ANNUAL
REPORT
2022
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).
2 MICHAEL HILL | 2022 ANNUAL REPORT
CONTENTS
5
6
Company
Profile
Letter from
the Chair
9
10
Key Facts
Performance
7
CEO’s
Message
12
Trend
Statement
38
Our Executive
Team
41
Directors’
Report
54
Remuneration
Report
8
Performance
Highlights
14
Sustainability
67
Auditor’s
Independence
Declaration
69
Financial
Statements
131
Corporate
Directory
124
Directors’
Declaration
125
Independent
Auditor’s Report
129
Additional
Information
The Directors are pleased to present the
annual report of Michael Hill International
Limited and its subsidiaries for the year
ended 26 June 2022.
MICHAEL HILL | 2022 ANNUAL REPORT 3
4 MICHAEL HILL | 2022 ANNUAL REPORT
COMPANY PROFILE
Michael Hill is a market leading, premium jewellery brand, operating a network of
280 stores across Australia, New Zealand and Canada, with multiple international
digital platforms.
The first Michael Hill store opened in 1979 when Sir
Retail Fundamentals, continual Product Evolution,
Michael Hill and his wife, Lady Christine Hill launched
exploring New Territories & Services, maintaining a Cost
their unique retail jewellery formula in Whangarei, on
Conscious Culture and with a focus on Sustainability.
the North Island of New Zealand.
Around the world, the Group employs over 2,500
With engaging store designs, a product range devoted
employees across retail sales, manufacturing and
exclusively to accessible jewellery and the clever use
corporate roles. As of 26 June 2022, the Group
of high impact advertising, Michael Hill rapidly gained
operates 147 stores in Australia, 48 in New Zealand and
popularity and rose to national prominence.
85 stores in Canada.
In 2016, Michael Hill moved its primary stock exchange
From 1979 to the present day, and as we look to the
listing to the Australian Securities Exchange and
future, Michael Hill is dedicated to creating quality
maintains a secondary listing on the New Zealand Stock
jewellery for our customers to celebrate the key
Exchange (ASX/NZX: MHJ).
moments in their lives.
Over the last three years, the Company has been on a
At Michael Hill, we are committed to becoming a
transformative journey reshaping many aspects of the
more sustainable and ethically responsible business,
business, underpinned by a clearly defined strategic
protecting our eco-system and contributing to
agenda to elevate the brand and drive growth. The
the communities we serve in meaningful ways, for
strategic framework is customer-led and continually
generations to come.
evolving as we adapt to the ever-changing landscape
of retail – with a focus on elevating our Brand, growing
our Loyalty membership, enhancing and innovating
our Digital & Omni-channel capabilities, refining our
Information on our corporate governance policies
and practices, including our Corporate Governance
Statement, is available on our Investor Centre website
at investor.michaelhill.com
Our purpose:
The people behind the
moments that matter
MICHAEL HILL | 2022 ANNUAL REPORT 5
LETTER FROM
THE CHAIR
ANOTHER RECORD PERFORMANCE
DESPITE DISRUPTIONS TO TRADE
FY22 has been another remarkable year at Michael Hill as
we delivered record results. I am extremely proud of the
commitment, resilience and creativity of Daniel and the
entire team as they continued to drive business performance,
strategically transform operations, and progressively elevate
the brand to expand our addressable market. All this has
been achieved whilst navigating through the evolving
Covid pandemic and complex economic conditions. Our
Environmental, Social and Governance (ESG) vision centered
around three key pillars: People, Product and Planet. We are
committed to bringing about change in how we operate in
order to drive more sustainable practices that benefit our
customers, our planet and future generations. We also want
to demonstrate and share these practices with the wider
jewellery industry to help all participants move toward a more
sustainable, innovative and responsible future.
CAPITAL MANAGEMENT
results over the last two years, despite these challenges,
Reflecting the strength of the balance sheet and strong
demonstrate the resilience of our business, strength of our
underlying operating results, the business undertook a
brand, loyalty of our customers and determination of our
team. We continue to have confidence in the momentum of
detailed capital management review during the year. One of
the outputs was the release of a new Dividend Distribution
the business and our ability to adapt and thrive in the face of
Policy which sets a target dividend payout range of 50% to
ongoing uncertainties.
75% of adjusted NPAT.
HERITAGE BRAND UNDERPINNED BY
CREATIVE FOUNDERS
We were pleased to declare a final dividend of AU4.0 cents
per share, bringing our total dividend for the year to AU7.5
cents per share, representing ~67% of adjusted annual NPAT, at
As the business continues its journey to evolve and elevate our
the higher end of the target range. Subject to the Company’s
brand, the legacy of our creative founders remains extremely
relevant as we showcase our artisanal craftsmanship, quality
ongoing trading performance and growth plans, the Board’s
intention is for dividends to remain at the higher end of the
products and innovative designs. These core elements
target range.
along with Sir Michael Hill and Lady Christine Hill’s values,
insightful vision and infectious passion continue to be infused
throughout every facet of the business and are fundamental to
the continued success of our business.
COMMITMENT TO OUR PEOPLE AND
OUR VALUES
At Michael Hill, we recognise that our business is our people.
Furthermore, we announced the launch of an on-market share
buy-back of up to 5% of the Company’s issued capital, funded
from existing cash reserves. The buy-back is expected to
commence in mid-September 2022.
In addition to the above, the Company still retains sufficient
balance sheet strength and cash reserves for deployment into
new earnings accretive organic growth initiatives and to also
pursue acquisition opportunities in the jewellery sector, which
We continually strive to be a workplace where all team members
meet our strict strategic and investment criteria.
feel valued, appreciated, and encouraged to be their brilliant
self. Our values: We care, We create outstanding experiences,
We are professional, and We are inclusive and diverse – are truly
embraced by all areas of the business and are key to attracting
and retaining our high-performance team. Our employee
engagement survey is a key source of insights into our cultural
wellbeing and employees’ connection with our purpose and
ambition at Michael Hill. Impressively, once again, Michael Hill
recorded another exceptionally high global engagement score of
83%, which is a credit to the strong leadership that has inspired a
collaborative and energetic culture.
FOCUS ON SUSTAINABILITY
We are passionate about identifying opportunities to make
Michael Hill more sustainable and I am proud of the progress
we are making. We recently published our new 2030
6 MICHAEL HILL | 2022 ANNUAL REPORT
IN CONCLUSION
As I reflect on FY22 and my first full year as Chair, I am
honoured to be surrounded by a very high calibre, stable
Board of Directors and Executive Team that are all aligned
on the strategic direction for Michael Hill. We look forward
to continuing the positive momentum of the business, and
focusing on growth initiatives that will strengthen our market
position and financial performance.
Regards,
Robert Fyfe
Chair
CEO’S MESSAGE
PIVOTING FROM TRANSFORMATION
TO GROWTH
I am absolutely delighted by our outstanding results for FY22,
delivering record sales, gross margin, and profit, especially
considering the disruptions we faced across Australia and
and customer engagement has delivered considerable
increases in gross margin, conversion rates and ATV. An
unwavering focus on people and performance, operational
excellence, and effective labour management underpin our
retail productivity which has seen significant lifts in all markets.
New Zealand in the first half. A key highlight was our ability to
Product Evolution: Product evolution is at the centre of a
grow profit faster than sales, underpinned by continued gross
customer-led retail strategy, and is critical to achieve sales
margin expansion. All facets of the business came together to
and margin growth. Elevated quality and craftmanship are
drive this result, but I would particularly like to highlight the
essential to our aspirational brand journey, and this will be
evolution of our product, the outstanding performance from
delivered through the evolution of our supply chain, and
our stores, the continued acceleration of our digital channels
further investment in the artisanal capabilities of our Australian
and the key role that our loyalty program now plays in driving
manufacturing facility.
sales and margin growth.
These results demonstrate that we have successfully shifted
the emphasis from transformation to growth, as we continue
to elevate and modernise the Michael Hill brand.
I am particularly proud of our people and the culture that we
continue to build at Michael Hill – a high performance team
across all levels, with an energy and passion that underpins
our growth agenda. This culture is best evidenced by the
sensational performance this year from our Canadian team
delivering huge lifts in productivity, sales and margin.
STRATEGIC UPDATE
New Territories & Services: As the Company pivots from
transformation to growth, the opportunity to stretch the brand
into new territories and services is a key focus. Through the
course of the year, the Company has executed its marketplace
strategy across its three core segments, partnering with The
Iconic in Australia and New Zealand, and The Bay in Canada.
Sustainability: Michael Hill is elevating its strategic focus
on Environmental, Social and Governance, with the launch
of our 2030 vision centred around three key pillars: People,
Product and Planet. In addition, laboratory created diamonds
are gaining momentum in the business, delivering increased
quality and choice while providing customers with a certified
Much of the Company’s strong performance can be attributed
Sustainable and Climate Neutral choice. For more information
to the strategic transformation and elevation of the brand,
on our 2030 vision, please refer to our sustainability update in
along with overarching emphasis on sales and margin growth.
this report.
The strategic framework underpins the future growth of the
business, is customer-led and continually evolving.
EXECUTIVE LEADERSHIP TEAM
Brand & Loyalty: The elevation of the Michael Hill brand
has been led by highly engaging and emotive marketing
campaigns with an emphasis on product, quality and craft,
which is leading the transition away from price and promotion,
towards emotional long-term customer relationships.
Simultaneously, the Brilliance by Michael Hill loyalty program
is proving to be a key lever for growth and customer
engagement and now has close to 1.5 million members.
Digital & Omni-Channel: Michael Hill’s digital transformation
continues to gather pace delivering another record year
in FY22. Strong performances on the Company’s direct to
consumer websites were driven by improved customer
experience, higher traffic and increased conversion rates. The
successful deployment of “click and collect” and “ship-from-
store”, now available in all stores globally, enhanced our omni-
channel capabilities as the Company continues its customer-
Our strategic roadmap has been carefully planned, articulated
and led by our highly cohesive and collaborative Executive
Leadership Team. I’m particularly proud of my entire team,
the breadth and depth of their knowledge spreads across
a wide range of retail, digital and technology capabilities,
brand and loyalty expertise, along with an elevated focus on
performance and culture, and of course financial acumen.
Importantly, the business will continue its growth agenda,
elevating our core business and at the same time, deploying
organic growth initiatives, and pursuing acquisition
opportunities in the jewellery sector.
Regards,
led digital transformation journey.
Regards,
Retail Fundamentals: Bricks and mortar retail is at the core
of the Michael Hill business, driving the majority of sales.
Elevating the in-store experience across visual presentation
Daniel Bracken
Managing Director and CEO
MICHAEL HILL | 2022 ANNUAL REPORT 7
PERFORMANCE
HIGHLIGHTS
KEY FINANCIAL RESULTS
Statutory net profit
after tax increased
by 13.9% to
$46.7M
Group gross margin
increased by 200 bps to
64.7%
Healthy inventory
levels supporting
elevated sales at
$181.5M
Earnings before
interest & tax (EBIT)
increased by 9.8% to
$73.2M
OPERATIONAL PERFORMANCE
Group operating
revenue increased
7.0% to
$595.2M
Strong balance
sheet, with a closing
cash position of
$95.8M
Digital sales increased by
to a
record
23%
$42M
One new store opened
and six under-performing
stores were closed
1.4M+
Brilliance by Michael Hill
members
Extensive H1
temporary store
closures culminated in
10,020
lost trading days
Group same store
sales were up
8.0%
for the year
New pure play brand Medley delivered over $1M in sales for its first full year of trade
8 MICHAEL HILL | 2022 ANNUAL REPORT
KEY FACTS
TRADING RESULTS
DIVIDENDS (including final dividend)
% Change
2022
$000’s
2021
$000’s
Restated1
Group revenue
7.0%
595,210
556,486
Gross profit
10.3%
384,826
348,916
Earnings before
interest & tax (EBIT)*
9.8%
73,236
66,672
2022
2021
Restated1
Per ordinary share
AU7.5c
AU4.5c
Times covered by net profit
after tax
1.60
2.35
Comparable EBIT*
11.1%
62,870
56,594
SHARE PRICE AT YEAR END
11.2%
65,703
59,081
13.9%
46,712
41,015
Share price (ASX)
AU$0.93
AU$0.83
2022
2021
(17.0%)
111,574
134,497
KEY INVESTOR RATIOS
Net profit before
tax (NPBT)
Net profit after
tax (NPAT)
Net cash inflow from
operating activities
FINANCIAL POSITION
% Change
2022
$000’s
2021
$000’s
Restated1
0.9%
11,388
11,285
Contributed equity
388,285,374 ordinary
shares
Total equity
Total assets
11.9%
195,095
174,313
4.5%
511,179
489,023
Net (debt)/cash
32.5%
95,844
72,361
Capital expenditure
123.1%
22,471
10,072
Australia
KEY RATIOS
New Zealand
Canada
Group
2022
2021
Restated1
Basic earnings per share
Diluted earnings per share
EBIT to sales
Return on average
total assets
2022
12.03c
11.86c
12.3%
2021
Restated1
10.57c
10.53c
12.0%
9.3%
8.2%
SAME STORE SALES* (in local currency)
2022
4.2%
8.9%
11.3%
8.0%
2021
13.0%
7.1%
6.8%
8.6%
Return on average
shareholders funds
25.3%
25.0%
STORE NUMBERS
Gross margin
64.7%
62.7%
2022
2021
Interest expense cover (times)
9.7
8.8
Australia
Equity ratio
38.2%
35.6%
New Zealand
Working capital ratio
Current ratio
3.7 : 1
1.8 : 1
3.7 : 1
1.8 : 1
Canada
Total stores
147
48
85
280
150
49
86
285
* EBIT, Comparable EBIT and Same Store Sales are Non-IFRS information and are unaudited. Please refer to page 48 for an explanation of Non-IFRS
information and a reconciliation of EBIT and Comparable EBIT.
1 Restated as required for changes introduced by IFRIC Agenda Decision - Configuration or Customisation Costs in Cloud Computing Arrangements.
Refer to note I1(R) for details.
MICHAEL HILL | 2022 ANNUAL REPORT 9
PERFORMANCE
Return on average
assets 9.3%
Net profit from operating
activities after tax up 13.9%
Ordinary dividend
%
AU$ MILLIONS
AU CENTS PER SHARE
9.3
8.2
8.2
46.7
41.0
7.5
4.3
31.8
16.5
0.7
3.1
5.0
4.0
4.5
1.5
F Y18
F Y19
FY 20
FY2 1
FY2 2
FY18
FY19
FY20
FY 21
FY 22
FY18
FY19
FY20
FY 21
FY22
Inventory
AU$ MILLIONS
EBITDA up 9.1%
Group revenue up 7.0%
AU$ MILLIONS
AU$ MILLIONS
192.1
179.5
178.7
181.5
171.2
64.5
69.7
40.5
125.2
114.7
575.5
569.5
595.2
556.5
492.1
20K
10K
10K
F Y18
F Y19
FY 20
FY2 1
FY2 2
FY18
FY19
FY20
FY 21
FY 22
FY18
FY19
FY20
FY 21
FY22
Lost trading days
10 MICHAEL HILL | 2022 ANNUAL REPORT
Return on average
shareholders’ funds 25.3%
Digital sales up 23.4%
Gross margin
%
AU$ MILLIONS
%
25.0% 25.3%
42.0
34.0
64.7
24.7
16.0
11.1
62.7
62.0
60.6
60.0
17.4%
9.4%
1.9%
F Y18
F Y19
F Y 20
FY2 1
FY2 2
FY18
FY19
FY20
FY 21
FY 22
FY18
FY19
FY20
FY 21
F Y22
Revenue by country
YEAR ENDED 26 JUNE 2022
CANADA
29%
NEW ZEALAND
20%
AUSTRALIA
51%
MICHAEL HILL | 2022 ANNUAL REPORT 11
TREND STATEMENT
TREND STATEMENT
Financial performance
2022
$’000
2021
$’000
RESTATED
2020
$’000
2019
$’000
2018
$’000
Group revenue
595,210
556,486
492,060
569,500
575,539
125,180
114,733
69,690
40,481
64,481
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 during the year
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
51,944
73,236
7,533
65,703
18,991
46,712
111,574
25,239
2022
$’000
95,844
181,539
14,749
48,061
66,672
7,591
59,081
18,066
41,015
55,611
14,079
9,594
4,485
1,426
3,059
134,497
83,699
5,817
2020
$’000
11,636
2021
$’000
RESTATED
72,361
171,246
27,463
19,366
21,115
2,304
18,811
2,313
16,498
38,969
19,365
2019
$’000
18,694
45,787
2,680
43,107
11,342
31,765
54,893
19,371
2018
$’000
11,204
7,923
7,220
178,742
179,503
192,074
31,007
35,878
29,314
292,132
271,070
220,953
223,304
228,608
42,121
58,552
37,729
68,329
57,857
74,468
72,742
67,708
72,219
68,022
392,805
377,128
353,278
363,754
368,849
107,385
105,882
10,989
6,013
123,911
24,429
–
–
15,439
12,626
511,179
489,023
501,618
379,193
381,475
Total current liabilities
158,596
151,522
159,405
105,130
108,710
Non-current borrowings
Lease liabilities
Other long term liabilities
Total liabilities
Net assets
–
91,386
66,102
–
10,681
32,704
35,213
99,382
63,806
115,848
–
–
61,878
64,607
62,627
316,084
314,710
347,812
202,441
206,550
195,095
174,313
153,806
176,752
174,925
Reserves and retained profits
183,707
163,028
142,790
165,768
164,659
Paid up capital
11,388
11,285
11,016
10,984
10,266
Total shareholder equity
195,095
174,313
153,806
176,752
174,925
Basic earnings per share
Diluted earnings per share
Dividends declared per share (interim)
Dividends declared per share (final)
Net tangible asset backing
12.11c
11.93c
AU3.5c
AU4.0c
$0.20
10.57c
10.53c
AU1.5c
AU3.0c
$0.16
0.79c
0.79c
AU1.5c
–
$0.01
4.26c
4.25c
AU2.5c
AU1.5c
$0.42
8.20c
8.19c
AU2.5c
AU2.5c
$0.42
12 MICHAEL HILL | 2022 ANNUAL REPORT
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
Net borrowings to equity
Equity ratio
2022
21.0%
12.3%
7.8%
14.3%
25.3%
9.3%
3.7 : 1
1.8 : 1
9.7
28.9%
(49.1%)
38.2%
2021
RESTATED
20.6%
12.0%
7.4%
13.6%
25.0%
8.2%
3.7 : 1
1.8 : 1
8.8
30.6%
(41.5%)
35.6%
2020
14.2%
2.9%
0.6%
2.8%
1.9%
0.7%
3.4 : 1
1.4 : 1
1.5
31.8%
(0.3%)
30.7%
2019
7.1%
3.7%
2.9%
5.6%
9.4%
4.3%
5.0 : 1
2.1 : 1
8.6
12.3%
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%
Shares issued at year end excl Treasury
388,285,374
388,142,149
387,769,105
387,750,000
387,438,513
Exchange rate for translating:
- New Zealand results
- Canadian results
Store numbers
Australia
New Zealand
Canada
Number of Michael Hill stores
1.06
0.92
2022
147
48
85
280
1.07
0.95
1.04
0.90
2021
2020
150
49
86
285
155
49
86
290
1.06
0.95
2019
167
52
86
305
1.09
0.98
2018
171
52
83
306
“I’m absolutely delighted by
our outstanding FY22 results,
delivering record sales, gross
margin, and profit.”
DANIEL BRACKEN, MANAGING DIRECTOR & CEO
MICHAEL HILL | 2022 ANNUAL REPORT 13
SUSTAINABILITY
MICHAEL HILL -
THE JEWELLER THAT CARES
At Michael Hill, we are evolving our strategic sustainability direction by mapping
out a 2030 vision for our three key pillars – People, Product and Planet. We have
made significant progress on our sustainability journey in previous years, however
with a new structure and rigor around roadmaps for delivery, we have established a
comprehensive set of goals to align with global sustainability efforts.
Our new 2030 vision for environmental, social and governance “ESG” relevant issues is to transform how we source and
manufacture our products, impact our planet and improve people’s lives, and we have mapped out a new strategic architecture,
with supporting pillars and goals we are striving to achieve by 2030.
Through these goals, we are committed to bringing change in how we operate to drive sustainable practices that benefit our
customers, our planet and future generations. Through our internal operations, we aim to move our business and the broader
jewellery industry toward a more sustainable, innovative and responsible future. We plan to have an active voice in key industry
sectors, while educating our customers on the choices they can make as consumers to support and drive our journey.
With our new strategic focus, combined with great governance and direction we look forward to providing updates on our
progress regularly. We recognise these goals require consistent and long-term focus and efforts – by us, by others in the retail and
jewellery industry, by customers, and by governments – however our commitment to striving for our goals is unwavering.
14 MICHAEL HILL | 2022 ANNUAL REPORT
THE MICHAEL HILL SUSTAINABILITY VISION & STRATEGIC DIRECTION
Our ESG vision is to: transform how we source and manufacture our products, impact our planet and improve people’s lives.
We aim to move our business and the broader jewellery industry towards a more sustainable, innovative, and responsible future.
This strategic framework outlines the goals Michaell Hill is working to achieve by 2030.
These goals will be delivered through a structured framework of cross functional team members with a clear governance program,
linking back to our Board. An internal ESG committee has been created, which includes the CEO and is accountable for deciding
on strategic orientations and accountability for progress. This committee will feed into the Board to update on progress and
strategic information and decisions and gain strategic endorsement where required.
Responsible Suppliers
100% of all suppliers meet our expectations on their social and
environmental impacts [by 2030]
PEOPLE
We will improve the
lives of people across
our value chain
Empowering Women
Deliver initiatives and develop partnerships focused on empowering
and supporting over 100,000 women [by 2030]
Great Place to Work
Michael Hill will maintain a leading workforce engagement score
of greater than 80% [by 2030]
Transparency
100% use of certified sustainable or responsibly sourced natural
diamonds, coloured gemstones and cultured pearls [by 2030]
PRODUCT
100% of our products
will be sustainable,
responsible or circular
Metal Stewardship
100% of Michael Hill’s products will be made from certified recycled,
local, artisanal or responsibly sourced metals [by 2025]
Innovation
We will pioneer an innovation hub to champion and integrate jewellery
circularity, product innovation and laboratory created diamonds [by 2024]
Zero Carbon Operations
Acheive net zero carbon operations (scopes 1 & 2) [by 2025]
PLANET
We will nurture nature
and reduce our negative
impacts to net zero
Nature Positive
Contributing to the restoration and conservation of the natural
environment in our key markets [by 2025]
Eliminate Waste
We will send zero waste to landfill and eliminate single use plastic from
our packaging [by 2025]
MICHAEL HILL | 2022 ANNUAL REPORT 15
DRIVING INDUSTRY CHANGE
The jewellery industry supply chain is long and complex. The materials used – namely precious metals and gemstones – come from
a variety of sources, all with varying locations, risks, and production methods. Multiple stakeholders are engaged throughout the
Michael Hill supply chain to gain confidence and assurance over sourcing practices for materials and to ensure sourcing practices
are in accordance with Michael Hill’s sustainability strategy. Some suppliers have the knowledge and capacity to meet these
demands and may even be further ahead on their journey than Michael Hill, however others will have limited knowledge and little
to no capacity and require drastic industry change to make this happen.
At Michael Hill, we want to be a part of the solution, advocating for change within our industry, setting high standards and
expectations of our suppliers. We will become a more active member of the jewellery community, working with partners, suppliers
and other participants in the jewellery industry generally. Our challenge will be to use our voice to advocate for industry change
relating to sustainability through industry relationships, memberships, and products we sell to our customers. We will work
throughout our entire supply chain to advocate for industry change.
RESPONSIBLE JEWELLERY COUNCIL
The Responsible Jewellery Council (RJC) is the jewellery and watch industry’s leading standard setting organisation. Membership
requires companies to demonstrate compliance with rigorous codes of practices covering all aspects of the business from sourcing
and procurement to manufacturing and selling of jewellery, with a key focus on human rights.
Michael Hill is proud to continue our long standing RJC membership, with our pending re-certification to 2025 being a major
milestone in our sustainability journey, demonstrating our commitment to responsible jewellery and promoting trust and
transparency in our supply chains.
Whilst we closely monitor ongoing developments with the RJC and the broader global impacts on the jewellery industry supply
chains, Michael Hill continues to endorse the RJC’s Code of Practices as the benchmark for our business.
As part of our pending recertification, Michael Hill made a provenance claim relating to the De Beers Code of Origin range. The
range includes diamonds ethically sourced from the De Beers Code of Origin Trusted Source Program, reflecting a dedication to
social and environmental responsibility. Michael Hill plans to make further provenance claims in support of our sustainability strategy
regarding responsible sourcing of Michael Hill products.
16 MICHAEL HILL | 2022 ANNUAL REPORT
“We want to be a part of
the solution, advocating for
change within our industry,
setting high standards and
expectations of our suppliers.”
MICHAEL HILL | 2022 ANNUAL REPORT 17
FY22 SUSTAINABILITY
HIGHLIGHTS
PEOPLE
$162,000+
Raised for Dress for Success
in AU, NZ and CA
Team members participated
in our volunteering trial
(420 team volunteering hours, equalling
$19,131 volunteering salary hours donated)
140
PRODUCT
Exceptionally high global
engagement score at
83%
17%
of our international
product sold was made
in Australia
PLANET
Laboratory created diamonds are Certified
Sustainability Rated and Climate Neutral
Launched DeBeers Code of Origin Trusted Source
program – our first traceable diamond range
Environmentally considerate head office
– a new 99kw solar panel system installed at
Head office
100%
recyclable e-commerce
packaging launched
340,000+
18 MICHAEL HILL | 2022 ANNUAL REPORT
Products repaired, preventing waste
and extending product lifespan
PEOPLE
People are the heart of Michael Hill and are the reason we
work is front of mind in all we do. The company’s values,
exist. Across our entire value chain – our customers, our
purpose, leadership promise, sustainability and aspirational
suppliers, our team and our communities, people are vital to
brand journeys are key enablers to attract and retain a new
bringing our brand to life.
At Michael Hill, we continually strive to be a workplace where
all team members feel consistently valued, appreciated,
and encouraged to be their brilliant selves. We recognise
generation of team members. Our revitalised Employee Value
Proposition, linked to our core theme of ‘The People Behind
The Moments That Matter’ aims to showcase our strengths as
an employer.
that a company’s purpose, behaviour and its values is a key
Michael Hill has a goal to maintain a leading workforce
component of attracting talent into the organisation and to
engagement score of greater than 80%. Our consistent focus
keeping our talent engaged.
Further to this, we see it as a privilege to be able to help
others where global challenges exist. We have a focus on
empowering women in need who live in our communities
and are committed to ensuring anyone who is connected to
our supply chain is responsible and meet our expectations on
social impact.
Our 2030 strategic direction shows our focus in our People
pillar area, with the aim that we will improve the lives of
people across our value chain. To achieve this goal, three
key areas of focus are crucial – Responsible Suppliers,
Empowering Women and being a Great Place to Work.
GREAT PLACE TO WORK
on our team member experience through their journey with
us, our leadership behaviours and our culture are key drivers
of engagement. We seek feedback from our team members,
and we listen to the feedback. Taking action to do and to
improve is paramount to building trust. We want our team
members to speak positively about us, to stay and grow with
us and to strive to deliver for our customers and each other.
This cultural leading focus is pivotal to feelings of belonging
and enthusiasm for who we are, what we do and why we do it.
Our leading-edge recruitment processes are key to providing
potential candidates with a positive experience and a human
touch to enhance their journey into Michael Hill. We also
utilise cutting edge recruitment tools to ensure we can secure
quality talent quickly. Tools such as video interviewing,
psychometric testing, online reference checking all help build
our capability and enable the company to look for candidates
Our high levels of workforce engagement, together with how
who demonstrate qualities that will make them successful in
positive our team feel about Michael Hill as their employer,
their roles and fit with our culture.
showcase that we are a great place to work. Even so, 2022
has been dominated worldwide by a tight talent market which
poses challenges to retention and attraction. To combat
the challenging labour market, Michael Hill has continued to
focus on internal career progression and providing rewarding
development and recognition opportunities to our people.
Our team’s health, safety, security and wellbeing whilst at
Our people practices will ensure we continue to remain
competitive, defend against skill shortages and decrease
team turnover. We desire to be known internally and externally
for providing a workplace environment and culture that
consistently delivers on maintaining our leading engagement
goal of greater than 80%.
MICHAEL HILL | 2022 ANNUAL REPORT 19
EMPLOYEE VALUE PROPOSITION
Our team are the people behind the moments that matter. They mark the moments that create the story of our customers’ lives.
Our collaborative and supportive environment creates high performance outcomes. We are a company full of the brightest,
most passionate and engaged people.
We desire for our people to love the culture, embrace our purpose and see it as unique and special to work at Michael Hill.
We’re a supportive, inclusive, collaborative, fun company committed to supporting career progression and long-term
development, by providing the tools to help our team progress and celebrating their success when they do.
We have best in class people practices including robust training that teach our team how to achieve their goals and unique
incentive programs.
We attract, retain and develop high performing people because of our collaborative and supportive processes and structures:
training protocols, incentive programs, loyalty programs, reward and recognition.
We value everyone’s point of view, and our people can be sure that their voice will be heard.
OUR TEAM STATISTICS
As at 26th June 2022 employee numbers across our markets out of a total 2554
1522
AUSTRALIA
679
353
CANADA
NEW ZEA LAN D
Gender Split
Age Distribution
736
PART
TIME
515
CAS UA L
9 27
FU LL TIME
Female
85%
2178 FEMALE
EMPLOYEES
3 6
CAS-
UAL
36
PART
T IME
30 0
FU L L TI ME
Male
15%
372 MALE
EMPLOYEES
4 EMPLOYEES HAVE NOT PROVIDED
GEN D ER INFORMATION
20 MICHAEL HILL | 2022 ANNUAL REPORT
1185
AGED
30-50
732
AGED >50
634
AGED <30
3
UNSPECIFIED
AGE
EMPLOYEE ENGAGEMENT
We pride ourselves on having a highly engaged and enabled workforce who love what they do and where they work. Our Pulse
Engagement Survey in 2022 was completed by 66% of our workforce and resulted in an engagement score of 83%. This positive
result sets us apart from the global retail industry average of 72% and confirms that Michael Hill remains an employer of choice and
is a great place to work.
Engagement
Participation
Key
N EGATIVE
N EUTRAL
P OSI T IVE
83%
66%
Australia
Canada
New Zealand
83%
86%
78%
Our results also show that across all length of service demographics we continue to outperform against the global retail average.
Engagement Scores by Length of Service
< 1 YEA RS
1-2 YEARS
3 -5 YEARS
6 -1 0 YEARS
11 -1 5 YEARS
1 6-20 YEA RS
>20 YEARS
0%
20%
40%
60%
86%
84%
80%
78%
76%
75%
80%
93%
100%
In 2022, as a further way to listen to our team members, we introduced an engagement survey for our seasonal casuals.
This enabled us to measure the experience of our seasonal team members who are a key enabler of quarter two performance.
The survey asked our seasonal casuals to consider our recruitment process, engagement, and onboarding experience.
We were pleased to see that these seasonal team members were also highly engaged, with a score of 84%.
MICHAEL HILL | 2022 ANNUAL REPORT 21
INVESTING IN OUR TEAM
DIVERSITY & INCLUSION
Our team at Michael Hill are here to create exceptional
Michael Hill recognises its talented and diverse workforce
experiences – and we don’t do that with mediocrity. We
as a key competitive advantage. Our business performance
continually evolve, we keep learning and we grow, and
reflects the quality and skill of our people and behaviours that
none of that can happen without our people. At Michael Hill,
are aligned to our Group Values. We are firmly committed
we have team members across three countries, and they
to developing policies, practices and ways of working that
are at the heart of everything we do. We encourage each
support diversity.
member of our team to bring their own individual talents
and perspectives to work every day. We are aligned in our
business purpose to be the People Behind the Moments
That Matter and live with our values at our core: we care, we
create exceptional experiences, we are inclusive and diverse
and we are professional. We believe Michael Hill isn’t just a
great place to work, it’s a place to do great things.
Central to achieving this goal is an inclusive work environment
and culture that allows team members to contribute to their
full potential, through recognising and supporting their
diverse strengths, experiences and needs. We achieve this
by educating our teams, sharing experiences and analysing
metrics of diversity across the business. We’ve continued
to work on building a comprehensive comparative analysis
We invest in our team’s learning and focus on development
framework to enable deeper understanding of quantitative
through experiences and empowerment, as we know our
and qualitative diversity and inclusion metrics across the
future leaders are among us. This focus on development
company. This includes measuring, tracking, and reporting
unlocks great potential in our workforce which is ready and
annually on markers such as gender distribution, gender
able to respond to our customers’ needs. We create bespoke
wage gap, generational spread and employee engagement.
learning experiences for our teams, including our 12-week
This data is used to inform our strategy and areas of focus
onboarding Stepping Stones program to provide all the
for the future. Together, we will continue to build an inclusive
detail retail team members need to know regarding product,
culture that encourages, supports, and celebrates the
systems, and sales in an interactive and human-centred
diverse voices of our team members; a culture which fuels
approach. We work with our vendors to ensure our product
innovation, and creates closer connections with our customers
training is aligned with industry excellence and our teams are
and our communities.
equipped with the knowledge they need to have the most
meaningful and informed connections with our customers. We
encourage our people to own their development and take
charge of their careers.
Michael Hill’s Diversity and Inclusion Committee has continued
its work through the year and is formed with a diverse
representation of team members from our global workforce.
The Committee is dedicated to and is passionate about
Our leaders at Michael Hill are trained and empowered to lead
elevating our Diversity and Inclusion strategy in a variety of
and coach their teams through an in house built coaching
ways, including a calendar of cultural, world and religious
platform and are taught to have valuable skills based coaching
days to celebrate the diversity within our organisation and
conversations through our leadership workshops.
communities, through awareness raising and educational
To develop our people in all areas of life, we have invested in
LinkedIn Learning for many roles in the business in FY22, with
the view to include all team members in the next financial year.
This allows our team to continue growing our learning culture,
initiatives. The Diversity and Inclusion Committee promotes
educational content and works with LinkedIn Learning
to promote and elevate our team’s perspective and
understanding of our teams and communities we live in.
where, when and how they like and to develop the way they
In 2022, Michael Hill continued to make good progress in our
want, while building an ongoing skillset with flexibility in this
holistic Diversity and Inclusion agenda, with a key focus on
approach for all.
calendar events including International Women’s Day, Pride
Month, World Mental Health Day and International Day of
People with Disabilities.
“ Michael Hill isn’t just a
great place to work, it’s a
place to do great things.”
22 MICHAEL HILL | 2022 ANNUAL REPORT
GENDER EQUALITY
At Michael Hill we are committed to fostering a gender equal
workplace and providing opportunities for women to thrive
at all levels of the business. 84% of our global workforce is
female, 43% of Executive Leadership Team is female, and 64%
of our global leadership positions are held by females. For
this reason, it was important that International Women’s Day
was celebrated across all three countries Michael Hill operates
in. Teams worked together to pledge ways to increase our
allyship and continue to ‘Break the Bias’ against females in the
workforce. We shared learnings and experiences in a fireside
chat with our CEO and key senior leaders and encouraged
team members to continue to learn how to challenge their
own biases which make an impact in their lives.
In June 2022, Michael Hill embraced and celebrated Pride
members, and trained our team on the importance of using
inclusive language and gender pronouns in the workplace.
We also used the gravity of PRIDE Month to launch ‘Room
For All’, Michael Hill’s Diversity and Inclusion podcast. The
podcast takes a closer look into the lives and experiences of
our team members at Michael Hill. Each month, we celebrate
our commonalities that bring us together as a global team,
but aim to learn more about our cultural backgrounds, religions,
sexuality, mental health, abilities and all of the differences that
make us uniquely us.
The next year will see the continuation of Diversity and
Inclusion program of work. The following initiatives will be
implemented in the next financial year:
• Inclusion of diversity training in leadership
development programs
Month with all team members. It’s important that we create a
• Ongoing reporting and review of diversity metrics
space where our team and customers feel safe and accepted
• Development of employee resource groups’ strategy
as their true and authentic selves. As such we reaffirmed our
solidarity with the Pride community, hosted lunchtime social
events, challenged our teams to continue their learning
about the history of pride and how to support LGBTQI+ team
• Increase accessibility requirements in line with health and
wellbeing strategy
• Expand our Diversity and Inclusion strategy on external
platforms and the Michael Hill careers website
MICHAEL HILL | 2022 ANNUAL REPORT 23
24 MICHAEL HILL | 2022 ANNUAL REPORT
HEALTH, SAFETY AND SECURITY
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. We continue to support our team
members through flexible work arrangements as we journey
out of COVID-19 and we also dealt with impacts of natural
disasters collaboratively as a team.
Key achievements across health, safety and security in
FY22 include:
• No non-conformances from the Responsible Jewellery
Council audit
•
Continued downward trends of lost time and significant
incident rates. LTIFR down to 3.22 compared to 9.50 in
FY2018, and SIFR down to 1.34 compared to 6.04 in FY2018
– Lost Time Injury Frequency Rate - Total number of W/Comp
Claimable Incidents where > 1 Day lost from work / Total # of
Hours Worked x 1,000,000. LTIFR Industry rate 3.7
– Significant Incident Frequency Rate - W/Comp Claimable
incident where > 5 days lost from work / Total # of Hours Worked
x 1,000,000. SIFR Industry Rate 6.4
•
Achieved a 22% participation rate for flu vaccinations
across AUS & NZ
•
16% of our workforce participated in our 6 week – 15 Minute
Exercise Challenge
•
Obtained an annual 3.4% utilisation rate of our Employee
Assistance Program (EAP) compared to an industry
rate of 1.3%
• Upgraded CCTV and / or intrusion systems across 30
stores in AUS, 15 stores in NZ and 6 stores in Canada
• Rolled out Mental Health First Aid Training to 34 of our
retail leaders
• Responded to increased criminal activity across the
North Island of New Zealand by improving pack down
procedures at end of trade, installing fog cannons and
pendant alarms into nine ‘hot spot’ stores, and improved
training on requirements and expectations regarding
safety and security
EMPOWERING WOMEN WITH
DRESS FOR SUCCESS
Gender equality is not only a fundamental human right,
but a necessary foundation for a peaceful, prosperous, and
sustainable world. There has been progress over the last
decades: more girls are going to school, fewer girls are forced
into early marriage, more women are serving in parliament
and positions of leadership, and laws are being reformed to
advance gender equality. Despite these gains, many global
aimed at improving the lives of women, through enabling
opportunities. By 2030 we aim to deliver initiatives and
programs focused on empowering and supporting over
100,000 women.
This year, Michael Hill was again proud to support Dress
for Success in empowering women. Dress for Success is a
global not-for-profit organisation that empowers women to
achieve economic independence and improve their lives; by
providing a network of support, professional attire, and the
development tools to thrive in work and in life, and operate in
our three markets, Australia, New Zealand and Canada.
Coinciding with International Women’s Day in March, Michael
Hill launched a new campaign to raise funds for Dress for
Success with various activations:
“ Michael Hill’s
philanthropic
efforts are aimed
at improving the
lives of women,
through enabling
opportunities.”
DRESS FOR SUCCESS SUPPORT OFFICE
VOLUNTEERING PROGRAM:
Michael Hill launched its first ever paid volunteering program
with Dress for Success where head office team members were
given the opportunity to volunteer at a “working bee”
at Dress for Success in Brisbane. This trial volunteering
program saw team members unpack donated items, clean
displays, and sort clothes racks to assist Dress for Success
in their daily operations.
• With over 140 team members taking up the trial
opportunity, Michael Hill successfully donated over 420
hours, worth $19,131 of paid volunteering hours to assist
Dress for Success Brisbane
•
Due to the success of our volunteering trial in FY22, we are
looking to permanently introduce volunteering for our head
challenges remain.
office team members
With over 85% of the people working at Michael Hill
identifying as female, and the majority of our customer base
identifying as women, Michael Hill’s philanthropic efforts are
•
One day of paid community service leave per calendar
year is planned to be available to eligible Australian retail
store-based team members.
MICHAEL HILL | 2022 ANNUAL REPORT 25
DRESS FOR SUCCESS EARRINGS SALES:
AUCTION FOR ACTION:
In March – June we asked customers to help us support
At times through our business operations, products can
Dress for Success in their mission to empower women, by
become impaired or damaged, unable to be sold to
purchasing a pair of beautiful 6mm button cultured freshwater
customers. We saw this as an opportunity to raise further
pearl earrings in sterling silver for $25. For every purchase
funds for Dress for Success with these impaired products
Michael Hill donated $15 to Dress for Success raising over
being repaired by our manufacturing team and auctioned to
$155,000 to be split across Australian, New Zealand and
head office team members, with all funds over the reserve
Canadian Dress for Success sites. We supported this initiative
price donated to Dress for Success. This initiative saw over
across our entire store network, as well as promoting
$7,000 donated this financial year.
Dress for Success and earrings sales at Business Chicks
events across Australia.
VIDEO CONTENT FOR THE DRESS FOR
SUCCESS LEARNING PORTAL:
ASSISTING OUR LOCAL COMMUNITY
WITH RECOVERY
March 2022 saw some of the worst floods in Australia across
South East Queensland and Northern New South Wales. Whilst
The importance of empowering women in their continued
supporting our team who reside and work in the impacted
education to re-enter the workforce is vital in growing
areas, Michael Hill wanted to support the local communities in
their confidence and competence to support their career
which we live and operate to get back on their feet. To assist
pathways. Michael Hill has worked with Dress for Success to
in community recovery Michael Hill donated $100,000 across
create instructional videos for job seekers on the following
four local charities, based on the groundwork each were
topics, which support women to gain confidence and
completing to support their local communities to recover.
knowledge in forging their next career move:
Charities who received a portion of the total donation
• Searching for Jobs on the Internet
amount include:
•
•
•
•
•
How to Shine When Applying for Casual Work in Retail
Preparing for Your Job Interview
Understanding Your Contract of Employment
Getting Ready for Your New Job
Tips for Networking.
•
•
•
•
St Vincent de Paul’s QLD Flood appeal
St Vincent de Paul’s NSW Flood appeal
Salvation Army NSW & QLD Flood Crisis appeal
Lifeline – Lismore / Northern Rivers Flood Appeal.
“ At Dress for Success, we economically empower women across the
globe. The past two years have been immensely challenging for our
organisation, and the women we serve. But by standing together with
partners like Michael Hill, we are continuing to help women break the
cycle of poverty and obtain safer and better futures. Our vision is a
world where women do not live in poverty; are treated with dignity
and respect; and are strengthening their families and shaping their
communities. Thank you Michael Hill, for your commitment to making
this vision a reality. Your support is helping to change the lives of
women throughout Australia, New Zealand, and Canada – and we
could not be more grateful”
- WENDY LONGWOOD, COO, DRESS FOR SUCCESS WORLDWIDE
26 MICHAEL HILL | 2022 ANNUAL REPORT
MICHAEL HILL | 2022 ANNUAL REPORT 27
RESPONSIBLE SUPPLIERS
Michael Hill is working closely with our key suppliers across our sourcing and procurement ecosystems to ensure our suppliers’
manufacturing and operations comply with our responsible sourcing practices.
Our vision is by 2030, 100% of our suppliers will meet our expectations on their social and environmental impacts. To achieve this,
several initiatives have commenced to enhance awareness on product sourcing and expectations of doing business with Michael
Hill. Our roadmap from our Modern Slavery Statement outlines the timeframes and detail.
01.
02.
03.
FOUNDATION
ENHANCE
OPTIMISE
FY20 – FY21
FY22 – FY24
FY25+
• Established Supplier Transparency
• Establish a process for undertaking
• Complete Modern Slavery
effectiveness review
• Annual Modern Slavery awareness
training for all staff
• Extend Ethical Supply Chain
Assessment to all suppliers
• Revise the process for selection of
new suppliers to include completion
of a tailored questionnaire per
industry type, visits to the facilities to
understand working conditions and
appropriate revisions to the supplier
code of conduct if required
• Working with our third-party
independent verification and audit
partner on high risk suppliers
• Undertake due diligence for Tier 2
and 3 suppliers
• Consideration of corporate structure
and alignment to business strategy
(e.g. B Corp certification)
• Sustainability – core pillar of our
brand proposition
• 100% of key jewellery suppliers
being RJC accredited
Platform
• Identified key suppliers to engage on
supplier transparency platform
• Developed Ethical Supply Chain
Assessment
• All Tier 1 jewellery and packaging
suppliers onboarded onto Supplier
Transparency Platform and
completed the Ethical Supply Chain
Assessment (accounts for 60% of
total supplier spend)
• Updated Code of Ethics and Code of
Conduct for Suppliers
• Review and update of key supplier
contracts and supply terms and
conditions
• Covid-19 response plan and crisis
management
• 2021 Group team engagement survey
• Updated team member Code
of Conduct
• Health, safety and wellbeing focus
• Appointment of senior leader
responsible for sustainability
• Alignment of modern slavery
questionnaire to RJC
• Issued our first Modern Slavery
Statement
due diligence for Tier 2 and 3
suppliers
• Review of new supplier onboarding
process, including simplifying the
assessment process to include pre-
screening questions
• Establish an Ethical Supply Chain
Assessment tailored to non-jewellery
industry suppliers
• Onboarding more suppliers onto the
supplier transparency program. The
focus will be on cleaning, security,
and repair suppliers initially with an
aim for all suppliers to be monitored
through the supplier transparency
platform
• Restarting, when possible, the
regularity of supplier visits to high risk
production facilities
• Assess high risk suppliers for audits
to be completed and developing
remediation plans with supplier or
cease supplier engagement
• RJC recertification – includes
improving compliance with COP
6 Human Rights in line with UN
Guiding Principles on Business and
Human RIghts
• Establish formal committee for
ongoing responsible sourcing
practices
• Modern Slavery Training for Michael
Hill Board and Executive Team and
relevant senior leaders
• Review of current grievance
mechanisms
• Sustainability objectives and
achievements being publicly shared –
holding us to account
• Issuing our second Modern Slavery
Statement
• Sustainability – core pillar of our
strategy
• 80% of all key jewellery suppliers
being RJC accredited
28 MICHAEL HILL | 2022 ANNUAL REPORT
Supporting this is our responsible supplier platform, providing
MADE IN AUSTRALIA
us greater visibility and understanding of our supply chain
across both jewellery and non-jewellery suppliers, including:
• Details of our suppliers’ top suppliers
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
• Supplier RJC membership status and products included in
jobs and protect our supply chain from disruption. Having
their certification
• Other certifications and memberships held to confirm
supplier commitment to social and environmental
performance
• Type of jewellery product supplied with tailored
questionnaires based on product risk
• Site operations, including understanding product or
material supplied by site
our in-house workshop located alongside our head office and
Australian 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.
Michael Hill has a team of over 25 jewellery craftspeople,
working locally in Brisbane, Australia who hand make and
bring our beautiful Made in Australia pieces to life.
• Further transparency over internal modern slavery practices
• 73% of all solitaire engagement rings were Made in Australia
(e.g. training, protocols, resources responsible for
• Made in Australia product made up 17% of Michael Hill’s
sustainable procurement).
international sales
Any non-conformances from suppliers are taken seriously and
• 45,425 individual products were made in our Australian
we will work with these suppliers to remediate in the first
manufacturing facility
instance and terminate relationships should they not mature
• 27 full time team members in our Australian
their practices in line with our expectations.
manufacturing team
The platform has the capability to capture ESG information
and is intended to be utilised for gaining transparency
into suppliers’ ESG commitments as part of delivering our
ESG strategy.
CRAFTING AT HOME
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
Craftsmanship is one of the founding pillars, and deep in
quality and finesse. Morris and Watson are also in the process
the heritage of our business. Michael Hill first established an
of becoming a certified member of the RJC.
in-house workshop in the 1980s, and we are one of the only
Australian jewellers to maintain a retail-led workshop to this
day, with a dedicated team of master craftsmen, diamond
specialists and quality control professionals.
MICHAEL HILL | 2022 ANNUAL REPORT 29
PRODUCT
Progress towards more sustainable product offerings and
business operations is evident globally, with many aspirational
retailers leading the way. Michael Hill is also actively evolving
the product ranges we create and provide our customers.
Our 2030 strategic direction outlines a clear focus in our
Product pillar, with the aim that 100% of our products will be
sustainable, responsible, or circular. To achieve this goal,
three key areas of focus are pivotal – Product Transparency,
Traceability and transparency and proving product origin is a
known and complex systemic challenge across the jewellery
industry, due to the varying layers of the supply chain, from
mine, to refiner, to producer, retailer and end consumer. For
businesses to create transparency and trust, organisations
are seeking to adopt a higher level of certification and due
diligence over their suppliers, to provide customers and
suppliers assurance around how their products and materials
Metal Stewardship, and Innovation.
PRODUCT TRANSPARENCY
Our aim is to have 100% use of certified sustainable or
responsibly sourced natural diamonds, coloured gemstones
and cultured pearls by 2030. Underpinning the rollout of
this pillar includes some form of industry change particularly
have been sourced, traced, and processed through the
within the coloured gemstones and pearls industry, including
supply chain. To create such a level of transparency is a time
responsible sourcing practices.
consuming process and requires buy in across the supplier
network in the supply chain.
NATURAL DIAMONDS
Rapid and comprehensive industry change is required for us
to achieve some of the product goals outlined in our 2030
strategic direction; however, we will advocate for this through
all of our supplier channels, setting the expectation high for
the quality product we wish to provide to our customers.
We also have confidence in the RJC, SCS Global and other
industry bodies to provide assurance systems so our products
Michael Hill is committed to offering only conflict-free
diamonds in our jewellery. We purchase our natural diamonds
from legitimate sources in accordance with the Kimberley
Process Certification Scheme (KPCS) as supported by the
World Diamond Council System of Warranties. As part of
our business practices and supply agreements, we require
diamond suppliers to warrant that the diamonds are
are responsibly sourced and meet best practice standards.
conflict-free.
30 MICHAEL HILL | 2022 ANNUAL REPORT
We are keeping up to date with any path of provenance
3. Is conflict-free and meets De Beers Code of Origin’s
improvements to purchasing mass natural diamonds in the
industry-leading ethical standards
market, noting the SCS global standards for sustainable
natural/mined diamonds has been developed. Challenges
of proving provenance for bulk diamonds parcels are still
relevant. In response to providing greater assurances to
our customers on diamond provenance we are proud of our
ongoing partnership with De Beers on their Code of Origin
range, our first foray into natural diamond provenance for
our customers.
• De Beers Code of Origin: Partnering with De Beers, Michael
Hill was proud to be one of the first global retailers to
carry a range of diamonds from the De Beers Code of
Origin Trusted Source Program. De Beers is a renowned
4. Has helped protect the planet through wildlife
conservation and De Beers’ commitment to be carbon
neutral by 2030.
This program of diamonds was rolled out to all Michael
Hill stores in June 2022, and contributes to 3% of solitaire
engagement ring sales, with a view to expand and
grow this figure in FY23. As part of our pending RJC
recertification, Michael Hill has made a provenance claim
relating to the De Beers Code of Origin range.
COLOURED GEMSTONES & PEARLS
world-leader in diamonds, and the Code of Origin program
There is limited guidance and inherent risk over sourcing
reflects their deep commitment to social and environmental
practices in the coloured gemstones and pearl industries
responsibility. Diamonds with the Code of Origin make a
significant contribution to the people and places where
they are found, helping provide jobs, healthcare and
comparative to the diamond and precious metal industry.
In response to limited available guidance, Michael Hill has
taken the initiative to develop a risk matrix which risk assesses
education, and helping protect the environment through
all coloured stones and pearls based on country of origin
wildlife conservation and De Beers’ commitment to be
carbon neutral by 2030.
At Michael Hill, responsibility and ethical sourcing are
an important focus. We are dedicated to offering our
customers the best range of diamonds and jewellery, to
reflect their preferences and personal values. Diamonds
with the Code of Origin offer customers extra peace of
mind, knowing that their diamond has had a positive
impact on people and the planet.
The De Beers Code of Origin program provides assurance
that the diamond:
in accordance with the Global Slavery Index, providing
intelligence to our sourcing teams about product and
sourcing locations to avoid.
We are reliant on prevailing standards of due diligence,
such as the RJC’s Code of Practices to help us carry out the
necessary due diligence on our supply chain. We recognise
that the systemic challenges cannot be solved overnight.
However using the risk-based approach, together with the
inclusion of specific questions relating to labour standards
on the supplier transparency platform, we hope to better-
understand at a supplier level the type of products supplied,
and their countries of origin. With this information we will be a
1. Is a natural diamond, discovered by De Beers
better position to assess which suppliers might be considered
2. Was discovered in Botswana, Canada, Namibia or South
Africa, where it has helped provide jobs, healthcare
and education, with a particular focus on programs
supporting women and girls
higher-risk if they disclose countries which are high-risk based
on our risk matrix.
MICHAEL HILL | 2022 ANNUAL REPORT 31
“ We recognise there is
opportunity to lead the
jewellery industry through
offering innovative product
and service solutions aligning
to a sustainable future.”
32 MICHAEL HILL | 2022 ANNUAL REPORT
METAL STEWARDSHIP
Michael Hill is committed to jewellery manufacturing using
conflict-free and responsibly sourced metals. Currently 87%
of our jewellery suppliers are RJC certified, meaning our
suppliers comply with the RJC standards for responsible
ethical, human rights, social and environmental practices
throughout the diamond, gold and platinum group metals
jewellery supply chain. We plan to have 100% of Michael
Hill’s silver and gold products made from certified recycled,
responsibly sourced, local or artisanal sources, however, will
also be working to develop a deeper understanding of all our
precious metal types.
RESPONSIBLE GOLD & SILVER
We are currently working with our suppliers to understand
more sustainable gold and silver options available and aim
to shift our product mix in the coming years. 95% of our
international sales are products made from gold and sterling
silver, therefore are our main metals of focus.
The introduction of new product and changes in product mix
sourced (e.g., recycled or locally sourced), creates additional
complexity and the need for further transparency of our
SUSTAINABLE & CLIMATE NEUTRAL
LABORATORY CREATED DIAMONDS
Michael Hill this year was proud to be the first major
jewellery retailer in Australia and New Zealand to become
an Accredited Retailer for Certified Sustainability Rated
Laboratory Created Diamonds.
Setting a new standard of excellence, a Certified Sustainability
Rated Diamond has been independently evaluated in
accordance with the SCS-007 Sustainability Rated Diamonds
Standard and certified against five pillars of sustainability
achievement provided by SCS global. Our entire range
of laboratory created diamonds are certified sustainable,
meaning they have achieved:
• Verified origin traceability: Sustainability Rated Diamonds
are tracked through a verified origin traceability process
that provides 99.9% accuracy of the origin of each diamond
through its entire chain of custody, from producer to point
of sale
• Ethical stewardship: each diamond is certified to adhere
to twelve core ethical principles aligned to the strictest
internationally recognized norms of business integrity
• Verified climate neutral: Sustainability Rated Diamonds
suppliers supply chains and sourcing practices. As a result,
are certified on their journey toward achieving full Climate
we will continue to uphold our standards and expectations
Neutrality – produced in a manner that mitigates both
of our suppliers regarding understanding the scope of our
current annual and past (“legacy”) greenhouse gas
suppliers’ product certifications and ensuring appropriate
emissions still affecting the climate
evidence exists to satisfy the RJC provenance claim
requirements we endeavour to make.
For recycled gold or silver suppliers, this includes
ensuring suppliers:
• Meet the RJC Chain of Custody certification or are on
• Sustainable production practices: Sustainability Rated
Diamond producers are committed to the principle of
doing no harm to humans or environment, and are actively
working to avoid, eliminate or offset any impacts that might
be associated with the production process
the journey to Chain of Custody certification; or
• Sustainability investments: Sustainability Rated Diamond
• Hold an alternative certification including SCS recycled
content certification. Noting this is a member voluntary
standard and the standard includes Chain of Custody
requirements of its suppliers.
Similarly, locally mined or refined sourced product follows a
similar path regarding chain of custody requirements.
We have several gold suppliers who are on the journey of RJC
Chain of Custody certification for these metal types, and we are
committed to working with these suppliers to bring certified
options into our supply chain, and in turn provide our customers
with more sustainable gold and silver product options,
CHAMPIONING PRODUCT
INNOVATION
At Michael Hill, we recognise there is opportunity to lead the
jewellery industry through offering innovative product and
service solutions aligning to a sustainable future. By 2024
Michael Hill will pioneer an innovation hub to champion
and integrate jewellery circularity, product innovation and
laboratory created diamonds. We already work closely with
our suppliers on the innovation pipeline and are proud be
the first major retailer in the southern hemisphere to launch
the DeBeers Code of Origin program as well SCS Certified
Sustainable and Climate Neutral laboratory created diamonds.
producers engage in sustainability investments that help
uplift artisanal and small-scale miners (ASM) and other
vulnerable communities, clean the air, protect the climate
and protect endangered watersheds and ecosystems.
Each certified diamond is accompanied by a detailed
certificate which is provided to the customer at the point
of purchase. The certificate explains their diamond’s
sustainability rating was earned, including origin traceability,
conformance with rigorous ethical and environmental
requirements, progress in reaching climate neutrality
and zeroing out other production-related impacts, and
sustainability investments.
MICHAEL HILL | 2022 ANNUAL REPORT 33
PLANET
Currently at Michael Hill we do not measure, offset, or
strategically approach our carbon, waste or energy
approaches from a sustainability perspective, however as
set out in our 2030 strategic direction we aim to drastically
change this.
United Nations Net Zero Coalition outlines emissions need to
be reduced by 45% by 2030 and reach net zero by 2050 for
the planet to stay below a 1.5°C increase in global warming.
At Michael Hill, we recognise we need to move beyond the
finite energy buried in the Earth towards the infinite energy
that surrounds us – with our first step to get our own house
in order and establish greenhouse gas emission reduction
targets in line with climate science to decouple any energy
use from our growth.
Alongside global warming companies are being challenged
more and more with reducing waste, managing resources,
and diverting them from landfill. We are committed to the
well-known principles of the waste hierarchy and searching for
better ways to operate so that we minimise natural resource
consumption in our operations and find innovative ways to
reduce the amount of residual waste.
Our 2030 strategic direction shows our focus in our planet
pillar with the aim that we will nurture nature and reduce our
negative impacts to net zero. To achieve this goal, three key
areas of focus are pivotal – Zero Carbon Operations, Nature
Positive and Eliminate Waste.
ZERO CARBON OPERATIONS
We are committed to consistently searching for better
ways to operate, to benefit and reduce our impact on the
environment. Having just relocated to a new head office in
Brisbane, we now occupy a building that is more efficient
and considerate of the environment. The building features
solar panels and water tanks to capture rainwater to be
used in the buildings facilities systems for all landscaping,
and as the specifying tenant of the new building, we have
driven the systems and technologies used on site to reduce
energy use. Our landlord is seeking official accreditation for
its green operating status in due course. Across our store real
estate, in the past year 50 stores switched over to using LED
lighting, and with an emphasis on store refresh next year, this
programme of change will continue at a wider scale. Another
aim is that our corporate headoffice and any sites where we
are in control of the electricity tariff will switch to a certified
renewable energy tariff.
A key aspect of our zero-carbon operations commitment
is that we are yet to have started measuring our direct and
indirect carbon emissions. Without this data we are not in a
position to make short-term or longer-term plans or targets to
reduce our emissions towards zero. An immediate priority is
therefore to map our Scope 1 and 2 carbon emissions. Once
we have collected the data on our Scope 1 and 2 emissions,
we will also then map out our Scope 3 value chain emissions
34 MICHAEL HILL | 2022 ANNUAL REPORT
MICHAEL HILL | 2022 ANNUAL REPORT 35
36 MICHAEL HILL | 2022 ANNUAL REPORT
and seek to engage our supply chain partners about their
Michael Hill will prioritise the development of a waste
plans to reduce their emissions. Net Zero emissions road maps
and resource management system as part of a broader
will provide a time-based programme of work, including the
environmental management system (EMS) to assist in
possibility of offsetting residual emissions. Our aim regarding
achieving our goals. Our retail operations have a diverse range
Net Zero target-setting is to collate the data and then set
of waste management solutions depending on their location
science-based targets that ultimately align this to the Science-
and who is responsible for managing the building or facilities.
Based Targets Initiative.
Key initiatives aimed at reducing consumption we have rolled
out this financial year include:
• Michael Hill is moving its Head office location to a new
office in Brisbane. A part of the brief for this development
was to be environmentally considerate and have installed
a 99KW solar panel system in accordance with Australian
Standard AS5033 by Clean Energy Council to assist in our
journey to offset our energy usage
This will present a challenge in terms of collating and then
managing daily waste streams, so a first part of this journey
is to carry out a waste audit to help us understand our store
operations more clearly.
As previously reported, we have started on the journey
of resource efficiency by reducing our catalogue printing,
shifting to FSC recycled paper and introducing bio-
degradable plastic bags for the transportation of our jewellery
pieces, however we are committed to consistently searching
for better ways to operate, to benefit and reduce our impact
• Installed four EVlink smart wallbox charging stations for the
on the environment.
charging of electric cars with 22KW configuration
• LED lights introduced to 50 existing stores (over 1,000 light
fittings) reducing electricity consumption of halogen lights;
and a commitment to deliver LED lights to our entire store
network by 2025
NATURE POSITIVE
It is widely recognised; the quality and quantity of the world’s
natural habitats are in decline. We accept that our business
operations, along with many other organisations are indirectly
connected to the deterioration of the natural environment
through the extraction and processing of raw materials
upstream, the use of other finite resources and consumption
of goods and services.
Michael Hill recognizes the impact mining in particular (the
core source of the majority of our product) has on the planet
and ecosystems around it. As a wider part of our ESG strategy
we wish to proactively contribute towards protecting and
restoring a part of our vulnerable environment by partnering
with organisations that help to protect and restore nature.
As outlined in our 2030 strategic direction, we are
committed to contributing to the restoration and
conservation of the natural environment in our key markets.
As a new area of focus for Michael Hill, we will investigate
partners in ocean conservation – a vital part of resisting
global climate change, and one of the most pressing
modern environmental concerns.
ELIMINATE WASTE
Our aim is to send zero waste to landfill by first minimising,
then diverting waste from our operations and educating
our colleagues on reusing and recycling. We will also
eliminate single use plastics from our packaging by 2027.
We will develop an internal mindset for reducing waste using
the waste hierarchy – waste prevention, as the preferred
option, followed by reuse, recycling, recovery including
energy recovery and as a last option, safe disposal for all our
manufacturing and store operations.
“ We are committed
to contributing
to the restoration
and conservation
of the natural
environment in our
key markets.”
PRODUCT END OF LIFE
Unlike many other consumers goods, jewellery product at the
end of life can be recycled and repurposed due to its inherent
nature and value. At Michael Hill we hold rigorous process
around product waste with any returned product, faulty items,
scrap metal or manufacturing waste scrapped and refined
with roughly 75% of the product value recovered. This financial
year saw Michael Hill scrap and refine 34kg of gold and 160kg
of sterling silver.
We take pride in the quality product we sell, as well as the
relationship we have with our customers, however over
time jewellery wear and tear is inevitable. We provide a
quality jewellery repair offering in store for all Michael Hill
product and work with global repair partners to repair and
restore jewellery back to life. This financial year Michael Hill
repaired over 340,000 pieces of jewellery for our customers,
preventing waste and extending each product’s lifespan.
MICHAEL HILL | 2022 ANNUAL REPORT 37
EXECUTIVE
LEADERSHIP TEAM
L-R Andrew Lowe, Amy Sznicer, Daniel Bracken, Matt Keays, Joanne Matthews, Jo Feeney, Keith Louie
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.
38 MICHAEL HILL | 2022 ANNUAL REPORT
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.
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
Joanne has also worked as the Executive General Manager,
across the business.
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
KEITH LOUIE
she worked in retail operations with Woolworths. With a large
CHIEF DIGITAL OFFICER
workforce 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.
AMY SZNICER
CHIEF RETAIL 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
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 transformation 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.
Aldo. She has led the roll out of over 200 new retail stores in
More recently, Keith has advised various listed, private
Australia, New Zealand and Singapore and was named 2006
and Government entities on eCommerce and digital
Australian Young Business Woman of the Year at the Telstra
transformation, building on his earlier experience as a Director
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 KEAYS
CHIEF INFORMATION OFFICER
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 FEENEY
CHIEF MARKETING OFFICER
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
Matt joined Michael Hill in June 2015, bringing with him
global organisations (including Woolworths, Telstra, Foxtel
extensive international IT experience in the retail space. Prior
and McDonald’s), specialising in strategic brand building, end
to joining the company, Matt led the global IT strategy for
to end marketing communications and driving key customer
Forever New as their General Manager Information Technology,
growth strategies across channels. In her most recent role
and prior to that worked as Chief Information Officer for
Super Amart where his final project was successfully leading
as Director of Marketing at McDonald’s Australia, she was
responsible for marketing, brand and media strategies
a full-scale disaster recovery process after the Queensland
and driving commercial growth through innovation and
floods in 2011. He also worked for leading national footwear
re- imagination of the brand. Jo is also a recognised leader
and apparel company, Colorado Group after enjoying his long
in creativity – winning multiple awards both locally and
retail apprenticeship with 11 years at Country Road, where he
internationally. She brings a fresh approach to driving the future
worked initially as a Finance Accountant, and also gained solid
growth of the brand through a lens of commercial creativity.
shop floor experience during his tenure.
MICHAEL HILL | 2022 ANNUAL REPORT 39
“ A key highlight was our
ability to grow profit
faster than sales,
underpinned by continued
gross margin expansion.”
40 MICHAEL HILL | 2022 ANNUAL REPORT
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 26 June 2022.
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:
DIVIDENDS
Final dividend for the year ended 27 June 2021 of 3.0 cents per fully paid share paid
on 24 September 2021 (2020: no final dividend)
2022
$’000
11,649
2021
$’000
–
Interim dividend for the year ended 26 June 2022 of 3.5 cents (2021: 1.5 cents) per
fully paid share paid on 25 March 2022 (2021: 26 March 2021)
13,590
5,820
The Directors have declared the payment of a final dividend of 4.0 cents per fully paid
ordinary share (2021: 3.0 cents). The final dividend will be unfranked for Australian
shareholders and fully imputed for New Zealand shareholders. The aggregate amount
15,531
11,649
of the proposed dividend expected to be paid on 23 September 2022 out of retained
earnings, but not recognised as a liability at year end, is:
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
Review of Operations and Strategic Update sections of this report.
MICHAEL HILL | 2022 ANNUAL REPORT 41
REVIEW OF OPERATIONS
26 June 2022 (2021: $56.6m) an increase of $6.3m year on
year, driven by a combination of strong sales growth and
The Group achieved the following key outcomes for the 2022
margin expansion.
financial year:
KEY FINANCIAL RESULTS
• Group operating revenue increased by 7.0% to $595.2m
(2021: $556.5m), with ~10,000 lost store trading days in
each of FY22 and FY21
• Comparable EBIT* increased by 11.1% to $62.9m
(2021: $56.6m)
• Statutory net profit after tax increased by 13.9% to $46.7m
(2021: $41.0m (Restated¹))
• Group gross margin increased by 200 bps to 64.7%
(2021: 62.7%), underpinned by our strategic initiatives
• Healthy inventory levels to support elevated sales at
$181.5m (2021: $171.2m)
• Balance sheet benefited from strong operating cashflows
and sale of the Canadian credit book, resulting in a closing
cash position of $95.8m (2021: $72.4m)
• Final dividend of 4.0 cents per share declared, delivering
total dividends for the year of 7.5 cents per share
For the year, the Group delivered same store sales growth of
8.0% and gross margin increased by 200 bps to 64.7%. Since
FY19Q3, the Group has achieved twelve quarters of same store
sales growth. These continued strong results demonstrate
the success of the Group’s strategic transformation and the
increasing strength of the brand during more than two years
of significant global disruption.
During the year, the Michael Hill global store network
suffered 10,020 lost store trading days (2021: 10,447) due to a
combination of government mandated lockdowns and COVID
impacting store teams. Despite these disruptions to trading
conditions and the global store network, total revenue grew
by 7.0% to $595.2m (2021: $556.5m) as the Group continues
to elevate and modernise the brand, and transform the
customer journey.
The Group’s digital businesses delivered another record year
with sales of $42.0m, now representing 7.1% of total sales.
During the year, the Group successfully launched “click &
collect” in all three markets, and rolled out “ship from store”
across our global network, further enhancing the Group’s
• Board announces that it will implement an on-market share
omni-channel ecosystem. The Group’s marketplace strategy has
buy-back of up to 5% of the Company’s issued capital.
progressed in all its existing markets, with activation in Australia
(The Iconic, Westfield Direct), New Zealand (The Iconic) and
OPERATIONAL PERFORMANCE
Canada (The Bay).
• Group same store sales were up 8.0% for the year, with
Prior to the key Christmas trading period, the business opened
Canada +11.3%, New Zealand +8.9%, and Australia +4.2%
its Canadian 3PL distribution centre in Ontario, creating a cost-
• Digital sales increased by 23.4% to a record $42.0m,
representing 7.1% of total sales, up from 6.3% last year
efficient flow of inventory from vendors, improving speed of
delivery to customers and ensuring reliable continuity of supply
• New pure play brand Medley delivered over $1m in sales
and optimal stock levels.
for its first full year of trade
During the year, the product range continued to evolve in
• Loyalty strategy continues to deliver with 76% of sales from
line with the elevated brand journey including the successful
members – Brilliance by Michael Hill now over 1.4 million
relaunch of the Group’s premium bridal offering – Sir Michael
members (2021: ~800,000 members)
• Extensive H1 temporary store closures in NSW, VIC and
Auckland, culminated in 10,020 lost trading days for the
year (2021: 10,447)
• One new store opened and six under-performing stores
were closed during the year, giving a network total of 280
stores at year-end (2021: 285 stores).
¹ Restated as required for changes introduced by IFRIC Agenda
Decision - Configuration or Customisation Costs in Cloud Computing
Arrangements. Refer to note I1(R) for details.
*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.
FY22 - GROUP BUSINESS
PERFORMANCE
Hill Designer Bridal collection. Demonstrating the increased
focus on ESG, the Group expanded its distribution of laboratory
created diamonds to all stores globally, providing customers
with a certified Sustainable and Climate Neutral choice.
Additionally, the Group also launched its De Beers Code of
Origin Diamonds collection to all stores, demonstrating a deep
commitment to social and environmental responsibility.
Supporting the Group’s ongoing growth agenda, our strategic
increase in ATV and elevated product offerings, the Group
made considered investments in core inventory, which saw
year-end stock holdings of $181.5m (2021: $172.2m).
The Group’s balance sheet has benefited from strong operating
cashflows, delivering a year-end cash position of $95.8m (2021:
$72.4m) and nil debt. During the year, the Group successfully
sold its in-house Canadian credit book delivering cash proceeds
of $14.2m, while also launching a long-term partnership with
Flexiti Financial Inc, to provide a new enhanced consumer
credit proposition.
The Group has reported operating revenue of $595.2m (2021:
$556.5m) for the 2022 financial year, producing a net profit
after tax (NPAT) of $46.7m (2021: $41.0m (Restated¹)). The Group
reported Comparable EBIT* of $62.9m for the year ended
During the year, the Group opened one new store in
Australia and closed six under-performing stores across the
network (AU: 4, NZ: 1, CA: 1), resulting 280 stores at year-end
(2021: 285 stores).
42 MICHAEL HILL | 2022 ANNUAL REPORT
SEGMENT RESULTS
FY22 was another year of COVID disruption for our retail network, with significant first half store closures in both Australia and
New Zealand, and the impacts of Omicron across all countries in the second half. Despite these disruptions, all markets delivered
strong results. The results below are expressed in local currency and for comparative purposes exclude the Emma & Roe
discontinued operations in all years.
AUSTRALIAN RETAIL PERFORMANCE
Operating Results (AU $’000)
2022
2021
2020
2019
2018
Revenue
Gross profit
Gross margin
303,358
312,206
265,915
309,066
325,707
196,609
193,908
160,579
191,895
206,301
64.8%
62.1%
60.4%
62.1%
63.3%
Comparable EBIT
51,750
54,347
Comparable EBIT as a % of revenue
Number of stores
17.1%
147
17.4%
150
27,641
10.4%
32,626
48,621
10.6%
14.9%
155
167
171
Same store sales increased by 4.2%, however significant temporary store closures and the closure of four under-performing
stores led to a decline in retail segment revenue by 2.8% to $303.4m for the year. This result is a testament to the resilience
of the Australian team, new leadership and the Group’s strategic initiatives. The government mandated store closures across
Victoria, South Australia, Australian Capital Territory and New South Wales, resulted in 7,551 lost store trading days (2021: 3,458
days) during the year.
As well as a strong sales performance, the segment also delivered expanded gross margin for the year to 64.8% (2021: 62.1%),
the country’s highest margin in the last five years.
During the year, one new store opened, and four under-performing stores closed, resulting in 147 stores at year-end (2021: 150 stores).
NEW ZEALAND RETAIL PERFORMANCE
Operating Results (NZ $’000)
2022
2021
2020
2019
2018
Revenue
Gross profit
Gross margin
Comparable EBIT
Comparable EBIT as a % of revenue
125,090
127,067
106,696
120,064
125,239
79,288
78,771
63,641
73,011
77,673
63.4%
62.0%
59.6%
60.8%
62.0%
30,130
24.1%
35,119
27.6%
21,067
24,125
27,800
19.7%
20.1%
22.2%
Number of stores
48
49
49
52
52
Same store sales increased by 8.9%, which was a particularly strong result, but temporary store closures through the year did
see a decline in retail segment revenue of 1.6% to NZ$125.1m for the year. This result was underpinned by strong retail metrics,
omni-channel initiatives, and the Group’s strategic agenda. The government mandated store closures, predominantly in the
Auckland region, resulted in 2,241 lost store trading days (2021: 464 days) during the year.
Gross margin for the year was 63.4% (2021: 62.0%), a strong year on year performance, and significant improvement on both
FY19 and FY20.
During the year one store closed, resulting in 48 stores at year-end (2021: 49 stores).
MICHAEL HILL | 2022 ANNUAL REPORT 43
CANADIAN RETAIL PERFORMANCE
Operating Results (CA $’000)
2022
2021
2020
2019
2018
Revenue
Gross profit
Gross margin
159,661
118,445
110,799
133,146
130,762
103,623
72,643
63,991
80,726
81,576
64.9%
61.3%
57.8%
60.6%
62.4%
Comparable EBIT
28,785
12,320
(2,412)
Comparable EBIT as a % of revenue
18.0%
10.4%
(2.2)%
9,797
7.4%
14,605
11.2%
Number of stores
85
86
86
86
83
Same store sales increased by 11.3%, and retail segment revenue increased by an impressive 34.8% to CA$159.7m for the year.
This is a record result for Canada, supported by a number of strategic initiatives, along with a reinvigorated leadership driving a
significant lift in productivity and team engagement. There was minimal temporary store disruption during the year with only 228
lost store trading days (2021: 6,525 days).
In addition to a record sales result, the segment also achieved a record gross margin for the year of 64.9% (2021: 61.3%),
underpinned by an absolute focus on retail fundamentals and productivity metrics.
During the year, one under-performing store was closed, resulting in 85 stores at year end (2021: 86 stores).
CASH FLOW
Net operating cash inflow was $111.6m (2021: $134.5m (Restated¹)). Excluding the sale of the in-house Canadian credit program
($14.2m), this was the result of the Group’s solid trading and cost initiatives implemented in the last three years coming to fruition.
Through further disciplined inventory and working capital management, the Group remains in a resilient financial position with
$95.8m in net cash (2021: $72.4m) available to continue to invest in improvements to its systems, infrastructure, and capabilities.
¹ Restated as required for changes introduced by IFRIC Agenda Decision - Configuration or Customisation Costs in Cloud Computing Arrangements.
Refer to note I1(R) for details.
CAPITAL MANAGEMENT
DIVIDENDS, SHARE BUY-BACK AND INVESTMENT UPDATE
Taking into consideration the Group’s performance and strength of balance sheet, the Board has decided to declare a final
dividend of 4.0 cents per share unfranked, fully imputed with conduit foreign income. This delivers a total dividend for the year of
7.5 cents per share, representing ~67% of adjusted annual NPAT, and at the higher end of the Group’s recently revised Dividend
Distribution Policy target range of 50% to 75%.
Subject to the Group’s ongoing trading performance and growth plans, the Board’s intention is for dividends to remain at the
higher end of the target range.
Furthermore, the Board is also pleased to announce that it will implement an on-market share buy-back of up to 5% of the
Company’s issued capital, funded from existing cash reserves. The buy-back is expected to commence in September 2022.
The total number of shares to be purchased under the pipeline will be dependent on business and market conditions.
In addition to the above, the Group still retains sufficient balance sheet strength and cash reserves for deployment into new
earnings accretive organic growth initiatives and to also pursue acquisition opportunities in the jewellery sector, which meet our
strict strategic and investment criteria.
44 MICHAEL HILL | 2022 ANNUAL REPORT
MICHAEL HILL | 2022 ANNUAL REPORT 45
STRATEGIC UPDATE
WITH AN INCREASED FOCUS ON
SUSTAINABILITY
Much of the Group’s strong performance can be attributed
to the strategic transformation and elevation of the brand,
along with overarching emphasis on sales and margin growth.
The strategic framework underpins the future growth of the
business, is customer-led and continually evolving, which
is best demonstrated with the introduction of a new pillar
dedicated to “Sustainability”.
1. Brand & Loyalty
The strategy to elevate and modernise the Michael Hill brand
underpins the overarching vision for the business. Highly
engaging and emotive marketing campaigns with an emphasis
on product, quality and craft, are leading the transition away
from price and promotion, towards emotional long-term
customer relationships. Simultaneously, the Brilliance by
Michael Hill loyalty program is proving to be a key lever for
growth and customer engagement. The program has increased
by more than 600,000 members in the year, and provides the
business with essential data to drive more frequent and more
profitable customers. Both brand and loyalty are key to driving
Australian manufacturing facility. During the year, the business
commenced a phased deployment of a new comprehensive
merchandise planning platform to improve buying processes,
margin optimisation, product ranging and inventory
management. The Group’s ongoing focus on product mix
continues to be a key enabler for sustained margin expansion.
Product newness is critical to achieve higher inventory turn and
frequency of purchase.
5. New Territories & Services
As the Group pivots from transformation to growth, the
opportunity to stretch the brand into new territories and
services is a key focus. Through the course of the year, the
Group has executed its marketplace strategy across its three
core segments, partnering with The Iconic in Australia and New
Zealand, and The Bay in Canada. Additionally, the Group is now
focused on extending its Canadian website to the currently
untapped Quebec market, and in the near future launching
international shipping to all countries from our websites. The
business is also well underway in developing a digital eco-
system with a number of new revenue driving service offerings
across bespoke design, sustainability, and financial services.
6. Cost Conscious Culture
medium to long term sustainable growth in both sales and
The Group made great progress with its global supply chain
strategy, with the successful delivery of a new Canadian 3PL
distribution centre – lowering input costs and duties while
significantly the improving customer experience and delivery
times. Additionally, in-market New Zealand warehouse
capability was activated during the second half. The Group’s
credit strategy was further enhanced with the sale of the in-
house Canadian credit book and partnering with a specialist
third party consumer credit provider across all Canadian stores,
and in a first for the Group, an online long-term credit offering.
Importantly, the Group’s embedded cost conscious culture
maintains an absolute focus on cost discipline, inventory and
working capital management.
7. Sustainability
Michael Hill is elevating its strategic focus on ESG, launching
our 2030 vision centred around People, Product and Planet.
Underpinned with detailed goals and milestones, the Michael
Hill 2030 ESG vision aims to transform; how we source and
manufacture our products; how we impact our planet; and how
we improve peoples’ lives across our entire value chain. We are
committed to bringing change in how we operate in order to
drive forward sustainable practices that benefit our customers,
our planet and future generations and aim to move our
business and influence the broader jewellery industry toward a
more sustainable, innovative and responsible future.
margin for the Group.
2. Digital & Omni-channel
Michael Hill’s digital transformation continues to gather pace
delivering another record year in FY22. Strong performances
on the Group’s direct to consumer websites were driven by
improved customer experience, higher traffic and increased
conversion rates, and now represent over 7% of total Group
sales. The successful deployment of “click & collect” and
“ship-from-store”, now available in all stores globally, enhanced
our omni-channel capabilities as the Group continues its
customer-led digital transformation journey.
3. Retail Fundamentals
Bricks and mortar retail is at the core of the Michael Hill
business, driving more than 90% of the Group’s sales.
Elevating the in-store experience across visual presentation
and customer engagement have delivered considerable
increases in gross margins, conversion rates and ATV. An
unwavering focus on people and performance, operational
excellence, and effective labour management underpin our
retail productivity which has seen significant lifts in all markets.
A new senior leadership structure is now firmly in place across
all markets and delivering strong results.
4. Product Evolution
Product evolution is at the centre of a customer-led retail
strategy, and is critical to achieve sales and margin growth.
Laboratory created diamonds are gaining momentum in the
business, delivering increased quality and higher margins
while providing customers with a certified Sustainable and
Climate Neutral choice. Elevated quality and craftmanship
are essential to our aspirational brand journey, and this will
be delivered through the evolution of our supply chain,
and further investment in the artisanal capabilities of our
46 MICHAEL HILL | 2022 ANNUAL REPORT
RISK MANAGEMENT
The Board believes 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:
DIVIDENDS
Ongoing challenges from COVID
continue longer than expected
impacting customers, suppliers
and staff
The Group has a COVID Crisis Management Team focused on monitoring the status
in key countries where it operates and has supply chain impacts. Where possible,
we seek to leverage government financial assistance for our staff, and the Group has
implemented processes to manage outbreaks to reduce the impact to customers and
staff. Furthermore, we work closely with suppliers to manage impacts to our supply
chain, including the establishment of a Canadian warehouse to reduce delivery times
within Canada but also offer alternative sourcing strategies.
Costs of raw materials impacted
raw materials for our production facilities and finished products. There are several
by global sanctions and scarcity
sourcing options that are employed, including forward planning and securing core
of material
ranges to curb the impact of rising prices of raw materials and to ensure financial
The Group has a dedicated team focused on ensuring the continued supply of
exposures are well managed.
Increase in cyber attacks
disrupting operations
The Group has tasked the IT Steering Committee to oversee its response to cyber
and the maturing of our cyber resilience. The Group continues to invest in new
technologies and remove vulnerable points of attack throughout its digital network.
External partners have been engaged to uplift 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.
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
Theft appeal of our product
safety of our staff. We work with local law enforcement bodies and other external
increases during periods of
parties to better the overall retail environment for our staff and customers. With
financial hardship and uncertainty
the ongoing escalation of violence in New Zealand, the Group has established
an executive led taskforce responding to these challenges and implementing
appropriate actions.
Supply chain transparency and
modern slavery
Talent acquisition and retention
The Group is working closely with our key suppliers across our sourcing and
procurement ecosystems to ensure our suppliers’ manufacturing and operations
comply with our responsible sourcing practices. Further, the Group has developed
a modern slavery roadmap to minimise the risk of modern slavery occurring in our
business and supply chains. The Group has also outlined its goals in the Sustainability
Strategy of having all suppliers meeting our expectations on their social and
environmental impacts by 2030.
The Group has talent management strategies and processes to ensure the
business is well equipped to manage peak trading periods and fulfilment of
specialised roles critical to our business. These include succession planning,
reviewing pipeline of external recruits and mentoring and coaching of staff
to promote internally. Emphasis has been focused on ensuring our workforce
engagement scores are above industry benchmarks, and also ongoing commitment
to diversity and inclusion through educating our teams, sharing experiences and
reporting on key metrics.
Breach of regulation or law
The Group has an in-house legal team who are focused on compliance in our three
in one of our jurisdictions in
markets and utilise external legal firms for specialised legal advice when required.
an increasingly complex legal
Any new legislative requirements or rectification initiatives have dedicated teams
compliance environment
focused on ensuring our compliance.
MICHAEL HILL | 2022 ANNUAL REPORT 47
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 items.
COMPARABLE EBIT
COMPARABLE EBIT HAS BEEN CALCULATED AS FOLLOWS:
Statutory EBIT
Add back costs relating to:
2022
$’000
73,236
2021
$’000
RESTATED1
66,672
In-house Canadian credit book revaluation
-
2,986
Less items relating to:
Government grants received (AU, NZ, CA)
Impact of AASB16 Leases
Impact of IFRIC SaaS-related guidance
Comparable EBIT
(2,864)
(13,489)
5,986
62,869
(14,593)
(4,197)
5,724
56,592
¹ Restated as required for changes introduced by IFRIC Agenda Decision - Configuration or Customisation Costs in Cloud Computing
Arrangements. Refer to note I1(R) for details.
ENVIRONMENTAL REGULATIONS
The Group has determined that no particular or significant environmental regulations apply to it.
48 MICHAEL HILL | 2022 ANNUAL REPORT
From left: Gary Smith, Jacqueline Naylor, Sir Michael Hill, Robert Fyfe, Emma Hill and Daniel Bracken
INFORMATION ON
DIRECTORS
ROBERT FYFE
B.Eng, F.E.N.Z. C.N.Z.M.
Rob was appointed a Director of the Company on 9 June 2016 and has served as 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
DIRECTORS’ INTERESTS IN SHARES
AND OPTIONS
• Non-Executive and Independent Director
2,293,640 Ordinary Shares
• Member of ARMC
• Member of PDRC
MICHAEL HILL | 2022 ANNUAL REPORT 49
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 1990. He led the Group as 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.
SPECIAL RESPONSIBILITIES
• Non-Executive Director
DIRECTORS’ INTERESTS IN SHARES
AND OPTIONS
148,330,600 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 PDRC
DIRECTORS’ 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
DIRECTORS’ INTERESTS IN SHARES
AND OPTIONS
• Chair of ARMC
• Member of PDRC
80,000 Ordinary Shares
50 MICHAEL HILL | 2022 ANNUAL REPORT
JACQUELINE NAYLOR
M.A.I.C.D.
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
DIRECTORS’ INTERESTS IN SHARES
AND OPTIONS
• Member of ARMC
160,000 Ordinary Shares
DANIEL BRACKEN
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
DIRECTORS’ INTERESTS IN SHARES
AND OPTIONS
201,869 Ordinary Shares
2,944,296 Share Rights
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.
MICHAEL HILL | 2022 ANNUAL REPORT 51
MEETINGS OF DIRECTORS
The numbers of meetings of the Company’s Board of Directors and of each Board committee held during the year ended 26 June
2022, and the numbers of meetings attended by each Director were:
FULL MEETINGS OF DIRECTORS
MEETING OF COMMITTEES
AUDIT AND RISK
MANAGEMENT
PEOPLE DEVELOPMENT
AND REMUNERATION
R I Fyfe
Sir R M Hill
E J Hill
G W Smith
J E Naylor
D Bracken
A
12
12
12
11
12
12
B
12
12
12
12
12
12
A
3
-
-
3
3
-
B
3
-
-
3
3
-
A
5
-
5
5
-
-
B
5
-
5
5
-
-
A = Number of meetings attended
B = Number of meetings held during the time the Director held office or was a member of the committee during the year
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
PEOPLE DEVELOPMENT AND
REMUNERATION COMMITTEE
Gary Smith (Chair)
Robert Fyfe
Jacqueline Naylor
Emma Hill (Chair)
Robert Fyfe
Gary Smith
52 MICHAEL HILL | 2022 ANNUAL REPORT
“The results the
Company has achieved
in the last 12 months
are outstanding.”
MICHAEL HILL | 2022 ANNUAL REPORT 53
AUDITED REMUNERATION REPORT
The Directors present the 2022 Michael Hill International Limited remuneration report, outlining key aspects of our remuneration
policy and framework, and remuneration awarded during FY22. 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,
On behalf of Michael Hill Group, I am pleased to present the
FY22 remuneration report. The report outlines the Group’s
remuneration strategy and framework and details how the
Board has approached remuneration to retain and incentivise
key management personal (KMP) while aligning reward with
shareholder value creation.
Over the past three years Michael Hill Group has achieved
significant growth and transformation on the journey to
become a high performing, modern, differentiated, omni-
channel jewellery group. The success of the transformation
agenda has seen growth in sales, margin and profit, translating
into earnings per share (EPS) and dividends per share (DPS)
of 12.0 cents and 7.5 cents respectively.
Highlights from FY22 include:
value for outstanding performance and the award is self-funded
through profit generation in excess of target.
LTI awarded over the year was 52.5% of fixed remuneration for
CEO and 32.5% for CFO. No awards to the CEO or CFO vested
in the year.
Non-Executive Director (NED) fees were increased by the CPI of
3.8%. There were no other changes to the structure of NED fees.
Continuous Improvement in our Remuneration Practices
is Important to us
It is the Company’s policy to conduct Executive remuneration
benchmarking every three years and to consider outcomes
in line with Company policy. During the year we reviewed
our remuneration practices to ensure the structure and level
of award was reflective of modern compensation packages.
PricewaterhouseCoopers conducted benchmarking of KMP and
the broader Executive Team using a consumer discretionary
peer group of companies 50% to 200% of our market cap as
reference data (no remuneration recommendations were made).
• Total Group revenue of $595.2m (2021: $556.5m) – an
This exercise commenced in FY22 and continued early into
increase of 7.0%
• EBIT* of $73.2m (2021: $66.7m (Restated¹)) – an increase of 9.8%
• Comparable EBIT of $62.9m (2021: $56.6m) – an increase of 11.1%
• EPS of 12.03 cents (2021: 10.57 cents (Restated¹)) – an
increase of 13.8%
*EBIT and Comparable EBIT are non-IFRS information and are
unaudited. Please refer to non-IFRS information section in the Directors’
Report for an explanation of non-IFRS information and a reconciliation
of EBIT and Comparable EBIT
¹ Restated as required for changes introduced by IFRIC Agenda
Decision - Configuration or Customisation Costs in Cloud Computing
Arrangements. Refer to note I1(R) for details.
FY22 Remuneration
The structure of compensation is designed with a mix of market
competitive fixed remuneration, short term incentives (STI) to
reward annual performance and long term incentives (LTI) to align
long term financial performance and shareholder value creation.
Compensation awarded over the year reflected results
delivered. In accordance with our policy Executive KMP
salaries were adjusted by the Consumer Price Index (CPI) of
3.8%. STI awarded was 100% of on target STI and 100% of
outperformance STI. The outperformance component of our
STI is awarded in share rights, deferred for 12 months. The
move to outperformance being awarded in share rights is a
change from FY21 and is intended to enhance Management’s
focus on long term performance. The outperformance
FY23. The insights from this review are being finalised to ensure
continued retention of our high performing Executive while more
closely aligning compensation mix with long term value creation.
Our remuneration report this year provides increased detail
and transparency on the link of reward to performance through
detailing STI targets and outcomes. Our aim is to demonstrate
the effectiveness of our incentive program in driving
performance outcomes and to give shareholders increased
confidence in our remuneration practices.
In conclusion, the Board believes the remuneration changes
and outcomes for FY22 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
component allows Executives to earn double the target STI
and Remuneration Committee
54 MICHAEL HILL | 2022 ANNUAL REPORT
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
POSITION
COMMENCEMENT AS KMP
Non-Executive Directors
Robert Fyfe
Chair and Non-Executive Director
Sir Richard Michael Hill
Founder and Non-Executive Director
Emma Hill
Gary Smith
Non-Executive Director
Non-Executive Director
Jacqueline Naylor
Non-Executive Director
Former Non-Executive Director
2016
2016
2016
2016
2020
Janine Allis
Non-Executive Director
9 June 2016 until 27 October 2020
Managing Director and CEO
Daniel Bracken
Managing Director and Chief Executive Officer
2019
Executive
Andrew Lowe
Former Executives
Chief Financial Officer and
Company Secretary
2017
Vanessa Brennan
Chief Brand and Strategy Officer
11 August 2020 until 13 December 2020
Andrea Slingsby
Chief Operating Officer
9 January 2019 until 22 January 2021
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 2022 reporting period:
• Emma Hill – Chair of the PDRC
• Robert Fyfe – Chair of the Board of Directors
• Gary Smith – Independent Non-Executive Director
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 and the objectives of the Group’s remuneration strategy. In FY22, the PDRC engaged
Pricewaterhouse Coopers to perform Executive remuneration benchmarking on our KMP and the broader Michael Hill Executive
Team. In selecting a suitable consultant, the committee considered conflicts of interest and independence from KMP. The work
performed does not amount to a remuneration recommendation. Its purpose was to inform the PDRC on the remuneration position
of each Executive compared with industry peers and comparable roles.
MICHAEL HILL | 2022 ANNUAL REPORT 55
REMUNERATION FRAMEWORK
Our remuneration philosophy is guided by our vision to be a modern, differentiated, omni-channel jewellery group.
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 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
01.
02.
03.
Attract, motivate &
retain talent
Reward the
achievement of
strategic objectives
Align to shareholder
value creation
OUR REMUNERATION FRAMEWORK
FIXED REMUNERATION
SHORT TERM INCENTIVE
LONG TERM INCENTIVE
Fixed remuneration is set with
reference to market competitive
Executive KMP participate
rates in comparative companies
in the Group’s STI program
The Company has
How is it set?
for similar positions, adjusted
which is directed to achieving
established an LTI plan as
to account for the experience,
Board approved on target and
deferred compensation.
ability and effectiveness of the
outperformance targets.
individual Executive.
Base salary plus any
Cash for on target performance
made to Executive KMP.
How is it
delivered?
fixed elements including
and for outperformance,
The rights vest at the end of
superannuation and leave
in share rights, deferred for
the performance period if
entitlements.
12 months.
certain performance hurdles
and vesting conditions are met.
An issue of share rights is
What is the
objective?
Attract and retain key
align Executive reward with
for sustainable long term
Executive talent.
achievement of performance
growth aligned to
Drive annual profit growth and
Reward Executive KMP
targets that underpin strategy.
shareholders' interests.
56 MICHAEL HILL | 2022 ANNUAL REPORT
RELATIONSHIP OF REMUNERATION TO GROUP PERFORMANCE
The remuneration framework operates to create a clear link between Executive remuneration and the Group’s performance.
Increased incentive remuneration outcomes for KMP reflect increased revenue, NPAT and dividends. The overall level of
remuneration takes into consideration the performance of the Group over several years. The performance of the Group over
the past five years is summarised below:
GROUP PERFORMANCE
2022
2021
RESTATED1
2020
2019
2018
Revenue ($'000)
595,210
556,486
492,060
569,500
604,319
EBIT* ($'000)
73,236
66,672
14,079
21,115
8,854
Profit for the year attributable to
owners of the Company^ ($'000)
46,712
41,015
3,059
16,498
1,557
Earnings per share (cents)
12.03c
10.57c
0.79c
4.26c
0.40c
Dividends paid during the
financial year² ($'000)
25,239
11,636
5,817
19,365
19,371
Market capitalisation ($'000)
361,105
322,158
131,841
209,385
375,815
Share price at year end ($)
Return on average total assets³
0.93
9.3%
0.83
9.0%
0.34
0.7%
0.54
4.3%
0.97
8.2%
*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.
¹ Restated as required for changes introduced by IFRIC Agenda Decision - Configuration or Customisation Costs in Cloud Computing Arrangements.
Refer to note I1(R) for details.
²The dividends paid in FY21 are the postponed interim dividend for FY20 and the interim dividend for FY21. No final dividend was declared for FY20.
³For 2021 - Return on average total assets is not restated as the required adjustment to total assets for 2020 has not been calculated.
^Profit amounts for 2018 to 2022 years 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 first graph below shows the share price growth and movement compared to the ASX300 whilst the second graph shows the
dividend paid and yield per financial year.
Share Price and ASX 300
Dividend and Yield
$1.6
$1.4
$1.2
$1.0
$0.8
$0.6
$0.4
$0.2
$0.0
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
e
r
a
h
s
r
e
p
s
t
n
e
c
Nov 18
May 19
Nov 19
May 20
Nov 20
May 21
Nov 21
May 22
FY19
FY20
FY21
FY22
Share Price
ASX 300 (RHS)
Dividend
Yield (RHS)
8%
7%
6%
5%
4%
3%
2%
1%
0%
MICHAEL HILL | 2022 ANNUAL REPORT 57
The graphs below show the relationship of KMP remuneration⁴ to revenue and Adjusted Earnings Per Share⁵ for the last four
financial years.
KMP Remuneration and Revenue
KMP Remuneration and Adjusted
Earnings Per Share
$3,200,000
$2,800,000
$2,400,000
$2,000,000
$1,600,000
$1,200,000
$800,000
$400,000
$0
$600m
$3,200,000
$550m
$500m
$2,800,000
$2,400,000
$2,000,000
$1,600,000
$1,200,000
$800,000
$400,000
$450m
$0
14
12
10
8
6
4
2
0
c
e
n
t
s
p
e
r
s
h
a
r
e
(2)
(4)
FY19
FY20
FY21
FY22
FY19
FY20
FY21
FY22
KMP Fixed
KMP STI
KMP LTI
Revenue (RHS)
KMP Fixed
KMP STI
KMP LTI
Adjusted EPS (RHS)
⁴Note that KMP remuneration is based on constant KMPs (Daniel Bracken and Andrew Lowe) and where Daniel Bracken started mid-way through the
year, this has been extrapolated on a straight line basis. KMP STI for FY22 includes share rights deferred for 12 months for outperformance.
⁵Adjusted Earnings Per Share is calculated similarly to statutory Earnings Per Share except EBIT is adjusted to Comparable EBIT as set out in the
Directors’ Report.
FY22 EXECUTIVE KMP REMUNERATION
REMUNERATION MIX
The total remuneration for Executive KMPs comprises both fixed remuneration and at risk components in the form of on target
STI, outperformance STI and LTI. The remuneration mix is designed to compensate KMP in a way that strongly correlates to Group
performance. The outperformance STI gives the Executive KMPs the ability to earn the on target STI value in the form of share
rights, deferred for 12 months.
KMP
FIXED
REMUNERATION
MAXIMUM STI
Daniel Bracken – CEO
Andrew Lowe – CFO
39.0%
51.0%
41.0%
33.0%
LTI
20.0%
16.0%
TOTAL
100.0%
100.0%
FIXED REMUNERATION
Fixed remuneration is reviewed annually, and our policy in this review is to consider the consumer price index (CPI) and increases
to any applicable superannuation concessional contributions cap. Remuneration is set with reference to market competitive rates
in comparable companies for similar positions adjusted for the experience, ability and effectiveness of the individual Executive KMP.
Fixed remuneration includes base salary and superannuation contributions at the rate of the concessional contributions cap.
At the commencement of the reporting period, base salaries were increased by CPI, 3.8%, and superannuation was increased by
the value in the increased concessional contributions cap.
58 MICHAEL HILL | 2022 ANNUAL REPORT
SHORT TERM INCENTIVE SCHEME
The Group’s STI program is designed to reward delivery of annual profit targets and ensure achievement of strategic and
operational objectives. The STI is detailed in performance scorecards that are set by the PDRC. The scorecards detail the
performance goals, targets and weightings for each Executive across the key performance areas of financial, strategy, customer
and people. The CEO’s scorecard is comprised of core objectives from each Executive’s scorecard.
The program is supported by a performance management system giving visibility and transparency of progress by each Executive.
Performance against key performance indicators (KPIs) is formally measured on a biannual basis and informally in regular meetings.
The STI program in FY22 for KMP was structured as follows:
Performance period
Annual award for Financial KPIs
Six monthly award for Strategy, Customer and People KPIs
Opportunity
CEO – 105% of fixed remuneration comprised of 52.5% for on target performance, and
52.5% for outperformance
CFO – 65% of fixed remuneration comprised of 32.5% for on target performance, and
32.5% for outperformance
How the STI is paid?
In cash for on target performance
In share rights for outperformance, deferred for 12 months
On target performance measures
Financial KPIs 60% weighting
Strategy, Customer and People KPIs 40% weighting
Performance measure for
outperformance component
How is STI assessed?
Starting at $1.5m above FY21 EBIT and increasing progressively
The PDRC reviews the CEO’s performance against the performance targets and
objectives set for that year. The CEO assesses the performance of the CFO, with
the CEO having oversight of his direct reports and the day-to-day functions of the
Company. The PDRC reviews the assessed performance for Board endorsement.
STI OUTCOMES
The following tables detail the FY22 STI scorecard KPIs and assessment applied to the CEO.
KPI
2022 PERFORMANCE ASSESSMENT
Financial (60% weighting)
EBIT
Sales, Margin, Costs
Strategy (15% weighting)
Click and collect, Canadian credit, Marketplace model, New
channel growth strategy, ESG strategy , New support office,
Capital allocation
Customer (15% weighting)
Store refresh program, Canadian performance and
productivity, Brand health tracking, Customer segmentation
strategy, Brilliance by Michael Hill loyalty program
Outperformance target achieved for EBIT
On target performance achieved for Sales, Margin and Costs
On target performance achieved for all objectives
On target performance achieved for all objectives
People (10% weighting)
Culture and engagement, Talent and retention
On target performance achieved for all objectives
MICHAEL HILL | 2022 ANNUAL REPORT 59
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 in the form of deferred share rights was awarded to both KMP due to the achievement of the EBIT
outperformance measure. An overall payment of 100% of total maximum STI potential was achieved.
ANALYSIS OF BONUSES INCLUDED IN REMUNERATION
INCENTIVE
REMUNERATION
KMP’s
short-term
incentive
cash bonuses
On target
achieved
%
Out-
performance
achieved
%
Total
potential
available
$
Cash STI
component
$
Deferred
share rights
component
$
Total STI
included
Amount
forfeited
$
$
Daniel
Bracken
Andrew
Lowe
100
100
100
1,071,088
535,544
535,544
1,071,088
100
338,357
169,178
169,179
338,357
–
–
LONG TERM INCENTIVE SCHEME
The FY22 LTI program for KMP was structured as follows:
Performance period
3 years
Opportunity
CEO – 52.5% of fixed remuneration
CFO – 32.5% of fixed remuneration
Instrument
Share rights
Performance metric
Total Shareholder Return (TSR) compound annual growth rate (CAGR) over 3 years
Subject to remaining an employee of the Group at the performance hurdle assessment date
(10 days following the release of the FY24 results), and satisfaction of the 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 10% CAGR
Vesting condition
•
10% of share rights vest for each 1% increase in CAGR performance between 10% CAGR
to 20% CAGR
•
100% of share rights vest if TSR is equal to or above 20% CAGR
Awards are subject to a service condition requiring the Executive KMP to remain employed
by the Group until the performance hurdle assessment date
Rationale for the
The absolute TSR metric has been deemed by the PDRC to be a suitable market based
performance metric and
measure to create alignment between the interests of Executive KMP and the interests
condition
of shareholders
What happens when a KMP
If the KMP’s employment is terminated for cause, or due to resignation, all unvested share
ceases employment?
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
60 MICHAEL HILL | 2022 ANNUAL REPORT
FY22 LTI OUTCOMES
OTHER BENEFITS
Both Executive KMP were eligible to participate in the FY22 LTI
Executive KMP do not receive additional benefits, such as
in accordance with the LTI program detailed in the preceding
non-cash benefits, other than superannuation, as part of
table. For the CEO, the grant of share rights under the FY22 LTI
the terms and conditions of their appointment. Loans are
plan was approved by shareholders at the FY22 Annual General
not provided.
Meeting. Further details of the number of share rights granted
to the CEO and CFO in relation to the FY22 LTI can be found
later in this report under the heading ‘Share Rights’.
Daniel Bracken, CEO, commenced with the Company in FY19
and participated in that year’s LTI, which has three vesting
dates over consecutive years, commencing in FY23. No share
rights vested for the CEO in FY22.
Andrew Lowe, CFO, commenced with the Company in FY18
and participated in that year’s LTI, which has three vesting
dates over consecutive years. Andrew’s first tranche of that
scheme, 4,325 share rights vested and were exercised in
August 2021. No other share rights vested for the CFO in FY22.
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.
FY22 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 FY22 were $104,235 per annum. The Board Chair receives twice the base fee. Additional fees are
paid where a Director is Chair of a committee.
Committee Chair fees
People Development and Remuneration
Audit and Risk
$
21,535
32,303
It is the Company’s policy to consider CPI in determining any increase to Directors’ fees annually. In FY22, CPI was 3.8% and
Non-Executive Director fees increased by this percentage.
All Non-Executive Directors enter into a service agreement with the Company in the form of a letter of appointment. The letter
sumarises 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.
MICHAEL HILL | 2022 ANNUAL REPORT 61
DIRECTOR AND EXECUTIVE REMUNERATION OUTCOMES FOR FY22
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:
SHORT-TERM
LONG-
TERM
POST-EMPLOYMENT
SHARE-
BASED
PAYMENTS
Name
Salary &
fees*
STI cash
bonus
$
$
Non-Executive Directors
Non-monetary
benefits
(deferred
share rights)
$
Total
Long
service
leave
Super-
annuation
benefits
Termination
benefits
Share rights
Total
$
$
$
$
$
$
Proportion
remuneration
performance
related
$
Value of
rights as
proportion of
remuneration
$
Emma Jane Hill
2022
121,907
2021
194,736
Sir Richard Michael Hill
2022
101,034
2021
97,368
Gary Warwick Smith
2022
124,125
2021
120,127
Robert Ian Fyfe
2022
202,068
2021
117,485
-
-
-
-
-
-
-
-
Jacqueline Elizabeth Naylor
2022
94,759
2021
88,180
-
-
-
-
-
-
-
-
-
-
-
-
121,907
194,736
101,034
97,368
124,125
120,127
202,068
117,485
94,759
88,180
Janine Suzanne Allis (retired 27 October 2020)
2022
-
2021
30,485
-
-
Total Director Remuneration
2022
643,893
2021
648,381
-
-
-
-
-
-
-
30,485
643,893
648,381
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,413
11,412
-
-
9,476
8,377
-
2,896
21,889
22,685
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
121,907
194,736
101,034
97,368
136,538
131,539
202,068
117,485
104,235
96,557
-
33,381
665,782
671,066
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
62 MICHAEL HILL | 2022 ANNUAL REPORT
SHORT-TERM
LONG-
TERM
POST-EMPLOYMENT
SHARE-
BASED
PAYMENTS
Name
Salary &
fees*
STI cash
bonus
$
$
Non-monetary
benefits
(deferred
share rights)
$
Total
Long
service
leave
Super-
annuation
benefits
Termination
benefits
Share rights
Total
$
$
$
$
$
$
Proportion
remuneration
performance
related
$
Value of
rights as
proportion of
remuneration
$
KMP
Daniel Bracken, CEO
2022
1,050,052
535,544
535,543
2,121,139
35,231
27,500
2021
1,025,532
620,487
–
1,646,019
16,962
25,000
Andrew Lowe, CFO
2022
502,689
169,179
169,179
841,047
15,673
27,500
2021
483,848
184,526
–
668,374
12,930
25,000
Andrea Slingsby, COO (ceased 22 January 2021)
2022
-
–
–
–
2021
293,388
70,000
–
363,388
–
–
–
14,904
-
–
–
–
–
–
Vanessa Brennan, CBSO (commenced 11 August 2020 and ceased 13 December 2020)
2022
-
2021
136,657
–
–
–
–
–
136,657
–
–
–
8,654
Total KMP Remuneration
2022
1,552,741
704,723
704,722 2,962,186 50,904
55,000
2021
1,939,425
875,013
– 2,814,438
29,892
73,558
Total Director and KMP Remuneration
2022
2,196,634
704,723
704,722 3,606,079 50,904
76,889
2021
2,587,806
875,013
– 3,462,819
29,892
96,243
–
–
–
–
–
–
156,176
2,340,046
45.77%
6.67%
33,716
1,721,697
36.04%
1.96%
47,161
931,381
36.33%
5.06%
19,684
725,988
25.42%
2.71%
–
–
-
-
19,909
398,201
17.58%
5.00%
–
–
13,489
158,800
-
-
-
8.49%
203,337
3,271,427
43.08%
6.22%
86,798
3,004,686
29.12%
2.89%
203,337
3,937,209
35.80%
5.16%
86,798
3,675,752
23.80%
2.36%
MICHAEL HILL | 2022 ANNUAL REPORT 63
ADDITIONAL STATUTORY
INFORMATION
EQUITY INSTRUMENTS
UNISSUED SHARES
All options or rights refer to options or rights over ordinary
As at the date of this report, there were 1,000,000 unissued
shares of Michael Hill International Limited, which are
ordinary shares under options. Option holders do not have any
exercisable on a one-for-one basis under the Executive
right, by virtue of the option, to participate in any share issue
incentive plan.
of the Company or any related body corporate.
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 KMP) have been altered or modified by the issuing entity
during the reporting period or the prior period. 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. The exercise price of any future option grants will be set
by using the same method, with reference to the Australian
Securities Exchange (‘ASX’).
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
management during FY22 was 2,106,647 share rights. Of these,
share rights issued to KMP are set out below. Refer to note D3
of the accompanying financial report for further details.
SHARE RIGHTS
KMP
Daniel Bracken
Andrew Lowe
Issued during the year
Number
Fair value per share right
$
634,081
200,307
0.29
0.29
64 MICHAEL HILL | 2022 ANNUAL REPORT
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
KMP’s short-
term incentive
cash bonuses
Vested and
exercisable
Unvested
Issued Forfeited Vested Exercised
Vested and
exercisable
Unvested Value of rights
issued during
the year
Daniel Bracken*
- 2,310,215
634,081
Andrew Lowe
-
679,575
200,307
Total
- 2,989,790 834,388
-
-
-
-
-
-
-
- 2,944,296
183,883
(4,325)
-
875,557
58,089
(4,325)
- 3,819,853
241,973
*Share rights granted to Daniel Bracken during the reporting period were approved by shareholders at the Company’s 2021 AGM as required
by ASX Listing Rule 10.14.
Share rights relating to FY23 LTI plan are anticipated to be granted in late 2022.
SHAREHOLDINGS
The number of ordinary shares held during the financial year by KMP is set out below:
NAME
BALANCE
AT START OF
THE YEAR
RECEIVED ON
EXERCISE OF
RIGHTS
OTHER
CHANGES
BALANCE AT
END OF THE
YEAR
Non-Executive Directors
Emma Hill*
167,487,526
Sir Richard (Michael) Hill*
148,330,600
Gary Smith
Robert Fyfe
Jacqueline Naylor
KMP
80,000
2,693,640
160,000
Daniel Bracken
201,869
-
-
-
-
-
-
Andrew Lowe
-
4,325
*Includes common shareholding due to a related party.
-
-
-
167,487,526
148,330,600
80,000
(400,000)
2,293,640
-
-
-
160,000
201,869
4,325
MICHAEL HILL | 2022 ANNUAL REPORT 65
VOTING OF SHAREHOLDERS
AT LAST YEAR’S ANNUAL
GENERAL MEETING
The Company received 99.3% of “For” votes on its
remuneration report for FY21. The Company did not receive
any specific feedback at the AGM or throughout the year
on its remuneration practices.
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.
INSURANCE OF OFFICERS
AND INDEMNITIES
NON-AUDIT SERVICES
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 Secretaries and certain other
officers. No Director or officer of the Company has received
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)
Advisory fees
Total remuneration for non-audit services
2022
$
3,682
3,682
2021
$
3,682
3,682
AUDITOR’S INDEPENDENCE DECLARATION
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 (Cth) is included
in this report.
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 26 August 2022 in accordance with a resolution of Directors as required by section 298 of the
Corporations Act 2001.
R I Fyfe
Chair
Brisbane
26 August 2022
66 MICHAEL HILL | 2022 ANNUAL REPORT
Ernst & Young
111 Eagle Street
Brisbane QLD 4000 Australia
GPO Box 7878 Brisbane QLD 4001
Tel: +61 7 3011 3333
Fax: +61 7 3011 3100
ey.com/au
Ernst & Young
111 Eagle Street
Ernst & Young
111 Eagle Street
Brisbane QLD 4000 Australia
Ernst & Young
Brisbane QLD 4000 Australia
GPO Box 7878 Brisbane QLD 4001
111 Eagle Street
Brisbane QLD 4000 Australia
GPO Box 7878 Brisbane QLD 4001
Tel: +61 7 3011 3333
Fax: +61 7 3011 3100
Tel: +61 7 3011 3333
Fax: +61 7 3011 3100
ey.com/au
Tel: +61 7 3011 3333
Fax: +61 7 3011 3100
ey.com/au
ey.com/au
GPO Box 7878 Brisbane QLD 4001
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 26 June 2022, I declare to the best of my knowledge and belief, there have been:
Auditor’s independence declaration to the directors of Michael Hill
International Limited
AUDITOR’S INDEPENDENCE DECLARATION
Auditor’s independence declaration to the directors of Michael Hill
International Limited
TO THE DIRECTORS OF MICHAEL HILL
As lead auditor for the audit of the financial report of Michael Hill International Limited for the
financial year ended 26 June 2022, I declare to the best of my knowledge and belief, there have been:
INTERNATIONAL LIMITED
As lead auditor for the audit of the financial report of Michael Hill International Limited for the
financial year ended 26 June 2022, 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;
relation to the audit;
relation to the audit.
b. No contraventions of any applicable code of professional conduct in relation to the audit; and
c. No non-audit services provided that contravene any applicable code of professional conduct in
a. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit;
a. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
b. No contraventions of any applicable code of professional conduct in relation to the audit; and
As lead auditor for the audit of the financial report of Michael Hill International Limited for the financial year ended 26 June 2022,
I declare to the best of my knowledge and belief, there have been:
c. No non-audit services provided that contravene any applicable code of professional conduct in
b. No contraventions of any applicable code of professional conduct in relation to the audit; and
(a) No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
This declaration is in respect of Michael Hill International Limited and the entities it controlled during
the financial year.
relation to the audit.
relation to the audit.
(b) No contraventions of any applicable code of professional conduct in relation to the audit; and
c. No non-audit services provided that contravene any applicable code of professional conduct in
This declaration is in respect of Michael Hill International Limited and the entities it controlled during
(c) No non-audit services provided that contravene any applicable code of professional conduct in relation to the audit.
the financial year.
This declaration is in respect of Michael Hill International Limited and the entities it controlled during the financial year.
This declaration is in respect of Michael Hill International Limited and the entities it controlled during
the financial year.
Ernst & Young
Ernst & Young
Ernst & Young
Ernst & Young
Kellie McKenzie
Partner
26 August 2022
Kellie McKenzie
Partner
26 August 2022
Kellie McKenzie
Kellie McKenzie
Partner
Partner
26 August 2022
26 August 2022
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
MICHAEL HILL | 2022 ANNUAL REPORT 67
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
68 MICHAEL HILL | 2022 ANNUAL REPORT
FINANCIAL STATEMENTS
70
Consolidated
Statement of
Comprehensive
Income
76
Notes to the
Financial
Statements
71
72
Consolidated
Statement Of
Financial Position
Consolidated
Statement Of
Changes In Equity
73
Consolidated
Cash Flow
Statement
124
Directors’
Declaration
125
Independent
Auditor’s Report
129
ASX Listing
– Additional
Information
The Directors present the
consolidated financial statements of
Michael Hill International Limited
for the year ended 26 June 2022
MICHAEL HILL | 2022 ANNUAL REPORT 69
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
& OTHER COMPREHENSIVE INCOME
Notes
A2
A3
D1
F5
F1
F1
F9
Notes
PROFIT OR LOSS
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
OTHER COMPREHENSIVE INCOME
Item 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
Total comprehensive income for the year is attributable to:
Owners of Michael Hill International Limited
2022
$’000
595,210
8,913
(210,384)
(155,332)
(9,446)
(41,174)
(17,674)
(521)
(3,253)
(51,944)
(231)
(40,912)
(7,549)
65,703
(18,991)
46,712
2022
$’000
-
(977)
(977)
45,735
45,735
2021
$’000
RESTATED1
556,486
17,969
(207,570)
(149,653)
(15,135)
(28,325)
(17,959)
(1,883)
(3,513)
(48,061)
(448)
(35,232)
(7,595)
59,081
(18,066)
41,015
2021
$’000
RESTATED1
34
(177)
(143)
40,872
40,872
EARNINGS PER SHARE FOR PROFIT ATTRIBUTABLE TO THE ORDINARY EQUITY HOLDERS OF THE COMPANY
Basic earnings per share
Diluted earnings per share
Notes
F2
F2
2022
cents
12.03
11.86
2021
cents
RESTATED1
10.57
10.53
¹ Restated as required for changes introduced by IFRIC Agenda Decision - Configuration or Customisation Costs in Cloud Computing
Arrangements. Refer to note I1(R) for details.
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes.
70 MICHAEL HILL | 2022 ANNUAL REPORT
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
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained profits
Total equity
Notes
B1
F3
A4
F4
A2
F3
A5
F5
F6
F9
A2
F7
A5
A2
F8
F4
A5
A2
F8
F11
2022
$’000
95,844
7,541
181,539
-
944
845
5,419
292,132
227
107,385
41,012
10,989
58,552
488
394
219,047
511,179
78,397
38,183
24,818
14,306
-
2,093
799
2021
$’000
RESTATED1
72,361
8,352
171,246
14,397
732
406
3,576
271,070
-
105,882
36,453
6,013
68,329
739
537
217,953
489,023
73,961
34,304
24,157
14,854
1,607
1,886
753
158,596
151,522
91,386
58,605
7,497
157,488
316,084
195,095
11,388
3,369
180,338
195,095
99,382
56,393
7,413
163,188
314,710
174,313
11,285
4,216
158,812
174,313
¹ Restated as required for changes introduced by IFRIC Agenda Decision - Configuration or Customisation Costs in Cloud Computing
Arrangements. Refer to note I1(R) for details.
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
MICHAEL HILL | 2022 ANNUAL REPORT 71
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to owners of Michael Hill
International Limited
Balance at 29 June 2020
Accounting policy change – SaaS
implementation costs
Restated total equity at the
beginning of the financial year
Profit for the year¹
Currency translation differences
Derivative fair value changes
Total comprehensive income
for the year¹
Transactions with members in their
capacity as owners:
Dividends paid
Issue of share capital on exercise of
share rights
Transfer option reserve on forfeiture
of vested options
Share-based payments expense
Balance at 27 June 2021¹
Profit for the year
Currency translation differences
Total comprehensive income for
the year
Transactions with members in their
capacity as owners:
Dividends paid
Issue of share capital on exercise of
share rights
Transfer option reserve on forfeiture
of vested options
Share-based payments expense
Balance at 26 June 2022
Notes
Contributed
Equity
Share Based
Payments
Reserve
$’000
11,016
$’000
697
Foreign
Currency
Translation
Reserve
$’000
Cash Flow
Hedge
Reserve
Retained
Profits
Total
Equity
$’000
$’000
$’000
3,757
(34)
138,370 153,806
I1(R)
-
-
(1)
-
(14,770)
(14,771)
11,016
697
3,756
(34)
123,600 139,035
-
-
-
-
-
-
-
-
-
-
269
(269)
-
-
11,285
-
-
-
-
(17)
226
637
-
-
-
-
103
(103)
-
-
103
11,388
(53)
286
130
767
-
(177)
-
(177)
-
-
-
-
3,579
-
(977)
(977)
-
-
-
-
-
2,602
-
-
34
34
41,015
41,015
-
-
(177)
34
41,015
40,872
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(5,820)
(5,820)
-
17
-
-
-
226
158,812
174,313
46,712
46,712
-
(977)
46,712
45,735
(25,239)
(25,239)
-
53
-
-
-
286
(25,186) (24,953)
180,338 195,095
B2
F11
D3
D3
B2
F11
D3
D3
¹ Restated as required for changes introduced by IFRIC Agenda Decision - Configuration or Customisation Costs in Cloud Computing
Arrangements. Refer to note I1(R) for details.
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
72 MICHAEL HILL | 2022 ANNUAL REPORT
CONSOLIDATED STATEMENT OF CASH FLOWS
Notes
F4
A5
B1
F5
F6
A5
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)
Proceeds from sale of in-house Canadian customer
finance debtors
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
B1
2022
$’000
686,575
(541,509)
145,066
14,209
16
4,477
(795)
(6,682)
(8,280)
(36,437)
111,574
36
(15,611)
(6,860)
(22,435)
-
-
(40,464)
(25,239)
(65,703)
23,435
72,361
48
95,844
2021
$’000
RESTATED1
657,320
(492,976)
164,344
-
4
14,442
(1,036)
(6,653)
(4,082)
(32,522)
134,497
73
(6,430)
(3,642)
(9,999)
2,000
(12,682)
(40,997)
(11,636)
(63,315)
61,183
11,204
(26)
72,361
¹ Restated as required for changes introduced by IFRIC Agenda Decision - Configuration or Customisation Costs in Cloud Computing
Arrangements. Refer to note I1(R) for details.
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
MICHAEL HILL | 2022 ANNUAL REPORT 73
“ I am particularly proud of our
people and the culture that we
continue to build at Michael
Hill - a high performance team
across all levels, with an energy
and passion that underpins our
growth agenda.”
DANIEL BRACKEN, MANAGING DIRECTOR & CEO
74 MICHAEL HILL | 2022 ANNUAL REPORT
NOTES TO THE
NOTES TO THE
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
A
Financial Overview
A1 Segment Information
A2 Revenue
A3 Other Income
A4
Inventories
A5 Leases
B Cash Management
B1 Cash And Cash Equivalents
B2 Dividends
76
76
78
80
81
81
84
84
85
C
Financial Risk Management 86
C1 Financial Risk Management
86
C2 Derivative Financial
Instruments
C3 Capital Management
90
91
D Reward And Recognition
92
D1 Employee Benefits
D2 Key Management Personnel
D3 Share-Based Payments
92
92
92
F4 Assets Held For Sale And
Directly Associated Liabilities
99
F5 Property, Plant And Equipment 100
F6
Intangible Assets
F7 Trade And Other Payables
F8 Provisions
F9 Tax
F10 Auditors’ Remuneration
F11 Contributed Equity
F12 Reserves
G Group Structure
G1
Interests In Other Entities
G2 Deed Of Cross Guarantee
G3 Parent Entity Financial
Information
H Unrecognised Items
H1 Contingencies And
Commitments
102
103
103
104
107
107
108
109
109
110
113
114
114
H2 Events Occuring After The
End Of The Reporting Period
114
E Related Parties
95
I
F Other Information
F1 Expenses
F2 Earnings Per Share
F3 Trade And Other Receivables
96
96
96
97
Summary of Accounting
Policies & Significant
Estimates & Judgements
I1
I2
Summary Of Significant
Accounting Policies
Significant Estimates
And Judgements
115
115
123
MICHAEL HILL | 2022 ANNUAL REPORT 75
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 26 June 2022 were authorised for issue in accordance with a resolution of the Directors on 26 August 2022. 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 Management team (chief operating decision
makers (CODM)) that are used to make strategic
decisions. The Board and Executive Management 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
Management team in respect of total assets and
liabilities are measured in a manner consistent with
the financial statements. These reports do not allocate
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 excluding the impact
of AASB16 Leases and IFRIC SaaS guidance. An adjustment
column representing these entries has been included
for the purposes of reconciliation to statutory results.
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
total assets or total liabilities based on the operations
Michael Hill International Limited and its controlled entities
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
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.
76 MICHAEL HILL | 2022 ANNUAL REPORT
SEGMENT RESULTS
YEAR ENDED 26 JUNE 2022
Australia
$’000
New
Zealand
$’000
Canada
$’000
Corporate
& other
$’000
Group pre-
adjustments
$’000
Adjustments
Group
$’000
$’000
Operating revenue
303,409
117,594
174,030
177
595,210
Gross profit
196,936
74,716
112,947
227
384,826
Gross margin
64.9%
63.5%
64.9%
64.7%
-
-
595,210
384,826
64.7%
EBITDA
58,826
30,765
39,648
(46,114)
83,125
42,055
125,180
Depreciation and
amortisation
(7,021)
(2,356)
(5,455)
(2,560)
(17,392)
(34,552)
(51,944)
Segment EBIT
51,805
28,409
34,193
(48,674)
65,733
7,503
73,236
EBIT as a % of revenue
17.1%
24.2%
19.6%
11.0%
12.3%
Interest income
Finance costs
-
(50)
-
(2)
-
-
16
16
-
16
(815)
(867)
(6,682)
(7,549)
Net profit before tax
51,755
28,407
34,193
(49,473)
64,882
821
65,703
Income tax expense
Net profit after tax
YEAR ENDED 27 JUNE 2021
(18,991)
46,712
Australia
$’000
New
Zealand
$’000
Canada
$’000
Corporate
& other
$’000
Group pre-
adjustments
$’000
Adjustments
Group
$’000
Restated1
$’000
Restated1
Operating revenue
312,264
118,663
123,930
1,629
556,486
Gross profit
194,148
73,554
76,017
5,197
348,916
Gross margin
62.2%
62.0%
61.3%
62.7%
-
-
556,486
348,916
62.7%
EBITDA
69,250
35,117
20,935
(40,411)
84,891
29,842
114,733
Depreciation and
amortisation
(6,361)
(1,996)
(5,100)
(3,233)
(16,690)
(31,371)
(48,061)
Segment EBIT
62,889
33,121
15,835
(43,644)
68,201
(1,529)
66,672
EBIT as a % of revenue
20.1%
27.9%
12.8%
12.3%
12.0%
Interest income
Finance costs
-
(68)
-
(7)
-
-
4
4
-
4
(867)
(942)
(6,653)
(7,595)
Net profit before tax
62,821
33,114
15,835
(44,507)
67,263
(8,182)
59,081
Income tax expense
Net profit after tax
(18,066)
41,015
¹ Restated as required for changes introduced by IFRIC Agenda Decision - Configuration or Customisation Costs in Cloud Computing
Arrangements. Refer to note I1(R) for details.
MICHAEL HILL | 2022 ANNUAL REPORT 77
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)
2022
$’000
2021
$’000
561,293
525,781
30,742
27,310
2,437
738
2,792
603
Total revenue from contracts with customers
595,210
556,486
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:
2022
Timing of revenue
recognition
Australia
$’000
New Zealand
$’000
Canada
$’000
Corporate & other
$’000
At a point in time
286,687
111,885
162,665
Over time
16,722
5,708
11,365
303,409
117,593
174,030
56
122
178
2021
Timing of revenue
recognition
Australia
$’000
New Zealand
$’000
Canada
$’000
Corporate & other
$’000
At a point in time
296,723
113,547
114,099
Over time
15,541
5,116
9,831
1,412
217
Total
$’000
561,293
33,917
595,210
Total
$’000
525,781
30,705
312,264
118,663
123,930
1,629
556,486
78 MICHAEL HILL | 2022 ANNUAL REPORT
ASSETS AND LIABILITIES RELATED TO CONTRACTS WITH CUSTOMERS
Right of return assets
Deferred PCP bonuses
Total contract assets
Deferred service revenue – PCP
Deferred service revenue – Lifetime Diamond Warranty
Right of return liabilities
Total contract liabilities
2022
$’000
577
756
1,333
77,148
4,808
1,467
2021
$’000
58
1,087
1,145
76,581
3,821
148
83,423
80,550
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
2022
$’000
2021
$’000
24,896
22,243
-
(1,305)
Revenue recognition patterns are regularly reassessed based on new and historical trends resulting in remeasurement of revenue
recognised in previous years.
MICHAEL HILL | 2022 ANNUAL REPORT 79
NOTES TO THE FINANCIAL STATEMENTS CONT.
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 and instalment plans or debit and credit cards.
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
(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.
Customers such as significant financing components
(v) Right of return assets and liabilities
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
Rights of return recognises the estimated returned sales under
the Group’s return policy, being 30 days for all countries.
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.
cleaning, repairs and resizing, to customers based on the type
(vi) Lifetime Diamond Warranty
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 Profit or Loss and
Comprehensive Income.
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
Direct and incremental sales staff bonuses associated with the
utilising this service-type warranty.
sale of PCPs are capitalised in contract assets and amortised in
proportion to the PCP revenue recognised.
A3 OTHER INCOME
Net foreign exchange gains
Government grants
Other items
2022
$’000
169
2,864
5,880
8,913
2021
$’000
2,367
14,593
1,009
17,969
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 pre-requisites of the grant were met. Further
information regarding wage subsidies is disclosed in note I2.
80 MICHAEL HILL | 2022 ANNUAL REPORT
A4 INVENTORIES
Raw materials
Finished goods
Packaging and other consumables
2022
$’000
13,033
2021
$’000
12,435
162,138
156,199
6,368
2,612
181,539
171,246
Finished goods are held at the lower of cost or net realisable value (NRV). During the year, finished goods incurred a write-down
of $2,565,000 (2021: $2,327,000) to be 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
Notes
Opening carrying value
Additional right-of-use assets relating to leases entered into
during the year
Lease modifications agreed during the year
2022
$’000
2021
$’000
221,894
179,524
(113,863)
(72,925)
(646)
(717)
107,385
105,882
2022
$’000
105,882
34,395
6,514
2021
$’000
123,911
13,311
7,581
Depreciation expense
F1
(39,257)
(35,357)
Reduction in right-of-use assets as a consequence of COVID-19
on rent concessions
Foreign currency translation
Closing carrying value
(1,106)
(3,902)
957
338
107,385
105,882
MICHAEL HILL | 2022 ANNUAL REPORT 81
NOTES TO THE FINANCIAL STATEMENTS CONT.
LEASE LIABILITIES
Current
Non-current
RECONCILIATION OF LEASE LIABILITIES
Notes
Opening carrying value
Additional lease liabilities entered into during the year
Lease modifications agreed during the year
Net reduction in future lease payments as a consequence of
COVID-19 on rent concessions
Interest expense
Lease repayments
Foreign currency translation
Closing carrying value
2022
$’000
38,183
91,386
2021
$’000
34,304
99,382
129,569
133,686
2022
$’000
2021
$’000
133,686
158,012
35,173
1,108
13,177
7,517
(1,106)
(3,902)
F1
6,682
6,653
(47,146)
(47,650)
1,172
(121)
129,569
133,686
The incremental borrowing rate used in determining the lease liability ranged between 1.44% and 9.30% (2021: 1.47% and 7.12%).
Expenses relating to short-term leases during the period of $1,478,000 (2021: $6,444,000) were included in occupancy costs.
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.
82 MICHAEL HILL | 2022 ANNUAL REPORT
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:
Within
five years
$’000
More than
five years
$’000
2022
Total
$’000
Within
five years
$’000
More than
five years
$’000
2021
Total
$’000
Extension options expected
not to be exercised
163
202
365
277
55
332
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 | 2022 ANNUAL REPORT 83
NOTES TO THE FINANCIAL STATEMENTS CONT.
B CASH MANAGEMENT
B1 CASH AND CASH EQUIVALENTS
Cash at bank and on hand
2022
$’000
95,844
2021
$’000
72,361
RECONCILIATION OF PROFIT AFTER INCOME TAX TO NET CASH INFLOW FROM OPERATING ACTIVITIES
Notes
F5
A5
F6
F5
D3
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
Non-cash employee benefits expense – share-based payments
Make good interest
Net loss on sale of non-current assets
Net exchange differences
Other non-cash movements
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
2022
$’000
2021
$’000
Restated1
46,712
41,015
10,954
39,257
1,733
521
3,253
286
109
231
335
(5,338)
14,037
(10,812)
9,778
393
(904)
187
(6)
855
(7)
11,746
35,357
958
1,883
3,513
226
(57)
448
2,999
-
13,163
7,663
14,708
451
(1,192)
6,637
2,896
(11,114)
3,197
Net cash inflow from operating activities
111,574
134,497
¹ Restated as required for changes introduced by IFRIC Agenda Decision - Configuration or Customisation Costs in Cloud Computing
Arrangements. Refer to note I1(R) for details.
84 MICHAEL HILL | 2022 ANNUAL REPORT
B2 DIVIDENDS
ORDINARY SHARES
Final dividend for the year ended 27 June 2021 of 3.0 cents per fully paid
share paid on 24 September 2021 (2020: no final dividend)
Interim dividend for the year ended 26 June 2022 of 3.5 cents (2021: 1.5 cents)
per fully paid share paid on 25 March 2022 (2021: 26 March 2021)
DIVIDENDS NOT RECOGNISED AT THE END OF THE REPORTING PERIOD
Since year-end, the Directors have recommended a 4.0 cents (2021: 3.0 cents)
per fully paid share final dividend
FRANKING AND IMPUTATION CREDITS
Franking credits available for subsequent reporting periods based on a tax rate of
30.0% (2021: 30.0%)
2022
$’000
11,649
2021
$’000
-
13,590
5,820
25,239
5,820
2022
$’000
2021
$’000
15,531
11,644
2022
$’000
2021
$’000
2,679
2,552
Imputation credits (NZ$) available for subsequent reporting periods based on New
Zealand tax rate of 28.0% (2021: 28.0%)
12,116
18,072
The dividends paid during the current financial period and corresponding previous financial period were fully imputed and not franked.
The 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 NZ$6,734,292 (2021: NZ$4,736,175). The amount of
imputation credits is dependent on the NZD exchange rate at the time of the dividend.
MICHAEL HILL | 2022 ANNUAL REPORT 85
NOTES TO THE FINANCIAL STATEMENTS CONT.
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 ageing analysis for credit risk.
RISK
EXPOSURE ARISING FROM
MEASUREMENT
MANAGEMENT
Market risk
Foreign
exchange
Future commercial transactions
Recognised financial assets
Cash flow forecasting and
Forward exchange
and liabilities not denominated
sensitivity analysis
contracts (FEC)
in AUD
Interest rate
Long-term borrowings at
variable rates
Sensitivity analysis
Interest rate swaps
Input prices
Components of finished goods
Sensitivity analysis
End product pricing flexibility
Credit risk
Cash and cash equivalents and
trade receivables
Ageing analysis
Diversification of bank
deposits, credit limits and
letters of credit
Availability of committed
Liquidity risk
Borrowings and other liabilities
Rolling cash flow forecasts
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.
86 MICHAEL HILL | 2022 ANNUAL REPORT
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:
26 JUNE 2022
27 JUNE 2021
USD
$’000
NZD
$’000
CAD
$’000
EUR
$’000
USD
$’000
NZD
$’000
CAD
$’000
EUR
$’000
Cash and cash
equivalents
10,348
Trade receivables
318
-
3
-
9
117
1,633
15
839
7
-
4
8
Trade payables
(11,302)
(108)
(59)
(793)
(15,723)
(36)
(42)
Forward exchange contracts:
Buy foreign currency
Sell foreign currency
Net foreign currency
exposure
Sensitivity
-
-
-
-
-
-
-
-
7,780
-
-
-
(5,000)
(5,000)
(636)
(105)
(50)
(661)
(5,471)
(5,029)
(5,030)
-
-
-
-
-
-
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.
IMPACT ON
PRE-TAX PROFIT
IMPACT ON OTHER
COMPONENTS OF EQUITY
AUD increases 10%
2022
$’000
190
2021
$’000
1,574
AUD decreases 10%
(232)
(1,924)
2022
$’000
2021
$’000
-
-
-
-
MICHAEL HILL | 2022 ANNUAL REPORT 87
NOTES TO THE FINANCIAL STATEMENTS CONT.
INTEREST RATE RISK
The Group had no borrowings and a cash surplus at the end of the reporting period. The Group is exposed to interest rate risk
on its cash holdings.
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.
IMPACT ON
PRE-TAX PROFIT
IMPACT ON OTHER
COMPONENTS OF EQUITY
Interest rates – increase by 100 basis points
2022
$’000
958
Interest rates – decrease by 100 basis points*
(958)
2021
$’000
724
-
2022
$’000
2021
$’000
-
-
-
-
*Deposit rates in prior period were close to nil. Negative interest rates were not modelled due to the low probability of this occurring within the
geographical segments in which the Group trades.
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.
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.
88 MICHAEL HILL | 2022 ANNUAL REPORT
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)
2022
$’000
1,909
2021
$’000
1,932
Expiring beyond one year (bank loans)
70,000
70,000
71,909
71,932
The termination date of the financing facilities provided to the Group by both Australia and New Zealand Banking Group Limited
and The Hongkong and Shanghai Banking Corporation Limited, Sydney Branch is 29 February 2024.
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.
CONTRACTUAL MATURITIES OF FINANCIAL LIABILITIES
At 26 June 2022
Less than
6 months
6-12 months
Between 1
and 2 years
Between 2
and 5 years
Over 5 years
$’000
$’000
$’000
$’000
$’000
Total
contractual
cash flow
$’000
Non-derivatives
Lease liabilities
21,730
19,806
32,499
51,798
20,146
145,979
Trade payables
78,397
-
-
-
-
78,397
Total non-derivatives
100,127
19,806
32,499
51,798
20,146
224,376
The Group did not hold any derivatives at financial year end.
At 27 June 2021
Less than
6 months
6-12 months
Between 1
and 2 years
Between 2
and 5 years
Over 5 years
$’000
$’000
$’000
$’000
$’000
Total
contractual
cash flow
$’000
Non-derivatives
Lease liabilities
19,831
18,300
30,378
51,179
34,661
154,349
Trade payables
73,961
-
-
-
-
73,961
Total non-derivatives
93,792
18,300
30,378
51,179
34,661
228,310
Derivatives
Gross settled (FECs)
232
-
-
-
-
232
MICHAEL HILL | 2022 ANNUAL REPORT 89
NOTES TO THE FINANCIAL STATEMENTS CONT.
C2 DERIVATIVE FINANCIAL
INSTRUMENTS
The Group is exposed to certain risks relating to its ongoing
business operations. The primary risks managed using
• 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.
derivative instruments are foreign currency risk and interest
Hedges that meet all the qualifying criteria for hedge
rate risk.
accounting are accounted for, as described below.
The Group’s risk management strategy and how it is applied
Fair value hedge
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:
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.
When an unrecognised firm commitment 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.
• Fair value hedges when hedging the exposure to changes
Cash flow hedge
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:
The effective portion of the gain or loss on the hedging
instrument is recognised in other comprehensive income
(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
• There is ‘an economic relationship’ between the hedged
reserve within equity. The change in the forward element
item and the hedging instrument.
• The effect of credit risk does not ‘dominate the value
changes’ that result from that economic relationship.
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
90 MICHAEL HILL | 2022 ANNUAL REPORT
(including forward points) as the hedging instrument. In such
accumulated OCI must be accounted for depending on the
cases, the gains or losses relating to the effective portion
nature of the underlying transaction as described above.
of the change in fair value of the entire forward contract are
recognised in the cash flow hedge reserve within equity.
Classification of derivatives
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
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
asset or non-financial liability subsequently becomes a firm
The Group uses foreign currency-denominated borrowings
commitment for which fair value hedge accounting is applied.
and foreign exchange forward contracts to manage some of its
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.
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.
If cash flow hedge accounting is discontinued, the amount
Hedging reserves
that has been accumulated in OCI must remain in accumulated
In the current period the Group did not have any hedging
OCI if the hedged future cash flows are still expected to occur.
Otherwise, the amount will be immediately reclassified to profit
in place that impacted the hedging reserves disclosed in
the statement of changes in equity (2021: $34,000 loss was
or loss as a reclassification adjustment. After discontinuation,
once the hedged cash flow occurs, any amount remaining in
reclassified from the cashflow hedge reserve to profit or loss).
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 included in other income
Hedge ineffectiveness
2022
$’000
-
2021
$’000
232
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.
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.
MICHAEL HILL | 2022 ANNUAL REPORT 91
NOTES TO THE FINANCIAL STATEMENTS CONT.
D REWARD AND RECOGNITION
D1 EMPLOYEE BENEFITS
EMPLOYEE BENEFITS
Employee wages
2022
$’000
2021
$’000
RESTATED1
139,155
135,181
Employee wages on-costs and post-retirement benefits
15,891
14,246
Employee share-based payments expense
286
226
155,332
149,653
¹ Restated as required for changes introduced by IFRIC Agenda Decision - Configuration or Customisation Costs in Cloud Computing
Arrangements. Refer to note I1(R) for details.
D2 KEY MANAGEMENT PERSONNEL
Short-term employee benefits
Long-term benefits
Post-employment benefits
Share-based payments
D3 SHARE-BASED PAYMENTS
OPTIONS
2022
$
2021
$
2,962,186
2,814,438
50,904
55,000
203,337
29,892
73,558
86,798
3,271,427
3,004,686
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, are
exercisable at any time during the final five years and vesting is subject to remaining employed by the Group.
Options granted under the plan carry no dividend or voting rights. When exercisable, each option is convertible into one
ordinary share.
92 MICHAEL HILL | 2022 ANNUAL REPORT
Set out below are summaries of options
granted under the plan:
Average
exercise price
per option
Number of
options
Average
exercise price
per option
2022
2021
Opening balance NZD options
1.63
1,000,000
Expired during the year
Vested options forfeited during the year
Closing balance NZD options
Opening balance AUD options
Closing balance AUD options
-
1.46
1.70
1.56
1.56
Number of
options
1,100,000
(100,000)
-
1.56
0.88
-
-
(300,000)
700,000
1.63
1,000,000
300,000
300,000
1.56
1.56
300,000
300,000
Options outstanding at the end of the year have the following expiry dates and exercise prices:
OPTIONS OUTSTANDING AT THE END OF THE YEAR
Grant date
Expiry date
Exercise price
2022
16 November 2011
30 September 2021
NZ$1.16
19 September 2012
30 September 2022
NZ$1.41
18 September 2013
30 September 2023
NZ$1.82
-
-
-
2021
100,000
100,000
100,000
29 November 2013
30 September 2023
NZ$1.82
500,000
500,000
10 November 2014
30 September 2024
NZ$1.63
22 January 2016
30 September 2025
NZ$1.14
22 September 2016
30 September 2026
AU$2.12
5 October 2017
30 September 2027
AU$1.44
22 September 2018
30 September 2028
AU$1.11
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
1,000,000
1,300,000
The weighted average remaining contractual life of share options outstanding at the end of the period was 2.8 years
(2021: 3.2 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.
MICHAEL HILL | 2022 ANNUAL REPORT 93
NOTES TO THE FINANCIAL STATEMENTS CONT.
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 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 used is Total
Shareholder Return (TSR) compound annual growth rate
(CAGR) over 3 years.
Subject to remaining an employee of the Group for a period
of 3 years and satisfaction of TSR target metric, the share
rights issued during the year will vest in accordance with the
sliding vesting schedule:
• no share rights vest if TSR is equal to or less than 10% CAGR;
•
10% share rights vest for each 1% increase in CAGR
performance between 10% CAGR to 20% CAGR;
•
100% share rights vest if TSR is equal to or above
20% CAGR.
During the year, the Board agreed to grant 2,106,647 share
rights to eligible participants of the deferred compensation
plan, subject to continual employment for a period of three
years and an absolute Total Shareholder Return condition for
vesting in three years.
Opening balance
Granted
Exercised
Forfeited
Closing balance
2022
2021
Average fair
value per
share right
Number of
share rights
Average fair
value per
share right
Number of
share rights
0.20
0.29
0.86
0.30
0.21
4,577,518
2,106,647
(143,225)
(428,608)
0.81
0.15
0.72
1.41
788,798
4,189,622
(373,044)
(27,858)
6,112,332
0.20
4,577,518
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 shares
trading subsequent to the final Annual results announcement.
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 right
2022
2021
2,106,647
3,878,533
$0.85
$0.39
40%
7.0%
0.18%
$0.29
45%
10.0%
0.27%
$0.13
*Further to the share rights issued above, in 2021 there were an additional 311,089 share rights issued on 6 October 2020 with a fair value of $0.35 per right.
94 MICHAEL HILL | 2022 ANNUAL REPORT
Expenses arising from share-based payment transactions
2022
$’000
286
2021
$’000
226
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 (e.g. the
entity’s share price)
• excluding the impact of any service and non-market
performance vesting conditions (e.g. profitability, sales
growth targets and remaining an employee of the entity
over a specified period), and
•
including the impact of any non-vesting conditions (e.g. 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.
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.
E RELATED PARTIES
RELATED PARTY TRANSACTIONS
Graphic design services rendered by a related party of board members
2022
$
16,621
2021
$
13,559
All transactions with related parties were in the normal course of business and on normal terms and conditions.
MICHAEL HILL | 2022 ANNUAL REPORT 95
NOTES TO THE FINANCIAL STATEMENTS CONT.
F OTHER INFORMATION
F1 EXPENSES
DEPRECIATION AND AMORTISATION
Depreciation on property, plant and equipment
Depreciation on right-of-use assets
Total depreciation
Amortisation on software
Total amortisation
Notes
F5
A5
F6
2022
$’000
10,954
39,257
50,211
1,733
1,733
2021
$’000
RESTATED1
11,746
35,357
47,103
958
958
Total depreciation and amortisation
51,944
48,061
¹ Restated as required for changes introduced by IFRIC Agenda Decision - Configuration or Customisation Costs in Cloud Computing
Arrangements. Refer to note I1(R) for details.
FINANCE COSTS
Interest on lease liabilities
Bank and interest charges
Interest on make good provision
F2 EARNINGS PER SHARE
Notes
A5
2022
$’000
6,682
758
109
2021
$’000
6,653
999
(57)
7,549
7,595
RECONCILIATION OF EARNINGS USED IN CALCULATING EARNINGS PER SHARE
Basic earnings per share
Profit attributable to the ordinary equity holders of the Company used
in calculating basic earnings per share
Diluted earnings per share
2022
$’000
2021
$’000
RESTATED1
46,712
41,015
Profit from continuing operations attributable to the ordinary equity
holders of the Company
46,712
41,015
¹ Restated as required for changes introduced by IFRIC Agenda Decision - Configuration or Customisation Costs in Cloud Computing
Arrangements. Refer to note I1(R) for details.
96 MICHAEL HILL | 2022 ANNUAL REPORT
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
2022
Number
2021
Number
388,268,845
387,924,289
5,668,197
1,771,137
Weighted average number of ordinary and potential ordinary shares used as the
denominator in calculating diluted earnings per share
393,937,042
389,695,426
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.
F3 TRADE AND OTHER RECEIVABLES
Trade receivables
Provision for expected credit loss
Canadian in-house customer
finance
Provision for expected credit loss
Sundry debtors
2022
2021
Current
$’000
Non-current
$’000
Total
$’000
Current
$’000
Non-current
$’000
3,795
(657)
3,138
524
(202)
322
4,081
-
-
-
240
(13)
227
3,795
6,555
(657)
(373)
3,138
6,182
764
(215)
549
-
-
-
-
4,081
2,170
7,541
227
7,768
8,352
-
-
-
-
-
-
-
-
Total
$’000
6,555
(373)
6,182
-
-
-
2,170
8,352
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
In October 2012, the Group launched an in-house customer
finance program in the Canadian and United States markets.
The terms available to customers range from an interest-
bearing revolving line of credit through to interest free terms
of between 6 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
previously determined to be an asset held for sale, refer to
note F4. The sale was finalised during the period. The balance
remaining consists of the unsold loan accounts, and any
customer sales made under the program after the completion
date of the loan book sale.
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.
MICHAEL HILL | 2022 ANNUAL REPORT 97
NOTES TO THE FINANCIAL STATEMENTS CONT.
EFFECTIVE INTEREST RATES
ECL AND RISK EXPOSURE
All receivables are non-interest bearing except for a small
An ECL analysis is performed at each reporting date.
portion of in-house customer finance receivables. In-house
The maximum exposure to credit risk is the carrying value of
customer finance receivables are recognised net of significant
in-house customer finance program and trade receivables.
financing components determined in accordance with
The Group does not hold collateral as security. The Group
AASB15 Revenue from Contracts with Customers.
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
2022
$’000
2,829
254
84
628
2021
$’000
5,961
298
-
296
3,795
6,555
MOVEMENTS IN THE PROVISION FOR ECL OF TRADE RECEIVABLES ARE AS FOLLOWS:
Opening balance
Additional provisions recognised
Net amounts written back/(written off)
Exchange differences
Closing balance
AGEING OF CANADIAN IN-HOUSE CUSTOMER DEBTOR FINANCE
Current, aged 0 – 30 days
Past due, aged 31 – 90 days
Past due, aged more than 90 days
98 MICHAEL HILL | 2022 ANNUAL REPORT
2022
$’000
373
614
(329)
(1)
657
2021
$’000
340
16
17
-
373
2022
$’000
2021
$’000
600
40
124
764
-
-
-
-
MOVEMENTS IN THE PROVISION FOR ECL OF CANADIAN IN-HOUSE CUSTOMER DEBTOR FINANCE
ARE AS FOLLOWS:
Opening balance
Additional provisions recognised
Net amounts written off
Exchange differences
Closing balance
2022
$’000
-
1,382
(1,149)
(18)
215
2021
$’000
1,436
-
(1,488)
52
-
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
2022
$’000
-
-
2022
$’000
-
-
2021
$’000
14,397
14,397
2021
$’000
1,607
1,607
During the year, the Group finalised the sale of the Canadian in-house customer finance debtors, alongside the associated liabilities.
In the previous financial year these were classified as assets held for sale, and written down to Management’s best estimate of net
proceeds of the sale and estimated costs of disposal. The sale finalisation resulted in cash inflows of $14,209,000, derecognition
of the sold assets and directly associated liabilities, and recognition of accruals for ongoing service fees. An overall expense
of $1,080,000 in the period (2021: $2,986,000) was recognised as impairment of other assets. Residual unsold accounts and
subsequent customer sales under the program are recorded under trade receivables, refer note F3.
The loss recognised on this asset sale is included in the Canada segment in note A1.
MICHAEL HILL | 2022 ANNUAL REPORT 99
NOTES TO THE FINANCIAL STATEMENTS CONT.
F5 PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT
At 29 June 2020
Cost
Accumulated depreciation
and impairment
Plant and
equipment
$’000
Fixtures and
fittings
$’000
Motor
vehicles
$’000
Leasehold
improvements
$’000
Display
materials
$’000
Total
$’000
32,831
34,431
47
78,164
15,197
160,670
(24,576)
(26,325)
(31)
(51,279)
(13,054)
(115,265)
Net book amount
8,255
8,106
16
26,885
2,143
45,405
Year ended 27 June 2021
Opening net book amount
8,255
8,106
Exchange difference
Additions
Disposals
(52)
2,109
(413)
9
792
(38)
Depreciation charge
(2,938)
(2,604)
Impairment loss
(349)
(126)
Closing net book amount
6,612
6,139
At 27 June 2021
Cost
Accumulated depreciation
and impairment
33,906
34,291
(27,294)
(28,152)
Net book amount
6,612
6,139
Year ended 26 June 2022
Opening net book amount
6,612
6,139
Exchange difference
(36)
12
Additions
Disposals
2,835
2,192
(77)
(97)
Depreciation charge
(2,569)
(2,254)
Impairment loss
(23)
(151)
Closing net book amount
6,742
5,841
At 26 June 2022
Cost
Accumulated depreciation
and impairment
36,315
35,733
(29,573)
(29,892)
Net book amount
6,742
5,841
100 MICHAEL HILL | 2022 ANNUAL REPORT
16
(1)
-
(12)
(3)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
26,885
2,143
45,405
47
3,279
(1,092)
(5,329)
(1,357)
43
250
(244)
(872)
46
6,430
(1,799)
(11,746)
(51)
(1,883)
22,433
1,269
36,453
78,996
2,184
149,377
(56,563)
(915)
(112,924)
22,433
1,269
36,453
22,433
1,269
36,453
325
27
328
6,648
4,297
15,972
(69)
(23)
(266)
(5,498)
(633)
(10,954)
(219)
(128)
(521)
23,620
4,809
41,012
86,673
6,489
165,210
(63,053)
(1,680)
(124,198)
23,620
4,809
41,012
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.
A review of impairment indicators was performed due to the potential impact of COVID-19, which resulted in periodic temporary
store closures and reduction in sales, as disclosed in note I2. There were no indicators of impairment identified. The Group treats
each store as a separate cash-generating unit for impairment testing of property, plant and equipment and right of use assets.
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:
• Plant and equipment | 4 – 7 years
• Motor vehicles | 3 – 5 years
• Fixtures and fittings | 6 – 10 years
• Leasehold improvements | 6 – 10 years
• Display materials | 6 – 10 years
MICHAEL HILL | 2022 ANNUAL REPORT 101
NOTES TO THE FINANCIAL STATEMENTS CONT.
F6 INTANGIBLE ASSETS
INTANGIBLE ASSETS
At 29 June 2020
Cost
Accumulated amortisation and impairment
Net book amount
Year ended 27 June 2021
Opening net book amount
Additions
Disposals
Amortisation charge
Closing net book amount
At 27 June 2021
Cost
Accumulated amortisation
Net book amount
Year ended 26 June 2022
Opening net book amount
Exchange difference
Additions
Amortisation charge
Closing net book amount
At 26 June 2022
Cost
Accumulated amortisation and impairment
Net book amount
Patents, trademarks
& other rights
$’000
Computer
software
$’000
RESTATED1
Total
$’000
RESTATED1
79
-
79
79
-
-
-
79
79
-
79
79
-
-
-
79
79
-
79
15,320
(12,078)
3,242
3,242
3,642
8
(958)
5,934
18,928
(12,994)
5,934
5,934
(151)
6,860
(1,733)
10,910
25,715
(14,805)
10,910
15,399
(12,078)
3,321
3,321
3,642
8
(958)
6,013
19,007
(12,994)
6,013
6,013
(151)
6,860
(1,733)
10,989
25,794
(14,805)
10,989
¹ Restated as required for changes introduced by IFRIC Agenda Decision - Configuration or Customisation Costs in Cloud Computing
Arrangements. Refer to note I1(R) for details.
IMPAIRMENT LOSS
A review of intangibles impairment indicators was performed during the period, with no indicators identified.
102 MICHAEL HILL | 2022 ANNUAL REPORT
F7 TRADE AND OTHER PAYABLES
Trade payables
Annual leave liability
Accrued expenses
Other payables
F8 PROVISIONS
2022
$’000
44,558
10,211
4,620
19,008
78,397
2021
$’000
44,499
9,390
3,453
16,619
73,961
2022
2021
Current
$’000
Non-current
$’000
Total
$’000
Current
$’000
Non-current
$’000
Total
$’000
Employee benefits
10,617
1,667
12,284
13,074
1,732
14,806
Assurance-type warranties
1,613
120
1,733
1,082
280
1,362
Make good provision
1,876
5,710
7,586
Restructuring costs
Diamond warranty
80
120
-
-
80
120
306
152
240
5,401
5,707
-
-
152
240
14,306
7,497
21,803
14,854
7,413
22,267
MOVEMENTS IN PROVISIONS
Employee
benefits
$’000
Assurance-
type
warranties
$’000
Opening carrying amount
14,806
1,362
$’000
5,707
Changes in provisions recognised
2,678
1,845
2,065
Amounts incurred and charged
(5,169)
(1,474)
Exchange differences
(31)
-
(124)
(62)
Closing carrying amount
12,284
1,733
7,586
Make good
provision
Restructuring
costs
Diamond
warranty
Total
$’000
$’000
$’000
152
80
240
22,267
-
6,668
(152)
(120)
(7,039)
-
80
-
(93)
120
21,803
MICHAEL HILL | 2022 ANNUAL REPORT 103
NOTES TO THE FINANCIAL STATEMENTS CONT.
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.
In determining the employee remediation provision,
Management has applied certain assumptions and judgements
including interpretation of relevant legal requirements and
expectations regarding final settlement of obligations with the
regulator. Any such estimates and assumptions may change
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.
as new information becomes available and/or when the
Restructuring
remediation program is completed and approved by
the regulator.
The liability for long service leave is measured as the present
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,
value of expected future payments to be made in respect of
which is when:
services provided by employees up to the reporting date using
the projected unit credit method.
Assurance-type warranties
Provision is made for the Group’s assurance-type warranties,
being 12 month guarantee on the quality of workmanship
•
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.
F9 TAX
INCOME TAX EXPENSE
Current tax
Current tax on profits for the year
Adjustments for current tax of prior periods
Total current tax expense
Deferred income tax
(Increase)/Decrease in deferred tax assets
Adjustments for deferred tax of prior periods
Total deferrred tax expense/(benefit)
Income tax expense
104 MICHAEL HILL | 2022 ANNUAL REPORT
2022
$’000
7,329
1,618
8,947
2021
$’000
RESTATED1
4,067
40
4,107
11,833
14,003
(1,789)
(44)
10,044
13,959
18,991
18,066
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% (2021: 30.0%)
Non-deductible expenditure
Sundry items
Total current tax expense
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
Change in tax rate on deferred tax balance
2022
$’000
65,703
19,711
83
(11)
2021
$’000
RESTATED1
59,081
17,724
355
(13)
19,783
18,066
(787)
1,618
(1,789)
(1)
167
31
40
(44)
(27)
-
Income tax expense
18,991
18,066
TAX LOSSES
2022
$’000
2021
$’000
Unused United States tax losses for which no deferred tax asset has been recognised
35,512
32,369
Potential tax benefit @ 25.0%
Unused New Zealand tax losses for which no deferred tax asset has been recognised
Potential tax benefit @ 28.0%
8,878
2,575
721
8,092
2,639
739
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.
MICHAEL HILL | 2022 ANNUAL REPORT 105
NOTES TO THE FINANCIAL STATEMENTS CONT.
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
Right-of-use assets
Lease liabilities
Provisions
Unrealised foreign exchange losses
Sundry items
Inventories
2022
$’000
2021
$’000
RESTATED1
246
10,558
23,468
(213)
(12)
1,002
377
16,280
19,705
(310)
(7)
1,379
(30,485)
(31,798)
37,349
16,486
43
47
63
40,064
20,190
885
(780)
2,344
Net deferred tax assets
58,552
68,329
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 28 June 2021
Credited/(charged) to the income statement
Prior year adjustment
Foreign exchange differences
21,082
37,470
26,612
41,717
58,552
68,329
68,329
82,212
(11,833)
(14,003)
1,790
266
44
76
Closing balance at 26 June 2022
58,552
68,329
106 MICHAEL HILL | 2022 ANNUAL REPORT
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
502,903
554,541
2022
$
2021
$
Fees for other services
Advisory fees
F11 CONTRIBUTED EQUITY
SHARE CAPITAL
2022
Shares
2021
Shares
Ordinary shares – fully paid
388,285,374
388,142,149
Total share capital
388,285,374
388,142,149
MOVEMENTS IN ORDINARY SHARES
Opening balance at 29 June 2020
Rights converted
Balance at 27 June 2021
Rights converted
Balance at 26 June 2022
3,682
3,682
506,585
554,541
2022
$’000
11,388
11,388
Number
of shares
387,769,105
373,044
388,142,149
143,225
2021
$’000
11,285
11,285
Total
$’000
11,016
269
11,285
103
388,285,374
11,388
MICHAEL HILL | 2022 ANNUAL REPORT 107
NOTES TO THE FINANCIAL STATEMENTS CONT.
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
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
Information relating to share rights issued under the
these plans.
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.
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.
108 MICHAEL HILL | 2022 ANNUAL REPORT
G FINANCIAL RISK MANAGEMENT
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:
COUNTRY OF
INCORPORATION
OWNERSHIP INTEREST
HELD BY THE GROUP
2022
%
2021
%
Michael Hill Jeweller (Australia) Pty Limited
Australia
Michael Hill Wholesale Pty Limited
Australia
Michael Hill Manufacturing Pty Limited
Australia
Michael Hill Franchise Pty Limited
Australia
Michael Hill Franchise Services Pty Limited
Australia
Michael Hill Finance (Limited Partnership)
Australia
Michael Hill Group Services Pty Limited
Australia
Michael Hill Charms Pty Limited
Michael Hill Online Pty Limited
Emma & Roe Pty Limited
Medley Jewellery Pty Limited
Durante Holdings Pty Limited
Australia
Australia
Australia
Australia
Australia
Michael Hill New Zealand Limited
New Zealand
Michael Hill Jeweller Limited
New Zealand
Michael Hill Finance (NZ) Limited
New Zealand
Michael Hill Franchise Holdings Limited
New Zealand
MHJ (US) Limited
Emma & Roe NZ Limited
New Zealand
New Zealand
Michael Hill Online Holdings Limited
New Zealand
Michael Hill Jeweller (Canada) Pty Limited
Canada
Michael Hill LLC
United States
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
MICHAEL HILL | 2022 ANNUAL REPORT 109
NOTES TO THE FINANCIAL STATEMENTS CONT.
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 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.
CONSOLIDATED STATEMENT OF PROFIT OR
LOSS, STATEMENT OF COMPREHENSIVE
INCOME AND SUMMARY OF MOVEMENTS IN
CONSOLIDATED RETAINED EARNINGS
The Class Order requires the Parent Company and each of the
Set out below is a consolidated statement of profit or loss,
subsidiaries to enter into a Deed of Cross Guarantee. The effect
of the deed is that the Company guarantees each creditor
a consolidated statement of comprehensive income and a
summary of movements in consolidated retained earnings for
payment in full of any debt in the event of winding up of any of
the year ended 26 June 2022 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
2022
$’000
2021
$’000
RESTATED1
421,019
431,904
39,354
6,063
47,254
15,212
(186,589)
(206,747)
(117,851)
(125,329)
(6,711)
(10,758)
(29,329)
(20,569)
(11,971)
(14,480)
(38,850)
(35,008)
(231)
(15,211)
(5,371)
54,322
(384)
(14,285)
(5,363)
61,447
(15,019)
(13,521)
39,303
47,926
¹ Restated as required for changes introduced by IFRIC Agenda Decision - Configuration or Customisation Costs in Cloud Computing
Arrangements. Refer to note I1(R) for details.
110 MICHAEL HILL | 2022 ANNUAL REPORT
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
2022
$’000
4,977
4,977
2021
$’000
RESTATED1
104
104
Total comprehensive income for the year
44,281
48,030
¹ Restated as required for changes introduced by IFRIC Agenda Decision - Configuration or Customisation Costs in Cloud Computing
Arrangements. Refer to note I1(R) for details.
STATEMENT OF CHANGES IN EQUITY
Equity at the beginning of the financial year
2022
$’000
2021
$’000
RESTATED1
453,554
426,106
Change in accounting policy – SaaS implementation costs
-
(14,771)
Total comprehensive income/(loss)
44,281
48,030
Share rights through share-based payments reserve
Issue of share captial on exercise of share rights
Dividends paid
Total equity at the end of the financial year
286
103
9
-
(25,239)
(5,820)
472,985
453,554
¹ Restated as required for changes introduced by IFRIC Agenda Decision - Configuration or Customisation Costs in Cloud Computing
Arrangements. Refer to note I1(R) for details.
MICHAEL HILL | 2022 ANNUAL REPORT 111
NOTES TO THE FINANCIAL STATEMENTS CONT.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Set out below is a consolidated statement of financial position as at 26 June 2022 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
Total equity
2022
$’000
2021
$’000
RESTATED1
55,499
7,010
137,374
-
251,706
5,102
456,691
27,032
73,601
87,834
767
10,989
48,971
249,194
705,885
58,671
28,351
2,093
18,812
14,219
17,190
7,822
133,096
580
279,769
3,455
441,912
21,219
71,900
87,834
1,117
8,605
60,552
251,227
693,139
64,922
23,921
-
18,925
15,172
122,146
122,940
58,295
45,081
7,378
110,754
232,900
472,985
310,378
(19,525)
182,132
472,985
65,176
44,336
7,133
116,645
239,585
453,554
310,275
(24,789)
168,068
453,554
¹ Restated as required for changes introduced by IFRIC Agenda Decision - Configuration or Customisation Costs in Cloud Computing
Arrangements. Refer to note I1(R) for details.
112 MICHAEL HILL | 2022 ANNUAL REPORT
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
2022
$’000
198
2021
$’000
344
425,363
452,206
425,561
452,550
1,398
1,398
522
522
424,163
452,028
291,531
291,445
41,617
91,015
41,544
119,039
424,163
452,028
2022
$’000
(28,024)
(28,024)
2021
$’000
(8,268)
(8,268)
GUARANTEES ENTERED INTO BY THE
PARENT ENTITY
The Parent has issued the following guarantees in relation to
the debts of its subsidiaries:
(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
(i) Pursuant to Class Order 2016/785, Michael Hill International
Limited and the subsidiaries listed below entered into a deed
Ltd, Michael Hill Jeweller Ltd, Michael Hill Franchise Holdings
Ltd, Michael Hill Finance (NZ) Ltd, Michael Hill Online Pty Ltd,
of cross guarantee on 30 June 2016. The effect of the deed is
Michael Hill Charms Pty Ltd, Emma & Roe Pty Ltd, Medley
that Michael Hill International Limited has guaranteed to pay
Jewellery Pty Ltd, Michael Hill Online Holdings Ltd and Emma &
any deficiency in the event of winding up of any controlled
Roe NZ Ltd.
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.
CONTINGENT LIABILITIES OF THE
PARENT ENTITY
The Parent entity had no material contingent liabilities as at
balance date.
MICHAEL HILL | 2022 ANNUAL REPORT 113
NOTES TO THE FINANCIAL STATEMENTS CONT.
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 26 June 2022.
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
2,838
12,186
34,342
49,366
H2 EVENTS OCCURRING AFTER THE END OF THE REPORTING PERIOD
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.
114 MICHAEL HILL | 2022 ANNUAL REPORT
I
SUMMARY OF ACCOUNTING
POLICIES AND SIGNIFICANT
ESTIMATES AND JUDGEMENTS
I1
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
(A) BASIS OF PREPARATION
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.
The financial report is a general purpose financial report,
which has been prepared in accordance with the requirements
Group companies
of the Corporations Act 2001, Australian Accounting Standards
and other authoritative pronouncements of the Australian
Accounting Standards Board.
The results and financial position of all the Group entities
(none of which have the currency of a hyperinflationary
economy) that have a functional currency different
The financial statements have been prepared on a historical
cost basis, except for derivative financial instruments that
from the presentation currency are translated
into the presentation currency as follows:
have been measured at fair value. The consolidated financial
• assets and liabilities for each balance sheet
statements provide comparative information in respect of
presented are translated at the closing rate at the
the previous period.
For reporting purposes, the Group adopts a weekly ‘retail
calendar’ closing each Sunday. The current 52 week reporting
period ended on 26 June 2022.
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
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
on consolidation. Unrealised losses are also eliminated unless
to temporary differences and to unused tax losses.
the transaction provides evidence of the impairment of the
transferred asset.
(C) FOREIGN CURRENCY TRANSLATION
Functional currency translation
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.
Items included in the financial statements of each of the
It establishes provisions where appropriate on the basis of
Group entities are measured using the currency of the
amounts expected to be paid to the tax authorities.
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.
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.
MICHAEL HILL | 2022 ANNUAL REPORT 115
NOTES TO THE FINANCIAL STATEMENTS CONT.
Deferred income tax
Deferred income tax is provided in full, using the liability
• When receivables and payables are stated
with the amount of GST included.
method, on temporary differences between the tax bases
The net amount of GST recoverable from, or payable to,
of assets and liabilities and their carrying amounts in the
the taxation authority is included as part of receivables or
consolidated financial statements. Deferred tax assets and
payables in the statement of financial position. Commitments
liabilities are classified as non-current assets and liabilities.
and contingencies are disclosed net of the amount of GST
Deferred tax assets are recognised for deductible temporary
recoverable from, or payable to, the taxation authority.
differences and unused tax losses only if it is probable
Cash flows are included in the statement of cash flows
that future taxable amounts will be available to utilise
on a gross basis and the GST components of cash flows
those temporary differences and losses.
arising from investing or financing activities which are
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, assets and liabilities are recognised net
of the amount of GST, except:
• When the GST incurred on a sale or purchase of assets
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.
or services is not payable to or recoverable from the
Management review stock holdings based on recoverability
taxation authority, in which case the GST is recognised
at a product level and write-down as appropriate.
as part of the revenue or the expense item or as part of
the cost of acquisition of the asset, as applicable; or
116 MICHAEL HILL | 2022 ANNUAL REPORT
(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 classification of financial assets at initial recognition
depends on the financial asset’s 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
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
Whilst there are four categories, two are relevant in
the current reporting period for the Group, being:
• The Group has transferred its rights to receive cash flows
from the asset or has assumed an obligation to pay the
Financial assets at amortised cost (debt instruments)
received cash flows in full without material delay to a third
•
•
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:
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,
• The financial asset is held within a business model
it evaluates if, and to what extent, it has retained the risks
with the objective to hold financial assets in order
and rewards of ownership. When it has neither transferred
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.
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.
MICHAEL HILL | 2022 ANNUAL REPORT 117
NOTES TO THE FINANCIAL STATEMENTS CONT.
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
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.
value through profit or loss. ECLs are based on the
Financial liabilities designated upon initial recognition at
difference between the contractual cash flows due in
fair value through profit or loss are designated at the initial
accordance with the contract and all the cash flows
date of recognition, and only if the criteria in AASB9 Financial
that the Group expects to receive, discounted at an
Instruments are satisfied. The Group has not designated
approximation of the original effective interest rate.
any financial liability as at fair value through profit or loss.
For trade receivables and contract assets, the Group
LOANS AND BORROWINGS AT AMORTISED COST
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
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.
indicates that the Group is unlikely to receive the
This category generally applies to interest-bearing loans
outstanding contractual amounts in full before taking into
and borrowings. For more information, refer to note C1.
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
118 MICHAEL HILL | 2022 ANNUAL REPORT
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
Computer software development costs recognised as
asset is derecognised when replaced. All other repairs
assets are amortised over their estimated useful lives
and maintenance are charged to profit or loss during the
(not exceeding ten years).
reporting year in which they are incurred.
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 is greater
than its estimated recoverable amount (note I1(F)).
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
(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
it will be available for use;
Short-term obligations
• Management intends to complete the software and use
or sell it;
Liabilities for wages and salaries, including non-monetary
benefits and accumulating sick leave that are expected
•
there is an ability to use or sell the software;
to be settled wholly within 12 months after the end of the
• adequate technical, financial and other resources to
complete the development and to use or sell the
software are available;
•
it can be demonstrated how the software will generate
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.
probable future economic benefits; and
Liabilities for employee benefits are measured at the present
•
the expenditure attributable to the software during its
development can be reliably measured.
value of Management’s best estimate of the expenditure
required to settle the present obligation at the reporting date.
In respect to cloud computing arrangements, the Group
Other long-term employee benefit obligations
assesses whether the arrangement contains a lease and if not,
whether the arrangement provides the Group with a resource
that it can control. Costs associated with implementation
are then assessed as to whether they can be capitalised
in accordance with relevant accounting standards.
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
Directly attributable costs that are capitalised as part of the
by employees up to the end of the reporting year using
software include employee costs and an appropriate portion
of relevant overheads.
the projected unit credit method. Consideration is given
to expected future wage and salary levels, experience of
Capitalised development costs are recorded as intangible
assets and amortised from the point at which the asset is
ready for use.
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.
MICHAEL HILL | 2022 ANNUAL REPORT 119
NOTES TO THE FINANCIAL STATEMENTS CONT.
The obligations are presented as current liabilities in
Diluted earnings per share
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.
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
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).
shareholders after certain adjustments. The Group recognises
(Q ) ROUNDING OF AMOUNTS
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.
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.
(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.
(R) CHANGES IN ACCOUNTING POLICIES
AND DISCLOSURES
IFRIC agenda decision - Net Realisable Values of Inventory
In June 2021, the IFRS Interpretations Committee (IFRIC)
published an agenda decision in relation to the accounting
treatment when determining net realisable value (NRV)
Where any group company purchases the Company’s equity
of inventories, in particular what costs are necessary
instruments, for example as the result of a share buy-back or a
to sell inventories under AASB 102 Inventories.
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
During the year, the Group finalised the analysis of
the impact of this agenda decision. The impact was
not material and has been incorporated into the
Group’s net realisable value accounting policy.
IFRIC agenda decision - Configuration or Customisation
Costs in a Cloud Computing Arrangement
In April 2021, IFRIC published an agenda decision for
configuration and customisation costs incurred related to
implementing Software as a Service (SaaS) arrangements.
The Group has changed its accounting policy in relation
Provision is made for the amount of any dividend declared,
to configuration and customisation costs incurred in
being appropriately authorised and no longer at the discretion
implementing SaaS arrangements. The nature and effect of the
of the entity, on or before the end of the reporting year
changes as a result of changing this policy is described below.
but not distributed at the end of the reporting year.
(P) EARNINGS PER SHARE
Basic earnings per share
Accounting Policy - Software-as-a Service
(SaaS) arrangements
SaaS arrangements are arrangements in which the Group
does not currently control the underlying software used
Basic earnings per share is calculated by dividing:
in the arrangement.
•
the profit attributable to owners of the Company, excluding
Where costs incurred to configure or customise SaaS
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).
arrangements result in the creation of a resource which is
identifiable, and where the Group has the power to obtain the
future economic benefits flowing from the underlying resource
and to restrict the access of others to those benefits, such
costs are recognised as a separate intangible software asset
120 MICHAEL HILL | 2022 ANNUAL REPORT
and amortised over the useful life of the software on a straight-line basis. The amortisation is reviewed at least at the end of each
reporting period and any changes are treated as changes in accounting estimates.
Where costs incurred to configure or customise SaaS arrangements do not result in the recognition of an intangible software asset,
then those costs that provide the Group with a distinct service (in addition to the SaaS access) are now recognised as expenses
when the supplier provides the services. When such costs incurred do not provide a distinct service, the costs are now recognised
as expenses over the duration of the SaaS contract. Previously some costs had been capitalised and amortised over its useful life.
The following tables show the adjustments recognised for each individual line item. Line items that were not affected by the
changes have not been included. As a result, the sub-totals and totals disclosed cannot be recalculated from the amounts provided.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
27 June 2021
As originally presented
$’000
Impact of
accounting policy
$’000
27 June 2021
Restated
$’000
Assets
Intangible assets
Deferred tax assets
Total assets
Equity
Reserves
Retained profits
Total equity
32,845
60,585
508,111
4,221
177,895
193,401
(26,832)
7,744
(19,088)
(5)
(19,083)
(19,088)
6,013
68,329
489,023
4,216
158,812
174,313
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Other expenses
Employee benefits expense
Depreciation and amortisation expense
Profit before income tax
Income tax expense
Profit for the year
27 June 2021
As originally presented
$’000
Impact of
accounting policy
$’000
27 June 2021
Restated
$’000
(28,308)
(147,619)
(51,293)
64,807
(19,479)
45,328
(6,924)
(2,034)
3,232
(5,726)
1,413
(4,313)
(35,232)
(149,653)
(48,061)
59,081
(18,066)
41,015
Total comprehensive income for the year attributable to:
Owners of Michael Hill International Limited
45,189
(4,317)
40,872
MICHAEL HILL | 2022 ANNUAL REPORT 121
NOTES TO THE FINANCIAL STATEMENTS CONT.
CONSOLIDATED STATEMENT OF CASH FLOWS
27 June 2021
As originally presented
$’000
Impact of
accounting policy
$’000
27 June 2021
Restated
$’000
Payments to suppliers and employees
Net cash inflow from operating activities
Payments for intangible assets
Net cash outflow from investing activities
(484,021)
143,452
(12,597)
(18,954)
(8,955)
(8,955)
8,955
8,955
(492,976)
134,497
(3,642)
(9,999)
EARNINGS PER SHARE FOR PROFIT ATTRIBUTABLE TO THE ORDINARY EQUITY HOLDERS OF THE COMPANY
27 June 2021
As originally presented
cents
Impact of
accounting policy
cents
27 June 2021
Restated
cents
Basic earnings per share
Diluted earnings per share
11.68
11.63
(1.11)
(1.10)
10.57
10.53
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Opening retained profits as originally presented
Impact on:
Intangible assets
Deferred tax assets
Opening retained profits - restated
27 June 2021
Restated
$’000
27 June 2020
Restated
$’000
177,895
(26,828)
7,745
158,812
138,370
(21,100)
6,330
123,600
122 MICHAEL HILL | 2022 ANNUAL REPORT
CRITICAL ACCOUNTING ESTIMATES,
ASSUMPTIONS AND JUDGEMENTS
In the process of applying the above policy, Management
has made the following judgements which have the
most significant effect on the amounts recognised in the
consolidated financial statements:
I2
SIGNIFICANT ESTIMATES
AND JUDGEMENTS
SIGNIFICANT ESTIMATES AND JUDGEMENTS
The preparation of financial statements requires the use
• Determining whether cloud computing arrangements
of accounting estimates which, by definition, will seldom
contain a software licence intangible asset
equal the actual results. Management also needs to
The Group evaluates a cloud computing arrangement
exercise judgement in applying the Group’s accounting
to determine if it provides a resource that the Group
policies. Estimates and judgements are continually
can control.
evaluated and are based on historical experience and
The Group determines that a software licence
other factors, including expectations of future events that
intangible asset exists in a cloud computing arrangement
are believed to be reasonable under the circumstances.
when both of the following are met at the inception
The estimates and assumptions that have a significant
of the arrangement:
– The Group has the contractual right to take
possession of the software during the hosting
period without significant penalty.
– It is feasible for the Group to run the software on
its own hardware or contract with another party
unrelated to the supplier to host the software.
• Determining whether configuration and customisation costs
provide a distinct service to access to the SaaS
The Group applies judgement in determining whether costs
incurred provide a distinct service, aside from access to
the SaaS. Where it is determined that no distinct service is
identifiable, the related costs are recognised as expenses
over the duration of the service contract.
Several other amendments and interpretations apply for
the first time in 2022, 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.
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 the significant accounting estimates were in
relation to the consideration recevied for assets held for
sale (note F4), the pattern of PCP revenue recognition
(note A2), and employee remediation (note F8).
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 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. These amounts have been disclosed
in note A5. Government grants were received during the
period and further information can be found in note A3.
MICHAEL HILL | 2022 ANNUAL REPORT 123
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 26 June 2022, 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 26 June 2022 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.
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.
Robert Fyfe
Chair
Brisbane
26 August 2022
124 MICHAEL HILL | 2022 ANNUAL REPORT
Ernst & Young
Ernst & Young
111 Eagle Street
Brisbane QLD 4000 Australia
Brisbane QLD 4000 Australia
GPO Box 7878 Brisbane QLD 4001
111 Eagle Street
Tel: +61 7 3011 3333
Tel: +61 7 3011 3333
Fax: +61 7 3011 3100
ey.com/au
Fax: +61 7 3011 3100
ey.com/au
GPO Box 7878 Brisbane QLD 4001
Auditor’s independence declaration to the directors of Michael Hill
International Limited
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF MICHAEL HILL
INTERNATIONAL LIMITED
a. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
As lead auditor for the audit of the financial report of Michael Hill International Limited for the
financial year ended 26 June 2022, I declare to the best of my knowledge and belief, there have been:
relation to the audit;
b. No contraventions of any applicable code of professional conduct in relation to the audit; and
REPORT ON THE AUDIT OF THE
c. No non-audit services provided that contravene any applicable code of professional conduct in
FINANCIAL REPORT
relation to the audit.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
KEY AUDIT MATTERS
OPINION
This declaration is in respect of Michael Hill International Limited and the entities it controlled during
the financial year.
We have audited the financial report of Michael Hill
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
International Limited (the Company) and its subsidiaries
report of the current year. These matters were addressed in
(collectively the Group), which comprises the consolidated
the context of our audit of the financial report as a whole,
statement of financial position as at 26 June 2022, the
consolidated statement of comprehensive income,
consolidated statement of changes in equity and consolidated
Ernst & Young
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.
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
In our opinion, the accompanying financial report of the Group
section of our report, including in relation to these matters.
is in accordance with the Corporations Act 2001, including:
Accordingly, our audit included the performance of procedures
(a) Giving a true and fair view of the consolidated financial
Kellie McKenzie
position of the Group as at 26 June 2022 and of its
Partner
26 August 2022
that date; and
consolidated financial performance for the year ended on
(b) Complying with Australian Accounting Standards and the
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.
Corporations Regulations 2001.
EXISTENCE OF INVENTORIES
BASIS FOR OPINION
Why significant
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
The existence of inventories is a key audit matter due to the
size of the recorded asset being $181,539,000 or 34% of the
Group’s total assets at 26 June 2022, the nature of the inventory
and the geographic spread of locations where items are held.
Inventories are primarily kept in the Group’s 280 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
Professional Accountants (including Independence Standards)
subject to misappropriation and other loss.
(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.
As a result, evidencing the existence of the Group’s inventory
at 26 June 2022 is a key audit matter.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
MICHAEL HILL | 2022 ANNUAL REPORT 125
The Group accounts for inventories in accordance with the
recognised in the income statement for the year ended 26 June
policy disclosed in Note I1(H) and further disclosure is included
2022 was $30,742,000 (2021: $27,310,000).
in Note A4 of the financial report.
How our audit addressed the key audit matter
Our audit procedures included the following:
The estimation process for PCP revenue is based on an analysis
of actual services (through historical cleaning, repairs and
re-sizing service data) performed under these plans since
inception in October 2010, with management judgement
• Testing the effectiveness of key controls relevant to the
applied to take account of emerging trends in customer
conduct of physical stocktakes, the review and investigation
behaviour, industry data and exceptional circumstances such as
of stocktake variances, and the approval of adjustments
COVID related store closures.
made to stock quantities.
•
In performing our testing, we attended 12 year end
stocktakes conducted at retail stores across Australia, New
Zealand and Canada.
The result of estimation process 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
•
In addition to the retail stores, we attended the stocktakes
(or reversal) in the current year results.
completed at each of the distribution and manufacturing
centres in June 2022.
• At these stocktakes at the retail stores, distribution and
The accounting policy for PCP revenue and description of the
estimation uncertainty is disclosed in Note A2 of the financial report.
manufacturing centres, we observed compliance with the
How our audit addressed the key audit matter
stocktake instructions (including the suspension of inventory
movements during the stocktake process) and selected a
sample of items to recount to establish the accuracy of the
counts performed by the Group.
• For each of these locations attended, and for a further
representative sample of retail stores, we inspected
evidence that stocktakes had been conducted in
accordance with Group policies, stock variances identified
had been reviewed and approved, and that the adjustments
were accurately recorded.
• Where stocktakes were completed prior to the balance
sheet 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
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:
– Obtained details of the sales of PCP products to customers
during the year and tested the cash receipts were
appropriately deferred.
– Obtained details of the actual cleaning, repairs and resizing
services in the year and tested a sample of transaction
to understand if repairs are accurately tagged to the
associated PCP plan date.
procedures to address the risk of incorrect cut-off of
– Performed analysis over the historic repairs data, to
inventory quantities at year end.
PROFESSIONAL CARE PLAN (PCP)
REVENUE RECOGNITION
Why significant
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
determine whether the assumptions made by the Group
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.
pattern for lifetime, 10 year and 3 year plans offered to the
• Performed sensitivity analysis over the assumptions using
Group’s customers. Under these plans, revenue is deferred on
reasonable alternative scenarios to determine whether there
receipt of the payment from the customer and recognised over
would be a material impact on revenue recognised in the year.
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.
• Evaluated the adequacy of disclosures in financial statements
of PCP revenue recorded and deferred at year-end and the
associated estimation uncertainty.
The balance of the deferred PCP revenue liability at 26 June
2022 was $77,148,000 (2021: $76,581,000), and PCP revenue
126 MICHAEL HILL | 2022 ANNUAL REPORT
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 2022 annual report, but does not include the
financial report and our auditor’s report thereon.
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, misrepresentations, or the
override of internal control. Obtain an understanding of
internal control relevant to the audit in order to design
Our opinion on the financial report does not cover the other
audit procedures that are appropriate in the circumstances,
information and accordingly we do not express any form
but not for the purpose of expressing an opinion on the
of assurance conclusion thereon, with the exception of the
effectiveness of the Group’s internal control.
Remuneration Report and our related assurance opinion.
In connection with our audit of the financial report, our
responsibility 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, 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
• 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
The Directors of the Company are responsible for the
going concern.
preparation of the financial report that gives a true and fair
• Evaluate the overall presentation, structure and content of
view in accordance with Australian Accounting Standards and
the financial report, including the disclosures, and whether
the Corporations Act 2001 and for such internal control as the
the financial report represents the underlying transactions
Directors determine is necessary to enable the preparation of
and events in a manner that achieves fair presentation.
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
• 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
Our objectives are to obtain reasonable assurance about
have complied with relevant ethical requirements regarding
whether the financial report as a whole is free from material
independence, and to communicate with them all relationships
misstatement, whether due to fraud or error, and to issue
and other matters that may reasonably be thought to bear on
an auditor’s report that includes our opinion. Reasonable
our independence, and where applicable, actions taken to
assurance is a high level of assurance, but is not a guarantee
eliminate threats or safeguards applied.
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
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
Standards, we exercise professional judgment and maintain
not be communicated in our report because the adverse
professional scepticism throughout the audit. We also:
consequences of doing so would reasonably be expected to
•
Identify and assess the risks of material misstatement of the
outweigh the public interest benefits of such communication.
financial report, whether due to fraud or error, design and
MICHAEL HILL | 2022 ANNUAL REPORT 127
Ernst & Young
111 Eagle Street
Tel: +61 7 3011 3333
Fax: +61 7 3011 3100
Brisbane QLD 4000 Australia
ey.com/au
GPO Box 7878 Brisbane QLD 4001
Ernst & Young
111 Eagle Street
Tel: +61 7 3011 3333
Fax: +61 7 3011 3100
Brisbane QLD 4000 Australia
ey.com/au
Auditor’s independence declaration to the directors of Michael Hill
GPO Box 7878 Brisbane QLD 4001
International Limited
As lead auditor for the audit of the financial report of Michael Hill International Limited for the
financial year ended 26 June 2022, I declare to the best of my knowledge and belief, there have been:
Auditor’s independence declaration to the directors of Michael Hill
International Limited
relation to the audit;
a. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
REPORT ON THE AUDIT OF THE REMUNERATION REPORT
As lead auditor for the audit of the financial report of Michael Hill International Limited for the
financial year ended 26 June 2022, I declare to the best of my knowledge and belief, there have been:
OPINION ON THE REMUNERATION REPORT
a. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
We have audited the Remuneration Report included in the Directors’ report for the year ended 26 June 2022.
relation to the audit.
b. No contraventions of any applicable code of professional conduct in relation to the audit; and
c. No non-audit services provided that contravene any applicable code of professional conduct in
relation to the audit;
In our opinion, the Remuneration Report of Michael Hill International Limited for the year ended 26 June 2022, complies with
section 300A of the Corporations Act 2001.
b. No contraventions of any applicable code of professional conduct in relation to the audit; and
This declaration is in respect of Michael Hill International Limited and the entities it controlled during
the financial year.
RESPONSIBILITIES
c. No non-audit services provided that contravene any applicable code of professional conduct in
relation to the audit.
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
This declaration is in respect of Michael Hill International Limited and the entities it controlled during
audit conducted in accordance with Australian Auditing Standards.
the financial year.
Ernst & Young
Kellie McKenzie
Kellie McKenzie
Partner
Partner
26 August 2022
Brisbane
26 August 2022
Ernst & Young
Ernst & Young
Kellie McKenzie
Partner
26 August 2022
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
128 MICHAEL HILL | 2022 ANNUAL REPORT
ADDITIONAL INFORMATION
AS AT 31 AUGUST 2022
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
Rank
Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
HOGLETT HAMLETT LIMITED*
CITICORP NOMINEES PTY LIMITED
SQUEAKIDIN LIMITED*
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CUSTODIAL SERVICES LIMITED
BNP PARIBAS NOMS PTY LTD
NEW ZEALAND CENTRAL SECURITIES DEPOSITORY LTD
NATIONAL NOMINEES LIMITED
MOLE HILL LIMITED*
FORSYTH BARR CUSTODIANS LIMITED
PETER KARL CHRISTOPHER HULJICH + JOHN HAMISH BONSHAW IRVING
CHRISTOPHER PETER HULJICH + CONSTANCE MARIA F HULJICH + PETER KARL
CHRISTOPHER HULJICH
BNP PARIBAS NOMS (NZ) LTD
NEW ZEALAND DEPOSITORY NOMINEE LIMITED
HWM (NZ) HOLDINGS LIMITED
FNZ CUSTODIANS LIMITED
VANWARD INVESTMENTS LIMITED
HOBSON WEALTH CUSTODIAN LTD
20
BNP PARIBAS NOMINEES PTY LTD
Total
Total Remaining Holders Balance
*Denotes entities in which a member or members of the Hill family have an interest.
Number
388, 285, 374
4,222
$1.140
224
Fully Paid
Ordinary Shares
% of Fully Paid
Ordinary Shares
148,330,600
38.20
26,794,291
19,156,926
15,951,910
14,239,499
10,110,361
9,230,919
9,086,943
7,877,050
5,000,000
4,805,402
3,881,540
3,488,861
2,876,425
2,783,902
2,458,570
2,345,755
2,036,974
2,029,508
1,890,450
294,375,886
93,909,488
6.90
4.93
4.11
3.67
2.60
2.38
2.34
2.03
1.29
1.24
1.00
0.90
0.74
0.72
0.63
0.60
0.52
0.52
0.49
75.81
24.19
MICHAEL HILL | 2022 ANNUAL REPORT 129
DISTRIBUTION OF SECURITY HOLDERS
Number of holders of fully
paid ordinary shares
Number of fully paid
ordinary shares
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
Over 100,001
Total
703
1,321
787
1,248
163
4,222
UNMARKETABLE PARCELS
Minimum $ 500.00 parcel at
$ 1.14 per unit
Minimum Parcel Size
439
Holder
224
As at 31 August 2022, there are four substantial shareholders that Michael Hill is aware of:
413,708
4,049,508
6,447,345
39,606,336
337,768,477
388,285,374
Units
35,048
SUBSTANTIAL HOLDERS
Name
Latest Notice Date
Shares
Hoglett Hamlett Limited and others*
13 October 2016
148,330,600
Mark Simon Hill
Emma Jane Hill
Spheria Asset Management Pty Ltd
3 September 2021
163,487,902
13 October 2016
15 April 2021
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 31 August 2022 there were 21 holders of options and rights.
130 MICHAEL HILL | 2022 ANNUAL REPORT
CORPORATE DIRECTORY
DIRECTORS
COMPANY SECRETARIES
R I Fyfe B.Eng, F.E.N.Z., C.N.Z.M. Chair
Sir R M Hill K.N.Z.M.
E J Hill B.Com., M.B.A.
G W Smith B.Com., F.C.A., F.A.I.C.D.
J E Naylor M.A.I.C.D.
D Bracken (appointed 28 June 2021)
A Lowe BCom, LLB (Hons), MAppFin, CA, CTA
E Bird LLB (Hons), BA (Psych), GradDipLegalPrac,
GradDipAppCorpGov, G.A.I.C.D.
PRINCIPAL REGISTERED OFFICE
IN AUSTRALIA
SHARE REGISTER
34 Southgate Avenue
Cannon Hill QLD 4170
+61 7 3114 3500
Computershare Investor Services Pty Ltd
Level 1
200 Mary Street
Brisbane QLD 4000
1300 552 270 (within Australia)
+61 3 9415 4000 (outside of Australia)
AUDITOR
SOLICITOR
Ernst & Young
Level 51
111 Eagle Street
Brisbane QLD 4000
BANKERS
Allens Linklaters
Level 26
480 Queen Street
Brisbane QLD 4000
WEBSITES
Australia and New Zealand Banking Group Limited
ANZ Banking Group (New Zealand) Limited
HSBC Australia Limited
Bank of Montreal
Bank of America
www.michaelhill.com.au
www.michaelhill.co.nz
www.michaelhill.ca
www.michaelhill.com
www.medleyjewellery.com.au
http://investor.michaelhill.com
EMAIL
online@michaelhill.com.au
MICHAEL HILL | 2022 ANNUAL REPORT 131