ANNUAL REPORT
2018
k
o
g
a
n
.
c
o
m
A
n
n
u
a
l
R
e
p
o
r
t
2
0
1
8
HIGHLIGHTS 2018
1,388,000 Active Customers
$26m
EBITDA
$122.8m
YOY REVENUE
GROWTH
108%
YOY EBITDA
GROWTH 1
1 The FY17 Pro Forma results represent the results of the business after removing the impact of transaction costs relating to the IPO,
as set out in Table 1.3 in the FY17 Annual Report (released to the ASX on 21 September 2017). The impact of mark-to-market on
unrealised foreign exchange contracts has not been removed from EBITDA in FY17, which is consistent with the treatment in FY18.
45.3%
GROWTH IN ACTIVE
CUSTOMERS
STRONG GROWTH
THROUGH KEY
INITIATIVES:
NEW
VERTICALS
EXPANSION:
KOGAN MOBILE
KOGAN HEALTH
INVESTMENTS
IN INVENTORY
& MARKETING
KOGAN LIFE
KOGAN PET
KOGAN INTERNET
CONTENTS
2 Chairman’s Letter
3
Founder & CEO’s Report
6 Operating & Financial Review
18 Directors’ Report
24 Remuneration Report (Audited)
32 Auditor’s Independence
Declaration
33 Financial Report
Independent Auditor’s Report
71 Directors’ Declaration
72
77 Shareholder Information
80 Corporate Directory
Annual Report 2018
1
A CLEAR AND WELL EXECUTED STRATEGY
I am delighted to report a year of excellent
performance across our portfolio of retail
and services businesses. EBITDA more
than doubled FY17 Pro Forma1 EBITDA,
reflecting both revenue growth and
margin expansion. Kogan.com has now
doubled earnings for three years in a row.
CHAIRMAN’S LETTER
These strong results reflect the benefits of a clear and
well executed strategy; fantastic consumer offerings;
and a committed, talented and decisive team.
In the last 12 months, the business has launched
five New Verticals: Kogan Insurance, Kogan Health,
Kogan Pet & Kogan Life, all of which fall under the
Kogan Insurance umbrella, and Kogan Internet.
The expansion of our service offerings is consistent
with our strategy to leverage our brand in partnership
with industry leaders, bringing best-in-market
offers to our customer base.
In addition to launching these New Verticals, we
have seen our Kogan Mobile Vertical continue to
flourish and expanded our product offering, with
Product Divisions achieving year-on-year revenue
growth of 40.5%. We have a growing portfolio of
brands, both established and nascent, and have
continued to invest in inventory and to leverage
digital efficiencies to bring the most in-demand
products to our customers at market-leading prices.
Our aim is always to delight our customers and,
with this in mind, we keep a laser focus on meeting
our customers’ needs and delivering great value.
Our performance in FY18 is a tremendous credit
to the commitment and passion of everyone at
Kogan.com in meeting that objective.
STRATEGIC OPPORTUNITIES
At Kogan.com, we do not stand still. We see huge
opportunities for growth in both our existing
businesses and in expansion of our portfolio. In the last
couple of months, we have announced agreements
with partners for New Verticals set to launch during
FY19. FY19 will see the launch of Kogan Mobile New
Zealand and Kogan Money Home Loans. These new
partnerships will strengthen and complement our
existing portfolio of businesses. Ruslan will discuss
these opportunities in his review on page 3.
The New Verticals launched in FY18 were
predominantly in the second half of the financial
year and we expect them to scale in FY19 and
beyond. Additionally, we continue to on-board new
and market-leading brands to our Partner Brands
Product Division, as well as broadening our
Exclusive Brands product range.
We see significant opportunities for growth in our
Product Divisions.
PEOPLE
We are fortunate to have a great team of committed
and talented people, who bring our business strategy
to life each and every day across all areas of the
business. I would like to recognise the commitment
and contribution of the entire Kogan.com team, and
thank them on behalf of the Board for delivering
another stellar year.
DIVIDEND
Following the strong results in FY18, the Board was
pleased to declare a final dividend of 6.1 cents per
share, fully franked. This brings the total dividend
paid in relation to FY18 to 13.0 cents per share, fully
franked, and represents year-on-year growth of 68.8%.
LOOKING AHEAD
The Board is excited about the opportunities ahead
and we look forward to continuing to deliver our
long term strategy for the benefit of customers
and shareholders into FY19 and beyond.
Greg Ridder Chairman
2
2
kogan.com
kogan.com
OPPORTUNITY FOCUSED
We exist to make the most in‑demand
products and services more accessible
and affordable for all Australians. In FY18
we delivered on that promise, creating
incredible offerings for our customers and
value for our shareholders. We doubled
earnings for the third year in a row, and
significantly invested in and improved
our customer offering.
FOUNDER & CEO’S REPORT
We now operate in more industries than ever, with
a compelling offering in each sector. We continue
to invest in the Kogan brand to drive our growing
portfolio of businesses and improve our
value proposition.
The strength of our brand creates significant
opportunities for continued growth. Our pipeline
of initiatives will further enhance our competitive
offering in the near future and continue to delight
our customers.
FY18 saw the ongoing implementation of our
strategy to grow the Kogan brand, accelerate
New Verticals, onboard new Partner Brands, and
invest in inventory. By doing all this, we have built
an exceptional portfolio of businesses. This strategy
led to year-on-year revenue growth of 42.4%
($122.8 million) to $412.3 million and EBITDA of
$26.0 million (FY17 Pro Forma: $12.5 million).
The FY18 highlights include:
• accelerating growth in Active Customers,
growing 45.3% year-on-year in FY18 to 1,388,000
Active Customers;
• achieving strong growth from key initiatives
like Kogan Mobile and investments in marketing
& inventory;
• the launch of 5 New Verticals – Kogan Insurance,
Kogan Health, Kogan Pet, Kogan Life and Kogan
Internet; and
• the announcement of Kogan Mobile
New Zealand, due to launch in FY19.
These highlights are testament to the commitment
of the Kogan.com team to continue to strengthen
and grow our brand by consistently delivering on
our promises to customers, and bringing the most
in-demand products and services to Australians at
market-leading prices.
BUILDING THE KOGAN.COM PORTFOLIO
At Kogan.com we pride ourselves on our
commitment to continually improve, push boundaries
and deliver on our promises to customers. It is our
duty to our customers to continuously bring better
and better value across a broader range of products
and services. The strength of the brand we have
built through constantly delighting our customers
has allowed us to become a portfolio of products
and services businesses with market-leading offers.
Thus allowing us to delight our customers in new
ways, with offers across more sectors. In the twelve
months to 30 June 2018, more than 1.3 million
people purchased from our retail channels and a
significant amount of our traffic continues to come
from free sources. Our commitment to bring the
most in-demand products and services to our
Kogan Community at market-leading prices
continues to resonate with Aussies.
In FY18, we engaged with that Community through
Kogan Retail, Kogan Marketplace, Kogan Mobile,
Kogan Internet, Kogan Insurance and Kogan Travel.
We are continually evolving as a business to respond
to the demands of our customers and to strengthen
our competitive advantage in the market. As such,
we continue to explore opportunities for future
growth in our Portfolio. We see many more
opportunities ahead.
With that in mind, FY19 will see the launch of more
New Verticals. In June 2018, we announced a new
partnership with Vodafone New Zealand Limited,
that will see Kogan.com offering telecommunications
services in New Zealand. Kogan Mobile New Zealand
will enable Kogan.com to bring market-leading
telecommunications offers to New Zealand
consumers in partnership with the largest mobile
network operator in New Zealand.
Annual Report 2018
3
Founder & Ceo’s report CONTINUED
Outlook – continued accelerated growth across the business
Active
Customer
base
Exclusive
Brands
Partner
Brands
Kogan
Mobile
New
Verticals
We also recently announced a new brand, Kogan
Money, which will offer a suite of financial products.
Kogan Money will focus on simplifying financial
services for all Australians and making them more
affordable through digital efficiency. The first of these
financial products will be Kogan Money Home Loans,
in partnership with Adelaide Bank and Pepper Group
Limited, set to launch during FY19. Kogan Money
Home Loans will offer competitively priced home
loans to Australian homeowners and investors.
These verticals are in line with our win-win-win
philosophy. 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
offering and leverage our brand to provide
incredible offers to our customers.
Kogan Mobile is a fantastic example of the potential
of our portfolio strategy. Kogan Mobile, which
launched during October 2015, represented 14.9% of
overall gross profit in FY18 (FY17: 7.0%) and achieved
gross profit of $12 million. So, less than 3 years since
launch, Kogan Mobile has become a significant
contributor to our business.
We are extremely excited about our New Verticals
and the opportunities they present for our customers,
our partners and our business. The New Verticals
launched in FY18 were mostly launched in the
second half of the financial year. As such, we
expect them to scale in FY19 and beyond.
PRODUCT OFFERING EXPANSION
FY18 saw us continue to invest in inventory of
new and in-demand products across our Product
Divisions. Our Partner Brands Product Division, where
we directly partner with brands, onboarded new and
market-leading brands, with more to come. This is
now a larger contributor to gross profit than the
Global Brands Product Division, in which we direct
import brands from distributors overseas. This shift
in product mix also helped drive the increase in gross
margin, alongside the growth in New Verticals. FY18
gross margin of 19.5% was up 1.6pp on the prior year.
Our Exclusive Brands Product Division, right at the
core of our business, remains the largest contributor
to gross profit, representing 44.2% of overall gross
profit in FY18. Kogan.com has over 12 years’
experience in private label manufacturing and
supply chain optimisation. Our Exclusive Brands
continue to demonstrate strong growth, as we
continue to service strong consumer demand
across a wide array of products.
We make 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.
We have delivered on that promise and will continue
to work hard to exceed the expectations of our
customer community.
In FY18, we invested in inventory to bring new
in-demand products to our customers. We
expanded the range within our Exclusive Brands
using our precision sourcing and demand driven
analytics systems and processes. This resulted in
year-on-year revenue growth of 39.6% in
Exclusive Brands.
4
4
kogan.com
kogan.com
We are excited about the growth
opportunities ahead of us. Our driven and
talented team remains focused on growth
across our Portfolio of existing businesses and
exploring new opportunities to expand
Our Retail business will continue to get more
compelling as we launch more products and
continue to on-board market-leading brands across
more categories to service the demand from our fast
growing Active Customer base. We will continue
to drive growth through our various New Verticals,
including launching Kogan Mobile New Zealand
and Kogan Money.
In addition, we are always assessing opportunities
to expand the Kogan Portfolio of products and
services in ways that serve the Kogan Community,
whether that be through selective and opportunistic
M&A, or partnering with industry leaders.
We look forward to delighting our customers
in the year ahead.
Ruslan Kogan
Founder & CEO
AWARDS AND ACCOLADES
During FY18, Kogan.com was recognised
through a number of prestigious industry awards.
The Australian public voted Kogan.com as their
favourite online shopping destination at the Australia
Post Online Retail Industry Awards for the second
year in a row. We are extremely proud and humbled
by this vote of confidence from the Australian public.
There is no more important vote than that of our
customers, and our team is committed to continuing
to delight our customers day in, day out.
Also this year, our Kogan TVs won the Canstar
Televisions 2018 Value for Money Award once again,
having been rated 5 star value for money in 2017 by
Canstar. And our Kogan Steam Mops won the 2017
Canstar Most Satisfied Customers Award. These
awards further demonstrate Kogan’s commitment
to price leadership and quality.
FY19 & BEYOND
We are excited about the growth opportunities
ahead of us. Our driven and talented team
remains focused on growth across our Portfolio
of existing businesses and exploring new
opportunities to expand.
We are relentless and ambitious. We have achieved
more than 1% market share in Kogan Retail and
Kogan Mobile, and our ambition is to do the same
in each New Vertical, while further growing our
market share in Kogan Retail and Kogan Mobile.
Annual Report 2018
5
OPERATING & 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,
Kogan Mobile New Zealand, Kogan Money 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 2018, we had 1,388,000 Active Customers2, representing
year-on-year growth of 45.3%.
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.
Kogan Marketplace partners with select brands and distributors,
giving them access to our 1,388,000 Active Customers, in addition
to our marketing and online distribution capability. 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.
In addition to Kogan.com, key channels for Kogan Retail and
Kogan Marketplace include: Dick Smith, eBay, Amazon and TradeMe.
2 Active customers refers to unique customers who have purchased in the last twelve months from X date, rounded to the
nearest thousand.
6
kogan.com
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 LAUNCHED IN FY18
Kogan Insurance
Kogan Insurance launched in August 2017 in partnership with Hollard
Insurance Company to offer general insurance, covering home, contents,
landlord, car and travel insurance, with a focus on value for money.
The underwriting of the general insurance policies is provided by Hollard,
with Kogan earning commission on the sale of all insurance policies.
In addition to the general insurance offering above, Kogan.com launched
Kogan Pet, Kogan Life and Kogan Health insurance offerings during
2HFY18. These additional insurance offerings are in partnership with
PetSure, a wholly owned subsidiary of The Hollard Insurance Company;
Greenstone Financial Services Pty Ltd; and Medibank Group, respectively.
Similar to Kogan Mobile and Kogan Internet, Kogan provides branding,
marketing and customer acquisition for all insurance offerings.
Kogan Internet
Under an expanded partnership with Vodafone Hutchison Australia
that was announced in June 2017, Kogan Internet launched in April 2018,
providing fixed-line NBN plans. NBN has an estimated market size of
10.9 million premises.
NEW VERTICALS LAUNCHING IN FY19
Kogan Mobile New Zealand
In June 2018, Kogan.com announced a new partnership with
Vodafone New Zealand Limited that will see Kogan.com offering
telecommunications services in New Zealand. Kogan Mobile New
Zealand will launch during FY19 and will enable Kogan.com to bring
market-leading telecommunications offers to New Zealand consumers in
partnership with the largest mobile network operator in New Zealand.
Kogan Money
In August 2018, Kogan.com announced Kogan Money Home Loans in
partnership with Adelaide Bank and Pepper Group Limited. These
partnerships will see Kogan.com offering competitively priced home
loans to Australian homeowners and investors under a new brand,
Kogan Money. Kogan Money Home Loans will be the first of a suite of
financial products to be rolled out under the Kogan Money brand in
FY19. Kogan Money will focus on simplifying financial services for all
Australians and making them more affordable through digital efficiency.
Annual Report 2018
7
operating & 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 12 years’ experience in Exclusive Brands, 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 2018.
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:
Back to back winner of the People’s Choice Award at the Australia Post Online Retail Industry Awards
(ORIAS) in July 2018, after having also won the coveted award in 2017. The People’s Choice Award is
awarded on the basis of a vote from more than 200,000 Australian online retail customers for the best
Australian online retailer.
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.
8
8
kogan.com
kogan.com
BUILDING THE KOGAN BRAND
In the twelve months to June 2018, the business achieved 45.3% 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 3 has been
stable with an average 58.8 (Figure 1.2). This number is important to us, because it shows we are delighting our
customers and we know that our business will only continue to thrive if we continue to delight our customers.
In addition to continuing to build our customer base, a large percentage of our traffic continues to come from
free sources. This is the direct result of our strong brand. It’s a brand that keeps existing customers coming back
and drives them to tell their friends about their positive experience. In turn, this generates marketing efficiencies
in our business and enables us to delight those customers with the most competitive offers in the market.
We use a data driven approach to continually improve our offering and to ensure that the right product or
service is shown to the right customers at the right time – through the right marketing medium. This also
enhances the customer’s experience as we are able to personalise offers and treat every shopper as
an individual.
Table 1.1 Active Customers
Jun‑17
Dec‑17
Jun‑18
Jun‑17 vs
Jun‑18
variance
Active Customers
955,000
1,166,000
1,388,000
45.3%
Figure 1.1 LTM Active customers
Figure 1.2 Net Promoter Score
0
0
0
’
1,500
1,200
900
600
Average 58.8
100
80
60
40
20
0
7
1
r
p
A
7
1
y
a
M
7
1
n
u
J
7
1
l
u
J
7
1
g
u
A
7
1
p
e
S
7
1
t
c
O
7
1
v
o
N
7
1
c
e
D
8
1
n
a
J
8
1
b
e
F
8
1
r
a
M
8
1
r
p
A
8
1
y
a
M
8
1
n
u
J
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
1
l
u
J
7
1
g
u
A
7
1
p
e
S
7
1
t
c
O
7
1
v
o
N
7
1
c
e
D
8
1
n
a
J
8
1
b
e
F
8
1
r
a
M
8
1
r
p
A
8
1
y
a
M
8
1
n
u
J
Figure 1.3 Annual revenue per customer
Figure 1.4 Traffic – Free vs paid marketing
Paid
32%
Free
68%
$330
$320
$310
$300
$290
$280
$270
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
1
l
u
J
7
1
g
u
A
7
1
p
e
S
7
1
t
c
O
7
1
v
o
N
7
1
c
e
D
8
1
n
a
J
8
1
b
e
F
8
1
r
a
M
8
1
r
p
A
8
1
y
a
M
8
1
n
u
J
3 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.
Annual Report 2018
9
operating & FinanCial review CONTINUED
PERFORMANCE REVIEW & OUTLOOK
Results Summary
Refer to Table 1.7 for an explanation of non IFRS measures used throughout this report.
Figure 1.5 Financial highlights
)
m
$
(
e
u
n
e
v
e
R
450
400
350
300
250
200
150
289.5
211.2
412.3
)
m
$
(
t
fi
o
r
p
s
s
o
r
G
90
80
70
60
50
40
30
20
10
0
80.6
51.7
32.7
)
m
$
(
A
D
T
B
E
I
30
25
20
15
10
5
0
26.0
12.5
4.0
FY16
FY17
FY18
FY16
FY17
FY18
FY164
FY174
FY18
Table 1.2 FY18 results compared to FY17 5
$m
revenue
Cost of sales
gross profit
Gross margin
Operating costs
eBitda
EBITDA margin
eBit
profit before tax
npat
NPATA
FY18
412.3
(331.7)
80.6
19.5%
(54.6)
26.0
6.3%
20.7
21.0
14.1
15.2
FY17 5
289.5
(237.8)
51.7
17.9%
(39.2)
12.5
Variance
42.4%
39.5%
55.9%
1.6pp/8.9%
39.3%
108.0%
4.3% 2.0pp/46.5%
8.7
9.1
6.7
8.1
137.9%
130.8%
110.4%
87.7%
Revenue increased by $122.8 million year on year, driven by growth across all Product Divisions, Active
Customers and New Verticals. Kogan Mobile grew by 233.3%, and successful implementation of the
Exclusive Brands strategy led to year-on-year revenue growth of 39.6% in that Product Division.
Gross margin increased by 1.6pp to 19.5% as a result of rapid growth in New Verticals and continued strong
growth in the Partner Brands Product Division.
4 The FY17 Pro Forma results represent the results of the business after removing the impact of transaction costs relating to the IPO,
as set out in Table 1.3 in the FY17 Annual Report (released to the ASX on 21 September 2017). The impact of mark-to-market on
unrealised foreign exchange contracts has not been removed from EBITDA in FY17, which is consistent with the treatment in FY18.
The FY16 Pro Forma results are consistent with the FY16 Investor Presentation (released to the ASX on 23 August 2016).
5 The FY17 Pro Forma results represent the results of the business after removing the impact of transaction costs relating to the IPO,
as set out in Table 1.3 in the FY17 Annual Report (released to the ASX on 21 September 2017). The impact of mark-to-market on
unrealised foreign exchange contracts has not been removed from EBITDA in FY17, which is consistent with the treatment in FY18.
10
10
kogan.com
kogan.com
During FY18 we on-boarded new and market-leading brands, expanded our Exclusive Brands range, and
invested in inventory across our Product Divisions to bring the most in-demand products to our customers
at best-in-market prices. The Partner Brands division, where we directly partner with brands, is now a larger
contributor to gross profit than the Global Brands division, in which we direct import brands from
distributors overseas.
In line with our growth strategy, we launched five New Verticals in FY18:
• Kogan Insurance;
• Kogan Health;
• Kogan Pet;
• Kogan Life; and
• Kogan Internet.
These New Verticals achieved gross profit of $0.8 million in FY18, $0.6 million of which was from Kogan
Internet. All but the general insurance offering launched during 2HFY18, so we are excited to scale these
New Verticals during FY19 and beyond.
Operating costs increased by less than revenue year-on-year, indicating some efficiency improvements,
allowing the business to benefit from ongoing operating leverage. The key operating costs are Marketing
and People Costs.
Given strong ROI metrics, the Company took the decision to invest further in Marketing, which is expected
to yield benefits over the short to medium term. As mentioned earlier in this report, Active Customers
increased by 45.3% in the 12 months to 30 June 2018.
We continue to recognise the contribution of our high-performing team and, as such, short-term and
long-term incentives remain in place to retain key talent and align their interests with shareholders.
Much of the year-on-year increase in People Costs was driven by equity based compensation expenses,
and short-term incentive bonuses arising as a result of the FY18 outperformance.
EBITDA margin increased by 2.0pp to 6.3% as the business is benefitting from ongoing operating leverage,
as mentioned above. This resulted in a more than doubling of prior year earnings.
Table 1.3 Statutory results FY18 versus FY17
$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
FY18
Statutory
FY17
412.3
(331.7)
80.6
19.5%
(60.6)
20.0
1.3
(0.3)
21.0
14.1
26.0
289.5
(237.8)
51.7
17.9%
(45.2)
6.5
(0.7)
0.3
6.1
3.7
9.5
Variance
42.4%
39.5%
55.9%
1.6pp/8.9%
34.1%
207.7%
244.3%
281.1%
173.7%
The results presented in Table 1.2 and discussed earlier in this report are consistent with the statutory
results, with the exception of the prior year statutory operating costs, which include $3.0 million of
transaction costs related to the IPO of Kogan.com Ltd 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.
EBITDA of $26.0 million represents a year on year increase of $16.5 million.
Annual Report 2018
Annual Report 2018
11
11
operating & FinanCial review CONTINUED
PRODUCT & BUSINESS MIX
Kogan Mobile increased as a % of gross profit to 14.9% from 7.0% in FY17. Exclusive Brands continues to be
the largest contributor to gross profit.
Figure 1.6 FY18 Gross profit mix
Other income
0.5%
Exclusive
Brands
44.2%
Mobile
14.9%
Internet
0.7%
Insurance
0.3%
Travel
0.7%
Partner
Brands
20.5%
Global Brands
18.3%
Table 1.4 New Verticals Gross Sales
$m
Kogan Travel
Kogan Insurance
Kogan Internet
Kogan Mobile
gross sales
FY17
6.9
–
–
3.6
10.5
FY18
7.8
0.3
0.6
12.0
20.7
Variance
YoY
13.0%
n/a
n/a
233.3%
97.1%
Kogan Mobile gross profit of $12.0 million represents a year on year increase of 233.3% (FY17: $3.6 million).
Kogan Mobile brought on ~1% of the total number of mobile phone users in Australia 6 within 2 years of
launching, and is approaching 2%. The success of Kogan Mobile demonstrates the strength of the Kogan
brand in powering New Verticals.
Kogan Insurance includes the new insurance verticals launched in 2HFY18 – Kogan Health, Kogan Pet &
Kogan Life, as well as the general insurance offering launched in August 2017. Kogan.com is focussed on
working with our partners in Kogan Insurance to implement strategies to accelerate Kogan Insurance
growth in FY19.
Kogan Internet launched during April 2018 offering competitively priced NBN plans. Kogan.com has
a strong commercial relationship with Vodafone, and there is a joint ambition to grow Kogan Internet
significantly in FY19
6 Source: According to Statista, there were forecast to be 19.4 million mobile phone users in Australia in 2017.
12
12
kogan.com
kogan.com
Figure 1.7 Kogan Mobile Active Customers
Figure 1.8 Kogan Mobile Quarterly Gross Profit
0
0
0
$
’
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
6
1
Q
Y
F
2
6
1
Q
Y
F
3
6
1
Q
Y
F
4
7
1
Q
Y
F
1
7
1
Q
Y
F
2
7
1
Q
Y
F
3
7
1
Q
Y
F
4
8
1
Q
Y
F
1
8
1
Q
Y
F
2
8
1
Q
Y
F
3
8
1
Q
Y
F
4
6
1
Q
Y
F
2
6
1
Q
Y
F
3
6
1
Q
Y
F
4
7
1
Q
Y
F
1
7
1
Q
Y
F
2
7
1
Q
Y
F
3
7
1
Q
Y
F
4
8
1
Q
Y
F
1
8
1
Q
Y
F
2
8
1
Q
Y
F
3
8
1
Q
Y
F
4
OPERATING LEVERAGE & COSTS
Figure 1.9 Operating leverage
– YoY % increase in Revenue and EBITDA
Figure 1.10 Operating costs as a % of revenue
– FY18 versus FY17 7
120%
100%
80%
60%
40%
20%
0%
108.0%
42.4%
Revenue
EBITDA
16.0%
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0%
2.1%
4.2%
3.6%
3.6%
FY17
1.2%
3.8%
4.8%
3.4%
FY18
Variable
costs
Marketing
costs
People
costs
Other
expenses
The acceleration of EBITDA materially outpaced revenue in FY18, as the business is experiencing significant
operating leverage.
As mentioned earlier in this report, the business continues to invest in marketing, following better than
expected ROI. Effective, targeted marketing is a key component of our growth strategy. With the exception
of marketing, all other operating costs decreased as a % of revenue year-on-year.
7 The FY17 Pro Forma results represent the results of the business after removing the impact of transaction costs relating to the IPO,
as set out in Table 1.3 in the FY17 Annual Report (released to the ASX on 21 September 2017). The impact of mark-to-market on
unrealised foreign exchange contracts has not been removed from EBITDA in FY17, which is consistent with the treatment in FY18.
Annual Report 2018
Annual Report 2018
13
13
operating & FinanCial review CONTINUED
STATEMENT OF FINANCIAL POSITION
Table 1.5 Summary net assets at 30 June 2018 and 30 June 2017
$m
Current assets
Non-current assets
total assets
Current liabilities
Non-current liabilities
total liabilities
net assets
30‑Jun‑18
30‑Jun‑17
99.0
6.9
106.0
(57.4)
(0.7)
(58.2)
47.9
74.4
5.9
80.3
(37.6)
(0.1)
(37.7)
42.6
The business continues to enjoy a healthy financial position, including a closing cash balance of $42.6 million
(30 June 2017: $32.0 million).
In line with growth strategies, Kogan.com invested in Exclusive Brands and Third Party inventory. As at
30 June 2018, Kogan.com had inventory of $50.2 million, comprising $40.4 million of inventory on hand
and $9.8 million of inventory in transit. The year on year increase in payables is largely driven by the increase
in inventory.
CASH FLOWS
Table 1.6 Statutory cash flow FY18
$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
Cash flow before financing and taxation
Operating cash flow conversion
FY18
Statutory
FY17
Statutory
26.0
(0.2)
–
25.8
5.9
31.7
(0.1)
(7.1)
24.5
122.9%
9.5
0.7
3.0
13.2
(2.4)
10.8
(0.1)
(3.5)
7.2
81.8%
The business generated operating cash flow before capital expenditure of $31.7 million in FY18, resulting
in an operating cash flow conversion ratio of 122.9%.
Net working capital decreased by $5.9 million in FY18. Given 30 June 2018 fell on a Saturday, this resulted
in higher deferred income and payables at year-end.
Kogan Mobile was a significant contributor to the FY18 results and operating cash flows following strong
growth. During FY18, the business launched five New Verticals, as discussed earlier. Management expects
that as the New Verticals, in which we receive commission-based revenue, accelerate in growth in the future,
operating cash flow conversion will continue to benefit.
14
14
kogan.com
kogan.com
OUTLOOK
At Kogan.com we are relentless in our mission to bring more in-demand products and services to
customers at market-leading prices. With that in mind, the pace continues into the new financial year.
Our retail business will continue to get more compelling as we launch more products and continue to
on-board market-leading brands across more categories to service the demand from our fast growing
Active Customer base. We will continue to drive growth through our existing New Verticals: Kogan Mobile,
Kogan Insurance, Kogan Internet and Kogan Travel. Additionally, we will launch Kogan Mobile New Zealand
and Kogan Money Home Loans during FY19.
We are very excited about the growth opportunities ahead of us. We believe we have barely scratched
the surface and, as such, we will continue to explore ways to leverage the Kogan brand to grow the
Kogan portfolio of businesses into New Verticals that will be beneficial for our customers, our partners
and our business.
In FY19, we expect:
• growth in the Active Customer base;
• growth in Exclusive Brands;
• growth in Partner Brands;
• growth in Kogan Mobile; and
• growth in Kogan Health, Kogan Life, Kogan Pet, Kogan Insurance and Kogan Internet.
NON IFRS MEASURES
Throughout this report, Kogan.com has included certain non-IFRS financial information, including 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 1.7 Non IFRS measures
EBITDA
NPATA
Gross Sales
Earnings before interest, tax, depreciation and amortisation.
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.
Annual Report 2018
Annual Report 2018
15
15
operating & FinanCial review CONTINUED
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.
Exclusive Brands Strategy
Exclusive Brands is a pillar of the business and remains a focus area for FY19 and beyond. In FY18,
Kogan.com achieved year-on-year revenue growth of 39.6% in Exclusive Brands. In addition, Exclusive
Brands continues to be the largest contributor to gross profit, representing 44.2% of gross profit in FY18.
In FY19, the business is focused on continuing to launch new products and new ranges, where there is
proven demand. Our Exclusive Brands business benefits from:
• Full control of the end-to-end supply chain;
• Strong competitive advantage;
• Compelling consumer offering; and
• Over 12 years’ experience.
16
16
kogan.com
kogan.com
New Verticals
We continue to explore opportunities to partner with industry leaders and bring more services to our
customers at market-leading prices. FY19 will see the launch of Kogan Mobile New Zealand and Kogan
Money, as discussed earlier in this report, in addition to the 5 New Verticals launched during FY18 that will
scale in FY19.
Our ambition with all our New Verticals is to achieve more than 1% market share, as we have already done
with Kogan Mobile. The business is focused on growing the existing New Verticals to our goal market share
and continuing to build our Portfolio of services businesses.
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
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.
Competition may increase
and change
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.
inventory management
In order to operate its business successfully, Kogan.com must maintain
sufficient inventory and also avoid the accumulation of excess inventory.
Key supplier, service provider
and counterparty factors
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.
performance and reliability
of Kogan.com’s websites,
databases and operating
systems
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.
Manufacturing and
product quality
reputational product
sourcing factors
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 gst and other
equivalent taxes
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.
retention of key staff
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.
reliance on third party
payment providers
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.
Annual Report 2018
Annual Report 2018
17
17
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 2018 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
Particular 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 Adam Sutherland acting jointly as Kogan.com’s company secretaries.
PRINCIPAL ACTIVITIES
Kogan.com is a portfolio of product and services businesses that included Kogan Retail, Kogan Marketplace,
Kogan Mobile, Kogan Internet, Kogan Insurance and Kogan Travel during the year ended 30 June 2018.
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, Vostok and Komodo (“Exclusive Brands 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 Mobile, Kogan Internet,
Kogan Insurance and Kogan Travel (“New Verticals”).
Kogan.com has signed an agreement with Vodafone New Zealand Limited that will see Kogan.com offering
telecommunications services in New Zealand.
Kogan.com has also signed agreements with Adelaide Bank and Pepper Group Limited. These agreements
will see Kogan.com offering competitive home loan products to Australian homeowners and investors under
a new brand, Kogan Money.
Both Kogan Mobile New Zealand and Kogan Money Home Loans will launch during FY19.
An operating and financial review of the Group during the financial year and the results of these operations
are contained on pages 6 to 17 of this report.
No significant change in the nature of other activities occurred during the year.
EVENTS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
The Directors have declared a final dividend of 6.1 cents per ordinary share, fully franked. The record date
of the dividend is 24 August 2018 and the dividend will be paid on 7 September 2018. The dividend was not
determined until the 17 August 2018 and accordingly no provision has been recognised as at 30 June 2018.
Changes in the goods and services tax in Australia (“GST”) came into effect from 1 July 2018.
18
18
kogan.com
kogan.com
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 2018, the Directors:
• declared a fully franked interim dividend of 6.9 cents per ordinary share. The record date of the dividend
is 1 March 2018 and the dividend was paid on 13 March 2018.
• declared a fully franked final dividend of 6.1 cents per ordinary share. The record date of the dividend
is 25 August 2017 and was paid on 4 September 2017.
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:
• 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.
Annual Report 2018
19
direCtors’ report CONTINUED
The following fees were paid or payable to KPMG for non-audit services provided during the year ended
30 June 2018:
Advisory services
Taxation services
$
46,000
55,622
101,622
LEAD AUDITOR’S INDEPENDENCE DECLARATION
The lead auditor’s independence declaration for the financial year ended 30 June 2018 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
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 a consultant at Accenture.
Mr Kogan holds a Bachelor of Business Systems from Monash University.
Board Committee membership
• Member of the Remuneration and Nomination Committee
20
20
kogan.com
kogan.com
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 until June 2018.
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 (appointed in September 2010)
Board Committee membership
• Chairman of the Audit and Risk Management Committee
• Member of the Remuneration and Nomination Committee
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 in 2007, 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.
adam sutherland (Mertons Corporate services pty ltd)
Joint Company Secretary
Adam Sutherland is an experienced corporate governance professional and is Company
Secretary for a number of ASX listed entities. He has expertise in corporate compliance
obligations, including ASX and ASIC requirements. Currently a Corporate Governance
Advisor at Mertons Corporate Services Pty Ltd, Adam has also held legal support and
corporate compliance roles with Crown Resorts Limited and Crown Melbourne Limited.
He holds an Advanced Diploma of Business (Legal Practice) from RMIT and Certificate in
Corporate Governance from the Governance Institute of Australia.
Annual Report 2018
Annual Report 2018
21
21
direCtors’ report CONTINUED
MEETINGS OF DIRECTORS
Directors’ meetings held between 1 July 2017 and 30 June 2018:
Greg Ridder
Harry Debney
Ruslan Kogan
David Shafer
BOARD
AUDIT AND RISK
REMUNERATION
AND NOMINATION
A
10
10
10
10
B
10
9
10
10
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.
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
Ordinary
Shares
24,904,461
9,543,688
160,500
245,198
22
22
kogan.com
kogan.com
SHARE RIGHTS
Unissued Shares under Rights
All rights were granted during the current financial year.
At 30 June 2018 unissued shares of the Group under right are:
Vest Date
30 June 2018
31 December 2018
30 June 2018
31 December 2019
30 June 2020
31 December 2020
30 June 2021
31 December 2021
30 June 2022
31 December 2022
Average
Rights Price
Number
of Shares
2.48
5.26
2.91
4.15
2.66
4.05
2.73
4.95
4.09
8.02
232,181
21,713
234,083
708,535
338,741
727,903
333,015
21,759
97,809
1,146
2,716,885
All unissued shares are ordinary shares of the Company.
Shares Issued on Exercise of Rights
During the financial year, the Group issued 135,764 ordinary shares as a result of the rights vesting.
Annual Report 2018
Annual Report 2018
23
23
REMUNERATION REPORT (AUDITED)
INTRODUCTION
The directors are pleased to present the FY18 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’s performance;
5. Details of remuneration;
6. Equity instruments;
7. Executive 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
24
24
kogan.com
kogan.com
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.
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, 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.
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.
Annual Report 2018
Annual Report 2018
25
25
reMuneration report (audited) CONTINUED
CEO
CFO, COO
Fixed remuneration
AT RISK
Fixed
remuneration
Short term
incentive
Long‑term
incentive
80%
80%
20%
20%
–%
–%
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
• the Group’s pay structure
The salaries are benchmarked against similar ASX-listed and other online retail companies.
All KMPs received an adjustment to their fixed remuneration in the 2018 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).
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.
Maximum opportunity
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.
26
26
kogan.com
kogan.com
performance period
1 July 2017 to 30 June 2018
timing of assessment
July 2018, following the completion of the 30 June 2018 accounts
Form of payment
Board discretion
Paid in cash
Targets are reviewed annually and the Board has discretion to adapt
appropriately to take into account exceptional items.
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.
Annual Report 2018
Annual Report 2018
27
27
reMuneration report (audited) CONTINUED
Non‑executive directors’ remuneration
Kogan.com 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 FY18 are $170,000 and $95,000, respectively.
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
• 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 recognise the importance
of having performance conditions that are linked to customer engagement.
28
28
kogan.com
kogan.com
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 2018
* Share Price as at Friday 29 June 2018.
FY2018
FY2017
14.1
0.15
26.0
10.0
42%
6.82*
3.7
0.04
9.5
3.6
37%
1.67
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.
SHORT-TERM
POST-
EMPLOYMENT
LONG TERM
BENEFITS
Salary and
Fees
$
Short‑Term
Incentives
$
Superannuation
$
Year
2018
2018
385,000
330,000
715,000
2017
2017
350,000
300,000
87,068
74,663
161,731
64,498
55,308
650,000
119,806
34,014
31,963
65,977
25,743
24,870
50,613
Annual
& long
service
leave
$
36,258
31,239
Total
$
542,340
467,865
67,497
1,010,205
30,374
25,874
56,248
470,615
406,052
876,667
R. Kogan
D. Shafer
total
R. Kogan
D. Shafer
total
Annual Report 2018
Annual Report 2018
29
29
reMuneration report (audited) CONTINUED
Non‑executive directors’ remuneration
The table below sets out the remuneration paid to Non-Executive Directors:
Greg Ridder
Harry Debney
total
Greg Ridder
Harry Debney
total
SHORT-TERM
BENEFITS
POST-
EMPLOYMENT
BENEFITS
Total fees
$
Superannuation
$
170,000
95,000
265,000
146,118
85,000
231,118
–
–
–
13,882
–
13,882
Year
2018
2018
2017
2017
Total
$
170,000
95,000
265,000
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:
Ordinary Shares
Ruslan Kogan
David Shafer
Greg Ridder
Harry Debney
No. shares held
2018
% ownership
2018
No. shares held
2017
% ownership
2017
24,904,461
9,543,688
160,500
245,198
26.6%
10.2%
0.2%
0.3%
47,430,205
17,802,705
111,110
222,221
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
30
30
Termination notice
by Kogan.com
Termination notice
by employee
Termination
payments provided
for under contract
12 months
6 months
12 months
6 months
12 months
6 months
kogan.com
kogan.com
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. Dividends paid in FY18 and FY17 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.
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
2018
$
2017
$
Ruslan Kogan
Purchases from eStore warehousing
9,734,113
6,335,297
Kogan Australia Pty Ltd had an amount payable to eStore of $450,177 as at 30 June 2018 (2017: $398,261).
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, 25 September 2018
Annual Report 2018
Annual Report 2018
31
31
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 2018 there have been:
i.
ii.
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.
KPM_INI_01
PAR_SIG_01
PAR_NAM_01
PAR_POS_01
PAR_DAT_01
PAR_CIT_01
KPMG
BW Szentirmay
Partner
Melbourne
25 September 2018
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
32
32
kogan.com
kogan.com
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. Segment Information
38 C. Uses of Judgements and Estimates
39 D. Common Control Transaction
39 E. Functional and Presentation Currency
39 seCtion 1: Business perForManCe
1.1 Revenue
39
40 1.2a Profit for the Year
40 1.2b Finance Costs
41
43 1.4 Notes to the Cash Flow Statement
1.3 Tax Balances
44 seCtion 2: operating assets
and liaBilities
44 2.1 Working Capital
46 2.2 Intangible Assets
48 2.3 Property, Plant and Equipment
49 seCtion 3: Capital struCture
and FinanCing
49 3.1 Loan and Borrowings
50 3.2 Capital and Financial Risk Management
56 3.3.1 Issued Capital And Reserves
57 3.3.2 Distributions
58 3.4 Earnings Per Share
59 seCtion 4: group struCture
59 4.1 Controlled Entities
59 4.2 Deed of Cross Guarantee
60 4.3 Parent Entity Disclosures
60 4.4 Related Parties
61 seCtion 5: eMploYee reward
and reCognition
61 5.1 Key Management Personnel Compensation
62 5.2 Incentive Plans
66 seCtion 6: otHer
66 6.1 Subsequent Events
66 6.2 Remuneration of Auditors
66 6.3 Capital and Leasing Commitments
67 6.4 New Accounting Standards
70 6.5 Company Information
71 DIRECTORS’ DECLARATION
72
INDEPENDENT AUDITOR’S REPORT
77 SHAREHOLDER INFORMATION
Annual Report 2018
Annual Report 2018
33
33
CONSOLIDATED INCOME STATEMENT AND
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2018
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 gain / (loss)
net finance costs
profit before income tax
Tax expense
net profit for the period attributable to the members
of company
Basic earnings per share
Diluted earnings per share
CONSOLIDATED GROUP
Note
2018
$
2017 1
$
1.1
412,312,395
289,517,780
1.2a
(331,718,953)
(237,824,300)
80,593,442
51,693,480
(24,526,714)
(15,275,422)
(9,409,514)
(5,810,443)
(25,449,124)
(23,108,076)
(1,227,541)
(993,060)
19,980,549
6,506,479
309,384
469,845
1.2b
(582,695)
(124,694)
1,299,973
(727,265)
1,026,662
(382,114)
21,007,211
6,124,365
1.3
(6,896,218)
(2,384,500)
14,110,993
3,739,865
3.4
3.4
0.15
0.15
0.04
0.04
The accompanying notes form part of these financial statements.
1 Pursuant to ASIC relief granted on 26 September 2016, the prior 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
34
kogan.com
kogan.com
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Prepayments and other current assets
2.1.2b
AS AT 30 JUNE 2018
assets
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Financial assets
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
Financial liabilities
Current tax liabilities
Employee benefits
Provisions
Deferred income
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Deferred tax liabilities
Employee benefits
Provisions
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
net assets
eQuitY
Issued capital
Merger reserve
Other reserves
Retained earnings
total eQuitY
Note
2018
$
2017
$
42,617,940
32,027,680
2.1.2a
4,999,536
2,045,324
2.1.1
50,200,175
39,741,987
572,708
652,478
–
625,517
99,042,837
74,440,508
2.3
2.2
1.3
449,088
489,372
6,492,748
4,480,040
–
913,936
6,941,836
5,883,348
105,984,673
80,323,856
2.1.3
45,355,366
28,504,597
–
3,154,445
684,879
871,493
727,265
2,163,197
508,188
488,337
7,319,876
5,165,416
57,386,059
37,557,000
577,527
110,536
29,293
717,356
–
65,614
29,557
95,171
58,103,415
37,652,171
47,881,258
42,671,685
1.3
3.3.1
3.3.1
167,293,634
167,100,702
(131,816,250)
(131,816,250)
832,851
(73,547)
11,571,023
7,460,780
47,881,258
42,671,685
The accompanying notes form part of these financial statements.
Annual Report 2018
Annual Report 2018
35
35
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2018
CONSOLIDATED GROUP
Share
Capital
$
Retained
Earnings
$
Merger
Reserve
$
Translation
Reserve
$
Note
Balance at 1 July 2016
Comprehensive income
Profit for the year
total comprehensive
income for the year
transactions with
owners, in their
capacity as owners,
and other transfers
343
7,361,042
–
–
3,739,865
3,739,865
Issue of ordinary shares,
net of issue costs
3.3.1 b 167,100,359
Kogan Group
restructure
Equity-settled share-
based payments
Dividends paid
total transactions with
owners, in their
capacity as owners
5.2
3.3.2
Share
based
payments
Reserve
$
–
–
–
Total
Equity
$
7,070,740
3,739,865
3,739,865
–
167,100,359
(131,816,250)
217,098
217,098
–
(3,640,127)
217,098
31,861,080
–
–
–
–
(131,816,250)
–
–
(290,645)
–
–
–
–
–
–
167,100,359
(3,640,127) (131,816,250)
Balance at 30 June 2017
167,100,702
7,460,780 (131,816,250)
(290,645)
217,098 42,671,685
Balance at 1 July 2017
167,100,702
7,460,780 (131,816,250)
(290,645)
217,098
42,671,685
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 under
performance plans
Equity-settled share-
based payments
Dividends paid
total transactions with
owners and other
transfers
3.3.1 b
192,932
5.2
3.3.2
–
–
– (10,000,750)
192,932 (10,000,750)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
14,110,993
14,110,993
(192,932)
–
1,099,330
1,099,330
– (10,000,750)
906,398
(8,901,420)
–
–
(3,640,127)
–
–
14,110,993
14,110,993
–
–
–
–
Balance at 30 June 2018
167,293,634
11,571,023 (131,816,250)
(290,645)
1,123,496
47,881,258
The accompanying notes form part of these financial statements.
36
36
kogan.com
kogan.com
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Interest received
Finance costs paid
Income tax paid
Note
2018
$
2017
$
448,098,179
291,236,987
(416,051,385)
(280,322,571)
309,384
469,845
(114,070)
(159,806)
(4,413,508)
(287,785)
Net cash provided by operating activities
1.4
27,828,600
10,936,670
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
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
(130,497)
(87,311)
(7,107,093)
(3,465,506)
(7,237,590)
(3,552,817)
–
–
–
34,999,999
(3,624,346)
(4,900,000)
(10,000,750)
(3,640,127)
(10,000,750)
22,835,526
10,590,260
30,219,379
32,027,680
1,808,301
Cash and cash equivalents at end of financial year
3.2
42,617,940
32,027,680
The accompanying notes form part of these financial statements.
Annual Report 2018
Annual Report 2018
37
37
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
BASIS OF PREPARATION
The financial report of Kogan.com Ltd and its controlled entities (“the Group”) for the year ended 30 June 2018
was authorised for issue in accordance with a resolution of the Directors on 25 September 2018.
Pursuant to ASIC relief granted on 26 September 2016, the prior 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). 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 2017.
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. 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.
C. Uses of Judgements and Estimates
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.
38
38
kogan.com
kogan.com
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.
D. 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 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.
E. Functional and Presentation Currency
These consolidated financial statements are presented in Australian dollars, which is the Company’s
functional currency.
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.
Annual Report 2018
39
notes to tHe FinanCial stateMents CONTINUED
SECTION 1: BUSINESS PERFORMANCE (continued)
1.1 Revenue (continued)
revenue
Sales revenue:
– sale of goods
– rendering of services
Other revenue:
– marketing subsidies
– ispONE settlement
– other revenue
total revenue
1.2a Profit for the Year
expenses
Cost of sales
Cost of services
total Cost of sales
Employee benefit expense
Depreciation and amortisation expense
Consolidated group
2018
$
2017
$
389,884,367
276,496,962
18,986,988
9,971,911
408,871,355
286,468,873
1,249,736
–
2,191,304
893,198
399,094
1,756,615
3,441,040
3,048,907
412,312,395
289,517,780
2018
$
2017
$
325,356,947
232,281,905
6,362,006
5,542,395
331,718,953
237,824,300
15,513,108
13,369,326 1
5,339,333
3,823,701
Costs associated with the group’s Initial Public Offering not eligible to be
offset against issued share capital
–
1,799,602
1
Includes $1,183,749 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
2018
$
468,625
114,070
582,695
2017
$
(35,112)
159,806
124,694
40
40
kogan.com
kogan.com
1.3 Tax Balances
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.
a. The components of tax expense comprise:
Current tax
Deferred tax
Under-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% (2017: 30%):
– consolidated group
Add:
– Tax effect of:
– amortisation of intangibles
– shared based payments
– entertainment (non-deductible)
– other items
Less:
Tax effect of:
– prior year losses now recognised
– rebateable fully franked dividends
– Research and development tax benefit
– current year revenue losses not recognised
– over provision of prior year income tax
Income tax attributable to the Group
The applicable weighted average effective tax rates
are as follows:
CONSOLIDATED GROUP
2018
$
2017
$
5,703,917
3,310,357
1,270,983
(574,400)
(78,682)
(351,457)
6,896,218
2,384,500
6,302,163
1,837,309
326,331
329,799
31,735
49,558
444,985
436,424
51,567
4,290
–
–
(65,016)
330
(78,682)
(111,604)
70,560
–
2,425
(351,456)
6,896,218
2,384,500
33%
39%
Annual Report 2018
Annual Report 2018
41
41
notes to tHe FinanCial stateMents CONTINUED
SECTION 1: BUSINESS PERFORMANCE (continued)
1.3 Tax Balances (continued)
The effective tax rate for FY18 of 33% reflects the impact of non-deductible intangible amortisation and
other non-deductible costs, offset by research and development tax benefit and an overprovision for
income tax in the prior year.
Current and deferred tax balances:
assets
CURRENT/NON-CURRENT
Deferred tax asset
Total
liabilities
CURRENT
Current tax liabilities
Deferred tax liabilities
Total
Movements in deferred tax balances
CONSOLIDATED GROUP
2018
$
2017
$
–
–
913,936
913,936
3,154,445
2,163,197
577,527
–
3,731,972
2,163,197
BALANCE AT 30 JUNE
Net
balance
at 1 July
Under/
Over
Recog‑
nised in
profit or
loss
Recog‑
nised in
OCI
Recog‑
nised
directly
to equity
Acqui‑
sitions
Other
Net
Deferred
tax
assets
Deferred
tax
liabilities
2018
Property, plant &
equipment
11,745
Intangible assets
(736,663)
–
–
4,361
(758,513)
Financial assets
218,180
– (389,992)
Employee benefits 155,266
Provisions
Other items
337,845
926,494
–
–
45,986
7,467
– (406,268)
Tax losses carried
forward
Net tax assets
(liabilities)
1,069
–
5,496
913,936
– (1,491,463)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
16,106
16,106
–
– (1,495,176)
– (1,495,176)
–
–
–
–
–
–
(171,812)
–
(171,812)
201,252
201,252
345,312
345,312
520,226
520,226
6,565
6,565
–
–
–
–
(577,527) 1,089,461 (1,666,988)
42
42
kogan.com
kogan.com
Net
balance
at 1 July
Under/
Over
Recog‑
nised in
profit or
loss
Recog‑
nised in
OCI
Recog‑
nised
directly
to equity
Acqui‑
sitions
Other
Net
Deferred
tax
assets
Deferred
tax
liabilities
BALANCE AT 30 JUNE
2017
Property, plant &
equipment
6,723
–
5,022
Intangible assets
(50,642) (355,354) (330,667)
Financial assets
–
Employee benefits
115,379
–
–
218,180
39,887
Provisions
247,380
2,100
88,365
Other items
18,951
Tax losses carried
forward
1,745
–
–
575,519
(676)
Net tax assets
(liabilities)
339.536 (353,254) 595,630
1.4 Notes to the Cash Flow Statement
–
–
–
–
–
–
–
–
–
–
–
–
–
332,024
–
332,024
–
–
–
–
–
–
–
–
a. reconciliation of Cash Flows from operating activities
with profit after income tax
Profit/(loss) 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) in inventories
– increase in trade payables and accruals
– increase in deferred income
– increase in provisions
– increase in income taxes receivable
– increase in income taxes payable
– increase in deferred taxes payable
– decrease/(increase) in deferred taxes receivable
Cash flows from operating activities
27,828,600
10,936,670
Annual Report 2018
Annual Report 2018
43
43
–
11,745
11,745
–
– (736,663)
– (736,663)
–
–
–
218,180
218,180
155,266
155,266
337,845
337,845
– 926,494 926,494
1,069
1,069
–
–
–
–
–
–
–
913,936 1,650,599 (736,663)
CONSOLIDATED GROUP
2018
$
2017
$
14,110,993
3,739,865
5,339,333
3,823,701
–
1,799,602
1,099,330
1,743,603
–
3,762
(1,299,973)
727,265
(2,954,212)
(101,129)
936,557
779,406
(10,458,188)
(19,209,612)
16,850,771
13,617,571
2,154,460
782,649
604,505
–
991,247
577,527
913,936
471,287
132,217
2,163,197
–
(574,400)
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
2018
$
2017
$
9,789,279
9,013,522
40,410,896
30,728,465
50,200,175
39,741,987
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
2018
$
2017
$
2,676,873
1,785,268
2,676,873
1,785,268
2,322,663
260,056
4,999,536
2,045,324
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
44
CONSOLIDATED GROUP
2018
$
2017
$
4,999,536
2,045,324
4,999,536
2,045,324
kogan.com
kogan.com
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 $499,954 as at 30 June 2018 (2017: $204,532).
past due But not iMpaired
(daYs overdue)
Gross
Amount
$
Past
Due and
Impaired
$
< 30
$
31–60
$
61–90
$
> 90
$
2018
Trade and term receivables
2,676,873
Other receivables
Total
2017
2,322,663
4,999,536
Trade and term receivables
1,785,268
Other receivables
Total
260,056
2,045,324
2.1.2b other Current assets
Prepayments
Rental bond
Other
–
–
–
–
–
–
2,522,174
76,032
56,537
22,130
2,322,663
–
–
–
4,844,837
76,032
56,537
22,130
1,776,142
260,056
2,036,198
1,647
–
1,647
1,882
5,597
–
–
1,882
5,597
CONSOLIDATED GROUP
2018
$
2017
$
546,732
445,287
29,197
76,549
652,478
29,197
151,033
625,517
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
2018
$
2017
$
32,504,512
21,176,695
10,914,140
5,936,089
1,936,714
1,391,813
45,355,366
28,504,597
Annual Report 2018
Annual Report 2018
45
45
notes to tHe FinanCial stateMents CONTINUED
SECTION 2: OPERATING ASSETS AND LIABILITIES (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.
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
46
kogan.com
kogan.com
patents and trademarks:
Cost
Accumulated amortisation
Net carrying amount
website development costs:
Cost
Accumulated amortisation
Net carrying amount
software costs:
Cost
Accumulated amortisation
Net carrying amount
intellectual property:
Cost
Accumulated amortisation
Net carrying amount
Total intangibles
Consolidated group:
Year ended 30 June 2017
Balance at the beginning
of the year
Additions
Write offs
Effect of movements in
exchange rates
CONSOLIDATED GROUP
2018
$
2017
$
625,153
358,425
(355,316)
(227,715)
269,837
130,710
4,056,281
2,893,581
(2,870,315)
(2,049,982)
1,185,966
843,599
831,792
784,946
(788,011)
(697,809)
43,781
87,137
13,643,245
8,012,425
(8,650,081)
(4,593,831)
4,993,164
3,418,594
6,492,748
4,480,040
Patents and
Trademarks
$
Website
Development
costs
$
Software
costs
$
Intellectual
Property
$
Total
$
108,428
113,748
(3,762)
–
643,410
747,184
349,303
3,532,332
4,633,473
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
Year ended 30 June 2018
Balance at the beginning of
the year
Additions
Effect of movements in
exchange rates
130,710
266,728
843,599
1,162,700
87,137
3,418,594
4,480,040
46,846
5,630,819
7,107,093
–
–
–
–
–
Amortisation charge
(127,601)
(820,333)
(90,202)
(4,056,249)
(5,094,385)
Closing value at 30 June 2018
269,837
1,185,966
43,781
4,993,164
6,492,748
Annual Report 2018
Annual Report 2018
47
47
notes to tHe FinanCial stateMents CONTINUED
SECTION 2: OPERATING ASSETS AND LIABILITIES (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 & straight line basis)
67%
Office equipment and furniture (reducing balance & straight line basis)
10-25%
Leasehold improvements
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
48
kogan.com
kogan.com
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
a. Movements in Carrying amounts
CONSOLIDATED GROUP
2018
$
2017
$
307,608
234,996
(253,233)
(183,776)
54,375
51,220
924,806
878,010
(552,015)
(455,037)
372,791
422,973
34,144
(12,222)
21,922
23,055
(7,876)
15,179
449,088
489,372
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 2016
Additions
Depreciation expense
Balance at 30 June 2017
Additions
Depreciation expense
Balance at 30 June 2018
Computer
Equipment
$
Office
Equipment
$
Leasehold
improvements
$
Total
$
33,854
67,963
519,674
18,643
17,774
705
571,302
87,311
(50,597)
(115,344)
(3,300)
(169,241)
51,220
72,612
422,973
46,796
(69,457)
(96,978)
54,375
372,791
15,179
11,089
(4,346)
21,922
489,372
130,497
(170,781)
449,088
SECTION 3: CAPITAL STRUCTURE AND FINANCING
3.1 Loan and Borrowings
The group’s interest-bearing loans and borrowings are measured at amortised cost.
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 30 June 2018 (30 June 2017: nil).
Annual Report 2018
Annual Report 2018
49
49
notes to tHe FinanCial stateMents CONTINUED
SECTION 3: CAPITAL STRUCTURE AND FINANCING (continued)
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.
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.
50
50
kogan.com
kogan.com
Cash and cash equivalents
liquidity risk
CONSOLIDATED GROUP
2018
$
2017
$
42,617,940
32,027,680
42,617,940
32,027,680
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 below 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.
Financial liability and financial asset maturity analysis
WITHIN 1 YEAR
1 TO 5 YEARS
OVER 5 YEARS
TOTAL
Consolidated
Group
2018
$
2017
$
2018
$
2017
$
2018
$
2017
$
2018
$
2017
$
Financial liabilities due for payment
Borrowings
Trade and
other payables
Total expected
outflows
–
(45,355,366) (28,504,597)
(45,355,366) (28,504,597)
Financial assets – cash flows realisable
Cash and cash
equivalents
Trade, term and
loan receivables
Total anticipated
inflows
Net (outflow)/
inflow on
financial
instruments
42,617,940 32,027,680
4,999,536
2,045,324
47,617,476 34,073,004
2,262,110
5,568,407
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– (45,355,366) (28,504,597)
– (45,355,366) (28,504,597)
–
–
–
–
42,617,940 32,027,680
4,999,536
2,045,324
47,617,476 34,073,004
2,262,110
5,568,407
Annual Report 2018
Annual Report 2018
51
51
notes to tHe FinanCial stateMents CONTINUED
SECTION 3: CAPITAL STRUCTURE AND FINANCING (continued)
3.2 Capital and Financial Risk Management (continued)
c. Market risk
(i) interest rate risk
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.
Subsequent to 30 June 2017, 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.
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.
52
52
kogan.com
kogan.com
NOTIONAL AMOUNTS
AVERAGE EXCHANGE RATE
Consolidated Group
Buy USD / sell AUD:
2018
$
2017
$
Settlement
– less than 6 months
47,053,962
28,508,771
– 6 months to 1 year
–
–
2018
$
0.75
–
2017
$
0.75
–
The fair value of foreign exchange contracts at 30 June 2018 totalled $572,708 (2017: $(727,265)).
sensitivity analysis
The following table illustrates sensitivities to the Group’s exposures to changes in exchange rates. 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 2018
+/–10bps in foreign exchange rates
Year ended 30 June 2017
+/–10bps in foreign exchange rates
CONSOLIDATED GROUP
Profit
$
Equity
$
4,705,396
4,705,396
2,850,877
2,850,877
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.
Annual Report 2018
Annual Report 2018
53
53
notes to tHe FinanCial stateMents CONTINUED
SECTION 3: CAPITAL STRUCTURE AND FINANCING (continued)
3.2 Capital and Financial Risk Management (continued)
Financial instruments (continued)
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.
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.
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.
54
54
kogan.com
kogan.com
The Group holds the following financial assets and liabilities at reporting date:
Financial assets
Cash and cash equivalents
Loans and receivables
Financial assets
total financial assets
Financial liabilities
Financial liabilities at amortised cost:
– trade and other payables
– borrowings
– financial liabilities
total financial liabilities
Fair value Measurements
CONSOLIDATED GROUP
Note
2018
$
2017
$
42,617,940
32,027,680
2.1.2a
4,999,536
2,045,324
572,708
–
48,190,184
34,073,004
2.1.3
45,355,366
28,504,597
–
–
–
727,265
45,355,366
29,231,862
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 2018 totalled $572,708 (asset) (2017: $727,265 (liability)).
This represented the amount ‘in the money’ on outstanding forward foreign exchange contracts as at
30 June 2018.
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.
Annual Report 2018
Annual Report 2018
55
55
notes to tHe FinanCial stateMents CONTINUED
SECTION 3: CAPITAL STRUCTURE AND FINANCING (continued)
3.3.1 Issued Capital And Reserves
a. ordinary shares
CONSOLIDATED GROUP
2018
$
2017
$
2018
No.
2017
No.
Fully paid ordinary shares
167,293,634
167,100,702
93,472,345
93,336,581
167,293,634
167,100,702
93,472,345
93,336,581
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
Shares
No.
343
Issue price
$1.00
(343)
$–
$
343
–
27,777,786
$1.80
50,000,015
7 July 2016
657,638
$1.80
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
Shares issued to eligible employees
under an incentive plan
Shares issued to eligible employees
under an incentive plan
Balance
c. Merger reserve
3 July 2017
128,357
$1.43
183,562
8 March 2018
30 June 2018
7,407
$1.27
9,370
93,472,345
167,293,634
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.
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
a discounted cash flow valuation model, taking into account the terms and conditions upon which the equity
instruments were granted, as discussed in Note 5.2.
56
56
kogan.com
kogan.com
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 2018 and 30 June 2017 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
a. ordinary shares
recognition and measurement
Note
CONSOLIDATED GROUP
2018
$
–
2017
$
–
(42,617,940)
(32,027,680)
(42,617,940)
(32,027,680)
47,881,258
42,671,685
–%
–%
CONSOLIDATED GROUP
2018
$
2017
$
10,000,750
3,640,127
10,000,750
3,640,127
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 2018 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 2018 and will be recognised in subsequent
financial reports.
Dividends
Dividend per share
(in cents)
2018
Final
6.1
Franking percentage
100%
2018
Interim
6.9
100%
2017
Final
3.8
100%
2017
Interim
3.9
100%
Payment date
7 September 2018 13 March 2018
4 September 2017 24 March 2017
Dividend record date
24 August 2018
1 March 2018
25 August 2017
9 March 2017
b. Franking credits
The franking account balance as at 30 June 2018 is $4,982,464 (2017: nil).
Annual Report 2018
Annual Report 2018
57
57
notes to tHe FinanCial stateMents CONTINUED
SECTION 3: CAPITAL STRUCTURE AND FINANCING (continued)
3.4 Earnings Per Share
a. Basic earnings per share
Net profit for the reporting period
Adjustments to reflect dividends paid
CONSOLIDATED GROUP
2018
$
2017
$
14,110,993
3,739,865
–
–
Net profit for the reporting period used in calculating EPS
14,110,993
3,739,865
Weighted average number of ordinary shares of the entity
93,466,568
91,801,537
Basic earnings per share
0.15
0.04
b. diluted earnings per share
Net profit for the reporting period
Weighted average number of ordinary shares of the entity – diluted
CONSOLIDATED GROUP
2018
$
2017
$
14,110,993
3,739,865
Weighted average number of ordinary shares of the entity on issue
93,466,568
91,801,537
Adjustments to reflect potential dilution for performance rights
1,247,616
509,062
Diluted weighted average number of ordinary shares of the entity
94,714,184
92,310,599
diluted earnings per share
0.15
0.04
58
58
kogan.com
kogan.com
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
Principal
Place of
Business
Australia
Australia
Australia
Australia
Hong Kong
Australia
Australia
Australia
Australia
Australia
Australia
Australia
OWNERSHIP INTEREST
HELD BY THE GROUP
2018
%
2017
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
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.
Annual Report 2018
Annual Report 2018
59
59
notes to tHe FinanCial stateMents CONTINUED
SECTION 4: GROUP STRUCTURE (continued)
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
2018
$
2017
$
36,121,929
36,620,011
–
–
36,121,929
36,620,011
–
–
–
–
–
–
36,121,929
36,620,011
35,477,041
35,278,377
1,123,496
217,098
(10,000,750)
(3,640,127)
9,522,142
4,764,663
36,121,929
36,620,011
(599,661)
(2,801,637)
(599,661)
(2,801,637)
The parent did not have any material contingent liabilities at period end (2017: $nil).
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).
60
60
kogan.com
kogan.com
(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 (2017: 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
Amounts payable to eStore as at 30 June
CONSOLIDATED GROUP
2018
$
2017
$
9,734,113
6,335,297
450,177
398,261
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 $385,000 and
$330,000, respectively, plus superannuation. The Board may invite Ruslan Kogan and David Shafer to
participate in 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
non-executive directors
Greg Ridder
Harry Debney
Held at
1 July
2017
Received
on exercise
of rights
47,095,205
17,802,705
–
–
Shares
purchased
Shares
sold
Held at
30 June
2018
–
–
(17,689,279)
29,405,926
(6,510,482)
11,292,223
Held at
1 July
2017
111,110
222,221
Received
on exercise
of rights
Shares
purchased
Shares
sold
–
–
41,390
22,977
–
–
Held at
30 June
2018
152,500
245,198
Annual Report 2018
Annual Report 2018
61
61
notes to tHe FinanCial stateMents CONTINUED
SECTION 5: EMPLOYEE REWARD AND RECOGNITION (continued)
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.
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
Calculation & target
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.
The actual EBITDA of Kogan shall exceeds the management forecast
for the full financial year (after payment of the STI).
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.
Maximum opportunity
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
1 July 2017 to 30 June 2018
timing of assessment
July 2018, following the completion of the 30 June 2018 accounts
Form of payment
Board discretion
Paid in cash
Targets are reviewed annually and the Board has discretion to adapt
appropriately to take into account exceptional items.
62
62
kogan.com
kogan.com
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. The fair value is determined using a discounted cash
flow valuation model. 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 rights 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. Individual must be
employed by the Kogan Group at time of vesting to be entitled to the equity incentive.
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.
Annual Report 2018
Annual Report 2018
63
63
notes to tHe FinanCial stateMents CONTINUED
SECTION 5: EMPLOYEE REWARD AND RECOGNITION (continued)
5.2 Incentive Plans (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
Rights life
Vesting dates
LONG TERM INCENTIVE PLANS
29 July
2016
29 September
2016
20 December
2016
20 December
2016
495,140
$583,727
$1.49
178,573
$237,500
$1.52
1,451,856
$1,516,224
$1.34
37,037
$42,029
$1.34
1 to 5 years
1 to 5 years
3 & 4 years
1 to 5 years
30 June 2017
30 June 2017
31 Dec 2019
31 Dec 2017
30 June 2018
30 June 2018
31 Dec 2020
31 Dec 2018
30 June 2019
30 June 2019
30 June 2020
30 June 2020
30 June 2021
30 June 2021
31 Dec 2019
31 Dec 2020
31 Dec 2021
Dividend yield
5.2%
5.1%
5.7%
5.7%
Grant Dates
Number
Fair value at grant date
Share price at grant date
Rights life
Vesting dates
LONG TERM INCENTIVE PLANS
29 June
2017
436,365
$617,699
$1.70
29 June
2017
12,121
$17,667
$1.70
29 June
2017
18,182
$27,295
$1.70
29 June
2017
212,121
$290,244
$1.70
1 to 5 years
1 to 4 years
1 to 3 years
3 & 4 years
30 June 2018
30 June 2018
30 June 2018
30 June 2020
30 June 2019
30 June 2019
30 June 2019
30 June 2021
30 June 2020
30 June 2020
30 June 2020
30 June 2021
30 June 2021
30 June 2022
Dividend yield
6.3%
6.3%
6.3%
6.3%
64
64
kogan.com
kogan.com
Grant Dates
Number
Fair value at grant date
Share price at grant date
Rights life
Vesting dates
LONG TERM INCENTIVE PLANS
22 December
2017
22 December
2017
55,633
$324,011
$6.20
30,810
$182,256
$6.20
6 April
2018
18,013
$151,273
$8.60
28 June
2018
21,708
$140,203
$6.76
1 to 4 years
1 to 5 years
1 to 5 years
1 to 4 years
31 Dec 2018
30 June 2018
31 Dec 2018
30 June 2019
31 Dec 2019
30 June 2019
31 Dec 2019
30 June 2020
31 Dec 2020
30 June 2020
31 Dec 2020
30 June 2021
31 Dec 2021
30 June 2021
31 Dec 2021
30 June 2022
30 June 2022
31 Dec 2022
Dividend yield
2.1%
2.1%
1.5%
1.9%
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.
2018
2,809,450
145,395
(135,764)
(102,196)
–
No.
2017
–
2,841,395
–
(31,945)
–
2,716,885
2,809,450
232,181
134,745
During the period the Group recognised a share-based payment expense of $1,099,330 (2017: $217,098)
which relates to performance rights granted during the year or in previous years.
The Group also recognised an expense of $762,064 (2017: $584,705) in relations to cash based short
term incentives.
Annual Report 2018
Annual Report 2018
65
65
notes to tHe FinanCial stateMents CONTINUED
SECTION 6: OTHER
6.1 Subsequent Events
dividends
The Directors have declared a final dividend of 6.1 cents per ordinary share, fully franked. The record date
of the dividend is 24 August 2018 and the dividend will be paid on 7 September 2018. The dividend was not
determined until the 17 August 2018 and accordingly no provision has been recognised as at 30 June 2018.
Changes in the goods and services tax in Australia (“GST”) came into effect from 1 July 2018.
6.2 Remuneration of Auditors
CONSOLIDATED GROUP
2018
$
2017
$
Remuneration of the auditor for:
– auditing or reviewing the financial statements
207,093
189,625
– IPO related advisory services including due diligence, taxation
and remuneration
– Other advisory services (including R&D tax)
–
101,622
308,715
295,048
42,204
526,877
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
2018
$
2017
$
594,446
575,027
1,305,257
1,899,703
–
–
1,899,703
2,474,730
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.
66
66
kogan.com
kogan.com
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 2017.
The new and revised standards adopted by the Group for its annual reporting period beginning on
1 July 2017 are AASB 2016-1: Amendments to Australian Accounting Standards – Recognition of Deferred
Tax Assets for Unrealised Losses and AASB 2016-1: Amendments to Australian Accounting Standards
– Disclosure Initiative: Amendments to AASB 107. The adoption of these standards has not resulted in
any impact to the financial reporting of the Group.
b. new accounting standards and interpretations issued but not yet effective
Title of
Standard
AASB 16
Leases
Summary and impact on Group’s financial statements
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.
3. Enhanced disclosures.
Application
date of
Standard
Application
date for Group
for financial
year ending
1 January
2019
30 June
2020
As at the reporting date, the group has non-cancellable
operating lease commitments of $1,899,703.
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.
Annual Report 2018
Annual Report 2018
67
67
Application
date of
Standard
Application
date for Group
for financial
year ending
1 January
2018
30 June
2019
notes to tHe FinanCial stateMents CONTINUED
SECTION 6: OTHER (continued)
6.4 New Accounting Standards (continued)
Title of
Standard
AASB 15
Revenue
from
contracts
with
customers
Summary and impact on Group’s financial statements
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
an 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 currently recognises the revenue for Kogan Travel
on a gross basis. Kogan Mobile is recorded on a net basis.
Upon application 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
revenues and cost of sale for Kogan Travel will decrease by the
same amount. The net impact on profit and loss will be nil.
68
68
kogan.com
kogan.com
Title of
Standard
Summary and impact on Group’s financial statements
Customers’ unexercised contractual rights
Application
date of
Standard
Application
date for Group
for financial
year ending
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
consideration and recognised as revenue in proportion to the
pattern of rights expected to be exercised by the customer.
The Group has undertaken an assessment and concluded that
customers’ unexercised contractual rights is unlikely to materially
impact recorded revenue. The Group will continue to recognise
breakage 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); and
• 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, upon adoption of AASB 15 the
Group will 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 by $3,019,471 as at 1 July 2018. The balance will start
decreasing and be recognised as revenue on a straight-line basis,
once the 12 month period related to the standard warranty is over.
AASB 9
Financial
Instruments
AASB 9 replaces AASB 139 and addresses the classification,
measurement and derecognition of financial assets and
financial liabilities.
1 January
2018
30 June
2019
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 Group
has decided not to early adopt AASB 9.
Annual Report 2018
Annual Report 2018
69
69
notes to tHe FinanCial stateMents CONTINUED
SECTION 6: OTHER (continued)
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
70
70
kogan.com
kogan.com
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 70 and the
Remuneration report in sections 24 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 2018 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 2018.
Signed in accordance with a resolution of the directors:
david shafer
Director
Melbourne, 25 September 2018
Annual Report 2018
Annual Report 2018
71
71
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF KOGAN.COM LTD AND CONTROLLED ENTITIES
Independent Auditor’s Report
To the shareholders 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 2018 and of its financial
performance for the year ended on
that date; and
complying with Australian
Accounting Standards and the
Corporations Regulations 2001.
Basis for opinion
The Financial Report comprises:
Consolidated statement of financial position as at
30 June 2018;
Consolidated income statement and consolidated
statement of comprehensive income,
Consolidated statement of changes in equity, and
Consolidated statement of cash flows for the year
then ended;
Notes including a summary of significant
accounting policies; and
Directors’ Declaration.
The Group consists of the Company and the entities
it controlled at the year-end or from time to time
during the financial year.
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.
72
72
kogan.com
kogan.com
Key Audit Matters
The Key Audit Matters we identified
are:
Valuation of inventory
Provisions for warranties and sales
returns
Key Audit Matters are those matters that, in our
professional judgement, were of most significance in
our audit of the Financial Report of the current
period.
These matters were addressed in the context of our
audit of the Financial Report as a whole, and in
forming our opinion thereon, and we do not provide a
separate opinion on these matters.
Valuation of inventory (AUD $40.4m)
Refer to Note 2.1.1 to the Financial Report
The key audit matter
How the matter was addressed in our audit
The Group sells high volumes of private label
and third party branded products. In valuing
inventory at the lower of cost and net
realisable value, there are factors subject to
judgement or estimation including:
Consideration of market and consumer
factors that could impact the Group’s
ability to sell certain inventory items at
profitable margins, such as seasonality of
demand, changing consumer
preferences, and obsolescence due to
technological or product change
(particularly relevant to electronic
products); and
Establishing an appropriate provision for
slow moving inventory based on relevant
factors such as inventory ageing and
inventory turnover.
We identified the valuation of inventory as a
key audit matter due to the significant audit
effort arising from the subjective nature and
level of judgement involved in determining
the write-downs.
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 at higher
risk of impairment;
We gained an understanding of how the
inventory system calculates ageing, and
assessed the accuracy of inventory ageing
by comparing the inventory receipt date for
a sample of purchases to underlying
documentation such as supplier invoices;
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
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 accounting policy
and Australian Accounting Standards.
Annual Report 2018
Annual Report 2018
73
73
independent auditor’s report CONTINUED
Provisions for warranties and sales returns (AUD $0.7m)
Refer to Note 1.1 to the Financial Report
The key audit matter
How the matter was addressed in our audit
It is the Group’s policy that:
The key procedures we performed included:
Sales are recorded at the time that goods
are shipped to customers based on the
price specified in the sales contract; and
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, provisions for expected warranty
claims and sales returns that have been
incurred and not yet paid are estimated by
the Group. We identified these provisions as
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 taking into account factors such as
changes in the product mix, or specific
product quality or performance issues.
Significant audit effort is required to respond
to this risk.
We assessed historical product warranty
claim and sales returns profiles and trends,
and compared this historical data to what
was used in the Group’s year-end provision;
We compared the warranty claims and sales
returns recorded subsequent to 30 June
2018 to the year-end composition for
consistency;
We challenged the use of historical data as
the best estimate for expected future
warranty claims and sales returns. We did
this by inquiring with management and
inspecting relevant reports to understand
any specific product quality issues that
arose during the year which may impact the
year-end provision; and
We assessed the Group’s provision
determination for consistency with the
Group’s established accounting policy and
Australian Accounting Standards.
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.
74
74
kogan.com
kogan.com
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’s ability to continue as a going concern and whether the use of the
going concern basis of accounting is appropriate. 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 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 the 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_responsibilities/ar1.pdf. This description forms part of our
Auditor’s Report.
Annual Report 2018
Annual Report 2018
75
75
independent auditor’s report CONTINUED
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report
of Kogan.com Ltd for the year ended 30
June 2018, 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 pages 24 to 31 of the Directors’ report for the year
ended 30 June 2018.
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
25 September 2018
76
76
kogan.com
kogan.com
SHAREHOLDER INFORMATION
The Shareholder information set out below was applicable as at 12 September 2018.
Additional information required by the Australian Securities Exchange Limited Listing Rules and not
disclosed elsewhere in this report, is listed below.
A. NUMBER OF HOLDERS OF EQUITY SECURITIES
Ordinary Share Capital
93,708,139 fully paid ordinary shares are held by 8,160 individual shareholders.
All issued ordinary shares carry one vote per share and the rights to dividends.
Performance Rights
2,484,704 performance rights are held by 56 individuals.
All performance rights are unvested and do not carry a right to vote.
B. DISTRIBUTION OF HOLDERS OF EQUITY SECURITIES
1 – 1000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Holding less than a marketable parcel
Fully paid
ordinary
shares
Performance
rights
5,022
2,416
450
244
28
8,160
82
6
7
8
28
7
56
–
Annual Report 2018
Annual Report 2018
77
77
sHareHolder inForMation CONTINUED
C. 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