ANNUAL REPORT
2020
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HIGHLIGHTS 2020
2,183,000 Active Customers
$46.5m
$768.9m
54.5%
EBITDA
GROSS SALES
YOY EBITDA
GROWTH
35.7%
YOY GROWTH IN
ACTIVE CUSTOMERS
STRONG GROWTH
THROUGH KEY
INITIATIVES:
EXCLUSIVE BRANDS
KOGAN MARKETPLACE
INVESTMENTS
IN INVENTORY &
MARKETING
NEW
VERTICALS
EXPANSION:
KOGAN MONEY
SUPER
KOGAN MONEY
CREDIT CARDS
KOGAN MOBILE
NEW ZEALAND
KOGAN ENERGY
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
38 Notes to the Financial Statements
71 Directors’ Declaration
72 Independent Auditor’s Report
77 Shareholder Information
80 Corporate Directory
Annual Report 2020
1
I am delighted to present the Kogan.com
Ltd (Kogan.com) Annual Report for the
financial year ended 30 June 2020 (FY20).
This year the Business surpassed 2 million
Active Customers whilst navigating
challenging circumstances and delivered
another year of strong growth of Gross
Sales1, Revenue, Gross Profit, EBITDA1
and NPAT.
CHAIRMAN’S LETTER
Despite the incredible challenges, disruptions
and sorrow that FY20 has imposed, our Business
continued to invest in inventory to support our
growth ambitions and customer offers, further
diversified by launching four New Verticals,
purchased one of Australia’s premier furniture
and homeware retailers in Matt Blatt, successfully
navigated the global pandemic and delivered the
best financial results in its nearly 15‑year history.
In FY20 our Exclusive Brands portfolio business achieved
growth of 26.4% on FY19, Third‑Party Brands stabilised
and Kogan Marketplace is showing its true potential,
accelerating Gross Sales1 by 71.2% in second half of
FY20 versus the first half of FY20.
At 30 June 2020 we had a strong Balance Sheet
with $146.7 million in cash, excluding $20.0 million of
proceeds from the Share Purchase Plan completed in
July 2020, and an undrawn debt facility of $30.0 million.
Inventory levels were $112.9 million with more than
99% of this being less than 365 days old.
Kogan.com’s portfolio continued to expand and diversify
in FY20 through the launch of Kogan Money Super,
Kogan Money Credit Cards, Kogan Energy and Kogan
Mobile New Zealand. Each service offering is in
partnership with industry leaders, bringing amazing
value to our customers. The team also purchased Matt
Blatt for $4.4 million dollars, launching the brand as an
online‑only offering and combining Matt Blatt’s decades
of industry expertise with our technology, systems and
infrastructure to deliver a market‑leading offering.
The results the team has achieved in FY20 is a testament
to the tremendous commitment and passion of everyone
at Kogan.com. As always, they have delivered fantastic
value to our customers with best‑in market offers.
growth in our Exclusive Brands portfolio business,
continued scaling of the Kogan Marketplace and
continued expansion of our New Verticals. Ruslan will
discuss these opportunities in his review on page 3.
In relation to the achievements in FY20, of particular
significance was the institutional placement of
$100.0 million, allowing for further investment in
inventory, continued expansion of the Kogan Marketplace
platform and delivering capital that provides the potential
for further successful acquisitions in line with the Matt
Blatt purchase. This will accelerate the expansion of
our platform, offerings and Active Customers.
Team
Our team at Kogan.com never fails to deliver on
bringing our business strategy to life. I would like
to recognise the commitment and contribution of
each team member and thank them on behalf of
the Board for delivering yet another incredible year.
Dividend
Following the outstanding results of FY20, the Board
was delighted to declare total Dividends of 21.0 cents
per share, fully franked. This represents year‑on‑year
growth of 46.9%.
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 our customers
and shareholders into FY21 and beyond.
Strategic opportunities
At Kogan.com we see enormous opportunity for
growth in both our existing businesses and in the
expansion of our portfolio. We anticipate further
Greg Ridder
Chairman
1. Non‑IFRS measure.
2
kogan.com
We delivered strong growth in the Business
in the midst of an extremely turbulent and
challenging period for the world, the
country and the Company. We have built a
diversified, resilient business over many
years, which has enabled us to help
Australians in their time of need.
FOUNDER & CEO’S REPORT
Our Business has thrived through adversity, as years
of preparation met opportunity this financial year,
resulting in our largest ever growth in Gross Sales1,
Gross Profit and Adjusted EBITDA1. We achieved this
all while heavily investing in our platform and growing
Active Customers which is expected to have ongoing
long‑term benefits as new Active Customers
continue repurchasing.
The year had many highlights, some of which were:
• we successfully completed an institutional
placement for $100.0 million which will allow
the Business to capitalise on opportunities
and accelerate growth.
These key highlights are the result of meticulous
planning and execution by the Kogan team during
the year, with no signs of slowing down moving
into FY21.
• Gross Sales1 outperformed the prior year by
39.3% to $768.9 million;
• Revenue, Gross Profit and Adjusted EBITDA1
outperformed the prior year by 13.5%, 39.6%
and 57.6%, respectively;
• growth of Active Customers by 35.7%
year‑on‑year, now totalling just under 2.2 million;
• Exclusive Brands Revenue and Gross Profit grew
by 26.4% and 43.7%, respectively, contributing
51.3% of overall Gross Profit of the Business;
• Kogan Marketplace was a standout performer
during the year, exceeding all our expectations,
increasing its Gross Sales1 by 71.2% in the second
half of FY20 compared to the first half of the
financial year;
• EBITDA1 of $46.5 million was up $16.4 million
on FY19;
• we ended the year with a strong Balance Sheet,
with cash of $146.7 million and an undrawn bank
facility of $30.0 million at 30 June 2020;
• we acquired and integrated Matt Blatt, one
of Australia’s premier furniture and homewares
brands and a pioneer of the online furniture
industry in Australia; and
BUILDING THE KOGAN.COM PORTFOLIO
At Kogan.com, we’re continually evolving the
Business to respond to the demands of our customers
and to strengthen our competitive advantage.
Our growing portfolio of businesses provides
diversification of income, making us a more resilient
business. We’re always looking for new ways to
delight our customers.
In the past 12 months to 30 June 2020, just under
2.2 million people have transacted with our retail
platform and it is our loyal customer base that
continues to drive most of the traffic to our platform.
We have invested heavily in our platform recording our
largest marketing spend ever in FY20, that delivered
Active Customer growth of 35.7% year‑on‑year.
As the majority of newly acquired customers started
shopping in the second half of the year we have
not seen the full benefit on annual Gross Profit per
customer, as many of these customers have only
been shopping for a short while. We expect to
have ongoing long‑term benefits as new Active
Customers continue repurchasing.
1. Non‑IFRS measure.
Annual Report 2020
3
FOuNDEr & CEO’S rEPOrT CONTINUED
Outlook – continued accelerated growth across the Business
Kogan
Marketplace
Exclusive
Brands
Active
Customer
base
Acquisitions
New
Verticals
Kogan Marketplace was a standout performer in
FY20, exceeding all our expectations, increasing
its Gross Sales1 by 71.2% in the second half of FY20
compared to the first half of this financial year.
We have broadened the product range available on
Kogan.com to millions of items, making Kogan.com
more relevant to more consumers at more times
during the year. Importantly, the emergence of
Kogan Marketplace has made the Company even
more scalable by enabling us to grow infinitely
without ongoing investment in inventory.
During FY20 we also delivered the acquisition and
integration of Matt Blatt, a pioneer in online furniture
retail in Australia. The new Matt Blatt was operating
within 24 hours of signing the deal, and there are
now more products available to Matt Blatt customers
than ever in its near‑40 year history.
The first half of FY20 saw the launch of Kogan Super,
Kogan Mobile New Zealand, Kogan Energy and Kogan
Credit Cards. We are engaging with our Community
more than ever.
These Verticals continue to deliver on our win‑win‑win
mantra. 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 platform to provide incredible offers
to our customers.
We have high expectations for our business and
we fully expect the current growth trajectory to
continue well into FY21.
PRODUCT OFFERING EXPANSION
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.
A perfect example of this is the continued expansion
of our Exclusive Brands division, which is right at the
heart of our business. This year it represented 51.3%
of overall Gross Profit (FY19: 49.7%).
The increase in our product offering has meant our
inventory holdings have also increased to $112.9 million
(FY19: $75.9 million). More than 99% of inventory
in‑warehouse at 30 June 2020 was less than 365 days
old, demonstrating the effectiveness of our sourcing
and marketing methodologies as well as the speed
at which we are selling through.
AWARDS AND ACCOLADES
During the year we won a number of awards for
Kogan Internet (Mozo and Finder), Kogan Mobile
(Mozo) and Kogan Home Loans (Rate City). This is
welcome recognition of the compelling deals we
offer to the market and reinforces the success of
our strategy. We are also extremely proud to be the
winner of the most recent Australia Post Online Retail
Industry Awards, which completed a three‑peat.
What makes this award extra special is that it is voted
on by the Australian public – for us, that’s the only
vote that matters. There’s no vote more important
than the vote of our customers. More than 1,350
retailers were considered for this award and over
285,000 Australians voted.
1. Non‑IFRS measure.
4
kogan.com
During FY21, we are due to further
develop and enhance the Kogan Marketplace,
grow our Active Customer base by
investing in our platform, expanding our
Exclusive Brands and Third‑Party Brands
product divisions, and reviewing ongoing
acquisition opportunities.
FY21 & BEYOND
As we look to FY21 we expect to see further growth in
Exclusive Brands, the scaling up of Kogan Marketplace
and New Verticals, and further growth in our Active
Customer base.
We believe we are only at the beginning of this retail
revolution and we look forward to delighting our
customers with the benefits of these strategic
investments for years to come.
Ruslan Kogan
Founder & CEO
Annual Report 2020
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 Travel,
Kogan Money, Kogan Cars, Kogan Energy, Dick Smith and Matt Blatt. Kogan.com 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 platform to seize opportunities like Kogan Marketplace and
Matt Blatt 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 continue to grow at pace.
At 30 June 2020, we had 2,183,000 Active Customers1, representing
year‑on‑year growth of 35.7%.
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 Exclusive Brands 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 2,183,000 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.
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.
1. Active Customers refers to unique customers who have purchased in the last twelve months from reference date, rounded to the
nearest thousand.
6
kogan.com
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).
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 our 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
11.6 million premises.
Kogan Money
In August 2018, Kogan.com announced Kogan Money Home Loans
in partnership with Adelaide Bank and Pepper Group Limited.
These partnerships have seen Kogan.com offering competitively
priced home loans to Australian homeowners and investors under the
brand, Kogan Money. Kogan Money Home Loans is the first of a suite
of financial products to be rolled out under the Kogan Money brand.
Kogan Money continues to focus on simplifying financial services for all
Australians and making them more affordable through digital efficiency.
Kogan Cars
In June 2019, Kogan.com announced the launch of Kogan Cars. Kogan
Cars, in partnership with Firstmac, secures new cars at competitive prices
from dealers across Australia and enables customers to trade‑in cars
from a wide range of makes and models.
Annual Report 2020
7
OPErATING & FINANCIAl rEVIEW CONTINUED
NEW BUSINESS IN FY20
Kogan Money Super
In partnership with Mercer Australia, Kogan.com offers a no frills,
ultra‑low fee Australian superannuation fund, Kogan Super. Kogan Super
leverages Kogan.com’s digital efficiency as one of Australia’s cheapest
super annuation options and aims to manage a share of the 28.6 million
Aussie superannuation accounts, which represent a combined total
of more than $2.6 trillion in assets.
Kogan Mobile New Zealand
Kogan Mobile New Zealand launched in 1HFY20 in partnership with
Vodafone New Zealand Limited offering telecommunications services
in New Zealand. Vodafone NZ is New Zealand’s largest mobile
network operator.
Kogan Energy
Kogan Energy offers competitive power and gas deals and was launched
in September 2019 in partnership with part of the Meridian Energy
Limited group.
Kogan Money Credit Cards
Kogan Credit Cards is a credit card with uncapped Kogan reward points,
no annual fee, complimentary Kogan First membership, and competitive
rates and fees. It was launched in October 2019 in partnership with
Citigroup Pty Ltd.
Matt Blatt Pty Ltd
In May 2020, Kogan.com acquired Matt Blatt, one of Australia’s premier
furniture and homewares brands and a pioneer of the online furniture
industry in Australia.
8
kogan.com
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 14+ years’ experience in Exclusive Brands, extensive Third‑Party Brands
offering, and using the strength of the Kogan platform to partner with industry leaders for Kogan Mobile,
Kogan Insurance, Kogan Internet and Kogan Money Home Loans.
We are able to pass on savings to customers by streamlining and cutting overheads in our supply chains
and marketing.
recognition:
MOZO Experts Choice Awards for Kogan Internet, Kogan Life Insurance & Kogan Energy.
MOZO People’s Choice Awards for Kogan Mobile.
Rate City Gold Awards for Kogan Home Loans.
Finder Award for Best NBN 100 Plan.
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:
Third year running, winner of the People’s Choice Award at the Australia Post Online Retail Industry Awards
(ORIAS) securing a three‑peat! The People’s Choice Award is awarded on the basis of a vote from more than
285,000 Australian online retail customers for the best Australian online retailer.
Industry leading IT platform & data driven culture:
The Kogan platform 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.
Annual Report 2020
9
OPErATING & FINANCIAl rEVIEW CONTINUED
BUILDING THE KOGAN PLATFORM
In the twelve months to 30 June 2020, the Company achieved 35.7% growth in Active Customers1. The Company
had 2,183,000 Active Customers as at 30 June 2020 (compared with 1,609,000 as at 30 June 2019).
Most importantly, we are keeping and growing our customer base. Kogan.com’s Net Promoter Score2 has been
stable with an average 58.5 (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 further demonstrates the strength of the platform we’ve built through constantly delighting
our customers. Our commitment to bring the most in‑demand products and services to our Kogan Community
at great prices continues to resonate.
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
Active Customers
1,609,000
2,183,000
35.7%
Jun‑19
Jun‑20
Jun‑19
vs Jun‑20
variance
Figure 1.1 LTM Active Customers
Figure 1.2 Net Promoter Score2
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1. Active Customers refers to unique customers who have purchased in the last twelve months from reference date, rounded to the
nearest thousand.
2. Net Promoter Score (NPS) 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 products and services 9 or 10 out of a
possible 10, less the percentage of ”detractors”, rating its products and services 0 to 6 out of a possible 10. The maximum possible
NPS is 100, and the minimum possible NPS is –100.
10
kogan.com
Figure 1.3 LTM customer orders and average
Gross Sales1 per customer
Figure 1.4 Traffic – free vs paid marketing
Paid
29.2%
Free
70.8%
3,900
3,700
3,500
3,300
3,100
2,900
2,700
2,500
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LTM Orders
Avg Gross Sales $ Per Customer
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PERFORMANCE REVIEW & OUTLOOK
RESULTS SUMMARY
Refer to Table 1.6 for an explanation of non‑IFRS measures used throughout this report.
Figure 1.5 Financial highlights
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FY18
FY19
FY20
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FY19
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1. Non‑IFRS measure.
Annual Report 2020
11
OPErATING & FINANCIAl rEVIEW CONTINUED
Table 1.2 FY20 Results Compared to FY19
$m
revenue
Cost of sales
Gross profit
Gross margin
Operating costs
results from operating activities
Unrealised FX gain/(loss)
Net finance costs
Profit before tax
NPAT
EBITDA1
Unrealised FX gain/(loss)
Equity based compensation
Penalties & costs provision
Adjusted EBITDA1
Earnings per Share ($)
FY20
497.9
(371.4)
126.5
25.4%
(85.5)
41.0
(1.4)
(0.7)
38.9
26.8
46.5
1.4
1.0
0.7
49.7
0.29
FY19
438.7
(348.0)
90.7
20.7%
(66.7)
24.0
(0.2)
(0.4)
23.4
17.2
30.1
0.2
1.2
–
31.5
0.18
Variance
13.5%
6.7%
39.6%
23.0%
28.2%
71.1%
659.2%
86.5%
66.0%
55.9%
54.5%
659.2%
(16.2%)
100%
57.5%
58.5%
Any discrepancies between totals, sums of components and percentage variances in this table are due to rounding.
Exclusive Brands continued to achieve year‑on‑year Revenue growth with an increase of 26.4% on FY19.
Exclusive Brands also achieved Gross Profit growth of 43.7%, resulting in a contribution of 51.3% to overall
Gross Profit in FY20. This was achieved through ongoing investment in Exclusive Brands inventory to broaden
our range and meet consumer demand from the growing base of Active Customers.
Third‑Party Brands returned to growth in Gross Profit, delivering an increase of 3.3% on FY19, through improved
product selection and sourcing.
The success of Kogan Marketplace has resulted in Gross Sales1 increasing by 71.2% in 2HFY20 compared
to 1HFY20. The exceptional growth of Kogan Marketplace has led to a period of transition for the Business.
The Business is continually improving its proprietary marketplace platform which enables ongoing growth
without a corresponding investment in inventory.
Kogan First memberships scaled significantly during FY20 as more and more customers recognise the
significant value of the loyalty program.
The Business strategically increased its marketing activities in order to grow the platform and had an immediate
impact on growth in Active Customers and is also expected to have ongoing long‑term benefits to the Business.
Variable Costs predominantly consist of warehousing and selling costs. The increase in these costs is largely
driven by growing volumes of transactions and stock holdings that has allowed the Business to deliver its largest
Gross Sales1 and Gross Profit ever.
In order to retain key talent and align their interests with our Shareholders, the Business has made strategic
investments in team members. Team member costs are inclusive of the annual Short‑Term Incentive of
$0.9 million for Senior Management following significant outperformance of budget. Long‑Term Incentives
remain in place and team member costs have increased year‑on‑year, partly as a result. The majority of
equity‑based compensation was issued in the period surrounding the IPO.
EBITDA1 of $46.5 million reflects an increase in EBITDA1 margin of 2.5pp to 9.3%. EBITDA1 was impacted
by unrealised FX losses of $1.4 million which are non‑cash. Adjusted EBITDA1 excluding unrealised FX losses,
equity‑based compensation and provision for penalties & costs grew to $49.7 million.
1. Non‑IFRS measure.
12
kogan.com
PORTFOLIO BUSINESS MIX
Exclusive Brands and Third‑Party Brands represent 51.3% and 19.8% of Gross Profit in FY20, respectively.
When combined with Kogan Marketplace and Kogan Mobile, these four core divisions accounted for 91.5%
of Gross Profit.
Figure 1.6 FY20 Gross Profit mix
Advertising Income
2.9%
Kogan Mobile
Australia
10.1%
Kogan Marketplace
10.3%
Third-Party Brands
19.8%
Other Income
5.6%
Exclusive
Brands
51.3%
Growth in Exclusive Brands and Kogan Marketplace contributed to an increase in Gross Profit to $126.5 million
(FY19: $90.7 million). Third‑Party Brands Revenue stabilised.
Table 1.3 New Verticals Revenue
$m
Kogan Travel
Kogan Insurance
Kogan Internet
Kogan Mobile
Kogan Money
Kogan First
New Verticals revenue growth excluding Kogan Travel1
FY20
FY19
YoY Revenue
growth %
0.5
0.8
1.0
12.8
0.2
2.4
0.8
0.6
0.4
13.2
0.0
0.0
(34.1%)
36.0%
144.9%
(2.9%)
>1,000%
>1,000%
18.0%
1. Year‑on‑year growth of Kogan Travel has been excluded due to the impact of applying AASB 15 from 1 July 2018.
Kogan Mobile performed relatively in line with FY19, contributing over 10% of total Gross Profit and setting up a
solid foundation for growth of Kogan Mobile New Zealand. Kogan Internet Customers grew 90.9% year‑on‑year,
resulting in commission‑based Revenue increasing by 144.9% over the same time period.
Kogan Insurance, which includes our suite of insurance products, continues to scale. Commission‑based
Revenues grew 36.0% year‑on‑year.
New Verticals launched in 1HFY20, Kogan Credit Cards, Kogan Superannuation, Kogan Energy and
Kogan Mobile NZ are growing. Customers continue to receive great deals on the services they need.
Annual Report 2020
13
OPErATING & FINANCIAl rEVIEW CONTINUED
Figure 1.7 Kogan Mobile Active Customers
Figure 1.8 Kogan Internet Active Customers
s
r
e
m
o
t
s
u
C
s
r
e
m
o
t
s
u
C
6
1
Y
F
7
1
Y
F
8
1
Y
F
9
1
Y
F
0
2
Y
F
8
1
Y
F
9
1
Y
F
0
2
Y
F
STATEMENT OF FINANCIAL POSITION
Table 1.4 Summary of Net Assets at 30 June 2020 and 30 June 2019
$m
Current assets
Non‑current assets
Total assets
Current liabilities
Non‑current liabilities
Total liabilities
Net assets
30‑Jun‑20
30‑Jun‑19
266.4
13.3
279.7
(114.6)
(1.0)
(115.6)
164.0
109.5
8.9
118.4
(65.4)
(2.0)
(67.4)
51.0
A strong Balance Sheet at 30 June 2020 with $146.7 million of cash and an undrawn $30.0 million debt facility.
Cash balance at 30 June 2020 of $146.7 million is inclusive of the proceeds from the $100.0 million Placement,
and exclusive of the proceeds from the $20.0 million Share Purchase Plan completed in July 2020.
In line with our growth strategy, Kogan.com invested in inventory. As at 30 June 2020, Kogan.com had inventory
of $112.9 million, comprising $80.4 million of inventory on hand and $32.5 million of inventory in transit.
More than 99% of inventory in warehouse was less than 365 days old.
The purchase of Matt Blatt included the capitalisation of intellectual property worth $4.0 million, which has been
included within the intangible assets balance.
14
kogan.com
CASH FLOWS
Table 1.5 Statutory Cash Flow from Operating Activities
$m
Receipts from customers
Payments to suppliers and employees
Interest received
Finance costs paid
Income tax paid
Net cash provided by operating activities
FY20
578.9
FY19
498.0
(523.8)
(489.2)
0.1
(0.6)
(9.0)
45.6
0.2
(0.5)
(6.4)
2.1
The Business delivered cash flow from operating activities of $45.6 million in FY20, demonstrating strong cash
generation across the Company’s portfolio of businesses.
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.
In FY21, we expect:
• growth in the Active Customer base;
• growth in Exclusive Brands and Third‑Party Brands;
• growth in Kogan Marketplace, and launch in New Zealand;
• growth across New Verticals; and
• growth by acquisition.
NON‑IFRS MEASURES
Throughout this report, Kogan.com has included certain non‑IFRS financial information, including Gross Sales,
EBITDA and Adjusted EBITDA. 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 1.6 Non IFRS‑Measures
Gross Sales
The gross transaction value, on a cash basis, of products and services sold,
of Kogan Retail, Kogan Marketplace and the New Verticals.
EBITDA
Earnings before interest, tax, depreciation and amortisation.
Adjusted EBITDA
Earnings before interest, tax, depreciation, amortisation, unrealised FX gain/(loss),
equity‑based compensation and one‑off non‑recurring items.
Annual Report 2020
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 FY21 and beyond. In FY20, Kogan.com
achieved year‑on‑year revenue growth of 26.4% in Exclusive Brands. In addition, Exclusive Brands continues to
be the largest contributor to Gross Profit, representing 51.3% of Gross Profit in FY20.
In FY21, 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
• building trusted brands renowned for “value“
• compelling consumer offering
• white goods as a new core category
•
14+ years’ experience
NEW VERTICALS
We continue to explore opportunities to partner with industry leaders and bring more services to our customers
at market‑leading prices.
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.
16
kogan.com
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. Any reduction in the disposable incomes of Kogan.com’s customers as a
result of changes to factors such as economic outlook, interest rates, unemployment
levels and taxation may decrease consumer confidence and consumer demand,
which may subsequently result in lower levels of revenue and profitability.
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.
COVID‑19
Events related to the Coronavirus pandemic (COVID‑19) have resulted in significant
market volatility. There is continued uncertainty as to ongoing and future response of
governments and authorities globally as well as a likelihood of an Australian economic
recession of unknown duration or severity. As such, the full impact of COVID‑19 to
consumer behaviour, suppliers, employees and the Company are not fully known.
Given this, the impact of COVID‑19 could potentially be materially adverse to the Company’s
financial and operational performance. Further, any government or industry measures may
adversely affect Kogan.com operations and are likely beyond the control of Kogan.com.
In compliance with its continuous disclosure obligations, Kogan.com will continue to
update the market in regard to any material impact of COVID‑19 on Kogan.com.
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
Performance and
reliability of Kogan.
com’s websites,
databases and
operating systems
Manufacturing and
product quality
Kogan.com has a large number of international suppliers and service providers, from
which it sources a broad range of products and services. There is a risk that Kogan.com
may be unable to continue to source products or services from existing suppliers or
service providers, and in the future, to source products from new suppliers or services
from new service providers, at favourable prices, on favourable terms, in a timely
manner or in sufficient volume.
Kogan.com’s websites, Apps, databases, IT and management systems, including
its ERP and security systems, are critically important to its success. The satisfactory
performance, reliability and availability of Kogan.com’s websites, Apps, databases,
IT and management systems are integral to the operation of the Business.
Kogan.com currently uses a wide range of third‑party suppliers to produce its Exclusive
Brands 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.
reputational product
sourcing factors
The Kogan.com portfolio of Exclusive Brands 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.
Exposure to litigation Kogan.com may be subject to litigation, claims, disputes and regulatory investigations,
including by customers, suppliers, government agencies, regulators or other third
parties. These disputes may be related to warranties, product descriptions, personal
injury, health, environmental, safety or operational concerns, nuisance, negligence or
failure to comply with applicable laws and regulations.
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 team
members
Kogan.com relies on the expertise, experience and strategic direction provided by
its Executive Directors and key team members. 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 team members.
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 2020
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 2020 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 – Founder, Chief Executive Officer and Executive Director
David Shafer – Chief Financial Officer, Chief Operating Officer and Executive Director
Harry Debney – Independent, Non‑Executive Director
Michael Hirschowitz – Independent, Non‑Executive Director (resigned 20 May 2020)
Particulars of each Director’s experience and qualifications are set out later in this report.
COMPANY SECRETARY
Kogan.com engages Mertons Corporate Services Pty Ltd to provide company secretarial services,
with Mark Licciardo as Kogan.com’s Company Secretary.
PRINCIPAL ACTIVITIES
Kogan.com is a portfolio of retail and services businesses that included Kogan Retail, Kogan Marketplace,
Kogan Mobile, Kogan Internet, Kogan Insurance, Kogan Travel, Kogan Money, Kogan Cars, Kogan Energy,
Dick Smith and Matt Blatt during the year ended 30 June 2020.
Kogan.com earns the majority of its Revenue and profit through the sale of goods and services to Australian and
New Zealand consumers. Its offering comprises products released under Kogan.com’s Exclusive 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 Brands Products”).
In addition to product offerings, Kogan.com earns seller‑fee based Revenue from Kogan Marketplace and
commission‑based Revenue from the New Verticals including Kogan Mobile, Kogan Internet, Kogan Insurance,
Kogan Money, Kogan Cars, Kogan Energy and Kogan Travel (“New Verticals”).
In May 2020, Kogan.com acquired Matt Blatt, one of Australia’s premier furniture and homewares retailers, and
a pioneer of the online furniture industry in Australia. Kogan.com acquired the intellectual property of Matt Blatt
for a purchase price of $4.4 million.
The results of Kogan HK Limited, a Hong Kong registered entity, and Kogan US Trading Inc, a US incorporated
entity, have been compiled using International Financial Reporting Standards (IFRS), as issued by the
International Accounting Standards Board.
An operating and financial review of the Group during the financial year and the results of these operations are
contained on pages page 6 to page 17 of this report.
No significant change in the nature of other activities occurred during the financial year.
EVENTS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
The Directors have declared a final Dividend of 13.5 cents per Ordinary Share, fully franked. The final Dividend
was not determined until after the Balance Sheet date and accordingly no provision has been recognised at
30 June 2020.
18
kogan.com
The Dividend Reinvestment Plan will apply to the final Dividend at a 2.5% discount to the 5‑day volume
weighted average price of Shares sold on ASX from the trading day prior to the Record date of the
final Dividend.
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
related to 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
Kogan.com recently informed its Shareholders in the ASX Announcement dated 17 July 2020, of the Federal
Court’s decision to uphold allegations made by the ACCC. Based on all current information available at the time
of this report, management have estimated penalties and costs relating to this matter of $0.7 million, and have
provided for these at 30 June 2020.
DIVIDENDS
In respect of the financial year ended 30 June 2020, the Directors:
• declared a fully franked interim Dividend of 7.5 cents per Ordinary Share. The record date for the Dividend
was 27 February 2020 and the Dividend was paid on 10 March 2020.
• declared a fully franked final Dividend of 13.5 cents per Ordinary Share. The record date for the Dividend was
24 August 2020 and will be paid on 19 October 2020.
Details with respect to the distribution paid during the year are provided in Note 3.2.2.
A Dividend Reinvestment Plan was available for the 2020 interim Dividend and the Dividend Reinvestment Plan
will also apply for the final Dividend of FY20.
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’s 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 2020
19
DIrECTOrS’ rEPOrT CONTINUED
The following fees were paid or payable to KPMG for non‑audit services provided during the year ended 30 June 2020:
Advisory services
Taxation services
$
–
6,700
6,700
LEAD AUDITOR’S INDEPENDENCE DECLARATION
The lead auditor’s independence declaration for the financial year ended 30 June 2020 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)
Chairman, Independent Non‑Executive Director
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, he is experienced
in leading businesses in multiple countries, cultures, economic circumstances and market
conditions. Mr Ridder is also a director at Spirit Telecom Limited and a number of unlisted
and not for profit entities.
Mr Ridder 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. He is a CPA and a graduate 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
Directorship of listed entities within the past three years
• Director of Spirit Telecom Ltd (appointed in November 2019)
ruslan Kogan
(BBS)
Founder, 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.
20
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 Financial Officer, Chief Operating Officer and Executive Director in November 2010.
Prior to joining Kogan.com, Mr Shafer was 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.
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 the 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
Michael Hirschowitz
(B.Com, BACC, GAICD)
Independent Non‑Executive Director (resigned 20 May 2020)
Mr Hirschowitz was appointed to the Board of Kogan.com in March 2019, as an
Independent Non‑Executive Director, and has subsequently resigned as of 20 May 2020.
Mr Hirschowitz currently serves as the Chief Financial Officer at QSR Guzman y Gomez,
having joined them in November 2018.
Prior to joining QSR Guzman y Gomez, Mr Hirschowitz served as the Chief Financial Officer
& Executive Director of the Accent Group, formerly known as RCG Corporation Ltd, for
22 years. During his time there, he helped create Australia and New Zealand’s largest
lifestyle and performance footwear business.
Mr Hirschowitz holds a Bachelor of Commerce and a Bachelor of Accounting for the
University of Witwatersrand and is a Graduate member of the Australian Institute of
Company Directors.
Directorships of listed entities within the past three years:
• Director of Accent Group (resigned in February 2018)
Board Committee membership
• Member of the Audit and Risk Management Committee (resigned 20 May 2020)
• Member of the Remuneration and Nomination Committee (resigned 20 May 2020)
Annual Report 2020
21
DIrECTOrS’ rEPOrT CONTINUED
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.
MEETINGS OF DIRECTORS
Directors’ meetings held between 1 July 2019 and 30 June 2020:
Greg Ridder
Harry Debney
Michael Hirschowitz2
Ruslan Kogan
David Shafer
BOARD
AUDIT AND RISK
REMUNERATION
AND NOMINATION
A
14
14
9
14
14
B
14
14
7
14
14
A
3
3
3
31
31
B
3
3
3
31
31
A
4
4
3
41
41
B
4
4
3
31
31
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 interest 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.
2. Resigned 20 May 2020.
22
kogan.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 Directors’ relevant interest in shares of the Company at the date of this report.
Ruslan Kogan
David Shafer
Greg Ridder
Harry Debney
Michael Hirschowitz (resigned 20 May 2020)
1. Ordinary Shares are stated as at the Directors resignation date, being 20 May 2020.
SHARE RIGHTS
UNISSUED SHARES UNDER RIGHTS
Ordinary
Shares
15,853,321
6,075,642
158,000
98,099
30,0701
At 30 June 2020 the Group had 1,514,138 unissued shares under Right which are expected to vest up until
30 June 2023, all unissued shares under Right are Ordinary Shares of the Company.
SHARES ISSUED ON EXERCISE OF RIGHTS
During the financial year, the Group issued 887,037 Ordinary Shares as a result of the Rights vesting.
Annual Report 2020
23
REMUNERATION REPORT (AUDITED)
INTRODUCTION
The Directors are pleased to present the FY20 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, Independent Non‑Executive Director
Chief Executive Officer and Executive Director
Chief Financial Officer, Chief Operating Officer and Executive Director
Independent Non‑Executive Director
MICHAEL HIRSCHOWITZ
Independent Non‑Executive Director (resigned 20 May 2020)
REMUNERATION GOVERNANCE
The Board has appointed the Remuneration and Nomination Committee (“the 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.
24
kogan.com
Remuneration and Nomination Committee
Kogan.com’s Remuneration and Nomination Committee is comprised of Independent Non‑Executive Directors.
The responsibilities of the 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 team members;
• 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, including members of senior management.
A full Charter outlining the 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 team members. To align the interests of
its team members and the goals of the Group, the Directors have decided the remuneration packages of the
executive team and other selected team members 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 Committee and reported to the Board. The remuneration of senior
managers are reviewed annually by the Committee. At the absolute discretion of the 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.
CEO
CFO, COO
AT RISK
Fixed
remuneration
Short‑term
incentive
Long‑term
incentive
80%
80%
20%
20%
–%
–%
Annual Report 2020
25
rEMuNErATION rEPOrT (AuDITED) CONTINUED
Fixed remuneration
Fixed remuneration is comprised of the base salary and team member benefits which include superannuation,
leave entitlements and other benefits.
The salaries are normally paid monthly and are based on:
•
•
•
responsibilities, abilities, experience and performance;
team member’s performance in the period since the last review; and
the Group’s pay structure.
The salaries are benchmarked against similar ASX‑listed and other online retail companies.
Some KMP’s received an adjustment to fixed remuneration in the 2020 financial year.
Short‑term incentives (STI) – 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 individuals for their contribution to the success of the Group.
Actively encourage team members to take more ownership over the EBITDA1.
Offers of cash incentive may be made to any team member of the 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 EBITDA1 of Kogan.com 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 team members in fixed proportions.
Maximum opportunity
The maximum payable is 25% of the outperformance and 35% of the team
member’s annual salary.
Performance conditions
Outperformance of the actual EBITDA1.
Continuation of employment.
Why were the performance
condition chosen
To achieve successful and sustainable financial business outcomes as well as
any annual objectives that drive short‑term and long‑term business success
and sustainability.
Performance period
1 July 2019 to 30 June 2020.
Timing of assessment
August 2020, following the completion of the 30 June 2020 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.
1. Non‑IFRS measure.
26
kogan.com
Long‑term incentives (LTI) – Equity Incentive Plan (EIP)
The Group has established an Equity Incentive Plan (EIP), which is designed to align the interests of
eligible team members more closely with the interests of Shareholders in the listed entity post 7 July 2016.
Under the EIP, eligible team members 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 team members 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 team members more closely with the interests
of Shareholders.
Reward individuals for their contribution to the success of the Group over
the long‑term.
Offers of Incentive Securities may be made to any team member of the
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
Individuals must be employed by the Group at time of vesting and not be
in their notice period.
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 the
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.com’s Securities Trading Policy).
Upon vesting, there will be no disposal restrictions placed on the
Ordinary 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.
Independent Non‑Executive Directors’ remuneration
Kogan.com Independent 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 Independent 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.
Annual Report 2020
27
rEMuNErATION rEPOrT (AuDITED) CONTINUED
The annual Independent Non‑Executive Directors’ fees paid or payable to Greg Ridder (as Chairman),
Harry Debney and Michael Hirschowitz (resigned 20 May 2020) for FY20 are $185,000, $110,000 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.
Independent 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 Committee
considers 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 talent; and
• encourages and rewards the behaviours and outcomes that will deliver business success and a good return
for our Shareholders.
To achieve this, we set challenging targets and monitor performance against them closely.
We have strengthened the connection between our key reward metrics and our business strategy by adapting
the performance conditions used for our STI.
We remain committed to the use of stretching performance metrics, and recognise the importance of having
performance conditions that are linked to customer engagement.
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
EBITDA1 (in $’m)
Dividends paid (in $’m)
Operating income growth
Share Price at 30 June
*
Share Price as at Friday 28 June 2019.
FY20
FY19
26.8
0.29
46.5
14.8
13.5%
14.72
17.2
0.18
30.1
11.4
6.4%
4.75*
Profit amounts have been calculated in accordance with Australian Accounting Standards (AASBs).
EBITDA1 is calculated based on the operating profit before interest, tax, depreciation and amortisation.
Operating income is operating profit as reported in the Statement of Comprehensive Income.
1. Non‑IFRS measure.
28
kogan.com
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
$
Super‑
annuation
$
Annual &
long service
leave
$
423,500
363,000
786,500
385,000
330,000
715,000
101,026
86,581
187,607
–
–
–
21,003
21,003
42,006
19,616
19,616
39,232
48,788
41,818
90,606
34,707
29,749
64,456
Year
2020
2020
2019
2019
R. Kogan
D. Shafer
Total
R. Kogan
D. Shafer
Total
Independent Non‑Executive Directors’ remuneration
The table below sets out the remuneration paid to Independent Non‑Executive Directors:
Greg Ridder
Harry Debney
Michael Hirschowitz
Total
Greg Ridder
Harry Debney
Michael Hirschowitz
Total
SHORT‑TERM
BENEFITS
POST‑
EMPLOYMENT
BENEFITS
Total fees
$
Super‑
annuation
$
185,000
110,000
87,083 1
382,083
185,000
110,000
23,750 1
318,750
–
–
–
–
–
–
–
Year
2020
2020
2020
2019
2019
2019
Total
$
594,317
512,402
1,106,719
439,323
379,365
818,688
Total
$
185,000
110,000
87,083
382,083
185,000
110,000
23,750
318,750
1. Michael Hirschowitz was appointed as an Independent Non‑Executive Director on 29 March 2019 and resigned on 20 May 2020.
Annual Report 2020
29
rEMuNErATION rEPOrT (AuDITED) CONTINUED
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
Michael Hirschowitz1
No. shares
held
2020
15,853,321
6,075,642
158,000
98,099
30,0702
% ownership
2020
No. shares
held
2019
% ownership
2019
15.0%
21,132,522
5.8%
0.2%
0.1%
0.0%
8,098,236
160,500
78,538
30,070
22.5%
8.6%
0.2%
0.0%
0.0%
1. Michael Hirschowitz resigned as an independent Non‑Executive Director on 20 May 2020.
2. Share holdings at time of resignation, being 20 May 2020.
EXECUTIVE DIRECTORS’ SERVICE AGREEMENTS
Notice and termination payments
Executives are on contracts with no fixed end date.
The following table captures the notice periods applicable to the termination of the executives’ employment:
CEO
CFO, COO
Termination notice by
Kogan.com
Termination notice by
employee
Termination payments
provided for under
contract
12 months
6 months
12 months
6 months
12 months
6 months
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.
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 Mr Kogan to govern his employment with
Kogan.com.
Mr Kogan or Kogan.com may terminate Mr Kogan’s employment by giving 12 months’ notice. Kogan.com may
elect to make payment in lieu of notice. Kogan.com may terminate Mr Kogan’s employment without notice in
circumstances warranting summary dismissal.
Upon termination of Mr Kogan’s employment, Mr Kogan will be subject to a restraint of trade period of
12 months during which time Mr 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 Mr Kogan to participate in Kogan.com’s incentive programs.
30
kogan.com
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 Mr Shafer to govern his employment with Kogan.com.
Mr Shafer or Kogan.com may terminate Mr Shafer’s employment by giving 6 months’ notice. Kogan.com may
elect to make payment in lieu of notice. Kogan.com may terminate Mr Shafer’s employment without notice in
circumstances warranting summary dismissal.
Upon termination of Mr Shafer’s employment, Mr Shafer will be subject to a restraint of trade period of 6 months
during which time Mr Shafer 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 Mr Shafer 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. Mr Kogan is a minority shareholder and Director of eStore. The agreement was entered into
on arm’s length terms.
KMP
Transaction type
Ruslan Kogan
Purchases from eStore warehousing
CONSOLIDATED GROUP
2020
$000
9,540
2019
$000
10,605
The Directors’ Report is signed on behalf of the Board in accordance with a resolution of the Directors.
Greg ridder
Non‑Executive Chairman
Melbourne, 22 September 2020
Annual Report 2020
31
AUDITOR’S INDEPENDENCE DECLARATION
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
To the Director 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 2020 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.
R
KPM_INI_01
KPMG
_01
_NAM
_01
Simon Dubois
Partner
Melbourne
22 September 2020
PAR_SIG_01
PAR_NAM_01
PAR_POS_01
PAR_DAT_01
PAR_CIT_01
KPMG, an Australian partnership and a member firm
of the KPMG network of independent member firms
International Cooperative
affiliated with KPMG
(“KPMG International”), a Swiss entity.
Liability limited by a scheme approved
under Professional Standards Legislation.
32
kogan.com
FINANCIAL REPORT
CONTENTS
34 CONSOLIDATED INCOME STATEMENT AND
CONSOLIDATED STATEMENT OF OTHER
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
39 1.1 REVENUE
40 1.2A OPERATING ACTIVITIES
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
48 2.2 INTANGIBLE ASSETS
50 2.3 PROPERTY, PLANT AND EQUIPMENT
52 SECTION 3: CAPITAl STruCTurE AND FINANCING
52 3.1 LOAN AND BORROWINGS
52 3.2 CAPITAL AND FINANCIAL RISK MANAGEMENT
61 3.3 EARNINGS PER SHARE
62 SECTION 4: GrOuP STruCTurE
62 4.1 CONTROLLED ENTITIES
62 4.2 DEED OF CROSS GUARANTEE
63 4.3 PARENT ENTITY DISCLOSURES
63 4.4 RELATED PARTIES
64 SECTION 5: EMPlOYEE rEWArD AND rECOGNITION
64 5.1 KEY MANAGEMENT
PERSONNEL COMPENSATION
65 5.2 INCENTIVE PLANS
69 SECTION 6: OTHEr
69 6.1 SUBSEQUENT EVENTS
69 6.2 REMUNERATION OF AUDITORS
70 6.3 CONTINGENT LIABILITIES
70 6.4 COMPANY INFORMATION
71 DIRECTORS’ DECLARATION
72 INDEPENDENT AUDITOR’S REPORT
77 SHAREHOLDER INFORMATION
Annual Report 2020
33
CONSOLIDATED INCOME STATEMENT AND CONSOLIDATED
STATEMENT OF OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2020
Revenue
Cost of sales
Gross profit
Selling and distribution expenses
Warehouse expenses
Administrative expenses
Other expenses
results from operating activities
Finance income
Finance costs
Unrealised foreign exchange (loss)
Net finance (costs)
Profit before income tax
Tax expense
Net profit and other comprehensive income for the year
attributable to the owners of the Company
Basic earnings per share
Diluted earnings per share
The accompanying notes form part of these financial statements.
CONSOLIDATED GROUP
2020
$000
2019
$000
497,904
438,700
(371,374)
(348,044)
Note
1.1
1.2a
126,530
(34,196)
(13,574)
(35,687)
(2,033)
41,040
52
(796)
(1,443)
(2,187)
38,853
(12,033)
90,656
(23,178)
(13,666)
(28,193)
(1,627)
23,992
195
(594)
(190)
(589)
23,403
(6,202)
26,820
17,201
0.29
0.28
0.18
0.18
1.2b
1.3
3.3a
3.3b
34
kogan.com
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2020
CONSOLIDATED GROUP
Note
2020
$000
2019
$000
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Financial assets
Prepayments and other current assets
TOTAL CURRENT ASSETS
NON‑CURRENT ASSETS
Property, plant and equipment
Intangible assets
Deferred tax assets
TOTAL NON‑CURRENT ASSETS
TOTAL ASSETS
lIABIlITIES
CURRENT LIABILITIES
Trade and other payables
Lease liabilities
Financial liabilities
Current tax liabilities
Employee benefits
Provisions
Deferred income
TOTAL CURRENT LIABILITIES
NON‑CURRENT LIABILITIES
Lease liabilities
Employee benefits
Deferred income
TOTAL NON‑CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQuITY
Share capital
Merger reserve
Other reserves
Retained earnings
TOTAl EQuITY
The accompanying notes form part of these financial statements.
Annual Report 2020
2.1.2a
2.1.1
2.1.2b
2.3
2.2
1.3
2.1.3a
2.1.3b
1.3
2.1.3c
2.1.3b
2.1.3c
3.2.1a
3.2.1c
146,726
5,390
112,882
–
1,400
266,398
2,603
8,279
2,387
13,269
27,462
5,365
75,850
383
482
109,542
1,566
5,815
1,474
8,855
279,667
118,397
82,495
51,725
1,987
1,060
5,451
1,134
3,159
19,334
114,620
453
197
372
1,022
115,642
164,025
269,033
(131,816)
1,352
25,456
164,025
557
–
3,311
748
1,304
7,733
65,378
692
136
1,211
2,039
67,417
50,980
167,823
(131,816)
1,537
13,436
50,980
35
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2020
$000
Balance at 1 July 2018 1
Adjustment on the initial application
of AASB 15 (net of tax)
CONSOLIDATED GROUP
Note
Share
capital
Retained
earnings
Merger
reserve
Share
based
pay‑
ments
reserve
Trans‑
lation
reserve
Total
equity
167,294
11,571
(131,816)
(291)
1,124
47,882
–
(3,902)
–
–
–
(3,902)
Adjusted balance as at 1 July 2018
167,294
7,669
(131,816)
(291)
1,124
43,980
Comprehensive income
Net profit and other comprehensive
income for the year
Total net profit and other
comprehensive income for the year
Transactions with owners, in their
capacity as owners
Issue of Ordinary Shares under
performance plans
Total transactions with owners,
in their capacity as owners
Balance at 30 June 2019
Balance at 1 July 2019
Comprehensive income
Net profit and other comprehensive
income for the year
Total net profit and other
comprehensive income for the year
Transactions with owners,
in their capacity as owners
Issue of Ordinary Shares under
performance plans
Equity‑settled share‑based payments
5.2c
Dividends paid
3.2.2
–
–
3.2.1b
529
–
–
(11,434)
529
(11,434)
167,823
13,436
(131,816)
167,823
13,436
(131,816)
(291)
(291)
1,828
50,980
1,828
50,980
–
–
17,201
17,201
–
–
26,820
26,820
–
–
–
–
–
–
–
–
–
–
–
–
–
–
17,201
17,201
(504)
1,208
25
1,208
–
(11,434)
704
(10,201)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
26,820
26,820
(1,217)
–
–
1,032
1,042
1,032
–
–
–
98,147
804
(14,800)
(185)
86,225
3.2.1b
1,217
Tax deductions for difference between
accounting expense and funds paid
to issue performance plans
Equity‑settled share‑based payments
5.2c
Institutional placement net
of tax impact
Dividend reinvestment plan
1,042
–
98,147
804
–
–
–
–
–
Dividends paid
3.2.2
–
(14,800)
Total transactions with owners,
in their capacity as owners
101,210
(14,800)
Balance at 30 June 2020
269,033
25,456
(131,816)
(291)
1,643
164,025
1. The Group applied AASB 9, 15 & 16 as at 1 July 2018.
The accompanying notes form part of these financial statements.
36
kogan.com
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2020
CONSOLIDATED GROUP
Note
2020
$000
2019
$000
578,954
497,943
(523,813)
(489,176)
52
(589)
(8,971)
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Interest received
Finance costs paid
Income tax paid
Net cash provided by operating activities
1.4
45,633
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment
Purchase of intangible assets
Proceeds from disposal of intangible assets
Net cash (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares
Transaction costs related to the issue of shares
Dividends paid net of dividend reinvestment plan
Repayment of lease liabilities
Net cash provided by/(used in) financing activities
Net increase/(decrease) in cash held
Cash and cash equivalents at beginning of financial year
Cash and cash equivalents at end of financial year
3.2
The accompanying notes form part of these financial statements.
(219)
(7,935)
–
(8,154)
100,000
(2,646)
(13,996)
(1,573)
81,785
119,264
27,462
146,726
196
(466)
(6,425)
2,072
(65)
(5,403)
250
(5,218)
–
(11,434)
(576)
(12,010)
(15,156)
42,618
27,462
Annual Report 2020
37
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
BASIS OF PREPARATION
The financial report of Kogan.com Ltd and its controlled entities (“the Group”; “Kogan.com”) for the year ended
30 June 2020 was authorised for issue in accordance with a resolution of the Directors on 22 September 2020.
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 on page 18.
These General Purpose Financial Statements have been prepared in accordance with the Corporations Act 2001,
Australian Accounting Standards and Interpretations of the Australia 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 2019.
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.
Kogan.com is a Company of the kind referred to in ASIC Corporations (Rounding in Financial/Directors’
Reports) Instrument 2016/191 and in accordance with that instrument, amounts in the Directors’ Report
and the Financial Report are rounded to the nearest thousand dollars, except where otherwise indicated.
a. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements incorporate all of the assets, liabilities and results of the Group, in line with
AASB 10 Consolidated Financial Statements. Subsidiaries are entities the parent controls. The parent controls an
entity when its exposed to, or has rights to, variable returns from the 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.a.
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 the 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 Australia and New Zealand
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 Group’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
kogan.com
Estimates and judgements that have the most significant effect on the amounts recognised in the financial
statements are:
•
•
the provisions for warranties and sales returns which 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 during financial year 2020/21;
the assessment of the recoverable value of non‑current assets, including intangible assets, which 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; and
•
the provision for slow moving and obsolete inventory, which is based on estimates of net realisable value.
Key estimates and judgements have not changed from those disclosed in the Group financial report for the year
ended 30 June 2019, with the exception of the assessment of useful life for patents and trademarks.
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 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.
e. FUNCTIONAL AND PRESENTATION CURRENCY
These consolidated financial statements are presented in Australian dollars, which is the Group’s
functional currency.
SECTION 1: BUSINESS PERFORMANCE
1.1 REVENUE
Sale of goods
Revenue is recognised when the Group satisfies a performance obligation by transferring a promised good
to a customer. When a performance obligation is satisfied, the Group recognises as revenue the amount the
transaction price which excludes the associated costs and possible return of goods. Prior to these conditions
being met, receipts from the sale of the goods are recorded in deferred income. Revenue is measured net of
returns, trade discounts and volume rebates.
The timing of transfer of control varies depending on the individual terms of the sales agreement. For sale
of goods, transfer usually occurs upon dispatch of the goods, where control is contractually transferred 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 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 obligations to the customer, in line with the terms and conditions of sale.
Annual Report 2020
39
NOTES TO THE FINANCIAl STATEMENTS CONTINUED
SECTION 1: BUSINESS PERFORMANCE (continued)
1.1 REVENUE (continued)
rendering of services (continued)
Revenue
Sales revenue:
– sale of goods
– rendering of services
Other revenue:
– commission from marketing
– other revenue
Total revenue
1.2a OPERATING ACTIVITIES
Expenses
Cost of sales
Cost of services
Total cost of sales
Employee benefit expense
Depreciation and amortisation expense
1.2b Finance costs
Realised foreign exchange losses
Finance costs on debt facilities
Total finance costs
CONSOLIDATED GROUP
2020
$000
2019
$000
461,251
30,809
418,118
14,448
492,060
432,566
3,676
2,168
5,844
2,864
3,270
6,134
497,904
438,700
2020
$000
2019
$000
371,374
347,958
–
86
371,374
348,044
20,154
7,419
16,519
6,739
2020
$000
207
589
796
2019
$000
129
465
594
40
kogan.com
1.3 TAX BALANCES
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 assets 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 assets or liability.
Deferred tax assets relating to temporary differences and unused tax losses are recognised only 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 liability 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/(Over) provision in respect of prior years
b. The prima facie tax on profit from ordinary activities before
income tax is reconciled to income tax as follows:
Prima facie tax payable on profit from ordinary activities before
income tax at 30% (2019: 30%):
Consolidated Group
Add:
Tax effect of:
– amortisation of intangibles
– entertainment (non‑deductible)
– current year revenue losses not recognised
– other non‑allowable items
Less:
Tax effect of:
– shared based payments
– prior year losses now recognised
– research and development tax benefit
– Under/(Over) provision of prior year income tax
Income tax attributable to the Group
The applicable weighted average effective tax rates are as follows:
Annual Report 2020
CONSOLIDATED GROUP
2020
$000
12,146
(120)
7
12,033
2019
$000
6,551
(159)
(190)
6,202
11,656
7,021
53
11
75
277
–
(1)
(45)
7
12,033
31%
14
27
1
47
(678)
–
(40)
(190)
6,202
27%
41
NOTES TO THE FINANCIAl STATEMENTS CONTINUED
SECTION 1: BUSINESS PERFORMANCE (continued)
1.3 TAX BALANCES (continued)
The effective tax rate for FY20 of 31% reflects the impact of non‑deductible intangible amortisation and other
non‑deductible costs, offset by research and development tax benefit and recognition of prior year losses.
Current and deferred tax balances:
Assets
NON‑CURRENT
Net deferred tax asset
Total
liabilities
CURRENT
Current tax liabilities
Total
Movements in deferred tax balances
CONSOLIDATED GROUP
2020
$000
2019
$000
2,387
2,387
5,451
5,451
1,474
1,474
3,311
3,311
2020
$000
Property, plant
& equipment
Intangible
assets
Financial
assets
Employee
benefits
Provisions
Deferred
income
Lease liability
Other items
Tax losses
carried forward
Net tax assets/
(liabilities)
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
(341)
(1,351)
(115)
232
521
963
375
1,058
132
1,474
–
–
–
–
–
–
–
–
–
–
(330)
452
433
114
88
(541)
357
(321)
(132)
120
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
793
–
793
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(671)
34
(705)
(899)
–
(899)
318
318
346
609
422
732
346
609
422
732
–
–
–
–
–
1,530
1,680
(150)
–
–
–
2,387
4,141
(1,754)
42
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
2019
$000
Property, plant
& equipment
Intangible
assets
Financial
assets
Employee
benefits
Provisions
Deferred
income
Lease liability
16
(1,495)
(172)
201
345
–
–
–
–
–
–
–
–
–
(357)
144
57
31
176
(709)
375
317
Other items
521
220
Tax losses
carried forward
Net tax assets/
(liabilities)
7
–
125
(577)
220
159
1.4 NOTES TO THE CASH FLOW STATEMENT
–
–
–
–
–
–
–
–
–
–
–
–
–
1,672
–
–
–
1,672
–
–
–
–
–
–
–
–
–
–
reconciliation of Cash Flows from Operating Activities
with Profit after Income Tax
Profit after income tax
Non‑cash flows in profit:
– depreciation & amortisation
– profit on the sale of intangibles
– issue of Performance Rights and Shares
– unrealised foreign exchange movement
– income tax expense
Changes in assets and liabilities:
– (increase) in trade and term receivables
– (increase)/decrease in prepayments and other assets
– (increase) in inventories
– increase in trade payables and accruals
– increase/(decrease) in deferred income
– increase in provisions
– tax paid
Cash flows from operating activities
Annual Report 2020
–
–
–
–
–
–
–
–
–
–
(341)
19
(360)
(1,351)
(115)
232
521
963
375
–
–
232
526
963
375
1,058
1,058
132
132
(1,351)
(115)
–
(5)
–
–
–
–
1,474
3,305
(1,831)
CONSOLIDATED GROUP
2020
$000
2019
$000
26,820
17,201
7,419
–
1,033
1,443
12,033
6,739
(108)
1,233
190
6,202
(25)
(918)
(366)
96
(37,032)
(25,650)
30,769
10,759
2,302
(8,970)
45,633
6,417
(3,949)
492
(6,425)
2,072
43
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
2020
$000
2019
$000
32,467
80,415
112,882
8,391
67,459
75,850
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
2020
$000
5,197
5,197
193
5,390
2019
$000
4,859
4,859
506
5,365
The Group has no significant concentration of credit risk with respect of 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:
Australia
44
CONSOLIDATED GROUP
2020
$000
5,390
2019
$000
5,365
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
transactions. 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) is considered to be
of high credit quality.
The Group had one customer that owed more than 10% of total trade and other receivables as at 30 June 2020
and 30 June 2019.
PAST DUE BUT NOT IMPAIRED
(DAYS OVERDUE)
Gross
Amount
$000
Past Due
and
Impaired
$000
< 30
$000
31–60
$000
61–90
$000
> 90
$000
5,197
193
5,390
4,859
506
5,365
–
–
–
–
–
–
4,233
193
4,426
3,945
506
4,451
41
–
41
891
–
891
616
–
616
8
–
8
307
–
307
15
–
15
2020
Trade and term receivables
Other receivables
Total
2019
Trade and term receivables
Other receivables
Total
2.1.2b PrEPAYMENTS AND OTHEr CurrENT ASSETS
Prepayments
Rental bond
Other
2.1.3 Trade and other payables
2.1.3a Trade and other payables
CONSOLIDATED GROUP
2020
$000
1,373
27
–
1,400
2019
$000
452
27
3
482
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.
CURRENT
Trade payables
Other payables
Accrued expenses
CONSOLIDATED GROUP
2020
$000
2019
$000
35,910
42,794
3,791
82,495
32,390
17,019
2,316
51,725
Annual Report 2020
45
NOTES TO THE FINANCIAl STATEMENTS CONTINUED
SECTION 2: OPERATING ASSETS AND LIABILITIES (continued)
2.1 WORKING CAPITAL (continued)
2.1.3b lease liability
At inception of a contract, the Group assess whether a contract is, or contains, a lease. A contract is, or contains,
a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange
for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the
Group assesses whether:
•
the contract involves the use of an identified asset – this may be specified explicitly, and should be physically,
or represent substantially, all the capacity of a physically distinct asset. If the supplier has a substantive
substitution right, then the asset is not identified;
• The Group has the right to obtain substantially all of the economic benefits from the use of the asset
throughout the period of use; and
• The Group has the right to direct the use of asset. The Group has this right when it has the decision‑making
rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where all
the decisions about how and for what purpose the asset is used. In rare cases where all the decisions about
how and for what purpose the asset is used are predetermined, the Group has the right to direct the use of
the asset if either:
– The Group has the right to operate the asset; or
– The Group designed the asset in a way that predetermines how and for what purpose it will be used.
The Group has applied this approach to all contracts effective as at 1 July 2019.
As a lessee
The Group recognises a right‑of‑use asset and a lease liability at the lease commencement date. The right‑of‑
use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for
any lease payments made at or before the commencement date, plus any initial direct costs incurred and
an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset, less
any lease incentives received.
The right‑of‑use asset is subsequently depreciated using the straight‑line method from the commencement
date to the earlier of the end of the useful life of the right‑of‑use or the end of the lease term. The estimated
useful lives of the right‑of‑use assets are determined on the same basis as those property, plant and equipment.
In addition, the right‑of‑use asset is periodically reduced by impairment losses, if any, and adjusted for certain
remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily
determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing
rate as the discount rate.
Lease payments included in the measurement of the lease liability comprise:
• fixed payments, including in‑substance fixed payments;
• amounts expected to be payable under a residual guarantee; and
•
lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension
option, and penalties for early termination of a lease unless the Group is reasonably certain not to
terminate early.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when
there is a change in future lease payments arising from a change in an index or rate, if there is a change in
the Group’s estimate of the amount expected to be payable under a residual value guarantee or if the Group
changes its assessment of whether it will exercise a purchase, extension or termination option.
46
kogan.com
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount
of the right‑of‑use asset, or is recorded in profit or loss if the carrying amount of the right‑of‑use asset has been
reduced to zero.
The Group does not have any short‑term or low‑value leases.
The Group presents right‑of‑use assets that do not meet the definition of investment property in ‘property,
plant and equipment’ and lease liabilities in ‘trade and other payables’ in the statement of financial position.
As at 30 June 2020, the net carrying amount of the right‑of‑use asset is $2.4 million, please refer to note 2.3.
The lease liability as of 30 June 2020 is presented below:
lease liability – Maturity analysis
Maturity analysis – contractual undiscounted cash flows
Less than one year
One to five years
More than five years
Total undiscounted lease liabilities as at 30 June
lease liabilities included in the statement of financial positions
as at 30 June
Current
Non‑current
Property and warehouse lease
2020
$000
2019
$000
2,030
507
–
2,537
2,440
1,987
453
587
757
–
1,344
1,249
557
692
The Group leases a building for its office space. The lease of office space is non‑cancellable lease with a 4‑year
term that expired on 31 July 2018. An option existed to renew the lease for one further term of 3 years.
The Group also leases warehouse space with a minimum applicable notice period of 24 months and has no fixed
expiration date.
Extension options
Where practicable, the Group seeks to include extension options in new leases to provide operational flexibility.
The Group assesses at lease commencement whether it is reasonably certain to exercise the options if there is
a significant event or significant change in circumstances within its control.
2.1.3c Deferred income
CURRENT
Deferred income
NON‑CURRENT
Deferred income
Total deferred income
2020
$000
2019
$000
19,334
19,334
372
19,706
7,733
7,733
1,211
8,944
Annual Report 2020
47
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 probably 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 the Statement of
Comprehensive Income.
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
2.5‑10.0 years
Website development costs
Software costs
Intellectual property
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 Cash Generating
Units (CGU).
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 marketing assessments of the time value of money and the risks specific
to the asset or CGU.
48
kogan.com
An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount.
Impairment losses are recognised in the Statement of Comprehensive Income. 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.
CONSOLIDATED GROUP
Patents and trademarks:
Cost
Accumulated amortisation and impairment losses
Net carrying amount
Website development costs:
Cost
Accumulated amortisation and impairment losses
Net carrying amount
Software costs:
Cost
Accumulated amortisation and impairment losses
Net carrying amount
Intellectual property:
Cost
Accumulated amortisation and impairment losses
2020
$000
4,881
(816)
4,065
6,152
(4,984)
1,168
858
(845)
13
20,418
(17,385)
3,033
8,279
2019
$000
781
(539)
242
5,100
(3,951)
1,149
850
(819)
31
17,642
(13,249)
4,393
5,815
Net carrying amount
Total intangibles
$000
Consolidated Group:
Year ended 30 June 2019
Balance at the beginning
of the year
Additions
Disposals
Amortisation charge
Balance at 30 June 2019
Year ended 30 June 2020
Balance at the beginning
of the year
Additions
Disposals
Amortisation charge
Balance at 30 June 2020
Patents and
trademarks
Website
development
costs
Software
costs
Intellectual
property
Total
270
342
(141)
(229)
242
242
4,100
–
(277)
4,065
1,186
1,044
–
(1,081)
1,149
1,149
1,052
–
(1,033)
1,168
44
18
–
(31)
31
31
8
–
(26)
13
4,993
3,999
–
(4,599)
4,393
4,393
2,776
–
(4,136)
3,033
6,493
5,403
(141)
(5,940)
5,815
5,815
7,936
–
(5,472)
8,279
Annual Report 2020
49
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 of fair value as indicated less, where applicable,
any accumulated depreciation and impairment losses.
Property, plant and equipment are measured on a cost basis and therefore carried at cost less accumulated
depreciation and any accumulated impairment losses. In the event the carrying amount of property, 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 property, plant and equipment is reviewed annually by the management 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 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 probably 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 the
Statement of Comprehensive Income during the financial period in which they are incurred.
Depreciation
The depreciable amount of all fixed assets purchased in 2020 is depreciated on a straight‑line basis over
the asset’s useful life to the 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)
Office equipment (reducing balance & straight‑line basis)
Leasehold improvements
Right of use asset
67%
10‑25%
20%
33‑50%
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 the Statement of Comprehensive Income in the period in which they arise.
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Computer equipment:
Cost
Accumulated depreciation
Net carrying amount
Office equipment:
Cost
Accumulated depreciation
Net carrying amount
leasehold improvements:
Cost
Accumulated amortisation
Net carrying amount
right of use asset:
Cost
Accumulated amortisation
Net carrying amount
Total property, plant and equipment
Movements in carrying amounts
CONSOLIDATED GROUP
2020
$000
2019
$000
551
(384)
167
960
(890)
70
39
(25)
14
4,541
(2,189)
2,352
2,603
346
(313)
33
948
(636)
312
37
(17)
20
1,778
(577)
1,201
1,566
Movements in the carrying amounts for each class of property, plant and equipment between the beginning and
the end of the current financial year:
$000
Consolidated Group:
Balance at 1 July 2018
Additions
Depreciation expense
Balance at 30 June 2019
Balance as at 1 July 2019
Additions
Depreciation expense
Balance at 30 June 2020
Computer
equipment
Office
equipment
Leasehold
improvements
Right of use
asset
55
38
(60)
33
33
205
(71)
167
373
23
(84)
312
312
12
(254)
70
23
2
(5)
20
20
2
(8)
14
1,778
–
(577)
1,201
1,201
2,763
(1,612)
2,352
Total
2,229
63
(726)
1,566
1,566
2,982
(1,945)
2,603
Annual Report 2020
51
NOTES TO THE FINANCIAl STATEMENTS CONTINUED
SECTION 3: CAPITAL STRUCTURE AND FINANCING
3.1 LOAN AND BORROWINGS
The Group’s interest‑bearing loans and borrowings have been measured at amortised cost.
The Group has a multi‑option facility agreement with Westpac Banking Corporation, for a term of three years,
maturing on 27 November 2021. The facility limit is $30.0 million.
There were no amounts drawn down under the facility at year end (2019: nil).
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 derivatives.
Financial risk management policies
The Board’s overall risk management strategy seeks to assist the 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 internal 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’
security 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 purchase.
Management has assessed that trade and other receivables that are not past due or are considered to be
of good credit rating. Aggregates of such amounts are detailed in Note 2.1.2a.
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Cash and cash equivalents
Credit and risk related to balances with banks and other financial institutions is managed by the Board.
The Group held cash and cash equivalents of $146.7 million as at 30 June 2020 and $27.5 million as at the
end of 30 June 2019. The cash and cash equivalents are held with bank and financial institution counterparties,
which are rated A to AA‑, based on the Standard & Poor’s ratings
Impairment of cash and cash equivalents has been measured on a 12‑month expected loss basis and reflects
the short maturities of the exposures. The Group considers that its’ cash and cash equivalents have low credit
risk based on the external credit ratings of the counterparties
The Group uses a similar approach for assessment of ECLs for cash and cash equivalents to those used for
debt securities.
No impairment allowance was recognised on during FY20.
liquidity risk
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:
• prepared forward‑looking cash flow analysis 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
Consolidated Group
$000
Note
2020
2019
2020
2019
2020
2019
2020
2019
WITHIN 1 YEAR
1 TO 5 YEARS
OVER 5 YEARS
TOTAL
Financial liabilities due for payment
Trade and other
payables
2.1.3a
(82,495)
(51,725)
–
–
Lease liabilities
2.1.3b
(1,987)
(557)
(453)
(692)
Financial liabilities
(1,060)
–
–
–
Total expected
outflows
(85,542)
(52,282)
(453)
(692)
Financial assets – cash flows realisable
Cash and cash
equivalents
Trade, term and loan
receivables
Financial assets
Total anticipated
inflows
Net inflow/(outflow)
on financial
instruments
146,726
27,462
2.1.2a
5,390
5,365
–
383
152,116
33,210
–
–
–
–
–
–
–
–
66,574
(19,072)
(453)
(692)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(82,495)
(51,725)
(2,440)
(1,249)
(1,060)
–
(85,995)
(52,974)
146,726
27,462
5,390
5,365
–
383
152,116
33,210
66,121
(19,764)
Annual Report 2020
53
NOTES TO THE FINANCIAl STATEMENTS CONTINUED
SECTION 3: CAPITAL STRUCTURE AND FINANCING (continued)
3.2 CAPITAL AND FINANCIAL RISK MANAGEMENT (continued)
Market risk
a. 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.
The balance of borrowings was fully repaid as at 30 June 2020.
b. 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 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 exception of ageing and obsolete inventory)
according to specified target Gross Margins, rather than to sacrifice Gross Margin to drive sales volumes.
In an environment where the Australian dollar may be 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 the contracts.
Consolidated Group
Buy USD/sell AUD:
Settlement – less than 6 months
– 6 months to 1 year
NOTIONAL AMOUNTS
AVERAGE EXCHANGE RATE
2020
$000
53,367
2
2019
$000
38,187
3,215
2020
$
0.66
0.69
2019
$
0.71
0.70
The fair value of foreign exchange contracts at 30 June 2020 totalled $1,059,971 (2019: $382,691).
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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 2020
+/–10bps in foreign exchange rates
Year ended 30 June 2019
+/–10bps in foreign exchange rates
CONSOLIDATED GROUP
Profit
$
Equity
$
5,337
5,337
4,140
4,140
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 Standards.
Fair value estimation
The carrying value of financial assets and financial liabilities are not materially different to their fair values.
Financial Instruments
Initial recognition and measurement
Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual
provisions to the instrument. For financial assets, this is equivalent to the date that the entity commits itself
to either the purchase or sale of the asset (i.e. trade date accounting is adopted).
Financial instruments are initially measured at fair value plus transaction costs, except where the instrument
is classified “at fair value through profit or loss”, in which case transaction costs are expensed to profit or
loss immediately.
Classification and subsequent measurement
Financial instruments are subsequently measured at fair value, amortised cost using the effective interest
method, or cost.
Amortised cost is calculated as the amount at which the financial asset or financial liability is measured at
initial recognition less principal repayments and any reduction for impairment, and adjusted for any cumulative
amortisation of the difference between that initial amount and the maturity amount calculated using the
effective interest method.
The effective interest method is used to allocate interest income or interest expense over the relevant period
and is equivalent to the rate that discounts estimated future cash payments or receipts (including fees,
transaction costs and other premiums or discounts) over the expected life (or when this cannot be reliably
predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset
or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying
amount with a consequential recognition of an income or expense item in profit or loss.
The Group does not designate any interests in subsidiaries, associates, or joint ventures as being subject to
the requirements of Accounting Standards specifically applicable to financial instruments.
Financial assets and financial liabilities at fair value through profit or loss (FVTPL) are initially recognised at
fair value and thereafter carried at fair value.
Annual Report 2020
55
NOTES TO THE FINANCIAl STATEMENTS CONTINUED
SECTION 3: CAPITAL STRUCTURE AND FINANCING (continued)
3.2 CAPITAL AND FINANCIAL RISK MANAGEMENT (continued)
Financial Instruments
Classification and subsequent measurement
a. Financial assets at amortised cost
Financial assets at amortised cost 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.
b. Financial assets/financial liabilities at fair value through profit or loss
Financial assets/financial liabilities relating to foreign exchange forward contracts are measured at fair value
and fair value changes are recognised in profit or loss.
c. Financial liabilities at amortised cost
Non‑derivative financial liabilities other than financial guarantees are subsequently measured at amortised cost.
Gains or losses are recognised in profit or loss when the financial liability is derecognised.
Derivative instruments
The Group enters into forward 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
The Group recognises loss allowances for expected credit loss (ECL) on:
• financial assets measured at amortised cost; and
• financial assets measured at FVTPL.
The Group measured loss allowances at an amount equal to lifetime ECLs.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition
and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and
available without undue cost or effort. This includes both quantitative and qualitative information and analysis,
based on the Group’s historical experience and informed credit assessment and including forward
looking information.
The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 90 days
past due.
The Group considers a financial asset to be in default when:
•
the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to
actions; or
•
the financial asset is more than 90 days past due.
Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a
financial instrument.
12‑month ECLs are the portion of ECLs that result from default events that are possible within the 12 months
after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).
The maximum period considered when estimating ECLs is the maximum contractual period over which the
Group is exposed to credit risk.
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Measurement of ECLs
ECLs are a probability‑weighted estimate of credit losses. Credit losses are measured as the present value of all
cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and
the cash flows that the Group expects to receive).
ECLs are discounted at the effective interest rate of the financial asset.
Credit‑impaired financial assets
At each reporting date, the Group assesses whether financial assets carried at amortised cost and financials
assets at FVTPL are credit‑impaired. A financial asset is ‘credit‑impaired’ when one or more events that have
a detrimental impact on the estimated future cash flows of the financial asset have occurred.
Evidence that a financial asset is credit‑impaired includes the following observable data:
• significant financial difficulty of the borrower or issuer;
• a breach of contract such as a default or being more than 90 days past due;
•
•
•
the restructuring of a loan or advance by the Group on terms that the Group would not consider otherwise;
it is probable that the borrower will enter bankruptcy or other financial reorganisation; or
the disappearance of an active market for a security because of financial difficulties.
Presentation of allowance for ECL in the statement of financial position
Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount
of the assets.
For financials assets at FVTPL, the loss allowance is charged to profit or loss.
Write‑off
The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations
of recovering a financial asset in its entirety or a portion thereof. For individual customers, the Group has a
policy of writing off the gross carrying amount when the financial asset is 180 days past due based on historical
experience of recoveries of similar assets. For corporate customers, the Group individually makes an assessment
with respect to the timing and amount of write‑off based on whether there is a reasonable expectation of
recovery. The Group expects no significant recovery from the amount written off. However, financial assets that
are written off could still be subject to enforcement activities in order to comply with the Group’s procedures
for recovery of amounts due.
The Group holds the following financial assets and financial liabilities at reporting date:
Financial assets
Cash and cash equivalents
Financial assets at amortised cost
– trade and other receivables
Financial assets at fair value through profit or loss
– foreign exchange forward contracts
Total financial assets
Financial liabilities
Financial liabilities at amortised cost:
– trade and other payables
– lease liability – current
– lease liability – non‑current
Financial liabilities at fair value through profit or loss
– foreign exchange forward contracts
Total financial liabilities
Annual Report 2020
CONSOLIDATED GROUP
Note
2020
$000
2019
$000
146,726
27,462
2.1.2a
5,390
5,365
–
152,116
383
33,210
2.1.3a
2.1.3b
2.1.3b
82,495
1,987
453
1,060
85,995
51,725
557
692
–
52,974
57
NOTES TO THE FINANCIAl STATEMENTS CONTINUED
SECTION 3: CAPITAL STRUCTURE AND FINANCING (continued)
3.2 CAPITAL AND FINANCIAL RISK MANAGEMENT (continued)
Fair value measurements
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 9 Financial Instruments 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
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.
Level 3
Measurements based
on unobservable inputs
for the asset or liability.
Cash and cash equivalents are Level 1 measurements, whilst foreign exchange contracts are Level 2. 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.
The fair value of foreign exchange contracts at 30 June 2020 totalled $1,059,971 (liability) (2019: $382,691
(asset)). This represented the amount ‘out of the money’ on outstanding forward foreign exchange contracts
as at 30 June 2020.
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.
The fair value of forward exchange contracts is determined based on an external valuation report using forward
exchange rates at the balance sheet date.
3.2.1 Issued capital and reserves
a. Ordinary Shares
Fully paid Ordinary Shares
269,033,496
167,822,590
103,531,706
93,729,852
CONSOLIDATED GROUP
2020
$
2019
$
2020
No.
2019
No.
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kogan.com
Ordinary Shares participate in Dividends and the proceeds on winding‑up of the parent entity in proportion
to the number of shares held. At the Shareholders’ meetings each Ordinary Share is entitled to one vote when
a poll is called, otherwise each Shareholder has one vote on a show of hands.
b. Movements in ordinary share capital
Details
Balance
Shares cancelled as part of the
Kogan purchase
Shares issued at IPO
Shares issued to senior managers
under an IPO bonus schemes
Shares issued to the previous owners
for the purchase of Kogan Operations
Holdings Pty Ltd
Date
1 July 2016
7 July 2016
7 July 2016
7 July 2016
7 July 2016
Transaction cost arising on IPO offset
against share capital, net of tax
7 July 2016
Shares issued to eligible employees
under an incentive plan
29 September 2016
Balance
Shares issued to eligible employees
under an incentive plan
Shares issued to eligible employees
under an incentive plan
30 June 2017
3 July 2017
8 March 2018
Shares
No.
343
Issue price
$1.00
(343)
$–
$
343
–
27,777,786
$1.80
50,000,015
657,638
$1.80
1,183,749
64,897,910
$1.80
116,816,238
–
$–
(904,643)
3,247
$1.54
5,000
93,336,581
167,100,702
128,357
$1.43
183,562
7,407
$1.27
9,370
Balance
30 June 2018
93,472,345
167,293,634
Shares issued to eligible employees
under an incentive plan
Shares issued to eligible employees
under an incentive plan
Shares issued to eligible employees
under an incentive plan
6 July 2018
6 July 2018
28 February 2019
232,181
$1.66
386,227
3,613
$6.92
25,000
21,713
$5.42
117,729
Balance
30 June 2019
93,729,852
167,822,590
Shares issued to eligible employees
under an incentives plan
Shares issued to eligible employees
under an incentives plan
Shares issued to eligible employees
under an incentives plan
20 August 2019
18 February 2020
18 February 2020
Dividend reinvestment plan
10 March 2020
Institutional placement
Transactional costs incurred during
institutional placement net of tax
Tax deduction for difference between
accounting expense and funds paid to
issue incentive plans
17 June 2020
17 June 2020
30 June 2020
229,360
$1.65
379,369
657,677
$1.27
833,421
977
180,215
$5.12
$4.46
5,002
803,657
8,733,625
$11.45
100,000,006
–
–
–
–
(1,852,134)
1,041,585
269,033,496
Balance
30 June 2020
103,531,706
Annual Report 2020
59
NOTES TO THE FINANCIAl STATEMENTS CONTINUED
SECTION 3: CAPITAL STRUCTURE AND FINANCING (continued)
3.2 CAPITAL AND FINANCIAL RISK MANAGEMENT (continued)
3.2.1 ISSuED CAPITAl AND rESErVES (continued)
c. Merger reserve
The acquisition of Kogan Operations Holdings Pty Ltd by Kogan.com Ltd has been treated as a common
control transaction at book value for accounting purposes, and no fair value adjustments have been made.
Consequently, the difference between the fair value of issued capital and the book value of net assets acquired
is recorded within a merger reserve of $131,816,250.
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.
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.
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3.2.2 Dividends
Dividends paid during the year
a. Ordinary Shares
Recognition and measurement
CONSOLIDATED GROUP
2020
$000
14,800
2019
$000
11,434
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 2020 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 2020 and will be recognised in subsequent
financial reports.
Dividends
2020
Final
Dividend per share (in cents)
13.5
Franking percentage
100%
2020
Interim
7.5
100%
2019
Final
8.2
100%
2019
Interim
6.1
100%
Payment date
19 October 2020
10 March 2020
14 October 2019
8 May 2019
Dividend record date
24 August 2020
27 February 2020
27 August 2019
23 April 2019
b. Franking credits
The franking account balance as at 30 June 2020 is $27,673,737 (2019: $15,992,910).
3.3 EARNINGS PER SHARE
a. Basic earnings per share
Net profit for the reporting period
Adjustments to reflect dividends paid
Net profit for the reporting period used in calculating EPS
Weighted average number of Ordinary Shares of the entity
Basic earnings per share
b. Diluted earnings per share
Net profit for the reporting period
Weighted average number of Ordinary Shares of the entity – diluted
CONSOLIDATED GROUP
2020
2019
26,819,740
17,201,226
–
–
26,819,740
17,201,226
94,027,393
93,712,226
0.29
0.18
CONSOLIDATED GROUP
2020
2019
26,819,740
17,201,226
Weighted average number of Ordinary Shares of the entity on issue
94,027,393
93,712,226
Adjustments to reflect potential dilution for Performance Rights
1,514,138
1,637,166
Diluted weighted average number of Ordinary Shares of the entity
95,541,531
95,349,392
Diluted earnings per share
0.28
0.18
Annual Report 2020
61
NOTES TO THE FINANCIAl STATEMENTS CONTINUED
SECTION 4: GROUP STRUCTURE
4.1 CONTROLLED ENTITIES
a. Information about Principal Subsidiaries
The subsidiaries listed below have share capital consisting solely of Ordinary Shares or, in the case of Kogan
Technologies Unit Trust, ordinary units, which are held directly by the Group. Kogan.com Holdings Pty Ltd is the
Trustee of the Kogan Technologies Unit Trust. The Trustee and the Trust are wholly‑owned entities within the
Group. The proportion of ownership interests held equal 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 Operations Pty Ltd
(formerly 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
Kogan US Trading Inc
Kogan Superannuation Pty Ltd
Matt Blatt Pty Ltd
b. Significant restrictions
Principal Place
of Business
Australia
Australia
Australia
Australia
Hong Kong
Australia
Australia
Australia
Australia
Australia
Australia
Australia
United States
Australia
Australia
OWNERSHIP INTEREST
HELD BY THE GROUP
2020
%
2019
%
100
100
100
100
100
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 its 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 its subsidiaries listed above. As its 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.
62
kogan.com
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
TOTAl ASSETS
LIABILITIES
Current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Performance Rights reserve
Dividends
Retained earnings
TOTAl EQuITY
Statement of Profit or loss and Other Comprehensive Income
Total profit
Total comprehensive income
The parent did not have any material contingent liabilities at period end (2019: $nil).
4.4 RELATED PARTIES
a. The Group’s main related parties are as follows:
(i) Entities exercising control over the Group:
2020
$000
2019
$000
145,849
145,849
533
533
39,931
39,931
52
52
145,316
39,879
137,217
1,643
(14,800)
21,256
145,316
36,006
1,828
(11,434)
13,479
39,879
4,187
4,187
1,557
1,557
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 the entity, are considered
Key Management Personnel (refer to Note 5.1).
(iii) Entities subject to significant influence by the Group:
An entity that has the power to participate in the financial and operating policy decisions of an entity, but
does not have control over those policies, is an entity which holds significant influence. Significant influence
may be gained by share ownership, statute or agreement. There are no such entities at year end (2019: 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.
Annual Report 2020
63
NOTES TO THE FINANCIAl STATEMENTS CONTINUED
SECTION 4: GROUP STRUCTURE (continued)
4.4 RELATED PARTIES (continued)
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
SECTION 5: EMPLOYEE REWARD AND RECOGNITION
5.1 KEY MANAGEMENT PERSONNEL COMPENSATION
CONSOLIDATED GROUP
2020
$
2019
$
9,540,192
10,605,444
683,324
843,673
As deemed under AASB124 Related Parties Disclosures, Key Management Personnel (KMP) include each of the
Directors, both Executive and Non‑Executive.
A summary of the KMP compensation is set out in the following table:
Short‑term employee benefits
Long‑term employee benefits
Post‑employment benefits
Movement in shares
2020
$
2019
$
1,356,190
1,033,750
90,606
42,006
64,456
39,232
1,488,802
1,137,438
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:
Executive KMP
Ruslan Kogan
David Shafer
Held at
1 July 2019
24,904,461
9,543,688
Received on
exercise
of rights
Shares
purchased
Shares
sold
Held at
30 June 2020
–
–
–
–
(3,771,939)
21,132,522
(1,445,452)
8,098,236
64
kogan.com
Independent Non‑Executive Directors
Held at
1 July 2019
Received on
exercise of
rights
160,500
245,198
30,070
–
–
–
Share
purchased
10,500
–
–
Shares sold
Held at
30 June 2020
–
(154,660)
–
171,000
90,538
30,0702
Greg Ridder
Harry Debney
Michael Hirschowitz1
5.2 INCENTIVE PLANS
Kogan.com Ltd has adopted an Equity Incentive Plan (EIP) to assist in the motivation and retention of
management and selected team members.
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 team members. 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 team members will consist of the following components:
• fixed remuneration (inclusive of superannuation);
• short‑term cash‑based incentives; and
• equity based long‑term incentives.
The Group has established the 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.
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
Maximum opportunity
Create sustainable Shareholder value.
Reward individual for their contribution to the success of the Group.
Actively encourage team members to take more ownership over the EBITDA3.
Offers of cash incentive may be made to any team members of the 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 EBITDA3 of Kogan.com 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
team members in fixed proportions.
The maximum payable is 25% of the outperformance and 35% of the team
member’s annual salary.
Performance conditions
Outperformance of the actual EBITDA3.
Continuation of employment.
Why were the performance
condition chosen
To achieve successful and sustainable financial business outcomes as well as
any annual objectives that drive short‑term and long‑term business success
and sustainability.
Performance period
Timing of assessment
Form of payment
Board discretion
1 July 2019 to 30 June 2020.
August 2020, following the completion of the 30 June 2020 accounts.
Paid in cash.
Targets are reviewed annually and the Board has discretion to adapt
appropriately to take into account exceptional items.
1. Michael Hirschowitz was appointed as an Independent Non‑Executive Director on 29 March 2019 and resigned on 20 May 2020.
2. Ordinary Shares are stated as at resignation date, being 20 May 2020.
3. Non‑IFRS measure.
Annual Report 2020
65
NOTES TO THE FINANCIAl STATEMENTS CONTINUED
SECTION 5: EMPLOYEE REWARD AND RECOGNITION (continued)
5.2 INCENTIVE PLANS (continued)
long‑term incentives – Equity Incentive Plan
The following table outlines the significant aspects of the current LTI.
Consideration
Eligibility
Nil.
Offers of Incentive Securities may be made to any employee of the 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.
Amount payable & Entitlement 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 Group at time of vesting and not be in
their notice period.
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
a. Equity‑settled transactions
The charge related to equity‑settled transactions with team members 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 team members, whereby team members
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 is
recognised in the Consolidated 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. Individuals must be employed by
the Group at the time of vesting, and not in their notice period, to be entitled to the equity incentives.
66
kogan.com
b. Cash‑settled transactions
The amount payable to team members in respect of cash‑settled share‑based payments is recognised as
an expense, with a corresponding increase in liabilities, over the period which the team members 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.
c. Expense recognised in profit or loss
During the period the Group recognised a share‑based payment expense of $1.0 million (2019: $1.2 million)
which relates to Performance Rights granted during the year or in previous years.
The Group has recognised an expense in relation to cash based short‑term incentives in 2020 of $0.9 million
(2019: nil).
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
29 July
2016
495,140
$583,727
$1.49
LONG‑TERM INCENTIVE PLANS
29 September
2016
20 December
2016
20 December
2016
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 Jun 2017
30 Jun 2017
31 Dec 2019
31 Dec 2017
30 Jun 2018
30 Jun 2018
31 Dec 2020
31 Dec 2018
30 Jun 2019
30 Jun 2019
30 Jun 2020
30 Jun 2020
30 Jun 2021
30 Jun 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 Jun 2018
30 Jun 2018
30 Jun 2018
30 Jun 2020
30 Jun 2019
30 Jun 2019
30 Jun 2019
30 Jun 2021
30 Jun 2020
30 Jun 2020
30 Jun 2020
30 Jun 2021
30 Jun 2021
30 Jun 2022
Dividend yield
6.3%
6.3%
6.3%
6.3%
Annual Report 2020
67
NOTES TO THE FINANCIAl STATEMENTS CONTINUED
SECTION 5: EMPLOYEE REWARD AND RECOGNITION (continued)
5.2 INCENTIVE PLANS (continued)
Incentive Plans inputs (continued)
long‑term incentives – Equity (continued)
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
31 Dec 2019
30 Jun 2018
30 Jun 2019
31 Dec 2018
30 Jun 2019
31 Dec 2019
30 Jun 2020
31 Dec 2020
30 Jun 2020
31 Dec 2020
30 Jun 2021
31 Dec 2021
30 Jun 2021
31 Dec 2021
30 Jun 2022
30 Jun 2022
31 Dec 2022
Dividend yield
2.1%
2.1%
1.5%
1.9%
Grant Dates
Number
Fair value at grant date
Share price at grant date
Rights life
Vesting dates
LONG‑TERM INCENTIVE PLANS
25 September
2018
25 September
2018
27 February
2019
27 February
2019
4,259
$24,489
$5.83
1 year
3,388
$19,427
$5.83
10,491
$42,908
$4.09
15,152
$23,837
$4.09
1 to 2 years
1 to 3 years
1 to 2 years
31 Dec 2019
30 Jun 2019
31 Dec 2019
30 Jun 2020
30 Jun 2020
31 Dec 2020
30 Jun 2021
31 Dec 2021
Dividend yield
2.5%
2.5%
2.0%
2.0%
Grant Dates
Number
Fair value at grant date
Share price at grant date
Rights life
Vesting dates
20 August
2019
30,711
$160,000
$5.21
LONG‑TERM INCENTIVE PLANS
20 August
2019
18 February
2020
18 February
2020
36,548
$190,420
$5.21
9,766
$50,000
$5.12
1 year
3,906
$20,000
$5.12
1 to 2 years
1 to 4 years
1 to 4 years
31 Dec 2019
30 Jun 2020
31 Dec 2020
30 Jun 2022
31 Dec 2020
30 Jun 2021
31 Dec2021
30 Jun 2022
31 Dec 2022
30 Jun 2023
30 Jun 2023
Dividend yield
1.3%
1.3%
1.5%
1.5%
68
kogan.com
reconciliation of outstanding Performance rights
The following table details the total movement in Performance Rights issued by the Group during the year:
LONG‑TERM
INCENTIVE PLANS
Performance Rights
No.
2020
No.
2019
2,342,370
2,716,885
80,931
33,290
(887,037)
(253,894)
(22,126)
(153,911)
–
–
1,514,138
2,342,370
343,440
229,360
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
SECTION 6: OTHER
6.1 SUBSEQUENT EVENTS
Dividends
The Directors have declared a final Dividend of 13.5 cents per Ordinary Share, fully franked. The record date
of the Dividend is 24 August 2020 and the final Dividend will be paid on 19 October 2020. The final Dividend
was not determined until after the Balance Sheet date and accordingly no provision has been recognised as
at 30 June 2020.
The Dividend Reinvestment Plan will apply to the final Dividend at a 2.5% discount to the 5‑day volume
weighted average price of shares sold on the ASX from the trading day prior to the Record date of the
final Dividend.
legal proceedings
On 17 July 2020 the Federal Court announced its decision to upheld allegations made by the ACCC. Based on all
current information available at the time of this report, management have estimated penalties and costs relating
to this matter of $0.7 million, and have provided for these at 30 June 2020.
6.2 REMUNERATION OF AUDITORS
Remuneration of the auditor for:
– auditing or reviewing the financial statements
– other advisory services (including R&D tax)
CONSOLIDATED GROUP
2020
$
2019
$
246,958
6,700
253,658
236,988
96,027
333,015
Annual Report 2020
69
NOTES TO THE FINANCIAl STATEMENTS CONTINUED
6.3 CONTINGENT LIABILITIES
As at 30 June 2020, the Group had bank guarantees amounting to $1.2 million with Westpac Banking
Corporation in relation to its ordinary course of business.
6.4 COMPANY INFORMATION
The registered office of the Company is:
Kogan.com Ltd
Level 7
330 Collins Street
Melbourne VIC 3000
The principal place of business is:
Kogan.com Ltd
139 Gladstone Street
South Melbourne VIC 3205
70
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 33 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 2020 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 2020.
Signed in accordance with a resolution of the Directors:
David Shafer
Executive Director
Melbourne, 22 September 2020
Annual Report 2020
71
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF KOGAN.COM LTD AND CONTROLLED ENTITIES
Independent Auditor’s Report
To the shareholder 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).
the
accompanying
In our opinion,
Financial Report of the Company is in
accordance with the Corporations Act
2001, including:
• giving a true and fair view of the
financial position as at
Group's
30 June 2020 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 2020;
• Consolidated
income statement and consolidated
income,
comprehensive
statement
Consolidated statement of changes
in equity, and
Consolidated statement of cash flows for the year then
ended;
other
of
• 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 (including Independence Standards) (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.
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.
72
kogan.com
Key Audit Matters
The Key Audit Matters we identified
are:
• Recognition of revenue; and
• Valuation of inventory.
Recognition of revenue (AUD $497.9m)
Refer to Note 1.1 to the Financial Report
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.
The key audit matter
How the matter was addressed in our audit
is a key audit
Revenue recognition
matter due to the significant audit effort
to test the:
• high volume of sale of goods
transactions recorded as revenue
and the significant value of revenue
recognised;
• Group’s
related
judgement
to
determining the timing of revenue
recognition driven by the conditions,
associated with each of the types of
services offered by the Group, such
as Kogan Marketplace, Kogan
Mobile and Kogan First; and
•
judgement to assess the Group’s
recognition basis as a principal on a
gross basis or an agent on a net of
costs paid basis using the relevant
terms of the underlying contract
against the requirements of the
accounting standard.
Our procedures included:
• evaluating the appropriateness of the Group’s revenue
recognition policies against the requirements of the
accounting standard;
•
testing key controls related to the sale of goods and
rendering of services, including approval of revenue rates
and matching of invoices to delivery documents;
•
for a sample of sale of goods and services income, we
verified the transactions to the respective invoices and
cash received from the customer in the bank statement;
• developing an expectation of the current year revenue by
using cash receipts from customers and comparing with
the Group’s recorded revenue;
•
for a sample of sale of goods that were sold and service
income that was earned before and after year end, we
performed procedures to ascertain that revenue was
recorded in the correct financial year;
• analysing
the
revenue
accurate presentation
presentation, in the financial statements; and
recognition
in
for
terms of gross or net
requirements
• analysing the relevant terms for a sample of the
underlying contracts across each revenue stream to the
criteria in the accounting standards, those in the Group’s
identified as
policy, and against what
performance obligations.
the Group
Annual Report 2020
73
INDEPENDENT AuDITOr’S rEPOrT CONTINUED
Valuation of inventory (AUD $112.9m)
Refer to Note 2.1.1 to the Financial Report
The key audit matter
How the matter was addressed in our audit
Our procedures included:
• analysing the level of inventory by ageing categories for
each product type,
in ageing
categories compared to prior periods, in order to highlight
products or categories at higher risk of impairment;
including movements
• obtaining an understanding of how the inventory system
computes 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;
• comparing 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
• assessing 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 accounting standards.
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
judgement or
to
estimation including:
subject
• consideration
at
items
of market
and
consumer factors that could impact
the Group’s ability to sell certain
inventory
profitable
margins, such as seasonality of
demand,
consumer
changing
preferences, and obsolescence due
to technological or product change
(particularly relevant to electronic
products); and
• establishing a 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 level of
provisioning.
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 Director is responsible for the
Other Information.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not and
will 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.
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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.
Responsibilities of the Director for the Financial Report
The Director is 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; and
• assessing the Group and Company'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 and Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
• to obtain reasonable assurance about whether the Financial Report as a whole is free from material
misstatement, whether due to fraud or error; and
• to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of 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/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our
Auditor’s Report.
Annual Report 2020
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 2020, 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
2020.
Our responsibility is to express an opinion on the Remuneration
Report, based on our audit conducted
in accordance
with Australian Auditing Standards.
KPM_INI_01
R
_01
KPMG
_NAM
Simon Dubois
_01
Partner
Melbourne
22 September 2020
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SHAREHOLDER INFORMATION
The Shareholder information set out below was applicable as at 9 September 2020.
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
105,621,879 fully paid Ordinary Shares are held by 21,235 individual shareholders.
All issued Ordinary Shares carry one vote per share and the rights to Dividends.
Performance Rights
1,211,454 performance rights are held by 76 individuals.
All Performance Rights are unvested and do not carry a right to vote.
B. DISTRIBUTION OF EQUITY SECURITY
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
16,405
3,935
535
333
27
21,235
289
30
11
9
24
2
76
–
Annual Report 2020
77
SHArEHOlDEr INFOrMATION CONTINUED
C. EQUITY SECURITY HOLDERS
Twenty largest quoted equity security holders
Name
Units
% units
Kogan Management Pty Ltd
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