ANNUAL REPORT 2021
DISCLAIMER: Certain statements in this report constitute forward-looking statements. Forward-looking statements are statements (other than statements of historical fact) relating to future events and
the anticipated or planned financial and operational performance of Michael Hill International Limited and its related bodies corporate (the Group). The words “targets,” “believes,” “expects,” “aims,” “intends,”
“plans,” “seeks,” “will,” “may,” “might,” “anticipates,” “would,” “could,” “should,” “continues,” “estimates” or similar expressions or the negatives thereof, identify certain of these forward-looking statements.
Other forward-looking statements can be identified in the context in which the statements are made. Forward-looking statements include, among other things, statements addressing matters such as the
Group’s future results of operations; financial condition; working capital, cash flows and capital expenditures; and business strategy, plans and objectives for future operations and events, including those
relating to ongoing operational and strategic reviews, expansion into new markets, future product launches, points of sale and production facilities.Although the Group believes that the expectations reflected
in these forward-looking statements are reasonable, such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the Group’s actual results,
performance, operations or achievements or industry results, to differ materially from any future results, performance, operations or achievements expressed or implied by such forward-looking statements.
Such risks, uncertainties and other important factors include, among others: global and local economic conditions; changes in market trends and end-consumer preferences; fluctuations in the prices of
raw materials, currency exchange rates, and interest rates; the Group’s plans or objectives for future operations or products, including the ability to introduce new jewellery and non-jewellery products; the
ability to expand in existing and new markets and risks associated with doing business globally and, in particular, in emerging markets; competition from local, national and international companies in the
markets in which the Group operates; the protection and strengthening of the Group’s intellectual property rights, including patents and trademarks; the future adequacy of the Group’s current warehousing,
logistics and information technology operations; changes in laws and regulations or any interpretation thereof, applicable to the Group’s business; increases to the Group’s effective tax rate or other harm to
the Group’s business as a result of governmental review of the Group’s transfer pricing policies, conflicting taxation claims or changes in tax laws; and other factors referenced to in this presentation.Should
one or more of these risks or uncertainties materialise, or should any underlying assumptions prove to be incorrect, the Company’s actual financial condition, cash flows or results of operations could differ
materially from that described herein as anticipated, believed, estimated or expected. Accordingly, you are cautioned not to place undue reliance on any forward-looking statements, particularly in light of the
current economic climate and the significant volatility, uncertainty and disruption caused by the COVID-19 pandemic.The Group does not intend, and do not assume any obligation, to update any forward-looking
statements contained herein, except as may be required by law. All subsequent written and oral forward-looking statements attributable to us or to persons acting on the Group’s behalf are expressly qualified
in their entirety by the cautionary statements referred to above and contained elsewhere in this announcement.
TERMINOLOGY: In this report, unless otherwise specified or appropriate in the context, the term "Company" refers to Michael Hill International Limited, and the terms "Group" or "Michael Hill" refer to the
Company and its subsidiaries (as appropriate).
The Directors are pleased to
present the annual report of
Michael Hill International Limited
and its subsidiaries for the year
ended 27 June 2021.
Contents
3
5
7
COMPANY PROFILE
CHAIR REVIEW
CEO REVIEW
10 PERFORMANCE HIGHLIGHTS
11
12
14
KEY FACTS
FY21 RESULTS
TREND STATEMENT
16 SUSTAINABILITY
27 OUR EXECUTIVE TEAM
29 DIRECTORS’ REPORT
41 REMUNERATION REPORT
52 AUDITOR’S INDEPENDENCE DECLARATION
53 FINANCIAL STATEMENTS
95 DIRECTORS’ DECLARATION
95
INDEPENDENT AUDITOR’S REPORT
99 ADDITIONAL INFORMATION
100 CORPORATE DIRECTORY
SOLITAIRE AND ENHANCER RINGS FROM
THE EVERMORE COLLECTION
1
Our purpose:
the people behind the
moments that matter
2
Company profile
Michael Hill is an international
retail business operating as a
leading modern, differentiated,
omni-channel jewellery group.
As of 27 June 2021, it operates
285 stores across Australia,
New Zealand and Canada.
The first Michael Hill store opened in 1979 when Sir
Michael Hill and his wife, Lady Christine Hill launched their
unique retail jewellery formula in the New Zealand town
of Whangarei, some 160 kilometres north of Auckland.
With dramatically different store designs, a product range
devoted exclusively to accessible jewellery and the clever
use of high impact advertising, Michael Hill rapidly gained
popularity and rose to national prominence.
Following a successful listing on the New Zealand
Stock Exchange in 1987, the Group expanded across the
Tasman to Australia. After 15 years of sustained growth in
both countries, Michael Hill embraced the opportunity to
expand to North America in 2002, opening its first stores in
Vancouver, Canada. The Group's Canadian retail presence
continues to evolve as does the Group's innovative online
presence in all markets in which it operates.
In 2016 Michael Hill moved its primary stock
exchange listing to the Australian Securities Exchange
and continues to maintain a secondary listing on the New
Zealand Stock Exchange (ASX/NZX: MHJ).
As of 27 June 2021, the Group operates 150 stores
in Australia, 49 in New Zealand and 86 stores in Canada.
Around the world, the Group employs approximately 2,000
permanent employees across retail sales, manufacturing
and corporate roles.
From 1979 to the present day, and as we look to the
future, one constant underpins all that we do: we’re for
love. Michael Hill remains committed to creating quality
jewellery for our customers to cherish for a lifetime.
Information on our corporate governance policies
and practices, including our Corporate Governance
Statement, is available on our Investor Centre website at
investor.michaelhill.com
3
We never lose sight of the
principles of courage, innovation,
quality, design and ambition that
Michael Hill was founded on...
Dear Shareholders,
STRENGTH OF OUR HERITAGE,
A FOUNDATION FOR OUR FUTURE
We are constantly evolving our brand position, product
offering, customer engagement programmes and
business systems at Michael Hill to ensure we remain
relevant as a modern, differentiated omni-channel
jeweller. But, notwithstanding the transformation
programme Daniel is successfully leading, we never lose
sight of the principles of courage, innovation, quality,
design and ambition that Michael Hill was founded on.
Daniel and his team are doing an outstanding job of
fusing our past with our future strategic direction and the
strength of the FY21 result demonstrates the traction we
are gaining.
OUR BOARD
The Board of Directors is comprised of highly collaborative,
capable individuals with deep retail backgrounds and a mix
of complementary skills.
We are very fortunate to have Sir Michael, our
Founder President, as custodian of our brand, actively
contributing both at the Board table and out around our
network. The Board and our teams in store continue to
benefit enormously from his experience, insights and
constant challenge to do better.
At the end of the financial year, Emma Hill decided to
retire as Chair and remain as a Non-Executive Director. As
an admirer of the Michael Hill brand for many decades,
I was honoured to be selected by the Board to succeed
Emma as Chair and I now look forward to building on
the heritage that Sir Michael and Emma and the entire
Hill Family have contributed over the last four decades.
Furthermore, Daniel Bracken CEO, joined the Board as
Managing Director. I look forward to working with my
fellow Directors and the wider Michael Hill team to ensure
we continue to execute our strategic transformation and
develop and strengthen the Michael Hill brand in our
chosen markets.
STRONG RESULTS DURING
TRADE DISRUPTIONS
I am immensely proud of what the
Michael Hill team has delivered
over the last twelve months.
From the outset, we were
determined that the disruption
and uncertainty caused by the
pandemic raging around the
globe would not distract us
from our transformation agenda and the great progress
being made to position Michael Hill as a high performing,
modern, differentiated, omni-channel jeweller.
And the results speak for themselves; a record net
profit result for the group, strong balance sheet and
cash position, reduced inventory levels, increased sales
of branded collections, increased stock turn, substantial
growth in membership of our loyalty programme, continued
strong growth in our digital presence and effective
collaboration of our digital, social and physical channels.
Daniel will talk more to these achievements in his report.
It is clear that the impact of COVID-19 is not set
to abate anytime soon and the agility, adaptability,
resilience and perseverance, which enabled such a strong
performance over the last 12 months, will continue to drive
our strategic and operational momentum into the future.
COMMITMENT TO OUR PEOPLE
The pandemic has brought constant uncertainty and
sporadic restrictions on our freedom of movement and ability
to socialise, which can be debilitating and overwhelming
for many people. It is times such as these, with our people
exposed to new and elevated stresses, that our commitment
to our core beliefs and values is truly tested.
Throughout the year we have constantly been
referencing our values: We care, We create outstanding
experiences, We are professional and We are inclusive
and diverse to inform our thinking and drive our decision
making. Through every lockdown event and in response to
every new COVID-19 protocol that has been mandated, we
have responded and engaged with our team to ensure they
have the best possible support to adapt to these changes.
First and foremost, our priority has been to ensure
that we implement best-in-class health and safety
protocols across all facets of our business to keep our
people, our customers and our suppliers safe.
It was pleasing to see this commitment recognised
with our highest ever employee engagement score in
our end of year employee engagement survey. We are
incredibly fortunate to have such an experienced and
committed team as we navigate these turbulent times.
THIS PAGE AND OPPOSITE PAGE:
MORGANITE AND DIAMOND RINGS FROM THE
SIR MICHAEL HILL DESIGNER BRIDAL COLLECTION
5
The business delivered
both strong sales growth
and margin expansion in
all three markets...
6
DIVIDENDS
The Board has previously stated its intention
to restore dividend payments to historic
levels as the pandemic recovery becomes
more certain. After taking into consideration
business performance, the strength of the
balance sheet, and while also recognising the
risk of ongoing trading disruption, the Board
declared a final dividend of au3.0¢ per share.
This final dividend complements the interim
FY20 deferred dividend debt of au1.5¢ per
share and FY21 interim dividend of au1.5¢ per
share, paid earlier in the year and lays the
foundation for a sustainable dividend profile
going forward, subject to the impacts of
ongoing trading disruptions.
IN CONCLUSION
Reflecting on the year, I’m very proud of the
dedication, energy and resilience consistently
demonstrated throughout the business, and
would like to thank every individual and team
for their strength and determination in forging
ahead and contributing to the successful year
for Michael Hill – our business is our people.
I believe the company has a compelling
strategy and is well-placed, with a strong
balance sheet and a high performing
leadership team, to deliver on our growth and
transformation agenda, while also exploring
new business opportunities.
Regards,
Robert Fyfe
Chair
CEO’s message
TRANSFORMATION AGENDA ON TRACK
FY21 has been an outstanding year for
Michael Hill, delivering record financial
results, with all metrics up. This result
is a credit to both the execution of our
strategic initiatives and the dedication
and resilience of our team.
I’m particularly proud of these
results, as they were delivered whilst
navigating significant disruption from
the global pandemic. Half our Canadian stores were closed
for many months, Victorian stores were closed for more than
three months and multiple short sharp temporary closures were
experienced across our global network resulting in over 10,000
lost store trading days. Pleasingly, due to deliberate planning,
the pandemic did not significantly disrupt our inventory supply
chain and importantly, the business continued to prioritise the
ongoing health, safety and well-being of our team members and
our customers.
From a results perspective, the business delivered both
strong sales growth and margin expansion in all three markets,
further validating the transformation agenda is on track. Our
reinvigorated retail leadership demonstrated their commitment
to further embedding our retail fundamentals, which saw
increases in all key metrics – ATV, IPS and conversion. Our
Brilliance by Michael Hill loyalty program went from strength to
strength, ending the year with over 800,000 members.
Throughout the year we continued
to enhance our digital business,
which pleasingly, exceeded
expectations increasing sales
by 53% and delivering yet
another record for digital,
now 6.3% of total sales. The
team also worked tirelessly
to roll-out additional
omni-channel offerings,
including “ship from store”,
“click and reserve” and
“virtual selling”.
THREE STONE DIAMOND RINGS FROM
THE SIR MICHAEL HILL DESIGNER BRIDAL COLLECTION
7
Throughout the year we continued to
enhance our digital business, which
pleasingly exceeded expectations,
increasing sales by 53% ...
It should be noted our transformation agenda touches
• LOYALTY: With over 800,000 members in 18 months,
every single aspect of our business, and I couldn’t be
happier with how the team is working together to deliver
common goals as we further strengthen and elevate the
Michael Hill brand.
This outstanding result is the culmination of over two
years of hard work, building and executing our strategy.
This is best evidenced by eight quarters of comparative
sales growth, together with sustained margin expansion.
STRATEGIC UPDATE
Our seven strategic pillars remain firmly in place and
continue to focus on the evolution of Michael Hill into a
modern, differentiated, omni-channel jewellery group.
• BRAND: Elevating the Michael Hill brand, with the
introduction of aspirational brand-led campaigns and
an emphasis on local craftsmanship and artisans,
resulting in higher ATV and margin growth. Our
customer facing messaging will be further enhanced by
data and insights from our customer segmentation and
personalisation programs.
• DIGITAL: Building on current momentum, we expect
our new initiatives will continue to grow this key
strategic pillar. Additionally, new 3rd party digital
channels will be explored and expanded to grow our
digital footprint. During the year, we also saw the launch
of our new pure-play demi-fine brand, Medley.
• RETAIL FUNDAMENTALS: Underpinned by revitalised
leadership and the new retail incentive scheme, all
markets saw an increase across all key retail metrics.
Roster optimisation, visual excellence and increased
training will continue to be a priority, with additional
performance metrics added to our incentive scheme.
• OMNI-CHANNEL: Enabled by the roll out of our new
ERP platform early in FY21, “ship from store” has
delivered many cost and customer experience benefits,
while “click and reserve” has contributed sizable
incremental sales and in-store upselling opportunities.
Having already seen the benefits for ATV in trialling
these new customer channels, these initiatives,
together with virtual sales and digital appointments
will now be progressively rolled out across our global
network, along with the launch of “click and collect”
for Christmas 2021, delivering incremental sales and
enhanced customer experience.
acquisition has been our number one priority for
Brilliance by Michael Hill. With the use of predicative
analytics and increased personalisation, further growth
in the business will be driven by opportunities of
activation, engagement and retention.
• PRODUCT EVOLUTION: This sees a focus on regular
product newness, and uniquely Michael Hill branded
product as a key differentiator to excite our customers,
drive increased sales and margin growth. In the coming
years, the Company will increase its emphasis on
our Australian craftmanship, and continue to explore
additional sustainable and environmental opportunities.
• COST CONSCIOUS CULTURE: The Company’s
significantly improved net cash and targeted inventory
position at year end demonstrate that a cost conscious
culture exists across every aspect of the Company.
We continue to optimise our supply chain, improve
the global store network, and enhance our credit
propositions globally.
EXECUTIVE LEADERSHIP TEAM
To support our strategic roadmap and further advance
our digital transformation, I’m delighted to welcome Keith
Louie, as our first ever Chief Digital Officer. Keith brings a
wealth of retail experience, eCommerce leadership and
digital strategy to the Michael Hill business.
Keith’s appointment, alongside the recent arrivals
of Amy Sznicer, Chief Retail Officer, and Jo Feeney,
Chief Marketing Officer, adds significant expertise to our
already high calibre leadership team.
We have assembled a world-class leadership team at
Michael Hill, which is fully committed to our strategy, the
transformation and delivering outstanding results.
Daniel Bracken
Managing Director and CEO
FANCY CUT THREE STONE DIAMOND
RINGS FROM THE SIR MICHAEL HILL
DESIGNER BRIDAL COLLECTION
9
Performance
Highlights
Key Financial Results
Operational Performance
STATUTORY NET PROFIT AFTER TAX
INCREASED TO $45.3m
DIGITAL SALES INCREASED BY
53.4% TO A RECORD $34.8m
EARNINGS BEFORE INTEREST AND TAX
(EBIT) INCREASED TO $72.4m
DIGITAL SALES
REPRESENT 6.3% OF TOTAL SALES
GROUP OPERATING REVENUES
INCREASED 13.1% TO $556.5m
BRILLIANCE BY MICHAEL HILL NOW
over 800,000 members
GROUP SAME STORE SALES WERE
up 8.6% FOR THE YEAR
GROUP GROSS MARGIN INCREASED BY
210BPS TO 62.7%
MAINTAINED TARGET INVENTORY LEVELS
AT $171.2m
STRONG BALANCE SHEET WITH A HEALTHY
NET CASH POSITION OF $72.4m
MICHAEL HILL BRANDED COLLECTION SALES
CLIMB TO 42.1% OF TOTAL SALES
EXTENSIVE TEMPORARY STORE CLOSURES
CULMINATING IN 10,447 LOST TRADING DAYS
ONE NEW STORE OPENED AND SIX
UNDER-PERFORMING STORES WERE CLOSED
10 MICHAEL HILL INTERNATIONAL LIMITED 2020 FINANCIAL STATEMENTS
Key Facts
TRADING RESULTS
Group revenue
Gross margin
Earnings before interest
and tax (EBIT)*
Comparable earnings before
interest and tax (EBIT)*
Net profit before tax (NPBT)
Net profit after tax (NPAT)
Group trading results
Profit for the year
Net cash inflow
from operating activities
FINANCIAL POSITION
Contributed equity
388,142,149 ordinary shares
Total equity
Total assets
Net (debt) / cash
Capital expenditure
2021
au$000
2020
au$000
% Change
556,486 492,060
348,916 298,204
13.1%
17.0%
72,398
14,079
414.2%
56,594
64,807
45,328
(5,225)
4,485
3,059
1,183.1%
1,345.0%
1,381.8%
2021
2020
KEY RATIOS
Return on average shareholders funds
Gross margin
Interest expense cover (times)
Equity ratio (total equity/total assets)
Working capital ratio
(current assets / trade payables)
Current ratio
(current assets/current liabilities)
26.1%
62.7%
9.5
38.1%
1.9%
60.6%
1.5
30.7%
3.7 : 1
3.0 : 1
1.8 : 1
1.4 : 1
45,328
3,059
1,381.8%
143,452
83,699
78.0%
DIVIDENDS - including final dividend
Per ordinary share
Times covered by net profit after tax
au4.5¢
2.60
au1.5¢
0.53
11,016
11,285
193,401 153,806
508,111 501,618
72,361
2.4%
25.7%
1.3%
523 13,735.8%
9.6%
19,027 17,353
SHARE PRICE AT YEAR END
au$0.83 au$0.32
KEY INVESTOR RATIOS
Basic earnings per share
Diluted earnings per share
EBIT to sales
Return on average total assets
au11.68¢ au0.79¢
au0.79
au11.63¢
2.9%
13.0%
0.7%
9.0%
SAME STORE SALES*
(in local currency)
Australia
New Zealand
Canada
Group same store sales movement
13.0%
7.1%
6.8%
8.6%
0.1%
2.4%
2.3%
2.7%
NUMBER OF S TORES
Australia
New Zealand
Canada
Total number of Michael Hill stores
150
49
86
285
155
49
86
290
* EBIT, Comparable EBIT and Same Store Sales are Non-IFRS
information and are unaudited. Please refer to page 35 for an
explanation of Non-IFRS information and a reconciliation of EBIT and
Comparable EBIT.
DESIGNER HALO ENGAGEMENT RING
WITH MATCHING PENDANT AND EARRINGS
FROM THE SIR MICHAEL HILL
DESIGNER BRIDAL COLLECTION
11
.
5
0
1
.
2
8
.
0
9
1
.
1
4
8
.
1
3
.
3
5
4
.
0
5
.
0
5
.
9
3
0
2
1
.
2
9
1
.
5
9
7
1
7
.
8
7
1
2
.
1
7
1
5
.
4
.
0
4
.
3
4
.
5
6
1
7
.
0
1
.
3
5
.
1
17
18
19 20 21
17
18
19 20 21
17
18
19 20 21
17
18
19 20 21
Return on average
assets 9%
% / YEAR ENDED 27 JUNE
Net profit from operating
activities after tax up 1,382%
AU$ MILLIONS /
YEAR ENDED 27 JUNE
Ordinary dividend
AU CENTS PER SHARE /
YEAR ENDED 27 JUNE
Inventory down 4.4%
AU$ MILLIONS /
FINANCIAL YEAR
12
7
.
3
2
1
5
.
5
7
5
.
5
9
6
5
1
.
1
5
5
.
5
6
5
5
1
.
2
9
4
5
.
5
7
5
.
4
6
7
.
9
6
.
5
0
4
%
1
.
6
2
%
9
0
2
.
%
4
.
7
1
AUSTRALIA 56%
NEW ZEALAND
23%
CANADA 21%
%
4
9
.
%
9
.
1
17
18
19 20 21
17
18
19 20 21
Revenue by country
FINANCIAL YEAR
Earnings before interest,
taxation, depreciation and
amortisation (EBITDA) up 77%
AU$ MILLIONS /
YEAR ENDED 27 JUNE
Group revenue up 13%
AU$ MILLIONS /
YEAR ENDED 27 JUNE
17
18
19 20 21
Return on average
shareholders’ funds 26.1%
YEAR ENDED 27 JUNE
EMERALD CUT SOLITAIRE FROM
THE FENIX CREATED DIAMONDS
FOR MICHAEL HILL COLLECTION
1313
Trend Statement
FINANCIAL PERFORMANCE
Group revenue
Earnings before interest, tax, depreciation
and amortisation (EBITDA)
Depreciation and amortisation
Earnings before interest and tax (EBIT)
Net interest paid
Net profit before tax (NPBT)
Income tax
Net profit after tax (NPAT)
Net operating cash flow
Ordinary dividends paid
FINANCIAL POSITION
Cash
Inventories
Other current assets
Total current assets
Other non-current assets
Deferred tax assets
Total tangible assets
Right-of-use assets
Intangible assets
Total assets
Total current liabilities
Non-current borrowings
Lease liabilities
Other long term liabilities
Total liabilities
2021
$000
2020
$000
2019
$000
2018
$000
2017
$000
556,486
492,060
569,500
575,539
551,099
123,691
51,293
72,398
7,591
64,807
19,479
45,328
143,452
11,636
2021
$000
72,361
171,246
27,463
271,070
37,729
60,585
369,384
105,882
32,845
508,111
151,522
-
-
163,188
314,710
69,690
55,611
14,079
9,594
4,485
1,426
3,059
83,699
5,817
40,481
19,366
21,115
2,304
18,811
2,313
16,498
38,969
19,365
64,481
18,694
45,787
2,680
43,107
11,342
31,765
54,893
19,371
75,482
17,427
58,055
3,149
54,906
13,769
41,138
39,752
19,264
2020
$000
2019
$000
2018
$000
2017
$000
11,204
7,923
7,220
5,676
178,742
179,503
192,074
203,853
31,007
35,878
29,314
29,052
220,953
223,304
228,608
238,581
57,857
74,468
72,742
67,708
72,219
68,022
83,864
62,712
353,278
363,754
368,849
385,157
123,911
-
-
-
24,429
15,439
12,626
8,784
501,618
379,193
381,475
393,941
159,405
105,130
108,710
10,681
32,704
35,213
115,848
-
-
95,716
45,034
-
61,878
64,607
62,627
62,252
347,812
202,441
206,550
203,002
Net assets
Reserves and retained profits
Paid up capital
193,401
182,116
11,285
153,806
176,752
174,925
190,939
142,790
165,768
164,659
180,924
11,016
10,984
10,266
10,015
Total shareholder equity
193,401
153,806
176,752
174,925
190,939
Basic earnings per share
Diluted earnings per share
Dividends declared per share - Interim
- Final
11.68¢
11.63¢
au1.5¢
au3.0¢
0.79¢
0.79¢
au1.5¢
-
4.26¢
4.25¢
au2.5¢
au1.5c¢
8.20¢
8.19¢
au2.5¢
au2.5¢
10.66¢
10.66¢
au2.5¢
au2.5¢
Net tangible asset backing
$0.14
$0.01
$0.42
$0.42
$0.47
14
ANALYTICAL INFORMATION
EBITDA to sales
EBIT to sales
Net profit after tax to sales
EBIT to total assets
Return on average shareholders funds
Return on average total assets
Working capital ratio
Current ratio
EBIT interest expense cover
Effective tax rate
2021
22.2%
13.0%
8.1%
14.2%
26.1%
9.0%
3.7 : 1
1.8 : 1
9.5
30.1%
2020
14.2%
2.9%
0.6%
2.8%
1.9%
0.7%
3.0 : 1
1.4 : 1
1.5
31.8%
2019
7.1%
3.7%
2.9%
5.6%
9.4%
4.3%
5.0 : 1
2.1 : 1
8.6
12.3%
Net borrowings to equity
Equity ratio
-37.4%
38.1%
-0.3%
30.7%
23.5%
46.6%
2018
11.2%
8.0%
5.5%
12.0%
17.4%
8.2%
4.6 : 1
2.1 : 1
17.0
26.3%
27.7%
45.9%
2017
13.7%
10.5%
7.5%
14.7%
20.9%
10.5%
4.9 : 1
2.5 : 1
18.3
25.1%
20.6%
48.5%
Shares issued at year end excl Treasury
Treasury stock at year end
388,142,149
-
387,769,105 387,750,000
387,438,513
387,438,513
-
-
-
14,677
1.07
0.95
-
150
49
86
-
285
1.04
0.90
-
155
49
86
-
290
1.06
0.95
-
167
52
86
-
305
1.09
0.98
0.78
171
52
83
-
306
1.07
0.97
0.83
166
52
76
9
303
Exchange rate for translating:
New Zealand results
Canadian results
United States results
Number of Michael Hill stores
Australia
New Zealand
Canada
USA
Total number of Michael Hill stores
.
8
4
3
7
.
4
2
.
0
6
1
1
.
1
1
.
9
6
1
.
2
4
3
.
7
3
5
.
2
3
.
0
8
1
2
.
4
1
17
18
19 20 21
17
18
19 20 21
Digital sales up 53%
AU$ MILLIONS /
FINANCIAL YEAR
Branded collections up 13%
% OF TOTAL SALES /
FINANCIAL YEAR
Total Michael Hill stores 285
1987 - 2021
15
Sustainability
Michael Hill
- the jeweller
who cares
Overarching Focus Areas
Love our Communities
We strive to have a consistent and positive
impact in the global communities we work with
and operate in.
Love our Team
Our priority is to create a diverse and inclusive
environment which allows our team members
to be their authentic selves and feel their
growth is recognised and supported.
Love our Environment &
Product
We will consistently search for a better way to
operate, to benefit and reduce our impact on
the environment.
At Michael Hill we are consistently striving
to be better, and do better for our team,
the environment, and our community. We
recognise that the decisions we make today
are a commitment to a more sustainable
future for our planet, and future generations.
Sustainability has been recognised as
an integral component of our strategic
plan. During FY21 we made a positive
difference in the communities we serve
through delivering initiatives aligned to
our three core sustainability pillars: to
love our team, love our environment and
product, and love our communities – as we
believe love changes lives. Aligned with
the United Nations (UN) 17 Sustainable
Development Goals, our future initiatives
will contribute towards vital, global areas
for improvement.
Committed to developing a strong roadmap
towards becoming a more sustainable
and ethically responsible business, we
will continue to focus on our three core
sustainability pillars, to ensure we are
protecting our ecosystem and contributing
to the communities we serve in meaningful
ways, for generations to come.
16
Aligned with Industry Experts
A UNITED EFFORT
As we embark on the next phase of our
sustainability journey, we are guided by, and
aligned with the UN Sustainable Development
Goals (SDG’s); 17 global goals adopted by
the UN to assist in transforming our world by
2030. The changes implemented at Michael
Hill will contribute positive change towards this
important global agenda.
RESPONSIBLE JEWELLERY COUNCIL
Michael Hill is a proud member of Responsible Jewellery Council
(RJC); the peak industry organisation established to advance
responsible business, human rights, social and environmental
practices throughout the jewellery and watch supply chain.
Responsible Jewellery Council is the leading standards
organisation of the global jewellery and watch industry. RJC
members commit to and are independently audited against the
RJC Code of Practices – an international standard on responsible
business practices for diamonds, coloured gemstones, silver, gold
and platinum group metals. The Code of Practices (COP) addresses
human rights, labour rights, environmental impact, mining
practices, product disclosure and other important aspects of the
jewellery supply chain. RJC also works with multi-stakeholder
initiatives on responsible sourcing and supply chain due
diligence. The RJC’s Chain-of-Custody Certification (CoC) for
precious metals supports these initiatives and can be used
as a tool to deliver broader member and stakeholder benefit.
Through the implementation of the COP and CoC members
contribute towards the 17 Sustainable Development Goals of
the United Nations 2030 agenda.
When a customer chooses to buy from an RJC certified
member, including Michael Hill, they are choosing a company that
is recognised for its ongoing commitment to put people and our
planet first. At Michael Hill, we work to ensure responsibility is at the
forefront of our strategic initiatives, demonstrated in our day-to-day
operations, business planning activities and decision-making
processes. In close consultation with the RJC Code of Practices, we
remain committed to providing special jewellery pieces worthy of
celebrating love. We continue to explore new materials, innovative
processes and the latest technologies that are shaping and evolving
the jewellery industry towards a more sustainable and ethically
responsible future.
C E R T I F I E D M E M B E R
0 0 0 0 1 5 5 7
“I would like to congratulate Michael Hill on their certification.
We work in an industry of beauty and emotions - connecting
hearts and minds. Consumers always expect trust when they
buy a piece of jewellery to celebrate a significant moment in
their lives. In this era of trust and resilience, now more than
ever there is a need for more companies to inspire, take action
and commit towards a journey of purpose, and continuous
improvement. RJC supports its members in an integrated
approach of best management practices to sustainability. We
welcome their leadership and commitment towards responsible
business practices."
THIS PAGE & OPPOSITE PAGE:
MORGANITE AND DIAMOND RINGS
FROM THE SIR MICHAEL HILL
DESIGNER BRIDAL COLLECTION
Iris Van der Veken
Executive Director
Responsible Jewellery Council
17
Love our Communities
SUPPLY CHAIN TRANSPARENCY
From the sourcing of our diamonds, precious stones
and precious metals, to our retail stores, Michael Hill
respects and promotes human rights at every step of
our supply chain. We work closely with suppliers to
remain at the forefront of innovation and technology,
continually advancing supply chain transparency. Our
customers can be assured they are purchasing special
jewellery pieces that have been ethically sourced.
In FY20, Michael Hill launched a web-based
platform to collect supplier data and identify modern
slavery risks and solutions in our supply chain. The
platform assists with gathering information regarding
the operational and procurement practices of direct
suppliers via an online Ethical Supply Chain Assessment,
and the results then drive more detailed audit processes.
1. Michael Hill has engaged its top 67 suppliers
(wholesale, manufacturing and packaging suppliers),
representing 60% of total supplier spend, to complete
the assessment.
2. As at 30 June 2021, of the 67 top suppliers, 93% have
completed assessments.
Third party assurance
provider performs review of
high risk areas and presents
findings to MHJ
Supplier flagged
for review
3. Where suppliers are already Responsible Jewellery
Council (RJC) accredited, they complete a simplified
version of the assessment, whilst non-RJC suppliers
(currently 31) complete the full assessment, which
includes information on:
• Site information
• Social
• Business ethics
• Health and safety
This provides a view in line with key RJC requirements.
• Responsible procurement
• Environment and sustainability
• Business performance
4. Bureau Veritas (testing, inspection and certification
provider) are performing independent audits and
verification over the completed assessments.
5. Targeted reviews are mandated in cases where more
clarity is required or there are concerns identified by
the assessment.
When renewing future supplier contracts, we place
significant weighting on whether a company’s ethical
and environmental standards are aligned with ours.
100% of diamonds used in our products are conflict
free, and we continue to explore, innovate with, and
invest in other sustainable raw materials. Our supplier
transparency platform process is outlined below.
In FY22 Michael Hill will ensure more of our existing
suppliers complete the assessment as part of contract
renewals, as well as any new suppliers being considered
as part of their onboarding process. Results of desktop
reviews will be risk assessed and decisions made
around the future supplier relationship.
MHJ assesses risk of continuing
supplier engagement
End contact with
supplier
Completed
assessments
Supplier not
flagged for review
No further action required.
Suppliers will be required
to redo assessments every
two years.
Existing and new suppliers
on-boarded to Supplier
Trnsparency Platform
Incomplete
assessments
MHJ follows up
directly with supplier
If assessment is not
complete within six months,
MHJ will end engagement
with supplier
18
Work with supplier
on a remediation plan
If remediation is
not completed within
acceptable time
frames, end contact
with supplier
Made in Australia
From the initial design and 3D-printed resin mould, to
gold casting, diamond sorting and setting, polishing and
engraving – our beautiful Made in Australia pieces come
to life in our in-house workshop in Brisbane, Australia.
Where possible, we believe it is important for
our business model and local communities to keep
manufacturing industries alive in the markets we operate,
to support local jobs and protect our supply chain
from disruption. Having our in-house workshop located
alongside our head office and distribution centre ensures
our manufacturing team are a central, focal point of our
organisation as we continue to increase our focus on,
and delivery of, quality product from this area.
69% of all solitaire engagement rings sold
were made in Australia
Made in Australia product made up
14% of sales
16,796 individual products
were made in our Australian manufacturing facility
30 full time team members in our
Australian manufacturing facility
Made in New Zealand
Several of our chain necklaces and bracelets, as well as
our most-loved round and oval solid bangles, are crafted
for quality and beauty by our New Zealand supplier, Morris
and Watson. Morris and Watson are a fourth-generation
family business, dedicated to providing beautiful jewellery
with quality and fineness. Morris and Watson are also a
member of the RJC.
OUR FIRST MODERN SLAVERY STATEMENT
In March 2021 we released our first Modern Slavery
Statement covering the financial year ending 30 June
2020, showing the steps we are taking to identify and
address the risks of modern slavery in our supply chain.
This statement reflects our wider commitment to sus-
tainability and proposes a new lens through which we
see our business operate; and a copy can be found on
our Investor Relations Centre website at
investor.michaelhill.com
Our Modern Slavery Statement identified supplier
due diligence as a key component for managing
modern slavery risks. The supply chain transparency
platform outlined above assists with gathering
necessary information on the operational and
procurement practices of direct suppliers via an online
Ethical Supply Chain Assessment, and the results then
drive more detailed audit processes.
In line with the commitments made in the 2020
Modern Slavery Statement, the following is underway to
improve and streamline supplier management:
• Review of new supplier onboarding process
• Review of existing supplier contracts
• Review our Code of Ethics and Code of Conduct for
Suppliers Policy.
Our focus areas for the coming years are to:
• Onboard more suppliers onto the supply chain
transparency platform
• Revise the selection process for new suppliers to
include completion of a more detailed questionnaire
around how they manage modern slavery risks, visits
to their facilities to understand working conditions,
and appropriate revisions to the Code of Conduct for
Suppliers Policy (if required)
• Restart, when travel restrictions allow, the regularity of
supplier visits to production facilities
• Review substantial supplier contracts.
Our 2021 Modern Slavery Statement covering the
financial year ending 30 June 2021 will be released in
the coming months.
KEEPING LOCAL INDUSTRY ALIVE
We work in partnership with all our suppliers to ensure
only high-quality jewellery is offered at Michael Hill, with
local craftsmanship being one of the founding pillars in
the heritage of our business. Michael Hill first established
an in-house workshop in the 1980s, and we are one of
the only jewellers to maintain a retail-led workshop to
this day, with a dedicated team of master craftsmen,
diamond specialists and quality control professionals.
19
SAVE THE CHILDREN
AND MICHAEL HILL
HELPING SAVE THE CHILDREN
THROUGH COVID-19
Throughout the 2020 festive period
we celebrated with our Ellie-Mae
Sparkle initiative - a children’s book
(with illustrations by Sir Michael
Hill and words by award-winning
author, Emma Mactaggart) sold in
store to raise funds towards Save
the Children’s COVID-19 response
efforts. Thanks to the sales of Ellie-Mae’s Sparkle, we successfully raised over
$30,000 for Save the Children, supporting disadvantaged children across our
Australian, Canadian and New Zealand communities.
"Thanks to the generous support of Michael Hill, we were able to
provide rapid response efforts to help protect and support communities
challenged by COVID-19, keeping them healthy and safe during this
heightened period of isolation”
David Faulmann,
Save The Children Corporate Partnerships Manager
EMPOWERING WOMEN GLOBALLY WITH DRESS FOR SUCCESS
Aligning with International Women’s Day in March 2021, Michael Hill partnered
with global charity, Dress for Success; a non-profit organisation that empowers
women to achieve economic independence. Dress for Success works with
women to help them achieve economic independence by providing a network of
support, professional attire, and the development tools to help women thrive in
work and in life.
We created a sterling silver pair of earrings with Michael Hill donating more
than 50% of the gross sales proceeds to Dress for Success. With incredible
engagement from our team and customers across all markets, we raised over
$14,500 to help empower women globally.
OUR TEAM
AS AT 27 JUNE 2021
Love our Team
NZ
AU
CA
Total employees
by region
Full time employees
by gender
Part time employees
by gender
Casual employees
by gender
Total employees
by gender
30–50
<30
>50
Total employees
by age
~90%
Education, training
and progression
Employees that received regular
performance and career development
review during the year
TEAM ENGAGEMENT
We are committed to creating outstanding employment
and workplace experiences for our team. Our 2021 Group
team engagement survey result saw a significant improvement in employee
engagement across the Company.
Our annual engagement survey indicated that 85% of our team members
are engaged, meaning they see us as a great place to work and feel a sense of
personal accomplishment in their roles at Michael Hill. This places us 13% above
the Qualtrics Global Retail Industry benchmark. Each market we operate in
experienced engagement results that were higher than in previous years and are
well above global and country retail and all company averages. With 86% of our
workforce having their say and completing the survey we are confident that these
results are reflective of our teams’ experiences.
We know that a highly engaged workforce correlates with strong performance,
better health and safety outcomes and better employee retention and we are seeing
this in our results. We empower every leader to improve team engagement with
real-time insights that show them exactly where to focus their efforts to increase
performance. The impact of our leaders is great. We are proud of these outstanding
results as it is our people that will drive the success of our company into the future.
OUR DIVERSE AND INCLUSIVE TEAM
At Michael Hill, we believe diversity of background, life experience and perspective
drives innovation, performance, and engagement and we strive to create a
workplace that is inclusive for all. We want our workplace to be a safe, supportive
environment where all team members feel valued and appreciated, and can be
their brilliant selves, all the time.
To do this well, we need to know more about our workforce. That’s why we’ve
embraced a refreshed and accelerated approach to diversity and inclusion. We’re
building a culture where difference is valued.
Together, we will continue to build an inclusive culture that encourages, supports,
and celebrates the diverse voices of our team members; a culture which fuels
innovation, and creates closer connections with our customers and our communities.
WOMEN IN THE WORKPLACE
Women play a significant role in our success and we are proud to offer opportunity,
development and progression for women in the workforce of all ages and life
stages. Gender equality is monitored annually at all levels of the organisation and
we are committed to an environment that is free from discrimination and enables
women to realise their full potential.
• Half of the Michael Hill Executive Leadership Team are female (three women and
three men)
• 1/3 of our Board of Directors are women
• 60% of leadership positions globally are held by women
• The Michael Hill workforce is comprised of individuals of various ages and life stages
• Women represent 88% of our global workforce.
CONSISTENTLY LISTENING, LEARNING, AND IMPROVING
• We’ve introduced a comprehensive comparative analysis framework to enable
deeper understanding of quantitative and qualitative diversity and inclusion
metrics across Michael Hill. This includes measuring, tracking, and reporting
annually on markers such as gender distribution, gender wage gap, generational
spread and employee engagement. This data is used to inform our strategy and
areas of focus for the future.
• We are committed to the ongoing development of our people, particularly in
relation to Diversity & Inclusion (D&I). In 2020 we delivered training to our hiring
THIS PAGE: DIAMOND LOVE NECKLACES
DESIGNED BY LADY CHRISTINE HILL
21
We care.
We create outstanding
experiences.
We are professional.
We are inclusive
& diverse.
22
HELPING OUR TEAM STAY HEALTHY, SAFE
AND SECURE
At Michael Hill, we are accountable for creating and
maintaining healthy, safe and secure work environments
for our team members, customers and visitors who
interact with our business. We know that our success
depends on our people, and we are committed to
ensuring the physical and mental health, safety and
security of everyone who comes to work, or visits our
stores. The unpredictable and ever-changing challenges
presented by the COVID-19 pandemic remain a priority.
Despite the ongoing disruption and threat caused by
COVID-19, we were still able to complete a range of
health, safety and security initiatives during the year.
Health, Safety and Security Initiatives delivered in FY21
• Completed an Emergency Response Management
Plan rollout – to ensure consistency in meeting
regulatory requirements and ensure our team
members are prepared to respond appropriately in
the event of an emergency.
• Renewed and updated first aid requirements across
the Group.
• Conducted a six-week health and wellbeing challenge
– to assist in maintaining health and wellbeing
awareness across the busiest time of the year
(November and December).
• Provide a flu vaccination program to team members in
Australia and New Zealand - to assist illness prevention.
• Completed task-based activity risk assessments for
manufacturing and safe work practices – to ensure
consistent and well-developed safety standards.
• Improvements across all statistical indicators
including injury and incident frequency rates.
• Our employee assistance program continues to offer
all team members up to six free counselling sessions
across a range of different service offerings.
• Reviewed and implemented improvements in our
store security framework, enabling us to gain better
insights into our security portfolio, and to ensure
we have up to date and effective security solutions
across our business.
managers which focused on why a diverse workforce
is important to achieving our goals and how inclusive
hiring practices that are based on capability and
merit lead to increased team effectiveness and
performance. We also developed an Inclusive
Leadership Guide for leaders, specifically designed
to raise awareness and recognise and address
unconscious bias. Over the next year we will introduce
unconscious bias training to our online learning
portfolio to further foster an environment of inclusive
practices and mindsets.
• A voluntary, confidential diversity questionnaire was
developed and deployed to enable a more robust
understanding of the workforce demographics of our
team members such as their cultural background,
gender identity, ability, education and much
more. This initiative will be enhanced next year
by introducing specific pulse surveys through our
listening program provider.
• Michael Hill’s new Diversity & Inclusion Committee
was formed in 2020 with a diverse representation
of team members from our global workforce. The
Committee is dedicated to and passionate about
pushing our Diversity & Inclusion Strategy forward
in a variety of ways, including a calendar of events
to celebrate the diversity within our organisation
and communities, through awareness raising and
educational initiatives.
INTERNAL CAMPAIGNS TO CELEBRATE OUR TEAM
At Michael Hill we are committed to celebrating and
honouring our diverse workforce. Throughout the year, our
Diversity & Inclusion Committee run internal campaigns
focussed on Diversity & Inclusion education and
awareness, fostering a collective commitment towards a
more inclusive environment for all team members.
Celebrating International Pride month
In June 2021 we celebrated International Pride month
with all team members. Throughout the month we
reaffirmed our solidarity with the Pride community,
highlighted the importance of inclusive language,
provided guidance on how to be an ally and shared
resources for any team member that may require
relevant support. We also hosted voluntary lunch and
learn sessions celebrating Pride culture.
International Women’s Day
In March we embraced the 2021 #choosetochallenge
theme. We encouraged our team members globally to
pledge how they would challenge for change and gender
equality through meaningful commitments, big or small,
that they could implement in their personal or professional
lives. We also celebrated some of our talented female
team members who are forces in their field.
RINGS FROM THE EVERMORE COLLECTION
23
...as part of our business
practices and supply
arrangements we ensure that
100% of our diamonds are
conflict free
24
Love our Environment & Product
OUR PRODUCT EVOLUTION
At Michael Hill, we are working
with the RJC, our suppliers and
other industry partners to ensure
we deliver ethical products to
the very highest quality standard
possible. We are constantly
investigating the materials we
use to be less impactful on our
environment, whilst continuing to
provide the quality of jewellery that
our customers trust us to create.
Our diamonds are purchased
from legitimate sources in
accordance with the Kimberley
Process Certification Scheme
(KPCS), as supported by the
World Diamond Council System
of Warranties. The KPCS is a joint
government, international diamond
industry and civil society initiative
to prevent conflict diamonds from
entering the supply chain.
As part of our business
practices and supply arrangements,
we ensure that 100% of our
diamonds are conflict free.
Other product initiatives we are
planning to rollout over the next few
years, reflecting our commitment to
progress toward a circular economy
in our category include:
• Using recycled gold and silver
to craft new products
• Ensuring all our vendors
source their gold from LBMA
accredited refiners
Introducing traceable diamond
programs
•
• Using repurposed diamonds to
craft new products.
We will continue to stay at the
forefront of sustainable product
evolution in our category and will
consistently strive to bring more
sustainable product solutions to
our customers.
EVOLVING OUR FOUNDATIONS FOR THE BENEFIT OF THE PLANET
During the year we have proudly implemented several changes to our
business operations which have had a positive environmental impact and
reduced operating costs.
Our expansion in Canada
reducing international freight lanes by establishing a new in country
distribution centre, and optimising local trade routes, reducing our
existing carbon footprint through a local approach.
LED lights
introduced to 78 stores
(1950 light fittings)
reducing electricity consumption of halogen
lights; and a commitment to deliver LED
lights to our entire store network by 2025.
Heavily reduced printed
marketing material:
226 tonnes of
printed collateral reduced
in FY21.
Use of
sustainable
paper:
all printed catalogues in
PEFC certified recycled
& recyclable paper.
Developing new
sustainable product &
eCommerce packaging
to reduce single use plastic waste in over
300,000 orders annually.
Removed single use plastic in manufacturing:
installation of a distilled water filtration system in our manufacturing
facility to replace plastic bottled water removing environmental impacts
of 240 x 20L plastic bottles going to landfill annually.
Project “Paper Cut”
reduced paper use across entire network,
including printer consolidation, scan/
login; e-receipts instore; automated
invoice program; digital retail calendar
and Regional Manager online hub.
Sustainable
Screen Disposal
Program:
over one tonne of out-of-date
hardware diverted from landfill.
OPPOSITE PAGE:
MODEL WEARS AN ENGAGEMENT RING FROM THE
MICHAEL HILL DESIGNER BRIDAL COLLECTION
Cloud based storage
and automated power down, reducing carbon footprint and energy use.
25
Executive Leadership Team
Daniel Bracken
MANAGING DIRECTOR & CHIEF
EXECUTIVE OFFICER
Daniel has more than 25
years’ experience managing
some of the world’s most
iconic brands. He has an
extensive background in
retailing, fashion, and brand
development in Australia and
international markets, as a
Chief Executive Officer and
in senior executive positions
across strategy, marketing,
merchandise, product design
and digital and customer
engagement strategies.
Prior to joining Michael
Hill as CEO in November 2018,
Daniel was CEO at Specialty
Fashion Group and previously
held positions as the Group
Vice President, Strategy for
Burberry London, as Deputy
CEO and Chief Merchandise &
Customer Officer of Myer, and
as CEO of The Apparel Group.
During his time at
Speciality Fashion Group,
Daniel led the company’s
corporate restructure and the
successful divestment of a
number of brands, returning
the company to profitability.
At Myer, he oversaw
merchandise buying, design,
sourcing, and manufacturing,
and led the Myer brand and
customer experience strategy.
During his tenure, the Apparel
Group owned leading fashion
brands Sportscraft, Saba,
Willow, and JAG.
His international
experience includes more than
15 years at Burberry London
in the United Kingdom, where
he was a key member of the
leadership team involved
in their turnaround into an
iconic global brand. He
performed a range of roles
at Burberry including Vice
President – Strategy (Group),
Head of Merchandising &
Production (Ready to Wear),
and Commercial & Operations
Director (Menswear).
Andrew Lowe
CHIEF FINANCIAL OFFICER &
COMPANY SECRETARY
Andrew joined Michael
Hill in December 2017 as
Chief Financial Officer, and
later assumed the role of
Company Secretary. He holds
a Bachelor of Commerce,
a Bachelor of Laws and a
Masters of Applied Finance,
and is a qualified Chartered
Accountant and a Chartered
Taxation Adviser of the
Taxation Institute of Australia.
Andrew has extensive
experience in finance and
leadership roles across a
range of listed corporate
groups with Australian and
offshore operations. This
includes as Head of Tax,
Shared Services and Finance
Partnering at Australia’s
largest rail-based freight
operator and ASX100 firm,
Aurizon. Previously, he was
Deputy CFO and Head of
Tax at Cleanaway Waste
Management, and spent a
decade with global mining
company, Anglo American.
Joanne Matthews
CHIEF PEOPLE OFFICER
Joanne joined Michael Hill in
January 2019 with extensive
experience in change leadership,
and talent management and
development. This experience was
gained across 14 years in senior
human resource leadership roles,
including as Divisional Human
Resources Manager (Leisure) for
Super Retail Group.
Joanne has also worked as the
Executive General Manager, Human
Resources for MAX Solutions
Pty Ltd, a national organisation
that delivers health, training and
humanitarian solutions for Federal
and State Governments, and
prior to this she worked in retail
operations with Woolworths.
With a large workforce in nearly
300 stores across Australia, New
Zealand and Canada, Joanne’s
experience is well aligned to deliver
on the Company’s core talent
priorities of team engagement and
attracting, developing, rewarding
and retaining top quality people at
Michael Hill.
Joanne holds an MBA and
Bachelor of Business in Human
Resources and Marketing.
FROM LEFT: ANDREW LOWE, AMY SZNICER ,
DANIEL BRACKEN, MATT KEAYS, JOANNE MATTHEWS,
JO FEENEY, KEITH LOUIE
26
Amy Sznicer
CHIEF RETAIL OFFICER
Matt Keays
CHIEF INFORMATION OFFICER
Keith Louie
CHIEF DIGITAL OFFICER
Jo Feeney
CHIEF MARKETING OFFICER
Amy has 24 years’ leadership
experience, across retail and
beauty industries, having
worked with prominent retail
brands such as Witchery, GAP,
Bras n Things, Guess Jeans and
Aldo. She has led the roll out
of over 200 new retail stores
in Australia, New Zealand and
Singapore and was named
2006 Australian Young Business
Woman of the Year at the Telstra
Business Women’s Awards.
Prior to joining Michael
Hill as Chief Retail Officer in
January 2021, Amy owned
and operated a New Zealand
blow dry bar/tea house salon
business ‘Dry & Tea’ since 2014.
During Amy’s leadership the
business expanded to Australia
and continued its status as a
multi-award winning category
leader. Amy’s extensive career
in specialty fashion retailing
along with her experience as
a business owner has built
a broad skill set that goes
beyond store operations.
Amy is extremely
passionate about dynamic
leadership, a strong company
culture, deep retail foundations
and driving high performance
in an ever-changing retail
landscape. These qualities
enable her to consistently
deliver the highest standard of
customer service and ultimately,
strong business performance.
Matt joined Michael Hill in
June 2015, bringing with
him extensive international
IT experience in the retail
space. Prior to joining the
company, Matt led the global
IT strategy for Forever New
as their General Manager
Information Technology, and
prior to that worked as Chief
Information Officer for Super
Amart where his final project
was successfully leading a
full-scale disaster recovery
process after the Queensland
floods in 2011. He also worked
for leading national footwear
and apparel company,
Colorado Group after enjoying
his long retail apprenticeship
with 11 years at Country Road,
where he worked initially as
a Finance Accountant, and
also gained solid shop floor
experience during his tenure.
Matt has strong technical
skills and a track record
of developing an effective
team focused on business
alignment. Matt’s career has
seen him lead significant
technology and infrastructure
programs, covering Microsoft
Dynamics, Infor, Oracle and
JDE. He has helped retail
businesses implement and
embrace data warehousing
with his first Microsoft based
implementation as far back
as 2004. The Michael Hill
advanced data warehouse
went live in 2016 and his team
continually evolve our data
platforms to align with the
strategic shifts across the
business.
Keith joined Michael Hill in
August 2021, as our first Chief
Digital Officer. He brings more
than 30 years’ experience in
consumer goods production,
wholesale, retail and advisory
across Europe and Australasia,
and deep experience of
eCommerce leadership and
digital transformation over the
last 15 years.
Keith led online shopping
for Coles Supermarkets for six
years during its transforma-
tion under the Wesfarmers
group, rebuilding the customer
experience and operating
model. Subsequently, he led
online retail for Target and
advised other Wesfarmers
brands on eCommerce, before
becoming CEO of the national
Aussie Farmers Group, a
privately-owned fresh food
production, wholesale, online
retail, and logistics group.
More recently, Keith has
advised various listed, private
and Government entities
on eCommerce and digital
transformation, building on
his earlier experience as a
Director and Associate Partner
of management consulting firm
PwC, and with IBM’s Global
Business Solutions team.
Keith is known for
innovative ideas, thinking
strategically, applying a
rigorous commercial lens, and
taking action to transform
businesses digitally. In doing so,
he inspires the teams he leads
to deliver change and improve
customer experiences.
Jo joined Michael Hill in March
2021 as Chief Marketing
Officer to lead the revitalisation
and growth of the Company’s
brand, delivering end to end
marketing strategies in an
omni-channel environment.
Jo is responsible for shaping
the Company’s messaging,
delivering an outstanding
experience to the Michael Hill
customer across both digital and
traditional marketing channels
and leading the vision for a world
class loyalty program.
Jo brings with her over
20 years’ experience in both
local and global organisations
(including Woolworths, Telstra,
Foxtel and McDonald’s),
specialising in strategic
brand building, end to end
marketing communications
and driving key customer
growth strategies across
channels. In her most recent
role as Director of Marketing
at McDonald’s Australia, she
was responsible for marketing,
brand and media strategies
and driving commercial growth
through innovation and re-
imagination of the brand.
Jo is also a recognised
leader in creativity - winning
multiple awards both locally and
internationally. She brings a fresh
approach to driving the future
growth of the brand through a
lens of commercial creativity.
27
Michael Hill is gaining
traction, as it continues
to evolve into a modern,
differentiated, omni-channel
jewellery brand
Directors' Report
The Directors present their report on the consolidated
entity (referred to hereafter as the ‘Group’) consisting
of Michael Hill International Limited ACN 610 937 598
(‘Michael Hill International’ or the ‘Company’) and all
controlled subsidiaries for the year ended 27 June 2021.
Principal activities
The Group operates predominately in the retail sale of
jewellery and related services sector in Australia, New
Zealand and Canada.
There were no significant changes in the nature of
the Group’s activities during the year.
Dividends
Dividends paid to members during the financial year
were as follows:
2021
$000
2020
$000
- 5,817
5,816 5,817
No final dividend was declared for
the year ended 28 June 2020
(2019: au1.5¢ per fully paid share).
Interim dividend for the year ended
27 June 2021 of au1.5¢ (2020: au1.5¢)
per fully paid share
paid on 26 March 2021
(2020: 29 January 2021).
The Directors have declared
the payment of a final dividend
of au3.0¢ per fully paid ordinary
share (2020: no final dividend
declared). The final dividend
will be unfranked for Australian
shareholders and fully imputed
for New Zealand shareholders.
The aggregate amount of the
proposed dividend expected to be
paid on 24 September 2021 out of
retained earnings, but not
recognsied a liability at year end, is:
Review of operations
In Australian dollars, the Group has reported operating
revenue of $556.5m (2020: $492.1m) for the 2021 financial
year, producing a net profit after tax (NPAT) of $45.3m
(2020: $3.1m). The Group reported EBIT* of $72.4m for
the year ended 27 June 2021 (2020: $14.1m) an increase
of $58.3m, largely driven by a lift in gross profit of $50.7m
to $348.9m (2020: $298.2m). Comparable EBIT*
increased to $56.6m (2020: loss of $5.2m).
* EBIT and Comparable EBIT are non-IFRS information and
are unaudited. Please refer to non-IFRS information section
in this report for an explanation of non-IFRS information
and a reconciliation of EBIT and Comparable EBIT.
The Group achieved the following key outcomes for the
2021 financial year:
Key Financial Results
• Statutory net profit after tax of $45.3m (2020: $3.1m).
• EBIT increased to $72.4m (2020: $14.1m).
• Group operating revenue increased 13.1% to $556.5m
(2020: $492.1m), with 10,447 lost store trading days.
• Group same store sales were up 8.6% for the year,
with H1 +6.3% and H2 +13.2%.
• Group gross margin increased by 210bps to 62.7%
(2020: 60.6%), underpinned by our strategic initiatives.
• Maintained target inventory levels at $171.2m
(2020: $178.7m).
• Strong balance sheet with a healthy net cash position
of $72.4m (2020: $0.5m).
• Final dividend of au3.0¢ per share declared, resulting in
total dividends for the year of au4.5¢ per share.
Operational Performance
• Digital sales increased by 53.4% to a record $34.8m,
representing 6.3% of total sales, up from 5.0% last year.
• Loyalty strategy continues to deliver – Brilliance
by Michael Hill now over 800,000 members
(2020: ~200,000).
• Product enhancements saw our unique to Michael
Hill jewellery, branded collection sales climb to 42.1%
of total sales for the full year (2020: 37.3%).
11,644
-
• Re-engineering our global supply chain – Canadian
Likely developments and
expected results of operations
Information on likely developments in the Group’s
operations and the expected results of operations have
been included in the Operational Review and Strategic
Update sections of this report.
3PL distribution centre to open in advance of
Christmas trading.
• Extensive temporary store closures in Eastern Canada,
together with sporadic closures across Australia,
culminating in 10,447 lost trading days for the year.
• One new store opened and six under-
performing stores were closed during the
year, giving a network total of 285 stores
across all markets (2020: 290).
EARRINGS FROM THE KNOTS COLLECTION,
DESIGNED BY LADY CHRISTINE HILL
MICHAEL HILL INTERNATIONAL LIMITED DIRECTORS' REPORT 29
Following the FY20 global store network shutdown,
the Group delivered significant same store sales growth
across all four quarters of FY21. For the year, the Group
delivered same store sales growth of +8.6% and gross
margin increased by 210 bps to 62.7% for the Group.
These results demonstrate the growth initiatives
underpinning the seven strategic pillars are firmly
embedded in the Group. These initiatives have created
a sustainable platform for sales growth and margin
expansion through the success of our loyalty program,
continued penetration of our online business, acceleration
of retail fundamentals, and product evolution.
As a result of Government mandated lockdowns,
the Michael Hill global store network suffered 10,447
lost store trading days. Despite the impact of disrupted
trading conditions and the reduced global store network,
total revenue grew by 13.1% to $556.5m (2020: $492.1m)
as the Group continues to elevate, modernise the brand
and transform the customer journey.
The Group’s online business exceeded expectations
in outperforming 2020, resulting in another year of record
digital sales of $34.8m and now represents 6.3% of total
sales. Website traffic increased by 35.3% against prior
year, with customers continuing to utilise our enhanced
online platform. During the year, the Group launched "ship
from store", "click and reserve" and in-store appointment
capabilities, and enhanced its "virtual selling" offering to
expand the Group’s omni-channel ecosystem.
The Group continues to prioritise product evolution
and creating uniquely Michael Hill jewellery, with branded
collections now representing 42.1% of total sales for the year
(2020: 37.3%). Our merchandise team have been refining
and improving our product offering, ranging and assortment
whilst ensuring our inventory levels are maintained. This saw
delivery of the targeted inventory range, with a holding
of $171.2m (2020: $178.7m) at year end.
The Group has strengthened its balance sheet, with
a year-end net cash position of $72.4m (FY20: $0.5m)
and nil debt. During the year, the Group also entered
into a new financing facility, jointly funded by ANZ and
HSBC. This new $70m facility is currently undrawn, with
a term to February 2024. Furthermore, the Group has
strategically reviewed the in-house Canadian credit
program to de-risk the balance sheet – the sale of the
credit book and partnering with a new credit provider is
nearing conclusion.
Sales from the Group’s Professional Care Plan (PCP)
increased to $30.3m (2020: $24.0m) with an amount of
$27.3m (2020: $27.5m) recognised as revenue for the
full year. At 27 June 2021, a deferred amount of $76.6m
remained on the balance sheet (2020: $73.8m).
The Group opened one new store in Canada and
closed six under-performing stores, resulting in 285
stores at 27 June 2021 (2020: 290).
Impact of COVID-19
The Group continues to monitor the situation throughout
the geographies in which it operates. Uncertainty remains
as to the future impact of COVID-19 and the ability to
operate bricks-and-mortar stores during this period.
The Group continues to adhere to local and national
government guidance in relation to any future impacts
which would temporarily close stores.
During the period, the Group received
financial support and assistance from
its suppliers, landlords, and local
governments. A number of landlords
and suppliers provided extended
payment terms. These agreements
have concluded with no
material amounts outstanding.
Additionally, landlords have
provided support in the form
of rental abatements.
30 MICHAEL HILL INTERNATIONAL LIMITED DIRECTORS' REPORT
OVAL DIAMOND RINGS FROM THE FENIX CREATED
DIAMONDS FOR MICHAEL HILL COLLECTION
Segment results
The operational segments below reflect the performance of the Group's retail operations in each geographic segment.
The segments include trading activity from our online channels presence and our Canadian in-house credit function.
The segments exclude revenue and expenses that do not relate directly to the relevant retail segments, and are treated
as unallocated. These predominately relate to corporate costs and Australian based support costs, but also include the
manufacturing activities, warehouse and distribution, interest and company tax.
The results below are expressed in local currency.
Michael Hill Australia
OPERATING RESULTS (AU $000)
Revenue
Gross margin
Gross margin as a % of revenue
EBIT
As a % of revenue
2021
312,264
194,149
62.2%
62,889
20.1%
2020
266,610
161,030
60.4%
27,410
10.3%
2019
313,587
194,052
61.9%
32,917
10.5%
2018
325,709
206,303
63.3%
48,621
14.9%
2017
321,981
201,707
62.6%
51,688
16.1%
In Australia, segment revenue increased by 17.1% to $312.3m (2020: $266.6m) and same store sales increased by 13.0%
for the year. This result is a credit to the segment, as it saw 3,458 lost store trading days due to various government
mandated store closures across the country.
Gross margin for the year was 62.2% (2020: 60.4%), which is a significant improvement on both FY19 and FY20.
At year end, of the 150 Australian stores (2020: 155), 30 NSW and two NT stores were temporarily closed. Currently,
46 NSW, 27 VIC, and four ACT are temporarily closed.
Five underperforming stores permanently closed during the period, resulting in 150 stores at 27 June 2021.
Michael Hill New Zealand
OPERATING RESULTS (NZ $000)
Revenue
Gross margin
Gross margin as a % of revenue
EBIT
As a % of revenue
2021
127,067
78,771
62.0%
35,451
27.9%
2020
106,696
63,641
59.6%
21,067
19.7%
2019
120,064
73,011
60.8%
24,125
20.1%
2018
125,239
77,673
62.0%
27,800
22.2%
2017
121,970
75,204
61.7%
27,836
22.8%
In New Zealand, segment revenue increased by 19.1% to NZ$127.1m (2020: NZ$106.7m) and same store sales increased
by 7.1% for the year. This result represents significant outperformance against FY17, FY18 and FY19. It should also be
noted that during the year, 16 Auckland stores were required to temporarily close on three separate occasions resulting
in 464 lost store trading days.
Gross margin for the year was 62.0% (FY20: 59.6%), resulting in the strongest margin in the last five years.
There were 49 stores trading at 27 June 2021. Currently, all New Zealand stores are temporarily closed, due to government
mandated lockdowns.
Michael Hill Canada
OPERATING RESULTS (CA $000)
Revenue
Gross margin
Gross margin as a % of revenue
EBIT
As a % of revenue
2021
118,445
72,643
61.3%
15,074
12.7%
2020
110,799
63,991
57.8%
(2,412)
(2.2)%
2019
133,146
80,726
60.6%
9,797
7.4%
2018
130,762
81,576
62.4%
14,605
11.2%
2017
112,721
69,078
61.3%
12,386
11.0%
In Canada, segment revenue increased by 6.9% to CA$118.4m (2020: CA$110.8m) and same store sales increased by
6.8% for the year. This segment was heavily impacted by temporary store closures in Eastern Canada, with 6,525 lost
store trading days for the year. By early July, all 86 stores were open and have remained trading, with our strategic focus
now returning to the productivity opportunity in the market.
Gross margin for the year was 61.3% (2020: 57.8%), which is a significant improvement on both FY19 and FY20.
One store was opened in Canada during the period in Avalon, Newfoundland.
One underperforming store permanently closed during the period, resulting in 86 stores at 27 June 2021.
MICHAEL HILL INTERNATIONAL LIMITED DIRECTORS' REPORT 31
While the Brilliance by Michael Hill
loyalty program is only 18 months old,
membership has already grown
to over 800,000
32 MICHAEL HILL INTERNATIONAL LIMITED DIRECTORS' REPORT
Cash, cash flow and dividends
Net operating cash inflows of $143.5m increased from
prior year of $76.1m. This is largely due to improvement
of receipts from customers through trade and working
capital management.
Through further disciplined inventory and working
capital management, the Group remains in a resilient
financial position with $72.4m in net cash (2020: $0.5m)
to continue to invest in improvements to its systems,
infrastructure, and capabilities.
Dividends
The Board has previously stated its intention to restore
dividend payments to historic levels as the pandemic
recovery becomes more certain.
After taking into consideration sales and margin
performance, the strength of the balance sheet, and while
also recognising the risk of ongoing trading disruption, the
Board has decided to declare a final dividend of au3.0¢ per
share unfranked, fully imputed with conduit foreign income.
This represents total dividends for the year of au4.5¢
per share and lays the foundation for a sustainable
dividend profile going forward, subject to the impacts of
ongoing trading disruptions.
Strategic update: emphasis
on growth and margin
The seven strategic pillars are underpinned by initiatives
that continue to deliver a transformation agenda focused
on sales growth and margin expansion, driving efficiencies
within the business, elevating the Michael Hill brand and
enabling a true omni-channel customer experience:
1 The elevation of the Michael Hill BRAND is gaining
traction, as it continues to evolve into a modern, differ-
entiated, omni-channel jewellery brand. Transitioning
our brand messaging from discount-led promotions
to quality and aspirational brand-led campaigns is key
to enticing a deeper customer base, generate higher
average transaction value (ATV) and margin growth.
2 DIGITAL is at the forefront of our transformation with
an emphasis on customer experience, product offering,
and fulfilment. Following another year of exceptional
growth, investment in our highest profit margin channel
continues to focus on incremental traffic, higher
conversion rates, and increased transaction value. Our
early foray into 3rd party digital channels has provided
the confidence to develop an integrated marketplace
solution that will be rolled out in the first half of FY22.
Looking further afield, we have identified opportunities
to explore new digital channels and markets.
3 With a portfolio of 285 stores across three countries,
bricks and mortar retail is at the core of the Michael
Hill business. Our RETAIL FUNDAMENTALS strategy
is focused on driving increased sales, higher margins,
lower costs, and a modern, differentiated customer
experience, all underpinned by our new retail incentive
scheme. The key retail metrics of ATV, IPS and
conversion all increased in all markets in FY21 and will
continue to be a key area of focus.
4 The roll out of our new ERP platform in early FY21,
was the enabler for OMNI-CHANNEL at Michael Hill.
Across the year, we successfully tested and trialled
“virtual selling”, “click and reserve”, and “ship from
store”. These initiatives will now be progressively rolled
out across our global network. Further connecting our
physical and digital businesses we will be launching
“click and collect” for Christmas 2021, delivering
incremental sales and enhanced customer experience.
5 While the Brilliance by Michael Hill LOYALTY PROGRAM
is only 18 months old, membership has already grown
to over 800,000. Acquisition has been our priority and
while this will continue to be a key focus, the business
is now turning its attention to the opportunities of
activation and retention. Our early insights already
provide confidence that the program is resonating with
our customers, delivering increased frequency, larger
baskets, and higher margins. Predicative analytics
and increased personalisation are being enabled by
investment in data analytics capability and artificial
intelligence to deliver further growth in the business.
6 PRODUCT EVOLUTION is the foundation of a
customer-led retail strategy, and is critical to continued
sales and margin growth. The business will maintain
its focus on uniquely Michael Hill branded product as
a key differentiator in the categories and markets in
which we operate. The business now delivers regular
product newness to excite our customers and increase
sales, with significantly lower inventory and higher
margins. Our Australian manufacturing division has
been reinvigorated delivering new bridal collections
and increased speed to market, underpinned by a
focus on craftsmanship, quality and local artisans and
still achieving improved margins.
7 The COST CONSCIOUS CULTURE exists across every
aspect of the Group. We continue to optimise the
global supply chain, improve the global store network,
and enhance our credit propositions globally. The new
Canadian 3PL facility will be fully operational for peak
Christmas trade - servicing both online
customers and stores, optimising
inventory, reducing logistics
costs, and enhancing overall
Canadian productivity and
customer experience.
MICHAEL HILL INTERNATIONAL LIMITED DIRECTORS' REPORT 33
Risk management
The Board believe that a strong Corporate Governance framework will underpin the Group’s growth
and success. The Group regularly reviews its risk management framework and has identified the
following at risk areas and mitigating strategies:
RISK
STRATEGIES AND MITIGATION
Ongoing impacts from COVID-19
continue longer than expected
or become more intensive than
forecasted impacting customers,
suppliers and staff
The Group has a COVID-19 crisis management team focussed
on monitoring the status in key counties where it operates and
has supply chain impacts. Where possible, we seek to leverage
government financial assistance for our staff. Furthermore, we
are working closely with our supply chain to support suppliers
and ensure continuity of supply.
Disruption to supply chain and
inefficiencies in replenishment
strategies
Increase in cyber attacks
disrupting operations and causing
financial distress
Risk of a disruptor or new
competition entering our
markets
The Group is exploring and investing in better in-market strategies
as well as revamping its ranging and increasing emphasis on
sourcing and mix of product. This risk is further being addressed
with the establishment of a Canadian warehouse to reduce
shipping times within country and reduce the concentration of
product within our network.
The Group has invested in new technologies and sought to remove
vulnerable points of attack throughout its digital network. External
parties are brought in to boost our capabilities, including both
proactive and reactive responses to cyber attacks. Penetration
testing and disaster recovery planning are built into our operating
rhythm to further prepare and respond to attacks.
We are committed to improving and differentiating the brand
from our existing competitors to create a point of difference and
increase market share. This in itself helps mitigate the risk of
other competitors entering our key markets and taking material
market share.
Breach of regulation or law
in one of our jurisdictions in
an increasingly complex legal
compliance environment
The Group invests, via an in-house legal team, who are focused
on compliance in our three markets and by utilising external
legal firms for specialised legal advice when required. Any
new legislative requirements or rectification initiatives have
dedicated teams focussed on ensuring our compliance.
Inability to adjust to the rapidly
changing consumer segment and
retail environment
The Group continues to have an intense focus on digital channels
and initiatives to meet consumer demand. The Group is investing
in new omni-channel initiatives, including responding to key
disruptions of trading due to COVID-19.
Theft appeal of our product
increases during periods of
financial hardship and uncertainty.
Our focus is on the safety and security of our staff and we are
investing in initiatives and processes that improve the overall
security of our stores, and contribute to the safety of our staff.
We work with local law enforcement bodies and other external
parties to better the overall retail environment for our staff and
customers.
THIS PAGE: PENDANT AND RING FROM THE KNOTS
COLLECTION, DESIGNED BY LADY CHRISTINE HILL
34 MICHAEL HILL INTERNATIONAL LIMITED DIRECTORS' REPORT
Non-IFRS Financial Information
This report contains certain non-IFRS financial measures of historical financial
performance. Non-IFRS financial measures are financial measures other than those
defined or specified under all relevant accounting standards. The measures therefore
may not be directly comparable with other companies' measures. Many of the measures
used are common practice in the industry in which the Group operates. Non-IFRS
financial information should be considered in addition to, and is not intended to be a
substitute for, or more important than, IFRS measures. The presentation of non-IFRS
measures is in line with Regulatory Guide 230 issued by Australian Securities and
Investments Commission (ASIC) to promote full and clear disclosure for investors and
other users of financial information, and minimise the possibility of those users being
misled by such information.
The measures are used by Management and Directors for the purpose of assessing
the financial performance of the Group and individual segments. The Directors also believe
that these non-IFRS measures assist in providing additional meaningful information on the
drivers of the business, performance and trends, as well as the position of the Group.
Non-IFRS financial measures are also used to enhance the comparability of information
between reporting periods by adjusting for non-recurring or controllable factors which
affect IFRS measures, to aid the user in understanding the Group's performance.
Consequently, non-IFRS measures are used by the Directors and Management for
performance analysis, planning, reporting and incentive setting. These measures are not
subject to audit.
The non-IFRS measures used in describing the business performance include:
• Same store sales reflect sales through store and online channels on a comparable
trading day basis
• Earnings before interest, tax, depreciation and amortisation (EBITDA)
• Earnings before interest and tax (EBIT)
• Comparable EBIT
• Significant item
CALCULATION OF COMPARABLE EBIT
Comparable EBIT has been calculated as follows:
Statutory EBIT
Add back costs relating to:
Employee restructure costs
Direct, incremental costs relating to COVID-19
Canadian credit book revaluation
Less items relating to:
Government grants received (AU, NZ, CA)
Impact of AASB16 Leases
Comparable EBIT
2021
$000
72,398
-
-
2,986
2020
$000
14,079
2,170
1,755
-
(14,593)
(4,197)
56,594
(17,678)
(5,551)
(5,225)
Environmental regulations
The Group has determined that no particular or significant environmental regulations
apply to it.
THIS PAGE: PENDANTS FROM THE SPIRITS BAY, ENDLESS AND
KNOTS COLLECTIONS, DESIGNED BY LADY CHRISTINE HILL
MICHAEL HILL INTERNATIONAL LIMITED DIRECTORS' REPORT 35
Information on Directors
FROM LEFT:
GARY SMITH, DANIEL BRACKEN, EMMA HILL,
SIR MICHAEL HILL, JACQUELINE NAYLOR AND
ROBERT FYFE
Information on the Directors of Michael
Hill International Limited in office during
the financial year and until the date of
this report are set out below.
Robert Fyfe
B.ENG, F.E.N.Z
Rob was appointed a Director of the Company on
9 June 2016 and has served as a Director of Michael
Hill’s listed entity since 6 January 2014. He was
appointed Chair of the Board in June 2021. Rob
served as CEO of Air New Zealand between 2005
and 2012, a period that saw a resurgence in Air New
Zealand to become one of the most recognised
and awarded airlines in the world and one of the
best performers in a tough industry. Prior to and
subsequent to his time at Air New Zealand, Rob has
gained extensive general management experience in
various retail businesses operating in New Zealand,
Australia and Great Britain, across sectors including
retail banking, telecommunications, pay television
and outdoor apparel. On New Year's Eve 2020, Rob
was appointed as a Companion of the New Zealand
Order of Merit for services to business and tourism.
Rob is also a Director of Air Canada and has not
had any former directorships of listed entities in the
last three years.
SPECIAL RESPONSIBILITIES
• Chair
• Non-Executive and Independent Director
• Member of Audit and Risk Management Committee
• Member of People Development and
Remuneration Committee
DIRECTOR'S INTERESTS IN SHARES AND OPTIONS
2,693,640 Ordinary Shares
Sir Richard Michael Hill
K.N.Z.M.
Sir Michael is the founder of Michael Hill and
was appointed a Director of the Company on 9
June 2016, having served as Director of Michael
Hill’s listed entity since its initial listing in 1987.
He led the Group as Executive Chairman from
1987 until 2015. Sir Michael had 23 years of
jewellery retailing experience before establishing
Michael Hill in 1979, which then listed on the New
Zealand Stock Exchange in 1987. Sir Michael’s
visionary leadership has been the foundation
for the Company’s successful international
expansion. In 2008 he was recognised as Ernst
& Young’s ‘Entrepreneur of the Year’ and in 2011
was appointed a Knight Companion of the New
Zealand Order of Merit for services to business
and the arts. Sir Michael was appointed Founder
President of the New Zealand listed entity in
2015 in recognition of his special connection with
Michael Hill for over 35 years.
Sir Michael is not a director of any other listed
entities and has not had any former directorships
of listed entities in the last three years.
DIRECTOR'S INTERESTS IN SHARES AND OPTIONS
148,330,600 Ordinary Shares
36 MICHAEL HILL INTERNATIONAL LIMITED DIRECTORS' REPORT
Daniel Bracken
Janine Allis
Janine was appointed a Director of the
Company on 9 June 2016 and retired on 27
October 2020. Janine is the Founder and
Executive Director of Retail Zoo Pty Ltd which
currently owns three brands - Boost Juice,
Salsa’s Fresh Mex Grill and Cibo.
Janine is not a director of any other listed
entities and has not had any former directorships
of listed entities in the last three years.
SPECIAL RESPONSIBILITIES
• Non-Executive and Independent Director
• Member of Audit and Risk Management
Committee
DIRECTOR'S INTERESTS IN SHARES AND OPTIONS
651,745 Ordinary Shares
Daniel joined Michael Hill International as
the CEO in November 2018. He has more
than 25 years’ experience managing some
of the world’s most iconic brands. He has an
extensive background in corporate strategy,
brand development, product design, customer
engagement, digital expansion and has been
instrumental in executing turnaround initiatives
across many retail businesses.
Daniel is not a director of any other listed
entities and has not had any former directorships
of listed entities in the last three years.
SPECIAL RESPONSIBILITIES
• Managing Director
• Chief Executive Officer
DIRECTOR'S INTERESTS IN SHARES AND OPTIONS
201,869 Ordinary Shares
2,310,215 Performance Rights
Jacqueline Naylor
Jacqueline was appointed a Director of the
Company on 15 July 2020. Jacqueline is a highly
regarded Australian retail leader with over thirty
years’ executive and board experience in retail,
fashion and eCommerce. She is currently an
Independent Non-Executive Director of Myer and
was previously a director of PAS Group, Macpac
and the Virgin Australia Melbourne Fashion
Festival. This follows an extensive career as a
retail executive (and later an Executive Director)
at the Just Group, where Jacqueline oversaw
merchandising, marketing and brand strategies
across a portfolio of 800 stores.
Jacqueline is a Director of Myer Holdings
Limited and has not had any former directorships
of listed entities in the last three years.
SPECIAL RESPONSIBILITIES
• Non-Executive and Independent Director
• Member of Audit and Risk Management
Committee
DIRECTOR'S INTERESTS IN SHARES AND OPTIONS
160,000 Ordinary Shares
Emma Hill
B.COM, M.B.A.
Emma was appointed a Director of the
Company on 9 June 2016 and has served as
Director of Michael Hill’s listed entity since 22
February 2007. She served as Deputy Chair of
the Group from 2011 until 2015 when she was
appointed Chair. Emma stepped down from
the Chair role in June 2021. Emma has over
30 years’ experience with subsidiaries of the
Company, commencing on the shop floor in
Whangarei, New Zealand. She held a number
of management positions in the Australian
company before successfully leading the
expansion of the Group into Canada as Retail
General Manager in 2002. Emma holds a
Bachelor of Commerce degree and an MBA
from Bond University.
Emma is not a director of any other listed
entities and has not had any former directorships
of listed entities in the last three years.
SPECIAL RESPONSIBILITIES
• Non-Executive Director
• Chair of People Development and
Remuneration Committee
DIRECTOR'S INTERESTS IN SHARES AND OPTIONS
167,487,526 Ordinary Shares
Gary Smith
B.COM, F.C.A., F.A.I.C.D.
Gary was appointed a Director of the Company
upon incorporation on 24 February 2016 and has
served as Director of Michael Hill’s listed entity
since 2 November 2012. Gary has had extensive
Director experience. He is Chairman of Flight
Centre Travel Group Ltd, one of Australia’s top
100 public companies and is a member of their
Audit and Remuneration sub-committee. He
is a Chartered Accountant and a Fellow of the
Australian Institute of Company Directors.
Gary is a Director of Flight Centre Travel Group
Limited and has not had any former directorships
of listed entities in the last three years.
SPECIAL RESPONSIBILITIES
• Non-Executive and Independent Director
• Chair of Audit and Risk Management
Committee
• Member of People Development and
Remuneration Committee
DIRECTOR'S INTERESTS IN SHARES AND OPTIONS
80,000 Ordinary Shares
EARRINGS FROM THE SPIRITS BAY COLLECTION,
DESIGNED BY LADY CHRISTINE HILL
MICHAEL HILL INTERNATIONAL LIMITED DIRECTORS' REPORT 37
Digital is at the forefront of our
transformation with an emphasis
on customer experience, product
offering, and fulfilment
38 MICHAEL HILL INTERNATIONAL LIMITED 2020 FINANCIAL STATEMENTS
Company secretaries
The Company has appointed two company
secretaries, Andrew Lowe and Emily Bird.
Andrew Lowe, who is also the Chief Financial
Officer of the Group, was appointed to the position
of Company Secretary on 1 March 2019, having
held that position previously (15 December 2017
to 22 January 2018). Andrew holds a Bachelor
of Commerce, a Bachelor of Laws (Hons) and
a Masters of Applied Finance, and is a qualified
Chartered Accountant and a Chartered Taxation
Adviser of the Taxation Institute of Australia. Andrew
has extensive experience in finance and leadership
roles across a range of listed corporate groups with
Australian and offshore operations.
Emily Bird, who is also the General Counsel
of the Group, was appointed to the position of
Company Secretary on 31 July 2020. Emily joined
Michael Hill in September 2019 as Senior Legal
Counsel, and was appointed General Counsel
& Company Secretary in July 2020. She holds a
Bachelor of Laws, Bachelor of Arts (Psychology),
Graduate Diploma in Legal Practice, Graduate
Diploma in Applied Corporate Governance and
Risk, and has completed the Company Directors
Course at the Australian Institute of Company
Directors. Emily has broad legal experience with
in-house roles at Lactalis Australia (formerly
Parmalat Australia), Virgin Blue (now Virgin
Australia) and a secondment at Tarong Energy
(now Stanwell Corporation), having started her
legal career at top-tier firm Clayton Utz.
Meetings of Directors
The numbers of meetings of the Company's Board of Directors and of each
Board committee held during the year ended 27 June 2021, and the numbers of
meetings attended by each Director were:
Full meetings
of Directors
Meetings Meetings
held*
attended
15
15
15
14
15
15
15
15
Meetings of committees
Audit and Risk People Development
and Remuneration
Management
Meetings Meetings
held*
attended
6
6
-
-
-
-
6
6
Meetings Meetings
held*
attended
5
5
-
-
5
5
5
5
13
8
4
2
4
2
-
-
-
-
R I Fyfe
Sir R M Hill
E J Hill
G W Smith
J E Naylor
(appointed 15/07/2020) 13
J S Allis
(retired 27/10/2020)
6
* Number of meetings held during the time the Director held office or was a
member of the committee during the year.
Daniel Bracken was appointed a Director of the Company on 28 June 2021,
after the end of the reporting period.
Committee membership
As at the date of this report, Michael Hill International Limited has an Audit and
Risk Management Committee and a People Development and Remuneration
Committee.
Audit and Risk
Management Committee
Gary Smith c
Robert Fyfe
Jacqueline Naylor
c designates Chair of the committee.
People Development and
and Remuneration Committee
Emma Hill c
Robert Fyfe
Gary Smith
MICHAEL HILL INTERNATIONAL LIMITED DIRECTORS' REPORT 39
Our 2021 team engagement
score of 85% is well above retail,
country and global benchmarks
40 MICHAEL HILL INTERNATIONAL LIMITED REMUNERATION REPORT
Audited
Remuneration Report
The Directors present the 2021 Michael Hill International Limited remuneration report, outlining key aspects of
our remuneration policy and framework, and remuneration awarded during FY21. The information provided in this
remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001.
Letter from the Chair of the People Development and
Remuneration Committee
Dear Shareholders,
The Board acknowledges the performance and resilience
of the Executive Leadership Team which has enabled
the Group to report above target results for the financial
year. As discussed earlier in the Annual Report, we
have successfully navigated the challenges brought on
by COVID-19. Despite the extremely challenging retail
environment, with continuing volatility and regional
government mandated lockdowns affecting store trade,
our digital and omni retail strategy has enabled us to adapt
to changing customer behaviour. Highlights include:
• Total Group revenue of $556.5m (2020: $492.1m) -
an increase of 13.1%
• EBIT of $72.4m (2020: $14.1m) - an increase of 414.2%
• Comparable EBIT of $56.6m (2020: -$5.2m) -
an increase of 1,183%
• Earnings per share of 11.68 cents (2020: 0.79¢) - an
increase of 1,378%.
These results have translated into shareholder returns
with the share price growing to $0.83, from $0.34
in 2020 and $0.54 in 2019. After the 2020 pause on
dividends to shareholders, dividends of 3.0c per share
were paid to our shareholders in FY21. Our performance
provides further evidence that our strategic transforma-
tion agenda is on track and delivering. We’ve seen record
digital sales, our loyalty program going from strength to
strength, further deployment of omni-channel initiatives,
and continued evolution of our product offering,
go-to-market campaigns and retail fundamentals.
We are proud of our values-led culture which has
established Michael Hill as an employer of choice. Our
values; We care, We create outstanding experiences,
We are professional and We are inclusive and diverse,
underpin team engagement and performance. Our 2021
team engagement score of 85% is well above retail,
country and global benchmarks. I’m proud we continue
to be a leader in gender diversity with 55% of leadership
positions globally held by women. We continue to build
our capability by attracting and developing key talent.
This year we have had three new members join our
Executive Leadership Team: Amy Sznicer, Chief Retail
Officer, Jo Feeney, Chief Marketing Officer and Keith Louie,
Chief Digital Officer. All three bring tremendous strategic
and technical capability to the cohesive, collaborative, and
high performing Executive Leadership Team.
Moving to the structure of our remuneration,
following a review of the executive incentive framework,
and in response to challenges in how to reward and
recognise in a rapidly changing and unpredictable
environment, the Board approved changes to the Short
Term Incentive Scheme (STI) and Long Term Incentive
Scheme (LTI) with effect from FY21. The STI opportunity
for on target performance reduced and an STI outperfor-
mance mechanism was introduced. The LTI opportunity
was amended to increase the weighting towards
long-term outcomes and a sliding vesting scale based on
Total Shareholder Return was introduced.
Given the challenging and uncertain environment,
executive salaries were not adjusted at the
commencement of the year as per the usual review
cycle. A review was completed after the first half which
recognised performance had strongly rebounded. A
moderate 1.75% increase was applied to CEO Daniel
Bracken’s base salary with an uplift of 10% applied to
Andrew Lowe’s base to remain market competitive and in
recognition of the expanded breadth of the CFO’s role.
Financial and non-financial risks were systematically
considered in the overall assessment of STI outcomes.
The CEO and CFO achieved 100% of on target STI and
due to the strong EBIT result, 75% of the outperfor-
mance STI was achieved. No awards to current KMP
vested under the LTI during the year. There were no
changes to the structure, level or value of Non-Executive
Director (NED) fees.
The Board will continue to review executive
remuneration to ensure that it aligns with our strategy and
support the delivery of sustainable long-term returns to
shareholders. In FY22 we will seek independent advice on
the appropriateness of remuneration practices of the Group.
In conclusion, the Committee believes the
remuneration changes and outcomes for FY21 reflect an
appropriate alignment between pay and performance
during the year and are also fair in terms of the operating
environment in which decisions have been made. We
are confident that shareholders will recognise this as a
continuation of our long-held approach to prior years.
The results the Company has achieved in the last 12
months are outstanding and the executive remuneration
set out in this report is considered by the Board
to be reflective of this performance.
Regards,
Emma Hill
Chair of the People Development
and Remuneration Committee
MICHAEL HILL INTERNATIONAL LIMITED REMUNERATION REPORT 41
Non-Executive Directors
Sir Richard Michael Hill
Emma Hill
Gary Smith
Jacqueline Naylor
Former Non-Executive
Director
Janine Allis
Manager Director and CEO
Daniel Bracken
Executives
Andrew Lowe
Former Executives
Vanessa Brennan
Andrea Slingsby
Remuneration overview
This report sets out the remuneration arrangements for Michael Hill International’s key management personnel (KMP).
KMP have the authority and responsibility for planning, directing and controlling the activities of the entity. All KMP
listed below have held their positions for the entire reporting period unless indicated otherwise.
NAME
Robert Fyfe
POSITION
Chair
Founder and Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
COMMENCEMENT AS KMP
2016
2016
2016
2016
2020
Non-Executive Director
9 June 2016 until 27 October 2020
Managing Director and Chief Executive Officer
2019
Chief Financial Officer and Company Secretary
2017
Chief Brand and Strategy Officer
11 August 2020 until 13 December 2020
Chief Operating Officer
9 January 2019 until 22 January 2021
The following changes were made on 28 June 2021:
• Emma Hill stepped down as Chair
• Robert Fyfe was appointed as Chair
• Daniel Bracken was appointed as Managing Director in addition to his Chief Executive Officer role.
PEOPLE DEVELOPMENT AND REMUNERATION COMMITTEE
The primary objective of the People Development and Remuneration Committee (PDRC) is to assist the Board fulfil its
corporate governance and oversight responsibilities in relation to the Company’s people strategy including remuneration
components, performance measurements and accountability frameworks, recruitment, engagement, retention, talent
management and succession planning.
The following Non-Executive Directors are members of the PDRC for the 2021 reporting period:
• Robert Fyfe - Independent Non-Executive and Chair of the Committee
• Emma Hill - Chair of the Board of Directors
• Gary Smith - Independent Non-Executive Director
In FY22, Emma Hill has assumed the role of Chair of the Committee and Robert Fyfe will remain as a Non-Executive
PDRC member.
USE OF REMUNERATION CONSULTANTS
The PDRC obtains independent advice every three years on the appropriateness of remuneration practices of the Group
given trends in comparative companies both locally and internationally, and the objectives of the Group’s remuneration
strategy. No advice was received in FY21. It is the Committee’s intention to seek this independent advice in FY22.
42 MICHAEL HILL INTERNATIONAL LIMITED REMUNERATION REPORT
Remuneration framework
Our remuneration philosophy is guided by our vision to be a modern, differentiated, omni-channel jewellery brand. The
structure of compensation is designed with a mix of market competitive fixed remuneration, short-term incentives to reward
annual performance and long-term incentives to align long term financial performance and shareholder value creation.
Our Values
We care
We are professional
We are inclusive and diverse
We create outstanding experiences
Our Remuneration Philosophy
Attract, motivate and retain talent
Reward the achievement of strategic objectives
Align to shareholder value creation
How it is set
Fixed Remuneration
Short Term Incentive
Long Term Incentive
Fixed remuneration is set with
reference to market competitive
rates in comparative companies
for similar positions adjusted
to account for the experience,
ability and effectiveness of the
individual executive.
Senior executives participate
in the Group’s STI which is
directed to achieving Board
approved targets. Refer to the
FY21 Executive Remuneration
Summary section of this report.
The Company has established
a Share Rights Plan as deferred
compensation. Refer to the
FY21 Executive Remuneration
Summary section of this report.
How is it delivered
Base salary plus any fixed
elements including superan-
nuation and leave entitlements.
Cash.
An issue of share rights is made
to participating executives. The
rights vest at the end of the
performance period if certain
performance hurdles and
vesting conditions are met.
What is the
objective
Attract and retain key executive
talent.
Align senior executive
reward with achievement of
performance targets designed to
drive shareholder value creation.
Reward executives for
sustainable long-term growth
aligned to shareholders'
interests.
FY21 executive remuneration summary
Following a review of the executive incentive framework, and in response to challenges in how to reward and recognise
in a rapidly changing and unpredictable environment, the Board approved a number of changes to both the STI and LTI
with effect from the FY21 year. The key changes are outlined below:
• STI opportunity for on target performance has reduced
• An STI stretch or outperformance mechanism has been introduced
• LTI opportunity for executives has also been updated to increase the weighting towards long-term outcomes.
Historically, the STI opportunity was 70% of total fixed remuneration (TFR) for the CEO and 50% of TFR for the CFO.
LTI opportunity was 50% of STI earned for the CEO (or 35% of TFR) and 30% of the STI earned for the CFO (being 15%
of TFR). The total target incentive (STI + LTI) for the CEO was 105% of TFR and 65% for the CFO.
Whilst the total target incentive opportunity remained consistent for both the CEO and CFO during the reporting period,
being 105% and 65% respectively, the structure of the STI was changed. FY21 CEO STI opportunity at target is 36.75% of
TFR and LTI is 68.25% of TFR to give a total target incentive of 105%. The structure for the
FY21 CFO STI is 22.75% of target incentive and LTI is 42.25% of target incentive.
In addition, the FY21 scheme includes an STI outperformance component which
allows executives to earn up to 200% of their on target STI payment for outstanding
performance. This outperformance component was added on the basis that it was
self-funding and only rewarded for significant EBIT outperformance (excluding any
benefit from Government wage subsidies).
MICHAEL HILL INTERNATIONAL LIMITED REMUNERATION REPORT 43
FIXED REMUNERATION
Fixed remuneration is set with reference
to market competitive rates in comparable
companies, locally and internationally, for similar
positions adjusted for the experience, ability and
effectiveness of the individual executive. Fixed
remuneration includes base salary and superan-
nuation at the rate of the maximum concessional
contributions cap.
Fixed remuneration is reviewed annually and
adjusted. Our policy is to increase base salary
by CPI and increase superannuation in line with
any increase to the concessional contributions
cap. In addition, external consultants provide
analysis and advice every three years to ensure
compensation packages are appropriate and
competitive in the marketplace. If there is a
change in role scope or complexity the position is
reassessed against market benchmarks.
Due to the uncertainty and volatility of
trading in a COVID-19 environment, executive
salaries were not adjusted for CPI at the
commencement of the reporting period as per
the usual review cycle. It was decided that any
adjustment to salaries would occur after a review
of FY21 H1 performance. This end of first half
review recognised that the performance of the
Company had strongly rebounded. Salaries were
increased from 1 February 2021. As the full year
(2020) CPI was negative, it was agreed that KMP
remuneration decisions would deviate from usual
remuneration policy. The CEO’s salary increased
by 1.75% in line with the 2020 national minimum
wage decision. It was also recognised that the
CFO’s role had increased in complexity and the
fixed remuneration was not market competitive.
Fixed remuneration increased by 10% for the CFO.
SHORT-TERM INCENTIVE SCHEME
The STI is detailed in performance scorecards that are agreed
with the Committee at the start of each half year. These scorecards
detail the performance goals, targets and weightings for the
financial half and follow a balanced scorecard approach where
performance against key deliverables across financial, strategy,
business improvement, customer and people areas are measured.
The scheme is supported by a performance management
system, along with integrated reporting for visibility and
transparency of progress by each executive. The framework aligns
the executive’s KPIs to delivery of the strategic plan, divisional
business plans along with critical operational and leadership
measures of each role. Performance against KPIs is formally
measured on a biannual basis and informally in regular meetings.
The STI program in FY21 was structured as follows:
Performance
period
How it is set
6 monthly based on H1 and H2 performance
CEO – 73.5% of fixed remuneration comprised
of 36.75% for on target performance, and
36.75% for outperformance
CFO – 45.5% of fixed remuneration comprised
of 22.75% for on target performance, and
22.75% for outperformance
How is it
delivered
In cash
Performance
measures/KPIs
for on target
performance
Financial 50% weighting – EBIT, Sales,
Margin, Costs
Strategy 20% weighting – Omni-Channel,
Supply Chain Evolution
Customer 20% weighting – Brilliance Membership,
Global Credit Strategy
People 10% weighting – Engagement, Retention
Scaled EBIT increments above on target
performance
Performance
measure for
outperformance
component
Performance
conditions
Awarded to the executive if performance
measures and KPIs are achieved
How is STI
assessed?
The Chair reviews the CEO’s performance against
the performance targets and objectives set for
that year. The CEO assesses the performance
of the Executive Leadership Team, with the
CEO having oversight of his direct reports and
the day-to-day functions of the Company. The
Committee reviews the assessed performance to
determine STI outcome for executives.
44 MICHAEL HILL INTERNATIONAL LIMITED REMUNERATION REPORT
FY21 STI OUTCOMES
In FY21, the CEO and CFO earned 100% of their on target STI. This STI was awarded due to the achievement in full of the
KPIs related to the financial, strategy, customer and people performance measures. An outperformance STI of 75% was
awarded to both KMP due to the achievement of the EBIT performance measure. An overall payment of 87.5% of total
potential STI was achieved.
Despite the challenging market conditions, FY21 has been a successful year for the Group with Management
delivering revenue of $556.5m (up 13.1%), Comparable EBIT of $56.6m (up 1,183%) and EPS of 11.68c (up 1,378%). The
Comparable EBIT growth achieved of 1,183% was in excess of the growth required for payment of 75% of the potential
outperformance STI.
The Board considers that the strong results delivered were a direct outcome of the response of the Management
Team in successfully navigating a raft of complex issues and implementing new initiatives to drive the business through
this period. These events required an immediate range of actions by the Management Team to both manage the COVID-19
impacts and to allow the business to continue trading in a complex and constantly changing global environment.
ANALYSIS OF BONUSES INCLUDED IN REMUNERATION
KMP
Daniel Bracken
Andrew Lowe
Andrea Slingsby
On target bonus Stretch target
achieved bonus achieved
%
75%
75%
n/a
%
100%
100%
100%
Total potential
bonus available
$
709,128
210,887
70,000
Included in
remuneration
$
620,487
184,526
70,000
Amounts
forfeited
$
88,641
26,361
-
Vanessa Brennan ceased to be a KMP during the first half of the financial year and was not awarded a bonus for the year.
OVAL DIAMOND ENGAGEMENT RINGS FROM THE FENIX CREATED DIAMONDS FOR MICHAEL HILL COLLECTION
MICHAEL HILL INTERNATIONAL LIMITED REMUNERATION REPORT 45
LONG TERM INCENTIVE SCHEME
In FY21, the LTI framework was amended. This amended
framework aligns with the existing Incentive Plan Rules. The Board
considers this new LTI framework to be aligned with shareholder
interests with a sliding vesting schedule reflecting total returns to
shareholders over the performance period.
Performance/
vesting period
3 years
Opportunity
65% of on target incentive delivered as LTI, at
no cost to the executive
Instrument
Share rights
Performance
metric
Total Shareholder Return (TSR) compound
annual growth rate (CAGR) over 3 years
Vesting
condition
Subject to remaining an employee of the Group
at the vesting date (following the release of the
FY23Q4 results), and satisfaction of TSR target
metric, share rights will vest in accordance with
a sliding vesting schedule. The absolute TSR
sliding vesting schedule is as follows:
- No rights vest if TSR is equal to or less than
15% CAGR
- 5% of share rights vest for each 1% increase
in CAGR performance between 15% CAGR to
35% CAGR
- 100% of share rights vest if TSR is equal to
or above 35% CAGR.
Awards are subject to a service condition
requiring the executive to remain employed by
the Group until the end of the vesting period
Rationale
for the
performance
metric and
condition
The absolute TSR metric has been deemed by
the Committee to be the best market based
measure to create alignment between the
interests of Management and the interests of
shareholders
What happens
when a
KMP ceases
employment?
If the KMP’s employment is terminated for
cause, or due to resignation, all unvested
Share Rights will lapse, unless the Board
determines otherwise
Dividends and
voting rights
Share rights do not confer on the holder
any entitlement to any dividends or other
distributions by the Group or any right to attend
or vote at any general meeting of the Group
FY21 LTI OUTCOMES
Daniel Bracken, CEO and Andrew Lowe, CFO are
the only current KMP eligible to participate in the
FY21 LTI. Andrew commenced with the Company
in FY18 and participated in that year’s LTI, which
has three vesting dates (or ‘tranches’) over
consecutive years; Andrew’s first tranche of that
scheme vested in early FY21. Daniel commenced
with Michael Hill in FY19 and participated in that
year’s LTI, which again has three vesting dates
over consecutive years; the first tranche vesting
date is early FY22 and is subject to continual
employment. Further details of the number of
share rights granted to the CEO and CFO in
relation to the FY21 LTI can be found later in this
report under the heading 'Share Rights'.
NON-EXECUTIVE DIRECTOR REMUNERATION
Total compensation for all Non-Executive
Directors, last voted upon by shareholders on
29 June 2016, is not to exceed $840,000 per
annum. Directors’ base fees for FY21 year were
$100,419 per annum. The Board Chair receives
twice the base fee. Additional fees are paid
where a Director is Chair of a committee.
Committee Chair
People Development
and Remuneration
Audit and Risk
Fees per Annum
$20,747
$31,120
It is the Company’s policy to increase Directors’
fees annually at the commencement of each
financial year, in accordance with the consumer
price index. However, in response to the COVID-19
global pandemic market conditions impacting
the Company in FY21, there was no increase
to any Non-Executive Director's fees at the
commencement of, or during, the reporting period.
All Non-Executive Directors enter into a
service agreement with the Company in the
form of a letter of appointment. The letter
summarises the Board policies and terms,
including remuneration, relevant to the office
of director. Non-Executive Directors do not
receive performance-related compensation.
Directors’ fees cover all main Board activities
and membership of committees. Non-Executive
Directors are not provided with retirement
benefits apart from statutory superannuation.
ENGAGEMENT RINGS FROM
THE EVERMORE COLLECTION
46 MICHAEL HILL INTERNATIONAL LIMITED REMUNERATION REPORT
Company performance - relationship of remuneration
to Group performance
The remuneration framework operates to create a clear link between executive remuneration and the Group’s performance.
The performance of the Group over the past five years is summarised below:
Revenue ($'000)
EBIT* ($'000)
Profit for the year attributable
to owners of the Company ($'000)
Earnings per share
Dividends paid during the financial year^ ($'000)
Market capitalisation ($'000)
Share price at year end
Compound annual growth rate
Return on average total assets
2021
2020
2019
2018
2017
556,486
72,398
45,328
11.68¢
11,636
322,158
$0.83
148.5%
9.0%
492,060
569,500
604,319
582,975
14,079
21,115
8,854
43,840
3,059
0.79¢
5,817
16,498
4.26¢
1,557
0.40¢
29,654
10.66¢
19,365
19,371
19,264
131,841
209,385
375,815
430,057
$0.34
$0.54
(34.3)%
(40.2)%
0.7%
4.3%
$0.97
(8.1)%
8.2%
$1.11
10.9%
10.5%
* EBIT and Comparable EBIT are Non-IFRS Information and are unaudited. Please refer to Non-IFRS Information in the
Directors Report for an explanation of Non-IFRS information and a reconciliation of EBIT and Comparable EBIT.
^ The dividends paid in FY21 are the postponed interim dividend for FY20 and the interim dividend for FY21. No final
dividend was declared for FY20.
Profit amounts for 2017 to 2021 have been prepared in accordance with the requirements of the Corporations Act
2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards
Board. This also complies with IFRS as issued by the International Accounting Standards Board.
The overall level of remuneration takes into consideration the performance of the Group over several years.
EXECUTIVE KMP REMUNERATION MIX
The total remuneration for the executive KMPs comprises both fixed remuneration and at-risk components in STI and
LTI. The mix shown below indicates the potential remuneration based on the current remuneration as at 27 June 2021
with STI presented at maximum opportunity.
Executive KMP
Daniel Bracken - CEO
Andrew Lowe - CFO
Andrea Slingsby - COO
Vanessa Brennan - CBSO
Fixed
Remuneration
41%
54%
81%
100%
STI
31%
24%
19%
-
LTI
28%
22%
-
-
Total
100%
100%
100%
100%
FY22 REMUNERATION
For FY22, Director fees increased in line with the Company’s policy of CPI increase. Additionally, and in line with the
Company’s policy on executive remuneration reviews, the base salary of both the CEO and CFO increased by CPI and their
superannuation was increased to the adjusted concessional contributions cap. The incentive scheme has been reweighted
to balance on target STI with LTI at 50% of total target incentive opportunity for the CEO and CFO. The absolute TSR sliding
vesting conditions of the LTI framework for FY22 will be a CAGR-based calculation whereby a prorata achievement of share
rights commencing from 10% CAGR, increasing by 10% for every 1% CAGR increment, limited to 100% achievement at 20%
CAGR. The committee and Board will continue reviewing the remuneration framework and incentive plans to ensure they
continue to align to market and shareholders’ best interests. An independent review is underway.
MICHAEL HILL INTERNATIONAL LIMITED REMUNERATION REPORT 47
OTHER BENEFITS
KMP do not receive additional benefits, such as non-cash benefits, other than superannuation, as part of the terms and conditions of
their appointment. Loans are not provided.
SERVICE CONTRACTS
It is the Group’s policy that service contracts for KMP are unlimited in term but capable of termination on three months’ notice (six
months in the case of the CEO) and that the Group retains the right to terminate the contract immediately, by making payment
equal to three months’ pay in lieu of notice (or six months’ in the case of the CEO). KMP are also entitled to receive on termination of
employment their statutory entitlements of accrued annual and long service leave, together with any superannuation benefits.
DIRECTOR AND EXECUTIVE REMUNERATION OUTCOMES FOR FY21
Details of the nature and amount of each major element of remuneration of each Director of the Company, and other KMP of the
consolidated entity are:
Salary &
fees
STI cash
bonus
Short-term
Non-monetary
benefits
(relocation)
Long-term
Post-
employment
Total
Long service
leave
Superannuation
benefits
Termination
benefits
Share-
based
payments
Share
rights
Total
Value of
Proportion
remuneration
rights as
performance proportion of
related remuneration
Non-Executive Directors
$
$
$
$
$
Emma Hill
2021
2020
Sir Richard Michael Hill
2021
2020
Gary Smith
2021
2020
Robert Fyfe
2021
2020
Jacqueline Naylor
(appointed 15/07/2020)
2021
Janine Allis
(retired 27/10/2020)
2021
2020
Total Director
remuneration
2021
2020
194,736
170,849
97,368
87,709
120,127
104,327
117,485
105,545
88,180
30,485
78,594
648,381
547,024
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
194,736
170,849
97,368
87,709
120,127
104,327
117,485
105,545
-
88,180
-
-
-
-
30,485
78,594
648,381
547,024
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
11,412
9,911
-
-
8,377
2,896
7,467
22,685
17,378
$
$
$
%
%
-
-
-
-
-
-
-
-
-
-
-
-
-
- 194,736
-
170,849
-
-
-
-
-
-
97,368
87,709
131,539
114,238
117,485
105,545
-
96,557
-
-
-
-
33,381
86,061
671,066
564,402
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
In response to COVID-19, all Directors' fees were reduced 50% for the period from 1 April 2020 to 30 June 2020.
48 MICHAEL HILL INTERNATIONAL LIMITED REMUNERATION REPORT
Salary &
fees
STI cash
bonus
Short-term
Non-monetary
benefits
(relocation)
Long-term
Post-
employment
Total
Long service
leave
Superannuation
benefits
Termination
benefits
Share-
based
payments
Share
rights
Total
Value of
Proportion
remuneration
rights as
performance proportion of
related remuneration
KMP
$
$
$
$
$
$
$
$
$
%
%
Daniel Bracken, CEO
2021
2020
Andrew Lowe, CFO
2021
2020
Andrea Slingsby, COO
(ceased 22/01/2021)
2021
2020
Vanessa Brennan, CBSO
(commenced 11/08/2020
and ceased 13/12/2020)
2021
Total KMP
remuneration
2021
2020
Total Director and
KMP remuneration
2021
2020
1,025,532
620,487
905,142
134,092
- 1,646,019
- 1,039,234
16,962
10,980
25,000
25,481
483,848
184,526
429,075
40,021
293,388
456,372
70,000
32,681
-
-
-
-
668,374
12,930
469,096
3,790
25,000
25,481
363,388
489,053
-
5,862
14,904
25,481
-
-
-
-
-
-
33,716 1,721,697 36.04% 1.96%
15,324 1,091,019 12.29% 1.40%
19,684
725,988 25.42% 2.71%
9,728
508,095 7.88% 1.91%
19,909
398,201 17.58% 5.00%
2,688
523,084 6.25% 0.51%
136,657
-
-
136,657
-
8,654
-
13,489
158,800
- 8.49%
1,939,425
875,013
1,790,589
206,794
- 2,814,438
- 1,997,383
29,892
20,632
73,558
76,443
2,587,806
875,013
2,337,613
206,794
- 3,462,819
- 2,544,407
29,892
20,632
96,243
93,821
-
-
-
-
86,798 3,004,686 29.12% 2.89%
27,740 2,122,198 9.74% 1.31%
86,798 3,675,752 23.81% 2.36%
27,740 2,686,600 7.67% 1.03%
Salary and fees include the net leave entitlement accrual, calculated as leave accrued less leave taken. In response to COVID-19, all
executive KMP's salaries were reduced by 20% over the same period.
MICHAEL HILL INTERNATIONAL LIMITED REMUNERATION REPORT 49
Additional statutory information
EQUITY INSTRUMENTS
All options or rights refer to options or rights over ordinary shares of Michael Hill International Limited, which are exercisable
on a one-for-one basis under the executive incentive plan.
OPTIONS AND RIGHTS OVER EQUITY INSTRUMENTS ISSUED AS COMPENSATION
MODIFICATION OF TERMS OF EQUITY-SETTLED SHARE-BASED PAYMENT TRANSACTIONS
No terms of equity-settled share-based payment transactions (including options and rights granted as compensation to
a key management person) have been altered or modified by the issuing entity during the reporting period or the prior
period. The exercise price of any future option grants will be set by using the same method, with reference to the Australian
Securities Exchange ('ASX'). Upon exercise of any option previously granted with a NZ$ exercise price, the exercise price will
be converted to AU$ with reference to the Reserve Bank of Australian foreign exchange rate on that date.
UNISSUED SHARES
As at the date of this report, there were 1,300,000 unissued ordinary shares under options. Option holders do not have
any right, by virtue of the option, to participate in any share issue of the Company or any related body corporate.
ANALYSIS OF OPTIONS AND RIGHTS OVER EQUITY INSTRUMENTS GRANTED AS COMPENSATION
No options were granted to KMP as compensation for the financial year.
SHARE RIGHTS
The number of share rights issued to KMP and senior executives during FY21 was 4,189,622 share rights. Of these, share
rights issued to KMP are set out below.
KMP
Daniel Bracken*
Andrew Lowe
Andrea Slingsby (ceased 22/01/2021)
Vanessa Brennan (ceased 13/12/2020)
Number of
share rights issued
2,200,197
628,814
33,311
24,285
Fair value
per share right
14¢
14¢
35¢
35¢
* Share rights issued to Daniel Bracken during the reporting period prior to him being appointed as a Director of the Board.
RECONCILIATION OF OPTIONS AND SHARE RIGHTS HELD BY KMP
No options are held by KMP. The number of rights over ordinary shares held during the financial year by KMP, including
the number issued, vested, exercised and forfeited is set out below:
Balance at start of the year
Balance at end of the year
Unvested
Number
Issued Forfeited
Vested &
Vested Exercised Exercisable
Unvested
Number Number Number Number Number
KMP share rights
rights movements
Daniel Bracken*
Andrew Lowe
Andrea Slingsby#
Vanessa Brennan#^
Total
Vested and
Exercisable
Number
-
-
-
-
-
110,018 2,200,197
628,814
33,311
24,285
229,840 2,886,607
50,761
19,301
49,760
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Value of rights
issued during
the year
$
317,367
87,399
11,659
8,500
424,924
Number
- 2,310,215
679,575
-
52,612
-
-
74,045
- 3,116,447
* Share rights issued to Daniel Bracken during the reporting period were issued prior to him being appointed as a
Director of the Board. Accordingly, shareholder approval was not required pursuant to ASX Listing Rule 10.14.
# Andrea Slingsby and Vanessa Brennan ceased to be KMP before financial year end. The "Balance at end of the year"
reflects their holdings at the time they ceased to be KMP. The Board resolved that both could retain their share rights
on cessation of employment and accordingly the share rights vested to both at the date of the resolution.
^ Vanessa Brennan became a KMP during the financial year and at that time held the share rights in the opening balance.
Share rights relating to FY21 performance are anticipated to be granted in late 2021. The number of shares will
depend on the Michael Hill International Limited’s share price over the five days prior to the grant date.
50 MICHAEL HILL INTERNATIONAL LIMITED REMUNERATION REPORT
SHAREHOLDINGS
The number of ordinary shares held during the financial year by KMP is set out below:
Non-Executive Directors
Emma Hill*
Sir Richard (Michael) Hill*
Gary Smith
Robert Fyfe
Jacqueline Naylor#
Janine Allis^
KMP
Daniel Bracken
Andrew Lowe
Andrea Slingsby^
Vanessa Brennan#^
Balance at start
of the year
Received on
exercise of rights
Other changes
Balance at end
of the year
Number
Number
Number
Number
167,487,526
148,330,600
80,000
2,693,640
160,000
651,745
141,869
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
167,487,526
148,330,600
80,000
2,693,640
160,000
651,745
60,000
-
-
-
201,869
-
-
-
* Includes common shareholding due to a related party.
# Became a KMP during the financial year and at that time held the ordinary shares in "Balance at the start of the year".
^ Ceased to be a KMP before financial year end and "Balance at end of the year" reflects their holdings at time of
ceasing to be KMP.
VOTING OF SHAREHOLDERS AT LAST YEAR'S
ANNUAL GENERAL MEETING
The Company received 99.4% of “For” votes on its
remuneration report for FY20. The Company did not
receive any specific feedback at the AGM or throughout
the year on its remuneration practices.
INSURANCE OF OFFICERS AND INDEMNITIES
The Company’s Constitution provides that it may
indemnify any person who is, or has been, an officer of the
Group, including the Directors, the Secretaries and other
officers, against liabilities incurred whilst acting as such
officers to the extent permitted by law. The Company
has entered into a Deed of Indemnity, Insurance and
Access with each of the Company’s Directors, Company
Secretary and certain other officers. No Director or officer
of the Company has received benefits under an indemnity
from the Company during or since the end of the year.
The Company has paid a premium for insurance
for officers of the Group. This insurance is against a
liability for costs and expenses incurred by officers in
defending civil or criminal proceedings involving them
as such officers, with some exceptions. The contract of
insurance prohibits disclosure of the nature of the liability
insured against and the amount of the premium paid.
NON-AUDIT SERVICES
The following non-audit services were provided by the
entity's auditor, Ernst & Young (Australia). The Directors
are satisfied that the provision of non-audit services is
compatible with the general standard of independence for
auditors imposed by the Corporations Act 2001. The nature
and scope of each type of non-audit service provided
means that auditor independence was not compromised.
Ernst & Young (Australia) received or are due to
receive the following amounts for the provision of
non-audit services:
Ernst & Young (Australia):
Employment advisory
Total remuneration
for non-audit services
2021
$
2021
$
3,682
10,050
3,682
10,050
AUDITOR'S INDEPENDENCE DECLARATION
A copy of the auditor's independence declaration as
required under section 307C of the Corporations Act
2001 is set out on page 52.
ROUNDING OF AMOUNTS
The Company is of a kind referred to in ASIC Legislative
Instrument 2016/191, relating to the 'rounding off' of
amounts in the Directors' Report. Amounts in the
Directors' Report have been rounded off in accordance
with the instrument to the nearest thousand dollars, or in
certain cases, to the nearest dollar.
This report is made on 20 August 2021 in accordance
with a resolution of Directors as required by section 298 of
the Corporations Act 2001.
R. I. Fyfe, Chair
Brisbane, 20 August 2021
MICHAEL HILL INTERNATIONAL LIMITED REMUNERATION REPORT 51
Ernst & Young
111 Eagle Street
Brisbane QLD 4000 Australia
GPO Box 7878 Brisbane QLD 4001
T +61 7 3011 3333
F +61 7 3011 3100
ey.com/au
Auditor’s independence declaration
to the Directors of
Michael Hill International Limited
As lead auditor for the audit of the financial report of Michael Hill International Limited
for the financial year ended 27 June 2021, I declare to the best of my knowledge and
belief, there have been:
a) No contraventions of the auditor independence requirements of the Corporations
Act 2001 in relation to the audit; and
b) No contraventions of any applicable code of professional conduct in relation to
the audit.
This declaration is in respect of Michael Hill International Limited and the entities it
controlled during the financial year.
Ernst & Young
Kellie McKenzie
Partner
20 August 2021
52
Financial
Statements
ABN 25 610 937 598
The Directors present the
consolidated financial statements
of Michael Hill International Limited
for the year ended 27 June 2021
48 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
49 CONSOLIDATED STATEMENT OF FINANCIAL POSITION
50 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
51 CONSOLIDATED CASH FLOW STATEMENT
52 NOTES TO THE FINANCIAL STATEMENTS
95 DIRECTORS' DECLARATION
95 AUDITOR'S REPORT
96 ASX LISTING – ADDITIONAL INFORMATION
Consolidated statement of profit or loss
and other comprehensive income
Revenue from contracts with customers
Other income
Cost of goods sold
Employee benefits expense
Occupancy costs
Marketing expenses
Selling expenses
Impairment of property, plant and equipment
Impairment of other assets
Depreciation and amortisation expense
Loss on disposal of property, plant and equipment
Other expenses
Finance expenses
Profit before income tax
Income tax expense
Profit for the year
NOTES
A2
A3
D1
F5
F1
F1
F9
2021
$000
556,486
17,969
(207,570)
(147,619)
(15,135)
(28,325)
(17,959)
(1,883)
(3,513)
(51,293)
(448)
(28,308)
(7,595)
64,807
(19,479)
45,328
2020
$000
492,060
20,574
(193,855)
(146,482)
(14,390)
(28,918)
(18,701)
(6,473)
(1,582)
(55,611)
(499)
(32,040)
(9,598)
4,485
(1,426)
3,059
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Gains/(losses) on cash flow hedges
Currency translation differences arising during the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
34
(173)
(139)
45,189
434
(1,716)
(1,282)
1,777
Total comprehensive income for the year is attributable to:
Owners of Michael Hill International Limited
45,189
1,777
Earnings per share for profit attributable to
the ordinary equity holders of the Company:
Basic earnings per share
Diluted earnings per share
F2
F2
11.68¢
11.63¢
0.79¢
0.79¢
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read
in conjunction with the accompanying notes.
54 MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021
Consolidated statement
of financial position
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Assets held for sale
Current tax receivables
Contract assets
Other current assets
Total current assets
Non-current assets
Trade and other receivables
Right-of-use assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Contract assets
Other non-current assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Lease liabilities
Contract liabilities
Provisions
Liabilities directly associated with assets held for sale
Current tax liabilities
Deferred revenue
Total current liabilities
Non-current liabilities
Lease liabilities
Contract liabilities
Borrowings
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained profits
Total equity
NOTES
2021
$000
2020
$000
B1
F3
A4
F4
A2
F3
A5
F5
F6
F9
A2
F7
A5
A2
F8
F4
A5
A2
B2
F8
72,361
8,352
171,246
14,397
732
406
3,576
271,070
-
105,882
36,453
32,845
60,585
739
537
237,041
11,204
25,006
178,742
-
3,165
733
2,103
220,953
10,727
123,911
45,405
24,429
74,468
1,048
677
280,665
508,111
501,618
73,961
34,304
24,157
14,854
1,607
1,886
753
151,522
99,382
56,393
-
7,413
163,188
64,472
42,164
25,974
24,949
-
1,445
367
159,405
115,848
53,539
10,681
8,339
188,407
314,710
347,812
193,401
153,806
F11
F12
11,285
4,221
177,895
193,401
11,016
4,420
138,370
153,806
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021 55
Consolidated statement of changes in equity
Attributable to owners of
Michael Hill International Limited
Balance at 1 July 2019
Adjustment on adoption of
AASB16 (net of tax)
Restated total equity at the
beginning of the financial year
Profit for the year
Currency translation differences
Derivative fair value changes
Total comprehensive income
for the year
Transactions with members
in their capacity as owners:
Dividends provided
Issue of share capital on
exercise of share rights
Transfer option reserve
on forfeiture of options
Share based payments expense
Notes Contributed
equity
$000
Share
based
payments
reserve
$000
Foreign
currency
translation
reserve
$000
Cash flow
hedge
reserve
Retained
profits
Total
equity
$000
$000
$000
10,984
757
5,516
(468) 159,963 176,752
-
-
(43)
-
(13,019)
(13,062)
10,984
757
5,473
(468) 146,944 163,690
-
-
-
-
-
-
-
-
-
-
32
-
-
32
(32)
(166)
138
(60)
B3
F11
D3
D3
-
(1,716)
-
-
-
434
3,059
-
-
3,059
(1,716)
434
(1,716)
434
3,059
1,777
-
-
-
-
-
-
-
-
-
-
(11,633)
(11,633)
-
-
-
-
(11,633)
(166)
138
(11,661)
Balance at 28 June 2020
11,016
697
3,757
(34) 138,370 153,806
Profit for the year
Currency translation differences
Derivative fair value changes
Total comprehensive income
for the year
Transactions with members
in their capacity as owners:
Dividends provided
Issue of share capital on
exercise of share rights
Transfer option reserve
on forfeiture of options
Share based payments expense
-
-
-
-
-
-
-
-
-
-
B3
F11
269
(269)
D3
D3
-
-
269
(17)
226
(60)
-
(173)
-
-
-
34
45,328
-
-
45,328
(173)
34
(173)
34
45,328
45,189
-
-
-
-
-
-
-
-
-
-
(5,820)
(5,820)
-
-
17
-
(5,803)
-
226
(5,594)
Balance at 27 June 2021
11,285
637
3,584
- 177,895 193,401
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
56 MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021
Consolidated statement of cash flows
Cash flows from operating activities
Receipts from customers (inclusive of GST and sales taxes)
Payments to suppliers and employees
(inclusive of GST and sales taxes)
Interest received
Other revenue received
Interest paid
Leasing interest paid
Income tax paid
Net GST and sales taxes paid
Net cash inflow from operating activities
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Payments for property, plant and equipment
Payments for intangible assets
Net cash (outflow) from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Principal portion of lease payments
Dividends paid to Company's shareholders
Net cash (outflow) from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the financial year
NOTES
2021
$000
2020
$000
657,320
547,258
(484,021)
173,299
4
14,442
(1,036)
(6,653)
(4,082)
(32,522)
143,452
(451,577)
95,681
4
13,193
(2,261)
(7,628)
(3,974)
(18,944)
76,071
73
(6,430)
(12,597)
(18,954)
2,000
(12,682)
(40,997)
(11,636)
(63,315)
61,183
11,204
(25)
72,361
146
(6,112)
(11,241)
(17,207)
70,500
(92,300)
(27,892)
(5,817)
(55,509)
3,355
7,923
(74)
11,204
A5
B1
F5
F6
A5
B3
B1
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021 57
Notes to the financial statements
Corporate information
The consolidated financial statements of Michael Hill International
Limited and its subsidiaries (collectively, the Group) for the year
ended 27 June 2021 were authorised for issue in accordance
with a resolution of the Directors on 20 August 2021. Michael
Hill International Limited (the Company or Parent) is a for profit
company limited by shares incorporated in Australia. The Company
is listed on the Australian Securities Exchange ('ASX') as its primary
listing, and maintains a secondary listing on the New Zealand Stock
Exchange ('NZX').
A Financial overview
A1 Segment information
Management have determined the operating segments based on
the reports reviewed by the Board and Executive Leadership Team
that are used to make strategic decisions. The Board and Executive
Leadership Team consider, organise and manage the business
primarily from a geographic perspective, being the country of origin
where the sale and service was performed.
The amounts provided to the Board and Executive Leadership
Team in respect of total assets and liabilities are measured in a
manner consistent with the financial statements. These reports do
not allocate total assets or total liabilities based on the operations
of each segment or by geographical location.
The Group's operations are in three geographical segments:
Australia, New Zealand and Canada.
The Corporate and other segment includes revenue and
expenses that do not relate directly to the relevant Michael Hill
retail segments. These predominately relate to corporate costs and
Australian based support costs, but also include manufacturing
activities, warehouse and distribution, interest and company tax.
Inter-segment pricing is at arm's length or market value.
The segment disclosures are prepared on a pre-AASB16 Leases
basis. An adjustment column, representing the Group's entries due
to AASB16 Leases, has been included for the purposes of reconcili-
ation to statutory results.
Corporate information p58
A Financial overview p58
A1 Segment information p58
A2 Revenue p60
A3 Other income p61
A4 Inventories p62
A5 Leases p62
B Cash management p64
B1 Cash and cash equivalents p64
B2 Borrowings p64
B3 Dividends p65
C Financial risk management p65
C1 Financial risk management p65
C2 Derivative financial instruments p69
C3 Capital management p70
D Reward and recognition p71
D1 Employee benefits p71
D2 Key management personnel p71
D3 Share-based payments p71
E Related parties p74
F Other information p74
F1 Expenses p74
F2 Earnings per share p74
F3 Trade and other receivables p75
F4 Assets held for sale and directly
associated liabilities p76
F5 Property, plant and equipment p77
F6 Intangible assets p78
F7 Trade and other payables p79
F8 Provisions p79
F9 Tax p80
F10 Auditors' remuneration p81
F11 Sontributed equity p82
F12 Reserves p82
G Group structure p83
G1 Interests in other entities p83
G2 Deed of cross guarantee p83
G3 Parent entity financial
information p86
H Unrecognised items p87
H1 Contingencies and commitments p87
H2 Events occuring after the end of
the reporting period p87
I Summary of accounting policies and
significant estimates and judgements p88
I1 Summary of significant
accounting policies p88
I2 Significant estimates and
judgements p94
58 MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021
Types of products and services
Michael Hill International Limited and its controlled entities operate predominately in the sale of jewellery and
related services.
Major customers
Michael Hill International Limited and its controlled entities sell goods and provide services to a number of
customers from which revenue is derived. There is no single customer from which the Group derives more than
10% of total consolidated revenue.
SEGMENT RESULTS
Australia
$000
New
Zealand
$000
Canada
$000
Corporate
Group
and other pre-AASB16
AASB16
adjustment
$000
$000
$000
Group
$000
Year ended 27 June 2021
Operating revenue
Gross profit
Gross profit %
EBITDA*
Depreciation and amortisation
Segment EBIT*
EBIT as a % of revenue
Interest income
Finance costs
Net profit before tax
Income tax expense
Net profit after tax
Year ended 28 June 2020
Operating revenue
Gross profit
Gross profit %
EBITDA*
Depreciation and amortisation
Segment EBIT*
EBIT as a % of revenue
Interest income
Finance costs
Net profit before tax
Income tax expense
Net profit after tax
312,264 118,663 123,930
76,017
73,554
194,148
61.3%
62.0%
62.2%
20,935
35,117
69,250
(5,100)
(1,996)
(6,361)
15,835
33,121
62,889
12.8%
27.9%
20.1%
-
-
-
-
(7)
(68)
15,835
33,114
62,821
(40,411)
(3,233)
(43,644)
1,629 556,486
5,197 348,916
62.7%
84,891
(16,690)
68,201
12.3%
4
(942)
67,263
4
(867)
(44,507)
4,197
- 556,486
- 348,916
62.7%
38,800 123,691
(34,603) (51,293)
72,398
13.0%
4
(7,595)
64,807
(19,479)
45,328
-
(6,653)
(2,456)
60.4%
- 492,060
1,136 492,060
266,610 101,276 123,038
- 298,204
5,687 298,204
161,030 60,412 71,075
60.6%
57.8%
60.6%
3,471 (33,971) 27,156 42,534 69,690
(2,355) (18,628) (36,983) (55,611)
5,551 14,079
2.9%
4
(9,598)
4,485
(1,426)
3,059
59.7%
35,102 22,554
(7,692)
(2,550)
27,410 20,004
19.8%
-
16
27,555 20,020
4
(2,131)
(2,560) (38,453)
8,528
1.7%
4
(1,970)
6,562
(6,031)
(2,560) (36,326)
-
(7,628)
(2,077)
10.3%
-
145
(2.1)%
-
-
* EBIT and EBITDA are non-IFRS information. Please refer to non-IFRS information in the Directors' Report for an
explanation of non-IFRS information and a reconciliation of EBIT to statutory results.
MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021 59
Notes to the financial statements cont.
A2 Revenue
Revenue from sale of goods and repair services
Revenue from Professional Care Plans (PCP)*
Interest and other revenue from in-house customer finance program
Revenue from Lifetime Diamond Warranty (LTDW)
Total revenue from contracts with customers
2021
$000
525,781
27,310
2,792
603
556,486
2020
$000
460,393
27,478
3,958
231
492,060
* During the financial year ended 27 June 2021, the Group did not recognise revenue of $1.3m (2020: $2.1m) for
PCP services in Canada from February to June 2021 due to the inability to service customers from temporary
closure of stores due to COVID-19. Revenue not recognised and deferred in the prior period was recognised in
the current reporting period.
DISAGGREGATION OF REVENUE FROM CONTRACTS WITH CUSTOMERS
The Group derives revenue from the transfer of goods and services over time and at a point in time in the following
geographical regions:
Australia
New Zealand
$000
$000
Canada
$000
Corporate
and other
$000
Total
$000
2021
Timing of revenue recognition
At a point in time
Over time
2020
Timing of revenue recognition
At a point in time
Over time
296,723
15,541
312,264
113,547
5,116
118,663
114,099
9,831
123,930
1,412
217
1,629
525,781
30,705
556,486
249,852
16,758
266,610
95,770
5,506
101,276
114,145
8,893
123,038
626
510
1,136
460,393
31,667
492,060
ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES
(i) Sale of goods
Sales of goods are recognised when a Group entity delivers a product to the customer. Retail sales are usually by
cash, payment plan or credit card. The recorded revenue is the gross amount of sale (excluding taxes), including
any fees payable for the transaction and net amounts deferred under AASB15 Revenue from Contracts with
Customers such as significant financing components and potential customer returns.
(ii) Repair services
Sales of services for repair work performed is recognised in the accounting period in which the services are performed.
(iii) Deferred service revenue and expenses
The Group offers a PCP product which is considered deferred revenue until such time that service has been
provided. A PCP is a plan under which the Group offers future services, such as cleaning, repairs and resizing, to
customers based on the type of plan purchased. The Group subsequently recognises the income in revenue in
the statement of comprehensive income once these services are performed. An estimate based on the timing
and quantum of expected services under the plans is used as a basis to establish the amount of service revenue
to recognise in the Consolidated Statement of Comprehensive Income.
Direct and incremental sales staff bonuses associated with the sale of PCPs are capitalised in contract assets
and amortised in proportion to the PCP revenue recognised.
(iv) Deferred interest revenue
Interest revenue is deferred on the in-house customer finance program when the sale of the good or service
occurs. It is calculated as the difference between the nominal cash and cash equivalents received from customers
and the discounted cashflows, on both interest and non-interest bearing products. Interest revenue is brought
to account over the term of the finance agreement, and the rate used for non-interest bearing products is in line
with current, comparable market rates.
60 MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021
(v) Right of return assets and liabilities
Rights of return recognises the estimated returned sales under the Group's return policy, being 30 day change of
mind in Australia and New Zealand and 60 day change of mind in Canada.
Management estimates the returned sales based on historical sale return information and any recent trends
that may suggest future claims could differ from historical amounts. For sales that are expected to be returned,
the Group recognises a right of return liability. The associated inventory value for sales that are expected to be
returned is recognised as a right of return asset.
(vi) Lifetime Diamond Warranty
LTDW is a warranty provided to customers with the purchase of jewellery items set with a diamond (excluding
watches). This has been deemed a service-type warranty and is calculated with reference to the estimated value
of service provided to customers and the stand-alone value of customers obtaining the service independently.
Income in relation to the LTDW is recognised in line with the estimated pattern of customers utilising this
service-type warranty.
ASSETS AND LIABILITIES RELATED TO CONTRACTS WITH CUSTOMERS
Right of return assets
Deferred PCP bonuses
Total contract assets
Deferred service revenue
Deferred interest revenue
Right of return liabilities
Lifetime Diamond Warranty
Total contract liabilities
2021
$000
58
1,087
1,145
76,581
-
148
3,821
80,550
2020
$000
108
1,673
1,781
73,856
2,918
250
2,489
79,513
REVENUE RECOGNISED IN RELATION TO CONTRACT LIABILITIES
The following table shows how much of the revenue recognised in the current reporting year relates to carried-
forward contract liabilities and how much relates to performance obligations that were satisfied or partially
satisfied in a prior year:
Revenue recognised that was included in the contract liability
balance at the beginning of the year
Impact on revenue recognised relating to performance
obligations satisfied in previous years
2021
$000
2020
$000
22,243
22,300
(1,305)
-
Revenue recognition patterns are regularly reassessed based on new and historical trends resulting in remeasurement
of revenue recognised in previous years.
A3 Other income
Net foreign exchange gain
Government grants
Other items
2021
$000
2,367
14,593
1,009
17,969
2020
$000
2,382
17,678
514
20,574
The Group received grants in relation to COVID-19 wage subsidies in all three markets. These grants were
accounted for as income upon recognition of the corresponding employee benefit expense as satisfactory
prerequisites of the grant were met. Further information regarding wage subsidies is disclosed in note I2.
MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021 61
Notes to the financial statements cont.
A4 Inventories
Raw materials
Finished goods
Packaging and other consumables
2021
$000
12,435
156,199
2,612
171,246
2020
$000
6,313
169,094
3,335
178,742
Finished goods are held at the lower of cost or net realisable value (NRV). During the year, $2,327,000 (2020:
$5,608,000) was recognised as an expense for finished goods inventories carried at NRV. This is recognised in
cost of goods sold.
A5 Leases
RIGHT-OF-USE ASSETS
Right-of-use assets
Less: Accumulated depreciation
Less: Accumulated impairment
Reconciliation of right-of-use assets
Opening carrying value
Additional right-of-use assets relating
to leases entered into during the year
Lease modifications agreed during the year
Depreciation expense
Reduction in right-of-use assets as a consequence
of COVID-19 on rent concessions
Impairment of right-of-use assets
Foreign currency translation
Closing carrying value
LEASE LIABILITIES
Current
Non-current
Reconciliation of lease liabilities
Opening carrying value
Additional lease liabilities entered into during the year
Lease modifications agreed during the year
Net reduction in future lease payments agreed as
a consequence of COVID-19 on rent concessions
Interest expense
Lease repayments
Foreign currency translation
Closing carrying value
2021
$000
2020
$000
179,524
(72,925)
(717)
105,882
162,380
(37,654)
(815)
123,911
123,911
142,833
13,311
7,581
(35,357)
21,702
(126)
(37,876)
(3,902)
-
338
105,882
(2,033)
(815)
226
123,911
34,304
99,382
133,686
42,164
115,848
158,012
158,012
13,177
7,517
(3,902)
6,653
(47,650)
(121)
133,686
166,322
21,671
14
(2,033)
7,628
(35,520)
(70)
158,012
The incremental borrowing rate used in determining the lease liability ranged between 1.47% and 7.12% (2020:
1.85% and 6.95%). Expenses relating to short-term leases during the period of $6,444,000 (2020: $4,467,000)
were included in occupancy costs.
62 MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021
ACCOUNTING POLICIES AND SIGNIFICANT JUDGEMENTS
The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract
conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
Group as a lessee
The Group applies a single recognition and measurement approach for all leases, except for short-term leases
and leases of low-value assets which are recognised in the profit or loss. The Group recognises lease liabilities to
make lease payments and right-of-use assets representing the right to use the underlying assets.
Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying
asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and
impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets
includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or
before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a
straight-line basis over the lease term.
On 28 May 2020, the IASB issued COVID-19-Related Rent Concessions - amendment to AASB16 Leases. The
amendments provide relief to lessees from applying AASB16 Leases guidance on lease modification accounting
for rent concessions arising as a direct consequence of the COVID-19 pandemic. As a practical expedient, a
lessee may elect not to assess whether a COVID-19 related rent concession from a lessor is a lease modification.
A lessee that makes this election accounts for any change in lease payments resulting from the COVID-19 related
rent concession the same way it would account for the change under AASB16 Leases, if the change were not a
lease modification. The Group has applied this practical expedient in the consolidated financial statements for all
COVID-19 impacted leases. Where the practical expedient has been applied, the Group has remeasured its lease
liabilities, using the remeasured consideration (e.g., reflecting the lease payment reduction or lease payment
deferral provided by the lessor), with a corresponding adjustment to the right-of-use asset.
The right-of-use assets are also subject to impairment. Refer to the accounting policies in note I1(f).
If ownership of the leased asset transfers to the Group at the end of the lease term or the cost reflects the
exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.
Lease liabilities
At commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease
payments to be made over the lease term. The lease payments include fixed payments (including in-substance
fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a
rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the
exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties
for terminating the lease, if the lease term reflects the Group exercising the option to terminate. Variable lease
payments that do not depend on an index or a rate are recognised as expenses (unless they are incurred to
produce inventories) in the period in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the
lease commencement date because the interest rate implicit in the lease is not readily determinable. After
the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and
reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there
is a modification, a change in the lease term, a change in the lease payment (e.g., changes to future payments
resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment
of an option to purchase the underlying asset.
The Group has several lease contracts that include extension options. These options are negotiated by
Management to provide flexibility in managing the leased-asset portfolio and align with the Group’s business
needs. Management exercises significant judgement in determining whether these extension options are
reasonably certain to be exercised (refer to note I2).
Set out below are the undiscounted potential future rental payments relating to the period following the
exercise date of extension options that are not included in the lease term:
Extension options expected not to be exercised
Within More than
five years
$000
55
five years
$000
277
2021
Total
$000
332
Within More than
five years
$000
60
five years
$000
455
2020
Total
$000
515
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases of machinery and
equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not
contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office
equipment that are considered to be low value. Lease payments on short-term leases and leases of low-value
assets are expensed on a straight-line basis over the lease term.
MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021 63
Notes to the financial statements cont.
B Cash management
B1 Cash and cash equivalents
Cash at bank and on hand
Reconciliation of profit after income tax to
net cash inflow from operating activities
Profit for the year
Adjustment for:
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of intangible assets
Impairment of property, plant and equipment
Impairment of other assets
Impairment of intangibles assets
Non-cash employee benefits expense - share-based payments
Make good interest
Net loss on sale of non-current assets
Net exchange differences
Change in operating assets and liabilities
(Increase)/decrease in trade and other receivables
(Increase)/decrease in inventories
(Increase)/decrease in deferred tax assets
(Increase)/decrease in other non-current assets
(Increase)/decrease in other current assets
(Decrease)/increase in trade and other payables
(Decrease)/increase in current tax liabilities
(Decrease)/increase in provisions
(Decrease)/increase in contract liabilities
Net cash inflow from operating activities
B2 Borrowings
Bank loans
Total secured borrowings
Current
$000
-
-
Non-
current
$000
-
-
2021
Total
$000
-
-
2021
$000
72,361
2021
$000
45,328
11,746
35,357
4,190
1,883
3,513
-
226
(57)
448
2,998
13,163
7,663
16,121
451
(1,192)
6,635
2,896
(11,114)
3,197
143,452
2020
$000
11,204
2020
$000
3,059
15,484
37,876
2,251
6,473
1,579
3
(25)
(228)
442
1,143
1,490
(206)
(1,430)
2,324
89
12,987
8,509
(6,121)
(2,000)
83,699
2020
Current
$000
Non-
current
$000
Total
$000
- 10,681 10,681
- 10,681 10,681
On 24 March 2021, the Group entered into a financing agreement with ANZ Banking Group and HSBC Australia
for an availability period of three years. The financial arrangement includes a $72 million multi-option borrowing
facility and ancillary working capital facilities in line with the business requirements of the Group. At balance date no
amounts were drawn on these facilities. Refer to note C3 for details of covenants relating to the financing facilities.
64 MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021
B3 Dividends
Ordinary shares
No final dividend was declared for the year ended 28 June 2020 (2019: 1.5¢)
Interim dividend for the year ended 27 June 2021 of 1.5¢ (2020: 1.5¢) per
fully paid share paid on 26 March 2021 (2020: 29 January 2021)
2021
$000
2020
$000
-
5,817
5,820
5,820
5,816
11,633
The interim dividend for the year ended 28 June 2020 of $5,816,000, originally deferred to 30 September 2021
for payment, was paid on 29 January 2021.
Dividends not recognised at the end of the reporting period
Since year-end, the Directors have recommended a 3¢ per fully paid share
(2020: no final dividend declared) final dividend.
Franking and imputation credits
Franking credits available for subsequent reporting periods based on a tax
rate of 30.0% (2020: 30.0%)
Imputation credits (NZ$) available for subsequent reporting periods based
on New Zealand tax rate of 28.0% (2020: 28.0%)
11,644
-
2,552
2,174
18,072
18,474
The dividends paid during the current financial period and corresponding previous financial period were fully
imputed and not franked.
The above franking credit amounts represent the balance of the franking account as at the end of the
financial year, adjusted for franking credits that will arise from the payment and refund of income tax payable.
The above imputation credit amounts represent the balance of the imputation account as at the end of the
financial year, adjusted for imputation credits that will arise from the payment and refund of income tax payable.
As the dividend recommended by the Directors since year end, but not recognised as a liability at year end,
will be unfranked there will be no reduction in the franking account.
The impact on the imputation credit account of the dividend recommended by the Directors since year end,
but not recognised as a liability at year end, is estimated to be a reduction in the imputation credit account of
NZ4,736,175 (2020: no dividend declared). The amount of imputation credits is dependent on the NZD exchange
rate at the time of the dividend.
C Financial risk management
C1 Financial risk management
The Group's activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and
price risk), credit risk and liquidity risk. The Group's overall risk management program focuses on the unpredictability of
financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group
seeks to use derivative financial instruments such as foreign exchange contracts and interest rate swaps to hedge
certain risk exposures as required. Derivatives are exclusively used for hedging purposes, i.e. not as trading or other
speculative instruments. The Group uses different methods to measure different types of risk to which it is exposed.
These methods include sensitivity analysis in the case of interest rate and foreign exchange risks and aging analysis for
credit risk.
MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021 65
Notes to the financial statements cont.
C1 Financial risk management cont.
Risk
Exposure arising from
Measurement
Management
Market risk - foreign
exchange
Future commercial transactions
Recognised financial assets and
liabilities not denominated in AUD
Cash flow
forecasting and
sensitivity analysis
Forward foreign
exchange contracts
Market risk - interest rate
Long-term borrowings at variable rates
Sensitivity analysis
Interest rate swaps
Credit risk
Cash and cash equivalents and
trade receivables
Ageing analysis
Liquidity risk
Borrowings and other liabilities
Rolling cash flow
forecasts
Diversification of bank
deposits, credit limits
and letters of credit
Availability of
committed credit lines
and borrowing facilities
The Group's overall risk management program includes a focus on financial risk including the unpredictability of
financial markets and foreign exchange risk.
The policies are implemented by the central finance function that undertakes regular reviews to enable
prompt identification of financial risks so that appropriate actions may be taken.
MARKET RISK
Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities that are
denominated in a currency that is not the entity’s functional currency and net investments in foreign operations.
The Group operates internationally and is exposed to foreign exchange risk arising from various currency
exposures. Where it is considered appropriate, the Group enters into forward foreign exchange contracts to buy
specified amounts of various foreign currencies in the future at a pre-determined exchange rate.
Exposure
The Group's exposure to foreign currency risk at the end of the reporting year, expressed in transactional currency,
was as follows:
27 June 2021
28 June 2020
Cash and cash equivalents
Trade receivables
Trade payables
Forward exchange contracts:
Buy foreign currency
Sell foreign currency
Net foreign currency exposure
USD
$000
1,633
839
(15,723)
NZD
$000
7
-
(36)
CAD
$000
4
8
(42)
7,780
-
(5,471)
-
(5,000)
(5,029)
-
(5,000)
(5,030)
USD
$000
36
500
(7,539)
-
-
(7,003)
NZD
$000
64
-
-
-
-
64
CAD
$000
43
-
(2)
-
-
41
Sensitivity
The following table summarises the sensitivity of the Group's financial assets and financial liabilities to foreign
currency risk. The foreign exchange sensitivities are based on the Group's exposure existing at balance date.
Sensitivity figures are pre-tax.
Foreign exchange rate sensitivities
AUD increases 10%
AUD decreases 10%
Impact on pre-tax profit
Impact on other
components of equity
2021
$000
2020
$000
2021
$000
2020
$000
1,574
(1,924)
831
(1,016)
-
-
-
-
66 MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021
INTEREST RATE RISK
The Group had no borrowings and a cash surplus at the end of the reporting period. The interest rate for cash
balances is currently close to nil so the Group is not exposed to any interest rate downside risk. The current
variable rate borrowings are detailed below:
Variable rate borrowings
2021
% of total
loans
n/a
2020
% of total
loans
100.0%
$000
10,681
$000
-
Instruments used by the Group
Historically, interest rate swaps are used to manage the Group's interest rate exposure. At 27 June 2021, the Group
had no borrowings and there were no swaps in place (2020: 46.8% of the variable rate principal outstanding). The
details of the variable rate borrowings and interest rate swap contracts outstanding are outlined below.
Bank overdrafts and bank loans
Interest rate swaps (notional principal amount)
Net exposure to cash flow interest rate risk
Weighted
average
interest rate
%
n/a
n/a
27 June 2021
Balance
$000
-
-
-
Weighted
average
interest rate
%
1.88%
4.63%
28 June 2020
Balance
$000
10,681
5,000
5,681
Sensitivity^
As the Group has a cash surplus with no borrowings, profit or loss is sensitive to higher/lower interest revenue from
cash and cash equivalents as a result of changes in interest rates. All other non-derivative and non-lease financial
liabilities have a contractual maturity of less than six months.
Interest rates - increase by 100 basis points
Interest rates - decrease by 100 basis points*
Impact on post-tax profit
Impact on other
components of equity
2021
$000
724
-
2020
$000
(107)
107
2021
$000
-
-
2020
$000
(15)
(36)
* Deposit rates are close to nil. Negative interest rates have not been modelled due to the low probability of this
occurring within the geographical segments in which the Group trades.
^ Sensitivity for prior year is based on the Group being in a borrowing position. Cash balances in prior year were
not considered material for sensitivity analysis purposes.
CREDIT RISK
Credit risk is managed on a Group basis and refers to the risk of a counterparty failing to discharge an obligation.
In the normal course of business, the Group incurs credit risk from trade receivables and transactions with
financial institutions. The Group places its cash and short term deposits with only high credit quality financial
institutions. Sales to retail customers are required to be settled via cash, major credit cards or passed onto various
credit providers in each country.
At the reporting date, no material credit risk exposure existed in relation to potential counterparty failure
on financial instruments. Other than the loss allowance recognised in trade and other receivables in note F3, no
financial assets were impaired or past due. The maximum exposure to credit risk at the end of the reporting year
is the carrying amount of each class of financial assets disclosed in note F3.
MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021 67
Notes to the financial statements cont.
C1 Financial risk management cont.
LIQUIDITY RISK
The Group maintains prudent liquidity risk management with sufficient cash and the availability of funding through
an adequate amount of committed credit facilities.
Financing arrangements
The Group’s objectives when managing capital are to ensure sufficient liquidity to support its financial obligations
and execute the Group's operational and strategic plans. The Group continually assesses its capital structure and
makes adjustments to it with reference to changes in economic conditions and risk characteristics associated
with its underlying assets.
The Group had access to the following undrawn borrowing facilities at the end of the reporting year:
Floating rate
Expiring beyond one year (bank overdrafts)
Expiring beyond one year (bank loans)
2021
$000
1,932
70,000
71,932
2020
$000
1,935
46,248
48,183
Maturities of financial liabilities
The tables below analyse the Group's financial liabilities into relevant maturity groupings based on their contractual
maturities for:
• all non-derivative financial liabilities, and
• net and gross settled derivative financial instruments for which the contractual maturities are essential for an
understanding of the timing of the cash flows.
The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months
equal their carrying balances as the impact of discounting is not significant. For interest rate swaps the cash flows
have been estimated using forward interest rates applicable at the end of the reporting year.
Contractual maturities
of financial liabilities
At 27 June 2021
Non-derivatives
Lease liabilities
Trade payables
Borrowings
Total non-derivatives
Derivatives
Less than
6 months
6 - 12
months
Between
1 and 2
years
Between
2 and 5
years
Over
Total
5 years contractual
cash flows
$000
$000
$000
$000
$000
$000
19,831
73,961
-
93,792
18,300
-
-
18,300
30,378
-
-
30,378
51,179
-
-
51,179
34,661 154,349
73,961
-
34,661 228,310
-
-
Gross settled (FECs)
Net settled (interest rate swaps)
232
-
232
-
-
-
-
-
-
-
-
-
-
-
-
232
-
232
At 28 June 2020
Non-derivatives
Lease liabilities
Trade payables
Borrowings
Total non-derivatives
Derivatives
10,065
64,964
-
75,029
1,168
-
-
1,168
9,954
-
10,681
20,635
59,411
-
-
59,411
77,414 158,012
64,964
10,681
77,414 233,657
-
-
Gross settled (FECs)
Net settled (interest rate swaps)
69
34
103
-
-
-
-
-
-
-
-
-
-
-
-
69
34
103
68 MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021
C2 Derivative financial instruments
The Group is exposed to certain risks relating to its
ongoing business operations. The primary risks managed
using derivative instruments are foreign currency risk and
interest rate risk.
The Group’s risk management strategy and how it is
applied to manage risk are explained below.
ACCOUNTING POLICY
Initial recognition and subsequent measurement
The Group uses derivative financial instruments, such as
forward currency contracts and interest rate swaps, to
hedge its foreign currency risks and interest rate risks,
respectively. Such derivative financial instruments are
initially recognised at fair value on the date on which a
derivative contract is entered into and are subsequently
remeasured at fair value. Derivatives are carried as
financial assets when the fair value is positive and as
financial liabilities when the fair value is negative.
For the purpose of hedge accounting, hedges are
classified as:
• Fair value hedges when hedging the exposure to
changes in the fair value of a recognised asset or
liability or an unrecognised firm commitment
• Cash flow hedges when hedging the exposure to
variability in cash flows that is either attributable to
a particular risk associated with a recognised asset
or liability or a highly probable forecast transaction
or the foreign currency risk in an unrecognised firm
commitment
• Hedges of a net investment in a foreign operation
At the inception of a hedge relationship, the Group formally
designates and documents the hedge relationship to
which it wishes to apply hedge accounting and the risk
management objective and strategy for undertaking the
hedge.
The documentation includes identification of the
hedging instrument, the hedged item, the nature of the
risk being hedged and how the Group will assess whether
the hedging relationship meets the hedge effectiveness
requirements (including the analysis of sources of hedge
ineffectiveness and how the hedge ratio is determined).
A hedging relationship qualifies for hedge accounting if
it meets all of the following effectiveness requirements:
• There is ‘an economic relationship’ between the hedged
item and the hedging instrument.
• The effect of credit risk does not ‘dominate the value
changes’ that result from that economic relationship.
• The hedge ratio of the hedging relationship is the same
as that resulting from the quantity of the hedged item
that the Group actually hedges and the quantity of the
hedging instrument that the Group actually uses to
hedge that quantity of hedged item.
Hedges that meet all the qualifying criteria for hedge
accounting are accounted for, as described below.
Fair value hedge
The change in the fair value of a hedging instrument is
recognised in the statement of profit or loss as other
expense. The change in the fair value of the hedged item
attributable to the risk hedged is recorded as part of the
carrying value of the hedged item and is also recognised
in the statement of profit or loss as other expense.
If the hedged item is derecognised, the unamortised
fair value is recognised immediately in profit or loss.
firm commitment
When an unrecognised
is
designated as a hedged item, the subsequent cumulative
change in the fair value of the firm commitment
attributable to the hedged risk is recognised as an asset
or liability with a corresponding gain or loss recognised in
profit or loss.
Cash flow hedge
The effective portion of the gain or loss on the hedging
instrument is recognised in OCI in the cash flow hedge
reserve, while any ineffective portion is recognised
immediately in the statement of profit or loss. The
cash flow hedge reserve is adjusted to the lower of the
cumulative gain or loss on the hedging instrument and
the cumulative change in fair value of the hedged item.
The Group uses
forward currency contracts
as hedges of its exposure to foreign currency risk in
forecast transactions and firm commitments, as well
as interest rate swaps for its exposure to volatility in
interest rates. The ineffective portion relating to foreign
currency contracts is recognised as other expense and
the ineffective portion relating to interest rate swaps is
recognised in other operating income or expenses.
When forward contracts are used to hedge forecast
transactions, the group designates the change in fair value
of the forward contract related to the spot component as
the hedging instrument. Gains or losses relating to the
effective portion of the change in the spot component
of the forward contracts are recognised in the cash flow
hedge reserve within equity. The change in the forward
element of the contract that relates to the hedged item
(‘aligned forward element’) is recognised within OCI in
the cash flow hedge reserve within equity. In some cases,
the entity may designate the full change in fair value of
the forward contract (including forward points) as the
hedging instrument. In such cases, the gains or losses
relating to the effective portion of the change in fair value
of the entire forward contract are recognised in the cash
flow hedge reserve within equity.
The amounts accumulated in OCI are accounted
for, depending on the nature of the underlying hedged
transaction. If the hedged transaction subsequently results
in the recognition of a non-financial item, the amount
accumulated in equity is removed from the separate
component of equity and included in the initial cost or other
carrying amount of the hedged asset or liability. This is not
a reclassification adjustment and will not be recognised
in OCI for the period. This also applies where the hedged
forecast transaction of a non-financial asset or non-financial
liability subsequently becomes a firm commitment for which
fair value hedge accounting is applied.
MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021 69
MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021 69
Notes to the financial statements cont.
For hedges of interest rate risk, the Group enters
into hedge relationships where the critical terms of the
hedging instrument match exactly with the terms of the
hedged item. The Group therefore performs a qualitative
assessment of effectiveness. If changes in circumstances
affect the terms of the hedged item such that the critical
terms no longer match exactly with the critical terms of
the hedging instrument, the Group uses the hypothetical
derivative method to assess effectiveness. It may occur
due to:
• the credit value/debit value adjustment on the interest
rate swaps which is not matched by the loan, and
• differences in critical terms between the interest rate
swaps and loans.
There was no recognised ineffectiveness during 2021 or
2020 in relation to the interest rate swaps.
C3 Capital management
The Group's objectives when managing capital are to:
• safeguard its ability to continue as a going concern, so
that it can continue to provide returns for shareholders
and benefits for other stakeholders, and
• maintain an optimal capital structure to reduce the cost
of capital.
In order to maintain or adjust the capital structure, the
Group may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new
shares or sell assets to reduce debt.
There are a number of external bank covenants
in place relating to debt facilities. These covenants
are calculated and reported to the banks quarterly on
a pre-AASB16 Leases basis. The principal covenants
relating to capital management are the EBIT fixed cover
charge ratio, consolidated debt to EBITDA, consolidated
debt to capitalisation, and consolidated debt to inventory.
There have been no breaches of these covenants and
the Group continues to collaborate with the external
financing partners as required.
C2 Derivative financial instruments
cont.
For any other cash flow hedges, the amount accumulated
in OCI is reclassified to profit or loss as a reclassification
adjustment in the same period or periods during which
the hedged cash flows affect profit or loss.
If cash flow hedge accounting is discontinued, the
amount that has been accumulated in OCI must remain
in accumulated OCI if the hedged future cash flows are
still expected to occur. Otherwise, the amount will be
immediately reclassified to profit or loss as a reclassifica-
tion adjustment. After discontinuation, once the hedged
cash flow occurs, any amount remaining in accumulated
OCI must be accounted for depending on the nature of
the underlying transaction as described above.
Classification of derivatives
Derivatives are only used for economic hedging purposes
and not as speculative investments. However, where
derivatives do not meet the hedge accounting criteria,
they are classified as ‘held for trading’ for accounting
purposes and are accounted for at fair value through
profit or loss. They are presented as current assets or
liabilities to the extent they are expected to be settled
within 12 months after the end of the reporting year.
Derivatives not designated as hedging instruments
The Group uses foreign currency-denominated borrowings
and foreign exchange forward contracts to manage some
of its transaction exposures. The foreign exchange forward
contracts are not designated as cash flow hedges and are
entered into for periods consistent with foreign currency
exposure of the underlying transactions, generally from
one to six months.
Hedging reserves
The Group’s hedging reserves are disclosed in the
statement of changes in equity.
A loss of $34,000 (2020: $434,000 loss) was reclassified
from the cash flow hedge reserve to profit or loss during
the year.
Amounts recognised in profit or loss
In addition to the amounts disclosed in the reconciliation
of hedging reserves above, the following amounts were
recognised in profit or loss in relation to derivatives:
Net foreign exchange gain/(loss)
included in other gains/(losses)
2021
$000
232
2020
$000
169
Hedge ineffectiveness
Hedge effectiveness is determined at the inception of
the hedge relationship, and through periodic prospective
effectiveness assessments to ensure that an economic
relationship exists between the hedged item and hedging
instrument.
70 MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021
D Reward and recognition
D1 Employee benefits
Employee wages
Employee wages on-costs and post-retirement benefits
Employee share-based payments expense
D2 Key management personnel
Short-term employee benefits
Long-term benefits
Post-employment benefits
Share-based payments
2021
$000
133,147
14,246
226
147,619
2020
$000
131,548
14,796
138
146,482
2021
$
2,814,438
29,892
73,558
86,798
3,004,686
2020
$
1,997,383
20,632
76,443
27,740
2,122,198
D3 Share-based payments
OPTIONS
Options are granted from time to time at the discretion of Directors to senior executives within the Group. Motions
to issue options to related parties of Michael Hill International Limited are subject to the approval of shareholders
at the Annual General Meeting in accordance with the Company's constitution.
Options are granted under the plan for no consideration. Options expire ten years after granted, vest over five
years and are exercisable at any time during the final five years.
Options granted under the plan carry no dividend or voting rights. When exercisable, each option is
convertible into one ordinary share.
Set out below are summaries of options granted under the plan:
As at 29 June 2020 NZD options
Expired during the year
Forfeited during the year
As at 27 June 2021 NZD options
As at 29 June 2020 AUD options
Expired during the year
Forfeited during the year
As at 27 June 2021 AUD options
2021
average
exercise price
per option $
2021
2020
2020
average
exercise price
per option $
Number of
options
1.56 1,100,000
(100,000)
0.88
-
-
1.63 1,000,000
Number of
options
1.58 1,900,000
0.94
(100,000)
(700,000)
1.70
1.56 1,100,000
1.56
-
-
1.56
300,000
-
-
300,000
1.56
-
1.56
1.56
600,000
-
(300,000)
300,000
MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021 71
MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021 71
Notes to the financial statements cont.
D3 Share-based payments cont.
Options outstanding at the end of the year have the following expiry dates and exercise prices:
Grant date
17 September 2010
16 November 2011
19 September 2012
18 September 2013
29 November 2013
10 November 2014
5 October 2017
22 September 2016
22 January 2016
22 September 2018
30 September 2020
30 September 2021
30 September 2022
30 September 2023
30 September 2023
30 September 2024
30 September 2027
30 September 2026
30 September 2025
30 September 2028
Expiry date Exercise price
nz$0.88
nz$1.16
nz$1.41
nz$1.82
nz$1.82
nz$1.63
au$1.44
au$2.12
nz$1.14
au$1.11
2021
-
100,000
100,000
100,000
500,000
100,000
100,000
100,000
100,000
100,000
2020
100,000
100,000
100,000
100,000
500,000
100,000
100,000
100,000
100,000
100,000
1,300,000 1,400,000
The weighted average remaining contractual life of share options outstanding at the end of the period was 3.2 years
(2020: 3.9 years).
The exercise price will be converted to Australian dollars using the Reserve Bank of Australia exchange rate
on the day the option is exercised.
SHARE RIGHTS
The Company introduced a deferred compensation plan (LTI) involving the granting of share rights to eligible
participants in 2016 and was approved by shareholders at the Company’s Annual General Meeting held on
31 October 2016.
Under the plan, a senior executive may be granted share rights by the Company. Each share right represents
a right to receive one ordinary share in the Company, subject to the terms and conditions of the rules of the plan.
An allocation of share rights is made to each eligible participant on an annual basis to a value of 65% of their
target opportunity. The performance metric uses is Total Shareholder Return (TSR) compound annual growth rate
(CAGR) over three years.
Subject to remaining an employee of the Group for a period of three years and satisfaction of TSR target
metric, share rights will vest in accordance with the sliding vesting schedule:
• no share rights vest if TSR is equal to or less than 15% CAGR
• 5% share rights vest for each 1% increase in CAGR performance between 15% CAGR to 35% CAGR
• 100% share rights vest if TSR is equal to or above 35% CAGR
During the year, the Board agreed to grant 4,189,622 share rights to eligible participants of the deferred
compensation plan, subject to continual employment for a period three years and an absolute Total Shareholder
Return condition for vesting in three years.
Outstanding at 29 June 2020
Granted
Exercised
Forfeited
Outstanding at 27 June 2021
2021
2021
average
fair value per
Number of
share right $
share rights
788,798
0.81
0.15 4,189,622
(373,044)
0.72
(27,858)
1.41
0.20 4,577,518
2020
average
fair value per
share right $
0.54
0.57
1.66
-
0.81
2020
Number of
share rights
521,609
286,294
(19,105)
-
788,798
The number of share rights in each tranche is based on the prescribed dollar value for each tranche divided by
the volume weighted average share price ('VWAP') of Michael Hill International Limited shares over ten trading
days following the Michael Hill International shares trading subsequent to the final quarterly trade announcement.
72 MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021
Share rights issued during the current financial year used the Monte Carlo model to determine the fair value of share
rights using the following inputs:
Number of rights
Share price
Annualised volatility
Expected dividend yield
Risk free rate
Fair value of share rights
2021
3,878,533
$0.39
45%
10.0%
0.27%
$0.13
2020
286,294
$0.68
40%
6.5%
0.75%
$0.57
Further to the share rights issued above, there were an additional 311,089 share rights issued on 6 October 2020 with
a fair value of $0.35 per right.
Expenses arising from share-based payment transactions
2021
$000
226
2020
$000
166
Upon the exercise of options, the balance of the
share-based payments reserve relating to those options
is transferred to share capital.
Share rights
Share rights are granted to eligible senior executives in
accordance with the Company's deferred compensation
plan ('LTI'). The fair value of rights granted is recognised
as an employee benefit expense with a corresponding
increase in equity.
The fair value was measured at grant date using the
Monte Carlo method and is recognised over the period
during which the employees become unconditionally
entitled to the rights.
The total expense is recognised over the vesting
period, which is the period over which all of the specified
vesting conditions are to be satisfied. At the end of
each year, the entity revises its estimates of the number
of share rights that are expected to vest based on the
non-market vesting and service conditions. It recognises
the impact of the revision to original estimates, if any, in
profit or loss, with a corresponding adjustment to equity.
Upon the exercise of the share rights, the balance
of the share-based payments reserve relating to those
rights is transferred to share capital.
ACCOUNTING POLICY
Options
The fair value was measured at grant date and is
recognised over the period during which the employees
become unconditionally entitled to the options. The
fair value at grant date for options issued during prior
financial years was independently determined using a
Binomial option pricing model, which is an iterative model
for options that can be exercised at times prior to expiry.
The model takes into account the grant date, exercise
price, market performance conditions, the impact of
dilution, the non-tradeable nature of the option, the share
price at grant date and expected price volatility of the
underlying share, the expected dividend yield and the
risk-free interest rate for the term of the option. It also
assumes the options will be exercised at the mid-point of
the exercise period.
The fair value of options granted is recognised as an
employee benefits expense with a corresponding increase
in equity. The total amount to be expensed is determined
by reference to the fair value of the options granted:
• including any market performance conditions (eg the
entity’s share price)
• excluding the impact of any service and non-market
performance vesting conditions (eg profitability, sales
growth targets and remaining an employee of the entity
over a specified period), and
• including the impact of any non-vesting conditions
(eg the requirement for employees to save or holdings
shares for a specific period of time).
The total expense is recognised over the vesting
period, which is the period over which all of the specified
vesting conditions are to be satisfied. At the end of
each year, the entity revises its estimates of the number
of options that are expected to vest based on the
non-market vesting and service conditions. It recognises
the impact of the revision to original estimates, if any, in
profit or loss, with a corresponding adjustment to equity.
MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021 73
MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021 73
Notes to the financial statements cont.
E Related parties
Related party transactions:
Services rendered for graphic design of the annual report
by a related party of board members
2021
$
2020
$
13,559
13,945
All transactions with related parties were in the normal course of business and on normal terms and conditions.
F Other information
F1 Expenses
Depreciation and amortisation
Depreciation on property, plant and equipment
Depreciation on right-of-use asset
Total depreciation
Amortisation on software
Total amortisation
Total depreciation and amortisation
Finance costs
Interest on lease liabilities
Bank and interest charges
Interest on make good provision
F2 Earnings per share
Reconciliation of earnings used in calculating
earnings per share
Basic earnings per share
NOTES
2021
$000
2020
$000
F5
A5
F6
A5
11,746
35,357
47,103
4,190
4,190
51,293
6,653
999
(57)
7,595
15,484
37,876
53,360
2,251
2,251
55,611
7,628
2,198
(228)
9,598
2021
$000
2020
$000
Profit attributable to the ordinary equity holders of the Company
used in calculating basic earnings per share
45,328
3,059
Diluted earnings per share
Profit from continuing operations attributable
to the ordinary equity holders of the Company
Weighted average number of shares
used as the denominator
Weighted average number of ordinary shares used as
the denominator in calculating basic earnings per share
Adjustments for calculation of diluted earnings per share:
Share rights
Weighted average number of ordinary and potential ordinary shares
used as the denominator in calculating diluted earnings per share
45,328
3,059
2021
Number
2020
Number
387,924,289 387,766,481
1,771,137
574,013
389,695,426 388,340,494
Options and share rights granted to employees under the Michael Hill International Limited Employee Option Plan
are considered to be potential ordinary shares and have been included in the determination of diluted earnings
per share to the extent to which they are dilutive. All options outstanding at financial year end were considered to
be non-dilutive. The options and share rights have not been included in the determination of basic earnings per
share. Details are set out in note D3.
74 MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021
F3 Trade and other receivables
Trade receivables
Provision for expected credit loss
Current Non-current
$000
-
-
-
$000
6,555
(373)
6,182
2021
Total
$000
6,555
(373)
6,182
Current Non-current
$000
-
-
-
$000
3,432
(340)
3,092
2020
Total
$000
3,432
(340)
3,092
Canadian in-house customer finance
Provision for expected credit loss
-
-
-
-
-
-
-
-
-
14,576
(1,143)
13,433
11,021
(294)
10,727
25,597
(1,437)
24,160
Sundry debtors
2,170
8,352
- 2,170
- 8,352
8,481
25,006
-
10,727
8,481
35,733
Trade receivables
Trade receivables from sales made to customers through third party credit providers are non-interest bearing and
are generally on 0-30 day terms.
Canadian in-house customer finance
The terms available to customers range from an interest-bearing revolving line of credit through to interest free
terms of between six and 40 months, although 12 to 18 months is the typical financing period.
The receivables from the in-house customer finance program are comprised of a large number of transactions
with no one customer representing a significant balance. The finance portfolio consists of contracts of similar
characteristics that are evaluated collectively for expected credit losses (ECL).
The Canadian in-house customer finance loan book was determined to be an asset held for sale as at
27 June 2021, refer to note F4.
Sundry debtors
Sundry debtors relates to supplier credits, security deposits and other sundry receivables. Based on the credit history
of these debtors, it is expected that these amounts will be received when due and no impairment is recognised.
Effective interest rates
All receivables are non-interest bearing except for a small portion of in-house customer finance receivables.
In-house customer finance receivables are recognised net of significant financing components determined in
accordance with AASB15 Revenue from Contracts with Customers.
ECL and risk exposure
An ECL analysis is performed at each reporting date. The maximum exposure to credit risk is the carrying value of
in-house customer finance program and trade receivables. The Group does not hold collateral as security. The Group
evaluates the concentration of risk with respect to these receivables as low. For further details refer to note C1.
Ageing of trade receivables
Current
< 30 days past due
30 - 60 days past due
60+ days past due
Movements in the provision for ECL of
trade receivables are as follows:
Opening balance
Net amounts written back/(written off)
Additional provisions recognised
Exchange differences
Closing balance
2021
$000
5,961
298
77
219
6,555
2021
$000
340
17
16
-
373
2020
$000
3,027
199
(2)
208
3,432
2020
$000
409
(193)
125
(1)
340
MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021 75
Notes to the financial statements cont.
F4 Assets held for sale and directly associated liabilities
Canadian in-house customer finance debtors
Total assets held for sale
Deferred interest revenue
Total liabilities directly associated with assets held for sale
2021
$000
14,397
14,397
1,607
1,607
During the period, the Group conducted a strategic review of the Canadian in-house customer credit book. At
reporting date, as the sale is considered probable and expected to be completed within a year from reporting
date, it is presented as held for sale.
Receivables relating to the credit book and associated liabilities were classified as assets held for sale,
alongside the corresponding liability, deferred interest revenue. The carrying value of the credit book was written
down to Management's best estimate of net proceeds of the sale and estimated costs of disposal. This resulted
in an expense of $2,986,000 in the period being recognised as Impairment of other assets. This estimate is based
on significant unobservable inputs (Level 3 under AASB13 Fair Value Measurement Hierarchy) which includes
assumptions in relation to the terms of the eventual sale which may differ from this estimate.
The loss recognised on this asset is included in the Canada Segment in note A1.
76 MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021
F5 Property, plant and equipment
At 1 July 2019
Cost
Accumulated depreciation
and impairment
Net book amount
Year ended 28 June 2020
Opening net book amount
Adjustment for change in
accounting policy
Exchange difference
Additions
Disposals
Transfers
Depreciation charge
Impairment loss
Closing net book amount
At 28 June 2020
Cost
Accumulated depreciation
and impairment
Net book amount
Year ended 27 June 2021
Opening net book amount
Exchange difference
Additions
Disposals
Depreciation charge
Impairment loss
Closing net book amount
At 27 June 2021
Cost
Accumulated depreciation
and impairment
Net book amount
Plant and Fixtures and
fittings
$000
equipment
$000
Motor
vehicles
$000
Leasehold
improvements
$000
Display
materials
$000
Total
$000
32,867
33,153
366
85,774
15,449 167,609
(21,961)
10,906
(23,171)
9,982
(277)
89
(49,962)
35,812
(9,025) (104,396)
63,213
6,424
10,906
9,982
89
35,812
6,424
63,213
-
(48)
1,852
(190)
90
(3,617)
(738)
8,255
-
(52)
1,819
(119)
253
(3,373)
(404)
8,106
-
-
-
(38)
-
(35)
-
16
(2,653)
(265)
3,133
(240)
(346)
(6,540)
(2,016)
26,885
-
19
1,065
(131)
-
(1,919)
(3,315)
2,143
(2,653)
(346)
7,869
(718)
(3)
(15,484)
(6,473)
45,405
32,831
34,431
47
78,164
15,197 160,670
(24,576)
8,255
(26,325)
8,106
(31)
16
(51,279)
26,885
(13,054) (115,265)
45,405
2,143
8,255
(52)
2,109
(413)
(2,938)
(349)
6,612
8,106
9
792
(38)
(2,604)
(126)
6,139
33,906
34,291
(27,294)
6,612
(28,152)
6,139
16
(1)
-
(12)
(3)
(0)
-
-
-
-
26,885
47
3,279
(1,092)
(5,329)
(1,357)
22,433
2,143
43
250
(244)
(872)
(51)
1,269
45,405
46
6,430
(1,799)
(11,746)
(1,883)
36,453
78,996
2,184 149,377
(56,563)
22,433
(915) (112,924)
36,453
1,269
Impairment loss
As per the Group's accounting policies, the Group impairs assets where the recoverable amount is less than the
carrying amount. This also includes assets held at stores facing closure. Any assets held at an impaired store that
are able to be redeployed throughout the Group are not impaired.
Impairment indicators were identified due to the impact of COVID-19 which resulted in temporary store
closures and reduction in sales, as disclosed in note I2. The Group treats each store as a separate cash-generating
unit for impairment testing of property, plant and equipment and right of use assets.
The pre-tax discount rates used in determining the recoverable amount ranged between 8.2% and 13.4%,
depending on the geographical segment of the assets.
MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021 77
Notes to the financial statements cont.
F5 Property, plant and equipment cont.
Depreciation methods and useful lives
Depreciation is calculated using the straight-line method to allocate the cost or revalued amounts of the assets,
net of their residual values, over their estimated useful lives or, in the case of leasehold improvements and certain
leased plant and equipment, the shorter lease term as follows:
4 - 7 years
• Plant and equipment
• Motor vehicles
3 - 5 years
• Fixtures and fittings
6 - 10 years
• Leasehold improvements 6 - 10 years
6 - 10 years
• Display materials
F6 Intangible assets
At 1 July 2019
Cost
Accumulated depreciation and impairment
Net book amount
Year ended 28 June 2020
Opening net book amount
Additions
Disposals
Impairment charge
Amortisation charge
Closing net book amount
At 28 June 2020
Cost
Accumulated amortisation
Net book amount
Year ended 27 June 2021
Opening net book amount
Additions
Disposals
Impairment charge
Amortisation charge
Closing net book amount
At 27 June 2021
Cost
Accumulated depreciation and impairment
Net book amount
Patents,
trademarks and
other rights
$000
79
-
79
Computer
software
Total
$000
30,852
(15,492)
15,360
$000
30,931
(15,492)
15,439
79
-
-
-
-
79
79
-
79
79
-
-
-
-
79
79
-
79
15,360
11,241
3
(3)
(2,251)
24,350
15,439
11,241
3
(3)
(2,251)
24,429
39,383
(15,033)
24,350
39,462
(15,033)
24,429
24,350
12,597
9
-
(4,190)
32,766
24,429
12,597
9
-
(4,190)
32,845
51,945
(19,179)
32,766
52,024
(19,179)
32,845
The Group is currently assessing the impact of the IFRIC agenda decision - Configuration or Customisation Costs
in a Cloud Computing Arrangement, refer further detail note I1(r).
78 MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021
F7 Trade and other payables
Trade payables
Annual leave liability
Accrued expenses
Other payables
2021
$000
44,499
9,390
3,453
16,619
73,961
F8 Provisions
Employee benefits
Assurance-type warranties
Make good provision
Restructuring costs
Diamond warranty
Current Non-current
$000
1,732
280
5,401
-
-
7,413
$000
13,074
1,082
306
152
240
14,854
2021
Total
$000
14,806
1,362
5,707
152
240
22,267
Current Non-current
$000
1,776
280
6,563
-
-
8,619
$000
20,599
1,125
260
2,325
360
24,669
2020
$000
28,982
7,758
1,131
26,601
64,472
2020
Total
$000
22,375
1,405
6,823
2,325
360
33,288
Total
Assurance Make good Restructuring
costs
provision
Diamond
warranty
Movements in provisions
Opening carrying amount
Changes in provisions recognised
Amounts incurred and charged
Exchange differences
Closing carrying amount
Employee
benefits
$000
22,375
719
(8,284)
(4)
14,806
-type
warranties
$000
1,405
(41)
-
(2)
1,362
$000
6,823
(848)
(246)
(22)
5,707
$000
2,325
-
(2,145)
(28)
152
$000
360
-
(120)
-
240
$000
33,288
(170)
(10,795)
(56)
22,267
ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES
Employee benefits
Employee benefits includes provision for long service leave, revaluation of employee benefits in New Zealand and
the provision for remediation. Provisions are measured at the present value of Management's best estimate of the
expenditure required to settle the present obligation at the end of the reporting year.
The liability for long service leave is measured as the present value of expected future payments to be made
in respect of services provided by employees up to the reporting date using the projected unit credit method.
Assurance-type warranties
Provision is made for the estimated sale returns for the Group's return policies, being 12 month guarantee on the
quality of workmanship and the 3 year watch guarantee. In addition, all Michael Hill watches sold before 30 June
2018 included a lifetime battery replacement guarantee. Management estimates the provision based on historical
sale return information and any recent trends that may suggest future claims could differ from historical amounts.
Make good provision
The Group has an obligation to restore certain leasehold sites to their original condition upon store closure or
relocation. This provision represents the present value of the expected future make good commitment. Amounts
charged to the provision represent both the cost of make good costs incurred and the costs incurred which
mitigate the final liability prior to the closure or relocation.
Restructuring
A provision has been raised for the estimated staffing exit costs from business structure changes. Restructuring
provisions are recognised only when the Group has a constructive obligation, which is when:
• there is a detailed formal plan that identifies the business or part of the business concerned, the location and
number of employees affected, the detailed estimate of the associated costs, and the timeline; and
• the employees affected have been notified of the plan’s main features.
MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021 79
Notes to the financial statements cont.
F9 Tax
INCOME TAX EXPENSE
Current tax
Current tax on profits for the year
Unrecognised tax losses utilised during the year
Adjustments for current tax of prior periods
Foreign income tax offsets not recognised
Total current tax expense
Deferred income tax
(Increase)/decrease in deferred tax assets
Adjustments for deferred tax of prior periods
Total deferred tax expense/(benefit)
Income tax expense
NUMERICAL RECONCILIATION OF INCOME TAX
EXPENSE TO PRIMA FACIE TAX PAYABLE
Profit before income tax expense
Tax at the Australian tax rate of 30.0% (2020: 30.0%)
Tax effect of amounts which are not deductible
(taxable) in calculating taxable income:
Non-deductible expenditure
Sundry items
Difference in overseas tax rates
Adjustments for current tax of prior periods
Adjustments for deferred tax of prior periods
Utilisation of tax losses not recognised
Income tax expense
TAX LOSSES
Unused United States tax losses for which
no deferred tax asset has been recognised
Potential tax benefit @ 25.0%
Unused New Zealand tax losses for which
no deferred tax asset has been recognised
Potential tax benefit @ 28.0%
2021
$000
5,481
-
40
-
5,521
14,002
(44)
13,958
19,479
64,807
19,442
145
(13)
19,574
(64)
40
(44)
(27)
19,479
32,369
8,092
2,639
739
2020
$000
2,488
-
650
-
3,138
(957)
(755)
(1,712)
1,426
4,486
1,346
279
(211)
1,414
208
650
(755)
(91)
1,426
35,745
8,936
2,651
742
The unused tax losses incurred in the United States and New Zealand are available indefinitely for offsetting
against future taxable profits of the countries in which the losses arose. Deferred tax assets have not been
recognised in respect of these losses as it is unknown when the New Zealand losses may be used to offset taxable
profits and the United States losses are not expected to be used.
80 MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021
DEFERRED TAX BALANCES
The balance comprises temporary differences attributable to:
Expected credit loss provision
Fixed assets and intangibles
Intangible assets from intellectual property transfer
Deferred expenditure
Prepayments
Deferred service revenue
Unearned income
Right-of-use assets
Lease liabilities
Provisions
Unrealised foreign exchange losses
Sundry items
Inventories
Net deferred tax assets
Expected settlement:
Deferred tax assets expected to be recovered
within 12 months
Deferred tax assets expected to be recovered
after more than 12 months
Movements:
Opening balance at 29 June 2020
Credited/(charged) to the income statement
Adjustment on adoption of AASB16
Prior year adjustment
Foreign exchange differences
Closing balance at 27 June 2021
2021
$000
2020
$000
377
8,536
19,705
(310)
(7)
1,379
-
(31,798)
40,064
20,190
885
(780)
2,344
60,585
485
8,190
22,723
(478)
(19)
235
-
(37,091)
44,578
20,757
(317)
(511)
15,916
74,468
26,612
39,585
33,973
60,585
74,468
(14,003)
-
44
76
60,585
34,883
74,468
67,708
957
5,375
755
(327)
74,468
F10 Auditors' remuneration
During the year the following fees were paid or payable for services provided by the auditor of the parent entity,
Michael Hill International Limited, its related practices and non-related audit firms:
Ernst & Young (Australia)
Fees for auditing the statutory financial report of
the Company and its subsidiaries
Fees for other services – employment advisory
Total remuneration paid to Ernst & Young (Australia)
2021
$
2020
$
554,541
3,682
558,223
535,506
10,050
545,556
MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021 81
Notes to the financial statements cont.
F11 Contributed equity
SHARE CAPITAL
Ordinary shares - fully paid
Total share capital
Movements in ordinary shares:
Opening balance at 1 July 2019
Rights converted
Balance at 28 June 2020
Rights converted
Balance at 27 June 2021
2021
Shares
2020
Shares
388,142,149 387,769,105
388,142,149 387,769,105
2021
$000
11,285
11,285
No. of shares
387,750,000
19,105
387,769,105
373,044
388,142,149
2020
$000
11,016
11,016
$000
10,984
32
11,016
269
11,285
Ordinary shares
Ordinary shares entitle the holder to participate in dividends, and to share in the proceeds of winding up the
Company in proportion to the number of and amounts paid on the shares held.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to
one vote, and on a poll each share is entitled to one vote.
Options
Information relating to the Michael Hill International Employee Option Plan, including details of options issued,
exercised and lapsed during the financial year and options outstanding at the end of the financial year, is set out
in note D3.
Rights issue
Information relating to share rights issued under the Company's deferred compensation plan, including details
of rights issued, exercised and lapsed during the financial year and rights outstanding at the end of the financial
year, is set out in note D3.
F12 Reserves
NATURE AND PURPOSES OF OTHER RESERVES
Cash flow hedges
The hedging reserve is used to record gains or losses on derivatives that are designated and qualify as cash
flow hedges and that are recognised in other comprehensive income, as described in note I1(i). Amounts are
reclassified to profit or loss when the associated hedged transaction affects profit or loss.
Share-based payments
The share-based payments reserve is used to recognise the value of equity-settled share-based payments
provided to employees, including key management personnel, as part of their remunerations. Refer to note D3 for
further details of these plans.
Foreign currency translation
Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive
income as described in note I1(c) and accumulated in a separate reserve within equity. The cumulative amount is
reclassified to profit or loss when the net investment is disposed of.
82 MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021
G Group structure
G1 Interests in other entities
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy described in note I1(b):
Country of
Incorporation
Ownership interest
held by the group
Michael Hill Jeweller (Australia) Pty Limited
Michael Hill Wholesale Pty Limited
Michael Hill Manufacturing Pty Limited
Michael Hill Franchise Pty Limited
Michael Hill Franchise Services Pty Limited
Michael Hill Finance (Limited Partnership)
Michael Hill Group Services Pty Limited
Michael Hill Charms Pty Limited
Michael Hill Online Pty Limited
Emma & Roe Pty Limited
Medley Jewellery Pty Limited
Durante Holdings Pty Limited
Michael Hill New Zealand Limited
Michael Hill Jeweller Limited
Michael Hill Finance (NZ) Limited
Michael Hill Franchise Holdings Limited
MHJ (US) Limited
Emma & Roe NZ Limited
Michael Hill Online Holdings Limited
Michael Hill Jeweller (Canada) Pty Limited
Michael Hill LLC
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
Canada
United States
2021
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
2020
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
G2 Deed of cross guarantee
Pursuant to ASIC Class Order 2016/785, the Australian wholly-owned subsidiaries listed below are relieved from
the Corporations Act 2001 requirements for preparation, audit and lodgement of financial reports and Directors'
Report in Australia.
The subsidiaries subject to the deed are: Durante Holdings Pty Ltd, Michael Hill Group Services Pty Ltd, Michael
Hill Jeweller (Australia) Pty Ltd, Michael Hill Manufacturing Pty Ltd, Michael Hill Wholesale Pty Ltd, Michael Hill
Franchise Services Pty Ltd, Michael Hill Franchise Pty Ltd, Michael Hill New Zealand Ltd, Michael Hill Jeweller Ltd,
Michael Hill Franchise Holdings Ltd, Michael Hill Finance (NZ) Ltd, Michael Hill Online Pty Ltd, Michael Hill Charms
Pty Ltd, Emma & Roe Pty Ltd, Medley Jewellery Pty Ltd, Michael Hill Online Holdings Ltd and Emma & Roe NZ Ltd.
The Class Order requires the Parent Company and each of the subsidiaries to enter into a Deed of Cross
Guarantee. The effect of the deed is that the Company guarantees 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 Corporations Act 2001, 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 above companies represent a Closed Group for the purposes of the Class Order and, as there are no other
parties to the Deed of Cross Guarantee that are controlled by Michael Hill International Limited, they also represent
the Extended Closed Group.
MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021 83
Notes to the financial statements cont.
G2 Deed of cross guarantee cont.
CONSOLIDATED STATEMENT OF PROFIT OR LOSS, STATEMENT OF COMPREHENSIVE INCOME
AND SUMMARY OF MOVEMENTS IN CONSOLIDATED RETAINED EARNINGS
Set out below is a consolidated statement of profit or loss, a consolidated statement of comprehensive income
and a summary of movements in consolidated retained earnings for the year ended 27 June 2021 of the closed
group consisting of Michael Hill International Limited and the entities noted above.
Consolidated statement of profit or loss
Revenue from sales of goods and services
Sales to Group companies not in Closed Group
Other income
Cost of goods sold
Employee benefits expense
Occupancy costs
Marketing expenses
Selling expenses
Depreciation and amortisation expense
Loss in disposal of property, plant and equipment
Other expenses
Finance costs
Profit before income tax
Income tax expense
Profit for the year
Other comprehensive income
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations
Other comprehensive income for the period, net of tax
Total comprehensive income for the year
Statement of changes in equity
Equity at the beginning of the financial year
Change in accounting policy - adoption of AASB16
Total comprehensive income/(loss)
Share rights through share-based payments reserve
Option expense through share based payments reserve
Dividends paid
Total equity at the end of the financial year
2021
$000
431,904
47,254
15,212
(206,747)
(123,295)
(10,758)
(20,569)
(14,480)
(38,239)
(384)
(9,949)
(5,363)
64,586
(14,255)
50,331
2020
$000
370,986
30,941
15,703
(175,412)
(117,063)
(9,193)
(20,684)
(15,223)
(40,988)
(454)
(17,588)
(6,949)
14,076
(3,801)
10,275
104
104
50,435
(23,808)
(23,808)
(13,533)
426,106
-
50,435
9
-
(5,820)
470,730
474,874
(23,574)
(13,533)
-
(28)
(11,633)
426,106
84 MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Set out below is a consolidated statement of financial position as at 27 June 2021 of the Closed Group consisting
of Michael Hill International Limited and the entities noted above.
Current assets
Cash and cash equivalents
Trade receivables
Inventories
Current tax receivables
Loans to related parties
Other current assets
Total current assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Investments in subsidiaries
Other non-current assets
Intangible assets
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Lease liabilities
Current tax liabilities
Deferred revenue
Provisions
Total current liabilities
Non-current liabilities
Lease liabilities
Deferred revenue
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained profits
Net assets
2021
$000
2020
$000
17,190
7,822
133,096
580
279,769
3,455
441,912
21,219
71,900
87,834
1,117
32,844
53,489
268,403
6,915
8,953
144,719
-
231,628
1,980
394,195
26,004
81,372
87,834
1,465
24,419
64,952
286,046
710,315
680,241
64,922
23,921
-
18,925
15,172
122,940
65,176
44,336
7,133
116,645
56,575
23,732
8,260
17,456
24,505
130,528
73,776
41,492
8,339
123,607
239,585
254,135
470,730
426,106
310,275
(24,789)
185,244
470,730
310,006
(24,633)
140,733
426,106
MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021 85
Notes to the financial statements cont.
G3 Parent entity financial information
SUMMARY FINANCIAL INFORMATION
The individual financial statements for Michael Hill International Limited (the Parent) show the following
aggregate amounts.
Statement of Financial Position
Current assets
Non-current assets
Total assets
Current liabilities
Total liabilities
Net assets
Issued capital
Reserves
Retained earnings
Total equity
Statement of Profit or Loss and Other Comprehensive Income
Profit or loss for the year
Total comprehensive income
2021
$000
344
452,206
452,549
521
521
452,028
291,445
41,544
119,039
452,028
2021
$000
(8,268)
(8,268)
2020
$000
1,495
464,727
466,222
6,153
6,153
460,069
291,158
41,604
127,307
460,069
2020
$000
92,647
92,647
GUARANTEES ENTERED INTO BY THE PARENT ENTITY
The Parent has issued the following guarantees in relation to the debts of its subsidiaries:
(i) Pursuant to Class Order 2016/785, Michael Hill International Limited and the subsidiaries listed below
entered into a deed of cross guarantee on 30 June 2016. The effect of the deed is that Michael Hill
International Limited has guaranteed to pay any deficiency in the event of winding up of any controlled entity
or if they do not meet their obligations under the terms of overdrafts, loans, leases or other liabilities subject
to the guarantee. The controlled entities have also given a similar guarantee in the event that Michael Hill
International Limited is wound up or if it does not meet its obligations under the terms of overdrafts, loans,
leases or other liabilities subject to the guarantee.
(ii) The subsidiaries subject to the deed are: Durante Holdings Pty Ltd, Michael Hill Group Services Pty Ltd,
Michael Hill Jeweller (Australia) Pty Ltd, Michael Hill Manufacturing Pty Ltd, Michael Hill Wholesale Pty Ltd,
Michael Hill Franchise Services Pty Ltd, Michael Hill Franchise Pty Ltd, Michael Hill New Zealand Ltd, Michael
Hill Jeweller Ltd, Michael Hill Franchise Holdings Ltd, Michael Hill Finance (NZ) Ltd, Michael Hill Online Pty
Ltd, Michael Hill Charms Pty Ltd, Emma & Roe Pty Ltd, Medley Jewellery Pty Ltd, Michael Hill Online Holdings
Ltd and Emma & Roe NZ Ltd.
CONTINGENT LIABILITIES OF THE PARENT ENTITY
The Parent entity had no material contingent liabilities as at balance date.
86 MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021
H Unrecognised items
H1 Contingencies and commitments
CONTINGENT LIABILITIES
From time to time, Companies within the Group are party to various legal actions as well as inquiries from
regulators and government bodies that have arisen in the normal course of business. The Directors have given
consideration to such matters which are or may be subject to claims or litigation at year end and are of the opinion
that that any liabilities arising over and above already provided in the financial statements from such action would
not have a material effect on the Group's financial performance.
The Group is not aware of any significant events occurring subsequent to balance date that have not
been disclosed.
The Group had no material contingent liabilities as at balance date.
CONTINGENT ASSETS
The Group has no material contingent assets existing as at balance date.
COMMITMENTS
The following sets out the various lease contracts that the Group has entered into and have yet to commence as
at 27 June 2021.
Future lease payments for these
non-cancellable lease contracts
Within
one year
$000
One to
five years
$000
Greater than
five years
$000
Total
$000
3,111
11,745
9,539
24,395
H2 Events occurring after the end of the reporting period
The Group continues to operate in an environment of regional lockdowns due to the COVID-19 pandemic. Subsequent
to reporting date, a number of regions in which the Australian and New Zealand businesses operate experienced
periods of lockdown. This impacted the ability of the stores within those regions to remain open and trade.
No other matters or circumstances have occurred subsequent to year end that has significantly affected, or
may significantly affect, the operations of the Group, the results of those operations or the state of affairs of the
Group or economic entity in subsequent financial years.
MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021 87
Notes to the financial statements cont.
I Summary of accounting policies and
significant estimates and judgements
I1 Summary of significant
accounting policies
(a) BASIS OF PREPARATION
The financial report is a general purpose financial
report, which has been prepared in accordance
with the requirements of the Corporations Act
2001, Australian Accounting Standards and other
authoritative pronouncements of the Australian
Accounting Standards Board.
The financial statements have been prepared on
a historical cost basis, except for derivative financial
instruments that have been measured at fair value. The
consolidated financial statements provide comparative
information in respect of the previous period.
For reporting purposes, the Group adopts a weekly
'retail calendar' closing each Sunday. The current 52
week reporting period ended on 27 June 2021.
The consolidated financial statements of the
Group comply with International Financial Reporting
Standards (IFRS) as issued by the International
Accounting Standards Board (IASB).
(b) PRINCIPLES OF CONSOLIDATION
Subsidiaries are all entities (including special purpose)
over which the Group has control. Control is achieved
when the Group is exposed, or has rights, to variable
returns from its involvement with the investee and has
the ability to affect those returns through its power to
direct the activities of the investee. Subsidiaries are
fully consolidated from the date on which control is
transferred to the Group. They are deconsolidated
from the date that control ceases.
Investments in subsidiaries are accounted for at
cost in the individual financial statements of Michael
Hill International Limited.
Intercompany transactions, balances and unrealised
gains on transactions between Group companies are
eliminated on consolidation. Unrealised losses are also
eliminated unless the transaction provides evidence of
the impairment of the transferred asset.
(c) FOREIGN CURRENCY TRANSLATION
Functional currency translation
Items included in the financial statements of each of
the Group entities are measured using the currency
of the primary economic environment in which the
entity operates ('the functional currency'). The Group
financial statements are presented in Australian
dollars, which is the Group's presentation currency.
Transactions and balances
Foreign currency transactions are translated into the
functional currency using the exchange rates prevailing
at the dates of the transactions. Net foreign exchange
gains and losses resulting from the settlement of such
transactions and from the translation at year-end
of monetary assets and liabilities denominated in
foreign currencies are recognised as other income
or other expenses, except when deferred in equity
as qualifying cash flow hedges and qualifying net
investment hedges or are attributable to part of the
net investment in a foreign operation.
Group companies
The results and financial position of all the Group
entities (none of which have the currency of a hyper-
inflationary economy) that have a functional currency
different from the presentation currency are translated
into the presentation currency as follows:
• assets and
liabilities for each balance sheet
presented are translated at the closing rate at the
date of the statement of financial position;
• income and expenses for each statement of profit
or loss and statement of comprehensive income are
translated at average exchange rates, unless this is
not a reasonable approximation of the cumulative
effect of the rates prevailing on the transaction
dates, in which case income and expenses are
translated at the dates of the transactions; and
• all resulting exchange differences are recognised in
other comprehensive income.
On consolidation, exchange differences arising from
the translation of any net investment in foreign entities,
and of borrowings and other financial instruments
designated as hedges of such investments, are
recognised in other comprehensive income.
(d) TAXES
Current income tax
The income tax expense or credit for the year is the tax
payable on the current year's taxable income based
on the applicable income tax rate for each jurisdiction
adjusted by changes in deferred tax assets and
liabilities attributable to temporary differences and to
unused tax losses.
The current income tax charge is calculated on the
basis of the tax laws enacted or substantively enacted
at the end of the reporting year in the countries where
the Group operates and generates taxable income.
Management periodically evaluates positions taken
in tax returns with respect to situations in which
applicable tax regulation is subject to interpretation. It
establishes provisions where appropriate on the basis
of amounts expected to be paid to the tax authorities.
Current tax is recognised in profit or loss, except to
the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this
case, the tax is also recognised in other comprehensive
income or directly in equity, respectively.
88 MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021
Deferred income tax
Deferred income tax is provided in full, using the
liability method, on temporary differences between
the tax bases of assets and liabilities and their carrying
amounts in the consolidated financial statements.
Deferred tax assets and liabilities are classified as
non-current assets and liabilities.
Deferred tax assets are recognised for deductible
temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to
utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised
for temporary differences between the carrying
amount and tax bases of investments in controlled
entities where the Parent Entity is able to control the
timing of the reversal of the temporary differences and
it is probable that the differences will not reverse in the
foreseeable future.
Deferred tax is recognised in profit or loss, except
to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this
case, the tax is also recognised in other comprehensive
income or directly in equity, respectively.
Deferred tax assets and liabilities are offset where
there is a legally enforceable right to offset current
tax assets and liabilities and where the deferred tax
balances relate to the same taxation authority. Current
tax assets and tax liabilities are offset where the entity
has a legally enforceable right to offset and intends
either to settle on a net basis, or to realise the asset
and settle the liability simultaneously.
Tax consolidation group
Michael Hill International Limited and its wholly-owned
Australian controlled entities form a tax consolidation
group. As a consequence, one income tax return is
completed for the Australian tax group and is treated
for income tax purposes as one taxpayer.
The tax balances have been attributed for reporting
purposes to each of the entities on the basis of their
individual results. Amounts of tax due to and receivable
from the Australian Taxation Office are made by
Michael Hill
International Limited as nominated
member of the Australian tax consolidated group.
The current tax balance for the Australian tax group
has been allocated between the members based on
each entity’s current tax movement for the period.
Where tax losses are incurred by Australian tax group
members, these are offset within the group.
(e) GOODS AND SERVICES TAX (GST)
Revenues, expenses and assets are recognised net of
the amount of GST, except:
• When the GST incurred on a sale or purchase of
assets or services is not payable to or recoverable
from the taxation authority, in which case the GST
is recognised as part of the revenue or the expense
item or as part of the cost of acquisition of the asset,
as applicable; or
• When receivables and payables are stated with the
amount of GST included.
The net amount of GST recoverable from, or payable to,
the taxation authority is included as part of receivables
or payables in the statement of financial position.
Commitments and contingencies are disclosed net of
the amount of GST recoverable from, or payable to,
the taxation authority.
Cash flows are included in the statement of cash
flows on a gross basis and the GST components of
cash flows arising from investing or financing activities
which are recoverable from, or payable to, the taxation
authority, are presented as operating cash flows.
(f) IMPAIRMENT OF ASSETS
At each annual reporting date (or more frequently if
events or changes in circumstances indicate that they
might be impaired), the Group assesses whether there
is any indication that an asset may be impaired. Where
such an indication is identified, the Group estimates
the recoverable amount of the asset and recognises
an impairment loss where the recoverable amount
is less than the carrying amount. The recoverable
amount is the higher of an asset's fair value less costs
to sell and value-in-use.
Where the recoverable amount exceeds the carrying
amount of an asset, an impairment loss is recognised.
Right-of-use assets are also incorporated into the
calculation. Subsequent to an impairment occurring,
if the recoverable amount from assets exceeds the
carrying value, the impairment loss is reversed to the
extent that it has been recognised.
(g) CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash on hand,
deposits held at call with financial institutions, other
short-term, highly liquid investments with original
maturities of three months or less that are readily
convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value,
and bank overdrafts. Bank overdrafts are shown within
borrowings in current liabilities in the statement of
financial position when utilised.
(h) INVENTORIES
Raw materials and finished goods are stated at the
lower of cost and net realisable value. Cost comprises
direct materials, direct labour and an appropriate
proportion of variable and fixed overhead expenditure,
the latter being allocated on the basis of normal
operating capacity. Costs are assigned to individual
items of inventory on the basis of weighted average
costs. Net realisable value is the estimated selling
price in the ordinary course of business less the
estimated costs of completion and the estimated
costs necessary to make the sale.
Management review stock holdings based on
recoverability at a product level and write-down as
appropriate.
MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021 89
Notes to the financial statements cont.
I1 Summary of significant accounting
policies cont.
(i) FINANCIAL INSTRUMENTS - INITIAL RECOGNITION
AND SUBSEQUENT MEASUREMENT
(i) FINANCIAL ASSETS
Initial recognition and measurement
Financial assets are classified, at initial recognition, as
subsequently measured at amortised cost, fair value
through Other Comprehensive Income (OCI), and fair
value through profit or loss.
the
The classification of financial assets at initial
financial asset’s
recognition depends on
contractual cash flow characteristics and the Group’s
business model for managing them. With the exception
of trade receivables that do not contain a significant
financing component, the Group initially measures
a financial asset at its fair value plus, in the case of
a financial asset not at fair value through profit or
loss, transaction costs. Trade receivables that do
not contain a significant financing component are
measured at the transaction price determined under
AASB15 Revenue from Contracts with Customers. Refer
to the accounting policies in note A2.
In order for a financial asset to be classified and
measured at amortised cost or fair value through OCI, it
needs to give rise to cash flows that are ‘Solely Payments
of Principal and Interest (SPPI)’ on the principal amount
outstanding. This assessment is referred to as the SPPI
test and is performed at an instrument level.
The Group’s business model for managing financial
assets refers to how it manages its financial assets
in order to generate cash flows. The business model
determines whether cash flows will result from
collecting contractual cash flows, selling the financial
assets, or both.
Subsequent measurement
Whilst there are four categories, two are relevant in the
current reporting period for the Group, being:
• Financial assets at amortised cost (debt instruments)
• Financial assets at fair value through profit or loss.
Financial assets at amortised cost (debt instruments)
This category is the most relevant to the Group. The
Group measures financial assets at amortised cost if
both of the following conditions are met:
• The financial asset is held within a business model
with the objective to hold financial assets in order to
collect contractual cash flows; and
• The contractual terms of the financial asset give
rise on specified dates to cash flows that are solely
payments of principal and interest on the principal
amount outstanding.
Financial assets at amortised cost are subsequently
measured using the Effective Interest Rate (EIR)
method and are subject to impairment. Gains and
losses are recognised in profit or loss when the asset
is derecognised, modified or impaired.
The Group’s financial assets at amortised cost
include trade receivables included under current and
non-current financial assets.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss
include financial assets held for trading, financial assets
designated upon initial recognition at fair value through
profit or loss, or financial assets mandatorily required
to be measured at fair value. Financial assets are
classified as held for trading if they are acquired for
the purpose of selling or repurchasing in the near term.
Derivatives, including separated embedded derivatives,
are also classified as held for trading unless they are
designated as effective hedging instruments. Financial
assets with cash flows that are not solely payments
of principal and interest are classified and measured
at fair value through profit or loss, irrespective of the
business model. Notwithstanding the criteria for debt
instruments to be classified at amortised cost or
at fair value through OCI, as described above, debt
instruments may be designated at fair value through
profit or loss on initial recognition if doing so eliminates,
or significantly reduces, an accounting mismatch.
Financial assets at fair value through profit or loss
are carried in the statement of financial position at fair
value with net changes in fair value recognised in the
statement of profit or loss.
This category includes derivative instruments which
the Group had not irrevocably elected to classify at fair
value through OCI.
Derecognition
A financial asset (or, where applicable, a part of a financial
asset or part of a group of similar financial assets) is
primarily derecognised (i.e. removed from the Group’s
consolidated statement of financial position) when:
• The rights to receive cash flows from the asset have
expired; or
• The Group has transferred its rights to receive cash
flows from the asset or has assumed an obligation
to pay the received cash flows in full without
material delay to a third party under a ‘pass-through’
arrangement; and either (a) the Group has transferred
substantially all the risks and rewards of the asset,
or (b) the Group has neither transferred nor retained
substantially all the risks and rewards of the asset, but
has transferred control of the asset.
When the Group has transferred its rights to receive
cash flows from an asset or has entered into a
pass-through arrangement, it evaluates if, and to
what extent, it has retained the risks and rewards
of ownership. When it has neither transferred nor
retained substantially all of the risks and rewards of
the asset, nor transferred control of the asset, the
Group continues to recognise the transferred asset
to the extent of its continuing involvement. In that
case, the Group also recognises an associated liability.
The transferred asset and the associated liability
are measured on a basis that reflects the rights and
obligations that the Group has retained.
Continuing involvement that takes the form of a
guarantee over the transferred asset is measured at
the lower of the original carrying amount of the asset
and the maximum amount of consideration that the
Group could be required to repay.
90 MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021
Impairment of financial assets
Further disclosures relating to impairment of financial
assets are also provided in note F3.
The Group recognises an allowance for Expected
Credit Losses (ECLs) for all debt instruments not held
at fair value through profit or loss. ECLs are based on
the difference between the contractual cash flows due
in accordance with the contract and all the cash flows
that the Group expects to receive, discounted at an
approximation of the original effective interest rate.
For trade receivables and contract assets, the
Group applies a simplified approach in calculating
ECLs. Therefore, the Group does not track changes
in credit risk, but instead recognises a loss allowance
based on lifetime ECLs at each reporting date. The
Group has established a provision matrix that is based
on its historical credit loss experience, adjusted for
forward-looking factors specific to the debtors and the
economic environment.
The Group considers a financial asset in default
when contractual payments are past due. However,
in certain cases, the Group may also consider a
financial asset to be in default when internal or external
information indicates that the Group is unlikely to
receive the outstanding contractual amounts in full
before taking into account any credit enhancements
held by the Group. A financial asset is written off when
there is no reasonable expectation of recovering the
contractual cash flows.
(ii) FINANCIAL LIABILITIES
Initial recognition and measurement
Financial liabilities are classified, at initial recognition,
as financial liabilities at fair value through profit or
loss, loans and borrowings, payables, or as derivatives
designated as hedging instruments in an effective
hedge, as appropriate.
All financial liabilities are recognised initially at fair
value and, in the case of loans and borrowings and
payables, net of directly attributable transaction costs.
Subsequent measurement
The measurement of financial liabilities depends on
their classification, as described below.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss
include financial liabilities held for trading and financial
liabilities designated upon initial recognition as at fair
value through profit or loss.
Financial liabilities are classified as held for trading
if they are incurred for the purpose of repurchasing in
the near term. This category also includes derivative
financial instruments entered into by the Group
that are not designated as hedging instruments in
hedge relationships as defined by AASB9 Financial
Instruments. Separated embedded derivatives are
also classified as held for trading unless they are
designated as effective hedging instruments.
Gains or losses on liabilities held for trading are
recognised in the statement of profit or loss.
Financial liabilities designated upon initial recognition
at fair value through profit or loss are designated at
the initial date of recognition, and only if the criteria in
AASB9 Financial Instruments are satisfied. The Group
has not designated any financial liability as at fair value
through profit or loss.
Loans and borrowings at amortised cost
This is the category most relevant to the Group.
After initial recognition, interest-bearing loans and
borrowings are subsequently measured at amortised
cost using the Effective Interest Rate (EIR) method.
Gains and losses are recognised in profit or loss when
the liabilities are derecognised as well as through the
EIR amortisation process.
Amortised cost is calculated by taking into account
any discount or premium on acquisition and fees
or costs that are an integral part of the EIR. The
EIR amortisation is included as finance costs in the
statement of profit or loss.
This category generally applies to interest-bearing
loans and borrowings. For more information, refer to
note B2.
Derecognition
A financial liability is derecognised when the obligation
under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another
from the same lender on substantially different terms,
or the terms of an existing liability are substantially
modified, such an exchange or modification is treated
as the derecognition of the original liability and the
recognition of a new liability. The difference in the
respective carrying amounts is recognised in the
statement of profit or loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset
and the net amount is reported in the consolidated
statement of financial position if there is a currently
enforceable legal right to offset the recognised
amounts and there is an intention to settle on a net
basis, to realise the assets and settle the liabilities
simultaneously.
(j) PROPERTY PLANT AND EQUIPMENT
All property, plant and equipment is stated at historical
cost less depreciation and impairment. Historical cost
includes expenditure that is directly attributable to the
acquisition of the items.
Subsequent costs are included in the asset's
carrying amount or recognised as a separate asset,
as appropriate, only when it is probable that future
economic benefits associated with the item will flow to
the Group and the cost of the item can be measured
reliably. The carrying amount of any component
accounted for as a separate asset is derecognised
when replaced. All other repairs and maintenance are
charged to profit or loss during the reporting year in
which they are incurred.
MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021 91
Notes to the financial statements cont.
I1 Summary of significant accounting
policies cont.
Depreciation on other assets is calculated using the
straight line method to allocate their cost or revalued
amounts, net of their residual values, over their estimated
useful lives (Note F5).
The assets' residual values and useful lives are
reviewed, and adjusted if appropriate, at the end of
each reporting year.
An asset's carrying amount
is written down
immediately to its recoverable amount if the asset's
carrying amount
its estimated
recoverable amount (note I1(f)).
is greater than
Gains and losses on disposals are determined by
comparing proceeds with carrying amount. These are
included in profit or loss.
(k) INTANGIBLE ASSETS
Software
Acquired computer software licences are capitalised
on the basis of the costs incurred to acquire and
bring to use the specific software. These costs are
amortised over their estimated useful lives (three to
five years).
Costs associated with developing or maintaining
software programmes are recognised as an expense
as incurred. Development costs that are directly
attributable to the design and testing of identifiable
and unique software products controlled by the Group
are recognised as intangible assets when the following
criteria are met:
• it is technically feasible to complete the software so
that it will be available for use
• Management intends to complete the software and
use or sell it
• there is an ability to use or sell the software
• it can be demonstrated how the software will
generate probable future economic benefits
• adequate technical, financial and other resources
to complete the development and to use or sell the
software are available, and
• the expenditure attributable to the software during
its development can be reliably measured.
Directly attributable costs that are capitalised as
part of the software include employee costs and an
appropriate portion of relevant overheads.
Capitalised development costs are recorded as
intangible assets and amortised from the point at
which the asset is ready for use.
Computer software development costs recognised
as assets are amortised over their estimated useful
lives (not exceeding ten years).
(l) PROVISIONS
Provisions are recognised when the Group has a
present legal or constructive obligation as a result of
past events, it is probable that an outflow of resources
will be required to settle the obligation and the amount
can be reliably estimated.
Where there are a number of similar obligations, the
likelihood that an outflow will be required in settlement
is determined by considering the class of obligations
as a whole. A provision is recognised even if the
likelihood of an outflow with respect to any one item
included in the same class of obligations may be small.
Present obligations arising from onerous contracts
are required to be recognised and measured as a
provision. An onerous contract is considered to exist
where the unavoidable cost of meeting the obligations
under the contract exceed the economic benefits
expected to be received from the contract.
Provisions are measured at the present value of
Management's best estimate of the expenditure
required to settle the present obligation at the end
of the reporting year. The discount rate used to
determine the present value is a pre-tax rate that
reflects current market assessments of the time value
of money and the risks specific to the liability. The
increase in the provision due to the passage of time is
recognised as interest expense.
(m) EMPLOYEE ENTITLEMENTS
Short-term obligations
Liabilities
including
for wages and salaries,
non-monetary benefits and accumulating sick leave
that are expected to be settled wholly within 12 months
after the end of the year in which the employees
render the related service are recognised in respect
of employees’ services up to the end of the reporting
year and are measured at the amounts expected to be
paid when the liabilities are settled.
Provisions for employee benefits are measured
at the present value of Management’s best estimate
of the expenditure required to settle the present
obligation at the reporting date.
Other long-term employee benefit obligations
The liabilities for long service leave and annual leave
that are not expected to be settled wholly within
12 months after the end of the year in which the
employees render the related service are measured as
the present value of expected future payments to be
made in respect of services provided by employees
up to the end of the reporting year using the projected
unit credit method. Consideration is given to expected
future wage and salary levels, experience of employee
departures and periods of service. Expected future
payments are discounted using the Milliman G100
discount rates at the end of the reporting period.
Remeasurements as a result of experience adjustments
and changes in actuarial assumptions are recognised
in profit or loss.
The obligations are presented as current liabilities in
the statement of financial position if the entity does not
have an unconditional right to defer settlement for at
least twelve months after the reporting year, regardless
of when the actual settlement is expected to occur.
92 MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021
Profit-sharing and bonus plans
The Group recognises a liability and an expense for
bonuses and profit-sharing based on a formula that
takes into consideration the profit attributable to the
Company's shareholders after certain adjustments.
The Group recognises a provision where contractually
obliged or where there is a past practice that has
created a constructive obligation.
Retirement benefit obligations
The Group provides retirement benefits to employees
through a defined contribution superannuation fund.
Contributions are recognised as expenses as they
become payable.
(n) CONTRIBUTED EQUITY
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue
of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds.
Where any group company purchases the Company's
equity instruments, for example as the result of a
share buy-back or a share-based payment plan, the
consideration paid, including any directly attributable
incremental costs (net of income taxes) is deducted
from equity attributable to the owners of Michael Hill
International Limited as treasury shares until the shares
are cancelled or reissued. Where such ordinary shares
are subsequently reissued, any consideration received,
net of any directly attributable incremental transaction
costs and the related income tax effects, is included
in equity attributable to the owners of Michael Hill
International Limited.
(o) DIVIDENDS
Provision is made for the amount of any dividend
declared, being appropriately authorised and no longer
at the discretion of the entity, on or before the end of
the reporting year but not distributed at the end of the
reporting year.
(p) EARNINGS PER SHARE
Basic earnings per share
Basic earnings per share is calculated by dividing:
• the profit attributable to owners of the Company,
excluding any costs of servicing equity other than
ordinary shares
• by the weighted average number of ordinary shares
outstanding during the financial year, adjusted for
bonus elements in ordinary shares issued during the
year and excluding treasury shares (note F2).
Diluted earnings per share
Diluted earnings per share adjusts the figures used in
the determination of basic earnings per share to take
into account:
• the after-income tax effect of interest and other
financing costs associated with dilutive potential
ordinary shares, and
• the weighted average number of additional ordinary
shares that would have been outstanding assuming
the conversion of all dilutive potential ordinary
shares (note F2).
(q) ROUNDING OF AMOUNTS
The Company is of a kind referred to in ASIC Legislative
Instrument 2016/191, relating to the 'rounding off'
of amounts in the financial statements. Amounts
in the financial statements have been rounded off
in accordance with the instrument to the nearest
thousand dollars, or in certain cases, the nearest dollar.
(r) CHANGES IN ACCOUNTING POLICIES & DISCLOSURES
IFRIC agenda decision – Configuration or
Customisation Costs in a Cloud Computing
Arrangement
In April 2021, the IFRS Interpretations Committee (IFRIC)
published an agenda decision for configuration and
customisation costs incurred related to implementing
Software as a Service (SaaS) arrangements. The
Group is currently assessing the impact of the agenda
decision on its current accounting policy, which may
result in previously capitalised costs needing to be
recognised as an expense.
The process to quantify the impact of the decision
is ongoing. A project team has been appointed and a
timeline has been determined. The project is ongoing
due to the effort required in obtaining the underlying
information from historical records covering multiple
projects and assessing the nature of each of the costs.
At the date of this report, the impact of the IFRIC
agenda decision on the Group is not reasonably estimable.
IFRIC agenda decision – Net Realisable Values
of Inventory
In June 2021, IFRIC published an agenda decision in
relation to the accounting treatment when determining
net realisable value (NRV) of inventories, in particular
what costs are necessary to sell inventories under IAS2
Inventories . The Group is currently assessing the impact
the agenda decision will have on its current accounting
policy and whether an adjustment to inventory may
be necessary. Accordingly, a reliable estimate of the
impact of the IFRIC agenda decision on the Group
cannot be made at the date of this report, however
based on preliminary analysis performed, the Group
isn’t expecting a material impact from the adoption
of the IFRIC agenda decision. The Group expects
to complete the implementation of the above IFRIC
agenda decision as part of its half-yearly reporting.
Several other amendments and interpretations
apply for the first time in 2021, but do not have an
impact on the consolidated financial statements of
the Group. The Group has not early adopted any
standards, interpretations or amendments that have
been issued but are not yet effective.
MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021 93
Notes to the financial statements cont.
I2 Significant estimates and
judgements
Significant Estimates And Judgements
The preparation of financial statements requires the use
of accounting estimates which, by definition, will seldom
equal the actual results. Management also needs to
exercise judgement in applying the Group’s accounting
policies. Estimates and judgements are continually
evaluated and are based on historical experience and
other factors, including expectations of future events that
are believed to be reasonable under the circumstances.
The estimates and assumptions that have a significant
risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial
year are incorporated within the relevant note.
The significant accounting judgements relate to the
accounting for COVID-19 related lease concessions
(note A5) and assets held for sale (note F4) and the
significant accounting estimates were in relation to the
pattern of PCP revenue recognition (note A2), employee
remediation (note F8) and the valuation of the assets held
for sale (note F4).
Impact of COVID-19
The uncertainty surrounding the trading environment
for the Group has impacted Management's approach to
forecasting, modelling cash flows and other accounting
estimates.
The Group continues to monitor the situation
throughout the geographies
it operates.
Uncertainty remains as to the future impact of COVID-19
and the ability to operate bricks-and-mortar stores during
this period. The Group continues to adhere to local and
national government guidance in relation to any future
impacts which would temporarily close stores.
in which
During the period, the Group received financial
support and assistance from its suppliers, landlords, and
local governments. A number of landlords and suppliers
provided extended payment terms. These agreements
have concluded with no material amounts outstanding.
Additionally, landlords have provided support in the
form of rental abatements. These amounts have been
disclosed in note A5. Government grants were received
during the period and further information can be found
in note A3.
94 MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021
Directors' declaration
In the Directors' opinion:
(a) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become
due and payable;
(b) the financial statements and notes of the Group for the financial year ended 27 June 2021, are in accordance with
the Corporations Act 2001, including:
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional
reporting requirements, and
(ii) giving a true and fair view of the consolidated entity's financial position as at 27 June 2021 and of its
performance for the financial year ended on that date;
(c) as at the date of this declaration, there are reasonable grounds to believe that the members of the extended
Group identified in note G1 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 described in note G2.
Note I1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued
by the International Accounting Standards Board.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated
on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of
the transferred asset.
The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required
by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.
R. I. Fyfe, Chair
Brisbane, 20 August 2021
95
Ernst & Young
111 Eagle Street
Brisbane QLD 4000 Australia
GPO Box 7878 Brisbane QLD 4001
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ey.com/au
Independent auditor’s report
to the members of Michael Hill International Limited
Report on the audit of the financial report
OPINION
We have audited the financial report of Michael Hill International Limited (the Company) and its subsidiaries (collectively the Group), which
comprises the consolidated statement of financial position as at 27 June 2021, the consolidated statement of profit or loss and other
comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes
to the financial statements, including a summary of significant accounting policies, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:
a) Giving a true and fair view of the consolidated financial position of the Group as at 27 June 2021 and of its consolidated financial
performance for the year ended on that date; and
b) Complying with Australian Accounting Standards and the Corporations Regulations 2001.
BASIS FOR OPINION
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described
in the Auditor’s responsibilities for the audit of the financial report section of our report. We are independent of the Group in accordance with
the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to
our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report of the
current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon,
but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is
provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial report section of our report,
including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment
of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address
the matters below, provide the basis for our audit opinion on the accompanying financial report.
96
EXISTENCE OF INVENTORIES
Why significant
The existence of inventories is a key audit matter due to the size of the
recorded asset (27 June 2021: $171,246,000) which represents 34%
(2020: 36%) of the Group’s total assets, the nature of the inventory
and the geographic spread of locations where items are held.
Inventories are primarily kept in the Group’s 285 retail stores
located in Australia, New Zealand and Canada, and the distribution
and manufacturing centres. Inventories comprise a large number of
physically small but high value items which are subject to misappro-
priation and other loss.
As a result, we considered the evidencing of the existence of the
Group’s inventory at 27 June 2021 to be a key audit matter.
The Group accounts for inventories in accordance with the policy
disclosed in Note I1(h) and further disclosure is included in Note A4
of the financial report.
How our audit addressed the key audit matter
Our audit procedures included the following:
• Testing the effectiveness of key controls relevant to the conduct
of physical stocktakes, the review and investigation of stocktake
variances, and the approval of adjustments made to stock quantities.
• In performing our testing, we attended 12 stocktakes conducted at
retail stores across Australia, New Zealand and Canada, of which
two were conducted virtually due to COVID-19 restrictions.
• In addition to the retail stores, we attended the stocktakes completed
at the distribution and manufacturing centres in June 2021.
• At these stocktakes at the retail stores, distribution and manufacturing
centres, we observed compliance with the stocktake instructions
(including the suspension of inventory movements during the
stocktake process) and selected a sample of items to re-count to
establish the accuracy of the counts performed by the Group.
• For each of these locations attended, and for a further representa-
tive sample of retail stores, we inspected evidence that stocktakes
had been conducted, stock variances identified had been reviewed
and approved, and that the adjustments were accurately recorded.
• Where stocktakes were completed prior to the year end date,
we performed inventory movement analysis and, on a sample
basis, evidenced changes in inventory quantities to evaluate the
movement of inventories between the stocktake date and year end
date. For retail locations not attended at stocktake, we performed
movements analysis on a store-by-store basis and further analysis
where the year end balance was outside our set expectations.
• We obtained details of stock-in-transit at year end, as well as
movements either side of the year end date and performed
procedures to address the risk of incorrect cut-off of inventory
quantities at year end.
PROFESSIONAL CARE PLAN (PCP) REVENUE RECOGNITION
Why significant
How our audit addressed the key audit matter
The recognition of Professional Care Plan (PCP) revenue is a key
audit matter due to the significant degree of estimation involved in
determining the appropriate revenue recognition pattern for both the
lifetime and three year plans offered to the Group’s customers. Under
these plans, revenue is deferred on receipt of the payment from the
customer, and recognised over time in a manner that reflects the
proportion of actual services used by customers relative to the total
amount of expected services to be provided under the PCPs.
The balance of the deferred PCP revenue liability at 27 June 2021
was $76,581,000 (2020: $73,856,000), and PCP revenue recognised
in the income statement for the year ended 27 June 2021 was
$27,310,000 (2020: $27,478,000).
The estimation is primarily based on an analysis of actual services
(through historical cleaning, repairs and re-sizing service data) made
under these plans since inception in October 2010, with Management
judgement applied to take account of emerging trends in customer
behaviour, industry data and exceptional circumstances such as
COVID related store closures.
The estimation is reviewed by the Group on at least an annual
basis. As circumstances change over time, the Group updates
its measure of progress and any adjustments are recognised as a
cumulative catch up in revenue recognition (or reversal) in the current
year results. In the current year, a total of $1,305,000 was reversed
from revenue due to the changes in estimates.
The accounting policy for PCP revenue and description of the
estimation uncertainty is disclosed in Note A2 of the financial report.
Our audit procedures included the following:
• Considered the Group’s PCP revenue recognition accounting
policies and assessed compliance with the requirements of
Australian Accounting Standards.
• Tested the operating effectiveness of controls related to PCP
customer transactions to ensure these sales are captured
accurately, and the related cash receipts are deferred on receipt.
• Assessed the accuracy of the data used in the PCP revenue
estimation calculation and challenged the reasonableness of the
key judgements including:
- Obtaining details of the sales of PCP products to customers
during the year, and testing that the cash receipts were
appropriately deferred.
- Obtaining details of the actual cleaning, repairs and resizing
services in the year, and tested a sample to ensure the repair is
accurately tagged to the associated PCP plan date.
- Performing analysis over the historic repairs data, to determine
whether the assumptions made by Management were supportable,
including the length of the lookback period, any adjustments
made for the impact of COVID related store closures, and the
weighting of recent trends compared to older data.
• Tested the mathematical accuracy of the PCP revenue estimation
model and reperformed the Group’s calculation supporting the
change in estimate relating to PCP revenue recognition.
• We evaluated the adequacy of disclosures in financial statements
of PCP revenue recorded and deferred at year end and the
associated estimation uncertainty.
97
INFORMATION OTHER THAN THE FINANCIAL REPORT
AND AUDITOR’S REPORT THEREON
The Directors are responsible for the other information. The other
information comprises the information included in the Company’s
2021 annual report other than the financial report and our auditor’s
report thereon. We obtained the Directors’ Report that is to be
included in the annual report, prior to the date of this auditor’s report,
and we expect to obtain the remaining sections of the annual report
after the date of this auditor’s report.
Our opinion on the financial report does not cover the other
information and we do not and will not express any form of assurance
conclusion thereon, with the exception of the Remuneration Report
and our related assurance opinion.
In connection with our audit of the financial report, our respon-
sibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the
financial report or our knowledge obtained in the audit or otherwise
appears to be materially misstated.
If, based on the work we have performed on the other information
obtained prior to the date of this auditor’s report, we conclude that
there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
RESPONSIBILITIES OF THE DIRECTORS FOR
THE FINANCIAL REPORT
The Directors of the Company are responsible for the preparation of
the financial report that gives a true and fair view in accordance with
Australian Accounting Standards and the Corporations Act 2001 and
for such internal control as the Directors determine is necessary to
enable the preparation of the financial report that gives a true and
fair view and is free from material misstatement, whether due to fraud
or error.
In preparing the financial report, the Directors are responsible
for assessing the Group’s ability to continue as a going concern,
disclosing, as applicable, matters relating to going concern and using
the going concern basis of accounting unless the Directors either
intend to liquidate the Group or to cease operations, or have no
realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT
OF THE FINANCIAL REPORT
Our objectives are to obtain reasonable assurance about whether the
financial report as a whole is free from material misstatement, whether
due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with the Australian
Auditing Standards will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users
taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing
judgment and maintain
Standards, we exercise professional
professional scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the
financial report, whether due to fraud or error, design and perform
audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for
our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as
fraud may involve collusion, forgery, intentional omissions, misrep-
resentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit
in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures
made by the Directors.
• Conclude on the appropriateness of the Directors’ use of the going
concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Group’s ability
to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the financial report or, if such
disclosures are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause
the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the
financial report, including the disclosures, and whether the
financial report represents the underlying transactions and events
in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial
information of the entities or business activities within the Group to
express an opinion on the financial report. We are responsible for
the direction, supervision and performance of the Group audit. We
remain solely responsible for our audit opinion.
We communicate with the Directors regarding, among other matters,
the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that
we identify during our audit.
We also provide the Directors with a statement that we have
complied with relevant ethical requirements regarding independence,
and to communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, and where
applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated to the Directors, we determine
those matters that were of most significance in the audit of the
financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law
or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not
be communicated in our report because the adverse consequences
of doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
REPORT ON THE AUDIT OF THE REMUNERATION REPORT
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the Directors’
Report for the year ended 27 June 2021.
In our opinion, the Remuneration Report of Michael Hill International
Limited for the year ended 27 June 2021, complies with section 300A
of the Corporations Act 2001.
Responsibilities
The Directors of the Company are responsible for the preparation
and presentation of the Remuneration Report in accordance with
section 300A of the Corporations Act 2001. Our responsibility is to
express an opinion on the Remuneration Report, based on our audit
conducted in accordance with Australian Auditing Standards.
Ernst & Young
Kellie McKenzie, Partner
Brisbane
20 August 2021
98
98 MICHAEL HILL INTERNATIONAL LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 27 JUNE 2021
Additional Information AS AT 27 AUGUST 2021
Michael Hill has one class of shares on issue (being ordinary shares). The Company’s shares are listed on the
Australian Securities Exchange and the New Zealand Stock Exchange.
Issued capital
Number of shareholders
Minimum Parcel Price
Holders with less than a marketable parcel
Twenty largest shareholders
Hoglett Hamlett Limited*
Citicorp Nominees Pty Limited
Squeakidin Limited*
New Zealand Central Securities Depository Ltd
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Pty Limited
Mole Hill Limited*
Forsyth Barr Custodians Limited
BNP Paribas Nominees Pty Ltd
BNP Paribas Nominees (NZ) Ltd
New Zealand Depository Nominee Limited
National Nominees Limited
BNP Paribas Nominees Pty Ltd
Vanward Investments Limited
FNZ Custodians Limited
BNP Paribas Nominees Pty Ltd
Mole Hill Limited*
Forsyth Barr Custodians
Hobson Wealth Custodian Limited
Custodial Services Limited
Total
Total Remaining Holders Balance
Number
388,285,374
4,325
$0.850
304
% of Fully Paid
Ordinary Shares
38.20
6.78
4.93
4.46
4.19
3.66
3.47
1.36
1.04
1.01
0.87
0.80
0.68
0.59
0.59
0.58
0.58
0.52
0.48
0.41
75.19
24.81
Fully Paid
Ordinary Shares
148,330,600
26,332,599
19,156,926
17,310,944
16,255,850
14,197,982
13,456,926
5,298,992
4,024,466
3,908,556
3,367,192
3,117,214
2,639,066
2,298,056
2,295,017
2,251,174
2,250,376
2,011,138
1,847,252
1,595,127
291,945,453
96,339,921
* Denotes entities in which a member or members of the Hill family have an ownership interest.
Distribution Of Security Holders
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
Over 100,000
Total
Number of holders
of fully paid
ordinary shares
636
1,343
824
1,353
169
4,325
Number of
of fully paid
ordinary shares
381,487
4,098,976
6,793,757
42,876,743
334,134,411
388,285,374
99
Unmarketable parcels
Minimum $500.00 parcel at $0.85 per unit
Minimum
parcel size
589
Holders
Units
304
83,702
Substantial holders
As at 27 August 2021, there are four substantial shareholders that Michael Hill is aware of:
Hoglett Hamlett Limited and others*
Mark Simon Hil
Emma Jane Hill
Spheria Asset Management Pty Ltd
Latest notice date
13 October 2016
13 October 2016
13 October 2016
15 April 2021
Shares
148,330,600
167,487,526
167,487,526
50,814,123
* Includes: Hoglett Hamlett Limited (New Zealand incorporated company with company number 5994887), Sir
Richard Michael Hill, Lady Ann Christine Hill and Veritas Hill Limited (New Zealand incorporated company with
company number 2303840).
The above table sets out the number of securities held by substantial shareholders in Michael Hill as
disclosed in their last substantial shareholder’s notice. Those shareholders may have acquired or disposed of
securities in Michael Hill since the date of that notice. A substantial shareholder is only required to disclose
acquisition or disposals where there has been a movement of at least 1% in their shareholding.
Share Options and Rights
Michael Hill has unlisted share options and rights on issue. As at 27 August 2021, there were six
holders of share options and rights.
Corporate directory
DIRECTORS
R.I. Fyfe BEng, FENZ (Chair)
Sir R.M. Hill KNZM
E.J. Hill BCom, MBA
G.W. Smith BCom, FCA, FAICD
J.E. Naylor
D. Bracken
COMPANY SECRETARIES
A. Lowe
BCom, LLB (Hons), MAppFin, CA, CTA
E. Bird LLB (Hons), BA (Psych),
GradDipLegalPrac, GradDipAppCorpGov
PRINCIPAL REGISTERED
OFFICE IN AUSTRALIA
Metroplex on Gateway
7 Smallwood Place
Murarrie QLD 4172
Telephone +61 7 3114 3500
Fax +61 7 3399 0222
SHARE REGISTRAR
Computershare Investor
Services Pty Ltd
Level 1, 200 Mary Street
Brisbane QLD 4000
1300 552 270
(within Australia)
+61 3 9415 4000
(outside Australia)
AUDITOR
Ernst & Young
Level 51
111 Eagle Street
Brisbane QLD 4000
SOLICITOR
Allens
Level 26
480 Queen Street
Brisbane QLD 4000
BANKERS
Australia and New Zealand
Banking Group Limited
ANZ Banking Group
(New Zealand) Limited
HSBC Australia Limited
Bank of Montreal
Bank of America
100
WEBSITES
michaelhill.com.au
michaelhill.co.nz
michaelhill.ca
michaelhill.com
medleyjewellery.com.au
investor.michaelhill.com
EMAIL
online@michaelhill.com.au