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2017
ANNUAL
REPORT
FOCUS ON
GROWTh
2017 PROGRESS
Shaver Shop is a
leading specialty retailer
of personal grooming
and beauty appliances
with more than 110
stores across Australia
and New Zealand.
We offer a differentiated
customer proposition
by being experts in
the products we sell
and providing customer
service excellence
through our store
network and online.
$142.6m
Sales up 33.6%
6.2%
Like for like sales growth
$9.1m
Pro forma net
profit up
20.7%
EBiTdA up
18.0%
to $14.9m
CONTENTS
03 Operational Highlights
04 Chairman’s and CEO’s Report
08
Directors’ Report
27 Auditor’s Independence
Declaration
28 Consolidated Statement
of Comprehensive Income
29 Consolidated Statement
of Financial Position
30 Consolidated Statement
of Changes in Equity
31 Consolidated Statement
of Cash Flows
32 Notes to the Financial
Statements
Independent Auditor’s Report
63 Directors’ Declaration
64
70 Shareholder information
72 Corporate Information
Shaver Shop Group Limited
2017 annuaL report
01
02
Shaver Shop Group Limited
2017 annuaL report
OPERATiONAL
hiGhLiGhTS
FY17 dividends
4.0
cents per share
fully franked
Launched
new e-commerce
platform leading to
9.4%
online sales growth
Successful
expansion into
female beauty
category
24
7
franchise
buy backs
8
new store openings
in Australia
stores in
maturity phase
Continued investments in
talent, brand, training and
e-commerce capabilities
03
ChAiRmAN’S
ANd CEO’S
REPORT
Dear Shareholder,
The Directors of Shaver Shop Group Limited (“Shaver Shop”
or the “Company”) are pleased to present the Company’s
annual report for the year ended 30 June 2017.
The 2017 financial year was a dynamic one for retailers
in general, including Shaver Shop. There are widespread
factors influencing the retail industry driven by digital
disruption and social media, globalisation and changing
consumer preferences. That said, our business is resilient
and primarily driven by people’s desire to look and feel good.
So we are pleased to advise that despite some headwinds
in key categories in the first half of the financial year, our
management team was agile and responsive to market
opportunities that arose, and in doing so was able to achieve
or exceed the financial targets outlined in our Prospectus for
the 2017 financial year. This entrepreneurial spirit has been a
hallmark of the Shaver Shop business over a number of years
and we believe is one of the key reasons for its success.
04
Shaver Shop Group Limited
2017 annuaL report
StronG FinanciaL perFormance
executinG our StrateGy
Total sales increased 33.6% to $142.6 million and earnings
before interest, tax, depreciation and amortisation
increased 18.0% to $14.9 million. Top line growth was
driven by a combination strong same store sales growth
of 6.2%, together with the addition of 15 stores into the
corporate store network during the year.
With access to product information now readily available
over the internet, we are increasingly seeing a more
educated consumer, that wants a seamless, value-driven
and engaging shopping experience whether they come
into one of our shops or decide to transact through our
e-commerce websites.
Whilst franchise royalties decreased by 11.4% resulting
from the acquisition of franchise stores, over the last
two years our costs of doing business decreased as a
percentage of sales decreased by approximately 90 basis
points to 33.8%.
As a result, Shaver Shop’s consolidated pro forma profit
after tax (NPAT) increased 20.7% to $9.1 million.
This strong bottom line performance was achieved whilst
keeping low gearing levels. We ended the year with net
debt of $9.4 million. It is this strong financial position and
earnings performance that has led to Shaver Shop’s Board
to recommend a final fully franked dividend of 2.4 cents
per share bringing the total dividend payment to 4.0 cents
per share for the 2017 financial year. As a result of strong
cash generation within the business, Shaver Shop’s Board
decided to change its dividend policy to be a payout of
approximately 50% of cash NPAT. Cash NPAT takes into
account the tax benefit Shaver Shop receives for the
deduction of the consideration paid for franchise licence
terminations resulting from its franchise buyback
program. In 2017, this represented a cash tax benefit
of approximately $1.6 million.
Consolidated
pro forma net profit
$9.1m
Up 20.7%
Shaver Shop’s obsession with being the unequivocal
experts in the products we sell, and delivering a highly
tailored customer experience based on individual’s
personal grooming and beauty needs is fundamentally
differentiated in the market. We do this whilst being
fiercely competitive on pricing. These are the hallmarks
that have led to our business not having closed a store
in over 30 years of trading.
Our obsession with the retail experience at Shaver Shop
is the same whether our customers come into our store
network or choose to shop online. It means that our front
line staff and e-commerce touchpoints are critical to our
brand proposition and explains why we have continued
to make significant incremental investments in talent,
systems and training capability in these key areas in the
past year. We will also continue to do this in the future as
it is a, if not the, critical pillar to our continued success.
Last year, we also made significant investments in building
brand awareness and recognition, so that we are equally
seen as the go to destination for hair removal, hair styling
and beauty products for him as well as for her. This is an
important focus for our business, and changes to the look
and feel of our website and marketing collateral were
made to reinforce this.
Our specialty retail focus in the personal grooming and
beauty market segments is recognised by our supplier
partners who continue to offer exclusive distribution rights
to Shaver Shop in Australia and New Zealand for some of
their newest and most innovative product launches.
Shaver Shop’s recognition as a key player in female beauty
appliances is no better exemplified by our partnership with
the Scholl and Veet brands in 2017 as well as with Dyson
and the sale of its Supersonic hair dryer in the coming
financial year. This is a major win for our business and
one we expect will perform well leading into our critical
Christmas trading period.
In addition to the investments in talent, capability and our
brand, we also continued our strategy to expand our store
footprint across Australia and New Zealand with the
additional of eight stores during the year. This was slightly
less than our target of 10 to 15 new stores, but we will
continue to remain true to our return on capital principles
and in doing so, evaluate each opportunity on its own
merits using the latest data available to us.
05
ChAiRmAN’S ANd CEO’S REPORT
Shaver Shop has a long track record of adapting and
delivering growth, driven by its differentiated business
model and the entrepreneurial spirit within its team.
This was no more evident in 2017.
Looking forward to 2018, Shaver Shop will continue to
invest in new systems and technologies that help us better
understand our customers and their preferences, and in
doing so drive an improved customer experience. We
will also look to invest in measures that will increase
the efficiency and effectiveness of our team. This is
fundamental to ensuring we remain differentiated, relevant,
competitively priced and valued by our customers.
Shaver Shop’s financial position remains robust, which
means we are well positioned to continue our disciplined
expansion of the store network in Australia and New
Zealand and consider franchise buyback opportunities
where the financial return is within acceptable tolerances.
It also means we can begin trialling alternative store formats,
product categories and concepts that complement and
enhance the tried and true Shaver Shop business model.
We remain at an exciting stage in Shaver Shop’s evolution
with clear visibility to further growth in Australia and New
Zealand as well as opportunities to take the Company’s
differentiated approach to international markets over time.
As a result, your Directors believe Shaver Shop is well
positioned to continue growing shareholder value.
We thank all team members for their commitment and
contribution during the year and we are grateful to our
shareholders for your continued support.
Brodie arnhold
Chairman
cameron Fox
Chief Executive Officer and Managing Director
We also acquired seven franchise stores during the year
bringing the corporate store network to 95 stores at
30 June 2017 with 13 franchise operated outlets. Whilst
Shaver Shop’s plans are to acquire all franchise outlets at
some point in the future, we will apply the same, prudent
discipline going forward ensuring that these investments
will deliver appropriate returns for shareholders.
Finally, we are pleased to advise that same store sales
growth for the corporate store network was 6.2% for the
2017 financial year. This performance was primarily driven
by Shaver Shop’s access to a new, multi-unit reseller
channel that first emerged in the third quarter across a
limited range of products. Thanks to our corporate and
franchise store managers’ entrepreneurship and customer
focus, we were able to quickly realise some significant
sales through this channel and deliver strong growth for
the business. Shaver Shop’s Board and Management team
are still learning about this channel and recognise that it
is unpredictable and may be volatile in nature. So we will
continue to focus on our base retail business in Australia
and New Zealand while at the same time working hard to
develop the multi-unit reseller channel into a sustainable
business. Preliminary signs are encouraging in this regard.
our team
Shaver Shop’s performance is directly linked to the
passion and talent of its team. On behalf of our Directors
and the senior executive team, we would like to thank
all our 550 team members for their contribution to the
growth and development of the business.
We recognise that our people remain the key factor that
underpins our success, both now and in the future, and
we are fortunate to have such a capable and motivated
team at Shaver Shop. That said, as our business continues
to mature and evolve, we will continue develop our team
and add further senior talent to strengthen its competitive
position. A good example of this is the addition of a
new retail director as well as the appointment of a
national training manager late in the year.
outLook and Future Growth
The retail environment over the last 12 months was
one of the most challenging and dynamic the business
has experienced in its 30 year history. That said, we
expect that the pace of change and the dynamic, highly
competitive and increasingly global nature of the retail
landscape will only continue. As a result, only those
businesses that can be nimble, adapt and accept
these new realities will succeed.
06
Shaver Shop Group Limited
2017 annuaL report
met or
exceeded
prospectus
forecast on
all key
financial
measures
108
stores across Australia
and New Zealand at
30 June 2017
07
diRECTORS’
REPORT
30 June 2017
Your directors present their report on the consolidated entity consisting of Shaver Shop Group Limited and the entities
it controlled at the end of, or during, the year ended 30 June 2017. Throughout the report, the consolidated entity is
referred to as the “Group”, the “Company” or “Shaver Shop”.
PRiNCiPAL ACTiviTiES
The principal activities of the Group during the financial year was the retailing of specialist personal grooming products
both online through its websites and through Shaver Shop’s corporate owned store and franchise store networks. No
significant change in the nature of these activities occurred during the year.
diRECTORS
The following persons were directors of Shaver Shop Group Limited during the whole of the financial year and up to the
date of this report:
Broderick Arnhold
Cameron Fox
Craig Mathieson
Trent Peterson
Brian Singer
Melanie Wilson
COmPANY SECRETARY
Lawrence Hamson held the position of Company Secretary during the whole of the financial year and up to the date of
this report.
diRECTORS ANd diRECTORS iNTERESTS
The following information is current as at the date of this report:
Brodie Arnhold
Independent Chair Non‑Executive
Expertise and experience
Brodie has over 15 years domestic and international experience in private equity,
investment banking and corporate finance. Prior to his current role as CEO of
Melbourne Racing Club, Brodie worked for Investec Bank from 2010-2013 where he
was responsible for building a high‑net‑worth private client business. Prior to this,
Brodie worked for Westpac Banking Corporation where he grew the institutional bank’s
presence in Victoria, South Australia and Western Australia, and from 2006-2010 held
the role of Investment Director at Westpac’s private equity fund.
08
Shaver Shop Group Limited
2017 annuaL report
Other current directorships
Non‑Executive Director, Endota Group Holdings Pty Ltd
Non‑Executive Director, iSelect Limited
Director, Racing.com
Director, RSN
Director, MRC Foundation Limited and other Melbourne Racing Club affiliated entities
Former listed directorships
in last 3 years
None
Special responsibilities
Chair of the Board
Member of the Audit and Risk Committee
Interests in shares
and options
Ordinary Shares – Shaver Shop Group Limited
2,407,000
Cameron Fox
Chief Executive Officer and Managing Director
Expertise and experience
Cameron joined Shaver Shop as General Manager before being promoted to the
position of Chief Executive Officer in July 2008. Cameron previously worked for
Gillette Australia in various roles, including Associate Product Manager, Territory
Manager, Business Analyst, National Account Manager and National Sales Manager.
Other current directorships
None
Former listed directorships
in last 3 years
None
Special responsibilities
Managing Director
Chief Executive Officer
Interests in shares
and options
Ordinary Shares – Shaver Shop Group Limited
1,980,024
Craig Mathieson
Non‑Executive Director
Expertise and experience
Craig became a director of Shaver Shop Pty Ltd in June 2011. For the last 10 years,
Craig has been the Chief Executive Officer of the Mathieson Group which has very
diverse business interests from company investment to property development. From
2001 to 2007 Craig was the Managing Director of DMS Glass Pty Ltd which was the
largest privately owned glass manufacturer in Australia.
Other current directorships
Abiliene Oil & Gas Ltd
Carlton Football Club Ltd
Endota Group Holdings Pty Ltd
Former listed directorships
in last 3 years
Funtastic Ltd
Special responsibilities
Chair of the Audit and Risk Committee
Interests in shares
and options
Ordinary Shares – Shaver Shop Group Limited
4,660,004
09
diRECTORS’ REPORT
Brian Singer
Non‑Executive Director
Expertise and experience
Brian became a director of Shaver Shop in June 2011. Brian founded the Rip Curl
business with a business partner in 1969 after a career as a high school teacher.
He became Chief Executive Officer for Rip Curl Group Pty Ltd in Australia and grew
the business into a major manufacturer and distributor of clothing and surfing related
products in Australia and internationally.
Other current directorships
Rip Curl Group Pty Ltd – Chairman
Endota Group Holdings Pty Ltd
Former listed directorships
in last 3 years
None
Special responsibilities
Member of the Remuneration and Nomination Committee
Interests in shares
and options
Ordinary Shares – Shaver Shop Group Limited
6,258,004
Trent Peterson
Non‑Executive Director
Expertise and experience
Other current directorships
Trent is a managing director and partner at Catalyst Investment Managers, and
has over 15 years’ experience as a company director and private equity investor.
He is currently a Director of Adairs Limited, Cirrus Media Pty Ltd, Max Fashions
(New Zealand), Power Farming Group (New Zealand), SkyBus, Dusk Retail Group.
He was a former director of Just Group Limited, Global Television Limited, EziBuy,
Metro GlassTech, Moraitis, Taverner Hotel Group, and Australian Discount Retail.
Adairs Limited
APH Holdco Pty Ltd (trading as Mr Vitamins)
dusk Retail Holdings (trading as dusk)
AATS Holdings Pty Ltd (trading as Skybus)
Catalyst Investment Managers Pty Ltd (and associated fund entities)
Catalyst Direct Capital Management Pty Ltd
Former listed directorships
in last 3 years
None
Special responsibilities
Chair of the Remuneration and Nomination Committee
Member of the Audit and Risk Committee
Interests in shares
and options
Ordinary Shares – Shaver Shop Group Limited
247,619
Melanie Wilson
Non‑Executive Director
Expertise and experience
Melanie has more than 12 years’ experience in Senior Management roles across
a number of global retail brands including Limited Brands (Victoria’s Secret, Bath
& Bodyworks – New York), Starwood Hotels (New York), Woolworths Ltd and Diva/
Lovisa. Her experience extends across all facets of retail operations, including store
operations, merchandise systems, online/e-commerce, marketing, brand development
and logistics/fulfilment.
Other current directorships
iSelect Limited
Baby Bunting Limited
Former directorships
in last 3 years
Nil
Special responsibilities
Member of the Remuneration and Nomination Committee
Interests in shares
and options
10
Ordinary Shares – Shaver Shop Group Limited
47,619
Shaver Shop Group Limited
2017 annuaL report
mEETiNGS OF diRECTORS
During the financial year, 15 meetings of directors were held, six meetings of the Audit & Risk Committee were held and
five meetings of the Nomination and Remuneration Committee were held. Attendances by each director during the year
were as follows:
Board of Directors
Meetings
Audit & Risk
Committee Meetings
Nom & Rem
Committee Meetings
Number
eligible
to attend
Number
attended
Number
eligible
to attend
Number
attended
Number
eligible
to attend
Number
attended
15
15
15
15
15
15
15
15
14
15
14
15
6
–
6
6
–
–
6
–
6
6
–
–
–
–
–
5
5
5
–
–
–
5
5
5
Broderick Arnhold
Cameron Fox
Craig Mathieson
Trent Peterson
Brian Singer
Melanie Wilson
dividENdS PAid OR RECOmmENdEd
The Directors declared Shaver Shop’s maiden interim dividend of 1.6 cents per share fully franked ($2.001 million)
in February 2017 (2016: Nil). The Directors have declared a fully franked final dividend of 2.4 cents per share
($3.002 million) to be paid in October 2017. The combined dividend payments represent the payout of approximately
56% of the Company’s FY2017 reported net profit after tax.
2017 OPERATiNG ANd FiNANCiAL REviEW
The statutory profit after income tax amounted to $8,993,956 (FY2016: $3,854,027) after subtracting income tax
expense of $4,061,112 (FY2016: $1,627,859). The increase in profit after income tax was due to improvements in
business performance in FY2017 as well as due to costs associated with the Company’s initial public offering being
included in FY2016. This is more fully explained in the pro forma results summary that follows.
non‑iFrS meaSureS
The Directors’ Report includes references to pro-forma results. The pro forma adjustments primarily relate to the 2016
Financial Year (FY2016) and when Shaver Shop went through the Initial Public Offering process. The pro-forma results
have been derived from Shaver Shop’s statutory accounts and adjusted on a pro forma basis to more appropriately
reflect the ongoing operations of Shaver Shop as a listed public company. Shaver Shop’s historical debt structure
has not been pro forma adjusted as it is closely related to the effects of the franchise store buy back activity. This is
consistent with the presentation as disclosed in the Company’s prospectus dated 7 June 2016. The Directors believe the
presentation of non‑IFRS financial measures are useful for the users of this financial report as they provide additional
and relevant information that reflect the underlying financial performance of the business and can be directly compared
to the forecasts given in the prospectus. Non‑IFRS financial measures contained within this report are not subject to
audit or review.
The Statutory Earnings before Interest, Tax, Depreciation and Amortisation (“EBITDA”) of the Group for FY2017 was
$14.9 million (FY2016: $7.5 million).
11
diRECTORS’ REPORT
Profit after income tax from continuing operations (NPAT)
Add back:
Net finance costs
Income tax expense/(benefit)
Depreciation and amortisation expense
EBITDA1
Statutory Consolidated
2017
$000
8,994
407
4,061
1,408
14,870
2016
$000
3,854
1,043
1,628
936
7,461
1
Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) is used as a measure of financial performance by excluding certain variables
that affect operating profits but which may not be directly related to the underlying performance of the Group. EBITDA is not a measure of operating
income, operating performance or liquidity under AIFRS. Other companies may calculate EBITDA in a different manner to Shaver Shop. The above
EBITDA reconciliation has not been audited.
At the end of FY2016, through the IPO of the business on the ASX, the Group restructured its balance sheet by issuing
new shares and using the proceeds to repay debt and pay a pre‑IPO dividend. As a result of the listing process, the
Group incurred significant one‑off transaction costs.
The table below reconciles the EBITDA result to the pro forma result for FY2016. This shows the full year 2016 results
from operations on a pro forma basis. There are no pro forma adjustments to the statutory EBITDA for 2017.
EBITDA
Add back:
IPO transaction costs expensed
Management IPO incentives
Incremental costs as a public company
Accounting for rebates in stock
One-off advisory costs
Pro Forma EBITDA
Consolidated
2016
$000
7,461
4,438
901
(521)
285
40
2017
$000
14,870
–
–
–
–
–
14,870
12,604
The table below reconciles the statutory NPAT result to the pro forma result for FY2017 and FY2016. This shows the full
year results on a pro forma basis.
Reported NPAT
Add back:
IPO transaction costs expensed
Management IPO incentives
Incremental costs as a public company
Accounting for rebates in stock
One-off advisory costs
Income tax effect
Tax on management IPO incentives
Pro Forma NPAT
12
Consolidated
2016
$000
3,854
4,438
901
(423)
285
40
(1,572)
–
7,523
2017
$000
8,994
–
–
–
–
–
–
87
9,081
Shaver Shop Group Limited
2017 annuaL report
The pro forma adjustment to FY2017 tax expense was not in the Prospectus forecast for FY2017.
The table below compares the pro forma operating performance of Shaver Shop for FY2017 against the Prospectus
forecast for FY2017 as well as against FY2016.
Pro forma
FY17 Actual
$000
Pro forma
Prospectus
$000
Pro forma
FY16 Actual
$000
% Change
127,119
54,379
42.8%
14,738
11.6%
9,110
+12.2%
106,711
+9.4%
–2.6%
+0.9%
–10.0%
–0.3%
45,622
42.8%
12,604
11.8%
7,523
Consolidated
% Change
+33.6%
+30.4%
–2.6%
+18.0%
–11.7%
+20.7%
84,211
48.6%
8.9
–18.0%
125,087
1.0%
6.0
+20.0%
Revenue
Gross Profit
Gross Margin
EBITDA
EBITDA Margin
NPAT
Weighted average shares
(000s)
Earnings per share – cents
(weighted average shares)
Fully diluted shares outstanding
at period end (000s)
Fully diluted earnings per share
(shares at period end)
pro Forma reSuLtS Summary
142,568
59,472
41.7%
14,870
10.4%
9,081
125,087
7.3
126,387
7.2
In FY2017, the Company grew pro forma EBITDA by $2.3 million (or 18.0%) to $14.9 million.
The increase in EBITDA was due to strong consolidated sales growth, up 33.6% to $142.6 million driven by: strong
like for like store sales growth (+6.2%) supported by access to a new multi-unit reseller channel; the continuation of
Shaver Shop’s franchise buyback program (seven franchise stores acquired in FY2017); as well as the launch of eight
new greenfield stores during the year. At 30 June 2017, Shaver Shop’s store network consisted of 95 corporate‑owned
stores and 13 franchisees (108 stores in total) with 102 outlets in Australia and 6 in New Zealand.
In the third quarter of FY2017, a new sales channel to Australian-based customers who purchase in higher quantities
for resale emerged which facilitated sales of certain product lines in high volume and lower average gross margins
through its corporate and franchise store network. Whilst this channel was a material contributor to revenue growth and
earnings in FY2017, it is new to Shaver Shop and is dynamic in nature. Accordingly, Shaver Shop remains cautious about
its ability to forecast the timing and quantum of revenue and earnings contribution from this channel in the future.
Shaver Shop also experienced growth in online revenues following the launch of a new e-commerce platform in
February 2017 that is mobile phone and tablet friendly. Since launch, online sales have experienced double digit growth.
Further improvements to, and investments in the website are expected to be made in FY2018.
Consistent with Shaver Shop’s sales growth, gross profit increased 30.4% to $59.5 million in FY2017 (FY2016 – $45.6 million).
Gross profit margins declined 110 basis points to 41.7% (FY2016 – 42.8%) due primarily to a change in product mix and
sales through the bulk channel which generally generate a lower average gross margin.
In FY2017, Shaver Shop continued its strategy to buy back franchises over time and roll out new store locations.
Following the successful execution of these plans, Shaver Shop’s EBITDA margins naturally declined in FY17 to 10.4%
(FY16 – 11.8%). Shaver Shop generates advertising contributions and royalties from franchise stores at a rate of 4.4%
of franchise sales, respectively (total 8.8%). As franchise buybacks occur, Shaver Shop no longer recognises the
royalties only, but consolidates the full revenue and costs of operating the store leading to increased EBITDA in dollar
terms but a lower EBITDA margin percentage.
13
diRECTORS’ REPORT
Pro forma NPAT increased 20.7% to $9.1 million leading to fully diluted earnings per share of 7.2 cents (FY2016 – 6.0 cents).
Shaver Shop had a pro forma income tax rate of 30.4% of earnings before tax in FY2017. Shaver Shop receives a tax
deduction over five years for the cost of franchise right terminations that occur through its franchise buyback program.
This leads to income tax payable being lower than income tax expense for the five year tax period following each
buyback. The reduction in cash tax payable for FY2017 associated with the franchise buybacks undertaken since
FY2012, amounts to $1,564,500 (FY2016: $1,130,700).
capitaL manaGement
In August 2016, Shaver Shop established a new $23.0 million commercial advance debt facility with a $2.0 million
facility to support bank guarantees.
At 30 June 2017, Shaver Shop had gross debt of $11.8 million up from $5.1 million at 30 June 2016. The increase in
gross debt was primarily used to fund the franchise buybacks undertaken during the year. Net debt (gross debt less
cash on hand) was $9.4 million at 30 June 2017 providing a leverage ratio (Net Debt/EBITDA) of 0.63X.
The Company’s debt facility has three key covenants: the leverage ratio; the interest coverage ratio (EBIT/Interest expense);
and the net worth ratio ((Total assets – Total liabilities) / Total assets). All banking covenants were well within
the bank’s thresholds for FY2017.
StrateGy
Shaver Shop offers customers a wide range of quality brands, at competitive prices, supported by excellent staff
product knowledge and customer service. Shaver Shop seeks to identify consumer trends and works closely with major
manufacturers and suppliers to source products to cater for these changing personal grooming and beauty trends.
DIFFERENTIATION IN THE MARKET
With more than 30 years of dedicated experience in its core hair removal product categories, Shaver Shop believes it is
the only significant pure‑play retailer in these categories in Australia and New Zealand. Shaver Shop invests heavily in
staff training to ensure that its store managers and customer facing staff are equipped to recommend the best product
that meets customer needs. This strong expertise, segment focus and customer experience has enabled Shaver Shop
to negotiate exclusive supply arrangements for the majority of its top 50 products by sales. Shaver Shop believes it is
this unique customer experience and access to exclusive products at competitive prices that differentiates its business
from other retailers that sell personal grooming products in the market.
Key drivers of Shaver Shop’s growth are expected to be:
Continued product innovation
Shaver Shop benefits as consumer trends evolve and require new and changing products to facilitate this. Shaver Shop seeks
to work with manufacturers and suppliers to source products that cater to the emerging demands of consumers within the hair
removal and personal care categories. In some cases, Shaver Shop seeks and obtains exclusive rights to sell personal grooming
and beauty products in the Australian and New Zealand markets which assists with product and range differentiation.
Organic growth
Shaver Shop will continue to implement a strategic marketing plan and other initiatives to attract new customers to
the business and encourage repeat business. Important components of this aspect of the Company’s strategy include
continued investment in the e-commerce websites and eBay digital store which continue to grow strongly as well as
establishing a loyalty program to attract and support returning customers.
Store rollout
Shaver Shop aims to grow total store network numbers across Australia and New Zealand to approximately 145 within
the next three years. This will be achieved through Greenfield store rollouts. Subject to the forecast financial returns
meeting appropriate hurdle rates, the Company expects to open these additional stores. In FY2017, Shaver Shop
opened 8 new stores and has identified 7 additional stores it intends to open in the first six months of FY18.
Franchise store buy backs
Shaver Shop also plans to continue its disciplined approach to buying back franchise stores, with transactions to be assessed
as they become available. As at 30 June 2017, there were 13 franchise stores (30 June 2016 – 20) within the Shaver Shop
network. Shaver Shop has entered into an agreement to acquire one additional franchise store in Victoria (The Glen) in FY18.
14
Shaver Shop Group Limited
2017 annuaL report
key BuSineSS riSkS
There are a number of factors that could have an effect on the financial performance of Shaver Shop Group Limited.
They include:
Competition may increase
Shaver Shop faces competition from specialty retailers, department stores, discount department stores, grocery chains
as well as online only retailers and professional salons. Shaver Shop’s competitive position may deteriorate as a result of
actions by existing competitors, the entry of new competitors (including manufacturers and suppliers of products who
decide to sell direct to end consumers) or a failure by Shaver Shop to successfully respond to changes in the market.
Retail environment and general economic conditions may deteriorate
Shaver Shop’s performance is sensitive to the current state of and future changes in the retail environment and general
economic conditions in Australia. Australian economic conditions may worsen including as a result of Australia’s
economy entering into a recession or another cause of a reduction in consumer spending. This could cause the retail
environment to deteriorate as consumers reduce their level of consumption of discretionary items.
Changes in international pricing or supply may change local demand for Shaver Shop products
Many of the products which Shaver Shop sells are available in many overseas markets. With the increasing propensity
for consumers in Australia and overseas to purchase products over the internet, should the comparative price of Shaver
Shop’s products be significantly lower than Shaver Shop in overseas markets, this could have an influence on local
demand for Shaver Shop’s products. Conversely, if the price for Shaver Shop’s products is significantly lower than the
comparable price for the same product overseas, this could increase demand and sales of Shaver Shop products.
Should suppliers increase (decrease) prices to create global wholesale price parity, this could materially decrease
(increase) local demand for Shaver Shop’s products. This is particularly true in relation to bulk sales of products to
customers in the multi‑unit reseller channel in Australia.
Seasonality of trading patterns
Shaver Shop’s sales are subject to seasonal patterns. In FY15 to FY17, the contribution of sales for the first half of each
FY to total sales for the full FY was within the range of 53.3% to 58.3%. The seasonality of Shaver Shop’s sales towards
the first half of the FY is largely due to the pre‑Christmas trading period and Father’s Day (being, the first Sunday in
September). An unexpected decrease in sales over traditionally high-volume trading periods for Shaver Shop could
have a material adverse effect on the overall profitability and financial performance of Shaver Shop.
In addition, an unexpected decrease in sales over traditionally high volume trading periods could also result in
abnormally large amounts of surplus inventory, which Shaver Shop may seek to sell through abnormally high and
broad-based price discounting to minimise the risk of product becoming aged or obsolete. If Shaver Shop were to sell
a significant volume of its products at deep discounts, this would reduce the business’ revenue and would have an
adverse impact on the Company’s financial performance.
Customer buying habits/trends may change
Any adverse change in personal grooming trends and a failure of Shaver Shop to correctly judge the change in
consumer preferences or poor quantification of purchase orders for related product may have an adverse impact
in the demand for Shaver Shop’s products or the gross margins achieved on these products.
Product innovation and exclusivity arrangements
Product innovation by suppliers has been a key driver in Shaver Shop’s sales growth. Shaver Shop relies on its suppliers
to continue to drive R&D and product innovation in the product category. A material reduction in the frequency or appeal
of new product innovations by suppliers may have an adverse impact on sales, performance rebates received and
gross margin levels achieved. In addition, a key driver in Shaver Shop’s sales growth has been the ability to secure new
innovative products on an exclusive basis. If Shaver Shop is unable to secure new product innovations on an exclusive
basis, or if the appeal of an existing product sold by Shaver Shop on an exclusive basis is weakened by a new innovative
product made widely available to retailers or on an exclusive basis to one of Shaver Shop’s competitors, Shaver Shop’s
sales and gross margin levels may be adversely affected.
15
diRECTORS’ REPORT
Product sourcing may be disrupted
Shaver Shop’s products are sourced from third party suppliers of major hair removal, hair care, personal care and other
shaving brands. In FY2017, approximately 89% of Shaver Shop’s total network sales came from products sourced from its
top 10 suppliers. Shaver Shop’s largest supplier constitutes approximately 24% of all supply purchases, with the next two
largest suppliers contributing approximately 17% and 15% of total supply purchases. While Shaver Shop has a diversified
supplier base, Shaver Shop is exposed to potential increases in the cost of materials and the cost of manufacturing
and foreign exchange rates applicable to its products. There may also be delays in delivery or failure by a supplier to
deliver goods. Such increases, delays and failure could significantly increase Shaver Shop’s cost of operations, or lead
to a reduction in the available range of products, which may affect Shaver Shop’s operating and financial performance.
Supplier relationships and ability to source products exclusively
The Company’s relationships with suppliers are often governed by individual purchase orders and invoices. Under those
arrangements, suppliers may seek to alter the terms on which products are supplied as well as the range of products
available for supply. This may result in changes of pricing levels and a reduction in the range of products made available to
Shaver Shop, both of which could adversely impact the Company’s ability to successfully provide customers with a wide
range of products at competitive prices. This could reduce Shaver Shop’s overall profitability and adversely impact its
financial performance. In addition, Shaver Shop receives income from suppliers in the form of volume rebates and supplier
contributions to specific marketing and advertising campaigns. Supplier rebates and contributions are negotiated on
a periodic basis. There are no fixed contracts in place with suppliers relating to rebates and contribution income. Any supplier
who provides Shaver Shop with rebates or marketing contributions may elect to cease such payments at any point in time.
Any such action could adversely impact Shaver Shop’s income which would reduce Shaver Shop’s overall profitability
and impact its financial performance. Finally, through good relationships with some suppliers, Shaver Shop has been
able to secure arrangements with third party distributors and brands for the supply of products to Shaver Shop on an
exclusive basis. These arrangements are for specific products and for varying time periods. There is a risk that Shaver
Shop may not be able to renew exclusive distribution agreements with the suppliers or that suppliers may enter into
exclusive distribution arrangements with Shaver Shop’s competitors. If this occurs, it will have a material adverse
impact on the Company’s business and reputation, operational performance as well as its financial results.
SiGNiFiCANT ChANGES iN STATE OF AFFAiRS
Except as otherwise described in this report, there have been no significant changes in the state of affairs of entities
in the Group during the year.
mATTERS OR CiRCUmSTANCES ARiSiNG AFTER ThE ENd OF ThE YEAR
Subsequent to year end, the Directors declared a fully franked final dividend of 2.4 cents per share to shareholders of
record on 10 October 2017. The dividend payment date is 24 October 2017.
No other matters or circumstances have arisen since the end of the financial year which significantly affected or could
significantly affect the operations of the Group, the results of those operations or the state of affairs of the Group in
future financial years.
FUTURE dEvELOPmENTS ANd OUTLOOk
As noted in the Strategy section of this Directors Report, Shaver Shop intends to grow revenue and EBITDA over the long
term through organic growth both online and in-store, incremental contributions from new store openings, as well as
continuing its disciplined approach to undertaking franchise buybacks.
In regards to FY2018, Shaver Shop has experienced a solid start to the year recording like for like sales growth of
approximately 15% over the first seven weeks. This growth rate is expected to moderate in the coming months due to
supply interruptions for key products sold through the multi-unit reseller channel. Shaver Shop has continued to execute
its corporate store expansion plans by identifying and committing to seven new store locations and one franchise
buyback. Consistent with prior years, Shaver Shop’s FY2018 performance is expected to be seasonal, relying heavily on
Christmas and Boxing Day trade. The new multi-unit reseller channel may assist in reducing this seasonality, however,
this channel is new to Shaver Shop very dynamic and therefore difficult to forecast with certainty.
16
Shaver Shop Group Limited
2017 annuaL report
ENviRONmENTAL iSSUES
The Group’s operations are not regulated by any significant environmental regulations under a law of the
Commonwealth or of a state or territory of Australia.
NON-AUdiT SERviCES
The Board of Directors, in accordance with advice from the audit committee, is satisfied that the provision of non‑audit
services during the year is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001. The directors are satisfied that the services disclosed below did not compromise the external
auditor’s independence for the following reasons:
> all non-audit services are reviewed and approved by the audit committee prior to commencement to ensure they
do not adversely affect the integrity and objectivity of the auditor; and
>
the nature of the services provided do not compromise the general principles relating to auditor independence in
accordance with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and
Ethical Standards Board.
Details of the amounts paid to PricewaterhouseCoopers for audit and non-audit services during the year are set out
in note 26 to the audited financial statements.
AUdiTORS iNdEPENdENCE dECLARATiON
The lead auditor’s independence declaration for the year ended 30 June 2017 has been received and can be found on
page 27 of this report.
ShARES UNdER OPTiON
There have been no unissued shares or interests under option in the Company or a controlled entity during or since
reporting date.
iNdEmNiFiCATiON ANd iNSURANCE OF OFFiCERS ANd AUdiTORS
During the financial year, the Company paid an insurance premium to insure the directors and senior management
of the Company and its subsidiaries.
The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be
brought against the officers in their capacity as officers of entities in the Group, and any other payments arising from
liabilities incurred by the officers in connection with such proceedings. This does not include such liabilities that arise
from conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of
information to gain advantage for themselves or someone else to cause detriment to the Company.
The terms of the insurance policies prohibit disclosure of the details of the premium paid.
PROCEEdiNGS ON BEhALF OF COmPANY
No person has applied for leave of court under Section 237 of the Corporations Act 2001 to bring proceedings on behalf
of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility
on behalf of the Company for all or any part of those proceedings.
17
diRECTORS’ REPORT
REmUNERATiON REPORT (AUdiTEd)
The Board of Directors of Shaver Shop Group Limited present the Remuneration Report for the Company for the
reporting period of 1 July 2016 to 30 June 2017. This Remuneration Report forms part of the Directors’ Report and
has been audited in accordance with the Corporations Act 2001.
(a)
key manaGement perSonneL covered in thiS report
This report sets out the remuneration arrangements for Shaver Shop’s key management personnel (KMP) (listed in the
table below) who have been KMP during the reporting period. For the remainder of this Remuneration Report, the KMP
are referred to as either Non‑Executive Directors or Senior Executives.
All Non-Executive Directors and Senior Executives have held their positions for the duration of the reporting period
unless indicated otherwise.
Non‑Executive Directors
Position
Broderick Arnhold
Independent, Non‑Executive Chairman
Craig Mathieson
Independent, Non‑Executive Director
Trent Peterson
Independent, Non-Executive Director
Brian Singer
Independent, Non‑Executive Director
Melanie Wilson
Independent, Non-Executive Director
Senior Executives
Cameron Fox
Chief Executive Officer (CEO) and Managing Director
Lawrence Hamson
Chief Financial Officer (CFO) and Company Secretary
Philip Tine
Retail Director (appointed 29 May 2017)
(B)
remuneration overview
The Board recognises that the performance of the Group depends to a large extend on the quality and motivation of
the Shaver Shop team, including the Senior Executives and our 555 team members (2016: 448) employed by the Group
across Australia and New Zealand. Shaver Shop’s remuneration strategy therefore seeks to appropriately attract, reward
and retain team members at all levels in the organisation but in particular aligning and motivating key senior executives
to create shareholder wealth. By aligning various remuneration mechanisms, the Board seeks to have a structure that
incentivises sustainable growth, risk management as well as driving a positive culture across the business.
As outlined in the Company’s prospectus, for FY2017 the Board implemented new short and long term incentive
mechanisms that are more consistent with a publicly listed entity. The FY2017 Short Term Incentive Plan (STIP) adopted
by the Company is based on achieving pre-determined performance conditions. The primary measure for award of the
FY2017 STI is the normalised EBITDA of the business.
In terms of its Long Term Incentive Plan (LTIP), consistent with the terms outlined in the Company’s prospectus, on
22 June 2017 Shaver Shop issued 1,300,000 shares to certain executives within the business. The shares are subject
to various vesting conditions which are outlined in further detail below. The Company also offered an offsetting limited
recourse loan to assist with the purchase of the LTIP shares.
The Nomination and Remuneration Committee will continue to review the remuneration arrangements for Non-Executive
Directors and Senior Executives to ensure that they are relevant, competitive and appropriate for a listed company.
18
Shaver Shop Group Limited
2017 annuaL report
(c)
reLationShip Between remuneration poLicy and company perFormance
The performance criteria and targets for Executives to realise benefits under both the Company’s STIP and LTIP are
aligned to company performance and enhancing shareholder value.
The following table provides a summary of the Company’s reported financial performance for FY2017 and FY2016.
Revenue
EBITDA
Net Profit After Tax
Dividends Paid (FY2016 – Pre-IPO dividend)
Earnings per share (cents)
Year End Share Price ($)
Statutory
FY2017
Result
$000
Statutory
FY2016
Result
$000
142,568
106,711
14,870
8,994
2,001
7.2
$0.64
7,461
3,854
18,175
4.6
N/A
For the financial year ended 30 June 2017, the Company exceeded its budget. As a result, under the terms of the
FY2017 STI plan, eligible Senior Executives were granted 100% of their maximum STI entitlement.
(d)
remuneration oBjectiveS
One of Shaver Shop’s core beliefs is that the success of the business is driven in large part by the skills, motivation and
the performance of all of its team members – from Senior Executives to Store Managers to retail assistants on the shop
floor. Creating an environment that fosters a high performance culture and aligns the team behind a common set of
values and behaviours is core to the Company’s continuing success.
Shaver Shop’s commitment to driving high performance is evidenced by its investment in a national training facility
at its new head office location. Shaver Shop believes that the knowledge and expertise of its sales staff is a critical
differentiating factor for the business and an important factor in its success. As a result, the Company takes pride in
promoting high performing staff through the business from the retail shop floor through to head office positions.
In addition to building the appropriate culture, Shaver Shop’s philosophy is to provide competitive remuneration
arrangements that reward team members for the underlying performance of the Company as well as building
shareholder value over the short and long term.
As such, remuneration for team members can include fixed pay, superannuation, short term incentives, long term
incentives as well as support for training and education, relocation assistance, and dues and membership fees that are
aligned with Shaver Shop’s needs and objectives. The components of total remuneration for a team member will vary
depending on the role, his or her seniority, the team member’s experience as well as their performance. The Remuneration
Committee also considers the importance of equity ownership for Senior Executives when setting remuneration packages.
Shaver Shop’s key principles underpinning its remuneration plans are set out below:
1. Simplicity: We seek to ensure remuneration arrangements are simple, and can be easily understood by both the
Senior Executives and other key stakeholders.
2. Alignment: We seek to ensure material components of the Senior Executive’s remuneration arrangements (including
their shareholding as appropriate) contribute to alignment of the interests of the Senior Executives with those of
the shareholders.
3. Best practice: We seek to ensure the material aspects of an employee’s remuneration arrangements are sustainable
and could withstand tests of precedent and transparency within the organisation and market place.
4. Competitive: We seek to ensure our Senior Executives are remunerated such that (when taken as a whole, and
having regard to their particular circumstances, including any risks and opportunities) their individual remuneration
arrangements are competitive with relevant comparable positions.
19
diRECTORS’ REPORT
5. Risk Conscious: In considering remuneration arrangements, the Company seeks to manage certain key risk
exposures, including the risk of loss of an individual, retention of intellectual property and skills, issues associated
with replacement of the individuals, risk of poaching, and the presence and quality of our succession planning.
6. Company First: The Company develops systems, policies, processes and team depth to manage its reliance on any
given individual within its leadership team. This extends to remuneration, where we seek to ensure the remuneration
architecture and individual arrangements are orderly and deliberately in line with our Core Competencies.
7. Rewards tied to outcome and performance: We back ourselves to identify the outcomes that drive sustainable value
creation (or value protection), and seek to reward executives who influence those outcomes most significantly and
directly pursuant to business strategy.
(e)
roLe oF the nomination and remuneration committee
The primary objective of the Nomination and Remuneration Committee is to assist the Board to fulfil its corporate
governance and oversight responsibilities in relation to the Company’s people strategy including remuneration
components, performance measurements and accountability frameworks, recruitment, engagement, retention,
talent management and succession planning.
The Committee also works with the CEO in considering the specific situations pertaining to employment terms
for individuals or groups of individuals as needed.
The Committee undertakes an annual review of the Company’s remuneration strategy and remuneration policy
to facilitate understanding of the overall approach to remuneration and to confirm alignment with the Company’s
business strategy, high standards of governance and compliance with regulatory standards.
The Committee reviews and recommends to the Board for approval, remuneration arrangements for the CEO and other
Senior Executives having regard to external remuneration practices, market expectations and regulatory standards.
The Committee also establishes the policy for the remuneration arrangements for Non‑Executive Directors.
Where appropriate the Nomination and Remuneration Committee will seek the advice of independent external
remuneration consultants.
(F)
(i)
kmp remuneration Structure
FY17 Remuneration and Incentive Structure
The remuneration framework for Senior Executives is based on a structure that includes:
1. Fixed remuneration – salary and superannuation and non‑monetary benefits
2. Short Term Incentives – tied to in‑year performance against metrics
3. Long Term Incentives – tied to multi‑year performance against value creation metrics
Element
Purpose
Fixed Remuneration
STI (Cash bonus)
Provide competitive market
salary including super
Reward superior performance
in year
Metrics
NIL
Potential Value
Based on market
competitive rates
Budget EBITDA
$300,000
LTI (Loan Share Plan)
Reward superior long term
value creation
TSR – 70%
EPS growth – 30%
Dependent on NPAT and
share performance
Fixed Remuneration
Senior Executive base salaries include a fixed component of base salary together with employer superannuation
contributions that are in line with statutory obligations. The fixed remuneration component also includes car allowances
and other benefits.
The fixed remuneration component for Senior Executives is based on market data for comparative companies of the
same size and complexity as well as having regard to the experience and expertise of the Senior Executive.
20
Shaver Shop Group Limited
2017 annuaL report
Fixed remuneration for executives is reviewed annually to provide competitiveness with the market, whilst also taking
into account capability, experience value to the organisation and performance of the individual. There is no guaranteed
salary increase in any Senior Executive service contract.
Short Term Incentives (STI)
STIs for Senior Executives are based on the Company exceeding its budgeted normalised EBITDA target for the year.
STIs are contracted with the Senior Executive and capped to a maximum amount relative to their Fixed Remuneration.
STIs are funded from the outperformance of the Company at a normalised EBITDA level. The Board of Directors may
decide to pay Senior Executives discretionary bonuses depending on individual and Company performance.
Long Term Incentives (LTI)
As outlined in the Company’s prospectus, Shaver Shop has established an LTIP to assist in the motivation, retention
and reward of Shaver Shop executives. The LTIP is designed to align the interests of executives more closely with the
interests of Shareholders by providing an opportunity for eligible executives to acquire Shares subject to the conditions
of the LTIP (Plan Shares).
The Plan Shares are issued or transferred to participants in the LTIP at market value based on the volume weighted
average price of the shares in the five days up to and including the date of grant. Under the terms of the LTIP, the
Company, or one of its subsidiaries, may provide a limited recourse loan to executives who are invited to participate
in the LTIP to assist them to purchase Plan Shares (Loan). Each Loan will be limited recourse such that a participant’s
obligation to repay the Loan will be the lesser of the Loan balance or the relevant Plan Share’s market value. Under the
LTIP rules, the Company will retain discretion to waive repayment of all, or part of, any Loan. The after-tax value of any
dividends paid on the Plan Shares acquired under a Loan will be applied to repay the relevant Loan.
Each Plan Share will be issued as a fully paid ordinary share in the Company subject to certain vesting conditions. The
holder of a Plan Share must not dispose of the Plan Share until the Plan Share vests and any Loan relating to that Plan
Share has been repaid.
As noted in the Shaver Shop prospectus, the Company has offered certain members of Management the right to acquire
up to 1,300,000 Plan Shares (representing approximately 1.0% of the Company’s issued share capital). The Plan Shares
are divided into three equal tranches and will have vesting conditions based on a performance condition and a service
condition. The three tranches apply to the following performance periods:
> Tranche 1 – 1 July 2016 to 30 June 2017
> Tranche 2 – 1 July 2016 to 30 June 2018
> Tranche 3 – 1 July 2016 to 30 June 2019.
The performance and service conditions specified for each tranche must be met in order for the relevant Plan Shares
to vest.
The table below under “FY17 LTI Allocation” sets out the number of Plan Shares to be offered to the relevant Senior
Executive, including details of the number of Plan Shares per tranche for each Senior Executive.
Performance condition
The performance conditions will be measured 70% by an absolute total shareholder return (TSR) performance
hurdle and 30% by an earnings per share (EPS) performance hurdle. The hurdles will be mutually exclusive such that
performance is measured independently of the other hurdle. Where both targets are met, 100% of the Plan Shares
which a participant holds for the relevant performance period will vest, subject to the service condition being met.
Where only a portion of the EPS and TSR targets are met, the total number of Shares which will vest under the LTIP
will be apportioned.
Both of the performance hurdles will be expressed as a Compound Annual Growth Rate (CAGR) percentage.
The TSR performance hurdle will be structured as an absolute TSR growth target and will be determined by the Board.
TSR is a measure of the performance of the Company’s shares over a period of time. It combines share appreciation
and dividends paid to show the total return to Shareholders expressed as an annualised percentage. It is the rate of
return of all cash flows to an investor during the holding period of an investment.
21
diRECTORS’ REPORT
The following table outlines the TSR performance hurdles which must be met in order for Plan Shares to vest:
TSR CAGR across the relevant
performance period
Proportion of the relevant Plan Shares that satisfy the TSR Vesting Condition
TSR CAGR is less than 15%
TSR CAGR is equal to 15%
Nil
20%
TSR CAGR is greater than 15%
and less than or equal to 20%
TSR CAGR is greater than 20%
and less than or equal to 25%
TSR CAGR is greater than 25%
and less than 30%
Progressive pro‑rata vesting from 20% to 40% (i.e. on a straight line basis)
Progressive pro‑rata vesting from 40% to 70% (i.e. on a straight line basis)
Progressive pro‑rata vesting from 70% to 100% (i.e. on a straight line basis)
TSR CAGR is equal to or greater
than 30%
100%
The EPS performance hurdle is a measure of the compound annual growth rate in the Company’s EPS measure over
the relevant performance period. The EPS CAGR will be determined by the Board and is the compound annual growth
rate (expressed as a percentage) of the Company’s EPS, which is measured by reference to the Group’s underlying net
profit for the performance divided by the weighted average number of shares on issue across the relevant performance
period. The Board may from time to time adjust the EPS CAGR to exclude the effects of material business acquisitions
or divestments and for certain one‑off costs.
For the purposes of calculating the FY16 base year EPS from which the EPS growth rates will be calculated, the Board
has agreed that EPS will be calculated using the total number of shares outstanding at 30 June 2016.
The following table outlines the EPS performance hurdles which must be met in order for Plan Shares to vest:
EPS CAGR across the relevant
performance period
Proportion of the relevant Plan Shares that satisfy the EPS Vesting Condition
EPS CAGR is less than 15%
EPS CAGR is equal to 15%
Nil
20%
EPS CAGR is greater than 15%
and less than or equal to 20%
EPS CAGR is greater than 20%
and less than or equal to 25%
EPS CAGR is greater than 25%
and less than or equal to 30%
Progressive pro‑rata vesting from 20% to 40% (i.e. on a straight line basis)
Progressive pro‑rata vesting from 40% to 70% (i.e. on a straight line basis)
Progressive pro‑rata vesting from 70% to 100% (i.e. on a straight line basis)
EPS CAGR is equal to or greater
than 30%
100%
Service condition
In addition to the performance condition, each tranche of Plan Shares is subject to specific service conditions, meaning
that if a participant in the LTIP ends their employment with Shaver Shop before the specified service periods the Plan
Shares issued to the participant will not vest regardless of whether the performance conditions have been met.
The Service conditions attaching to the three tranches of Plan Shares are as follows:
> Tranche 1 – a participant must remain a Shaver Shop employee at all times up to (and including) 30 June 2019
before performance qualified number of Plan Shares will vest.
> Tranche 2 – a participant must remain a Shaver Shop employee at all times up to (and including) 30 June 2019
before performance qualified number of Plan Shares will vest.
> Tranche 3 – a participant must remain a Shaver Shop employee at all times up to (and including) 30 June 2020
before performance qualified number of Plan Shares will vest.
22
Shaver Shop Group Limited
2017 annuaL report
FY2017 LTIP Allocation
Consistent with the Company’s Prospectus, Shaver Shop offered management the right to acquire up to 1,300,000
Shares under the LTIP (Plan Shares) (representing approximately 1.0% of the Company’s issued share capital at Listing)
within 12 months after Listing. Specifically, Senior Executives set out in the table below were granted Plan Shares under
the LTIP on 22 June 2017.
Management
Cameron Fox
Managing Director and CEO
Larwrence Hamson
CFO
Number of
Tranche 1
Shares to be
issued under
LTI Plan
Number of
Tranche 2
Shares to be
issued under
LTI Plan
Number of
Tranche 3
Shares to be
issued under
LTI Plan
325,000
325,000
325,000
33,333
33,333
33,334
The following table sets out the terms and conditions of the share based payment arrangements:
Terms and
conditions of share
based payments
arrangements
Grant date
The terms and conditions of the LTIP are discussed in detail under section (f) (i) of the
Remuneration Report: “FY17 Remuneration and Incentive Structure”.
The Grant Date for the FY17 LTIP Shares is 22 June 2017. As noted in the Company’s
prospectus, the LTIP Shares were issued to the eligible participants within the first 12 months
after the Company’s listing on the Australian Stock Exchange (1 July 2016).
Vesting date
The LTIP Shares vest on the satisfaction of the applicable performance, service or other
vesting conditions specified at the time of grant. See additional detail under section (f)(i) of
the Remuneration Report for the specific metrics that govern vesting for the 2017 LTIP Shares.
Expiry date
There is no expiry date of the LTIP Shares.
Exercise price
Not applicable.
Performance
achieved
Subject to the service conditions being met for the relevant LTIP tranche, the Total Shareholder
Return CAGR and the EPS CAGR over the relevant period will determine the number of LTIP
Shares that vest for the relevant LTIP tranche.
Vested
At the date of this report, none of the LTIP Shares have vested.
(G)
non‑executive director remuneration
Under the Constitution, the Board may decide the remuneration from the Company to which each non-executive
Director is entitled for their services as a Director. However, the total amount of fees paid to all Non‑Executive Directors
for their services as Directors must not exceed in aggregate in any financial year the amount fixed by the Company in
the annual general meeting. As disclosed in the Company’s prospectus, the pre-IPO Shareholders approved $440,000
per annum for this purpose.
For FY17, the annual base non-executive Director fees currently agreed to be paid by the Company are $140,000 to the
Chairman of the Board (Brodie Arnhold), $80,000 to each of Craig Mathieson (Chair of the Audit and Risk Committee)
and Trent Peterson (Chair of the Nomination and Remuneration Committee), and $70,000 to each of Melanie Wilson and
Brian Singer. These amounts comprise fees paid in cash. In subsequent years, these figures may vary.
Directors may also be reimbursed for travel and other expenses incurred in attending to the Company’s affairs. Directors
may be paid additional or special remuneration where a Director performs services outside the ordinary duties of
a Non‑executive Director.
23
diRECTORS’ REPORT
(h)
remuneration detaiLS For the year ended 30 june 2017
The following table of benefits and payment details, in respect to the FY2017 financial year, the components of
remuneration for each Non‑Executive Director and Senior Executive of the Group.
Table of benefits and payments
2017
Non‑Executive Directors
Brodie Arnhold
Trent Peterson
Craig Mathieson
Brian Singer
Melanie Wilson
Senior Executives
Cameron Fox
Cash salary/
fees
$
Annual leave
and long
service leave
$
Post
employment
benefits
$
Bonus
$
Share based
payments
$
140,000
80,000
80,000
70,000
70,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
$
140,000
80,000
80,000
70,000
70,000
549,613
200,000
77,705
30,000
36,236
893,554
Lawrence Hamson
365,296
100,000
12,589
34,703
3,716
516,304
Philip Tine*
TOTAL
*
Appointed 29 May 2017.
26,538
–
1,960
2,521
–
31,019
1,381,447
300,000
92,254
67,224
39,952
1,880,877
(i)
additionaL Statutory inFormation
The Board may decide to pay Senior Executives discretionary bonus amounts in addition to their maximum STI amount
under the STIP outlined above. The Board rarely exercises this discretion and only does so in exceptional circumstances.
No additional discretionary cash bonuses have been awarded to Senior Executives or Non-Executive Directors in
relation to FY2017.
The following tables illustrate performance based remuneration granted and forfeited related to FY2017.
STI Paid or Granted in Relation to FY2017
KMP
Directors
Cameron Fox
Senior Executive
Lawrence Hamson
Eligible
maximum
STI
$
Grant date
STI granted
$
% paid/
vested in the
period
% forfeited
in period
23 August 2017
$200,000
$200,000
100%
23 August 2017
$100,000
$100,000
100%
0%
0%
24
Shaver Shop Group Limited
2017 annuaL report
LTI Paid or Granted in Relation to FY2017
Grant Date
LTI granted
(shares)
Value at
grant date
$
Loan value
at 30 June
2017
% paid/
vested in
the period
% forfeited
in period
Value
expensed
in FY17
$
KMP
Directors
Cameron Fox
22 June 2017
975,000
575,152
575,172
Senior Executives
Lawrence Hamson
22 June 2017
100,000
58,990
58,990
0%
0%
0%
36,236
0%
3,716
The TSR performance hurdle for Tranche 1 was not met. The EPS hurdle for Tranche 1 was met with EPS growth of
21% recorded over FY2016.
The following table shows the relative proportions of remuneration that are linked to performance and those that are
fixed, based on the amounts disclosed as statutory remuneration expense in section (g) of this remuneration report.
Directors
Cameron Fox
Senior Executives
Lawrence Hamson
Fixed
remuneration
%
At risk – STI
%
At Risk – LTI
%
74
80
22
19
4
1
(j)
kmp SharehoLdinGS
The number of ordinary shares in Shaver Shop Group Limited held by each key management person of the Group during
the financial year is as follows:
30 June 2017
Directors
Broderick Arnhold
Cameron Fox
Craig Mathieson
Brian Singer
Trent Peterson
Melanie Wilson
Senior Executives
Lawrence Hamson
Philip Tine
TOTAL
Balance at
beginning
of year
On market
sale of
shares
On market
purchase of
shares
Shares
vested as
remuneration
Balance at
end of year
1,600,000
1,800,024
4,160,004
5,408,004
47,619
47,619
428,571
–
13,491,841
–
–
–
–
–
–
–
–
–
807,000
180,000
500,000
850,000
200,000
190,000
152,600
–
–
–
–
–
–
–
–
–
2,407,000
1,980,024
4,660,004
6,258,004
247,619
237,619
581,171
–
2,879,600
– 16,371,441
25
diRECTORS’ REPORT
(k)
contractuaL arranGementS with Senior executiveS
The remuneration and other terms of employment for the CEO and senior executives are set out in formal service
agreements as summarised below.
In FY17 the CEO was entitled to fixed remuneration of $580,000 (FY16: $494,062) whilst the fixed remuneration for
other senior executives was in the range of $200,000 to $400,000.
All service agreements are for an unlimited duration. The Chief Executive Officer’s contract may be terminated by giving
six months’ notice (except in the case of serious or wilful misconduct). The Chief Financial Officer’s contract may be
terminated by giving four weeks’ notice where continuous employment has been less than 18 months or eight weeks’
notice thereafter.
(L)
LoanS made to kmp
The following information relates to KMP loans made, guaranteed or secured during the reporting period on an
aggregate basis.
Balance at
beginning of
the year
$
Balance at the
end of the year
$
Provision for
bad debts
expense
$
Employee Share Plan Loans
56,189
56,189
–
Loans to KMP arise as a result of the early Shaver Shop long‑term incentive plans. KMP loans are repayable after
a maximum period of six years or upon disposal of the shares.
KMP
No.
1
(m)
tranSactionS with kmp (excLudinG LoanS)
There were no other transactions with Senior Executives and Non-Executive Directors except as disclosed elsewhere
in the remuneration report.
Signed in accordance with a resolution of the Board of Directors:
Broderick Arnhold
Director
Melbourne
24 August 2017
26
AUdiTOR’S iNdEPENdENCE dECLARATiON
under Section 307C of the Corporations Act 2001 to the Directors of Shaver Shop Group Limited
and Controlled Entities
Shaver Shop Group Limited
2017 annuaL report
Shaver Shop Group Limited
Directors’ Report (continued)
30 June 2017
Auditor’s Independence Declaration
As lead auditor for the audit of Shaver Shop Group Limited for the year ended 30 June 2017, I declare
that to the best of my knowledge and belief, there have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Shaver Shop Group Limited and the entities it controlled during the
period.
Daniel Rosenberg
Partner
PricewaterhouseCoopers
Melbourne
24 August 2017
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
27
27
CONSOLidATEd STATEmENT OF COmPREhENSivE iNCOmE
For the Year Ended 30 June 2017
Revenue from continuing operations
4
142,567,549
106,711,001
Consolidated
Note
2017
$
2016
$
Cost of goods sold
Gross profit from corporate owned retail stores
Franchise and other revenue
Employee benefits expense
Depreciation and amortisation expense
Marketing and advertising expenses
Occupancy expenses
Other expenses
Finance costs
Profit before income tax
Income tax (expense)/credit
Profit for the year
(83,095,092)
(61,373,595)
59,472,457
45,337,406
4(b)
3,569,733
4,027,815
5
5
6
(20,905,725)
(16,639,205)
(1,407,599)
(935,630)
(7,672,767)
(5,360,564)
(12,508,996)
(9,792,404)
(7,085,316)
(10,112,158)
(406,719)
(1,043,374)
13,055,068
5,481,886
(4,061,112)
(1,627,859)
8,993,956
3,854,027
(3,469)
(3,469)
(49,058)
(49,058)
8,990,487
3,804,969
8,993,956
3,854,027
Items that may be reclassified to profit or loss
Exchange differences on translating foreign operations
20(a)
Other comprehensive income for the year
Total comprehensive income for the year
Profit attributable to:
Members of the parent entity
Total comprehensive income attributable to:
Members of the parent entity
8,990,487
3,804,969
Earnings per share for profit attributable to the ordinary
equity holders of the Company
Basic earnings per share (weighted average shares)
Diluted earnings per share (weighted average shares)
Cents
Cents
21
21
7.2
7.2
4.6
4.6
28
CONSOLidATEd STATEmENT OF FiNANCiAL POSiTiON
As at 30 June 2017
Shaver Shop Group Limited
2017 annuaL report
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax receivable
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Property, plant and equipment
Deferred tax assets
Intangible assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
Employee benefits
Current tax payable
Other liabilities
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Borrowings
Other liabilities
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Retained earnings
TOTAL EQUITY
Note
2017
$
2016
$
9
10
11
25
12
25
13
14
15
25
17
16
17
18
20
22
2,389,271
4,333,943
1,896,146
2,031,710
29,122,762
18,114,692
–
880,717
33,408,179
25,361,062
8,001,348
6,318,078
6,726,586
5,681,049
39,848,539
34,410,324
54,576,473
46,409,451
87,984,652
71,770,513
13,014,382
11,681,187
1,130,040
949,573
131,606
–
344,330
394,277
14,620,358
13,025,037
11,824,267
5,124,267
2,457,455
1,576,046
14,281,722
6,700,313
28,902,080
19,725,350
59,082,572
52,045,163
50,385,497
50,385,497
290,942
246,096
8,406,133
1,413,570
59,082,572
52,045,163
29
CONSOLidATEd STATEmENT OF ChANGES iN EqUiTY
For the Year Ended 30 June 2017
Dividends paid or provided for
19
Balance at 30 June 2017
50,385,497
8,406,133
290,942
59,082,572
2017
Balance at 1 July 2016
Profit for the period
Other comprehensive income
Total comprehensive income
Transactions with owners in their
capacity as owners
Share based payments
2016
Balance at 1 July 2015
Profit for the period
Other comprehensive income
Total comprehensive income
Transactions with owners in their
capacity as owners
Shares issued during the year
Transaction costs on share issue
Note
Ordinary
Shares
$
Retained
Earnings
$
Other reserves
$
Total
$
50,385,497
1,413,570
246,096
52,045,163
–
–
–
–
–
8,993,956
–
8,993,956
–
(3,469)
(3,469)
8,993,956
(3,469)
8,990,487
–
48,315
48,315
(2,001,393)
–
(2,001,393)
Note
Ordinary
Shares
$
Retained
Earnings
$
Other reserves
$
Total
$
10,539,383
15,734,959
23,841
26,298,183
–
–
–
3,854,027
–
3,854,027
–
(49,058)
(49,058)
3,854,027
(49,058)
3,804,969
Deferred tax asset arising on share issue
Shares bought back during the year
Share based payments
Dividends paid or provided for
19
41,767,750
(2,298,206)
551,570
(175,000)
–
–
–
–
–
–
–
–
–
–
–
41,767,750
(2,298,206)
551,570
(175,000)
271,313
271,313
(18,175,416)
–
(18,175,416)
Balance at 30 June 2016
50,385,497
1,413,570
246,096
52,045,163
30
Shaver Shop Group Limited
2017 annuaL report
CONSOLidATEd STATEmENT OF CASh FLOWS
For the Year Ended 30 June 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Receipts from customers (inclusive of GST)
156,959,868
116,955,998
Payments to suppliers and employees (inclusive of GST)
(149,559,487)
(104,307,466)
Note
2017
$
2016
$
Interest received
Interest paid
Income taxes paid
Payments for IPO transaction costs
7,400,381
12,648,532
36,996
33,093
(443,715)
(1,076,467)
(1,773,573)
(2,490,396)
(1,804,469)
(4,438,108)
Net cash inflow from operating activities
31
3,415,620
4,676,654
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for property, plant and equipment (net)
(2,039,734)
(3,181,957)
Payments for acquisition of corporate stores
7
(8,019,165)
(7,317,840)
Net cash outflows from investing activities
(10,058,899)
(10,499,797)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issue of shares
Share issue transaction costs
Payment for shares bought back
Proceeds from (repayment of) borrowings
Dividends paid
Net cash inflows from financing activities
Net increase/(decrease) in cash and cash equivalents held
Cash and cash equivalents at beginning of financial year
–
–
–
41,767,750
(2,298,207)
(175,000)
6,700,000
(10,775,000)
(2,001,393)
(18,175,416)
4,698,607
10,344,127
(1,944,672)
4,520,984
4,333,943
(187,041)
Cash and cash equivalents at end of financial year
9
2,389,271
4,333,943
31
NOTES TO ThE FiNANCiAL STATEmENTS
For the Year Ended 30 June 2017
1
BASiS OF PREPARATiON
The consolidated financial report covers Shaver Shop Group Limited and its controlled entities (‘the Group’). Shaver
Shop Group Limited is a for‑profit Company limited by shares, incorporated and domiciled in Australia.
The general purpose financial statements have been prepared in accordance with Australian Accounting Standards
and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001.
compLiance with iFrS
These financial statements and associated notes comply with International Financial Reporting Standards as issued
by the International Accounting Standards Board.
Each of the entities within the Group prepare their financial statements based on the currency of the primary economic
environment in which the entity operates (functional currency). The consolidated financial statements are presented
in Australian dollars which is the parent entity’s functional and presentation currency.
The financial report was authorised for issue by the Directors on 24 August 2017.
Comparatives are consistent with prior years, unless otherwise stated.
2
SUmmARY OF SiGNiFiCANT ACCOUNTiNG POLiCiES
(a)
BaSiS For conSoLidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Shaver Shop Group
Limited (‘Company’ or ‘parent entity’) as at 30 June 2017 and the results of all subsidiaries for the period then ended.
Shaver Shop Group Limited and its subsidiaries together are referred to in these financial statements as the Group or
the consolidated entity.
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an
entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the
ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated
from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred
asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies
adopted by the Group.
A list of controlled entities is contained in Note 27 to the financial statements.
(B)
BuSineSS comBinationS
The acquisition method of accounting is used to account for all business combinations, regardless of whether
equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary
comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the
Group. The consideration transferred also includes the fair value of any asset or liability resulting from a contingent
consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related
costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in
a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On an
acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or
at the non‑controlling interest’s proportionate share of the acquiree’s net identifiable assets.
The excess of the consideration transferred and the amount of any non-controlling interest in the acquiree over the fair
value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the
net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference
is recognised directly in profit or loss as a gain from a bargain purchase.
32
Shaver Shop Group Limited
2017 annuaL report
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted
to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate,
being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms
and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability
are subsequently remeasured to fair value with changes in fair value recognised in profit or loss.
(c)
SeGment reportinG
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision maker. The Group operates within one reportable segment, being retail store sales of a variety of specialist
personal grooming products through their corporate stores, and royalty income from franchise stores.
(d)
ForeiGn currency tranSactionS and BaLanceS
Functional and presentation currency
Items included in the financial statements of each of the Company’s entities are measured using the currency of the
primary economic environment in which the entity operates (‘the functional currency’). The financial statements are
presented in Australian dollars, which is Shaver Shop Group Limited’s functional and presentation currency.
Transaction and balances
Foreign currency transactions are recorded at the spot rate on the date of the transaction. Foreign exchange gains and
losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities
denominated in foreign currencies at year end exchange rates are generally recognised in profit and loss. They are
deferred in equity if they relate to qualifying cash flow hedges and qualifying net investment hedges or are attributable
to part of the net investment in a foreign operation.
(e)
revenue and other income
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are
presented net of returns, trade allowances, discounts, rebates and amounts collected on behalf of third parties.
The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future
economic benefits will flow to the entity and specific criteria have been met for each of the Group’s activities as
described below. The Group bases its estimates on historical results, taking into consideration the type of customer,
the type of transaction and the specifics of each arrangement.
Revenue is recognised for the major business activities using the methods outlined below:
Sale of goods
Revenue from the sale of goods is recognised at the point of delivery as this corresponds to the transfer of significant
risks and rewards of ownership of the goods and cessation of all involvement in those goods.
Interest income
Interest is recognised using the effective interest method, which, for floating rate financial assets is the rate inherent
in the instrument.
Franchise royalty fee income
Franchise royalty fee income includes advertising contributions, which is generally earned based upon a percentage
of sales, is recognised on an accrual basis.
33
NOTES TO ThE FiNANCiAL STATEmENTS
2
SUmmARY OF SiGNiFiCANT ACCOUNTiNG POLiCiES continued
(F)
income tax
The income tax expense or credit for the period is the tax payable on the current period’s taxable income based on the
applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable
to temporary differences and to unused tax losses.
The current tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the
reporting period in the countries where the Company’s subsidiaries and associates operate and generate taxable
income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable
tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected
to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax liabilities
are not recognised if they arise from the initial recognition of goodwill. However, deferred tax liabilities are recognised
in respect of any adjustments to goodwill subsequent to initial recognition. On that basis, deferred tax liabilities have
been recognised in the year in respect of additions to goodwill in respect of franchise buyback activities, to the extent
that they are deductible in calculating current tax expense in the year. Deferred income tax is also not accounted for
if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the
time of the transaction affects neither accounting nor taxable profit nor loss. Deferred income tax is determined using
tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected
to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred
tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount of tax
bases of investments in foreign operations where the Company is able to control the timing of the reversal of the
temporary differences and it is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and
liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and liabilities are
offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise
the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit and loss, except to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive or directly
in equity, respectively.
(G)
GoodS and ServiceS tax (GSt)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the taxation authority. In this case, it is recognised as part of the cost of acquisition of the asset or
as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the taxation authority is included with other receivables or payables in the statement
of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows.
(h)
LeaSeS
Leases of property, plant and equipment where the Company, as lessee, has substantially all the risks and rewards of
ownership are classified as finance leases. Finance leases are capitalised at the lease’s inception at the fair value of the
leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net
of finance charges, are included in other short‑term and long‑term payables. Each lease payment is allocated between the
liability and finance cost. The finance cost is charged to the profit or loss over the lease period so as to produce a constant
34
Shaver Shop Group Limited
2017 annuaL report
periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment
acquired under finance leases is depreciated over the asset’s useful life or over the shorter of the asset’s useful life and
the lease term if there is no reasonable certainty that the Company will obtain ownership at the end of the lease term.
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Company as
lessee are classified as operating leases. Payments made under operating leases (net of any incentives received
from the lessor) are charged to profit or loss on a straight‑line basis over the period of the lease.
(i)
property, pLant and equipment
Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is
directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains or losses
on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only
when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item
can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised
when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they
are incurred.
Depreciation on assets is calculated using the straight-line method to allocate their cost or revalued amounts, net of
their residual values, over their estimated useful lives or, in the case of leasehold improvements and certain leased plant
and equipment, the shorter of the lease term and the assets’ useful life as follows:
Fixed asset class
Plant and Equipment
Computer Equipment
Leasehold Improvements
2‑12 years
1‑7 years
10 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset’s carrying value is written down immediately to its recoverable amount if the asset’s carrying value is greater
than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying value. These are included in profit
or loss.
(j)
impairment oF aSSetS
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually
for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other
assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may
not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds
its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and
value-in-use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of
assets (cash‑generating units). Non‑financial assets other than goodwill that suffered an impairment are reviewed for
possible reversal of the impairment at the end of each reporting period. At the end of each reporting period the Group
determines whether there is an evidence of an impairment indicator for non‑financial assets.
(k)
intanGiBLe aSSetS
Goodwill
Goodwill is measured as described in note 2(b). Goodwill on acquisitions of subsidiaries is included in intangible
assets. Goodwill is not amortised but it is tested for impairment annually, or more frequently if events or changes in
circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains
and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those
cash‑generating units or groups of cash‑generating units that are expected to benefit from the business combination
in which the goodwill arose, are identified according to operating segments.
35
NOTES TO ThE FiNANCiAL STATEmENTS
2
SUmmARY OF SiGNiFiCANT ACCOUNTiNG POLiCiES continued
Brand names
Brand names have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated
using the straight line method to allocate the cost of the brand names over their useful life of 20 years.
(L)
caSh and caSh equivaLentS
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand,
deposits held at call with financial institutions, other short‑term, highly liquid investments with original maturities of
three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant
risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the
balance sheet.
(m)
trade receivaBLeS
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method, less provision for impairment. Trade receivables are generally due for settlement within 30 days. They
are presented as current assets unless collection is not expected for more than 12 months after the reporting date.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written
off by reducing the carrying amount directly. An allowance account (provision of impairment of trade receivables) is
used when there is objective evidence that the Group will not be able to collect all amounts due according to the original
terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or
financial reorganisation, and default or delinquency in payment (more than 30 days overdue) are considered indicators
that the trade receivable is impaired. The amount of the impairment allowance is the difference between the asset’s
carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.
Cash flows relating to short‑term receivables are not discounted if the effect of discounting is immaterial.
The amount of impairment loss is recognised in profit or loss within other expenses. When a trade receivable for which
an impairment allowance has been recognised becomes uncollectible in a subsequent period, it is written off against
the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses
in profit or loss.
(n)
inventorieS
Inventories are stated at the lower of cost and net realisable value. Cost comprises cost of purchases and direct
shipping costs to bring the inventories into their current location. Costs are assigned to individual items of inventory
on the basis of weighted average costs. Costs of purchased inventory are determined after deducting rebates and
discounts. Net realisable value is the estimated selling price in the ordinary course of business less the estimated
costs of completion and the estimated costs necessary to make the sale.
(o)
trade and other payaBLeS
Trade and other payables represent liabilities for goods and services provided to the Group prior to the end of the
financial year which are unpaid. The amounts are unsecured and are usually paid within 60 days of recognition. Trade
and other payables are presented as current liabilities unless payment is not due within 12 months from the reporting
date. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective
interest method.
36
Shaver Shop Group Limited
2017 annuaL report
(p)
empLoyee BeneFitS
Short term obligations
Liabilities for wages and salaries, including non‑monetary benefits, annual leave expected to be settled within 12 months
after the end of the reporting period in which the employees render the related service are recognised in respect of
employee’s services up to the end of the reporting period and are measured at the amounts expected to be paid when the
liabilities are settled. The liability for annual leave is recognised in the provision for employee benefits. All other short‑term
employee benefit obligations are presented as payables. 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 wholly settled within one year have been measured at the amounts expected to be paid when the liability is settled.
Other long term employee benefit obligations
The liability for long service leave and annual leave which is not expected to be settled within 12 months after the end
of the reporting period in which the employees render the related service is recognised in the provision for employee
benefits and measured as the present value of expected future payments to be made in respect of services provided
by employees up to the end of the reporting period using the projected unit credit method. Consideration is given to
expected future wage and salary levels, experience of employee departures and periods of service. Expected future
payments are discounted using market yields at the end of the reporting period on high-quality corporate bond rates
with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
The obligations are presented as current liabilities in the consolidated statement of financial position if the entity does
not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of
when the actual settlement is expected to occur.
Share based payments
Share based compensation benefits are provided to employees via the Share Plan and LTI Plan.
Share Plan
The fair value of shares granted under the Share Plan is recognised as an employee benefit expense with
a corresponding increase in equity. The design of the Share Plan results in it being treated as an in substance option
for the purposes of fair valuing share awards under the Share Based Payment accounting standards. The total expense
is recognised over the vesting period, which is the period over which all of the specific vesting conditions are to be
satisfied. At the end of each period, the entity revises estimates of the number of shares that are expected to vest based
on the non-market vesting and service conditions. It recognises the impact of the revision to original estimates, if any,
in profit or loss, with a corresponding adjustment to equity.
Information on the Share Plan
The establishment of the Shaver Shop Group Limited Employee Performance Share Plan (Share Plan) was approved by
the shareholders in August 2014. The Share Plan is designed to provide long-term incentives for senior managers and
above to deliver long-term shareholder returns. Under the plan, participants are granted shares which only vest if an exit
event occurs, except for Class A shares in which no vesting conditions exist. Shares granted under the plan are funded
by an employee loan contract provided by the Company, the loan will be paid back upon vesting of the shares. The
loan amount of the shares is based on market value of the Company shares at grant date. Class A shares are entitled
to a discretionary dividend at the Board’s discretion. There are no voting rights of the shares granted. On vesting each
special class of loan funded share is convertible into one ordinary share. All shares under the Share Plan converted to
ordinary shares prior to the Company’s IPO on 1 July 2016. The Share Plan was replaced with the LTI Plan to provide
long‑term incentives for senior management and above.
LTI Plan
The fair value of shares granted under the Shaver Shop Group Limited Long Term Incentive Plan (LTIP) is recognised as
an employee benefit expense with a corresponding increase in equity. The total amount to be expensed is determined
by reference to the fair value of the options granted:
>
Including any market performance conditions (for example the entity’s share price)
> Excluding the impact for any service and non-market performance vesting conditions (for example, sales growth
targets, profitability and an employee remaining an employee of the entity over a specified time period), and
>
Including the impact of non-vesting conditions (for example the requirement for employees to hold shares for
a specified period of time).
37
NOTES TO ThE FiNANCiAL STATEmENTS
2
SUmmARY OF SiGNiFiCANT ACCOUNTiNG POLiCiES continued
The total expense is recognised over the vesting period, which is the period over which all of the specific vesting
conditions are to be satisfied. At the end of each period, the entity revises estimates of the number of shares that are
expected to vest based on the non-market vesting and service conditions. It recognises the impact of the revision to
original estimates, if any, in profit or loss, with a corresponding adjustment to equity.
(q)
BorrowinGS
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently
measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption
amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid
on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probably
that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the
extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised
as a prepayment for liquidity services and amortised over the period of the facility to which it relates.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the
liability for at least 12 months after the reporting date.
(r)
BorrowinG coStS
Borrowing costs are recognised as an expense in the period in which they are incurred.
(S)
proviSionS
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events,
it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably
estimated. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is
determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an
outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the
present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre‑tax
rate that reflects current market assessments of the time value of money and the risks specific to the liability. The
increase in the provision due to the passage of time is recognised as interest expense. Provisions are recognised when
the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of
economic benefits will result and that outflow can be reliably measured.
(t)
(i)
earninGS per Share
Basic earnings per share
Basic earnings per share is determined by dividing net profit after income tax attributable to members of the Group,
excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares
outstanding during the financial period, adjusted for bonus elements in ordinary shares issued during the period.
(ii)
Diluted earnings per share
Diluted earnings per share adjusts the figure used in the determination of basic earnings per share to take into account
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares
(including performance rights) and the weighted average number of shares assumed to have been issued for no
consideration in relation to dilutive potential ordinary shares.
38
Shaver Shop Group Limited
2017 annuaL report
(u)
adoption oF new and reviSed accountinG StandardS
The Group has applied the following standards and amendments for the first time for the annual reporting period
commencing 1 July 2016:
> AASB 2014-3 Amendments to Australian Accounting Standards – Accounting for Acquisitions of Interests in
Joint Operations
> AASB 2014-4 Amendments to Australian Accounting Standards – Clarification of Acceptable Methods of Depreciation
and Amortisation
The adoption of these standards does not have a material affect the Group’s accounting policies or disclosures.
(v)
new accountinG StandardS and interpretationS
The AASB has issued new and amended Accounting Standards and Interpretations that have mandatory application
dates for future reporting periods. The Group has decided not to early adopt these standards. The following table
summarises those future requirements, and their impact on the Group where the standard is relevant:
Standard Name
AASB 9: Financial
Instruments
Effective date
for entity
1 July 2018
AASB 15: Revenue
from Contracts
with Customers
1 July 2018
AASB 16: Leases
1 July 2019
Requirements
Impact
AASB 9 addresses the
classification, measurement and
derecognition of financial assets
and financial liabilities, introduces
new rules for hedge accounting
and a new impairment model
for financial assets.
The AASB has issued a new
standard for the recognition
of revenue. The new standard
is based on the principle that
revenue is recognised when
control of a good or service
transfers to a customer.
AASB 16 will require lessees 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 will measure
right-of-use assets similarly to
other non‑financial assets and
lease liabilities similarly to other
financial liabilities.
The Group will undertake a more detailed
assessment of the impact over the next
twelve months.
The Group will undertake a more detailed
assessment of the impact over the next
twelve months.
The standard will affect primarily the
accounting for the Group’s operating leases.
As at the reporting date, the Group has
operating lease commitments of $30.1 million.
However, the Group has not yet determined to
what extent these commitments will result in
the recognition of an asset and a liability for
future payments and how this will affect the
Group’s profit and classification of cash flows.
Some of the commitments may be covered
by the exception for short-term and low-value
leases and some commitments may relate to
arrangements that will not qualify as leases
under AASB 16.
3
CRiTiCAL ACCOUNTiNG ESTimATES ANd JUdGmENTS
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving
significant estimates or judgements are estimates of goodwill impairment, refer to Note 13, and recoverable amount of
inventory, refer to Note 11.
39
NOTES TO ThE FiNANCiAL STATEmENTS
4
REvENUE ANd OThER iNCOmE
(a)
revenue From continuinG operationS
Sales revenue
Retail sales
Total Revenue
(B)
FranchiSe and other revenue and other GainS/(LoSSeS)
Franchise revenue
Franchise royalties
Other revenue
Advertising contributions
Other revenue
Other gains/(losses)
Loss on disposal of Property, Plant & Equipment
Total franchise and other revenue
5
ExPENSES
The result for the year includes the following specific expenses:
Finance Costs (net)
Interest and finance charges
Interest income
Finance Costs (net)
Amortisation
Brand names
Depreciation
Property, plant & equipment
Depreciation and amortisation expense
Rental expense relating to operating leases
Minimum lease payments
Other expenses
2017
$
2016
$
142,567,549
106,711,001
142,567,549
106,711,001
2017
$
2016
$
3,310,061
3,819,964
222,315
37,357
213,650
30,866
–
(36,665)
259,672
207,851
3,569,733
4,027,815
2017
$
2016
$
443,715
1,076,467
(36,996)
(33,093)
406,719
1,043,374
72,628
72,488
1,334,971
1,407,599
863,142
935,630
10,174,805
8,041,196
Initial Public Offering related transaction costs
–
4,438,108
40
Shaver Shop Group Limited
2017 annuaL report
6
iNCOmE TAx ExPENSE
(a) the major componentS oF tax expenSe (income) compriSe:
Current tax expense
Current tax on profits for the year
2,792,149
1,962,576
2017
$
2016
$
Deferred tax expense
Movement in deferred tax assets
Movement in deferred tax liabilities
Income tax expense relating to continuing operations
(B) reconciLiation oF income tax to accountinG proFit:
1,288,272
(271,311)
(19,309)
(63,406)
4,061,112
1,627,859
2017
$
2016
$
Profit from continuing operations before income tax expense
13,055,069
5,481,886
Tax at the Australian tax rate of 30% (2016 – 30%)
3,916,521
1,644,566
Add:
Tax effect of:
– non-deductible depreciation and amortisation
— non-deductible IPO exit incentives expense
– other non-deductible items
Less/(Add):
Tax effect of:
– Other
Income tax attributable to parent entity
Income tax expense
21,059
87,588
34,006
20,038
12,641
4,059,174
1,677,245
1,938
(49,386)
4,061,112
1,627,859
4,061,112
1,627,859
Franchise Buy Backs
Shaver Shop has received a private ruling from the Australian Tax Office in respect of deductions for the amount relating
to the termination of the franchise licence forming part of the purchase consideration paid for the buy back of franchise
stores. The tax ruling confirms that this amount is to be deducted in equal portions over a five year period following the
date of purchase.
For each franchise store, a portion of the purchase consideration equal to the total tax benefit to be received over five
years is recognised as a deferred tax asset. The deferred tax asset is then released over five years in accordance with
the deduction schedule for each acquired franchise store with the effect of reducing income tax payable for each period.
Prior to 2015, the Company had assessed that the deduction was not probable. In 2015, a private ruling from the
Australian Tax Office was obtained and the deductions were recognised through income tax benefit.
41
NOTES TO ThE FiNANCiAL STATEmENTS
6
iNCOmE TAx ExPENSE continued
(c) amountS recoGniSed directLy in equity
Aggregate current and deferred tax arising in the reporting period and not recognised in net profit or loss or other
comprehensive income but directly debited or credited to equity.
Deferred tax: share issue costs
7
BUSiNESS COmBiNATiONS
2017
$
–
2016
$
551,570
The Company acquired one franchise store on 5 July 2016, three franchise stores on 8 August 2016, one franchise on
2 November 2016 and two franchises on 31 May 2017, for a total purchase consideration $8,069,165.
The acquisitions are expected to increase the Group’s retail sales and synergies are expected to arise after the
Company’s acquisition of these stores.
Details of the purchase consideration, the net assets acquired and the resulting goodwill are as follows:
Purchase consideration:
– Cash
– Deferred consideration
Total purchase consideration
Assets or liabilities acquired:
Inventories
Payables
Deferred tax assets
Total net identifiable assets acquired and liabilities assumed
Purchase consideration
Less: Identifiable assets acquired
Goodwill
Total
$
8,019,165
50,000
8,069,165
1,048,654
(808,119)
2,317,500
2,558,035
8,069,165
2,558,035
5,511,130
The goodwill is attributable to the retail stores bought back, strong profitability in trading personal grooming products
and synergies expected to arise after the Company’s acquisition of these stores. The goodwill is not expected to be
deductible for tax purposes.
Revenue of the acquired franchise stores included in the consolidated revenue of the Group since the respective
acquisition dates amounted to $7.2 million.
Had the results of the acquired franchise stores been consolidated from 1 July 2016, additional revenue of the Group
would have been $6.6 million for the year ended 30 June 2017.
Acquisition related costs for the franchise buybacks were not material and are included in other expenses in the profit
and loss statement.
42
Shaver Shop Group Limited
2017 annuaL report
8
OPERATiNG SEGmENTS
Segment information
The Group operates within one reportable segment, being retail sales of specialist personal grooming products through
their corporate and online stores and royalty income from franchise stores. The chief operating decision maker for
the Company is the Chief Executive Officer. The retail stores and franchise royalty income has been aggregated into
one reportable segment, as they have similar growth rates. Total revenue disclosed in the consolidated statement
of comprehensive profit and loss all relates to this one reportable segment. The Group is not reliant on any single
customer. At 30 June 2017, the Group operated 89 Corporate stores in Australia (2016: 74) and 6 Corporate Stores
in New Zealand (2016: 6). Sales and profit derived from outside Australia are not material to disclose.
9
CASh ANd CASh EqUivALENTS
Cash at bank and on hand
10
TRAdE ANd OThER RECEivABLES
CURRENT
Trade receivables
Prepayments
Related party receivables
Other receivables
Total current trade and other receivables
2017
$
2016
$
2,389,271
4,333,943
Note
2017
$
2016
$
30(c)
1,171,011
1,721,547
482,480
179,056
81,377
161,278
81,377
49,730
1,896,146
2,031,710
The carrying value of trade receivables is considered a reasonable approximation of fair value due to the short‑term
nature of the balances.
The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable in the
financial statements.
11
iNvENTORiES
Finished goods
2017
$
2016
$
29,122,762
18,114,692
Amounts recognised in profit and loss
Inventories recognised as an expense during the year ended 30 June 2017 amounted to $83,095,092 (2016: $61,373,595).
These were recognised in cost of goods sold. The Company has created a provision for slow moving inventories. At
30 June 2017, this amounted to $594,352 (2016: $158,687). Any movement in the slow moving stock provision for the
year is recognised in cost of goods sold.
43
NOTES TO ThE FiNANCiAL STATEmENTS
11
iNvENTORiES continued
Critical accounting estimates and judgements – recoverable amount of inventory
Management has assessed the value of inventory that requires a provision due to the inventory being slow moving,
using past experience and judgement on the likely sell through rates of various items of inventory. To the extent that
these judgements and assumptions prove incorrect, the Group may be exposed to potential additional inventory
write‑downs or write‑backs in future periods.
12
PROPERTY, PLANT ANd EqUiPmENT
Capital works in progress
At cost
Plant and equipment
At cost
Accumulated depreciation
Total plant and equipment
Computer equipment
At cost
Accumulated depreciation
Total computer equipment
Improvements
At cost
Accumulated depreciation
Total improvements
Total property, plant and equipment
2017
$
2016
$
380,759
949,392
9,785,512
6,868,984
(2,975,641)
(1,785,566)
6,809,871
5,083,418
1,137,419
465,494
(339,468)
(194,412)
797,951
271,082
14,798
(2,031)
12,767
14,798
(612)
14,186
8,001,348
6,318,078
Movements in carrying amounts of property, plant and equipment
Movement in the carrying amounts for each class of property, plant and equipment between the beginning and the end
of the current financial year:
Consolidated
Year ended 30 June 2017
Balance at the beginning
of the year
Additions
Transfers
Leasehold
Improvements
in Progress
$
Plant and
Equipment
$
Computer
Equipment
$
Improvements
$
Total
$
949,392
5,083,418
2,952,631
28,787
(3,521,294)
2,889,687
271,082
40,366
631,607
14,186
6,318,078
–
–
3,021,784
–
Depreciation expense
Foreign exchange movements
–
30
(1,188,665)
(144,964)
(1,419)
(1,335,048)
(3,356)
(140)
–
(3,466)
Balance at the end of the year
380,759
6,809,871
797,951
12,767
8,001,348
44
Shaver Shop Group Limited
2017 annuaL report
Consolidated
Year ended 30 June 2016
Balance at the beginning
of the year
Leasehold
Improvements
in Progress
$
Plant and
Equipment
$
Computer
Equipment
$
Improvements
$
Total
$
166,181
2,697,958
250,955
35,694
3,150,788
Additions
3,409,376
537,282
88,424
–
4,035,082
Disposals – written down value
–
(20,275)
(222)
(16,168)
(36,665)
Transfers
(2,626,545)
2,592,779
33,766
–
–
Depreciation expense
Foreign exchange movements
–
380
(755,396)
(102,406)
(5,340)
(863,142)
31,070
565
–
32,015
Balance at the end of the year
949,392
5,083,418
271,082
14,186
6,318,078
13
iNTANGiBLE ASSETS
Movements in carrying amounts of intangible assets
Year ended 30 June 2017
Opening net book value
Brand names
$
Goodwill
$
Total
$
1,114,527
33,295,797
34,410,324
Additions through business combinations
–
5,511,130
5,511,130
Amortisation
Foreign exchange movements
Closing value at 30 June 2017
Year ended 30 June 2016
Opening net book amount
(72,628)
(287)
–
–
(72,628)
(287)
1,041,612
38,806,927
39,848,539
Brand names
$
Goodwill
$
Total
$
1,178,289
29,325,797
30,504,086
Additions through business combinations
–
3,970,000
3,970,000
Amortisation
Foreign exchange movements
Closing value at 30 June 2016
(72,711)
8,949
–
–
(72,711)
8,949
1,114,527
33,295,797
34,410,324
Impairment testing for goodwill
For the purpose of impairment testing, goodwill is monitored as one operating segment.
Significant estimate: key assumptions used for value‑in‑use calculations
The Group performed its annual impairment testing as at 30 June 2017. The Group considers the relationship between
its market capitalisation and its carrying value, among other factors, when reviewing for indicators of impairment. The
recoverable amount of the relevant CGUs has been determined based on the value in use calculation using cash flow
projections from budgets approved by senior management covering a five year period. Cash flows beyond the five year period
are extrapolated using estimated growth rates of 3.0%. The pre tax discount rate applied to cash flow projected is 12.9%.
45
NOTES TO ThE FiNANCiAL STATEmENTS
13
iNTANGiBLE ASSETS continued
The value in use calculation is most sensitive to the following key assumptions:
> Gross margin
> Growth rate
> Discount rate
Gross margin: Gross margin is based on average values achieved in the past. Margins are not increased over the budget timeline.
Growth rate: Rates are based on management’s best estimates of anticipated growth in the short to medium term and
are not significantly different to rates applied across the retail industry. The growth rate in the terminal year is 3%.
Discount rate: The discount rate is specific to the Group’s circumstances and is derived from its average weighted
average cost of capital (WACC). The WACC takes into account the cost of both debt and equity. The cost of equity is
determined by the expected return on investment by the Group’s shareholders. The cost of debt is based on the average
cost of interest bearing debt that the Group is committed to service.
Sensitivity analysis: Management recognises that the future growth rates may differ from what has been estimated, however
management have assessed there are no changes in estimates that are probable that would result in an impairment charge.
14
TRAdE ANd OThER PAYABLES
CURRENT
Unsecured liabilities
Trade payables
Deferred consideration
GST payable
Sundry payables and accrued expenses
2017
$
2016
$
10,294,280
10,252,467
50,000
371,267
–
35,863
2,298,835
1,392,857
13,014,382
11,681,187
All amounts are short term and the carrying values are considered to be a reasonable approximation of fair value.
15
EmPLOYEE BENEFiTS
Current liabilities
Provision for employee benefits
2017
$
2016
$
1,130,040
949,573
The provision for employee benefits includes accrued annual leave and long service leave. For long service leave it covers all
unconditional entitlements where employees have completed the required period of service and also those where employees
are entitled to pro-rata payments in certain circumstances. The entire amount of the provision is presented as current, since
the Group does not have an unconditional right to defer settlement for any of these obligations. However, based on past
experience, the Group does not expect all employees to take the full amount of accrued leave or require payment within the
next 12 months. The following amounts reflect leave that is not expected to be taken or paid within the next 12 months.
46
Shaver Shop Group Limited
2017 annuaL report
2017
$
2016
$
141,345
97,406
2017
$
2016
$
11,824,267
5,124,267
11,824,267
5,124,267
11,824,267
5,124,267
Leave obligations expected to be settled after 12 months
16
BORROWiNGS
NON-CURRENT
Secured liabilities:
Bank loans
Total non‑current borrowings
Total borrowings
(a)
coLLateraL
The carrying amounts of current and non‑current assets pledged as collateral for liabilities are:
Fixed and Floating charge:
– cash and cash equivalents
– trade receivables
– Inventories
– plant and equipment
(B)
deBt covenantS
2017
$
2016
$
2,389,271
4,333,943
1,171,011
1,721,547
29,122,762
18,146,692
8,001,348
6,318,078
Under the terms of the major borrowing facilities, as at year end, the Group is required to comply with the following
financial covenants:
(a) the ratio of debt to EBITDA must be less than or equal to 2.0;
(b) the ratio of interest expense to EBIT must be greater than 3.0; and
(c) the ratio of total assets less total liabilities to total assets must be greater than 0.5.
During the current and prior year, there were no defaults on borrowings or breaches of debt covenants.
47
NOTES TO ThE FiNANCiAL STATEmENTS
17
OThER LiABiLiTiES
CURRENT
Deferred lease incentive liabilities
NON-CURRENT
Deferred lease incentive liability
Deferred rent liability
Total non-current other liabilities
Total
18
iSSUEd CAPiTAL
2017
$
2016
$
344,330
394,277
1,475,813
981,642
965,782
610,264
2,457,455
1,576,046
2,801,785
1,970,323
2017
$
2016
$
126,387,040 (2016: 125,087,040) Ordinary shares
50,385,497
50,385,497
The 1,300,000 shares issued under the Long Term Incentive Plan have vesting criteria and are therefore only included in
diluted share calculations.
(a)
movementS in Share capitaL
At the beginning of the reporting period
Shares bought back
Shares issued in Initial Public Offering
Transaction costs on share issue
Deferred tax asset arising on transaction costs
At the end of the reporting period
2017
$
2016
$
50,385,497
10,539,383
–
–
–
–
(175,000)
41,767,750
(2,298,206)
551,570
50,385,497
50,385,497
Ordinary
Shares
No.
A Class
Shares
No.
B Class
Shares
No.
C Class
Shares
No.
D Class
Shares
No.
E Class
Shares
No.
2017
Shares on issue at beginning
and end of the financial year
125,087,040
Unvested shares issued under
Long Term Incentive Plan
1,300,000
Diluted shares on issue at
end of the financial year
126,387,040
All A, B, C, D and E Class Shares were either cancelled or converted to ordinary shares immediately prior to the
Company’s IPO in June 2016.
48
Shaver Shop Group Limited
2017 annuaL report
Ordinary
Shares
No.
A Class
Shares
No.
B Class
Shares
No.
C Class
Shares
No.
D Class
Shares
No.
E Class
Shares
No.
2016
Shares on issue at beginning
of the financial year
10,489,378
75,004
255,264
30,631
30,631
36,330
Shares bought back
Share cancellation
(50,000)
–
–
–
–
–
–
(30,631)
–
–
–
–
Shares issued in share split
73,075,646
734,933
1,786,848
Share consolidation
–
–
(540,861)
Conversion to ordinary shares
2,702,803
(809,937)
(1,501,251)
Shares issued in IPO
38,869,213
Shares on issue at end of the
financial year
125,087,040
–
–
–
–
–
–
–
–
–
214,417
254,310
(64,898)
(79,175)
(180,150)
(211,465)
–
–
–
–
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.
A dividend may be payable on A Class shares at the discretion of the board. All A Class, B Class, D Class and E Class shares
vested and were converted to ordinary shares immediately prior to the Company’s Initial Public Offering in June 2016.
The Company does not have authorised capital or par value in respect of its shares.
(B)
capitaL manaGement
Capital of the Group is managed in order to safeguard the ability of the Group to continue as a going concern, to provide
returns for shareholders, benefits for other stakeholders and to maintain an optimal capital structure.
The Group monitors capital through the gearing ratio, which is calculated as net debt divided by total capital. Net debt
is calculated as total borrowings less cash and cash equivalents. Total capital is defined as equity per the consolidated
statement of financial position plus net debt.
There are no externally imposed capital requirements.
19
dividENdS
The following dividends were declared and paid:
Fully franked dividend of 1.6 cents per share
Pre-IPO dividend of 21.608 cents per share
Total dividends per share declared and paid
2017
$
2016
$
2,001,393
–
–
18,175,416
2017
$
0.016
2016
$
0.22
49
NOTES TO ThE FiNANCiAL STATEmENTS
19
dividENdS continued
Franking account
2017
$
2016
$
The franking credits available for subsequent financial years at a tax rate of 30%
1,664,459
746,302
The above available balance is based on the dividend franking account at year‑end adjusted for:
(a) Franking credits that will arise from the payment of the current tax liabilities;
(b) Franking debits that will arise from the payment of dividends recognised as a liability at the year end;
(c) Franking credits that will arise from the receipt of dividends recognised as receivables at the end of the year.
The ability to use the franking credits is dependent upon the Company’s future ability to declare dividends.
20
RESERvES
Foreign currency translation reserve
Opening balance
Currency translation differences arising during the year
Balance at 30 June
Share based payments reserve
Opening balance
Transfers in
Balance at 30 June
Total
2017
$
2016
$
(25,217)
(3,469)
(28,686)
271,313
48,315
319,628
290,942
23,841
(49,058)
(25,217)
–
271,313
271,313
246,096
(a)
ForeiGn currency tranSLation reServe
Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive
income – foreign currency translation reserve. The cumulative amount is reclassified to profit or loss when the net
investment is disposed of.
(B)
Share BaSed paymentS reServe
This reserve records the cumulative value of employee service received for the issue of share options. When the option
is exercised the amount in the share option reserve is transferred to share capital.
21
EARNiNGS PER ShARE
Profit from continuing operations
2017
$
2016
$
8,993,956
3,854,027
Earnings used to calculate basic EPS from continuing operations
8,993,956
3,854,027
50
Shaver Shop Group Limited
2017 annuaL report
Weighted average number of ordinary shares outstanding during the year used in calculating basic EPS and diluted EPS:
Weighted average number of ordinary shares outstanding during the year used in
calculating basic EPS
125,087,040
84,210,684
Weighted average number of ordinary shares outstanding during the year used in
calculating fully diluted basic EPS
125,115,533
84,210,684
2017
No.
2016
No.
22
RETAiNEd EARNiNGS
Retained earnings at beginning of the financial year
Net profit for the year
Dividends paid
Retained earnings at end of the financial year
23
CAPiTAL ANd LEASiNG COmmiTmENTS
(a)
operatinG LeaSeS
Minimum lease payments under non‑cancellable operating leases:
– not later than one year
– between one year and five years
– later than five years
2017
$
2016
$
1,413,570
15,734,959
8,993,956
3,854,027
(2,001,393)
(18,175,416)
8,406,133
1,413,570
2017
$
2016
$
8,854,729
7,053,945
19,557,383
16,454,902
1,751,926
1,334,315
30,164,038
24,843,162
Operating leases have been taken out for retail stores and head office. Lease payments are increased on an annual basis
to reflect market rentals. The Company has Bank Guarantees in place as security for rental payments on several of its
locations. As at 30 June 2017, $811,363 was drawn under the Company’s bank guarantee facility.
24
FiNANCiAL RiSk mANAGEmENT
The Group is exposed to a variety of financial risks through its use of financial instruments.
The Group‘s overall risk management plan seeks to minimise potential adverse effects due to the unpredictability
of financial markets. The Group does not speculate in derivative financial instruments.
51
NOTES TO ThE FiNANCiAL STATEmENTS
24
FiNANCiAL RiSk mANAGEmENT continued
The most significant financial risks to which the Group is exposed to are described below:
Risk
Liquidity risk
Credit risk
Exposure arising from
Borrowings, bank overdrafts and other liabilities
Cash at bank and trade receivables
Market risk – currency risk
Recognised assets and liabilities not denominated in Australian dollars
Market risk – interest rate risk
Borrowings at variable rates
oBjectiveS, poLicieS and proceSSeS
Risk management is carried out by the Group’s senior management and the Board of Directors. The Chief Financial
Officer has primary responsibility for the development of relevant policies and procedures to mitigate the risk exposure
of the Group, these policies and procedures are then approved by the risk management committee and tabled at the
board meeting following their approval. Reports are presented to the Board regarding the implementation of these
policies and any risk exposure which the Risk Management Committee believes the Board should be aware of.
Specific information regarding the mitigation of each financial risk to which the Group is exposed is provided below.
Liquidity riSk
Liquidity risk arises from the Group’s management of working capital and the finance charges and principal repayments
on its debt instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they
fall due.
The Group’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities as and when they
fall due. The Group maintains cash to meet its liquidity requirements for up to 30-day periods. Funding for long-term
liquidity needs is additionally secured by an adequate amount of committed credit facilities and the ability to sell
long‑term financial assets.
The Group manages its liquidity needs by carefully monitoring scheduled debt servicing payments for long-term
financial liabilities as well as cash‑outflows due in day‑to‑day business.
Liquidity needs are monitored in various time bands, on a day‑to‑day and week‑to‑week basis, as well as on the basis
of a rolling six‑week projection. Long‑term liquidity needs for an 180‑day and a 360‑day period are identified monthly.
(i) Financing arrangements
The Group had access to the following undrawn borrowing facilities at the end of the reporting period:
Commercial advance facilities
Bank guarantee facility
Total
2017
$
2016
$
11,175,733
8,375,733
1,188,637
–
12,364,370
8,375,733
The commercial advance facility has a limit of $23,000,000 and was drawn to $11,824,267 as at 30 June 2017. In
addition, Shaver Shop has access to a bank guarantee facility with a limit of $2,000,000 was drawn to $811,363 as at
30 June 2017. The commercial advance facility bears an interest rate of BBSY +1.65%. Both facilities mature in July 2018.
52
Shaver Shop Group Limited
2017 annuaL report
(ii) Maturities of financial liabilities
The Group‘s liabilities have contractual maturities which are summarised below:
Not later than 1 month
1 month to 1 year
1 to 2 years
2017
$
–
2016
$
19,237
10,344,280
10,252,456
10,344,280
10,271,693
2017
$
2016
$
2017
$
2016
$
–
–
–
211,611
11,824,267
5,335,115
–
–
–
211,611
11,824,267
5,355,115
Bank loans
Trade
payables
Total
The timing of cash flows presented in the table to settle financial liabilities reflects the earliest contractual settlement
dates and does not reflect management’s expectations that banking facilities will be rolled forward. The amounts
disclosed in the table are the undiscounted contracted cash flows and therefore the balances in the table may not
equal the balances in the consolidated statement of financial position due to the effect of discounting.
The timing of expected outflows is not expected to be materially different from contracted cashflows.
credit riSk
Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in a financial loss
to the Group.
Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as well as credit
exposure to certain customers, including outstanding receivables and committed transactions.
The Group has adopted a policy of only dealing with creditworthy counter parties as a means of mitigating the risk of
financial loss from defaults. In addition, sales to retail customers are required to be settled in cash or through the use
of major credit cards, reducing credit risk associated with sales.
Trade receivables consist mainly of supplier rebates and franchise royalty income owing to the Group. Ongoing credit
evaluation is performed on the financial condition of accounts receivable. No impairment exists within trade receivables
at year end. There are no balances within trade receivables that contain assets that are overdue but not impaired. It is
expected that these balances will be received when due.
The credit risk for liquid funds and other short‑term financial assets is considered negligible, since the counter parties
are reputable banks with high quality external credit ratings.
Credit quality
The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external
credit ratings (if available) or to historical information about counterparty default rates.
Cash at bank
AA– (Standard & Poors)
Accounts receivable
Counter‑parties with no external credit rating
2017
$
2016
$
2,389,271
4,333,943
Group 1*
1,171,011
1,721,547
* Group 1: Existing counter‑parties (more than 12 months) with no defaults in the past.
53
NOTES TO ThE FiNANCiAL STATEmENTS
24
FiNANCiAL RiSk mANAGEmENT continued
market riSk
(i) Foreign currency risk
Most of the Group transactions are carried out in Australian Dollars. Exposures to currency exchange rates arise from
the Group’s New Zealand operations which are denominated in New Zealand Dollars.
Whilst the Group’s exposure to foreign currency is not considered to be material, the Group’s exposure to non-Australian
Dollar cash flows is monitored in accordance with the Group’s risk management policies.
There are no material foreign currency denominated financial assets or liabilities at year end.
Market volatility in the New Zealand Dollar is unlikely to have a material impact on the Group’s pre‑tax profit or equity.
Therefore a sensitivity analysis has not been performed.
(ii) Interest rate risk
The Group is exposed to interest rate risk arising from both short-term and long-term variable rate borrowings. The
Group does not hedge against interest rate movements and monitors the exposure to interest rate risk in accordance
with the Group’s risk management policy. All of the Group’s borrowings are denominated in Australian Dollars.
As at the end of the reporting period, the Group had the following variable rate borrowings outstanding:
Floating rate instruments
Bank loans
Total
Weighted
average
interest rate
%
Weighted
average
interest rate
%
2017
$
2016
$
3.43
3.43
11,824,267
11,824,267
3.51
3.51
5,124,267
5,124,267
Management considers that interests rates could reasonably increase by 1% or decrease by 0.5% (2016: increase of 1%,
decrease of 0.5%). As these movements would not have a material impact on either the net result for the year or equity,
no sensitivity analysis has been performed.
25
TAx ASSETS ANd LiABiLiTiES
(a)
current tax aSSetS and LiaBiLitieS
Income tax receivable
Income tax payable
(B)
recoGniSed deFerred tax aSSetS and LiaBiLitieS
Deferred tax assets
54
2017
$
–
131,606
2016
$
880,717
–
2017
$
2016
$
6,726,586
5,681,049
Shaver Shop Group Limited
2017 annuaL report
Deferred tax assets
Provisions – employee benefits
Accruals
Lease incentive liability
Cancellation of franchise fee
on acquisition
IPO costs
Other
Set off Deferred Tax Liability
Balance at 30 June 2016
Provisions – employee benefits
Accruals
Lease incentive liability
Cancellation of franchise fee
on acquisition
IPO costs
Other
Opening
Balance
$
Charged to
Income
$
Charged
directly to
Equity
$
Acquisition
of Franchise
Stores
$
Closing
Balance
$
323,207
301,608
382,277
–
–
–
207,399
155,340
202,740
115,808
146,268
179,537
2,858,716
(1,148,116)
–
–
–
–
–
978,062
551,570
99,619
(248)
(409,052)
3,114,762
323,207
301,608
382,277
63,406
334,717
63,614
156,124
166,353
3,390,600
(1,564,500)
1,529,632
(387,164)
99,371
(274,301)
1,680,000
3,390,600
–
–
1,529,632
99,371
–
(345,646)
–
–
551,570
1,680,000
5,681,049
–
–
–
–
–
–
–
–
–
–
386,821
457,732
548,630
2,317,500
4,143,600
–
–
–
1,142,468
376,672
(326,337)
Set off Deferred Tax Liability
(345,646)
19,309
Balance at 30 June 2017
5,681,049
(1,268,963)
–
2,317,500
6,726,586
55
NOTES TO ThE FiNANCiAL STATEmENTS
26
AUdiTORS’ REmUNERATiON
During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its
related practices and non‑related audit firms:
PwC Australia
(a) PricewaterhouseCoopers Australia
(i) Audit of financial statements
Audit of financial statements
Total remuneration for audit and other assurance services
(ii) Taxation services
Tax compliance services
Tax consulting services
Total remuneration for taxation services
(iii) Other Services
Initial Public Offering Advice
Other consulting services
Total remuneration for other services
Total remuneration of PricewaterhouseCoopers Australia
(b) Network firms of PricewaterhouseCoopers Australia
(i) Taxation services
Tax compliance services
Total remuneration for taxation services
Total remuneration of network firms of PricewaterhouseCoopers Australia
27
iNTERESTS iN SUBSidiARiES
The Group’s subsidiaries as at 30 June 2017 are set out below.
2017
$
2016
$
206,000
206,000
230,000
230,000
48,552
10,200
58,752
21,930
–
21,930
–
595,975
49,100
49,100
313,852
–
595,975
847,905
3,155
3,155
3,155
–
–
–
Principal place of business/
Country of Incorporation
Percentage
Owned (%)*
2017
Percentage
Owned (%)*
2016
Subsidiaries:
Lavomer Riah Pty Ltd
Shaver Shop Pty Ltd
Australia
Australia
Shaver Shop (New Zealand) Limited
New Zealand
Rasoirs Pty Ltd
Australia
*
The percentage of ownership interest held is equivalent to the percentage voting rights for all subsidiaries.
100
100
100
100
100
100
100
–
56
Shaver Shop Group Limited
2017 annuaL report
28
dEEd OF CROSS-GUARANTEE
Shaver Shop Group Limited, Lavomer Riah Pty Ltd and Shaver Shop Pty Ltd are parties to a deed of cross guarantee
under which each company guarantees the debts of the others. Under ASIC class order 98/1418 there is no requirement
for these subsidiaries to prepare or lodge a consolidated financial report and directors’ report as a result of entering into
the deed.
These companies represent a closed Group for the purposes of the class order.
The consolidated statement of profit or loss and other comprehensive income and consolidated statement of financial
position, comprising the closed group, after eliminating all transactions between parties to the deed of cross guarantee
are shown below:
Consolidated Statement of Comprehensive Income
Revenue
Cost of Sales
Gross Profit
Other revenue
Operating expenses
Finance costs
Profit before income tax
Income tax (expense)/credit
Profit after income tax
Profit attributable to members of the parent entity
Retained earnings:
Retained earnings at the beginning of the year
Profit after income tax
Dividends recognised
Retained earnings at the end of the year
Attributable to:
Equity holders of the Company
2017
$
2016
$
138,174,651
103,375,651
(80,241,920)
(59,341,632)
57,932,731
44,004,019
3,606,286
4,027,462
(47,641,876)
(41,293,245)
(443,715)
(1,043,374)
13,453,426
5,724,862
(4,061,112)
(1,627,859)
9,392,314
4,097,003
9,392,314
4,097,003
2017
$
2016
$
2,163,227
16,241,640
9,392,314
4,097,003
(2,001,393)
(18,175,416)
9,554,148
2,163,227
9,554,148
2,163,227
57
NOTES TO ThE FiNANCiAL STATEmENTS
28
dEEd OF CROSS-GUARANTEE continued
Consolidated Statement of Financial Position
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax receivables
Total Current Assets
Non‑Current Assets
Property, plant and equipment
Intangible Assets
Deferred Tax Assets
Total Non‑Current Assets
Total Assets
Current Liabilities
Trade and other payables
Current tax payables
Total Current Liabilities
Non‑Current Liabilities
Long-term borrowings
Other liabilities
Total Non‑Current Liabilities
Total Liabilities
Net Assets
Equity
Issued Capital
Reserves
Retained Earnings
Total Equity
58
2017
$
2016
$
1,870,811
3,988,044
1,890,216
3,491,810
27,471,643
16,732,815
–
880,717
31,232,670
25,093,386
7,234,274
5,446,350
39,742,222
33,963,528
6,726,586
6,015,407
53,703,082
45,425,285
84,935,752
70,518,671
10,096,562
11,300,111
131,606
–
10,228,168
11,300,111
11,824,267
5,124,267
2,624,044
1,274,256
14,448,311
6,398,523
24,676,479
17,698,634
60,259,273
52,820,037
50,385,497
50,385,497
319,628
271,313
9,554,148
2,163,227
60,259,273
52,820,037
Shaver Shop Group Limited
2017 annuaL report
29
CONTiNGENCiES
Contingent Liabilities
There are no contingent liabilities recognised by the Group.
30
RELATEd PARTiES
(a)
SuBSidiarieS
Interests in subsidiaries are set out in Note 27.
(B)
key manaGement perSonneL
Key management personnel remuneration included within employee expenses for the year is shown below:
Short‑term employee benefits
Post‑employment benefits
Share-based payments
2017
$
2016
$
1,333,701
1,380,098
67,224
39,952
34,827
209,428
1,440,877
1,624,353
(c)
LoanS to/From reLated partieS
The following balances are outstanding at the end of the reporting period in relation to transactions with related parties:
Opening
balance
Closing
balance
Interest
not charged
Interest paid/
payable
Impairment
Loans to KMP and
related parties
2017
2016
81,377
81,377
81,377
81,377
–
–
–
4,435
–
–
The loans to KMP resulted from a share incentive scheme implemented prior to the Shaver Shop Employee Share Plan
(refer Note 32). Interest is payable on the KMP loans based on the Australian Taxation Office benchmark rate from time
to time. KMP loans are repayable after a maximum period of six years or upon disposal of the shares.
59
NOTES TO ThE FiNANCiAL STATEmENTS
31
CASh FLOW iNFORmATiON
(a)
reconciLiation oF reSuLt For the year to caShFLowS From operatinG activitieS
Reconciliation of net income to net cash provided by operating activities:
Profit for the year
Cash flows excluded from profit attributable to operating activities
Non‑cash flows in profit:
Depreciation and amortisation
Net loss on disposal of property, plant & equipment
Share based payments expense
Net exchange differences
Changes in assets and liabilities, net of the effects of purchase and disposal
of subsidiaries:
– (increase)/decrease in trade and other receivables
– (increase)/decrease in inventories
– (increase)/decrease in deferred tax assets
– increase/(decrease) in trade and other payables
– increase/(decrease) in income taxes payable
Cashflow from operations
32
ShARE-BASEd PAYmENTS
2017
$
2016
$
8,993,956
3,854,027
1,407,599
935,630
–
48,315
48,676
36,665
271,313
(89,799)
135,564
(426,103)
(9,954,101)
(3,071,821)
1,606,321
(334,716)
116,967
4,028,017
1,012,323
(526,559)
3,415,620
4,676,654
Consistent with the disclosures in the Company’s Prospectus, in the year ended 30 June 2017 Shaver Shop established
a long term incentive plan (LTIP) to assist in the motivation, retention and reward of Shaver Shop senior executives. The
LTIP is designed to align the interests of senior executives more closely with the interests of Shareholders by providing
an opportunity for eligible senior executives to acquire shares subject to the conditions of the LTIP.
Under the plan, eligible participants were granted 1,300,000 plan shares which will only vest if certain criteria are met.
The number of Plan Shares which will vest under the LTI Plan will be dependent on time based (years of service) and
performance based criteria. Plan Shares are granted under the plan and funded by a limited recourse loan to the eligible
senior executive. The Plan Shares rank pari passu in all respects with the ordinary shares of the Company.
Grant Date
LTI granted
(shares)
Value at
Grant Date
$
Loan Value
at 30 June
2017
% paid /
vested in
the period
% forfeited
in period
Value
Expensed in
FY17$
KMP
Directors
Cameron Fox
22 June 2017
975,000
575,152
575,172
Senior Executive
Lawrence Hamson
22 June 2017
100,000
58,990
58,990
0%
0%
0%
36,236
0%
3,716
The TSR performance hurdle for Tranche 1 was not met. The EPS hurdle for Tranche 1 was met with EPS growth of 21%
recorded over FY2016.
60
Shaver Shop Group Limited
2017 annuaL report
The shares were granted to eligible participants on 22 June 2017. Based on the volume weighted price of shares traded
in the five days up to and included the grant date, each share was worth $0.5899. Accordingly, limited recourse loans
with an aggregated value of $766,870 were provided by the Company to the participants. The fair value at grant date
of the LTIP shares is independently determined using an adjusted form of Black Scholes Model. The model takes into
account the vesting criteria, the current share price, the expected dividend yield, the risk free interest rate, the expected
volatility of the shares and the correlations and volatilities of peer group companies.
The key assumptions used in the valuation model are:
> Share price (at Grant Date) – $0.59
> Exercise price (5 day VWAP to Grant Date) – $0.59
> Volatility – 45%
> Dividend Yield – Nil (as dividend used to pay off loan value)
> Risk free rate – 2%
In the year ended 30 June 2016, the Company maintained an Employee Performance Share Plan. The plan was
approved by shareholders in August 2014 and designed to provide long term incentives for senior managers to deliver
long term shareholder returns. Prior to the Company’s initial public offering (IPO), these shares were converted to
ordinary shares that were either sold or retained by the relevant participants at the time of the IPO. As a result, the
Employee Performance Share Plan is no longer maintained by the Company.
Total expenses arising during the year ended 30 June 2017 as a result of share based transactions were $48,315
(2016: $271,313).
33
EvENTS OCCURRiNG AFTER ThE REPORTiNG dATE
The consolidated financial report was authorised for issue on 24 August 2017 by the board of directors.
Subsequent to year end, the Directors declared a fully franked final dividend of 2.4 cents per share to shareholders of
record on 10 October 2017. The dividend payment date is 24 October 2017.
No other matters or circumstances have arisen since the end of the financial year which significantly affected or could
significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in
future financial years.
34
PARENT ENTiTY
The following information has been extracted from the books and records of the parent, Shaver Shop Group Limited
and has been prepared in accordance with Accounting Standards.
The financial information for the parent entity, Shaver Shop Group Limited has been prepared on the same basis as the
consolidated financial statements.
61
NOTES TO ThE FiNANCiAL STATEmENTS
34
PARENT ENTiTY continued
Summary financial information
ASSETS
Current assets
Non-current assets
Total Assets
LIABILITIES
Current liabilities
Total Liabilities
EQUITY
Contributed equity
Reserves
Retained losses
Total Equity
Profit for the period
Total comprehensive income
Opening retained losses
Profit for the period
Dividends paid or provided for
Closing retained losses
2017
$
2016
$
16,544,578
16,544,578
29,857,267
30,290,290
46,401,845
46,834,868
–
–
–
–
50,385,496
50,385,496
319,628
271,313
(4,303,279)
(3,821,941)
46,401,845
46,834,868
1,520,055
14,935,320
1,520,055
14,935,320
(3,821,941)
(581,845)
1,520,055
14,935,320
(2,001,393)
(18,175,416)
(4,303,279)
(3,821,941)
Contingent liabilities
The parent entity did not have any contingent liabilities as at 30 June 2017 or 30 June 2016.
Contractual commitments
The parent entity did not have any commitments as at 30 June 2017 or 30 June 2016.
35
COmPANY dETAiLS
The registered office of and principal place of business of the Company is:
Shaver Shop Group Limited
Level 1, Chadstone Tower One
1341 Dandenong Road
CHADSTONE VIC 3148
62
Shaver Shop Group Limited
2017 annuaL report
diRECTORS’ dECLARATiON
The directors of the Company declare that:
1. the consolidated financial statements and notes for the year ended 30 June 2017 are in accordance with the
Corporations Act 2001 and:
(a) comply with Accounting Standards, which, as stated in basis of preparation Note 1 to the consolidated financial
statements, constitutes explicit and unreserved compliance with International Financial Reporting Standards
(IFRS); and
(b) give a true and fair view of the financial position and performance of the consolidated Group;
2. In the directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts
as and when they become due and payable.
This declaration is made in accordance with a resolution of the Board of Directors.
Broderick Arnhold
Director
Melbourne
24 August 2017
63
iNdEPENdENT AUdiTOR’S REPORT
Independent auditor’s report
To the shareholders of Shaver Shop Group Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Shaver Shop Group Limited (the Company) and its controlled
entities (together, the Group) is in accordance with the Corporations Act 2001, including:
(a)
giving a true and fair view of the Group's financial position as at 30 June 2017 and of its
financial performance for the year then ended
(b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
the Consolidated statement of financial position as at 30 June 2017
the Consolidated statement of comprehensive income for the year then ended
the Consolidated statement of changes in equity for the year then ended
the Consolidated statement of cash flows for the year then ended
the Notes to the consolidated financial statements, which include a summary of significant
accounting policies
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant
to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities
in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
64
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Shaver Shop Group Limited
2017 annuaL report
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
Materiality
For the purpose of our audit we used overall Group materiality of $652,000 which represents approximately
5% of the Group’s profit before tax.
We applied this threshold, together with qualitative considerations, to determine the scope of our audit and
the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the
financial report as a whole.
We chose group profit before tax because, in our view, it is the benchmark against which the performance of
the Group is most commonly measured. We utilised a 5% threshold based on our professional judgement,
noting it is within the range of commonly accepted thresholds.
Audit Scope
Our audit focused on where the Group made subjective judgments; for example, significant accounting
estimates involving assumptions and inherently uncertain future events.
The Group sells personal grooming products to customers across Australia and New Zealand, through retail
stores and the Group’s website. The products are predominately held in the Group’s warehouse in Melbourne,
and across the retail stores. The accounting processes are structured around a group finance function at the
head office in Melbourne where the majority of our audit procedures were performed.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
65
65
iNdEPENdENT AUdiTOR’S REPORT
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context. We communicated the key audit matters to the
Audit and Risk Committee.
Key audit matter
Carrying value of goodwill
(Refer to note 13) $38.8 million
At 30 June 2017 the Group had a balance of
$38.8m of goodwill in the financial report.
How our audit addressed the key audit
matter
Our audit procedures included:
Making an assessment of whether the CGUs
identified by the Group were consistent with our
knowledge of the Group’s operations and internal
reporting.
Australian Accounting Standards require the
Group to assess the carrying value of goodwill
each year for impairment at the Cash Generating
Unit (CGU) level.
Assessing whether the CGUs appropriately
included all assets, liabilities and cash flows
directly attributable to each CGU and a
reasonable allocation of corporate overheads.
We focussed on the impairment assessment due
to the size of the goodwill balance and the
significant judgements and assumptions required
in estimating the future performance of the Group
in the Group’s discounted cashflow impairment
model (the impairment model).
Testing that forecast cash flows used in the
impairment model were consistent with the most
up-to-date budgets and business plans presented
to and discussed with the board of directors.
Evaluating the Group’s track record of
forecasting future results within impairment
models based on a comparison of budgets with
reported actual results for the previous year.
Performing a sensitivity analysis on key
assumptions. Calculations were most sensitive to
changes in sales and EBITDA growth rate
assumptions. We adjusted the impairment model
for our view of other foreseeable outcomes to
consider their impact.
With the assistance of our valuation experts,
evaluating the appropriateness of the discount
rate by assessing the reasonableness of the
relevant inputs to the calculation against industry
and market factors.
Testing of the mathematical accuracy of the
impairment model’s calculations.
Evaluation of the adequacy and accuracy of
disclosures in note 13, including those regarding
the key assumptions and sensitivities to changes
in such assumptions, in light of the requirements
66
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Shaver Shop Group Limited
2017 annuaL report
Key audit matter
Carrying value of inventory
(Refer to note 11) $29.1 million
At 30 June 2017 the Group recognised inventory
of $29.1 million in the financial report.
The Group also recognised a provision for
obsolete inventory of $594k. The Group estimate
the required provision using past experience and
judgement to determine the likely sales volumes
and expected future selling prices and associated
costs.
We have focused on this matter because of the
significant judgement and estimation involved in
determining the net realisable value of inventory
and the potentially material impact on the
financial report.
Accounting for supplier rebates
(Refer to note 2 (n))
The Group has entered into a number of
arrangements with various suppliers under which
they receive rebates for purchasing goods. These
rebates are known as supplier volume rebates and
vary dependent on the specific terms agreed with
each supplier in relation to the rebate rate(s) and
the range of products included.
We have focused on this matter because of the
magnitude and number of rebates received during
the year, and the different terms applicable to
How our audit addressed the key audit
matter
of Australian Accounting Standards.
Our procedures included the following:
Testing to verify that all inventory
balances were included in the provision
calculation.
An evaluation of whether the
methodology applied to calculate the
provision was consistent with that
applied in the prior year.
Assessing the Group’s historical ability to
make estimates by testing a sample of
products included in the prior year
inventory provision, including comparing
the estimated recoverable amount to the
actual gross margin earned on those
products sold in the financial year, and
considering the clearance rate.
Testing of the mathematical accuracy of
the provision calculation.
Evaluating whether the provision for
inventory was adequate by assessing:
-
-
the gross margins recognised by
the Group; and
the inventory turnover ratio and
ageing, including a comparison to
the prior year.
Our audit procedures included the following:
Obtained confirmations from a sample of
suppliers of the quantity of relevant
inventory purchased and the terms of
rebate and compared these to the
information used in the Group’s
calculations.
Tested the mathematical accuracy of the
Group’s rebate calculations.
67
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iNdEPENdENT AUdiTOR’S REPORT
Key audit matter
each rebate agreement.
Other information
How our audit addressed the key audit
matter
The directors are responsible for the other information. The other information included in the Group's
annual report for the year ended 30 June 2017 comprises the Directors report (but does not include
the financial report and our auditor’s report thereon), which we obtained prior to the date of this
auditor's report. We also expect other information to be made available to us after the date of this
auditor's report, including the Chairman’s and CEO’s report and Corporate Information.
Our opinion on the financial report does not cover the other information and we do not and will not
express an opinion or any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
When we read the other information not yet received as identified above, if we conclude that there is a
material misstatement therein, we are required to communicate the matter to the directors and use
our professional judgement to determine the appropriate action to take.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
68
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Shaver Shop Group Limited
2017 annuaL report
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our auditor's
report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 11 to 19 of the directors’ report for the year
ended 30 June 2017.
In our opinion, the remuneration report of Shaver Shop Group Limited for the year ended 30 June
2017 complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance with
Australian Auditing Standards.
PricewaterhouseCoopers
Daniel Rosenberg
Partner
Melbourne
24 August 2017
69
69
ShAREhOLdER iNFORmATiON
for the year ended 30 June 2017
The Shareholder information set out below is based on information in the Company’s share register as at 11 September 2017.
diSTRiBUTiON OF hOLdiNGS OF FULLY PAid ORdiNARY ShARES
Range
100,001 and Over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
Securities
106,367,976
17,643,477
1,768,522
562,326
44,739
%
No. of holders
84.16
13.96
1.40
0.44
0.04
71
550
198
161
84
%
6.67
51.69
18.61
15.13
7.89
126,387,040
100.00
1,064
100.00
As at 11 September 2017, there were 54 holders of an unmarketable parcel of shares.
SUBSTANTiAL ShAREhOLdERS
The following is a summary of the substantial shareholder in Shaver Shop Group Limited (the Company) pursuant to
notices lodged with the ASX in accordance with Section 671B of the Corporations Act as at 11 September 2017.
Name of Shareholder
Shaver Shop Group Limited
Perpetual Limited
Brian Singer
(1) % of issued capital specified in the relevant notice.
No. of Shares
31,718,485
19,199,155
6,258,040
% of Issued
Capital(1)
25.36%
15.35%
5.00%
70
Shaver Shop Group Limited
2017 annuaL report
No. of Shares
21,030,654
14,277,125
11,185,899
9,329,233
5,552,270
5,408,004
4,160,004
3,463,360
3,102,670
2,773,336
2,500,000
1,800,024
1,627,780
1,600,000
1,300,000
1,250,000
1,210,000
850,000
807,000
750,736
% of Issued
Capital
16.64
11.30
8.85
7.38
4.39
4.28
3.29
2.74
2.45
2.19
1.98
1.42
1.29
1.27
1.03
0.99
0.96
0.67
0.64
0.59
93,978,095
32,408,945
74.36
25.64
126,387,040
100.00
TOP 20 ShAREhOLdERS
Rank
Name of Shareholder
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
HSBC Custody Nominees (Australia) Limited
Alsop Pty Limited
J.P. Morgan Nominees Australia Limited
National Nominees Limited
Anacacia Pty Limited
Katani Pty Ltd
Zara Holdings Pty Ltd
UBS Nominees Pty Ltd
BNP Paribas Noms Pty Ltd
Dovali Pty Ltd
RBC Investor Services Australia Nominees Pty Ltd
Mr Cameron Fox
Citicorp Nominees Pty Limited
Broderick Ernst George Arnhold
Pacific Custodians Pty Limited
Claydon Super Pty Ltd
Mr Ingo Rehder & Mrs Heather Rehder
Arkindale Pty Ltd
Mr Brodie Ernst Arnhold
Stemlow Pty Ltd
TOTAL
Balance of Register
GRAND TOTAL
UNqUOTEd EqUiTY SECURiTiES
There are currently no unquoted equity securities of the Company.
ShAvER ShOP WEBSiTE
www.shavershop.com.au
ESCROWEd ShARES
In aggregate, 31,718,485 Shares were the subject of voluntary escrow arrangements as outlined in Section 7.15 of the
Company’s Prospectus. These shares were released from escrow after close of trading on 6 September 2017. A copy
of the Prospectus is available from the Investor Relations section of Shaver Shop’s website.
71
ShAREhOLdER iNFORmATiON
vOTiNG RiGhTS FOR FULLY PAid ORdiNARY ShARES
The Constitution provides for votes to be cast at a meeting of members:
(1) on a show of hands, each member has 1 vote; and
(2) on a poll:
(a) for each fully paid share held by a member, 1 vote; and
(b) for each partly paid share, a fraction of a vote equivalent to the proportion which the amount paid (not credited)
is of the total amounts paid and payable (excluding amounts credited).
ON-mARkET BUY-BACk
There is no current on-market buy-back of the Company’s shares.
FOR iNvESTOR RELATiONS iNFORmATiON:
Larry Hamson, CFO and Company Secretary
+61 3 9840 5900
CORPORATE iNFORmATiON
ABN 78 150 747 649
ShARE REGiSTRY
Link Market Services Limited
Tower 4
727 Collins Street
Melbourne Victoria 3008
Phone: 1300 554 474
AUdiTORS
PricewaterhouseCoopers
SOLiCiTORS
Norton Rose Fulbright
BANkERS
Bankwest
diRECTORS
Broderick Arnhold
Cameron Fox
Craig Mathieson
Trent Peterson
Brian Singer
Melanie Wilson
COmPANY SECRETARY
Lawrence Hamson
REGiSTEREd OFFiCE
Level 1, Chadstone Tower One
1341 Dandenong Road, Chadstone, Victoria, 3148
Australia
PRiNCiPAL PLACE OF BUSiNESS
Level 1, Chadstone Tower One
1341 Dandenong Road, Chadstone, Victoria, 3148
Australia
Phone: +61 (0) 3 9840 5900
72
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shavershop.com.au