annual report 2019
Contents
Page
Contents
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Year in Review
Highlights and Commentary
Chair’s Letter
CEO’s Review
Directors’ Report
Auditor’s Independence Declaration
Remuneration Report
Consolidated Financial Statements
Directors’ Declaration
Independent Auditors’ Report
Shareholder and other ASX Required Information
Corporate Information
Founded in 2006, the Redbubble Group incorporates Redbubble Limited
and its subsidiaries, including TP Apparel LLC (TeePublic). The Redbubble
Group owns and operates the leading global online marketplaces hosted
at Redbubble.com and TeePublic.com, powered by over one million
independent artists. The Redbubble Group’s community of passionate
creatives sell uncommon designs on high-quality, everyday products such
as apparel, stationery, housewares, bags, wall art and so on. Through the
Redbubble and TeePublic marketplaces, independent artists are able to profit
from their creativity and reach a new universe of adoring fans. For customers,
it’s the ultimate in self-expression. A simple but meaningful way to show the
world who they are and what they care about.
This report covers Redbubble Limited as a consolidated entity consisting of Redbubble Limited (referred to in this report as Redbubble or the
Company) and its controlled entities. Redbubble is a company limited by shares, incorporated and domiciled in Australia (ACN 119200592).
Its registered office is at Level 3, 271 Collins Street, Melbourne VIC 3000. Redbubble is listed on the Australian Securities Exchange (ASX:RBL).
Through the use of the internet, the Company ensures that our corporate reporting is timely, complete and available globally. All press releases,
financial reports and other information are available on the Redbubble Investor Centre at shareholders.redbubble.com
2
3
Annual Report 2019
Year in
Review
Highlights &
Commentary
Key financial highlights (year on year comparison)
FY19
$’m
FY18
$’m
Change
%
FY2019 Financial Performance
Restated (1)
rates, where applicable) are:
Key financial measures for the consolidated Redbubble Group (“RB Group”) in FY2019 (with year on year (“YoY”) growth
Total reported revenue from services
Less Artists’ margin
Marketplace revenue
Gross profit
Gross profit margin on Marketplace revenue
Paid acquisition costs (marketing)
Gross Profit After Paid Acquisition costs (GPAPA)
GPAPA % (on marketplace revenue)
Operating expenses
Operating EBITDA
Operating EBITDA % (on marketplace revenue)
Other income/expenses
EBITDA (loss/profit)
307.0
(50.1)
256.9
94.5
36.8%
(27.1)
67.5
26.3%
(63.7)
3.8
1.5%
(8.5)
(4.7)
218.7
(35.9)
182.8
63.9
35.0%
(16.8)
47.1
25.8%
(51.0)
(3.8)
(2.1%)
(3.5)
(7.4)
40%
40%
41%
48%
5%
61%
43%
2%
25%
200%
172%
143%
36%
(1) On 1 July 2018 the Group adopted AASB 15 - Revenue from Contracts with Customers using the full retrospective method of adoption. Prior year
comparatives have been restated to align the accounting treatment across both periods.
4
• Marketplace Revenue of $257 million, up 41% (up 34% on a constant currency basis).
•
•
•
Gross profit of $95 million, up 48% (up 41% on a constant currency basis).
Gross profit margin up 1.8pp to 36.8% (based on Marketplace Revenue).
Cash operating expenses of $64 million, up 25% (up 20% on a constant currency basis).
• Operating EBITDA profit of $3.8 million, an improvement of $7.7 million from a FY2018 loss of $3.8 million.
•
•
EBITDA loss of $4.7 million, an improvement of $2.7 million from a FY2018 loss of $7.4 million.
Income tax expense of $15.2 million resulting predominantly from Management’s position to write off the deferred tax
asset as communicated at the time of the July Appendix 4C.
•
Net loss after tax of $27.7 million compared to $10.0 million in FY2018, mainly due to the write off of the deferred tax
asset.
FY2019 Cashflows
The total cash balance for FY2019 increased by $7.8 million compared to a $6.6 million decrease in FY2018. The closing
cash balance at 30 June 2019 was $29.0 million. Aggregate operating and investing cash outflow (negative free cash flow)
was $3.1 million in FY2019, improved by 56% compared to $6.9 million in FY2018. The RB Group has no debt.
Business Update
The RB Group continues to make progress in areas of strategic investment that are critical to long term marketplace growth
and profitability. FY2019 metrics are reported below and outlined in the July Investor Presentation:
•
Product revenue1 from authentic sellers2 at Redbubble grew by 39% and represented 76% of Redbubble product
revenue
• Marketplace revenue from members grew by 109%, equating to 29% of Redbubble marketplace revenue
•
•
•
1
2
The RB Group has on-boarded a total of 48 brands, with 25 new brands in 4Q FY2019. In addition, licensed content
increased 46% from 3Q totaling 350,000 works
Five new products were launched resulting from re-platforming work enabling efficient and fast new product launches
140% growth in marketplace revenue from the iOS app. Work has commenced on the development of the Android app
Product revenue is the portion of Marketplace revenue derived from Product sales. It excludes Shipping revenue.
Defined as those artists that tend to upload high quality, original works which resonate well with customers. Data Science work during 2018 has helped identify
this critical segment at Redbubble and significant development investment has been focused on increasing the output of this group. TeePublic’s artists are yet
to be segmented.
5
Annual Report 2019Redbubble
Highlights & Commentary
(continued)
Chair’s Letter
Looking Forward
The RB Group is targeting long term growth in a large addressable market. The priorities remain:
•
•
•
•
Grow customer base and increase loyalty through personal “creative adventures” and member experiences
Launch and sell products that artists want to design for and customers will love
Build deeper relationships with authentic artists by increasing their commercial success
Launch and expand partnerships with the world’s leading fan art brands
• Maintain strong growth and synergy value of TeePublic, leveraging new product, on-boarding content partnerships and
geographic growth opportunities
•
Persist in current discipline to improve the Group’s take rate, extract maximum value from marketing channels, and
maintain operating expenses and cash discipline
This strategic work will underpin reaching the milestone of $1 billion in sales.
of our talented and committed Executive team and
the strong contribution from the hard-working
employees of Redbubble and TeePublic around
the globe. We also thank artists, content partners,
customers and fulfillers for their continued support in
the past year.
I would personally like to thank my fellow board
members for their guidance and counsel. It is a
strong board who are experienced, knowledgeable
and strategic. We are delighted with the contributions
that our newer board members, Anne Ward and
Jenny Macdonald, have both made since they
joined in early 2018. Their broad experience in ASX,
commercial, operating and governance areas have
enhanced the board. We thank our departing board
members, Grant Murdoch and Hugh Williams, for the
terrific contributions they have made during their
tenure.
Finally, many thanks to you, our shareholders. We will
continue to focus on building a company of enduring
value and look forward to rewarding you for your
support.
Yours faithfully,
Richard Cawsey
We are pleased to present the Redbubble Group’s
2019 Annual Report.
The Redbubble Group’s mission is to bring more
creativity into the world. That guides everything we
do. We are proud of our ever-expanding community
of authentic artists and the quality of art and design
work they bring to the Redbubble and TeePublic
marketplaces.
Overcoming the adverse impact of changes that
Google made to their display algorithms, the
Redbubble Group delivered strong financial results
this year and invested for the future. We are proud of
our achievements during the period, including:
•
•
•
•
generating our first positive Operating EBITDA
since IPO, without compromising on strategic
investments for the long term;
completing the acquisition of TeePublic and
taking early advantage of business synergies;
transitioning successfully to a new CEO and CFO,
Barry Newstead and Emma Clark, who have both
made strong starts in their roles; and
Redesigning our executive compensation
structures to better align with our strategy and
long-term value creation. Details are set out in
the Remuneration Report.
We are particularly excited about the potential of
our Fan Art licensing initiatives. We have achieved
a remarkable number of new content partnerships.
We look forward to realising the potential of this key
segment so our artists can capitalise on their new
freedom to create fan artwork and our customers
can enjoy innovative art based on their favourite
brands.
The Redbubble Group continues to make a positive
contribution to the community in many ways. In
addition to our success in bringing more creativity
into the world, our employees have engaged in some
wonderful community initiatives in the last 12 months
such as ‘Create Some Good’ and the Community
Collective, further described in this Report.
We thank the Redbubble Group employees. The
Group’s ability to grow, evolve and deliver against
its purpose would not be possible without the work
6
7
Annual Report 2019Redbubble CEO’s Review
CEO’s Review
(continued)
This year the Redbubble Group achieved an
important milestone. The Group delivered its first
positive Operating EBITDA since IPO, in the amount
of $3.8 million. We achieved this milestone without
compromising on strategic investments for the long
term and made our first acquisition, which is already
adding significantly to the Group. Redbubble Group is
a business with real momentum and huge potential.
Redbubble and TeePublic are still in our early years
and we see a revolution in retail commerce that will
open up a large market opportunity. Our vision is to
connect authentic artists and content partners with
millions of loyal customers enabling personalised
adventures in creativity.
This revolution is powered by three forces that have
been building in retail commerce:
•
The ‘gig’ economy that has brought hundreds of
thousands of artists to Redbubble and TeePublic
to monetise their artistic content with no
financial risk or operational hassle;
• On-demand technologies that allow us to
leverage our huge long tail content library to
make and deliver personalised, quality, affordable
products at the same standard as traditional
retailers; and
• Global consumers who want more personal retail
experiences that enable self-expression rather
than mass market sameness.
The Redbubble Group is a much bigger market play
than many people appreciate. The marketplace
model extends into a wide array of consumer product
markets. We can access these markets as we scale
up, build our brand and consumers realise they
don’t need to compromise between personalisation,
quality, speed and affordability. We deliver a great
experience that is differentiated and is becoming
more so.
The Group is uniquely positioned to win, as we are
a flywheel business that is hard to replicate and
our moat gets stronger as each strategic initiative
reinforces the system. Competitors face a daunting
investment challenge to try and reach a similar scale.
Our strategy aims to solidify our advantage.
First, we are the artist & content leader that is a
magnet for authentic artists. The 24 million strong
back catalog of content is evergreen, generating
long running value at a tiny cost to maintain. Artists
continue to join and upload at negligible costs of
acquisition. The Group is the most attractive play
for “no hassle” monetisation. In the near term, the
offering for artists will only get more attractive as we
roll out new services including art theft prevention,
promotional tools, and value-added marketing offers
for high potential artists to better manage their
business.
For content partners, Redbubble and TeePublic
present a new way to engage fans and evolve their
merchandise business in partnership with artists.
We are working with them to create a truly scalable
way to manage thousands of brands and ultimately
license and market millions of content units at a
global level. This will extend our content advantage.
Second, we have a diverse product catalogue that
multiplies the value of an art work. This is what makes
new products so attractive in the marketplace as we
instantly create a massive personalised catalogue for
each new product we launch. We will launch many
more products in the coming years on both platforms
to build category leadership.
Our supply advantage is solidified by the fulfillment
and operational capabilities we’ve built over a
decade. Our third party network can make and
deliver any of over 90 products to a North American
or European customer in 3-5 business days with
standard shipping. Our supply economics continue to
improve as the business reaches scale.
The supply side is our essential moat. We are a
business with exceptional and diverse content. Going
forward, we have the ability to professionally turn this
content into hundreds of monetisable products via
a global supply chain that delivers a great customer
experience.
Third, is our customer strategy. For customers,
content is king and Redbubble and TeePublic
continue to have the best content. The business is
deepening relationships with customers to enrich
the experience. Redbubble customers are signing
up as members at rapid rates and flocking to
business with all of the advantages of some of the best
marketplaces on earth.
As part of my first year as CEO, it was a priority to
ensure that we have the leadership in place for the next
phase. We have promoted five people to the executive
team from within and transitioned to a new CFO, Emma
Clark, who has made an immediate impact. We have
retained key leadership at TeePublic and added key
talent.
Redbubble has a strong, committed board who
have been very supportive in the CEO and executive
transitions. They helped us navigate the waters over
the past year retaining a focus on the strategy.
One of the defining characteristics of businesses that
are “Built to Last” is that they develop talent from
within and always ensure they have the ‘right people
on the bus’. The board and executive team that leads
the Redbubble Group has a proven track record and
a clear vision for what it is going to take to realise the
opportunities ahead of us.
We have a team that knows what it takes to win.
Now that we reached the profitability goal, our next
milestone is to grow to a billion dollars in sales. This is
within our grasp.
Thank you for your commitment to the Redbubble
Group. I look forward to realising our mission and
creating value for customers, artists, employees and
shareholders.
Barry Newstead
Chief Executive Officer
Redbubble’s iOS app. Members are provided with
deeply personalised experiences via improving
recommendations, personalised service, enhanced
merchandising and human connections to artists.
We will also extend TeePublic into new markets and
progressively replicate the member experience that
is proving to be so valuable on Redbubble.
Fourth and finally, Redbubble and TeePublic continue
to generate a lot of inbound organic search and
social traffic, which keeps marketing costs low. The
Group has well established paid search capabilities,
which provide profitable growth. What is emerging
is a powerful shift toward brand and content-based
marketing partnerships that are enabling new sources
of growth. We have the potential to take our brands
to scale by partnering with people who love our
content; our artists, our customers, our partners and
influencers. This is starting to happen now:
•
•
In the final quarter of FY2019, theme-based
influencer campaigns such as Pride and Asteroid
Day featured unique content and helped extend
the Redbubble brand to new audiences
Fan art is widening our reach as artists, partners,
affiliates and influencers share this amazing
licensed content with the huge audiences for
brands like Rick & Morty, Star Trek and Billions
• Our referral programs and brand
ambassadorships help loyal customers extend
the brands by rewarding word of mouth
•
And we are seeing organic growth of the brands
into youth-focused social media, especially
Snapchat and TikTok, allowing for new avenues
of low cost acquisition. Redbubble-tagged
videos on TikTok have received millions of views
As we look forward, there is the opportunity to really
scale up the brands and new customer acquisition
at low-cost. And as customer life-term value grows
from membership and app penetration, this will create
additional marketing avenues.
Beyond the current growth priorities, we see an
opportunity to take on wider retail and wholesale
business areas. Redbubble and TeePublic have a long
and profitable growth investment runway ahead of us.
We are building for this opportunity. This is a formidable
8
9
Annual Report 2019Redbubble DIRECTORS’ REPORT
Directors’
Report
Your Directors present their report on the consolidated
entity, consisting of Redbubble Limited (the Company or
Redbubble) and the entities it controlled during the financial
year ended 30 June 2019 (referred to hereafter as the RB
Group or Group).
Directors
The following persons were Directors of the Company
during the 2019 financial year and to the date of this
Report:
Richard Cawsey
Chair, Non-executive Director
Barry Newstead
Martin Hosking
CEO and Managing Director
(appointed effective 1 August
2018)
Non-executive Director
(effective 1 October 2018) -
previously CEO and Managing
Director (up to 1 August 2018)
and Executive Director (from 1
August 2018 to 30 September
2018)
Principal activities
RB Group, through its websites at Redbubble.com,
TeePublic.com and three foreign language Redbubble.com
websites, owns and operates the Redbubble and TeePublic
online marketplaces. These marketplaces facilitate the sale
and purchase of art and designs on a range of products
between independent creatives and consumers. The
products are produced and shipped by third party service
providers (i.e. product manufacturers, printers and shipping
companies) referred to as fulfillers.
In November 2018, the Company’s wholly-owned
subsidiary, Redbubble Inc., completed the acquisition of
TP Apparel LLC, which owns and operates the TeePublic
business. The acquisition was funded by a capital raising
via an institutional placement and entitlement offer. The
total consideration for the acquisition was US $41 million. A
deferred consideration payment of US $6 million is due to
be paid in May 2020. The fair value of this consideration is
US $5.5 million (A$7.8 million). The fair value of the deferred
consideration has been reduced since acquisition by the
payment of pre-acquisition expenses.
Apart from the acquisition of the TeePublic business, there
was no significant change in the nature of RB Group’s
Jennifer (Jenny)
Macdonald
Non-executive Director
activities during the year.
Anne Ward
Non-executive Director
Greg Lockwood
Non-executive Director
Review of operations
FY2019 Financial Performance
Grant Murdoch
Hugh Williams
Non-executive Director
(resigning at the end of the
October 2019 AGM)
Non-executive Director
(resigned effective 29 May
2019)
RB Group FY2019 financial performance demonstrated
the core strengths of the marketplace while benefiting
from management discipline across the income statement
and the value of the TeePublic acquisition. Key FY2019 RB
Group financial measures (with YoY growth rates, where
applicable) including TeePublic for the eight months to 30
June 2019 are:
• Marketplace Revenue of $257 million, up 41% (up 34%
on a constant currency basis).
Gross profit of $95 million, up 48% (up 41% on a
constant currency basis).
Gross profit margin up 1.8pp to 36.8% (based on
Marketplace Revenue).
•
•
11
10
Annual Report 2019
•
Cash operating expenses of $64 million, up 25% (up 20%
ecommerce peers. Both businesses continue to generate
on a constant currency basis).
profitable paid marketing growth.
Business Update
• Operating EBITDA profit of $3.8 million, an improvement
The Group achieved significant operating leverage during
RB Group is making progress in areas of strategic
•
Improving Margins: Leveraged Group scale to achieve
improved fulfilment costs and sharing insights on
pricing and promotions.
of $7.7 million from a FY2018 loss of $3.8 million.
FY2019 with 48% Gross Profit growth outpacing growth
investment that are critical to long term marketplace
These initiatives have provided individual benefit for
•
EBITDA loss of $4.7 million, an improvement of $2.7
million from a FY2018 loss of $7.4 million.
of 34% in expenses (aggregate of Operating Expenses and
Marketing) during FY2019. This leverage has been achieved
as teams focus on productivity and investments are made in
•
Income tax expense of $15.2 million resulting
automation.
predominantly from Management’s position to write off
the deferred tax asset as communicated at the time of
the 4C.
The total cash balance for FY2019 increased by $7.8 million
compared to a $6.6 million decrease in FY2018. The
closing cash balance at 30 June 2019 was $29.0 million.
•
Net loss after tax of $27.7 million compared to $10.0
Aggregate operating and investing cash outflow (negative
million in FY2018, mainly due to the write off of the
free cash flow) was $3.1 million in FY2019, improved by 56%
deferred tax asset.
compared to $6.9 million in FY2018. The Redbubble Group
Marketplace Revenue growth has been driven by the
has no debt.
accelerating TeePublic business. At Redbubble, results from
As flagged at the time of the July Appendix 4C release,
strategic investments lay the groundwork for a return to
management has taken a conservative view and has written
healthy topline growth.
The Group continues to strengthen gross margins
leveraging scale and localisation benefits in fulfillment and
shipping along with pricing optimisation to increase its
effective take rate.
Across the Group, FY2019 marketing spend, while
increasing from FY2018, represented 10.5% of Marketplace
Revenue, well below many online marketplaces /
off its deferred tax asset from the balance sheet derived
from post-IPO taxation losses. As at the end of FY2019,
the Group has, in aggregate, $97 million of losses (FY2018
$75 million). The Group’s position on tax losses is now
completely consistent, with all losses de-recognised but
still remaining in existence for taxation purposes.
A reconciliation of reported results to non-IFRS numbers in
this Directors’ report is provided below.
Reconciliation of reported results to non-IFRS (1) numbers
Total reported revenue from services
Less Artists’ margin
Marketplace revenue
Fulfiller expenses
Gross profit
Gross profit margin on Marketplace revenue
Paid acquisition costs
Gross Profit After Paid Acquisition costs (GPAPA)
Cash Operating Expenses
Operating (Cash) earnings before interest, tax, depreciation and amortisation (EBITDA)
Depreciation and amortisation
Other expenses
Share based payments
TeePublic acquisition costs
Interest and other income tax
Total Loss before income tax
Income tax (expense)/benefit (4)
Reported total loss for the year
2019
$’m(2)
307.0
(50.1)
256.9
(162.4)
94.5
36.8%
(27.1)
67.5
(63.7)
3.8
(8.1)
(1.5)
(5.9)
(1.2)
0.4
(12.5)
(15.2)
(27.7)
2018
$’m(2)
Restated (3)
218.7
(35.9)
182.8
(118.9)
63.9
35.0%
(16.8)
47.1
(51.0)
(3.8)
(7.8)
(0.8)
(2.7)
-
0.4
(14.7)
4.7
(10.0)
(1) Non-IFRS measures are presented to provide readers a better understanding of Redbubble’s financial performance. The non-IFRS measures are unaudited,
however, they have been derived from the audited financial statements.
(2) For presentation purposes, numbers been rounded to millions of dollars, however calculations are based on unrounded numbers.
(3) On 1 July 2018 the Group adopted AASB 15 - Revenue from Contracts with Customers using the full retrospective method of adoption. Prior year
comparatives have been restated to align the accounting treatment across both periods.
(4) Details of the movement in the income tax (expense)/benefit are found in note 7(b) of the financial statements. The movement is predominantly due to
Management’s decision to write off the deferred tax asset during the year.
growth and profitability.
TeePublic as well as some collective benefits across the RB
For the Redbubble business, key initiatives are starting to
Group.
power the business:
•
Artists: Product Revenue5 from authentic sellers at
Redbubble grew by 39% in FY2019 and now represent
76% of Redbubble Product Revenue;
Strategy and likely developments in
operations
• Membership: During FY2019, Marketplace Revenue
from members grew by 109%, being 29% of Redbubble
Marketplace Revenue, and there were 5.7 million active
members on Redbubble;
RB Group is targeting long term growth in a large
addressable market. The business has demonstrated
progress across a number of strategic initiatives aimed at
diversifying the Group’s sources of growth and profitability.
• Mobile App: Redbubble iOS app saw growth in
The priorities remain:
•
Grow customer base and increase loyalty through
personal “creative adventures” and member
experiences;
•
Launch and sell products that artists want to design for
and customers will love;
•
Build deeper relationships with authentic artists by
increasing their commercial success;
•
Launch and expand content partnerships with the
world’s leading fan art brands;
• Maintain strong growth and synergy value of TeePublic,
leveraging new product, on-boarding content
partnerships and geographic growth opportunities; and
•
Persist in current discipline to improve the Group’s take
rate, extract maximum value from marketing channels,
and maintain operating expenses and cash discipline.
The business is focused on the strategic work to reach
the milestone of $1 billion in sales and current economics
demonstrate that this can be achieved profitably.
Significant changes in the state of affairs
In the Directors’ opinion, apart from the acquisition of
the TeePublic business noted above, there have been no
significant changes in the state of affairs of RB Group during
the 2019 financial year.
Marketplace Revenue of 140% in FY2019 and work
is underway on the development of an Android app.
In 4Q, the iOS app represented 8% of Redbubble
Marketplace Revenue;
•
Branded Marketing: A strengthening brand is allowing
a shift of spend to lower cost channels e.g. direct and
branded search. RB Group 4Q marketing spend was
only 9.7% of Marketplace Revenue;
•
Content Partners: RB Group has on-boarded a total
of 48 brands, added 25 new brands in 4Q, and the
volume of licensed content grew to 350,000, up 46%
quarter-on-quarter;
•
New Products: 5 new products (throw blankets,
bathmats, shower curtains, glossy and transparent
stickers) were launched in 4Q, after the completion of
re-platforming work enabling efficient and faster new
product launches;
•
Fulfilment: Continued to reduce fulfilment costs while
increasing customer NPS by 3 points to 68 which is an
excellent score; and
• Operating Costs: Redbubble operating expenses grew
by only 12% in FY2019, achieved by management
spending discipline.
For the TeePublic business, significant progress has been
made across the following aspects:
•
Paid Marketing: Grew and scaled efficiently across paid
channels, particularly Google Shopping;
•
Content Partners: Built core process for fan art and
onboarded first brands, including Star Trek;
•
•
Europe: Expanded fulfilment network and enhanced
market coverage via localisation;
Supply Chain Improvements: Enabled additional US
fulfilment and migrated to faster, lower cost shipping
service; and
5
Product revenue is the portion of Marketplace revenue derived from Product sales. It excludes Shopping revenue.
12
13
Annual Report 2019Redbubble
Significant events after end of the
2019 financial year
In the Directors’ opinion, there have been no matters or
circumstances arising since the end of the 2019 financial
year that has significantly affected, or may significantly
affect:
•
‘Community Collective’
Redbubble’s Community Collective is an employee-
driven initiative with one core purpose: to creatively
bring compassion into our local communities. We’ve
partnered with organizations who focus on issues like
the environment, cancer, HIV/AIDS, domestic violence,
and poverty.
Ethical Production
•
assessing all risks before work starts on new areas of
RB Group is committed to ethically-sourced apparel.
operation, for example, buying new equipment and
Only independent third-party manufacturers that source
setting up new work methods;
high quality garments and value the health and welfare
of their staff are permitted to participate in the RB Group
marketplaces. All Redbubble’s participating third-party
•
removing unacceptable risks to safety where feasible;
and
manufacturers hold formal social compliance approvals
•
providing staff with adequate facilities and specific
such as Worldwide Responsible Accredited Production
health and safety programs, as further detailed below.
RB Group’s operations in future financial years;
(WRAP) or equivalent certifications.
the results of those operations in future financial years; or
• Major Global Incidents Policy
Redbubble also requires that all third-party printers
The Group has maintained a strong safety record with very
•
•
•
RB Group’s state of affairs in future financial years.
Dividends
No dividends were paid or declared since the start of the
2019 financial year.
When a global incident occurs, the Company often
see works emerge on the Redbubble website as artists
respond to real life events. In certain scenarios, the
Company donates all profits from related works to
the appropriate charity or organization, ensuring the
funds will be used in a meaningful and relevant way.
Any content created in response to such events must
comply with Redbubble’s User Agreement and all of
Redbubble’s usual policies.
Corporate Sustainability Statement
Environmental regulations
RB Group takes its corporate social responsibilities seriously
and recognises that social, environmental and ethical
conduct has an impact on RB Group’s reputation and the
broader community.
Redbubble’s Board is committed to creating enduring value
for shareholders and other stakeholders. This is achieved
through:
•
Implementing sound corporate governance practices;
RB Group is committed to compliance with all applicable
environmental legislation. RB Group adopts responsible
environmental practices to meet its compliance
requirements and operate consistent with its values.
The Directors are not aware of any material breaches of any
environmental legislation affecting RB Group’s operations.
• Operating in a responsible manner towards employees
Ethical Sourcing Policies
and fulfilment partners through fair and equitable
practices;
•
Transparent reporting on operations and activities;
• Monitoring potential risks and applying mitigating
policies; and
• Making a positive impact on the community.
Examples of RB Group’s contributions to the community
are summarised below (further details can be found on
Redbubble’s Corporate Sustainability page at redbubble.
com/social-responsibility/giving-back/community-
collective):
•
’Create Some Good’
Redbubble’s commitment to the power of creativity
and belief that a simple idea can help open hearts
and minds led to the launch of the ‘Create Some
Good’ initiative. The Company funded 5 projects by 6
artists from 4 countries. All with a single goal – to use
creativity to make the world a little better.
As a global marketplace, RB Group places great emphasis
on its contribution and impact in the wider community,
both socially and environmentally.
Print on Demand
Every product on RB Group’s marketplaces is printed on
demand (i.e. made one at a time). The product does not
exist unless and until the customer orders it, which means
less waste.
A Small Footprint
Around 95% of the Redbubble’s marketplace packages
originate within the same region from which they are
ordered. This regional fulfillment ensures that less energy
is used in the delivery of packages and leads to a smaller
carbon footprint. To offset the shipping emissions from
annual package delivery, the Company is partnering with
a leading third-party carbon offset organisation. Current
examples of conservation initiatives in which the Group is
investing include reforestation in the United States and a
cookstove replacement program to reduce emissions in
India.
14
participating in the marketplace ensure safe working
few health and safety incidents.
conditions, minimise environmental impact, and treat
their employees with respect and dignity. To ensure these
requirements are met, they must adhere to the Fair Labor
Association (FLA) Code of Conduct.
A comprehensive employee wellness program is offered
which includes complementary flu vaccinations, healthy
snacks and ergonomic support. In recognition that the risk
of mental health issues is rising, wellbeing initiatives are
Redbubble coordinates with identified third-party firms to
aimed at preventing future mental health incidents. The
schedule announced compliance audits of the FLA Code
Group offers an Employee Assistance Program, providing
of Conduct. The core purpose is to ensure standards are
confidential telephonic and face to face support for
being met and sustainable management, reporting, and
employees and contractors.
tracking systems have been established. Participants in
the Redbubble marketplace must commit to continual
improvement where Code Standards are not met and
assure ongoing compliance in a reasonable and timely
manner.
Governance and risk
RB Group is committed to strong and effective governance
and risk management frameworks. These frameworks are
California Transparency in Supply Chains Act
described in Redbubble’s Corporate Governance Statement
Redbubble supports the California Transparency in Supply
- available in the Corporate Governance section of the
Chains Act, which requires members of the supply chain
Redbubble’s Investor Centre at: shareholders.redbubble.com.
to certify compliance, agree to audits, undergo Social
Responsibility training and remain accountable for their
actions.
RB Group manages its risks in an integrated, consistent
and practical manner. The overall objective of risk
management is to assist the Group to achieve its objectives
by appropriately considering both threats and opportunities,
Australian Modern Slavery Act 2018 requirements
and making informed decisions. Redbubble’s Audit and
The Modern Slavery Act 2018 (Cth) commenced on 1
Risk Committee oversees the process for identification
January 2019. Redbubble is subject to the new statutory
and management of risk, as described in the Corporate
modern slavery reporting requirements and, in addition to
Governance Statement. The Company Secretaries are
the activities and processes described above, the Company
responsible for providing oversight of the risk management
is reviewing supply chain operations and collecting data
framework and assurance on the management of significant
ahead of compliance with the first mandatory report due by
risks to the CEO and the Board.
The Group’s risk management framework, responsibilities
and accountabilities are aligned with its business
model. The risk management policy and risk appetite is
provided in the Corporate Governance Statement. The
key organisational controls within the risk management
framework help to shape the strategies, capabilities and
culture of the Group, identify and address vulnerabilities,
strengthen the system of internal controls and build a more
resilient organisation.
December 2020.
Health and Safety
RB Group is committed to ensuring the health and safety
of its employees, contractors and visitors by conducting its
business in accordance with all workplace health and safety
laws, standards and codes of practice. RB Group strives
to provide a safe work environment for the physical and
mental health, safety and welfare of team members and
visitors, including by:
•
•
•
developing and maintaining safe systems of work, and
a safe working environment;
consulting with staff on safety;
providing information and training for team members
where necessary;
15
Annual Report 2019Redbubble
Risk Framework
Principal risks
RB Group seeks to take and manage risk in ways that will
The following are key risks that may impact RB Group’s
generate and protect shareholder value. The management
financial and operating results in future periods:
of risk is a continual process and an integral part of the
Group’s business.
•
Competitive activity / technological disruption - To
mitigate the impact of this risk RB Group is focusing on
The Group acknowledges that it is has an obligation
ensuring that its marketplaces provide a market leading
to shareholders, customers, employees, creatives and
experience for artists and customers. The RB Group
contractors to implement a risk management framework
has 24.1 million active works providing a substantial
that reflects its overall risk appetite and tolerances for risk
barrier to new entrants.
in specific areas. The Group believes that this approach
contributes to the achievement of its strategic objectives.
The Group is committed to ensuring that a consistent and
integrated approach to managing risk is established at all
levels and is embedded in its processes and culture.
The objective of the Group’s risk appetite is to foster a
culture of innovation. The Group is aware that an overly
cautious approach to risk management may have a
harmful impact on the achievement of strategic and
operational objectives. For this reason, the Redbubble
Board encourages prudent risk taking by staff that balances
•
Google search channel risk - RB Group continues
to focus on customer loyalty, engagement and
member relationships as a strategic priority to reduce
dependence on organic search.
•
Costs risk arising from consolidation in fulfillment
market - RB Group has reduced this risk by
implementation of a diversification strategy by
integration of new fulfillers and improvements to the
fulfillment API, systems and tooling, enabling new
fulfillers to be onboarded significantly faster.
the risks of action versus inaction and subject always to
•
Attracting and retaining top talent in business critical
applicable Group policies.
The Group has adopted a risk management strategy
that aims to identify and minimize the potential for loss
while also maximising strategic opportunities for growth
and enhanced service delivery and profitability. The risk
framework is based on the principles contained in AS/NZ
ISO Risk Management Principles:
Identifying and analysing risks;
functions - Redbubble is encountering increased
competition for technology talent in Melbourne. This
risk is being mitigated with the introduction of a new
executive compensation plan and compensation
adjustments for key talent roles. In recruitment, the
RB Group has built effective employment branding to
attract new talent.
•
Technology Security Risk - This risk covers
categories of risk around the security and reliability
•
Evaluating those risks – making judgments about
of the technology infrastructure and processes
whether they are acceptable or not;
used to operate the marketplaces. As a technology-
•
Implementing and Documenting appropriately
designed control systems to manage these risks;
focused business, managing security, and taking
care of consumer and customer data is essential. To
manage this risk, The Company has developed and
•
Treating unacceptable risks – formulating responses
tested its disaster recovery capability and procedures,
following the identification of unacceptable risks,
implemented high availability infrastructure and
including action plans to reduce the probability or
architectures, and continually monitor our systems
consequences of an event occurring; and
for signs of poor performance, intrusion or
• Ongoing monitoring, communication, and review.
interruption. The Company maintains appropriate
data management, security and compliance policies,
The risk framework outlines the responsibilities for risk
procedures and practices in place.
management at all levels in the organization and supports
these responsibilities by defining a risk reporting structure,
expectations and the resources and tools required.
The risk management process includes risk assessment
methodology with identification, analysis, evaluation and
treatment in key risk areas.
•
Litigation brought against Redbubble for intellectual
property infringement - This arises from RB Group’s
role as an intermediary for user-generated content. RB
Group mitigates this risk by responding expeditiously
to content takedown notices from intellectual property
rights-holders, engaging in collaborative relationships
with rights-holders to promote the integrity of website
content (including through the RB Group Fan Art
Licensing Program), as well as software tools that
automate the content management activities.
•
Privacy and Data Protection Compliance Risk - To
minimise the impact of this compliance risk we have
undergone an extensive compliance framework
initiative with the enactment of the European General
Data Protection Regulation (GDPR) and implemented
Directors’ qualifications and
experience
Mr Richard Cawsey
appropriate IT security measures; including
Non-executive Director and Chair of the Board
preventative, detective and responsive capabilities.
Member of Audit and Risk Committee
• Macroeconomic Risks - RB Group is subject to
Richard Cawsey has a 32 year track record of building
macroeconomic risks affecting consumer demand in
high-performing organisations in Australia, Europe, North
relevant retail markets. These risks are largely outside
America and Asia. In addition to chairing Redbubble,
of RB Group’s control, and are mitigated by spreading
he is the executive chair of Denali Venture Partners, a
risk and investments across a wide range of countries
consultancy that works with fast growing companies to
and investments of varying sizes and value.
realise their potential and chairs two private companies.
Change in key management personnel
during the 2019 financial year and
since the end of that financial year
The “Key Management Personnel” for the purposes of the
FY2019 Remuneration Report have been determined to be:
Richard has held a number of board and senior executive
roles for ASX listed companies including St. George Bank
(then Australia’s 5th largest). Prior to returning to Australia,
Richard was a managing director with Morgan Stanley
working senior roles in Europe, the US and Asia. Richard
has a Bachelor of Commerce (Hons) degree from Australian
National University and is a graduate of the Australian
Institute of Company Directors.
•
•
Barry Newstead - Chief Executive Officer;
Richard has not held any other listed company directorships
in the 3 years to 30 June 2019.
Emma Clark - Chief Financial Officer from 1 June 2019
and as at the date of this Report;
•
Chris Nunn - Chief Financial Officer until 1 June 2019; and
Mr Barry Newstead
• Martin Hosking, who resigned from his role as Chief
CEO and Managing Director
Barry Newstead has been CEO and Managing Director
since August 2018. He joined Redbubble in 2013 as Chief
Operating Officer. Prior to joining Redbubble, Barry
held internet focused executive roles at the Wikimedia
Foundation (which runs Wikipedia) in San Francisco and at
Australia Post. He spent 14 years as a strategy consultant
with the Boston Consulting Group and the Bridgespan
Group (an affiliate of Bain & Company). Barry has lived and
worked in North America, Asia, Europe and Australia. He is
based in Melbourne and travels to the US regularly.
Barry earned his bachelor’s degree from Ivey Business
School, Canada, and Master’s degree from Harvard
University, USA. Barry is a graduate of the Australian
Institute of Company Directors. He is a board member of
the Foundation for Young Australians.
Barry has not held any other listed company directorships in
the 3 years to 30 June 2019.
Executive Officer and Managing Director with effect
from 1 August 2018 and continued as an executive
director from that date until his retirement from RB
Group employment on 30 September 2018. Martin
then became a non-executive director and he remains
a non-executive director as at the date of this Report.
Whilst each of the Executive Team members listed on
page 21 and 22 are considered key employees, only the
individuals above, together with Non-executive directors,
are considered “Key Management Personnel” within the
definition in ‘AASB 124 - Related Party Disclosures’.
Information on Directors
At the date of this report, the Board comprises six Non-
executive Directors and one Executive Director who
collectively have a diverse range of skills and experience. The
names of Directors and details of their skills, qualifications,
experience can be found below.
Details of the number of Board and Board Committee
meetings held during the year and Directors’ attendance at
those meetings are shown on page 19 of this report.
Details of the qualifications and experience of the Directors
and their directorships of other listed companies held by each
current Director in the three years before the end of the 2019
financial year are listed below.
16
17
Annual Report 2019Redbubble
Jenny has held the following listed company directorships
Mr Grant Murdoch
a member of the finance committee), an adjunct professor
Redflow Ltd (from 22 December 2017 to present)
Non-executive director and Chair of the Audit and Risk
Advanced Executive Program and the Advanced Leadership
Mr Martin Hosking
Non executive Director
in the 3 years to 30 June 2019:
to present)
Member of the People and Nomination Committee
•
Australian Pharmaceuticals Ltd (from 9 November 2017
Martin Hosking is a co-founder of Redbubble. He became
the CEO and Managing Director in July 2010. Martin
resigned as CEO and Managing Director and became an
Executive Director on 1 August 2018 (upon the appointment
•
•
Bapcor Ltd (from 1 September 2018 to present)
of Barry Newstead as CEO and Managing Director) and
transitioned from Executive Director to Non-executive
Director on 1 October 2018.
Martin has spent over 20 years scaling Australian
technology companies. Previously, Martin was the chair
Ms Anne Ward
Independent Non-executive Director
Chair of the People and Nomination Committee
of Aconex, a SaaS provider to construction firms, and
Anne Ward is a professional company director with over
Southern Innovation, a digital pulse processing solution.
30 years extensive experience in business management,
He was instrumental in the development and subsequent
strategy, finance, risk and governance across a range
listing on the NASDAQ of search company, LookSmart.
of industries including banking, financial services,
Martin started his career as a diplomat with the Australian
technology, healthcare, education, property and tourism.
Department of Foreign Affairs and Trade before joining
Anne is independent Chairman of Colonial First State
McKinsey & Company, serving clients focusing on emerging
Investments Ltd and recently retired as Chairman of Qantas
technologies. Martin has a Bachelor of Arts (Hons – First
Superannuation Ltd and a Director of ASX listed MYOB
class) degree from the University of Melbourne and an MBA
Group Ltd (ASX:MYO). She is currently a member of the
(with distinction) from Melbourne Business School, where
Council at RMIT University, a Director of the Foundation for
he has also lectured. Martin is a graduate of the Australian
Imaging Research, and a Governor of the Howard Florey
Institute of Company Directors.
Martin has not held any other listed company directorships
in the 3 years to 30 June 2019.
Ms Jennifer (Jenny) Macdonald
Independent Non executive Director
Member of the Audit and Risk Committee
Member of the People and Nomination Committee
Jenny Macdonald is a professional company director,
currently serving on the board and audit committee of
ASX-listed Australian Pharmaceuticals Ltd (ASX: API), the
parent company of Priceline Pharmacy, Soul Pattinson
Neuroscience Institutes. Prior to becoming a professional
director, Anne was a commercial lawyer for 28 years and
was General Counsel for Australia at the National Australia
Bank. She holds a Bachelor of Laws and a Bachelor of Arts
from the University of Melbourne, is admitted as a barrister
and solicitor in the Supreme Court of Victoria and is a
Fellow of the Australian Institute of Company Directors.
Anne has held the following listed company directorships in
the 3 years to 30 June 2019:
• MYOB Group Ltd (from March 2015 to May 2019)
Mr Greg Lockwood
Chemist and Pharmacist Advice - and serves as the Audit
Independent Non-executive Director
Chair for Bapcor Limited (ASX:BAP). Jenny was appointed
a Non-executive Director of Property Guru Pte Ltd on
10 September 2019. She previously held Non-executive
Director roles at online services marketplace hipages
Group, and non-profit organisation Fitted for Work. She
also has extensive experience working for ASX-listed and
global companies at the CFO and general management
level, including as CFO and interim CEO at Helloworld
Limited, and CFO and General Manager International with
REA Group. Jenny holds a Masters of Entrepreneurship
and Innovation: Swinburne University (Victoria), a Graduate
Diploma from the Securities Institute of Australia and a
Bachelor of Commerce from Deakin University (Victoria).
She is a Graduate of the Australian Institute of Company
Directors and a Member of the Institute of Chartered
Greg Lockwood was appointed as a Non-executive director
with effect from June 2015. Greg is a partner of Piton
Capital, which is a shareholder in Redbubble. In 1999,
Greg founded UBS Capital’s early stage venture investing
activities in Europe. Subsequently, he co-founded Piton
Capital, the London-based venture capital fund specialising
in marketplaces and business models with network effects.
Prior to his venture capital activities, Greg worked in
telecommunications corporate finance with UBS in London
and Zurich and held operating roles in classified media
publishing in Toronto. Greg has an Honours Business
degree from the University of Western Ontario, and a
Master’s degree in management from the Kellogg Graduate
School of Management.
Accountants ANZ.
Greg has not held any other listed company directorships in
the 3 years to 30 June 2019.
Independent Non-executive Director
Chair of Audit and Risk Committee
at the University of Queensland Business School and a
director of UQ Holdings Limited. Grant has a Master’s
degree in Commerce (Honours) from the University of
Grant Murdoch joined the Board as an independent
Canterbury, New Zealand, is a graduate of the Kellogg
Committee in January 2016. Grant has more than 39 years’
Program at Northwestern University. He is fellow of both
chartered accounting experience. From 2004 to 2011,
the Institute of Chartered Accountants in Australia and
Grant led the corporate finance team for Ernst & Young
New Zealand and of the Australian Institute of Company
Queensland and was an audit and corporate finance partner
Directors. He is a member of the AICD State Council
with Deloitte from 1980 to 2000. Grant has extensive
for Queensland for the Australian Institute of Company
experience in providing advice in relation to mergers,
Directors. Grant will retire from the board of Redbubble at
acquisitions, takeovers, corporate restructures, share issues,
the end of the 2019 AGM (on 23 October 2019).
pre acquisition pricing due diligence advice, expert reports
for capital raisings and initial public offerings. Grant is
currently a director and the chair of the audit committees
for each of ALS limited (formerly Campbell Brothers), Lynas
and OFX Limited (previously Ozforex Limited). He was
previously a Director and the Chair of the Audit committees
Grant has held the following listed company directorships
in the 3 years to 30 June 2019:
•
•
ALS Limited (from 1 September 2011 to present)
Lynas Limited (from 1 November 2017 to present)
for QIC from 2011 to 2017. He is a senator of the University
• OFX Group Limited (from 19 September 2013 to
of Queensland (as well as Chair of the risk committee and
present)
Board and Committee Meetings - attendance during FY2019
Board
Audit and Risk
Committee
People and Nomination
Committee
Held whilst in
office
Attended
whilst in
office
Held whilst in
office
Attended
whilst in
office
Held whilst in
office
Attended
whilst in
office
Richard Cawsey
Barry Newstead
Martin Hosking*
Greg Lockwood
Jenny Macdonald
Anne Ward
Grant Murdoch*
Hugh Williams
18
17
18
18
18
18
18
16
17
17
18
16
18
18
15
10
3
-
-
-
3
-
3
-
3
-
-
-
3
-
3
-
-
-
1
-
5
5
4
-
-
-
1
-
4
5
4
-
* Martin Hosking was appointed to the People and Nomination Committee upon Grant Murdoch’s retirement from that Committee, in April 2019.
18
19
Annual Report 2019Redbubble
Directors’ interests and shares and options
The Directors’ interests in shares and options as at 28 August 2019 was as follows:
Richard Cawsey
Barry Newstead
Martin Hosking
Greg Lockwood
Jennifer Macdonald
Grant Murdoch
Anne Ward
Hugh Williams
Total interests
Shareholdings
Options outstanding
Share appreciation
rights outstanding
14,066,549
39,423
-
562,413
3,360,690
5,666,668
56,500,090
6,465,131
56,539
220,971
100,000
47,670
19,711
-
19,711
120,649
22,916
-
-
-
-
-
-
-
78,019,363
3,583,100
5,666,668
Share options granted
Company Secretaries
During the financial year and since the end of the financial
RB Group’s Company Secretaries are Ms Corina Davis
year to 28 August 2019, an aggregate 2,022,402 share
(based in the US) and Mr Paul Gordon (based in Australia).
options and 5,666,668 share appreciation rights were
granted to the Directors and to the five highest remunerated
Ms Corina Davis
officers of the Company and its controlled entities as part of
Executive Vice President - Business Development, Chief
their remuneration.
Legal Officer and Company Secretary
Retirement, election, continuation in
office of Directors
Under the Company’s constitution, Directors cannot
serve beyond three years or the third AGM after their
appointment, whichever is longer, without submitting for
re-election by the Company. A retiring Director is eligible
for re-election without needing to give any prior notice of
Corina Davis joined Redbubble in 2012. Corina oversees
the Company’s legal function and Redbubble’s partnerships
and licensing initiatives. Corina has a wide range of
cross functional experience with particular expertise in
copyright and trademark law, litigation, compliance and risk
management. Before joining Redbubble, Corina practiced
law in Los Angeles and New York City at Milstein Adelman,
McCurdy & Fuller and Mendes & Mount. Corina is an active
member of the Women’s General Counsel Network and the
San Francisco General Counsel Group. Corina is a board
member of the Australian Digital Alliance, Australia’s peak
an intention to submit for re-election and holds office as a
body representing copyright users and innovators in digital.
Director (subject to re-election) until the end of the general
Corina holds a Bachelor of Arts degree from the University
Barry Newstead, who is Managing Director and Chief
Executive Officer, is not required to be re-elected while he
Mr Paul Gordon
Regional Counsel and Company Secretary (Australia)
holds the position of Managing Director.
Paul Gordon joined Redbubble in early 2015. Paul has broad
corporate and commercial legal experience, gained in-
house and in private practice in Australia, the UK and New
Zealand. Before joining RB Group, Paul was the General
Counsel at ASX-listed REA Group. Before that Paul was a
Senior Corporate Associate at Nabarro LLP in the UK and
also practiced at Hogan Lovells (UK) and Chapman Tripp
Mr Arnaud Deshais
(NZ). Paul holds a Bachelor of Laws (Hons) and Master of
Chief Supply Chain Officer
Commerce from the University of Canterbury NZ and a
Certificate in Governance Practice from the Governance
Institute of Australia.
Executive Team
Please see above for the biographies of the following
Executive Team members:
Arnaud Deshais joined Redbubble in 2014 and oversees
the Global Operations function. Arnaud has a wide range
of supply chain experience with particular expertise in
the areas of fulfillment, logistics, quality and customer
experience. Before joining Redbubble, Arnaud was the
Director of Supply Chain for Art.com. Earlier, he was a
Consultant Manager for Cap Gemini Ernst and Young within
the Supply Chain and High Tech Practices. Arnaud is an
active member of APICS and ISM. Arnaud holds an MBA
•
Barry Newstead, Chief Executive Officer and Managing
from Clemson University, USA and ESC Rennes, France.
Director
•
Corina Davis, Executive Vice President, Business
Ms Sadie Stoumen
Development, Chief Legal Officer and Company
Vice President - Product
Secretary
Biographies for the remaining Executive Team members
follow:
Ms Emma Clark
Chief Financial Officer
Emma Clark joined Redbubble as Chief Financial Officer
in June 2019. Prior to this she spent ten years at ANZ
Bank holding a variety of executive roles, with the most
recent being CFO of ANZ’s Technology Division. Emma
Sadie Stoumen joined Redbubble in 2017 and oversees
the Product Management and Design functions. During
her time at Redbubble, Sadie has worked across fulfilment
systems, product launches, and scalable platforms. Prior
to joining Redbubble, Sadie held product management
and product marketing positions at Intuit and Google, and
led content strategy at a venture-backed marketplace.
Sadie has a Bachelor of Arts in International Relations and
Economics from Wellesley College, Massachusetts.
has previously been both CFO and Managing Director for
Mr Georg Friedrich
the Diners Club business in Australia. CPA qualified, Emma
Head of Platforms / Vice President - Engineering
has a Bachelor of Business from Monash University, and is
also active on Boards, most recently spending four years as
Treasurer for the Ovarian Cancer Research Foundation.
Mr Daniel Vydra
Chief Technology Officer
Daniel Vydra has been with Redbubble since 2012,
working across the engineering organisation in strategy
and infrastructure leadership roles. Prior to that, Daniel
worked as a software consultant in the media, travel
and telecommunications industries, spending several
years working with the technology team at The Guardian
newspaper in London. Daniel has a Bachelor of Information
Systems degree from The University of Melbourne.
Vanessa Freeman joined Redbubble as Chief People and
Culture Officer in August 2015. Vanessa previously held
senior human resources and strategy roles at Pacific
Brands and McKinsey & Company - London, where she
focused on corporate strategy, post-merger management
and operational transformation. Vanessa has Bachelor of
Arts and Bachelor of Commerce degrees from Auckland
University and an MBA from Stanford University, California.
Georg Friedrich joined Redbubble in 2009 and has held
various leadership roles within the engineering team. He
has contributed to most of Redbubble’s code base since
the earliest days. Georg’s experience spans 20 years of
software development roles in industries ranging from
printing to online fundraising and e-commerce. In 2007,
he co-founded ‘betterplace.org’ and developed an online
donation platform which remains Germany’s largest of its
kind. Georg holds a degree in business informatics from the
Berlin School of Economics.
Mr Anuj Luthra
Head of Artists & Content / Vice President - Engineering
Anuj Luthra joined Redbubble in 2012 as a senior engineer
and has been in various leadership roles within the
engineering team. He has been the driving force behind
building the search platform, paid marketing platform and
product engineering discipline. Currently, he leads our
Artist and Content user group. Before Redbubble, he ran his
own business (36 Zeroes) in software consulting & product
development and worked as a senior engineer for Sealink
Travel Group. Anuj has a Bachelor’s of Computer Science
from Jodhpur University and a Masters of Information
Technology from the University of South Australia.
meeting at which the Director retires.
As noted above, Grant Murdoch is not seeking re-election at
the 2019 AGM and will retire at the end of that AGM.
of Michigan, Ann Arbor and a Juris Doctor degree from the
University of San Diego School of Law, California.
Ms Vanessa Freeman
Chief People and Culture Officer
20
21
Annual Report 2019Redbubble
Dr Sadegh (Sam) Kharazmi
Head of Customer Experience / Vice President -
Engineering & Data Science
Mr Adam Schwartz
CEO - TeePublic
Adam Schwartz joined the RB Group in November 2018 as
Sam Kharazmi joined Redbubble in 2015 to build the
TeePublic’s CEO after TeePublic was acquired. Prior to the
company’s data science and machine learning capability
acquisition, Adam was TeePublic’s Co-Founder and Chief
and currently leads customer experience and data science.
Operating Officer. Previously, Adam was Chief Operating
Sam holds a PhD in Computer Science from RMIT where he
Officer of BustedTees.com and a Co-Founder of Le Souk.
specialised in machine learning and information retrieval.
In 2016, Adam was named to Forbes 30 Under 30. He is a
He has held research positions at RMIT and National ICT
start-up mentor for ERA Ventures and an advisory board
Australia, and collaborated with Microsoft Research and Yahoo
member for Bombas, The Loyalist, Attentive, Pathspark and
Research. His prior experiences also include a number of senior
Curos. He holds a Bachelor’s of Science from the University
technical, operational and advisory positions at several startups.
of Florida in Telecommunications Operations Management
and Business.
Dr Brett Watson
Chief Commercial Officer
Brett Watson joined Redbubble in 2016 as a Senior Strategy
Manager and has provided strategic and commercial
leadership across the Redbubble marketplace, being
promoted to the role of Chief Commercial Officer in August
2019. Prior to Redbubble Brett has held senior strategy
positions at Coles and as a consultant with KPMG and
Pacific Strategy Partners. Brett has a Bachelor of Mechanical
Engineering from Curtin University and a PhD in Engineering
from Monash University.
Details of share options and performance rights for Directors and Executives
Below are details of options, share appreciation rights and performance rights in respect of ordinary shares in the Company
granted to Directors or any of the 5 most highly remunerated officers of the Company (other than the Directors) during the
2019 financial year.
Number of options /
performance rights granted
Number of ordinary shares under
options /performance rights
Number of share appreciation
rights granted
Richard Cawsey
Barry Newstead
Martin Hosking
Greg Lockwood
Jennifer Macdonald
Grant Murdoch
Anne Ward
Hugh Williams
Corina Davis
Arnaud Deshais
Chris Nunn
Jorie Waterman
Total options
39,423
920,304
19,711
-
19,711
22,916
22,916
19,711
337,023
480,658
29,447
110,582
39,423
920,304
19,711
-
19,711
22,916
22,916
19,711
337,023
480,658
29,447
110,582
The following table shows the total numbers of ordinary
shares in the Company subject to options, share
appreciation rights or performance rights as at the date of
this Report:
Number
outstanding
Last
expiry date
Options
20,949,164
31 July 2029
Share appreciation rights (1)
5,666,668
1 August 2025
Proceedings against the Company
As at the date of these financial statements there are
current lawsuits filed against entities within RB Group that
relate to alleged intellectual property infringement and/
or breach of consumer laws. There is no certainty around
amount or timing of any outflow should any of the actions
ultimately be successful (at first instance or on appeal, as
applicable).
RB Group does not currently consider that any of the
Performance Rights (2)
723,600
current proceedings are likely to have a material adverse
Total awards outstanding
27,339,432
(1) Share appreciation rights (SARs) entitle the holder to equity equal to the
appreciation of the Group’s share price over a defined period. There is not
a 1 to 1 relationship with the number of SARs on issue and the number of
shares that will be issued upon exercise.
(2) Performance rights granted do not have an expiry date. Ordinarily these
vest and are settled according to a participant’s vesting schedule, and any
outstanding performance rights are otherwise forfeited when a participant
no longer satisfies the service conditions in their agreement.
Holders of options or performance rights do not, by virtue
of their holdings, have any pre-emptive right to participate
in any share issue of the Company or any related body
corporate.
effect on the business or financial position of RB Group.
RB Group is not aware of any other current or material
threats of civil litigation proceedings, arbitration
proceedings, administration appeals, or criminal or
governmental prosecutions in which entities within RB
Group are directly or indirectly concerned.
CEO and CFO declaration
The CEO and CFO have provided a written statement to the
Board in accordance with Section 295A of the Corporations
Act. With regard to the financial records and systems of
The Financial Report contains details of the total number of
risk management and internal compliance in this written
ordinary shares in the Company issued following exercise of
statement, the Board received assurance from the CEO and
options and vesting of performance rights during the 2019
CFO that the declaration was founded on a sound system
financial year. The following table shows the total number
of risk management and internal control, and that the
of ordinary shares in the Company issued following exercise
system was operating effectively in all material aspects in
of options and vesting of performance rights since the end
relation to the reporting of financial risks.
of the 2019 financial year, to the date of this Report:
-
5,666,668
Settlement of vested
performance rights
Number
Exercise
price paid
$
4,166
-
Remuneration Report
The Remuneration Report is set out on pages 26 to 45 and
forms part of the Directors’ Report for the financial year
ended 30 June 2019.
-
-
-
-
-
-
-
-
-
-
Exercise of options
1,697,684
1,162,358
Total
1,701,850
1,162,358
Rounding of amounts
No amounts remain unpaid in respect of the shares issued,
The amounts contained in the Financial Report have
been rounded to the nearest $1,000 (where rounding is
applicable) where noted ($000) under the option available
to the Company under ASIC Legislative Instrument
2016/191. The Company is an entity to which the Legislative
Instrument applies.
as outlined above.
Indemnification and insurance of
officers
The Company has entered into Deeds of Indemnity
with all its Directors in accordance with the Company’s
constitution. During the 2019 financial year, the Company
paid a premium to insure the Directors, Officers and
Managers of RB Group entities. The insurance contract
requires that the amount of the premium paid is
confidential.
2,022,402
2,022,402
5,666,668
There are no options or performance rights granted to this group since the end of the 2019 financial year to 28 August 2019.
22
23
Annual Report 2019Redbubble
Auditor
Fees for Audit services
Ernst & Young was appointed as the Company’s Auditor on
Details of the amounts paid to the auditor for audit services
25 November 2014 and continues in office in accordance
provided throughout the 2019 and 2018 financial years are
with section 327 of the Corporations Act 2001.
set out in Note 23 to the Consolidated Financial Statements.
To the extent permitted by law, the Company has agreed
to indemnify 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
Auditor’s Independence Declaration
payment has been made to indemnify Ernst & Young during
A copy of the Auditor’s Independence Declaration, as
or since the end of the 2019 financial year.
required under section 307C of the Corporations Act, is set
On 27 August 2019, the Directors approved the extension
of the appointment of the Company’s Audit Partner, Ms
out on page 25. The Auditor’s Independence Declaration
forms part of the Directors’ Report.
Kylie Bodenham, for a further period of two years (pursuant
The Directors’ Report is made in accordance with a
to Section 324DAA of the Corporations Act 2001). The
resolution of the directors of the Company.
Richard Cawsey
Chair
28 August 2019
Directors’ approval followed an Audit and Risk Committee
recommendation to extend the appointment, including
a statement by the Committee members that they were
satisfied that the extension:
• would be consistent with maintaining the quality of the
audit provided to the Company; and
• would not give rise to a conflict of interest situation as
defined in section 324CD of the Corporations Act.
Non-audit services
During the year Ernst & Young performed other services
in addition to its audit responsibilities. The Directors are
satisfied that the provision of non-audit services by Ernst
& Young during the reporting period did not compromise
the auditor independence requirements set out in the
Corporations Act. All non-audit services were subject to the
Company’s External Auditor Policy and do not undermine
the general principles relating to auditor independence set
out in APES 110 Code of Ethics for Professional Accountants
as they did not involve reviewing or auditing the auditor’s
own work, acting in a management or decision-making
capacity for the Company, or jointly sharing risks and
rewards.
Details of the amounts paid to the auditor of the Company
and its related practices for non-audit services provided
throughout the 2019 and 2018 financial years are set out
below.
Non-audit services
Taxation services
Other services (1)
2019
$
2018
$
18,250
147,715
19,750
48,751
Total
165,965
68,501
(1) Other services for FY2019 include a one-off cost relating to the
acquisition of TeePublic of $93k.
24
25
Annual Report 2019Redbubble
REMUNERATION REPORT
LETTER FROM THE
PEOPLE AND NOMINATION COMMITTEE
Dear Shareholder,
On behalf of the Board of Redbubble Limited (referred to as “RB Group” or “Group”), I am pleased to present our Remuneration
Report for FY2019.
The role of the People and Nomination Committee is to ensure RB Group has a remuneration structure which attracts and retains
quality global and local talent, motivates them to build a company of enduring value and encourages and rewards innovation and
long-term focus.
Reflecting the changing needs of a growing, global, ASX listed company, the Group’s approach to remuneration continues to
evolve. During FY2019, the People and Nomination Committee conducted a full review of the Group’s executive remuneration
arrangements and the Board approved a revised model designed to better align with the Group’s strategic intent. A process is now
underway to transition the executive team to the new model.
The objectives of the RB Group executive remuneration model are to:
•
•
•
•
Clearly link executive performance with RB Group’s strategic goals;
Motivate executives to create sustainable, long term value for shareholders;
Unify the global executive leadership team by providing consistent goals in a single model which is easy to understand and
encourages a long-term focus; and
Attract and retain exceptional talent in globally competitive, highly mobile markets.
FY2019 Key Management Personnel (KMP) remuneration arrangements
In August 2018 Barry Newstead was appointed Chief Executive Officer (CEO) of RB Group and in June 2019 Emma Clark was
appointed Chief Financial Officer (CFO).
The CEO contract agreed with Barry Newstead and approved by shareholders included fixed cash compensation, a short-term
incentive (STI) comprising zero priced options and a multi-year long-term incentive (LTI) of share appreciation rights (SARs) with
exercise conditions. This remuneration structure reflects a number of the objectives which were later incorporated into the new
executive remuneration model, including:
•
•
•
A shift away from cash-based STIs;
The introduction of share-price exercise conditions for LTIs; and
The introduction of SARs as the LTI instrument.
It is intended that Barry Newstead will transition to the new executive remuneration model to be fully aligned with the rest of the
executive team.
Emma Clark joined as CFO in June 2019 on the new executive remuneration structure, with a total target remuneration
benchmarked to Redbubble’s ASX peer group and comprising cash compensation, long-term equity (LTE) in the form of zero-priced
options and long-term incentive (LTI) in the form of share appreciation rights (SARs) with exercise conditions.
FY2019 KMP remuneration outcomes
Based on the Group’s financial performance in FY2019, the CEO will receive 40% of his target short-term incentive, reflecting the
partial achievement of the CEO’s performance goals for the year.
The outgoing CFO will receive 47.5% of his target short-term incentive, reflecting partial achievement of the CFO’s performance
goals for the year.
Executive remuneration model
As described in more detail in the Remuneration Report, the new executive remuneration model will comprise cash compensation,
long term equity grants with restrictions on disposal and LTI with long term vesting and exercise conditions based on compound
annual share price growth.
The Committee is confident that the new Executive Remuneration Model will provide a strong foundation for the RB Group for the future.
RB Group People and Nomination Committee Chair
Anne Ward
26
27
Annual Report 2019
Contents
1.
2.
3.
4.
5.
6.
7.
8.
9.
Remuneration Report overview
Overview of executive remuneration
Performance & executive remuneration outcomes in FY2019
How remuneration is governed
Overview of non-executive director remuneration
Executive statutory reporting for FY2019
Equity instruments held by KMP
Equity grants outstanding
Loans, transactions and other balances with KMP and their related parties
1.
Remuneration Report overview
The Directors of Redbubble Limited present the Remuneration Report (the Report) for the Group for the financial year
ended 30 June 2019. This Report forms part of the Directors’ Report and has been audited in accordance with section 300A
of the Corporations Act 2001.
The Report details the remuneration arrangements for Key Management Personnel (KMP). KMP are those persons who have
authority and responsibility for planning, directing and controlling the activities of the Group.
The table below outlines the KMP of the Group and changes during FY2019:
Name
Position
Non-executive Directors
Richard Cawsey
Chair, Non-executive director
Martin Hosking
Non-executive director (retired as Managing Director and Chief
Executive Officer (CEO) 1 August 2018 and remained a Director)
2.
Overview of executive remuneration
2.1 Changes in Key Management Personnel (KMP)
During the year the following transitions occurred:
• Martin Hosking resigned from his role as Chief Executive Officer and Managing Director with effect from 1 August 2018.
Mr Hosking continued as an Executive Director from that date until his retirement from Redbubble Group employment
on 30 September 2018. Mr Hosking then became a Non-executive Director and he remains a Non-executive Director
as at the date of this Report.
•
Barry Newstead transitioned from Chief Operating Officer to Chief Executive Officer and Managing Director, effective
1 August, 2018.
•
Chris Nunn stepped down from his role as Chief Financial Officer on 1 June 2019, continuing in an executive advisory
capacity before his retirement from RB Group, effective 1 July 2019.
•
Emma Clark joined RB Group on 1 June 2019 as Chief Financial Officer.
2.2
Group remuneration strategy
FY2019 was a transitional year for RB Group’s executive remuneration strategy.
As indicated in last year’s report, RB Group is moving to a new Executive Compensation Model, which is expected to be
fully effective for FY2020. RB Group’s newly appointed Chief Financial Officer, Emma Clark, is the first executive to be
hired under the new model. Emma Clark joined the RB Group on June 1, 2019. A process is now underway to transition the
executive team to the new model.
RB Group’s vision is to build a global leading retail commerce platform and an enduring organisation that delivers
sustainable value for shareholders over the long term. The Group’s new Executive Compensation Model is designed to
attract and retain proven, global executive talent who will successfully execute on the Groups vision and strategy in a
manner that aligns with the company’s values.
RB Group’s Executive Compensation Model recognises compensation will increasingly need to be positioned to extract
mid-career executives on a strong earnings trajectory from roles in companies that provide them with the experience that
Greg Lockwood
Non-executive director
RB Group needs.
Jennifer (Jenny)
Macdonald
Non-executive director
Grant Murdoch
Non-executive director
In FY2019, the Board undertook a full review of RB Group’s executive remuneration structure, and a new model has been
introduced. Initial thinking on the new model was underway when Barry Newstead was appointed as CEO and was partially
reflected in his contract. Emma Clark is the first executive hired under the new model and it is intended that Barry Newstead
will transition to the new model for FY2020, following shareholder approval at the October 2019 AGM. Non-KMP executives
will transition onto the new model for FY2020.
Anne Ward
Non-executive director
The new executive remuneration model is made up of the following components:
Hugh Williams
Non-executive director (resigned 29 May 2019)
Component
Definition and approach
Executive Director
Barry Newstead
Managing Director and Chief Executive Officer (CEO)
(appointed 1 August 2018)
Other key management personnel
Chris Nunn
Chief Financial Officer (CFO) (resigned as CFO 1 June 2019)
Emma Clark
Chief Financial Officer (CFO) (appointed as CFO 1 June 2019)
Cash compensation
35%-60%
Base salary and superannuation (1).
Guaranteed salary. Intended to provide the executive with the financial resources
commensurate with executives at companies of a similar size in that location.
No significant change from RB Group’s previous remuneration approach.
Long-term Equity (LTE)
15% - 20%
Annual grant of restricted stock units (RSUs) or zero-priced options, with one year vesting
and one year disposal restriction period. Intended to reduce the guaranteed compensation
gap to more established players and encourage long-term share ownership.
Long-term Incentive (LTI)
25% - 50%
(1) Australia only.
Annual grant of share appreciation rights (SARs) intended to align executives with long-
term value creation. SARs have vesting conditions based on time and achievement of
minimum business health metrics, and exercise conditions based on achieving a 10%
compound annual share price growth rate over the five-year performance period.
28
29
Annual Report 2019Redbubble 2.
Overview of executive remuneration (continued)
2.
Overview of executive remuneration (continued)
2.2
Group remuneration strategy (continued)
2.3
Elements of remuneration (continued)
Redbubble executives will no longer have a short-term incentive as part of their compensation package. Redbubble
believes that traditional short-term incentives may not be aligned to long-term value creation and may encourage a within
year focus at the expense of long term outcomes. For RB Group, this is compounded by the difficulty of setting short-term
targets in a fast-paced operating environment where priorities can change rapidly. Under the new model, the value of LTE
and LTI components is variable and dependent on share price performance, aligning executives with shareholder interests.
The objectives of the RB Group executive remuneration model are to:
LINK
MOTIVATE
UNIFY
ATTRACT
executive
performance with RB
Group’s innovation
and growth goals
executives to create
sustainable, long term
value for shareholders
the leadership team by
providing consistent
goals in one model for
the whole team which
is easy to understand
and encourages a
long-term focus
and retain exceptional
talent in globally
competitive, highly
mobile markets
The main changes from prior remuneration arrangements are:
• Move away from STIs tied to within year targets;
•
No longer make large upfront equity grants that vest over time, without performance hurdles. These models were
•
•
more suited to the Group pre and immediately post- IPO;
The introduction of annual equity grants;
The split of equity grants into a long-term equity (LTE) component and a long-term incentive (LTI) component, with
the LTI component having exercise conditions dependent on the achievement of multi-year share price appreciation;
and
•
Focusing on the fair-market value of total annual remuneration, and targeting total annual remuneration at levels that
are competitive with our ASX listed and global talent competitors.
The Group benchmarks its KMP against a group of Australian listed companies in the technology sector with similar values
for market capitalisation, employee headcount and revenue.
Executive remuneration levels are reviewed annually by the People and Nomination Committee with reference to the
Group’s remuneration strategy, group performance, talent market activity and external benchmarks.
2.3
Elements of remuneration
The remuneration of the KMP is set out in section 6 (Statutory and Share-based reporting).
The CEO and CFO transitions during FY2019 resulted in each KMP being on unique compensation structures for the period.
The table below lays out the compensation components for each KMP.
Cash
compensation
Short-term Incentive
Long-term Equity
Long-term Incentive
Martin Hosking
(CEO to 31 July
2018)
Chris Nunn (CFO
to 31 May 2019)
The fixed
component
comprises base
salary, allowances
and superannuation.
Barry Newstead
(CEO from 1
August 2018) *
The fixed
component
comprises base
salary, allowances
and superannuation.
STI awards are granted
under the Group’s Short
Term Incentive Plan (STI
Plan). The actual STI
award for a participant is
determined by performance
against group and personal
key performance indicators
(KPIs). STI awards are paid
50% in cash, with the
remainder given in the
form of performance rights
under the Group’s Employee
Equity Plan with a two-
year deferral. The Group’s
Board retains discretion in
approving STI awards.
Quantum of RSUs based
on the dollar value of a
percentage of base salary.
Awarded based on the
delivery of the strategic
plan as agreed between the
Board and executive.
Executives have
received equity grants
(stock options and
performance rights) that
vest monthly or annually
over multiple years.
Emma Clark
(CFO from
1 June 2019)
The fixed
component
comprises base
salary, allowances
and superannuation.
Annual grant of
restricted stock units
(RSUs) or zero-priced
options.
A grant of Share
Appreciation Rights
(SARs) intended to cover
the life of the contract (4
years), with share price
performance exercise
condition.
Annual grant of share
appreciation rights
(SARs) SARs have vesting
conditions based on
time and achievement
of minimum business
health metrics, and
exercise conditions
based on share price
performance exercise
condition.
* Note that it is intended that Barry will transition to the new Executive Compensation Plan for FY2020 (pending shareholder approval)
30
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Annual Report 2019Redbubble
2.
Overview of executive remuneration (continued)
2.
Overview of executive remuneration (continued)
2.3
Elements of remuneration (continued)
Technical conditions of the long-term equity
The long-term equity component of the new executive compensation plan operates as outlined below. These terms apply
to Emma Clark’s compensation arrangements.
LTE instrument
RSUs (US)
Zero-priced options (Australia) i.e. an option with a strike price of $0
VWAP
Granting date
90 day VWAP calculated on either 1 October or 3 days after the October 4C release (if RB
Group is still required to release a 4C). 90 days is elapsed calendar days, not trading days
Company health
condition
Grants are made in October, following the setting of total compensation for the year and
Board approval and the issue of the 4C
Vesting date
Grants vest after 12 months, with Board discretion on pro-rata vesting for good leavers
Holding period
12 months following vesting
Clawback
Clawback under certain business failure or bad actor conditions
Termination
Employees forfeit grants that have not vested. Board discretion for pro-rata vesting for
good leavers
Technical conditions of the long-term incentive
The long-term incentive component of the new executive compensation plan operates as outlined below. These terms
apply to Emma Clark’s compensation arrangements.
LTE instrument
Share appreciation rights (SARs)
2.3
Elements of remuneration (continued)
Technical conditions of the long-term incentive (continued)
The proportion of the target LTI which vests to participants at the end of the performance year
will be determined based on the achievement of three to five minimum health metrics for that
year.
This condition is designed to ensure management is building RB Group for enduring value and not
degrading operational metrics to achieve share price gains. The business will need to meet health
metrics targets within the year of grant in order for the LTI grant to be made. As the equity grants
motivate both short and long-term out-performance, the minimum thresholds are designed to
ensure that enduring value creation is not damaged by any short-term imperatives. The minimum
health conditions are set by the Board prior to the start of each financial year.
The Board will assess performance against the health metrics and may approve for less than 100%
of the target LTI grant to vest depending on performance against the metrics. If less than 100% of
the LTI vests under the minimum health metrics, the non-vested portion would be cancelled.
The weighting between the health metrics is at the Board’s discretion.
The SARs are only exercisable (following vesting) if the share-price appreciation exercise
condition is met during the 5 years of the grant.
The share-price appreciation exercise condition can be achieved in the first 12 months of the
grant. If this occurs exercise can only occur after the time based and minimum health conditions
have been met.
The exercise condition will be achieved (subject to vesting) when the 90 (calendar) day VWAP
share price is greater than the strike price by an annual compound rate of 10% at any point over
the 5 year exercise period. The exercise condition may be met at any time up to 5 years from
grant at which point the exercise condition will be deemed to have failed and the SARs will expire.
Share-price
appreciation exercise
condition
Holding period
There is no holding period following the exercise condition being met.
Clawback
Clawback under certain business failure or bad actor conditions.
Fair market dollar value of LTI grant set as a percent of total compensation as part of an
Grant quantum
executive’s contract. The dollar amount converted to SARs at fair market value determined at the
Termination as a bad leaver (for cause) would result in forfeiture of all LTI where the exercise
beginning of grant period based on Monte Carlo valuation of the LTI instrument.
Termination
condition had not yet been met.
Granting date
Grants are made on either 1 October or 3 days after the October 4C release. Grants are made in
October at the start of the compensation year. E.g. Grant for FY2020 will be made in October 2019.
90 (calendar) day VWAP calculated on either 1 October or 3 days after the October 4C release.
Vesting date &
conditions
The LTI’s vest 12 months after grant subject to:
The executive remaining employed at RB Group (time vesting); and
The Board having agreed that the minimum business health metrics for the year have been
achieved (all or part). See notes below on minimum health conditions.
The LTI has an exercise condition (see below) that must be achieved in order for executives to be
able to exercise the grant. The SARs will be able to be exercised at any time over the 4 years after
the first year’s time based vesting and minimum health conditions have been met, subject to the
RBL share-price achieving a compound annual growth of 10% and maintaining that price for 90
consecutive calendar days at any point over the 5 year grant period. As noted below, it is possible
that the exercise condition could be met in year one, in which case executives could exercise
after the time-based vesting and minimum health conditions have been met.
Where the exercise condition has been met, but the executive has not yet exercised, the executive
would have 90 calendar days to exercise.
Strike price
Strike price is set in October of the financial year when grant and vesting commence (e.g.
October 2019 for FY2020). The strike price will be set based on the 90 (calendar) day VWAP prior
to the grant.
SARs valuation
Expiration
Hedging
The valuation is conducted by independent experts for the Committee and the SARs are valued
using Monte Carlo simulation.
LTI’s expire 5 years from grant date and therefore the SARs must be exercised by this point or they
lapse.
Executives are prohibited from hedging under RB Group’s Share Trading policy and clawback
under existing rules.
32
33
Annual Report 2019Redbubble
2.
Overview of executive remuneration (continued)
3.
Performance and executive remuneration outcomes in FY2019
2.3
Alignment of the Group’s remuneration strategy to shareholders’ interests
(continued)
Vesting and exercise periods for the long-term incentive of the new plan
YEAR 0
YEAR 1
YEAR 2
YEAR 3
YEAR 4
YEAR 5
Period 1
Period 2
Period 3
Period 4
Period 5
Time based vesting period
* Share price of 110% of
strike price
Executive can exercise if year 1 exercise condition is met
* Share price of 121% of
strike price
Executive can exercise if year 2 exercise condition is met
LEGEND
Exercise condition testing period
Exercise condition achieved
Exercise condition not achieved
Exercise condition requirement
*
* Share price of 133% of
strike price
Executive can exercise if year 3 exercise
condition is met
* Share price of 146% of
strike price
Executive can exercise if year
4 exercise condition is met
* Share price of 161% of
strike price
Executive can exercise if year 5
exercise condition is met
CEO remuneration arrangements for FY2019
In FY2019 Barry Newstead’s CEO compensation arrangements had the following elements:
•
•
A base salary of $500,000 (inclusive of superannuation).
A short-term incentive of 218,750 RSUs per annum, vesting based on the delivery of the strategic plan as agreed
between the Board and executive.
•
A grant of 5,666,668 Share Appreciation Rights (SARs), exercisable based on share price performance, implying an
annual grant value of $524k that expire 7 years from grant.
The SARs in Barry Newstead’s contract have the following conditions:
•
•
•
Each SAR has a strike price of $1.60.
The SARs are only able to be exercised once time-based vesting conditions are met.
The number of SARs that are then exercisable depends on the performance of RB shares over the 4 year period. Specifically:
The FY2019 short-term incentives of Barry Newstead included an assessment of financial performance of RB.
The FY2019 short-term incentives of Chris Nunn included as assessment against financial targets for the Group.
The Group’s key financial measures of performance over the last 5 years are summarised in the table below:
Key indicators
Revenue ($’m)
Gross profit after paid acquisition (GPAPA)($'m)
Earnings before interest, taxes, depreciation and
amortisation (EBITDA)($’m)
Cash balance ($’m) (2)
Share price at year end (3) ($)
2019
2018
2017
2016
2015
307.0 (1)
218.7 (1)
141.0
114.6
67.5
(4.7)
29.0
0.91
47.1
(7.4)
21.2
1.57
37.9
(8.1)
27.8
0.97
31.3
(10.7)
42.0
1.07
71.1
19.8
(6.5)
14.0
*
(1) On 1 July 2018 the Group adopted AASB 15 - Revenue from Contracts with Customers using the full retrospective method of adoption. The FY19 and FY18
revenues disclosed in the table above include the impact of this new standard. Please refer to Note 1 in the Group’s financial statements for further information
about this change.
(2) Cash balance for 2016 includes net proceeds from issue of pre-IPO convertible notes and shares issued pursuant to the IPO of $39.7 million.
(3) Redbubble Ltd was listed on 16 May 2016.
3.1
Performance against STI measures
The Group’s performance against key financial measures are as follows for FY2019:
Financial Measure (1)
Revenue Growth
Operating EBITDA
Operating Cash Flow Neutrality
Assessment
Threshold not achieved
Threshold not achieved
Target achieved
(1) For assessment of performance against STI measures, Revenue growth is assessed on a constant currency basis. Operating EBITDA and cash flow neutrality are
assessed using budgeted rates.
Barry Newstead’s FY2019 STI is awarded taking into account performance against company financial measures appropriate
to his position. The Board granted 40% of the total potential STI award for Barry Newstead for FY2019.
Chris Nunn has 50% of his STI awarded based on company financial measures and the remaining 50% based on non-
financial measures appropriate to his position, selected to focus on sustainable growth of the Group’s platform. The Board
granted 47.5% of the total potential STI award for Chris Nunn for FY2019.
Share Price
SARs to be granted (% of total)
The Group’s performance against key financial measures are as follows for FY2019:
$2.34 or less (approximately 10% per annum compound share price growth from grant
date over a 4 year period)
Between $2.34 and $3.32
$3.32 or higher (approximately 20% per annum compound share price growth from
grant date over the 4 year period)
Nil
0%-100% (1)
100%
(1)
Should the Group’s share price be greater than $2.34 but less than $3.32 then a proportion of SARs will be granted. Each $0.01 increase in the share
price over $2.34 results in a 1% increase (approximately) to the amount SARs granted.
Name
Barry Newstead
Chris Nunn
Martin Hosking (1)
Emma Clark (2)
% of target STI granted
% of target STI forfeited
40.0%
47.5%
-
-
60.0%
52.5%
-
-
(1) Martin Hosking resigned from his role as CEO and Managing Director on 1 August 2018 and was not granted STI in relation to the FY2019 financial year.
(2) Emma Clark was appointed 1 June 2019 and was not granted STI in relation to the FY2019 financial year.
34
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Annual Report 2019Redbubble
4.
How remuneration is governed
4.1
People and Nomination Committee role
The People and Nomination Committee is responsible for reviewing and advising the Board on remuneration policies and
practices. This Committee also reviews and advises the Board on the design and implementation of short and long term
incentive performance packages, superannuation entitlements, termination entitlements and fringe benefits policies. The
Committee also manages the nomination process of Board members and the selection of the CEO.
4.
How remuneration is governed (continued)
4.4 Executive employment agreements (continued)
Transition arrangements
Martin Hosking retired from RB Group on 30 September 2018. Martin Hosking received no retirement benefits or payment
for notice as part of his transition. Vesting was accelerated for 37,500 zero-priced options relating to prior years’ short-term
incentive and 101,352 options with a strike price of 78 cents being the portion of LTI granted in the prior year relating to
The remuneration of Directors, the CEO, KMP, and other executives is reviewed by the People and Nomination Committee
FY2018. Martin Hosking’s FY2018 short-term incentive was paid entirely in cash.
which then provides recommendations to the Board.
The members of the Committee during FY2019 were: Anne Ward (Committee Chair), Jenny Macdonald, Grant Murdoch
(ceased 1 May 2019) and Martin Hosking (commenced 1 May 2019).
4.2 Use of remuneration advisors
The People and Nomination Committee engaged the services of independent external consultants to provide insights on
KMP remuneration trends, regulatory and governance updates, pros and cons of possible alternatives, and market data.
No remuneration recommendations as defined in Section 9B of the Corporations Act 2001 were obtained during FY19.
4.3 Clawback of remuneration
Chris Nunn ceased to be Key Management Personnel on 1 June 2019, prior to his retirement on 1 July 2019. Chris Nunn
received no retirement benefits or payment for notice as part of his transition. Vesting was accelerated for zero-priced
options relating to prior years’ short-term incentive. Chris Nunn’s FY2019 short-term incentive will be paid in cash. Vesting
was accelerated for 94,047 options, being the remainder of Chris Nunn’s on-hire long-term incentive and for share options
granted under the FY2017 and FY2018 STI plan. Chris Nunn will receive an ex-gratia payment of $16,830 in July 2019 for
assistance with transition to the new CFO.
5.
Overview of Non-executive Director (NED) remuneration
The Group seeks to attract and retain high calibre non-executive directors who will provide good governance, strong
oversight, independence, a range of skills and alignment of interests with long-term share price appreciation.
In the event of serious misconduct or a material misstatement of the Group’s financial statements, the Board has the
discretion to reduce, cancel or clawback any unvested STI or LTI.
The elements of the NED remuneration policy are as follows:
4.4 Executive employment agreements
CEO and Managing Director
The employment of Martin Hosking, as the Group’s CEO and Managing Director, was governed by an employment contract
dated 30 June 2017. The employment of Barry Newstead, as the Group’s CEO and Managing Director, is governed by an
employment contract dated 26 June 2018 (commencement date of 1 August 2018).
Upon appointment as CEO on 1 August 2018 Barry Newstead receives base salary (inclusive of superannuation) of $500,000
per annum. In FY2019 Barry Newstead’s target STI award was 218,750 zero-priced options. In FY2019 40% of the target STI
award was granted.
Martin Hosking received base salary (inclusive of superannuation) of $536,550 per annum up until his resignation as CEO on
1 August 2018. In FY2019 no STI award was granted to Martin, reflecting his retirement effective 1 August 2018.
Other senior employment arrangements
All other executives are employed on open ended individual employment contracts that set out the terms of their
employment. Each agreement varies according to the individual executive but typically includes:
•
•
•
Termination provisions incorporating notice periods and payments of six months;
Performance and confidentiality obligations on the part of both the employer and employee; and
Eligibility to participate in the Group’s Employee Equity Plan.
Termination provisions
All KMP including the CEO have 6 month termination notice periods to manage business continuity risk during any KMP
transition.
In the case of termination due to death, disablement, redundancy or notice without cause, the Board may in certain
circumstances apply discretion to approve a payment of up to 6 months’ salary.
•
•
The NED remuneration year runs from 1 November to the following 31 October;
NED remuneration is paid two-thirds in cash and one-third in Deferred Stock (share options with a zero-exercise price)
to provide for alignment with shareholders and the Group’s objective of share price appreciation over the medium to
long term;
•
The Deferred Stock is awarded annually and is priced when the market is fully informed of the Group’s previous
financial year performance i.e. following the release of the Appendix 4C results for the final quarter for the previous
financial year; and
•
The Deferred Stock vests in 1/12th equal monthly instalments over the 12 months commencing from the grant date.
NEDs are subject to restrictions on the sale of shares allotted following exercise of Deferred Stock, with the restrictions
released incrementally over the four year period from the Deferred Stock grant date in accordance with the following
release schedule:
•
•
•
a third of the shares are released from sale restrictions on the two-year anniversary of the grant date;
a further third of the shares are released from sale restrictions on the three-year anniversary of the grant date; and
the final third of the shares are released from sale restrictions on the four-year anniversary of the grant date.
In FY2019 the NEDs’ Deferred Stock remuneration was priced at $1.56 cents per share option (based on the Group’s share
price in July 2018. The fair value of the awards at grant date (November 2018) was $1.53 cents per share option.
The Board Chair, Audit and Risk Committee Chair and People and Nomination Committee Chair receive additional
remuneration as follows (with the same cash/equity split applying to the full remuneration package):
1.
the Board Chair is paid twice the NED remuneration amount; and
2.
the Chairs of the Audit and Risk Committee and People and Nomination Committee both receive an additional
$15,000.
36
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Annual Report 2019Redbubble 5.
Overview of Non-executive Director (NED) remuneration (continued)
6.
Statutory and share-based reporting
NEDs who are appointed to fill a casual vacancy during the year are paid entirely in cash until the next AGM, following
which the cash/equity split applies from the following 1 November subject to their re-election at the AGM and shareholders’
approval of their equity grant.
The annual remuneration packages for NEDs from 1 November 2018 are as follows:
6.1
Executive KMP remuneration for the year ended 30 June 2019
The following table shows details of the nature and amount of each element of remuneration paid or awarded to executives
for services provided during the year while they were KMP (including STI amounts in respect of performance during the year
which are paid following the end of the year)
Non-executive directors
Richard Cawsey
Martin Hosking
Jenny Macdonald
Grant Murdoch
Anne Ward
Hugh Williams
Total
Cash component
$
Deferred stock
component
$
123,000
61,500
61,500
71,500
71,500
61,500
61,500
30,750
30,750
35,750
35,750
30,750
Total
$
184,500
92,250
92,250
107,250
107,250
92,250
450,500
225,250
675,750
The policy applies to all the Group’s NEDs except for Greg Lockwood. Greg is a partner with Piton Capital, a private equity
firm with a shareholding in Redbubble Limited. Greg receives no remuneration from the Group, in accordance with Piton
Capital’s policy that their partners do not accept remuneration for external board positions.
Directors are also reimbursed for all reasonable travelling and other expenses properly incurred by them in attending Board
meetings or any meetings of committees of Directors, in attending any general meetings of the Group or otherwise in
connection with the business or affairs of the Group. Directors may be paid additional or special remuneration if they, with
the approval of the Board, perform any extra services or make special exertions for the benefit of the Group.
Short term benefits
Post-
employment
benefits
Long-
term
benefits
Share-based payments
Cash
salary (1)
$
Cash
bonus (2)
$
Non-
monetary
benefits (3)
$
Superan-
nuation (4)
$
Long
service
leave (5)
$
Performance
rights
(Time based) (6)
$
Share options
(Performance
based) (6)
$
Share
options
(Time based) (6)
$
Share
appreciation
rights
(Performance
based) (7)
$
Deferred
STI (8)
$
Total
remuner-
ation
$
Performance
- related (9)
%
Executive director
Barry Newstead
(appointed as
CEO 1 August
2018) (10)
Martin Hosking
(retired as CEO
1 August 2018) (11)
2019
487,312
-
-
25,000
13,456
23,411
484,900
233,192
453,930
44,096
1,765,297
2018
347,512
76,563
600
25,000
4,991
86,463
122,855
219,221
-
45,438
928,643
2019
87,125
-
150
25,000
2,474
23,914
23,428
28,181
2018
489,970 183,750
600
25,000
39,934
112,234
92,948
44,561
-
-
3,395
193,667
19,989
1,008,986
56%
26%
14%
29%
Other key
management personnel
Emma Clarke
(appointed 1 June
2019)
2019
37,500
2018
-
-
-
-
-
-
-
23
-
Chris Nunn
(resigned as CFO
1 June 2019) (12)
2019
237,606
56,733
350
25,000
(2,332)
2018
317,362
49,766
-
25,000
1,698
-
-
-
-
-
-
-
-
5,246
10,491
-
98,491
133,553
-
-
-
-
-
53,260
20%
-
40,304
456,152
29,818
557,197
21%
14%
There are no retirement benefit schemes for Directors, other than statutory superannuation contributions.
Total
2019
849,543
56,733
500
75,000
13,621
47,325
508,328
365,110
464,421
87,795
2,468,376
2018
1,154,844 310,079
1,200
75,000
46,623
198,697
215,803
397,335
-
95,245
2,494,826
Maximum aggregate NED fee pool
(1)
Includes base salary, excess superannuation (refer to footnote 4) and short term compensated absences, such as leave entitlements accrued.
The total amount paid to all Directors for their services must not exceed in aggregate in any financial year the amount
(2) Represents cash bonus accrued for the year.
fixed by shareholders in a general meeting. Shortly before the Group listed on the ASX in May 2016, the Board fixed this
(3) Non-monetary benefits include wellness benefits for all the executives.
amount at $1,200,000. Any changes to this amount in future will require approval by shareholders in a general meeting in
accordance with the ASX Listing Rules.
(4) Staff can elect to have their superannuation capped at $25,000 (2018: $25,000 or $35,000 (aged based)), with any amount above this included in cash salary. These amounts include
superannuation on bonus paid during the year.
(5) Australian executives are entitled to long service leave. The annual charge reflects long service leave accrued during the period.
(6) Amounts disclosed reflect the value of remuneration consisting of performance rights/options, based on the value of options expensed during the year. The fair value of rights is
equivalent to fair value of shares at the grant date and the fair value of options is ascertained using Black-Scholes model and is amortised over the vesting period.
(7) Amounts disclosed reflect the value of remuneration consisting of share appreciation rights (SARs), based on the value of options expensed during the year. The fair value is
ascertained using the Monte Carlo options model and is amortised over the vesting period.
(8)
Includes share based payment expenses recognised during the year over the vesting period, in relation to deferred STI awards for prior years and share based payment expense
accrued during the year for STI award for the current year.
(9) Cash bonus, share options with a performance condition and deferred STI are all considered to be performance-related remuneration, based on their nature at grant date.
(10) Barry Newstead was appointed as CEO on 1 August 2018. Prior to his appointment as CEO Barry was the Group’s Chief Operating Officer (COO) and was considered a KMP. The
remuneration shown in this table is for his services as COO from 1 July 2018 to 31 July 2018 and as CEO and executive director from 1 August 2018 .
(11) Martin Hosking retired as CEO on 1 August 2018 and remained an executive director of the Group until 30 September 2018 when he transitioned to a non-executive director role.
The remuneration shown in this table is for his services as CEO and executive director until 30 September 2018.
(12) Chris Nunn resigned as CFO on 1 June 2019. The remuneration shown in this table is for his services as CFO up until this date. As he did not meet the threshold for long service leave
at retirement, amounts accrued in prior years were written back in the current period.
38
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Annual Report 2019Redbubble
6.
Statutory and share-based reporting (continued)
7.
Equity instruments held by Directors and KMP
6.2 NED remuneration for the year ended 30 June 2019 (1)
7.1 Option, performance rights and warrant holdings
Short term
benefits
Post-employment
benefits
Share-based
payments
Director fees
$
Superannuation
$
Share options
(Time based) (2)
$
Total
$
123,000
117,000
46,125
-
65,525
29,702
65,297
57,230
74,658
25,859
56,375
96,232
-
37,500
-
-
430,980
363,523
-
-
-
-
6,225
2,822
6,203
5,437
7,092
2,457
-
-
-
3,563
-
-
19,520
14,279
74,660
50,442
27,818
-
27,818
-
43,396
39,217
32,341
-
27,095
11,673
-
-
-
-
233,128
101,332
197,660
167,442
73,943
-
99,568
32,524
114,896
101,884
114,091
28,316
83,470
107,905
-
41,063
-
-
683,628
479,134
Non-executive directors
Richard Cawsey (3)
Martin Hosking (4)
Jenny Macdonald (5)
Grant Murdoch
Anne Ward (6)
Hugh Williams (7)
Teresa Engelhard (8)
Greg Lockwood (9)
Total
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
(1) The NED remuneration table has been prepared in accordance with Australian Accounting Standards and Section 300A of the Corporations Act 2001 (Cth). The
information in this table is different to the contracted amounts shown in section 5 of this report which is a voluntary non-statutory disclosure showing annual
contracted remuneration amounts.
(2) Amounts disclosed reflect the value of remuneration consisting of rights/options, based on the value of rights/options expensed during the year. The fair value
of rights/options is ascertained using Black-Scholes model.
(3) Richard Cawsey’s fees are paid to and options/performance rights are issued to Denali Venture Partners (Aust).
(4) Martin Hosking retired as CEO on 1 August 2018. He remained an executive director until 30 September 2018 when he transitioned to a non-executive director
role. The remuneration shown in this table is for his services as a non-executive director from 1 October 2018.
(5) Jennifer Macdonald was appointed effective 22 February 2018.
(6) Anne Ward was appointed effective 22 March 2018.
(7) Hugh Williams resigned effective 29 May 2019. Hugh Williams’s fees are paid to Via Alto Advisors Pty Ltd and options are issued to Los Gatos Pty Ltd ATF Los
Gatos Investment Trust.
(8) Teresa Engelhard resigned effective 25 October 2017. The director fees and superannuation reported above includes remuneration for services rendered until
this date.
(9) Greg Lockwood is a partner with Piton Capital, a private equity firm with a shareholding in Redbubble Ltd. Greg receives no remuneration from the Group, in
accordance with Piton Capital’s policy that their partners do not accept remuneration for external board positions.
The tables below disclose the number of share options, performance rights and warrants granted, exercised, vested or
forfeited during the year.
Option holdings
Share options do not carry any voting or dividend rights, and can only be exercised once the vesting conditions have been
met, until their expiry date.
Balance at
the start of
the year
Granted during
the year as
compensation
Exercised
during the
year
Cancelled
during
the year
Balance at
the end of
the year
Vested and
exercisable
at the end
of the year
Unvested
at the
end of
the year
Vested
during
the year
2019
Non-executive
Directors
Martin Hosking (1)
2,087,505
19,711
1,670,952
416,553
19,711
11,494
8,217
322,154
Jenny Macdonald
Grant Murdoch
Anne Ward
Executive Director
-
97,733
-
19,711
22,916
22,916
-
-
-
-
-
-
19,711
11,494
8,217
11,494
120,649
111,096
9,553
30,892
22,916
13,363
9,553
13,363
Barry Newstead
2,750,303
6,586,972
178,667
-
9,158,608
2,070,112
420,995
Other key management
personnel
Chris Nunn (2)
856,628
29,447
522,163
-
363,912
255,699
108,213
322,408
Related party
Denali Venture Partners
Pty Ltd (Beneficiary:
Richard Cawsey)
Jellicom Pty Ltd as
trustee for the
Three Springs Family
Trust (Beneficiary -
Martin Hosking)
Los Gatos Pty Ltd ATF
Los Gatos Investment
Trust (Beneficiary - Hugh
Williams) (3)
72,353
39,423
72,353
-
39,423
22,995
16,428
53,144
1,600,200
-
1,600,200
-
-
-
-
-
36,176
19,711
-
8,217
47,670
47,670
-
26,570
Total
7,500,898
6,760,807
4,044,335
424,770
9,792,600
2,543,923
7,248,677
1,201,020
(1) Martin Hosking resigned from his role as CEO and Managing Director on 1 August 2018. The remaining unvested options connected with his employment
as CEO were cancelled. Martin has remained a Director and the options granted during the year represent compensation for his services as a Non-executive
Director.
(2) Chris Nunn resigned from his role as CFO on 1 June 2019. The table above reports activity for his period of service up until retirement date.
(3) Hugh Williams resigned from his role as Non-executive Director on 29 May 2019. The table above reports activity for his period of service up until resignation
date. Any unvested options at the date of resignation were cancelled. Any vested options held at resignation date must be exercised within 90 days or they also
will be forfeited.
40
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Annual Report 2019Redbubble
7.
Equity instruments held by Directors and KMP (continued)
7.
Equity instruments held by Directors and KMP (continued)
7.1 Option, performance rights and warrant holdings (continued)
7.3
Shareholdings of Directors and KMP
Performance rights holdings
Performance rights do not carry any voting or dividend rights.
2019
Non-executive directors
Martin Hosking
Executive director
Barry Newstead
Total
7.2
Shares on exercise of options/rights
Balance at
the start of
the year
Settled
during the
year
Balance at
the end of
the year
Unvested
at the
end of
the year
65,890
65,890
60,304
60,304
126,194
126,194
-
-
-
-
-
-
Vested
during
the year
65,890
60,304
126,194
2019 - Redbubble Limited
ordinary shares (1)
Non-executive Directors
Richard Cawsey
Martin Hosking
Jennifer Macdonald
Anne Ward
Executive Directors
Barry Newstead
Received
during the
year on
exercise of
options /
settlement of
performance
rights
Balance at
the start of
the year
Purchase
of Shares
Sale /
transfer
of shares
Balance at
the end of
the year
1,440,000
-
656,710
1,736,842
-
-
20,000
-
-
-
36,539
100,000
302,112
238,971
21,330
-
-
-
-
-
1,440,000
2,393,552
56,539
100,000
562,413
Number of
ordinary shares on
exercise of options
/ settlement of
performance rights
Nature of
grant
Exercise price
per option
Share price
per share at
exercise/
settlement
dates (1)
Value at
exercise/
settlement
dates (2)
Options
1,670,952
Between $0.00
and $0.78
$0.96
770,852
Performance
rights
Between $1.55
and $1.69
105,835
65,890
178,667
60,304
-
-
-
2019
Non-executive director
Martin Hosking
Executive director
Barry Newstead
Options
Performance
rights
Other key management
personnel
Chris Nunn
Options
Related party
Denali Venture Partners (Aust)
(Beneficiary: Richard Cawsey)
Options
$0.87
155,440
Denali Investors Pty Ltd
Richard Cawsey
725,200
Between $1.55
and $1.69
96,148
Denali Venture Partners (Aust)
Richard Cawsey
248,360
72,353
Denali Ventures Pty Ltd
Richard Cawsey
41,856
-
522,163
Between $0.00
and $0.85
Between $1.47
and $1.67
403,288
Jellicom Pty Ltd as trustee for the Three
Springs Family Trust
Three Springs Foundation Pty Ltd as
trustee for the Three Springs Foundation
Martin Hosking
2,500,000
Martin Hosking
48,006,338
1,600,200
2,000,000
72,353
-
$1.15
83,206
Piton Capital Venture Fund II LP
Greg Lockwood
5,537,291
Other key management personnel
Chris Nunn (2)
-
522,163
Related parties
Beneficiary
Cawsey Superannuation Fund Pty Ltd
Richard Cawsey
9,043,980
Denali Venture Partners Fund 1 LP
Richard Cawsey
1,840,240
Denali Capital Managers Pty Ltd
Richard Cawsey
654,560
Jellicom Pty Ltd as trustee for
the Three Springs Family Trust
(Beneficiary - Martin Hosking)
Total
Options
1,600,200
$0.14
$1.55
2,252,282
4,170,529
3,867,051
(1) Performance rights have monthly vestings and are hence settled over multiple dates. The share price per share at settlement dates represents VWAP for the
previous 5 trading days.
(2) Value at exercise / settlement date is calculated as:
- for options: share price on exercise date less exercise price paid, multiplied by number of options exercised
- for performance rights: share price on settlement date, multiplied by the number of performance rights settled
For presentation purposes, share price has been rounded to two decimal places, however the value at exercise / settlement date has been calculated based on
unrounded numbers.
Piton Capital Investments Cooperatief B Greg Lockwood
927,840
G & M Murdoch Pty Ltd as trustee for the
Murdoch Family Superannuation Fund
G & M Murdoch Pty Ltd as trustee for the
Murdoch Family
Overan Holdings Pty Ltd as trustee for
the Nunn Family Super Fund (2)
Grant Murdoch
75,187
Grant Murdoch
130,000
Chris Nunn
76,000
Total
72,225,674
4,170,529
2,173,653
-
78,569,856
(1)
Includes shares held directly, indirectly and beneficially by KMP.
(2) Chris Nunn resigned as CFO on 1 June 2019. The total balance represents his shareholding at the date he ceased to be a KMP.
42
43
-
-
-
-
-
-
-
-
-
-
5,784
10,000
(469,620)
52,543
(150,000)
8,893,980
-
-
1,840,240
654,560
150,000
875,200
-
-
-
-
-
-
-
-
320,713
41,856
51,606,538
2,500,000
5,537,291
927,840
80,971
140,000
-
469,620
545,620
-
-
-
-
-
-
-
-
-
-
Annual Report 2019Redbubble
8.
Details of equity awards granted
9.
Loans, transactions and other balances with KMP and their related parties
# of
options
/ rights
granted Vest period/date
Grant date
Value per
options/
right at
grant
date
Value of
options /
rights at
grant date
(1)
Expiry
date
Exercise
price
Non-executive Directors
Martin Hosking
02-Nov-18
19,711
1/12 per Month from Vesting Start Date 02-Nov-28
$0.00
$1.53
$30,158
9.1 Other transactions with KMP
Chris Nunn, the Group’s former Chief Financial Officer, is a director of Elite Executive Services Pty Ltd, which provided
executive relocation services to the employees of the Group during the year for which the fees totaled $5,434 (2018:
$22,944). The engagement is on an arm’s length basis and the fees charged are comparable to similar service providers in
the market. At the year end, there were no balances outstanding in relation to this engagement (2018: $5,334).
Martin Hosking, Non-executive Director and former Managing Director, sub-underwrote up to A$3.0 million of Shares
under the retail component of the Entitlement Offer with respect to the funding of the acquisition of TeePublic. Mr Hosking
Jenny Macdonald
02-Nov-18
19,711
1/12 per Month from Vesting Start Date 02-Nov-28
$0.00
$1.53
$30,158
was paid a fee of A$45,000 (equal to 1.5% of his A$3.0 million sub-underwriting commitment) by the underwriters for
providing this sub-underwriting commitment.
Richard Cawsey, Board Chair, is a director and shareholder of Denali Holdings Pty Ltd, which is the owner of the ‘Bondle’
messaging application. The Group engaged Denali Holdings Pty Ltd in respect of a licence of the Bondle application and
paid licence fees totalling $4,788 for the year (2018: nil). The engagement is on an arm’s length basis and the fees charged
are comparable to similar application licensors in the market. At the year end, there were no balances outstanding in
Grant Murdoch
02-Nov-18
22,916
1/12 per Month from Vesting Start Date 02-Nov-28
$0.00
$1.53
$35,061
Anne Ward
02-Nov-18
22,916
1/12 per Month from Vesting Start Date 02-Nov-28
$0.00
$1.53
$35,061
Executive Director
Barry Newstead
02-Nov-18
875,000
1/4 vest every year subject to
performance hurdles
02-Nov-25
$0.00
$1.53
$1,338,750
relation to this engagement (also nil in 2018).
02-Nov-18
45,304
50% End of Year 1 / 50% End of Year 2 02-Nov-28
$0.00
$1.53
$69,315
02-Nov-18 5,666,668
4 year vesting period subject
to performance hurdles
02-Nov-25
$0.00
$0.37 $2,095,687(1)
Other key management
personnel
Chris Nunn
30-Aug-18
29,447
All vest on 1 July 2019
30-Aug-28
$0.00
$1.69
$49,765
Other related parties
Denali Venture
Partners (Aust) -
(Beneficiary -
Richard Cawsey)
Los Gatos Pty Ltd ATF
Los Gatos Investment
Trust (Beneficiary -
Hugh Williams)
02-Nov-18
39,423
1/12 per Month from Vesting Start Date 02-Nov-28
$0.00
$1.53
$60,317
02-Nov-18
19,711
1/12 per Month from Vesting Start Date 02-Nov-28
$0.00
$1.53
$30,158
Total
6,760,807
$3,774,430
(1) The value at grant date for options / performance rights has been determined by using the Black-Scholes method. The value for share appreciation rights has
been determined using the Monte Carlo method. For presentation purposes, share price has been rounded to two decimal places, however the value at grant
date has been calculated based on unrounded numbers.
44
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Annual Report 2019Redbubble
A n n u a l R e p o r t 2 0 1 8
consolidated
financial statements
Consolidated statement of comprehensive income
for the year ended 30 June 2019
Revenue from contracts with customers
Marketplace revenue
Artists’ revenue (1)
Total revenue from contracts with customers
Operating expenses
Artists’ margin (1)
Fulfiller expenses (2)
Employee and contractor costs
Marketing expenses
Operations and administration
Depreciation and amortisation
Total operating expenses
Other income (3)
Other expenses (4)
Loss before income tax
Income tax benefit/(expense)
Notes
2019
$’000
2018
$’000
Restated (1)
3
3
4
5
6
256,889
182,811
50,065
35,907
306,954
218,718
(50,065)
(35,907)
(162,354)
(118,886)
(47,603)
(34,701)
(28,577)
(18,334)
(22,338)
(17,959)
11 & 12
(8,086)
(7,797)
(319,023)
(233,584)
1,053
(1,486)
957
(769)
(12,502)
(14,678)
7
(15,162)
4,654)
Total loss for the year attributable to owners
(27,664)
(10,024)
Other comprehensive income / (loss)
Items that will be reclassified subsequently to profit or loss
Gain / (loss) on foreign currency translation
Total other comprehensive income / (loss) attributable to owners
39
39
(660)
(660)
Total comprehensive loss for the year attributable to owners
(27,625)
(10,684)
Loss per share attributable to the ordinary equity holders of the company
Basic loss per share
Diluted loss per share
8
8
(0.12)
(0.12)
(0.05)
(0.05)
(1) On application of AASB 15 Revenue from Contracts with Customers (AASB 15), the Group is deemed (for accounting purposes only) to be the principal in the
sale of goods bearing artists’ designs. Artists’ revenue is included in revenue with the corresponding artists’ margin being recognised in operating expenses.
Refer to note 2 for details of the restatement of the prior year comparatives.
(2) Fulfiller expenses comprise product and printing, shipping and transaction costs and are equivalent to cost of goods sold.
(3) Other income includes finance income and lease income.
(4) Other expenses include finance expenses and net foreign exchange losses.
The above consolidated statement of comprehensive income should be read in conjunction with accompanying notes.
46
46
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Annual Report 2019Redbubble
Consolidated statement of financial position
as at 30 June 2019
Consolidated statement of changes in equity
for the year ended 30 June 2019
For the year ended 30 June 2019
Share capital
$’000
Treasury
reserve (1)
$’000
Share
based
payments
reserve
$’000
Foreign
exchange
translation
reserve
$’000
Accumulated
losses
$’000
Total
$’000
Balance as at 1 July 2018
74,555
(1,895)
4,692
(1,795)
(49,809)
25,748
Loss for the year
Other comprehensive loss
Total comprehensive loss
Exercise of share options
16 (b)
Transfer to issued capital(2)
Share-based payments expense
-
-
-
2,249
1,930
-
-
-
-
-
-
-
Shares issued to Employee Share Trust
7,515
(7,515)
Shares issued/allocated to participants(3)
Payment of withholding taxes(4)
16 (b)
16 (b)
Shares issued to fund the acquisition of TeePublic LLC
Transaction costs for above issued share capital
(8,016)
8,016
(110)
60,572
(3,501)
-
-
-
-
-
-
-
(1,930)
5,915
-
-
-
-
-
-
39
39
-
-
-
-
-
-
-
-
(27,664)
(27,664)
-
39
(27,664)
(27,625)
-
-
-
-
-
-
-
-
2,249
-
5,915
-
-
(110)
60,572
(3,501)
Balance at 30 June 2019
135,194
(1,394)
8,677
(1,756)
(77,473)
63,248
(1) The Group operates an Employee Share Trust (the Trust) for the purpose of issuance of shares to participants on exercise of options / settlement of performance
rights. The balance in the Treasury Reserve represents the book value of shares held by the Trust for future issue to participants on exercise of options /
settlement of performance rights.
(2) Transfer to issued capital on issuance of shares for exercised options / settled performance rights.
(3) Shares issued / allocated to participants from the Employee Share Trust.
(4) Payment of withholding taxes to US tax authorities on settlement of performance rights funded by shares withheld
The above consolidated statement of changes in equity should be read in conjunction with accompanying notes.
Current assets
Cash and cash equivalents
Other receivables
Prepayments
Other assets (2)
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Prepayments
Deferred tax assets
Other assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Unearned revenue (3)
Employee benefit liabilities
Provisions
Tax liabilities
Other liabilities
Total current liabilities
Non-current liabilities
Employee benefit liabilities
Deferred tax liabilities
Other liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Treasury reserve
Share based payment reserve
Foreign exchange translation reserve
Accumulated losses
Total equity
Notes
9
10 (b)
11
12
7 (c)
13
14
15
14
7 (c)
15
16 (a)
16 (b)
16 (d)
16 (d)
2019
$’000
29,030
2,562
2,804
2,299
36,695
2,925
71,492
132
-
1,498
76,047
112,742
26,520
8,101
2,423
1,121
849
8,282
47,296
227
296
1,675
2,198
49,494
63,248
135,194
(1,394)
8,677
(1,756)
(77,473)
63,248
2018
$’000
Restated (1)
21,247
997
1,968
2,073
26,285
3,596
10,532
129
13,952
1,254
29,463
55,748
19,524
5,305
2,045
192
438
406
27,910
149
-
1,941
2,090
30,000
25,748
74,555
(1,895)
4,692
(1,795)
(49,809)
25,748
(1) Prior period comparatives have been restated upon the implementation of AASB 15. Refer to note 2 for details of the restatement of the prior year
comparatives.
(2) Other assets include deferred costs relating to the implementation of AASB 15, refer to note 2, and current financial assets as detailed within note 10 (b).
(3) Unearned revenue represents the consideration paid by customers for goods that are not yet delivered.
The above consolidated statement of financial position should be read in conjunction with accompanying notes.
48
49
Annual Report 2019Redbubble Consolidated statement of changes in equity
for the year ended 30 June 2019
Consolidated statement of cash flows
for the year ended 30 June 2019
For the year ended 30 June 2018
Notes
Share capital
$’000
Treasury
reserve(1)
$’000
Share
based
payments
reserve
$’000
Foreign
exchange
translation
reserve
$’000
Accumulated
losses
$’000
Total
$’000
Balance as at 1 July 2017
72,594
(2,475)
3,412
(1,135)
(38,747)
33,649
Effect of adoption of new accounting standards
(2)
-
-
-
-
(1,038)
(1,038)
Balance as at 1 July 2017 (restated)
72,594
(2,475)
3,412
(1,135)
(39,785)
32,611
Loss for the year
Other comprehensive loss
Total comprehensive loss for the year
Exercise of share options
16 (b)
Transfer to issued capital (3)
Share-based payments expense
-
-
-
1,257
1,421
-
-
-
-
-
-
-
Shares issued to Employee Share Trust
2,866
(2,866)
Shares issued / allocated to participants (4)
16 (b)
(3,446)
3,446
Payment of withholding taxes (5)
16 (b)
(137)
Shares issued to fund the acquisition of TeePublic
LLC
Transaction costs for above issued share capital
-
-
-
-
-
-
-
-
-
(1,421)
2,701
-
-
-
-
-
-
(10,024)
(10,024)
(660)
-
(660)
(660)
(10,024)
(10,684)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,257
-
2,701
-
-
(137)
-
-
Cash flows from operating activities
Receipts from customers
Payments to artists
Payments to fulfillers
Payments to other suppliers and employees
Other income received
Income taxes received / (paid)
Net cash provided by / (used in) operating activities (1)
Cash flows from investing activities
Payment for property, plant and equipment
Acquisition of subsidiary (net of cash acquired)
Payment for development of intangible assets
Net cash provided by / (used in) investing activities
Cash flows from financing activities
Balance at 30 June 2018
74,555
(1,895)
4,692
(1,795)
(49,809)
25,748
Proceeds from exercise of share options / warrants
(1) The Group operates an Employee Share Trust (the Trust) for the purpose of issuance of shares to participants on exercise of options / settlement of
performance rights. The balance in the Treasury Reserve represents the book value of shares held by the Trust for future issue to participants on exercise of
options / settlement of performance rights.
(2) On application of AASB 15, the Group adopted the full retrospective approach which resulted in changes to the opening accumulated loss position. Refer to
note 2 for details of the restatement of the prior year comparatives in relation to this.
(3) Transfer to issued capital on issuance of shares for exercised options / settled performance rights.
(4) Shares issued / allocated to participants from the Employee Share Trust.
(5) Payment of withholding taxes to US tax authorities on settlement of performance rights funded by shares withheld.
The above consolidated statement of changes in equity should be read in conjunction with accompanying notes.
Payment of withholding taxes to US tax authorities on settlement of
performance rights funded by shares withheld
Proceeds from issue of share capital
Transaction costs arising from issue of share capital
Net cash provided by / (used in) financing activities
Net increase / (decrease) in cash and cash equivalents held
Cash and cash equivalents at beginning of year
Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the financial year
Notes
2019
$’000
2018
$’000
330,793
(48,199)
(158,707)
(118,937)
942
(349)
5,543
(428)
(46,674)
(9,412)
(56,514)
2,249
(110)
60,572
(3,501)
59,210
8,239
21,247
(456)
29,030
236,242
(35,601)
(116,595)
(82,629)
913
14
2,344
(904)
-
(8,380)
(9,284)
1,257
(137)
-
-
1,120
(5,820)
27,809
(742)
21,247
17
12
16 (b)
16 (b)
16 (b)
16 (b)
(1) Net cash provided by operating activities includes $1.2 million of transaction costs associated with the acquisition of TP Apparel LLC and its wholly owned
subsidiary TP Apparel Europe Limited (TeePublic).
The above consolidated statement of cash flows should be read in conjunction with accompanying notes.
50
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Annual Report 2019Redbubble
Notes to the consolidated financial statements
for the year ended 30 June 2019
1.
Basis of preparation
The consolidated financial statements of Redbubble Limited and its controlled entities (the Group) for the year ended 30
June 2019 were authorised for issue by a resolution of the Directors on 28 August 2019. The Group, through its websites
at Redbubble.com, TeePublic.com and three foreign language Redbubble.com websites, owns and operates the Redbubble
and TeePublic online marketplaces. These marketplaces facilitate the sale and purchase of art and designs on a range of
products between independent creatives and consumers. The products are produced and shipped by third party service
providers (i.e. product manufacturers, printers and shipping companies) referred to as fulfillers.
In November 2018, Redbubble Limited’s (the Company’s) wholly-owned subsidiary, Redbubble Inc., completed the
acquisition of TP Apparel LLC, which owns and operates the TeePublic business (TeePublic). The acquisition was funded by
a capital raising via an institutional placement and entitlement offer. Apart from the acquisition of TeePublic, there was no
significant change in the nature of the Group’s activities during the year.
These financial statements:
•
•
•
•
•
•
are general purpose financial statements;
cover Redbubble Limited and its controlled entities as the consolidated Group. Redbubble Limited is the ultimate
parent entity of the Group;
have been prepared in accordance with Australian Accounting Standards (AASBs) and interpretations issued by the
Australian Accounting Standards Board and the Corporations Act 2001;
comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards
Board (IASB);
have been prepared on a going concern basis under the historical cost convention;
are presented in Australian dollars with all values rounded off in accordance with the Australian Securities and
Investments Commission 2016/191 Legislative Instrument, to the nearest thousand dollars or in certain other cases,
nearest dollar, unless otherwise stated; and
•
apply significant accounting policies consistently to all the years presented, unless otherwise stated. Comparatives are
also consistent with prior years, unless otherwise stated.
The preparation of financial statements requires the use of certain critical accounting estimates and exercise of significant
judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement
and use of estimates are disclosed in the relevant notes. Estimates and judgements are continually evaluated and are
based on historical experience and other factors, including expectations of future events that may have a financial impact
on the entity and that are believed to be reasonable under circumstances. The Group makes estimates and assumptions
concerning the future which may not equal the actual results.
At 30 June 2019, the Group had a net current asset deficiency of $10.6 million (2018: $1.6 million). Included in this are non-
cash items totaling $11m. Excluding these items the Group is in a positive net current asset position. The Directors have
satisfied themselves that the continued application of going concern basis is appropriate as it is expected that the Group
will be able to fully repay its debts as and when they become due.
Note
Page
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
Basis of preparation
Changes in significant accounting policies
Revenue
Employee and contractor costs
Marketing expenses
Operations and administration
Income tax
Loss per share
Cash and cash equivalents
Financial risk management
Property, plant and equipment
Intangible assets
Trade and other payables
Employee benefit liabilities
Other liabilities
Contributed equity and reserves
Business combinations
Interests in subsidiaries
Parent entity financial information
Commitments and contingencies
Share-based payments
Related party transactions
Remuneration of auditors
Segment information
Events occurring after the balance sheet date
Other significant accounting policies
53
54
56
56
56
57
57
59
60
61
64
66
68
69
70
70
71
73
74
75
76
79
80
80
81
81
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Annual Report 2019Redbubble 2.
Changes in significant accounting policies
2.
Changes in significant accounting policies (continued)
AASB 15 Revenue from Contracts with Customers (AASB 15)
Impact on Statement of Financial Position
AASB 15 supersedes the prior standards for revenue recognition including, AASB 111 Construction Contracts, AASB 118
The impact on the Statement of Financial Position as at 30 June 2018 is as follows:
Revenue and related Interpretations. AASB 15 applies to all revenue arising from contracts with customers, unless those
contracts are in the scope of other standards. The new standard establishes a five-step model to account for revenue
arising from contracts with customers and is recognised at an amount that reflects the consideration to which an entity
expects to be entitled in exchange for transferring goods or services to a customer.
The standard requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances
when applying each step of the model to contracts with their customers. The standard also specifies the accounting for the
incremental costs of obtaining a contract and the costs directly related to fulfilling a contract.
The Group adopted AASB 15 using the full retrospective method of adoption. The following tables show the impact of this
new standard on the reported 30 June 2018 comparative figures.
Impact on Statement of Comprehensive Income
The impact on the Statement of Comprehensive Income for the year to 30 June 2018 is as follows:
Assets
Other assets
Liabilities
Unearned revenue
Equity
Accumulated losses
Net assets
Reported
30 June
2018
$’000
AASB15
Adjustments
$’000
Restated 30 June
2018
S’000
248
1,825
2,073
2,477
2,828
5,305
(48,806)
26,751
(1,003)
(1,003)
(49,809)
25,748
Revenue
Marketplace revenue
Artists’ revenue
Total revenue impact
Operating expenses
Fulfiller expenses
Artists’ margin
Operating expenses impact
Net profit impact
Reported
30 June
2018
$’000
182,769
-
182,769
(118,879)
-
(118,879)
63,890
AASB15
Adjustments
$’000
Restated 30 June
2018
S’000
42
35,907
35,949
(7)
(35,907)
(35,914)
35
182,811
35,907
218,718
(118,886)
(35,907)
(154,793)
63,925
The impact on the Statement of Financial Position as at 1 July 2017 is as follows:
Assets
Other assets
Liabilities
Unearned revenue
Equity
Accumulated losses
Net assets
Reported
1 July
2017
$’000
AASB15
Adjustments
$’000
Restated 1 July
2017
S’000
413
1,833
2,246
2,527
2,871
5,398
(38,747)
33,649
(1,038)
(1,038)
(39,785)
32,611
Prior to the adoption of AASB 15 the Group had determined, for accounting purposes, that it was acting as the artists’ agent
in arranging for the selling of artists’ goods to customers on the basis that the Group’s agency capacity is confirmed in
the Group’s user agreement. This agreement is the contractual basis upon which artists upload their work, sell products
to customers and upon which the Group provides marketplace services (including acting in an agency capacity in the
transaction between artist and customer). Whilst the Group retains that view of its legal position (the user agreement
remains unchanged) it has been determined under AASB 15 that the Group is acting as principal for accounting purposes.
Under AASB 15, the Group has concluded that when the customer contracts with the Group, there is only one performance
obligation for goods bearing the artists’ designs. Both the artist and the Group are involved in satisfying the performance
obligation. However, as the Group controls a substantial part of the process it is construed to be the party primarily
responsible for satisfying the performance obligation, the Group is determined (for accounting purposes) to be the principal
Prior to the implementation of AASB 15, unearned revenue represented amounts received from customers for products
that were not yet shipped. Once the item was shipped, revenue was recognised. Under the new standard the performance
obligation is satisfied (and therefore revenue is recognised) when control of the goods is transferred to the customer,
which is deemed to be when the product is delivered. This has impacted the timing of revenue recognition and increased
the unearned revenue balance at 30 June 2018. The corresponding cost of goods that have been manufactured but are in
transit to customers is not recognised as an expense until control of the goods is transferred to the customer.
There is no impact on the Statement of Cash Flows or basic and diluted EPS.
AASB 9 Financial Instruments
in the sale. The performance obligation is satisfied when control of the goods is transferred to the customer (in the Group’s
AASB 9 Financial Instruments (AASB 9) replaces AASB 139 Financial Instruments: Recognition and Measurement, bringing
case, when delivered to the customer).
As the Group is seen as the principal (for accounting purposes) in the sale of goods bearing artists’ designs, artists’ revenue
is included in revenue with the corresponding artists’ margin being recognised in operating expenses.
together all three aspects of the accounting for financial instruments: classification and measurement; impairment; and
hedge accounting. Due to the nature of the Group’s financial instruments, the implementation of AASB 9 has not had a
material impact on the Group.
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Annual Report 2019Redbubble 2.
Changes in significant accounting policies (continued)
6. Operations and administration
Other changes in accounting policies
The Group has also applied several other amendments and interpretations for the first time in this period, but these do not
have a material impact on the consolidated financial statements.
3.
Revenue
The Group has concluded that when the customer contracts with the Group, there is only one performance obligation
for goods bearing the artists’ designs. Both the artist and the Group are involved in satisfying the performance obligation.
However, as the Group controls a substantial part of the process it is construed to be the party primarily responsible for
satisfying the performance obligation, the Group is determined (for accounting purposes) to be the principal in the sale.
Under the new standard the performance obligation is satisfied (and therefore revenue is recognised) when control of the
goods is transferred to the customer, which is deemed to be when the product is delivered.
Technology infrastructure and software costs
Travel expenses
Rental expense on operating leases
TeePublic acquisition costs
Other operations and administration expenses
Total operations and administration
2019
$’000
10,306
1,133
3,269
1,235
6,395
22,338
2018
$’000
7,194
1,700
2,177
-
6,888
17,959
As the Group is seen as the principal (for accounting purposes) in the sale of goods bearing artists’ designs, artists’ revenue
is included in revenue with the corresponding artists’ margin being recognised in operating expenses.
7.
Income tax
All of the unearned revenue balance as at 30 June 2018 was recognised as revenue during the FY2019 year.
Recognition of tax expense / (benefit)
For information regarding disaggregated revenue required under AASB 8 Operating Segments, refer to note 24.
4.
Employee and contractor costs
Salary costs
Contractor costs
Share-based payments expense
Superannuation costs and other pension related costs (1)
Total employee and contractor costs
2019
$’000
33,292
5,974
5,915
2,422
47,603
(1)
Includes contribution to 401K funds, which is the superannuation equivalent for the US subsidiaries, and contributions to pension funds in Germany.
5. Marketing expenses
Paid marketing (1)
Other marketing expenses
Total marketing expenses
2019
$’000
27,051
1,526
28,577
2018
$’000
24,976
4,887
2,701
2,137
34,701
2018
$’000
16,766
1,568
18,334
(1) Paid marketing represents affiliate marketing and other paid marketing costs paid per click basis on search engines like Google, and advertising on social media
platforms such as Instagram, Facebook, Pinterest and SnapChat.
The tax expense recognised in the statement of comprehensive income relates to current income tax expense plus deferred
tax expense (being the movement in deferred tax assets and liabilities and unused tax losses during the year).
Current and deferred tax is recognised as income or an expense and included in the income statement for the period except
where the tax arises from a transaction which is recognised in other comprehensive income or equity, in which case the tax is
recognised in other comprehensive income or equity respectively.
Current tax
Current tax is the amount of income taxes payable / (recoverable) in respect of the taxable profit / (taxable loss) for the year
and is measured at the amount expected to be paid to / (recovered from) the taxation authorities, using the tax rates (and tax
laws) that have been enacted by the end of the reporting period.
Current tax assets and liabilities are offset where there is a legally enforceable right to set off the recognised amounts and
there is an intention either to settle on a net basis or to realise the asset and settle the liability simultaneously.
Deferred tax
Deferred tax is provided on temporary differences which are determined by comparing the carrying amounts of tax bases of
assets and liabilities to the carrying amounts in the consolidated financial statements.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is
realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end
of the reporting period.
Deferred tax assets are recognised for all deductible temporary differences and unused tax losses to the extent:
•
it is probable that future taxable profits will be available against which the deductible temporary differences and losses
can be utilised;
•
the likelihood of achieving appropriate continuity of ownership levels and continuing to meet the relevant definitions of
“same business” are met; and
•
there are no changes in tax legislation that adversely affect the ability to realise the deferred tax asset benefits.
Deferred tax assets and liabilities are offset where they relate to income taxes levied by the same taxation authority and the
intention is to realise the assets and settle the liabilities simultaneously in each future period in which significant amounts of
deferred tax liabilities or assets are expected to be settled or recovered.
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Annual Report 2019Redbubble
7.
Income tax (continued)
Critical accounting estimates and judgements
Deferred income taxes arise from temporary differences between the tax and financial statement recognition of revenue
and expense, the incurrence of tax losses and entitlement to non-refundable tax offsets. In evaluating the Group’s ability
to recover deferred tax assets within the jurisdiction from which they arise, the Group considers all available positive and
negative evidence, including probability of achieving appropriate continuity of ownership levels, likelihood of meeting
relevant definitions of “same business”, scheduled reversals of deferred tax liabilities, projected future taxable income and
results of recent operations. This evaluation requires significant management judgment.
The Group wrote back $13.9m of the deferred tax asset balance during the year aligning the accounting position on
recognition of pre and post IPO losses. This asset predominantly related to Australian carried forward tax losses and non
refundable research and development (R&D) tax offsets. These losses remain in existence for taxation purposes.
The Group has in aggregate $97.3 million (2018: $74.6 million) of unrecognised losses and R&D tax offsets. An unrecognised
deferred tax asset of $29.2 million exists as at 30 June 2019 (2018: $9.0 million), in relation to these items.
(a) Income tax expense / (benefit)
Current tax
Current tax expense / (benefit)
Over provision in prior years
Deferred tax
Deferred tax expense / (benefit)
Under provision in prior years
Total income tax expense / (benefit)
(b) Numerical reconciliation of income tax expense / (benefit) to prima facie tax payable
Loss from ordinary activities before income tax expense / (benefit)
Income tax calculated @ 30%
Tax effect of amounts that are not deductible / (taxable) in calculating income tax:
Tax effect of foreign jurisdictions’ different tax rates (1)
US income tax benefit due to exercise / disposition of employee stock options
Research and development
Share-based payments
Other non-deductible / non-assessable items
Effect of movements in foreign exchange
Over provision in prior year
Australian income tax benefit arising from deductibility of the issue of shares to Employee
Share Trust
Unrecognised tax losses and R&D tax offsets
Income tax expense / (benefit) attributable to loss from ordinary activities
2019
$’000
1,141
(420)
14,193
248
15,162
2019
$’000
(12,502)
(3,751)
(412)
165
(57)
1,217
494
85
(172)
(2,255)
19,848
15,162
2018
$’000
599
(27)
(5,127)
(99)
(4,654)
2018
$’000
(14,713)
(4,414)
(60)
(388)
(146)
838
475
27
(126)
(860)
-
(4,654)
7.
Income tax (continued)
(c) Deferred tax (liability) / assets
The balance comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Employee benefits
Carry forward state tax credits
Deferred expenditure - other
Carried forward tax losses
Property, plant, equipment and intangible assets
IPO costs
Lease incentive
Other items
Net deferred tax (liability) / assets
Movements:
Opening balance at 1 July
Credited / (debited) due to the acquisition of TeePublic
Credited / (debited) to the consolidated statement of comprehensive income
Exchange differences
Closing balance at 30 June
8.
Loss per share
Basic earnings per share (EPS)
2019
$’000
71
-
10
21
(1,486)
-
73
1,015
(296)
13,952
161
(14,441)
32
(296)
2018
$’000
751
266
248
13,395
(1,708)
542
300
158
13,952
8,707
-
5,226
19
13,952
Basic EPS is calculated by dividing the profit attributable to ordinary equity holders of the Company by the weighted
average number of ordinary shares outstanding during the financial year.
Diluted EPS
Diluted EPS is calculated by dividing the profit attributable to ordinary equity holders of the Company (after adjusting for
the after income tax effect of interest and other financing costs associated with the dilutive potential ordinary shares) by
the weighted average number of ordinary shares outstanding during the financial year plus the weighted average number of
ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.
Potential ordinary shares
None of the options over ordinary shares and performance rights over ordinary shares that could be considered as potential
ordinary shares have been included in determination of diluted EPS, since they are anti-dilutive. Due to losses incurred
during the current as well as the prior year, inclusion of potential ordinary shares in weighted average number of shares
would increase the denominator used in calculating diluted EPS and thereby reduce the loss per share.
(1)
Within the prior year, effective 1 January 2018, the corporate federal income tax rate applicable to the Group in the United States of America reduced from
34% to 21%.
58
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Annual Report 2019Redbubble
8.
Loss per share (continued)
9.
Cash and cash equivalents (continued)
Basic and diluted loss per share
Reconciliation of loss for the year to net cash outflow from operating activities
Basic and diluted loss per share attributable to the ordinary equity holders of the company is $0.12 (2018: $0.05).
The calculation for basic and diluted loss per share is detailed below.
2019
$’000
2018
Restated
$’000
Loss for the year
Non-cash items
Note
2019
$’000
2018
$’000
(27,664)
(10,024)
Loss attributable to the ordinary equity holders of the company used in
calculating basic and diluted loss per share
(27,664)
(10,024)
De-recognition / (recognition) of net deferred tax asset
7 (c)
14,441
(5,226)
Weighted average number of shares used as the denominator
Depreciation and amortisation
Amortisation of share-based payments
Net exchange differences
Weighted average number of shares used as denominator in calculating
basic and diluted loss per share
237,934,306
208,949,685
Unwinding of discount on deferred consideration
2019
2018
Net loss on the disposal / write off of property, plant and equipment and
intangible assets
Lease incentive offset
8,086
5,915
(93)
171
(231)
143
(1,004)
415
7,797
2,701
(103)
107
(143)
-
(914)
605
4,367
7,608
997
(64)
5,543
2,344
Change in operating assets and liabilities
Net increase in trade and other receivables, prepayments, inventories and
other financial assets
Net increase in current tax liabilities
Net increase in trade and other payables, employee benefit and other liabil-
ities and provisions
Net increase / (decrease) in unearned revenue
Net cash provided by operating activities
10.
Financial risk management
This note explains the Group’s financial risk management and how the exposure to these risks affects the Group’s future
financial performance. The Group’s risk management framework is maintained by senior management through delegation
from the Board of Directors. The Board oversees and monitors senior management’s implementation of the Group’s risk
management framework. This is based on recommendations from the Audit and Risk Committee, where appropriate.
The risk management framework includes policies and procedures approved by the Board and managed by internal legal
counsel and the Finance function.
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date
and the date of authorisation of these financial statements that would significantly impact the above calculations.
9.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and short-term deposits which are readily convertible to known
amounts of cash and which are subject to an insignificant risk of change in value.
Cash at bank and on hand
Fixed term bank deposits (1)
Total cash and cash equivalents
2019
$’000
18,028
11,002
29,030
2018
$’000
3,247
18,000
21,247
(1)
Fixed term bank deposits attract interest at normal term deposit rates. They are placed for various periods of up to 12 months. All deposits are capable of being
called at 31 days’ notice with minimal financial impact.
60
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Annual Report 2019Redbubble 10.
Financial risk management (continued)
10.
Financial risk management (continued)
Financial assets
Cash and cash equivalents
Other receivables
Other financial assets
Financial liabilities
Fulfiller payables
Artist payables
Staff payables
Other payables
Deferred consideration
Notes
9
10 (b)
10 (b)
13
13
13
13
15
2019
$’000
29,030
2,562
1,675
14,877
4,663
1,252
3,311
7,773
2018
$’000
21,247
997
1,359
11,322
2,755
1,617
1,922
-
(b) Credit risk (continued)
Cash and bank balances / other financial assets
As at 30 June 2019, the Group holds $11.0 million (2018: $18.0 million) in bank deposits, classified as cash and cash
equivalents, that attract interest at normal term deposit rates. All the term deposits are placed with one bank.
The Group’s bank accounts are predominantly non-interest bearing accounts. These operating bank accounts are not
concentrated with any one bank. Funds in excess of the short-term liquidity requirements are moved to interest-bearing
term deposit accounts.
The other financial assets include certain other operational deposits over and above the deposits placed with banks as
security.
Security held with banks
Deposits/advances
Total other assets
Current
Non-current
2019
$’000
-
387
387
2018
$’000
-
158
158
2019
$’000
1,094
194
1,288
2018
$’000
1,063
138
1,201
The carrying value of the assets and liabilities disclosed in the table equals or closely approximates their fair value.
The banks with which securities are held are reputable financial institutions and hence the credit risk is considered low.
(a) Market Risk
Foreign exchange risk
The Group collects funds from customers in five currencies (USD, AUD, EUR, CAD and GBP) and maintains bank accounts
in these currencies. The Group has liabilities to fulfillers, artists and other suppliers in these currencies. Where possible, the
Group settles its liabilities in the native currency hence creating a natural hedge. Any surplus funds are converted in to the
required currencies’ operating accounts when management feels it is prudent to do so.
The net exposure to foreign currency financial instruments (expressed in AUD) held by the Group, which are largely held by
the US subsidiaries whose functional currency is USD, are as below:
Net exposure (asset / (liability))
30 June 2019
30 June 2018
GBP
$’000
(278)
278
USD
$’000
380
717
EUR
$’000
(409)
(244)
CAD
$’000
242
(268)
Total
$’000
(65)
483
Since the foreign currency exposure at year end for each currency is minimal, the impact of movement in foreign exchange
rates on the Group’s net profit and equity would be immaterial.
Other receivables
The Group is not exposed to any significant credit risk on account of other receivables. The Group accepts payments either
via credit card platforms, PayPal, Amazon Pay or Apple Pay. In any case, the Group ensures that cash is received prior to the
product being manufactured. The other receivables balance as at 30 June 2019 represents amounts receivable from these
payment service providers. It is believed that the credit risk from collections from payment service providers is low.
Other receivables (1)
Total other receivables
2019
$’000
2,562
2,562
2018
$’000
997
997
(1) None of the other receivables balances are impaired or past due date. The Group does not hold any collateral in relation to these receivables.
The Group encounters credit card fraud typical of the industry in which it operates, representing less than 0.1% (2018: less
than 0.3%) of marketplace revenue.
(b) Credit risk
(c) Liquidity risk
Credit risk is the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Group.
The Group faces primary credit risk from potential default on receivables by payment service providers. The Group receives
payments of the balance due from two of the three service providers, every day, two to three days in arrears. The credit risk
of balances held with the third party service provider is managed by regularly sweeping funds out of the provider accounts
into a portfolio of managed banking facilities held with highly rated and regulated financial institutions.
Prudent liquidity risk management implies maintaining sufficient cash and ensuring that all term deposits can be converted
to funds in accordance with forecast cash usage. Due to the dynamic nature of the underlying business, flexibility in funding
is maintained by ensuring ready access to the cash reserves of the business.
Term deposits classified as cash and cash equivalents are placed for various periods up to 12 months. These can, however,
be called at 31 days’ notice, with minimal financial impact.
All financial liabilities are current and anticipated to be repaid over the normal payment terms, usually 30 days.
62
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Annual Report 2019Redbubble
10.
Financial risk management (continued)
11.
Property, plant and equipment (continued)
(c) Liquidity risk (continued)
Financial arrangements
The Group had no borrowing facilities at the end of reporting period nor at the end of the prior reporting period.
Cost
Leasehold
improvements
$’000
Furniture and
equipment
$’000
Computer
equipment
$’000
Work in
progress
$’000
Total
$’000
Maturities of financial liabilities
Trade and other payables of $26.5 million and the deferred consideration of $7.8 million were the only financial liabilities
owed by the Group at 30 June 2019 (2018: $19.5 million). These items are based on contractual undiscounted payments.
Trade and other payables have a contractual maturity ranging between one to three months in both the current and the
prior year. The deferred consideration is due to be paid in May 2020.
(d) Capital management
The Group’s policy is to maintain a capital structure for the business which ensures sufficient liquidity, provides support for
business operations, maintains shareholder confidence and positions the business for future growth. The Group manages
its capital structure and makes adjustments in light of changes in economic conditions.
The ongoing maintenance of the Group’s policy is characterised by ongoing cash flow forecast analysis and detailed
budgeting which is directed at providing a sound financial positioning for the Group’s operations and financial management
activities.
The Group is not subject to externally imposed capital requirements.
11.
Property, plant and equipment
Plant and equipment is measured on a cost basis and carried at cost less accumulated depreciation and any accumulated
impairment losses.
Depreciation
The depreciable amount of all fixed assets is depreciated on a straight-line basis over the asset’s useful life to the Group
commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of
either the unexpired period of the lease or the estimated useful lives of the improvements. The depreciation rates used for
each class of depreciable asset are shown below:
Class of Fixed Assets
Leasehold improvements
Computer equipment
Furniture and equipment
Useful life
Life of the applicable lease
3 years
2-5 years
At the end of each annual reporting period, the depreciation method, useful life and residual value of each asset is
reviewed. Any revisions are accounted for prospectively as a change in estimate.
Balance at 1 July 2018
3,754
Additions
Transfers
Disposals
Exchange differences
Balance at 30 June 2019
Balance at 1 July 2017
Additions (1)
Transfers
Disposals
Exchange differences
Balance at 30 June 2018
Accumulated depreciation
Balance at 1 July 2018
Charge for the year
Disposals
Exchange differences
Balance at 30 June 2019
Balance at 1 July 2017
Charge for the year
Disposals
Exchange differences
Balance at 30 June 2018
Net book value
As at 30 June 2019
As at 30 June 2018
8
-
-
121
3,883
1,908
1,652
87
-
107
3,754
(1,360)
(622)
-
(35)
(2,017)
(857)
(484)
-
(19)
(1,360)
1,866
2,394
671
27
-
-
23
721
470
327
53
(194)
15
671
(227)
(123)
-
(6)
(356)
(264)
(89)
127
(1)
(227)
365
444
2,314
393
-
(4)
52
2,755
1,822
462
3
(6)
33
2,314
(1,556)
(468)
-
(37)
(2,061)
(1,016)
(520)
-
(20)
(1,556)
694
758
-
6,739
-
-
-
-
-
82
62
(143)
-
(1)
-
-
-
-
-
-
-
-
-
-
-
-
-
428
-
(4)
196
7,359
4,282
2,503
-
(200)
154
6,739
(3,143)
(1,213)
-
(78)
(4,434)
(2,137)
(1,093)
127
(40)
(3,143)
2,925
3,596
(1) Of the total additions during the year to 30 June 2018, $2.0 million related to new leasehold premises at 111 Sutter Street, San Francisco. These additions
included leasehold improvements amounting to $1.5 million which were funded by the landlord.
64
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Annual Report 2019Redbubble
11.
Property, plant and equipment (continued)
12.
Intangible Assets (continued)
Critical accounting estimates and judgements
Critical accounting estimates and judgements
At the end of each reporting period, the Group assesses whether there is any indication that any property, plant &
equipment asset may be impaired. If such an indication exists, an impairment test is carried out on the asset by comparing
the recoverable amount of the asset, being the higher of the asset’s fair value less costs to dispose, and value in use, to the
asset’s carrying amount.
Any excess of the asset’s carrying amount over its recoverable amount is recognised immediately as a loss. Where it is not
possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the
cash-generating unit to which the asset belongs.
Key assumptions used in value in use calculations and sensitivity to changes in assumptions (continued)
(b)
Gross margins
Gross margins are based on the average values achieved in the period since the acquisition of TeePublic. These values are
increased over the forecast period for anticipated efficiency improvements as the TeePublic business scales.
No items of property, plant and equipment have been impaired in the financial year ending 30 June 2019 (2018: $nil).
(c)
Discount rates
12.
Intangible Assets
Recognition and measurement
The pre-tax discount rate applied to cash flow projections is 17%. Discount rates represent the consideration of the time
value of money and the individual risks of the underlying assets. The discount rate calculation is based on the specific
circumstances of the Group and is derived from its weighted average cost of capital (WACC). Adjustments to the discount
rate are made to factor in the specific amount and timing of the future tax flows in order to reflect a pre-tax discount rate.
Capitalised
Development expenditure is capitalised when future economic benefits are probable.
Impairment
development costs
Expenditure during the research phase of a project is recognised as an expense when incurred.
Goodwill
impairment losses. All of the goodwill held by the Group is attributable to the TeePublic cash
Goodwill arising on the acquisition of subsidiaries is measured at cost less accumulated
The Group performed an impairment test as at 30 June 2019. Using the above assumptions, it was concluded that the carrying
value of the TeePublic CGU does not exceed its value in use and therefore no impairment charge has been recognised.
There is no reasonable possible change in a key assumption used to determine the recoverable amount that would result in
generating unit (CGU).
impairment.
Other intangible assets
Other intangible assets include brand name assets that have been acquired by the Group.
Amortisation
Amortisation is calculated to write off the cost of intangible assets less their estimated residual values using the straight-line
method over their estimated useful lives, and is recognised in profit or loss. Goodwill is not amortised.
The estimated useful lives for current and comparative periods are as follows:
Capitalised development costs:
Brand name asset (attributable to the TeePublic CGU):
2–3 years
Indefinite
Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if deemed
necessary.
Critical accounting estimates and judgements
Key assumptions used in value in use calculations and sensitivity to changes in assumptions
The Group assesses the recoverability of its intangible assets annually. The recoverable amount of the TeePublic business
has been determined based on a value in use calculation using cash flow projections over a 5 year period approved by
management. The key assumptions in the calculation are as follows:
(a)
Growth rate
The long-term business growth rate used in the forecast is based upon Management’s experience with the growth of
Redbubble and applied to the TeePublic business. Cash flows beyond the forecast period are projected using a growth rate
of 2.5%.
66
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Annual Report 2019Redbubble
12.
Intangible Assets (continued)
Cost
Balance at 1 July 2018
Additions
Acquisition of a subsidiary
Disposals
Exchange differences
Balance at 30 June 2019
Balance at 1 July 2017
Additions
Disposals
Exchange differences
Balance at 30 June 2018
Accumulated depreciation
Balance at 1 July 2018
Charge for the year
Exchange differences
Balance at 30 June 2019
Balance at 1 July 2017
Charge for the year
Exchange differences
Balance at 30 June 2018
Net book value
As at 30 June 2019
As at 30 June 2018
-
-
6,694
-
62
6,756
-
-
-
-
-
-
-
-
-
-
-
-
-
Brand name
$’000
Capitalised
development costs
$’000
Goodwill
$’000
Total
$’000
29,077
9,412
-
-
49,991
57,901
-
585
(185)
819
50,576
97,024
-
-
-
-
-
20,612
8,380
(37)
122
29,077
29,077
9,412
1,216
(185)
172
39,692
20,612
8,380
(37)
122
29,077
(18,545)
-
(18,545)
(6,873)
(114)
(25,532)
(11,759)
(6,704)
(82)
(18,545)
-
-
-
-
-
-
-
(6,873)
(114)
(25,532)
(11,759)
(6,704)
(82)
(18,545)
6,756
-
14,160
10,532
50,576
71,492
-
10,532
No intangible assets have been impaired in the financial year ending 30 June 2019 (2018: nil).
13. Trade and other payables
Fulfiller payables
Artist payables
Staff payables
Sales tax payables
Other payables (1)
Total trade and other payables
(1) Other payables consist of operations, administration and marketing payables.
2019
$’000
14,877
4,663
1,252
2,417
3,311
26,520
2018
$’000
11,322
2,755
1,617
1,908
1,922
19,524
14. Employee benefit liabilities
Wages, salaries, annual and long service leave
A provision is made for the Group’s liability for employee benefits arising from services rendered by employees to the end
of the reporting period.
Employee benefits that are expected to be settled within one year represent the amounts expected to be paid when
the liability is settled. Employee benefits expected to be settled more than twelve months after the end of the reporting
period have been measured at the present value of the estimated future cash outflows to be made for those benefits. In
determining the liability, consideration is given to employee wage increases and the probability that the employee may
satisfy service period requirements. Cash flows are discounted using market yields at the reporting date on high quality
corporate bonds with terms to maturity that match the expected timing of cash flows.
Employee benefits are presented as current liabilities in the balance sheet if the Group does not have an unconditional
right to defer settlement of the liability for at least 12 months after the reporting date regardless of the classification of the
liability for measurement purposes under AASB 119 Employee Benefits.
Changes in the measurement of the liability are recognised in the income statement.
Defined contribution schemes
Obligations for contributions to defined contribution superannuation plans are recognised as an employee benefit expense
in the income statement in the periods in which services are provided by employees.
Termination benefits
Termination benefits are those benefits paid to an employee as a result of either the Group’s decision to terminate an
employee’s employment before the normal retirement date or an employee’s decision to accept an offer of benefits in
exchange for the termination of employment.
Termination benefits are recorded as a provision when the Group can no longer withdraw the offer of those benefits.
Annual leave
Long service leave
Termination benefits
Total employee benefit liabilities
Current
Non-current
2019
$’000
2,058
212
153
2,423
2018
$’000
1,659
230
156
2,045
2019
$’000
-
227
-
227
2018
$’000
-
149
-
149
68
69
Annual Report 2019Redbubble 15. Other liabilities
Deferred rent
Lease incentive liability (1)
Deferred consideration payable (2)
Other
Total other liabilities
Current
Non-current
2019
$’000
191
318
7,773
-
8,282
2018
$’000
129
223
-
54
406
2019
$’000
616
1,059
-
-
2018
$’000
714
1,227
-
-
1,675
1,941
(1) The Group has recognised a lease incentive liability for the additions to leasehold improvements funded by the landlord at 111 Sutter Street, San Francisco. The
benefit of this lease incentive is being released in line with the treatment of the corresponding lease.
16. Contributed equity and reserves (continued)
(b) Movements in ordinary share capital (continued)
Balance at 1 July 2017
Exercise of options / warrants
Settlement of vested performance rights
Shares issued to Employee Share Trust
Shares issued / allocated to participants from the Employee Share Trust
Payment of withholding taxes to US tax authorities (1)
Balance at 30 June 2018 (including treasury shares)
(2) US $6.0 million of deferred consideration in relation to the TeePublic acquisition is to be paid 18 months from the date of acquisition (May 2020). The estimated
Treasury shares -unallocated (2)
fair value of the deferred consideration at 30 June 2019 is US $5.5 million (AU $7.8 million).
Balance at 30 June 2018 (including treasury shares)
Number of shares
208,440,096
2,676,107
911,766
1,500,000
(3,480,043)
(107,830)
209,940,096
(991,706)
208,948,390
$’000
69,481
1,257
-
2,866
(3,446)
(137)
70,021
(1,895)
68,126
16. Contributed equity and reserves
(a) Share capital
Ordinary shares (1)
Issued and fully paid
Consolidated and parent entity
2019
Shares
2018
Shares
2019
$’000
2018
$’000
256,156,543
209,940,096
128,730
70,021
Transferred from share based payments reserve
-
-
6,464
4,534
(1) Represents payment of withholding taxes accounted for as a deduction from equity in accordance with AASB 2 Share-based Payments.
(2) The unallocated treasury shares balance represents book value of shares held by the Trust for future issue to participants on exercise of options / settlement of
performance rights.
(c) Dividends
No dividends were declared or paid during the year (2018: $nil). The Group’s franking account balance is $nil (2018: $nil).
(d) Nature and purpose of reserves
Share based payment reserve
The share-based payments reserve arises on issue of share options / performance rights as payment for services to board
members, employees (including senior executives) and contractors.
Total share capital
256,156,543
209,940,096
135,194
74,555
Foreign currency translation reserve
(1)
The holders of ordinary shares are entitled to participate in dividends and the proceeds on winding up of the Company. On a show of hands at meetings of the
Company, each holder of ordinary shares has one vote in person or by proxy, and upon a poll each share is entitled to one vote. The Company does not have
authorised capital or par value in respect of its shares.
Exchange differences arising on translation of the foreign controlled entities are recognised in the foreign currency
translation reserve within other comprehensive income. The cumulative amount is reclassified to the income statement
when the net investment to which it relates is disposed of.
(b) Movements in ordinary share capital
Treasury reserve
Balance at 1 July 2018
Shares issued to fund the acquisition of TeePublic LLC
Transaction costs for issued share capital
Exercise of options / warrants
Settlement of vested performance rights
Shares issued to Employee Share Trust
Shares allocated to participants from the Employee Share Trust
Payment of withholding taxes to US tax authorities (1)
Balance at 30 June 2019 (including treasury shares)
Treasury shares - unallocated (2)
Number of shares
209,940,096
40,381,447
-
5,151,049
353,095
5,835,000
(5,432,588)
(71,556)
$’000
70,021
60,572
(3,501)
2,249
-
7,515
(8,016)
(110)
256,156,543
128,730
(1,394,118)
(1,394)
The treasury reserve is used to hold the book value of shares held by the Employee Share Trust for future issue to
participants on exercise of options / settlement of performance rights.
17. Business combinations
In November 2018, the Group acquired 100% of TP Apparel LLC and its wholly owned subsidiary TP Apparel Europe Limited
(TeePublic). Like Redbubble, TeePublic is a global online marketplace that enables designers from around the world to sell
their artwork on products produced and fulfilled by a network of third party suppliers. The Group has acquired TeePublic to
expand its market coverage and achieve operating leverage from greater scale and shared technology. The acquisition has
been accounted for using the acquisition method. The consolidated financial statements include the results of TeePublic for
the eight-month period from the acquisition date.
Critical accounting estimates and judgements
A third-party valuations team was engaged in a valuation assessment of the identifiable intangible assets acquired in the
Balance at 30 June 2019 (excluding treasury shares)
254,762,425
127,336
purchase of TeePublic.
(1) Represents payment of withholding taxes accounted for as a deduction from equity in accordance with AASB 2 Share-based Payments.
(2) The unallocated treasury shares balance represents book value of shares held by the Trust for future issue to participants on exercise of options / settlement of
performance rights.
70
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Annual Report 2019Redbubble
17. Business combinations (continued)
17. Business combinations (continued)
Critical accounting estimates and judgements (continued)
Total consideration comprises:
The valuation techniques used for measuring the fair value of identified intangible assets acquired were as follows.
Assets acquired
Valuation technique
Capitalised development costs
The capitalised development costs were valued using the depreciated replacement
cost method.
Brand name
The brand name asset was valued using the relief-from-royalty method.
At 31 December 2018 provisionally determined values were reported in the Group’s Interim Financial Report. Subsequent
to 31 December 2018, final fair values for the business combination were determined. The restated fair values of the
identifiable assets and liabilities of TeePublic as at the date of acquisition were:
Provisional fair value
$000
Adjustment
$000
Final fair value
$000
Assets
Cash and cash equivalents
Other receivables (1)
Inventories
Prepayments
Other financial assets
Deferred tax asset (2)
Capitalised development costs
Brand name (3)
Total assets
Liabilities
Trade and other payables (4)
Unearned revenue (1)
Settlement provision (5)
Deferred tax liability (2)
Other liabilities (4)
Total liabilities
Total identifiable assets and liabilities at fair value
Goodwill arising on acquisition (6)
Total goodwill and identifiable assets and
liabilities at fair value
2,605
271
16
501
174
-
1,216
16,813
21,596
3,141
325
-
43
314
3,823
17,773
39,428
57,201
-
947
-
-
-
161
-
(10,119)
(9,011)
50
1,460
495
(43)
(48)
1,914
(10,925)
10,563
(362)
2,605
1,218
16
501
174
161
1,216
6,694
12,585
3,191
1,785
495
-
266
5,737
6,848
49,991
56,839
(1) The movement in other receivables and unearned revenue is due to the implementation of AASB 15 upon acquisition.
(2) Deferred tax movements resulted from finalisation of the acquisition tax accounting.
(3) A detailed review of values assigned to intangible assets in the preliminary valuation has resulted in a change in the value of the brand name asset.
(4) The increase to trade and other payables is due to a reclassification from other liabilities.
(5) The settlement provision relates to a litigation claim that existed at acquisition.
(6) Goodwill is deductible for tax purposes in the United States.
Cash
Deferred consideration (7)
Total consideration
Provisional fair value
$000
Adjustment
$000
Final fair value
$000
(49,279)
(7,922)
(57,201)
-
362
362
(49,279)
(7,560)
(56,839)
(7) The total consideration for the acquisition was US$41 million. US$35 million (A$49.3 million) has been paid with a further US$6.0 million of deferred
consideration to be paid 18 months from the date of acquisition (May 2020). The estimated fair value of the deferred consideration is US$5.5 million (A$7.8
million). The fair value of the deferred consideration has reduced since acquisition due to the payment of pre-acquisition expenses.
Analysis of cash flows on acquisition
Cash paid
Net cash acquired (included in cash flows from investing activities)
Net cash flow on acquisition
(49,279)
2,605
(46,674)
Since the date of acquisition, TeePublic has contributed $43.2 million of revenue and $3.3 million of net profit before tax
from the continuing operations of the Group. If the acquisition had taken place at the beginning of the year, revenue from
continuing operations would have been $59.7 million and the profit from continuing operations for the period would have
been $4.1 million. The goodwill recognised is primarily attributable to TeePublic’s position in its market, the high growth
potential of that market and the expected synergies between TeePublic and Redbubble.
Transaction costs of $1.2 million have been expensed and are included in administrative expensed in the statement of
comprehensive income and are included as part of operating cash flows in the statement of cash flows.
18.
Interests in subsidiaries
Information about subsidiaries
The consolidated financial statements of the Group include:
Name of Entity
Country of
incorporation
Principal activities
Equity
holding
2019
%
Equity
holding
2018
%
Redbubble Incorporated
USA
Provider of global sales, marketing and distribution
services in respect of the Redbubble marketplace
100
100
Redbubble Europe Limited
UK
Marketing and distribution services in Europe
100
100
Redbubble Europe GmbH
Germany
Marketing and distribution services in Europe
100
100
TP Apparel LLC
USA
Provider of global sales, marketing and distribution
services in respect of the TeePublic marketplace
TP Apparel Europe Limited
Ireland
Marketing and distribution services in Europe
100
100
n/a
n/a
72
73
Annual Report 2019Redbubble
parent entity.
(a) Summary financial information
Statement of financial position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Equity
Contributed equity
Share based payment reserve
Treasury reserve
Accumulated losses
Total equity
Loss and other comprehensive income
Loss for the year
Total comprehensive loss
19.
Parent entity financial information
19.
Parent entity financial information (continued)
The financial information for the parent entity, Redbubble Limited, has been prepared on the same basis as the consolidated
(d) Capital and lease commitments
financial statements except for investments in subsidiaries. They are recognised at cost in the financial statements of the
The parent entity had no capital commitments as at 30 June 2019 (2018: $nil).
2019
$’000
2018
$’000
Operating leases
Lease payments for operating leases, where substantially all of the risks and benefits remain with the lessor, are charged as
expenses on a straight-line basis over the life of the lease term.
Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:
48,893
11,163
60,056
3,165
451
3,616
135,194
8,684
(1,394)
(86,044)
56,440
(31,742)
(31,742)
18,860
24,377
43,237
19,658
519
20,177
75,002
4,700
(2,340)
(54,302)
23,060
(12,186)
(12,186)
2019
$’000
1,049
1,277
-
2,326
2018
$’000
1,006
2,326
-
3,332
Within one year
Later than one year but not later than five years
More than five years
Total lease commitments
20. Commitments and contingencies
(a) Capital and lease commitments
The Group had no capital commitments as at 30 June 2019 (2018: $nil).
Operating leases – Group as lessee
Lease payments for operating leases, where substantially all of the risks and benefits remain with the lessor, are charged as
expenses on a straight-line basis over the life of the lease term.
Commitments for minimum lease payments in relation non-cancellable operating leases are payable as follows:
Within one year
Later than one year but not later than five years
More than five years
Total lease commitments
2019
$’000
3,863
8,322
791
2018
$’000
2,856
8,878
2,222
12,976
13,956
The Group leases offices under non-cancellable operating leases for periods ranging within one to six years, with rent
payable monthly in advance. The leases have varying terms, escalation clauses and renewal rights. Rental provisions within
the lease agreement provide for increase in the minimum lease payments as contracted.
(b) Guarantees entered into by the parent entity
The parent entity has not entered into any guarantees as at 30 June 2019 (2018: $nil).
(c) Contingent liabilities of the parent entity
As at the date of these financial statements there are current lawsuits filed against the Company that relate to alleged
intellectual property infringement and / or breach of consumer laws. There is no certainty around the amount or timing of
any outflow should any of the actions ultimately be successful (at first instance or on appeal, as applicable). The Company
does not consider that any of the current actions are likely to have a material adverse effect on the business or financial
position of the Company.
74
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Annual Report 2019Redbubble
20. Commitments and contingencies (continued)
21.
Share-based payments (continued)
(a) Capital and lease commitments (continued)
Operating leases – Group as lessor
Options over ordinary shares
Redbubble Equity Incentive Plan
The Group entered into a sublease arrangement as lessor on an existing, non-cancellable operating lease during the prior
In September 2015, the Group introduced the “Redbubble Equity Incentive Plan”. Under this plan options over ordinary
year. Future minimum rental income under the sublease as at 30 June 2019 is as follows:
Within one year
Later than one year but not later than five years
More than five years
Total lease commitments
(b) Contingencies
Legal claim contingencies
2019
$’000
694
547
-
1,241
2018
$’000
662
1,234
-
1,896
As at the date of these financial statements there are current lawsuits filed against some of the entities within the Group
that relate to alleged intellectual property infringement and/or breach of consumer laws. There is no certainty around
the amount or timing of any outflow should any of the actions ultimately be successful (at first instance or on appeal, as
applicable). The Group does not consider that any of the current actions are likely to have a material adverse effect on the
business or financial position of the Group.
21.
Share-based payments
shares are granted to Redbubble Limited board members, employees (including senior executives) and contractors. The
options are subject to service conditions and have a predetermined time-based vesting schedule. The grantees of options
under this Plan may exercise vested options at any time before the earlier of:
(a) a specified expiry date (generally 10 years from the grant date); and
(b) 90 days after ceasing to be a Director, employee or contractor for Redbubble Limited.
Some of the options have a zero exercise price, so as to be akin to performance rights (or restricted stock units).
2014 Option Plan
Options to employees / contractors of US subsidiary are granted under this plan. The vesting conditions and expiry period
under this plan is akin to the Redbubble Equity Incentive Plan.
Performance rights
Performance rights are granted under the Restricted Share and Performance Rights Plan to certain employees including
senior executives and consultants. Once granted, the rights have a predetermined time-based vesting schedule. All the
performance rights are subject to service conditions.
Executive STI - Options and Performance Rights
The Redbubble Limited has contracted with executives, who can materially impact the financial and operational
performance of the Group to pay a benefit under the “Redbubble SLT Short Term Incentive (STI) Plan”. The STI benefits are
subject to: achievement of certain performance based requirements in relation to Group and personal performance.
The Group operates equity-settled share-based payment employee share and option schemes. The fair value of the equity
to which employees become entitled is measured at grant date and recognised as an expense over the vesting period, with
a corresponding increase to an equity account.
Share appreciation rights
The fair value of options and share appreciation rights is ascertained using industry standard valuation models. A Black-
Share appreciation rights have been granted to the Chief Executive Officer. The rights are subject to the performance of the
Scholes pricing model is used for options and the Monte Carlo simulation model is used for share appreciation rights. These
Group’s shares over a 4-year period.
models incorporate all market vesting conditions. The amount to be expensed is determined by reference to the fair value
of the options or shares granted. This expense takes into account any market performance conditions and the impact of
any non-vesting conditions but ignores the effect of any service and non-market performance vesting conditions. Non-
market vesting conditions are taken into account when considering the number of options expected to vest and at the end
of each reporting period, the Group revisits its estimate. Revisions to the prior period estimate are recognised in the income
statement and equity.
The fair value of performance rights is determined in accordance with the fair market value of the shares available at the
grant date. Up to the date of Listing, the fair value of shares was ascertained by carrying out an independent valuation.
Since Listing, the fair value of performance rights has been calculated using the five-day volume-weighted average price
(VWAP) of the five trading days immediately preceding grant date.
Critical accounting estimates and judgements
Some of the inputs to the pricing models require application of significant judgement.
The Black-Scholes and Monte Carlo simulation pricing models require inputs for the expected share price volatility of
Redbubble Limited shares for a period similar to the expected life of the options. As the Group listed on the Australian Stock
Exchange (ASX) on 16 May 2016 there is insufficient trading history to calculate this input for the time period required. The
Group uses a selection of ASX listed peer companies to calculate comparable expected volatility for the appropriate time
periods.
76
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Annual Report 2019Redbubble 21.
Share-based payments (continued)
21.
Share-based payments (continued)
(a) Movement
The table below summarises the movement in the number of options / performance rights during the year:
2019
Number
2019
WAEP ($) (*)
2018
Number
2018
WAEP ($) (*)
Options over ordinary shares
Outstanding at 1 July
Granted during the year (1)
Exercised during the year
Forfeited during the year
Expired during the year
Outstanding at 30 June
Exercisable at 30 June
Performance rights
Outstanding at 1 July
Granted during the year
Settled during the year
Forfeited during the year
Outstanding at 30 June
Share appreciation rights
Outstanding at 1 July
Granted during the year
Outstanding at 30 June
Exercisable at 30 June
22,111,251
9,472,033
(5,151,049)
(2,014,819)
(1,040,733)
23,376,683
10,656,430
337,707
789,201
(353,095)
(46,047)
727,766
-
5,666,668
5,666,668
-
0.74
18,908,594
0.73
0.44
1.00
1.18
0.76
0.79
-
-
-
-
-
-
-
-
-
7,490,236
(2,676,107)
(1,453,699)
(157,773)
22,111,251
11,283,920
1,165,124
241,265
(911,766)
(156,916)
337,707
-
-
-
-
0.69
0.83
0.47
1.00
0.99
0.74
0.64
-
-
-
-
-
-
-
-
-
(*) WAEP stands for Weighted Average Exercise Price.
(1) 7,917,106 options have zero exercise price (2018: 900,431). The expiry period for grants made during the current and prior year is 10 years.
(b) Modifications to the awards
The table below details modifications to a number of options / performance rights during the year.
Accelerated vesting of unvested options over ordinary shares upon termination
Waiver of liquidity event condition / accelerated vesting upon termination with respect
to performance rights
Cancellation pursuant to amendment of contract
Total
2019
Number
180,619
-
-
180,619
2018
Number
68,750
17,274
33,866
119,890
(c) Additional disclosures
Weighted average fair value of
Share at the date of exercise of options / settlement of rights during the year
Share options and share appreciation rights granted during the year
Performance rights granted during the year
Weighted average remaining contractual life of
Share options and share appreciation rights outstanding at the end of the year
Inputs to pricing models (weighted average)
Expected volatility (%) (1)
Risk-free interest rate (%)
Expected life (years)
Fair market value of share ($)
2019
$
1.39
0.63
1.55
2019
(years)
7.57
2019
33.08
2.58
6.20
1.35
2018
$
1.19
0.41
0.78
2018
(years)
7.44
2018
33.83
2.96
6.00
0.92
(1) The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is indicative of future trends, which
may not necessarily be the actual outcome. The range of exercise prices for options outstanding at the end of the year is $nil to $1.62 (2018: $nil to $1.55).
22. Related party transactions
Compensation of the key management personnel of the Group
Short-term employee benefits
Post-employment benefits
Share-based employee benefits
Other long-term benefits
Termination benefits
2019
$
2018
$
1,337,755
1,829,646
94,520
89,279
1,706,107
1,008,412
13,622
-
46,623
-
Total transactions with key management personnel
3,152,004
2,973,960
Transactions with related parties
Transactions between related parties are on normal commercial terms and conditions no more favourable than those
available to other parties unless otherwise stated.
78
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Annual Report 2019Redbubble 22. Related party transactions (continued)
25.
Events occurring after the balance sheet date
Transactions with related parties (continued)
The financial report was authorised for issue on 28 August 2019 by the Board of Directors.
Chris Nunn, the Group’s former Chief Financial Officer, is a director of Elite Executive Services Pty Ltd, which provided
Other than the above, there have been no further significant events after the balance sheet date that require disclosure.
executive relocation services to the employees of the Group during the year for which the fees totalled $5,434 (2018:
$22,944). The engagement is on an arm’s length basis and the fees charged are comparable to similar service providers in
the market. At the year end, there were no balances outstanding in relation to this engagement (2018: $5,334).
Martin Hosking, Non-executive Director and former Managing Director, sub-underwrote up to $3.0 million of shares under
the retail component of the Entitlement Offer with respect to the funding of the acquisition of TeePublic. Mr Hosking was
26. Other significant accounting policies
paid a fee of $45,000 (equal to 1.5% of his $3.0 million sub-underwriting commitment) by the underwriters for providing
(a) Principles of consolidation
this sub-underwriting commitment.
Subsidiaries are all entities over which the Group has control. Control is established when the Group is exposed to, or has
Richard Cawsey, Board Chair, is a director and shareholder of Denali Holdings Pty Ltd, which is the owner of the ‘Bondle’
rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power
messaging application. The Group engaged Denali Holdings Pty Ltd in respect of a licence of the Bondle application and
to direct the relevant activities of the entity. Subsidiaries are fully consolidated from the date on which the Group gains
paid licence fees totalling $4,788 for the year (2018: nil). The engagement is on an arm’s length basis and the fees charged
control. They would be deconsolidated from the date that control ceases. A list of the subsidiaries is provided in note 18 to
are comparable to similar application licensors in the market. At the year end, there were no balances outstanding in
the financial statements.
relation to this engagement (2018: nil).
23. Remuneration of auditors
Ernst & Young
Audit and review of financial reports
Taxation services
Other services (1)
Remuneration of Ernst & Young
2019
$
2018
$
278,342
18,250
147,715
444,307
159,005
19,750
48,751
227,506
(1) Other services for FY2019 include a one-off cost relating to the acquisition of TeePublic of $93k.
24.
Segment information
AASB 8 Operating Segments allows for the aggregation of operating segments where they exhibit similar economic
characteristics. The Group considers the Redbubble and TeePublic marketplaces to have similar economic characteristics
and therefore have been aggregated to form a single reportable operating segment.
Geographical information required per AASB 8 and disaggregated revenue reporting is detailed below:
Intercompany transactions, balances and unrealised gains or losses on transactions between Group entities are fully
eliminated on consolidation. Accounting policies of subsidiaries have been aligned where necessary to ensure consistency
with the policies adopted by the Group.
(b) Business combinations and goodwill
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the
aggregate of the consideration transferred, which is measured at acquisition date fair value, and the amount of any non-
controlling interests in the acquiree. For each business combination, the Group elects whether to measure the non-
controlling interests in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets.
Acquisition-related costs are expensed as incurred and included in operations and administration expenses.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification
and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the
acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date.
Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within
equity. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of AASB
9 Financial Instruments, is measured at fair value with the changes in fair value recognised in the statement of profit or loss
in accordance with AASB 9.
Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount
recognised for non-controlling interests and any previous interest held over the net identifiable assets acquired and
liabilities assumed). If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the
Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews
the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an
excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in
2019
2018
profit or loss.
Australia
United States
United Kingdom
Rest of the world
Total
Revenue
$’000
Non-current
assets (1)
$’000
Revenue
$’000
Non-current
assets (1)
$’000
19,215
11,069
14,077
200,061
62,997
129,524
34,277
53,401
1
350
26,905
48,212
10,245
3,586
28
269
306,954
74,417
218,718
14,128
(1) Non-current assets for this purpose consist of property, plant and equipment and intangible assets.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of
impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the
Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or
liabilities of the acquiree are assigned to those units.
Where goodwill has been allocated to a single cash-generating unit (CGU) and part of the operation within that unit is
disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the operation when
determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative
values of the disposed operation and the portion of the cash-generating unit retained.
80
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Annual Report 2019Redbubble 26. Other significant accounting policies (continued)
26. Other significant accounting policies (continued)
(c) Foreign currency transactions
Functional and presentation currency
The functional currency of each of the Group’s entities is the currency of the primary economic environment in which
that entity operates. The consolidated financial statements are presented in Australian dollars which is the parent entity’s
functional and presentation currency.
Transactions and balances
(f) Financial assets
Trade and other receivables and other financial assets are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. After initial recognition, loans and trade and other receivables are
measured at amortised cost using the effective interest method. Any change in their value is recognised in the statement of
comprehensive income.
The Group assesses at the end of each financial reporting period whether there is any objective evidence that a financial
asset is impaired. If there is objective evidence that an impairment loss on loans and receivables has been incurred, the
amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated
Transactions in foreign currencies are initially recorded by the Group’s entities at their respective functional currency spot
future cash flows.
rates at the date the transaction first qualifies for recognition.
At the end of the reporting period:
•
•
Foreign currency monetary items are translated using the closing exchange rate;
Non-monetary items that are measured at historical cost are translated using the exchange rate at the date of the
transaction; and
(g) Trade and other payables
Trade and other payables represent the liabilities for goods and services received by the Group that remain unpaid at the
end of the reporting period. The balance is recognised as a current liability with the amounts normally paid within 30 days
of recognition of the liability.
•
Non-monetary items that are measured at fair value are translated using the exchange rate at the date when fair value
(h) Other provisions
was determined.
Other provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event,
Exchange differences arising on the settlement of monetary items or on translating monetary items at exchange rates
it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a
different from those at which they were translated on initial recognition or in prior reporting periods are recognised through
reliable estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be
the income statement, except where they relate to an item of other comprehensive income.
Group companies
The results and financial position of all the Group entities that have a functional currency different from the presentation
currency are translated into the presentation currency (none of which has the currency of a hyperinflationary economy) as
follows:
•
Assets and liabilities for each balance sheet are translated at the closing exchange rate at the date of that balance
sheet;
•
Income and expenses for each income statement and statement of comprehensive income are translated at average
exchange rates; and
reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when
the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of income net of
any reimbursement.
(i) Sales Tax (includes Goods and Services Tax (GST) and Value Added Tax (VAT))
Revenue, expenses and assets are recognised net of the amount of sales tax, except where the amount incurred is not
recoverable from the Australian Taxation Office (ATO) or other similar international bodies. Receivables and payables are
stated inclusive of sales tax, where applicable. The net amount of sales tax recoverable from, or payable to, the ATO or
other similar international bodies, is included as part of receivables or payables in the statement of financial position.
The statement of cash flows includes cash on a gross basis and the sales tax component of cash flows arising from
investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as operating
•
All resulting exchange differences are recognised in other comprehensive income.
cash flows.
(d) Other income
Finance income
Finance income is recognised on an accruals basis using the effective interest method.
Lease income
Lease income from operating leases is recognised in income on a straight-line basis over the lease term.
(e) Inventories
Inventories of packaging materials are measured at the lower of cost and net realisable value. Cost of inventory is
determined using the first-in-first-out basis and are net of any rebates and discounts received.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion
and the costs necessary to make the sale. Net realisable value is estimated using the most reliable evidence available at the
reporting date and inventory is written down through an obsolescence provision if necessary.
Critical accounting estimates and judgements
The Group currently collects and remits sales tax on sales made to customers in the US state of California as management
believes that a sales tax nexus may exist due to its own offices in that state.
As a result of a decision in the United States Supreme Court, commonly known as the Wayfair case, management has
reviewed the sales tax footprint of the Group. A number of individual states within the USA have enacted economic nexus
laws. The Group has reviewed these laws and registered and begun collecting sales taxes where appropriate. Further,
additional states are considering economic nexus laws which may impact the Group in FY20.
(j) Accounting standards issued but not yet effective
The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.
The Group’s interpretation of the impact of certain new standards / amendments is set out below. There are other
new accounting standards issued but not yet effective, over and above the ones mentioned below, however they are
not considered relevant to the activities of the Group and are not expected to have a material impact on the financial
statements of the Group.
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Annual Report 2019Redbubble 26. Other significant accounting policies (continued)
(j) Accounting standards issued but not yet effective (continued)
Reference
AASB 16
Title
Leases
Application date of Standard
Application date for the Group
1 January 2019
1 July 2019
Summary
The key features of AASB 16 are as follows:
Lessee accounting
•
Lessees are required to recognise assets and liabilities for all leases with a term of more than 12 months, unless the
underlying asset is of low value.
•
A lessee measures right-of-use assets similarly to other non-financial assets and lease liabilities similarly to other
financial liabilities.
•
Assets and liabilities arising from a lease are initially measured on a present value basis. The measurement includes
Directors’ Declaration
In accordance with a resolution of the Directors of Redbubble Limited, we state that in the Directors’ opinion:
(a)
the financial statements and notes, as set out on pages 47 to 84 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 30 June 2019 and
of its performance for the financial year ended on that date; and
non-cancellable lease payments (including inflation-linked payments).
(b)
there are reasonable grounds to believe that Redbubble Limited will be able to pay its debts as and
•
AASB 16 contains disclosure requirements for lessees.
Lessor accounting
AASB 16 substantially carries forward the lessor accounting requirements in AASB 117.
•
•
AASB 16 also requires enhanced disclosures to be provided by lessors that will improve information disclosed about a
Section 295A of the Corporations Act 2001.
lessor’s risk exposure, particularly to residual value risk.
when they become due and payable.
The financial statements also comply with International Financial Reporting Standards as issued by the International
Accounting Standards Board.
The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by
AASB 16 supersedes:
•
•
•
•
AASB 117 Leases;
Interpretation 4 Determining Whether an Arrangement Contains a Lease;
SIC-15 Operating Leases – Incentives; and
SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.
The new standard will be effective for annual periods beginning on or after 1 January 2019.
Group Assessment of Transition to AASB 16
The Group plans to adopt AASB 16 retrospectively to each prior reporting period presented. The Group will elect to apply
the standard to contracts that were previously identified as leases applying AASB 117 and AASB Interpretation 4. The Group
will therefore not apply the standard to contracts that were not previously identified as containing a lease applying AASB 117
and AASB Interpretation 4.
The Group will elect to use the exemptions proposed by the standard on lease contracts for which the lease terms ends
within 12 months as of the date of initial application, and lease contracts for which the underlying asset is of low value.
The Group has performed an impact assessment of AASB 16. As the Group is applying AASB 16 retrospectively the
comparative results will also be restated. At the start of the FY 2020 comparative period, being 1 July 2018, the Group
estimates it will recognise lease liabilities of approximately $11 million to $13 million, corresponding right-of-use assets of
approximately $7.5 million to $9.5 million and a net investment in sublease of approximately $1 million to $3 million. The
actual impacts of adopting the standard may differ from this estimate because the new accounting policies are subject to
change until the Group presents its first financial statements that include the date of initial application.
The nature of expenses related to leases will now change because the Group will recognise a depreciation charge for
right-of-use assets and interest expense on lease liabilities. Previously, the Group recognised rent expense on a straight-line
basis over the term of the lease, and recognised assets and liabilities only to the extent that there was a timing difference
between actual lease payments and the expense recognised.
Richard Cawsey
Chairman
Melbourne
28 August 2019
Barry Newstead
Chief Executive Officer
Melbourne
28 August 2019
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Annual Report 2019Redbubble Shareholder and other
ASX Required Information
The shareholder information set out below was applicable as at 20 September 2019 (except as otherwise stated).
A.
Distribution of shareholders
Analysis of numbers of ordinary shareholders by size of holding:
Range
100,001 and Over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Grand Totals
Total Holders
Shares
% of Issued
Capital
103
308
334
1,157
665
2,567
243,302,750
94.43
8,444,275
2,501,713
3,003,572
404,233
257,656,543
3.28
0.97
1.17
0.16
100
There were 124 holders of less than a marketable parcel of ordinary shares.
B.
Top 20 Registered Holders of Fully Paid Ordinary Shares
The names of the twenty largest registered holders of quoted fully paid ordinary shares are listed below:
Name
Number of ordinary shares
% of Issued Capital
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
JELLICOM PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
NATIONAL NOMINEES LIMITED
CITICORP NOMINEES PTY LIMITED
BLACKBIRD FOF PTY LTD
CAWSEY SUPERANNUATION FUND PTY LTD
GROKCO PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
PITON CAPITAL VENTURE FUND II LP
RADIATA SUPER PTY LTD
RADIATA INVESTMENTS PTY LTD
BNP PARIBAS NOMS PTY LTD
CAV IH NO5 LIMITED
MIRRABOOKA INVESTMENTS LIMITED
THREE SPRINGS FOUNDATION P/L
BNP PARIBAS NOMINEES PTY LTD
MARTIN HOSKING
IMPERIA ASIA OFFSHORE FUND
JABBOUR HOLDINGS PTY LTD
Top 20 holders of Ordinary Fully Paid Shares (TOTAL)
Total Remaining Holders Balance
Grand Totals
39,428,690
33,509,720
26,013,440
14,464,436
12,976,521
11,361,819
8,893,980
8,404,907
7,111,494
5,537,291
3,804,590
3,648,700
3,522,338
2,892,166
2,787,920
2,500,000
2,442,123
2,393,552
2,353,549
1,952,250
195,999,486
61,657,057
257,656,543
15.30
13.01
10.12
5.55
4.94
4.41
3.45
3.26
2.76
2.15
1.48
1.42
1.37
1.12
1.08
0.97
0.95
0.93
0.91
0.76
76.07
23.93
100.00
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Annual Report 2019Redbubble Shareholder and other
ASX Required Information (continued)
Corporate
Information
C.
Unquoted equity securities
The numbers of unquoted equity securities in the Company are set out below:
Type of equity security
Share Options (including Share Appreciation Rights)
Performance Rights
Total number of ordinary shares subject of options and performance rights
D.
Substantial Holders
Substantial holders in the Company* are set out below (as at 4 September 2019)
Name
Mr Martin Hosking
Osmium Partners
Greencape Capital
Mr Richard Cawsey
* As disclosed in substantial shareholder notices received by the Company
E.
Securities subject to escrow arrangements
There are no shares on issue that are subject to voluntary escrow.
F.
Voting Rights
The voting rights attaching to each class of equity securities are set out below:
Directors
Number held
26,100,834
746,907
26,847,741
Richard Cawsey (Chair)
Barry Newstead
(CEO and Managing Director - appointed effective 1 August 2018)
Martin Hosking
Greg Lockwood
Grant Murdoch (resigning at the end of the October 2019 AGM)
Hugh Williams (resigned effective 29 May 2019)
Jenny Macdonald
Anne Ward
Number Held
38,403,272
23,095,459
14,091,410
14,024,693
% of Issued
Capital
14.9%
9.0%
5.5%
5.4%
Company Secretaries
Corina Davis
Paul Gordon
Registered Office
Share Register
Auditors
Level 3, 271 Collins Street
Melbourne VIC 3000
Australia
Link Market Services
Tower 4, 727 Collins Street
Melbourne VIC 3008
Australia
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000
Australia
• Ordinary Shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll
each share shall have one vote.
• Options and Performance Rights
No voting rights
Bankers
Commonwealth Bank of Australia
Stock Exchange Listing
Redbubble shares are listed on the Australian Securities Exchange
(ASX: RBL)
Website
redbubble.com
Investor Centre
shareholders.redbubble.com
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