S h a v e r S h o p G r o u p L i m i t e d a n n u a L r e p o r t 2 0 2 1 Transform yourself S h a v e r S h o p 2 0 2 1 a n n u a L r e p o r t Shaver Shop Group Limited Shaver Shop is the leading specialty retailer of personal grooming and beauty appliances in Australia and New Zealand. Through our network of more than 120 stores and online sales capability, we deliver customer service excellence across every channel that our customers choose to engage with us. CONTENTS 2021 Highlights Chairman’s Letter CEO’s Letter Performance Corporate Sustainability Directors’ Report Auditors Independence Declaration Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Balance Sheet Consolidated Statement of Changes In Equity Consolidated Statement of Cashflows Notes To The Financial Statements Directors’ Declaration Independent Audit Report Shareholder information Corporate Information 2 4 6 8 10 13 40 41 42 43 44 45 78 79 85 88 1 Annual Report 2021 2021 h iG hL iG h t S 2 Shaver Shop Group Limited Sales growth up 9.6% Online sales up 41.1% to $61.2 million Dividends per share up 71% to 8.2 cents NPAT up 68.3% to $17.5 million Sales up 9.6% to $213.7 million 3 Annual Report 2021 Chairman’s Letter B r o d i e a r n h oL d – C h a i r m a n Dear fellow shareholder, ATTRACTIVE AND GROWING MARKET Shaver Shop has delivered another year of record sales and earnings in one of the most turbulent periods in Australian retail history. Our products were in high demand as the periodic closure of hair salons, barber shops, skin and laser clinics, as well as physiotherapists and dentists led to an acceleration in the long term trend towards do‑it‑yourself (DIY) personal care and grooming solutions. The increase in sales meant we were able to keep as many of our team members employed as possible whether they were serving customers in our stores, or picking and packing the record levels of online orders we received. The personal care and grooming market has been growing for many years and we believe will continue to do so with a number of fundamental trends driving increasing demand. These trends include: • The rising prevalence and influence of social media on people’s desire to look and feel good with an individual’s health and well‑being more important than ever following COVID‑19; • Ongoing new product innovation by leading multi‑national personal care corporations that is making it easier to get a salon quality outcome from the comfort of your own home; • Men increasingly becoming more attuned to their health and beauty regimes. Whether it’s skin care, hair care, beard or body grooming, men are buying more tools to get or maintain the look they want; and • The increased propensity for online shopping means customers are able to get the products they want whenever and wherever they want. COVID‑19 has accelerated these trends and pleasingly Shaver Shop has been, and continues to be, well positioned to benefit from these underlying fundamentals. HEALTH AND SAFETY FIRST Throughout the pandemic, Shaver Shop has supported government and community efforts to limit the spread of COVID‑19. Whilst this has affected our operations significantly, the health and safety of our team members, customers, supply partners and the broader community remains our number one priority. As we now move towards a period when the bulk of our stores in Victoria and New South Wales will re‑open to the general public, our focus on health and safety will remain paramount. OUR UNIQUE SPECIALTY RETAIL MODEL Shaver Shop’s unique business model has always been one of the hallmarks that has led to the company’s success. At its heart, Shaver Shop has always strived for customer service excellence. In the rapidly evolving personal care and grooming market, this means we need to be product experts that live and breathe these categories so that we can stay on top of the latest innovations and trends. Each year, we invest heavily in training our teams not only about the products on our shelves, but also how best to engage with our customers, 4 Shaver Shop Group Limited so that we can understand their needs and match them with the best fitting products that meets their specific requirements. It is not an easy task and requires constant fine tuning to ensure our stock position, promotional plans and training programs are all aligned to deliver an optimal result for our customers. It is also the specialty focus on these categories as well as our strong brand awareness that gives our suppliers the confidence to exclusively range new and innovative lines with Shaver Shop each year. 26 of our top 30 selling lines were exclusive to Shaver Shop in FY2021 further evidencing our entrenched and differentiated position in the market. STRONG FINANCIAL POSITION AND CASH FLOW Shaver Shop remained fiscally prudent in FY2021 reflected by our controlled investment in working capital across the year. We generated $36.0 million in operating cash flow, ended the year with $7.4 million in cash, no debt and had a $30 million undrawn debt facility. While none are expected, Shaver Shop is well positioned to weather any demand or supply shocks that may arise in the future. CAPITAL MANAGEMENT With our strong financial position, profitability and cash flow, your Board was pleased to increase our fully franked dividend payout by 71% to 8.2 cents per share. This represents a payout of approximately 60% of reported net profit after tax (NPAT) and 55% of our cash NPAT. It also represents the fifth consecutive year of Shaver Shop increasing its annual dividend payments evidencing the Board’s desire to continue sustainably increasing dividend payments over time. Your Board remains committed to balancing the trading risks associated with COVID‑19, the desire to increase returns to shareholders whilst maintaining our ability to invest in, and drive increasing returns from, Shaver Shop’s business. CORPORATE GOVERNANCE AND ESG Your Board recognises the importance of environmental, social and governance matters. In FY2021, the company adopted and rolled out its first Environmental and Social Governance Policy which provides a framework through which we intend to: • Further reduce our impact on the environment; • Enhance our ability to provide our team members with a flexible, supportive, healthy and safe work environment; and • Ensure Shaver Shop operates in an ethical manner with good corporate governance, compliance and risk management practices. Shaver Shop also continued its Board renewal process with the appointment of Debra Singh in early September 2020. Debra’s wealth of retail, commercial and leadership experience has been valuable in helping us navigate through the volatile trading environment caused by COVID‑19. The Board remains dedicated to ensuring we have the appropriate breadth and depth of skills to best place the company to deliver improving and sustainable returns over the long term. On behalf of the Board, I would like to thank Shaver Shop’s management and the broader Shaver Shop team for their outstanding performance in FY2021. We look forward to another successful year in FY2022. Yours sincerely Brodie Arnhold Chairman 5 Annual Report 2021 CEO’s Letter C a m e r o n F o X – m a n a G i n G d i r e C t o r a n d C e o Dear shareholder, I am incredibly proud of our business performance over FY2021. The record financial results were accompanied by many outstanding operational achievements by the Shaver Shop team. Our people continue to be, and will always be, our most valuable asset. They have shown incredible persistence, passion and dedication while adapting to their changed circumstances since the pandemic began. We have seen our store teams as well as the support office living and breathing Shaver Shop’s core values: Customer Focus; Drive for Results, Adaptability and Accountability. So while I am incredibly pleased with the FY2021 financial results that we delivered, what I am most proud of, is the way in which our team rallied and responded to each challenge while being true to Shaver Shop’s values. CUSTOMER SERVICE EXCELLENCE As our core values imply, we strive to continually inspire and delight our customers with each and every touchpoint. This is reflected in our customer service metrics which continue to be world class. Shaver Shop’s net promoter score was consistently 89 (out of a possible 100) in each quarter of FY2021 and our customer experience score was equally impressive at approximately 9.8 (out of 10). While many of the products we sell are available at other retail outlets, it is Shaver Shop’s specialist product knowledge and service excellence that sets us apart and keeps our customers coming back. FULLY CORPORATE OWNED BUSINESS In February 2021, Shaver Shop completed an eight year journey in moving from a largely franchised model to a fully corporate owned business. This is a very important milestone for the company that will deliver the following immediate benefits: • Simplified internal processes around buying and merchandising, marketing and finance; • More consistency in customer service standards; • Control over the end to end online sales channel; and • Opportunities to open new stores in key shopping centres across the Sydney metro area. These benefits are in addition to the financial returns of the deal being highly accretive for shareholders. OMNI‑RETAIL ACHIEVEMENTS The growth in online sales by 41.1% to $61.2 million is one of the key drivers in Shaver Shop’s active customer base (those online customers that transacted with Shaver Shop in the last 12 months) growing to almost 500,000 and our marketing database membership almost doubling to 800,000 members. 6 Shaver Shop Group Limited The contribution margin Shaver Shop generates from both the online and in‑store channels are equally strong and by being a multi‑channel retailer, we have been able to meet customer needs when our stores have been closed and have benefited with the return of foot traffic to our stores when government restrictions have eased. RECORD FINANCIAL RESULTS SUMMARY Shaver Shop’s total consolidated sales were up 9.6% to $213.7 million and online sales were up 41.1% to $61.2 million to now represent 28.6% of the company’s revenue (FY2020 – 22.3% of total sales). The impact of COVID‑19 and the associated lockdown experiences have varied greatly by geography, severity and duration making comparison between FY2020 and FY2021 quite difficult. Accordingly, we have also compared Shaver Shop’s performance to FY2019 when COVID‑19 did not yet exist. On this basis, Shaver Shop’s total sales increased 27.6% in FY2021 with each quarter consistently delivering more than 20% growth over the comparative quarter two years earlier. In addition to the strong sales growth, Shaver Shop’s gross profit margins increased 240 basis points to 44.3% (FY2020 – 41.9%). Lower discounting, particularly on lines exclusively sold by Shaver Shop as well as category mix were key contributors to this excellent result. Costs remained well controlled with operating expenses as a percentage of sales reducing almost 110 basis points to 25.8% (FY2020 – 26.9%). We have always been a cost conscious enterprise and with the continued trading uncertainty leading into FY2022 we will maintain this focus in the year ahead. This is especially true when we consider our store portfolio. The impact of the current lockdowns in Victoria and New South Wales is likely to cause some changes in tenancy mix in the near to medium term. As a result, we will continue to be pragmatic during lease renewal negotiations by ensuring commercial returns remain attractive at the centres we are in, and secure shorter terms of two to three years to retain additional flexibility in case a relocation or closure is warranted. The growth in sales and gross profit margin, together with operating leverage led to net profit after tax (NPAT) increasing 68.3% to $17.5 million (FY2020: $10.4 million) and earnings per share (EPS) increasing 66.2% to 14.2 cents per share. After accounting for the tax benefit we receive on the franchise buybacks completed over the last five years, our cash EPS was 15.5 cents up 63.2% on last year’s 9.5 cents. FY2022 KEY PRIORITIES As we look forward towards FY2022, our priorities are clear: 1. The health and safety of our team, customers, partners and the broader community is critical to minimising the impacts of COVID‑19 and ensuring we are best placed to prosper when restrictions ease; 2. We will continue to be true to our core values and culture; 3. We will further invest in our online channel and related skills and tools; 4. Our growing customer database will help us to derive new customer insights that deliver an increasingly personalised and engaging shopping experience; 5. We will selectively open new stores here in Australia and increasingly in New Zealand to take advantage of our increased brand awareness and improved financial performance across the Tasman; 6. Our focus on securing exclusive access to the latest innovative products in personal care and grooming will be maintained; 7. We will expand into new categories with new suppliers; and 8. We will remain nimble and adapt as required to the constantly changing retail environment. I would like to once again thank our team members for their dedication and passion over FY2021. The strategic priorities we established prior to COVID‑19 have enabled Shaver Shop to successfully overcome the challenges we have faced over the last 18 months and deliver exceptional financial and operational performances. These same priorities give me confidence that we are well positioned to continue to succeed in the years ahead despite the near term uncertainties we are experiencing in the COVID‑19 impacted trading environment. Thank you for your continued support. Cameron Fox Managing Director and CEO 7 Annual Report 2021 Active customer growth Dividends per share up 71% to 8.2 cents 478,681 489,843 437,114 322,671 10 8 Performance 4.2 6 4 h iG hL iG h t S 4 2 0 2.4 1.6 2.4 1.8 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 500000 400000 300000 220,381 200000 173,764 100000 0 Earnings per share up 66.2% 8.2 5.0 3.2 4.5 2.5 2.0 4.8 2.7 2.1 FY17 FY18 FY19 FY20 FY21 Interim Final 14.2 Sales ($Am) 250 200 213.7 194.9 8.5 150 142.6 167.4 155.0 7.3 5.8 6 100 50 0 FY17 FY18 Active customer growth 41.1% FY19 FY20 FY21 478,681 489,843 Online sales growth ONLINE SALES GROWTH ($A MILLIONS) 437,114 400000 70 60 300000 50 200000 40 173,764 322,671 220,381 30 100000 20 10 0 0 10.7 Mar-20 7.5% 15.3 9.9% Jun-20 20.7 12.4% 61.2 28.6% 43.4 22.3% Sep-20 Dec-20 Mar-21 Jun-21 FY18 FY19 FY20 FY21 Dividends per share up 71% to 8.2 cents FY17 71% NPAT ($ millions) 20 DIVIDENDS PER SHARE UP 71% TO 8.2 CENTS 10 17.5 15 10 9.1 4 5 2.4 1.6 0 4.2 2.4 1.8 10.4 4.8 2.7 2.1 7.2 4.5 7.4 2.5 2.0 8.2 5.0 3.2 FY17 FY18 FY19 FY20 FY21 8 6 4 2 0 15 12 9 6 3 0 500000 FY17 FY18 FY19 FY20 FY21 FY17 FY18 FY19 FY20 FY21 Earnings per share up 66.2% 15 8 Shaver Shop Group Limited 14.2 12 9 6 3 0 70 60 50 40 30 20 10 0 213.7 194.9 Interim Final Sales ($Am) 250 200 100 50 0 20 15 5 0 8.5 150 142.6 167.4 155.0 7.3 5.8 6 FY17 FY18 FY19 FY20 FY21 FY17 FY18 FY19 FY20 FY21 Online sales growth 17.5 NPAT ($ millions) 61.2 28.6% 43.4 22.3% 15.3 9.9% 10.7 7.5% 20.7 12.4% FY17 FY18 FY19 FY20 FY21 10 9.1 7.2 7.4 10.4 FY17 FY18 FY19 FY20 FY21 Active customer growth Dividends per share up 71% to 8.2 cents 478,681 489,843 437,114 322,671 500000 400000 300000 220,381 200000 173,764 100000 Dividends per share up 71% to 8.2 cents 478,681 489,843 0 Active customer growth Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 10 8 66.2% EARNINGS PER SHARE GROWTH 6 Earnings per share up 66.2% Dividends per share up 71% to 8.2 cents 8.2 Interim Final FY17 FY18 FY19 FY20 FY21 4 2.4 1.6 4.2 2.4 1.8 4.5 2.5 2.0 4.8 2.7 2.1 Sales ($Am) 213.7 194.9 167.4 155.0 150 142.6 8.2 5.0 3.2 17.5 10 8 6 4 2 0 250 200 100 50 0 20 15 5 0 61.2 213.7 28.6% FY21 17.5 FY21 10 9.1 7.2 7.4 10.4 FY17 FY18 FY19 FY20 FY21 5.0 3.2 FY21 213.7 FY17 FY18 FY19 FY20 FY21 194.9 FY20 FY21 NPAT ($ millions) 500000 400000 437,114 489,843 322,671 300000 ACTIVE CUSTOMERS Active customer growth 220,381 200000 500000 173,764 478,681 489,843 437,114 100000 400000 0 300000 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 322,671 220,381 Dividends per share up 71% to 8.2 cents 200000 173,764 10 100000 Earnings per share up 66.2% 4.2 2.4 1.8 FY18 5.8 Final 4.2 2.4 4.5 2.5 2.0 4.8 2.7 2.1 8.5 14.2 5.0 3.2 8.2 FY19 6 FY20 FY21 4.5 2.5 4.8 2.7 15 10 12 8 4 2 4 2.4 9 1.6 0 7.3 6 FY17 6 3 4 Interim 4 2.4 Sales ($Am) 2 250 0 0 Active customer growth 478,681 489,843 437,114 322,671 220,381 200000 173,764 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Earnings per share up 66.2% 14.2 15 12 9 6 3 0 8 6 4 0 4 2.4 1.6 2 15 0 12 9 Mar-20 Jun-20 Sep-20 Dec-20 8.2 14.2 Mar-21 Jun-21 1.6 FY17 1.8 FY18 2.0 FY19 2.1 FY20 4.2 4.5 7.3 Earnings per share up 66.2% 5.8 2.4 2.5 6 1.8 2.0 4.8 8.5 2.7 2.1 5.0 3.2 14.2 200 FY17 FY18 FY19 Interim Final 167.4 Online sales growth 142.6 150 155.0 70 Sales ($Am) 100 60 250 FY17 FY18 FY19 FY20 FY21 FY17 Interim Final FY18 $213.7m FY19 7.3 5.8 6 Sales ($Am) 6 FY20 8.5 FY21 200 50 50 40 0 30 150 20 167.4 FY17 FY18 155.0 142.6 $17.5m FY19 15.3 20.7 12.4% NPAT ($ millions) 100 10.7 194.9 43.4 FY20 22.3% 250 SALES ($A MILLIONS) Online sales growth 10 20 NPAT ($A MILLIONS) 9.9% 7.5% 3 70 200 60 0 8.5 150 FY17 142.6 213.7 194.9 155.0 FY18 167.4 FY19 61.2 FY20 FY21 7.3 5.8 6 50 40 30 20 10 100 Online sales growth 50 70 10.7 60 0 7.5% 20.7 12.4% 15.3 9.9% 43.4 22.3% 28.6% 61.2 FY17 FY18 FY19 FY20 0 50 0 FY17 FY18 FY19 FY20 FY21 10.4 7.2 7.4 9.1 NPAT ($ millions) 20 15 17.5 15 10 5 0 FY17 FY18 FY19 FY20 FY21 0 50 FY17 FY18 FY19 FY20 FY21 FY17 FY18 FY19 FY20 10.4 FY21 FY17 FY18 FY19 FY20 43.4 FY21 10 9.1 40 NPAT ($ millions) 7.2 7.4 Online sales growth 61.2 28.6% 43.4 22.3% 15.3 9.9% 10.7 7.5% 20.7 12.4% FY17 FY18 FY19 FY20 FY21 10.7 7.5% FY17 9.1 20.7 12.4% 15.3 9.9% 7.2 7.4 20 30 20 15 10 0 10 5 0 28.6% 17.5 22.3% 5 0 FY18 FY19 10.4 FY20 FY21 FY17 FY18 FY19 FY20 FY21 500000 400000 300000 100000 0 15 12 9 6 3 0 70 60 50 40 30 20 10 0 FY17 FY18 FY19 FY20 FY21 9 Annual Report 2021 Shaver Shop is committed to responsible business practices as reflected in our Code of Business Ethics and associated framework of corporate governance policies and business practices. We work with our internal and external stakeholders to understand the most important social and environmental issues and based on this feedback seek to continue to improve our policies, practices and operations on an ongoing basis. Corporate Sustainability 10 Shaver Shop Group Limited Social governance People and culture The Shaver Shop team is our most important asset and defines our brand values for customers each and every day. We aim to provide our employees with a flexible, supportive, healthy and safe working environment and remunerate competitively so that we attract the best and brightest for each role. We adopt and train our teams on policies and practices that encourage appropriate work and life balance, diversity, provide equal opportunity and promote our values. Shaver Shop seeks to provide a stimulating and rewarding work environment where employees can expand and refine their skills to further their careers. To this end, employees are provided with opportunities, depending on their position and performance, to participate in the following programs: • Brand Ambassador Leadership Program – led by our Retail Operations and Human Resource Directors, this program recognises and rewards the top performing store team members (when international travel is available) by introducing them to a selection of the top retailers globally so they can learn and apply those principles in Shaver Shop’s environment. Previous programs have visited Dubai, London & Los Angeles. • Assistant Store Manager Program – A two day accelerated leadership development program designed to equip staff with necessary skillsets to move into a Store Manager position. • Professional development conferences are offered (pending travel restrictions) to Area Managers and Regional Managers as part of ongoing development. Further education is subsidised at 50% of the cost for staff who take on studies associated with positions at Shaver Shop. Whilst not mandatory, we encourage our employees to take their full annual leave entitlements to ensure they are mentally and physically refreshed when at work. Health and safety The health and safety of our teams, customers, stakeholders and the broader community has always been a top priority for Shaver Shop. We provide ongoing training for our team members and have implemented a framework for incident management and risk mitigation in the workplace. Over the course of the COVID‑19 pandemic, we have adopted policies and practices in line with public health and safety guidelines and ensured our teams are trained in the latest protocols. We have regularly closed stores for a “deep clean” where there is even the slightest concern of exposure and ensure our stores have appropriate hygiene and other supplies (e.g. masks, hand sanitiser etc…) to minimise the risk of transmission. We have also conducted hundreds of phone and video calls to staff members as part of our well‑being initiatives to ensure our teams are best managing through the unique impacts of pandemic on each individual. Community involvement Shaver Shop supports staff members who work with charitable organisations whenever possible. We encourage our teams to give back to their communities by permitting team members to take paid leave to pursue their charitable work. Shaver Shop recognises that our corporate and social responsibilities reside in both our own direct activities and our supply chains, and seeks to purchase products and services that are ethically produced. We look for suppliers that demonstrate a commitment to implementing policies and practices consistent with, and complementary to, our own. We regularly evaluate modern slavery risks in our supply chain and are implementing systems and processes that will simplify, prioritise and manage these risks in the future. Environment Shaver Shop is committed to minimising the impact of its operations on the environment and to working with our suppliers to continually reduce our carbon footprint. To this end, Shaver Shop has taken steps to reduce its use of electricity, we recycle (to the extent possible) all cardboard packaging and paper within our stores, we encourage team members to limit paper use in our support office and within stores (including by offering customers e‑receipts) and limit the amount of travel undertaken by team by using new electronic video conferencing technologies. We are also working with suppliers to ensure the packaging of the products we sell is made either from recycled products or can be recycled. We understand that many of our suppliers are proactively reviewing their packaging to reduce the impact on the environment. We have trialled a recycling program at stores for customers to return their used shavers and other men’s grooming products. In FY2022, we are working with a global supplier on a recycling program that we intend will reduce the waste going to landfill by allowing customers to return their old and unwanted power oral care products to our stores. We intend to continue investigating and implementing options with our suppliers so that used or damaged products can be recycled or repurposed. 11 Annual Report 2021 Consolidated Financial Report F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 2 1 SHAVER SHOP GROUP LIMITED ABN: 78 150 747 649 12 Shaver Shop Group Limited D I R E C T O R S ’ R E P O R T 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 2021. 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 through Shaver Shop’s corporate owned stores and franchise store networks as well as online through its websites. No significant change in the nature of these activities occurred during the year. By the end of the financial year, all 121 Shaver Shop stores across Australia and New Zealand were fully corporate owned with no franchised stores remaining. 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 Debra Singh was appointed as a director on 2 September 2020. 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: Broderick Arnhold Independent Chair, Non‑Executive Director 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 Chairman of iSelect Limited, he was the CEO of iSelect Limited and prior to that the CEO of Melbourne Racing Club for four years. He 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. Other current listed directorships Chairman, iSelect Limited Non‑Executive Director, Bailador Technology Investments Limited Former listed directorships in last 3 years None Special responsibilities Chair of the Board Member of the Audit and Risk Committee Member of the Nomination and Remuneration Committee Interests in shares and options Ordinary Shares – Shaver Shop Group Limited 2,000,000 13 Annual Report 2021 D I R E C T O R S ’ R E P O R T Continued Cameron Fox Chief Executive Officer and Managing Director Expertise and experience Cameron has over 20 years’ experience working across the personal care and grooming industry. Cameron joined Shaver Shop as General Manager in 2006 before being appointed to the position of Chief Executive Officer in July 2008. Cameron previously worked for Gillette Australia for a period of 10 years. During his time at Gillette Australia, Cameron held various roles, including Associate Product Manager, Business Analyst, National Account Manager and National Sales Manager. Other current listed directorships Former listed directorships in last 3 years None None Special responsibilities Managing Director Interests in shares and options Chief Executive Officer Ordinary Shares – Shaver Shop Group Limited Unvested LTI Shares Total 2,438,785 1,683,873 4,122,658 Craig Mathieson Non‑Executive Director Expertise and experience Craig became a director of Shaver Shop Pty Ltd in June 2011. Craig is the Chief Executive Officer of the Mathieson Group which has 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 listed directorships Former listed directorships in last 3 years None None Special responsibilities Chair of the Audit and Risk Committee Interests in shares and options Ordinary Shares – Shaver Shop Group Limited 4,820,004 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 listed directorships Former listed directorships in last 3 years None None Special responsibilities Member of the Remuneration and Nomination Committee Interests in shares and options Ordinary Shares – Shaver Shop Group Limited 3,258,004 14 Shaver Shop Group Limited Trent Peterson Non‑Executive Director Expertise and experience Mr Peterson is a Managing Director at Catalyst Investment Managers and CDCM, and has over 20 years’ experience as a company director and private equity investor. He is currently a Director of Adairs Limited, Dusk Group Limited and Universal Store Holdings Limited. He is a former Director of Just Group, Max Fashions, SkyBus, Global Television, EziBuy, and Taverner Hotel Group. Prior to joining Catalyst, Mr Peterson worked for NM Rothschild & Sons and PricewaterhouseCoopers. Mr Peterson qualified as a Chartered Accountant and graduated from the University of Melbourne with a Bachelor of Commerce. Other current listed directorships Adairs Limited dusk Group Limited Universal Store Limited 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 547,619 Debra Singh Non‑Executive Director Expertise and experience Debra Singh has a wealth of retail experience gained while working within the Woolworth’s group across supermarkets, operations and consumer electronics. Debra has also held key leadership roles as COO and Group CEO at Fantastic Holdings Limited as well as Group CEO Household Goods at Greenlit Brands. Other current listed directorships Former listed directorships in last 3 years None None Special responsibilities Member of the Audit & Risk Committee Interests in shares and options Ordinary Shares – Shaver Shop Group Limited 100,000 Lawrence Hamson Chief Financial Officer and Company Secretary Expertise and experience Lawrence joined Shaver Shop in April 2016 immediately prior to the Company’s listing on the ASX. He is a Chartered Accountant (Canada) and Chartered Financial Analyst with more than 20 years experience in both public practice and within industry. For the 9 years prior to joining Shaver Shop, Lawrence acted as Chief Financial Officer for both private and public companies, most recently with Dun & Bradstreet as its CFO for the Asia Pacific region. He has experience across venture capital with Rothschild as well as corporate communications having been Mayne Group Limited’s General Manager Corporate Relations through its demerger into two ASX listed entities – Symbion Healthcare Limited and Mayne Pharma Limited. Interests in shares and options Ordinary Shares – Shaver Shop Group Limited Unvested LTI Shares Total 642,159 833,550 1,475,709 15 Annual Report 2021 D I R E C T O R S ’ R E P O R T Continued MEETINGS OF DIRECTORS During the financial year, 14 meetings of directors were held, 6 meetings of the Audit & Risk Committee were held and 2 meetings of the Nomination and Remuneration Committee were held. Attendances by each director who was a member of the Board and relevant subcommittee 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 Broderick Arnhold Cameron Fox Craig Mathieson Trent Peterson Brian Singer Debra Singh 14 14 14 14 14 12 14 14 14 14 14 10 6 – 6 6 – 4 6 – 6 6 – 4 2 – – 2 2 – 2 – – 2 2 – DIVIDENDS PAID OR RECOMMENDED The Directors have announced a fully‑franked final dividend of 5.0 cents per share or ($6.4 million) to be paid on 23 September 2021 (2020: 2.7 cents per share fully franked or $3.3 million). The Directors announced an interim dividend of 3.2 cents per share fully franked ($4.0 million) in February 2021. The dividend was paid on 25 March 2021. The FY2020 interim dividend of 2.1 cents per share (80% franked) was cancelled and subsequently replaced by an equivalent Special Dividend of 2.1 cents per share (80% franked) that was paid in July 2020. The combined interim and final dividend payments for FY2021 represent the payout of approximately 60% of the Company’s FY2021 reported net profit after tax. 2021 OPERATING AND FINANCIAL REVIEW NON‑IFRS MEASURES The Directors’ Report includes references to normalised results. The normalised results have been derived from Shaver Shop’s statutory accounts and adjusted to a normalised basis to more appropriately reflect the ongoing operations of Shaver Shop. 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. Non‑IFRS measures contained within this report are not subject to audit or review. 16 Shaver Shop Group Limited GROUP RESULTS Sales Gross profit Gross margin % Franchise and other income Operating expenses Operating expenses % of sales (costs of doing business) Earnings before interest, tax depreciation & amortization (EBITDA) EBITDA margin Depreciation & amortization Earnings before interest & tax (EBIT) EBIT margin Interest expense Income tax expense Net profit after tax (NPAT) attributable to owners Earnings per share (EPS) – basic (cents) Cash earnings per share (Cash EPS) – basic (cents) Dividends per share (cents) – declared* Reported 2021 $000 Reported 2020 $000 Increase (Decrease) % 213,667 194,924 94,681 44.3% 891 81,622 41.9% 1,056 (55,148) (52,341) 25.8% 40,424 18.9% 26.9% 30,337 15.6% (14,066) (13,499) 26,358 12.3% (1,627) (7,258) 17,473 14.2 15.5 8.2 16,838 8.6% (2,078) (4,378) 10,382 8.5 9.5 4.8 9.6% 16.0% 5.7% ‑15.6% 5.4% ‑4.1% 33.2% 21.2% 4.2% 56.5% 43.0% ‑21.7% 65.8% 68.3% 66.2% 63.2% 70.8% * Reflects the period from which the dividends were declared – not the financial period in which they were paid. The FY2021 final dividend is to be paid in September 2021. In FY2021, the Company grew consolidated revenue by 9.6% to $213.7 million (FY2020 – $194.9 million). The growth in sales was driven primarily by: • FY2021 like for like1 store sales growth of 8.6%. This sales growth was supported by online sales growth of 41.1% over the prior corresponding period. Online sales now represent 28.6% of total sales for the Group. Like for like sales growth was supported by the ongoing trend towards Do‑It‑Yourself (DIY) personal care and grooming solutions, the increasing acceptance of online shopping, as well as the need for consumers to seek alternatives to salon and barber shop services during periods of government imposed restrictions due to COVID‑19; and • The acquisition of the remaining 6 franchise stores in February 2021. These stores represented one large group based in NSW and consisted of the following stores, Blacktown, Burwood, Castle Towers, Chatswood, Galeries and Parramatta. Shaver Shop has 121 stores across Australia and New Zealand which are now all fully corporate‑owned. The sales from these additional 6 stores was partially offset by the permanent closure of two stores (Plenty Valley, VIC and Belrose, NSW) in H1 FY2021. Gross profit margins increased 240 basis points to 44.3% in FY2021 (FY2020 – 41.9%). The increase in gross profit margin was due to a shift in category mix over the first six months of the year towards Shaver Shop’s higher margin and largely exclusive Hair Clipping, Trimming and Body Grooming categories as well as less aggressive pricing and promotional strategies across the FY2021 year. 1 Like for like sales are sales for those stores that were owned and operated by Shaver Shop for all of FY2020 and FY2021. It therefore excludes any franchise buy‑backs, new stores or stores that were permanently closed in FY2020 or FY2021. Where any like for like stores were temporarily closed for in‑store sales (e.g. due to COVID‑19 restrictions) for any day in FY2020 or FY2021, the in‑store sales (if any) and any online sales for those days have been excluded from like for like sales in both FY2020 and FY2021. 17 Annual Report 2021 D I R E C T O R S ’ R E P O R T Continued Franchise and other revenue decreased 15.6% or $0.2 million to $0.9 million due to lower franchise royalties being earned following the buy‑back of the last six franchised stores in early February 2021. As at 30 June 2021, Shaver Shop owned and operated all 121 stores across its store network (30 June 2020: 6 franchised stores). Shaver Shop’s total operating expenses increased 5.4% to $55.1 million (FY2020: $52.3 million), primarily due to: • The full period impact of additional national support office roles as well as an increase in employment costs in Q4 FY2021 (versus the prior year), resulting from Shaver Shop reverting to normal wages on 1 July 2020. In Q4 FY2020, due to the uncertainty caused by COVID‑19, Shaver Shop Support Office employees voluntarily reduced their salaries and stores reduced store rosters hours due to government imposed trading restrictions relating to COVID‑19; • The increase in the number of stores in the network following the buyback of the last 6 franchised stores in February 2021; and • Increased postage and online transactional costs resulting from the significant increase in online sales. These increases in operating expenses were partially offset by the following operating expense reductions in FY2021: • Rent relief provided by landlords of approximately $0.8 million in FY2021 during periods where stores were closed or foot traffic was negatively impacted over an extended period; and • Lower store rosters and associated payroll costs of predominantly across Victorian stores from August 2020 through October 2020 due to the Victorian government’s lockdown restrictions associated with COVID‑19. Shaver Shop did not receive any government wage subsidies (JobKeeper) in FY2021. Overall, Shaver Shop’s costs of doing business as a percentage of total sales decreased 110 basis points to 25.8% in FY2021 (FY2020 – 26.9%). Shaver Shop’s EBIT increased 56.5% to $26.4 million compared to $16.8 million generated in the prior corresponding period. Shaver Shop generated net profit after tax of $17.5 million in FY2021 representing an increase of 68.3% on the net profit after tax of $10.4 million generated in the prior corresponding period. Shaver Shop receives a tax deduction over five years for the cost of franchise right terminations that occur through its franchise buy‑back program. This leads to income tax payable being lower than income tax expense for the five year tax period following each buy‑back. Based on the franchise buy‑backs completed to 30 June 2021, the reduction in cash tax payable for FY2021 and each subsequent financial year arising as a result of the franchise buy‑back tax deduction is set out in the table below. (at 30 June 2021) Reduction in income tax payable FY2021 $000 FY2022 $000 FY2023 $000 FY2024 $000 FY2025 $000 1,690 1,230 988 955 795 After adjusting for the tax benefit associated with franchise buybacks, Shaver Shop’s Cash EPS was 15.5 cents per share (FY2020 – 9.5 cents), an increase of 63.2% over the prior corresponding year. LIQUIDITY AND CAPITAL MANAGEMENT Shaver Shop has an undrawn $30.0 million, multi‑option debt facility with an additional $1.0 million facility to support bank guarantees. The facility has a two year term, expiring on 31 July 2022. The Company’s debt facility has three key covenants: the leverage ratio (Gross Debt / EBITDA); the fixed coverage ratio ((Occupancy Costs + EBITDA)/(Occupancy Costs + Interest expense); and the net worth ratio ((Total assets – Total liabilities) / Total assets). All banking covenants were well within the bank’s thresholds for FY2021. Shaver Shop generated $36.0 million in operating cash flow in FY2021 (FY2020: $38.8 million). This operating cash flow was used to acquire the last 6 franchise stores in February 2021 for approximately $14.8 million (including stock on hand). It was also used to fund the payment of the three dividends that were paid in FY2021 amounting to $9.9 million. At 30 June 2021, Shaver Shop had not drawn any debt under the facility (FY2020 – nil) and had net cash at bank of $7.4 million (FY2020: $12.6 million). 18 Shaver Shop Group Limited COVID‑19 IMPACTS AND RISK MITIGATION MEASURES INITIATED While the retail environment remains uncertain, after a short period of soft sales results in early to mid‑March 2020, COVID‑19 subsequently contributed to increased demand across most of FY2021 for Shaver Shop’s products as consumers looked for cost‑effective personal care and grooming solutions that can be used in the comfort of their home. Short term lockdowns do not appear to drive the same level of demand for DIY personal care solution as longer‑term lockdowns, likely due to the extended closure of beauty salons and barbers shops and the need for men, women and families to look for alternative grooming options. As a result of strong sales growth, Shaver Shop did not qualify for, and did not receive any, government wage subsidies (e.g. JobKeeper) in Australia or New Zealand across FY2021. Despite Shaver Shop’s strong financial performance in FY2021, the Company has implemented a number of measures to mitigate the risk of COVID‑19 on its business. These measures include, but are not limited to: • Implementing improved health and safety policies, systems and procedures in all of its locations to mitigate the risk of infection to staff and customers; • Reduced inventory holdings (compared to long term averages) across its store network to increase stock turns and improve liquidity; • Shorter store opening hours and reduced rostered hours in‑store to reflect changes in store and centre foot traffic; • Continuing investments in Shaver Shop’s online and omni‑retail initiatives that support the ability to generate and fulfill online sales to customers even when stores are closed; • Steps to increase the flexibility of Shaver Shop’s online fulfilment model by maintaining a high‑volume third‑party warehouse facility in Victoria which can be used as required; and • Working with suppliers to mitigate supply constraints and switch to alternative products where possible. These activities and more have led to Shaver Shop not having any gross debt across FY2021. For additional financial security, Shaver Shop has an undrawn debt facility of $30.0 million. STRATEGY AND KEY DRIVERS OF GROWTH 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 that cater for these changing personal grooming and beauty trends. 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 specialty 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. In FY2021, 26 of Shaver Shop’s top 30 products by sales value were sold exclusively by Shaver Shop in Australia. 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. Organic growth both online and in‑store (omni retail 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 ongoing investments in its omni‑retail capabilities (across both online channels and in‑store) which continue to improve as well as establishing a customer experience program to attract and support returning customers. Shaver Shop is also undertaking a deliberate store refit strategy to refresh the look and feel of several of its key stores. 19 Annual Report 2021 D I R E C T O R S ’ R E P O R T Continued Continued product innovation Shaver Shop benefits as consumer beauty and grooming trends evolve and require new and changing tools to help customers achieve their desired look. 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. Store rollout Shaver Shop aims to grow total store network numbers across Australia and New Zealand to approximately 130‑135 within the next three years. Shaver Shop continues to apply prudence to new store openings given the variability in foot traffic at shopping centres experienced over the last 24 months as well as consumer trends to continue purchasing through online channels. Subject to the forecast financial returns meeting appropriate hurdle rates, the Company expects to open these additional stores in Australia and New Zealand. Shaver Shop also intends to evaluate opportunities to expand into international markets through both online and in‑store channels. NZ business growth Shaver Shop opened its first three New Zealand stores in mid‑2014. Since that time, the New Zealand network has grown to seven locations across both the north and south islands. With recent in‑store and online improvements together with increased brand awareness and recognition in New Zealand, the business has now reached sufficient critical mass to drive economies of scale and profitability. Shaver Shop expects to drive further growth in New Zealand through the opening of additional stores as well as ongoing improvements in its omni‑retail offering. The recent success of the New Zealand operation also provides additional confidence to evaluate additional regions for international expansion. Market growth in personal care and grooming solutions Shaver Shop operates in the personal care, beauty and grooming solutions market. This market has been growing for many years as new and innovative do‑it‑yourself (DIY) products enable consumers to perform their daily beauty regime in the comfort of their home rather than going to a salon. In addition, over the last 10‑20 years the prevalence and acceptance of men having a beauty regime (as women do) has increased. This has resulted in men buying and using more grooming and beauty tools. Management expects that these trends will continue over the long term. 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: 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 and New Zealand. Australian and New Zealand economic conditions may worsen, including as a result of the impact of COVID‑19 and associated government imposed trading restrictions, the 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. COVID‑19 related impacts COVID‑19 voluntary and legislated restrictions may impact Shaver Shop’s ability to trade for an extended period in some or all of its locations for a period of time. It may also impact Shaver Shop’s ability to fulfil online orders to customers. Whilst Shaver Shop would take steps to reduce the financial and operational effects of COVID‑19 including seeking government support (where applicable) and reducing its cost base, Shaver Shop’s profitability, liquidity and financial position may be negatively impacted by the prolonged closure of its stores or inability of Shaver Shop to fulfil online orders. As government COVID‑19 restrictions ease, those customers who have purchased DIY personal care and grooming solutions from Shaver Shop or other retailers may choose to go back to the salon or barber shop rather than continuing to use the products purchased from Shaver Shop. 20 Shaver Shop Group Limited 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. 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 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 Australia. Seasonality of trading patterns Shaver Shop’s sales are subject to seasonal patterns. In FY2021, the contribution of sales for the first half to total sales for the full year was approximately 57.9% (FY2020 – 55.2%). The seasonality of Shaver Shop’s sales towards the first half of the financial year is largely due to the pre‑Christmas and Boxing Day trading periods 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 materially 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 likely 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/or a failure of Shaver Shop to correctly judge the change in consumer preferences or poor quantification of purchases 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 its product categories. 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. Product sourcing may be disrupted (including due to COVID‑19) Shaver Shop’s products are sourced from third party suppliers of major hair removal, hair care, personal care and other shaving brands. In FY2021, approximately 91% (FY2020 – 93%) of Shaver Shop’s total network sales came from products sourced from its top ten suppliers. Shaver Shop’s largest supplier constitutes approximately 29.5% (FY2020 – 27%) of all sales, with the next two largest suppliers contributing approximately 22% (FY2020 – 22%) and 16% (FY2020 – 18%) of total sales. Whilst 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. 21 Annual Report 2021 D I R E C T O R S ’ R E P O R T Continued 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. Shaver Shop has a limited number of fixed contracts in place with suppliers relating to rebates and contribution income. Most suppliers who provide 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. Breach of industrial practices Shaver Shop, like all retailers, is exposed to industrial relations risk that can impact the reputation and financial performance of its business. The Company has governance programs in place to mitigate this risk including remuneration oversight, training, policies and procedures. Cyber & information security Shaver Shop, like most retailers, relies heavily on technology for the operation of both its stores as well as its online sales channels. The rapid changes in technology and data management, creates challenges for all companies to maintain a robust and resilient technology network as well as a strong cyber security program. Shaver Shop has implemented strategies and systems with the aim of protecting against deliberate exploitation of computer systems, data and networks by internal and external parties. Cyber security is constantly evolving and is a significant risk to all retailers and Shaver Shop will need to maintain vigilance and adopt appropriate responses to protect its information assets. 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 the 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 5.0 cents per share to shareholders of record on 9 September 2021. The dividend payment date is 23 September 2021. 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. 22 Shaver Shop Group Limited FUTURE DEVELOPMENTS AND OUTLOOK Year to date (YTD) trading in FY2022 has been volatile and heavily impacted by government mandated lockdowns across NSW, VIC, QLD and now NZ. Between 1 July 2021 and 27 August 2021, Shaver Shop lost 2,844 in‑store trading days (or 41% of available in‑store trading days) due to government trading restrictions (1 July 2020 to 27 Aug 2020 – 793 in‑store trading days lost or 10.4% of available in‑store trading days lost to lockdowns). With that in context, Shaver Shop provides the following sales update for the period from 1 July 2021 to 27 August 2021: FY22 YTD Growth Total sales* Like for like** sales (inc online sales) Online sales growth vs FY2021 ‑7.3% +0.5% vs FY2020 +15.8% +28.7% +52.8% +368.1% * YTD total sales are down 7.3% vs FY2021, which equates to approximately ‑$2.3 million and YTD total sales are up 15.8% vs FY2020, which equates to approximately +$4.0 million vs FY2020. ** Like for like sales are sales for those stores that were owned and operated by Shaver Shop for all of FY2020 and FY2021. It therefore excludes any franchise buy‑backs, new stores or stores that were permanently closed in FY2020 or FY2021. Where any like for like stores were temporarily closed for in‑store sales (e.g. due to COVID‑19 restrictions) for any day in FY2020. FY2021 or FY2022, the in‑store sales (if any) and any online sales for those days have been excluded from like for like sales in all periods. It should be noted that comparative trading performance in July 2020 was very strong with exceptional gross profit margins. Recent sales trends in NSW and VIC from mid to late August are analogous to Shaver Shop’s experience at the start of the pandemic with rising demand for DIY hair removal and personal care solutions as lockdowns in these States have extended. Category mix and promotional plans are also supporting healthy gross profit margins (albeit lower than the comparative result in FY2021 but higher than the FY2020 comparative result). Shaver Shop expects demand for DIY hair removal and personal care products to remain elevated and Shaver Shop intends to capture more of that demand as our stores open in due course. In addition, Shaver Shop’s FY2022 sales and earnings will reflect the full period contribution from the six franchise buybacks acquired in early February 2021. Given the uncertainty due to COVID‑19 and associated government imposed trading restrictions, as well as the importance of Christmas and Boxing Day sales to our annual financial results, it is not appropriate to provide FY2022 sales or profit guidance for Shaver Shop at this time. 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, are satisfied that the provision of non‑audit services during the year are 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 • 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 28 to the audited financial statements. 23 Annual Report 2021 D I R E C T O R S ’ R E P O R T Continued AUDITORS INDEPENDENCE DECLARATION The lead auditor’s independence declaration for the year ended 30 June 2021 has been received and can be found on page 40 of the consolidated financial 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. 24 Shaver Shop Group Limited 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 2020 to 30 June 2021. This Remuneration Report forms part of the Directors’ Report and has been audited in accordance with the Corporations Act 2001. Our remuneration report for the 2020 financial year received positive shareholder support at the 2020 AGM, with 99.67% of votes in favour of adoption. (A) SUMMARY GROUP FINANCIAL AND OPERATIONAL PERFORMANCE Shaver Shop delivered record financial performance for shareholders in FY2021 evidenced by: • Sales growth of 9.6% to $213.7 million (FY2020 – $194.9 million) supported by online sales growth of 41.1% (FY2020 – 103.5%) to $61.2 million • Cost management leading to operating expenses as a percentage of sales declining by 110 basis points to 25.8% • Strong working capital management leading to strong operating cash flow of $36.0 million • Continuing strong customer service metrics • Comparable net profit after tax (NPAT) of $17.5 million up 68.3% on FY2020 NPAT of $10.4 million Importantly, Shaver Shop did not receive any financial support in FY2021 under the Australian government’s JobKeeper program. SHORT‑TERM INCENTIVE (STI) The Company delivered an exceptionally strong financial performance in FY2021 resulting in the maximum STI award being granted to executive Key Management Personnel (KMP or Senior Executives) by Shaver Shop’s board of directors as a result of exceeding the predetermined stretch earnings targets for the business. In FY2021, these targets were based on underlying NPAT of the Company. LONG‑TERM INCENTIVE (LTI) Tranche 3 of the FY2018 LTI grant reached the end of its three‑year performance period on 30 June 2020. The Company’s EPS compound annual growth rate (CAGR) was 6.2% for this performance period and accordingly 31.2% of the EPS Tranche 3 shares has vested with Senior Executives. The achieved TSR CAGR for the FY2018 Tranche 3 LTI shares was 21.5% and accordingly 81.6% of the FY2018 TSR Tranche 3 LTI shares have vested with qualifying participants. The shares also had a service condition which required LTI participants to have continuous tenure through 30 June 2021. Accordingly, this Service Condition has now been met and the FY2018 Tranche 3 shares that met their Performance Conditions have now vested with the participants. Tranche 2 of the FY2019 LTI grant reached the end of its two‑year performance period on 30 June 2020. The Company’s EPS CAGR over this period was 22.1% exceeding the maximum threshold for vesting and accordingly all Tranche 2 EPS shares (125,000 shares) for Senior Executives vested subject to the relevant service condition being met. The TSR CAGR for Tranche 2 of the FY2019 LTI grant was 84.0% and exceeded the maximum threshold for vesting and accordingly, 100% of the Tranche 2 TSR shares (291,666 shares) vested with Senior Executives subject to the relevant service condition being met. The FY2019 Tranche 1 and Tranche 2 shares had a service condition which required LTI participants to have continuous tenure through 30 June 2021. Accordingly, this Service Condition has now been met and the FY2019 Tranche 1 and Tranche 2 shares that met their Performance Conditions have now vested with the participants. Tranche 3 of the FY2019 LTI grant reached the end of its three‑year performance period on 30 June 2021. The EPS hurdles for Tranche 3 of the FY2019 LTI grant exceeded the maximum EPS performance hurdle, and accordingly, subject to meeting the tenure requirement (30 June 2022), 100% of the Tranche 3 EPS shares (125,000 shares) will vest with Senior Executives. The determination of the TSR CAGR for Tranche 3 of the FY2019 LTI grant is unable to be calculated at the time of writing this report as it is based on the 5 day volume weighted average price (VWAP) of Shaver Shop’s shares in the 5 days after release of the FY2021 financial results. 25 Annual Report 2021 D I R E C T O R S ’ R E P O R T Continued Tranche 1 of the FY2020 LTI grant reached the end of its two‑year performance period on 30 June 2020. The EPS CAGR for Tranche 1 of the FY2020 LTI grant was 44.1% and exceeded the maximum EPS performance hurdle and accordingly, subject to the tenure requirement being met (30 June 2022), 100% of the Tranche 1 EPS shares (135,000 shares) will vest with Senior Executives. The TSR CAGR for Tranche 1 of the FY2020 LTI grant was 87.5% and accordingly, subject to the tenure requirement being met (30 June 2022), 100% of the Tranche 1 TSR shares (314,998 shares) will vest with Senior Executives. Tranche 2 of the FY2020 LTI grant reached the end of its two‑year performance period on 30 June 2021. The EPS CAGR for Tranche 2 of the FY2020 LTI was 53.1% and exceeded the maximum EPS performance hurdle. Accordingly, subject to meeting the tenure requirement (30 June 2022), 100% of the FY2020 Tranche 2 EPS shares (135,000 shares) will vest with Senior Executives. The determination of the TSR CAGR for Tranche 2 of the FY2020 LTI grant is unable to be calculated at the time of writing this report as it is based on the 5 day volume weighted average price (VWAP) of Shaver Shop’s shares in the 5 days after release of the FY2021 financial results. Tranche 1 of the FY2021 LTI grant reached the end of its one‑year performance period. The EPS CAGR for Tranche 1 of the FY2021 LTI grant was 66.2% and exceeded the maximum EPS performance hurdle. Accordingly, subject to the tenure requirement being met (30 June 2023), 100% of the FY2021 Tranche 1 EPS shares (140,000 shares) will vest with Senior Executives. The TSR CAGR for Tranche 1 of the FY2021 LTI grant is unable to be calculated at the time of writing this report as it is based on the 5 day VWAP of Shaver Shop’s shares in the 5 days after the release of the FY2021 financial results. (B) 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 Craig Mathieson Trent Peterson Brian Singer Independent, Non‑Executive Chairman Independent, Non‑Executive Director Independent, Non‑Executive Director Independent, Non‑Executive Director Debra Singh (appointed 2 September 2020) Independent, Non‑Executive Director Senior Executives Cameron Fox Lawrence Hamson Philip Tine Chief Executive Officer (CEO) and Managing Director Chief Financial Officer (CFO) and Company Secretary Retail Director (C) REMUNERATION OVERVIEW The Board recognises that the performance of the Group depends to a large extent on the quality and motivation of the Shaver Shop team, including the Senior Executives and our 749 team members (2020: 757) 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. In FY2021, the primary performance mechanism for determining whether Senior Executives Short Term Incentive Plan (STIP) are paid, was the Company’s Net Profit After Tax (NPAT) having regard to preset growth objectives relative to NPAT for FY2020. The key measure for determination of the STIP was changed to NPAT in FY2021 due to the implementation of the new lease accounting standard (AASB 16 – Leases) which meant EBITDA was no longer as 26 Shaver Shop Group Limited relevant as a performance metric for the Group. In FY2021, in recognition of the differential performance of the business in FY2020 as a result of COVID‑19, and the difficulty in forecasting for a full 12 months at the time the targets were set, the STIP was divided into three performance periods with one‑third of the annual STI attributable to each performance period: 1.) H1 FY2021 NPAT growth versus H1 FY2020; 2.) H2 FY2021 NPAT growth vs H2 FY2020; and, 3.) FY2021 annual NPAT growth vs FY2020. Having regard to the exceptional NPAT performance for Shaver Shop in FY2021 of $17.5 million, up 68.3% on the previous record Group NPAT of $10.4 million achieved in FY2020, the targets were met or exceeded and the Board awarded the maximum STI to Senior Executives in FY2021. The Board believes the STIP outcomes were fair and appropriate and reflect the alignment between shareholders’ interests and the Company’s remuneration practices and policies. In terms of its Long Term Incentive Plan (LTIP), in FY2021 Shaver Shop granted 2,350,000 shares to participants in the LTIP. The LTIP share allocations are subject to Service, Total Shareholder Return (TSR) and Earnings Per Share (EPS) vesting conditions over one, two and three year performance periods which are outlined in further detail below. The Group also offered offsetting limited recourse loans 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. (D) 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. Shaver Shop’s Nomination and Remuneration Committee considers both the statutory and normalised results (where appropriate) for the business in evaluating performance against key metrics. The following table provides a summary of the Company’s statutory financial performance from FY2016 to FY2021. The results for FY2016 were prior to the Shaver Shop’s Initial Public Offering on 1 July 2016. Statutory FY2021 Result $000 213,667 40,424 Statutory FY2020 Result $000 194,924 30,337 Statutory FY2019 Result $000 Statutory FY2018 Result $000 Statutory FY2017 Result $000 Statutory FY2016 Result $000 167,437 154,937 142,568 106,711 12,530 12,170 14,870 7,461 17,473 10,382 6,670 6,555 8,994 3,854 14.2 7,261 5.9 $1.00 8.5 5,659 4.6 $0.70 5.5 5,399 4.5 $0.42 5.3 5,252 4.2 $0.45 7.2 2,001 1.6 $0.64 4.6 18,175 21.6 N/A Revenue EBITDA* Net Profit After Tax (NPAT) Basic earnings per share (cents) Dividends declared Dividends per share declared (cents) Year end share price ($) For the financial year ended 30 June 2021, the Company’s NPAT increased by 68.3% to $17.5 million and in doing so, significantly exceeded the Company’s internal targets for FY2021. Please note that Shaver Shop adopted the new accounting standard for leases (AASB16 – Leases) on 1 July 2019. In accordance with the transition provisions to this new accounting standard, prior year financial statements were not restated. Accordingly, rental expenses relating to Shaver Shop’s corporate store network were included in operating expenses and EBITDA up to and including Shaver Shop’s FY2019 result. For the FY2020 and FY2021 financial years, in accordance with AASB 16 Shaver Shop records base rent payments associated with its store portfolio through depreciation and interest on the profit and loss statement. Further detail regarding this accounting treatment can be found in the Notes to the Consolidated Financial Statements. Due to the change in accounting standard, from FY2020 Senior Executive STI targets were amended to be based on NPAT rather than EBITDA. 27 Annual Report 2021 D I R E C T O R S ’ R E P O R T Continued % OF MAXIMUM STI AWARDED VS NORMALISED NPAT The graph below illustrates the percentage of the maximum available STI that was awarded to Senior Executives for each financial year (since listing on the ASX) versus the normalised NPAT for the Company. s n o i l l i m A $ 20 18 16 14 12 10 8 6 4 2 0 9.1 7.2 7.4 10.4 17.5 100 90 80 70 60 50 40 30 20 10 0 d e d r a w A I T S x a M f o % FY17 FY18 FY19 FY20 FY21 Normalised NPAT % of Max STI Award LONG TERM INCENTIVE PLAN OUTCOMES FOR FY2021 In each grant year, under the terms of the LTIP, shares are issued to participants that have three tranches. The tranches have one year, two year and three year performance periods. For each tranche, 70% of the shares issued are subject to TSR performance hurdles and 30% are subject to EPS performance hurdles. The base share price used for calculating the TSR performance hurdle is equivalent to the 5 day VWAP immediately prior to the Grant Date. The ending share price for the TSR performance hurdle is calculated using the 5 day volume weighted average share price (VWAP) of Shaver Shop’s shares following the release of the Company’s results for the relevant performance period. As a result, the VWAP of the Company’s shares for performance periods ending on 30 June 2021 is not known at the time of writing this report and therefore no vesting has been assumed for shares with TSR performance hurdles ending in FY2021. Vesting percentages are only shown in the table below where both the performance conditions and service conditions related to a tranche have been achieved. EPS CAGR (30% of tranche shares) TSR CAGR (70% of shares) Perfor‑ mance Period Starting Perfor‑ mance Period Ending LTI shares granted to KMP Perfor‑ mance outcome Service Condition FY2018 FY2018 30 Jun 20 383,333 –19.6% FY2018 FY2019 30 Jun 20 383,333 –8.8% Vested Forfeited Perfor‑ mance outcome 0% 0% 100% –29.0% 100% –4.8% Vested Forfeited 0% 0% 100% 100% 81.6% 18.4% 21.5% 42.3% 84.0% 100% 100% 87.5% 0% 0% 0% 0% FY2018 FY2020 30 Jun 21 383,334 FY2019 FY2019 30 Jun 21 383,333 FY2019 FY2020 30 Jun 21 383,333 FY2019 FY2021 30 Jun 22 383,334 FY2020 FY2020 30 Jun 22 449,998 FY2020 FY2021 30 Jun 22 450,001 FY2020 FY2022 30 Jun 23 450,001 6.2% 3.5% 22.1% 34.4% 44.1% 53.1% FY2021 FY2021 30 Jun 23 466,665 66.2% FY2021 FY2022 30 Jun 23 466,667 FY2021 FY2023 30 Jun 24 466,668 31.2% 68.8% 0% 100% 100% 0% 0% 0% 0% 0% 0% 0% 0% 0% 28 Shaver Shop Group Limited The following share tranches have met the required performance thresholds as at the date of this report, however, have not yet met the required service condition. Performance Period Starting Performance Period Ending FY2019 FY2020 FY2020 FY2021 FY2021 FY2020 FY2021 FY2021 Tranche Service Condition EPS Shares Granted EPS Shares to Vest TSR Shares Granted TSR Shares to Vest* Tranche 3 30 Jun 22 125,000 125,000 291,667 Tranche 1 30 Jun 22 135,000 135,000 314,998 314,998 Tranche 2 30 Jun 22 135,000 135,000 315,001 Tranche 1 30 Jun 22 140,000 140,000 326,665 It is anticipated that the FY2019 Tranche 3 and FY2020 Tranche 2 TSR shares will meet their vesting conditions in full. It is uncertain whether the FY2021 Tranche 1 TSR shares will also meet their vesting conditions. (E) 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 support office location as well as year round training provided across the country. 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 national 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: a. Simplicity: We seek to ensure remuneration arrangements are simple, and can be easily understood by both the Senior Executives and other key stakeholders. b. 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. c. 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. d. 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. e. 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. 29 Annual Report 2021 D I R E C T O R S ’ R E P O R T Continued f. 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 deliberate in line with our Core Competencies. g. 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 to business strategy. (F) 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 an 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. (G) SENIOR EXECUTIVE REMUNERATION 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 The proportion of remuneration between fixed and variable (i.e. at risk) for a Senior Executive is determined after consideration of the seniority of the role, the responsibilities of the role for driving business performance and responsibilities for developing and implementing business strategy. Element Purpose Fixed Remuneration Provide competitive market salary including super STI (Cash bonus) Reward superior performance in year Metrics NIL Potential Value Based on market competitive rates Specific NPAT target(s) set at or around the beginning the financial year $440,000 LTI (Loan Share Plan) Reward superior long term value creation TSR – 70% EPS growth – 30% Dependent on NPAT, dividends paid and share price performance 30 Shaver Shop Group Limited For FY2021, having regard to the uncertainty and impact of COVID‑19 on its FY2020 and FY2021 results, the Nomination and Remuneration Committee set H1, H2 and full year FY2021 NPAT targets for the purpose of determining STI awards. One third of the Senior Executive’s STIP was subject to delivery of each of H1, H2 and full year NPAT targets. The mix of fixed and at risk components of each of the Senior Executives as a percentage of total target remuneration for FY2021 was as follows: Senior Executive Cameron Fox Lawrence Hamson Philip Tine FIXED REMUNERATION Fixed Remuneration At Risk STI Maximum Opportunity At Risk LTI Maximum Opportunity 64% 72% 66% 23% 17% 23% 13% 11% 11% 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. 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) Following the omni‑retail and operational platform investments made in prior years, Shaver Shop delivered substantial sales and earnings growth in FY2021, and set a new NPAT record for the company. The STI earnings targets for FY2021 were exceeded leading to the Senior Executives being awarded the maximum possible award under the STI program for the year. Senior Executive Cameron Fox Lawrence Hamson Philip Tine Target STI ($) Actual STI Awarded ($) $220,000 $220,000 $100,000 $100,000 $120,000 $120,000 Awarded STI as % of Maximum STI % of Maximum STI Award Forfeited 100% 100% 100% 0% 0% 0% The Board of Directors may decide to pay Senior Executives discretionary bonuses depending on individual and Company performance. The Remuneration Committee and Board of Directors chose an NPAT target as the performance measure because the Company believes this is one of the key business drivers that is understood by stakeholders and is a balanced indicator of the relative performance of the business. For FY2022, having regard to the uncertainty and impact of COVID‑19 on its FY2022 and FY2021 results, the Nomination and Remuneration Committee has set a full year NPAT targets for the purpose of determining FY2022 STI awards. 31 Annual Report 2021 D I R E C T O R S ’ R E P O R T Continued LONG TERM INCENTIVES (LTI) Shaver Shop 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 Plan 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 5 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. The grant of Plan Shares is accounted for as an option with the loan value representing the strike price of the instrument. For tranches issued prior to FY2022, each year’s LTIP share grant is split into three equal share tranches which relate to 1 year, 2 year and 3 year performance periods. After consulting with shareholders, the Board have determined that for the FY2022 grant of the LTIP, there will be a single tranche with a 3 year performance period. 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. Unless as determined otherwise by the Board of Shaver Shop, the performance and service conditions specified for each tranche must be met in order for the relevant Plan Shares to vest. 32 Shaver Shop Group Limited The table below summarises the key terms of each LTI share grant over the last five financial years. FY2021 LTI Grant FY2020 LTI Grant FY2019 LTI Grant FY2018 LTI Grant FY2017 LTI Grant 2,350,000 2,300,000 1,990,000 1,910,000 1,300,000 1,400,000 1,350,000 1,250,000 1,150,000 1,075,000 28 Oct 2020 30 Oct 2019 21 Nov 2018 26 Oct 2017 22 Jun 2017 $1.0651 $0.6344 $0.3969 $0.6829 $0.5899 70% 30% 70% 30% 1 July 20 to 30 Jun 21 1 July 19 to 30 Jun 20 1 July 20 to 30 Jun 22 1 July 19 to 30 Jun 21 70% 30% 1 Jul 18 to 30 Jun 19 1 Jul 18 to 30 Jun 20 70% 30% 1 Jul 17 to 30 Jun 18 1 July 17 to 30 Jun 19 1 July 20 to 30 Jun 23 1 July 19 to 30 Jun 22 1 Jul 18 to 30 Jun 21 1 July 17 to 30 Jun 20 70% 30% 1 Jul 16 to 30 Jun 17 1 Jul 16 to 30 Jun 18 1 Jul 16 to 30 Jun 19 Under 10% – NIL Under 10% – NIL Under 10% – NIL Under 10% – NIL Under 15% – Nil 10‑25% – pro‑rata vesting from 20% to 100% 10‑25% – pro‑rata vesting from 20% to 100% 10‑25% – pro‑rata vesting from 20% to 100% 10‑25% – pro‑rata vesting from 20% to 100% 15‑20% – pro‑rata vesting from 20% to 40% Total LTI shares granted LTI shares granted to KMP Grant Date Issue price % of grant with TSR hurdle % of grant with EPS hurdle Tranche 1 performance period Tranche 2 performance period Tranche 3 performance period TSR Vesting CAGR (%) Hurdle applicable to each performance period Above 25% – 100% Above 25% – 100% Above 25% – 100% Above 25% – 100% 20‑25% – pro‑rata vesting from 40% to 70% 25‑30% – pro‑rata vesting from 70 to 100% Above 30% – 100% EPS Vesting CAGR (%) hurdle applicable to each performance period Under 5% – NIL Under 5% – NIL Under 5% – NIL Under 5% – NIL Under 15% – Nil 5‑20% – pro‑rata vesting from 20% to 100% 5‑20% – pro‑rata vesting from 20% to 100% 5‑20% – pro‑rata vesting from 20% to 100% 5‑20% – pro‑rata vesting from 20% to 100% 15‑20% – pro‑rata vesting from 20% to 40% Above 20% – 100% Above 20% – 100% Above 20% – 100% Above 20% – 100% 20‑25% – pro‑rata vesting from 40% to 70% 25‑30% – pro‑rata vesting from 70% to 100% Above 30% – 100% Tranche 1 & 2 Service Condition Tranche 3 Service Condition Expiry date 30 Jun 23 30 June 22 30 June 21 30 Jun 20 30 Jun 19 30 Jun 24 30 June 23 30 Jun 22 30 Jun 21 30 Jun 20 None, however the latest loan repayment date is 7 years after the grant date. None, however the latest loan repayment date is 7 years after the grant date. None, however the latest loan repayment date is 7 years after the grant date. None, however the latest loan repayment date is 7 years after the grant date. None, however the latest loan repayment date is 7 years after the grant date. 33 Annual Report 2021 D I R E C T O R S ’ R E P O R T Continued PERFORMANCE CONDITIONS The performance conditions are to be measured 70% by an absolute total shareholder return (TSR) performance hurdle and 30% by an earnings per share (EPS) performance hurdle. The hurdles are 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. TSR PERFORMANCE CONDITIONS The TSR performance hurdle is 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. With exception of the FY2017 LTI Grant, the starting point for the TSR performance hurdle is the 5 day volume weighted average price (VWAP) per share immediately prior to the grant date. For the FY2017 Grant, the starting point for the TSR hurdle is the IPO issue price of $1.05 per share. With exception of the FY2017 LTI Grant, the TSR performance period concludes based on the 5 day VWAP of the Company’s shares following the relevant performance period’s full year results announcement. For the FY2017 LTI Grant, the TSR performance period concludes based on the 5 day VWAP of the Company’s shares prior to 30 June each year. EPS PERFORMANCE CONDITIONS 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 NPAT for the performance period 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. SERVICE CONDITION In addition to the performance conditions, 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 table below sets out the number of Plan Shares offered to the relevant Senior Executives, including details of the number of Plan Shares per tranche for each Senior Executive for LTI Plan grants between FY2017 and FY2021. KMP Cameron Fox Tranche 1 Tranche 2 Tranche 3 TOTAL Lawrence Hamson Tranche 1 Tranche 2 Tranche 3 TOTAL FY2021 LTI Grant (# shares) FY2020 LTI Grant (# shares) FY2019 LTI Grant (# shares) FY2018 LTI Grant (# shares) FY2017 LTI Grant (# shares) 233,333 233,333 233,334 216,666 216,667 216,667 250,000 250,000 250,000 250,000 250,000 250,000 325,000 325,000 325,000 700,000 650,000 750,000 750,000 975,000 116,666 116,667 116,667 116,666 116,667 116,667 100,000 100,000 100,000 100,000 100,000 100,000 33,333 33,333 33,334 350,000 350,000 300,000 300,000 100,000 34 Shaver Shop Group Limited KMP Philip Tine FY2021 LTI Grant (# shares) FY2020 LTI Grant (# shares) FY2019 LTI Grant (# shares) FY2018 LTI Grant (# shares) FY2017 LTI Grant (# shares) Tranche 1 Tranche 2 Tranche 3 TOTAL 116,666 116,667 116,667 116,666 116,667 116,667 66,666 66,667 66,667 33,333 33,333 33,334 350,000 350,000 200,000 100,000 Shaver Shop obtains an independent valuation of the LTIP Shares at the date of grant. The following table summarises the valuation of each LTIP share for each tranche in each year of grant: Performance Condition FY2021 LTI Grant FY2020 LTI Grant FY2019 LTI Grant FY2018 LTI Grant FY2017 LTI Grant TSR (70% of shares) Tranche 1 Tranche 2 Tranche 3 EPS (30% of shares) Tranche 1 Tranche 2 Tranche 3 $0.260 $0.270 $0.290 $0.440 $0.440 $0.460 $0.120 $0.124 $0.129 $0.224 $0.224 $0.235 $0.093 $0.100 $0.104 $0.166 $0.166 $0.174 $0.030 $0.060 $0.080 $0.140 $0.140 $0.150 Nil $0.061 $0.086 $0.233 $0.233 $0.246 The following tables illustrate LTIP performance based remuneration granted and forfeited related to FY2021 and FY2020. LTI GRANTED IN RELATION TO FY2021 LTIP ALLOCATION Senior Executives LTI Grant Year LTI granted (shares) % Paid / vested in the period # LTIP Shares Vested in Period % Forfeited in period # LTIP Shares Forfeited in Period Value Expensed in FY21 $ Cameron Fox FY2021 700,000 FY2020 650,000 FY2019 750,000 FY2018 750,000 Lawrence Hamson FY2021 350,000 FY2020 350,000 FY2019 300,000 FY2018 300,000 Philip Tine FY2021 350,000 FY2020 350,000 FY2019 200,000 FY2018 100,000 0% 0% 56.7% 22.2% 0% 0% 56.7% 22.2% 0% 0% 56.7% 22.2% – – 425,000 166,127 – – 170,000 0% 0% 0% 11.2% 0% 0% 0% 66,450 11.2% – – 113,333 0% 0% 0% 22,151 11.2% – – – – – – – – – – – – $51,779 $38,056 $31,187 $7,237 $25,890 $20,492 $12,475 $2,895 $25,890 $20,492 $8,317 $965 The maximum EPS performance condition for Tranche 1 of the FY2021 LTIP allocation was met and accordingly, subject to the service condition being met, 100% of the Tranche 1 EPS shares will vest on 30 June 2023. The determination of the TSR performance condition for Tranche 1 of the FY2021 LTIP allocation, Tranche 2 of the FY2020 LTIP allocation and Tranche 3 of the FY2019 LTIP allocation is based on the 5 day VWAP of the Company’s shares following the release of Shaver Shop’s FY2021 results and therefore it cannot be determined whether this vesting condition will be met at the date of this report. 35 Annual Report 2021 D I R E C T O R S ’ R E P O R T Continued (H) 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 FY2021, the annual base Non‑Executive Director fees currently agreed to be paid by the Company were $140,000 (FY2020 – $140,000) to the Chairman of the Board, Broderick Arnhold, $80,000 (FY2020 – $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 (FY2020 – $70,000) to Brian Singer and Debra Singh. These amounts comprise fees paid in cash. In subsequent years, these figures may vary. The director’s fees for Trent Peterson are paid to Catalyst Direct Capital Management Pty Ltd. The director’s fees for Debra Singh were paid to PD Singh Enterprises Pty Limited. 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. (I) STATUTORY REMUNERATION DETAILS AND OTHER STATUTORY DISCLOSURES The following tables in respect to the FY2020 and FY2021 financial years detail the components of remuneration for each Non‑Executive Director and Senior Executive of the Group. FY2021 TABLE OF BENEFITS AND PAYMENTS Cash salary / Director’s fees $ Annual leave / long service leave $ Post‑ employment benefits $ Share‑based payments(3) $ STI / bonus $ 140,000 80,000 80,000 70,000 58,333 – – – – – – – – – – – – – – – – – – – – Total $ 140,000 80,000 80,000 70,000 58,333 550,000 220,000 400,000 330,000 100,000 120,000 81,699 55,419 48,568 1,708,333 440,000 185,686 30,000 25,860 21,694 77,554 128,260 1,009,959 61,751 55,663 643,030 575,925 245,674 2,657,247 Non‑Executive Directors Broderick Arnhold Trent Peterson(1) Craig Mathieson Brian Singer Debra Singh(2) Senior Executives Cameron Fox Lawrence Hamson Philip Tine TOTAL (1) The directors fees paid to Trent Peterson are paid to Catalyst Direct Capital Management Pty Ltd (2) The directors fees paid to Debra Singh are paid to PD Singh Enterprises Pty Ltd (3) Share based payments refer to LTI Shares only. 36 Shaver Shop Group Limited FY2020 TABLE OF BENEFITS AND PAYMENTS Cash salary / Director’s fees $ Annual leave / long service leave $ Post‑ employment benefits $ Share‑based payments(3) $ STI / bonus $ Non‑Executive Directors Broderick Arnhold Trent Peterson (1) Craig Mathieson Brian Singer Melanie Wilson(2) Senior Executives Cameron Fox Lawrence Hamson Philip Tine TOTAL 135,345 77,333 77,333 67,667 59,267 500,000 371,394 304,348 – – – – – – – – – – 200,000 100,000 100,000 32,505 (1,604) 4,682 1,592,687 400,000 35,583 – – – – – 30,000 25,860 21,810 77,670 Total $ 135,345 77,333 77,333 67,667 59,267 822,234 522,714 452,245 – – – – – 59,729 27,064 21,405 108,198 2,214,138 (1) The directors fees paid to Trent Peterson are paid to Catalyst Direct Capital Management Pty Ltd (2) The directors fees paid to Melanie Wilson are paid to Peandel Pty Ltd (3) Share based payments refer to LTI Shares only. In Q4 FY2020, in response to concerns surrounding the potential impact of COVID‑19 on Shaver Shop’s business, the Non‑Executive Directors and Senior Executives voluntarily agreed to take a 20% fixed remuneration reduction for this period. (J) 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. (K) KMP SHAREHOLDINGS The number of ordinary shares (excluding unvested LTIP shares) in Shaver Shop Group Limited held by each KMP of the Group during the financial year is as follows: 30 June 2021 Directors Broderick Arnhold Cameron Fox Craig Mathieson Brian Singer Trent Peterson Debra Singh 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 3,000,000 (1,000,000) 2,437,658 (590,000) 4,820,004 – 6,258,004 (3,000,000) 547,619 – – – – – – – 100,000 – 2,000,000 591,127 2,438,785 – – – 4,820,004 3,258,004 547,619 100,000 643,804 (238,095) – – – – 236,450 135,484 642,159 135,484 17,707,089 (4,828,095) 100,000 963,061 13,942,055 37 Annual Report 2021 D I R E C T O R S ’ R E P O R T Continued LTIP HOLDINGS OF KMP The following table details the LTIP holding and the movements in the LTIP shares for KMP during FY2021. Senior Executives Cameron Fox Lawrence Hamson Philip Tine Unvested Balance at 30 June 2020 LTI Shares Granted as Remuneration Vested / Exercisable Forfeited Unvested Balance at 30 June 2021 1,575,000 700,000 (591,127) 720,000 350,000 (236,450) 563,334 350,000 (135,484) – – – 1,683,873 833,550 777,850 During FY2021, 700,000 LTIP shares with a fair value of $1.0651 per share were granted to Cameron Fox with a grant date of 28 October 2020. The shares vest upon the satisfaction of the performance and service conditions noted earlier in this remuneration report. During FY2021, 350,000 LTIP shares with a fair value of $1.0651 per share were granted to Lawrence Hamson with a grant date of 28 October 2020. The shares vest upon the satisfaction of the performance and service conditions noted earlier in this remuneration report. During FY2021, 350,000 LTIP shares with a fair value of $1.0651 per share were granted to Philip Tine with a grant date of 28 October 2020. The shares vest upon the satisfaction of the performance and service conditions noted earlier in this remuneration report. (L) 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 FY2021 the CEO was entitled to fixed remuneration of $580,000 (FY2020: $580,000) whilst the fixed remuneration for other Senior Executives was in the range of $350,000 to $430,000. 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 eight weeks notice. No contracted retirement benefits are in place with any of the Company’s Senior Executives. (M) LOANS MADE TO KMP The following information relates to KMP loans made, guaranteed or secured during the reporting period on an aggregate basis. Employee Share Plan Loans 56,189 56,189 – Balance at beginning of the year $ Balance at the end of the year $ Provision for bad debts expense $ KMP No. 1 Loans to KMP arise as a result of the early Shaver Shop long‑term incentive plans. The above KMP loans related to incentive plans established prior to the Company’s IPO and are repayable after a maximum period of six years or upon disposal of the shares. 38 Shaver Shop Group Limited (N) TRANSACTIONS WITH KMP (EXCLUDING LOANS) There were no other material transactions or contracts with KMP except as disclosed elsewhere in the remuneration report. Signed in accordance with a resolution of the Board of Directors: Broderick Arnhold Director Melbourne 31 August 2021 39 Annual Report 2021 A U D I T O R S I N D E P E N D E N C E D E C L A R A T I O N Under Section 307C of the Corporations Act 2001 to the Directors of Shaver Shop Group Limited and Controlled Entities Auditor’s Independence Declaration As lead auditor for the audit of Shaver Shop Group Limited for the year ended 30 June 2021, 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 31 August 2021 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. 40 Shaver Shop Group Limited C O N S O L I D A T E D S T A T E M E N T O F P R O F I T O R L O S S A N D O T H E R C O M P R E H E N S I V E I N C O M E For the year ended 30 June 2021 Revenue from continuing operations 5(a) 213,667,482 194,924,114 Consolidated Note 2021 $ 2020 $ Cost of goods sold Gross profit from corporate owned retail stores Franchise and other revenue Employee benefits expense Marketing and advertising expenses Occupancy expenses Operational expenses Depreciation and amortisation expense Other expenses Finance costs Profit before income tax Income tax expense Profit for the year Items that may be reclassified to profit or loss Exchange differences on translating foreign operations 22(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 (118,986,477) (113,302,030) 94,681,005 81,622,084 5(b) 890,729 1,055,716 6 6 7 (31,976,548) (29,230,184) (7,310,247) (6,929,670) (2,535,890) (3,060,556) (9,764,598) (8,928,753) (14,065,851) (13,499,234) (3,560,867) (4,191,488) (1,626,968) (2,077,915) 24,730,765 14,760,000 (7,258,261) (4,377,564) 17,472,504 10,382,436 7,347 7,347 24,188 24,188 17,479,851 10,406,624 17,472,504 10,382,436 17,479,851 10,406,624 Cents Cents 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) 23 23 14.2 13.7 8.5 8.3 41 Annual Report 2021 C O N S O L I D A T E D B A L A N C E S H E E T As at 30 June 2021 ASSETS CURRENT ASSETS Cash and cash equivalents Trade and other receivables Lease receivables Inventories TOTAL CURRENT ASSETS NON‑CURRENT ASSETS Lease receivables Property, plant and equipment Right‑of‑use assets Deferred tax assets Intangible assets TOTAL NON‑CURRENT ASSETS TOTAL ASSETS LIABILITIES CURRENT LIABILITIES Trade and other payables Lease liabilities Employee benefits Current tax payable Other liabilities TOTAL CURRENT LIABILITIES NON‑CURRENT LIABILITIES Lease Liabilities Other liabilities TOTAL NON‑CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Retained earnings TOTAL EQUITY 42 Shaver Shop Group Limited Note 2021 $ 2020 $ 10 11 13 12 13 14 13 27 15 16 13 17 27 19 13 19 20 22 24 7,374,965 12,628,517 3,627,156 1,829,907 – 847,615 18,124,686 15,097,228 29,126,807 30,403,267 – 1,379,919 10,565,989 10,823,278 21,263,334 26,632,491 7,809,240 5,596,607 54,058,081 44,766,679 93,696,644 89,198,974 122,823,451 119,602,241 19,213,283 18,109,162 10,415,254 13,047,029 2,512,259 1,853,567 2,044,397 617,441 21,197 16,727 34,206,390 33,643,926 15,983,369 23,931,704 55,948 77,145 16,039,317 24,008,849 50,245,707 57,652,775 72,577,744 61,949,466 48,872,261 48,872,261 1,014,616 597,597 22,690,867 12,479,608 72,577,744 61,949,466 C O N S O L I D A T E D S T A T E M E N T O F C H A N G E S I N E Q U I T Y For the year ended 30 June 2021 2021 Balance at 1 July 2020 Profit for the period Other comprehensive income Total comprehensive income Transactions with owners in their capacity as owners Dividends provided for and/or paid Employee share schemes – value of employee services Ordinary Shares $ Retained Earnings $ Other reserves $ Note Total $ 48,872,261 12,479,608 597,597 61,949,466 – – – – – 17,472,504 – 17,472,504 – 7,347 7,347 17,472,504 7,347 17,479,851 (7,261,245) – (7,261,245) – 409,672 409,672 21 34 Balance at 30 June 2021 48,872,261 22,690,867 1,014,616 72,577,744 2020 Balance at 1 July 2019 Ordinary Shares $ Retained Earnings $ Other reserves $ Note Total $ 48,872,261 10,964,103 400,080 60,236,444 Change of accounting policy – cloud software configuration costs Change of accounting standard – AASB 16 Leases 3 Restated balance at 1 July 2019 Profit for the period Other comprehensive income Total comprehensive income Transactions with owners in their capacity as owners Dividends provided for and/or paid Employee share schemes – value of employee services 21 34 (1,994,594) (1,994,594) – (1,213,717) – (1,213,717) 48,872,261 7,755,792 400,080 57,028,133 – – – – – 10,382,436 – 10,382,436 – 24,188 24,188 10,382,436 24,188 10,406,624 (5,658,620) – (5,658,620) – 173,329 173,329 Balance at 30 June 2020 48,872,261 12,479,608 597,597 61,949,466 43 Annual Report 2021 C O N S O L I D A T E D S T A T E M E N T O F C A S H F L O W S For the year ended 30 June 2021 CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Interest received Interest paid – borrowings Interest paid – leases Income taxes paid Note 2021 $ 2020 $ 237,363,270 212,627,693 (195,625,054) (170,268,422) 41,738,216 42,359,271 – 14,286 (130,670) (417,460) (1,434,643) (1,674,741) (4,132,393) (1,457,131) Net cash inflow from operating activities 33 36,040,509 38,824,225 CASH FLOWS FROM INVESTING ACTIVITIES: Payments for property, plant and equipment Landlord contributions for new premises fitouts (2,032,128) (3,381,806) 425,000 410,000 Payments for acquisition of corporate stores 8 (14,799,720) (2,912,707) Net cash outflows from investing activities (16,406,848) (5,884,513) CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of borrowings Principal elements of lease payments Dividends paid Net cash inflows from financing activities – (10,324,099) (15,030,091) (10,866,440) 21 (9,857,123) (3,062,742) (24,887,213) (24,253,280) Net increase/(decrease) in cash and cash equivalents held Cash and cash equivalents at beginning of financial year (5,253,552) 8,686,432 12,628,517 3,942,085 Cash and cash equivalents at end of financial year 10 7,374,965 12,628,517 44 Shaver Shop Group Limited N O T E S T O T H E F I N A N C I A L S T A T E M E N T S 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. These 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. Where necessary, and as a result of a change in the classification of certain expenses during the current year, comparative amounts in the statement of profit and loss and balance sheet have been reclassified for consistency with current year presentation. 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 31 August 2021. Comparatives are consistent with prior years, unless otherwise stated. 2 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS 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 15, and net realisable value of inventory, refer to Note 12. 3 CHANGES IN ACCOUNTING POLICIES (A) COSTS CAPITALISED FOR CLOUD SOFTWARE CUSTOMISATION AND CONFIGURATION Shaver Shop previously capitalised costs incurred in configuring or customising Software‑as‑a‑Service (SaaS) arrangements as intangible assets, as the group considered that it would benefit from those costs to implement the SaaS arrangements over the expected term of the arrangements. Following the IFRS Interpretations Committee agenda decision on Configuration or Customisation Costs in a Cloud Computing Arrangement in March 2021, the group has reconsidered its accounting treatment and adopted the treatment set out in the IFRS IC agenda decision, which is to recognise those costs as intangible assets only if the implementation activities create an intangible asset that the entity controls and the intangible asset meets the recognition criteria. Costs that do not result in intangible assets are expensed as incurred, unless they are paid to the suppliers of the SaaS arrangement to significantly customise the cloud‑based software for the group, in which case the costs are recorded as a prepayment for services and amortised over the expected renewable term of the arrangement. As a result of this change in accounting policy, the group has determined that costs totalling $4.5 million relating to the implementation of SaaS arrangements would need to be expensed when they were incurred, as the amounts were paid to third parties and to the suppliers of the SaaS arrangements who did not create separate intangible assets controlled by the group. 45 Annual Report 2021 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S Continued The change in policy has been applied retrospectively and comparative information has been restated. This had the following impact on the amounts recognised in the financial statements: Balance Sheet Intangible assets Deferred tax asset Retained earnings Statement of profit or loss Amortisation of intangible assets Other expenses Income tax expense Profit (loss) Basic earnings per share (cents) Diluted earnings per share (cents) Cash flow statement Cash flows from operating activities Payments to suppliers and employees Cash flows from investing activities Payments for property, plant, equipment and software Net cash flow Increase (Decrease) 30 June 2021 $ 30 June 2020 $ 1 July 2019 $ (3,122,071) (3,162,631) (2,849,420) 936,621 948,789 854,826 (2,185,450) (2,213,842) (1,994,594) Increase (Decrease) 30 June 2021 $ 30 June 2020 $ (760,731) (610,293) 720,171 923,505 12,168 28,392 0.0 0.0 (93,964) (219,248) (0.2) (0.2) Increase (Decrease) 30 June 2021 $ 30 June 2020 $ 720,171 923,505 (720,171) (923,505) – – 46 Shaver Shop Group Limited 4 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 2021 and the results of all subsidiaries for the period there 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 29 to the financial statements. (B) NEW ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET MANDATORY OR EARLY ADOPTED Certain new accounting standards and interpretations have been published that are not mandatory for the 30 June 2021 reporting period and have not been adopted early by the Group. These standards are not expected to have a material impact on the Group in the current or future reporting periods or on foreseeable future transactions. (C) 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. 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. (D) 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 operating segment, being retail store sales of a variety of specialist personal grooming products through their corporate stores and royalty income from franchise stores. 47 Annual Report 2021 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S Continued (E) 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. (F) 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. Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods and services. This is generally in store when the customer purchases the goods or services or on delivery in the case of online sales. Revenue is recognised for the major business activities using the methods outlined below: Sale of goods The Group operates a chain of retail stores and associated websites selling personal grooming products. Revenue from the sale of goods is recognised at a point in time when a Group entity sells a product to the customer. Payment of the transaction price is due immediately when the customer purchases the product and takes delivery in store. It is the Group’s policy to sell its products to the end customer with a right of return within 21 days. Therefore, a refund liability (included in trade and other payables) and a right to the returned goods (included in other current assets) are recognised for the products expected to be returned. Accumulated experience is used to estimate such returns at the time of sale at a portfolio level (expected value method). Because the number of products returned has been relatively steady for a number of years, it is not considered probable that a significant reversal in the cumulative revenue recognised will occur. The validity of this assumption and the estimated amount of returns are reassessed at each reporting date. Interest income Interest is recognised using the effective interest method, which, for floating rate financial assets is the rate inherent in the financial instrument. Franchise royalty fee income Franchise royalty fee income includes advertising contributions and is recognised at a point in time when a franchisee sells a product to a customer. It is based upon a percentage of franchisee sales and is recognised on an accrual basis. As at 30 June 2021, Shaver Shop owned and operated all stores. (G) 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. 48 Shaver Shop Group Limited 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 the initial recognition. On that basis, deferred tax liabilities have been recognised in the year for additions to goodwill in respect of franchise buy‑back activities, to the extent that they are deductible in calculating the 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 income or directly in equity, respectively. (H) 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. (I) LEASES The Group leases retail sites for its corporate store locations across Australia and New Zealand. Rental contracts are typically made for fixed periods of 2‑7 years and in limited situations contain an option to renew at the end of the initial term. Lease terms are negotiated on an individual basis. Until 1 July 2019, leases for retail sites were treated as operating leases in accordance with AASB117. Payments made under operating leases (net of any incentives received from the lessor) were charged to profit or loss on a straight‑line basis over the period of the lease. From 1 July 2019, leases are recognised as a right‑of‑use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right‑of‑use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight‑line basis. 49 Annual Report 2021 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S Continued Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: • fixed payments (including in‑substance fixed payments), less any lease incentives receivable; • variable lease payments that are based on an index or a rate, initially measured using the index or rate as at the commencement date; • amounts expected to be payable by the group under residual value guarantees; • the exercise price of a purchase option if the group is reasonably certain to exercise that option; and • payments of penalties for terminating the lease, if the lease term reflects the group exercising that option. As a practical expedient, AASB 16 permits a lessee not to separate non‑lease components, and instead account for any lease and associated non‑lease components as a single arrangement. The Group has elected to apply this practical expedient. In line with accounting standard guidance, where leases have a fixed escalation rate, the fixed rate has been applied when accounting for the lease payments. No rate has been applied to leases that increase at the rate of CPI or leases that have a variable escalation rate. Right‑of‑use assets are measured at cost comprising the initial measurement of the lease liability and other components as required under AASB16. Payments associated with leases of low‑value assets are recognised on a straight‑line basis as an expense in profit or loss. Low‑value assets comprise IT equipment and small office related items. Where the Group was the lessee under a property head lease and sublets the property to a third party franchisee, the present value of the remaining lease payments, discounted using the incremental borrowing rate was applied to recognise the associated lease liability as at 1 July 2019. The Group has also recognised the associated lease receivable from the sublessee. No right‑of‑use asset has been recognised where a sublease arrangement exists as the asset has been transferred to the sublessee by virtue of the sublease. (J) 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 the carrying value. These are included in profit or loss. 50 Shaver Shop Group Limited (K) 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. (L) INTANGIBLE ASSETS Goodwill 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. 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. Costs incurred in configuring and customising cloud based software Costs incurred in configuring or customising cloud software and Software as a Service (SaaS) arrangements can only be recognised as intangible assets if the implementation activities create an intangible asset that the entity controls and the intangible asset meets the recognition criteria. Those costs that do not result in intangible assets are expensed as incurred, unless they are paid to the suppliers of the SaaS arrangements to significantly customise the cloud‑based software for the group, in which case the costs are recorded as a prepayment for services and amortised over the expected renewable term of the arrangement. (M) 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. (N) FINANCIAL ASSETS Credit losses on trade receivables The Group has elected to apply the simplified approach to measuring expected credit losses, using the lifetime expected loss allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. A provision matrix is then determined based on the historic credit loss rate for each group, adjusted for any material expected changes to the future credit risk for that group. (O) 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. 51 Annual Report 2021 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S Continued (P) 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. (Q) 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. These 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 services are 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 12 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 Company’s Long Term Incentive Plan (LTIP). LTI Plan The fair value of shares granted under the Shaver Shop Group Limited’s 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). 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. 52 Shaver Shop Group Limited (R) BORROWINGS Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount, is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility. 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. (S) BORROWING COSTS Borrowing costs are recognised as an expense in the period in which they are incurred. (T) 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. (U) EARNINGS PER SHARE (i) 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. 53 Annual Report 2021 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S Continued 5 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 Franchise fees Other revenue Other revenue Total franchise and other revenue 6 EXPENSES The result for the year includes the following specific expenses: Finance costs Interest and finance charges – borrowings Interest and finance charges – leases Interest income – franchise leases Interest income Finance Costs Depreciation and amortisation Intangible assets Property, plant & equipment Right‑of‑use assets Depreciation and amortisation expense 54 Shaver Shop Group Limited 2021 $ 2020 $ 213,667,482 194,924,114 213,667,482 194,924,114 2021 $ 2020 $ 878,772 984,294 – 54,167 878,772 1,038,461 11,957 17,255 890,729 1,055,716 2021 $ 2020 $ 192,325 417,460 1,489,318 1,804,351 (54,675) (129,610) – (14,286) 1,626,968 2,077,915 74,424 79,555 2,047,014 2,159,026 11,944,413 11,260,653 14,065,851 13,499,234 7 INCOME TAX EXPENSE (A) THE MAJOR COMPONENTS OF TAX EXPENSE (INCOME) COMPRISE: Current tax expense Current tax on profits for the year Deferred tax expense Movements in deferred tax assets and liabilities Income tax expense relating to continuing operations (B) RECONCILIATION OF INCOME TAX TO ACCOUNTING PROFIT: Profit from continuing operations before income tax expense Tax at the Australian tax rate of 30% (2020 – 30%) Add: Tax effect of: other nondeductible items Less/(Add): Tax effect of: Other Income tax attributable to parent entity Income tax expense Franchise Buy‑Backs 2021 $ 2020 $ 5,502,952 3,189,587 1,755,309 1,187,977 7,258,261 4,377,564 2021 $ 2020 $ 24,730,765 14,760,000 7,419,230 4,428,000 177,440 118,606 7,596,670 4,546,606 (338,409) (169,042) 7,258,261 4,377,564 7,258,261 4,377,564 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 and included in the calculation of goodwill. 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. 55 Annual Report 2021 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S Continued 8 BUSINESS COMBINATIONS The Company acquired the last remaining six franchise stores on 3 February 2021 for a total purchase consideration of $14,799,720. The acquisitions are expected to increase the Group’s retail sales and synergies are expected to arise after the Company’s acquisition of the stores. Details of the purchase consideration, the net assets acquired and the resulting goodwill are as follows: Purchase consideration: – Cash Assets or liabilities acquired: Inventories Payables Net acquired right of use assets and lease liabilities Deferred tax assets Total net identifiable assets acquired and liabilities assumed Goodwill Total $ 14,799,720 2,154,964 (355,244) (266,313) 3,900,000 5,433,407 9,366,313 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 the 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 acquisition date amounted to $5.0 million. Had the results of the acquired franchise stores been consolidated from 1 July 2020, additional revenue of the Group would have been $9.9 million for the year ended 30 June 2021. Acquisition related costs for the franchise buy‑backs were not material and are included in other expenses in the profit and loss statement. 9 OPERATING SEGMENTS SEGMENT INFORMATION The Group operates within one operating 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. Total revenue disclosed in the consolidated statement of comprehensive profit and loss all relates to this one operating segment. The Group is not reliant on any single customer. At 30 June 2021, the Group operated 114 Corporate Stores in Australia (2020: 110) and 7 Corporate Stores in New Zealand (2020: 7). 10 CASH AND CASH EQUIVALENTS Cash at bank and on hand 56 Shaver Shop Group Limited 2021 $ 2020 $ 7,374,965 12,628,517 11 TRADE AND OTHER RECEIVABLES CURRENT Trade receivables Prepayments Related party receivables Other receivables Total current trade and other receivables 2021 $ 2020 $ 2,057,347 990,528 1,243,731 425,799 32(c) 81,377 81,377 244,701 332,203 3,627,156 1,829,907 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. 12 INVENTORIES Finished goods 2021 $ 2020 $ 18,124,686 15,097,228 AMOUNTS RECOGNISED IN PROFIT AND LOSS Inventories recognised as an expense in costs of goods sold during the year ended 30 June 2021 amounted to $118,986,477 (2020: $113,302,030). Amounts recognised in expenses relating to write‑downs of stock in FY2021 amounted to $867,811. CRITICAL ACCOUNTING ESTIMATES – REALISABLE VALUE OF INVENTORY Inventories are stated at the lower of cost and net realisable value. Costs are assigned to individual items of inventory on the basis of weighted average costs. Costs of inventories are determined after deducting rebates and discounts. Net realisable value represents the estimated selling price less all estimated costs necessary to make the sale. Determining the net realisable value of inventories relies on key assumptions that require the use of management judgement. These key assumptions are the variables affecting the expected selling price and are reviewed at least annually. Any reassessment of the selling price in a particular year will affect the cost of goods sold. 13 LEASES Lease receivables Lease receivables – current Lease receivables – non‑current Total lease receivables 2021 $ 2020 $ – – – 847,615 1,379,919 2,227,534 57 Annual Report 2021 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S Continued Shaver Shop acquired the last six remaining franchises in February 2021. Accordingly, at the time of acquisition the lease receivables from the franchisees were extinguished. Lease liabilities Lease liabilities – current Lease liabilities – non‑current Total lease liabilities 2021 $ 2020 $ 10,415,254 13,047,029 15,983,369 23,931,704 26,398,623 36,978,733 The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right‑of‑use asset. Right‑of‑use assets Right‑of‑use assets – at cost Less: accumulated depreciation Total right‑of‑use assets 2021 $ 2020 $ 42,273,673 37,900,313 (21,010,339) (11,267,822) 21,263,334 26,632,491 RECOGNITION AND MEASUREMENT – LEASES Lease liabilities The Group enters into non‑cancellable leases for retail stores and support office facilities in Australia and New Zealand. Leases are entered into for varying terms and rent reviews are based on CPI increases or fixed increases. A lease liability is recognised at the commencement date of the lease at the present value of lease payments to be made over the term of the lease. The leases generally do not have renewal options. Right‑of‑use assets Right‑of‑use assets are measured at cost at commencement of the lease and depreciated on a straight‑line basis over the effective life of the asset. The right‑of‑use assets have an effective life of between 2 and 7 years. 58 Shaver Shop Group Limited 14 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) 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 2021 Leasehold Improvements in Progress $ Plant and Equipment $ Computer Equipment $ Improvements $ Total $ Balance at the beginning of the year 605,758 9,902,899 206,526 81,800 10,796,983 – – – 2,032,146 (213,236) – Additions 301,675 1,436,332 294,139 Disposals and write‑downs – (113,289) (99,947) Transfers Depreciation expense Foreign exchange movements (560,758) 558,858 1,900 – – (1,869,837) (159,765) (17,411) (2,047,013) (2,875) (16) – (2,891) Balance at the end of the year 346,676 9,912,088 242,836 64,389 10,565,989 Consolidated Year ended 30 June 2020 Leasehold Improvements in Progress $ Plant and Equipment $ Computer Equipment $ Improvements $ Total $ Balance at the beginning of the year 206,540 9,039,329 222,118 9,808 9,477,795 Additions 560,758 2,922,107 140,591 89,402 3,712,858 Disposals and write‑downs – (230,169) (161,540) 161,540 – – – – (230,169) – Transfers Depreciation expense Foreign exchange movements – – (1,985,367) (156,249) (17,410) (2,159,026) (4,541) 66 – (4,475) Balance at the end of the year 605,758 9,902,899 206,526 81,800 10,796,983 59 Annual Report 2021 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S Continued 15 INTANGIBLE ASSETS MOVEMENTS IN CARRYING AMOUNTS OF INTANGIBLE ASSETS Year ended 30 June 2021 Opening net book value Additions through business combinations Amortisation Foreign exchange movements Closing value at 30 June 2021 Software development in progress $ Software $ Brand names $ Goodwill $ Total $ – – – – – – – – – – 823,415 43,943,264 44,766,679 – 9,366,313 9,366,313 (74,417) (494) – – (74,417) (494) 748,504 53,309,577 54,058,081 Software development in progress $ Software $ Brand names $ Goodwill $ Total $ Year ended 30 June 2020 Opening net book value 1,894,452 1,011,586 895,582 42,074,264 45,875,884 Write downs due to change in accounting policy Additions through business combinations Amortisation Foreign exchange movements Closing value at 30 June 2020 (1,894,452) (1,011,586) – – – – – – – – – – (70,731) (1,436) – (2,906,038) 1,869,000 1,869,000 – – (70,731) (1,436) 823,415 43,943,264 44,766,679 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 2021. 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 CGU has been determined based on the value in use calculation using cash flow projections from budgets approved by senior management and presented to the Board of Directors covering a five year period. Cash flows beyond the five year period are extrapolated using estimated growth rates of 2.5% (2020: 2.5%). The pre‑tax discount rate applied to cash flow projected is 12.3% (2020: 12.4%). The value in use calculation is most sensitive to the following key assumptions: gross margin, growth rate and discount rate. Gross margin: Gross margin is based on average values achieved in the past. Margins are not increased over the forecast timeline. The gross margin used in the forecast period is 42.7% (2020: 42.7%) based on average gross margins achieved historically together with expectations of the future. Growth rate: Sales growth rates are based on management’s best estimates of anticipated growth (based on industry and company considerations) in the short to medium term and consider the historical average like for like sales growth achieved in the past. The growth rate in the terminal year is 2.5% (2020: 2.5%) and the same store sales growth rate used for the five year forecast period is 3.0% (2020: 3.0%). 60 Shaver Shop Group Limited Discount rate: The discount rate is specific to the Group’s circumstances and is derived from its 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 risk free interest rate as well as a margin that takes into consideration both industry and company specific risk factors. Sensitivity analysis: Management recognises that the recoverable amount of goodwill is sensitive to the assumptions used in the model. Using the assumption outlined above, the surplus of the recoverable amount over the carrying value of goodwill at 30 June 2021 is $227.4 million. If all of the following scenarios happen together, the recoverable amount of the CGU would equal its carrying amount: the five year forecasted growth rate decreased from 3.0% to 0.0%, the pre‑tax discount rate is increased from 12.3% to 17.9%, the growth rate in the terminal year decreased from 2.5% to 2.0% and operating expenses increased at 3.0% versus expected CPI growth of 2.5%. The Group believes the assumptions adopted in the value in use calculations reflect an appropriate balance between the Group’s experience to date and the uncertainties associated with the COVID‑19 pandemic. Whilst temporary store closures resulting from Government restrictions may impact short‑term financial performance, the timing and nature of these closures is not expected to impact the Group financial results in the long‑term. 16 TRADE AND OTHER PAYABLES CURRENT Unsecured liabilities GST payable Dividend accrued Payroll related accruals Other creditors and accruals Total trade and other payables 2021 $ 2020 $ 16,033,605 11,287,436 598,654 707,652 – 2,595,878 1,926,806 1,730,812 654,218 1,787,384 19,213,283 18,109,162 All amounts are short term and the carrying values are considered to be a reasonable approximation of fair value. 17 EMPLOYEE BENEFITS Current liabilities Provision for employee benefits 2021 $ 2020 $ 2,512,259 1,853,567 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 twelve months. The following amounts reflect leave that is not expected to be taken or paid within the next twelve months. Leave obligations expected to be settled after twelve months 814,119 442,794 2021 $ 2020 $ 61 Annual Report 2021 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S Continued 18 BORROWINGS NON‑CURRENT Secured liabilities: Bank loans (A) COLLATERAL 2021 $ 2020 $ – – 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 – property, plant and equipment – intangible assets 2021 $ 2020 $ 7,374,965 12,628,517 2,057,347 990,528 18,124,686 15,097,228 10,565,989 10,823,278 54,058,081 44,766,679 Under the terms of the major borrowing facilities, as at 30 June 2021, the Group was required to comply with the following primary financial covenants: a) the ratio of debt to EBITDA must be less than or equal to 2.0; b) the ratio of EBITDA plus occupancy costs to occupancy cost plus interest expense must be greater than 1.5; and c) the ratio of total assets less total liabilities to total assets must be greater than 0.45. During the current and prior year, there were no defaults on borrowings or breaches of debt covenants. 19 OTHER LIABILITIES CURRENT Other liabilities Total current other liabilities Other liabilities Total non‑current other liabilities Total other liabilities 62 Shaver Shop Group Limited 2021 $ 2020 $ 21,197 21,197 55,948 55,948 77,145 16,727 16,727 77,145 77,145 93,872 20 ISSUED CAPITAL 128,812,494 (2020: 126,462,494) Ordinary shares 48,872,261 48,872,261 Shaver Shop has issued and unvested shares (LTI Plan Shares) under its Long Term Incentive Plan (LTI Plan) of 5,280,002 at 30 June 2021 (2020: 4,665,302). The LTI Plan Shares have vesting criteria and are therefore only included, if appropriate, in diluted share calculations and are not included in the calculation of basic weighted average shares outstanding. 2021 $ 2020 $ (A) MOVEMENTS IN SHARE CAPITAL At the beginning of the reporting period At the end of the reporting period Number of shares outstanding At the beginning of the reporting period Unvested LTIP shares issued in period Unvested LTIP shares cancelled in period At the end of the reporting period Calculation of weighted average number of diluted shares 2021 $ 2020 $ 48,872,261 48,872,261 48,872,261 48,872,261 2021 No. 2020 No. 126,462,494 125,531,498 2,350,000 2,300,000 – (1,369,004) 128,812,494 126,462,494 2021 No. 2020 No. Weighted average number of ordinary shares used for calculating basic earnings per share 123,328,960 121,797,192 Adjustment for weighted average number of LTI Plan Shares issued (unvested shares) 4,314,249 3,732,699 Weighted average number of ordinary shares and potential ordinary shares used in calculating diluted earnings per share 127,643,209 125,529,891 The LTI Plan Shares are included in the calculation of the weighted average number of fully diluted shares outstanding when the average market price of the Company’s shares is above the exercise price of the LTI Plan Shares for the year ended 30 June 2021. Additional LTI Plan Shares could potentially be included in the number of fully diluted shares outstanding in the future. The holders of ordinary shares are entitled to participate in dividends and the proceeds on winding up of the Company. On a show of hands at meetings of the Company, each holder of ordinary shares has one vote in person or by proxy, and upon a poll each share is entitled to one vote. The Company does not have authorised capital or par value in respect of its shares. 63 Annual Report 2021 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S Continued (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. 21 DIVIDENDS The following dividends were declared and paid: Fully franked FY2020 final dividend of 2.7 cents per share (FY2019: 2.5 cents per share, fully franked) 3,309,215 3,062,742 2021 $ 2020 $ Fully franked FY2021 interim dividend of 3.2 cents per share (FY2020: 2.1 cents per share, 80% franked – interim dividend cancelled due to COVID‑19 and subsequently replaced by an equivalent special dividend declared in June 2020) Total dividends per share declared Franking account 3,952,030 2,595,878 2021 $ 0.059 2020 $ 0.046 The franking credits available for subsequent financial years at a tax rate of 30% 3,247,581 1,228,845 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/(receipt) of the current tax liabilities/(receivable); (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. 22 RESERVES Foreign currency translation reserve Opening balance Currency translation differences arising during the year Balance at 30 June 2021 Share based payments reserve Opening balance Transfers in Balance at 30 June 2021 Total 64 Shaver Shop Group Limited 2021 $ 2020 $ (10,295) (34,483) 7,347 24,188 (2,948) (10,295) 607,892 434,563 409,672 173,329 1,017,564 1,014,616 607,892 597,597 (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. 23 EARNINGS PER SHARE Profit from continuing operations Earnings used to calculate basic EPS from continuing operations 2021 $ 2020 $ 17,472,504 10,382,436 17,472,504 10,382,436 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 123,328,960 121,797,192 Weighted average number of ordinary shares outstanding during the year used in calculating fully diluted EPS 127,643,209 125,529,891 2021 No. 2020 No. Basic earnings per share Fully diluted earnings per share 2021 cents 14.2 13.7 2020 cents 8.5 8.3 INFORMATION CONCERNING CLASSIFICATION OF SECURITIES LTI Plan shares granted to participants are considered to be potential ordinary shares. They have been included in the determination of diluted earnings per share if the required TSR and EPS hurdle would have been met based on the company’s performance up to the reporting date, and to the extent to which they are dilutive. 24 RETAINED EARNINGS Retained earnings at beginning of the financial year 12,479,608 10,964,103 2021 $ 2020 $ Change of accounting policy – cloud software configuration costs Change of accounting standard – AASB 16 Leases Net profit for the year Dividends declared Retained earnings at end of the financial year – – (1,994,594) (1,213,717) 17,472,504 10,382,436 (7,261,245) (5,658,620) 22,690,867 12,479,608 65 Annual Report 2021 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S Continued 25 CAPITAL COMMITMENTS BANK GUARANTEES The Company has Bank Guarantees in place as security for rental payments on several of its locations. As at 30 June 2021 $422,169 (2020: $519,957) was drawn under the Company’s bank guarantee facility. 26 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. 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 a 180‑day and a 360‑day period are identified monthly. 66 Shaver Shop Group Limited (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 2021 $ 2020 $ 30,000,000 30,000,000 577,831 480,043 30,577,831 30,480,043 The multi‑option facility has a limit of $30.0 million and was undrawn as at 30 June 2021. In addition, Shaver Shop has access to a bank guarantee facility with a limit of $1.0 million which was drawn to $0.42 million as at 30 June 2021. The multi‑option facility has interest rates varying from BBSY +0.75% to BBSY +1.20% depending on the sub‑facility being utilised. (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 2021 $ – 2020 $ – 2021 $ – 17,865,344 18,109,162 1,347,939 2020 $ 2021 $ 2020 $ – – – – – – Bank loans Trade and other payables Lease liabilities 940,011 1,025,632 9,454,046 10,682,295 7,450,573 10,094,209 Total 18,805,355 19,134,794 10,801,985 10,682,295 7,450,573 10,094,209 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 and suppliers, 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 material impairment exists within trade receivables at year end. 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. 67 Annual Report 2021 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S Continued Cash at bank AA (Standard & Poors) Accounts receivable Counterparties with no external credit rating Group 1* * Group 1: Existing counterparties (more than 12 months) with no defaults in the past. 2021 $ 2020 $ 7,374,965 12,628,517 2,057,347 990,528 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. Shaver Shop Pty Ltd has an inter‑company receivable of $2.5 million at 30 June 2021 (30 June 2020: $3.4 million). This balance represents the initial and ongoing investment in Shaver Shop’s New Zealand operations. Based on the year‑end balance, a 1% appreciation in the NZ dollar has approximately a $27,000 impact on the company’s pre‑tax profit. (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 % 2021 $ 0.85% 0.85% – – 2.89 2.89 2020 $ – – Shaver Shop did not draw down on any of its loan facility in FY2021. Accordingly, the weighted average interest rate represents the line fee payable on the $30 million facility. Management considers that interests rates could reasonably increase by 1% or decrease by 0.5% (2020: 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. 68 Shaver Shop Group Limited 27 TAX ASSETS AND LIABILITIES (A) CURRENT TAX ASSETS AND LIABILITIES Income tax payable (B) RECOGNISED DEFERRED TAX ASSETS AND LIABILITIES Deferred tax assets Deferred tax liabilities Net deferred tax assets 2021 $ 2020 $ 2,044,397 617,441 2021 $ 2020 $ 14,422,550 14,350,399 (6,613,310) (8,753,792) 7,809,240 5,596,607 Opening Balance $ Change in accounting policy $ Charged to Income $ Acquisition of Franchise Stores $ Closing Balance $ Note Deferred tax assets (liabilities) Provisions for employee benefits Accruals Leased liabilities Cancellation of franchise licence on acquisition IPO costs Software intangibles Other deferred tax assets Right‑of‑use assets Other deferred tax liabilities Balance at 30 June 2021 588,009 480,413 9,977,197 7 1,682,993 152,082 948,789 520,916 (8,447,292) (306,500) 5,596,607 – – – – – – – – – – 203,735 (71,181) (2,268,657) – – – 791,744 409,232 7,708,540 (1,690,148) 3,975,507 3,968,352 (50,694) (12,168) (14,244) 2,195,175 (54,692) – – – – 101,388 936,621 506,672 (6,252,117) (361,192) (1,762,874) 3,975,507 7,809,240 69 Annual Report 2021 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S Continued Opening Balance $ Change in accounting policy $ Charged to Income $ Acquisition of Franchise Stores $ Note Provisions for employee benefits 461,581 – 126,428 Accruals Lease incentive liability Leased liabilities Cancellation of franchise licence on acquisition IPO costs Software intangibles Other deferred tax assets Right‑of‑use assets 510,088 (382,621) 352,946 717,382 (717,382) – – 11,294,074 (1,316,877) – 948,789 – 486,898 – 34,018 – (9,673,091) 1,225,799 7 2,113,039 380,823 – – (228,741) (1,231,046) 801,000 1,682,993 Closing Balance $ 588,009 480,413 – 9,977,197 – – – – – – – – – 152,082 948,789 520,916 (8,447,292) (306,500) Other deferred tax liabilities (261,181) – (45,319) Balance at 30 June 2020 4,408,630 1,469,769 (1,082,792) 801,000 5,596,607 28 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: PricewaterhouseCoopers Australia (i) Audit and other assurance services Audit of financial statements Total remuneration for audit and other assurance services (ii) Taxation services Tax services Total remuneration for taxation services (iii) Other Services Other consulting services Total remuneration for other services Total remuneration of PricewaterhouseCoopers Australia 2021 $ 2020 $ 175,600 175,600 80,500 80,500 174,100 174,100 84,560 84,560 8,500 8,500 135,600 135,600 264,600 394,260 70 Shaver Shop Group Limited 29 INTERESTS IN SUBSIDIARIES The Group’s subsidiaries as at 30 June 2021 are set out below. Principal place of business / Country of Incorporation Percentage Owned (%)* 2021 Percentage Owned (%)* 2020 Subsidiaries: Lavomer Riah Pty Ltd Shaver Shop Pty Ltd Australia Australia Shaver Shop (New Zealand) Limited New Zealand * The percentage of ownership interest held is equivalent to the percentage voting rights for all subsidiaries. 100 100 100 100 100 100 30 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 2021 $ 2020 $ 203,099,855 187,201,176 (112,325,151) (108,128,146) 90,774,704 79,073,030 890,729 1,055,716 (66,573,561) (63,558,004) (1,586,093) (2,022,515) 23,505,779 14,548,227 (7,258,261) (4,377,564) 16,247,518 10,170,663 16,247,518 10,170,663 71 Annual Report 2021 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S Continued Retained earnings: Retained earnings at the beginning of the year 14,011,793 12,674,841 2021 $ 2020 $ Change of accounting policy – cloud software configuration costs Change of accounting standard – AASB 16 Leases Profit after income tax Dividends recognised Retained earnings at the end of the year Attributable to: Equity holders of the company Consolidated Statement of Financial Position Current Assets Cash and cash equivalents Trade and other receivables Inventories Total Current Assets Non‑Current Assets Property, plant and equipment Intangible assets Right‑of‑use assets Deferred tax assets Total Non‑Current Assets Total Assets Current Liabilities Trade and other payables Lease liabilities Current tax liabilities Total Current Liabilities Non‑Current Liabilities Lease liabilities Deferred tax liabilities Total Non‑Current Liabilities Total Liabilities Net Assets Equity Issued Capital Reserves Retained Earnings Total Equity 72 Shaver Shop Group Limited – – (1,994,594) (1,180,497) 16,247,518 10,170,663 (7,261,245) (5,658,620) 22,998,066 14,011,793 22,998,066 14,011,793 2021 $ 2020 $ 6,776,967 12,231,043 6,045,998 5,937,819 16,901,376 13,749,153 29,724,341 31,918,015 10,124,140 10,286,737 53,977,696 44,678,177 20,782,850 25,856,520 14,408,100 14,335,868 99,292,786 95,157,302 129,017,127 127,075,317 21,755,199 18,363,612 10,092,845 12,593,495 2,044,397 617,441 33,892,441 31,574,548 15,623,484 23,255,031 6,613,310 8,753,792 22,236,794 32,008,823 56,129,235 63,583,371 72,887,892 63,491,946 48,872,261 48,872,261 1,017,564 607,892 22,998,066 14,011,793 72,887,892 63,491,946 31 CONTINGENCIES CONTINGENT LIABILITIES There are no contingent liabilities recognised by the Group. 32 RELATED PARTIES (A) SUBSIDIARIES Interests in subsidiaries are set out in Note 29. (B) KEY MANAGEMENT PERSONNEL Key management personnel remuneration (excluding Directors Fees) included within employee expenses for the year is shown below: Short‑term employee benefits Post‑employment benefits Share‑based payments 2021 $ 2020 $ 1,905,686 1,611,325 77,554 77,670 245,674 108,198 2,228,914 1,797,193 Detailed remuneration disclosures are provided in the Remuneration Report. (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: Loans to KMP and related parties 2021 2020 Opening balance $ Closing balance $ 81,377 81,377 81,377 81,377 The loans to KMP resulted from a share incentive scheme implemented prior to the Shaver Shop Employee Share Plan (refer Note 34). 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. 73 Annual Report 2021 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S Continued 33 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 Disposal/write‑down 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, leases 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 (B) RECONCILIATION OF NET CASH (DEBT) Cash and cash equivalents Net cash (debt) 34 SHARE‑BASED PAYMENTS 2021 $ 2020 $ 17,472,504 10,382,436 14,065,851 14,109,528 28,090 230,169 409,672 173,329 1,442 18,283 (430,285) 438,702 (872,499) 10,807,782 1,687,367 1,087,926 1,390,841 348,152 1,426,956 1,932,175 36,040,509 38,824,225 2021 $ 2020 $ 7,374,965 12,628,517 7,374,965 12,628,517 In FY2017, the Company established a Long Term Incentive Plan (LTI Plan) to assist in the motivation, retention and reward of 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 Shaver Shop managers and executives to acquire shares (Plan Shares) in the Company subject to the conditions of the LTIP. Plan Shares that are granted under the plan may be funded by a limited recourse loan to the eligible participant from the Company or one of its subsidiaries. The Plan Shares rank pari passu in all respects with the ordinary shares of the Company. Under the terms of the LTIP and relevant offer letters, vesting of the LTIP shares is subject to the achievement of performance conditions as well as service conditions. Vesting of 70% of the LTIP shares is subject to the achievement of a minimum Total Shareholder Return (TSR) and 30% of the LTIP shares is subject to the achievement of EPS conditions. If the minimum TSR and EPS performance conditions are achieved, then the relevant service condition attaching to the shares must also be met. In the event the participant leaves the Company prior to the vesting date, the options will generally lapse. 74 Shaver Shop Group Limited In FY2017, the Company issued 1,300,000 Plan Shares to eligible participants. In FY2018, the Company broadened the eligible participant base with 1,910,000 shares issued to eligible participants. In FY2019, the Company issued a further 1,990,000 shares to eligible participants. In FY2020 the Company issued 2,300,000 Plan Shares to eligible participants. In FY2021 the company issued 2,350,000 Plan Shares to eligible participants. The Plan Shares have been treated as equity‑settled share‑based payment transactions in the Company’s financial accounts. Details of the number of Plan Shares granted and the fair value of the Plan Shares on the relevant Grant Date is set out below. 2021 2020 2019 2018 2018 Grant Date 28 Oct 20 30 Oct 19 21 Nov 18 10 Nov 17 26 Oct 17 Number of Plan Shares Granted 2,350,000 2,300,000 1,990,000 210,000 1,700,000 Issue Price of Plan Shares $1.0651 $0.6344 $0.3969 $0.6829 $0.6829 The number of LTIP shares outstanding and the relative exercise price of the LTIP shares is set out below. FY2021 LTIP (Shares) FY2020 LTIP (Shares) FY19 LTIP (Shares) FY18 LTIP (Shares) Outstanding at the beginning of the year – 2,300,000 1,701,000 606,672 Granted during the year Vested during the year Forfeited during the year* 2,350,000 – – – – – – – (1,070,998) (403,140) – (203,532) Outstanding at the end of the year 2,350,000 2,300,000 630,002 – Average exercise price $1.0651 $0.6344 $0.3969 $0.6829 * 203,532 shares issued under Tranche 3 of the FY2018 LTIP grant were forfeited by participants during FY2021 as they did not meet the required Performance Condition. However at the time of writing this report, these shares have not yet been compulsorily divested in accordance with the Plan rules. The fair value at grant date of the LTIP shares is independently determined using an adjusted form of Monte Carlo model for TSR LTIP Shares and a Black‑Scholes model for EPS based shares. 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 assessed fair value at grant date of Plan Shares granted during the year ended 30 June 2021 varied from $0.26 per Plan Share to $0.46 per Plan Share depending on the Grant Date and the relevant vesting criteria (FY2020 – $0.12 to $0.235). The key assumptions used in the valuation models are: Financial Year 2021 2020 2019 2018 2018 Grant Date 28 Oct 20 30 Oct 19 21 Nov 18 10 Nov 17 26 Oct 17 Closing share price on Grant Date $1.04 $0.645 $0.40 $0.50 $0.465 Exercise price Volatility Dividend yield (Nil as used to pay off loan value) Risk free rate $1.0651 $0.6344 $0.3969 $0.6829 $0.6829 50% 40% 45% 45% 45% Nil 0.27% Nil 0.86% Nil 2.33% Nil 2.19% Nil 2.30% 75 Annual Report 2021 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S Continued Total expenses arising from share based payment transactions recognised during the period as part of Employment Benefit Expense were as follows: Expense for Plan Shares issued under LTI Plan 35 EVENTS OCCURRING AFTER THE REPORTING DATE Financial Year 2021 $ 2020 $ 409,672 173,329 Subsequent to year end, the Directors declared a final dividend of 5.0 cents per share (100% franked) to shareholders of record on 9 September 2021. The dividend payment date is 23 September 2021. 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. 36 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. Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the financial statements of Shaver Shop Group Limited. Dividends received from associates are recognised in the parent entity’s profit or loss when its right to receive the dividend is established. The financial information for the parent entity, Shaver Shop Group Limited has been prepared on the same basis as the consolidated financial statements. 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 76 Shaver Shop Group Limited 2021 $ 2020 $ 18,579,975 17,162,019 28,714,799 28,714,799 47,294,774 45,876,818 2,035,397 2,035,397 617,441 617,441 48,872,260 48,872,260 1,017,563 607,891 (4,630,446) (4,220,774) 45,259,377 45,259,377 6,851,573 5,104,469 6,851,573 5,104,469 (4,220,774) (3,666,623) 6,851,573 5,104,469 (7,261,245) (5,658,620) (4,630,446) (4,220,774) CONTINGENT LIABILITIES The parent entity did not have any contingent liabilities as at 30 June 2021 or 30 June 2020. CONTRACTUAL COMMITMENTS The parent entity did not have any commitments as at 30 June 2021 or 30 June 2020. 37 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 77 Annual Report 2021 D I R E C T O R S ’ D E C L A R A T I O N The directors of the Company declare that: 1. the consolidated financial statements and notes for the year ended 30 June 2021 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. 3. In the directors’ opinion, there are reasonable grounds to believe that the Company and its subsidiary which have entered into a Deed of Cross Guarantee will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee. This declaration is made in accordance with a resolution of the Board of Directors. Broderick Arnhold Director Melbourne 31 August 2021 78 Shaver Shop Group Limited I N D E P E N D E N T A U D I T R E P O R T Independent auditor’s report To the members 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 2021 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 balance sheet as at 30 June 2021 the consolidated statement of profit or loss and other 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 significant accounting policies and other explanatory information the directors’ declaration. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial report section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. 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. 79 Annual Report 2021 I N D E P E N D E N T A U D I T R E P O R T Continued 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 Audit scope ● For the purpose of our audit we used overall Group materiality of $1.2 million, which represents approximately 5% of the Group’s profit before tax. ● Our audit focused on where the Group made subjective judgements; for example, significant accounting estimates involving assumptions and inherently uncertain future events. ● We applied this threshold, together with ● The Group sells personal grooming and beauty appliances to customers across Australia and New Zealand, through retail stores and the Group’s website. The products are held in the Group’s warehouse in Melbourne, and across the retail stores. The accounting processes are structured around a group finance function located at the head office in Melbourne. 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 acceptable thresholds. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for the current period. The key audit matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Further, any commentary on the outcomes of a particular audit procedure is made in that context. We communicated the key audit matters to the Audit and Risk Committee. 80 Shaver Shop Group Limited Key audit matter How our audit addressed the key audit matter Carrying value of goodwill (Refer to note 15) $53.3 million We performed the following procedures, amongst others: At 30 June 2021 the Group recognised $53.3 million of goodwill in the consolidated balance sheet. The Group assesses goodwill for impairment annually, irrespective of whether there are indicators of impairment and has determined that there is only one Cash Generating Unit (CGU). The carrying value of goodwill was a key audit matter due to: ● ● the financial significance of the goodwill balance ; and the level of judgement involved in the Group assessing the recoverable amount of the goodwill including forecasting future cash flows, estimating the discount rate and terminal growth rate. ● Evaluated whether the CGU identified by the Group was consistent with our knowledge of the Group’s operations and internal reporting. ● Assessed whether the CGU included all directly attributable assets, liabilities, corporate overheads and cash flows. ● Compared the forecast cash flows used in the Group’s impairment model to the latest budgets and business plans presented to the board. ● Evaluated the Group’s historical ability to forecast future cash flows by comparing budgets with reported actual results for the previous five years. ● Considered whether the cash flows used in the impairment model were reasonable by comparing actual cash flows for previous years to forecast cash flows and evaluating the support available from the Group for significant differences in actual and forecast cash flows. ● Evaluated the appropriateness of the discount rate by assessing the reasonableness of the relevant inputs to the calculation against industry and market factors. ● Evaluated the appropriateness of the terminal growth rate by comparison to the forecast long- term average growth rate of the countries the Group operates in, being Australia and New Zealand. ● Assessed the mathematical accuracy, on a sample basis, of the impairment model’s calculations. ● Evaluated the reasonableness of disclosures in note 15 in light of the requirements of Australian Accounting Standards. Carrying value of inventory (Refer to note 12) $18.1 million We performed the following procedures, amongst others: At 30 June 2021 the Group recognised $18.1 million of inventory in the consolidated balance sheet valued at the lower of cost and net realisable value. ● Compared inventory balances within the inventory provision calculation to total inventory on hand to ensure the completeness of the assessment. The identification of products expected to be sold below net realisable value depends, in part, on estimated sales below estimated costs for the sale. ● Evaluated whether the methodology applied to calculate the provision was reasonable based on the requirements of Australian Accounting 81 Annual Report 2021 I N D E P E N D E N T A U D I T R E P O R T Continued The carrying value of inventory was a key audit matter due to: Standards and consistent with that applied in the prior year. ● ● the financial significance of the inventory balance; and the level of judgement and estimation required in determining the net realisable value of inventory including assumptions of expected future selling prices and related costs. ● Assessed 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 net realisable value to the actual sales value earned on those products sold in the financial year. ● Assessed the mathematical accuracy of the provision calculation on a sample basis. ● Evaluated whether the provision for inventory was adequate by assessing the gross margins recognised for a sample of inventory items. Accounting for supplier rebates (Refer to note 12) We performed the following procedures, amongst others: 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 depending on the specific terms agreed with each supplier in relation to the rebate rate(s) and the range of products included. The accounting for supplier rebates was a key audit matter due the magnitude of rebates received during the year, and the different terms applicable to each rebate agreement. ● For rebates receivable we obtained confirmations from a sample of suppliers of the balance receivable at 30 June 2021, key rebate terms and rebates received during the year and compared them to the Group’s records. ● For a sample of rebates not subject to confirmation procedures we obtained evidence of settlement and a valid arrangement. ● Tested the mathematical accuracy of the Group’s rebate calculations on a sample basis. Other information The directors are responsible for the other information. The other information comprises the information included in the annual report for the year ended 30 June 2021, but does not include the financial report and our auditor’s report thereon. Prior to the date of this auditor's report, the other information we obtained included the Directors’ report. We expect the remaining other information to be made available to us after the date of this auditor's report. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 82 Shaver Shop Group Limited When we read the other information not yet received, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the directors and use our professional judgement to determine the appropriate action to take. Responsibilities of the directors for the financial report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our auditor's report. Report on the remuneration report Our opinion on the remuneration report We have audited the remuneration report included in pages 25 to 39 of the directors’ report for the year ended 30 June 2021. In our opinion, the remuneration report of Shaver Shop Group Limited for the year ended 30 June 2021 complies with section 300A of the Corporations Act 2001. 83 Annual Report 2021 I N D E P E N D E N T A U D I T R E P O R T Continued 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 31 August 2021 84 Shaver Shop Group Limited S H A R E H O L D E R I N F O R M A T I O N For the year ended 30 June 2021 The Shareholder information set out below is based on information in the Company’s share register as at 2 September 2021. 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 Unmarketable Parcels Securities 100,710,632 22,360,029 3,367,522 2,111,491 262,820 % 78.18 17.36 2.61 1.64 0.20 128,812,492 100.00 20,073 0.02 No. of holders 104 687 397 718 433 2,339 121 % 4.45 29.37 16.97 30.70 18.51 100.00 5.17 As at 2 September 2021, there were 121 holders of an unmarketable parcel of shares. SUBSTANTIAL SHAREHOLDERS The following is a summary of the substantial shareholders in the Company pursuant to notices lodged with the ASX in accordance with Section 671B of the Corporations Act as at 2 September 2021. Name of Shareholder Alsop Pty Limited ATF the Johnston Trust Perpetual Limited (1) % of issued capital specified in the relevant notice. No. of Shares % of Issued Capital(1) 14,277,125 11,226,887 11.00% 8.72% 85 Annual Report 2021 S H A R E H O L D E R I N F O R M A T I O N Continued 02 Sep 2021 16,339,438 14,277,125 10,349,334 7,015,302 5,427,581 5,108,231 4,160,004 3,258,004 2,500,000 2,490,215 2,000,000 1,800,024 1,724,497 1,401,000 1,329,857 1,122,051 857,511 660,000 603,333 600,000 600,000 %IC 12.68 11.08 8.03 5.45 4.21 3.97 3.23 2.53 1.94 1.93 1.55 1.40 1.34 1.09 1.03 0.87 0.67 0.51 0.47 0.47 0.47 83,623,507 45,188,987 64.92 35.08 128,812,494 100.00 TOP 20 SHAREHOLDERS Rank Name 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 20 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED ALSOP PTY LTD J P MORGAN NOMINEES AUSTRALIA PTY LIMITED PACIFIC CUSTODIANS PTY LIMITED NATIONAL NOMINEES LIMITED CITICORP NOMINEES PTY LIMITED ZARA HOLDINGS PTY LTD ARKINDALE PTY LTD DOVALI PTY LTD C N BOTTING & ASSOCIATES PTY LTD MR BRODIE ERNST ARNHOLD MR CAMERON FOX ANACACIA PTY LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED NEWECONOMY COM AU NOMINEES PTY LIMITED BNP PARIBAS NOMINEES PTY LTD MORGAN STANLEY AUSTRALIA SECURITIES (NOMINEE) PTY LIMITED HOLDERY PTY LTD MOSKA HOLDINGS PTY LTD ROSHERVILLE PTY LTD JE & FJ CUNNINGHAM SUPERANNUATION 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 CORPORATE GOVERNANCE INFORMATION Copies of the Company’s Policies and Charters, including its Corporate Governance Statement are available at the Corporate Governance section of Shaver Shop’s Investor Relations website: investors.shavershop.com.au 86 Shaver Shop Group Limited 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. INVESTOR RELATIONS INFORMATION Lawrence (Larry) Hamson, CFO and Company Secretary +61 3 9840 5900 investors.shavershop.com.au 87 Annual Report 2021 C O R P O R A T E I N F O R M A T I O N ABN 78 150 747 649 DIRECTORS Broderick Arnhold Cameron Fox Craig Mathieson Trent Peterson Brian Singer Debra Singh 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 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 Commonwealth Bank of Australia 88 Shaver Shop Group Limited www.colliercreative.com.au #SHS0014 C Annual Report 2021 S h a v e r S h o p G r o u p L i m i t e d a n n u a L r e p o r t 2 0 2 1