Annual Report
2023
MICHAEL HILL | 2023 ANNUAL REPORT 1
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”, “projects”, “assumes”,
“forecast”, “likely”, “outlook”, “would”, “could”, “should”, “continues”, “estimates” or similar expressions or the negatives thereof, generally identify 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, sustainability targets, 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, they are not guarantees or predictions of future performance or statements of
fact. 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 report.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, as there can be no assurance the actual outcomes will not differ materially from the forward-looking statements in this report. Except as
required by applicable laws or regulations (including the ASX Listing Rules), the Group does not intend, and does not assume any obligation, to update any forward-
looking statements contained herein. 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 report.
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 | 2023 ANNUAL REPORT
CONTENTS
5
6
8
Company Profile
Letter from
the Chair
CEO’s Message
10
Performance
Highlights
11
12
14
16
Key Facts
Performance
Trend Statement
Sustainability
42
Executive
Leadership Team
45
Directors’
Report
56
Remuneration
Report
71
Auditor’s
Independence
Declaration
73
Financial
Statements
126
Directors’
Declaration
127
Independent
Auditor’s Report
133
Additional
Information
135
Corporate
Directory
The Directors are pleased to present the
annual report of Michael Hill International
Limited and its subsidiaries for the year
ended 2 July 2023.
MICHAEL HILL | 2023 ANNUAL REPORT 3
4 MICHAEL HILL | 2023 ANNUAL REPORT
COMPANY PROFILE
The Michael Hill Group is a market leading jewellery retailer, with a portfolio of
brands, operating a network of over 300 stores across Australia, New Zealand and
Canada, with multiple international digital platforms.
The first Michael Hill store opened in 1979 when Sir
On 1 June 2023, the Group strategically acquired a
Michael Hill and his wife, Lady Christine Hill launched
complementary and scalable Australian value-led
their unique retail jewellery formula in Whangarei, on
jewellery retailer, Bevilles.
the North Island of New Zealand.
Around the world, the Group employs over 2,800
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 2 July 2023, the Group operates
of high impact advertising, Michael Hill rapidly gained
172 stores in Australia (including 26 Bevilles stores),
popularity and rose to national prominence.
46 in New Zealand and 86 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
jewellery for our customers to celebrate the key
Stock Exchange (ASX/NZX: MHJ).
moments in their lives.
Over the last four years, the Company has been on
At Michael Hill, we are committed to becoming a
a transformative journey reshaping many aspects of
more sustainable and ethically responsible business,
the business, underpinned by a clearly defined
protecting our eco-system and contributing to
strategic agenda to elevate the brand and drive
the communities we serve in meaningful ways, for
growth. The strategic framework is customer-led and
generations to come.
continually 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 Retail Fundamentals, continual Product
Evolution, exploring New Territories & Services,
maintaining a Cost Conscious Culture and with
a focus on Sustainability.
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 | 2023 ANNUAL REPORT 5
LETTER FROM
THE CHAIR
Dear shareholders,
NAVIGATING CHALLENGING
MARKET CONDITIONS
FY23 has been a challenging year for Michael Hill.
We have successfully transitioned from FY22; when we
continued to benefit from Covid economic stimulus,
reduced operating costs and travel restrictions in all our
markets, which boosted domestic retail spend, to FY23
which has seen inflation in wages, gold, diamonds and
other input costs, along with rising interest rates eating into
disposable consumer spending and an increased portion
of that remaining spend being redirected to domestic and
international leisure travel.
We have also experienced a particularly challenging security
environment in New Zealand, with record levels of retail
crime necessitating a significant increase in spend on security
counter-measures, resulting in increased stock losses.
Despite these challenges we have maintained an unwavering
commitment to our strategy; with an increased investment in
elevating the Michael Hill brand and product offering, a strong
commitment to executing on the retail fundamentals, strong
cost and inventory management and investment in a series of
new brand offerings to expand our addressable market.
Against this backdrop the business has delivered a solid
performance for FY23, with record revenue, elevated
margins and strong earnings. I’m both proud and grateful
for the agility, resilience, perseverance and focus that Daniel
and the entire Michael Hill team have displayed in delivering
these results.
STRENGHTHENING THE HERITAGE OF
THE BRAND
The heritage of our brand and creative inspiration from
our founders continues to underpin the foundations of the
Company. This year saw the launch of ‘The Jewellers’ brand
campaign, which focused on our origins as a fine jeweller,
the vision of our founders, and showcasing our craftmanship,
creativity and commitment to quality. As the Michael Hill brand
6 MICHAEL HILL | 2023 ANNUAL REPORT
continues on its aspirational brand journey, we will
maintain a strong connection to our rich heritage and
our founders’ vision.
COMMITMENT TO OUR PEOPLE AND OUR
VALUES
I have taken great pride in the way in which our leadership team
in New Zealand and our Group Executive team have responded
to and supported our New Zealand team members and
customers impacted by the spate of retail crime events and ram
raids we have experienced in New Zealand along with a series of
extreme weather events. It’s during these times of adversity that
our values, who we are and what we stand for get truly tested.
I’m proud to be part of a team who have clearly demonstrated
and lived the Company’s values as we have responded to these
challenges: We care, We create outstanding experiences,
We are professional and We are inclusive and diverse.
Pleasingly, our engagement survey was completed by 84% of
our workforce and resulted in an engagement score of 82%,
which is 10% higher than the global retail industry average.
Our consistently high engagement score demonstrates how
hard we continue to work to ensure that Michael Hill remains
an employer of choice and is a great place to work.
SUSTAINABILITY MANIFESTO
In August 2022, we released our 2030 sustainability manifesto
centered around three key pillars: People, Product and
Planet. During the year, we have made great progress
with our goals: reduced our scope 1 emissions by 39%,
reduced our head office waste by 65% and made significant
donations towards empowering women with Dress for
Success and Women’s Refuge.
In addition, we have launched our Re:cycle initiative in
Australia – a digitally enabled gold recycling program, that
encourages customers to recycle gold jewellery pieces in
exchange for a Michael Hill e-gift card. The opportunity in
the coming year to extend this offering to New Zealand and
Canada is exciting.
CAPITAL MANAGEMENT
Last year, the Company articulated a capital management
framework for the business which included pursuing acquisition
opportunities in the jewellery sector. Pleasingly, the business
successfully acquired an earnings accretive, scalable and
complementary Australian value-led jewellery brand, Bevilles.
With the Bevilles team having successfully transitioned, the
In August this year, the Board appointed Dave Whittle as a
Non-Executive Director. Dave’s experience and expertise will
bring a fresh perspective, with a wealth of knowledge across
data, technology and brand which will be invaluable to the
Company. His extensive experience in marketing, omni-
channel retail and digital transformation complements the
existing Board composition.
key focus is now on expanding the store network nationally.
IN CONCLUSION
During the year, the Company commenced its on-market share
I am immensely proud of Daniel, our highly capable executives
buy-back with 8.63m shares bought back, representing 2.2%
working alongside him and the broader Michael Hill team.
of issued capital for a total cash cost of A$10.2m. The directors
Even though FY23 was a particularly challenging year, the
have decided to discontinue the on-market share buy-back.
team remained focused, executed on our strategy, delivered
Furthermore, we were pleased to declare a final dividend of
AU3.5 cents per share, bringing our total dividend for the
year to AU7.5 cents per share, representing ~70% of adjusted
annual NPAT, and at the higher end of the Company’s Dividend
Distribution Policy target range of 50% to 75%.
OUR BOARD
a plethora of initiatives, and successfully acquired a new
brand, Bevilles, which represents a fabulous opportunity
to expand our addressable market and support our growth
ambitions for FY24.
Regards,
It continues to be a privilege to serve on the Michael Hill
Board alongside such a talented group of directors, including
our founder, Sir Michael Hill, a true entrepreneur and creative
spirit who continues to inspire and challenge us all.
Robert Fyfe
Chair
MICHAEL HILL | 2023 ANNUAL REPORT 7
CEO’S
MESSAGE
It has been a very busy year at Michael Hill and I’d like to both
We also continued to focus on digital to modernise customer
acknowledge and thank the team for their unwavering focus
experience, and reach new markets. The creation of a dual
and energy throughout the year.
RECORD REVENUE WITH STRONG MARGIN
While we finished FY23 with comparable EBIT slightly below
prior year due to a more challenging second half, we still
delivered record revenue, strong elevated margin and the
language Canadian website allows us to attract a new
French speaking customer base in Quebec and across
Canada. Additionally, we have continued to expand our
marketplace strategy by opening into new markets for
the brand. In May, we partnered with Zalora to enter both
Singapore and Malaysia markets.
second highest comparable EBIT in the Company’s history.
In October 2023, the business will launch its new bespoke
These results were underpinned by our clearly articulated
brand TenSevenSeven, focused on servicing the high-end
strategic initiatives, and most notably during the year:
of the market with its unique personalised diamond ring
• elevating ATV supported by Michael Hill’s aspirational
brand journey,
•
leveraging our loyalty program, which now has over two
million members,
proposition. With these additional brands and channels,
the Michael Hill Group now services all significant customer
segments of the fine jewellery category, and delivers multiple
new growth pipelines.
• continuing to evolve our product – during the year we
CULTURE AND TEAM
introduced some amazing new ranges,
• and most importantly, a relentless focus on retail
fundamentals driving continued improvement in
productivity across all markets.
INVESTING FOR GROWTH
In August 2022, the Company executed a seamless relocation
of its global headquarters to new purpose-built premises
housing the global support functions, with a reimagined
artisanal jewellery workshop and state-of-the-art Australasian
distribution centre. Our new offices provide a contemporary,
dynamic and productive environment, strategically aligned to
Michael Hill’s aspirational brand journey.
In June 2023, the Company completed the Bevilles
acquisition, successfully transitioning all team members,
And most importantly, the Michael Hill business is built on
the foundations of a great culture and a fantastic team as
evidenced by our most recent engagement survey result, with
our global engagement score above 80%.
As we approach the key trading period of Christmas, our
teams are excited and energised by the new product ranges
we will be launching, and our new emotive Christmas
campaign. While inflation and rising interest rates have
impacted consumer spending, I am confident that the Group
strategy has us well-placed to continue to take market share.
Regards,
stores and inventory to the Group. As the Michael Hill brand
elevates its position in the market, the Bevilles business gives
Regards,
us the opportunity to capture market share at the value end of
the fine jewellery category. Currently a 26 store business, it is
Daniel Bracken
Managing Director and CEO
primed for a significant real estate expansion strategy.
8 MICHAEL HILL | 2023 ANNUAL REPORT
MICHAEL HILL | 2023 ANNUAL REPORT 9
PERFORMANCE
HIGHLIGHTS
KEY FINANCIAL RESULTS
Group operating
revenue increased
by 5.8% to
$629.6M
Strong group gross margin
Net cash position
64.2%
$8.4M
Second highest
comparable earnings
before interest and
tax (EBIT)
$58.9M
OPERATIONAL PERFORMANCE
Total dividends for
the year
AU 7.5
cps
Healthy inventory
position including
Bevilles
$203.3M
Digital sales were
largely flat to LY
$41.3M
Three new stores
opened and five under-
performing stores
were closed
Brilliance by Michael Hill
membership now over
2.0M+
New digital markets
entered:
Quebec,
Singapore &
Malaysia
Pure play brand Medley
delivered sales growth of
31%
on last year
Executed acquisition strategy with
purchase of Bevilles
Successful transition to new
global headquarters
10 MICHAEL HILL | 2023 ANNUAL REPORT
KEY FACTS
TRADING RESULTS
DIVIDENDS (including final dividend)
% Change
2023
$000’s
2022
$000’s
Group revenue
5.8%
629,562
595,210
Gross profit
5.1%
404,440
384,826
Earnings before interest
& tax (EBIT)*
(19.6%)
58,883
73,236
Comparable EBIT*
(6.3%)
58,889
62,870
2023
2022
Per ordinary share
AU7.5c
AU7.5c
Times covered by net profit
after tax
1.24
1.60
SHARE PRICE AT YEAR END
(24.3%)
49,747
65,703
2023
2022
(24.7%)
35,182
46,712
Share price (ASX)
AUD 0.90
AU$0.93
(28.2%)
80,072
111,574
Net profit before
tax (NPBT)
Net profit after
tax (NPAT)
Net cash inflow from
operating activities
FINANCIAL POSITION
Contributed
equity 379,688,884
ordinary shares
Total equity
Total assets
% Change
2023
$000’s
2022
$000’s
(2.4%)
11,112
11,388
(3.3%)
188,615
195,095
KEY INVESTOR RATIOS
Basic earnings per share
Diluted earnings per share
EBIT to sales
Return on average
total assets
2023
9.20c
9.00c
9.4%
2022
12.03c
11.86c
12.3%
6.7%
9.3%
6.9%
546,488
511,179
SEGMENT REVENUE GROWTH (local currency)
Net cash
(91.3%)
8,367
95,844
Capital expenditure
52.5%
34,271
22,471
Australia
New Zealand
Canada
Group
2023
9.1%
5.8%
(0.5%)
5.8%
2022
(2.8%)
(1.6%)
34.8%
7.0%
KEY RATIOS
Return on average shareholders
funds
18.3%
25.3%
STORE NUMBERS
2023
2022
Gross margin
64.2%
64.7%
2023
2022
Interest expense cover (times)
Equity ratio
Working capital ratio
Current ratio
5.9
34.5%
3.4 : 1
1.6 : 1
9.7
Australia1
38.2%
3.7 : 1
1.8 : 1
New Zealand
Canada
Total stores1
172
46
86
304
147
48
85
280
* EBIT and Comparable EBIT are Non-IFRS information and are unaudited. Please refer to page 52 for an explanation of Non-IFRS information and a
reconciliation of EBIT and Comparable EBIT.
1 Includes 26 Bevilles stores in 2023
MICHAEL HILL | 2023 ANNUAL REPORT 11
PERFORMANCE
Group revenue
AU$ MILLIONS
629.6
569.5
595.2
556.5
492.1
Gross margin
Comparable EBIT
%
62.7
64.7
64.2
AU$ MILLIONS
62.9
58.9
56.6
62.0
60.6
34.6
-5.2
F Y19
F Y20
FY 21
FY2 2
FY2 3
FY19
FY20
FY 21
FY 22
FY23
FY19
FY20
FY21
FY 22
FY23
Revenue by country
YEAR ENDED 2 JULY 2023
CANADA
28%
NEW ZEALAND
19%
AUSTRALIA
53%
12 MICHAEL HILL | 2023 ANNUAL REPORT
EBITDA
AU$ MI LLIONS
125.2
114.7
116.6
69.7
40.5
Net profit from operating
activities after tax
Inventory
AU$ MILLIONS
* Includes Bevilles inventory
35.2
179.5
178.7
181.5
171.2
203.3
AU$ MILLIONS
46.7
41.0
16.5
3.1
F Y19
F Y20
F Y21
FY2 2
FY2 3
FY19
FY20
FY21
FY 22
FY23
FY19
FY20
FY 21
FY 22
FY23*
Ordinary dividend
AU CENT S PER SHARE
7.5
7.5
4.5
4.0
1.5
Return on
average assets
Return on average
shareholders’ funds
%
8.2
9.3
%
25.0
25.3
6.7
18.3
4.3
9.4
0.7
1.9
F Y19
F Y20
F Y 21
FY2 2
FY2 3
FY19
FY20
FY21
FY 22
FY23
FY19
FY20
FY21
FY 22
FY23
MICHAEL HILL | 2023 ANNUAL REPORT 13
TREND STATEMENT
TREND STATEMENT
Financial performance
2023
$’000
2022
$’000
2021
$’000
2020
$’000
2019
$’000
Group revenue
629,562
595,210
556,486
492,060
569,500
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
Other Intangible assets
Goodwill
Total assets
Total current liabilities
Non-current borrowings
Lease liabilities
Other long term liabilities
Total liabilities
Net assets
Reserves and retained profits
Paid up capital
116,607
125,180
114,733
69,690
40,481
19,366
21,115
2,304
18,811
2,313
16,498
38,969
19,365
2019
$’000
7,923
57,724
58,883
9,136
49,747
14,565
35,182
80,072
30,719
2023
$’000
20,867
203,260
20,735
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
11,204
11,636
2021
$’000
72,361
171,246
27,463
178,742
179,503
31,007
35,878
244,862
292,132
271,070
220,953
223,304
59,546
49,118
42,121
58,552
37,729
68,329
57,857
74,468
72,742
67,708
353,526
392,805
377,128
353,278
363,754
139,052
107,385
105,882
36,215
17,695
10,989
6,013
-
-
123,911
24,429
-
–
15,439
-
546,488
511,179
489,023
501,618
379,193
155,001
158,596
151,522
159,405
105,130
12,500
117,518
72,854
–
91,386
66,102
–
10,681
32,704
99,382
63,806
115,848
–
61,878
64,607
357,873
316,084
314,710
347,812
202,441
188,615
177,503
11,112
195,095
174,313
153,806
176,752
183,707
163,028
142,790
165,768
11,388
11,285
11,016
10,984
Total shareholder equity
188,615
195,095
174,313
153,806
176,752
Basic earnings per share
Diluted earnings per share
Dividends declared per share (interim)
Dividends declared per share (final)
Net tangible asset backing
9.20c
9.00c
AU4.0c
AU3.5c
$0.35
12.03c
11.86c
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
14 MICHAEL HILL | 2023 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
2023
18.5%
9.4%
5.6%
10.8%
18.3%
6.7%
3.4 : 1
1.6 : 1
5.9
29.3%
(4.4%)
34.5%
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
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%
Shares issued at year end excl Treasury
379,688,884
388,285,374
388,142,149
387,769,105
387,750,000
Exchange rate for translating:
- New Zealand results
- Canadian results
Store numbers
Australia
New Zealand
Canada
Total stores1
¹ Includes 26 Bevilles stores in 2023.
1.09
0.90
2023
1721
46
86
304
1.06
0.92
2022
147
48
85
280
1.07
0.95
2021
150
49
86
285
1.04
0.90
2020
155
49
86
290
1.06
0.95
2019
167
52
86
305
“Pleasingly, FY23 delivered
record revenue with the second
highest comparable EBIT in
the company’s history, together
with continued elevated
gross margin.”
DANIEL BRACKEN, MANAGING DIRECTOR & CEO
MICHAEL HILL | 2023 ANNUAL REPORT 15
SUSTAINABILITY
MICHAEL HILL -
THE JEWELLER THAT CARES
In August 2022, we announced our Sustainability Strategy for 2030 centered around
three key pillars – People, Product and Planet. Since then, we have made significant
progress in our sustainability journey towards our goals with a rigor and discipline
that align to our Executive Management and Board Cadence.
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 to support and drive our journey.
With our new strategic focus, combined with strong governance and direction, we look forward to providing regular updates
on our progress. 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.
16 MICHAEL HILL | 2023 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 Michael Hill is working to achieve by 2030.
These goals are being progressed through a structured framework of cross functional team members with a clear governance
program, linking back to the Board. An internal ESG Steering Committee has been created and meets regularly with the CEO and is
accountable for deciding on strategic orientations and accountability for progress. This Committee feeds into the Board quarterly
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%
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 2027]
MICHAEL HILL | 2023 ANNUAL REPORT 17
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 recertification to 2025 being a major milestone in our
sustainability journey achieved this financial year. This demonstrates 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 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 for certification by the RJC across the house
of brands in support of our sustainability strategy regarding responsible sourcing, chain of custody, sustainability certified and
provenance for Michael Hill products in the coming years.
A KEY PARTICIPANT IN INDUSTRY CHANGE
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. The jewellery industry supply chain remains long and complex. The materials we use to craft
our jewellery – namely precious metals and gemstones – come from a variety of sources, all with varying locations, risks,
and production methods. Multiple stakeholders are engaged throughout Michael Hill’s supply chain to gain confidence and
assurance over sourcing practices for materials and to ensure sourcing practices comply with Michael Hill’s sustainability strategy.
Some suppliers have the capability and capacity to meet these demands and may even be further ahead on their journey than
Michael Hill, however others have limited capability and capacity, and require drastic industry change to make this happen. For the
latter, we work closely to share knowledge, information and guidance on how those suppliers can improve their practices and align
with our high expectations.
We have become a more active member of the jewellery community this year, through championing innovative, sustainable
products and introducing new circular services for our customers, whilst working with partners, suppliers and other participants
in the jewellery industry. Our challenge is still to use our voice to advocate for industry change relating to sustainability through
industry relationships, memberships, and products we sell to our customers, however we are working hard to advocate for change
and have set this expectation for delivery throughout our entire supply chain.
18 MICHAEL HILL | 2023 ANNUAL REPORT
“We are becoming a part of
the solution, advocating for
change within our industry
and introducing innovative,
new sustainable products
and services.”
DANIEL BRACKEN, MANAGING DIRECTOR & CEO
MICHAEL HILL | 2023 ANNUAL REPORT 19
FY23 SUSTAINABILITY
HIGHLIGHTS
PEOPLE
$150,000+
towards empowering women with
Dress for Success (AU & CA) and
Women’s Refuge (NZ)
of all employees identify
as female
85%
PRODUCT
Retail industry high global
engagement score at
82%
23,839 products crafted
in our Brisbane
manufacturing facility
Launched Re:cycle, our
gold recycling program –
an innovative circularity
program for customers
Repaired over 401,641 pieces of our
customers’ jewellery, extending product
lifespan and preventing waste
Certified Sustainable and Carbon
Neutral Laboratory-grown diamonds
make up 7.7% of our total diamond mix
PLANET
Reduced our Scope 1
emissions by
39%
Reduced head office
waste by
65%
100%
20 MICHAEL HILL | 2023 ANNUAL REPORT
of our Scope 1 Emissions calculated
PEOPLE
Everything at Michael Hill originates with our people. We bring
and utilise fresh new imagery to capture attention and
the customer experience to life by hiring the brightest talent.
showcase life at Michael Hill. Part of our EVP process was to
Our values of ‘We Care’, ‘We Are Inclusive and Diverse’, ‘We
capture a uniquely Michael Hill experience through our EVP
are Professional’, and ‘We Create Outstanding Experiences’
video, which highlighted our employment brand, and we also
pervade all of our people choices and practices, beginning
launched an updated website designed to capture candidate’s
with the attraction of a new team member and continuing
interest by targeting what candidates are looking for today.
throughout our people lifecycle. We welcome change or
Diversity, equity and inclusion, wellbeing, our sustainability
innovation where needed. 2023 saw the introduction of
journey, and career development were key focuses.
new improved people practices that continue to support
and enable our greatest attribute, our people.
GREAT PLACE TO WORK
A HIGHLY ENGAGED CULTURE
At Michael Hill we strive to ensure our culture consistently
drives the behaviours needed to deliver a remarkable
experience to our customers. Our leaders are focused on
2023 was dominated by a challenging talent market and in an
effort to make Michael Hill’s offer stand out we also created
a premium pre-commencement onboarding process where
candidates receive a Digital Introduction Booklet, a new and
engaging contract of employment and a Digital Welcome To
Michael Hill Booklet. Supporting flexibility that works for all is
core to our offer.
We continue to utilise leading edge recruitment techniques
to ensure we meet the needs of the business and can quickly
value-adding activities to support the execution of the business
modify our approach based on the needs of the business and
strategy and objectives. Our internal communication platforms
the candidate market. We utilise psychometric testing, video
provide a comprehensive array of need-to-know information
and insights that enhance collaboration, productivity, and
engagement. They build trust in our workplace, improve
knowledge sharing and empower and align our team.
Our positive and rewarding environment is enhanced by
coaching and development activities that allow our team
members to be confident and comfortable in delivering a
interviewing and online reference checking to ensure we can
support the business to fill roles quickly with quality talent.
This year we introduced our Enterprise Agreement in Australia
which showcases care for our team through the introduction
of paid parental leave for primary and secondary carers and
extended definitions to allow for greater utilisation, paid
domestic violence Leave, flexible public holiday leave, and
premium service to customers, colleagues and all stakeholders.
offering our team members rates of pay greater than the
We are focused on delivering exceptional experiences through
relevant Modern Award.
strong and consistent processes across the organisation as we
elevate our brand.
We also launched our exclusive rewards platform across
the organisation offering percentage off discounts, cashback,
Our people are our priority, and we are focused on responding
weekly recipe inspiration, wellbeing tips and much more.
to feedback, taking actions, and making the changes necessary
In Canada we commenced a registered retirement savings
to ensure our engagement levels remain best in class and push
plan that our managers can contribute to that includes a
our performance to new heights. The voices of our team are
company matching component to support our team members
important to us. The FY23 We’re Listening process included
comfortable retirement.
both an Engagement Survey and a Pulse Survey. We are proud
to have scored 82% engagement for the 2022 Engagement
Survey and 81% engagement for the 2023 Pulse Survey.
We continue to have industry leading engagement scores
and participation rates of over 80%. These results showcase
that Michael Hill is an exceptional employer of choice in the
retail environment with a culture that is unparalleled.
ATTRACTING AND RETAINING THE BEST
In 2023 we completely reinvigorated our Employee Value
Proposition (EVP) in the external market to ensure we
consistently attract the best talent, the People Behind The
Moments That Matter. We launched refreshed recruitment
campaigns with a renewed focus on benefits and delivering
the ‘what’s in it for me’ message to candidates. We now also
offer a seamless experience on desktop and mobile devices
Our commitment to our culture is reinforced further in renewed
people practices throughout our People Cycle including
performance management, 360-degree reviews and talent
mapping. Our talent mapping strategies allow us to recognise
our top talent for advancement and create development
plans to retain and grow our teams and our leadership bench
strength. In 2023 we introduced a new systemised talent
mapping process to further streamline and simplify our
processes allowing greater visibility and transparency and
more meaningful conversations to support decision making.
We know that one of the key success factors of high
performing organisations is putting their people first.
We are committed to investing in our people to develop
their skills, expertise and careers and to create business
value through the execution of business strategy.
MICHAEL HILL | 2023 ANNUAL REPORT 21
CRAFTSMANSHIP
At Michael Hill, the art of craftsmanship lies at the heart of our rich heritage, defining the essence of who we are. Our unwavering
commitment to preserving and enhancing this tradition has driven us to continually evolve and refine our capabilities. Nestled in
Brisbane, our home to 35 masterful artisans serves as the crucible where creativity meets skill.
In 2023, our dedication to craftsmanship led us to forge a significant partnership with TAFE Queensland. Together, we have
embarked on a transformative apprenticeship program, meticulously designed to nurture emerging talents in alignment with
our values and honouring our heritage. This collaboration symbolises our deep-rooted belief in passing on the torch of artisanal
excellence to the next generation.
In our relentless pursuit of excellence, we embrace not only the time-honoured techniques but also cutting-edge innovations in
our craft. We recognise that true preservation lies in the fusion of tradition and technology. To this end, we have integrated state-
of-the-art technologies and harnessed the power of modern expertise. Through strategic innovation, and nurturing the talents of
tomorrow, we embark on a journey to safeguard our legacy while propelling it into new dimensions.
We remain steadfast in our commitment to championing craftsmanship – not merely as a part of our history, but as the very soul
that guides us into a future imbued with the brilliance of human ingenuity.
OUR TEAM STATISTICS
As at 2 July 2023 employee numbers across our markets out of a total 2459
1496
AUS TRA LIA
647
316
CANADA
NEW ZEAL AN D
Gender Split
Age Distribution
1088
AGED
30-50
704
AGED >50
667
AGED <30
49 4
CASUAL
707
PART
TIME
8 86
FU L L TI ME
Female
85%
2087 FEMALE
EMPLOYEES
3 6
CAS-
UAL
39
PART
T IME
29 4
FU L L TI ME
Male
15%
369 MALE
EMPLOYEES
3 EM PLOYEES HAVE NOT PROVIDED
GEN D ER INFORMATION
22 MICHAEL HILL | 2023 ANNUAL REPORT
EMPLOYEE ENGAGEMENT
We pride ourselves on having a highly engaged and enabled workforce who love what they do and where they work.
Our Engagement Survey in August 2022 was completed by 84% of our workforce and resulted in an engagement score of 82%.
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.
EN GAGEMENT SURVEY 2022
AUSTRALIA - 81%
Engagement
Participation
AU Support Centre
AU Retail
82%
84%
85%
80%
CAN ADA - 8 4%
NEW ZEALAND - 78%
CA Support Centre
CA Retail
New Zealand
100%
83%
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
85 %
79%
81 %
81 %
79%
82%
88%
0%
20%
40%
60%
80%
100%
SE ASON AL CAS UAL 2023 SURVEY
Engagement
Participation
85%
37%
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 85%.
MICHAEL HILL | 2023 ANNUAL REPORT 23
INVESTING IN OUR TEAM
At Michael Hill, our steadfast commitment to cultivating skills
and enhancing capabilities is a cornerstone of our strategic
vision to future-proof our workforce. In the realm of retail,
we have diligently ingrained a culture of learning, ensuring
that our team members receive continuous training that
encompasses vital aspects such as product knowledge,
sales techniques, and exceptional service. Our resolute
focus on learning extends further into leadership
development, with comprehensive programs centered
on retail operational leadership as well as holistic business
leadership. These programs offer a comprehensive guide
to navigating the intricacies of people practices across the
employee life cycle, equipping our leaders with the necessary
tools to inspire and empower their teams.
In tandem with these initiatives, LinkedIn Learning stands
as a pivotal resource, fostering an environment where
every team member can proactively create personalised
development plans and actively engage in a wealth of learning
opportunities. As we look to the horizon, our commitment
to skill enrichment extends beyond the confines of our retail
sphere. Our manufacturing apprenticeship program and
corporate internship initiatives, in partnership with esteemed
Australian institutions such as TAFE Queensland,
The Queensland University of Technology, and Griffith
University, lay the foundation for nurturing young talent.
These dynamic pathways not only infuse fresh perspectives
Our unwavering commitment to fostering diversity and
inclusion at Michael Hill is a cornerstone of our organisational
ethos. In October 2022, a pivotal milestone was reached as
we conducted our inaugural Diversity and Inclusion Pulse
Check, an integral component of the Michael Hill ‘We’re
Listening’ strategy. This initiative garnered a remarkable 834
responses from across the globe, representing 37% of our
workforce, and yielded an impressive overall DEI score of 82%.
These invaluable insights serve as a compass guiding our
endeavors to create an environment where every team
member feels a profound sense of belonging, experiences
psychological safety, and perceives their voice as impactful.
It is with great pride that we note the resounding success of
our inclusion efforts, as evidenced by scores exceeding 83%
in key areas such as open discussions of social and cultural
backgrounds, fair treatment for all, the ability to advocate
for diversity and inclusion without personal risk, and the
commitment demonstrated by our managers in handling
diversity matters adeptly.
The commendable themes that have emerged from our
assessment accentuate our strengths in inclusive hiring
practices, the harmonious integration of diverse cultures
and backgrounds, and the steadfast cultivation of a
welcoming and accepting workplace for all. As we reflect on
these achievements, we remain resolute in our dedication to
furthering diversity and inclusion across every facet of Michael
Hill, ensuring a rich tapestry of perspectives and experiences
but also ensure that our teams remain fortified and adaptable
that fuel our collective success.
for the challenges and opportunities that lie ahead.
At Michael Hill, our resolute dedication to building a skilled
GENDER EQUALITY
and empowered workforce is a testament to our enduring
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. 85% of our global workforce is
female, 43% of our Executive Leadership Team is female, and
65% 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 ‘Embrace Equity’
for females in the workforce. We shared learnings and
experiences in a panel discussion with our key senior
leaders and encouraged team members to continue to
learn how to challenge their own biases which make an
impact in their lives.
commitment to excellence and innovation.
DIVERSITY, EQUITY & INCLUSION
Michael Hill recognises its talented and diverse workforce
as a key competitive advantage. Our business performance
reflects the quality and skill of our people and behaviours that
are aligned to our Group Values. We are firmly committed
to developing policies, practices and ways of working that
support diversity.
Michael Hill’s Diversity, Equity and Inclusion (DEI) 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 elevating our diversity and inclusion strategy in a variety
of ways, including a calendar of cultural, world and religious
days to celebrate the diversity within our organisation and
communities, through awareness raising and educational
initiatives. The 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.
24 MICHAEL HILL | 2023 ANNUAL REPORT
DIVERSITY & INCLUSION INITIATIVES
The DEI Committee has played a pivotal role in orchestrating
a series of impactful initiatives that reflect our unwavering
commitment to diversity, equity, and inclusion. With a keen
focus on education, awareness, and community engagement,
the Committee has successfully orchestrated a range of global
diversity calendar events throughout the year. These events,
such as International Women’s Day with the empowering
theme #EmbraceEquity, International Pride month in June,
World Mental Health Day in October, and the International
Day of People with Disability in December, serve as powerful
platforms to foster understanding and advocate for an
inclusive Michael Hill community.
In addition to these calendar events, the DEI Committee’s
influence extends through thought-provoking blog posts.
These blogs, including topics such as “Brilliance in our
Furthermore, the DEI Committee has brought forth the
enlightening “Room for All” podcast episodes, which
serve as powerful conversations on diverse subjects.
Episodes celebrating PRIDE, acknowledging Canada Day,
raising awareness about neurodiversity, commemorating
Diwali: The Festival of Lights, and initiating dialogue about
mental health exemplify the Committee’s dedication to
fostering open discussions that enrich understanding and
create an inclusive dialogue. Collectively, these endeavours
represent the remarkable impact and significance of the DEI
Committee’s efforts in driving forward our commitment to
diversity and inclusion at Michael Hill.
The next year will see the continuation of the Diversity and
Inclusion program of work. The following initiatives will be
implemented in the next financial year:
•
Inclusion of diversity training in leadership
differences: Embracing Neurodiversity at Michael Hill,” “A guide
development programs
to gender pronouns for #PRIDEMonth,” “Ramadan blessings to
• Ongoing reporting and review of diversity metrics
our Islamic community", “Lunar New Year”, “Today is Waitangi
Day, NZ’s National Celebration” embody the spirit of inclusivity
by addressing pertinent issues and showcasing the vibrant
tapestry of perspectives within our organisation.
• Development of ‘employee resource groups’ strategy
•
Increase accessibility requirements in line with health
and wellbeing strategy.
MICHAEL HILL | 2023 ANNUAL REPORT 25
26 MICHAEL HILL | 2023 ANNUAL REPORT
HEALTH, SAFETY AND SECURITY
At Michael Hill, safeguarding the health, safety, wellbeing and security of our team members, customers and visitors remains
our utmost priority. The past few years have presented numerous challenges, including the pandemic, rising youth crime rates,
and mounting cost of living pressures. Against this backdrop, Michael Hill continues to pave the way by embracing flexible work
options, collaborating proactively with external stakeholders to establish industry-leading security measures, fortifying our
infrastructure to deter criminal activity, and implementing assistance programs and benefit schemes that underscore the value we
place on our team members at Michael Hill. As we forge ahead, fuelled by our ongoing growth, Michael Hill remains dedicated to
expanding our knowledge, presence and approach to health, safety, wellbeing, and security.
Key achievements across the health, safety and security portfolio in FY23 include:
• Continued downward trends of lost time and significant incident rates. Lost Time Injury Frequency Rate down to 5.43 compared
to 9.50 in FY 2018, and Significant Incident Frequency Rate down to 1.90 compared to 6.04 in FY 2018
•
11% of our workforce participated in our 6 week – 15 Minute Exercise Challenge
• Obtained an annual utilisation rate of 4.0% regarding our Employee Assistance Program (EAP) compared to an industry
rate of 1.7%
• Ongoing upgrades of CCTV and / or intrusion alarm systems across our stores
•
Installed fog cannons, dual pendant alarms, guarding and improved store fortification requirements across a number of our store
in New Zealand in response to the increased levels of crime and incidents in our stores
• Rolled out Mental Health First Aid Training to 32 of our retail leaders.
EMPOWERING WOMEN
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 recent 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 challenges remain.
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 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 and have strong roadmaps
and partnerships in development to deliver this goal in the coming years.
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.
This year Michael Hill introduced a new partner to our Empowering Women program, The Women’s Refuge in Auckland.
Through the sales of our charity earring product, we supported their Safe Nights program, designed to provide girls and women
a safe night to escape family violence including safe clean bed, hot meal, secure transport, and helpful advice.
Coinciding with International Women’s Day in March 2023, Michael Hill launched our annual campaign to raise funds for Dress for
Success and The Women’s Refuge with various activations:
DRESS FOR SUCCESS SUPPORT OFFICE VOLUNTEERING PROGRAM:
Last year we commenced our first ever paid volunteering program with Dress for Success in Brisbane. Feedback from all teams who
participated was positive, and the program was made a permanent offering for all head office team members. The volunteering
program continued in FY23, with 117 of our team participating as a “working bee” this year. The volunteering team members
unpacked donated items, cleaned displays, and sorted clothes racks to assist Dress for Success in their daily operations. This year:
•
117 team members took up the opportunity, resulting in Michael Hill successfully donating over 468 hours, worth $23,399 of paid
volunteering hours to assist Dress for Success Brisbane
• Though an evolution of our enterprise agreement, one day of paid community service leave per calendar year has been made
available to eligible Australian retail store-based team members.
MICHAEL HILL | 2023 ANNUAL REPORT 27
EMPOWERING WOMEN EARRINGS SALES:
Between March and June this year, we asked customers to help us support our mission to empower women, by purchasing a pair
of beautiful 6mm button cultured freshwater pearl earrings in sterling silver for $25. For every purchase, Michael Hill donated $15
to Dress for Success in AU and CA, and The Women’s Refuge in NZ, raising over $150,000 to be split across our charity partners.
We supported this initiative across our entire store network as well as online, and received great engagement from our teams and
customers, connecting with the cause, and the elected charities.
AUCTION FOR ACTION:
At times through our business operations, products can become impaired or damaged, and are unable to be sold to customers.
We saw this as an opportunity to raise further funds for Dress for Success with these impaired products being repaired by our
manufacturing team and auctioned to head office team members, with all funds over the reserve price donated to Dress for
Success. This initiative saw over $4,300 donated this financial year.
ASSISTING OUR LOCAL COMMUNITY WITH RECOVERY
February 2023 saw some of the worst floods in New Zealand across the North Island, with Auckland being the most significantly
affected. In addition to ensuring our Michael Hill team were safe and supported, we wanted to support the local communities in
which we live and operate to get back on their feet. To assist in community recovery Michael Hill donated $50,000 to Auckland
City Mission, to support their front-line flood response efforts for those most in need.
About Auckland City Mission:
Every day, the Mission responds to poverty and great need in our Auckland. People come to The Mission when they need access
to permanent and sustained housing, enough nutritious food to eat, and when their physical and mental health is compromised.
“ We are grateful to partner
with Michael Hill Jeweller
to help Women’s Refuge
provide safe nights for
women and children
experiencing family
violence across Aotearoa.
Without the support of
generous partners and
community, we would
struggle to be there for the
thousands of women and
children who need our help
each year.”
DR ANG JURY, ONZM, CHIEF
EXECUTIVE, NATIONAL
COLLECTIVE OF INDEPENDENT
WOMEN’S REFUGES
28 MICHAEL HILL | 2023 ANNUAL REPORT
“Volunteering has given our head office team
the opportunity to do deeply impactful work
in the community.”
JO MATTHEWS, CHIEF PEOPLE OFFICER
MICHAEL HILL | 2023 ANNUAL REPORT 29
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, however we are
confident our jewellery suppliers will achieve this goal sooner. 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. FOUNDATION
02. ENHANCE
03. OPTIMISE
FY20 – FY21
FY22 – FY24
FY25+
• Established Supplier
Transparency 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
• Reviewed and updated 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 standards
•
Issued our first Modern
Slavery Statement
• Uplifting Michael Hill’s Modern Slavery
Program for new legislation to come
into effect in our markets of operation
• Complete Modern Slavery effectiveness
review (Australia).
• Developing a Modern Slavery Risk
Scorecard for measuring effectiveness
of Michael Hill’s actions in assessing
modern slavery risk*
• 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
• Embedding ongoing cycle of audits
with our third-party independent
verification and audit partner on high-
risk suppliers.
• Undertake due diligence for
all suppliers
• Consideration of corporate structure
and alignment to business strategy
(e.g. B Corp certification)
• Ongoing RJC compliance monitored
through management attestation
confirming compliance with
relevant COPs.
• Establish a process for undertaking due
diligence for Tier 2 and 3 suppliers
• Reviewed new supplier onboarding
process and supplier scorecards,
including implementation of quarterly
business review processes with
suppliers conforming to adherence to
modern slavery, ESG and responsible
sourcing requirements.
• Established an Ethical Supply Chain
Assessment tailored to non-jewellery
industry suppliers
• Onboarding more suppliers
onto the supplier transparency
program. The focus was on categories
that involved human services or higher
risk industries (e.g. property, security,
maintenance, facilities management,
packaging, offshore vendors) and
marketing and digital/IT vendors.
This is representative of 30% of
Michael Hill’s supplier base and 85%
of total supplier spend.
• Recommenced the regularity
of supplier visits to high risk
production facilities.
• Developed remediation plans with
high risk supplier audits or cease
supplier engagement
• RJC certification to 2025– includes
improving compliance with COP 6
Human Rights in line with UN Guiding
Principles on Business and Human
Rights and COP 7 Due Diligence for
responsible sourcing from Conflict
Affected and High Risk Areas
• Established formal committee
for ongoing responsible
sourcing practices
• Modern Slavery Training for Michael
Hill staff in key sourcing and contract
management roles, an acceleration of
FY25+ target*
• Reviewed of current
grievance mechanisms
• Sustainability – core pillar of our
strategy and brand proposition
• All jewellery suppliers meet
‘responsibly sourced’ standards.
Target revised from: 80% of key
jewellery suppliers being RJC
certified in 2022 and 100% in 2026.
• Validating supplier certifications and
membership to confirm commitment to
social and environmental performance.*
• Revised anti-slavery contract terms
and conditions.
Legend:
Achieved
| Partially Achieved
| Continual Improvement*
30 MICHAEL HILL | 2023 ANNUAL REPORT
Supporting this is our responsible supplier platform,
providing us greater visibility and understanding of our
supply chain across both jewellery and non-jewellery
suppliers. This platform gathers information including:
• Supplier RJC membership status and products included
in their certification
CREATING OUR PRODUCT IN BRISBANE
Craftsmanship is one of the founding pillars, and deep in
the heritage of our business. Michael Hill first established an
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
• Other certifications and memberships held to
specialists and quality control professionals.
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
• Further transparency over the suppliers modern slavery
practices (e.g. training, protocols, resources responsible
for sustainable procurement)
• Details of our suppliers’ primary supply chain,
where applicable.
The platform has the capability to capture sustainability
information for gaining transparency into suppliers’
sustainability commitments as part of delivering our
sustainability strategy.
Any non-conformances from suppliers are taken seriously and
we will work with these suppliers to remediate in the first
instance and terminate relationships should they not uplift
their practices in line with our expectations.
Where possible, we believe it is important for our business
model and local communities to keep manufacturing
industries alive in the markets we operate, to support
local jobs and protect our supply chain from disruption.
Having our in-house workshop located alongside our
head office and 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 32 people, working locally in
Brisbane, Australia who hand make and bring our quality
Made in Australia pieces to life.
We have proudly partnered with TAFE Queensland to provide
employment opportunities for talented apprentices in the
jewellery trade. Our team is committed to keeping the
jewellery trade alive and have provided three apprentice
positions into our unique artisanal jewellery manufacturing
operations, with a further intake in the coming year.
• 81% of all solitaire engagement rings were Made in Australia
• Made in Australia product made up 13% of Michael Hill’s
international sales
• 26,839 individual products were made in our Australian
manufacturing facility
• 32 full time team members in our Australian
manufacturing team
MICHAEL HILL | 2023 ANNUAL REPORT 31
PRODUCT
In the past year, we have made solid progress towards more sustainable product offerings and business operations through
actively evolving our product ranges and we will see these changes come to fruition in FY24 due to production timelines.
Our suppliers are clear on our sustainable product goals and are actively working with us to develop and supply more
sustainable product jewellery options.
It is widely known proving product origin is a complex challenge across all industries, with the jewellery category no different.
With varied layers to our supply chain, from mine, refiner, producer, retailer then end-consumer – we are working to deepen our
understanding of our complete supply chain and ensure we can create as much transparency as possible.
We have previously mentioned that rapid and comprehensive industry change is required for us to achieve some of the product
goals outlined in our 2030 strategic direction; however, we have seen a sizeable shift in our industry over the past year, collectively
working to provide more responsible and sustainable solutions. We have been advocating for and requesting more responsible
product options from all our suppliers and have made key supplier and product decisions around what is being offered in our future
product ranges.
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, Metal Stewardship, and
Innovation, and we are confident this will be achieved within the ambitious timeframes we have committed to.
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 significant industry change, particularly within the coloured
gemstones and pearls industry, including responsible sourcing practices.
We have been working with our suppliers to develop a deeper understanding of our raw material supply chain, with product
supply chain mapping being developed across all ranges We are reliant on prevailing standards of due diligence, such as the
RJC’s Code of Practices standard, to help us carry out the necessary due diligence on our supply chain and we seek ESG-related
accreditation certificates from our suppliers wherever possible.
32 MICHAEL HILL | 2023 ANNUAL REPORT
NATURAL DIAMONDS
Conflict Free Diamonds:
Michael Hill remains committed to offering only conflict-free
diamonds in our jewellery. We will continue to 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,
and supply evidence, that the diamonds supplied to us
are conflict-free.
Path to Provenance:
We are continually keeping up to date with any provenance
improvements to purchasing a large volume of natural
diamonds in the market, noting the global standards
for sustainable natural/mined diamonds that have been
developed by SCS Standards and other natural diamonds
with clear provenance are becoming more readily available.
Challenges of proving provenance for bulk diamonds parcels
however are still relevant.
Origin program reflects their deep commitment to social
and environmental 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 education, and helping protect the
environment through 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:
1. Is a natural diamond, discovered by De Beers
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
Whist we are exploring other options to expand our path to
3. Is conflict-free and meets De Beers Code of Origin’s
provenance range for our customers, we continue to provide
our customers the De Beers Code of Origin range, our natural
diamond range with provenance for our customers.
industry-leading ethical standards
4. Has helped protect the planet through wildlife
conservation and De Beers’ commitment to be carbon
• De Beers Code of Origin: Partnering with De Beers,
neutral by 2030.
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
world-leader in diamond production, and the Code of
As part of our approved RJC recertification, Michael Hill has
made a certified provenance claim relating to the De Beers
Code of Origin range.
MICHAEL HILL | 2023 ANNUAL REPORT 33
“ We are committed to
providing new and innovative
services for our customers
whilst building a more
circular economy.”
KERRIE HOCKLESS,HEAD OF SUSTAINABILITY
34 MICHAEL HILL | 2023 ANNUAL REPORT
COLOURED GEMSTONES & PEARLS
RECYCLED GOLD & SILVER
There is limited guidance and inherent risk over sourcing
Throughout the year, several of our existing suppliers have
practices in the coloured gemstones and pearl industries in
started to offer certified recycled silver or gold which we
comparison to the diamond and precious metal industry.
can use to craft our products. We have been performing due
In response to limited available guidance, Michael Hill has
taken the initiative to develop a risk matrix which assesses
all coloured stones and pearls based on country of origin
in accordance with the Global Slavery Index, providing
intelligence to our sourcing teams about product and
diligence into these metal sources whilst considering how we
can bring these to market in our upcoming ranges. 96% of
our international sales are products made from gold and silver,
therefore these metal types remain our key focus to originate
from more sustainable sources.
sourcing locations to avoid, and the team has acted upon this
We will introduce both certified recycled gold and silver
matrix when sourcing and developing coloured stone ranges.
into our FY24 product mix to reduce our reliance on mined
The RJC provides standards of due diligence, such as the
Code of Practices, to help us carry out the necessary due
diligence on our supply chain, which we are heavily reliant on.
We recognise that the challenges relating to the sourcing of
coloured gemstones and pearls cannot be solved overnight.
However, using a risk-based approach, together with the
inclusion of specific questions relating to labour standards
on the supplier transparency platform, we hope to better
metals. To introduce these certified recycled metals to our
product mix, we have required full transparency from our
suppliers through formal certifications as well as in depth
detail around their supply chains and sourcing practices.
This is to ensure any product claims satisfy our high internal
legal and compliance standards as well as RJC provenance
claim requirements. For recycled gold or silver suppliers, this
includes ensuring suppliers:
understand at a supplier level the type of products supplied,
• Meet the RJC Chain of Custody certification or are on the
and their countries of origin. With this information we will
be in a better position to assess which suppliers might be
considered higher-risk.
METAL STEWARDSHIP
Michael Hill is committed to jewellery manufacturing using
conflict-free and responsibly sourced metals. Currently 71% of
our jewellery suppliers are RJC certified or are on the journey
to becoming 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 by 2025, however we will also be working to develop
journey to Chain of Custody certification; or
• 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.
We have several gold suppliers who are on the journey of RJC
Chain of Custody certification for precious metals (including
recycled gold and silver), 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
a deeper understanding of all our precious metal types.
At Michael Hill, we are taking the lead in innovative
CONFLICT FREE GOLD & SILVER
Michael Hill does not support activities which cause, support
jewellery product and services in the countries we operate.
The more we challenge the industry and our suppliers for
more sustainable products to sell to our customers, the more
or benefit armed conflict, contribute to human rights abuses or
dramatic the industry shift.
breaches of international humanitarian law, money laundering
and terrorist financing.
In order to comply with our commitments, we source through
suppliers who provide assurances that the precious metals
We have launched an internal Innovation Hub, involving a
group of passionate individuals who are abreast of global
movement in the category and are tasked with developing
new and innovative services and products for the future of
in their products are responsibly sourced and conflict free in
Michael Hill.
accordance with recognised responsible sourcing frameworks
maintained by leading industry bodies for precious metals,
such as the London Bullion Market Association, the Dubai Multi
Commodities Centre or the Responsible Minerals Initiative.
The standards protect the integrity of the global supply chain
for the precious metal markets.
We have established internal management systems and
due diligence processes to validate our suppliers’ responsible
sourcing practices, and we are confident we will source
100% conflict free all gold and silver in accordance with
our outlined goal.
Meeting quarterly, the Innovation Hub has already brought
many future thinking ideas around product sourcing
and circularity to the Group Executive team for future
consideration and rollout.
MICHAEL HILL | 2023 ANNUAL REPORT 35
RE:CYLE - OUR NEW CIRCULARITY PROGRAM
The definition for circular economy defined by the European Parliament is “a model of production and consumption, which
involves sharing, leasing, reusing, repairing, refurbishing, and recycling existing materials and products for as long as possible.
That requires a transition from the traditional linear economy where natural resources are extracted, used and ultimately
discarded to an economic system that does not rely on virgin resources and reshapes how products are made, used and
recovered”. Michael Hill sees the circular economy playing a big part in the jewellery industry in the future and are committed to
introducing circularity wherever possible.
Due to the inherent fungible and circular nature of fine jewellery materials, precious metals used to craft jewellery can be refined
and recycled repeatedly, without losing their value or purity. We are fortunate to work with materials which allow us to provide
innovative services whilst building a more circular economy. We passionately believe this is something our industry should be
tapping into, to protect our planet’s precious natural resources, leading to a more sustainable and ethically responsible future.
Providing circularity services to our customers provides a dual opportunity – to reduce our environmental impact and the reliance
on virgin materials, as well as provide more service opportunities for our customers over the lifetime relationship with our brand,
and their product.
Our new exciting gold recycling program, “Re:cycle”, is the first phase of our new sustainable jewellery ecosystem which focuses
on the renewal and circularity of existing gold products. Through this program, we are encouraging all Australians to give “new life
to their old loves”, by recycling any broken, old, or no longer worn gold jewellery pieces in exchange for a Michael Hill gift card,
to purchase a new piece online or instore. With no clear competitor offering a premium gold recycling service, we chose to
lead the industry and create an innovative and market-first national program that provides genuine value to customers for their
gold products.
Through reputable global research, we know that recycling 1g of pure gold can reduce an estimated 3 tonnes of ore extraction
and avoid up to 16kg of carbon emissions. This program allows us and our customers to contribute towards reducing the need for
virgin-mined gold while reducing mining ore and carbon emissions. After a customer’s gold is recycled, we send a personalised
email which includes the individual amount of mining ore and carbon emissions they have helped avoid thorough recycling their
gold pieces.
From early April until the end of July 2023, the Re:cycle program has delivered:
• Pure gold recycled: 1,192 grams
• 2734.18 grams of gold alloy received
• Mining ore avoided: 3,575 tonnes
• Carbon emissions saved: 19,068 kilograms
EXTENDING PRODUCT LIFE THROUGH REPAIRS
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 in New Zealand
we offer repairs on any jewellery products, working with global partners to repair and restore even the most precious jewellery
back to life.
This year Michael Hill has repaired over 401,641 pieces of jewellery for our customers, preventing waste and extending each
product’s lifespan.
THE HIGHEST STANDARD IN LABORATORY GROWN DIAMONDS
Michael Hill is still one of the few global retailers to become an Accredited Retailer for SCS-007 Certified Sustainability Rated
Laboratory Created Diamonds, and in the past year have received a raft of positive global press acknowledging the innovative and
sustainable nature of this new product we offer our customers.
Sales of this product have increased to 7.7% of our overall diamond mix while attracting a new sustainability-conscious customer to
our brand. We see our certified sustainability rated laboratory-grown diamonds providing our customer the 5th C when purchasing
a diamond – Choice. We will be expanding this range of laboratory-grown diamonds in FY24.
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 are certified on their journey toward achieving full Climate Neutrality –
produced in a manner that mitigates both current annual and past (“legacy”) greenhouse gas emissions still affecting the climate
36 MICHAEL HILL | 2023 ANNUAL REPORT
• 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
• Sustainability investments: Sustainability Rated Diamond producers engage in sustainability investments that help uplift artisanal
and small-scale miners 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 | 2023 ANNUAL REPORT 37
PLANET
Our 2030 strategic vision 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. Since announcing these goals in August 2022, we have made great traction measuring our carbon and waste and
have crafted a clear roadmap on how we aim to achieve our goals.
The 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 baselines, and reduction targets.
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 reduce natural resource consumption in our operations and find innovative ways to reduce the amount of
residual waste.
ZERO CARBON OPERATIONS
We are committed to consistently searching for better ways to operate, and to benefit and reduce our impact on the environment.
We have acted in the past year towards our ambition for our Scope 1 and 2 operations to be Net Zero Carbon by 2025.
Issues around the climate crisis are well comprehended across business, political and social agendas around the world.
Our customers, suppliers and team expect us to act and address the risk of climate change to our business and reduce the
impact of operating our business on the climate.
We note the release of Treasury’s consultation on climate-reporting disclosure standards in Australia, which will be based on
the International Sustainability Standards Board’s IFRS S2 Climate-related Disclosures standard. Guidance from the Australian
Accounting Standards Board, to be released later in 2023, will provide clear direction on what Michael Hill needs to report, and
by when. As we await the final standards, we are following the Green House Gas (GHG) Protocol, with guidance from our local
regulatory agencies.
38 MICHAEL HILL | 2023 ANNUAL REPORT
SCOPE 1, 2 AND 3 PROGRESS:
Scope 1 and 2:
• A team has been tasked to identify and calculate the Group’s Scope 1 and 2 emissions. Work continues to capture and calculate
all of the Group’s emissions in these categories with significant progress achieved in the past year.
• Scope 2 emissions are being calculated across our entire store network in the markets we operate (AU, NZ, and CA). We are
confident that by the next annual report period we will have all Scope 2 emissions calculated.
• August 2022 saw the Michael Hill Brisbane Head Office move to a state-of-the-art facility which has environmental considerations
throughout many design elements. The building features a 99KW solar panel system to reduce energy consumption, water tanks
to capture rainwater to be used in the building’s facilities systems for all landscaping, insulated glass to reduce heat loss and
gain, as well as efficient LED lighting all aimed at reducing environmental impact. Through this move to a more environmentally
conscious building, we have reduced our Head Office energy consumption by 39% from the first full month of moving in.
• To support our existing solar energy generation, our Brisbane Head Office Energy supply will become 100% renewable energy
in 2024.
• We also aim to make our Head Office a Net Zero operation in 2024, supported by fully accredited net-zero emission energy
supply and offsetting residual unavoidable emissions.
• Michael Hill has entered renewable energy supply arrangements in New Zealand to ensure all NZ stores’ energy consumption is
from 100% certified renewable energy sources in 2024.
• We are currently addressing solutions with key stakeholders including landlords around the use of renewable energy for our
store electricity consumption. Landlords such as LendLease, Scentre Group, GPT and Vicinity provide various renewable energy
plans for retailers to use. These opportunities will continue to be assessed over the coming financial year.
Scope 3:
• Our focus since announcing our Net Zero goal has been on calculating and reducing our Scope 1 and 2 emissions, however we
are seeking to engage our supply chain partners about their plans to reduce their emissions in the coming year.
We are pleased with our progress towards our ambition of Net Zero carbon operations for Scope 1 and 2 by 2025.
AUSTRALIA HEAD OFFICE ELECTRICITY CONSUMPTION
SE PT EMBER
OCTOBER
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FY23
NATURE POSITIVE
The 2022 WWF Living Planet report states that land-use change is still the biggest current threat to nature, destroying or
fragmenting the natural habitats of many plant and animal species on land, in freshwater and in the sea. Its most comprehensive
finding to date shows an average 69% decline in the relative abundance of monitored wildlife populations around the world
between 1970 and 2018. We accept that our business operations, along with many others, 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 recognises the impact that 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 manifesto, we are committed to contributing to the restoration and conservation of the natural environment
in our key markets and plans are underway to launch a program around this in FY24.
MICHAEL HILL | 2023 ANNUAL REPORT 39
40 MICHAEL HILL | 2023 ANNUAL REPORT
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.
Eliminating waste across our entire business has required extensive auditing across all our touchpoints to collate and measure our
current baseline waste data. We are confident of the type and quantities of waste we are producing across our entire business and
are using a structured waste hierarchy to minimise and divert all waste possible.
We are consistently training and educating our internal departments on waste management and making changes wherever
possible to reduce our waste and, in turn, our impact on the environment.
HEAD OFFICE WASTE VOLUME
SE PTEMBER
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REDUCING OUR HEAD OFFICE WASTE
REDUCING OUR WASTE IN STORES
In moving to our new Head Office at Cannon Hill, we have
Store waste can come from several areas including, general
made significant changes in our approach to waste resulting in
waste, packaging / transportation waste and store de-fit
a reduction of 65%. This reduction is due to several initiatives
waste. We are actively conversing with our landlords to
being implemented across our daily operations including:
ensure we are adhering to their waste policies across our
• Purchasing a metal crusher in our Brisbane Distribution
Centre, to flatten and recycle all aluminum containers our
network and educating our team members on the importance
of their adoption.
overseas suppliers transport our product in, rather than
Our landlords are also actively involved in developing
send to landfill.
• Reducing printing stations across the office, while
introducing hot desk working environments with
limited storage.
innovative de-fit strategies for closed stores adopting the
waste hierarchy, however further adoption and innovation is
required in this space.
We are currently in the final stages of designing our “Store of
•
Introducing a new segregated waste management
the Future” – a new store design for future Michael Hill stores
system including general recycling, organic waste, paper
and are implementing our waste hierarchy into these designs
cardboard recycling and general waste sections with clear
from inception through contemplating the end of life for each
labelling in all waste areas.
of the materials used.
PRODUCT WASTE
We aim to use materials in this design from as much recycled,
sustainable, or eco-friendly materials as possible.
We are fortunate to work with precious metals that can
readily contribute to the circular economy and be reused
A MEMBER OF APCO
many times over without losing their value. Our product waste
from manufacturing processes, including aged stock, is well
managed to ensure minimal waste. Michael Hill is also proud
to offer services for our customers to manage the end-of-life
journey for their preloved products, including repairs or gold
recycling under our Re:cycle program, to reduce waste to
landfill. We are exploring other innovative services for our
customers to trade up their preloved items and reduce the
need for more virgin materials in the industry.
TECHNOLOGY WASTE
Through upgrading some of our store technology, we worked
with our partner Truis to donate and repurpose 90 iPads
in November 2022. The iPads were wiped, upgraded and
donated to 3 Brisbane schools (Richland, Darra and Carol Park
State Schools) to use for primary school students’ education.
Michael Hill is an Australian Packaging Covenant (APCO) Brand
Owner Member, ensuring we meet regulatory obligations
under the National Environment Protection Measure
2001 (NEPM) and as a commitment towards reducing the
environmental impact of our packaging. As a member we
have access to the Sustainable Packaging Guidelines (SPGs), a
government-supported, national resource for packaging best
practice, and have started to implement recommendations
across our business.
MICHAEL HILL | 2023 ANNUAL REPORT 41
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
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
background in retailing, fashion, and brand development in
& Operations Director (Menswear).
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.
ANDREW LOWE
CHIEF FINANCIAL OFFICER &
COMPANY SECRETARY
Andrew joined Michael Hill in 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
During his time at Specialty Fashion Group, Daniel led
of Australia.
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.
42 MICHAEL HILL | 2023 ANNUAL REPORT
Andrew has extensive experience in corporate governance,
mergers and acquisitions, finance and leadership roles across
a range of listed corporate groups with Australian and offshore
operations, including roles with Aurizon, Cleanaway Waste
Management and Anglo American.
JOANNE MATTHEWS
CHIEF PEOPLE OFFICER
Joanne joined Michael Hill in January 2019 with extensive
experience in change leadership, and talent management and
development. This experience was gained across 14 years in
senior human resource leadership roles, including as Divisional
Human Resources Manager (Leisure) for Super Retail Group.
Joanne has also worked as the Executive General Manager,
Human Resources for MAX Solutions Pty Ltd, a national
organisation that delivers health, training and humanitarian
solutions for Federal and State Governments, and prior to this
she worked in retail operations with Woolworths. With a large
workforce 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 over 25 years’ leadership experience, across retail
and beauty industries, having worked with prominent retail
brands such as Witchery, GAP, Bras n Things, Guess Jeans and
Aldo. She has led the roll out of over 200 new retail stores in
Australia, New Zealand and Singapore and was named 2006
Australian Young Business Woman of the Year at the Telstra
Business Women’s Awards.
Amy’s extensive career in specialty fashion retailing has built
a broad skill set that goes beyond store operations. She has
worked as an Executive Leader in privately owned, private-
equity controlled, and listed organisations. 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
Matt joined Michael Hill in June 2015, bringing with him
extensive international IT experience in the retail space.
Prior to joining the company, Matt led the global IT strategy
for Forever New as their General Manager Information
Technology, and prior to that worked as Chief Information
Officer for Super Amart where his final project was successfully
leading a full-scale disaster recovery process after the
Queensland floods in 2011. He also worked for leading national
footwear and apparel company, Colorado Group after
enjoying his long retail apprenticeship with 11 years at Country
Road, where he worked initially as a Finance Accountant, and
also gained solid shop floor experience during his tenure.
Matt has strong technical skills and a track record of
developing an effective team focused on business alignment.
Matt’s career has seen him lead significant technology and
infrastructure programs, covering Microsoft Dynamics, Infor,
Oracle and JDE. He has helped retail businesses implement
and embrace data warehousing with his first Microsoft based
implementation as far back as 2004. The Michael Hill advanced
data warehouse went live in 2016 and his team continually
evolve our data platforms to align with the strategic shifts
across the business.
KEITH LOUIE
CHIEF DIGITAL OFFICER
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.
More recently, Keith has advised various listed, private
and Government entities on eCommerce and digital
transformation, building on his earlier experience as a Director
and Associate Partner of management consulting firm PwC,
and with IBM’s Global Business Solutions team. Keith is known
for innovative ideas, thinking strategically, applying a rigorous
commercial lens, and taking action to transform businesses
digitally. In doing so, he inspires the teams he leads to deliver
change and improve customer experiences.
JO 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
global organisations (including Woolworths, Telstra, Foxtel
and McDonald’s), specialising in strategic brand building, end
to end marketing communications and driving key customer
growth strategies across channels. In her most recent role
as Director of Marketing at McDonald’s Australia, she was
responsible for marketing, brand and media strategies
and driving commercial growth through innovation and
re- imagination of the brand. Jo is also a recognised leader
in creativity – winning multiple awards both locally and
internationally. She brings a fresh approach to driving the future
growth of the brand through a lens of commercial creativity.
MICHAEL HILL | 2023 ANNUAL REPORT 43
“
Even though FY23 was a
particularly challenging
year, the team remained
focused, executed on
our strategy, delivered a
plethora of initiatives, and
successfully acquired a new
brand, Bevilles”
ROB FYFE, CHAIR
44 MICHAEL HILL | 2023 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 2 July 2023. FY23 is a 53-week period (27 June 2022 to 2 July 2023)
compared to FY22 a 52-week period (28 June 2021 to 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 26 June 2022 of 4.0 cents (2021: 3.0 cents) per fully paid share
paid on 23 September 2022 (2021: 24 September 2021)
Interim dividend for the year ended 2 July 2023 of 4.0 cents (2022: 3.5 cents) per fully paid share
paid on 24 March 2023 (2022: 25 March 2022)
The directors have declared the payment of a final dividend of 3.5 cents per fully paid ordinary
share (2022: 4.0 cents). The final dividend will be unfranked for Australian purposes, with nil
2023
$’000
2022
$’000
15,531
11,649
15,188
13,590
New Zealand imputation credits and with conduit foreign income. The aggregate amount of the
13,289
15,531
proposed dividend expected to be paid on 22 September 2023 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 | 2023 ANNUAL REPORT 45
REVIEW OF OPERATIONS
The Group achieved the following key outcomes for the 2023
FY23 - GROUP BUSINESS
PERFORMANCE
financial year:
KEY FINANCIAL RESULTS
• Group operating revenue increased by 5.8% to $629.6m
(2022: $595.2m, 2021: $556.5m).
The Group has reported operating revenue of $629.6m (2022:
$595.2m) for the 2023 financial year (53-week retail financial
year ended 2 July 2023). Comparable EBIT* for the Group was
reduced to $58.9m for the year (2022: $62.9m), a decline of
6.3% year on year, due to higher COGS pressure, wage inflation
• Comparable EBIT* decreased by 6.3% to $58.9m
and elevated New Zealand security costs.
(2022: $62.9m), given inflationary cost pressures and
substantial investments in New Zealand security measures.
This compares favourably to FY21 by 4% (2021: $56.6m).
• Group gross margin decreased by 50 bps to 64.2% (2022:
64.7%), yet 150 bps ahead of FY21 (62.7%).
• Statutory net profit after tax decreased to $35.2m (2022:
$46.7m), with the variance to comparable EBIT performance
largely driven by AASB 16 Leases and IFRIC SaaS.
• Healthy inventory position to support elevated sales
While the Company delivered record revenue for the year,
this was driven by a particularly strong first half performance,
followed by a more challenging second half as macroeconomic
conditions deteriorated and consumer confidence declined.
Notwithstanding the impact of sustained elevated raw material
input costs (diamonds and gold), and while slightly down on
prior year, the Company still delivered strong gross margins.
This performance was underpinned by the aspirational brand
strategy and the ability to elevate ATV even in a challenging
at $203.3m (2022: $181.5m), with the increase mainly
retail environment.
attributable to the Bevilles acquisition.
• Deployment of cash on share buy-back, dividends, the
Bevilles acquisition and reinvestment in the business,
resulted in a net cash position of $8.4m (2022: $95.8m).
Whilst the Company’s digital channels declined in the first
half as it cycled the pandemic digital surge, there was a
strong return to growth in the second half driven by improved
customer experience, traffic and conversion. Throughout the
• A three year $90m banking facility was finalised on
year, the Company has continued to make good progress in its
favourable terms in June, providing access to an additional
various omni-channel offerings, with 50% of digital sales now
$20m, to support strategic growth initiatives.
being fulfilled via a store.
• Final dividend of 3.5 cents per share declared, delivering
In August 2022, the Company executed a seamless
total dividends for the year of 7.5 cents per share (2022: 7.5
relocation of its global headquarters to new purpose-built
cents per share).
OPERATIONAL PERFORMANCE
leased premises housing the global support functions,
reimagined artisanal jewellery workshop and a state-of-the-art
Australasian distribution centre. These new premises provide
• Group revenue was up 5.8% for the year, with Australia +9.1%,
a contemporary, dynamic and productive environment,
New Zealand +5.8% and Canada flat.
strategically aligned to Michael Hill’s aspirational brand journey.
• Digital sales were largely flat at $41.3m (2022: $41.9m, 2021:
$34.0m) for the year, demonstrating a strong second half
recovery from -9% at the end of the first half.
On 1 June 2023, the Company completed the Bevilles
acquisition, successfully transitioning all team members, stores
and inventory to the Group. Accordingly, four weeks of Bevilles
• Brilliance by Michael Hill membership now over 2 million
trade are reflected in the Group and Australian segment results.
(2022: ~1.4 million members), driving repeat customers and
higher ATV.
• Key initial focus for Bevilles is on integration and store roll
Inventory year-end holdings were $203.3m (2022: $181.5m), with
Michael Hill on target and broadly in line with prior year. The lift
in stock holdings was largely driven by the inventory acquired
outs, with three sites secured and another three sites close
in the Bevilles transaction.
to finalisation for pre-Christmas opening, with a further
tranche of sites already identified for the second half.
The newly acquired Bevilles business contributed four
weeks of sales to the FY23 Group result.
• For Michael Hill, three new stores opened (AU: 2, CA: 1) and
five under-performing stores permanently closed (AU: 3, NZ:
2) during the year. With the inclusion of 26 acquired Bevilles
stores, the store network totals 304 across all markets at the
end of the year (2022: 280).
During the year, the Company benefited from strong operating
cashflows, successfully acquired Bevilles, returned capital to
shareholders through a buy-back and dividends, continued
investment in both the core business and growth initiatives,
which resulted in a year end net cash position of $8.4m (2022:
$95.8m). Furthermore, the Company refinanced a three year
$90m bank facility on favourable terms, which will support
future strategic growth initiatives.
Michael Hill opened three new stores (AU: 2, CA: 1) and closed
five under-performing stores across the network (AU: 3, NZ:
2) during the year. With the inclusion of 26 acquired Bevilles
stores, the store network totals 304 across all markets at the
end of the year (2022: 280).
*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.
46 MICHAEL HILL | 2023 ANNUAL REPORT
SEGMENT RESULTS
FY23 delivered strong results in all markets, despite cycling record results in FY22 and facing challenging economic market
conditions during FY23H2.
The results below are expressed in local currency.
AUSTRALIAN RETAIL PERFORMANCE
Operating Results (AU $’000)
2023
2022
2021
2020
2019
Revenue
Gross profit
Gross margin
Comparable EBIT
Comparable EBIT as a % of revenue
Number of stores
331,007
303,409
312,264
266,610
313,587
211,823
196,936
194,148
161,030
194,052
64.0%
53,549
16.2%
172*
64.9%
51,750
17.1%
147
62.2%
54,347
17.4%
150
60.4%
27,641
10.4%
61.9%
32,626
10.6%
155
167
Retail segment revenue increased by 9.1% to $331.0m for the year.
In addition to a record sales performance, the segment also delivered a strong gross margin for the year of 64.0%, slightly down on
prior year (FY22: 64.9%), yet up 210 bps on pre-pandemic levels (FY19: 61.9%).
*During the year, two stores opened, and three under-performing stores closed, resulting in 172 stores (including 26 Bevilles stores)
at year end (FY22: 147).
NEW ZEALAND RETAIL PERFORMANCE
Operating Results (NZ $’000)
2023
2022
2021
2020
2019
Revenue
Gross profit
Gross margin
Comparable EBIT
Comparable EBIT as a % of revenue
Number of stores
132,359
125,090
127,067
106,696
120,064
81,961
79,288
78,771
63,641
73,011
61.9%
25,622
19.4%
46
63.4%
30,130
24.1%
62.0%
35,119
27.6%
59.6%
21,067
19.7%
60.8%
24,125
20.1%
48
49
49
52
Retail segment revenue increased by 5.8% to NZ$132.4m for the year.
Gross margin for the year was 61.9% (FY22: 63.4%), largely attributable to the higher penetration of diamond sales in this market.
This result was still 110 bps above pre-pandemic levels (FY19: 60.8%).
New Zealand earnings were directly and adversely impacted by a ~$5m investment required to be made for uplifted and ongoing
security measures to protect our team, customers and stores. Additionally, impacted stores experienced softer sales in the period
immediately following an incident.
During the year, two under-performing stores closed, resulting in 46 stores at year end (FY22: 48).
MICHAEL HILL | 2023 ANNUAL REPORT 47
CANADIAN RETAIL PERFORMANCE
Operating Results (CA $’000)
2023
2022
2021
2020
2019
Revenue
Gross profit
Gross margin
Comparable EBIT
Comparable EBIT as a % of revenue
Number of stores
158,894
159,661
118,445
110,799
133,146
100,531
103,623
72,643
63,991
80,726
63.3%
64.9%
61.3%
57.8%
60.6%
27,110
17.1%
86
28,785
12,320
(2,412)
18.0%
10.4%
(2.2%)
85
86
86
9,797
7.4%
86
Retail segment revenue was CA$158.9m for the year, largely flat to prior year.
Gross margin declined to 63.3% for the year, as the segment cycled a record gross margin in FY22 (64.9%). This result was still 270
bps ahead of pre-pandemic levels (FY19: 60.6%).
The overall performance of this segment is a credit to the strategic focus placed on Canada in recent years. With strong and
refreshed leadership, brand awareness continues to increase, and productivity metrics have lifted significantly.
During the year, one store opened, resulting in 86 stores at year end (FY22: 85).
CAPITAL MANAGEMENT
DIVIDENDS AND SHARE BUY-BACK
Taking into consideration the Group's performance and strength of balance sheet, the Board has decided to declare a final
dividend of 3.5 cents per share, unfranked for Australian purposes, with nil New Zealand imputation credits and with conduit
foreign income.
This delivers a total dividend for the year of 7.5 cents per share, representing ~70% of adjusted annual NPAT, and at the higher end
of the Group's Dividend Distribution Policy target range of 50% to 75%.
Subject to the Company’s ongoing trading performance and growth plans, the Board’s intention is for dividends to remain at the
higher end of the target range.
The Company commenced its on-market share buy-back on 19 September 2022, which was paused on 21 November 2022.
The directors have decided to discontinue the buy-back. Under the buy-back, the Company acquired 8,631,237 shares (ASX
4,350,875; NZX 4,280,362), being 2.2% of Company's shares on issue at the commencement of the buy-back, at a total cash cost of
A$10,206,543. The total number of shares on issue following the completion of the on-market share buy-back was 379,688,884.
GROUP STRATEGY
EMPHASIS ON GROWTH
As the Michael Hill brand continues its aspirational brand journey to a more premium position, the acquisition of the Bevilles
business in late FY23 provides a vehicle to take market share at the value end of the fine jewellery category. Additionally, in the first
half of FY24, the Company will launch its new bespoke brand TenSevenSeven, focused on servicing the high-end of the market with
its unique personalised diamond ring proposition.
With these additional brands, the Michael Hill Group now services all significant customer segments of the fine jewellery category,
and delivers multiple new growth pipelines.
The Bevilles brand will deliver both sales and profit growth through a significant real estate expansion strategy, coupled with digital
growth and an optimised business model. For FY24, three sites have been secured and another three sites are close to finalisation
for pre-Christmas opening, with a further tranche of sites already identified for the second half. Leveraging group capabilities
and partnerships, Bevilles will benefit from optimisation of both supply chain and vendor relationships delivering margin and cost
benefits to the business. With system integration planned for the second half of FY24, this will drive further opportunities in both
productivity and efficiencies by leveraging a common technology platform.
TenSevenSeven is a new start-up brand designed to test a completely unique and elevated proposition, capturing an entirely new
high-end customer. The brand will be brought to life through an immersive digital experience supported by the gradual roll-out of
a limited number of showrooms in key capital cities. Customers will be invited to select from thousands of unique diamonds, paired
with a ring design of their choice and ultimate handcrafting in our artisanal Australian workshop.
The Michael Hill brand continues to deliver growth through its elevated brand strategy driving higher productivity and strong
margins across all channels.
48 MICHAEL HILL | 2023 ANNUAL REPORT
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 focusing on
key life moments, with an emphasis on product, quality and
craft, are leading the transition away from price and promotion,
towards emotional long-term customer relationships.
The Brilliance by Michael Hill loyalty program underpins
customer engagement and has now grown to over two
million members.
2. Digital & Omni-channel
Michael Hill’s digital transformation continues with a
shift to a new headless website architecture, providing
greater flexibility, productivity and improved customer
experience. The role of our digital platforms is not only to
serve as a transactional channel but also to provide product
education, and brand messaging to drive traffic to our
physical stores. More than half of our online transactions are
now fulfilled from stores, and with data insights show a large
proportion of our instore sales originate from online and
digital marketing, demonstrating the success of the Michael
Hill's omni-channel strategy.
3. Retail Fundamentals
Bricks and mortar retail is at the core of the Michael
Hill business, driving more than 90% of sales. The retail
fundamentals strategy has delivered a 21% lift in productivity
per store over the last four years. During FY23, the business
invested in refreshing a significant portion of our store network
as we elevate the instore experience to align with the brand
strategy. The retail team continues to focus on productivity as
the key performance metric for stores, in conjunction with a
deliberate emphasis on lifting average transaction value.
4. Product Evolution
Product evolution is at the centre of a customer-led retail
strategy, and is critical to achieve sales growth and support
elevated margin. The laboratory grown diamond category
continues to expand, with higher sales growth and margins,
helping to offset high input costs for both mined diamonds
and gold. During the course of the year, the business invested
in new talent and capability across product, buying, sourcing
and procurement, as well as technology investments in
merchandise planning. The Michael Hill artisanal Australian
manufacturing facility was upgraded as part of the move
to new global headquarters, optimising both production
and costs.
5. New Territories & Services
As the business shifts from transformation to growth, the
opportunity to stretch the brand into new territories and
services is a key focus. The Michael Hill marketplace strategy
has continued, building on partnerships in all three core
markets, and now available in both Singapore and Malaysia
through a new partnership with Zalora. Following strong early
insights from The Bay in Canada, michaelhill.ca now has a dual
language offering to engage with French speaking customers
in both Quebec and across the country, and early signs are
very promising. The pure-play Medley business, while still
relatively small, delivered sales growth of 31% on last year,
and continues to test and trial new products in the demi-fine
jewellery category.
During the year, the Group developed a number of new
digitally-led services offerings: the new bespoke brand,
TenSevenSeven; the new gold recycling platform, Re:cycle;
and the ability to introduce jewellery insurance to customers
in Australia. Furthermore, the Company is in the process of
reinventing its repair service offering, initially with the creation
of an app to modernise and improve customer experience,
with the end goal of creating a seamless repair business to
drive incremental revenue.
6. Cost Conscious Culture
During the year, the Michael Hill business successfully
relocated its global headquarters including its Australasian
distribution centre. This new state-of-the-art distribution
centre is technology enabled and has generated significant
efficiencies in processing stock, fulfilment to stores and
delivery to customers. The embedded cost conscious culture
continues, with an absolute focus on cost discipline, inventory
and working capital management. In particular, the business
has invested in technology to support labour optimisation and
rostering to ensure targeted productivity levels can
be achieved.
7. Sustainability
In August 2022, Michael Hill announced its ESG manifesto for
2030, centered around three key pillars – People, Product and
Planet, with more detail in the Annual Report. An integral part
of this strategy is the launch of a circular jewellery ecosystem,
Re:new. During the year, the first phase was launched via
Re:cycle – a digitally enabled gold recycling program, that
encourages customers to give “new life to their old loves”,
by recycling gold jewellery pieces in exchange for a Michael
Hill gift card. The second phase, Re:store, will focus on
jewellery repairs, and the third phase, Re:imagine, a
diamond upgrade program.
MICHAEL HILL | 2023 ANNUAL REPORT 49
50 MICHAEL HILL | 2023 ANNUAL REPORT
RISK MANAGEMENT
The Board believes that a strong risk management framework supports the Group’s growth and success. The Group regularly
reviews its risk environment and has identified the following at risk areas and mitigating strategies:
RISK
STRATEGIES AND MITIGATION
Global uncertainty due to
changing political landscapes and
increased sanctions of raw materials
creates volatility for the Group’s
operating environments
Increase in cyber-attacks disrupting
operations and increased reliance on
third-party platform providers to have
robust cyber controls
Theft appeal of our product increases
during periods of financial hardship
and uncertainty
The Group has a growth strategy that embraces omni-channel expansion and strategic
acquisitions in markets that limit cannibalisation of sales and focusses on improving the
customer experience.
Furthermore, there is executive oversight of all drivers, both internal and external, and prudent
policy execution to adjust accordingly.
There are several sourcing options that are employed, including forward planning and securing
core ranges to curb the impact of rising prices of raw materials and to ensure financial exposures
are well managed.
The Group has tasked the Technology Governance Committee to oversee its response to cyber
risk 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.
The safety and security of our staff and customers is our most important priority. We are investing
in initiatives and processes which improve the overall security of our stores and contribute to
the safety of our staff and customers. We are working with both local and national law
enforcement bodies and other external parties to better the overall retail environment for our
staff and customers.
With the ongoing escalation of theft and violence in New Zealand, the Group continues to have
a dedicated executive led taskforce responding to these challenges and continue to implement
appropriate actions.
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.
There are dedicated workstreams supporting each of our pillars of people, planet and product.
Sustainability goals and supply
In the product and people pillars, the Group is working closely with our key suppliers across
chain transparency
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 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
Talent acquisition and retention in
business. These include succession planning, reviewing pipeline of external recruits and mentoring
increasing regulated markets and higher
and coaching of staff to promote internally.
competition for resources
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 in one of our
jurisdictions in an increasingly complex
compliance environment
The Group has in-house legal and compliance teams who are focused on compliance in our
three markets and utilise external firms for specialised advice when required. Any new legislative
requirements or rectification initiatives have dedicated teams focused on ensuring our compliance
and training our teams appropriately.
MICHAEL HILL | 2023 ANNUAL REPORT 51
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:
• 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:
Impact of IFRIC SaaS-related guidance
Employee restructure costs
Bevilles acquisition transaction costs
Less items relating to:
Impact of AASB 16 Leases
Government grants received (AU, NZ, CA)
Comparable EBIT
2023
$’000
58,883
7,356
734
1,960
(10,044)
-
58,889
2022
$’000
73,236
5,986
-
-
(13,489)
(2,864)
62,869
ENVIRONMENTAL REGULATIONS
The Group has determined that no particular or significant environmental regulations apply to it.
52 MICHAEL HILL | 2023 ANNUAL REPORT
From left: Jacqueline Naylor, Robert Fyfe, Daniel Bracken, Emma Hill, David Whittle, Sir Michael Hill and Gary Smith
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 and board experience in various retail businesses operating in New Zealand, Australia and Great Britain,
across sectors including retail banking, telecommunications, pay television, sport, manufacturing and outdoor apparel. In 2015
Rob was awarded an Honorary Doctor of Commerce from University of Canterbury and 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
DIRECTORS’ INTERESTS IN SHARES AND OPTIONS
• Chair
• Non-Executive and Independent Director
1,953,578 Ordinary Shares
• Member of ARMC
• Member of PDRC
SIR RICHARD (MICHAEL) HILL
K.N.Z.M.
Sir Michael is the founder of Michael Hill, and his visionary leadership has been the foundation for the Company’s successful
international expansion. 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 led the Group as Chairman from 1987 until 2015 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 on the New
Zealand Stock Exchange. 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
DIRECTORS’ INTERESTS IN SHARES AND OPTIONS
• Non-Executive Director
148,330,600 Ordinary Shares
MICHAEL HILL | 2023 ANNUAL REPORT 53
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
DIRECTORS’ INTERESTS IN SHARES AND OPTIONS
• Non-Executive Director
• Chair of PDRC
GARY SMITH
B.Com, F.C.A., F.A.I.C.D.
167,487,526 Ordinary Shares
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 across a range of boards and tourism related industry
bodies. 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-committees. 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
DIRECTORS’ INTERESTS IN SHARES AND OPTIONS
• Non-Executive and Independent Director
80,000 Ordinary Shares
• Chair of ARMC
• Member of PDRC
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
DIRECTORS’ INTERESTS IN SHARES AND OPTIONS
• Non-Executive and Independent Director
160,000 Ordinary Shares
• Member of ARMC
DAVID WHITTLE
B.A., B.Com
Dave has considerable brand, data, technology, omni-channel retail and digital transformation experience. He is a Founder of Lexer,
a global software company helping brands and retailers genuinely understand and engage their customers. In 2015, Dave became
the youngest ASX 200 Non-Executive Director when he joined the board of Myer. Previously, Dave spent 10 years with global
advertising group M&C Saatchi in a number of local and international leadership roles, culminating in three years as Managing
Director in Australia. Prior to joining M&C Saatchi, Dave was the first employee of a marketing services group that built four
digital service and software businesses.
SPECIAL RESPONSIBILITIES
DIRECTORS’ INTERESTS IN SHARES AND OPTIONS
• Non-Executive and Independent Director
Nil
54 MICHAEL HILL | 2023 ANNUAL REPORT
DANIEL BRACKEN
Daniel joined the Company as the CEO in November 2018 and was appointed to the Board in June 2021. 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
DIRECTORS’ INTERESTS IN SHARES AND OPTIONS
• Managing Director
• Chief Executive Officer
201,869 Ordinary Shares
4,331,046 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.
MEETINGS OF DIRECTORS
The numbers of meetings of the Company’s Board of Directors and of each Board committee held during the year ended 2 July 2023,
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
A
15
12
15
13
15
-
15
B
15
15
15
15
15
-
15
A
5
-
-
5
5
-
-
B
5
-
-
5
5
-
-
A
7
-
7
7
-
-
-
B
7
-
7
7
-
-
-
R I Fyfe
Sir R M Hill
E J Hill
G W Smith
J E Naylor
D Whittle*
D Bracken
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
*D Whittle was appointed as director subsequent to balance sheet date.
COMMITTEE MEMBERSHIP
As at the date of this report, Michael Hill International Limited has an Audit and Risk Management Committee and a People
Development and Remuneration Committee.
AUDIT AND RISK
MANAGEMENT COMMITTEE
Gary Smith (Chair)
Robert Fyfe
Jacqueline Naylor
PEOPLE DEVELOPMENT AND
REMUNERATION COMMITTEE
Emma Hill (Chair)
Robert Fyfe
Gary Smith
MICHAEL HILL | 2023 ANNUAL REPORT 55
AUDITED REMUNERATION REPORT
The directors present the 2023 Michael Hill International Limited remuneration report, outlining key aspects of our remuneration
policy and framework, and remuneration awarded during FY23. 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,
As a result of the benchmarking the CEO’s base salary
increased by 4.50%, STI potential as a percentage of total fixed
remuneration reduced by 13% and LTI potential increased by
42%. The CFO’s base salary increased by 4.96%, STI potential
as a percentage of total fixed remuneration increased by 1%
On behalf of Michael Hill Group, I am pleased to present the
and LTI potential increased by 7.5%.
FY23 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 several years Michael Hill Group has
achieved significant growth and transformation on the journey
to become a high performing, modern, differentiated, omni-
channel jewellery group. In FY23 however, the
Group experienced a decline on FY22 in Comparable EBIT.
This decline can be attributed to higher COGS pressure,
wage inflation and elevated New Zealand security costs.
In addition, we experienced a more challenging second half
as macroeconomic conditions deteriorated and consumer
confidence declined.
Key results from FY23 include:
FY23 Remuneration
The STI awarded for the year was 35% of potential and 70% of on
target for both the CEO and CFO. The KPI for on target EBIT was
not achieved, however, in consideration of the significant costs
related to New Zealand security which materially impacted profit
in New Zealand, the Committee applied discretion to award 50%
of the on target STI for the Financial KPI. The deliverables related
to the non financial KPIs of Strategy, Customer and People were
achieved and 100% of STI applicable to these KPIs was awarded.
LTI awarded over the year was 95% of fixed remuneration for
CEO and 40% for CFO. 570,674 awards vested to the CEO and
187,776 awards vested to the CFO in the year.
Non-Executive Director (NED) fees were increased by the Wage
Price Index (WPI) of 2.6%. There were no other changes to the
structure of NED fees.
• Total Group revenue of $629.6m (2022: $595.2m) – an
In conclusion, the Board believes the remuneration changes and
outcomes for FY23 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.
Whilst experiencing challenging trading, security and economic
conditions that contributed to a decline in comparable EBIT, the
Company did have a record year in revenue results. The Executive
remuneration set out in this report is considered by the Board to
be reflective of this performance.
Regards,
Emma Hill
Chair of the People Development
and Remuneration Committee
increase of 5.8%
• Statutory EBIT* of $58.9m (2022: $73.2m) – a decrease of 19.6%
• Comparable EBIT* of $58.9m (2022: $62.9m) – a decrease of 6.3%
• EPS of 9.20 cents (2022: 12.03 cents) – a decrease of 23.5%
*Statutory 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.
It is the Company’s policy to conduct Executive remuneration
benchmarking every three years and to consider outcomes
in line with Company policy including market trends.
Late last 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. The insights from this review
resulted in changes to KMP and executive packages to ensure
continued retention of our high performing Executive Team
while more closely aligning compensation mix with long term
value creation.
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.
56 MICHAEL HILL | 2023 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
Managing Director and CEO
2016
2016
2016
2016
2020
Daniel Bracken
Managing Director and Chief Executive Officer
2019
Executive
Andrew Lowe
Chief Financial Officer and
Company Secretary
2017
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 2023 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. This advice was gained in FY22 and
considered in FY23 remuneration decisions. No advice was sought in FY23. Advice will next be gained in FY25 to assist in informing
remuneration outcomes in FY26.
MICHAEL HILL | 2023 ANNUAL REPORT 57
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 for
in the Group’s STI program
How is it set?
similar positions, adjusted
which is directed to achieving
to account for the experience,
Board approved on target and
ability and effectiveness of the
outperformance targets.
individual Executive.
How is it
delivered?
Base salary plus any fixed elements
including superannuation and
leave entitlements.
Cash for on target performance and
for outperformance.
What is the
objective?
Attract and retain key
Executive reward with achievement
Executive talent.
of performance targets that
Drive annual profit growth and align
underpin strategy.
The Company has established an LTI
plan as deferred compensation.
An issue of share rights is made to
Executive KMP. The rights vest at
the end of the performance period
if certain performance hurdles and
vesting conditions are met.
Reward Executive KMP for
sustainable long term growth
aligned to shareholders' interests.
58 MICHAEL HILL | 2023 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
2023
2022
2021
2020
2019
Revenue ($'000)
629,562
595,210
556,486
492,060
569,500
Comparable EBIT* ($'000)
58,889
62,870
56,594
25,686
34,608
Profit for the year attributable to
owners of the Company ($'000)
35,182
46,712
41,015
3,059
16,498
Earnings per share (cents)
9.20c
12.03c
10.57c
0.79c
4.26c
Dividends paid during the
financial year1 ($'000)
30,719
25,239
11,636
5,817
19,365
Market capitalisation ($'000)
339,822
361,105
322,158
131,841
209,385
Share price at year end ($)
Return on average total assets
0.90
6.7%
0.93
9.3%
0.83
9.0%
0.34
0.7%
0.54
4.3%
*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.
¹The dividends paid in FY21 are the postponed interim dividend for FY20 and the interim dividend for FY21. No final dividend was declared for FY20.
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
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
e
r
a
h
s
r
e
p
s
t
n
e
c
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Jul 19
Jan 20
Jul 20
Jan 21
Jul 21
Jan 22
Jul 22
Jan 23
FY20
FY21
FY22
FY23
Share Price
ASX 300 (RHS)
Dividend
Yield (RHS)
MICHAEL HILL | 2023 ANNUAL REPORT 59
The graphs below show the relationship of KMP remuneration to revenue and Adjusted Earnings Per Share2 for the last four
financial years.
KMP Remuneration and Revenue
KMP Remuneration and Adjusted
Earnings Per Share
$4,000,000
$3,500,000
$3,000,000
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$0
$700m
$4,000,000
$600m
$550m
$3,500,000
$3,000,000
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$500m
$0
14
12
10
8
6
4
2
0
c
e
n
t
s
p
e
r
s
h
a
r
e
(2)
(4)
FY20
FY21
FY22
FY23
FY20
FY21
FY22
FY23
KMP Fixed
KMP STI
KMP LTI
Revenue (RHS)
KMP Fixed
KMP STI
KMP LTI
Adjusted EPS (RHS)
2Adjusted 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.
FY23 EXECUTIVE KMP REMUNERATION
In the lead up to FY23, PricewaterhouseCoopers were engaged to conduct benchmarking on KMP remuneration. As per our policy,
this formal benchmarking activity is conducted every three years. The findings from this activity contributed to the remuneration
outcomes for FY23 KMP remuneration. Any changes to remuneration mix are outlined in this section.
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 equivalent on target STI value in cash.
KMP
FIXED
REMUNERATION
MAXIMUM STI
Daniel Bracken – CEO
Andrew Lowe – CFO
35.0%
49.0%
32.0%
32.0%
LTI
33.0%
19.0%
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), Executive
performance and retention, 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, the base salary of the CEO increased by
4.50% and the base salary of the CFO increased by 4.96%. Superannuation was maintained at the concessional contributions cap of
$27,500 for both KMP.
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.
60 MICHAEL HILL | 2023 ANNUAL REPORT
The STI program in FY23 for KMP was structured as follows:
Performance period
Annual award for Financial KPI
Six monthly award for Strategy, Customer and People KPIs
Opportunity
CEO – 92% of fixed remuneration comprised of 46% for on target performance, and 46% for
outperformance (this represents a reduction of 13% on FY22)
CFO – 66% of fixed remuneration comprised of 33% for on target performance, and 33% for
outperformance (this represents an increase of 1% on FY22)
How the STI is paid?
In cash for on target performance and in cash for outperformance
On target performance measures
Financial KPI 60% weighting
Strategy, Customer and People KPIs 40% weighting
Performance measure for
outperformance component
How is STI assessed?
Starting at $2.0m above FY23 budgeted 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 FY23 STI scorecard KPIs and assessment applied to the CEO.
KPI
2023 PERFORMANCE ASSESSMENT
Financial (60% weighting)
EBIT
The Committee used discretion to award 50% of the on target EBIT
STI due to the significant costs related to New Zealand security which
materially impacted profit in New Zealand
Strategy (15% weighting)
Growth, Cyber security, Store of the future, Brand ambassador
On target performance achieved for all objectives
Customer (15% weighting)
Store refresh program, Insurance, Brilliance by Michael Hill loyalty
On target performance achieved for all objectives
program, data and insights
People (10% weighting)
Culture and engagement, ESG
On target performance achieved for all objectives
MICHAEL HILL | 2023 ANNUAL REPORT 61
ANALYSIS OF BONUSES INCLUDED IN REMUNERATION
INCENTIVE
REMUNERATION
KMP’s short-term
incentive cash bonuses
Daniel Bracken
Andrew Lowe
On target
achieved
%
70
70
Out-
performance
achieved
%
0
0
Total potential
available
Cash STI
component
Total STI
included
Amount forfeited
$
$
$
$
979,570
342,850
342,850
636,721
359,700
125,895
125,895
233,805
The CEO and CFO earned 70% of their on target STI. This STI was awarded due to the achievement of 100% of the strategy,
customer and people performance measures, and 50% of on target EBIT performance due to the discretion the Committee applied.
LONG TERM INCENTIVE SCHEME
The FY23 LTI program for KMP was structured as follows:
Performance period
3 years
Opportunity
CEO – 95% of fixed remuneration (this represents an increase of 42% on FY22)
CFO – 40% of fixed remuneration (this represents an increase of 7.5% on FY22)
Instrument
Share rights
Performance metric
Total Shareholder Return (TSR) compound annual growth rate (CAGR) over 3 years
Earnings per Share (EPS) 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 FY25 results), and satisfaction of the TSR and EPS target metrics, 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
The EPS sliding vesting schedule is as follows:
• No rights vest if EPS is equal to or less than 5% CAGR
•
•
10% of share rights vest for each 1% increase in CAGR between 5% CAGR to 10% CAGR
100% of share rights vest if EPS is equal to or above 10% 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 performance
The absolute TSR and EPS metrics have been deemed by the PDRC to be a suitable market based
metric and condition
measure to create alignment between the interests of Executive KMP and the interests of shareholders
What happens when a KMP
If the KMP’s employment is terminated for cause, or due to resignation, all unvested share rights will
ceases employment?
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
62 MICHAEL HILL | 2023 ANNUAL REPORT
FY23 LTI OUTCOMES
SERVICE CONTRACTS
Both Executive KMP were eligible to participate in the FY23 LTI
It is the Group’s policy that service contracts for KMP are
in accordance with the LTI program detailed in the preceding
unlimited in term but capable of termination on three months’
table. For the CEO, the grant of share rights under the FY23 LTI
notice (six months in the case of the CEO) and that the Group
plan was approved by shareholders at the FY22 Annual General
retains the right to terminate the contract immediately, by
Meeting. Further details of the number of share rights granted
making payment equal to three months’ pay in lieu of notice
to the CEO and CFO in relation to the FY23 LTI can be found
(or six months in the case of the CEO). KMP are also entitled
later in this report under the heading ‘Reconciliation of Options
to receive on termination of employment their statutory
and Share Rights held by KMP’.
entitlements of accrued annual and long service leave,
OTHER BENEFITS
Executive KMP do not receive additional benefits, such as non-
cash benefits, other than superannuation, as part of the terms
and conditions of their appointment. Loans are not provided.
together with any superannuation benefits.
FY23 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 FY23 were $106,945 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
$
22,095
33,143
It is the Company’s policy to consider CPI and the WPI in determining any increase to Directors’ fees annually. In FY23, CPI was
6.1% and WPI was 2.6%. It was decided that that the appropriate measure to apply was WPI and the Non-Executive Director fees
increased by the WPI percentage of 2.6%.
All Non-Executive Directors enter into a service agreement with the Company in the form of a letter of appointment. The letter
summarizes 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 | 2023 ANNUAL REPORT 63
DIRECTOR AND EXECUTIVE REMUNERATION OUTCOMES
FOR FY23
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-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
$
Non-Executive Directors
Emma Jane Hill
2023
128,748
2022
121,907
Sir Richard Michael Hill
2023
106,702
2022
101,034
Gary Warwick Smith
2023
126,634
2022
124,125
Robert Ian Fyfe
2023
213,405
2022
202,068
Jacqueline Elizabeth Naylor
2023
96,674
2022
94,759
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
128,748
121,907
106,702
101,034
126,634
124,125
213,405
202,068
96,674
94,759
Total Non-Executive Director Remuneration
2023
672,163
2022
643,893
-
-
-
-
672,163
643,893
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13,454
12,413
-
-
10,390
9,476
23,844
21,889
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
128,748
121,907
106,702
101,034
140,088
136,538
213,405
202,068
107,064
104,235
696,007
665,782
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
64 MICHAEL HILL | 2023 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
2023
1,062,937
342,850
-
1,405,787
21,252
27,500
2022
1,050,052
535,544
535,543
2,121,139
35,231
27,500
Andrew Lowe, CFO
2023
523,568
125,895
-
649,463
11,117
27,500
2022
502,689
169,179
169,179
841,047
15,673
27,500
Total KMP Remuneration
2023
1,586,505
468,745
- 2,055,250
32,369
55,000
2022
1,552,741
704,723
704,722 2,962,186 50,904
55,000
Total Director and KMP Remuneration
2023
2,258,668
468,745
-
2,727,413
32,369
78,844
2022
2,196,634
704,723
704,722 3,606,079 50,904
76,889
-
-
-
-
-
-
-
-
290,033
1,744,572
19.65%
16.62%
156,176
2,340,046
45.77%
6.67%
78,139
766,219
16.43%
10.20%
47,161
931,381
36.33%
5.06%
368,172
2,510,791
18.67%
14.66%
203,337
3,271,427
43.08%
6.22%
368,172
3,206,798
14.62%
11.48%
203,337
3,937,209
35.80%
5.16%
*Salary and fees include the net leave entitlement accrual, calculated as leave accrued less leave taken.
MICHAEL HILL | 2023 ANNUAL REPORT 65
ADDITIONAL STATUTORY
INFORMATION
EQUITY INSTRUMENTS
All options or rights refer to options or rights over ordinary
shares of Michael Hill International Limited, which are
exercisable on a one-for-one basis under the executive
incentive plan.
MODIFICATION OF TERMS
OF EQUITY-SETTLED
SHARE-BASED PAYMENT
TRANSACTIONS
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 FY23 was 4,001,391 share rights. Of these,
No terms of equity-settled share-based payment transactions
(including options and rights granted as compensation to
share rights issued to KMP are set out below. Refer to note D3
of the accompanying financial report for further details.
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 Australia 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').
SHARE RIGHTS
KMP
Daniel Bracken
Andrew Lowe
Issued during the year
Number
Fair value per share right
$
1,386,750
347,060
0.85
0.85
66 MICHAEL HILL | 2023 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
KMP share
rights movements
Vested and
exercisable
Unvested
Issued
Forfeited
Vested
Exercised
BALANCE AT END
OF THE YEAR
Vested and
exercisable
Unvested
Daniel Bracken*
FY19 LTI Plan
Tranche One
-
27,504
-
-
27,504
-
27,504
Tranche Two
Tranche Three
FY20 LTI Plan
Tranche One
Tranche Two
Tranche Three
FY21 LTI Plan
Single Issue
FY22 LTI Plan
Single Issue
FY22 STI Plan
Single Issue
FY23 LTI Plan
Single Issue
-
-
-
-
-
-
-
-
-
27,504
55,010
35,615
35,615
71,229
2,057,738
634,081
-
-
-
-
-
-
-
-
-
480,051
906,699
-
-
-
-
-
-
-
-
-
27,504
-
35,615
-
-
-
-
480,051
-
-
-
-
-
-
-
-
-
-
-
-
27,504
-
55,010
35,615
-
-
-
-
-
35,615
71,229
2,057,738
634,081
480,051
-
-
906,699
MICHAEL HILL | 2023 ANNUAL REPORT 67
BALANCE AT START OF THE YEAR
Vested and
exercisable
Unvested
Issued
Forfeited
Vested
Exercised
BALANCE AT END
OF THE YEAR
Vested and
exercisable
Unvested
Andrew Lowe
FY18 LTI Plan
Tranche Two
Tranche Three
FY19 LTI Plan
Tranche One
Tranche Two
Tranche Three
FY20 LTI Plan
Tranche One
Tranche Two
Tranche Three
FY21 LTI Plan
Single Issue
FY22 LTI Plan
Single Issue
FY22 STI Plan
Single Issue
FY23 LTI Plan
Single Issue
Total
-
-
-
-
-
-
-
-
-
-
-
-
-
4,325
8,648
8,365
8,365
16,733
6,424
6,424
12,847
603,119
200,307
-
-
-
-
-
-
-
-
-
-
-
-
151,649
195,411
3,819,853
1,733,810
-
-
-
-
-
-
-
-
-
-
-
4,325
(4,325)
-
8,648
-
8,648
8,365
(8,365)
-
-
-
-
-
8,365
-
16,733
6,424
-
-
-
-
-
6,424
12,847
603,119
200,307
151,649
-
-
195,411
8,365
-
6,424
-
-
-
-
151,649
-
-
-
-
-
-
-
-
-
-
758,450
(12,690)
745,760
4,795,213
*Share rights granted to Daniel Bracken during the reporting period were approved by shareholders at the Company's 2022 AGM as required
by ASX Listing Rule 10.14.
68 MICHAEL HILL | 2023 ANNUAL REPORT
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
Daniel Bracken
Andrew Lowe
80,000
2,293,640
160,000
201,869
4,325
*Includes common shareholding due to a related party.
-
-
-
-
-
-
12,690
-
-
-
167,487,526
148,330,600
80,000
(340,062)
1,953,578
-
-
-
160,000
201,869
17,015
MICHAEL HILL | 2023 ANNUAL REPORT 69
VOTING OF SHAREHOLDERS
AT LAST YEAR’S ANNUAL
GENERAL MEETING
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
The Company received 94.7% of “For” votes on its
premium paid.
remuneration report for FY22. The Company did not receive
any specific feedback at the AGM or throughout the year on its
remuneration practices.
INSURANCE OF OFFICERS
AND INDEMNITIES
To the extent permitted by law, the Company has agreed to
indemnify its auditor, Ernst & Young, as part of the terms of its
audit engagement agreement against claims by third parties
arising from the audit (for an unspecified amount). No payment
has been made to indemnify Ernst & Young during or since the
financial year.
The Company’s Constitution provides that it may indemnify
any person who is, or has been, an officer of the Group,
NON-AUDIT SERVICES
including the directors, the Secretaries and other officers,
The following non-audit services were provided by the entity's
against liabilities incurred whilst acting as such officers to
auditor, Ernst & Young (Australia). The directors are satisfied
the extent permitted by law. The Company has entered into
that the provision of non-audit services is compatible with the
a Deed of Indemnity, Insurance and Access with each of the
general standard of independence for auditors imposed by the
Company’s directors, Company Secretaries and certain other
Corporations Act 2001. The nature and scope of each type of
officers. No director or officer of the Company has received
non-audit service provided means that auditor independence
benefits under an indemnity from the Company during or
was not compromised.
since the end of the year.
The Company has paid a premium for insurance for officers
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
2023
$
-
-
2022
$
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 25 August 2023 in accordance with a resolution of directors as required by section 298 of the
Corporations Act 2001.
R I Fyfe
Chair
Brisbane
25 August 2023
70 MICHAEL HILL | 2023 ANNUAL REPORT
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
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 2 July 2023,
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;
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.
This declaration is in respect of Michael Hill International Limited and the entities it controlled during the financial year.
Ernst & Young
Kellie McKenzie
Partner
25 August 2023
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
MICHAEL HILL | 2023 ANNUAL REPORT 71
“ It has been a very busy year
at Michael Hill and I’d like to
both acknowledge and thank
the team for their unwavering
focus and energy throughout
the year.”
DANIEL BRACKEN, MANAGING DIRECTOR & CEO
72 MICHAEL HILL | 2023 ANNUAL REPORT
FINANCIAL STATEMENTS
74
Consolidated
Statement of Profit
or Loss and Other
Comprehensive
Income
79
Notes to the
Financial
Statements
75
76
Consolidated
Statement of
Financial Position
Consolidated
Statement of
Changes In Equity
77
Consolidated
Statement of
Cash Flow
126
Directors’
Declaration
127
Independent
Auditor’s Report
133
ASX Listing
– Additional
Information
The Directors present the
consolidated financial statements of
Michael Hill International Limited
for the year ended 2 July 2023
MICHAEL HILL | 2023 ANNUAL REPORT 73
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
PROFIT OR LOSS
Revenue from contracts with customers
Other income
Cost of goods sold
Employee benefits expense
Occupancy costs
Marketing expenses
Selling expenses
Reversal/(impairment) of property, plant and equipment and
other assets
Depreciation and amortisation expense
Loss on disposal of property, plant and equipment
Administrative expenses
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:
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
Notes
A2
A3
D1
B1
F1
F1
F8
Notes
2023
$’000
629,562
2,256
(225,122)
(168,357)
(9,928)
(44,152)
(20,871)
2,244
(57,724)
(116)
(25,533)
(22,581)
(9,931)
49,747
(14,565)
35,182
2023
$’000
(2,554)
(2,554)
32,628
32,628
2022
$’000
595,210
8,913
(210,384)
(155,332)
(9,446)
(41,174)
(17,674)
(3,774)
(51,944)
(231)
(24,157)
(16,755)
(7,549)
65,703
(18,991)
46,712
2022
$’000
(977)
(977)
45,735
45,735
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
2023
cents
9.20
9.00
2022
cents
12.03
11.86
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes.
74 MICHAEL HILL | 2023 ANNUAL REPORT
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
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
Goodwill
Other 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
Current tax liabilities
Deferred revenue
Deferred consideration
Total current liabilities
Non-current liabilities
Lease liabilities
Contract liabilities
Borrowings
Provisions
Deferred consideration
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained profits
Total equity
Notes
2023
$’000
2022
$’000
B1
F3
A4
A2
F3
A5
F4
G1
F5
F8
A2
F6
A5
A2
F7
G1
A5
A2
B2
F7
G1
F10
20,867
14,533
203,260
689
452
5,061
244,862
995
139,052
57,806
17,695
36,215
49,118
371
374
301,626
546,488
71,202
41,075
20,685
13,245
6,768
212
1,814
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
-
155,001
158,596
117,518
59,418
12,500
10,879
2,557
202,872
357,873
188,615
11,112
2,609
174,894
188,615
91,386
58,605
-
7,497
-
157,488
316,084
195,095
11,388
3,369
180,338
195,095
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
MICHAEL HILL | 2023 ANNUAL REPORT 75
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to owners of Michael Hill
International Limited
Balance at 27 June 2021
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
Profit for the year
Currency translation differences
Total comprehensive income for
the year
Transactions with members in their capacity
as owners:
Dividends paid/provided
Issue of share capital on exercise of share rights
Share-based payments expense
Share buy-back
Balance at 2 July 2023
Notes
Contributed
Equity
Share-Based
Payments
Reserve
$’000
11,285
$’000
637
-
-
-
-
-
-
-
-
103
(103)
-
-
103
11,388
-
-
-
-
24
-
(300)
(276)
11,112
(53)
286
130
767
-
-
-
-
(24)
1,818
-
1,794
2,561
B3
F11
D3
D3
B3
F10
D3
F10
Retained
Profits
Total Equity
Foreign
Currency
Translation
Reserve
$’000
$’000
3,579
158,812
-
46,712
(977)
-
$’000
174,313
46,712
(977)
(977)
46,712
45,735
-
-
-
-
(25,239)
(25,239)
-
53
-
-
-
286
(25,186)
(24,953)
2,602
180,338
195,095
-
35,182
35,182
(2,554)
-
(2,554)
(2,554)
35,182
32,628
-
-
-
-
-
(30,719)
(30,719)
-
-
-
1,818
(9,907)
(10,207)
(40,626)
(39,108)
48
174,894
188,615
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
76 MICHAEL HILL | 2023 ANNUAL REPORT
CONSOLIDATED STATEMENT OF CASH FLOWS
Notes
A5
B1
F4
F5
G1
B2
B2
A5
B3
F10
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
Acquisition of Bevilles, net of cash acquired
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
Share buyback / share options exercised
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
2023
$’000
693,744
(571,361)
122,383
-
792
1,460
(919)
(8,791)
(6,728)
(28,125)
80,072
61
(26,479)
(7,792)
(48,113)
(82,323)
21,500
(9,000)
(45,098)
(30,719)
(10,207)
(73,524)
(75,773)
95,844
796
20,867
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
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
MICHAEL HILL | 2023 ANNUAL REPORT 77
78 MICHAEL HILL | 2023 ANNUAL REPORT
NOTES TO THE
NOTES TO THE
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
104
105
105
106
109
109
110
111
111
113
113
114
117
Corporate Information
A
Financial Overview
A1 Segment Information
A2 Revenue
A3 Other Income
A4
Inventories
A5 Leases
B Cash Management
B1 Cash And Cash Equivalents
B2 Borrowings
B3 Dividends
80
80
80
82
84
85
85
88
88
89
89
F3 Trade And Other Receivables
100
F4 Property, Plant And Equipment 102
F5
Intangible Assets
F6 Trade And Other Payables
F7 Provisions
F8 Tax
F9 Auditors’ Remuneration
F10 Contributed Equity
F11 Reserves
G Business Combination
G1 Acquisition Of Bevilles
H Group Structure
C
Financial Risk Management 90
H1
Interests In Other Entities
C1 Financial Risk Management
90
H2 Deed Of Cross Guarantee
C2 Derivative Financial
H3 Parent Entity Financial
Instruments
C3 Capital Management
94
94
Information
D Reward And Recognition
95
I1 Contingencies
I
Unrecognised Items
118
D1 Employee Benefits
D2 Key Management Personnel
D3 Share-Based Payments
E Related Parties
F Other Information
F1 Expenses
F2 Earnings Per Share
95
95
95
98
99
99
99
I2
J
J1
And Commitments
Events Occurring After The End Of
The Reporting Period
118
118
Summary of Accounting
Policies & Significant
Estimates & Judgements
Summary Of Significant
Accounting Policies
J2 Significant Estimates
And Judgements
119
119
125
MICHAEL HILL | 2023 ANNUAL REPORT 79
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 2 July 2023 were authorised for issue in accordance with a resolution of the directors on 25 August 2023. 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
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 AASB 16 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
the financial statements. These reports do not allocate
Michael Hill International Limited and its controlled entities
total assets or total liabilities based on the operations
sell goods and provide services to a number of customers
of each segment or by geographical location.
from which revenue is derived. There is no single customer
The Group's operations are in three geographical
segments: Australia, New Zealand and Canada.
The Corporate and other segment includes revenue
and expenses that do not relate directly to the relevant
Michael Hill retail segments. These predominately relate
from which the Group derives more than 10% of total
consolidated revenue.
80 MICHAEL HILL | 2023 ANNUAL REPORT
SEGMENT RESULTS
YEAR ENDED 2 JULY 2023
Australia
$’000
New
Zealand
$’000
Canada
$’000
Corporate
& other
$’000
Group pre-
adjustments
$’000
Adjustments
Group
$’000
$’000
Operating revenue
331,007
121,470
176,442
643
629,562
Gross profit
211,823
75,193
111,629
5,795
404,440
Gross margin
64.0%
61.9%
63.3%
64.2%
-
-
629,562
404,440
64.2%
EBITDA*
63,774
26,842
36,753
(48,701)
78,668
37,939
116,607
Depreciation and
amortisation
(10,242)
(3,292)
(6,742)
(2,197)
(22,473)
(35,251)
(57,724)
Segment EBIT*
53,532
23,550
30,011
(50,898)
56,195
2,688
58,883
EBIT as a % of revenue
16.2%
19.4%
17.0%
Interest income
Finance costs
3
(155)
-
(3)
-
-
792
(982)
8.9%
795
9.4%
795
-
(1,140)
(8,791)
(9,931)
Net profit before tax
53,380
23,547
30,011
(51,089)
55,850
(6,103)
49,747
Income tax expense
Net profit after tax
YEAR ENDED 26 JUNE 2022
(14,565)
35,182
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
(18,991)
46,712
*EBIT and EBITDA are non-IFRS information. Please refer to non-IFRS information in the Directors' Report for an explanation of non-IFRS information
and a reconciliation of EBIT to statutory results.
MICHAEL HILL | 2023 ANNUAL REPORT 81
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)
2023
$’000
2022
$’000
595,105
561,293
32,905
30,742
590
962
2,437
738
Total revenue from contracts with customers
629,562
595,210
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:
2023
Timing of
revenue recognition
Australia
$’000
New Zealand
$’000
Canada
$’000
Corporate & other
$’000
At a point in time
311,884
114,588
168,248
Over time
19,123
6,882
8,194
331,007
121,470
176,442
385
258
643
2022
Timing of
revenue recognition
Australia
$’000
New Zealand
$’000
Canada
$’000
Corporate & other
$’000
At a point in time
286,687
111,886
162,665
Over time
16,722
5,708
11,365
303,409
117,594
174,030
55
122
177
Total
$’000
595,105
34,457
629,562
Total
$’000
561,293
33,917
595,210
82 MICHAEL HILL | 2023 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
2023
$’000
257
566
823
73,860
5,664
579
2022
$’000
577
756
1,333
77,148
4,808
1,467
80,103
83,423
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
2023
$’000
2022
$’000
22,075
24,896
2,319
-
Revenue recognition patterns are regularly reassessed based on new and historical trends resulting in remeasurement of revenue
recognised in previous years.
MICHAEL HILL | 2023 ANNUAL REPORT 83
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 AASB 15 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
Rights of return recognises the estimated returned sales under
the Group's return policy, being 30 days for all countries.
Sales of services for repair work performed is recognised in the
Management estimates the returned sales based on historical
accounting period in which the services are performed.
sale return information and any recent trends that may suggest
(iii) Deferred service revenue and expenses
The Group offers a PCP product which is considered deferred
revenue until such time that service has been provided. A PCP
is a plan under which the Group offers future services, such as
cleaning, repairs and resizing, to customers based on the type
of plan purchased. The Group subsequently recognises the
future claims could differ from historical amounts. For sales
that are expected to be returned, the Group recognises a
right of return liability. The associated inventory value for
sales that are expected to be returned is recognised as a
right of return asset.
(vi) Lifetime Diamond Warranty
income in revenue in the Consolidated Statement of Profit
LTDW is a warranty provided to customers with the purchase
or Loss and Other Comprehensive Income once these services
of jewellery items set with a diamond (excluding watches).
are performed. An estimate based on the timing and quantum
This has been deemed a service-type warranty and is
of expected services under the plans is used as a basis to
calculated with reference to the estimated value of service
establish the amount of service revenue to recognise in
provided to customers and the stand-alone value of customers
the Consolidated Statement of Profit or Loss and
obtaining the service independently. Income in relation to
Comprehensive Income.
Direct and incremental sales staff bonuses associated with the
sale of PCPs are capitalised in contract assets and amortised in
proportion to the PCP revenue recognised.
the LTDW is recognised in line with the estimated pattern of
customers utilising this service-type warranty.
A3 OTHER INCOME
Net foreign exchange gains
Government grants
Interest received
Other items
2023
$’000
-
-
792
1,464
2,256
2022
$’000
169
2,864
16
5,864
8,913
Net foreign exchange losses of $1,570,000 have been presented in Other expenses (2022: net foreign exchange gains of $169,000).
84 MICHAEL HILL | 2023 ANNUAL REPORT
A4 INVENTORIES
Raw materials
Finished goods
Packaging and other consumables
2023
$’000
9,547
2022
$’000
13,033
185,602
162,138
8,111
6,368
203,260
181,539
Finished goods are held at the lower of cost and net realisable value (NRV). During the year, finished goods incurred a write-down
of $805,000 (2022: $2,565,000) 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
Opening carrying value
Additional right-of-use assets relating to leases entered into during
the year
Lease modifications agreed during the year
Depreciation expense
Reduction in right-of-use assets as a consequence of COVID-19 on
rent concessions
Impairment of right-of-use assets
Foreign currency translation
Closing carrying value
Notes
G1
F1
2023
$’000
2022
$’000
296,237
221,894
(156,575)
(113,863)
(610)
(646)
139,052
107,385
2023
$’000
2022
$’000
107,385
105,882
59,341
34,395
14,486
6,514
(42,211)
(39,257)
(658)
(1,106)
(54)
763
-
957
139,052
107,385
MICHAEL HILL | 2023 ANNUAL REPORT 85
NOTES TO THE FINANCIAL STATEMENTS CONT.
LEASE LIABILITIES
Current
Non-current
RECONCILIATION OF LEASE LIABILITIES
Opening carrying value
Additional lease liabilities entered into during the year
Lease modifications agreed during the year
Net reduction in future lease payments as a consequence of COVID-19 on
rent concessions
Interest expense
Lease repayments
Foreign currency translation
Closing carrying value
Notes
G1
F1
2023
$’000
41,075
117,518
2022
$’000
38,183
91,386
158,593
129,569
2023
$’000
2022
$’000
129,569
133,686
59,355
14,446
(658)
8,791
35,173
1,108
(1,106)
6,682
(53,889)
(47,146)
979
1,172
158,593
129,569
The incremental borrowing rate used in determining the lease liability ranged between 1.44% and 10.06% (2022: 1.44% and 9.30%).
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.
The right-of-use assets are also subject to impairment. Refer to the accounting policies in note J1(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.
86 MICHAEL HILL | 2023 ANNUAL REPORT
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 J2).
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
2023
Total
$’000
Within
five years
$’000
More than
five years
$’000
2022
Total
$’000
Extension options expected not
to be exercised
1,058
144
1,202
163
202
365
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e., those
leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also
applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be low value.
Lease payments on short-term leases and leases of low-value assets are expensed on a straight-line basis over the lease term.
MICHAEL HILL | 2023 ANNUAL REPORT 87
NOTES TO THE FINANCIAL STATEMENTS CONT.
B CASH MANAGEMENT
B1 CASH AND CASH EQUIVALENTS
Cash at bank and on hand
2023
$’000
20,867
2022
$’000
95,844
RECONCILIATION OF PROFIT AFTER INCOME TAX TO NET CASH INFLOW FROM OPERATING ACTIVITIES
Notes
F4
A5
F5
F4
D3
2023
$’000
35,182
12,632
42,211
2,881
(2,293)
49
1,818
220
116
(2,508)
2022
$’000
46,712
10,954
39,257
1,733
521
3,253
286
109
231
335
-
(5,338)
(8,446)
(2,772)
9,433
137
1,249
(15,839)
4,931
5,080
(4,009)
80,072
14,037
(10,812)
9,778
393
(904)
187
(6)
855
(7)
111,574
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
Net cash inflow from operating activities
88 MICHAEL HILL | 2023 ANNUAL REPORT
B2 BORROWINGS
2023
Current
$’000
Non-
Current
$’000
Total
Current
$’000
$’000
Non-
Current
$’000
Bank Loans
Total secured borrowings
-
-
12,500
12,500
12,500
12,500
-
-
-
-
2022
Total
$’000
-
-
On 30 June 2023, the Group extended its financing agreement with ANZ Banking Group and HSBC Australia for an availability period
of three years. The financial arrangement includes a $92 million multi-option borrowing facility and ancillary working capital facilities in
line with the business requirements of the Group. At balance date, $12.5m was drawn on these facilities. Refer to note C3 for details of
covenants relating to the financing facilities.
B3 DIVIDENDS
ORDINARY SHARES
Final dividend for the year ended 26 June 2022 of 4.0 cents (2021: 3.0 cents) per fully paid share
paid on 23 September 2022 (2021: 24 September 2021)
Interim dividend for the year ended 2 July 2023 of 4.0 cents (2022: 3.5 cents) per fully paid
share paid on 24 March 2023 (2022: 25 March 2022)
DIVIDENDS NOT RECOGNISED AT THE END OF THE REPORTING PERIOD
Since year-end, the Directors have recommended a 3.5 cents (2022: 4.0 cents) per fully paid
share final dividend.
FRANKING AND IMPUTATION CREDITS
Franking credits available for subsequent reporting periods based on a tax rate of 30.0%
(2022: 30.0%)
Imputation credits (NZ$) available for subsequent reporting periods based on New Zealand tax
rate of 28.0% (2022: 28.0%)
2023
$’000
2022
$’000
15,531
11,649
15,188
13,590
30,719
25,239
2023
$’000
13,289
2022
$’000
-
2023
$’000
2022
$’000
2,812
2,679
2,196
12,116
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 final dividend, which was unpaid at balance sheet date, will be unfranked for Australian purposes, with nil New Zealand imputation
credits and with conduit foreign income.
MICHAEL HILL | 2023 ANNUAL REPORT 89
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 by its treasury policy. 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
Recognised financial assets and
Future commercial transactions
liabilities not denominated in AUD
Interest rate
Long-term borrowings at
variable rates
Cash flow forecasting and
Forward exchange
sensitivity analysis
contracts (FEC)
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
Liquidity risk
Borrowings and other liabilities
Rolling cash flow forecasts
Diversification of bank deposits,
credit limits and letters of credit
Availability of committed credit
lines and borrowing facilities
The Group’s overall risk management program includes a focus on financial risk including the unpredictability of financial markets
and foreign exchange risk.
The policies are implemented by the central finance function that undertakes regular reviews to enable prompt identification of
financial risks so that appropriate actions may be taken.
90 MICHAEL HILL | 2023 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, including
the purchase of inventory. 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:
2 JULY 2023
26 JUNE 2022
Cash and cash equivalents
Trade receivables
344
(36)
Trade payables
(8,484)
Forward exchange contracts:
Buy foreign currency
5,400
Net foreign currency
exposure
(2,776)
-
4
-
-
4
USD
$’000
NZD
$’000
CAD
$’000
EUR
$’000
USD
$’000
10,348
318
NZD
$’000
CAD
$’000
EUR
$’000
-
3
-
9
117
15
1
59
12
54
(29)
(784)
(11,302)
(108)
(59)
(793)
-
31
-
-
-
-
-
(718)
(636)
(105)
(50)
(661)
Sensitivity
The following table summarises the sensitivity of the Group's financial assets and financial liabilities to foreign currency risk.
The foreign exchange sensitivities are based on the Group's exposure existing at balance date. Sensitivity figures are pre-tax.
AUD increases 10%
AUD decreases 10%
IMPACT ON
PRE-TAX PROFIT
IMPACT ON OTHER
COMPONENTS OF EQUITY
2023
$’000
485
(593)
2022
$’000
190
(232)
2023
$’000
-
-
2022
$’000
-
-
MICHAEL HILL | 2023 ANNUAL REPORT 91
NOTES TO THE FINANCIAL STATEMENTS CONT.
INTEREST RATE RISK
The Group's main interest rate risk arises from long-term borrowings and cash. Borrowings issued at variable rates expose the
Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. Group policy
is to maintain fixed interest cover of core debt in line with the Group's treasury policy. As the Group has a working capital facility,
no core debt was identified.
To manage variable interest rate borrowings risk, the Group may enter into interest rate swaps in which the Group agrees to
exchange, at specified intervals, the difference between fixed and variable rate interest amounts calculated by reference to an
agreed-upon notional principal amount. At 2 July 2023, the Group had no core debt and there were no swaps in place (2022: no
swaps in place).
The interest rate derivatives require settlement of net interest receivable or payable each 30 days and are settled on a net basis.
The exposure of the Group’s borrowings to interest rate changes at the end of the reporting year are as follows:
2023
$’000
% of total
loans
2022
$’000
% of total
loans
Variable rate borrowings
12,500
100.0%
12,500
100.0%
-
-
0.0%
0.0%
An analysis by maturities is provided below. The percentage of total loans shows the proportion of loans that are currently at
variable rates in relation to the total amount of borrowing.
The details of the variable rate borrowings outstanding are outlined below.
2 JULY 2023
26 JUNE 2022
Weighted
average
interest rate
%
Balance
$’000
Weighted
average
interest rate
%
Bank overdrafts and bank loans
6.01%
12,500
0.00%
Net exposure to cash flow interest rate risk
12,500
Balance
$’000
-
-
Sensitivity
Profit or loss is sensitive to higher/lower interest income from cash and cash equivalents as a result of changes in interest rates.
Other components of equity change as a result of an increase/decrease in the fair value of the cash flow hedges of borrowings.
All other non-derivative financial liabilities have a contractual maturity of less than 6 months.
Interest rates – increase by 100 basis points
Interest rates – decrease by 100 basis points
IMPACT ON
PRE-TAX PROFIT
IMPACT ON OTHER
COMPONENTS OF EQUITY
2023
$’000
84
(84)
2022
$’000
958
(958)
2023
$’000
2022
$’000
-
-
-
-
92 MICHAEL HILL | 2023 ANNUAL REPORT
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.
The Group provides interest-free consumer credit in Canada as a secondary product and the credit risk exposure which exists
against this financial instrument is detailed in note F3. 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.
The Group had access to an overdraft facility, as well as a $90m working capital facility. The following were undrawn from these
facilities at the end of the reporting year:
FLOATING RATE
Expiring beyond one year (bank overdrafts)
2023
$’000
1,914
2022
$’000
1,909
Expiring beyond one year (bank loans)
77,500
70,000
79,414
71,909
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 31 August 2026.
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 2 July 2023
Less than
6 months
6-12 months
Between 1
and 2 years
Between 2
and 5 years
Over 5 years
Total contractual
cash flow
$’000
$’000
$’000
$’000
$’000
$’000
Non-derivatives
Lease liabilities
25,699
20,069
33,274
48,336
15,766
143,144
Trade payables
Borrowings
71,202
-
-
-
-
-
-
12,500
-
-
71,202
12,500
Total non-derivatives
96,901
20,069
33,274
60,836
15,766
226,846
MICHAEL HILL | 2023 ANNUAL REPORT 93
NOTES TO THE FINANCIAL STATEMENTS CONT.
CONTRACTUAL MATURITIES OF FINANCIAL LIABILITIES
At 2 July 2023
Less than
6 months
6-12 months
Between 1
and 2 years
Between 2
and 5 years
Over 5 years
Total contractual
cash flow
$’000
$’000
$’000
$’000
$’000
$’000
Derivatives
Outward payments FECs
Inward receipts FECs
Net FECs
At June 26 2022
Non-derivatives
8,011
(8,163)
(152)
-
-
-
-
-
-
-
-
8,011
(8,163)
(152)
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
C2 DERIVATIVE FINANCIAL INSTRUMENTS
The Group is exposed to certain risks relating to its ongoing business operations. The primary risks managed using derivative
instruments are foreign currency risk and interest rate risk. The Group does not apply hedge accounting.
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-AASB 16 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.
94 MICHAEL HILL | 2023 ANNUAL REPORT
D REWARD AND RECOGNITION
D1 EMPLOYEE BENEFITS
EMPLOYEE BENEFITS
Employee wages
Employee wages on-costs and post-retirement benefits
Employee share-based payments expense
D2 KEY MANAGEMENT PERSONNEL
Short-term employee benefits
Long-term benefits
Post-employment benefits
Share-based payments
2023
$’000
147,781
18,758
1,818
2022
$’000
139,155
15,891
286
168,357
155,332
2023
$
2022
$
2,727,413
3,606,080
32,369
78,844
50,904
76,889
368,172
203,337
3,206,798
3,937,210
D3 SHARE-BASED PAYMENTS
OPTIONS
Options are granted from time to time at the discretion of Directors to senior executives within the Group. Motions to issue
options to related parties of Michael Hill International Limited are subject to the approval of shareholders at the Annual
General Meeting in accordance with the Company's constitution.
Options are granted under the plan for no consideration. Options expire ten years after granted, vest over five years, 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.
MICHAEL HILL | 2023 ANNUAL REPORT 95
NOTES TO THE FINANCIAL STATEMENTS CONT.
Set out below are summaries of options granted
under the plan:
Average exercise
price per option
Number of
options
Average exercise
price per option
2023
2022
Opening balance NZD options
Vested options forfeited during the year
Closing balance NZD options
Opening balance AUD options
Closing balance AUD options
1.70
-
1.70
1.56
1.56
700,000
-
700,000
300,000
300,000
1.63
1.46
1.70
1.56
1.56
Number of
options
1,000,000
(300,000)
700,000
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
2023
2022
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
1,000,000
The weighted average remaining contractual life of share options outstanding at the end of the period was 1.7 years
(2022: 2.8 years).
The exercise price will be converted to Australian dollars using the Reserve Bank of Australia exchange rate on the day the
option is exercised.
SHARE RIGHTS
The Company introduced a deferred compensation plan (LTI) involving the granting of share rights to eligible participants in
2016 and was approved by shareholders at the Company’s Annual General Meeting held on 31 October 2016.
Under the plan, a senior executive may be granted share rights by the Company. Each share right represents a right to receive
one ordinary share in the Company, subject to the terms and conditions of the 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.
96 MICHAEL HILL | 2023 ANNUAL REPORT
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 4,001,391 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
2023
2022
Average fair
value per
share right
Number of share
rights
Average fair
value per
share right
Number of share
rights
0.21
0.85
0.74
0.29
0.37
6,112,332
4,001,391
(34,747)
(24,095)
10,054,881
0.20
0.29
0.86
0.30
0.21
4,577,518
2,106,647
(143,225)
(428,608)
6,112,332
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
Expenses arising from share-based payment transactions
2023
2022
4,001,391
2,106,647
$1.15
45%
6.8%
3.42%
$0.85
2023
$’000
1,818
$0.85
40%
7.0%
0.18%
$0.29
2022
$’000
286
MICHAEL HILL | 2023 ANNUAL REPORT 97
NOTES TO THE FINANCIAL STATEMENTS CONT.
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 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
The fair value of options granted is recognised as an employee
in equity.
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)
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
• excluding the impact of any service and non-market
are to be satisfied. At the end of each year, the entity revises
performance vesting conditions (e.g. profitability, sales
its estimates of the number of share rights that are expected to
growth targets and remaining an employee of the entity
vest based on the non-market vesting and service conditions. It
over a specified period), and
recognises the impact of the revision to original estimates, if any,
•
including the impact of any non-vesting conditions (e.g. the
in profit or loss, with a corresponding adjustment to equity.
requirement for employees to save or holdings shares for a
specific period of time).
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
A contribution to the Michael Hill Violin Charitable Trust was paid by the Group during the year
2023
$
37,624
2022
$
-
Graphic design services rendered by a related party of board members
-
16,621
All transactions with related parties were in the normal course of business and on normal terms and conditions.
98 MICHAEL HILL | 2023 ANNUAL REPORT
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
F4
A5
F5
2023
$’000
12,632
42,211
54,843
2,881
2,881
2022
$’000
10,954
39,257
50,211
1,733
1,733
Total depreciation and amortisation
57,724
51,944
Notes
A5
FINANCE COSTS
Interest on lease liabilities
Bank and interest charges
Interest on make good provision
FOREIGN EXCHANGE
Net foreign exchange loss
F2 EARNINGS PER SHARE
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
2023
$’000
8,791
920
220
9,931
2023
$’000
1,570
2022
$’000
6,682
758
109
7,549
2022
$’000
-
2023
$’000
35,182
2022
$’000
46,712
Profit from continuing operations attributable to the ordinary equity
holders of the Company
35,182
46,712
MICHAEL HILL | 2023 ANNUAL REPORT 99
NOTES TO THE FINANCIAL STATEMENTS CONT.
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
2023
Number
2022
Number
382,252,063
388,268,845
8,446,083
5,668,197
Weighted average number of ordinary and potential ordinary shares used as the denominator
in calculating diluted earnings per share
390,698,146
393,937,042
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
2023
2022
Current
$’000
Non-current
$’000
Total
$’000
Current
$’000
Non-current
$’000
Total
$’000
3,795
(657)
3,138
764
(215)
549
-
-
-
240
(13)
227
Trade receivables
Provision for expected credit loss
Canadian in-house customer finance
Provision for expected credit loss
Sundry debtors
3,494
(225)
3,269
5,041
(152)
4,889
6,375
-
-
-
3,494
3,795
(225)
(657)
3,269
3,138
1,027
6,068
524
(184)
(202)
5,884
322
(32)
995
-
6,375
4,081
-
4,081
14,533
995
15,528
7,541
227
7,768
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
100 MICHAEL HILL | 2023 ANNUAL REPORT
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 prior 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.
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 AASB15
The Group does not hold collateral as security. The Group
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
2023
$’000
3,197
91
64
142
2022
$’000
2,829
254
84
628
3,494
3,795
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
2023
$’000
657
225
(657)
-
225
2023
$’000
5,171
409
488
6,068
2022
$’000
373
614
(329)
(1)
657
2022
$’000
600
40
124
764
MICHAEL HILL | 2023 ANNUAL REPORT 101
NOTES TO THE FINANCIAL STATEMENTS CONT.
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
2023
$’000
215
531
(565)
3
184
2022
$’000
-
1,382
(1,149)
(18)
215
F4 PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT
At 27 June 2021
Cost
Plant and
equipment
$’000
Fixtures and
fittings
$’000
Leasehold
improvements
$’000
Display
materials
$’000
Total
$’000
33,906
34,291
78,996
2,184
149,377
Accumulated depreciation and impairment
(27,294)
(28,152)
(56,563)
(915)
(112,924)
Net book amount
6,612
6,139
22,433
1,269
36,453
Year ended 26 June 2022
Opening net book amount
Exchange difference
Additions
Disposals
6,612
(36)
2,835
(77)
6,139
22,433
1,269
36,453
12
2,192
(97)
325
27
328
6,648
4,297
15,972
(69)
(23)
(633)
(128)
(266)
(10,954)
(521)
Depreciation charge
(2,569)
(2,254)
(5,498)
Impairment loss
(23)
(151)
(219)
Closing net book amount
6,742
5,841
23,620
4,809
41,012
At 26 June 2022
Cost
Accumulated depreciation
and impairment
36,315
35,733
86,673
6,489
165,210
(29,573)
(29,892)
(63,053)
(1,680)
(124,198)
Net book amount
6,742
5,841
23,620
4,809
41,012
102 MICHAEL HILL | 2023 ANNUAL REPORT
PROPERTY, PLANT AND EQUIPMENT
Year ended 2 July 2023
Opening net book amount
Exchange difference
Additions
Acquisition of Bevilles
Disposals
Plant and
equipment
$’000
Fixtures and
fittings
$’000
Leasehold
improvements
$’000
Display
materials
$’000
Total
$’000
6,742
(62)
5,875
270
(62)
5,841
43
3,515
-
(13)
23,620
4,809
41,012
192
31
204
12,455
2,945
24,790
1,725
(58)
321
(44)
2,316
(177)
Depreciation charge
(2,478)
(2,132)
(5,603)
(2,419)
(12,632)
Impairment write-back/(loss)
Closing net book amount
242
10,527
223
7,477
1,893
34,224
(65)
5,578
2,293
57,806
At 2 July 2023
Cost
41,122
38,353
98,342
9,743
187,560
Accumulated depreciation and impairment
(30,595)
(30,876)
(64,118)
(4,165)
(129,754)
Net book amount
10,527
7,477
34,224
5,578
57,806
IMPAIRMENT LOSS
As per the Group's accounting policies, the Group impairs assets where the recoverable amount is less than the carrying amount
and reverses the impairment if no longer applicable. 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. The accounting policy for this is disclosed in note J1. 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 | 2 – 5 years
MICHAEL HILL | 2023 ANNUAL REPORT 103
NOTES TO THE FINANCIAL STATEMENTS CONT.
F5 INTANGIBLE ASSETS
INTANGIBLE ASSETS
At 27 June 2021
Cost
Accumulated amortisation and impairment
Net book amount
Year ended 26 June 2022
Opening net book amount
Additions
Disposals
Amortisation charge
Closing net book amount
At 26 June 2022
Cost
Accumulated amortisation
Net book amount
Year ended 2 July 2023
Opening net book amount
Exchange difference
Additions
Acquisition of Bevilles
Amortisation charge
Closing net book amount
At 2 July 2023
Cost
Accumulated amortisation and impairment
Net book amount
IMPAIRMENT LOSS
Brand, Loyalty Programs
& Trademarks
$’000
79
-
79
79
-
-
-
79
79
-
79
79
-
-
20,421
-
20,500
20,500
-
20,500
Computer software
$’000
18,928
(12,994)
5,934
5,934
(151)
6,860
(1,733)
10,910
25,715
(14,805)
10,910
10,910
(106)
7,792
-
(2,881)
15,715
33,509
(17,794)
15,715
Total
$’000
19,007
(12,994)
6,013
6,013
(151)
6,860
(1,733)
10,989
25,794
(14,805)
10,989
10,989
(106)
7,792
20,421
(2,881)
36,215
54,009
(17,794)
36,215
A review of intangibles impairment indicators was performed during the period, with no indicators identified.
104 MICHAEL HILL | 2023 ANNUAL REPORT
F6 TRADE AND OTHER PAYABLES
Trade payables
Annual leave liability
Accrued expenses
Consumption taxes payable
Other payables
F7 PROVISIONS
2023
$’000
39,422
10,376
4,006
2,803
2022
$’000
44,558
10,211
4,620
3,376
14,595
15,632
71,202
78,397
2023
2022
Current
$’000
Non-current
$’000
Total
$’000
Current
$’000
Non-current
$’000
Total
$’000
Employee benefits
9,986
2,090
12,076
10,617
1,667
12,284
Assurance-type warranties
1,927
-
1,927
1,613
120
1,733
Make good provision
Restructuring costs
Diamond warranty
594
738
-
8,789
9,383
1,876
5,710
7,586
-
-
738
-
80
120
-
-
80
120
13,245
10,879
24,124
14,306
7,497
21,803
MOVEMENTS IN PROVISIONS
Employee
benefits
Assurance-type
warranties
Make good
provision
Restructuring
costs
Diamond
warranty
Total
$’000
$’000
$’000
$’000
$’000
$’000
Opening carrying amount
12,284
Changes in provisions recognised
Recognised on Bevilles acquisition
Amounts incurred and charged
Exchange differences
390
724
(1,348)
26
1,733
194
-
-
-
7,586
921
-
(109)
985
Closing carrying amount
12,076
1,927
9,383
80
733
-
(80)
5
738
120
21,803
-
-
2,238
724
(120)
(1,657)
-
-
1,016
24,124
MICHAEL HILL | 2023 ANNUAL REPORT 105
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
watches sold before 30 June 2018 included a lifetime battery
replacement guarantee. Management estimates the provision
based on historical sale return information and any recent
trends that may suggest future claims could differ from
historical amounts.
Make good provision
The Group has an obligation to restore certain leasehold sites
to their original condition upon store closure or relocation.
This provision represents the present value of the expected
future make good commitment. Amounts charged to the
provision represent both the cost of make good costs incurred
and the costs incurred which mitigate the final liability prior
to the closure or relocation.
Restructuring
as new information becomes available and/or when the
A provision has been raised for the estimated staffing exit costs
remediation program is completed and approved
by the regulator.
from business structure changes. Restructuring provisions are
recognised only when the Group has a constructive obligation,
The liability for long service leave is measured as the present
which is when:
value of expected future payments to be made in respect of
•
there is a detailed formal plan that identifies the business or
services provided by employees up to the reporting date using
part of the business concerned, the location and number of
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
and the 3 year watch guarantee. In addition, all Michael Hill
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.
F8 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 deferred tax expense/(benefit)
2023
$’000
11,043
(964)
10,079
3,517
969
4,486
2022
$’000
7,329
1,618
8,947
11,833
(1,789)
10,044
Income tax expense
14,565
18,991
106 MICHAEL HILL | 2023 ANNUAL REPORT
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%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
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
Tax losses not recognised
Change in tax rate on deferred tax balance
2023
$’000
49,744
14,923
50
-
2022
$’000
65,703
19,711
83
(11)
14,973
19,783
(542)
(964)
969
-
172
(43)
(787)
1,618
(1,789)
(1)
-
167
Income tax expense
14,565
18,991
TAX LOSSES
2023
$’000
2022
$’000
Unused United States tax losses for which no deferred tax asset has been recognised
35,497
35,512
Potential tax benefit @ 25.0%
Unused New Zealand tax losses for which no deferred tax asset has been recognised
Potential tax benefit @ 28.0%
8,874
2,597
727
8,878
2,575
721
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 | 2023 ANNUAL REPORT 107
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
2023
$’000
114
1,552
21,825
(162)
(89)
399
2022
$’000
246
10,558
23,468
(213)
(12)
1,002
(40,149)
(30,485)
48,513
17,267
(124)
(25)
(3)
37,349
16,486
43
47
63
Net deferred tax assets
49,118
58,552
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 27 June 2022
Credited/(charged) to the income statement
Acquisition of Bevilles
Prior year adjustment
Foreign exchange differences
Closing balance at 2 July 2023
108 MICHAEL HILL | 2023 ANNUAL REPORT
21,377
27,741
49,118
58,552
(3,517)
(5,105)
(969)
157
21,082
37,470
58,552
68,329
(11,833)
-
1,790
266
49,118
58,552
F9 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
528,563
502,903
2023
$
2022
$
Fees for other services
Advisory fees
F10 CONTRIBUTED EQUITY
SHARE CAPITAL
Ordinary shares – fully paid
379,688,884
388,285,374
Total share capital
379,688,884
388,285,374
2023
Shares
2022
Shares
MOVEMENTS IN ORDINARY SHARES
Opening balance at 28 June 2021
Rights converted
Balance at 26 June 2022
Rights converted
Shares buy-back
Balance at 2 July 2023
-
3,682
528,563
506,585
2023
$’000
11,112
11,112
Number
of shares
388,142,149
143,225
2022
$’000
11,388
11,388
Total
$’000
11,285
103
388,285,374
11,388
34,747
(8,631,237)
379,688,884
24
(300)
11,112
MICHAEL HILL | 2023 ANNUAL REPORT 109
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.
During the year the Group engaged in an on-market share buy-back program, purchasing 8,631,237 shares at an average price of
AUD1.18 per share. The buyback was apportioned against Share Capital and Retained Earnings on a par-value basis. As a result, the
Contributed Equity of the Company reflected a reduction in Share Capital of $300,000 with the remainder shown as a reduction in
Retained Earnings.
Options
Information relating to the Michael Hill International Employee Option Plan, including details of options issued, exercised
and lapsed during the financial year and options outstanding at the end of the financial year, is set out in note D3.
Rights issue
Information relating to share rights issued under the Company's deferred compensation plan, including details of rights issued,
exercised and lapsed during the financial year and rights outstanding at the end of the financial year, is set out in note D3.
F11 RESERVES
NATURE AND PURPOSES OF OTHER RESERVES
Share-based payments
The share-based payments reserve is used to recognise the value of equity-settled share-based payments provided to employees,
including key management personnel, as part of their remunerations. Refer to note D3 for further details of these plans.
Foreign currency translation
Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive income as
described in note J1(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.
110 MICHAEL HILL | 2023 ANNUAL REPORT
G BUSINESS COMBINATION
G1 ACQUISITIONS OF BEVILLES
ACQUISITION OF BEVILLES
On 1 June 2023, the Group acquired the business and selected assets of Bevilles, with consideration consisting of cash upfront
(after adjustments) and earn-out payments over two years.
Bevilles is a fast growing and profitable Australian jewellery and watch retailer that centres its brand and products on the 'value'
customer segment. As such, this provides a strong strategic fit and complements the strategy to elevate the Michael Hill brand to a
'premium' market positioning.
The Group measures the assets and liabilities assumed in the acquisition at fair value.
ASSETS ACQUIRED AND LIABILITIES ASSUMED
The fair values of the identifiable assets and liabilities of Bevilles as at the date of acquisition were:
ASSETS ACQUIRED AND LIABILITIES ASSUMED
Fair value recognised on
acquisition
$’000
Assets
Cash
Trade receivables
Inventories
Property, plant and equipment
Intangibles
Right-of-use assets
Other current assets
Total assets
Liabilities
Trade payables
Contract liabilities
Employee entitlements
Lease liabilities
Provisions
Deferred tax liabilities
Total liabilities
Total identifiable net assets at fair value
Goodwill arising on acquisition
Purchase consideration transferred
22
49
18,909
2,316
20,421
10,812
172
52,700
1,098
1,162
2,212
10,812
1,001
5,105
21,390
31,310
17,695
49,006
MICHAEL HILL | 2023 ANNUAL REPORT 111
NOTES TO THE FINANCIAL STATEMENTS CONT.
The Group has assessed the value of the net assets brought on at acquisition date and has consolidated the above on a provisional
basis. From the date of acquisition, Bevilles contributed $3,759,000 in revenue and a loss of $319,000 to profit before tax of the Group.
The Group measured the acquired lease liabilities using the present value of the remaining lease payments at the date
of acquisition.
The deferred tax liability mainly comprises the tax effect of acquisition of intangible assets.
Intangible assets identified on acquisition include the Bevilles brand and the loyalty program run by the business. The brand has an
indefinite useful life and the loyalty program will be provisionally amortised over a three year period.
Goodwill comprises the value of expected synergies arising from the acquisition as well as the assembled workforce.
PURCHASE CONSIDERATION
Cash consideration paid to the vendor
Deferred contingent consideration paid in escrow
Deferred consideration payable
Total consideration
CONTINGENT CONSIDERATION
$’000
44,635
3,500
871
49,006
As part of the purchase agreement with the previous owners of Bevilles, a contingent consideration has been agreed. There will be
additional cash payments to the previous owners of Bevilles of:
a. A minimum of $1,000,000; and
b. An earnings based on the Michael Hill International Limited share price with the first gate at $1.50 increasing to over $1.80.
At $1.50 the consideration will be $450,000 multiplied by the share price at the time. At over $1.80 the earn out will be
equivalent to $1,080,000 multiplied by the share price. An independent valuation has not ascribed a material value to this
component of consideration.
As at the acquisition date, the fair value of the deferred consideration discounted to balance sheet date was estimated to
be $871,000.
112 MICHAEL HILL | 2023 ANNUAL REPORT
H GROUP STRUCTURE
H1 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 noteJ1(B):
COUNTRY OF
INCORPORATION
OWNERSHIP INTEREST HELD
BY THE GROUP
2023
2022
Michael Hill Jeweller (Australia) Pty Limited
Michael Hill Wholesale Pty Limited
Michael Hill Manufacturing Pty Limited
Michael Hill Franchise Pty Limited
Michael Hill Franchise Services Pty Limited
Michael Hill Finance (A Limited Partnership)
Michael Hill Group Services Pty Limited
Michael Hill Charms Pty Limited
MH Bespoke Diamonds AU Pty Ltd
(previously Michael Hill Online Pty Ltd)
Fine Jewellery Retail AU Pty Ltd
(previously Emma & Roe Pty Limited)
Medley Jewellery Pty Limited
Durante Holdings Pty Limited
Michael Hill New Zealand Limited
Michael Hill Jeweller Limited
Michael Hill Finance (NZ) Limited
Michael Hill Franchise Holdings Limited
MHJ (US) Limited
Emma & Roe NZ Limited
Michael Hill Online Holdings Limited
Michael Hill Jeweller (Canada) Limited
Michael Hill LLC
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
Canada
United States
%
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 | 2023 ANNUAL REPORT 113
NOTES TO THE FINANCIAL STATEMENTS CONT.
H2 DEED OF CROSS GUARANTEE
Pursuant to ASIC Class Order 2016/785, the Australian wholly-
full. The subsidiaries have also given similar guarantees in the
owned subsidiaries listed below are relieved from the
event that the Company is wound up.
Corporations Act 2001 requirements for preparation, audit and
lodgement of financial reports and directors' report in Australia.
The above companies represent a Closed Group for the
purposes of the Class Order and, as there are no other parties
The subsidiaries subject to the deed are: Durante Holdings Pty
to the Deed of Cross Guarantee that are controlled by Michael
Ltd, Michael Hill Group Services Pty Ltd, Michael Hill Jeweller
Hill International Limited, they also represent the Extended
(Australia) Pty Ltd, Michael Hill Manufacturing Pty Ltd, Michael
Closed Group.
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, MH Bespoke Diamonds AU Pty
Ltd, Michael Hill Charms Pty Ltd, Fine Jewellery Retail AU Pty
CONSOLIDATED STATEMENT OF PROFIT OR
LOSS, STATEMENT OF COMPREHENSIVE
INCOME AND SUMMARY OF MOVEMENTS IN
CONSOLIDATED RETAINED EARNINGS
Ltd, Medley Jewellery Pty Ltd, Michael Hill Online Holdings Ltd
Set out below is a consolidated statement of profit or loss,
a consolidated statement of comprehensive income and a
summary of movements in consolidated retained earnings for
the year ended 2 July 2023 of the closed group consisting of
Michael Hill International Limited and the entities noted above.
and Emma & Roe NZ Ltd.
The Class Order requires the Parent Company and each of the
subsidiaries to enter into a Deed of Cross Guarantee. The effect
of the deed is that the Company guarantees each creditor
payment in full of any debt in the event of winding up of any of
the subsidiaries under certain provisions of the Corporations
Act 2001. If a winding up occurs under other provisions of the
Corporations Act 2001, the Company will only be liable in the
event that after six months any creditor has not been paid in
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
114 MICHAEL HILL | 2023 ANNUAL REPORT
2023
$’000
435,796
17,121
(236)
(160,161)
(129,675)
(4,812)
(31,594)
(12,845)
(44,960)
(114)
(22,885)
(6,583)
39,052
(12,964)
26,088
2022
$’000
421,019
39,354
6,063
(186,589)
(117,851)
(6,711)
(29,329)
(11,971)
(38,850)
(231)
(15,211)
(5,371)
54,322
(15,019)
39,303
OTHER COMPREHENSIVE INCOME
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations
Other comprehensive income for the period, net of tax
Total comprehensive income for the year
STATEMENT OF CHANGES IN EQUITY
Equity at the beginning of the financial year
Share buy-back
Total comprehensive income/(loss)
Share rights through share-based payments reserve
Issue of share capital on exercise of share rights
Dividends paid
Total equity at the end of the financial year
2023
$’000
1,379
1,379
27,467
2023
$’000
472,985
10,207
27,467
1,794
-
(30,719)
481,734
2022
$’000
4,977
4,977
44,281
2022
$’000
453,554
-
44,281
286
103
(25,239)
472,985
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Set out below is a consolidated statement of financial position as at 2 July 2023 of the Closed Group consisting of Michael Hill
International Limited and the entities noted above.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CURRENT ASSETS
Cash and cash equivalents
Trade receivables
Inventories
Loans to related parties
Other current assets
Total current assets
2023
$’000
9,971
5,950
151,266
246,710
4,714
418,611
2022
$’000
55,499
7,010
137,374
251,706
5,102
456,691
MICHAEL HILL | 2023 ANNUAL REPORT 115
NOTES TO THE FINANCIAL STATEMENTS CONT.
41,756
108,121
83,346
18,341
36,215
40,767
328,546
747,157
54,035
31,074
9,450
14,616
12,310
121,485
88,947
44,113
10,878
143,938
265,423
481,734
320,585
(16,352)
177,501
481,734
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
122,146
58,295
45,081
7,378
110,754
232,900
472,985
310,378
(19,525)
182,132
472,985
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
116 MICHAEL HILL | 2023 ANNUAL REPORT
H3 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
Loss for the year
Total comprehensive loss
2023
$’000
286
387,715
388,001
11,664
11,664
376,337
291,255
33,504
51,578
376,337
2023
$’000
(39,437)
(39,437)
2022
$’000
198
425,363
425,561
1,398
1,398
424,163
291,531
41,617
91,015
424,163
2022
$’000
(28,024)
(28,024)
GUARANTEES ENTERED INTO BY THE PARENT ENTITY
The Parent has issued the following guarantees in relation to the debts of its subsidiaries:
(i)
Pursuant to Class Order 2016/785, Michael Hill International Limited and the subsidiaries listed below entered into a deed
of cross guarantee on 30 June 2016. The effect of the deed is that Michael Hill International Limited has guaranteed to pay
any deficiency in the event of winding up of any controlled entity or if they do not meet their obligations under the terms of
overdrafts, loans, leases or other liabilities subject to the guarantee. The controlled entities have also given a similar guarantee
in the event that Michael Hill International Limited is wound up or if it does not meet its obligations under the terms of
overdrafts, loans, leases or other liabilities subject to the guarantee.
(ii)
The subsidiaries subject to the deed are: Durante Holdings Pty Ltd, Michael Hill Group Services Pty Ltd, Michael Hill Jeweller
(Australia) Pty Ltd, Michael Hill Manufacturing Pty Ltd, Michael Hill Wholesale Pty Ltd, Michael Hill Franchise Services Pty Ltd,
Michael Hill Franchise Pty Ltd, Michael Hill New Zealand Ltd, Michael Hill Jeweller Ltd, Michael Hill Franchise Holdings Ltd,
Michael Hill Finance (NZ) Ltd, Michael Hill Online Pty Ltd, Michael Hill Charms Pty Ltd, Emma & Roe Pty Ltd, Medley Jewellery
Pty Ltd, Michael Hill Online Holdings Ltd and Emma & Roe NZ Ltd.
CONTINGENT LIABILITIES OF THE PARENT ENTITY
The Parent entity had no material contingent liabilities as at balance date.
MICHAEL HILL | 2023 ANNUAL REPORT 117
NOTES TO THE FINANCIAL STATEMENTS CONT.
I
UNRECOGNISED ITEMS
I1
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 2 July 2023.
Future lease payments for these
non-cancellable lease contracts
Within
one year
$’000
One to
five years
$’000
Greater than five
years
$’000
413
3,812
2,981
Total
$’000
7,206
I2 EVENTS OCCURRING AFTER THE END OF THE
REPORTING PERIOD
On 2 August 2023, David Whittle was appointed as a non-executive director of Michael Hill International Limited.
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.
118 MICHAEL HILL | 2023 ANNUAL REPORT
J
SUMMARY OF ACCOUNTING POLICIES AND SIGNIFICANT
ESTIMATES AND JUDGEMENTS
J1 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
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
(A) BASIS OF PREPARATION
The financial report is a general purpose financial report, which
has been prepared in accordance with the requirements of
the Corporations Act 2001, Australian Accounting Standards
and other authoritative pronouncements of the Australian
Accounting Standards Board.
The financial statements have been prepared on a historical
cost basis, except for derivative financial instruments that
have been measured at fair value. The consolidated financial
statements provide comparative information in respect of the
previous period.
For reporting purposes, the Group adopts a weekly 'retail
calendar' closing each Sunday. The current 53 week reporting
period ended on 02 July 2023.
The consolidated financial statements of the Group comply
with International Financial Reporting Standards (IFRS) as
to part of the net investment in a foreign operation.
Group companies
The results and financial position of all the Group
entities (none of which have the currency of a
hyperinflationary economy) that have a functional
currency different from the presentation currency are
translated into the presentation currency as follows:
• assets and liabilities for each balance sheet
presented are translated at the closing rate at the
date of the statement of financial position;
•
income and expenses for each statement of profit
or loss and statement of comprehensive income are
translated at average exchange rates, unless this is
not a reasonable approximation of the cumulative
effect of the rates prevailing on the transaction
dates, in which case income and expenses are
translated at the dates of the transactions; and
issued by the International Accounting Standards Board (IASB).
• all resulting exchange differences are recognised
(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.
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
Intercompany transactions, balances and unrealised gains on
to temporary differences and to unused tax losses.
transactions between Group companies are eliminated on
consolidation. Unrealised losses are also eliminated unless
the transaction provides evidence of the impairment of the
transferred asset.
(C) FOREIGN CURRENCY TRANSLATION
Functional currency translation
Items included in the financial statements of each of the
Group entities are measured using the currency of the
primary economic environment in which the entity operates
('the functional currency'). The Group financial statements
are presented in Australian dollars, which is the Group's
presentation currency.
Transactions and balances
Foreign currency transactions are translated into the
functional currency using the exchange rates prevailing at
the dates of the transactions. Net foreign exchange gains
and losses resulting from the settlement of such transactions
and from the translation at year-end of monetary assets
and liabilities denominated in foreign currencies are
The current income tax charge is calculated on the basis of the
tax laws enacted or substantively enacted at the end of the
reporting year in the countries where the Group operates and
generates taxable income. Management periodically evaluates
positions taken in tax returns with respect to situations in
which applicable tax regulation is subject to interpretation.
It establishes provisions where appropriate on the basis
of amounts expected to be paid to the tax authorities.
Current tax is recognised in profit or loss, except to
the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this
case, the tax is also recognised in other comprehensive
income or directly in equity, respectively.
Deferred income tax
Deferred income tax is provided in full, using the liability
method, on temporary differences between the tax bases
of assets and liabilities and their carrying amounts in the
consolidated financial statements. Deferred tax assets and
liabilities are classified as non-current assets and liabilities.
MICHAEL HILL | 2023 ANNUAL REPORT 119
NOTES TO THE FINANCIAL STATEMENTS CONT.
Deferred tax assets are recognised for deductible
• When receivables and payables are stated
temporary differences and unused tax losses only if it is
with the amount of GST included.
probable that future taxable amounts will be available
to utilise those temporary differences and losses.
The net amount of GST recoverable from, or payable to,
the taxation authority is included as part of receivables
Deferred tax liabilities and assets are not recognised for
or payables in the statement of financial position.
temporary differences between the carrying amount and
Commitments and contingencies are disclosed
tax bases of investments in controlled entities where the
net of the amount of GST recoverable from, or
Parent Entity is able to control the timing of the reversal
payable to, the taxation authority.
of the temporary differences and it is probable that the
differences will not reverse in the foreseeable future.
Cash flows are included in the statement of cash flows
on a gross basis and the GST components of cash flows
Deferred tax is recognised in profit or loss, except to
arising from investing or financing activities which are
the extent that it relates to items recognised in other
recoverable from, or payable to, the taxation authority, are
comprehensive income or directly in equity. In this
presented as operating cash flows.
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:
(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
• When the GST incurred on a sale or purchase of assets
cost and net realisable value. Cost comprises direct materials,
or services is not payable to or recoverable from the
direct labour and an appropriate proportion of variable and
taxation authority, in which case the GST is recognised
fixed overhead expenditure, the latter being allocated on the
as part of the revenue or the expense item or as part of
basis of normal operating capacity. Costs are assigned to
the cost of acquisition of the asset, as applicable; or
individual items of inventory on the basis of weighted average
costs. Net realisable value is the estimated selling price in
the ordinary course of business less the estimated costs of
completion and the estimated costs necessary to make the sale.
Management review stock holdings based on recoverability
at a product level and write-down as appropriate.
120 MICHAEL HILL | 2023 ANNUAL REPORT
(I) FINANCIAL INSTRUMENTS
- INITIAL RECOGNITION AND
SUBSEQUENT MEASUREMENT
The Group’s financial assets at amortised cost include
trade receivables included under current and non-current
financial assets.
(i) Financial assets
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT
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.
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..
The Group’s business model for managing financial assets
refers to how it manages its financial assets in order to
DERECOGNITION
generate cash flows. The business model determines
A financial asset (or, where applicable, a part of a financial
whether cash flows will result from collecting contractual
asset or part of a group of similar financial assets) is
cash flows, selling the financial assets, or both.
primarily derecognised (i.e. removed from the Group’s
SUBSEQUENT MEASUREMENT
Whilst there are four categories, two are relevant in
the current reporting period for the Group, being:
•
•
Financial assets at amortised cost (debt instruments)
Financial assets at fair value through profit or loss
FINANCIAL ASSETS AT AMORTISED
COST (DEBT INSTRUMENTS)
This category is the most relevant to the Group.
The Group measures financial assets at amortised
cost if both of the following conditions are met:
• The financial asset is held within a business model
with the objective to hold financial assets in order
to collect contractual cash flows; and
• The contractual terms of the financial asset
give rise on specified dates to cash flows that
are solely payments of principal and interest
on the principal amount outstanding.
consolidated statement of financial position) when:
• The rights to receive cash flows from
the asset have expired; or
• The Group has transferred its rights to receive cash flows
from the asset or has assumed an obligation to pay the
received cash flows in full without material delay to a third
party under a ‘pass-through’ arrangement; and either (a) the
Group has transferred substantially all the risks and rewards
of the asset, or (b) the Group has neither transferred
nor retained substantially all the risks and rewards of
the asset, but has transferred control of the asset.
When the Group has transferred its rights to receive cash flows
from an asset or has entered into a pass-through arrangement,
it evaluates if, and to what extent, it has retained the risks
and rewards of ownership. When it has neither transferred
nor retained substantially all of the risks and rewards of
the asset, nor transferred control of the asset, the Group
continues to recognise the transferred asset to the extent
of its continuing involvement. In that case, the Group also
Financial assets at amortised cost are subsequently measured
recognises an associated liability. The transferred asset and
using the Effective Interest Rate (EIR) method and are subject
the associated liability are measured on a basis that reflects
to impairment. Gains and losses are recognised in profit or
the rights and obligations that the Group has retained.
loss when the asset is derecognised, modified or impaired.
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 | 2023 ANNUAL REPORT 121
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
value through profit or loss. ECLs are based on the
difference between the contractual cash flows due in
Gains or losses on liabilities held for trading are
recognised in the statement of profit or loss.
Financial liabilities designated upon initial recognition at fair
value through profit or loss are designated at the initial date
of recognition, and only if the criteria in AASB9 Financial
Instruments are satisfied. The Group has not designated
any financial liability as at fair value through profit or loss.
accordance with the contract and all the cash flows
LOANS AND BORROWINGS AT AMORTISED COST
that the Group expects to receive, discounted at an
approximation of the original effective interest rate.
This is the category most relevant to the Group. After initial
recognition, interest-bearing loans and borrowings are
For trade receivables and contract assets, the Group
subsequently measured at amortised cost using the Effective
applies a simplified approach in calculating ECLs.
Interest Rate (EIR) method. Gains and losses are recognised
Therefore, the Group does not track changes in credit risk,
in profit or loss when the liabilities are derecognised
but instead recognises a loss allowance based on lifetime
as well as through the EIR amortisation process.
ECLs at each reporting date. The Group has established
a provision matrix that is based on its historical credit
loss experience, adjusted for forward-looking factors
specific to the debtors and the economic environment.
The Group considers a financial asset in default when
contractual payments are past due. However, in certain
cases, the Group may also consider a financial asset to be
in default when internal or external information indicates
Amortised cost is calculated by taking into account any
discount or premium on acquisition and fees or costs
that are an integral part of the EIR. The EIR amortisation is
included as finance costs in the statement of profit or loss.
This category generally applies to interest-bearing loans
and borrowings. For more information, refer to note C1.
DERECOGNITION
that the Group is unlikely to receive the outstanding
A financial liability is derecognised when the obligation
contractual amounts in full before taking into account
under the liability is discharged or cancelled or expires.
any credit enhancements held by the Group. A financial
When an existing financial liability is replaced by another
asset is written off when there is no reasonable
from the same lender on substantially different terms, or
expectation of recovering the contractual cash flows.
the terms of an existing liability are substantially modified,
(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.
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
Financial liabilities are classified as held for trading if they are
associated with the item will flow to the Group and the
incurred for the purpose of repurchasing in the near term.
This category also includes derivative financial instruments
entered into by the Group that are not designated as
hedging instruments in hedge relationships as defined
by AASB9 Financial Instruments. Separated embedded
derivatives are also classified as held for trading unless
they are designated as effective hedging instruments.
122 MICHAEL HILL | 2023 ANNUAL REPORT
cost of the item can be measured reliably. The carrying
amount of any component accounted for as a separate
asset is derecognised when replaced. All other repairs
and maintenance are charged to profit or loss during
the reporting year in which they are incurred.
Depreciation on other assets is calculated using the straight
Development costs that are directly attributable to the
line method to allocate their cost or revalued amounts, net of
design and testing of identifiable and unique software
their residual values, over their estimated useful lives (note F4).
products controlled by the Group are recognised as
The assets' residual values and useful lives are reviewed, and
intangible assets when the following criteria are met:
adjusted if appropriate, at the end of each reporting year.
•
it is technically feasible to complete the software so that
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 J1(F)).
Gains and losses on disposals are determined by comparing
it will be available for use;
• Management intends to complete the software and use
or sell it;
•
there is an ability to use or sell the software;
proceeds with carrying amount. These are included in profit
• adequate technical, financial and other resources to
or loss.
(K) INTANGIBLE ASSETS
Goodwill
complete the development and to use or sell the
software are available;
•
it can be demonstrated how the software will generate
probable future economic benefits; and
Goodwill is initially measured at cost (being the excess of the
•
the expenditure attributable to the software during its
aggregate of the consideration transferred and the amount
development can be reliably measured.
recognised for non-controlling interests and any previous
interest held over the net identifiable assets acquired and
liabilities assumed). If the fair value of the net assets acquired
is in excess of the aggregate consideration transferred, the
Group re-assesses whether it has correctly identified all of
the assets acquired and all of the liabilities assumed and
reviews the procedures used to measure the amounts to be
recognised at the acquisition date. If the reassessment still
results in an excess of the fair value of net assets acquired
In respect to cloud computing arrangements, the Group
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.
Directly attributable costs that are capitalised as part of the
software include employee costs and an appropriate portion of
over the aggregate consideration transferred, then the gain is
relevant overheads.
recognised in profit or loss.
After initial recognition, goodwill is measured at cost less any
Capitalised development costs are recorded as intangible
assets and amortised from the point at which the asset is ready
accumulated impairment losses. For the purpose of impairment
for use.
testing, goodwill acquired in a business combination is,
from the acquisition date, allocated to each of the Group’s
cash-generating units that are expected to benefit from the
combination, irrespective of whether other assets or liabilities
of the acquiree are assigned to those units.
Brand
Bevilles has an established brand operating for 89 years in the
specialty retail industry. The Bevilles brand name has been
valued using the relief-from-royalty method assuming an
indefinite useful life.
Loyalty Program
Computer software development costs recognised as assets
are amortised over their estimated useful lives (not exceeding
ten years).
Useful life
The useful lives of intangible assets are assessed as either finite
or indefinite.
Intangible assets with finite lives are amortised over the useful
economic life i.e. three years for customer loyalty program
and assessed for impairment whenever there is an indication
that the intangible asset may be impaired. The amortisation
period and the amortisation method for an intangible asset
Bevilles operate a customer loyalty program which attributes
with a finite useful life are reviewed at least at the end of
value to the business by offering a returning customer
base. The cost of intangible assets acquired in a business
combination is their fair value at the date of acquisition.
each reporting period. Changes in the expected useful life
or the expected pattern of consumption of future economic
benefits embodied in the asset are considered to modify
Following initial recognition, intangible assets are carried at
the amortisation period or method, as appropriate, and are
cost less any accumulated amortisation and accumulated
treated as changes in accounting estimates. The amortisation
impairment losses. Internally generated intangibles, excluding
expense on intangible assets with finite lives is recognised in
capitalised development costs, are not capitalised and the
the statement of profit or loss in the expense category that is
related expenditure is reflected in profit or loss in the period in
consistent with the function of the intangible assets.
which the expenditure is incurred.
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.
MICHAEL HILL | 2023 ANNUAL REPORT 123
NOTES TO THE FINANCIAL STATEMENTS CONT.
(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
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 obligation and the amount can be reliably estimated.
The Group recognises a liability and an expense for
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
bonuses and profit-sharing based on a formula that takes
into consideration the profit attributable to the Company's
shareholders after certain adjustments. The Group recognises
a provision where contractually obliged or where there is a
past practice that has created a constructive obligation.
in the same class of obligations may be small.
Retirement benefit obligations
Present obligations arising from onerous contracts are
The Group provides retirement benefits to
required to be recognised and measured as a provision.
employees through a defined contribution
An onerous contract is considered to exist where the
superannuation fund. Contributions are recognised
unavoidable cost of meeting the obligations under the
as expenses as they become payable.
contract exceed the economic benefits expected to
be received from the contract.
Provisions are measured at the present value of management's
best estimate of the expenditure required to settle
the present obligation at the end of the reporting year.
The discount rate used to determine the present value
is a pre-tax rate that reflects current market assessments
of the time value of money and the risks specific to the
liability. The increase in the provision due to the passage
of time is recognised as interest expense.
(M) EMPLOYEE ENTITLEMENTS
Short-term obligations
Liabilities for wages and salaries, including non-monetary
benefits and accumulating sick leave that are expected
to be settled wholly within 12 months after the end of the
year in which the employees render the related service
are recognised in respect of employees’ services up to the
end of the reporting year and are measured at the amounts
expected to be paid when the liabilities are settled.
Liabilities for employee benefits are measured at the present
value of management’s best estimate of the expenditure
required to settle the present obligation at the reporting date.
Other long-term employee benefit obligations
The liabilities for long service leave and annual leave that are
not expected to be settled wholly within 12 months after the
end of the year in which the employees render the related
service are measured as the present value of expected
future payments to be made in respect of services provided
by employees up to the end of the reporting year using
the projected unit credit method. Consideration is given
to expected future wage and salary levels, experience of
employee departures and periods of service. Expected future
payments are discounted using the Milliman G100 discount
rates at the end of the reporting period. Remeasurements
as a result of experience adjustments and changes in
actuarial assumptions are recognised in profit or loss.
The obligations are presented as current liabilities in the
statement of financial position if the entity does not have an
124 MICHAEL HILL | 2023 ANNUAL REPORT
(N) BUSINESS COMBINATIONS
Business combinations are accounted for using the
acquisition method. The cost of an acquisition is measured
as the aggregate of the consideration transferred, which
is measured at acquisition date fair value, and the amount
of any non-controlling interests in the acquiree. For each
business combination, the Group elects whether to measure
the non-controlling interests in the acquiree at fair value or
at the proportionate share of the acquiree’s identifiable net
assets. Acquisition-related costs are expensed as incurred
and included in administrative expenses. At the acquisition
date, identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured
initially at their fair values, except deferred tax assets or
liabilities and assets or liabilities related to employee
benefit arrangements which are recognised and measured
in accordance with AASB 112 Income Taxes and AASB 119
Employee Benefits respectively.
The Group determines that it has acquired a business when
the acquired set of activities and assets include an input and
a substantive process that together significantly contribute
to the ability to create outputs. The acquired process is
considered substantive if it is critical to the ability to continue
producing outputs, and the inputs acquired include an
organised workforce with the necessary skills, knowledge,
or experience to perform that process or it significantly
contributes to the ability to continue producing outputs and
is considered unique or scarce or cannot be replaced without
significant cost, effort, or delay in the ability to continue
producing outputs.
When the Group acquires a business, it assesses the financial
assets and liabilities assumed for appropriate classification
and designation in accordance with the contractual terms,
economic circumstances and pertinent conditions as at the
acquisition date. This includes the separation of embedded
derivatives in host contracts by the acquiree.
Any contingent consideration to be transferred by the
acquirer will be recognised at fair value at the acquisition
date. Contingent consideration classified as equity is not
remeasured and its subsequent settlement is accounted for
Some comparative amounts included within these financial
within equity. Contingent consideration classified as an asset
statements have been reclassified, to allow greater
or liability that is a financial instrument and within the scope
transparency when comparing current period to prior period.
of AASB 9 Financial Instruments, is measured at fair value
The reclassification adjustments have had no impact on the
with the changes in fair value recognised in the statement of
prior period Profit Before Tax, Profit After Tax, or Net Assets.
profit or loss in accordance with AASB 9. Other contingent
consideration that is not within the scope of AASB 9 is
measured at fair value at each reporting date with changes in
fair value recognised in profit or loss.
(O) CONTRIBUTED EQUITY
(S) CHANGES IN ACCOUNTING POLICIES
AND DISCLOSURES
Several other amendments and interpretations apply for
the first time in 2023, but do not have an impact on the
consolidated financial statements of the Group. The Group
Ordinary shares are classified as equity.
has not early adopted any standards, interpretations or
Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction, net of
tax, from the proceeds.
Where any group company purchases the Company's equity
instruments, for example as the result of a share buy-back or a
share-based payment plan, the consideration paid, including
any directly attributable incremental costs (net of income
taxes) is deducted from equity attributable to the owners of
Michael Hill International Limited as treasury shares until the
shares are cancelled or reissued. Where such ordinary shares
are subsequently reissued, any consideration received, net
of any directly attributable incremental transaction costs
and the related income tax effects, is included in equity
attributable to the owners of Michael Hill International Limited.
(P) DIVIDENDS
Provision is made for the amount of any dividend declared,
being appropriately authorised and no longer at the discretion
amendments that have been issued but are not yet effective
J2 SIGNIFICANT ESTIMATES
AND JUDGEMENTS
SIGNIFICANT ESTIMATES AND JUDGEMENTS
The preparation of financial statements requires the use
of accounting estimates which, by definition, will seldom
equal the actual results. Management also needs to
exercise judgement in applying the Group’s accounting
policies. Estimates and judgements are continually
evaluated and are based on historical experience and
other factors, including expectations of future events that
are believed to be reasonable under the circumstances.
The estimates and assumptions that have a significant
risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial
year are incorporated within the relevant note.
of the entity, on or before the end of the reporting year
The significant accounting judgements relate to the pattern
of PCP revenue recognition (note A2), and employee
remediation (note F7). Accounting for the acquisition of
Bevilles is prepared on a provisional basis (note G1).
but not distributed at the end of the reporting year.
(Q ) EARNINGS PER SHARE
Basic earnings per share
Basic earnings per share is calculated by dividing:
•
the profit attributable to owners of the Company, excluding
any costs of servicing equity other than ordinary shares
• by the weighted average number of ordinary shares
outstanding during the financial year, adjusted for bonus
elements in ordinary shares issued during the year and
excluding treasury shares (note F2).
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the
determination of basic earnings per share to take into account:
•
the after-income tax effect of interest and other financing
costs associated with dilutive potential ordinary shares, and
•
the weighted average number of additional ordinary shares
that would have been outstanding assuming the conversion
of all dilutive potential ordinary shares (note F2).
(R) ROUNDING OF AMOUNTS
The Company is of a kind referred to in ASIC Legislative
Instrument 2016/191, relating to the 'rounding off'
of amounts in the financial statements. Amounts in
the financial statements have been rounded off in
accordance with the instrument to the nearest thousand
dollars, or in certain cases, the nearest dollar.
MICHAEL HILL | 2023 ANNUAL REPORT 125
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 2 July 2023, 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 2 July 2023 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 H1 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 H2.
Note J1(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
25 August 2023
126 MICHAEL HILL | 2023 ANNUAL REPORT
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
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF MICHAEL HILL
INTERNATIONAL LIMITED
REPORT ON THE AUDIT OF THE FINANCIAL REPORT
OPINION
We have audited the financial report of Michael Hill International Limited (the Company) and its subsidiaries (collectively the Group),
which comprises the consolidated statement of financial position as at 2 July 2023 , the consolidated statement of profit or loss and
other comprehensive income, consolidated statement of
changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial statements, including a
summary of significant accounting policies, and
the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:
(a) Giving a true and fair view of the consolidated financial position of the Group as at 2 July 2023 and of its consolidated financial
performance for the year ended on that date; and
(b) Complying with Australian Accounting Standards and the Corporations Regulations 2001.
BASIS FOR OPINION
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit of the financial report section of our report. We are independent of the
Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements
of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including
Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our
other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report
of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our
opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our
audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial report section of our
report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond
to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report.
MICHAEL HILL | 2023 ANNUAL REPORT 127
EXISTENCE OF INVENTORIES
Why significant
How our audit addressed the key audit matter
As at 2 July 2023 the Group’s inventories balance is $203 million
Our audit procedures included the following:
or 38% of the Group’s total assets.
• Attended stocktakes conducted at 15 Michael Hill branded
Inventories are primarily kept in the Group’s 304 retail stores
and 5 Bevilles branded retail stores across Australia, New
located in Australia, New Zealand and Canada, and the
Zealand and Canada.
distribution and manufacturing centres. Inventories comprise a
•
In addition to the retail stores, we attended the stocktakes
large number of physically small but high value items which are
completed at each of the distribution and manufacturing
subject to misappropriation and other loss.
centres in June 2023 prior to year end.
The Group accounts for inventories in accordance with the
• Testing the operating effectiveness of key controls relevant
policy disclosed in Note J1(H) and further disclosure is included
to the conduct of physical stocktakes, the review and
in Note A4 of the financial report.
investigation of stocktake variances, and the approval of
Inventory is considered a key audit matter due to the nature,
adjustments made to stock quantities.
size and geographic spread of locations where items are held.
• At these stocktakes at the retail stores, distribution and
manufacturing centres, we observed compliance with the
stocktake instructions (including the suspension of inventory
movements during the stocktake process) and selected a
sample of items to recount to establish the accuracy of the
counts performed by the Group.
• For each of the 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 year end
date, we performed inventory movement analysis, and on a
sample basis, evidenced changes in inventory quantities to
evaluate the movement of inventories between the stocktake
date and year end date. For retail locations not attended at
stocktake, we performed movements analysis on a store-by-
store basis and further analysis where the year end balances
were outside our set expectations.
• We obtained details of stock-in-transit at year end, as well as
movements either side of the year end date and performed
procedures to address the risk of incorrect cut-off of
inventory quantities at year end.
128 MICHAEL HILL | 2023 ANNUAL REPORT
PROFESSIONAL CARE PLAN (PCP) REVENUE RECOGNITION
Why significant
How our audit addressed the key audit matter
The balance of the deferred PCP revenue liability at 2 July 2023 was
Our audit procedures included the following:
$73.9 million, and PCP revenue recognised in the income statement
for the year ended 2 July 2023 was $32.9 million as disclosed in
• Assessed the Group’s PCP revenue recognition accounting
policies and compliance with the requirements of Australian
Note A2 of the financial report.
Accounting Standards.
The recognition of Professional Care Plan (PCP) revenue is a key
• Assessed the accuracy of the data used in the PCP revenue
audit matter due to the significant degree of estimation involved
estimation calculation and challenged the reasonableness of
in determining the appropriate revenue recognition pattern for
the key judgements including:
lifetime, 10 year and 3 year plans offered to the Group’s customers.
Under these plans, revenue is deferred on receipt of the payment
from the customer and recognised over time in a manner that
reflects the proportion of actual services used by customers
relative to the total amount of expected services to be provided
under the PCPs.
The 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 applied to
take account of emerging trends in customer behaviour,
industry data and exceptional circumstances such as COVID
related store closures.
The result of the 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 (or
reversal) in the current year results.
– 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 during the year and tested a sample of
transactions to understand if repairs are accurately tagged
to the associated PCP plan date.
– Performed analysis over the historic repairs data, to
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 in recent years, 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.
• Re-performed management’s sensitivity analysis over the
assumptions using reasonable alternative scenarios to
determine whether there would be a material impact on
revenue recognised in the year.
• Assessed the adequacy of disclosures included in the
Notes to the financial statements of PCP revenue
recorded and deferred at year-end and the associated
estimation uncertainty.
MICHAEL HILL | 2023 ANNUAL REPORT 129
ACQUISITION OF BEVILLES
Why significant
How our audit addressed the key audit matter
On 1 June 2023 the Group acquired the business and selected
Our audit procedures included:
assets of Bevilles, with consideration consisting of cash upfront
of $44.6m, deferred consideration of $0.9m and contingent
consideration of $3.5m relating to earn out payments over the
next two years. The details of the provisional business combination
accounting for the acquisition are disclosed in Note G1 of the
financial report.
The acquisition has been accounted for as a business combination
in accordance with Australian Accounting Standards, and due to the
proximity of the acquisition to year end, the business combination
is accounted on a provisional basis.
In undertaking the provisional acquisition accounting, the Group is
required to measure the fair value of consideration transferred, the
fair values of identifiable assets, assumed liabilities and contingent
liabilities acquired at the acquisition date, and determine the
amount of goodwill to be recognised.
The fair value measurements require significant judgement and
complex estimation, including the:
• Assessing the accuracy of treating the acquisition as
a business combination in accordance with Australian
Accounting Standards.
• Assessing the Group’s determination of the acquisition date
of the business combination.
• Evaluating the Group’s determination of the purchase
consideration and the fair value of future payments.
• Evaluating the qualifications, competence and objectivity
of the Group’s external experts used to determine the
provisional values recorded particularly for intangible
assets recorded.
• Using our valuation experts to independently assess
the reasonability of provisional fair value estimates
determined by the Group’s external experts, particularly for
intangible assets.
• Performing valuation cross checks on the acquired
intangible assets with reference to market and
•
identification and measurement of all assets, liabilities and
transaction multiples.
contingencies of the business;
• valuation of intangible assets acquired including brand
names utilised by the Bevilles business; and
• The valuation of contingent and deferred consideration,
a portion of which is linked to the Group’s share price at
• Testing the working capital balances, including cash,
inventory, trade receivable and payables, contract liabilities
and provisions at the acquisition date. Our procedures on
inventory included attendance at 5 retail store stocktakes
and the stocktake of the head office location at the date
future dates.
of acquisition.
As a result, we considered the Group’s provisional business
combination accounting and the related disclosures in the
financial report to be a key audit matter.
• Testing the provisional right of use assets and lease
liabilities recorded in accordance with Australian Accounting
Standards and underlying lease documentation.
•
Involving our taxation specialists in assessing the deferred
tax balances associated with the provisional accounting for
the acquisition.
• Assessed the adequacy of the financial report disclosures
included in the Notes to the financial report setting out
the nature and basis of the provisional business
combination accounting.
130 MICHAEL HILL | 2023 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 2023 annual report, but does not include the financial
report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance
conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion.
In connection with our audit of the financial report, our 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
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors
determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material
misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue as a going concern,
disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the directors
either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL REPORT
Our objectives are to obtain reasonable assurance
about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and
to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgment and maintain
professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform
audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud
may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by the directors.
• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on
the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify
our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the
financial report represents the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the
Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the
Group audit. We remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence,
and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence,
and where applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated to the directors, we determine those matters that were of most significance in the audit of the
financial report of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless
law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a
matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected
to outweigh the public interest benefits of such communication.
MICHAEL HILL | 2023 ANNUAL REPORT 131
REPORT ON THE AUDIT OF THE REMUNERATION REPORT
OPINION ON THE REMUNERATION REPORT
We have audited the Remuneration Report included in the directors’ report for the year ended 2 July 2023.
In our opinion, the Remuneration Report of Michael Hill International Limited for the year ended 2 July 2023, complies with section
300A of the Corporations Act 2001.
RESPONSIBILITIES
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with
section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our
audit conducted in accordance with Australian Auditing Standards.
Ernst & Young
Kellie McKenzie
Partner
Brisbane
25 August 2023
132 MICHAEL HILL | 2023 ANNUAL REPORT
ADDITIONAL INFORMATION
AS AT 25 SEPTEMBER 2023
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.
PETER KARL CHRISTOPHER HULJICH + JOHN HAMISH BONSHAW IRVING
12,464,116
Issued Capital
Number of shareholders
Minimum Parcel price
Holders with less than a marketable parcel
TWENTY LARGEST SHAREHOLDERS
Rank
Name
HOGLETT HAMLETT LIMITED*
CITICORP NOMINEES PTY LIMITED
SQUEAKIDIN LIMITED*
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
CUSTODIAL SERVICES LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
BNP PARIBAS NOMS PTY LTD
NEW ZEALAND CENTRAL SECURITIES DEPOSITORY LTD
NATIONAL NOMINEES LIMITED
MOLE HILL LIMITED*
CHRISTOPHER PETER HULJICH + CONSTANCE MARIA F HULJICH + PETER
KARL CHRISTOPHER HULJICH
NEW ZEALAND DEPOSITORY NOMINEE LIMITED
FNZ CUSTODIANS LIMITED
HWM (NZ) HOLDINGS LIMITED
BNP PARIBAS NOMINEES PTY LTD
FORSYTH BARR CUSTODIANS LIMITED
HULJICH FAMILY TRUST NOMINEES LIMITED
VANWARD INVESTMENTS LIMITED
20
HOBSON WEALTH CUSTODIAN LTD
Total
Total Remaining Holders Balance
*Denotes entities in which a member or members of the Hill family have an interest.
Number
384,623,963
4,181
$0.870
368
Fully Paid
Ordinary Shares
% of Fully Paid
Ordinary Shares
148,330,600
38.57
31,854,919
19,156,926
13,271,446
9,637,959
9,478,140
8,164,435
7,970,707
7,267,965
5,000,000
3,488,861
3,432,272
3,125,715
2,458,570
2,348,734
2,264,363
2,062,443
2,036,974
1,964,928
295,780,073
88,843,890
8.28
4.98
3.44
3.24
2.51
2.46
2.12
2.07
1.89
1.30
0.91
0.89
0.81
0.64
0.61
0.59
0.54
0.53
0.51
76.89
23.11
MICHAEL HILL | 2023 ANNUAL REPORT 133
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
726
1,306
772
1,230
147
4,181
UNMARKETABLE PARCELS
Minimum $500.00 parcel at
$0.87 per unit
Minimum Parcel Size
575
Holders
368
As at 25 September 2023, there are four substantial shareholders that Michael Hill is aware of:
421,082
3,978,343
6,320,269
39,352,955
334,551,314
384,623,963
Units
102,302
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
2 May 2023
167,487,526
44,034,477
* 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 25 September 2023 there were 41 holders of options and rights.
134 MICHAEL HILL | 2023 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
D Whittle BA, B.Com
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
AUDITOR
Ernst & Young
Level 51
111 Eagle Street
Brisbane QLD 4000
BANKERS
ANZ Australia
ANZ New Zealand
HSBC Australia
HSBC Canada
Bank of Montreal
Bank of America
EMAIL
online@michaelhill.com.au
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)
SOLICITOR
Allens Linklaters
Level 26
480 Queen Street
Brisbane QLD 4000
WEBSITES
www.michaelhill.com.au
www.michaelhill.co.nz
www.michaelhill.ca
www.michaelhill.com
www.medleyjewellery.com.au
www.bevilles.com.au
www.watchesgalore.com.au/
http://investor.michaelhill.com
MICHAEL HILL | 2023 ANNUAL REPORT 135
136 MICHAEL HILL | 2023 ANNUAL REPORT