AnnuAl RepoRt 2023 Transform Yourself ABOUT US Shaver Shop’s unique specialty retail model continued to resonate with customers and delivered strong results for shareholders despite the softening retail environment. From humble beginnings on Melbourne’s Lonsdale Street in 1986, Shaver Shop has grown to become the largest specialty retailer purely focussed on men’s and women’s personal care and grooming solutions across Australia and New Zealand. We still operate from that initial location and now have 122 stores in total that are served by our dedicated and passionate team members. We started as a service and repair shop for men’s electric shavers. That service-based ethos has always been a core part of our DNA and why we are so focussed on the education and training of our teams to be trusted experts in the categories we sell. Our stores and store teams will always be the key assets of Shaver Shop. CONTENTS FY2023 Financial Highlights FY2023 Operational Highlights Chairman’s Letter CEO’s Letter 02 04 06 08 Corporate Sustainability Financial Report Shareholder information Corporate Information 10 12 76 79 Shaver Shop Group Limited Annual Report 2023 01 FY2023 Financial Highlights Net profit after tax up 0.8% to Sales up 0.8% to 16.8m up 128% on pre-COVID-19 (FY2019) normalised NPAT 224.5m up 34.1% on pre-COVID-19 (FY2019) levels Almost 50% of sales from exclusive products Basic earnings per share (EPS) 13.1c down 0.1 cents (or 0.8%) on FY2022 (up 117% on pre-COVID-19 – FY2019 normalised EPS) 02 Shaver Shop Group Limited Record gross profit margin 44.5% up 60bps on FY2022 Operating cash flow 32.3m up 14.1% ($4.0m) on FY2022 FY2023 dividends up 2.0% to 10.2 cents per share (cps) with fully franked final dividend of 5.5cps Online sales 22.7% of total sales Annual Report 2023 03 FY2023 Operational Highlights 04 Shaver Shop Group Limited Total transaction volume Online transactions fulfilled Net Promote Score (NPS) 2.53m 378k 88.6 Ending stock levels (per store) New greenfield stores c$180k Two Click & collect 13.4% of total online fulfilments Costs of doing business Marketing & advertising 26.2% % of total sales (up 40bps) 3.2% of total sales (down 60bps) Annual Report 2023 05 Chairman’s Letter Dear shareholder It is a pleasure to update you on another successful year for Shaver Shop. Over the last 12 months, we have experienced the return of shopping patterns back to historical norms and preferences with customers returning to our stores. We pride ourselves on the unique and pleasant shopping experience we deliver in-store. In fact, we consider it our greatest point of difference and competitive advantage and so the return of face-to-face shopping has been whole-heartedly welcomed. Current retail environment After a strong start to FY2023 in the first quarter, the impact of several interest rate rises by the Reserve Banks in Australia and New Zealand, as well as ongoing cost of living pressures began to be felt in the second quarter with lower sales and retail volumes. With the learnings gained over the pandemic, Shaver Shop was able to adjust its promotional programs quickly to balance the desire to maintain or grow market share with maximising gross profit. This strategy worked very well for the business across the remainder of the financial year leading to Shaver Shop recording its highest gross profit margin ever of 44.5%. So while we expect the retail environment to remain somewhat challenged over the coming 6-12 months, Shaver Shop remains a highly differentiated specialty retailer with a very strong business model that we believe positions the company for ongoing success. Why Shaver Shop is positioned strongly? There are several reasons why your board is confident in Shaver Shop’s future. Firstly, we operate in an attractive category that is experiencing ongoing tailwinds that will help drive our business forward. Men’s personal care and wellness is now widely accepted by the general public with the range of grooming devices and consumable products (such as skincare) growing every day. This reflects a priority that men are now placing on health and wellbeing that women have chosen for many years. 06 Shaver Shop Group Limited With this increased awareness and interest in taking care of ones self, global manufacturers are investing in new DIY product innovations that allow customers to follow their beauty regimes from the comfort of their homes. Many of these innovations enable customers to have more budget conscious alternatives to going into a barber, hair salon or beauty clinic; something that is highly relevant given the economic realities that many families face today. For these reasons, we believe the grooming and personal care appliances market, for men in particular, is positioned to remain resilient throughout the economic cycle. Secondly, Shaver Shop’s position within the category is enviable with very strong unprompted brand awareness, a significant proportion of sales coming from branded lines that are exclusive to Shaver Shop, and world class customer service scores that mean our customers will continue returning to our physical stores as well as online. Lastly, we have a highly experienced management team that has successfully grown the business over many years. This has a positive impact across many aspects of the business including all stakeholder groups such as our customers, suppliers as well as our team members. Strong financial position and cashflow Over the last three years, Shaver Shop has worked hard to build a very strong balance sheet that is able to withstand any unexpected changes in short term trading performance. Operating cashflows were again outstanding at $32.1 million which led to us finishing the year with a net cash position of $13.5 million. While our balance sheet is conservatively geared at present, we are conscious of the potential headwinds to consumer demand in the short term and also wish to retain the flexibility to pursue value accretive acquisitions if they present themselves. We have looked at a number of acquisition opportunities over the last 12 months, however none have been attractive enough to pursue through due diligence. Capital management In addition to providing optionality for future growth, our strong balance sheet enabled us to return $12.8 million to shareholders by way of fully franked dividends. This represents combined interim and final dividends of 10.2 cents per share paid in FY2023, and our FY2023 final dividend of 5.5 cents per share (fully franked) was paid in September 2023. This dividend payout has increased for six consecutive years since the business was listed on the ASX in mid-2016 – a fact that your Board is very proud of. Based on the current share price, our dividend yield is highly attractive. Our dividend payout also reflects the confidence the board has in the future performance of the group. Your board remains very focussed on maximising returns for shareholders and regularly considers the most appropriate capital position for the business. At this time, and given the macroeconomic factors influencing consumer sentiment now, and over the foreseeable future, we have chosen to remain very prudent and retain our balance sheet strength. We will continue to monitor and review this position regularly. I would like to thank all the team members at Shaver Shop for their ongoing commitment to delivering strong financial results and returns for shareholders. Your board continues to focus on ensuring the controls and governance systems at the company delivers these results, but also ensures the safety and wellness of our team members and considers our broader commitment to supporting the community and our environment. Thank you for your ongoing support as shareholders in Shaver Shop. Sincerely, Brodie Arnhold Annual Report 2023 07 CEO’s Letter Dear shareholder Thank you for supporting Shaver Shop again in 2023. Adapting to the changing retail environment The 2023 financial year was another successful one for Shaver Shop. We adapted well again to the constantly changing trading and economic environment. Instead of the pandemic related impacts of the previous two years, during the last 12 months we have faced an increasingly discerning and budget conscious consumer. With the learnings gathered from the pandemic period, we deliberately focused on maximising Shaver Shop’s profitability which in some cases meant accepting lower sales volumes and revenues. Pleasingly, our strategy worked very successfully leading to record gross profit margins of 44.5% for the business with almost all categories recording margin growth. The strong margin performance was also supported by our core men’s grooming categories of men’s shavers and hair cutting being highly resilient despite cycling the robust sales generated through the pandemic. The fact these core categories have remained so resilient during tougher economic times, is testament to the underlying consumer demand that exists for cost-effective DIY hair removal solutions. We also believe the growth in men’s shavers is at least in part being driven by workers increasingly returning to office environments. The rebound of in-store shopping by our customers was another highlight with 77% of our sales being generated in our stores in FY2023. As a strong omni-channel retailer, we remain agnostic to whether customers prefer shopping in-store or online. That said, our specialised focus on personal care and grooming solutions together with our store teams’ passion for delivering an engaging, informative and enjoyable shopping experience is something that is unique in the market, sets Shaver Shop apart from our competitors and supports strong brand loyalty. Ongoing customer service excellence Delivering customer service excellence remains a hallmark of our brand identity and DNA. In 2023, our net promoter score remained world class at 89 (out of 100). We continue to seek and act on the feedback we receive from customers. This has led us to continually adjust the layout and look and feel of our stores and we continue to tweak our online sales and order fulfilment processes to make it as simple as possible to shop at Shaver Shop. Foot traffic within shopping centres and within our stores remain well below pre-pandemic levels but sales conversion (the percentage of customers that enter our stores who make a purchase) has more than offset the reduced shopper numbers. This is a credible result, particularly given the recent economic climate. Delivering on our financial targets In terms of our financial results, sales increased 0.8% to $224.5 million – another Shaver Shop record. With improved gross profit margins, up 60 basis points to 44.5% and ongoing cost control, we were able to mitigate both the inflationary impacts to our business as well as the full year impact and incremental costs of our stores being open for all of FY2023. In particular, we adopted a more strategic approach to digital marketing activity which focused on driving sales and significantly improving return on investment. The combination 08 Shaver Shop Group Limited of all these factors led to Shaver Shop reporting the second highest net profit after tax result in Shaver Shop’s 37 year history of $16.8 million. In addition to delivering a strong bottom-line profit result, Shaver Shop once again generated strong operating cash flows of $32.1 million allowing us to continue to invest in our business as well as return $12.8 million to shareholders by way of fully franked dividends of 10.2 cents per share. We ended FY2023 with stronger than expected sales in June and in turn our inventories were approximately $2 million to $3 million lower than optimal. In FY2024, we expect to re-invest this amount back into trading stock which will in-turn impact next year’s operating cash flow. Optimising our store footprint Over the past several years, we have been implementing a store refresh program that brings key doors in line with our latest brand standards and improves customer shopping experiences. The changes that we have made in store design and merchandising reflect feedback that we receive from customers day in and day out. Three of our most recent store upgrades have taken place in Joondalup, West Australia, Geelong, Victoria and Bankstown, New South Wales. Our refresh program will continue in FY2024 with 6-8 stores earmarked for upgrades in the coming year, including our flagship Chadstone shop. Late in FY2023, we re-opened our Elizabeth, SA store which had been temporarily closed early in the financial year. We also opened two new stores during the year, Hervey Bay in Queensland as well as Bayfair in New Zealand. This brings our footprint to eight stores in New Zealand in-line with our longer term plan to expand to 12-13 stores in the medium term. Importantly our Chadstone store was forced to close in late March 2023 as that section of the centre goes through a major refurbishment. While we were able to secure a temporary location in a different part of the centre, we are looking forward to launching the latest evolution of our store design when our permanent Chadstone location opens in November 2023. We also chose to close our Spencer Street, Victoria store in early FY2024. We expect this decision will drive higher profitability across our remaining metropolitan Melbourne stores given we are now a destination brand for men’s and women’s personal care and beauty solutions. Priorities for FY2024 As with prior years, our first priority remains for all Shaver Shop team members to live and breathe Shaver Shop’s core values. Our values of customer focus, driving for results, adaptability and accountability have held the business in good stead though past economic cycles and will continue to do so in the future. We will continue to use these values to differentiate our brand through exhibiting outstanding product knowledge and offering a unique and engaging shopping experience that delights our customers. We intend to broaden our customer appeal by accessing the younger demographic with increased social media activity that is relevant and relatable. By utilising our store team’s passion and insight, we intend to use these social channels to showcase that we are product matter experts across men’s and women’s personal care. We will maintain our focus on providing value for money offers across all price points and categories, something that has always been important, but particularly so today given the current macro environment. Lastly, we will continue adapting and remaining nimble when observing changing market trends and shopping patterns. Historically, given our specialist knowledge of this sector, we have successfully identified which new personal care innovations coming to market would be those most in demand. We have then sought to secure distribution and in some cases exclusive rights for Shaver Shop. This will continue to be a key priority for our business as it has helped our brand to become recognised as the destination for men’s and increasingly women’s personal care and wellness solutions with the deepest and broadest range across Australia and New Zealand. In closing, I would again like to thank our team members, our supplier partners and our shareholders for your ongoing support of our business. You are all key contributors to Shaver Shop’s ongoing success story. Sincerely Cameron Fox Annual Report 2023 09 Corporate Sustainability Shaver Shop has been in business since 1986 and over that time has developed a highly recognised and trusted brand. We understand that our future success is tied to our ability to act in a responsible and ethical manner across all aspects of our business. We want to be a business that is recognised for acting responsibly and ethically and this is reflected in our Core Values (shared across all employees) as well as our Code of Business Ethics and associated framework of corporate governance policies and business practices. Corporate sustainability is an ongoing program of improvement. In FY2023, we continued to work with internal and external stakeholders to better understand the prioritise and adapt our policies, practices and operations to meet our, and the broader community’s, expectations. Our sustainability approach is focussed on three core areas: Our team Shaver Shop’s team is comprised of approximately 750 passionate and dedicated team members across Australia and New Zealand. As a service-focussed business that takes pride in delivering customer service excellence, our team has, and will always be, our most important asset. Each individual team member contributes to how our brand and business is viewed by customers and other stakeholders each and every day, so we take pride in sharing consistent core values that centre upon: a) Customer Focus, b) Accountability, c) Adaptability and d) Driving for Results. These values have been applied consistently for many years and we believe have been a key input to Shaver Shop’s success over time. As indicated in our diversity policy, we are a customer centric organisation that seeks to have a diverse, inclusive and highly-engaged workforce with a variety of backgrounds and experience. Across the business, approximately 51% of our team members are female with 38% of executive leadership positions (defined as those positions which report directly to the Managing Director and CEO) held by women. 20% of Shaver Shop’s independent non-executive director positions are currently held by females. Shaver Shop’s Board of Directors and management team continue to be focussed on recruiting and retaining the best person for each role that is aligned with Shaver Shop’s core values, business aspirations as well as the specific requirements of the position. This is supported by a detailed rewards and recognition program that ultimately is overseen by the Nomination and Remuneration Committee and the Board of Directors. The health and wellbeing of our team as well as maintaining a safe working environment, continues to be a top priority for our business. We have a range of policies and practices that promote work-life balance, zero-tolerance to discrimination, anti-harassment and bullying, as well 10 Shaver Shop Group Limited 1.Our Team 3. Our Environment 2. Our Community as measures to protect our teams from customer-related abuse. In FY2023, we had 29 reported injuries that primarily stemmed from the manually handling of stock items in our stores. We are continuing to educate our store teams about the importance of occupational health and safety and take steps to reduce the frequency of injury to our teams. We also continue to offer a number of programs that support improved mental health and open communication across the business as well as offering an employee assistance program to support those in need. We also offer career development opportunities including our brand ambassador program which recognises and rewards the top performing store team members by introducing them to a selection of the top retailers globally so that they can learn and apply those principles within Shaver Shop. In FY2023, 7 team members travelled to Dubai and New York to learn from the world’s best retail organisations. We also actively seek to promote internal candidates to support office positions when role opportunities present themselves and have created new cluster store manager positions which help our best store managers have influence over an increased number of stores in a particular geographic area. All of these programs are intended to deliver a robust and well-rounded employee development program that is focused on the long-term facilitation of a strategic workforce that engages our employees based on their needs and our company vision. Whilst not mandatory, we also encourage our employees to take their full annual leave entitlements to ensure they are mentally and physically refreshed when at work. Our Community Shaver Shop seeks to be a good corporate citizen that also sources the products we sell from like-minded organisations. Our programs include supporting team members who wish to volunteer with charitable organisations by permitting team members to take paid leave to pursue their charitable work. Shaver Shop sources its products from distributors and manufacturers that operate in many countries around the world. We are committed to socially responsible sourcing of these products and work with our supply chain partners to ensure that modern slavery, environmental and other risks are identified and mitigated. We seek to find suppliers that demonstrate an alignment with our commitment to sourcing products ethically and that have implemented policies and practices consistent with our own. In FY2023, Shaver Shop implemented a cloud-based solution that assists us with identifying and mitigating risks associated with modern slavery. In FY2024, we intend to increase the number of questionnaires sent to our supplier base with a risk-based approach to targeting suppliers with a potentially higher modern slavery risk. Last year, we also adopted a new supplier charter which outlines the standards that we expect of our vendor partners and have been requesting our suppliers to acknowledge their compliance with the charter when completing their modern slavery questionnaires. Our Environment Shaver Shop appreciates the need to minimise its impact on our natural environment. We are committed to actively taking steps to reduce waste, reduce power consumption and drive down emissions across our business as well as working with suppliers to do so. At our stores, we take measures to ensure we are being efficient in our use of electricity. We recycle, to the greatest extent possible, cardboard, paper and packaging material. We have also implemented the option of customers receiving e-mailed sales receipts and invoices rather than paper-based copies. In FY2023, many of our product suppliers have taken further steps to reduce the amount of plastic packaging used as well as move towards more sustainable and recyclable packaging options such as cardboard. In FY2024, we intend to audit our store network to better understand our use of low emission lighting as well as consider other energy saving initiatives that will reduce our carbon footprint. We will also continue to work with our supplier partners to identify more eco-friendly alternatives for packaging and displaying the goods we sell. Annual Report 2023 11 Contents Directors’ Report Auditor’s Independence Declaration Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Balance Sheet Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Directors’ Declaration Independent Auditor’s Report 13 36 37 38 39 40 41 70 71 12 Shaver Shop Group Limited Directors’ Report 30 June 2023 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 2023. 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 care and grooming products both through Shaver Shop’s corporate owned stores as well as online through its websites and the online marketplaces it partners with. No significant change in the nature of these activities occurred during the year. Directors The following persons were directors of Shaver Shop Group Limited during the whole of the financial year and up to the date of this report: Broderick Arnhold Cameron Fox Craig Mathieson Trent Peterson Brian Singer Debra Singh 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 Other Current Listed Directorships Former Listed Directorships in last 3 years Brodie has over 15 years domestic and international experience in private equity, investment banking and corporate finance. He is currently an active investor and independent director for a number of private and public companies. Prior to his previous 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. Brodie worked for Investec Bank from 2010‑2013 where he was responsible for building a high‑net‑worth private client business. Prior to this, Brodie worked for Westpac Banking Corporation where he grew the institutional bank’s presence in Victoria, South Australia and Western Australia, and from 2006‑2010 held the role of Investment Director at Westpac’s private equity fund. Non‑Executive Director, Bailador Technology Investments Limited Chairman, iSelect Limited Special responsibilities Chair of the Board Member of the Audit and Risk Committee Member of the Nomination and Remuneration Committee Interests in shares Ordinary Shares – Shaver Shop Group Limited 1,500,000 Annual Report 2023 13 Directors’ Report continued Cameron Fox Chief Executive Officer and Managing Director Expertise and Experience Cameron has over 25 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 approximately 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 Chief Executive Officer Interests in shares Ordinary Shares – Shaver Shop Group Limited Unvested LTI Shares Unvested LTI Performance Share Rights Total 3,535,303 933,334 420,000 4,888,637 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 Ordinary Shares – Shaver Shop Group Limited 4,820,004 Brian Singer Non‑Executive Director Expertise and Experience Brian became a director of Shaver Shop Pty Ltd 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 Nomination and Remuneration Committee Interests in shares Ordinary Shares – Shaver Shop Group Limited 3,258,004 14 Shaver Shop Group Limited Directors’ Report continued Trent Peterson Non‑Executive Director Expertise and Experience Trent is a managing director and partner at Catalyst Investment Managers and has over 15 years’ experience as a company director and private equity investor. He is currently a Director of Adairs Limited, dusk Group Limited and Universal Store Limited. He was a former director of Just Group, Global Television, EziBuy, Max Fashions, Power Farming, Metro GlassTech, Moraitis Group, Taverner Hotel Group, SkyBus and Australian Discount Retail. Trent is also a Non‑Executive director of the Ascham Foundation and Gathermycrew.org. 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 Nomination and Remuneration Committee Member of the Audit and Risk Committee Interests in shares 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 CEO of Fantastic Furniture and Group CEO at Fantastic Holdings Limited as well as Group CEO of Household Goods at Greenlit Brands. Debra is currently a Director on the G8 Education Board, is the Chair of the Nomination Committee and member of the People and Culture Committee, and is also a Director on The Kids Cancer Project Board. Other Current Listed Directorships G8 Education Limited Former Listed Directorships in last 3 years None Special responsibilities Member of the Audit and Risk Committee Member of the Nomination and Remuneration Committee Interests in shares 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. Lawrence 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 Ordinary Shares – Shaver Shop Group Limited Unvested LTI Shares Unvested Performance Share Rights Total 1,040,183 466,667 210,000 1,716,850 Annual Report 2023 15 Directors’ Report continued Meetings of Directors During the financial year, 10 meetings of directors were held, 6 meetings of the Audit and Risk Committee were held and 4 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 and Risk Committee Meetings Nom and Rem Committee Meetings Number eligible to attend Number attended Number eligible to attend Number attended Number eligible to attend Number attended 10 10 10 10 10 10 10 10 10 9 10 10 6 – 6 6 – 6 6 – 5 5 – 6 4 – – 4 4 – 4 – – 4 4 – Broderick Arnhold Cameron Fox Craig Mathieson Trent Peterson Brian Singer Debra Singh Dividends paid or recommended The Directors have announced a 100% franked final dividend of 5.5 cents per share (or $7.2 million) to be paid on 21 September 2023 (FY2022: 5.5 cents per share 100% franked or $7.2 million). The Directors announced an interim dividend of 4.7 cents per share, 100% franked (or $5.8 million) in February 2023 (FY2022: 4.5 cents per share 100% franked or $5.6 million). The FY2023 interim dividend was paid on 16 March 2023. This brings total 100% franked dividends declared for FY2023 to 10.2 cents per share (up 2.0% on the FY2022 dividends of 10.0 cents per share 100% franked). The combined interim and final dividend payments for FY2023 represent the payout of approximately 79% of the Company’s FY2023 reported net profit after tax. 2023 Operating and Financial Review Non‑IFRS measures The Directors’ Report includes references to non‑IFRS financial measures. 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 financial measures contained within this report are not subject to audit or review. 16 Shaver Shop Group Limited Directors’ Report continued Group Results Sales Gross profit Gross margin % Operating expenses Operating expenses % of sales (costs of doing business) Earnings before interest, tax, depreciation & amortisation (EBITDA) EBITDA margin Depreciation & amortisation 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)* Reported 2023 $000 Reported 2022 $000 Increase (Decrease) % 224,524 222,745 99,933 44.5% 97,714 43.9% (58,897) (57,431) 26.2% 41,036 18.3% (15,266) 25,770 11.5% (1,243) (7,707) 16,819 13.1 13.9 10.2 25.8% 40,284 18.1% (14,398) 25,886 11.6% (1,696) (7,497) 16,692 13.2 14.2 10.0 0.8% 2.3% 1.4% 2.6% 1.6% 1.9% 1.1% 6.0% –0.4% –0.9% –26.7% 2.8% 0.8% –0.8% –2.1% 2.0% * Reflects the period from which the dividends were declared – not the financial period in which they were declared and paid – accordingly the FY2023 final dividend has been included in the table above. The FY2023 final dividend is to be paid in September 2023. In FY2023, the Company’s consolidated revenue increased by 0.8% to $224.5 million (FY2022 – $222.7 million). The growth in sales was driven primarily by: • in‑store sales growth of 18.0% (or $26.5 million) driven by the fact Shaver Shop’s stores were open for the whole of FY2023 compared to the COVID‑19 impacted FY2022 trading period when most of the Company’s stores across Victoria (VIC), New South Wales (NSW), New Zealand (NZ) and Australian Capital Territory (ACT) were closed for more than 3 months due to government mandated lockdowns; and • offsetting the increased in‑store sales was a 32.6% decrease in online sales (or $24.7 million) as customers reverted to their normal in‑store shopping patterns as stores re‑opened for the full year. Shaver Shop opened two new stores during FY2023. Hervey Bay, QLD was opened in July 2022 while the Bayfair, NZ store was opened in June 2023, bringing the total number of stores in NZ to eight. In addition, Elizabeth, SA was temporarily closed between late August 2022 and late June 2023 as Shaver Shop relocated its store within the centre. Similarly, Shaver Shop’s flagship Chadstone store closed in March 2023 while the centre goes through a refurbishment. A temporary location was opened within the Chadstone centre pending the re‑opening of the new flagship store planned for November 2023 (in‑line with the planned re‑opening of the affected portion of the centre). Gross profit margins increased approximately 60 basis points to 44.5% in FY2023 (FY2022 – 43.9%). The increase in gross profit margin was driven by increased margins realised across almost all product categories as Shaver Shop reduced levels of discounting, particularly across its exclusive ranges and products. Shaver Shop’s total operating expenses increased 2.6% to $58.9 million (FY2022 – $57.4 million), primarily due to: • the full period impact associated with operating Shaver Shop’s entire store network for the whole of FY2023 compared to the lockdown impacted period in FY2022; and • higher occupancy costs given Shaver Shop did not receive the same quantum of COVID‑19 related rent abatements in FY2023. Annual Report 2023 17 Directors’ Report continued These increases in operating expenses were partially offset by the following operating expense reductions in FY2023: • • • lower operational expenses primarily related to reduced postage costs in‑line with the reduced level of online sales generated during FY2023; lower marketing and advertising expenditure as Shaver Shop optimised it’s digital advertising spend in‑line with the reduced website traffic and associated sales; and lower short‑term incentive payments accrued for managers and senior executives in FY2023. Overall, Shaver Shop’s costs of doing business (total operating expenses) as a percentage of total sales increased slightly to 26.2% in FY2023, up approximately 40 basis points (FY2022 – 25.8%). Shaver Shop’s EBIT was relatively flat at $25.8 million down only $0.1 million or 0.4% compared to the prior corresponding period. Shaver Shop generated net profit after tax (NPAT) of $16.8 million in FY2023 (FY2022 – $16.7 million), an increase of $0.1 million or 0.8%. Shaver Shop receives a tax deduction over five years for the cost of franchise right terminations that occurred through its franchise buy‑back program. This leads to income tax payable being lower than income tax expense for the five year tax period that followed each buy‑back. The reduction in cash tax payable for FY2023 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 2023) Reduction in income tax payable FY2023 $000 988 FY2024 $000 955 FY2025 $000 795 After adjusting for the tax benefit associated with franchise buy‑backs, Shaver Shop’s Cash EPS was 13.9 cents per share, (FY2022 – 14.2 cents), a decrease of 2.1% over the prior corresponding year. Liquidity and Capital Management As at 30 June 2023, Shaver Shop had net cash of $13.5 million (FY2022 – $9.4 million) and undrawn debt facilities amounting to $29.5 million in aggregate. These are comprised of a $19.5 million term debt facility, together with a $10 million trade finance facility. Both facilities have a two year term, expiring on 31 July 2024. 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 FY2023. Shaver Shop generated $32.3 million in operating cash flow in FY2023 (FY2022 – $28.3 million). This operating cash flow was used to fund the payment of the two dividends that were paid in FY2023 amounting to $12.8 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 of personal care and beauty goods to source products that cater for these changing personal grooming and beauty trends. With more than 35 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 the customer’s needs. This strong expertise, segment focus and customer experience has enabled Shaver Shop to negotiate exclusive supply arrangements for a significant proportion of its top 50 products by sales. In FY2023, Shaver Shop generated approximately 49.2% of sales and approximately 57.2% of gross profit from products only sold at Shaver Shop in Australia and New Zealand. Shaver Shop believes its service focussed ethos and differentiated product range provides a unique customer experience that distinguishes its business from other retailers that sell personal grooming products in the market. Organic growth both online and in‑store (omnichannel 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. 18 Shaver Shop Group Limited Directors’ Report 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 new and innovative 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 to 36 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. 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 eight 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. 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 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. These 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 due to higher cost of living pressures and interest rates rising. These and other factors may lead to 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. 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 directly to end consumers), or a failure by Shaver Shop to successfully respond to changes in the market. Product sourcing may be disrupted Shaver Shop’s products are sourced from third party suppliers of major hair removal, hair care, personal care and other shaving brands. In FY2023, approximately 91% (FY2022 – 90%) of Shaver Shop’s total network sales came from products sourced from its top ten suppliers. Shaver Shop’s largest supplier constitutes approximately 28.0% (FY2022 – 29.0%) of all sales, with the next two largest suppliers contributing approximately 22.1% (FY2022 – 23.9%) and 18.4% (FY2022 – 14.9%) 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. Annual Report 2023 19 Directors’ Report continued Reputational risk Shaver Shop’s brand and reputation is important for building and maintaining strong relationships with customers and suppliers which in turn has an influence on the sales and profitability of the Company. A significant issue or event could attract criticism of Shaver Shop and negatively impact the Company’s brand and reputation as well as Shaver Shop’s share price. Shaver Shop has a range of policies and initiatives to mitigate brand risk, including our Code of Conduct, a Whistleblower Policy, a Modern Slavery Policy, a Supplier Charter, as well as ongoing environmental and corporate social responsibility initiatives. 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 any bulk sales of products to customers in Australia. Seasonality of trading patterns Shaver Shop’s sales are subject to seasonal patterns. In FY2023, the contribution of sales for the first half to total sales for the full year was approximately 58.8% (FY2022 – 57.1%). 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 in Australia and New Zealand). 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 the 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, 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. Supplier relationships, supplier input costs and the 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, together with potential changes in input costs of suppliers, 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 purchase 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 20 Shaver Shop Group Limited Directors’ Report continued 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 these suppliers or that suppliers may enter into exclusive distribution arrangements with Shaver Shop’s competitors. If this occurs, it may 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 and 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. Should Shaver Shop’s systems, and/or the systems that Shaver Shop relies on from suppliers be breached, and customer data become unprotected, this could have significant reputational, financial and regulatory implications for the Group. 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 100% franked final dividend of 5.5 cents per share to shareholders of record on 7 September 2023. The dividend payment date is 21 September 2023. No other matters or circumstances have arisen since the end of the financial year which significantly affected or could materially affect the operations of the Group, the results of those operations or the state of affairs of the Group in future financial years. Future developments and outlook Shaver Shop is cycling very strong trading results from Q1 FY2023 in which sales were up 17.5% vs Q1 FY2022. Total sales for the period from 1 July 23 to 19 August 23 (year to date or “YTD”) versus the prior comparative period and pre‑COVID‑19 (FY2020) are set out in the table below: FY2024 YTD Growth Total sales vs FY2023 Pre‑COVID‑19 vs FY2020 –5.1% +27.0% Like for like sales growth YTD is down 4.0% on the prior comparative period. Total sales are up 27.0% YTD versus pre‑COVID‑19 levels (FY2020). Despite some discounting by competitors across trade wide models, Shaver Shop is maintaining attention and discipline on gross margin management and maximising gross profit dollars. Shaver Shop’s store refit program together with upgrades of its technology systems and hardware is expected to result in net capital expenditure of $2 million to $3 million in FY2024. Consistent with prior years, having regard to the importance of the Black Friday, Christmas and Boxing Day trading results to Shaver Shop’s FY2024 financial performance, it is not appropriate to provide FY2024 sales or profit guidance at this time. Annual Report 2023 21 Directors’ Report continued 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 25 to the audited financial statements. Auditor’s independence declaration The lead auditor’s independence declaration for the year ended 30 June 2023 has been received and can be found on page 36 of the 2023 Annual 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. 22 Shaver Shop Group Limited Directors’ Report continued 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 2022 to 30 June 2023. This Remuneration Report forms part of the Directors’ Report and has been audited in accordance with the Corporations Act 2001. Shaver Shop’s remuneration report for the 2022 financial year received positive shareholder support at the 2022 AGM, with 98.76% of votes in favour of adoption. (a) Summary Group financial and operational performance Shaver Shop again delivered solid financial results for shareholders in FY2023 evidenced by: • sales of $224.5 million up 0.8% on the prior year. In‑store sales increased 18.0% (or $26.5 million) as customers returned to traditional shopping habits following the end of the pandemic. The growth of in‑store sales more than offset the 32.6% decline in online sales. Online sales represented approximately 23% of total sales for the year; • gross profit margins increased approximately 60 basis points to 44.5% with improved margin results across almost all categories; • costs were well controlled with total operating expenses representing 26.2% of total sales (FY2022 – 25.8%); • net profit was up $0.1m or 0.8% to $16.8 million (FY2022 – $16.7 million); • operating cash flow increased 13.9% to $32.3 million leading to net cash of $13.5 million at 30 June 2023 (30 June 2022 – $9.4 million); and • continuing strong customer service metrics with an average net promoter score (NPS) of 88.6 (out of 100). Short‑term incentive (STI) The Company delivered another strong financial performance in FY2023 and in doing so exceeded Shaver Shop’s internal targets but not the stretch targets established at the start of the year. This resulted in 50% of the maximum potential STI award being granted to executive Key Management Personnel, (KMP or Senior Executives), by Shaver Shop’s Board of Directors. Consistent with FY2022, the STI targets for FY2023 were based on underlying NPAT of the Company. Long‑term incentive (LTI) As outlined in Shaver Shop’s FY2022 Remuneration Report, the Company undertook a review in conjunction with advice from external remuneration and tax consultants of its incentive structures which included the benchmarking of its program against comparable retailers listed on the ASX. As a result of this review, Shaver Shop’s Board of Directors decided from FY2023 to change its LTI structure to be based on Performance Share Rights rather than continuing with the pre‑existing loan share plan. Share rights are a more generally accepted and common structure for executive leadership incentive plans for listed entities and are considered less complex to administer and easier for participants to understand. Details regarding the new LTI plan including specifics of the vesting conditions associated with the Performance Share Rights were included in Shaver Shop’s 2022 Notice of Annual General Meeting (AGM) dated 7 October 2022. Shareholders adopted the Shaver Shop Executive Long‑Term Incentive Plan at the Company’s 2022 AGM held on 10 November 2022 with 97.6% of the votes cast in favour of the resolution. The loan share plan will stay in place until the previously issued awards either vest or expire. Tranche 3 of the FY2020 LTI grant reached the end of its three‑year performance period on 30 June 2022. The related service condition for the shares ended on 30 June 2023. The Company’s EPS CAGR over the performance period was 29.8%, exceeding the maximum threshold for vesting and accordingly all Tranche 3 EPS shares (135,000 shares) for Senior Executives vested on 30 June 2023, once the relevant service condition was met. The TSR CAGR for Tranche 3 of the FY2020 LTI grant was 32.7% and exceeded the maximum threshold for vesting and accordingly, 100% of the Tranche 3 TSR shares (315,001 shares) vested with Senior Executives on 30 June 2023, once the relevant service condition was met. Annual Report 2023 23 Directors’ Report continued Tranche 2 of the FY2021 LTI grant reached the end of its two‑year performance period on 30 June 2022. The EPS CAGR for Tranche 2 of the FY2021 LTI grant was 24.5% and exceeded the maximum EPS performance hurdle and accordingly, following the tenure requirement being met (30 June 2023) 100% of the Tranche 2 EPS shares (140,000 shares) vested with Senior Executives. The TSR CAGR for Tranche 2 of the FY2021 LTI grant was 12.7% and accordingly, following the tenure requirement being met (30 June 2023) 34.6% (or 113,036 shares) of the granted Tranche 2 TSR shares (326,667 shares) vested with Senior Executives. Tranche 3 of the FY2021 LTI grant reached the end of its three‑year performance period on 30 June 2023. The EPS CAGR for Tranche 3 of the FY2021 LTI was 15.4% which was below the maximum EPS performance hurdle. Accordingly, subject to meeting the tenure requirement (30 June 2024) 75.7% of the FY2021 Tranche 3 EPS shares (105,977 shares) will vest with Senior Executives. The determination of the TSR CAGR for Tranche 3 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 volume weighted average price (VWAP) of Shaver Shop’s shares in the 5 days after release of the FY2023 financial results. The FY2022 LTI grant has one, three‑year performance period that concludes on 30 June 2024 for the EPS Performance Condition and concludes 5 days after the release of the FY2024 financial results for the TSR Performance Condition. Accordingly, neither the TSR, nor the EPS CAGRs for the FY2022 grant will be known until that time. In FY2023, Shaver Shop’s Board decided to move from a loan share‑based LTI plan for senior executives, to a Performance Share Rights plan known as the Shaver Shop Executive Long‑Term Incentive Plan. The new plan has been determined to be easier to understand for senior executives and should therefore provide a better motivational outcome that is aligned with shareholders’ interests. In accordance with the invitations to senior executives in FY2023, the rights have a three‑year term with vesting subject to EPS growth performance conditions as well as service conditions. (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 Debra Singh Senior Executives Cameron Fox Lawrence Hamson Philip Tine Independent, Non‑Executive Chairman Independent, Non‑Executive Director Independent, Non‑Executive Director Independent, Non‑Executive Director Independent, Non‑Executive Director 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 745 team members (FY2022 – 788) 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 FY2023, the primary performance mechanism for determining whether Senior Executives were rewarded the Short‑Term Incentive Plan (STIP), was the Company’s Net Profit After Tax (NPAT), having regard to pre‑set growth objectives relative to Shaver Shop’s internal NPAT targets for FY2023. Shaver Shop generated $16.8 million NPAT in FY2023 which was above Shaver Shop’s internal target but did not meet the Company’s stretch objectives. Accordingly, in accordance with the pre‑set NPAT targets, the Board approved the payment of 50% of the maximum STI award for senior executives. The Board believes the STI outcomes were fair and appropriate and reflect the alignment between shareholders’ interests and the Company’s remuneration practices and policies. 24 Shaver Shop Group Limited Directors’ Report continued In terms of its Executive Long‑Term Incentive Plan (ELTIP), in FY2023 Shaver Shop granted 1,280,000 performance share rights to participants in the ELTIP. The performance rights allocations are subject to Service and Earnings Per Share (EPS) vesting conditions over a three‑year performance period which is outlined in further detail below. Due to the departure of one participant, 20,000 performance rights lapsed during FY2023. 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 FY2017 to FY2023. Revenue EBITDA Net Profit After Tax (NPAT) Basic earnings per share (cents) Dividends declared Dividends per share declared (cents) Statutory FY2023 Result $000 Statutory FY2022 Result $000 Statutory FY2021 Result $000 Statutory FY2020 Result $000 Statutory FY2019 Result $000 Statutory FY2018 Result $000 Statutory FY2017 Result $000 224,524 222,745 213,667 194,924 167,437 154,937 142,568 41,036 16,819 13.1 12,788 40,284 16,692 13.2 11,794 10.2 9.5 40,424 17,473 14.2 7,261 5.9 $1.00 30,337 10,382 8.5 5,659 4.6 $0.70 12,530 6,670 5.5 5,399 4.5 $0.42 12,170 6,555 5.3 5,252 4.2 $0.45 14,870 8,994 7.2 2,001 1.6 $0.64 Year‑end share price ($) $0.945 $0.975 For the financial year ended 30 June 2023, the Company’s NPAT increased by 0.8% to $16.8 million. The FY2023 NPAT result of $16.8 million was achieved at a time when consumers were experiencing significantly higher costs of living as well as increased interest rates across Australia and New Zealand. % 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. Shaver Shop’s FY2023 NPAT result of $16.8m is 157% higher than the result achieved in FY2018 and represents a compound average growth rate of 20.7% over the five‑year period. s n o i l l i m A $ 20 18 16 14 12 10 8 6 4 2 0 17.5 16.7 16.8 7.2 7.4 10.4 FY18 FY19 FY20 FY21 FY22 FY23 Normalised NPAT ($m) % of Max STI Award 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 % Annual Report 2023 25 Directors’ Report continued Long‑Term Incentive Plan Outcomes for FY2023 Loan Plan Shares issued up to FY2022 Up until FY2022, under the terms of the LTIP, loan plan shares were issued to participants that had three tranches. The tranches had one‑year, two‑year and three‑year performance periods. For each tranche, 70% of the shares issued were subject to TSR performance hurdles and 30% were subject to EPS performance hurdles. The base share price used for calculating the TSR performance hurdle was 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 2023 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 FY2023. In FY2022, after consulting with shareholders, the structure of the LTI Plan was changed slightly for the FY2022 LTI share grant such that there was only one tranche with one, three‑year performance period. Consistent with the prior structure, 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 after the release of Shaver Shop’s FY2022 financial results. The ending share price for the TSR performance hurdle is calculated using the 5 day VWAP of Shaver Shop’s shares following the release of the Company’s results for FY2024. The issue price of the shares is based on the 5 day VWAP of the Company’s shares immediately prior to the date of Grant. 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) Perform ance Period Starting Perform ance Period Ending Service Condition LTI shares granted to KMP Perform ance outcome Vested Forfeited FY2020 FY2020 30 Jun 22 449,998 FY2020 FY2021 30 Jun 22 450,001 FY2020 FY2022 30 Jun 23 450,001 FY2021 FY2021 30 Jun 23 466,665 FY2021 FY2022 30 Jun 23 466,667 FY2021 FY2023 30 Jun 24 466,668 FY2022 FY2024 10 Nov 24 1,400,000 44.1% 53.1% 29.8% 66.2% 24.5% 100% 100% 100% 100% 100% 0% 0% 0% 0% 0% Perform ance outcome 87.5% 39.9% 32.7% 4.8% 12.7% Vested Forfeited 100% 100% 100% 0% 35% 0% 0% 0% 100% 65% The following share tranche has 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 Tranche Service Condition EPS Shares Granted EPS Shares to Vest TSR Shares Granted TSR Shares to Vest FY2021 FY2023 Tranche 3 30 Jun 24 140,000 105,977 326,668 At the time of writing this report, it is uncertain whether the FY2021 Tranche 3 TSR shares will meet their vesting conditions. Performance Share Rights issued in FY2023 The following performance share rights have been issued to KMP under the ELTIP. Performance Period Starting Performance Period Ending FY2023 FY2025 Service Condition 30 Jun 25 EPS Growth (100% of shares) Performance Rights granted to KMP Performance outcome Vested Forfeited 820,000 N/A 0% 0% 26 Shaver Shop Group Limited Directors’ Report continued (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 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 training team members in Shaver Shop’s values and approach to business, as well as 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 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. 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 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. Annual Report 2023 27 Directors’ Report continued 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; and 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 Fixed Remuneration STI (Cash bonus) Purpose Provide competitive market salary including super Reward superior performance in‑year LTI (Loan Share Plan) Reward superior long‑term value creation Metrics NIL Specific NPAT target(s) set at or around the beginning of the financial year EPS growth – 100% Potential Value Based on market competitive rates $575,000 Dependent on NPAT result and capital structure The mix of fixed and at risk components of each of the Senior Executives as a percentage of total target remuneration for FY2023 was as follows: Senior Executive Cameron Fox Lawrence Hamson Philip Tine Fixed Remuneration Fixed Remuneration At Risk STI Maximum Opportunity At Risk LTI Maximum Opportunity 53% 63% 59% 25% 19% 22% 22% 18% 19% Senior Executive base salaries include a fixed component of base salary together with employer superannuation contributions that are in line with statutory obligations. The fixed remuneration component also includes car allowances and other benefits. The fixed remuneration component for Senior Executives is based on market data for comparative companies of the same size and complexity as well as having regard to the experience and expertise of the Senior Executive. Fixed remuneration for executives is reviewed annually to provide competitiveness with the market, whilst also taking into account capability, experience value to the organisation and performance of the individual. There is no guaranteed salary increase in any Senior Executive service contract. 28 Shaver Shop Group Limited Directors’ Report continued Short‑Term Incentives (STI) Senior Executive Cameron Fox Lawrence Hamson Philip Tine Target STI ($) Actual STI Awarded ($) Awarded STI as % of Maximum STI % of Maximum STI Award Forfeited $290,000 $145,000 $135,000 $150,000 $67,500 $75,000 50% 50% 50% 50% 50% 50% 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 FY2024, consistent with prior years, the Nomination and Remuneration Committee has set a full year NPAT target for the purpose of determining FY2024 STI rewards. 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). From FY2017 through FY2022, Shaver Shop offered LTIs to Senior Executives using a loan share plan structure. The Plan Shares were 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 one‑year, two‑year and three‑year performance periods. After consulting with shareholders, the Board determined that for the FY2022 grant of the LTIP, there will be a single tranche with a three‑year performance period. Each Plan Share is 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. In FY2023, following an external review of its LTI program, Shaver Shop changed its LTI structure to be based on Performance Share Rights. This structure is more common for public companies of Shaver Shop’s size and nature. Similar to the loan share plan, rights issued to participants have a three‑year performance period with vesting subject to an EPS performance condition as well as a service condition. Annual Report 2023 29 Directors’ Report continued The table below summarises the key terms of each LTI share grant over the last four financial years. Total LTI securities granted FY2023 LTI Grant 1,280,000 FY2022 LTI Grant 2,200,000 FY2021 LTI Grant 2,350,000 LTI security type Performance Rights Loan Shares Loan Shares LTI securities granted to KMP 820,000 1,400,000 Grant Date Issue price Starting price for TSR % of grant with TSR hurdle % of grant with EPS hurdle 28 Nov 2022 10 Nov 2021 N/A N/A 0% 100% $1.0252 $1.0773 70% 30% 1,400,000 28 Oct 2020 $1.0651 $1.0651 70% 30% FY2020 LTI Grant 2,300,000 Loan Shares 1,350,000 30 Oct 2019 $0.6344 $0.6344 70% 30% Tranche 1 performance period 1 Jul 22‑30 Jun 25 1 Jul 21‑30 Jun 24 1 Jul 20‑30 Jun 21 1 Jul 19‑30 Jun 20 Tranche 2 performance period Tranche 3 performance period TSR Vesting CAGR (%) Hurdle applicable to each performance period N/A N/A N/A EPS Vesting hurdle applicable to each performance period FY25 EPS under $0.14 – NIL N/A N/A 1 Jul 20‑30 Jun 22 1 Jul 19‑30 Jun 21 1 Jul 20‑30 Jun 23 1 Jul 19‑30 Jun 22 Under 6% – NIL Under 10% – NIL Under 10% – NIL 6‑15% – 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% Above 15% – 100% Above 25% – 100% Above 25% – 100% Under 3% – NIL Under 5% – NIL Under 5% – NIL FY25 EPS from $0.14 to $0.16 – pro‑rata vesting from 30% to 100% FY25 EPS above $0.16 – 100% 3‑13% – 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% Above 13% – 100% Above 20% – 100% Above 20% – 100% Trance 1 & 2 (if applicable) Service Condition 30 Jun 25 10 Nov 24 30 Jun 23 30 Jun 22 Tranche 3 Service Condition N/A N/A 30 Jun 24 30 Jun 23 Expiry date 15 years from Grant Date unless otherwise determined by the Board 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 EPS Performance Conditions The EPS hurdle for the Performance Share Rights issued in FY2023 is based on achieving discrete EPS targets in FY2025 as outlined in the table above. For the LTI Shares issued in the years prior to FY2023, 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. 30 Shaver Shop Group Limited Directors’ Report continued TSR Performance Conditions The TSR performance hurdle for the FY2020 to FY2022 grants 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. For the FY2018 through FY2021 LTI grants, 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 FY2022 Grant, the starting point for the TSR hurdle was the 5 day VWAP per share immediately after the release of the Company’s FY2021 financial results, which was $1.0773. 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. 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 Performance Share Rights (FY2023) and Plan Shares (prior to FY2023) offered to the relevant Senior Executives, including details of the number of Rights or Plan Shares per tranche for each Senior Executive for grants between FY2020 and FY2023. For the FY2022 and FY2023 grants, these had one, three‑year Performance Period. In relation to the FY2020 and FY2021 grants, these had three Tranches with one‑year, two‑year and three‑year Performance Periods respectively. KMP Cameron Fox Lawrence Hamson Philip Tine Tranche 1 Tranche 2 Tranche 3 TOTAL Tranche 1 Tranche 2 Tranche 3 TOTAL Tranche 1 Tranche 2 Tranche 3 TOTAL FY2023 LTI Grant (# rights) FY2022 LTI Grant (# shares) FY2021 LTI Grant (# shares) FY2020 LTI Grant (# shares) 420,000 700,000 – – – – 420,000 210,000 700,000 350,000 – – – – 210,000 210,000 350,000 350,000 – – – – 233,333 233,333 233,334 700,000 116,666 116,667 116,667 216,666 216,667 216,667 650,000 116,666 116,667 116,667 350,000 350,000 116,666 116,667 116,667 116,666 116,667 116,667 210,000 350,000 350,000 350,000 Shaver Shop obtains an independent valuation of the Performance Share Rights and LTIP Shares at the date of grant. The following table summarises the valuation of each Performance Share Right that was issued to participants in the ELTIP in FY2023: Performance Condition EPS (100% of allocation) FY2023 LTI Grant $0.89 Annual Report 2023 31 Directors’ Report continued The following table summarises the valuation of each LTIP share for each tranche in each year of grant: Performance Condition TSR (70% of securities) EPS (30% of allocation) Tranche 1 Tranche 2 Tranche 3 Tranche 1 Tranche 2 Tranche 3 LTI Granted in Relation to FY2020 to FY2023 LTIP Allocation Senior Executives Cameron Fox Lawrence Hamson Philip Tine LTI Grant Year LTI Securities Granted % Paid/ Vested in Period # LTIP Securities Vested in Period FY2023 FY2022 FY2021 FY2020 FY2023 FY2022 FY2021 FY2020 FY2023 FY2022 FY2021 FY2020 420,000 700,000 700,000 650,000 210,000 350,000 350,000 350,000 210,000 350,000 350,000 350,000 0% 0% 28.1% 33.3% 0% 0% 28.1% 33.3% 0% 0% 28.1% 33.3% – – 196,518 216,667 – – 98,259 116,667 – – 98,259 116,667 FY2022 LTI Grant $0.360 N/A N/A $0.440 N/A N/A FY2021 LTI Grant FY2020 LTI Grant $0.260 $0.270 $0.290 $0.440 $0.440 $0.460 $0.120 $0.124 $0.129 $0.224 $0.224 $0.235 # LTIP Securities Forfeited in Period Value Expensed in FY2023 $ % Forfeited in Period 0% 0% – – 15.3% 106,815 0% 0% 0% – – – 15.3% 53,408 0% 0% 0% 15.3% 0% – – – 53,408 – $80,154 $87,230 $70,819 $8,346 $40,077 $43,615 $35,410 $4,494 $40,077 $43,615 $35,410 $4,494 The shares noted as forfeited in the above table did not meet their required Performance Conditions and were compulsorily divested by the Company in FY2023. (h) Non‑Executive Director Remuneration Under the Constitution, the Board may decide the remuneration for the Company to which each Non‑Executive Director is entitled to 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 FY2023, the annual base Non‑Executive Director fees currently agreed to be paid by the Company were $140,000 (FY2022 – $140,000) to the Chairman of the Board, Broderick Arnhold, $80,000 (FY2022 – $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 (FY2022 – $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 were 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. 32 Shaver Shop Group Limited Directors’ Report continued (i) Statutory remuneration details and other statutory disclosures The following tables in respect to the FY2022 and FY2023 financial years detail the components of remuneration for each Non‑Executive Director and Senior Executive of the Group. FY2023 table of benefits and payments Annual leave/ long service leave $ STI/ bonus $ Post‑ employment benefits $ Share‑based payments(3) $ – – – – – – – – – – – – – – – Total $ 140,000 80,000 80,000 70,000 70,000 Cash salary/ Director’s fees $ 140,000 80,000 80,000 70,000 70,000 591,779 432,254 368,077 – – – – – 145,000 67,500 75,000 1,832,110 287,500 37,286 7,782 20,167 65,235 30,000 25,860 25,293 81,153 246,549 123,596 123,596 493,741 1,050,614 656,992 612,133 2,759,739 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 and Performance Share Rights only. FY2022 table of benefits and payments Cash salary/ Director’s fees $ 140,000 80,000 80,000 70,000 70,000 580,000 428,713 350,192 1,798,905 Annual leave/ long service leave $ STI/ bonus $ Post‑ employment benefits $ Share‑based payments(3) $ – – – – – – – – – – – – – – – – – – – – Total $ 140,000 80,000 80,000 70,000 70,000 290,000 125,000 140,000 555,000 38,757 13,238 22,835 74,830 30,000 25,860 23,568 79,428 180,770 1,119,527 90,982 89,826 683,793 626,421 361,578 2,869,741 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 and Performance Share Rights only. Annual Report 2023 33 Directors’ Report continued (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 2023 Directors Broderick Arnhold Cameron Fox Craig Mathieson Brian Singer Trent Peterson Debra Singh Senior Executives Lawrence Hamson Philip Tine Total LTIP holdings of KMP Balance at Beginning of Year On Market Sale of Shares On Market Purchase of Shares Shares Vested as Remuneration Balance at End of Year 2,000,000 (500,000) 3,122,118 4,820,004 3,258,004 547,619 100,000 – – – – – 925,492 300,000 (100,235) (25,000) 15,073,237 (625,235) – – – – – – – – – – 1,500,000 413,185 3,535,303 – – – – 4,820,004 3,258,004 547,619 100,000 214,926 214,926 1,040,183 489,926 843,037 15,291,039 The following table details the LTIP holding and the movements in the LTIP securities for KMP during FY2023: Senior Executives LTI Security Type Unvested Balance at 30 June 2022 LTI Securities Granted as Remuneration Vested/ Exercisable Forfeited Unvested Balance at 30 June 2023 Cameron Fox Shares Rights 1,616,667 – (413,185) (270,148) – 420,000 – – Lawrence Hamson Shares 816,667 – (214,926) (135,074) Philip Tine Rights Shares Rights – 210,000 – – 816,667 – (214,926) (135,074) – 210,000 – – 933,334 420,000 466,667 210,000 466,667 210,000 (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 FY2023 the CEO was entitled to fixed remuneration of $625,000 (FY2022 $610,000) whilst the fixed remuneration for other Senior Executives was in the range of $395,000 to $465,000. 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. 34 Shaver Shop Group Limited Directors’ Report continued (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 Balance at beginning of the year $ Balance at the end of the year $ Provision for bad debts expense $ 56,189 56,189 – 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. (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 22 August 2023 Annual Report 2023 35 Auditor’s Independence Declaration Auditor’s Independence Declaration As lead auditor for the audit of Shaver Shop Group Limited for the year ended 30 June 2023, 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. Brad Peake Partner PricewaterhouseCoopers Melbourne 22 August 2023 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. 36 Shaver Shop Group Limited Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 30 June 2023 Revenue Revenue from continuing operations Cost of goods sold Gross profit from corporate owned retail stores Expenses Employee benefits expense Marketing and advertising expense Depreciation and amortisation expense Occupancy expenses Operational expenses Other expenses Finance costs Profit before income tax Income tax Consolidated Note 2023 $ 2022 $ 3 224,523,767 222,745,103 (124,590,985) (125,030,670) 99,932,782 97,714,433 (35,821,579) (31,847,964) (7,238,685) (8,519,349) 4 (15,265,884) (14,397,705) (3,261,716) (2,929,723) (9,376,725) (11,091,791) (3,198,548) (3,042,220) (1,243,179) (1,696,342) 24,526,466 24,189,339 (7,707,174) (7,496,863) 4 5 Profit after income tax for the year attributable to the owners of Shaver Shop Group Limited 21 16,819,292 16,692,476 Other comprehensive income Items that may be reclassified subsequently to profit or loss Exchange differences on translating foreign operations Other comprehensive income for the year, net of tax Total comprehensive income for the year attributable to the owners of Shaver Shop Group Limited Earnings per share for profit attributable to the owners of Shaver Shop Group Limited Basic earnings per share (weighted average shares) Diluted earnings per share (weighted average shares) 21,408 (30,366) 21,408 (30,366) 16,840,700 16,662,110 Cents Cents 20 20 13.1 12.8 13.2 12.8 The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. Annual Report 2023 37 Consolidated Balance Sheet As at 30 June 2023 Assets Current assets Cash and cash equivalents Trade receivables and current assets Inventories Total current assets Non‑current assets 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 Current tax liabilities Employee benefits 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 Consolidated Note 2023 $ 2022 $ 7 8 9 11 10 24 12 13 10 24 15 16 10 16 17 19 21 13,471,437 9,395,910 2,131,793 3,075,883 21,959,590 22,175,081 37,562,820 34,646,874 10,839,362 10,387,939 17,635,700 22,340,317 4,382,792 6,036,319 54,233,038 54,304,560 87,090,891 93,069,135 124,653,712 127,716,009 14,601,192 17,708,190 10,620,151 10,849,286 1,059,380 1,837,762 2,785,066 2,610,385 30,139 25,667 29,095,928 33,031,290 11,083,885 15,974,064 177,145 77,145 11,261,030 16,051,209 40,356,958 49,082,499 84,296,754 78,633,510 50,275,510 49,492,703 2,400,932 1,551,477 31,620,312 27,589,330 84,296,754 78,633,510 The above consolidated balance sheet should be read in conjunction with the accompanying notes. 38 Shaver Shop Group Limited Consolidated Statement of Changes in Equity For the year ended 30 June 2023 Consolidated Balance at 1 July 2022 Profit after income tax for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: On‑market sale of unvested LTI shares Share‑based payments (note 19) Dividends paid (note 18) Balance at 30 June 2023 Consolidated Balance at 1 July 2021 Profit after income tax for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: On‑market sale of unvested LTI shares Share‑based payments (note 31) Dividends paid (note 18) Balance at 30 June 2022 Ordinary Shares $ Reserves $ Retained earnings $ Total equity $ 49,492,703 1,551,477 27,589,330 78,633,510 – – – – 16,819,292 16,819,292 21,408 – 21,408 21,408 16,819,292 16,840,700 782,807 – – – 828,047 – – 782,807 828,047 – (12,788,310) (12,788,310) 50,275,510 2,400,932 31,620,312 84,296,754 Ordinary Shares $ Reserves $ Retained earnings $ Total equity $ 48,872,261 1,014,616 22,690,867 72,577,744 – – – – 16,692,476 16,692,476 (30,366) – (30,366) (30,366) 16,692,476 16,662,110 620,442 – – – 567,227 – – 620,442 567,227 – (11,794,013) (11,794,013) 49,492,703 1,551,477 27,589,330 78,633,510 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. Annual Report 2023 39 Consolidated Statement of Cash Flows For the year ended 30 June 2023 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 Consolidated Note 2023 $ 2022 $ 248,471,085 246,122,594 (208,175,913) (210,092,626) 40,295,172 36,029,968 166,512 – (274,617) (255,000) (1,220,349) (1,441,750) (6,708,204) (6,017,784) Net cash from operating activities 30 32,258,515 28,315,434 Cash flows from investing activities Payments for property, plant and equipment Payments for software Contributions for new premises fitouts 11 12 (2,369,640) (1,845,179) (65,997) (328,214) 1,046,153 625,000 Net cash used in investing activities (1,389,484) (1,548,393) Cash flows from financing activities Principal elements of lease repayments Proceeds on sale of unvested LTI shares Dividends paid Net cash used in financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year (14,788,001) (13,572,525) 782,807 620,442 18 (12,788,310) (11,794,013) (26,793,504) (24,746,096) 4,075,527 2,020,945 9,395,910 7,374,965 Cash and cash equivalents at the end of the financial year 7 13,471,437 9,395,910 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. 40 Shaver Shop Group Limited Notes to the Consolidated Financial Statements 30 June 2023 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 22 August 2023. Comparatives are consistent with prior years, unless otherwise stated. Basis of 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 2023 and the results of all subsidiaries for the period then ended. Shaver Shop Group Limited and its subsidiaries together are referred to in these financial statements as the ‘Group’ or the consolidated entity. Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. A list of controlled entities is contained in Note 26 to the financial statements. 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 12 and net realisable value of inventory, refer to Note 9. 3. Revenue and other income Revenue from continuing operations Sales revenue Retail sales Total revenue Consolidated 2023 $ 2022 $ 224,523,767 222,745,103 224,523,767 222,745,103 Annual Report 2023 41 Notes to the Consolidated Financial Statements continued Accounting policy for 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 care and 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 that could be returned. Accumulated experience is used to estimate such returns at the time of sale at a portfolio level (expected value method). As 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. 4. Expenses Profit before income tax includes the following specific expenses: Finance costs Interest and finance charges – borrowings Interest and finance charges – leases Interest income Total finance costs Depreciation and amortisation Intangible assets Property, plant & equipment Right‑of‑use assets Total depreciation and amortisation expense Consolidated 2023 $ 2022 $ 189,342 254,718 1,220,349 1,441,750 (166,512) (126) 1,243,179 1,696,342 139,009 79,759 1,759,451 1,800,284 13,367,424 12,517,662 15,265,884 14,397,705 42 Shaver Shop Group Limited Notes to the Consolidated Financial Statements continued 5. Income tax The major components of tax expense 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 Reconciliation of income tax to accounting profit Profit before income tax Tax at the statutory tax rate of 30% Tax effect amounts which are not deductible/(taxable) in calculating taxable income: Other items Income tax Franchise Buy‑Backs Consolidated 2023 $ 2022 $ 6,484,884 5,723,942 1,222,290 1,772,921 7,707,174 7,496,863 Consolidated 2023 $ 2022 $ 24,526,466 24,189,339 7,357,940 7,256,802 349,234 240,061 7,707,174 7,496,863 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. Accounting policy for 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. Annual Report 2023 43 Notes to the Consolidated Financial Statements continued 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 (if any) 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 or 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. 6. Operating segments The Group operates within one operating segment, being retail sales of specialist personal grooming products through their corporate and online stores. The chief operating decision maker for the Company is the Managing Director and 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 one single customer. At 30 June 2023, the Group operated 115 Corporate Stores in Australia (FY2022: 114) and 8 Corporate Stores in New Zealand (FY2022: 7). Accounting policy for operating segments 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. 7. Cash and cash equivalents Cash at bank and on hand Accounting policy for cash and cash equivalents Consolidated 2023 $ 2022 $ 13,471,437 9,395,910 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, which are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value and bank overdrafts. Bank overdrafts (if applicable) are shown within borrowings in current liabilities in the balance sheet. 44 Shaver Shop Group Limited Notes to the Consolidated Financial Statements continued 8. Trade receivables and other current assets Current assets Trade receivables Prepayments Related party receivables Other receivables Total trade receivables and other current assets Consolidated 2023 $ 2022 $ 944,009 822,514 81,377 283,893 942,621 1,670,093 81,377 381,792 2,131,793 3,075,883 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. Accounting policy for 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. 9. Inventories Current assets Finished goods Consolidated 2023 $ 2022 $ 21,959,590 22,175,081 Amounts recognised in profit and loss Inventories recognised as an expense in costs of goods sold during the year ended 30 June 2023 amounted to $124,590,985 (FY2022 $125,030,670). Amounts recognised in expenses relating to write‑downs and write‑offs of stock in FY2023 amounted to $983,179 (FY2022: $922,022). Critical accounting estimates – realisable value of inventory Inventories are stated at the lower of cost and net realisable value. 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 effect the cost of goods sold. Accounting policy for inventories Inventories are stated at the lower of cost and net realisable value. Cost comprises of 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. Annual Report 2023 45 Notes to the Consolidated Financial Statements continued 10. Leases Lease liabilities Lease liabilities – current Lease liabilities – non‑current Consolidated 2023 $ 2022 $ 10,620,151 10,849,286 11,083,885 15,974,064 21,704,036 26,823,350 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 Accounting policy for leases Consolidated 2023 $ 2022 $ 46,474,610 47,572,696 (28,838,910) (25,232,379) 17,635,700 22,340,317 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 very limited situations contain an option to renew at the end of the initial term. Lease terms are negotiated on an individual basis. 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. 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. 46 Shaver Shop Group Limited Notes to the Consolidated Financial Statements continued 11. Property, plant and equipment Movements in carrying amounts of property, plant and equipment Movements 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 2023 Leasehold Improve‑ ments in Progress $ Plant and Equipment $ Computer Equipment $ Improve‑ ments $ Total $ Balance at the beginning of the year 492,528 Additions Disposals and write–downs Transfers Depreciation expense Foreign exchange movements – – (130,641) – – 9,679,223 1,886,456 (171,245) 130,641 169,210 483,184 – – 46,978 10,387,939 – – – 2,369,640 (171,245) – (1,605,202) (136,839) (17,411) (1,759,452) 12,232 248 – 12,480 Balance at the end of the year 361,887 9,932,104 515,803 29,568 10,839,362 Consolidated Year ended 30 June 2022 Balance at the beginning of the year Additions Disposals and write‑downs Depreciation expense Foreign exchange movements Leasehold Improve‑ ments in Progress $ 346,675 145,853 – – – Plant and Equipment $ Computer Equipment $ Improve‑ ments $ Total $ 9,912,088 1,621,248 (213,448) 242,837 78,059 – 64,389 10,565,989 – – 1,845,160 (213,448) (1,631,426) (151,447) (17,411) (1,800,284) (9,239) (239) – (9,478) Balance at the end of the year 492,528 9,679,223 169,210 46,978 10,387,939 Accounting policy for property, plant and equipment Property, plant and equipment is stated at historical cost minus 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. Plant and Equipment 2‑12 years Computer Equipment 1‑7 years Leasehold Improvements 10 years The asset’s 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. Annual Report 2023 47 Notes to the Consolidated Financial Statements continued 12. Intangible assets Movements in carrying amounts of intangible assets Consolidated Year ended 30 June 2023 Opening net book value Additions Amortisation Foreign exchange movements Balance at the end of the year Consolidated Year ended 30 June 2022 Opening net book value Additions Amortisation Foreign exchange movements Balance at the end of the year Software $ Brand names $ Goodwill $ Total $ 321,039 65,997 (66,562) – 673,944 53,309,577 54,304,560 – (72,447) 1,490 – – – 65,997 (139,009) 1,490 320,474 602,987 53,309,577 54,233,038 Software $ Brand names $ Goodwill $ Total $ – 748,504 53,309,577 54,058,081 328,214 (7,175) – – (72,584) (1,976) – – – 328,214 (79,759) (1,976) 321,039 673,944 53,309,577 54,304,560 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 2023. 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% (FY2022: 2.5%). The pre‑tax discount rate applied to cash flow projected is 14.2% (FY2022: 13.6%). 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 44.6% (FY2022: 43.2%) based on recent gross margins achieved, 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% (FY2022: 2.5%) and the same store sales growth rate used for the five‑year forecast period varies from 1% to 3% (FY2022: 1% to 3%). 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 2023 is approximately $160 million. If all of the following scenarios happen together, the recoverable amount of the CGU would exceed its carrying amount by approximately $22 million: the five‑year forecasted growth rate decreased from 1.0% to 3.0% to 0.0%, the pre‑tax discount rate is increased from 13.6% to 17.1%, the growth rate in the terminal year decreased from 2.5% to 0.0% and operating expenses increased at 4.0% versus expected long‑term 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 ongoing macroeconomic risks and uncertainties. 48 Shaver Shop Group Limited Notes to the Consolidated Financial Statements continued Accounting policy for 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. 13. Trade and other payables Current liabilities Trade payables GST payable Payroll related accruals Other creditors and accruals Consolidated 2023 $ 2022 $ 10,430,136 12,876,151 1,077,791 1,139,678 1,758,548 2,189,049 1,334,717 1,503,312 14,601,192 17,708,190 All amounts are short‑term and the carrying values are considered to be a reasonable approximation of fair value. Accounting policy for 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. Annual Report 2023 49 Notes to the Consolidated Financial Statements continued 14. Borrowings 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 2023 $ 2022 $ 13,471,437 9,395,910 944,009 942,621 21,959,590 22,175,081 10,839,362 10,387,939 54,233,038 54,304,560 Under the terms of the major borrowing facilities, as at 30 June 2023, the Group was required to comply with the following primary financial covenants: (a) Leverage Ratio: the ratio of debt to EBITDA must be less than or equal to 2.0; (b) Fixed Charge Cover Ratio: the ratio of a) EBITDA plus occupancy costs; to b) Interest expense plus right of use asset amortisation plus occupancy costs must be great than 1.5; and (c) Net Worth Ratio: 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. Accounting policy for 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. 50 Shaver Shop Group Limited Notes to the Consolidated Financial Statements continued 15. Employee benefits Current liabilities Provision for employee benefits Consolidated 2023 $ 2022 $ 2,785,066 2,610,385 The provision for employee benefits includes accrued annual leave and long service leave. For long service leave it covers all unconditional entitlements where employees have completed the required period of service and also those where employees are entitled to pro‑rata payments in certain circumstances. The entire amount of the provision is presented as current, since the Group does not have an unconditional right to defer settlement for any of these obligations. However, based on past experience, the Group does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months. The following amounts reflect leave that is not expected to be taken or paid within the next 12 months. The following amounts reflect leave that is not expected to be taken within the next 12 months: Consolidated 2023 $ 2022 $ Leave obligations expected to be settled after 12 months 1,058,244 918,245 Accounting policy for employee benefits Short‑term obligations Liabilities for wages and salaries, including non‑monetary benefits and annual leave expected to be settled within 12 months after the end of the 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. Annual Report 2023 51 Notes to the Consolidated Financial Statements continued 16. Other liabilities Current liabilities Other liabilities Non‑current liabilities Other liabilities Total other liabilities 17. Issued capital Consolidated 2023 $ 2022 $ 30,139 25,667 177,145 207,284 77,145 102,812 Consolidated 2023 $ 2022 $ 131,012,494 (FY2022: 131,012,494) Ordinary shares 50,275,510 49,492,703 Shaver Shop has issued and unvested shares (LTI Plan Shares) under its Long‑Term Incentive Plan (LTI Plan) of 2,783,336 at 30 June 2023 (FY2022: 5,052,412). 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. In addition, in FY2023 Shaver Shop has issued 1.28 million rights to acquire Shaver Shop shares under its Executive Long‑Term Incentive Plan. At 30 June 2023, $1.26 million of these rights remain outstanding and are subject to both performance conditions for vesting as well as service conditions. Movements in share capital At the beginning of the reporting period Sale of unvested long‑term incentive shares At the end of the reporting period Number of shares outstanding At the beginning of the reporting period Unvested LTIP shares issued in period At the end of the reporting period 52 Shaver Shop Group Limited Consolidated 2023 $ 2022 $ 49,492,703 48,872,261 782,807 620,442 50,275,510 49,492,703 2023 No. 2022 No. 131,012,494 128,812,494 – 2,200,000 131,012,494 131,012,494 Notes to the Consolidated Financial Statements continued Calculation of weighted average number of diluted shares 2023 No. 2022 No. Weighted average number of ordinary shares used for calculating basic earnings per share 128,229,158 126,244,152 Adjustment for weighted average number of LTI Plan Shares issued (unvested shares) 2,783,336 3,797,931 Weighted average number of ordinary shares and potential ordinary shares used in calculating diluted earnings per share 131,012,494 130,042,083 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 2023 or there is an expectation the shares will become traded on the ASX. 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. Capital risk 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. Accounting policy for issued capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. 18. Dividends Dividends The following dividends were declared and paid: Franked 100% FY2022 final dividend of 5.5 cents per share (FY2021: 5.0 cents per share, franked 100%) Franked 100% FY2023 interim dividend of 4.7 cents per share (FY2022: 4.5 cents per share, franked 100%) Total dividends declared per share Consolidated 2023 $ 2022 $ 6,847,739 6,193,847 5,940,571 5,600,166 12,788,310 11,794,013 Consolidated 2023 0.102 2022 0.095 Annual Report 2023 53 Notes to the Consolidated Financial Statements continued Franking account Consolidated 2023 $ 2022 $ Franking credits available for subsequent financial years based on a tax rate of 30% 3,612,342 3,473,367 The above available balance is based on the dividend franking account at year‑end adjusted for: • • • franking credits that will arise from the payment/(receipt) of the current tax liabilities/(receivable); franking debits that will arise from the payment of dividends recognised as a liability at the year‑end; and 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. Accounting policy for dividends Dividends are recognised when declared during the financial year and no longer at the discretion of the Company. 19. Reserves Foreign currency translation reserve Opening balance Currency translation differences arising during the year Closing balance Share‑based payments reserve Opening balance Transfers in – Share‑based payments Closing balance Balance at the end of the year Foreign currency translation reserve Consolidated 2023 $ 2022 $ (33,314) 21,408 (11,906) (2,948) (30,366) (33,314) 1,584,791 1,017,564 828,047 567,227 2,412,838 1,584,791 2,400,932 1,551,477 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. 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. 54 Shaver Shop Group Limited Notes to the Consolidated Financial Statements continued 20. Earnings per share Profit from continuing operations Earnings used to calculate basic EPS from continuing operations Consolidated 2023 $ 2022 $ 16,819,292 16,692,476 16,819,292 16,692,476 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 Weighted average number of ordinary shares outstanding during the year used in calculating fully diluted EPS Basic earnings per share Diluted earnings per share 2023 No. 2022 No. 128,229,158 126,244,152 131,012,494 130,042,083 Cents 13.1 12.8 Cents 13.2 12.8 Information concerning classification of securities LTI Plan shares and rights granted to participants in Shaver Shop’s long‑term incentive plans 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 or if the company expects the potential shares to become ordinary issued shares, and to the extent to which they are dilutive. Accounting policy for earnings per share Basic earnings per share Basic earnings per share is determined by dividing net profit after income tax attributable to members of the Group, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial period, adjusted for bonus elements in ordinary shares issued during the period. 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. Annual Report 2023 55 Notes to the Consolidated Financial Statements continued 21. Retained earnings Retained earnings at beginning of the financial year Net profit for the year Dividends declared Retained earnings at the end of the financial year 22. Commitments Bank Guarantees Consolidated 2023 $ 2022 $ 27,589,330 22,690,867 16,819,292 16,692,476 (12,788,310) (11,794,013) 31,620,312 27,589,330 The Company has bank guarantees in place as security for rental payments on several of its locations. As at 30 June 2023 $114,800 (FY2022: $299,791) was drawn under the Company’s bank guarantee facility. This facility has a capacity limit of $0.5 million. The Group is exposed to a variety of financial risks through its use of financial instruments. 23. Financial risk management 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. 56 Shaver Shop Group Limited Notes to the Consolidated Financial Statements continued Financing arrangements The Group had access to the following undrawn borrowing facilities at the end of the reporting period: Term debt facility Trade finance facility Commercial advance facilities Bank guarantee facility Consolidated 2023 $ 19,500,000 10,000,000 2022 $ – – – 30,000,000 385,200 700,209 29,885,200 30,700,209 Shaver Shop renegotiated the bank facility which was due on 31 July 2022. Shaver Shop now has access to a $19.5 million term debt facility, a $10.0 million trade finance facility and a $0.5 million bank guarantee facility. The term debt and trade finance facilities have a maturity date of 31 July 2024. Maturities of financial liabilities Not later than 1 month 2023 $ Not later than 1 month 2022 $ 1 month to 1 year 2023 $ 1 month to 1 year 2022 $ Bank loans – – – – Trade and other payables 13,810,860 17,136,178 790,332 571,982 1 to 2 years 2023 $ – – 1 to 2 years 2022 $ – – Lease liabilities 995,014 1,023,316 9,625,138 9,825,970 6,629,907 8,803,733 14,806,874 18,159,494 10,415,470 10,397,952 6,629,907 8,803,733 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 cash flows. Credit risk Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in 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 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. Annual Report 2023 57 Notes to the Consolidated Financial Statements continued Credit quality The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates. Cash at bank AA– (Standard & Poors) Accounts receivable Counter‑parties with no external credit rating Group 1* Consolidated 2023 $ 2022 $ 13,471,437 9,395,910 944,009 942,621 * Group 1: Existing counter‑parties (more than 12 months) with no defaults in the past. Market risk Foreign currency risk Most of the Group’s 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 $0.5 million at 30 June 2023 (30 June 2022: $1.8 million). 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 % 1.15% – Weighted average interest rate % 0.85% – 2023 $ – – 2022 $ – – Shaver Shop did not draw‑down on any of its loan facilities in FY2023. Accordingly, the weighted average interest rate represents the line fee payable on the $19.5 million term debt facility. There is no line fee on the trade finance facility. Management considers that interest rates could reasonably increase by 1.0% or decrease by 1.0% (FY2022: increase of 3.0%, decrease of 0.25%). 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. 58 Shaver Shop Group Limited Notes to the Consolidated Financial Statements continued 24. Tax assets and liabilities Current tax assets and liabilities Income tax payable Recognised deferred tax assets and liabilities Deferred tax assets Deferred tax liabilities Net deferred tax assets Deferred tax assets (liabilities) Provisions – 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 2023 Provisions – 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 2022 Consolidated 2023 $ 2022 $ 1,059,380 1,837,762 Consolidated 2023 $ 2022 $ 9,929,582 12,752,754 (5,546,790) (6,716,435) 4,382,792 6,036,319 Opening balance $ Charged to income $ Closing balance $ 827,648 421,325 74,040 (156,815) 901,688 264,510 7,578,028 (1,250,574) 6,327,454 2,738,704 (988,301) 1,750,403 50,694 657,193 465,106 (50,694) (242,103) (50,410) – 415,090 414,696 (6,290,851) 987,319 (5,303,532) (411,528) 24,013 (387,515) 6,036,319 (1,653,527) 4,382,792 791,744 409,232 35,904 12,903 827,648 421,325 7,708,540 (130,512) 7,578,028 3,968,352 (1,229,648) 2,738,704 101,388 936,621 506,672 (50,694) (279,428) (41,566) 50,694 657,193 465,106 (6,252,117) (38,734) (6,290,851) (361,192) (50,336) (411,528) 7,809,240 (1,772,921) 6,036,319 Annual Report 2023 59 Notes to the Consolidated Financial Statements continued 25. 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 Consolidated 2023 $ 2022 $ 245,000 245,000 220,000 220,000 26,250 26,250 30,900 30,900 2,450 2,450 7,000 7,000 Total remuneration of PricewaterhouseCoopers Australia 273,700 257,900 26. Interests in subsidiaries The Group’s subsidiaries as at 30 June 2023 are set out below. Name Lavomer Riah Pty Ltd Shaver Shop Pty Ltd Principal place of business/ Country of incorporation Australia Australia Shaver Shop (New Zealand) Limited New Zealand Ownership interest 2023 % 100% 100% 100% 2022 % 100% 100% 100% The percentage of ownership interest held is equivalent to the percentage of voting rights for all subsidiaries. 60 Shaver Shop Group Limited Notes to the Consolidated Financial Statements continued 27. 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 Operating expenses Finance costs Profit before income tax Income tax expense Profit after income tax Equity – retained profits Retained profits at the beginning of the financial year Profit after income tax Dividends paid Retained profits at the end of the financial year 2023 $ 2022 $ 214,506,750 211,710,946 (118,509,048) (118,418,663) 95,997,702 93,292,283 (71,288,153) (69,142,536) (1,196,494) (1,627,194) 23,513,055 22,522,553 (7,412,713) (7,006,781) 16,100,342 15,515,772 2023 $ 2022 $ 26,807,217 22,998,066 16,100,342 15,515,772 (12,697,040) (11,706,621) 30,210,519 26,807,217 Annual Report 2023 61 Notes to the Consolidated Financial Statements continued 2023 $ 2022 $ 12,425,231 7,959,762 2,177,737 4,611,345 20,691,839 20,839,588 35,294,807 33,410,695 9,953,847 10,019,707 16,030,609 20,927,894 9,654,481 12,738,696 54,164,583 54,231,942 89,803,520 97,918,239 125,098,327 131,328,934 16,694,126 20,050,908 9,993,948 10,399,894 723,821 1,387,490 27,411,895 31,838,292 9,834,518 14,885,866 5,204,502 6,716,435 15,039,020 21,602,301 42,450,915 53,440,593 82,647,412 77,888,341 50,275,510 49,492,703 2,412,838 1,588,420 29,959,064 26,807,217 82,647,412 77,888,341 Balance sheet Current assets Cash and cash equivalents Trade and other receivables Inventories Total current assets Non‑current assets Property, plant and equipment Right‑of‑use assets Deferred tax assets Intangible 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 profits Total equity 62 Shaver Shop Group Limited Notes to the Consolidated Financial Statements continued 28. Contingent liabilities There are no contingent liabilities recognised by the Group. 29. Related parties Subsidiaries Interests in subsidiaries are set out in note 26. 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 Total remuneration for the year Consolidated 2023 $ 2022 $ 1,744,845 1,988,735 81,153 493,741 79,428 361,578 2,319,740 2,429,741 Detailed remuneration disclosures are provided in the Remuneration Report. Loans to/from related parties The following balances are outstanding at the end of the reporting period in relation to transactions with related parties: Current receivables: Loans to KMP and related parties Consolidated 2023 $ 2022 $ 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 31). 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. Annual Report 2023 63 Notes to the Consolidated Financial Statements continued 30. Cash flow information Profit after income tax for the year Non‑cash flows in profit: Depreciation and amortisation Disposal/write‑down of property, plant & equipment Share‑based payments Net exchange differences Change in operating assets and liabilities: Decrease in trade, leases and other receivables Decrease in inventories Decrease in deferred tax assets Decrease in trade and other payables Decrease in income taxes payable Net cash from operating activities Consolidated 2023 $ 2022 $ 16,819,292 16,692,476 15,265,884 14,397,705 171,245 785,713 13,970 39,911 567,227 (42,082) 944,090 551,273 215,492 (4,050,394) 1,653,528 1,772,921 (2,832,317) (1,406,968) (778,382) (206,635) 32,258,515 28,315,434 31. Share‑based payments The Group’s Long‑Term Incentive Plan 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. From FY2017 to FY2022, the Group granted shares to participants using a loan share plan structure. In this Plan, ordinary shares in the Company (Plan Shares) are granted to participants subject to various performance conditions. The Plan Shares 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 loan share plan and relevant offer letters, vesting of the Plan Shares is subject to the achievement of performance conditions as well as service conditions. Vesting of 70% of the Plan Shares is subject to the achievement of a minimum Total Shareholder Return (TSR) and 30% of the Plan Shares is subject to the achievement of Earnings Per Share (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. Details of the number of Plan Shares issued under the loan share plan from FY2019 to FY2022 is set out in the table below. The Plan Shares have been treated as equity‑settled, share‑based payment transactions in the Company’s financial accounts. In FY2023, following a review of the Company’s incentive plan structures and benchmarking against peer listed entities, shareholders approved a new performance rights LTIP structure at the Company’s 2022 Annual General Meeting. The new structure is considered to better align LTIP participants and shareholder objectives and is a more commonly used program. Similar to the loan share plan, the rights will only convert into ordinary shares in the Company if the performance conditions (EPS based) and service conditions attaching to the rights are met. 64 Shaver Shop Group Limited Notes to the Consolidated Financial Statements continued Details of the number of rights and Plan Shares granted and the fair value of the Rights and Plan Shares on the relevant Grant Date is set out below. Grant Date Security type Number of Securities Granted Issue Price of Securities FY2023 FY2022 FY2021 FY2020 28 Nov 22 10 Nov 21 28 Oct 20 30 Oct 19 Rights Plan Shares Plan Shares Plan Shares 1,280,000 2,200,000 2,350,000 2,300,000 $0.0000 $1.0252 $1.0651 $0.6344 The number of securities outstanding and the relative exercise price of the LTIP shares is set out below. Outstanding at the beginning of the year – 2,200,000 1,648,338 700,003 FY2023 LTIP (Shares) FY2022 LTIP (Shares) FY2021 LTIP (Shares) FY2020 LTIP (Shares) Granted during the year Vested during the year Forfeited during the year Outstanding at the end of the year Average exercise price 1,280,000 – – – – – (575,517) (666,669) (20,000) (100,000) (389,485) (33,334) 1,260,000 2,100,000 $0.0000 $1.0252 683,336 $1.0651 – $0.6344 The fair value at grant date of the rights is independently determined using a Black‑Scholes model. The fair value at grant date of the Plan 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 rights granted during the year ended 30 June 2023 was $0.89 per right. Grant Date Closing share price on Grant Date Exercise price Volatility Dividend yield (Nil for Loan Shares as used to pay off loan value) Risk‑free rate FY2023 FY2022 FY2021 FY2020 28 Nov 22 10 Nov 21 28 Oct 20 30 Oct 19 $1.11 $0.00 n/a 8.0% 3.20% $1.06 $1.0252 45% Nil 1.31% $1.04 $1.0651 50% Nil 0.27% $0.645 $0.6344 40% Nil 0.86% Total expenses arising from share‑based payment transactions recognised during the period as part of Employment Benefit Expenses were as follows: Expense for Plan Shares issued under LTI Plan Consolidated 2023 $ 2022 $ 785,713 567,227 Annual Report 2023 65 Notes to the Consolidated Financial Statements continued Accounting policy for share‑based payments Share‑based compensation benefits are provided to employees via the Company’s Long‑Term Incentive Plan (LTIP). Equity‑settled transactions are awards of shares or options over shares, that are provided to employees in exchange for the rendering of services. Cash‑settled transactions are awards of cash for the exchange of services, where the amount of cash is determined by reference to the share price. 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. 32. Events occurring after the reporting date Subsequent to year end, the Directors declared a final dividend of 5.5 cents per share (100% franked) to shareholders of record on 7 September 2023. The dividend payment date is 21 September 2023. 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. 66 Shaver Shop Group Limited Notes to the Consolidated Financial Statements continued 33. Parent entity information 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. 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 Contingent liabilities The parent entity did not have any contingent liabilities as at 30 June 2023 or 30 June 2022. Contractual commitments The parent entity did not have any commitments as at 30 June 2023 or 30 June 2022. 2023 $ 2022 $ 18,671,649 18,552,511 28,714,799 28,714,799 47,386,448 47,267,310 723,821 723,821 1,387,490 1,387,490 50,275,510 49,492,703 2,514,310 1,728,597 6,127,192 (5,341,480) 46,662,627 45,879,820 12,002,598 11,082,979 12,002,598 11,082,979 (5,341,480) (4,630,446) 12,002,598 11,082,979 (12,788,310) (11,794,013) (6,127,192) (5,341,480) Annual Report 2023 67 Notes to the Consolidated Financial Statements continued 34. Summary of other significant accounting policies 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. 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. Transactions 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. 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 purpose 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. Recoverable amount is the higher of an asset’s fair value less costs of disposal and value‑in‑use. The value‑in‑use is the present value of the estimated future cash flows relating to the asset using a pre‑tax discount rate specific to the asset or cash‑generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash‑generating unit. 68 Shaver Shop Group Limited Notes to the Consolidated Financial Statements continued Borrowing costs Borrowing costs are recognised as an expense in the period in which they are incurred. 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. 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. New Accounting Standards and Interpretations not yet mandatory or early adopted Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 30 June 2023. The consolidated entity has not yet assessed the impact of these new or amended Accounting Standards and Interpretations. 35. Company details The registered office of and principal place of business of the Company is: Shaver Shop Group Limited Level 1, Chadstone Tower One 1341 Dandenong Road Chadstone, Victoria 3148 Annual Report 2023 69 Directors’ Declaration 30 June 2023 The directors of the Company declare that: 1. The consolidated financial statements and notes for the year ended 30 June 2023 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. 3. 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. 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 22 August 2023 70 Shaver Shop Group Limited Independent Auditor’s Report To The Members Of Shaver Shop Group Limited 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 2023 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 2023 the consolidated statement of changes in equity for the year then ended the consolidated statement of cash flows for the year then ended the consolidated statement of profit or loss and other comprehensive income 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 Liability limited by a scheme approved under Professional Standards Legislation. Annual Report 2023 71 Independent Auditor’s Report 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 $1.226 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. ● 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. ● We applied this threshold, together with qualitative considerations, to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the financial report as a whole. ● We chose Group profit before tax because, in our view, it is the benchmark against which the performance of the Group is most commonly measured. ● We utilised a 5% threshold based on our professional judgement, noting it is within the range of commonly 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. 72 Shaver Shop Group Limited Independent Auditor’s Report continued Key audit matter Carrying value of goodwill (Refer to note 12) $53.3 million At 30 June 2023 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 Group assesses impairment by preparing a model which estimates forecast cash flows discounted to their present value. 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 assessing the recoverable amount of the goodwill including forecasting future cash flows and estimating the discount rate and terminal growth rate. Carrying value of inventory (Refer to note 9) $22.0 million At 30 June 2023 the Group recognised $22.0 million of inventory in the consolidated balance sheet. The inventory balance was valued at the lower of cost and net realisable value. The identification of products expected to be sold below net realisable value depends, in part, on forecasts of future sales made at below estimated costs for the sale. The carrying value of inventory was a key audit matter due to: ● 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. How our audit addressed the key audit matter We performed the following procedures, amongst others: ● Assessed the historical accuracy of the Group’s cash flow forecasts by comparing prior budgets to actual performance. ● Compared the forecast cash flows used in the Group’s impairment model to the latest budgets and business plans. ● Assessed the appropriateness and supportability of the cash flow forecasts by considering the key factors upon which they were based and the underlying drivers for growth. ● Compared growth rate assumptions used in the impairment model to historical results and economic forecasts. ● ● ● Tested the mathematical accuracy of the calculations made in the impairment model. Engaged internal valuation experts to assess the appropriateness of the discount rate used in the model. Evaluated the reasonableness of the disclosures made in note 12, against the requirements of Australian Accounting Standards. We performed the following procedures, amongst others: ● Compared inventory balances within the inventory provision calculation to total inventory on hand to ensure the completeness of the assessment. ● Evaluated the appropriateness of significant assumptions used to develop the provision for net realisable value, by having regard to: − − aggregate inventory sold below cost during the financial period; and expected weeks cover based on historical information. ● Compared the current selling price (net realisable value) to the recorded cost for a sample of inventory items; ● Evaluated the appropriateness of the disclosures made in note 9, against the requirements of Australian Accounting Standards. Annual Report 2023 73 Independent Auditor’s Report continued Key audit matter How our audit addressed the key audit matter Accounting for supplier rebates (Refer to note 9) The Group has entered into a number of arrangements with various suppliers under which they receive rebates for purchasing goods. There are a range of rebate types with the majority being supplier volume rebates. The rebates vary depending on the specific terms agreed with each supplier in relation to the rebate rate(s) and the range of products included. We considered rebates to be a key audit matter because: ● the financial significance of the supplier rebates recognised during the year; We performed the following procedures, amongst others: ● For rebates receivable at balance date we: − − − sent a confirmation to a supplier; and for a sample of suppliers, agreed key rebates terms and the rebates receivable at balance date to supporting documentation and remittances for a sample of rebates receivable, where inventory was still on hand at balance date, the rebate amount had been appropriately deducted from inventory. ● ● supplier arrangements can vary between suppliers; and ● For rebates recognised as a reduction to cost of sales we: judgement is involved by the Group to determine the amount of rebates that should be recognised in the cost of sales and the amount that should be deferred to inventory. − agreed the rebates recognised to supporting documentation and remittances for a sample of invoices. 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 2023, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon through our opinion on the financial report. We have issued a separate opinion on the remuneration report. 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. 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. 74 Shaver Shop Group Limited Independent Auditor’s Report continued 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 23 to 35 of the directors’ report for the year ended 30 June 2023. In our opinion, the remuneration report of Shaver Shop Group Limited for the year ended 30 June 2023 complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards. PricewaterhouseCoopers Brad Peake Partner Melbourne 22 August 2023 Annual Report 2023 75 Shareholder information For the year ended 30 June 2023 The Shareholder information set out below is based on information in the Company’s share register as at 1 September 2023. 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 01 Sep 2023 % No. of holders Securities 89,326,034 33,047,258 5,153,494 3,078,776 406,932 68.18 25.22 3.93 2.35 0.31 131,012,494 100.00 129 1,043 618 1,040 656 3,486 134 % 3.70 29.92 17.73 29.83 18.82 100.00 3.84 Unmarketable Parcels 16,943 0.01 As at 1 September 2023, there were 134 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 4 September 2023. Name of Shareholder Alsop Pty Limited ATF the Johnston Trust (1) % of issued capital specified in the relevant notice. No. of Shares % of Issued Capital(1) 14,277,125 11.00% 76 Shaver Shop Group Limited Shareholder information continued 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 ALSOP PTY LTD PACIFIC CUSTODIANS PTY LIMITED CITICORP NOMINEES PTY LIMITED J P MORGAN NOMINEES AUSTRALIA PTY LIMITED ZARA HOLDINGS PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED ARKINDALE PTY LTD NATIONAL NOMINEES LIMITED C N BOTTING & ASSOCIATES PTY LTD DOVALI PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED MR CAMERON FOX ANACACIA PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED‑GSCO ECA MR BRODIE ERNST ARNHOLD NEWECONOMY COM AU NOMINEES PTY LIMITED BNP PARIBAS NOMS PTY LTD NCH PTY LTD BNP PARIBAS NOMINEES PTY LTD HOLDREY PTY LTD Total Balance of register Grand total 01 Sep 2023 14,277,125 %IC 10.90 7,118,791 6,579,921 4,477,144 4,160,004 3,300,796 3,258,004 3,213,983 2,699,990 2,500,000 1,937,912 1,800,024 1,689,178 1,513,159 1,500,000 1,359,221 786,904 762,123 727,226 660,000 5.43 5.02 3.42 3.18 2.52 2.49 2.45 2.06 1.91 1.48 1.37 1.29 1.15 1.14 1.04 0.60 0.58 0.56 0.50 64,321,505 66,690,989 131,012,494 49.10 50.90 100.00 Annual Report 2023 77 Shareholder information continued 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 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 78 Shaver Shop Group Limited Corporate Information 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 Level 13, Tower 4 727 Collins Street Melbourne, Victoria 3008 Australia Phone: 1300 554 474 Auditors PricewaterhouseCoopers Solicitors Norton Rose Fulbright Bankers Commonwealth Bank of Australia colliercreative.com.au #SHS0020 Annual Report 2023 79