Premier Investments Limited Annual Report 2021

Plain-text annual report

Annual Report 2021 Annual Report 2021 Chairman’s Report Solomon Lew Chairman Richard Murray Premier Retail CEO On behalf of the Premier Investments Limited (“Premier”) Board of Directors, it is my pleasure to present the Annual Report for the year ended 31 July 2021 (“2021”). As a result of this prudent approach – and notwithstanding the global health crisis – your company reported Net Profit After Tax of $271.8 million for 2021, up 97.3% on last year1. Our wholly-owned retail businesses (Premier Retail) contributed a record Earnings Before Interest and Tax (EBIT) of $351.9 million to this result, up 88.0% on 20202. $271.8m NET PROFIT AFTER TAX 2021 has been an incredibly difficult year for consumers and businesses in the context of the COVID-19 health crisis. Yet, Premier is proud to have delivered record results for our shareholders. This is a testament to the skills and dedication of our entire global team. Your Directors have always focused their attention on maintaining a strong and sustainable business. Over the past decade, this has manifested in a strong balance sheet with a significant cash balance and investment in both owning and operating critical business infrastructure. 1 The 2021 financial year represented a 53 week period, ended 31 July 2021. The 2020 financial year represented a 52 week period, ended 25 July 2020. 2 Refer to page 9 of the Directors Report for a reconciliation between underlying EBIT and statutory reported profit before taxation for the Retail Segment. Premier Investments Limited 1 PETER ALEXANDER DELIVERS $100 MILLION SALES GROWTH IN ONE YEAR The Peter Alexander brand is a powerful brand in Australia and New Zealand that continues to deliver record results. Annual sales of $388.2 million in 2021 were up 34.7% on prior year with positive LFL sales growth in both Australia and New Zealand despite the pandemic. All Peter Alexander channels delivered exceptional growth across both Australia and New Zealand – full priced stores, outlet stores and online, with some outstanding results from suburban and regional stores. Peter Alexander’s unique design-led product combined with the Group’s strategic decision, early in the global health crisis, to continuously invest in inventory enabled Peter Alexander to be in stock of its much-loved products at the key gift giving periods of Black Friday/Cyber Monday, Christmas, Easter, Mother’s Day and Father’s Day. This is a credit to the design, sourcing and supply chain teams who adapted to the ever-changing circumstances to ensure Peter Alexander was able to deliver for its customers. $388.2m PETER ALEXANDER FY21 SALES $351.9m PREMIER RETAIL FY21 EBIT SMIGGLE POWERFUL GLOBAL BRAND STARTING TO REBOUND The impact of COVID-19 was particularly severe on the Smiggle global business as families no longer felt safe shopping with children in-store and schools were closed for long periods of time. A fundamental aspect to Smiggle’s success is children attending school. Pleasingly, in countries and markets where schools have re-opened largely free of COVID-19 restrictions, Smiggle is flourishing. In the key “back to school” periods, Smiggle has demonstrated its unique product and competitive advantage. Both our Northern Hemisphere retail store network and our wholesale channel partners have recently seen very strong responses to our products as countries reach high COVID-19 vaccination rates and COVID-19 restrictions ease. These positive responses give every confidence that the Smiggle business has started to rebound and grow. Annual Report 2021 PREMIER RETAIL GOVERNMENT MANDATED STORE CLOSURES Premier Retail includes our five iconic Apparel Brands (Just Jeans, Jay Jays, Portmans, Dotti and Jacqui E), Smiggle and Peter Alexander. During the year, Premier Retail faced temporary store closures across our global store network due to government mandated lockdowns. For 52 of the 53 trading weeks during the 2021 financial year, Premier faced temporary closures across our global store network. On average, 176 stores were forced into temporary closures in any given week during the year. This resulted in 50,581 lost retail store trading days during the year. This added immense operational complexity across every aspect of our business. However, notwithstanding this, the Group’s five iconic Apparel Brands delivered record sales of $841.6 million, up 25.3% on 2020 with like-for-like (“LFL”) sales growth for the year up 18.7%. We continue to manage through these unprecedented conditions whilst doing our best to balance the needs of our customers, our team members and you, our shareholders. We are optimistic that accelerating vaccination rates in Australia and New Zealand will allow the reopening of our stores in these jurisdictions as has occurred in other parts of the world. Premier Retail has made the strategic decision to invest in inventory for the all-important second quarter of 2022 (Black Friday/Cyber Monday; Christmas, Boxing Day, ‘Back to School’) and we have the appropriate supply chains to support this decision and ensure we remain in stock of wanted product. 2 Annual Report 2021ONLINE – NOW REPRESENTS 20% GROUP SALES Premier Retail delivered record online sales of $300.7 million in 2021, up $80.3 million or 36.4% on a previous record 2020 (2020: $220.4 million). The online business contributed 20.8% of total Group sales for the year (2020: 18.1%) and has a significantly higher EBIT margin than the retail store channel. Premier’s strategic decision to invest in a wholly owned Australian Distribution Centre has allowed the Group to remain agile and to scale up its online fulfillment in response to unprecedented customer demand providing the Group with significant operating leverage. Plans have commenced to expand this facility in calendar 2022 to meet ongoing demand resulting from the accelerating industry restructure as customers increasingly choose to shop online. The Group today has world class customer facing websites and will continue to make major investments in its people, its information technology, digital marketing capability and distribution centres to maximise the increasing customer preference to shop online. $300.7m RECORD FY21 ONLINE SALES RETAIL INDUSTRY RESTRUCTURE – PREMIER IS PREPARED The temporary global closures of retail stores and ongoing government implementation of social distancing in each of the countries and markets we operate in has significantly changed customer shopping behaviour. Customers are increasingly choosing to shop online in this highly uncertain macro environment. Over the past ten years, Premier has made significant investment in its fully integrated online channel and is well placed to maximise this significant swing in customer shopping preference. Premier Retail today has: • Seven distinct brands each with a strong, distinctive, and competitive market position • A world class customer facing website platform trading in three countries • A fully integrated and owned Australian distribution centre • Significant digital capability, online technology and IT infrastructure – including dedicated teams focused on online growth The accelerated swing in customer preference to shopping online has further increased Premier Retail’s focus on each store’s profitability. Pleasingly, many landlords recognise the long-term financial strength of Premier and its seven iconic brands. During 2021 Premier Retail was able to reach mutual agreement with key landlords that appropriately rebased the Group’s rent. Premier Retail maintains maximum flexibility in reviewing each store’s profitability, with over 75% of its global store network either in holdover or with leases expiring in less than 12 months. 20.8% OF TOTAL GROUP SALES WERE FROM ONLINE BUISNESS BALANCE SHEET AND DIVIDENDS Throughout the crisis Premier has maintained a very strong balance sheet. At year-end the Group had $523 million of cash on hand. Our year-end balance sheet reflects our holding in Breville Group Limited at $271 million in line with accounting standards, with a fair market value at year-end of $1.2 billion. The Premier Board remains optimistic about the future as the COVID-19 vaccination rollout across Australia and New Zealand increases, however the Board also recognises that the Group is operating in highly uncertain times. The Board also notes that the environment, whilst challenging for many businesses, may present new opportunities for the Group given the strength of its balance sheet. In balancing these considerations, the Board has approved a final fully franked dividend of 46 cents per share (up 10 cents per share or 27.8% on 2020). The final dividend will be paid on 27 January 2022. Total 2021 full year dividends amounted to 80 cents per share, fully franked. This is an increase of 10 cents per share or 14.3%. Premier Investments Limited 3 I have no doubt that 2022 will bring both challenges and opportunities, but I feel confident that Premier is well positioned and well invested to deliver long term returns to shareholders. Chairman’s Report continued We welcomed Richard to our strong and committed team in September 2021, and we look forward to introducing you to Richard at Premier’s Annual General Meeting. This is the beginning of a new chapter for Premier as the Group continues to grow its brands both locally and globally while carefully managing through continued pandemic conditions across numerous jurisdictions. With a very strong balance sheet, Premier is exceptionally well placed to continue to grow our existing businesses and seek out new opportunities into the future. As I reflect on 2021, I am as always indebted to my fellow Directors for their valuable contribution, insights and counsel. I am incredibly thankful for the skill and dedication of our senior leadership team who have provided stewardship across our global business during another challenging year. I am grateful for the knowledge, hard work and enthusiasm of our entire workforce. But most importantly I acknowledge the support of our shareholders which, during unprecedented times, has allowed us to make long term decisions and invest with certainty. Solomon Lew Chairman and Non-Executive Director LEADERSHIP AND GOVERNANCE Premier’s Board and management team remain focused, flexible and nimble in response to the current environment. The Directors are extremely proud of our team’s dedication and commitment during these unprecedented times. As announced during the year, Mark McInnes stepped down from his role following the conclusion of the 2021 financial year. Mark was an Executive Director of Premier and the CEO of Premier Retail for ten years – a long and distinguished tenure during which he guided the business to deliver record year-on-year operational and financial performance. On behalf of the Board and fellow Premier shareholders, I thank Mark for his service. As I have said previously, the Board believes that we have the most outstanding senior management team of any retail business in Australia, and one which could be successfully benchmarked internationally. So, I’d also like to thank Premier Retail’s senior leadership group and our entire team of employees for their outstanding contribution and their resilience during this challenging period. I have no doubt that 2022 will bring both challenges and opportunities, but I feel confident that Premier is well positioned and well invested to deliver long term returns to shareholders. During the year, the Board was delighted to announce that Richard Murray has been appointed as CEO of Premier Retail, succeeding Mark McInnes. Richard is unquestionably one of the best retailers in Australia, having delivered significant growth, transformation and shareholder value during his career at the JB Hi-Fi Group. Richard’s appointment continues Premier’s track record of recruiting and retaining the best executives in the industry. 4 Annual Report 2021The Directors Solomon Lew Chairman and Non-Executive Director David M. Crean Deputy Chairman and Non-Executive Director Timothy Antonie Non-Executive Director Sylvia Falzon Non-Executive Director Sally Herman Non-Executive Director Henry D. Lanzer AM Non-Executive Director Terrence McCartney Non-Executive Director Mark McInnes Executive Director Michael R.I. McLeod Non-Executive Director Premier Investments Limited 5 Brand Performance Premier Retail Jay Jays, under Linda Whitehead’s leadership, delivered FY21 sales growth up 19.0% to $202.3 million - a strong result for the brand underpinned by strong LFL growth both in stores and online. Sales have grown 28.0% over 3 years from FY18 to FY21. Jay Jays has a strong, distinctive and competitive market position and is well positioned for future growth. Jacqui E, under the leadership of Nicole Naccarella, delivered strong results in FY21 with sales growth up 13.6% to $70.1 million underpinned by strong LFL growth both in stores and online. While Jacqui E continues to be significantly impacted by the temporary exodus of workers from CBD areas during the COVID-19 health crisis, the FY21 sales growth demonstrates the long term strength of the brand. In regions living with easing COVID-19 social distancing restrictions, Jacqui E sales were significantly stronger. Jacqui E has an extremely strong and distinctive market position and is well positioned for future growth. Smiggle, is a powerful global brand flourishing where children are back at school. The brand’s strength has been demonstrated in FY21 with strong LFL sales growth across all states in Australia up 5.7% and New Zealand up 6.3%, and in the key Back to School periods as children were able to return to school strong LFL Sales up 39% in Australia, up 27% in New Zealand and up 143% in Malaysia. John Cheston, Managing Director Smiggle, continues to lead a strong and focused management team behind a powerful global brand starting to rebound. Portmans, under the leadership of Jade Wyatt, delivered record FY21 sales of $141.7 million, up a record $36.5 million or 34.6% on FY20. Online sales continue to drive overall growth at a significantly higher EBIT margin than the store portfolio. Portmans has an extremely strong and distinctive market position and is well positioned for future growth, particularly looking beyond the current temporary exodus of workers from CBD areas during the COVID-19 health crisis. Dotti, under Deanna Moylan’s leadership, delivered strong results in FY21 with sales growth up 16.3% to $111.6 million underpinned by strong LFL growth both in stores and online. Dotti continues to deliver improvement in profit margins being delivered through changes to sourcing strategy. Online sales continued to grow ahead of the market with this channel delivering significantly higher EBIT margin than the brand average. Dotti has a strong, distinctive and competitive market position and is well positioned for future growth. Peter Alexander, is a powerful brand in Australia and New Zealand and delivered record sales in FY21, up $100 million or 34.7% to $388.2 million - underpinned by strong Like-for-Like (LFL) sales growth. Peter Alexander’s unique design led product, combined with the Group’s strategic decision to be in stock for the critical gift giving periods has enabled the brand to deliver increased full priced sales with much less promotional activity delivering significantly higher gross margins in FY21. Under the leadership of Judy Coomber, Managing Director Peter Alexander and Dotti, and Peter Alexander, Creative Director, the growth is set to continue. Peter Alexander is extremely well placed as the leading gift destination for the upcoming Christmas trading period. Just Jeans, under Matthew McCormack’s leadership, delivered record FY21 sales of $315.8 million, up a record $77 million or 32.2% on FY20 – a particularly pleasing result for the Group’s iconic original brand. FY21 sales growth was underpinned by strong LFL growth both in stores and online, with sales growth up 48.5% over 3 years from FY18 to FY21. Just Jeans has a strong, distinctive and competitive market position and is well positioned for future growth. 6 Annual Report 2021Peter Alexander Delivers $100 Million Sales Growth in One Year • Record FY21 sales of $388.2 million, up a record $100.0 million or 34.7% on FY20, underpinned by strong LFL growth both in stores and online • Peter Alexander delivered three year sales growth of 77.5% from FY18 to FY21 and over 400% sales growth in the past 10 years • Peter Alexander’s unique design led product, combined with the Group’s strategic decision early in the global health crisis to be in stock for the critical gift giving periods has enabled the brand to deliver increased full priced sales with much less promotional activity delivering significantly higher gross margins in FY21 Peter Alexander Sales • All Peter Alexander channels • Peter Alexander is extremely well placed as the leading gift destination for the upcoming Christmas trading period • Strong and focused management team led by Judy Coomber (Managing Director: Peter Alexander and Dotti) and Peter Alexander (Creative Director: Peter Alexander) delivered exceptional growth across both Australia and New Zealand – online, full priced & outlet stores - including several outstanding results from suburban and regional retail stores • Peter Alexander’s record sales result was driven by exceptional performance across all product categories • Womenswear • Menswear • Childrenswear • PA Plus • Footwear • Gift & Home Fragrance m $ D U A s e l a S 450 400 350 300 250 200 150 100 50 0 $388 $288 $248 $219 $191 $167 $140 $122 $101 $86 $73 $61 $50 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Premier Investments Limited 7 Internet Performance Premier Retail • Record online sales of $300.7 million, up $80.3 million or 36.4% on a previous record FY20 and contributed 20.8% of total FY21 sales (FY20: 18.1%) • The Group’s 2013 investment in a centralised and specifically customised Australian Distribution Centre servicing 100% order fulfilment of 100% of Premier Retail products in Australia has enabled the business to be agile and scale up operations in response to unprecedented customer demand, providing the Group with significant operating leverage • Plans have progressed to expand the 100% owned Australian Distribution Centre in calendar 2022 to meet ongoing demand resulting from the accelerating industry restructure as customers increasingly choose to shop online • Under the leadership of Georgia Chewing, major investment continues in people, technology, digital marketing and distribution centres whilst continuing to deliver a world class platform and customer experience • The online channel continues to deliver significantly higher EBIT margin than the retail store network providing significant operating leverage for future growth $300.7m RECORD ONLINE SALES 100% ORDER FULFILMENT OF ALL PREMIER RETAIL PRODUCTS IS IN AUSTRALIA Full Year Online Sales Growth 20.8% 300.7 18.1% 220.4 11.7% 9.5% 148.2 112.5 20% 15% 10% 5% 0% 6.2% 68.1 4.5% 47.5 3.6% 34.4 1.0% 8.3 1.7% 13.8 2.3% 18.9 2.8% 24.6 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Online Sales ($'M) Online Sales as % of Total Sales 325 300 275 250 225 200 175 150 125 100 75 50 25 0 8 Annual Report 2021Smiggle Strong Global Brand Flourishing Where Children are Back at School • Smiggle is a powerful global brand • With children back in the classroom • This positive response in the • Despite the ongoing impact of COVID-19 throughout FY21, the brand’s true strength was proven, delivering full year LFL sales growth up 5.7% in Australia, with all states recording LFL sales growth, and up 6.3% in New Zealand • Smiggle delivered record global online sales in FY21 of $52.6 million, up 24.4% on FY20, and contributed 24.7% of total Smiggle FY21 sales (FY20: 16.5%) • In countries and markets where schools have reopened under easing COVID-19 restrictions, the brand is flourishing • In the key ‘back to school’ periods as children have returned to school, Smiggle has demonstrated its unique product competitive advantage by delivering LFL sales growth up 39% in Australia, up 27% in New Zealand and up 143% in Malaysia in FY21 there has been a very strong response to Smiggle’s product offering for ‘back to school’ essentials, with sales for the key ‘back to school’ period in 1H22 significantly ahead of expectations. Retail store LFL growth is up 69% in the UK and up 64% in the Republic of Ireland, delivering record ‘back to school’ sales results at full margin • In the wholesale channel, for the key ‘back to school’ period in 1H22, in the Middle East where children have returned to school in highly vaccinated societies, sales have significantly exceeded expectations delivering record sales and LFL growth up 131%. The strong Middle East performance gives the Group confidence that the wholesale channel will flourish in an environment under easing COVID-19 restrictions Like for Like sales during the key “back to school” period as children have returned to school in a normal setting free of COVID-19 restrictions 143% 39% 27% 69% 64% 150% 120% 90% 60% 30% 0% Australia New Zealand Malaysia UK Ireland Wholesale partner Like for Like “back to school” sales 160% 140% 120% 100% 80% 60% 40% 20% 0% 131% Middle East Northern Hemisphere gives every confidence that the business in the Southern Hemisphere will bounce back strongly as restrictions ease, children return to the classroom and retail and wholesale stores are able to reopen • John Cheston, Managing Director Smiggle, continues to lead a strong and focused management team behind a powerful global brand starting to rebound Premier Investments Limited 9 Our Commitment to Business Sustainability Premier acknowledges the importance of respecting our stakeholders, including employees, shareholders, customers and suppliers. PEOPLE COMMUNITY ENVIRONMENT ETHICAL SOURCING • Attraction and retention • Development • Reward and recognition • Workplace Safety • Peter Alexander and RSPCA/PAW JUSTICE • Smiggle Community Partnerships • Packaging Stewardship • Waste and Recycling • Energy efficiency • Our sourcing models, principles & policies • Our Assurances • Ethical Raw Material Procurement We are committed to a long term goal of delivering sustainable value through the effective use of our resources and relationships. This goal influences how we behave and impacts everything we do. OUR COMMITMENT TO OUR PEOPLE Our goal is for Premier to attract, retain and motivate high calibre employees. Our outstanding leadership team have developed and nurtured a culture that supports our success. We value speed, integrity, energy, and results. We have a ‘can do’ culture in which employees see the difference they make. 92% % FEMALE EMPLOYEES ATTRACTION AND RETENTION By Christmas 2021, Premier will employ over 11,000 staff in seven countries. Premier believes that it is important to ensure that all team members enjoy a workplace which is free from discrimination; we believe our staff perform the best when they can be themselves at work and so we strongly support gender, age, sexual orientation, disability and cultural diversity at work. 10 In FY21, 92% of our total team members are women, who held 74% of the positions at management level internationally. We have continued our focus on the development and career trajectory of our very strong team of female executives. Female leaders spearheaded ecommerce, marketing, People & Culture, and five out of our seven brands, to deliver exceptional results. We rely on the passion and commitment of our employees to achieve the results we do. DEVELOPMENT Premier provides ongoing and regular training throughout the year to support and develop all team members. Upon commencement, all new team members complete our 3 Stage Just Getting Started Induction Program. All existing team members complete sales training seasonally online and participate in regular instore H&S training. Leadership and Management Development training is provided for our leaders. This year a suite of online modules were designed for our leaders to access remotely via our JUST Learn platform. Zoom sessions were lead by our People & Culture Team to support all newly appointed leaders and all Store Managers participated in seasonal sessions lead by the Senior Leadership Teams. REWARD AND RECOGNITION We recognise and reward outstanding contributions to our Group results, both individually and for team performance. Our annual Just Excellence Awards recognise our best performing Retail Leaders and salespeople for their excellent performance and contribution to achieving our financial goals. The top performing Regional Managers, Store Managers and Visual Merchandisers for each of our brands are rewarded publicly amongst their peers for their great leadership and delivery of their results. WORKPLACE SAFETY Premier is committed to the prevention of workplace injury and lost time. Using the ‘Just Play it Safe’ and ‘Safety Eyes’ themes, we want to create a culture where all employees feel responsible for all aspects of health and safety. Workplace safety is considered in all our business decisions, including workplace design and development, supply chain, visual merchandising and store planning. We have clear and measurable performance targets. However, in the event that a work related injury or illness occurs, we are also committed to fully supporting affected employees to return to work and continuing their career. We will continue to develop Premier as a great place to work, and a great company in which our team build their careers. Annual Report 2021Our Commitment to the Community Premier has a long history of philanthropic support, particularly with our Peter Alexander and Smiggle brands. Peter Alexander Founder and Creative Director PETER ALEXANDER AND THE RSPCA As much as Peter Alexander has become famous for his pyjamas, he has also become known for his dogs, and is a huge supporter of animal welfare organisations. Peter Alexander has worked closely for the last 15 years with the RSPCA in Australia, and for the last seven years with Paw Justice in New Zealand. Our work has included a variety of fundraising activities which raise awareness for these animal charities. Working with the RSPCA, Peter has raised over $1,250,000 contributing to RSPCA shelters, which care for more than 140,000 animals every year supporting rescue, rehabilitation and rehoming unwanted, stray and injured animals. Peter has been awarded the status of RSPCA Ambassador in recognition of his efforts. $136,000 RAISED FOR PAW JUSTICE IN NZ IN THE LAST 7 YEARS $109,535 DONATED TO RSPCA IN FY21 PETER ALEXANDER AND PAW JUSTICE In 2014, aligned with the growing presence of Peter Alexander in New Zealand, we partnered with the NZ animal charity Paw Justice, and over the last seven years have raised almost $136,000. Paw Justice works to stop violent animal abuse; and they have been instrumental in focusing the New Zealand public’s attention on the need for reform of animal welfare laws through youth education and advocacy for pets. Since we’ve been working with RSPCA shelters in Australia and Paw Justice in New Zealand, Peter has raised over $1.2 Million During the year Peter Alexander continued its commitment to the prevention of cruelty to animals. The involvement with the RSPCA in Australia and Paw Justice in New Zealand continues to be the key charity supported by the brand. Each year, Peter develops a special product to be made available in store in the lead up to gift giving events. In 2020 and 2021, a range of chocolate bars featuring Peter Alexander prints were sold over the Christmas and Easter periods with 100% of all proceeds donated to these charities. During the year we donated $109,535 to the RSPCA and $10,981 to Paw Justice. Premier Investments Limited 11 Our Commitment to the Community continued SMIGGLE COMMUNITY PARTNERSHIPS Premier and our Smiggle brand regularly support a number of children’s charities, organisations and educational programs. Plus countless community fundraising initiatives both locally and abroad, for schools and educational events. In FY21 Smiggle partnered with Dolly’s Dream, a sister charity of the Alannah & Madeline Foundation in Australia. Dolly’s Dream is an organisation committed to educating parents and communities on the issues of bullying and cyber bullying. Smiggle raised $8,000 AUD through promoting the charities ‘digi-pledge’ programme and selling our partnership keyrings. All money raised goes towards the development of bullying prevention and online safety programs that can be provided to children, families, schools, and communities across Australia. Smiggle also partnered with The Diana Award in the UK, which is a charity legacy to Diana, Princess of Wales that develops and delivers anti-bullying programmes to schools across the UK. The Diana Award Anti-Bullying Programme engages young people, parents and teachers to change the attitudes, behaviour and culture of bullying. Through their school programmes they help children build the skills and confidence they need to address different bullying situations, both online and offline. Smiggle sponsored the facilitation of 10 school workshops valued at £5,000 GBP and donated over £3,000 GBP worth of Smiggle product. 12 Smiggle also supported Camp Quality, an organisation that gives children facing cancer the chance to be children again. Camp Quality provides children and their families with fun experiences, trusted information, coping tools and a supportive community; in-hospital, online, at school and away from it all on camps and at their retreats. Smiggle donated $20,000 AUD worth of Smiggle stationery to be included in packs provided to children in hospital. In the same period, Smiggle also partnered with the Jonathan Thurston Academy, an organisation which provides outstanding initiatives and community programs throughout Australia. Smiggle is proud to sponsor the JTBelieve Kowanyama program, donating $6,000 AUD worth of school supplies and prizes for the JTBelieve program awards. The JTBelieve program supports young Australians in Indigenous communities to reach their full potential by providing educational and well-being support. Annual Report 2021Our Commitment to the Environment PACKAGING STEWARDSHIP WASTE AND RECYCLING Premier and Just Group are committed to managing and reducing the impact our business operations have on the environment. Just Group is a signatory to the Australian Packaging Covenant, a voluntary agreement between government and industry which provides companies with tools to be more involved in reducing their impact on the environment through sustainable packaging design, recycling and product stewardship. Just Group has submitted its Action Plan outlining its objectives in relation to: 1 2 3 4 5 Having a strategy to improve packaging sustainability Preparing a procedure that requires the use of the Sustainable Packaging Guidelines or equivalent to evaluate packaging during design or procurement Developing a documented plan to optimise material efficiency Investigating opportunities to increase the use of recycled and/or renewable materials in packaging Investigating opportunities to improve recoverability in packaging and amount of single use business-to-business packaging Premier has extensive recycling and sustainability practices across our network of Stores, Distribution Centres and Support Centre. Our Distribution Centres execute on-site recovery systems for recycling used packaging, following Sustainable Packaging Guidelines. All carton packaging uses recycled content. Cartons are reused to facilitate the replenishment of stock, and where necessary waste packaging is compacted and collected for recycling. We have partnered with Orora, a signatory to the Australian Packaging Covenant, to collect and process waste in line with their recycling procedures. Orora’s recycling waste business specialises in paper and cardboard, among others, which is the major input for their recycled paper mill that produces 100% recycled paper. Our Support Centre recycles all paper and has a continuing co-mingled recycling program for glass and plastics on every floor in our entire building. All paper purchased for our Support Centre is accredited from The Forest Stewardship Council sources, an international network which promotes responsible management of the world’s forests. All necessary printing at our support centre is activated by personalised swipe access only to release print. This initiative has seen a significant reduction in waste paper printing, as it removes non-collection of printouts. All weekly retail reporting, forms, reference and administrative material is stored and accessible via mobile technology, where possible. Across our network of stores, reuse is always our first option. Specific initiatives relate to plastic hangers and carton packaging. In store, plastic hangers are first reused, and if there is an oversupply our supplier collects and repackages hangers for reuse or 100% recycling. Additionally, cartons are reused to facilitate movement of stock between our stores. In the balance of instances we will utilise our shopping centre recycling facilities. Partnered with Orora Upgraded stores and support offices to LED lighting ENERGY EFFICIENCY Premier recognises the importance of energy efficient, low environmental impact lighting systems and since 2012 have adhered to new improved lighting standards to efficiently manage our energy consumption in all of our stores. This has resulted in an investment to our store network, Distribution Centre and Support Centre, upgrading stores and support office to LED lighting. In addition to the Support office lighting upgrade the lights are controlled by timers and motion sensors to ensure that they are on only when required. This initiative has subsequently meant less heat, thereby reducing the overall heat load on our stores and reduced investment in cooling requirements. In addition this has led to a dramatic reduction in ongoing maintenance and light bulb replacement. Premier Investments Limited 13 Our Commitment to Ethical Sourcing Premier commits to the highest standards of ethical conduct and responsible product sourcing practices. We support this commitment by our models for sourcing products, the principles that back-up those models, together with our policies and assurance program. MODERN SLAVERY Premier has zero tolerance to modern slavery in all its forms, including forced labour, child labour, slavery, people trafficking, deceptive labour recruitment practices, forced marriage and debt bondage. Premier fully supports the introduction of modern slavery legislation in various jurisdictions in which we operate. Premier published its full Modern Slavery Statement in March 2021 and it is available on Premier Investments’ website at premierinvestments.com.au OUR SOURCING MODELS, PRINCIPLES & POLICIES We share our customers’ full engagement in understanding where products come from, how products are made and the way that people who manufacture those products are treated. Our sourcing activities include direct sourcing from fully audited factories across Asia. In addition, we work with known established and trusted Australian importers. We currently source products in the following countries: China, Australia, Bangladesh, India, Pakistan, Turkey and Vietnam. Source Countries (The Just Group, Units) Rest of the world 16% China 84% 14 Our Ethical Sourcing and Supply Code (Code) supports our commitment to sourcing merchandise that is produced according to these principles, regardless of origin. All suppliers must sign our supply terms and conditions, which incorporate both our Code of Conduct and clauses relating to the Modern Slavery legislation. In addition suppliers must sign a Modern Slavery commitment and we will not do business with suppliers who do not comply with these requirements. Among other things, we note that our supply terms and the Code: • Requires compliance with all laws (and/or requires our suppliers to meet higher standards) • Insists on the free association of workers, including the right to collectively bargain and be represented • Requires labour to be voluntary, without workers being required to lodge deposits (eg. identity documents; for recruitment fees etc.) • Prohibits forced labour (including child labour) • Insists on worker rights such as the right to work in safe, hygienic premises where working hours are not excessive • Requires the payment of the minimum national legal standards or local benchmark standards (whichever is higher), and, in relation to full time workers, sufficient to meet basic needs and to provide discretionary income • Prohibits unauthorised sub-contracting – meaning that we have a fully transparent relationship with our suppliers • Prohibits discrimination on the basis of personal attributes as well as union membership or political affiliations In each case our model is supported by the following strict sourcing principles: 1 2 3 4 5 We comply with all laws in the countries we source from and operate We have zero tolerance for modern slavery in all its forms We insist on workers’ legal rights – including worker empowerment and free association We have zero tolerance for bribery and corruption We have zero tolerance for animal cruelty ASSURANCES WHICH SUPPORT OUR SOURCING PRINCIPLES Background checks. We conduct thorough and ongoing compliance activities of all direct suppliers by qualified audit firms. Factory inspections. All factories that manufacture for us are audited and inspected. We continue factory visits and ensure audits are up to date throughout our relationship with our suppliers to ensure our principles are strictly adhered to. Annual Report 2021BANGLADESH SOURCING Background OUR ACTIVITIES IN BANGLADESH Bangladesh’s economic and social development relies on the expansion and strength of the garment sector, including through investment by international retailers. The garment industry comprises around 80% of all Bangladesh export earnings, is a significant contributor to GDP, and employs over 4 million workers, most of whom are women. Premier currently sources a portion of its Just Jeans, Dotti and Jay Jays branded products in Bangladesh and we highlight our program in this country in the interest of full transparency. MEMBERSHIP OF THE ACCORD ON FIRE AND BUILDING SAFETY IN BANGLADESH As of the 31st July 2021 The Just Group was a member of the Accord on Fire and Building Safety in Bangladesh (the Accord). This has since expired and will be replaced by both a government run program RSC and the New Accord jointly signed by International Brands and unions. The Just Group plans to join the Brand Association and new Accord agreement in due course, once finalised. The Accord shares common priorities including a relentless focus on workers generally, as well as building integrity and safety – all supported by financial commitments and good governance. Together with our international peers in Bangladesh, we have invested in worker safety, improved conditions and transparent reporting in a results-oriented, measurable and verifiable way. All initiatives of the Accord are publicly available at http://bangladeshaccord.org/ Our operational processes have included the establishment of our own office in Bangladesh, which we opened in March 2014. Our investment in on the ground infrastructure in Bangladesh, including employing staff at our sourcing office directly, supports our audit and compliance activities in that market with particular focus on social compliance and safety which includes: 1. Senior management personally inspect ALL factories that manufacture for us prior to commencing business. We continue factory visits throughout our relationship with our suppliers to ensure our principles are strictly adhered to. Our Code includes the ability for us to make unannounced visits in Bangladesh for the purposes of our audit and compliance activities. 2. Prior to placing orders with any factory, we also engage independent, internationally recognised assessment and audit firms to verify compliance with all local laws and safety conditions, in relation to labour and safety issues (including fire and building integrity). 3. During manufacturing, an independent audit firm or our own Just Group quality inspectors, inspect all audits. 4. In addition, we will not conduct business with factories that do not comply with the requirements of the Accord. All factories have been disclosed to the Accord for assessment under its operational processes. ETHICAL RAW MATERIAL PROCUREMENT Our sourcing commitment is supported by the following initiatives relating to fibre procurement: Cotton 1. On 1 January 2021 Just Jeans became a member of the Better Cotton Initiative (BCI) now known as Better Cotton. Through our membership we support initiatives to make global cotton production better for the people who produce it, better for the environment it grows in and better for the sector’s future. 2. We will not source cotton harvested in Uzbekistan or Turkmenistan. We will maintain this position until the government of Uzbekistan and Turkmenistan ends the practice of forced child and adult labour in its cotton sector. To this end, we signed the Pledge against Child and Adult Forced Labour in Uzbek and Turkmen Cotton. Azo Dyes We have voluntarily adopted the EU standard whereby we prohibit the manufacture and sale of goods which contain prohibited levels of the specific aromatic amines originating from a small number of azo dyes. Sandblasted denim The harmful practice of ‘sandblasting’ denim with silica based powders has been discontinued in our business since 2011. Premier has zero tolerance to modern slavery in all its forms Premier Investments Limited 15 All team members globally are issued with the Code of Conduct upon commencement with the business which they need to formally acknowledge. Additionally, they are re-issued with a copy annually and again are asked to formally acknowledge receipt in line with any amendments which may have been made to the Code. SHRINKAGE Shrinkage is the loss of merchandise that can be attributed to product theft or through administrative handling process. Premier has a shrinkage reduction strategy in place with processes and education aimed at reducing these losses. Premier continues to deliver low levels of shrinkage and we will continue to maintain this focus into the future. Our Business CODE OF CONDUCT We believe that the ‘what’ and the ‘how’ are both important when it comes to operating. We want great results, and how we go about achieving them is also important. Premier acknowledges the importance of respecting our stakeholders, including team members, shareholders, customers and suppliers. We also know that by respecting and working with the communities in which we operate we can make a positive impact. Our recently reviewed and updated Code of Conduct outlines our legal, moral and ethical obligations which are underpinned by the behaviours we expect of all of our stakeholders. The principles ensure that we: • Foster a culture in which all stakeholders including customers, shareholders and fellow team members are treated with respect • Comply with the law and Premier policies • Protect company assets, information and reputation • Provide a safe workplace for our team members and visitors • Develop a culture where professional integrity and ethical behaviour is valued 16 Annual Report 2021Premier Investments Limited A.C.N. 006 727 966 Financial Report For the 53 week period 26 July 2020 to 31 July 2021 Premier Investments Limited 1 Contents Directors’ Report Auditor’s Independence Declaration Statement of Comprehensive Income Statement of Financial Position Statement of Cash Flows Statement of Changes In Equity Notes to the Financial Statements Directors’ Declaration Independent Auditor’s Report to the Members of Premier Investments Limited ASX Additional Information 2 35 36 37 38 39 40 90 91 99 Corporate Directory 100 DIRECTORS’ REPORT The Board of Directors of Premier Investments Limited (A.B.N. 64 006 727 966) has pleasure in submitting its report in respect of the financial year ended 31 July 2021. The Directors present their report together with the consolidated financial report of Premier Investments Limited (the “Company” or “Premier") and its controlled entities (the “Group”) for the 53-week period 26 July 2020 to 31 July 2021, together with the independent audit report to the members thereon. DIRECTORS The names and details of the Company’s Directors in office during the financial year and until the date of the report are as follows. Directors were in office for this entire period unless otherwise stated. Solomon Lew Chairman and Non-Executive Director Mr. Lew was appointed as Non-Executive Director and Chairman of Premier on 31 March 2008. Mr. Lew is a director of Century Plaza Investments Pty Ltd, the largest shareholder in Premier and was previously Chairman of Premier from 1987 to 1994. Mr. Lew has over 50 years’ experience in the manufacture, wholesale and retailing of textiles, apparel and general merchandise, as well as property development. His success in the retail industry has been largely due to his ability to read fashion trends and interpret them for the Australasian market, in addition to his demonstrated ability in the timing of strategic investments. Mr. Lew was a Director of Coles Myer Limited from 1985 to 2002, serving as Vice Chairman from 1989, Chairman from 1991 to 1995, Executive Chairman in 1995 and Vice Chairman in 1995 and 1996. Mr. Lew is a member of the World Retail Hall of Fame and is the first Australian to be formally inducted. He is also a former Board Member of the Reserve Bank of Australia and former Member of the Prime Minister’s Business Advisory Council. Mr. Lew was the inaugural Chairman of the Mount Scopus Foundation (1987 – 2013) which supports the Mount Scopus College, one of Australia’s leading private colleges with 2000 students. He has also been the Chairman or a Director of a range of philanthropic organisations. Dr. David M. Crean Deputy Chairman and Non-Executive Director Dr. Crean has been an Independent Non-Executive Director of Premier since December 2009, Deputy Chairman since July 2015 and is currently the Chairman of Premier’s Audit and Risk Committee (appointed August 2010). Dr. Crean was Chairman of the Hydro Electric Corporation (Hydro Tasmania) from September 2004 until October 2014 and was also Chairman of the Business Risk Committee at Hydro Tasmania, member of the Audit Committee and Chairman of the Corporate Governance Committee. Dr. Crean was State Treasurer of Tasmania from August 1998 to his retirement from the position in February 2004. He was also Minister for Employment from July 2002 to February 2004. He was a Member for Buckingham in the Legislative Council from 1992 to February 1999, and then for Elwick until May 2004. From 1989 to 1992 he was the member for Denison in the House of Assembly. From 1993 to 1998 he held Shadow Portfolios of State Development, Public Sector Management, Finance and Treasury. Dr. Crean has been a Non-Executive Director and Deputy Chairman of Moonlake Investments, owner of VDL dairy farms in Tasmania from August 2016 to April 2018. He is also a Board member of the Linfox Foundation. Dr. Crean graduated from Monash University in 1976 with a Bachelor of Medicine and Bachelor of Surgery. 2 DIRECTORS’ REPORT Directors’ Report The Board of Directors of Premier Investments Limited (A.B.N. 64 006 727 966) has pleasure in submitting its report in respect of the financial year ended 31 July 2021. The Directors present their report together with the consolidated financial report of Premier Investments Limited (the “Company” or “Premier") and its controlled entities (the “Group”) for the 53-week period 26 July 2020 to 31 July 2021, together with the independent audit report to the members thereon. DIRECTORS The names and details of the Company’s Directors in office during the financial year and until the date of the report are as follows. Directors were in office for this entire period unless otherwise stated. Solomon Lew Chairman and Non-Executive Director Mr. Lew was appointed as Non-Executive Director and Chairman of Premier on 31 March 2008. Mr. Lew is a director of Century Plaza Investments Pty Ltd, the largest shareholder in Premier and was previously Chairman of Premier from 1987 to 1994. Mr. Lew has over 50 years’ experience in the manufacture, wholesale and retailing of textiles, apparel and general merchandise, as well as property development. His success in the retail industry has been largely due to his ability to read fashion trends and interpret them for the Australasian market, in addition to his demonstrated ability in the timing of strategic investments. Mr. Lew was a Director of Coles Myer Limited from 1985 to 2002, serving as Vice Chairman from 1989, Chairman from 1991 to 1995, Executive Chairman in 1995 and Vice Chairman in 1995 and 1996. Mr. Lew is a member of the World Retail Hall of Fame and is the first Australian to be formally inducted. He is also a former Board Member of the Reserve Bank of Australia and former Member of the Prime Minister’s Business Advisory Council. Mr. Lew was the inaugural Chairman of the Mount Scopus Foundation (1987 – 2013) which supports the Mount Scopus College, one of Australia’s leading private colleges with 2000 students. He has also been the Chairman or a Director of a range of philanthropic organisations. Dr. David M. Crean Deputy Chairman and Non-Executive Director Dr. Crean has been an Independent Non-Executive Director of Premier since December 2009, Deputy Chairman since July 2015 and is currently the Chairman of Premier’s Audit and Risk Committee (appointed August 2010). Dr. Crean was Chairman of the Hydro Electric Corporation (Hydro Tasmania) from September 2004 until October 2014 and was also Chairman of the Business Risk Committee at Hydro Tasmania, member of the Audit Committee and Chairman of the Corporate Governance Committee. Dr. Crean was State Treasurer of Tasmania from August 1998 to his retirement from the position in February 2004. He was also Minister for Employment from July 2002 to February 2004. He was a Member for Buckingham in the Legislative Council from 1992 to February 1999, and then for Elwick until May 2004. From 1989 to 1992 he was the member for Denison in the House of Assembly. From 1993 to 1998 he held Shadow Portfolios of State Development, Public Sector Management, Finance and Treasury. Dr. Crean has been a Non-Executive Director and Deputy Chairman of Moonlake Investments, owner of VDL dairy farms in Tasmania from August 2016 to April 2018. He is also a Board member of the Linfox Foundation. Dr. Crean graduated from Monash University in 1976 with a Bachelor of Medicine and Bachelor of Surgery. 2 Premier Investments Limited 2 DIRECTORS’ REPORT (CONTINUED) Directors’ Report continued DIRECTORS’ REPORT (CONTINUED) Mark McInnes Executive Director (Resigned as Director: 19 August 2021) Sally Herman Non-Executive Director Mr. McInnes is a career retailer with a long track record of success in every role he has occupied. Like many great retailers, Mark started his career from the shop floor as a company cadet for Grace Brothers. Mark has been directly responsible for some of Australia’s greatest retail success stories – including as a co-founder of the Officeworks concept which is today Australia’s largest office supply superstore and turning David Jones into a fashion and financial powerhouse creating in excess of $2 billion of Shareholder value in his time as CEO. Mark was appointed CEO of Premier Retail in April 2011 and has set about transforming the company to compete in an industry under great structural pressure. Premier Retail today has a clear path and a clear focus. global financial crisis. Since his appointment, Mark, as CEO of Premier Retail, has assembled and led the executive team to completely restructure and rebuild the organisation to deliver long-term strategic competitive advantage and sustainable growth platforms, which has delivered significant shareholder value since he joined the Group. Premier Retail has delivered record underlying earnings before interest and tax each year over the past ten years. Today, the Group has a world-class, fully integrated, and highly profitable online operation, with seven high performing and distinctive brands delivering exceptional results through a highly capable senior leadership team. Mark holds an MBA from the University of Melbourne. In December 2012, Mark was appointed as an Executive Director of Premier Investments Limited. In January 2021, Mark advised the Board of his decision to step down from his role as Premier Retail CEO. Mark resigned as Executive Director effective 19 August 2021. Timothy Antonie Non-Executive Director and Lead Independent Director Mr. Antonie was appointed to the Board of Directors on 1 December 2009. He holds a Bachelor of Economics degree from Monash University and qualified as a Chartered Accountant with Price Waterhouse. He has 20 years’ experience in investment banking and formerly held positions of Managing Director from 2004 to 2008 and Senior Advisor in 2009 at UBS Investment Banking, with particular focus on large scale mergers and acquisitions and capital raisings in the Australian retail, consumer, media and entertainment sectors. Mr. Antonie is also a Non-Executive Director of Breville Group Limited, Chairman of Netwealth Group Limited and is a Principal of Stratford Advisory Group. Mr. Antonie was also a Non-Executive Director of Village Roadshow Limited (retired 4 December 2019). Sylvia Falzon Non-Executive Director Terrence L. McCartney Non-Executive Director Ms. Falzon was appointed to the Board of Directors on 16 March 2018. She brings to Premier an executive career that spanned over nearly 30 years in Financial Services where she held senior executive positions responsible for institutional and retail funds management businesses, both here in Australia and offshore. As a Non-Executive Director since 2010, Ms. Falzon has experience across a range of sectors and customer driven businesses in financial services, health, aged care, e-commerce and retail. During this time, she has been involved in several business transformations, IPOs, merger and acquisitions and divestment activities. Ms. Falzon is currently an Independent Non-Executive Director of ASX listed companies Suncorp Group Limited and Zebit Inc. In the not-for-profit sector, she is the Chairman of Cabrini Australia Limited. Ms. Falzon previously served on the board of ASX listed companies Regis Healthcare until October 2021, Perpetual Limited until October 2019 and SAI Global until December 2016. Ms. Falzon holds a Masters Degree in Industrial Relations and Human Resource Management (Hons) from the University of Sydney and a Bachelor of Business from the University of Western Sydney. She is a Senior Fellow of the Financial Services Institute of Australasia and a Fellow of the Australian Institute of Company Directors. Ms. Herman is an experienced Non-Executive Director in the fields of financial services, retail, manufacturing and property. She had a successful executive career spanning 25 years in financial services in both Australia and the US, transitioning in late 2010 to a full time career as a Non-Executive Director. Prior to that, she had spent 16 years with the Westpac Group, running major business units in most operating divisions of the Group as well as heading up Corporate Affairs and Sustainability through the merger with St. George and the Ms. Herman sits on both listed and not-for-profit Boards, including Suncorp Group Limited, Breville Group Limited, E&P Financial Group Limited and Irongate Funds Management Limited. She is also a Trustee of the Art Gallery of NSW. Ms. Herman holds a Bachelor of Arts from the University of New South Wales and is a Graduate of the Australian Institute of Company Directors. Henry D. Lanzer AM B.COM. LLB (Melb) Non-Executive Director Henry Lanzer AM is Managing Partner of Australian commercial law firm, Arnold Bloch Leibler. Henry has over 40 years’ experience in providing legal, corporate finance and strategic advice to some of Australia’s leading companies. Mr. Lanzer was appointed to the Board of Directors in 2008. He is a Non-Executive Director of Just Group Limited, Thorney Opportunities Limited and previously the TarraWarra Museum of Art and the Burnett Institute. He is also a Life Governor of the Mount Scopus College Council. In June 2015, Mr. Lanzer was appointed as a Member of the Order of Australia. Michael R.I. McLeod Non-Executive Director Mr. McLeod is a former Executive Director of the Century Plaza Group and has been involved with the Group since 1996 as an advisor in the areas of corporate strategy, investment and public affairs. He has been a Non-Executive Director of Premier Investments Limited since 2002 and was a Non-Executive Director of Just Group Limited from 2007 to 2013. Past experience includes the Australian Board of an international funds manager, chief of staff to a Federal Cabinet Minister and statutory appointments including as a Commission Member of the National Occupational Health and Safety Commission. He holds a Bachelor of Arts (First Class Honours and University Medal) from the University of New South Wales. Mr. McCartney has had a long and successful career in retail. Mr. McCartney started at Boans Department Stores in Perth then moved to Grace Bros in Sydney. After the acquisition of Grace Bros by Myer, he relocated to the merged Department Stores Group in Melbourne within the merchandise and marketing department. His successful career within Coles Myer meant that Terry then moved to the Kmart discount department stores as Head of Merchandise and Marketing and then Managing Director. Following several years as Managing Director of Kmart Australia and New Zealand, Terry became Managing Director of Myer Grace Bros. For 5 years Terry lead year on year growth in profitability of Australia’s largest department store. Terry’s experience spans the full spectrum of retailing, ranging from luxury goods in department stores to large mass merchandise discount operations. Terry has also been retained by large international accounting and legal firms as an expert witness in relation to Australian retail. In addition to his extensive list of retail experience, he has also been an advisor to large Australian and international mining companies, prior to joining the Just Group Board in 2008. Terry lends his extensive retail and commercial expertise to the Just Group as Non-Executive Director, and by serving on a number of committees, including the Internet Steering Committee of the Group, and through various store and site visits, both locally and overseas. He is also involved in seasonal and trading performance reviews for the Group. Terry is a member of the Remuneration and Nomination Committee of Premier Investments Limited. In August 2017, he was appointed Chairman of the Remuneration and Nomination Committee. 3 3 4 Annual Report 2021 DIRECTORS’ REPORT (CONTINUED) Sally Herman Non-Executive Director Ms. Herman is an experienced Non-Executive Director in the fields of financial services, retail, manufacturing and property. She had a successful executive career spanning 25 years in financial services in both Australia and the US, transitioning in late 2010 to a full time career as a Non-Executive Director. Prior to that, she had spent 16 years with the Westpac Group, running major business units in most operating divisions of the Group as well as heading up Corporate Affairs and Sustainability through the merger with St. George and the global financial crisis. Ms. Herman sits on both listed and not-for-profit Boards, including Suncorp Group Limited, Breville Group Limited, E&P Financial Group Limited and Irongate Funds Management Limited. She is also a Trustee of the Art Gallery of NSW. Ms. Herman holds a Bachelor of Arts from the University of New South Wales and is a Graduate of the Australian Institute of Company Directors. Henry D. Lanzer AM B.COM. LLB (Melb) Non-Executive Director Henry Lanzer AM is Managing Partner of Australian commercial law firm, Arnold Bloch Leibler. Henry has over 40 years’ experience in providing legal, corporate finance and strategic advice to some of Australia’s leading companies. Mr. Lanzer was appointed to the Board of Directors in 2008. He is a Non-Executive Director of Just Group Limited, Thorney Opportunities Limited and previously the TarraWarra Museum of Art and the Burnett Institute. He is also a Life Governor of the Mount Scopus College Council. In June 2015, Mr. Lanzer was appointed as a Member of the Order of Australia. Michael R.I. McLeod Non-Executive Director Mr. McLeod is a former Executive Director of the Century Plaza Group and has been involved with the Group since 1996 as an advisor in the areas of corporate strategy, investment and public affairs. He has been a Non-Executive Director of Premier Investments Limited since 2002 and was a Non-Executive Director of Just Group Limited from 2007 to 2013. Past experience includes the Australian Board of an international funds manager, chief of staff to a Federal Cabinet Minister and statutory appointments including as a Commission Member of the National Occupational Health and Safety Commission. He holds a Bachelor of Arts (First Class Honours and University Medal) from the University of New South Wales. Terrence L. McCartney Non-Executive Director Mr. McCartney has had a long and successful career in retail. Mr. McCartney started at Boans Department Stores in Perth then moved to Grace Bros in Sydney. After the acquisition of Grace Bros by Myer, he relocated to the merged Department Stores Group in Melbourne within the merchandise and marketing department. His successful career within Coles Myer meant that Terry then moved to the Kmart discount department stores as Head of Merchandise and Marketing and then Managing Director. Following several years as Managing Director of Kmart Australia and New Zealand, Terry became Managing Director of Myer Grace Bros. For 5 years Terry lead year on year growth in profitability of Australia’s largest department store. Terry’s experience spans the full spectrum of retailing, ranging from luxury goods in department stores to large mass merchandise discount operations. Terry has also been retained by large international accounting and legal firms as an expert witness in relation to Australian retail. In addition to his extensive list of retail experience, he has also been an advisor to large Australian and international mining companies, prior to joining the Just Group Board in 2008. Terry lends his extensive retail and commercial expertise to the Just Group as Non-Executive Director, and by serving on a number of committees, including the Internet Steering Committee of the Group, and through various store and site visits, both locally and overseas. He is also involved in seasonal and trading performance reviews for the Group. Terry is a member of the Remuneration and Nomination Committee of Premier Investments Limited. In August 2017, he was appointed Chairman of the Remuneration and Nomination Committee. 4 Premier Investments Limited 4 DIRECTORS’ REPORT (CONTINUED) Directors’ Report continued COMPANY SECRETARY Marinda Meyer Ms. Meyer has over 17 years’ experience as a practising Chartered Accountant in senior finance roles. She has both local and international experience in financial accounting and reporting, corporate governance, and administration of listed companies. PRINCIPAL ACTIVITIES The Group operates a number of specialty retail fashion chains within the specialty retail fashion markets in Australia, New Zealand, Asia and Europe. The Group also has significant investments in listed securities and money market deposits. DIVIDENDS Final Dividend approved for 2021 Dividends paid in the year: Interim for the half-year ended 25 January 2020 (paid on 30 September 2020) Final for 2020 (paid on 28 January 2021) Interim for the half-year ended 30 January 2021 (paid on 29 July 2021) OPERATING AND FINANCIAL REVIEW Group Overview: CENTS 46.00 34.00 36.00 34.00 $’000 73,077 53,966 57,191 54,014 Premier Investments Limited acquired a controlling interest in Just Group Limited (“Just Group”), a listed company on the Australian Securities Exchange in August 2008. Just Group is a leading specialty fashion retailer with operations in Australia, New Zealand, Asia and Europe. The Group has a portfolio of well-recognised retail brands, consisting of Just Jeans, Jay Jays, Jacqui E, Portmans, Dotti, Peter Alexander and Smiggle. Currently, these seven unique brands are trading from more than 1,200 stores across seven countries, as well as through wholesale and online. The Group’s key strategic growth initiatives continues to deliver results for the Group. The Group’s emphasis is on a range of brands that provide diversification through breadth of target demographic and sufficiently broad appeal to enable a broad footprint. Over 90% of the product range is designed, sourced and sold under its own brands. There is a continuing investment in these brands to ensure they remain relevant to changing customer tastes and remain at the forefront of their respective target markets. The Group’s reported revenue from contracts with customers, total income and net profit before income tax for the 53- week period ended 31 July 2021 (2020: 52 week period ended 25 July 2020) are summarised below: CONSOLIDATED 53 WEEKS ENDED 31 JULY 2021 $’000 52 WEEKS ENDED 25 JULY 2020 $’000 % CHANGE Revenue from contracts with customers 1,443,174 1,216,316 +18.7% Total interest income Total other income and revenue Total revenue and other income 1,148 14,337 2,290 30,356 -49.9% -52.8% 1,458,659 1,248,962 +16.8% Reported profit before income tax 379,583 195,199 +94.5% 5 5 in the final key trading weeks of July 2021. DIRECTORS’ REPORT (CONTINUED) OPERATING AND FINANCIAL REVIEW (CONTINUED) Retail Segment: DIRECTORS’ REPORT (CONTINUED) highlighted below: OPERATING AND FINANCIAL REVIEW (CONTINUED) As Premier’s core business, Just Group (Premier Retail) was the key contributor to the Group’s operating results for the financial year. Key financial indicators for the retail segment for the 53-week period ended 31 July 2021 are Retail Segment: RETAIL SEGMENT 53 WEEKS 52 WEEKS ENDED 31 JULY ENDED 25 JULY 2021 2020 As Premier’s core business, Just Group (Premier Retail) was the key contributor to the Group’s operating results for $’000 $’000 % CHANGE the financial year. Key financial indicators for the retail segment for the 53-week period ended 31 July 2021 are highlighted below: Revenue from contracts with customers Total segment income RETAIL SEGMENT Segment net profit before income tax 1,443,174 1,448,752 53 WEEKS 2021 352,112 $’000 1,216,316 1,230,918 52 WEEKS 2020 165,776 $’000 +18.7% +17.7% +112.4% % CHANGE ENDED 31 JULY ENDED 25 JULY The Retail Segment contributed $352.1 million to the Group’s net profit before income tax for the 53-week period Revenue from contracts with customers ended 31 July 2021 (2020: $165.8 million net profit before income tax for the 52-week period ended 25 July 2020). The 1,443,174 1,216,316 +18.7% Total segment income results for the 2021 financial year include a 53rd trading week, which contributed $19.1 million in sales, and $7.9 million 1,448,752 1,230,918 +17.7% to the Retail Segment’s earnings before interest and tax (“EBIT”). Refer to page 9 of the directors’ report for a reconciliation of Underlying EBIT and reported Premier Retail Profit before Tax. Segment net profit before income tax 352,112 165,776 +112.4% The Retail Segment contributed $352.1 million to the Group’s net profit before income tax for the 53-week period Premier Retail Underlying EBIT History (52-week basis) ended 31 July 2021 (2020: $165.8 million net profit before income tax for the 52-week period ended 25 July 2020). The results for the 2021 financial year include a 53rd trading week, which contributed $19.1 million in sales, and $7.9 million to the Retail Segment’s earnings before interest and tax (“EBIT”). Refer to page 9 of the directors’ report for a reconciliation of Underlying EBIT and reported Premier Retail Profit before Tax. Premier Retail Underlying EBIT History (52-week basis) $344.0 $65.3 $80.4 $83.7 $92.8 $105.7 $126.7 $136.0 $150.1 $167.3 $187.2 $' MILLIONS $344.0 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY21 and FY16 underlying EBIT represents a comparable 52-week period. Refer to page 9 for a reconciliation between underlying $50.0 $65.3 $80.4 $83.7 $92.8 $105.7 $126.7 $136.0 $150.1 $167.3 $187.2 EBIT and statutory reported operating profit before taxation for the Retail Segment. $' MILLIONS The onset of COVID-19 in early 2020 created an extremely challenging operating environment in the second half of the FY11 FY12 FY21 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 2020 financial year and has continued to impact the operating environment throughout the 2021 financial year. Since the onset of COVID-19, the Group’s absolute priority has been, and continues to be, the safety and wellbeing of its FY21 and FY16 underlying EBIT represents a comparable 52-week period. Refer to page 9 for a reconciliation between underlying team members and the broader community in which it operates. EBIT and statutory reported operating profit before taxation for the Retail Segment. The Retail Segment faced temporary government mandated store closures across its global store network for 52 of the 53 trading weeks during 2021 financial year. All geographic segments in which the Group operates have been affected The onset of COVID-19 in early 2020 created an extremely challenging operating environment in the second half of the by these temporary store closures during this financial year. On average, 176 stores were forced into temporary 2020 financial year and has continued to impact the operating environment throughout the 2021 financial year. Since closures in any given week of the 2021 financial year, adding immense operational complexity across every aspect of the onset of COVID-19, the Group’s absolute priority has been, and continues to be, the safety and wellbeing of its the entire business. Furthermore, mandated store closures increased from late June 2021, with over 400 stores closed team members and the broader community in which it operates. in the final key trading weeks of July 2021. The Retail Segment faced temporary government mandated store closures across its global store network for 52 of the 53 trading weeks during 2021 financial year. All geographic segments in which the Group operates have been affected by these temporary store closures during this financial year. On average, 176 stores were forced into temporary closures in any given week of the 2021 financial year, adding immense operational complexity across every aspect of the entire business. Furthermore, mandated store closures increased from late June 2021, with over 400 stores closed $400.0 $350.0 $300.0 $250.0 $200.0 $400.0 $150.0 $350.0 $100.0 $300.0 $50.0 $250.0 $- $200.0 $150.0 $100.0 $- 6 6 Annual Report 2021DIRECTORS’ REPORT (CONTINUED) OPERATING AND FINANCIAL REVIEW (CONTINUED) DIRECTORS’ REPORT DIRECTORS’ REPORT Retail Segment: (CONTINUED) (CONTINUED) As Premier’s core business, Just Group (Premier Retail) was the key contributor to the Group’s operating results for the financial year. Key financial indicators for the retail segment for the 53-week period ended 31 July 2021 are OPERATING AND FINANCIAL REVIEW (CONTINUED) highlighted below: OPERATING AND FINANCIAL REVIEW (CONTINUED) Retail Segment: Retail Segment: As Premier’s core business, Just Group (Premier Retail) was the key contributor to the Group’s operating results for As Premier’s core business, Just Group (Premier Retail) was the key contributor to the Group’s operating results for the financial year. Key financial indicators for the retail segment for the 53-week period ended 31 July 2021 are the financial year. Key financial indicators for the retail segment for the 53-week period ended 31 July 2021 are highlighted below: highlighted below: 53 WEEKS ENDED 31 JULY 2021 $’000 52 WEEKS ENDED 25 JULY 2020 $’000 Revenue from contracts with customers RETAIL SEGMENT 1,443,174 1,216,316 % CHANGE +18.7% Total segment income RETAIL SEGMENT RETAIL SEGMENT Segment net profit before income tax 53 WEEKS 1,448,752 ENDED 31 JULY 53 WEEKS 2021 ENDED 31 JULY $’000 2021 352,112 $’000 52 WEEKS 1,230,918 ENDED 25 JULY 52 WEEKS 2020 ENDED 25 JULY $’000 2020 165,776 $’000 +17.7% % CHANGE % CHANGE +112.4% 1,443,174 1,443,174 1,448,752 1,448,752 Segment net profit before income tax Segment net profit before income tax Revenue from contracts with customers Revenue from contracts with customers Total segment income Total segment income The Retail Segment contributed $352.1 million to the Group’s net profit before income tax for the 53-week period ended 31 July 2021 (2020: $165.8 million net profit before income tax for the 52-week period ended 25 July 2020). The results for the 2021 financial year include a 53rd trading week, which contributed $19.1 million in sales, and $7.9 million to the Retail Segment’s earnings before interest and tax (“EBIT”). Refer to page 9 of the directors’ report for a reconciliation of Underlying EBIT and reported Premier Retail Profit before Tax. The Retail Segment contributed $352.1 million to the Group’s net profit before income tax for the 53-week period Premier Retail Underlying EBIT History (52-week basis) The Retail Segment contributed $352.1 million to the Group’s net profit before income tax for the 53-week period ended 31 July 2021 (2020: $165.8 million net profit before income tax for the 52-week period ended 25 July 2020). The ended 31 July 2021 (2020: $165.8 million net profit before income tax for the 52-week period ended 25 July 2020). The results for the 2021 financial year include a 53rd trading week, which contributed $19.1 million in sales, and $7.9 million results for the 2021 financial year include a 53rd trading week, which contributed $19.1 million in sales, and $7.9 million to the Retail Segment’s earnings before interest and tax (“EBIT”). Refer to page 9 of the directors’ report for a to the Retail Segment’s earnings before interest and tax (“EBIT”). Refer to page 9 of the directors’ report for a reconciliation of Underlying EBIT and reported Premier Retail Profit before Tax. reconciliation of Underlying EBIT and reported Premier Retail Profit before Tax. Premier Retail Underlying EBIT History (52-week basis) 1,216,316 1,216,316 1,230,918 1,230,918 +18.7% +18.7% +17.7% +17.7% +112.4% +112.4% 352,112 352,112 165,776 165,776 $344.0 $400.0 $350.0 $350.0 $400.0 $300.0 $250.0 $400.0 $200.0 $400.0 $350.0 $150.0 $350.0 $300.0 $100.0 $300.0 $250.0 $50.0 $250.0 $200.0 $200.0 $150.0 $150.0 $100.0 $100.0 $50.0 $50.0 $- $- $- $300.0 $250.0 $200.0 $150.0 $100.0 $50.0 $- Premier Retail Underlying EBIT History (52-week basis) Premier Retail Underlying EBIT History (52-week basis) $344.0 $187.2 $65.3 $80.4 $83.7 $92.8 $105.7 $126.7 $136.0 $150.1 $167.3 $187.2 $136.0 $150.1 $126.7 $167.3 $80.4 $83.7 $92.8 $105.7 $' MILLIONS $344.0 $344.0 FY13 FY14 FY15 FY16 $65.3 $80.4 $83.7 $92.8 $105.7 $126.7 $136.0 $150.1 $167.3 $187.2 $65.3 $80.4 $83.7 $92.8 $105.7 $126.7 $136.0 $150.1 $167.3 $187.2 FY17 FY18 FY19 FY20 FY21 $65.3 FY12 FY11 FY21 and FY16 underlying EBIT represents a comparable 52-week period. Refer to page 9 for a reconciliation between underlying FY13 FY12 FY11 FY21 FY20 FY18 FY17 FY16 FY14 FY11 FY11 FY20 FY20 FY12 FY12 FY13 FY13 FY19 FY19 FY18 FY18 FY15 FY15 FY14 FY14 FY21 FY21 FY17 FY17 $' millions EBIT and statutory reported operating profit before taxation for the Retail Segment. FY19 $' MILLIONS FY15 $' MILLIONS FY16 FY16 The onset of COVID-19 in early 2020 created an extremely challenging operating environment in the second half of the 2020 financial year and has continued to impact the operating environment throughout the 2021 financial year. Since FY21 and FY16 underlying EBIT represents a comparable 52-week period. Refer to page 9 for a reconciliation between underlying the onset of COVID-19, the Group’s absolute priority has been, and continues to be, the safety and wellbeing of its FY21 and FY16 underlying EBIT represents a comparable 52-week period. Refer to page 9 for a reconciliation between underlying EBIT and statutory reported operating profit before taxation for the Retail Segment. team members and the broader community in which it operates. EBIT and statutory reported operating profit before taxation for the Retail Segment. The Retail Segment faced temporary government mandated store closures across its global store network for 52 of the The onset of COVID-19 in early 2020 created an extremely challenging operating environment in the second half of the 53 trading weeks during 2021 financial year. All geographic segments in which the Group operates have been affected The onset of COVID-19 in early 2020 created an extremely challenging operating environment in the second half of the 2020 financial year and has continued to impact the operating environment throughout the 2021 financial year. Since by these temporary store closures during this financial year. On average, 176 stores were forced into temporary 2020 financial year and has continued to impact the operating environment throughout the 2021 financial year. Since the onset of COVID-19, the Group’s absolute priority has been, and continues to be, the safety and wellbeing of its closures in any given week of the 2021 financial year, adding immense operational complexity across every aspect of the onset of COVID-19, the Group’s absolute priority has been, and continues to be, the safety and wellbeing of its team members and the broader community in which it operates. the entire business. Furthermore, mandated store closures increased from late June 2021, with over 400 stores closed team members and the broader community in which it operates. in the final key trading weeks of July 2021. The Retail Segment faced temporary government mandated store closures across its global store network for 52 of the The Retail Segment faced temporary government mandated store closures across its global store network for 52 of the 53 trading weeks during 2021 financial year. All geographic segments in which the Group operates have been affected 53 trading weeks during 2021 financial year. All geographic segments in which the Group operates have been affected by these temporary store closures during this financial year. On average, 176 stores were forced into temporary by these temporary store closures during this financial year. On average, 176 stores were forced into temporary closures in any given week of the 2021 financial year, adding immense operational complexity across every aspect of 6 closures in any given week of the 2021 financial year, adding immense operational complexity across every aspect of the entire business. Furthermore, mandated store closures increased from late June 2021, with over 400 stores closed the entire business. Furthermore, mandated store closures increased from late June 2021, with over 400 stores closed in the final key trading weeks of July 2021. in the final key trading weeks of July 2021. Premier Investments Limited 6 6 6 DIRECTORS’ REPORT (CONTINUED) Directors’ Report continued OPERATING AND FINANCIAL REVIEW (CONTINUED) Retail Segment (continued): Despite these significant challenges, the Retail Segment reported net profit before income tax for the 53-week period ended 31 July 2021 of $352.1 million – up 112.4% on the previous year (2020: $165.8 million), and delivered revenue for the year of $1,443.2 million, up 18.7% on the previous year (2020: $1,216.3 million). In addition, the Retail Segment increased its gross margin to 64.3% (2020: 61.0%). The strong sales and uplift in gross profit, together with operational excellence and strong cost control has delivered a record EBIT of $351.9 million, up 88.0% on the previous year (2020: $187.2 million). The Retail Segment delivered record online sales of $300.7 million for the 53 weeks ended 31 July 2021 – an increase of 36.4% on the prior year (2020: $220.4 million). The online channel contributed 20.8% of total group sales to customers for the period ended 31 July 2021 (2020: 18.1%). The Group is pleased to have world class customer facing websites and it will continue to make major investments in its people, its information technology, digital marketing capability and distribution centres to maximise the increasing customer preference to shop online. Peter Alexander delivered record sales to customers for the period ended 31 July 2021 of $388.2 million, up 34.7% on a record set in the prior year (2020: $288.2 million). The record result was driven across all Peter Alexander product categories. The Group’s decision to continuously invest in inventory, enabled Peter Alexander to be in-stock during key gift giving periods during the year – Black Friday/Cyber Monday, Christmas, Easter, Mother’s Day and Father’s Day. Pleasingly, the Group’s five iconic Apparel Brands (Just Jeans, Jay Jays, Portmans, Dotti and Jacqui-E) delivered a combined record sales result for the period ended 31 July 2021 of $841.6 million (up 25.3% on the prior year sales of $671.8 million). The Group’s strategic decisions taken mid-2020 to significantly invest in inventory, which continued into the second half of 2021, ensured that the Group was in-stock during key trading periods – summer season, Christmas and January sale periods, April holiday season and winter season. This ensured the Group had a strong inventory position, delivering strong sales and growth margin growth across the Group. Since the onset of COVID-19, the Group’s absolute priority has been the safety and wellbeing of its team members and customers. The Group recognises that the Australian Federal Government’s JobKeeper initiative has been fundamental to keeping employees and employers connected during COVID-19 – an unprecedented health crisis. On 3 May 2021, the Group announced that it will voluntarily return the $15.6 million net JobKeeper wage subsidy benefit that it received under the scheme rules during the 2021 financial year, to the Australian Taxation Office. As a result, the Group recorded no net JobKeeper benefit in its statement of comprehensive income for the period ended 31 July 2021. The Group was not eligible for the second phase of the Australian Government JobKeeper scheme from 28 September 2020 onwards. The Group continued to pay its full and part time Australian team members their contracted hours whilst these teams were unable to work during various state government mandated temporary store closures from October 2020 through to July 2021; when the Federal Government made its temporary COVID-19 disaster payment scheme available directly to impacted team members (refer to note 5 of the financial statements for further information). In January 2021, Premier Retail CEO, Mark McInnes, advised Premier of his decision to step down from his role. Mr. McInnes continued in his role as CEO Premier Retail until 13 August 2021 and commenced gardening leave on 14 August 2021 until the end of his 12-month Notice Period, being 15 January 2022 (refer to the Remuneration Report included in the Directors’ Report, for further information). In April 2021, Premier announced the appointment of Mr. Richard Murray as CEO Premier Retail. Mr. Murray commenced with the Group on 6 September 2021. The Group prides itself on having: • Seven unique brands, each with a strong and distinctive competitive market position • A world-class customer facing website platform trading in three countries • A fully integrated and owned Australian Distribution Centre • Significant investment in digital capability, online technology and IT infrastructure • Significant investment in dedicated teams focusing on online growth DIRECTORS’ REPORT (CONTINUED) OPERATING AND FINANCIAL REVIEW (CONTINUED) Retail Segment (continued): Revenue from customers per Geographic Segment for the year ended 31 July 2021 Asia 3% Europe 5% New Zealand 11% Australia 81% COVID-19 continued to impact on the Group’s global operations. Smiggle, which also operates throughout Asia and Europe, was impacted by long periods of school closures and remote learning during the financial year, and families not feeling safe shopping in-store. A fundamental aspect of Smiggle’s success is children attending school. Pleasingly, the response to the brand has been strong during key “back-to-school” periods, in countries and regions where schools have reopened in highly vaccinated societies where there are easing COVID-19 restrictions. Investment Segment: The Group’s balance sheet remains strong, primarily due to the significant asset holding of the investment segment. As at 31 July 2021, the Group continued to reflect its 26.27% (2020: 26.73%) shareholding in Breville Group Limited as an investment in associate, with an equity accounted value of $271.4 million (2020: $257.4 million). The fair value of the Group’s interest in Breville Group Limited as determined based on the quoted market price for the shares as at 31 July 2021 was $1,173.5 million (2020: $947.9 million). Dividends received from Breville Group Limited during the year amounted to $12.2 million (2020: $14.2 million). During the 2017 financial year, the Group acquired a strategic investment of 10.77% in Myer Holdings Limited. A further 5% was acquired during the 2021 financial year, taking the total investment to 15.77%. At the end of the 2021 financial year the fair value of this listed equity investment is reflected as $63.5 million (2020: $18.1 million). Premier Investments owns its Australian Distribution Centre, as well as the global head office building of Premier Retail in Melbourne. These properties are carried at a combined written down value at 31 July 2021 of $74.2 million (2020: $70.8 million). 7 7 8 Annual Report 2021DIRECTORS’ REPORT (CONTINUED) OPERATING AND FINANCIAL REVIEW (CONTINUED) DIRECTORS’ REPORT Retail Segment (continued): (CONTINUED) Revenue from customers per Geographic Segment for the year ended 31 July 2021 Revenue from customers per Geographic Segment for the year ended 31 July 2021 OPERATING AND FINANCIAL REVIEW (CONTINUED) 5% Europe Retail Segment (continued): Asia 3% Europe 5% Revenue from customers per Geographic Segment for the year ended 31 July 2021 New Zealand 11% 3% Asia 11% New Zealand New Zealand 11% Asia 3% Europe 5% 81% Australia Australia 81% Australia 81% COVID-19 continued to impact on the Group’s global operations. Smiggle, which also operates throughout Asia and Europe, was impacted by long periods of school closures and remote learning during the financial year, and families not feeling safe shopping in-store. A fundamental aspect of Smiggle’s success is children attending school. Pleasingly, the response to the brand has been strong during key “back-to-school” periods, in countries and regions where schools have reopened in highly vaccinated societies where there are easing COVID-19 restrictions. COVID-19 continued to impact on the Group’s global operations. Smiggle, which also operates throughout Asia and Europe, was impacted by long periods of school closures and remote learning during the financial year, and families Investment Segment: not feeling safe shopping in-store. A fundamental aspect of Smiggle’s success is children attending school. Pleasingly, the response to the brand has been strong during key “back-to-school” periods, in countries and regions where schools The Group’s balance sheet remains strong, primarily due to the significant asset holding of the investment segment. As have reopened in highly vaccinated societies where there are easing COVID-19 restrictions. at 31 July 2021, the Group continued to reflect its 26.27% (2020: 26.73%) shareholding in Breville Group Limited as an investment in associate, with an equity accounted value of $271.4 million (2020: $257.4 million). The fair value of the Group’s interest in Breville Group Limited as determined based on the quoted market price for the shares as at 31 July Investment Segment: 2021 was $1,173.5 million (2020: $947.9 million). Dividends received from Breville Group Limited during the year The Group’s balance sheet remains strong, primarily due to the significant asset holding of the investment segment. As amounted to $12.2 million (2020: $14.2 million). at 31 July 2021, the Group continued to reflect its 26.27% (2020: 26.73%) shareholding in Breville Group Limited as an During the 2017 financial year, the Group acquired a strategic investment of 10.77% in Myer Holdings Limited. A investment in associate, with an equity accounted value of $271.4 million (2020: $257.4 million). The fair value of the further 5% was acquired during the 2021 financial year, taking the total investment to 15.77%. At the end of the 2021 Group’s interest in Breville Group Limited as determined based on the quoted market price for the shares as at 31 July 2021 was $1,173.5 million (2020: $947.9 million). Dividends received from Breville Group Limited during the year financial year the fair value of this listed equity investment is reflected as $63.5 million (2020: $18.1 million). amounted to $12.2 million (2020: $14.2 million). Premier Investments owns its Australian Distribution Centre, as well as the global head office building of Premier Retail in Melbourne. These properties are carried at a combined written down value at 31 July 2021 of $74.2 million (2020: During the 2017 financial year, the Group acquired a strategic investment of 10.77% in Myer Holdings Limited. A further 5% was acquired during the 2021 financial year, taking the total investment to 15.77%. At the end of the 2021 $70.8 million). financial year the fair value of this listed equity investment is reflected as $63.5 million (2020: $18.1 million). Premier Investments owns its Australian Distribution Centre, as well as the global head office building of Premier Retail in Melbourne. These properties are carried at a combined written down value at 31 July 2021 of $74.2 million (2020: $70.8 million). 8 Premier Investments Limited 8 8 e s e h t i s e d v o r p p u o r G e h T . 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 l l l a h t i w e c n a d r o c c a n i n a h t r e h o t t d e n e s e r p s i t a h t n o i t a m r o n f i l i a c n a n i f s i n o i t a m r o f n i S R F I - n o N . ) B S A I ( d r a o B s d r a d n a S t g n i t n u o c c A l a n o i t a n r e t n I e h t y b d e u s s i s a ) ” S R F I “ ( s d r a d n a S g n t i t r o p e R l i a c n a n F i l a n o i t a n r e n t I d n a s d r a d n a S g n t i t n u o c c A n a i l a r t s u A r e d n u d e t r o p e r e r a s t l u s e r ’ s p u o r G e h T t l u s e R t n e m g e S l i a t e R d e t r o p e R d n a T B E I l i a t e R r e i m e r P g n i y l r e d n u n e e w t e b n o i t a i l i c n o c e R . t n e m g e S l i ’ t a e R s p u o r G e h t f o s r e v i r d d n a e c n a m r o f r e p e h t f o s t c e p s a y e k d n a t s r e d n u r e t t e b o t s e r u s a e m l i a c n a n i f S R F I - n o N 1 1 0 2 0 0 0 $ ’ 2 1 0 2 0 0 0 $ ’ 3 1 0 2 0 0 0 $ ’ 4 1 0 2 0 0 0 $ ’ 5 1 0 2 0 0 0 $ ’ 6 1 0 2 0 0 0 $ ’ 7 1 0 2 0 0 0 ’ $ 8 1 0 2 0 0 0 ’ $ 9 1 0 2 0 0 0 ’ $ 0 2 0 2 0 0 0 ’ $ 1 2 0 2 0 0 0 ’ $ 6 9 7 , 9 3 8 8 9 , 9 6 6 8 6 , 6 7 9 9 2 , 9 7 8 5 9 , 8 9 7 0 2 , 6 2 1 2 8 1 , 6 2 1 4 8 4 , 2 4 1 7 6 6 , 6 3 1 6 7 7 , 5 6 1 2 1 1 , 2 5 3 n o i t a x a T e r o f e b t i f o r P g n i t a r e p O t n e m g e S l i a t e R d e t r o p e R : s r a e y l i a c n a n i f e h t f o h c a e r o f t l u s e R t n e m g e S l i t a e R d e t r o p e R e h t o t I T B E g n y l r e d n u i l i a t e R i r e m e r P m r e t l i a c n a n i f S R F I - n o N e h t s e l i c n o c e r l w o e b e b a l t e h T 0 1 4 , 9 4 2 8 1 , 0 8 4 7 6 , 3 8 0 1 6 , 5 8 6 9 6 , 4 0 1 9 1 1 , 1 3 1 6 6 0 , 1 3 1 1 5 9 , 7 4 1 5 7 4 , 1 4 1 3 3 5 , 8 6 1 9 7 0 , 4 5 3 4 1 6 9 , 4 9 1 , 0 1 8 8 9 6 , 1 1 3 6 , 8 3 7 5 , 2 1 9 4 , 4 8 8 , 4 7 6 4 , 5 8 0 8 , 4 7 5 7 , 2 7 6 9 , 1 ) s e i t i l i b a i l e s a e l n o t s e r e t n i 6 1 B S A A g n d u c x e ( i l e s n e p x e t s e r e t n I : k c a b d d A : r o f d e t s u d A j I T B E d e u n i t n o c ) I D E U N T N O C ( I I I W E V E R L A C N A N F D N A G N T A R E P O I T R O P E R ’ S R O T C E R D I t r o p e R I ) ’ s r D o E U t N T c N O e C r i D ( 9 2 9 1 0 3 ) 2 8 4 ( ) 3 7 6 ( ) 7 6 1 ( - - - - - - - - - - 4 7 1 7 7 , 5 1 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 3 9 1 3 , 2 8 4 4 , - - - 4 2 7 1 , - - - - - - - - - - - - - ) 6 9 5 , 6 ( ) 4 8 ( - 8 1 2 - - - ) 2 9 ( - 7 4 7 - - - 6 8 7 , 1 0 6 4 , 1 - - - - - - 5 4 3 2 , 5 4 0 , 3 - - - - - - - - - - - - - - - - - 8 5 8 , 5 2 - - - - - - - - - 7 2 4 0 2 4 , 1 3 ) 7 0 2 , 3 1 ( - - ) 7 4 1 , 2 ( - - - s t s o c d e t a c o s s a d n a i t n e m p u q e & i t n a p l e r o t s f o t n e m r i a p m i 9 1 - D V O C I f f o - e n O k o o b e g d e h w o l f h s a c f o t n e m e l t t e s m o r f n a g i t e n 9 1 - D V O C I f f o - e n O s t l u s e r n o 6 1 B S A A f o t c a p m i t e N e s n e p x e n o i t a g i t i l f f o - e n O s t s o c d e t a c o s s a i d n a l i n o i t a c e r p e d d e t a r e e c c a m o d g n K d e t i n U i f f o - e n O l d o o g - e k a m d n a n o i t a c o e r e c i f f o d a e H o t g n i t a e r l s e s n e p x e f f o - e n O - - - - - e s n e p x e y r t n e t e k r a m w e n e g g m S i l f f o - e n O e s n e p x e n o i t a m r o f s n a r t n a h c i l y p p u s f f o - e n O e r u t n e V i t n o J n a c i r f A h t u o S f o t i x e f f o - e n O i w e v e r i c g e t a r t s o t d e t a e r l s t s o c f f o - e n O s t n e m t s u d a j t n e m g e s - r e t n I ) 1 3 9 , 7 ( 6 1 0 2 d n a 1 2 0 2 n i k e e w d r 3 5 e h t I r o f n o i t u b i r t n o c T B E e b a r a p m o c - n o N l DIRECTORS’ REPORT (CONTINUED) 9 GROUP PERFORMANCE The Group is pleased to report that despite tough economic conditions, it continued to generate strong returns to shareholders. The dividends declared for the period reaffirm the confidence the Directors have in the future performance and underline Premier’s commitment to enhancing shareholder value through capital management and business investment. 2021 2020 2019 2018 2017 Closing share price at end of financial year $26.84 $17.57 $16.28 $17.35 $13.35 Basic earnings per share (cents) Dividend paid per share (cents) Return on equity (%) 171.15 104.01 86.89 37.01 17.7% 10.2% 67.51 52.97 66.0 7.9% 56.0 8.5%2 Net debt/equity ratio (%) (24.6%)3 (22.4%)3 (1.7%) (0.2%) 1 The FY20 approved interim fully franked dividend of 34 cents per share was paid on 30 September 2020 and is therefore reflected in FY21. 2 Return on Equity excludes the impact of a non-cash impairment of intangible assets in FY18 ($30 million). 3 Net debt has been calculated as cash and cash equivalents, less interest-bearing liabilities, representing bank loans. 66.8 51.0 7.9% 0.2% SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS There have been no significant changes in the state of affairs of the Group during the financial year ended 31 July 2021. SIGNIFICANT EVENTS AFTER THE REPORTING DATE The Directors of Premier Investments Limited approved a final dividend in respect of the 2021 financial year. The total amount of the dividend is $73,077,000 (2020: $57,191,000) which represents a fully franked dividend of 46 cents per share (2020: 36 cents per share). The dividend has not been provided for in the 2021 financial statements. Subsequent to 31 July 2021, the Group’s retail store network continues to be impacted by various Government mandated retail store closures related to COVID-19. The Group has had 661 stores temporarily closed across Australia and New Zealand through the majority of the month of August 2021, noting it has since progressively been able to reopen over 170 of these stores in the past two weeks. During the temporary store closures, the Group continues to operate through its online channel. LIKELY DEVELOPMENTS AND EXPECTED RESULTS Certain likely developments in the operations of the Group and the expected results of those operations in financial years subsequent to the period ended 31 July 2021 are referred to in the preceding operating and financial review. No additional information is included on the likely developments in the operations of the Group and the expected results of those operations as the Directors reasonably believe that the disclosure of such information would be likely to result in unreasonable prejudice to the Group if included in this report, and it has therefore been excluded in accordance with section 299(3) of the Corporations Act 2001. ENVIRONMENTAL REGULATION AND PERFORMANCE The Group’s operations are not subject to any significant environmental obligations or regulations. 10 5 5 2 , 5 6 4 7 3 , 0 8 4 0 7 , 3 8 3 0 8 , 2 9 7 4 7 , 5 0 1 1 0 7 , 6 2 1 1 3 0 , 6 3 1 6 6 0 , 0 5 1 3 3 3 , 7 6 1 3 7 1 , 7 8 1 1 0 0 , 4 4 3 ) 6 1 B S A A - e r p ( T B E I l i a t e R r e i m e r P g n i y l r e d n U 3 . 5 6 4 . 0 8 7 . 3 8 8 . 2 9 7 . 5 0 1 7 . 6 2 1 0 . 6 3 1 1 . 0 5 1 3 . 7 6 1 2 . 7 8 1 0 . 4 4 3 s n o i l l i m ’ $ n i d e s s e r p x e , I T B E l i a t e R r e i m e r P g n i y l r e d n U Annual Report 2021 DIRECTORS’ REPORT (CONTINUED) GROUP PERFORMANCE The Group is pleased to report that despite tough economic conditions, it continued to generate strong returns to shareholders. The dividends declared for the period reaffirm the confidence the Directors have in the future performance and underline Premier’s commitment to enhancing shareholder value through capital management and business investment. 2021 2020 2019 2018 2017 Closing share price at end of financial year $26.84 $17.57 $16.28 $17.35 $13.35 Basic earnings per share (cents) Dividend paid per share (cents) Return on equity (%) 171.15 104.01 86.89 37.01 17.7% 10.2% 67.51 52.97 66.0 7.9% 56.0 8.5%2 Net debt/equity ratio (%) (24.6%)3 (22.4%)3 (1.7%) (0.2%) 1 The FY20 approved interim fully franked dividend of 34 cents per share was paid on 30 September 2020 and is therefore reflected in FY21. 2 Return on Equity excludes the impact of a non-cash impairment of intangible assets in FY18 ($30 million). 3 Net debt has been calculated as cash and cash equivalents, less interest-bearing liabilities, representing bank loans. 66.8 51.0 7.9% 0.2% SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS There have been no significant changes in the state of affairs of the Group during the financial year ended 31 July 2021. SIGNIFICANT EVENTS AFTER THE REPORTING DATE The Directors of Premier Investments Limited approved a final dividend in respect of the 2021 financial year. The total amount of the dividend is $73,077,000 (2020: $57,191,000) which represents a fully franked dividend of 46 cents per share (2020: 36 cents per share). The dividend has not been provided for in the 2021 financial statements. Subsequent to 31 July 2021, the Group’s retail store network continues to be impacted by various Government mandated retail store closures related to COVID-19. The Group has had 661 stores temporarily closed across Australia and New Zealand through the majority of the month of August 2021, noting it has since progressively been able to reopen over 170 of these stores in the past two weeks. During the temporary store closures, the Group continues to operate through its online channel. LIKELY DEVELOPMENTS AND EXPECTED RESULTS Certain likely developments in the operations of the Group and the expected results of those operations in financial years subsequent to the period ended 31 July 2021 are referred to in the preceding operating and financial review. No additional information is included on the likely developments in the operations of the Group and the expected results of those operations as the Directors reasonably believe that the disclosure of such information would be likely to result in unreasonable prejudice to the Group if included in this report, and it has therefore been excluded in accordance with section 299(3) of the Corporations Act 2001. ENVIRONMENTAL REGULATION AND PERFORMANCE The Group’s operations are not subject to any significant environmental obligations or regulations. 10 Premier Investments Limited 10 DIRECTORS’ REPORT (CONTINUED) Directors’ Report continued DIRECTORS’ REPORT (CONTINUED) SHARE OPTIONS AND SHARES ISSUED DURING THE FINANCIAL YEAR DIRECTOR INTERESTS IN SHARES AND RIGHTS OF THE COMPANY Unissued Shares: At the date of this report, the interests of the Directors in the shares and performance rights of the company were: As at the date of this report, there were 673,886 (2020: 813,410) unissued performance rights. Refer to the remuneration report for further details of the options outstanding. Shares Issued as a Result of the Exercise of Options: A total of 139,524 shares (2020: 294,579) were issued during the year pursuant to the Group’s Performance Rights Plan. No other shares were issued during the year. INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS To the extent permitted by law, the company indemnifies every person who is or has been a director or officer of the company or of a wholly-owned subsidiary of the company against liability for damages awarded or judgments entered against them and legal defence costs and expenses, arising out of a wrongful act, incurred by that person whilst acting in their capacity as a director or officer provided there has been no admission, or judgment, award or other finding by a court, tribunal or arbitrator which establishes improper use of position, or committing of any criminal, dishonest, fraudulent or malicious act. The officers include the Directors, as named earlier in this report, the Company Secretary and other officers, being the executive senior management team. Details of the nature of the liabilities covered or the amount of the premium paid in respect of the Directors, and Officers, liability insurance contracts are not disclosed as such disclosure is prohibited under the terms of the contracts. INDEMNIFICATION OF AUDITORS To the extent permitted by law, the company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify Ernst & Young during or since the financial year. AUDITOR INDEPENDENCE The Directors received a copy of the Auditor’s Independence Declaration in relation to the audit for this financial year and is presented on page 35. REMUNERATION REPORT NON-AUDIT SERVICES The Directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The nature and scope of each type of non-audit service provided means that independence was not compromised. Details of non-audit services provided by the Group’s auditor, Ernst & Young, can be found in Note 31 of the Financial Report. ROUNDING The company is a company of the kind specified in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, dated 24 March 2016. In accordance with that ASIC instrument amounts in the financial statements and the Directors’ Report have been rounded to the nearest thousand dollars unless specifically stated to be otherwise. CORPORATE GOVERNANCE STATEMENT To view Premier’s Corporate Governance Statement, please visit www.premierinvestments.com.au/about-us/board- policies. Solomon Lew Chairman 1 October 2021 Solomon Lew Timothy Antonie Sally Herman Henry Lanzer AM Michael McLeod Mark McInnes 4,437,699 ordinary shares** 5,001 ordinary shares 11,500 ordinary shares 27,665 ordinary shares 28,186 ordinary shares 982,100 ordinary shares (resigned as director: 19 August 2021) **Mr. Lew is an associate of Century Plaza Investments Pty. Ltd. and Metrepark Pty. Ltd (Associated Entities). The Associated Entities, collectively, have a relevant interest in 59,804,731 shares in the company. However, Mr. Lew does not have a relevant interest in the shares of the company held by the Associated Entities. The number of meetings of the Board of Directors during the financial year, and the number of meetings attended by DIRECTORS’ MEETINGS each director were as follows: DIRECTOR Solomon Lew Mark McInnes Timothy Antonie David Crean Sylvia Falzon Sally Herman Henry Lanzer AM Terrence McCartney Michael McLeod 15 15 15 15 15 15 15 15 15 BOARD MEETINGS AUDIT AND RISK COMMITTEE REMUNERATION AND NOMINATION COMMITTEE MEETINGS HELD NUMBER ATTENDED MEETINGS HELD NUMBER ATTENDED MEETINGS HELD NUMBER ATTENDED 15 9 15 14 14 13 15 15 15 - - 5 5 5 5 - - - - 1 5 5 5 5 2 3 - - - 2 - - - - 2 2 - - 2 - - - - 2 2 The Remuneration Report, which forms part of this Directors’ Report, is presented from page 13. The Directors’ Report is signed in accordance with a resolution of the Board of Directors. 11 11 12 Annual Report 2021 DIRECTORS’ REPORT (CONTINUED) DIRECTOR INTERESTS IN SHARES AND RIGHTS OF THE COMPANY At the date of this report, the interests of the Directors in the shares and performance rights of the company were: Solomon Lew Timothy Antonie Sally Herman Henry Lanzer AM Michael McLeod Mark McInnes 4,437,699 ordinary shares** 5,001 ordinary shares 11,500 ordinary shares 27,665 ordinary shares 28,186 ordinary shares 982,100 ordinary shares (resigned as director: 19 August 2021) **Mr. Lew is an associate of Century Plaza Investments Pty. Ltd. and Metrepark Pty. Ltd (Associated Entities). The Associated Entities, collectively, have a relevant interest in 59,804,731 shares in the company. However, Mr. Lew does not have a relevant interest in the shares of the company held by the Associated Entities. DIRECTORS’ MEETINGS The number of meetings of the Board of Directors during the financial year, and the number of meetings attended by each director were as follows: DIRECTOR Solomon Lew Mark McInnes Timothy Antonie David Crean Sylvia Falzon Sally Herman Henry Lanzer AM Terrence McCartney Michael McLeod BOARD MEETINGS AUDIT AND RISK COMMITTEE REMUNERATION AND NOMINATION COMMITTEE MEETINGS HELD NUMBER ATTENDED MEETINGS HELD NUMBER ATTENDED MEETINGS HELD NUMBER ATTENDED 15 15 15 15 15 15 15 15 15 15 9 15 14 14 13 15 15 15 - - 5 5 5 5 - - - - 1 5 5 5 5 2 3 - - - 2 - - - - 2 2 - - 2 - - - - 2 2 REMUNERATION REPORT The Remuneration Report, which forms part of this Directors’ Report, is presented from page 13. The Directors’ Report is signed in accordance with a resolution of the Board of Directors. Solomon Lew Chairman 1 October 2021 12 Premier Investments Limited 12 DIRECTORS’ REPORT DIRECTORS’ REPORT (CONTINUED) Directors’ Report continued (CONTINUED) REMUNERATION REPORT REMUNERATION REPORT $400.0 $350.0 $300.0 $250.0 $200.0 $150.0 $100.0 $50.0 $- Dear Shareholders, Dear Shareholders, As Chairman of the Remuneration and Nomination Committee, I am pleased to present Premier Investments’ remuneration report for the 53 weeks ended 31 July 2021. This report outlines, in detail, the remuneration outcomes As Chairman of the Remuneration and Nomination Committee, I am pleased to present Premier Investments’ and incentive arrangements, related to our performance. remuneration report for the 53 weeks ended 31 July 2021. This report outlines, in detail, the remuneration outcomes and incentive arrangements, related to our performance. It has been a year like no other. The COVID-19 health crisis has continued to present numerous challenges for our It has been a year like no other. The COVID-19 health crisis has continued to present numerous challenges for our business, many that required swift and decisive action from our experienced Board and leadership team in an effort to protect and build on the success of our business, for our teams, shareholders and many other stakeholders, reliant business, many that required swift and decisive action from our experienced Board and leadership team in an effort on a robust Premier business. Premier has remained focused on the safety and wellbeing of our global teams and to protect and build on the success of our business, for our teams, shareholders and many other stakeholders, reliant on a robust Premier business. Premier has remained focused on the safety and wellbeing of our global teams and our customers during this health crisis. our customers during this health crisis. It is our exceptional and highly experienced business leadership, through their meticulous execution of the Group’s strategies, and dedication of our entire global team that have delivered a result for this financial year that have It is our exceptional and highly experienced business leadership, through their meticulous execution of the Group’s strategies, and dedication of our entire global team that have delivered a result for this financial year that have surpassed expectations. surpassed expectations. For the 2021 financial year, Premier Retail has delivered a record Earnings before Interest and Taxation (“EBIT”) of $344.0 million (comparable 52 weeks) – a remarkable result amidst a challenging and uncertain macro-economic For the 2021 financial year, Premier Retail has delivered a record Earnings before Interest and Taxation (“EBIT”) of $344.0 million (comparable 52 weeks) – a remarkable result amidst a challenging and uncertain macro-economic backdrop. backdrop. Underlying EBIT History1 Underlying EBIT History1 Underlying EBIT History1 $344.0 344.0 344.0 $187.2 $167.3 $80.4 $83.7 $92.8 $105.7 $126.7 $136.0 $150.1 $126.7 $136.0 $150.1 $167.3 $126.7 $136.0 $167.3 $187.2 $150.1 $187.2 $65.3 $80.4 $83.7 $92.8 $105.7 $65.3 $80.4 $83.7 $92.8 $105.7 $65.3 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY11 FY12 FY11 FY13 FY12 FY14 FY13 FY15 FY15 FY17 $'millions FY16 FY14 $'millions FY18 FY16 FY19 FY17 FY20 FY18 FY21 FY19 FY20 FY21 $' millions 1 Refer to page 9 of the Directors’ Report for a definition and reconciliation of underlying EBIT. FY20 and FY21 Underlying EBIT is presented on a pre-AASB 16 basis. FY21 and FY16 Underlying EBIT represent a comparable 52-week period. 1 Refer to page 9 of the Directors’ Report for a definition and reconciliation of underlying EBIT. FY20 and FY21 Underlying EBIT is presented on a pre-AASB 16 basis. FY21 and FY16 Underlying EBIT represent a comparable 52-week period. For 52 of the 53 trading weeks during the 2021 financial year, Premier faced temporary store closures across its For 52 of the 53 trading weeks during the 2021 financial year, Premier faced temporary store closures across its global store network due to government mandated closures. Over 400 stores were closed in July 2021 - the final key trading weeks of the reporting period. global store network due to government mandated closures. Over 400 stores were closed in July 2021 - the final key trading weeks of the reporting period. The Directors believe that the exceptional result delivered for this financial year, amidst a very challenging global The Directors believe that the exceptional result delivered for this financial year, amidst a very challenging global background, was a function of the swift response of the Group’s world-class management team, led by Premier Retail CEO, Mark McInnes. This has been a year of great turmoil in the retail market, here in Australia as well as for background, was a function of the swift response of the Group’s world-class management team, led by Premier our international operations, which has required the very best executives to deliver the result. Key strategic decisions Retail CEO, Mark McInnes. This has been a year of great turmoil in the retail market, here in Australia as well as for our international operations, which has required the very best executives to deliver the result. Key strategic decisions to significantly invest in inventory, to be in stock for critical trading periods such as Black Friday, Christmas, Mother’s Day and across both the summer and winter seasons have set the Group apart from its competitors. to significantly invest in inventory, to be in stock for critical trading periods such as Black Friday, Christmas, Mother’s Day and across both the summer and winter seasons have set the Group apart from its competitors. A skilled and experienced Board, working together with a highly motivated and proven management team, have led A skilled and experienced Board, working together with a highly motivated and proven management team, have led to Premier shareholders consistently enjoying some of the best returns of any listed company within the ASX200 over the past decade. Premier continues to encourage, incentivise and develop executives who understand this to Premier shareholders consistently enjoying some of the best returns of any listed company within the ASX200 complex retail environment and proactively develop business outcomes that build shareholder wealth. over the past decade. Premier continues to encourage, incentivise and develop executives who understand this complex retail environment and proactively develop business outcomes that build shareholder wealth. 13 13 13 DIRECTORS’ REPORT DIRECTORS’ REPORT (CONTINUED) (CONTINUED) REMUNERATION REPORT (CONTINUED) REMUNERATION REPORT (CONTINUED) Premier Investments Limited Total Shareholder Return against the ASX200 Index – 2011 to 2021 Premier Investments Limited Total Shareholder Return against the ASX200 Index – 2011 to 2021 PMV: +540% PMV: +540% ASX200: +133% ASX200: +133% 50.00 50.00 45.00 45.00 40.00 40.00 35.00 35.00 30.00 30.00 25.00 25.00 20.00 20.00 15.00 15.00 10.00 10.00 5.00 5.00 – Apr-11 – Apr-11 Apr-12 Apr-12 Apr-13 Apr-13 Apr-14 Apr-14 Apr-16 Apr-16 Apr-17 Apr-17 Apr-18 Apr-18 Apr-19 Apr-19 Apr-20 Apr-20 Apr-21 Apr-21 Apr-15 Apr-15 PMV PMV ASX 200 ASX 200 The Board believes that the strong financial returns enjoyed by shareholders stem, in large part, from the strategic The Board believes that the strong financial returns enjoyed by shareholders stem, in large part, from the strategic appointment of high calibre key management personnel. The Board is proud of its diverse senior executive team, appointment of high calibre key management personnel. The Board is proud of its diverse senior executive team, whom are all very well respected within the retail industry. Female senior leaders are responsible for five of our whom are all very well respected within the retail industry. Female senior leaders are responsible for five of our seven retail brands, and two of our major support functions, being Internet and Marketing and People and Culture. seven retail brands, and two of our major support functions, being Internet and Marketing and People and Culture. 50%2 of the CEO’s direct reports are female. 50%2 of the CEO’s direct reports are female. Across our over 1,100 stores in Australia, New Zealand, Asia and Europe, the critical support functions within those Across our over 1,100 stores in Australia, New Zealand, Asia and Europe, the critical support functions within those markets, our fast-growing online business and in the Group’s head office, over 90% of the Group’s workforce are markets, our fast-growing online business and in the Group’s head office, over 90% of the Group’s workforce are female. Female management represents approximately 74%2 of management. We will continue to encourage and female. Female management represents approximately 74%2 of management. We will continue to encourage and support a business leadership structure that reflects the values of equal opportunity across the Group. support a business leadership structure that reflects the values of equal opportunity across the Group. In January 2021, Premier Retail CEO, Mark McInnes advised the Board of his decision to step down from his role. In January 2021, Premier Retail CEO, Mark McInnes advised the Board of his decision to step down from his role. Mark’s exceptional leadership over the past 10 years have led to record year on year Premier Retail operational and Mark’s exceptional leadership over the past 10 years have led to record year on year Premier Retail operational and financial performance. Premier Retail have thrived during this time, whilst many of our competitors have come and financial performance. Premier Retail have thrived during this time, whilst many of our competitors have come and gone. The Board expresses its sincere thanks to Mark for a decade of service to the Group. gone. The Board expresses its sincere thanks to Mark for a decade of service to the Group. Following Mark’s resignation, the Board was delighted to advise the market in April 2021 of the appointment of Following Mark’s resignation, the Board was delighted to advise the market in April 2021 of the appointment of Richard Murray to the role of Premier Retail CEO. Richard commenced with the Group on 6 September 2021. This Richard Murray to the role of Premier Retail CEO. Richard commenced with the Group on 6 September 2021. This represents a new chapter for the Group, as we continue to grow our brands both locally and globally, whilst carefully represents a new chapter for the Group, as we continue to grow our brands both locally and globally, whilst carefully managing through the continued effects of COVID-19. managing through the continued effects of COVID-19. The Group received a disappointing “first strike” against its Remuneration Report at its 2020 Annual General The Group received a disappointing “first strike” against its Remuneration Report at its 2020 Annual General Meeting. The Board is committed to transparent disclosure of Key Management Personnel remuneration, and Meeting. The Board is committed to transparent disclosure of Key Management Personnel remuneration, and therefore certain areas of this year’s remuneration report have been expanded on. therefore certain areas of this year’s remuneration report have been expanded on. The report summarises our remuneration strategies, the way in which incentives are calculated and the connection The report summarises our remuneration strategies, the way in which incentives are calculated and the connection between those strategies and the achievement of positive returns for shareholders. between those strategies and the achievement of positive returns for shareholders. Terrence McCartney Terrence McCartney Chairman, Remuneration and Nomination Committee Chairman, Remuneration and Nomination Committee 2 As per the Just Group Limited Australian Workplace Gender Equality Agency Report 2020-2021. 2 As per the Just Group Limited Australian Workplace Gender Equality Agency Report 2020-2021. 14 14 Annual Report 2021 DIRECTORS’ REPORT DIRECTORS’ REPORT (CONTINUED) (CONTINUED) REMUNERATION REPORT (CONTINUED) REMUNERATION REPORT (CONTINUED) Premier Investments Limited Total Shareholder Return against the ASX200 Index – 2011 to 2021 Premier Investments Limited Total Shareholder Return against the ASX200 Index – 2011 to 2021 Premier Investments Limited Total Shareholder Return against the ASX200 Index - 2011 to 2021 PMV: +540% PMV: +540% +540% +133% ASX200: +133% ASX200: +133% 50.00 50.00 50.00 45.00 45.00 45.00 40.00 40.00 40.00 35.00 35.00 35.00 30.00 30.00 30.00 25.00 25.00 25.00 20.00 20.00 20.00 15.00 15.00 15.00 10.00 10.00 10.00 5.00 5.00 5.00 - – Apr-11 – Apr-11 Apr-13 Apr-11 Dec-11 Aug-12 Apr-13 Dec-13 Aug-14 Apr-13 Apr-14 Apr-14 Apr-12 Apr-12 Apr-15 Apr-15 Apr-15 PMV PMV Apr-18 Apr-17 Apr-16 Dec-15 Aug-16 Apr-17 Dec-17 Apr-18 Apr-16 Apr-17 ASX 200 ASX 200 ASX 200 PMV Apr-19 Aug-18 Apr-19 Apr-19 Apr-20 Dec-19 Aug-20 Apr-21 Apr-20 Apr-21 Apr-21 The Board believes that the strong financial returns enjoyed by shareholders stem, in large part, from the strategic The Board believes that the strong financial returns enjoyed by shareholders stem, in large part, from the strategic appointment of high calibre key management personnel. The Board is proud of its diverse senior executive team, appointment of high calibre key management personnel. The Board is proud of its diverse senior executive team, whom are all very well respected within the retail industry. Female senior leaders are responsible for five of our whom are all very well respected within the retail industry. Female senior leaders are responsible for five of our seven retail brands, and two of our major support functions, being Internet and Marketing and People and Culture. seven retail brands, and two of our major support functions, being Internet and Marketing and People and Culture. 50%2 of the CEO’s direct reports are female. 50%2 of the CEO’s direct reports are female. Across our over 1,100 stores in Australia, New Zealand, Asia and Europe, the critical support functions within those Across our over 1,100 stores in Australia, New Zealand, Asia and Europe, the critical support functions within those markets, our fast-growing online business and in the Group’s head office, over 90% of the Group’s workforce are markets, our fast-growing online business and in the Group’s head office, over 90% of the Group’s workforce are female. Female management represents approximately 74%2 of management. We will continue to encourage and female. Female management represents approximately 74%2 of management. We will continue to encourage and support a business leadership structure that reflects the values of equal opportunity across the Group. support a business leadership structure that reflects the values of equal opportunity across the Group. In January 2021, Premier Retail CEO, Mark McInnes advised the Board of his decision to step down from his role. In January 2021, Premier Retail CEO, Mark McInnes advised the Board of his decision to step down from his role. Mark’s exceptional leadership over the past 10 years have led to record year on year Premier Retail operational and Mark’s exceptional leadership over the past 10 years have led to record year on year Premier Retail operational and financial performance. Premier Retail have thrived during this time, whilst many of our competitors have come and financial performance. Premier Retail have thrived during this time, whilst many of our competitors have come and gone. The Board expresses its sincere thanks to Mark for a decade of service to the Group. gone. The Board expresses its sincere thanks to Mark for a decade of service to the Group. Following Mark’s resignation, the Board was delighted to advise the market in April 2021 of the appointment of Following Mark’s resignation, the Board was delighted to advise the market in April 2021 of the appointment of Richard Murray to the role of Premier Retail CEO. Richard commenced with the Group on 6 September 2021. This Richard Murray to the role of Premier Retail CEO. Richard commenced with the Group on 6 September 2021. This represents a new chapter for the Group, as we continue to grow our brands both locally and globally, whilst carefully represents a new chapter for the Group, as we continue to grow our brands both locally and globally, whilst carefully managing through the continued effects of COVID-19. managing through the continued effects of COVID-19. The Group received a disappointing “first strike” against its Remuneration Report at its 2020 Annual General The Group received a disappointing “first strike” against its Remuneration Report at its 2020 Annual General Meeting. The Board is committed to transparent disclosure of Key Management Personnel remuneration, and Meeting. The Board is committed to transparent disclosure of Key Management Personnel remuneration, and therefore certain areas of this year’s remuneration report have been expanded on. therefore certain areas of this year’s remuneration report have been expanded on. The report summarises our remuneration strategies, the way in which incentives are calculated and the connection The report summarises our remuneration strategies, the way in which incentives are calculated and the connection between those strategies and the achievement of positive returns for shareholders. between those strategies and the achievement of positive returns for shareholders. Terrence McCartney Terrence McCartney Chairman, Remuneration and Nomination Committee Chairman, Remuneration and Nomination Committee 2 As per the Just Group Limited Australian Workplace Gender Equality Agency Report 2020-2021. 2 As per the Just Group Limited Australian Workplace Gender Equality Agency Report 2020-2021. Premier Investments Limited 14 14 14 DIRECTORS’ REPORT (CONTINUED) Directors’ Report continued REMUNERATION REPORT (AUDITED) This remuneration report for the 53 weeks ended 31 July 2021 outlines the remuneration arrangements of the Group in accordance with the requirements of the Corporations Act 2001 (Cth), as amended (the “Act”) and its regulations. This information has been audited as required by section 308 (3C) of the Act. The remuneration report is presented under the following headings: (iii) Executives 1. Introduction 2. Remuneration Governance 3. Executive remuneration arrangements: A. Remuneration principles and strategy B. Approach to setting remuneration C. Fixed remuneration objectives D. Detail of incentive plans 4. Executive remuneration outcomes (including link to performance) 5. Remuneration of outgoing CEO Premier Retail, Mr. McInnes 6. Remuneration framework of incoming CEO Premier Retail, Mr. Murray 7. Executive service agreements 8. Non-Executive Director remuneration arrangements 9. Remuneration of Key Management Personnel 10. Additional disclosures relating to Rights and Shares 11. Additional disclosures relating to transactions and balances with Key Management Personnel 1. INTRODUCTION The remuneration report details the remuneration arrangements for Key Management Personnel (“KMP”) who are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Group, directly or indirectly, including any director (whether executive or otherwise) of the Group. The table below outlines the Group’s KMP during the 53 weeks ended 31 July 2021. Unless otherwise indicated, the individuals were KMP for the entire financial year. Group STI pool. KEY MANAGEMENT PERSONNEL (i) Non-Executive Directors Solomon Lew David Crean Chairman and Non-Executive Director Deputy Chairman and Non-Executive Director Timothy Antonie Non-Executive Director and Lead Independent Director Sylvia Falzon Sally Herman Non-Executive Director Non-Executive Director Henry Lanzer AM Non-Executive Director Terrence McCartney Non-Executive Director Michael McLeod Non-Executive Director DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) 1. INTRODUCTION (CONTINUED) KEY MANAGEMENT PERSONNEL (CONTINUED) (ii) Executive Director Mark McInnes Executive Director and Chief Executive Officer Premier Retail (see note (a)) John Bryce Chief Financial Officer, Just Group Limited Marinda Meyer Company Secretary, Premier Investments Limited (a) Mr. McInnes resigned on 15 January 2021 and commenced gardening leave on 14 August 2021 until the end of his 12-month notice period, being 15 January 2022. Mr. McInnes resigned as a Director of Premier Investments Limited effective 19 August 2021. Refer to Section 5 for further information. Mr. Richard Murray was appointed as CEO Premier Retail effective 6 September 2021. There were no other changes to the KMP after the reporting date and before the date the financial report was authorised for issue. 2. REMUNERATION GOVERNANCE Remuneration and Nomination Committee The Remuneration and Nomination Committee (“Committee”) of the Board of Directors of the Group (“Board”) comprises three Non-Executive Directors. The Committee is led by Terrence McCartney, an independent Non-Executive Director, and the majority of its members are independent Non-Executive Directors. This demonstrates an ongoing commitment to the independence of the Committee. The Committee has delegated decision-making authority for some matters related to the remuneration arrangements for KMP and is required to make recommendations to the Board on other matters. Specifically, the Board approves the remuneration arrangements of the Chief Executive Officer Premier Retail (“CEO Premier Retail”) and other executives, including awards made under the short-term incentive (“STI”) and long-term incentive (“LTI”) plans, following recommendations from the Committee. The Board also sets the aggregate remuneration for Non-Executive Directors (which is subject to shareholder approval) and Non-Executive Director fee levels. The Committee approves, having regard to recommendations made by the CEO Premier Retail, the level of the The Committee meets regularly. The CEO Premier Retail attends certain Committee meetings by invitation, where management input is required. The CEO Premier Retail is not present during discussions relating to his own Further information relating to the Committee’s role, responsibilities and membership can be seen at remuneration arrangements. www.premierinvestments.com.au. Use of remuneration advisors The Committee may from time to time seek external remuneration advice to ensure it is fully informed when making remuneration decisions. Remuneration advisors are engaged by, and report directly to, the Committee. No remuneration advisors were engaged during the 2021 financial year. 15 15 16 Annual Report 2021 DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) 1. INTRODUCTION (CONTINUED) KEY MANAGEMENT PERSONNEL (CONTINUED) (ii) Executive Director Mark McInnes Executive Director and Chief Executive Officer Premier Retail (see note (a)) (iii) Executives John Bryce Chief Financial Officer, Just Group Limited Marinda Meyer Company Secretary, Premier Investments Limited (a) Mr. McInnes resigned on 15 January 2021 and commenced gardening leave on 14 August 2021 until the end of his 12-month notice period, being 15 January 2022. Mr. McInnes resigned as a Director of Premier Investments Limited effective 19 August 2021. Refer to Section 5 for further information. Mr. Richard Murray was appointed as CEO Premier Retail effective 6 September 2021. There were no other changes to the KMP after the reporting date and before the date the financial report was authorised for issue. 2. REMUNERATION GOVERNANCE Remuneration and Nomination Committee The Remuneration and Nomination Committee (“Committee”) of the Board of Directors of the Group (“Board”) comprises three Non-Executive Directors. The Committee is led by Terrence McCartney, an independent Non-Executive Director, and the majority of its members are independent Non-Executive Directors. This demonstrates an ongoing commitment to the independence of the Committee. The Committee has delegated decision-making authority for some matters related to the remuneration arrangements for KMP and is required to make recommendations to the Board on other matters. Specifically, the Board approves the remuneration arrangements of the Chief Executive Officer Premier Retail (“CEO Premier Retail”) and other executives, including awards made under the short-term incentive (“STI”) and long-term incentive (“LTI”) plans, following recommendations from the Committee. The Board also sets the aggregate remuneration for Non-Executive Directors (which is subject to shareholder approval) and Non-Executive Director fee levels. The Committee approves, having regard to recommendations made by the CEO Premier Retail, the level of the Group STI pool. The Committee meets regularly. The CEO Premier Retail attends certain Committee meetings by invitation, where management input is required. The CEO Premier Retail is not present during discussions relating to his own remuneration arrangements. Further information relating to the Committee’s role, responsibilities and membership can be seen at www.premierinvestments.com.au. Use of remuneration advisors The Committee may from time to time seek external remuneration advice to ensure it is fully informed when making remuneration decisions. Remuneration advisors are engaged by, and report directly to, the Committee. No remuneration advisors were engaged during the 2021 financial year. 16 Premier Investments Limited 16 DIRECTORS’ REPORT DIRECTORS’ REPORT (CONTINUED) (CONTINUED) Directors’ Report continued REMUNERATION REPORT (AUDITED) (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) 3. EXECUTIVE REMUNERATION ARRANGEMENTS 3. EXECUTIVE REMUNERATION ARRANGEMENTS 3A. Remuneration principles and strategy 3A. Remuneration principles and strategy The Group’s executive remuneration strategy is designed to attract, motivate and retain high performing individuals, The Group’s executive remuneration strategy is designed to attract, motivate and retain high performing individuals, and align the interests of executives with shareholders. and align the interests of executives with shareholders. The Group operates mainly in the retail industry, with significant revenues earned in its traditional markets of Australia The Group operates mainly in the retail industry, with significant revenues earned in its traditional markets of Australia and New Zealand. The retail industry in these markets has seen marked structural change over recent years, including and New Zealand. The retail industry in these markets has seen marked structural change over recent years, including a prevalence in the use of new and existing technology, an increase in international competitors and significant a prevalence in the use of new and existing technology, an increase in international competitors and significant changes in general consumer sentiment. Globally, as a result of the COVID-19 health crisis, temporary store closures changes in general consumer sentiment. Globally, as a result of the COVID-19 health crisis, temporary store closures and the ongoing government implementation of social distancing in each of the countries and markets the Group and the ongoing government implementation of social distancing in each of the countries and markets the Group operates in, customer shopping behaviour continues to change significantly. operates in, customer shopping behaviour continues to change significantly. Complementing its strong market position in Australia and New Zealand, the Group continues to operate in Complementing its strong market position in Australia and New Zealand, the Group continues to operate in international markets in Asia and Europe. The Group remains committed to growing its existing international presence. international markets in Asia and Europe. The Group remains committed to growing its existing international presence. REVENUE FROM CUSTOMERS PER GEOGRAPHIC AREA FY21 REVENUE FROM CUSTOMERS PER GEOGRAPHIC AREA FY21 Revenue from customers per Geographic Area FY21 Europe Europe 5% 5% Asia Asia 3% 3% 5% Europe New Zealand New Zealand 11% 11% 3% Asia 11% New Zealand 81% Australia Australia Australia 81% 81% The market for skilled and experienced executives in the retail industry continues to be increasingly competitive and The market for skilled and experienced executives in the retail industry continues to be increasingly competitive and international in nature. The Group’s strong domestic position, as well as global reach, provides exposure to an international in nature. The Group’s strong domestic position, as well as global reach, provides exposure to an international pool of talent and access to a diverse range of strategies to respond to industry changes. international pool of talent and access to a diverse range of strategies to respond to industry changes. Given these structural changes and the Group’s growth focus, the Board believes it is both critical to the future success Given these structural changes and the Group’s growth focus, the Board believes it is both critical to the future success of the business, and in the best interest of shareholders, to attract, retain and develop the best possible executive team of the business, and in the best interest of shareholders, to attract, retain and develop the best possible executive team through the provision of competitive remuneration packages, and incentive arrangements which are aligned to growth through the provision of competitive remuneration packages, and incentive arrangements which are aligned to growth and performance. The year-on-year growth in performance and shareholder value over the last 10 years, is a and performance. The year-on-year growth in performance and shareholder value over the last 10 years, is a testament to Premier’s remuneration strategy. testament to Premier’s remuneration strategy. The Group’s strategic objective is to be recognised as a leader in the retail industry and build long term value for The Group’s strategic objective is to be recognised as a leader in the retail industry and build long term value for shareholders. shareholders. The Group is committed to ensuring that executive remuneration outcomes are explicitly linked to the overall The Group is committed to ensuring that executive remuneration outcomes are explicitly linked to the overall performance and success of the Group. This section illustrates this link between the Group’s strategic objectives and performance and success of the Group. This section illustrates this link between the Group’s strategic objectives and its executive remuneration strategies. its executive remuneration strategies. 17 17 17 Annual Report 2021DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) EXECUTIVE REMUNERATION ARRANGEMENTS (CONTINUED) 3A. Remuneration principles and strategy (continued) To be recognised as a leader in our industry and build long-term value for our shareholders Group Objective Remuneration strategy linkages to Group objective Align the interests of executives with shareholders • The remuneration framework incorporates “at- risk” components, through STI and LTI plans. • Performance is assessed against a suite of financial and non-financial measures relevant to the success of the Group and generating returns for shareholders. Attract, motivate and retain high performing individuals • • Remuneration is competitive as compared to companies of a similar size and complexity. Longer-term remuneration frameworks and “at-risk” components encourage retention, development and a multi-year performance focus. Component Vehicle Purpose Link to performance To provide competitive fixed remuneration with reference to the applicable role, market and relevant executive’s experience. Both the executive’s performance, and the performance of the Group, are considered during regular remuneration reviews. Comprises base salary, superannuation contributions and other benefits Awarded in cash Fixed remuneration STI LTI Rewards executives for their contribution to achievement of Group and business unit annual outputs and performance outcomes. Awarded in performance rights Rewards executives for their contribution to the creation of shareholder value over the long term. Discretionary Bonus Awarded in cash or performance rights Rewards executives in exceptional circumstances linked to long term shareholder outcomes. Key financial metrics based primarily on Premier Retail’s underlying earnings before interest and taxation (“EBIT”) of each business unit, as well as a suite of other internal financial and non- financial measures. Vesting of performance rights is dependent on both a positive total shareholder return (“TSR”) Premier and testing against the Comparison Peer Group (defined in Section 3D of this report). Granted at the discretion of the Board upon recommendation of the Committee in exceptional circumstances, and when in the best interests of the Group. 18 Premier Investments Limited 18 DIRECTORS’ REPORT (CONTINUED) Directors’ Report continued REMUNERATION REPORT (AUDITED) (CONTINUED) DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) 3. EXECUTIVE REMUNERATION ARRANGEMENTS (CONTINUED) 3. EXECUTIVE REMUNERATION ARRANGEMENTS (CONTINUED) 3B. Approach to setting remuneration For the 53 weeks ended 31 July 2021, the executive remuneration framework comprised of fixed remuneration, STI and LTI, as outlined below. Details of Mr. McInnes’ remuneration is provided in section 5 of this report. The Group aims to reward executives with a competitive level and mix of remuneration appropriate to their position and responsibilities and linked to shareholder value creation. 3C. Fixed remuneration objectives Fixed remuneration is reviewed by the Committee. The process consists of a review of the Group, applicable business unit and executive’s individual performance, relevant comparative remuneration (both externally and internally) and, where appropriate, external advice. The Committee has access to external advice independent of management. 3D. Detail of incentive plans Short term incentive (“STI”) The Group operates an annual STI program which is awarded subject to the attainment of clearly defined financial and non-financial Group and business unit measures. Who participates? Executives who have served a minimum of nine months. How is STI delivered? Cash. What is the STI opportunity? Executives have an STI opportunity of between 0% and 100% of their fixed remuneration. What are the applicable financial performance measures? STI payments awarded to each executive are explicitly aligned to the key value drivers of Premier Retail, such that rewards will only be payable when the following criteria have been met: • • • • budgeted EBIT of Premier Retail has been achieved and an incentive pool has been created; the executive receives a performance appraisal on target or above; the executive’s minimum performance outcomes have been achieved (hurdle); and the executive’s key performance indicators (“KPIs”) have been met (qualifiers). The financial performance measures are chosen with reference to the strategic objective to promote both short term success and provide a framework for delivering long term value. The hurdle criteria are designed to ensure STI outcomes are aligned to the creation of shareholder value. If the hurdles are not met, the STI is not payable. The qualifier criteria aligns the individual activities and focus of the executive to shareholder value. Each executive is set multiple KPIs covering financial, non- financial, Group and business unit measures of performance. The KPIs are quantifiable and weighted according to their value. The budgeted EBIT for each year is expected to incorporate growth on the previous year. As such, in a year in which STI payments are made, executives must exceed the actual result in the prior year to achieve an STI in the following year. This mechanism ensures the STI scheme continues to build shareholder returns over time. 3D. Detail of incentive plans (continued) Short-term incentive (“STI”) (continued) non-financial performance measures? What are the applicable The award of an STI is also dependent on the executive achieving individual aligned non-financial performance indicators, such as: • • • • retention of existing customers through outstanding customer service; implementation of key growth initiatives; demonstrated focus on a continuous improvement in safety performance; and demonstrated focus on the growth and development of leadership and team talent to encourage leadership succession. How is performance After the end of the financial year, following consideration of the financial and non- assessed? financial performance indicators, the Committee obtains input from the CEO Premier Retail in relation to the amount of STI to be paid to eligible executives. The Committee then provides its recommendations to the Just Group Board for approval. The provision of any STI payments is subject to the sole discretion of the Chairman. Long-term incentive (“LTI”) Group’s strategic objectives. Premier’s LTI plan seeks to create shareholder value over the long term by aligning executive remuneration with the Refer to section 5 for details surrounding Mr McInnes’ LTI arrangements. Prior to the 2020 financial year, LTI performance rights were granted to executives annually and eligible to vest three years from the date of the grant. During the 2020 financial year, certain amendments were made to LTI performance rights granted to executives, which have been described in more detail below. Who participates? Executives. How is LTI delivered? Performance rights. What were the performance measures for the 2021 and 2020 financial years? LTI rights awarded to each executive are subject to a two-stage performance test - an absolute and relative test - based on Premier’s TSR. Broadly, TSR is the percentage growth achieved from an investment in ordinary shares over the relevant testing period (assuming all dividends are reinvested). The two-stage performance measure approach ensures that the LTI plan operates as a key driver for performance whilst also providing an incentive to executives. lapse. The absolute test requires Premier to achieve a positive TSR over the testing period. If the TSR is negative over the testing period, then the performance rights If the TSR is positive over the testing period, the relative test is undertaken, which compares Premier’s TSR with the S&P/ASX200 Industrials excluding overseas and resource companies (“Comparison Peer Group”). The Comparison Peer Group represents over 100 companies in the ASX200, which reflects the Group’s competitors for both capital and talent. The Comparator Peer Group consists of ASX200 companies, including companies within the consumer discretionary, consumer staple and information technology sectors. 19 19 20 Annual Report 2021DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) 3. EXECUTIVE REMUNERATION ARRANGEMENTS (CONTINUED) 3D. Detail of incentive plans (continued) Short-term incentive (“STI”) (continued) What are the applicable non-financial performance measures? How is performance assessed? The award of an STI is also dependent on the executive achieving individual aligned non-financial performance indicators, such as: • • • • retention of existing customers through outstanding customer service; implementation of key growth initiatives; demonstrated focus on a continuous improvement in safety performance; and demonstrated focus on the growth and development of leadership and team talent to encourage leadership succession. After the end of the financial year, following consideration of the financial and non- financial performance indicators, the Committee obtains input from the CEO Premier Retail in relation to the amount of STI to be paid to eligible executives. The Committee then provides its recommendations to the Just Group Board for approval. The provision of any STI payments is subject to the sole discretion of the Chairman. Long-term incentive (“LTI”) Premier’s LTI plan seeks to create shareholder value over the long term by aligning executive remuneration with the Group’s strategic objectives. Refer to section 5 for details surrounding Mr McInnes’ LTI arrangements. Prior to the 2020 financial year, LTI performance rights were granted to executives annually and eligible to vest three years from the date of the grant. During the 2020 financial year, certain amendments were made to LTI performance rights granted to executives, which have been described in more detail below. Who participates? Executives. How is LTI delivered? Performance rights. What were the performance measures for the 2021 and 2020 financial years? LTI rights awarded to each executive are subject to a two-stage performance test - an absolute and relative test - based on Premier’s TSR. Broadly, TSR is the percentage growth achieved from an investment in ordinary shares over the relevant testing period (assuming all dividends are reinvested). The two-stage performance measure approach ensures that the LTI plan operates as a key driver for performance whilst also providing an incentive to executives. The absolute test requires Premier to achieve a positive TSR over the testing period. If the TSR is negative over the testing period, then the performance rights lapse. If the TSR is positive over the testing period, the relative test is undertaken, which compares Premier’s TSR with the S&P/ASX200 Industrials excluding overseas and resource companies (“Comparison Peer Group”). The Comparison Peer Group represents over 100 companies in the ASX200, which reflects the Group’s competitors for both capital and talent. The Comparator Peer Group consists of ASX200 companies, including companies within the consumer discretionary, consumer staple and information technology sectors. 20 Premier Investments Limited 20 DIRECTORS’ REPORT (CONTINUED) Directors’ Report continued REMUNERATION REPORT (AUDITED) (CONTINUED) DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) 3. EXECUTIVE REMUNERATION ARRANGEMENTS (CONTINUED) 3. EXECUTIVE REMUNERATION ARRANGEMENTS (CONTINUED) 3D. Detail of incentive plans (continued) Long-term incentive (“LTI”) (continued) What were the performance measures for the 2021 and 2020 financial years (continued)? Premier’s performance against the Comparison Peer Group measure is determined according to its ranking against the Comparison Peer Group over the performance period. The vesting schedule for rights issued prior to the 2020 financial year was as follows: 3D. Detail of incentive plans (continued) Long-term incentive (“LTI”) (continued) vest? When does the LTI No new performance rights have been granted in the 2021 financial year. Target Conversion ratio of rights to shares available to vest under the TSR performance condition Below 50th percentile 50th percentile Between 50th and 62.5th percentile 62.5th percentile Between 62.5th and 75th percentile 75th percentile and above 0% 25% Pro Rata 50% Pro Rata 100% For LTI rights issued during the 2020 financial year, the vesting schedule has been amended as follows: Target Conversion ratio of rights to shares available to vest under the TSR performance condition Below 50th percentile 50th percentile Between 50th and 75th percentile 75th percentile and above 0% 50% Pro Rata 100% The absolute test ensures that shareholders and executives are aligned in the goal of absolute wealth creation. The relative test provides alignment between comparative shareholder return and reward for executives. Premier considers the suitability of the above performance conditions on an annual basis. How is performance assessed? TSR performance is calculated by an independent external advisor at the end of each performance period. Section 10 of this report, titled “Additional disclosures relating to rights and shares”, provides details of performance rights granted, vested, exercised and lapsed during the year. For rights issued prior to the 2020 financial year, the performance rights will generally vest over a period of three years subject to meeting performance measures. For rights issued during the 2020 financial year, the performance rights will vest in accordance with the following schedule: Tranche A: LTI rights will be tested for vesting from 1 May 2020 to 1 October 2022 Tranche B: LTI rights will be tested for vesting from 1 May 2020 to 1 October 2023 (being the 1st Vesting Date). (being the 2nd Vesting Date). (being the 3rd Vesting Date). Tranche C: LTI rights will be tested for vesting from 1 May 2020 to 1 May 2024 The performance rights issued during the 2020 financial year will be tested for vesting in three equal tranches. The three-tranche performance rights issue replaces the previous annual performance rights issue during the above vesting periods (e.g. additional performance rights will not be granted during the above vesting periods). Performance rights have no opportunity to re-test. How are grants treated Generally, all rights (whether vested or unvested) lapse and terminate on cessation on termination? of employment. May participants enter Executives are prohibited from entering into transactions to hedge or limit the into hedging arrangements? economic risk of the securities allocated to them under the LTI scheme, either before vesting or after vesting while the securities are held subject to restriction. Executives are only able to hedge securities that have vested but continue to be subject to a trading restriction and a seven-year lock, with the prior consent of the Board. No employees have any hedging arrangements in place. Are there restrictions on disposals? Once rights have been allocated, disposal of performance shares is subject to restrictions whereby Board approval is required to sell shares granted within seven years under the LTI plan. Participants do not receive distributions or dividends on unvested LTI grants. Do participants receive distributions or dividends on unvested LTI grants? 21 21 22 Annual Report 2021DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) 3. EXECUTIVE REMUNERATION ARRANGEMENTS (CONTINUED) 3D. Detail of incentive plans (continued) Long-term incentive (“LTI”) (continued) When does the LTI vest? No new performance rights have been granted in the 2021 financial year. For rights issued prior to the 2020 financial year, the performance rights will generally vest over a period of three years subject to meeting performance measures. For rights issued during the 2020 financial year, the performance rights will vest in accordance with the following schedule: Tranche A: LTI rights will be tested for vesting from 1 May 2020 to 1 October 2022 (being the 1st Vesting Date). Tranche B: LTI rights will be tested for vesting from 1 May 2020 to 1 October 2023 (being the 2nd Vesting Date). Tranche C: LTI rights will be tested for vesting from 1 May 2020 to 1 May 2024 (being the 3rd Vesting Date). The performance rights issued during the 2020 financial year will be tested for vesting in three equal tranches. The three-tranche performance rights issue replaces the previous annual performance rights issue during the above vesting periods (e.g. additional performance rights will not be granted during the above vesting periods). Performance rights have no opportunity to re-test. How are grants treated on termination? Generally, all rights (whether vested or unvested) lapse and terminate on cessation of employment. May participants enter into hedging arrangements? Are there restrictions on disposals? Do participants receive distributions or dividends on unvested LTI grants? Executives are prohibited from entering into transactions to hedge or limit the economic risk of the securities allocated to them under the LTI scheme, either before vesting or after vesting while the securities are held subject to restriction. Executives are only able to hedge securities that have vested but continue to be subject to a trading restriction and a seven-year lock, with the prior consent of the Board. No employees have any hedging arrangements in place. Once rights have been allocated, disposal of performance shares is subject to restrictions whereby Board approval is required to sell shares granted within seven years under the LTI plan. Participants do not receive distributions or dividends on unvested LTI grants. 22 Premier Investments Limited 22 DIRECTORS’ REPORT DIRECTORS’ REPORT (CONTINUED) (CONTINUED) Directors’ Report continued REMUNERATION REPORT (AUDITED) (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) 4. EXECUTIVE REMUNERATION OUTCOMES (INCLUDING LINK TO PERFORMANCE) 4. EXECUTIVE REMUNERATION OUTCOMES (INCLUDING LINK TO PERFORMANCE) Group performance and its link to STI Group performance and its link to STI STI payment outcomes are primarily driven by Premier Retail’s underlying EBIT growth. The following chart shows STI payment outcomes are primarily driven by Premier Retail’s underlying EBIT growth. The following chart shows Premier Retail’s underlying EBIT for the past ten years. Premier Retail’s underlying EBIT for the past ten years. Premier Retail Underlying EBIT (52-week basis) Premier Retail Underlying EBIT (52-week basis) Premier Retail Underlying EBIT (52-week basis) $344.0 $344.0 $344.0 $187.2 $187.2 $187.2 $105.7 $126.7 $105.7 $126.7 $80.4 $83.7 $92.8 $105.7 $92.8 $92.8 $80.4 $83.7 $80.4 $83.7 $65.3 $65.3 $65.3 $167.3 $167.3 $150.1 $167.3 $136.0 $150.1 $136.0 $150.1 $126.7 $136.0 $400.0 $350.0 $300.0 $250.0 $200.0 $150.0 $100.0 $50.0 $- FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 $' millions Note: The term underlying EBIT is not an IFRS defined term. Please refer to page 9 for a reconciliation between underlying EBIT and Note: The term underlying EBIT is not an IFRS defined term. Please refer to page 9 for a reconciliation between underlying EBIT and statutory reported operating profit before tax for the Retail Segment. FY21 and FY16 Underlying EBIT represent a comparable 52- statutory reported operating profit before tax for the Retail Segment. FY21 and FY16 Underlying EBIT represent a comparable 52- week period. week period. Performance compared to STI payments made during the financial years ended 31 July 2021 and 25 July 2020 Performance compared to STI payments made during the financial years ended 31 July 2021 and 25 July 2020 Mr Bryce received a discretionary bonus payment during the 2021 financial year amounting to $225,000. During the Mr Bryce received a discretionary bonus payment during the 2021 financial year amounting to $225,000. During the 2020 financial year, an amount of $215,851 was paid to Mr Bryce and combined both an STI payment and 2020 financial year, an amount of $215,851 was paid to Mr Bryce and combined both an STI payment and discretionary bonus payment. The STI payment was in line with hurdles and qualifiers relating to his 2019 financial discretionary bonus payment. The STI payment was in line with hurdles and qualifiers relating to his 2019 financial year STI plan. This included the achievement of Premier Retail underlying EBIT. year STI plan. This included the achievement of Premier Retail underlying EBIT. Group performance and its link to LTI Group performance and its link to LTI The performance measure which drives LTI vesting is dependent on an absolute test, being a positive Premier TSR The performance measure which drives LTI vesting is dependent on an absolute test, being a positive Premier TSR performance and a relative test, being a comparison against the Comparison Peer Group (as defined in section 3D of performance and a relative test, being a comparison against the Comparison Peer Group (as defined in section 3D of this report). this report). The table below illustrates the outcomes of the TSR testing performed during the 2020 and 2021 financial years in The table below illustrates the outcomes of the TSR testing performed during the 2020 and 2021 financial years in relation to KMP: relation to KMP: Testing Period Testing Period Share price Share price at start of at start of testing testing period period Share price Share price at end of at end of testing testing period period Dividends Dividends paid paid TSR TSR percentage percentage TSR TSR percentile percentile Number of Number of Performance Performance Rights Rights tested for tested for KMP KMP 4 Apr 2014 to 4 Apr 2020 4 Apr 2014 to 4 Apr 2020 $9.95 $9.95 $11.55 $11.55 1 Oct 2017 to 30 Sept 2020 1 Oct 2017 to 30 Sept 2020 $13.01 $13.01 $20.56 $20.56 $3.24 fully $3.24 fully franked franked $1.93 fully $1.93 fully franked franked 54.73% 54.73% 68.0 68.0 250,000* 250,000* 75.38% 75.38% 88.2 88.2 8,713 8,713 * Relates to Mr. McInnes, refer to section 5 of this report. * Relates to Mr. McInnes, refer to section 5 of this report. 23 23 23 Annual Report 2021DIRECTORS’ REPORT DIRECTORS’ REPORT (CONTINUED) (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) 4. EXECUTIVE REMUNERATION OUTCOMES (INCLUDING LINK TO PERFORMANCE) (CONTINUED) 4. EXECUTIVE REMUNERATION OUTCOMES (INCLUDING LINK TO PERFORMANCE) (CONTINUED) The below chart shows the Premier TSR against the S&P/ASX200 Index, from April 2011 to 31 July 2021: The below chart shows the Premier TSR against the S&P/ASX200 Index, from April 2011 to 31 July 2021: Premier Investments Limited TSR against the Premier Investments Limited TSR against the ASX200 Index from April 2011 to 31 July 2021 ASX200 Index from April 2011 to 31 July 2021 Premier Investments Limited TSR against the ASX200 Index from April 2011 to 31 July 2021 +540% +540% +540% +133% +133% +133% Apr-11 Dec-11 Aug-12 Apr-13 Dec-13 Aug-14 Apr-15 Dec-15 Aug-16 Apr-17 Dec-17 Aug-18 Apr-19 Dec-19 Aug-20 Apr-21 50.00 50.00 45.00 45.00 50.00 40.00 40.00 45.00 35.00 35.00 30.00 30.00 40.00 35.00 30.00 25.00 25.00 25.00 20.00 20.00 15.00 15.00 20.00 15.00 10.00 10.00 10.00 5.00 5.00 5.00 - – – PMV Apr-11Dec-11Aug-12Apr-13Dec-13Aug-14Apr-15Dec-15Aug-16Apr-17Dec-17Aug-18Apr-19Dec-19Aug-20Apr-21 Apr-11Dec-11Aug-12Apr-13Dec-13Aug-14Apr-15Dec-15Aug-16Apr-17Dec-17Aug-18Apr-19Dec-19Aug-20Apr-21 ASX 200 PMV PMV ASX 200 ASX 200 5. REMUNERATION OF OUTGOING CEO PREMIER RETAIL, MR. MCINNES 5. REMUNERATION OF OUTGOING CEO PREMIER RETAIL, MR. MCINNES Mr. McInnes’ fixed remuneration Mr. McInnes’ fixed remuneration Mr. McInnes’ annual fixed remuneration for each of the 2020 and 2021 financial years was $2,750,000. Mr. McInnes’ annual fixed remuneration for each of the 2020 and 2021 financial years was $2,750,000. Mr. McInnes’ notice period Mr. McInnes’ notice period Upon cessation of his employment, Mr. McInnes is entitled to 12 months’ notice (“Notice Period”) if he resigns or is Upon cessation of his employment, Mr. McInnes is entitled to 12 months’ notice (“Notice Period”) if he resigns or is terminated by Premier for any reason other than for serious misconduct, or for conduct otherwise giving rise to an terminated by Premier for any reason other than for serious misconduct, or for conduct otherwise giving rise to an entitlement at law to summarily dismiss (“Terminated Without Cause”). entitlement at law to summarily dismiss (“Terminated Without Cause”). During the Notice Period, Premier may direct Mr. McInnes to continue in his role, perform no duties, reduced duties or During the Notice Period, Premier may direct Mr. McInnes to continue in his role, perform no duties, reduced duties or alternative duties during the Notice Period, or elect to provide Mr. McInnes with payment in lieu of the Notice Period. alternative duties during the Notice Period, or elect to provide Mr. McInnes with payment in lieu of the Notice Period. The maximum amount of any payment in lieu of the Notice Period based on Mr. McInnes’ current fixed remuneration The maximum amount of any payment in lieu of the Notice Period based on Mr. McInnes’ current fixed remuneration for a 12-month period is $2,750,000 gross, less applicable tax. for a 12-month period is $2,750,000 gross, less applicable tax. Mr. McInnes provided notice of his resignation on 15 January 2021. Mr. McInnes remained CEO Premier Retail for the Mr. McInnes provided notice of his resignation on 15 January 2021. Mr. McInnes remained CEO Premier Retail for the full financial year ended 31 July 2021, and commenced gardening leave on 14 August 2021 until the end of his Notice full financial year ended 31 July 2021, and commenced gardening leave on 14 August 2021 until the end of his Notice Period, being 15 January 2022. Period, being 15 January 2022. 24 24 Premier Investments Limited 24 DIRECTORS’ REPORT (CONTINUED) Directors’ Report continued REMUNERATION REPORT (AUDITED) (CONTINUED) DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) 5. REMUNERATION OF OUTGOING CEO PREMIER RETAIL, MR. MCINNES (CONTINUED) 5. REMUNERATION OF OUTGOING CEO PREMIER RETAIL, MR. MCINNES (CONTINUED) Mr. McInnes’ STI arrangements Mr. McInnes’ LTI arrangements (continued) Mr. McInnes is entitled to receive a STI if the applicable performance targets and conditions set out below are met. Calculation of Mr. McInnes’ STI is based on growth of Premier Retail EBIT, as compared to the previous financial year (“Base Year”). The relevant performance targets and corresponding STI payment amounts are as follows: The performance rights granted vested in four equal tranches subject to the achievement of both an absolute and relative TSR test. No value was received by Mr. McInnes if the performance rights lapsed prior to the vesting date. Each tranche of performance rights has been tested against the TSR performance measure over different testing EBIT growth less than 5% of Base Year No payment. EBIT growth of 5% of Base Year $1,375,000. EBIT growth between 5% and 10% of Base Year $1,375,000 plus a pro rata payment based on the % of the EBIT growth above 5%, up to a maximum of $2,750,000 for 10% EBIT growth. EBIT growth of above 10% of Base Year If Mr. McInnes considers that any additional payment is warranted based on EBIT growth of above 10%, he may make a request for an additional payment to the Chairman of Premier. The Chairman may determine whether or not to make any such payment in his sole and absolute discretion within 30 days of receiving any such request. The maximum payment that Mr. McInnes may receive under the current STI scheme is $2,750,000, unless the Chairman decides to make an additional payment in his absolute discretion. The Chairman has not used such discretion during the 2020 or 2021 financial years. As Mr. McInnes has resigned from his employment, he remains entitled to continue participating in the STI scheme until the end of the Notice Period in accordance with the above table (on a pro rata basis for the 2022 financial year as the Notice Period ends part way through the year). Mr. McInnes’ STI entitlements for the financial years ended 31 July 2021 and 25 July 2020 For the 2021 financial year, Mr. McInnes was entitled to an STI payment of $2,750,000 which primarily reflected the significant growth achieved in Premier Retail’s EBIT for the 2021 financial year. This STI payment was paid on 27 September 2021 and has been reflected as part of Mr. McInnes’ remuneration for the 2021 financial year in section 9. For the 2020 financial year, Mr. McInnes was entitled to an STI payment of $2,750,000 which primarily reflected the significant growth achieved in Premier Retail’s EBIT for the 2020 financial year. This STI payment was paid during the 2021 financial year, however, has been reflected as part of Mr. McInnes’ remuneration for the 2020 financial year in section 9. The historical growth in Premier Retail’s underlying EBIT is detailed in the graph in section 4 of this report. Mr. McInnes’ LTI arrangements Mr. McInnes was entitled to 1,000,000 performance rights split into four equal tranches. The performance rights were granted at no cost to Mr. McInnes and, conditional on the performance hurdles being met, the performance rights were exercisable at no cost. Shareholders approved the right of the Group to issue the 1,000,000 performance rights to Mr. McInnes at the 2015 Annual General Meeting of shareholders held on 27 November 2015. The rules pertaining to this grant were approved by shareholders at the Extraordinary General Meeting of shareholders held on 15 June 2016. Mr. McInnes’ final tranche of performance rights vested during the 2020 financial year. McInnes had no active performance rights arrangements during the 2021 financial year. periods, as follows: Tranche A – 4 April 2014 to 4 April 2017 Tranche B – 4 April 2014 to 4 April 2018 Tranche C – 4 April 2014 to 4 April 2019 • • • • (each date being a “Vesting Date”). Tranche D – 4 April 2014 to 4 April 2020 (Final tranche tested in FY20, see Section 5) The share price baseline for each tranche was $9.88, which was the volume weighted average share price (“VWAP”) of the ordinary shares on ASX for the five trading days prior to 4 April 2014. Premier’s TSR was calculated based on the percentage growth achieved from the share price baseline of $9.88 to the share price on the relevant Vesting Date (calculated by the VWAP of the ordinary shares on ASX for the five trading days prior to the relevant Vesting Date). The first stage absolute test required that the TSR over the testing period is positive. If the TSR is positive, the second stage relative test required the TSR to be assessed against the relative performance of the Comparison Peer Group. The relative TSR performance targets and the corresponding vesting percentages were as follows: Conversion ratio of performance rights to shares available to vest under the TSR performance condition: Target Below the 50th percentile 50th percentile Between 50th and 62.5th percentile 62.5th percentile Between 62.5th and 75th percentile 75th percentile and above 0% 25% Pro Rata 50% Pro Rata 100% Premier’s TSR and ranking within the Comparison Peer Group for each testing period was assessed by an external independent advisor. The performance rights under each tranche lapsed if the applicable performance hurdles are not met (unless otherwise determined by the Board in its absolute discretion). Shares issued as a result of vesting of performance rights issued to Mr McInnes for the financial years ended 31 July 2021 and 25 July 2020 During the 2020 financial year, the final tranche of 250,000 performance rights (being Tranche D) were tested for the period 4 April 2014 to 4 April 2020. The TSR over this period was 54.73%, placing Premier in the 68.0 percentile of the Comparison Peer Group, resulting in vesting of 72% of the performance rights. Details of this test have been presented in Section 4 of this report. The Board, in its absolute discretion under the Performance Rights Plan, performed an indicative TSR test over two alternative testing periods, being 4 April 2014 to 29 April 2020, and 4 April 2014 and 28 February 2020, to provide the Board with further clarity on the impact on the short-term global share price volatility on Premier’s TSR resulting from the COVID-19 pandemic. 25 25 26 Annual Report 2021DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) 5. REMUNERATION OF OUTGOING CEO PREMIER RETAIL, MR. MCINNES (CONTINUED) Mr. McInnes’ LTI arrangements (continued) The performance rights granted vested in four equal tranches subject to the achievement of both an absolute and relative TSR test. No value was received by Mr. McInnes if the performance rights lapsed prior to the vesting date. Each tranche of performance rights has been tested against the TSR performance measure over different testing periods, as follows: • • • • Tranche A – 4 April 2014 to 4 April 2017 Tranche B – 4 April 2014 to 4 April 2018 Tranche C – 4 April 2014 to 4 April 2019 Tranche D – 4 April 2014 to 4 April 2020 (Final tranche tested in FY20, see Section 5) (each date being a “Vesting Date”). The share price baseline for each tranche was $9.88, which was the volume weighted average share price (“VWAP”) of the ordinary shares on ASX for the five trading days prior to 4 April 2014. Premier’s TSR was calculated based on the percentage growth achieved from the share price baseline of $9.88 to the share price on the relevant Vesting Date (calculated by the VWAP of the ordinary shares on ASX for the five trading days prior to the relevant Vesting Date). The first stage absolute test required that the TSR over the testing period is positive. If the TSR is positive, the second stage relative test required the TSR to be assessed against the relative performance of the Comparison Peer Group. The relative TSR performance targets and the corresponding vesting percentages were as follows: Target Below the 50th percentile 50th percentile Between 50th and 62.5th percentile 62.5th percentile Between 62.5th and 75th percentile 75th percentile and above Conversion ratio of performance rights to shares available to vest under the TSR performance condition: 0% 25% Pro Rata 50% Pro Rata 100% Premier’s TSR and ranking within the Comparison Peer Group for each testing period was assessed by an external independent advisor. The performance rights under each tranche lapsed if the applicable performance hurdles are not met (unless otherwise determined by the Board in its absolute discretion). Shares issued as a result of vesting of performance rights issued to Mr McInnes for the financial years ended 31 July 2021 and 25 July 2020 During the 2020 financial year, the final tranche of 250,000 performance rights (being Tranche D) were tested for the period 4 April 2014 to 4 April 2020. The TSR over this period was 54.73%, placing Premier in the 68.0 percentile of the Comparison Peer Group, resulting in vesting of 72% of the performance rights. Details of this test have been presented in Section 4 of this report. The Board, in its absolute discretion under the Performance Rights Plan, performed an indicative TSR test over two alternative testing periods, being 4 April 2014 to 29 April 2020, and 4 April 2014 and 28 February 2020, to provide the Board with further clarity on the impact on the short-term global share price volatility on Premier’s TSR resulting from the COVID-19 pandemic. 26 Premier Investments Limited 26 DIRECTORS’ REPORT (CONTINUED) Directors’ Report continued REMUNERATION REPORT (AUDITED) (CONTINUED) DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) 5. REMUNERATION OF OUTGOING CEO PREMIER RETAIL, MR. MCINNES (CONTINUED) 6. REMUNERATION FRAMEWORK OF INCOMING CEO PREMIER RETAIL, MR. MURRAY Shares issued as a result of vesting of performance rights issued to Mr McInnes for the financial years ended 31 July 2021 and 25 July 2020 (continued) On 28 April 2021, Premier announced the appointment of Mr. Richard Murray as incoming CEO Premier Retail, commencing 6 September 2021. The material terms of Mr. Murray’s employment contract were provided to the ASX on The results of these two TSR tests reflected an indicative percentile ranking of 75.7 percentile and 78.6 percentile, respectively. Therefore, both indicative tests would have resulted in 100% of the performance rights qualifying for vesting into newly issued shares. Based on the circumstances surrounding the testing period for Tranche D, the results of the extended indicative TSR tests and the Group’s compounding growth achieved over the testing period, the Board exercised its discretion provided under the Performance Rights Plan. As a result, 250,000 performance rights vested into newly issued shares in May 2020. This is the first incidence where the Board has exercised its discretion under the Performance Rights Plan in relation to performance rights for members of Premier’s KMP. Mr. McInnes had no performance rights plans in place during the 2021 financial year, therefore no performance rights were tested for vesting during the year ended 31 July 2021. No shares were issued to Mr. McInnes during the 2021 financial year. Mr. McInnes’ post-employment restrictions If Mr. McInnes’ employment ends, Premier may elect to restrict Mr. McInnes from certain conduct in competition with Premier for a period of either 12 months or 24 months from the end of the Notice Period (“Post-employment Restrictions”). If Premier elects to enforce the Post-employment Restrictions, it is required to provide Mr. McInnes with his total fixed remuneration during the relevant period (up to a maximum period of 24 months). Following Mr. McInnes’ resignation on 15 January 2021, Premier elected to implement the Post-employment Restrictions for a 12-month period, ending on 15 January 2023. As a result, Mr. McInnes will receive a total of $2,750,000 gross, less applicable tax. Premier remains entitled to implement the Post-employment Restrictions for a further 12-month period ending 15 January 2024 (therefore a maximum 24-month period). If Premier elects to enforce the Post-employment Restrictions for maximum of 24 months, Mr. McInnes would receive a total of $5,500,000 gross, less applicable tax. The payments outlined above may be considered a termination benefit within the meaning of Part 2D.2 of the Act. Termination benefits The STI and Post-employment Restrictions payments and benefits outlined above may be considered termination benefits within the meaning of Part 2D.2 of the Act. At an Extraordinary General Meeting held on 15 June 2016, shareholders approved these potential termination benefits for the purposes of Part 2D.2 of the Act. 28 April 2021, and are summarised below: Contract Term No fixed term, ongoing until terminated by either party in accordance with the employment contract. Fixed Remuneration $2,000,000 per annum (subject to annual review). Sign-on Retention Subject to shareholder approval and other threshold conditions, the Company will grant Mr. Murray 200,000 performance rights as a once off sign-on retention. The performance rights will be tested, and if applicable, will vest in four equal tranches as follows: • • • • Tranche 1: 50,000 performance rights, tested 1 year after Commencement Tranche 2: 50,000 performance rights, tested 2 years after Commencement Tranche 3: 50,000 performance rights, tested 3 years after Commencement Tranche 4: 50,000 performance rights, tested 4 years after Commencement Vesting of each tranche of performance rights is subject to Mr. Murray being actively employed on the relevant vesting date of the respective tranche. If vested, each performance right is an entitlement to a fully paid ordinary share of the Company (Performance Shares). The Retention performance rights is subject to the terms and conditions of the Company’s Performance Rights Plan Rules (Rules). In accordance with the Rules, disposal of Performance Shares is subject to restrictions whereby Board approval is required to sell shares granted within 7 years. Short-term Incentive The Company will provide Mr. Murray with an FY22 STI opportunity equivalent to between 37.5% and 75% of his fixed remuneration (pro-rata), subject to achievement of performance hurdles and other conditions to be determined. Long-term Incentive Subject to shareholder approval and other threshold conditions, on Commencement the Company will grant Mr. Murray 600,000 performance rights. The performance rights will be tested, and if applicable, will vest in four equal tranches as follows: (STI) (LTI) • • • • Tranche 1: 150,000 performance rights, tested on 1 October 2024 Tranche 2: 150,000 performance rights, tested on 1 October 2025 Tranche 3: 150,000 performance rights, tested on 1 October 2026 Tranche 4: 150,000 performance rights, tested on 1 October 2027 Vesting of each tranche of performance rights is subject to Mr. Murray being actively employed on the relevant vesting date of the respective tranche and a two-stage performance test – an absolute and relative test based on the Company’s total shareholder return, with performance measures which are in line with Premier’s current LTI plan. If vested, each performance right is an entitlement to a fully paid ordinary share of the Company. The Performance Rights are subject to the terms and conditions of the Company’s Rules. In accordance with the Rules, disposal of Performance Shares is subject to restrictions whereby Board approval is required to sell shares granted within 7 years. Mr. Murray will not be entitled to any additional performance rights for the first four years of employment. Notice Period Either party may terminate the employment by providing 12 months’ notice. Post-employment Mr. Murray is subject to post-employment non-solicit and non-compete restraints for a restraint maximum of two years commencing from the end of his employment. The Company may elect to pay Mr. Murray his base salary during some or all of this period. 27 27 28 Annual Report 2021DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) 6. REMUNERATION FRAMEWORK OF INCOMING CEO PREMIER RETAIL, MR. MURRAY On 28 April 2021, Premier announced the appointment of Mr. Richard Murray as incoming CEO Premier Retail, commencing 6 September 2021. The material terms of Mr. Murray’s employment contract were provided to the ASX on 28 April 2021, and are summarised below: Contract Term No fixed term, ongoing until terminated by either party in accordance with the employment contract. Fixed Remuneration $2,000,000 per annum (subject to annual review). Sign-on Retention Subject to shareholder approval and other threshold conditions, the Company will grant Mr. Murray 200,000 performance rights as a once off sign-on retention. The performance rights will be tested, and if applicable, will vest in four equal tranches as follows: • • • • Tranche 1: 50,000 performance rights, tested 1 year after Commencement Tranche 2: 50,000 performance rights, tested 2 years after Commencement Tranche 3: 50,000 performance rights, tested 3 years after Commencement Tranche 4: 50,000 performance rights, tested 4 years after Commencement Vesting of each tranche of performance rights is subject to Mr. Murray being actively employed on the relevant vesting date of the respective tranche. If vested, each performance right is an entitlement to a fully paid ordinary share of the Company (Performance Shares). The Retention performance rights is subject to the terms and conditions of the Company’s Performance Rights Plan Rules (Rules). In accordance with the Rules, disposal of Performance Shares is subject to restrictions whereby Board approval is required to sell shares granted within 7 years. Short-term Incentive (STI) The Company will provide Mr. Murray with an FY22 STI opportunity equivalent to between 37.5% and 75% of his fixed remuneration (pro-rata), subject to achievement of performance hurdles and other conditions to be determined. Long-term Incentive (LTI) Subject to shareholder approval and other threshold conditions, on Commencement the Company will grant Mr. Murray 600,000 performance rights. The performance rights will be tested, and if applicable, will vest in four equal tranches as follows: • • • • Tranche 1: 150,000 performance rights, tested on 1 October 2024 Tranche 2: 150,000 performance rights, tested on 1 October 2025 Tranche 3: 150,000 performance rights, tested on 1 October 2026 Tranche 4: 150,000 performance rights, tested on 1 October 2027 Vesting of each tranche of performance rights is subject to Mr. Murray being actively employed on the relevant vesting date of the respective tranche and a two-stage performance test – an absolute and relative test based on the Company’s total shareholder return, with performance measures which are in line with Premier’s current LTI plan. If vested, each performance right is an entitlement to a fully paid ordinary share of the Company. The Performance Rights are subject to the terms and conditions of the Company’s Rules. In accordance with the Rules, disposal of Performance Shares is subject to restrictions whereby Board approval is required to sell shares granted within 7 years. Mr. Murray will not be entitled to any additional performance rights for the first four years of employment. Notice Period Either party may terminate the employment by providing 12 months’ notice. Post-employment restraint Mr. Murray is subject to post-employment non-solicit and non-compete restraints for a maximum of two years commencing from the end of his employment. The Company may elect to pay Mr. Murray his base salary during some or all of this period. 28 Premier Investments Limited 28 DIRECTORS’ REPORT (CONTINUED) Directors’ Report continued REMUNERATION REPORT (AUDITED) (CONTINUED) 7. EXECUTIVE SERVICE AGREEMENTS Remuneration and other terms of employment for KMP and other executives are formalised in written service agreements (with the exception of Ms. Meyer, whose relevant terms of employment are set out below). Material provisions of the service agreements are set out below: Start date Term of agreement Review period Notice period required from Premier Mr. McInnes 4 April 2011 Open Annual 12 months Mr. Bryce 13 Dec 2016 Open Annual 12 months Termination benefits Notice period required from employee 12 months fixed rem. including notice 12 months Premier initiated 12 months fixed rem. including notice 12 months fixed rem. including notice Ms. Meyer 4 Feb 2019 Open Annual 12 months Nil 12 months 8. NON-EXECUTIVE DIRECTOR REMUNERATION ARRANGEMENTS Determination of fees and maximum aggregate Non-Executive Director Remuneration The Board seeks to set Non-Executive Director fees at a level which provides the Group with the ability to attract and retain Non-Executive Directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders. The Group’s constitution and the ASX listing rules specify that the Non-Executive Director maximum aggregate remuneration shall be determined from time to time by a general meeting. The most recent determination of this kind was at the 2016 Annual General Meeting held on 2 December 2016 when shareholders approved an aggregate remuneration of an amount not exceeding $1,500,000 per year. The Chairman of the Group, consistent with his past practice, has declined to accept any remuneration for his role as a director or for his role on any committees. Fee policy Non-Executive Director’s fees consist of base fees and committee fees. The payment of committee fees recognises the additional time commitment required by Non-Executive Directors who serve on Board committees. Non-Executive Directors may be reimbursed for expenses reasonably incurred in attending to the Group’s affairs. Non- Executive Directors do not participate in any incentive programs. Premier has not established any schemes for retirement benefits for Non-Executive Directors (other than superannuation). 29 29 Annual Report 2021% - - - % 0 5 % 9 3 % 7 1 $ - 0 0 0 , 0 4 1 0 0 0 , 0 8 1 0 0 0 , 0 2 1 0 0 0 , 0 2 1 0 0 0 , 0 2 1 0 0 0 , 0 4 3 0 0 0 , 0 4 1 , 0 0 0 0 6 1 , 1 6 9 3 , 9 9 7 0 5 3 , 8 3 4 , 0 0 0 0 0 5 , 5 , 6 4 7 7 3 7 , 6 , 6 4 7 7 9 8 , 7 $ - - - - - - - - - - - 4 5 0 , 9 8 4 5 0 , 9 8 4 5 0 , 9 8 - - - - $ - - 9 7 6 , 5 1 0 0 0 , 5 2 9 7 6 , 0 4 0 0 0 , 5 2 0 5 8 , 1 2 0 5 8 , 1 2 0 0 7 , 8 6 9 7 3 , 9 0 1 l . e b a t e v o b a e h t n i d e t c e l f e r t n e m y a p I T S e h t n o n o i t a m r o f n i r e h t r u f r o f 5 2 e g a p o t r e f e R . r a e y $ - - - - - - - - - $ - 0 0 0 , 0 4 1 1 2 3 , 4 6 1 0 0 0 , 0 2 1 0 0 0 , 0 2 1 0 0 0 , 0 2 1 0 0 0 , 0 4 3 0 0 0 , 5 1 1 s r o t c e r i D e v i t u c e x E - n o N i e n o t n A . T . r M n a e r C . D . r D n o z a F l . S . s M n a m r e H S . s M w e L . S . r M 1 r e z n a L . D . H . r M y e n t r a C c M . . L T . r M d o e L c M . I . R . M . r M 1 2 3 , 9 1 1 , 1 s r o t c e r i D e v i t u c e x E - n o N l a t o T 0 0 0 , 5 7 0 0 0 , 5 2 2 0 0 0 , 0 5 7 , 2 0 0 0 , 0 5 0 , 3 0 0 0 , 0 5 0 , 3 2 9 4 , 3 6 4 0 0 5 , 1 4 3 0 0 0 , 5 2 7 , 2 2 9 9 , 9 2 5 , 3 3 1 3 , 9 4 6 , 4 2 s e n n I c M . M . r M 3 e c y r B . S . J . r M s e v i t u c e x E r e y e M . M . s M s e v i t u c e x e l a t o T 1 2 0 2 L A T O T l i a c n a n i f 1 2 0 2 e h t o t n o i t a e r l n i 0 0 0 , 0 5 7 , 2 $ f o t n e m y a p I T S n a o t d e l t i t n e s i s e n n I c M . r M i l . r e b e L h c o B d o n r A o t l l i d a p e r e w s e e f s ’ r o t c e r i d s ’ r e z n a L . r M . 1 2 Y F d n o y e b s n o i t c i r t s e r d n a s t n e m e l t i t n e l t n e m y o p m e - t s o p d n a d o i r e p e c i t o n ’ s e n n I c M . r M f o s l i a t e d r e h t r u f r o f 7 2 d n a 4 2 s e g a p o t r e f e r , n o i t i d d a n I 0 3 . e c y r B . r M r o f t n e m y a p s u n o b e h t o t g n i t a e r l n o i t a m r o f n i r e h t r u f r o f 3 2 e g a p o t r e f e R 1 2 3 . Premier Investments Limited 30 d e s a b e r a h S l t n e m y o p m e - t s o P m r e t - t r o h S e c n a m r o f r e P d e t a l e r l a t o T m r e t - g n o L s e v i t n e c n i n o i t a u n n a r e p u S h s a C e e F / y r a l a S 1 2 0 2 : s w o l l o f s a e r a r a e y l i a c n a n i f e h t o t d e t a e r l p u o r G e h t f o P M K r o f i s e c v r e s r o f n o i t a s n e p m o c f o t n e m e e l 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 ) P M K ( L E N N O S R E P T N E M E G A N A M Y E K F O N O T A R E N U M E R I . 9 ) I D E U N T N O C ( ) I D E T D U A ( T R O P E R N O T A R E N U M E R I T R O P E R ’ S R O T C E R D I ) D E U N T N O C I ( d e s a b e r a h S l t n e m y o p m e - t s o P m r e t - t r o h S e c n a m r o f r e P d e t a l e r l a t o T m r e t - g n o L s e v i t n e c n i n o i t a u n n a r e p u S h s a C e e F / y r a l a S 0 2 0 2 ) I D E U N T N O C ( ) I D E T D U A ( T R O P E R N O T A R E N U M E R I ) I D E U N T N O C ( I P M K F O N O T A R E N U M E R . 9 % - - - - - - - - - % 4 3 . 6 5 % 2 5 . 0 4 $ - 3 3 3 , 1 2 1 0 0 0 , 6 5 1 0 0 0 , 4 0 1 0 0 0 , 4 0 1 0 0 0 , 4 0 1 7 6 6 , 4 9 2 3 3 3 , 1 2 1 3 3 3 , 5 0 0 , 1 6 3 5 , 1 8 6 5 8 9 , 9 3 3 4 4 4 , 9 6 6 , 5 5 6 9 , 0 9 6 , 6 8 9 2 , 6 9 6 , 7 $ - - - - - - - - - - 8 7 2 , 0 6 4 4 4 , 4 4 4 2 2 7 , 4 0 5 2 2 7 , 4 0 5 $ - - 8 3 3 , 4 8 3 3 , 4 4 3 5 , 3 1 - - 0 0 0 , 5 2 0 1 2 , 7 4 7 1 9 , 2 2 0 1 3 , 9 1 1 3 7 , 3 2 8 5 9 , 5 6 8 6 1 , 3 1 1 $ - - - - - - - - - - 1 5 8 , 5 1 2 , 0 0 0 0 5 7 , 2 , 1 5 8 5 6 9 , 2 , 1 5 8 5 6 9 , 2 $ - 3 3 3 , 1 2 1 6 6 4 , 2 4 1 2 6 6 , 9 9 2 6 6 , 9 9 0 0 0 , 4 0 1 7 6 6 , 4 9 2 3 3 3 , 6 9 3 2 1 , 8 5 9 7 9 0 , 6 8 3 4 5 2 , 6 1 3 3 8 0 , 2 5 4 , 2 4 3 4 , 4 5 1 , 3 7 5 5 , 2 1 1 , 4 s r o t c e r i D e v i t u c e x E - n o N i e n o t n A . T . r M n a e r C . D . r D n o z a F l . S . s M n a m r e H S . s M w e L . S . r M 1 r e z n a L . D . H . r M y e n t r a C c M . . L T . r M 2 s r o t c e r i D e v i t u c e x E - n o N l a t o T d o e L c M . I . R . M . r M 3 s e n n I c M . M . r M 4 e c y r B . S . J . r M s e v i t u c e x E r e y e M . M . s M s e v i t u c e x e l a t o T 0 2 0 2 L A T O T DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) 1 3 10. ADDITIONAL DISCLOSURES RELATING TO RIGHTS AND SHARES OF KMP a) Rights awarded, vested and lapsed during the year: Rights vested and lapsed during 2021 Rights vested Rights lapsed No. No. Remuneration consisting of rights for the year % - 11.14% - - - The table below discloses the number of performance rights granted to KMP as remuneration for the financial year ended 31 July 2021, as well as the number of rights vested and lapsed during the year: Terms and conditions Grant Rights granted Grant date Fair value per Expiry and year during the year right at grant Exercise No. date $ date 2021 Mr. M. McInnes Mr. J.S. Bryce - 2018 - - - 19-Feb-18 - - - - - 8,713 - - b) Value of rights awarded, exercised and lapsed during the year: Value of rights granted Value of rights Value of rights during the year exercised during lapsed during the 2021 $ the year $ year $ Mr. M. McInnes Mr. J.S. Bryce - - - 189,682 There were no alterations to the terms and conditions of rights awarded as remuneration since their award date. The value of rights exercised during the year represent the intrinsic value of the rights based on the share price on the relevant day of vesting. c) Shares issued on exercise of rights: 2021 Mr. J.S. Bryce Shares issued Paid per share Unpaid per share No $ $ 8,713 - There were no alterations to the terms and conditions of rights awarded as remuneration since their award date. d) Rights holdings of KMP: 2021 Balance at 25 July 2020 Granted as Rights remuneration exercised Rights lapsed Balance at Rights not 31 July 2021 exercisable At 31 July 2021 Mr. M. McInnes Mr. J.S. Bryce - 40,449 - - - (8,713) - - - 31,736 - 31,736 Rights granted to key management personnel were made in accordance with the provisions of the Group’s Performance Rights Plan. 32 n o n o i t a m r o f n i r e h t r u f r o f 5 2 e g a p o t r e f e R . r a e y l i a c n a n i f 0 2 0 2 e h t o t n o i t a e r l n i 0 0 0 , 0 5 7 , 2 $ f o t n e m y a p I T S n a o t d e l t i t n e s a w s e n n I c M . r M . 0 2 0 2 y a M r o f n o i t a r e n u m e r s s o r g l y h t n o m . e c y r B . r M r o f t n e m y a p s u n o b e h t o t g n i t a e r l n o i t a m r o f n i r e h t r u f r o f 3 2 e g a p o t r e f e R l e b a t e v o b a e h t n i d e t c e l f e r t n e m y a p I T S e h t i s h f o % 0 8 d e v e c e r i d n a 0 2 0 2 l i r p A r o f n o i t a r e n u m e r y n a e v e c e r i t o n i d d y l i r a t n u o v l s e n n I c M . r M , e m i t e h t i t a c m e d n a p I 9 1 - D V O C e h t i g n d n u o r r u s i s e i t n a t r e c n u e h t o t e s n o p s e r n I 3 4 i d e v e c e r d n a 0 2 0 2 l i r p A r o f n o i t a r e n u m e r y n a i e v e c e r t o n d d i y l i r a t n u o v l s r o t c e r i D e v i t u c e x E - n o N l l a , e m i t e h t i t a c m e d n a p I 9 1 - D V O C e h t i g n d n u o r r u s i s e i t n a t r e c n u e h t o t e s n o p s e r n I l i . r e b e L h c o B d o n r A o t l l i d a p e r e w s e e f s ’ r o t c e r i d s ’ r e z n a L . r M 1 2 . 0 2 0 2 l y u J – y a M f o s h t n o m e h t r o f n o i t a r e n u m e r l y h t n o m r i e h t f o % 0 8 d e u n i t n o c t r o p e T R R O ’ P s E r R o S R t O c T e C r E R i D D I ’ ) D E U N T N O C I ( 31 Annual Report 2021 DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) 10. ADDITIONAL DISCLOSURES RELATING TO RIGHTS AND SHARES OF KMP a) Rights awarded, vested and lapsed during the year: The table below discloses the number of performance rights granted to KMP as remuneration for the financial year ended 31 July 2021, as well as the number of rights vested and lapsed during the year: Terms and conditions Grant year Rights granted during the year No. Grant date Fair value per right at grant date $ Expiry and Exercise date 2021 Rights vested and lapsed during 2021 Rights vested Rights lapsed No. No. Mr. M. McInnes Mr. J.S. Bryce - 2018 - - - 19-Feb-18 - - - - - 8,713 - - b) Value of rights awarded, exercised and lapsed during the year: Value of rights granted during the year 2021 $ Value of rights exercised during the year $ Value of rights lapsed during the year $ Remuneration consisting of rights for the year % Mr. M. McInnes Mr. J.S. Bryce - - - 189,682 - - - 11.14% There were no alterations to the terms and conditions of rights awarded as remuneration since their award date. The value of rights exercised during the year represent the intrinsic value of the rights based on the share price on the relevant day of vesting. c) Shares issued on exercise of rights: 2021 Mr. J.S. Bryce Shares issued No Paid per share $ Unpaid per share $ 8,713 - - There were no alterations to the terms and conditions of rights awarded as remuneration since their award date. d) Rights holdings of KMP: 2021 Balance at 25 July 2020 Granted as remuneration Rights exercised Rights lapsed Balance at 31 July 2021 Rights not exercisable At 31 July 2021 Mr. M. McInnes Mr. J.S. Bryce - 40,449 - - - (8,713) - - - 31,736 - 31,736 Rights granted to key management personnel were made in accordance with the provisions of the Group’s Performance Rights Plan. Premier Investments Limited 32 32 DIRECTORS’ REPORT Directors’ Report continued (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) 10. ADDITIONAL DISCLOSURES RELATING TO RIGHTS AND SHARES OF KMP (CONTINUED) e) Number of Ordinary Shares held in Premier Investments Limited by KMP: 2021 NON-EXECUTIVE DIRECTORS Balance at 25 July 2020 Shares acquired under performance rights plan Balance at 31 July 2021 Mr. S. Lew * Mr. T. Antonie Dr. D.M. Crean Ms. S. Falzon Ms. S. Herman Mr. H.D. Lanzer Mr. T.L. McCartney Mr. M.R.I. McLeod EXECUTIVES Mr. M. McInnes Mr. J.S. Bryce Ms. M. Meyer TOTAL 4,437,699 5,001 - - 11,500 27,665 - 28,186 982,100 - - 5,492,151 - - - - - - - - - 8,713 - 8,713 4,437,699 5,001 - - 11,500 27,665 - 28,186 982,100 8,713 - 5,500,864 * Mr. Lew is an associate of Century Plaza Investments Pty. Ltd. and Metrepark Pty. Ltd (Associated Entities). The Associated Entities, collectively, have a relevant interest in 59,804,731 (2020: 59,804,731) shares in the company. However, Mr. Lew does not have a relevant interest in the shares in the company held by the Associated Entities. f) Details and terms and conditions of other transactions and balances with KMP and their related parties Mr. Lanzer is the managing partner of the legal firm Arnold Bloch Leibler. Group companies use the services of Arnold Bloch Leibler from time to time. Legal services totalling $2,809,669 (2020: $2,396,209), including Mr. Lanzer's Director fees, GST and disbursements were invoiced by Arnold Bloch Leibler to the Group, with $544,387 (2020: $713,866) remaining outstanding at year-end. The fees paid for these services were at arm's length and on normal commercial terms. Mr. Lanzer is a director of Loch Awe Pty Ltd. During the year, operating lease payments totalling $42,158 (2020: $223,293) including GST was paid to Loch Awe Pty Ltd, with $177,852 outstanding rent payments at year-end (2020: nil). The payments were at arm’s length and on normal commercial terms. Mr. Lew is a director of Voyager Distributing Company Pty Ltd. During the year, purchases totalling $22,990,422 (2020: $17,273,036) including GST have been made by Group companies from Voyager Distributing Co. Pty Ltd, with $9,843,740 (2020: $4,058,067) remaining outstanding at year-end. The purchases were all at arm’s length and on normal commercial terms. Mr. Lew is a director of Century Plaza Trading Pty. Ltd. Premier and Century Plaza Trading Pty Ltd are parties to a Services Agreement to which Century Plaza Trading agrees to provide certain administrative services to the Company to the extent required and requested by Premier. Premier is required to reimburse Century Plaza Trading for costs it incurs in providing the Company with the services under the Service Agreement. Premier reimbursed a total of $561,000 (2020: $512,600) costs including GST incurred by Century Plaza Trading Pty Ltd. 33 33 DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) 10. ADDITIONAL DISCLOSURES RELATING TO TRANSACTIONS AND BALANCES WITH KMP f) Details and terms and conditions of other transactions and balances with KMP and their related parties (continued) Amounts recognised in the financial report at the reporting date in relation to other transactions: i) Amounts included within Assets and Liabilities Current Liabilities Trade and other payables ii) Amounts included within Profit or Loss Expenses Purchases/ Cost of goods sold Lease rental expense Legal fees Other expenses Total expenses 2021 $’000 10,566 10,566 2021 $’000 21,161 200 2,554 561 24,476 34 Annual Report 2021DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) 10. ADDITIONAL DISCLOSURES RELATING TO TRANSACTIONS AND BALANCES WITH KMP f) Details and terms and conditions of other transactions and balances with KMP and their related parties (continued) Amounts recognised in the financial report at the reporting date in relation to other transactions: i) Amounts included within Assets and Liabilities Current Liabilities Trade and other payables ii) Amounts included within Profit or Loss Expenses Purchases/ Cost of goods sold Lease rental expense Legal fees Other expenses Total expenses 2021 $’000 10,566 10,566 2021 $’000 21,161 200 2,554 561 24,476 Premier Investments Limited 34 34 Auditor’s Independence Declaration Ernst & Young 8 Exhibition Street Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au Ernst & Young 8 Exhibition Street Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 Independent auditor’s report to the Members of Premier Investments Limited Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au Report on the audit of the financial report Opinion We have audited the financial report of Premier Investments Limited (the Company) and its Auditor’s Independence Declaration to the Directors of Premier subsidiaries (collectively the Group), which comprises the consolidated statement of financial position Investments Limited as at 31 July 2021, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. As lead auditor for the audit of the financial report of Premier Investments Limited for the financial period ended 31 July 2021, I declare to the best of my knowledge and belief, there have been: In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and a. Giving a true and fair view of the consolidated financial position of the Group as at 31 July 2021 and of its consolidated financial performance for the year ended on that date; and b) no contraventions of any applicable code of professional conduct in relation to the audit. b. Complying with Australian Accounting Standards and the Corporations Regulations 2001. This declaration is in respect of Premier Investments Limited and the entities it controlled during the financial period. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial report section of our report. We are independent of the Group in accordance with the auditor Ernst & Young independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in Glenn Carmody our audit of the financial report of the current year. These matters were addressed in the context of Partner our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide 1 October 2021 a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 35 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation STATEMENT OF COMPREHENSIVE INCOME FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 CONSOLIDATED NOTES 2021 $’000 2020 $’000 1,443,174 1,422 1,444,596 14,063 1,458,659 (515,271) (334,818) 7,544 (178,258) (18,510) (11,574) (52,086) 23,897 379,583 (107,743) 271,840 12,568 802 (3,782) (3,772) 5,816 28,820 (8,646) Revenue from contracts with customers Other revenue Total revenue Other income Total revenue and other income Changes in inventories Employee expenses Lease rental benefits (expenses) Advertising and direct marketing Finance costs Other expenses Total expenses Share of profit of associate Depreciation, impairment and amortisation of non-current assets Profit from continuing operations before income tax Income tax expense Net profit for the period attributable to owners Other comprehensive income (loss) Items that may be reclassified subsequently to profit or loss Net gain (loss) on cash flow hedges Foreign currency translation Net movement in other comprehensive loss of associates Income tax on items of other comprehensive income (loss) Other comprehensive income (loss) which may be reclassified to profit or loss in subsequent periods, net of tax Items not to be reclassified subsequently to profit or loss Net fair value gain (loss) on listed equity investment Income tax on items of other comprehensive income (loss) Other comprehensive income (loss) not to be reclassified to profit or loss in subsequent periods, net of tax TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ATTRIBUTABLE TO THE OWNERS Earnings per share from continuing operations attributable to the ordinary equity holders of the parent: - basic, profit for the year (cents per share) - diluted, profit for the year (cents per share) 4 4 4 5 5 5 5 20 6 24 24 24 6 24 6 7 7 The accompanying notes form an integral part of this Statement of Comprehensive Income. (1,102,973) (1,071,459) 20,174 (20,124) 297,830 109,151 171.15 170.39 86.89 86.56 1,216,316 2,464 1,218,780 30,182 1,248,962 (474,582) (247,612) (17,532) (250,060) (14,171) (16,716) (50,786) 17,696 195,199 (57,446) 137,753 (9,886) (868) (688) 2,964 (8,478) (28,747) 8,623 36 Annual Report 2021STATEMENT OF COMPREHENSIVE INCOME Statement of Comprehensive Income FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 For the 53 weeks ended 31 July 2021 and the 52 weeks ended 25 July 2020 CONSOLIDATED NOTES 2021 $’000 2020 $’000 Revenue from contracts with customers Other revenue Total revenue Other income Total revenue and other income Changes in inventories Employee expenses Lease rental benefits (expenses) Depreciation, impairment and amortisation of non-current assets Advertising and direct marketing Finance costs Other expenses Total expenses Share of profit of associate Profit from continuing operations before income tax Income tax expense Net profit for the period attributable to owners Other comprehensive income (loss) Items that may be reclassified subsequently to profit or loss Net gain (loss) on cash flow hedges Foreign currency translation Net movement in other comprehensive loss of associates Income tax on items of other comprehensive income (loss) Other comprehensive income (loss) which may be reclassified to profit or loss in subsequent periods, net of tax Items not to be reclassified subsequently to profit or loss Net fair value gain (loss) on listed equity investment Income tax on items of other comprehensive income (loss) Other comprehensive income (loss) not to be reclassified to profit or loss in subsequent periods, net of tax TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ATTRIBUTABLE TO THE OWNERS Earnings per share from continuing operations attributable to the ordinary equity holders of the parent: - basic, profit for the year (cents per share) - diluted, profit for the year (cents per share) 4 4 4 5 5 5 5 20 6 24 24 24 6 24 6 7 7 1,443,174 1,422 1,444,596 14,063 1,458,659 (515,271) (334,818) 7,544 (178,258) (18,510) (11,574) (52,086) 1,216,316 2,464 1,218,780 30,182 1,248,962 (474,582) (247,612) (17,532) (250,060) (14,171) (16,716) (50,786) (1,102,973) (1,071,459) 23,897 379,583 (107,743) 271,840 12,568 802 (3,782) (3,772) 5,816 28,820 (8,646) 17,696 195,199 (57,446) 137,753 (9,886) (868) (688) 2,964 (8,478) (28,747) 8,623 20,174 (20,124) 297,830 109,151 171.15 170.39 86.89 86.56 The accompanying notes form an integral part of this Statement of Comprehensive Income. Premier Investments Limited 36 36 STATEMENT OF FINANCIAL POSITION Statement of Financial Position STATEMENT OF FINANCIAL POSITION AS AT 31 JULY 2021 AND 25 JULY 2020 AS AT 31 JULY 2021 AND 25 JULY 2020 As at 31 July 2021 and 25 July 2020 STATEMENT OF CASH FLOWS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 NOTES NOTES CONSOLIDATED CONSOLIDATED 2021 2021 $’000 $’000 2020 2020 $’000 $’000 CONSOLIDATED NOTES 2021 $’000 2020 $’000 ASSETS ASSETS Current assets Current assets Cash and cash equivalents Cash and cash equivalents Trade and other receivables Trade and other receivables Inventories Inventories Other financial instruments Other financial instruments Other current assets Other current assets Total current assets Total current assets Non-current assets Non-current assets Property, plant and equipment Property, plant and equipment Right-of-use assets Right-of-use assets Intangible assets Intangible assets Deferred tax assets Deferred tax assets Listed equity investment at fair value Listed equity investment at fair value Investment in associate Investment in associate Total non-current assets Total non-current assets TOTAL ASSETS TOTAL ASSETS LIABILITIES LIABILITIES Current liabilities Current liabilities Trade and other payables Trade and other payables Income tax payable Income tax payable Interest-bearing liabilities Interest-bearing liabilities Lease liabilities Lease liabilities Provisions Provisions Other financial instruments Other financial instruments Other current liabilities Other current liabilities Total current liabilities Total current liabilities Non-current liabilities Non-current liabilities Interest-bearing liabilities Interest-bearing liabilities Deferred tax liabilities Deferred tax liabilities Lease liabilities Lease liabilities Provisions Provisions Other financial instruments Other financial instruments Other non-current liabilities Other non-current liabilities Total non-current liabilities Total non-current liabilities TOTAL LIABILITIES TOTAL LIABILITIES NET ASSETS NET ASSETS EQUITY EQUITY Contributed equity Contributed equity Reserves Reserves Retained earnings Retained earnings TOTAL EQUITY TOTAL EQUITY 21 21 9 9 10 10 25 25 11 11 17 17 12 12 18 18 6 6 19 19 20 20 13 13 22 22 14 14 15 15 25 25 16 16 22 22 6 6 14 14 15 15 25 25 16 16 23 23 24 24 523,356 523,356 9,490 9,490 208,760 208,760 7,073 7,073 10,326 10,326 759,005 759,005 137,798 137,798 167,087 167,087 827,004 827,004 55,494 55,494 63,462 63,462 271,372 271,372 1,522,217 1,522,217 2,281,222 2,281,222 164,269 164,269 58,218 58,218 69,000 69,000 159,050 159,050 45,610 45,610 815 815 15,120 15,120 512,082 512,082 77,834 77,834 68,319 68,319 78,435 78,435 11,421 11,421 - - 226 226 236,235 236,235 748,317 748,317 1,532,905 1,532,905 608,615 608,615 (10,001) (10,001) 934,291 934,291 1,532,905 1,532,905 The accompanying notes form an integral part of this Statement of Financial Position. The accompanying notes form an integral part of this Statement of Financial Position. 37 448,832 448,832 30,320 30,320 156,590 156,590 - - 10,531 10,531 646,273 646,273 155,134 155,134 231,790 231,790 826,888 826,888 66,924 66,924 18,132 18,132 257,391 257,391 1,556,259 1,556,259 2,202,532 2,202,532 208,979 208,979 66,172 66,172 - - 189,221 189,221 38,297 38,297 4,008 4,008 8,588 8,588 515,265 515,265 146,659 146,659 65,427 65,427 114,668 114,668 10,603 10,603 2,316 2,316 146 146 339,819 339,819 855,084 855,084 1,347,448 1,347,448 608,615 608,615 (37,847) (37,847) 776,680 776,680 1,347,448 1,347,448 37 37 NET CASH FLOWS FROM OPERATING ACTIVITIES 21(b) 383,520 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Interest received Borrowing costs paid Interest on lease liabilities Income taxes paid CASH FLOWS FROM INVESTING ACTIVITIES Dividends received from investment in associate Payment for trademarks Purchase of investments Payment for property, plant and equipment NET CASH FLOWS (USED IN) FROM INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Equity dividends paid Payment of lease liabilities Proceeds from borrowings Repayment of borrowings 1,620,975 (1,115,786) 1,313 (4,632) (6,676) (111,674) 12,227 (116) (16,510) (2,917) (7,316) (165,171) (137,180) - - 448,832 671 523,356 NET CASH FLOWS USED IN FINANCING ACTIVITIES (302,351) NET INCREASE IN CASH HELD 73,853 259,634 Cash at the beginning of the financial year Net foreign exchange difference CASH AT THE END OF THE FINANCIAL YEAR 21(a) The accompanying notes form an integral part of this Statement of Cash Flows. 1,344,202 (829,742) 2,436 (5,422) (11,080) (16,812) 483,582 14,235 (273) - (7,316) 6,646 (58,636) (150,958) 137,000 (158,000) (230,594) 190,255 (1,057) 448,832 38 Annual Report 2021STATEMENT OF CASH FLOWS Statement of Cash Flows FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 For the 53 weeks ended 31 July 2021 and the 52 weeks ended 25 July 2020 CONSOLIDATED NOTES 2021 $’000 2020 $’000 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Interest received Borrowing costs paid Interest on lease liabilities Income taxes paid 1,620,975 (1,115,786) 1,313 (4,632) (6,676) (111,674) NET CASH FLOWS FROM OPERATING ACTIVITIES 21(b) 383,520 CASH FLOWS FROM INVESTING ACTIVITIES Dividends received from investment in associate Payment for trademarks Purchase of investments Payment for property, plant and equipment NET CASH FLOWS (USED IN) FROM INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Equity dividends paid Payment of lease liabilities Proceeds from borrowings Repayment of borrowings 12,227 (116) (16,510) (2,917) (7,316) (165,171) (137,180) - - NET CASH FLOWS USED IN FINANCING ACTIVITIES (302,351) 1,344,202 (829,742) 2,436 (5,422) (11,080) (16,812) 483,582 14,235 (273) - (7,316) 6,646 (58,636) (150,958) 137,000 (158,000) (230,594) NET INCREASE IN CASH HELD 73,853 259,634 Cash at the beginning of the financial year Net foreign exchange difference CASH AT THE END OF THE FINANCIAL YEAR 21(a) 448,832 671 523,356 190,255 (1,057) 448,832 The accompanying notes form an integral part of this Statement of Cash Flows. Premier Investments Limited 38 38 0 0 0 ’ $ 0 0 0 ’ $ 0 0 0 ’ $ 8 4 4 , 7 4 3 , 1 0 8 6 , 6 7 7 ) 2 3 0 , 9 5 ( ) 4 2 0 , 3 ( 4 2 4 , 4 4 3 , 1 0 9 9 , 5 2 0 4 8 , 1 7 2 0 3 8 , 7 9 2 - ) 4 2 0 , 3 ( 6 5 6 , 3 7 7 0 4 8 , 1 7 2 0 4 8 , 1 7 2 - - 4 7 1 , 0 2 4 7 1 , 0 2 ) 2 3 0 , 9 5 ( 0 0 0 ’ $ 1 8 7 , 5 E V R E S E R - - 1 8 7 , 5 ) 0 8 9 , 2 ( ) 0 8 9 , 2 ( 6 5 8 , 1 - ) 5 0 2 , 1 1 1 ( ) 5 0 2 , 1 1 1 ( - - - - - 6 9 7 , 8 6 9 7 , 8 - - 9 3 5 0 9 , 2 3 5 , 1 1 9 2 , 4 3 9 ) 8 5 8 , 8 3 ( 1 0 8 , 2 7 7 3 , 4 6 8 2 , 9 4 3 , 1 3 5 7 , 7 3 1 ) 2 0 6 , 8 2 ( 1 5 1 , 9 0 1 - 9 2 5 , 1 5 7 3 5 7 , 7 3 1 3 5 7 , 7 3 1 ) 8 0 9 , 8 3 ( 7 3 3 , 7 - ) 4 2 1 , 0 2 ( ) 4 2 1 , 0 2 ( - ) 6 5 5 , 1 ( ) 6 5 5 , 1 ( - 3 0 5 , 2 ) 2 2 9 , 6 ( ) 2 2 9 , 6 ( 3 1 6 , 1 ) 2 0 6 , 2 1 1 ( 8 4 4 , 7 4 3 , 1 - 0 8 6 , 6 7 7 ) 2 0 6 , 2 1 1 ( - - - - - - ) 2 3 0 , 9 5 ( 1 8 7 , 5 ) 9 1 4 , 4 ( 0 0 0 ’ $ ) 9 1 4 , 4 ( 0 0 0 ’ $ 9 5 3 , 9 1 - - ) 9 1 4 , 4 ( 9 5 3 , 9 1 - - - - 6 5 8 , 1 5 1 2 , 1 2 6 4 7 , 7 1 - - - - 3 1 6 , 1 9 5 3 , 9 1 L A T O T I S T F O R P I D E N A T E R E V R E S E R E U L A V R A F I I N G E R O F Y C N E R R U C E G D E H W O L F H S A C E C N A M R O F R E P I N O T A L S N A R T E V R E S E R S T H G R I E V R E S E R 4 6 4 0 0 0 ’ $ - 4 6 4 - - - - - 4 6 4 4 6 4 - - - - - - - - - - 0 0 0 ’ $ 5 1 6 , 8 0 6 - 5 1 6 , 8 0 6 - - - - - 5 1 6 , 8 0 6 5 1 6 , 8 0 6 I L A T P A C I S T F O R P E V R E S E R I Y T U Q E I D E T U B R T N O C e g n a h c y c i l o p g n i t n u o c c a o t e u d t n e m t s u d A j ) d e t s u d A j ( 0 2 0 2 l y u J 6 2 t A d o i r e p e h t r o f t i f o r p t e N ) 0 2 t e o N ( e t i a c o s s a y b d o i r e p e h t r o f e m o c n i e v i s n e h e r p m o c l a t o T r i e h t n i s r e n w o h t i w s n o i t c a s n a r T ) s s o l ( e m o c n i i e v s n e h e r p m o c r e h t O d e u s s i s t h g i r e c n a m r o f r e P : s r e n w o s a y t i c a p a c ) l a n g i r i O ( 0 2 0 2 l y u J 6 2 t A l e b a y a p d n a i d a p s d n e d v D i i d o i r e p e h t r o f e m o c n i e v i s n e h e r p m o c l a t o T r i e h t n i s r e n w o h t i w s n o i t c a s n a r T d e u s s i s t h g i r e c n a m r o f r e P : s r e n w o s a y t i c a p a c 1 2 0 2 y l u J 1 3 t a s a e c n a l a B s s o l i e v s n e h e r p m o c r e h t O d o i r e p e h t r o f t i f o r p t e N 9 1 0 2 l y u J 8 2 t A l e b a y a p d n a i d a p s d n e d v D i i 4 6 4 5 1 6 , 8 0 6 0 2 0 2 y l u J 5 2 t a s a e c n a l a B y t i u q E n i s e g n a h C f o t n e m e t a t S s h t i f o t r a p l a r g e t n i n a m r o f s e t o n i g n y n a p m o c c a e h T I D E T A D L O S N O C 0 2 0 2 y l u J 5 2 d e d n e s k e e w 2 5 e h t d n a 1 2 0 2 l y u J 1 3 d e d n e s k e e w 3 5 e h t r o F I i 0 2 0 2 Y L U J y t i u q E n 5 2 D E D N E s S e K E E g W Y 2 n 5 T E a H U T Q h D E N A C N 1 2 0 S 2 f E Y o L G U N J 1 A t 3 H D n E C D e N F E O m S K T E N E e W E M 3 t 5 E a E H T T A t R T S O S F I NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 1 GENERAL INFORMATION The financial report contains the consolidated financial statements of the consolidated entity, comprising Premier Investments Limited (the ‘parent entity’) and its wholly owned subsidiaries (‘the Group’) for the 53 weeks ended 31 July 2021. The financial report was authorised for issue by the Directors on 1 October 2021. Premier Investments Limited is a for profit company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. The nature of the operations and principal activities of the Group are described in the Directors’ Report. The notes to the financial statements have been organised into the following sections: (i) Other significant group accounting policies: Summarises the basis of financial statement preparation and other accounting policies adopted in the preparation of these consolidated financial statements. Specific accounting policies are disclosed in the note to which they relate. (ii) Group performance: Contains the notes that focus on the results and performance of the Group. (iii) Operating assets and liabilities: Provides information on the Group’s assets and liabilities used to (iv) Capital invested: Provides information on the capital invested which allows the Group to generate its generate the Group’s performance. performance. (v) Capital structure and risk management: Provides information on the Group’s capital structure and summarises the Group’s Risk Management policies. (vi) Group structure: Contains information in relation to the Group’s structure and related parties. (vii) Other disclosures: Summarises other disclosures which are required in order to comply with Australian Accounting Standards and other authoritative pronouncements. 2 OTHER SIGNIFICANT GROUP ACCOUNTING POLICIES The consolidated financial report is prepared for the 53 weeks from 26 July 2020 to 31 July 2021. Below is a summary of significant group accounting policies applicable to the Group which have not been disclosed elsewhere. The notes to the financial statements, which contain detailed accounting policy notes, should be read in conjunction with the below Group accounting policies. (a) BASIS OF FINANCIAL REPORT PREPARATION The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The financial report has been prepared on a historical cost basis, except for other financial instruments and listed equity investments at fair value, which have been measured at fair value as explained in the relevant accounting policies throughout the notes. The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($’000), unless otherwise stated, as the Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, dated 24 March 2016. (b) STATEMENT OF COMPLIANCE The financial report complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). 39 40 Annual Report 2021 Notes to the Financial Statements NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 For the 53 weeks ended 31 July 2021 and the 52 weeks ended 25 July 2020 1 GENERAL INFORMATION The financial report contains the consolidated financial statements of the consolidated entity, comprising Premier Investments Limited (the ‘parent entity’) and its wholly owned subsidiaries (‘the Group’) for the 53 weeks ended 31 July 2021. The financial report was authorised for issue by the Directors on 1 October 2021. Premier Investments Limited is a for profit company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. The nature of the operations and principal activities of the Group are described in the Directors’ Report. The notes to the financial statements have been organised into the following sections: (i) Other significant group accounting policies: Summarises the basis of financial statement preparation and other accounting policies adopted in the preparation of these consolidated financial statements. Specific accounting policies are disclosed in the note to which they relate. (ii) Group performance: Contains the notes that focus on the results and performance of the Group. (iii) Operating assets and liabilities: Provides information on the Group’s assets and liabilities used to generate the Group’s performance. (iv) Capital invested: Provides information on the capital invested which allows the Group to generate its performance. (v) Capital structure and risk management: Provides information on the Group’s capital structure and summarises the Group’s Risk Management policies. (vi) Group structure: Contains information in relation to the Group’s structure and related parties. (vii) Other disclosures: Summarises other disclosures which are required in order to comply with Australian Accounting Standards and other authoritative pronouncements. 2 OTHER SIGNIFICANT GROUP ACCOUNTING POLICIES The consolidated financial report is prepared for the 53 weeks from 26 July 2020 to 31 July 2021. Below is a summary of significant group accounting policies applicable to the Group which have not been disclosed elsewhere. The notes to the financial statements, which contain detailed accounting policy notes, should be read in conjunction with the below Group accounting policies. (a) BASIS OF FINANCIAL REPORT PREPARATION The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The financial report has been prepared on a historical cost basis, except for other financial instruments and listed equity investments at fair value, which have been measured at fair value as explained in the relevant accounting policies throughout the notes. The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($’000), unless otherwise stated, as the Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, dated 24 March 2016. (b) STATEMENT OF COMPLIANCE The financial report complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Premier Investments Limited 40 40 Notes to the Financial Statements NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) For the 53 weeks ended 31 July 2021 and the 52 weeks ended 25 July 2020 (continued) 2 OTHER SIGNIFICANT GROUP ACCOUNTING POLICIES (CONTINUED) (c) BASIS OF CONSOLIDATION The consolidated financial statements are those of the consolidated entity, comprising Premier Investments Limited and its wholly owned subsidiaries as at the end of each financial year. A list of the Group’s subsidiaries is included in note 27. Subsidiaries are entities that are controlled by the Group. Control is achieved when the Group has: - - - Power over the investee; Exposure, or rights, to variable returns from its involvement with the investee, and The ability to use its power over the investee to affect its returns. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. Investments in subsidiaries held by Premier Investments Limited are accounted for at cost in the separate financial statements of the parent entity less any impairment losses. Dividends received from subsidiaries are recorded as a component of other revenue in the separate statement of comprehensive income of the parent entity, and do not impact the recorded cost of the investment. The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. (d) COMPARATIVE AMOUNTS The current reporting period, 26 July 2020 to 31 July 2021, represents 53 weeks and the comparative reporting period is from 28 July 2019 to 25 July 2020 which represents 52 weeks. From time to time, management may change prior year comparatives to reflect classifications applied in the current year. (e) SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS The preparation of the Group’s consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements and estimates on historical experience and on other various factors it believes to be reasonable under the circumstances, the results of which form the basis of the carrying values of assets and liabilities that are not readily apparent from other sources. Management has identified certain critical accounting policies for which significant judgements, estimates and assumptions are required. These key judgements, estimates and assumptions have been disclosed as part of the relevant note to the financial statements. Actual results may differ from those estimated under different assumptions and conditions and may materially affect financial results or the financial position reported in future periods. The Group’s operations continued to be impacted during the 2021 financial year as a direct result of the ongoing COVID-19 pandemic. In particular, the Group experienced a disruption to trading conditions, mainly due to widespread temporary retail store closures. In respect of the financial statements for the 2021 financial year, the impact of COVID-19 is particularly relevant to estimates of future performance. This, in turn, has an impact on areas of impairment of assets as well as the estimation of the expected lease term of retail store leases in holdover. The extent of the impact of the pandemic on future trading performance is unclear, and estimations in this environment entail a great degree of uncertainty. In response to these estimation uncertainties, key assumptions have been critically assessed and incorporate the possibility of a level of continued COVID-19 restrictions and regulations, along with the Group’s proposed responses in these circumstances. Assumptions have been based on management’s best estimates and information available in respect of conditions that existed at the reporting date, amidst this global health crisis. NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) 2 OTHER SIGNIFICANT GROUP ACCOUNTING POLICIES (CONTINUED) (f) OFFSETTING OF FINANCIAL INSTRUMENTS Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously. (g) CURRENT VERSUS NON-CURRENT CLASSIFICATION The Group presents assets and liabilities in the statement of financial position based on current versus non- current classification. An asset is current when it is: Expected to be realised or intended to be sold in the normal operating cycle, or primarily held for the purpose of trading, or is expected to be realised within twelve months after the reporting period, or; Cash and cash equivalents unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. All other assets are classified as non-current. A liability is current when it is: Expected to be settled in the normal operating cycle, or primarily held for the purpose of trading, or is due to be settled within twelve months after the reporting period, or; There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. All other liabilities are classified as non-current. Deferred tax assets and liabilities are classified as non- current. dollars. (h) FOREIGN CURRENCY TRANSLATION 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’). Both the functional and presentation currency of the parent entity and its Australian subsidiaries is Australian Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting date. All exchange differences are taken to profit or loss in the statement of comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. As at the reporting date the assets and liabilities of the overseas subsidiaries are translated into the presentation currency of the parent entity at the rate of exchange ruling at the reporting date and the statements of comprehensive income are translated at the weighted average exchange rates for the period. Exchange variations resulting from the translations are recognised in the foreign currency translation reserve in equity. (i) GOODS AND SERVICES TAX (GST), INCLUDING OTHER VALUE-ADDED TAXES Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST) except: When the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. - - - - - - 41 42 41 Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) 2 OTHER SIGNIFICANT GROUP ACCOUNTING POLICIES (CONTINUED) (f) OFFSETTING OF FINANCIAL INSTRUMENTS Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously. (g) CURRENT VERSUS NON-CURRENT CLASSIFICATION The Group presents assets and liabilities in the statement of financial position based on current versus non- current classification. An asset is current when it is: - - Expected to be realised or intended to be sold in the normal operating cycle, or primarily held for the purpose of trading, or is expected to be realised within twelve months after the reporting period, or; Cash and cash equivalents unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. All other assets are classified as non-current. A liability is current when it is: - - Expected to be settled in the normal operating cycle, or primarily held for the purpose of trading, or is due to be settled within twelve months after the reporting period, or; There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. All other liabilities are classified as non-current. Deferred tax assets and liabilities are classified as non- current. (h) FOREIGN CURRENCY TRANSLATION 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’). Both the functional and presentation currency of the parent entity and its Australian subsidiaries is Australian dollars. Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting date. All exchange differences are taken to profit or loss in the statement of comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. As at the reporting date the assets and liabilities of the overseas subsidiaries are translated into the presentation currency of the parent entity at the rate of exchange ruling at the reporting date and the statements of comprehensive income are translated at the weighted average exchange rates for the period. Exchange variations resulting from the translations are recognised in the foreign currency translation reserve in equity. (i) GOODS AND SERVICES TAX (GST), INCLUDING OTHER VALUE-ADDED TAXES Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST) except: - - When the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Premier Investments Limited 42 42 NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) 2 OTHER SIGNIFICANT GROUP ACCOUNTING POLICIES (CONTINUED) (j) NEW ACCOUNTING STANDARDS AND INTERPRETATIONS (CONTINUED) Changes in accounting policies, disclosures, standards and interpretations (continued) Where costs incurred to configure or customise do not result in the recognition of an intangible software asset, then those costs that provide the Group with a distinct service (in addition to the SaaS access) are recognised as expenses when the supplier provides the services. When such costs incurred do not provide a distinct service, the costs are recognised as expenses over the duration of the SaaS contract. This change in accounting policy in relation to configuration and customisation costs incurred in implementing SaaS arrangements has not had a material impact on the Group. Accounting Standards and Interpretations issued but not yet effective Recently issued or amended Australian Accounting Standards and Interpretations that have been identified as those which may be relevant to the Group in future reporting periods, but are not yet effective, have not been early adopted by the Group for the reporting period ended 31 July 2021. The Group does not anticipate that the below amended standards and interpretations will have a material impact on the Group: - Amendments to AASB 101: Classification of Liabilities as Current or Non-current; - Reference to the Conceptual Framework – Amendments to AASB 3; - Property, Plant and Equipment: Proceeds before Intended Use – Amendments to AASB 116; and - Onerous Contracts – Costs of Fulfilling a Contract – Amendments to AASB 137 Notes to the Financial Statements NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) For the 53 weeks ended 31 July 2021 and the 52 weeks ended 25 July 2020 (continued) 2 OTHER SIGNIFICANT GROUP ACCOUNTING POLICIES (CONTINUED) (i) GOODS AND SERVICES TAX (GST), INCLUDING OTHER VALUE-ADDED TAXES (continued) Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. (j) NEW ACCOUNTING STANDARDS AND INTERPRETATIONS Changes in accounting policies, disclosures, standards and interpretations The accounting policies adopted are consistent with those of the previous financial year except for new and amended Australian Accounting Standards and AASB Interpretations relevant to the Group and its operations that are effective for the current annual reporting period, described below. These new and amended Accounting Standards did not have a material impact on the consolidated financial report of the Group. Amendments to AASB 3: Definition of a Business The amendment to AASB 3 Business Combinations clarifies that to be considered a business, an integrated set of activities and assets must include, at a minimum, an input and a substantive process that, together, significantly contribute to the ability to create output. Furthermore, it clarifies that a business can exist without including all of the inputs and processes needed to create outputs. Amendments to AASB 7, AASB 9 and AASB 139 Interest Rate Benchmark Reform The amendments to AASB 9 and AASB 139 Financial Instruments: Recognition and Measurement provide a number of reliefs, which apply to all hedging relationships that are directly affected by interest rate benchmark reform. A hedging relationship is affected if the reform gives rise to uncertainty about the timing and/or amount of benchmark-based cash flows of the hedged item or the hedging instrument. Amendments to AASB 101 and AASB 108 Definition of Material The amendments provide a new definition of material that states, “information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.” The amendments clarify that materiality will depend on the nature or magnitude of information, either individually or in combination with other information, in the context of the financial statements. A misstatement of information is material if it could reasonably be expected to influence decisions made by the primary users. IFRIC agenda decision – Configuration or Customisation Costs in a Cloud Computing Arrangement In April 2021, the IFRS Interpretations Committee (IFRIC) published an agenda decision for configuration and customisation costs incurred related to a Software as a Service (SaaS) arrangement. SaaS arrangements are arrangements in which the Group does not currently control the underlying software used in the arrangement. Where costs incurred to configure or customise SaaS arrangements result in the creation of a resource which is identifiable, and where the Group has the power to obtain the future economic benefits flowing from the underlying resource and to restrict the access of others to those benefits, such costs are recognised as a separate intangible software asset and amortised over the useful life of the software on a straight-line basis. The amortisation is reviewed at least at the end of each reporting period and any changes are treated as changes in accounting estimates. 43 43 44 Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) 2 OTHER SIGNIFICANT GROUP ACCOUNTING POLICIES (CONTINUED) (j) NEW ACCOUNTING STANDARDS AND INTERPRETATIONS (CONTINUED) Changes in accounting policies, disclosures, standards and interpretations (continued) Where costs incurred to configure or customise do not result in the recognition of an intangible software asset, then those costs that provide the Group with a distinct service (in addition to the SaaS access) are recognised as expenses when the supplier provides the services. When such costs incurred do not provide a distinct service, the costs are recognised as expenses over the duration of the SaaS contract. This change in accounting policy in relation to configuration and customisation costs incurred in implementing SaaS arrangements has not had a material impact on the Group. Accounting Standards and Interpretations issued but not yet effective Recently issued or amended Australian Accounting Standards and Interpretations that have been identified as those which may be relevant to the Group in future reporting periods, but are not yet effective, have not been early adopted by the Group for the reporting period ended 31 July 2021. The Group does not anticipate that the below amended standards and interpretations will have a material impact on the Group: - Amendments to AASB 101: Classification of Liabilities as Current or Non-current; - Reference to the Conceptual Framework – Amendments to AASB 3; - Property, Plant and Equipment: Proceeds before Intended Use – Amendments to AASB 116; and - Onerous Contracts – Costs of Fulfilling a Contract – Amendments to AASB 137 Premier Investments Limited 44 44 NOTES TO THE FINANCIAL STATEMENTS Notes to the Financial Statements FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) For the 53 weeks ended 31 July 2021 and the 52 weeks ended 25 July 2020 (continued) GROUP PERFORMANCE 3 OPERATING SEGMENTS Identification of operating segments The Group determines and presents operating segments based on the information that is internally provided and used by the chief operating decision maker in assessing the performance of the Group and in determining the allocation of resources. An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. The operating segments are identified by management based on the nature of the business conducted, and for which discrete financial information is available and reported to the chief operating decision maker on at least a monthly basis. Segment results that are reported to the chief operating decision maker include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly of corporate assets, head office expenses and income tax assets and liabilities. Reportable Segments Retail The retail segment represents the financial performance of a number of speciality retail fashion chains. Investment The investment segment represents investments in securities for both long and short term gains, dividend income and interest. Accounting policies The key accounting policies used by the Group in reporting segments internally are the same as those contained in these financial statements. Income tax expense Income tax expense is calculated based on the segment operating net profit using the Group’s effective income tax rate. It is the Group’s policy that if items of revenue and expense are not allocated to operating segments then any associated assets and liabilities are also not allocated to the segments. This is to avoid asymmetrical allocations within segments which management believe would be inconsistent. Segment capital expenditure Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, and intangible assets other than goodwill. The table on the following page presents revenue and profit information for operating segments for the periods ended 31 July 2021 and 25 July 2020. NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) GROUP PERFORMANCE 3 OPERATING SEGMENTS (CONTINUED) (A) OPERATING SEGMENTS RETAIL INVESTMENT ELIMINATION CONSOLIDATED 2021 $’000 2020 $’000 2021 $’000 2020 $’000 2021 $’000 2020 $’000 2021 $’000 2020 $’000 REVENUE AND OTHER INCOME Revenue from contracts Interest revenue Other revenue Other income Total revenue and other with customers 1,443,174 1,216,316 - - - 1,443,174 1,216,316 392 240 159 147 756 2,131 1,148 2,290 165,034 53,027 (165,000) (53,000) 274 174 4,946 14,296 9,117 15,886 14,063 30,182 income 1,448,752 1,230,918 174,907 71,044 (165,000) (53,000) 1,458,659 1,248,962 Total revenue per the statement of comprehensive income 1,458,659 1,248,962 RESULTS Depreciation and amortisation Impairment – property, plant and equipment Depreciation – right-of- Impairment – right-of- use asset Interest expense Share of profit of associate Profit before income tax expense Income tax expense use asset 155,552 175,932 (3,251) (3,251) 152,301 172,681 24,452 42,337 1,505 1,368 25,957 43,705 31,254 2,420 - - - - - - - - - 8,757 14,057 2,931 2,879 (114) (220) 11,574 16,716 - 23,897 17,696 - 23,897 17,696 352,112 165,776 192,497 82,343 (165,026) (52,920) 379,583 195,199 - - 31,254 2,420 Net profit after tax per the statement of comprehensive income (107,743) (57,446) 271,840 137,753 - - - - - - - - - - - - RETAIL INVESTMENT ELIMINATION CONSOLIDATED 2021 $’000 2020 $’000 2021 $’000 2020 $’000 2021 $’000 2020 $’000 2021 $’000 2020 $’000 ASSETS AND LIABILITIES Segment assets 1,006,557 970,254 1,420,029 1,381,509 (145,364) (149,231) 2,281,222 2,202,532 Segment liabilities 622,906 733,215 187,845 242,195 (62,434) (120,326) 748,317 855,084 Capital expenditure 8,579 19,024 - - - - 8,579 19,024 45 45 46 Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) GROUP PERFORMANCE 3 OPERATING SEGMENTS (CONTINUED) (A) OPERATING SEGMENTS RETAIL INVESTMENT ELIMINATION CONSOLIDATED 2021 $’000 2020 $’000 2021 $’000 2020 $’000 2021 $’000 2020 $’000 2021 $’000 2020 $’000 REVENUE AND OTHER INCOME Revenue from contracts with customers 1,443,174 1,216,316 - - Interest revenue Other revenue Other income Total revenue and other income 392 240 159 147 756 2,131 165,034 53,027 (165,000) (53,000) 274 174 - - - 1,443,174 1,216,316 - 1,148 2,290 4,946 14,296 9,117 15,886 - - 14,063 30,182 1,448,752 1,230,918 174,907 71,044 (165,000) (53,000) 1,458,659 1,248,962 Total revenue per the statement of comprehensive income 1,458,659 1,248,962 RESULTS Depreciation and amortisation Impairment – property, plant and equipment Depreciation – right-of- Impairment – right-of- use asset Interest expense Share of profit of associate Profit before income tax expense Income tax expense use asset 155,552 175,932 24,452 42,337 1,505 1,368 - 31,254 - 2,420 - - - - 25,957 43,705 - 31,254 (3,251) (3,251) 152,301 172,681 - - - 2,420 - - - - - - 8,757 14,057 2,931 2,879 (114) (220) 11,574 16,716 - - 23,897 17,696 - - 23,897 17,696 352,112 165,776 192,497 82,343 (165,026) (52,920) 379,583 195,199 Net profit after tax per the statement of comprehensive income (107,743) (57,446) 271,840 137,753 RETAIL INVESTMENT ELIMINATION CONSOLIDATED 2021 $’000 2020 $’000 2021 $’000 2020 $’000 2021 $’000 2020 $’000 2021 $’000 2020 $’000 ASSETS AND LIABILITIES Segment assets 1,006,557 970,254 1,420,029 1,381,509 (145,364) (149,231) 2,281,222 2,202,532 Segment liabilities 622,906 733,215 187,845 242,195 (62,434) (120,326) 748,317 855,084 Capital expenditure 8,579 19,024 - - - - 8,579 19,024 Premier Investments Limited 46 46 NOTES TO THE FINANCIAL STATEMENTS Notes to the Financial Statements FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) For the 53 weeks ended 31 July 2021 and the 52 weeks ended 25 July 2020 (continued) GROUP PERFORMANCE 3 OPERATING SEGMENTS (CONTINUED) (B) GEOGRAPHIC AREAS OF OPERATION AUSTRALIA NEW ZEALAND ASIA EUROPE ELIMINATION CONSOLIDATED REVENUE 2021 $’000 2021 $’000 2021 $’000 2021 $’000 2021 $’000 2021 $’000 REVENUE AND OTHER INCOME Revenue from contracts with customers 1,171,833 160,179 34,152 77,010 - 1,443,174 Other revenue and income 18,170 3 3,962 4,622 (11,272) 15,485 Total revenue and other income 1,190,003 160,182 38,114 81,632 (11,272) 1,458,659 Segment non-current assets 1,403,407 30,990 13,483 34,512 39,815 1,522,217 Capital expenditure 7,594 878 25 82 - 8,579 AUSTRALIA NEW ZEALAND ASIA EUROPE ELIMINATION CONSOLIDATED 2020 $’000 2020 $’000 2020 $’000 2020 $’000 2020 $’000 2020 $’000 REVENUE AND OTHER INCOME Revenue from contracts with customers 929,747 126,507 Other revenue and income 49,250 6 Total revenue and other 61,709 14,594 98,353 - 1,216,316 296 (31,500) 32,646 income 978,997 126,513 76,303 98,649 (31,500) 1,248,962 Segment non-current assets 1,420,303 33,522 17,767 47,281 37,386 1,556,259 Capital expenditure 15,633 2,221 1,139 31 - 19,024 NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) Revenue from contracts with customers 1,443,174 1,216,316 (Disaggregated revenue from contracts with customers is presented in note 3B, Operating Segments) GROUP PERFORMANCE 4 REVENUE AND OTHER INCOME OTHER REVENUE Sundry revenue Interest received TOTAL OTHER REVENUE TOTAL REVENUE OTHER INCOME Net gain from settlement of cash flow hedges Gain on investment in associate resulting from share issue United Kingdom COVID-19 lockdown grants Other TOTAL OTHER INCOME TOTAL REVENUE AND OTHER INCOME REVENUE RECOGNITION ACCOUNTING POLICY CONSOLIDATED 2021 $’000 2020 $’000 1,444,596 1,218,780 274 1,148 1,422 - 9,117 4,622 324 14,063 1,458,659 174 2,290 2,464 13,207 15,886 - 1,089 30,182 1,248,962 Revenue recognition occurs at the point in time when control of the goods is transferred to the customer, generally at the point of sale or on delivery of the goods. The Group estimates the value of expected customer returns that will arise as a result of the Group’s returns policy, which entitles the customer to a refund of returned unused products within the specified timeframe for the respective brands. At the same time, the Group recognises a right of return asset, being the former carrying amount of the inventory, less any expected costs to recover the goods the Group expects to be returned by customers as a result of the returns policy. The Group operates certain loyalty programmes, which allow customers to accumulate points when products are purchased, and which can be redeemed for free or discounted product once a minimum number of points have been accumulated. Loyalty points give rise to a separate performance obligation providing a material right to the customer, therefore a portion of the transaction price is allocated to the loyalty programme based on the relative stand-alone selling prices. The Group recognises a contract liability upon the sale of gift cards and recognises revenue when the customer redeems the gift card, and the Group fulfils its performance obligation. The Group also recognises revenue on the portion of unredeemed gift cards for which redemption is unlikely, known as gift card breakage. Gift card breakage is estimated and recognised as revenue in proportion to the pattern of rights exercised by customers. On expiry of the gift card, any unused funds are recognised in full as breakage. Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. 47 48 47 Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) GROUP PERFORMANCE 4 REVENUE AND OTHER INCOME REVENUE CONSOLIDATED 2021 $’000 2020 $’000 Revenue from contracts with customers 1,443,174 1,216,316 (Disaggregated revenue from contracts with customers is presented in note 3B, Operating Segments) OTHER REVENUE Sundry revenue Interest received TOTAL OTHER REVENUE TOTAL REVENUE OTHER INCOME Net gain from settlement of cash flow hedges Gain on investment in associate resulting from share issue United Kingdom COVID-19 lockdown grants Other TOTAL OTHER INCOME TOTAL REVENUE AND OTHER INCOME REVENUE RECOGNITION ACCOUNTING POLICY 274 1,148 1,422 174 2,290 2,464 1,444,596 1,218,780 - 9,117 4,622 324 14,063 1,458,659 13,207 15,886 - 1,089 30,182 1,248,962 Revenue recognition occurs at the point in time when control of the goods is transferred to the customer, generally at the point of sale or on delivery of the goods. The Group estimates the value of expected customer returns that will arise as a result of the Group’s returns policy, which entitles the customer to a refund of returned unused products within the specified timeframe for the respective brands. At the same time, the Group recognises a right of return asset, being the former carrying amount of the inventory, less any expected costs to recover the goods the Group expects to be returned by customers as a result of the returns policy. The Group operates certain loyalty programmes, which allow customers to accumulate points when products are purchased, and which can be redeemed for free or discounted product once a minimum number of points have been accumulated. Loyalty points give rise to a separate performance obligation providing a material right to the customer, therefore a portion of the transaction price is allocated to the loyalty programme based on the relative stand-alone selling prices. The Group recognises a contract liability upon the sale of gift cards and recognises revenue when the customer redeems the gift card, and the Group fulfils its performance obligation. The Group also recognises revenue on the portion of unredeemed gift cards for which redemption is unlikely, known as gift card breakage. Gift card breakage is estimated and recognised as revenue in proportion to the pattern of rights exercised by customers. On expiry of the gift card, any unused funds are recognised in full as breakage. Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Premier Investments Limited 48 48 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS Notes to the Financial Statements FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) For the 53 weeks ended 31 July 2021 and the 52 weeks ended 25 July 2020 (continued) GROUP PERFORMANCE GROUP PERFORMANCE GROUP PERFORMANCE 5 EXPENSES (CONTINUED) CONSOLIDATED CONSOLIDATED EMPLOYEE EXPENSES (CONTINUED) NOTES NOTES 2021 2021 $’000 $’000 2020 2020 $’000 $’000 NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) 5 EXPENSES 5 EXPENSES LEASE RENTAL (BENEFITS) EXPENSES LEASE RENTAL (BENEFITS) EXPENSES Variable lease expenses Variable lease expenses Other lease expenses Other lease expenses COVID-19 related rent concessions COVID-19 related rent concessions Other Australia and New Zealand holdover rent concessions Other Australia and New Zealand holdover rent concessions Other Other NET LEASE RENTAL EXPENSES NET LEASE RENTAL EXPENSES DEPRECIATION, AMORTISATION AND IMPAIRMENT OF DEPRECIATION, AMORTISATION AND IMPAIRMENT OF NON-CURRENT ASSETS NON-CURRENT ASSETS Depreciation of property, plant and equipment Depreciation of property, plant and equipment Depreciation of right-of-use assets Depreciation of right-of-use assets Impairment of right-of-use assets Impairment of right-of-use assets Impairment of property, plant and equipment Impairment of property, plant and equipment Amortisation of leasehold premiums Amortisation of leasehold premiums TOTAL DEPRECIATION, AMORTISATION AND TOTAL DEPRECIATION, AMORTISATION AND IMPAIRMENT OF NON-CURRENT ASSETS IMPAIRMENT OF NON-CURRENT ASSETS 17 17 12 12 12 12 17 17 18 18 FINANCE COSTS FINANCE COSTS Interest on lease liabilities Interest on lease liabilities Interest on bank loans and overdraft Interest on bank loans and overdraft TOTAL FINANCE COSTS TOTAL FINANCE COSTS OTHER EXPENSES INCLUDE: OTHER EXPENSES INCLUDE: 7,501 7,501 15,986 15,986 (19,521) (19,521) (9,960) (9,960) (1,550) (1,550) (7,544) (7,544) 25,957 25,957 152,301 152,301 - - - - - - 4,135 4,135 28,410 28,410 (15,013) (15,013) - - - - 17,532 17,532 43,682 43,682 172,681 172,681 2,420 2,420 31,254 31,254 23 23 178,258 178,258 250,060 250,060 6,676 6,676 4,898 4,898 11,574 11,574 11,080 11,080 5,636 5,636 16,716 16,716 Net loss on disposal of property, plant and equipment Net loss on disposal of property, plant and equipment 5 5 982 982 EMPLOYEE EXPENSES EMPLOYEE EXPENSES Premier recognises that the Australian Federal Government’s JobKeeper initiative was fundamental to keeping Premier recognises that the Australian Federal Government’s JobKeeper initiative was fundamental to keeping employees and employers connected during the once in a century health crisis. On 3 May 2021, the Group employees and employers connected during the once in a century health crisis. On 3 May 2021, the Group announced that it will voluntarily return the $15.6 million FY21 net JobKeeper wage subsidy benefit that it received announced that it will voluntarily return the $15.6 million FY21 net JobKeeper wage subsidy benefit that it received under the scheme rules, to the Australian Taxation Office. As a result, the Group recorded no net JobKeeper benefit under the scheme rules, to the Australian Taxation Office. As a result, the Group recorded no net JobKeeper benefit in its FY21 statement of comprehensive income. The Group was not eligible for the second phase of the Australian in its FY21 statement of comprehensive income. The Group was not eligible for the second phase of the Australian Government JobKeeper scheme from 28 September 2020 onwards. The Group continued to pay its full and part Government JobKeeper scheme from 28 September 2020 onwards. The Group continued to pay its full and part time Australian team members their contracted hours whilst these teams were unable to work during various state time Australian team members their contracted hours whilst these teams were unable to work during various state government mandated temporary store closures from October 2020 through to July 2021, when the Federal government mandated temporary store closures from October 2020 through to July 2021, when the Federal Government made available its temporary COVID disaster payment scheme directly to impacted team members. Government made available its temporary COVID disaster payment scheme directly to impacted team members. For the 52 weeks ended 25 July 2020, the financial impact of COVID-19 was most severe for the period March 2020 For the 52 weeks ended 25 July 2020, the financial impact of COVID-19 was most severe for the period March 2020 to May 2020, when global sales were down approximately $131.1 million on the prior comparable period, with retail to May 2020, when global sales were down approximately $131.1 million on the prior comparable period, with retail store sales down 78.4%. As a result of this devastating impact on the Group’s FY20 global sales, the Group store sales down 78.4%. As a result of this devastating impact on the Group’s FY20 global sales, the Group became eligible for $68.7 million of global wage subsidies across seven countries. became eligible for $68.7 million of global wage subsidies across seven countries. 49 49 49 Of the total amount, $35.5 million was passed directly through to eligible employees unable to work. In addition, in Australia, many of the Group’s casual and part time work force received subsidy payments in excess of their normal working arrangements in accordance with the rules of the government scheme. The funds received were used to support standing up the Group’s employees as stores gradually re-opened under COVID-19 safe plans. The Government wage subsidies have been recorded as a reduction in employee expenses in the statement of comprehensive income. CONSOLIDATED 2021 $’000 2020 $’000 106,275 475 68,047 (479) 6 INCOME TAX The major components of income tax expense are: (a) INCOME TAX RECOGNISED IN PROFIT OR LOSS CURRENT INCOME TAX Current income tax charge DEFERRED INCOME TAX Adjustment in respect of current income tax of previous years Relating to origination and reversal of temporary differences 993 (10,122) INCOME TAX EXPENSE REPORTED IN THE STATEMENT OF COMPREHENSIVE INCOME 107,743 57,446 (b) STATEMENT OF CHANGES IN EQUITY Deferred income tax related to items credited directly to equity: Net deferred income tax on movements on cash-flow hedges 3,772 (2,964) Net deferred income tax on unrealised gain (loss) on listed equity investment at fair value INCOME TAX EXPENSE (BENEFIT) REPORTED IN EQUITY 8,646 12,418 (8,623) (11,587) (c) RECONCILIATION BETWEEN TAX EXPENSE AND THE ACCOUNTING PROFIT BEFORE TAX MULTIPLIED BY THE GROUP’S APPLICABLE AUSTRALIAN INCOME TAX RATE Accounting profit before income tax At the Parent Entity’s statutory income tax rate of 30% (2020: 30%) Adjustment in respect of current income tax of previous years Expenditure not allowable for income tax purposes Effect of different rates of tax on overseas income Effect of tax losses not recognised Income not assessable for tax purposes Other AGGREGATE INCOME TAX EXPENSE 379,583 195,199 113,875 475 697 (1,345) - (5,791) (168) 107,743 58,560 (479) 544 2,203 693 (4,175) 100 57,446 50 Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) GROUP PERFORMANCE 5 EXPENSES (CONTINUED) EMPLOYEE EXPENSES (CONTINUED) Of the total amount, $35.5 million was passed directly through to eligible employees unable to work. In addition, in Australia, many of the Group’s casual and part time work force received subsidy payments in excess of their normal working arrangements in accordance with the rules of the government scheme. The funds received were used to support standing up the Group’s employees as stores gradually re-opened under COVID-19 safe plans. The Government wage subsidies have been recorded as a reduction in employee expenses in the statement of comprehensive income. 6 INCOME TAX The major components of income tax expense are: (a) INCOME TAX RECOGNISED IN PROFIT OR LOSS CURRENT INCOME TAX Current income tax charge Adjustment in respect of current income tax of previous years DEFERRED INCOME TAX CONSOLIDATED 2021 $’000 2020 $’000 106,275 475 68,047 (479) Relating to origination and reversal of temporary differences 993 (10,122) INCOME TAX EXPENSE REPORTED IN THE STATEMENT OF COMPREHENSIVE INCOME 107,743 57,446 (b) STATEMENT OF CHANGES IN EQUITY Deferred income tax related to items credited directly to equity: Net deferred income tax on movements on cash-flow hedges 3,772 (2,964) Net deferred income tax on unrealised gain (loss) on listed equity investment at fair value INCOME TAX EXPENSE (BENEFIT) REPORTED IN EQUITY 8,646 12,418 (8,623) (11,587) (c) RECONCILIATION BETWEEN TAX EXPENSE AND THE ACCOUNTING PROFIT BEFORE TAX MULTIPLIED BY THE GROUP’S APPLICABLE AUSTRALIAN INCOME TAX RATE Accounting profit before income tax 379,583 195,199 At the Parent Entity’s statutory income tax rate of 30% (2020: 30%) Adjustment in respect of current income tax of previous years Expenditure not allowable for income tax purposes Effect of different rates of tax on overseas income Effect of tax losses not recognised Income not assessable for tax purposes Other AGGREGATE INCOME TAX EXPENSE 113,875 475 697 (1,345) - (5,791) (168) 107,743 58,560 (479) 544 2,203 693 (4,175) 100 57,446 Premier Investments Limited 50 50 NOTES TO THE FINANCIAL STATEMENTS Notes to the Financial Statements FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) For the 53 weeks ended 31 July 2021 and the 52 weeks ended 25 July 2020 (continued) GROUP PERFORMANCE CONSOLIDATED 2021 $’000 2020 $’000 6 INCOME TAX (CONTINUED) (d) RECOGNISED DEFERRED TAX ASSETS AND LIABILITIES DEFERRED TAX RELATES TO THE FOLLOWING: Foreign currency balances Potential capital gains tax on financial investments Deferred gains and losses on financial instruments Inventory provisions Lease arrangements Employee provisions Other receivables and prepayments Property, plant and equipment Impairment of store plant and equipment Other provisions Other 192 (42,516) (1,877) 1,748 8,153 9,400 - 3,546 - 2,769 5,760 NET DEFERRED TAX (LIABILITIES) ASSETS (12,825) REFLECTED IN THE STATEMENT OF FINANCIAL POSITION AS FOLLOWS: Deferred tax assets Deferred tax liabilities NET DEFERRED TAX (LIABILITIES) ASSETS INCOME TAX ACCOUNTING POLICY 55,494 (68,319) (12,825) 1,162 (30,654) 1,910 878 11,001 7,519 (1,679) (3,195) 6,822 3,461 4,272 1,497 66,924 (65,427) 1,497 Income tax expense comprises current tax (amounts payable or receivable within 12 months) and deferred tax (amounts payable or receivable after 12 months). Tax expense is recognised in profit or loss, unless it relates to items that have been recognised in equity as part of other comprehensive income or directly in equity. In this instance, the related tax expense is also recognised in other comprehensive income or directly in equity. Current income tax Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the tax authorities based on the current and prior period taxable income. The tax rates and tax laws used to calculate tax amounts are those that are enacted or substantially enacted by the reporting date. Deferred income tax Deferred income tax is recognised on taxable temporary differences at the reporting date between the tax base of the assets and liabilities and their carrying amounts for financial reporting purposes based on the expected manner of recovery of the carrying value of an asset or liability. NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) GROUP PERFORMANCE 6 INCOME TAX (CONTINUED) INCOME TAX ACCOUNTING POLICY (CONTINUED) Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantially enacted at the reporting date. Deferred income tax liabilities are recognised for all temporary differences except: - When the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor the taxable profit or loss: and - When the taxable temporary difference is associated with investments in subsidiaries, associates and interest in joint ventures, and the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred income tax assets are recognised for all taxable temporary differences, except for the following: - When the deferred tax asset arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction affects neither the accounting profit nor taxable profit; - When the deductible temporary difference is associated with investments in subsidiaries, associates and interest in joint ventures, in which case the deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available to utilise the deferred tax asset. The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Tax assets and tax liabilities are offset only if a legally enforceable right exists to set off and the tax assets and tax liabilities relate to the same taxable entity and the same taxation authority. Tax consolidation Premier Investments Limited and its wholly owned Australian controlled entities have implemented a tax consolidation group. The head entity, Premier Investments Limited and the controlled entities continue to account for their own current and deferred tax amounts. The Group has applied the Group allocation approach to determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated group. The agreement provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. At reporting date the possibility of default is remote. In addition to its own current and deferred tax amounts, Premier Investments 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. KEY ACCOUNTING ESTIMATES AND JUDGEMENTS Deferred tax assets are recognised for taxable temporary differences as management considers that it is probable that future taxable profits will be available to utilise those temporary differences. 51 51 52 Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) GROUP PERFORMANCE 6 INCOME TAX (CONTINUED) INCOME TAX ACCOUNTING POLICY (CONTINUED) Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantially enacted at the reporting date. Deferred income tax liabilities are recognised for all temporary differences except: - When the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor the taxable profit or loss: and - When the taxable temporary difference is associated with investments in subsidiaries, associates and interest in joint ventures, and the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred income tax assets are recognised for all taxable temporary differences, except for the following: - When the deferred tax asset arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction affects neither the accounting profit nor taxable profit; - When the deductible temporary difference is associated with investments in subsidiaries, associates and interest in joint ventures, in which case the deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available to utilise the deferred tax asset. The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Tax assets and tax liabilities are offset only if a legally enforceable right exists to set off and the tax assets and tax liabilities relate to the same taxable entity and the same taxation authority. Tax consolidation Premier Investments Limited and its wholly owned Australian controlled entities have implemented a tax consolidation group. The head entity, Premier Investments Limited and the controlled entities continue to account for their own current and deferred tax amounts. The Group has applied the Group allocation approach to determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated group. The agreement provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. At reporting date the possibility of default is remote. In addition to its own current and deferred tax amounts, Premier Investments 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. KEY ACCOUNTING ESTIMATES AND JUDGEMENTS Deferred tax assets are recognised for taxable temporary differences as management considers that it is probable that future taxable profits will be available to utilise those temporary differences. Premier Investments Limited 52 52 NOTES TO THE FINANCIAL STATEMENTS Notes to the Financial Statements FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) For the 53 weeks ended 31 July 2021 and the 52 weeks ended 25 July 2020 (continued) GROUP PERFORMANCE 6 INCOME TAX (CONTINUED) KEY ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED) Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies. Assumptions about the generation of future taxable profits depend on management's estimates of future cash flows. These depend on estimates of future sales volumes, operating costs, capital expenditure, dividends and other capital management transactions. Judgements are also required about the application of income tax legislation. These judgements and assumptions 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 and deferred tax liabilities recognised in the statement of financial position and the amount of other tax losses and temporary differences not yet recognised. In such circumstances, some or all of the carrying amounts of recognised deferred tax assets and liabilities may require adjustment, resulting in a corresponding credit or charge to profit or loss in the statement of comprehensive income. CONSOLIDATED 2021 $’000 2020 $’000 7 EARNINGS PER SHARE The following reflects the income and share data used in the calculation of basic and diluted earnings per share: Net profit for the period 271,840 137,753 Weighted average number of ordinary shares used in calculating: - basic earnings per share - diluted earnings per share NUMBER OF SHARES ‘000 NUMBER OF SHARES ‘000 158,829 159,538 158,540 159,134 There have been no other conversions to, calls of, or subscriptions for ordinary shares or issues of potential ordinary shares since the reporting date and before the completion of this financial report. EARNINGS PER SHARE ACCOUNTING POLICY Basic earnings per share are calculated as net profit attributable to members of the parent divided by the weighted average number of ordinary shares. Diluted earnings per share is calculated as net profit attributable to members of the parent, adjusted for costs of servicing equity, the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses, and other non-discretionary changes in revenue or expenses during the period that would result from the dilution of potential ordinary shares, divided by the weighted average number of ordinary shares and dilutive potential ordinary shares. NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) GROUP PERFORMANCE 8 A) DIVIDENDS DIVIDENDS APPROVED AND/ OR PAID Approved during the year: Interim franked dividends: 2021 Approved and paid: 34 cents per share 2020 Approved: 34 cents per share (i) Approved and paid during the year: Final franked dividends for 2020: 36 cents per share (2019: 37 cents) TOTAL FOR THE YEAR CONSOLIDATED 2021 $’000 2020 $’000 54,014 - - 53,966 57,191 111,205 58,636 112,602 CONSOLIDATED 2021 $’000 2020 $’000 231,271 196,701 56,181 59,205 (31,319) 256,133 (47,639) 208,267 (i) The 2020 interim dividend was paid on 30 September 2020. DIVIDENDS APPROVED AND NOT RECOGNISED AS A LIABILITY: Final franked dividend for 2021: 46 cents per share (2020: 36 cents) The Directors of Premier Investments Limited approved a final dividend in respect of the 2021 financial year. The total amount of the dividend is $73,077,000 (2020: $57,191,000) which represents a fully franked dividend of 46 cents per share (2020: 36 cents per share). 73,077 57,191 B) FRANKING CREDIT BALANCE The amount of franking credits available for the subsequent financial year are: franking account balance as at the end of the financial year at 30% (2020: 30%) franking credits that will arise from the payment of income tax payable as at the end of the financial year franking debits that will be used on the payment of dividends subsequent to the end of the financial year TOTAL FRANKING CREDIT BALANCE The tax rate at which paid dividends have been franked is 30% (2020: 30%). Dividends proposed will be franked at the rate of 30% (2020: 30%). 53 53 54 Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) GROUP PERFORMANCE 8 A) DIVIDENDS DIVIDENDS APPROVED AND/ OR PAID Approved during the year: Interim franked dividends: 2021 Approved and paid: 34 cents per share 2020 Approved: 34 cents per share (i) Approved and paid during the year: Final franked dividends for 2020: 36 cents per share (2019: 37 cents) TOTAL FOR THE YEAR (i) The 2020 interim dividend was paid on 30 September 2020. DIVIDENDS APPROVED AND NOT RECOGNISED AS A LIABILITY: Final franked dividend for 2021: 46 cents per share (2020: 36 cents) CONSOLIDATED 2021 $’000 2020 $’000 54,014 - - 53,966 57,191 111,205 58,636 112,602 73,077 57,191 The Directors of Premier Investments Limited approved a final dividend in respect of the 2021 financial year. The total amount of the dividend is $73,077,000 (2020: $57,191,000) which represents a fully franked dividend of 46 cents per share (2020: 36 cents per share). B) FRANKING CREDIT BALANCE The amount of franking credits available for the subsequent financial year are: franking account balance as at the end of the financial year at 30% (2020: 30%) franking credits that will arise from the payment of income tax payable as at the end of the financial year franking debits that will be used on the payment of dividends subsequent to the end of the financial year TOTAL FRANKING CREDIT BALANCE CONSOLIDATED 2021 $’000 2020 $’000 231,271 196,701 56,181 59,205 (31,319) 256,133 (47,639) 208,267 The tax rate at which paid dividends have been franked is 30% (2020: 30%). Dividends proposed will be franked at the rate of 30% (2020: 30%). Premier Investments Limited 54 54 NOTES TO THE FINANCIAL STATEMENTS Notes to the Financial Statements FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) For the 53 weeks ended 31 July 2021 and the 52 weeks ended 25 July 2020 (continued) OPERATING ASSETS AND LIABILITIES CONSOLIDATED 2021 $’000 2020 $’000 9 TRADE AND OTHER RECEIVABLES (CURRENT) Sundry debtors TOTAL CURRENT TRADE AND OTHER RECEIVABLES 9,490 9,490 30,320 30,320 (a) Impairment losses Receivables are non-interest-bearing and are generally on 30 to 60 day terms. An allowance for credit losses is recognised based on the expected credit loss from the time the financial asset is initially recognised. Bad debts are written off when identified. No material allowance for credit losses has been recognised by the Group during the financial year ended 31 July 2021 (2020: $nil). During the year, no material bad debt expense (2020: $nil) was recognised. It is expected that sundry debtor balances will be received when due. (b) Fair value Due to the short-term nature of these receivables, their carrying value is considered to approximate their fair value. TRADE AND OTHER RECEIVABLES ACCOUNTING POLICY Trade and other receivables are classified as non-derivative financial assets and are recognised initially at their transaction value. After initial measurement, these assets are measured at amortised cost, less any allowance for any expected credit losses. 10 INVENTORIES Finished goods TOTAL INVENTORIES AT COST INVENTORIES ACCOUNTING POLICY CONSOLIDATED 2021 $’000 2020 $’000 208,760 208,760 156,590 156,590 Inventories are valued at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and conditions are accounted for as follows: - Finished goods and work-in-progress - purchase cost plus a proportion of the purchasing department, freight, handling and warehouse costs incurred to deliver the goods to the point of sale. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated direct costs necessary to make the sale. NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) OPERATING ASSETS AND LIABILITIES 11 OTHER ASSETS (CURRENT) Deposits and prepayments TOTAL OTHER CURRENT ASSETS 12 RIGHT-OF-USE ASSETS Opening balance Recognition of asset on initial application of AASB 16 Additions / Remeasurements Depreciation expense Impairment expense Exchange differences TOTAL RIGHT-OF-USE ASSETS CONSOLIDATED 2021 $’000 2020 $’000 10,326 10,326 10,531 10,531 231,790 86,621 (152,301) - - 977 167,087 - 364,643 43,700 (172,681) (2,420) (1,452) 231,790 RIGHT-OF-USE ASSETS ACCOUNTING POLICY The Group recognises right-of-use assets at the commencement date of the lease, being the date that the underlying asset is available for use. Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right- of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date of the lease less any lease incentives received and an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease, unless those costs are incurred to produce inventories. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment. KEY ACCOUNTING ESTIMATES AND ASSUMPTIONS Impairment of right-of-use assets The carrying values of the right-of-use assets are reviewed for impairment annually. If an indication of impairment exists, and where the carrying value of the asset exceeds the estimated recoverable amount, the assets or cash-generating units (CGU) are written down to their recoverable amount. The recoverable amount is the greater of fair value less costs of disposal and value-in-use. Value-in-use refers to an asset’s value based on the expected future cash flows arising from its continued use, discounted to present value using a post-tax discount rate that reflect current market assessments of the risks specific to the asset. The recoverable amount was estimated on an individual store basis, as this has been identified as the CGU of the Group’s retail segment. No impairment loss was recognised in relation to the Group’s right-of-use assets during the current financial year (2020: $2,420,000). The impairment loss recognised in 2020 relates to the closure of certain retail stores ahead of their contracted lease end dates, therefore writing down the associated right-of-use assets to their recoverable amount. 55 55 56 Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) OPERATING ASSETS AND LIABILITIES 11 OTHER ASSETS (CURRENT) Deposits and prepayments TOTAL OTHER CURRENT ASSETS 12 RIGHT-OF-USE ASSETS Opening balance Recognition of asset on initial application of AASB 16 Additions / Remeasurements Depreciation expense Impairment expense Exchange differences TOTAL RIGHT-OF-USE ASSETS CONSOLIDATED 2021 $’000 2020 $’000 10,326 10,326 10,531 10,531 231,790 - 86,621 (152,301) - 977 167,087 - 364,643 43,700 (172,681) (2,420) (1,452) 231,790 RIGHT-OF-USE ASSETS ACCOUNTING POLICY The Group recognises right-of-use assets at the commencement date of the lease, being the date that the underlying asset is available for use. Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right- of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date of the lease less any lease incentives received and an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease, unless those costs are incurred to produce inventories. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment. KEY ACCOUNTING ESTIMATES AND ASSUMPTIONS Impairment of right-of-use assets The carrying values of the right-of-use assets are reviewed for impairment annually. If an indication of impairment exists, and where the carrying value of the asset exceeds the estimated recoverable amount, the assets or cash-generating units (CGU) are written down to their recoverable amount. The recoverable amount is the greater of fair value less costs of disposal and value-in-use. Value-in-use refers to an asset’s value based on the expected future cash flows arising from its continued use, discounted to present value using a post-tax discount rate that reflect current market assessments of the risks specific to the asset. The recoverable amount was estimated on an individual store basis, as this has been identified as the CGU of the Group’s retail segment. No impairment loss was recognised in relation to the Group’s right-of-use assets during the current financial year (2020: $2,420,000). The impairment loss recognised in 2020 relates to the closure of certain retail stores ahead of their contracted lease end dates, therefore writing down the associated right-of-use assets to their recoverable amount. Premier Investments Limited 56 56 NOTES TO THE FINANCIAL STATEMENTS Notes to the Financial Statements FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) For the 53 weeks ended 31 July 2021 and the 52 weeks ended 25 July 2020 (continued) OPERATING ASSETS AND LIABILITIES 13 TRADE AND OTHER PAYABLES (CURRENT) Trade creditors Interim dividend payable Other creditors and accruals TOTAL CURRENT TRADE AND OTHER PAYABLES (a) Fair values CONSOLIDATED 2021 $’000 2020 $’000 76,231 - 88,038 164,269 69,637 53,966 85,376 208,979 Due to the short-term nature of these payables, their carrying values approximate their fair values. TRADE AND OTHER PAYABLES ACCOUNTING POLICY Trade and other payables are recognised and carried at original invoice cost, which is the fair value of the consideration to be paid in the future for goods and services received whether or not billed to the Group. 14 LEASE LIABILITIES Opening balance Recognition of liability on initial application of AASB 16 Additions / Remeasurements Interest expense Payments COVID-19 related rent concessions Other Australia and New Zealand holdover rent concessions Other Exchange rate differences TOTAL LEASE LIABILITIES COMPRISING OF: Current lease liability Non-current lease liability TOTAL LEASE LIABILITIES CONSOLIDATED 2021 $’000 2020 $’000 303,889 - 87,569 6,676 (137,180) (19,521) (4,527) (1,550) 2,129 237,485 159,050 78,435 237,485 - 410,193 50,315 11,080 (150,958) (15,013) - - (1,728) 303,889 189,221 114,668 303,889 LEASE LIABILITIES ACCOUNTING POLICY At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in- substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate initially measured using the index or rate as at the commencement date, and amount expected to be paid under residual value guarantees. The variable lease payments which are not included in the measurement of the lease liability are recognised as an expense in the period in which the event or condition that triggers the payment occurs. NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) OPERATING ASSETS AND LIABILITIES 14 LEASE LIABILITIES (CONTINUED) LEASE LIABILITIES ACCOUNTING POLICY (CONTINUED) In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date, if the rate implicit in the lease cannot be readily determined, using inputs such as government bond rates for the lease period and the Group’s expected borrowing margin. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments, a change in the assessment to purchase the underlying asset, or a change in the amounts expected to be payable under a residual value guarantee. The Group applies the low-value assets recognition exemption to leases of certain office equipment that are considered of low value. Lease payments on low-value assets are recognised as a lease expense on a straight- line basis over the lease term. Significant judgement in determining the lease term The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. After the lease commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew. Where a lease enters holdover, the Group estimates the expected lease term based on reasonably certain information available as at balance date. Any adjustments required due to changes in estimates or entering into a new lease agreement are recognised in the period in which the adjustments are made. Significant judgement in determining the incremental borrowing rate The Group has applied judgement to determine the incremental borrowing rate, which affects the amount of lease liabilities and right-of-use assets recognised. The Group assesses and applies the incremental borrowing rate on a lease by lease basis at the relevant lease commencement date, based on the term of the lease. The incremental borrowing rate is determined using inputs including the Group’s expected lending facility margin and applicable government bond rates at the time of entering into the lease, which reflects the expected lease term. COVID-19 related rent concessions The Group has adopted the practical expedient issued by the Australian Accounting Standards Board whereby it has not accounted for rent concessions which are a direct consequence of the COVID-19 pandemic as lease modifications. Instead, the Group recognised these concessions in the statement of comprehensive income for the year ended 31 July 2021 and 25 July 2020 as a variable amount as and when incurred. The practical expedient may be applied where the following conditions apply: The changed lease payments were substantially the same or less than the payments prior to the rent concession; - - - The reductions only affect payments which fall due before 30 June 2021; and There has been no substantive change in the terms and conditions of the lease. 57 57 58 Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) OPERATING ASSETS AND LIABILITIES 14 LEASE LIABILITIES (CONTINUED) LEASE LIABILITIES ACCOUNTING POLICY (CONTINUED) In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date, if the rate implicit in the lease cannot be readily determined, using inputs such as government bond rates for the lease period and the Group’s expected borrowing margin. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments, a change in the assessment to purchase the underlying asset, or a change in the amounts expected to be payable under a residual value guarantee. The Group applies the low-value assets recognition exemption to leases of certain office equipment that are considered of low value. Lease payments on low-value assets are recognised as a lease expense on a straight- line basis over the lease term. Significant judgement in determining the lease term The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. After the lease commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew. Where a lease enters holdover, the Group estimates the expected lease term based on reasonably certain information available as at balance date. Any adjustments required due to changes in estimates or entering into a new lease agreement are recognised in the period in which the adjustments are made. Significant judgement in determining the incremental borrowing rate The Group has applied judgement to determine the incremental borrowing rate, which affects the amount of lease liabilities and right-of-use assets recognised. The Group assesses and applies the incremental borrowing rate on a lease by lease basis at the relevant lease commencement date, based on the term of the lease. The incremental borrowing rate is determined using inputs including the Group’s expected lending facility margin and applicable government bond rates at the time of entering into the lease, which reflects the expected lease term. COVID-19 related rent concessions The Group has adopted the practical expedient issued by the Australian Accounting Standards Board whereby it has not accounted for rent concessions which are a direct consequence of the COVID-19 pandemic as lease modifications. Instead, the Group recognised these concessions in the statement of comprehensive income for the year ended 31 July 2021 and 25 July 2020 as a variable amount as and when incurred. The practical expedient may be applied where the following conditions apply: - - - The changed lease payments were substantially the same or less than the payments prior to the rent concession; The reductions only affect payments which fall due before 30 June 2021; and There has been no substantive change in the terms and conditions of the lease. Premier Investments Limited 58 58 NOTES TO THE FINANCIAL STATEMENTS Notes to the Financial Statements FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) For the 53 weeks ended 31 July 2021 and the 52 weeks ended 25 July 2020 (continued) OPERATING ASSETS AND LIABILITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) OPERATING ASSETS AND LIABILITIES 15 PROVISIONS (CONTINUED) CONSOLIDATED 2021 $’000 2020 $’000 EMPLOYEE ENTITLEMENTS ACCOUNTING POLICIES (CONTINUED) Long service leave and non-current annual leave 15 PROVISIONS CURRENT Employee entitlements – Annual Leave Employee entitlements – Long Service Leave Provision for make-good in relation to leased premises Refund liability Other provisions TOTAL CURRENT PROVISIONS NON-CURRENT Employee entitlements – Long Service Leave Provision for make-good in relation to leased premises Other provisions TOTAL NON-CURRENT PROVISIONS MOVEMENT IN PROVISIONS Provision for make-good in relation to leased premises Opening balance Charged to profit or loss Utilised during the period CLOSING BALANCE (CURRENT AND NON-CURRENT) 16,359 10,363 12,490 2,088 4,310 45,610 2,469 4,595 4,357 11,421 17,855 - (770) 17,085 12,591 9,297 13,091 2,088 1,230 38,297 2,061 4,764 3,778 10,603 6,087 11,988 (220) 17,855 PROVISIONS ACCOUNTING POLICIES Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect of the time-value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax discount rate that reflects the risks specific to the liability and the time value of money. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost. EMPLOYEE ENTITLEMENTS ACCOUNTING POLICIES Current annual leave The provisions for employee entitlements to wages, salaries and annual leave (which are expected to be settled wholly within 12 months of the reporting date) represent the amount which the Group has a present obligation to pay, resulting from employees’ services provided up to the reporting date. The provisions have been calculated at nominal amounts based on current wage and salary rates, and include related on-costs. The liability for long service leave and non-current annual leave (which are not expected to be settled wholly within 12 months of the reporting date) 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 reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures, and periods of service. Related on-costs have also been included in the liability. Expected future payments are discounted using market yields at the reporting date on high quality corporate bonds with terms to maturity that match as closely as possible the estimated cash outflow. Retirement benefit obligations All employees of the Group are entitled to benefits from the Group’s superannuation plan on retirement, disability or death. The Group operates a defined contribution plan. Contributions to the plan are recognised as an expense as they become payable. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payment is made available. PROVISION FOR MAKE-GOOD IN RELATION TO STORE PLANT AND EQUIPMENT ACCOUNTING POLICY A provision has been recognised in relation to make-good costs arising from contractual obligations in lease agreements, in regions where the Group has such a present obligation. The provision recognised represents the present value of the estimated expenditure required to remove these store plant and equipment. 16 OTHER LIABILITIES CURRENT Deferred income TOTAL CURRENT NON-CURRENT Deferred income TOTAL NON-CURRENT DEFERRED INCOME ACCOUNTING POLICY Unredeemed gift cards are expected to be largely redeemed within a year. CONSOLIDATED 2021 $’000 2020 $’000 15,120 15,120 226 226 8,588 8,588 146 146 59 59 60 Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) OPERATING ASSETS AND LIABILITIES 15 PROVISIONS (CONTINUED) EMPLOYEE ENTITLEMENTS ACCOUNTING POLICIES (CONTINUED) Long service leave and non-current annual leave The liability for long service leave and non-current annual leave (which are not expected to be settled wholly within 12 months of the reporting date) 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 reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures, and periods of service. Related on-costs have also been included in the liability. Expected future payments are discounted using market yields at the reporting date on high quality corporate bonds with terms to maturity that match as closely as possible the estimated cash outflow. Retirement benefit obligations All employees of the Group are entitled to benefits from the Group’s superannuation plan on retirement, disability or death. The Group operates a defined contribution plan. Contributions to the plan are recognised as an expense as they become payable. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payment is made available. PROVISION FOR MAKE-GOOD IN RELATION TO STORE PLANT AND EQUIPMENT ACCOUNTING POLICY A provision has been recognised in relation to make-good costs arising from contractual obligations in lease agreements, in regions where the Group has such a present obligation. The provision recognised represents the present value of the estimated expenditure required to remove these store plant and equipment. 16 OTHER LIABILITIES CURRENT Deferred income TOTAL CURRENT NON-CURRENT Deferred income TOTAL NON-CURRENT DEFERRED INCOME ACCOUNTING POLICY Unredeemed gift cards are expected to be largely redeemed within a year. CONSOLIDATED 2021 $’000 2020 $’000 15,120 15,120 226 226 8,588 8,588 146 146 Premier Investments Limited 60 60 NOTES TO THE FINANCIAL STATEMENTS Notes to the Financial Statements FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) For the 53 weeks ended 31 July 2021 and the 52 weeks ended 25 July 2020 (continued) CAPITAL INVESTED 17 PROPERTY, PLANT AND EQUIPMENT CONSOLIDATED LAND $’000 BUILDINGS $’000 PLANT AND EQUIPMENT $’000 LEASED PLANT AND EQUIPMENT $’000 CAPITAL WORKS IN PROGRESS $’000 TOTAL $’000 21,953 59,577 463,737 343 4,753 550,363 - (7,370) (404,852) (343) - (412,565) 21,953 52,207 58,885 21,953 48,855 72,866 - - - - - - 4,857 3,285 7,074 (1,505) (24,452) - - (5) 117 21,953 52,207 58,885 - - - - - - - - 4,753 137,798 11,460 5,294 (11,931) - - (70) 155,134 8,579 - (25,957) (5) 47 4,753 137,798 are accounted for as a change in accounting estimate, in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. 21,953 54,720 469,790 343 11,460 558,266 - (5,865) (396,924) (343) - (403,132) AT 31 JULY 2021 Cost Accumulated depreciation and impairment NET CARRYING AMOUNT RECONCILIATIONS: Carrying amount at beginning of the financial year Additions Transfers between classes Depreciation Disposals Exchange differences Carrying amount at end of the financial year AT 25 JULY 2020 Cost Accumulated depreciation and impairment NET CARRYING AMOUNT 21,953 48,855 72,866 RECONCILIATIONS: Carrying amount at beginning of the financial year Additions Transfers between classes Depreciation Disposals Impairment Exchange differences Carrying amount at end of the financial year LAND AND BUILDINGS 21,953 50,223 128,702 - - - - - - - - 15,696 1,845 (1,368) (42,314) - - - (982) (31,254) 1,173 21,953 48,855 72,866 - - - - - - - - - 11,460 155,134 9,977 210,855 3,328 (1,845) - - - - 19,024 - (43,682) (982) (31,254) 1,173 11,460 155,134 The land and buildings with a combined carrying amount of $74,160,000 (2020: $70,808,000) have been pledged to secure certain interest-bearing borrowings of the Group (refer to note 22). NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) CAPITAL INVESTED 17 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) PROPERTY, PLANT AND EQUIPMENT ACCOUNTING POLICY Property, plant and equipment is stated at historical cost less accumulated depreciation and any accumulated impairment losses. Depreciation is calculated on a systematic basis over the estimated useful life of the asset as follows: Buildings - - - 40 years Store plant and equipment 3 to 10 years Other plant and equipment 2 to 20 years Freehold land is not depreciated. KEY ACCOUNTING ESTIMATES AND ASSUMPTIONS Estimation of useful lives of assets The estimation of useful lives of assets has been based on historical experience as well as manufacturers’ warranties (for plant and equipment). In addition, the condition of the assets is assessed at least once per year and considered against the remaining useful life. Adjustments to useful lives are made when considered necessary and are accounted for as a change in accounting estimate, in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. Depreciation methods used reflect the pattern in which the asset’s future economic benefits are expected to be consumed and are reviewed at least at each financial year-end. Adjustments to depreciation methods are made when considered necessary and Impairment testing of Property, Plant and Equipment and key accounting estimates and assumptions The carrying values of property, plant and equipment are reviewed for impairment annually. If an indication of impairment exists, and where the carrying value of the asset exceeds the estimated recoverable amount, the assets or cash-generating units (CGU) are written down to their recoverable amount. The recoverable amount is the greater of fair value less costs of disposal and value-in-use. Value-in-use refers to an asset’s value based on the estimated future cash flows arising from its continued use, discounted to present value using a post-tax discount rate that reflect current market assessments of the risks specific to the asset. These value- in-use calculations use cash flow projections based on financial estimates covering a period of up to five years, discounting using a post-tax discount rate of 10.5%. If an asset does not generate largely independent cash inflows, the recoverable amount is determined for the CGU to which the asset belongs. The recoverable amount was estimated for certain items of plant and equipment on an individual store basis, as this has been identified as the CGU of the Group’s retail segment. No impairment loss was recognised during the current financial year (2020: $31,254,000). During the 2020 financial year, the temporary global closures of stores and ongoing government implementation of social distancing measures due to COVID-19 had significantly impacted customer shopping behaviour. Customers increasingly chose to shop online in this highly uncertain macro-environment. 61 62 61 Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) CAPITAL INVESTED 17 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) PROPERTY, PLANT AND EQUIPMENT ACCOUNTING POLICY Property, plant and equipment is stated at historical cost less accumulated depreciation and any accumulated impairment losses. Depreciation is calculated on a systematic basis over the estimated useful life of the asset as follows: - - - Buildings 40 years Store plant and equipment 3 to 10 years Other plant and equipment 2 to 20 years Freehold land is not depreciated. KEY ACCOUNTING ESTIMATES AND ASSUMPTIONS Estimation of useful lives of assets The estimation of useful lives of assets has been based on historical experience as well as manufacturers’ warranties (for plant and equipment). In addition, the condition of the assets is assessed at least once per year and considered against the remaining useful life. Adjustments to useful lives are made when considered necessary and are accounted for as a change in accounting estimate, in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. Depreciation methods used reflect the pattern in which the asset’s future economic benefits are expected to be consumed and are reviewed at least at each financial year-end. Adjustments to depreciation methods are made when considered necessary and are accounted for as a change in accounting estimate, in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. Impairment testing of Property, Plant and Equipment and key accounting estimates and assumptions The carrying values of property, plant and equipment are reviewed for impairment annually. If an indication of impairment exists, and where the carrying value of the asset exceeds the estimated recoverable amount, the assets or cash-generating units (CGU) are written down to their recoverable amount. The recoverable amount is the greater of fair value less costs of disposal and value-in-use. Value-in-use refers to an asset’s value based on the estimated future cash flows arising from its continued use, discounted to present value using a post-tax discount rate that reflect current market assessments of the risks specific to the asset. These value- in-use calculations use cash flow projections based on financial estimates covering a period of up to five years, discounting using a post-tax discount rate of 10.5%. If an asset does not generate largely independent cash inflows, the recoverable amount is determined for the CGU to which the asset belongs. The recoverable amount was estimated for certain items of plant and equipment on an individual store basis, as this has been identified as the CGU of the Group’s retail segment. No impairment loss was recognised during the current financial year (2020: $31,254,000). During the 2020 financial year, the temporary global closures of stores and ongoing government implementation of social distancing measures due to COVID-19 had significantly impacted customer shopping behaviour. Customers increasingly chose to shop online in this highly uncertain macro-environment. Premier Investments Limited 62 62 NOTES TO THE FINANCIAL STATEMENTS Notes to the Financial Statements FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) For the 53 weeks ended 31 July 2021 and the 52 weeks ended 25 July 2020 (continued) CAPITAL INVESTED 17 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Impairment testing of Property, Plant and Equipment and key accounting estimates and assumptions (continued) Given these changed consumer behaviours, the Group reviewed each retail store’s future estimated cash flows, using financial estimates covering a period of up to five years, discounted using a post-tax discount rate of 10.5%. These estimated cash flows considered the possibility of a continued adverse impact on future estimated cash flows as a result of the COVID-19 pandemic. Furthermore, consideration was given to the fact that the Group has maximum flexibility within its current retail store portfolio, given that over 70% of its Australian and New Zealand store leases are currently in holdover, or are due to expire within 2020. As a result of the uncertain future trading environment of traditional bricks-and-mortar stores due to COVID-19, together with the accelerating growth of the online channel the Group has recognised an impairment loss on store plant and equipment during the 2020 financial year. 18 INTANGIBLES RECONCILIATION OF CARRYING AMOUNTS AT THE BEGINNING AND END OF THE PERIOD YEAR ENDED 31 JULY 2021 As at 26 July 2020 net of accumulated amortisation and impairment Trademark registrations As at 31 July 2021 net of accumulated amortisation and impairment CONSOLIDATED GOODWILL $’000 BRAND NAMES $’000 TRADEMARKS $’000 LEASEHOLD PREMIUMS $’000 TOTAL $’000 477,085 - 346,179 - 3,624 116 477,085 346,179 3,740 - - - 826,888 116 827,004 AS AT 31 JULY 2021 Cost (gross carrying amount) Accumulated amortisation and impairment NET CARRYING AMOUNT 477,085 - 477,085 376,179 (30,000) 346,179 3,740 - 3,740 3,351 273 - - 979 (979) - 857,983 (30,979) 827,004 24 - (23) (1) 826,639 273 (23) (1) 477,085 346,179 - - - - - - YEAR ENDED 25 JULY 2020 As at 28 July 2019 net of accumulated amortisation and impairment Trademark registrations Amortisation Exchange differences As at 25 July 2020 net of accumulated amortisation and impairment AS AT 25 JULY 2020 Cost (gross carrying amount) Accumulated amortisation and impairment NET CARRYING AMOUNT 477,085 346,179 3,624 - 826,888 life intangibles, impairment is tested annually and where an indicator of impairment exists. 477,085 - 477,085 376,179 (30,000) 346,179 3,624 - 3,624 979 (979) - 857,867 (30,979) 826,888 NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) CAPITAL INVESTED 18 INTANGIBLES (CONTINUED) GOODWILL ACCOUNTING POLICY Goodwill acquired in a business combination is initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised but is subject to impairment testing. Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Goodwill acquired in a business combination is, from the date of acquisition, allocated to each of the Group’s cash-generating units (CGUs) that are expected to benefit from the synergies of the combination. Impairment is determined by assessing the recoverable amount of the CGU to which the goodwill relates. Where the recoverable amount of the CGU is less than the carrying amount, an impairment loss is recognised. Impairment losses recognised for goodwill are not subsequently reversed. OTHER INTANGIBLE ASSETS (excluding goodwill) ACCOUNTING POLICY Intangible assets acquired separately are initially measured at cost. Intangible assets acquired in a business combination are initially recognised at fair value. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. The useful lives of intangible assets are assessed as either finite or indefinite. A summary of the key accounting policies applied to the Group’s intangible assets are as follows: Brands Leasehold Premiums Trademarks & Licences Indefinite Finite Indefinite Method used? Not amortised or revalued Not amortised or revalued Amortised over the term of the lease Acquired Acquired Acquired Annually or more Amortisation method Annually or more frequently if there are reviewed at each financial frequently if there are indicators of impairment year end; reviewed indicators of impairment annually for indicators of impairment Brand names, trademarks and licences are assessed as having an indefinite useful life, as this reflects management’s intention to continue to operate these to generate net cash inflows into the foreseeable future. These assets are not amortised but are subject to impairment testing. Intangible assets are tested for impairment where an indicator of impairment exists, or in the case of indefinite Where the carrying amount of an intangible asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. The recoverable amount is the higher of the asset’s value-in-use and fair value less costs of disposal. Value-in use refers to an asset’s value based on the expected future cash flows arising from its continued use, discounted to present value using a post-tax discount rate that reflect current market assessments of the risks specific to the asset. If an asset does not generate largely independent cash inflows, the recoverable amount is determined for the CGU to which the asset belongs. Useful life assessment? Internally generated or acquired? Impairment test/recoverable amount testing 63 63 64 Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) CAPITAL INVESTED 18 INTANGIBLES (CONTINUED) GOODWILL ACCOUNTING POLICY Goodwill acquired in a business combination is initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised but is subject to impairment testing. Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Goodwill acquired in a business combination is, from the date of acquisition, allocated to each of the Group’s cash-generating units (CGUs) that are expected to benefit from the synergies of the combination. Impairment is determined by assessing the recoverable amount of the CGU to which the goodwill relates. Where the recoverable amount of the CGU is less than the carrying amount, an impairment loss is recognised. Impairment losses recognised for goodwill are not subsequently reversed. OTHER INTANGIBLE ASSETS (excluding goodwill) ACCOUNTING POLICY Intangible assets acquired separately are initially measured at cost. Intangible assets acquired in a business combination are initially recognised at fair value. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. The useful lives of intangible assets are assessed as either finite or indefinite. A summary of the key accounting policies applied to the Group’s intangible assets are as follows: Brands Leasehold Premiums Trademarks & Licences Useful life assessment? Indefinite Finite Indefinite Method used? Not amortised or revalued Amortised over the term of the lease Not amortised or revalued Internally generated or acquired? Acquired Acquired Acquired Impairment test/recoverable amount testing Annually or more frequently if there are indicators of impairment Amortisation method reviewed at each financial year end; reviewed annually for indicators of impairment Annually or more frequently if there are indicators of impairment Brand names, trademarks and licences are assessed as having an indefinite useful life, as this reflects management’s intention to continue to operate these to generate net cash inflows into the foreseeable future. These assets are not amortised but are subject to impairment testing. Intangible assets are tested for impairment where an indicator of impairment exists, or in the case of indefinite life intangibles, impairment is tested annually and where an indicator of impairment exists. Where the carrying amount of an intangible asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. The recoverable amount is the higher of the asset’s value-in-use and fair value less costs of disposal. Value-in use refers to an asset’s value based on the expected future cash flows arising from its continued use, discounted to present value using a post-tax discount rate that reflect current market assessments of the risks specific to the asset. If an asset does not generate largely independent cash inflows, the recoverable amount is determined for the CGU to which the asset belongs. Premier Investments Limited 64 64 NOTES TO THE FINANCIAL STATEMENTS Notes to the Financial Statements FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) For the 53 weeks ended 31 July 2021 and the 52 weeks ended 25 July 2020 (continued) CAPITAL INVESTED 18 INTANGIBLES (CONTINUED) SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONS The recoverable amounts of CGUs are determined based on the higher of value-in-use calculations or fair value less costs of disposal. These calculations depend on management estimates and assumptions. In particular, significant estimates and judgements are made in relation to the key assumptions used in forecasting future cash flows and the expected growth rates used in these cash flow projections, as well as the discount rates applied to these cash flows. Management assesses these assumptions each reporting period and considers the potential impact of changes to these assumptions. IMPAIRMENT TESTING OF GOODWILL The key factors contributing to the goodwill relate to the synergies existing within the acquired business and also synergies expected to be achieved as a result of combining Just Group Limited with the rest of the Group. Accordingly, goodwill is assessed at a retail segment level, which is also an operating segment for the Group. The COVID-19 pandemic has had a significant impact on the Group’s operations. The extent of the impact of the pandemic on future trading performance is unclear, and an assessment of the impacts as they relate to estimated future cash flow projections entail a significant degree of estimation uncertainty. In response to these estimation uncertainties, the recoverable amount of the CGU has been determined based upon a range of value-in-use calculations, using estimated cash flow scenarios for a period of five years plus a terminal value. The value-in-use calculations have been determined based on scenarios of cash flows using financial estimates for the 2022 financial year (FY22) and are projected for a further four years (FY23 – FY26) based on estimated growth rates. As part of the annual impairment test for goodwill, management assesses the reasonableness of profit margin assumptions by reviewing historical cash flow projections as well as future growth objectives. The financial estimates for FY22 include a COVID-19 overlay, whereby the cash flow estimates have been adjusted to reflect the possibility of a continued COVID-19 impact in FY22 on the Group’s Sales and Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA). These financial estimates are projected for a further four years based on average annual estimated growth rates for FY23 to FY26 of 0.875% (2020: 0.6% to 1.6%). Cash flow estimates beyond the five year period have been extrapolated using a growth rate ranging from 2% to 2.5% (2020: 2% to 2.5%), which reflects the long-term growth expectations beyond the five year period. The post-tax discount rate applied to these cash flow projections is 9.4% (2020: 9.5%). The discount rate has been determined using the weighted average cost of capital which incorporates both the cost of debt and the cost of capital and adjusted for risks specific to the CGU. In determining the possible scenarios of cash flows, management considered the reasonably possible changes in estimated sales growth, estimated EBITDA and discount rates applied to the CGU to which goodwill relates. These reasonably possible adverse change in key assumptions on which the recoverable amount is based would not cause the carrying amount of the CGU to exceed its recoverable amount. IMPAIRMENT TESTING OF BRAND NAMES Brand names acquired through business combinations have been allocated to the following CGU groups ($’000) as no individual brand name is considered significant: NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) CAPITAL INVESTED 18 INTANGIBLES (CONTINUED) IMPAIRMENT TESTING OF BRAND NAMES (CONTINUED) The recoverable amounts of brand names acquired in a business combination have been determined on an individual brand basis based upon value-in-use calculations. The value-in-use calculations have been determined based upon the relief from royalty method using cash flow estimates for a period of five years plus a terminal value The COVID-19 pandemic has had a significant impact on the Group’s operations. The extent of the impact of the pandemic on future trading performance is unclear, and an assessment of the impacts as they relate to estimated future cash flow projections entail a significant degree of estimation uncertainty. In response to these estimation uncertainties, the recoverable amount of brand names has been determined based upon a range of value-in-use calculations, using estimated cash flow scenarios for a period of five years plus a terminal value. The value-in-use calculations have been determined based on scenarios of cash flows using financial estimates for the 2022 financial year (FY22) and are projected for a further four years (FY23 – FY26) based on estimated growth rates. The financial estimates for FY22 include a COVID-19 overlay, whereby the cash flow estimates have been adjusted to reflect the possibility of a continued COVID-19 impact in FY22 in relation to sales. These financial estimates are projected for a further four years based on average annual estimated growth rates for FY23 to FY26. These extrapolated growth rate ranges at which cash flows have been estimated for the individual brands within each of the CGU groups were 0.875% (2020: a range of 0.6% - 6.1%). Cash flow estimates beyond the five year period have been extrapolated using a growth rate ranging from 2% to 2.5% (2020: 2% to 2.5%), which reflects the long-term growth expectations beyond the five year period. The post-tax discount rate applied to the cash flow projections for each of the three CGU groups is 8.3% (2020: 8.5%). The discount rate has been determined using the weighted average cost of capital which incorporates both the cost of debt and cost of capital and adjusted for risks specific to the CGU. Royalty rates have been determined for each brand within the CGU groups by considering the brand’s history and future expected performance. Factors such as the profitability of the brand, market share, brand recognition and general conditions in the industry have also been considered in determining an appropriate royalty rate for each brand. Consideration is also given to the industry norms relating to royalty rates by analysing market derived data for comparable brands and by considering the notional royalty payments as a percentage of the divisional earnings before interest and taxation generated by the division in which the brand names are used. Net royalty rates applied across the three CGU groups range between 3.5% and 8% (2020: 3.5% and 8%). In addition to the range of cash flow scenarios, management has considered reasonably possible adverse changes in key assumptions applied to brands within the relevant CGU groups, each of which have been subjected to sensitivities. Key assumptions relate to estimated sales growth, net royalty rates and discount rates applied. Based upon the reasonably possible adverse changes in key assumptions, no brands within a CGU group indicated that its carrying value exceed its recoverable value. - - - Casual wear - $158,975 Women’s wear - $137,744 Non Apparel - $49,460 65 65 66 Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) CAPITAL INVESTED 18 INTANGIBLES (CONTINUED) IMPAIRMENT TESTING OF BRAND NAMES (CONTINUED) The recoverable amounts of brand names acquired in a business combination have been determined on an individual brand basis based upon value-in-use calculations. The value-in-use calculations have been determined based upon the relief from royalty method using cash flow estimates for a period of five years plus a terminal value The COVID-19 pandemic has had a significant impact on the Group’s operations. The extent of the impact of the pandemic on future trading performance is unclear, and an assessment of the impacts as they relate to estimated future cash flow projections entail a significant degree of estimation uncertainty. In response to these estimation uncertainties, the recoverable amount of brand names has been determined based upon a range of value-in-use calculations, using estimated cash flow scenarios for a period of five years plus a terminal value. The value-in-use calculations have been determined based on scenarios of cash flows using financial estimates for the 2022 financial year (FY22) and are projected for a further four years (FY23 – FY26) based on estimated growth rates. The financial estimates for FY22 include a COVID-19 overlay, whereby the cash flow estimates have been adjusted to reflect the possibility of a continued COVID-19 impact in FY22 in relation to sales. These financial estimates are projected for a further four years based on average annual estimated growth rates for FY23 to FY26. These extrapolated growth rate ranges at which cash flows have been estimated for the individual brands within each of the CGU groups were 0.875% (2020: a range of 0.6% - 6.1%). Cash flow estimates beyond the five year period have been extrapolated using a growth rate ranging from 2% to 2.5% (2020: 2% to 2.5%), which reflects the long-term growth expectations beyond the five year period. The post-tax discount rate applied to the cash flow projections for each of the three CGU groups is 8.3% (2020: 8.5%). The discount rate has been determined using the weighted average cost of capital which incorporates both the cost of debt and cost of capital and adjusted for risks specific to the CGU. Royalty rates have been determined for each brand within the CGU groups by considering the brand’s history and future expected performance. Factors such as the profitability of the brand, market share, brand recognition and general conditions in the industry have also been considered in determining an appropriate royalty rate for each brand. Consideration is also given to the industry norms relating to royalty rates by analysing market derived data for comparable brands and by considering the notional royalty payments as a percentage of the divisional earnings before interest and taxation generated by the division in which the brand names are used. Net royalty rates applied across the three CGU groups range between 3.5% and 8% (2020: 3.5% and 8%). In addition to the range of cash flow scenarios, management has considered reasonably possible adverse changes in key assumptions applied to brands within the relevant CGU groups, each of which have been subjected to sensitivities. Key assumptions relate to estimated sales growth, net royalty rates and discount rates applied. Based upon the reasonably possible adverse changes in key assumptions, no brands within a CGU group indicated that its carrying value exceed its recoverable value. Premier Investments Limited 66 66 NOTES TO THE FINANCIAL STATEMENTS Notes to the Financial Statements FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) For the 53 weeks ended 31 July 2021 and the 52 weeks ended 25 July 2020 (continued) CAPITAL INVESTED 19 LISTED EQUITY INVESTMENT AT FAIR VALUE INVESTMENT Investment in listed securities at fair value TOTAL INVESTMENTS CONSOLIDATED 2021 $’000 2020 $’000 63,462 63,462 18,132 18,132 FAIR VALUE LISTED EQUITY INVESTMENT ACCOUNTING POLICY The listed equity investment comprises a non-derivative equity instrument not held for trading and relates to an equity investment in Myer Holdings Limited. The Group has made the irrevocable election to designate the listed equity investment as ‘fair value through other comprehensive income’, without subsequent reclassification of gains or losses nor impairment to profit or loss, as it is not held for trading, with only dividends recognised in profit or loss. The fair value of equity investments in listed securities is determined by reference to quoted market bid prices at the close of business on the reporting date. 20 INVESTMENT IN ASSOCIATE Movements in carrying amounts Carrying amount at the beginning of the financial year Share of profit after income tax Gain resulting from associate share issue Share of other comprehensive income Adjustment due to associate accounting policy change Dividends received TOTAL INVESTMENT IN ASSOCIATE CONSOLIDATED 2021 $’000 2020 $’000 257,391 23,897 9,117 (3,782) (3,024) (12,227) 271,372 238,732 17,696 15,886 (688) - (14,235) 257,391 As at 31 July 2021, Premier Investments Limited holds 26.27% (2020: 26.73%) of Breville Group Limited (“BRG”), a company incorporated in Australia whose shares are quoted on the Australian Securities Exchange. The principal activities of BRG involves the innovation, development, marketing and distribution of small electrical appliances. There were no impairment losses relating to the investment in associate and no capital commitments or other commitments relating to the associate. The Group’s share of the profit after tax in its investment in associate for the year was $23,897,294 (2020: $17,695,527). As at 31 July 2021, the fair value of the Group’s interest in BRG as determined based on the quoted market price was $1,173,460,147 (2020: $947,893,002). During the 2021 financial year, BRG reconsidered its accounting treatment with regards to accounting for capitalised costs incurred in configuring or customising a supplier’s application software in a cloud computing arrangement. The change in accounting policy led to a decrease in BRG’s opening retained earnings. The Group share of this retained earnings adjustment due to a change in accounting policy was $3,024,000. 67 67 NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) CAPITAL INVESTED 20 INVESTMENT IN ASSOCIATE (CONTINUED) During the period, a gain of $9,117,000 (25 July 2020: $15,886,000) was recorded in other income resulting from an issue of shares by the associate, and the corresponding impact on the Group’s method of equity accounting. The financial year end date of BRG is 30 June. For the purpose of applying the equity method of accounting, the financial statements of BRG for the year ended 30 June 2021 have been used. The accounting policies applied by BRG in their financial statements materially conform to those used by the Group for like transactions and events in similar circumstances. The following table illustrates summarised financial information relating to the Group’s investment in BRG: EXTRACT OF BRG’S STATEMENT OF FINANCIAL POSITION 30 JUNE 2021 $’000 30 JUNE 2020 $’000 Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities NET ASSETS 473,464 297,176 770,640 (219,085) (45,070) (264,155) 506,485 443,328 200,836 644,164 (181,517) (36,247) (217,764) 426,400 Group’s share of BRG net assets 133,054 113,977 EXTRACT OF BRG’S STATEMENT OF COMPREHENSIVE INCOME Revenue Profit after income tax Other comprehensive income 30 JUNE 2021 $’000 1,187,659 90,968 (9,884) 30 JUNE 2020 $’000 952,244 66,201 62 Group’s share of BRG profit after income tax 23,897 17,696 INVESTMENT IN ASSOCIATE ACCOUNTING POLICY An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. The considerations made in determining significant influence are similar to those necessary to determine control over subsidiaries. The Group accounts for its investments in associate using the equity method of accounting in the consolidated financial statements. Under the equity method, the investment in the associate is initially recognised at cost. Thereafter, the carrying amount of the investment is adjusted to recognise the Group’s share of profit after tax of the associate, which is recognised in profit or loss, and the Group’s share of other comprehensive income, which is recognised in other comprehensive income in the statement of comprehensive income. Dividends received from the associate generally reduces the carrying amount of the investment. After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in an associate. At each reporting period, the Group determines whether there is objective evidence that the investment in the associate is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value, then recognises the impairment loss in profit or loss in the statement of comprehensive income. 68 Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) CAPITAL INVESTED 20 INVESTMENT IN ASSOCIATE (CONTINUED) During the period, a gain of $9,117,000 (25 July 2020: $15,886,000) was recorded in other income resulting from an issue of shares by the associate, and the corresponding impact on the Group’s method of equity accounting. The financial year end date of BRG is 30 June. For the purpose of applying the equity method of accounting, the financial statements of BRG for the year ended 30 June 2021 have been used. The accounting policies applied by BRG in their financial statements materially conform to those used by the Group for like transactions and events in similar circumstances. The following table illustrates summarised financial information relating to the Group’s investment in BRG: EXTRACT OF BRG’S STATEMENT OF FINANCIAL POSITION 30 JUNE 2021 $’000 30 JUNE 2020 $’000 Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities NET ASSETS 473,464 297,176 770,640 (219,085) (45,070) (264,155) 506,485 443,328 200,836 644,164 (181,517) (36,247) (217,764) 426,400 Group’s share of BRG net assets 133,054 113,977 EXTRACT OF BRG’S STATEMENT OF COMPREHENSIVE INCOME Revenue Profit after income tax Other comprehensive income 30 JUNE 2021 $’000 1,187,659 90,968 (9,884) 30 JUNE 2020 $’000 952,244 66,201 62 Group’s share of BRG profit after income tax 23,897 17,696 INVESTMENT IN ASSOCIATE ACCOUNTING POLICY An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. The considerations made in determining significant influence are similar to those necessary to determine control over subsidiaries. The Group accounts for its investments in associate using the equity method of accounting in the consolidated financial statements. Under the equity method, the investment in the associate is initially recognised at cost. Thereafter, the carrying amount of the investment is adjusted to recognise the Group’s share of profit after tax of the associate, which is recognised in profit or loss, and the Group’s share of other comprehensive income, which is recognised in other comprehensive income in the statement of comprehensive income. Dividends received from the associate generally reduces the carrying amount of the investment. After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in an associate. At each reporting period, the Group determines whether there is objective evidence that the investment in the associate is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value, then recognises the impairment loss in profit or loss in the statement of comprehensive income. Premier Investments Limited 68 68 NOTES TO THE FINANCIAL STATEMENTS Notes to the Financial Statements FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) For the 53 weeks ended 31 July 2021 and the 52 weeks ended 25 July 2020 (continued) CAPITAL STRUCTURE AND RISK MANAGEMENT NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) CAPITAL STRUCTURE AND RISK MANAGEMENT 21 NOTES TO THE STATEMENT OF CASH FLOWS (a) RECONCILIATION OF CASH AND CASH EQUIVALENTS Cash at bank and in hand Short-term deposits TOTAL CASH AND CASH EQUIVALENTS (b) RECONCILIATION OF NET PROFIT AFTER INCOME TAX TO NET CASH FLOWS FROM OPERATIONS Net profit for the period after tax Adjustments for: Amortisation Depreciation Impairment of non-current assets Share of profit of associate Gain on investment in associate resulting from share issue Borrowing costs Net loss on disposal of property, plant and equipment Share-based payments expense Movement in cash flow hedge reserve Net exchange differences Changes in assets and liabilities: Decrease (increase) in trade and other receivables Decrease in other current assets (Increase) decrease in inventories (Increase) decrease in other financial assets Decrease (increase) in deferred tax assets Increase in provisions Increase in deferred tax liabilities (Decrease) increase in trade and other payables (Decrease) increase in other financial liabilities Increase (decrease) increase in deferred income (Decrease) increase in income tax payable NET CASH FLOWS FROM OPERATING ACTIVITIES CONSOLIDATED 2021 $’000 2020 $’000 385,815 137,541 523,356 305,960 142,872 448,832 271,840 137,753 - 178,258 - (23,897) (9,117) 174 5 1,856 8,796 132 20,830 205 (52,170) (7,073) 2,784 8,901 2,892 (14,045) (5,509) 6,612 (7,954) 383,520 23 216,363 33,674 (17,696) (15,886) 166 982 1,613 (6,922) 188 (7,309) 4,157 14,575 6,119 (16,626) 1,786 1,552 73,075 3,776 (1,382) 53,601 483,582 21 NOTES TO THE STATEMENT OF CASH FLOWS (CONTINUED) (c) FINANCE FACILITIES Working capital and bank overdraft facility Used Unused Finance facility Used Unused Used Unused Used Unused Used Unused TOTAL Total facilities Bank guarantee facility Interchangeable facility CONSOLIDATED 2021 $’000 2020 $’000 - 9,800 9,800 147,000 82,000 229,000 - 200 200 4,268 8,732 13,000 151,268 100,732 252,000 - 9,800 9,800 147,000 82,000 229,000 - 200 200 6,169 6,831 13,000 153,169 98,831 252,000 CASH AND CASH EQUIVALENTS ACCOUNTING POLICY Cash and cash equivalents in the statement of financial position comprise cash on hand and in banks, money market investments readily convertible to cash within two working days and short-term deposits with an original maturity 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. For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. 69 69 70 Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) CAPITAL STRUCTURE AND RISK MANAGEMENT 21 NOTES TO THE STATEMENT OF CASH FLOWS (CONTINUED) (c) FINANCE FACILITIES Working capital and bank overdraft facility Used Unused Finance facility Used Unused Bank guarantee facility Used Unused Interchangeable facility Used Unused Total facilities Used Unused TOTAL CONSOLIDATED 2021 $’000 2020 $’000 - 9,800 9,800 147,000 82,000 229,000 - 200 200 4,268 8,732 13,000 151,268 100,732 252,000 - 9,800 9,800 147,000 82,000 229,000 - 200 200 6,169 6,831 13,000 153,169 98,831 252,000 CASH AND CASH EQUIVALENTS ACCOUNTING POLICY Cash and cash equivalents in the statement of financial position comprise cash on hand and in banks, money market investments readily convertible to cash within two working days and short-term deposits with an original maturity 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. For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. Premier Investments Limited 70 70 NOTES TO THE FINANCIAL STATEMENTS Notes to the Financial Statements FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) For the 53 weeks ended 31 July 2021 and the 52 weeks ended 25 July 2020 (continued) CAPITAL STRUCTURE AND RISK MANAGEMENT NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) CAPITAL STRUCTURE AND RISK MANAGEMENT 22 INTEREST-BEARING LIABILITIES CURRENT Bank loans ** secured TOTAL INTEREST-BEARING LIABILITIES NON-CURRENT Bank loans* unsecured Bank loans ** secured TOTAL INTEREST-BEARING LIABILITIES CONSOLIDATED 2021 $’000 2020 $’000 69,000 69,000 77,834 - 77,834 - - 77,659 69,000 146,659 * Bank loans are subject to a negative pledge and cross guarantee within the Just Group Ltd group. Premier Investments Limited is not a participant or guarantor of the Just Group Ltd financing facilities. ** Premier Investments Limited obtained bank borrowings amounting to $69 million. A $19 million borrowing is secured by a mortgage over Land and Buildings, representing the National Distribution Centre in Truganina, Victoria, and is repayable in full in January 2022. Premier Investments Limited obtained a further $50 million borrowing which is secured by a mortgage over Land and Buildings, representing an office building in Melbourne, Victoria, and is repayable in full in December 2021. (a) Fair values The carrying values of the Group’s current and non-current interest-bearing liabilities approximate their fair values. (b) CAPITAL MANAGEMENT (b) Defaults and breaches During the current and prior years, there were no defaults or breaches on any of the loans. capital available to the Group. (c) Changes in interest-bearing liabilities arising from financing activities CONSOLIDATED 25 JULY 2020 $’000 CASH FLOWS $’000 OTHER $’000 31 JULY 2021 $’000 Non-current interest-bearing liabilities TOTAL INTEREST-BEARING LIABILITIES 146,659 146,659 - - 175 175 146,834 146,834 ‘Other’ includes the effect of the amortisation of the capitalised borrowing costs, which are amortised over the life of the facility. INTEREST-BEARING LIABILITIES ACCOUNTING POLICY (c) EXTERNALLY IMPOSED CAPITAL REQUIREMENTS Interest-bearing liabilities are initially recognised at the fair value of the consideration received net of issue costs associated with the borrowing. After initial recognition, such items are subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement. Fees paid on the establishment of loan facilities are amortised over the life of the facility while on- going borrowing costs are expensed as incurred. 71 71 72 CONSOLIDATED 2021 $’000 2020 $’000 NO. (‘000) $‘000 158,724 140 158,864 158,430 294 158,724 608,615 608,615 608,615 - - 608,615 23 CONTRIBUTED EQUITY Ordinary share capital 608,615 608,615 (a) MOVEMENTS IN SHARES ON ISSUE Ordinary shares on issue 26 July 2020 Ordinary shares issued during the year (i) Ordinary shares on issue at 31 July 2021 Ordinary shares on issue 28 July 2019 Ordinary shares issued during the year (i) Ordinary shares on issue at 25 July 2020 Fully paid ordinary shares carry one vote per share and carry the rights to dividends. (i) A total of 139,524 ordinary shares (2020: 294,579) were issued in relation to the performance rights plan. The Group’s objective is to ensure the entity continues as a going concern as well as to maintain optimal returns to shareholders. The Group also aims to maintain a capital structure that ensures the lowest cost of The capital structure of the Group consists of debt which includes interest-bearing borrowings, cash and cash equivalents and equity attributable to the equity holders of Premier Investments Limited, comprising of contributed equity, reserves and retained earnings. The Group operates primarily through its two business segments, investments and retail. The investments segment is managed and operated through the parent company. The retail segment operates through subsidiaries established in their respective markets and maintains a central borrowing facility through a subsidiary, to meet the retail segment’s funding requirements and to enable the Group to find the optimal debt and equity balance. The Group’s capital structure is reviewed on a periodic basis in the context of prevailing market conditions, and appropriate steps are taken to ensure the Group’s capital structure and capital management initiatives remain in line with the Board’s objectives. Just Group Ltd, a subsidiary of Premier Investments Limited, is subject to a number of financial undertakings as part of its financing facility agreement. These undertakings have been satisfied during the period. The Group is not subject to any capital requirements imposed by regulators or other prudential authorities. Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) CAPITAL STRUCTURE AND RISK MANAGEMENT 23 CONTRIBUTED EQUITY Ordinary share capital 608,615 608,615 CONSOLIDATED 2021 $’000 2020 $’000 (a) MOVEMENTS IN SHARES ON ISSUE Ordinary shares on issue 26 July 2020 Ordinary shares issued during the year (i) Ordinary shares on issue at 31 July 2021 Ordinary shares on issue 28 July 2019 Ordinary shares issued during the year (i) Ordinary shares on issue at 25 July 2020 NO. (‘000) $‘000 158,724 140 158,864 158,430 294 158,724 608,615 - 608,615 608,615 - 608,615 Fully paid ordinary shares carry one vote per share and carry the rights to dividends. (i) A total of 139,524 ordinary shares (2020: 294,579) were issued in relation to the performance rights plan. (b) CAPITAL MANAGEMENT The Group’s objective is to ensure the entity continues as a going concern as well as to maintain optimal returns to shareholders. The Group also aims to maintain a capital structure that ensures the lowest cost of capital available to the Group. The capital structure of the Group consists of debt which includes interest-bearing borrowings, cash and cash equivalents and equity attributable to the equity holders of Premier Investments Limited, comprising of contributed equity, reserves and retained earnings. The Group operates primarily through its two business segments, investments and retail. The investments segment is managed and operated through the parent company. The retail segment operates through subsidiaries established in their respective markets and maintains a central borrowing facility through a subsidiary, to meet the retail segment’s funding requirements and to enable the Group to find the optimal debt and equity balance. The Group’s capital structure is reviewed on a periodic basis in the context of prevailing market conditions, and appropriate steps are taken to ensure the Group’s capital structure and capital management initiatives remain in line with the Board’s objectives. (c) EXTERNALLY IMPOSED CAPITAL REQUIREMENTS Just Group Ltd, a subsidiary of Premier Investments Limited, is subject to a number of financial undertakings as part of its financing facility agreement. These undertakings have been satisfied during the period. The Group is not subject to any capital requirements imposed by regulators or other prudential authorities. 72 Premier Investments Limited 72 NOTES TO THE FINANCIAL STATEMENTS Notes to the Financial Statements FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) For the 53 weeks ended 31 July 2021 and the 52 weeks ended 25 July 2020 (continued) CAPITAL STRUCTURE AND RISK MANAGEMENT CONSOLIDATED 2021 $’000 2020 $’000 24 RESERVES RESERVES COMPRISE: Capital profits reserve Foreign currency translation reserve (a) Cash flow hedge reserve (b) Performance rights reserve (c) Fair value reserve (d) TOTAL RESERVES (a) FOREIGN CURRENCY TRANSLATION RESERVE Nature and purpose of reserve Reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries. - Movements in the reserve Opening balance Foreign currency translation of overseas subsidiaries Net movement in associate entity’s reserves CLOSING BALANCE (b) CASH FLOW HEDGE RESERVE Nature and purpose of reserve Reserve records the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an effective hedge. - Movements in the reserve Opening balance Net loss on cash flow hedges Transferred to statement of financial position/ profit or loss Deferred income tax movement on cash flow hedges CLOSING BALANCE 464 2,801 4,377 21,215 (38,858) (10,001) 5,781 802 (3,782) 2,801 (4,419) (3,258) 15,826 (3,772) 4,377 73 464 5,781 (4,419) 19,359 (59,032) (37,847) 7,337 (868) (688) 5,781 2,503 (3,387) (6,499) 2,964 (4,419) 73 NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) CAPITAL STRUCTURE AND RISK MANAGEMENT 24 RESERVES (CONTINUED) (c) PERFORMANCE RIGHTS RESERVE Nature and purpose of reserve Reserve is used to record the cumulative amortised value of performance rights issued to key senior employees, net of the value of performance shares acquired under the performance rights plan. - Movements in the reserve Opening balance Performance rights expense for the year CLOSING BALANCE (d) FAIR VALUE RESERVE Nature and purpose of reserve CONSOLIDATED 2021 $’000 2020 $’000 19,359 1,856 21,215 17,746 1,613 19,359 Reserve is used to record unrealised gains and losses on fair value revaluation of listed equity investment at fair value. - Movements in the reserve Opening balance Unrealised gain (loss) on revaluation of listed investment at fair value 28,820 (28,747) Net deferred income tax movement on listed equity investment at fair value CLOSING BALANCE (8,646) (38,858) 8,623 (59,032) (59,032) (38,908) 74 Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) CAPITAL STRUCTURE AND RISK MANAGEMENT 24 RESERVES (CONTINUED) (c) PERFORMANCE RIGHTS RESERVE Nature and purpose of reserve Reserve is used to record the cumulative amortised value of performance rights issued to key senior employees, net of the value of performance shares acquired under the performance rights plan. - Movements in the reserve Opening balance Performance rights expense for the year CLOSING BALANCE (d) FAIR VALUE RESERVE Nature and purpose of reserve Reserve is used to record unrealised gains and losses on fair value revaluation of listed equity investment at fair value. - Movements in the reserve Opening balance Unrealised gain (loss) on revaluation of listed investment at fair value Net deferred income tax movement on listed equity investment at fair value CLOSING BALANCE CONSOLIDATED 2021 $’000 2020 $’000 19,359 1,856 21,215 17,746 1,613 19,359 (59,032) (38,908) 28,820 (28,747) (8,646) (38,858) 8,623 (59,032) 74 Premier Investments Limited 74 NOTES TO THE FINANCIAL STATEMENTS Notes to the Financial Statements FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) For the 53 weeks ended 31 July 2021 and the 52 weeks ended 25 July 2020 (continued) CAPITAL STRUCTURE AND RISK MANAGEMENT 25 OTHER FINANCIAL INSTRUMENTS CURRENT ASSETS Derivatives designated as hedging instruments Forward currency contracts – cash flow hedges TOTAL CURRENT ASSETS CURRENT LIABILITIES Derivatives designated as hedging instruments Forward currency contracts – cash flow hedges Interest rate swaps – cash flow hedges TOTAL CURRENT LIABILITIES NON –CURRENT LIABILITIES Derivatives designated as hedging instruments Interest rate swaps – cash flow hedges TOTAL NON-CURRENT LIABILITIES CONSOLIDATED 2021 $’000 2020 $’000 7,073 7,073 - 815 815 - - - - 4,008 - 4,008 2,316 2,316 (a) DERIVATIVE INSTRUMENTS USED BY THE GROUP (i) Forward currency contracts – cash flow hedges The majority of the Group’s inventory purchases are denominated in US Dollars. In order to protect against exchange rates movements, the Group has entered into forward exchange contracts to predominantly purchase US Dollars. The forward currency contracts are considered to be highly effective hedges as they are matched against forecast inventory purchases and are timed to mature when payments are scheduled to be made. Any gain or loss on the contracts attributable to the hedge risk are recognised in other comprehensive income and accumulated in the hedge reserve in equity. The cash flows are expected to occur between one to twelve months from 31 July 2021 and the profit or loss within cost of sales will be affected over the next year as the inventory is sold. (ii) Interest rate swaps – cash flow hedges The Group has entered into interest rate swap contracts exchanging floating rate interest amounts for fixed rate interest amounts on certain of its interest-bearing liabilities. These interest rate swap contracts are designated as cash flow hedges in order to reduce the Group’s cash flow exposure resulting from variable interest rates on borrowings. The interest rate swaps and the interest rate payments on the loans occur simultaneously. The amount accumulated in the hedge reserve in equity is reclassified to profit or loss over the period that the floating rate interest payments on debt affect profit or loss. NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) CAPITAL STRUCTURE AND RISK MANAGEMENT 25 OTHER FINANCIAL INSTRUMENTS (CONTINUED) (a) DERIVATIVE INSTRUMENTS USED BY THE GROUP (CONTINUED) At reporting date, the details of outstanding forward currency contracts are: CONSOLIDATED 2021 $’000 2020 $’000 2021 2020 NOTIONAL AMOUNTS $AUD AVERAGE EXCHANGE RATE 133,430 27,016 128,198 114,909 0.7725 0.7403 0.6938 0.7049 NOTIONAL AMOUNTS $NZD AVERAGE EXCHANGE RATE 22,990 0.7267 21,876 21,149 0.6479 0.6573 NOTIONAL AMOUNTS $NZD AVERAGE EXCHANGE RATE 4,602 1.0365 - - - - Buy USD / Sell AUD Maturity < 6 months Maturity 6 – 12 months Buy USD / Sell NZD Maturity < 6 months Maturity 6 – 12 months Buy AUD / Sell NZD Maturity < 6 months OTHER FINANCIAL INSTRUMENTS AND HEDGING ACCOUNTING POLICY The Group uses derivative financial instruments such as forward currency contracts and interest rate swaps to hedge its foreign currency risks and interest rate risks. These derivative financial instruments are initially recognised at fair value on the date on which the derivative contract is entered into and are subsequently remeasured at fair value at subsequent reporting dates. Derivatives are carried as financial assets when their fair value is positive and as financial liabilities when their fair value is negative. Any gains or losses arising from changes in the fair value of derivatives, except for those that qualify as cash flow hedges and are considered to be effective, are taken directly to profit or loss for the period. Cash flow hedges Cash flow hedges are hedges of the Group’s exposure to variability in cash flows that is attributable to highly probable future purchases as well as cash flows attributable to a particular risk associated with a recognised asset or liability that is a firm commitment and that could affect the statement of comprehensive income. The Group’s cash flow hedges that meet the strict criteria for hedge accounting are accounted for by recognising the effective portion of the gain or loss on the hedging instrument directly in other comprehensive income and accumulated in the cash flow hedge reserve in equity, while the ineffective portion due to counterparty credit risk is recognised in profit or loss. Amounts taken to equity are reclassified out of equity and included in the measurement of the hedged transaction (finance costs or inventory purchases) when the forecast transaction occurs. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked (due to being ineffective), amounts previously recognised in equity remain in equity until the forecast transaction occurs. 75 75 76 Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) CAPITAL STRUCTURE AND RISK MANAGEMENT 25 OTHER FINANCIAL INSTRUMENTS (CONTINUED) (a) DERIVATIVE INSTRUMENTS USED BY THE GROUP (CONTINUED) At reporting date, the details of outstanding forward currency contracts are: CONSOLIDATED 2021 $’000 2020 $’000 2021 2020 NOTIONAL AMOUNTS $AUD AVERAGE EXCHANGE RATE 133,430 27,016 128,198 114,909 0.7725 0.7403 0.6938 0.7049 NOTIONAL AMOUNTS $NZD AVERAGE EXCHANGE RATE 22,990 - 21,876 21,149 0.7267 - 0.6479 0.6573 NOTIONAL AMOUNTS $NZD AVERAGE EXCHANGE RATE - 4,602 - 1.0365 Buy USD / Sell AUD Maturity < 6 months Maturity 6 – 12 months Buy USD / Sell NZD Maturity < 6 months Maturity 6 – 12 months Buy AUD / Sell NZD Maturity < 6 months OTHER FINANCIAL INSTRUMENTS AND HEDGING ACCOUNTING POLICY The Group uses derivative financial instruments such as forward currency contracts and interest rate swaps to hedge its foreign currency risks and interest rate risks. These derivative financial instruments are initially recognised at fair value on the date on which the derivative contract is entered into and are subsequently remeasured at fair value at subsequent reporting dates. Derivatives are carried as financial assets when their fair value is positive and as financial liabilities when their fair value is negative. Any gains or losses arising from changes in the fair value of derivatives, except for those that qualify as cash flow hedges and are considered to be effective, are taken directly to profit or loss for the period. Cash flow hedges Cash flow hedges are hedges of the Group’s exposure to variability in cash flows that is attributable to highly probable future purchases as well as cash flows attributable to a particular risk associated with a recognised asset or liability that is a firm commitment and that could affect the statement of comprehensive income. The Group’s cash flow hedges that meet the strict criteria for hedge accounting are accounted for by recognising the effective portion of the gain or loss on the hedging instrument directly in other comprehensive income and accumulated in the cash flow hedge reserve in equity, while the ineffective portion due to counterparty credit risk is recognised in profit or loss. Amounts taken to equity are reclassified out of equity and included in the measurement of the hedged transaction (finance costs or inventory purchases) when the forecast transaction occurs. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked (due to being ineffective), amounts previously recognised in equity remain in equity until the forecast transaction occurs. 76 Premier Investments Limited 76 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS Notes to the Financial Statements FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) For the 53 weeks ended 31 July 2021 and the 52 weeks ended 25 July 2020 (continued) CAPITAL STRUCTURE AND RISK MANAGEMENT CAPITAL STRUCTURE AND RISK MANAGEMENT 26 FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES 26 FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES The Group’s principal financial instruments comprise cash and cash equivalents, derivative financial The Group’s principal financial instruments comprise cash and cash equivalents, derivative financial instruments, listed equity investments at fair value, receivables, payables, bank overdrafts and interest- instruments, listed equity investments at fair value, receivables, payables, bank overdrafts and interest- bearing liabilities. bearing liabilities. RISK EXPOSURES AND RESPONSES RISK EXPOSURES AND RESPONSES The Group manages its exposure to key financial risks in accordance with Board-approved policies which are The Group manages its exposure to key financial risks in accordance with Board-approved policies which are reviewed annually and includes liquidity risk, foreign currency risk, interest rate risk and credit risk. The reviewed annually and includes liquidity risk, foreign currency risk, interest rate risk and credit risk. The objective of the policy is to support the delivery of the Group’s financial targets whilst protecting future objective of the policy is to support the delivery of the Group’s financial targets whilst protecting future financial security. financial security. The Group uses different methods to measure and manage different types of risks to which it is exposed. The Group uses different methods to measure and manage different types of risks to which it is exposed. These include, monitoring levels of exposure to interest rate and foreign exchange risk and assessment of These include, monitoring levels of exposure to interest rate and foreign exchange risk and assessment of market forecasts for interest rate and foreign exchange prices. Liquidity risk is monitored through market forecasts for interest rate and foreign exchange prices. Liquidity risk is monitored through development of future cash flow forecast projections. development of future cash flow forecast projections. CREDIT RISK CREDIT RISK The overwhelming majority of the Group’s sales are on cash terms with settlement within 24 hours. As The overwhelming majority of the Group’s sales are on cash terms with settlement within 24 hours. As such, the Group’s exposure to credit risk is minimal. Receivable balances are monitored on an ongoing such, the Group’s exposure to credit risk is minimal. Receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant. basis with the result that the Group’s exposure to bad debts is not significant. There are no significant concentrations of credit risk within the Group and financial instruments are spread There are no significant concentrations of credit risk within the Group and financial instruments are spread amongst a number of financial institutions. amongst a number of financial institutions. With respect to credit risk arising mainly from cash and cash equivalents and certain derivative instruments, With respect to credit risk arising mainly from cash and cash equivalents and certain derivative instruments, the Group’s exposure to credit risk arises from default of the counter party, with a maximum exposure equal the Group’s exposure to credit risk arises from default of the counter party, with a maximum exposure equal to the carrying amount of these instruments. Since the Group trades only with recognised creditworthy third to the carrying amount of these instruments. Since the Group trades only with recognised creditworthy third parties, there is no requirement for collateral by either party. parties, there is no requirement for collateral by either party. Credit risk for the Group also arises from financial guarantees that members of the Group act as guarantor. Credit risk for the Group also arises from financial guarantees that members of the Group act as guarantor. At 31 July 2021, the maximum exposure to credit risk of the Group is the amount guaranteed as disclosed in At 31 July 2021, the maximum exposure to credit risk of the Group is the amount guaranteed as disclosed in note 34. note 34. INTEREST RATE RISK INTEREST RATE RISK The Group’s exposure to market interest rates relates primarily to its cash and cash equivalents that it holds The Group’s exposure to market interest rates relates primarily to its cash and cash equivalents that it holds and interest-bearing liabilities. and interest-bearing liabilities. At reporting date, the Group had the following mix of financial assets and liabilities exposed to variable At reporting date, the Group had the following mix of financial assets and liabilities exposed to variable interest rate risk that are not designated in cash flow hedges: interest rate risk that are not designated in cash flow hedges: CONSOLIDATED CONSOLIDATED FOREIGN OPERATIONS Financial Assets Financial Assets Cash and cash equivalents Cash and cash equivalents Financial Liabilities Financial Liabilities Bank loans AUD Bank loans AUD NET FINANCIAL ASSETS NET FINANCIAL ASSETS 77 NOTES NOTES 21 21 22 22 2021 2021 $’000 $’000 523,356 523,356 523,356 523,356 146,834 146,834 146,834 146,834 376,522 376,522 2020 2020 $’000 $’000 448,832 448,832 448,832 448,832 146,659 146,659 146,659 146,659 302,173 302,173 77 77 NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) CAPITAL STRUCTURE AND RISK MANAGEMENT 26 FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES (CONTINUED) INTEREST RATE RISK (CONTINUED) Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s objective of managing interest rate risk is to minimise the Group’s exposure to fluctuations in interest rates that might impact its interest revenue, interest expense and cash flow. The Group manages this by locking in a portion of its cash and cash equivalents into term deposits. The maturity of term deposits is determined based on the Group’s cash flow forecast. The Group manages its interest rate risk relating to interest-bearing liabilities by having access to both fixed and variable rate debt which can be drawn down. The Group also entered into interest rate swaps, in which it agreed to exchange, at specific intervals, the difference between fixed and variable interest amounts, calculated on an agreed-upon notional principal amount. i) Interest rate sensitivity The following table demonstrates the sensitivity to a reasonably possible change in interest rates on the portion of cash and cash equivalents and interest-bearing liabilities affected. A 100 (2020:100) basis point increase and decrease in Australian interest rates represents management's assessment of the reasonably possible change in interest rates. The table indicates an increase or decrease in the Group’s profit before tax. Impacts of reasonably possible movements: CONSOLIDATED +1.0% (100 basis points) -1.0% (100 basis points) POST-TAX PROFIT TO INCREASE (DECREASE) BY: 2021 $000 3,117 (3,117) 2020 $000 3,035 (3,035) Significant assumptions used in the interest rate sensitivity analysis include: - Reasonably possible movements in interest rates were determined based on the Group’s current credit rating and mix of debt in Australian and foreign countries, relationships with financial institutions, the level of debt that is expected to be renewed as well as a review of the last two years’ historical movements and economic forecasters’ expectations. to in the next twelve months. - The net exposure at reporting date is representative of what the Group was and is expecting to be exposed - The sensitivity analysis assumes all other variables are held constant, and the change in interest rates take place at the beginning of the financial year and are held constant throughout the reporting period. The Group has operations in Australia, New Zealand, Singapore, Hong Kong, Malaysia, The Republic of Ireland and the United Kingdom. As a result, movements in the Australian Dollar and the currencies applicable to these foreign operations affect the Group’s statement of financial position and results from operations. From time to time the Group obtains New Zealand Dollar denominated financing facilities from a financial institution to provide a natural hedge of the Group’s exposure to movements in the Australian Dollar and New Zealand Dollar (AUD/NZD) on translation of the New Zealand statement of financial position. In addition, the Group, on occasion, hedges its cash flow exposure to movements in the AUD/NZD. The Group also on occasion, hedges its cash flow exposure in movements in the AUD/SGD and AUD/GBP. 78 Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) CAPITAL STRUCTURE AND RISK MANAGEMENT 26 FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES (CONTINUED) INTEREST RATE RISK (CONTINUED) Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s objective of managing interest rate risk is to minimise the Group’s exposure to fluctuations in interest rates that might impact its interest revenue, interest expense and cash flow. The Group manages this by locking in a portion of its cash and cash equivalents into term deposits. The maturity of term deposits is determined based on the Group’s cash flow forecast. The Group manages its interest rate risk relating to interest-bearing liabilities by having access to both fixed and variable rate debt which can be drawn down. The Group also entered into interest rate swaps, in which it agreed to exchange, at specific intervals, the difference between fixed and variable interest amounts, calculated on an agreed-upon notional principal amount. Interest rate sensitivity i) The following table demonstrates the sensitivity to a reasonably possible change in interest rates on the portion of cash and cash equivalents and interest-bearing liabilities affected. A 100 (2020:100) basis point increase and decrease in Australian interest rates represents management's assessment of the reasonably possible change in interest rates. The table indicates an increase or decrease in the Group’s profit before tax. Impacts of reasonably possible movements: CONSOLIDATED +1.0% (100 basis points) -1.0% (100 basis points) POST-TAX PROFIT TO INCREASE (DECREASE) BY: 2021 $000 3,117 (3,117) 2020 $000 3,035 (3,035) Significant assumptions used in the interest rate sensitivity analysis include: - Reasonably possible movements in interest rates were determined based on the Group’s current credit rating and mix of debt in Australian and foreign countries, relationships with financial institutions, the level of debt that is expected to be renewed as well as a review of the last two years’ historical movements and economic forecasters’ expectations. - The net exposure at reporting date is representative of what the Group was and is expecting to be exposed to in the next twelve months. - The sensitivity analysis assumes all other variables are held constant, and the change in interest rates take place at the beginning of the financial year and are held constant throughout the reporting period. FOREIGN OPERATIONS The Group has operations in Australia, New Zealand, Singapore, Hong Kong, Malaysia, The Republic of Ireland and the United Kingdom. As a result, movements in the Australian Dollar and the currencies applicable to these foreign operations affect the Group’s statement of financial position and results from operations. From time to time the Group obtains New Zealand Dollar denominated financing facilities from a financial institution to provide a natural hedge of the Group’s exposure to movements in the Australian Dollar and New Zealand Dollar (AUD/NZD) on translation of the New Zealand statement of financial position. In addition, the Group, on occasion, hedges its cash flow exposure to movements in the AUD/NZD. The Group also on occasion, hedges its cash flow exposure in movements in the AUD/SGD and AUD/GBP. 78 Premier Investments Limited 78 NOTES TO THE FINANCIAL STATEMENTS Notes to the Financial Statements FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) For the 53 weeks ended 31 July 2021 and the 52 weeks ended 25 July 2020 (continued) CAPITAL STRUCTURE AND RISK MANAGEMENT 26 FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES (CONTINUED) FOREIGN CURRENCY TRANSACTIONS The Group has exposures to foreign currencies principally arising from purchases by operating entities in currencies other than their functional currency. Over 80% of the Group’s purchases are denominated in United States Dollar (USD), which is not the functional currency of any Australian entities or any of the foreign operating entities. The Group considers its exposure to USD arising from the purchases of inventory to be a long-term and ongoing exposure. In order to protect against exchange rate movements, the Group enters into forward exchange contracts to purchase US Dollars. These forward exchange contracts are designated as cash flow hedges that are subject to movements through equity and profit or loss respectively as foreign exchange rates move. The Group’s foreign currency risk management policy provides guidelines for the term over which foreign currency hedging will be undertaken for part or all of the risk. This term cannot exceed two years. Factors taken into account include: - - - - the implied market volatility for the currency exposure being hedged and the cost of hedging, relative to long-term indicators; the level of the base currency against the currency risk being hedged, relative to long-term indicators; the Group’s strategic decision-making horizon; and other factors considered relevant by the Board The policy requires periodic reporting to the Audit and Risk Committee, and its application is subject to oversight from the Chairman of the Audit and Risk Committee or the Chairman of the Board. The policy allows the use of forward exchange contracts and foreign currency options. At reporting date, the Group had the following exposures to movements in the United States Dollar (USD), New Zealand Dollar (NZD), Singapore Dollar (SGD), Pound Sterling (GBP), Hong Kong Dollar (HKD), Malaysian Ringgit (MYR), and Euro (EUR): 2021 CONSOLIDATED FINANCIAL ASSETS USD NZD SGD GBP HKD $’000 $’000 $’000 $’000 $’000 MYR $’000 EUR $’000 Cash and cash equivalents 11,400 52,035 23,807 18,484 Trade and other receivables Derivative financial assets 678 7,073 - - 19 - - - 19,151 52,035 23,826 18,484 FINANCIAL LIABILITIES Trade and other payables 51,287 7,539 339 4,490 Derivative financial liabilities - - - - 51,287 7,539 339 4,490 6 - - 6 - - 2,210 716 - - - - 2,210 716 - - - - NET EXPOSURE (32,136) 44,496 23,487 13,994 6 2,210 716 The Group has forward currency contracts designated as cash flow hedges that are subject to movements through other comprehensive income and profit or loss respectively as foreign exchange rates move (refer to Note 24) 79 79 NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) CAPITAL STRUCTURE AND RISK MANAGEMENT 26 FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES (CONTINUED) FOREIGN CURRENCY TRANSACTIONS (CONTINUED) 2020 CONSOLIDATED FINANCIAL ASSETS USD NZD SGD GBP HKD MYR EUR $’000 $’000 $’000 $’000 $’000 $’000 $’000 Cash and cash equivalents 14,076 27,477 14,787 12,669 1,802 5,124 904 Trade and other receivables Derivative financial assets 755 - 48 - 14,831 27,477 14,835 12,669 1,802 5,124 904 FINANCIAL LIABILITIES Trade and other payables 44,954 5,876 191 3,297 Derivative financial liabilities 4,008 - 48,962 5,876 191 3,297 - - - - - - - - 257 - 257 - - - - - NET EXPOSURE (34,131) 21,601 14,644 9,372 1,545 5,124 904 FOREIGN CURRENCY RISK The following sensitivity is based on the foreign exchange risk exposures in existence at the reporting date: POST-TAX PROFIT HIGHER/(LOWER) OTHER COMPREHENSIVE INCOME HIGHER/(LOWER) CONSOLIDATED Impacts of reasonably possible movements: CONSOLIDATED AUD/USD + 2.5% AUD/USD – 10.0% AUD/NZD + 2.5% AUD/NZD – 10.0% AUD/SGD + 2.5% AUD/SGD –10.0% AUD/GBP + 2.5% AUD/GBP –10.0% AUD/HKD + 2.5% AUD/HKD –10.0% AUD/MYR + 2.5% AUD/MYR –10.0% AUD/EUR + 2.5% AUD/EUR –10.0% 2021 $000 1,023 (4,111) (1,085) 4,944 (573) 2,610 (341) 1,555 - 1 (54) 246 (17) 80 2020 $000 685 (3,192) (527) 3,285 (357) 1,627 (229) 1,041 (50) 229 (125) 569 (22) 100 2021 $000 (4,603) 19,815 2020 $000 (5,015) 21,836 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 80 Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) CAPITAL STRUCTURE AND RISK MANAGEMENT 26 FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES (CONTINUED) FOREIGN CURRENCY TRANSACTIONS (CONTINUED) 2020 CONSOLIDATED FINANCIAL ASSETS USD NZD SGD GBP HKD MYR EUR $’000 $’000 $’000 $’000 $’000 $’000 $’000 Cash and cash equivalents 14,076 27,477 14,787 12,669 1,802 5,124 904 Trade and other receivables Derivative financial assets 755 - - - 48 - - - - - - - - - 14,831 27,477 14,835 12,669 1,802 5,124 904 FINANCIAL LIABILITIES Trade and other payables 44,954 5,876 191 3,297 Derivative financial liabilities 4,008 - - - 48,962 5,876 191 3,297 257 - 257 - - - - - - NET EXPOSURE (34,131) 21,601 14,644 9,372 1,545 5,124 904 FOREIGN CURRENCY RISK The following sensitivity is based on the foreign exchange risk exposures in existence at the reporting date: POST-TAX PROFIT HIGHER/(LOWER) OTHER COMPREHENSIVE INCOME HIGHER/(LOWER) CONSOLIDATED Impacts of reasonably possible movements: CONSOLIDATED AUD/USD + 2.5% AUD/USD – 10.0% AUD/NZD + 2.5% AUD/NZD – 10.0% AUD/SGD + 2.5% AUD/SGD –10.0% AUD/GBP + 2.5% AUD/GBP –10.0% AUD/HKD + 2.5% AUD/HKD –10.0% AUD/MYR + 2.5% AUD/MYR –10.0% AUD/EUR + 2.5% AUD/EUR –10.0% 2021 $000 1,023 (4,111) (1,085) 4,944 (573) 2,610 (341) 1,555 - 1 (54) 246 (17) 80 2020 $000 685 (3,192) (527) 3,285 (357) 1,627 (229) 1,041 (50) 229 (125) 569 (22) 100 2021 $000 (4,603) 19,815 2020 $000 (5,015) 21,836 - - - - - - - - - - - - - - - - - - - - - - - - 80 Premier Investments Limited 80 NOTES TO THE FINANCIAL STATEMENTS Notes to the Financial Statements FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) For the 53 weeks ended 31 July 2021 and the 52 weeks ended 25 July 2020 (continued) CAPITAL STRUCTURE AND RISK MANAGEMENT 26 FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES (CONTINUED) FOREIGN CURRENCY RISK (CONTINUED) Significant assumptions used in the foreign currency exposure sensitivity analysis include: - Reasonably possible movements in foreign exchange rates were determined based on a review of the last two years historical movements and economic forecasters’ expectations. - The net exposure at reporting date is representative of what the Group was and is expecting to be exposed to in the next twelve months from reporting date. - The effect on other comprehensive income is the effect on the cash flow hedge reserve. - The sensitivity does not include financial instruments that are non-monetary items as these are not considered to give rise to currency risk. LIQUIDITY RISK Liquidity risk refers to the risk of encountering difficulties in meeting obligations associated with financial liabilities and other cash flow commitments. Liquidity risk management is ensuring that there are sufficient funds available to meet financial commitments in a timely manner and planning for unforeseen events which may curtail cash flows and cause pressure on liquidity. The Group keeps its short-, medium- and long-term funding requirements under constant review. Its policy is to have sufficient committed funds available to meet medium term requirements, with flexibility and headroom to make acquisitions for cash in the event an opportunity should arise. The Group has, at reporting date, $385.8 million (2020: $306.0 million) cash held in deposit with 11am at call and the remaining $137.5 million (2020: $142.9 million) cash held in deposit with maturity terms ranging from 30 to 180 days (2020: 30 to 90 days). Hence management believe there is no significant exposure to liquidity risk at 31 July 2021 and 25 July 2020. The Group aims to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts and bank loans with a variety of counterparties. At reporting date, the remaining undiscounted contractual maturities of the Group’s financial liabilities are: 2021 CONSOLIDATED FINANCIAL LIABILITIES Trade and other payables Bank loans Lease liabilities Forward currency contracts MATURITY 0 - 12 MONTHS MATURITY > 12 MONTHS $’000 $’000 164,269 69,000 159,050 189,492 581,811 - 77,834 78,435 - 156,269 NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) CAPITAL STRUCTURE AND RISK MANAGEMENT 26 FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES (CONTINUED) LIQUIDITY RISK (CONTINUED) 2020 CONSOLIDATED FINANCIAL LIABILITIES Trade and other payables Bank loans Lease liabilities Forward currency contracts MATURITY 0 - 12 MATURITY > 12 MONTHS MONTHS $’000 $’000 208,979 - 189,221 283,742 681,942 146,659 114,668 - - 261,327 FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES The Group measures financial instruments, such as derivatives and listed equity investments at fair value, at fair value at each reporting date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place in either the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability, which is accessible to the Group. In determining the fair value of an asset or liability, the Group uses market observable data, to the extent possible. The fair value of financial assets and financial liabilities is based on market prices (where a market exists) or using other widely accepted methods of valuation. Fair value hierarchy All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the following fair value hierarchy, based on the lowest level input that is significant to the fair value measurement as a whole: Level 1 – the fair value is calculated using quoted price in active markets for identical assets or liabilities. Level 2 – the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices). Level 3 – the fair value is estimated using inputs for the asset or liability that are not based on observable market data. 81 81 82 Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) CAPITAL STRUCTURE AND RISK MANAGEMENT 26 FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES (CONTINUED) LIQUIDITY RISK (CONTINUED) 2020 CONSOLIDATED FINANCIAL LIABILITIES Trade and other payables Bank loans Lease liabilities Forward currency contracts MATURITY 0 - 12 MONTHS MATURITY > 12 MONTHS $’000 $’000 208,979 - 189,221 283,742 681,942 - 146,659 114,668 - 261,327 FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES The Group measures financial instruments, such as derivatives and listed equity investments at fair value, at fair value at each reporting date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place in either the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability, which is accessible to the Group. In determining the fair value of an asset or liability, the Group uses market observable data, to the extent possible. The fair value of financial assets and financial liabilities is based on market prices (where a market exists) or using other widely accepted methods of valuation. Fair value hierarchy All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the following fair value hierarchy, based on the lowest level input that is significant to the fair value measurement as a whole: Level 1 – the fair value is calculated using quoted price in active markets for identical assets or liabilities. Level 2 – the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices). Level 3 – the fair value is estimated using inputs for the asset or liability that are not based on observable market data. 82 Premier Investments Limited 82 NOTES TO THE FINANCIAL STATEMENTS Notes to the Financial Statements FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) For the 53 weeks ended 31 July 2021 and the 52 weeks ended 25 July 2020 (continued) CAPITAL STRUCTURE AND RISK MANAGEMENT 26 FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES (CONTINUED) FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (CONTINUED) Fair value hierarchy (continued) The following table provides the fair value measurement hierarchy of the Group’s financial assets and liabilities: FINANCIAL YEAR ENDED 31 JULY 2021 FINANCIAL YEAR ENDED 25 JULY 2020 CONSOLIDATED LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 1 LEVEL 2 LEVEL 3 $’000 $’000 $’000 $’000 $’000 $’000 FINANCIAL ASSETS Listed equity investment at fair value 63,462 - Foreign Exchange Contracts - 7,073 63,462 7,073 FINANCIAL LIABILITIES Interest Rate Swaps Foreign Exchange Contracts - - - 815 - 815 - - - - - - 18,132 - 18,132 - - - - - - 2,316 4,008 6,324 - - - - - - There have been no transfers between Level 1, Level 2 and Level 3 during the financial year. At 31 July 2021 and 25 July 2020, the fair values of cash and cash equivalents, short-term receivables and payables approximate their carrying values. The carrying value of interest-bearing liabilities is considered to approximate the fair value, being the amount at which the liability could be settled in a current transaction between willing parties. Foreign exchange contracts and interest rate swaps are initially recognised in the statement of financial position at fair value on the date which the contract is entered into, and subsequently remeasured to fair value. Accordingly, the carrying amounts of forward exchange contracts and interest rate swaps approximate their fair values at the reporting date. Foreign exchange contracts are measured based on observable spot exchange rates, the yield curves of the respective currencies as well as the currency basis spread between the respective currencies. Interest rate swaps are measured based on forward interest rates from observable yield curves at the end of the respective reporting period, and contract interest rates, which have been discounted at a rate that incorporates the credit risk of the counterparties. 83 83 NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) GROUP STRUCTURE 27 SUBSIDIARIES The consolidated financial statements include that of Premier Investments Limited (ultimate parent entity) and the subsidiaries listed in the following table. (* Indicates not trading as at the date of this report) COUNTRY OF INCORPORATION 2021 INTEREST 2020 INTEREST Kimtara Investments Pty Ltd Premfin Pty Ltd Springdeep Investments Pty Ltd Prempref Pty Ltd Metalgrove Pty Ltd Just Group Limited Just Jeans Group Pty Limited Just Jeans Pty Limited Jay Jays Trademark Pty Limited Just-Shop Pty Limited Peter Alexander Sleepwear Pty Limited Old Blues Pty Limited Kimbyr Investments Limited Jacqui E Pty Limited Jacqueline-Eve Fashions Pty Limited * Jacqueline-Eve (Hobart) Pty Limited * Jacqueline-Eve (Retail) Pty Limited * Jacqueline-Eve (Leases) Pty Limited * Sydleigh Pty Limited * Old Favourites Blues Pty Limited * Urban Brands Retail Pty Ltd * Portmans Pty Limited Dotti Pty Ltd Smiggle Pty Limited Just Group International Pty Limited * Smiggle Group Holdings Pty Limited * Smiggle International Pty Limited * Smiggle Singapore Pte Ltd Just Group International HK Limited* Smiggle HK Limited Just Group USA Inc.* Peter Alexander USA Inc.* Smiggle USA Inc.* Just UK International Limited* Smiggle UK Limited Peter Alexander UK Limited* Smiggle Ireland Limited Smiggle Netherlands B.V.* ETI Holdings Limited* Roskill Hill Limited* RSCA Pty Limited* RSCB Pty Limited* Just Group Singapore Private Ltd * Peter Alexander Singapore Private Ltd * Smiggle Stores Malaysia SDN BHD New Zealand Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Singapore Hong Kong Hong Kong USA USA USA UK UK UK Ireland Netherlands New Zealand New Zealand Australia Australia Singapore Singapore Malaysia 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 84 Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) GROUP STRUCTURE 27 SUBSIDIARIES The consolidated financial statements include that of Premier Investments Limited (ultimate parent entity) and the subsidiaries listed in the following table. (* Indicates not trading as at the date of this report) Kimtara Investments Pty Ltd Premfin Pty Ltd Springdeep Investments Pty Ltd Prempref Pty Ltd Metalgrove Pty Ltd Just Group Limited Just Jeans Group Pty Limited Just Jeans Pty Limited Jay Jays Trademark Pty Limited Just-Shop Pty Limited Peter Alexander Sleepwear Pty Limited Old Blues Pty Limited Kimbyr Investments Limited Jacqui E Pty Limited Jacqueline-Eve Fashions Pty Limited * Jacqueline-Eve (Hobart) Pty Limited * Jacqueline-Eve (Retail) Pty Limited * Jacqueline-Eve (Leases) Pty Limited * Sydleigh Pty Limited * Old Favourites Blues Pty Limited * Urban Brands Retail Pty Ltd * Portmans Pty Limited Dotti Pty Ltd Smiggle Pty Limited Just Group International Pty Limited * Smiggle Group Holdings Pty Limited * Smiggle International Pty Limited * Smiggle Singapore Pte Ltd Just Group International HK Limited* Smiggle HK Limited Just Group USA Inc.* Peter Alexander USA Inc.* Smiggle USA Inc.* Just UK International Limited* Smiggle UK Limited Peter Alexander UK Limited* Smiggle Ireland Limited Smiggle Netherlands B.V.* ETI Holdings Limited* Roskill Hill Limited* RSCA Pty Limited* RSCB Pty Limited* Just Group Singapore Private Ltd * Peter Alexander Singapore Private Ltd * Smiggle Stores Malaysia SDN BHD COUNTRY OF INCORPORATION Australia Australia Australia Australia Australia 2021 INTEREST 100% 100% 100% 100% 100% 2020 INTEREST 100% 100% 100% 100% 100% Australia Australia Australia Australia Australia Australia Australia New Zealand Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Singapore Hong Kong Hong Kong USA USA USA UK UK UK Ireland Netherlands New Zealand New Zealand Australia Australia Singapore Singapore Malaysia 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Premier Investments Limited 84 84 NOTES TO THE FINANCIAL STATEMENTS Notes to the Financial Statements FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) For the 53 weeks ended 31 July 2021 and the 52 weeks ended 25 July 2020 (continued) GROUP STRUCTURE 28 PARENT ENTITY INFORMATION The accounting policies of Premier Investments Limited, being the parent entity, which have been applied in determining the financial information shown below, are the same as those applied in the consolidated financial statements. (a) Summary financial information Statement of financial position Current assets Total assets Current liabilities Total liabilities Shareholders’ equity Issued capital Reserves: - Foreign currency translation reserve - Performance rights reserve - Cash flow hedge reserve Retained earnings Net profit for the period Total comprehensive loss for the period, net of tax (b) Guarantees entered into by the parent entity 2021 $’000 2020 $’000 212,017 1,482,514 77,725 136,742 225,111 1,461,108 114,731 190,029 608,615 608,615 659 21,215 (157) 715,440 190,558 (3,492) 4,442 19,359 (449) 639,112 78,319 (628) The parent entity has provided no financial guarantees in respect of bank overdrafts and loans of subsidiaries (2020: $nil). The parent entity has also given no unsecured guarantees in respect of finance leases of subsidiaries or bank overdrafts of subsidiaries (2020: $nil). (c) Contingent liabilities of the parent entity The parent entity did not have any contingent liabilities as at 31 July 2021 (2020: $nil). length and on normal commercial terms. (d) Contractual commitments for the acquisition of property, plant or equipment The parent entity did not have any contractual commitments to purchase property, plant and equipment as at 31 July 2021 or 25 July 2020. 85 85 86 NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) GROUP STRUCTURE 29 DEED OF CROSS GUARANTEE Pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785, dated 17 December 2016, relief has been granted to certain wholly-owned subsidiaries in the Australian Group from the Corporations law requirements for preparation, audit and lodgement of financial reports. As a condition of this instrument, Just Group Limited, a subsidiary of Premier Investments Limited, and each of the controlled entities of Just Group Limited entered into a Deed of Cross Guarantee as at 25 June 2009. Premier Investments Limited is not a party to the Deed of Cross Guarantee. 30 RELATED PARTY TRANSACTIONS (a) PARENT ENTITY AND SUBSIDIARIES (b) KEY MANAGEMENT PERSONNEL The ultimate parent entity is Premier Investments Limited. Details of subsidiaries are provided in note 28. COMPENSATION FOR KEY MANAGEMENT PERSONNEL Short-term employee benefits Post-employment benefits Share-based payments TOTAL CONSOLIDATED 2021 $ 2020 $ 7,699,313 109,379 89,054 7,897,746 7,078,408 113,168 504,722 7,696,298 (c) RELATED PARTY TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL Mr. Lanzer is the managing partner of the legal firm Arnold Bloch Leibler. Group companies use the services of Arnold Bloch Leibler from time to time. Legal services totalling $2,809,669 (2020: $2,396,209), including Mr. Lanzer's Director fees, GST and disbursements were invoiced by Arnold Bloch Leibler to the Group, with $544,387 (2020: $713,866) remaining outstanding at year-end. The fees paid for these services were at arm's length and on normal commercial terms. Mr. Lanzer is a director of Loch Awe Pty Ltd. During the year, operating lease payments totalling $42,158 (2020: $223,293 including GST was paid to Loch Awe Pty Ltd, with $177,852 outstanding rent payments at year-end (2020: nil). The payments were at arm’s length and on normal commercial terms. Mr. Lew is a director of Voyager Distributing Company Pty Ltd. During the year, purchases totalling $22,990,422 (2020: $17,273,036) including GST have been made by Group companies from Voyager Distributing Co. Pty Ltd, with $9,843,740 (2020: $4,058,067) remaining outstanding at year-end. The purchases were all at arm’s Mr. Lew is a director of Century Plaza Trading Pty. Ltd. The company and Century Plaza Trading Pty Ltd are parties to a Services Agreement to which Century Plaza Trading agrees to provide certain administrative services to the company to the extent required and requested by the company. The company is required to reimburse Century Plaza Trading for costs it incurs in providing the company with the services under the Service Agreement. The company reimbursed a total of $561,000 (2020: $512,600) costs including GST incurred by Century Plaza Trading Pty Ltd. Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) GROUP STRUCTURE 29 DEED OF CROSS GUARANTEE Pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785, dated 17 December 2016, relief has been granted to certain wholly-owned subsidiaries in the Australian Group from the Corporations law requirements for preparation, audit and lodgement of financial reports. As a condition of this instrument, Just Group Limited, a subsidiary of Premier Investments Limited, and each of the controlled entities of Just Group Limited entered into a Deed of Cross Guarantee as at 25 June 2009. Premier Investments Limited is not a party to the Deed of Cross Guarantee. 30 RELATED PARTY TRANSACTIONS (a) PARENT ENTITY AND SUBSIDIARIES The ultimate parent entity is Premier Investments Limited. Details of subsidiaries are provided in note 28. (b) KEY MANAGEMENT PERSONNEL COMPENSATION FOR KEY MANAGEMENT PERSONNEL Short-term employee benefits Post-employment benefits Share-based payments TOTAL CONSOLIDATED 2021 $ 2020 $ 7,699,313 109,379 89,054 7,897,746 7,078,408 113,168 504,722 7,696,298 (c) RELATED PARTY TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL Mr. Lanzer is the managing partner of the legal firm Arnold Bloch Leibler. Group companies use the services of Arnold Bloch Leibler from time to time. Legal services totalling $2,809,669 (2020: $2,396,209), including Mr. Lanzer's Director fees, GST and disbursements were invoiced by Arnold Bloch Leibler to the Group, with $544,387 (2020: $713,866) remaining outstanding at year-end. The fees paid for these services were at arm's length and on normal commercial terms. Mr. Lanzer is a director of Loch Awe Pty Ltd. During the year, operating lease payments totalling $42,158 (2020: $223,293 including GST was paid to Loch Awe Pty Ltd, with $177,852 outstanding rent payments at year-end (2020: nil). The payments were at arm’s length and on normal commercial terms. Mr. Lew is a director of Voyager Distributing Company Pty Ltd. During the year, purchases totalling $22,990,422 (2020: $17,273,036) including GST have been made by Group companies from Voyager Distributing Co. Pty Ltd, with $9,843,740 (2020: $4,058,067) remaining outstanding at year-end. The purchases were all at arm’s length and on normal commercial terms. Mr. Lew is a director of Century Plaza Trading Pty. Ltd. The company and Century Plaza Trading Pty Ltd are parties to a Services Agreement to which Century Plaza Trading agrees to provide certain administrative services to the company to the extent required and requested by the company. The company is required to reimburse Century Plaza Trading for costs it incurs in providing the company with the services under the Service Agreement. The company reimbursed a total of $561,000 (2020: $512,600) costs including GST incurred by Century Plaza Trading Pty Ltd. Premier Investments Limited 86 86 NOTES TO THE FINANCIAL STATEMENTS Notes to the Financial Statements FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) For the 53 weeks ended 31 July 2021 and the 52 weeks ended 25 July 2020 (continued) OTHER DISCLOSURES CONSOLIDATED 2021 $ 2020 $ 31 AUDITOR’S REMUNERATION The auditor of Premier Investments Limited is Ernst & Young (Australia). Amounts received, or due and receivable, by Ernst & Young (Australia) for: Audit or review of the statutory financial report of the parent covering the group and auditing the statutory financial reports of any controlled entities Other assurance services or agreed-upon-procedures under other legislation or contractual arrangements not required to be performed by the auditor Other non-audit services SUB-TOTAL Amounts received, or due and receivable, by overseas member firms of Ernst & Young (Australia) for: Audit of the financial report of any controlled entities TOTAL AUDITOR’S REMUNERATION 32 SHARE-BASED PAYMENT PLANS (a) RECOGNISED SHARE-BASED PAYMENT EXPENSE TOTAL EXPENSE ARISING FROM EQUITY-SETTLED SHARE-BASED PAYMENT TRANSACTIONS (b) TYPE OF SHARE-BASED PAYMENT PLANS Performance rights 709,350 804,262 performance period, as well as the probability of not meeting the Total Shareholder Return (“TSR”) performance 39,287 11,613 760,250 38,696 29,144 872,102 230,940 991,190 225,209 1,097,311 CONSOLIDATED 2021 $’000 1,856 2020 $’000 1,613 The Group grants performance rights to executives, thus ensuring that the executives who are most directly able to influence the Group’s performance are appropriately aligned with the interests of shareholders. A performance right is a right to acquire one fully paid ordinary share of the Group after meeting a three- or four- year performance period, provided specific performance hurdles are met. The number of performance rights to vest is determined by a vesting schedule based on the performance of the Company. These performance hurdles have been discussed in the Remuneration Report section of the Directors’ Report. 87 88 87 NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) OTHER DISCLOSURES 32 SHARE-BASED PAYMENT PLANS (CONTINUED) (b) TYPE OF SHARE-BASED PAYMENT PLANS (CONTINUED) Performance rights (continued) hurdles. existence: GRANT DATE (DD/MM/YYYY) 26/04/2016 10/04/2017 19/02/2018 12/04/2019 01/05/2020 The fair value of the performance rights has been calculated as at the respective grant dates using an appropriate valuation technique. The valuation model applied, being the Monte-Carlo simulation pricing model is dependent on the assumptions underlying the performance rights granted to ensure these are appropriately factored into the determination of fair value. In determining the share-based payments expense for the period, the number of instruments expected to vest has been adjusted to reflect the number of executives expected to remain with the Group until the end of the The following table shows the share-based payment arrangements in existence during the current and prior reporting periods, as well as the factors considered in determining the fair values of the performance rights in NUMBER OF RIGHTS GRANTED 1,000,000 120,124 148,237 124,472 544,809 SHARE ISSUE PRICE OPTION LIFE DIVIDEND YIELD VOLATILITY RISK-FREE RATE FAIR VALUE $9.88 $15.70 $12.91 $18.18 3-6 years 2.5 years 2.5 years 2.5 years $13.21 2.5 – 4 years 5.5% 5% 3.4% 3.4% 3.5% 30% 30% 16% 30% 36% 2.06% 1.79% 2.14% 1.44% 0.40% $9.96 $6.89 $7.85 $6.81 $8.33 (c) SUMMARY OF RIGHTS GRANTED UNDER PERFORMANCE RIGHTS PLANS The following table illustrates the number (No.) and weighted average exercise prices (“WAEP”) of, and movements in, performance rights issued during the year: Balance at beginning of the year Granted during the year Exercised during the year (i) (139,524) Expired during the year Balance at the end of the year 673,886 2021 No. 813,410 - - 2021 WAEP 2020 No. 2020 WAEP - - - - - 615,637 544,809 (294,579) (52,457) 813,410 - - - - - (i) The weighted average share price at the date of exercise of rights exercised during the year was $21.77 (2020: $15.86). Since the end of the financial year and up to the date of this report, no performance rights have been exercised, no performance rights have been forfeited and no performance rights have expired. Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) OTHER DISCLOSURES 32 SHARE-BASED PAYMENT PLANS (CONTINUED) (b) TYPE OF SHARE-BASED PAYMENT PLANS (CONTINUED) Performance rights (continued) The fair value of the performance rights has been calculated as at the respective grant dates using an appropriate valuation technique. The valuation model applied, being the Monte-Carlo simulation pricing model is dependent on the assumptions underlying the performance rights granted to ensure these are appropriately factored into the determination of fair value. In determining the share-based payments expense for the period, the number of instruments expected to vest has been adjusted to reflect the number of executives expected to remain with the Group until the end of the performance period, as well as the probability of not meeting the Total Shareholder Return (“TSR”) performance hurdles. The following table shows the share-based payment arrangements in existence during the current and prior reporting periods, as well as the factors considered in determining the fair values of the performance rights in existence: GRANT DATE (DD/MM/YYYY) 26/04/2016 10/04/2017 19/02/2018 12/04/2019 01/05/2020 NUMBER OF RIGHTS GRANTED 1,000,000 120,124 148,237 124,472 544,809 SHARE ISSUE PRICE OPTION LIFE DIVIDEND YIELD VOLATILITY RISK-FREE RATE FAIR VALUE $9.88 $15.70 $12.91 $18.18 3-6 years 2.5 years 2.5 years 2.5 years $13.21 2.5 – 4 years 5.5% 5% 3.4% 3.4% 3.5% 30% 30% 16% 30% 36% 2.06% 1.79% 2.14% 1.44% 0.40% $9.96 $6.89 $7.85 $6.81 $8.33 (c) SUMMARY OF RIGHTS GRANTED UNDER PERFORMANCE RIGHTS PLANS The following table illustrates the number (No.) and weighted average exercise prices (“WAEP”) of, and movements in, performance rights issued during the year: Balance at beginning of the year Granted during the year Exercised during the year (i) Expired during the year Balance at the end of the year 2021 No. 813,410 - (139,524) - 673,886 2021 WAEP 2020 No. 2020 WAEP - - - - - 615,637 544,809 (294,579) (52,457) 813,410 - - - - - (i) The weighted average share price at the date of exercise of rights exercised during the year was $21.77 (2020: $15.86). Since the end of the financial year and up to the date of this report, no performance rights have been exercised, no performance rights have been forfeited and no performance rights have expired. Premier Investments Limited 88 88 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS Notes to the Financial Statements NOTES TO THE FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) FOR THE 53 WEEKS ENDED 31 JULY 2021 AND THE 52 WEEKS ENDED 25 JULY 2020 (CONTINUED) For the 53 weeks ended 31 July 2021 and the 52 weeks ended 25 July 2020 (continued) OTHER DISCLOSURES OTHER DISCLOSURES OTHER DISCLOSURES 32 SHARE-BASED PAYMENT PLANS (CONTINUED) 32 SHARE-BASED PAYMENT PLANS (CONTINUED) 32 SHARE-BASED PAYMENT PLANS (CONTINUED) (d) WEIGHTED AVERAGE FAIR VALUE (d) WEIGHTED AVERAGE FAIR VALUE (d) WEIGHTED AVERAGE FAIR VALUE The weighted average fair value of performance rights granted during the year was $nil (2020: $8.33). The weighted average fair value of performance rights granted during the year was $nil (2020: $8.33). The weighted average fair value of performance rights granted during the year was $nil (2020: $8.33). SHARE-BASED PAYMENT ACCOUNTING POLICIES SHARE-BASED PAYMENT ACCOUNTING POLICIES SHARE-BASED PAYMENT ACCOUNTING POLICIES The Group provides benefits to its employees in the form of share-based payments, whereby employees render The Group provides benefits to its employees in the form of share-based payments, whereby employees render The Group provides benefits to its employees in the form of share-based payments, whereby employees render services in exchange for rights over shares (equity-settled transactions). The plan in place to provide these services in exchange for rights over shares (equity-settled transactions). The plan in place to provide these services in exchange for rights over shares (equity-settled transactions). The plan in place to provide these benefits is a long-term incentive plan known as the performance rights plan (“PRP”). benefits is a long-term incentive plan known as the performance rights plan (“PRP”). benefits is a long-term incentive plan known as the performance rights plan (“PRP”). The cost of these equity-settled transactions with employees is measured by reference to the fair value of the The cost of these equity-settled transactions with employees is measured by reference to the fair value of the The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instrument at the date at which they are granted. equity instrument at the date at which they are granted. equity instrument at the date at which they are granted. The cost of equity-settled transactions is recognised in profit or loss, together with a corresponding increase in The cost of equity-settled transactions is recognised in profit or loss, together with a corresponding increase in The cost of equity-settled transactions is recognised in profit or loss, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled (the vesting period), ending equity, over the period in which the performance and/or service conditions are fulfilled (the vesting period), ending equity, over the period in which the performance and/or service conditions are fulfilled (the vesting period), ending on the date on which the relevant employees become fully entitled to the award (the vesting date). on the date on which the relevant employees become fully entitled to the award (the vesting date). on the date on which the relevant employees become fully entitled to the award (the vesting date). At each subsequent reporting date until vesting, the cumulative charge to profit or loss in the statement of At each subsequent reporting date until vesting, the cumulative charge to profit or loss in the statement of At each subsequent reporting date until vesting, the cumulative charge to profit or loss in the statement of comprehensive income is the product of: the grant date fair value of the award, the extent to which the vesting comprehensive income is the product of: the grant date fair value of the award, the extent to which the vesting comprehensive income is the product of: the grant date fair value of the award, the extent to which the vesting period has expired, and the current best estimate of the number of awards that will vest as at the grant date. period has expired, and the current best estimate of the number of awards that will vest as at the grant date. period has expired, and the current best estimate of the number of awards that will vest as at the grant date. The charge to profit or loss for the period is the cumulative amount as calculated above less the amounts already The charge to profit or loss for the period is the cumulative amount as calculated above less the amounts already The charge to profit or loss for the period is the cumulative amount as calculated above less the amounts already charged in previous periods. There is a corresponding entry to equity. charged in previous periods. There is a corresponding entry to equity. charged in previous periods. There is a corresponding entry to equity. No expense is recognised for awards that do not ultimately vest, except for equity-settled transactions for which No expense is recognised for awards that do not ultimately vest, except for equity-settled transactions for which No expense is recognised for awards that do not ultimately vest, except for equity-settled transactions for which vesting is conditional upon a market or non-vesting condition. These are treated as vested, irrespective of vesting is conditional upon a market or non-vesting condition. These are treated as vested, irrespective of vesting is conditional upon a market or non-vesting condition. These are treated as vested, irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance and service whether or not the market or non-vesting condition is satisfied, provided that all other performance and service whether or not the market or non-vesting condition is satisfied, provided that all other performance and service conditions are met. conditions are met. conditions are met. KEY ACCOUNTING ESTIMATES AND ASSUMPTIONS KEY ACCOUNTING ESTIMATES AND ASSUMPTIONS KEY ACCOUNTING ESTIMATES AND ASSUMPTIONS The fair value of share-based payment transactions is determined at the grant date using an appropriate The fair value of share-based payment transactions is determined at the grant date using an appropriate The fair value of share-based payment transactions is determined at the grant date using an appropriate valuation model, which takes into account the terms and conditions upon which the instruments were granted valuation model, which takes into account the terms and conditions upon which the instruments were granted valuation model, which takes into account the terms and conditions upon which the instruments were granted to key executives. The terms and conditions require estimates to be made of the number of equity instruments to key executives. The terms and conditions require estimates to be made of the number of equity instruments to key executives. The terms and conditions require estimates to be made of the number of equity instruments expected to vest, as well as the probabilities of meeting the relevant TSR performance hurdles. These expected to vest, as well as the probabilities of meeting the relevant TSR performance hurdles. These expected to vest, as well as the probabilities of meeting the relevant TSR performance hurdles. These accounting estimates and assumptions would have no impact on the carrying amounts of assets or liabilities accounting estimates and assumptions would have no impact on the carrying amounts of assets or liabilities accounting estimates and assumptions would have no impact on the carrying amounts of assets or liabilities within the next annual reporting period, but may impact the share-based payment expense and performance within the next annual reporting period, but may impact the share-based payment expense and performance within the next annual reporting period, but may impact the share-based payment expense and performance rights reserve within equity. rights reserve within equity. rights reserve within equity. 33 EVENTS AFTER THE REPORTING DATE 33 EVENTS AFTER THE REPORTING DATE 33 EVENTS AFTER THE REPORTING DATE The Directors of Premier Investments Limited approved a final dividend in respect of the 2021 financial year. The Directors of Premier Investments Limited approved a final dividend in respect of the 2021 financial year. The Directors of Premier Investments Limited approved a final dividend in respect of the 2021 financial year. The total amount of the dividend is $73,077,000 (2020: $57,191,000) which represents a fully franked dividend The total amount of the dividend is $73,077,000 (2020: $57,191,000) which represents a fully franked dividend The total amount of the dividend is $73,077,000 (2020: $57,191,000) which represents a fully franked dividend of 46 cents per share (2020: 36 cents per share). The dividend has not been provided for in the 2021 financial of 46 cents per share (2020: 36 cents per share). The dividend has not been provided for in the 2021 financial of 46 cents per share (2020: 36 cents per share). The dividend has not been provided for in the 2021 financial statements. statements. statements. Subsequent to 31 July 2021, the Group’s retail store network continues to be impacted by various Government Subsequent to 31 July 2021, the Group’s retail store network continues to be impacted by various Government Subsequent to 31 July 2021, the Group’s retail store network continues to be impacted by various Government mandated retail store closures related to COVID-19. The Group has had 661 stores temporarily closed across mandated retail store closures related to COVID-19. The Group has had 661 stores temporarily closed across mandated retail store closures related to COVID-19. The Group has had 661 stores temporarily closed across Australia and New Zealand through the majority of the month of August 2021, noting it has since progressively Australia and New Zealand through the majority of the month of August 2021, noting it has since progressively Australia and New Zealand through the majority of the month of August 2021, noting it has since progressively been able to reopen over 170 of these stores in the past two weeks. During the temporary store closures, the been able to reopen over 170 of these stores in the past two weeks. During the temporary store closures, the been able to reopen over 170 of these stores in the past two weeks. During the temporary store closures, the Group continues to operate through its online channel. Group continues to operate through its online channel. Group continues to operate through its online channel. 34 CONTINGENT LIABILITIES 34 CONTINGENT LIABILITIES 34 CONTINGENT LIABILITIES The Group has bank guarantees and outstanding letters of credit totalling $4,267,668 (2020: $6,168,632). The Group has bank guarantees and outstanding letters of credit totalling $4,267,668 (2020: $6,168,632). The Group has bank guarantees and outstanding letters of credit totalling $4,267,668 (2020: $6,168,632). 89 89 89 89 DIRECTORS’ DECLARATION In accordance with a resolution of the Directors of Premier Investments Limited, I state that: In the opinion of the Directors: (a) the financial statements and notes of Premier Investments Limited for the financial year ended 31 July 2021 are in accordance with the Corporations Act 2001, including: (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and (ii) giving a true and fair view of the consolidated entity’s financial position as at 31 July 2021 and of its performance for the financial year 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 and payable. (c) in the opinion of the directors, as at the date of this declaration, there are reasonable grounds to believe that the members of the 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. Note 2(b) 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 declaration by the Chief Financial Officer required by section 295A of the Corporations Act 2001 for the financial year ended 31 July 2021. On behalf of the Board Solomon Lew Chairman 1 October 2021 90 Annual Report 2021 DIRECTORS’ DECLARATION Directors’ Declaration In accordance with a resolution of the Directors of Premier Investments Limited, I state that: In the opinion of the Directors: (a) the financial statements and notes of Premier Investments Limited for the financial year ended 31 July 2021 are in accordance with the Corporations Act 2001, including: (i) (ii) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and giving a true and fair view of the consolidated entity’s financial position as at 31 July 2021 and of its performance for the financial year ended on that date, and there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. in the opinion of the directors, as at the date of this declaration, there are reasonable grounds to believe that the members of the 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. (b) (c) Note 2(b) 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 declaration by the Chief Financial Officer required by section 295A of the Corporations Act 2001 for the financial year ended 31 July 2021. On behalf of the Board Solomon Lew Chairman 1 October 2021 90 Premier Investments Limited 90 Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au Independent Auditor’s Report Ernst & Young 8 Exhibition Street Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 Ernst & Young 8 Exhibition Street Melbourne VIC 3000 Australia Ernst & Young GPO Box 67 Melbourne VIC 3001 8 Exhibition Street Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 Ernst & Young 8 Exhibition Street Melbourne VIC 3000 Australia Independent auditor’s report to the Members of Premier Investments GPO Box 67 Melbourne VIC 3001 Limited Independent auditor’s report to the Members of Premier Investments Report on the audit of the financial report Limited Independent auditor’s report to the Members of Premier Investments Opinion Limited Report on the audit of the financial report We have audited the financial report of Premier Investments Limited (the Company) and its Independent auditor’s report to the Members of Premier Investments subsidiaries (collectively the Group), which comprises the consolidated statement of financial position Report on the audit of the financial report Opinion Limited as at 31 July 2021, the consolidated statement of comprehensive income, consolidated statement of Opinion We have audited the financial report of Premier Investments Limited (the Company) and its changes in equity and consolidated statement of cash flows for the year then ended, notes to the Opinion We have audited the financial report of Premier Investments Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position financial statements, including a summary of significant accounting policies, and the directors’ Report on the audit of the financial report subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 31 July 2021, the consolidated statement of comprehensive income, consolidated statement of We have audited the financial report of Premier Investments Limited (the Company) and its declaration. as at 31 July 2021, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes to the subsidiaries (collectively the Group), which comprises the consolidated statement of financial position changes in equity and consolidated statement of cash flows for the year then ended, notes to the Opinion financial statements, including a summary of significant accounting policies, and the directors’ as at 31 July 2021, the consolidated statement of comprehensive income, consolidated statement of In our opinion, the accompanying financial report of the Group is in accordance with the Corporations financial statements, including a summary of significant accounting policies, and the directors’ declaration. changes in equity and consolidated statement of cash flows for the year then ended, notes to the We have audited the financial report of Premier Investments Limited (the Company) and its Act 2001, including: declaration. financial statements, including a summary of significant accounting policies, and the directors’ subsidiaries (collectively the Group), which comprises the consolidated statement of financial position In our opinion, the accompanying financial report of the Group is in accordance with the Corporations declaration. as at 31 July 2021, the consolidated statement of comprehensive income, consolidated statement of a. Giving a true and fair view of the consolidated financial position of the Group as at 31 July 2021 Act 2001, including: changes in equity and consolidated statement of cash flows for the year then ended, notes to the In our opinion, the accompanying financial report of the Group is in accordance with the Corporations financial statements, including a summary of significant accounting policies, and the directors’ a. Giving a true and fair view of the consolidated financial position of the Group as at 31 July 2021 Act 2001, including: declaration. b. Complying with Australian Accounting Standards and the Corporations Regulations 2001. Independent auditor’s report to the Members of Premier Investments Limited In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: and of its consolidated financial performance for the year ended on that date; and Report on the audit of the financial report a. Giving a true and fair view of the consolidated financial position of the Group as at 31 July 2021 and of its consolidated financial performance for the year ended on that date; and and of its consolidated financial performance for the year ended on that date; and Ernst & Young 8 Exhibition Street Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au Ernst & Young 8 Exhibition Street Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au Independent auditor’s report to the Members of Premier Investments Limited Why significant Opinion Carrying value of intangible assets Report on the audit of the financial report How our audit addressed the key audit matter As at 31 July 2021, the Group held $827.0 We have audited the financial report of Premier Investments Limited (the Company) and its Our audit procedures included the following: million (or 36.4% of total assets) in goodwill and subsidiaries (collectively the Group), which comprises the consolidated statement of financial position ► Assessed the application of the valuation indefinite-life brand names recognised from as at 31 July 2021, the consolidated statement of comprehensive income, consolidated statement of methodologies applied. historical business combinations. changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial statements, including a summary of significant accounting policies, and the directors’ As outlined in Note 18 of the financial report, CGUs was in accordance with Australian ► Evaluated whether the determination of declaration. the goodwill and brand names are tested by the Accounting Standards. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations ► Agreed the cashflows within the impairment Group for impairment annually. The recoverable amount of these assets was Act 2001, including: determined based on a value in use model model to forecast cashflows. referencing discounted cash flows of the retail a. Giving a true and fair view of the consolidated financial position of the Group as at 31 July 2021 ► Considered the impact of COVID-19 on the segment for goodwill, and the casual wear, and of its consolidated financial performance for the year ended on that date; and cash flow assumptions used in the women’s wear and non-apparel cash generating impairment model. b. Complying with Australian Accounting Standards and the Corporations Regulations 2001. units (CGUs) for brand names. The model ► Considered the historical accuracy of the contains estimates and significant judgements Basis for opinion regarding future cash flow projections which are Group’s cash flow forecasting process. ► Compared the forecast cash flows used in the critical to the assessment of impairment, We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under value in use model to the actual current year particularly planned sales growth in the casual those standards are further described in the Auditor’s responsibilities for the audit of the financial financial performance of the underlying CGUs wear and women’s wear CGUs and discount report section of our report. We are independent of the Group in accordance with the auditor for reasonability. independence requirements of the Corporations Act 2001 and the ethical requirements of the rates applied. Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional At 31 July 2021, the Group’s performance, and Accountants (including Independence Standards) (the Code) that are relevant to our audit of the relief from royalty rates and sales growth financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with rates adopted in the value in use model the economy as a whole, continue to be ► Assessed key inputs being discount rates, impacted by the restrictions and economic including comparison to available market the Code. uncertainty resulting from the COVID-19 data for comparable businesses. pandemic. Significant assumptions used in the We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis ► Performed sensitivity analysis on key inputs impairment testing referred to above are for our opinion. inherently subjective and in times of economic uncertainty the degree of subjectivity is higher Key audit matters than it might otherwise be. Changes in certain and assumptions included in the forecast cashflows and impairment models including the discount rates, to assess the risk of the Key audit matters are those matters that, in our professional judgment, were of most significance in CGU carrying value exceeding the assumptions can lead to significant changes in our audit of the financial report of the current year. These matters were addressed in the context of recoverable amount. the recoverable amount of these assets. our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide ► Compared earnings multiples derived from Accordingly, given the significant judgements a separate opinion on these matters. For each matter below, our description of how our audit and estimates involved in assessing impairment addressed the matter is provided in that context. of intangible assets we considered this a key the Group’s value in use model to those observable from external market data of We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the audit matter. For the same reasons we consider financial report section of our report, including in relation to these matters. Accordingly, our audit ► Assessed the adequacy of the disclosures it important that attention is drawn to the included the performance of procedures designed to respond to our assessment of the risks of included in the financial report. information in Note 18. material misstatement of the financial report. The results of our audit procedures, including the Our valuation specialists were involved in the procedures performed to address the matters below, provide the basis for our audit opinion on the conduct of these procedures where considered comparable listed entities. accompanying financial report. relevant. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation b. Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation and of its consolidated financial performance for the year ended on that date; and and of its consolidated financial performance for the year ended on that date; and a. Giving a true and fair view of the consolidated financial position of the Group as at 31 July 2021 In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Basis for opinion b. Complying with Australian Accounting Standards and the Corporations Regulations 2001. Act 2001, including: 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 Basis for opinion b. Complying with Australian Accounting Standards and the Corporations Regulations 2001. a. Giving a true and fair view of the consolidated financial position of the Group as at 31 July 2021 report section of our report. We are independent of the Group in accordance with the auditor We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under independence requirements of the Corporations Act 2001 and the ethical requirements of the Basis for opinion those standards are further described in the Auditor’s responsibilities for the audit of the financial Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional b. Complying with Australian Accounting Standards and the Corporations Regulations 2001. report section of our report. We are independent of the Group in accordance with the auditor We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under Accountants (including Independence Standards) (the Code) that are relevant to our audit of the independence requirements of the Corporations Act 2001 and the ethical requirements of the those standards are further described in the Auditor’s responsibilities for the audit of the financial financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with Basis for opinion Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional report section of our report. We are independent of the Group in accordance with the auditor the Code. Accountants (including Independence Standards) (the Code) that are relevant to our audit of the independence requirements of the Corporations Act 2001 and the ethical requirements of the We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional those standards are further described in the Auditor’s responsibilities for the audit of the financial We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis the Code. Accountants (including Independence Standards) (the Code) that are relevant to our audit of the report section of our report. We are independent of the Group in accordance with the auditor for our opinion. financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with independence requirements of the Corporations Act 2001 and the ethical requirements of the We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis the Code. Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Key audit matters for our opinion. Accountants (including Independence Standards) (the Code) that are relevant to our audit of the Key audit matters are those matters that, in our professional judgment, were of most significance in We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with our audit of the financial report of the current year. These matters were addressed in the context of Key audit matters for our opinion. the Code. our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide Key audit matters are those matters that, in our professional judgment, were of most significance in a separate opinion on these matters. For each matter below, our description of how our audit Key audit matters We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis our audit of the financial report of the current year. These matters were addressed in the context of addressed the matter is provided in that context. for our opinion. our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide Key audit matters are those matters that, in our professional judgment, were of most significance in a separate opinion on these matters. For each matter below, our description of how our audit our audit of the financial report of the current year. These matters were addressed in the context of We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the Key audit matters addressed the matter is provided in that context. our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide financial report section of our report, including in relation to these matters. Accordingly, our audit a separate opinion on these matters. For each matter below, our description of how our audit Key audit matters are those matters that, in our professional judgment, were of most significance in included the performance of procedures designed to respond to our assessment of the risks of We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the addressed the matter is provided in that context. our audit of the financial report of the current year. These matters were addressed in the context of material misstatement of the financial report. The results of our audit procedures, including the financial report section of our report, including in relation to these matters. Accordingly, our audit our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide procedures performed to address the matters below, provide the basis for our audit opinion on the included the performance of procedures designed to respond to our assessment of the risks of We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the a separate opinion on these matters. For each matter below, our description of how our audit accompanying financial report. material misstatement of the financial report. The results of our audit procedures, including the financial report section of our report, including in relation to these matters. Accordingly, our audit addressed the matter is provided in that context. procedures performed to address the matters below, provide the basis for our audit opinion on the included the performance of procedures designed to respond to our assessment of the risks of accompanying financial report. material misstatement of the financial report. The results of our audit procedures, including the We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the procedures performed to address the matters below, provide the basis for our audit opinion on the A member firm of Ernst & Young Global Limited financial report section of our report, including in relation to these matters. Accordingly, our audit Liability limited by a scheme approved under Professional Standards Legislation accompanying financial report. included the performance of procedures designed to respond to our assessment of the risks of 91 material misstatement of the financial report. The results of our audit procedures, including the A member firm of Ernst & Young Global Limited procedures performed to address the matters below, provide the basis for our audit opinion on the Liability limited by a scheme approved under Professional Standards Legislation accompanying financial report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Annual Report 2021Ernst & Young 8 Exhibition Street Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au Independent auditor’s report to the Members of Premier Investments Limited Report on the audit of the financial report Carrying value of intangible assets cash flow assumptions used in the impairment model. and of its consolidated financial performance for the year ended on that date; and Why significant How our audit addressed the key audit matter As at 31 July 2021, the Group held $827.0 million (or 36.4% of total assets) in goodwill and indefinite-life brand names recognised from historical business combinations. Opinion We have audited the financial report of Premier Investments Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 31 July 2021, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. ► Evaluated whether the determination of CGUs was in accordance with Australian Accounting Standards. As outlined in Note 18 of the financial report, the goodwill and brand names are tested by the Group for impairment annually. Our audit procedures included the following: ► Assessed the application of the valuation In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: ► Agreed the cashflows within the impairment methodologies applied. model to forecast cashflows. a. Giving a true and fair view of the consolidated financial position of the Group as at 31 July 2021 ► Considered the impact of COVID-19 on the The recoverable amount of these assets was determined based on a value in use model referencing discounted cash flows of the retail segment for goodwill, and the casual wear, women’s wear and non-apparel cash generating units (CGUs) for brand names. The model contains estimates and significant judgements regarding future cash flow projections which are critical to the assessment of impairment, particularly planned sales growth in the casual wear and women’s wear CGUs and discount rates applied. ► Considered the historical accuracy of the b. Complying with Australian Accounting Standards and the Corporations Regulations 2001. Group’s cash flow forecasting process. Basis for opinion ► Compared the forecast cash flows used in the We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under value in use model to the actual current year those standards are further described in the Auditor’s responsibilities for the audit of the financial financial performance of the underlying CGUs report section of our report. We are independent of the Group in accordance with the auditor for reasonability. independence requirements of the Corporations Act 2001 and the ethical requirements of the ► Assessed key inputs being discount rates, Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional relief from royalty rates and sales growth Accountants (including Independence Standards) (the Code) that are relevant to our audit of the rates adopted in the value in use model financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with including comparison to available market the Code. data for comparable businesses. At 31 July 2021, the Group’s performance, and the economy as a whole, continue to be impacted by the restrictions and economic uncertainty resulting from the COVID-19 pandemic. Significant assumptions used in the impairment testing referred to above are inherently subjective and in times of economic uncertainty the degree of subjectivity is higher than it might otherwise be. Changes in certain assumptions can lead to significant changes in the recoverable amount of these assets. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis ► Performed sensitivity analysis on key inputs for our opinion. and assumptions included in the forecast cashflows and impairment models including the discount rates, to assess the risk of the CGU carrying value exceeding the recoverable amount. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide Accordingly, given the significant judgements a separate opinion on these matters. For each matter below, our description of how our audit and estimates involved in assessing impairment addressed the matter is provided in that context. of intangible assets we considered this a key audit matter. For the same reasons we consider it important that attention is drawn to the information in Note 18. We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the ► Assessed the adequacy of the disclosures financial report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the Our valuation specialists were involved in the procedures performed to address the matters below, provide the basis for our audit opinion on the conduct of these procedures where considered accompanying financial report. relevant. ► Compared earnings multiples derived from the Group’s value in use model to those observable from external market data of comparable listed entities. included in the financial report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Premier Investments Limited 92 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Independent Auditor’s Report continued Ernst & Young 8 Exhibition Street Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au Independent auditor’s report to the Members of Premier Investments Limited Report on the audit of the financial report Opinion We have audited the financial report of Premier Investments Limited (the Company) and its Existence and valuation of inventory subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 31 July 2021, the consolidated statement of comprehensive income, consolidated statement of Why significant changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial statements, including a summary of significant accounting policies, and the directors’ As at 31 July 2021, the Group held $208.8 Our audit procedures included the following: declaration. million in inventories. How our audit addressed the key audit matter ► Assessed the application of valuation Inventories are held at several distribution In our opinion, the accompanying financial report of the Group is in accordance with the Corporations centres, as well as at over 1,200 retail stores. Act 2001, including: As detailed in Note 10 of the financial report, a. Giving a true and fair view of the consolidated financial position of the Group as at 31 July 2021 inventories are valued at the lower of cost and net realisable value. controls over the determination of standard costs methodologies applied for compliance with Australian Accounting Standards. and of its consolidated financial performance for the year ended on that date; and ► Assessed the effectiveness of relevant ► Selected a sample of inventory lines and recalculated standard costs based on supporting supplier invoices and assessed the allocation of costs absorbed from the purchasing department, freight and warehouse costs. The cost of finished goods includes a proportion b. Complying with Australian Accounting Standards and the Corporations Regulations 2001. of purchasing department costs, as well as freight, handling, and warehouse costs incurred Basis for opinion to deliver the goods to the point of sale. We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under Provisions are recorded for matters such as those standards are further described in the Auditor’s responsibilities for the audit of the financial aged and slow moving inventory to ensure report section of our report. We are independent of the Group in accordance with the auditor ► Attended store and distribution centre inventory is recorded at the lower of cost and independence requirements of the Corporations Act 2001 and the ethical requirements of the inventory counts on a sample basis and net realisable value. This requires a level of Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional assessed the stock counting process which judgement with regard to changing consumer 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 addressed inventory quantity and condition. demands and fashion trends. Such judgements the Code. include the Group’s expectations for future sales ► Assessed the basis for inventory provisions, and inventory mark downs. including the rationale for recording specific We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis provisions. In doing so we examined the Accordingly, the existence and valuation of for our opinion. ageing profile of inventory, considered how inventory was considered to be a key audit the Group identified specific slow-moving matter. Key audit matters inventories, assessed future selling prices Key audit matters are those matters that, in our professional judgment, were of most significance in and historical loss rates. our audit of the financial report of the current year. These matters were addressed in the context of ► Tested the slow-moving inventory reports for our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. accuracy and completeness. ► Considered the completeness of inventory We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. provisions by identifying mark down sales at or subsequent to year end. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 93 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Ernst & Young 8 Exhibition Street Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au AASB 16 Leases Independent auditor’s report to the Members of Premier Investments Limited Why significant AASB 16 Leases How our audit addressed the key audit matter The Group holds a significant volume of leases Why significant Carrying value of intangible assets Report on the audit of the financial report by number and value over retail sites as a Why significant The Group holds a significant volume of leases lessee, which makes the impact of this standard by number and value over retail sites as a significant to the financial statements of the Opinion lessee, which makes the impact of this standard As at 31 July 2021, the Group held $827.0 Group. Our audit procedures included the following: How our audit addressed the key audit matter ► Assessed the mathematical accuracy of the Our audit procedures included the following: How our audit addressed the key audit matter Group’s AASB 16 lease calculation model. ► Assessed the mathematical accuracy of the Group. We have audited the financial report of Premier Investments Limited (the Company) and its significant to the financial statements of the million (or 36.4% of total assets) in goodwill and subsidiaries (collectively the Group), which comprises the consolidated statement of financial position The recognition and measurement of ► Assessed the application of the valuation ► For a sample of leases, agreed the Group’s indefinite-life brand names recognised from as at 31 July 2021, the consolidated statement of comprehensive income, consolidated statement of remeasured lease agreements executed during model in relation to those leases, such as, inputs in the AASB 16 lease calculation The recognition and measurement of historical business combinations. changes in equity and consolidated statement of cash flows for the year then ended, notes to the the year in accordance with AASB 16 Leases methodologies applied. inputs in the AASB 16 lease calculation key dates, fixed and variable rent payments, ► For a sample of leases, agreed the Group’s Our audit procedures included the following: Group’s AASB 16 lease calculation model. financial statements, including a summary of significant accounting policies, and the directors’ (“AASB 16”) are dependent on a number of key declaration. remeasured lease agreements executed during As outlined in Note 18 of the financial report, the year in accordance with AASB 16 Leases judgements and estimates. These include: the goodwill and brand names are tested by the (“AASB 16”) are dependent on a number of key Group for impairment annually. The treatment of the option to extend and judgements and estimates. These include: ► ► The recoverable amount of these assets was The treatment of the option to extend and Act 2001, including: The impact of COVID-19 rental abatements determined based on a value in use model the lease term under holdover; ► and backdated rent variations; and model in relation to those leases, such as, ► Evaluated whether the determination of renewal options and incentives, to the key dates, fixed and variable rent payments, CGUs was in accordance with Australian relevant terms of the underlying signed lease renewal options and incentives, to the Accounting Standards. agreements. relevant terms of the underlying signed lease model to forecast cashflows. to renegotiated lease agreements during the ► Assessed the accounting treatment applied ► Considered the impact of COVID-19 on the year, including the impact of abatements and In our opinion, the accompanying financial report of the Group is in accordance with the Corporations ► Agreed the cashflows within the impairment ► Assessed the accounting treatment applied the lease term under holdover; agreements. ► referencing discounted cash flows of the retail a. Giving a true and fair view of the consolidated financial position of the Group as at 31 July 2021 to renegotiated lease agreements during the The impact of COVID-19 rental abatements segment for goodwill, and the casual wear, and of its consolidated financial performance for the year ended on that date; and year, including the impact of abatements and The calculation of incremental borrowing backdated rental savings on the lease cash flow assumptions used in the and backdated rent variations; and ► balances recognised. impairment model. backdated rental savings on the lease b. Complying with Australian Accounting Standards and the Corporations Regulations 2001. Accordingly, given the significant judgements units (CGUs) for brand names. The model ► Considered the historical accuracy of the ► Considered the Group’s assumptions in balances recognised. rates. women’s wear and non-apparel cash generating The calculation of incremental borrowing ► rates. and estimates involved in assessing the contains estimates and significant judgements Accordingly, given the significant judgements treatment of lease remeasurements we regarding future cash flow projections which are Basis for opinion and estimates involved in assessing the considered this a key audit matter. critical to the assessment of impairment, relation to the treatment of the option to Group’s cash flow forecasting process. ► Considered the Group’s assumptions in extend and lease term under holdover. ► Compared the forecast cash flows used in the relation to the treatment of the option to We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under value in use model to the actual current year ► Assessed the incremental borrowing rates extend and lease term under holdover. treatment of lease remeasurements we particularly planned sales growth in the casual those standards are further described in the Auditor’s responsibilities for the audit of the financial used to discount future lease payments to financial performance of the underlying CGUs considered this a key audit matter. wear and women’s wear CGUs and discount report section of our report. We are independent of the Group in accordance with the auditor present value. ► Assessed the incremental borrowing rates for reasonability. independence requirements of the Corporations Act 2001 and the ethical requirements of the rates applied. used to discount future lease payments to ► Assessed the adequacy of the disclosures ► Assessed key inputs being discount rates, present value. Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional At 31 July 2021, the Group’s performance, and included in the financial report. relief from royalty rates and sales growth the economy as a whole, continue to be Accountants (including Independence Standards) (the Code) that are relevant to our audit of the ► Assessed the adequacy of the disclosures financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with included in the financial report. ► We assessed the Group’s calculations of the rates adopted in the value in use model impacted by the restrictions and economic the Code. uncertainty resulting from the COVID-19 pandemic. Significant assumptions used in the We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis judgements made in respect of the Group’s ► Performed sensitivity analysis on key inputs including comparison to available market financial impact of the standard and the ► We assessed the Group’s calculations of the data for comparable businesses. accounting policies, estimates and financial impact of the standard and the accounting policies, estimates and right of use assets and lease liabilities, as and assumptions included in the forecast judgements made in respect of the Group’s well as related depreciation and interest cashflows and impairment models including right of use assets and lease liabilities, as expense recognised through the the discount rates, to assess the risk of the well as related depreciation and interest impairment testing referred to above are for our opinion. inherently subjective and in times of economic uncertainty the degree of subjectivity is higher Key audit matters than it might otherwise be. Changes in certain Key audit matters are those matters that, in our professional judgment, were of most significance in CGU carrying value exceeding the Consolidated Statement of Comprehensive assumptions can lead to significant changes in our audit of the financial report of the current year. These matters were addressed in the context of recoverable amount. expense recognised through the Income. Consolidated Statement of Comprehensive the recoverable amount of these assets. our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide Accordingly, given the significant judgements a separate opinion on these matters. For each matter below, our description of how our audit ► Compared earnings multiples derived from Income. and estimates involved in assessing impairment addressed the matter is provided in that context. Information other than the financial report and auditor’s report thereon observable from external market data of of intangible assets we considered this a key The directors are responsible for the other information. The other information comprises the We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the Information other than the financial report and auditor’s report thereon audit matter. For the same reasons we consider information in Note 18. it important that attention is drawn to the information included in the Company’s 2021 annual report other than the financial report and our financial report section of our report, including in relation to these matters. Accordingly, our audit The directors are responsible for the other information. The other information comprises the auditor’s report thereon. We obtained the directors’ report that is to be included in the annual report, included the performance of procedures designed to respond to our assessment of the risks of information included in the Company’s 2021 annual report other than the financial report and our prior to the date of this auditor’s report, and we expect to obtain the remaining sections of the annual material misstatement of the financial report. The results of our audit procedures, including the auditor’s report thereon. We obtained the directors’ report that is to be included in the annual report, ► Assessed the adequacy of the disclosures Our valuation specialists were involved in the included in the financial report. procedures performed to address the matters below, provide the basis for our audit opinion on the prior to the date of this auditor’s report, and we expect to obtain the remaining sections of the annual conduct of these procedures where considered report after the date of this auditor’s report. comparable listed entities. the Group’s value in use model to those accompanying financial report. report after the date of this auditor’s report. Our opinion on the financial report does not cover the other information and we do not and will not relevant. express any form of assurance conclusion thereon, with the exception of the Remuneration Report Our opinion on the financial report does not cover the other information and we do not and will not and our related assurance opinion. express any form of assurance conclusion thereon, with the exception of the Remuneration Report A member firm of Ernst & Young Global Limited and our related assurance opinion. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Annual Report 2021Ernst & Young 8 Exhibition Street Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au AASB 16 Leases Independent auditor’s report to the Members of Premier Investments Limited Why significant AASB 16 Leases How our audit addressed the key audit matter and of its consolidated financial performance for the year ended on that date; and Our audit procedures included the following: The Group holds a significant volume of leases How our audit addressed the key audit matter Why significant Report on the audit of the financial report Carrying value of intangible assets by number and value over retail sites as a ► Assessed the mathematical accuracy of the Our audit procedures included the following: The Group holds a significant volume of leases lessee, which makes the impact of this standard How our audit addressed the key audit matter Why significant Group’s AASB 16 lease calculation model. by number and value over retail sites as a Opinion ► Assessed the mathematical accuracy of the significant to the financial statements of the lessee, which makes the impact of this standard ► For a sample of leases, agreed the Group’s As at 31 July 2021, the Group held $827.0 Our audit procedures included the following: Group. Group’s AASB 16 lease calculation model. We have audited the financial report of Premier Investments Limited (the Company) and its significant to the financial statements of the inputs in the AASB 16 lease calculation million (or 36.4% of total assets) in goodwill and The recognition and measurement of subsidiaries (collectively the Group), which comprises the consolidated statement of financial position ► Assessed the application of the valuation ► For a sample of leases, agreed the Group’s Group. model in relation to those leases, such as, indefinite-life brand names recognised from remeasured lease agreements executed during as at 31 July 2021, the consolidated statement of comprehensive income, consolidated statement of methodologies applied. inputs in the AASB 16 lease calculation The recognition and measurement of key dates, fixed and variable rent payments, historical business combinations. the year in accordance with AASB 16 Leases changes in equity and consolidated statement of cash flows for the year then ended, notes to the model in relation to those leases, such as, ► Evaluated whether the determination of remeasured lease agreements executed during renewal options and incentives, to the (“AASB 16”) are dependent on a number of key financial statements, including a summary of significant accounting policies, and the directors’ As outlined in Note 18 of the financial report, key dates, fixed and variable rent payments, CGUs was in accordance with Australian the year in accordance with AASB 16 Leases relevant terms of the underlying signed lease declaration. judgements and estimates. These include: the goodwill and brand names are tested by the renewal options and incentives, to the Accounting Standards. (“AASB 16”) are dependent on a number of key agreements. The treatment of the option to extend and Group for impairment annually. relevant terms of the underlying signed lease ► judgements and estimates. These include: In our opinion, the accompanying financial report of the Group is in accordance with the Corporations ► Agreed the cashflows within the impairment ► Assessed the accounting treatment applied the lease term under holdover; agreements. The recoverable amount of these assets was The treatment of the option to extend and Act 2001, including: model to forecast cashflows. ► to renegotiated lease agreements during the The impact of COVID-19 rental abatements ► determined based on a value in use model ► Assessed the accounting treatment applied the lease term under holdover; year, including the impact of abatements and ► Considered the impact of COVID-19 on the and backdated rent variations; and referencing discounted cash flows of the retail to renegotiated lease agreements during the a. Giving a true and fair view of the consolidated financial position of the Group as at 31 July 2021 The impact of COVID-19 rental abatements backdated rental savings on the lease ► cash flow assumptions used in the The calculation of incremental borrowing segment for goodwill, and the casual wear, year, including the impact of abatements and ► and backdated rent variations; and balances recognised. impairment model. rates. women’s wear and non-apparel cash generating backdated rental savings on the lease The calculation of incremental borrowing ► ► Considered the Group’s assumptions in ► Considered the historical accuracy of the b. Complying with Australian Accounting Standards and the Corporations Regulations 2001. Accordingly, given the significant judgements units (CGUs) for brand names. The model balances recognised. rates. relation to the treatment of the option to and estimates involved in assessing the Group’s cash flow forecasting process. contains estimates and significant judgements ► Considered the Group’s assumptions in Accordingly, given the significant judgements extend and lease term under holdover. treatment of lease remeasurements we Basis for opinion regarding future cash flow projections which are ► Compared the forecast cash flows used in the relation to the treatment of the option to and estimates involved in assessing the considered this a key audit matter. critical to the assessment of impairment, ► Assessed the incremental borrowing rates We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under value in use model to the actual current year extend and lease term under holdover. treatment of lease remeasurements we particularly planned sales growth in the casual used to discount future lease payments to those standards are further described in the Auditor’s responsibilities for the audit of the financial financial performance of the underlying CGUs considered this a key audit matter. ► Assessed the incremental borrowing rates wear and women’s wear CGUs and discount report section of our report. We are independent of the Group in accordance with the auditor present value. for reasonability. used to discount future lease payments to rates applied. independence requirements of the Corporations Act 2001 and the ethical requirements of the ► Assessed the adequacy of the disclosures ► Assessed key inputs being discount rates, present value. Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional included in the financial report. relief from royalty rates and sales growth Accountants (including Independence Standards) (the Code) that are relevant to our audit of the ► Assessed the adequacy of the disclosures rates adopted in the value in use model ► We assessed the Group’s calculations of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with included in the financial report. including comparison to available market financial impact of the standard and the the Code. ► We assessed the Group’s calculations of the data for comparable businesses. accounting policies, estimates and financial impact of the standard and the judgements made in respect of the Group’s We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis ► Performed sensitivity analysis on key inputs accounting policies, estimates and for our opinion. right of use assets and lease liabilities, as and assumptions included in the forecast judgements made in respect of the Group’s well as related depreciation and interest cashflows and impairment models including right of use assets and lease liabilities, as Key audit matters expense recognised through the the discount rates, to assess the risk of the well as related depreciation and interest Consolidated Statement of Comprehensive Key audit matters are those matters that, in our professional judgment, were of most significance in CGU carrying value exceeding the expense recognised through the Income. our audit of the financial report of the current year. These matters were addressed in the context of recoverable amount. Consolidated Statement of Comprehensive our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide ► Compared earnings multiples derived from Income. Accordingly, given the significant judgements a separate opinion on these matters. For each matter below, our description of how our audit the Group’s value in use model to those and estimates involved in assessing impairment addressed the matter is provided in that context. Information other than the financial report and auditor’s report thereon observable from external market data of of intangible assets we considered this a key comparable listed entities. The directors are responsible for the other information. The other information comprises the Information other than the financial report and auditor’s report thereon We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the audit matter. For the same reasons we consider information included in the Company’s 2021 annual report other than the financial report and our ► Assessed the adequacy of the disclosures financial report section of our report, including in relation to these matters. Accordingly, our audit it important that attention is drawn to the The directors are responsible for the other information. The other information comprises the auditor’s report thereon. We obtained the directors’ report that is to be included in the annual report, included the performance of procedures designed to respond to our assessment of the risks of information in Note 18. information included in the Company’s 2021 annual report other than the financial report and our prior to the date of this auditor’s report, and we expect to obtain the remaining sections of the annual material misstatement of the financial report. The results of our audit procedures, including the auditor’s report thereon. We obtained the directors’ report that is to be included in the annual report, Our valuation specialists were involved in the report after the date of this auditor’s report. procedures performed to address the matters below, provide the basis for our audit opinion on the prior to the date of this auditor’s report, and we expect to obtain the remaining sections of the annual conduct of these procedures where considered accompanying financial report. report after the date of this auditor’s report. relevant. Our opinion on the financial report does not cover the other information and we do not and will not express any form of assurance conclusion thereon, with the exception of the Remuneration Report Our opinion on the financial report does not cover the other information and we do not and will not and our related assurance opinion. express any form of assurance conclusion thereon, with the exception of the Remuneration Report A member firm of Ernst & Young Global Limited and our related assurance opinion. Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation At 31 July 2021, the Group’s performance, and the economy as a whole, continue to be impacted by the restrictions and economic uncertainty resulting from the COVID-19 pandemic. Significant assumptions used in the impairment testing referred to above are inherently subjective and in times of economic uncertainty the degree of subjectivity is higher than it might otherwise be. Changes in certain assumptions can lead to significant changes in the recoverable amount of these assets. included in the financial report. Premier Investments Limited 94 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Independent Auditor’s Report continued Ernst & Young 8 Exhibition Street Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au Independent auditor’s report to the Members of Premier Investments Limited Report on the audit of the financial report and of its consolidated financial performance for the year ended on that date; and Opinion We have audited the financial report of Premier Investments Limited (the Company) and its In connection with our audit of the financial report, our responsibility is to read the other information subsidiaries (collectively the Group), which comprises the consolidated statement of financial position and, in doing so, consider whether the other information is materially inconsistent with the financial as at 31 July 2021, the consolidated statement of comprehensive income, consolidated statement of report or our knowledge obtained in the audit or otherwise appears to be materially misstated. changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial statements, including a summary of significant accounting policies, and the directors’ If, based on the work we have performed on the other information obtained prior to the date of this declaration. 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 the Group is in accordance with the Corporations Act 2001, including: Responsibilities of the directors for the financial report a. Giving a true and fair view of the consolidated financial position of the Group as at 31 July 2021 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 b. Complying with Australian Accounting Standards and the Corporations Regulations 2001. financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. Basis for opinion In preparing the financial report, the directors are responsible for assessing the Group’s ability to We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under continue as a going concern, disclosing, as applicable, matters relating to going concern and using the those standards are further described in the Auditor’s responsibilities for the audit of the financial going concern basis of accounting unless the directors either intend to liquidate the Group or to cease report section of our report. We are independent of the Group in accordance with the auditor operations, or have no realistic alternative but to do so. independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Auditor’s responsibilities for the audit of the financial report 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 Our objectives are to obtain reasonable assurance about whether the financial report as a whole is the Code. 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 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis audit conducted in accordance with the Australian Auditing Standards will always detect a material for our opinion. 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 Key audit matters decisions of users taken on the basis of this financial report. Key audit matters are those matters that, in our professional judgment, were of most significance in As part of an audit in accordance with the Australian Auditing Standards, we exercise professional our audit of the financial report of the current year. These matters were addressed in the context of judgment and maintain professional scepticism throughout the audit. We also: our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit ► Identify and assess the risks of material misstatement of the financial report, whether due to addressed the matter is provided in that context. fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the detecting a material misstatement resulting from fraud is higher than for one resulting from financial report section of our report, including in relation to these matters. Accordingly, our audit error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the included the performance of procedures designed to respond to our assessment of the risks of override of internal control. material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the ► Obtain an understanding of internal control relevant to the audit in order to design audit accompanying financial report. procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. A member firm of Ernst & Young Global Limited ► Evaluate the appropriateness of accounting policies used and the reasonableness of accounting Liability limited by a scheme approved under Professional Standards Legislation estimates and related disclosures made by the directors. 95 ► Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 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 obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for the financial report Ernst & Young The directors of the Company are responsible for the preparation of the financial report that gives a Melbourne VIC 3000 Australia ey.com/au true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 GPO Box 67 Melbourne VIC 3001 and for such internal control as the directors determine is necessary to enable the preparation of the 8 Exhibition Street financial report that gives a true and fair view and is free from material misstatement, whether due to Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 fraud or error. Limited In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease Independent auditor’s report to the Members of Premier Investments operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial report Carrying value of intangible assets Report on the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is Why significant free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that How our audit addressed the key audit matter includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an Opinion As at 31 July 2021, the Group held $827.0 audit conducted in accordance with the Australian Auditing Standards will always detect a material We have audited the financial report of Premier Investments Limited (the Company) and its Our audit procedures included the following: misstatement when it exists. Misstatements can arise from fraud or error and are considered material subsidiaries (collectively the Group), which comprises the consolidated statement of financial position million (or 36.4% of total assets) in goodwill and ► Assessed the application of the valuation if, individually or in the aggregate, they could reasonably be expected to influence the economic as at 31 July 2021, the consolidated statement of comprehensive income, consolidated statement of indefinite-life brand names recognised from decisions of users taken on the basis of this financial report. historical business combinations. changes in equity and consolidated statement of cash flows for the year then ended, notes to the methodologies applied. financial statements, including a summary of significant accounting policies, and the directors’ As part of an audit in accordance with the Australian Auditing Standards, we exercise professional CGUs was in accordance with Australian As outlined in Note 18 of the financial report, the goodwill and brand names are tested by the judgment and maintain professional scepticism throughout the audit. We also: Accounting Standards. declaration. ► Evaluated whether the determination of Group for impairment annually. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations ► Agreed the cashflows within the impairment ► Identify and assess the risks of material misstatement of the financial report, whether due to The recoverable amount of these assets was Act 2001, including: determined based on a value in use model fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not a. Giving a true and fair view of the consolidated financial position of the Group as at 31 July 2021 referencing discounted cash flows of the retail ► Considered the impact of COVID-19 on the segment for goodwill, and the casual wear, detecting a material misstatement resulting from fraud is higher than for one resulting from and of its consolidated financial performance for the year ended on that date; and cash flow assumptions used in the error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the impairment model. women’s wear and non-apparel cash generating override of internal control. b. Complying with Australian Accounting Standards and the Corporations Regulations 2001. units (CGUs) for brand names. The model ► Considered the historical accuracy of the model to forecast cashflows. contains estimates and significant judgements Group’s cash flow forecasting process. Basis for opinion ► Obtain an understanding of internal control relevant to the audit in order to design audit regarding future cash flow projections which are procedures that are appropriate in the circumstances, but not for the purpose of expressing an ► Compared the forecast cash flows used in the critical to the assessment of impairment, We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under value in use model to the actual current year opinion on the effectiveness of the Group’s internal control. particularly planned sales growth in the casual those standards are further described in the Auditor’s responsibilities for the audit of the financial financial performance of the underlying CGUs wear and women’s wear CGUs and discount report section of our report. We are independent of the Group in accordance with the auditor ► Evaluate the appropriateness of accounting policies used and the reasonableness of accounting for reasonability. independence requirements of the Corporations Act 2001 and the ethical requirements of the estimates and related disclosures made by the directors. Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional ► Assessed key inputs being discount rates, rates applied. At 31 July 2021, the Group’s performance, and Accountants (including Independence Standards) (the Code) that are relevant to our audit of the ► Conclude on the appropriateness of the directors’ use of the going concern basis of accounting the economy as a whole, continue to be financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with and, based on the audit evidence obtained, whether a material uncertainty exists related to impacted by the restrictions and economic rates adopted in the value in use model relief from royalty rates and sales growth including comparison to available market uncertainty resulting from the COVID-19 events or conditions that may cast significant doubt on the Group’s ability to continue as a going the Code. data for comparable businesses. concern. If we conclude that a material uncertainty exists, we are required to draw attention in pandemic. Significant assumptions used in the We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis our auditor’s report to the related disclosures in the financial report or, if such disclosures are ► Performed sensitivity analysis on key inputs impairment testing referred to above are for our opinion. inherently subjective and in times of economic A member firm of Ernst & Young Global Limited uncertainty the degree of subjectivity is higher Liability limited by a scheme approved under Professional Standards Legislation Key audit matters than it might otherwise be. Changes in certain and assumptions included in the forecast cashflows and impairment models including the discount rates, to assess the risk of the Key audit matters are those matters that, in our professional judgment, were of most significance in CGU carrying value exceeding the assumptions can lead to significant changes in our audit of the financial report of the current year. These matters were addressed in the context of recoverable amount. the recoverable amount of these assets. our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide ► Compared earnings multiples derived from Accordingly, given the significant judgements a separate opinion on these matters. For each matter below, our description of how our audit and estimates involved in assessing impairment addressed the matter is provided in that context. of intangible assets we considered this a key the Group’s value in use model to those observable from external market data of We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the audit matter. For the same reasons we consider financial report section of our report, including in relation to these matters. Accordingly, our audit ► Assessed the adequacy of the disclosures it important that attention is drawn to the included the performance of procedures designed to respond to our assessment of the risks of included in the financial report. information in Note 18. material misstatement of the financial report. The results of our audit procedures, including the Our valuation specialists were involved in the procedures performed to address the matters below, provide the basis for our audit opinion on the conduct of these procedures where considered comparable listed entities. accompanying financial report. relevant. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Annual Report 2021In 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 obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for the financial report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. Ernst & Young 8 Exhibition Street Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au Why significant In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease Independent auditor’s report to the Members of Premier Investments operations, or have no realistic alternative but to do so. Limited Auditor’s responsibilities for the audit of the financial report Report on the audit of the financial report Carrying value of intangible assets 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 How our audit addressed the key audit matter includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an Opinion audit conducted in accordance with the Australian Auditing Standards will always detect a material We have audited the financial report of Premier Investments Limited (the Company) and its misstatement when it exists. Misstatements can arise from fraud or error and are considered material subsidiaries (collectively the Group), which comprises the consolidated statement of financial position ► Assessed the application of the valuation if, individually or in the aggregate, they could reasonably be expected to influence the economic as at 31 July 2021, the consolidated statement of comprehensive income, consolidated statement of decisions of users taken on the basis of this financial report. changes in equity and consolidated statement of cash flows for the year then ended, notes to the ► Evaluated whether the determination of financial statements, including a summary of significant accounting policies, and the directors’ CGUs was in accordance with Australian As part of an audit in accordance with the Australian Auditing Standards, we exercise professional declaration. judgment and maintain professional scepticism throughout the audit. We also: Accounting Standards. As at 31 July 2021, the Group held $827.0 million (or 36.4% of total assets) in goodwill and indefinite-life brand names recognised from historical business combinations. As outlined in Note 18 of the financial report, the goodwill and brand names are tested by the Group for impairment annually. Our audit procedures included the following: In our opinion, the accompanying financial report of the Group is in accordance with the Corporations ► Identify and assess the risks of material misstatement of the financial report, whether due to Act 2001, including: ► Agreed the cashflows within the impairment methodologies applied. model to forecast cashflows. fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not a. Giving a true and fair view of the consolidated financial position of the Group as at 31 July 2021 detecting a material misstatement resulting from fraud is higher than for one resulting from and of its consolidated financial performance for the year ended on that date; and error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. cash flow assumptions used in the impairment model. ► Considered the historical accuracy of the b. Complying with Australian Accounting Standards and the Corporations Regulations 2001. Group’s cash flow forecasting process. ► Considered the impact of COVID-19 on the The recoverable amount of these assets was determined based on a value in use model referencing discounted cash flows of the retail segment for goodwill, and the casual wear, women’s wear and non-apparel cash generating units (CGUs) for brand names. The model contains estimates and significant judgements regarding future cash flow projections which are critical to the assessment of impairment, particularly planned sales growth in the casual wear and women’s wear CGUs and discount rates applied. estimates and related disclosures made by the directors. At 31 July 2021, the Group’s performance, and the economy as a whole, continue to be impacted by the restrictions and economic uncertainty resulting from the COVID-19 pandemic. Significant assumptions used in the impairment testing referred to above are inherently subjective and in times of economic uncertainty the degree of subjectivity is higher than it might otherwise be. Changes in certain assumptions can lead to significant changes in the recoverable amount of these assets. ► Obtain an understanding of internal control relevant to the audit in order to design audit Basis for opinion ► Compared the forecast cash flows used in the procedures that are appropriate in the circumstances, but not for the purpose of expressing an We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under value in use model to the actual current year opinion on the effectiveness of the Group’s internal control. those standards are further described in the Auditor’s responsibilities for the audit of the financial financial performance of the underlying CGUs report section of our report. We are independent of the Group in accordance with the auditor for reasonability. ► Evaluate the appropriateness of accounting policies used and the reasonableness of accounting independence requirements of the Corporations Act 2001 and the ethical requirements of the ► Assessed key inputs being discount rates, Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional relief from royalty rates and sales growth Accountants (including Independence Standards) (the Code) that are relevant to our audit of the ► Conclude on the appropriateness of the directors’ use of the going concern basis of accounting rates adopted in the value in use model financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with and, based on the audit evidence obtained, whether a material uncertainty exists related to including comparison to available market the Code. events or conditions that may cast significant doubt on the Group’s ability to continue as a going data for comparable businesses. concern. If we conclude that a material uncertainty exists, we are required to draw attention in We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis ► Performed sensitivity analysis on key inputs our auditor’s report to the related disclosures in the financial report or, if such disclosures are for our opinion. and assumptions included in the forecast A member firm of Ernst & Young Global Limited cashflows and impairment models including Liability limited by a scheme approved under Professional Standards Legislation Key audit matters the discount rates, to assess the risk of the Key audit matters are those matters that, in our professional judgment, were of most significance in CGU carrying value exceeding the our audit of the financial report of the current year. These matters were addressed in the context of recoverable amount. our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide Accordingly, given the significant judgements a separate opinion on these matters. For each matter below, our description of how our audit and estimates involved in assessing impairment addressed the matter is provided in that context. of intangible assets we considered this a key audit matter. For the same reasons we consider it important that attention is drawn to the information in Note 18. We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the ► Assessed the adequacy of the disclosures financial report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the Our valuation specialists were involved in the procedures performed to address the matters below, provide the basis for our audit opinion on the conduct of these procedures where considered accompanying financial report. relevant. ► Compared earnings multiples derived from the Group’s value in use model to those observable from external market data of comparable listed entities. included in the financial report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Premier Investments Limited 96 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au Ernst & Young 8 Exhibition Street Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 Independent Auditor’s Report continued Independent auditor’s report to the Members of Premier Investments Limited Independent auditor’s report to the Members of Premier Investments Limited Report on the audit of the financial report Opinion We have audited the financial report of Premier Investments Limited (the Company) and its inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up subsidiaries (collectively the Group), which comprises the consolidated statement of financial position to the date of our auditor’s report. However, future events or conditions may cause the Group to as at 31 July 2021, the consolidated statement of comprehensive income, consolidated statement of cease to continue as a going concern. changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial statements, including a summary of significant accounting policies, and the directors’ ► Evaluate the overall presentation, structure and content of the financial report, including the declaration. disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: ► Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are a. Giving a true and fair view of the consolidated financial position of the Group as at 31 July 2021 responsible for the direction, supervision and performance of the Group audit. We remain solely and of its consolidated financial performance for the year ended on that date; and responsible for our audit opinion. b. Complying with Australian Accounting Standards and the Corporations Regulations 2001. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we Basis for opinion identify during our audit. We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial We also provide the directors with a statement that we have complied with relevant ethical report section of our report. We are independent of the Group in accordance with the auditor requirements regarding independence, and to communicate with them all relationships and other independence requirements of the Corporations Act 2001 and the ethical requirements of the matters that may reasonably be thought to bear on our independence, and where applicable, actions Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional taken to eliminate threats or safeguards applied. 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 From the matters communicated to the directors, we determine those matters that were of most the Code. significance in the audit of the financial report of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis disclosure about the matter or when, in extremely rare circumstances, we determine that a matter for our opinion. should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in Report on the audit of the Remuneration Report our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide Opinion on the Remuneration Report a separate opinion on these matters. For each matter below, our description of how our audit We have audited the Remuneration Report included in the directors’ report for the year ended 31 July addressed the matter is provided in that context. 2021. We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the In our opinion, the Remuneration Report of Premier Investments Limited for the year ended 31 July financial report section of our report, including in relation to these matters. Accordingly, our audit 2021, complies with section 300A of the Corporations Act 2001. included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 97 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Ernst & Young 8 Exhibition Street Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au Responsibilities Report on the audit of the financial report The directors of the Company are responsible for the preparation and presentation of the Opinion 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 We have audited the financial report of Premier Investments Limited (the Company) and its accordance with Australian Auditing Standards. subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 31 July 2021, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial statements, including a summary of significant accounting policies, and the directors’ Ernst & Young In our opinion, the accompanying financial report of the Group is in accordance with the Corporations declaration. Act 2001, including: a. Giving a true and fair view of the consolidated financial position of the Group as at 31 July 2021 and of its consolidated financial performance for the year ended on that date; and b. Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial Glenn Carmody Partner Melbourne 1 October 2021 report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis the Code. for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Annual Report 2021Ernst & Young 8 Exhibition Street Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au Independent auditor’s report to the Members of Premier Investments Limited Report on the audit of the financial report Responsibilities The directors of the Company are responsible for the preparation and presentation of the Opinion 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 We have audited the financial report of Premier Investments Limited (the Company) and its accordance with Australian Auditing Standards. subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 31 July 2021, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. Ernst & Young In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: a. Giving a true and fair view of the consolidated financial position of the Group as at 31 July 2021 and of its consolidated financial performance for the year ended on that date; and b. Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial Glenn Carmody report section of our report. We are independent of the Group in accordance with the auditor Partner independence requirements of the Corporations Act 2001 and the ethical requirements of the Melbourne Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional 1 October 2021 Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Premier Investments Limited 98 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation ASX ADDITIONAL SHAREHOLDER INFORMATION ASX Additional Information AS AT 12 OCTOBER 2021 as at 12 October 2021 TWENTY LARGEST SHAREHOLDERS NAME TOTAL % IC RANK HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 3,544,881 CENTURY PLAZA INVESTMENTS PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED J P MORGAN NOMINEES AUSTRALIA PTY LIMITED CITICORP NOMINEES PTY LIMITED METREPARK PTY LTD SL SUPERANNUATION NO 1 PTY LTD NATIONAL NOMINEES LIMITED LINFOX SHARE INVESTMENT PTY LTD BNP PARIBAS NOMINEES PTY LTD BNP PARIBAS NOMS PTY LTD ARGO INVESTMENTS LIMITED UBS NOMINEES PTY LTD MILTON CORPORATION LIMITED MR MARK MCINNES MR CON ZEMPILAS CITICORP NOMINEES PTY LIMITED GEOMAR SUPERANNUATION PTY LTD BNP PARIBAS NOMINEES PTY LTD SIX SIS LTD DAVID ALAN BULL TOTAL FOR TOP 20: SUBSTANTIAL SHAREHOLDERS NAME 51,569,400 32.46% 25,482,238 16.04% 25,295,425 15.92% 11,091,107 8,235,331 4,437,699 3,764,500 2,577,014 2,379,568 1,426,423 1,250,000 711,181 590,321 582,100 470,000 259,261 250,000 247,899 201,472 6.98% 5.18% 2.79% 2.37% 2.23% 1.62% 1.50% 0.90% 0.79% 0.45% 0.37% 0.37% 0.30% 0.16% 0.16% 0.16% 0.13% 144,365,820 90.87% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 TOTAL UNITS % IC 58,552,420 42.43% 14,120,975 8.89% 12,381,525 7.80% CENTURY PLAZA INVESTMENTS PTY LTD AND ASSOCIATES PERPETUAL LIMITED AND ITS SUBSIDIARIES AIRLIE FUNDS MANAGEMENT PTY LTD ON ITS OWN BEHALF AND ON BEHALF OF MAGELLAN FINANCIAL GROUP LIMITED AND RELATED BODIES CORPORATE DISTRIBUTION OF EQUITY SHAREHOLDERS Holders 1 TO 1,000 6,206 1,001 TO 5,000 2,168 5,001 TO 10,000 263 10,001 TO 100,000 174 100,001 TO (MAX) 29 TOTAL 8,840 Ordinary Fully Paid Shares 2,191,965 4,778,273 1,940,680 4,176,147 145,776,894 158,863,959 The number of investors holding less than a marketable parcel of 17 securities ($29.91 on 12 October 2021) is 217 and they hold 627 securities. VOTING RIGHTS All ordinary shares carry one vote per share without restriction. 99 Annual Report 2021Corporate Directory A.C.N. 006 727 966 DIRECTORS Mr. Solomon Lew (Chairman) Dr. David M. Crean (Deputy Chairman) Mr. Timothy Antonie (Lead Independent Director) Ms. Sylvia Falzon Ms. Sally Herman Mr. Henry D. Lanzer AM Mr. Terrence L. McCartney Mr. Mark McInnes (resigned: 19 August 2021) Mr. Michael R.I. McLeod COMPANY SECRETARY Ms. Marinda Meyer REGISTERED OFFICE Level 7 417 St Kilda Road Melbourne Victoria 3004 Telephone (03) 9650 6500 Facsimile (03) 9654 6665 AUDITOR Ernst & Young 8 Exhibition Street Melbourne Victoria 3000 SHARE REGISTER AND SHAREHOLDER ENQUIRIES Computershare Investor Services Pty Limited Yarra Falls 452 Johnston Street Abbotsford Victoria 3067 Telephone (03) 9415 5000 LAWYERS Arnold Bloch Leibler Level 21 333 Collins Street Melbourne Victoria 3000 Telephone (03) 9229 9999 WEBSITE www.premierinvestments.com.au EMAIL info@premierinvestments.com.au

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