LOVISA HOLDINGS LIMITED
ANNUAL REPORT
2017
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ACN 602 304 503
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only
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Lovisa Holdings Limited Annual Report - 2 July 2017
For personal use only CONTENTS
Overview
Chairman’s and MD’s Report
Directors Report
Financial Statements
Consolidated statement of financial position
Consolidated statement of profit or loss and
other comprehensive income
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to Financial Statements
Setting the scene
Business performance
Asset platform
Risk and capital management
Other information
Signed Reports
Directors’ declaration
Independent auditor’s report
Lead auditor’s independence declaration
ASX information
Shareholder information
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Lovisa Holdings Limited Annual Report - 2 July 2017
For personal use only
OUR BRAND
MOVING GLOBALLY
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• 288 Stores in 13 Countries
• First Spanish Store Opened in June 2017
• 120 new products arriving weekly
• New Franchise territories in Vietnam and Bahrain
• Bank Facilities refinanced to 2020
Lovisa Holdings Limited Annual Report - 2 July 2017
For personal use only HIGHLIGHTS
EBIT up 68%
$40.7m
$29.0m
NPAT up
75%
Revenue up 16.5%
$178.7m
Like For Like sales
+10.3%
Final Dividend
7.6 CPS
Fully Franked
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Total Stores
288
Net increase of 38 stores
Lovisa Holdings Limited Annual Report - 2 July 2017
For personal use only Overview
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WHITE CITY
LONDON
Lovisa Holdings Limited Annual Report - 2 July 2017
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Overview
GLOBAL
REACH
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KEY
Owned Stores
Franchise
STORE NUMBERS
Owned
FY16 FY17
Franchise
FY16 FY17
Aus/NZ
Australia
144
145
Asia
Middle East
Total Franchise
-
16
16
4
19
23
TOTAL STORES
250 288
New Zealand
18
Asia
Singapore
Malaysia
Africa
South Africa
19
14
36
Europe
United Kingdom 3
Spain
-
18
21
19
50
11
1
Total Owned
234
265
Lovisa Holdings Limited Annual Report - 2 July 2017
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Overview
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ABOUT
LOVISA
LOVISA WAS BORN
FROM A DESIRE TO
FILL THE VOID FOR
FASHION FORWARD
AND DIRECTIONAL
JEWELLERY THAT
IS BRILLIANTLY
AFFORDABLE.
Now trading from 288 stores
in 13 Countries. To stay ahead
of trend, Lovisa utilises daily
inventory monitoring software
and airfreight to move product
to store locations within 48
hours from our centrally located
warehouses in Melbourne and
Hong Kong.
Lovisa Holdings Limited Annual Report - 2 July 2017
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Lovisa Holdings Limited Annual Report - 2 July 2017
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CHAIRMAN’S & MANAGING DIRECTOR’S
REPORT
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Global roll-out continued in 2017 with strong earnings growth, a strengthened
balance sheet and disciplined control of CODB.
OVERVIEW
FINANCIALS
It is very pleasing to report that Lovisa Holdings Limited
(Lovisa) has delivered a record result for the year ended
2nd July 2017 with sales, profits, cash flow and dividends
all significantly up on the prior year. This result was driven
by a combination of sales growth, margin improvement
and lower cost of doing business underpinned by
emphasis on ensuring our retail offer resonates with our
customers.
The company continued its international expansion with
a net increase of 38 new stores which included three new
markets. Following strong operating cash flows Lovisa
refinanced and repaid its debt facilities ensuring the
company is well positioned to accelerate its international
growth plans.
Revenue for the year was $178.7m being a 16.5%
increase on the prior year. Sales momentum was strong
throughout the year with same store growth of 10.3%
driven predominantly by on-trend ranges and price
increases introduced during the second half of 2016 to
offset foreign currency pressures.
Trading margins increased to 78.8% from 74% in the
prior year following a reduction in sales and markdown
activity and more disciplined inventory management. This
increase in trading margins was delivered despite AUD
currency headwinds on the prior year and we estimate
that on a constant currency basis trading margins would
have lifted a further 500 bps.
The Company’s Cost of Doing Business (CODB)
decreased during the year despite the continued
investment in both management bench strength and the
opening of a net 38 new stores. While Lovisa continues to
invest in its international operating structure ahead of the
curve, importantly the key retail metrics of labour, rent and
distribution all experienced reductions in percentage to
sales ratios during the year.
Lovisa Holdings Limited Annual Report - 2 July 2017
For personal use only Chairman’s Report
Earnings before interest and tax (EBIT) was $40.7m
being a 68% increase on EBIT from the prior year.
Financing costs decreased during the year due to less
reliance on debt facilities resulting in Net profit after tax
increasing 75.5% to $29.0m with EPS lifting to 27.7 cents.
The Company’s cash flow was strong with operating cash
conversion at 109% resulting in cashflow from operating
activities lifting $17.9m to $50.4m. Capital expenditure
predominantly into new stores and existing store
refurbishments was $8.8m. Free cash flow after debt
repayments and dividends was $6.2m.
CAPITAL MANAGEMENT
The balance sheet was strengthened significantly
during the year with the company repaying all its debt
and ending the financial year with net cash reserves
of $11.0m. During the year Lovisa refinanced its bank
facilities for a further three years and took the opportunity
to increase its available debt facilities to $30m and
adjust its covenant package to be more in line with the
company’s international rollout ambitions. In addition, as
part of the refinancing our bank has agreed to additional
acquisition finance subject to due diligence of $15m if an
acquisition opportunity was to present itself.
DIVIDENDS
Following the strong earnings performance the Directors
declared a final dividend of 7.6 cents per share fully
franked for the year ended 2nd July 2017. The final
dividend will be paid on 26th October 2017.
OUTLOOK
It has been a relatively positive start to the year and we
expect 2018 to be a year of further profitable growth for
Lovisa as we continue to open new stores in our current
markets and continue due diligence on other markets.
We will update shareholders upon success of any pilot
programs we are undertaking in new territories. We are
targeting to open 20 to 30 stores for the 2018 financial
year.
The key success drivers of Lovisa derive from our
ability to offer on-trend and well priced fast fashion
jewellery to our customers supported by a talented and
enthusiastic team. Your Board and Management team
remain committed to maintaining and enhancing these
capabilities. We look forward to another exciting and
successful year.
INTERNATIONAL STORE EXPANSION
During the year the company increased its store
network to 288 stores. The company’s international
expansion continued with store openings within its
existing international markets of South Africa, Singapore,
Malaysia, New Zealand and the United Kingdom. We
continue to be diligent in ensuring store location and
rent economics meet our internal hurdles before signing
long term leases. We are engaged with Landlords across
Asia and Europe ensuring Landlords are familiar with the
Lovisa Brand and the company’s financial strength.
In May, Lovisa South Africa agreed to purchase 17 stores
from Klines South Africa. This transaction has accelerated
the rate of growth in South Africa and takes to maturity
the anticipated roll-out program in this territory (subject to
some minor store rationalisation) and allows management
to focus on other international opportunities.
In June Lovisa opened its first company owned store in
Spain as part of a pilot program. We continue to perform
due diligence on other markets.
During the year Lovisa opened two new Franchise
territories in Bahrain and Vietnam.
Michael Kay
Non-Executive Chairman
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Shane Fallscheer
Managing Director
Lovisa Holdings Limited Annual Report - 2 July 2017
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THE
DIRECTORS
REPORT
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Lovisa Holdings Limited Annual Report - 2 July 2017
For personal use only Directors’ Report
THE
DIRECTORS
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Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only Directors’ Report
Details of the qualifications and experience of each Director in accordance with
the requirements of the Corporation Act have been included below.
Michael Kay
Shane Fallscheer
Tracey Blundy
Paul Cave
James King
Michael Kay
Independent Non-Executive Director & Chairman
Appointed 13 April 2016
Chairman of the Board
Chairman of the Remuneration & Nomination Committee
Member of the Audit, Business Risk & Compliance Committee.
A qualified lawyer, Michael Kay brings a wealth of commercial
experience to Lovisa. Michael was CEO and Managing Director of
listed salary packaging business McMillan Shakespeare, a position
he held for six years. Previously, Michael was CEO of national
insurer AAMI after serving in a variety of senior roles with that firm.
Prior to joining AAMI, he spent 12 years in private legal practice.
Michael is Chairman of ASX listed litigation funder, IMF Bentham
Ltd (ASX : IMF) and is Chairman of Apply Direct Ltd (ASX : AD1).
Michael has also been a non-executive Director of Quintis Limited
(ASX : QIN) since February 2015 and is a non-executive Director of
Royal Automotive Club Insurance (WA). Michael holds a Bachelor
of Laws from The University of Sydney.
Shane Fallscheer
Managing Director
Appointed 6 November 2014
Paul Cave
Independent Non-Executive Director
Appointed 6 November 2014
Member of the Audit, Business Risk & Compliance
Committee
Member of the Remuneration & Nomination
Committee
Paul is a Non-Executive Director of Domino’s
Pizza Enterprises Ltd since 2005 and the
Chairman and Founder of BridgeClimb. Paul
was made a Member of the Order of Australia in
2010 for his services to the tourism industry. Paul
has previously worked in marketing and general
management roles for B&D Roll A-Door and
also founded the Amber Group in 1974, which
he sold in 1996. Paul was a founding Director
of Chris O’Brien Lifehouse at the Royal Prince
Alfred Hospital, and founding Director of InterRisk
Australia Pty Ltd. He is a patron of the Hunter
Melanoma Foundation, and holds a Bachelor
of Commerce from the University of New South
Wales.
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Shane Fallscheer is the Managing Director and founder of Lovisa.
He has 30 years of experience in retailing operations across
Australia, UK and US markets. He was previously in senior
management roles with retailers including: General Manager,
Sanity Australia; Chief Executive Officer, Sanity UK; Chief
Executive Officer, Diva; and Global Retail Chairman and Chief
Operating Officer, Rip Curl USA.
James King
Independent Non-Executive Director
Appointed 17 May 2016
Chairman of the Audit, Business Risk &
Compliance Commitee
Member of the Remuneration & Nomination
Committee
Tracey Blundy
Non-Executive Director
Appointed 6 November 2014
Member of the Audit, Business Risk & Compliance Committee
Member of the Remuneration & Nomination Committee.
Tracey joined BB Retail Capital in 1981 and is the nominated
representative of BB Retail Capital on the Board of Lovisa. Over
the past 36 years, she has held a number of senior executive
positions across BB Retail Capital’s brands, including Chief
Executive Officer of Sanity Entertainment and Bras n Things. She
is a Board-level advisor across the BB Retail Capital portfolio
bringing in-depth knowledge and expertise on retail operations
and roll-out strategy.
Tracey was a founding shareholder of Lovisa in 2010, and has
since been a senior advisor to the Company’s management team.
Tracey is currently a Director of BB Retail Capital Pty Limited, Bras
N Things Pty Limited and BB Retail Property Pty Limited. Tracey
was previously a Director of Aventus Capital Limited.
James has over 30 years’ experience as a
Director and an Executive in major multinational
corporations in Australia and internationally. He
was previously with Foster’s Group Limited as
Managing Director Carlton & United Breweries
and Managing Director Foster’s Asia. Prior to
joining Foster’s, he spent six years in Hong Kong
as President of Kraft Foods (Asia Pacific). He is
currently a non-executive Director of Navitas Ltd
and a member of Global Coaching Partnership.
Previously James was a Director of ASX listed JB
Hi-Fi Limited, Trust Company Ltd, Pacific Brands
and Tattersalls, a member of the Council of Xavier
College and Chairman of Juvenile Diabetes
Research Foundation (Victoria). James holds a
Bachelor of Commerce from University of New
South Wales and is a Fellow of the Australian
Institute of Company Directors.
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only Directors’ Report
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1. DIRECTORS
The Directors of Lovisa Holdings Limited (the ‘Company’) present their report together with the Consolidated Financial
Statements of the Company and its controlled entities (the ‘Group’ or ‘Consolidated Entity’) for the financial year ended 2
July 2017.
Board
Audit and Risk
Remuneration & Nomination
Number
attended
Number
held
Number
attended
Number
held
Number attended
Number held
11
11
10
11
11
11
11
11
11
11
4
4
3
-
4
4
4
4
-
4
4
4
4
-
4
4
4
4
-
4
Director
M Kay
T Blundy
P Cave
S Fallscheer
J King
1.1 Company Secretary
Graeme Fallet was appointed Company Secretary on 14 April 2016. He is also the company’s Chief Financial Officer. Mr
Fallet is a Chartered Accountant and a Member of the Institute of Company Directors.
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only
Directors’ Report
1.2 Directors Interests in Shares
The relevant interest of each Director in the Company at
the date of the report is as follows:
Director
M Kay (1)
P Cave (2)
T Blundy (3)
S Fallscheer (4)
J King (5)
4. REVIEW OF OPERATIONS
The following summary of operating results and operating
metrics reflects the Group’s performance for the year
ended 2 July 2017:
Consolidated
Gross Margin %
EBITDA ($000)
NPAT ($000)
2017
79%
2016
74%
46,243
30,256
29,046
16,553
Basic Earnings per share
27.66c
15.76c
Ordinary
Shares in the
Company
250,000
1,000,000
1,153,005
4,490,000
34,000
4.1 Financial Performance
(1) Shares held by Doveton Kay Investments Pty
Ltd ATF Doveton Kay Investments Trust and M&S
Kay Superannuation Fund Pty Ltd ATF M&S Kay
Superannuation Fund
(2) Shares held by P.B.C. Investments Pty Limited
(3) Shares held by Coloskye Pty Ltd
(4) Shares held by Centerville Pty Ltd
(5) Shares held by King Family Super Fund
For the year ended 2 July 2017 the Group reported a
net profit after tax of $29.0 million following continued
strong same store sales growth of 10.3% and the addition
of a further net 38 stores across the globe assisted by
an increase in gross margin on the back of retail price
increases first implemented in the first half of 2016.
This result reflects an increase of 75.5% on the Group’s
2016 net profit.
2. PRINCIPAL ACTIVITIES
Consolidated $’000
FY2017
FY2016
Change
The principal activity of the Group during the financial year
was the retail sale of fashion jewellery and accessories.
Sales
178,746
153,461
16.5%
The business has 288 retail stores in operation at 2 July
2017 including 23 franchise stores.
There was no significant change in the nature of the
activities of the Group during the period.
3. DIVIDENDS
Dividends paid to members during the financial year were
as follows:
2017
2016
$000's
$000's
2,100
4,273
10,500
7,004
Final ordinary dividend for
the year ended 30 June 2016
of 2.00 cents (2015: 4.07
cents) per fully paid share fully
franked paid on 27 October
2016
Interim ordinary dividend for
the year ended 30 June 2017
of 10.00 cents (2016: 6.67
cents) per fully paid share fully
franked (2016: 75% franked)
paid on 28 April 2017
Total dividends paid
12,600
11,277
In addition to the above dividends, since the end of
the financial year the Directors have recommended the
payment of a final dividend of $7,980,000 (7.60 cents per
fully paid share) expected to be paid on 26 October 2017.
The dividend will be fully franked.
Gross profit
140,822
113,562
24.0%
Operating expenses
94,579
83,306
13.5%
46,243
30,256
52.8%
40,704
24,222
68.0%
29,046
16,553
75.5%
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EBITDA
EBIT
Net profit after tax
(NPAT)
4.1.1 Sales
STRONG REVENUE GROWTH (A$M)
.
m
7
0
7
$
.
m
7
5
0
1
$
.
m
3
4
3
1
$
.
m
5
3
5
1
$
.
m
7
8
7
1
$
FY13
FY14
FY15
FY16
FY17
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only
Directors’ Report
4.1.1 Sales (continued)
4.1.3 Cost Of Doing Business
NUMBER OF STORES IN OFFSHORE
MARKETS GROWING
DECREASE IN COST OF DOING BUSINESS
5
7
1
0
1
2
9
3
2
0
5
2
8
8
2
FY17
FY13
FY14
FY15
FY16
FY17
AUSTRALIA
OFFSHORE
%
4
6
%
1
6
%
4
5
%
4
5
%
3
5
FY13
FY14
FY15
FY16
FY17
The Group’s reported revenue was $178.7m, being a
16.5% increase on the prior year with comparable sales
growth of 10.3% across the Group. Total Company sales
were $177.6m being 16.3% up on last year. Franchise
income increased by 32% to $1.1m following the addition
of two new Franchise territories in Vietnam and Bahrain.
The offshore expansion continued during the year with the
addition of a net 38 stores across the Group including a
trial Company store opened in Spain in June.
The Group’s Cost of Doing Business (CODB) decreased
during the year despite the continued investment in both
management bench strength and the net opening of
38 new stores. While the Group continues to invest in
its international operating structure ahead of the curve,
importantly the key retail metrics of labour, rent and
distribution all experienced reductions in percentage to
sales ratios during the year.
4.1.4 Earnings
Earnings before interest and tax (EBIT) was $40.7m being a
68% increase on EBIT from the prior year. Financing costs
decreased during the year following strong cash flow and
less reliance on debt facilities.
Net profit after tax increased 75.5% to $29.0m with EPS
lifting to 27.7 cents.
4.1.5 Cash Flow
The Group’s net cash flow from operating activities
increased $16.3m during the year to $39.6m. The Group’s
cash flow before tax and financing costs was $50.4m.
Capital expenditure of $8.8m relates predominately to new
store openings and refurbishments of current stores upon
lease renewal. During the year the Group repaid its cash
advance facility and has net cash of $11m on hand at year
end.
4.1.2 Gross Profit Margin
LIFT IN GROSS MARGINS
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%
8
FY13
7
%
6
FY14
7
%
7
FY15
7
%
4
FY16
7
%
FY17
9
7
FY13
FY14
FY15
FY16
FY17
The Group’s Gross Profit increased by 24% to $140.8m.
Gross Margin increased to 78.8% from 74.0% in the
prior year following price increases introduced in 2016
along with reductions in clearance activity and average
unit cost. In addition the Group experienced strong
performances in a number of fashion trends throughout
the year.
This Margin increase was achieved on the back of
continued currency headwinds associated with the
Australian Dollar. We estimate that on a 2016 constant
currency basis on stock purchases Gross Margin would
have lifted by a further 500bps to 79.3%.
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only
4.2 Financial Position
Consolidated
Trade receivables and prepayments
Inventories
Trade payables and provisions
Net working capital
Property, plant & equipment
Intangible assets and goodwill
Total funds employed
Net debt
Net derivative liability
Net deferred tax balances
Net assets/equity
Net working capital
Directors’ Report
Actual
FY2017
$’000
3,615
13,127
(19,996)
(3,254)
15,658
2,276
14,680
11,039
(805)
3,275
28,189
Actual
FY2016
$’000
2,293
15,034
(14,995)
2,332
13,123
2,073
17,528
(7,271)
(909)
1,823
11,171
Change
FY16/FY17
%
57.7%
(12.7%)
33.4%
(239.5%)
19.3%
9.8%
(16.2%)
(251.8%)
(11.4%)
79.6%
152.3%
The Group’s net working capital strengthened during the year predominately from improved inventory management.
Inventory levels decreased from $15.0m to $13.1m during the year despite an increase of 31 company owned stores
and 7 Franchise stores.
Property, plant and equipment
Capital expenditure during the year reflects fit out costs associated with new stores and refurbishment of existing
stores. Fit out costs are depreciated over the term of the lease.
Debt facilities
The Group refinanced its debt facilities during the year in line with its international growth expectations. The Group
increased its debt facilities to $25m along with a $5m contingent liability facility predominately for issuance of Bank
Guarantees and Letters of Credit to international landlords. Following the strong cash flow during the year the Group
repaid its cash advance facility with net cash reserves of $11m at year end.
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Directors’ Report
5. BUSINESS STRATEGIES
Lovisa has achieved rapid growth since it was founded, with revenue growing from $25.5 million in FY2011 to $178.7
million in FY2017. The Group continues to focus on its key drivers to deliver growth in sales and profit growth.
Growth pillar
International
expansion
Strategy
Risks
Achievements
Business
Strategy
Section
5.2
• Continue to leverage current
international territories
• Leverage the Company’s
capital in large international
markets
• Competition (6.2)
• Retail environment
and general
economic conditions
(6.3)
• Roll out UK territory and
• Failure to
Streamline
global supply
chain
5.3
investigate other Northern
Hemisphere markets
• Consider franchise partners
for selected territories
• Expand into new international
markets, targeting one new
trial territory per annum
• Streamline and optimise
supply base in Asia
• Optimise air and sea freight
whilst maintaining speed to
market operating model
• Consider Northern
Hemisphere distribution
centre
successfully
implement growth
strategies (6.4)
• Exchange rates (6.5)
• Product sourcing
or supply chain
disruptions
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Enhance
existing store
performance
5.4
• Optimise and improve existing
store network
• Continue to target high traffic
shopping precincts
• Judicious pricing
Brand
proliferation
5.5
• Continue to leverage online
social media to connect with
customers and increase brand
loyalty
Lead and
pre-empt
trends
5.1
• Stay on trend with shifts
in jewellery and accessory
market
• Continue to provide a high
quality and diverse product
offering
5.1 Lead and Pre-Empt Trends
• Competition (6.2)
• Retail environment
and general
economic conditions
(6.3)
• Prevailing fashions
and consumer
preferences may
change (6.6)
• Prevailing fashions
and consumer
preferences may
change (6.6)
• Privacy breaches
• Prevailing fashions
and consumer
preferences may
change (6.6)
• Net 37 stores
opened outside of
Australia during
the year including
8 stores in the
United Kingdom,
a trial new store
in Spain with 8
franchise stores
opened during the
year
• Over 36% of
product was
moved through
the HK warehouse
(FY16: 34%)
• Re-engineering of
supply chain to
accommodate sea
freight
• FY17 LFL sales
growth of 10.3%
• We continue to
close stores in
sub-optimal
locations
•
Increased
social media
engagement
• Continued strong
LFL growth being
testament to an
ability to identify
trends
Product innovation is a core component of Lovisa’s competitive advantage. Its customers expect a broad range of
fashionable products that are in line with the latest global fashion trends. In order to meet this expectation, Lovisa
employs a product team of more than 20 people who are responsible for Lovisa’s forward range planning, designs,
product development, production, visual merchandising and merchandise planning, ensuring Lovisa is continually
meeting market demand. Whilst product teams are based in Melbourne and London, its team members travel the world
to identify global trends. In addition, its product teams meet with suppliers in China, India, Thailand and other parts of
Asia frequently.
As Lovisa is frequently developing new products in response to evolving fashion trends, it does not register patents on
its product designs. This is consistent with practices in the fast fashion industry.
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only Directors’ Report
5.2 New Store Rollouts & International Expansion
One of the key attributes of the Group’s success has been the ability to identify and secure quality retail store sites in
locations with high pedestrian traffic. This typically involves securing leases in AA, A or B grade rating shopping centres
and malls. Lovisa has refined its global store model based on what it understands to be the optimal store size, location
and format. The combination of a 50 square metre floor space and a homogenised layout allows Lovisa to have strict
criteria when identifying and securing potential store sites in new regions, facilitating the roll-out of stores quickly, at
low cost. On average, it takes approximately 14 days to fit out a new Lovisa store.
The key driver of future growth for Lovisa is the continued international store roll-out. Lovisa has proven it is capable
of successfully operating profitably in international territories, having established its initial portfolio of company owned
stores in Australia, New Zealand, Singapore, Malaysia, South Africa and the United Kingdom and supporting franchised
stores in Kuwait, the United Arab Emirates, Oman, Bahrain and Saudi Arabia. During the year, Lovisa also opened its
first store in Vietnam and commenced a pilot program in Spain. Lovisa will continue to explore other markets through pilot
programs and will advise shareholders upon successful completion of those pilot programs.
The Group plans to remain nimble and opportunistic in expanding and moving into new markets, such that if
opportunities arise, the Group may accelerate its plans to enter a new market or continue to grow an existing market.
Likewise it will defer its entry into a new market if it considers that appropriate opportunities are not presented at the
relevant time.
Lovisa’s objective is to fully maximise its footprint in its current territories within the medium term (1-2 years) and target
at least one new territory a year.
The history of Lovisa stores is as follows:
FY2013
FY2014
FY2015
FY2016
FY2017
Australia
New Zealand
Singapore
South Africa
Malaysia
United Kingdom
Spain
Middle East*
Vietnam*
Total
* Franchise Stores
160
6
6
-
3
-
-
-
-
166
14
10
11
7
-
-
2
-
146
144
145
14
15
36
15
-
-
13
-
18
19
36
14
3
-
16
-
18
21
50
19
11
1
19
4
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175
210
239
250
288
5.3 Streamline Global Supply Chain
Lovisa’s third party suppliers are currently located in mainland China, India and Thailand. Stock is inspected by Lovisa’s
quality control team in China. Once manufactured, stock is transported to Lovisa’s leased warehouse in Melbourne,
Australia (for stock to be sold in Australian and New Zealand stores) or its third party operated warehouse in Hong
Kong (for stock to be sold in all other countries). There is sufficient capacity in Lovisa’s third party operated Hong Kong
warehouse to handle further international growth.
Lovisa constantly reviews its supply chain process for potential efficiency gains and cost reductions in order to
generate higher gross margins. This includes improvements in its global warehouse and logistics program and the
consolidation and rationalisation of its supplier base.
5.4 Enhance Existing Store Performance
Lovisa’s store roll-out in Australia is largely complete with 145 stores in operation as at 2 July 2017. Subject to the
availability of attractive sites, Lovisa will still seek to open a small number of new stores per year in Australia for the
foreseeable future. This growth is expected to be supplemented by store optimisation and improvement initiatives.
Lovisa believes it will be able to enhance profitability through improvements to its store portfolio and operations. This
includes the planned closure of some company owned stores acquired from Klines South Africa in June 2017.
5.5 Brand Proliferation
Lovisa supports the growth of its brand through social media and promotional activity that matches our customer base,
and our international footprint. Efforts are focussed on social media, rather than traditional media, as we believe it
connects us directly to our customers in a way that suits their lifestyle.
The brand is also developed through the customer in-store experience – on trend product, cleanly merchandised,
focussed imagery, and the store “look and feel”. Stores are located in high foot traffic areas, in high performing
centres.
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only
Directors’ Report
6. MATERIAL BUSINESS RISKS
6.1 Business Risks
The business risks faced by the Group and how
it manages these risks are set out below. Further
information surrounding how the Group monitors,
assesses, manages and responds to risks identified is
included within Principle 7 of the Company’s Corporate
Governance statement.
6.2 Competition
The fast fashion jewellery sector in which Lovisa operates
is highly competitive. While the costs and time that would
be required to replicate Lovisa’s business model, design
team, IT systems, store network, warehouse facilities
and level of brand recognition would be substantial, the
industry as a whole has relatively low barriers to entry.
The industry is also subject to ever changing customer
preferences.
Lovisa’s current competitors include:
• specialty retailers selling predominately fashion
jewellery;
• department stores;
•
fashion apparel retailers with a fashion jewellery
section; and
• smaller retailers (i.e. less than five stores) that
specialise in the affordable jewellery segment.
Competition is based on a variety of factors including
merchandise selection, price, advertising, new stores,
store location, store appearance, product presentation
and customer service.
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Lovisa’s competitive position may deteriorate as a result
of factors including actions by existing competitors, the
entry of new competitors (such as international retailers
or online retailers) or a failure by Lovisa to successfully
respond to changes in the industry.
To mitigate this risk, Lovisa employs a product team
of more than 20 people to meet market demands as
described in section 5.1. Management believe it would
take a number of years for a new entrant to establish a
portfolio of leases comparable with Lovisa in premium
store locations due to substantial barrier to entry costs as
detailed above.
6.3 Retail Environment and General Economic
Conditions
As Lovisa’s products are typically viewed by consumers
to be ‘discretionary’ items rather than ‘necessities’,
Lovisa’s financial performance is sensitive to the current
state of, and future changes in, the retail environment
in the countries in which it operates. However, with a
low average retail spend per transaction, macro market
performance has minimal impact for Lovisa.
Lovisa’s main strategy to overcome any downturn in the
retail environment or economic conditions is to continue
to offer our customers quality, affordable and on trend
products.
6.4 Failure to Successfully Implement Growth
Strategies
Lovisa’s growth strategy is based on its ability to increase
earnings contributions from existing stores and continue
to open and operate new stores on a timely and profitable
basis. This includes the opening of new stores in both
Australia and overseas.
Lovisa’s store roll-out program is dependent on securing
stores in suitable locations on acceptable terms, and may
be impacted by factors including delays, cost overruns
and disputes with landlords.
The following risks apply to the roll out program:
• new stores opened by Lovisa may be unprofitable;
• Lovisa may be unable to source new stores in
preferred areas, and this could reduce Lovisa’s ability
to continue to expand its store footprint;
• new stores may reduce revenues of existing stores;
and
• establishment costs may be greater than budgeted for.
Factors mitigating these risks are that fit-out costs are low
with minimal standard deviation in set-up costs across
sites and territories through our small store format and
homogeneous store layout, minimising potential downside
for new stores. The Group assesses store performance
regularly and evaluates store proximity and likely impact
on other Lovisa stores as part of its roll-out planning.
When entering new markets, Lovisa assesses the region,
which involves building knowledge by leveraging a local
network of industry contacts, and aims to secure a
portfolio of stores in order to launch an operating footprint
upon entry. The Group plans to remain nimble and
opportunistic in expanding and moving into new markets,
such that if opportunities arise, the Group may accelerate
its plans to enter a new market or continue to grow an
existing market. Likewise it will defer its entry into a new
market if it considers that appropriate opportunities are
not presented at the relevant time. Regular investigation
and evaluation of new stores and territories is undertaken
by management to ensure that the Group’s store footprint
continues to expand.
6.5 Exchange Rates
The majority of inventory purchases that are imported
by Lovisa are priced in USD. Consequently, Lovisa is
exposed to movements in the exchange rate in the
markets it operates in. Adverse movements could have an
adverse impact on Lovisa’s gross profit margin.
The Group’s foreign exchange policy is aimed at
managing its foreign currency exposure in order to
protect profit margins by entering into forward exchange
contracts specifically against movements in the USD
rate against the AUD associated with its cost of goods.
The Group does not currently hedge its foreign currency
earnings. The Group monitors its working capital in its
foreign subsidiaries to ensure exposure to movements in
currency is limited.
6.6 Prevailing Fashions and Consumer Preferences
May Change
Lovisa’s revenues are entirely generated from the retailing
of jewellery, which is subject to changes in prevailing
fashions and consumer preferences. Failure by Lovisa
to predict or respond to such changes could adversely
impact the future financial performance of Lovisa. In
addition, any failure by Lovisa to correctly judge customer
preferences, or to convert market trends into appealing
product offerings on a timely basis, may result in lower
revenue and margins. In addition, any unexpected change
in prevailing fashions or customer preferences may lead
to Lovisa carrying increased obsolete inventory.
To mitigate this risk, Lovisa employs a product team
of more than 20 people to meet market demands as
described in section 5.1. As the Group responds to trends
as they occur, this drives store visits by customers and
significantly reduces the risk of obsolete stock.
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only Directors’ Report
7. EVENTS SUBSEQUENT TO
REPORTING DATE
Since the end of the financial year the Directors have
recommended the payment of a final dividend of
$7,980,000 (7.60 cents per fully paid share) expected to
be paid on 26 October 2017. The dividend will be fully
franked.
No other matters or circumstance has arisen since 2 July
2017 that has significantly affected, or may significantly
affect:
(a) the Group’s operations in future financial years, or
(b) the results of those operations in future financial years,
or
(c) the Group’s state of affairs in future financial years.
8. LIKELY DEVELOPMENTS
Information on likely developments is contained within the
Review of Operations section of this annual report.
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Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only Directors’ Report
9. REMUNERATION REPORT - AUDITED
A. Principles Used to Determine the Nature and Amount
of Remuneration
9.1 Remuneration Overview
The Board recognises that the performance of the Group
depends on the quality and motivation of its team members
employed by the Group across Australia and internationally.
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 Board has appointed the Remuneration and
Nomination Committee whose objective is to assist the
Board in relation to the Group remuneration strategy,
policies and actions. In performing this responsibility,
the Committee must give appropriate consideration to
the Group’s performance and objectives, employment
conditions and external remuneration relativities.
Further information surrounding the responsibilities of the
Remuneration and Nomination Committee is included
within Principle 8 of the Company’s Corporate Governance
statement.
9.2 Principles Used to Determine the Nature and
Amount of Remuneration
Key Management Personnel
Key Management Personnel (KMP) have the authority and
responsibility for planning, directing and controlling the
activities of the consolidated entity, and comprise;
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1. Non-Executive Directors
2. Managing Director
3. Chief Executive Officer
4. Chief Financial Officer
Non-Executive Director KMP
Michael Kay
Chairman
Paul Cave
James King
Director
Director
Tracy Blundy
Director
Executive KMP
Shane Fallscheer Managing Director
Steven Doyle
Chief Executive Officer
(Appointed 25 October 2016)
Graeme Fallet
Chief Financial Officer
This report has been audited by the Company’s Auditor
KPMG as required by Section 308 (3C) of the Corporation
Act 2001.
The Remuneration and Nomination Committee is governed
by its Charter which was developed in line with ASX
Corporate Governance Principles and Recommendations.
The Charter specifies the purpose, authority, membership
and the activities of the Remuneration and Nomination
Committee and the Charter is annually reviewed by the
Committee to ensure it remains consistent with regulatory
requirements.
(a) Non-Executive Directors KMP Remuneration
Non-executive Directors’ fees are determined within an
aggregate Non-executive Directors’ pool limit of $600,000.
Total Non-executive Directors’ remuneration including non-
monetary benefits and superannuation paid at the statutory
prescribed rate for the year ended 2 July 2017 was $390,000.
Michael Kay, the Non-executive Chairman, is entitled
to receive annual fees of $150,000, which is inclusive
of superannuation. Other Non-executive Directors are
entitled to receive annual fees of $80,000 inclusive of
superannuation.
The Non-executive Directors’ fees are reviewed annually
to ensure that the fees reflect market rates. There are no
guaranteed annual increases in any Directors’ fees. None of
the non-executive Directors participate in the short or long
term incentives.
(b) Executive remuneration
Lovisa’s remuneration strategy is to;
• Offer a remuneration structure that will attract, focus,
retain and reward highly capable people
•
•
•
Have a clear and transparent link between performance
and remuneration
Build employee engagement and align management
and shareholder interest through ownership of Company
shares
Ensure executive remuneration is set with regard to the
size and nature of the position with reference to market
benchmarks and the performance of the individual.
Remuneration will incorporate at risk elements to;
•
•
Link executive reward with the achievement of Lovisa’s
business objectives and financial performance
Ensure total remuneration is competitive by market
standards.
B. Remuneration Structure
The current executive salary and reward framework consists
of the following components;
1. Base salary and benefits including superannuation
2. Short term incentive scheme comprising cash
3. Long term incentive scheme comprising options and
performance rights
The mix of fixed and at risk components for each Senior
Executive as a percentage of total target remuneration for the
2017 financial year is as follows
Senior Executive
Shane Fallscheer
Steven Doyle
Graeme Fallet
Fixed
remuneration
At risk
remuneration
67%
50%
67%
33%
50%
33%
Note: the above assumes each KMP receives their maximum STI and LTI
in the relevant period. If this is not the case, then the mix would change in
favour of the fixed remuneration %.
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only
Directors’ Report
Base Salary and Benefits
Base pay is structured as a total employment cost
package which may be delivered as a combination of
cash and non-cash benefits. Retirement benefits are
delivered to the employee’s choice of Superannuation
fund. The Company has no interest or ongoing liability to
the fund or the employee in respect of retirement benefits.
Short Term Incentive plan
The Company operates a short-term incentive (STI)
plan that rewards some Executives and Management
on the achievement of pre-determined key performance
indicators (KPIs) established for each financial year
according to the accountabilities of his/her role and its
impact on the organisation’s performance. KPIs include
company profit targets and personal performance criteria.
Using a profit target ensures variable reward is paid only
when value is created for shareholders.
Long Term Incentive plan
The Company operates a long term incentive plan. The
plan is designed to align the interests of the employees
with the interest of the shareholders by providing an
opportunity for the employees to receive an equity interest
in Lovisa. The plan provides flexibility for the Company
to grant performance rights and options as incentives,
subject to the terms of the individual offers and the
satisfaction of performance conditions determined by the
Board from time to time.
The key terms associated with the Long Term Incentive
plan are;
•
•
A Performance Option entitles the holder to acquire a
share upon payment of an applicable exercise price
at the end of the performance period, subject to
meeting specific performance conditions.
A Performance Right entitles the holder to acquire
a share for nil consideration at the end of the
performance period, subject to meeting specific
performance conditions.
• Options and Performance Rights will be granted for
nil consideration.
•
No exercise price is payable in respect of the
Performance Rights.
Performance Conditions
The Board considers EPS Growth the most appropriate
performance condition as it aligns the interest of
shareholders with management.
Initial Public Offering Grant – Performance Rights
In conjunction with the Initial Public Offering a number of
Executives and Management were granted Performance
Rights.
The key terms associated with the IPO Grant are;
•
•
The performance period ends 30 June 2017.
The grant of Performance Rights are subject to
performance conditions based on achieving the
Company’s EPS over the performance period.
• One third of the Performance Rights will vest on the
achievement of the Company’s EPS Prospectus
forecast.
•
•
50% of the remaining Performance Rights will vest
on an aggregate EPS of 37.33 cents over the 2016
and 2017 financial year.
The remaining 50% will vest on a straight line basis
from 37.33 cents to 41.23 cents.
During the year 100% of Performance Rights vested with
an aggregate EPS of 43.42 cents achieved over the 2016
and 2017 financial years.
Initial Public Offering Grant - Options
In conjunction with the Initial Public Offering the Managing
Director Shane Fallscheer was granted 550,000 Options
at a face value of $210,000.
The key terms associated with these options are:
• The performance period commences from the time of
the Initial Public Offering and ends on 2 July 2017.
• An exercise price of $2.30 is payable on exercise of the
Options.
The grant of options were subject to the following
performance conditions;
• One third awarded upon achievement of prospectus
forecast.
• 50% of the remaining options will vest on an aggregate
EPS of 37.33 cents over the 2016 and 2017 financial
year.
• The remaining 50% will vest on a straight line basis
from 37.33 cents to 41.23 cents.
During the year 100% of these options vested with an
aggregate EPS of 43.42 cents achieved over the 2016 and
2017 financial years.
FY2017 LTI – Performance Options
In May 2016 and August 2016 a grant of Performance
Options was made to the Managing Director, Executives
and Management as part of the FY2017 LTI. The key
terms associated with the 2016 Grant are;
•
•
•
•
•
•
The performance period commences 4 July 2016 and
ends 30 June 2019.
The exercise price of the Performance Options is
$2.10 for the May granted options, and $2.63 for the
August granted options, which represents the 30 day
VWAP to the date of grant.
A total of 3,459,916 Performance Options were
granted in the May grant and 411,764 in the August
grant. 1,687,764 of these options were subject to
shareholder approval.
The expiry of the Performance Options is 12 months
following the end of the performance period.
The grant of Performance Options are subject to
performance conditions based on achieving the
Company’s EPS over the performance period.
The Performance Options granted to the Managing
Director were approved at the 2016 AGM.
The Board has determined the threshold EPS Target as
follows;
EPS over the Performance Period % Exercisable
Less than threshold
10% compound growth
12.5% compound growth
15% compound growth
17.5% compound growth
Nil
20% awarded
40% awarded
60% awarded
80% awarded
20% compound growth
100% awarded
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Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only Directors’ Report
9.3 Details of Remuneration
Details of the remuneration of the Directors and Key Management Personnel (KMPs) is set out below.
Year
Short Term Employment Benefits
Post-
Employment
Benefits
Long
Term
Benefits
Salary &
Fees ($)
Non-
monetary
benefits
($)
Performance
based
payment ($)
Super
Contributions
($)
Annual
& Long
Service
Leave ($)
Share
Based
Payments
Options/
Rights ($)
Total ($)
NON-EXEC DIRECTORS
M Kay (1)
P Cave
T Blundy
J King (2)
TOTAL
NON-EXEC
DIRECTORS
2017
2016
2017
2016
2017
2016
2017
2016
2017
136,986
34,247
73,059
111,510
60,000
58,333
73,059
9,133
343,104
2016
213,223
EXEC DIRECTORS
-
-
-
-
-
-
-
-
-
-
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S Fallscheer
2017
607,025
22,023
2016
668,454
8,425
-
-
-
-
-
-
-
-
-
-
-
-
13,014
3,253
6,941
10,593
20,000
21,667
6,941
867
46,896
36,380
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
150,000
37,500
80,000
122,103
80,000
80,000
80,000
10,000
390,000
249,603
30,000
65,891
245,144
970,083
30,000
96,415
100,489
903,783
OTHER KMP
S Doyle (3)
2017
546,118
2016
382,519
2017
2016
367,217
84,598
G Fallet (4)
TOTAL
EXEC
-
-
-
-
225,000
19,616
47,787
100,000
938,521
-
12,872
29,630
-
425,021
60,000
21,250
30,299
40,000
518,766
-
4,291
6,493
-
95,382
2017
1,520,360
22,023
285,000
70,866
143,978
385,144
2,427,370
2016
1,135,571
8,425
-
47,163
132,538
100,489
1,424,186
(1) Appointed to the Board of Lovisa Holdings on 13th April 2016
(2) Appointed to the Board of Lovisa Holdings on 17th May 2016
(3) Appointed Global General Manager on 4th November 2015 and appointed CEO on 25 October 2016
(4) Appointed Chief Financial Officer on 14th April 2016
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only
Directors’ Report
9.4 STI Remuneration Analysis
Analysis of STI included in remuneration
Details of STI bonuses awarded as remuneration to each key management person are detailed below.
Grant Date
STI awarded ($)
STI awarded as % of
maximum STI
% of STI award forfeited
S Doyle
G Fallet
15 August 2017
15 August 2017
225,000
60,000
75%
75%
25%
25%
9.5 Equity Remuneration Analysis
Analysis of Performance Rights over Equity Instruments Granted as Compensation
Details of the vesting profile of performance rights awarded as remuneration to each key management person are
detailed below.
Performance Rights/Options granted
Number
Value
$
Performance period
commences
Included in
Remuneration
$
%
vested
in the
period
%
forfeited
in the
period
Financial
period in
which grant
vests
S Fallscheer
IPO LTIP
550,000
210,000
18 December 2014
111,811
100
FY17 LTIP
1,687,764 400,000
4 July 2016
133,333
S Doyle
FY17 LTIP
1,265,823 300,000
4 July 2016
100,000
G Fallet
FY17 LTIP
506,329
120,000
4 July 2016
40,000
-
-
-
-
-
-
-
2 July 2017
30 June 2019
30 June 2019
30 June 2019
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9.6 Options and Performance Rights Over Equity Instruments
The movement during the reporting period in the number of performance rights and options over ordinary shares in Lovisa
Holdings Limited held directly or beneficially, by each key management person, including their related parties, is as follows:
Held at 4
July 2016
Granted
Exercised
Forfeited
Vested
during
the year
%
Vested and
exercisable at 2
July 2017
Held at 2
July 2017
Directors
S Fallscheer
- IPO LTIP
550,000
- FY17 LTIP
1,687,764
Executives
S Doyle
- FY17 LTIP
1,265,823
G Fallet
- FY17 LTIP
506,329
-
-
-
-
-
-
-
-
-
-
-
-
550,000
100
550,000
1,687,764
1,265,823
506,329
-
-
-
-
-
-
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only
Directors’ Report
9.7 Consequences of Performance on Shareholder
Wealth
In considering the consolidated entity’s performance and
the benefits for shareholder wealth, the Remuneration and
Nomination Committee has regard to a range of indicators
in respect of senior executive remuneration and linked
these to the previously described short and long term
incentives.
The following table presents these indicators showing
the impact of the Group’s performance on shareholder
wealth, during the financial years:
FY 2017 FY2016 FY2015*
Net profit after tax ($000)
29,046
16,553
17,602
Dividends paid ($000)
12,600
11,277
14,591
Share Price
$3.69
$2.28
$3.50
* Pro-forma result as disclosed in 2015 Lovisa Holdings
Ltd Annual Report
KMP Shareholdings
The following table details the ordinary shareholdings and
the movements in the shareholdings of KMP (including
their personally related entities) for FY2017.
No. of shares
Held at 3
July 2016
Shares
Purchased
Held at 2
July 2017
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Non-executive
Directors
M Kay
250,000
T Blundy
1,153,005
-
-
-
250,000
1,153,005
1,000,000
1,000,000
-
34,000
34,000
P Cave
J King
Executive
Directors
S Fallscheer
4,490,000
-
4,490,000
Executive
S Doyle
G Fallet
-
-
164,000
164,000
-
-
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only Directors’ Report
12. PROCEEDINGS ON BEHALF OF
COMPANY
No person has applied to the Court under section
237 of the Corporations Act 2001 for leave to bring
proceedings on behalf of the Company, or to intervene in
any proceedings to which the Company is a party, for the
purpose of taking responsibility on behalf of the Company
for all or part of those proceedings.
No proceedings have been brought or intervened in on
behalf of the Company with leave of the Court under
section 237 of the Corporations Act 2001.
13. ENVIRONMENTAL REGULATION
The Company’s operations are not subject to any
significant environmental regulations under either
Commonwealth or State legislation. However, the
Directors believe that the Company has adequate
systems in place for the management of its environmental
requirements and is not aware of any breach of these
environmental requirements as they apply to the entity.
14. ROUNDING OF AMOUNTS
The Group is of a kind referred to in ASIC Corporations
(Rounding in Financial/Directors’ Reports) Instrument
2016/191 issued by the Australian Securities and
Investments Commission, relating to the ‘rounding off’
of amounts in the Directors’ report. Amounts in the
Directors’ Report have been rounded off in accordance
with that Instrument to the nearest thousand dollars, or in
certain cases, to the nearest dollar.
Signed in accordance with a resolution of the Directors
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Michael Kay
Non-Executive Chairman
Shane Fallscheer
Managing Director
Melbourne, 23 August 2017
10. INSURANCE OF OFFICERS AND
INDEMNITIES
During the financial year, Lovisa Holdings Limited paid
a premium of $43,000 (2016: $37,000) to insure the
Directors and officers of the Group.
The liabilities insured are costs and expenses that may
be incurred in defending civil or criminal proceedings
that may be brought against the officers in their capacity
as officers of the Group, and any other payments arising
from liabilities incurred by the officers in connection with
such proceedings, other than where such liabilities arise
out of conduct involving a wilful breach of duty by the
officers or the improper use by the officers of their position
or of information to gain advantage for themselves or
someone else or to cause detriment to the Group.
11. AUDIT SERVICES
11.1 Auditors Independence Declaration
A copy of the auditor’s independence declaration as
required under section 307C of the Corporations Act 2001
is set out on page 79 and forms part of this Directors’
Report.
11.2 Audit and Non-Audit Services Provided by the
External Auditor
During the financial year ended 2 July 2017, the
following fees were paid or were due and payable for
services provided by the external auditor, KPMG, of the
Consolidated Entity:
Consolidated Entity
2017 $000
2016 $000
Audit and assurance services
Audit and review of
financial statements
Other services
Tax compliance services
Other accounting services
230
220
129
86
445
47
107
374
The Group may decide to employ the auditor on
assignments additional to their statutory audit duties
where the auditor’s expertise and experience with the
Group are important.
The Board of Directors has considered the position and, in
accordance with advice received from the Audit, Business
Risk and Compliance Committee, is satisfied that the
provision of the non-audit services is compatible with the
general standard of independence for auditors imposed
by the Corporations Act 2001. The Directors are satisfied
that the provision of non-audit services by the auditor did
not compromise the auditor independence requirements
of the Corporations Act 2001 for the following reasons:
• all non-audit services have been reviewed by the Audit,
Business Risk and Compliance Committee to ensure
they do not impact the impartiality and objectivity of
the auditor; and
• none of the services undermine the general principles
relating to auditor independence as set out in APES
110 Code of Ethics for Professional Accountants.
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only
CONTENTS
Financial Statements
Consolidated statement of financial position
Consolidated statement of profit or loss and other comprehensive income
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
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Setting the scene
Business performance
A1 Operating segments
A2 Revenue
A3 Expenses
A4 Earnings per share
A5 Dividends
A6 Income taxes
Asset platform
B1 Trade and other receivables
B2 Inventories
B3 Property, plant and equipment
B4 Intangible assets and goodwill
B5 Impairment of property, plant and equipment & intangible assets and goodwill
B6 Trade and other payables
B7 Provisions
B8 Employee benefits
34
35
36
37
38
40
40
41
42
42
43
43
46
46
46
46
48
48
49
49
50
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only
Notes to the consolidated financial statements cont’d
Risk and capital management
C1 Capital and reserves
C2 Capital management
C3 Loans and borrowings
C4 Financial instruments – Fair values and risk management
C5 Cash flows
Other information
D1 List of subsidiaries
D2 Operating leases
D3 Commitments and contingencies
D4 Share-based payment arrangements
D5 Related parties
D6 Auditors’ remuneration
D7 Deed of cross guarantee
D8 Parent entity disclosures
D9 New standards and interpretations adopted by the group
D10 New standards and interpretations not yet adopted
Signed Reports
Directors’ declaration
Independent auditor’s report
Lead auditor’s independence declaration
ASX information
Shareholder information
Corporate directory
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52
52
53
53
54
60
62
62
62
63
63
66
67
68
70
70
71
74
75
79
82
84
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only
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Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only FINANCIAL
STATEMENTS
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Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only Financial Statements
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 2 July 2017
Consolidated ($000s)
Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Total current assets
Deferred tax assets
Property, plant and equipment
Intangible assets and goodwill
Total non-current assets
Total assets
Liabilities
Bank overdraft
Trade and other payables
Employee benefits - current
Derivatives
Provisions - current
Current tax liabilities
Total current liabilities
Employee benefits - non current
Loans and borrowings
Provisions - non current
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Common control reserve
Other reserves
Retained earnings
Total equity
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Note
C5
B1
B2
A6
B3
B4
C5
B6
B8
C4
B7
B8
C3
B7
C1
2 July
2017
12,744
3,615
13,127
29,486
3,275
15,658
2,276
21,209
50,695
1,705
10,001
2,075
805
1,042
3,819
19,447
608
-
2,451
3,059
22,506
28,189
3 July
2016
8,295
2,293
15,034
25,622
1,823
13,123
2,073
17,019
42,641
3,566
8,350
1,594
909
655
1,487
16,561
401
12,000
2,508
14,909
31,470
11,171
208,526
(208,906)
(461)
29,030
28,189
208,526
(208,906)
(1,032)
12,584
11,171
The Notes on pages 38 to 71 are an integral part of these consolidated financial statements.
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only Financial Statements
CONSOLIDATED STATEMENT OF PROFIT OR LOSS & OTHER COMPREHENSIVE INCOME
For the financial year ended 2 July 2017
Consolidated ($000s)
Revenue
Cost of sales
Gross profit
Salaries and employee benefits expense
Property expenses
Distribution costs
Depreciation and amortisation expense
Loss on disposal of property, plant and equipment
Other expenses
Operating profit
Finance income
Finance costs
Net finance costs
Profit before tax
Income tax expense
Profit after tax
Other comprehensive income
Items that may be reclassified to profit or loss:
Cash flow hedges
Foreign operations - foreign currency translation differences
Other comprehensive income, net of tax
Total comprehensive income
Profit attributable to:
Owners of the Company
Total comprehensive income attributable to:
Owners of the Company
Total comprehensive income for the year
Earnings per share
Basic earnings per share (cents)
Diluted earnings per share (cents)
Note
A2
A3
A6
A4
A4
2017
178,746
(37,924)
140,822
(45,276)
(28,683)
(4,464)
(5,539)
(785)
(15,371)
40,704
142
(404)
(262)
40,442
(11,396)
29,046
41
90
131
131
29,177
29,046
29,046
29,177
29,177
27.66
27.25
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2016
153,461
(39,899)
113,562
(39,980)
(25,881)
(4,340)
(6,034)
(162)
(12,943)
24,222
49
(723)
(674)
23,548
(6,995)
16,553
(772)
(257)
(1,029)
(1,029)
15,524
16,553
16,553
15,524
15,524
15.76
15.74
The Notes on pages 38 to 71 are an integral part of these consolidated financial statements.
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only Financial Statements
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
As at 2 July 2017
Attributable to Equity Holders of the Company
Consolidated ($000s)
Note
Balance at 29 June
2015
Total comprehensive
income for the year
Profit
Cash flow hedges
Foreign operations
- foreign currency
translation differences
Total comprehensive
income for the year
Transactions with
owners of the Company
Employee share schemes
D4
Dividends
A5
Total transactions with
owners of the Company
Share
Capital
Common
Control
Reserve
Retained
Earnings
208,526 (208,907)
7,308
-
-
-
-
-
-
-
-
-
-
-
-
-
-
16,553
-
-
16,553
-
(11,277)
(11,277)
12,584
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Balance at 3 July 2016
208,526 (208,907)
Balance at 4 July 2016
208,526 (208,907)
12,584
Total comprehensive
income for the year
Profit
Cash flow hedges
Foreign operations
- foreign currency
translation differences
Total comprehensive
income for the year
Transactions with
owners of the Company
Employee share schemes
Dividends
Total transactions with
owners of the Company
D4
A5
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Balance at 2 July 2017
208,526 (208,907)
29,046
-
-
29,046
-
(12,600)
(12,600)
29,030
Share
Based
Payments
Reserve
Cash
Flow
Hedge
Reserve
Foreign
Currency
Translation
Reserve
Total
Equity
-
-
-
-
-
116
-
116
116
116
-
-
-
-
440
-
440
556
-
-
(772)
-
(119)
6,808
-
-
(257)
16,553
(772)
(257)
(772)
(257)
15,524
-
-
-
(772)
(772)
-
41
-
41
-
-
-
-
-
-
116
(11,277)
(11,161)
(376)
11,171
(376)
11,171
-
-
90
29,046
41
90
90
29,177
-
-
-
440
(12,600)
(12,160)
(731)
(286)
28,189
The Notes on pages 38 to 71 are an integral part of these consolidated financial statements.
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only Financial Statements
CONSOLIDATED STATEMENT OF CASH FLOWS
For the financial year ended 2 July 2017
Consolidated ($000s)
Note
2017
2016
Cash flows from operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Cash generated from operating activities
Interest received
Interest paid
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Acquisition of fixed assets
Proceeds from sale of property, plant and equipment
Acquisition of subsidiary, net of cash acquired
Net cash used in investing activities
Cash flows from financing activities
Repayment of cash advance facility
Dividends paid
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of movement in exchange rates on cash held
Cash and cash equivalents at the end of the year
197,296
(146,931)
50,365
142
(404)
(10,471)
39,632
(8,800)
-
-
(8,800)
(12,000)
(12,600)
(24,600)
6,231
4,729
79
11,039
169,891
(137,475)
32,416
49
(723)
(8,404)
23,338
(9,282)
21
(250)
(9,511)
-
(11,277)
(11,277)
2,550
2,343
(164)
4,729
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C5
B3
A5
C5
C5
The Notes on pages 38 to 71 are an integral part of these consolidated financial statements.
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only Notes to the Consolidated Financial Statements
SETTING
THE
SCENE
Lovisa Holdings Limited (the “Company”) is a for-profit
company incorporated and domiciled in Australia with its
registered office at 41-45 Camberwell Road, Hawthorn
East, Victoria 3123. The consolidated financial statements
comprise the Company and its subsidiaries (collectively
the “Group” and individually the “Group companies”).
The Group is primarily involved in the retail sale of fashion
jewellery and accessories.
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Lovisa Holdings Limited reports within a retail financial
period. The current financial year represents a 52 week
period ended on the 2 July 2017 (2016: 53 week period
ended 3 July 2016). This treatment is consistent with
section 323D of Corporations Act 2001.
The consolidated financial statements of the Group for the
financial year ended 2 July 2017 were authorised for issue
by the Board of Directors on 23 August 2017.
Basis of accounting
The consolidated financial statements and supporting
notes form a general purpose financial report. It:
• Has been prepared in accordance with the
requirements of the Corporations Act 2001,
Australian Accounting Standards (AASBs) including
Australian Accounting Interpretations, adopted by the
Australian Accounting Standards Board (AASB) and
International Financial Reporting Standards (IFRS)
and Interpretations as issued by the International
Accounting Standards Board;
• Has been prepared on a historical cost basis except
for derivative financial instruments which are measured
at fair value. Non-current assets are stated at the lower
of carrying amount and fair value less costs to sell;
• Presents reclassified comparative information where
required for consistency with the current year’s
presentation;
• Adopts all new and amended Accounting Standards
and Interpretations issued by the AASB that are
relevant to the operations of the Group and effective
for reporting periods beginning on or after 1 July 2016.
Refer to note D9 for further details; and
• Does not early adopt any Accounting Standards and
Interpretations that have been issued or amended but
are not yet effective except as disclosed in note D10.
Use of judgements and estimates
In preparing these consolidated financial statements,
management has made a number of judgements, estimates
and assumptions that affect the application of accounting
policies and the reported amounts of assets, liabilities,
income and expenses. Actual results may differ from these
estimates. Judgements and estimates which are material to
the financial statements are outlined below:
Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties
that have a significant risk of resulting in a material
adjustment within the financial year ended 2 July 2017 are
included in the following notes:
• Note A6 – recognition of deferred tax assets: availability
of future taxable profit against which carry forward tax
losses can be used;
• Note B5 – impairment test: key assumptions underlying
recoverable amounts, including the recoverability of
goodwill; and
• Notes B7 and D3 – recognition and measurement of
provisions and contingencies: key assumptions about the
likelihood and magnitude of an outflow of resources.
Basis of consolidation
Business combinations
The Group accounts for business combinations using the
acquisition method when control is transferred to the Group.
The consideration transferred in the acquisition is generally
measured at fair value, as are the identifiable net assets
acquired. Any goodwill that arises is tested annually for
impairment (see note B5). Any gain on a bargain purchase is
recognised in profit or loss immediately. Transaction costs
are expensed as incurred, except if related to the issue of
debt or equity securities (see note C1).
The consideration transferred does not include amounts
related to the settlement of pre-existing relationships. Such
amounts are generally recognised in profit or loss.
Any contingent consideration payable is measured at fair
value at the acquisition date. If the contingent consideration
is classified as equity, then it is not remeasured and
settlement is accounted for within equity. Otherwise,
subsequent changes in the fair value of the contingent
consideration are recognised in profit or loss.
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only
Notes to the Consolidated Financial Statements
gains and losses arising from such a monetary item
that are considered to form part of a net investment in a
foreign operation are recognised in other comprehensive
income, and are presented in the translation reserve in
equity.
About the Notes to the financial statements
The notes include information which is required to
understand the financial statements and is material
and relevant to the operations, financial position and
performance of the Group. Information is considered
material and relevant if, for example:
• The amount with respect to the information is
significant because of its size or nature;
• The information is important for understanding the
•
•
results of the Group;
It helps to explain the impact of significant changes in
the Group’s business; or
It relates to an aspect of the Group’s operations that is
important to its future performance.
Subsequent events
There are no matters or circumstances that have arisen
since the end of the financial year which significantly
affected or may significantly affect the operations of the
Group, the result of those operations, or the state of
affairs of the Group in future financial years.
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Subsidiaries
Subsidiaries are all entities over which the Group has
control. The Group controls an entity when the Group
is exposed to, or has rights to, variable returns from its
investment with the entity and has the ability to affect
those returns through its power to direct activities of the
entity.
The financial results of subsidiaries are included in the
consolidated financial information from the date that
control commences until the date that control ceases.
The accounting policies of subsidiaries have been
changed when necessary to align them with the policies
adopted by the Group.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any
unrealised income and expenses arising from intra-group
transactions, are eliminated.
Foreign currency
Functional and presentation currency
These consolidated financial statements are presented
in Australian dollars, which is the Company’s functional
currency and the functional currency of the majority of the
Group.
The Group is of a kind referred to in ASIC Corporations
(Rounding in Financial/Directors’ Reports) Instrument
2016/191 and in accordance with that instrument all
financial information presented in Australian dollars has
been rounded to the nearest thousand unless otherwise
stated.
Translation of foreign currency transactions
Transactions in foreign currencies are translated to the
respective functional currencies of Lovisa at the exchange
rates at the dates of the transactions. Monetary assets
and liabilities denominated in foreign currencies at the
reporting date are retranslated to the functional currency
at the exchange rate at that date.
Non-monetary assets and liabilities denominated in
foreign currencies that are measured at fair value are
retranslated to the functional currency at the exchange
rate at the date that the fair value was determined. Non-
monetary items in a foreign currency that are measured in
terms of historical cost are translated using the exchange
rate at the date of the transaction.
Foreign currency differences arising on retranslation are
recognised in profit or loss.
Foreign operations
The assets and liabilities of foreign operations are
translated to Australian dollars at exchange rates at the
end of the reporting period. The income and expenses of
foreign operations are translated to Australian dollars at
exchange rates at the dates of the transactions. Goodwill
and fair value adjustments arising on the acquisition of a
foreign operation are treated as assets and liabilities of
the foreign operation and are translated at the exchange
rates at the end of the reporting period.
Foreign currency differences are recognised in other
comprehensive income, and presented in the foreign
currency translation reserve in equity. When a foreign
currency operation is disposed of, the cumulative amount
in the translation reserve related to that foreign operation
is transferred to profit or loss on disposal of the entity.
When the settlement of a monetary item receivable from
or payable to a foreign operation is neither planned nor
likely to occur in the foreseeable future, foreign exchange
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only
Notes to the Consolidated Financial Statements
BUSINESS
PERFORMANCE
This section highlights key financial performance measures of the Lovisa Group’s operating segments, as well as
Group financial metrics incorporating revenue, earnings, taxation and dividends.
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A1 OPERATING SEGMENTS
(a) Basis for segmentation
The Chief Operating Decision Maker (CODM) for Lovisa Holdings Limited and its controlled entities, is the Managing
Director (MD). For management purposes, the Group is organised into geographic segments to review sales by
territory. All territories offer similar products and services and are managed by sales teams in each territory reporting
to the Global GM of Sales, however overall company performance is managed on a global level by the MD and the
Group’s management team. Store performance is typically assessed at an individual store level. Lovisa results are
aggregated to form one reportable operating segment, being the retail sale of fashion jewellery and accessories. This is
a difference in the basis of segmentation from the 3 July 2016 annual report. The individual stores meet the aggregation
criteria to form a reportable segment.
The company’s stores exhibit similar long-term financial performance and economic characteristics throughout the
world, which include:
a. Consistent products are offered throughout the company’s stores worldwide;
b. All stock sold throughout the world utilises common design processes and products are sourced from the same supplier
base;
c. Customer base is similar throughout the world;
d. All stores are serviced from two delivery centres;
e. No major regulatory environment differences exist between operating territories.
As the Group reports utilising one reportable operating segment, no reconciliation of the total of the reportable
segments measure of profit or loss to the consolidated profit has been provided as no reconciling items exist.
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only Notes to the Consolidated Financial Statements
(b) Geographic information
The segments have been disclosed on a regional basis consisting of Australia and New Zealand, Asia (consisting of
Singapore and Malaysia), Africa (South Africa) and Europe (United Kingdom and Spain) and the Group’s franchise
stores in the Middle East and Asia. Geographic revenue information is included in Note A2.
In presenting the following information, segment assets were based on the geographic location of the assets.
($000s)
a) Australia / New Zealand
b) Asia
c) Africa
d) Europe
Total
2017
2016
Non-current assets (i)
Non-current assets (i)
8,499
1,763
3,186
2,210
15,658
8,008
2,046
2,344
725
13,123
(i)
Excluding financial instruments, deferred tax assets, employee benefit assets and intangible assets.
A2 REVENUE
Revenue by nature and geography
The geographic information below analyses the Group’s revenue by region. In presenting the following information,
segment revenue has been based on the geographic location of customers.
($000s)
Sale of Goods
Australia / New Zealand
Asia
Africa
Europe
Total Sale of Goods
Franchise Revenue
Middle East
Asia
Total Franchise Revenue
Total Revenue
2017
2016
122,577
28,320
21,895
4,830
177,622
891
233
1,124
178,746
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108,401
25,500
18,182
530
152,613
848
-
848
153,461
a) Revenue recognition and measurement
Revenue is recognised when the significant risks and rewards of ownership have been transferred to the customer,
recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably,
there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably.
Revenue is measured net of returns and trade discounts. The following specific recognition criteria must also be met
before revenue is recognised:
Sale of Goods
Revenue from the sale of fashion jewellery is recognised when the significant risks and rewards of ownership have
been transferred to the buyer.
Franchise income
Franchise income, which is generally earned based upon a percentage of sales is recognised on an accrual basis.
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only Notes to the Consolidated Financial Statements
A3 EXPENSES
Expenses by nature
Consolidated ($000s)
Lease expense
Salaries and employee benefits expense
Wages and salaries
Compulsory social security contributions
Increase in liability for long-service leave
Share-based payment expense
Total salaries and employee benefits expense
A4 EARNINGS PER SHARE (EPS)
Calculation methodology
2017
23,861
41,047
3,677
112
440
45,276
2016
24,516
36,362
3,380
122
116
39,980
The calculation of basic earnings per share has been based on the following profit attributable to ordinary shareholders
and weighted-average number of ordinary shares outstanding.
The calculation of diluted earnings per share has been based on the following profit attributable to ordinary
shareholders and weighted-average number of ordinary shares outstanding after adjustment for the effects of all
dilutive potential ordinary shares.
EPS for profit attributable to ordinary shareholders of Lovisa Holdings Limited
Basic EPS (cents)
Diluted EPS (cents)
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2017
27.66
27.25
2016
15.76
15.74
Profit attributable to ordinary shareholders ($000s)
29,046
16,553
Weighted average number of ordinary shares for basic EPS (shares)
105,000,000
105,000,000
Weighted average number of ordinary shares and potential ordinary shares for diluted
EPS (shares)
106,581,406
105,193,666
Weighted average number of ordinary shares used as the denominator in calculating
basic earnings per share
105,000,000
105,000,000
2017
2016
Adjustments for calculation of diluted earnings per share:
Options
Performance Rights
1,565,406
188,333
16,000
5,333
Weighted average number of ordinary shares and potential ordinary shares used as the
denominator in calculating diluted earnings per share
106,581,406
105,193,666
Information concerning the classification of securities
i) Options and performance rights
Options and performance rights granted to employees under the Lovisa Holdings Long Term Incentive Plan are
considered to be potential ordinary shares. They have been included in the determination of diluted earnings per share
if the required hurdles would have been met based on the Group’s performance up to the reporting date, and to the
extent to which they are dilutive. The options and performance rights have not been included in the determination of
basic earnings per share. Details relating to the options are set out in note D4.
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only
Notes to the Consolidated Financial Statements
A5 DIVIDENDS
The Board may pay any interim and final dividends that, in its judgement, the financial position of the Company justifies.
The Board may also pay any dividend required to be paid under the terms of issue of a Share, and fix a record date for
a dividend and the timing and method of payment.
The following dividends were declared and paid by the Company for the year.
Consolidated ($000s)
2.00 cents per qualifying ordinary share (2016: 4.07 cents)
10.00 cents per qualifying ordinary share (2016: 6.67 cents)
2017
2,100
10,500
2016
4,273
7,004
12,600
11,277
After the reporting date, the following dividends were proposed by the Board of Directors. The dividends have not
been recognised as liabilities and there are no tax consequences.
Consolidated ($000s)
7.60 cents per qualifying ordinary share (2016: 2.00 cents)
Consolidated ($000s)
Dividend franking account
2017
7,980
7,980
2016
2,100
2,100
2017
2016
Franking credits available for subsequent reporting periods based on a tax rate of
30.0% (2016: 30%)
5,363
2,308
A6 INCOME TAXES
Recognition and measurement
Income tax on the profit or loss for the years presented comprises current and deferred tax. Income tax is recognised in
the statement of profit or loss except to the extent that it relates to items recognised directly in equity, in which case it
is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially
enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
The following differences are not provided for: reversal of buy back of company shares, goodwill not deductible for tax
purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit, and differences
relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The
amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of
assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available
against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that
the related tax benefit will be realised.
Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to
pay the related dividend is recognised.
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(a) Amounts recognised in profit or loss
Consolidated ($000s)
Current tax expense
Current period
Changes in estimates related to prior years
Deferred tax (benefit)/expense
Origination and reversal of temporary differences
Changes in temporary differences related to prior years
Total income tax expense
2017
2016
12,933
(79)
12,854
(1,148)
(310)
(1,458)
11,396
6,218
-
6,218
777
-
777
6,995
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only
Notes to the Consolidated Financial Statements
A6 INCOME TAXES (CONTINUED)
(b) Reconciliation of effective tax rate
Consolidated ($000s)
Profit before tax from continuing operations
Tax at the Australian tax rate of 30% (2016: 30%)
Effect of tax rates in foreign jurisdictions
Non-deductible expenses
Tax exempt income
Utilisation of carried-forward tax losses
Current year losses for which no deferred tax asset is recognised
Changes in estimate related to prior years
Total non temporary differences
Temporary differences
Amounts recognised in OCI
Net movement in deferred tax balances
Total temporary differences
Income taxes payable for the current financial year
Income taxes payable at the beginning of the year
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Less: Tax paid during the year
Income taxes payable as at year end
Represented in the Statement of financial position by:
Current tax liabilities
Current tax assets
2017
40,442
12,133
(674)
318
(52)
(201)
262
(390)
2016
23,548
7,064
(384)
225
(8)
(24)
122
-
11,396
6,995
(51)
1,458
1,407
12,803
1,487
(10,471)
3,819
45
(777)
(732)
6,263
3,628
(8,404)
1,487
3,819
1,487
-
-
3,819
1,487
Effective tax rates (ETR)
Bases of calculation of each ETR
Global operations – Total consolidated tax expense ETR: IFRS calculated total consolidated company income tax
expense divided by total consolidated accounting profit on continuing operations.
Australian operations – Australian company income tax expense ETR: IFRS calculated company income tax expense
for all Australian companies and Australian operations of overseas companies included in these consolidated financial
statements, divided by accounting profit derived by all Australian companies included in these consolidated
financial statements.
Percentage
ETR
Global operations – Total consolidated tax expense
Australian operations – Australian company income tax expense
2017
2016
28.2%
29.9%
29.7%
29.3%
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only
Notes to the Consolidated Financial Statements
A6 INCOME TAXES (CONTINUED)
(c) Deferred tax assets and liabilities reconciliation
Statement of financial
position
Statement of profit or loss
Consolidated ($000s)
Property, plant and equipment
Employee benefits
Provisions
Other items
Transaction costs
Carry forward tax losses
Deferred tax expense
Net deferred tax assets
2017
357
967
1,084
397
469
-
2016
(397)
719
754
43
704
-
3,275
1,823
2017
(760)
(248)
(332)
(353)
235
-
(1,458)
Presented in the Statement of financial position as
follows:
Deferred tax assets
3,275
1,823
Unused tax losses for which no deferred tax asset has been recognised total $913,000 (2016: $907,000).
(d) Expected settlement of deferred tax balances
Consolidated ($000s)
Deferred tax assets expected to be settled within 12 months
Deferred tax assets expected to be settled after 12 months
Deferred tax liabilities expected to be settled within 12 months
Deferred tax liabilities expected to be settled after 12 months
2017
2,454
1,169
3,623
178
171
348
2016
563
(160)
92
(27)
309
-
777
2016
1,604
863
2,467
302
342
644
P
/
4
5
Net deferred tax assets
3,275
1,823
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only
Notes to the Consolidated Financial Statements
ASSET PLATFORM
This section outlines the key operating assets owned and liabilities incurred by the Group.
B1 TRADE AND OTHER RECEIVABLES
Recognition and measurement
Trade and other receivables are initially recognised at fair value and subsequently stated at their amortised cost using
the effective interest method, less impairment losses.
Consolidated ($000s)
Trade receivables
Deposits
Prepayments
Other receivables
Impairment of receivables
Note
2017
1,001
1,954
620
40
3,615
2016
375
1,214
610
94
2,293
Recoverability of receivables is assessed monthly to determine whether there is any indication of impairment. If any
such indication exists then the asset’s recoverable amount is estimated. An impairment loss is recognised in profit or
loss if the carrying amount of an asset exceeds its recoverable amount.
The recoverable amount of the Group’s receivables carried at amortised cost is calculated as the present value of
estimated future cash flows, discounted at the original effective interest rate (i.e. the effective interest rate computed
at initial recognition of these financial assets). Significant receivables are individually assessed for impairment.
Receivables with a short duration are not discounted.
Information about the Group’s exposure to credit and market risks, and impairment losses for trade and other
receivables is disclosed in Note C4.
B2 INVENTORIES
Recognition and measurement
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Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price
in the ordinary course of business, less the estimated costs of completion and selling expenses. Cost includes the
product purchase cost, import freight and duties together with other costs incurred in bringing inventory to its present
location and condition using the weighted average cost method. All stock on hand relates to finished goods.
Costs of goods sold comprises purchase price from the supplier, cost of shipping product from supplier to warehouse,
shrinkage and obsolescence. Warehouse and outbound freight costs are reported as distribution expenses. Inventories
recognised as expenses during 2017 and included in cost of sales amount to $32,508,000 (2016: $34,564,000).
During 2017 inventories of $5,180,000 (2016: $4,801,000) were written down to net realisable value and included in
cost of sales.
B3 PROPERTY, PLANT AND EQUIPMENT
Recognition and measurement
Owned Assets
Items of property, plant and equipment are stated at cost less accumulated depreciation. Cost includes expenditures
that are directly attributable to the acquisition of the assets. The cost of acquired assets includes estimates of the costs
of dismantling and removing the items and restoring the site on which they are located where it is probable that such
costs will be incurred.
Subsequent costs
The Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of
such an item when that cost is incurred if it is probable that the future economic benefits embodied within the item will
flow to the entity and the cost of the item can be measured reliably. All other costs are recognised in the profit or loss
as an expense as incurred.
Depreciation and amortisation
Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful life on all property, plant
and equipment. Land is not depreciated.
The residual value, the useful life and the depreciation method applied to an asset are re-assessed at least annually.
Derecognition
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are
expected from its use. Gains and losses on disposals are determined by comparing disposal proceeds with the
carrying amount of the disposed asset and are recognised in the profit or loss in the year the disposal occurs.
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only Notes to the Consolidated Financial Statements
B3 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Reconciliation of carrying amount
Consolidated ($000s)
Depreciation policy
Cost
Note
Leasehold
improvements
Hardware
and
software
Fixtures
and
fittings
Office
equipment
Total
Lease term
3 years
3 years
3 years
Balance at 29 June 2015
23,400
2,482
436
53
26,371
Additions
Disposals
Effect of movements in exchange rates
8,379
(3,320)
(306)
620
(94)
(21)
283
-
-
-
-
-
9,282
(3,414)
(327)
Balance at 3 July 2016
28,153
2,987
719
53
31,912
Balance at 4 July 2016
Additions
Disposals
28,153
7,962
2,987
684
719
151
53
3
31,912
8,800
(3,495)
(2,124)
(679)
(53)
(6,351)
Effect of movements in exchange rates
(89)
8
Balance at 2 July 2017
32,532
1,555
-
191
-
3
(81)
34,281
Consolidated ($000s)
Accumulated depreciation and
impairment losses
Balance at 29 June 2015
Depreciation
Disposals
Effect of movements in exchange rates
Note
Leasehold
improvements
Hardware
and
software
Fixtures
and
fittings
Office
equipment
P
/
4
7
Total
(14,017)
(1,657)
(269)
(27)
(15,971)
(5,356)
(535)
(127)
(16)
(6,034)
3,148
(20)
83
5
-
-
-
-
3,231
(15)
Balance at 3 July 2016
(16,245)
(2,104)
(396)
(43)
(18,789)
Balance at 4 July 2016
(16,245)
(2,104)
Depreciation
Disposals
Effect of movements in exchange rates
(4,861)
3,089
137
(522)
1,920
2
Balance at 2 July 2017
(17,881)
(704)
Carrying amounts
At 28 June 2015
At 3 July 2016
At 2 July 2017
9,382
11,908
14,651
825
883
851
(396)
(146)
504
1
(37)
167
323
154
(43)
(10)
52
-
(1)
25
10
2
(18,789)
(5,539)
5,566
140
(18,623)
10,400
13,123
15,658
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only
Notes to the Consolidated Financial Statements
B4 INTANGIBLE ASSETS AND GOODWILL
Recognition and measurement
Goodwill
Goodwill arising on the acquisition of subsidiaries is measured at cost less accumulated impairment losses.
Amortisation
Goodwill is not amortised.
(a) Reconciliation of carrying amount
Consolidated ($000s)
Cost
Balance at 29 June 2015
Finalisation of purchase price adjustment from previous business combination
Effect of movements in exchange rates
Balance at 3 July 2016
Balance at 4 July 2016
Effect of movements in exchange rates
Balance at 2 July 2017
Note
Goodwill
1,610
984
(522)
2,073
2,073
203
2,276
B5 IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE
ASSETS AND GOODWILL
Recognition and measurement
Impairment
8
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The carrying amounts of the Group’s property, plant and equipment, and intangible assets and goodwill, are reviewed
at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the
asset’s recoverable amount is estimated in line with the calculation methodology listed below.
An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable
amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that largely are
independent from other assets and groups. Impairment losses are recognised in profit or loss. Impairment losses
recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill
allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro
rata basis.
Calculation of recoverable amount
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs
to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
Impairment test
Impairment testing for CGUs containing goodwill
For the purpose of impairment testing, goodwill is allocated to the Group’s CGUs identified by country.
The recoverable amount of each CGU was based on its value in use, determined by discounting the future cash flows
to be generated from the continuing use of the CGU.
Key assumptions used in the calculation of value in use were as follows:
In Percent
Discount rate
Budgeted EBITDA growth rate (average of next five years)
2017
15.0%
3.0%
2016
12.7%
5.0%
The discount rate was a pre-tax measure based on the rate of 10-year government bonds issued by the government
in the relevant market and in the same currency as the cash flows, adjusted for a risk premium to reflect both the
increased risk of investing in equities generally and the systemic risk of the specific CGU.
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only
Notes to the Consolidated Financial Statements
B5 IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE
ASSETS AND GOODWILL (CONTINUED)
Impairment test (continued)
Impairment testing for CGUs containing goodwill (continued)
Five years of cash flows were included in the discounted cash flow model with a long-term growth rate into perpetuity
determined as the lower of the nominal GDP rates for the countries in which the CGU operates and the long-term
compound annual EBITDA growth rate estimated by management.
Budgeted EBITDA was based on expectations of future outcomes taking into account past experience, adjusted for the
anticipated revenue growth with FY18 balances based on budgeted results. Beyond this period, revenue growth was
projected taking into account the growth levels experienced over the past five years and the estimated sales volume
and price growth for the next five years.
If no growth was budgeted to occur no impairment would result.
Reversals of impairment
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in
previous years are assessed at each reporting date for any indications that the loss has decreased or no longer exists.
An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.
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, if no impairment loss had been recognised.
There were no material reversals of impairment in the current or prior year.
B6 TRADE AND OTHER PAYABLES
Recognition and measurement
Liabilities for trade payables and other amounts are carried at their amortised cost.
Payables to related parties are carried at the principal amount. Interest, when charged by the lender, is recognised as
an expense on an accrual basis.
Consolidated ($000s)
Trade payables
Non-trade payables and accrued expenses
2017
4,568
5,433
10,001
P
/
4
9
2016
4,292
4,058
8,350
Trade payables are unsecured and are usually paid within 30 days of recognition.
Information about the Group’s exposure to currency and liquidity risk is included in Note C4.
B7 PROVISIONS
Recognition and measurement
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can
be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.
Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is
recognised as a finance cost.
A provision for dividends is not recognised as a liability unless the dividends are declared, determined or publicly
recommended on or before the reporting date.
Consolidated ($000s)
Balance at 4 July 2016
Provisions made during the year
Provisions used during the year
Provisions released during the year
Effect of movement in exchange rates
Balance at 2 July 2017
Current
Non-current
Site
restoration
Straight line rent and
lease incentive
Onerous
lease
Other
provisions
1,721
865
(669)
-
39
1,956
552
1,404
1,956
791
448
(115)
-
2
1,126
79
1,047
1,126
411
240
-
-
-
-
411
411
-
411
-
-
(240)
-
-
-
-
-
Total
3,163
1,313
(784)
(240)
41
3,493
1,042
2,451
3,493
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only Notes to the Consolidated Financial Statements
B7 PROVISIONS (CONTINUED)
Recognition and measurement (continued)
(a) Site restoration
Description
In accordance with the Group’s legal requirements, a provision for site restoration
in respect of make good of leased premises is recognised when the premises are
occupied.
The provision is the best estimate of the present value of the expenditure required
to settle the restoration obligation at the reporting date, based on current legal
requirements and technology. Future restoration costs are reviewed annually and any
changes are reflected in the present value of the restoration provision at the end of the
reporting period.
The amount of the provision for future restoration costs is capitalised and is depreciated
in accordance with the policy set out above. The unwinding of the effect of discounting
on the provision is recognised as a finance cost.
(b) Straight line rent and lease incentive
Description
Lease payments are recognised on a straight-line basis over the lease term.
The lease incentive liability in relation to non-cancellable operating leases are offset
against lease rental expense on a straight line basis over the lease term (generally three
to five years).
c) Onerous leases
Description
0
5
/
P
Onerous leases arise when the cost of exiting an existing lease is greater than the loss
on the sub-lease arrangement. In these circumstances, the best estimate is made of
the expenditure required to settle the present obligation at the end of the reporting
period with a provision made based on the least net cost alternative of exiting the
lease. Provisions are based on the excess of the cash flows for the unavoidable costs
in meeting the obligations under the lease over the unrecognised estimated future
economic benefits from the lease.
Where the Group has agreed to exit an existing lease early, these balances have been
accrued for at year-end.
B8 EMPLOYEE BENEFITS
Recognition and measurement
Long-term service benefits
Key Estimates
Expenditure to settle the
restoration obligation at
the end of the lease term
is based on the Group’s
best estimate.
Key Estimates
No major estimation
required in the calculation
of these provisions.
Key Estimates
• Sub-lease party to
undertake rental in line
with agreements
• Expenditure to settle
the lease at the end of
the lease term is based
on the Group’s best
estimate
The Group’s net obligation in respect of long-term service benefits is the amount of future benefit that employees have
earned in return for their service in the current and prior periods. The obligation is calculated using expected future
increases in wage and salary rates including related on-costs and expected settlement dates, and is discounted using
high quality Australian corporate bond rates at the balance sheet date which have maturity dates approximating to the
terms of the Group’s obligations.
Short-term benefits
Liabilities for employee benefits for wages, salaries and annual leave that are expected to be settled within 12 months
of the reporting date represent present obligations resulting from employees’ services provided to reporting date, are
calculated at undiscounted amounts based on remuneration wage and salary rates that the Group expects to pay as at
reporting date including related on-costs, such as workers compensation insurance and payroll tax.
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only
Notes to the Consolidated Financial Statements
B8 EMPLOYEE BENEFITS (CONTINUED)
Recognition and measurement (continued)
Consolidated ($000s)
Current
Liability for annual leave
Total employee benefit liabilities
Consolidated ($000s)
Non-Current
Liability for long-service leave
Total employee benefit liabilities
2017
2016
2,075
2,075
1,594
1,594
2017
2016
608
608
401
401
For details on the related employee benefit expenses, see Note A3.
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a
separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to
defined contribution plans are expensed as the related service is provided. Prepaid contributions are recognised as an
asset to the extent that a cash refund or a reduction in future payments is available.
P
/
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Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only Notes to the Consolidated Financial Statements
RISK AND CAPITAL
MANAGEMENT
This section discusses the Group’s capital management practices, as well as the instruments and strategies utilised by the
Group in minimising exposures to and impact of various financial risks on the financial position and performance of the Group.
C1 CAPITAL AND RESERVES
Recognition and measurement
Ordinary shares
Initially, share capital is recognised at the fair value of the consideration received by the Company.
Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the
share proceeds received.
(a) Share capital
No. of Ordinary Shares
Value of Ordinary Shares
2017
'000's
2016
'000's
2017
2016
'$000's
'$000's
On issue at beginning/end of year
105,000
105,000
208,526
208,526
All ordinary shares rank equally with regard to the Company’s residual assets.
(i) Ordinary shares
2
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The Company does not have authorised capital or par value in respect of its issued shares. All issued shares are fully
paid.
The holders of these shares are entitled to receive dividends as declared from time to time, and are entitled to one vote
per share at general meetings of the Company. All rights attached to the Company’s shares held by the Group are
suspended until those shares are reissued.
(b) Nature and purpose of reserves
(i) Common control reserve
The Group’s accounting policy is to use book value accounting for common control transactions. The book value used
is the book value of the transferor of the investment. Book value accounting is applied on the basis that the entities are
part of a larger economic group, and that the figures from the larger group are the relevant ones. In applying book value
accounting, no entries are recognised in profit or loss; instead, the result of the transaction is recognised in equity as
arising from a transaction with shareholders.
The book value (carry-over basis) is accounting on the basis that the investment has simply been moved from one
Group owner to a new Group Company. In applying book value accounting, an adjustment may be required in equity to
reflect any difference between the consideration received and the aggregated capital of the transferee. The adjustment
is reflected in the ‘common control reserve’ capital account.
(ii) Translation reserve
The translation reserve reflects all foreign currency differences of the international entities upon translation to the
Group’s functional currency.
(iii) Hedging Reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of hedging
instruments used in cash flow hedges pending subsequent recognition in profit or loss as the hedged cash flows affect
profit or loss.
Cash flow hedges
When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of
the derivative is recognised in other comprehensive income and accumulated in the hedging reserve. Any ineffective
portion of changes in the fair value of the derivative is recognised immediately in profit or loss.
The amount accumulated in equity is retained in other comprehensive income and reclassified to profit or loss in the
same period or periods during which the hedged item affects profit or loss.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised,
or the designation is revoked, then hedge accounting is discontinued prospectively. If the forecast transaction is no
longer expected to occur, then the amount accumulated in equity is reclassified to profit or loss.
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only Notes to the Consolidated Financial Statements
C1 CAPITAL AND RESERVES (CONTINUED)
(b) Nature and purpose of reserves (continued)
(iv) Share-based payments reserve
The share-based payments reserve is used to recognise:
• the grant date fair value of options issued to employees but not exercised
• the grant date fair value of shares issued to employees
• the grant date fair value of deferred shares granted to employees but not yet vested
C2 CAPITAL MANAGEMENT
The Group’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and
to sustain future development of the business. The Board of Directors seeks to maintain a balance between the higher
returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound
capital position.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders,
return capital to shareholders or issue new shares.
C3 LOANS AND BORROWINGS
Recognition and measurement
Loans and borrowings are initially recognised at fair value less any directly attributable transaction costs. Subsequent to
initial recognition, these liabilities are measured at amortised cost using the effective interest method.
Consolidated ($000s)
Current liabilities
Bank overdraft
Non-current liabilities
Secured bank loans
Note
2017
1,705
2016
3,566
P
/
5
3
-
12,000
Information about the Group’s exposure to interest rate, foreign currency and liquidity risk is included in Note C4.
(a) Terms and debt repayment schedule
Terms and conditions of outstanding loans are as follows:
Consolidated ($000s)
Cash advance facility
Multi-option facility
Contingent liability facility
Currency Nominal
interest
rate
AUD
AUD
AUD
3.62%
6.73%
2.30%
Corporate card facility
AUD
17.99%
2 July 2017
3 July 2016
Year of
maturity
Face
value
Carrying
amount
Face
value
Carrying
amount
2020
2018
2018
2017
-
-
12,000
12,000
1,705
1,705
3,566
3,566
-
54
-
54
-
-
-
-
Total interest-bearing liabilities
1,759
1,759
15,566
15,566
The bank loans are secured by security interests granted by Lovisa Holdings Limited and its subsidiaries over all of their
assets in favour of the Commonwealth Bank of Australia (CBA).
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only
Notes to the Consolidated Financial Statements
C4 FINANCIAL INSTRUMENTS – FAIR VALUES AND RISK MANAGEMENT
(a) Fair values
Recognition and measurement
A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial
and non-financial assets and liabilities.
The Group has begun to establish a control framework with respect to the measurement of fair values. This includes
overseeing all significant fair value measurements, including Level 3 fair values, by the CFO.
The Group periodically reviews significant unobservable inputs and valuation adjustments. If third party information,
such as broker quotes or pricing services, is used to measure fair values, then the Group assesses the evidence
obtained from the third parties to support the conclusion that such valuations meet the requirements of IFRS, including
the level in the fair value hierarchy in which such valuations should be classified. Significant valuation issues are
reported to the Group Audit, Business Risk and Compliance Committee.
When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair
values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques
as follows.
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices).
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair
value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy
as the lowest level input that is significant to the entire measurement.
The Group recognises transfers between levels of the fair value hierarchy at the end of the financial year during which
the change has occurred.
The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their
levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not
measured at fair value if the carrying amount is a reasonable approximation of fair value.
2 July 2017
Carrying Amount
Fair Value
Hedging
instruments
Loans and
receivables
Other
financial
liabilities
Total
Level
1
Level
2
Level
3
Total
4
5
/
P
Consolidated ($000s) Note
Financial liabilities
measured at fair
value
Derivatives
Financial assets not
measured at fair
value
Trade and other
receivables
Cash and cash
equivalents
Financial liabilities
not measured at fair
value
Bank overdrafts
Secured bank loans
Trade and other
payables
B1
C5
C5
C3
B6
805
805
-
-
3,615
12,744
16,359
-
-
-
-
-
805
805
3,615
12,744
16,359
-
-
-
-
1,705
1,705
-
-
10,001
10,001
11,706
11,706
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
805
805
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
805
805
-
-
-
-
-
-
-
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only Notes to the Consolidated Financial Statements
C4 FINANCIAL INSTRUMENTS – FAIR VALUES AND RISK MANAGEMENT (CONTINUED)
(a) Fair values (continued)
Recognition and measurement (continued)
3 July 2016
Carrying Amount
Fair Value
Hedging
instruments
Loans and
receivables
Other
financial
liabilities
Total
Level
1
Level
2
Level
3
Total
Consolidated ($000s) Note
Financial liabilities
measured at fair
value
Derivatives
Financial assets not
measured at fair
value
Trade and other
receivables
Cash and cash
equivalents
Financial liabilities
not measured at fair
value
Bank overdrafts
Secured bank loans
Trade and other
payables
B1
C5
C5
C3
B6
909
909
-
-
2,293
8,295
10,588
-
-
-
-
-
909
909
2,293
8,295
10,588
-
-
-
-
3,566
3,566
12,000
12,000
8,350
8,350
23,916
23,916
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
909
909
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
909
909
-
-
-
-
-
-
-
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(i) Valuation technique and significant unobservable inputs
The following tables show the valuation techniques used in measuring Level 2 and Level 3 fair values, as well as the
significant unobservable inputs used.
Financial instruments measured at fair value
Significant
unobservable
inputs
Inter-relationship between key
unobservable inputs and fair
value measurement
Not applicable.
Not applicable.
Type
Valuation technique
Forward exchange
contracts
Market comparison technique: Fair
value of forward exchange contracts
is determined using forward exchange
rates at the balance sheet date. These
over-the-counter derivatives utilise
valuation techniques maximising the
use of observable market data where
it is available.
Financial instruments not measured at fair value
Type
Valuation technique
Significant unobservable inputs
Secured bank loans Discounted cash flows.
Not applicable.
(ii) Transfers between Level 1 and 2
There were no transfers between Level 1 and Level 2 during the year.
(iii) Level 3 fair values
Transfer out of Level 3
There were no transfers out of Level 3 during the year.
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only Notes to the Consolidated Financial Statements
C4 FINANCIAL INSTRUMENTS – FAIR VALUES AND RISK MANAGEMENT (CONTINUED)
(b) Financial risk management
The Group has exposure to the following risks arising from financial instruments:
• credit risk (see (b)(ii))
liquidity risk (see (b)(iii))
•
• market risk (see (b)(iv))
(i) Risk Management framework
The Company’s Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk
management framework. The Board of Directors has established the Audit, Business Risk and Compliance Committee,
which is responsible for developing and monitoring the Group’s risk management policies. The Committee reports
regularly to the Board of Directors on its activities.
The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set
appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and
systems are reviewed to reflect changes in market conditions and the Group’s activities. The Group, through its training
and management standards and procedures, aims to maintain a disciplined and constructive control environment in
which all employees understand their roles and obligations.
The Audit, Business Risk and Compliance Committee oversees how management monitors compliance with the
Group’s risk management policies and procedures, and reviews the adequacy of the risk management framework in
relation to the risks faced by the Group.
The Committee’s specific function with respect to risk management is to review and report to the Board that:
a) the Group’s ongoing risk management program effectively identifies all areas of potential risk;
b) adequate policies and procedures have been designed and implemented to manage identified risks;
c) a regular program of audits is undertaken to test the adequacy of and compliance with prescribed policies; and
d) proper remedial action is undertaken to redress areas of weakness.
(ii) Credit risk
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Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet
its contractual obligations, and arises principally from the Group’s receivables from customers and deposits placed for
leased outlets.
The Group’s credit risk on its receivables is recognised on the consolidated statement of financial position at the
carrying amount of those receivable assets, net of any provisions for doubtful debts. Receivable balances and deposit
balances are monitored on a monthly basis with the result that the Group’s exposure to bad debts is not considered to
be material.
Credit risk also arises from cash and cash equivalents and derivatives with banks and financial institutions. For banks
and financial institutions, only independently rated parties with a minimum rating of ‘A’ are accepted by Lovisa.
At the reporting date, the carrying amount of financial assets recorded in the financial statements, net of any
allowances for impairment losses, represents the Group’s maximum exposure to credit risk. There were no significant
concentrations of credit risk.
Past due but not impaired
As at 2 July 2017, no trade receivables were past due but not impaired (2016: nil). The other classes within trade and
other receivables do not contain impaired assets and are not past due.
(iii) Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial
liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to
ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal
and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. Cash flow
forecasts are updated and monitored weekly.
In addition, the Group maintains the following lines of credit secured by security interests granted by Lovisa Holdings
Ltd and its subsidiaries over all of their assets in favour of the Commonwealth Bank of Australia (CBA):
• $15 million revolving cash advance facility
• $10 million multi option facility
• $5 million contingent liability facility for global letters of credit and bank guarantees.
Exposure to liquidity risk
The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are
gross and undiscounted, and include estimated interest payments and exclude the impact of netting agreements.
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only Notes to the Consolidated Financial Statements
C4 FINANCIAL INSTRUMENTS – FAIR VALUES AND RISK MANAGEMENT (CONTINUED)
(b) Financial risk management (continued)
(iii) Liquidity risk (continued)
2 July 2017
Contractual cash flows
Carrying
amount
Total
2 mths or
less
2-12 mths
1-2
years
2-5
years
More
than 5
years
4,568
1,705
-
4,568
1,705
-
4,568
-
-
-
1,705
-
6,273
6,273
4,568
1,705
-
-
35,586
7,140
28,446
(34,781)
(7,015)
(27,766)
805
805
125
680
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Carrying
amount
Total
2 mths or
less
2-12 mths
1-2
years
2-5
years
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7
More
than 5
years
Contractual cash flows
Consolidated ($000s)
Non-derivative financial
liabilities
Trade payables
Bank overdrafts
Secured bank loans
Derivative financial liabilities
Forward exchange contracts
used for hedging:
- Outflow
- Inflow
Total
3 July 2016
Consolidated ($000s)
Non-derivative financial
liabilities
Trade payables
Bank overdrafts
4,292
3,566
4,292
3,566
4,292
-
-
-
3,566
-
-
-
12,000
Secured bank loans
12,000
12,000
Derivative financial liabilities
Forward exchange contracts
used for hedging:
- Outflow
- Inflow
Total
19,858
19,858
4,292
3,566
12,000
-
-
25,633
6,861
18,772
(24,724)
(6,532)
(18,192)
909
909
329
580
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The gross inflows/(outflows) disclosed in the above table represent the contractual undiscounted cash flows relating
to derivative financial liabilities held for risk management purposes and which are usually not closed out before
contractual maturity. The disclosure shows net cash flow amounts for derivatives that are net cash-settled and gross
cash inflow and outflow amounts for derivatives that have simultaneous gross cash settlement.
As disclosed in Note C3, the Group has a secured bank loan which contains a loan covenant. A future breach of
covenant may require the Group to repay the loan earlier than indicated in the above table. The interest payments
on bank overdrafts and secured bank loans in the table above reflect market forward interest rates at the reporting
date and these amounts may change as market interest rates change. The future cash flows on trade payables may
be different from the amount in the above table as exchange rates change. Except for these financial liabilities, it is
not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly
different amounts.
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only Notes to the Consolidated Financial Statements
C4 FINANCIAL INSTRUMENTS – FAIR VALUES AND RISK MANAGEMENT
(CONTINUED)
(b) Financial risk management (continued)
(iv) Market risk
Market risk is the risk that changes in market prices – such as foreign exchange rates, interest rates and equity
prices – will affect the Group’s income or the value of its holdings of financial instruments. The objective of market
risk management is to manage and control market risk exposures within acceptable parameters, while optimising the
return.
The Group uses derivatives to manage market risks. All such transactions are carried out within the guidelines set by
the Audit, Business Risk and Compliance Committee. The Group also applies hedge accounting in order to manage
volatility in profit or loss.
Currency risk
The Group is exposed to currency risk to the extent that there is a mismatch between the currencies in which sales,
purchases and borrowings are denominated and the respective functional currencies of Group companies. The
presentation currency of the Group is the Australian dollar (AUD) which is the functional currency of the majority of
Lovisa. The currencies in which transactions are primarily denominated are Australian dollars, Singapore dollars, US
dollars, British pounds and South African Rand.
The Company’s foreign exchange policy is aimed at managing its foreign currency exposure in order to protect profit
margins by entering into forward exchange contracts and currency options, specifically against movements in the USD
rate against the AUD.
The following table defines the range of cover that has been authorised by the Board relating to purchases over a
defined period:
Exposure
Minimum Hedge Position
Neutral Hedge Position Maximum Hedge Position
Purchases 0 to 6 months
Purchases 7 to 9 months
Purchases 10 to 12 months
Exposure to currency risk
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60%
40%
30%
80%
50%
40%
100%
75%
50%
The summary quantitative data about the Group’s exposure to currency risk as reported to the management of the
Group is as follows:
2 July 2017
3 July 2016
In thousands of
SGD
USD
GBP
ZAR
SGD
USD
GBP
ZAR
Cash and cash equivalents
1,174
-
1,108
7,404
1,920
-
75
1,951
Trade receivables
Trade payables
-
406
-
-
-
108
-
(28)
(3,491)
(117)
(136)
(127)
(2,876)
(385)
10
(12)
Net statement of financial position
exposure
Sensitivity analysis
1,146 (3,085)
991
7,268
1,793 (2,768)
(310)
1,949
A reasonably possible strengthening (weakening) of the USD, the SGD, the GBP or ZAR against all other currencies
would have affected the measurement of financial instruments denominated in a foreign currency and affected profit
or loss by the amounts shown below. The analysis assumes that all other variables, in particular interest rates, remain
constant and ignores any impact of forecast sales and purchases. The translation of the net assets in subsidiaries with
a functional currency other than the Australian dollar has not been included in the sensitivity analysis as part of the
equity movement.
There is no impact on equity as the foreign currency denominated assets and liabilities represent cash, receivables and
payables.
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only Notes to the Consolidated Financial Statements
C4 FINANCIAL INSTRUMENTS – FAIR VALUES AND RISK MANAGEMENT
(CONTINUED)
(b) Financial risk management (continued)
(iv) Market risk (continued)
Sensitivity Analysis (continued)
Effect in thousands of dollars
Strengthening
Weakening
Profit or loss
2 July 2017
SGD (5 percent movement)
USD (5 percent movement)
GBP (5 percent movement)
ZAR (5 percent movement)
3 July 2016
SGD (5 percent movement)
USD (5 percent movement)
GBP (5 percent movement)
ZAR (5 percent movement)
Interest rate risk
(55)
147
(54)
(346)
(85)
132
15
(93)
60
(162)
59
383
94
(146)
(16)
103
The Group is subject to exposure to interest rate risk as changes in interest rates will impact borrowings which bear
interest at floating rates. Any increase in interest rates will impact Lovisa’s costs of servicing these borrowings which
may adversely impact its financial position. This impact is not assessed to be material.
Increases in interest rates may also affect consumer sentiment and the level of customer demand, potentially leading to
a decrease in consumer spending.
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Exposure to interest rate risk
The interest rate profile of the Group’s interest-bearing financial instruments as reported to the management of the
Group is as follows:
Consolidated ($000s)
Variable-rate instruments
Financial liabilities
Nominal amount
2017
1,705
1,705
2016
15,566
15,566
Cash flow sensitivity analysis for variable rate instruments
At 2 July 2017, if interest rates had changed by +/- 100 basis points from the year end rates with all other variables held
constant, pre tax profit for the year would have been $114,000 lower/higher (3 July 2016 - $122,000 lower/higher), as a
result of higher/lower interest expense from variable rate borrowings. There is no additional impact on equity.
(c) Derivative assets and liabilities
The Group holds derivative financial instruments to manage its foreign currency risk exposures.
Recognition and measurement
Derivative financial instruments are recognised initially at fair value; any directly attributable transaction costs are
recognised in profit or loss as they are incurred. Subsequent to initial recognition, derivative financial instruments are
measured at fair value, and changes therein are generally recognised in profit or loss.
Determination of fair values
A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial
and non-financial assets and liabilities. Fair values have been determined for measurement and / or disclosure
purposes based on the following methods.
Forward rate contracts
The fair value of forward exchange contracts is based on their quoted price, if available. If a quoted price is not
available, then fair value is estimated by discounting the difference between the contractual forward price and the
current forward price for the residual maturity of the contract using a credit-adjusted risk-free interest rate (based on
government bonds).
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only
Notes to the Consolidated Financial Statements
C4 FINANCIAL INSTRUMENTS – FAIR VALUES AND RISK MANAGEMENT
(CONTINUED)
(c) Derivative assets and liabilities (continued)
Forward rate contracts (continued)
The following table provides details of the derivative financial assets and liabilities included on the balance sheet:
Consolidated ($000s)
Current Investments
Forward exchange contracts
2017
(805)
(805)
2016
(909)
(909)
The following table indicates the periods in which the cash flows associated with cash flow hedges are expected to occur and
the carrying amounts of the related hedging instruments.
2017
2016
Expected Cash Flows
Expected Cash Flows
Carrying
Amount
Total
12 mths
of less
More
than 1
year
Carrying
Amount
Total
12 mths
of less
More
than 1
year
-
(805)
(805)
-
(805)
(805)
-
(805)
(805)
-
-
-
-
(909)
(909)
-
(909)
(909)
-
(909)
(909)
-
-
-
Consolidated ($000s)
Forward exchange
contracts:
Assets
Liabilities
A loss of $64,000 was included in other expenses on foreign currency derivatives not qualifying as hedges (2016: $3,000).
C5 CASH FLOWS
Recognition and measurement
Cash and cash equivalents comprise cash balances, and cash in transit and call deposits. Bank overdrafts that are repayable
on demand and form an integral part of the entity’s cash management are included as a component of cash and cash
equivalents for the purpose of the statement of cash flows.
Consolidated ($000s)
Bank balances
Cash and cash equivalents in the statement of financial position
Bank overdrafts used for cash management purposes
Cash and cash equivalents in the statement of cash flows
2017
2016
12,744
(1,705)
11,039
8,295
(3,566)
4,729
0
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Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only Notes to the Consolidated Financial Statements
C5 CASH FLOWS (CONTINUED)
Reconciliation of cash flows from operating activities
Consolidated ($000s)
Note
2017
2016
Cash flows from operating activities
Profit
Adjustments for:
Depreciation
Loss on sale of property, plant and equipment
Share based payments
Fair value adjustment to derivatives
C4
Exchange differences
Change in inventories
Change in trade and other receivables
Change in deferred tax assets
Change in derivatives
Change in trade and other payables
Change in current tax liabilities
Change in provisions and employee benefits
Net cash from operating activities
29,046
16,553
5,539
785
440
64
(376)
35,498
1,907
(1,322)
(1,452)
-
1,651
2,332
1,018
39,632
6,034
162
116
3
1,154
24,022
(146)
(23)
734
30
580
(2,141)
282
23,338
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Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only Notes to the Consolidated Financial Statements
OTHER INFORMATION
This section includes mandatory disclosures to comply with Australian Accounting Standards, the Corporations Act
2001 and other regulatory pronouncements.
D1 LIST OF SUBSIDIARIES
Set out below is a list of subsidiaries of the Group. All subsidiaries are wholly owned, unless otherwise stated.
Name
Lovisa Australia Pty Ltd
Lovisa Pty Ltd
Lovisa International Pte Ltd
Lovisa Singapore Pte Ltd
Lovisa Accessories Pty Ltd
DCK Jewellery South Africa (Pty) Ltd
Lovisa New Zealand Pty Ltd
Lovisa Malaysia Sdn Bhd
Lovisa UK Ltd
Lovisa Global Pte Ltd
Lovisa Complementos España SL
Principal place of business
Australia
Australia
Singapore
Singapore
South Africa
South Africa
New Zealand
Malaysia
United Kingdom
Singapore
Spain
Lovisa America, LLC isa Comple España SL
United States of America
Lovisa Hong Kong Ltd
Hong Kong
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D2 OPERATING LEASES
Recognition and measurement
Leases are classified at their inception as either operating or finance leases based on the economic substance of the
agreement so as to reflect the risks and benefits incidental to ownership.
Operating leases
The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefits
of ownership of the leased item, are recognised as an expense on a straight-line basis.
The lease incentive liability in relation to the non-cancellable operating leases are offset against lease rental expense on a
straight line basis over the lease terms (generally three to five years).
(a) Leases as lessee
The Group has a number of lease commitments related to the operation of its retail stores. The leases typically run for a period
of 3 to 5 years, with an option to renew the lease after that date. Leases typically have an annual rental increase linked to CPI
or a fixed annual increase.
(i) Future minimum lease payments
The future minimum lease payments under non-cancellable leases are payable as follows:
Consolidated ($000s)
Less than one year
Between one and five years
More than five years
2017
17,930
36,062
5,552
59,544
2016
14,574
21,280
364
36,218
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only
Notes to the Consolidated Financial Statements
D3 COMMITMENTS AND CONTINGENCIES
(a) Guarantees
The Group has guarantees outstanding to landlords and other parties to the value of $1,810,000 at 2 July 2017
(2016: $670,000).
(b) Capital commitments and contingent liabilities
The Group is committed to incur capital expenditure of $557,000 (2016: nil). There are no contingent liabilities that exist
at 2 July 2017 (3 July 2016: none).
D4 SHARE-BASED PAYMENT ARRANGEMENTS
The grant-date fair value of equity-settled share-based payment awards granted to employees is generally recognised
as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognised
as an expense is adjusted to reflect the number of awards for which the related service and non-market performance
conditions are expected to be met, such that the amount ultimately recognised is based on the number of awards
that meet the related service and non-market performance conditions at the vesting date. For share-based payment
awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such
conditions and there is no true-up for differences between expected and actual outcomes.
(a) Descriptions of the share-based payment arrangements
The Board has issued share option programmes that entitle key management personnel and senior management to
purchase shares in the Company. Under these programmes, holders of vested options are entitled to purchase shares
at the market price of the shares at the grant date. Currently, these programmes are limited to key management
personnel and senior management.
The key terms and conditions related to the grants under these programmes are as follows; all options are to be settled
by physical delivery of shares.
At 2 July 2017 the Group has the following share-based payment arrangements:
(i) Share option programmes (equity-settled)
FY2017 LTI - Performance Options (1)
Grant date/employee entitiled
Options granted
On 18 May 2016
Number of
instruments
(000’s)
Vesting conditions
3,460 20% compound increase in EPS over 3 years, with a
decrease in the number of options vesting down to a
minimum of 10% compound EPS growth over the 3
year period in line with the table below.
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Contractual
life of options
3 years
Total share options
3,460
1,687,764 of these options were approved at the Company’s AGM on 25 October 2016.
The Board has determined that the threshold EPS target is 10% compound growth over the 3 year period and the
stretch EPS target is 20% compound growth over the 3 year period.
Company’s EPS over the Performance Period
% of Performance Options that become exercisable
Less than threshold
Equal to threshold
Between threshold and stretch
Nil
10% compound growth - 20% awarded
12.5% compound growth - 40% awarded
15% compound growth - 60% awarded
17.5% compound growth - 80% awarded
Stretch
20% compound growth - 100% awarded
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only
Notes to the Consolidated Financial Statements
D4 SHARE-BASED PAYMENT ARRANGEMENTS (CONTINUED)
(a) Descriptions of the share-based payment arrangements (continued)
i) Share option programmes (equity-settled) (continued)
FY2017 LTI - Performance Options (2)
Grant date/employee entitiled
Options granted
On 15 August 2016
Number of
instruments
(000’s)
Vesting conditions
412 20% compound increase in EPS over 3 years, with a
decrease in the number of options vesting down to a
minimum of 10% compound EPS growth over the 3
year period in line with the table below.
Contractual
life of options
3 years
Total share options
412
The Board has determined that the threshold EPS target is 10% compound growth over the 3 year period and the
stretch EPS target is 20% compound growth over the 3 year period.
Company’s EPS over the Performance Period
% of Performance Options that become exercisable
Less than threshold
Equal to threshold
Between threshold and stretch
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Stretch
Initial Public Offering - Performance Options
Nil
10% compound growth - 20% awarded
12.5% compound growth - 40% awarded
15% compound growth - 60% awarded
17.5% compound growth - 80% awarded
20% compound growth - 100% awarded
Grant date/employee entitled
Options granted
Number of
instruments
(000’s)
Vesting conditions
Contractual
life of options
On 23 December 2014
550 As per table below
2.5 years
Total share options
550
The achievement of forecast EPS for FY15 (15.62c) resulted in the award of one third of the options.
The remaining two thirds of Options were subject to a performance condition based on the Company’s EPS over FY16
and FY17 (EPS Hurdle). The Board determined that the threshold EPS target was 37.33c and the stretch EPS target
was 41.23c over FY16 and FY17.
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only
Notes to the Consolidated Financial Statements
D4 SHARE-BASED PAYMENT ARRANGEMENTS (CONTINUED)
(a) Descriptions of the share-based payment arrangements (continued)
i) Share option programmes (equity-settled) (continued)
Initial Public Offering - Performance Options (continued)
Company’s EPS over the Performance Period
% of Performance Options that become exercisable
Less than threshold
Equal to threshold
Nil
50% awarded
Between threshold and stretch
50% - 100%, on a straight-line sliding scale
Stretch
100% awarded
(ii) Performance rights (equity-settled)
On 18 November 2015, the Group granted 20,000 and 16,000 performance rights to the former CFO and Head of
Product respectively, which entitle them to acquire a Share for nil consideration at the end of the performance period,
subject to satisfaction of specific performance conditions.
The 20,000 performance rights were cancelled in the prior year upon the resignation of the former CFO.
(b) Measurement of fair values
(i) Equity-settled share-based payment arrangements
The fair value of the employee share options and performance rights (see (a)(i) and (a)(ii)) have been measured using the
Black-Scholes formula. Service and non-market performance conditions attached to the transactions were not taken
into account in measuring fair value.
The inputs used in the measurement of the fair values at grant date of the equity-settled share-based payment plans
were as follows.
Fair value at grant date
Share price at grant date
30 day VWAP share price at grant date
Exercise price
Expected volatility (weighted-average)
Expected life (weighted-average)
Expected dividends
Risk-free interest rate (based on government bonds)
Share option programme
IPO LTI
FY2017 LTI (1)
FY2017 LTI (2)
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$0.386
$2.300
N/A
$2.300
34%
2.5 years
4.67%
2.23%
$0.237
$2.050
$2.100
$2.100
24.70%
3 years
5.11%
1.86%
$0.340
$2.79
$2.63
$2.63
25.88%
3 years
4.08%
1.44%
Expected volatility has been based on an evaluation of the historical volatility of the Company’s share price.
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only Notes to the Consolidated Financial Statements
D4 SHARE-BASED PAYMENT ARRANGEMENTS (CONTINUED)
(c) Reconciliation of outstanding share options
The number and weighted average exercise prices of share options under the share option programmes (see (a)(i)) and
performance rights (see (a)(ii)) were as follows.
Number of options
Weighted average exercise
price
Number of performance
rights
2017
000’s
4,010
412
(206)
-
4,216
550
2017
$
$2.13
$2.63
$2.63
-
$2.15
$2.30
2017
000’s
16
-
-
-
16
16
Outstanding at 4 July
Granted during the year
Forfeited during the year
Exercised during the year
Outstanding at 2 July
Exercisable at 2 July
(d) Expenses recognised in profit or loss
For details on the related employee benefit expenses, see Note A3.
D5 RELATED PARTIES
(a) Parent and ultimate controlling party
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Lovisa Holdings Limited is the parent entity and ultimate controlling party in the Group comprising itself and its subsidiaries.
Subsidiaries of the Group are listed in note D1.
(b) Transactions with key management personnel
(i) Key management personnel compensation
The key management personnel compensation comprised the following:
Consolidated ($000s)
Short-term employee benefits
Post-employment benefits
Share based payment
Other long term benefits
2017
2,170
118
385
144
2,817
2016
1,634
99
100
146
1,979
Compensation of the Group’s key management personnel includes salaries and non-cash benefits (see Note A3).
Detailed remuneration disclosures are provided in the Remuneration report on pages 24 to 28.
(ii) Key management personnel and Director transactions
A number of key management personnel, or their related parties, hold positions in other companies that result in them having
control or joint control over these companies. There were no transactions or balances outstanding from these related parties
during the period or at 2 July 2017 (3 July 2016: nil).
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only
Notes to the Consolidated Financial Statements
D5 RELATED PARTIES (CONTINUED)
(c) Other related party transactions
Consolidated ($000s)
2 July 2017
3 July 2016
2 July 2017
3 July 2016
Transaction values for the year ended
Balance outstanding as at
a) Expenses
Expense recharges
b) Sales
Recharges
752
121
394
3
-
32
(28)
2
Transactions between the Lovisa Group and BB Retail Capital and its related parties have been disclosed above
due to BB Retail Capital continuing to be in a position of holding significant influence in relation to the Group, with
representation on the Board of Directors. Lovisa has, and will continue to benefit from the relationships that its
management team and BB Retail Capital have developed over many years of retail operating experience. BB Retail
Capital has provided certain property management services to Lovisa on an arm’s length basis including managing
negotiations with landlords for new leases and lease renewals. This arrangement ceased as at 2 July 2017 with
property management services now provided in-house. Non property management related expense recharges are also
priced on an arms length basis. The Group will continue to utilise BBRC Retail Capital’s retail operating experience on
an arms length basis.
All outstanding balances with other related parties are priced on an arm’s length basis and are to be settled in cash
within two months post the end of the reporting year. None of the balances are secured. No expense has been
recognised in the current year or prior year for bad or doubtful debts in respect of amounts owed by related parties.
D6 AUDITOR’S REMUNERATION
Consolidated ($)
a) KPMG
Audit and review services
Auditors of the Company - KPMG Australia
Audit and review of financial statements
Network firms of KPMG Australia
Audit and review of financial statements
Total remuneration for audit and review services
Other services
Auditors of the Company - KPMG Australia
2017
2016
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186,787
199,240
43,213
230,000
20,760
220,000
In relation to other assurance, taxation and due diligence services
193,430
137,250
Network firms of KPMG Australia
In relation to other assurance, taxation and due diligence services
Total remuneration for other services
Total remuneration of KPMG
b) Non-KPMG audit firms
Audit and review services
Audit and review of financial statements
Total remuneration for audit and review services
Other services
In relation to other assurance, taxation and due diligence services
Total remuneration for other services
Total remuneration of non-KPMG audit firms
Total auditors remuneration
21,402
214,832
444,832
9,972
9,972
46,803
46,803
56,775
501,607
16,842
154,092
374,092
18,978
18,978
165
165
19,143
393,235
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only Notes to the Consolidated Financial Statements
D7 DEED OF CROSS GUARANTEE
Pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 issued by the Australian Securities
and Investment Commission, the wholly-owned subsidiaries listed below are relieved from the Corporations Act 2001
requirements for preparation, audit and lodgement of financial reports, and Directors’ reports.
It is a condition of the Instrument that the Company and each of the subsidiaries enter into a Deed of Cross Guarantee.
The effect of the Deed is that the Company guarantees to each creditor payment in full of any debt in the event of
winding up of any of the subsidiaries under certain provisions of the Corporations Act 2001. If a winding up occurs
under other provisions of the Act, the Company will only be liable in the event that after six months any creditor has not
been paid in full. The subsidiaries have also given similar guarantees in the event that the Company is wound up.
The subsidiaries subject to the Deed are:
• Lovisa Australia Pty Ltd
• Lovisa Pty Ltd
Both of these companies became a party to the Deed on 18 June 2015, by virtue of a Deed of Assumption.
A consolidated statement of profit or loss and other comprehensive income and consolidated statement of financial
position, comprising the Company and controlled entities which are a party to the Deed, after eliminating all
transactions between parties to the Deed of Cross Guarantee, at 2 July 2017 is set out as follows.
Statement of profit or loss and other comprehensive income and retained earnings
Consolidated ($000s)
Revenue
Cost of sales
Gross profit
Salaries and employee benefits expense
Property expenses
Distribution costs
Depreciation
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Loss on disposal of property, plant and equipment
Other expenses
Finance income
Finance costs
Profit before tax
Tax expense
Profit after tax
Other comprehensive income for the year, net of tax
Total comprehensive income for the year, net of tax
Retained earnings at beginning of year
Dividends recognised during the year
Retained earnings at end of year
2017
112,825
(26,298)
86,527
(35,081)
(18,167)
(1,183)
(2,995)
(666)
(3,899)
4,757
(403)
28,890
(7,225)
21,665
41
21,705
426
(12,600)
9,491
2016
100,387
(26,507)
73,880
(32,198)
(17,035)
(767)
(3,726)
(184)
(3,075)
1
(706)
16,189
(4,736)
11,453
(772)
10,681
250
(11,277)
426
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only Notes to the Consolidated Financial Statements
D7 DEED OF CROSS GUARANTEE (CONTINUED)
Statement of financial position
Consolidated ($000s)
Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Total current assets
Deferred tax assets
Property, plant and equipment
Investments
Total non-current assets
Total assets
Liabilities
Bank overdraft
Trade and other payables
Employee benefits - current
Current tax liabilities
Derivatives
Provisions - current
Total current liabilities
Employee benefits - non-current
Loans and borrowings
Provisions - non current
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Common control reserve
Share based payments reserve
Cash flow hedge reserve
Retained earnings
Total equity
2 July 2017
3 July 2016
1,770
27,311
6,224
35,305
2,806
7,421
210,000
220,227
255,532
1,705
26,870
1,660
2,774
805
886
34,700
608
-
1,457
2,065
36,765
218,767
2,055
6,587
10,062
18,704
1,541
6,876
210,000
218,417
237,121
3,566
6,474
1,404
874
909
357
13,584
401
12,000
1,916
14,317
27,901
209,221
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208,526
208,526
925
556
(731)
9,491
925
116
(772)
426
218,767
209,221
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only Notes to the Consolidated Financial Statements
D8 PARENT ENTITY DISCLOSURES
($000s)
Result of parent entity
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Financial position of parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Total equity of parent entity comprising of:
Share capital
Share based payments reserve
Accumulated profits
Total equity
(a) Parent entity accounting policies
2017
17,194
-
17,194
5,535
216,560
2,774
2,774
208,526
556
4,704
213,786
2016
13,208
-
13,208
-
210,826
2,074
2,074
208,526
116
110
208,752
The financial information for the parent entity, Lovisa Holdings Limited, has been prepared on the same basis as the
consolidated financial report, except as set out below.
Investments in subsidiaries
Investments in subsidiaries are accounted for at cost.
(b) Parent entity contingent liabilities
The parent entity did not have any contingent liabilities as at 2 July 2017.
(c) Parent entity guarantees in respect of the debts of its subsidiaries
The parent entity has entered into a Deed of Cross Guarantee with the effect that the Company guarantees debts in
respect of certain subsidiaries. Further details of the Deed of Cross Guarantee and the subsidiaries subject to the deed
are disclosed in Note D7.
D9 NEW STANDARDS AND INTERPRETATIONS ADOPTED BY THE GROUP
The Group has applied the following standards and amendments for the first time for the annual reporting year ending
2 July 2017:
• AASB 1057 Application of Australian Accounting Standards
The adoption of these standards did not have any impact on the current year or any prior year and are not likely to affect
future years.
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Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only
Notes to the Consolidated Financial Statements
D10 NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED
A number of new standards and amendments to standards are effective for annual periods beginning after 1 July 2016;
however, the Group has not applied the following new or amended standards in preparing these consolidated financial
statements.
New or amended
standards
IFRS 9 Financial
Instruments
IFRS 15 Revenue
from Contracts with
Customers
IFRS 16 Leases
Summary of the requirements
IFRS 9, published in July 2014, replaces the
existing guidance in IAS 39 Financial Instruments:
Recognition and Measurement. IFRS 9 includes
revised guidance on the classification and
measurement of financial instruments, including
a new expected credit loss model for calculating
impairment on financial assets, and the new
general hedge accounting requirements. It also
carries forward the guidance on recognition and
derecognition of financial instruments from IAS 39.
IFRS 9 is effective for annual reporting periods
beginning on or after 1 January 2018, with early
adoption permitted.
IFRS 15 establishes a comprehensive framework
for determining whether, how much and when
revenue is recognised. It replaces existing revenue
recognition guidance, including IAS 18 Revenue,
IAS 11 Construction Contracts and IFRIC 13
Customer Loyalty Programmes.
IFRS 15 is effective for annual reporting periods
beginning on or after 1 January 2018, with early
adoption permitted.
IFRS 16 removes the classification of leases as
either operating or finance leases – for the lessee –
effectively treating all leases as finance leases.
Short-term leases (less than 12 months) and leases
of low-value assets are exempt from the lease
accounting requirements.
There are also changes in accounting over the life
of the lease. This will result in the recognition of a
front-loaded pattern of expense for most leases,
even when constant annual rentals are paid.
Lessor accounting remains similar to current
practice.
IFRS 16 is effective for annual periods beginning on
or after 1 January 2019. Early adoption is permitted
for entities that apply IFRS 15 at or before the date
of initial application of IFRS 16.
Possible impact on consolidated
financial statements
The Group is assessing the potential
impact on its consolidated financial
statements resulting from the
application of IFRS 9 however the
impact of the new standard is not
expected to be material.
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Adoption of IFRS 15 not expected to
have a material impact on the Group’s
profit. Recognition of a provision for
refunds will result in a gross up of
balances on the statement of financial
position. The impact on reported sales
and margins is not expected to be
material in the ordinary course of events.
As a lessee with a substantial portfolio
of operating leases, the implementation
of IFRS 16 is expected to have a
material impact on the future statutory
performance of Lovisa Holdings Limited
as the Groups operating leases are
recognised on the balance sheet.
A summary of the key impacts are as
follows:
•
•
•
EBITDA: increases because no
operating lease expense is included
Equity: decreases as carrying
amount of right-of-use asset
reduces faster than the reduction of
the lease liability in the early years
of the lease
Profit before tax/EPS: Decreases
as amortisation and interest
expense recognised is greater than
operating lease expense in the early
years of the lease
The overall income statement impact
is profit neutral over the course of a
lease. The impact upon implementation
will depend on the leases in place on
transition.
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only
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Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only SIGNED
REPORTS
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Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only DIRECTORS’
DECLARATION
1.
In the opinion of the Directors of Lovisa Holdings Limited (‘the Company’):
(a) the consolidated financial statements and notes that are set out on pages 34 to 71 and the Remuneration report
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 2 July 2017 and of its performance, for the
financial year ended on that date; and
(ii) complying with Australian 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 D7 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 have been given the declarations required by Section 295A of the Corporations Act 2001 from the
Chief Executive Officer and Chief Financial Officer for the financial year ended 2 July 2017.
4. The Directors draw attention to the Basis of Accounting for the consolidated financial statements set out on page
38, which includes a statement of compliance with International Financial Reporting Standards.
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Signed in accordance with a resolution of the Directors.
________________________________________________
Shane Fallscheer
Director
Melbourne
23 August 2017
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only
INDEPENDENT AUDIT REPORT TO THE MEMBERS OF
LOVISA HOLDINGS LIMITED
Independent Auditor’s Report
To the shareholders of Lovisa Holdings Limited
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of
Lovisa Holdings Limited (the Company).
In our opinion, the accompanying Financial
Report of the Company is in accordance
with the Corporations Act 2001, including:
giving a true and fair view of the
Groups financial position as at 2 July
2017 and of its financial performance
for the year ended on that date; and
complying with Australian Accounting
Standards
the Corporations
Regulations 2001.
and
The Financial Report comprises:
Consolidated statement of financial position as at 2
July 2017
Consolidated statement of profit or loss and other
comprehensive income, Consolidated statement of
changes in equity, and Consolidated statement of
cash flows for the year then ended
Notes including a summary of significant accounting
policies
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.
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Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditors 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 Boards APES 110 Code of Ethics
for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in Australia.
We have fulfilled our other ethical responsibilities in accordance with the Code.
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.
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Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only Signed Reports
INDEPENDENT AUDIT REPORT TO THE MEMBERS OF
LOVISA HOLDINGS LIMITED (CONTINUED)
Key Audit Matters
Key Audit Matters are those matters that, in our professional judgment, were of most significance in
our audit of the Financial Report of the current period.
These matters were addressed in the context of our audit of the Financial Report as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.
Valuation of inventories ($13.1m)
Refer to Note B2 to the financial report.
The key audit matter
How the matter was addressed in our audit
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A key audit matter for us was the Groups
valuation of inventories, given the relative size of
the balance (being 26% of total assets within the
Groups consolidated statement of financial
position) and the judgement we apply to assess
the Groups estimates specific to the value of
obsolete inventory.
jewellery and
is
The Group sells fashion
therefore subject
to changing consumer
demands and fashion trends. This increases the
risk that, as trends change, products may either
need to be sold at a discount below their
recorded cost, or ultimately disposed of for zero
value. Estimating the level of provisioning for
obsolete inventory requires consideration of the
ageing and condition of products on hand,
historic trends
inventory
turnover and anticipated future sales. Such
judgements may have a significant impact on the
calculation of the
inventory provision, and
therefore
the overall carrying value of
inventories, necessitating our audit effort
thereon.
in write-offs and
Our procedures included:
the historical accuracy of
the
Assessing
Groups
inventory provision against actual
outcomes, to inform our evaluation of the
current year provision and assumptions;
Challenging the Groups assumptions within
their provision, particularly the extent to which
aged and seasonal inventory can be sold, taking
into account our knowledge of the industry and
past Group performance;
in
Analysing current and historic
identify
inventory holdings and ageing to
indicators of
slow-moving or obsolete
inventory. We compared this to the Groups
listing of obsolete inventory;
trends
Checking the integrity of the inventory ageing
report at 2 July 2017, as a key input used in the
provision calculation, by comparing on a sample
basis inventory age per the report to purchase
invoices;
Attending a sample of inventory counts across
the store and warehouse locations to observe
the existence and condition of products held;
and
Comparing a statistical sample of inventory
carrying values to post year-end sales prices,
and against amounts recorded in the provision.
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Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only Signed Reports
INDEPENDENT AUDIT REPORT TO THE MEMBERS OF
LOVISA HOLDINGS LIMITED (CONTINUED)
Other Information
Other Information is financial and non-financial information in Lovisa Holdings Limiteds annual
reporting which is provided in addition to the Financial Report and the Auditor's Report. The Directors
are responsible for the Other Information.
The Other Information we obtained prior to the date of this Auditors Report was the Directors report.
The Chairman and Chief Executives Report, and the ASX Additional Information are expected to be
made available to us after the date of the Auditor's Report.
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.
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 Auditors Report we have nothing to report.
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
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preparing the Financial Report that gives a true and fair view in accordance with Australian
Accounting Standards and the Corporations Act 2001
implementing necessary internal control to enable the preparation of a Financial Report that gives
a true and fair view and is free from material misstatement, whether due to fraud or error
assessing the Groups ability to continue as a going concern. This includes disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless they either
intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Auditors 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 Auditors Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it
exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of this Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the Auditing
and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_files/ar2.pdf. This
description forms part of our Auditors Report.
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Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only Signed Reports
INDEPENDENT AUDIT REPORT TO THE MEMBERS OF
LOVISA HOLDINGS LIMITED (CONTINUED)
Report on the Remuneration Report
Opinion
Directors responsibilities
In our opinion, the Remuneration Report of
Lovisa Holdings Limited for the year ended
2 July 2017, complies with Section 300A of
the Corporations Act 2001.
The Directors of the Company are responsible for the
preparation and presentation of the Remuneration Report
in accordance with Section 300A of the Corporations Act
2001.
Our responsibilities
We have audited the Remuneration Report included in
section 9 of the Directors report for the year ended 2
July 2017.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
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KPMG
Maurice Bisetto
Partner
Melbourne
23 August 2017
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Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only
Signed Reports
LEAD AUDITOR’S INDEPENDENCE DECLARATION UNDER
SECTION 307C OF THE CORPORATIONS ACT 2001
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
To the Directors of Lovisa Holdings Limited
I declare that, to the best of my knowledge and belief, in relation to the audit of Lovisa Holdings Limited
for the financial year ended 2 July 2017 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.
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KPMG
Maurice Bisetto
Partner
Melbourne
23 August 2017
1
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.
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only
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Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only ASX
INFORMATION
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Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only ASX Information
ASX ADDITIONAL INFORMATION
Additional information required by the ASX Limited Listing Rules and not disclosed elsewhere in this report is set out
below.
CORPORATE GOVERNANCE STATEMENT
The Board of Directors of Lovisa Holdings Limited is responsible for the corporate governance of the Group. The
Lovisa Holdings Board of Directors is committed to achieving best practice in the area of corporate governance and
business conduct. Lovisa Holding Limited’s Corporate Governance Statement outlines the main corporate governance
principles and practices followed by the Group. These policies and practices are in accordance with the ASX Corporate
Governance Council’s Corporate Governance Principles and Recommendations (3rd Edition) unless otherwise stated.
Details of the Company’s Corporate Governance Statement as well as key policies and practices and the charters for the
Board and each of its committees are available on the Company’s website (http://www.lovisa.com.au/shareholder-info/),
including performance against measurable objectives. The Corporate Governance Statement will be lodged with ASX at
the same time that this Annual Report is lodged with ASX.
The Corporate Governance Statement includes details of the main corporate governance practices in place throughout
the reporting period (unless otherwise stated) in relation to the corporate governance principles and recommendations
published by the ASX Corporate Governance Council and are current as at 23 August 2017 and have been approved by
the Board. The Board is comfortable that the practices are appropriate for a Company of Lovisa Holdings’ size.
SHAREHOLDINGS (AS AT 31 AUGUST 2017)
SUBSTANTIAL SHAREHOLDERS
The number of shares held by substantial shareholders and their associates are set out below:
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Shareholder
BB Retail Capital Pty Ltd
Grahger Capital Securities Pty Ltd
VOTING RIGHTS
Ordinary shares
Refer to Note C1 in the financial statements.
Options
There are no voting rights attached to options.
Rights
There are no voting rights attached to rights.
Redeemable preference shares
Number
43,207,500
12,301,000
There are no voting rights attached to redeemable preference shares.
Non-redeemable preference shares
There are no voting rights attached to non-redeemable preference shares.
Distribution of equity security holders
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Total
Number of equity security holders
Units
% of Issued Capital
290
636
269
277
41
129,600
1,980,178
2,113,006
7,331,280
93,461,936
1,513
105,016,000
0.12
1.89
2.01
6.98
89.00
100.00
The number of shareholders holding less than a marketable parcel of ordinary shares is 68.
Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only ASX Information
Securities Exchange
The Company is listed on the Australian Securities Exchange. The Home exchange is Sydney.
Other information
Lovisa Holdings Limited, incorporated and domiciled in Australia, is a publicly listed company limited by shares.
Twenty largest shareholders
The names of the twenty largest holders of quoted equity securities are listed below:
Name
BB Retail Capital Pty Ltd
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
Centreville Pty Ltd
National Nominees Limited
Grahger Retail Securities Pty Ltd
JP Morgan Nominees Australia Limited
Grahger Capital Securities Pty Ltd
Grahger Retail Securities Pty Ltd
Sandhurst Trustees Ltd
Grahger Capital Securities Pty Ltd
BNP Paribas Noms Pty Ltd
Mrs Vanessa Louise Speer
Coloskye Pty Limited
HSBC Custody Nominees (Australia) Limited - A/C 2
PBC Investments Pty Ltd
Mr Robert Thomas & Mrs Kyrenia Thomas
UBS Nominees Pty Ltd
BNP Paribas Nominees Pty Ltd
RBC Investor Services Australia Nominees Pty Ltd
Number of ordinary
shares held
Percentage of capital
held
43,207,500
41.14
7,622,648
4,840,337
4,490,000
4,312,096
3,400,000
3,101,518
2,425,750
2,100,000
1,630,821
1,600,000
1,291,890
1,227,460
1,153,005
1,074,546
1,000,000
970,000
807,898
806,471
690,691
7.26
4.61
4.28
4.11
3.24
2.95
2.31
2.00
1.55
1.52
1.23
1.17
1.10
1.02
0.95
0.92
0.77
0.77
0.66
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Total
Balance of register
87,752,631
17,263,369
Grand total
105,016,000
83.56
16.44
100.00
Options and performance rights issued under the Lovisa Holdings
Ltd Long Term Incentive Plan to take up ordinary shares
Number on issue
Number of holders
4,215,798
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Lovisa Holdings Limited Annual Report - 2 July 2017For personal use only
CORPORATE DIRECTORY
Company Secretary
Graeme Fallet, Chief Financial Officer and Company Secretary
Principal Registered Office
Lovisa Holdings Limited
41-45 Camberwell Road
Hawthorn East VIC 3123
+61 3 9831 1800
Location of Share Registry
Link Market Services Limited
Tower 4
727 Collins Street
Melbourne Victoria 3000
+61 3 9615 9800
Stock Exchange Listing
Lovisa Holdings Limited (LOV) shares are listed on the ASX.
Auditors
KPMG
Tower 2, Collins Square
727 Collins Street
Melbourne Victoria 3000
Website
www.lovisa.com
For personal use only