Myer Holdings Ltd
Annual Report 2022

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Annual Report 2022 Contents Annual General Meeting The thirteenth Annual General Meeting of Myer Holdings Limited ABN 14 119 085 602 will be held on Thursday 10 November 2022 at 2:00pm (Sydney time). The AGM will be a hybrid meeting, held in person at the Wesley Conference Centre – 220 Pitt Street, Sydney NSW 2000, and on an online platform. Shareholders attending in person will be able to vote and ask questions during the AGM. Shareholders attending online will be able to access a webcast of the AGM, vote and submit written questions. A telephone facility will also be available to shareholders to ask a question verbally during the AGM. The online platform can be accessed at: The 2022 Myer Annual Report reflects Myer’s financial and sustainability performance for the period 1 August 2021 to 30 July 2022. 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. Acknowledgement of Country In the spirit of reconciliation, Myer acknowledges the Traditional Custodians of country throughout Australia and their connections to land, sea, and community. We pay our respects to their Elders past and present and extend that respect to all Aboriginals and Torres Strait Islander people. About Myer 1 Myer is Australia’s favourite and most trusted department store, 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. Myer operates 58 department stores across Australia, as well as our online business: myer.com.au, and with our team members, we are committed to being Australia’s favourite department store. 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. In addition to our Australian operations, we have a sourcing office located in Hong Kong. Myer’s online business is a significant asset that continues to deliver strong growth, now representing 24.2% of total sales. . About MYER one Our loyalty program, MYER one, has more than six million digitally contactable members. Members earn Credits on purchases at Myer that convert into Reward Cards on a quarterly basis. For every 1000 points earnt, Members receive a $10 Reward Card. Further details about the MYER one program are available at: myerone.com.au Myer in the community Myer has a long-standing history of supporting local communities and is proud to partner with more than 60 charities across Australia annually. Myer’s founder Sidney Myer was a well-known philanthropist, and it is in his tradition that the Myer Community Fund remains committed and focused on charitable work. 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 fund is committed to raising funds through charitable activities involving Myer team members, customers, and suppliers. 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. In FY22, the Myer Community Fund was proud to raise over $1.3 million, which will go towards supporting children and families in Australia, including those experiencing family violence. Funds were directed to our charity partners including The Salvation Army, Polished Man and local charity partners nationally. Myer Annual Report 2022Year in ReviewDirectors’ Report Remuneration ReportFinancial StatementsYear in Review 2 Chairman and CEO’s Letter Dear Shareholder, • NPAT(1) of $60.2 million, an increase of Taking possession of our National The FY22 results show we have emerged from the pandemic a better, $30.7 million or 103.8% if JobKeeper support excluded(5) from prior year stronger and more agile business that • Statutory NPAT $49.0 million, is well equipped to meet the demands 5.7% higher than prior year of today’s consumer. • Net cash at the end of the period Pleasingly, despite disruptions from was $186 million, up $74 million lockdowns and Omicron, the business on prior year showed strong improvement in sales, profitability, cash generation and other key measures, as well as delivering our most profitable second half in almost a decade, demonstrating the continuing momentum being delivered under our Customer First Plan. The unique strength of our multi- channel strategy, with a return to growth in our Store channel supported by one of Australia’s largest and fastest growing online retail businesses, underpinned by our leading loyalty program, provides a solid foundation for future growth. FY22 Results Our financial highlights include: • Final fully franked dividend of 2.5 cents per share declared, bringing the total FY22 dividend to 4.0 cents per share. Momentum of the Customer First Plan Our FY22 results demonstrate the continuing momentum of the Customer First Plan. We are continuing to deliver against our Plan to ensure we remain Australia’s favourite and most trusted department store through leading service, improving our range and offer, and by enhancing and scaling our online business and leading MYER one loyalty program. It also ensures we are operating in the most productive, efficient, and • Myer’s best second half net profit effective way across the business, with after tax(1) (NPAT) since 2H13 a focus on profitable sales, disciplined • Total sales(2) growth of 12.5% to $2,989.8 million; comparable store sales(3) growth of 15.0% • Group online(4) sales growth of 34.0% to $722.8 million, representing 24.2% of total sales management of costs, cash and inventory, and deleveraging of the balance sheet. Some of the key deliverables over the past year include: Distribution Centre (NDC) in Victoria to drive the growth of our online business; the NDC is expected to be operational in the second half of FY23. Continuing to build a high-growth, large-scale online business, on our way to our aspiration to be a $1 billion+ sales per annum business. Further unlocking the value of our MYER one loyalty program delivering our strongest tag rate since public listing, significant acquisition and increased engagement underpinning the growth of our business. Continuing to improve our store network, with major refurbishments completed at Toowoomba and Albury and re-layering of Chadstone and Fountain Gate. Adding new brands, including American Eagle, Simone Pérèle and Bendon to Myer, with a continued focus on making the big brands bigger; more than 30 new and exciting brands have recently been added across our Fashion, Beauty, and Home portfolios. Agreed to the rollout of new Point of Sale registers to make customer transactions quicker and team member Zebra mobility devices to provide a higher level of service to our customers. (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 $2,340.6 million (FY21: $2,116.5 million) (3) 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. Comparable sales also excludes the 53rd week in 2021 (4) Group online sales includes sass & bide and Marcs and David Lawrence. Excludes sales via in-store iPads (5) Excluding implementation costs and individually significant items, and after the removal of the net JobKeeper benefit of $22 million post tax ($32 million pre tax) in 1H21 Myer Annual Report 2022Year in Review 3 “ The Board has continued to work in a collaborative and cohesive way with the Myer Executive Team to execute the Customer First Plan and deliver value for all shareholders.” Myer Chairman, JoAnne Stephenson “ The FY22 results show we have emerged from the pandemic a better, stronger and more agile business that is well equipped to meet the demands of today’s consumer.” Myer CEO, John King The Board Thank you Following the appointment of From both of us, and on behalf of the Non-Executive Director, Ari Mervis, in Board and executive team, we want to September 2021, there have been no thank our shareholders, our wonderful further changes to the Board. The team members, our partners and Board has an appropriate mix of skills, suppliers – the backbone of our diversity and experience, is united and business – and above all else, our independent, and continues to work in customers for your ongoing support a collaborative and cohesive way with and loyalty. the Myer Executive Team to execute the Customer First Plan and deliver value for all shareholders. Year ahead and Christmas Despite the broader economic uncertainty, we believe that we are well placed to capitalise on the opportunities that exist with the right value-based proposition of affordable and aspirational brands, a performing store and online offer underpinned by a leading loyalty program providing greater value and choice for our customers. In relation to Christmas, we are well stocked and well planned and, through our leading Giftoriums and Santalands, are ready to delight our customers, providing a true one-stop shop for everything they need this Christmas. We will continue to deliver against our Customer First Plan – it was the right plan when we started it, and the right plan going forward, and has underpinned the growth we have seen in recent times. Through the Plan we have achieved Yours sincerely, a lot together, but we know there is more to be done, and we look forward to continuing to deliver against our Plan, as well as ensuring a successful upcoming peak trade period for our customers. JoAnne Stephenson Chairman John King CEO and Managing Director Myer Annual Report 2022Year in ReviewDirectors’ Report Remuneration ReportFinancial StatementsYear in Review 4 Performance overview While the last few years have been disruptive to our people and our business, they have created an opportunity for Myer to adapt and grow in the new environment. The full year results demonstrated how We are buoyed by the strength of These results gave the Board the Customer First Plan continues to deliver and gain momentum. our multi-channel capability, with online sales(2) growing 34.0% during confidence to declare a final dividend of 2.5 cents per share, taking the total Despite the disruptions of government- mandated lockdowns and the the period, now representing 24.2% FY22 dividend to 4.0 cents per share. of total sales. Omicron wave, Myer achieved strong Our focus has remained on the year-on-year sales growth, which disciplined management of translated into increasing profit. costs, cash, inventory and space The momentum was particularly strong in the second half, with the business reporting its best second half NPAT(1) since 2H13. optimisation. Net cash increased during the year by $74m to $186m at period end. Key Financials $ Millions Total Sales(3) Operating Gross Profit (OGP) Cost of Doing Business (CODB)(1) 2022 2021 Change 2,989.8 2,658.3 12.5% 1,145.2 1,055.7 (745.2) (665.7) 8.5% 11.9% 2.6% 8.0% Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA)(1) 400.0 390.0 Earnings before Interest and Tax (EBIT)(1) 184.2 170.5 Net Profit after Tax(1) Implementation costs and individually significant items (post-tax) Statutory Net Profit after Tax Basic EPS (cents)(4) Basic EPS (cents) – adjusted(5) 60.2 (11.2) 49.0 6.0 7.3 51.7 16.5% (5.3) 111.2% 46.4 5.7 6.3 5.7% 5.4% 16.3% (1) Excluding implementation costs and individually significant items (2) Group online sales includes sass & bide and Marcs and David Lawrence. Excludes sales via in-store iPads (3) Revenue from sale of goods excluding concession sales and sales revenue deferred under customer loyalty program was $2,340.6 million (FY21: $2,116.5 million) (4) Based on statutory NPAT (5) Based on NPAT excluding implementation costs and individually significant items Myer Annual Report 2022Year in Review 5 Our Customer First Plan All Myer team members are continuing to deliver against the Customer First Plan – providing a leading offer, great value, with the best customer service - ensuring we remain Australia’s favourite and most trusted department store. l s e u a v r u O y r e v i l e D l f o s r a e Y r u o F – n a P t s r i F r e m o t s u C r u O Customers Come First Own Our Future Do What’s Right One Inclusive Team Accelerate online Accelerate F2C Adapt in-store experience Refocus merchandise Rationalise property Reduce overheads Engage the customer Accelerate online: We continue to enhance and improve myer.com.au, as well as making improvements in the way we engage and reward customers through MYER one, with group online sales up 34.0% to $722.8 million, representing 24.2% of total sales. Accelerate Factory to Customer: We have taken possession of our new NDC. When operational (expected in 2H23), this will ensure we are getting products to our customers in the quickest and most efficient way. Adapt in-store experience: We continue to improve and curate our store experience with major refurbishments at Toowoomba and Albury, and re-layering at Chadstone and Fountain Gate; with space optimisation planned at a further 17 stores in FY23. We continue to modernise our store technology to improve the customer and team member experience. Refocus merchandise: We have added new brands including Reduce overheads: We remain focused on reducing Simone Pérèle and Bendon costs and will continue to and announced that American proactively reduce space Eagle will be coming to Myer, and seek productivity all part of our ongoing focus on improvements in our stores making the big brands bigger. and at the Store Support More than 30 new and exciting Office. In line with this, in brands have recently been January 2022 we moved to added across our Fashion, our more appropriately sized Beauty, and Home portfolios. Store Support Office. Rationalise property: We continue to strategically review, Engage the customer: We are driving engagement and optimise and reduce our overall growth through our MYER one store space with a view to driving loyalty base by delivering greater profitability. Our approach improved rewards and greater will seek the appropriate balance personalisation, and have also between physical stores and announced a new partnership online capability to better serve with Virgin, under which our customers. This included the Velocity members can use closure of our Knox and Blacktown points for online purchases stores, and announced the at Myer. closure of our Frankston store scheduled for January 2023. We have also handed back space to our landlords at our Toowoomba, Chermside and Eastland stores during the year. Myer Annual Report 2022Year in ReviewDirectors’ Report Remuneration ReportFinancial StatementsYear in Review 6 $722.8MGroup online sales representing 24.2%of total sales Accelerate online Group online sales were $722.8 million, up from $208.6 million in FY18 when we started our Customer First Plan. Throughout the year we have continued to improve our end-to-end online customer experience with improvements to search, navigation and filters to help customers find for Wellness and Travel plus new brand additions like Skinceuticals and Chanel No.1. There has been ongoing work to match our store and online ranges, with further online only products available via our marketplace offering, ensuring customers have access to one of the biggest online catalogues in the country. what they are looking for, and made it With the ongoing work done to improve easier for customers to join MYER one the user experience, our Net Promoter online and take advantage of exclusive Score online has significantly improved MYER one promotions. We have also continued enhancing checkout to since the start of our Customer First Plan. We remain focused on making make it even easier for customers to online even bigger and better, buy and added new payment and delivery options. We also expanded whilst being more data driven in our approach to engagement with our our pay with points program to enable customers. Velocity Frequent Flyer members and Commonwealth Bank customers to redeem their rewards for Myer products online. We have also renewed our focus on driving more effective customer relationship management, trade and insight led marketing capabilities, while We have continued to improve the developing more MYER one member breadth of our online offering, including exclusive promotional activity, to foster launching our new sport category, which aligns with ‘The Movement at Myer’ rollout in stores, and new edits greater engagement and growth. Myer Annual Report 2022Year in Review Myer Annual Report 2022 Year in Review 7 Y e a r i n R e v e w i Above: Images of some of the leading technology that will deliver widespread customer benefits and efficiencies. Accelerating factory to customer Myer CEO, John King, said: We have taken possession of our new 40,000 square metre National Distribution Centre for both stores and online fulfilment, which is expected to be operational in the second half of FY23. The new build, located at Dexus’ The sortation solution will sort product ‘Horizon 3023’ industrial estate in by store and/or carrier for cross dock, Ravenhall, Victoria, is a state-of-the art store replenishment and online orders. facility that will hold over 100,000 SKUs, The P800 AMR will process our hanging with widespread customer benefits garments for stores and online. The and efficiencies anticipated for both RS8 shuttles are 8 metre high AMR’s the stores and online business. with the capability of putting away The NDC, through leading innovation and retrieving full product cartons. and automation, will be the driver and The design of the NDC is to an backbone of this important part of our uncertified 5-star Green Star rating business, allowing better distribution and includes water harvesting and of stock to our stores, delivering recycling, LED lighting throughout greater efficiency in inventory the warehouse and offices, energy- management, reducing mark down efficient fittings, water-saving taps requirements and maximising sell and fixtures in kitchen amenities and through. It will also provide a more efficient online fulfilment process to enable delivery of greater profitability and ensuring we have the future capacity the use of sustainable materials where applicable. Solar will reduce the NDC’s energy consumption by an estimated 20%, with any excess power returned to the grid. to meet the growth expectations we We are currently in the process of have within the online channel. fitting out the NDC facility and we expect it to be operational in the second half of FY23. The NDC will feature more than 200 Autonomous Mobile Robots (AMRs) and boast three different AMR technologies (Geek+ RS8 Shuttle, P800s, and Körber’s sortation solution). It will be the largest Geek+ RS8 shuttle implementation to date in the Southern Hemisphere. “ Our NDC will fundamentally change our supply chain operations – delivering a faster, more efficient and profitable way to meet the demands of our online business and ensure we maximise the inventory flow to our stores. “ This is an important deliverable of our Customer First Plan and, importantly, will deliver a better outcome for both our customers and shareholders.” Myer’s Executive General Manager of Supply Chain, Tony Carr, said: “ The team were excited to get the keys to this state of the art facility. Having an NDC is incredibly important as it will ensure we can accommodate the growth in our online business, as well as providing the service levels our customers expect and deserve from Myer. “ There are widespread customer benefits and efficiencies anticipated for both the stores and online businesses. It will allow us to be more data led in stocking our stores – to allow stores to draw from the NDC as they meet demand, not the push model of old, ensuring we continue to fulfil the stores more efficiently to meet customer demand. This will provide huge benefits to our business. It will ensure, through automation, that online purchases are serviced in an even faster and streamlined way.” 8 Adapt in-store experience We have continued with our focus on improving customer service, store layouts and the appearance of our stores as well as our range and offer. It is this work that has led to us again recording strong customer satisfaction results, with our in-store team members receiving a score of 82%, up from 70% in 1H18. Myer was again named Department Store of the Year by Roy Morgan, as well as being rated as the 8th most trusted brand in Australia in the Roy Morgan 2022 Risk Report. This result reflects the commitment from all team members to provide exceptional service, our value proposition, improvements across the store network with our brand offer, as well as making the big brands bigger. We are continuing to ensure team members have the technology they need to service our customers in an even better way. As part of this, Myer has embarked on its biggest store technology transformation in recent history. The 18-month transformation will deliver new Zebra TC57X mobility devices and new NCR point of sale to all stores. 82in-store team members’ customer satisfaction score The Zebra mobility devices will be rolled out to stores with brand new applications to conduct activities such as receiving and dispatch, stocktake, online fulfilment and inventory enquiry/pricing, significantly enhancing team member experience and delivering multiple process efficiencies. The “One Device Strategy” will see all core business applications bundled onto the Zebra Mobility device, as well as new applications such as the Push- To-Talk which will seamlessly connect our team members across the store. We will commence the rollout of new NCR point of sale registers in FY23 including the new point of sale software, providing a significant uplift to our customers’ experience at checkout. This is in addition to our leading M-Metrics team member application, which provides real time digital communications, product knowledge and performance recognition delivered direct to our team members. The app displays customer feedback and provides a wide range of learning moments, including video content. General Manager Retail Operations, Gary Stones said: “ Myer is embarking on our biggest transformation of store technology in recent history, ensuring a better experience for customers in store. “ Our new registers will ensure simpler and quicker transaction times – approximately 20 percent faster, and through our new Zebra devices we can provide on-the-spot assistance with stock availability, as well as team members being able to connect to provide faster service and assistance to our customers. “ We have a commitment to put customers first in everything we do, and this step-change in technology will ensure Myer remains Australia’s favourite and most trusted department store into the future.” Voice of our customers Our Voice of Customer program provides our customers with the opportunity to rate their shopping experience and we have maintained leading customer satisfaction results this year with our in-store team members receiving a score of 82%. Two of our team members who provided exceptional service to our customers are Nita Govind Vanmali and Rose Errington: Nita Govind Vanmali Indooroopilly, QLD Rose Errington Marion, SA Nita received feedback from 100 Rose received feedback from 102 customers, averaging a Customer customers, averaging a Customer Service Satisfaction result of 95% for Service Satisfaction result of 93% for the year. One of our customers said: the year. One of our customers said: “ Very professional, genuinely friendly. I felt like I was being spoken to as a long-time friend. Can’t rate her highly enough. A real asset to your store.” “ She was so kind, jumped at the opportunity to help me, wished me a happy birthday, helped me pick out towels. Just a genuinely positive shopping experience.” Myer Annual Report 2022Year in Review 9 Store improvements We are continuing to improve the customer experience with major refurbishments at Toowoomba and Albury and re-layering taking place at Chadstone and Fountain Gate, with space optimisation planned at a further 17 stores in FY23. These targeted works are aimed at giving our customers the best possible in-store experience when shopping with us. Myer Albury Store Manager, Chris Boneham, said: “ Our refurbished store really showcases our brands and extensive offering in the best possible way - in a modern, fresh and bright new layout. The improvements include new lighting, flooring, fixtures as well as the removal of many existing walls to open up the store, ensuring an even better experience for our loyal customers. “ It was great to officially open the refurbished store which demonstrates our ongoing commitment to our loyal customers and the Albury community.” Myer Toowoomba Store Manager, Fiona Trevitt said: “ Our Toowoomba team were so excited to officially open our refurbished store to the community with new lighting, flooring, fixtures as well as the removal of many existing walls to open up the store, improved change rooms and entrance upgrade works. “We are loving showing customers through the new store and for them to see, first- hand, some of the fantastic new brands we have on offer.” Refocus merchandise Myer has recently introduced over over 30 new brands across its Fashion, Beauty and Home portfolios, with a healthy inventory position, ensuring In womenswear, we have seen the return of Bendon Group brands, Bendon, Pleasure State, me.by bendon and Fayreform, which will establish Myer’s place as a leading destination for intimate apparel brands in Australia. We also launched luxury Parisian lingerie brand, Simone Pérèle, into selected Myer stores and online in February this year. In a department store exclusive, leading apparel brands, American Eagle and Aerie, will land at 40 Myer stores, progressively from October 2022 onwards, bringing a broad assortment of high-quality, on-trend and accessibly priced jeans, apparel, activewear and intimates. In menswear, we have launched British heritage brands Barbour and GANT, which will roll out to a further ten stores. newness for our customers. In childrenswear, we strengthened our brand offer with Tommy Hilfiger, Calvin Klein Jeans, Jack & Jones Junior and Levi’s, all going to more stores. We are working with our key brand partners to cement long-term, strategic partnerships to drive commercial success, and as such, more brands are choosing Myer as their preferred trading partner. This is in line with our ongoing strategy of making the big brands bigger. Myer Annual Report 2022Year in ReviewDirectors’ Report Remuneration ReportFinancial StatementsYear in Review 10 ‘The Movement at Myer’, our leading Sport Fashion, Lifestyle and Technology offer in Melbourne and Online, includes popular brands Adidas, Champion, Puma, Lacoste Sport, Superdry Sport, the AFL Store, Fitbit, L.I Virtual and many more. This will be rolled out to 52 stores in an edited version during Summer 23. In beauty, Myer has expanded Gucci Beauty to Parramatta and Perth, as well as Libertine Parfumerie to Highpoint, Perth and Adelaide. The Perth beauty hall has been refurbished with the beautiful new counter designs, showcasing the latest from Chanel, Estee Lauder, Lancôme, Clinique, M.A.C, Clarins, Benefit and many more. Myer Melbourne opened global first counters for Estee Lauder, M.A.C, Bobbi Brown and Hermès with further exciting new counters planned to open later this year. . Chief Merchandise Officer, Allan Winstanley, said: “ Throughout the year, Myer has cemented its place as the number one destination for Australian and international brands through the reach of our store network, our leading online store and our MYER one loyalty program. “ We are thrilled to bring so many new and exciting brands to Myer this year, which will continue to surprise and delight our loyal customers. Myer is trusted by Australian customers for our quality product and brand offering, experience and service, and that’s why we are seeing more and more brands choose to call Myer home.” Rationalise property and reduce overheads Myer is continuing to reduce space across the business, with the closure of our Knox and Blacktown stores this year and space reductions in our Toowoomba, Chermside and Eastland stores. Myer also announced the closure of the Frankston store, scheduled for January 2023. In total, we have exited or announced a reduction of 119,534 square metres GLA (11.1%) of space since 1H18, with a further 69,000 square metres in the pipeline. Reducing costs and ensuring we are operating in the most efficient and effective way continues to be a focus across the business. As part of this, in January this year, we moved to a more appropriately sized store support office, ensuring the best office environment for our team members, whilst reducing costs to the business. Myer named Department Store of the Year and 8th Most Trusted Brand Myer was honoured to have been announced as the Roy Morgan Annual Customer Satisfaction Awards Department Store of the Year, as well as moving to 8th spot on Roy Morgan’s Most Trusted Brands list. Myer Annual Report 2022Year in Review 11 Engage the customer The MYER one program provides a key competitive and strategic advantage for our business. With 6.6 million digitally contactable members across our omni-channel network, the program enables us to connect with our most valuable customers to provide relevant, insight led communications and experiences, while providing the core data and insights that underpin the customer and data first decisions made across the business. There has been a great deal of work undertaken during FY22 to get even closer to our customers – to understand what they want to buy, when they want to buy, and where they want to buy it – than ever before. We are using our data and analytics capabilities, infrastructure and technology assets and owned channels more effectively for promotions and offers, as well as advertising and marketing, to better engage with our customers. Our increased focus on driving MYER one in-store, and process improvements to online user and account flows has seen MYER one engagement (tag rate) improve significantly in FY22, to its highest level since public listing. MYER one sales improved to 71.3% of total sales, up from 69.7% in FY21, with MYER one online sales improving to 70.5% of total sales, up from 66.4% the year prior. New member acquisition has grown 29.9% year on year, with 593,358 new members joining the MYER one program in FY22. Encouragingly, we are attracting a younger, more affluent and digitally active customer, with new member acquisition over-indexing in the 18-34 year age group. Chief Customer Officer, Geoff Ikin, said: “At a time when Australians are looking to make their dollar stretch further, Myer has been building new ways to provide value to Australians through our recent partnership with the Velocity Frequent Flyer program - an extension of the very successful CommBank “Pay with Points” program, and of course through our leading loyalty program, MYER one.” Myer’s future customer growth is underpinned by our growth in MYER one and new partnership opportunities 71.3% tag rate The rate for all purchases in-store and online is now at its highest level since public listing. 593K acquired customers 3.7M active customers We have acquired 593k customers throughout FY22, mainly in younger demographics. MYER one had 3.7m active customers in the last 12 months, making it one of the largest active retail loyalty programs in the country. New and innovative partnerships The continued growth and expansion of our CommBank “Pay with Points” program and the newly announced strategic partnership with Velocity Frequent Flyer will continue to provide new customer acquisition, revenue, and engagement opportunities. Myer Annual Report 2022Year in ReviewDirectors’ Report Remuneration ReportFinancial StatementsYear in Review 12 Sustainability at Myer 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. Myer recognises that addressing The website will be used to release in Australian communities and climate change is important to our information on an ongoing basis and increasing recycling diversion. customers, shareholders, suppliers enable connection and transparency and team members. Myer continues with stakeholders, customers and to be committed to the development shareholders as Myer continues along of a Sustainability Strategy, taking its sustainability journey. into account business activities and impacts, as well as stakeholder concerns and interests. The Sustainability Strategy has four primary focus areas including, Sustainable Packaging and Recycling, Ethical Sourcing, Sustainable Merchandise and Energy Management. Accountability for the implementation of this strategy is cross-departmental, with many core business units working Sustainable packaging and recycling Packaging is a key focus of the Sustainability Strategy, with a number of initiatives in place across departments to reduce packaging, increase the amount of recycled and renewable content in private label packaging and implement labelling regarding recyclability. During FY22, Myer conducted a number of packaging reviews across private label packaging through the Packaging Recyclability Evaluation Portal (PREP), which is an online platform used by organisations to verify if packaging is or isn’t recyclable in Australian kerbside collections. From these evaluations, Myer implemented the Australasian Recycling Label (ARL) onto packaging for the first time. This is an evidence-based system underpinned by the PREP providing easy to understand recycling information. These initiatives assist together to embed sustainable Myer remains a committed signatory with keeping contamination out of initiatives into business processes to the Australian Packaging Covenant the recycling stream and recyclable and ensuring the values of our (APC), submitting its 15th Annual material away from landfill. stakeholders continue to be met. Report in March 2022. The APC is a During the year, Myer launched its Sustainability web page on its Investor and Media Centre, providing customers and stakeholders information on Myer’s commitments and initiatives. national co-regulatory initiative in place of state-based regulatory arrangements for sustainable packaging management, optimising packaging practices, reducing the environmental impact of packaging Renewable sources were also introduced into private label packaging, including FSC accredited materials. In this year’s Action Plan, Myer has committed to reviewing at least 90% of packaging with reference to Sustainable Packaging Guidelines (SPG) or equivalent and will continue to embed the SPGs further into business processes and collaborate with suppliers for private label and supply chain packaging. Myer’s plastic bag initiative, which focuses on phasing out single- use plastic shopping bags, has successfully decreased plastic bag consumption in stores, with the total number of units ordered down 4.92 million on FY21. 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 Myer Annual Report 2022Year in Review 13 pallets and security tags. Myer also has a Reverse Logistics process that recycles or salvages products including hangers accompanying products. In FY22, total hanger reuse rate was 63%, equating to 775 tonnes of CO2 reduced, 2,278,637 litres of water saved and 259 tonnes of waste reduced from landfill. In FY22, Myer’s total waste and recycling generation remains relatively stable with a 66.4% recycling diversion rate. A waste roadmap is currently under development, to continue to improve on existing waste and recycling systems and processes within Myer’s operations. Myer’s commitment to reducing waste goes beyond our operations. During the year, Myer offered customers a convenient place to drop off textiles, cookware and cosmetic packaging through in-store partnership recycling trials to support with closing the loop and preventing these materials from going to landfill. Myer engaged with longstanding charity partner The Salvation Army for the Moving the Needle initiative. Participating stores include Eastland, Fountain Gate and Melbourne, with a plan to expand into Sydney, Erina and Penrith. Myer also partnered with Close The Loop to Adelaide, Parramatta, Bondi, Suppliers must also ensure that Macquarie, Canberra, Garden City workers are provided a safe work and Indooroopilly. Myer will review the environment free from discrimination, results of each initiative at the end of abuse and harassment, protected the trial periods to determine whether against forced or child labour, they continue in stores permanently. compensated fairly, and allowed Ethical sourcing Myer is committed to sourcing responsibly and ensuring our sourcing framework remains relevant and effective in improving social practices and protecting worker rights within our operations and supply chain. freedom of association and the right to collectively bargain. Myer recognises the importance of understanding and managing the risks of modern slavery within our operations and supply chain. Our approach to managing these risks is embedded within our Ethical Sourcing trial a product stewardship scheme Myer acknowledges its responsibility Framework and is implemented for cosmetics in Sydney, Melbourne, in respecting global standards through our management and due Chadstone, Highpoint, Parramatta, on human rights, ethical business diligence systems. Myer published its Adelaide, Brisbane, Perth, Ballarat, practices and workplace safety, second Modern Slavery Statement Albury, Joondalup and North Lakes. and works with suppliers and which reports on our progress to Close the Loop, with support from the Australian Government, is working to establish a cosmetic recycling scheme, initially focusing on cosmetic makeup products, by developing a comprehensive collection network that will collect, process and reuse or recycle this waste. This support provides momentum in shifting the business partners that share our identify, assess and mitigate the risk of values of accountability and ethical modern slavery within our operations conduct. Our Ethical Sourcing and supply chains. This Statement Program standardises our approach addresses our cross-functional to ethical business conduct and approach to address modern slavery responsible sourcing, and embraces risks, with accountability across many internationally recognised labour internal business units to embed standards such as the Ethical Trade ethical sourcing initiatives into Initiative (ETI). processes. industry towards a circular economy All suppliers and business partners to ensure higher rates of recycling of must adhere to our Ethical Sourcing cosmetic products. A third partnership, Policy and have management with internationally recognised systems covering all factories, which homeware brand Tefal, is exclusively must include a requirement launching a recycling cookware campaign in selected stores to recognise the rights of workers, and treat them with dignity Melbourne, Chadstone, Chatswood, and respect as understood by Miranda, Sydney, Perth, Brisbane, international community standards. Myer Annual Report 2022Year in ReviewDirectors’ Report Remuneration ReportFinancial StatementsYear in Review Energy management Myer is committed to understanding and reducing our carbon emission impacts and is exploring sustainable and renewable energy options. This year Myer’s total energy use for the year reduced by 1.4% to 462,664 gigajoules, resulting in 96,838 tonnes of carbon dioxide equivalent greenhouse gas emissions, which is a reduction of 4.8% from FY21. The energy intensity of our business decreased by 2.7% on the FY21 result. Since the commencement of the strategy in 2014, we have achieved 36% reduction in total net company overall energy use, 44% reduction in CO2 emissions and 21% reduction in our energy intensity. Through store refurbishments, Myer has commenced LED lighting upgrades and has recently conducted a number of store lighting audits to prioritise which stores will be selected for future energy efficient lighting upgrades. Myer’s new Support Office in Docklands has been rated as a 5-star green design and a 5-star NABERS energy office rating. Myer’s new NDC in Victoria has energy- efficient fittings, solar panels and LED lighting throughout the building. As our strategic plan continues to develop, Myer will continue to focus on decarbonising through various emissions reduction initiatives and will provide updates through our sustainability web page and annual reports as our strategy evolves. 14 During the year, Myer continued to strengthen its ethical sourcing program with a focus on improving and implementing mitigation processes for identified modern slavery risks. The complexity of supply chains remain a challenge, with a primary focus on increasing traceability and mapping beyond our tier one supply chain in progress. Further, we have prioritised transparency and published a listing of our private label factories including their location, number of employees and the percentage of migrant workers and women. Sustainable merchandise Myer acknowledges customer demands for sustainable merchandising and increasing the offering of sustainable merchandise remains a key focus of the Sustainability Strategy. This includes the ongoing development of products that have sustainably sourced or recycled materials, products that are made ensuring animals are treated humanely and that no harmful processes are employed, products that support specific community organisations, Australian made or products of Australia and products Myer directly sources products from that are designed to be reusable. over 300 suppliers across 16 countries for its private label brands. The major locations we source from include China, India, Bangladesh and Vietnam. During the year we reviewed audits from 201 suppliers (326 factories) within our private label network. Our review identified a zero tolerance issue where a factory amended an audit report provided (factory exited) and The impacts of fibres are reviewed as part of the design and development process, with private label teams focusing on utilising a number of sustainable alternatives to traditional fibres, including Certified European Flax, organic cotton, recycled PET and recycled nylon, vegan leather alternatives and Tencel. 64 high-risk issues, which primarily Work continues to be done to explore related to excessive overtime hours. avenues to increase supply chain We continue to work and support transparency and further ensure factories and suppliers to address certification of sustainably sourced any non-conformances and fibres, including cotton and wool. develop corrective action plans to achieve compliance. Myer Annual Report 2022Year in Review Our team Myer team members are our most important resource. We are committed to offering our approximately 10,000 team members a supportive, challenging and rewarding workplace that enables them to contribute to Myer’s success and reach their full potential. Myer aspires to create and maintain a collaborative and inclusive workplace to reflect the diversity of our customers and our community. The business focuses on three key inclusion priorities: cultural diversity, LGBTQIA+ inclusion and female representation at senior leadership levels. These priorities form the basis of our ongoing diversity and inclusion calendar of programs and events, as well as communications with our team. 15 Providing an environment that behaviour. This program is well- protects the health and safety of all supported by our Employee team members, contractors and Assistance and Manager Assist customers has, as always, been an counselling programs, which have overriding priority during the year. been actively promoted throughout As the COVID-19 pandemic has the year. To drive improved safety in our workplaces, we have focused on delivering safety management training to all our team members and a targeted workplace inspection program to enhance the identification and management of commonly occurring hazards. continued, our focus has been on continuing to provide a safe place for our team members, contractors and customers to work and shop. The Myer Group’s workforce Through the Omicron wave, strategies composition at 30 July 2022 was 79.5% were taken to keep our teams female, with 57.4% of leadership roles informed about exposures, and and 50% of our Non-Executive Directors regular communication with our team being female. Myer monitors progress members has been critical in keeping in female representation through them informed about any measures measurable objectives in terms of being implemented to manage succession planning, parental leave associated risks. and leadership development metrics. The wellbeing of our team is a key Our commitment to developing the priority, and to support our teams with leadership and capability of our team managing challenging interactions was also reflected with the continuation with customers, Myer has introduced of Certificate IV in Retail Management, an online training program which Merchandise Buyer and Planner in provides guidance on how to respond Training programs and Leadership to and manage unacceptable training programs during the year. Sustainability performance and targets Focus Area Key Measure Team Diversity and inclusion (% female senior managers) Workplace safety (LTIFR) Environment Greenhouse gas emissions reduction (%) Energy intensity (kJ/m2.opening hour) Recycling rate (%) Business Code of Conduct Training (% of required team members trained) Improved / met target Did not reach target * impacted by store closures due to COVID-19 pandemic FY20 FY21 FY22 Performance Performance Performance 56.5 6.4 9.6 163.1 63.0 88.8 54.9 5.2 6.9 146.7 63.6 57.4 5.8 4.9* 142.7 66.4 87.9 85.6 FY23 Target ≥50 <5.6 ≥1.0 ≤142.7 ≥66.4 ≥80.0 Myer Annual Report 2022Year in ReviewDirectors’ Report Remuneration ReportFinancial StatementsYear in Review 16 Directors’ Report DIRECTORS’ REPORT Your directors present their annual 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 30 July 2022. 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 JoAnne Stephenson Independent Non-Executive Director Acting Chairman from 29 October 2020 to 15 September 2021 Chairman from 16 September 2021 John King Chief Executive Officer and Managing Director Jacquie Naylor Independent Non-Executive Director Dave Whittle Ari Mervis Independent Non-Executive Director Independent Non-Executive Director Date appointed 28 November 2016 4 June 2018 27 May 2019 30 November 2015 20 September 2021 Ari Mervis was appointed to the Board with effect from 20 September 2021. All other directors 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. JoAnne Stephenson Independent Non-Executive Director • • • • • • Member of the Board since 28 November 2016 Acting Chairman from 29 October 2020 to 15 September 2021 Chairman from 16 September 2021 Member – Audit, Finance and Risk Committee Chairman – Nomination Committee Member – Human Resources and Remuneration Committee John King Chief Executive Officer & Managing Director • Member of the Board since 4 June 2018 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. Other Current Directorships JoAnne is an Independent Non-Executive Director of Challenger Limited and Qualitas Limited. She is also Chair of the Victorian Major Transport Infrastructure Board. JoAnne was previously a director of Asaleo Care Ltd and Japara Healthcare Limited. 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. John 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 successfully led Matalan from 2003 to 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. More 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. 1 Myer Annual Report 2022Directors’ Report 17 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. Jacquie has held the position of Non-Executive Director at The PAS Group and 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. Other Current Directorships Jacquie is a Non-Executive Director of Cambridge Clothing Ltd and Michael Hill International Limited. Dave has considerable brand, data, technology, omni-channel retail and digital transformation experience. Over the last six 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. DIRECTORS’ REPORT Continued Jacquie Naylor Independent Non-Executive Director • • • • Member of the Board since 27 May 2019 Member – Audit, Finance and Risk Committee Member – Nomination Committee Chairman – Human Resources and Remuneration Committee Dave Whittle Independent Non-Executive Director Member of the Board since 30 November 2015 Chairman – Audit, Finance and Risk Committee Member – Nomination Committee • • • • Member – Human Resources and Remuneration Committee Other Current Directorships Dave is a director of Lexer Pty Ltd. Ari Mervis Independent Non-Executive Director • • • Member of the Board since 20 September 2021 Member – Audit, Finance and Risk Committee Member – Nomination Committee Ari has broad global experience spanning a range of industries in branded goods, consumer staples, agriculture, food and beverages. Ari’s career includes more than 25 years with global brewer SABMiller plc, including nearly 10 years as Managing Director of the Asia Pacific region. In this role, Ari was Chairman of China Resources Snow Breweries, a joint venture between China Resources Enterprises and SABMiller for 8 years, and Chairman of SAB India and SAB Vietnam. He was also responsible for the acquisition and integration of Carlton and United Breweries by SABMiller. More recently, Ari was the Executive Chairman of Accolade Wines from 2018 to 2020, and Managing Director and CEO of Murray Goulburn from 2017 to 2018. Ari brings a wealth of experience in formulating and executing strategies that helps drive top line growth in a sustainable and responsible manner. Ari has a Bachelor of Commerce from the University of Witwatersrand. Other Current Directorships Ari is a Non-Executive Director and Chairman of McPherson’s Limited. 2 Myer Annual Report 2022Directors’ ReportDirectors’ Report Remuneration ReportFinancial StatementsYear in Review 18 DIRECTORS’ REPORT Continued 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 31 July 2019, and the period during which each directorship has been held. Director Listed entity Period directorship held JoAnne Stephenson Challenger Limited October 2012 – present John King Jacquie Naylor Dave Whittle Ari Mervis Asaleo Care Limited May 2014 – June 2021 Japara Healthcare Limited September 2015 – November 2021 Qualitas Limited November 2021 - present - - Michael Hill International Limited 15 July 2020 – present - - McPherson’s Limited February 2021 – 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 30 July 2022 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 Directors Risk Committee Committee Meetings of Audit, Finance and Human Resources and Remuneration Nomination Committee Meetings Held* Attended Meetings Attended Meetings Attended Meetings Attended Held* Held* Held* JoAnne Stephenson John King Jacquie Naylor Dave Whittle Ari Mervis(1) 16 16 16 16 13 16 15 15 16 12 6 - 6 6 4 6 - 6 6 4 7 - 7 7 - 7 - 7 7 - 3 - 3 3 2 3 - 3 3 2 * Number of meetings held during the time the director held office or was a member of the Committee during the period. (1) Ari Mervis was appointed to the Board as an Independent Non-Executive Director, and as a member of the Audit Finance and Risk Committee and Nomination Committee, with effect from 20 September 2021. 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 Ordinary Shares Deferred Rights Rights Options Performance Performance JoAnne Stephenson 300,000 Nil Nil Nil 3,582,432 677,602 4,912,180 5,598,756 211,000 266,666 250,000 Nil Nil Nil Nil Nil Nil Nil Nil Nil John King Jacquie Naylor Dave Whittle Ari Mervis 3 Myer Annual Report 2022Directors’ Report 19 DIRECTORS’ REPORT Continued 5. Company Secretary and Other Officers Paul Morris is the General Counsel and Company Secretary of the Company. Prior to joining Myer, Paul was General Counsel and Company Secretary of Spotless Group. Nigel Chadwick is the Chief Financial Officer of the Company. Details of Nigel’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 represent the financial performance of the Group excluding implementation costs and individually significant items. Refer to the Non-IFRS Financial Measures section below. Summary of Financial Results for 52 Weeks Ended 30 July 2022: • • • • • • • • • • (1) (2) Total sales(1) up 12.5% to $2,989.8 million; up 15.0% on a comparable sales basis(2). Group online sales(3) of $722.8 million, up 34.0%, representing 24.2% of total sales. Operating Gross Profit (OGP) improved by 8.5% to $1,145.2 million, with OGP margin declining by 141 basis points to 38.3%. Cost of Doing Business(4) as a percent to sales decreased by 12 basis points, and was $745.2 million, including rent waivers. Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA)(4) of $400.0 million. Net profit after tax(4) was $60.2 million, compared to net profit after tax(4) of $51.7 million in prior year. Implementation costs and individually significant items of $11.2 million ($13.2 million pre-tax) included store closure and space exit costs and asset impairments. Statutory net profit after tax of $49.0 million, up 5.7% from prior year of $46.4 million. Net cash position of $185.9 million, an improvement of $74.1 million compared to FY21, reflecting disciplined approach to the balance sheet and cost control. Final dividend of 2.5 cents per share, fully franked, to be paid on 7 November 2022 (Record Date is 29 September 2022). Revenue from sale of goods excluding concession sales and sales revenue deferred under customer loyalty program was $2,340.6 million (FY21: $2,116.5 million) 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. Also excluded is the 53rd week in 2021 (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 4 Myer Annual Report 2022Directors’ ReportDirectors’ Report Remuneration ReportFinancial StatementsYear in Review 20 DIRECTORS’ REPORT Continued Income Statement for the 52 Weeks to 30 July 2022 Total sales(1) Operating gross profit Cost of doing business(2) EBITDA(2) Depreciation(2) EBIT(2) Net finance costs Tax(2) Profit after tax(2) Implementation costs and individually significant items (post- tax) 2022 $m 2,989.8 1,145.2 (745.2) 400.0 (215.8) 184.2 (98.9) (25.1) 60.2 (11.2) 2021 $m 2,658.3 1,055.7 (665.7) 390.0 (219.5) 170.5 (96.1) (22.7) 51.7 (5.3) Change 12.5% 8.5% 11.9% 2.6% (1.7%) 8.0% 2.8% 10.7% 16.5% 111.2% Statutory profit after tax 49.0 46.4 5.7% (1) (2) Revenue from sale of goods excluding concession sales and sales revenue deferred under customer loyalty program was $2,340.6 million (FY21: $2,116.5 million) Excluding implementation costs and individually significant items Balance Sheet as at 30 July 2022 July 2022 $m 371.4 (429.3) 147.2 (96.7) 1,177.8 July 2021 $m 305.2 (353.3) 137.3 (85.6) 1,224.1 (1,699.2) (1,735.5) 21.2 283.8 240.2 65.1 81.5 (58.0) 243.9 185.9 267.4 21.7 296.8 240.2 64.2 115.1 (66.8) 178.6 111.8 226.9 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 Cash Equity 5 Myer Annual Report 2022Directors’ Report 21 DIRECTORS’ REPORT Continued Cash Flow for the 52 Weeks to 30 July 2022 EBITDA(1) Less Implementation costs and individually significant items Add Non-cash impairments Working capital movement Operating cash flow (before interest and tax) Conversion Tax (paid)/refunded Net Interest paid Interest – lease liabilities Operating cash flow Capex paid(2) Free cash flow Dividends paid Principle portion of lease liabilities paid Other Net cash flow Excluding implementation costs and individually significant items (1) (2) Net of landlord contributions Shares and Dividends Shares on issue Basic earnings per share(1) Basic earnings per share (pre implementation and individually significant items)(2) 2022 $m 400.0 (13.2) 2.4 (2.3) 386.9 99.4% (16.4) (7.3) (87.8) 275.4 (44.2) 231.2 (12.3) (139.6) (0.6) 78.7 2021 $m 390.0 (7.6) 1.8 (19.0) 365.2 95.1% 6.8 (7.5) (87.2) 277.3 (31.9) 245.4 - (140.3) (0.4) 104.7 2022 2021 821.3 million 821.3 million 6.0 cents 7.3 cents 5.7 cents 6.3 cents Dividend per share 4.0 cents Nil (1) Calculated on weighted average number of shares of 820.6 million (FY21: 818.9 million) and based on NPAT (2) Calculated on weighted average number of shares of 820.6 million (FY21: 818.9 million) and based on NPAT pre implementation costs and individually significant items 6 Myer Annual Report 2022Directors’ ReportDirectors’ Report Remuneration ReportFinancial StatementsYear in Review 22 DIRECTORS’ REPORT Continued 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 EBIT Interest Tax NPAT 171.0 (98.9) (23.1) 49.0 Add back: implementation costs and individually significant items Space exit costs and other asset impairments 13.2 - (2.0) 11.2 Results excluding implementation costs and individually significant items 184.2 (98.9) (25.1) 60.2 FY22 Operations In addition to the Company’s actions during the COVID-19 pandemic as noted below, the Company achieved the following during FY22: • • • • • • • • • • (1) (2) 2H FY22 represented the best second half NPAT(1) since 2H FY13. Comparable sales growth of 15%.(2) Group online sales(3) of $722.8 million, representing 24.2% of total sales, driven by conversion improvements and a record online Net Promoter Score. Launched the popular Commbank pay with points partnership online, which was previously only available in-store. Launched The Movement at Myer, an all-encompassing fitness and lifestyle destination. Continued to improve the MYER one program resulting in an increase in tag rate to 71.3% (FY21: 69.7%). Exited the Blacktown and Knox stores, and refurbished the Toowoomba and Albury stores. Relocated the Store Support Office (SSO) to a new and smaller footprint. Took possession of the National Distribution Centre (NDC) facility in Ravenhall, Victoria. Expect the state of the art facility to be fully operational in 2H FY23. Refinanced existing credit facilities with a four-year Asset Based Loan funding package. Excluding implementation costs and Individually Significant Items 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. Also excluded is the 53rd week in 2021 (3) 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 future developments and strategy. These should be read in conjunction with Section 10, which describes factors that could impact the Company’s results. 7 Myer Annual Report 2022Directors’ Report 23 DIRECTORS’ REPORT Continued Impact of COVID-19 The COVID-19 pandemic and associated Government actions had an ongoing impact on the Company during FY22. The Company’s response has been managed by its Executive Management team, and Board, with the primary focus being on the health and wellbeing of its customers, team members and the broader community in which it operates, and in supporting government health measures. As a result of COVID-19 outbreaks in the community and Government directions, the Company temporarily closed some stores across its network in the first half of FY22. A breakdown of the temporary store closures is set out below. State Period of temporary closure Days closed Stores affected Australian Capital Territory 13 August 2021 – 21 October 2021 70 days 2 stores New South Wales 1 August 2021 – 10 October 2021 6 August 2021 – 10 October 2021 12 August 2021 – 10 October 2021 15 August 2021 – 10 September 2021 17 September 2021 – 22 September 2021 Queensland 1 August 2021 – 8 August 2021 Tasmania Victoria 9 August 2021 – 11 August 2021 16 October 2021 – 18 October 2021 6 August 2021 – 28 October 2021 6 August 2021 – 9 August 2021 22 August 2021 – 9 September 2021 16 September 2021 – 22 September 2021 20 September 2021 – 26 September 2021 71 days 66 days 60 days 27 days 6 days 8 days 3 days 3 days 84 days 4 days 19 days 7 days 7 days 16 stores 1 store 1 store 2 stores 1 store 9 stores 1 store 1 store 11 stores 3 stores 3 stores 1 store 1 store The Company ceased to generate revenue or cash inflows from its physical stores during these temporary closures, other than through click-and-collect services. When stores reopened in line with the easing of Government restrictions, various factors continued to impact sales in physical stores including staffing challenges with significant numbers of team members absent as a result of COVID-19 and isolation requirements, the ongoing uncertainty generated by Omicron, the lack of tourism, a large proportion of workers still working remotely, and reduced foot traffic (primarily in CBD store locations). Global supply chain disruptions associated with COVID-19 also resulted in increased supply chain costs, shipping delays and disruption to stock flow. 8. Significant Changes in the State of Affairs in FY22 In addition to the matters described in Section 7 above, the following significant changes occurred during FY22: • • JoAnne Stephenson was appointed Chairman of the Company with effect from 16 September 2021. Ari Mervis was appointed as an Independent Non-Executive Director of the Company, and as a member of the Audit Finance and Risk Committee and Nomination Committee with effect from 20 September 2021. There were no new 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. The FY22 results reflect the improving momentum driven by the successful transformation of the business achieved under the Customer First Plan – it is the right strategy for the Company. The Customer First Plan further evolved during COVID-19 and focuses on the following areas: Accelerate Online: focus on profitable online growth in terms of both overall scale and as a percentage of total company sales. Investment in customer experience has led to significant improvements in conversion and customer Net Promoter Scores. • 8 Myer Annual Report 2022Directors’ ReportDirectors’ Report Remuneration ReportFinancial StatementsYear in Review 24 DIRECTORS’ REPORT Continued • • • • • • Accelerate Factory to Customer (F2C) change: improvements to online fulfilment (3PL / multicarrier) arrangements delivered cost and customer experience benefits, and the development of a National Distribution Centre (expected to be fully operational in 2H FY23) will be transformational to Myer’s supply chain and customer experience. Engage the Customer: drive engagement and new customer growth through our MYER one loyalty base by delivering improved rewards, leverage of new and expanded partnerships and greater personalisation. Adapting our in-store experience: our focus on delivering an uplifted in-store experience has contributed to significantly higher levels of in-store customer satisfaction. Investments in store formats and the product offer, and the increasing use of technology in store, such as M-metrics and the one device strategy, will continue to deliver a compelling experience for our customers. Refocus Merchandise: improving our range in key categories, with continuation of a more disciplined approach to purchasing and inventory, focusing on core lines and supplier relationships, making the big brands bigger. Rationalise Property: strategically review, optimise and reduce our overall store space with a view to driving greater profitability. Our approach will seek the appropriate balance between physical stores and online capability to better serve our customers. Reduce 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. External Environment Risks Unstable and deteriorating macro-economic factors such as the fluctuation of the Australian dollar and increasing interest rates; heightened domestic and global inflation; poor consumer confidence; changes in government policies; external, natural or unforeseen events, such as an act of terrorism, political instability, 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 allow the Company to develop action plans to 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. Supplier and Supply Chain Risks Myer monitors its supplier relationships and quality standards via a range of means, including implementation of its quality assurance, compliance policies and rigorous procurement and contracting processes. Our sourcing offices maintain regular contact with our supplier base to ensure they adhere to our requirements and also assist in any challenges they may have. We continue to review new sourcing opportunities to allow us greater flexibility and diversification across the portfolio. This assists with minimising any risks, helps ensure competitiveness and gives us the ability to expand ranges and brands. Disruption in the global shipping industry, though reduced, remains a risk. Lockdowns in other countries may impact speed to market through congested ports, shipping delays and increased costs, and disruption of stock flow. Supply chain management continues to work with suppliers and partners to ensure these challenges are carefully monitored and addressed. 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. COVID-19 The impact of the COVID-19 pandemic or other wide spread pandemics 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 Executive Management Group continue to monitor and assist the business to adapt to changes in ongoing risks and adhere to Government requirements and 9 Myer Annual Report 2022Directors’ Report 25 DIRECTORS’ REPORT Continued health measures. 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. 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, inability to attract and retain qualified team members, cyber-security violation or 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 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 As one of the top 10 most trusted brands in Australia as reported in the Roy Morgan 2022 Risk Report, 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 (including a failure to meet stakeholder and regulatory expectations in regards to the area of sustainability) 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 an updated 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 Customer First Plan could impact sales, profitability, share price, and our reputation. 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. The strategy has been overlaid and enhanced with additional details of initiatives and mitigation plans in response to COVID-19 to ensure it remains “fit for purpose”. This includes changes to the economic environment, customer behaviours, and to the retail landscape. People Management Risks With the impact of current labour shortages in the external market, 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, and store and online team members to ensure sales growth. Failure to do so may adversely impact Myer’s ability to deliver on its strategic imperatives. Training and development programs continue to be offered to further refine the skills of our team members and business leaders. The safety of our team members, customers, and suppliers is a high priority at Myer. Failure to manage health and safety risks could have a negative effect on team member wellbeing, and Myer’s reputation and performance. We conduct regular detailed risk assessments at each store, distribution centre, and at our support office, as well as provide 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. 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. 10 Myer Annual Report 2022Directors’ ReportDirectors’ Report Remuneration ReportFinancial StatementsYear in Review 26 DIRECTORS’ REPORT Continued 11. Matters Subsequent to the End of the Financial Year Following the end of the financial year, the Company announced that it will exit its Frankston store in January 2023. 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: • • • the Group’s operations in future financial years; the results of those operations in future financial years; or the Group’s state of affairs in future financial years. 12. Dividends Myer paid an interim dividend of AU$0.015 per share, fully franked, totalling $12.3 million on 12 May 2022. The Board has determined a final dividend of AU$0.025 per share, fully franked, to be paid on 7 November 2022 (Record Date of 29 September 2022). This takes the total FY22 dividend to 4.0 cents per share. 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 (LTI) plan operates for selected senior executives and has been in operation since December 2006. Under the LTI plan, the Company has granted eligible executives: (1) (2) (3) in FY21 and FY22, performance rights over unissued ordinary shares of the Company; in FY19 and FY20, performance options over unissued ordinary shares of the Company, and in previous years, performance rights over unissued ordinary shares of the Company, with all options and rights issued, 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 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 30 July 2022, the Company granted a total of 6,514,842 performance rights under the LTI plan: 1,469,558 performance rights to the CEO and 5,045,284 performance rights 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 30 July 2022. In September 2021, a total of 30,046,033 performance options granted under the LTI plan in FY19 lapsed following testing against the performance criteria. The table in Section 14 sets out the details of performance options and rights that have been granted under the LTI plan 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. During FY21, the Transformative Incentive (TI) plan was introduced to replace the normal Short Term Incentive (STI) plan for a 11 Myer Annual Report 2022Directors’ Report 27 DIRECTORS’ REPORT Continued period of 2 years. Under the TI plan, the Chief Executive Officer and nominated executives receive 50% of the annual TI achieved in cash and 50% in the form of deferred rights to shares in the Company. During the financial period ended 30 July 2022, the Company issued a total of 2,294,105 deferred rights under the FY21 TI plan, comprising 677,602 deferred rights to the CEO and 1,616,503 deferred rights to other nominated senior executives. The number of deferred shares to be issued under the FY22 TI plan will be determined by dividing the dollar value of the deferred component of the TI plan award outcome by the volume weighted average price of the Company’s shares over the five trading days immediately following the release to the market of the Company’s full year FY22 results. Further information about performance options and rights issued under the LTI plan and TI plan (including the performance conditions attached to the performance options and rights granted under the LTI plan and TI plan, 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 LTI plan and TI plan. 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 30 July 2022, 1,147,053 fully paid ordinary shares were purchased on market by the Trust and 2,987,987 shares were transferred from the Trust for alignment rights issued to John King and Allan Winstanley in 2018 and that fully vested in FY21. Since 30 July 2022, 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 LTI plan or TI plan. Date performance rights and options granted Expiry date Issue price 21 November 2019 (options grant to CEO under the FY20 LTI plan offer) 21 November 2019 (options grant to senior executives under the FY20 LTI plan offer) 21 Nov 2023 21 Nov 2023 Nil Nil Number of performance rights and options remaining on issue(1) 5,598,756 18,658,535 9 November 2020 (rights grant to CEO under the FY21 LTI plan offer) 9 November 2020 (rights grant to senior executives under the FY21 LTI plan offer) 8 October 2021 (deferred rights grant to CEO under the FY21 TI plan) 8 October 2021 (deferred rights grant to senior executives under the FY21 TI plan) 10 November 2021 (rights grant to CEO under the FY22 LTI plan offer) 10 November 2021 (rights granted to senior executives under the FY22 LTI plan offer) Closing balance of performance rights and options n/a Nil 3,442,622 n/a Nil 10,697,922 Nil Nil n/a n/a n/a n/a 677,602 1,616,503 1,469,558 5,045,284 47,206,782 (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. 12 Myer Annual Report 2022Directors’ ReportDirectors’ Report Remuneration ReportFinancial StatementsYear in Review 28 DIRECTORS’ REPORT Continued 15. Remuneration Report The Remuneration Report, which forms part of this Directors’ Report, is presented separately from page 30. 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 is due to submit its report by 31 October 2022. 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. The Group submitted its report on 31 March 2022. 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. • • 13 Myer Annual Report 2022Directors’ Report 29 DIRECTORS’ REPORT Continued 20. Auditor’s Independence Declaration 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 10 November 2022. The Directors’ Report is made in accordance with a resolution of directors. JoAnne Stephenson Chairman Melbourne, 15 September 2022 14 Myer Annual Report 2022Directors’ ReportDirectors’ Report Remuneration ReportFinancial StatementsYear in Review 30 Remuneration Report REMUNERATION REPORT Dear Shareholder, On behalf of the Board, I present to you Myer Holdings Limited’s (Myer or the Company) Remuneration Report for FY22. This report sets out the remuneration information for the Non-Executive Directors and Executive Key Management Personnel (Executive KMP). It describes our executive remuneration framework and pay outcomes for FY22 in a simple and transparent way. The remuneration outcomes set out in this Report were carefully considered by the Board, taking into account all relevant factors, including the Management team’s performance in delivering the FY22 results, and ensuring the best interest of our shareholders and other stakeholders. In determining the remuneration framework and assessing remuneration outcomes, Myer’s Remuneration objective is to support Management to deliver a business strategy that puts our customers first and ultimately delivers value to our shareholders. There are five key principles associated with the Remuneration objective: (1) Reward outcomes that reinforce our Customer First Plan (2) Build our capability by attracting and retaining high calibre talent (3) Align the interests of our executives to those of our shareholders – think like owners (4) Drive sustainable long-term performance of the business (5) Be simple and transparent Company Performance in FY22 The FY22 results showed the strength of Myer’s omni channel offering in driving sales and earnings momentum. The business showed strong improvement in sales, profitability, cash generation and other key measures. Progress in our Customer First Plan means Myer is well placed to drive value creation for all shareholders, and Myer recommenced dividend distributions during FY22. These results were achieved despite the impacts of the COVID-19 pandemic, particularly in 1H22 which saw Government mandated lockdowns across the first quarter and then footfall during the Christmas and January sales periods impacted by the Omicron variant. In 2H22, which was not impacted by lockdowns, Myer recorded its highest net profit after tax since 2H13(4) demonstrating the strong momentum in the business. FY22 results and highlights include: • Total sales(1) up 12.5% to $2,989.8 million; up 15.0% on a comparable sales basis(2). • Group online sales(3) of $722.8 million, up 34.0%, representing 24.2% of total sales. • • • • • Net profit after tax(4) was $60.2 million, compared to net profit after tax(4) of $51.7 million in prior year. Statutory net profit after tax of $49.0 million, up 5.7% from prior year of $46.4 million. Net cash position of $185.9 million, an improvement of $74.1 million compared to FY21. Launched the popular Commbank pay with points partnership online, which was previously only available in-store. Launched The Movement at Myer, an all-encompassing fitness and lifestyle destination. • Continued to improve the MYER one program resulting in an increase in tag rate to 71.3% (FY21: 69.7%), its highest since public listing in 2009. • • • • (1) (2) Exited the Blacktown and Knox stores, and refurbished the Toowoomba and Albury stores. Relocated the Store Support Office (SSO) to a new and smaller footprint. Took possession of the National Distribution Centre (NDC) facility in Ravenhall, Victoria, with the state of the art facility expected to be fully operational in 2H23. Refinanced existing credit facilities with a four-year Asset Based Loan. Revenue from sale of goods excluding concession sales and sales revenue deferred under customer loyalty program was $2,340.6 million (FY21: $2,116.5 million) 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. Also excluded is the 53rd week of 2021 (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 1 Myer Annual Report 2022Remuneration Report 31 REMUNERATION REPORT Continued Changes to the Executive Remuneration Framework for FY21 and FY22 As outlined in both the FY20 and FY21 Remuneration Reports, in FY21 we made a number of changes to our remuneration framework to further align the remuneration of our executives with the interests of our shareholders. These changes included the introduction of the Transformation Incentive (TI) plan to replace the normal Short Term Incentive (STI) plan for both FY21 and FY22. The objective of the TI plan was to promote longer-term shareholder interests during a crucial period for the Company, by placing significant importance on transforming the business and ensuring an optimal response to the challenges presented by the COVID-19 pandemic. In line with this, financial performance was measured against net profit after tax, the strongest indicator of Myer’s profitability, but performance was also assessed against key measures critical to the transformation of Myer, such as online profitability, physical stores earnings per square metre, management of stock and the MYER one tag rate. For the period of the TI plan, a greater portion of Executive KMP’s remuneration was also weighted towards the TI plan, relative to the Long Term Incentive (LTI) plan, and a higher percentage of awards were granted in equity as opposed to cash. The Board is pleased with the outcomes of the TI plan over the last two years, as well as the positive shareholder response. As previously disclosed, from FY23 we will revert to a more traditional STI structure and remuneration mix. The Board has decided to retain key elements of the TI plan, including in particular transformative performance measures that remain strongly aligned to our Customer First Plan. The LTI plan introduced for FY21 has been retained, with the delivery of the plan by way of performance rights as opposed to performance options; and the inclusion of a positive absolute Total Shareholder Return (TSR) gateway measure, which prevents reward outcomes where there have been declines in shareholder return over the performance period. The changes made to the executive remuneration framework over the past two years support the Company’s transformation agenda and the challenging macro environment. As always, the Board is focussed on maintaining a strong link between transforming our business performance and executive remuneration outcomes, as well as ensuring our approach to executive remuneration supports the delivery of our Customer First Plan, for the benefit of our customers and our shareholders. Executive Remuneration Outcomes in FY22 The Board believes the remuneration outcomes detailed below reflect the performance of our Executive KMP during FY22, including in particular the Executive Management’s Team efforts in continuing to lead the transformation of the business in alignment with our Customer First Plan. • The freeze on the CEO and Managing Director’s total fixed compensation (TFC) continued in FY22. • Other Executive KMP received a 5% TFC increase effective 1 April 2022, which was their first increase to TFC since 2015 (apart from an increase made to the CFO’s TFC in 2018 to reflect a change to his role). The Board considered this to be an appropriate decision given the continuing priority to retain our high calibre senior personnel who are critical in the delivery of our Customer First Plan and market conditions. This increase was effected as part of the annual remuneration review process conducted at this time for salaried team members. • When assessing performance and associated remuneration outcomes for the FY22 TI plan, the Board made the decision to take account of material matters beyond the control of the executive team, including in particular extensive store closures in the first half of FY22 as well as the impact of the Omicron wave. • • (1) Executive KMP and the broader Management team will receive a TI award equal to 47.3% of their maximum entitlement. The TI award outcome reflected strong performance against the key financial metric of net profit after tax, with the Company’s growth in profitability driven by the Management team’s efforts in continuing to lead the transformation of the business in alignment with our Customer First Plan. Despite strong progress in relation to other key transformational measures, the challenging targets set by the Board for these measures were not met and there was no vesting in relation to these measures. In relation to performance options issued under the FY20 LTI plan for Executive KMP, the Relative TSR component did not vest, but maximum performance under the EPS condition was met with a compound annual growth rate of 22.4%(1). EPS compound annual growth rate is calculated using net profit after tax excluding implementation costs and individually significant items Non-Executive Director Remuneration Following the reductions in Board fees disclosed in the FY21 Remuneration Report after taking account of shareholder feedback, there have been no further changes to the Chairman’s and Non-Executive Directors’ base annual fees and these reduced fees will continue to apply for the duration of FY23. 2 Myer Annual Report 2022Remuneration ReportDirectors’ Report Remuneration ReportFinancial StatementsYear in Review 32 REMUNERATION REPORT Continued FY23 Remuneration Framework At our 2021 Annual General Meeting (AGM), the majority of eligible shareholder votes cast (63.18 percent) were in favour of adopting the FY21 Remuneration Report and 36.82 percent of the votes cast were against the adoption of the Report. The Board has determined to revert back to a more traditional STI and LTI framework for FY23. While the total variable remuneration opportunity will not change for FY23, the overall remuneration mix will shift with the STI opportunity decreasing from 100% to 90% for the CEO and Managing Director and 75% to 65% for other Executive KMP and the LTI opportunity increasing from 70% to 80% for the CEO and Managing Director and 45% to 55% for other Executive KMP, promoting long-term shareholder alignment. Further details regarding the FY23 remuneration framework will be provided in the Notice of Meeting and next year’s Remuneration Report. We thank the many stakeholders who have shared their feedback with us over the past year. The Board will continue to take account of the views of our shareholders in reviewing and setting the remuneration framework. Yours faithfully, Jacquie Naylor Chairman – Human Resources and Remuneration Committee 3 Myer Annual Report 2022Remuneration Report REMUNERATION REPORT Continued Contents (1) Introduction (2) Snapshot of Remuneration Framework (3) Executive KMP Remuneration (4) Executive KMP Service Agreements (5) Non-Executive Director Remuneration (6) Remuneration Governance (7) Executive KMP Statutory Disclosures (8) Equity (9) Loans (10) Dealing in Securities 1. Introduction 33 33 34 39 46 46 49 50 55 56 56 The Directors of the Company present the Remuneration Report for the financial period ended 30 July 2022 prepared in accordance with the requirements of the Corporations Act 2001 (Cth) 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 FY22. All KMP were in their roles for the full year, unless otherwise stated. Name Role Non-Executive Directors J Stephenson(1) Chairman, Independent Non-Executive Director D Whittle J Naylor A Mervis(2) Executive Directors Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director J King Chief Executive Officer and Managing Director Other Executive KMP N Chadwick A Sutton A Winstanley Chief Financial Officer Executive General Manager Stores Chief Merchandise Officer Ms Stephenson was Acting Chairman from 29 October 2020 to 15 September 2021, and was appointed Chairman with effect from 16 September 2021. (1) (2) Mr Mervis was appointed as a Non-Executive Director with effect from 20 September 2021. 4 Myer Annual Report 2022Remuneration ReportDirectors’ Report Remuneration ReportFinancial StatementsYear in Review 34 REMUNERATION REPORT Continued 2. Snapshot of Remuneration Framework 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 ultimately deliver value to our shareholders. 2.2 Remuneration Structure for FY22 Strategic objectives and performance link Performance measures What has changed for FY22? Total Fixed Compensation (TFC) • • • To attract and retain high calibre talent. • Provides “predictable” base level of reward. Set with reference to the market using external benchmark data. Varies based on employee’s experience, skills, and • No changes to the CEO and Managing Director’s TFC during performance. FY22. • Consideration is given to both • The other Executive KMP internal and external relativities across retail and other relevant sectors. received a TFC increase of 5%, effective 1 April 2022 which represents the first TFC increase for the Executive KMP since 2015(1). Transformation Incentive (TI) plan For Executive KMP, 50 percent of the award is delivered in cash, and 50 percent is delivered in deferred shares subject to a disposal restriction for 12 months (as to 25 percent) and 24 months (as to the other 25 percent) following performance testing. Under the TI plan, a greater portion of the award is delivered in equity and there is a longer deferral period than the previous STI plan (FY20). Designed to drive the short-term financial and strategic objectives of the Company, aligned to the accelerated Customer First Plan and Myer’s turnaround strategy. Encourages focus on long-term value in addition to annual results, through the equity component. • • TI awards for all participants at Myer are assessed against a set of balanced scorecard measures outlined below: • • Net profit after tax accounts for 50 percent of the maximum TI. Transformation progress against the accelerated Customer First Plan accounts for 50 percent of the maximum TI. Transformation measures include online EBIT, Bricks & mortar EBITDA per square metre, cost per customer order, Stock turn performance and MYER one tag rate(2). • • • This is the second and final year of the TI plan. The FY22 TI plan remains largely unchanged from the FY21 TI plan. Performance measures remain focused on our Customer First Plan and Myer’s turnaround strategy with net profit after tax the key financial measure of performance under the TI plan. The equity component will be delivered in deferred shares subject to a disposal restriction only, over a period of 12 and 24 months. • • • 5 Myer Annual Report 2022Remuneration Report 35 • • Performance rights have been maintained for the FY22 LTI plan. The absolute TSR gateway which was introduced last year has also been maintained. REMUNERATION REPORT Continued Long Term Incentive (LTI) • • Delivered in equity, in the form of performance rights, which most appropriately aligns Executive KMP with shareholder interests and avoids the dilutive impact of performance options. Focused on delivery of Myer’s long-term business strategy and shareholder value creation. • Measures complement those in the TI plan to provide a holistic and aligned reward offer. • Supports ongoing, sustainable performance and the retention of key executive talent. • All Performance Rights granted under each LTI award will be tested against a positive absolute Total Shareholder Return (TSR) gateway measure. • Where positive TSR is achieved over the 3-year performance period (FY22- FY24), the award will be assessed against: • • Relative TSR (50 percent of award) against a retail and consumer services peer group; and Underlying Earnings Per Share (EPS) compound annual growth (50 percent of award). • Performance is measured over 3 years and shares are provided on vesting following performance testing, which are restricted for 12 months. For the CEO and Managing Director, performance is measured over 3 years, but the vesting period is 4 years and no further restriction period applies. (1) (2) Apart from an increase made to the CFO’s TFC in 2018 to reflect an increase in the scope of his role. For more details on performance measures, refer to Section 3.2. The following diagram shows how our remuneration framework is delivered to Executive KMP (dates provided are not intended to be exhaustive). The CEO and Managing Director has a vesting period of 4 years for the LTI, with no restriction period which has not been illustrated in the below diagram. 6 Myer Annual Report 2022Remuneration ReportDirectors’ Report Remuneration ReportFinancial StatementsYear in Review 36 REMUNERATION REPORT Continued 2.3 Company Performance for FY22 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. The table below presents the Company’s annual performance against key financial metrics since 2018. Basic EPS (cents) Basic EPS (cents) – adjusted(1) Net profit after tax (NPAT) (pre implementation costs and individually significant items) ($m) FY18 FY19 FY20 FY21 FY22 (59.2) 3.0 (21.0) 4.0 4.0 (1.6) 5.7 6.3 6.0 7.3 32.5 33.2 (13.4) 51.7 60.2 NPAT (post implementation costs and individually significant items) ($m) (486.0) 24.5 (172.4) 46.4 49.0 Dividends (cents per share) - - - - 4.0 Share price at beginning of year ($) 0.77 0.46 0.53 0.21 0.49 Share price at end of year ($) Market capitalisation ($m) 0.46 0.53 0.21 0.49 0.47 377.8 435.3 172.5 402.4 386.0 (1) 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. 2.4 Remuneration Outcomes for FY22 FY22 TFC No increase was made to the CEO and Managing Director’s TFC in FY22. Mr King’s fixed TFC has not increased since his appointment in June 2018. The other Executive KMP received a TFC increase of 5%, effective 1 April 2022 in response to labour market pressures and to ensure we retain our critical executive talent through our transformation period. This increase was effected as part of the annual remuneration review process conducted at this time for salaried team members. This represents the first TFC increase for Executive KMP since 2015, apart from an increase made to the CFO’s TFC in 2018 to reflect an increase in the scope of his role. TFC consists of base salary plus statutory superannuation contributions. Executive KMP receive a TFC package which is reviewed annually by the Human Resources and Remuneration Committee with reference to Company and individual performance, size and complexity of the role and benchmark market data. FY22 TI Plan Outcome The Board set challenging performance targets for the FY22 TI following a robust target setting process that took into account many factors, including FY21 performance, market conditions such as disruptions to the supply chain and the continuing challenges presented by COVID-19. Following a year in which significant progress was made by our people in delivering the Customer First Plan, TI outcomes for FY22 reflect the strong growth that was again achieved against the key financial metric of net profit after tax. The remaining TI metrics were transformational objectives, aligned with key priorities of the Customer First Plan. These measures comprised online EBIT, Bricks & mortar EBITDA per square metre, cost per customer order, Stock turn performance and MYER one tag rate. Whilst FY22 saw further strong progress in relation to these measures, the challenging threshold targets set by the Board were not achieved. Actual TI payments to each Executive KMP are detailed in the table at Section 7. The payment of a TI award for FY22 represents the second time that the Company has paid either a TI or STI award to Executive KMP since the STI award relating to FY16. 7 Myer Annual Report 2022Remuneration Report REMUNERATION REPORT Continued The following table details FY22 TI scorecard measures and assessment applied to Executive KMP. Objectives 2022 Performance Assessment Commentary Financial Objectives (50% weighting) NPAT Threshold hurdle exceeded • NPAT threshold target achieved despite 37 Transformation Objectives (50% weighting, 10% for each measure) Online Earnings Before Interest and Taxes Threshold hurdle not met Cost per Customer Order Threshold hurdle not met Department Store, Bricks and Mortar EBITDA per square metre Threshold hurdle not met Stock turn Threshold hurdle not met MYER one tag rate (in-store and online) % Threshold hurdle not met lockdowns in FY22. • Company achieved highest 2H NPAT(1) since 2H13. • • • • Achieved strong growth from sales increase and significant market share gains but below stretch transformation objective. Did not achieve targeted improvement Year on Year (YoY). Despite a 15% YoY increase in this metric, did not meet the stretch transformation objective due to 1H22 lockdowns and COVID-19 impacts. Despite the improvements to inventory health, stock-turn did not meet threshold hurdle as more inventory on average was held due to 1H22 COVID-19 impacts and to mitigate supply chain disruptions. • Grew tag rate significantly YoY to 71.3%, a record result since public listing in 2009, but not above threshold hurdle, largely due to Omicron impacts. % of Maximum Achieved: 47.3% (1) Excluding implementation costs and individually significant items FY20 LTI Plan Outcome The FY20 LTI was tested equally against both performance conditions over the three-year performance period between 28 July 2019 and 30 July 2022. Maximum performance under the EPS condition (accounting for 50% of the performance options) was met with a compound annual growth rate of 22.4%(1). The relative TSR component did not vest. The performance options have an exercise price of $0.55 and will expire on 23 November 2023, four years after the grant date. (1) EPS compound annual growth rate is calculated using net profit after tax excluding implementation costs and individually significant items 8 Myer Annual Report 2022Remuneration ReportDirectors’ Report Remuneration ReportFinancial StatementsYear in Review 38 REMUNERATION REPORT Continued 2.5 Payments to Executive KMP in FY22 The table below sets out the actual remuneration received by Executive KMP in FY22. 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 STI deferred Vested & Termination Actual FY22 Name Cash salary(1) $ Super- annuation(2) $ FY21 TIP(3) $ from prior year(4) $ exercised LTIP(5) $ Executive Directors J King(6) 1,200,000 - 387,318 - 1,386,486 Other Executive KMP N Chadwick 784,538 23,712 192,449 A Sutton 647,288 23,712 159,769 A Winstanley(7) 808,250 - 192,449 - - - - - 316,666 and other payments Remuneration $ $ - - - - 2,973,804 1,000,699 830,769 1,317,365 (1) Cash salary includes short-term compensated absences, 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. TIP payments relating to FY21 performance and conditions, but paid during FY22. Includes only the non-deferred component. (3) (4) Deferred STI relating to FY20 performance and conditions, paid during FY22. (5) Mr King and Mr Winstanley exercised rights vested under their equity alignment plans following the opening of the trading window after the release of the FY21 Results. The Myer share price at exercise was $0.57. (6) Mr King does not receive superannuation contributions due to his tax status. As per the terms of his employment contract, Mr King is entitled to other support, including a health insurance allowance, relocation expenses for spouse, and return flights home. 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, Mr Winstanley is entitled to other support, including a health insurance allowance and return flights home. More details can be found in Section 7. 9 Myer Annual Report 2022Remuneration Report 39 REMUNERATION REPORT Continued 3. Executive KMP Remuneration 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; Transformation Incentive Plan; 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. 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 retail Senior Management 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, and has not been adjusted since 2015. Some of Mr King’s significant achievements have included: • • Leading the ongoing business transformation under the Customer First Plan which was launched in September 2018. Delivering improved FY22 results, despite ongoing COVID-19 impacts, with the Company recording its highest second half net profit after tax since 2H13(1), demonstrating the continuing strong momentum in the business. • Continued strong growth in the online business, now one of Australia’s largest online businesses, demonstrating the strength of Myer’s omni channel offer (annual Group online sales(2) up to $722.8 million or 24% of total sales). • • Further progress on space optimisation (exited Blacktown store and refurbished the Toowoomba store). Significantly improved net cash position of $185.9 million (up $74.1 million compared to FY21), reflecting a disciplined approach to balance sheet and cost control. 10 Myer Annual Report 2022Remuneration ReportDirectors’ Report Remuneration ReportFinancial StatementsYear in Review 40 REMUNERATION REPORT Continued • • • Relocated the Store Support Office (SSO) to a new and smaller footprint and took possession of the NDC facility in Ravenhall, Victoria. Refinanced existing credit facilities with a four-year Asset Based Loan. Launched the Commbank pay with points partnership online (previously only available in- store). • Continued to improve the MYER one program resulting in an increase in tag rate to 71.3% (highest level since public listing in 2009), from 69.7% in previous year. As in FY21, Mr King did not receive an increase to his TFC in FY22. Excluding implementation costs and individually significant items (1) (2) Group online sales includes sass & bide and Marcs and David Lawrence. Excludes sales via in-store iPads. 3.2 Transformation Incentive Plan As part of the executive reward review undertaken during FY20, the Transformative Incentive (TI) plan was introduced to replace the normal STI plan for a period of 2 years, starting in FY21. The FY22 TI plan applied to all eligible executives, including Executive KMP, senior managers, and other select participants, subject to certain conditions and performance criteria being met which are reviewed and approved annually by the Board. Form and purpose of the plan What is the TI The TI plan replaces the annual STI plan for a period of two years after which the Company intends to plan? return to a STI plan. The TI plan is an at risk component of an Executive KMP’s reward opportunity, with longer deferral periods and greater deferral into equity than the previous STI plan, which is designed to put a meaningful part of the Executive KMP’s remuneration at risk. Payment under the TI plan has been designed to link a portion of remuneration to the transformation of Myer, aligned with delivery of the Customer First Plan and to address the new challenges presented by COVID-19. What is the value of the TI opportunity? TI targets are set as a percentage of the Executive KMP’s TFC. The maximum levels for Executive KMP are set out below. • CEO and Managing Director – 100 percent of TFC. • Other Executive KMP – 75 percent of TFC. Does the TI include a deferred 50 percent of the FY22 TI award will be delivered in deferred shares subject to a disposal restriction meaning that the shares are unable to be disposed during the restriction period. The TI plan also allocates a greater portion of the TI award into equity than the previous STI plan which ensures further shareholder component? alignment. The equity component to be granted under the FY22 TI plan will be issued in two tranches: • • Tranche 1: 50% of the deferred shares will be subject to a one-year disposal restriction, which will not be released until the first day after the first anniversary of the date on which the deferred shares are granted which occurs during a trading window under the Company’s Security Dealing Policy; and Tranche 2: the remaining 50% of deferred shares will be subject to a two-year disposal restriction, which will not be released until the first day after the second anniversary of the date on which the deferred shares are granted which occurs during a trading window under the Company’s Security Dealing Policy. Performance measures What were the The performance measures and their relative weightings applicable to the FY22 TI plan are: FY22 performance measures? • • NPAT accounts for 50 percent of the TI scorecard. Transformation measures (Online EBIT, cost per customer order, Bricks & mortar EBITDA per square metre, stock turn performance, and MYER one tag rate) account for 50 percent of the TI scorecard, with each measure counting towards 10 percent of the TI scorecard. Why were the performance Performance measures under the TI plan are transformational in nature, in line with the accelerated Customer First Plan. These measures immediately align Executive KMP effort with the turnaround strategy measures selected? of the Company. The performance measures are quantifiable and heavily focused on financial performance. The Board believes that a large component of an Executive KMP’s TI award should be driven by the financial performance of the Company, and accordingly 50 percent of the TI is dependent on Company NPAT, providing close alignment with shareholder outcomes. 11 Myer Annual Report 2022Remuneration Report 41 REMUNERATION REPORT Continued The Transformation measure reflects the significant importance of transforming the business and focus on our Customer First Plan and turnaround strategy, including key focus areas of online profitability, physical stores earnings per square metre, management of stock and M one tag rate. Targets are set at stretching levels to align with the objectives set under the Customer First Plan. This directly links Myer’s short-term goals with the longer-term strategy of the Company. Performance objectives and targets are set following a rigorous budget setting process at the beginning of the financial period, while performance against these targets is reviewed following the end of the financial period. Governance When are performance targets set and reviewed? How is performance 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 measured? Directors. The quantum of any TI reward provided will depend on the extent to which the maximum reward is achieved. Once it has been determined whether each objective has been satisfied, the Committee will make a recommendation to the Board for approval of the TI awards to be paid to the Executive KMP and other participants. 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 TI 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 considering unexpected or unintended circumstances. When are incentives paid? The component of the TI awards approved by the Board that is not subject to deferral is paid to participating Executive KMP in October following the Financial Year End and are subject to ongoing employment at the date of payment. The deferred component of Executive KMP’s TI is provided in deferred shares, which they will not be able to trade during the relevant disposal restriction period. See above for details. Cessation of employment, clawback or change of control If an individual Participants leaving employment during the performance year due to resignation, termination for cause, or gross misconduct are generally not eligible to receive an award under the TI plan. Participants leaving employment during the performance year for other reasons (e.g. redundancy) will be entitled to receive a pro-rata award. The TI plan allows the Board to take any steps that it determines appropriate to recover from the individual executives any TI 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 TI. 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 TI awards on a change of control, which it would exercise in the best interests of the Company. ceases employment during the performance year, will they receive a payment? Does a “clawback” apply? How would a change of control affect TI plan entitlements? 12 Myer Annual Report 2022Remuneration ReportDirectors’ Report Remuneration ReportFinancial StatementsYear in Review 42 REMUNERATION REPORT Continued 3.3 FY22 Long Term Incentive Plan Features of the LTI plan applicable in respect of FY22 are outlined in the table below. 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 rights 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 rights. The number of performance rights that vest is not determined until after the end of the performance period. The performance rights will therefore not provide any value to the holder between the dates the performance rights are granted and the end of the vesting period and restriction period (if applicable), and then only if the performance hurdles are satisfied. Performance rights do not carry entitlements to ordinary dividends or other shareholder rights until the performance rights vest and shares are provided. Accordingly, participating executives do not receive dividends during the vesting period. How was the number of The number of performance rights 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 performance rights determined? the quantum required to provide a market competitive total remuneration level, for on target performance. The number of performance rights 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 70 percent of TFC in FY22. Other Executive KMP are entitled to a maximum value of 45 percent of TFC. These opportunity levels are the same as in FY21, representing a reduction in quantum from the maximum opportunity levels provided to Executive KMP under the FY20 LTI plan. This reduction was implemented as part of changes to the remuneration mix and the introduction of the TI plan for FY21 and FY22. The maximum value divided by the value attributed to the performance right was used to determine the exact number of performance rights granted. The value attributed to the performance right was $0.5716, being the volume weighted average price (VWAP) of the Company’s shares over the five trading days following the release of the Company’s FY21 results (i.e. the 5 trading days commencing on 16 September 2021). Vesting and performance hurdles What is the performance period? The performance period commences at the beginning of the financial period in which the performance rights are granted. For the performance rights granted under the FY22 LTI plan, the performance period started on 1 August 2021 and ends on 27 July 2024. Following the end of the performance period and after the Company has lodged its audited financial results for FY24 with the ASX, the Board will test the performance hurdles that apply to the FY22 LTI plan offer and will determine how many performance rights (if any) are eligible to vest. What are the performance hurdles? The performance measures approved by the Board for the FY22 LTI plan offer were in two stages: Stage 1 – Absolute TSR gateway - requiring achievement of a positive absolute TSR over the testing period. If absolute TSR is negative, performance rights lapse. Stage 2 – Where absolute TSR performance is positive over the performance period, performance rights will be assessed against underlying 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. Why were the performance hurdles chosen? The hurdles were chosen to align shareholder returns with executive remuneration outcomes over the three-year performance period and to complement the TIP plan measures. The Board considers underlying 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 13 Myer Annual Report 2022Remuneration Report 43 REMUNERATION REPORT Continued 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 rights that vest will depend on how well Myer has performed during the performance period. For superior performance, 100 percent of the performance rights will vest. Only a percentage of performance rights will vest for performance below that level. If Myer does not achieve certain minimum thresholds then all the applicable performance rights will lapse, and no performance rights will vest. For the FY22 LTI plan offer, the following vesting hurdles apply: Stage 1 – Absolute TSR gateway The absolute TSR hurdle is tested by measuring the Company’s Share price at the beginning and at the end of the performance period, and the absolute TSR must be positive over the performance period to progress to Stage 2 of testing. If the absolute TSR over the performance period is negative, all performance rights granted under the LTI will lapse. For the purpose of this calculation, the opening value was set at $0.459, this being the 5 trading day VWAP up to and including 30 July 2021. The end value will be based on the 5 trading day VWAP up to and including the last day of the performance period. The Board retains discretion to adjust the absolute TSR performance gateway in exceptional circumstances. Stage 2 – Relative TSR and Underlying EPS Only if Stage 1 testing delivers a positive absolute TSR result, will Stage 2 testing be undertaken. Stage 2 testing focuses executive effort on long-term sustainable performance. Stage 2 requires two performance hurdles to be met: a) 50% of the performance rights will be subject to a hurdle based on the Company’s TSR relative to an agreed peer group across the three-year performance period (Performance Period); b) 50% of the performance rights will be subject to a hurdle based on the Company’s underlying EPS. The Stage 2 performance hurdles have been chosen to align with shareholder returns and the delivery of shareholder value over the long-term. Each of the performance hurdles under Stage 2 will be assessed separately and apply to different performance rights. This means that both hurdles do not need to be satisfied for any of the performance rights to vest. Stage 2 - Performance rights 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 underlying EPS using EPS at the end of FY21 as the base year. The resulting growth rate will be used to determine the level of vesting for the performance rights subject to the EPS Hurdle. The table below sets out the percentage of performance rights subject to the EPS Hurdle that can vest depending on the Company’s growth in underlying EPS. The EPS targets were the same as under the FY21 LTI plan. The Board believes that the FY22 targets provide appropriate ambition and stretch for Executives, in light of Myer’s EPS growth in prior years. Growth in underlying EPS from base year EPS Below 5% compound annual growth At 5% compound annual growth % of performance rights subject to the EPS Hurdle that will vest (rounded down to the nearest whole number) Nil 50% Between 5% and 12% (inclusive) compound Straight line pro-rata vesting between 50% and annual growth At or above 12% compound annual growth 100% 100% 14 Myer Annual Report 2022Remuneration ReportDirectors’ Report Remuneration ReportFinancial StatementsYear in Review 44 REMUNERATION REPORT Continued Stage 2 - Performance rights 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 TSR performance over the performance period relative to a set peer group. The peer group for the FY21 LTI grant includes listed companies from the retail and the consumer services sector. The constituents are: Accent Group, Adairs, Adore Beauty Group, Baby Bunting, Beacon Lighting, Best & Less Holdings, Booktopia Group, Cettire, City Chic Collective, Dusk Group, Endeavour Group, Harvey Norman Holdings, JB Hi-Fi, Kogan, Lovisa Holdings, Metcash, Michael Hill International, Nick Scali, Premier Investments, Redbubble, Super Retail Group, Temple & Webster Group, The Reject Shop, Universal Store Holdings, Wesfarmers and Woolworths. This group is different to that used for the FY21 LTI grant and was selected following a Board review with a view to ensuring the list contains companies that are appropriate comparators for Myer for the purposes of assessing company performance during the LTIP period. Key changes to the peer group include the addition of recently listed consumer discretionary retailers (including several online retailers) and the removal of several travel companies and automotive retailers. 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 Below the 50th percentile At the 50th percentile % of performance rights subject to the TSR Hurdle that will vest (rounded down to the nearest whole number) 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% Are the No. Each performance hurdle is only tested once at the end of the performance period. performance hurdles subject to retesting? How are shares Under the plan, following vesting, the performance rights will be automatically exercised and the allocated? Executive is allocated one fully paid ordinary share for each vested performance right. Do any Any shares provided on vesting of the performance rights will be subject to a restriction period of one restrictions apply once the rights year, during which they cannot be sold, transferred or otherwise dealt with. A continuous service restriction will also apply during the restriction period. vest? Due to foreign resident tax considerations, for the CEO and Managing Director, the performance period is 3 years, but the vesting period is 4 years during which a continuous service condition applies. Cessation of employment, change of control, clawback, forfeiture, participation in future issues and hedging The treatment of performance rights 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 rights. If employment ceases on or before the end of the restriction period for other reasons, the executive 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). arrangements Cessation of employment 15 Myer Annual Report 2022Remuneration Report 45 REMUNERATION REPORT Continued How would a change of control impact LTI plan entitlements? The Board has absolute discretion to allow full or pro-rated accelerated vesting of performance rights in the event of certain change of control events, and would exercise this discretion as appropriate considering the circumstances. Does a “clawback” 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 and/or forfeiture apply? ‘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 rights and entitlements attaching to performance rights 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 rights may be changed in a manner determined by the Myer Board and consistent with the ASX Listing Rules. How would a bonus or rights issue impact performance rights under the LTI plan? Do any other restrictions apply Executives are forbidden from entering into any hedging arrangements affecting their economic exposure to performance rights or restricted shares. to performance rights prior to vesting or subject to restriction? Executives are also forbidden from entering into transactions or arrangements prohibited under the Company’s Securities Dealing Policy. In FY22, Executive KMP and other participating executives received a grant of performance rights. 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 FY22 performance rights granted to Executive KMP: Name J King N Chadwick A Sutton A Winstanley Number of performance rights granted Valuation of each performance right at grant date(1) $ 734,779 734,779 312,937 312,937 259,797 259,797 312,937 312,937 0.3760 0.3982 0.3760 0.3982 0.3760 0.3982 0.3760 0.3982 (1) The valuation is calculated in accordance with AASB 2 Share-based Payment. Exercise price $ Nil Nil Nil Nil Nil Nil Nil Nil Applicable hurdles End of performance period TSR EPS TSR EPS TSR EPS TSR EPS 27 July 2024 27 July 2024 27 July 2024 27 July 2024 27 July 2024 27 July 2024 27 July 2024 27 July 2024 16 Myer Annual Report 2022Remuneration ReportDirectors’ Report Remuneration ReportFinancial StatementsYear in Review 46 REMUNERATION REPORT Continued 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 payment in lieu of notice, initiated by Company Termination notice period, or 12 months 6 months 3 months 6 months 12 months 6 months 6 months 6 months The agreements also provide for an Executive KMP’s participation in the TI 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 30 July 2022 is summarised in Section 7. 5. Non-Executive Director Remuneration Remuneration Policy Myer’s policy regarding Non-Executive Director fees is as follows: • • • • • fees and payments to Non-Executive Directors reflect the demands upon and responsibilities of those Directors; 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 (excluding the Nomination Committee) to recognise the additional responsibility and time requirements involved in chairing a Committee; 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; and the Board, on the recommendation of the Human Resources and Remuneration 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 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. Aggregate Fee Pool 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. 17 Myer Annual Report 2022Remuneration Report 47 REMUNERATION REPORT Continued Reductions to Non-Executive Director Fees There were no changes to the Chairman and Non-Executive Directors’ base annual fees during FY22. As previously disclosed, there have been a number of reductions since FY17, with the Chairman fee reducing during that period from $400,000 to $250,000, Non-Executive Directors’ fees reducing from $150,000 to $100,000, the Audit Finance and Risk Committee Chairman fees reducing from $30,000 to $20,000 and the Human Resources and Remuneration Committee Chairman fees reducing from $22,500 to $20,000. During her tenure as Acting Chairman, Ms Stephenson elected not to receive the full Chairman fee and instead only received an annual Non-Executive Director fee of $120,000. From her appointment as Chairman on 16 September 2021, Ms Stephenson received the full Chairman fee. Chairman and Non-Executive Directors’ base annual fees are as detailed below. The same base annual fees will apply for FY23. Base Annual Fees Chairman (all inclusive)(1) 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 1 August 2021 – 30 July 2022 250,000 100,000 20,000 - 20,000 - - - (1) As Acting Chairman until 15 September 2021, JoAnne Stephenson received a base annual fee of $120,000. Minimum Shareholding 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. 18 Myer Annual Report 2022Remuneration ReportDirectors’ Report Remuneration ReportFinancial StatementsYear in Review 48 REMUNERATION REPORT Continued The table below shows the remuneration amounts recorded in the financial statements in the period for Non-Executive Directors: Name Non-Executive Directors J Stephenson(1) D Whittle(2) J Naylor(3) A Mervis(4) Former Non-Executive Directors G Hounsell(5) J Morrison(6) L Cattermole AM(7) Total Non-Executive Directors FY 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 Myer Holdings Limited Board & Committee Fees $ Superannuation $ 211,484 108,550 107,950 104,094 107,950 104,094 78,027 - - 55,347 - 22,282 - 22,282 505,411 416,649 22,266 11,450 12,050 10,982 12,050 10,982 8,716 - - 5,259 - 2,339 - 2,339 55,082 43,351 Total $ 233,750 120,000 120,000 115,076 120,000 115,076 86,743 - - 60,606 - 24,621 - 24,621 560,493 460,000 (1) Ms Stephenson was Acting Chairman from 29 October 2020 to 15 September 2021 but during that period elected not to receive the full Chairman Fees and was instead paid a base fee of $120,000. (2) Mr Whittle was appointed Chairman of the Audit, Finance and Risk Committee on 29 October 2020. (3) Ms Naylor was appointed Chairman of the Human Resource and Remuneration Committee on 29 October 2020. (4) Mr Mervis was appointed as a Non-Executive Director on 20 September 2021. (5) Mr Hounsell retired as a Non-Executive Director on 28 October 2020. (6) Ms Morrison retired as a Non-Executive Director on 29 October 2020. (7) Ms Cattermole AM retired as a Non-Executive Director on 29 October 2020. 19 Myer Annual Report 2022Remuneration Report 49 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 (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. The Committee comprises Ms Jacquie Naylor (Committee member from 3 September 2019) as Chairman and Ms JoAnne Stephenson and Mr David Whittle as members. 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, the CFO, and the General Manager, People & Culture are regular attendees at the Committee meetings. Neither the CEO and Managing Director nor the CFO were present during any Committee or Board meetings when their 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 she 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. No remuneration recommendations were made during FY22 as defined in the Corporations Act 2001. 20 Myer Annual Report 2022Remuneration ReportDirectors’ Report Remuneration ReportFinancial StatementsYear in Review 50 d n a s t n e m y a p d e s a b - e r a h s f o e s a c e h t n I . d o i r e p s h t n i i i d e d v o r p s e c v r e s i r o f i d e d r a w a r o d a p n o i t a r e n u m e r e h t l f o t n e m e e h c a e f o t n u o m a d n a e r u t a n e h t f o s l i a t e d s w o h s e b a t g n w o l i l l o f e h T l s e r u s o c s i D y r o t u t a t S P M K e v i t u c e x E . 7 I T R O P E R N O T A R E N U M E R d e u n i t n o C t c e l f e r y l i i l i r a s s e c e n t o n s e o d s h t y g n d r o c c a d n a s d r a d n a t s g n i t n u o c c a t n a v e e r h t i l w e c n a d r o c c a n i d o i r e p e h t g n i r u d d e s n e p x e t n u o m a e h t l i t c e l f e r d e s o c s d s t n u o m a e h t , s e v i t n e c n i n o i t n e t e r e s n e p x e n o i t a r e n u m e r l a t o T s t i f e n e b m r e t - g n o L t s o P ) 5 ( s t i f e n e b t n e m y o p m e l l s t i f e n e b e e y o p m e m r e t - t r o h S . l s e b a t g n w o i l l o f e h t n i n w o h s t n u o m a e h t n a h t s s e l r o e r o m e b y a m h c h w i , d o i r e p e h t g n i r u d l i a u d v d n i i e h t o t d a p y i l l a u t c a t n u o m a e h t f o % n o i t a r e n u m e R f o % f o g n i t s i s n o c e c n a m r o f r e P r o / d n a s t h g i r d e t a e r l l a t o T - e r a h S d e s a b t n e m y a p ) 8 ( e s n e p x e e r a h s d e s a b i g n d u c x E l r e h t o & n o i t a n m r e T i g n o L i e c v r e s ) 7 ( e v a e l s t n e m y a p s t n e m y a p l a t o t b u S ) 6 ( n o i t a u n n a ) 4 ( r e h t O ) 3 ( y r a t e n o M $ $ $ ) 2 ( I T ) 1 ( y r a a s l $ Y F e m a N - r e p u S - n o N h s a C s n o i t p o n o i t a r e n u m e r $ $ $ % 0 4 % 8 2 % 2 3 % 0 2 % 1 3 % 0 2 % 1 3 % 1 2 % 1 5 % 4 4 % 2 4 % 5 3 % 2 4 % 5 3 % 1 4 % 5 3 , 3 3 9 2 8 5 2 , , 2 1 2 3 3 4 2 , , 8 8 0 3 3 0 , 1 , 5 4 8 9 4 5 , 1 7 2 3 , 1 7 6 5 8 8 , 1 6 7 , 1 , 2 5 2 8 9 3 , 1 , 1 7 5 0 4 4 , 1 8 6 7 5 9 , 1 5 9 3 0 3 , 1 8 4 3 3 6 2 , , 3 0 6 0 4 0 , 1 , 0 5 2 4 6 1 , 1 , 7 5 7 5 6 3 3 9 4 8 9 7 , , 9 6 7 0 8 0 , 1 6 3 7 8 1 2 , , 3 3 0 2 6 8 , 5 9 8 9 2 4 , 1 , 1 7 5 0 4 4 , 4 2 3 9 8 9 , 9 0 6 4 0 3 , 1 3 6 9 8 6 2 , , 6 4 6 5 3 0 , 1 , 0 3 3 5 7 5 6 , , 7 8 9 9 7 2 2 , , 3 4 3 5 9 2 4 , , 1 4 5 2 2 1 , 6 , 4 7 3 2 2 4 , 1 7 6 1 , 0 0 7 4 , $ - - - - - - - - - - $ $ ) 0 0 9 4 ( , , 5 4 7 4 5 5 , 1 2 1 1 , 6 2 , 3 7 7 5 3 7 , 1 $ - - 5 4 9 , 1 3 7 7 2 9 3 , , 3 2 5 3 8 2 , 0 0 0 0 0 2 , 1 2 2 0 2 6 0 5 0 7 , 8 8 4 6 7 , , 9 7 7 8 8 3 , 0 0 0 0 0 2 , 1 1 2 0 2 s r o t c e r i D e v i t u c e x E ) 9 ( g n K J i P M K e v i t u c e x E r e h t O ) 0 1 9 2 ( , , 1 9 5 0 6 9 2 1 7 3 2 , 6 9 9 6 , 8 2 1 , 2 , 7 1 2 3 4 1 8 3 5 4 8 7 , 2 2 0 2 i k c w d a h C N 7 8 1 , 8 1 , 6 1 4 2 2 0 , 1 0 5 8 , 1 2 7 1 9 2 3 , 4 2 3 , 1 5 7 1 , 3 9 1 0 5 1 , 3 7 7 1 2 0 2 3 7 8 , 1 1 0 2 6 6 8 7 , 2 1 7 3 2 , ) 1 8 1 , 4 ( 4 0 9 7 9 8 8 1 1 , 8 8 2 7 4 6 , 2 2 0 2 n o t t u S A 5 9 0 2 1 , , 8 3 9 9 4 8 0 5 8 , 1 2 9 5 6 8 2 , 8 0 9 , 1 7 3 0 6 1 0 5 1 , 8 3 6 1 2 0 2 ) 6 8 9 , 1 ( 0 1 3 , 1 9 9 2 7 0 7 1 , , 4 7 5 8 1 0 , 1 - - 2 7 5 2 , 1 7 2 7 3 , , 7 1 2 3 4 1 , 0 5 2 8 0 8 2 2 0 2 2 3 3 2 2 , 7 6 0 8 , 5 7 1 , 3 9 1 0 0 0 5 9 7 , 1 2 0 2 l ) 0 1 ( y e n a t s n W A i 7 7 0 2 , 6 6 4 3 7 , , 6 6 2 3 9 2 4 , , 1 0 7 6 2 6 4 , 4 2 4 7 4 , 0 0 7 3 4 , 2 3 3 7 3 , 0 8 5 9 7 , , 4 5 8 8 8 6 , 4 1 4 4 5 1 7 8 7 6 8 , 0 0 5 5 3 9 , , 6 7 0 0 4 4 3 , , 0 0 3 6 0 4 3 , 2 2 0 2 1 2 0 2 n o i t a r e n u m e R P M K l a t o T 1 2 Myer Annual Report 2022Remuneration Report REMUNERATION REPORT Continued Footnotes (1) Cash salary includes short-term compensated absences, including any salary sacrifice arrangement implemented by the Executive KMPs, including additional superannuation contributions. TI payments relate to program performance and conditions for the year they were earned, not the year of actual payment. (2) (3) Non-monetary short term benefits include Fringe Benefits Tax paid by the Company in respect of Company provided car parking up to the end of March 2022 (in accordance with the FBT year), mobile phone expenses and other items referred to in footnotes (9) and (10) for Mr King and Mr Winstanley, respectively. 51 (4) Other short-term employee benefits include the movement in annual leave accrual. (5) (6) There were no post-employment benefits other than superannuation. Executive KMPs receive a statutory superannuation contribution up to a threshold limit in line with the ATO published maximum superannuation (7) (8) contribution base, with the exception of Mr King and Mr Winstanley, who do not receive superannuation due to their tax status. This benefit includes the movement in long service leave accrual. 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. (9) 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 terms of his employment contract. (10) Mr Winstanley's other short-term benefits include annual leave accrual, a health insurance allowance, and return flights home under the terms of his employment contract. 22 Myer Annual Report 2022Remuneration ReportDirectors’ Report Remuneration ReportFinancial StatementsYear in Review 52 REMUNERATION REPORT Continued 7.1 Unvested Performance Rights and Options Details of performance rights and options granted to Executive KMP under the previous equity incentive plans that remain unvested as at 30 July 2022 are set out in the table below. Value per instrument at grant Vesting date (if holder Grant type Grant date Number of instruments date $ remains employed by a Myer Group company) CEO Options (EPS hurdle)(1) 21-Nov-19 2,799,378 $0.18 End of vesting period Other Executive KMP Options (EPS hurdle)(1) 21-Nov-19 3,499,223 $0.15 End of vesting period CEO Options (TSR hurdle)(1) 21-Nov-19 2,799,378 $0.16 End of vesting period Other Executive KMP Options (TSR hurdle)(1) 21-Nov-19 3,499,223 $0.15 End of vesting period CEO Rights (EPS hurdle) 9-Nov-20 1,721,311 $0.22 End of vesting period Other Executive KMP Rights (EPS hurdle) 9-Nov-20 2,074,795 $0.22 End of vesting period CEO Rights (TSR hurdle) 9-Nov-20 1,721,311 $0.19 End of vesting period Other Executive KMP Rights (TSR hurdle) 9-Nov-20 2,074,795 $0.19 End of vesting period CEO TIP Rights 15-Dec-20 677,602 $0.57 End of vesting period(2) Other Executive TIP Rights 15-Dec-20 952,877 $0.57 End of vesting period(2) CEO Rights (EPS hurdle) 10-Nov-21 734,779 $0.40 End of vesting period Other Executive KMP Rights (EPS hurdle) 10-Nov-21 885,671 $0.40 End of vesting period CEO Rights (TSR hurdle) 10-Nov-21 734,779 $0.38 End of vesting period Other Executive KMP Rights (TSR hurdle) 10-Nov-21 885,671 $0.38 End of vesting period TIP Rights(3) Total 16-Feb-22 - - End of vesting period(3) 25,060,793 (1) (2) (3) Performance options granted on 21 November 2019 will have an expiry date of 21 November 2023. From issue date 50% of TIP rights are subject to a one-year service period and 50% are subject to a two-year service period. The number of rights granted and converted into deferred shares will be determined by dividing the dollar value of the rights component of the TIP award by the volume weighted average price of the Company’s shares over the five trading days immediately following the release to the market of the Company’s full year FY22 results. The deferred share will then be subject to a disposal restriction period. Details of performance rights or options over ordinary shares in the Company currently provided as remuneration and granted during FY22 to Executive KMP are set out overleaf. Further information on the LTI and TI plan is set out in note H4 of the Financial Statements. 7.2 Equity Instruments Granted to Executive KMP in FY22 Name J King N Chadwick A Sutton A Winstanley Vesting Date Number of performance rights granted(1) Value of performance rights at grant date(2) $ Number of rights vested during the period 30-Sep-25 30-Sep-24 30-Sep-24 30-Sep-24 1,469,558 625,874 519,594 625,874 840,000 357,750 297,000 357,750 - - - - (1) (2) No performance rights were granted to Non-Executive Directors during the reporting period. The face value for allocating rights under the FY22 LTI plan was $0.57, based on the volume weighted average price of the Company’s shares over the five trading days following the release of the Company’s FY21 results. 23 Myer Annual Report 2022Remuneration Report 53 REMUNERATION REPORT Continued Deferred Shares – FY22 TI Plan The number of deferred shares (subject to a disposal restriction) to be issued will be determined by dividing the dollar value of the deferred shares component of the TI plan award by the volume weighted average price of the Company’s shares over the five trading days immediately following the release to the market of the Company’s full year FY22 results, and therefore these shares are not reflected in the above table. 7.3 Shares Provided on Exercise of Rights or Options The following Non-Executive Directors of the company or Executive KMP were provided ordinary shares as a result of exercise of options or rights. As part of the terms of their appointment in 2018, Mr King and Mr Winstanley were granted alignment rights. These rights fully vested during FY21, and were automatically exercised and converted into Myer ordinary shares following the opening of the trading window after the release of the FY21 Results. Name J King A Winstanley Number of ordinary shares provided on exercise of rights during the period(1) Value at exercise date(2) $ 2,432,432 555,555 1,386,486 316,666 (1) (2) The number of shares provided on exercise of rights are on a one-for-one basis. The value at exercise date of rights that were granted in prior periods as part of remuneration and were exercised during the period has been determined as the intrinsic value of the rights at that date. This represents the market value of the shares acquired. 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. Grant date Equity Vehicle Vested % Forfeited % Maximum total value of grant yet to be expensed (1) 16-Feb-22 10-Nov-21 15-Dec-20 9-Nov-20 21-Nov-19 24-Dec-18 16-Feb-22 10-Nov-21 15-Dec-20 9-Nov-20 21-Nov-19 24-Dec-18 16-Feb-22 10-Nov-21 15-Dec-20 9-Nov-20 21-Nov-19 24-Dec-18 Rights(4) Rights Rights Rights Options(2) Options(3) Rights(4) Rights Rights Rights Options(2) Options(3) Rights(4) Rights Rights Rights Options(2) Options(3) - - - - - - - - - - - - - - - - - - - - - - - 100% - - - - - 100% - - - - - 100% 47,254 474,055 64,797 410,777 313,250 53,763 23,870 191,802 32,196 167,978 116,244 18,318 19,816 159,232 26,729 139,454 96,504 15,207 Name J King N Chadwick A Sutton 24 Myer Annual Report 2022Remuneration ReportDirectors’ Report Remuneration ReportFinancial StatementsYear in Review 54 REMUNERATION REPORT Continued A Winstanley 16-Feb-22 10-Nov-21 15-Dec-20 9-Nov-20 21-Nov-19 24-Dec-18 Rights(4) Rights Rights Rights Options(2) Options(3) - - - - - - - - - - - 100% 23,870 191,802 32,196 167,978 116,244 18,318 Performance options granted on 21 November 2019 will expire on 21 November 2023. This represents the maximum remaining accounting value of the LTI and TI plan awards (rights and options) as at their grant date. (1) (2) (3) (4) Rights to deferred shares relating to the FY22 TI plan. The number of rights issued will be determined by dividing the dollar value of the rights component of The grants under the FY19 LTI plan lapsed following the release of the FY21 results due to failure of the vesting conditions. the TIP award by the volume weighted average price of the Company’s shares over the five trading days immediately following the release to the market of the Company’s full year FY22 results. 7.5 Transactions with KMP Mr King is a director of Raging Bull Group Limited and has a relevant interest in 18 percent of the shares. During the period ended 30 July 2022, Myer Pty Ltd placed orders for apparel totalling $1.4 million with Raging Bull Leisure Limited, whose ultimate parent is Raging Bull Group Limited. The orders have been placed on an arm’s length basis under a standard wholesale agreement. As at 30 July 2022, $0.6 million remains on order and not received, and $0.02 million was owing to Raging Bull Leisure Limited, in accordance with the terms under the wholesale agreement. 25 Myer Annual Report 2022Remuneration Report t u o t e s e r a , s e i t r a p d e t a e r y l l l a n o s r e p r i e h t g n d u c n i l i , y n a p m o C e h t f o P M K e v i t u c e x E y b d o i r e p l i a c n a n i f e h t g n i r u d d e h y n a p m o C e h t n l i i s e r a h s y r a n d r o r e v o s n o i t p o d n a s t h g i r f o r e b m u n e h T I T R O P E R N O T A R E N U M E R d e u n i t n o C y t i u q E . 8 l e c n a a b g n i s o C l d e s p a L d e s i c r e x E n o i t a s n e p m o c s a d e t n a r G l e c n a a b g n n e p O i s t h g R i s n o i t p O s t h g R i s n o i t p O s t h g R i s n o i t p O ) 2 ( ) 1 ( s t h g R i s n o i t p O s t h g R i s n o i t p O . l s r o t c e r i D e v i t u c e x E - n o N y b d e h e r a s e r a h s y r a n d r o r e v o s n o i t p o r o s t h g i r o N i . w o e b l 2 8 7 , 9 8 5 5 , 6 5 7 , 8 9 5 5 , 5 4 7 , 8 2 4 , 2 4 8 7 , 2 7 4 , 2 , 9 1 3 6 1 0 , 2 8 7 8 , 2 5 0 , 2 5 4 7 , 8 2 4 , 2 4 8 7 , 2 7 4 , 2 , 4 5 0 5 7 8 5 , 4 1 0 , 1 3 6 4 1 , - - - - - 3 4 7 , 1 2 0 , 2 4 0 2 , 0 5 5 5 , - 8 8 1 , 6 6 4 , 1 4 0 2 , 0 5 5 5 , ) 8 1 8 , 1 8 6 ( 4 1 2 , 7 1 2 , 1 6 1 7 , 7 0 6 4 , , ) 0 0 0 0 0 6 ( , ) 8 5 2 2 3 0 9 ( , , ) 2 3 4 2 3 4 2 ( , - - - - , ) 0 2 4 7 7 0 3 ( , , ) 8 3 8 4 5 5 2 ( , , ) 0 2 4 7 7 0 3 ( , - - - - - - , ) 5 5 5 5 5 5 ( - - - - - - - - 0 6 1 , 7 4 1 , 2 , 7 5 5 2 6 9 5 0 1 , 9 9 7 , 7 5 5 2 6 9 , 2 2 6 2 4 4 3 , 8 8 1 , 6 6 4 , 1 , 4 1 2 7 1 2 , 1 8 8 1 , 6 6 4 , 1 - - - - - - - - , 4 5 0 5 7 8 5 , 4 1 0 , 1 3 6 4 1 , 8 8 1 , 6 6 4 , 1 , 4 1 2 7 1 2 , 1 3 4 7 , 1 2 0 2 , , 2 3 4 2 3 4 2 , 8 1 8 , 1 8 6 , 0 0 0 0 0 6 5 5 5 5 5 5 , , 4 0 2 0 5 5 5 , , 6 1 7 7 0 6 4 , , 4 0 2 0 5 5 5 , 4 1 0 , 1 3 6 4 1 , , 4 0 2 0 5 5 5 , , 6 1 7 7 0 6 4 , , 4 0 2 0 5 5 5 , i k c w d a h C N n o t t u S A 2 2 0 2 i g n K J l y e n a t s n W A i i k c w d a h C N n o t t u S A i g n K J 1 2 0 2 l y e n a t s n W A i l i y e t a d e m m i i s y a d g n d a r t e v i f e h t r e v o s e r a h s ’ s y n a p m o C e h t i f o e c i r p e g a r e v a d e t h g e w e m u o v e h t n o d n e p e d l l l i w s e r a h s d e r r e f e d o t s t h g i r f o r e b m u n e h T . 2 2 0 2 y r a u r b e F 6 1 n o d e t n a r g e r e w P T 2 2 Y F e h t I f o n o i t r o p d e r r e f e d e h t r o f s t h g R i ) 1 ( . l e b a t e v o b a e h t n i n w o h s s r e b m u n e h t n i d e t c e l f e r t o n e r a s t h g i r e h t e r o f e r e h T . s e r a h s d e r r e f e d o t n i t r e v n o c l l i w d n a s t l u s e r 2 2 Y F r a e y l l u f ’ s y n a p m o C e h t f o t e k r a m e h t o t e s a e e r e h t g n w o i l l l o f 55 6 2 . s t l u s e r 1 2 Y F r a e y l l u f ’ s y n a p m o C e h t f o t e k r a m e h t o t e s a e e r e h t g n w o l i l l l o f y e t a d e m m i i i s y a d g n d a r t e v i f e h t r e v o s e r a h s ’ s y n a p m o C e h t f o e c i r p e g a r e v a d e t h g e w e m u o v l i e h t y b d r a w a e h t f o t n e n o p m o c s t h g i r d e r r e f e d e h t l f o e u a v r a l l i i i o d e h t g n d v d y b d e n m r e t e d s a w d e u s s i i s t h g i r f o r e b m u n e h T . 0 2 0 2 r e b m e c e D 5 1 n o d e t n a r g e r e w I t a h t P T 1 2 Y F e h t f o n o i t r o p d e r r e f e d e h t r o f d e u s s i e r e w s t h g i r , 2 2 Y F g n i r u D ) 2 ( Myer Annual Report 2022Remuneration ReportDirectors’ Report Remuneration ReportFinancial StatementsYear in Review 56 REMUNERATION REPORT Continued The number of shares in the Company held during the financial period by each Director of the Company and Executive KMP of the Company, including their personally related parties are set out below. Received on exercise of rights and / or options to Other changes Opening balance shares during the year Closing balance 2022 Directors J Stephenson D Whittle J Naylor Ari Mervis Executive KMP J King N Chadwick A Sutton A Winstanley 2021 Directors J Stephenson D Whittle J Naylor Former Directors G Hounsell(1) J Morrison(2) L Cattermole AM(3) Executive KMP J King N Chadwick A Sutton A Winstanley 235,000 266,666 121,000 - 1,150,000 350,000 26,086 500,000 185,000 66,666 121,000 1,400,000 146,788 1,023,232 1,000,000 350,000 26,086 500,000 - - - - 2,432,432 - - 65,000 - 90,000 250,000 - - 87,000 300,000 266,666 211,000 250,000 3,582,432 350,000 113,086 Auditor’s Independence Declaration As lead auditor for the audit of Myer Holdings Limited for the period ended 30 July 2022, I declare that to the best of my knowledge and belief, there have been: (a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 555,555 - 1,055,555 (b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Myer Holdings Limited and the entities it controlled during the period. - - - - - - - - - 50,000 200,000 - - - - 150,000 - - - 235,000 266,666 121,000 - - - 1,150,000 350,000 26,086 500,000 Alison Tait Milner Partner PricewaterhouseCoopers Melbourne 15 September 2022 (1) Mr Hounsell retired as Non-Executive Director on 28 October 2020. His holdings for the end of the FY21 period have not been reported in the table. (2) Ms Morrison retired as Non-Executive Director on 29 October 2020. Her holdings for the end of the FY21 period have not been reported in the table. (3) Ms Cattermole AM retired as Non-Executive Director on 29 October 2020. Her holdings for the end of the FY21 period have not been reported in the table. 9. Loans There were no loans made to Executive KMP or entities related to them, including their personally related parties, at any time during FY21 or FY22. 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. 27 43 Myer Annual Report 2022Remuneration Report 57 Auditor’s Independence Declaration As lead auditor for the audit of Myer Holdings Limited for the period ended 30 July 2022, I declare that to the best of my knowledge and belief, there have been: (a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Myer Holdings Limited and the entities it controlled during the period. Alison Tait Milner Partner PricewaterhouseCoopers Melbourne 15 September 2022 43 Myer Annual Report 2022Remuneration ReportDirectors’ Report Remuneration ReportFinancial StatementsYear in Review 58 Financial Statements for the period ended 31 July 2022 FINANCIAL STATEMENTS for the period ended 30 July 2022 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 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 59 60 61 62 63 64 64 65 66 67 68 68 68 69 70 71 73 75 75 76 77 83 84 85 86 87 89 90 90 90 91 92 92 93 Myer Annual Report 2022Financial Statements CONSOLIDATED INCOME STATEMENT for the period ended 30 July 2022 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, space exit costs and impairment of assets Finance revenue Finance costs Net finance costs Profit before income tax Income tax expense Profit for the period attributable to owners of Myer Holdings Limited Earnings 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. 59 2022 52 weeks $m 2,989.8 (606.2) 2,383.6 (43.0) 2,340.6 161.4 (1,356.8) 1,145.2 0.9 (690.9) (271.0) (13.2) 171.0 0.3 (99.2) (98.9) 72.1 (23.1) 49.0 Cents 6.0 5.9 2021 53 weeks $m 2,658.3 (505.5) 2,152.8 (36.3) 2,116.5 133.6 (1,194.4) 1,055.7 2.4 (648.3) (239.3) (7.6) 162.9 0.3 (96.4) (96.1) 66.8 (20.4) 46.4 Cents 5.7 5.6 Notes A2 A2 A2 A2 A3 A2 A3 A4 A5 A5 Myer Annual Report 2022Financial StatementsDirectors’ Report Financial StatementsYear in Review Remuneration Report 60 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the period ended 30 July 2022 Profit for the period Other comprehensive income Items that may be reclassified to profit or loss: Cash flow hedges Exchange differences on translation of foreign operations Other comprehensive income for the period, net of tax Total comprehensive income for the period attributable to owners of Myer Holdings Limited Notes F2 F2 2022 52 weeks $m 49.0 2021 53 weeks $m 46.4 0.8 0.9 1.7 50.7 5.9 0.6 6.5 52.9 The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes. Myer Annual Report 2022Financial Statements CONSOLIDATED BALANCE SHEET as at 30 July 2022 Assets Current assets Cash and cash equivalents Trade and other receivables and prepayments Inventories Derivative financial instruments 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 Lease liabilities Provisions Derivative financial instruments Current tax liabilities Other liabilities Total current liabilities Non-current liabilities Borrowings Lease liabilities Provisions 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. 61 2021 $m 178.6 20.0 305.2 3.1 506.9 318.5 1,224.1 304.4 112.2 0.7 1.3 1,961.2 2,468.1 353.3 156.2 63.1 1.1 16.4 0.2 590.3 66.8 1,579.3 4.8 - 1,650.9 2,241.2 226.9 737.7 (514.0) 3.2 226.9 2022 $m 243.9 28.4 371.4 5.3 649.0 305.0 1,177.8 305.3 111.6 0.3 1.6 1,901.6 2,550.6 429.3 144.2 67.7 0.6 23.8 0.1 665.7 58.0 1,555.0 4.4 0.1 1,617.5 2,283.2 267.4 737.1 (477.3) 7.6 267.4 Notes D1 B1 B2 E1 C1 C4 C2 A4 E1 B3 C4 C3 E1 D3 C4 C3 E1 F1 F2 F2 Myer Annual Report 2022Financial StatementsDirectors’ Report Financial StatementsYear in Review Remuneration Report 62 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the period ended 30 July 2022 Balance as at 25 July 2020 Net profit for the period Other comprehensive income for the period Total comprehensive income for the period Transactions with owners in their capacity as owners: Acquisition of treasury shares Employee share schemes Balance as at 31 July 2021 Net profit for the period Other comprehensive income for the period Total comprehensive income for the period Transactions with owners in their capacity as owners: Acquisition of treasury shares Employee share schemes Dividends Paid Balance as at 30 July 2022 Notes F1 F2 F1 F2 F3 Contributed equity $m 738.1 - - - Accumulated losses $m (560.4) 46.4 - 46.4 (0.4) - (0.4) 737.7 - - - (0.6) - - (0.6) 737.1 - - - (514.0) 49.0 - 49.0 - - (12.3) (12.3) (477.3) Reserves $m (5.1) - 6.5 6.5 - 1.8 1.8 3.2 - 1.7 1.7 - 2.7 - 2.7 7.6 Total $m 172.6 46.4 6.5 52.9 (0.4) 1.8 1.4 226.9 49.0 1.7 50.7 (0.6) 2.7 (12.3) (10.2) 267.4 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. Myer Annual Report 2022Financial Statements CONSOLIDATED STATEMENT OF CASH FLOWS for the period ended 30 July 2022 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)/received 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, including transaction costs Proceeds from borrowings, net of transaction costs Payments for principal portion of lease liabilities Dividends paid to equity holders of the parent Payment for acquisition of treasury shares 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 63 Notes 2022 52 weeks $m 2021 53 weeks $m 2,791.1 (2,405.2) 385.9 1.0 (95.4) (16.4) 275.1 (39.8) (28.7) 24.3 0.3 (43.9) (70.0) 56.6 (139.6) (12.3) (0.6) (165.9) 65.3 178.6 243.9 2,515.6 (2,153.1) 362.5 2.7 (95.0) 6.8 277.0 (37.9) (19.1) 25.1 0.3 (31.6) (12.6) - (140.3) - (0.4) (153.3) 92.1 86.5 178.6 D2 F3 F1 D1 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. Myer Annual Report 2022Financial StatementsDirectors’ Report Financial StatementsYear in Review Remuneration Report 64 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the period ended 30 July 2022 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 Other 1 Finance revenue Interest revenue Total revenue 2022 52 weeks $m 2021 53 weeks $m 2,989.8 (606.2) 2,383.6 (43.0) 2,340.6 138.9 22.5 161.4 0.3 2,502.3 2,658.3 (505.5) 2,152.8 (36.3) 2,116.5 114.7 18.9 133.6 0.3 2,250.4 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 future 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 income 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. Myer Annual Report 2022Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the period ended 30 July 2022 A3 Expenses Profit 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 assets Finance costs Interest and finance charges paid/payable for lease liabilities and financial liabilities Rental expense relating to operating leases Contingent rentals Net foreign exchange gains 65 2022 52 weeks $m 2021 53 weeks $m 32.9 376.3 - 409.2 57.4 27.8 130.7 215.9 99.2 99.2 1.4 1.4 (12.0) 31.2 379.1 (50.7) 359.6 64.2 31.2 124.1 219.5 96.4 96.4 1.5 1.5 (7.9) 1. In the prior period the Group was eligible to receive payments under the JobKeeper Payment Scheme (Australia) and Wage Subsidy (New Zealand). The Group only qualified for the first phase of the JobKeeper Payment Scheme which ended on 27 September 2020. The payments received had 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 FY21, the Group recognised government grant income totalling $50.7 million, with $19.1 million 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. Restructuring, space exit costs and impairment of assets The following individually significant items are included within restructuring, space exit costs and impairment of assets in the consolidated income statement: Space exit costs and other asset impairments 1 Income tax benefit Restructuring, space exit costs and impairment of assets, net of tax 2022 52 weeks $m 13.2 (2.0) 11.2 2021 53 weeks $m 7.6 (2.3) 5.3 1. Space exit costs and other asset impairments includes costs associated with store closures and space hand backs and other store based asset impairments. 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 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. Myer Annual Report 2022Financial StatementsDirectors’ Report Financial StatementsYear in Review Remuneration Report 66 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the period ended 30 July 2022 A4 Income Tax (a) Income tax expense (i) Income tax expense Current tax Deferred tax Income tax expense1 Deferred income tax expense included in income tax expense comprises: (Increase)/Decrease in deferred tax assets (ii) Numerical reconciliation of income tax expense to prima facie tax payable Profit before income tax expense Tax at the Australian tax rate of 30% (2021: 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 expense1 2022 52 weeks $m 2021 53 weeks $m 23.4 (0.3) 23.1 (0.3) (0.3) 72.1 21.6 1.9 - 23.5 (0.4) 23.1 16.1 4.3 20.4 4.3 4.3 66.8 20.0 - 0.5 20.5 (0.1) 20.4 1. Income tax includes an income tax benefit of $2.0 million (2021: $2.3 million) attributable to the space exit costs and other impairment of assets recorded during the period. Refer to note A3 for more information. (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 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 change to accounting policy Charged to income statement Carrying amount at end of period (c) Deferred tax liabilities Deferred tax liabilities comprise temporary differences attributable to: Brand names 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 Carrying amount at end of period 2022 $m 2021 $m 15.2 5.5 0.3 35.1 122.0 5.3 183.4 (71.8) 111.6 184.0 - (0.6) 183.4 14.9 6.9 0.1 33.7 123.3 5.1 184.0 (71.8) 112.2 188.3 (0.2) (4.1) 184.0 2022 $m 2021 $m 71.8 71.8 (71.8) - 71.8 71.8 71.8 71.8 (71.8) - 71.8 71.8 Myer Annual Report 2022Financial Statements 67 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the period ended 30 July 2022 A4 Income Tax (continued) 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. 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 (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 2022 cents 6.0 5.9 2022 $m 49.0 2021 cents 5.7 5.6 2021 $m 46.4 2022 Number 2021 Number 820,574,482 818,929,830 15,649,249 8,740,296 836,223,731 827,670,126 (e) Information concerning the classification of securities Performance rights and options granted to employees under the Myer Long Term Incentive Plan and Transformation 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. 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. Myer Annual Report 2022Financial StatementsDirectors’ Report Financial StatementsYear in Review Remuneration Report 68 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the period ended 30 July 2022 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. B1 Trade and Other Receivables and Prepayments Trade receivables Loss allowance Other receivables Prepayments 2022 $m 13.0 (0.1) 12.9 9.1 6.4 15.5 28.4 2021 $m 10.2 (0.5) 9.7 6.3 4.0 10.3 20.0 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 2022 $m 371.4 2021 $m 305.2 Provision for write-down of inventories to net realisable value amounted to $7.7 million (2021: $7.8 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 Payable Trade payables Other payables Trade and other payables are non-interest bearing. 2022 $m 195.1 234.2 429.3 2021 $m 165.2 188.1 353.3 Accounting policy 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. Myer Annual Report 2022Financial Statements 69 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the period ended 30 July 2022 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. C1 Property, Plant and Equipment At 25 July 2020 Cost Accumulated depreciation and impairment Net book amount Period ended 31 July 2021 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 31 July 2021 Cost Accumulated depreciation and impairment Net book amount Period ended 30 July 2022 Carrying amount at beginning of period Additions Transfer between classes Assets written off – cost Assets written off – accumulated depreciation Impairment1 Depreciation charge Exchange differences Carrying amount at end of period At 30 July 2022 Cost Accumulated depreciation and impairment Net book amount Freehold land $m Freehold buildings $m Fixtures and fittings $m Plant and equipment $m Capital works in progress $m 9.6 - 9.6 9.6 - - - - - - 9.6 9.6 - 9.6 9.6 - - - - - - - 9.6 9.6 - 9.6 19.5 (6.9) 12.6 12.6 - - - - - (0.5) 12.1 19.5 (7.4) 12.1 12.1 - - - - - (0.5) - 11.6 19.5 (7.9) 11.6 522.4 (395.8) 126.6 126.6 7.4 2.2 (9.0) 5.7 0.3 (33.3) 99.9 523.0 (423.1) 99.9 99.9 9.8 7.9 (24.0) 22.5 (0.7) (31.5) 0.1 84.0 516.8 (432.8) 84.0 460.4 (283.4) 177.0 177.0 21.7 9.8 (4.3) 3.1 - (27.2) 180.1 487.6 (307.5) 180.1 180.1 15.7 4.1 (37.2) 35.7 (2.5) (24.6) - 171.3 470.2 (298.9) 171.3 21.2 - 21.2 21.2 14.2 (18.6) - - - - 16.8 16.8 - 16.8 16.8 30.8 (19.1) - - - - - 28.5 28.5 - 28.5 Total $m 1,033.1 (686.1) 347.0 347.0 43.3 (6.6) (13.3) 8.8 0.3 (61.0) 318.5 1,056.5 (738.0) 318.5 318.5 56.3 (7.1) (61.2) 58.2 (3.2) (56.6) 0.1 305.0 1,044.6 (739.6) 305.0 1. Impairment relates to assets associated with space handbacks and store closures. 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: 40 years (2021: 40 years) • Fixtures and fittings: 3 - 12.5 years (2021: 3 - 12.5 years) • Plant and equipment, including leasehold improvements: 10 - 20 years (2021: 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. Myer Annual Report 2022Financial StatementsDirectors’ Report Financial StatementsYear in Review Remuneration Report 70 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the period ended 30 July 2022 C2 Intangible Assets At 25 July 2020 Cost Accumulated amortisation and impairment Net book amount Period ended 31 July 2021 Carrying amount at beginning of period Additions Transfer between classes Assets written off – cost Assets written off – accumulated amortisation Amortisation charge(1) Carrying amount at end of period At 31 July 2021 Cost Accumulated amortisation and impairment Net book amount Period ended 30 July 2022 Carrying amount at beginning of period Additions Transfer between classes Assets written off – cost Assets written off – accumulated amortisation Amortisation charge(1) Carrying amount at end of period At 30 July 2022 Cost Accumulated amortisation and impairment Net book amount Goodwill $m Brand names and trademarks $m Software $m 492.1 (492.1) - - - - - - - - 492.1 (492.1) - - - - - - - - 492.1 (492.1) - 437.3 (197.1) 240.2 240.2 - - - - - 240.2 437.3 (197.1) 240.2 240.2 - - - - - 240.2 437.3 (197.1) 240.2 337.7 (261.5) 76.2 76.2 12.7 6.6 (2.0) 1.7 (31.0) 64.2 355.0 (290.8) 64.2 64.2 22.0 7.1 (3.2) 3.0 (28.0) 65.1 380.9 (315.8) 65.1 Lease rights $m 18.3 (18.3) - - - - - - - - Total $m 1,285.4 (969.0) 316.4 316.4 12.7 6.6 (2.0) 1.7 (31.0) 304.4 18.3 (18.3) - 1,302.7 (998.3) 304.4 - - - - - - - 304.4 22.0 7.1 (3.2) 3.0 (28.0) 305.3 18.3 (18.3) - 1,328.6 (1,023.3) 305.3 1. Amortisation of $28.0 million (2021: $31.0 million) is included in administration and selling expenses in the consolidated income statement. 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 $232.8 million (2021: $232.8 million) cannot be allocated to the Group’s individual cash generating units (CGUs) (the Group’s stores), and hence has been allocated to the Myer business as a whole. The remaining brand name intangible asset with an indefinite useful life has been allocated to the Marcs David Lawrence business totalling $7.4 million (2021: $7.4 million). AASB 136 Impairment of Assets requires goodwill and intangible assets with an indefinite useful life to be tested annually for impairment. As a result during the period, 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. Key assumption 2022 2021 Approach used to determine value Weighted average discount rate (pre-tax) 11.9% 12.8% Terminal growth rate 1.7% 1.7% Average EBITDA margin 11.9% 12.5% 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. 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 future cost saving initiatives. Myer Annual Report 2022Financial Statements 71 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the period ended 30 July 2022 C2 Intangible Assets (continued) Impairment of non-financial assets (continued) The headroom approximates 34% of the CGU's net carrying value. The recoverable amount is based on approved cashflow projections, however the projections can be influenced by market and macro economic conditions. The recoverable amount is highly sensitive to changes in the average EBITDA margin assumption. For the recoverable amount to approximate the carrying value, a 186 basis points decrease in the average EBITDA margin would need to occur. Any reasonable possible change in other key assumptions would not result in an impairment. During the period, a review of the carrying value for each Myer store was undertaken and no indicators of impairment were identified. 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. (iv) Computer software All costs directly incurred in the purchase or development of major computer software or subsequent upgrades and material enhancements are capitalised as intangible assets where the Group has control and obtains all the future economic benefit from the underlying asset. 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. Costs paid to the suppliers for Software-as-a-Service arrangements to significantly customise cloud-based software for the Group are recorded as a prepayment for services and amortised over the expected renewable term of the arrangement. 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. Goodwill and certain intangibles are tested for impairment at the level of the Group as a whole, using value-in-use calculations, which requires an estimation of the recoverable amount. C3 Provisions Current Employee benefits Restructuring1 Workers' compensation 2 Other3 Non-current Employee benefits Other3 2022 $m 49.0 7.2 9.0 2.5 67.7 3.2 1.2 4.4 2021 $m 49.7 2.9 8.7 1.8 63.1 4.8 - 4.8 1. Restructuring - the restructuring provision relates to the costs associated with store closures and space hand backs committed but not yet paid. Refer to note A3 for more information. 2. Workers' compensation - the amount represents a provision for workers' compensation claims in certain states, for which the Group is self insured. 3. Other - the amount includes the provision for make good associated with leased premises. Myer Annual Report 2022Financial StatementsDirectors’ Report Financial StatementsYear in Review Remuneration Report 72 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the period ended 30 July 2022 C3 Provisions (continued) Movement in provisions Movement in each class of provision during the financial period, other than employee benefits, are set out below: 2022 Carrying amount at beginning of period Additional provisions recognised Amounts utilised Carrying amount at end of period Workers' compensation $m Restructuring $m 8.7 2.0 (1.7) 9.0 2.9 10.9 (6.6) 7.2 Other $m 1.8 13.2 (11.3) 3.7 Total $m 13.4 26.1 (19.6) 19.9 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 2022 $m 18.3 2021 $m 21.8 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. Myer Annual Report 2022Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the period ended 30 July 2022 C4 Leases The Group has lease agreements for properties and various items of equipment used in its operations. The carrying amounts of the right-of-use assets and movements during the period are set out below: 73 At 25 July 2020 Additions, modifications and other reassessments Depreciation At 31 July 2021 At 31 July 2021 Additions, modifications and other reassessments Depreciation At 30 July 2022 The carrying amounts of the lease liabilities and movements during the period are set out below: At 25 July 2020 Additions, modifications and other reassessments Cash payments Interest expense At 31 July 2021 Current Non-current At 31 July 2021 Additions, modifications and other reassessments Cash payments Interest expense At 30 July 2022 Current Non-current The following amounts have been recognised in the consolidated income statement during the period: Depreciation of right-of-use assets1 Interest expense on lease liabilities 1 Short-term leases expense2 Variable lease payments3 Property leases $m 1,272.3 81.7 (129.9) 1,224.1 Equipment leases $m 0.3 - (0.3) - 1,224.1 90.4 (136.7) 1,177.8 - - - - Property leases $m 1,794.3 81.1 (227.1) 87.2 1,735.5 156.2 1,579.3 Equipment leases $m 0.4 - (0.4) - - - - 1,735.5 103.3 (227.4) 87.8 1,699.2 144.2 1,555.0 - - - - - - - Total $m 1,272.6 81.7 (130.2) 1,224.1 1,224.1 90.4 (136.7) 1,177.8 Total $m 1,794.7 81.1 (227.5) 87.2 1,735.5 156.2 1,579.3 1,735.5 103.3 (227.4) 87.8 1,699.2 144.2 1,555.0 2022 52 weeks $m 130.7 86.4 0.5 0.3 217.9 2021 53 weeks $m 124.1 85.5 3.8 1.5 214.9 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 $14.9 million (2021: $17.1 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. Myer Annual Report 2022Financial StatementsDirectors’ Report Financial StatementsYear in Review Remuneration Report 74 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the period ended 30 July 2022 C4 Leases (continued) 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. The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use 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 right-of-use asset is subsequently depreciated on a straight-line basis from the commencement date to the end of the lease term. The right-of-use 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. Myer Annual Report 2022Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the period ended 30 July 2022 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 30 July 2022 and 31 July 2021 is as follows: 75 Borrowings Less: cash and cash equivalents Net cash at end of period (excluding lease liabilities) Plus: lease liabilities Net debt at end of period The movement in net cash excluding lease liabilities is as follows: Opening balance Net increase in cash and cash equivalents Repayment of borrowings, including transaction costs Proceeds from borrowings, net of transaction costs Other non-cash movements Closing balance D1 Cash and Cash Equivalents Cash on hand Cash at bank 2022 $m 58.0 (243.9) (185.9) 1,699.2 1,513.3 (111.8) (65.3) (70.0) 56.6 4.6 (185.9) 2022 $m 2.1 241.8 243.9 2021 $m 66.8 (178.6) (111.8) 1,735.5 1,623.7 (7.9) (92.1) (12.6) - 0.8 (111.8) 2021 $m 2.0 176.6 178.6 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 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 (Increase)/decrease in inventories (Increase)/decrease in deferred tax assets (Increase)/decrease in derivative financial instruments Increase/(decrease) in trade and other payables Increase/(decrease) in current tax payable Increase/(decrease) in provisions (Decrease)/increase in other liabilities Net cash inflow from operating activities 2022 52 weeks $m 49.0 207.2 (0.3) 4.6 3.9 0.9 (10.0) (61.6) (0.5) (6.2) 78.0 7.4 2.8 (0.1) 275.1 2021 53 weeks $m 46.4 210.3 (0.3) 2.9 2.3 0.6 34.5 (54.7) 3.7 5.3 (6.8) 23.5 9.3 - 277.0 Myer Annual Report 2022Financial StatementsDirectors’ Report Financial StatementsYear in Review Remuneration Report 76 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the period ended 30 July 2022 D3 Borrowings (a) Structure of debt The debt funding of the Group at 30 July 2022 is an Asset Based Loan (ABL) syndicated facility, which contains a term loan tranche and a revolving credit tranche. The maximum facility size is $215 million and availability fluctuates in line with a borrowing base of nominated assets, including specified inventory and intangibles, less allowances and certain liabilities. This facility was established on 28 November 2021 and the Term Loan was drawn down on 3 December 2021. As at 30 July 2022, the following amounts were drawn: Non-current Bank loans Less: transaction costs Borrowings 30 July 2022 $m 65.0 (7.0) 58.0 31 July 2021 $m 70.0 (3.2) 66.8 The terms and conditions of the Group's syndicated facility is as follows: Term loan - Tranche A1 Revolving Credit - Tranche B2 Total syndicated facility Amount3,4 $65 million $150 million $215 million Term 4 years 4 years Expiry date 3 December 2025 3 December 2025 1. Tranche A is a non-amortising term loan and is required to be fully drawn during the term. 2. Tranche B is a revolving credit and may be redrawn during the term. 3. The syndicated facility available at 30 July 2022 was $142.2 million, at which time the company also had $243.9 million cash on hand. 4. Subsequent to the end of the financial period, the available syndicated facility increased to $197.9 million in line with the seasonal and fluctuating nature of the ABL facility. (b) Security The ABL facility is secured, 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 Under the terms of the ABL facility, the Group is not required to comply with any financial covenant unless it utilises more than 90% of the available facility. The Group did not utilise more than 90% of the available borrowing base at any time in the period ended 30 July 2022, and therefore testing of compliance with the financial covenant was not required. 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. Myer Annual Report 2022Financial Statements 77 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the period ended 30 July 2022 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 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 30 July 2022 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 31 July 2021 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 Notes Total Amortised cost $m $m Fair value through OCI $m D1 B1 E1 B3 D3 C4 E1 D1 B1 E1 B3 D3 C4 E1 243.9 22.0 5.6 271.5 329.4 58.0 1,699.2 0.7 2,087.3 178.6 16.1 3.8 198.5 262.2 66.8 1,735.5 1.1 2,065.6 243.9 22.0 - 265.9 329.4 58.0 1,699.2 - 2,086.6 178.6 16.1 - 194.7 262.2 66.8 1,735.5 - 2,064.5 - - 5.6 5.6 - - - 0.7 0.7 - - 3.8 3.8 - - - 1.1 1.1 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, 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 financial 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. Myer Annual Report 2022Financial StatementsDirectors’ Report Financial StatementsYear in Review Remuneration Report 78 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the period ended 30 July 2022 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: 2022 $m 5.6 0.7 161.6 Aug 2022 - Oct 2023 2.3 (2.3) 0.703 0.680 2021 $m 3.8 1.1 169.9 Aug 2021 - Nov 2022 6.1 (6.1) 0.737 0.620 Cash and cash equivalents Trade payables Forward exchange contracts USD $m 0.9 42.9 159.6 2022 EURO $m 1.0 - 2.0 Other $m 4.0 - - USD $m 9.5 21.0 168.6 2021 EURO $m 4.1 0.1 1.3 Other $m 4.5 0.2 - 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 2022 $m 15.4 (12.2) 0.2 (0.1) 2021 $m 16.5 (13.5) 0.1 (0.1) (ii) Interest rate risk The Group is exposed to interest rate risk from floating rate long-term 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 2022 $m 243.9 58.0 2021 $m 178.6 66.8 At the end of the reporting period the Group held no interest rate swap contracts as the interest rate risk associated with borrowings is managed against the interest rate earned on operating cash held. Myer Annual Report 2022Financial Statements 79 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the period ended 30 July 2022 E1 Financial Risk Management (continued) (a) Market risk (continued) (ii) Interest rate risk (continued) Sensitivity Applying a sensitivity of 100 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. (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 2022 $m 243.9 22.0 5.6 2021 $m 178.6 16.1 3.8 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. Myer Annual Report 2022Financial StatementsDirectors’ Report Financial StatementsYear in Review Remuneration Report 80 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the period ended 30 July 2022 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 Expiring beyond one year1 2022 $m - 44.9 44.9 2021 $m - 217.6 217.6 1. The ABL maximum facility size is $215 million and fluctuates in line with a borrowing base of nominated assets, including specified inventory and intangibles, less allowances and certain liabilities. The syndicated facility available at 30 July 2022 was $142.2 million with $44.9 million accessible, at which time the company also had $243.9 million cash on hand. Refer to note D3 for more information on the syndicated facility. 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. 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 2022 Non-derivatives Trade and other payables Borrowings Lease liabilities Total non-derivatives Derivatives Gross settled - (inflow) - outflow Total derivatives 2021 Non-derivatives Trade and other payables Borrowings Lease liabilities Total non-derivatives Derivatives Gross settled - (inflow) - outflow Total derivatives 329.4 3.9 105.7 439.0 (89.3) 86.0 (3.3) 262.2 11.3 108.2 381.7 (84.3) 84.3 - - 3.9 108.8 112.7 (65.6) 64.2 (1.4) - 10.6 104.2 114.8 (70.3) 68.3 (2.0) - 7.7 211.5 219.2 (11.6) 11.4 (0.2) - 50.8 203.3 254.1 (18.0) 17.3 (0.7) - 75.4 624.7 700.1 - - - - - 568.4 568.4 - - - - - 1,172.7 1,172.7 - - - - - 1,246.3 1,246.3 - - - 329.4 90.9 2,223.4 2,643.7 (166.5) 161.6 (4.9) 262.2 72.7 2,230.4 2,565.3 (172.6) 169.9 (2.7) 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 329.4 65.0 1,699.2 2,093.6 (5.6) 0.7 (4.9) 262.2 70.0 1,735.5 2,067.7 (3.9) 1.2 (2.7) Myer Annual Report 2022Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the period ended 30 July 2022 E1 Financial Risk Management (continued) (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 81 2022 $m 2021 $m 5.3 5.3 0.3 0.3 0.6 0.6 0.1 0.1 3.1 3.1 0.7 0.7 1.1 1.1 - - 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. Myer Annual Report 2022Financial StatementsDirectors’ Report Financial StatementsYear in Review Remuneration Report 82 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the period ended 30 July 2022 E1 Financial Risk Management (continued) Accounting policy - Financial assets and liabilities (continued) (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. 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. 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. 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. (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. Myer Annual Report 2022Financial Statements 83 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the period ended 30 July 2022 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. F1 Contibuted Equity Ordinary shares - fully paid Treasury shares Opening balance Shares acquired by Myer Equity Plans Trust on market at $0.61 Shares acquired by Myer Equity Plans Trust on market at $0.21 Shares issued for alignment rights granted Shares acquired by Myer Equity Plans Trust on market at $0.52 Closing balance of treasury shares Closing balance 2022 Number of shares 2021 Number of shares 821,278,815 821,278,815 (2,987,987) (1,376,662) - (931,893) - (679,432) 2,987,987 - (1,147,053) - (1,147,053) (2,987,987) 820,131,762 818,290,828 2022 $m 780.0 (42.3) - - - (0.6) (42.9) 737.1 2021 $m 780.0 (41.9) (0.2) (0.2) - - (42.3) 737.7 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). The gearing ratios at 30 July 2022 and 31 July 2021 were as follows: Borrowings (note D3) Less: cash and cash equivalents (note D1) Net 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. 2022 $m 58.0 (243.9) (185.9) 1,699.2 1,513.3 267.4 81.5 1,780.7 -228.2% 85.0% 2021 $m 66.8 (178.6) (111.8) 1,735.5 1,623.7 226.9 115.1 1,850.6 -97.2% 87.7% 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. Myer Annual Report 2022Financial StatementsDirectors’ Report Financial StatementsYear in Review Remuneration Report 84 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the period ended 30 July 2022 F2 Accumulated Losses and Reserves (a) Accumulated losses Movements in Accumulated losses were as follows: Balance at beginning of period Profit for the period Dividends paid Balance at end of period (b) Reserves Share-based payments 1 Cash flow hedges 2 Other reserve 3 Foreign currency translation 4 Movements in reserves were as follows: Share-based payments Balance at beginning of period Share-based payments expense recognised (note H4) Income tax (note A4) Balance at end of period Cash flow hedges Balance at beginning of period Net gain 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 2022 $m 2021 $m (514.0) 49.0 (12.3) (477.3) 32.0 4.0 (25.6) (2.8) 7.6 29.3 3.9 (1.2) 32.0 3.2 2.3 (1.5) 4.0 (3.7) 0.9 (2.8) (560.4) 46.4 - (514.0) 29.3 3.2 (25.6) (3.7) 3.2 27.5 2.3 (0.5) 29.3 (2.7) 6.1 (0.2) 3.2 (4.3) 0.6 (3.7) 1. 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. 2. 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. 3. 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. 4. 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. Myer Annual Report 2022Financial Statements 85 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the period ended 30 July 2022 F2 Accumulated Losses and Reserves (continued) 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. (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 Interim fully franked dividend for the period ended 30 July 2022 of 1.5 cents (2021: nil) per fully paid ordinary share, paid 12 May 2022 Total dividends paid (b) Dividends not recognised at the end of the reporting period The directors have determined the payment of a final dividend of 2.5 cents (2021: nil) per fully paid ordinary share fully franked based on tax paid at 30%, payable on 7 November 2022 The aggregate amount of the proposed dividend expected to be paid after period end, but not recognised as a liability at period end, is: 2022 $m 12.3 12.3 20.5 2021 $m - - - (c) Franked dividends The franked portions of final dividends recommended after 30 July 2022 will be franked out of existing franking credits or out of franking credits arising from the payment of income tax in the period ended 29 July 2023: Franking credits available for subsequent reporting periods based on a tax rate of 30% (2021: 30%) 85.5 67.0 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. Myer Annual Report 2022Financial StatementsDirectors’ Report Financial StatementsYear in Review Remuneration Report 86 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the period ended 30 July 2022 G. Group Structure 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) (2), (3) (2), (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) 2022 % 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Equity holdings(4) 2021 % 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 30 July 2022 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. Myer Annual Report 2022Financial Statements 87 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the period ended 30 July 2022 G2 Deed of Cross Guarantee 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 30 July 2022: 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, space exit costs and impairment of assets Earnings before interest and tax Finance revenue Finance costs Net finance costs Profit before income tax Income tax expense Profit for the period attributable to Deed of Cross Guarantee group Statement of comprehensive income Profit for the period Other comprehensive income Items that may be reclassified to profit or loss: Cash flow hedges Exchange differences on translation of foreign operations Other comprehensive income for the period, net of tax Total comprehensive income for the period Summary of movements in accumulated losses Balance at beginning of period Profit for the period Dividends paid Balance at end of period 2022 52 weeks $m 2021 53 weeks $m 2,989.8 (606.2) 2,383.6 (43.0) 2,340.6 161.4 (1,356.7) 1,145.3 0.9 (690.9) (271.0) (13.2) 171.1 0.3 (99.2) (98.9) 72.2 (23.1) 49.1 49.1 0.8 0.7 1.5 50.6 (510.5) 49.1 (12.3) (473.7) 2,658.3 (505.5) 2,152.8 (36.3) 2,116.5 133.6 (1,194.6) 1,055.5 2.4 (648.3) (239.3) (7.6) 162.7 0.3 (96.4) (96.1) 66.6 (20.2) 46.4 46.4 5.9 0.5 6.4 52.8 (556.9) 46.4 - (510.5) Myer Annual Report 2022Financial StatementsDirectors’ Report Financial StatementsYear in Review Remuneration Report 88 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the period ended 30 July 2022 G2 Deed of Cross Guarantee (continued) (b) Consolidated balance sheet Set out below is a consolidated balance sheet as at 30 July 2022 of the closed group: Assets Current assets Cash and cash equivalents Trade and other receivables and prepayments Inventories Derivative financial instruments 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 Lease liabilities Provisions Derivative financial instruments Current tax liabilities Other liabilities Total current liabilities Non-current liabilities Borrowings Lease liabilities Provisions Total non-current liabilities Total liabilities Net assets Equity Contributed equity Accumulated losses Reserves Total equity 2022 $m 240.8 36.1 371.3 5.3 653.5 304.8 1,177.6 305.3 111.4 0.3 3.2 1,902.6 2,556.1 429.7 144.0 67.7 0.6 23.8 0.1 665.9 58.0 1,554.9 4.3 1,617.2 2,283.1 273.0 737.1 (473.7) 9.6 273.0 2021 $m 176.2 28.1 304.0 3.1 511.4 318.3 1,223.7 304.4 112.2 0.7 2.7 1,962.0 2,473.4 352.9 156.0 63.1 1.1 16.4 0.2 589.7 66.8 1,579.1 4.8 1,650.7 2,240.4 233.0 737.7 (510.5) 5.8 233.0 Myer Annual Report 2022Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the period ended 30 July 2022 G3 Parent Entity Financial Information (a) Summary financial information The individual financial statements for the parent entity show the following aggregate amounts: Balance sheet Current assets Total assets Current liabilities Total liabilities Shareholders' equity Issued capital Reserves Other reserves Share-based payments Retained profits reserve - pre 2018 Accumulated losses reserve - 2018 Retained profits reserve - 2019 Accumulated losses reserve - 2020 Retained profits reserve - 2022 Profit for the period Total comprehensive income for the period (b) Guarantees entered into by the parent entity Carrying amount included in current liabilities 89 2022 $m 235.7 435.6 45.8 103.8 737.1 (2.7) 27.9 66.6 (406.7) 6.0 (170.6) 74.2 74.2 74.2 2021 $m 171.6 370.7 37.4 104.2 737.7 (2.7) 23.9 78.9 (406.7) 6.0 (170.6) - - - - - 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 30 July 2022 or 31 July 2021. (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 30 July 2022 or 31 July 2021. (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. Myer Annual Report 2022Financial StatementsDirectors’ Report Financial StatementsYear in Review Remuneration Report 90 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the period ended 30 July 2022 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 30 July 2022 in respect of: Guarantees The Group has issued bank guarantees amounting to $32.3 million (2021: $33.2 million), of which $14.1 million (2021: $16.5 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 2022 $m 26.7 - - 26.7 2021 $m 15.9 - - 15.9 H3 Related Party Transactions (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 ended 30 July 2022 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. Short-term employee benefits Post employment benefits Long-term benefits Share-based payments 2022 $ 4,750,055 102,506 2,077 2,278,990 7,133,628 2021 $ 4,999,650 87,051 73,466 1,422,374 6,582,541 Detailed remuneration disclosures are provided in the Remuneration Report on pages 30 to 56. (ii) Loans In 2022 and 2021 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. Myer Annual Report 2022Financial Statements 91 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the period ended 30 July 2022 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 Group’s long term strategic and operational objectives. Each right and option 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 rights and 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: 2022 Performance rights Performance options Total Weighted average exercise price 2021 Performance rights Performance options Total Weighted average exercise price Granted Balance 31 July 2021 Exercised 17,128,531 6,514,842 (2,987,987) 54,303,324 - - (30,046,033) 71,431,855 6,514,842 (2,987,987) (30,046,033) $0.42 Expired and lapsed Balance 30 July 2022 - 20,655,386 24,257,291 44,912,677 $0.30 $0.00 $0.00 $0.36 Balance 25 July 2020 Expired and lapsed 7,049,241 14,140,544 - (4,061,254) 57,444,948 - - (3,141,624) 64,494,189 14,140,544 - (7,202,878) $0.21 Exercised Granted $0.00 $0.00 $0.43 Balance 31 July 2021 17,128,531 54,303,324 71,431,855 $0.36 The weighted average remaining contractual life of share rights and options outstanding at the end of the period was 1.0 year (2021: 1.0 year). Fair value of performance rights granted The assessed fair value at grant date of rights 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 rights, 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 right. The fair values and model inputs for performance rights granted during the period included: (a) Fair value of performance rights 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 2022 LTIP Rights (TSR) $0.38 10-Nov-21 10-Nov-25 $0.52 73% 0% 1.24% 2022 LTIP Rights (EPS) $0.40 10-Nov-21 10-Nov-25 $0.52 73% 0% 1.24% 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 rights 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 rights. (b) Transformation Incentive (TI) Plan The Transformation Incentive (TI) Plan was introduced to replace the normal STI plan for a period of two years, starting in FY21. Under the TI plan, the Chief Executive Officer and nominated executives receive 50% of the annual TI achieved in cash and 50% in equity. FY21 TI Plan The FY21 TI plan delivered the equity component via deferred rights, 50% subject to a one-year deferral period and 50% subject to a two-year deferral period. On vesting following the end of the deferral periods, the rights automatically convert into ordinary shares on a one for one basis at an exercise price of nil. There is no entitlement to receive dividends nor any voting rights in relation to the deferred rights during the vesting period. If an executive ceases to be employed by the Group within this period, the rights will be forfeited, except in circumstances that are approved by the board on a case-by-case basis. During the period 2,294,105 deferred rights were issued based on the currency value of the achieved FY21 TI award divided by the volume weighted average price of the Company’s shares over the five trading days immediately following the release to the market of the company's full year FY21 results. Myer Annual Report 2022Financial StatementsDirectors’ Report Financial StatementsYear in Review Remuneration Report 92 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the period ended 30 July 2022 H4 Share-Based Payments (continued) (b) Transformation Incentive (TI) Plan (continued) FY22 TI Plan The FY22 TI plan delivered the equity component via rights to deferred shares, 50% subject to a one-year disposal restriction and 50% subject to a two-year disposal restriction. The number of deferred shares to be issued will be determined by dividing the dollar value of the right to deferred shares component of the TI plan award by the volume weighted average price of the Company’s shares over the five trading days immediately following the release to the market of the Company’s full year FY22 results. The shares will carry rights to dividends and voting rights and will rank equally in all respects with other ordinary shares already on issue on the date of allocaton, except for entitlements which had a record date before the date of allocation. (c) 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 Rights issued under the TIP 2022 $m 3.1 0.8 2021 $m 1.8 0.5 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. Accounting policy Share-based compensation benefits are provided to employees through the Myer Long Term Incentive Plan (LTIP) and Transformation Incentive Plan (TIP). 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. 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 and TIP are 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 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 H6 Events Occurring After the Reporting Period 2022 $ 2021 $ 498,260 561,000 40,769 539,029 3,000 542,029 29,283 590,283 3,000 593,283 71,796 71,796 66,452 66,452 Store Closure On 23 August 2022, Myer announced that it will be exiting its store located at Frankston, Victoria. The store is anticipated to cease trading on 15 January 2023. An estimate of the financial effect has been recognised in the financial statements for the period ended 30 July 2022. Dividends on the Company's ordinary shares The directors have determined to pay a final dividend of 2.5 cents per share, fully franked at the 30% corporate income tax rate, payable on 7 November 2022 for the period ended 30 July 2022. Myer Annual Report 2022Financial Statements 93 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the period ended 30 July 2022 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 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'). (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. Working capital position As at 30 July 2022, the Group has a net current liability position of $16.7 million, which includes cash and cash equivalents of $243.9 million. The net current liability includes the recognition of current lease liabilities of $144.2 million from the adoption of AASB 16 Leases . The Group has available borrowing facility of $44.9 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 New and amended standards adopted by the Group The Group note that none of the new standards or amendments to existing standards that are mandatory for the first time for the 30 July 2022 reporting period materially affect any of the amounts recognised in the current period or prior period, and are not likely to significantly affect future periods. Myer Annual Report 2022Financial StatementsDirectors’ Report Financial StatementsYear in Review Remuneration Report 94 Directors’ Declaration DIRECTORS’ DECLARATION In the directors’ opinion: (a) the financial statements and notes set out on pages 58 to 93 are in accordance with the Corporations Act 2001 (Cth), including: (i) (ii) complying with Accounting Standards, the Corporations Regulations 2001 (Cth) and other mandatory professional reporting requirements; and giving a true and fair view of the consolidated entity’s financial position as at 30 July 2022 and of its performance for the financial period ended on that date; and (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due Report on the audit of the financial report and payable; and (c) 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 (Cth). This declaration is made in accordance with a resolution of the directors. JoAnne Stephenson Chairman Melbourne, 15 September 2022 Independent auditor’s report To the members of Myer Holdings Limited 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: (a) giving a true and fair view of the Group's financial position as at 30 July 2022 and of its financial performance for the period 1 August 2021 to 30 July 2022 (b) complying with Australian Accounting Standards and the Corporations Regulations 2001. What we have audited The Group financial report comprises: the consolidated balance sheet as at 30 July 2022 the consolidated income statement for the period then ended the consolidated statement of comprehensive income for the period then ended the consolidated statement of changes in equity for the period then ended the consolidated statement of cash flows for the period then ended the notes to the consolidated financial statements, which include significant accounting policies ● ● ● ● ● ● ● and other explanatory information the directors’ declaration. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial report section of our report. We 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 Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. 81 Myer Annual Report 2022 95 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 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: (together the Group) is in accordance with the Corporations Act 2001, including: (a) giving a true and fair view of the Group's financial position as at 30 July 2022 and of its financial (a) giving a true and fair view of the Group's financial position as at 30 July 2022 and of its financial performance for the period 1 August 2021 to 30 July 2022 performance for the period 1 August 2021 to 30 July 2022 (b) complying with Australian Accounting Standards and the Corporations Regulations 2001. (b) complying with Australian Accounting Standards and the Corporations Regulations 2001. What we have audited The Group financial report comprises: What we have audited The Group financial report comprises: ● ● ● ● ● ● ● ● ● ● ● ● ● the consolidated balance sheet as at 30 July 2022 the consolidated balance sheet as at 30 July 2022 the consolidated income statement for the period then ended the consolidated income statement for the period then ended the consolidated statement of comprehensive income for the period then ended the consolidated statement of comprehensive income for the period then ended the consolidated statement of changes in equity for the period then ended the consolidated statement of changes in equity for the period then ended the consolidated statement of cash flows for the period then ended the consolidated statement of cash flows for the period then ended the notes to the consolidated financial statements, which include significant accounting policies the notes to the consolidated financial statements, which include significant accounting policies and other explanatory information and other explanatory information the directors’ declaration. the directors’ declaration. ● 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 report section of our report. We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial report section of our report. We 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 Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. Independence We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. 81 81 Myer Annual Report 2022Directors’ Report Year in Review Remuneration ReportFinancial Statements 96 Our audit approach Independent auditor’s report Key audit matters To the members of Myer Holdings Limited 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. Report on the audit of the financial report Our opinion 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. 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: (a) giving a true and fair view of the Group's financial position as at 30 July 2022 and of its financial performance for the period 1 August 2021 to 30 July 2022 (b) complying with Australian Accounting Standards and the Corporations Regulations 2001. What we have audited The Group financial report comprises: ● ● ● ● ● Materiality ● the consolidated balance sheet as at 30 July 2022 the consolidated income statement for the period then ended the consolidated statement of comprehensive income for the period then ended the consolidated statement of changes in equity for the period then ended the consolidated statement of cash flows for the period then ended the notes to the consolidated financial statements, which include significant accounting policies and other explanatory information the directors’ declaration. ● For the purpose of our audit we used overall Group materiality of $3.6 million, which represents ● approximately 5% of the Group’s profit before tax. Basis for opinion ● 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 Group profit before tax because, in our view, it is the benchmark against which the performance We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial report section of our report. of the Group is most commonly measured. ● We utilised a 5% threshold based on our professional judgement, noting it is within the range of commonly We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis acceptable thresholds. for our opinion. Audit Scope ● Our audit focused on where the Group made subjective judgements; for example, significant accounting Independence We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. ● 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. estimates involving assumptions and inherently uncertain future events. 81 82 83 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 Carrying value of non-current assets (Refer to notes C1, C2 and C4) Our audit procedures included, amongst others: The Group’s non-financial assets include, amongst into CGUs was consistent with our knowledge of the others, intangible assets with indefinite lives, Group’s operations and internal Group reporting • evaluated whether the allocation of the Group’s assets representing brand names and trademarks, property, plant and equipment, software and right-of-use assets. • evaluated the appropriateness of the Group’s method for developing the estimate of the recoverable amount The Group assessed there were no indicators of • performed testing over the mathematical accuracy of a impairment for individual stores. selection of key data in the model. At least annually, an impairment assessment is • compared the Group’s forecast cash flows to Board performed by the Group over the cash generating unit approved budgets which has the trademark with an indefinite life. The Group performed an impairment assessment by assumptions used in the model, including forecast preparing a value-in-use model to determine if the EBITDA margins, discount rates and terminal growth • evaluated the appropriateness of significant carrying value of the assets in the Myer Group cash rates generating unit was supported by forecast future cash flows, discounted to present value (the "model"). Given the financial significance of non-financial results for the past three years assets and the significant judgements and assumptions applied by the Group in estimating future cash flows, we considered this to be a key audit matter. • assessed the Group’s historical ability to forecast cash flows by comparing the forecast cash flows to actual • together with PwC valuation experts, evaluated the appropriateness of the discount rates used in the model by comparing them to market data and comparable companies. • evaluated the Group’s assessment of whether there were any indicators of impairment for individual stores. We assessed the reasonableness of the Group's disclosures in the financial report against the requirements of the Australian Accounting Standards. Myer Annual Report 2022 97 Key audit matters Independent auditor’s report To the members of Myer Holdings Limited 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. Our opinion Report on the audit of the financial report Key audit matter In our opinion: How our audit addressed the key audit matter 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: Our audit procedures included, amongst others: Carrying value of non-current assets (Refer to notes C1, C2 and C4) (a) giving a true and fair view of the Group's financial position as at 30 July 2022 and of its financial performance for the period 1 August 2021 to 30 July 2022 • evaluated whether the allocation of the Group’s assets into CGUs was consistent with our knowledge of the Group’s operations and internal Group reporting (b) complying with Australian Accounting Standards and the Corporations Regulations 2001. The Group’s non-financial assets include, amongst others, intangible assets with indefinite lives, representing brand names and trademarks, property, plant and equipment, software and right-of-use What we have audited assets. The Group financial report comprises: • evaluated the appropriateness of the Group’s method for developing the estimate of the recoverable amount ● ● ● ● ● ● The Group assessed there were no indicators of impairment for individual stores. At least annually, an impairment assessment is performed by the Group over the cash generating unit which has the trademark with an indefinite life. • performed testing over the mathematical accuracy of a selection of key data in the model. the consolidated balance sheet as at 30 July 2022 the consolidated income statement for the period then ended the consolidated statement of comprehensive income for the period then ended the consolidated statement of changes in equity for the period then ended the consolidated statement of cash flows for the period then ended the notes to the consolidated financial statements, which include significant accounting policies and other explanatory information the directors’ declaration. • evaluated the appropriateness of significant assumptions used in the model, including forecast EBITDA margins, discount rates and terminal growth rates • compared the Group’s forecast cash flows to Board approved budgets The Group performed an impairment assessment by preparing a value-in-use model to determine if the carrying value of the assets in the Myer Group cash generating unit was supported by forecast future cash flows, discounted to present value (the "model"). Basis for opinion ● • assessed the Group’s historical ability to forecast cash flows by comparing the forecast cash flows to actual results for the past three years We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under Given the financial significance of non-financial those standards are further described in the Auditor’s responsibilities for the audit of the financial assets and the significant judgements and report section of our report. assumptions applied by the Group in estimating future cash flows, we considered this to be a key audit matter. • together with PwC valuation experts, evaluated the appropriateness of the discount rates used in the model by comparing them to market data and comparable companies. 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 Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We assessed the reasonableness of the Group's disclosures in the financial report against the requirements of the Australian Accounting Standards. • evaluated the Group’s assessment of whether there were any indicators of impairment for individual stores. 81 83 Myer Annual Report 2022Directors’ Report Year in Review Remuneration ReportFinancial Statements 98 Key audit matter Independent auditor’s report How our audit addressed the key audit matter To the members of Myer Holdings Limited Inventory valuation (Refer to note B2) Report on the audit of the financial report To assess the Group’s inventory provisions we performed the following procedures, amongst others: Our opinion The Group held inventory of $371 million at 30 July 2022. Inventories are valued at the lower of cost and net realisable value. In our opinion: • assessed the Group’s inventory provisioning policy by considering the levels of aged inventory and the Group’s inventory clearance strategy 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: • for a sample of inventory items, compared the current selling price (net realisable value) to the recorded cost The Group recognises a provision where it expects the net realisable value of inventory to fall below its cost price. (a) giving a true and fair view of the Group's financial position as at 30 July 2022 and of its financial performance for the period 1 August 2021 to 30 July 2022 (b) complying with Australian Accounting Standards and the Corporations Regulations 2001. • evaluated the appropriateness of the Group’s markdown assumptions when considered against promotional activity after period end We considered this a key audit matter because the Group applies judgements and assumptions in forecasting future selling prices to estimate the value What we have audited of inventory likely to sell below cost in the future. The Group financial report comprises: We assessed the reasonableness of the Group's disclosures in the financial report against the requirements of the Australian Accounting Standards. Refinancing of the debt facility (Refer to notes D3) ● ● ● ● ● ● ● the consolidated balance sheet as at 30 July 2022 the consolidated income statement for the period then ended the consolidated statement of comprehensive income for the period then ended the consolidated statement of changes in equity for the period then ended the consolidated statement of cash flows for the period then ended the notes to the consolidated financial statements, which include significant accounting policies and other explanatory information the directors’ declaration. Read the signed agreements between the Group and its lenders to understand the terms of the Asset Based Loan syndicated facility agreement and the amount of facility available for drawdown. Obtained confirmations directly from the Group’s banks to confirm the borrowings’ balance at 30 July 2022 The Group has bank loans of $65 million as at 30 July 2022. The new debt funding agreement of the Group is an Basis for opinion Asset Based Loan (ABL) syndicated facility. Given the debt funding agreement was a new facility and the financial significance of the balance, we considered it was a key audit matter. We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial report section of our report. Evaluated whether the debt was classified as current or non-current at 30 July 2022 in accordance with Australian Accounting Standards We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. We assessed the reasonableness of the Group's disclosures in the financial report against the requirements of the Australian Accounting Standards. Other information Independence We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. The directors are responsible for the other information. The other information comprises the information included in the annual financial report for the period ended 30 July 2022, 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. 81 84 85 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. 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. Responsibilities of the directors for the financial report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the 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. Auditor’s responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of 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. Myer Annual Report 2022 99 Independent auditor’s 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. To the members of Myer Holdings Limited 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. Report on the audit of the financial report Our opinion 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. 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: 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. performance for the period 1 August 2021 to 30 July 2022 (a) giving a true and fair view of the Group's financial position as at 30 July 2022 and of its financial Responsibilities of the directors for the financial report (b) complying with Australian Accounting Standards and the Corporations Regulations 2001. What we have audited The Group financial report comprises: 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. the consolidated balance sheet as at 30 July 2022 the consolidated income statement for the period then ended the consolidated statement of comprehensive income for the period then ended In preparing the financial report, the directors are responsible for assessing the ability of the Group to the consolidated statement of changes in equity for the period then ended continue as a going concern, disclosing, as applicable, matters related to going concern and using the the consolidated statement of cash flows for the period then ended going concern basis of accounting unless the directors either intend to liquidate the Group or to cease the notes to the consolidated financial statements, which include significant accounting policies operations, or have no realistic alternative but to do so. and other explanatory information the directors’ declaration. Auditor’s responsibilities for the audit of the financial report ● ● ● ● ● ● ● Basis for opinion 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. We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial report section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 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. Independence We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. 81 85 Myer Annual Report 2022Directors’ Report Year in Review Remuneration ReportFinancial Statements 100 Report on the remuneration report Independent auditor’s report Our opinion on the remuneration report To the members of Myer Holdings Limited We have audited the remuneration report included in pages 30 to 56 of the directors’ report for the period ended 30 July 2022. Report on the audit of the financial report In our opinion, the remuneration report of Myer Holdings Limited for the period ended 30 July 2022 complies with section 300A of the Corporations Act 2001. Our opinion In our opinion: Responsibilities 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) giving a true and fair view of the Group's financial position as at 30 July 2022 and of its financial 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. (b) complying with Australian Accounting Standards and the Corporations Regulations 2001. performance for the period 1 August 2021 to 30 July 2022 What we have audited The Group financial report comprises: PricewaterhouseCoopers ● ● ● ● ● ● ● the consolidated balance sheet as at 30 July 2022 the consolidated income statement for the period then ended the consolidated statement of comprehensive income for the period then ended the consolidated statement of changes in equity for the period then ended the consolidated statement of cash flows for the period then ended the notes to the consolidated financial statements, which include significant accounting policies and other explanatory information the directors’ declaration. Melbourne 15 September 2022 Alison Tait Milner Partner Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial report section of our report. We 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 Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. 81 86 Myer Annual Report 2022 101 Shareholder information As at 16 September 2022. Myer has one class of shares on issue (being ordinary shares). All the Company’s shares are listed on the Australian Securities Exchange. 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 Number 821,278,815 41,271 $0.615 18,883 Units 648,212,059 111,931,364 21,430,628 29,587,347 10,117,417 % 78.93 13.63 2.61 3.60 1.23 Holders 454 3,617 2,688 13,327 21,185 % 1.10 8.76 6.51 32.29 51.33 821,278,815 100.00 41,271 100.00 Minimum $500.00 parcel at $0.615 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 20 METALGROVE PTY LTD CITICORP NOMINEES PTY LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED J P MORGAN NOMINEES AUSTRALIA PTY LIMITED HAPPY SABA GROUP NO 1 PTY LTD BOND STREET CUSTODIANS LIMITED BNP PARIBAS NOMS PTY LTD SPROUT GROUP PTY LTD NATIONAL NOMINEES LIMITED AM GLORY PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 ACE PROPERTY HOLDINGS PTY LTD TSOU ENTERPRISE PTY LTD SRH SUPER PTY LTD MR JOHN ANTHONY KING MR PAT O’NEILL RIADIS HOLDINGS PTY LTD MR RAJESH PARSOTAM HARIDAS COMSEC NOMINEES PTY LIMITED DR PETER MALCOLM HEYWORTH Total Balance of register Grand total Minimum Parcel Size 813 Holders 18,883 Units 7,908,907 Units % of Units 22.87 15.40 9.40 4.34 1.27 1.24 1.12 1.01 0.77 0.77 0.72 0.63 0.49 0.44 0.44 0.42 0.37 0.34 0.33 0.32 187,795,283 126,463,655 77,190,937 35,682,057 10,390,648 10,198,111 9,177,044 8,300,000 6,344,798 6,331,195 5,911,667 5,200,000 3,996,560 3,600,000 3,582,432 3,478,649 3,000,000 2,800,000 2,721,042 2,603,300 514,767,378 306,511,437 821,278,815 62.68 37.32 100.00 Myer Annual Report 2022Directors’ Report Year in Review Remuneration ReportFinancial Statements 102 Substantial shareholders As at 16 September 2022, there are three substantial shareholders that Myer is aware of: Premier Investments Dimensional Fund Advisors Mitsubishi UFJ Financial Group Inc Total Date of last notice 8 August 2022 2 December 2016 31 August 2022 Number of securities in last notice 187,795,283 57,539,611 41,129,409 % 22.87 7.01 5.01 34.89 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 16 September 2022, there were 24 holders of performance options and rights. Myer Annual Report 2022 103 Corporate directory Registered office Myer Holdings Limited Level 7, 1000 La Trobe Street Docklands VIC 3008 Myer postal address Myer Holdings Limited PO Box 869J Melbourne VIC 3001 Company secretary Paul Morris Myer customer service centre 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 General Counsel and Company Secretary on the Australian Securities Exchange (ASX) Shareholder enquiries: Share registry Link Market Services Limited Attn: Myer Holdings Limited Locked Bag A14 Sydney South NSW 1235 Myer shareholder information line Australian Telephone: 1300 820 260 International Telephone: +61 1300 820 260 Facsimile: +61 2 9287 0309 www.linkmarketservices.com.au Websites myer.com.au myerone.com.au myer.com.au/investor Find us here Facebook.com/myer Instagram.com/myer Investor relations and media enquiries Twitter.com/myer Email: myer.corporate.affairs@myer.com.au Sustainability Email: sustainability@myer.com.au Youtube.com/myer Designed and produced at www.twelvecreative.com.au Myer Annual Report 2022Directors’ Report Year in Review Remuneration ReportFinancial Statements

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