A N N U A L R E P O R T
2 0 2 0
C O N T E N T S
A B O U T M Y E R
“MYER IS ONE OF AUSTRALIA’S LARGEST DEPARTMENT STORE GROUPS,
PLACING CUSTOMERS FIRST IN EVERY DECISION WE MAKE AND EVERY
ACTION WE TAKE. WE PROVIDE FRIENDLY, HELPFUL SERVICE,
HIGH QUALITY AND EXCLUSIVE BRANDS, WITH COMPELLING VALUE
– IN A SAFE SHOPPING ENVIRONMENT.”
Myer operates 60 department stores across
Australia, along with one of Australia’s
largest retail online sites myer.com.au,
and we are committed to being Australia’s
favourite department store. Myer’s online
business continues to deliver strong growth,
representing 17% of total sales during FY20.
Our merchandise offer includes core
product categories: Womenswear;
Menswear; Childrenswear; Beauty;
Homewares; Electrical Goods; Toys and
General Merchandise. The majority of Myer’s
operations are in Australia and encompass
Myer department stores, sass & bide and
Marcs and David Lawrence (MDL). In addition
to our Australian operations, we have a
sourcing office located in Hong Kong.
MYER IN THE COMMUNITY
Myer has been committed to local
community and philanthropy since Sidney
Myer founded the company in 1900.
We believe that by engaging with and
contributing to the communities in which we
live and work, we can have a positive social
impact, make a lasting contribution and help
achieve positive change.
The Myer Community Fund is the national
charity of the Myer Group, it is a public
ancillary fund and governed by its own
Board. The Myer Community Fund is
committed to raising funds through
charitable activities involving Myer team
members, customers and suppliers.
Annually, the Myer Community Fund
engages with and supports more than
60 charities across Australia. In FY20,
the Myer Community Fund was proud to
donate over $1.1 million to support women
and children impacted by family violence
and over $400,000 to assist Australians
impacted by natural disasters.
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ANNUAL GENERAL MEETING
The eleventh Annual General Meeting of Myer Holdings Limited ABN 14 119 085 602 will be held virtually on Thursday 29 October
2020 at 2.30 pm (Melbourne time).
The AGM will be accessible to shareholders via a live webcast and an online platform. Shareholders who attend the AGM by
logging into the online platform will be able to vote and submit questions in relation to the business of the AGM online during the
AGM. The online platform can be accessed at https://agmlive.link/MYR20.
The 2020 Myer Annual Report reflects the Company’s financial and sustainability performance for the period 28 July 2019 to 25 July 2020. It covers our
retail and store support operations in Australia. The Annual Report is prepared for all Myer stakeholders including shareholders, analysts, customers,
suppliers, team members, and the wider community. Content is based on ASX financial and governance reporting guidelines, stakeholder feedback,
and Myer’s business strategy. Further information is available from myer.com.au.
1
C H A I R M A N &
C E O ’ S R E P O R T
“WITH THE ONSET OF COVID-19, MY PRIORITY, AND THAT OF THE BOARD, CONTINUES
TO BE THE SAFETY AND WELLBEING OF OUR CUSTOMERS AND TEAM MEMBERS AND
WORKING WITH OUR EXPERIENCED MANAGEMENT TEAM TO NAVIGATE AND ADAPT TO
THIS UNPRECEDENTED OPERATING ENVIRONMENT.”
“THE WORK WE HAVE UNDERTAKEN OVER THE PAST TWO YEARS TO DELEVERAGE AND
DE-RISK THE BUSINESS, PRIMARILY THROUGH FOCUSED MANAGEMENT OF COSTS AND
PRESERVATION OF CASH, HAS BEEN ESSENTIAL IN STRENGTHENING THE FOUNDATIONS
AS WE MANAGE THROUGH THIS HEALTH CRISIS.”
– Garry Hounsell, Chairman
– John King, CEO and Managing Director
In March 2020, in response to the onset of
COVID-19, we made one of the toughest
decisions in the Company’s 120 year history to
close all 60 Myer department stores, and stand
down the majority of our team members.
For the majority of the second half, there
was substantially reduced traffic to physical
stores, particularly to those located in CBD
locations. Total sales for FY20 were down
15.8% to $2,519.4 million, with comparable
store sales down 3.3%. Operating Gross
Profit (OGP) was down 17.6% to $957.3
million, and OGP margin was down 85bps
to 38.0%.
Our continued focus on costs saw Cost
of Doing Business (CODB) decrease by
$138.6 million to $863.8 million including
benefits from government subsidies and
rent waivers during the period. EBITDA
was down 41.6% to $93.5 million. OGP,
CODB and EBITDA are referenced excluding
implementation costs and individually
significant items and pre-AASB 16.
Our trading result, excluding
implementation costs and individually
significant items and the impact of the
new lease accounting standard AASB 16,
was a net loss after tax of $11.3 million.
Implementation costs and individually
significant items were incurred totalling
$159.0 million ($221.4 million pre-tax),
including impairments to brand names of
$95.9 million and lease right-of-use assets
of $37.1 million. This resulted in a statutory
net loss after tax of $172.4 million.
Net cash at the end of the period was
$7.9 million, representing a $46.6 million
improvement on the prior year, in
conjunction with inventory being
down 26% to $256.0 million.
We announced in August this year that
we had finalised an agreement with our
existing lenders to amend and extend our
bank facility until August 2022. Securing
this new facility with our existing lenders
is testament to the work that we have
undertaken during the past two years.
The extension to the facilities will underpin
our business during this unprecedented time
of economic and social disruption.
RECORD ONLINE SALES
As a result of stores being closed, we
transitioned, overnight, to an online only
offering. During FY20, we delivered record
online sales of $422.5 million, up 61.1%, and
representing 17% of total sales. This online
growth was particularly strong as you would
expect, in the second half; up 98.8%, and
representing 28% of total sales.
During the past two years, we have
undertaken significant improvements to the
myer.com.au website including enhancing
infrastructure and peak capacity and
improved search and check-out functionality.
Together with improved fulfilment, these
enhancements have underpinned the
significant growth in sales, delivering a 50%
improvement in conversion and, importantly,
the profit contribution increased at a
significantly faster rate than sales.
The benefit of being a department store is
that we offer significant range and choice
to our customers and the business has
therefore been able to respond to the most
in demand categories that our customers
have been looking for during COVID-19.
In the second half, we had some standout
growth in online sales in key categories.
Our cosmetics business led by skincare,
fragrances and wellness products delivered
a 218% increase. The traction of our
expanding homewares business has also
allowed us to capitalise on the growth,
with homewares increasing by 177%. We have
also seen strong growth in our intimates,
activewear and casualwear areas.
CUSTOMER FIRST PLAN -
COVID-19 OVERLAY
While the Customer First Plan remains
the right plan, it has been adapted for
the current operating environment to
ensure Myer can capitalise on all available
opportunities as restrictions are eased.
We have put in place a COVID-19 overlay to
ensure we are responding in the best way to
meet the changed trading environment, and
will accelerate, re-sequence and expand
various initiatives, especially in the areas of
online and factory to customer.
Garry Hounsell
Chairman
John King
CEO and Managing Director
Dear Shareholder,
FY20 has been a year like no other, firstly
with devastating bushfires, and then with
the onset of COVID-19, which has challenged
the community’s health, the economy,
businesses, and Myer.
When the COVID-19 pandemic first hit, as
a Board and Executive team, we acted to
prioritise the health and wellbeing of our
customers, team members, and the broader
communities in which we operate.
Throughout FY20, we demonstrated
prudent fiscal management as we further
deleveraged and de-risked the business.
In response to the deterioration of trading
conditions, management took decisive
action, reducing operating expenses,
deferring non-essential expenditure,
and preserving cash.
FY20 RESULTS
During the first half, Myer delivered a solid
financial result, as well as a strengthened
balance sheet despite a deteriorating
operating environment during the peak
trading period.
CONTINUING TO ENHANCE
ONLINE AND OUR FACTORY
TO CUSTOMER PROGRAM
As a result of strong growth in recent years,
Myer is now one of the most significant
online retailers in Australia. However,
our online business needs to be bigger,
faster; and we have active plans in place
to do just that.
We have a focused plan to further improve
our online fulfilment, this is evident with the
Third Party Logistics (3PL) partnership that
we recently announced with Australia Post.
This is a key step in allowing us to deliver
improved online fulfilment to our customers,
but also giving us significant capacity as we
continue to grow this channel.
REFOCUSING MERCHANDISE
In relation to merchandise, we are focused
on making our bigger suppliers bigger,
offering high quality brands and products
at great value; and you will see more of this
in-store and online.
We have seen some standout results with
this approach, including enhancing our Polo
Ralph Lauren, Tommy Hilfiger and Industrie
ranges. We have rolled out Vero Moda to all
stores. Radley handbag sales have grown
by more than 80%. We are continuing to
improve our leading cosmetics offer. In
homewares, we are enhancing our Maxwell
and Williams and Salt&Pepper ranges with
shop-in-shop formats, and we are seeing
positive trends in toys and electrical.
RE-ENGAGING OUR CUSTOMER
AND ADAPTING OUR IN-STORE
EXPERIENCE
Even during COVID-19, we have seen our
highest in-store customer satisfaction
scores in three and a half years. These
results reflect our dedication to ensuring
the safest possible shopping environment,
with our enhanced safety measures in
place. The COVID shopper will want fewer
stops, with minimal health risk, they will
appreciate a store that offers a broad range
of merchandise, multiple services, in one
place - and that is what Myer stands for:
a one-stop, safe shop for what they need.
REDUCING OUR COSTS –
PROPERTY AND OVERHEADS
We successfully reduced our CODB by
$138.6 million in FY20. Government
subsidies and rent and outgoings waivers
provided support during the second half.
The focus on reducing costs must and will
continue into FY21 as we rationalise our
running costs and scrutinise spending
across all areas.
We are also continuing to negotiate with our
landlords as we seek to manage our short
and long term space requirements.
REMUNERATION
Given our ongoing focus on prudent
management of costs, there was a freeze on
Executive pay in FY20. In addition, no awards
were made under the FY20 STI and there
was no vesting of awards under the FY18 LTI.
For a period during April, when all stores
were closed due to COVID-19, the Executive
Management Team elected to either forego
their base salaries, or accessing their existing
leave entitlements, and the Chairman and
other Non-Executive Directors elected to
forego their Director fees.
Additionally, for a period in May and June,
the Executive Management Team elected
to work at reduced base salaries and the
Non-Executive Directors elected to receive
reduced Director fees.
Furthermore, from 1 July 2020, the
Chairman and Non-Executive Directors
also elected to reduce their annual base
fee to $250,000 (from $300,000) and
$100,000 (from $120,000) respectively. This
represents the third reduction to Chairman
and Non-Executive Director fees since FY18.
EVOLVING THE BOARD
The Board has evolved significantly during
the past three years, with the addition of
new and relevant skills and experience.
However, it is important that the Board
continues to evolve to reflect the current
operating environment.
In September 2020, we announced that
Lyndsey Cattermole AM and Julie Ann
Morrison have made the decision to retire
as directors at the 2020 AGM and do not
intend to seek re-election. We thank them
both for their service to the Company.
As a result of this, and with a view to further
reducing Board costs, we will not be seeking
to replace these positions.
THANK YOU
In closing, we thank you for the confidence
you have shown in the Board and Executive
Management Team, and we look forward to
working with you as we continue to respond
and adapt to COVID-19.
We will continue to accelerate key parts
of our Customer First Plan to ensure
that we are on the best footing to meet
the challenges, and to embrace the
opportunities of tomorrow, as we enter
a COVID normal retail environment.
With our dedicated team members,
we will continue to focus on the things
we can control. We will continue to provide
a leading offer, at great value, with the best
customer service in the safest possible
shopping environment. This is so that we
can remain Australia’s favourite, and most
trusted, department store into the future.
From the start of this year with the
devastating bushfires, to now, during this
unprecedented pandemic, every decision
we make is in the interests of our customers,
team members, and you, our valued
shareholders.
Yours sincerely,
Garry Hounsell
Chairman
John King
Managing Director and CEO
2
Myer Annual Report 2020
3
P E R F O R M A N C E
R E V I E W
RECORD GROUP ONLINE SALES OF $422.5 MILLION,
REPRESENTING 17% OF TOTAL SALES.
The FY20 result reflects a solid result achieved
in 1H20, despite macro headwinds during the
peak trading period and the 2H20 result that
was severely impacted by COVID-19.
SALES
Total sales1 were down 15.8% to $2,519.4
million; reflecting widespread store closures
in 2H20, comparable store sales2 were
down 3.3%.
Group online sales3 grew by 61.1% to
$422.5 million; up 98.8% in 2H20. The online
channel grew ahead of market in 2H20
with key categories of beauty up 218% and
homewares up 177%. Importantly the gross
profit for the online channel also improved.
OPERATING GROSS PROFIT
Operating Gross Profit (OGP)4 declined by
17.6% to $957.3 million. OGP margin declined
by 85 basis points to 38.0%, unwinding
the 62 basis point improvement that was
achieved in 1H20. This was due to several
impacts of COVID-19 in the second half
including reduced new stock which resulted
in a higher mix of clearance sales and a mix
that was skewed to lower margin products.
COST OF DOING BUSINESS
Cost of Doing Business4 decreased by 13.8%
or $138.6 million; reflecting cost mitigation
activities throughout the year and during
2H20 when Bricks & Mortar stores closed.
As a result of the reduction in sales,
Myer was successful in its application
for the Australian Government’s JobKeeper
Payment Scheme, which ensured a
significant number of roles could be
maintained during this period. Several other
payment deferrals, as well as rent relief,
were also negotiated.
In response to the deterioration in trading
conditions, management took decisive
action, reducing operating expenses,
deferring non-essential expenditure,
and managing inventory levels.
NET LOSS AFTER TAX
Net loss after tax4 was $11.3 million excluding
implementation costs and individually
significant items and pre-AASB 16.
Implementation costs and individually
significant items were incurred totalling
$159.0 million (post-tax), with the value
of intangible assets reviewed and
impairments to brand names of $95.9 million
(post-tax) and lease right-of-use (ROU)
assets of $37.1 million (post-tax) recorded.
Statutory net loss after tax was $172.4 million.
CASH FLOW AND BALANCE
SHEET
As a result of the prudent approach to
preserving cash, disciplined cost control,
support from the Australian Government
and other payment deferrals, and despite
the loss of revenue and earnings as a result
of the store closures and reduced foot
traffic, the Company finished the period
with a net cash position of $7.9 million
representing a $46.6 million improvement
on the prior year. Inventory was down 26%
to $256.0 million at the end of the period.
In August 2020, Myer announced that it had
completed an agreement with its existing
lenders to amend and extend its bank facility
until August 2022.
KEY FINANCIALS
$ MILLIONS
Total Sales¹
Operating Gross Profit (OGP)
Cost of Doing Business (CODB)⁵
Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA)⁵
Earnings before Interest and Tax (EBIT)⁵
Net Profit / (Loss) after Tax⁵
Implementation Costs and Individually Significant Items (post-tax)
Statutory Net Profit / (Loss) after Tax
Basic EPS (cents)5
FY20
(Statutory)
FY20
(Pre-AASB16)
FY19
(Pre-AASB16)
CHANGE
(Pre-AASB16)
2,519.4
958.2
(652.9)
305.3
78.5
(13.4)
(159.0)
(172.4)
(1.6)
2,519.4
957.3
(863.8)
93.5
(6.1)
(11.3)
(120.1)
(131.4)
(1.4)
2,991.8
1,162.4
(1,002.4)
160.1
58.5
33.2
(8.7)
24.5
4.0
(15.8%)
(17.6%)
(13.8%)
(41.6%)
nm6
nm⁶
nm⁶
nm⁶
nm⁶
1 Revenue from sale of goods excluding concession sales and sales revenue deferred under customer loyalty program was $2,047.9 million (FY19: $2,345.1 million)
2
In addition to the historical definition of comparable sales, stores closed during COVID-19 have been removed from both the current and previous year
to obtain comparable sales. Where a store was closed mid-week, the week in which the store closed has been removed. On reopening, the store has
been included from the first full week of trade
3 Group online sales includes sass & bide and Marcs and David Lawrence. Excludes sales via in-store iPads
4 Excluding implementation costs and individually significant items and pre AASB-16
5 Excluding implementation costs and individually significant items
6 Not meaningful
4
Myer Annual Report 2020
C O V I D - 1 9
“OUR FOCUS MUST REMAIN ON OPERATING OUR BUSINESS IN A MANNER THAT
PROTECTS THE HEALTH AND WELLBEING OF CUSTOMERS AND TEAM MEMBERS,
WHILST SUPPORTING THE GOVERNMENT, AND THE COMMUNITIES IN WHICH
WE OPERATE, IN LIMITING THE SPREAD OF COVID-19.”
– John King, CEO and Managing Director
From the start of the pandemic, the
HEALTH AND SAFETY
health and wellbeing of customers,
team members, their families and the
broader communities in which we
operate has remained Myer’s absolute
priority to assist in preventing the
spread of COVID-19.
Myer temporarily closed all stores
from the close of business on Sunday
29 March 2020.
Stores were progressively reopened from
8 May 2020, with the majority of stores
reopening on 27 May 2020.
sass and bide and Marcs David Lawrence
stores were also closed during this time.
Following the announcement of
Stage 4 restrictions by the Victorian
Government, Myer also temporarily
closed all metropolitan Melbourne
stores from the close of business on
5 August 2020.
Throughout this time, Myer operated
its online businesses, while ensuring a
safe and hygienic environment for those
Myer is absolutely focused on providing a safe working and shopping environment
for our team members and customers, with enhanced safety and cleaning measures
implemented across our stores, including:
Increased frequency of
cleaning services across
all stores
Protective items such as hand
Change rooms open with
distancing and hygiene
measures in place
sanitiser stations, face masks
The monitoring of customer
and gloves available to team
numbers in store
members
Hand sanitiser available
for our customers
Sneeze guards at registers
rolled out across the stores
Social distancing measures of
1.5 metres between customers
and team members, with clear
signage across the stores
Contactless payments
Informing our team members
on social distancing and
hygiene measures
Some services were suspended to reduce close contact, including:
• Beauty and hairdressing appointments
• Suit fittings
• Intimate apparel fittings
• Shoe fittings
team members.
SUPPORT TO TEAM MEMBERS
This was a challenging and difficult period for our team members, where we focused
on providing support and assistance throughout the year. Team members were offered
free counselling, as well as health and wellbeing resources and materials made available.
In order to make it easier for customers,
Myer reduced the threshold for free
delivery to $49 per order and relaxed
its returns policy.
Eligible Myer team members had access
to the JobKeeper Payment Scheme to
support them during this time, which
ensured a significant number of roles
were maintained.
5
O U R C U S T O M E R
F I R S T P L A N
WHILE THE CUSTOMER FIRST PLAN REMAINS THE RIGHT PLAN,
WE HAVE PUT IN PLACE A COVID-19 OVERLAY TO ENSURE
WE ARE RESPONDING IN THE BEST WAY.
Our values
CU STOM ERS
COME FI R ST
OWN OUR
FUTURE
DO W HAT’S
RIGHT
ONE INCLUSIVE
TEAM
TR ANSFORM
CU STOMER
EX PERIENCE
I N STORE
Focus areas
‘ONLY A T MYER’
BRANDS AND
CATE GORIE S;
VALUE FOR MONEY
Efficiency levers
CONTINUE
ENHANCING
MYER.COM.AU
SIM PLIFIED
BU SI NESS PROCESSES
Work smarter
EFFICIENT
FROM FACTORY
TO CUSTOMER
Mov e product at low est total c ost
ACCELERATE D
COST REDUCTION
S pend prudently
C O V I D - 1 9 O V E R L A Y
Actions taken
ACC ELERATE
RE-SEQUENCE
EXPAND
Our plan
ACCELERATE
ONLINE
ACCELERATE
F2C
ADAPT IN-S TORE
EXPE RIE NCE
R EFOCUS
MERCHANDISE
RATIONALISE
PROPE RTY
RE DUCE
OVERHEADS
RE-ENGAGE THE CONSUME R
THROUGH PEAK
CUSTOMER FIRST PLAN -
COVID-19 OVERLAY
While the Customer First Plan remains
the right plan, it has been adapted for
the current operating environment to
ensure Myer can capitalise on all available
opportunities as restrictions are eased.
We have put in place a COVID-19 overlay
to ensure we are responding in the
best way, to meet the changed trading
environment, and will accelerate, re-
sequence and expand various initiatives,
especially in the areas of online and
factory to customer.
RE-ENGAGING OUR CUSTOMER
AND ADAPTING OUR IN-STORE
EXPERIENCE
We have continued to deliver initiatives
to improve service, store layouts,
merchandise range and the appearance
of our stores. Our commitment to
providing exceptional service, offering
value and ranging brands that our
customers love and trust has seen an
overall improvement in our customer
experience measures across our stores.
During COVID-19, we are committed to
ensuring the safest possible shopping
environment, with enhanced measures
in place ensuring a one-stop, safe
shop for our customers. Protecting the
health and wellbeing of customers, team
members, their families and the broader
communities in which we operate has
been our absolute priority and this has
been supported by the implementation
of extensive COVID safety and physical
distancing measures at our stores.
Our customers have responded positively
to our digital shopping channels and the
convenience of our contact free Click
& Collect and Home Delivery service,
backed by a relaxed returns policy for
peace of mind purchases.
Our team members have been
empowered with real time digital
communications, product knowledge
and recognition, delivered direct to
their mobile device via our team member
app – M-Comms. The app displays
customer feedback, provides a wide
range of learning moments including
video content, and has been crucial to
keeping our team members connected
and informed, providing health and safety
information and ensuring our customers
enjoy a safe shopping experience with us.
As a result of this, and even during
COVID-19, we have seen our highest in-
store customer satisfaction scores in three
and a half years, finishing at 78% for July.
Stores
We relayered Myer Melbourne following the
exit of the Emporium level within the store,
with childrenswear, toys, men’s sportswear
and shoes, as well as luggage, relocated
within the store.
We are currently in the process of
refurbishing stores in Belconnen (due
for completion November 2020), Cairns
(due for completion November 2020), and
Karrinyup (due for completion August 2021).
Belconnen
Across two floors, we are undertaking
a refurbishment of the store with new
flooring, lighting, and fixtures, with refreshed
customer amenities and fitting rooms.
Cairns
Across one larger floor, a full refurbishment
of the store is being undertaken, with
new cosmetic installations as well as
enhanced lighting, fixtures, fitting rooms
and customer amenities.
Karrinyup
We are providing a new shopping
environment with the full refurbishment
of the store including all amenities, lighting,
fixtures, flooring, and fitting rooms with
new cosmetic installations.
Lease extensions
Leases have been extended at our
Toowoomba and Belconnen stores.
At both stores, we are operating on
a reduced footprint and lower rent.
Listening to our customers
Our Voice of Customer program
provides our customers with the
opportunity to rate their shopping
experience in areas such as product
range, value, service and ease of
shopping. This year, over 200,000
customers completed these surveys
and told us about their recent
shopping experience at Myer.
Christopher Dragt – Hobart City, TAS
Christopher has received feedback
from 128 customers, averaging a
Team Member Satisfaction score
of 89% for the year. “Chris is
always cheerful and very helpful
and wants you to appreciate the
Myer experience.”
Vynka Blanchard – Carousel, WA
Vynka has received feedback from
122 customers, averaging a Team
Member Satisfaction score of 87%
for the year. “Very professional and
friendly. You don’t get customer
service like this anymore.”
Yogesh Bhasin – Melbourne City, VIC
Yogesh has received feedback from
111 customers, averaging a Team
Member Satisfaction score of 85%
for the year. “He is really delightful,
very friendly, attentive, making jokes
while being efficient. Certainly an
asset to the Myer team.”
Dawn Ralph – Northlakes, QLD
Dawn has received feedback from
109 customers, averaging a Team
Member Satisfaction score of 88%
for the year. “Dawn is always smiling,
super friendly and helpful. She will
always do whatever she can to help
the customer. She is wonderful.”
6
Myer Annual Report 2020
7
MYER one
The MYER one loyalty program has
more than five million membership
cards in circulation. We continue to
work hard to reward our customers’
loyalty by providing engaging,
personalised offers and exclusive
experiences. MYER one customers
are highly engaged in the program,
accounting for almost two thirds
of Myer sales, enabling Myer to
reward our most loyal customers.
In response to the COVID situation,
we maintained all customers’
MYER one tier status to ensure that
their benefits of participating in
the program were not adversely
affected.
CONTINUING TO ENHANCE
ONLINE AND OUR FACTORY
TO CUSTOMER PROGRAM
We have seen significant growth in Myer’s
online business which has accelerated
since the onset of COVID-19, with record
online sales of $422.5 million, up 61.1%,
and representing 17% of total sales.
Throughout the year, further
improvements have been made to
the website including enhanced
infrastructure and capacity as well
as improved search and check out
functionality. Together with improved
fulfilment, these enhancements have
underpinned the significant growth in
sales and improvements in conversion
we have seen over the past year.
We have focused on making online
easy for our customers by reducing the
threshold for free delivery to $49 per
order and relaxing our returns policy
to give them peace of mind with their
purchases.
Australia Post 3PL
In relation to Factory to Customer, Myer
entered into a multi-year agreement with
Australia Post to provide warehousing
and online fulfilment services, to further
enhance the Company’s ability to provide
an efficient and fast online experience
for customers.
These new warehouse and fulfilment
arrangements will underpin the next stage
of growth in Myer’s online business, to
further strengthen the existing fulfilment
capacity and improve efficiency, delivering
benefits to Myer’s customers as well as
providing significant cost savings.
This partnership with Australia Post as our
eCommerce fulfilment partner, represents
an important next step in our Customer
First Plan to deliver products to customers
in the fastest and most effective way, as
we continue scaling our online business
during the next few years.
REDUCING OUR COSTS –
PROPERTY AND OVERHEADS
We have continued to proactively realign
our cost base through efficiencies and
cost savings with a focus to reduce costs
and space and we are still on track to
reduce our gross lettable area by more
than 110,000sqm.
We continue to be focused on reducing
floor space, and we are progressing our
discussions with landlords in relation to
space in a constructive way.
In relation to costs, we have continued
with our commitment to be operating in
the most efficient and effective way.
Throughout the year, we exited our
Hornsby store (January 2020), and the
Emporium level at Myer Melbourne
(May 2020).
REFOCUSING MERCHANDISE
It has been a challenging year with
COVID-19. We have increased order
flexibility, shortened buying cycles and
reduced inventory. We will continue to
respond quickly, with agility, to what
our customers want and need – and our
buying decisions will reflect this.
During the pandemic, we have seen
strong growth and demand across our
beauty business, especially in skincare,
fragrances and wellness products.
This has also been evident across our
expanded and improved homewares
business, as well as in sleepwear,
activewear and casualwear; as customers
adjust their buying habits in response
to the COVID-19 lockdowns.
In addition, Myer has focused on
strengthening our merchandise offer by
making our biggest brand partners bigger,
offering high quality brands and products
at great value; and you will see more of
this in store and online across all our key
categories.
In homewares, we have rolled out
10 shop-in-shop concepts, with
Salt&Pepper with further locations
planned for 2021, making Myer the biggest
retailer of Salt&Pepper. We have also
completed a shop-in-shop concept with
Maxwell & Williams and have expanded
their range in all of our stores.
‘Styling your Home’ continues its trend
with categories such as cookware, coffee
and food preparation performing above
expectations, especially during the last
six months. This has resulted in homewares
doubling its contribution online. Brands
such as Linen House, Mini Jumbuk,
Le Creuset, Kitchenaid, Nespresso,
Breville and Delonghi have been the
most popular with customers.
In womenswear, department store
exclusive brand, Vero Moda, was rolled
out to all stores during 2019. Activewear
and sneakers have been the stand out
categories across womenswear, with
Tommy Hilfiger, Lacoste and Champion
leading the performance in this category.
We have refocused our handbags
business by partnering with internationally
renowned brands Radley, Karl Lagerfeld
and Pixie Mood and strengthened our
partnerships with Tommy Hilfiger
and Calvin Klein.
For menswear, we have rolled out our
biggest concession, Industrie, to a further
12 stores during 2020, with the brand now
in 48 stores and increased space in our
largest stores. We have also extended
brand offers in Polo Ralph Lauren and
Tommy Hilfiger into denim, accessories
and swimwear.
Roy Morgan - Department Store of the Year
During the year, Myer won the Roy Morgan
“ It was an absolute honour to represent
Annual Customer Satisfaction Award for
Myer at the Roy Morgan Customer
Department Store of the Year. This is the
Satisfaction Awards and receive the award
fifth consecutive year that Myer has won
for the Department Store of the Year
this award and the seventh time in the
category for 2019. This award is judged
last nine years.
Gary Stones, Myer’s Head of Retail
Operations, accepted the Award
on behalf of the Company and said:
based on interviews with real customers
and it demonstrates the significant
effort that our team members across
the organisation have put in to help Myer
deliver the Customer First Plan, particularly
transforming the customer experience.”
8
Myer Annual Report 2020
9
S U S T A I N A B I L I T Y
A T M Y E R
AT MYER, SUSTAINABILITY IS ABOUT RESPONSIBLE BUSINESS GROWTH AND
DEVELOPMENT THAT CONSIDERS AND ADDRESSES THE ENVIRONMENTAL,
ETHICAL, ECONOMIC AND SOCIAL IMPACTS OF OUR BUSINESS OPERATIONS
AND STRATEGIES.
Our Sustainability Strategy has five focus
customers, team members, their families
Providing an environment that protects
ENVIRONMENT
From 1 January 2020 and in line with
a positive social impact, make a lasting
areas: Customer, Team, Environment,
and the broader communities in which
the health and safety of all team
Community and Business.
we operate has been our absolute priority
members, contractors and customers
and is supported by the implementation
has, as always, been an overriding
of extensive COVID-19 safety plans.
priority during the year, particularly as
Myer is continuing to reinforce its
Sustainability Strategy, ensuring that
it aligns with our Customer First
TEAM
Plan, taking into consideration Myer’s
business activities and impacts, and our
stakeholder concerns and interests.
CUSTOMER
Myer’s customers are key to our
sustainability as a business, and our
MYER one loyalty program has more
Myer team members are our most
to offering our approximately 10,000
team members a supportive, challenging
and rewarding workplace that enables
them to contribute and develop to their
full potential.
than five million membership cards in
Myer aspires to create and maintain a
circulation. We continue to work hard
collaborative and inclusive workplace
to reward our customer’s loyalty by
to reflect the diversity of our customers
providing engaging content and offers,
and our community, to enable all team
exclusive experiences and the quarterly
members and people leaders to reach
MYER one Reward Cards.
their full potential and to contribute
we managed the impacts of the COVID-19
pandemic. As the pandemic evolved,
Myer acted promptly to implement a
measures at all sites, in accordance
with Government guidelines. Regular
communication with our team members
has been critical, including providing
clear guidelines and keeping them
informed on new measures implemented,
which have included suspending some
services, installation of sneeze guards,
increased cleaning regimes, availability and
use of personal protective equipment (PPE),
physical distancing and hand hygiene.
important resource. We are committed
range of hygiene and physical distancing
Building on our Customer First Plan, we
continue to deliver initiatives to improve
service, store layout, merchandise
ranges and the store theatre. Our
commitment to providing exceptional
service, offering value and ranging brands
to Myer’s success. We understand the
value of having a diverse and inclusive
We have continued our commitment
to mental health awareness, rolling out
team, have undertaken Unconscious Bias
training to people leaders in the first
education workshops for management
and facilitation of flexible work options
within our Support Office.
half, and providing access to counselling
services for our team to support them
during the challenges of the COVID-19
pandemic. Whilst the lost time injury
frequency rate (LTIFR) increased in
FY20, the actual number of lost time
injuries decreased compared to last
year (63 vs 69). The Total Recordable
Injury Frequency Rate result of 19.8
is an improvement on last year.
that our customers love and trust has
The business focuses on three
seen an overall improvement in our
key inclusion priorities: cultural
customer experience measures across
diversity, LGBTI inclusion and female
stores and myer.com.au. Our customers
representation at senior leadership levels.
have responded positively to our digital
shopping channels and the convenience
of our contact free Click & Collect and
Home Delivery service, supported by a
relaxed returns policy.
The Group’s workforce composition at
25 July 2020 was 80.0% female, with
56.5% of leadership roles and 66.7%
of our Non-Executive Directors being
female. Myer monitors progress in female
Our team members have been
representation through measurable
empowered with real time digital
objectives in terms of succession
communication, product knowledge and
planning, parental leave and leadership
recognition, delivered direct to their
development metrics.
mobile device via our team member app.
The app displays customer feedback,
provides a wide range of learning
moments including video content, and
has been crucial to keeping our team
members connected and informed.
Protecting the health and wellbeing of
Our commitment to developing the
capability of our team was also reflected
with the continuation of Certificate
IV in Retail Management, as well as
Merchandiser in Training and Planner in
Training programs during the year.
Energy usage and associated greenhouse
gas emissions continue to be a focus
area with regard to our impact on the
environment. This year Myer’s total energy
use for the year reduced by 10.4% to
500,690 GJ, resulting in 110,962 tonnes of
carbon dioxide equivalent greenhouse gas
emissions, which is a reduction of 10.5%
from FY19. The energy intensity of our
business increased by 11.4% on the FY19
result. The store closures during April
and May have impacted the relative result
of intensity due to fewer opening hours.
When excluding the trading impacts due
to store closures at this time, the energy
intensity compared to last year reduced
by 3.3%.
Since the commencement of this
strategy in 2014, we have achieved
30.5% reduction in total net company
overall energy use, 36.1% reduction in
CO2 emissions and 9.3% reduction in our
energy intensity.
Our ongoing strategy includes
fundamental activities that continue to
drive operational efficiency, including the
implementation of the Energy Resource
Advisor reporting tool, in partnership with
Schneider Electric, allowing us to monitor
ongoing daily energy performance and
action both short-term and long-term
initiatives to control and optimise energy
use. We continue to benchmark and
identify opportunities on our overnight
‘base load energy’ and target further
energy savings during non-trading
periods.
the International Maritime Organisation
contribution and help achieve positive
Guidelines and Australian Maritime Safety
change.
legislation, all Myer’s contracted shipping
line vessels use low sulphur fuel oil.
This will significantly reduce the amount
of sulphur oxides emanating from
ships and will have major health and
environmental benefits for the world,
particularly for populations living close
to ports and coasts.
Myer continues to support the Myer
Community Fund, which is committed to
raising funds through charitable activities
involving Myer team members, customers
and suppliers and supports more than
60 charities across Australia annually.
Through our FY20 POS Round Up
Campaigns and Stores fundraising efforts,
Myer continues its commitment to the
our team together with Myer customers
Australian Packaging Covenant (APC)
raised over $650,000 for our Charity
and Sustainable Packaging Guidelines
Partners nationally.
and submitted its 13th annual report
in June 2020. The APC is a national
co-regulatory initiative in place of
state-based regulatory arrangements
for sustainable packaging management,
optimising packaging practices, reducing
the environmental impact of packaging
In FY20, the Myer Community Fund
was proud to donate over $1.1 million to
support women and children impacted
by family violence and over $400,000 to
assist Australians impacted by natural
disasters.
in Australian communities and increasing
BUSINESS
recycling diversion.
Ethical Sourcing
In FY20, Myer’s total waste and recycling
generation remains relatively stable with
a 63% recycling diversion rate. There
have been some further improvements
in Myer’s floor ready process with the use
of 50 reusable Goods on Hanger (GOH)
trolleys resulting in approximately
1,800 GOH cardboard boxes saved.
Myer continues to reduce its waste sent
to landfill, while sustaining effective
re-use systems including cardboard and
paper, less clear flexible plastics, apparel
hangers, damaged and unsold stock,
timber pallets and security tags.
COMMUNITY
Myer is committed to sourcing
responsibly and has a robust ethical
sourcing framework which focuses
on working with suppliers to improve
social and environmental practices in
the supply chain. Myer acknowledges its
responsibility to respect human rights
and requires that all employees, whether
in our own or our suppliers’ network,
be treated with respect and dignity, be
provided a safe work environment free
from discrimination, abuse, harassment,
are protected against forced labour or
child labour, be compensated fairly and
allowed the freedom of association and
right to collective bargain. All suppliers
must adhere to the Myer Ethical Sourcing
Policy, built on the principles of the
Ethical Trading Initiative (ETI), and which
prohibits all forms of modern slavery
including forced, slave and child labour in
all of our operations and across our whole
supply chain.
We have set conservative energy targets
Myer has a longstanding history of
for FY21 with a view to holding current
community support and engagement,
good results as we continue to work
and we continue to maintain strong and
through and identify energy reduction
meaningful partnerships with our local
opportunities relative to investment
communities. We believe that by engaging
returns.
with and contributing to the communities
in which we live and work, we can have
10
Myer Annual Report 2020
11
In line with the requirements of the
Modern Slavery Act 2018 (Cth), our Modern
Slavery Statement will be published within
six months of the end of FY20. Our teams,
including suppliers, have been made
aware of their responsibility to ensure
that processes are in place to identify and
prevent potential human rights risks and
impacts, and develop corrective actions
to eliminate or mitigate such risks within
the supply chain locally and globally.
our private label network. Our review
identified no zero tolerance issues and 73
high risk issues, which primarily related
to excessive overtime hours and the need
for safety improvements. Myer is working
with these factories to address the non-
conformances as our preference is to work
collaboratively with our suppliers, seeking
alternative sources of supply only when it
is evident that they are unwilling or unable
to adequately remediate the concerns.
Myer directly sources products from
almost 350 suppliers across 17 countries.
Some of the major locations we source
from include China, Italy, India, Bangladesh
and Vietnam. We continue to operate
our ethical sourcing audit program and
during the year reviewed audits from
274 suppliers (411 factory audits) within
Animal welfare
Myer recognises the importance of not
only ensuring the welfare of our people,
but also animals within our supply chains.
We are committed to providing customers
with quality products that are consistent
with recognised animal welfare standards
and adhere to local and national laws.
Myer will only source from suppliers with
good animal husbandry standards and will
not tolerate any forms of cruelty, abuse
or inhumane treatment of animals in
its supply chain. Suppliers must uphold
these values and have processes in place
to monitor and ensure that animals are
treated humanely and with respect,
strive to improve traceability throughout
their supply chain, and comply with all
applicable local laws and regulations
relating to animal production and welfare.
By 2025, we aim to transition away from
the practice of mulesing in our private
label merchandise and encourage all
suppliers including national brands and
brand partners to observe the same.
SUSTAINABILITY PERFORMANCE AND TARGETS
Focus area
Key measure
Customer
Team
Net Promoter Score
Diversity and inclusion
(% female senior managers)
Workplace safety (LTIFR)
Community
Direct community contribution (% EBIT)
Environment Greenhouse gas emissions reduction (%)2
Business
Energy intensity (kJ/m2.opening hour)2
Recycling rate (%)
New suppliers agreed to
Ethical Sourcing Policy (%)
Code of Conduct training
(% of required team members trained)
Improved / met target
Did not reach target
FY18
FY19
FY20
Performance
Performance
Performance
FY21
Target1
Achieved
Achieved
Achieved
Improvement
57
5.4
3.0
7.4
156.5
60
100
82.5
55
6.0
1.2
8.6
146.4
64
100
83.8
56.5
6.4
1.9
9.6
163.1*
63
100
88.8
≥50
<5.3
>0.5
≥1.0
≤146.0
≥60
100
≥80.0
1 Previous financial year targets are available in Myer Annual Reports available on our Investor Centre website
2 Energy and emission data were reported from 1 July to 30 June Fiscal year
*On a comparable actual trading hours the FY20 energy intensity performance would be 141.6
D I R E C T O R S ’ R E P O R T
DIRECTORS’ REPORT
Your directors present their report on the consolidated entity consisting of Myer Holdings Limited ABN 14 119 085 602 (the Company
or Myer) and the entities it controlled (collectively referred to as the Group) at the end of, or during the financial period ended 25 July
2020.
1. DIRECTORS
The following persons were directors of the Company during the financial period and/or up to the date of this Directors’ Report:
Director
Position
Garry Hounsell
Independent Non-Executive Director
Deputy Chairman from 20 September 2017
Chairman from 24 November 2017 and from 4 June 2018
Executive Chairman from 14 February 2018 to 3 June 2018
John King
CEO and Managing Director
Lyndsey Cattermole AM
Independent Non-Executive Director
Julie Ann Morrison
Independent Non-Executive Director
Jacquie Naylor
Independent Non-Executive Director
JoAnne Stephenson
Independent Non-Executive Director
Dave Whittle
Ian Cornell
Independent Non-Executive Director
Independent Non-Executive Director
Date appointed
20 September 2017
4 June 2018
15 October 2018
17 October 2017
27 May 2019
28 November 2016
30 November 2015
6 February 2014
Ian Cornell retired from the Board with effect from 30 October 2019. All directors other than Mr Cornell served as directors of the
Company for the whole financial period and until the date of this Directors’ Report. Details of the qualifications, experience, and special
responsibilities of each current director are set out below.
GARRY HOUNSELL
Chairman
Independent Non-Executive Director
Member of the Board since 20 September 2017
Chairman from 24 November 2017 and from 4 June 2018
Chairman – Nomination Committee
Chairman – Human Resources and Remuneration
Executive Chairman from 14 February 2018 to 3 June 2018
Committee
Member – Audit, Finance and Risk Committee
Garry has been Chairman of Spotless Holdings Limited,
PanAust Limited and eMitch Limited and Deputy Chairman of
Mitchell Communications Group Limited. He has also been a
Director of Qantas Airways Limited, Orica Limited, Nufarm
Limited, Integral Diagnostics Limited and Dulux Group Limited.
Garry was also a Director of the Burnet Institute Limited and
Methodist Ladies’ College Limited. He was an Advisory Board
member of PanAust Limited and Rothschild Australia Limited.
Garry is a former Chief Executive Officer and Country Managing
Partner of Arthur Andersen and a Senior Partner of Ernst &
Young. He is a Fellow of Australian Institute of Company
Directors and a Fellow of Chartered Accountants Australia and
New Zealand. Garry resides in Victoria.
Other current directorships
Garry is the Chairman of Helloworld Travel Limited and a
Director of Treasury Wine Estates Limited. He is also a Director
of Commonwealth Superannuation Corporation Limited and
Findex Group Limited.
JOHN KING
Chief Executive Officer & Managing Director
Member of the Board since 4 June 2018
John was appointed CEO & Managing Director on 4 June 2018.
In this role, John has overall accountability for Myer strategy and
performance. John brings to the role more than 30 years’ retail
experience in merchandising and management roles across a
variety of retail sectors, including department stores, value retail
and wholesale apparel. Most recently John led the successful
turnaround of House of Fraser from 2006 to 2015. During his
tenure he improved the product differentiation, decreased debt,
improved EBITDA and repositioned the business as one of the
leading premium department stores in the UK.
John also successfully led Matalan from 2003 - 2006, an apparel
and housewares retailer based in the UK. In this role, John
launched new brands, opened 20 new stores and successfully
sold the company back to the founder. He started his career at
Sainsbury’s and also worked for Marks & Spencer before taking
senior roles in the manufacturing and wholesale sector in the UK
and the USA. John resides in Victoria.
LYNDSEY CATTERMOLE AM
Independent Non-Executive Director
Member of the Board since 15 October 2018
Member – Nomination Committee
Member – Human Resources and Remuneration
Committee
Lyndsey founded one of Australia’s largest and most successful
IT businesses, Aspect Computing, which operated for almost
thirty years before being sold to the ASX listed company KAZ
Group. Aspect Computing specialised in IT consulting, program
development and product development, including retail and
training. Aspect Computing developed international award
winning systems and created one of Australia’s biggest software
product exports, LANSA. In 2002, Lyndsey became a Non-
Executive Director of KAZ Group following its purchase of
Aspect Computing.
Lyndsey has significant board experience including at Foster’s
Group Ltd, Treasury Wine Estates Ltd, Tatts Group Ltd and the
Victorian Major Events Corporation. Lyndsey also has extensive
experience on State and Federal Government committees and
boards, including the Federal Government’s Electronic,
Electrical and Information Industry Board and the Prime
Minister’s Science and Engineering Council. In Victoria, she was
a member of the Premier’s Business Round Table.
12
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2
13
DIRECTORS’ REPORT
Continued
DIRECTORS’ REPORT
Continued
Lyndsey was a Director of the Heide Museum for Modern Art,
the Melbourne Theatre Company and has spent over ten years
involved with community health, including at the Royal
Children’s Hospital Foundation and as Chairman for the
Women’s and Children’s Health Care Network. She was
instrumental in merging the Royal Children’s Hospital Research
Institute and the Murdoch Research Institute to form the
Murdoch Children’s Research Institute; which is now one of
Australia’s largest biomedical research institutes.
For her significant community involvement Lyndsey has been
awarded an Order of Australia (AM). She is also a Fellow of the
Australian Computer Society recognising her distinguished
contribution to the Australian IT industry. Lyndsey resides in
Victoria.
Other current directorships
Lyndsey is a director of PACT Group Holdings Ltd, Florey
Neurosciences, and the Melbourne Rebels.
JULIE ANN MORRISON
Independent Non-Executive Director
Member of the Board since 17 October 2017
Member – Nomination Committee
Member – Human Resources and Remuneration
Committee
Julie Ann has over 30 years’ retail experience in brands, fashion
and cosmetics from the sales floor through to buying, marketing,
HR and as a managing director.
Julie Ann was Managing Director of Bulgari UK (2012 to 2014)
concurrent with being Managing Director of Bulgari Australia
(2007 to 2014), part of the LVMH Group. She was also the
Managing Director of FJB Australia, the then largest luxury
goods company in Australia, which had franchise rights for
brands including Gucci, Guess, Moschino, Lanvin and Fendi in
South East Asia and Australia. While at FJB, she established
and headed up an international licensing business for local and
US brands overseeing offices in Italy and New York with
production in China. Julie Ann was a finalist in the BRW/Qantas
Business Woman of the Year and went on to establish a
management consulting business specialising in retail and
brands. She holds a Master of Arts, Creative Media from RMIT
University and a Diploma of Arts, RMIT University. She has
been a member of the Institute of Directors (UK) and is currently
a member of the Australian Institute of Company Directors.
From February 2017 to June 2018, Julie Ann was Non-
Executive Chair of Myer subsidiary boards overseeing the sass
& bide, Marcs and David Lawrence brands where she set brand
and business strategies. In June 2018 she handed responsibility
for overseeing these brands to the incoming CEO, John King.
Julie Ann is an advisory board member and consultant to Carla
Zampatti Pty Ltd. She also consults on projects specialising in
fashion, retail, brands and the arts. Julie Ann resides in Victoria.
Other current directorships
Julie Ann is an Independent Non-Executive Director of Food +
Wine Victoria.
JACQUIE NAYLOR
Independent Non-Executive Director
Member of the Board since 27 May 2019
Member – Nomination Committee
Member – Human Resources and Remuneration
Committee
Jacquie was appointed as a Non-Executive Director on 27 May
2019. Jacquie brings to the role a wealth of experience and
knowledge of both women’s and men’s apparel, homewares and
outdoor brands. She has been an owner, director and executive
at some of the most iconic Australian retailers including as an
Executive Director and Non-Executive Director at The PAS
Group. In addition, Jacquie was a Non-Executive Director of one
of the world’s most trusted outdoor brands, Macpac, which is
sold in more than thirty countries.
At the Just Jeans Group, Jacquie was a Group Executive
Director and responsible for driving the merchandise, marketing
and brand strategies of five of their key brands including Just
Jeans, Jay Jays, Portmans, Jacqui E and Dotti.
Jacquie brings to the Myer Board considerable eCommerce
experience from her retail career and as a strategic adviser at
Practicology, a digital marketing and eCommerce agency.
Jacquie was a Non-Executive Director of the Virgin Australia
Melbourne Fashion Festival for more than 12 years and remains
committed to showcasing the fashion industry as well as new
and emerging talent. Jacquie is also a member of the Australian
Institute of Company Directors and of the International Women’s
Forum. Jacquie resides in Victoria.
Other current directorships
Jacquie is a Non-Executive Director of Cambridge Clothing Ltd
and Michael Hill International Limited.
JOANNE STEPHENSON
Independent Non-Executive Director
Member of the Board since 28 November 2016
Chairman – Audit, Finance and Risk Committee
Member – Nomination Committee
JoAnne has extensive experience spanning over 25 years
across a range of industries. JoAnne was previously a senior
client partner in the Advisory division at KPMG and has key
strengths in finance, accounting, risk management and
governance. JoAnne holds a Bachelor of Commerce and
Bachelor of Laws (Honours) from The University of Queensland.
She is also a member of both the Australian Institute of
Company Directors and Chartered Accountants in Australia and
New Zealand. JoAnne resides in Victoria.
Other current directorships
JoAnne is an Independent Non-Executive Director of Challenger
Limited, Asaleo Care Limited and Japara Healthcare Limited.
She is also Chair of the Victorian Major Transport Infrastructure
Board.
DAVE WHITTLE
Independent Non-Executive Director
Member of the Board since 30 November 2015
Member – Audit, Finance and Risk Committee
Member – Nomination Committee
Dave has considerable brand, data, technology, omni-channel
retail and digital transformation experience. Over the last
five years Dave has led Lexer, a global software company
helping brands and retailers genuinely understand and engage
their customers. 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. Dave has a
Bachelor of Arts and a Bachelor of Commerce from Deakin
University. Dave resides in New South Wales.
Other current directorships
Dave is a director of Lexer Pty Ltd.
2. DIRECTORSHIPS OF OTHER LISTED COMPANIES
The following table shows, for each director, all directorships of companies that were listed on the ASX, other than the Company, since
25 July 2017, and the period during which each directorship has been held.
Director
Listed entity
Garry Hounsell
Helloworld Travel Limited
Period directorship held
4 October 2016 – present
Treasury Wine Estates Limited
1 September 2012 – present
Spotless Group Holdings Limited
20 March 2014 – 31 August 2017
DuluxGroup Limited
8 July 2010 – 31 December 2017
John King
-
-
Lyndsey Cattermole AM
PACT Group Holdings Limited
November 2013 – present
Julie Ann Morrison
-
-
Jacquie Naylor
Michael Hill International Limited
15 July 2020 – present
JoAnne Stephenson
Challenger Limited
Asaleo Care Limited
Japara Healthcare Limited
Dave Whittle
-
October 2012 – present
May 2014 – present
September 2015 – present
-
3. MEETINGS OF DIRECTORS AND BOARD COMMITTEES
The number of meetings of the Board and of each Board Committee held during the period ended 25 July 2020 are set out below. All
directors are invited to attend Board Committee meetings. Most Board Committee meetings are attended by all directors; however, only
attendance by directors who are members of the relevant Board Committee is shown in the table below:
Director
Meetings of
Directors
Audit, Finance and
Risk Committee
Human Resources and
Remuneration
Committee
Nomination
Committee
Meetings
Held*
Attended
Meetings
Held*
Attended
Meetings
Held*
Attended
Meetings
Held*
Attended
Garry Hounsell
John King
Lyndsey Cattermole AM
Julie Ann Morrison
Jacquie Naylor
JoAnne Stephenson
Dave Whittle
Ian Cornell**
18
18
18
18
18
18
18
4
18
17
17
18
17
18
18
4
5
-
-
-
1
6
6
-
5
-
-
-
1
6
6
-
2
-
4
2
3
1
-
2
2
-
3
2
3
1
-
2
2
-
2
2
2
2
2
1
* Number of meetings held during the time the director held office or was a member of the Committee during the period.
** Ian Cornell retired from the Board with effect from 30 October 2019.
2
-
1
2
2
2
2
1
4. DIRECTORS’ RELEVANT INTERESTS IN SHARES
The following table sets out the relevant interests that each director has in the Company’s ordinary shares or other securities as at the
date of this Directors’ Report. No director has a relevant interest in a related body corporate of the Company.
Director
Garry Hounsell
John King
Lyndsey Cattermole AM
Julie Ann Morrison
Jacquie Naylor
JoAnne Stephenson
Dave Whittle
Ordinary Shares
1,400,000
1,000,000
1,023,232
146,788
121,000
185,000
66,666
Performance
Rights
Performance
Options
Nil
Nil
2,432,432
14,631,014
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
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4
15
DIRECTORS’ REPORT
Continued
DIRECTORS’ REPORT
Continued
5. COMPANY SECRETARY AND OTHER OFFICERS
Paul Morris was appointed as General Counsel and Company Secretary of the Company effective 3 February 2020. Prior to joining
Myer, Paul Morris was General Counsel and Company Secretary of Spotless Group.
Nigel Chadwick acted as interim Company Secretary of the Company from 19 December 2019 to 3 February 2020. Prior to this,
Jonathan Garland was Company Secretary of the Company from 31 July 2018 to 18 December 2019, and General Counsel of the
Company from 1 September 2018 to 18 December 2019.
Myer’s Chief Financial Officer is Nigel Chadwick. Details of Nigel Chadwick’s experience and background are set out in the Executive
Management Team section of Myer’s Investor Centre website.
6. PRINCIPAL ACTIVITIES
During the financial period, the principal activity of the Group was the operation of the Myer department store business.
7. OPERATING AND FINANCIAL REVIEW
The Directors’ Report includes references to non-IFRS financial measures which represents the financial performance of the Group
excluding the impact of the new lease accounting standard AASB 16 and excluding implementation costs and individually significant
items. Refer to Non-IFRS Financial Measures section below.
SUMMARY OF FINANCIAL RESULTS (PRE-AASB 16) FOR 52 WEEKS ENDED 25 JULY 2020:
•
•
•
•
•
•
•
•
•
•
Total sales2 declined by 15.8% to $2,519.4 million; reflecting widespread store closures
Group online sales3 of $422.5 million, up 61.1%, representing 17% of total sales
Operating Gross Profit (OGP) declined by 17.6% to $957.3 million. OGP margin decreased by 85 basis points to 38.0%,
unwinding the 62-basis point improvement that was achieved in 1H20. This was due to several impacts of COVID-19 in 2H20
including a higher mix of clearance sales and a mix that was skewed to lower margin products.
Cost of Doing Business1 decreased by 13.8% to $863.8 million, reflecting net cost reduction achieved in 1H20 as well as actions
taken in response to COVID-19. The JobKeeper Payment Scheme allowed the business to retain stood down staff
Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) of $93.5 million1
Implementation costs and individually significant items (ISIs) $159.0 million ($221.4 million pre-tax), including impairments of
lease right-of-use (ROU) assets and brand names totalling $184.4 million ($133.0 million pre-tax)
The adoption of AASB 16 Leases resulted in a net loss after tax of $2.1 million before ISIs
Statutory net loss after tax of $172.4 million (post-AASB 16)
Net cash position of $7.9 million, an improvement of $46.6 million compared to FY19, due to a prudent approach to preserving
cash, disciplined cost control, support from the Australian Government and other payment deferrals, and despite the loss of
revenue and earnings as a result of the store closures and reduced foot traffic.
No final dividend will be paid
1 Excluding implementation costs and individually significant items
2 Revenue from sale of goods excluding concession sales and sales revenue deferred under customer loyalty program was $2,047.9
million (FY19: $2,345.1 million)
3 Group online sales includes sass & bide and Marcs and David Lawrence. Excludes sales via in-store iPads
INCOME STATEMENT FOR THE 52 WEEKS TO 25 JULY 2020
2020
(Statutory)
$m
2020
(Pre-AASB 16)
$m
2019
(Pre-AASB 16)
$m
Change
(Pre-AASB 16)
Total sales***
Operating gross profit
Cost of doing business
EBITDA*
Depreciation*
EBIT*
Net finance costs
Tax*
Profit/(Loss) after tax*
2,519.4
958.2
(652.9)
305.3
(226.8)
78.5
(98.2)
6.3
(13.4)
2,519.4
957.3
(863.8)
93.5
(99.6)
(6.1)
(10.6)
5.4
(11.3)
Implementation costs and individually significant items
(post-tax)
(159.0)
(120.1)
Statutory profit/(loss) after tax
(172.4)
(131.4)
* Excluding implementation costs and individually significant items
** Not meaningful
2,991.8
1,162.4
(1,002.4)
160.1
(101.6)
58.5
(11.5)
(13.8)
33.2
(8.7)
24.5
(15.8%)
(17.6%)
(13.8%)
(41.6%)
(1.9%)
nm**
7.9%
nm**
nm**
nm**
nm**
*** Revenue from sale of goods excluding concession sales and sales revenue deferred under customer loyalty program was $2,047.9 million (FY19:
$2,345.1 million)
BALANCE SHEET AS AT 25 JULY 2020
Inventory
Creditors
Other assets
Other liabilities
Right-of-use assets
Lease liabilities
Property
Fixed assets
Intangibles – Brands
Intangibles - Software
Total Funds Employed
Debt
Less Cash
Net (Debt) / Cash
Equity
July 2020
(Statutory)
$m
July 2020
(Pre-AASB 16)
$m
July 2019
(Pre-AASB 16)
$m
256.0
(354.2)
182.4
(62.5)
1,272.6
(1,794.7)
22.2
324.8
240.2
79.4
166.2
(78.6)
86.5
7.9
174.1
256.0
(383.5)
70.6
(154.7)
-
-
22.2
324.8
240.2
79.4
455.0
(78.6)
86.5
7.9
462.9
346.9
(372.6)
41.2
(225.8)
-
-
22.7
360.8
371.6
96.0
640.8
(86.1)
47.4
(38.7)
602.1
16
Myer Annual Report 2020
Myer Annual Financial Report 2020
5
Myer Annual Financial Report 2020
6
17
DIRECTORS’ REPORT
Continued
DIRECTORS’ REPORT
Continued
CASH FLOW FOR THE 52 WEEKS TO 25 JULY 2020
IMPACT OF COVID-19
EBITDA*
Less Implementation costs and ISIs
Add Non-cash asset impairments
Working capital movement
Operating cash flow (before interest and tax)
Conversion
Tax paid
Interest paid
Interest – lease liabilities
Operating cash flow
Capex paid**
Free cash flow
Principle portion of lease liabilities paid
Other
Net cash flow
* Excluding implementation costs and individually significant items
** Net of landlord contributions
SHARES AND DIVIDENDS
Shares on issue
Basic earnings per share*
Dividend per share
2020
(Statutory)
$m
2020
(Pre-AASB 16)
$m
2019
(Pre-AASB 16)
$m
305.3
(221.4)
185.2
29.2
298.3
93.5
(165.8)
132.2
47.2
107.1
110.9%
178.8%
(8.1)
(8.9)
(89.3)
192.0
(40.3)
151.7
(101.9)
(0.7)
49.1
(8.1)
(8.9)
-
90.1
(40.3)
49.8
-
(0.7)
49.1
160.1
(12.5)
3.4
(12.5)
138.5
91.7%
(13.6)
(9.2)
-
115.7
(44.8)
70.9
-
(0.4)
70.5
2020
2019
821.3 million
821.3 million
(1.6) cents
4.0 cents
Nil
Nil
* Calculated on weighted average number of shares of 820.1 million (FY19: 821.0 million) and based on NPAT pre implementation costs and individually
significant items
NON-IFRS FINANCIAL MEASURES
The Company’s results are reported under International Financial Reporting Standards (IFRS) as issued by the International
Accounting Standards Board. The Company discloses certain non-IFRS measures in this Directors’ Report, which can be reconciled to
the Financial Statements as follows:
Income Statement reconciliation
$ millions
Statutory reported result
Add back: implementation costs and individually significant items
Restructuring and redundancy costs
Clearance floor closure and brand exit costs and related asset impairments
Store exit costs/(reversals) and other asset impairments/(reversals)
Impairment of assets
Myer one loyalty program change
Result: post-AASB 16*
Impact from adoption of AASB 16
Result: pre-AASB 16*
* Excluding implementation costs and individually significant items
EBIT
INTEREST
(142.9)
(98.2)
TAX
68.7
NPAT
(172.4)
11.9
18.5
(0.3)
184.4
6.9
78.5
(84.6)
(6.1)
-
-
-
-
-
(98.2)
87.6
(10.6)
(3.6)
(5.4)
0.1
(51.4)
(2.1)
6.3
(0.9)
5.4
8.3
13.1
(0.2)
133.0
4.8
(13.4)
2.1
(11.3)
The COVID-19 pandemic and subsequent Government actions have had a significant impact on the Company during 2H20.
Early impacts on the Company were generally limited to delays in supply chain and sourcing private label product, primarily
from China. However, as the COVID-19 pandemic progressed, the impact on the Company’s business began to increase, as
Government bodies announced the implementation of various isolation and distancing measures, and restrictions.
On 29 March 2020 the Company temporarily closed all 60 of its physical stores to protect the health and wellbeing of its
customers, team members, their families and the broader communities in which it operates. From this time, the Company
ceased to generate any revenue or cash inflows from its physical store network. Stores were progressively re-opened from 8
May 2020, with all physical stores open for trade by 30 May 2020. Significant reductions in foot traffic, in particular in CBD
locations, has continued to impact sales after the re-opening of stores. Following the announcement of Stage 4 restrictions by
the Victorian Government on 3 August 2020, 11 stores in metropolitan Melbourne were again temporarily closed from 5 August
2020 (Stage 4 Restriction Period).
The Company stood down approximately 10,000 team members across the store network and store support office without pay
from 30 March 2020 as a result of the closure of physical stores. The Company qualified for the Federal Government
JobKeeper Payment Scheme, which ensured a significant number of roles could be maintained during this period. Most team
members returned to work progressively in subsequent months before further team members in Victoria were stood down
during the Stage 4 Restriction Period.
The Company has continued to operate all online businesses during store closure periods (including contactless click and
collect in selected Victorian stores during the Stage 4 Restriction Period). Strong online performance during 2H20, with sales up
98.8% in this period compared to 2H19, saw the Company achieve record online sales in FY20. Investment in significant
enhancements to the website over the past two years, together with improved fulfilment, ensured peak volumes were handled
successfully during this period, and underpinned the significant growth in sales, a 50-basis point improvement in conversion,
and improved gross profit for the online channel.
In response to the temporary cessation of trade in physical stores, deterioration in trading conditions, and other impacts of the
COVID-19 pandemic, the Company took decisive actions to reduce operating expenses, defer non-essential services and
manage inventory levels. As a result of this prudent approach to preserving cash, disciplined cost control, support from the
Federal Government and other payment deferrals, and despite the loss of revenue and earnings as a result of the store
closures and reduced foot traffic, the Company finished the period with a net cash position of $7.9 million, representing a $46.6
million improvement on the prior year.
Throughout the COVID-19 pandemic, the Company’s primary focus has been the health and wellbeing of team members,
customers, and the broader communities in which it operates. The Company’s response in this regard was driven by the
specially formed COVID-19 Management Operations Committee as well as the EGM team, with regular oversight by the Board.
Additional health and safety measures that were implemented across the Company’s stores, distribution centres and store
support office (as appropriate) to protect team members, customers and visitors to these sites, included:
Increased frequency and intensity of cleaning
Contactless payment
Social distancing practices at POS and change rooms
Installation of protective screens at POS
Introduction of personal protective items, including hand sanitiser stations
Mandating the wearing of personal protective equipment (face coverings) in Victoria and strongly recommending this practice in
New South Wales, in line with Government requirements
Implementation of temperature testing on entry to site for all team members, suppliers and contractors who attend stores,
distribution centres and store support office in Victoria
Implementation of COVID Safe Plans and COVID safe training for team members in line with Government requirements
Implementation of “Please be Kind” signage at POS in store to remind customers that inappropriate behaviour directed to team
members is not accepted
Restrictions on team member travel and meetings
Increased remote working arrangements for store support office team members
Increased support for the health and wellbeing of team members through the Company’s employee assistance programs
Despite the challenges of the COVID-19 pandemic for team members, the Company is pleased to note that in-store customer
satisfaction has increased following the re-opening of stores.
18
Myer Annual Report 2020
Myer Annual Financial Report 2020
7
Myer Annual Financial Report 2020
8
DIRECTORS’ REPORT
Continued
DIRECTORS’ REPORT
Continued
FY20 OPERATIONS
COVID-19
In addition to the Company’s actions during the COVID-19 pandemic as noted above, the Company achieved the following during
FY20:
Group online sales* of $422.5 million, representing 17% of total sales
Continued simplification of operations, resulting in a 17% reduction in headcount in the Store Support Office at the end of FY20
compared to the end of FY19
Inventory down 26% to $256.0 million at the end of the period
Exit of the Hornsby store (January 2020) and the Emporium level at Myer Melbourne (May 2020)
Commencement of store refurbishments at Belconnen (due for completion November 2020), Cairns (due for completion
November 2020), and Karrinyup (due for completion August 2021)
Destination upgrades in key stores including Melbourne Handbags, Parramatta Beauty Hall and Sydney Homewares Floor
Closure of the Clearance floor concept
* Group online sales includes sass & bide and Marcs and David Lawrence. Excludes sales via in-store iPads
Further to these matters, section 9 provides an outline of the Company’s corporate developments and strategy. These should be read
in conjunction with section 10, which describes factors that could impact the Company’s results.
8. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS IN FY20
In addition to the matters described in section 7 above, the following significant changes occurred during FY20:
Ian Cornell resigned from the Board with effect from 30 October 2019
There were no new Board or Executive appointments during the period.
9. BUSINESS STRATEGIES AND FUTURE DEVELOPMENTS
The Board and the Executive Management Group continue to focus on delivery against the Customer First Plan as follows:
Focus areas:
Transform customer experience in store;
‘Only at Myer’ brands and categories; value for money; and
Continue enhancing myer.com.au.
Efficiency levers:
Simplified business processes;
Efficient from factory to customer; and
Accelerated cost reduction.
The Board and the Executive Management Group have considered the future operating environment and consumer trends as COVID-
19 restrictions are eased in the future. The Customer First Plan remains ‘fit for purpose’ but COVID-19 has escalated the change
required, and the Company’s response reflects this. The Company has adjusted its Customer First Plan initiatives by accelerating, re-
sequencing or expanding areas in response to the changing market context.
The Company’s COVID-19 response is an overlay to the Customer First Plan and elevates the following areas:
Accelerate Online: following the step-change in online sales mix in FY20, online investments brought forward enhancing Myer’s
omni-channel experience and positioning Myer to translate customer loyalty developed offline to the online business
Accelerate Factory to Customer (F2C) change: centralised online fulfilment to commence in FY21 to deliver an improved
experience to online customers
Merchandise: improving our range for the new customer in key categories, and a more disciplined approach to purchasing and
inventory, focusing on core lines and supplier relationships
Adapting our in store experience and engagement: enhancements to our loyalty program and in-store experience provide a safe
and compelling proposition especially during key sale and gifting periods
Realign Costs: proactively realign our cost base to manage profitability and increase flexibility as the change to our markets and
channels accelerates.
10. KEY RISKS AND UNCERTAINTIES
The Group’s strategies take into account the expected operating and retail market conditions, together with general economic
conditions, which are inherently uncertain.
The Group has a structured proactive risk management framework and internal control systems in place to manage material risks. The
key risks and uncertainties that may have an effect on the Group’s ability to execute its business strategies, and the Group’s future
growth prospects and how the Group manages these risks, are set out below.
The future impact of the COVID-19 pandemic on the Company’s operations (including any requirement for further temporary store
closures), domestic and global economic conditions, and consumer behaviour remains uncertain, and may adversely affect the
Company’s financial position and performance. The Company has implemented measures to mitigate these future risks, including the
implementation of a COVID-19 Management Operations Committee to manage and adapt to changes in ongoing risks and Government
requirements. In addition, the Company continues to remain agile to adapt to changing market conditions (including adjusting its
strategic initiatives in response to the changing market context), whilst maintaining its focus on the disciplined management of costs
and preservation of cash to ensure it is well placed to deal with any future impacts.
EXTERNAL RISKS
Macro-economic factors such as the fluctuation of the Australian dollar and interest rates; poor consumer confidence; changes in
government policies; external, natural or unforeseen events, such as an act of terrorism, national strike or pandemic; transition to a
lower carbon economy; physical impacts of climate change and weakness in the global economy could adversely impact the
Company’s ability to achieve financial and trading objectives. Myer regularly analyses and monitors economic and other available data
to help mitigate the future impact on sales, and has implemented conservative hedging, capital management, and marketing and
merchandise initiatives to address the cyclical nature of the business.
COMPETITIVE LANDSCAPE RISKS
The Australian retail industry in which Myer operates remains highly competitive. The Company’s competitive position may be
negatively impacted by new entrants to the market, existing competitors, changes to consumer demographics and increased online
competition, which could impact sales. To mitigate these risks, Myer continues to select optimal merchandise assortment with the right
categories and brands.
SUPPLIER RISKS
Myer monitors its supplier relationships and quality standards via a range of means, including implementation of its quality assurance
and compliance policies and rigorous procurement and contracting processes. Recent headwinds in the retail sector, exacerbated by
the impact of the COVID-19 pandemic, have created particular financial and other challenges for some of Myer’s suppliers, but these
risks are mitigated by the size and diversity of the supplier base and Myer’s ability to expand its product ranges and brands.
TECHNOLOGY RISKS, INCLUDING CYBER SECURITY
With Myer’s increasing reliance on technology in a rapidly changing digital environment, there is a risk that the malfunction of IT
systems, outdated IT infrastructure, a cyber-security violation or a data breach of personal information could have a detrimental effect
on Myer’s sales, business efficiencies, and brand reputation. To offset these risks, Myer continues to invest and develop our in-house
technology capabilities and engage with reputable third-party IT service providers to ensure that we have reliable IT systems and issue
management processes in place.
BRAND REPUTATION RISKS
Myer’s strong brand reputation is crucial for building positive relationships with customers, suppliers and contractors which in turn
generates sales and goodwill towards the Company. A significant event or issue could attract strong criticism of the Myer brand, which
could impact sales or our share price. Myer has a range of policies and initiatives to mitigate brand risk, including a Code of Conduct, a
Whistleblower Policy, an Ethical Sourcing Policy, marketing campaigns, and ongoing environmental and sustainability initiatives.
STRATEGIC AND BUSINESS PLAN RISKS
A failure to deliver our strategic plan could impact sales, profitability, share price, and our reputation. The cornerstone of our strategic
plan is the ‘customer’ and ensuring every decision made puts the customer first. It includes that all team members, brand partners and
suppliers provide our customers with the service, brands and products they desire and expect, both in store and online.
PEOPLE MANAGEMENT RISKS
Myer needs to attract and retain talented senior managers to ensure that our leadership team has the right skills and experience to
deliver our strategy. Failure to do so may adversely impact Myer’s ability to deliver on its strategic imperatives. During the year, we
made a new appointment to our Executive Management Group, and we provided our team members with access to training and
development to further develop their skills.
Safety is a high priority at Myer to ensure the wellbeing of all of our team members, customers, and suppliers. Failure to manage health
and safety risks could have a negative effect on Myer’s reputation and performance. We conduct regular detailed risk assessments at
each store, distribution centre, and at our support office, as well as regular education sessions.
REGULATORY RISKS
From time to time, Myer may be subject to regulatory investigations and disputes, including by the Australian Taxation Office (ATO),
Federal or State regulatory bodies including the Australian Competition and Consumer Commission (ACCC), the Australian Securities
and Investments Commission (ASIC), the Australian Securities Exchange (ASX) and Federal and State work, health and safety
authorities. The outcome of any such investigations or disputes may have a material adverse effect on Myer’s operating and financial
performance. Myer has an established governance framework to monitor, assess and report on such occurrences to senior
management when they arise.
20
Myer Annual Report 2020
Myer Annual Financial Report 2020
9
Myer Annual Financial Report 2020
10
21
DIRECTORS’ REPORT
Continued
DIRECTORS’ REPORT
Continued
LITIGATION
The Company is required to maintain compliance with applicable laws and regulations. Failure to comply could result in enforcement
action and claims, which may have a material adverse impact on the Company’s reputation, financial performance and profitability.
Legal proceedings and claims may also arise in the ordinary course of the Company’s business and could result in high legal costs,
adverse monetary judgements, reputational damage and other adverse consequences. The Company has an established governance
framework to monitor, assess and report to management on litigation risks when they arise, and seeks to minimise risk through
appropriate compliance training for team members and management.
11. MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
Following the end of the financial year:
11 Myer stores were temporarily closed to customers from 5 August 2020, following the Victorian Government’s announcement of
Stage 4 restrictions in metropolitan Melbourne in response to the ongoing COVID-19 pandemic;
the Company completed an amendment and extension of its bank facility until August 2022; and
the Company entered into a multi-year agreement with Australia Post to provide warehousing and online fulfilment services, to
enhance the Company’s ability to provide an efficient and fast online experience for customers.
No other matter or circumstance has arisen since the end of the financial year which has not been dealt with in this Directors’ Report or
the Financial Report, and which has significantly affected, or may significantly affect:
(a)
the Group’s operations in future financial years;
(b)
the results of those operations in future financial years; or
(c)
the Group’s state of affairs in future financial years.
12. DIVIDENDS
The Board determined that no final dividend would be paid for the period ending 27 July 2019.
The Board determined that no interim dividend would be paid for the period ending 25 January 2020.
The Board determined that no final dividend would be paid for the period ending 25 July 2020.
Further information regarding dividends is set out in the Financial Statements (at note F3).
13. PERFORMANCE RIGHTS AND OPTIONS GRANTED OVER UNISSUED SHARES
The Myer Long Term Incentive Plan (LTIP) operates for selected senior executives and has been in operation since December 2006.
Under the LTIP, the Company has granted eligible executives performance options in FY19 and FY20, and rights in previous years
over unissued ordinary shares of the Company, subject to certain vesting conditions. Shares delivered to senior executives as a result
of the vesting of performance options and rights can be either issued as new shares or purchased on market.
Each performance right entitles the holder to acquire one ordinary fully paid share in the Company (subject to the adjustments outlined
below).
Performance options are exercised on a net settlement basis, the executive is allocated the total number of shares that would have
been allocated upon exercise, less the number of shares equal to the value of the aggregated exercise price payable (and the exercise
price is not required to be paid). The number of shares delivered by the Company represents the value above the exercise price in
accordance with the formula below:
(A - B) / C, where:
A = Aggregate value of vested performance options (based on the market value of a share)
B = Aggregate exercise price payable
C = Market value of a share
The net settlement method ensures that executive reward is aligned to shareholder value creation by only rewarding executives if there
is a growth to share price and material reward can be earned only if there is a significant growth to share price.
During the financial period ended 25 July 2020, the Company granted a total of 29,361,640 performance options under the LTIP:
5,598,756 performance options to the CEO and 23,762,884 performance options to other selected senior executives. The performance
options and rights granted under each offer are subject to different performance conditions. No performance options or rights have
been granted since the end of the financial period ended 25 July 2020.
In September 2019, a total of 1,148,812 performance rights granted under the LTIP in FY17 lapsed following testing against the
performance criteria.
During FY18, the Company granted 2,432,432 alignment rights to the CEO, and 555,555 alignment rights to the Chief Merchandise
Officer. These rights vest on a monthly basis in 36 equal tranches and will convert to Myer ordinary shares at the end of the three year
period. During FY20, 810,804 alignment rights vested to the CEO and 185,184 rights vested to the Chief Merchandise Officer. During
FY19, the company granted 192,307 alignment rights to a person who was not a Key Management Personnel (KMP). These 192,307
rights lapsed in FY20. No shares were issued under the alignment rights plan.
The table in section 14 sets out the details of performance options and rights that have been granted under the LTIP and the alignment
rights plan and which remain on issue as at the date of this Directors’ Report.
A holder of a performance option or right may only participate in new issues of securities of the Company if the performance option or
right has been exercised, participation is permitted by its terms, and the shares in respect of the performance options or rights have
been allocated and transferred to the performance option or right holder before the record date for determining entitlements to the new
issue.
Further information about performance options and rights issued under the LTIP (including the performance conditions attached to the
performance options and rights granted under the LTIP, and the performance options and rights granted to the KMP of the Company) is
included in the Remuneration Report.
14. SHARES ISSUED ON THE EXERCISE OF PERFORMANCE OPTIONS AND PERFORMANCE
RIGHTS
From time to time, the Company issues fully paid ordinary shares in the Company to the Myer Equity Plans Trust (Trust) for the
purpose of meeting anticipated exercises of securities granted under the LTIP. To calculate the issue price of shares issued to the
Trust, the Company uses the five-day volume weighted average price of the Company’s shares as at the close of trading on the date of
issue.
During the financial period ended 25 July 2020, 504,356 fully paid ordinary shares were purchased on market by the Trust. No shares
were transferred from the Trust in relation to any performance rights or options issued. Since 25 July 2020, no shares have been
issued to or otherwise acquired by the Trust, and no fully paid ordinary shares of the Company held by the Trust were transferred to
participants in the LTIP.
Date performance rights and options granted
Expiry date
Issue price
21 December 2017 (rights grant to senior executives under the FY18 LTIP offer)
31 Oct 2020
4 June 2018 (rights grant to CEO under Alignment Equity offer)(2)
25 June 2018 (rights grant to senior executive under Alignment Equity offer(3)
24 December 2018 (options grant to CEO under the FY19 LTIP offer)
4 Jun 2021
25 Jun 2021
31 Oct 2021
24 December 2018 (options grant to senior executives under the FY19 LTIP offer)
31 Oct 2021
21 November 2019 (options grant to CEO under the FY20 LTIP offer)
31 Oct 2022
21 November 2019 (options grant to senior executives under the FY20 LTIP offer)
31 Oct 2022
Closing balance of performance rights and options
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Number of
performance
rights and
options
remaining on
issue(1)
4,061,254
2,432,432
555,555
9,032,258
22,755,711
5,598,756
20,058,223
64,494,189
(1) Each performance right entitles the holder to receive one fully paid ordinary share in the Company, subject to the satisfaction of the
relevant performance outcomes. Performance options vest and are automatically exercised on a net settlement basis. The executive is
allocated the total number of shares that would have been allocated upon exercise, less the number of shares equal to the value of the
aggregated exercise price payable (and the exercise price is not required to be paid). The number of shares delivered by the Company
represents the value above the exercise price in accordance with the formula below:
(A - B) / C, where:
A = Aggregate value of vested performance options (based on the market value of a share)
B = Aggregate exercise price payable
C = Market value of a share
The number of performance options or rights that a holder is entitled to receive on the exercise of a performance option or right may
also be adjusted in a manner consistent with the ASX Listing Rules if there is a pro-rata issue of shares or a reconstruction of the
capital of the Company.
(2) Mr King was appointed as CEO and Managing Director on 4 June 2018. The performance rights referred to in this table were rights
granted upon his appointment. These rights vest in equal monthly instalments over the period 4 June 2018 to 4 June 2021.
(3) Mr Winstanley was appointed as Chief Merchandise Officer on 25 June 2018. The performance rights referred to in this table were
rights granted upon his appointment. These rights vest in equal monthly instalments over the period 25 June 2018 to 25 June 2021.
22
Myer Annual Report 2020
Myer Annual Financial Report 2020
11
Myer Annual Financial Report 2020
12
23
DIRECTORS’ REPORT
Continued
DIRECTORS’ REPORT
Continued
15. REMUNERATION REPORT
20. AUDITOR’S INDEPENDENCE DECLARATION
The Remuneration Report, which forms part of this Directors’ Report, is presented separately from page 27.
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is attached to this
Directors’ Report.
21. ROUNDING OF AMOUNTS
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 and, except
where otherwise stated, amounts in the Directors’ Report have been rounded off to the nearest hundred thousand dollars.
22. ANNUAL GENERAL MEETING
The Annual General Meeting of the Company will be held on Thursday 29 October 2020.
The Directors’ Report is made in accordance with a resolution of directors.
Garry Hounsell
Chairman
Melbourne, 9 September 2020
16. INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
The Company’s Constitution requires the Company to indemnify current and former directors, alternate directors, executive officers and
officers of the Company on a full indemnity basis and to the full extent permitted by the law against all liabilities incurred as an officer of
the Group, except to the extent covered by insurance. Further, the Company’s Constitution permits the Company to maintain and pay
insurance premiums for director and officer liability insurance, to the extent permitted by law.
Consistent with (and in addition to) the provisions in the Company’s Constitution outlined above, the Company has also entered into
deeds of access, indemnity and insurance with all directors of the Company which provide indemnities against losses incurred in their
role as directors, subject to certain exclusions, including to the extent that such indemnity is prohibited by the Corporations Act 2001
(Cth) or any other applicable law. The deeds stipulate that the Company will meet the full amount of any such liabilities, costs and
expenses (including legal fees).
During the financial period, the Company paid insurance premiums for a directors’ and officers’ liability insurance contract that provides
cover for the current and former directors, alternate directors, secretaries, executive officers and officers of the Company and its
subsidiaries. The directors have not included details of the nature of the liabilities covered in this contract or the amount of the premium
paid, as disclosure is prohibited under the terms of the contract.
The Group’s auditor is PricewaterhouseCoopers (PwC). No payment has been made to indemnify PwC during or since the financial
period end. No premium has been paid by the Group in respect of any insurance for PwC. No officers of the Group were partners or
directors of PwC whilst PwC conducted audits of the Group.
17. PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied to the court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the
Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the
Company for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of the Company with the leave of the court under section 237 of the
Corporations Act 2001.
18. ENVIRONMENTAL REGULATION
The Group is subject to and has complied with the reporting and compliance requirements of the National Greenhouse and Energy
Reporting Act 2007 (Cth) (NGER Act). The NGER Act requires the Group to report its annual greenhouse gas emissions and energy
use. The Group has implemented systems and processes for the collection and calculation of the data required. In compliance with the
NGER Act, the Group submitted its 11th report to the Clean Energy Regulator in October 2019 and is due to submit its 12th report by 2
November 2020. No significant environmental incidents have been reported internally, and no breaches have been notified to the Group
by any government agency.
The Group is a signatory to the Australian Packaging Covenant, which is a national co-regulatory initiative in place of state-based
regulatory arrangements for sustainable packaging management. Members are required to adhere to the covenant commitments,
which include development and implementation of an action plan and report annually on progress. Myer submitted its 13th annual
report in June 2020.
19. NON-AUDIT SERVICES
The Company may decide to employ its external auditor on assignments additional to its statutory audit duties where the auditor’s
expertise and experience with the Company and/or the Group are important.
Details of the amounts paid or payable to the auditor (PwC) for audit and non-audit services provided during the financial period are set
out in the Financial Statements (at note H5).
The Board has considered the position and, in accordance with advice received from the Audit, Finance and Risk Committee, is
satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by
the Corporations Act 2001. The directors are satisfied that the provision of the non-audit services by the auditor did not compromise the
auditor independence requirements of the Corporations Act 2001 for the following reasons:
all non-audit services have been reviewed by the Audit, Finance and Risk Committee to ensure that they do not impact on the
impartiality and objectivity of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for
Professional Accountants.
24
Myer Annual Report 2020
Myer Annual Financial Report 2020
13
Myer Annual Financial Report 2020
14
25
Auditor’s Independence Declaration
As lead auditor for the audit of Myer Holdings Limited for the period 28 July 2019 to 25 July 2020, I
Auditor’s Independence Declaration
Auditor’s Independence Declaration
declare that to the best of my knowledge and belief, there have been:
As lead auditor for the audit of Myer Holdings Limited for the period 28 July 2019 to 25 July 2020, I
As lead auditor for the audit of Myer Holdings Limited for the period 28 July 2019 to 25 July 2020, I
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
declare that to the best of my knowledge and belief, there have been:
declare that to the best of my knowledge and belief, there have been:
relation to the audit; and
(a)
(a)
(b)
(a)
no contraventions of any applicable code of professional conduct in relation to the audit.
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
This declaration is in respect of Myer Holdings Limited and the entities it controlled during the period.
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
no contraventions of any applicable code of professional conduct in relation to the audit.
(b)
This declaration is in respect of Myer Holdings Limited and the entities it controlled during the period.
This declaration is in respect of Myer Holdings Limited and the entities it controlled during the period.
Jason Perry
Partner
PricewaterhouseCoopers
Jason Perry
Partner
PricewaterhouseCoopers
Jason Perry
Partner
PricewaterhouseCoopers
Melbourne
9 September 2020
Melbourne
9 September 2020
Melbourne
9 September 2020
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
26
Liability limited by a scheme approved under Professional Standards Legislation.
Myer Annual Report 2020
Liability limited by a scheme approved under Professional Standards Legislation.
15
15
15
R E M U N E R A T I O N R E P O R T
REMUNERATION REPORT
Dear Shareholder,
On behalf of the Board, I present to you the Remuneration Report for FY20. This report sets out the remuneration information for the
Non-Executive Directors and Executive KMP. It describes our Executive remuneration framework and pay outcomes for FY20 in a
simple and transparent way.
Firstly, it is important to highlight the exceptional circumstances we have encountered during the year – the extreme bushfire season
that occurred during our peak trading period and the COVID-19 pandemic – both of which have deeply affected the communities we
serve. Through this time, I have been proud of the significant effort of our team members, to maintain our Company’s focus and agility
in this difficult period; I am particularly proud of the support that we have provided to communities impacted by the devastating
bushfires, and our team’s COVID-19 response to protect the health and wellbeing of our people and customers.
Our financial results and remuneration outcomes reflect this challenging operating environment. They should be viewed in the context
of a year in which we took hard but necessary steps to reduce our cost base and preserve cash.
Executive Remuneration outcomes in FY20
This year’s remuneration outcomes reflect the FY20 results.
Despite a net cash improvement of $46.6 million compared to the prior year, the following remuneration outcomes were delivered:
-
-
-
No awards were made under the FY20 STI.
There was no vesting of awards under the FY18 Long Term Incentive (LTI) plan.
A freeze on Executive pay was in place throughout the year, given our ongoing focus on prudent cost management.
For a period during April, when all stores were closed due to COVID-19, the CEO and Managing Director, and Executive
Management Team elected to forego their base salaries, or access their existing leave entitlements, and the Chairman and other
Non-Executive Directors elected to forego their annual Director fees. Additionally, for a period in May and June, the CEO and
Managing Director, and Executive Management Team elected to work at reduced base salaries and the Non-Executive Directors
elected to receive reduced Director fees.
Furthermore, from 1 July 2020, the Chairman and Non-Executive Directors also elected to reduce their annual base fee to $250,000
(from $300,000) and $100,000 (from $120,000) respectively. This represents the third reduction to Chairman and Non-Executive
Director fees since FY18.
These reductions to Executive KMP base salaries and Non-Executive Director fees were in response to the impact COVID-19 has
had on our shareholders, customers, team members and the communities in which we operate.
FY21 Executive Remuneration Framework
Due to the impact of the COVID-19 pandemic and resulting business performance, a decision was made not to implement any salary
increases for the Executive Management Team for FY21. The Human Resources and Remuneration Committee debated the
appropriateness of this decision and believes, in the context of wider macroeconomic factors and the experience of the business with
a large number of team members being stood down during COVID-19, that this is the right decision for Myer.
The Board also reviewed the Executive reward framework and as part of this review has introduced a Transformation Incentive (TI)
plan that will replace the normal STI plan for a period of two years, starting from FY21. The TI plan places significant importance on
transforming the business and adapting to the new challenges presented by COVID-19, whilst simultaneously promoting longer-term
shareholder interests. The TI plan has been designed to:
1.
2.
3.
Focus Executive effort on transforming the business: Performance measures under the TI plan are transformational in
nature, in line with the accelerated Customer First Plan. It immediately aligns Executive effort behind the turn-around
strategy of the business. The performance measures are quantifiable and heavily focused on financial performance.
Increase alignment to shareholder value creation: An increased portion of the award, compared to the normal STI plan,
is to be delivered in deferred equity and the cash portion of the award has been reduced.
Focus on long-term sustainable performance: The equity component will be delivered in equal instalments over a longer
two-year deferral period, taking the overall life of the plan to three years, as compared to two years under the normal STI
plan.
After taking into account market feedback, the FY21 LTI plan will be granted in performance rights and includes the introduction of a
positive absolute Total Shareholder Return (TSR) gateway measure. The performance hurdles of relative TSR and Earnings Per
Share (EPS) have been retained. Replacing the LTI plan with rights, will address shareholder concerns on the dilutive effect of the
leveraged design of the FY20 options plan, particularly in an environment where COVID-19 has affected the Myer share price, as it
has for many companies across many industries.
The Board is mindful of shareholder feedback that, where the share price has fallen significantly compared to prior years, it will be
taken into account when determining the LTI grant price. FY21 LTI awards are not due to be granted until after the AGM and this year
careful consideration will be given to ensure that grant sizes are appropriate.
In addition to the above, the pay mix for the CEO and Managing Director, and the Executive Management Team for FY21 and FY22
has been changed by direction of the Board. There will be an increase in the weighting towards the TI and a decrease in the
weighting toward LTI. It is important to note that this is a pay mix change only; there is no increase in the overall ‘maximum’
opportunity. This change in pay mix will apply for FY21 and FY22 only and aligns the entire Executive Management Team with the
immediate priority of transforming the business over the next two years. The larger equity component and longer deferral period will
provide a meaningful retention hook and promote longer-term shareholder value creation.
Myer Annual Financial Report 2020
16
27
REMUNERATION REPORT
Continued
REMUNERATION REPORT
Continued
It is our intention that this reward framework will stay in place for the transformation period in FY21 and FY22 and the normal STI plan
will be replaced after this time.
Under both the TI and LTI plans, clawback provisions that apply to equity have been strengthened, to include unsustainable
performance with regard to non-financial risk.
These changes to the executive reward framework demonstrate our ongoing commitment to creating a strong link between
transforming business performance and Executive remuneration outcomes in a sustainable way.
Finally, I would like to acknowledge the many stakeholders who have shared their feedback with us over the past year. I can assure
you that the Board remains committed to ensuring the views of our shareholders are fully considered in the development of the
remuneration framework.
Yours faithfully,
CONTENTS
1.
2.
3.
4.
Introduction
Snapshot of Remuneration Report
Executive KMP Remuneration
Executive KMP Service Agreements
5. Non-Executive Director Remuneration
6. Remuneration Governance
7.
8.
9.
Executive KMP Statutory Disclosures
Equity
Loans
10. Dealing in Securities
1.
INTRODUCTION
29
30
33
39
40
42
43
46
48
48
Garry Hounsell
Chairman, Human Resources and Remuneration Committee
The Directors of the Company present the Remuneration Report for the financial period ended 25 July 2020 prepared in accordance
with the requirements of the Corporations Act 2001 and its regulations.
This report outlines the remuneration strategy, framework and other conditions of employment for Executive KMP and Non-Executive
Directors, and details the role and accountabilities of the Board and relevant Committees that support the Board on these matters.
The information provided within this report has been audited as required by section 308(3C) of the Corporations Act 2001 and forms
part of the Directors’ Report. The table below details the Company’s Executive KMP and Non-Executive Directors during FY20:
All KMP were in their roles for the full year, unless otherwise stated.
Name
Role
Non-Executive Directors
G Hounsell
J Morrison
J Stephenson
D Whittle
L Cattermole AM
J Naylor
Chairman, Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Former Non-Executive Directors
I Cornell(1)
Independent Non-Executive Director
Executive Directors
J King
Executive KMP
N Chadwick
A Sutton
A Winstanley
Chief Executive Officer and Managing Director
Chief Financial Officer
Executive General Manager Stores
Chief Merchandise Officer
(1) Mr Cornell retired as a Non-Executive Director on 30 October 2019.
28
Myer Annual Report 2020
Myer Annual Financial Report 2020
17
Myer Annual Financial Report 2020
18
29
REMUNERATION REPORT
REMUNERATION REPORT
Continued
Continued
REMUNERATION REPORT
Continued
2.
2.
SNAPSHOT OF REMUNERATION REPORT
SNAPSHOT OF REMUNERATION REPORT
2.1 OBJECTIVE AND GUIDING PRINCIPLES
2.1 OBJECTIVE AND GUIDING PRINCIPLES
Our remuneration objective is to support Executive KMP in delivering a business strategy that will put our customers first and
Our remuneration objective is to support Executive KMP in delivering a business strategy that will put our customers first and
ultimately deliver value to our shareholders.
ultimately deliver value to our shareholders.
Business priorities – focus areas & efficiency levers
Transform customer
experience in store
‘Only at Myer’ brands &
categories; value for money
Continue enhancing
myer.com.au
Simplified
business processes
‘Work smarter’
Efficient
from factory to customer
‘Move product at lowest total
cost’
Accelerated
cost reduction
‘Spend prudently’
Remuneration Principles
Reward outcomes that
reinforce our Customer First
Plan
Build our capability by
attracting and retaining high
calibre talent
Align the interests of our
executives to those of our
shareholders - think like
owners
Drive sustainable long term
performance of the business
Be simple and transparent
2.2 REMUNERATION STRUCTURE FOR FY20
2.2 REMUNERATION STRUCTURE FOR FY20
Strategic objectives & performance link
Strategic objectives & performance link
Strategic objectives & performance link
Performance measures
Performance measures
Performance measures
Total Fixed
Total Fixed
Compensation
Compensation
(TFC)
(TFC)
>
>
To attract and retain high calibre talent.
To attract and retain high calibre talent.
> Provides ‘predictable’ base level of reward.
> Provides ‘predictable’ base level of reward.
> Set with reference to market using external
> Set with reference to market using external
benchmark data.
benchmark data.
> Varies based on employee’s experience, skills
> Varies based on employee’s experience, skills
and performance.
and performance.
> Consideration is given to both internal and
> Consideration is given to both internal and
external relativities across retail and other
external relativities across retail and other
relevant sectors.
relevant sectors.
> Sixty percent of the award is delivered in
> Sixty percent of the award is delivered in
> NPAT ‘gateway’ – minimum threshold
> NPAT ‘gateway’ – minimum threshold
Short Term
Short Term
Incentive
Incentive
Long Term
Long Term
Incentive
Incentive
cash, and 40 percent is deferred.
cash, and 40 percent is deferred.
> Deferral is made in rights for the CEO and
> Deferral is made in rights for the CEO and
Managing Director. For other members of
Managing Director. For other members of
the Executive Management Team, deferral is
the Executive Management Team, deferral is
split equally between cash and restricted
split equally between cash and restricted
shares.
shares.
> Designed to drive the short-term financial
> Designed to drive the short-term financial
and strategic objectives of the Company and
and strategic objectives of the Company and
aligned to creating shareholder value.
aligned to creating shareholder value.
> An NPAT gateway ensures a minimum
> An NPAT gateway ensures a minimum
acceptable level of Company profit before
acceptable level of Company profit before
Executive KMP receive any STI award.
Executive KMP receive any STI award.
> Supports retention and encourages focus on
> Supports retention and encourages focus on
long-term value in addition to annual results,
long-term value in addition to annual results,
through the deferred component.
through the deferred component.
> Delivered in equity, in the form of
> Delivered in equity, in the form of
performance options, to align Executive KMP
performance options, to align Executive KMP
with shareholder interests. Options ensure
with shareholder interests. Options ensure
that Executives are only rewarded for a
that Executives are only rewarded for a
growth in share price from the grant date.
growth in share price from the grant date.
Focused on delivery of long-term business
Focused on delivery of long-term business
strategy and shareholder value.
strategy and shareholder value.
>
>
> Measures complement those in the STI to
> Measures complement those in the STI to
provide a holistic and aligned reward offer.
provide a holistic and aligned reward offer.
> Supports ongoing, sustainable performance
> Supports ongoing, sustainable performance
and the retention of key talent.
and the retention of key talent.
performance level below which no STI is paid.
performance level below which no STI is paid.
> Once the gateway is achieved, performance is
> Once the gateway is achieved, performance is
assessed against a set of measures outlined
assessed against a set of measures outlined
below:
below:
•
•
•
•
Company EBITDA accounts for up to 60
Company EBITDA accounts for up to 60
percent of the maximum STI.
percent of the maximum STI.
Business unit objectives, relevant to the
Business unit objectives, relevant to the
specific role, account for 40 percent of the
specific role, account for 40 percent of the
maximum STI. Individual objectives are
maximum STI. Individual objectives are
aligned to the strategy by including
aligned to the strategy by including
measures related to inventory
measures related to inventory
management, customer experience, cash
management, customer experience, cash
flow, cost of doing business, online EBIT
flow, cost of doing business, online EBIT
and occupancy costs.
and occupancy costs.
> Performance measures:
> Performance measures:
•
•
•
•
Relative TSR (50 percent of award)
Relative TSR (50 percent of award)
against a retail and consumer services
against a retail and consumer services
peer group
peer group
EPS compound annual growth(50 percent
EPS compound annual growth(50 percent
of award)
of award)
> Performance measured over a 3-year
> Performance measured over a 3-year
performance period (FY20 – FY22)
performance period (FY20 – FY22)
> Shares provided on vesting subject to
> Shares provided on vesting subject to
restriction for 1 year, making the total alignment
restriction for 1 year, making the total alignment
period with shareholders 4 years. For the CEO
period with shareholders 4 years. For the CEO
and Managing Director performance is
and Managing Director performance is
measured over 3 years, but the vesting period
measured over 3 years, but the vesting period
is 4 years and no further restriction period
is 4 years and no further restriction period
applies.
applies.
2.3 COMPANY PERFORMANCE AND REMUNERATION OUTCOMES FOR FY20
The Company’s remuneration structure aligns Executive KMP remuneration with shareholder interests over the short and long term
and provides an appropriate reward on delivering our strategy.
Key aspects of the FY20 performance (pre-AASB 16) include:
•
•
•
•
•
•
•
•
•
•
Total sales2 declined by 15.8% to $2,519.4 million; reflecting widespread store closures
Group online sales3 of $422.5 million, up 61.1%, representing 17% of total sales
Operating Gross Profit (OGP) declined by 17.6% to $957.3 million. OGP margin decreased by 85 basis points to 38.0%,
unwinding the 62-basis point improvement that was achieved in 1H20. This was due to several impacts of COVID-19 in 2H20
including a higher mix of clearance sales and a mix that was skewed to lower margin products.
Cost of Doing Business1 decreased by 13.8% to $863.8 million, reflecting net cost reduction achieved in 1H20 as well as actions
taken in response to COVID-19. The JobKeeper Payment Scheme allowed the business to retain stood down staff
Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) of $93.5 million1
Implementation costs and individually significant items (ISIs) $159.0 million ($221.4 million pre-tax), including impairments of
lease right-of-use (ROU) assets and brand names totalling $184.4 million ($133.0 million pre-tax)
The adoption of AASB 16 Leases resulted in a net loss after tax of $2.1 million before ISIs
Statutory net loss after tax of $172.4 million (post-AASB 16)
Exit of the Hornsby store (January 2020), and the Emporium level at Myer Melbourne (May 2020)
Commencement of store refurbishments at Belconnen (due for completion November 2020), Cairns (due for completion
November 2020), and Karrinyup (due for completion August 2021)
1 Excluding implementation costs and individually significant items
2 Revenue from sale of goods excluding concession sales and sales revenue deferred under customer loyalty program was $2,047.9
million (FY19: $2,345.1 million)
3 Group online sales includes sass & bide and Marcs and David Lawrence. Excludes sales via in-store iPads
The table below presents the Company’s annual performance against key financial metrics since 2016.
Basic EPS (cents)
Basic EPS (cents) – adjusted(2)
NPAT (pre implementation costs and individually significant
items) ($m)
NPAT (post implementation costs and individually significant
items) ($m)
Dividends (cents per share)
Share price at beginning of year ($)
Share price at end of year ($)
Market capitalisation ($m)
FY16(1)
FY17
7.7
8.8
69.3
60.5
5.0
1.18(3)
1.34(4)
1.5
8.3
67.9
11.9
5.0
1.34
0.77
FY18
(59.2)
4.0
32.5
(486.0)
-
0.77
0.46
FY19
3.0
4.0
33.2
24.5
-
0.46
0.53
FY20
(21.0)
(1.6)
(13.4)
(172.4)
-
0.53
0.21
1,100.5
632.4
377.8
435.3
172.5
(1) FY16 results were impacted by the fully underwritten accelerated pro rata non-renounceable Entitlement Offer completed by
the Company in September 2015. The Entitlement Offer resulted in the issue of 234,661,660 new shares at $0.94 per share.
(2) Basic EPS is adjusted to exclude implementation costs and individually significant items. Refer to section 7 of the Directors’
Report for further details. The Directors believe this metric is more relevant as it excludes individually significant items that may
not recur and may not be predictive of future performance.
(3) Share price before the Entitlement Offer completed in September 2015.
(4) Share price after the Entitlement Offer completed in September 2015.
Remuneration outcomes for FY20
Remuneration outcomes for FY20
Executive KMP and TFC
Executive KMP and TFC
Short Term Incentive
Short Term Incentive
Long Term Incentive
Long Term Incentive
There was no change to the TFC for
There was no change to the TFC for
Executive KMP effective in FY20.
Executive KMP effective in FY20.
In addition, the CEO and Executive
In addition, the CEO and Executive
Management Team elected to forego
Management Team elected to forego
12 percent of their annual base salary
12 percent of their annual base salary
in response to COVID-19.
in response to COVID-19.
The NPAT gateway condition was not
The NPAT gateway condition was not
achieved in FY19, and accordingly no
achieved in FY19, and accordingly no
STI was paid during FY20 to the
STI was paid during FY20 to the
Executive Management Team,
Executive Management Team,
including Executive KMP.
including Executive KMP.
The LTI awards under the FY17 plan
The LTI awards under the FY17 plan
did not meet the required performance
did not meet the required performance
hurdles and hence no performance
hurdles and hence no performance
rights under that plan have vested.
rights under that plan have vested.
30
Myer Annual Report 2020
Myer Annual Financial Report 2020
Myer Annual Financial Report 2020
19
19
Myer Annual Financial Report 2020
20
31
REMUNERATION REPORT
Continued
REMUNERATION REPORT
Continued
2.4 PAYMENTS TO EXECUTIVE KMP IN FY20
3.
EXECUTIVE KMP REMUNERATION
The table below sets out the actual remuneration received by Executive KMP in FY20. The table has not been prepared in
accordance with accounting standards but has been provided to outline clearly the remuneration outcomes for Executive KMP.
Remuneration outcomes prepared in accordance with the accounting standards are provided in Section 7.
Short Term Incentive
Long Term
Incentive
Cash
salary(1)
$
Super-
annuation(2)
$
FY2020
STI(3)
$
STI
deferred
from prior
year(4)
$
Vested &
exercised
LTIP(5)
$
Termination
and other
payments
$
Actual FY20
Remuneration
$
1,058,225
-
670,186
614,274
701,074
21,060
21,060
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,058,225
691,246
635,334
701,074
Name
Executive Directors
J King(6)
Executive KMP
N Chadwick
A Sutton
A Winstanley(7)
(1) Cash salary includes short-term compensated absences, including any leave taken during the COVID-19 store closure period,
any salary sacrifice arrangement implemented by the Executive KMP, including additional superannuation contributions.
(2) Executive KMP receive a statutory superannuation contribution up to a threshold limit in line with the ATO published maximum
superannuation contribution base.
(3) STI payments relating to FY19 performance and conditions, but paid during FY20. Includes only the non-deferred component.
(4) Deferred STI relating to FY18 performance and conditions, paid during FY20.
(5) The number of performance rights vested and exercised under the FY17 LTI plan multiplied by the Myer share price at vesting.
Mr King and Mr Winstanley had rights vest under their alignment equity plans; these rights are not exercisable until the end of
the three-year performance period.
(6) Mr King does not receive superannuation contributions due to his tax status. As per the terms of his employment contract, and
consistent with market practice, Mr King is entitled to ongoing expatriate support. This support has not been included in this table.
More details can be found in Section 7.
(7) Mr Winstanley does not receive superannuation contributions due to his tax status. As per the terms of his employment
contract, and consistent with market practice, Mr Winstanley is entitled to ongoing expatriate support. This support has not
been included in this table. More details can be found in Section 7.
2.5 EQUITY VESTED IN FY20
Following the release of our financial results in September 2019, the performance rights granted to Executive KMP in December 2016
were tested against the hurdles of ROFE, EPS and relative TSR. The hurdles were not met, and accordingly the rights granted to
Executive KMP under the FY17 LTI plan lapsed.
On commencement of their employment, Mr King and Mr Winstanley were granted share rights, creating an immediate alignment
between them and shareholders. These rights vest on a monthly basis, in 36 equal tranches and will convert to ordinary Myer shares
at the end of the three-year period. Mr King was granted 2,432,432 share rights worth $900,000 at the time of announcement of his
appointment and Mr Winstanley was granted 555,555 share rights worth $250,000 at the time of announcement of his appointment.
During FY20, Mr King and Mr Winstanley had rights vest under their alignment equity plans; these rights are not exercisable until the
end of the three-year performance period.
Executive KMP remuneration is delivered through a mix of fixed and variable (or ‘at risk’) pay, and a blend of short and longer-term
incentives. As outlined in the Remuneration Structure in Section 2.2, Executive KMP remuneration is made up of three components:
•
•
•
Total Fixed Compensation;
Short Term Incentives; and
Long Term Incentives.
The combination of these components comprises an Executive KMP’s total remuneration.
3.1
TOTAL FIXED COMPENSATION
TFC provides the base level of reward and is set at a level to attract and retain high calibre Executives.
Features of Total Fixed Compensation
What is
included in
TFC?
TFC is structured as a total fixed remuneration package, made up of base salary, superannuation, other
benefits and Fringe Benefits Tax, where applicable. Some of the benefits include the opportunity to receive a
portion of fixed remuneration in a variety of forms, including fringe benefits such as motor vehicles, or to make
additional contributions to superannuation or retirement plans (as permitted by relevant legislation).
How is TFC
reviewed?
TFC levels for each Executive KMP are set with reference to the market, the scope and nature of each role,
the incumbent’s experience and individual performance.
The Human Resources and Remuneration Committee (Committee) typically reviews and makes
recommendations to the Board regarding TFC for Executive KMP annually, having regard to Company and
individual performance and relevant comparative remuneration in the market. However, given current financial
performance, the Board decided not to increase TFC as part of the annual remuneration review in FY20.
The Board may also consider adjustments to Executive KMP remuneration outside the annual remuneration
review process as recommended by the CEO and Managing Director, such as on promotion or as a result of
additional duties performed by the Executive KMP. Where new Executive KMP join the Company or existing
Executive KMP are appointed to new roles, a review and benchmarking of fixed and total remuneration is
conducted prior to the offer and execution of a new employment contract.
Which
benchmarks are
used?
Remuneration for Executive KMP is considered in the context of the skills and experience being sought and
the global Senior Management retail market, as well as in relation to the other industries where we are
increasingly seeking talent. Benchmarking is also undertaken against local industry peer groups and
companies with a similar market capitalisation to Myer where relevant for the roles under review.
Mr King’s package was set with reference to the skills and experience required to turn around the company’s
performance in what is a very challenging time in the retail industry. It must also be noted that Myer is
competing for talent in a very small pool of international candidates and the current package was necessary to
attract and retain a high quality, experienced CEO of Mr King’s calibre. Mr King’s fixed remuneration was set
at the same level as the previous CEO, which had not been reviewed since 2015.
Some of Mr King’s significant achievements have been:
•
•
•
Marked improvements to the customer’s digital shopping experience, including enhanced systems
and processes and improved search and checkout functionality. Together with improved fulfilment,
these enhancements have underpinned the significant growth in online sales as well as a 50-basis
point improvement in conversion, and an improved gross profit.
An agreement with existing lenders to amend and extend the banking facility until August 2022. The
amended facility of $340m (which will amortise by $30m during 2021 and by $60m during
2022), compared to the existing facility of $360m. The reduced size in part reflects the Company’s
success in deleveraging the balance sheet during the past two years.
A net cash position of $7.9 million representing an improvement of $46.6 million on prior year. This
was achieved through simplified business processes and prudent financial management, which was
escalated during the COVID-19 pandemic period, along with support from the federal government
and other payment deferrals, despite the loss of revenue and earnings as a result of store closures
and reduced foot traffic.
Mr King did not receive an increase to his Fixed Remuneration in FY20.
3.2 SHORT TERM INCENTIVE PLAN
Myer’s STI plan for Executive KMP and other Senior Executives operates on an annual basis subject to Board review and approval.
The FY20 STI applied to all eligible Executives, including Executive KMP, subject to certain conditions and performance criteria being
met which are reviewed and approved annually by the Board.
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REMUNERATION REPORT
Continued
REMUNERATION REPORT
Continued
Form and purpose of the plan
What is the STI
plan?
The STI plan is an annual, at risk component of an Executive KMP’s reward opportunity, designed to put a
meaningful part of the Executive KMP’s remuneration at risk. Payment under the STI is subject to achieving
pre-determined Company and individual performance criteria. All Senior Managers, including Executive KMP,
participate in the STI.
What is the
value of the STI
opportunity?
STI targets are set as a percentage of the Executive KMP’s TFC. The current maximum levels for Executive
KMP are set out below.
•
•
CEO and Managing Director – 80 percent of TFC.
Other Executive KMP – 60 percent of TFC.
Does the STI
include a
deferred
component?
40 percent of any award payable to members of the Executive Management Team is deferred for 12 months
following the end of the performance period. The deferred component supports share ownership and is also a
risk management lever to facilitate the clawback policy application during the deferral period.
The deferred component of the CEO and Managing Director’s STI is provided in deferred rights, which vest
after 12 months. The deferred component of other members of the Executive Management Team is provided
equally in cash, and restricted shares. Restricted shares carry a 12-month restriction period. Participants are
entitled to receive a dividend during the restriction period.
The CEO and Managing Director award is provided in deferred rights rather than restricted shares due to his
tax considerations. Since deferred rights do not carry an entitlement to dividends, additional shares are
granted on vesting of CEO and Managing Director rights to ensure that his benefit is equivalent to any
dividends earned by other participants during their one-year restriction period. This ensures that all
participants under the plan are treated fairly and consistently.
Gateway and performance measures
Is there a
performance
‘gateway’ and
how is it
determined?
What were the
FY20
performance
measures?
Why were the
performance
measures
selected?
Are the STI
performance
measures and
targets
disclosed?
Governance
When are
performance
targets set and
reviewed?
No STI is awarded to any participants if minimum performance across the Company does not reach the pre-
determined threshold NPAT level.
The NPAT gateway is determined by the Board each year, with reference to the annual business plan,
economic conditions and other relevant factors.
The FY20 STI was structured around two key components:
•
•
Company EBITDA accounts for 60 percent of the STI scorecard for Executive KMP.
Key business unit financial and strategic objectives aligned to the strategy account for the remaining 40
percent of the STI scorecard. It includes measures related to inventory management, customer
experience, cash flow, cost of doing business, online EBIT and occupancy costs.
Overall performance measures are selected to align with annual and long-term business plans. Details of the
FY20 performance measures, and the strategic objectives they are aligned to, are set out in Section 2.2.
The Board believes that a large component of an Executive KMP’s STI award should be driven by the financial
performance of the Company, and accordingly 60 percent of the STI is dependent on Company EBITDA,
providing close alignment with shareholder outcomes.
Other financial and strategic objectives in the performance scorecard are set by the CEO and Managing
Director (and approved by the Human Resources and Remuneration Committee (the Committee) and the
Board), and, combined with the Company EBITDA measure, are intended to drive strategy and deliver
financial results. These objectives and their targets align with key financial metrics and strategic goals, and the
measures selected for each Executive KMP are determined by reference to the specific objectives of their role
for the financial period.
The disclosure of prospective STI measures and targets would provide the market and our competitors with
our financial forecasts, and it is for this reason that we do not disclose them in advance. We will disclose
outcomes and/or performance against targets in instances where the disclosure would not involve the release
of commercially sensitive information.
Performance objectives and targets are set at the beginning of the financial period, while performance against
these targets is reviewed following the end of the financial period.
How is
performance
measured?
The Committee determines whether, or the extent to which, each target is satisfied following the end of the
financial period, once the Company’s annual accounts are audited and have been approved by the Directors.
If the gateway is satisfied, an STI may be paid to participating Executive KMP and other Executives. The
quantum of any STI reward provided will depend on the extent to which the maximum reward is achieved. A
minimum threshold is also set, below which no STI reward will be provided. Once it has been determined
whether each objective has been satisfied, the Committee will make a recommendation to the Board for
approval of the STI awards to be paid to the CEO and Managing Director, Executive KMP and other
Executives.
The Committee is responsible for assessing whether the performance criteria are met. To help make this
assessment, the Committee receives reports on the Company’s performance from management. All proposed
STI awards are only made once the Company’s financial performance has been verified by internal and
external audit. The Committee has the discretion to recommend to the Board an adjustment to any award in
light of unexpected or unintended circumstances.
When are
incentives paid?
The component of the STI awards approved by the Board that is not subject to deferral is paid to participating
Executive KMP and other Executives in the month following the release of the Company’s results to the ASX.
The deferred component of the CEO and Managing Director’s STI is provided in deferred rights, which he will
not be able to trade during the 12-month deferral period. The deferred component of other Executive KMP is
paid equally in cash and restricted shares, following the end of the 12-month deferral period.
Cessation of employment, clawback or change of control
Participants leaving employment during the performance year are generally not eligible to receive an award
under the STI. In certain circumstances (such as redundancy), the Board may consider eligibility for a pro rata
payment.
The STI Plan allows the Board to take any steps that it determines appropriate to recover from the individual
Executives any STI reward that was determined to have been an ‘unfair benefit’ as a result of a material
misstatement in, or omission from, the Company’s financial statements or concerning the satisfaction of KPI
applicable to the STI. The provision applies only to those who were Executives of the Company at the time the
financial statements were approved by the Board and issued by the Company. The Board may also adjust the
award in cases of fraud, or dishonest or gross misconduct, unsustainable performance involving high-risk
actions and bringing the company into disrepute.
The Board has absolute discretion in relation to the treatment, payment or provision of STI awards on a
change of control, which it would exercise in the best interests of the Company. The Board may also give the
CEO and Managing Director notice that the restriction period for any restricted shares will end if certain
change of control events occur.
If an individual
ceases
employment
during the
performance
year, will they
receive a
payment?
Does a
‘clawback’
apply?
How would a
change of
control affect
STI
entitlements?
FY20 Outcome
The NPAT gateway was not met and accordingly no STI was payable to the Executives, including Executive KMP.
3.3
FY20 LONG TERM INCENTIVE PLAN
Features of the LTI plan applicable in respect of FY20 are outlined in the table below. In FY20, the Board granted performance options
under the LTI plan to Executive KMP and other Senior Executives.
Form and purpose of the plan
What is the LTI
plan?
The LTI plan is an incentive that is intended to promote alignment between Executives and shareholder
interests over the longer term. Under the LTI plan, performance options may be offered annually to the CEO
and Managing Director and nominated Executives, including Executive KMP. The employees invited to
participate in the plan include Executives who are considered to play a leading role in achieving the Company’s
long-term strategic and operational objectives.
How is the LTI
plan delivered?
The LTI plan is delivered via a grant of performance options. The number of performance options that vest is
not determined until after the end of the performance period.
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35
REMUNERATION REPORT
Continued
REMUNERATION REPORT
Continued
How was the
number of
performance
options
determined?
The performance options will therefore not provide any value to the holder between the dates the performance
options are granted and the end of the vesting period and restriction period (if applicable), and then only if the
performance hurdles are satisfied and there has been share price growth over the exercise price.
Performance options do not carry entitlements to ordinary dividends or other shareholder rights until the
performance options vest and shares are provided. Accordingly, participating Executives do not receive
dividends during the vesting Period.
The number of performance options for each Executive was determined as part of the calculation of total
remuneration for an Executive role. The Committee determined LTI plan awards by assessing the quantum
required to provide a market competitive total remuneration level, for on target performance.
The number of performance options granted was determined by reference to the maximum value of the grant.
The maximum value was determined by a fixed percentage of the Executive’s TFC. The CEO and Managing
Director was entitled to a maximum value of 90 percent of TFC in FY20. Executive KMP are entitled to a
maximum value of 60 percent of TFC. The maximum value divided by the value attributed to the performance
option was used to determine the exact number of performance options granted. The value attributed to the
performance option was calculated using the Black-Scholes option valuation approach as at the grant date.
The exercise price was set based on the volume weighted average price (VWAP) of the Company’s shares
over the five trading days up to and including the day before the closing date of the grant.
Vesting and performance hurdles
What is the
performance
period?
The performance period commences at the beginning of the financial period in which the performance options
are granted. For the performance options granted under the FY20 LTI plan, the performance period started on
28 July 2019 and ends after three years on 30 July 2022. Following the end of the performance period and
after the Company has lodged its audited financial results for FY22 with the ASX, the Board will test the
performance hurdles that apply to the FY20 LTI plan offer and will determine how many performance options (if
any) are eligible to vest.
What are the
performance
hurdles?
Why were the
performance
hurdles chosen?
The performance measures approved by the Board for the FY20 LTI plan offer were EPS and relative TSR:
•
•
50 percent of the award is subject to the EPS hurdle; and
50 percent of the award is subject to the relative TSR hurdle.
The hurdles were chosen to align shareholder returns with Executive reward outcomes over the three-year
performance period and to complement the STI plan measures.
The Board considers EPS the most effective measure for determining the underlying profitability of the
business. When determining normalised EPS for LTI purposes statutory earnings is adopted as the base and
the Board will allow adjustments to be made for significant items on a case-by-case basis. To the extent a
write-down occurs that is considered to have been within management’s control, it will form a part of the EPS
calculation.
The TSR hurdle was selected to ensure alignment between comparative shareholder return and reward for
Executives. This measure also provides a direct comparison of the Company's performance over the
performance period against a comparator group of companies that would, broadly, be expected to be similarly
impacted by changes in market conditions.
What is the
vesting
framework?
The number of performance options that vest will depend on how well Myer has performed during the
performance period. For superior performance, 100 percent of the performance options will vest. Only a
percentage of performance options will vest for performance below that level. If Myer does not achieve certain
minimum thresholds then all the applicable performance options will lapse, and no performance options can
vest.
For the FY20 LTI plan offer, the following vesting hurdles apply:
Performance options subject to the EPS hurdle (50 percent of the Award)
The EPS hurdle will be tested over the performance period by calculating the compound annual growth rate in
the Company’s EPS using EPS at the end of FY19 as the base year. The resulting growth rate will be used to
determine the level of vesting for the performance options subject to the EPS Hurdle.
The table below sets out the percentage of performance options subject to the EPS Hurdle that can vest
depending on the Company’s growth in EPS:
Growth in EPS from base year EPS
% of performance options subject to the EPS
Hurdle that will vest
(rounded down to the nearest whole number)
Below 5% compound annual growth
At 5% compound annual growth
Nil
50%
Between 5% and 12% (inclusive) compound annual
growth
Straight line pro-rata vesting between 50% and 100%
At or above 12% compound annual growth
100%
When determining normalised EPS for LTI purposes statutory earnings is adopted as the base and the Board
will allow adjustments to be made for significant items on a case-by-case basis. To the extent a write-down
occurs that is considered to have been within management’s control, it will form a part of the EPS calculation.
The EPS targets were lowered by 8 percent from the FY19 LTI plan. The board believes that the FY20 targets
provide an appropriate ambition and stretch for Myer that has experienced negative EPS growth in prior years.
Performance options subject to the TSR Hurdle (50 percent of the Award)
The TSR Hurdle will be tested following the end of the performance period by comparing the Company’s total
shareholder return performance over the performance period relative to a set peer group. The peer group for
the FY20 Grant was amended to include a more relevant base of listed companies from the retail and the
consumer services sector. The constituents are: Accent Group, Adairs, AP Eagers, Automotive Holdings, Baby
Bunting, Bapcor, Beacon Lighting, Coles Group, Collins Foods, Corporate Travel Management, Domino’s
Pizza Enterprises, Flight Centre Travel Group, Harvey Norman Holdings, Helloworld Travel, JB Hi-Fi, Kogan,
Lovisa Holdings, Metcash, Michael Hill International, Motorcycle Holdings, National Tyre & Wheel, Nick Scali,
Noni B, Premier Investments, Super Retail Group, Webjet, Wesfarmers and Woolworths Group. The
comparator group may, at the discretion of the Board, be adjusted to take into account events during the
performance period including, but not limited to, takeovers, mergers, de-mergers and de-listings.
The table below sets out the percentage of performance rights subject to the TSR Hurdle that can vest depending
on the Company’s relative TSR performance:
TSR performance relative to peer group
% of performance options subject to the TSR
Hurdle that will vest
(rounded down to the nearest whole number)
Below the 50th percentile
At the 50th percentile
Nil
50%
Between the 50th percentile and the 75th percentile
Straight line pro-rata vesting between 50% and 100%
At or above the 75th percentile
100%
For the CEO and Managing Director, the performance period is three years, but the vesting period is 4 years
during which a continuous service condition applies.
No. Each performance hurdle is only tested once at the end of the performance period.
Are the
performance
hurdles subject
to retesting?
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37
REMUNERATION REPORT
Continued
REMUNERATION REPORT
Continued
How are shares
allocated?
Under the plan, following vesting, shares are allocated on a net settlement basis, where the Executive is
allocated the total number of shares that would have been allocated upon exercise less the number of shares
equal to the value of the aggregated exercise price. The number of shares delivered by the Company
represents the value above the exercise price in accordance with the formula below:
(A - B) / C, where:
A = Aggregate value of vested performance options (based on the market value of a share)
B = Aggregate exercise price payable
C = Market value of a share
This approach ensures that Executives are only rewarded for the increase to share price from the grant date,
thereby strengthening the alignment between Executive remuneration and growth in shareholder value. The
exercise price of $0.55 for the FY20 LTI plan was calculated using the VWAP of a share over the five trading
days up to and including the day before the closing date of the grant.
Do any
restrictions apply
once the options
vest?
Any shares provided on vesting of the performance options will be subject to a restriction period of one year,
during which they cannot be sold, transferred or otherwise dealt with. A continuous service restriction will also
apply during the restriction period. For the CEO and Managing Director performance is measured over 3 years,
but the vesting period is 4 years and there is no additional restriction period following the vesting.
Cessation of employment, change of control, clawback, forfeiture, participation in future issues and hedging
arrangements
Cessation of
employment
The treatment of performance options on cessation of employment will depend on the date as well as the
circumstances of cessation. Generally, if an Executive ceases employment on or before the end of the
restriction period due to resignation, termination for cause or gross misconduct, they will forfeit any interest in
the options. If employment ceases on or before the end of the restriction period for other reasons, the
Executive KMP will retain a pro-rata interest in the vested shares. The calculation is determined based on time
elapsed between the start of the performance period and cessation of employment. Subject to applicable law,
the Board has the discretion to allow a different treatment (although the discretion is only likely to be exercised
in exceptional circumstances).
The Board has absolute discretion to allow full or pro-rated accelerated vesting of performance options in the
event of certain change of control events, and would exercise this discretion in the best interests of the
Company.
The LTI Plan allows the Board to take any steps that it determines appropriate to recover from the individual
Executives any LTI award that vests or may vest if it was determined to have been an ‘unfair benefit’ as a
result of a material misstatement in, or omission from, the Company’s financial statements or concerning the
satisfaction of KPI applicable to the LTI. The provision applies only to those who were Executives of the
Company at the time the financial statements were approved by the Board and issued by the Company. The
Board may also adjust the award in cases of fraud, or dishonest or gross misconduct, unsustainable
performance involving high-risk actions and bringing the company into disrepute.
The options and entitlements attaching to performance options may be adjusted if the Company undertakes a
bonus or rights issue or a capital reconstruction in relation to the Company's shares. For example, in the event
of a rights issue, the number of shares which an Executive is entitled to be allocated on the exercise of
performance options may be changed in a manner determined by the Myer Board and consistent with the ASX
Listing Rules.
The expiry date for performance options under the FY20 LTI plan is 21 November 2023.
Executives are forbidden from entering into any hedging arrangements affecting their economic exposure to
performance options or restricted shares.
Executives are also forbidden from entering into transactions or arrangements prohibited under the Company’s
Securities Dealing Policy.
How would a
change of
control impact
LTI plan
entitlements?
Does a
‘clawback’
and/or forfeiture
apply?
How would a
bonus or rights
issue impact
performance
options under
the LTI plan?
Do performance
options expire?
Do any other
restrictions apply
to performance
options prior to
vesting or
subject to
restriction?
In FY20, Executive KMP and other Senior Executives received a grant of performance options. The awards granted may deliver value
to Executives at the end of the three-year performance period, subject to satisfaction of performance hurdles as set out in the table
below.
The following table summarises the FY20 performance options granted to Executive KMP:
Name
J King
N Chadwick
A Sutton
A Winstanley
Number of
performance options
granted
2,799,378
2,799,378
1,236,392
1,236,392
1,026,439
1,026,439
1,236,392
1,236,392
Valuation of each
performance option at
grant date(1)
$
0.1781
0.1576
0.1517
0.1452
0.1517
0.1452
0.1517
0.1452
Exercise
price
$
0.55
0.55
0.55
0.55
0.55
0.55
0.55
0.55
Applicable
hurdles
EPS
TSR
EPS
TSR
EPS
TSR
EPS
TSR
End of
performance
period
30 July 2022
30 July 2022
30 July 2022
30 July 2022
30 July 2022
30 July 2022
30 July 2022
30 July 2022
(1) The valuation is calculated in accordance with AASB 2 Share Based Payment.
4.
EXECUTIVE KMP SERVICE AGREEMENTS
Remuneration and other terms of employment for the CEO and Managing Director, and other Executive KMP are formalised in
service agreements. The termination provisions for Executive KMP, as set out in their service agreements, are described below:
Name
J King
N Chadwick
A Sutton
A Winstanley
Contract type
Rolling contract
Rolling contract
Rolling contract
Rolling contract
Termination notice period
initiated by Executive KMP
12 months
Termination notice period, or
payment in lieu of notice,
initiated by Company
12 months
6 months
3 months
6 months
6 months
6 months
6 months
The agreements also provide for an Executive KMP’s participation in the STI and LTI plans subject to Board approval of their eligibility
and in accordance with the terms and conditions of the respective plans.
In addition, Mr King and Mr Winstanley have been provided with support relating to their relocations, and are entitled to the following
benefits:
•
•
Coverage of costs associated with moving personal and household items, tax services and rental assistance for the first year of
their assignments; and
Health care coverage and two return flights for self and spouse to and from the USA or the United Kingdom annually, and other
costs related to their Australian residency.
The cost to the Company in providing this support for the period ended 25 July 2020 is summarised in Section 7.
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39
REMUNERATION REPORT
Continued
REMUNERATION REPORT
Continued
5. NON-EXECUTIVE DIRECTOR REMUNERATION
Fees and payments to Non-Executive Directors reflect the demands upon and responsibilities of those Directors. The Board, on the
recommendation of the Committee, reviews Non-Executive Directors' fees and payments at least once a year. As part of that review,
the Board considers the advice of independent remuneration consultants in relation to:
•
•
•
Chairman’s fees and payments;
Non-Executive Directors’ fees and payments; and
Payments made in relation to the Chairman of committees or for other specific tasks that may be performed by Directors.
Non-Executive Directors’ fees are determined within an aggregate Directors’ fee pool limit as approved from time to time by Myer
shareholders at the AGM. The maximum aggregate limit includes superannuation contributions for the benefit of Non-Executive
Directors and any fees which a Non-Executive Director agrees to sacrifice for other benefits. It does not include reimbursement of
genuine out-of-pocket expenses, genuine special exertions fees paid in accordance with the Company’s constitution, or certain issues
of securities under ASX Listing Rule 10.11 or 10.14, with the approval of shareholders. The current maximum aggregate fee pool limit
is $2,150,000 per annum. The aggregate fee pool limit has not changed since the Company was listed in November 2009.
Base fees for Non-Executive Directors include payment for participation on Board Committees; however, an additional payment is
made to those who serve as Chairman on a Committee to recognise the additional responsibility and time requirements involved in
chairing a Committee.
In FY18, the Chairman and Non-Executive Directors’ fees had been reduced to align them with market benchmarks for companies
with a similar market capitalisation. The Chairman fee was initially reduced from $400,000 in FY17 to $350,000 from the start of
FY18. From 21 March 2018, the Chairman fee was subsequently further reduced from $350,000 to $300,000, Non-Executive
Directors’ fees were reduced from $150,000 to $120,000, the Audit Finance and Risk Committee Chairman fees were reduced from
$30,000 to $20,000 and Human Resources and Remuneration Committee Chairman fees were reduced from $22,500 to $20,000.
A further reduction of 16.7 percent to the Chairman and Non-Executive Director fees was made effective from 1 July 2020, in
response to the impact of COVID-19 on Myer’s investors, customers, team members and the community more broadly.
Base Annual Fees
Chairman (all inclusive)
Other Non-Executive Directors
Additional annual fees
Audit Finance and Risk Committee – Chairman
Audit Finance and Risk Committee – member
Human Resources and Remuneration Committee – Chairman
Human Resources and Remuneration Committee – member
Nomination Committee – Chairman
Nomination Committee – member
28 July 2019 –
30 June 2020
1 July 2020 –
25 July 2020
300,000
120,000
250,000
100,000
20,000
20,000
-
20,000
-
-
-
-
20,000
-
-
-
Non-Executive Directors are not entitled to any additional remuneration upon retirement. Superannuation contributions required by
legislation are made from the fee paid to Directors and fall within the aggregate fee pool limit.
Non-Executive Directors do not receive performance-based pay. However, they are able to purchase shares in the Company, which
can be acquired on market during approved trading ‘windows’ for share trading consistent with the Company’s Securities Dealing
Policy.
Each Non-Executive Director will target the purchase of a shareholding in the Company that, as at the date of the last purchase, is
equivalent to at least one year’s Non-Executive Director’s base fees, progressively over three years from the date of their
appointment, for new Non-Executive Directors, and within three years from April 2018 for Non-Executive Directors appointed before
this date.
In FY20, the Chairman and other Non-Executive Directors, elected to forego 17 percent of their annual Director fees in response to
COVID-19. The table below shows the remuneration amounts recorded in the financial statements in the period for Non-Executive
Directors:
Name
Non-Executive Directors
G Hounsell(1)
J Morrison
J Stephenson
D Whittle
L Cattermole AM(2)
J Naylor(3)
Former Non-Executive Directors
I Cornell(4)
C Froggatt(5)
B Thorn(6)
Total Non-Executive Directors
Myer Holdings Limited
Board & Committee
Fees
$
FY
Superannuation
$
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
227,649
279,429
92,199
108,600
104,075
126,700
88,992
108,600
88,992
86,565
88,992
20,067
31,216
126,700
-
35,567
-
61,540
722,115
953,768
18,185
20,571
9,342
11,400
10,925
13,300
9,342
11,400
9,342
9,087
9,342
2,107
3,277
13,300
-
-
-
6,460
69,755
87,625
Total
$
245,834
300,000
101,541
120,000
115,000
140,000
98,334
120,000
98,334
95,652
98,334
22,174
34,493
140,000
-
35,567
-
68,000
791,870
1,041,393
(1) Mr Hounsell assumed the role of Chairman of the Human Resources and Remuneration Committee since 1 November 2019. He
has opted not to receive the additional Committee Chairman fee for FY20.
(2) Ms Cattermole AM was appointed as a Non-Executive Director on 15 October 2018.
(3) Ms Naylor was appointed as a Non-Executive Director on 27 May 2019.
(4) Mr Cornell retired as a Non-Executive Director on 30 October 2019.
(5) Ms Froggatt retired as a Non-Executive Director on 30 November 2018.
(6) Mr Thorn retired as Non-Executive Director on 24 February 2019.
40
Myer Annual Report 2020
Myer Annual Financial Report 2020
29
Myer Annual Financial Report 2020
30
41
REMUNERATION REPORT
Continued
6.
REMUNERATION GOVERNANCE
6.1 HUMAN RESOURCES AND REMUNERATION COMMITTEE
The Board reviews its role, responsibilities, and performance annually to ensure that the Company continues to maintain and improve
its governance standards.
The Board is responsible for ensuring the Company’s remuneration strategy is equitable and aligned with Company performance and
shareholder interests. The Board conducts an annual review of the remuneration strategy of the business. To assist with this, the
Board has established a Human Resources and Remuneration Committee made up of Non-Executive Directors only. The Committee
charter is available on the Company’s Investor Centre website.
When making remuneration decisions, the Committee will also consider the Company’s internal succession plan and capability
profile.
Mr Ian Cornell served as Chairman of the Committee for the period July 2018 to October 2019. Mr Garry Hounsell has assumed the
role of Chairman since then. Ms JoAnne Stephenson stepped down from the Committee on 13 August 2019 and Ms Julie Ann Morrison
was appointed as a member from the same date. Ms Jacquie Naylor was appointed as a member from 3 September 2019. Ms
Lyndsey Cattermole AM was a member of the Committee throughout FY20.
In performing its role, the Committee has the responsibility to make recommendations to the Board on:
•
•
•
•
Non-Executive Director fees;
Executive remuneration (for the CEO and Managing Director, and other Executives) including specific recommendations on
remuneration packages and other terms of employment;
The overarching remuneration framework including the policy, strategy and practices for fixed reward and both short and long
term incentive plans and performance hurdles; and
The health of the organisation, suitable succession coverage, organisational culture and diversity.
The Committee has been established under rule 8.15 of the Constitution of the Company. Further information on the role of the
Committee, its membership and meetings held throughout the year will be set out in the Corporate Governance Statement (available
on the Company’s website) and the Directors’ Report.
The CEO and Managing Director, and the Executive General Manager Human Resources are regular attendees at the Committee
meetings. The CEO and Managing Director was not present during any Committee or Board meetings when his remuneration was
considered or discussed during the financial period.
The Committee must at all times have regard to, and notify the Board as appropriate, of all legal and regulatory requirements,
including any shareholder approvals required in connection with remuneration matters.
The Committee Chairman or, if he is not available, a Committee member, will attend the AGM and be available to answer any
questions from shareholders about the Committee’s activities or, if appropriate, the Company’s remuneration arrangements.
6.2 USE OF REMUNERATION CONSULTANTS
To ensure it is fully informed when making remuneration decisions, the Committee draws on services from a range of external
sources, including remuneration consultants where appropriate. The Company’s guidelines on the use of remuneration consultants
aim to ensure the independence of remuneration consultants from Myer’s management, and include the process for the selection of
consultants and the terms of engagement.
Remuneration consultants are engaged by the Committee Chairman, and report directly to the Committee. As part of this
engagement, an agreed set of protocols to be followed by the consultants, the Committee, and management, have been devised that
determine the way in which remuneration recommendations are developed and provided to the Board. This process is intended to
ensure that any recommendation made by a remuneration consultant is free from undue influence by the Executive KMP to whom
any recommendations may relate.
During FY20, the Human Resources and Remuneration Committee engaged KPMG to provide various remuneration advice regarding
market practice and trends and assistance with other ad-hoc matters. KPMG did not provide any remuneration recommendations as
defined in the Corporations Act 2001 (Cth) to the Committee during FY20.
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42
Myer Annual Report 2020
Myer Annual Financial Report 2020
31
43
REMUNERATION REPORT
Continued
REMUNERATION REPORT
Continued
Footnotes
7.2 EQUITY INSTRUMENTS GRANTED TO EXECUTIVE KMP IN FY20
(1) Cash salary includes short-term compensated absences, including any leave taken during the COVID-19 store closure period,
any salary sacrifice arrangement implemented by the Executive KMPs, including additional superannuation contributions.
(2) STI payments relate to program performance and conditions for the year they were earned, not the year of actual payment.
(3) Other short-term employee benefits include the movement in annual leave accrual, and Fringe Benefits Tax paid by the
Company in respect of Company provided car parking up to the end of March 2020 (in accordance with the FBT year), mobile
phone expenses and expatriate support for Mr King and Mr Winstanley.
(4) There were no post-employment benefits other than superannuation.
(5) Executive KMPs receive a statutory superannuation contribution up to a threshold limit in line with the ATO published maximum
superannuation contribution base, with the exception of Mr King and Mr Winstanley, who do not receive superannuation due to
their tax status.
(6) This benefit includes the movement in long service leave accrual.
(7) The share-based payment expense represents the amount expensed for the period based on valuations determined under
AASB 2 Share Based Payment. This expense is based on the fair value at grant date, and reflects expectations of the number of
rights and options expected to vest. Where expectations change in relation to vesting, adjustment is made in the current period
to reflect this change. As the equity grant may fully vest, partially vest or not vest at all, the benefit that the Executive KMP
ultimately realises is likely to be different to the amount disclosed in a particular year. The amount disclosed does not represent
cash payments received in the period, and if vesting conditions are not met, may result in reversal of the remuneration amount in
a future period. There were no other equity-settled share-based payments and there were no cash-settled share based
payments.
(8) Mr King's other short-term benefits include annual leave accrual, a health insurance allowance, relocation expenses for spouse,
and return flights home under the expatriate terms of his employment contract.
(9) Mr Winstanley's other short-term benefits include annual leave accrual, a health insurance allowance, and return flights home
under the expatriate terms of his employment contract.
(10) Mr Cripsey stepped down as Chief Operating Officer on 31 October 2018 and was paid the minimum payment required under
the terms of his employment.
(11) Mr Umbers stepped down as CEO and Managing Director on 14 February 2018, and his notice period concluded on 31 July
2018. His termination payment consists of all payments made post 14 February 2018, which were the minimum payments
required under the terms of his employment.
Name
J King(3)
N Chadwick
A Sutton
Vesting Date
Number of performance
options granted(1)
Value of performance
options at grant date(2)
$
Number of rights
vested during the
period
16-Sep-23
16-Sep-22
16-Sep-22
5,598,756
2,472,784
2,052,878
1,080,000
477,000
396,000
810,804
-
-
A Winstanley(4)
(1) No performance rights were granted to Non-Executive Directors during the reporting period.
(2) The Black Scholes valuation for determining the face value for allocating options under the FY20 LTI plan was $0.193.
(3) Mr King was appointed as CEO and Managing Director on 4 June 2018. The number of performance rights vested refer to rights
16-Sep-22
2,472,784
477,000
185,184
granted on his commencement. This plan vests monthly in 36 equal tranches.
(4) Mr Winstanley was appointed as Chief Merchandise Officer on 25 June 2018. The number of performance rights vested refer to
rights granted on his commencement. This plan vests monthly in 36 equal tranches.
7.3 SHARES PROVIDED ON EXERCISE OF RIGHTS OR OPTIONS
No Non-Executive Directors of the company or Executive KMP were provided ordinary shares as a result of exercise of options or
rights.
7.4 PERFORMANCE OPTIONS AND PERFORMANCE RIGHTS ON ISSUE
For each grant of options or grant of performance rights included in this report, the percentage of the grant that was paid, or that
vested, in the financial period, and the percentage and value that was forfeited because the service and performance criteria were not
met is set out below. Options and performance rights vest provided the vesting conditions or performance hurdles are met. No options
or performance rights will vest if the hurdles (either service or performance) are not satisfied, therefore the minimum value of the
options or performance rights yet to vest is nil.
7.1 UNVESTED PERFORMANCE RIGHTS AND OPTIONS
Name
Grant date
Equity Vehicle
Vested %
Forfeited %
Details of performance rights and options granted to Executive KMP under the previous equity incentive plans that remain unvested as
at 25 July 2020 are set out in the table below.
Grant type
Rights (ROFE hurdle)
Rights (EPS hurdle)
Rights (TSR hurdle)
Rights (CEO only service hurdle)
Rights (CMO only service hurdle)
Options (EPS hurdle)(1)
Options (TSR hurdle)(1)
CEO Options (EPS hurdle)(2)
Other Executive KMP Options (EPS hurdle)(2)
CEO Options (TSR hurdle)(2)
Other Executive KMP Options (TSR hurdle)(2)
Total
Grant date
21-Dec-17
21-Dec-17
21-Dec-17
4-Jun-18
25-Jun-18
24-Dec-18
24-Dec-18
21-Nov-19
21-Nov-19
21-Nov-19
21-Nov-19
Value per
instrument at
grant date
$
Number of
instruments
Vesting date (if holder remains
employed by a Myer Group
company)
640,909
320,455
320,454
743,257
169,755
8,870,968
8,870,968
2,799,378
3,499,223
2,799,378
3,499,223
32,533,968
$0.47
$0.21
$0.47
$0.29
$0.35
$0.12
$0.12
$0.18
$0.15
$0.16
$0.15
End of performance period
End of performance period
End of performance period
End of performance period
End of performance period
End of vesting period
End of vesting period
End of vesting period
End of vesting period
End of vesting period
End of vesting period
(1) Performance options granted on 24 December 2018 will expire on 24 December 2022.
(2) Performance options granted on 21 November 2019 will expire on 21 November 2023.
Details of performance rights or options over ordinary shares in the Company currently provided as remuneration and granted during
FY20 to Executive KMP are set out overleaf. Further information on the LTI plan is set out in note H4 of the Financial Statements.
J King(2)
N Chadwick
A Sutton
A Winstanley(8)
M Cripsey
21-Nov-19
24-Dec-18
4-Jun-18
21-Nov-19
24-Dec-18
29-Jan-18(5)(6)
21-Nov-19
24-Dec-18
21-Dec-17(6)
22-Dec-16(7)
21-Nov-19
24-Dec-18
25-Jun-18
21-Dec-17(9)
22-Dec-16(7)
Options(3)
Options(4)
Rights
Options(3)
Options(4)
Rights
Options(3)
Options(4)
Rights
Rights
Options(3)
Options(4)
Rights
Rights
Rights
-
-
33%
-
-
-
-
-
-
-
-
-
33%
-
-
-
-
-
-
-
-
-
-
-
100%
-
-
-
100%
100%
Maximum total value
of grant yet to be
expensed (1)
783,126
311,826
16,460
290,609
106,244
2,163
241,260
88,202
1,903
-
290,609
106,244
4,572
-
-
(1) This represents the maximum remaining accounting value of the LTI plan awards (rights and options) as at their grant date.
(2) Mr King was appointed as CEO and Managing Director on 4 June 2018. The performance rights referred to in this table were
rights granted upon his appointment. These rights vest monthly over the period 4 June 2018 to 4 June 2021.
(3) Performance options granted on 21 November 2019 will expire on 21 November 2023.
(4) Performance options granted on 24 December 2018 will expire on 24 December 2022.
(5) Mr Chadwick was appointed as Chief Financial Officer on 29 January 2018, and was granted performance rights upon his
appointment.
(6) The grants under the FY18 LTI plan will be tested for vesting following the release of the FY20 results and details disclosed in
the FY21 Remuneration Report.
(7) The grants under the FY17 LTI plan were tested following the release of the FY19 results. The performance hurdles were not
met and hence no rights vested under this plan.
(8) Mr Winstanley was appointed as Chief Merchandise Officer on 25 June 2018. The performance rights referred to in this table
were rights granted upon his appointment. These rights vest monthly over the period 25 June 2018 to 25 June 2021.
(9) Mr Cripsey voluntarily surrendered his unvested rights under the FY18 LTI plan.
44
Myer Annual Report 2020
Myer Annual Financial Report 2020
33
Myer Annual Financial Report 2020
34
45
REMUNERATION REPORT
Continued
REMUNERATION REPORT
Continued
7.5
TRANSACTIONS WITH KMP
Mr King is a director of Raging Bull Group Limited and has a relevant interest in 20 percent of the shares. During the period ended 25
July 2020, Myer Pty Ltd placed orders for apparel totalling $0.8m with Raging Bull Leisure Limited, whose ultimate parent is Raging Bull
Group Limited.
The order has been placed on an arm’s length basis under a standard wholesale agreement. As at 25 July 2020, the apparel product
ordered had been received and $0.4 million was owing to Raging Bull Leisure Limited, in accordance with the terms under the
wholesale agreement.
8.
EQUITY
The number of rights and options over ordinary shares in the Company held during the financial period by Executive KMP of the
Company, including their personally related parties, are set out below. No rights or options over ordinary shares are held by Non-
Executive Directors.
Opening balance
Granted as
compensation
Exercised
Lapsed
Closing balance
Options
Rights
Options
Rights
Options
Rights
Options
Rights
Options
Rights
2020
J King
9,032,258
2,432,432
5,598,756
N Chadwick
3,077,420
681,818
2,472,784
A Sutton
2,554,838
896,429
2,052,878
A Winstanley
3,077,420
555,555
2,472,784
Former Disclosed Executives
M Cripsey(1)
2019
J King
N Chadwick
A Sutton
A Winstanley
-
-
-
-
-
231,060
-
2,432,432
9,032,258
681,818
3,077,420
1,209,471
2,554,838
555,555
3,077,420
Former Disclosed Executives
M Cripsey(1)
R Umbers(2)
G Devonport(3)
-
-
-
554,545
3,383,936
858,695
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(173,913)
-
-
-
-
-
-
-
-
-
-
-
-
- 14,631,014 2,432,432
- 5,550,204
681,818
(296,429) 4,607,716
600,000
- 5,550,204
555,555
(231,060)
-
-
- 9,032,258 2,432,432
- 3,077,420
681,818
(313,042) 2,554,838
896,429
- 3,077,420
555,555
(323,485)
(3,383,936)
(684,782)
-
-
-
231,060
-
-
(1) Mr Cripsey's performance rights relate only to the time he was considered as Executive KMP.
(2) Mr Umbers stepped down as CEO and Managing Director on 14 February 2018, and is no longer considered Executive KMP
from this date. The performance rights held by Mr Umbers lapsed when his notice period concluded on 31 July 2018.
(3) Mr Devonport stepped down as Chief Financial Officer on 28 January 2018 and is no longer considered Executive KMP from this
date. A portion of the performance rights referred to in this table held by Mr Devonport, granted on 5 January 2016, were linked
to his continuous service, these rights vested in FY19. All other rights were forfeited.
The number of shares in the Company held during the financial period by each Director of the Company and other Executive KMP of
the Company, including their personally related parties are set out below. There were no shares granted during the reporting period as
compensation.
Opening balance
Received on exercise of
rights and/or options to
shares
Other changes during
the year
Closing balance
2020
Directors
G Hounsell
J Morrison
J Stephenson
D Whittle
L Cattermole AM
J Naylor
Former Directors
I Cornell(1)
Executive KMP
J King
N Chadwick
A Sutton
A Winstanley
2019
Directors
G Hounsell
I Cornell
J Morrison
J Stephenson
D Whittle
L Cattermole AM
J Naylor
Former Directors
C Froggatt(2)
R Thorn(3)
Executive KMP
J King
N Chadwick
A Sutton
A Winstanley
Former Disclosed Executives
M Cripsey(4)
1,000,000
124,788
95,000
66,666
659,996
-
266,000
400,000
200,000
-
200,000
1,000,000
266,000
89,788
95,000
12,345
-
-
24,056
225,400
50,000
50,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
400,000
22,000
90,000
-
363,236
121,000
1,400,000
146,788
185,000
66,666
1,023,232
121,000
-
-
600,000
150,000
26,086
300,000
-
-
35,000
-
54,321
659,996
-
-
-
350,000
150,000
-
200,000
1,000,000
350,000
26,086
500,000
1,000,000
266,000
124,788
95,000
66,666
659,996
-
-
-
400,000
200,000
-
200,000
-
-
(1) Mr Cornell retired as Non-Executive Director on 30 October 2019. His holdings for the end of the FY20 period have not been
reported in the table above.
(2) Ms Froggatt retired as Non-Executive Director on 30 November 2018. Her holdings for the end of the FY19 period have not been
reported in the table above.
(3) Mr Thorn retired as Non-Executive Director on 24 February 2019. His holdings for the end of the period FY19 have not been
reported in the table above.
(4) Mr Cripsey stepped down as Executive KMP on 31 October 2018. His holdings for the end of the FY19 period have not been
reported in the table above.
46
Myer Annual Report 2020
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35
Myer Annual Financial Report 2020
36
47
REMUNERATION REPORT
Continued
F I N A N C I A L S T A T E M E N T S
FINANCIAL STATEMENTS
for the period ended 25 July 2020
for the period ended 25 July 2020
9.
LOANS
There were no loans made to Executive KMP or entities related to them, including their personally related parties, or other transactions
at any time during FY19 or FY20.
10. DEALING IN SECURITIES
Under the Securities Dealing Policy, Directors and Senior Executives are prohibited from entering into hedging arrangements with
respect to the Company’s securities. A copy of the Securities Dealing Policy is available on the Myer Investor Centre website.
Contents
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
A. Group performance
A1 Segment information
A2 Revenue
A3 Expenses
A4 Income tax
A5 Earnings per share
B. Working capital
B1 Trade and other receivables and prepayments
B2 Inventories
B3 Trade and other payables
C. Capital employed
C1 Property, plant and equipment
C2 Intangible assets
C3 Provisions
C4 Deferred income
C5 Leases
D. Net debt
D1 Cash and cash equivalents
D2 Reconciliation of cash flows from operating activities
D3 Borrowings
E. Risk management
E1 Financial risk management
F. Equity
F1 Contributed equity
F2 Accumulated losses and reserves
F3 Dividends
G. Group structure
G1 Subsidiaries
G2 Deed of cross guarantee
G3 Parent entity financial information
H. Other financial information
H1 Contingencies
H2 Commitments
H3 Related party transactions
H4 Share-based payments
H5 Remuneration of auditors
H6 Events occurring after the reporting period
I. Other accounting policies
50
51
52
53
54
55
55
56
57
59
60
60
60
61
62
64
65
66
67
67
68
69
75
76
77
78
79
81
82
82
82
83
84
84
85
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Myer Annual Report 2020
Myer Annual Financial Report 2020
37
Myer Annual Financial Report 2020
38
49
CONSOLIDATED INCOME STATEMENT
for the period ended 25 July 2020
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the period ended 25 July 2020
Total sales
Concession sales
Sale of goods
Sales revenue deferred under customer loyalty program
Revenue from sale of goods
Other operating revenue
Cost of goods sold
Operating gross profit
Other income
Selling expenses
Administration expenses
Restructuring, impairment of assets and other significant items
Earnings before interest and tax
Finance revenue
Finance costs
Net finance costs
Profit/(loss) before income tax
Income tax (expense)/benefit
Profit/(loss) for the period attributable to owners of Myer Holdings Limited
Earnings/(loss) per share attributable to the ordinary equity holders of the Company:
Basic earnings per share
Diluted earnings per share
The above consolidated income statement should be read in conjunction with the accompanying notes.
Notes
A2
A2
A2
A2
A3
A2
A3
A4
A5
A5
2020
52 weeks
$m
2,519.4
(445.2)
2,074.2
(26.3)
2,047.9
111.5
(1,201.2)
958.2
3.1
(635.8)
(247.0)
(221.4)
(142.9)
0.4
(98.6)
(98.2)
(241.1)
68.7
(172.4)
Cents
(21.0)
(21.0)
2019
52 weeks
$m
2,991.8
(612.2)
2,379.6
(34.5)
2,345.1
153.5
(1,336.2)
1,162.4
-
(822.8)
(281.1)
(12.5)
46.0
0.6
(12.1)
(11.5)
34.5
(10.0)
24.5
Cents
3.0
3.0
Profit/(loss) for the period
Other comprehensive income/(loss)
Items that may be reclassified to profit or loss:
Notes
2020
52 weeks
$m
(172.4)
2019
52 weeks
$m
24.5
Cash flow hedges
Exchange differences on translation of foreign operations
Other comprehensive income/(loss) for the period, net of tax
Total comprehensive income/(loss) for the period attributable to owners of Myer Holdings Limited
F2
F2
(7.4)
(0.1)
(7.5)
(179.9)
(1.9)
(0.5)
(2.4)
22.1
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
50
Myer Annual Report 2020
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39
Myer Annual Financial Report 2020
40
51
CONSOLIDATED BALANCE SHEET
as at 25 July 2020
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the period ended 25 July 2020
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables and prepayments
Inventories
Derivative financial instruments
Current tax assets
Total current assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Deferred tax assets
Derivative financial instruments
Other non-current assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Lease liabilities
Provisions
Deferred income
Derivative financial instruments
Current tax liabilities
Other liabilities
Total current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Provisions
Deferred income
Deferred tax liabilities
Derivative financial instruments
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Accumulated losses
Reserves
Total equity
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
Notes
D1
B1
B2
E1
C1
C5
C2
A4
E1
B3
D3
C5
C3
C4
E1
D3
C5
C3
C4
A4
E1
F1
F2
F2
2020
$m
86.5
57.7
256.0
0.3
7.2
407.7
347.0
1,272.6
319.6
115.5
-
1.7
2,056.4
2,464.1
354.2
78.6
167.5
55.0
-
3.5
-
0.2
659.0
-
1,627.2
3.6
-
-
0.2
1,631.0
2,290.0
174.1
738.1
(558.9)
(5.1)
174.1
2019
$m
47.4
31.2
346.9
5.7
-
431.2
383.5
-
467.6
-
0.1
4.2
855.4
1,286.6
372.6
-
-
64.4
8.3
0.1
5.3
0.4
451.1
86.1
-
12.3
80.1
54.9
-
233.4
684.5
602.1
738.8
(138.6)
1.9
602.1
Contributed
equity
$m
Accumulated
losses
$m
Notes
Balance as at 28 July 2018
Adjustment on initial application of AASB 15, net of tax
Restated balance as at 29 July 2018
Net profit/(loss) for the period
Other comprehensive income/(loss) for the period
Total comprehensive income/(loss) for the period
Transactions with owners in their capacity as owners:
Acquisition of treasury shares
Employee share schemes
Balance as at 27 July 2019
Adjustment on initial application of AASB 16, net of tax
Restated balance as at 28 July 2019
Net profit/(loss) for the period
Other comprehensive income/(loss) for the period
Total comprehensive income/(loss) for the period
Transactions with owners in their capacity as owners:
Acquisition of treasury shares
Employee share schemes
Balance as at 25 July 2020
F1
F2
I
F1
F2
739.0
-
739.0
-
-
-
(0.2)
-
(0.2)
738.8
-
738.8
-
-
-
(0.7)
-
(0.7)
738.1
(160.3)
(2.8)
(163.1)
24.5
-
24.5
-
-
-
(138.6)
(247.9)
(386.5)
(172.4)
-
(172.4)
-
-
-
(558.9)
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Reserves
$m
5.3
-
5.3
-
(2.4)
(2.4)
-
(1.0)
(1.0)
1.9
-
1.9
-
(7.5)
(7.5)
-
0.5
0.5
(5.1)
Total
$m
584.0
(2.8)
581.2
24.5
(2.4)
22.1
(0.2)
(1.0)
(1.2)
602.1
(247.9)
354.2
(172.4)
(7.5)
(179.9)
(0.7)
0.5
(0.2)
174.1
52
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41
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42
53
CONSOLIDATED STATEMENT OF CASH FLOWS
for the period ended 25 July 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the period ended 25 July 2020
Cash flows from operating activities
Receipts from customers (inclusive of goods and services tax)
Payments to suppliers and employees (inclusive of goods and services tax)
Other income
Interest paid
Tax paid
Net cash inflow from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intangible assets
Lease incentives and contributions received
Interest received
Net cash outflow from investing activities
Cash flows from financing activities
Repayment of borrowings, net of transaction costs
Payments for principal portion of lease liabilities
Payment for acquisition of treasury shares
Other
Net cash outflow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at end of period
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
2020
52 weeks
$m
2,396.0
(2,098.4)
297.6
0.7
(98.6)
(8.1)
191.6
(31.3)
(13.7)
4.7
0.4
(39.9)
(10.0)
(101.9)
(0.7)
-
(112.6)
39.1
47.4
86.5
2019
52 weeks
$m
2,769.8
(2,631.3)
138.5
-
(9.8)
(13.6)
115.1
(35.7)
(17.0)
7.9
0.6
(44.2)
(64.9)
-
(0.2)
(0.2)
(65.3)
5.6
41.8
47.4
D2
F1
D1
A. GROUP PERFORMANCE
This section provides additional information regarding lines in the financial statements that are most relevant to explaining the performance of the Group
during the period, including the applicable accounting policies applied and significant estimates and judgements made.
A1 SEGMENT INFORMATION
Management has determined the operating segments based on the reports reviewed by the Chief Executive Officer that are used to make strategic
decisions about the allocation of resources.
The Chief Executive Officer considers the business based on total store and product portfolio, and has identified that the Group operates in Australia in the
department store retail segment.
The Group also undertakes activities outside the department store retail business through its subsidiaries: sass & bide and Marcs and David Lawrence.
On the basis that these subsidiaries represent less than 10% of the total Group's operations and have similar economic characteristics to the department
store retail business, they have not been disclosed as separate reporting segments.
Accounting policy
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating
decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief
Executive Officer.
A2 REVENUE
Sales revenue
Total sales
Concession sales
Sale of goods
Sales revenue deferred under customer loyalty program
Revenue from sale of goods
Other operating revenue
Concessions revenue
Other1
Finance revenue
Interest revenue
Total revenue
2020
52 weeks
$m
2019
52 weeks
$m
2,519.4
(445.2)
2,074.2
(26.3)
2,047.9
98.7
12.8
111.5
0.4
2,159.8
2,991.8
(612.2)
2,379.6
(34.5)
2,345.1
136.8
16.7
153.5
0.6
2,499.2
1. Other includes revenue in relation to gift card non-redemption income, forfeited lay-by deposits and financial services income.
Accounting policy
Total sales value presented in the consolidated income statement represents proceeds from sale of goods (both from the Group and concession
operators) and prior to the deferral of revenue under the Myer one customer loyalty program. Concession sales presented in the income statement
represents the sales proceeds of concession operators within Myer stores. Total sales value is disclosed to show the total sales generated by the Group
and provide a basis of comparison with similar department stores.
Revenue from sale of goods, excluding lay-by transactions, is recognised when the performance obligation has been fulfilled, which is principally at the
point of sale after deducting taxes paid, and does not include concession sales. Goods are sold to the end customer with a right of return within a
reasonable period at the Group’s discretion and in accordance with legislative requirements. A refund liability (included in trade and other payables) and a
right to returned goods (included in trade and other receivables) are recognised for the goods expected to be returned, with a corresponding adjustment to
revenue from sale of goods and cost of goods sold. The assumptions and the estimated amount of returns are based on historical evidence and are
reassessed at the end of each reporting period. Revenue from lay-by transactions is recognised as part of revenue from sale of goods at the date upon
which the customer satisfies all payment obligations and control of the goods has transferred to the customer.
Revenue from sale of goods excludes concession sales in Myer stores on the basis that the inventory sold is owned by the concession operator at the time
of sale and not the Group. The Group's share of concession sales is recognised as revenue within other operating revenue at the time the sale is made.
Gift cards are considered a prepayment for goods or services to be delivered in the future, which creates a performance obligation for the Group. The
Group recognises a liability for the amount received in advance for the gift card and recognises revenue when the customer redeems the gift card and the
Group fulfils the performance obligation related to the transaction. The Group recognises revenue on the unredeemed value of gift cards and rewards
cards (under the Myer one loyalty program), referred to as non-redemption income. The Group recognises the expected non-redemption amount as
revenue in proportion to the pattern in which the gift card or reward card is utilised by the customer.
Interest revenue is recognised on a time proportion basis using the effective interest method.
Critical accounting estimates and judgements – customer loyalty program
The Group operates a loyalty program where customers accumulate award points for purchases made which entitle them to discounts on future
purchases. The award points are recognised as a separately identifiable component of the initial sale transaction, by allocating the fair value of the
consideration received between the award points and the other components of the sale such that the award points are recognised at their fair value.
Revenue from the award points is recognised when the points are redeemed. The amount of revenue recognised is based on the number of points
redeemed relative to the total number expected to be redeemed. Award points expire 24 months after the initial sale.
54
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44
55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the period ended 25 July 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the period ended 25 July 2020
2020
52 weeks
$m
2019
52 weeks
$m
Revision of useful lives of software assets
In accordance with the Group’s accounting policies, a periodic asset useful life review was performed during the period and the estimated total useful lives
of certain software assets were revised. The impact of the changes was a decrease in amortisation expense of $6.1 million.
A3 EXPENSES (CONTINUED)
A3 EXPENSES
Profit/(loss) before income tax includes the following specific expenses:
Employee benefits expenses
Defined contribution superannuation expense
Other employee benefits expenses
Government grant income - wage subsidies1
Depreciation, amortisation and write-off expense
Property, plant and equipment
Intangibles
Right-of-use assets2
Finance costs
Interest and finance charges paid/payable for lease liabilities and financial liabilities2
Fair value losses on interest rate swap cash flow hedges, transferred from equity
Rental expense relating to operating leases
Minimum lease payments2
Contingent rentals
Net foreign exchange gains
32.6
403.2
(93.2)
342.6
69.1
30.6
127.1
226.8
98.5
0.1
98.6
-
1.1
1.1
(3.8)
36.6
408.2
-
444.8
66.8
34.7
-
101.5
12.0
0.1
12.1
226.0
2.3
228.3
(6.3)
1. The Group has determined that it is eligible to receive payments under the JobKeeper Payment Scheme (Australia) and Wage Subsidy (New Zealand).
The payments received have been recognised as government grant income because the wage subsidy has been provided with the objective of keeping
employees connected with the Group during the COVID-19 pandemic. During the period, the Group received or was entitled to receive government grant
income totalling $93.2 million, with $41.1 million paid or to be paid to eligible employees whose remuneration was lower than the required income
threshold under the JobKeeper Payment Scheme. These amounts have been included in administration and selling expenses in the consolidated income
statement. As at 25 July 2020, $26.7m is owing to the Group and included in other receivables in the consolidated balance sheet.
2. On adoption of AASB 16 Leases on 28 July 2019, the rental expense relating to operating leases is recognised within depreciation and interest
expense. Refer to note C5 and section I for more information.
Restructuring, impairment of assets and other significant items
The following individually significant items are included within restructuring, impairment of assets and other significant items in the consolidated income
statement:
Restructuring and redundancy costs1
Clearance floor closure and brand exit costs and related asset impairments2
Store exit costs/(reversals) and other asset impairments/(reversals)3
Impairment of assets4
Myer one loyalty program change5
Income tax benefit6
Restructuring, impairment of assets and other significant items, net of tax
2020
52 weeks
$m
2019
52 weeks
$m
11.9
18.5
(0.3)
184.4
6.9
221.4
(62.4)
159.0
7.8
-
4.7
-
-
12.5
(3.8)
8.7
1. The Group has completed several restructuring programs during the period resulting in redundancy and other costs being incurred or committed but not
yet paid. Refer to note C3 for more information.
2. Clearance floor closure and brand exit costs and related asset impairments includes the write-down of inventories to reflect the accelerated liquidation
of inventories and impairment of store assets associated with the closure of the clearance floor concept. Also included in this amount is the write-down of
inventories for the exit of brands from category changes, as part of the Customer First Plan. Refer to note C1 for more information on asset impairments.
3. Store exit costs/(reversals) and other asset impairments/(reversals) includes the final closure costs associated with previously announced store
closures and other store based asset impairments, offset by the reversal of previous asset impairments associated with surplus space identified at the
support office as a sublease has been entered into for this space. In 2019, the Group recognised an onerous lease provision and asset impairment relating
to surplus space identified at the support office, partially offset by the write-back of the fixed lease rental increase provision and deferred income
associated with this space. Refer to note C1 and C3 for more information.
4. The Group has recognised an impairment of the Myer and associated brand names, the sass & bide brand name and an impairment of certain Myer
store's right-of-use assets. Refer to note C2 for more information.
5. The Group has made changes to the Myer one loyalty program including a reduction in the threshold for the eligibility of a Myer one member to receive a
reward card, resulting in a required increase to the Myer one loyalty program liability.
6. The income tax benefit includes a $35.5 million benefit relating to the unwind of the deferred tax liability as a result of the impairment of the Myer and
associated brand names, and the sass & bide brand name. Refer to note C2 for more information.
Accounting policy
The expenses disclosed above are also disclosed in the following sections of the financial statements:
• Employee benefits expenses – refer to note C3
• Depreciation and amortisation expense – refer to note C1 and C2
• Finance costs – refer to note D3 and E1
• Net foreign exchange gains – refer to note F2
Individually Significant Items
Certain items have been separately disclosed and presented as individually significant based on the nature and/or impact these items have on the Group’s
financial performance for the period.
Government Grants
Grants from the government are recognised where there is a reasonable assurance that the grant will be received and the Group will comply with all
attached conditions. Government grants relating to expenses are deferred and recognised in profit or loss over the period necessary to match them with
the expenses that they are intended to compensate.
A4 INCOME TAX
(a) Income tax expense/(benefit)
(i) Income tax expense/(benefit)
Current tax
Deferred tax
Income tax expense/(benefit)1
Deferred income tax expense included in income tax expense/(benefit) comprises:
(Increase)/Decrease in deferred tax assets
Increase/(Decrease) in deferred tax liabilities
(ii) Numerical reconciliation of income tax expense/(benefit) to prima facie tax payable
Profit/(loss) before income tax expense/(benefit)
Tax at the Australian tax rate of 30% (2019: 30%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Non-deductible asset impairments
Sundry items
Adjustments for current tax of prior periods
Income tax expense/(benefit)1
2020
52 weeks
$m
2019
52 weeks
$m
(11.8)
(56.9)
(68.7)
(21.4)
(35.5)
(56.9)
(241.1)
(72.3)
3.9
0.2
(68.2)
(0.5)
(68.7)
14.6
(4.6)
10.0
(5.5)
0.9
(4.6)
34.5
10.4
-
(0.1)
10.3
(0.3)
10.0
1. Income tax includes an income tax benefit of $62.4 million (2019: $3.8 million) attributable to the restructuring, impairment of assets and other
significant items recorded during the period. Refer to note A3 for more information.
56
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46
57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the period ended 25 July 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the period ended 25 July 2020
A5 EARNINGS PER SHARE
(a) Basic earnings per share
Total basic earnings per share attributable to the ordinary equity holders of the Company
(b) Diluted earnings per share
Total diluted earnings per share attributable to the ordinary equity holders of the Company
(c) Reconciliation of earnings used in calculating earnings per share
Earnings used in calculation of basic and diluted EPS attributable to ordinary shareholders
2020
cents
(21.0)
(21.0)
2020
$m
(172.4)
2020
Number
2019
cents
3.0
3.0
2019
$m
24.5
2019
Number
(d) 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 - performance rights and options
Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating
diluted earnings per share
820,092,092 821,026,706
- 5,795,213
820,092,092 826,821,919
(e) Information concerning the classification of securities
Performance rights and options granted to employees under the Myer Long Term Incentive 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. The performance rights and options granted have
not been included in the determination of basic earnings per share. Details relating to performance rights and options are set out in note H4. The
performance rights and options outstanding at period end have not been included in the calculation of diluted earnings per share because the rights and
options outstanding are considered antidilutive for the period ended 25 July 2020.
Potential ordinary shares are treated as dilutive when, and only when, their conversion to ordinary shares decreases earnings per share or increases loss
per share.
Accounting policy
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to owners of the Company by the weighted average number of ordinary shares
outstanding during the financial period, adjusted for bonus elements in ordinary shares issued during the period and excluding treasury shares.
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.
A4 INCOME TAX (CONTINUED)
(b) Deferred tax assets
Deferred tax assets comprise temporary differences attributable to:
Employee benefits
Non-employee provisions and accruals
Amortising deductions
Property, plant, equipment and software
Leases
Trading stock
Tax losses
Total deferred tax assets
Set off of deferred tax liabilities/assets pursuant to set off provisions
Net deferred tax assets
Movement
Carrying amount at beginning of period
Adjustment on initial application of AASB 15
Adjustment on initial application of AASB 16
Tax losses
Credited/(charged) to income statement
Credited/(charged) to other comprehensive income
Carrying amount at end of period
2020
$m
12.3
10.7
0.4
23.6
127.0
5.7
7.6
187.3
(71.8)
115.5
57.9
-
100.6
7.4
21.4
-
187.3
2019
$m
14.5
15.9
1.0
19.4
-
6.4
0.7
57.9
(57.9)
-
51.1
1.2
-
-
5.5
0.1
57.9
Deferred tax assets - tax losses
The deferred tax assets include an amount of $7.4 million which relates to tax losses incurred by the Australian tax consolidated group during the period.
The Group has determined that the deferred tax associated with these carried forward tax losses will be recoverable using the estimated future taxable
income based on approved business plans and budgets. The losses can be carried forward indefinitely and have no expiry date.
(c) Deferred tax liabilities
Deferred tax liabilities comprise temporary differences attributable to:
Brand names
Deferred income
Sundry items
Total deferred tax liabilities
Set off of deferred tax liabilities/assets pursuant to set off provisions
Net deferred tax liabilities
Movement
Carrying amount at beginning of period
Adjustment on initial application of AASB 16
Charged/(credited) to income statement
Charged/(credited) to other comprehensive income
Carrying amount at end of period
2020
$m
71.8
-
-
71.8
(71.8)
-
112.8
(5.5)
(35.5)
-
71.8
2019
$m
107.3
5.0
0.5
112.8
(57.9)
54.9
112.1
-
0.9
(0.2)
112.8
Accounting policy
The income tax expense or credit for the period is the tax payable on the current period’s taxable income based on the national income tax rate adjusted
by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying
amounts in the financial statements, and to unused tax losses.
Deferred tax assets and liabilities are recognised for temporary differences and losses at the tax rates expected to apply when the assets are recovered or
liabilities are settled, based on those tax rates which are enacted or substantively enacted. The relevant tax rates are applied to the cumulative amounts of
deductible and taxable temporary differences to measure the deferred tax asset or liability. An exemption is made for certain temporary differences if they
arise in a transaction, other than a business combination, that at the time of the transaction did not affect accounting profit or taxable profit or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be
available to utilise those temporary differences and losses, which is dependent on the generation of future taxable profits. The assumptions regarding
future taxable profits are subject to risk and uncertainty, hence there is a possibility that changes in circumstances will alter expectations, which may
impact the amount of deferred tax assets recognised.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when 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.
Current and deferred tax balances attributable to amounts recognised in other comprehensive income or directly in equity are also recognised directly in
other comprehensive income or equity.
Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation
authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated
inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other
receivables or payables in the balance sheet.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities, which are recoverable from,
or payable to, the taxation authority, are presented as operating cash flow.
58
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48
59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the period ended 25 July 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the period ended 25 July 2020
B. WORKING CAPITAL
This section provides additional information regarding lines in the financial statements that are most relevant to explaining the assets used to generate the
Group's trading performance during the period and liabilities incurred as a result, including the applicable accounting policies applied and significant
estimates and judgements made.
C. CAPITAL EMPLOYED
This section provides additional information regarding lines in the financial statements that are most relevant to explaining the capital investment made
that allows the Group to generate its trading performance during the period and liabilities incurred as a result, including the applicable accounting policies
applied and significant estimates and judgements made.
B1 TRADE AND OTHER RECEIVABLES AND PREPAYMENTS
C1 PROPERTY, PLANT AND EQUIPMENT
Trade receivables
Loss allowance
Other receivables
Prepayments1
2020
$m
14.7
(2.1)
12.6
35.4
9.7
45.1
57.7
2019
$m
9.5
(1.7)
7.8
11.1
12.3
23.4
31.2
1. On adoption of AASB 16 Leases on 28 July 2019, the value of prepayments associated with operating leases was derecognised. Refer to section I for
more information.
Fair value and risk exposure
Due to the short term nature of these receivables, their carrying amount is assumed to approximate their fair value. The maximum exposure to credit risk
at the end of the reporting period is the carrying amount of each class of receivables mentioned above. Information about the Group's exposure to credit
risk, foreign currency risk and interest rate risk in relation to trade and other receivables and the Group's financial risk management policy is provided in
note E1.
Accounting policy
Trade receivables are non interest-bearing and are recognised initially at fair value, and subsequently at amortised cost using the effective interest rate
method, less expected loss allowance. Cash flows relating to short term receivables are not discounted if the effect of discounting is immaterial.
The Group applies the simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for trade and other
receivables based on all possible default events over the expected life of the receivable. The amount of the impairment loss is recognised as an expense
in the consolidated income statement. Subsequent recoveries of amounts previously written off are credited against expenses in the consolidated income
statement.
B2 INVENTORIES
Retail inventories
2020
$m
256.0
2019
$m
346.9
Provision for write-down of inventories to net realisable value amounted to $10.4 million (2019: $10.5 million). This was recognised as an expense during
the period and included in cost of sales in the consolidated income statement.
Accounting policy
Inventories are valued at the lower of cost and net realisable value. Cost is determined using the weighted average cost method, after deducting any
purchase settlement discount and including logistics expenses incurred in bringing the inventories to their present location and condition.
Volume-related supplier rebates and supplier promotional rebates are recognised as a reduction in the cost of inventory and are recorded as a reduction of
cost of goods sold when the inventory is sold.
Critical accounting estimates and judgements - recoverable amount of inventory
Management has assessed the value of inventory that is likely to be sold below cost using past experience and judgement on the likely sell through rates
of various items of inventory, and booked a provision for this amount. To the extent that these judgements and assumptions prove incorrect, the Group
may be exposed to potential additional inventory write-downs in future periods.
B3 TRADE AND OTHER PAYABLES
Trade payables
Other payables
Trade and other payables are non-interest bearing.
Accounting policy
2020
$m
120.3
233.9
354.2
2019
$m
187.5
185.1
372.6
These amounts represent liabilities for goods and services provided to the Group prior to the end of financial period which are unpaid. The amounts are
unsecured and are usually paid within 30 to 90 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due
within 12 months from the reporting date.
At 28 July 2018
Cost
Accumulated depreciation and impairment
Net book amount
Period ended 27 July 2019
Carrying amount at beginning of period
Additions
Transfer between classes
Assets written off – cost
Assets written off – accumulated
depreciation
Impairment1
Depreciation charge
Carrying amount at end of period
At 27 July 2019
Cost
Accumulated depreciation and impairment
Net book amount
Period ended 25 July 2020
Carrying amount at beginning of period
Additions
Transfer between classes
Assets written off – cost
Assets written off – accumulated
depreciation
Impairment1
Depreciation charge
Carrying amount at end of period
At 25 July 2020
Cost
Accumulated depreciation and impairment
Net book amount
Freehold
land
$m
9.6
-
9.6
9.6
-
-
-
-
-
-
9.6
9.6
-
9.6
9.6
-
-
-
-
-
-
9.6
9.6
-
9.6
Freehold
buildings
$m
19.5
(5.9)
13.6
13.6
-
-
-
-
-
(0.5)
13.1
19.5
(6.4)
13.1
13.1
-
-
-
-
-
(0.5)
12.6
19.5
(6.9)
12.6
Fixtures and
fittings
$m
509.0
(337.3)
171.7
171.7
10.4
6.2
(2.9)
2.2
(3.4)
(36.5)
147.7
522.7
(375.0)
147.7
147.7
7.8
5.2
(13.3)
13.4
1.1
(35.3)
126.6
522.4
(395.8)
126.6
Plant and
equipment
Capital works
in progress
$m
447.0
(232.0)
215.0
215.0
11.7
4.7
(2.5)
1.6
-
(28.2)
202.3
460.9
(258.6)
202.3
202.3
6.6
1.5
(8.6)
5.6
-
(30.4)
177.0
460.4
(283.4)
177.0
$m
14.2
-
14.2
14.2
8.5
(11.9)
-
-
-
-
10.8
10.8
-
10.8
10.8
21.8
(11.4)
-
-
-
-
21.2
21.2
-
21.2
Total
$m
999.3
(575.2)
424.1
424.1
30.6
(1.0)
(5.4)
3.8
(3.4)
(65.2)
383.5
1,023.5
(640.0)
383.5
383.5
36.2
(4.7)
(21.9)
19.0
1.1
(66.2)
347.0
1,033.1
(686.1)
347.0
1. Impairment relates to assets associated with previously announced space handbacks, store assets associated with closure of clearance floor concept,
offset by reversal of asset impairments associated with surplus space identified at support office as a sublease has been entered into for this space.
(2019: assets associated with store space hand backs and support office onerous lease provision). Refer to note A3 for more information.
Accounting policy
Property, plant and equipment is stated at cost less depreciation. Cost includes expenditure that is directly attributable to the acquisition of the items. Cost
may also include transfers from equity of any gains/losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are
charged to profit or loss during the financial period in which they are incurred.
Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate the cost net of their residual values, over their
estimated useful lives, as follows:
• Buildings
• Fixtures and fittings
• Plant and equipment, including leasehold improvements
40 years
3 – 12.5 years
10 – 20 years
(2019: 40 years)
(2019: 3 – 12.5 years)
(2019: 10 – 20 years)
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable
amount (refer to note C2).
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss.
60
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50
61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the period ended 25 July 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the period ended 25 July 2020
C2 INTANGIBLE ASSETS
At 28 July 2018
Cost
Accumulated amortisation and impairment
Net book amount
Period ended 27 July 2019
Carrying amount at beginning of period
Additions
Transfer between classes
Assets written off – cost
Assets written off – accumulated amortisation
Amortisation charge1
Carrying amount at end of period
At 27 July 2019
Cost
Accumulated amortisation and impairment
Net book amount
Period ended 25 July 2020
Carrying amount at beginning of period
Additions
Transfer between classes
Assets written off – cost
Assets written off – accumulated amortisation
Impairment2
Amortisation charge1
Carrying amount at end of period
At 25 July 2020
Cost
Accumulated amortisation and impairment
Net book amount
Goodwill
$m
492.1
(492.1)
-
-
-
-
-
-
-
-
492.1
(492.1)
-
-
-
-
-
-
-
-
-
492.1
(492.1)
-
Brand names
and trademarks
$m
437.3
(65.7)
371.6
371.6
-
-
-
-
-
371.6
437.3
(65.7)
371.6
371.6
-
-
-
-
(131.4)
-
240.2
437.3
(197.1)
240.2
Software
$m
309.8
(196.3)
113.5
113.5
16.2
1.0
-
-
(34.7)
96.0
327.0
(231.0)
96.0
96.0
9.3
4.7
(0.3)
0.1
-
(30.4)
79.4
340.7
(261.3)
79.4
Lease
rights
$m
25.8
(25.8)
-
-
-
-
(7.5)
7.5
-
-
18.3
(18.3)
-
-
-
-
-
-
-
-
-
18.3
(18.3)
-
Total
$m
1,265.0
(779.9)
485.1
485.1
16.2
1.0
(7.5)
7.5
(34.7)
467.6
1,274.7
(807.1)
467.6
467.6
9.3
4.7
(0.3)
0.1
(131.4)
(30.4)
319.6
1,288.4
(968.8)
319.6
1. Amortisation of $30.4 million (2019: $34.7 million) is included in administration and selling expenses in the consolidated income statement.
2. Impairment of Myer and associated brand names and sass & bide brand name. Refer below for more information.
Impairment of non-financial assets
AASB 136 Impairment of Assets requires goodwill and intangible assets with an indefinite useful life to be assessed at the end of each reporting period
where there is any indication that an asset may be impaired. A review of indicators of impairment using both external and internal sources of information
has been undertaken.
The brand names arising on the acquisition of the Myer business amounting to $352.5 million (2019: $352.5 million) cannot be allocated to the Group’s
individual cash generating units (CGU’s) (the Group’s stores), and hence has been allocated to the Myer business as a whole. The remaining brand
names intangible assets with an indefinite useful life have been allocated to the sass & bide business totalling $11.7 million (2019: $11.7 million) and to
the Marcs David Lawrence business totalling $7.4 million (2019: $7.4 million).
As at 25 July 2020, there are indicators of impairment due to the recent changes in market conditions associated with the COVID-19 pandemic, and the
current market capitalisation position. As a result, the recoverable amount of the assets relating to this CGU have been assessed using a value-in-use
discounted cash flow model. This model uses cash flow projections based on financial forecasts approved by management covering a five-year period.
Cash flows beyond five-year periods are extrapolated using a terminal growth rate.
During the period, the carrying value exceeded the recoverable amount and an impairment charge of $119.7 million has been recognised in respect of
Myer and associated brand names. This has been included within restructuring, impairment of assets and other significant items in the consolidated
income statement.
The decrease in the recoverable amount reflects a moderation of future cashflow expectations as the COVID-19 pandemic has impacted near term
financial performance. The COVID-19 pandemic may lead to increased volatility in future years and impact the timing of improvement initiatives, which has
been reflected in management's expectations of future cash flows. The key assumptions used in the model are outlined in the table below.
C2 INTANGIBLE ASSETS (CONTINUED)
Impairment of non-financial assets (continued)
Key assumption
2020
2019
Weighted average discount
rate (pre-tax)
13.0%
14.8%
Terminal growth rate
1.7%
1.7%
Average EBITDA margin
11.8%
5.9%
Approach used to determine value
The pre-tax discount rate is sourced from observable market information and is risk-
adjusted relative to the risks associated with the net pre-tax cash flows being achieved.
On adoption of AASB 16 Leases , the Group has recognised lease liabilities which are
considered debt for the purposes of determining a discount rate, resulting in a decrease in
the pre-tax discount rate compared to prior period.
This is the weighted average growth rate used to extrapolate cash flows beyond the five-
year forecast period.
Average annual EBITDA margin over the five-year forecast period, applied to sales
forecast consistent with external market forecasts. The average annual EBITDA margin is
based on external sources of information, past performance and management’s
expectations. This assumption incorporates anticipated market conditions, sales channel
performance, and management’s expectations of margin improvement and future cost
saving initiatives. On adoption of AASB 16 Leases , the average EBITDA margin has
increased compared to the prior period, with the rental expense relating to operating
leases recognised within depreciation and interest expense.
As the recoverable amount approximates carrying value, any adverse movement in these key assumptions may lead to further impairment. The
recoverable amount is based on operating and cashflow performance improving post the COVID-19 pandemic, however the timing of cashflow benefits
arising from initiatives could be influenced by market conditions. The recoverable amount is highly sensitive to changes in all of the key assumptions. The
impact of these changes in key assumptions is shown in the table below and has been calculated in isolation from other changes:
Key assumption
Sensitivity
Impact of Sensitivity
Weighted average discount rate (pre-tax)
Terminal growth rate
Average EBITDA margin
+0.5%
-0.5%
-0.5%
Further impairment of $63 million
Further impairment of $26 million
Further impairment of $127 million
During the period, a review of the carrying value of the assets for each Myer store was undertaken and if indicators of impairment were identified, the
recoverable amount of these store assets were determined using a value-in-use discounted cash flow model. This model uses cash flow projections based
on financial budgets approved by management covering a five-year period. The key assumptions in the model are consistent with those noted above.
Based on this, the Group identified indicators of impairment in certain Myer stores and an impairment of these store's right-of-use assets has been
recognised totalling $53.0 million. Refer to note C5 for more information.
sass & bide
The sass & bide brand name, which has an indefinite useful life, was $11.7 million (2019: $11.7 million) and cannot be allocated to the individual CGU’s
(the sass & bide stores), hence has been allocated to the sass & bide business as a whole. As a result, the recoverable amount of the assets relating to
this CGU have been assessed using a value-in-use discounted cash flow model. This model uses cash flow projections based on financial forecasts
approved by management covering a five-year period. Cash flows beyond five-year periods are extrapolated using a terminal growth rate.
During the period, the carrying value of the sass & bide CGU exceeded the recoverable amount and an impairment charge of $11.7 million has been
recognised in respect of its brand name. This has been included within restructuring, impairment of assets and other significant items in the consolidated
income statement.
The recoverable amount is highly sensitive to changes in the average EBITDA margin assumption. Given sass & bide’s recoverable amount approximates
its carrying value, any adverse movements in these key assumptions may lead to further impairment.
Accounting policy
(i) Impairment of assets
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently
if events or changes in circumstances indicate they might be impaired. Other non-current assets are reviewed for impairment whenever events or changes
in circumstances indicate the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely
independent of the cash inflows from other assets or group of assets (cash generating units). For store assets, the appropriate cash generating unit is an
individual store. Non-financial assets other than goodwill that have previously suffered an impairment are reviewed for possible reversal of the impairment
at each reporting date.
(ii) Goodwill
Goodwill is measured as described below under business combinations. Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill
is not amortised but it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is
carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the
entity sold.
(iii) Brand names and trademarks
The useful life of brands are assessed on acquisition. The brands which are not considered to have foreseeable brand maturity dates have been assessed
as having indefinite useful lives as there is a view that there is no foreseeable limit to the period over which key brands are expected to generate net cash
inflows for the entity. These brands are therefore not amortised. Instead, these brand names are tested for impairment annually, or more frequently if
events or changes in circumstances indicate that they might be impaired, and are carried at cost less accumulated impairment losses.
62
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51
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52
63
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the period ended 25 July 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the period ended 25 July 2020
C2 INTANGIBLE ASSETS (CONTINUED)
C3 PROVISIONS (CONTINUED)
Accounting policy (continued)
(iv) Computer software
All costs directly incurred in the purchase or development of major computer software or subsequent upgrades and material enhancements, which can be
reliably measured and are not integral to a related asset, are capitalised as intangible assets. Direct costs may include internal payroll and on-costs for
employees directly associated with the project. Costs incurred on computer software maintenance or during the planning phase are expensed as incurred.
Computer software is amortised over the period of time during which the benefits are expected to arise, initially being up to 10 years. The assets' residual
values and useful lives are reviewed annually and adjusted if appropriate, which may result in a useful life outside of this period.
(v) Lease rights
Lease rights represent the amount paid up front to take over store site leases from the existing lessee where such payments are in addition to the ongoing
payment of normal market lease rentals. Lease rights are amortised over the term of the lease plus any renewal options reasonably certain to be utilised at
the time of acquisition of the lease rights.
Critical accounting estimates and judgements - impairment
Goodwill and intangible assets that have an indefinite life are tested annually for impairment, or more frequently if there are indicators of impairment, in
accordance with the accounting policy noted above. The recoverable amount of cash generating units have been determined at a store level. Goodwill and
certain intangibles are tested for impairment at the level of the Group as a whole, using value-in-use calculations.
The uncertainty surrounding the trading environment for the Group has impacted the approach to forecasting and modelling cash flows supporting the
impairment assessment over non-financial assets. The financial modelling considers the impact of COVID-19 at a store level, which reflects an
acceleration of sales mix towards the online channel and away from bricks and mortar stores. Uncertainty remains as to the timing and extent of the
economic recovery generally, the recovery from store closures and the impact of possible future outbreaks of COVID-19 and the ability to operate bricks
and mortar stores during these periods. Any adverse changes could lead to further impairments. The Group continues to closely monitor and respond to
the situation.
C3 PROVISIONS
Current
Employee benefits
Support office onerous lease (i)
Restructuring (ii)
Workers' compensation (iii)
Other
Non-current
Employee benefits
Support office onerous lease (i)
Fixed lease rental increases (iv)
Other
2020
$m
40.8
-
4.1
9.4
0.7
55.0
3.5
-
-
0.1
3.6
2019
$m
45.3
2.2
4.8
10.4
1.7
64.4
3.3
3.5
5.4
0.1
12.3
(i) Support office onerous lease
In 2019, the support office onerous lease provision related to excess office space identified. On adoption of AASB 16 Leases on 28 July 2019, the value of
this provision was derecognised and recognised as an impairment against the respective right-of-use asset. Refer to section I for more information.
(ii) Restructuring
The restructuring provision relates to redundancy costs associated with restructuring of the organisational structure and the costs associated with store
closures and space hand backs committed but not yet paid. Refer to note A3 for more information.
(iii) Workers' compensation
The amount represents a provision for workers' compensation claims in certain states, for which the Group is self insured.
(iv) Fixed lease rental increases
In 2019, this provision reflected the requirement for total rentals over an operating lease term to be expensed over the lease term on a straight-line basis,
with some leases including fixed rental increases during their term. On adoption of AASB 16 Leases on 28 July 2019, the value of this provision was
derecognised. Refer to section I for more information.
Movement in provisions
Movement in each class of provision during the financial period, other than employee benefits, are set out below:
Support office
onerous lease
$m
Restructuring
$m
Workers'
compensation
$m
5.7
(5.7)
-
-
-
-
4.8
-
4.8
2.6
(3.3)
4.1
10.4
-
10.4
3.0
(4.0)
9.4
Fixed lease
rental
increases
$m
5.4
(5.4)
-
-
-
-
Other
$m
1.8
(0.2)
1.6
7.5
(8.3)
0.8
Total
$m
28.1
(11.3)
16.8
13.1
(15.6)
14.3
2020
Carrying amount at beginning of period
Adjustment on initial application of AASB 16
Restated carrying amount at beginning of
period
Additional provisions recognised
Amounts utilised
Carrying amount at end of period
64
Myer Annual Report 2020
Amounts not expected to be settled within the next 12 months
The current provision for employee benefits includes accrued annual leave and long service leave. For long service leave it covers all unconditional
entitlements where employees have completed the required period of service. The entire annual leave amount and current portion of the long service
leave provision is presented as current since the Group does not have an unconditional right to defer settlement for any of these obligations. However,
based on past experience, the Group does not expect all employees to take the full amount of accrued long service leave or require payment within the
next 12 months. The following amounts reflect leave that is not expected to be taken or paid within the next 12 months.
Current long service leave obligations expected to be settled after 12 months
2020
$m
17.8
2019
$m
19.1
Accounting policy
Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of
resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of
obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations
may be small.
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 period. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks
specific to the liability.
The Group is self-insured for costs relating to workers’ compensation and general liability claims in certain states. Provisions are recognised based on
claims reported, and an estimate of claims incurred but not yet reported, prior to balance date. These provisions are determined utilising an actuarially
determined method, which is based on various assumptions including but not limited to future inflation, average claim size and claim administrative
expenses. These assumptions are reviewed annually and any reassessment of these assumptions will affect the workers’ compensation expense.
Employee benefits
(i) Short term obligations
Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months after the end of the period in
which the employees render the related service are recognised in respect of employees' services up to the end of the reporting period and are measured
at the amounts expected to be paid when the liabilities are settled. The liability for annual leave is recognised in the provision for employee benefits. All
other short term employee benefit obligations are presented as payables.
(ii) Other long term employee benefit obligations
The liability for long service leave which is not expected to be settled within 12 months after the end of the period in which the employees render the
related service is recognised in the provision for employee benefits and 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 period 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 market yields at the
end of the reporting period on corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least 12
months after the reporting date, regardless of when the actual settlement is expected to occur.
(iii) Profit sharing and bonus plans
The Group recognises a liability and an expense for bonuses and profit sharing based on a formula that takes into consideration the profit attributable to
the Group’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.
(iv) Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement date, or when an employee accepts voluntary redundancy
in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to either terminating the employment of
current employees according to a detailed formal plan without possibility of withdrawal or providing termination benefits as a result of an offer made to
encourage voluntary redundancy. Benefits falling due more than 12 months after the end of the reporting period are discounted to present value.
C4 DEFERRED INCOME
Current
Lease incentives and contributions
Non-current
Lease incentives and contributions
2020
$m
-
-
-
2019
$m
8.3
80.1
88.4
In 2019, the lease incentive or lease contribution presented as deferred income was released on a straight-line basis over the lease term. On adoption of
AASB 16 Leases on 28 July 2019, the value of deferred income was derecognised and recognised as an adjustment to right-of-use assets. Refer to
section I for more information.
Myer Annual Financial Report 2020
53
Myer Annual Financial Report 2020
54
65
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the period ended 25 July 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the period ended 25 July 2020
C5 LEASES
The Group has lease agreements for properties and various items of equipment used in its operations. The Group has adopted AASB 16 Leases from 28
July 2019 by applying the modified retrospective method with no restatement of comparatives for the 2019 financial period. Refer to Section I for more
information.
The carrying amounts of the right-of-use assets recognised on adoption of AASB 16 Leases and movements during the period are set out below:
At 28 July 2019
Additions, modifications and other reassessments
Depreciation
Impairment1
At 25 July 2020
Property leases
$m
1,449.6
8.6
(132.9)
(53.0)
1,272.3
Equipment
leases
$m
0.7
-
(0.4)
-
0.3
1. An impairment on Myer store right-of-use assets has been recognised during the period. Refer to note A3 and C2 for more information.
The carrying amounts of the lease liabilities recognised on adoption of AASB 16 Leases and movements during the period are set out below:
At 28 July 2019
Additions, modifications and other reassessments
Cash payments
Interest expense
At 25 July 2020
Current
Non-current
Property leases
$m
1,899.3
(3.5)
(190.7)
89.2
1,794.3
167.1
1,627.2
Equipment
leases
$m
0.8
-
(0.5)
0.1
0.4
0.4
-
The following amounts have been recognised in the consolidated income statement during the period:
Depreciation of right-of-use assets1
Interest expense on lease liabilities1
Short-term leases expense2
Variable lease payments3
Total
$m
1,450.3
8.6
(133.3)
(53.0)
1,272.6
Total
$m
1,900.1
(3.5)
(191.2)
89.3
1,794.7
167.5
1,627.2
2020
52 weeks
$m
127.1
87.6
7.3
1.1
223.1
1. The depreciation and interest expense associated with certain leases is recognised in cost of sales in the consolidated income statement.
2. Short-term leases expense are included in selling and administration expenses in the consolidated income statement.
3. Some property leases contain variable payment terms that are linked to sales generated from a store and are recognised in selling expenses in the
consolidated income statement in the period in which the condition that triggers those payments occurs.
COVID-19 related rent concessions
The Group has adopted the practical expedient for rent concessions and elected not to account for changes to lease payments negotiated as a
consequence of COVID-19 as a lease modification. During the period, the total rent concessions recognised as a reduction in selling and administration
expenses in the consolidated income statement was $11.3 million. This has been reflected as an adjustment to the carrying amount of the lease liabilities
in additions, modifications and other reassessments in the movement table above.
Accounting policy
The Group leases various retail stores, distribution centres and offices. Rental contracts are typically made for fixed periods but may have extension
options. Until the period ending 27 July 2019, leases of property, plant and equipment were classified as operating leases. Payments made under
operating leases (net of any incentives received from the lessor) were charged to profit or loss on a straight-line basis over the period of the lease.
The Group recognises a ROU asset and a lease liability at the lease commencement date. The ROU asset is initially measured at cost, which comprises
the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred
and any estimated restoration costs, less any lease incentives received. The ROU asset is subsequently depreciated on a straight-line basis from the
commencement date to the end of the lease term. The ROU asset can be reduced by impairment losses, if any, and adjusted for certain remeasurements
of the lease liability.
The lease liability is measured at the present value of the lease payments that are not paid at the commencement date, discounted using the Group's
incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise of fixed payments and variable payments that are
based on an index or rate.
Some property leases contain variable payment terms that are linked to sales generated from a store. Variable lease payments that depend on sales are
recognised in profit or loss in the period in which the condition that triggers those payments occurs.
Payments associated with short-term leases and leases of low-value assets, such as IT equipment, are recognised on a straight-line basis as an expense
in profit or loss. Short-term leases are leases with a lease term of 12 months or less.
Critical accounting estimate - Determining the lease term
Extension options are included in a number of leases across the Group. In determining the lease term, the Group considers all facts and circumstances
that create an economic incentive to exercise an extension option. Extension options are only included in the lease term if the lease is reasonably certain
to be extended. The assessment of reasonable certainty is only revised if a significant event or a significant change in circumstances occurs, which affects
this assessment, and is within the control of the Group.
D. NET DEBT
This section provides additional information regarding lines in the financial statements that are most relevant to explaining the net debt position and
structure of the Group's borrowings for the period, which are key to financing the Group's activities both now and for the future.
The net debt/(cash) of the Group as at 25 July 2020 and 27 July 2019 is as follows:
Borrowings
Less: cash and cash equivalents
Net debt/(cash) at end of period (excluding lease liabilities)
Plus: lease liabilities
Net debt at end of period
The movement in net debt/(cash) excluding lease liabilities is as follows:
Opening balance
Net increase in cash and cash equivalents
Repayment of borrowings, net of transaction costs
Other non-cash movements
Closing balance
D1 CASH AND CASH EQUIVALENTS
Cash on hand
Cash at bank
2020
$m
78.6
(86.5)
(7.9)
1,794.7
1,786.8
38.7
(39.1)
(10.0)
2.5
(7.9)
2020
$m
1.9
84.6
86.5
2019
$m
86.1
(47.4)
38.7
-
38.7
107.4
(5.7)
(64.9)
1.9
38.7
2019
$m
2.4
45.0
47.4
Accounting policy
For the purpose of presentation in the statement of cash flows, 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.
D2 RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES
Profit/(loss) for the period
Depreciation, amortisation and impairment, including lease incentives and contributions
Interest income
Interest expense
Share-based payments expense
Net exchange differences
Change in operating assets and liabilities
(Increase)/decrease in trade and other receivables and prepayments
Decrease/(increase) in inventories
(Decrease)/increase in deferred tax assets/liabilities
(Increase)/decrease in derivative financial instruments
(Decrease)/increase in trade and other payables
Increase/(decrease) in current tax receivable/payable
Increase/(decrease) in provisions
(Decrease)/increase in other liabilities
Net cash inflow from operating activities
2020
52 weeks
$m
(172.4)
406.0
(0.4)
2.4
0.6
(0.1)
(31.3)
91.0
(64.4)
1.6
(29.2)
(5.3)
(6.7)
(0.2)
191.6
2019
52 weeks
$m
24.5
94.1
(0.6)
1.9
(1.3)
(0.5)
(6.8)
21.3
(5.7)
(2.1)
(5.4)
1.0
(5.2)
(0.1)
115.1
66
Myer Annual Report 2020
Myer Annual Financial Report 2020
55
Myer Annual Financial Report 2020
56
67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the period ended 25 July 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the period ended 25 July 2020
D3 BORROWINGS
(a) Structure of debt
The debt funding of the Group at 25 July 2020 is a syndicated facility, which contains an amortising term loan tranche and a revolving tranche. This facility
was established on 23 November 2018, and drawn down on 26 November 2018. As at 25 July 2020, the following amounts were drawn:
Current
Bank loans
Less: transaction costs
Non-current
Bank loans
Less: transaction costs
Borrowings
2020
$m
80.0
(1.4)
-
-
78.6
2019
$m
-
-
90.0
(3.9)
86.1
The terms and conditions of the Group's revolving cash advance facility is as follows:
Amortising term loan - Tranche A1
Revolving - Tranche B2
Amount
Term
$80 million
$280 million
2.25 years
2.25 years
Expiry date
28 February 2021
28 February 2021
1. This tranche was $100 million when the facility was established and is fully drawn during its term. The limit steps down by $10 million every six months
from 31 March 2019. The scheduled step down on 31 March 2020 did not occur as agreed with the financiers of the syndicated facility. The Group has the
discretion to draw Tranche B to at least the equivalent of the step downs in Tranche A at all times.
2. This tranche is revolving and amounts repaid may be redrawn during their term. The tranche limit step down to $260 million from 23 May 2020 was
amended to reflect a step down to $280 million as agreed with the financiers of the syndicated facility.
(b) Security
The syndicated facility in place at 25 July 2020 is secured. The syndicated facility is subject to various representations, undertakings, events of default and
review events.
(c) Fair value
The fair value of existing borrowings approximates their carrying amount, as the impact of discounting is not significant.
(d) Risk exposures
Details of the Group's exposure to risks arising from borrowings are set out in note E1.
(e) Debt covenants
The Group agreed with the financiers of the syndicated facility that the financial covenants under the terms of the syndicated facility will not be required to
be tested for the quarterly period ended 25 July 2020, due to the significant impact of the COVID-19 pandemic.
Refer to Note H6 for more information on the refinancing of the Group's syndicated facility subsequent to the end of the reporting period.
Accounting policy
Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference
between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the
effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable
that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is
probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the
facility to which it relates.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the
reporting period.
Borrowing costs
Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete and prepare the
asset for its intended use or sale. Other borrowing costs are expensed.
E. RISK MANAGEMENT
This section provides information relating to the Group's exposure to various financial risks, how they could affect the Group's financial position and
performance and how these risks are managed.
E1 FINANCIAL RISK MANAGEMENT
The Group's activities expose it to a variety of financial risks: market risk (including foreign exchange and interest rate 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 uses derivative financial instruments such as forward foreign exchange contracts and interest rate swaps
to hedge certain risk exposures. Derivatives are exclusively used for hedging purposes and are not used as trading or other speculative instruments.
The Group’s financial risk management is predominantly controlled by the centralised Group Treasury function under the Group’s financial risk
management policies approved by the Board of Directors. The Group Treasury function is responsible for the identification and management of financial
risks, with the co-operation of other Group functions. The Board provides written principles for overall risk management, as well as policies covering
specific areas such as foreign exchange risk, interest rate risk, and use of financial instruments and non-derivative financial instruments.
Where all relevant criteria are met, hedge accounting is applied to remove the accounting mismatch between the hedging instrument and the hedged item.
This will effectively result in recognising interest expense at a fixed interest rate for the hedged floating rate borrowings and inventory at a fixed foreign
currency rate for the hedged purchases.
Financial Instruments
The Group holds the following financial instruments, classified under the categories in the table below:
At 25 July 2020
Financial assets
Cash and cash equivalents
Trade and other financial receivables
Derivative financial instruments
Total financial assets
Financial liabilities
Trade and other financial payables1
Borrowings
Lease liabilities
Derivative financial instruments
Total financial liabilities
At 27 July 2019
Financial assets
Cash and cash equivalents
Trade and other financial receivables
Derivative financial instruments
Total financial assets
Financial liabilities
Trade and other financial payables1
Borrowings
Derivative financial instruments
Total financial liabilities
Note
D1
B1
E1
B3
D3
C5
E1
D1
B1
E1
B3
D3
E1
Total
$m
86.5
47.5
0.3
134.3
266.6
78.6
1,794.7
3.7
2,143.6
47.4
18.9
5.8
72.1
282.1
86.1
0.1
368.3
Amortised
cost
$m
Fair value
through OCI
$m
86.5
47.5
-
134.0
266.6
78.6
1,794.7
-
2,139.9
47.4
18.9
-
66.3
282.1
86.1
-
368.2
-
-
0.3
0.3
-
-
-
3.7
3.7
-
-
5.8
5.8
-
-
0.1
0.1
1. Trade and other financial payables comprise trade payables, other financial payables and accruals.
(a) Market risk
(i) Foreign exchange risk
The Group is exposed to foreign exchange risk when there is mismatch between the currencies in which future commercial transactions and assets and
liabilities recognised are denominated, and the respective functional currency of the Group companies.
The focus of the Group’s foreign exchange risk management activities is on the transaction exposures that arise on the sourcing and purchasing of
inventory overseas, with these transactions primarily denominated in United States Dollar (USD) and some denominated in Euro (EUR). This risk is
hedged with the objective of minimising the volatility of the Australian Dollar (AUD) cost of highly probably forecast inventory purchases.
The Group’s treasury risk management policy is to hedge forecast USD and EUR cash flows for inventory purchases, up to 18 months in advance. The
amount of hedging required is dependent on the timing of the settlement of the forecast inventory purchases, with a higher percentage required to be
hedged for inventory purchases with an earlier settlement.
The Group uses forward foreign exchange contracts to hedge its exposure to foreign currency risk. The Group designates the forward rate of foreign
currency forwards to hedge its currency risk. The Group’s policy is for the critical terms of the forward foreign exchange contracts to align with the hedged
item.
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69
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the period ended 25 July 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the period ended 25 July 2020
E1 FINANCIAL RISK MANAGEMENT (CONTINUED)
E1 FINANCIAL RISK MANAGEMENT (CONTINUED)
(a) Market risk (continued)
(i) Foreign exchange risk (continued)
At the end of the reporting period, the Group is holding the following forward foreign exchange contracts:
Carrying amount - Derivative Financial Instruments (Asset)
Carrying amount - Derivative Financial Instruments (Liability)
Notional amount
Maturity date
Change in fair value of the hedging instrument used as the basis for recognising hedge ineffectiveness
Change in value of hedged item used to determine hedge effectiveness
Weighted average hedged rate (AUD/USD)
Weighted average hedged rate (AUD/EUR)
Exposure
At the end of the reporting period, the Group’s exposure to foreign exchange risk, expressed in AUD, was as follows:
2020
$m
0.3
3.7
147.7
2019
$m
5.8
0.1
205.1
Aug 2020 -
Oct 2021
(9.2)
9.2
0.709
0.610
Aug 2019 -
Dec 2020
(1.2)
1.2
0.700
0.618
Cash and cash equivalents
Trade receivables
Trade payables
Forward exchange contracts
USD
$m
3.3
-
9.7
145.3
2020
EURO
$m
2.4
-
-
2.4
Other
$m
1.8
-
-
-
USD
$m
2.3
-
25.5
199.0
2019
EURO
$m
0.9
-
0.4
6.1
Other
$m
2.5
0.1
0.1
-
Sensitivity
As shown in the table above, the Group is primarily exposed to changes in USD/AUD and EUR/AUD exchange rates. The table below shows the impact of
reasonably possible foreign exchange movements in the USD and EUR against the AUD and the effect this would have on the measurement of the
financial instruments denominated in these currencies:
Currency
United States Dollar
United States Dollar
Euro
Euro
Sensitivity assumption
+10%
-10%
+10%
-10%
Impact directly on equity
2020
$m
12.8
(10.5)
0.2
(0.2)
2019
$m
18.7
(15.3)
1.5
(1.2)
(ii) Interest rate risk
The Group is exposed to interest rate risk from floating rate long-term bank borrowings. The Group’s policy is to maintain an appropriate mix between fixed
and floating rate borrowings through the use of interest rate swap contracts. This risk is managed through the forecasting of expected borrowings to
determine the level of exposure to floating rates.
Exposure
At the end of the reporting period, the Group’s exposure to interest rate risk was as follows:
Cash and cash equivalents
Floating rate borrowings
At the end of the reporting period the Group held no interest rate swap contracts due to the low interest rate environment.
2020
$m
86.5
78.6
2019
$m
47.4
86.1
(a) Market risk (continued)
(ii) Interest rate risk (continued)
Sensitivity
Applying a sensitivity of 25 basis points to the Group's period end floating interest rate results in an immaterial impact on post tax profit and equity. This
assumes that the change in interest rates is effective from the beginning of the financial period and the net debt position and fixed/floating mix is constant
over the period. However, interest rates and the debt profile of the Group are unlikely to remain constant and therefore the above sensitivity analysis will
be subject to change.
(iii) Hedge ineffectiveness
Hedge ineffectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that
an economic relationship exists between the hedged item and hedging instrument.
For hedges of foreign currency purchases, the group enters into hedge relationships where the critical terms of the hedging instrument match exactly with
the terms of the hedged item. The Group therefore performs a qualitative assessment of effectiveness. If changes in circumstances affect the terms of the
hedged item such that the critical terms no longer match exactly with the critical terms of the hedging instrument, the Group uses the hypothetical
derivative method to assess effectiveness.
The Group enters into interest rate swaps that have similar critical terms as the hedged item, such as reference rate, payment dates, maturities and
notional amount. The Group does not hedge 100% of its loans, therefore the hedged item is identified as the proportion of the outstanding loans up to the
notional amount of the swaps. As all critical terms matched during the period, the economic relationship was 100% effective.
(b) Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. This
arises primarily from the following assets: cash and cash equivalents, trade and other receivables and derivative financial instruments.
Group Treasury manages credit risk from banks and financial institutions, in accordance with Board approved policy. The policy is to limit the Group’s loss
from default by any one counterparty by dealing only with banks and financial institution counterparties whose long-term credit rating is at or above an 'A'
rating.
Trade and other receivables balances outstanding with third parties are primarily ad-hoc in nature and the credit quality of the third party is assessed by
taking into account its financial position, past experience and other relevant factors.
Sales to retail customers are primarily required to be settled in cash or using major credit cards, mitigating credit risk. There are no significant
concentrations of credit risk, whether through exposure to individual customers, specific industry sectors and/or regions.
Exposure
At the end of the reporting period, the maximum credit risk exposure is the carrying value of the financial assets below:
Cash and cash equivalents
Trade and other financial receivables
Derivative financial instruments - assets
2020
$m
86.5
47.5
0.3
2019
$m
47.4
18.9
5.8
Trade and other receivables
The Group applies the AASB 9 simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance for all trade and
other receivables.
To measure the expected credit losses, trade and other receivables have been grouped based on shared credit risk characteristics and the days past due.
The expected credit loss rates are based on historical observed default rates, adjusted to reflect current and forward looking information on
macroeconomic factors affecting the ability of customers to settle the receivables.
Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery
include, amongst others, the failure of a debtor to engage in a repayment plan with the Group. Refer to note B1 for more information.
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60
71
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the period ended 25 July 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the period ended 25 July 2020
E1 FINANCIAL RISK MANAGEMENT (CONTINUED)
E1 FINANCIAL RISK MANAGEMENT (CONTINUED)
(c) Liquidity risk
The Group adopts a prudent liquidity risk management strategy by seeking to maintain sufficient cash and availability of funding through an adequate
amount of committed credit facilities to meet financial obligations as and when they fall due. The Group’s objective is to maintain flexibility in funding given
the seasonal nature of the retail business.
The Group monitors forecast and actual cash flows and performs sensitivity analysis, to ensure at all times there is an appropriate minimum level of
liquidity available through committed undrawn borrowing facilities and cash and cash equivalents.
Financing arrangements
The Group had access to the following undrawn borrowing facilities at the end of the reporting period:
Floating rate
Expiring within one year (revolving cash advance facility)
Expiring beyond one year (revolving cash advance facility)
2020
$m
280.0
-
280.0
2019
$m
-
300.0
300.0
Refer to note D3 for more information. The refinancing of the Group's syndicated facility was completed subsequent to the end of the reporting period.
Refer to Note H6 for more information.
Maturities of financial liabilities
The tables below analyse the Group's financial liabilities into relevant maturity groupings based on their contractual maturities for:
(a) all non-derivative financial liabilities; and
(b) 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 and therefore may not equal their carrying amount. Balances due within
12 months equal their carrying amounts as the impact of discounting is not significant. For interest rate swaps, the cash flows have been estimated using
forward interest rates applicable at the end of the reporting period.
Contractual maturities of
financial liabilities
Less than
6 months
6 - 12
months
Between
1 and 2
years
Between
2 and 5
years
Over 5
years
Total
contractual
cash flows
$m
$m
$m
$m
$m
$m
2020
Non-derivatives
Trade and other payables
Borrowings
Lease liabilities
Total non-derivatives
Derivatives
Net settled (interest rate
swaps)
Gross settled
- (inflow)
- outflow
Total derivatives
2019
Non-derivatives
Trade and other payables
Borrowings
Total non-derivatives
Derivatives
Net settled (interest rate
swaps)
Gross settled
- (inflow)
- outflow
Total derivatives
266.6
11.1
104.6
382.3
-
(97.1)
99.1
2.0
282.1
11.7
293.8
0.1
(104.7)
100.8
(3.8)
-
70.3
104.6
174.9
-
(43.0)
44.3
1.3
-
11.4
11.4
-
(83.6)
81.8
(1.8)
-
-
200.3
200.3
-
(4.2)
4.3
0.1
-
70.6
70.6
-
(22.6)
22.5
(0.1)
-
-
548.2
548.2
-
-
1,376.8
1,376.8
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
266.6
81.4
2,334.5
2,682.5
-
(144.3)
147.7
3.4
282.1
93.7
375.8
0.1
(210.9)
205.1
(5.7)
The amount disclosed for variable rate instruments is determined by reference to the interest rate at the last re-pricing date.
Carrying
amount
(assets)/
liabilities
$m
266.6
80.0
1,794.7
2,141.3
-
(0.3)
3.7
3.4
282.1
90.0
372.1
-
(5.8)
0.1
(5.7)
(d) Fair value measurements
The Group has the following derivative financial instruments:
Current assets
Forward foreign exchange contracts
Total current derivative financial instrument assets
Non-current assets
Forward foreign exchange contracts
Total non-current derivative financial instrument assets
Current liabilities
Forward foreign exchange contracts
Total current derivative financial instrument liabilities
Non-current liabilities
Forward foreign exchange contracts
Total non-current derivative financial instrument liabilities
2020
$m
2019
$m
0.3
0.3
-
-
3.5
3.5
0.2
0.2
5.7
5.7
0.1
0.1
0.1
0.1
-
-
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
• Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities;
• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liabilities either directly (as prices)
…..or indirectly derived from prices; and
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
All of the Group’s financial instruments were valued using the Level 2 technique, with no transfers between levels during the period.
The fair value of forward foreign exchange contracts is determined using the present value of future cash flows based on the forward exchange rates at the
end of the reporting period. The fair value of interest rate swaps is determined using the present value of the estimated future cash flows based on
observable yield curves.
Accounting policy - Financial assets and liabilities
Classification
The group classifies its financial assets in the following measurement categories:
• those to be measured subsequently at fair value (either through OCI or through profit or loss); and
• those to be measured at amortised cost.
The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity instruments that are not held
for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at
fair value through other comprehensive income (FVOCI).
Initial recognition and measurement
At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss
(FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are
expensed in profit or loss.
(i) Financial assets at amortised cost (debt instruments)
Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at
amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising
on derecognition is recognised directly in profit or loss and presented in other gains/(losses) together with foreign exchange gains and losses. Impairment
losses are recognised in profit or loss. Trade receivables that do not contain a significant financing component or for which the Group has applied the
practical expedient are measured at the transaction price determined under AASB 15.
(ii) Financial assets at fair value through OCI (debt instruments)
Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of
principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or
losses, interest income and foreign exchange gains and losses which are recognised in profit or loss. When the financial asset is derecognised, the
cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other gains/(losses). Interest income
from these financial assets is included in finance income using the effective interest rate method. Foreign exchange gains and losses are presented in
other gains/(losses) and impairment expenses are recognised in profit or loss.
(iii) Financial assets at fair value through profit or loss (debt instruments)
Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that is subsequently
measured at FVPL is recognised in profit or loss and presented net within other gains/(losses) in the period in which it arises.
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62
73
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the period ended 25 July 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the period ended 25 July 2020
E1 FINANCIAL RISK MANAGEMENT (CONTINUED)
Accounting policy - Financial assets and liabilities (continued)
F. EQUITY
This section provides additional information regarding lines in the financial statements that are most relevant to explaining the equity position of the Group
at the end of the period, including the dividends declared and/or paid during the period.
(iv) Financial assets designated at fair value through OCI (equity instruments)
The Group subsequently measures all equity investments at fair value. Where the Group’s management has elected to present fair value gains and losses
on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the
investment. Dividends from such investments continue to be recognised in profit or loss as other income when the Group’s right to receive payments is
established.
F1 CONTRIBUTED EQUITY
Changes in the fair value of financial assets at FVPL are recognised in other gains/(losses) in profit or loss, as applicable. Impairment losses (and reversal
of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.
Ordinary shares - fully paid
Derecognition
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group
has transferred substantially all the risks and rewards of ownership.
Impairment
The Group assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at amortised cost and FVOCI. The
impairment methodology applied depends on whether there has been a significant increase in credit risk.
For trade receivables, the Group applies the simplified approach permitted by AASB 9, which requires expected lifetime losses to be recognised from
initial recognition of the receivables. Refer to note E1(b) for more information.
Accounting policy - Derivatives
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at the
end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging
instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as either:
• hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedges); or
• hedges of the cash flows or recognised assets or liabilities and highly probable forecast transactions (cash flow hedges).
The Group documents at the inception of the hedging transaction the economic relationship between hedging instruments and hedged items, as well as its
risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessments, both at hedge inception
and on an ongoing basis, of whether changes in the cash flows of the hedging instruments are expected to offset changes in the cash flows of hedged
items.
The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12
months. It is classified as a current asset or liability when the remaining maturity of the hedged item is less than 12 months.
(i) Fair value hedge
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the consolidated income statement, together
with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The gain or loss relating to the effective portion of
interest rate swaps hedging fixed rate borrowings is recognised in profit or loss within finance costs, together with changes in the fair value of the hedged
fixed rate borrowings attributable to interest rate risk. The gain or loss relating to the ineffective portion is recognised in profit or loss.
(ii) Cash flow hedge
The Group uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from operational and financing
activities.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in equity in the hedging
reserve. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss.
When forward contracts are used to hedge forecast transactions, the Group designates the full change in fair value of the forward contract (including
forward points) as the hedging instrument. Gains or losses relating to the effective portion of the change in the fair value of the entire forward contracts are
recognised in the cash flow hedge reserve within equity.
Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss. When the forecast transaction
that is hedged results in the recognition of a non-financial asset (for example, inventory or fixed assets) the gains and losses previously deferred in equity
are transferred from equity and included in the initial measurement of the cost of the asset. The deferred amounts are ultimately recognised in profit or loss
as cost of goods sold in the case of inventory, or as depreciation in the case of fixed assets.
The gain or loss relating to the effective portion of the interest rate swaps hedging variable rate borrowings is recognised in profit or loss within finance
costs at the same time as the interest expense on the hedged borrowings.
When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or
loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When a
forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately reclassified to profit or loss.
(iii) Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that does not qualify for hedge
accounting are recognised immediately in profit or loss.
Treasury shares
Opening balance
Shares acquired by Myer Equity Plans Trust on market at $0.52
Shares acquired by Myer Equity Plans Trust on market at $0.61
Shares issued for performance rights granted
Closing balance of treasury shares
Closing balance
2020
Number of
shares
2019
Number of
shares
821,278,815 821,278,815
(331,996) (1,553)
(504,356)
-
(1,044,666) -
173,913
-
(1,376,662) (331,996)
819,902,153 820,946,819
2020
$m
780.0
(41.2)
-
(0.7)
-
(41.9)
738.1
2019
$m
780.0
(41.0)
(0.2)
-
-
(41.2)
738.8
Ordinary shares
The ordinary shares issued are fully paid. Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of 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 upon a poll each share is entitled to one vote.
Treasury shares
Treasury shares are shares in Myer Holdings Limited that are held by the Myer Equity Plans Trust for the purposes of issuing shares under the Equity
Incentive Plans. Refer to note H4 for more information.
Employee share schemes
Information relating to the employee share-based payment schemes, including details of shares issued under the schemes, is set out in note H4.
Capital risk management
The Group’s key objective when managing capital is to minimise its weighted average cost of capital while maintaining appropriate financing facilities. This
provides the opportunity to pursue growth and capital management initiatives. In managing its capital structure, the Group also seeks to safeguard its
ability to continue as a going concern in order to provide appropriate returns to shareholders and benefits for other stakeholders.
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.
Consistent with others in the industry, the Group monitors capital on the basis of various balance sheet ratios including the gearing ratio. This ratio is
calculated as net debt/(cash) divided by total capital. Net debt/(cash) is calculated as total borrowings less cash and cash equivalents. Total capital is
calculated as equity as shown in the balance sheet plus net debt/(cash).
Borrowings (note D3)
Less: cash and cash equivalents (note D1)
Net debt/(cash) at end of period (excluding lease liabilities)
Plus: lease liabilities
Net debt at end of period
Total equity
Total capital (excluding lease liabilities)
Total capital
Gearing ratio (excluding lease liabilities)
Gearing ratio
Accounting policy
Ordinary shares are classified as equity.
2020
$m
78.6
(86.5)
(7.9)
1,794.7
1,786.8
174.1
166.2
1,960.9
-4.8%
91.1%
2019
$m
86.1
(47.4)
38.7
-
38.7
602.1
640.8
-
6.0%
-
Incremental costs directly attributable to the issue of new shares 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 Myer
Holdings 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
Myer Holdings Limited.
If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest
method is used is amortised to profit or loss over the period to maturity using a recalculated effective interest rate.
The gearing ratios at 25 July 2020 and 27 July 2019 were as follows:
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64
75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the period ended 25 July 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the period ended 25 July 2020
F2 ACCUMULATED LOSSES AND RESERVES
F2 ACCUMULATED LOSSES AND RESERVES (CONTINUED)
Accounting policy (continued)
(iii) Group companies
The results and financial position of foreign operations (none of which has 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 that balance sheet;
• income and expenses for each consolidated income statement and statement of comprehensive income are translated at the rates prevailing on the
transaction dates; and
• all resulting exchange differences are recognised in other comprehensive income.
On consolidation, when a foreign operation is sold, the associated exchange difference is reclassified to profit or loss, as part of the gain or loss on sale.
F3 DIVIDENDS
(a) Ordinary shares
Total dividends paid
2020
$m
-
2019
$m
-
(b) Dividends not recognised at the end of the reporting period
The directors have determined that no final dividend will be payable (2019: no final dividend).
(c) Franked dividends
The franked portions of final dividends recommended after 25 July 2020 will be franked out of existing franking credits
or out of franking credits arising from the payment of income tax in the period ending 31 July 2021
Franking credits available for subsequent reporting periods based on a tax rate of 30% (2019: 30%)
50.6
54.7
The above amounts are calculated from the balance of the franking account as at the end of the reporting period, adjusted for franking credits and debits
that will arise from the settlement of liabilities or receivables for income tax and dividends after the end of the reporting period.
The consolidated amounts include franking credits that would be available to the parent entity if distributable profits of subsidiaries were paid as dividends.
Accounting policy
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the
end of the financial period but not distributed at balance date.
(a) Accumulated losses
Movements in Accumulated losses were as follows:
Balance at beginning of period
Adjustment on initial application of AASB 15, net of tax
Adjustment on initial application of AASB 16, net of tax
Restated balance at beginning of period
Profit/(loss) for the period
Balance at end of period
(b) Reserves
Share-based payments (i)
Cash flow hedges (ii)
Other reserve (iii)
Foreign currency translation (iv)
Movements in reserves were as follows:
Share-based payments
Balance at beginning of period
Share-based payments (credit)/expense recognised (note H4)
Income tax (note A4)
Balance at end of period
Cash flow hedges
Balance at beginning of period
Net gain/(loss) on revaluation
Transfer to net profit
Balance at end of period
Foreign currency translation
Balance at beginning of period
Exchange differences on translation of foreign operations during the period
Balance at end of period
2020
$m
(138.6)
-
(247.9)
(386.5)
(172.4)
(558.9)
27.5
(2.7)
(25.6)
(4.3)
(5.1)
27.0
0.6
(0.1)
27.5
4.7
(9.1)
1.7
(2.7)
(4.2)
(0.1)
(4.3)
2019
$m
(160.3)
(2.8)
-
(163.1)
24.5
(138.6)
27.0
4.7
(25.6)
(4.2)
1.9
28.0
(1.3)
0.3
27.0
6.6
(1.2)
(0.7)
4.7
(3.7)
(0.5)
(4.2)
(i) Share-based payments
The share-based payments reserve is used to recognise the fair value of options and rights granted to employees under the employee share plans.
Further information on share-based payments is set out in note H4.
(ii) Cash flow hedges
The hedging reserve is used to record gains or losses on a hedging instrument in a cash flow hedge that are recognised directly in equity, as described in
note E1. Amounts are recognised in the consolidated income statement when the associated hedged transaction affects profit or loss.
(iii) Other reserve
The Group acquired 65% of the sass & bide business in 2011, and the non-controlling shareholders held a put option over the remaining 35%. This
resulted in the Group recognising a financial liability for the put option and a corresponding amount in other reserve. In 2014, upon acquisition of the
remaining 35% of sass & bide, the cash payment of $33.4m was recorded against the financial liability and non-controlling interests balances were
recorded against other reserve.
(iv) Foreign currency translation
Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive income and accumulated in a separate
reserve within equity. The cumulative amount is reclassified to the consolidated income statement when the net investment is disposed of.
Accounting policy
(i) Functional and presentation currency
Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which
the entity operates ('the functional currency'). The consolidated financial statements are presented in Australian dollars, which is Myer Holdings Limited’s
functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign
exchange gains and losses resulting from the settlement of such transactions and from the translation at end of period exchange rates of monetary assets
and liabilities denominated in foreign currencies are generally recognised in profit or loss. They are deferred in equity if they relate to qualifying cash flow
hedges.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was
determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation
differences on non-monetary assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair
value gain or loss and translation differences on non-monetary assets such as equities classified as available-for-sale financial assets are recognised in
other comprehensive income.
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77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the period ended 25 July 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the period ended 25 July 2020
G. GROUP STRUCTURE
G2 DEED OF CROSS GUARANTEE
This section summarises how the Group structure affects the financial position and performance of the Group as a whole.
G1 SUBSIDIARIES
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy
described below:
Name of entity
NB Elizabeth Pty Ltd
NB Russell Pty Ltd
NB Lonsdale Pty Ltd
NB Collins Pty Ltd
Warehouse Solutions Pty Ltd
Myer Group Pty Ltd
Myer Pty Ltd
Myer Group Finance Limited
The Myer Emporium Pty Ltd
ACT Employment Services Pty Ltd
Myer Employee Share Plan Pty Ltd
Myer Travel Pty Ltd
Myer Sourcing Asia Ltd
Shanghai Myer Service Company Ltd
Boogie & Boogie Pty Ltd
sass & bide Pty Ltd
sass & bide Retail Pty Ltd
sass & bide Retail (NZ) Pty Ltd
sass & bide USA inc.
sass & bide inc.
Marcs David Lawrence Pty Ltd
Notes
(1), (3)
(2), (3)
(2), (3)
(1), (3)
(2), (3)
(1), (3)
(1), (3)
(1), (3)
(2), (3)
(2)
(2)
(2)
(1), (3)
(1), (3)
(2), (3)
(2), (3)
(1), (3)
Country of
incorporation
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Hong Kong
China
Australia
Australia
Australia
Australia
USA
USA
Australia
Class of shares
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Equity
holdings(4)
2020
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Equity
holdings(4)
2019
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
(1) Each of these entities have been granted relief from the necessity to prepare financial statements in accordance with ASIC Corporations (Wholly-
owned Companies) Instrument 2016/785.
(2) Each of these entities is classified as small proprietary and therefore relieved from the requirement to prepare and lodge financial reports with ASIC.
(3) Each of these entities is party to a deed of cross guarantee, refer to note G2.
(4) The proportion of ownership interest is equal to the proportion of voting power held.
Accounting policy
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Myer Holdings Limited ('Company' or 'parent entity') as at
25 July 2020 and the results of all subsidiaries for the period then ended.
Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or
has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the
entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control
ceases. The acquisition method of accounting is used to account for business combinations by the Group (refer to note C2).
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also
eliminated unless the transaction provides evidence of impairment of the asset transferred. Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with the policies adopted by the Group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated income statement, statement of comprehensive
income, balance sheet and statement of changes in equity respectively.
Employee Share Trust
The Group has the Myer Equity Plans Trust to administer the Group's employee share scheme. This trust is consolidated, as the substance of the
relationship is that the trust is controlled by the Group. Shares in Myer Holdings Limited held by the trust are disclosed as treasury shares and deducted
from contributed equity.
The following entities are parties to a deed of cross guarantee under which each company guarantees the debts of the others:
• Myer Holdings Limited
• NB Elizabeth Pty Ltd
• NB Russell Pty Ltd
• Myer Group Pty Ltd
• NB Lonsdale Pty Ltd
• NB Collins Pty Ltd
• Warehouse Solutions Pty Ltd
• Myer Pty Ltd
• Myer Group Finance Limited
• The Myer Emporium Pty Ltd
• Boogie & Boogie Pty Ltd
• sass & bide Pty Ltd
• sass & bide Retail Pty Ltd
• sass & bide Retail (NZ) Pty Ltd
• Marcs David Lawrence Pty Ltd
By entering into the deed, the wholly-owned entities within note reference 1 in note G1 have been relieved from the requirements to prepare a financial
report and directors' report under ASIC Corporations (Wholly-owned Companies) Instrument 2016/785.
The above companies represent a 'closed group' for the purposes of the ASIC Legislative Instrument, and as there are no other parties to the deed of
cross guarantee that are controlled by Myer Holdings Limited, they also represent the 'extended closed group'.
(a) Consolidated income statement, statement of comprehensive income and summary of movements in consolidated accumulated losses
Set out below is a consolidated income statement, statement of comprehensive income and a summary of movements in consolidated accumulated
losses for the closed group for the period ended 25 July 2020:
Income statement
Total sales
Concession sales
Sale of goods
Sales revenue deferred under customer loyalty program
Revenue from sale of goods
Other operating revenue
Cost of goods sold
Operating gross profit
Other income
Selling expenses
Administration expenses
Restructuring, impairment of assets and other significant items
Earnings before interest and tax
Finance revenue
Finance costs
Net finance costs
Profit/(loss) before income tax
Income tax (expense)/benefit
Profit/(loss) for the period attributable to Deed of Cross Guarantee group
Statement of comprehensive income
Profit/(loss) for the period
Other comprehensive income/(loss)
Items that may be reclassified to profit or loss:
Cash flow hedges
Exchange differences on translation of foreign operations
Other comprehensive income/(loss) for the period, net of tax
Total comprehensive income/(loss) for the period
Summary of movements in accumulated losses
Balance at beginning of period
Adjustment on initial application of AASB 15, net of tax
Adjustment on initial application of AASB 16, net of tax
Restated balance at beginning of period
Profit/(loss) for the period
Balance at end of period
2020
52 weeks
$m
2019
52 weeks
$m
2,519.4
(445.2)
2,074.2
(26.3)
2,047.9
111.5
(1,204.5)
954.9
3.1
(635.8)
(246.9)
(220.8)
(145.5)
0.4
(98.6)
(98.2)
(243.7)
69.3
(174.4)
2,991.8
(612.2)
2,379.6
(34.5)
2,345.1
153.5
(1,337.7)
1,160.9
-
(822.8)
(281.1)
(12.2)
44.8
0.6
(12.1)
(11.5)
33.3
(8.9)
24.4
(174.4)
24.4
(7.4)
(0.2)
(7.6)
(182.0)
(133.1)
-
(247.9)
(381.0)
(174.4)
(555.4)
(1.9)
-
(1.9)
22.5
(154.7)
(2.8)
-
(157.5)
24.4
(133.1)
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the period ended 25 July 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the period ended 25 July 2020
G2 DEED OF CROSS GUARANTEE (CONTINUED)
G3 PARENT ENTITY FINANCIAL INFORMATION
(b) Consolidated balance sheet
Set out below is a consolidated balance sheet as at 25 July 2020 of the closed group:
(a) Summary financial information
The individual financial statements for the parent entity show the following aggregate amounts:
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables and prepayments
Inventories
Derivative financial instruments
Current tax assets
Total current assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Deferred tax assets
Derivative financial instruments
Other non-current assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Lease liabilities
Provisions
Deferred income
Derivative financial instruments
Current tax liabilities
Other liabilities
Total current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Provisions
Deferred income
Deferred tax liabilities
Derivative financial instruments
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Accumulated losses
Reserves
Total equity
2020
$m
85.6
65.5
254.5
0.3
7.2
413.1
346.7
1,272.0
319.6
115.1
-
3.2
2,056.6
2,469.7
345.8
78.6
167.3
55.0
-
3.5
-
0.2
650.4
-
1,626.7
3.6
8.3
-
0.2
1,638.8
2,289.2
180.5
738.1
(555.4)
(2.2)
180.5
2019
$m
45.6
41.5
346.1
5.7
-
438.9
383.5
-
467.5
-
0.1
5.5
856.6
1,295.5
372.3
-
-
64.3
8.3
0.1
5.3
0.4
450.7
86.1
-
12.3
80.1
55.9
-
234.4
685.1
610.4
738.8
(133.1)
4.7
610.4
Balance sheet
Current assets
Total assets
Current liabilities
Total liabilities
Shareholders' equity
Issued capital
Reserves
Cash flow hedges
Other reserves
Share-based payments
Retained profits reserve - pre 2018
Accumulated losses reserve - 2018
Retained profits reserve - 2019
Accumulated losses reserve - 2020
Profit/(loss) for the period1
Total comprehensive income/(loss) for the period
(b) Guarantees entered into by the parent entity
Carrying amount included in current liabilities
2020
$m
147.0
357.7
14.5
93.1
738.1
-
(2.7)
21.6
78.9
(406.7)
6.0
(170.6)
(170.6)
(170.6)
-
2019
$m
163.0
542.0
20.6
106.7
738.8
(0.1)
(2.7)
21.0
78.9
(406.7)
6.0
-
6.0
6.0
-
1. The loss for the period reflects the impairment recognised on the investments held in subsidiaries within the Group. Refer to note C2 for more
information.
The parent entity is the borrowing entity under the Group's financing facilities. Under these facilities, the parent entity is party to a cross-guarantee with
various other Group entities, who guarantee the repayment of the facilities in the event that the parent entity is in default.
The parent entity is also party to the deed of cross guarantee. The details of the deed of cross guarantee are set out in note G2. At the end of the reporting
period, no liability has been recognised in relation to these guarantees on the basis that the potential exposure is not considered material.
(c) Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 25 July 2020 or 27 July 2019.
(d) Contractual commitments for the acquisition of property, plant or equipment
The parent entity did not have any contractual commitments for the acquisition of property, plant or equipment as at 25 July 2020 or 27 July 2019.
(e) Event subsequent to balance date
Refer to note H6 for additional events which have occurred after the financial reporting date.
Accounting policy
The financial information that is disclosed for the parent entity, Myer Holdings Limited, has been prepared on the same basis as the consolidated financial
statements, except as set out below.
(i) Investments in subsidiaries
Investments in subsidiaries are accounted for at cost in the financial statements of Myer Holdings Limited.
(ii) Tax consolidation legislation
Myer Holdings Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation.
The head entity, Myer Holdings Limited, and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax
amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand-alone taxpayer in its own right.
In addition to its own current and deferred tax amounts, Myer Holdings Limited also recognises the current tax liabilities (or assets) and the deferred tax
assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group.
The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate Myer Holdings Limited for any current
tax payable assumed and are compensated by Myer Holdings Limited for any current tax receivable and deferred tax assets relating to unused tax losses
or unused tax credits that are transferred to Myer Holdings Limited under the tax consolidation legislation. The funding amounts are determined by
reference to the amounts recognised in the wholly-owned entities’ financial statements.
The funding amounts are recognised as current intercompany receivables or payables.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other
entities in the Group.
Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or
distribution from) wholly-owned tax consolidated entities.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the period ended 25 July 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the period ended 25 July 2020
H. OTHER FINANCIAL INFORMATION
This section of the notes includes other financial information that must be disclosed to comply with the accounting standards and other pronouncements,
but that is not immediately related to individual line items in the financial statements. This section also provides information about items that are not
recognised in the financial statements as they do not (yet) satisfy the recognition criteria.
H1 CONTINGENCIES
Contingent liabilities
The Group had contingent liabilities at 25 July 2020 in respect of:
Guarantees
The Group has issued bank guarantees amounting to $38.0 million (2019: $26.9 million), of which $18.0 million (2019: $16.9 million) represents
guarantees supporting workers' compensation self insurance licences in various jurisdictions.
For information about other guarantees given by entities within the Group, including the parent entity, refer to notes G2 and G3.
There can be legal claims and exposures which arise from the ordinary course of business. There is significant uncertainty as to whether a future liability
will arise in respect of these items, or the amount of any such liability.
H2 COMMITMENTS
Capital commitments
Capital expenditure contracted for at the end of the reporting period but not recognised as liabilities is as follows:
Property, plant, equipment and software
Payable:
Within one year
Later than one year but not later than five years
Later than five years
H3 RELATED PARTY TRANSACTIONS
2020
$m
19.8
-
-
19.8
2019
$m
5.8
-
-
5.8
(a) Parent entities
The parent entity within the Group is Myer Holdings Limited, a listed public company, incorporated in Australia.
(b) Subsidiaries
Interests in subsidiaries are set out in note G1.
(c) Key Management Personnel
(i) Compensation
Key Management Personnel compensation for the period ending 25 July 2020 is set out below. The Key Management Personnel of the Group are persons
having the authority for planning, directing and controlling the Company's activities directly or indirectly, including the directors of Myer Holdings Limited.
H4 SHARE-BASED PAYMENTS
(a) Long Term Incentive Plan
The Myer Long Term Incentive Plan (LTIP) is an incentive that is intended to promote alignment between executive and shareholder interests over the
longer term. Under the LTIP, performance rights and options may be offered annually to the Chief Executive Officer and nominated executives. The
employees invited to participate in the plan include executives who are considered to play a leading role in achieving the Company’s long term strategic
and operational objectives.
Each right offered is an entitlement to one fully paid ordinary share in the Company, subject to adjustment for capital actions, on terms and hurdles
determined by the Board, including hurdles linked to Company performance and service. Performance options vest and are automatically exercised on a
net settlement basis.
The LTIP is delivered via a grant of performance rights or options. The number of performance rights or options that vest is not determined until after the
end of the performance period. The performance right or option will therefore not provide any value to the holder between the date the performance right or
option is granted until after the end of the vesting period, if the performance hurdles and restriction period (if applicable) are satisfied. Performance rights
and options do not carry entitlements to ordinary dividends or other shareholder rights until the end of the vesting period.
Set out below is a summary of performance rights and options granted under the plan:
2020
Performance rights
Performance options
Total
Weighted average exercise price
2019
Performance rights
Performance options
Total
Weighted average exercise price
Granted
Expired and
Balance
lapsed
27 July 2019
8,820,637
- - (1,771,396)
34,272,272 30,264,866 - (7,092,190)
43,092,909 30,264,866 - (8,863,586)
$0.39
Exercised
$0.00
$0.33
$0.55
Granted
Balance
28 July 2018
Expired and
lapsed
13,692,652 192,307 (173,913) (4,890,409)
- 35,833,562 - (1,561,290)
13,692,652 36,025,869 (173,913) (6,451,699)
$0.10
Exercised
$0.00
$0.00
$0.42
Balance
25 July 2020
7,049,241
57,444,948
64,494,189
$0.43
Balance
27 July 2019
8,820,637
34,272,272
43,092,909
$0.33
The weighted average remaining contractual life of share rights and options outstanding at the end of the period was 1.6 years (2019: 2.0 years).
Fair value of performance options granted
The assessed fair value at grant date of options granted during the period is noted below. Fair value varies depending on the period to vesting date. The
fair values at grant dates were independently determined using a Monte Carlo simulation pricing model that takes into account the exercise price, the term
of the options, the impact of dilution, the fair value of shares in the Company at grant date and expected volatility of the underlying share, the expected
dividend yield and the risk-free interest rate for the term of the option. The fair values and model inputs for performance options granted during the period
included:
Short term employee benefits
Post employment benefits
Long term benefits
Termination and other payments
Share-based payments
2020
$
3,983,303
111,875
7,519
-
722,776
4,825,473
2019
$
4,861,515
137,362
14,628
1,087,912
869,866
6,971,283
(a) Fair value of performance options granted
(b) Grant date
(c) Expiry date
(d) Share price at grant date
(e) Expected price volatility of the Group’s shares
(f) Expected dividend yield
(g) Risk-free interest rate
Detailed remuneration disclosures are provided in the Remuneration Report on pages 27 to 48.
(ii) Loans
In 2020 and 2019 there were no loans made to directors of Myer Holdings Limited and other Key Management Personnel of the Group, including their
related parties.
(iii) Other transactions
The transactions with Key Management Personnel or entities related to them are as disclosed in the Remuneration Report.
(d) Transactions with other related parties
There were no material transactions with other related parties during the current period.
The expected price volatility is based on the historic volatility (based on the remaining life of the performance options), adjusted for any expected changes
to future volatility due to publicly available information.
Where options are issued to employees of subsidiaries within the Group, the subsidiaries compensate the Company for the amount recognised as an
expense in relation to these options.
(b) Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit expense were as follows:
Rights and options issued under the LTIP
2020
$m
0.6
2019
$m
(1.3)
Share-based payment transaction expenses represent the amount recognised in the period in relation to share-based remuneration plans. Where
expectations of the number of rights or options expected to vest changes, the life to date expense is adjusted, which can result in a negative expense for
the period due to the reversal of amounts recognised in prior periods.
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2020 LTIP
Options (TSR)
$0.15
21-Nov-19
21-Nov-23
$0.51
49%
0%
0.76%
2020 LTIP
Options
(EPS)
$0.15
21-Nov-19
21-Nov-23
$0.51
49%
0%
0.76%
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the period ended 25 July 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the period ended 25 July 2020
H4 SHARE-BASED PAYMENTS (CONTINUED)
Accounting policy
Share-based compensation benefits are provided to employees through the Myer Long Term Incentive Plan (LTIP).
I. OTHER ACCOUNTING POLICIES
This section provides a list of other accounting policies adopted in the preparation of these consolidated financial statements. Specific accounting policies
are disclosed in their respective notes to the financial statements. This section also provides information on the impacts of new accounting standards,
amendments and interpretations, and whether they are effective in the current or future reporting periods.
The fair value of rights and options granted under a plan are recognised as an employee benefit expense with a corresponding increase in equity. The
total amount to be expensed is determined by reference to the fair value of the rights and options granted, which includes any market performance
conditions but excludes the impact of any services and non-market performance vesting conditions and the impact of any non-vesting conditions.
The principal accounting policies adopted in the preparation of these consolidated financial statements ('financial statements' or 'financial report') are set
out below. These policies have been consistently applied to all the periods presented, unless otherwise stated. The financial statements are for the
consolidated entity consisting of Myer Holdings Limited and its subsidiaries ('Group').
Non-market vesting conditions are included in assumptions about the number of rights and options that are expected to vest. The total expense is
recognised over the vesting period, which is the period over which all the specified vesting conditions are to be satisfied. At the end of each period, the
Group revises its estimates of the number of rights or options that are expected to vest based on the non-market vesting conditions. It recognises the
impact of revisions to original estimates, if any, in profit or loss, with a corresponding adjustment to equity.
The LTIP is administered by the Myer Equity Plan Trust (refer to note G1). When rights or options are vested, the trust transfers the appropriate number of
shares to the employee. The proceeds received net of any directly attributable transaction costs are credited directly to equity.
H5 REMUNERATION OF AUDITORS
During the period, the following fees were paid or payable for services provided by the auditor of the Group, and its related practices:
(a) PwC Australia
(i) Assurance services
Audit services
Audit and review of financial statements
Other assurance services
Audit of rent certificates
Total remuneration for audit and other assurance services
(ii) Taxation services
Tax compliance services
(iii) Other services
Consulting services
Total remuneration of PwC Australia
(b) Overseas practices of PwC
(i) Assurance services
Audit services
Audit and review of financial statements
Total remuneration for overseas practices of PwC
2020
$
2019
$
426,000
428,000
38,519
464,519
57,851
485,851
3,000
43,000
10,799
478,318
492,627
1,021,478
69,067
69,067
70,719
70,719
H6 EVENTS OCCURRING AFTER THE REPORTING PERIOD
Dividends on the Company's ordinary shares
The directors have determined that no final dividend will be payable for the period ended 25 July 2020.
Refinancing
On 6 August 2020, the Group entered into a binding term sheet with its financiers in relation to a refinancing of its syndicated facility now totalling $340
million. On 28 August 2020, the amendment and extension of the syndicated facility was completed. The key terms are noted below:
(a) Structure of debt
Amortising term loan - Tranche A1
Revolving - Tranche B2
Total syndicated facility
Amount
$80 million
$260 million
$340 million
Term
2 years
2 years
Expiry date
31 August 2022
31 August 2022
1. Tranche A steps down by $10 million during the period ending 31 July 2021 and a further $20 million during the period ending 30 July 2022.
2. Tranche B steps down by $20 million during the period ending 31 July 2021 and a further $40 million during the period ending 30 July 2022.
(b) Security
The syndicated facility is secured, subject to various representations, undertakings, events of default and review events.
(c) Debt covenants
Under the terms of the syndicated facility, the Group is required to comply with financial covenants and report compliance on a quarterly basis.
Stage 4 restrictions in metropolitan Melbourne
Following the Victorian Government’s announcement of Stage 4 restrictions in metropolitan Melbourne in response to the ongoing COVID-19 pandemic,
11 Myer stores were temporarily closed to customers from 5 August 2020.
(a) Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board (AASB) and the Corporations Act 2001. Myer Holdings Limited is a for-profit entity for the purpose of preparing the
financial statements.
Compliance with IFRS
The consolidated financial statements of Myer Holdings Limited group also comply with International Financial Reporting Standards (IFRS) as issued by
the International Accounting Standards Board (IASB).
Historical cost convention
These financial statements have been prepared under the historical cost convention, except for financial assets and liabilities (including derivative
instruments), which have been measured at fair value through profit or loss.
Critical accounting estimates
The preparation of financial statements in conformity with accounting standards requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in notes A2, B2, C2 and C5.
Working capital position
As at 25 July 2020, the Group’s net current liability position has increased to $251.3 million. This is due to the recognition of current lease liabilities of
$167.5 million from the adoption of AASB 16 Leases and borrowings of $78.6 million being classified as current at the end of the reporting period. The
refinancing of the Group's syndicated facility was completed subsequent to the end of the reporting period. Refer to Note H6 for more information. The
refinancing completed provides the Group with an undrawn borrowing facility of $260 million, which will enable the Group to pay its debts as and when they
become due and payable.
(b) Rounding of amounts
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument 2016/191 and, except where otherwise
stated, amounts in the consolidated financial statements have been rounded off to the nearest hundred thousand dollars.
(c) New accounting standards and interpretations
(i) New and amended standards adopted by the Group
The Group has adopted AASB 16 Leases from 28 July 2019. None of the other new standards or amendments to existing standards that are mandatory
for the first time for the 25 July 2020 reporting period materially affected any of the amounts recognised in the current period or any prior period, and are
not likely to significantly affect future periods.
AASB 16 Leases
AASB 16 Leases has replaced the existing accounting requirements under AASB 117 Leases and related interpretations. AASB 16 has eliminated the
classification between operating and finance leases and has introduced a single lessee accounting model.
The Group has adopted AASB 16 from 28 July 2019 by applying the modified retrospective method with no restatement of comparatives for the 2019
financial period. On adoption of AASB 16, the Group recognised right-of-use (ROU) assets and corresponding lease liabilities in relation to leases which
had previously been classified as operating leases under the principles of AASB 117, with the exception of short-term leases under 12 months and where
the underlying ROU asset was of a low value. The ROU assets were measured as if AASB 16 had always applied. The lease liabilities were measured at
the present value of the remaining lease payments, discounted at the Group's incremental borrowing rate on 28 July 2019. The weighted average
incremental borrowing rate applied to the lease liabilities on 28 July 2019 was 5.0%.
In applying AASB 16 for the first time, the Group has used the following practical expedients permitted by the standard:
• the use of a single discount rate to a portfolio of leases with reasonably similar characteristics; and
• reliance on previous assessments on whether leases are onerous.
The financial covenants under the Group’s syndicated facility are measured excluding the adoption of AASB 16.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the period ended 25 July 2020
D I R E C T O R S ’ D E C L A R A T I O N
DIRECTORS’ DECLARATION
I. OTHER ACCOUNTING POLICIES (CONTINUED)
(c) New accounting standards and interpretations (continued)
The following table summarises the increase/(decrease) on the Group's balance sheet at 28 July 2019 as a result of the transition to AASB 16:
In the directors’ opinion:
Current assets
Trade and other receivables and prepayments
Non-current assets
Right-of-use assets
Deferred tax assets
Other non-current assets
Current liabilities
Lease liabilities
Provisions
Deferred income
Non-current liabilities
Lease liabilities
Provisions
Deferred income
Equity
Accumulated losses
$m
(2.4)
1,450.3
106.1
(1.5)
142.0
(2.2)
(8.3)
1,758.1
(9.1)
(80.1)
(247.9)
a)
b)
c)
the financial statements and notes set out on pages 49 to 86 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
giving a true and fair view of the consolidated entity’s financial position as at 25 July 2020 and of its performance for the
financial period ended on that date; and
ii)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable; and
at the date of this declaration, there are reasonable grounds to believe that the members of the extended closed group will be
able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee
described in note G2.
Note I. (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 the Chief Financial Officer required by section 295A
of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
The following is a reconciliation of the Group’s operating lease commitments, as disclosed in the Annual Report for the period ended 27 July 2019, to the
lease liabilities that were recognised on transition to AASB 16:
Operating lease commitments disclosed as at 27 July 2019
Discounted using the lessee’s incremental borrowing rate at the date of initial application
Less: short-term leases not recognised as a liability
Add: adjustments as a result of a different treatment of extension options
Lease liabilities recognised as at 28 July 2019
Of which are:
Current lease liabilities
Non-current lease liabilities
$m
2,427.9
(641.1)
(0.1)
113.4
1,900.1
142.0
1,758.1
1,900.1
Garry Hounsell
Chairman
Melbourne, 9 September 2020
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giving a true and fair view of the Group's financial position as at 25 July 2020 and of its financial
performance for the period 28 July 2019 to 25 July 2020
giving a true and fair view of the Group's financial position as at 25 July 2020 and of its financial
performance for the period 28 July 2019 to 25 July 2020
complying with Australian Accounting Standards and the Corporations Regulations 2001.
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Independent auditor’s report
Independent auditor’s report
To the members of Myer Holdings Limited
To the members of Myer Holdings Limited
Report on the audit of the financial report
Report on the audit of the financial report
Our opinion
Our opinion
In our opinion:
In our opinion:
The accompanying financial report of Myer Holdings Limited (the Company) and its controlled
entities (together the Group) is in accordance with the Corporations Act 2001, including:
The accompanying financial report of Myer Holdings Limited (the Company) and its controlled
entities (together the Group) is in accordance with the Corporations Act 2001, including:
(a)
(a)
(b)
(b)
What we have audited
The Group financial report comprises:
What we have audited
The Group financial report comprises:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Basis for opinion
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
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
report section of our report.
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Independence
Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical
We are independent of the Group in accordance with the auditor independence requirements of the
Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence
Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical
Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also
Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence
fulfilled our other ethical responsibilities in accordance with the Code.
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.
the consolidated balance sheet as at 25 July 2020
the consolidated balance sheet as at 25 July 2020
the consolidated income statement for the period 28 July 2019 to 25 July 2020
the consolidated income statement for the period 28 July 2019 to 25 July 2020
the consolidated statement of comprehensive income for the period 28 July 2019 to 25 July
2020
the consolidated statement of comprehensive income for the period 28 July 2019 to 25 July
2020
the consolidated statement of changes in equity for the period 28 July 2019 to 25 July 2020
the consolidated statement of changes in equity for the period 28 July 2019 to 25 July 2020
the consolidated statement of cash flows for the period 28 July 2019 to 25 July 2020
the consolidated statement of cash flows for the period 28 July 2019 to 25 July 2020
the notes to the consolidated financial statements, which include a summary of significant
accounting policies
the notes to the consolidated financial statements, which include a summary of significant
accounting policies
the directors’ declaration.
the directors’ declaration.
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
Materiality
•
For the purpose of our audit we used overall Group materiality of $1.6 million, which represents
approximately 5% of the Group's three year average profit or loss before tax adjusted for individually
significant items, separately disclosed as restructuring, impairment of assets and other significant items.
• We applied this threshold, together with qualitative considerations, to determine the scope of our audit and
the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the
financial report as a whole.
• We chose weighted average adjusted Group profit or loss before tax and individually significant items
because, in our view, it is the benchmark against which the performance of the Group is most commonly
measured. Due to fluctuations in profit or loss from year to year, we chose a three year average. We adjusted
for individually significant items as they are unusual or infrequently occurring items impacting profit and
loss.
• We utilised a 5% threshold based on our professional judgement, noting it is within the range of commonly
acceptable thresholds.
Audit Scope
• Our audit focused on where the Group made subjective judgements; for example, significant accounting
estimates involving assumptions and inherently uncertain future events.
• The Group is principally involved in retailing through department stores across Australia and online. The
accounting processes are structured around the Group's finance function at its Melbourne support office.
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
PricewaterhouseCoopers, ABN 52 780 433 757
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
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Liability limited by a scheme approved under Professional Standards Legislation.
77
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89
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context. We communicated the key audit matters to the
Audit, Finance and Risk Committee.
Key audit matter
How our audit addressed the key audit matter
Impairment of non-financial assets
(refer note C2)
The Group’s non-financial assets include, amongst
others, intangible assets with indefinite lives,
representing brands and trademarks, property, plant
and equipment, software and right-of-use assets.
The Group has determined that it has multiple CGUs
for the purpose of impairment testing, including:
•
•
•
individual stores
sass & bide and Marcs David Lawrence
the consolidated Myer Group.
Where the Group determined a CGU had indicators of
impairment, or where that CGU holds intangible assets
with indefinite useful lives, it was tested for impairment
at 25 July 2020. The Group determined the recoverable
amount using value-in-use discounted cash flow
models (the models).
The carrying value of the Myer Group CGU exceeded
the recoverable amount, resulting in an impairment
charge of $184.4 million. The impairment was allocated
to the Group’s brand names and trademarks ($131.4
million) and right-of-use assets ($53.0 million).
Significant judgement is required by the Group to
estimate the key assumptions used in the models to
determine the recoverable amount of non-financial
assets and the amount of any resulting impairment (if
applicable). The key assumptions applied by the Group
include:
•
terminal growth rate
• EBITDA margin throughout the forecast
To assess the Group’s value-in-use impairment models
we performed the following procedures, amongst
others:
• assessed whether the allocation of the Group’s
assets into CGUs was consistent with our
knowledge of the Group’s operations and internal
Group reporting
• developed an understanding of the key relevant
internal controls over the impairment assessment
process
•
•
•
•
•
•
•
•
performed testing over the mathematical accuracy
of the models on a sample basis
compared the Group’s forecast cash flows to Board
approved budgets, externally available economic
data and historical actual results
compared the Group’s terminal growth rates to
external benchmark data
assessed sensitivity to change of key assumptions
used in the models
evaluated the extent of the impairment charge
recognised with reference to key assumptions
including forecast average EBITDA margins,
discount rates and terminal growth rates
considered the allocation of the impairment to the
Group’s assets by reference to the relative values of
assets
assessed the Group’s historical ability to forecast
cash flows by comparing budgets to reported actual
results for the past three years
together with PwC valuation experts, evaluated
whether discount rates used in the models
Key audit matter
How our audit addressed the key audit matter
appropriately reflected the risks of the Group by
considering relevant industry and market factors
We considered the disclosures made in note C2,
including those regarding the key assumptions and
sensitivities to changes in such assumptions, in light of
the requirements of Australian Accounting Standards.
period
• weighted average discount rate adopted in the
models.
The COVID-19 pandemic has impacted the Group’s
financial performance significantly and has meant
assumptions regarding the economic outlook and
impacts on the Group are uncertain, increasing the
degree of judgement required in determining the
recoverable amount of non-financial assets.
We considered this a key audit matter because of the
magnitude of non-financial assets, the overall
impairment indicators applicable to the Group and the
significant estimation uncertainty in the Group’s future
trading cash flows.
Provisions and disclosures relating to
strategic decisions
(Refer to note A3 and C3)
Our procedures over the Group’s provisions and
disclosures relating to strategic provisions included,
but were not limited to:
•
•
•
During the period ended 25 July 2020 the Group’s
strategic decisions included redundancies and
restructuring at the Group’s support office and across
the store network, the exit of clearance floors and
certain brands and changes to the Myer one loyalty
program.
These decisions resulted in costs of $37.0 million in the
period, recorded within restructuring, impairment of
assets and other significant items in accordance with
Australian Accounting Standards. Restructuring
activity incomplete at period end required the
recognition of provisions associated with strategic
decisions of $4.1 million.
We considered this a key audit matter because of the
judgements and assumptions applied by the Group in
estimating the level of provisioning required to be
recognised at 25 July 2020.
considering, with reference to Australian
Accounting Standards, the judgements and
assumptions applied by the Group to determine the
recognition of provisions based on the status of
committed and Board approved strategic action
plans
comparing the outcome of the exit of clearance
floors and accelerated liquidation of inventories to
provisions recognised
comparing the Group’s judgements and
assumptions used to calculate the provisions
associated with strategic decisions to:
-
-
-
-
Board minutes
landlord agreements
historic data, including prior store closures
and restructuring experience
other supporting audit evidence.
We assessed whether there were other provisions which
met the Group’s recognition criteria, and if they had
been recognised at 25 July 2020, by making inquiries
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Key audit matter
How our audit addressed the key audit matter
Key audit matter
How our audit addressed the key audit matter
of directors and key management personnel
responsible for strategic decisions and by reading
minutes of Board meetings for the full financial period.
We considered the disclosures made in note A3 and C3,
in light of the requirements of Australian Accounting
Standards.
To assess the Group’s judgements and assumptions
applied in calculating the value of inventory provisions
we performed the following procedures, amongst
others:
•
•
•
•
considered the design and effective operation of a
sample of relevant key inventory controls
attended inventory counts at two distribution
centres and three retail stores and inspected the
results of a sample of other inventory counts
performed in the period
assessed the Group’s inventory provisioning policy
by considering the levels of aged inventory and the
Group’s inventory clearance strategy
considered the historical accuracy of the Group’s
inventory provisioning by comparing the prior
period inventory provision to inventory sold below
cost or written off in the current period.
We considered the disclosures made in note B2, in light
of the requirements of Australian Accounting
Standards.
Inventory valuation and provisions
(Refer to note B2)
The Group held inventory of $256.0 million at 25 July
2020. As described in note B2 to the financial
statements, inventories are valued at the lower of cost
and net realisable value.
The Group recognises a provision where it expects the
net realisable value of inventory to fall below its cost
price. This will occur where inventory becomes aged,
damaged or obsolete and will be sold below its cost
price in order to clear. Inventory provisioning is also
required where inventory no longer exists due to theft
and processing errors.
We considered this a key audit matter because:
•
•
the Group applies judgements and
assumptions in forecasting future selling
prices and inventory sell through rates to
estimate the value of inventory likely to sell
below cost in the future
the COVID-19 pandemic has meant
assumptions regarding forecast selling prices
and inventory sell through rates are uncertain,
increasing the degree of judgement required
in determining the value of inventory likely to
sell below cost.
Lease accounting
(Refer to notes C5 and I)
Our procedures over the Group’s AASB 16 Leases
related balances included, but were not limited to:
The Group adopted AASB 16 Leases as of 28 July 2019.
The adoption of the standard has had a significant
impact on the presentation of the Group’s financial
report, as disclosed in notes C5 and I.
•
developing an understanding of and
evaluating a sample of relevant internal
controls relating to identifying lease contracts
and maintaining lease data
•
the period ended 25 July 2020 being the first
year of reporting under AASB 16 and the
Group has significant lease arrangements
• magnitude of lease liabilities and right-of-use
assets recorded on the Group’s consolidated
balance sheet
•
•
significant judgements applied by the group
including incremental borrowing rates,
exercise of extension options and lease terms
complexity of landlord negotiations and
agreements regarding COVID-19 related rent
concessions.
policies were in accordance with the
requirements of AASB 16
evaluating the appropriateness of the Group’s
incremental borrowing rates by comparing to
the Group’s existing facilities and external
market evidence
evaluating the judgements applied by the
group in determining the probability of
exercising extension options
for a sample of lease contracts, we:
•
•
•
o
o
compared lease data in the Group’s
lease management system to the
underlying lease agreement and
subsequent variations
evaluated the appropriateness of the
lease term applied and the Group’s
assumptions relating to the exercise
of option periods
o
recalculated the right-of-use asset
and lease liability.
Our procedures over the Group’s COVID-19 related
rent concessions included:
•
•
developing an understanding of the status of
negotiations with landlords regarding rent
waivers and agreements reached
for a sample of rent concessions allowed,
inspecting correspondence between the Group
and its landlords supporting the value of rent
concessions recognised.
We considered the disclosures made in notes C5 and I,
in light of the requirements of Australian Accounting
Standards.
Refinancing
(Refer to notes D3 and H6)
The Group has external borrowings of $78.6 million as
at 25 July 2020. The Group’s syndicated facility was
amended and extended post balance sheet date.
We obtained confirmations directly from the Group’s
banks to confirm the borrowings’ balance, tenure and
conditions at 25 July 2020.
We considered this to be a key audit matter due to the:
•
assessing whether the Group’s new accounting
Given the financial significance of the borrowings
We read the signed agreements between the Group and
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Key audit matter
How our audit addressed the key audit matter
Auditor’s responsibilities for the audit of the financial report
balance, refinancing of facilities subsequent to year
end, the cyclical financing demands of the business and
the importance of capital in supporting the Group’s
strategy, accounting for the Group’s borrowings was
considered a key audit matter.
its lenders to develop an understanding of the terms
associated with the new facilities and the amount of
facility available for drawdown.
We evaluated whether the debt was classified in
accordance with Australian Accounting Standards and
we also evaluated the adequacy of the disclosures made
in notes D3 and H6.
Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report for the period 28 July 2019 to 25 July 2020, but does not
include the financial report and our auditor’s report thereon. Prior to the date of this auditor's report,
the other information we obtained included the directors' report. We expect the remaining other
information to be made available to us after the date of this auditor's 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 the financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of
our auditor's report.
Report on the remuneration report
Our opinion on the remuneration report
Our opinion on the financial report does not cover the other information and we do not and will not
express an opinion or any form of assurance conclusion thereon.
We have audited the remuneration report included in pages 27 to 48 of the directors’ report for the
period 28 July 2019 to 25 July 2020.
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 on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
When we read the other information not yet received, if we conclude that there is a material
misstatement therein, we are required to communicate the matter to the directors and use our
professional judgement to determine the appropriate action to take.
In our opinion, the remuneration report of Myer Holdings Limited for the period 28 July 2019 to 25
July 2020 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.
Responsibilities of the directors for the financial report
PricewaterhouseCoopers
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 ability of the Group to
continue as a going concern, disclosing, as applicable, matters related 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.
Jason Perry
Partner
Melbourne
9 September 2020
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95
S H A R E H O L D E R
I N F O R M A T I O N
S H A R E H O L D E R I N FO R M AT I O N
Continued
As at 11 September 2020.
Substantial shareholders
Myer has one class of shares on issue (being ordinary shares). All the Company’s shares are listed on the Australian Securities Exchange.
As at 11 September 2020, there are five substantial shareholders that Myer is aware of:
Premier Investments
Credit Suisse Holdings (Australia) Limited
Wilson Asset Management
Dimensional Fund Advisors
Mitsubishi UFJ Financial Group Inc
Total
Date of last notice
in last notice
Number of securities
29 March 2017
17 June 2020
27 May 2019
2 December 2016
26 June 2020
80,450,664
64,520,799
63,748,538
57,539,611
41,140,917
%
10.77
7.86
7.76
7.01
5.01
38.41
The above table sets out the number and percentage of securities held by substantial shareholders in Myer as disclosed in their last
substantial shareholder’s notice. Note that those shareholders may have acquired or disposed of securities in Myer since the date of
that notice. A substantial shareholder is only required to disclose acquisitions or disposals where there has been a movement of at
least 1% in their shareholding.
VOTING RIGHTS
Shareholders may vote at a meeting of shareholders in person, directly or by proxy, attorney or representative, depending on
whether the shareholder is an individual or a company. Subject to any rights or restrictions attaching to shares, on a show of hands
each shareholder present in person or by proxy, attorney or representative has one vote and, on a poll, has one vote for each fully
paid share held.
Presently, Myer has only one class of fully paid ordinary shares and these do not have any voting restrictions. If shares are not fully
paid, on a poll the number of votes attaching to the shares is pro-rated accordingly. Options and performance rights do not carry
any voting rights.
PERFORMANCE OPTIONS AND RIGHTS
Myer has unlisted performance options and rights on issue. As at 11 September 2020, there were 26 holders of performance options
and rights.
Issued Capital
Number of Shareholders
Minimum Parcel Price
Holders with less than a marketable parcel
Distribution of shareholders and shareholdings
Range
100,001 and over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
Unmarketable parcels
Minimum $500.00 parcel at $0.215 per unit
Twenty largest shareholders
Rank Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
METALGROVE PTY LTD
CITICORP NOMINEES PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
UBS NOMINEES PTY LTD
NATIONAL NOMINEES LIMITED
GLENN HARGRAVES INVESTMENTS PTY LTD
BNP PARIBAS NOMS PTY LTD
BNP PARIBAS NOMS PTY LTD
BNP PARIBAS NOMINEES PTY LTD
HAPPY SABA GROUP NO 1 PTY LTD
ACE PROPERTY HOLDINGS PTY LTD
SPROUT GROUP PTY LTD
MUTUAL TRUST PTY LTD
MR PAT O'NEILL
MR TODD EWAN PENFOLD
RIADIS HOLDINGS PTY LTD
BNP PARIBAS NOMINEES PTY LTD
DR PETER MALCOLM HEYWORTH
20
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
Total
Balance of register
Grand total
Number
821,278,815
46,522
$0.215
30,326
%
1.40
11.53
7.79
32.37
46.91
100
Units
577,452,785
169,713,055
28,868,922
34,736,952
10,507,101
821,278,815
%
70.31
20.66
3.52
4.23
1.28
100
Holders
653
5,364
3,622
15,061
21,822
46,522
Minimum
Parcel Size
Holders
Units
2,326
30,326
22,814,254
Units
% of Units
134,499,461
88,450,664
60,121,957
40,671,723
18,600,008
11,509,069
7,200,000
5,198,348
5,122,085
4,735,574
4,300,000
4,200,000
4,000,000
3,671,927
3,478,649
3,148,000
3,000,000
2,644,074
2,603,300
2,073,860
16.38
10.77
7.32
4.95
2.26
1.40
0.88
0.63
0.62
0.58
0.52
0.51
0.49
0.45
0.42
0.38
0.37
0.32
0.32
0.25
409,228,699
412,050,116
821,278,815
49.83
50.17
100.00
96
Myer Annual Report 2020
97
C O R P O R A T E
D I R E C T O R Y
REGISTERED OFFICE
MYER CUSTOMER SERVICE CENTRE
Myer Holdings Limited
Level 7
800 Collins Street
Docklands VIC 3008
Phone: 03 8667 6800
MYER POSTAL ADDRESS
Myer Holdings Limited
PO Box 869J
Melbourne VIC 3001
COMPANY SECRETARY
Paul Morris
General Counsel and Company Secretary
SHAREHOLDER ENQUIRIES:
SHARE REGISTRY
Link Market Services Limited
Postal Address
Locked Bag A14
Sydney South NSW 1235
MYER SHAREHOLDER
INFORMATION LINE
Australian Telephone: 1300 820 260
International Telephone: +61 1300 820 260
Facsimile: 02 9287 0303
www.linkmarketservices.com.au
INVESTOR RELATIONS
AND MEDIA ENQURIES
Email: myer.corporate.affairs@myer.com.au
SUSTAINABILITY
Email: sustainability@myer.com.au
PO Box 869J
Melbourne VIC 3001
Phone: 13 69 37 (within Australia)
AUDITOR
PricewaterhouseCoopers
2 Riverside Quay
Southbank VIC 3006
SECURITIES EXCHANGE LISTING
Myer Holdings Limited (MYR) shares are listed
on the Australian Securities Exchange (ASX)
WEBSITES
myer.com.au
myerone.com.au
myer.com.au/investor
FIND US HERE
Facebook.com/myer
Instagram.com/myer
Twitter.com/myer
Youtube.com/myer
98
Myer Annual Report 2020
Designed and produced at www.twelvecreative.com.au
Year in Review
Directors’ Report
Remuneration Report
Financial Statements
99
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