ANNUAL REPORT 2016
INSPIR ING YOU TO LI VE YOUR PA S SI ON
PERFORMANCE TRENDS
FINANCIAL
SALES ($M)
TOTAL SEGMENT EBIT ($M)
EPS (C)
DIVIDEND (C)
POST TAX ROC (%)
POST TAX ROE (%)*
*Normalised NPAT
TEAM
TEAM ENGAGEMENT
SAFETY – LTIFR
TEAM RETENTION
CUSTOMER
AVERAGE NPS
ACTIVE CLUB MEMBERS
CUSTOMER TRANSACTIONS
2
Super Retail Group Limited | ANNUAL REPORT 2016 C O N T E N T S
Our Business
Chairman’s Letter
CEO’s Letter
Group Strategy
Board of Directors
Group Executive Team
Sustainability @SRG
Directors’ Report
Consolidated Statement of 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
Shareholder Information
Corporate Directory
Key Dates for Stakeholders
2
6
8
11
14
16
21
26
52
53
54
55
56
105
106
108
111
111
These financial statements are the consolidated financial statements of the consolidated entity consisting of Super Retail Group
Limited and its subsidiaries. The financial report is presented in Australian dollars.
Super Retail Group Limited is a company limited by shares, incorporated and domiciled in Australia. Its principal registered
office and principal place of business is 751 Gympie Road, Lawnton, Queensland, 4501.
A description of the nature of the consolidated entity’s operations and its principal activities is included in the Directors’ Report
on pages 26 to 50.
The financial report was authorised for issue by the Directors on 25 August 2016. The Directors have the power to amend and
reissue the financial report.
Through the use of the internet, we have ensured that our corporate reporting is timely, complete, and available globally at
minimum cost to the Company. All press releases, financial reports and other information are available on our Investors and
Media page on our website: www.superretailgroup.com
Super Retail Group Limited | ANNUAL REPORT 2016
1
1
Super Retail Group Limited | ANNUAL REPORT 2016 OUR BUSINESS
OUR PURPOSE
To provide solutions and engaging experiences
that enable our customers to make the most of their
leisure time.
OUR VISION
Inspiring you to live your passion.
PASSION
OPENNESS
INTEGRITY
CARE
DISCIPLINE
STRATEGIC PILLARS
We see that customer engagement, delivering inspiring customer solutions, developing a world class supply chain
and building an engaged and capable team are critical to our future. We remain focused on our strategic pillars
to ensure we continue to foster sustainable value creation in a changing retail environment.
1|
2|
3|
CUSTOMER UNDERSTANDING
AND INSIGHT
SOLUTIONS THAT ENGAGE AND
INSPIRE OUR CUSTOMERS
LEADING
PRIVATE BRANDS
4|
5|
6|
AGILE AND EFFICIENT
SUPPLY CHAIN
ENGAGED AND
CAPABLE TEAM
STRONG, SUSTAINABLE AND
EFFICIENT FOUNDATIONS
OUR CORE BRANDS
Super Retail Group is one of Australasia’s largest retailers, and is proud to provide solutions and engaging
experiences that inspire our customers to live their leisure passions as the owner of iconic Australian brands including:
Amart Sports provides a broad range of leisure sports products geared to the casual market
at compelling prices. With a wide range of products designed for family and team sports,
the Amart Sports range includes equipment, apparel and associated accessories for sporting
enthusiasts and spectators alike.
With stores across every state of mainland Australia, BCF is the largest outdoor retailer in the
country. We only sell quality brands from trusted manufacturers and are committed to offering
the widest product range to our customers, who are as passionate about boating, camping
and fishing as we are.
As Australia’s largest outdoor entertainment and camping leisure retailer, Rays offers families
everything they need to enjoy the outdoors from the backyard to the bush.
Rebel offers a wide range of the latest release, quality, branded sporting and leisure goods for
the casual enthusiast and serious competitor, including fitness equipment, sports equipment,
apparel and associated accessories.
Supercheap Auto is a thriving specialty retail business, specialising in automotive parts and
accessories. Supercheap Auto stocks a wide range of tools and accessories for the DIY home
handyman, as well as products for travel, touring, outdoors, garage and the shed.
2
Super Retail Group Limited | ANNUAL REPORT 2016 OUR BUSINESS
OUR FINANCIAL TARGETS
TO DELIVER COMPOUND
ANNUAL GROWTH IN EPS OF
>15%
TO GROW RETURN
ON CAPITAL TO
>15%
OUR GOALS
Super Retail Group has a strong portfolio of retail businesses, each with strong potential for organic growth.
We recognise the imperative of turning this potential into growth in total Group earnings.
TO BE
ONE OF THE FIVE
LARGEST AUSTRALASIAN RETAIL COMPANIES
TO ACHIEVE HIGHER
CUSTOMER ENGAGEMENT
RATINGS THAN OUR COMPETITORS
TO ACHIEVE THE HIGHEST
TEAM MEMBER
ENGAGEMENT
ACROSS THE RETAIL INDUSTRY
TO PROVIDE RETURNS TO OUR
SHAREHOLDERS
THAT EXCEED THE ASX 200 BY 5%
DELIVERING OUR FINANCIAL TARGETS 5 YEAR TARGETS
STORE NUMBERS
LFL GROWTH
(quantity)
EBIT MARGIN
(percentage per annum)
PRE TAX ROC %*
>50%
>30%
>30%
(percentage)
(percentage) *excludes aquired goodwill and brand names
3
Super Retail Group Limited | ANNUAL REPORT 2016 3 SUPPORT
OFFICES
641STORES ACROSS OUR
ENTIRE NETWORK
~12,000
TEAM MEMBERS
3 DISTRIBUTION
CENTRES
640+
STORES
3 COUNTRIES OF OPERATION:
AUSTRALIA, NZ & CHINA
6
43
160
12
10
45
BRAND
ACT
NSW
NT
QLD
SA
TAS
VIC
WA
NZ
TOTAL
AMART SPORTS
BCF
RAYS
REBEL
SUPERCHEAP AUTO
-
3
1
4
4
12
34
7
40
67
TOTAL
12
160
1
1
1
-
3
6
28
38
10
14
82
172
5
7
5
7
19
43
-
-
4
1
5
14
21
17
25
54
10
131
-
16
8
10
28
62
-
-
-
-
45
45
60
120
53
101
307
641
4
Super Retail Group Limited | ANNUAL REPORT 2016SINGAPORECHINA62172131 SUPER RETAIL GROUP
DISTRIBUTION CENTRE
SHIPPING
ROAD FREIGHT
RAIL FREIGHT
5
Super Retail Group Limited | ANNUAL REPORT 2016SINGAPORECHINA CHAIRMAN’S
LETTER
DEAR FELLOW SHAREHOLDER,
On behalf of your Board of Directors, I am pleased
to present Super Retail Group’s annual report for the
financial year ending 2 July 2016.
In this year, we have maintained our focus on long-
term value creation for shareholders, delivering a
credible underlying financial result alongside continued
progress against the Group’s strategic priorities.
Super Retail Group holds a unique market position in
the leisure retail sector. In recent years, we have made
significant investment improving our core capabilities,
expanding into new solutions and service offerings for
our customers, and strengthening our multi-channel
delivery infrastructure. This investment will ensure we
remain competitive in a changing global marketplace
and that the Group is equipped to keep pace with our
customers’ evolving needs.
6
2016 PERFORMANCE
Super Retail Group’s full year accounting periods are
normally 52 weeks but on average every five years
the Group adds an extra week to maintain its end of
year balance date within a few days of 30 June. The
2016 financial year was a 53 week period, which has
the impact of increasing sales and net debt but has a
negligible impact on net profit.
Net Profit After Tax attributable to owners (NPAT) was
$62.8 million, representing a decline of 22.6 per cent
compared to the prior comparative period.
After adjusting for brand name impairment and
business transformation provisions, Normalised Net
Profit After Tax was $108.6 million, representing growth
of 2.2 per cent over the prior comparative period.
The result reflected solid revenue growth of
8.2 per cent across the Group, with like for like
growth in all Divisions. Earnings Before Interest, Tax,
Depreciation and Amortisation (EBITDA) showed
growth of 6.4 per cent against the previous
corresponding period.
The Auto and Sports Divisions continue to perform
well and are well-positioned for future growth. Both
businesses in the Leisure Division, BCF and Ray’s
Outdoors delivered disappointing results for the full
year although the performance in BCF improved
through the year and we expect BCF to have a much
stronger performance in the year ahead.
Cash flow generation remained strong, with operating
cash flow of $159.2 million. Capital investment was
3.7 per cent of revenue. Super Retail Group
maintained its disciplined approach to financial
management and its robust balance sheet.
TRANSFORMATION INITIATIVES
In the light of the continued underperformance of the
Ray’s Outdoors business, it was decided to accelerate
the review of the business that had been announced
in February 2015.
The performance of the five stores trialling the new
Rays concept has confirmed the potential for a
profitable business targeting outdoor adventure
enthusiasts. Following a review of the 50 legacy Ray’s
Outdoors stores, it was determined that 12 stores will
convert to Rays stores, 17 stores will convert to one of
the other Group brands and 21 stores will close prior to
the end of this calendar year.
It is estimated that approximately $110 million of the
$135 million sales currently generated by the Ray’s
Outdoors business will be retained by the Leisure
Division following the completion of the transformation.
The annual EBIT benefit to the Leisure Division once the
transformation is complete is estimated to be circa
$8 million.
Super Retail Group Limited | ANNUAL REPORT 2016
In November 2015, the Group increased its ownership
share of Infinite Retail, an online sports merchandise
business, from 50.05 per cent to 95 per cent. Following
this change in ownership, the management of Infinite
Retail has been integrated into Rebel. Governance
processes have been improved and operating costs
have been reduced.
However, unprofitable contracts with sporting bodies
and clubs and integration costs resulted in the business
incurring an EBIT loss of circa $6 million (Net of Non-
Controlling Interests) in the 2016 financial year. The
business has also further recognised total restructuring
costs of $5.0 million in the 2015/16 accounts representing
$3.1 million provision for onerous contracts, $1.7 million
for write off of systems and $0.2 million other costs.
The restructure will enable Infinite Retail to contribute
approximately $25 million sales at break-even EBIT to the
Sports Division results in 2016/17.
DIVIDEND
As a result of the Group’s solid operating performance
and cash flow, your Directors have recommended a
final dividend of 21.5 cents a share bringing the total
dividend payment to 41.5 cents a share, an increase
of 3.8 per cent on last year. This represents a dividend
payout ratio of 65 per cent of underlying NPAT, in line
with the ratio guideline of between 55 and 65 per cent
of underlying NPAT.
GOVERNANCE & RISK
Your Board is committed to transparency, accountability
and high standards in corporate governance.
We have continued to refine many of our governance
processes to keep pace with the changing business
environment the Group operates in. Not only is the
external environment changing, but the dramatically
increased size, scale and complexity the Group has
achieved over the past few years also places different
demands on the role for corporate governance. As a
consequence, our corporate governance, including
in areas such as risk management, safety, sustainability
and diversity, is increasingly mature and robust.
BOARD RENEWAL
The Board recognises the importance of undergoing
a regular process of renewal to maintain a proactive
and effective Board with the appropriate mix of skills,
background and experience for the Group’s strategic
goals and governance requirements.
Accordingly, in October 2015, Super Retail Group
continued its board renewal program, welcoming Ms
Launa Inman and Ms Diana Eilert as independent non-
executive directors, taking the total number of Directors
to seven and female representation on the Board to
over 40 per cent.
Launa brings to the Board extensive experience in
retailing, marketing (including digital technology
and social media), finance and logistics. Her diverse
experience includes terms as Managing Director and
CEO of Billabong International, Managing Director of
Target Australia and Managing Director of Office Works.
Launa is a director of the Commonwealth Bank of
Australia, Bellamy’s Australia Limited and a member of
the boards of the Alannah and Madeline Foundation
and the Virgin Australia Melbourne Fashion Festival.
Diana is an experienced non-executive director who
brings three key skills to Super Retail Group: extensive
operational experience as a Group Executive and CEO,
Partner level skills in Strategy (with particular emphasis
on technology customer experience and data), and,
more recently, significant work in digital disruption and
business models. Diana is a director of Navitas, AMP
Life, Queensland Urban Utilities and NSW Electricity
Networks. Her previous non-executive director (NED)
experience includes realestate.com.au and other
digital businesses, “onthehouse” and “OurDeal”.
Launa and Diana will stand for election at Super Retail
Group’s Annual General Meeting on 24 October 2016.
OUTLOOK
In summary, Super Retail Group is well positioned to
deliver on its vision of providing solutions and engaging
experiences that enable our customers to make the
most of their leisure time, at the same time as offering
ongoing growth and development opportunities for our
team members, and, consequently, growth and value
for our shareholders.
The Board is fully committed to supporting the
Company’s long-term strategy and investment plan,
that we believe will leave Super Retail Group well-
placed to deliver profitable, sustainable growth over the
long-term.
The Board looks forward to 2017 with confidence and
enthusiasm.
On behalf of the board I thank our Group Managing
Director and CEO, Peter Birtles, his leadership team and
all our team members for their contribution. We also
take this opportunity to thank you for your continued
support.
Robert Wright
Chairman
7
Super Retail Group Limited | ANNUAL REPORT 2016 CEO’S LETTER
DEAR FELLOW SHAREHOLDER,
The ever more rapidly changing dynamics of the retail
industry mean that we need to balance our focus on
optimising the current financial performance of the
company with progressing the initiatives that will enable
us to engage and inspire our customers and team
members and build the organisational capabilities that
we will need to build a business that will successfully
meet and exceed the needs of our customers in the
future.
In 2016 our financial performance was mixed and
we did not achieve the overall financial results we
believe we are capable of. However, many parts of
the Group performed very well and we have made a
number of changes to lift the Group’s overall financial
performance in the years ahead.
The financial performance of the Auto and Sports
Divisions was strong and it was the underperformance
of the BCF and Rays Outdoors businesses that held
back overall Group results. The BCF business had
a stronger second half and we are confident of
improved performance in the 2017 financial year. We
are transforming the new Rays business into one with a
distinct market opportunity and the potential for long
term profit growth.
We have been very pleased with our progress across all
of our businesses in increasing customer engagement
and endorsement and in improving our team member
engagement and safety. We have also made good
progress in building the brand development, supply
chain and digital capabilities that will be required to
drive the organisation in the future.
The impact of digital and the pace of change mean
that we will need to be ever more agile in the way we
operate. It also means that we will need to adopt more
of a test and learn approach and that we need to
recognise that some things we try will not work – the key
will be to recognise this quickly and not over invest in
the wrong initiatives.
We have a clear strategy with a roadmap of initiatives
that will deliver continued growth in each of our retail
businesses while also generating improved earnings and
return on capital.
OUR FINANCIAL PERFORMANCE
The Auto and Sports Divisions both had successful
years with strong growth in both revenue and profit.
The Leisure Division generated a solid uplift in revenue
but lower gross margin and higher operating costs
resulted in a lower profit contribution. The Group has
continued to invest in strategic initiatives, particularly
in supply chain and digital, which led to an increase in
Group Costs. Total Segment Net Profit before Tax was
$155.9 million, an increase of $7.3 million over the prior
comparative period.
Key highlights include:
• Full year sales for the Group increased by
8.2 per cent to $2,422.2 million.
• Group’s Segment Earnings Before Interest and Tax
(EBIT) was $175.3 million, an increase of 3.0 per cent.
• Auto and Sports Divisions performing strongly
with Segment EBIT growth of 9.0 per cent and
18.6 per cent respectively.
• Leisure Division delivering 7.1 per cent sales growth
8
Super Retail Group Limited | ANNUAL REPORT 2016
but investment in competitive pricing, inventory
clearance and higher product costs resulting in
Segment EBIT declining by 42.4 per cent.
• Online sales continue to grow strongly, with a
number of digital initiatives launched during the
year.
• $81.3 million invested in new and refurbished stores.
• Strong working capital management with operating
cash flow of $159.2 million up by circa $15 million on
a like for like basis.
INVESTMENT IN PROFITABLE GROWTH
Super Retail Group has a strong portfolio of retail
businesses, each with strong potential for organic
growth. We recognise the imperative of turning this
potential into growth in total Group earnings.
We expect capital expenditure for 2017 financial
year to be in the order of $115 million, with five main
programs that will be our investment priorities for the
coming year:
OUR STRATEGY
The retail environment is going through massive
change, we are seeing more and more global
competitors coming into our markets, we are seeing
the impact of digital disruption, and we are seeing
more informed and demanding customers.
The balance of power between retailers and customers
has changed. No longer can we invite the customers
into our stores with the promise of an unmatched
product range at unbeatable prices. Now we must
earn the right to be invited by our customer to fulfil one
of their needs how, when and where it best suits them
and unless we can do this well, our customers have
plenty of other choices.
Retailers need to decide how they will position
themselves in this new world. The opportunity is there
to win on product and price but only if you have the
scale and cost structures to do so. Although product
and price has been our heritage, at Super Retail Group
we have recognised that we will not be successful in
the long term if we continue to try and win on product
and price alone.
We are in the fortunate position that our customers are
passionate about the product categories we retail.
Whether it’s a customer who is proud of their classic
Commodore or an avid follower of V8 Supercars, the
guy who can’t wait to get out and catch his next
Barra, the family who love nothing better than getting
out hiking through the bush or going to watch their
favourite footy team or the young mum getting out to
her weekly Pilates class.
Our opportunity is to connect with our customers
around their passions and to inspire them with the
experiences and solutions we provide. We must no
longer see the interaction with our customers as a
transaction but as part of a long term relationship. We
need to understand our customers and predict their
needs and wants.
We see that customer engagement, delivering inspiring
customer solutions, developing a world class supply
chain and building an engaged and capable team
are critical to our future.
• New store development
• Existing store refurbishment
• Rays Transformation
• Inventory Management Transformation
• Information Systems (IS) Transformation
The initiatives will position the Group for a step up in
earnings delivery by focusing resources and capital
on realising profitable growth from its retail brands and
ensuring the Group has the systems, infrastructure and
support in place to best realise the growth opportunity
offered by the shift in consumer spending to services
and solutions, at the same time as meeting customer
expectations for a seamless and swift omni-channel
experience.
OUR TEAM
On behalf of our Directors and senior executive team,
I would like to express our thanks to all 12,000 team
members for their contribution to the growth and
development of the Group. Even in a digital world,
retail will always be a people business and it is our
team that will be key to the successful execution of our
strategy.
We are pleased that we saw a further increase on our
team engagement across the Group from 68 per cent
to 71 per cent. The level of engagement is particularly
strong in our retail stores and we have the opportunity
to build engagement in our distribution centres and
support offices to achieve our long term target of
75 per cent engagement.
We are also pleased that our retention level across all
team members continues to hold above 75 per cent
which is strongly ahead of the Retail Industry. Our team
have told us that they would like to see more focus on
their personal development opportunities so we are
initiating a program in that area.
9
Super Retail Group Limited | ANNUAL REPORT 2016 CEO’S LETTER (CONT.)
We see significant business value in having a leadership
team that is representative of its customer base and
one that embraces diversity as a way of generating
greater creativity. At this time, our primary focus is on
gender diversity and we are pleased with our progress
towards our goal of 40 per cent of our senior leadership
positions being held by females. At the end of June
34 per cent of our senior management positions were
held by females up from 28 per cent in the prior year.
We are now broadening our focus to other forms of
diversity and will be developing initiatives to encourage
broader diversity in the next 12 months.
In last year’s report, I highlighted that we were
disappointed with our safety performance which fell
below industry averages and that we had established
improved safety performance as a key priority for
the Group in the 2016 financial year. In the 2015
financial year we had a Lost Time Injury Frequency
Rate (LTIFR) of 13.2 and we set ourselves a target of a
30 per cent improvement in the 2016 financial year.
We are extremely pleased that we achieved a LTIFR
of 6.8 which benchmarks strongly against the industry.
However, we must continue to focus on this area and
aim to minimise the number of injuries with recognition
that all injuries are preventable.
”SINCE OUR EARLY BEGINNINGS, OUR BUSINESS
HAS BEEN ONE OF CONTINUOUS GROWTH AND
EVOLUTION – IT HAS SEEN US GROW FROM A
SMALL MAIL-ORDER BUSINESS INTO A NATIONAL
STORE NETWORK AND BEYOND THAT TO AN
EMERGING OMNI-CHANNEL PLATFORM; FROM
A SINGLE BRAND TO A PORTFOLIO OF ICONIC
RETAIL BRANDS SOME OF WHICH WE HAVE
BUILT FROM SCRATCH INTO MARKET-LEADERS;
FROM A LOCAL QUEENSLAND COMPANY TO A
MAJOR AUSTRALASIAN RETAILER.
WE ARE PROUD OF OUR TRACK RECORD OF
DISCIPLINED EXECUTION IN DELIVERING
CUSTOMER-CENTRIC OUTCOMES. THE RESULTS
WE ACHIEVE – OUR SALES, OUR PROFIT, OUR
CASH FLOW, OUR SHARE PRICE – ONLY COME
FROM ENGAGING OUR CUSTOMERS WITH
SOLUTIONS AND EXPERIENCES THAT MEET
OR EXCEED THEIR EXPECTATIONS. THAT WILL
CONTINUE TO BE WHERE OUR FOCUS WILL BE
AS WE CONTINUE TO GROW OUR BUSINESS
OVER THE LONG-TERM.
10
FUTURE GROWTH
We are moving into a period of low growth with low
inflation. However, the changing dynamics of the retail
industry mean that there are opportunities for those
businesses who embrace these changing dynamics
to grow at rates faster than the markets in which they
operate.
We have demonstrated over many years that our
Supercheap Auto business has continued to grow
strongly as customers have shifted from ‘Do It Yourself’
to ‘Do It For Me’ and we feel confident we have
the capabilities to deliver strong growth across all of
our businesses. We have a complementary portfolio
of leading, differentiated retail brands, supported
by a strong supply chain, technology platform and
an engaged and passionate team. This leaves us
well-placed to deliver the inspiring solutions and
experiences our customers expect, and in so doing
deliver continued value for shareholders.
Whatever our customers’ passion may be – a passion
is for life. That is why building a business that focuses on
people’s passions is a business with a strong future. Our
challenge is to understand the things that matter to our
customers, and create the solutions and experience
that inspire them to get the most from their leisure time.
The macro trend towards solutions and services leaves
our business well-placed to capture the revenue,
customer and margin growth offered by the shift from
products towards the solutions-centric offering that’s
already well underway across our portfolio of iconic
Australian brands.
We enjoy a unique position within the leisure market,
and the omni-channel environment that customers
increasingly expect offers significant opportunities for us
to leverage the scale, insights and synergies across the
Group to realise the upside potential within each of our
divisions, and so drive profitable growth.
Our robust balance sheet and financial resources
means we are well-equipped to invest in establishing
the right foundations and business architecture
needed to enable the Group to realise the growth
synergies and competitive advantages arising from our
overarching perspective over the market as a whole.
We thank all team members for their commitment and
hard work during the year, and we are grateful to our
shareholders for your support.
Peter Birtles
Group Managing Director
and Chief Executive Officer
GROUP STRATEGY
The strategy for the Group remains focused on the delivery of our strategic pillars and our financial targets.
We have seen the successful execution of our strategy in an improved customer experience and our new
Supply Chain network.
This year, we have refined our strategic pillars to ensure we continue to foster sustainable value creation in a
changing retail market. This considers customer solutions, community and capability, coupled with a growing
investment in digital and innovation.
Our strategic pillars are:
1|
2|
3|
CUSTOMER UNDERSTANDING
AND INSIGHT
SOLUTIONS THAT ENGAGE AND
INSPIRE OUR CUSTOMERS
LEADING
PRIVATE BRANDS
4|
5|
6|
AGILE AND EFFICIENT
SUPPLY CHAIN
ENGAGED AND
CAPABLE TEAM
STRONG, SUSTAINABLE AND
EFFICIENT FOUNDATIONS
Each pillar has a defined growth path, and we will be successful through the application of a customer centric,
collaborative approach to delivery.
11
Super Retail Group Limited | ANNUAL REPORT 2016 SUPERCHEAP AUTO
SUCCESSFULLY LAUNCHES 90 MINUTE
CLICK & COLLECT SERVICE
”In February, Supercheap Auto successfully launched a ’90 minute
click-and-collect’ service across all 300 stores throughout Australia and New
Zealand. The 90 minute turnaround sets a new benchmark for online
retailing in the Australasian market and has proved extremely popular with
customers. Click & Collect offers customers certainty that an item is in stock
and available, as well as offering savings on shipping fees and the potential
cost of returns. Customers can now seamlessly shop online, choose their
products and collect from their chosen Supercheap Auto store in 90
minutes, within store trading hours.
This initiative reflects the brand’s ongoing investment in offering a truly
omni-channel retail experience for customers, and reflects a core strategic
focus for the Group – that being digital isn’t merely about online, but is
about lining up the entire organisation to deliver the best outcomes for
customers. Offering a 90-minute Click & Collect service requires seamless
integration between the e-Commerce customer interface, supply chain,
demand management and in-store team resource management,
and would not have been possible without the team’s strong focus on
customers’ evolving expectations and the close collaboration across
the business. Supercheap Auto is proud to be offering customers market-
leading services and the solutions that really matter most to them, and look
forward to delivering further innovations and improvements in our omni-
channel experience.
12
Super Retail Group Limited | ANNUAL REPORT 2016 13
Super Retail Group Limited | ANNUAL REPORT 2016 BOARD OF DIRECTORS
ROBERT WRIGHT
Independent
Non-Executive Chairman
PETER BIRTLES
Group Managing Director
Chief Executive Officer
DIANA EILERT
Independent
Non-Executive Director
LAUNA INMAN
Independent
Non-Executive Director
Peter Birtles was
appointed a Director
of the Company on 5
January 2006. Peter has
over 27 years’ leadership
experience in the retail,
pharmaceutical and
consumer products
industries. Peter joined
Super Retail Group Limited
in April 2001 as Chief
Financial Officer and also
served as Secretary of the
Company between May
2004 and January 2006.
He was appointed Group
Managing Director and
Chief Executive Officer
in January 2006. Prior to
joining Super Retail Group,
Peter spent 12 years
working with The Boots
Company in the United
Kingdom and Australia
in a variety of senior roles
across finance, planning,
operations, supply chain,
human resources and
information technology.
Peter is a Chartered
Accountant and prior
to joining The Boots
Company, he worked
for Coopers & Lybrand.
Peter is currently a Non-
Executive Director of GWA
Group Limited.
Diana Eilert was
appointed a Director
of the Company on 21
October 2015. Diana is
an experienced non-
executive director who
brings three key skills
to Super Retail Group:
extensive operational
experience as a Group
Executive and CEO,
Partner level skills in
Strategy (with particular
emphasis on technology
customer experience
and data), and, more
recently, significant work
in digital disruption and
business models. Diana is
currently appointed to the
Boards of Navitas, AMP
Life, Queensland Urban
Utilities and NSW Electricity
Networks. With 25 years
in executive roles, Diana
was Group Executive with
Suncorp and Citibank and
also as a Partner with IBM,
where she gained further
technology experience.
Most recently, Diana was
Head of Strategy and
Corporate Development
for News Ltd where her
focus was on digital
transformation and
emerging business
models.
Launa Inman was
appointed a Director
of the Company on 21
October 2015. Launa
brings to the board
extensive experience
in retailing, marketing
(including digital
technology and social
media), finance and
logistics. Her diverse
experience includes terms
as Managing Director
and CEO of Billabong
International (May 2012 to
August 2013), Managing
Director of Target Australia
Pty Ltd (2005 to 2011)
and Managing Director
of Office Works (2004 to
2005). Launa is a member
of the Australian Institute
of Company Directors
and has completed
the Wharton Business
School executive
program. Launa is a Non-
Executive Director of the
Commonwealth Bank
of Australia, Bellamy’s
Australia Limited and
Precinct Properties New
Zealand, and a member
of the boards of the
Alannah and Madeline
Foundation and Virgin
Australia Melbourne
Fashion Festival.
Robert Wright was
appointed a Director of
the Company on 19 May
2004 and Chairman on 28
October 2009. Robert has
over 35 years’ financial
management experience
across a range of
industries including Retail,
Food Processing and Fast
Moving Consumer Goods.
During his executive
career he was the Chief
Financial Officer of
several listed companies
including ten years for
David Jones Limited.
He has over 25 years’
experience as both an
Executive Director and
Non-Executive Director
of a number of private
and listed companies
in the following industry
sectors: Retail, Fast
Moving Consumer Goods,
Property Development,
Manufacturing and
Natural Gas Infrastructure.
Robert is currently the
Chairman of APA Ethane
Limited, the responsible
entity of Ethane Pipeline
Income Fund. Robert was
previously Chairman of
SAI Global Limited and
a Director of Australian
Pipeline Limited, the
responsible entity of the
registered managed
investment schemes that
comprise APA Group.
14
Super Retail Group Limited | ANNUAL REPORT 2016
SALLY PITKIN
Independent
Non-Executive Director
REG ROWE
Non-Executive Director
JOHN SKIPPEN
Independent
Non-Executive Director
Dr Sally Pitkin was
appointed a Director of
the Company on 1 July
2010. Sally is the Chair of
the Human Resources
and Remuneration
Committee. Sally has 20
years’ experience as a
Non-Executive Director in
the listed, private, public
and non-profit sectors,
including experience in
international markets, and
12 years’ experience as
a Non-Executive Director
of ASX 200 companies.
She is a lawyer and
former partner of Clayton
Utz with banking law,
corporate law and
corporate governance
expertise. Sally is a Non-
Executive Director and
Fellow of the Australian
Institute of Company
Directors and is President
of the Queensland
Division, and a member
of the External Advisory
Board of the Australian
Securities and Investments
Commission. Sally is
presently a Director of
ASX listed companies
Star Entertainment
Group Limited, Link
Administration Holdings
Limited, and IPH Limited.
Sally holds a Doctor of
Philosophy (Governance),
awarded in 2012.
Reg Rowe was appointed
a Director of the
Company on 8 April 2004.
Reg and Hazel Rowe
founded an automotive
accessories mail order
business in 1972 which
they ran from their
Queensland home. In
1974 they commenced
retail operations of the
business which evolved
into Supercheap Auto.
Reg served as Managing
Director until 1996 and
then Chairman from
1996 to 2004. Prior to
this, Reg had 13 years’
experience in various
retail and merchandise
roles at Myer department
stores. Reg brings to the
Board extensive retail
industry and general
management expertise
and skills in retail and
merchandise operations,
property and strategy.
Reg is a Director of a
number of private family
companies.
John Skippen was
appointed a Director
of the Company on 16
September 2008. John has
been Chairman of the
Audit and Risk Committee
since 28 October 2009,
and is also a member of
the Human Resources
and Remuneration
Committee. John has
over 36 years’ experience
both as an Executive and
Non-Executive Director
of listed and non-listed
public companies and
was Finance Director and
Chief Financial Officer of
Harvey Norman Holdings
Ltd for 12 years and also
operated as a Chartered
Accountant for over 30
years. John has extensive
retail, property acquisition
and development,
mergers and acquisition,
and funding experience,
both internationally
and in Australia, as well
as previous ownership
of businesses in the
advertising, marketing
and construction
industries. John is currently
Non-Executive Chairman
of Slater & Gordon Limited
and Non-Executive
Director of Flexigroup Ltd.
15
GROUP EXECUTIVE TEAM
DAVID BURNS
Chief Financial Officer
ERICA BERCHTOLD
Managing Director –
Sports Retailing
ANTHONY HERAGHTY
Managing Director –
Leisure Retailing
CHRIS WILESMITH
Managing Director –
Auto Retailing
David joined Super Retail
Group in December
2012 in the role of
Chief Financial Officer.
David holds a degree
in Economics from the
University of Sydney,
and is a CPA. David has
over 20 years of finance
experience in a number
of industry sectors. He has
held senior management
positions at Qantas,
Spotless and Lend
Lease. David has overall
responsibility for the
finance, risk management
and customer relationship
management functions
for the Group.
Erica joined Super Retail
Group in November 2011
as Managing Director –
Sports Retailing, following
the acquisition of Rebel
Group, and leads the
Rebel, Amart Sports
and Goldcross Cycles
businesses. Erica has over
15 years of Australian
retail experience and
has served in senior
management positions,
including General
Manager of two women’s
apparel businesses for
Specialty Fashion Group
and National Product
Management roles at
Harvey Norman.
Anthony joined the Group
in April 2015 from Pacific
Brands Limited, where he
most recently served as
Group General Manager
of Underwear. Anthony
was previously Global
Marketing Director for
Foster’s Group Limited
and spent more than
10 years at advertising
agencies George
Patterson and McCann-
Erickson, where he served
as Managing Director.
As Managing Director -
Leisure Retailing, Anthony
is responsible for the BCF
Boating Camping Fishing
and Rays businesses.
Chris joined Super Retail
Group in 2007. He is a
graduate of the Australian
Graduate School of
Management and has
over 25 years retail and
wholesale experience
across Australasia, US
and the greater Asia
Pacific region. Prior to
Super Retail Group, Chris
was General Manager at
Toys ‘R’ Us and previously
spent 13 years with
Woolworths, holding
Senior Management
roles in Merchandise, as
well as Retail Operations
within Dick Smith and Big
W. Chris is responsible for
the Supercheap Auto
Retail Stores, Trade, Online
and Auto Trade Direct
businesses.
16
Super Retail Group Limited | ANNUAL REPORT 2016 CLUB BCF SMASHES MILLION
MEMBERS MILESTONE
”In this brave new digital world, only a deep understanding of our customers
and their journey will ensure our sustained success as a business. Strong
engagement, relationships and connections with our customers need to be
what underpins any successful growth strategy and is what provides the
confidence we need to invest in the right opportunities that will take our
brands forward. The strong growth of Club BCF over the past 12 months is a
critical part of developing those winning formulas.
Club BCF is the customer loyalty and rewards program for our BCF Boating
Camping Fishing business. Membership smashed through the million members
mark in 2016 to over 1.1 million active members, following sustained growth
over the period. Over 70 per cent of total BCF sales are made by active club
members, who also are typically highly engaged with the brand. Club BCF
nights, held regularly throughout the store network to provide after-hours
access to stores, specials and information, were attended by over 25,000
members this year alone.
This remarkable milestone was achieved through the team’s relentless focus on
what our customers want, and how we can best add value and inspiration to
how they go about getting the most from their leisure time. Our customers are
as passionate about boating, camping and fishing as we are, and Club BCF is
about how we can help them take those experiences to the next level.
The size, scale and strong levels of activity achieved among Club members
yields rich, deep insights into our customers, their needs and changing
expectations. This rich data enables us to better design a more effective
customer experience, harnessing the power of digital and data across an
integrated channel strategy, so we can provide the solutions and services
our customers expect. This in turn drives growth and competitive advantage,
and will continue to be a source of strategic strength for BCF as it continues to
evolve its customer-centric focus.
17
Super Retail Group Limited | ANNUAL REPORT 2016 REBEL CHATSWOOD
ACCELERATES
”From rooftop parking area to 1,445m2 of sporting retail
heaven, Rebel Chatswood adopted the ‘Accelerate’
concept in February and has been reaping the benefits
since. Accelerate stores embrace physical design,
technology and innovation to ensure customers
experience the closest thing to being in an arena,
the locker room, or playing alongside sporting legends.
With large format screens and sound showers to immerse
customers in the moment, more emotion and passion is
injected into the shopping experience.
Rebel Chatswood also boasts a 37m shop front sign backlit
with 3,600 individually gridded acrylic cylinders. The first of
its kind, this installation stamps ‘stadium of sport’ over the
Westfield atrium.
In its first three days of opening, Rebel Chatswood hit
number one in football boot sales, and the store continues
to be highly ranked. Net promoter scores for stores
adopting the Accelerate concept are also significantly
greater. With customer centricity a key focus area for Super
Retail Group, Rebel Chatswood offers a number of in-store
personal services including footwear fitters, bra fitters, and
personal trainers—testament to our understanding and
insight, and the engaging solutions we provide to inspire
our customers. Feedback has found customers are more
engaged and team members are also happier working in
the new Accelerate environment.
DAVID AJALA
Managing Director –
Super Retail Commercial
David joined Super
Retail Group in July 2005
as General Manager
of Merchandise,
subsequently serving as
Chief Operating Officer
and Managing Director of
the Group’s Auto Retailing
business. He currently
leads the Super Retail
Commercial business. Prior
to Super Retail Group,
David held various senior
management positions in
Coles Myer’s supermarket
division.
18
Super Retail Group Limited | ANNUAL REPORT 2016 ROBERT DAWKINS
Company Secretary,
Chief Legal &
Property Officer
Robert joined Super
Retail Group in 2001 as
Property Manager and
was appointed the Group
Company Secretary
in December 2010. He
also leads the Group’s
Legal, Compliance,
Sustainability and Property
Services functions. Prior
to joining the Group,
Robert was Property
Manager for Bank of
Queensland Limited. He
holds a Bachelor Degree
in Accountancy from
QUT and a Postgraduate
Diploma in Applied
Corporate Governance.
PAUL HAYES
Chief Information Officer
JANE KELLY
Chief Human
Resources Officer
STEVE TEWKESBURY
Managing Director –
International Operations
Paul was appointed
Chief Information Officer
(CIO) in December 2015
from UK retailer, John
Lewis, where he served
for a number of years
as Head of Information
Systems Delivery. Paul
was previously a senior
IT consultant with IBM,
leading multi-million
dollar projects for premier
retailers including Tesco,
Argos and Woolworths,
and prior to that held a
variety of roles with British
Home Stores.
Steve joined the Super
Retail Group in 2004 as
Supply Chain Manager
and in 2006 was
appointed as General
Manager – Overseas
Sourcing. Prior to Super
Retail Group, Steve
worked in Global Supply
Chain and E-Commerce
Strategy for Reckitt
& Colman, then as a
Supply Chain Consultant
within the Australian
FMCG sector. He holds
a degree qualification
in e-Commerce from
Monash University. Steve
has been based in
China since August 2006,
managing our overseas
sourcing, shipping and
logistics operations in
Hangzhou and Shanghai.
Jane Kelly joined Super
Retail Group in July
2016 as Chief Human
Resources Officer (CHRO)
from BT Financial Group,
where she served as
Human Resources and
Corporate Affairs Director.
Previously, she served
in a number of senior
roles in large, complex
organisations, including
Head of Reward for
St. George Bank and
Head of HR Australian
Financial Services at
Westpac. Jane holds a
Masters of Commerce
and Employee Relations
with honours from the
University of Melbourne,
and a Bachelor of
Commerce from the
University of New South
Wales. As CHRO, Jane is
responsible for advancing
Super Retail Group’s
strong focus on team
engagement, culture and
capability development.
19
Super Retail Group Limited | ANNUAL REPORT 2016
20
Super Retail Group Limited | ANNUAL REPORT 2016 SUSTAINABILITY @SRG
Super Retail Group takes pride in our commitment to
corporate social responsibility, and to managing and
reducing our impact on the environment.
Achieving profitable and sustainable growth in a
manner consistent with our Group values is central
to how we do business as a Group, and making a
meaningful contribution to social and environmental
initiatives for the benefit of our team, customers and
trade partners, and the communities in which we
operate is something that’s important to us all.
We recognise we live in a world where financial and
non-financial challenges are becoming still more
interdependent. The triple bottom line of financial,
environmental and social sustainability is not a theory
– it is the reality for any business operating today, and
a framework that is aligned to our values and how
we strive to operate our business.
Further information on our sustainability initiatives will
be set out in the Group’s Sustainability Report, which
will be published on our corporate website.
SUSTAINABILITY GOALS
The Group has set a target to improve its sustainability performance, based on external rating assessment, to
equal or better than global retail benchmark, with the following objectives:
1|
2|
3|
4|
5|
Establish a governance framework aligned with business strategy that supports stakeholder
engagement, performance measurement and reporting.
Sustainability integrated into business practices, addressing material risks and opportunities,
and aligned with Group values.
Community engagement programs, including product stewardship,
aligned with business strategy.
An ethical Supply Chain compliant with
international standards.
Reduction in carbon footprint (relative to business scale)
aligned with science based targets.
OUR TEAM
DIVERSITY & INCLUSION
The passion and dedication we see within our people
every day is what makes our team our most powerful
differentiator. From a workforce of 6,000 in 2011, our
team has nearly doubled in size over the last five years,
totaling 11,937 at the close of 2016.
We have experienced considerable growth over the
last few years and we attribute a significant share of
this success to our people. We are proud to know our
team is engaged, enjoys coming to work, and goes
over and above to provide exceptional service. This
attitude is present in every corner of our business,
whether it’s working in a customer-facing role in store or
a support role at our offices or Distribution Centres, we
all share a sense of pride knowing we’re inspiring our
customers to live their passions.
We are conscious that the only constant in retail is
constant change: continually evolving our business
to match the needs of our customers is the key to our
ongoing success – as a business, but also as retail
professionals – by ensuring we continue to develop the
skills demanded by the new world of omni-channel
retailing.
Diverse teams are proven to be more innovative and
adaptable to change and the Group endeavours to
form a team that is reflective of our increasingly broad
and diverse customer base.
Accordingly, the Group recognises its talented and
diverse workforce as a key competitive advantage.
Our business performance is a reflection of the quality
and skill of our people and behaviours that are aligned
to our Group values. The Board and the Super Retail
Group Leadership Team are firmly committed to
developing policies and ways of working that support
diversity.
21
Super Retail Group Limited | ANNUAL REPORT 2016
Central to achieving this goal is a diverse and inclusive
work environment and culture that allows team
members to contribute their full potential through
recognising and supporting their unique strengths and
needs.
2. High Potential Development Programs
The Group’s learning and development programs
are designed to foster the development of female
future leaders.
Our dedicated ‘Women in Leadership Development’
(WILD) program, which aims to equip female
team members to progress their careers within the
business, has continued in 2016 and will be rolled out
again in the coming year.
3. Flexible Working Practices
The Group continues to actively seek opportunities
to increase the flexibility of its work practices to
encourage its team members (both male and
female) to take opportunities to advance their
careers while balancing personal commitments.
In the previous year, the Group’s CEO led a Flexibility
Listening Tour across key sites in Brisbane, Sydney and
Melbourne to improve awareness and identify any
barriers team members currently experience around
adopting flexible working arrangements. The insights
gathered will be used to inform the Group’s ongoing
efforts to lift team members’ uptake of flexible working
arrangements, such as further advancing how we track
and promote flexibility across the Group.
At the end of June, five members of the executive
team (Bands 1-2), being one male and four
females are successfully working under flexible work
arrangements.
OTHER DIVERSITY INITIATIVES
The Group has also implemented a number of other
initiatives to foster workplace diversity. These include:
• Carried out a Diversity Audit
• Extended access to domestic and family violence
leave, incorporating this into 2015 SRG Enterprise
Agreement
• Ongoing CEO participation in the Queensland
Male Champions of Change
We also note no incidents of discrimination have been
reported during the reporting period.
GENDER DIVERSITY
We are proud that our culture and inclusive policies
have created a workforce in which women represent
45.9 per cent of the workforce at the end of June,
particularly given many of the Group’s businesses
operate in retail sectors that have traditionally been
male-dominated.
The Group has set a target of 40 per cent female
representation in Board and senior management
positions by 2019, and diversity is championed in the
business at both Board and executive level.
As at the end of June, 43 per cent of the membership
of our Board of Directors, 34 per cent of senior
management positions (Bands 1-3), and 32 per cent of
middle and senior management positions (Bands 1-4)
are held by women.
This compares to the previous reporting period
whereby 20 per cent of our Board, 28 per cent of senior
management positions, and 32 per cent of middle and
senior management positions as at the end of June
2015.
In addition, we achieved an increase in number of
female General Managers appointed (to 9 from 4 in
the prior year), including in non-traditional roles, such
as Merchandise.
As of the date of this report, women represented
20 per cent of senior executives, which comprise the
direct reports to the CEO, including the Managing
Directors of the Group’s retail divisions and international
operations, Chief Financial Officer (CFO) and Chief
Officers of the Group’s Support Services.
To continue to progress towards achieving our Diversity
goals, the Group maintains three areas of focus:
1. Recruitment Practices
The Group’s recruitment practices are aimed at
fostering and encouraging diversity and inclusion.
Specific initiatives that have been continued or
maintained for 2016 financial year include:
• requiring a minimum of one female to be
shortlisted and interviewed for all management
positions
• actively seeking female talent through targeted
LinkedIn searches and talent pooling
• all Band 1 to 3 appointments reviewed by the CEO
and Chief Human Resources Officer to ensure
adherence to Diversity Policy
22
Super Retail Group Limited | ANNUAL REPORT 2016
TEAM ENGAGEMENT
At Super Retail Group, we know our people are the
foundation of our business success. Our team members
are critical to delivering our strategy through operating
in a manner that is consistent with our sustainability
goals and providing world-class experiences for
our customers. Like our customers, it is important to
understand what matters to our team members if we
are to continue to ensure an engaged workforce and
be successful as a business.
We regularly undertake a Group-wide team
engagement survey every 18 months. The survey
is conducted by an independent third party and
provides a valuable benchmark of our levels of team
engagement both over time and compared with
our peer group. Beyond measuring overall team
engagement, the survey provides important insights
into where we need to improve our team engagement
efforts.
The most recent survey was conducted in October
2015. The survey showed an overall team member
engagement score of 71 per cent, 3 per cent higher
than our previous survey and placing Super Retail
Group within the top 25 per cent of companies across
Australia and New Zealand for engagement.
Our high levels of engagement are further
demonstrated by our strong levels of team retention.
Over the past year, a total of 2,789 new team members
joined the Group during the reporting period and our
total retention held steady at over 75 per cent.
WORKPLACE SAFETY
At Super Retail Group, we are committed to providing
a healthy and safe work environment for all our team
members, contractors and customers. Our Group safety
and wellbeing strategic plan and safety management
system reflects a proactive risk and behaviour-based
approach. Our Work, Health and Safety Policy also
supports this commitment.
In the 2016 financial year, the Group Lost Time Injury
Frequency Rate (LTIFR) was 6.87 per million hours
worked, compared to 13.29 for the previous year. We
have continued to drive a whole-of-business focus on
safety leadership; actively working towards meeting
standardised safety positive performance indicators
and targets, and increasing team member awareness
and education through frequent and relevant safety
communications. As a result of these programs, we
have seen a 44 per cent decrease in the number of
lost time injuries and an overall 48 per cent decrease in
LTIFR.
There were no work related fatalities or occupational
diseases recorded during the reporting period.
OUR CUSTOMERS
Ethical Sourcing
As a major Australian retailer with international
operations, we are committed to upholding the
principles of the United Nations Global Compact
wherever we operate. Given our international
presence, we have a responsibility to everyone who
contributes to our success. This means integrating social
and environmental concerns such as, ethical labour
practices and anti-corruption principles into all our
business operations.
Our compliance framework underpins the Group’s
competitive sourcing arrangements and the strategic
development of leading private and exclusive brands.
The framework includes our Ethical Sourcing Policy and
General Business Agreement. We continue to engage
with our trade partners to raise awareness of our
standards, to establish supporting business agreements,
and to execute a system of audits and reviews of
selected factories to monitor compliance.
While we do not own factories, we work with our major
trade partners in China and elsewhere to promote
workers’ rights and to positively influence them to
improve working conditions across their operations.
This year we completed a comprehensive review of
our compliance framework. Whilst recognising the
many positive activities currently effected, we see
the opportunity to improve the visibility of our supply
chain to a broader range of factories, including those
supplying our private brands with whom we do not
have a direct relationship.
We have committed to and have commenced activity
to extend the coverage of the audit program to
validate trade partner compliance with our standards.
Looking ahead, a five year plan is being developed
to improve our ethical sourcing practices as a key
component of our Strong, Sustainable and Efficient
Foundations strategic pillar. This includes further
extension of the coverage of the audit program and
reporting capabilities.
Product Responsibility
We are committed to providing safe products that
enable our customers to make the most of their leisure
time. We have a dedicated compliance team in place
and a clear commitment as a Group to ensure our
products comply with relevant mandatory standards
before they are offered for sale. Our testing regime
meets that required by mandatory Australian and
New Zealand standards, and includes rigorous testing
by both in-house and NATA-accredited third party
assessors.
During the financial year, there were no incidents of
non-compliance with health and safety, labelling,
information or any other regulations related to our
private brand products and services resulting in fines,
23
Super Retail Group Limited | ANNUAL REPORT 2016 penalties or formal warnings. We have supported
all regulatory requirements that applied to products
sourced from local trade partners in a timely manner,
and have processes and policies in place to address
any such events that may occur in our wholesale
relationships.
This year, we have initiated two voluntary recalls of
products that we considered posed potential safety
risks to our customers. These recalls were initiated after
detailed discussions with the relevant regulators.
OUR ENVIRONMENT
Care towards the environment requires a joint effort
and our focus is to work with our trade partners,
customers and team members to reduce the impacts
of our products and operational activities.
As a retailer, our main environmental impacts relate to
transportation, packaging, energy and raw material
consumption, and waste production.
Cyber Security
Packaging Optimisation
Technology has dramatically changed the way people
are spending their leisure time. From Australia and
New Zealand to emerging markets like China, digital
technology offers a vast information resource, a means
of social networking and a way of sharing experiences
with others that greatly enriches people’s leisure
experiences and love affair with the great outdoors.
Despite the opportunities of a connected and digital
world, the rise of digital security, privacy and data
protection issues also brings a level of risk. Protection
of our customer and team member data is a priority of
the Group and we will continue to adapt and evolve
our business and processes to keep on top of these
issues.
The Group has appointed a Chief Information Officer
(CIO) during the reporting period to support our
information systems strategy, which includes the
development and implementation of innovative
and cost-effective technologies and enhancement
of our data security. The CIO reports to the Group’s
Managing Director, who is a member of the Group’s
Board of Directors.
Customer Data and Privacy
We are committed to conducting our business in full
compliance with laws and regulations, and have
implemented a number of measures to protect the
personal information of our customers, club members
and team members, including safeguards to prevent
security breaches in our networks and database
systems, limited access to information in our systems
and verification processes to prevent unauthorised
access to information.
Securing and protecting personal information is
managed at all levels of the business. The Group
adopts strong industry standards as the basis for
protecting this information.
During the reporting period, there were no incidences
leading to a loss of customer data and no complaints
were received from customers, external organisations
or regulatory bodies regarding breaches of customer
privacy or losses of customer data.
We work closely with our trade partners to ensure
packaging meets our environmental specifications
to achieve resource efficiency and reduced
environmental impact without compromising product
quality and safety, and align with our demonstrated
commitment to product stewardship across our supply
chain.
As a result of these efforts, during the reporting period:
• Our packaging optimisation program, which
involved a review of packaging used by over 500
suppliers, achieved a pallet utilisation improvement
of 23.5 per cent and container utilisation
improvement of 10.65 per cent by improving
the packaging of over 85 per cent of products
reviewed.
• Our plastics reduction program, which aims to
reduce the amount of plastics in packaging,
achieved improvements that will see total savings
of 4,309 kg of plastic material per year.
Product Recycling
We continue to explore opportunities to improve
resource recovery. Some of the current initiatives
include:
• Supercheap Auto’s oil and battery recycling
initiatives – used batteries are collected in all stores
and sent to recycling facilities to reduce waste.
Old engine oil is also collected in selected stores for
recycling.
• Clothes hangers reuse – all hangers used in Leisure
and Sports stores are returned to our trade partners
for reuse.
• Cartridge recycling – all used cartridges are
recycled, and we use recycled cartridges in
photocopiers.
• Pallet reuse – Stores return pallets to our Distribution
Centres for reuse, while damaged pallets are
recycled.
• E-waste – used and obsolete IS equipment is
disposed of in accordance with international
standards.
24
Super Retail Group Limited | ANNUAL REPORT 2016
Energy and Greenhouse Gas Emissions
In our 2015 submission provided under the National
Greenhouse and Energy Reporting Act (NGER),
we were pleased to report the Group achieved a
decrease in our energy use intensity of 3 per cent and
decrease in emissions intensity by 4 per cent through
energy efficiency initiatives, such as purchasing more
energy efficient cars. Overall, we reported a total
energy consumption increase of 3 per cent and
a total greenhouse gas emissions increase of
2 per cent compared to the previous reporting period.
This increase was due to business growth, with total
site numbers increasing from 604 to 613 sites over the
period, and store refurbishment activity, with floor
space increasing at some stores.
Our 2016 report will be submitted to the Clean Energy
Regulator in October 2016.
Supply Chain Efficiency
Our products are sent to distribution centres, stores
and customers by trade partners using road, air and
sea. We continue to work closely with transport trade
partners to increase the use of modern, fuel efficient
vehicles, and to explore the use of more sustainable
fuels. During the reporting period we also made
good progress with our efforts to increase packaging
efficiency, consolidate store loads and optimise our
distribution network.
This year the Group further benefited from the re-
configuration of our distribution centre network
implemented that was completed in 2014. This
reporting period represented the first full year of
benefits from the re-design and has resulted in
significant reductions in both truck trips and total
kilometres travelled. With our distribution centres now
located closer to our store network, we have been
able to consolidate loads across multiple brands.
Over the last 12 months, the Group has achieved a
reduction of more than 2.7 million kilometres in truck
travel, as well as reducing the number of truck trips by
over 2,000.
OUR COMMUNITY
Super Retail Group is committed to supporting the
communities in which we operate. This includes
supporting community groups through corporate
philanthropy, providing assistance and support in
times of natural disasters, and actively participating
in improving community wellbeing. Our decisions
about how we can allocate resources to best support
communities are based on alignment to our core
purpose and values.
We also support communities through the employment,
product stewardship and education programs we
provide through our normal business operations. Many
of our stores are in small, regional communities and we
are often a key source of employment opportunities for
the local area, particularly for young people.
Community Services Leave and
Workplace Giving Donation
We support and encourage Team Members who wish
to make an impact on the community by taking part in
civic activities. We provide various forms of leave under
Community Services Leave, including Blood Donor
Leave, Emergency Services Leave and Natural Disaster
Leave. The opportunity to participate in workplace
giving is also available to all team members in Australia
and New Zealand using pre-tax dollars debited from
their pay.
Super Retail Group is also part of Red25, a nationwide
initiative to drive blood donations for the one in three
Australians that will need blood or blood products in
their lifetime.
Community and Sponsorship Partnerships
In the 2016 financial year, we launched a national
community partnership with Red Cross Australia.
This partnership provides a focus for our corporate
philanthropy work across the Group and aligns with
our core corporate values of supporting the local
communities where we operate. Red Cross is the
official recipient for all fundraising efforts undertaken
by team members throughout the year, and in the
coming year we will be expanding this partnership with
a fundraising and awareness drive that will activate our
national retail network in support of Red Cross’ annual
Disaster Preparedness and Recovery campaign.
In addition, each of our brands engage in their
own programs of community giving and corporate
philanthropy that are aligned with their individual
brand purpose and the issues that matter to their
customers. These include support for Marine Rescue,
Cancer Council and Coastguard NZ.
In total, our cash contributions through community
partnerships, sponsorships and team member
contributions in the 2016 financial year was $129,911.
In addition, discounts and store credits were provided
to community groups and customers at store level
during the reporting period.
25
Super Retail Group Limited | ANNUAL REPORT 2016 DIRECTORS’ REPORT
The Directors present their report together with the consolidated financial statements of the Group comprising Super Retail Group
Limited (SUL) (the Company) and its subsidiaries for the period ended 2 July 2016.
1.
The Directors of the Company at any time during or since the end of the period, up to the date of this report are:
Directors
R J Wright
(Independent Non-Executive Chair)
P A Birtles
(Group Managing Director and Chief Executive Officer)
R A Rowe
(Non-Executive Director)
R J Skippen
(Independent Non-Executive)
S A Pitkin
(Independent Non-Executive)
D J Eilert
(Independent Non-Executive) (appointed 21 October 2015)
L K Inman
(Independent Non-Executive) (appointed 21 October 2015)
Details of the qualifications, experience and responsibilities of the Directors are on pages 14 to 15 of this annual report.
Special Responsibilities of Directors
Director
Audit & Risk Committee
Nomination Committee
Human Resources & Remuneration
R J Wright
P A Birtles
R A Rowe
R J Skippen
S A Pitkin
D J Eilert(4)
n/a(1)
n/a
n/a
(2)
(5)
(2)
n/a
n/a
n/a(3)
(2)
(5)
(5)
L K Inman(4)
(1) R J Wright resigned from the Audit & Risk Committee, effective 3 December 2015.
(2) Denotes Chair of Committee.
(3) R A Rowe resigned from the Human Resources & Remuneration Committee, effective 3 December 2015.
(4) D J Eilert and L K Inman were appointed Directors on 21 October 2015.
(5) D J Eilert and L K Inman were appointed to the Audit & Risk Committee and the Human Resources & Remuneration Committee, effective 3
(5)
December 2015.
1.1
Directorships of listed companies held by members of the Board
Director
Listed Company
Directorship
Key Dates
R J Wright
Super Retail Group Limited
APA Ethane Limited
Australian Pipeline Limited
Independent Chair
Independent Non-Executive Director
Chair and Non-Executive Director
Independent Non-Executive Director
SAI Global Limited
Chair and Non-Executive Director
P A Birtles
Super Retail Group Limited
GWA Group Limited
Group Managing Director and Chief
Executive Officer
Independent Non-Executive Director
R A Rowe
Super Retail Group Limited
Non-Executive Director
Current, appointed 28 October 2009
Appointed 19 May 2004
Current, appointed 10 July 2008
Former, appointed 10 Feb 2000 and
ceased October 2015
Former, appointed 17 December
2003 and ceased 29 October 2013
Current, appointed 05 January 2006
Current, appointed 24 November
2010
Current, appointed 08 April 2004
26 Super Retail Group Limited | ANNUAL REPORT 2016
26
Super Retail Group Limited | ANNUAL REPORT 2016
DIRECTORS’ REPORT (continued)
1.
1.1
Directors (continued)
Directorships of listed companies held by members of the Board (continued)
R J Skippen
Super Retail Group Limited
Independent Non-Executive Director
S A Pitkin
Slater & Gordon Limited
Flexigroup Limited
Independent Chairman and Non-
Executive Director
Independent Non-Executive Director
Emerging Leaders Investment
Limited (delisted 19/06/2014)
Super Retail Group Limited
Star Entertainment Group
Limited
IPH Limited
Link Administration Holdings
Limited
Billabong International Limited
Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
D J Eilert
Super Retail Group Limited
Navitas Limited
Onthehouse Holdings Limited
Independent Non-Executive Director
Non-Executive Director
Non-Executive Director
REA Group
Non-Executive Director
Veda Group Limited
Non-Executive Director
L K Inman
Super Retail Group Limited
Commonwealth Bank of
Australia
Bellamy’s Australia Limited
Independent Non-Executive Director
Non-Executive Director
Non-Executive Director
Billabong International Limited
Managing Director & CEO
Precinct Properties New
Zealand Limited
Independent Non-Executive Director
1.2
Directors’ Meetings
Current, appointed 16 September
2008
Current, appointed 26 May 2010
Current, appointed 20 November
2006
Former, appointed 12 October 2010
and ceased 15 September 2014
Current, appointed 01 July 2010
Current, appointed 31 July 2014
Current, appointed 23 September
2014
Current, appointed 23 September
2015
Former, appointed 28 February 2012
and ceased 15 August 2016
Current, appointed 21 October 2015
Current appointed 28 July 2014
Former, appointed 1 Jul 2012 and
ceased 26 November 2013
Former, appointed 30 June 2010 and
ceased 17 February 2012
Former, appointed 4 October 2013
and delisted 26 February 2016
Current, appointed 21 October 2015
Current, appointed 16 March 2011
Current, appointed 15 February
2015
Former, appointed May 2012 and
ceased 2 August 2013
Current, appointed 28 October 2015
The number of meetings of the Company’s Board of Directors and each Board Committee held during the period ended 2 July 2016
is set out below:
Meetings of Committees
Board Meetings
Audit and Risk
Nomination
Human Resources and
Remuneration
Attended
Held(1)
Attended
Held(1)
Attended
Held(1)
Attended
Held(1)
R J Wright
P A Birtles
R A Rowe
R J Skippen
S A Pitkin
D J Eilert
L K Inman
11
11
11
10
11
6
7
11
11
11
11
11
7
7
4
4
4
4
4
3
3
4
4
4
4
4
3
3
1
1
1
1
1
0
0
1
1
1
1
1
0
0
3
3
3
3
3
1
1
3
3
3
3
3
1
1
(1)Number of meeting held during the time the Director held office during the year.
Super Retail Group Limited | ANNUAL REPORT 2016 27
27
Super Retail Group Limited | ANNUAL REPORT 2016
DIRECTORS’ REPORT (continued)
1.
1.3
Directors (continued)
Directors’ Interests
The relevant interest of each Director in shares and options over such instruments issued by the companies within the Group and
other related bodies corporate, as notified by the Directors to the Australian Securities Exchange (ASX) in accordance with section
205G(1) of the Corporations Act 2001, at the date of this report is as follows:
Director
R J Wright
P A Birtles
R A Rowe
R J Skippen
S A Pitkin
D J Eilert
L K Inman
Number of Ordinary Shares
Options over Ordinary Shares
107,001
1,392,596
59,876,285
7,500
26,453
-
5,241
-
-
-
-
-
-
-
2.
Company Secretary
The Company Secretary (and Chief Legal and Property Officer) is Mr R W Dawkins, B.Bus (Acct), Grad. Dip. AppCorpGov, ACIS,
ACSA. Mr Dawkins commenced with Super Retail Group Limited as the Property Services Manager in July 2001 and was appointed
Company Secretary in December 2010.
3.
3.1
Operating and Financial Review
Overview of the Group
The Group is a for-profit entity and is primarily involved in the retail industry. Founded in 1972, as an automotive accessories mail
order business which evolved into Supercheap Auto, the Group has grown through both organic growth and mergers and
acquisitions evolving its principal activities to include:
•
•
•
retailing of auto parts and accessories, tools and equipment;
retailing of boating, camping, outdoor equipment, fishing equipment and apparel; and
retailing of sporting equipment, bicycles and apparel.
3.2
Review of Financial Condition
(a)
Group Results
Revenue from continuing operations
Segment EBITDA
Segment EBIT
Normalised NPAT
Profit for the period attributable to owners
Profit for the period
Operating cash flow
EPS – basic (cents)
Dividends per share (cents)
2016
$m
2,422.2
245.7
175.3
108.6
62.8
58.0
159.2
31.8
41.5
2015
$m
2,238.7
231.0
170.2
106.3
81.1
76.9
182.0
41.2
40.0
The Group has delivered a robust result for the financial year despite recognising significant restructuring costs related to the
commitment to transform underperforming parts of the business. Total sales from continuing operations increased 8.2% to
$2,422.2 million on the prior year.
During the year the Group announced its plans to restructure the Ray’s Outdoors and Infinite Retail businesses. The restructuring
of these businesses is expected to have a positive impact on the financial performance of the Group in future years. The total
restructuring impact this financial year is $43.3 million (before tax), with $38.3 million related to Ray’s Outdoors and $5.0 million
related to Infinite Retail.
The Group also resolved to impair the Ray’s Outdoors brand name during the year based on the underperformance of the older
format stores and in light of the identified restructuring plans which will see the current 53 store network reduce to 17. The
impairment charge recognised was $20.0 million ($14.0 million after tax).
28
28 Super Retail Group Limited | ANNUAL REPORT 2016
Super Retail Group Limited | ANNUAL REPORT 2016
DIRECTORS’ REPORT (continued)
3.
Operating and Financial Review (continued)
3.2
Review of Financial Condition (continued)
(a)
Group Results (continued)
Net profit after tax (NPAT) attributable to owners was $62.8 million compared to $81.1 million in the prior period. After excluding
restructuring activities and the impairment of the Ray’s Outdoors brand name, the normalised NPAT was $108.6 million compared
to $106.3 million in the prior period, an increase of 2.2%. The table below provides the reconciliation to the statutory profit.
Profit for the period
Loss for the period attributable to non-controlling interests
Profit for the period attributable to owners of Super Retail Group Limited
Loss from discontinued operations
Profit for the period attributable to owners of Super Retail Group Limited from
continuing operations
Impairment of Ray’s Outdoors brand name(1)
Business restructuring costs(1)
Normalised net profit after tax
Business restructuring costs comprise:
- Ray’s Outdoors
- Infinite Retail
- Workout World
- Tax benefit
Total business restructuring costs
(1) Net of tax
2016
$m
58.0
4.8
62.8
-
62.8
14.0
31.8
108.6
38.3
5.0
-
(11.5)
31.8
2015
$m
76.9
4.2
81.1
16.2
97.3
-
9.0
106.3
10.3
-
2.5
(3.8)
9.0
As a result of the restructuring costs and impairment charge during the 2015/16 financial period, basic earnings per share (EPS) was
31.8 cents compared to 41.2 cents in the prior comparable period, a decrease of 22.8%. EPS on normalised NPAT was however
55.1 cents compared to 54.0 cents last year, an increase of 2.0%.
Both overall sales growth and like for like sales growth was achieved in each division. In the Auto Retailing Division, new stores, like
for like sales growth and gross margin expansion contributed to EBITDA growth. The Leisure Retailing Division also delivered solid
overall sales growth driven by new stores and improvement in like for like sales. EBITDA margins in the Leisure Retailing Division
were below the prior period due to gross margin compression and reduced cost leverage. The Sports Retailing Division reported
sales increases due to strong underlying like for like sales growth and new stores. EBITDA margins improved in the period due to
gross margin expansion. Included in the Sports Retailing result is the results of Infinite Retail. During the year the Group increased
its interest in Infinite Retail from 50.05% to 95%.
The Group continues to invest in the development of its businesses through the expansion and improvements to the retail store
network and supporting capability through information technology, digital initiatives and inventory management projects.
(b)
Division Results
Auto
Leisure
Sports
Unallocated
Auto Retailing
Sales
EBITDA
EBIT
2016
$m
922.8
581.9
910.2
7.3
2,422.2
2015
$m
854.3
543.2
835.0
6.2
2,238.7
2016
$m
133.2
37.5
100.3
(25.3)
245.7
2015
$m
119.4
48.8
85.8
(23.0)
231.0
2016
$m
104.6
18.6
77.8
(25.7)
175.3
2015
$m
96.0
32.3
65.6
(23.7)
170.2
Divisional sales at $922.8 million were 8.0% higher than the prior comparative period with like for like sales growth of 4.4%.
Segment EBIT at $104.6 million was 9.0% higher than the comparative period.
Super Retail Group Limited | ANNUAL REPORT 2016 29
29
Super Retail Group Limited | ANNUAL REPORT 2016
DIRECTORS’ REPORT (continued)
3.
Operating and Financial Review (continued)
3.2
Review of Financial Condition (continued)
(b)
Division Results (continued)
Auto Retailing (continued)
Like for like sales growth of 4.4% was driven by improvements across all key metrics of average item value, average items per
transaction and total transactions. Gross margin improvements were again driven by ranging and sourcing initiatives. Operating
costs leverage was achieved after accommodating increased investment in store services standards.
The Supercheap Auto Club Plus membership increased to 1.6 million by 2 July 2016, with active members (members that have
purchased in the last 12 months) totalling over 1.1 million. Sales attributable to club members are increasing and club members
continue to have higher average transaction values than non-club members.
Supercheap Auto has an ongoing focus on sales and margin growth with particular focus on store refurbishment, ranging initiatives,
private brand development, partnering with the world’s best automotive brands and team engagement.
All the major product categories delivered positive growth during the financial year with particularly strong growth being achieved
in the audio, car care, lubricants and spare parts categories. The strongest like for like sales growth was achieved in New Zealand.
All Australian states achieved like for like growth.
The business opened eight new stores and closed one store during the year. The store refurbishment program increased this year
to 46 stores including twelve converted to superstores. At 2 July 2016, there were 307 stores across Australia and New Zealand
with the business targeting an additional 33 stores over the next 3 years.
Customer response to the store of the future concept continues to be strong as the stores provides a more engaging interactive
shopping experience for the customer. The business is planning to refurbish around 50 stores and open 15 stores in the new format
in the coming year.
During the year the business extended the retail trade offer to provide a stronger trade offering to existing and new trade
customers growing trade sales by 100%.
The business continues to invest in the development of digital engagement for customer through web site development, increasing
product videos and partnering integrations. Supercheap Auto has extended the omni-channel offering through the introduction of
90 minute click and collect promise, track and trace for home deliveries increasing e-commerce sales by 84% above the prior
comparable period.
Leisure Retailing
Divisional sales at $581.9 million were 7.1% higher with like for like sales growth being 4.4%. The Leisure Segment EBIT result at
$18.6 million was $13.7 million below the prior comparative period. Segment EBIT margin was 3.2%, which was 2.7% lower than
the prior comparative. This decline was driven by a shift in pricing and promotion strategy, higher purchase costs and inventory
clearance.
During the year the BCF business saw gross margin compression due to poor execution of an everyday low price strategy across a
portion of the range. This strategy was adjusted after the key Christmas trading period and has resulted in gross margin recovery
over the balance of the second half of the financial year.
The BCF business has improved like for like sales through the year regaining strong transaction and average item per transaction
growth. This sales growth has been achieved despite weak demand within its core Queensland retail market. All categories
achieved like for like growth. Fishing, Camping and Apparel have performed the strongest. All states achieved like for like sales
growth.
The BCF club loyalty program continued to grow in the financial year with active membership totalling over one million members.
The BCF club membership group have higher levels of visitation, average transaction value and engagement than other customers.
Increasing and deepening engagement with BCF club members was and remains a key strategy for the business.
The business opened four new stores and closed one store during the year taking total store numbers to 120. BCF expects to reach
150 stores in the next four years. The business has continued to refine its store of the future concept extending the pilot to 15
stores during the 2016 financial year. Further testing and rollout is planned for the 2017 financial year.
30
30 Super Retail Group Limited | ANNUAL REPORT 2016
Super Retail Group Limited | ANNUAL REPORT 2016
DIRECTORS’ REPORT (continued)
3.
Operating and Financial Review (continued)
3.2
Review of Financial Condition (continued)
(b)
Division Results (continued)
Leisure Retailing (continued)
BCF continues to be focused on driving inventory improvements in the store network, supply chain and through collaborating with
trade partners. Good progress has been made this year in extending more trade partners into the Group’s distribution centres and
developing the businesses inventory planning capabilities.
As outlined earlier, during the year the Group accelerated the strategic review of the Ray’s Outdoors business. This will involve
reducing the business to a small network of 17 stores primarily based in Victoria. The performance of the first group of Rays pilot
stores has confirmed the potential to establish a meaningful business in the outdoor adventure market. Transformation of 12
stores to the new Rays format will be undertaken in the 2016/17 financial year. The transformation of the Rays business is expected
to contribute a benefit of $8 million on an annualised basis when complete.
The Group has taken up restructuring costs of $38.3 million this financial year to close 21 and convert to other Group brands 17 of
the remaining 38 Ray’s Outdoors stores, which is expected to be completed by the end of September 2016. At 2 July 2016, two of
the Ray’s Outdoors stores had already closed.
Sports Retailing
Divisional sales at $910.2 million were 9.0% higher than the prior period and Segment EBIT at $77.8 million was 18.6% higher than
the prior period. Like for like sales growth for Rebel and Amart Sports was 6.3%.
Like for like sale growth in Rebel and Amart Sports was driven by growth in transactions and average transaction value. The key
categories of Clothing and Footwear delivered strong like for like growth and gross margin improvements. Sub-category highlights
were the strong growth in Football and the strong and consistent growth across men’s, women’s and kids apparel. Pleasingly, the
Hard Goods category achieved good sales growth and gross margin expansion.
The Sports division remains focused on building customer engagement with the key brands. Rebel Active and Team Amart loyalty
programs have grown strongly again with active members now totalling 1.5 million and 0.3 million respectively. Members of the
loyalty programs have higher average transaction values and higher visitation levels.
The division has continued to build the Amart Sports business in Victoria and New South Wales with five new stores opened and
one store closed during the year. Three Rebel stores were opened and three Rebel stores were closed during the year.
The transformation of the Workout World business was advanced in the financial year. The business is now being run from within
the Rebel business and two stores are being trialled with the RebelFIT brand. A total of the old 10 Workout World stores remain
and are now included in the Rebel store count. At 2 July 2016 there were 101 Rebel stores and 60 Amart Sports stores.
Sports Retailing inventory management performance has improved this year with aged inventory closing at a record low of just
3.1%. Average inventory per store in Rebel improved and increased slightly in Amart Sports. This result was delivered despite an
increased cost base due to the Australian Dollar decline and an increase in private brands.
In November 2015 the Group took its controlling interest in Infinite Retail from 50.05% to 95%. Infinite Retail operates the
Fangear.com website, a number of other merchandising websites and event activity for major sporting codes. Integration of the
business was completed during the year, improving operating costs and governance of the business. The business contributed a
loss of $5.6 million to the Sports Division EBIT result for the financial year. During the year it was identified that a number of
business contracts were unprofitable and the Group has taken restructuring costs of $5.0m to address key loss making contracts
and to bring the business to profitability from financial year 2017.
The strong underlying sales growth, gross margin expansion and benefits from the restructuring of the Workout World business
have contributed to the 18.6% increase in the Sports Segment EBIT of $77.8 million.
Super Retail Group Limited | ANNUAL REPORT 2016 31
31
Super Retail Group Limited | ANNUAL REPORT 2016
DIRECTORS’ REPORT (continued)
3.
Operating and Financial Review (continued)
3.2
Review of Financial Condition (continued)
(b)
Division Results (continued)
Group Costs
Group costs for the period were $25.7 million, including $6.9 million in corporate costs, $8.0 million related to un-utilised
distribution centre space, $8.2 million related digital including investment in digital businesses and $2.6 million in costs associated
with commercial and other projects.
(c)
Financial Position and Cash Flow
BALANCE SHEET
Trade and other receivables
Inventories
Trade and other payables
Current tax (liabilities) / assets
Total working capital
Cash and cash equivalents
Borrowings
Net debt
Property, plant and equipment
Intangible assets
Derivatives
Provisions
Deferred taxes
NET ASSETS
CASH FLOW
Net cash inflow from operations
Net cash (outflow) from investing
Net cash (outflow) from financing
Net increase / (decrease) in cash
Cash at the beginning of the period
Effects of exchange rates on cash
Cash at the end of the period
2016
$m
42.7
501.9
(292.8)
(6.3)
245.5
15.6
(415.8)
(400.2)
236.9
772.4
(8.0)
(87.9)
(24.7)
734.0
159.2
(79.9)
(77.0)
2.3
13.1
0.2
15.6
2015
$m
29.3
505.6
(305.3)
2.9
232.5
13.1
(392.0)
(378.9)
224.1
801.3
2.7
(64.9)
(51.5)
765.3
182.0
(71.9)
(121.1)
(11.0)
24.2
(0.1)
13.1
Net assets for the Group decreased $31.3 million on the prior year largely due to the $20.0 million impairment write down of the
Ray’s Outdoors brand name intangible asset.
Group Net Debt was $400.2 million, which was $21.3 million higher than the prior year. This is a direct result of the 53 week year
ending on 2 July 2016 impacting timing of cash outflows. Net cash outflows relating to the 53rd week equate to $37.9 million. Net
debt remains comfortably within the Group’s facility limits and the Group remains within its banking covenants.
Cash flow from operations of $159.2 million was $15.1 million higher than the prior year on a like for like basis after removing the
impact of the 53rd week. This is due to improvements in working capital management year on year and is a strong cash flow result
despite showing an actual $22.8 million decrease on the prior comparative period.
Group capital expenditure cash flow was $79.9 million which included $56.1 million in new and refurbished store fit out, and $23.8
million in information technology projects, inventory management projects and general capital expenditure.
32
32 Super Retail Group Limited | ANNUAL REPORT 2016
Super Retail Group Limited | ANNUAL REPORT 2016
DIRECTORS’ REPORT (continued)
3.
Operating and Financial Review (continued)
3.2
Review of Financial Condition (continued)
(d)
Dividends
Super Retail Group has declared a 21.5 cents per share fully franked final dividend for 2016. This will result in a full year dividend of
41.5 cents per share fully franked, an increase of 3.8% over the prior year. This represents a dividend payout ratio of 65 per cent of
underlying NPAT.
(e)
Material Business Risks
The Group recognises that all of its businesses operate in an environment of change and uncertainty and is committed to managing
the potential risks associated with this uncertainty in a continuous, proactive and systematic way. The Group regularly reviews the
possible impact of these risks and seeks to minimise this impact through a commitment to its corporate governance principles and
its various risk management functions.
The material business risks faced by the Group that are likely to have an effect on the financial prospects of the Group and how the
Group manages these risks include:
•
•
•
•
•
•
Global competition - The Retail market is becoming increasingly a global market place through the impact of on-line shopping
and overseas retailers’ inward investment into Australasia which expose the Group to a new higher level of competition.
Therefore the Group has to increasingly benchmark its customer offering and business model against global on-line and
physical retail businesses. The Group’s strategic change programs have been developed to build the capabilities required to
be successful in the global market place. With competitors constantly seeking to enter the market with improved designs, the
Group sees this risk increasing in the future.
Digital - The proliferation and growth of new sales and marketing channels will make it increasingly challenging to ‘stand out
from the crowd’ and to develop customer loyalty. With digitally enabled competitors constantly seeking to enter the market
with improved designs, the Group sees this risk increasing in the future. Increased digital disruption requires new and agile
forms of development and consequentially impact on the Group’s business models and ways of working. The Group’s
strategies are focused on developing a strong and well supported digital capability to ensure the Group manages the pace of
change in technology and its impact on customer expectations and business models. The Group continues to develop
mitigating omni-channel strategies leveraging its existing market presence.
The breakdown of traditional business models - The breakdown of traditional business models with retailers becoming
manufacturers and brand owners, while brand owners and manufacturers are becoming retailers, is increasing competition
risk and cost pressures. The Group continues to develop its sourcing and product and brand development capabilities. These
risks are continuously monitored and mitigation strategies updated. Some of these actions include an annual review of brand
strategies, regular customer research, and external research of brand perception. Targets are in place for private brand sales
for each business. The Group is also discussing opportunities to reduce the cost of supply chain with its major trade partners
and to develop mutual business opportunities. The Group does not expect any significant change in this risk over the next
couple of years.
Customer power - Customer expectations have changed significantly over the last few years and will continue to do so in the
future. The Group recognises changes to consumer behaviour and engagement methods will require the Group to ‘earn the
right’ to meet a customer need. There is an increasing expectation of engaging experiences, solutions rather than products
and ‘do it for me’ rather than ‘do it yourself’. The Group’s businesses are all considering opportunities to add the provision of
information and services to its customer offering as well as product. In addition the Group has a focus on customer
engagement to its strategic programs. This will cover interaction with the customer across all channels – store, on-line, social
media and traditional media. The Group believes that this will remain a consistent risk in the retail market for years to come
and if not adequately managed will result in loss of sales to alternative suppliers.
Supply Chain and Inventory Management - In order to meet increasing customer expectations, the Group requires an agile,
low cost responsive supply chain to remain competitive. The Group has made substantial investments in an updated supply
chain network and supporting information systems. The Group continues to pursue opportunities to reduce the cost of the
supply chain through improved delivery models with its major trade partners including the development of mutual business
opportunities. Risks associated with the supply chain remains constant. Ineffective or inefficient management of inventory is
a significant risk to all retailers. For the Group to be successful it must improve inventory efficiencies, whilst improving
customer service. The Group continues to develop its sourcing, product and brand development capabilities. Targets remain
in place for private brand sales for each business. The Group also performs an annual review of brand strategies, regular
customer research and external research of brand perception.
Organisation structure, culture and capabilities - Attraction, retention, engagement, safety and succession of team members
are key risks to be managed to maximise financial growth in the retail sector. The Group has undertaken strategies that have
successfully mitigated these risks. However, the significant changes required to accommodate digital strategies will make
these strategies critical to the Group’s long term success. The Group’s strategic programs are focused on developing the
capabilities the Group requires to successfully operate a multi-channel retail business.
Super Retail Group Limited | ANNUAL REPORT 2016 33
33
Super Retail Group Limited | ANNUAL REPORT 2016
DIRECTORS’ REPORT (continued)
3.
Operating and Financial Review (continued)
3.2
Review of Financial Condition (continued)
(e)
•
•
•
Material Business Risks (continued)
Stakeholder management and expectations - Confidence in our brands is critical for the Group’s success, key external
stakeholders can have a material impact on the Group’s reputation and the Group recognises the importance of minimising
the risk of breach of corporate policy, fraud or compliance in legislation/ regulations. The increase in regulatory controls and
compliance obligations and impact of increased Corporate Social Responsibility expectations (direct and indirect) has a direct
cost implication for the Group. The Group has developed strong compliance processes and a clear focus on Corporate Social
Responsibility and sustainable business practices. On-going review of changes to regulation and stakeholder sustainability
expectations is required to assess the impact on the Group and develop appropriate response strategies.
Financial risk - The Group’s activities expose it to a number of financial risks. The Group adopts a financial risk management
program which seeks to minimise the potential adverse impacts on financial performance of the Group. Financial risks and
specific risk management approaches are reported in more detail in note 2 - Summary of Significant Accounting Policies,
included in the Notes to the Consolidated Financial Statements.
Cyber risk - The ever-changing nature of technology offers significant opportunities and challenges for all Australian
companies in relation to maintaining a strong cyber resilience program. Cyber security is an evolving and significant risk and
the Group will need to maintain ongoing vigilance and adopt appropriate responses (technological / physical / other) to
protect its information assets. During this reporting period the Group, through formal risk assessments, considered its
exposure and there is continuous focus on mitigating emerging risks in relation to cyber risks. It is also recognised that the
Group requires a stable, secure and efficient information systems environment that can deliver competitive advantage. The
Group has made and will continue to make a significant investment in Information Management Systems to meet the
challenges of the digital economy and evolving technology landscape. The Group believes that this will remain a consistent
and increasing risk requiring ongoing management.
3.3
Dividends
Dividends paid or declared by the Group to members since the end of the previous financial year were:
Declared and paid during the year:
2015 final fully franked dividend
2016 interim fully franked dividend
Declared after end of year:
2016 final fully franked dividend
Cents per share
Total amount
$m
Payment date
21.5
20.0
21.5
42.4
39.5
2 October 2015
8 April 2016
42.4
7 October 2016
3.4
Significant Changes in the State of Affairs
There were no significant changes in the Group’s state of affairs during the period.
3.5
Matters Subsequent to the End of the Financial Year
Since 2 July 2016 Super Retail Group Limited does not have any matters subsequent to the end of the financial year to be disclosed.
3.6
Likely Developments and Future Prospects
Information on likely developments in the operations of the Group is set out in this report under the section Review of Financial
Condition. Further information on the expected results of operations has not been included in this Annual Report because the
Directors believe it would be likely to result in unreasonable prejudice to the Group.
3.7
Environmental Regulation
The Group’s environmental obligations are regulated under State, Territory and Federal Law. The Group has an Environmental
Management System in place and a policy of complying with its environmental performance obligations. All material
environmental performance obligations are monitored by the Board. No environmental breaches have been notified to the Group
during the period ended 2 July 2016.
34
34 Super Retail Group Limited | ANNUAL REPORT 2016
Super Retail Group Limited | ANNUAL REPORT 2016
DIRECTORS’ REPORT (continued)
4.
Remuneration Report - Audited
Contents
Section 1
Section 2
Section 3
Section 4
Section 5
Section 6
Section 7
Section 8
Section 9
Section 10
Section 11
Remuneration Strategy and Policy
Role of the Human Resources and Remuneration Committee
Key Management Personnel
Senior Executive Remuneration Structure
Non-Executive Directors Remuneration Structure
Relationship of Remuneration to Group Performance
Remuneration Outcomes for 2016
Remuneration Changes for 2017
Service Agreements
Period of Restraint
Additional Information
Section 1: Remuneration Strategy and Policy
One of the Group’s core principles is that the attraction, development, engagement and retention of passionate team members
provides a competitive advantage which is fundamental to the long term success of the Group. The maintenance of a workplace
culture and the development of people practices that support this principle are strategic priorities for the Group.
The development of people practices covers a number of areas including attraction, diversity, learning and development,
engagement, workplace health and safety, talent and succession management, and remuneration and benefits.
Remuneration and benefits practices are set in the context of an overall policy to provide market competitive remuneration
arrangements which support the attraction, development, engagement and retention of passionate team members, and that are
aligned with the interests of shareholders.
The Group is committed to creating a high performance culture. The philosophy is to provide flexible and competitive market based
total remuneration arrangements that are linked to the performance of the Group and its businesses and support services.
The key elements of the Remuneration Policy are:
•
to provide competitive total remuneration arrangements that enable the Group to attract and retain high performing team
members, and to reward them for their contribution to the success of the Group;
to align remuneration arrangements with the delivery of sustainable value to the Group’s shareholders;
to maintain a pay for performance environment through linking incentive pay opportunities to the achievement of specific,
measurable business goals;
to position base salaries at or around the median and performance incentives in the 2nd quartile of relevant market
remuneration levels, subject to individual performance;
to provide gender pay equity across the Group through regular analysis and review;
to provide arrangements with the flexibility to recognise individuals based on performance, experience and qualifications; and
to provide equitable, fair and consistent pay arrangements across the Group through a systematic methodology involving job
value and market positioning.
•
•
•
•
•
•
Remuneration can include a number of different elements such as base pay, superannuation, short term incentives, long term
incentives, tools of trade, study and relocation assistance, share plans and novated lease arrangements. The elements of the total
remuneration package may vary according to the job role, team members experience and performance and market practice. The
Group Managing Director and Chief Executive Officer, and his direct reports (senior executives) are remunerated under a Total
Reward Structure.
For the 2016 Financial Year remuneration benchmarking for all key management personnel (KMP) was sourced from Ernst & Young
(EY) Remuneration Consultants. The Board referenced three sets of comparator groups to benchmark remuneration, being:
• Market Capitalisation and revenue comparator group: S&P/ASX 200 companies within 50% to 200% of Super Retail Group’s 12
month average market capitalisation and within 50% to 200% of Super Retail Group’s budgeted sales revenue;
• Market Capitalisation and GICS comparator group: S&P/ASX 200 companies within the ‘Consumer Discretionary Sector’ Global
Industry Classification Standard (GICS) and also within 50% to 200% of Super Retail Group’s 12 month average market
capitalisation; and
• Market Capitalisation comparator group: S&P/ASX 200 companies within 50% to 200% of Super Retail Group’s 12 month
average market capitalisation.
Super Retail Group Limited | ANNUAL REPORT 2016 35
35
Super Retail Group Limited | ANNUAL REPORT 2016
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
Section 1: Remuneration Strategy and Policy (continued)
Section 2: Role of the Human Resources and Remuneration Committee
The primary objective of the Committee is to assist the Board to fulfil its corporate governance and oversight responsibilities in
relation to the Group’s people strategy including remuneration components, performance measurements and accountability
frameworks, recruitment, engagement, retention, talent management and succession planning.
The Committee undertakes an annual review of the Group’s remuneration strategy and remuneration policy to facilitate
understanding of the overall approach to remuneration, and to confirm alignment with the Group’s business strategy, high
standards of governance and compliance with regulatory standards.
The Committee reviews and recommends to the Board for approval, remuneration arrangements for the Group Managing Director
and Chief Executive Officer and other senior executives. The Committee reviews the arrangements on an annual basis against the
Remuneration Policy, obtaining independent external remuneration advice where appropriate.
The Committee undertakes an annual review of the Group’s performance management system to confirm the integrity of systems
and processes in making incentive based payments. The Committee also verifies compliance with vesting or exercise requirements
for equity based rewards.
The Committee establishes the policy for the remuneration arrangements for Non-Executive Directors, reviewing remuneration
arrangements annually and obtaining independent external remuneration advice where appropriate.
The Committee reviews and recommends to the Board for approval the Remuneration Report and any other report required to be
produced for shareholders to meet regulatory requirements.
The Committee reviews its Charter at least once in each financial year.
Section 3: Key Management Personnel
The names and titles of the Group’s key management personnel (KMP) (being those persons having authority and responsibility for
planning, directing and controlling the activities of the entity) are set out below.
Non-Executive Directors
Current:
R J Wright
R A Rowe
R J Skippen
S A Pitkin
D J Eilert
L K Inman
Chair and Independent Non-Executive Director
Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
36
36 Super Retail Group Limited | ANNUAL REPORT 2016
Super Retail Group Limited | ANNUAL REPORT 2016
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
Section 3: Key Management Personnel (continued)
Executive Director
P A Birtles
Group Managing Director and Chief Executive Officer
Other KMP
Current:
Chief Financial Officer
D J Burns
E A Berchtold
Managing Director – Sports Division
C D Wilesmith Managing Director – Auto Division
A M Heraghty
G G Carroll
Managing Director – Leisure Division
Chief Supply Chain Officer (resigned effective 22 July 2016)
Section 4: Senior Executive Remuneration Structure
The senior executive remuneration structure is reviewed annually by the Human Resources and Remuneration Committee against
the Remuneration Policy, external remuneration practices, market expectations and regulatory standards.
The Group Managing Director and Chief Executive Officer, together with the other executive key management personnel, are
remunerated under a Total Reward structure consisting of three elements:
•
•
•
Base Salary Package (inclusive of superannuation contributions, car allowance and other non-monetary benefits);
Short Term Incentive (STI);
Long Term Incentive (LTI).
The mix of remuneration between fixed and variable components is determined having regard to the seniority of the role, the
responsibilities of the role for driving business performance and for developing and implementing business strategy and external
remuneration practices.
Reward Structure Split
(i)
The mix of fixed and at risk components for each of the Group Managing Director and Chief Executive Officer and executive KMPs
disclosed in the Remuneration Report, as a percentage of total target annual remuneration for the 2016 financial year, is as follows:
The chart above assumes that a full STI is received and that the LTI fully vests – the actual reward is dependent on the achievement
of performance targets.
The LTI component is based on the notional monetary value at the time of grant. This notional valuation may differ from the
accounting valuation which considers probability of vesting and other factors.
Super Retail Group Limited | ANNUAL REPORT 2016 37
37
Super Retail Group Limited | ANNUAL REPORT 2016
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
Section 4: Senior Executive Remuneration Structure (continued)
(a)
Base Salary Package
The Remuneration Policy provides executive KMP a base salary package that reflects the median market base salary package for a
comparable role in a similarly sized publicly listed company operating in the retail and consumer goods industry. The KMP’s
performance, skills and experience are also considered in determining the base salary package.
The base salary package comprises base pay and superannuation and may include prescribed non-financial benefits at the
executives’ discretion on a salary sacrifice basis. The Group provides superannuation contributions in line with statutory
obligations.
Base salary packages for executive KMPs are reviewed annually by the Human Resources and Remuneration Committee and
recommendations are made to the Board. There is no guaranteed base salary increases in any executive KMP’s service contract.
Approved amendments to base salary packages are effective from the commencement of the new financial year.
(b)
Short Term Incentive (STI)
The Group Managing Director and Chief Executive Officer and other executive KMP are invited to participate in a short term
incentive scheme that provides cash rewards for the achievement of performance targets that are consistent with the Group’s
approved business plan and that are aligned to delivering sustainable value to shareholders.
The scheme is directly linked to the Group’s overall performance and takes into consideration both company and divisional
performance measures and individual performance targets.
Company and Divisional Performance Measures
(i)
Achievement of company performance measures determines the STI bonus pool from which the Group Managing Director and
Chief Executive Officer and executive KMP are paid.
The Human Resources and Remuneration Committee recommends to the Board an annual profit before tax target. In setting this
target, the Committee considers the profit projections set out in the Group’s approved business plan and investor expectations.
Should actual profit before tax exceed the profit before tax target, a STI bonus pool is created to a value of 20% of the amount that
Group profit before tax exceeds the target. To achieve the maximum bonus potential the actual profit before tax needs to exceed
target by 10%.
For the year to 2 July 2016, the profit before tax target was set at $159.5 million, 21.2% higher than the profit before tax achieved
in the period to 27 June 2015 of $131.6 million. This target was not achieved.
The Divisional Managing Directors are eligible to achieve an additional individual performance related bonus in the form of a
Divisional Profit bonus. The maximum opportunity is capped at 30% of base salary. Divisional profit is measured by segment EBIT
performance against budget. Maximum divisional STI is received when the division exceeds its budget by 10%.
In the year to 2 July 2016, the Auto and Sports Divisions exceeded their budgets by 2.6% and 5.0% respectively while the Leisure
Division did not achieve its budget EBIT.
If the profit target is not met, KMPs can still earn STI up to a value of 10% of their base salary for individual performance, against a
set of 10 key performance indicators (KPI) targets that are established at the beginning of the year.
The Board has considered the adverse impact that the underperformance and the restructuring of the Leisure Division has had on
the outcome of company performance measures. The Board has resolved to exercise its discretion and to award an additional
incentive payment of 10% of total fixed remuneration to three of the executive KMP; namely C E Wilesmith - Managing Director –
Auto Division, E A Berchtold – Managing Director – Sports Division and D J Burns - Chief Financial Officer. This decision was made
having reference to the strong performance of the Auto and Sports Divisions and the strong cash flow management across the
Group.
Individual Performance Measures
(ii)
Individual performance targets include both Individual KPI targets and Divisional Profit targets. The Group Managing Director and
Chief Executive Officer and all executive KMP are eligible for reward for individual achievement of KPI targets, with Divisional
Managing Directors also eligible for reward on divisional performance. Achievement of individual performance targets determines
the value of the STI payment rewarded.
38 Super Retail Group Limited | ANNUAL REPORT 2016
38
Super Retail Group Limited | ANNUAL REPORT 2016
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
Section 4: Senior Executive Remuneration Structure (continued)
(b)
Short Term Incentive (STI) (continued)
Individual Performance Measures (continued)
(ii)
The Human Resources and Remuneration Committee is responsible for setting KPI targets for the Group Managing Director and
Chief Executive Officer, with the Group Managing Director and Chief Executive Officer cascading these KPI targets to his senior
executives as appropriate. These KPI targets cover achievement of financial and operational performance metrics and strategic
plan implementation milestones across four focus areas: Safety, Team, Customer and Business Improvement/Financial. The KPI
targets are consistent with the overall performance targets and objectives set out in the Group’s business plan. The level of
participation is dependent on the achievement of these KPI targets relevant to their area of responsibility.
The achievement of individual KPI targets (independent of profit performance) shall determine the proportion of the potential
bonus entitlement that will be granted.
The individual KPI targets comprises:
Category
Safety
Team
Customer
Business Improvement / Financial
# of Performance Goals
2
2
2
4
Weighting
20%
20%
20%
40%
As the KPI targets are stretch targets – a performance rating of 80% or higher will result in 100% of the potential bonus entitlement
being rewarded. This is on the basis that the Safety KPI targets have been fully met. Any shortfall on the Safety KPI targets will be
deducted from the 100% potential.
The Human Resources and Remuneration Committee is also responsible for assessing whether the KPI targets are achieved and for
approving STI payments. The Committee receives reports from management to assist in the assessment. The Human Resources
and Remuneration Committee have the authority to adjust the payment to reflect any special circumstances that may have
prevented the achievement of the KPI targets.
The individual KPIs and 2016 achievement as determined by the Human Resources and Remuneration for the Group Managing
Director and Chief Executive Officer was:-
Category
Safety
Performance Goals
Safety Performance
Safety Action
Team
Customer
Business
Improvement
/ Financial
Team Engagement
Collaboration / Agility
Paradigm Shifts
Customer Centricity
Paradigm Shift
Customer Measurement
Systems
Group Strategy
Development
Supply Chain
Development Program
IS Transformation
Program
Ray’s Outdoors Future
Option Evaluation
Measure and Target
30% Improvement in LTIFR to below 10
2015/16 safety action plans implemented and delivered across
the Group
Group engagement increases by 2% to 70%
Collaboration and Agility initiatives implemented in line with
plan and initial cultural change evidenced
Plan to build Group wide focus on customer centricity
developed and initial initiatives implemented
Consistent methodology for measurement of customer
engagement introduced across the Group and appropriate
management focus applied
Group strategic plan to deliver goals and Financial targets
agreed with Group Board
Key initiatives implemented and expected benefits delivered –
DC Productivity and Transport savings
Key initiatives progressed in line with plan – Data Centre and
Telecoms Service Partners, Team restructure, Security and
Architecture
Trial new store formats and commence planning for future
development or closure of Ray’s Outdoors business
Achievement
Full
Full
Full
Partial
Full
Full
Full
Partial
Full
Full
Super Retail Group Limited | ANNUAL REPORT 2016 39
39
Super Retail Group Limited | ANNUAL REPORT 2016
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
Section 4: Senior Executive Remuneration Structure (continued)
(b)
Short Term Incentive (STI) (continued)
Individual Performance Measures (continued)
(iii)
The following table summarises the components of total STI, the maximum STI opportunity and the percentage achieved.
KMP
Maximum
STI
Opportunity(1)
Company Measures
Components of Total STI
Individual Performance
Divisional Performance
Group Profit
Opportunity
Achieved
Individual KPIs
Opportunity Achieved
Divisional Profit
Opportunity
Achieved
Discretionary
Payment
Group Managing Director
and Chief Executive
Officer
Chief Financial Officer and
Chief Supply Chain Officer
Divisional Managing
Directors
100%
50%
60%
(1) As a percentage of base salary package.
90%
40%
20%
The above table is shown graphically below:
nil
nil
nil
10%
10%
10%
10%
10%
10%
n/a
n/a
30%
n/a
n/a
nil
nil-10%
nil-15%
nil-10%
The Committee has again this year considered the deferral of a portion of the STI award into equity. This has not been introduced
due to the Board’s assessment that:
•
•
•
the nature of the business is one where revenue is not dependent on long term contracts;
the Group has a strong risk management framework;
STI payment arrangements are not excessive and the Company can demonstrate a clear link between STI payments and the
Company performance over a number of years; and
deferral of STI and part payment in equity may cause confusion between STI and LTI arrangements.
•
(c)
Long Term Incentive (LTI)
The Group’s remuneration structure aims to align long term incentives for executive KMPs and other executives with the delivery of
sustainable value to shareholders. The alignment of interests is important in ensuring that KMPs and executives are focused on
delivering sustainable returns to shareholders, whilst allowing the Group to attract and retain executives of a high calibre.
In October 2009, the Group’s shareholders approved the establishment of the Super Retail Group Limited Performance Rights Plan
(Plan). The Plan links the long term remuneration of KMP and Executive Officers with the economic benefit derived by shareholders
over a three to five year period. Participation in the Plan is by invitation only as determined by the Board.
40 Super Retail Group Limited | ANNUAL REPORT 2016
40
Super Retail Group Limited | ANNUAL REPORT 2016
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
Section 4: Senior Executive Remuneration Structure (continued)
(c)
Long Term Incentive (LTI) (continued)
The Plan allows for the annual grant of Performance Rights to executive KMP and other executives. The grant of Performance
Rights entitles the executive to be granted an equivalent number of shares upon vesting of those Performance Rights. The vesting
of Performance Rights is subject to the satisfaction of performance conditions and service conditions as detailed in the Super Retail
Employee Performance Rights Plan Rules available on the Group’s external website.
The performance conditions were amended as approved at the 2014 Annual General Meeting and will be satisfied if the Group
achieves certain earnings per share (EPS) and return on capital (ROC) performance hurdles over a three year period (Performance
Period) as determined by the Board.
The EPS Performance Hurdle – EPS Compound Annual Growth Rate (50% of Grant)
At the end of the Performance Period the normalised EPS compound annual growth rate of shares is calculated. If the normalised
EPS compound annual growth rate is equal to 10%, then 50% of the Performance Rights will be available to vest. If the normalised
EPS compound annual growth rate is 15% or better, all the Performance Rights will be available to vest. Between 10% and 15%,
Performance Rights will vest on a pro rata basis.
The ROC Performance Hurdle – Averaged ROC (50% of Grant)
At the end of the Performance Period the averaged ROC over the Performance Period is calculated. If the averaged ROC is 12%,
then 50% of the Performance Rights will be available to vest. If the averaged ROC is 15% or better, all the Performance Rights will
be available to vest. Between 12% and 15%, Performance Rights will vest on a pro rata basis.
Under these performance hurdles, for the plan to achieve 100% vesting the cumulative EPS growth must be at least 15%, and ROC
must average at least 15%.
If the performance conditions are satisfied within the Performance Period, the Performance Rights will vest over the subsequent
years in accordance with the following schedule:
Time after grant of Performance Rights
3 years
4 years
5 years
% of Performance Rights that vest
50%
25%
25%
Participating executives are prohibited from entering into any hedging arrangements in relation to Performance Rights.
The notional value of Performance Rights granted to executive KMP and other executives is determined on a face value basis using
the VWAP for SRG shares traded on the ASX on the five trading days from and including the release of the Group’s results for the
preceding reporting period. The number of Performance Rights granted to each KMP is determined in accordance with the
Executive Remuneration Structure outlined above, and have a value of between 50% and 78% of their base salary. The value of
Performance Rights for grant purposes may differ from the accounting valuation which considers probability of vesting and other
factors.
Executives must be employed at the time of vesting to receive the Performance Rights grant. The Board has discretion to amend
the employment requirement based on the circumstances associated with the executive KMP and other executives leaving. The
Board plans to exercise its discretion where an employee leaves due to retirement, retrenchment or redundancy, or termination by
mutual consent. The employee may retain entitlement to a portion of the Performance Rights prorated to reflect the period of
service from the start of the Performance Period to the date of departure. After the employees’ departure the Performance Rights
would only be available to vest to the extent that the performance conditions are met. Where an employee leaves due to
resignation or termination with cause, all unvested Performance Rights will lapse.
Super Retail Group Limited | ANNUAL REPORT 2016 41
41
Super Retail Group Limited | ANNUAL REPORT 2016
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
Section 5: Non-Executive Directors Remuneration Structure
The Group’s remuneration strategy is designed to attract and retain experienced, qualified Non-Executive Directors and to
remunerate appropriately to reflect the demands which are made on them and the responsibilities of the position. The level of fees
are reviewed annually by the Human Resources and Remuneration Committee.
Additional fees are paid to the Chairs and members of the Audit and Risk, and the Human Resources and Remuneration
Committees. This reflects the additional time commitment required by the Chairs and members of these committees.
Non-Executive Directors’ Fees are determined within an aggregate Directors’ fee pool approved by shareholders. The current fee
pool of $1,200,000 per annum was approved at the Annual General Meeting on 23 October 2013. This pool provides the capacity to
appoint additional directors to facilitate board succession and regeneration and to apply the Group’s remuneration policy. No
increase in the pool is proposed for the 2017 financial year.
Non-Executive Directors’ fees are inclusive of statutory superannuation contributions. The focus of the Board is on the strategic
direction of the Group and the creation of sustainable shareholder value. Non-Executive Directors do not receive shares,
Performance Rights or Share Options as part of their remuneration. Non-Executive Directors may opt each year to receive a
proportion of their remuneration in Super Retail Group Limited shares, which would be acquired on market.
Directors’ Fees
(a)
The fees paid to Non-Executive Directors are set out in the table below and are annual fees, inclusive of superannuation, unless
otherwise stated. Director’s fees were last adjusted in July 2014.
Chairman(1)
Other Non-Executive Directors
Chair of the Audit and Risk Committee
Chair of the Human Resources and Remuneration Committee
Committee Member(2)
(1) Committee fees are not paid to the Chairman.
(2) Committee fees are not paid to members of the Nomination Committee.
Section 6: Relationship of Remuneration to Group Performance
2016
300,000
135,000
25,000
20,000
10,000
The performance of the Group and remuneration paid to KMP over the last 6 years is summarised in the following table:
Financial performance
2011
2012
2013
2014
2,112.1
2015(1)
2,238.7
2016(2)
2,422.2
CAGR(3)
17%
1,092.3
2,020.0
1,654.1
77.7
17.3
134.3
15.9
Sales ($m)
Normalised Profit before tax
($m)
Normalised Post Tax ROC (%)
Shareholder value created
Normalised Earnings Per
Share(¢)
Dividends Per Share (¢)
June Share Price ($)
(1) Results from continuing operations.
(2) 2016 is a 53 week reporting period compared to 52 weeks for the previous 5 years.
(3) Percentage movement shown is the Compound Annual Growth Rate over the last 5 years.
58.1
38.0
11.97
53.7
32.0
7.19
40.9
29.0
7.00
163.0
12.6
158.6
11.3
148.6
10.6
155.9
10.7
55.1
40.0
8.46
54.0
40.0
9.40
55.1
41.5
8.77
15%
6%
7%
5%
Remuneration Expense of Key Management Personnel
Base Salary Package
Short Term Incentive
Long Term Incentive
Total
2011
$m
2.7
1.1
0.7
4.5
2012
$m
3.1
1.1
1.1
5.3
2013
$m
3.9
1.5
1.5
6.9
2014
$m
4.8
0.4
0.4
5.6
2015
$m
4.9
0.4
0.1
5.4
2016(1)
$m
5.4
0.8
0.5
6.7
(1) 2016 is a 53 week reporting period compared to 52 weeks for the previous 5 years and excludes “Other” remuneration.
Since 2011 normalised earnings per share has increased by 34.7%, dividends per share have increased by 43.1% and the share price
has increased by 25.3% demonstrating a balance between strategic growth and shareholder value.
42
42 Super Retail Group Limited | ANNUAL REPORT 2016
Super Retail Group Limited | ANNUAL REPORT 2016
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
Section 6: Relationship of Remuneration to Group Performance (continued)
During the same period, total remuneration paid to KMP has increased by 48.9% whilst total base salary has increased by 100.0%.
During this period the number of executive KMP increased from 5 to 6. The amount of total remuneration is significantly impacted
by the value of incentive payments which have varied over the years in line with Group performance.
Total remuneration paid to KMP as a proportion of normalised profit before tax was 5.8% in 2011 and has decreased to 4.3% in
2016.
KMP STI paid compared to EPS over the last 6 financial years:
KMP LTI expense compared to EPS over the last 6 financial years:
Super Retail Group Limited | ANNUAL REPORT 2016 43
43
Super Retail Group Limited | ANNUAL REPORT 2016
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
Section 7: Remuneration Outcomes for 2016
Details of the remuneration of the Directors and KMP of the Group are set out in the following tables:
2016
Short-term Benefits
Post-
employment
Share-based
Name
Non-Executive Directors
R J Wright
R A Rowe
R J Skippen
S A Pitkin
D J Eilert(4)
L K Inman(4)
Subtotal
Executive Director
P A Birtles
Other KMP
D J Burns
E A Berchtold
C D Wilesmith
A M Heraghty(5)
G G Carroll(6)
Subtotal
Total
2015
Name
Cash
salary
and fees
$
280,692
105,215
155,251
150,685
96,640
105,821
894,304
Cash
bonus
$
Non-
monetary
benefits
$
Super-
annuation
$
Performance
Rights (1)
$
Other (2)
$
Total (3)
(53 weeks)
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19,308
33,952
14,749
14,315
9,181
-
91,505
-
-
-
-
-
-
-
-
-
-
-
-
-
-
300,000
139,167
170,000
165,000
105,821
105,821
985,809
1,199,688
120,000
3,710
21,465
174,321
28,985
1,548,169
617,340
612,244
567,513
690,431
510,321
4,197,537
5,091,841
125,000
229,255
170,100
75,000
52,000
771,355
771,355
-
30,577
48,923
54,047
-
137,257
137,257
20,414
20,460
26,336
20,643
20,223
129,541
221,046
53,158
72,131
72,980
120,024
(39,424)
453,190
453,190
3,833
33,354
(14,887)
340,297
18,561
410,143
410,143
819,745
998,021
870,965
1,300,442
561,681
6,099,023
7,084,832
Short-term Benefits
Post-
employment
Share-based
Cash
salary
and fees
$
Cash
bonus
$
Non-
monetary
benefits
$
Super-
annuation
$
Performance
Rights(1)
$
Other(2)
Total
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,153,145
18,783
28,720
14,749
14,315
11,206
87,773
281,217
116,280
155,251
150,685
117,961
821,394
Non-Executive Directors
R J Wright
R A Rowe
R J Skippen
S A Pitkin
R A Murray(7)
Subtotal
Executive Director
P A Birtles
Other KMP
D J Burns
D F Ajala(10)
E A Berchtold(8)
C D Wilesmith
A M Heraghty(5)
G G Carroll(6)
S J Doyle(9)
Subtotal
Total
(1) As a result of confirming that prior issues of Performance Rights will not vest into shares, the Performance Rights value includes the reversal of
amounts reported in prior periods. This results in certain positions displaying as negative values. Due to length of service A M Heraghty has no
reversal of prior amounts reported.
672,659
508,226
505,456
604,463
235,406
524,999
299,053
4,840,108
5,749,275
581,117
401,817
490,122
476,217
120,499
481,181
35,940
3,740,038
4,561,432
10,207
22,398
(23,091)
12,050
63,353
6,155
232,004
375,260
375,260
2,452
(7,172)
(50,079)
(1,587)
-
(18,656)
26,413
96,533
96,533
100
-
27,346
45,000
46,858
36
-
122,412
122,412
18,783
33,183
18,783
18,783
4,696
18,783
4,696
136,490
224,263
60,000
58,000
42,375
54,000
-
37,500
-
369,375
369,375
300,000
145,000
170,000
165,000
129,167
909,167
1,489,846
145,162
117,500
52,184
18,783
3,072
(2) Includes accruals for annual leave and long service leave entitlements, sign-on bonus based on successful completion of probation period in lieu
of forgone incentives from previous employer of $300,000 paid to A M Heraghty in 2016 and also termination payments for S J Doyle in 2015.
(3) The reporting period of 28 June 2015 to 2 July 2016 is a period representing 53 weeks, compared to the comparative reporting period 29 June
2014 to 27 June 2015 representing 52 weeks which has resulted in a $0.1 million increase in expense for the period.
(4) D J Eilert and L K Inman commenced as KMP on 21 October 2015.
(5) A M Heraghty commenced with the Group and as KMP on 27 April 2015. His 2015 non-monetary benefits includes a relocation reimbursement.
(6) G G Carroll resigned effective 22 July 2016 and ceased as KMP on this date.
(7) R A Murray resigned effective 29 April 2015.
(8) E A Berchtold adjusted base salary is reflective of a period of unpaid leave taken during the 2015 financial year.
(9) S J Doyle resigned effective 1 August 2014 and ceased as KMP on this date.
(10) D F Ajala ceased to be a KMP effective 28 June 2015 due to changes in nature of his responsibility for planning, directing, controlling activities.
44
44 Super Retail Group Limited | ANNUAL REPORT 2016
Super Retail Group Limited | ANNUAL REPORT 2016
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
Section 7: Remuneration Outcomes for 2016 (continued)
(a)
Remuneration related to performance
Both STI and LTI are awarded based on performance. The achievement rates of both STI and LTI are detailed below, indicating the
relative proportions paid and forfeited linked to each performance based remuneration.
Short Term Incentives
(i)
STI is dependent on the satisfaction of performance conditions as set out in Section 4(b) - Short Term Incentives. The 2016 STI cash
bonus was awarded on 25 August 2016. No part of the bonuses are payable in future years.
Long Term Incentives
(ii)
LTI is dependent on the satisfaction of performance conditions and service conditions as set out in Section 4(c) - Long Term
Incentives.
Performance Rights over equity instruments of Super Retail Group Limited
The movement during the reporting period in the number of performance rights over ordinary shares in the Company held directly
or indirectly or beneficially, by each KMP, including their related parties is as per the table below.
Held at
27 June
2015
Number
Granted(1)
Number
Vested
Number
Other
Changes(2)
Number
Held at
2 July
2016(3)
Number
Value of Performance
Rights granted in year
$
Financial year
in which grant vests
Year
25,000
31,650
110,000
110,000
100,000
-
-
-
-
-
-
104,516
(25,000)
(15,825)
-
-
-
-
-
-
(110,000)
-
-
-
21,615
32,017
-
35,712
26,137
37,519
-
3,145
4,335
11,687
22,838
35,859
-
-
-
34,994
-
-
-
45,291
-
-
-
-
-
43,897
-
-
-
-
-
-
-
(3,145)
(2,168)
-
-
-
-
-
-
-
(35,712)
-
-
-
-
-
(11,687)
-
-
-
-
15,825
-
110,000
100,000
104,516
21,615
32,017
34,994
-
26,137
37,519
45,291
-
2,167
-
22,838
35,859
43,897
n/a
n/a
n/a
n/a
n/a
853,803
n/a
n/a
285,870
n/a
n/a
n/a
369,987
n/a
n/a
n/a
n/a
n/a
358,600
n/a
2016, 2017
2016, 2017, 2018
2017, 2018, 2019
2018, 2019, 2020
2019, 2020, 2021
2017, 2018, 2019
2018, 2019, 2020
2019, 2020, 2021
2016, 2017, 2018
2017, 2018, 2019
2018, 2019, 2020
2019, 2020, 2021
n/a
2016, 2017
2016, 2017, 2018
2017, 2018, 2019
2018, 2019, 2020
2019, 2020, 2021
-
52,258
-
-
52,258
426,901
2019, 2020, 2021
5,772
9,744
26,432
18,760
26,681
-
-
-
-
-
-
29,115
(5,772)
(4,872)
-
-
-
-
-
-
(26,432)
-
-
-
-
4,872
-
18,760
23,681
29,115
n/a
n/a
n/a
n/a
n/a
237,844
n/a
2016, 2017
2016, 2017, 2018
2017, 2018, 2019
2018, 2019, 2020
2019, 2020, 2021
2016
P A Birtles
2011
2012
2013
2014
2015
2016
D J Burns
2014
2015
2016
E A Berchtold
2013
2014
2015
2016
C D Wilesmith
2011
2012
2013
2014
2015
2016
A M Heraghty
2016
G G Carroll
2011
2012
2013
2014
2015
2016
(1) Performance Rights provided as remuneration to each of the KMP of the Group during the financial year.
(2) Other changes represent Performance Rights that lapsed or were forfeited during the financial year.
(3) The maximum possible total financial value in future years is dependent on the Group share price at exercise date, the minimum possible total
value is nil.
Super Retail Group Limited | ANNUAL REPORT 2016 45
45
Super Retail Group Limited | ANNUAL REPORT 2016
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
Section 7: Remuneration Outcomes for 2016 (continued)
(a)
Remuneration related to performance (continued)
Long Term Incentives (continued)
(ii)
The Performance Rights granted in the current reporting period were valued using a fair value of $8.17. The Performance Rights are
expensed over a five year period in-line with the vesting conditions of the Performance Rights; refer to Section 4(c) - Long Term
Incentives, for details of these vesting conditions. Plan participants may not enter into any transaction designed to remove the at
risk aspect of the Performance Rights before they vest. The value at exercise date for Performance Rights is the Group share price.
There are no amounts unpaid on the shares issued as a result of the exercise of the options in the 2016 financial year.
No Performance Rights vested in relation to the 2015/16 financial results.
Option over equity instruments of Super Retail Group Limited
No Options were granted or vested during the financial year.
Section 8: Remuneration Changes for 2017
Approach for 2017
(a)
In the 2016/17 year, the Human Resources and Remuneration Committee will lead a review of the incentive component of the
executive remuneration framework as the Board seeks to achieve continuing alignment of the Group’s approach to remuneration
with the strategic objectives.
Total Reward Structure – Group Managing Director and Chief Executive Officer
(b)
The Board has reviewed the total reward structure for Group Managing Director and Chief Executive Officer to ensure that there is
an appropriate amount “at risk” based on performance. Therefore the “at risk” long term incentive component has increased from
2016/17 with the total reward structure moving to one-third as fixed remuneration, one-third as short term incentive and one-third
as long term incentive.
Base Salary Package
(c)
This year, the comparator benchmarks show that overall executive KMP base salary packages for the 2016/17 year will be in line
with the market median with individual KMP base salary packages varying from 91% to 112% of respective market median. The
base salary package for the Group Managing Director and Chief Executive Officer has been set at market median with a base salary
increase of 2.5% for the 2016/17 year. Overall KMP base salary packages will increase by 3% in the 2016/17 year.
(d)
The EPS performance hurdle – EPS Compound Growth Rate (50% of Grant) will be unchanged.
Long Term Incentive (LTI) – Performance Hurdle
The ROC performance hurdle – Averaged ROC (50% of Grant) will be set annually with reference to the Group’s cost of capital as
determined by an independent advisor. The Board will set the bottom end of the range at a premium to the Group’s cost of capital.
The top end of the range will continue to be set at 15%, consistent with the Group’s long term financial targets.
The vesting criteria in relation to the averaged ROC performance hurdle for those performance rights granted in the 2016/17 year
has been set as follows:
•
•
•
If the averaged ROC is 10%, then 30% of the Performance Rights will be available to vest;
If the averaged ROC is 12%, then 50% of the Performance Rights will be available to vest; or
If the averaged ROC is 15%, then 100% of the Performance Rights will be available to vest.
Performance Rights will vest on a pro rata basis between these averaged ROC ranges.
Under these performance hurdles for the plan to achieve 100% of vesting the cumulative EPS growth must be at least 15% and ROC
must average at least 15%.
Approval for the vesting criteria change in relation to the Group Managing Director and Chief Executive Officer will be sought at the
Annual General Meeting.
Non-Executive Directors’ Fees
(e)
Director’s fees will increase by 2.5% in 2016/17. In addition, based on benchmarking and an increase in the number of committee
meetings, the annual fee for the Chair of the Human Resources and Remuneration Committee will increase from $20,000 to
$25,000.
46 Super Retail Group Limited | ANNUAL REPORT 2016
46
Super Retail Group Limited | ANNUAL REPORT 2016
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
Section 9: Service Agreements
Remuneration and other terms of employment for KMP are formalised in service agreements. Each of these agreements provide
for the provision of performance related cash bonuses, other benefits and when eligible, participation in the Performance Rights
Plans and Option Plans. Restraint provisions are detailed in Section 10.
All contracts with KMP may be terminated early by either party with three months’ notice, subject to termination payments as
detailed below:
Name
Term of Agreement
Agreement
Commencement Date(1)
P A Birtles
D J Burns
3 years
5 years, 10 months
E A Berchtold
C D Wilesmith
4 years, 11 months
5 years, 3 months
1 January 2014
3 December 2012
5 November 2011
1 July 2013
A M Heraghty
G G Carroll
4 years, 8 months
5 years, 3 months
27 April 2015
30 June 2011
Review
Term(2)
Annual
Annual
Annual
Annual
Annual
Annual
Termination
payment
12 months(3)
6 months(4)
6 months(4)
6 months(4)
Commencement
date with Super
Retail Group
30 April 2001
3 December 2012
5 November 2011
18 September
2007
6 months(3)
6 months(4)
27 April 2015
17 April 2006
(1) Commencement date of service agreement.
(2) Reviewed annually by the Human Resource and Remuneration Committee.
(3) Payment of a termination benefit on early termination by the Company, other than for cause, equal to the base salary for the period detailed.
(4) Payment of a termination benefit on early termination by the Company, other than for cause, equal to the base salary for period detailed if the
termination is effective more than 12 months before the expiry date, or three months base salary if the termination is effective within 12 months
before the expiry date.
Section 10: Period of Restraint
The above KMP have the following post-employment restraints within their service contracts.
After cessation of employment for any reason, for the period set out below, the employee must not compete with the Company’s
relevant speciality retailing businesses (including direct or indirect involvement as a principal, agent, partner, employee,
shareholder, unit holder, director, trustee, beneficiary, manager, contractor, adviser or financier), without first obtaining the
consent of the Company in writing.
Ref:
A
B
C
D
Post-employment Restraints
Solicit or compete for the custom of or engage or be involved in any business with any person, firm or
corporation who or which was a Customer, supplier, or client of the Company at any time during the 12
months preceding the cessation of the employment with the Company and with whom the Employee
had contact with, or gained knowledge of, in the course of carrying out the employee’s duties for the
Company;
Engage or be involved in any capacity in any entity, firm or corporation which competes with the
Company in connection with the said business;
Interfere with, disrupt, attempt to disrupt the relationship, contractual or otherwise, between any
member of the Group and any of the Group’s customers, suppliers, or potential customers or potential
suppliers, with whom the employee had contact with, or gained knowledge of, at any time during the 12
month preceding the cessation of employment in the course of carrying out duties for the Company; or
Induce, encourage or solicit any person who is an employee, contractor or agent of any member of the
Group, with whom the employee had contact with during the 12 months preceding the cessation of the
employment in the course of carrying out duties for the Company, to terminate their employment or
engagement with any member of the Group.
Period
12 months
9 months
6 months
3 months
Section 11: Additional Information
(a)
Minimum Securities Holding Policy
Commencing from the 2015 financial year, the Board has approved a minimum shareholding requirement for Non-Executive
Directors to be 100% of base fees, the Group Managing Director and Chief Executive Officer to be 150% of fixed remuneration and
for other executive KMP 100% of fixed remuneration. This is to be achieved by the later of October 2020 or within five years from
the commencement of employment. This is to further align the interest of Non-Executive Directors and executive KMP with those
of shareholders.
Super Retail Group Limited | ANNUAL REPORT 2016 47
47
Super Retail Group Limited | ANNUAL REPORT 2016
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
Section 11: Additional Information (continued)
(a)
Minimum Securities Holding Policy (continued)
The minimum number of securities to be held shall be reduced relative to the Performance Rights tested under the LTI Plan, over
the five year period. The adjusted minimum security holding requirement shall be three-quarters of the quantum of the
Performance Rights attributable to the executive KMP. The reduction in the minimum number of securities to be held under the
minimum securities holding policy shall have the effect of extending the timeframe for acquisition. The adjusted minimum security
holding requirement shall be increased each year by three-quarters of the required quantum until the minimum holding is
achieved.
(b)
Equity instruments held by KMP
Shares provided on exercise of Performance Rights and Options
(i)
The table below lists the ordinary shares in the Company issued during the year as a result of the exercise of Performance Rights.
There were no shares issued during the year ended 2 July 2016 on the exercise of Options.
Name(1)
Incentive Scheme(2)
P A Birtles
D J Burns
E A Berchtold
C D Wilesmith
A M Heraghty
G G Carroll
Total
Performance Rights
n/a
Performance Rights
Performance Rights
n/a
Performance Rights
Number of Ordinary Shares Issued on
Exercise of Share Plans During the Year(3)
40,825
n/a
-
5,313
n/a
10,644
56,782
Market Value at Exercise
Date(4)
350,687
n/a
-
45,639
n/a
91,432
487,758
(1) D J Burns and A M Heraghty were not employees of the Company at the time of the grant of performance rights detailed above and were
therefore not eligible to participate in these incentive schemes.
(2) Refer to Section 4(c) - Long Term Incentives.
(3) Both the 2011 and 2012 grants were exercised on 1 September 2015, with the 2013 grant lapsing due to hurdles not being met.
(4) The value at exercise date for Performance Rights was determined using the Group share price of $8.59.
Movement in shares
(ii)
The movement during the year in the number of ordinary shares in the Company held directly or indirectly or beneficially, by each
KMP, including their related parties is as follows:
2016
Non-Executive
Directors
R J Wright
R A Rowe
R J Skippen
S A Pitkin
D J Eilert
L K Inman
Executive Director
P A Birtles
Other KMP
D J Burns
E A Berchtold
C D Wilesmith
A M Heraghty
G G Carroll
Held at
27 June 2015
Granted(1)
Purchases
In lieu of
dividends(2)
Sales
Held at
2 July 2016
106,757
59,283,087
-
26,453
-
-
-
-
-
-
-
-
1,424,246
40,825
-
-
1,019
-
90,000
-
-
5,313
-
10,644
-
-
7,500
-
-
5,241
-
-
-
-
-
-
244
593,198
-
-
-
-
-
-
-
54
-
-
-
-
-
-
-
-
107,001
59,876,285
7,500
26,453
-
5,241
(72,475)
1,392,596
-
-
(5,100)
-
(40,644)
-
-
1,286
-
60,000
(1) Granted on exercise of performance rights awarded under the Group’s Performance Rights and Options plans.
(2) Shareholders are eligible to receive dividends in cash or choose to participate in the dividend reinvestment plan.
48
48 Super Retail Group Limited | ANNUAL REPORT 2016
Super Retail Group Limited | ANNUAL REPORT 2016
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
Section 11: Additional Information (continued)
(b)
Equity instruments held by KMP (continued)
(iii)
Unissued ordinary shares of Super Retail Group Limited under the Performance Rights Plan at the date of this report are:
Unissued shares under Performance Rights and Options plans
Grant date
Vesting Date
1 September 2011
1 September 2012
1 September 2013
1 September 2014
1 September 2015
Total
(1)
(1)
(1)
(1)
(1)
Value per Performance Right
at Grant Date
$6.09
$7.95
$10.83
$6.03
$8.17
Number of Performance
Rights
62,702
-
349,748
479,724
546,500
1,438,674
(1) Performance rights vest progressively three to five years after grant date and have no expiry date. Refer to Section 4(c) - Long Term Incentives, for
details of these vesting conditions.
Plan participants may not enter into any transaction designed to remove the at risk aspect of Performance Rights.
As at the date of this report there are no remaining unissued ordinary shares of Super Retail Group Limited under Option.
(c)
Loans to KMP and their Related Parties
There are no loans to KMP and their related parties as at 2 July 2016 and no loans were made during the financial year.
(d)
Other Transactions with KMP
KMP may hold positions in other companies that transacted with the Group in the reporting period. Refer to note 24 to the
consolidated financial statements, Related Party Transactions, for further details.
(e)
Insurance of Officers
During the financial year, the Group paid a premium of $91,839 (2015: $93,378) to insure the Officers of the Group including
Directors and Secretaries of the Company and its controlled entities, and the General Managers of each of the divisions of the
Group.
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, other than where such liabilities arise out of 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 or
to cause detriment to the Group. It is not possible to apportion the premium between amounts relating to the insurance against
legal costs and those relating to other liabilities.
5.
Non-Audit Services
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s
expertise and experience with the Company and/or the Group are important.
The Board of Directors has considered the position and, in accordance with the advice received from the Audit and Risk Committee
is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors
imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the auditor, as set out
below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:
•
•
all non-audit services have been reviewed by the Audit and Risk Committee to ensure they do not impact the impartiality and
objectivity of the auditor;
none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics
for Professional Accountants, including reviewing or auditing the auditor’s own work, acting in a management or a decision-
making capacity for the Company, acting as advocate for the Company or jointly sharing economic risk and rewards.
Super Retail Group Limited | ANNUAL REPORT 2016 49
49
Super Retail Group Limited | ANNUAL REPORT 2016
DIRECTORS’ REPORT (continued)
5.
Non-Audit Services (continued)
During the period the following fees were paid or payable for services provided by the auditor PricewaterhouseCoopers of the
parent entity and its network firms for audit and non-audit services provided during the year is set out below:
Audit Services
PricewaterhouseCoopers Australian firm:
Remuneration for audit and review services
Audit of subsidiaries(1)
Other assurance
Total remuneration for audit and review services
Taxation and Other Services
PricewaterhouseCoopers Australian firm:
Taxation Services(2)
Digital Innovation Support(3)
Network firms of PricewaterhouseCoopers Australia:
Taxation Services
Total remuneration for non-audit services
2016
$
2015
$
423,700
88,230
53,500
565,430
215,834
340,290
33,845
589,969
473,854
20,000
10,000
503,854
124,367
-
26,025
150,392
(1) Increase due to audit requirements of partially owned subsidiaries.
(2) Increase due to indirect taxes review resulting in refunds being received.
(3) Engagement in relation to digital capability analysis and support awarded under a competitive tender.
6.
Corporate Governance Statement
The Group’s Corporate Governance Statement sets out the corporate governance framework adopted by the Board of Super Retail
Group Limited. This statement is publically available on the Super Retail Group external website:
http://www.superretailgroup.com
7.
Proceedings on behalf of the Company
No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the
Corporations Act 2001.
8.
Auditors Independence Declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page
51.
9.
Rounding of amounts
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, issued
by the Australian Securities and Investments Commission, relating to the ‘rounding off’ of amounts in the Directors’ Report.
Amounts in the Directors’ Report have been rounded off in accordance with that instrument to the nearest hundred thousand
dollars or in certain cases to the nearest dollar.
This report is made in accordance with a resolution of the Directors.
R J Wright
Chairman
Brisbane
25 August 2016
50 Super Retail Group Limited | ANNUAL REPORT 2016
50
P A Birtles
Group Managing Director and
Chief Executive Officer
Super Retail Group Limited | ANNUAL REPORT 2016
Auditor’s Independence Declaration
As lead auditor for the audit of Super Retail Group Limited for the period 28 June 2015 to 2 July 2016,
I declare that to the best of my knowledge and belief, there have been:
1.
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2.
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Super Retail Group Limited and the entities it controlled during the
period.
Kim Challenor
Partner
PricewaterhouseCoopers
Brisbane
25 August 2016
PricewaterhouseCoopers, ABN 52 780 433 757
480 Queen Street, BRISBANE QLD 4000, GPO Box 150, BRISBANE QLD 4001
T: +61 7 3257 5000, F: +61 7 3257 5999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Super Retail Group Limited | ANNUAL REPORT 2016
51
51
Super Retail Group Limited | ANNUAL REPORT 2016 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period ended 2 July 2016
CONTINUING OPERATIONS
Revenue from continuing operations
Other income from continuing operations
Total revenues and other income
Expenses
Cost of sales of goods
Other expenses from ordinary activities
- selling and distribution
- marketing
- occupancy
- administration
Net finance costs
Total expenses
Profit before income tax from continuing operations
Income tax expense
Profit for the period from continuing operations
DISCONTINUED OPERATIONS
Loss from discontinued operations
Profit for the period
Profit for the period is attributable to:
Owners of Super Retail Group Limited
Non-controlling interests
OTHER COMPREHENSIVE INCOME
Items that may be reclassified to profit or loss
Changes in the fair value of cash flow hedges
Exchange differences on translation of foreign operations
Other comprehensive (loss)/income for the period, net of tax
Total comprehensive income for the period
Total comprehensive income for the period is attributable to:
Continuing operations
Discontinued operations
Total comprehensive income for the period is attributable to:
Owners of Super Retail Group Limited
Non-controlling interests
Earnings per share for profit from continuing operations attributable to
the ordinary equity holders of the Company:
Basic earnings per share
Diluted earnings per share
Earnings per share for profit attributable to the ordinary equity holders
of the Company:
Basic earnings per share
Diluted earnings per share
Notes
2016
$m
2,422.2
1.6
2,423.8
2015
$m
2,238.7
2.5
2,241.2
(1,372.4)
(1,273.3)
(313.5)
(86.8)
(215.9)
(328.0)
(19.4)
(2,336.0)
87.8
(29.8)
58.0
-
58.0
62.8
(4.8)
58.0
(7.5)
0.4
(7.1)
50.9
50.9
-
50.9
55.7
(4.8)
50.9
Cents
31.8
31.6
31.8
31.6
5
6
26
16
16
30
30
30
30
(290.2)
(81.9)
(186.2)
(256.1)
(21.9)
(2,109.6)
131.6
(38.5)
93.1
(16.2)
76.9
81.1
(4.2)
76.9
6.3
(0.6)
5.7
82.6
98.5
(15.9)
82.6
86.8
(4.2)
82.6
Cents
49.4
49.0
41.2
40.8
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
52
52 Super Retail Group Limited | ANNUAL REPORT 2016
Super Retail Group Limited | ANNUAL REPORT 2016
CONSOLIDATED BALANCE SHEET
As at 2 July 2016
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Current tax assets
Derivative financial instruments
Inventories
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Interest-bearing liabilities
Current tax liabilities
Derivative financial instruments
Provisions
Total current liabilities
Non-current liabilities
Trade and other payables
Interest-bearing liabilities
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
NET ASSETS
EQUITY
Contributed equity
Reserves
Retained earnings
Capital and reserves attributable to owners of
Super Retail Group Limited
Non-controlling interests
TOTAL EQUITY
Notes
7
17
8
10
11
12
13
17
14
12
13
9
14
15
16
16
2016
$m
15.6
42.7
-
-
501.9
560.2
236.9
772.4
1,009.3
1,569.5
251.1
5.7
6.3
8.0
58.7
329.8
41.7
410.1
24.7
29.2
505.7
835.5
734.0
542.3
(0.9)
193.7
735.1
(1.1)
734.0
2015
$m
13.1
29.3
2.9
6.8
505.6
557.7
224.1
801.3
1,025.4
1,583.1
268.6
2.2
-
4.1
48.6
323.5
36.7
389.8
51.5
16.3
494.3
817.8
765.3
542.3
13.2
212.8
768.3
(3.0)
765.3
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
Super Retail Group Limited | ANNUAL REPORT 2016 53
53
Super Retail Group Limited | ANNUAL REPORT 2016
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the period ended 2 July 2016
Contributed
Equity
Reserves Retained
Earnings
Total
Notes
$m
$m
$m
$m
Non-
Controlling
Interests
$m
Total
Equity
$m
Balance at 28 June 2014
542.3
7.7
210.4
760.4
-
760.4
Profit for the period
Other comprehensive income for the period
Total comprehensive income for the period
Transactions with owners in
their capacity as owners
Dividends provided for or paid
Employee performance rights
Acquisition of non-controlling interests
19
16
-
-
-
-
-
-
-
Balance at 27 June 2015
542.3
Profit for the period
Other comprehensive loss for the period
Total comprehensive income for the period
Transactions with owners in
their capacity as owners
Dividends provided for or paid
Employee performance rights
Change in ownership interest in controlled entities
19
16
25
-
-
-
-
-
-
-
Balance at 2 July 2016
542.3
-
5.7
5.7
81.1
-
81.1
81.1
5.7
86.8
-
(0.2)
-
(0.2)
13.2
-
(7.1)
(7.1)
-
0.7
(7.7)
(7.0)
(0.9)
(78.7)
-
-
(78.7)
212.8
62.8
-
62.8
(81.9)
-
-
(81.9)
193.7
(78.7)
(0.2)
-
(78.9)
768.3
62.8
(7.1)
55.7
(81.9)
0.7
(7.7)
(88.9)
735.1
(4.2)
-
(4.2)
-
-
1.2
1.2
(3.0)
(4.8)
-
(4.8)
-
-
6.7
6.7
(1.1)
76.9
5.7
82.6
(78.7)
(0.2)
1.2
(77.7)
765.3
58.0
(7.1)
50.9
(81.9)
0.7
(1.0)
(82.2)
734.0
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
54 Super Retail Group Limited | ANNUAL REPORT 2016
54
Super Retail Group Limited | ANNUAL REPORT 2016
CONSOLIDATED STATEMENT OF CASH FLOWS
For the period ended 2 July 2016
Notes
Cash flows from operating activities
Receipts from customers (inclusive of goods and services tax)
Payments to suppliers and employees (inclusive of goods and services tax)
Rental payments
- external
- related parties
Income taxes paid
Net cash inflow from operating activities
29
Cash flows from investing activities
Payments for property, plant and equipment and computer software
Proceeds from sale of property, plant and equipment
Net cash (outflow) from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Finance lease payments
Interest paid
Interest received
Dividends paid to Company’s shareholders
Net cash (outflow) from financing activities
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of the period
19
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
2016
$m
2,678.4
(2,216.3)
(247.2)
(11.9)
(43.8)
159.2
(79.9)
-
(79.9)
917.0
(892.0)
(1.7)
(18.5)
0.1
(81.9)
(77.0)
2.3
13.1
0.2
15.6
2015
$m
2,530.0
(2,077.6)
(213.2)
(10.8)
(46.4)
182.0
(72.8)
0.9
(71.9)
785.4
(803.5)
(2.5)
(22.1)
0.3
(78.7)
(121.1)
(11.0)
24.2
(0.1)
13.1
Super Retail Group Limited | ANNUAL REPORT 2016 55
55
Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the period ended 2 July 2016
Contents of the notes to the consolidated financial statements
Reporting entity .......................................................................................................................................................................... 57
1.
Summary of significant accounting policies ................................................................................................................................ 57
2.
Critical accounting estimates and judgements ........................................................................................................................... 69
3.
Segment information .................................................................................................................................................................. 70
4.
Expenses from continuing operations ........................................................................................................................................ 72
5.
Income tax expense .................................................................................................................................................................... 73
6.
Trade and other receivables ....................................................................................................................................................... 74
7.
Inventories .................................................................................................................................................................................. 75
8.
Deferred tax assets and liabilities ............................................................................................................................................... 76
9.
Property, plant and equipment ................................................................................................................................................... 77
10.
Intangible assets ......................................................................................................................................................................... 78
11.
Trade and other payables ........................................................................................................................................................... 80
12.
Interest-bearing liabilities ........................................................................................................................................................... 80
13.
Provisions .................................................................................................................................................................................... 80
14.
Contributed equity ...................................................................................................................................................................... 81
15.
Reserves and retained earnings .................................................................................................................................................. 82
16.
Financial assets and financial liabilities ....................................................................................................................................... 83
17.
Financial risk management ......................................................................................................................................................... 85
18.
Capital management ................................................................................................................................................................... 91
19.
Key management personnel disclosures ..................................................................................................................................... 92
20.
Remuneration of auditors ........................................................................................................................................................... 93
21.
Contingencies .............................................................................................................................................................................. 93
22.
Commitments ............................................................................................................................................................................. 94
23.
Related party transactions .......................................................................................................................................................... 94
24.
25.
Business combinations ................................................................................................................................................................ 95
26. Discontinued operations ............................................................................................................................................................. 98
27. Net tangible asset backing .......................................................................................................................................................... 98
28. Deed of cross guarantee ............................................................................................................................................................. 98
Reconciliation of profit from ordinary activities after income tax to net cash inflow from operating activities ...................... 101
29.
30.
Earnings per share .................................................................................................................................................................... 101
31.
Share-based payments .............................................................................................................................................................. 102
Events occurring after balance date ......................................................................................................................................... 103
32.
Parent entity financial information ........................................................................................................................................... 103
33.
Investments in controlled entities ............................................................................................................................................ 104
34.
56 Super Retail Group Limited | ANNUAL REPORT 2016
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Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
1.
Reporting entity
Super Retail Group Limited (the Company) is a company domiciled in Australia. The address of the Company’s registered office and
principal place of business is 751 Gympie Road, Lawnton, Queensland.
The consolidated annual financial report of the Company as at and for the period ended 2 July 2016 comprises: the Company and its
subsidiaries (together referred to as the Group, and individually as Group entities).
The Group is a for-profit entity and is primarily involved in the retail industry. Principal activities of the Group consist of:
•
•
•
retailing of auto parts and accessories, tools and equipment;
retailing of boating, camping, outdoor equipment, fishing equipment and apparel; and
retailing of sporting equipment, bicycles, bicycle accessories and apparel.
2.
Summary of significant accounting policies
The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These
policies have been consistently applied to all the years presented, unless otherwise stated.
(a)
Basis of preparation
Statement of compliance
This general purpose financial report has been prepared in accordance with Australian Accounting Standards, other authoritative
pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001.
The consolidated financial statements and accompanying notes of Super Retail Group Limited comply with International Financial
Reporting Standards (IFRS) as issued by the International Accounting Standards Board.
Basis of measurement
These financial statements have been prepared under the historical cost convention, unless otherwise stated.
(b)
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all entities controlled by Super Retail Group Limited
(the Company or parent entity) as at 2 July 2016 and the results of its controlled entities for the period then ended. The effects of all
transactions between entities in the consolidated entity are fully eliminated.
Transactions eliminated on consolidation
(i)
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated
in preparing the consolidated financial statements. Unrealised losses are eliminated in the same way as unrealised gains, but only to
the extent that there is no evidence of impairment.
Subsidiaries
(ii)
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. These are deconsolidated from the date that control ceases. The acquisition method of accounting is used
to account for business combinations by the Group (refer note 25 - Business combinations).
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.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated income statement,
statement of comprehensive income, balance sheet and statement of changes in equity respectively.
Super Retail Group Limited | ANNUAL REPORT 2016 57
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Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
2.
Summary of significant accounting policies (continued)
(b)
Principles of consolidation (continued)
Business combinations
(iii)
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 value 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 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 as 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, the amount of any non-controlling interest in the acquiree and the acquisition-date fair
value of any previous equity interest in the acquiree over the fair value of the Group’s share 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 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.
Joint arrangements
(iv)
Under AASB 11 Joint Arrangements, investments in joint arrangements are classified as either joint operations or joint ventures.
The classification depends on the contractual rights and obligations of each investor, rather than the legal structure of the joint
arrangement.
Interests in joint ventures are accounted for using the equity method (see (v) below), after initially being recognised at cost in the
consolidated balance sheet.
Equity method
(v)
Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the
Group’s share of the post-acquisition profits or losses of the investee in profit or loss, and the Group’s share of movements in other
comprehensive income of the investee in other comprehensive income. Dividends received or receivable from associates and joint
ventures are recognised as a reduction in the carrying amount of the investment.
When the Group’s share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other
unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments
on behalf of the other entity.
Unrealised gains on transactions between the Group and its associates and joint ventures are eliminated to the extent of the
Group’s interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment
of the asset transferred. Accounting policies of equity accounted investees have been changed where necessary to ensure
consistency with the policies adopted by the Group.
The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners
of the Group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-
controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to
non-controlling interests and any consideration paid or received is recognised in a separate reserve within equity attributable to the
owners of Super Retail Group Limited.
Comparatives
(vi)
Where applicable, various comparative balances have been reclassified to align with current period presentation. These
amendments have no material impact on the consolidated financial statements.
58 Super Retail Group Limited | ANNUAL REPORT 2016
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Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
2.
(c)
Summary of significant accounting policies (continued)
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the Group Managing Director and
Chief Executive Officer, who is responsible for allocating resources and assessing performance of the operating segments.
Unallocated items comprise mainly of corporate assets (primarily the Support Office, Support Office expenses, and income tax
assets and liabilities).
(d)
Income tax
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national
income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences
between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are
recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The
relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred
tax asset or liability.
An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax
asset or liability is recognised in relation to these temporary differences if they arise in a transaction, other than a business
combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.
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 and tax bases of
investments in controlled entities where the parent entity 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.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.
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 tax 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.
A deferred tax liability is recognised in relation to some of the Group’s indefinite life intangibles. The tax base assumed in
determining the amount of the deferred tax liability is the capital cost base of the assets.
Tax Consolidation Legislation
Super Retail Group Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation
as of 1 July 2003.
The head entity, Super Retail Group Limited, and the controlled entities in the tax consolidated group account for current and
deferred tax amounts under the Separate taxpayer within Group approach in accordance with AASB Interpretation 1052, Tax
Consolidation Accounting.
(e)
Foreign currency translation
Functional and presentation currency
(i)
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in
Australian dollars, which is Super Retail Group Limited’s functional and presentation currency.
Transactions and balances
(ii)
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-
end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement,
except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges.
Translation differences on non-monetary items such as equities held at fair value through profit or loss, are reported as part of the
fair value gain or loss. Translation differences on non-monetary items, such as equities classified as available-for-sale financial
assets, are included in the fair value reserve in equity.
Super Retail Group Limited | ANNUAL REPORT 2016 59
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Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
2.
(e)
Summary of significant accounting policies (continued)
Foreign currency translation (continued)
Group companies
(iii)
The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that
have a functional currency different from the presentation currency are translated into the presentation currency as follows:
•
assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that
statement of financial position;
income and expenses for each income statement are translated at average exchange rates (unless this is not a reasonable
approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are
translated at the dates of the transactions); and
all resulting exchange differences are recognised as a separate component of equity.
•
•
(f)
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns,
trade allowances, duties and taxes paid. The Group recognises revenue when the amount of revenue can be reliably measured, it is
probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Group’s activities
as described below. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of
transaction and the specifics of each arrangement.
Revenue is recognised for the major business activities as follows:
Sale of goods – retail
(i)
Revenue from the sale of goods is recognised when a Group entity sells a product to the customer pursuant to sales orders and
when the associated risk and rewards have passed to the customer. Retail sales are usually by credit card or in cash.
Interest income
(ii)
Interest income is recognised using the effective interest method. When a receivable is impaired, the Group reduces the carrying
amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the
instrument. Interest income on impaired loans is recognised using the original effective interest rate.
(g)
Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for doubtful
debts. Trade receivables are due for settlement 30 days from the end of the month after sale. Collectability of trade receivables is
reviewed on an ongoing basis. Debts which are known to be uncollectable are written off. A provision for doubtful receivables is
established when there is objective evidence that the Group will not be able to collect all amounts due. The amount of any
impairment loss is included within Administration in the income statement.
(h)
Inventories
Inventories are measured at the lower of cost and net realisable value. Costs comprise direct purchase costs and an appropriate
proportion of supply chain variable and fixed overhead expenditure in bringing them to their existing location and condition. Costs
are assigned to individual items of stock on the basis of weighted average costs. Net realisable value is the estimated selling price in
the ordinary course of business less the estimated cost of completion and the estimated costs necessary to make the sale.
(i)
Provisions
Provisions for legal claims, service warranties and make good obligations 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 statement of financial position date. The discount rate used to determine the present value 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.
60 Super Retail Group Limited | ANNUAL REPORT 2016
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Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
2.
(i)
Summary of significant accounting policies (continued)
Provisions (continued)
Make good requirements in relation to leased premises
(i)
Make good costs arising from contractual obligations in lease agreements are recognised as provisions at the inception of the
agreement. A corresponding asset is taken up in property, plant and equipment at that time. Expected future payments are
discounted using appropriate market yields at reporting date.
(j)
Financial assets
Classification
(i)
The Group classifies its financial assets in the following categories: financial assets at fair value through profit or loss, and loans and
receivables. The classification depends on the purpose for which the investments were acquired. Management determines the
classification of its investments at initial recognition and re-evaluates this designation at each reporting date.
Financial assets at fair value through profit or loss
This category has two sub-categories: financial assets held for trading, and those designated at fair value through profit or loss on
initial recognition. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or
if so designated by management. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets
in this category are classified as current assets if they are either held for trading or are expected to be realised within 12 months of
the balance sheet date.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. They are included in current assets, except for those with maturities greater than 12 months after the end of the reporting
period which are classified as non-current assets.
Recognition and derecognition
(ii)
Regular purchases and sales of financial assets are recognised on trade date – the date on which the Group commits to purchase or
sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have
been transferred and the Group has transferred substantially all the risks and rewards of ownership.
Measurement
(iii)
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value
through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of
financial assets carried at fair value through profit or loss are expensed in profit or loss.
Loans and receivables are subsequently carried at amortised cost using the effective interest method.
(k)
Impairment of financial assets
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of
financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if
there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a
‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of
financial assets that can be reliably estimated.
Evidence of impairment may include indications that the receivable or a group of receivables is experiencing significant financial
difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial
reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as
changes in arrears or economic conditions that correlate with defaults.
Assets carried at amortised cost
(i)
For loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount and
the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the
financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised
in the consolidated income statement.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event
occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously
recognised impairment loss is recognised in the consolidated income statement.
Super Retail Group Limited | ANNUAL REPORT 2016 61
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Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
2.
(l)
Summary of significant accounting policies (continued)
Derivative financial instruments and hedging activities
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to
their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging
instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as either: hedges of the fair
value of recognised assets or liabilities or a firm commitment (fair value hedge); or hedges of highly probable forecast transactions
(cash flow hedges).
The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items as well
as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its
assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have
been and will continue to be highly effective in offsetting changes in cash flows of hedged items.
Cash flow hedges
(i)
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in
equity in the hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in the income
statement.
Amounts accumulated in equity are recycled in the income statement in the income periods when the hedged item will affect profit
or loss (for instance when the forecast payment that is hedged takes place). However, when the forecast transaction that is hedged
results in the recognition of a non-financial asset (for example, inventory) or a non-financial liability, the gains and losses previously
deferred in equity are transferred from equity and included in the measurement of the initial cost or carrying amount of the asset
or liability.
When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting,
any cumulative gain or loss existing in equity at the time remains in equity and is recognised when the forecast transaction is
ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or
loss that was reported in equity is immediately transferred to the income statement.
(ii)
Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges.
Net investment hedges
Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in equity. The gain or loss
relating to the ineffective portion is recognised immediately in the income statement within other income or other expenses.
Gains and losses accumulated in equity are included in the income statement when the foreign operation is partially disposed of or
sold.
Derivatives that do not qualify for hedge accounting
(iii)
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that does
not qualify for hedge accounting are recognised immediately in the income statement.
(m)
Fair value estimation
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure
purposes.
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is
determined using valuation techniques. The fair value of interest rate swaps is calculated as the present value of the estimated
future cash flows. The fair value of forward exchange contracts is determined using forward exchange market rates at the
statement of financial position date.
The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair
values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at
the current market interest rate that is available to the Group for similar financial instruments.
62 Super Retail Group Limited | ANNUAL REPORT 2016
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Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
2.
(n)
Summary of significant accounting policies (continued)
Property, plant & equipment
Property, plant and equipment are stated at historical cost, less any accumulated depreciation or amortisation. Historical costs
include expenditure that is directly attributable to the acquisition of the items.
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. All repairs and maintenance are charged to the income statement during the financial period in which they are incurred.
Depreciation and amortisation of property, plant and equipment
(i)
Depreciation and amortisation are calculated on a straight line basis for accounting and on a diminishing value basis for tax.
Depreciation and amortisation allocates the cost of an item of property, plant and equipment net of residual values over the
expected useful life of each asset to the consolidated entity. Estimates of remaining useful lives and residual values are reviewed
and adjusted, if appropriate, at each statement of financial position date.
The depreciation rates used for each class of assets are:
Plant and equipment
Capitalised leased plant and equipment
Motor vehicles
Computer equipment
7.5% – 37.5%
10% – 37.5%
25%
20% – 37.5%
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its
estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the income
statement. When revalued assets are sold, it is Group policy to transfer the amounts included in other reserves in respect of those
assets to retained earnings.
(o)
Impairment of non-financial assets
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are
subject to amortisation are reviewed 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 to sell and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows
(cash generating units).
(p)
Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement
on a straight-line basis over the period of the lease term.
The Group leases certain property, plant and equipment. Leases of property, plant and equipment where the Group has
substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s
inception at the lower of the fair value of the leased property and the present value of the minimum lease payments. The
corresponding rental obligations, net of finance charges, are included in other long term payables. Each lease payment is allocated
between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The interest element
of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on
the remaining balance of the liability for each period. Property, plant and equipment acquired under finance leases are depreciated
over the shorter of the asset’s useful life and the lease term.
Super Retail Group Limited | ANNUAL REPORT 2016 63
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Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
2.
(q)
Summary of significant accounting policies (continued)
Intangible assets
Goodwill
(i)
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of
the acquired subsidiary or business at the date of the acquisition. Goodwill on acquisitions of subsidiaries is included in intangible
assets. Goodwill and intangibles acquired in business combinations are not amortised. Instead, they are tested for impairment
annually, or more frequently if events or changes in circumstances indicated that it might be impaired, and is carried at cost less
accumulated impairment losses. Any impairment is recognised as an expense and is not subsequently reversed.
Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-
generating units or groups of cash-generating units that are expected to benefit from the business combination in which the
goodwill arose, identified according to operating segments.
Intangible assets with indefinite useful lives
(ii)
Separately acquired trademarks and licences are shown at historical cost. Trademarks and licences acquired in a business
combination are recognised at fair value at the acquisition date. Trademarks have an indefinite useful life and are carried at cost less
impairment losses.
(iii)
Amortisation is calculated on a straight line basis. The amortisation rates used for each class of intangible assets are as follows:
Other intangible assets
Computer software
Brand names
Supplier agreement
10% – 33.3%
Nil to 5%
5%
Computer software
Costs incurred in developing products or systems and costs incurred in acquiring software and licenses that will contribute to future
period financial benefits through revenue generation and/or cost reduction are capitalised to software and systems. Costs
capitalised include external direct costs of materials and service, employee costs and an appropriate portion of relevant overheads.
IT development costs include only those costs directly attributable to the development phase and are only recognised following
completion of technical feasibility and where the Group has an intention and ability to use the asset.
Brand names
Brand names that are acquired as part of a business combination are recognised separately from goodwill. These assets are carried
at their fair value at the date of acquisition less impairment losses. Brand names are valued using the relief from royalty method.
Amortisation is calculated based on the brand names estimated useful lives, which is 20 years or indefinite.
Supplier agreements
Supplier agreements are acquired as part of a business combination and are recognised separately from goodwill. These assets are
carried at their fair value at the date of acquisition less accumulated amortisation and impairment losses. Supplier agreements have
been valued using the multi-period excess earnings method.
Research and development
(iv)
Research expenditure is recognised as an expense as incurred. Costs incurred on development projects (relating to the design and
testing of new or improved products) are recognised as intangible assets when it is probable that the project will, after considering
its commercial and technical feasibility, be completed and generate future economic benefits and its costs can be measured reliably.
The expenditure capitalised comprises all directly attributable costs, including costs of materials, services, direct labour and an
appropriate proportion of overheads. Other development expenditures that do not meet these criteria are recognised as an
expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent
period. Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready
for use.
Other items of expenditure
(v)
Significant items of expenditure, such as costs incurred in store set-ups, are expensed in the financial period in which these costs are
incurred.
64 Super Retail Group Limited | ANNUAL REPORT 2016
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Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
2.
(r)
Summary of significant accounting policies (continued)
Trade and other payables
Trade and other payables are payables for goods and services provided to the consolidated entity prior to the end of the financial
period and which are unpaid at that date. The amounts are unsecured and are normally 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.
(s)
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 value is recognised in the
income statement over the period of the borrowings using the effective interest method.
(t)
Contributed equity
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. Incremental costs directly attributable to the issue of new shares or options,
or for the acquisition of a business, are included in the cost of the acquisition as part of the purchase consideration.
(u)
Dividend distribution
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the
entity, on or before the end of the financial period but not distributed at balance date.
(v)
Employee benefits
Short-term obligations
(i)
Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly within 12 months after the
end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end
of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. All other short-term
employee benefit obligations are presented as payables.
Other long-term employee benefit obligations
(ii)
The liabilities for long service leave and annual leave are not expected to be settled wholly within 12 months after the end of the
period in which the employees render the related service. They are therefore 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 of government bonds with terms and currencies that match, as closely as possible, the estimated future cash
outflows. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or
loss.
The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer
settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
(iii)
Contributions are made by the economic entity to an employee superannuation fund and are charged as expenses when incurred.
Retirement benefit obligations
Share-based payments
(iv)
Share-based compensation benefits are provided to certain employees via the Super Retail Group Executive Option Plan and Super
Retail Group Performance Rights Plan.
The fair value of options and performance rights granted under these plans are recognised as an employee benefit expense with a
corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the
employees become unconditionally entitled to the options.
For share options and performance rights, the fair value at grant date is determined using a Binomial option pricing model that
takes into account the exercise price, the term of the option, the vesting and performance criteria, the impact of dilution, the non-
tradeable nature of the option, the share price at grant date and expected price volatility of the underlying share, the expected
dividend yield and the risk-free interest rate for the term of the option.
Super Retail Group Limited | ANNUAL REPORT 2016 65
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Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
2.
(v)
Summary of significant accounting policies (continued)
Employee benefits (continued)
Share-based payments (continued)
(iv)
The fair value of the options granted excludes the impact of any non-market vesting conditions (for example, profitability and sales
growth targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to
become exercisable. At each statement of financial position date, the entity revises its estimate of the number of options and
performance rights that are expected to become exercisable. The employee benefit expense recognised each period takes into
account the most recent estimate.
Upon exercise of the options and performance rights, the balance of the share-based payments reserve relating to those options
remains in the share based reserve.
Profit-sharing and bonus plans
(v)
The Group recognises a liability and an expense for bonuses and profit-sharing based on a formula that takes into consideration the
profit attributable to the Company’s shareholders after certain adjustments. The Group recognises a provision where contractually
obliged or where there is a past practice that has created a constructive obligation.
(w)
Finance costs
Finance costs are recognised in the period in which these are incurred and are expensed in the period to which the costs relate.
Generally costs such as discounts and premiums incurred in raising borrowings are amortised on an effective yield basis over the
period of the borrowing. Finance costs include:
•
•
•
•
•
interest on bank overdrafts and short-term and long-term borrowings;
amortisation of discounts or premiums relating to borrowings;
amortisation of ancillary costs incurred in connection with the arrangement of borrowings;
finance lease charges; and
interest revenue.
(x)
Cash and cash equivalents
For the purposes of the cash flow statement, cash includes cash on hand, cash at bank and at call deposits with banks or financial
institutions, other short term, highly liquid investments with original maturities of three months or less that are readily convertible
to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts.
(y)
Goods and Services Tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax, except where the amount of goods and
services tax incurred is not recoverable. In these circumstances the goods and services tax is recognised as part of the cost of
acquisition of the asset or as part of the item of expense. Receivables and payables in the consolidated statement of financial
position are shown inclusive of goods and services tax.
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 flow.
(z)
Earnings per share
Basic earnings per share
(i)
Basic earnings per share is calculated by dividing:
•
•
the profit attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares;
by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in
ordinary shares issued during the year and excluding treasury shares (refer note 30 - Earnings Per Share).
Diluted earnings per share
(ii)
Diluted earnings per share adjusts the figures 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 and the weighted average
number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
66 Super Retail Group Limited | ANNUAL REPORT 2016
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Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
2.
Summary of significant accounting policies (continued)
(aa)
Rounding of amounts
The economic entity is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191,
issued by the Australian Securities and Investments Commission, relating to the ‘rounding off’ of amounts in the financial report.
Amounts in the financial report have been rounded off in accordance with that instrument to the nearest hundred thousand dollars.
(ab)
Financial year
As allowed under Section 323D(2) of the Corporations Act 2001, the Directors have determined the financial year to be a fixed
period of 52 calendar or 53 calendar weeks. For the period to 2 July 2016, the Group is reporting on the 53 week period that began
28 June 2015 and ended 2 July 2016. For the period to 27 June 2015, the Group is reporting on the 52 week period that began 29
June 2014 and ended 27 June 2015.
(ac)
New and amended standards adopted by the Group
The following new accounting standards and amendments to accounting standards became applicable in the current reporting
period.
New Accounting
Standard
AASB 2012-3 Offsetting
Financial Assets and
Financial Liabilities
AASB 2013-3 Limited
amendment of
impairment disclosures
AASB 2013-4 Novation of
derivatives and hedge
accounting
AASB 2014-1 Part A
Annual improvements
project – 2010-2012 cycle
AASB 2014-1 Part A
Annual improvements
project – 2011-2013 cycle
Effective Date
Summary of Changes
Group Impact
1 July 2015
1 July 2015
in AASB 132 Financial
Clarifies the offsetting rules
Instruments: Presentation (AASB 132), and explains when
offsetting can be applied.
Adopted with no
significant impacts.
Adopted with no
significant impacts.
Removes the requirement to disclose the recoverable
amount of all cash generating units (CGU) that contain
goodwill or identifiable assets with indefinite lives if there
has been no
impairment, requires disclosure of the
recoverable amount of an asset or CGU when an
impairment loss has been recognised or reversed, and
requires detailed disclosure of how the fair value less costs
of disposal has been measured when an impairment loss
has been recognised or reversed.
1 July 2015
Allows for the continuation of hedge accounting when a
derivative is novated, provided specific conditions are met.
Adopted with no
significant impacts.
1 July 2015
An annual improvements project clarifies minor points in
various Australian accounting standards
Adopted with no
significant impacts.
1 July 2015
An annual improvements project clarifies minor points in
various Australian accounting standards
Adopted with no
significant impacts.
Super Retail Group Limited | ANNUAL REPORT 2016 67
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Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
2.
Summary of significant accounting policies (continued)
(ac)
New and amended standards adopted by the Group (continued)
Certain new accounting standards and interpretations have been published that are not mandatory to the current reporting period
and have not been early adopted by the Group as follows:
Effective Date
Summary of Changes
Group Impact
New Accounting
Standard
AASB 9 Financial
Instruments
1 January 2018 Addresses the classification, measurement and de-
recognition of financial assets and financial liabilities and
new rules for hedge accounting.
The group is assessing
the potential impact on
its consolidated
financial statements
resulting from the
application of IFRS 9.
While still assessing the
potential impact, the
group does not
anticipate any
significant impacts on
its consolidated
financial statements
resulting from the
application of IFRS 15.
The group is assessing
the potential impact on
its consolidated
financial statements
resulting from the
application of IFRS 16
which is considered to
be significant.
IFRS 15 Revenue from
Contracts with Customers
1 January 2018 Establishes the reporting principles relating to the nature,
amount, timing, and uncertainty of revenue and cash flows
arising from a contract with a customer.
IFRS 16 Leases
1 January 2019
Introduces a single lessee accounting model requiring a
lessee to recognise assets and liabilities for all leases with
a term of more than 12 months where they are not
considered of low value. A right-of-use asset will be
recognised representing the right to use the underlying
leased asset and a lease liability representing the
obligations to make lease payments. As a consequence, a
lessee recognises depreciation of the right-of-use asset
and interest on the lease liability
There are no other standards that are not yet effective and that are expected to have a material impact on the entity in the current
or future reporting periods and on foreseeable future transactions.
(ad)
Parent entity financial information
The financial information for the parent entity, Super Retail Group Limited, disclosed in note 33 has been prepared on the same
basis as the consolidated financial statements, except as set out below.
(i)
Investments in subsidiaries are accounted for at cost in the financial statements of Super Retail Group Limited.
Investments in subsidiaries
Tax consolidation legislation
(ii)
Super Retail Group Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation.
The head entity, Super Retail Group Limited, and the controlled entities in the tax consolidated group account for current and
deferred tax amounts under the Separate taxpayer within Group approach in accordance with AASB Interpretation 1052, Tax
Consolidation Accounting.
In addition to its own current and deferred tax amounts, Super Retail Group Limited also recognises the current tax liabilities (or
assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax
consolidated group.
The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate Super Retail
Group Limited for any current tax payable assumed and are compensated by Super Retail Group Limited for any current tax
receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Super Retail Group
Limited under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in
the wholly-owned entities’ financial statements.
68 Super Retail Group Limited | ANNUAL REPORT 2016
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Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
2.
Summary of significant accounting policies (continued)
(ad)
Parent entity financial information (continued)
Tax consolidation legislation (continued)
(ii)
The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head entity,
which is issued as soon as practicable after the end of each financial year. The head entity may also require payment of interim
funding amounts to assist with its obligations to pay tax instalments.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as current amounts
receivable from or payable to other entities in the Group.
Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised
as a contribution to (or distribution from) wholly-owned tax consolidated entities.
Financial guarantees
(iii)
Where the parent entity has provided financial guarantees in relation to loans and payables of subsidiaries for no compensation, the
fair values of these guarantees are accounted for as contributions and recognised as part of the cost of the investment.
3.
Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including
expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the
circumstances.
(a)
Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom
equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year are discussed below.
Estimated impairment of indefinite useful life non-financial assets
(i)
The Group tests annually whether indefinite useful life non-financial assets has suffered any impairment, in accordance with the
accounting policy stated in note 2(o). The recoverable amounts of cash-generating units have been determined based on
value-in-use calculations. These calculations require the use of assumptions. Refer to note 11 – Intangible assets, for details of
these assumptions.
Capitalised software costs and useful lives
(ii)
The Group has undertaken significant development of software in relation to the multi-channel customer programme and mutli-
channel supply chain and inventory programme. The useful lives have been determined based on the intended period of use of this
software.
Estimated value of make good provision
(iii)
The Group has estimated the present value of the estimated expenditure required to remove any leasehold improvements and
return leasehold premises to their original state, in addition to the likelihood of this occurring. These costs have been capitalised as
part of the cost of the leasehold improvements.
Net realisable value
(iv)
The Group records inventory at net realisable value. This is the estimated selling price in the normal course of business, less the
estimated cost of completion and the estimate costs necessary to make the sale.
Long service leave
(v)
Judgement is required in determining the following key assumptions used in the calculation of long service leave at balance date.
•
•
•
Future increase in salaries and wages;
Future on-cost rates; and
Experience of employee departures and period of service.
Onerous contracts
(vi)
For surplus leases, the Group estimates the period it will take to exit surplus lease space. It then records a liability for the present
value of the future lease payments for the estimated exit period less estimated future sub-lease revenue. For loss making revenue
contracts, the Group estimates a range of potential financial outcomes for each contract based on forecasted scenarios. It then
records a liability for the present value of the resulting forecasted loss of each contract.
Super Retail Group Limited | ANNUAL REPORT 2016 69
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Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
4.
(a)
Segment information
Description of segments
Management has determined the operating segments based on the reports reviewed by the Group Managing Director and Chief
Executive Officer that are used to make strategic decisions. No operating segments have been aggregated to form the below
reportable operating segments. This results in the following business segments:
Auto: retailing of auto parts and accessories, tools and equipment;
Leisure: retailing of boating, camping, outdoor equipment, fishing equipment and apparel; and
Sports: retailing of sporting equipment, bicycles, bicycle accessories and apparel.
(b)
Segment information provided to the Group Managing Director and Chief Executive Officer
Detailed below is the information provided to the Group Managing Director and Chief Executive Officer for reportable segments.
Items not included in Normalised Net Profit After Tax (Normalised NPAT) are one-off charges relating to business restructuring, non-
continuing operations and impairment of intangible assets.
For the period ended 2 July 2016
Auto
$m
Leisure
$m
Sports
$m
Total
continuing
operations
$m
Inter-segment
eliminations/
unallocated
$m
Consolidated
$m
922.8
-
-
922.8
133.2
(28.6)
104.6
Segment Revenue and Other Income
External segment revenue
Inter segment sales
Other income
Total segment revenue and other income
Segment EBITDA(1)
Segment depreciation and amortisation(2)
Segment EBIT result
Net finance costs
Total segment NPBT
Segment income tax expense(3)
Normalised NPAT
Other items not included in the total segment NPAT(4)
Profit for the period attributable to:
Owners of Super Retail Group Limited
Non-controlling interests
Profit for the period
Intangible assets.
581.9
-
-
581.9
37.5
(18.9)
18.6
910.2
-
0.9
911.1
100.3
(22.5)
77.8
2,414.9
-
0.9
2,415.8
271.0
(70.0)
201.0
7.9
(0.6)
0.7
8.0
(25.3)
(0.4)
(25.7)
2,422.8
(0.6)
1.6
2,423.8
245.7
(70.4)
175.3
(19.4)
155.9
(47.3)
108.6
(45.8)
62.8
(4.8)
58.0
(1) Adjusted for business restructuring costs of $43.3 million and the $20.0 million impairment charge for the Ray’s Outdoors brand, refer to note 11 –
(2) Adjusted for NCI depreciation of $0.9 million and $14.9 million provision for depreciation relating to business restructuring.
(3) Excludes $17.5 million relating to the tax effect of business restructuring costs with a value of $63.3 million.
(4) Includes $63.3 million of business restructuring costs (including $20.0 million impairment) and the associated income tax benefit of $17.5 million.
Business restructuring - 2016
During the period ended 2 July 2016, Super Retail Group Limited continued its strategic review of the Ray’s Outdoors and also
reviewed the Infinite Retail business.
Leisure - Ray’s Outdoors
In May 2016, a decision was made to reduce the Ray’s network from 55 stores as at December 2015 to 17 stores. Twenty-one
stores close as a result of this decision and 17 stores will convert to other Super Retail Group Limited brands. As a result there have
been $38.3 million of business restructuring costs associated with the closures, comprising $18.7 million of property costs, $13.3
million of Property, plant and equipment write-offs, and $6.3 million of other closures costs. In December 2015, the Directors
resolved to impair the $20 million Ray’s Outdoors brand name based on the underperformance of the older Rays stores during the
period and after reviewing their suitability for the Rays new format.
Sports – Infinite Retail
A business review identified the need to renegotiate or exit structurally unprofitable contracts with major sporting bodies or clubs
and to integrate the operations into Rebel. Super Retail Group Limited has recognised business restructuring costs of $5.0 million
comprising $3.0 million provision for onerous contracts, $1.7 million of Property, plant and equipment and Computer software
write-offs, and $0.2 million other costs.
70 Super Retail Group Limited | ANNUAL REPORT 2016
70
Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
4.
(b)
Segment information (continued)
Segment information provided to the Group Managing Director and Chief Executive Officer (continued)
For the period ended 27 June 2015
Auto
$m
Leisure
$m
Sports
$m
Total
continuing
operations
$m
Inter-segment
eliminations/
unallocated
$m
Consolidated
$m
543.2
-
-
543.2
48.8
(16.5)
32.3
835.0
-
0.9
835.9
85.8
(20.2)
65.6
2,232.5
-
1.6
2,234.1
254.0
(60.1)
193.9
8.2
(2.0)
0.9
7.1
(23.0)
(0.7)
(23.7)
854.3
-
0.7
855.0
119.4
(23.4)
96.0
Segment Revenue and Other Income
External segment revenue
Inter segment sales
Other income
Total segment revenue and other income
Segment EBITDA(1)
Segment depreciation and amortisation(2)
Segment EBIT result
Net finance costs(3)
Total segment NPBT
Segment income tax expense(4)
Normalised NPAT
Other items not included in the total segment NPAT(5)
Loss from discontinuing operations
Profit for the period attributable to:
Owners of Super Retail Group Limited
Non-controlling interests
Profit for the period
2,240.7
(2.0)
2.5
2,241.2
231.0
(60.8)
170.2
(21.6)
148.6
(42.3)
106.3
(9.0)
(16.2)
81.1
(4.2)
76.9
(1) Adjusted for business restructuring costs for continuing operations and discontinuing operations.
(2) Adjusted for expenses pertaining to discontinued operations of $5.9 million and business restructuring costs for continuing operations of $0.4m.
(3) Adjusted for non-controlling interest (NCI) interest of $0.3 million).
(4) Segment income tax expense of $42.3 million excludes $3.8 million relating to the tax effect of business restructuring costs with a value of $12.8
million, refer to (i) below.
(5) Includes $12.8 million of business restructuring costs, the related income tax effect of $3.8 million.
Business restructuring - 2015
During the period ended 27 June 2015, Super Retail Group Limited conducted a strategic review of the Ray’s Outdoors, FCO Fishing
Camping Outdoors (FCO), and Workout World businesses.
Leisure - Ray’s Outdoors
The strategic review of Ray’s Outdoors determined to reposition Ray’s Outdoors from a broad camping and outdoor offering to an
outdoor adventure for all’ retail offering, focusing on providing a wide range of quality outdoor products at constant fair value.
$10.3 million of restructuring expenses have been incurred during the period, with five stores being closed or downsized, and the
commencement of clearance of inventory lines that have been identified to be exited under the new strategic direction. As at the
end of the 2015 financial year, provisions recorded in the consolidated balance sheet in relation to this activity comprise $2.7
million for inventories, $0.4 million for property, plant and equipment, $2.2 million for onerous leases.
Leisure - Fishing Camping Outdoors (FCO)
The Group has exited the FCO business with all 13 stores closed by the end of the 2015 financial year incurring a loss from
operations during the period ended 27 June 2015, of $16.2 million - $14.1 million loss generated from trading in the second half of
the financial year. As at the end of the financial year, provisions recorded in the consolidated balance sheet in relation to this
activity comprise $5.5 million for onerous leases, $0.5 for make good provisions and other accruals of $0.6 million. Refer to note 26 -
Discontinued operations.
Sports - Workout World
During the 2015 financial year, a plan was developed to integrate the Workout World stores into the Rebel business with a
combined buying and marketing team. Workout World has been rebranded as a fitness brand. $2.5 million of restructuring
expenses were incurred during the period ended 27 June 2015 with five stores closed at the end of the 2015 financial year and
another five closed in the 2016 financial year. As at the end of the financial year, provisions recorded in the consolidated balance
sheet in relation to this activity comprise $0.4 million for inventories and $1.0 million for onerous leases.
Super Retail Group Limited | ANNUAL REPORT 2016 71
71
Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
4.
(c)
Segment information (continued)
Other information
Revenue is attributable to the country where the sale of goods has transacted. The consolidated entity’s divisions are operated in
two main geographical areas with the following areas of operation:
Australia (the home country of the parent entity)
Auto: retailing of auto parts and accessories, tools and equipment;
Leisure: retailing of boating, camping, outdoor equipment, fishing equipment and apparel; and
Sports: retailing of sporting equipment, bicycles, bicycle accessories and apparel.
New Zealand
Auto: retailing of auto parts and accessories, tools and equipment;
(i)
Total revenue and other income from continuing operations
Australia
New Zealand
5.
Expenses from continuing operations
Profit before income tax includes the following specific gains and expenses:
Expenses
Net loss on disposal of property, plant and equipment
Depreciation
Plant and equipment
Motor vehicles
Computer equipment
Total depreciation(1) (2)
2016
$m
2,320.3
103.5
2,423.8
2016
$m
-
56.2
0.3
10.4
66.9
2015
$m
2,146.1
95.1
2,241.2
2015
$m
0.4
34.1
0.1
9.2
43.4
(1)
Included in depreciation expense is $14.9 million (2015: nil) relating to accelerated depreciation on fixed assets for Ray’s Outdoors and Infinite
Retail in respect of business restructuring activities – refer note 4 – Segment information.
(2)
An additional nil (2015: $5.9 million) depreciation expense pertains to discontinued operations.
Amortisation and Impairment
Computer software
Brand name amortisation
Brand name impairment
Total amortisation and impairment
Net finance costs
Interest and finance charges
Interest revenue
Net finance costs
Employee benefits expense
Superannuation
Salaries and wages
Total employee benefits expense
72 Super Retail Group Limited | ANNUAL REPORT 2016
72
19.2
0.1
20.0
39.3
19.5
(0.1)
19.4
34.0
438.3
472.3
17.3
0.5
-
17.8
22.2
(0.3)
21.9
30.5
397.2
427.7
Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
5.
Expenses from continuing operations (continued)
Rental expense relating to operating leases
Lease expenses(3)
Equipment hire
Total rental expense relating to operating leases(4)
2016
$m
233.1
8.1
241.2
2015
$m
203.2
10.1
213.3
(3)
Included in lease expenses is $16.8 million (2015: $2.3 million) relating to provision for onerous leases for Ray’s Outdoors in respect of business
restructuring activities – refer note 4 – Segment information.
(4)
An additional nil (2015: $9.0 million) rental expense pertains to discontinued operations.
Foreign exchange gains and losses
Net foreign exchange (gain) / loss
6.
Income tax expense
(a)
Income tax expense
Current tax expense
Deferred tax (benefit)
Adjustments to tax expense of prior periods
Deferred income tax (revenue) / expense included in income tax expense comprises:
(Increase) in deferred tax assets (note 9)
(Decrease) / increase in deferred tax liabilities (note 9)
(b)
Numerical reconciliation between tax expense and pre-tax profit
Profit before income tax from continuing operations
Tax at the Australian tax rate of 30% (2015: 30%)
Tax effect of amounts which are not deductible / (taxable) in
calculating taxable income:
Tax consolidation adjustments regarding NZ branches
Research and development credits and sundry items
Difference in overseas tax rates
Derecognition of tax losses and deferred tax assets
Previously unrecognised tax losses now recouped to reduce tax expense
Adjustments to tax expense of prior periods
Income tax expense
Effective tax rate:
Australia
Consolidated group
(2.8)
1.7
2016
$m
53.7
(24.0)
0.1
29.8
(17.1)
(6.9)
(24.0)
87.8
26.3
(2.7)
-
23.6
0.3
5.8
-
0.1
29.8
33.3%
33.9%
2015
$m
41.3
(4.2)
1.4
38.5
(9.2)
5.0
(4.2)
131.6
39.5
(2.2)
(0.5)
36.8
(0.1)
2.9
(0.4)
(0.7)
38.5
29.5%
29.3%
Super Retail Group Limited | ANNUAL REPORT 2016 73
73
Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
6.
Income tax expense (continued)
(c)
Numerical reconciliation of income tax expense to income tax payable
Income tax (expense)
Tax effect of timing differences:
Depreciation
Provisions
Accruals and prepayments
Sundry temporary differences
Current tax payable
Income tax instalments paid during the year
Income tax (payable) / receivable
(d)
Amounts recognised directly in equity
Aggregate current and deferred tax arising in the reporting period and not
recognised in net profit or loss but directly debited or credited to equity:
Net deferred tax (credited) / debited directly to equity (note 9)
Tax (income) / expenses relating to items of other comprehensive income
Cash flow hedges
(e)
Tax consolidation legislation
2016
$m
(29.8)
(9.0)
(8.6)
(4.7)
2.0
(50.1)
43.8
(6.3)
(2.8)
(2.8)
(3.2)
(3.2)
2015
$m
(38.5)
2.6
(4.8)
-
1.5
(39.2)
42.1
2.9
3.1
3.1
2.7
2.7
Super Retail Group Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation
as of 1 July 2003. The accounting policy in relation to this legislation is set out in note 2(d).
On adoption of the tax consolidation legislation, the entities in the tax consolidated group entered into a tax sharing agreement
which, in the opinion of the directors, limits the joint and several liability of the wholly-owned entities in the case of a default by the
head entity, Super Retail Group Limited.
The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate Super Retail
Group Limited for any current tax payable assumed and are compensated by Super Retail Group Limited for any current tax
receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Super Retail Group
Limited under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in
the wholly-owned entities’ financial statements.
The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head entity,
which is issued as soon as practicable after the end of each financial year. The head entity may also require payment of interim
funding amounts to assist with its obligations to pay tax instalments.
7.
Trade and other receivables
Current
Trade receivables
Provision for impairment of receivables
Net trade receivables
2016
$m
11.6
(0.6)
11.0
2015
$m
12.8
(0.3)
12.5
Other receivables
Prepayments(1)
Net current trade and other receivables
(1)
7.8
9.0
29.3
Due to period end being 2 July 2016, compared to 27 June 2015, the prepayments balance has increased due to rent payments being made on the
first day of the month.
6.8
24.9
42.7
74 Super Retail Group Limited | ANNUAL REPORT 2016
74
Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
7.
(a)
Trade and other receivables (continued)
Impaired trade receivables
As at 2 July 2016 current trade receivables of the Group with a nominal value of $0.6 million (2015: $0.3 million) were impaired and
provided for. The individually impaired receivables mainly relate to wholesalers with whom the Group no longer trade.
Movements in the provision for impairment of receivables are as follows:
Opening balance
Provision for impairment recognised during the period
Provision for impairment reversed during the period
Receivables written off during the year as uncollectable
Closing balance
2016
$m
(0.3)
(0.5)
0.2
-
(0.6)
2015
$m
(0.5)
(0.7)
-
0.9
(0.3)
The creation and release of the provision for the impaired receivables has been included in administration expenses within the
consolidated income statement. Amounts charged to the allowance account are generally written off when there is no expectation
of recovering additional cost.
(b)
Past due but not impaired
As at 2 July 2016, trade receivables of $6.2 million (2015: $6.3 million) were past due but not impaired. These relate to a number of
independent customers for whom there is no recent history of default. The ageing analysis of these trade receivables is as follows:
30 to 60 days
60 to 90 days
90 days and over
8.
Inventories
Finished goods, at lower of cost or net realisable value
(a)
Inventory expense
2016
$m
1.7
1.5
3.0
6.2
2016
$m
501.9
2015
$m
3.1
1.3
1.9
6.3
2015
$m
505.6
Inventories recognised as expense during the period ended 2 July 2016 amounted to $1,291.9 million (2015: $1,222.7 million).
Write-downs of inventories to net realisable value recognised as an expense during the period ended 2 July 2016 amounted to $4.3
million (2015: $6.3 million). This expense has been included in cost of sales of goods within the consolidated statement of
comprehensive income.
Super Retail Group Limited | ANNUAL REPORT 2016 75
75
Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
9.
Deferred tax assets and liabilities
Assets
Amounts recognised in profit or loss
Provisions
Accruals and prepayments
Depreciation
Tax losses
Sundry temporary differences
Amounts recognised directly in equity
Cash flow hedges
Share placement costs
Set off with deferred tax liabilities
Net deferred tax assets
Liabilities
Amounts recognised in profit or loss
Brand values
Depreciation
Amounts recognised directly in equity
Cash flow hedges
Set-off of deferred tax assets
Net deferred tax liabilities
Net deferred tax assets (liabilities)
Movements in deferred tax assets:
Opening balance
Credited to the income statement
Credited / (charged) to equity
Closing balance
Deferred tax assets to be recovered after more than 12 months
Deferred tax assets to be recovered within 12 months
Movements in deferred tax liabilities:
Opening balance
(Credited) / charged to the income statement
Charged to equity
Closing balance
Deferred tax liabilities to be settled after more than 12 months
Deferred tax liabilities to be settled within 12 months
76 Super Retail Group Limited | ANNUAL REPORT 2016
76
2016
$m
37.3
6.4
16.0
-
0.4
60.1
2.4
-
62.5
(62.5)
-
74.0
13.2
87.2
-
87.2
(62.5)
24.7
(24.7)
43.4
17.1
2.0
62.5
45.6
16.9
62.5
94.9
(6.9)
(0.8)
87.2
87.2
-
87.2
2015
$m
26.1
1.5
12.8
1.3
1.3
43.0
-
0.4
43.4
(43.4)
-
80.0
14.1
94.1
0.8
94.9
(43.4)
51.5
(51.5)
36.5
9.2
(2.3)
43.4
30.2
13.2
43.4
89.1
5.0
0.8
94.9
94.1
0.8
94.9
Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
10.
Property, plant and equipment
Plant and equipment, at cost
Less accumulated depreciation
Net plant and equipment
Motor vehicles, at cost
Less accumulated depreciation
Net motor vehicles
Computer equipment, at cost
Less accumulated depreciation
Net computer equipment
Total net property, plant and equipment
(a)
Reconciliations
2016
$m
383.2
(179.9)
203.3
0.7
(0.4)
0.3
88.1
(54.8)
33.3
236.9
Reconciliations of the carrying amounts for each class of property, plant and equipment are set out below:
2016
Carrying amounts at 27 June 2015
Additions
Disposals
Depreciation(1)
Foreign currency exchange differences
Carrying amounts at 2 July 2016
2015
Carrying amounts at 28 June 2014
Additions
Disposals
Acquisition of subsidiary
Depreciation(2)
Transfers between asset class(3)
Foreign currency exchange differences
Carrying amounts at 27 June 2015
Plant and
equipment $m
199.5
59.5
-
(56.2)
0.5
Motor vehicles
$m
0.2
0.4
-
(0.3)
-
203.3
0.3
172.9
50.5
(0.3)
0.4
(39.2)
15.6
(0.4)
199.5
0.1
0.1
(0.1)
0.2
(0.1)
-
-
0.2
Computer
equipment
$m
24.4
19.3
(0.2)
(10.4)
0.2
33.3
24.6
9.8
(0.1)
0.1
(10.0)
-
-
24.4
2015
$m
360.7
(161.2)
199.5
0.5
(0.3)
0.2
83.9
(59.5)
24.4
224.1
Total
$m
224.1
79.2
(0.2)
(66.9)
0.7
236.9
197.6
60.4
(0.5)
0.7
(49.3)
15.6
(0.4)
224.1
(1) During the 2016 financial year the useful lives of Plant and equipment and Computer equipment relating to assets in leased locations were re-
assessed to have a shortened useful life associated with the lease term or refurbishment cycle. This includes those items of Plant and equipment
and Computer equipment associated with the Ray’s Outdoors and Infinite Retail business restructuring activities – refer note 4 – Segment
information.
(2) During the 2015 financial year, depreciation of $43.4 million was included in administration expenses in the consolidated statement of
comprehensive income relating to continuing operations. Total depreciation for the Group including discontinued operations was $49.3 million.
(3) Transfers relates to amounts for computer hardware disclosed within Intangible Assets work-in-progress at period end, which were capitalised as
Plant and Equipment assets during the subsequent financial year.
Finance Leases
The carrying value of computer equipment held under finance leases as at 2 July 2016 was $1.2 million (2015: $2.6 million).
During the 2015 financial year, finance leases with a value of $0.2 million were acquired on acquisition of subsidiary during the
financial year. There were no other additions during the year. Leased assets are pledged as security for the related finance lease
liability.
Super Retail Group Limited | ANNUAL REPORT 2016 77
77
Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
11.
Intangible assets
Goodwill, at cost
Less accumulated impairment charge
Net goodwill
Computer software, at cost
Less accumulated amortisation
Net computer software
Brand names, at cost
Less accumulated amortisation and impairment charge
Net brand names
Total net intangible assets
(a)
Reconciliations
2016
$m
449.7
(2.1)
447.6
146.5
(68.2)
78.3
267.5
(21.0)
246.5
772.4
Reconciliations of the carrying amounts for each class of intangible asset are set out below:
2016
Carrying amounts at 27 June 2015
Additions
Impairment
Amortisation charge
Carrying amounts at 2 July 2016
Goodwill
$m
Computer
Software
$m
Brand
Name
$m
Supplier
Agreement
$m
447.6
-
-
-
447.6
87.1
10.4
-
(19.2)
78.3
266.6
-
(20.0)
(0.1)
246.5
-
-
-
-
-
Goodwill
$m
Computer
Software
$m
Brand
Name
$m
Supplier
Agreement
$m
2015
$m
449.7
(2.1)
447.6
147.7
(60.6)
87.1
267.5
(0.9)
266.6
801.3
Totals
$m
801.3
10.4
(20.0)
(19.3)
772.4
Totals
$m
2015
Carrying amounts at 28 June 2014
Additions
Acquisition of business
Disposals
Amortisation charge(1)
Transfers between asset class(2)
Carrying amounts at 27 June 2015
801.3
(1) During the 2015 financial year amortisation of $17.8 million was included in administration expenses in the consolidated statement of
813.4
14.8
6.6
(0.1)
(17.8)
(15.6)
104.9
14.8
0.4
(0.1)
(17.3)
(15.6)
441.4
-
6.2
-
-
-
266.8
-
-
-
(0.2)
-
0.3
-
-
-
(0.3)
-
266.6
447.6
87.1
-
comprehensive income relating to continuing operations. There was nil amortisation expense included in discontinued operations.
(2) Transfers relates to amounts disclosed within computer software work-in-progress at period end, which were capitalised as Plant and Equipment
assets during the subsequent financial year.
78 Super Retail Group Limited | ANNUAL REPORT 2016
78
Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
11.
Intangible assets (continued)
(b)
Impairment tests for goodwill
Goodwill is allocated to the Group’s cash generating units (CGUs) identified according to the group of assets based on acquisition.
A CGU level summary of the goodwill allocation is presented below:
CGU
Auto
Leisure
Sports
Group
Total
2016
$m
45.3
25.1
376.5
0.7
447.6
2015
$m
45.3
25.1
376.5
0.7
447.6
The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections
based on financial business plans approved by the Board of Directors covering a five-year period. Cash flows beyond the five-year
period are extrapolated using the estimated growth rates stated below. The growth rate does not exceed the long-term average
growth rate for the business in which the CGU operates.
Key assumptions used for value-in-use calculations
Management have consistently applied two key assumptions in the value-in-use analysis across each business segment CGU, a pre-
tax discount rate of 14.0% (2015: 14.0%) and terminal growth rate of 3.0% (2015: 3.0%). Budgeted gross margin is determined
based on past performance and its expectations for the future. The weighted average growth rates used are consistent with
forecasts included in industry reports. The recoverable amount of the Group’s goodwill currently exceeds its carrying value.
(c)
Impairment tests for the useful life for brands
No amortisation is provided against the carrying value of the purchased Rebel Sport and Amart Sports brands on the basis that they
are considered to have an indefinite useful life.
Key factors taken into account in assessing the useful life of brands were:
•
•
the strong recognition of brands; and
there are currently no legal, technical or commercial factors indicating that the life should be considered limited.
The Goldcross Cycles brand has been determined to have a 20 year life and is amortised over this period.
The carrying values of the purchased brand names are:
Brand
Rebel Sport
Amart Sports
Ray’s Outdoors
Goldcross Cycles
Total
2016
$m
209.0
36.0
-
1.5
246.5
2015
$m
209.0
36.0
20.0
1.6
266.6
Key assumptions used for value-in-use calculations
Management have consistently applied two key assumptions in the value-in-use analysis across each brand, a pre-tax discount rate
of 14.0% (2015: 14.0%) and terminal growth rate of 3.0% (2015: 3.0%). Budgeted gross margin is determined based on past
performance and its expectations for the future. The weighted average growth rates used are consistent with forecasts included in
industry reports.
The recoverable amount of the Group’s brand names currently exceeds its carrying value.
During the financial year, the Group continued to reassess the recoverable amount of the associated brand name as a result of the
ongoing restructure of the Rays business. Following an analysis as at 26 December 2015, the recoverable amount was determined
to be nil, based on a value in use calculation using a pre-tax discount rate of 14.0% (2015: 14.0%) and terminal growth rate of 3.0%
(2015: 3.0%). Forecasted gross margin is determined based on past performance and its expectations for the future. The weighted
average growth rates used are consistent with forecasts included in industry reports. The Group has recognised an impairment
charge of $20.0 million against the Ray’s Outdoors brand name. This impairment charge has been included in administration
expenses in the consolidated income statement.
Super Retail Group Limited | ANNUAL REPORT 2016 79
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Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
12.
Trade and other payables
Current
Trade payables
Other payables
Straight line lease adjustment
Total current trade and other payables
Non-current
Straight line lease adjustment
Total non-current trade and other payables
13.
Interest-bearing liabilities
Current
Finance leases - secured by leased asset
Bank debt funding facility - secured
Bank debt funding facility - unsecured
Total current interest-bearing liabilities
Non-current
Finance lease - secured by leased asset
Bank debt funding facility - secured
Bank debt funding facility - unsecured(1)
Loan from related party - unsecured
Total non-current interest-bearing liabilities
(1)Net of borrowing costs capitalised of $1.2 million (2015: $1.7 million)
14.
Provisions
Current
Employee benefits(a)
Onerous contracts(b)
Make good provision(c)
Other provisions(d)
Total current provisions
Non-current
Employee benefits(a)
Onerous contracts(b)
Make good provision(c)
Total non-current provisions
2016
$m
167.4
79.6
4.1
251.1
41.7
41.7
2016
$m
0.8
0.1
4.8
5.7
-
0.1
410.0
-
410.1
2016
$m
45.1
10.1
2.6
0.9
58.7
8.7
13.0
7.5
29.2
2015
$m
194.9
70.1
3.6
268.6
36.7
36.7
2015
$m
1.6
0.6
-
2.2
1.0
0.1
387.8
0.9
389.8
2015
$m
37.9
7.2
1.5
2.0
48.6
7.6
2.2
6.5
16.3
Employee benefits
(a)
Provisions for employee benefits includes accrued annual leave, long service leave and accrued bonuses.
Onerous contracts
(b)
Onerous contracts include the provision for surplus lease space which represents the present value of the future lease payments
that the Group is obligated to make in respect of surplus lease space under non-cancellable operating lease agreements, less
estimated future sub-lease revenue. During the year, the group committed to a plan to restructure the Ray’s Outdoors business by
converting various stores into either the new concept Rays stores or to other Group brands and close other stores. $17.7million
associated with the transformation relates to surplus lease space.
80 Super Retail Group Limited | ANNUAL REPORT 2016
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Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
14.
Provisions (continued)
Onerous contracts (continued)
(b)
Onerous contracts also includes the provision for loss making contracts which represents the present value of the forecasted loss.
During the year the Group performed a review of key contracts relating to Infinite Retail that were loss making and as a result $3.1
million was provided within the onerous contracts provision.
Make good provision
(c)
Provision is made for costs arising from contractual obligations in lease agreements at the inception of the agreement. A provision
has been recognised for the present value of the estimated expenditure required to remove any leasehold improvements. These
costs have been capitalised as part of the cost of the leasehold improvements and are amortised over the shorter of the term of the
lease or the useful life of the assets.
Other provisions
(d)
The current provision for other items includes the provision for store refunds.
Movement in provisions
(e)
Movements in each class of provision during the period, except for employee benefits and other, are set out below:
Onerous
contracts
$m
9.4
20.8
-
(7.1)
23.1
Make good
$m
8.0
2.8
0.9
(1.6)
10.1
Total
$m
17.4
23.6
0.9
(8.7)
33.2
2016
Opening balance as at 27 June 2015
Provisions made
Indexing of provisions
Provisions used
Closing balance as at 2 July 2016
15.
Contributed equity
(a)
Share capital
Ordinary shares fully paid (197,177,318 ordinary shares as at 2 July 2016)
2016
$m
542.3
Movement in ordinary share capital
(i)
Opening Balance 28 June 2014
Shares issued under performance rights
Balance 27 June 2015
Shares issued under performance rights
Closing balance 2 July 2016
Number of Shares
Issue Price
196,731,620
298,951
197,030,571
146,747
197,177,318
-
-
2015
$m
542.3
$m
542.3
-
542.3
-
542.3
Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.
The ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the parent entity in proportion
to the number of and amounts paid on the shares held.
On a show of hands every holder of ordinary shares present, in person or by proxy, at a meeting of shareholders of the parent entity
is entitled to one vote and, upon a poll, each share is entitled to one vote.
Performance rights over 621,365 (2015: 579,192) ordinary shares were issued during the period with 146,747 (2015: 298,951)
performance rights vesting during the period. Under the share option plan, nil (2015: nil) ordinary shares were issued during the
period. Information relating to performance rights and options outstanding at the end of the financial period are set out in note 31
- Share-based payments.
Super Retail Group Limited | ANNUAL REPORT 2016 81
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Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
15.
Contributed equity (continued)
(a)
Share capital (continued)
Dividend reinvestment plan
The Company has established a dividend reinvestment plan under which holders of ordinary shares may elect to have all or part of
their dividend entitlements satisfied by shares purchased on market rather than by being paid in cash.
16.
Reserves and retained earnings
Reserves
(a)
Foreign currency translation reserve
Share based payments reserve
Hedging reserve
NCI equity reserve
Total
Movements
(i)
Foreign currency translation reserve
Balance at the beginning of the financial period
Net exchange difference on translation of foreign controlled entities
Balance at the end of the financial period
Share-based payments reserve
Balance at the beginning of the financial period
Options and performance rights expense
Balance at the end of the financial period
Hedging reserve
Balance at the beginning of the financial period
Revaluation – gross
Deferred tax
Balance at the end of the financial period
NCI equity reserve
Balance at the beginning of the financial period
Change in ownership interest in controlled entities
Balance at the end of the financial period
2016
$m
3.9
8.5
(5.6)
(7.7)
(0.9)
3.5
0.4
3.9
7.8
0.7
8.5
1.9
(10.7)
3.2
(5.6)
-
(7.7)
(7.7)
2015
$m
3.5
7.8
1.9
-
13.2
4.1
(0.6)
3.5
8.0
(0.2)
7.8
(4.4)
9.0
(2.7)
1.9
-
-
-
Nature and purpose of reserves
(ii)
Hedging reserve - cash flow hedges
The hedging reserve is used to record gains or losses on a hedging instrument in a cash flow hedge that are recognised directly in
equity, as described in note 2(l). Amounts are recognised in profit and loss when the associated hedged transaction affects profit
and loss.
Share-based payments reserve
The share-based payments reserve is used to recognise the grant date fair value of options and performance rights issued.
Foreign currency translation reserve
Exchange differences arising on translation of the foreign controlled entity are taken to the foreign currency translation reserve, as
described in note 2(e). The reserve is recognised in profit and loss when the net investment is disposed of.
NCI equity reserve
The NCI equity reserve is used to recognise the change in ownership interest in controlled entities.
82 Super Retail Group Limited | ANNUAL REPORT 2016
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Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
16.
Reserves and retained earnings (continued)
(b)
Retained earnings
Balance at the beginning of the financial period
Net profit for the period attributable to owners of Super Retail Group Limited
Dividends paid
Retained profits at the end of the financial period
17.
Financial assets and financial liabilities
(a)
Financial instruments
The Group holds the following financial instruments:
2016
$m
212.8
62.8
(81.9)
193.7
2015
$m
210.4
81.1
(78.7)
212.8
Financial assets
2016
Cash and cash equivalents
Trade and other receivables
Derivative financial instruments
Total
2015
Cash and cash equivalents
Trade and other receivables
Derivative financial instruments
Total
Financial liabilities
2016
Trade and other payables
Interest-bearing liabilities
Derivative financial instruments
Total
2015
Trade and other payables
Interest-bearing liabilities
Derivative financial instruments
Total
Derivatives used for
hedging
$m
Financial assets at
amortised cost
$m
Notes
7
18
7
18
-
-
-
-
-
-
6.8
6.8
15.6
42.7
-
58.3
13.1
29.3
-
42.4
Derivatives used for
hedging
$m
Financial liabilities at
amortised cost
$m
Notes
12
13
18
12
13
18
-
-
8.0
8.0
-
-
4.1
4.1
292.8
415.8
-
708.6
305.3
392.0
-
697.3
Total
$m
15.6
42.7
-
58.3
13.1
29.3
6.8
49.2
Total
$m
292.8
415.8
8.0
716.6
305.3
392.0
4.1
701.4
The Group’s exposure to various risks associated with the financial instruments is discussed in note 18 – Financial risk management.
The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of financial assets
mentioned above.
(b)
Recognised fair value measurements
Fair value hierarchy
(i)
This section explains the judgements and estimates made in determining the fair values of the financial instruments that are
recognised and measured at fair value in the financial statements. To provide an indication about the reliability of the inputs used
in determining fair value, the Group has classified its financial instruments into the three levels prescribed under the accounting
standards. An explanation of each level follows underneath the table.
Super Retail Group Limited | ANNUAL REPORT 2016 83
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Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
17.
Financial assets and financial liabilities (continued)
(b)
Recognised fair value measurements (continued)
(i)
Fair value hierarchy (continued)
The fair value of forward exchange contracts is determined using forward exchange market rates at the balance sheet date.
The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to
their short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future
contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.
The following tables present the Group’s entity’s assets and liabilities measured and recognised at fair value.
2016
Financial assets
Derivatives used for hedging
Total
Financial liabilities
Derivatives used for hedging
Total
2015
Financial assets
Derivatives used for hedging
Total
Financial liabilities
Derivatives used for hedging
Total
Level 1
$m
Level 2
$m
Level 3
$m
-
-
-
-
-
-
8.0
8.0
-
-
-
-
Level 1
$m
Level 2
$m
Level 3
$m
-
-
-
-
6.8
6.8
4.1
4.1
-
-
-
-
Total
$m
-
-
8.0
8.0
Total
$m
6.8
6.8
4.1
4.1
There were no transfers between any levels for recurring fair value measurements during the year. The Group’s policy is to
recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period.
Level 1: The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and
available-for-sale securities) is based on quoted market prices at the end of the reporting period. The quoted market price used
for financial assets held by the Group is the current bid price. These instruments are included in level 1.
Level 2: The fair value of financial instruments that are not traded in an active market (for example, over-the-counter
derivatives) is determined using valuation techniques which maximise the use of observable market data and rely as little as
possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument
is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This
is the case for unlisted equity securities.
Valuation techniques used to determine fair value
(ii)
Specific valuation techniques used to value financial instruments include:
•
•
the use of quoted market prices or dealer quotes for similar instruments;
the fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on
observable yield curves;
the fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date;
the fair value of the remaining financial instruments is determined using discounted cash flow analysis.
•
•
All of the resulting fair value estimates are included in level 2, where the fair values have been determined based on present
values and the discount rates used were adjusted for counterparty or own credit risk.
84 Super Retail Group Limited | ANNUAL REPORT 2016
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Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
18.
Financial risk management
This note explains the Group’s exposure to financial risks and how these risks could affect the Group’s future financial performance.
Current year profit and loss information has been included where relevant to add further context.
Market risk
Credit risk
Liquidity risk
Exposure
arising from
Foreign exchange
Future commercial
transactions
Recognised financial assets
and liabilities not
denominated in AUD
Interest rate
Long-term borrowings at
variable rates
Cash and cash equivalents,
trade and other receivables
and derivative financial
instruments
Borrowings and other
liabilities
Measurement
Cash flow forecasting
Sensitivity analysis
Sensitivity analysis
Management
Forward foreign
exchange contracts and
options
Interest rate swaps
Aging analysis
Credit ratings
Rolling cash flow
forecasts
Credit limits and
retention of title over
goods sold
Availability of committed
credit lines and
borrowing facilities
The Group’s risk management is carried out by the finance department under policies approved by the Board of Directors. The
finance department identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units. The
Board provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange
risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of
excess liquidity.
(a)
Derivative Financial Instruments
Derivative Financial Instruments are only used for economic hedging purposes and not as trading or speculative instruments. The
Group has the following derivative financial instruments:
Current assets
Forward foreign exchange contracts – cash flow hedges
Total current derivative financial instrument assets
Current liabilities
Forward foreign exchange contracts – cash flow hedges
Interest rate swap contracts – cash flow hedges
Total current derivative financial instrument liabilities
2016
$m
-
-
4.2
3.8
8.0
2015
$m
6.8
6.8
-
4.1
4.1
Classification of derivatives
(i)
Derivatives are classified as held for trading and accounted for at fair value through profit or loss unless they are designated as
hedges. They are presented as current assets or liabilities if they are expected to be settled within 12 months after the end of the
reporting period.
The Group’s accounting policy for its cash flow hedges is set out in note 2(l). For hedged forecast transactions that result in the
recognition of a non-financial asset, the Group has elected to include related hedging gains and losses in the initial measurement of
the cost of the asset.
(ii)
For information about the methods and assumptions used in determining the fair value of derivatives please refer to note 2(m).
Fair value measurement
(b) Market risk
Foreign exchange risk
(i)
Group companies are required to hedge their foreign exchange risk exposure using forward contracts transacted with the finance
department.
Super Retail Group Limited | ANNUAL REPORT 2016 85
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Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
18.
Financial risk management (continued)
(b) Market risk (continued)
Foreign exchange risk (continued)
(i)
The Group operates internationally and is exposed to foreign exchange risk arising from currency exposures to the United States
dollar (USD) and Chinese Yuan (CNY).
Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated in a
currency that is not the entity’s functional currency.
The Group’s risk management policy is to hedge between 50% and 75% of anticipated foreign currency purchases for the
subsequent 4 months and up to 50% of anticipated foreign currency purchases for the following 5 to 12 month period.
Instruments used by the Group
The economic entity retails products including some that have been imported from Asia, with contract pricing denominated in USD.
In order to protect against exchange rate movements, the economic entity has entered into forward exchange rate contracts to
purchase USD. The contracts are timed to mature in line with forecasted payments for imports and cover forecast purchases for the
subsequent twelve months, on a rolling basis. The Group does not currently enter into forward exchange rate contracts to purchase
CNY.
Exposure
The Group’s exposure to foreign currency risk at the end of the reporting period was as follows:
Trade receivables
Trade payables
Forward exchange contract - foreign currency (cash flow hedges)
Buy United States dollars and sell Australian dollars with maturity
- 0 to 4 months
- 5 to 12 months
Trade receivables
Trade payables
2016
USD
$m
2.3
16.9
47.0
74.0
121.0
2016
CNY
$m
0.4
2.0
2015
USD
$m
1.5
8.0
54.0
80.0
134.0
2015
CNY
$m
0.2
3.9
The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised directly in
equity. When the cash flows occur, the Group adjusts the initial measurement of the component recognised in the consolidated
balance sheet by the related amount deferred in equity. In the year ended 2 July 2016, no hedges were designated as ineffective
(2015: nil).
Gains and losses arising from hedging contracts terminated prior to maturity are also carried forward until the designated hedged
transaction occurs.
The following gains, losses and costs have been deferred as at the balance date:
- unrealised (losses) / gains / on USD foreign exchange contracts
- unrealised (losses) / gains / on interest rate swaps
Total unrealised (losses) / gains
2016
$m
(4.2)
(3.8)
(8.0)
2015
$m
6.8
(4.1)
2.7
86 Super Retail Group Limited | ANNUAL REPORT 2016
86
Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
18.
Financial risk management (continued)
(b) Market risk (continued)
(i) Foreign exchange risk (continued)
Group sensitivity
Based on the financial instruments held at 2 July 2016, had the Australian dollar weakened/strengthened by 10% against other
currencies with all other variables held constant, the impact on the Group’s post-tax profit would have been nil, on the basis that
the financial instruments would have been designated as cash flow hedges and the impact upon the foreign exchange movements
of other financial assets and liabilities is negligible.
Equity would have been $10.7 million lower/$13.1 million higher (2015: $11.9 million lower/$14.5 million higher) had the Australian
dollar weakened/strengthened by 10% against other currencies, arising mainly from forward foreign exchange contracts designated
as cash flow hedges. The impact on other Group assets and liabilities as a result of movements in exchange rates are not material.
A sensitivity of 10% was selected following review of historic trends.
(ii) Cashflow and fair value interest rate risk
Instruments used by the Group - interest rate swap contracts
Bank loans of the economic entity currently bear an average variable interest rate of 3.28% (2015: 3.49%). It is policy to protect part
of the forecasted debt from exposure to increasing interest rates. Accordingly, the economic entity has entered into interest rate
swap contracts, under which it is obliged to receive interest at variable rates and to pay interest at fixed rates. The contracts are
settled on a net basis and the net amount receivable or payable at the reporting date is included in other receivables or other
payables.
At period end, the Group was a party to multiple interest rate swaps for a total nominal value of $155.0 million (2015: $175.0
million). The Group also has $200.0 million (2015: $75.0 million) interest rate swaps in place for future periods up until November
2018 at an average rate of 2.85%.
The contracts require settlement of net interest receivable or payable each 90 days. The settlement dates coincide with the dates
on which interest is payable on the underlying debt. Swaps on the current debt balance cover approximately 37.0% (2015: 45.0%)
of the loan principal outstanding. The average fixed interest rate is 3.35% (2015: 3.37%).
Interest rate risk exposures
The economic entity’s exposure to interest rate risk and the effective weighted average interest rate by maturity periods is set out
in the following table:
Notes
7
12
13
14
2016
Financial assets
Cash and cash equivalents
Trade and other receivables
Total financial assets
Weighted average rate of interest
Financial liabilities
Trade and other payables
Interest-bearing liabilities
Provisions (employee benefits)
Total financial liabilities
Weighted average rate of interest
Net financial (liabilities) / assets
Floating
interest
rate
$m
13.8
-
13.8
1.75%
-
415.0
-
415.0
3.28%
(401.2)
Fixed interest maturing in
1 year or
less
$m
Over 1 to 5
years
$m
More than
5 years
$m
Non-
interest
bearing
$m
Total
$m
15.6
42.7
58.3
292.8
415.8
53.8
762.4
-
-
-
-
0.8
-
0.8
(0.8)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1.8
42.7
44.5
292.8
-
53.8
346.6
(302.1)
(704.1)
Super Retail Group Limited | ANNUAL REPORT 2016 87
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Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
18.
Financial risk management (continued)
(b) Market risk (continued)
(ii) Cashflow and fair value interest rate risk (continued)
Notes
7
12
13
14
2015
Financial assets
Cash and cash equivalents
Trade and other receivables
Total financial assets
Weighted average rate of interest
Financial liabilities
Trade and other payables
Interest-bearing liabilities
Provisions (employee benefits)
Total financial liabilities
Weighted average rate of interest
Net financial (liabilities) / assets
Floating
interest
rate
$m
11.4
-
11.4
2.00%
-
389.4
-
389.4
3.49%
(378.0)
Fixed interest maturing in
1 year or
less
$m
Over 1 to
5 years
$m
More than
5 years
$m
-
-
-
-
1.6
-
1.6
-
-
-
-
1.0
-
1.0
(1.6)
(1.0)
-
-
-
-
-
-
-
-
Non-
interest
bearing
$m
1.7
29.3
31.0
305.3
-
45.5
350.8
Total
$m
13.1
29.3
42.4
305.3
392.0
45.5
742.8
(319.8)
(700.4)
Group sensitivity
The Group’s main interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Group to cash
flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. During the 2016 and 2015
financial years, the Group’s borrowings were at variable rates and were denominated in Australian dollars.
As at the reporting date, the Group had the following variable rate borrowings and interest rate swap contracts outstanding:
Bank overdrafts and bank loans
Interest rate swaps
An analysis by maturities is provided in (d) below.
2016
$m
416.2
155.0
2015
$m
390.2
175.0
The Group risk management policy is to maintain fixed interest rate hedges of approximately 40% of anticipated debt levels over a 3
year period. The Group utilises interest rate swaps to hedge its interest rate exposure on borrowings.
As at 2 July 2016, if interest rates had changed by +/- 100 basis points from the year-end rates with all other variables held constant,
post-tax profit and equity for the year would have been $1.8 million lower/higher (2015: $1.7 million lower/higher), mainly as a
result of higher/lower interest expense on bank loans.
(c) Credit risk
Credit risk arises from cash and cash equivalents, favourable derivative financial instruments and deposits with banks and financial
institutions, as well as credit exposures to wholesale and retail customers, including outstanding receivables and committed
transactions.
(i) Risk management
Credit risk is managed on a Group basis. For banks and financial institutions, only independently rated parties with a minimum
rating of ‘A’ are accepted.
If wholesale customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, risk control
assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual
risk limits are set based on internal or external ratings in accordance with limits set by the board. The compliance with credit limits
by wholesale customers is regularly monitored by line management.
88 Super Retail Group Limited | ANNUAL REPORT 2016
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Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
18.
Financial risk management (continued)
(c)
Credit risk (continued)
(i) Risk management (continued)
Sales to retail customers are required to be settled in cash or using major credit cards, mitigating credit risk. There are no significant
concentrations of credit risk, whether through exposure to individual customers, specific industry sectors and/or regions.
(ii) Security
For wholesale customers without credit rating, the Group generally retains title over the goods sold until full payment is received,
thus limiting the loss from a possible default to the profit margin made on the sale. For some trade receivables the Group may also
obtain security in the form of guarantees, deeds of undertaking or letters of credit which can be called upon if the counterparty is in
default under the terms of the agreement.
(d) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount
of committed credit facilities to meet obligations when due. Due to the dynamic nature of the underlying businesses, finance
department maintains flexibility in funding by maintaining availability under committed credit lines.
Management monitors rolling forecasts of the Group’s liquidity reserve (comprising the undrawn borrowing facilities below) and
cash and cash equivalents on the basis of expected cash flows. In addition, the Group’s liquidity management policy involves
projecting cash flows in major currencies and considering the level of liquid assets necessary to meet these.
(i) Financing arrangements
Unrestricted access was available at balance date to the following lines of credit:
Total facilities
- bank debt funding facility
- multi-option facility (including indemnity/guarantee)
Total
Facilities used at balance date
- bank debt funding facility
- multi-option facility (including indemnity/guarantee)
Total
Unused balance of facilities at balance date
- bank debt funding facility
- multi-option facility (including indemnity/guarantee)
Total
2016
$m
615.0
20.0
635.0
416.0
3.7
419.7
199.0
16.3
215.3
2015
$m
615.0
20.0
635.0
389.5
4.8
394.3
225.5
15.2
240.7
Current interest rates on bank loans of the economic entity are 2.88% - 3.33% (2015: 3.19% - 3.68%).
Maturities of financial liabilities
(ii)
The following tables analyse the Group’s financial liabilities into relevant maturity groupings based on their contractual maturities
for:
-
-
all non-derivative financial liabilities; and
net and gross settled derivative financial instruments for which the contractual maturities are essential for an understanding of
the timing of the cash flows.
The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying
balances as the impact of discounting is not significant. For interest rate swaps the cash flows have been estimated using forward
interest rates applicable at the end of the reporting period.
Super Retail Group Limited | ANNUAL REPORT 2016 89
89
Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
18.
Financial risk management (continued)
(d) Liquidity risk (continued)
(ii)
Maturities of financial liabilities (continued)
Less than
6 months
$m
6-12
months
$m
Between
1 and 2
years
$m
Between
2 and 5
years
$m
Over 5
years
$m
Total
contractual
cash flows
$m
247.0
6.8
0.4
254.2
-
11.5
0.4
11.9
-
221.7
-
221.7
-
210.2
-
210.2
1.2
1.0
1.3
0.3
(103.4)
107.0
4.8
(59.1)
60.9
2.8
-
-
1.3
-
-
0.3
-
-
-
-
-
-
-
-
Less than
6 months
$m
6-12
months
$m
Between
1 and 2
years
$m
Between
2 and 5
years
$m
Over 5
years
$m
Total
contractual
cash flows
$m
265.0
7.4
0.9
273.3
-
6.8
0.7
7.5
-
101.8
1.0
102.8
-
313.2
-
313.2
1.1
1.0
1.9
0.6
(112.9)
108.3
(3.5)
(61.0)
60.5
0.5
-
-
1.9
-
-
0.6
-
-
-
-
-
-
-
-
Carrying
amount
(assets) /
liabilities
$m
247.0
416.2
0.8
664.0
247.0
450.2
0.8
698.0
3.8
3.8
(162.5)
167.9
9.2
-
4.2
8.0
Carrying
amount
(assets) /
liabilities
$m
265.0
390.2
2.6
657.8
265.0
429.2
2.6
696.8
4.6
4.1
(173.9)
168.8
(0.5)
(6.8)
-
(2.7)
2016
Non-derivatives
Trade and other payables
Interest-bearing liabilities(1)
Finance lease liabilities
Total non-derivatives
Derivatives
Net settled (Interest Rate Swaps)
Forward exchange contracts used for
hedging:
Gross settled
- (inflow)
- outflow
Total derivatives
(1)Excludes finance leases.
2015
Non-derivatives
Trade and other payables
Interest-bearing liabilities(1)
Finance lease liabilities
Total non-derivatives
Derivatives
Net settled (Interest Rate Swaps)
Forward exchange contracts used for
hedging:
Gross settled
- (inflow)
- outflow
Total derivatives
(1)Excludes finance leases.
90 Super Retail Group Limited | ANNUAL REPORT 2016
90
Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
19.
(a)
Capital management
Risk management
The Group’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can
continue to provide returns for shareholders and benefits for other stakeholders, and maintain an optimal capital structure to
reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return
capital to shareholders, issue new shares or sell assets to reduce debt.
The Group monitors overall capital on the basis of the gearing ratio. The ratio is calculated as net debt divided by total capital. Net
debt is calculated as total borrowings less cash and cash equivalents. Total capital is calculated as equity as shown in the
consolidated balance sheet (including non-controlling interests) plus net debt.
During 2016 the Group’s strategy, which was unchanged from 2015, was to ensure that the gearing ratio remained below 50%. This
target ratio range excludes the short-term impact of acquisitions. The gearing ratios at 2 July 2016 and 27 June 2015 were as
follows:
Total borrowings
Less: Cash & cash equivalents
Net Debt
Total Equity
Total Capital
Gearing Ratio
2016
$m
415.8
(15.6)
400.2
734.0
1,134.2
35.3%
2015
$m
392.0
(13.1)
378.9
765.3
1,144.2
33.1%
The Group monitors ongoing capital on the basis of the fixed charge cover ratio. The ratio is calculated as earnings before net
finance costs, income tax, depreciation, amortisation and store and rental expense divided by fixed charge obligations (being
finance costs and store and distribution centre rental expenses). Rental expenses are calculated net of straight line lease
adjustments, while finance costs exclude non-cash mark-to-market losses or gains on interest rate swaps.
During 2016 the Group’s strategy, which was unchanged from 2015, was to maintain a fixed charge cover ratio of around 2.0 times
and a net debt to EBITDA of below 2.5 times. The fixed charge cover and net debt to EBITDA ratios at 2 July 2016 and 27 June 2015
were as follows:
Profit attributable to Owners of Super Retail Group Limited
Add: Taxation expense
Net finance costs
Depreciation and amortisation (excludes Goodwill impairment)
EBITDA
Rental expense
EBITDAR
Net finance costs
Rental expense
Fixed charges
Fixed charge cover ratio
Net debt to EBITDA ratio
(1) 2015 includes continuing and discontinued operations.
Fixed charge cover ratio from normalised net profit after tax(2)
Net debt to EBITDA ratio from normalised net profit after tax(2)
(2) Normalised EBITDAR is $470.0m (2015: $444.3m) and normalised EBITDA is $245.7m (2015: $231.0m)
2016
$m
62.8
29.8
19.4
86.2
198.2
241.2
439.4
19.4
241.2
260.6
1.69
2.02
1.93
1.63
2015(1)
$m
81.1
38.5
21.9
67.1
208.6
222.3
430.9
21.9
222.3
244.2
1.76
1.82
1.89
1.64
Loan Covenants
(i)
Financial covenants are provided by Super Retail Group Limited with respect to leverage, gearing, fixed charges coverage and
shareholder funds. The Group has complied with the financial covenants of its borrowing facilities during the 2016 and 2015
financial years. There are no assets pledged as security in relation to the unsecured debt in the 2016 financial year (2015: nil).
Super Retail Group Limited | ANNUAL REPORT 2016 91
91
Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
19.
Capital management (continued)
(b)
Dividends
Ordinary shares
Dividends paid by Super Retail Group Limited during the 2016 financial year were as
follows:
Final dividend for the period ended 27 June 2015 of 21.5 cents per share (2014: 21.5
cents per share) paid on 2 October 2015. Fully franked based on tax paid @ 30%
Interim dividend for the period ended 26 December 2015 of 20.0 cents (2015: 18.5
cents per share) paid on 8 April 2016. Fully franked based on tax paid @ 30%
Total dividends provided and paid
Dividends paid in cash or satisfied by the issue of shares under the dividend
reinvestment plan were as follows:
-
-
paid in cash
satisfied by issue of shares purchased on market
Dividends not recognised at year end
Subsequent to year end, the Directors have declared the payment of a final dividend of
21.5 cents per ordinary share (2015: 21.5 cents per ordinary share), fully franked based
on tax paid at 30%.
The aggregate amount of the dividend expected to be paid on 7 October 2016, out of
retained profits as at 2 July 2016, but not recognised as a liability at year end, is
Franking credits
The franked portions of dividends paid after 2 July 2016 will be franked out of existing
franking credits and out of franking credits arising from the payments of income tax in
the years ending after 2 July 2016.
Franking credits remaining at balance date available for dividends declared after the
current balance date based on a tax rate of 30%
2016
$m
2015
$m
42.4
39.5
81.9
72.3
9.6
81.9
42.2
36.5
78.7
74.6
4.1
78.7
42.4
42.4
121.9
106.7
The above amounts represent the balance of the franking account as at the end of the financial period, adjusted for:
- franking credits that will arise from the payment of the current tax liability; and
- franking debits that will arise from the payment of the dividend as a liability at the reporting date.
The amount recorded above as the franking credit amount is based on the amount of Australian income tax paid or to be paid in
respect of the liability for income tax at the balance date.
The impact on the franking account of the dividend recommended by the directors since year end will be a reduction in the
franking account of $18,168,481 (2015: $18,154,960). The recommended dividend has not been recognised as a liability at year
end.
20.
Key management personnel disclosures
(a)
Key management personnel compensation
Short-term employee benefits
Long-term employee benefits
Post-employment benefits
Share-based payments
Termination benefits
The key management personnel remuneration in some instances has been paid by a subsidiary.
Loans to key management personnel
There were no loans to individuals at any time.
92 Super Retail Group Limited | ANNUAL REPORT 2016
92
2016
$
6,358,770
51,826
221,046
453,190
-
7,084,832
2015
$
5,145,292
51,183
224,263
96,533
232,004
5,749,275
Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
20.
Key management personnel disclosures (continued)
Other transactions with key management personnel
Aggregate amounts of each of the above types of other transactions with key management personnel of Super Retail Group Limited:
2015
$
23,192,162
Amounts paid to key management personnel as shareholders
Dividends
2016
$
25,261,350
21.
Remuneration of auditors
During the period 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
Assurance services
(a)
(i)
Audit and review of financial statements
Audit and review of subsidiaries(1)
Other assurance
Taxation services
Total remuneration for audit and other assurance services
(ii)
Tax compliance services, including review of Company income tax returns(2)
Customs Advice
Other services
Total remuneration for taxation services
(iii)
Digital innovation support(3)
Total remuneration for advisory services
Total remuneration of PricewaterhouseCoopers Australia
(b) Network firms of PricewaterhouseCoopers Australia
(i)
Tax compliance services, including review of Company income tax returns
Taxation services
Total remuneration for taxation services
Total remuneration of network firms of PricewaterhouseCoopers Australia
2016
$
423,700
88,230
53,500
565,430
211,244
4,590
215,834
340,290
340,290
1,121,554
33,845
33,845
33,845
2015
$
473,854
20,000
10,000
503,854
101,692
22,675
124,367
-
-
628,221
26,025
26,025
26,025
Total auditors’ remuneration
(1) Increase due to audit requirements of partially owned subsidiaries.
(2) Increase due to indirect taxes review resulting in refunds being received.
(3) Engagement in relation to digital capability analysis and support awarded under a competitive tender.
1,155,399
654,246
It is the Group’s policy to employ PricewaterhouseCoopers on assignments additional to their statutory audit duties where
PricewaterhouseCoopers’ expertise and experience with the Group are important. These assignments are principally tax advice and
due diligence reporting on acquisitions, or where PricewaterhouseCoopers is awarded assignments on a competitive basis. It is the
Group’s policy to seek competitive tenders for all major consulting projects.
22.
Contingencies
Guarantees
Guarantees issued by the bankers of the Group in support of various rental arrangements
for certain retail outlets and support of banking arrangements for associates.
The maximum future rental payments guaranteed amount to:
2016
$m
2015
$m
3.7
5.3
From time to time the Group is subject to legal claims as a result of its operations. An immaterial contingent liability may exist for
any exposure over and above current provisioning levels.
Super Retail Group Limited | ANNUAL REPORT 2016 93
93
Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
23.
Commitments
Capital commitments
Commitments for the acquisition of plant and equipment contracted for at the
reporting date but not recognised as liabilities payable:
Within one year
Total capital commitments
Lease commitments
Commitments in relation to operating lease payments for property and motor vehicles
under non-cancellable operating leases are payable as follows:
Within one year
Later than one year but not later than five years
Later than five years
Less lease straight lining adjustment (note 12)
Total lease commitments
Future minimum lease payments expected to be received in relation to non-cancellable
sub-leases of operating leases
2016
$m
2015
$m
4.0
4.0
202.0
596.7
157.1
(45.8)
910.0
2.5
4.5
4.5
193.0
561.5
201.0
(40.3)
915.2
0.2
The Group leases various offices, warehouses and retail stores under non-cancellable operating leases. The leases have varying
terms, escalation clauses and renewal rights. On renewal the terms of the leases are renegotiated.
Finance leases
The Group leases various plant and equipment with a carrying amount of $1.2m (2015: $2.6m) under finance leases expiring within
one year.
Commitments in relation to finance leases are payable as follows:
Within one year
Later than one year but not later than five years
Minimum lease payments
Future finance charges
Total lease liabilities
Representing lease liabilities:
Current (note 13)
Non-current (note 13)
2016
$m
0.8
-
0.8
-
0.8
0.8
0.0
0.8
2015
$m
1.8
1.0
2.8
(0.2)
2.6
1.6
1.0
2.6
24.
Related party transactions
Transactions with related parties are at arm’s length unless otherwise stated.
Parent entities
(a)
The parent entity within the Group is Super Retail Group Limited, which is the ultimate Australian parent.
Subsidiaries
(b)
Interests in subsidiaries are set out in note 34 – Investments in controlled entities.
Key Management Personnel
(c)
Disclosures relating to key management personnel are set out in note 20 – Key management personal disclosures.
94 Super Retail Group Limited | ANNUAL REPORT 2016
94
Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
24.
Related party transactions (continued)
Directors
(d)
The names of the persons who were Directors of Super Retail Group Limited during the financial period are R J Wright, R A Rowe, R J
Skippen, S A Pitkin, D J Eilert, L K Inman and P A Birtles.
Amounts due from related parties
(e)
Amounts due from Directors of the consolidated entity and their director-related entities are shown below in note 24(f).
(f)
Loans to / (from) Related Parties
Loans to / (from) Related Parties
Loan from related parties(1)
Loan to related parties(2)
2016
$
-
259,088
2015
$
(955,687)
50,000
(1) Loan from Sports and Entertainment Limited (SEL), an entity with a non-controlling interest in Infinite Retail Pty Ltd (Infinite Retail), a controlled
entity of the Group. This loan has been repaid in November 2015 as part of the transaction resulting in the Group’s change in ownership interest
in Infinities Retail, refer to note 25(a) - Business combinations. In the prior financial year, the loan was deemed to be on an arms-length basis,
attracting interest at a rate of 6.9%.
(2) Loans to James Woodford Pty Ltd, an entity with a non-controlling interest in Youcamp Pty Ltd, a controlled entity of the Group and Australian
Creatives Online Pty Ltd, an entity with a non-controlling interest in Fixed Price Car Service Pty Ltd, a controlled entity of the Group. These loans
were extended as part of the Group’s acquisition arrangements with Youcamp Pty Ltd and Fixed Price Car Service Pty Ltd, refer to note 25(b) & (d)
- Business combinations. These loans are deemed to be on an arms-length basis, attracting interest at a rate of 7.0% (2015: nil).
Transactions with other related parties
(g)
Aggregate amounts included in the determination of profit from ordinary activities before income tax that resulted from
transactions with related parties:
Purchase of goods and services
Store lease payment(1)
Inventories(2)
Royalties for brand name(3)
Management fees(4)
Finance costs(5)
2016
$
2015
$
12,064,672
1,163,091
551,637
-
11,087,692
2,237,048
486,157
275,000
67,260
158,102
(1) Rent on properties, with rates which are deemed to be on an arms-length basis. Rent payable at year-end was nil (2015: nil).
(2) Inventories sourced from Velocity Brand Management Pty Ltd (VBML) a sports licensing agency and it’s operating entities Velocity Brand
Management NZ Limited and VBM Manufacturing Pty Ltd which are deemed to be on an arms-length basis.
(3) Royalties are payable to VBML which are deemed to be on an arms-length basis.
(4) Management services are provided by VBML which are determined to be on an arms-length basis.
(5) Interest accrued relating to the related party loans between James Woodford Pty Ltd and Australian Creatives Online Pty Ltd at a rate of 7.0%
(2015: nil), in addition to motor vehicle finance lease charges paid to VBML at a rate of 6.22% (2015: 6.22%). Includes also interest paid and
accrued in the prior year relating to the related party loan to SEL at a rate of 6.9% which was repaid in November 2015. These transactions are
determined to be on an arms-length basis.
25.
Business combinations
2016
There were no business combinations during the 2016 financial year. The Group did however change its ownership interest in
Infinite Retail Pty Ltd and Fixed Price Car Service Australia Pty Ltd as detailed below.
Infinite Retail Pty Ltd
(a)
On 4 November 2015, the shareholders of Infinite Retail Pty Ltd, entered into an agreement to restructure its shareholder
ownership and to issue new shares resulting in an increase in the Group’s ownership interest to 95% from 50.05% for a total
consideration of $5.0 million for the new share issue. In recognising the change in ownership, the Group reassessed the value of the
Group’s non-controlling interest (NCI) held in Equity Reserves at the grant date, 4 November 2015, to reflect the change in NCI from
49.95% to 5%. The differential was transferred to a separate NCI Equity Reserve.
Super Retail Group Limited | ANNUAL REPORT 2016 95
95
Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
25.
Business combinations (continued)
Fixed Price Car Service Australia Pty Ltd
(b)
On 12 May 2016, the shareholders of Fixed Price Car Service Australia Pty Ltd, entered into an agreement to issue shares resulting in
an increase in the Group’s ownership interest to 61.85% from 51% for a total consideration of $1.0 million. In recognising the
change in ownership, the Group reassessed the value of the Group’s non-controlling interest (NCI) held in Equity Reserves at the
grant date, 12 May 2016, to reflect the change in NCI from 49% to 38.15%. The differential was transferred to a separate NCI Equity
Reserve.
2015
During the 2015 financial year, the Group entered into several strategic business combination transactions, enhancing the Group’s
diverse business segment portfolio. The details of each business combination, consideration paid, net assets acquired, and
provisional goodwill assumed are outlined below. Entities acquired include:
•
•
•
•
Infinite Retail Pty Ltd (Infinite Retail)
Fixed Price Car Service Australia Pty Ltd (FPCS)
Oceania Bicycles Pty Ltd (Oceania)
Youcamp Pty Ltd (Youcamp)
2015
(i) Consideration
Cash paid
Fair value of the Group’s previous equity accounted holding
Fair value of non-controlling interest previous equity
accounted holding
Total consideration
(ii) Net assets
ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Total current assets
Property, plant & equipment
Intangible assets
Total non-current assets
Total assets
LIABILITIES
Trade and other payables
Provisions
Total current liabilities
Interest-bearing liabilities
Total non-current liabilities
Total liabilities
NET ASSETS
Infinite
Retail(a)
$m
-
5.3.
5.3.
10.6.
0.5
3.4
6.9
10.8
1.0
-
1.0
11.8
5.7
0.1
5.8
5.8
5.8
11.6
0.2
FPCS(b)
$m
Oceania(c) Youcamp(d)
$m
$m
1.5
-
1.5
3.0
1.5
-
-
1.5
-
0.2
0.2
1.7
-
-
-
-
-
-
1.7
0.5
-
-
0.5
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.5
-
0.5
1.0
0.5
-
-
0.5
-
-
-
0.5
-
-
-
-
-
-
0.5
Total
$m
2.5
5.3
7.3
15.1
2.5
3.4
6.9
12.8
1.0
0.2
1.2
14.0
5.7
0.1
5.8
5.8
5.8
11.6
2.4
(iii) Goodwill
15.1
Total consideration
(2.4)
Fair value of net identifiable assets acquired
Fair value of put option liability extinguished(1)
(0.5)
12.2
Provisional goodwill
6.2
Attributable to the Group
Attributable to non-controlling interests
6.0
(1) On acquisition of Oceania in 2008 a put option liability was recognised, reflecting an estimate of the potential obligation under the put agreement.
This liability was extinguished as part of the wider business combination transaction. Refer to note 25(c) - Business combinations for further detail.
10.6.
(0.2)
-
10.4.
5.2.
5.2.
0.5
-
(0.5)
-
-
-
1.0
(0.5)
-
0.5
0.3
0.2
3.0
(1.7)
-
1.3
0.7
0.6
96 Super Retail Group Limited | ANNUAL REPORT 2016
96
Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
25.
Business combinations (continued)
(a)
Infinite Retail Pty Ltd
On 14 July 2014, an additional 2 shares were acquired, increasing the ownership from 50% to 50.05%, for a cash consideration of
$5,300 per share. Infinite Retail Pty Ltd (Infinite Retail) is a sports merchandising business specialist. The entity changed from being
an associate to a controlled entity in accordance with AASB 10 Consolidated Financial Statements.
As at the acquisition date, 14 July 2014, the Group elected to measure the non-controlling interest in the acquiree at the
proportionate share of its interest in the acquiree’s identifiable net assets. The previously held interests were fair valued and
formed part of the consideration transferred. The Group recognised a gain of $0.6 million as a result of measuring at fair value it
50% equity interest in Infinite Retail Pty Ltd held before the business combination. The gain is included in other income in the
Group’s statement of comprehensive income for the year ended 27 June 2015.
The goodwill is attributable mainly to the licensing and brand management programs developed in Australia, New Zealand and
internationally and the synergies expected to be achieved from integrating the businesses into the Group’s existing Sporting
Business. Goodwill will not be deductible for tax purposes.
The acquired business contributed revenues of $29.1 million for the period 14 July 2014 to 27 June 2015 and a loss after tax of $3.9
million attributable to the Owners of Super Retail Group Limited. Included in the Sports Division segment result is a loss of $3.6
million. The Group has accounted for the entity as if it had been acquired on 29 June 2014, based on insignificant net trading during
the period from 29 June 2014 to 14 July 2014.
(b)
Fixed Price Car Service Australia Pty Ltd
On 24 December 2014, the Group acquired a 51% shareholding in Fixed Price Car Service Australia Pty Ltd, an online car servicing
solution, for a cash consideration of $1.5 million.
The Group elected to measure the non-controlling interest in the acquiree at the proportionate share of its interest in the acquiree’s
identifiable net assets. The goodwill is attributable mainly to the internally developed software and access to management, which is
not separately recognised. Goodwill will not be deductible for tax purposes.
The acquired business contributed revenues of $0.1 million for the period 24 December 2014 to 27 June 2015 and a loss after tax of
$0.3 million attributable to the Owners of Super Retail Group Limited. As the acquired business was non-trading prior to the
acquisition date, these results are reflective of the contribution to the Group’s results as if it the acquisition date had been 29 June
2014.
(c)
Oceania Bicycles Pty Ltd
On 25 June 2015, the Group entered into a Deed of Settlement and Release to acquire the remaining 50% non-controlling interest
shareholding in Oceania Bicycles Pty Ltd (Oceania), an Australian bicycle, parts and accessories distributor, for a cash consideration
of $0.5 million, resulting in the ownership interest in this entity increasing to 100%. Oceania Bicycles Limited is a subsidiary of
Oceania Bicycles Pty Ltd and as such, 100% ownership interest was also gained of this entity as part of this transaction.
The Group had acquired an initial 50% shareholding in Oceania on 23 June 2008. The Group had elected to deem control had
passed on acquisition due to the provisions of a put agreement on the remaining 50% shares, entered into at this date. As such the
Group consolidated 100% of their results and net assets since acquisition date. No additional net assets were recognised at 25 June
2015.
(d)
Youcamp Pty Ltd
On 24 June 2015, the Group completed the acquisition of a 51% shareholding in Youcamp Pty Ltd, an online accommodation
solution connecting a community of private landowners and customers, for a cash consideration of $0.5 million.
The Group elected to measure the non-controlling interest in the acquiree at the proportionate share of its interest in the acquiree’s
identifiable net assets. The goodwill is attributable mainly to access to management which is not separately recognised. Goodwill
will not be deductible for tax purposes.
The acquired business contributed revenues of $nil million for the period 24 June 2015 to 27 June 2015 and a profit after tax of $nil
million to the Group’s results. As the acquired business was non-trading prior to the acquisition date, these results are reflective of
the contribution to the Group’s results as if it the acquisition date had been 29 June 2014.
Super Retail Group Limited | ANNUAL REPORT 2016 97
97
Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
26.
Discontinued operations
(a)
Description
In the previous financial year, on 19 February 2015, the Group announced the decision to exit the FCO business with an objective of
ceasing operations by the end of the financial year. As at the end of the 2015 financial year, all stores had ceased trading.
(b)
Financial performance and cash flow information
Revenue
Expenses
Loss before income tax of discontinued operations
Income tax expense / (benefit)
Loss after income tax of discontinued operations
Net cash (outflow) / inflow from operating activities
Net (decrease) / increase in cash generated by the division
27.
Net tangible asset backing
Net tangible asset per ordinary share
2016
$m
-
-
-
-
-
(0.4)
(0.4)
2016
Cents
$0.18
2015
$m
31.2
(47.4)
(16.2)
-
(16.2)
(0.5)
(0.5)
2015
Cents
$0.22
Net tangible asset per ordinary share is calculated based on Net Assets of $734.0 million (2015: $765.3 million) less intangible assets
of $772.4 million (2015: $801.3 million) adjusted for the associated deferred tax liability of $74.1 million (2015: $80.1 million). The
number of shares used in the calculation was 197,177,318 (2015: 197,030,571).
28.
Deed of cross guarantee
Super Retail Group Limited, A-Mart All Sports Pty Ltd, Auto Trade Direct Pty Ltd, Workout World Pty Ltd, Coyote Retail Pty Limited,
Foghorn Holdings Pty Ltd, Goldcross Cycles Pty Ltd, Quinns Rock Pty Ltd, Ray’s Outdoors Pty Ltd, Rebel Group Limited, Rebel
Management Services Pty Limited, Rebel Sport Limited, Rebel Wholesale Pty Limited, Rebelsport.com Pty Limited, SCA Equity Plan
Pty Ltd, SRG Leisure Retail Pty Ltd, SRGS Pty Ltd, Super Cheap Auto Pty Ltd, Super Retail Commercial Pty Ltd and Super Retail Group
Services Pty Ltd are parties to a Deed of Cross Guarantee under which each company guarantees the debts of the others. By
entering into the Deed, the wholly owned entities have been relieved from the requirement to prepare a financial report and
directors’ report under Class Order 98/1418 (as amended) issued by the Australian Securities and Investments Commission.
98 Super Retail Group Limited | ANNUAL REPORT 2016
98
Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
28.
Deed of cross guarantee (continued)
(a)
Consolidated Comprehensive Income Statement and Summary of Movements in Consolidated Retained Earnings
The above companies represent a Closed Group for the purposes of the Class Order, and as there are no other parties to the Deed
of Cross Guarantee that are controlled by Super Retail Group Limited, they also represent the Extended Closed Group.
Set out below is a consolidated comprehensive income statement and a summary of movements in consolidated retained earnings
for the period ended 2 July 2016 of the Closed Group.
Consolidated Comprehensive Income Statement
Revenue from continuing operations
Other income from continuing operations
Total revenues and other income
Cost of sales of goods
Other expenses from ordinary activities
- selling and distribution
- marketing
- occupancy
- administration
Net finance costs
Total expenses
Profit before income tax
Income tax expense
Profit for the period
Statement of comprehensive income
Profit for the period
Other comprehensive income
Items that may be reclassified to profit or loss
Changes in the fair value of cash flow hedges
Other comprehensive income for the period, net of tax
Total comprehensive income for the period
Summary of movements in consolidated retained earnings
Retained profits at the beginning of the financial period
Profit for the period
Dividends paid
Retained profits at the end of the financial period
2016
$m
2,284.4
1.5
2,285.9
2015
$m
2,110.9
11.3
2,122.2
(1,278.2)
(1,184.3)
(299.1)
(82.0)
(207.4)
(299.0)
(19.1)
(2,184.8)
101.1
(28.8)
72.3
72.3
(7.5)
(7.5)
64.8
203.8
72.3
(81.9)
194.2
(276.6)
(77.1)
(178.2)
(267.1)
(19.1)
(2,002.4)
119.8
(38.2)
81.6
81.6
6.3
6.3
87.9
200.9
81.6
(78.7)
203.8
Super Retail Group Limited | ANNUAL REPORT 2016 99
99
Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
28.
Deed of cross guarantee (continued)
(b)
Consolidated Balance Sheet
Set out below is a consolidated balance sheet as at 2 July 2016 of the Closed Group.
2016
$m
10.7
44.7
-
-
469.9
525.3
37.5
223.3
764.3
1,025.1
1,550.4
232.8
5.6
6.6
8.0
55.1
308.1
40.7
410.0
25.6
26.6
502.9
811.0
739.4
542.3
2.9
194.2
739.4
2015
$m
4.6
38.7
2.9
6.8
469.6
522.6
18.9
211.0
792.1
1,022.0
1,544.6
249.3
1.4
-
4.1
40.7
295.5
35.8
388.6
53.7
15.2
493.3
788.8
755.8
542.3
9.7
203.8
755.8
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Current tax assets
Derivative financial instruments
Inventories
Total current assets
Non-current assets
Other financial assets
Property, plant and equipment
Intangible assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Interest-bearing liabilities
Current tax liabilities
Derivative financial instruments
Provisions
Total current liabilities
Non-current liabilities
Trade and other payables
Interest-bearing liabilities
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
NET ASSETS
EQUITY
Contributed equity
Reserves
Retained profits
TOTAL EQUITY
100 Super Retail Group Limited | ANNUAL REPORT 2016
100
Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
29.
Reconciliation of profit from ordinary activities after income tax to net cash inflow from operating
activities
Profit from ordinary activities after related income tax
Depreciation and amortisation
Impairment charge
Net gain on sale of non-current assets
Non-cash employee benefits expense/share based payments
Fair value gain on acquisition of associate
Profit for the period attributable to non-controlling interests
Net finance costs
Change in operating assets and liabilities, net of effects from the
purchase of controlled entities and the sale of the service entity
- (increase) / decrease in receivables
- decrease / (increase) in net current tax asset
- decrease / (increase) in inventories
- (decrease) / increase in payables
- increase in provisions
- (decrease) in deferred tax liability
Net cash inflow from operating activities
(1) Continuing and discontinued operations results.
30.
Earnings per share
Basic earnings per share
(a)
From continuing operations attributable to the ordinary equity holders of the company
From discontinued operations
Total basic earnings per share attributable to the ordinary equity holders of the
company
Diluted earnings per share
(b)
From continuing operations attributable to the ordinary equity holders of the company
From discontinued operations
Total diluted earnings per share attributable to the ordinary equity holders of the
company
2016
$m
62.8
86.2
20.0
-
0.7
-
(4.8)
19.4
(13.7)
9.2
3.7
(23.7)
23.0
(23.6)
159.2
2016
Cents
31.8
-
31.8
31.6
-
31.6
2015
$m(1)
81.1
67.1
-
(0.6)
(0.2)
(0.6)
(4.2)
21.9
15.7
(4.0)
(15.5)
6.7
15.7
(1.1)
182.0
2015
Cents
49.4
(8.2)
41.2
49.0
(8.2)
40.8
Normalised earnings per share(1)
(c)
From continuing operations attributable to the ordinary equity holders of the company
(1) Normalised profit attributable to ordinary equity holders is $108.6 million (2015: $106.3 million) – note 4(b).
55.1
54.0
Weighted average number of shares used as the denominator
(d)
Weighted average number of shares used as the denominator in calculating basic EPS
Adjustments for calculation of diluted earnings per share options
Weighted average potential ordinary shares used as the denominator in
calculating diluted earnings per share
Reconciliations of earnings used in calculating earnings per share
(e)
Basic earnings and diluted earnings per share
Profit attributable to the ordinary equity holders of the company used in EPS
From continuing operations
From discontinued operations
2016
Number
197,152,793
1,513,230
2015
Number
196,944,779
1,617,360
198,666,023
198,562,139
2016
$m
62.8
-
62.8
2015
$m
97.3
(16.2)
81.1
Super Retail Group Limited | ANNUAL REPORT 2016 101
101
Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
30.
Earnings per share (continued)
(f)
Information concerning the classification of securities
Options and Performance Rights
Options and performance rights granted are considered to be potential ordinary shares and have been included in the
determination of diluted earnings per share to the extent to which they are dilutive.
31.
Share-based payments
(a)
Executive Performance Rights
The Company has established the Super Retail Group Executive Performance Rights Plan (Performance Rights) to assist in the
retention and motivation of executives of Super Retail Group (Participants).
It is intended that the Performance Rights will enable the Company to retain and attract skilled and experienced executives and
provide them with the motivation to enhance the success of the Company.
Under the Performance Rights, rights may be offered to Participants selected by the Board. Unless otherwise determined by the
Board, no payment is required for the grant of rights under the Rights Plan.
Subject to any adjustment in the event of a bonus issue, each right is an option to subscribe for one Share. Upon the exercise of a
right by a Participant, each Share issued will rank equally with other Shares of the Company.
Performance Rights issued under the plan may not be transferred unless approved by the Board. The table below summarises
rights granted under the plan.
Number of Rights Issued
Grant Date
2016
1 September 2010
1 September 2011
1 September 2012
1 September 2013
1 September 2014
1 September 2015
2015
1 September 2009
1 September 2010
1 September 2011
1 September 2012
1 September 2013
1 September 2014
(b)
Executive Option Plan
Balance at
start of the
year
(Number)
80,980
131,535
448,156
403,999
561,081
-
1,625,751
83,421
171,058
443,152
534,019
469,920
-
1,701,570
Granted
during the
year
(Number)
-
-
-
-
-
621,365
621,365
-
-
-
-
-
579,192
579,192
Exercised
during the
year
(Number)
(80,980)
(65,767)
-
-
-
-
(146,747)
(83,421)
(82,389)
(133,141)
-
-
-
(298,951)
Forfeited
during the
year
(Number)
-
(3,066)
(448,156)
(35,491)
(54,676)
(45,750)
(587,139)
-
(7,689)
(178,476)
(85,863)
(65,921)
(18,111)
(356,060)
Balance at
the end of
the year
(Number)
-
62,702
-
368,508
506,405
575,615
1,513,230
-
80,980
131,535
448,156
403,999
561,081
1,625,751
Unvested at
the end of
the year
(Number)
-
62,702
-
368,508
506,405
575,615
1,513,230
-
80,980
131,535
448,156
403,999
561,081
1,625,751
The Company has established the Super Retail Group Executive Share Option Plan (Option Plan). The Company had established the
Option Plan to assist in the retention and motivation of executives of Super Retail Group (Participants). It is intended that the
Option Plan will enable the Company to retain and attract skilled and experienced executives and provide them with the motivation
to enhance the success of the Company.
Under the Option Plan, options may be offered to Participants selected by the Board. Unless otherwise determined by the Board,
no payment is required for the grant of options under the Option Plan.
Subject to any adjustment in the event of a bonus issue, each option is an option to subscribe for one Share. Upon the exercise of
an option by a Participant, each Share issued will rank equally with other Shares of the Company.
102 Super Retail Group Limited | ANNUAL REPORT 2016
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Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
31.
Share-based payments (continued)
(b)
Executive Option Plan (continued)
Options issued under the Option Plan may not be transferred unless the Board determines otherwise. The Company has no
obligation to apply for quotation of the options on ASX. However, the Company must apply to the ASX for official quotation of
Shares issued on the exercise of the options.
There were no options granted under the Option Plan during the 2016 financial year (2015: nil).
Fair value of options granted
The fair value at grant date is independently determined using a Binomial option pricing model that takes into account the exercise
price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying
share, the expected dividend yield and the risk free interest rate for the term of the option.
The expected price volatility is based on the historic volatility (based on the remaining life of the options), adjusted for any expected
changes to future volatility due to publicly available information.
At any one time, the total number of options on issue under the Performance Rights or Option Plan that have neither been
exercised nor lapsed will not exceed 5.0% of the total number of shares in the capital of the Company on issue.
Expenses arising from share based payments transactions:
Executive Performance Rights
2016
$m
0.7
2015
$m
(0.2)
32.
Events occurring after balance date
No matter or circumstance has arisen since 2 July 2016 that has significantly affected, or may significantly affect:
(a)
(b)
(c)
the Group’s operations in future financial years; or
the results of those operations in future financial years; or
the Group’s state of affairs in future financial years.
33.
Parent entity financial information
Summary financial information
The individual financial statements for the parent entity show the following aggregate amounts:
Balance Sheet
Current assets
Total assets
Current liabilities
Total liabilities
NET ASSETS
Contributed equity
Reserves
- share-based payments
- cash flow hedges
Retained earnings
Total Equity
Profit after tax for the period
Total comprehensive income
2016
$m
224.2
1,026.3
42.2
452.2
574.1
542.3
8.5
(2.7)
26.0
574.1
56.8
57.0
2015
$m
392.5
1,176.6
190.7
578.3
598.3
542.3
7.8
(2.9)
51.1
598.3
29.0
27.7
Super Retail Group Limited | ANNUAL REPORT 2016 103
103
Super Retail Group Limited | ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 2 July 2016
34.
Investments in controlled entities
The Group’s subsidiaries at 2 July 2016 are set out below. Unless otherwise stated, they have share capital consisting of ordinary
shares that are held directly by the Group, and the proportion of ownership interests held equals the voting rights held by the
Group. The country of incorporation is also their principal place of business.
Name of Entity
A-Mart All Sports Pty Ltd(1)
Auto Trade Direct (NZ) Limited
Auto Trade Direct Pty Ltd(1)
BCF New Zealand Limited
Workout World Pty Limited(1)(2)
Coyote Retail Pty Limited(1)
FCO New Zealand Limited
Fixed Price Car Service Australia Pty Ltd(3)
Foghorn Holdings Pty Ltd(1)
Goldcross Cycles Pty Ltd(1)
Infinite Retail Pty Ltd(4)(5)
VBM Retail (HK) Limited(5)(6)
Infinite Retail UK Limited(5) (6)
VBM Retail NZ Limited(5) (6)
Oceania Bicycles Pty Ltd(1) (7)
Oceania Bicycles Limited (8)
Quinns Rock Pty Ltd(1)
Ray’s Outdoors New Zealand Limited
Ray’s Outdoors Pty Ltd(1)
Rebel Group Limited(1)
Rebel Management Services Pty Limited(1)
Rebel Sport Limited(1)
Rebel Wholesale Pty Limited(1)
Rebelsport.com Pty Limited(1)
SCA Equity Plan Pty Ltd
SRG Leisure Retail Pty Ltd(1)
SRGS (New Zealand) Limited
SRGS Pty Ltd(1)
Super Cheap Auto (New Zealand) Pty Ltd
Super Cheap Auto Pty Ltd(1)
Super Retail Commercial Pty Ltd(1)
Super Retail Group Services (New Zealand) Limited
Super Retail Group Services Pty Ltd(1)
Super Retail Group Trading (Shanghai) Ltd
Youcamp Pty Ltd(9)
(1) These controlled entities have been granted relief from the necessity to prepare financial reports in accordance with Class Order 98/1418 issued
Principal Activities
Sports retail
Auto retail
Auto retail
Leisure retail
Sports retail
Sports retail
Leisure retail
Auto services
Sports retail
Sports retail
Sports retail
Sports retail
Sports retail
Sports retail
Sports retail
Sports retail
Sports retail
Leisure retail
Leisure retail
Sports retail
Sports retail
Sports retail
Sports retail
Sports retail
Investments
Leisure retail
Product acquisition and distribution
Product acquisition and distribution
Auto retail
Auto retail
Auto retail
Support services
Support services
Product sourcing
Leisure services
Country of
Incorporation
Australia
New Zealand
Australia
New Zealand
Australia
Australia
New Zealand
Australia
Australia
Australia
Australia
Hong Kong
United Kingdom
New Zealand
Australia
New Zealand
Australia
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
New Zealand
Australia
Australia
New Zealand
Australia
China
Australia
Equity Holding
2015
%
100
100
100
100
100
100
100
51
100
100
50.05
50.05
50.05
50.05
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
51
2016
%
100
100
100
100
100
100
100
61.85
100
100
95
95
95
95
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
51
by the Australian Securities and Investments Commission.
(2) Previously known as Coyote Retail Investments Pty Limited.
(3) On 12 May 2016, the shareholders of Fixed Price Car Service Australia Pty Ltd, entered into an agreement resulting in an increase in the Group’s
ownership interest to 61.85% from 51%. Refer to note 25 - Business combinations.
(4) On 14 July 2014, an additional 2 shares were acquired, resulting in the ownership interest in Infinite Retail Pty Ltd (formerly known as VBM Retail
Pty Ltd) increasing to 50.05%. The entity changed from being an associate to a controlled entity. Refer to note 25 - Business combinations.
(5) On 4 November 2015, the shareholders of Infinite Retail Pty Ltd, entered into an agreement resulting in an increase in the Group’s ownership
interest to 95% from 50.05%. Refer to note 25 – Business combinations.
(6) Investment is held directly by Infinite Retail Pty Ltd.
(7) On 25 June 2015, the Group acquired the remaining 50% non-controlling interest shareholding, resulting in the ownership interest in these
entities increasing to 100%. Refer to note 25 – Business combinations.
(8) Investment is held directly by Oceania Bicycles Pty Ltd.
(9) On 24 June 2015, the Group acquired a 51% controlling shareholding in Youcamp Pty Ltd. Refer to note 25 - Business combinations.
104 Super Retail Group Limited | ANNUAL REPORT 2016
104
Super Retail Group Limited | ANNUAL REPORT 2016
DIRECTORS’ DECLARATION
In the Directors’ opinion:
(a)
(b)
(c)
the financial statements and notes set out on pages 52 to 104 are in accordance with the Corporations Act 2001, including:
(i)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional
reporting requirements; and
giving a true and fair view of the consolidated entity's financial position as at 2 July 2016 and of its performance for
the financial period ended on that date; and
(ii)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable; and
at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group
identified in note 28 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 described in note 28.
Note 2(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board.
The Directors have been given the declarations by the Group Managing Director and Chief Financial Officer required by section 295A
of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
R J Wright
Director
Brisbane
25 August 2016
P A Birtles
Director
Super Retail Group Limited | ANNUAL REPORT 2016 105
105
Super Retail Group Limited | ANNUAL REPORT 2016
Independent auditor’s report to the members of Super Retail
Group Limited
Report on the financial report
We have audited the accompanying financial report of Super Retail Group Limited (the company),
which comprises the consolidated balance sheet as at 2 July 2016, the consolidated statement of
comprehensive income, consolidated statement of changes in equity and consolidated statement of
cash flows for the period 28 June 2015 to 2 July 2016, a summary of significant accounting policies,
other explanatory notes and the directors’ declaration for Super Retail Group Limited (the
consolidated entity). The consolidated entity comprises the company and the entities it controlled at
the period’s end or from time to time during the financial period.
Directors' responsibility 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 is free from material misstatement, whether due to fraud or error. In Note 2, the
directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial
Statements, that the financial statements comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the consolidated
entity’s preparation and fair presentation of the financial report in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by the directors, as well
as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001.
PricewaterhouseCoopers, ABN 52 780 433 757
480 Queen Street, BRISBANE QLD 4000, GPO Box 150, BRISBANE QLD 4001
T: +61 7 3257 5000, F: +61 7 3257 5999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
106
Super Retail Group Limited | ANNUAL REPORT 2016
106
Super Retail Group Limited | ANNUAL REPORT 2016 Auditor’s opinion
In our opinion:
(a)
the financial report of Super Retail Group Limited is in accordance with the Corporations Act
2001, including:
(i)
(ii)
giving a true and fair view of the consolidated entity's financial position as at 2 July 2016
and of its performance for the period ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations
2001.
(b)
the financial report and notes also comply with International Financial Reporting Standards as
disclosed in Note 2.
Report on the Remuneration Report
We have audited the remuneration report included in pages 35 to 49 of the directors’ report for the
period ended 2 July 2016. 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.
Auditor’s opinion
In our opinion, the remuneration report of Super Retail Group Limited for the period ended 2 July
2016 complies with section 300A of the Corporations Act 2001.
PricewaterhouseCoopers
Kim Challenor
Partner
Brisbane
25 August 2016
Super Retail Group Limited | ANNUAL REPORT 2016
107
107
Super Retail Group Limited | ANNUAL REPORT 2016 SHAREHOLDER INFORMATION
For the period ended 2 July 2016
The shareholder information set out below was applicable as at 24 August 2016.
Number of Shareholders
There were 7,192 shareholders, holding 197,177,318 fully paid ordinary shares.
Distribution of equity securities
A.
Analysis of numbers of equity security holders by size of holding:
Range
1-1000
1,001-5,000
5,001-10,000
10,001-100,000
100,001 and over
Total
Ordinary Shareholders
Performance Rights &
Option holders
3,672
2,804
414
258
44
7,192
-
4
12
37
3
56
There were 484 holders of less than a marketable parcel of ordinary shares.
Equity security holders
B.
The names of the twenty largest holders of quoted equity securities are listed below:
Name
SCA FT PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
NATIONAL NOMINEES LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMS PTY LTD
BNP PARIBAS NOMINEES PTY LTD
BNP PARIBAS NOMINEES PTY LTD
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
UBS NOMINEES PTY LTD
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
MR PETER ALAN BIRTLES
MR PETER ALAN BIRTLES
CITICORP NOMINEES PTY LIMITED
EQUITAS NOMINEES PTY LIMITED
SCCASP HOLDINGS PTY LTD AS TRUSTEE FOR H & R SUPER FUND
EQUITAS NOMINEES PTY LIMITED
EQUITAS NOMINEES PTY LIMITED
Ordinary shares
Number held
Percentage of
issued shares
57,047,015
30,587,089
25,358,922
14,658,312
12,518,526
10,554,627
9,436,513
2,550,292
2,474,900
1,620,655
955,000
801,362
681,680
675,000
665,000
610,690
583,889
578,703
567,302
547,135
28.93%
15.51%
12.86%
7.43%
6.35%
5.35%
4.79%
1.29%
1.26%
0.82%
0.48%
0.41%
0.35%
0.34%
0.34%
0.31%
0.30%
0.29%
0.29%
0.28%
173,472,612
87.98%
108 Super Retail Group Limited | ANNUAL REPORT 2016
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Super Retail Group Limited | ANNUAL REPORT 2016
SHAREHOLDER INFORMATION (continued)
For the period ended 2 July 2016
C.
Substantial shareholdings
As at 24 August 2016, there are three substantial shareholders that the Company is aware of:
Name
SCA FT PTY LTD
PERPETUAL LIMITED
GOLDMAN SACHS GROUP
D.
Unquoted equity securities
Ordinary shares
Number held
Percentage of issued
shares
Date of most
Recent notice
56,954,670
24,896,333
15,186,241
28.99%
12.63%
7.70%
02/08/2013
21/06/2016
08/07/2016
As at 24 August 2016, there were 1,438,674 unlisted performance rights, granted to 56 holders, over unissued ordinary shares in the
Company.
E.
Voting rights
The voting rights relating to each class of equity securities is as follows:
Ordinary Shares
a)
On a show of hands at a General Meeting of the Company, every member present in person or by proxy shall have one vote and
upon poll each person present in person or by proxy shall have one vote for each ordinary share held.
Options and Performance Rights
b)
Performance Rights and Options do not have any voting rights.
F.
Market buy-back
There is currently no on market buy-back.
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Super Retail Group Limited | ANNUAL REPORT 2016
PERFORMANCE TRENDS
FINANCIAL
REPORTED SALES
($M)
REPORTED TOTAL
SEGMENT EBIT
($M)
REPORTED EPS
(C)
DIVIDEND
(C)
REPORTED
POST TAX ROC
(%)
JUN 08
JUN 09
JUN 10
JUN 11
JUN 12
JUN 13
JUN 14
JUN 15
JUN 16
715
829
938
1,092
1,654
2,020
2,112
2,239
2,422
45.7
55.1
65.8
87.5
140.7
172.3
182.6
170.2
175.3
22.6
28.1
32.1
40.9
46.4
52.3
55.1
49.4
31.8
13.0
18.0
21.5
29.0
32.0
38.0
40.0
40.0
41.5
14.1
15.4
16.8
17.3
15.9
12.6
11.3
10.6
10.7
CUSTOMER
TEAM
JUN 15
JUN 16
JUN 15
JUN 16
AVERAGE NPS
36.9%
43.1%
TEAM ENGAGEMENT
68%*
71%
ACTIVE CLUB MEMBERS
3.9M
4.5M
SAFETY - LTIFR
13.2
6.8
CUSTOMER TRANSACTIONS
42.8M
44.8M
TEAM RETENTION
75%
75%
*Results of 2014 survey
110
Super Retail Group Limited | ANNUAL REPORT 2016 CORPORATE DIRECTORY
Name of Entity
SUPER RETAIL GROUP LIMITED
ABN
81 108 676 204
Company Secretary
Mr Robert Dawkins
Principal Registered Office
751 Gympie Road
LAWNTON QLD 4501 Australia
Telephone
Facsimile
Website Address
www.superretailgroup.com
+61 7 3482 7900
+61 7 3205 8522
Securities Exchange
Super Retail Group Limited (SUL) shares are quoted on the
Australian Securities Exchange
Share Registry
Link Market Services
Level 12, 680 George Street
SYDNEY NSW 2000 Australia
Telephone
www.linkmarketservices.com.au
Solicitors
King & Wood Mallesons
Auditors
PricewaterhouseCoopers
1300 554 474
+61 2 8280 7100
KEY DATES FOR SHAREHOLDERS
Event
Date(1)
Annual General Meeting(2)
24 October 2016
Final Dividend Ex-Date
5 September 2016
Final Dividend Record Date
6 September 2016
DRP Election Date
7 September 2016
Final Dividend Payment Date
7 October 2016
Interim Results Announcement
24 February 2017
Interim Dividend Ex-Date
6 March 2017
Interim Dividend Record Date
7 March 2017
DRP Election Date
8 March 2017
Interim Dividend Payment Date
7 April 2017
(1)If there are any changes to these dates, the Australian Securities Exchange will be notified accordingly.
(2) The 2016 Annual General Meeting of the Shareholders of Super Retail Group Limited will be held at Kedron Wavell
Services Club, 375 Hamilton Road, Chermside South, Queensland.
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www.superretailgroup.com
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Super Retail Group Limited | ANNUAL REPORT 2016