnddeeppeennddeennccee DDeeccllaarraattiioonn ttoo CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd 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 report City Chic Collective Limited and the entities it controlled for the 52 week period ended 27 June 2021, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. Yours faithfully DELOITTE TOUCHE TOHMATSU Annalisa Amiradakis Partner Chartered Accountants PHIL RYAN Chief Executive Officer and Managing Director Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte organisation. 23 57  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 KKeeyy AAuuddiitt MMaatttteerr EEvvaannss AAccqquuiissiittiioonn HHooww tthhee ssccooppee ooff oouurr aauuddiitt rreessppoonnddeedd ttoo tthhee KKeeyy AAuuddiitt MMaatttteerr Our procedures included, but were not limited to: 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 City Chic Collective Limited (the "Company") and the entities it controlled (the "Group") which comprises the consolidated statement of financial position as at 27 June 2021, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the 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 27 June 2021 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. 58 On 23 December 2020, the Group completed the acquisition of the Evans brand, and the e- commerce and wholesale businesses ("Evans Assets") for cash consideration of £23.1m (A$40.2m) in cash. During the 52-week period ending 27 June 2021, the accounting for the acquisition of Evans assets was finalised. In accordance with 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 $17.1m with a residual goodwill balance identified of $23.1m. 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 Business Combinations as the accounting 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 associated with the business combination. transaction costs • • Reading the Purchase Agreement to understand the terms and conditions of the transaction and identify the date that CCX acquired control of Evans. Evaluating management's assessment the acquisition should be accounted for as the acquisition of a business in accordance with the requirements of the accounting standards. that • • 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 Evans, including customer relationships and brand. • Assessing the competence, 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 long term growth rates, including discount rate, contributory asset charges and royalty relief rates by comparing management’s assumptions to data from other the appropriateness of key financial assumptions applied in the PPA. This permitted an independent challenge to the assumptions in the PPA. independent sources assess to • Assessment of the cash flows included within the valuation model for customer relationships and brand, by considering the cash flows previously incurred by the seller, evaluating City Chic management ability to achieve the forecast cash flows since acquisition and considering cash flows subsequent to year end, to form an independent assessment over the reasonability of management’s ability to forecast. • 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. the difference between • Recalculating the goodwill recognised as the residual balance, being the consideration paid and the fair value of the net assets acquired; and Testing the incurred were appropriately expensed and valid by selecting a sample of invoices. acquisition costs • We also assessed the appropriateness of the disclosures in Notes 1, 2, 12 and 32 to the financial statements. 59 59 KKeeyy AAuuddiitt MMaatttteerr VVaalluuaattiioonn ooff iinnvveennttoorryy oobbssoolleesscceennccee aalllloowwaannccee As at 27 June 2021, the carrying value of inventory totalled $66.9m and represents 25% of total assets. Inventory is located in retail stores and also at central warehouses for distribution through online website, online marketplace and is subject to risk of wholesale. obsolescence. Inventory Management establishes an obsolescence allowance by reference to recent sales, ageing of inventories, seasonal ageing, and other factors such as product category. Of particular attention in the current year, for Evans and Avenue inventory, was: • • • • understanding through of the sell inventory acquired at-acquisition and post-acquisition and reasonability of management’s obsolescence allowance for inventory. significant understanding judgments applied by management due to limited historical sales information available. understanding management’s ability to optimise margins using various sales channels. understanding discounting strategies being applied during a volatile retail environment in the prior year and current year which have resulted in judgement and estimation significant being the appropriateness of the allowance for obsolescence at year end. required assess to information In all cases, including assessment over the net for the CC brand, where realisable value contradictory identified from multiple data points across the business and externally, this information creates uncertainty thereby judgement required to evaluate the appropriateness of the Group’s net realisable valuation policy. increasing the extent of is HHooww tthhee ssccooppee ooff oouurr aauuddiitt rreessppoonnddeedd ttoo tthhee KKeeyy AAuuddiitt MMaatttteerr Our procedures for all inventory unless stated otherwise, included but were not limited to: • Understanding the processes relating to inventory valuation. Performing tests to evaluate the design and effectiveness of controls over the existence and valuation 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. • • • Making inquiries of the Chief Executive Officer, finance team and product planners to validate the assumptions applied in estimating the allowances and to understand the current market conditions and strategy of the relevant brands that impacts the inventory on hand available to sell. Where possible inspected to validate supporting evidence was explanations regarding sell through, discounting and decisions taken by management. Recalculating the mathematical accuracy of the inventory obsolescence and net realisable value allowances. • • In respect of Evans and Avenue related inventory: o Obtaining an understanding of the various o categories of inventory. Evaluating management’s analysis over the ageing of the inventory and challenging the inputs and assumptions used to further support and justify the allowance percentages used. stores through clearance o Understanding the sell through of the stock since acquisition and the clearance rates of inventory which can no longer be sold online. o Understanding the cost vs benefit to sell the inventory in Australia, global wholesale partners or by marketing campaigns online. Selecting a sample of items for testing and understanding the discount rates applied to sale prices; and independent estimate of Developing an inventory obsolescence allowance using sell through trends and consideration of costs to sell. o o • In respect of City Chic related inventory: o Performing a retrospective review of the allowance balance from FY20 to FY21 to assess the historical accuracy of management’s inventory ability obsolescence allowance. determine the to KKeeyy AAuuddiitt MMaatttteerr VVaalluuaattiioonn ooff iinnvveennttoorryy oobbssoolleesscceennccee aalllloowwaannccee ((ccoonntt)) HHooww tthhee ssccooppee ooff oouurr aauuddiitt rreessppoonnddeedd ttoo tthhee KKeeyy AAuuddiitt MMaatttteerr Developing independent estimates of the inventory obsolescence allowance, including: o ▪ ▪ actual inventory losses incurred in the current financial year, and the net realisable value with reference to the last selling price of inventory on hand. We also assessed the appropriateness of the disclosures in Notes 1, 2 and 9 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 27 June 2021 but does not include the financial report (excluding Directors’ Report therein which is other information) and our auditor’s report thereon. 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 and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: 60 61 61 In our opinion, the Remuneration Report of City Chic Collective Limited for the 52-week period ended 27 June 2021, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Other Matters This audit report has been re-issued subsequent to 26 August 2021 due to the issuance of the annual report amending the page numbers of the Remuneration Report from page numbers 11 to 20 as per the financial report signed on that date (26 August 2021) to the revised page numbers 43 to 54 in this annual report. DELOITTE TOUCHE TOHMATSU Annalisa Amiradakis Partner Chartered Accountants Parramatta, 17 September 2021 • Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. • 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. RReeppoorrtt oonn tthhee RReemmuunneerraattiioonn RReeppoorrtt Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 43 to 54 of the Directors’ Report for the 52-week period ended 27 June 2021. 62 63 63 CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd CCoonnssoolliiddaatteedd ssttaatteemmeenntt ooff pprrooffiitt oorr lloossss aanndd ootthheerr ccoommpprreehheennssiivvee iinnccoommee FFoorr tthhee ppeerriioodd eennddeedd 2277 JJuunnee 22002211 CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd CCoonnssoolliiddaatteedd ssttaatteemmeenntt ooff pprrooffiitt oorr lloossss aanndd ootthheerr ccoommpprreehheennssiivvee iinnccoommee FFoorr tthhee ppeerriioodd eennddeedd 2277 JJuunnee 22002211 NNootteess CCeennttss CCeennttss EEaarrnniinnggss ppeerr sshhaarree ffoorr pprrooffiitt ffrroomm ccoonnttiinnuuiinngg ooppeerraattiioonnss aattttrriibbuuttaabbllee ttoo tthhee oowwnneerrss ooff CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd Basic earnings per share Diluted earnings per share 23 23 EEaarrnniinnggss ppeerr sshhaarree ffoorr pprrooffiitt ffrroomm ddiissccoonnttiinnuueedd ooppeerraattiioonnss aattttrriibbuuttaabbllee ttoo tthhee oowwnneerrss ooff CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd Basic earnings per share Diluted earnings per share EEaarrnniinnggss ppeerr sshhaarree ffoorr pprrooffiitt aattttrriibbuuttaabbllee ttoo tthhee oowwnneerrss ooff CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd Basic earnings per share Diluted earnings per share 23 23 23 23 9.6 9.4 - - 9.6 9.4 4.8 4.7 0.3 0.3 5.1 5.0 The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. RReevveennuuee ffrroomm ccoonnttiinnuuiinngg ooppeerraattiioonnss Interest and other revenue EExxppeennsseess Purchase and inbound-related costs of inventory4 Fulfilment costs4 Cost of sales Employee benefits expense Depreciation, amortisation and impairment expense Rental-related recoveries, concessions and expenses Other expenses Finance costs PPrrooffiitt bbeeffoorree iinnccoommee ttaaxx eexxppeennssee ffrroomm ccoonnttiinnuuiinngg ooppeerraattiioonnss NNoottee CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 4 4 5 5 5 5,13 5 5,13,18 258,477 194,492 1,386 934 (98,694) (30,657) (129,351) (82,155) (18,864) (101,019) (37,345) (14,379) (3,551) (42,418) (1,347) (30,340) (17,568) (1,173) (27,298) (1,336) 31,472 16,692 Income tax expense 6 (9,916) (7,532) PPrrooffiitt aafftteerr iinnccoommee ttaaxx eexxppeennssee ffrroomm ccoonnttiinnuuiinngg ooppeerraattiioonnss 21,556 9,160 Profit after income tax expense from discontinued operations - 497 PPrrooffiitt aafftteerr iinnccoommee ttaaxx eexxppeennssee ffoorr tthhee ppeerriioodd aattttrriibbuuttaabbllee ttoo tthhee oowwnneerrss ooff CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd 22 21,556 9,657 OOtthheerr ccoommpprreehheennssiivvee iinnccoommee Items that may be reclassified subsequently to profit or loss Foreign currency translation Other comprehensive income for the period, net of tax TToottaall ccoommpprreehheennssiivvee iinnccoommee ffoorr tthhee ppeerriioodd aattttrriibbuuttaabbllee ttoo tthhee oowwnneerrss ooff CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd Total comprehensive income for the period is attributable to: Continuing operations Discontinued operations (4,967) (4,967) (369) (369) 16,589 9,288 16,589 - 8,791 497 16,589 9,288 The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. 4 Cost of goods sold represents the purchase and inbound-related costs of inventory. Fulfilment costs (net) represent warehousing and freight costs to deliver online sales. In the prior period, Cost of goods sold and Fulfilment costs were together presented as Cost of sales. The additional disclosure in the current period and going forward is appropriate with the growth of the online business. 27 28 FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 65 Annual Financial Report 2021 | Annual Financial Statements CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd CCoonnssoolliiddaatteedd ssttaatteemmeenntt ooff ffiinnaanncciiaall ppoossiittiioonn AAss aatt 2277 JJuunnee 22002211 CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd CCoonnssoolliiddaatteedd ssttaatteemmeenntt ooff cchhaannggeess iinn eeqquuiittyy FFoorr tthhee ppeerriioodd eennddeedd 2277 JJuunnee 22002211 AAsssseettss CCuurrrreenntt aasssseettss Cash and cash equivalents Trade and other receivables Inventories Other TToottaall ccuurrrreenntt aasssseettss NNoonn--ccuurrrreenntt aasssseettss Plant and equipment Right-of-use assets Intangibles Deferred tax TToottaall nnoonn--ccuurrrreenntt aasssseettss TToottaall aasssseettss LLiiaabbiilliittiieess CCuurrrreenntt lliiaabbiilliittiieess Trade and other payables Lease liabilities Income tax Provisions Other TToottaall ccuurrrreenntt lliiaabbiilliittiieess NNoonn--ccuurrrreenntt lliiaabbiilliittiieess Lease liabilities Provisions Borrowings Other TToottaall nnoonn--ccuurrrreenntt lliiaabbiilliittiieess TToottaall lliiaabbiilliittiieess NNeett aasssseettss EEqquuiittyy Issued capital Reserves Retained profits TToottaall eeqquuiittyy NNoottee CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 7 8 9 10 11 13 12 6 14 13 6 16 17 13 16 15 17 71,457 5,606 66,996 6,870 150,929 10,191 22,442 75,602 7,808 116,043 21,382 5,073 38,073 2,262 66,790 8,944 22,252 39,193 8,661 79,050 266,972 145,840 41,896 9,286 1,818 8,070 3,072 64,142 18,768 459 - 701 19,928 37,528 9,193 2,530 6,350 77 55,678 17,998 775 17,500 - 36,273 84,070 91,951 182,902 53,889 20 21 22 158,368 417 24,117 49,139 2,189 2,561 182,902 53,889 CCoonnssoolliiddaatteedd Balance at 1 July 2019 IIssssuueedd ccaappiittaall $$''000000 SShhaarree--bbaasseedd ppaayymmeennttss rreesseerrvvee $$''000000 FFoorreeiiggnn ccuurrrreennccyy ttrraannssllaattiioonn rreesseerrvvee $$''000000 ((AAccccuummuullaatteedd lloosssseess))// RReettaaiinneedd pprrooffiittss $$''000000 TToottaall eeqquuiittyy $$''000000 49,139 1,141 (1,389) (4,625) 44,266 Adjustment for change in accounting policy (AASB 16) - - - 413 413 Balance at 1 July 2019 - restated 49,139 1,141 (1,389) (4,212) 44,679 Profit after income tax expense for the period Other comprehensive income for the period, net of tax Total comprehensive income for the period Transactions with owners in their capacity as owners: Share-based payments (Note 19) Issue of loan funded shares (Note 20) Loan funded shares held in trust (Note 20) Dividends paid (Note 24) - - - - 22,052 (22,052) - - - - 2,806 - - - - (369) (369) - - - - 9,657 - 9,657 (369) 9,657 9,288 - - - (2,884) 2,806 22,052 (22,052) (2,884) BBaallaannccee aatt 2288 JJuunnee 22002200 49,139 3,947 (1,758) 2,561 53,889 CCoonnssoolliiddaatteedd Balance at 29 June 2020 IIssssuueedd ccaappiittaall $$''000000 SShhaarree--bbaasseedd ppaayymmeennttss rreesseerrvvee $$''000000 FFoorreeiiggnn ccuurrrreennccyy ttrraannssllaattiioonn rreesseerrvvee $$''000000 RReettaaiinneedd pprrooffiittss $$''000000 TToottaall eeqquuiittyy $$''000000 49,139 3,947 (1,758) 2,561 53,889 Profit after income tax expense for the period Other comprehensive income for the period, net of tax Total comprehensive income for the period - - - - - - - (4,967) 21,556 - 21,556 (4,967) (4,967) 21,556 16,589 Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (Note 20) Share-based payments (Note 19) Issue of loan funded shares (Note 20) Loan funded shares held in trust (Note 20) 109,229 - 1,580 (1,580) - 3,195 - - - - - - - - - - 109,229 3,195 1,580 (1,580) BBaallaannccee aatt 2277 JJuunnee 22002211 158,368 7,142 (6,725) 24,117 182,902 Note reference 20 19 21 22 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. The above consolidated statement of financial position should be read in conjunction with the accompanying notes. 29 30 FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 67 Annual Financial Report 2021 | Annual Financial Statements CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd CCoonnssoolliiddaatteedd ssttaatteemmeenntt ooff ccaasshh fflloowwss FFoorr tthhee ppeerriioodd eennddeedd 2277 JJuunnee 22002211 CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd GGeenneerraall iinnffoorrmmaattiioonn 2277 JJuunnee 22002211 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 Sydney, Australia Telephone: (+61) 2 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 26 August 2021. The directors have the power to amend and reissue the financial statements. CCaasshh fflloowwss ffrroomm ooppeerraattiinngg aaccttiivviittiieess Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Government grants received Interest received Other revenue Interest and other finance costs paid Income taxes paid NNoottee CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 281,722 (262,258) 4,964 243 352 (638) (9,232) 208,984 (181,540) 2,510 55 246 (590) (4,440) NNeett ccaasshh ffrroomm ooppeerraattiinngg aaccttiivviittiieess 18 15,153 25,225 CCaasshh fflloowwss ffrroomm iinnvveessttiinngg aaccttiivviittiieess Payments for plant and equipment Payments for intangibles Payment for purchase of business NNeett ccaasshh uusseedd iinn iinnvveessttiinngg aaccttiivviittiieess CCaasshh fflloowwss ffrroomm ffiinnaanncciinngg aaccttiivviittiieess Net proceeds from the issue of shares Repayment of lease liabilities Proceeds from borrowings Repayment of borrowings Dividends paid NNeett ccaasshh ffrroomm ffiinnaanncciinngg aaccttiivviittiieess 11 12 32 (5,034) (1,542) (40,208) (3,283) (2,247) (25,658) (46,784) (31,188) 20 24 108,618 (7,845) - (17,500) - - (11,588) 22,500 (5,000) (2,884) 83,273 3,028 NNeett iinnccrreeaassee//((ddeeccrreeaassee)) iinn ccaasshh aanndd ccaasshh eeqquuiivvaalleennttss ffrroomm ccoonnttiinnuuiinngg ooppeerraattiioonnss 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 51,642 - 21,382 (1,567) (2,935) 1,072 23,214 31 ((55,,883355)) - 28,929 120 Cash and cash equivalents at the end of the financial period 7 71,457 21,382 23,214 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. 31 32 FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 69 Annual Financial Report 2021 | Annual Financial Statements CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 11.. SSiiggnniiffiiccaanntt aaccccoouunnttiinngg ppoolliicciieess BBaassiiss ooff pprreeppaarraattiioonn 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. CCrriittiiccaall aaccccoouunnttiinngg eessttiimmaatteess aanndd jjuuddggeemmeennttss 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. OOffffsseettttiinngg ffiinnaanncciiaall aasssseettss aanndd lliiaabbiilliittiieess 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. PPaarreenntt eennttiittyy iinnffoorrmmaattiioonn 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 31. Parent entity disclosures. PPrriinncciipplleess ooff ccoonnssoolliiddaattiioonn The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of City Chic Collective Limited ('company' or 'parent entity') as at 27 June 2021 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. CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 11.. SSiiggnniiffiiccaanntt aaccccoouunnttiinngg ppoolliicciieess ((ccoonnttiinnuueedd)) FFoorreeiiggnn ccuurrrreennccyy ttrraannssllaattiioonn 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. CCuurrrreenntt aanndd nnoonn--ccuurrrreenntt ccllaassssiiffiiccaattiioonn 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. FFiinnaanncciiaall aasssseettss 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. 33 34 FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 71 Annual Financial Report 2021 | Annual Financial Statements CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 11.. SSiiggnniiffiiccaanntt aaccccoouunnttiinngg ppoolliicciieess ((ccoonnttiinnuueedd)) CCoommppaarraattiivvee aammoouunnttss Where management has considered appropriate to achieve more relevant and reliable presentation of the entity's financial performance, the presentation of certain items in the financial statements has changed since the prior year. Where this re-presentation of results requires reclassification of comparative amounts, the comparatives have been re-presented to achieve more relevant and reliable presentation and comparability. The principle accounting policies adopted are consistent with those of the previous financial year and corresponding current reporting period, except for the policies stated below. AAmmeennddmmeennttss ttoo AAccccoouunnttiinngg SSttaannddaarrddss tthhaatt aarree mmaannddaattoorriillyy eeffffeeccttiivvee ffoorr tthhee ccuurrrreenntt rreeppoorrttiinngg ppeerriioodd The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) that are relevant to their operations and effective for the current year. New and revised Standards and amendments thereof and interpretations effective for the current year that are relevant to the Group include: • AASB 2020-4 Amendments to Australian Accounting Standards - COVID-19-Related Rent Concessions • AASB 2021-3 Amendments to Australian Accounting Standards - COVID-19-Related Rent Concessions beyond 30 June 2021 • AASB 2018-6 Amendments to Australian Accounting Standards - Definition of a Business • AASB 2018-7 Amendment to Australian Accounting Standards - Definition of Material • AASB 2019-3 Amendments to Australian Accounting Standards - Interest Rate Benchmark Reform • AASB 2019-1 Amendments to Australian Accounting Standards - References to the Conceptual Framework • AASB 2019-5 Amendments to Australian Accounting Standards - Disclosure of the Effect of New IFRS Standards Not Yet Issued in Australia CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 11.. SSiiggnniiffiiccaanntt aaccccoouunnttiinngg ppoolliicciieess ((ccoonnttiinnuueedd)) 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 8. Trade and other receivables for detail. IImmppaaiirrmmeenntt ooff nnoonn--ffiinnaanncciiaall aasssseettss 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. FFiinnaannccee ccoossttss 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. GGooooddss aanndd SSeerrvviicceess TTaaxx ((''GGSSTT'')) aanndd ootthheerr ssiimmiillaarr ttaaxxeess 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. RRoouunnddiinngg ooff aammoouunnttss 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. 35 36 FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 73 Annual Financial Report 2021 | Annual Financial Statements CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 11.. SSiiggnniiffiiccaanntt aaccccoouunnttiinngg ppoolliicciieess ((ccoonnttiinnuueedd)) IImmppaacctt ooff tthhee iinniittiiaall aapppplliiccaattiioonn ooff aammeennddeedd SSttaannddaarrddss aanndd aaggeennddaa ddeecciissiioonnss ppuubblliisshheedd bbyy tthhee IIFFRRSS IInntteerrpprreettaattiioonnss CCoommmmiitttteeee ((““IIFFRRIICC””)) tthhaatt aarree eeffffeeccttiivvee ffoorr tthhee ccuurrrreenntt ppeerriioodd During the current reporting period, the Group had transactions which were affected by the following newly effective standards and IFRIC agenda decisions: AAmmeennddmmeenntt SSttaannddaarrddss // IIFFRRIICC AAggeennddaa DDeecciissiioonnss DDeessccrriippttiioonn AASB 2020-4 Amendments to Australian Accounting Standards - COVID-19-Related Rent Concessions The Group early adopted the AASB 2020-4 amendment in the prior reporting period, with its adoption having a material impact on the disclosures and amounts reported in these financial statements and the prior period's financial statements. The amendments introduce a practical expedient into AASB 16. The practical expedient permits a lessee not to assess whether a COVID-19-related rent concession is a lease modification. A lessee that makes this election does account for any change in lease payments resulting from the COVID-19-related rent concession the same way it would account for the change applying AASB 16 if the change were not a lease modification. The practical expedient applies only to rent concessions occurring as a direct consequence of COVID-19 and only if all of the following conditions are met: -The change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change -Any reduction in lease payments affects only payments originally due on or before 30 June 2021 -There is no substantive change to other terms and conditions of the lease. The impact on accounting for changes in lease payments as a result of applying the exemption has been disclosed in Note 13. Right-of-use assets and Lease Liabilities. Given this amendment was early adopted in the prior reporting period, the Group did not have to apply the practical expedient retrospectively to all rent concessions that meet the conditions in AASB16.46B, and therefore has not had to restate prior period figures. AASB 2018-6 Amendments to Australian Accounting Standards - Definition of a Business This Standard amends AASB 3 Business Combinations. The Group has adopted the amendments for the first time in the current reporting period. The amendments clarify that while businesses usually have outputs, outputs are not required for an integrated set of activities and assets to qualify as a business. To be considered a business, an acquired set of activities and assets, must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. The amendments remove the assessment of whether market participants are capable of replacing any missing inputs or processes and continuing to produce outputs. The amendments also introduce additional guidance that helps determine whether a substantive process has been acquired. The amendments introduce an optional concentration test that permits a simplified assessment of whether an acquired set of activities and assets is not a business. Under the optional concentration test, the acquired set of activities and assets is not a business if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar assets. The amendments are applied prospectively to all business combinations and asset acquisitions for which the acquisition date is on or after 1 January 2020. The Group has applied this amendment to business combinations whose acquisition dates are on or after 1 January 2020 in assessing whether it had acquired a business or a group of assets. Refer to Note 32. Business Combinations for details of the Group's acquisition of a business during the current reporting period and for details of the Group's accounting policies in relation to business combinations. CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 11.. SSiiggnniiffiiccaanntt aaccccoouunnttiinngg ppoolliicciieess ((ccoonnttiinnuueedd)) AAmmeennddmmeenntt SSttaannddaarrddss // IIFFRRIICC AAggeennddaa DDeecciissiioonnss DDeessccrriippttiioonn Software-as-a-Service arrangements The IFRS Interpretations Committee has published two agenda decisions clarifying how arrangements in respect of a specific part of cloud technology, Software-as-a-Service (SaaS), should be accounted for. The agenda decisions do not address the accounting for other components of cloud technology such as Infrastructure-as-a-Service and Platform-as-a-Service: • The first agenda decision, published in March 2019, concludes that SaaS arrangements are likely to be service arrangements, rather than intangible or leased assets. This is because the customer typically only has a right to receive future access to the supplier’s software running on the supplier’s cloud infrastructure and therefore the supplier controls the intellectual property (IP) of the underlying software code • The second agenda decision, published in April 2021, deals with specific circumstances in relation to configuration and customisation costs incurred in implementing SaaS: - - In limited circumstances, certain configuration and customisation activities undertaken in implementing SaaS arrangements may give rise to a separate asset, where the customer controls the IP of the underlying software code. For example, the development of bridging modules to existing on-premise systems or bespoke additional software capability In all other instances, configuration and customisation costs will be an operating expense. They are generally recognised in profit or loss as the customisation and configuration services are performed or, in certain circumstances, over the SaaS contract term when access to the cloud application software is provided. The Group has assessed the implications of the recent agenda decisions on its SaaS arrangements which were in place during the current financial reporting period and where relevant and applicable, has recognised configuration and customisation costs incurred in implementing SaaS arrangements over the SaaS contract term when access to the cloud application software is provided. Refer to Note. 12 Intangibles for details of the Group’s accounting policies in relation to intangible assets. The other new or revised amendments did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect current or future periods. NNeeww AAccccoouunnttiinngg SSttaannddaarrddss aanndd IInntteerrpprreettaattiioonnss nnoott yyeett mmaannddaattoorryy oorr eeaarrllyy aaddoopptteedd 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 27 June 2021. SSttaannddaarrddss iinn iissssuuee bbuutt nnoott yyeett eeffffeeccttiivvee NNeeww oorr rreevviisseedd rreeqquuiirreemmeenntt AASB 2020-8 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform – Phase 2 WWhheenn eeffffeeccttiivvee Effective for annual reporting periods beginning on or after 1 January 2021 AASB 2020-1 Amendments to Australian Accounting Standards – Classification of Liabilities as Current or Non-current and AASB 2020- 6 Amendments to Australian Accounting Standards – Classification of Liabilities as Current or Non-current – Deferral of Effective Date Effective for annual reporting periods beginning on or after 1 January 2023 AASB 2020-3 Amendments to Australian Accounting Standards – Annual Improvements 2018-2020 and Other Amendments Effective for annual reporting periods beginning on or after 1 January 2022 AASB 17 Insurance Contracts and AASB 2020-5 Amendments to Australian Accounting Standards – Insurance Contracts Effective for annual reporting periods beginning on or after 1 January 2023 AASB 2021-2 Amendments to Australian Accounting Standards – Disclosure of Accounting Policies and Definition of Accounting Estimates Effective for annual reporting periods beginning on or after 1 January 2023 AASB 2020-8 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform – Phase 2 addresses issues that may affect financial reporting during the interest rate benchmark reform, including the effect of changes to contractual cash flows or hedging relationships resulting from the replacement of an interest rate benchmark with an alternative benchmark rate. The amendments complement AASB 2019-3 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform and focus on the effects on financial statements when an entity replaces the existing interest rate benchmark with an alternative benchmark rate as 37 38 FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 75 Annual Financial Report 2021 | Annual Financial Statements CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 11.. SSiiggnniiffiiccaanntt aaccccoouunnttiinngg ppoolliicciieess ((ccoonnttiinnuueedd)) a result of the reform. The amendments are effective for annual periods beginning on or after 1 January 2021, with early application permitted. The Group has completed a preliminary assessment of the impact of this amendment and does not anticipate that it will have a material impact on the Group. The Group has not yet assessed the impact of the remaining new or amended Accounting Standards and Interpretations. NNoottee 22.. CCrriittiiccaall aaccccoouunnttiinngg jjuuddggeemmeennttss,, eessttiimmaatteess aanndd aassssuummppttiioonnss 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 27 June 2021, surrounding the impact of 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. Allowance for impairment of inventories The allowance 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 9. 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 12. Intangibles. The recoverable amounts of cash- generating units have been determined based on value-in-use calculations. These calculations require the use of assumptions, including estimated discount rates based on the current cost of capital and growth rates of the estimated future cash flows. The recoverable amount of brands is determined independently using the Relief from Royalty valuation method. 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. Refer to Note 12. 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. CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 22.. CCrriittiiccaall aaccccoouunnttiinngg jjuuddggeemmeennttss,, eessttiimmaatteess aanndd aassssuummppttiioonnss ((ccoonnttiinnuueedd)) 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 13. Right-of-use assets and Lease liabilities 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 13. Right-of-use assets and Lease liabilities for further information. NNoottee 33.. OOppeerraattiinngg sseeggmmeennttss 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 daily and 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: • Asia Pacific (APAC) – current operations in Australia and New Zealand. Both regions serviced by stores and website • Americas – current operations in United States and Canada. US sales are comprised of online (website and marketplace) and wholesale; Canadian business is wholesale and online (marketplace only) • Europe, Middle East and Africa (EMEA) – current operations in UK and Europe. UK sales are comprised of online (website only) and wholesale; European business is solely wholesale. Refer to Note 4. Revenue for details on revenue by geographical area. 39 40 FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 77 Annual Financial Report 2021 | Annual Financial Statements CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 33.. OOppeerraattiinngg sseeggmmeennttss ((ccoonnttiinnuueedd)) 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: CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 44.. RReevveennuuee ((ccoonnttiinnuueedd)) Disaggregation of revenue The disaggregation of revenue from contracts with customers is as follows: Net profit after tax from continuing operations Net interest expense (excluding AASB 16 impact) Tax expense from continuing operations Depreciation, amortisation and impairment expense (excluding AASB 16 impact) Transition costs5 US logistics consolidation6 Transaction costs7 Share issue costs8 Other9 Net AASB 16 impact10 UUnnddeerrllyyiinngg EEBBIITTDDAA ffrroomm ccoonnttiinnuuiinngg ooppeerraattiioonnss -- pprree--AAAASSBB1166 Redemption/Repayment of lease liabilities UUnnddeerrllyyiinngg EEBBIITTDDAA ffrroomm ccoonnttiinnuuiinngg ooppeerraattiioonnss -- ppoosstt--AAAASSBB1166 AASB 16 accounts Depreciation on right-of-use assets Interest expense on lease liabilities and make good provisions Redemption/repayment of lease liabilities NNeett AAAASSBB 1166 iimmppaacctt NNoottee 44.. RReevveennuuee From continuing operations Sale of goods Interest revenue Other revenue Revenue CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 21,556 395 9,916 6,405 2,298 - 1,008 184 (233) 838 42,367 9,160 535 7,532 5,845 778 921 1,599 - - 149 26,519 7,845 12,320 50,212 38,839 CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 7,974 709 (7,845) 11,723 746 (12,320) 838 149 CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 258,477 194,492 243 1,143 1,386 55 879 934 259,863 195,426 5 FY2021 Transition costs related to costs to integrate Evans; FY2020 Transition costs related to costs to integrate Avenue. 6 These prior year costs are in relation to the consolidation of the US logistics operations. 7 FY2021 Transaction costs related to executing the acquisition of Evans; FY2020 costs related to executing the acquisition of Avenue. 8 Current year share issue costs relate to the July-August 2020 equity raise, to the extent not allocated to equity. 9 Includes realised foreign currency gains from settling intercompany balances within the Group and the settlement and subsequent release of provision for cure costs previously recognised in respect of the acquisition of Avenue. 10 Net impact of the AASB 16 Lease adjustments to reflect pre-AASB 16 rent expense in Underlying EBITDA. Timing of revenue recognition Goods transferred at a point in time Geographical regions APAC Americas EMEA Channel Online website Stores Online marketplace Wholesale CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 258,477 194,492 144,460 99,600 14,417 113,685 78,532 2,275 258,477 194,492 184,624 66,990 4,461 2,402 118,671 60,232 7,970 7,619 258,477 194,492 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. Contract liabilities for vendor funded markdown provision In determining the level of vendor funded markdown provision required, the consolidated entity makes judgements in respect of the expected vendor discounting and the likelihood of the vendor achieving their guaranteed margin. The provision is based on estimates from historical margin achieved by the vendor. As at 27 June 2021, there were no provisions required for vendor funded markdowns. 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. 41 42 FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 79 Annual Financial Report 2021 | Annual Financial Statements CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 44.. RReevveennuuee ((ccoonnttiinnuueedd)) 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 16. Provisions on sales return raised and Note 10. 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. NNoottee 55.. EExxppeennsseess Purchase and inbound-related costs of inventory11 Fulfilment costs11 Depreciation, amortisation, and impairment expense (excluding AASB16 charges) Depreciation on ROU assets Rental-related expenses Rent concessions Employee benefits expense excluding superannuation Defined contribution superannuation expenses Share-based payments expense Government grants Other expenses Utility and maintenance expenses Transactional fees and charges Marketing expenses Advertising expenses Professional, consulting and insurance Other CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 98,694 30,657 6,405 7,974 4,595 (1,043) 35,433 2,267 3,196 (3,551) 184,627 5,292 6,048 5,979 15,432 5,888 3,779 42,418 82,155 18,864 5,845 11,723 2,495 (1,322) 29,441 2,026 2,805 (3,932) 150,100 5,470 4,172 3,183 4,332 4,412 5,729 27,298 TToottaall 227,045 177,398 The Group has benefitted from the following significant government support packages as a result of COVID-19 during the period: SSuuppppoorrtt rreecceeiivveedd DDeessccrriippttiioonn JobKeeper Scheme (Australia) Due to the impact of COVID-19 on the Group's turnover, government subsidies of $3.5m were received relating to the current reporting period (2020: $3.9m) under the Australian Federal Government's JobKeeper Scheme. The entity became eligible for the Scheme from its inception in March 2020. The amounts were paid in full to employees in line with the government's objective of helping businesses to continue paying employees to keep them in their jobs so that businesses can re-start when business conditions improve, for example during the period of Victorian store closures. The grants have been deducted in the reporting period against employee benefits expense. The Australian JobKeeper was paid monthly in arrears in the first three months of the reporting period and concluded on 27 September 2020, after which the Group was no longer eligible. 11 Cost of goods sold represents the purchase and inbound-related costs of inventory. Fulfilment costs (net) represent warehousing and freight costs to deliver online sales. In the prior period, Cost of goods sold and Fulfilment costs were together presented as Cost of sales. The additional disclosure in the current period and going forward is appropriate with the growth of the online business. CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 55.. EExxppeennsseess ((ccoonnttiinnuueedd)) Accounting policy for government grants 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. Accounting policy for rent concessions Refer to Note 13. Right-of-use assets and Lease liabilities. Accounting policy for Advertising and Marketing expenses Advertising and Marketing expenses have been disclosed separately in the current financial reporting period, with the corresponding balances for the prior financial reporting period updated for comparative purposes. Advertising Expenses include costs associated with driving customer acquisition and re-engagement, such as digital advertising and direct mail campaigns. All other marketing costs, such as photoshoots and content development, are reflected in Marketing Expenses. NNoottee 66.. IInnccoommee ttaaxx a) Income tax expense Current tax Deferred tax - origination and reversal of temporary differences Prior year current tax over/ (under) provisions Foreign exchange Aggregate income tax expense Income tax expense is attributable to: Profit from continuing operations Profit from discontinued operations (Note 6(c)) 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 LTIP and LFSP Sundry items Difference in overseas tax rates Prior year deferred tax over/(under) provisions Prior year current tax over/(under) provisions Adjustment in US effective tax rate Foreign exchange Income tax expense from continuing operations CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 8,344 1,508 88 (24) 9,916 9,916 - 9,916 2,152 5,261 46 73 7,532 7,532 2,143 9,675 31,472 16,692 9,442 5,007 - 958 - 10,400 6 (356) 88 - (222) 9,916 2 841 264 6,114 (489) 46 - 1,861 - 7,532 43 44 FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 81 Annual Financial Report 2021 | Annual Financial Statements CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 66.. IInnccoommee ttaaxx ((ccoonnttiinnuueedd)) c) Capital losses Unused tax losses related to capital losses of $147.2m (2020: $147.2m) carried forward for 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 February 2020 has crystalised the tax revenue and capital gains in the prior year. The NBL settlement did not have any impact in the current financial period from a taxation perspective. d) Income tax losses As at 27 June 2021, the consolidated entity had carried forward income tax losses of $10.8m from its US, UK and New Zealand businesses (2020: $12.3m). 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. f) Deferred tax assets Deferred tax asset comprises temporary differences attributable to: Tax losses Property, plant and equipment Employee benefits Leases Other provisions and accruals Inventories Other Amounts recognised in equity 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 (Charged)/Credited to Business Combination and Retained Earnings Closing balance Provision for income tax CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 1,687 (2,615) 1,253 2,154 3,995 696 26 7,196 612 2,733 (630) 857 1,543 4,144 (3) 17 8,661 - 7,808 8,661 8,661 (353) (1,508) - 1,008 12,057 111 (5,261) (836) 2,590 7,808 8,661 CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 1,818 2,530 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. CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 66.. IInnccoommee ttaaxx ((ccoonnttiinnuueedd)) Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for: ● When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. ● Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset. Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously. 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. 45 46 FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 83 Annual Financial Report 2021 | Annual Financial Statements CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 77.. CCaasshh aanndd ccaasshh eeqquuiivvaalleennttss Current assets Cash at bank CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 71,457 21,382 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. NNoottee 88.. TTrraaddee aanndd ootthheerr rreecceeiivvaabblleess Current assets Trade receivables Less: Allowance for expected credit losses Other receivables TToottaall ttrraaddee aanndd ootthheerr rreecceeiivvaabblleess Past due but not impaired CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 2,432 (202) 3,376 5,606 2,670 (354) 2,757 5,073 As at 27 June 2021, trade receivables of $0.3m (2020: $0.6m) 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 TTrraaddee rreecceeiivvaabblleess -- ppaasstt dduuee bbuutt nnoott iimmppaaiirreedd Current TToottaall ttrraaddee rreecceeiivvaabblleess CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 133 - 150 283 2,149 2,432 278 300 60 638 2,032 2,670 Allowance for expected credit losses The Group has recognised a gain of $0.1m (2020: loss of $0.3m) in profit of loss in respect of the expected credit losses for the year ended 27 June 2021. The recoverability of trade and other receivables at 27 June 2021 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. CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 88.. TTrraaddee aanndd ootthheerr rreecceeiivvaabblleess ((ccoonnttiinnuueedd)) Current 30 to 60 days 60 to 90 days 90 days and over AAlllloowwaannccee ffoorr eexxppeecctteedd ccrreeddiitt lloossss Movement of allowance for expected credit loss Carrying amount at the start of the period Additional allowance recognised Allowance derecognised Amount used Carrying amount at the end of the period CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 83 44 - 75 220022 12 30 252 60 335544 CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 354 - (118) (34) 202 82 324 - (52) 354 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. NNoottee 99.. IInnvveennttoorriieess Current assets Inventories on hand at lower of cost and net realisable value CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 66,996 38,073 The increase in inventory is aligned with the growth of the business globally and is driven primarily by the acquisition of Avenue and Evans in the prior year and current year respectively. 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 fulfilment 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. 47 48 FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 85 Annual Financial Report 2021 | Annual Financial Statements CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 1100.. OOtthheerr aasssseettss Current assets Prepayments Right of return assets TToottaall ootthheerr aasssseettss CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 5,564 1,306 6,870 800 1,462 2,262 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. NNoottee 1111.. PPllaanntt aanndd eeqquuiippmmeenntt Non-current assets Plant and equipment - at cost Less: Accumulated depreciation TToottaall ppllaanntt aanndd eeqquuiippmmeenntt CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 24,508 (14,317) 23,070 (14,126) 10,191 8,944 Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial period are set out below: CCoonnssoolliiddaatteedd BBaallaannccee aatt 11 JJuullyy 22001199 Additions Depreciation expense Accelerated depreciation Exchange differences Impairment write-back BBaallaannccee aatt 2288 JJuunnee 22002200 Additions Depreciation expense Accelerated depreciation Exchange differences BBaallaannccee aatt 2277 JJuunnee 22002211 TToottaall ppllaanntt aanndd eeqquuiippmmeenntt $$''000000 9,306 3,283 (2,966) (948) (14) 283 8,944 5,034 (2,926) (976) 115 10,191 Accelerated depreciation During the current and prior reporting periods, the Group closed a number of stores. The carrying value of these stores was extinguished to nil through accelerated depreciation. CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 1111.. PPllaanntt aanndd eeqquuiippmmeenntt ((ccoonnttiinnuueedd)) Accounting policy for property, 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. Management has performed an impairment assessment on all stores (excluding clearance outlets, new stores and newly refurbished stores per the Group’s impairment methodology) at year-end and the calculations confirmed that there was no impairment (2020: nil). NNoottee 1122.. IInnttaannggiibblleess Non-current assets Goodwill - at cost Brand Value - at cost Other intangible assets - at cost Less: Other intangible assets - accumulated amortisation Customer relationships - at cost Less: Customer relationships - accumulated amortisation CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 45,199 26,001 7,421 (4,795) 2,626 2,757 (981) 1,776 22,466 12,691 6,085 (3,154) 2,931 1,453 (348) 1,105 TToottaall iinnttaannggiibblleess 75,602 39,193 49 50 FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 87 Annual Financial Report 2021 | Annual Financial Statements CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 1122.. IInnttaannggiibblleess ((ccoonnttiinnuueedd)) Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial period are set out below: CCoonnssoolliiddaatteedd BBaallaannccee aatt 11 JJuullyy 22001199 Additions through business combinations (Note 32) Additions Amortisation expense Exchange differences BBaallaannccee aatt 2288 JJuunnee 22002200 Additions through business combinations (Note 32) Additions Amortisation expense Exchange differences GGooooddwwiillll $$''000000 BBrraanndd VVaalluuee $$''000000 OOtthheerr iinnttaannggiibblleess $$''000000 CCuussttoommeerr rreellaattiioonnsshhiippss $$''000000 TToottaall $$''000000 10,095 12,601 - - (230) 22,466 23,087 - - (354) 2,547 10,319 - - (175) 12,691 14,007 - - (697) 2,511 - 2,247 (1,867) 40 2,931 - 1,542 (1,834) (13) - 1,453 - (348) - 1,105 1,418 - (669) (78) 15,153 24,373 2,247 (2,215) (365) 39,193 38,512 1,542 (2,503) (1,142) BBaallaannccee aatt 2277 JJuunnee 22002211 45,199 26,001 2,626 1,776 75,602 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. CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 1122.. IInnttaannggiibblleess ((ccoonnttiinnuueedd)) 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. Configuration and customisation costs incurred in implementing SaaS arrangements are recognised in profit or loss as the customisation and configuration services are performed, or, in certain circumstances, over the SaaS contract term when access to the cloud application software is provided. 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. 51 52 FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 89 Annual Financial Report 2021 | Annual Financial Statements CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 1122.. IInnttaannggiibblleess ((ccoonnttiinnuueedd)) CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 1122.. IInnttaannggiibblleess ((ccoonnttiinnuueedd)) The key assumptions used by management in setting the financial budgets for the initial five-year period were as follows: 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. 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 discount rates used in the value-in-use calculations are pre-tax and reflect management's estimate of the time value of money, as well as the risks specific to the CGUs. The discount rates have been determined using the average weighted cost of capital and the current market risk-free rate, adjusted for relevant business risks. Discount rate applied in the current year value-in-use model: 10.7% (2020: 9.7%). A terminal growth rate of 2.5% (2020: 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 calculation confirmed that there was no impairment of any of the Brands (2020: 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 each brand has an indefinite life. (i) Forecast sales growth rates Forecast sales growth rates are based on past experience adjusted for sales/market trends and the strategic decisions made in respect of the CGU. (ii) Operating profits Operating profits are forecast based on historical experience of operating margins, adjusted for the impact of changes to product and fulfilment costs and cost saving initiatives. (iii) Cash conversion Cash conversion is the ratio of operating cash flow to operating profit. Management forecasts cash conversion rates based on historical experience. 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 CGU. The discount rates have been determined using the average weighted cost of capital and the current market risk-free rate, adjusted for relevant business risks. Discount rate applied in the current year value-in-use model: 10.7% (2020: 9.7%). A terminal growth rate of 2.5% (2020: 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 (2020: 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 (i) Avenue Brand The recoverable amount of the Avenue Brand was determined independently using the Relief from Royalty (‘RFR’) valuation method. The calculations reflect a five-year revenue forecast and requires the use of assumptions, including estimated royalty rates, tax rate, estimated discount rates and an assumed indefinite useful life. (ii) Hips & Curves Brand 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. The recoverable amount of the Hips & Curves brand was determined independently using the RFR valuation method. The calculations reflect a five-year revenue forecast and requires the use of assumptions, including estimated royalty rates, tax rate, estimated discounted rates and an assumed indefinite useful life. (iii) Evans Brand In the current financial year, the Group completed the acquisition of the Evans brand, and the e-commerce and wholesale businesses, for cash consideration of $40.2m. Brand value of $14.0m was recognised per management assessment. The recoverable amount of the Evans brand was determined independently using the RFR valuation method. The calculations reflect a five-year revenue forecast and requires the use of assumptions, including estimated royalty rates, tax rate, estimated discount rates and an assumed indefinite useful life. (iv) Assessment process The five-year revenue forecast used in independently determining the recoverable amount of each brand using the RFR valuation method was based on Board approved business plans. Business plans are modelled 53 54 FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 91 Annual Financial Report 2021 | Annual Financial Statements CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 1133.. RRiigghhtt--ooff--uussee aasssseettss aanndd LLeeaassee lliiaabbiilliittiieess Non-current assets Right-of-use assets Less: Accumulated depreciation TToottaall RRiigghhtt--ooff--uussee aasssseettss Current liabilities Lease liabilities Non-current liabilities Lease liabilities TToottaall lleeaassee lliiaabbiilliittiieess CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 34,620 (12,178) 31,535 (9,283) 22,442 22,252 9,286 9,193 18,768 17,998 28,054 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. Rent concessions received for the current reporting period amounted to $1.0m (2020: $1.3m). 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: CCoonnssoolliiddaatteedd BBaallaannccee aatt 11 JJuullyy 22001199 Additions Disposals Depreciation expense Accumulated depreciation on disposals BBaallaannccee aatt 2288 JJuunnee 22002200 Additions Disposals Accumulated depreciation on disposals Depreciation expense Exchange differences BBaallaannccee aatt 2277 JJuunnee 22002211 TToottaall rriigghhtt--ooff--uussee aasssseett $$''000000 30,129 6,638 (5,232) (11,723) 2,440 22,252 14,692 (11,578) 5,125 (7,974) (75) 22,442 CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 1133.. RRiigghhtt--ooff--uussee aasssseettss aanndd LLeeaassee lliiaabbiilliittiieess ((ccoonnttiinnuueedd)) Amounts recognised in profit and loss Depreciation expense on right-of-use assets Interest expense on lease liabilities Expenses relating to leases not recognised under AASB 16 CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 7,974 692 2,292 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 the fixed component of the store cost base. Accounting policy for right-of-use assets A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset. Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the 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. Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities. Accounting policy for lease liabilities A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the consolidated entity's incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred. Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down. NNoottee 1144.. TTrraaddee aanndd ootthheerr ppaayyaabblleess Current liabilities Trade creditors Sundry creditors Other payables TToottaall ttrraaddee aanndd ootthheerr ppaayyaabblleess Refer to Note 25 for further information on financial instruments. CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 13,395 11,744 16,757 7,388 8,349 21,791 41,896 37,528 55 56 FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 93 Annual Financial Report 2021 | Annual Financial Statements CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 1144.. TTrraaddee aanndd ootthheerr ppaayyaabblleess ((ccoonnttiinnuueedd)) Accounting policy for trade and other payables These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial period and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The amounts are unsecured and are usually paid within 60 days of recognition. NNoottee 1155.. BBoorrrroowwiinnggss Non-current liabilities Bank loans CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 - 17,500 Refer to Note 25. Financial Instruments for further information. During the reporting period, the Group repaid its $17.5m of debt in full, with the $40.0m available debt facility maturing in February 2023. Financing arrangements Unrestricted access was available at the reporting date to the following lines of credit: Total facilities Corporate credit card Bank loans Letter of credit Used at the reporting date Corporate credit card Bank loans Letter of credit Unused at the reporting date Corporate credit card Bank loans Letter of credit CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 944 39,950 50 40,944 463 - 50 513 481 39,950 - 40,431 1,007 40,000 - 41,007 72 17,500 - 17,572 935 22,500 - 23,435 Accounting policy for borrowings Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method. CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 1166.. PPrroovviissiioonnss Current liabilities Employee benefits Lease make good Onerous contracts Sales return provision Restructuring provision TToottaall pprroovviissiioonnss -- ccuurrrreenntt Non-current liabilities Employee benefits Onerous contracts TToottaall pprroovviissiioonnss -- nnoonn--ccuurrrreenntt TToottaall pprroovviissiioonnss CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 2,899 731 267 3,476 697 2,203 501 559 3,087 - 88,,007700 66,,335500 459 - 445599 339 436 777755 88,,552299 77,,112255 Movements in provisions Movements in provisions during the current financial period, other than employee benefits and restructuring provision, are set out below: CCoonnssoolliiddaatteedd -- 22002211 Current provisions CCaarrrryyiinngg aammoouunntt aatt tthhee ssttaarrtt ooff tthhee ppeerriioodd Recognised on business combination (Note 32) Additional provisions recognised Amounts used CCaarrrryyiinngg aammoouunntt aatt tthhee eenndd ooff tthhee ppeerriioodd Non-current provisions CCaarrrryyiinngg aammoouunntt aatt tthhee ssttaarrtt ooff tthhee ppeerriioodd Recognised on business combinations (Note 32) Additional provisions recognised Amounts used CCaarrrryyiinngg aammoouunntt aatt tthhee eenndd ooff tthhee ppeerriioodd LLeeaassee mmaakkeeggoooodd $$''000000 OOnneerroouuss ccoonnttrraaccttss $$''000000 SSaalleess rreettuurrnn pprroovviissiioonn $$''000000 TToottaall $$''000000 501 - 510 (280) 731 - - - - - 559 258 83 (633) 267 436 - - (436) - 3,087 1,091 32,256 (32,958) 3,476 - - - - - 4,147 1,349 32,849 (33,871) 4,474 436 - - (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 the acquisition of the Evans brand and, e- commerce and wholesale businesses. The prior year balance represented onerous contracts entered into on the acquisition of Avenue online assets. 57 58 FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 95 Annual Financial Report 2021 | Annual Financial Statements CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 1166.. PPrroovviissiioonnss ((ccoonnttiinnuueedd)) 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. Restructuring provision A restructuring provision is recognised when the Group has developed a detailed formal plan for the restructuring and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement the plan or announcing its main features to those affected by it. Accounting policy for employee benefits 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. 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. CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 1177.. OOtthheerr lliiaabbiilliittiieess ((ccoonnttiinnuueedd)) Accounting policy for deferred income Deferred income relates mainly to unredeemed gift cards, income received in advance from customers and deferred lease incentives. Gift cards are considered a prepayment for goods and services to be delivered in the future. The Group has an obligation to transfer the goods or services in the future, creating a performance obligation. The Group recognises deferred revenue for the amount of the prepayment and recognises revenue when the customer redeems the gift card and the Group fulfils the performance obligation related to the transaction or when the likelihood of the gift card being redeemed by the customer is deemed remote. Income received in advance from customers are recognised as revenue at the point of delivery of the goods to the customer. Customer orders are typically completed within a few days and income received in advance is therefore considered short term in nature and is not discounted. Deferred lease incentives represents operating lease incentives received for those leases not accounted for under AASB 16 Leases. The incentives are allocated to profit or loss on a straight-line bases over the lease term. NNoottee 1188.. CCaasshh ffllooww iinnffoorrmmaattiioonn Reconciliation of profit after income tax to net cash from continuing operating activities CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 NNoottee 1177.. OOtthheerr lliiaabbiilliittiieess Profit after income tax expense from continuing operations 21,556 9,160 Current liabilities Deferred income Deferred revenue - customer loyalty points Non-current liabilities Deferred income TToottaall ootthheerr lliiaabbiilliittiieess CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 3,040 32 3,072 701 3,773 - 77 77 - 77 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. Adjustments for: Depreciation, amortisation, and impairment 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 deferred tax assets Increase in trade and other payables Decrease in provision for income tax Increase in other provisions Increase/(decrease) in other liabilities 14,379 3,195 - 709 1,696 (1,927) (533) (28,923) (4,608) 853 4,368 (712) 1,404 3,696 17,568 2,805 3,102 746 1,285 774 (499) (18,720) (939) 3,396 12,007 (3,014) 113 (2,559) NNeett ccaasshh ffrroomm ccoonnttiinnuuiinngg ooppeerraattiinngg aaccttiivviittiieess 15,153 25,225 Reconciliation of liabilities arising from financing activities: Long-term borrowings Lease liabilities 22002200 CCaasshh fflloowwss NNoonn--ccaasshh cchhaannggeess NNoonn--ccaasshh cchhaannggeess AAccqquuiissiittiioonnss NNeeww lleeaasseess 22002211 17,500 27,191 (17,500) (7,845) 44,691 (25,345) - - - - 8,708 - 28,054 8,708 28,054 59 60 FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 97 Annual Financial Report 2021 | Annual Financial Statements CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 1199.. SShhaarree--bbaasseedd ppaayymmeennttss 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: TTrraanncchhee GGrraanntt ddaattee PPeerrffoorrmmaannccee 11 22AA 22BB 22CC TToottaall PPeerrffoorrmmaannccee RRiigghhttss 13/11/2018 13/11/2018 13/11/2018 13/11/2018 ppeerriioodd eenndd ddaattee 30/06/2021 30/06/2021 30/06/2021 30/06/2023 SShhaarree pprriiccee aatt ggrraanntt ddaattee $1.17 $1.17 $1.17 $1.17 EExxppeecctteedd vvoollaattiilliittyy %% 35.00% 35.00% 35.00% 35.00% DDiivviiddeenndd yyiieelldd %% 3.50% 3.50% 3.50% 3.50% BBaallaannccee aatt RRiisskk--ffrreeee tthhee ssttaarrtt ooff iinntteerreesstt rraattee tthhee ppeerriioodd %% 781,848 2.12% 1,237,500 2.12% 2.12% 1,237,500 2.12% 2,475,000 55,,773311,,884488 - - - - -- GGrraanntteedd VVeesstteedd 33 33 33 TToottaall LLooaann FFuunnddeedd SShhaarreess 21/11/2019 30/06/2024 03/03/2020 30/06/2024 16/09/2020 30/06/2024 $2.68 $2.79 $3.33 35.00% 35.00% 35.00% N/A N/A N/A 2.12% 7,533,448 667,464 2.12% - 2.12% 88,,220000,,991122 - - 474,576 447744,,557766 BBaallaannccee aatt EExxppiirreedd// tthhee eenndd ooff ffoorrffeeiitteedd// tthhee ppeerriioodd ootthheerr 778811,,884488 - 11,,223377,,550000 - 11,,223377,,550000 - - 22,,447755,,000000 55,,773311,,884488 -- - 77,,553333,,444488 666677,,446644 - 447744,,557766 - -- 88,,667755,,448888 - - - - -- - - - -- LLTTIIPP TTrraanncchheess Vesting conditions of the LTIP tranches are set out below: Tranche 1 Vesting Condition 1 Vesting Condition 2 Continued service to 27 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: EEPPSS CCAAGGRR aaccrroossss tthhee TTrraanncchhee 11 PPeerrffoorrmmaannccee PPeerriioodd Below 5.0% 5% 5.0% ≤ EPS CAGR ≤ 20.0% Nil PPrrooppoorrttiioonn ooff TTrraanncchhee 11 PPeerrffoorrmmaannccee RRiigghhttss hheelldd tthhaatt wwiillll ssaattiissffyy VVeessttiinngg CCoonnddiittiioonn 22 CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 1199.. SShhaarree--bbaasseedd ppaayymmeennttss ((ccoonnttiinnuueedd)) 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: GGrroouupp EEPPSS ffoorr tthhee yyeeaarr ttoo 3300 JJuunnee 22002233 PPrrooppoorrttiioonn ooff TTrraanncchhee 22CC PPeerrffoorrmmaannccee RRiigghhttss hheelldd tthhaatt wwiillll ssaattiissffyy 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 VVeessttiinngg CCoonnddiittiioonn 22 Nil 50% 75% 100% LLFFSSPP TTrraanncchheess During the period, 474,576 loan funded shares were issued as part of the LFSP. As at 27 June 2021, the Loan Funded (LF) shares issued under the LFSP 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 key terms of the LFSP are listed as follows: ● ● ● 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. ● ● ● 25% Straight line pro-rata vesting between 25% and 100% (inclusive) Vesting conditions of the LF Shares are set out below: Tranche 2A Vesting Condition Continued service to 27 August 2021, with no holding lock on resulting shares Tranche 2B Vesting Condition 1 Vesting Condition 2 Continued service to 27 August 2021, with no holding lock on resulting shares; Group EPS performance in accordance with the following schedule: GGrroouupp EEPPSS ffoorr tthhee yyeeaarr ttoo 3300 JJuunnee 22002211 Below $0.0975 (1.3 x FY202018 EPS) $0.0975 ≤ EPS ≤ $0.1050 (1.4 x FY202018 EPS) EPS ≥ $0.1050 PPrrooppoorrttiioonn ooff TTrraanncchhee 22BB PPeerrffoorrmmaannccee RRiigghhttss hheelldd tthhaatt wwiillll ssaattiissffyy VVeessttiinngg CCoonnddiittiioonn 22 Nil 50% 100% TTrraanncchhee 33 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: AAEEPPSS 33--yyeeaarr CCAAGGRR ffrroomm 11 JJuullyy 22001199 12.5% 20% 12.5% ≤ AEPS CAGR ≤ 20.0% PPrrooppoorrttiioonn ooff TTrraanncchhee 33 LLFF sshhaarreess tthhaatt wwiillll ssaattiissffyy VVeessttiinngg CCoonnddiittiioonn 22 25% 100% Straight-line pro rata vesting between 25% and 100% (inclusive) Accounting policy for share-based payments Equity-settled share-based compensation benefits are provided to employees. 61 62 FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 99 Annual Financial Report 2021 | Annual Financial Statements CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 1199.. SShhaarree--bbaasseedd ppaayymmeennttss ((ccoonnttiinnuueedd)) 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. Market conditions are taken into consideration in determining fair value. Therefore, any awards subject to market conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisfied. If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share-based compensation benefit as at the date of modification. If the non-vesting condition is within the control of the consolidated entity or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the consolidated entity or employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited. If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modification. NNoottee 2200.. IIssssuueedd ccaappiittaall Ordinary shares - fully paid Less: Loan funded shares TToottaall iissssuueedd ccaappiittaall 22002211 SShhaarreess 22002200 SShhaarreess 22002211 $$''000000 22002200 $$''000000 CCoonnssoolliiddaatteedd 237,338,726 (8,675,488) 200,437,033 (8,200,912) 183,000 (23,632) 71,191 (22,052) 228,663,238 192,236,121 159,368 49,139 CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 2200.. IIssssuueedd ccaappiittaall ((ccoonnttiinnuueedd)) Movements in ordinary share capital DDeettaaiillss DDaattee SShhaarreess IIssssuuee pprriiccee $$''000000 BBaallaannccee Issue of Loan funded shares Issue of Loan funded shares Loan funded shares held in trust BBaallaannccee Institutional Placement Share Purchase Plan Share issue expenses (net of tax) Issue of Loan funded shares Loan funded shares held in trust 11 JJuullyy 22001199 21 November 2019 3 March 2020 2288 JJuunnee 22002200 30 July 2020 24 August 2020 16 September 2020 BBaallaannccee 2277 JJuunnee 22002211 192,236,121 7,533,448 667,464 (8,200,912) 192,236,121 26,229,509 10,197,608 - 474,576 (474,576) 228,663,238 $2.68 $2.78 $0.00 $3.05 $3.05 $0.00 $3.33 $0.00 49,139 20,190 1,862 (22,052) 49,139 80,000 31,103 (1,874) 1,580 (1,580) 158,368 In July 20, 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 issued capital at the time. 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. Net proceeds of $109.2m were recorded in the share capital account, after taking into account costs of $1.9m (net of tax of $0.8m). Net cash proceeds of $108.6m was received during the current period and recorded in cash and cash equivalents. A total of 36,427,117 shares were issued and commenced trading on 31 July 2020 and 25 August 2020. 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. Loan funded shares Under the LFSP, 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. 63 64 FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 101 Annual Financial Report 2021 | Annual Financial Statements CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 2200.. IIssssuueedd ccaappiittaall ((ccoonnttiinnuueedd)) 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. NNoottee 2211.. RReesseerrvveess Foreign currency reserve Share-based payments reserve TToottaall rreesseerrvveess CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 (6,725) 7,142 (1,758) 3,947 417 2,189 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. CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 2222.. RReettaaiinneedd pprrooffiittss Retained profits/(accumulated losses) at the beginning of the financial period Adjustment for implementation of AASB 16 Retained profits/(accumulated losses) at the beginning of the financial period – adjusted for the impact of AASB 16 Profit after income tax expense for the period Dividends paid (Note 24) RReettaaiinneedd pprrooffiittss aatt tthhee eenndd ooff tthhee ffiinnaanncciiaall ppeerriioodd Retained earnings at the end of the financial period comprises Loss reserve12 Retained earnings NNoottee 2233.. EEaarrnniinnggss ppeerr sshhaarree 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 Movements in reserves Movements in each class of reserve during the current and previous financial period are set out below: Earnings per share for profit from discontinued operations Profit after income tax attributable to the owners of City Chic Collective Limited CCoonnssoolliiddaatteedd BBaallaannccee aatt 11 JJuullyy 22001199 Foreign currency translation Share-based payments expense BBaallaannccee aatt 2288 JJuunnee 22002200 Foreign currency translation Share-based payments expense BBaallaannccee aatt 2277 JJuunnee 22002211 SShhaarree--bbaasseedd ppaayymmeennttss rreesseerrvvee $$''000000 FFoorreeiiggnn ccuurrrreennccyy ttrraannssllaattiioonn rreesseerrvvee $$''000000 1,141 - 2,806 3,947 - 3,195 (1,389) (369) - (1,758) (4,967) - TToottaall $$''000000 (248) (369) 2,806 2,189 (4,967) 3,195 7,142 (6,725) 417 Basic earnings per share Diluted earnings per share Earnings per share for profit Profit after income tax attributable to the owners of City Chic Collective Limited Basic earnings per share Diluted earnings per share 65 66 12 Accumulated losses as at 1 July 2018 of $(11.0m) were transferred to a Loss Reserve. CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 2,561 - (4,625) 413 2,561 21,556 - (4,212) 9,657 (2,884) 2244,,111177 22,,556611 CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 (10,991) 35,108 (10,991) 13,552 24,117 2,561 CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 21,556 9,160 CCeennttss CCeennttss 9.6 9.4 4.8 4.7 22002211 $$''000000 22002200 $$''000000 - 497 CCeennttss CCeennttss - - 0.3 0.3 22002211 $$''000000 22002200 $$''000000 21,556 9,657 CCeennttss CCeennttss 9.6 9.4 5.1 5.0 FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 103 Annual Financial Report 2021 | Annual Financial Statements CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 2233.. EEaarrnniinnggss ppeerr sshhaarree ((ccoonnttiinnuueedd)) Weighted average number of ordinary shares Weighted average number of ordinary shares used in calculating basic earnings per share Adjustments for calculation of diluted earnings per share: Adjustments for performance rights Adjustments for loan funded shares NNuummbbeerr NNuummbbeerr 224,648,407 192,236,121 4,578,118 569,838 2,812,659 - Weighted average number of ordinary shares used in calculating diluted earnings per share 229,796,363 195,048,780 Accounting policy for earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to the owners of City Chic Collective Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial period, adjusted for bonus elements in ordinary shares issued during the financial period. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. NNoottee 2244.. DDiivviiddeennddss Dividends Dividends paid during the financial period and prior period were as follows: Final dividend for the period (2019: 1.5 cents per ordinary share) - 2,884 Franking credits CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 Franking credits available at the reporting date based on a tax rate of 30% Franking credits that will arise from the payment of the amount of the provision for income tax at the reporting date based on a tax rate of 30% Franking credits available for subsequent financial years based on a tax rate of 30% CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 58,143 49,083 1,888 2,464 60,031 51,547 CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 Franking credits available for subsequent financial years based on a tax rate of 30% 60,031 51,547 CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 2244.. DDiivviiddeennddss ((ccoonnttiinnuueedd)) The above amounts represent the balance of the franking account as at the end of the financial period, adjusted for: ● franking credits that will arise from the payment of the amount of the provision for income tax at the reporting date franking debits that will arise from the payment of dividends recognised as a liability at the reporting date franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date ● ● Accounting policy for dividends Dividends are recognised when declared during the financial period and no longer at the discretion of the company. NNoottee 2255.. FFiinnaanncciiaall iinnssttrruummeennttss FFiinnaanncciiaall AAsssseettss aanndd LLiiaabbiilliittiieess:: Amounts are accounted for at amortised cost and shown at approximate fair values below: FFiinnaanncciiaall aasssseettss Cash and cash equivalents Trade and other receivables FFiinnaanncciiaall lliiaabbiilliittiieess Trade and other payables Borrowings Other liabilities CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 71,457 5,606 77,063 41,896 - 3,773 45,669 21,382 5,073 26,455 37,528 17,500 77 55,105 FFiinnaanncciiaall rriisskk mmaannaaggeemmeenntt oobbjjeeccttiivveess 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 account while assessing these risks. 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. 67 68 FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 105 Annual Financial Report 2021 | Annual Financial Statements CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 2255.. FFiinnaanncciiaall iinnssttrruummeennttss ((ccoonnttiinnuueedd)) 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 2020 Annual Report. In order to maintain or adjust the capital structure, the consolidated entity manages the level of cash and debt that is prudent in light of the operational plan and the growth opportunities for the business. 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 7. Cash and cash equivalents, less borrowings as detailed in Note 15. Borrowings) and equity of the consolidated entity (comprising issued capital, reserves and accumulated losses as detailed in Note 20. Issued capital, Note 21. Reserves and Note 22. Retained profits. MMaarrkkeett rriisskk 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 FY2021 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 in USD. This natural hedge meant the Group was not required to hedge its foreign exchange exposure. Management monitors his natural hedge on an ongoing basis to ensure that the exposure to foreign exchange is acceptable. In December 2020 the Group acquired UK-based Evans, with revenues received and operating expenses in GBP and stock purchases in both GBP and USD. The first six months from acquisition was a period of low revenue due to the rebuild of inventory and UK-government imposed lockdowns due to COVID-19, as well as elevated expenses due to a transition services agreement. The GBP exposure was therefore not material and no hedge was put in place for the FY2021. In FY2022 the Group expects the UK business to generate more GBP inflows than outflows, and will put in place appropriate hedges to manage this FX exposure. There is significant ongoing work on the diversification of the supply chain, which will inform whether any material USD exposure exists in FY2022 and thereafter. If the natural hedge for USD the Group has enjoyed to date is no longer in place, the USD exposure will be hedged appropriately. For the current financial period, 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 $0.3m lower/higher. Price risk The consolidated entity is not exposed to any significant price risk. CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 2255.. FFiinnaanncciiaall iinnssttrruummeennttss ((ccoonnttiinnuueedd)) 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. As at the reporting date, the consolidated entity had the following variable rate borrowings: CCoonnssoolliiddaatteedd Cash and cash equivalents Borrowings Net exposure to cash flow interest rate risk 22002211 22002200 WWeeiigghhtteedd aavveerraaggee iinntteerreesstt rraattee %% WWeeiigghhtteedd aavveerraaggee iinntteerreesstt rraattee %% BBaallaannccee $$''000000 BBaallaannccee $$''000000 0.229% 2.732% 71,457 - 71,457 0.790% 2.886% 21,382 (17,500) 3,882 For the current financial period, if interest rates had changed by +/- 100 basis points from the year-end rates with all other variables constant, the impact on post-tax profit for the year would have been $0.6m higher/lower (2020: $0.1m higher/lower), relating to the interest income on the cash at bank. CCrreeddiitt rriisskk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the consolidated entity. The consolidated entity has a strict code of credit, including obtaining agency credit information, confirming references and setting appropriate credit limits. The consolidated entity obtains guarantees where appropriate to mitigate credit risk. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. The consolidated entity does not hold any collateral. The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based on the lifetime expected credit loss, grouped based on days overdue, and makes assumptions to allocate an overall expected credit loss rate for each group. These assumptions include recent sales experience and historical collection rates. The consolidated entity has a credit risk exposure with trade debtors, which as at 27 June 2021 owed the consolidated entity $2.4m (2020: $2.7m). There are no guarantees against this receivable but management closely monitors the receivable balance on a monthly basis and is in regular contact with its customers to mitigate risk. The Group has recognised a gain of $0.1m (2020: loss of $0.3m) in profit or loss in respect of the expected credit losses for the year ended 27 June 2021. The recoverability of trade and other receivables at 27 June 2021 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. 69 70 FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 107 Annual Financial Report 2021 | Annual Financial Statements CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 2255.. FFiinnaanncciiaall iinnssttrruummeennttss ((ccoonnttiinnuueedd)) LLiiqquuiiddiittyy rriisskk 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, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. At balance date, the bank loan facility totalling $40.0m was available to the Group (28 June 2020: $40.0m). 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 CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 481 39,950 40,431 935 22,500 23,435 Remaining contractual maturities The following tables detail the consolidated entity's remaining contractual maturity for its financial instrument liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position. WWeeiigghhtteedd aavveerraaggee iinntteerreesstt rraattee %% 11 yyeeaarr oorr lleessss $$''000000 BBeettwweeeenn 11 aanndd 22 yyeeaarrss $$''000000 BBeettwweeeenn 22 aanndd 55 yyeeaarrss $$''000000 OOvveerr 55 yyeeaarrss $$''000000 RReemmaaiinniinngg ccoonnttrraaccttuuaall mmaattuurriittiieess $$''000000 CCoonnssoolliiddaatteedd -- 22002211 NNoonn--ddeerriivvaattiivveess Non-interest bearing Trade and other payables Interest-bearing - variable Undiscounted lease liabilities Total non-derivatives CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 2255.. FFiinnaanncciiaall iinnssttrruummeennttss ((ccoonnttiinnuueedd)) CCoonnssoolliiddaatteedd -- 22002200 NNoonn--ddeerriivvaattiivveess Non-interest bearing Trade and other payables Interest-bearing - variable Bank loans Undiscounted lease liabilities Total non-derivatives WWeeiigghhtteedd aavveerraaggee iinntteerreesstt rraattee %% 11 yyeeaarr oorr lleessss $$''000000 BBeettwweeeenn 11 aanndd 22 yyeeaarrss $$''000000 BBeettwweeeenn 22 aanndd 55 yyeeaarrss $$''000000 OOvveerr 55 yyeeaarrss $$''000000 RReemmaaiinniinngg ccoonnttrraaccttuuaall mmaattuurriittiieess $$''000000 - 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 cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above. The lease liabilities include holdover assumptions in addition to contractually obligated periods, as disclosed in Note. 13 Right-of-use assets and Lease liabilities. FFaaiirr vvaalluuee ooff ffiinnaanncciiaall iinnssttrruummeennttss 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. 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. - 41,896 - - - 41,896 NNoottee 2266.. KKeeyy mmaannaaggeemmeenntt ppeerrssoonnnneell 3.00% 9,393 51,289 7,231 7,231 11,686 11,686 1,413 1,413 29,723 71,619 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 71 72 FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 109 Annual Financial Report 2021 | Annual Financial Statements CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 2266.. KKeeyy mmaannaaggeemmeenntt ppeerrssoonnnneell ((ccoonnttiinnuueedd)) 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 Share-based payments CCoonnssoolliiddaatteedd 22002211 $$ 22002200 $$ 1,471,565 78,689 105,075 1,400,127 1,401,013 69,741 90,834 1,314,982 3,055,456 2,876,570 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: Directors' shareholding Ordinary shares: Michael Kay Michael Hardwick Phil Ryan Total OOtthheerr kkeeyy mmaannaaggeemmeenntt ppeerrssoonnnneell sshhaarreehhoollddiinngg Ordinary shares: Munraj Dhaliwal TToottaall BBaallaannccee aatt tthhee ssttaarrtt ooff tthhee ppeerriioodd NNeett AAddddiittiioonnss dduurriinngg tthhee ppeerriioodd BBaallaannccee aatt tthhee eenndd ooff tthhee ppeerriioodd 609,914 495,000 124,000 1,228,914 90,086 9,836 9,836 109,758 700,000 504,836 133,836 1,338,672 80,000 80,000 19,672 19,672 99,672 99,672 CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 2277.. RReemmuunneerraattiioonn ooff aauuddiittoorrss 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: AAuuddiittoorr ooff tthhee ppaarreenntt eennttiittyy 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 TToottaall rreemmuunneerraattiioonn -- aauuddiittoorr ooff ppaarreenntt eennttiittyy NNeettwwoorrkk ffiirrmmss ooff tthhee ppaarreenntt eennttiittyy aauuddiittoorr 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 TToottaall rreemmuunneerraattiioonn -- nneettwwoorrkk ffiirrmmss ooff tthhee ppaarreenntt eennttiittyy aauuddiittoorr TToottaall rreemmuunneerraattiioonn CCoonnssoolliiddaatteedd 22002211 $$ 22002200 $$ 508,578 390,044 5,460 10,920 5,460 10,920 514,038 400,964 62,160 62,160 5,380 - - - 8,260 8,740 67,540 17,000 581,578 417,964 It is the consolidated entity's policy to employ Deloitte on assignments additional to their statutory audit duties where Deloitte's expertise and experience with the consolidated entity are important. These assignments are principally tax advice and other advisory services, or where Deloitte is awarded assignments on a competitive basis. It is the consolidated entity's policy to seek competitive tenders for all major consulting projects. NNoottee 2288.. CCoonnttiinnggeenntt lliiaabbiilliittiieess The consolidated entity had contingent liabilities at 27 June 2021 in respect of: Cross guarantees by and between City Chic Collective Limited and Specialty Fashion Group No.5 Pty Limited. These are described in Note 34. Deed of cross guarantees. No deficiencies of assets exist in any of these companies. No material losses are anticipated in respect of any of the above contingent liabilities. 73 74 FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 111 Annual Financial Report 2021 | Annual Financial Statements CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 2299.. CCoommmmiittmmeennttss Lease commitments - operating Committed at the reporting date but not recognised as liabilities, payable: Within one year One to five years More than five years TToottaall lleeaassee ccoommmmiittmmeennttss -- ooppeerraattiinngg Capital commitments Committed at the reporting date but not recognised as liabilities, payable: Plant and equipment CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 743 2,765 844 4,352 166 - - - - - Lease commitments includes contracted amounts for a small number of retail outlets considered short term (expiring within less than one year) and not accounted for under AASB 16 Leases as of 27 June 2021 and contracted amounts for leases not yet commenced as of 27 June 2021 to which the Group is committed. Lease commitments for the leases not yet commenced includes contracted amounts for a small number of retail outlets under non-cancellable operating leases expiring within 1 to 10 years. The leases have various escalation clauses. On renewal, the terms of the leases are renegotiated. The lease commitments do not include rental payments which may arise in the event that sales revenue exceeds a pre-determined amount. Capital commitments includes contracted amounts for fit-out costs (net of landlord fit-out contributions) relating to retail outlets for which the leases have not yet commenced as of 27 June 2021 but to which the Group is committed. NNoottee 3300.. RReellaatteedd ppaarrttyy ttrraannssaaccttiioonnss Parent entity City Chic Collective Limited is the parent entity. Subsidiaries Interests in subsidiaries are set out in Note 33. Key management personnel Disclosures relating to key management personnel are set out in Note 26. Key management personnel and the remuneration report included in the directors' report. CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 3300.. RReellaatteedd ppaarrttyy ttrraannssaaccttiioonnss ((ccoonnttiinnuueedd)) 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 CFO13 Services provided by International Southern Cross Shopfitting (NZ), a company that is associated with the Cotton on Group, of which Michael Hardwick is a Director and the CFO14 TToottaall rreellaatteedd ppaarrttyy ttrraannssaaccttiioonnss CCoonnssoolliiddaatteedd 22002211 $$ 22002200 $$ 2,356,173 2,552,160 9,360 67,386 2,365,533 2,619,546 Receivable from and payable to related parties The following balances are outstanding at the reporting date in relation to transactions with related parties: CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 Current payables Trade payables to Southern Cross Shopfitting, a company that is associated with the Cotton Group, of which Michael Hardwick is a Director and the CFO13 841,580 - Loans to/from related parties There were no loans to or from related parties at the current and previous reporting date. Terms and conditions All transactions were made on normal commercial terms and conditions and at market rates. Proposals are sought from various suppliers and awarded to the best proposal, i.e. a number of suppliers were engaged for shopfitting services for the period. NNoottee 3311.. PPaarreenntt eennttiittyy iinnffoorrmmaattiioonn Set out below is the supplementary information about the parent entity Statement of profit or loss and other comprehensive income Revenue Expenses Profit before income tax Income tax expense Profit after income tax from discontinued operations Total profit after income tax for the year from parent entity Other comprehensive income / (loss) Total comprehensive income from parent entity CCoonnssoolliiddaatteedd 22002211 $$''000000 22002200 $$''000000 136,282 (104,054) 32,228 105,877 (100,164) 5,713 (9,772) (2,712) - 22,456 (198) 22,258 369 3,370 (369) 3,001 75 76 13 Michael Hardwick was not involved in decision making related to Southern Cross Shopfitting and its dealings with the Group 14 Michael Hardwick was not involved in decision making related to International Southern Cross Shopfitting (NZ) and its dealings with the Group. FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 113 Annual Financial Report 2021 | Annual Financial Statements CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 3311.. PPaarreenntt eennttiittyy iinnffoorrmmaattiioonn ((ccoonnttiinnuueedd)) Statement of financial position Total current assets Total assets Total current liabilities Total liabilities Equity Issued capital Foreign currency reserve Share-based payments reserve Dividends paid Retained profits/(accumulated losses) Total equity PPaarreenntt 22002211 $$''000000 22002200 $$''000000 88,089 19,307 245,675 120,847 40,397 33,770 59,296 69,151 158,368 (205) 7,142 (2,884) 23,958 49,139 (7) 3,947 (2,884) 1,502 186,379 51,697 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 34. Deed of cross guarantee. As at 27 June 2021, the parent entity has net current assets of $47.7m (2020: net current liabilities of $14.5m). The net current liabilities position in the prior financial reporting period had arisen due to the classification of intercompany receivables/payables as current/non-current with wholly-owned subsidiaries of the parent entity in accordance with AASB 132 Financial Instruments: Presentation. These intercompany balances eliminate on consolidation. In the prior year, it was noted that 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 $80m in capital in the current financial reporting period (Refer to Note 20. Issued capital for further information). 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 - Property, plant and equipment The parent entity had capital commitments for plant and equipment as at 27 June 2021 of $0.17m (2020: $nil). Significant accounting policies The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in Note 1, except for the following: ● ● ● Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity. 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. CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 3322.. BBuussiinneessss ccoommbbiinnaattiioonnss On 23 December 2020, the Group completed the acquisition of the Evans brand, and the e-commerce and wholesale businesses ("Evans Assets") for cash consideration of £23.1m (A$41m) in cash. During the 52-week period ending 27 June 2021, the provisional accounting for the acquisition of the Evans Assets was finalised, with the final cash consideration paid for the acquisition being revised down to £22.7m (A$40.2m). 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 Deferred tax asset Provisions and payables Gift cards liabilities Net assets acquired Goodwill Acquisition-date fair value of the total consideration transferred Representing: Amount settled in cash on acquisition Acquisition costs expensed to profit or loss FFaaiirr vvaalluuee $$’’000000 3,042 1,418 14,007 384 (1,447) (283) 17,121 23,087 40,208 40,208 1,008 The goodwill is attributable to the profitability of the acquired business. It will not be deductible for tax purposes. Revenue and profit contributions The acquired business contributed revenues of $14.0m to the Group for the period from 23 December 2020 to 27 June 2021. 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 27 June 2021. 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 acquisition or (ii) when the acquirer receives all the information possible to determine fair value. 77 78 FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 115 Annual Financial Report 2021 | Annual Financial Statements CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 3333.. IInntteerreessttss iinn ssuubbssiiddiiaarriieess The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in Note 1: NNaammee 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 South Africa (Pty) Ltd City Chic Collective USA Incorporated Avenue Online LLC15 City Chic Collective UK Limited NNoottee 3344.. DDeeeedd ooff ccrroossss gguuaarraanntteeee PPrriinncciippaall ppllaaccee ooff bbuussiinneessss // CCoouunnttrryy ooff iinnccoorrppoorraattiioonn Australia Australia Australia Australia Australia New Zealand South Africa United States United States England and Wales OOwwnneerrsshhiipp iinntteerreesstt 22002211 %% 22002200 %% 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 31. Parent entity information. CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss 2277 JJuunnee 22002211 NNoottee 3355.. EEvveennttss aafftteerr tthhee rreeppoorrttiinngg ppeerriioodd Covid-19 related matters The Covid-19 pandemic continues to have an impact globally in the new financial period. The Directors continue to monitor COVID-19 related developments and are closely working with management to assess and navigate through 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. Subsequent to the end of the financial year, the Australian store network was impacted by varying periods of temporary closures in response to government direction on restrictions and lockdowns. During the first 8 weeks of FY22, there were approximately 1,646 equivalent store days closed (c.33% of total equivalent store days over the period) including 764 in NSW, 565 in Victoria, 178 in Queensland, 40 in Western Australia, 32 in South Australia, 20 in ACT, 7 in Northern Territory and 40 in New Zealand. Stores in NSW (18), Victoria (21), ACT (2) and New Zealand (8) remain temporarily closed as of the date of this report. However, the Group continues to trade profitably with the benefit of the geographic and channel diversification. City Chic is well capitalised to deliver on its strong organic growth pipeline and well positioned for future inorganic opportunities to expand the global customer base. Navabi acquisition On 23 July 2021, the Group signed and completed a share purchase agreement to acquire 100% of the shares in JPC United GmbH (“Navabi’) for €6.0m (A$9.6m) in cash, from the co-founders of Navabi. Navabi’s assets include €2.1m of cash net of tax liabilities, as well as inventory and immaterial other working capital. In 2009, Navabi was established as an online marketplace selling hundreds of third-party women’s plus-size brands. Navabi has also developed its own brands exclusively sold on the marketplace, which have grown to become the majority of sales in recent years. Navabi’s loyal customer base are focused on size, fit and quality, and are based predominantly in Germany. Navabi’s websites had 5.8m customer visits in 2020, generating €10.4m (A$16.6m) in sales revenue, and pre-pandemic traffic exceeded 10m visits. No other matter or circumstance has arisen since 27 June 2021 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. 15 Avenue Online LLC was merged into City Chic Collective USA Incorporated, and no longer exists as a standalone entity. 79 80 FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 117 Annual Financial Report 2021 | Annual Financial Statements CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd DDiirreeccttoorrss’’ ddeeccllaarraattiioonn 2277 JJuunnee 22002211 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 27 June 2021 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 34 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 26 August 2021 Sydney Phil Ryan Chief Executive Officer and Managing Director Annual Financial Report 2021 | Corporate Governance Statement CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd CCoorrppoorraattee GGoovveerrnnaannccee SSttaatteemmeenntt 2277 JJuunnee 22002211 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 (4th 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 the Group’s website for (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 27 June 2021 (unless otherwise stated) and are current as at 17 September 2021 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. 81 FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 119 Annual Financial Report 2021 | Annual Financial Statements Annual Financial Report 2021 | Shareholder information CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd SShhaarreehhoollddeerr iinnffoorrmmaattiioonn The shareholder information set out below was applicable as at 27 August 2021. DDiissttrriibbuuttiioonn ooff eeqquuiittaabbllee sseeccuurriittiieess 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 NNuummbbeerr ooff hhoollddeerrss ooff oorrddiinnaarryy sshhaarreess %% ooff eeqquuiittyy sseeccuurriittiieess iinn tthhiiss ccllaassss NNuummbbeerr ooff sseeccuurriittiieess 1,938 1,991 529 491 61 5,010 147 918,686 5,019,234 3,955,224 11,523,002 207,247,092 228,663,238 0.40 2.20 1.73 5.04 90.63 100 1,432 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 NNuummbbeerr ooff hhoollddeerrss ooff uunnqquuootteedd oorrddiinnaarryy sshhaarreess %% ooff eeqquuiittyy sseeccuurriittiieess iinn tthhiiss ccllaassss NNuummbbeerr ooff sseeccuurriittiieess - - - - 9 9 - - - - 100.0 100.0 - - - - 8,675,488 8,675,488 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 NNuummbbeerr ooff hhoollddeerrss ooff ppeerrffoorrmmaannccee rriigghhttss %% ooff eeqquuiittyy sseeccuurriittiieess iinn tthhiiss ccllaassss NNuummbbeerr ooff sseeccuurriittiieess - - - 1 6 7 - - - 0.97 99.03 100.00 - - - 55,556 5,676,296 5,731,852 CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd SShhaarreehhoollddeerr iinnffoorrmmaattiioonn EEqquuiittyy sseeccuurriittyy hhoollddeerrss Twenty largest quoted equity security holders The names of the twenty largest security holders of quoted equity securities are listed below: Name J P MORGAN NOMINEES AUSTRALIA PTY LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED CITICORP NOMINEES PTY LIMITED NATIONAL NOMINEES LIMITED T BATSAKIS PTY LTD BNP PARIBAS NOMS PTY LTD BNP PARIBAS NOMINEES PTY LTD HENOCH INVESTMENTS PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED LANDPEAK PTY LIMITED BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD ONE MANAGED INVT FUNDS LTD UBS NOMINEES PTY LTD CITICORP NOMINEES PTY LIMITED ONE FUND SERVICES LTD SANDHURST TRUSTEES LTD WARBONT NOMINEES PTY LTD BRISPOT NOMINEES PTY LTD BNP PARIBAS NOMINEES PTY LTD TOWER HOLDINGS PTY LIMITED A/C designation Ordinary shares Number held 55,286,126 % of total shares issued 24.18 41,611,355 29,794,168 25,709,572 7,230,000 5,946,634 5,798,916 4,000,000 3,665,141 3,010,000 2,099,748 1,997,122 1,474,343 1,367,650 1,263,051 1,033,620 1,021,536 786,639 782,209 686,485 119944,,556644,,331155 18.20 13.03 11.24 3.16 2.60 2.54 1.75 1.60 1.32 0.92 0.87 0.64 0.60 0.55 0.45 0.45 0.34 0.34 0.30 85.09 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. SSuubbssttaannttiiaall hhoollddeerrss Substantial holders in the company are set out below: AUSTRALIANSUPER PTY LTD VVoottiinngg rriigghhttss The voting rights attached to ordinary shares are set out below: Ordinary shares Number held % of total shares issued 17,045,752 7.20 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. 2 3 FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 121 Annual Financial Report 2021 | Company Directory Annual Financial Report 2021 | References References PAGE 12, GLOBAL BUSINESS OVERVIEW 1Active customers includes customers who have shopped in online, stores and omni-channel in the last 12 months; excludes wholesale and marketplace (at Jun 2021) 2Traffic to our own websites in the 12 months to Jun 2021; excludes stores and partner marketplace websites 3Average annual spend excludes wholesale and marketplace customers 4Includes Evans revenue (in AUD) and metrics for 6 months since acquisition (acquired on 23 Dec 2020) PAGE 14, FINANCIAL PERFORMANCE 1 Underlying EBITDA excludes non-recurring costs (e.g. relating to acquisitions and equity raise) and is presented on a pre-AASB16 basis 2 Active customers include customers who have shopped in online, stores and omni-channel in the last 12 months; excludes wholesale and marketplace customers 3 Defined as transacted and sales in last 12 months. Online represents websites and online marketplace sales CCiittyy CChhiicc CCoolllleeccttiivvee LLiimmiitteedd CCoorrppoorraattee ddiirreeccttoorryy 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 Natalie McLean – Non-executive director (appointed 5 August 2021) Neil Thompson – Non-executive director (appointed 5 August 2021) Company secretary Marta Kielich Registered office Principal place of business Share register Auditor Solicitors Bankers 151-163 Wyndham Street Alexandria, NSW 2015 Telephone: (02) 9059 4300 151-163 Wyndham Street Alexandria, NSW 2015 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 Thomson Greer Level 25, 1 O’Connell Street Sydney, NSW 2000 National Australia Bank 255 George Street Sydney, NSW 2000 Stock exchange listing City Chic Collective Limited shares are listed on the Australian Securities Exchange (ASX code: CCX) Website http://www.citychiccollective.com.au Corporate Governance Statement https://www.citychiccollective.com.au/corporate-governance ABN 43 057 569 169 4 FY2021 CITY CHIC COLLECTIVE ANNUAL REPORT 123 CITY CHIC COLLECTIVE 151–163 Wyndham Street, Alexandria NSW 2015 Australia ABN 43 057 569 169 P +61 2 9059 4300 

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