k
o
g
a
n
.
c
o
m
A
n
n
u
a
l
R
e
p
o
r
t
2
0
1
7
Annual Report 2017
$13.2m
Pro Forma
EBITDA
$78.3m
YoY revenue
growth
230.0%
YoY Pro Forma
EBITDA growth
36.0%
Growth in active
customers
Contents
Chairman’s Letter
Founder & CEO’s Report
1
2
4 Operating And Financial Review
17 Directors’ Report
23 Remuneration Report (Audited)
32 Auditor’s Independence
Declaration
33 Financial Report
Independent Auditor’s Report
73 Directors’ Declaration
74
80 Shareholder Information
IBC Corporate Directory
ChAIRmAn’s lETTER
its expanding portfolio of products
and services is delivering both
value for customers and returns
for shareholders.
The key drivers of financial
performance for Kogan.com
in FY17 were:
• Release of cash constraints
following the IPO – with
shareholder support,
management was able to invest
in marketing, Private Label
and Third Party Domestic
inventory to drive growth
in FY17 and beyond.
• Brand growth – Kogan.com
increased active customers by
36% to 955,000 during the year.
• Channel Growth – the
Dick Smith channel launched
in May 2016, and was a strong
contributor during the year,
with strategic marketing
efforts channeling customers
to both the Kogan and
Dick Smith websites.
• Strong growth in Kogan Mobile
– annual revenue commissions
continue to scale, reaching
$3.6 million in FY17 as a result of
both new customer acquisitions
and repeat customers.
• Gross margin improvement
– management’s relentless
focus on improvements in
efficiency and automation;
ERP; expansion of the product
offering; and the commission-
based structure of new vertical
channels all contributed to a
pleasing margin uplift.
As at 30 June 2017, your company
has a strong balance sheet with
$32.0 million in cash and an
undrawn debt facility of
$10.0 million. The business
generated operating cash flow
before capital expenditure
of $10.8 million during the year,
representing an operating cash
flow conversion of 81.8%.
Inventory levels are at a
sustainable level of $39.7 million
and management is confident
that future inventory investments
can be funded by the Company’s
cash flows.
Due to the strength of Kogan.com’s
operating result and balance sheet,
your Directors declared total
dividends for FY17 of 7.70 cents
per share, fully franked.
The Board believes that
Kogan.com will continue its
trajectory of strong revenue
through investments in brand,
marketing and inventory. The
Board also expects further margin
expansion due to the rapid
growth of Kogan Mobile and
the continued expansion of the
Kogan Portfolio into new verticals.
On behalf of the Board, I would
like to congratulate the entire
Kogan.com team on delivering
this strong financial result. I would
also like to thank my fellow
directors Ruslan Kogan, David
Shafer and Harry Debney for their
contribution and collaboration.
Finally, thank you to our fellow
shareholders who have provided
the capital that has allowed
Kogan to scale over the past year.
We look forward to delivering
continued growth for
shareholders as the company
continues to pursue its growth
plans into FY18 and beyond.
Yours sincerely,
Greg Ridder
Chairman
1
Dear Shareholder,
I am delighted to present
Kogan.com Ltd’s (Kogan.com)
annual report for the financial
year ended 30 June 2017
(FY17). Your company has
significantly outperformed its
Prospectus forecasts on all key
metrics demonstrating strong
growth in Kogan.com’s portfolio
of products and services as
the team continued to build
a diversified platform for
future growth.
The highlights of your Company’s
performance were:
• Revenue of $289.5 million,
up 37.1% on prior year (FY16:
$211.2 million) and up 20.0%
on Prospectus forecasts
• Pro Forma earnings before
interest, tax, depreciation and
amortisation (Pro Forma
EBITDA) of $13.2 million, up
230.0% on prior year (FY16:
$4.0 million) and up 91.3%
on Prospectus forecasts
• Pro Forma net profit after
tax (Pro Forma NPAT) of
$7.2 million, up 800.0% on prior
year (FY16: $0.8 million) and up
188.0% on Prospectus forecasts
Kogan.com’s Pro Forma results are
adjusted for one-off transaction
costs associated with the
Company’s Initial Public Offering
(IPO) in July 2016 and unrealised
foreign exchange gains and losses.
Statutory NPAT was $3.7 million.
These strong results demonstrate
that management’s strategy to
invest in the Kogan.com brand and
Kogan.com Annual Report 2017
FounDER & CEo’s REPoRT
We also recently announced that
we would extend our partnership
with Vodafone to launch Kogan
Internet in 2018. The NBN is a
major opportunity for Kogan.com
– current NBN activations of
2 million premises are not even
a third of the projected 7.6 million
activations by 2020. We expect
Kogan Internet to launch in the
second half of FY18 and scale
into FY19.
The other exciting new vertical
we have recently announced is
Kogan Insurance. By partnering
with leading insurance provider
Hollard, we are targeting the
$30.8 billion Australian insurance
market with a focus on value
for money offerings in Home,
Contents, Landlord, Car and
Travel insurance.
These verticals are a win-win-win.
They are a win for our customers
through competitive market-
leading offers. They are a win
for our partners by providing an
effective and efficient customer
acquisition channel. And they are
a win for our business, enabling
us to scale our consumer offering
and leverage our growth to
provide incredible offers to
our customers.
Kogan Mobile is a great example
of the potential of our portfolio
strategy. Having launched less
than two years ago, Kogan Mobile
has grown quickly to represent
7% of Kogan.com’s gross profit
at 30 June 2017.
Kogan Mobile gross sales are
100% gross margin, with Kogan
contributing branding and
marketing services to drive
customer retention and growth.
We have high expectations for
this business and we fully expect
the current growth trajectory to
continue for years to come.
FY17 has been a landmark year for
Kogan.com. strong operating momentum
led to three separate earnings upgrades
in FY17 as we continued to stretch ourselves
and our expectations during our first year
as a publicly listed company.
We have strengthened
our brand organically
by delivering on our
promises to our
Kogan Community of customers
and subscribers day in and day
out. This has cemented our
reputation for price leadership
through digital efficiency, delivering
revenues of $289.5 million, up
37.1% on FY16.
During the year, we capitalised
on growth opportunities in Private
Label, Kogan Mobile, the Dick
Smith online integration and
a number of other initiatives –
all while improving our margins
through precision sourcing,
analytics and automation. At the
end of FY17, our gross margin was
17.9% (compared to 15.5% this
time last year), reflecting our
investment in efficiency and
our ability to scale.
2
At the end of the financial year,
more than 6.5 million Australians
were members of the Kogan
Community. And in the past 12
months, 955,000 members of that
Community have transacted with
us (up 36% on the previous year).
Building the Kogan.com
Portfolio
At Kogan.com we are continually
redefining who we are. We do
not stand still. It is our duty to our
customers to continuously
improve and deliver better and
better value. Our brand has
now extended itself to become
a portfolio of products and
services businesses targeted at
our Community of subscribers
and loyal customers.
In FY17, we engaged with that
Community through Kogan Retail,
Kogan Marketplace, Kogan Mobile
and Kogan Travel.
Kogan.com Annual Report 2017 Precision sourcing and market
leadership in Private Label
Kogan.com has over 11 years’
experience in Private Label
manufacturing and supply chain
optimisation. Our exclusive brands
are a pillar of the business and are
a focus area for us. They enable
us to provide our customers with
market leading prices on the most
in-demand products.
The Kogan.com team makes daily
data-driven decisions backed
by existing demand metrics to
determine how we deploy capital
on inventory. Our goal is not to
create demand, but to service
demand on the most popular
products.
In FY17, we invested IPO proceeds
primarily to replenish inventory
of our best-selling products.
This resulted in total Private Label
gross sales of $97.5 million, an
increase of 21% from the previous
year. Private Label growth in 2H17
versus 2H16 was 43.9%. Private
Label accounted for 52.2% of
gross profit in FY17.
As we move into FY18, we
are focused on bringing new
in-demand products to market.
Kogan Marketplace – a platform
for brand partnerships
Kogan Marketplace is a platform
for us to partner with select
international and domestic brands
and distributors. It provides an
opportunity for brands and
distributors to reach a wider
audience and generate additional
sales, supported by our marketing
capability. It provides our loyal
customers with more choice and
very competitive pricing.
We have over 50,000 products
currently listed. We have sold over
2.5 million products across Kogan
Retail and Kogan Marketplace
in the last 12 months alone.
Awards and accolades
• Continued investment in
In 2017, the Kogan.com team was
recognised through a number of
prestigious industry awards that
variously reflect: our brand’s
standing in the community;
the quality of our products; the
user friendliness of our online
experience; and the calibre
of our team.
The Australian public voted
Kogan.com as their favourite
online shopping destination at the
Startrack Online Retail Industry
Awards. We are extremely
humbled by this vote of confidence
from the Australian public. There is
no more important vote than that
of our customers.
Also this year, our Kogan TVs
were the only TVs in Australia to
be rated 5 star value-for-money
by Canstar, demonstrating once
again, Kogan’s price leadership
and quality.
Proudly, Kogan.com’s Chief
Technology Officer, Goran
Stefkovski, won “Consumer CIO
of the Year” for the fantastic
work that he and his team did
to integrate the online operations
of Dick Smith so quickly.
Additionally, our proprietary
ecommerce platform earned us
the ranking of Number 1 most
mobile-ready Australian brand.
Growth into FY18 and beyond
The Kogan.com team has strong
momentum as we commence
FY18 and will be relentlessly
focused on the following
initiatives to deliver returns
for shareholders:
• Continued focus on delighting
our customers and exceeding
their expectations;
• Continued investment in
expanding the Private Label
range, where pre-existing
online demand is established
and where Kogan.com can be
a price leader with a strong
competitive advantage;
brand-building to drive revenue
per customer and conversion
rates across the portfolio;
• Continued partnerships with
select brands and distributors
via Kogan Marketplace,
giving those brands an
effective channel to market
via a direct voice with the
Kogan Community;
• Continued promotion and
marketing support for Kogan
Mobile, which continues to grow
strongly with a win-win-win
proposition for the Kogan
Community, our partner
Vodafone, and Kogan.com;
• Ramp up of Kogan Insurance
– which launched in early 1H18
in partnership with Hollard
Insurance Company – with the
objective of delivering value
for money in home, contents,
landlord, car and travel insurance;
• Launch of Kogan Internet
in 2H18, also in partnership
with Vodafone, offering
competitively priced fixed-line
NBN services;
• Continued assessment
of opportunities to grow
Kogan Retail via opportunistic
M&A; and
• Continued assessment of
opportunities to expand the
Kogan portfolio of products
and services in ways that serve
the Kogan Community and
continue to build goodwill.
We remain focused and excited
about the opportunities to grow
Kogan.com and we look forward
to serving our customers in the
year ahead.
Ruslan Kogan
Founder & CEO
3
Kogan.com Annual Report 2017
oPERATInG AnD FInAnCIAl REVIEW
oRGAnIsATIonAl oVERVIEW & BusInEss moDEl
ouR BusInEss moDEl
Kogan.com is a portfolio of retail and services
businesses that includes Kogan Retail, Kogan
marketplace, Kogan mobile, Kogan Internet,
Kogan Insurance and Kogan Travel. Kogan is a
leading Australian consumer brand renowned
for price leadership through digital efficiency.
The company is focused on making in-demand
products and services more affordable
and accessible.
We have created a business model that allows us to be
agile, bold and innovative. We can leverage our brand
to seize opportunities like Kogan Mobile, Kogan Insurance
and Kogan Internet to drive future growth, bringing best
in market offers to our customer base.
Our aim is to continue to build our portfolio of
businesses synonymous with great value, service
and compelling offerings.
Who WE ARE
Our community and our portfolio continues to grow at pace.
At 30 June 2017, we had 955,000 Active Customers and 6.5 million
Active Subscribers.
Kogan Retail & Kogan Marketplace
Kogan.com is part of a ‘Next Generation’ of online retailers.
Kogan.com’s technology and sourcing-driven business model is more
than just a disruptive, low-cost distribution platform. In combining
the data analytics, systems and culture with the deep technological
expertise of its management and team, Kogan.com has created a
vertically-integrated business model with a market-leading Private
Label capability. This is complemented by a compelling range
of in-demand third party brands, supporting website traffic and
cash generation. This combination is unique among Australian
online retailers.
4
Kogan.com Annual Report 2017 Kogan Marketplace partners with select brands and distributors,
giving them access to our 955,000 Active Customers, in addition
to our marketing and online distribution capability. We have over
50,000 products from over 50 brands and distributors already listed.
Our curated marketplace works with brands and distributors who
generate incremental sales with exposure on the Kogan.com platform
and marketing initiatives to the Kogan Community.
We have sold over 2.5 million products to customers across
Kogan Retail and Kogan Marketplace in the last 12 months alone.
In addition to Kogan.com, key channels for Kogan Retail and
Kogan Marketplace include: Dick Smith, eBay and TradeMe.
Kogan Mobile
Kogan Mobile launched in October 2015 offering pre-paid mobile
phone plans online in partnership with Vodafone. The strong
commercial relationship with Vodafone has translated into strong
growth for Kogan Mobile. The unique model means that Vodafone
is responsible for operations, while Kogan is responsible for branding,
marketing and customer acquisition. The success of Kogan Mobile
demonstrates the strength of the Kogan brand in powering
new verticals.
Kogan Travel
Kogan Travel launched in May 2015 and offers directly sourced
holiday packages and travel bookings, in addition to hotel bookings
through hotels.kogan.com and cruises through cruises.kogan.com.
Kogan Travel is an accredited Travel agent under the ATAS
Accreditation Scheme, and is a member of the Australian
Federation of Travel Agents (AFTA).
nEW VERTICAls In FY18
Kogan Insurance
Kogan Insurance launched in August 2017 in partnership with
Hollard Insurance Company. The agreement, which is for an initial
period of three years, allows Kogan Insurance to offer home, contents,
landlord, car and travel insurance, with a focus on value for money.
The underwriting of the insurance policies is provided by Hollard,
with Kogan earning commission on the sale of all insurance policies.
Similar to Kogan Mobile and Kogan Internet, Kogan will provide
branding, marketing and customer acquisition.
Kogan Internet
The expanded partnership with Vodafone Hutchison Australia was
announced in June 2017 to provide fixed-line NBN plans from 2018 and
mobile broadband plans from 2017. NBN is an exciting opportunity for
Kogan.com; current NBN activations of 2 million premises are less than
a third of the projected 7.6 million activations by 2020.
5
Kogan.com Annual Report 2017 OPERATING AND FINANCIAL REVIEW CONTINuED
hoW WE DElIVER VAluE To ouR CusTomERs
Compelling offering:
We aim to bring market leading prices to our customers on in-demand
products and services across our portfolio of businesses.
We achieve this by leveraging our 11 years’ experience in Private Label,
extensive Third Party brand offering, and using the strength of the
Kogan brand to partner with industry leaders for Kogan Mobile, Kogan
Insurance and Kogan Internet.
We are able to pass on savings to customers by streamlining and
cutting overheads in our supply chains and marketing.
Recognition
Kogan TVs won the Canstar Value for Money Award in 2017.
Customer-centric approach:
We are customer obsessed. understanding and servicing our
customers’ needs is central to what we do. Our customers have high
expectations and we aim to offer a seamless shopping experience.
Our analytics capability ensures we know what our customers want
and when they want it. Our investment in automation has driven faster
fulfilment of products and services and happier customers.
Our portfolio of retail and services businesses is focused on making
in-demand products and services more affordable and accessible for
our customers.
Recognition
Kogan won the People’s Choice Award at the Startrack Online Retail
Industry Awards (ORIAS) in July 2017.
Industry leading IT platform & data driven culture:
The Kogan brand is renowned for price leadership through digital
efficiency. We believe ‘There is always a better way’ and our vision
is to harness the power of technology and personalisation to change
the way our customers shop online.
We understand our customers, what inspires them and what interests
them. We leverage this understanding, driven by data analytics and
long-term investments in systems to continue to reach and inspire
our customers in new and exciting ways.
We use technology innovation to stay ahead of our customers’
expectations and ahead of the curve in offering price leading
goods and services in Australia.
Recognition
Our Chief Technology Officer, Goran Stefkovski, won Consumer CIO
of the year at the itnews Benchmark Awards 2017.
Kogan.com was awarded the #1 Most Mobile Ready Australian brand
by Ansible in February 2017.
6
Kogan.com Annual Report 2017 BuIlDInG ThE KoGAn BRAnD
In the twelve months to June 2017, the business achieved 36.0% growth in Active Customers. Our consistent
month on month growth of Active Customers illustrates that we continue to outpace the growth of the
online retail industry in Australia.
Most importantly, we are keeping and growing our customer base. Kogan.com’s net promoter score has
been stable with an average 60.5 (Figure 1.2).
In addition to continuing to build our customer base, we have also increased our annual revenue per customer
(refer to Figure 1.3). This is a direct result of our data-driven approach to customer insights and analytics.
We are able to continuously improve our offering to ensure that the right product is shown to our customers
at the right time, through the right medium.
Table 1.1 Active Customers
Active Customers
702,000
830,000
955,000
36.0%
Jun-16
Dec-16
Jun-17
Jun-16 vs
Jun-17
variance
Figure 1.1 LTM Active customers
Figure 1.2 Net Promoter Score 1
1,000
900
0
0
0
‘
800
700
600
100
80
60 Average 60.05
40
20
0
6
1
r
p
A
6
1
y
a
M
6
1
n
u
J
6
1
l
u
J
6
1
g
u
A
6
1
p
e
S
6
1
t
c
O
6
1
v
o
N
6
1
c
e
D
7
1
n
a
J
7
1
b
e
F
7
1
r
a
M
7
1
r
p
A
7
1
y
a
M
7
1
n
u
J
6
1
n
a
J
6
1
b
e
F
6
1
r
a
M
6
1
r
p
A
6
1
y
a
M
6
1
n
u
J
6
1
l
u
J
6
1
g
u
A
6
1
p
e
S
6
1
t
c
O
6
1
v
o
N
6
1
c
e
D
7
1
n
a
J
7
1
b
e
F
7
1
r
a
M
7
1
r
p
A
7
1
y
a
M
7
1
n
u
J
1 The net promoter score is calculated based on answers to the question, “How likely is it that you would recommend Kogan.com to a
friend or colleague?” Kogan.com measures its NPS as the percentage of customers who are ‘promoters’ rating its product and service
9 or 10 out of a possible 10, less the percentage of ‘detractors’, rating Kogan.com’s products and services 0 to 6 out of a possible 10.
The maximum possible NPS score is 100 and the minimum possible is –100.
Figure 1.3 Annual revenue per customer
Figure 1.4 Traffic – Free vs paid marketing
Paid
22%
Free
78%
$310
$305
$300
$295
$290
$285
$280
$275
6
1
n
a
J
6
1
b
e
F
6
1
r
a
M
6
1
r
p
A
6
1
y
a
M
6
1
n
u
J
6
1
l
u
J
6
1
g
u
A
6
1
p
e
S
6
1
t
c
O
6
1
v
o
N
6
1
c
e
D
7
1
n
a
J
7
1
b
e
F
7
1
r
a
M
7
1
r
p
A
7
1
y
a
M
7
1
n
u
J
7
Kogan.com Annual Report 2017
OPERATING AND FINANCIAL REVIEW continued
PERFORMANCE REVIEW & OUTLOOK
RESULTS SUMMARY
PRO FORMA RESULTS
Pro Forma results are consistent with the basis of the Prospectus Pro Forma financials. A reconciliation
of the Pro Forma results to the statutory results is provided in table 1.3. Refer to table 1.8 for an explanation
of non iFRS measures used throughout this report.
Figure 1.5 Pro Forma results
)
m
$
(
e
u
n
e
v
e
R
300
250
200
150
100
50
0
i
)
%
(
n
g
r
a
M
s
s
o
r
G
18.5
18.0
17.5
17.0
16.5
16.0
15.5
15.0
14.5
14.0
13.5
)
m
$
(
A
D
T
B
E
I
14
12
10
8
6
4
2
0
FY16A
FY17F
FY17A
FY16A
FY17F
FY17A
FY16A
FY17F
FY17A
Table 1.2 Pro Forma results versus forecast – FY17
Pro Forma
forecast
FY17
Pro Forma
actual
FY17
241.2
(204.5)
36.7
15.2%
(29.8)
6.9
2.9%
3.6
3.6
2.5
3.8
289.5
(237.8)
51.7
17.9%
(38.5)
13.2
4.6%
9.4
9.8
7.2
8.6
Variance
20.0%
40.9%
17.8%
91.3%
59.2%
161.1%
172.2%
188.0%
126.3%
$m
Revenue
cost of sales
Gross profit
Gross margin
operating costs
EBITDA
EBITDA margin
EBIT
Profit before tax
NPAT
nPAtA
8
Kogan.com Annual Report 2017
FY17 PRo FoRmA REsulTs VERsus PRosPECTus FoRECAsT
REVEnuE
Revenue exceeded FY17 Prospectus forecast by $48.3 million, driven by growth in Active Customers, Kogan
Mobile and channel growth with the launch of Dick Smith. Kogan Mobile achieved revenue of $3.6 million,
representing an out-performance against forecast of 140.0% and 620.0% versus the prior year.
GRoss mARGIn
Gross margin was 2.7pp (17.8%) above the Prospectus forecast. The out-performance was driven by precision
sourcing, improved efficiencies/automation in processes and Kogan Mobile.
EBITDA
Higher than forecast revenue and gross margin drove an out-performance against FY17 Prospectus forecast
EBITDA of 91.3%. EBITDA of $13.2 million exceeded Prospectus forecast by $6.3 million.
Following the IPO on 7 July 2016, cash constraints were released and the business was able to implement
growth strategies, one of which was marketing. As such, better than expected ROI on marketing led us to
increase marketing spend as a % of revenue versus the Prospectus forecast, which in turn helped grow our
Active Customer base.
In addition, the business invested heavily in people. Short and long-term incentives are in place to retain
key talent in the business and align the interests of key staff with shareholders. As a result of the significant
out-performance, bonuses paid in FY17, including superannuation and LTIs, were $0.9 million. Excluding these
bonuses, People costs were higher than forecast largely due to an increased focus on retention of key staff.
Retaining and motivating our key talent is an important part of our culture and strategy for growth.
Table 1.3 Reconciliation of Statutory to Pro Forma results – FY17
$m
Revenue
Cost of sales
Gross profit
Gross margin
Operating costs
unrealised FX gain or loss
EBITDA
EBITDA margin
EBIT
Profit before tax
Notes:
statutory
Transaction
costs 1
unrealised
FX gain
or loss 2
Pro Forma
289.5
(237.8)
51.7
17.9%
(41.5)
(0.7)
9.5
3.3%
5.7
6.1
–
–
–
–
3.0
–
3.0
–
3.0
3.0
–
–
–
–
–
0.7
0.7
–
0.7
0.7
289.5
(237.8)
51.7
17.9%
(38.5)
–
13.2
4.6%
9.4
9.8
1 Transaction costs: adjustments to remove balances included in Statutory figures which relate to the IPO.
2 unrealised FX gain or loss: adjustment to remove the impact of the unrealised FX loss on forward exchange contracts at 30 June 2017.
9
Kogan.com Annual Report 2017 OPERATING AND FINANCIAL REVIEW CONTINuED
STATUTORY RESULTS
Table 1.4 Statutory results FY17 versus FY16
$m
Revenue
Cost of sales
Gross profit
Gross margin
Operating costs
Results from operating activities
unrealised FX gain or loss
Net finance costs
Profit before tax
NPAT
EBITDA
statutory
FY17
statutory
FY16
289.5
(237.8)
51.7
17.9%
(45.2)
6.5
(0.7)
0.3
6.1
3.7
9.5
211.2
(178.5)
32.7
Variance
37.1%
58.1%
15.5%
2.4pp/15.5%
(31.1)
1.6
–
(0.2)
1.4
0.8
3.9
306.3%
335.7%
362.5%
143.6%
sTATuToRY PERFoRmAnCE VERsus PRIoR YEAR
Revenue increased by $78.3 million year on year, driven by growth in Active Customers, Kogan Mobile
and channel growth with the launch of Dick Smith. Dick Smith launched on 4 May 2016, therefore FY17
is the first full year of this channel.
Gross margin increased from 15.5% to 17.9% as a result of Kogan Mobile, improvements in efficiency,
automation initiatives and expansion in the product offering. Kogan Mobile revenue is 100% gross margin
and represented 7.0% of total gross profit in FY17.
Statutory operating costs include $3.0 million of transaction costs related to the IPO of Kogan.com
on 7 July 2016. The transactions costs comprise $1.2 million of bonus shares issued to certain senior
management on IPO and $1.8 million of adviser, legal and similar transaction costs.
Excluding the transaction costs, operating costs increased primarily as a result of marketing and people
costs. Marketing costs in FY16 were low due to cash constraints. Following the release of cash constraints
post IPO, and better than expected ROI on marketing expenditure, the business invested in marketing to
drive growth. In addition, the business invested in people in FY17. Motivating and retaining key talent are
key to our culture and growth strategies. With this in mind, short and long-term incentives are in place
to retain key talent and align their interests with those of shareholders.
EBITDA of $9.5 million represents a year on year increase of $5.6 million. FY17 EBITDA includes the
$3.0 million of transaction costs and $0.7 million of unrealised foreign exchange losses on forward
contracts at 30 June 2017.
10
Kogan.com Annual Report 2017 PRoDuCT & BusInEss mIX
Private Label exclusive brands accounted for 52.2% of FY17 gross profit and Kogan Mobile increased
from 4.2% of gross profit in FY16 to 7.0% in FY17.
Figure 1.6 FY17 Gross profit mix
Kogan Mobile
7.0%
Travel
1.3%
Third Party
Domestic
18.8%
Third Party International
19.5%
Other income
1.2%
Private Label
52.2%
The deployment of IPO proceeds into Private Label inventory in FY17 was focused on replenishing ranges,
whereas we are now focused on new products and new ranges. As such, management expects Private
Label to show further growth in FY18 and beyond.
Table 1.5 New Verticals Gross Sales
$m
Kogan Travel
Kogan Mobile
Gross Sales
FY16
Actual
FY17
Forecast
FY17
Actual
Variance to
forecast
Variance
YoY
4.8
0.5
5.3
5.4
1.5
6.9
6.9
3.6
10.5
27.8%
140.0%
52.2%
43.8%
620.0%
98.1%
Kogan Travel and Kogan Mobile exceeded Prospectus forecast Gross Sales by 27.8% and 140.0%, respectively.
Kogan Mobile commission of $3.6 million represents a year on year increase of 620.0% (FY16: $0.5 million).
Management expects further growth in Kogan Mobile in FY18 and enhanced economics for Kogan Mobile
are set to commence in October 2017. Kogan Mobile Gross Sales represent the commission received and
are 100% gross margin.
Figure 1.7 Kogan Mobile Active Customers
Figure 1.8 Kogan Mobile Quarterly Commissions
0
0
0
‘
1,400
1,200
1,000
800
600
400
200
0
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
11
Kogan.com Annual Report 2017 OPERATING AND FINANCIAL REVIEW CONTINuED
oPERATInG CosTs
Pro Forma operating costs
Figure 1.9 Pro Forma Operating costs as a % of revenue – FY17 versus Prospectus forecast and FY16
breakdown FY16 – FY17A
Pro Forma operating costs
breakdown FY17F– FY17A
16.0%
12.0%
8.0%
4.0%
0%
13.6%
2.2%
4.4%
2.7%
4.3%
FY16A
13.3%
1.8%
4.2%
3.6%
3.6%
FY17A
16.0%
12.0%
8.0%
4.0%
0%
12.3%
1.9%
3.7%
3.0%
3.7%
FY17F
13.3%
1.8%
4.2%
3.6%
3.6%
FY17A
Variable
costs
Marketing
costs
People
costs
Other
expenses
Operating costs as a % of revenue were 1pp higher than Prospectus forecast, primarily driven by marketing
and people costs. Following the release of cash constraints in FY17, the business invested in marketing
to assist in driving growth and building the Kogan brand. FY16 marketing costs were at a historical low of
just 2.7% of revenue due to cash constraints limiting investment at the time. Management believes targeted
marketing with strict ROI metrics was a key driver of growth in FY17, and will continue to be a driver in FY18
and beyond.
As mentioned earlier in this report, in addition to marketing, the business also invested in people in FY17.
sTATEmEnT oF FInAnCIAl PosITIon
Table 1.6 Summary net assets at 30 June 2017 and 30 June 2016
$m
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
30-Jun-17
30-Jun-16
74.4
5.9
80.3
(37.6)
(0.1)
(37.6)
42.7
26.9
5.5
32.4
(25.3)
(0.0)
(25.4)
7.1
Net assets increased by $35.6 million year on year, as a result of the proceeds received upon IPO
of Kogan.com on 7 July 2016. The cash retained in the business, prior to issue costs, was $35 million.
At 30 June 2017, Kogan.com had cash of $32.0 million and a Pro Forma operating cash flow conversion
of 81.8% in FY17.
In line with growth strategies, Kogan.com deployed IPO proceeds into Private Label and Third Party inventory.
As at 30 June 2017, Kogan.com had inventory of $39.7 million, comprising $30.7 million of inventory on hand
and $9.0 million of inventory in transit. The year on year increase in payables is largely driven by the increase
in inventory. In addition to investing in inventory, IPO proceeds were used to repay bank debt of $4.9 million.
12
Kogan.com Annual Report 2017 CAsh FloWs
Table 1.7 Statutory cash flow FY17 and FY16
$m
Statutory EBITDA
Non-cash in EBITDA
Transaction costs of share issue in EBITDA
EBITDA excluding non-cash and financing costs
Change in net working capital
Operating cash flow before capital expenditure
Purchase of PP&E
Investment in intangibles
Purchase of the Dick Smith Assets
Cash flow before financing and taxation
Operating cash flow conversion
FY17
statutory
FY16
statutory
9.5
0.7
3.0
13.2
(2.4)
10.8
(0.1)
(3.5)
–
7.2
3.9
–
–
3.9
8.1
12.0
(0.0)
(1.7)
(2.7)
7.6
81.8%
307.7%
The business generated operating cash flow before capital expenditure of $10.8 million in FY17, resulting
in an operating cash flow conversion ratio of 81.8%.
Net working capital increased by $2.4 million, driven predominantly by an increase in inventories, which
was partially offset by an increase in payables.
FY16 operating cash flow conversion of 307.7% was driven by a reduction in working capital of $8.1 million.
The FY16 decrease in working capital was the result of an increase in trade payables driven by improved
payment terms with some Private Label suppliers, and a decrease in inventory due to cash constraints
experienced during the year, which were subsequently relieved by the receipt of IPO proceeds in July 2016.
ouTlooK
At Kogan.com we are relentless in our mission to both continue to grow our existing businesses and
to expand our portfolio to bring more in-demand products and services to Aussies at market-leading
prices. With that in mind, the pace continues into the new financial year.
We are excited for the year ahead with the launch of two New Verticals in FY18 – Kogan Insurance launched
in August 2017 and Kogan Internet is set to launch in 2H18. In addition, our planning for the peak Christmas
trading season is well underway with funds being invested in new Private Label ranges and products;
Third Party products; and marketing. Following strong performance in FY17, Kogan Mobile’s momentum
is expected to continue in FY18.
We expect FY18 to show:
• Further growth of the Active Customer base;
• Increased value from the investment in our ERP and automation;
• Private Label growth;
• Continued growth of Third Party Domestic;
• Further growth in Kogan Mobile; and
• Growth coming from the launch of Kogan Insurance and Kogan Internet.
13
Kogan.com Annual Report 2017 OPERATING AND FINANCIAL REVIEW CONTINuED
non-IFRs mEAsuREs
Throughout this report, Kogan.com has included certain non-IFRS financial information, including EBITDA,
Pro Forma EBITDA, NPATA and Gross Sales. Kogan.com believes that these non-IFRS measures provide useful
information to recipients for measuring the underlying operating performance of Kogan.com’s business.
Non-IFRS measures have not been subject to audit.
The table below provides details of the Non-IFRS measures used in this report.
Table 1.8 Non-IFRS measures
EBITDA
Pro Forma EBITDA
NPATA
Gross Sales
Earnings before interest, tax, depreciation and amortisation
EBITDA excluding the impact of costs associated with the IPO and unrealised
foreign exchange gains or losses.
Net profit after tax (NPAT) plus the non-cash amortisation of the Dick Smith Assets.
Gross Sales represents sales on a cash basis and prior to cancellations and
refunds. Gross Sales is a key measure which management uses to track financial
performance and to make management decisions at a product group level.
14
Kogan.com Annual Report 2017 sTRATEGY, RIsKs AnD oPPoRTunITIEs
sTRATEGY
Kogan.com’s strategy involves a number of initiatives aimed at sustaining long-term growth, which include
continued growth in our existing portfolio of businesses, the launch of further new verticals and selective
& opportunistic M&A.
Kogan.com maintains a prudent and disciplined approach to capital deployment and continues to invest
in growth opportunities in the medium to long-term that generate shareholder value.
PRIVATE lABEl sTRATEGY
Private Label is a pillar of the business and remains a focus area for FY18 and beyond. In FY17,
Kogan.com focused on replenishing best-sellers following receipt of the IPO proceeds, which released
cash constraints. This investment resulted in year on year growth in Private Label revenue of 20.8%.
In FY18, the business is focused on new products and new ranges, where there is proven demand.
Our Private Label business benefits from:
• Full control of the end-to-end supply chain;
• Strong competitive advantage;
• Compelling consumer offering; and
• 11 years’ experience.
Private Label offering
15
Kogan.com Annual Report 2017 OPERATING AND FINANCIAL REVIEW CONTINuED
RIsKs
Set out below are the key financial and operational risks facing the business. Kogan.com manages and seeks
to mitigate these risks through internal review and control processes at the Board and management level.
Australian retail environment
and general economic
conditions may worsen
Competition may
increase and change
Inventory management
Key supplier, service provider
and counterparty factors
Performance and
reliability of Kogan.com’s
websites, databases
and operating systems
Manufacturing and
product quality
Reputational product
sourcing factors
Changes in GST and
other equivalent taxes
Retention of key staff
Reliance on third party
payment providers
Many of Kogan.com’s products are discretionary goods and, as a result,
sales levels are sensitive to consumer sentiment. Kogan.com’s offering of
products, and its financial and operational performance, may be affected
by changes in consumers’ disposable incomes, or their preferences as to
the utilisation of their disposable incomes.
Kogan.com could be adversely affected by increased competition in the
various segments in which it operates. The Australian online retail market
is highly competitive and is subject to changing customer preferences.
In order to operate its business successfully, Kogan.com must maintain
sufficient inventory and also avoid the accumulation of excess inventory.
Kogan.com has a large number of international suppliers and service
providers, from which it sources a broad range of products and services.
There is a risk that Kogan.com may be unable to continue to source
products or services from existing suppliers or service providers, and
in the future, to source products from new suppliers or services from new
service providers, at favourable prices, on favourable terms, in a timely
manner or in sufficient volume.
Kogan.com’s websites, Apps, databases, IT and management systems,
including its ERP and security systems, are critically important to its
success. The satisfactory performance, reliability and availability of
Kogan.com’s websites, Apps, databases, IT and management systems
are integral to the operation of the business.
Kogan.com currently uses a wide range of third party suppliers to produce
its Private Label Products. While Kogan.com employs dedicated engineers
to assess product samples, and uses third party inspection agencies for
quality control and inspections, there is no guarantee that every supplier
will meet Kogan.com’s cost, quality and volume requirements.
The Kogan.com portfolio of Private Label brand names and related
intellectual property are key assets of the business. In addition, Kogan.com
sells a range of Third Party Branded Products, where the intellectual
property is owned by third parties.
Changes in local indirect tax, such as the goods and services tax in Australia
(“GST”), and duty treatment of any of the markets in which Kogan.com
operates, could have an impact on the sales of imported brands.
Kogan.com relies on the expertise, experience and strategic direction
provided by its Executive Directors and key staff. These individuals
have extensive experience in, and knowledge of, Kogan.com’s business
and the Australian online retail market. Additionally, successful operation
of Kogan.com’s business depends on its ability to attract and retain
quality employees.
Kogan.com is exposed to risks in relation to the methods of payment that
it currently accepts, including credit card, PayPal and vouchers. Kogan.com
may incur loss from fraud or erroneous transactions.
16
Kogan.com Annual Report 2017 DIRECToRs’ REPoRT
The directors of Kogan.com Limited and its controlled entities (“the Group”) present their report together
with the consolidated financial report of the Group for the financial year ended 30 June 2017 and the audit
report thereon.
DIRECToRs
The following persons were directors of the Group at any time during the financial year and up to the date
of signing this report.
Greg Ridder – Independent, Non-Executive Chairman
Ruslan Kogan – Chief Executive Officer and Executive Director
David Shafer – Chief Financial Officer, Chief Operating Officer and Executive Director
Harry Debney – Independent, Non-Executive Director
Particulars of each director’s experience and qualifications are set out later in this report.
ComPAnY sECRETARY
Kogan.com engages Mertons Corporate Services Pty Ltd to provide company secretarial services,
with Mark Licciardo and Chris Lobb acting jointly as Kogan.com’s company secretary.
PRInCIPAl ACTIVITIEs
Kogan.com is a portfolio of retail and services businesses that included Kogan Retail, Kogan Marketplace,
Kogan Mobile and Kogan Travel during the year ended 30 June 2017.
Kogan.com earns the majority of its revenue and profit through the sale of goods and services to Australian
consumers. Its offering comprises products released under Kogan.com’s in-house brands, such as Kogan,
Ovela, Fortis and Komodo (“Private Label Products”), and products sourced from imported and domestic
third party brands such as Apple, Canon, Swann and Samsung (“Third Party Branded Products”). In addition
to product offerings, Kogan.com earns revenue and profit from Kogan Travel and Kogan Mobile, which offer
travel packages and prepaid mobile phone plans online, respectively.
Kogan.com has signed agreements with Vodafone that will see Kogan.com offering fixed-line NBN services
in 2018 as well as mobile broadband plans in 2017. These agreements broaden and deepen the successful
partnership between Kogan.com and Vodafone, who have been collaborating on Kogan Mobile since 2015.
Kogan.com has also entered into an agreement with the Hollard Insurance Company Pty Ltd allowing
Kogan.com to market a range of insurance offerings under a new brand: Kogan Insurance. Kogan insurance
was launched in August 2017 and will initially offer home, contents, landlord, car and travel insurance with
a focus on value for money.
An operating and financial review of the Group during the financial year and the results of these operations
are contained on pages 4 to 16 of this report.
No significant change in the nature of the other activities occurred during the year.
EVEnTs suBsEQuEnT To ThE EnD oF ThE FInAnCIAl YEAR
The Directors have declared a final dividend of 3.8 cents per ordinary share, fully franked. The record date
of the dividend is 25 August 2017 and the dividend was paid on 4 September 2017. The dividend was not
determined until 18 August 2017 and accordingly no provision has been recognised as at 30 June 2017.
17
Kogan.com Annual Report 2017 DIRECTORS’ REPORT CONTINuED
InDEmnIFICATIon AnD InsuRAnCE oF DIRECToRs AnD oFFICERs
Kogan.com has entered into a deed of indemnity, insurance and access with each Director confirming
the Director’s right of access to Board papers and requires Kogan.com to indemnify the Director, on a full
indemnity basis and to the full extent permitted by law against all losses or liabilities (including all reasonable
legal costs) insured by the Director as an officer of Kogan.com or of a related body corporate.
under the deeds of indemnity, insurance and access, Kogan.com must maintain a Directors’ and Officers’
insurance policy insuring a Director (among others) against liability as a director and officer of Kogan.com and
its related bodies corporate until seven years after a Director ceases to hold office as a Director or a related
body corporate (or the date any relevant proceedings commenced during the seven year period have been
finally resolved).
Disclosure of the total amount of the premiums paid under this renewed insurance policy is not permitted
under the provisions of the insurance contract.
InDEmnIFICATIon AnD InsuRAnCE oF AuDIToRs
No indemnities have been given or insurance premiums paid, during or since the end of the year, for any
person who is or has been an auditor of the group.
PRoCEEDInGs on BEhAlF oF ThE ComPAnY
No person has applied for leave of court to bring proceedings on behalf of the company or 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 any part of those proceedings.
The company was not a party to any such proceedings during the year.
DIVIDEnDs
In respect of the financial year ended 30 June 2017, the Directors:
• declared a fully franked interim dividend of 3.9 cents per ordinary share. The record date of the dividend
is 9 March 2017 and the dividend of $3,640,127 was paid on 17 March 2017.
• declared a fully franked final dividend of 3.8 cents per ordinary share. The record date of the dividend
is 25 August 2017 and was paid on 4 September 2017.
The 2016 dividends were paid to the previous owners of the business prior to the company’s IPO.
Details with respect to the distributions paid during the year are provided in Note 3.3.2.
There was no dividend reinvestment plan in operation during the financial year.
non-AuDIT sERVICEs
During the year KPMG, the Group’s auditors, performed certain other services in addition to the audit
and review of the financial statements.
The Board of Directors has considered the non-audit services provided during the year by the auditor and
is satisfied that the provision of those non-audit services during the year is compatible with, and did not
compromise, the auditor independence requirements of the Corporations Act 2001. The directors are
satisfied that the services disclosed below did not compromise the external auditor’s independence for
the following reasons:
18
Kogan.com Annual Report 2017 • all non-audit services were subject to the corporate governance procedures adopted by the Group and
have been reviewed by the audit committee to ensure they did not adversely affect the integrity and
objectivity of the auditor; and
• The non-audit services provided do not undermine the general principles relating to auditor independence
as set out in APES 110: Code of Ethics for Professional Accountants, as they did not involve reviewing
or auditing the auditor’s own work, acting in a management or decision making capacity for the Group,
acting as an advocate for the Group or jointly sharing risks and rewards.
The following fees were paid or payable to KPMG for non-audit services provided during the year ended
30 June 2017:
Advisory services
Taxation services
$
295,048
42,204
337,252
lEAD AuDIToR’s InDEPEnDEnCE DEClARATIon
The lead auditor’s independence declaration for the financial year ended 30 June 2017 can be found
on page 32 of the financial report and forms part of the Directors Report.
ThE BoARD oF DIRECToRs AnD ComPAnY sECRETARY
Greg Ridder
(BBus (Acc), Grad Dip (Mktg), GAICD, CPA)
Non-Executive Chairman
Mr Ridder was appointed to the board of Kogan.com in May 2016 as Independent,
Non-Executive Chairman. Mr Ridder also serves as chairman of the Remuneration
and Nomination Committee.
Formerly Asia Pacific Regional President at NYSE listed Owens-Illinois, Greg led growth
and diversification from its traditional Australian base through joint ventures and
acquisitions in China and Southeast Asia. Recently he has focused on intensive business
improvement, acting as CEO at the Australian Institute of Architects, CEO at Phoenix
Australia and as CFO at World Vision Australia. Greg is experienced in leading businesses
in multiple countries, cultures, economic circumstances and market conditions.
Greg holds a Bachelor of Business in Accounting from RMIT, a Graduate Diploma in
Marketing from Monash university, and has completed the Advanced Management
Programme at INSEAD in France. Greg is a CPA and graduated member of the Australian
Institute of Company Directors.
Board Committee membership
• Member of the Audit and Risk Management Committee
• Chairman of the Remuneration and Nomination Committee
19
Kogan.com Annual Report 2017 DIRECTORS’ REPORT CONTINuED
Ruslan Kogan
(BBS)
Chief Executive Officer and Executive Director
Mr Kogan founded Kogan.com in 2006, and has been its CEO since inception, growing
the business into Australia’s leading Pure Play Online Retailer in under a decade.
Prior to founding Kogan.com, Mr Kogan held roles in the IT departments of Bosch
and GE, and as consultant at Accenture.
Mr Kogan holds a Bachelor of Business Systems from Monash university.
Board Committee membership
• Member of the Remuneration and Nomination Committee
David Shafer
(LLB (Hons), BCom, CFA)
Chief Financial Officer, Chief Operating Officer and Executive Director
Mr Shafer has worked with Kogan.com since 2006, moving to a full time role
as Chief Operating Officer and Executive Director in November 2010.
Prior to joining Kogan.com, Mr Shafer was a Senior Associate at Arnold Bloch Leibler.
Mr Shafer holds a Bachelor of Law (Honours) and Bachelor of Commerce from
The university of Melbourne and is a Chartered Financial Analyst.
Board Committee membership
• Member of the Audit and Risk Management Committee
• Member of the Remuneration and Nomination Committee.
Harry Debney
(BAppSc (Hons))
Independent Non-Executive Director
Mr Debney was appointed to the board of Kogan.com in May 2016, as an
Independent, Non-Executive Director and also serves as Chairman of the
Audit and Risk Management Committee.
Mr Debney is CEO of Costa Group and has overseen the business’ transition
from a privately-owned company to a member of the S&P/ASX 200 Index.
Prior to joining Costa Group, Mr Debney spent 24 years at Visy Industries, including
eight years as CEO. During this time, he substantially grew the Visy business, both
organically and through acquisitions.
Mr Debney holds a Bachelor of Applied Science (Honours) from The university
of Queensland.
Directorships of listed entities within the past three years:
• Director of Costa Group Holdings Ltd
Board Committee membership
• Chairman of the Audit and Risk Management Committee
• Member of the Remuneration and Nomination Committee
20
Kogan.com Annual Report 2017 Mark Licciardo (Mertons Corporate Services Pty Ltd)
(B Bus(Acc), GradDip CSP, FGIA, GAICD)
Company Secretary
Mr Licciardo is Managing Director of Mertons Corporate Services Pty Ltd (Mertons)
which provides company secretarial and corporate governance consulting services to
ASX listed and unlisted public and private companies.
Prior to establishing Mertons, Mr Licciardo was Company Secretary of the Transurban
Group and Australian Foundation Investment Company Limited. Mr Licciardo has also
had an extensive commercial banking career with the Commonwealth Bank and State
Bank Victoria. Mr Licciardo is a former Chairman of the Governance Institute Australia
(GIA) in Victoria and the Melbourne Fringe Festival, a fellow of GIA, the Institute of
Chartered Secretaries (CIS) and the Australian Institute of Company Directors (AICD)
and a Director of ASX listed Frontier Digital Ventures Limited, iCar Asia Limited and
Mobilicom Limited as well as several other public and private companies.
Chris Lobb (Mertons Corporate Services Pty Ltd)
(B Bus (Acc), FGIA, FCIS, CPA, MAICD)
Joint Company Secretary
Mr Lobb was appointed Joint Company Secretary on 17 October 2016 and is the
Manager, Corporate Governance at Mertons Corporate Services Pty Ltd. Mr Lobb has
over 20 years’ experience as a company secretary having held the role for both for listed
and unlisted entities, including CSG Limited, MSF Sugar Limited, Colonial First State
Property Management and The Gandel Group. Mr Lobb is a former State Chairman of
the Governance Institute of Australia (GIA) in Victoria and non-executive director of
Box Hill Institute of TAFE.
mEETInGs oF DIRECToRs
Directors’ meetings held between 1 July 2016 and 30 June 2017:
Greg Ridder
Harry Debney
Ruslan Kogan
David Shafer
BoARD
AuDIT AnD RIsK
REmunERATIon
AnD nomInATIon
A
13
13
13
13
B
13
13
13
13
A
3
3
3 (1)
3
B
3
3
3 (1)
3
A
2
2
2
2
B
2
2
2
2
(1) Indicates that a Director is not a member of a specific committee and attended by invitation.
A Number of meetings held during the time the Director held office or was a member of the committee during the year.
B Number of meetings attended.
21
Kogan.com Annual Report 2017 DIRECTORS’ REPORT CONTINuED
CoRPoRATE GoVERnAnCE sTATEmEnT
The Board is committed to achieving and demonstrating the highest standards of corporate governance.
The Board continues to refine and improve the governance framework and practices in place to ensure
they meet the interests of shareholders.
The company complies with the Australian Securities Exchange Corporate Governance Council’s Corporate
Governance Principles and Recommendations 3rd Edition (‘the ASX Principles’). Kogan.com’s Corporate
Governance Statement, which summarises the Company’s corporate governance practices and incorporates
the disclosures required by the ASX Principles, can be viewed at www.kogancorporate.com.
EnVIRonmEnTAl REGulATIon
The Group is not subject to any significant environmental regulations under Commonwealth
or State legislation.
DIRECToRs InTEREsTs
The following table sets out each Director’s relevant interest in shares of the Company at the date
of this report.
Ruslan Kogan
David Shafer
Greg Ridder
Harry Debney
shARE oPTIons
unIssuED shAREs unDER oPTIons
All options were granted during the current financial year.
At the date of this report unissued shares of the Group under option are:
ordinary shares
42,555,205
15,177,705
145,000
222,221
Expiry Date
30 June 2020
30 June 2021
30 June 2021
30 June 2021
30 June 2020 & 30 June 2021
30 June 2022
31 December 2019 & 2020
31 December 2021
Exercise Price
number of shares
1.65
1.80
1.54
1.65
1.65
1.65
1.35
1.35
18,182
396,110
142,858
12,121
212,121
436,365
1,451,856
37,037
2,841,395
All unissued shares are ordinary shares of the Company.
shAREs IssuED on EXERCIsE oF oPTIons
During the financial year, the Group did not issue any ordinary shares as a result of the exercise of options.
22
Kogan.com Annual Report 2017 REmunERATIon REPoRT (AuDITED)
InTRoDuCTIon
The directors are pleased to present the FY17 Remuneration Report, outlining the Board’s approach to the
remuneration for key management personnel (KMP).
The Board recognises that the performance of the Group depends on the quality and motivation of its
team members. The Group remuneration strategy therefore seeks to appropriately attract, reward and
retain team members at all levels of the business, but in particular for management and key executives.
The Board aims to achieve this by establishing executive remuneration packages that include a mix of fixed
remuneration, short term incentives and long term incentives.
The Report covers the following matters:
1. Details of key management personnel;
2. Remuneration governance;
3. Remuneration policy;
4. Company performance;
5. Details of remuneration;
6. Equity instruments;
7. Executive directors service agreements; and
8. Key management personnel transactions.
DETAIls oF KEY mAnAGEmEnT PERsonnEl
Key Management Personnel (KMP) are individuals who have authority and responsibility for planning,
directing and controlling the activities of the Group, directly or indirectly, and comprise the directors
and the senior executives of the Group, as listed below.
KEY mAnAGEmEnT PERsonnEl
PosITIon hElD
GREG RIDDER
RUSLAN KOGAN
DAVID SHAFER
HARRY DEBNEY
Chairman, Non-executive Director
Chief Executive Officer and Executive Director
Chief Financial Officer, Chief Operating Officer
and Executive Director
Non-executive Director
REmunERATIon GoVERnAnCE
The Board has appointed the Remuneration and Nomination Committee whose objective is to assist the
Board in relation to the Group remuneration strategy, policies and actions. In performing this responsibility,
the Committee must give appropriate consideration to the Company’s performance and objectives,
employment conditions and external remuneration relativities.
23
Kogan.com Annual Report 2017 REMUNERATION REPORT (AUDITED) CONTINuED
REmunERATIon AnD nomInATIon CommITTEE
Kogan.com’s Remuneration and Nomination Committee is comprised of the Directors.
The responsibilities of the Remuneration and Nomination Committee include to:
• Develop criteria for Board membership and identify specific individuals for nomination;
• Establish processes for the review of the performance of individual Directors, Board committees
and the Board as a whole and implementation of such processes;
• Review and make recommendations to the Board on Board succession plans generally;
• Review and make recommendations to the Board on the process for recruiting a new Director, including
evaluating the balance of skills, knowledge, experience, independence and diversity on the Board;
• Review and make recommendations to the Board on Kogan.com’s remuneration framework,
remuneration packages and policies applicable to senior management and Directors;
• Review and make recommendations to the Board on equity-based remuneration plans for the executive
team and other employees;
• Define levels at which the CEO must make recommendations to the committee on proposed changes
to remuneration and employee benefit policies;
• Ensure that remuneration packages and policies attract, motivate and retain high calibre executives; and
• Ensure that remuneration policies demonstrate a clear relationship between executives’ performance
and remuneration.
All Directors who are not members of the committee are entitled to attend any meeting of the committee.
The committee may invite any Director and/or member of senior management.
A full charter outlining the Remuneration and Nomination Committee’s responsibilities and the Process
for Evaluation of Performance are available at www.kogancorporate.com.
Kogan.com has not engaged remuneration consultants for their services as at the date of this report.
KPMG were engaged by the Remuneration and Nomination committee to provide remuneration advice
in relation to the incentive plans.
The Committee sought input from independent remuneration consultants in 2017 to assist in the review
of a number of remuneration matters.
REmunERATIon PolICY
The Group has established incentive arrangements subsequent to listing on the ASX to assist in the attraction,
motivation and retention of the executive team and other selected employees. To align the interests of its
employees and the goals of the Group, the Directors have decided the remuneration packages of the
executive team and other selected employees will consist of the following components:
• Fixed remuneration (inclusive of superannuation);
• Short term cash based incentives; and
• Long term equity based incentives.
The payment of any cash and award of equity under the incentive arrangements will be subject to the
achievement of performance criteria or hurdles set by the Board. The remuneration packages of the
senior management team are determined by the Remuneration and Nomination Committee and reported
to the Board. The remuneration of senior managers will be reviewed annually by the Remuneration and
Nomination Committee. At the absolute discretion of the Remuneration and Nomination Committee,
Kogan.com may seek external advice on the appropriate level and structure of the remuneration packages
of the senior management team from time to time.
The table below represents the target remuneration mix for group executives in the current year.
The short-term incentive is provided at target levels, and the long-term incentive amount is provided
based on the value granted in the current year.
24
Kogan.com Annual Report 2017 Fixed remuneration
short term incentive
long-term incentive
80%
80%
20%
20%
–%
–%
AT RIsK
CEO
CFO, COO
FIXED REmunERATIon
Fixed remuneration is comprised of the base salary and employee benefits which include superannuation,
leave entitlements and other benefits.
The salaries are normally paid monthly and are based on:
• responsibilities, abilities, experience and performance;
• employee’s performance in the period since the last review; and
• the Group’s pay structure.
The salaries are benchmarked against similar ASX-listed and other online retail companies.
No KMP received an adjustment to fixed remuneration in the 2017 financial year.
shoRT TERm InCEnTIVEs – CAsh BAsED
The following table outlines the significant aspects of the STI.
Purpose of STI plan
Provide a link between remuneration and both short term Company
and individual performance.
Eligibility
Create sustainable shareholder value.
Reward individual for their contribution to the success of the Group.
Actively encourage employees to take more ownership over the EBITDA.
Offers of cash incentive may be made to any employee of the Kogan Group
(including a director employed in an executive capacity) or any other
person who is declared by the Board to be eligible to receive a grant
of cash incentive under the STI.
Calculation & Target
The actual EBITDA of Kogan shall exceed the management forecast
for the full financial year (after payment of the STI).
Maximum opportunity
25% of the outperformance will be allocated to a ‘bonus pool’.
The ‘bonus pool’ will then be shared in cash bonuses among a number
of employees in fixed proportions.
The maximum payable is 25% of the outperformance and 35% of the
employee’s annual salary.
Performance conditions
Outperformance of the actual EBITDA.
Continuation of employment.
Why were the performance
conditions chosen
To achieve successful and sustainable financial business outcomes as well
as annual objectives that drive short-term and long-term business success
and sustainability.
Performance period
Timing of assessment
Form of payment
Board discretion
7 July 2016 to 30 June 2017.
July 2017, following the completion of the 30 June 2017 accounts.
Paid in cash.
Targets are reviewed annually and the Board has discretion to adapt
appropriately to take into account exceptional items.
25
Kogan.com Annual Report 2017 REMUNERATION REPORT (AUDITED) CONTINuED
lonG TERm InCEnTIVEs – EQuITY InCEnTIVE PlAn
The Group has established an Equity Incentive Plan (EIP), which is designed to align the interests of eligible
employees more closely with the interests of Shareholders in the listed entity post 7 July 2016. under the
EIP, eligible employees may be offered Restricted Shares, Options or Rights which may be subject to vesting
conditions. The Group may offer additional long-term incentive schemes to senior management and other
employees over time.
The following table outlines the significant aspects of the current EIP.
Purpose of LTI plan
Support the strategy and business plan of the Group.
Eligibility
Align the interests of employees more closely with the interests
of Shareholders.
Reward individual for their contribution to the success of the Group
over the long term.
Offers of Incentive Securities may be made to any employee of the
Kogan Group (including a director employed in an executive capacity)
or any other person who is declared by the Board to be eligible to receive
a grant of incentive Securities under the EIP.
Service condition on vesting
Individual must be employed by the Kogan Group at time of vesting.
Form of award and payment
Performance Rights
Board discretion
Consideration
Rights
Restrictions on dealing
The Board has the absolute discretion to determine the terms and
conditions applicable to an offer under the EIP
Nil.
Each Right confers on its holder an entitlement to a Share, subject
to satisfaction of applicable conditions
Shares allocated upon exercise of Performance Rights will rank equally
with all existing ordinary shares from the date of issue (subject only to the
requirements of Kogan’s Securities Trading Policy).
upon vesting, there will be no disposal restrictions placed on the Shares
issued to participants (subject only to the requirements of Kogan.com’s
Securities Trading Policy).
Lapse of Rights
A right will lapse upon the earliest to occur of:
– Expiry date;
– Failure to meet vesting conditions;
– Employment termination;
– The participant electing to surrender the Right;
– Where, in the opinion of the Board, a participant deals with
a Right in contravention of any dealing restrictions under the EIP.
26
Kogan.com Annual Report 2017 non-EXECuTIVE DIRECToRs’ REmunERATIon
Kogan.com’s Non-executive Director remuneration policy is set up to attract and retain Directors with
the experience, knowledge, expertise and acumen to manage the Company.
Each of the Non-Executive Directors has entered into appointment letters with Kogan.com, confirming
the terms of their appointment, their roles and responsibilities and Kogan.com’s expectations of them
as Directors.
under the Constitution, the Board may decide the remuneration from Kogan.com to which each Director
is entitled for their services as a Director. However, under the ASX Listing Rules, the total amount paid
to all Non-Executive Directors for their services must not exceed in aggregate in any financial year the
amount fixed at Kogan.com’s general meeting.
This amount has been fixed by Kogan.com at $500,000 per annum. Any change to that aggregate
annual sum needs to be approved by Shareholders.
The annual Non-Executive Directors’ fees paid or payable to Greg Ridder (as Chairman) and to Harry Debney
for FY17 are $160,000 and $85,000, respectively. Non-executive Directors did not receive remuneration
for any services provided in FY16.
No additional fees are presently proposed to be paid for membership or Chairmanship of the Audit and
Risk Management Committee or the Remuneration and Nomination Committee. In subsequent years,
additional fees for membership or Chairmanship of these committees may apply.
All Directors’ fees include superannuation payments, to the extent applicable.
Non-executive Directors are not eligible to participate in Kogan.com’s short term or long term
incentive programs.
ComPAnY PERFoRmAnCE
RElATIonshIP To REmunERATIon PolICY
In considering the consolidated entity’s performance and the benefits of shareholder wealth, the
Remuneration and Nomination Committee has regard to a range of indicators in respect of senior
executive remuneration and linked these to the previously described short and long term incentives.
At Kogan.com, we remunerate our KMP in a way which:
• Aims to align executive interests with shareholders;
• Is sufficiently competitive in the marketplace to enable us to attract, retain, and motivate
exceptional people; and
• Encourages and rewards the behaviours and outcomes that will deliver business success
and a good return for our shareholders.
To achieve this, we set challenging targets and monitor performance against them closely.
We have strengthened the connection between our key reward metrics and our business strategy
by adapting the performance conditions used for our STI.
We remain committed to the use of stretching performance metrics, and now recognise the importance
of having performance conditions that are linked to customer engagement.
27
Kogan.com Annual Report 2017 REMUNERATION REPORT (AUDITED) CONTINuED
shAREholDER WEAlTh
The following table presents these indicators showing the impact of the Company’s performance
on shareholder wealth, during the financial years:
Net profit attributable to owners of the company (in $’m)
Earnings per share
EBITDA (in $’m)
Dividends paid (in $’m)
Operating income growth
Share Price at 30 June 2017
FY17*
3.7
0.04
9.5
3.6
37%
1.67
* As the company was listed on the ASX on 7 July 2016 there are no prior year comparatives. The IPO price at the time of listing was
$1.80 per ordinary share.
Profit is one of the financial performance targets considered in setting the Short Term Incentive (STI).
Profit amounts have been calculated in accordance with Australian Accounting Standards (AASBs).
EBITDA is calculated based on the operating profit before interest, tax, depreciation and amortisation.
Operating income is operating profit as reported in the statement of profit or loss.
DETAIls oF REmunERATIon
EXECuTIVE KmP REmunERATIon
Details of the remuneration to the executive Key Management Personnel is set out below.
Total
$
470,615
406,052
876,667
shoRT-TERm
PosT-
EmPloYmEnT
short-Term
Incentives
$
superannuation
$
lonG TERm
Annual &
long service
leave
$
64,498
55,308
119,806
25,743
24,870
50,613
30,374
25,874
56,248
R. Kogan
D. Shafer
Total
salary
and Fees
$
350,000
300,000
650,000
28
Kogan.com Annual Report 2017 non-EXECuTIVE DIRECToRs’ REmunERATIon
The table below sets out the remuneration paid to Non-Executive Directors for the 2017 financial year:
G. Ridder
H. Debney
Total
shoRT-TERm
PosT-
EmPloYmEnT
Total fees
$
superannuation
$
146,118
85,000
231,118
13,882
–
13,882
Total
$
160,000
85,000
245,000
EQuITY InsTRumEnTs
Kogan.com successfully listed on the ASX on 7 July 2016. The following table presents the interests of each
director held directly, indirectly or beneficially, including their related parties as at 30 June 2017:
Ordinary Shares
Ruslan Kogan
David Shafer
Greg Ridder
Harry Debney
no. shares
held
2017
47,430,205
17,802,705
111,110
222,221
% ownership
2017
50.8%
19.1%
0.2%
0.3%
EXECuTIVE DIRECToRs sERVICE AGREEmEnTs
Notice and termination payments
Executives are on contracts with no fixed end date.
The following table captures the notice periods applicable to the termination of the executives’ employment:
CEO
CFO, COO
Termination
notice by
Kogan.com
Termination
notice by
employee
Termination
payments
provided for
under
contract
12 months
12 months
12 months
6 months
6 months
6 months
29
Kogan.com Annual Report 2017 REMUNERATION REPORT (AUDITED) CONTINuED
Chief Executive Officer & Chief Financial Officer Service Agreements
Prior to the Company’s ASX Listing on 7 July 2016, Ruslan Kogan and David Shafer were not subject to
employment arrangements and instead received profit distributions proportionate to their shareholdings
in the Group. Distributions paid in FY17 and FY16 are disclosed in the notes to the Financial Statements.
Subsequent to Listing, Ruslan Kogan and David Shafer entered into employment contracts.
Chief Executive Officer
Ruslan Kogan is employed in the position of Chief Executive Officer of Kogan.com.
Kogan.com has entered into an employment contract with Ruslan to govern his employment with Kogan.com.
Ruslan or Kogan.com may terminate Ruslan’s employment by giving 12 months’ notice. Kogan.com may
elect to make payment in lieu of notice. Kogan.com may terminate Ruslan’s employment without notice
in circumstances warranting summary dismissal.
upon termination of Ruslan’s employment, Ruslan will be subject to a restraint of trade period of 12 months
during which time Ruslan Kogan cannot compete with Kogan.com or provide services in any capacity
to a competitor of Kogan.com or solicit suppliers, clients or employees of Kogan.com. The enforceability
of the restraint clause is subject to all usual legal requirements.
The Board may invite Ruslan to participate in Kogan.com’s incentive programs.
Chief Financial Officer and Chief Operating Officer
David Shafer is employed in the position of Chief Financial Officer and Chief Operating Officer of Kogan.com.
Kogan.com has entered into an employment contract with David to govern his employment with Kogan.com.
David or Kogan.com may terminate David Shafer’s employment by giving 6 months’ notice. Kogan.com
may elect to make payment in lieu of notice. Kogan.com may terminate David’s employment without notice
in circumstances warranting summary dismissal.
upon termination of David’s employment, David will be subject to a restraint of trade period of 6 months
during which time David cannot compete with Kogan.com or provide services in any capacity to a competitor
of Kogan.com or solicit suppliers, clients or employees of Kogan.com. The enforceability of the restraint
clause is subject to all usual legal requirements.
The Board may invite David to participate in Kogan.com’s incentive programs.
30
Kogan.com Annual Report 2017 KEY mAnAGEmEnT PERsonnEl TRAnsACTIons
Transactions between related parties are on normal commercial terms and conditions no more favourable
than those available to other parties unless otherwise stated.
The following transactions occurred with related parties:
Kogan Australia Pty Ltd entered into a Logistic Services Agreement with eStore Logistics Pty Ltd (“eStore”),
in a prior financial period, in relation to the provision of warehousing, distribution and logistics services by
eStore to Kogan Australia. Ruslan Kogan is a minority shareholder and director of eStore. The agreement
was entered into on arm’s length terms.
KmP
Transaction type
ConsolIDATED GRouP
2017
$
2016
$
Ruslan Kogan Purchases from eStore warehousing
6,335,297
4,625,251
The Director’s report is signed on behalf of the Board in accordance with a resolution of the Directors.
Greg Ridder
Non-Executive Chairman
Melbourne, 21 September 2017
31
Kogan.com Annual Report 2017
AuDIToR’s InDEPEnDEnCE
DEClARATIon
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
To the Directors of Kogan.com Ltd
I declare that, to the best of my knowledge and belief, in relation to the audit of Kogan.com Ltd for the
financial year ended 30 June 2017 there have been:
no contraventions of the auditor independence requirements as set out in the Corporations Act
2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
BW Szentirmay
Partner
Melbourne
21 September 2017
32
i.
ii.
KPMG
32
Kogan.com Annual Report 2017
FInAnCIAl REPoRT
Contents
34 ConsolIDATED InComE sTATEmEnT
AnD ConsolIDATED sTATEmEnT
oF ComPREhEnsIVE InComE
35 ConsolIDATED sTATEmEnT
oF FInAnCIAl PosITIon
36 ConsolIDATED sTATEmEnT
oF ChAnGEs In EQuITY
37 ConsolIDATED sTATEmEnT
oF CAsh FloWs
38 noTEs To ThE FInAnCIAl sTATEmEnTs
38 BASIS OF PREPARATION
38 A. PRINCIPLES OF CONSOLIDATION
38 B. COMPARATIVE FIGuRES
38 C. SEGMENT INFORMATION
39 D. uSES OF JuDGEMENTS AND ESTIMATES
39 E. COMMON CONTROL TRANSACTION
39 F.
FuNCTIONAL AND
PRESENTATION CuRRENCY
40 SECTION 1: BuSINESS PERFORMANCE
40 1.1 REVENuE
41
41
41
43 1.4 NOTES TO THE CASH FLOW STATEMENT
1.2A PROFIT FOR THE YEAR
1.2B FINANCE COSTS
1.3 TAX BALANCES
44 SECTION 2: OPERATING ASSETS AND LIABILITIES
44 2.1 WORKING CAPITAL
46 2.2
48 2.3 PROPERTY, PLANT AND EQuIPMENT
INTANGIBLE ASSETS
50 SECTION 3: CAPITAL STRuCTuRE AND FINANCING
50 3.1 LOAN AND BORROWINGS
50 3.2
CAPITAL AND FINANCIAL
RISK MANAGEMENT
57 3.3.1 ISSuED CAPITAL AND RESERVES
58 3.3.2 DISTRIBuTIONS
59 3.4 EARNINGS PER SHARE
60 SECTION 4: GROuP STRuCTuRE
60 4.1 CONTROLLED ENTITIES
60 4.2 DEED OF CROSS GuARANTEE
61 4.3 PARENT ENTITY DISCLOSuRES
62 4.4 RELATED PARTIES
63 SECTION 5: EMPLOYEE REWARD
AND RECOGNITION
63 5.1
KEY MANAGEMENT PERSONNEL
COMPENSATION
INCENTIVE PLANS
63 5.2
67 SECTION 6: OTHER
67 6.1 SuBSEQuENT EVENTS
67 6.2 REMuNERATION OF AuDITORS
68 6.3 CAPITAL AND LEASING COMMITMENTS
68 6.4 NEW ACCOuNTING STANDARDS
72 6.5 COMPANY INFORMATION
73 DIRECToRs’ DEClARATIon
74
InDEPEnDEnT AuDIToR’s REPoRT
80 shAREholDER InFoRmATIon
33
Kogan.com Annual Report 2017 ConsolIDATED InComE sTATEmEnT AnD ConsolIDATED
sTATEmEnT oF ComPREhEnsIVE InComE
FOR THE YEAR1 ENDED 30 JuNE 2017
Revenue
Cost of sales
Gross profit
Selling and distribution expenses
Warehouse expenses
Administrative expenses
Other expenses
Results from operating activities
Finance income
Finance costs
unrealised foreign exchange (loss)
Net finance costs
Profit before income tax
Tax expense
Net profit for the period attributable
to the members of company
ConsolIDATED GRouP
note
2017
$
2016
$
1.1
289,517,780
211,158,595
1.2a
(237,824,300)
(178,462,191)
51,693,480
32,696,404
(15,275,422)
(10,182,023)
(5,810,443)
(4,672,696)
(23,108,076)
(15,798,804)
(993,060)
(406,279)
6,506,479
1,636,602
469,845
(124,694)
(727,265)
(382,114)
6,207
(211,588)
–
(205,381)
1.2b
6,124,365
1,431,221
1.3
(2,384,500)
(622,072)
3,739,865
809,149
Basic earnings per share
Diluted earnings per share
3.4
3.4
0.04
0.04
2,359
2,359
The accompanying notes form part of these financial statements
1 Pursuant to ASIC relief granted on 26 September 2016, the reporting period represents the period from 19 May 2016 (Kogan.com Ltd
date of incorporation) to 30 June 2017. As Kogan.com Ltd acquired the Kogan group of companies just prior to the date of listing on
the Australian Stock Exchange on 7 July 2016, and was previously non-operational, the reporting period represents the trading results
of the Kogan group of companies for the twelve months ended 30 June 2017.
34
Kogan.com Annual Report 2017 ConsolIDATED sTATEmEnT oF FInAnCIAl PosITIon
AS AT 30 JuNE 2017
ASSETS
CuRRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Prepayments and other current assets
Current tax receivable
TOTAL CuRRENT ASSETS
NON-CuRRENT ASSETS
Plant and equipment
Intangible assets
Deferred tax assets
TOTAL NON-CuRRENT ASSETS
TOTAL ASSETS
LIABILITIES
CuRRENT LIABILITIES
Trade and other payables
Borrowings
Financial liabilities
Current tax liabilities
Employee benefits
Provisions
Deferred income
TOTAL CuRRENT LIABILITIES
NON-CuRRENT LIABILITIES
Employee benefits
Provisions
TOTAL NON-CuRRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Merger reserve
Other reserves
Retained earnings
TOTAL EQUITY
The accompanying notes form part of these financial statements
note
2017
$
2016
$
2.1.2a
2.1.1
2.1.2b
1.3
2.3
2.2
1.3
32,027,680
2,045,324
1,808,301
2,981,881
39,741,987
20,532,375
625,517
1,444,206
–
132,217
74,440,508
26,898,980
489,372
571,302
4,480,040
4,633,473
913,936
339,536
5,883,348
5,544,311
80,323,856
32,443,291
2.1.3
28,504,597
15,469,375
3.1
–
4,900,000
727,265
2,163,197
508,188
488,337
–
–
341,233
235,812
5,165,416
4,382,767
37,557,000
25,329,187
65,614
29,557
95,171
43,364
–
43,364
37,652,171
25,372,551
42,671,685
7,070,740
3.3.1
3.3.1
167,100,702
(131,816,250)
343
–
(73,547)
(290,645)
7,460,780
7,361,042
42,671,685
7,070,740
35
Kogan.com Annual Report 2017 ConsolIDATED sTATEmEnT oF ChAnGEs In EQuITY
FOR THE YEAR ENDED 30 JuNE 2017
ConsolIDATED GRouP
share
Capital
$
Retained
Earnings
$
merger
Reserve
$
Translation
Reserve
$
note
share
based
payments
Reserve
$
Total
Equity
$
Balance at 1 July 2015
343
9,011,995
–
(290,645)
–
8,721,693
Comprehensive
income
Profit for the year
Total comprehensive
income for the year
Transactions with
owners, in their
capacity as owners,
and other transfers
Issue of ordinary
shares
Distributions paid
3.3.2
Total transactions
with owners, in their
capacity as owners
Balance at
30 June 2016
–
–
–
–
–
809,149
809,149
–
(2,460,102)
(2,460,102)
343
7,361,042
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
809,149
809,149
–
(2,460,102)
(2,460,102)
(290,645)
–
7,070,740
Balance at 1 July 2016
343
7,361,042
–
(290,645)
–
7,070,740
Comprehensive
income
Profit for the year
Total comprehensive
income for the year
Transactions with
owners, in their
capacity as owners,
and other transfers
Issue of ordinary
shares, net of issue
costs
Kogan Group
restructure
Equity-settled share-
based payments
3.3.1
5.2
Dividends paid
3.3.2
Total transactions
with owners and
other transfers
Balance at
30 June 2017
–
–
3,739,865
3,739,865
167,100,359
–
–
–
–
–
(3,640,127)
–
–
–
(131,816,250)
–
–
167,100,359 (3,640,127) (131,816,250)
–
–
–
–
–
–
–
–
3,739,865
3,739,865
– 167,100,359
(131,816,250)
217,098
217,098
–
(3,640,127)
217,098 31,861,080
167,100,702 7,460,780 (131,816,250)
(290,645)
217,098 42,671,685
36
Kogan.com Annual Report 2017 ConsolIDATED sTATEmEnT oF CAsh FloWs
FOR THE YEAR ENDED 30 JuNE 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Interest received
Finance costs paid
(Income tax paid)
ConsolIDATED GRouP
note
2017
$
2016
$
291,236,987
208,751,567
(280,322,571)
(196,594,316)
469,845
6,224
(159,806)
(211,589)
(287,785)
(473,587)
Net cash provided by operating activities
1.4
10,936,670
11,478,299
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment
Purchase of intangible assets
Net cash (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issue of shares
Transaction costs related to the issue of shares
Proceeds from borrowings
Repayment of borrowings
Dividends/distributions paid
Net cash provided by/(used in) financing activities
Net increase in cash held
Cash and cash equivalents at beginning of financial year
(87,311)
(34,371)
(3,465,506)
(4,373,306)
(3,552,817)
(4,407,677)
34,999,999
(3,624,346)
–
–
–
4,900,000
(4,900,000)
(8,100,000)
(3,640,127)
(2,460,102)
22,835,526
(5,660,102)
30,219,379
1,410,520
1,808,301
397,781
Cash and cash equivalents at end of financial year
3.2
32,027,680
1,808,301
The accompanying notes form part of these financial statements.
37
Kogan.com Annual Report 2017 noTEs To ThE FInAnCIAl sTATEmEnTs
FOR THE YEAR ENDED 30 JuNE 2017
BAsIs oF PREPARATIon
The financial report of Kogan.com Ltd and its controlled entities (“the Group”) for the year ended 30 June 2017
was authorised for issue in accordance with a resolution of the Directors on 21 September 2017.
Pursuant to ASIC relief granted on 26 September 2016, the reporting period represents the period from
19 May 2016 (Kogan.com Ltd date of incorporation) to 30 June 2017. As Kogan.com Ltd acquired the
Kogan group of companies just prior to the date of listing on the Australian Stock Exchange on 7 July 2016,
and was previously non-operational, the reporting period represents the trading results of the Kogan group
of companies for the twelve months ended 30 June 2017.
The Group is a for-profit entity for financial reporting purposes under Australian Accounting Standards
and the nature of its operations and principal activities are described in the Directors’ Report.
These general purpose financial statements have been prepared in accordance with the Corporations Act
2001, Australian Accounting Standards and Interpretations of the Australian Accounting Standards Board
and International Financial Reporting Standards as issued by the International Accounting Standards Board
(IASB). Material accounting policies adopted in the preparation of these financial statements are presented
below and have been consistently applied unless stated otherwise.
The accounting policies applied in these financial statements are the same as those applied in the Group’s
consolidated financial statements as at and for the year ended 30 June 2016.
Except for cash flow information, the financial statements have been prepared on an accruals basis and
are based on historical costs, modified, where applicable, by the measurement at fair value of selected
non-current assets, financial assets and financial liabilities.
A. PRInCIPlEs oF ConsolIDATIon
The consolidated financial statements incorporate all of the assets, liabilities and results of the parent
(Kogan.com Ltd) and all of the subsidiaries (including any structured entities), in line with AASB 10
Consolidated Financial Statements. Subsidiaries are entities the parent controls. The parent controls
an entity when it 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 over the entity. A list of the subsidiaries
is provided in Note 4.1.
The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements
of the Group from the date on which control is obtained by the Group. The consolidation of a subsidiary
is discontinued from the date that control ceases. Intercompany transactions, balances and unrealised gains
or losses on transactions between group entities are fully eliminated on consolidation. Accounting policies
of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the
accounting policies adopted by the Group.
B. ComPARATIVE FIGuREs
When required by Accounting Standards, comparative figures have been adjusted to conform to changes
in presentation for the current financial year.
Where the Group retrospectively applies an accounting policy, makes a retrospective restatement or
reclassifies items in its financial statements, an additional (third) statement of financial position as at the
beginning of the preceding period in addition to the minimum comparative financial statements is presented.
C. sEGmEnT InFoRmATIon
The Group’s operations consist primarily of selling goods and services online to Australian customers.
The Group has considered the requirements of AASB 8 Operating Segments and assessed that the
Group has one operating segment, representing the consolidated results, as this is the only segment
which meets the requirements of AASB 8.
38
Kogan.com Annual Report 2017 D. usEs oF JuDGEmEnTs AnD EsTImATEs
In preparing the financial report, the Directors made an assessment of the ability of the group to continue
as a going concern, which contemplates the continuity of business operations, realisation of assets and
settlement of liabilities in the ordinary course of business and at the amounts stated in the financial report.
The Directors have a reasonable expectation that the group will continue to have adequate financial
resources to continue to meet its obligations as they fall due and remain within the limits of its loan
facility conditions and covenants as applicable. For these reasons, the financial report has been prepared
on a going concern basis.
Furthermore, in preparing the financial report management have made judgements, estimates and
assumptions that affect the application of the Company’s accounting policies and the reported amounts
of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognised prospectively.
Estimates and judgments that have the most significant effect on the amounts recognised in the financial
statements are:
• The provisions for warranties and sales returns are based on estimates from historical warranty and
sales returns data associated with similar products and services. The Group expects to incur most
of the liability over this next year.
• The assessment of the carrying value of non-current assets, including intangible assets, is based
on management’s assessment of the nature of the capitalised costs and their expected continued
contribution of economic benefit to the Group, having regard to actual and forecast performance
and profitability.
• The provision for slow moving and obsolete inventory is based on estimates of net realisable value
of aged items over 365 days.
E. Common ConTRol TRAnsACTIon
On 6 July 2016 Kogan.com Ltd acquired control of Kogan Operations Holdings Pty Ltd and subsidiaries at
book value for consideration of $131,816,250 in preparation for the Initial Public Offering and the Group’s
admission to the ASX on 7 July 2016 pursuant to a replacement prospectus dated 24 June 2016.
The results, including prior year comparatives, reflect a full 12 months of trading for all Kogan group entities
as if they were a consolidated group in both reporting periods. This ensures consistency of presentation
with historical and forecast financial information contained in the prospectus.
F. FunCTIonAl AnD PREsEnTATIon CuRREnCY
These consolidated financial statements are presented in Australian dollars, which is the Company’s
functional currency.
39
Kogan.com Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS CONTINuED
sECTIon 1: BusInEss PERFoRmAnCE
1.1 REVEnuE
Sale of goods
Revenue is recognised when the significant risks and rewards of ownership have been transferred to the
customer, recovery of the consideration is probable, the associated costs and possible return of goods can
be estimated reliably, there is no continuing management involvement with the goods, and the amount
of revenue can be measured reliably. Prior to these conditions being met, receipts from the sale of goods
are recorded in deferred income. Revenue is measured net of returns, trade discounts and volume rebates.
The timing of transfer of risks and rewards varies depending on the individual terms of the sales agreement.
For sale of goods, the transfer usually occurs upon dispatch of the goods, where risks and rewards
contractually transfer to the customer.
A provision for warranties is recognised when the underlying products or services are sold, based on historical
warranty data and a specific review of warranty claims outstanding.
A provision for sales returns is recognised for the expected value of returns, based on historical sales return
data and a specific review of the profile of sales for the period and post period-end.
Rendering of services
Revenue from the rendering of services is recognised when management has fulfilled its service obligations
in providing mobile and travel services to the Group’s customers, recovery of the consideration is probable
and the amount of revenue can be measured reliably. Revenue is measured net of returns and trade discounts.
The timing of revenue recognition varies depending on the individual terms of the services agreement and
the contractual obligations of the Group.
Revenue from the rendering of services is deferred when a customer has paid up front but the Group has
not yet fulfilled its obligation to the customer, in line with the terms and conditions of sale.
ConsolIDATED GRouP
2017
$
2016
$
276,496,962
204,213,344
9,971,911
4,625,461
286,468,873
208,838,805
893,198
399,094
1,756,615
1,184,759
-
1,135,031
3,048,907
2,319,790
289,517,780
211,158,595
Revenue
Sales revenue:
– sale of goods
– rendering of services
Other revenue:
– marketing subsidies
– ispONE settlement
– other revenue
Total revenue
40
Kogan.com Annual Report 2017 1.2A PRoFIT FoR ThE YEAR
Expenses
Cost of sales
Cost of services
Total Cost of sales
Employee benefit expense
Depreciation and amortisation expense
Costs associated with the group’s Initial Public Offering not eligible to be
offset against issued share capital
2017
$
2016
$
232,281,905
175,104,134
5,542,395
3,358,057
237,824,300
178,462,191
13,369,326 1
8,461,766
3,823,701
2,411,394
1,799,602
1,090,236
1
Includes $1,183,748 of bonus shares issued to certain senior management (excluding Ruslan Kogan and David Shafer) upon the
company’s IPO.
1.2B FInAnCE CosTs
Realised foreign exchange gains/(losses)
Finance costs on debt facilities
Total Finance costs
1.3 TAX BAlAnCEs
2017
$
35,112
2016
$
27,719
(159,806)
(239,307)
(124,694)
(211,588)
The income tax expense (income) for the year comprises current income tax expense (income) and deferred
tax expense (income).
Current income tax expense charged to profit or loss is the tax payable on taxable income. Current tax liabilities
(assets) are measured at the amounts expected to be paid to (recovered from) the relevant taxation authority.
Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances
during the year as well as unused tax losses.
Current and deferred income tax expense (income) is charged or credited outside profit or loss when the
tax relates to items that are recognised outside profit or loss.
Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period
when the asset is realised or the liability is settled and their measurement also reflects the manner in which
management expects to recover or settle the carrying amount of the related asset or liability.
Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the
extent that it is probable that future taxable profit will be available against which the benefits of the
deferred tax asset can be utilised.
Deferred tax assets and liabilities are offset where: (i) a legally enforceable right of set-off exists; and (ii)
the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either
the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous
realisation and settlement of the respective asset and liability will occur in future periods in which significant
amounts of deferred tax assets or liabilities are expected to be recovered or settled.
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 ATO are presented as operating
cash flows included in receipts from customers or payments to suppliers.
41
Kogan.com Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS CONTINuED
a. The components of tax comprise:
Current tax
Deferred tax
Over provision in respect of prior years
b. The prima facie tax on profit from ordinary activities
before income tax is reconciled to income tax as follows:
Prima facie tax payable on profit from ordinary activities
before income tax at 30% (2016: 30%):
– consolidated group
Add:
Tax effect of:
– amortisation of intangibles
– non-deductible IPO related costs
– entertainment (non-deductible)
– other items
Less:
Tax effect of:
– prior year losses now recognised
– rebateable fully franked dividends
– over provision for current year income tax
– current year revenue losses not recognised
– over provision of prior year income tax
– trust related tax adjustments
Income tax attributable to the Group
The applicable weighted average effective tax rates are
as follows:
ConsolIDATED GRouP
note
2017
$
2016
$
3,310,357
831,918
(574,400)
300,540
(351,456)
(510,386)
2,384,500
622,072
1,837,309
429,372
444,985
436,424
51,567
4,290
(111,604)
70,560
2,425
431,108
–
13,528
19,558
(11,783)
(12,078)
–
9,253
(351,456)
(510,386)
–
2,384,500
39%
253,500
622,072
43%
42
Kogan.com Annual Report 2017 The effective tax rate for FY17 of 39% reflects the impact of non-deductible intangible amortisation
and other non-deductible costs, offset by an overprovision for income tax in the prior year.
Current and deferred tax balances:
Assets
CuRRENT/NON-CuRRENT
Current tax receivable
Deferred tax asset
Total
Liabilities
CuRRENT
Current tax liabilities
Total
1.4 noTEs To ThE CAsh FloW sTATEmEnT
a. Reconciliation of Cash Flows from Operating Activities
with Profit after Income Tax
Profit after income tax
Non-cash flows in profit:
– depreciation & amortisation
– transaction cost related to the issue of shares
– issue of performance rights and shares
– write off of intangibles
– unrealised foreign exchange movement
Changes in assets and liabilities:
– (increase)/decrease in trade and term receivables
– (increase)/decrease in prepayments and other assets
– (increase)/decrease in inventories
– increase in trade payables and accruals
– increase/(decrease) in deferred income
– increase/(decrease) in provisions
– decrease in income taxes receivable
– increase in income taxes payable
– (decrease) in deferred taxes payable
– (increase) in deferred taxes receivable
Cash flows from operating activities
ConsolIDATED GRouP
2017
$
2016
$
–
913,936
913,936
132,217
339,536
471,753
2,163,197
2,163,197
–
–
ConsolIDATED GRouP
2017
$
2016
$
3,739,865
809,149
3,823,701
1,799,602
1,743,603
3,762
727,265
2,411,394
-
-
-
-
936,557
(780,772)
779,406
(1,305,453)
(19,209,612)
4,540,134
13,617,571
7,524,719
782,649
(1,850,291)
471,287
132,217
2,163,197
(19,066)
625,856
-
-
(137,835)
(574,400)
(339,536)
10,936,670
11,478,299
43
Kogan.com Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS CONTINuED
sECTIon 2: oPERATInG AssETs AnD lIABIlITIEs
2.1 WoRKInG CAPITAl
2.1.1 Inventories
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based
on the weighted average cost principle and includes all direct costs attributable to purchase, such as
freight and insurance.
CuRRENT
Inventory in transit
Inventory on hand
ConsolIDATED GRouP
2017
$
2016
$
9,013,522
4,772,392
30,728,465
15,759,983
39,741,987
20,532,375
2.1.2a Trade and Other Receivables
Trade and other receivables include amounts due from customers for goods sold and services performed
in the ordinary course of business. Receivables expected to be collected within 12 months of the end of the
reporting period are classified as current assets.
Trade and other receivables are initially recognised at fair value and subsequently measured at amortised
cost using the effective interest method, less any provision for impairment.
CuRRENT
Trade receivables
Other receivables
Total current trade and other receivables
Credit risk
ConsolIDATED GRouP
2017
$
2016
$
1,785,268
1,785,268
627,436
627,436
260,056
2,354,445
2,045,324
2,981,881
The Group has no significant concentration of credit risk with respect to any single counterparty or group
of counterparties other than those receivables specifically provided for and mentioned within Note 3.2.
The class of assets described as “trade and other receivables” is considered to be the main source of credit
risk related to the Group.
On a geographical basis, the Group has significant credit risk exposures in Australia given the substantial
operations in this region. The Group’s exposure to credit risk for receivables at the end of the reporting
period in those regions is as follows:
AuD
Australia
44
ConsolIDATED GRouP
2017
$
2,045,324
2,045,324
2016
$
2,981,881
2,981,881
Kogan.com Annual Report 2017 The following table details the Group’s trade and other receivables exposed to credit risk with ageing analysis
and impairment provided for thereon. Amounts are considered as “past due” when the debt has not been
settled, within the terms and conditions agreed between the Group and the customer or counterparty to
the transaction. Receivables that are past due are assessed for impairment by ascertaining solvency of the
debtors and are provided for where there are specific circumstances indicating that the debt may not be
fully repaid to the Group.
The balance of receivables that remain within initial trade terms (as detailed in the table) are considered
to be of high credit quality.
The Group had one customer that owed more than $204,532 as at 30 June 2017 (2016: none).
PAsT DuE BuT noT ImPAIRED
(DAYs oVERDuE)
Gross
Amount
$
Past Due
and
Impaired
$
< 30
$
31–60
$
61–90
$
> 90
$
2017
Trade and term receivables
1,785,268
Other receivables
Total
2016
260,056
2,045,324
Trade and term receivables
627,436
Other receivables
Total
2,354,445
2,981,881
2.1.2b OTHER CURRENT ASSETS
Prepayments
Rental bond
Other
–
–
–
–
–
–
1,776,142
–
1,776,142
1,647
–
1,647
1,882
5,597
–
–
1,882
5,597
562,447
56,942
–
–
562,447
56,942
–
–
–
8,047
–
8,047
ConsolIDATED GRouP
2017
$
2016
$
445,287
1,034,115
29,197
151,033
625,517
218,397
191,694
1,444,206
2.1.3 Trade and Other Payables
Trade and other payables represent the liabilities for goods and services received by the entity that remain
unpaid at the end of the reporting period. The balance is recognised as a current liability with the amounts
normally paid within 45 days of recognition of the liability.
CuRRENT
Trade payables
Other payables
Accrued expenses
ConsolIDATED GRouP
2017
$
2016
$
21,176,695
10,105,669
5,936,089
3,259,089
1,391,813
2,104,617
28,504,597
15,469,375
45
Kogan.com Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS CONTINuED
2.2 InTAnGIBlE AssETs
(i) Website development and software costs
Website development and software costs are measured at cost less any accumulated amortisation and
accumulated impairment losses. Such development costs are only capitalised if they can be reliably
measured, the process is technically and commercially feasible, future economic benefits are probable,
and the Group has sufficient resources to complete development.
(ii) Intellectual property
Acquired intellectual property, including customer lists, which enable direct marketing of products and
services are capitalised to the extent it is probable that expected future economic benefits attributable
to the asset will flow to the entity, and the cost can be reliably measured.
(iii) Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied
in the specific asset to which it relates. All other expenditure, including expenditure on internally generated
goodwill and brands, is recognised in profit or loss as incurred.
(iv) Amortisation
Amortisation is calculated to write off the cost of intangible assets less their estimated residual values using
the straight-line method over their estimated useful lives, and is generally recognised in profit or loss.
Intangibles that are considered to have indefinite useful lives are not subject to amortisation.
The estimated useful lives for the current and comparative periods are as follows:
Patents and trademarks
Website development costs
Software costs
Intellectual Property
2.5 years
2.5 years
2.5 years
2.0 years
Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted,
if appropriate.
(v) Impairment of Assets
At each reporting date, the Group reviews the carrying amounts of its non-financial assets (other than
inventories and deferred tax assets) to determine whether there is any indication of impairment. If any
such indication exists, then the asset’s recoverable amount is estimated.
For impairment testing, assets are grouped together into the smallest group of assets that generates
cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGus
(cash generating unit).
The recoverable amount of an asset or CGu is the greater of its value in use and its fair value less costs
to sell. Value in use is based on the estimated future cash flows, discounted to their present value using
a pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset or CGu.
An impairment loss is recognised if the carrying amount of an asset or CGu exceeds its recoverable amount.
Impairment losses are recognised in profit or loss. They are allocated to reduce the carrying amount of assets
in the CGu on a pro rata basis. An impairment loss is reversed only to the extent that the asset’s carrying
amount does not exceed the carrying amount that would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised.
46
Kogan.com Annual Report 2017 Patents and Trademarks:
Cost
Accumulated amortisation and impairment losses
Net carrying amount
Website development costs:
Cost
Accumulated amortisation and impairment losses
Net carrying amount
Software costs:
Cost
Accumulated amortisation and impairment losses
Net carrying amount
Intellectual Property:
Cost
Accumulated amortisation and impairment losses
Net carrying amount
Total intangibles
ConsolIDATED GRouP
2017
$
2016
$
358,425
(227,715)
130,710
260,439
(152,011)
108,428
2,893,581
2,146,396
(2,049,982)
(1,502,986)
843,599
643,410
784,946
765,377
(697,809)
(416,074)
87,137
349,303
8,012,425
5,528,211
(4,593,831)
(1,995,879)
3,418,594
3,532,332
4,480,040
4,633,473
Patents and
Trademarks
$
Website
Development
costs
$
software
costs
$
Intellectual
Property
$
Total
$
127,788
609,813
518,038
1,242,170
2,497,809
Consolidated Group:
Year ended 30 June 2016
Balance at the beginning
of the year
Additions
69,505
466,213
122,400
3,715,189
4,373,306
Effect of movements
in exchange rates
Amortisation charge
Closing value at
30 June 2016
Year ended 30 June 2017
Balance at the beginning
of the year
Additions
Write offs
Effect of movements
in exchange rates
–
–
–
–
–
(88,865)
108,428
(432,616)
(291,135)
(1,425,027)
(2,237,643)
643,410
349,303
3,532,332
4,633,473
108,428
643,410
349,303
3,532,332
4,633,473
113,748
(3,762)
–
747,184
17,244
2,555,154
3,433,330
–
–
–
–
–
–
(3,762)
–
Amortisation charge
(87,704)
(546,995)
(279,410)
(2,668,892)
(3,583,001)
Closing value at
30 June 2017
130,710
843,599
87,137
3,418,594
4,480,040
47
Kogan.com Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS CONTINuED
2.3 PRoPERTY, PlAnT AnD EQuIPmEnT
Property, Plant and Equipment
Each class of property, plant and equipment is carried at cost or fair value as indicated less, where applicable,
any accumulated depreciation and impairment losses.
Plant and equipment
Plant and equipment are measured on the cost basis and therefore carried at cost less accumulated
depreciation and any accumulated impairment losses. In the event the carrying amount of plant and
equipment is greater than the estimated recoverable amount, the carrying amount is written down
immediately to the estimated recoverable amount and impairment losses are recognised either in profit
or loss or as a revaluation decrease if the impairment losses relate to a revalued asset. A formal assessment
of recoverable amount is made when impairment indicators are present.
The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of
the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected
net cash flows that will be received from the asset’s employment and subsequent disposal. The expected
net cash flows have been discounted to their present values in determining recoverable amounts.
The cost of fixed assets constructed within the consolidated group includes the cost of materials, direct
labour, borrowing costs and an appropriate proportion of fixed and variable overheads.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow to the Group and
the cost of the item can be measured reliably. All other repairs and maintenance are recognised as expenses
in profit or loss during the financial period in which they are incurred.
Depreciation
The depreciable amount of all fixed assets is depreciated on a straight-line basis over the asset’s useful life
to the consolidated group commencing from the time the asset is held ready for use. Leasehold improvements
are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of
the improvements.
The depreciation rates used for each class of depreciable assets are:
Class of Fixed Asset
Depreciation Rate
Computer equipment (reducing balance basis)
Office equipment and furniture (reducing balance basis)
Leasehold improvements
67%
10-25%
20%
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each
reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains
and losses are recognised in profit or loss in the period in which they arise.
48
Kogan.com Annual Report 2017 Plant and Equipment
Computer Equipment:
At cost
Accumulated depreciation
Office Equipment:
At cost
Accumulated depreciation
Leasehold improvements:
At cost
Accumulated amortisation
Total plant and equipment
ConsolIDATED GRouP
2017
$
2016
$
234,996
(183,776)
51,220
167,033
(133,179)
33,854
878,010
859,367
(455,037)
(339,693)
422,973
519,674
23,055
(7,876)
15,179
22,350
(4,576)
17,774
489,372
571,302
a. Movements in Carrying Amounts
Movements in the carrying amounts for each class of property, plant and equipment between the
beginning and the end of the current financial year:
Consolidated Group:
Balance at 1 July 2015
Additions
Depreciation expense
Balance at 30 June 2016
Additions
Depreciation expense
Balance at 30 June 2017
Computer
Equipment
$
office
Equipment
$
leasehold
improvements
$
52,855
21,505
646,014
3,056
11,813
9,810
(40,506)
(129,396)
(3,849)
33,854
67,963
(50,597)
51,220
519,674
18,643
(115,344)
422,973
17,774
705
(3,300)
15,179
Total
$
710,682
34,371
(173,751)
571,302
87,311
(169,241)
489,372
49
Kogan.com Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS CONTINuED
sECTIon 3: CAPITAl sTRuCTuRE AnD FInAnCInG
3.1 loAn AnD BoRRoWInGs
The group’s interest-bearing loans and borrowings are measured at amortised cost.
CuRRENT
Working capital facility – secured
ConsolIDATED GRouP
note
2017
$
2016
$
–
–
4,900,000
4,900,000
On 31 May 2016, the Group signed a new multi-option facility agreement with Westpac Banking Corporation,
maturing on 31 May 2019. The Facility includes a Cash Advance Facility, Trade Finance Facility and LC
Facility with a total limit of $10.0 million.
There were no amounts drawn down under the facility at year end, and the amount drawn down under
the previous working capital facility was repaid out of the proceeds of the Initial Public Offering.
3.2 CAPITAl AnD FInAnCIAl RIsK mAnAGEmEnT
The Group’s financial instruments consist mainly of deposits with banks, local money market instruments,
short-term investments and payable and derivatives.
Financial Risk Management Policies
The Board’s overall risk management strategy seeks to assist the consolidated group in meeting its financial
targets, while minimising potential adverse effects on financial performance. This includes the review of the
use of hedging derivative instruments, credit risk policies and future cash flow requirements.
Specific Financial Risk Exposures and Management
The main risks the Group is exposed to through its financial instruments are credit risk, liquidity risk, and
market risk consisting of interest rate risk and foreign currency risk. There have been no substantive changes
in the types of risks the Group is exposed to, how these risks arise, or the Board’s objectives, policies and
processes for managing or measuring the risks from the previous period.
Credit risk
Exposure to credit risk relating to financial assets arises from the potential non-performance by counterparties
of contract obligations that could lead to a financial loss to the Group.
Credit risk is managed through the maintenance of procedures (such as the utilisation of systems for the
approval, granting and renewal of credit limits, regular monitoring of exposures against such limits and
monitoring of the financial stability of significant customers and counterparties), ensuring to the extent
possible that customers and counterparties to transactions are of sound credit worthiness. Such monitoring
is used in assessing receivables for impairment.
Risk is also minimised through investing surplus funds in financial institutions that maintain a high credit
rating, or in entities that the Board has otherwise assessed as being financially sound. Where the Group
is unable to ascertain a satisfactory credit risk profile in relation to a customer or counterparty, the risk
may be further managed through title retention clauses over goods or obtaining security by way of personal
or commercial guarantees over assets of sufficient value which can be claimed against in the event of
any default.
50
Kogan.com Annual Report 2017 Credit risk exposures
The maximum exposure to credit risk by class of recognised financial assets at the end of the reporting
period excluding the value of any collateral or other security held, is equivalent to the carrying amount
and classification of those financial assets (net of any provisions) as presented in the statement of financial
position. Credit risk also arises through the provision of financial guarantees, as approved at board level,
given to parties securing the liabilities of certain subsidiaries.
The Group has no significant concentrations of credit risk with any single counterparty or group of
counterparties. However, the Group has significant credit risk exposures to Australia given the substantial
operations in this region. Details with respect to credit risk of trade and other receivables are provided
in Note 2.1.2a. The group’s exposure to credit risk is minimised given a significant portion of sales are
paid for at the time of purchase.
Trade and other receivables that are neither past due nor impaired are considered to be of high credit quality.
Aggregates of such amounts are detailed in Note 2.1.2a.
Credit risk related to balances with banks and other financial institutions is managed by the Board.
The following table provides information regarding the credit risk relating to cash and money
market securities.
Cash and cash equivalents
Liquidity risk
ConsolIDATED GRouP
2017
$
2016
$
32,027,680
32,027,680
1,808,301
1,808,301
Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts
or otherwise meeting its obligations related to financial liabilities. The Group manages this risk through
the following mechanisms:
• preparing forward-looking cash flow analyses in relation to its operating, investing and financing activities;
• using derivatives that are only traded in highly liquid markets;
• monitoring undrawn credit facilities;
• maintaining a reputable credit profile;
• managing credit risk related to financial assets; and
• only investing surplus cash with major financial institutions.
The table on the following page reflects an undiscounted contractual maturity analysis for
financial liabilities.
Cash flows realised from financial assets reflect management’s expectation as to the timing of realisation.
Actual timing may therefore differ from that disclosed. The timing of cash flows presented in the table
to settle financial liabilities reflects the earliest contractual settlement dates.
51
Kogan.com Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS CONTINuED
Financial liability and financial asset maturity analysis
WIThIn 1 YEAR
1 To 5 YEARs
oVER 5 YEARs
ToTAl
Consolidated
Group
2017
$
2016
$
2017
$
2016
$
2017
$
2016
$
2017
$
2016
$
Financial liabilities due for payment
Borrowings
Trade and
other payables
Total expected
outflows
–
(4,900,000)
(28,504,597) (15,469,375)
(28,504,597) (20,369,375)
Financial assets – cash flows realisable
Cash and cash
equivalents
Trade, term and
loan receivables
Total anticipated
inflows
Net (outflow)/
inflow on financial
instruments
32,027,680
1,808,301
2,045,324
2,981,881
34,073,004
4,790,182
5,568,407
(15,579,193)
Market risk
(i) Interest rate risk
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(4,900,000)
– (28,504,597) (15,469,375)
– (28,504,597) (20,369,375)
–
–
32,027,680
1,808,301
2,045,324
2,981,881
– 34,073,004
4,790,182
–
5,568,407
(15,579,193)
Exposure to interest rate risk arises on financial assets and financial liabilities recognised at the end of the
reporting period whereby a future change in interest rates will affect future cash flows or the fair value of
fixed rate financial instruments. The Group is also exposed to earnings volatility on floating rate instruments.
The financial instruments that primarily expose the Group to interest rate risk are borrowings and cash and
cash equivalents.
The net effective variable interest rate borrowings (i.e. unhedged debt) expose the Group to interest rate
risk, which will impact future cash flows and interest charges and is indicated by the following floating
interest rate financial liabilities:
Borrowings
note
ConsolIDATED GRouP
2017
$
2016
$
–
–
4,900,000
4,900,000
Subsequent to 30 June 2016, the balance of borrowings was fully repaid out of IPO proceeds.
(ii) Foreign exchange risk
Exposure to foreign exchange risk may result in the fair value or future cash flows of a financial instrument
fluctuating due to movement in foreign exchange rates of currencies in which the Group holds financial
instruments which are other than the AuD functional currency of the Group.
With instruments being held by overseas operations, fluctuations in the uS dollar may impact on the Group’s
financial results unless those exposures are appropriately hedged.
The foreign currency risk in the books of the parent entity is considered immaterial and is therefore not shown.
52
Kogan.com Annual Report 2017 Foreign Currency Transactions
Functional and presentation currency
The functional currency of each of the Group’s entities is measured using the currency of the primary
economic environment in which that entity operates. The consolidated financial statements are presented
in Australian dollars, which is the parent entity’s functional currency.
Foreign exchange forward contracts
The Group has open foreign exchange forward contracts at the end of the reporting period relating to highly
probable forecast transactions and recognised financial assets and financial liabilities. These contracts commit
the Group to buy and sell specified amounts of foreign currencies in the future at specified exchange rates.
It is the Group’s policy to manage pricing of its products (with the exception of ageing and obsolete inventory)
according to specified target Gross Margins, rather than to sacrifice Gross Margin in order to drive sales
volumes. In an environment in which the Australian dollar is declining, in particular relative to the united States
dollar, the Group’s ability to price Third Party Branded International Products competitively in comparison
with other Australian retailers deteriorates (to the extent that those retailers have not adjusted retail prices).
As a result, lower volumes of Third Party Branded International Products are generally sold during periods
of sharp decline in the Australian dollar, leading to lower revenues in that product segment. The reverse occurs
in periods in which there is a sharp increase in the Australian dollar, while there has historically been neutral
revenue impact in periods in which the currency is relatively stable, whether that is at high or low levels.
The following table summarises the notional amounts of the Group’s commitments in relation to foreign
exchange forward contracts. The notional amounts do not represent amounts exchanged by the transaction
counterparties and are therefore not a measure of the exposure of the Group through the use of these contracts.
noTIonAl AmounTs
AVERAGE EXChAnGE RATE
Consolidated Group
Buy uSD/sell AuD:
2017
$
2016
$
Settlement
– less than 6 months
28,508,771
14,603,983
– 6 months to 1 year
–
–
2017
$
0.75
–
2016
$
0.74
–
The fair value of foreign exchange contracts at 30 June 2017 totalled $(727,265) (2016:$33,000).
53
Kogan.com Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS CONTINuED
Sensitivity analysis
The following table illustrates sensitivities to the Group’s exposures to changes in interest rates, exchange
rates and commodity and equity prices. The table indicates the impact of how profit and equity values
reported at the end of the reporting period would have been affected by changes in the relevant risk
variable that management considers to be reasonably possible.
These sensitivities assume that the movement in a particular variable is independent of other variables.
Year ended 30 June 2017
+/–10bps in foreign exchange rates
Year ended 30 June 2016
+/–10bps in foreign exchange rates
ConsolIDATED GRouP
Profit
$
Equity
$
2,850,877
2,850,877
1,460,398
1,460,398
The Group, through its hedging of foreign exchange using Forward Contracts, reduces its exposure to foreign
exchange risk by locking in the exchange rate with the bank on deal date. Any movement in interest rates
has been deemed to be immaterial.
Fair values
The Group measures some of its assets and liabilities at fair value on either a recurring or non-recurring basis,
depending on the requirements of the applicable Accounting Standard.
Fair value estimation
The carrying value of Financial Assets and Financial Liabilities are not materially different to their Fair values.
Financial Instruments
Initial recognition and measurement
Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual
provisions to the instrument. For financial assets, this is equivalent to the date that the entity commits itself
to either the purchase or sale of the asset (i.e. trade date accounting is adopted).
Financial instruments are initially measured at fair value plus transaction costs, except where the instrument
is classified “at fair value through profit or loss”, in which case transaction costs are expensed to profit or
loss immediately.
Classification and subsequent measurement
Financial instruments are subsequently measured at fair value, amortised cost using the effective interest
method, or cost.
Amortised cost is calculated as the amount at which the financial asset or financial liability is measured
at initial recognition less principal repayments and any reduction for impairment, and adjusted for any
cumulative amortisation of the difference between that initial amount and the maturity amount calculated
using the effective interest method.
The effective interest method is used to allocate interest income or interest expense over the relevant period
and is equivalent to the rate that discounts estimated future cash payments or receipts (including fees,
transaction costs and other premiums or discounts) over the expected life (or when this cannot be reliably
predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset
or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying
amount with a consequential recognition of an income or expense item in profit or loss.
The Group does not designate any interests in subsidiaries, associates or joint ventures as being subject
to the requirements of Accounting Standards specifically applicable to financial instruments.
54
Kogan.com Annual Report 2017 I. Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market and are subsequently measured at amortised cost. Gains or losses are recognised
in profit or loss through the amortisation process and when the financial asset is derecognised.
II. Financial liabilities
Non-derivative financial liabilities other than financial guarantees are subsequently measured at amortised
cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial
liability is derecognised.
Derivative instruments
The group enters into forward exchange contracts to manage the cash flow risk attached to inventory
purchased in foreign currency. The group has elected not to adopt hedge accounting, with any period
movements in the fair value of the derivative contract taken to the income statement when material.
Impairment
A financial asset (or a group of financial assets) is deemed to be impaired if, and only if, there is objective
evidence of impairment as a result of one or more events (a “loss event”) having occurred, which has an
impact on the estimated future cash flows of the financial asset(s).
In the case of available-for-sale financial assets, a significant or prolonged decline in the market value of
the instrument is considered to constitute a loss event. Impairment losses are recognised in profit or loss
immediately. Also, any cumulative decline in fair value previously recognised in other comprehensive income
is reclassified into profit or loss at this point.
In the case of financial assets carried at amortised cost, loss events may include: indications that the debtors
or a group of debtors are experiencing significant financial difficulty, default or delinquency in interest
or principal payments; indications that they will enter bankruptcy or other financial reorganisation; and
changes in arrears or economic conditions that correlate with defaults.
When the terms of financial assets that would otherwise have been past due or impaired have been
renegotiated, the Group recognises the impairment for such financial assets by taking into account the
original terms as if the terms have not been renegotiated so that the loss events that have occurred are
duly considered.
Derecognition
Financial assets are derecognised when the contractual rights to receipt of cash flows expire or the asset
is transferred to another party whereby the entity no longer has any significant continuing involvement
in the risks and benefits associated with the asset. Financial liabilities are derecognised when the related
obligations are discharged, cancelled or have expired. The difference between the carrying amount of the
financial liability extinguished or transferred to another party and the fair value of consideration paid, including
the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss.
55
Kogan.com Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS CONTINuED
The Group holds the following financial assets and liabilities at reporting date:
Financial assets
Cash and cash equivalents
Loans and receivables
Total financial assets
Financial liabilities
Financial liabilities at amortised cost:
– trade and other payables
– borrowings
Total financial liabilities
Fair Value Measurements
ConsolIDATED GRouP
note
2017
$
2016
$
32,027,680
2.1.2a
2,045,324
1,808,301
2,981,881
34,073,004
4,790,182
2.1.3
28,504,597
15,469,375
–
4,900,000
28,504,597
20,369,375
The Group measures and recognises the following assets and liabilities at fair value on a recurring basis after
initial recognition:
• Cash and cash equivalents; and
• Foreign exchange forward contracts.
The Group does not subsequently measure any liabilities at fair value on a non-recurring basis.
a. Fair Value Hierarchy
AASB 13: Fair Value Measurement requires the disclosure of fair value information by level of the fair value
hierarchy, which categorises fair value measurements into one of three possible levels based on the lowest
level that an input that is significant to the measurement can be categorised into as follows:
level 1
level 2
level 3
Measurements based on quoted
prices (unadjusted) in active
markets for identical assets
or liabilities that the entity can
access at the measurement date.
Measurements based on inputs
other than quoted prices included
in Level 1 that are observable for
the asset or liability, either directly
or indirectly.
Measurements based
on unobservable inputs
for the asset or liability.
The fair values of assets and liabilities that are not traded in an active market are determined using one
or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of
observable market data. If all significant inputs required to measure fair value are observable, the asset
or liability is included in Level 2. If one or more significant inputs are not based on observable market data,
the asset or liability is included in Level 3.
Cash and cash equivalents are level 1 measurements, whilst foreign exchange contracts are level 2. The fair
value of foreign exchange contracts at 30 June 2017 totalled $727,265 (2016: $33,000). This represented
the amount ‘in the money’ on outstanding forward foreign exchange contracts as at 30 June 2017.
56
Kogan.com Annual Report 2017 b. Disclosed Fair Value Measurements
The carrying amounts of assets and liabilities are the same as their carrying values.
The Group enters into forward exchange contracts to manage the foreign exchange risk attached to inventory
purchased in foreign currency. The group has elected not to adopt hedge accounting, with any period
movements in the fair value of the derivative contract taken to the income statement when material.
The fair value of forward exchange contracts is determined based on an external valuation report using
forward exchange rates at the balance sheet date.
3.3.1 IssuED CAPITAl AnD REsERVEs
a. Ordinary Shares
Fully paid ordinary shares
2017
$
167,100,702
167,100,702
ConsolIDATED GRouP
2016
$
343
343
2017
no.
93,336,581
93,336,581
2016
no.
343
343
Ordinary shares participate in dividends and the proceeds on winding-up of the parent entity in proportion
to the number of shares held. At the shareholders’ meetings each ordinary share is entitled to one vote
when a poll is called, otherwise each shareholder has one vote on a show of hands.
b. Movements in ordinary share capital
Details
Balance
Shares cancelled as part of the
Kogan purchase
Shares issued at IPO
Shares issued to senior managers
under an IPO bonus schemes
Shares issued to the previous owners
for the purchase of Kogan Operations
Holdings Pty Ltd
Date
1 July 2016
7 July 2016
7 July 2016
7 July 2016
shares
no.
343
(343)
27,777,786
657,638
Issue price
$1.00
$–
$1.80
$1.80
$
343
–
50,000,015
1,183,749
7 July 2016
64,897,910
$1.80
116,816,238
Transaction cost arising on IPO offset
against share capital, net of tax
7 July 2016
–
$–
(904,643)
Shares issued to eligible employees
under an incentive plan
29 September 2016
3,247
$1.54
5,000
Balance
30 June 2017
93,336,581
167,100,702
c. Merger reserve
The acquisition of Kogan Operations Holdings Pty Ltd by Kogan.com Ltd has been treated as a common
control transaction at book value for accounting purposes, and no fair value adjustments have been made.
Consequently, the difference between the fair value of issued capital and the book value of net assets
acquired is recorded within a merger reserve.
57
Kogan.com Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS CONTINuED
d. Performance Rights reserve
The reserve is used to recognise the value of equity benefits provided to employees as part of their
remuneration. The Group measures the cost of equity-settled transactions with employees by reference
to the fair value of the ordinary shares at the date at which they are granted. The fair value is determined
using Black Scholes simulation valuation techniques, taking into account the terms and conditions upon
which the equity instruments were granted, as discussed in Note 5.2.
e. Capital Management
Management controls the capital of the Group in order to maintain a sustainable debt to equity ratio,
generate long-term shareholder value and ensure that the Group can fund its operations and continue
as a going concern.
The Group’s debt and capital include ordinary share capital and financial liabilities, supported by
financial assets.
The Group is not subject to any externally imposed capital requirements.
Management effectively manages the Group’s capital by assessing the Group’s financial risks and adjusting
its capital structure in response to changes in these risks and in the market. These responses include the
management of debt levels, distributions to shareholders and share issues.
There have been no changes in the strategy adopted by management to control the capital of the Group
since the prior year. The gearing ratios for the years ended 30 June 2017 and 30 June 2016 are as follows:
Total borrowings
Less cash and cash equivalents
Net debt
Total equity
Gearing ratio
3.3.2 DIsTRIBuTIons
Dividends/Distributions paid during the year
note
ConsolIDATED GRouP
2017
$
2016
$
–
4,900,000
(32,027,680)
(1,808,301)
(32,027,680)
3,091,699
42,671,685
7,070,740
–%
44%
ConsolIDATED GRouP
2017
$
2016
$
3,640,127
3,640,127
2,460,102
2,460,102
Prior year distributions were paid to the previous owners of the business prior to the company’s IPO.
a. Ordinary shares
Recognition and measurement
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer
at the discretion of the entity before or at the end of the financial year but not distributed at balance date.
The final 2017 dividend has not been declared at the reporting date and therefore is not reflected in the
consolidated financial statements for the year ended 30 June 2017 and will be recognised in subsequent
financial reports.
58
Kogan.com Annual Report 2017 Dividends
Dividend per share
(in cents)
2017
Final
3.8
2017
Interim
3.9
2016
Final
535,015
2016
Interim
182,216
Franking percentage
100%
100%
Nil%
Nil%
Payment date
4 September 2017
24 March 2017
30 June 2016
31 December 2015
Dividend record date
25 August 2017
9 March 2017
30 June 2016
31 December 2015
b. Franking credits
The franking account balance as at 30 June 2017 is nil (2016: nil).
3.4 EARnInGs PER shARE
a. Basic earnings per share
Net profit for the reporting period
Adjustments to reflect dividends paid
Net profit for the reporting period used in calculating EPS
Weighted average number of ordinary shares of the entity
Basic earnings per share
b. Diluted earnings per share
Net profit for the reporting period
Weighted average number of ordinary shares of the entity – diluted
Weighted average number of ordinary shares of the entity on issue
Adjustments to reflect potential dilution for performance rights
Diluted weighted average number of ordinary shares of the entity
Basic earnings per share
ConsolIDATED GRouP
2017
2016
3,739,865
809,149
–
3,739,865
91,801,537
0.04
–
809,149
343
2,359
ConsolIDATED GRouP
2017
2016
3,739,865
809,149
91,801,537
509,062
92,310,599
0.04
343
–
343
2,359
59
Kogan.com Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS CONTINuED
sECTIon 4: GRouP sTRuCTuRE
4.1 ConTRollED EnTITIEs
a. Information about Principal Subsidiaries
The subsidiaries listed below have share capital consisting solely of ordinary shares or, in the case of Kogan
Technologies unit Trust, ordinary units, which are held directly by the Group. Kogan.com Holdings Pty Ltd
is the Trustee of the Kogan Technologies unit Trust. The Trustee and the Trust are wholly-owned entities
within the Kogan Group. The proportion of ownership interests held equals the voting rights held by the
Group. Each subsidiary’s principal place of business is also its country of incorporation.
name of subsidiary
Kogan Mobile Australia Pty Ltd
Kogan Mobile Pty Ltd
Kogan Australia Pty Ltd
Kogan International Holdings Pty Ltd
Kogan HK Limited
Kogan HR Pty Ltd
Kogan Travel Pty Ltd
Dick Smith IP Holdings Pty Ltd
(formerly Kogan Technologies uK Pty Ltd)
Online Business Number 1 Pty Ltd
Kogan Technologies unit Trust
Kogan.com Holdings Pty Ltd
Kogan Operations Holdings Pty Ltd
b. Significant Restrictions
oWnERshIP InTEREsT
hElD BY ThE GRouP
2017
%
2016
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Principal
Place of
Business
Australia
Australia
Australia
Australia
Hong Kong
Australia
Australia
Australia
Australia
Australia
Australia
Australia
There are no significant restrictions over the Group’s ability to access or use assets, and settle liabilities,
of the Group.
4.2 DEED oF CRoss GuARAnTEE
A deed of cross guarantee between Kogan.com Ltd and all entities listed above was enacted during the
financial year and relief was obtained from preparing individual financial statements for the Group under
ASIC Corporations (Wholly-owned Companies) Instrument 2016/785. under the deed, Kogan.com Ltd
guarantees to support the liabilities and obligations of the subsidiaries listed above. As all entities are
a party to the deed the income statement and balance sheet information of the combined class-ordered
group is equivalent to the consolidated information presented in this financial report.
60
Kogan.com Annual Report 2017 4.3 PAREnT EnTITY DIsClosuREs
The following information has been extracted from the books and
records of the parent and has been prepared in accordance with
Australian Accounting Standards.
Statement of Financial Position
ASSETS
Current assets
Non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQuITY
Issued capital
Performance rights reserve
Distribution of profit
Retained earnings
TOTAL EQuITY
Statement of Profit or Loss and Other Comprehensive Income
Total profit
Total comprehensive income
2017
$
2016
$
36,620,011
–
36,620,011
–
–
–
26,018
1,200
27,218
–
–
–
36,620,011
27,218
35,278,377
1,200
217,098
(3,640,127)
4,764,663
36,620,011
–
–
26,018
27,218
(2,801,637)
(2,801,637)
26,018
26,018
The parent did not have any material contingent liabilities at period end (2016: $nil).
The parent was incorporated in May 2016. The comparative profit and loss disclosures are for the period
of incorporation to 30 June 2016.
61
Kogan.com Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS CONTINuED
4.4 RElATED PARTIEs
a. The Group’s main related parties are as follows:
(i) Entities exercising control over the Group:
The ultimate parent entity that exercised control over the Group at year-end was Kogan.com Ltd, which
is incorporated in Australia.
(ii) Key management personnel:
Any person(s) having authority and responsibility for planning, directing and controlling the activities
of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity,
are considered key management personnel (refer to 5.1).
(iii) Entities subject to significant influence by the Group:
An entity that has the power to participate in the financial and operating policy decisions of an entity, but
does not have control over those policies, is an entity which holds significant influence. Significant influence
may be gained by share ownership, statute or agreement. There are no such entities at year end (2016: nil).
(iv) Other related parties:
Other related parties include entities controlled by the ultimate parent entity and entities over which key
management personnel have joint control.
b. Transactions with related parties:
Transactions between related parties are on normal commercial terms and conditions no more favourable
than those available to other parties unless otherwise stated.
The following transactions occurred with related parties:
Kogan Australia Pty Ltd entered into a Logistic Services Agreement with eStore Logistics Pty Ltd (“eStore”),
in a prior financial period, in relation to the provision of warehousing, distribution and logistics services by
eStore to Kogan Australia. Ruslan Kogan is a minority shareholder and director of eStore. The agreement
was entered into on arm’s length terms.
Purchases from eStore warehousing
ConsolIDATED GRouP
2017
$
2016
$
6,335,297
4,625,251
62
Kogan.com Annual Report 2017 sECTIon 5: EmPloYEE REWARD AnD RECoGnITIon
5.1 KEY mAnAGEmEnT PERsonnEl ComPEnsATIon
Ruslan Kogan and David Shafer are subject to employment contracts with base salaries of $350,000 and
$300,000, respectively, plus superannuation. The Board may invite Ruslan Kogan and David Shafer to
participate in Kogan.com’s incentive programs, but as at the date of this report, neither has been granted
any additional incentives under Kogan.com’s incentive programs (refer to the Remuneration Report).
Movement in shares
The movement during the reporting period in the number of ordinary shares in Kogan.com held, directly,
indirectly or beneficially, by each key management person, including their related parties, is as follows:
Ruslan Kogan
David Shafer
held at
1 July 2016
240
103
Received
on exercise
of options
IPo
held at
30 June 2017
–
–
47,095,205 *
47,095,205
17,802,705 *
17,802,705
* Kogan.com Ltd acquired control of related entities Kogan Operations Holdings Pty Ltd and subsidiaries prior to listing on the ASX on
7 July 2016. Kogan.com entered into a sale agreement with the Existing Owners (Ruslan Kogan and David Shafer), pursuant to which
the Existing Owners have agreed to sell all their shares in Kogan Operations Holdings Pty Ltd.
Compensation
Short-term employee benefits
Long-term employee benefits
Post-employment benefits
Total
2017
$
769,806
56,248
50,613
876,667
2016
$
–
–
–
–
Following the IPO, Ruslan Kogan and David Shafer are subject to employment contract with base salaries
of $350,000 and $300,000, respectively, plus superannuation.
5.2 InCEnTIVE PlAns
Kogan.com Ltd has adopted an equity incentive plan to assist in the motivation and retention of management
and selected employees.
The Group has established incentive arrangements subsequent to listing on the ASX to assist in the attraction,
motivation and retention of the executive team and other selected employees. To align the interests of
its employees and the goals of the Group, the Directors have decided the remuneration packages of the
executive team and other selected employees will consist of the following components:
• Fixed remuneration (inclusive of superannuation); and
• Equity based long-term incentives.
The Group has established an Equity Incentive Plan (EIP), which is designed to align the interests of eligible
employees more closely with the interests of Shareholders in the listed entity post 7 July. under the EIP,
eligible employees may be offered Restricted Shares, Options or Rights which may be subject to vesting
conditions. The Group may offer additional long-term incentive schemes to senior management and other
employees over time.
Following the successful listing on 7 July 2016, certain senior management and other employees received
one-off bonuses in the form of shares. The aggregate amount of bonuses is $1,183,750 worth of shares at
the offer price of $1.80. This offer made to relevant employees was for nil consideration and the shares
vested immediately. No Directors received an IPO bonus.
63
Kogan.com Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS CONTINuED
Kogan.com Ltd has adopted the EIP in order to assist in the motivation and retention of senior management
and other selected employees of Kogan.com. The EIP is designed to align the interests of eligible employees
more closely with the interests of Shareholders, by providing an opportunity for eligible employees to receive
an equity interest in Kogan.com.
Short term incentives – Cash based
The following table outlines the significant aspects of the STI.
Purpose of STI plan
Provide a link between remuneration and both short term Company
and individual performance.
Eligibility
Create Sustainable shareholder value.
Reward individual for their contribution to the success of the Group.
Actively encourage employees to take more ownership over the EBITDA.
Offers of cash incentive may be made to any employee of the Kogan Group
(including a director employed in an executive capacity) or any other
person who is declared by the Board to be eligible to receive a grant
of cash incentive under the STI.
Calculation & Target
The actual EBITDA of Kogan shall exceeds the management forecast
for the full financial year (after payment of the STI).
Maximum opportunity
25% of the outperformance will be allocated to a ‘bonus pool’.
The ‘bonus pool’ will then be shared in cash bonuses among a number
of employees in fixed proportions.
The maximum payable is 25% of the outperformance and 35% of the
employee’s annual salary
Performance conditions
Outperformance of the actual EBITDA.
Continuation of employment.
Why were the performance
condition chosen
To achieve successful and sustainable financial business outcomes as well
as and annual objectives that drive short-term and long-term business
success and sustainability
Performance period
Timing of assessment
Form of payment
Board discretion
7 July 2016 to 30 June 2017
July 2017, following the completion of the 30 June 2017 accounts
Paid in cash
Targets are reviewed annually and the Board has discretion to adapt
appropriately to take into account exceptional items.
64
Kogan.com Annual Report 2017 Long term incentives – Equity Incentive Plan
The following table outlines the significant aspects of the current LTI.
Consideration
Eligibility
Amount payable
& Entitlement
Nil.
Offers of Incentive Securities may be made to any employee of the
Kogan Group (including a director employed in an executive capacity)
or any other person who is declared by the Board to be eligible to receive
a grant of incentive Securities under the EIP.
No amount is payable upon the exercise of a Performance Right that has
vested, with each Performance Right entitling the holder to one fully paid
ordinary share on exercise.
Service condition on vesting
Individual must be employed by the Kogan Group at time of vesting.
Restrictions on dealing
Shares allocated upon exercise of Performance Rights will rank equally
with all existing ordinary shares from the date of issue (subject only to the
requirements of Kogan’s Securities Trading Policy).
upon vesting, there will be no disposal restrictions placed on the Shares
issued to participants (subject only to the requirements of Kogan.com’s
Securities Trading Policy).
Recognition and measurement
Equity-settled transactions
The charge related to equity-settled transactions with employees is measured by reference to the fair
value of the equity instruments at the date they are granted, using an appropriate valuation model
selected according to the terms and conditions of the grant. Judgement is applied in determining the
most appropriate valuation model and in determining the inputs to the model. Third-party experts are
engaged to advise in this area where necessary. Judgements are also applied in relation to estimations
of the number of options which are expected to vest, by reference to historic leaver rates and expected
outcomes under relevant performance conditions.
The Group issues equity-settled share-based payments to certain employees, whereby employees render
services in exchange for shares or rights over shares of the parent company.
Equity-settled awards are measured at fair value at the date of grant. The cost of these transactions are
recognised in the income statement and consolidated statement of Comprehensive Income and credited
to equity on a straight-line basis over the vesting period after allowing for an estimate of shares that will
eventually vest. The level of vesting is reviewed annually and the charge adjusted to reflect actual and
estimated levels of vesting.
Where an equity-settled share-based payment scheme is modified during the vesting period, an additional
charge is recognised over the remainder of that vesting period to the extent that the fair value of the revised
scheme at the modification date exceeds the fair value of the original scheme at the modification date.
Where the fair value of the revised scheme does not exceed the fair value of the original scheme, the
Group continues to recognise the charge required under the conditions of the original scheme.
Cash-settled transactions
The amount payable to employees in respect of cash-settled share-based payments is recognised as
an expense, with a corresponding increase in liabilities, over the period which the employees become
unconditionally entitled to the payment. The liability is measured at each reporting date and at settlement
date based on the fair value, with any changes in the liability being recognised in profit or loss.
65
Kogan.com Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS CONTINuED
Incentive Plans inputs
Long term incentives – Equity
The following inputs were used in the measurement of the fair values of performance rights issued,
at grant date:
Grant Dates
Number
Fair value at grant date
Share price at grant date
Offer price
Expected volatility
(weighted average volatility) (1)
Option life (expected
weighted average life)
lonG TERm InCEnTIVE PlAns
29 July
2016
29 september
2016
20 December
2016
20 December
2016
495,140
$282,518
$1.49
$1.80
53%
178,573
$109,492
$1.52
$1.54
49%
1,451,856
$716,488
$1.34
$1.35
49%
37,037
$20,417
$1.34
$1.35
49%
5 years
5 years
3 & 4 years
5 years
Vesting dates
30 June 2021
30 June 2021
Expected dividends
Risk-free interest rate
(based on corporate bonds)
Nil
1.59%
Nil
1.73%
31 Dec 2019
& 2020
Nil
2.22%
31 Dec 2021
Nil
2.35%
Grant Dates
Number
Fair value at grant date
Share price at grant date
Offer price
Expected volatility
(weighted average volatility) (1)
Option life (expected
weighted average life)
lonG TERm InCEnTIVE PlAns
29 June
2017
436,365
$318,545
$1.70
$1.65
45%
29 June
2017
12,121
$7,879
$1.70
$1.65
45%
29 June
2017
18,182
$10,364
$1.70
$1.65
45%
29 June
2017
212,121
$137,879
$1.70
$1.65
45%
5 years
4 years
3 years
3 & 4 years
Vesting dates
30 June 2022
30 June 2021
30 June 2020
Expected dividends
Risk-free interest rate
(based on corporate bonds)
Nil
2.16%
Nil
2.03%
Nil
1.86%
30 June 2020
& 2021
Nil
2.03%
(1) Expected volatility is estimated by taking into account historic average share price volatility of similar entities. The Group is a newly
listed entity and therefore has little historical data on the volatility of its share price.
66
Kogan.com Annual Report 2017 Reconciliation of outstanding performance rights
The following table details the total movement in performance rights issued by the Group during the year:
Outstanding at beginning of period
Granted during the period
Exercised during the period
Forfeited during the period
Expired during the period
Outstanding at the end of the period
Exercisable at the end of the period
Expense recognised in profit or loss
lonG TERm
InCEnTIVE PlAns
PERFoRmAnCE RIGhTs
no.
2017
–
2,841,395
–
(31,945)
–
2,809,450
134,745
no.
2016
–
–
–
–
–
–
During the period the Group recognised a share-based payment expense of $217,098 (2016: $Nil) which
relates to performance rights granted during the year.
The Group also recognised an expenses of $584,705 in relations to cash based short term incentives.
sECTIon 6: oThER
6.1 suBsEQuEnT EVEnTs
Dividends
The Directors have declared a final dividend of 3.8 cents per ordinary share, fully franked. The record date
of the dividend is 25 August 2017 and the dividend was paid on 4 September 2017. The dividend was not
determined until the 18 August 2017 and accordingly no provision has been recognised as at 30 June 2017.
6.2 REmunERATIon oF AuDIToRs
Remuneration of the auditor for:
– auditing or reviewing the financial statements
– IPO related advisory services including due diligence, taxation and
remuneration
– Other advisory services (including R&D tax)
ConsolIDATED GRouP
2017
$
2016
$
189,625
295,048
42,204
526,877
210,000
515,816
213,216
939,032
67
Kogan.com Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS CONTINuED
6.3 CAPITAl AnD lEAsInG CommITmEnTs
Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor,
are recognised as expenses in the periods in which they are incurred.
Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis
over the lease term.
Operating Lease Commitments
Non-cancellable operating leases contracted for but not recognised in the financial statements.
Payable – minimum lease payments:
– not later than 12 months
– between 12 months and 5 years
– later than 5 years
2017
$
2016
$
575,027
1,899,703
–
564,675
633,142
–
2,474,730
1,197,817
The property lease is a non-cancellable lease with a 4-year term, with rent payable monthly in advance.
Contingent rental provisions within the lease agreement require the minimum lease payments shall be
increased by the lower of the change in the consumer price index (CPI) or 3.5% per annum. An option
exists to renew the lease at the end of the 4-year term for an additional term of 3 years.
6.4 nEW ACCounTInG sTAnDARDs
a. New and amended accounting standards adopted by the Group
In the current year, the Group has applied a number of new and revised accounting standards issued by the
Australian Accounting Board (AASB) that are mandatorily effective for an accounting period that begins
on or after 1 July 2016.
The new and revised standard adopted by the Group for its annual reporting period beginning on 1 July 2016
is AASB 2014-3: Amendments to Australian Accounting Standards – Accounting for Acquisition of Interests
in Joint Operations. The adoption of this standard has not resulted in any impact to the financial reporting
of the Group.
68
Kogan.com Annual Report 2017 b. New accounting standards and interpretations issued but not yet effective
Title of
standard summary and impact on Group’s financial statements
AASB 16
Leases
AASB 16 introduces three main changes:
1. Enhanced guidance on identifying whether a contract contains
a lease.
2. A completely new lease accounting model for lessees that
requires lessees to recognise all leases on balance sheet,
except for short-term leases and leases of low value assets.
Application
date of
standard
Application
date for
Group for
financial
year ending
1 January
2019
30 June
2020
3. Enhanced disclosures.
As at the reporting date, the group has non-cancellable
operating lease commitments of $2,474,730.
The Group has decided not to early adopt AASB 16, this is in
line with the requirement to adopt AASB 15 at the same time.
Once adopted, the structure of cash flows and the presentation
of the balance sheet and income statement will change.
Based on the entity’s assessment, it is expected that the first-time
adoption of AASB 16 for the year ending 30 June 2020 will have
a material impact on the transactions and balances recognised in
the financial statements, in particular:
– lease assets and financial liabilities on the balance sheet will
increase (based on the facts at the date of the assessment);
– there will be a reduction in the reported equity as the carrying
amount of lease assets will reduce more quickly than the
carrying amount of lease liabilities;
– EBIT and EBITDA in the consolidated income statement and
consolidated statement of comprehensive income will be higher
as the implicit interest in lease payments for former off balance
sheet leases will be presented as part of finance costs rather
than being included in operating expenses. This will impact the
cash-based short term incentive payment calculations as
payment is based on the actual EBITDA exceeding the
management forecast for the full financial year;
– Covenants calculation will also be impacted through the fixed
charge cover ratio. The entity is not expecting any breaches
of covenants following the first-time adoption;
– operating cash outflows will be lower and financing cash
flows will be higher in the statement of cash flows as principal
repayments on all lease liabilities will now be included in
financing activities rather than operating activities. Interest
can also be included within financing activities.
69
Kogan.com Annual Report 2017 Application
date of
standard
Application
date for
Group for
financial
year ending
1 January
2018
30 June
2019
NOTES TO THE FINANCIAL STATEMENTS CONTINuED
Title of
standard summary and impact on Group’s financial statements
AASB 15
Revenue
from
contracts
with
customers
AASB 15 replaces AASB 111 Construction Contracts, AASB 118
Revenue and related Interpretations. The core principle of AASB
15 is that revenue is recognised when control of a good or service
transfers to a customer at the transaction price. An entity
recognises revenue by applying the following steps:
Step 1: Identify the contract with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance
obligations in the contract
Step 5: Recognise revenue when (or as) the entity satisfies
a performance obligation.
The Group has decided not to early adopt AASB 15 as a detailed
assessment of the impact, additional disclosures and reporting
requirements is still in progress.
A preliminary analysis of AASB 15 Revenue from Contracts with
Customers has been completed. Based on the entity’s assessment,
it is expected that the first-time adoption will have a material
impact on the transactions and balances recognised in the
financial statements, in particular:
– Principal vs Agent transactions;
– Customers’ unexercised contractual rights;
– Warranties.
Principal vs Agent
AASB 15 clarifies the principal versus agent considerations.
When another party is involved in providing goods or services
to an entity’s customer, the entity must determine whether its
performance obligation is to provide the good or service itself
(i.e., the entity is a principal) or to arrange for another party
to provide the good or service (i.e., the entity is an agent).
It requires for the entity to assess whether it controls the specified
goods or services before they are transferred to the customer.
When the entity is the principal in the contract, the revenue
recognised is the gross amount to which the entity expects
to be entitled. When the entity is the agent, the revenue
recognised is the net amount.
The Group is assessing the potential impact on its consolidated
financial statements resulting from the application of IFRS 15.
The Group currently recognises the revenue for Kogan Travel
on a gross basis. Kogan Mobile is recorded on a net basis.
Following the clarifications of AASB 15, the Group determined
that Kogan.com Ltd is an agent in the contract for both Kogan
Travel and Kogan Mobile and will therefore record its revenues
as the net amount it retains as a commission. It is expected that
the revenues and cost of sale for Kogan Travel will decrease by
the same amount.
70
Kogan.com Annual Report 2017 Application
date of
standard
Application
date for
Group for
financial
year ending
1 January
2018
30 June
2019
Title of
standard summary and impact on Group’s financial statements
AASB 15
Revenue
from
contracts
with
customers
(cont.)
Customers’ unexercised contractual rights
When an entity receives a non-refundable prepayment from
the customer, the customer has an unexercised right to receive
goods/services in the future, which some customers may not
use (typically termed as ‘breakage’). For example, these would
include gift vouchers, Kogan travel vouchers, Mobile vouchers.
With the new AASB 15, an entity is required to consider whether
or not the customer will eventually exercise their rights which will
impact the entity’s pattern of revenue recognition. The associated
amounts paid are treated as variable and recognised as revenue
in proportion to the pattern of rights expected to be exercised
by the customer.
We undertook a detailed assessment and concluded that there
will be no material impact regarding the customers’ unexercised
contractual rights. We will continue to recognise breakage
amount when it is highly probable that a significant revenue
reversal will not occur.
Warranties
The new revenue standard identifies two types of warranties:
– Warranties that provide a service to the customer in addition
to assurance that the delivered product is as specified in the
contract (i.e., service-type warranties)
– Warranties that promise the customer that the delivered
product is as specified in the contract (i.e., assurance-type
warranties).
Kogan provides two types of warranties, a standard warranty of
12 months and an extended warranty. We consider the extended
warranty we provide beyond 12 months to be a distinct service.
We will continue to calculate the warranty liability as per previous
financial years. However, we will now recognise the extended
warranty revenue in deferred income and recognise revenue over
the warranty period on a straight-line basis.
Based on our assessment, it is expected that the liabilities
recognised for the extended warranty as a distinct service will
increase for the first year. The balance will start decreasing and
be recognised as revenue in year two on a straight-line basis.
71
Kogan.com Annual Report 2017 Application
date of
standard
Application
date for
Group for
financial
year ending
1 January
2018
30 June
2019
NOTES TO THE FINANCIAL STATEMENTS CONTINuED
Title of
standard summary and impact on Group’s financial statements
AASB 9
Financial
Instruments
AASB 9 replaces AASB 139 and addresses the classification,
measurement and derecognition of financial assets and
financial liabilities.
It also addresses the new hedge accounting requirements,
including changes to hedge effectiveness testing, treatment
of hedging costs and risk components that can be hedged.
AASB 9 introduces a new expected-loss impairment model
that will require entities to account for expected credit losses
at the time of recognising the asset.
The Group does not expect the adoption of the new Standard
to have a material impact on its classification and measurement
of the financial assets and liabilities, its hedging arrangements
or its results on adoption of the new impairment model.
The new Standard will result in extended disclosures in the
financial statements. The Group has decided not to early
adopt AASB 9.
6.5 ComPAnY InFoRmATIon
The registered office of the company is:
Kogan.com Limited
Level 7
330 Collins Street
Melbourne VIC 3000
The principal places of business are:
Kogan.com Limited
139 Gladstone Street
South Melbourne VIC
72
Kogan.com Annual Report 2017 DIRECToRs’ DEClARATIon
1
In the opinion of the directors of Kogan.com Ltd (‘the Company’):
(a) the consolidated financial statements and notes that are set out on pages 34 to 72 and the
Remuneration report in sections 23 to 31 in the Directors’ report, are in accordance with the
Corporations Act 2001, including:
(i) giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its
performance and its cash flows, for the financial year ended on that date; and
(ii) complying with Accounting Standards and the Corporations Regulations 2001; and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when
they become due and payable.
2 There are reasonable grounds to believe that the Company and the group entities identified in Note 4.1
will be able to meet any obligations or liabilities to which they are or may become subject to by virtue of
the Deed of Cross Guarantee between the Company and those group entities pursuant to ASIC
Corporations (Wholly-owned Companies) Instrument 2016/785.
3 The directors draw attention to the Basis of Preparation note to the consolidated financial statements,
which includes a statement of compliance with International Financial Reporting Standards.
4 This declaration has been made after receiving the declarations required to be made to the Directors in
accordance with section 295A of the Corporations Act 2001 for the financial year ending 30 June 2017.
Signed in accordance with a resolution of the directors:
David Shafer
Director
Melbourne, 21 September 2017
73
Kogan.com Annual Report 2017
InDEPEnDEnT AuDIToR’s REPoRT
TO THE MEMBERS OF KOGAN.COM LTD AND CONTROLLED ENTITIES
Independent Auditor’s Report
To the members of Kogan.com Ltd
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of
Kogan.com Ltd (the Company).
In our opinion, the accompanying
Financial Report of the Company is in
accordance with the Corporations Act
2001, including:
• giving a true and fair view of the
Group's financial position as at 30
June 2017 and of its financial
performance for the period ended on
that date; and
The Financial Report comprises:
• Consolidated statement of financial position as at 30
June 2017
• Consolidated income statement and consolidated
statement of comprehensive income, Consolidated
statement of changes in equity, and Consolidated
statement of cash flows for the period then ended
• Notes including a summary of significant accounting
policies
• Directors' Declaration.
• complying with Australian Accounting
Standards and the Corporations
Regulations 2001.
The Group consists of the Company and the entities it
controlled at the period end or from time to time during the
financial period.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
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 Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (the Code) that are relevant to our audit of the Financial Report in Australia. We
have fulfilled our other ethical responsibilities in accordance with the Code.
74
74
Kogan.com Annual Report 2017
Key Audit Matters
The Key Audit Matters we identified
are:
• Valuation of inventory
Key Audit Matters are those matters that, in our
professional judgement, were of most significance in our
audit of the Financial Report of the current period.
• Provisions for warranties and sales
returns
• Equity raising transaction
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.
Valuation of inventory (AUD 30.7m)
Refer to Note 2.1.1 Inventories
The key audit matter
How the matter was addressed in our audit
Kogan sells high volumes of private
label and third party branded products.
In valuing inventory at the lower level of
cost and net realisable value, there are
factors subject to judgment or
estimation including:
• consideration of market and
consumer factors that could impact
the Group’s ability to sell certain
inventory items at appropriate
margins, such as seasonality of
demand, changing consumer
preferences, and obsolescence due
to technological or product change
(particularly relevant to electronic
products)
• establishing an appropriate provision
for slow moving inventory based on
relevant factors such as inventory
ageing and inventory turnover
The subjective nature of these
judgments is why valuation of inventory
is a key audit matter.
The key procedures we performed included:
• We analysed the level of inventory by ageing categories
for each product type, including movements in ageing
categories compared to prior periods, in order to
highlight products or categories that could be at higher
risk of impairment.
• We compared product unit cost to most recent sales
price information for a sample of products in order to
identify inventory that may not be able to be sold above
cost and therefore should be impaired.
• We compared inventory unit cost information to product
sales information in order to identify products sold at
negative margins during the year and is therefore at
higher risk of impairment.
• We attended physical inventory counts at all locations
with substantial inventory holdings. We inspected the
physical condition of inventory on hand at year end for a
sample of products and compared this to listings of
obsolete/slow moving inventory contained in the year
end provision calculation.
• We assessed the Group’s inventory provision, based on
the ageing of product category and other relevant factors
such as those identified above, for consistency with the
Group’s established policy and Australian Accounting
Standards.
75
75
Kogan.com Annual Report 2017
INDEPENDENT AUDITOR’S REPORT CONTINuED
Provision for warranties and sales returns (AUD 0.4m)
The key audit matter
How the matter was addressed in our audit
Sales are recorded at the time that
goods are shipped to customers based
on the price specified in the sales
contract. Estimated costs associated
with warranties and returns are
recorded at the time that the sale is
recognised based on historical claim and
return experience.
At year end, amounts for expected
warranty claims and sales returns that
have been incurred and not yet paid are
estimated by management. This is a key
audit matter as there is a risk that the
year-end provision is not representative
of the underlying warranty and sales
return profile and historical experience
due to factors such as changes in the
product mix, or specific product quality
or performance issues. Our procedures
focus on these assessments.
The key procedures performed included:
• We assessed historical product warranty claim and sales
returns profile and trends, and compared historical
claims/sales return experience to the Group’s year end
provision calculation.
• We compared the warranty claims and sales returns
recorded after year end to the year end provision
composition for consistency.
• Through discussion with management and inspection of
documentation we enquired about specific product
quality issues arising during the year which may impact
the year end provision calculations.
• We assessed the Group’s provision calculation for
consistency with the Group’s established policy and
Australian Accounting Standards.
76
76
Kogan.com Annual Report 2017
Equity raising (AUD 167.1m)
Refer to Note 3.3.1b Movements in ordinary share capital
The key audit matter
How the matter was addressed in our audit
During the year the group undertook
a significant capital raising as part of
its Initial Public Offering (IPO) and
subsequent admission to the
Australian Stock Exchange (ASX) in
July 2016.
This transaction was a key audit
matter given:
•
•
the size and effect of the
transaction on the Group’s
financial position and
performance
the level of complexity in
accounting for the transaction
including the impact of the pre
IPO internal reorganisation and
treatment of IPO related costs
for both accounting and income
tax purposes, and on financial
report disclosures.
The key procedures performed included:
• Reading the Prospectus dated 24 June 2016 and other
relevant documentation to gain an understanding of the
capital raising transaction.
• Assessing the accuracy of capital raising related
transactions recorded in the Group’s financial report by
checking relevant amounts to ASX, ASIC, supplier (e.g.
legal advisors) and bank account information.
• Considering the consistency of the IPO related accounting
treatment with Australian Accounting Standard
requirements and observed market practice.
• Assessing the appropriateness of treatment of IPO costs
for income tax purposes based on relevant legislative
requirements and Australian Taxation Office public
guidance. We involved our taxation specialists in this
assessment.
• Reading the related disclosures in the Group financial report
and assessing it for compliance with Australian Accounting
Standard requirements.
Other Information
Other Information is financial and non-financial information in Kogan.com Ltd’s annual reporting which is
provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible for the
Other Information.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In
doing so, we 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.
We are required to report if we conclude that there is a material misstatement of this Other Information,
and based on the work we have performed on the Other Information that we obtained prior to the date of
this Auditor’s Report we have nothing to report.
77
Kogan.com Annual Report 2017
77
INDEPENDENT AUDITOR’S REPORT CONTINuED
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
• preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting
Standards and the Corporations Act 2001
•
implementing necessary internal control to enable the preparation of a Financial Report that gives a
true and fair view and is free from material misstatement, whether due to fraud or error
• assessing the Group and Company's ability to continue as a going concern. This includes disclosing, as
applicable, matters related to going concern and using the going concern basis of accounting unless
they either intend to liquidate the Group and Company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
•
•
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 Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of this Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the Auditing
and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_files/ar2.pdf. This
description forms part of our Auditor’s Report.
78
78
Kogan.com Annual Report 2017
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration
Report of Kogan.com Ltd for the
period ended 30 June 2017, complies
with Section 300A of the Corporations
Act 2001.
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 responsibilities
We have audited the Remuneration Report included in page 23
to 30 of the Directors’ report for the period ended 30 June
2017.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
KPMG
BW Szentirmay
Partner
Melbourne
21 September 2017
79
Kogan.com Annual Report 2017
79
shAREholDER
InFoRmATIon
The Shareholder information set out below was applicable as at 5 September 2017.
Additional information required by the Australian Securities Exchange Limited Listing Rules and not disclosed
elsewhere in this report, is listed below.
A. DIsTRIBuTIon oF EQuITY sECuRITIEs
Analysis of numbers of equity security holders by size of holding:
holding
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001 over
Total
ClAss oF EQuITY sECuRITY
oRDInARY shAREs
no. of
shareholders
no. of
shares
758
698
229
192
20
402,746
1,812,300
1,740,062
4,903,106
84,606,724
1,897
93,464,938
%
units
0.43
1.94
1.86
5.25
90.52
100.00
There were 65 security holders with less than a marketable parcel of ordinary shares.
80
Kogan.com Annual Report 2017 B. EQuITY sECuRITY holDERs
Twenty largest quoted equity security holders
name
units
% units
Kogan Management Pty Ltd
Continue reading text version or see original annual report in PDF format above