A4 5 mm A4
5mm and 10mm guides
ANNUAL REPORT 2017
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www.superretailgroup.com
Inspiring you to live your passion
Inspiring you to live you passion
PERFORMANCE TRENDS
FINANCIAL
SALES ($M)
2,020
2,112
2,239
2,422
2,466
1,654
TOTAL SEGMENT EBIT ($M)
172.3
182.6
170.2
175.3
207.3
715
829
1,092
938
140.7
87.5
45.7
55.1
65.8
JUN 08
JUN 09
JUN 10
JUN 11
JUN 12
JUN 13
JUN 14
JUN 15
JUN 16
JUN 17
JUN 08
JUN 09
JUN 10
JUN 11
JUN 12
JUN 13
JUN 14
JUN 15
JUN 16
JUN 17
EPS (C)
55.1
52.3
49.4
51.6
46.4
40.9
31.8
32.1
28.1
22.6
DIVIDEND (C)
38.0
40.0
40.0
41.5
46.5
32.0
29.0
21.5
18.0
13.0
JUN 08
JUN 09
JUN 10
JUN 11
JUN 12
JUN 13
JUN 14
JUN 15
JUN 16
JUN 17
JUN 08
JUN 09
JUN 10
JUN 11
JUN 12
JUN 13
JUN 14
JUN 15
JUN 16
JUN 17
POST TAX ROC (%)
POST TAX ROE (%)*
15.4
14.1
16.8
17.3
15.9
12.6
11.3
10.6
10.7
13.0
22.0
19.8
18.8
19.4
19.5
16.1
14.5
13.9
14.5
18.2
JUN 08
JUN 09
JUN 10
JUN 11
JUN 12
JUN 13
JUN 14
JUN 15
JUN 16
JUN 17
JUN 08
JUN 09
JUN 10
JUN 11
JUN 12
JUN 13
JUN 14
JUN 15
JUN 16
JUN 17
*Normalised NPAT
TEAM
TEAM ENGAGEMENT
SAFETY
Lost Time Injury Frequency Rate
TEAM RETENTION
68%
71%
71%
75%
75%
74%
JUN 15
JUN 16
JUN 17
13.2
JUN 15
8.8
JUN 16
6.3
JUN 17
JUN 15
JUN 16
JUN 17
CUSTOMER
AVERAGE NPS
ACTIVE CLUB MEMBERS
CUSTOMER TRANSACTIONS
36.9%
JUN 15
43.1%
JUN 16
53.5%
JUN 17
3.9M
JUN 15
4.5M
JUN 16
5.2M
JUN 17
42.8M
44.0M
44.5M
JUN 15
JUN 16
JUN 17
*Normalised
CONTENTS
008
010
Chair’s Message
CEO’s Message
022
Board of Directors
024
Group Executive
Team
033
037
Sustainability
Directors’ Report
115
116
Independent
Auditor’s Report
004
Our Business
016
Strategy &
Performance
028
Our Team
064
Financial Statements
Directors Declaration
124
Shareholder
Information
127
Financial Calendar &
Corporate Directory
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 37 to 62.
The financial report was authorised for issue by the Directors on 24 August 2017. 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
OUR BUSINESS
OUR PURPOSE
To provide solutions and engaging
experiences that enable our customers
to make the most of their leisure time.
OUR VISION
We exist to inspire you
to live your passion.
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.
SOLUTIONS
THAT ENGAGE AND
INSPIRE
FUTURE
ORGANISATION
AGILE & EFFICIENT
SUPPLY CHAIN
07
STRONG &
SUSTAINABLE
FOUNDATIONS
SEAMLESS
OMNI-RETAIL
CAPABILITIES
ACTIONABLE
CUSTOMER
INSIGHTS
ENGAGED &
CAPABLE TEAM
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:
AUTO
LEISURE
SPORTS
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.
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.
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.
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.
Amart Sports provides a broad range
of leisure sports products designed for
familyand team sports, and geared
to the casual market at compelling
prices. The Amart Sports brand will
be merged into the Rebel business in
November 2017.
4
Super Retail Group Limited • Annual Report 2017PASSION INTEGRITYCAREOPENNESSDISCIPLINE OUR BUSINESS
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.
INSPRIRED,
ENGAGED
AND SATISFIED
CUSTOMERS
HEALTHY,
PASSIONATE AND
HIGH PERFORMING
TEAM MEMBERS
TOP QUARTILE
SHAREHOLDER
RETURNS
SUSTAINABLE
AND EFFICIENT
OMNI-RETAIL
CAPABILITIES
DELIVERING OUR FINANCIAL TARGETS 5 YEAR TARGETS
STORE NUMBERS
LFL GROWTH
EBIT MARGIN
PRE TAX ROC %*
>50%
>30%
>30%
5
Super Retail Group Limited • Annual Report 2017(quantity)(percentage)(percentage per annum)(percentage) *excludes acquired goodwill and brand names OUR NETWORK
~12,000
TEAM MEMBERS
7 DISTRIBUTION
CENTRES
630+
STORES
3 COUNTRIES OF OPERATION:
AUSTRALIA, NZ & CHINA
632STORES ACROSS OUR
ENTIRE NETWORK
6
59
44
4 SUPPORT
OFFICES
6
Super Retail Group Limited • Annual Report 2017 BRAND
ACT
NSW
NT
QLD
SA
TAS
VIC
WA
NZ
TOTAL
AMART SPORTS
BCF
RAYS
REBEL
SUPERCHEAP AUTO
-
3
1
4
4
13
38
1
37
72
TOTAL
12
161
1
2
-
-
3
6
28
38
1
15
83
165
5
10
1
7
21
44
-
4
-
1
5
18
22
11
26
54
10
131
3
18
-
8
30
59
-
-
-
-
44
44
68
135
15
98
316
632
SUPER RETAIL GROUP
DISTRIBUTION CENTRE
SHIPPING
ROAD FREIGHT
RAIL FREIGHT
OUR DIGITAL NETWORK
165
161
131
12
10
44
7
Super Retail Group Limited • Annual Report 2017 CHAIR’S MESSAGE
DEAR FELLOW SHAREHOLDER,
On behalf of your Board of Directors, I am pleased to present Super Retail Group’s annual
report for the 2017 financial year.
Super Retail Group continues
to
perform strongly, growing profits and
revenues, adding new customers
in core and adjacent segments,
expanding our store
to
strategically match demand, investing
in building strong connections with our
passionate customers, and increasing
dividends to shareholders.
footprint
2017 PERFORMANCE
I am pleased to report that it has been
a record year for Super Retail Group.
like sales
The Group generated total sales
of $2.5 billion, driven by a
like
for
increase of 4.1 per
cent, and Normalised Net Profit
After Tax attributable to owners of
increase of
$135.8 million, an
25.0 per cent over
the prior
comparative period.
Earnings Before
Interest and Tax
(EBIT) increased by 18.3 per cent to
$207.3 million. This was largely driven
by like for like sales growth, gross
margin expansion and
improved
business efficiencies.
Sports Divisions
The Auto and
continued to perform strongly and we
are pleased to see a return to positive
results from our Leisure Division. The
transformation initiatives undertaken
in the last two years have contributed
to the strong results with the significant
improvement in performance in the
Leisure Division and the turnaround
the
in
Sports Division.
loss making businesses
in
We are also pleased that the invest-
ment in supply chain infrastructure
and systems is generating significant
operational efficiencies and better
stock availability for our customers.
The Group maintained its disciplined
approach to financial management,
with operating cash
flows of
$234.5 million fully funding the Group’s
capital expenditure and dividend
8
payments and
net debt.
DIVIDEND
reducing average
Reflecting the Group’s strong financial
performance and balance sheet,
your Directors are pleased to have
been able to declare a final dividend
of 25.0 cents per share. Added to
the interim dividend of 21.5 cents
per share, this maintains a full year
dividend of 46.5 cents per share, an
increase of 12.0 per cent over the
prior year.
GOVERNANCE & RISK
remains highly aware
Your Board
of
risks
the new and emerging
arising from the changing nature of
the environment in which the Group
operates. Cyber security, privacy and
digital disruption are all issues with
increasing prominence and which
require close and careful attention
by all retailers. As the Company
continues
shift
to accelerate
towards omni-retailing, we continue
to
in enhanced corporate
governance and risk management
capabilities to ensure the systems,
processes
in
functions
the maturity and
place have
robustness
to protect
and maintain the Group’s ability
to effectively navigate and mitigate
any risks.
required
invest
and
its
BOARD RENEWAL
The Board undertakes a
regular
review of its performance and of the
experience and tenure of its members
to ensure it maintains the necessary
diverse range of skills and experience
required to oversee the strategy and
in the
governance of the Group
evolving retail market.
John Skippen retired from the Board
in October 2016 having served as
a Director for eight years. During
this time, John made a significant
contribution to the growth of the
Group, drawing on his extensive
retail, property and finance experi-
ence We wish John all the very best
for his retirement.
Howard Mowlem was appointed to
the Board in June 2017 and brings
diverse experience across the retail
sector, in Australia and throughout
Asia. He has extensive expertise in
corporate finance, mergers and
acquisitions,
reporting,
treasury, tax, investor relations, audit
and governance. Howard will be
appointed as the Chair of the Audit
& Risk Committee
the
publication of this report.
following
financial
I have also announced my intention
to retire from the Board, effective
from the date of the Annual General
The Board
Meeting
have elected my
fellow non-
executive director, Dr Sally Pitkin as
the new Chair.
in October.
role a great
Sally brings to the
depth of understanding of
the
Company, having joined the Board
in July 2010, and I am certain that she
shall provide outstanding leadership
as the Company continues to respond
to the dynamic retail environment
and
sustainable value
to drive
for shareholders.
It has been a great pleasure to serve
as Chair of such a successful Australian
Company and to work with such a
strong Board and management team.
Moving forward, the Company shall
be extremely well served by having as
its Chair a person of Sally’s capacity
and experience.
OUTLOOK
We enter the new financial year with
good momentum. We will sustain
our focus in the year ahead on the
continuing growth and transformation
of our existing businesses and the
development of
the capabilities
and culture required to operate as a
world-class omni-retail business.
Super Retail Group Limited • Annual Report 2017 We will continue to review the structure
and positioning of our businesses
to ensure they are best placed to
in the evolving
compete strongly
retail market. We have decided to
merge the Rebel and Amart Sports
businesses, as we have determined
that
focusing on one business
presents the best opportunity to meet
the needs and wants of customers
in the Sports Retail market. We will
continue to assess the performance
of the BCF and Rays businesses to
determine the optimal strategy for our
participation in the Outdoor Leisure
Retail market. We are continuing
to extend our service offerings for
our Supercheap Auto customers
increasingly offer solutions not
to
just products.
We are also making the investment
necessary to build the digital, IT, supply
chain and analytical capabilities to
build our omni-retail capabilities. At
the same time, we will continue our
program of store network growth
and refurbishment to ensure that we
present our customers with engaging
experiences in stores and enabling
them to shop their way.
look
We
forward to the coming
year with energy, enthusiasm and
confidence.
On behalf of the Board, I thank all
shareholders
their continued
support, and Super Retail Group’s
management
team
members for their contributions.
team and
for
Robert Wright, Chair
9
Super Retail Group Limited • Annual Report 2017 CEO’S MESSAGE
DEAR FELLOW SHAREHOLDER,
The record results achieved in 2017 reflect the strong underlying performance across all three
of the Group’s divisions, the benefits of transformation initiatives in the Leisure and Sports
Divisions and the investment in the Group’s omni-retail capabilities.
The investment in our store network, in
the form of opening new stores and
refurbishing existing stores, continues
to deliver strong returns with our
underlying sales growth significantly
higher than the growth in consumer
spending across the retail market.
We continue to see large increases in
the number of customers interacting
with our brands through our digital
channels. This is not only generating
significant growth
in digital sales,
particularly through click-and-collect,
but is also helping our customers
make their buying decisions before
to complete
store
coming
their purchases.
into
We are very pleased that we continue
to see strong performance across
the non-financial measures that we
use as indicators of the long term
health of our company. From the
customer perspective, we have
seen increases in customer traffic in
store and online, and an increase
in endorsement scores. From a team
member perspective, we have
seen another strong
improvement
in our
safety performance and
we have maintained engagement
levels within the top quartile of all
Australian businesses.
ROBUST FINANCIAL PERFORMANCE
All
three divisions generated an
increase in EBIT margins driven by solid
like for like sales growth, improvement
in gross margin and control of
operating costs. The transformation
initiatives undertaken during the last
two years have contributed to the
strong
results, with the significant
improvement in performance in the
Leisure Division and the elimination of
losses in the Infinite Retail business in
the Sports Division.
10
Our investment in our supply chain
is delivering expected
capabilities
benefits with improvement in store
stock availability and reductions in
logistics cost per unit. We expect to
generate further efficiency savings in
the coming year.
Continued good management of
working capital has contributing
towards generating operating cash
flow of $234.5 million, $75.3 million
above the previous corresponding
period.
in cash
conversion has enabled the Group
to invest $101.2 million in supporting its
strategic programs, at the same time
as reducing average net debt.
strength
This
Key highlights include:
• Normalised Net Profit After Tax
(NPAT) at $135.8 million, an
increase of 25.0 per cent over the
comparative period
• Group Segment Earnings
Before Interest and Tax (EBIT) at
$207.3 million, an increase of
18.3 per cent
• Strong contribution from all
Divisions, with Auto, Leisure and
Sports Segment EBIT growth of
6.1 per cent, 36.6 per cent and
17.4 per cent respectively
• Reported NPAT includes non-cash
transformation costs of $34.0 million
associated with the merging of the
Rebel and Amart Sports businesses.
TRANSFORMATION ACTIVITIES
DELIVERING POSITIVE RESULTS
Integral to the Group’s ongoing growth
and financial performance has been
the delivery of key transformation
activities as we continue to evolve our
business to stay ahead of changing
customer and market dynamics.
BCF has reasserted itself as the market
leader in outdoor leisure retail. Its sales
performance strengthened through
the year as its new brand campaign
and revised pricing and promotion
strategies strongly
resonated with
target customers.
The performance of many aspects
of the new format Rays stores has
been promising, with customer
transaction
conversion, average
value and customer net promoter
scores exceeding targets. However,
customer traffic has not reached
target levels and as a result sales have
fallen short of expectations.
The Group will continue to develop
and test the new Rays format to
determine the most value creating
participation strategy for the brand
within the Leisure Division.
We have successfully returned the
Infinite business to profit this financial
year as a
restructuring
result of
commercial contracts and integrating
administrative
functions within the
Sports Division. The Infinite business
plays an important role in the overall
Sports strategy, and helps to further
cement our strong partnerships with
local sporting bodies, such as the AFL
and NRL.
We announced in July that we have
concluded that the long-term interests
of shareholders, customers and team
members will be best served by the
Group focusing on one single core
brand within the Sports Division. As
a result we will be converting our
network of Amart Sports stores to new
Rebel stores by November 2017.
The Group will be combining
Rebel’s strengths
in solutions and
services with Amart Sports’ customer
the one
service excellence
into
Super Retail Group Limited • Annual Report 2017 Sports
national
strong,
retailer.
This combination will sustain and
strengthen the competitive position
of the Sports Retailing Division in the
changing customer and competitive
landscape.
As a management team, we will
continue to
review how
regularly
we conduct our retail businesses to
ensure they properly align with our
Group strategy and meet the evolving
needs of our customers and the
changing competitive dynamics in
the retail market.
STRATEGIC INITIATIVES ON TRACK
Our strong operating cash flows leave
us well placed to invest in future
growth. We will continue to invest in
growing core businesses, including
retail
strategic
footprint. Our store network is integral
to our omni-retail strategy and we
see ongoing positive uplift in sales per
square metre across our brands.
investment
in our
We have seen continued strong
growth in our digital sales across our
brands. In the 2017 financial year,
digital sales grew by 75 per cent for
the Auto Division, over 150 per cent in
the Leisure Division and 73 per cent in
the Sports Division. These results, and
the growth we’re seeing particularly in
click-and-collect, further underline the
importance of enabling customers to
shop however and wherever they
want and
the clear competitive
advantage our national physical
network of stores offers in this regard.
To that end, we will continue to invest
in further integrating the off-line to
online experience we provide to our
customers so it is seamless across all
touchpoints.
In Supply Chain, we have realised the
benefits of a multi-year operational
11
Super Retail Group Limited • Annual Report 2017 CEO’S MESSAGE (cont)
improvement program
that has
delivered efficiencies over and above
our targeted $10 million goal. We see
further potential benefits of a similar
size that we are aiming to realise in
the near term.
We expect capital expenditure for
the 2018 financial year to be in the
order of $120 million, with a number
of key programs to form the main
recipient of financial investment in the
coming year:
• Implementing a new platform
to improve the experience for
our customers on our websites
and investing in supply chain
and inventory management to
improve our inventory availability
and improve speed and cost
of fulfillment
• Strategic investment in enhancing
the in-store experience through
refurbishments and new formats,
such as the Supercheap Auto’s
Customer Experience Centre
(or ‘Vision’ store) and Rebel’s
Accelerate stores
• Strengthening customer
endorsement through continuing
our focus on our Net Promoter
Score (NPS) performance and
initiatives aimed at further
strengthening our connections
with our customers around their
leisure passions
• Leveraging and building the
strong customer loyalty we enjoy
across our brands, with active club
memberships continuing to
increase and an increased focus
on direct, personalised marketing
to our various customers
• Continued focus on investing
in our IT foundations that form
a critical part of our omni-retail
12
capabilities, including strategic
partnering with external providers
to upgrade our data centre
capacity and an ongoing focus
on cyber security management.
These initiatives are aligned with the
Group’s chief focus on continuing
to build world-class omni-retail
capabilities, capitalising on
the
progress already well embedded
across our business operations.
OUR TEAM
On behalf of my fellow Directors and
the Group Leadership Team, I would
like to thank every one of our 12,000
team members across Australia, New
Zealand and China for their tireless
contribution to the Group’s ongoing
growth and
team
members’ knowledge, passion and
commitment to customer service has
been and will continue to be the most
important driver of our performance.
success. Our
I am proud that we maintained top
quartile levels of team engagement
across the Group, with our overall
team engagement score of 71 per
cent, including a 6 per cent increase
in the number of ‘highly engaged’
team members.
retail
from being
Engagement within
team
members remains particularly high,
and we continue to see the benefits
that come
fortunate
enough to be in a business with
brands that both our team and
customers are passionate about.
We see opportunities to continue to
improve our people and leadership
increase our
further
activities
team engagement scores across our
business, and that will be our focus for
the year ahead.
to
Our commitment to continuing to
improve our safety performance has
been an ongoing focus for myself
and my leadership team, and I am
pleased to report that our Group Lost
Time Injury Frequency Rate (LTIFR) for
this financial year continues to reduce
and compares favourably to industry
benchmarks. This year LTIFR was 6.31
per million hours worked. As part of
our ongoing development of the
maturity of our data, we have revised
the definition of LTIFR and adjusted
the 2016 score to 8.77. While we are
pleased with the reduction achieved,
we will continue to strive towards
getting our LTIFR as close as possible
to zero, recognising that every injury
is preventable. We will increasingly
focus on our total injury frequency
rate in the years ahead.
For Super Retail Group, a diverse
and inclusive workforce is a core
competitive advantage. We are one
of those infamous ASX200 businesses
that has a CEO named Peter, but we
are proud of our efforts to increase
gender diversity in our leadership.
Females represent 43 per cent of our
directors and 40 per cent of my direct
reports.
I am particularly pleased
that we have been able to increase
the number of female leaders in
senior operational roles in retail and
supply chain.
remain committed to
further
We
advancing diversity and
inclusion
across our business and increasing
the percentage of our leadership
positions held by females not only
at the Board and Group Leadership
Team level, but throughout our senior
and middle management from 34 per
cent today to 40 per cent by 2019.
FUTURE STRATEGIC FOCUS
We recognise that the Retail Industry
through unprecedented
is going
change as a result of the impact
Super Retail Group Limited • Annual Report 2017 ”
WE HAVE BUILT A GROUP OF BUSINESSES
THAT OPERATE IN RETAIL MARKETS IN
WHICH OUR CUSTOMERS ARE LOOKING
FOR MORE THAN PRODUCT.
of ever more demanding customer
expectations, global competition
and digitalisation. However, we have
been considering these forces for
a number of years and our strategy
has been developed to ensure that
we continue
this
evolving environment.
to succeed
in
We have built a group of businesses
that operate in retail markets in which
our customers are looking for more
than product. The products they buy
are used to support a passion whether
that’s making sure that their prized
Monaro continues to run well and look
great or landing an 80cm barramundi
or running the 10km in 40 minutes. We
have the opportunity to engage the
customer in store or online, provide
them with related information and
services and build a
relationship
based around a shared passion.
Central to our success will be our ability
to attract, develop and engage team
members who share our customers’
passions and are dedicated
to
that meet or
solutions
providing
exceed our customers’ expectations.
through our
is competitive
We recognise that while we can
differentiate
shared
passion and our focus on solutions
we still need to ensure that our
customer offer
in
the core aspects of retail – price,
convenience,
range, service and
experience. We are now operating
in a market in which the world’s best
retailers have set up shop so we need
to build an organisation with world-
class retail capabilities. Strengthening
our capabilities in digital, IT, direct
to customer delivery and analytics
will be core focus areas in the next
three years.
We also recognise that we will need to
ensure that we operate as efficiently
as possible and we will continue to
look for opportunities to generate
efficiencies in our ranging, sourcing
and supply chain operations. We
are also
reviewing our operating
model to ensure that we are set
up to operate in the most effective
and efficient manner to meet the
needs of our customers in this omni-
retail environment.
Customers will
increasingly expect
to be able to shop the way that is
most convenient for them at any
given moment in time, whether that’s
in store, at home or at work, or by
clicking and collecting, and those
retailers who are able to serve the
customer however they want to shop
will be best placed to succeed. We
believe that the seamless integration
of our digital business with our network
of conveniently located stores offers
us a major competitive advantage
so we will continue to invest in the
growth and
refurbishment of our
store network.
CONFIDENT OUTLOOK
The Group’s focus for the year ahead
will therefore be on the continuing
of
growth and
transformation
the
our existing businesses, and
development of
the capabilities
and culture required to operate as a
world-class omni-retail business.
The benefits from the transformation
initiatives, supply chain efficiencies
and private brand development
programs will be reinvested in our
customer offer and we are confident
that we can continue to deliver sales
growth ahead of the retail market and
also generate further improvements in
our operating margins.
We will also sustain our focus on working
capital efficiency and we expect that
underlying operating cash flows will
continue to be higher than operating
profit over the next few years. This
will enable the Group to continue to
invest in building our capabilities and
the growth and refurbishment of our
store network while growing dividends
and reducing debt.
leaders
We have a strong platform for the
future having built strong businesses
that are market
their
categories. We are confident we
have the right strategies in place to
continue to meet the evolving needs
of our customers and keep us ahead
of our competition.
in
look
We
progress with you.
forward
to sharing our
Peter Birtles, Group Managing Director
and Chief Executive Officer
13
Super Retail Group Limited • Annual Report 2017 14
Super Retail Group Limited • Annual Report 2017 CASE STUDY
CUSTOMER
EXPERIENCE
CENTRE
In a rapidly changing automotive
landscape, innovation is the defining factor
in Supercheap Auto’s ability to keep pace
with evolving customer needs and to stay
at the forefront of the industry
This year, Supercheap Auto marked
a key milestone in its journey of store
evolution with
the creation of an
innovative new concept, known as the
Customer Experience Centre or ‘Vision’
store. Located in the Sydney suburb
of Penrith, the Customer Experience
Centre opened in June 2017 and is the
largest store in the Supercheap network.
Experience Centre
The Customer
creates a truly immersive and engaging
experience for the customer where
cutting edge digital
seamlessly
integrated into the store environment,
exemplifying what the future of omni-
retail will look like.
is
TEAM MEMBERS MAKES THE DIFFERENCE
The key to delivering an authentic
customer experience starts with having
a passionate team who are driven to
exceed customers’ expectations and
are willing to go above and beyond.
In the Customer Experience Centre,
Supercheap Auto has introduced a
number of new roles including:
• ‘Services and Customer Experience
Manager’ – a role focused on
leading all customer experience
connection points in the store
• ‘Concierge’ – responsible for
providing a warm, authentic
welcome and farewell for customers
as they enter and leave the store
• ‘Gurus’ – a team of highly
knowledgeable and experienced
team members focused on
delivering service in more complex
and involved product categories.
further
Technology
the
team to deliver service excellence
through enhancing efficiency and
communication.
enables
FOCUS ON EXPERIENCE
• At the heart of the store is a
Customer Experience Arena
complete with grandstand seating
around a central octagon digital
screen. In this area, customers
can watch and learn from live
demonstrations or one of the 700
available ‘How To’ videos.
• The Car Clinic Advice Bar serves as
a central hub of engagement and
service, where team members can
interact with customers in a more
collaborative fashion, sitting side by
side rather than standing behind a
traditional store service counter.
• The Pit Stop area creates an
environment for customers to sit and
relax, perhaps whilst waiting for a
fitment service to be completed.
Complete with an iPad bar,
complimentary refreshments and
community sharing boards, this
area enables customers to connect
holistically with Supercheap
Auto beyond a simple product
transaction.
CUTTING EDGE DIGITAL ENGAGEMENT
• The Customer Experience Centre
is a hub of digital innovation and
connectivity with over 30 digital
interaction points throughout the
store, all seamlessly connected and
controlled with the touch of an iPad.
• Greeting customers in the carpark
is a 38 square metre external LED
screen, complete with weather
sensor for rapid content response
to weather conditions. Audio
streaming through a FM transmitter
creates a ‘drive-in theatre’ feel for
out-of-hours community events.
• 24-hour parcel pick up lockers allow
customers to access their ‘click and
collect’ or special order at a time
that suits them by using a unique
access code.
• Digital product selection tablets
replace paper catalogues
throughout the store, ensuring
relevant and up-to-date product
information is always on display.
Endless aisle screens allow
customers to shop an extended
range of products online while
digital product kiosks enable
customers with instant access to
rich, online content to assist their
purchase decision.
15
Super Retail Group Limited • Annual Report 2017 STRATEGY & PERFORMANCE
The priority focus for the Group is continuing to build upon the substantial progress already
underway in delivering world-class omni-retail capabilities. In 2017, we have seen the
successful execution of our strategy in an improved customer experience, stronger supply
chain efficiencies and enhanced system and infrastructure foundations.
Moving into 2018, the strategy for
the Group remains focused on the
delivery of the strategic pillars and
financial targets we have set out for
the business.
To deliver this, we will focus on three
key areas:
1. We will keep growing our business
in high involvement categories, so
that we continue to invest in what
our customers are most passionate
about.
2. We will develop and attract
capable team members who
share our customers’ passions, and
are as passionate as they are.
3. We will transform our operating
model and build a world-class
omni-retail organisation, so
customers can connect with us
whenever and however they
choose.
The successful execution of our strategy will require a focus on building world class
capability in seven areas - our strategic pillars:
Solutions that
Engage & Inspire
1
Seamless Omni
Retail Capability
2
4
Actionable
Customer
Insights
5
Agile & Efficient
Supply Chain
Strategic
Pillars
Future
Organisation
3
6
Engaged &
Capable team
7
Strong &
Sustainable
Foundations
The development of solutions that engage and inspire is central to the strategies of our individual businesses while the development
of the six other pillars are approached on a Group-wide basis. Through focusing on these pillars we prioritise the investment and
resources on accelerating our transformation to a world class omni-retailer delivering the solutions and services to inspire our
customers to live their leisure passions.
Our Group pillars underpin the defined growth path and have shaped the plan for the coming year. The Group anticipates a capital
expenditure program amounting to circa $120 million in the 2018 financial year associated with the development of these strategic
programs across the Group.
OUR PILLARS
PURPOSE
Seamless Omni
Retail Capability
Future
Organisation
Actionable
Customer Insights
Agile and
Efficient Supply Chain
Engaged and
Capable team
Provide the capability that will enable our customers to have a seamless,
sustainable omni-retail experience.
Challenge our operating approach, and continually improve how effectively and
efficiently we work together as one team to deliver our strategy and provide the
foundations of a scalable cost base.
Develop a clear understanding of our customers’ leisure passions, buying behaviours
and opinions to drive the development of the best customer experience.
Optimise the supply chain network, connecting our customers to our products,
delivering as promised.
Develop and maintain an achievement culture that is consistent with our values, attracts,
engages and empowers team members who share our customers’ leisure passions.
Strong and
Sustainable Foundations
Sustainable business performance, underpinned by system and information
management capability that delivers visibility, alignment, stability and focus.
16
Super Retail Group Limited • Annual Report 2017 17
Super Retail Group Limited • Annual Report 2017 18
Super Retail Group Limited • Annual Report 2017 OUR CUSTOMER
JOURNEY
STEP ONE
FIND INSPIRATION
Customers expect channel
parity in their ability to access
preliminary information to trigger
or discover a potential need.
STEP TWO
BROWSE & RESEARCH
STEP THREE
SELECT & VALIDATE
Customers expect channel parity
in regards to consistency, quality
(expertise) and quantity (depth
and breadth) of information,
ability to compare, a broad
choice of offerings, along with
expertise and personalised
insights.
In-store, customers expect a
convergence of channels and
an experience that subtly, and
beneficially intertwines digital
into the in-store experience.
STEP FOUR
PURCHASE & PAY
STEP FIVE
RECONSIDER
Customers expect the ability
to purchase over their channel
of choice (store vs online), pay
in their preferred method, and
have the order fulfilled in their
preferred manner (take home,
delivery, or click-and-collect).
Customers expect the ability to
seamlessly change channel in
order to A) return or exchange,
and B) re-complete the journey
with another purchase.
19
Super Retail Group Limited • Annual Report 2017 20
Super Retail Group Limited • Annual Report 2017 CASE STUDY
STRATEGY & PERFORMANCE
OUTDOOR
LEISURE
EXPERTS
BCF reinforces positioning as ‘go
to’ for outdoor leisure solutions
with BCFing experts.
iconic by
Merit badges, made
the popular Scouts movement,
symbolise the aspirational desire
within us all
to achieve and
accumulate practical new skills
and knowledge that can be put
to good use in the context of our
daily lives.
Super Retail Group has been
accelerating its ongoing shift away
from being a chiefly product-
centric business, and
towards
being focused on delivering the
experiences, solutions and services
to make
our customers need
the most of their leisure time. We
want to help them catch the fish
they’ve always wanted to – not just
sell them the fishing rod. Building
engagement and connection with
customers around their passions,
which our team members share,
long-term
creates meaningful,
ultimately
relationships, which
long-term value, market
drives
growth, customer
loyalty and
financial performance.
Fundamental to the success of
our omni-retail strategy is ensuring
we are leveraging both our stores
and online assets as places of
engagement around the services
and solutions our customers need.
to offer customers
Being able
the benefit of our expert advice,
knowledge and assistance is an
important element of this, as well
as being a key driver of customer
advocacy.
To
further enhance customer
recognition and awareness, as
well as continuing to develop
the team’s technical knowledge,
launched the ‘BCFing
BCF has
Experts’ program, to be rolled out
across the business in the coming
financial year. The program
is
aimed at providing all BCF team
members strong, consistent and
shared knowledge of the range
of products, solutions and services
offered to customers, equipping
them to help customers with the
advice they need to catch that fish,
have the best outdoor experience
possible or get what they need to
make the most of their leisure time.
As a program, BCFing Experts will:
• Provide
technical knowledge
to all team members to enable
them to engage with customers
and provide the superior, expert
service that is part of the BCF
brand’s DNA.
• Ensure team members who are
the most passionate experts
across the full range of outdoor
that BCF
is
leisure pursuits
involved
in are encouraged
to share their knowledge with
other team members as well
as customers.
Under the program, team members
will be able to achieve badges in
four key areas: Camping, Fishing,
Boating and Apparel. All team
members will be expected to work
to achieve a ‘Bronze’ badge in
all four areas, while truly expert
team members will be able to
work at achieving ‘Silver’ and
ultimately ‘Gold’ badges. Badges
will be awarded on the basis of
technical knowledge, as well
as demonstrations of practical
expertise that includes experience
and
involvement.
Team members will proudly display
their accomplishments on
their
name badges, enabling customers
to recognise team members with
particular areas of expertise.
community
We hope achieving a BCF ‘Gold’
badge in Camping will become as
famous across Australia as a mark
of true expertise as the Climbing
merit badge is the mark of a Scout
adept in the art of tying figure-
eight knots.
21
Super Retail Group Limited • Annual Report 2017 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
Robert Wright was
appointed a Director of
the Company on 19 May
2004 and Chair 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 was previously the
Chairman of APA Ethane
Limited, the responsible
entity of Ethane Pipeline
Income Fund, 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.
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,
Queensland Urban Utilities
and NSW Electricity
Networks. With over
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 has a
Bachelor of Commerce
majoring in Accounting
and Economics and a
Masters in Commerce
and Strategy. Launa is a
Non-Executive Director of
the Commonwealth Bank
of Australia and Precinct
Properties New Zealand,
and a member of the
boards of the Alannah
and Madeline Foundation
and Virgin Australia
Melbourne Fashion
Festival.
22
Super Retail Group Limited • Annual Report 2017
SALLY PITKIN
Independent
Non-Executive Director
REG ROWE
Non-Executive Director
HOWARD MOWLEM
Independent
Non-Executive Director
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 Chair 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.
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 over
20 years’ experience as a
Non-Executive Director in
the listed, private, public
and non-profit sectors,
including experience in
international markets,
and 13 years’ experience
as a Non-Executive
Director of ASX200
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. 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.
Howard Mowlem was
appointed a Director
of the Company on 13
June 2017. Howard is
experienced in many
segments of the Australian
and international retail
industry. From 2001
to 2010 he was Chief
Financial Officer and
a Board member of
Dairy Farm International
Holdings, a Hong Kong-
based pan-Asian retailer
operating over 5,000
stores predominantly in
the fast moving consumer
goods sector. Prior to
that, for over 12 years
he held a range of
financial management
positions with the Coles
Myer Group, including
as finance director for
Coles Supermarkets.
Howard brings extensive
experience in corporate
finance, mergers and
acquisitions, financial
reporting, treasury, tax,
audit and governance.
He holds a Bachelor of
Economics (Hons), MBA
and Securities Industry
Diploma. He is a Fellow
of CPA Australia. Since
October 2012, Howard
has been a Non-Executive
director of Billabong
International Ltd, and
Chair of its Audit and Risk
Committee.
23
Super Retail Group Limited • Annual Report 2017
GROUP EXECUTIVE TEAM
DAVID AJALA
Managing Director –
Super Retail Commercial
DAVID BURNS
Chief Financial Officer
ERICA BERCHTOLD
Managing Director –
Sports Retailing
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.
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.
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.
24
Super Retail Group Limited • Annual Report 2017 AMANDA FLEMING
Chief Transformation
Officer
PAUL HAYES
Chief Information Officer
ANTHONY HERAGHTY
Managing Director –
Leisure Retailing
JANE KELLY
Chief Human
Resources Officer
Amanda was appointed
Chief Transformation
Officer (CTO) in June 2017
from Coles, where she
was Director of Human
Resources. Previous senior
roles also include Chief
Operations Officer and
Chief People Officer for
Pizza Hut USA and Human
Resources Director for
Mars in Australia, where
she also served as
European Organisational
Development Manager
for Mars in the UK and
Europe. Amanda has a
Masters in Organisation
Change from Hult
International Business
School and a Bachelor
of Business from Deakin
University.
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.
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.
Jane 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.
25
Super Retail Group Limited • Annual Report 2017 DEANNA LOMAS
Chief Supply Chain Officer
STEVE TEWKESBURY
Managing Director –
International Operations
CHRIS WILESMITH
Managing Director –
Auto Retailing
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.
Deanna joined Super
Retail Group in 2016
as Chief Supply Chain
Officer. Prior to joining
the Group, Deanna
was Director of Supply
Chain at Telstra, leading
a centralised team
responsible for $3 billion
consumer product
supply and distribution
operations. Previously,
Deanna held senior
roles with MMG, Carlton
United Breweries, and
BP. Deanna holds
bachelor degrees in
Engineering, Business and
Arts, and a Masters of
Business Administration.
She is a Graduate
of the Australian
Institute of Company
Directors, a Fellow and
Engineering Executive
with Engineers Australia
and has completed
executive programs
in the USA at Kellogg
School of Management,
Massachusetts Institute
of Technology and WHU
School of Management in
Germany.
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.
Steve has announced
his intention to retire from
the Group in January
2018. Deanna Lomas
assumed responsibility for
international operations
in July 2017 with Steve
providing transitional
support.
26
Super Retail Group Limited • Annual Report 2017
”
OUR FOCUS IS ON
HELPING OUR CUSTOMER
CATCH THE FISH THEY’VE
ALWAYS WANTED TO –
NOT JUST TO SELL THEM
THE FISHING ROD.
27
Super Retail Group Limited • Annual Report 2017 OUR TEAM
In retail, we know the only constant is constant change. In 2017, that was ever more evident
with customers becoming more empowered through social technologies, giving rise to
evolving expectations and an increasingly competitive market landscape.
To ensure Super Retail Group continues
to thrive in this new retail reality, we
know that our team members are
our first and most valuable asset, and
an engaged and capable team is
critical to our success.
that
By developing and maintaining
an achievement culture
is
consistent with our values, we will
attract, engage and empower team
members who share our customers’
leisure passions and in so doing provide
critical support for our business as we
continue our transformative journey
as a world-class omni-retailer.
Quite simply, our team members are
critical to our business success. It is
our team members who deliver and
execute our strategy, provide world-
class customer experiences and
ensure we are working towards a
sustainable future.
TEAM ENGAGEMENT
to our
success as
Fundamental
is a workplace where
a business
team members enjoy coming to
work, are engaged and inspired, as
well as equipped
to meet our
customers’ needs.
values of Passion,
Our Group
Openness,
Integrity, Care and
Discipline symbolise who we are and
how we approach our work. These
values are embedded throughout all
stages of the team member lifecycle
including attraction and recruitment,
on-boarding,
training
and development, performance
management,
reward
and retention. These values support
a strong, positive team culture that is
aligned to the Group strategy.
recognition,
ongoing
One way we understand the needs
and desires of our team members is
through a Group-wide team member
undertaken
survey
engagement
28
every two years, with a pulse survey
every alternate year. These surveys
are conducted by an independent
third party and provide valuable
insights that allow us to track team
engagement over time, as well as
compare how we are tracking against
industry benchmarks. In addition to
measuring engagement at a specific
point-in-time we garner valuable
insights about what we are doing well
and where we can improve.
Our most recent engagement survey
was conducted in May 2017. We
maintained our strong levels of team
engagement, with an overall Group
score consistent with the 2015 score
of 71 per cent, putting us in the top
quartile of employers
in Australia
and New Zealand and above the
global norm for the retail sector.
Pleasingly, we improved the strength
of engagement across the team,
with 33 per cent of team members
categorised as ‘highly engaged’, an
increase of 6 per cent on 2015, and
improved our already strong overall
participation rate of 82 per cent in
2015 to 85 per cent in 2017.
We are proud of our continued
high levels of engagement across
the Group and are committed to
leveraging
to make
meaningful change to our team
members’ experience at work.
insights
the
retention. During
Complementing our highly engaged
team is our strong levels of team
member
the
reporting period, 3,260 team members
joined Super Retail Group and our
total retention levels continued to be
strong at over 74 per cent, maintaining
the Group’s high levels of retention.
TEAM MEMBER SAFETY & WELLBEING
is committed
Super Retail Group
to providing a healthy and safe
work environment for all our team
members, contractors, customers and
visitors. Our Work Health and Safety
Policy defines this commitment and
is supported by our Group safety and
wellbeing strategic plan and safety
management system, which reflects
a proactive
risk and behaviour-
based approach.
Safety is a key performance measure
at all levels and across all aspects
including stores,
of our business,
Distribution Centres and Support
Offices,
reinforcing our approach
that safety and injury management
practices are embedded in the way
we do business.
In the 2017 financial year, the Group
Lost Time Injury Frequency Rate (LTIFR)
was 6.31 per million hours worked,
compared to 8.77 for the previous
year. Our result for the 2016 financial
year was adjusted from the previously
reported 6.87 to reflect re-clarification
of key definitions, continuing the
ongoing maturation of our data
measurement.
The continued decrease in our LTIFR
reflects 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.
There were no work related fatalities
recorded during the reporting period.
At the same time, we recognise a
healthy team member is a safer team
member and, this year, we increased
our support for our team members’
health and wellbeing
through
providing, or providing access to,
a range of health and wellbeing
resources. These resources educate
and support our team members to be
physically, mentally and emotionally
Super Retail Group Limited • Annual Report 2017 in peak condition so they can meet
the demands of their roles and go
home safe and energised to enjoy life
outside of work.
DIVERSITY & INCLUSION
We believe a diverse and inclusive
is a core competitive
workforce
advantage. Ensuring the make-up
of our team reflects the diversity
of our customers in the areas we
serve means we can better
understand and anticipate customer
needs and develop deeper, more
meaningful connections.
Given our collective understanding
on this belief, we are committed
to ensuring all
team members’
contributions are welcomed and
valued, differences are celebrated
and everyone benefits from inclusive
practices and behaviours.
As a business, we are about inspiring
people to live their passions and we
believe supporting diversity, inclusion
and flexibility enables our
team
members to both live their passions
and realise their full potential.
We proudly offer flexible working
arrangements to support our team
members enjoy greater work-life
balance, so they, like our customers,
can enjoy their leisure passions. We
also offer flexible work arrangements
that cater
family needs and
commitments.
to
GENDER DIVERSITY
In
the 2017 financial year, we
achieved continued progress on
gender diversity at our most senior
levels. The number of women within
the Group Executive Team (Band 1),
reporting into the CEO, rose to four,
up from two the prior year, resulting
in female representation at this senior
level of 40 per cent.
At the same time, we are proud that
gender
representation within our
Board of Directors was maintained at
43 per cent, with Dr Sally Pitkin named
as independent Non-Executive Chair
to replace Mr Robert Wright upon his
retirement in October 2017. This again
underlines the strong commitment to
gender diversity being championed
by the highest levels within Super
Retail Group.
There was continued improvement
in other key workplace diversity
indicators over the period, including
an increase in the overall population
of women as well as the number
of women
leadership, with 12
additional female appointments to
key senior management roles (Bands
1-3), taking the total representation
in
to
remain committed
of women at this level to 34 per cent.
We
further
advancing gender diversity at all
levels, in line with our target of having
40 per cent female representation at
Board and senior management level
by 2019.
investment
Workplace diversity continues to be
fostered through the Group’s learning
and development programs. This
includes continued
in
leadership development
targeted
programs, such as our dedicated
‘Women
and
Development’ (WILD) program, and
increased female representation in
Turbo Boost, aimed at developing
emerging leaders.
Leadership
in
We encourage all our team members
across Super Retail Group to be strong
advocates for diversity and inclusion
in the business and retail sectors, and
this is led by our CEO Peter Birtles who is
an active member of the Queensland
Male Champions of Change and a
regular speaker on gender diversity
and inclusion.
Super Retail Group’s 2017 Workplace
Gender Equality Agency
(WGEA)
report may be obtained via the WGEA
website: https://www.wgea.gov.au/.
TEAM LEARNING & DEVELOPMENT
Investing in our team is a Group-
wide commitment and evidenced
by our development pathways, retail
training, management development
and personal development programs,
as well as product and
sales
training suites.
This includes a partnership with a
Registered Training Organisation that
delivers training modules for a range
of nationally-recognised qualifications
for retail team members. Our learning
and development programs are
delivered through a variety of formats
to best meet the needs of our diverse
and geographically-dispersed team.
In 2018, leadership development will
be a key focus. We know we need to
be best equipping our managers to
effectively lead the business through
the period of ongoing change for the
retail sector, and a new leadership
program will be introduced in the
coming financial year to support our
leaders with this opportunity.
71%TEAM ENGAGEMENT
74%TEAM RETENTION
34%
FEMALE REPRESENTATION IN
SENIOR MANAGEMENT
(BANDS 1-3)
43%FEMALE BOARD
REPRESENTATION
29
Super Retail Group Limited • Annual Report 2017 30
Super Retail Group Limited • Annual Report 2017 CASE STUDY
SHARED
PASSION
Rebel engages with customers
around a shared passion for
women in sport.
to
Rebel is proud to have partnered
with the Women’s Big Bash League
(WBBL) for a second year as it
support women
continues
in sport.
the
Its approach
partnership is but one example
of how Rebel is driving deeper
customers
connections
through engaging with
them
around meaningful experiences
that we share together.
with
to
In 2015, Rebel made history by
signing on as the Naming Rights
Partner of the inaugural WBBL. Now
in its second year, the partnership
has allowed Rebel to cement its
position as a leading supporter of
women in sport. Through a number
of different touch points, Rebel
has been able to demonstrate the
brand’s commitment to inspiring
young women to play cricket.
Key to the success of the opening
weekend was the launch of the
‘Rebel women’ content series -
driving interest in the athletes on
and off the ground. The videos
provided a rare platform for these
athletes to share their stories. On
the forefront of the mainstream
Australian sporting landscape, a
female’s story of rising to success
is often very different to their male
counterparts. The ultimate aim
of these profile pieces is to inspire
young women to pick up a bat or
ball and play cricket.
franchise
The ‘Rebel women’ content series
features one player from each
Rebel WBBL
including
Meg Lanning from the Melbourne
Stars and Alyssa Healy from the
Sydney Sixers. The content was
through Rebel and
distributed
Cricket Australia’s social channels
right through the WBBL season and
provided a platform to showcase
the inspiring tales of sacrifice and
dedication.
The videos have a dual purpose: to
showcase and elevate the profiles
of these amazing athletes and tell
each of their unique stories, and it’s
also about letting younger women
know that sport – and
in this
instance cricket – is a viable career
path and that Rebel wants to step
up and support them.
To date, the videos have been
viewed over 300,000
times on
Rebel’s
social channels and
218,291 on Cricket Australia
pages. The reception has been
overwhelmingly
positive, with
Channel 10 airing several of the
videos during WBBL broadcast
matches throughout the season.
31
Super Retail Group Limited • Annual Report 2017 ”
WE CAN WIN BY CONNECTING
WITH AND INSPIRING OUR
CUSTOMERS AROUND THEIR
PASSIONS BY PROVIDING
SOLUTIONS AND ENGAGING
EXPERIENCES – NOT JUST
PRODUCT AND PRICE
TRANSACTIONS.
32
Super Retail Group Limited • Annual Report 2017 SUSTAINABILITY
At Super Retail Group we share your passion to make our world a cleaner, healthier and
happier place. We recognise the important role we have to play ensuring the well-being of
the environment and the communities in which we operate.
As a key focus area for our business,
sustainability is embedded in our
business practices through ensuring
high standards of governance,
promoting
responsible business
supply
practices across our
chain, fostering a highly engaged
workforce to create a diverse
and high performing team, and
managing our environmental
impacts to minimise our carbon
footprint.
the
During
reporting period,
our Sustainability efforts have
been publicly recognised by the
following organisations;
• CDP (formerly Carbon
Disclosure Project) Australian
Climate Leadership Award:
Most profitable carbon
reduction activity
• Dow Jones Sustainability
Indices (DJSI) Review: Named
one of the leaders in the
Retail category in Australia
compared with our peers
• Australian Packaging
Covenant: Remained a high
performer signatory with a star
rating 4 out of 5
• Australian Council of
Superannuation: Recognised
the Group’s levels of corporate
sustainability disclosure and
ESG reporting as ‘Leading’.
information on our
Detailed
sustainability performance will be
set out in the Group’s Sustainability
Report, which will be published on
our corporate website.
MANAGING OUR MOST MATERIAL
SUSTAINABILITY ISSUES
to
to
refine our
We continue
materiality assessment process
identify and
to ensure we
respond
sustainability
the
issues and opportunities that are
most important to our business
and stakeholders. We manage
to economic,
our exposure
environmental
social
sustainability risks in accordance
with our
risk management
strategy and frameworks.
and
During the 2017 financial year,
we enhanced our materiality
assessment process by extending
our engagement with selected
customers, trade partners and
issues
team members.
The
substantially
identified were
consistent with past
years,
reflecting the fact that the issues
we face remain an ongoing and
complex challenge and require
us to monitor them diligently.
ETHICAL SOURCING
We are committed to promoting
better working conditions in our
global supply chain and ensuring
the products we provide to our
customers are ethically and
sustainably sourced.
in
principles
Standards,
International
An updated Ethical Sourcing
Policy was implemented in 2017
across the Group. The Policy
incorporates the standards of
the
behaviour mandated
Group’s Code of Conduct,
contained
the
in
Labour
the
International
Organisation’s
Labour
the
employment
rights provisions
within the United Nations Human
Rights Charter and the labour
laws and
the
country of manufacture or supply.
Adherence to the policy applies
to all our trade partners. With
an initial focus on our private
branded products, a program of
factory audits was extended to
align with the new policy.
regulations
in
PRODUCT SAFETY & QUALITY
team,
We are committed to providing
safe and
that are
products
of high quality to enable our
customers to make the most of
their leisure time. Our dedicated
together
compliance
with our trade partners, aim to
ensure our products comply with
product safety requirements and
relevant consumer
laws. Our
product testing regime addresses
mandatory
regulated
and
Australian and New Zealand
standards, and includes testing
by either in-house or third-party
NATA-accredited facilities.
33
Super Retail Group Limited • Annual Report 2017 DIGITAL & CYBER SECURITY
in the
live and thrive
As we
digital economy, we continue
to evolve our business to better
protect our operations
from
disruption. Dramatic changes
in digital technology coupled
with frequent media reports of
cyber breaches has demanded
better controls from companies
in this space. Key areas of priority
include detection and response,
technical security, people security
and data security.
potential to create sustainable
for the Group through
value
reducing
greenhouse
emissions and operational costs
related to waste, packaging and
electricity consumption.
our
Super Retail Group has been
disclosing its carbon emissions in
Australia and New Zealand to the
CDP (formerly Carbon Disclosure
Project) since 2015. Our annual
CDP Reports are available on our
corporate website.
CUSTOMER DATA & PRIVACY
PACKAGING & WASTE
Protecting customer information
and ensuring the confidentiality,
integrity and availability of our
systems is an obligation we take
seriously. We strive to conduct our
business in full compliance with
the laws and regulations, and
have controls in place to protect
the personal information of our
customers, club members and
team members. For the reporting
period the Group has had no
notifiable breaches to the Privacy
Commissioner.
OUR ENVIRONMENT
We share the same passion for
the outdoors with our customers
and continue to work with them
and our trade partners to reduce
the impacts of our products and
activities in the environment.
system
Our direct environmental impacts
relate
to packaging, energy
use and waste production.
We manage those impacts by
maintaining an environmental
management
the
prevention of pollution, complying
with applicable environmental
laws,
and
opportunities associated with
our operations and conducting
business in accordance with our
Environmental Policy and Ethical
Sourcing Policy.
identifying
risks
for
We recognise the products we
sell contribute to the generation
of waste, the major contributor
being product packaging.
recycling
During the reporting period, we
continued to decrease the waste
produced within Australia and
improved our
rates
by 7.3 per cent (59.8 per cent
in total), well above our target
of 54.5 per cent for the 2017
financial year. This was achieved
through waste management
process
improvements during
store
refurbishments, openings,
closures and relocations.
Packaging efficiency and waste
reduction was further improved
through:
• Packaging optimisation that
achieved a 21.8 per cent
pallet utilisation improvement
and 11.2 per cent container
utilisation improvement
through reducing packaging
materials and improving
air space. This will save an
estimated 2,700 kg of plastic
material per year
• Packaging for private label
products imported from
China were made of 100 per
cent recycled materials.
CLIMATE CHANGE
PRODUCT RECYCLING & REUSE
remains a
Climate change
prominent
issue and presents
some level of risk and disruption
for all businesses globally. We
recognise that action on climate
change also offers significant
34
to
continue
We
explore
opportunities to improve resource
recovery of products that we sell
in stores and use in our operations.
Some current recycling programs
of note include:
• Battery Recycling: We
collected over 60,000
batteries for recycling during
the 2017 financial year
• Oil Recycling: For the
reporting period, we
collected 750,200 litres of oil
for recycling
• Clothes hangers reuse:
Hangers used in our Leisure
and Sports stores are returned
to our trade partners for reuse
• Pallet reuse: Stores return
their pallets to our Distribution
Centres for reuse, and
any damaged pallets are
recycled.
ENERGY & GREENHOUSE GAS
EMISSIONS
During the reporting period, we
in our
achieved a decrease
energy use intensity of 4.9 per
cent and decrease in emissions
intensity of 7.9 per cent. Overall,
our total energy consumption
increased by 3.0 per cent due
to business growth and store
refurbishment activity. Despite this
increase, our total greenhouse
gas emissions slightly decreased
by 0.3 per cent compared to
the previous
reporting period,
due to a 26.0 per cent reduction
in the number of vehicles fully
maintained by the Group.
OUR COMMUNITY
Super Retail Group is committed
to having a positive impact on
the many communities in which
we operate. Our community ini-
tiatives include corporate philan-
thropy,
supporting community
groups and other NGOs, actively
participating in improving com-
munity well-being, and providing
on-the-ground assistance in times
of natural disasters, such as fires,
floods and earthquakes.
With our significant store presence
in communities large and small
across Australia and New Zealand
and
team
large number of
members we employ nationally,
Super Retail Group has a unique
opportunity
to
the communities where we live,
work and play. We believe that
to contribute
Super Retail Group Limited • Annual Report 2017 being part of the communities
where we operate is mutually
beneficial both for our business
and the people who are part of
those communities, and helps to
strengthen our relationships with
local customers, partners and
team members.
COMMUNITY PARTNERSHIPS
Super Retail Group maintains
a number of partnerships with
community organisations and
seeks to be actively involved in
the issues that matter to us and
the community.
We are proud to continue to
support the important work of
Australian Red Cross, raising over
$160,000 to support the Red Cross
Disaster preparedness, relief and
recovery campaign. The Group
also donated almost $700,000 of
winter clothing to Red Cross for
sale through their Red Cross store
network in support of their Winter
Woolies campaign.
Sport’s
Community
Amart
Kickbacks and Rebel’s Support
Your
Sport are community
programs that provides support
to local clubs and schools. These
programs have provided over
$4.5 million in sporting goods to
local groups in the 2017 financial
period.
than $111,000
During the period, Super Retail
Group contributed a total of
more
through
cash donations,
sponsorships
and team member contributions
in support of our community
partnerships. In addition, we also
provide discounted products
and store credits to support local
community groups.
”
AT SUPER RETAIL GROUP
WE SHARE YOUR PASSION
TO MAKE OUR WORLD A
CLEANER, HEALTHIER AND
HAPPIER PLACE.
35
Super Retail Group Limited • Annual Report 2017
DIRECTORS’ &
FINANCIAL
REPORTS
2017
36
Super Retail Group Limited • Annual Report 2017 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 1 July 2017.
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
Directors:
R J Wright
(Independent Non-Executive Chair)
P A Birtles
(Group Managing Director and Chief Executive Officer)
R A Rowe
(Non-Executive Director)
S A Pitkin
(Independent Non-Executive)
D J Eilert
(Independent Non-Executive)
L K Inman
(Independent Non-Executive)
H L Mowlem
(Independent Non-Executive) (appointed 13 June 2017)
Former:
R J Skippen
(Independent Non-Executive) (retired 24 October 2016)
Details of the qualifications, experience and responsibilities of the Directors are on pages 22 to 23 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
S A Pitkin
D J Eilert
L K Inman
H L Mowlem (3)
n/a
n/a
n/a
(cid:1)
(cid:1)
(cid:1)(1)(2)
(cid:1)
(cid:1)(1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
n/a
n/a
n/a
(cid:1)(1)
(cid:1)
(cid:1)
(cid:1)
(1) Denotes Chair of Committee.
(2) L K Inman replaced R J Skippen as the Chair of the Audit & Risk Committee, effective 24 October 2016.
(3) Appointed 21 June 2017.
1.1
Directorships of listed companies held by members of the Board
Current directors:
Director
Listed Company
Directorship
Key Dates
R J Wright
Super Retail Group Limited
APA Ethane Limited
Independent Chair
Independent Non-Executive Director
Chair and Non-Executive Director
Australian Pipeline Limited
Independent 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
Former, appointed 10 July 2008 and
ceased September 2016
Former, appointed 10 Feb 2000 and
ceased October 2015
Current, appointed 05 January 2006
Current, appointed 24 November
2010
Current, appointed 08 April 2004
Super Retail Group Limited • Annual Report 2017 37
DIRECTORS’ REPORT (continued)
1.
1.1
Directors (continued)
Directorships of listed companies held by members of the Board (continued)
Current directors:
Director
Listed Company
Directorship
Key Dates
S A Pitkin
D J Eilert
L K Inman
H L Mowlem
Former director:
Super Retail Group Limited
Star Entertainment Group
Limited
IPH Limited
Link Administration Holdings
Limited
Billabong International
Limited
Super Retail Group Limited
Navitas Limited
Veda Group Limited
Super Retail Group Limited
Commonwealth Bank of
Australia
Bellamy’s Australia Limited
Precinct Properties New
Zealand Limited
Super Retail Group Limited
Billabong International
Limited
Independent Non-Executive Director
Independent Non-Executive Director
Current, appointed 01 July 2010
Current, appointed 31 July 2014
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Non-Executive Director
Non-Executive Director
Independent Non-Executive Director
Non-Executive Director
Non-Executive Director
Independent Non-Executive Director
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 4 October 2013
and delisted 26 February 2016
Current, appointed 21 October 2015
Current, appointed 16 March 2011
Former, appointed 15 February 2015
and ceased 28 February 2017
Current, appointed 28 October 2015
Independent Non-Executive Director
Independent Non-Executive Director
Current, appointed 13 June 2017
Current, appointed 24 October 2012
Director
Listed Company
Directorship
Key Dates
R J Skippen
Super Retail Group Limited
Independent Non-Executive Director
Slater & Gordon Limited
Flexigroup Limited
Independent Chairman and Non-
Executive Director
Independent Non-Executive Director
Emerging Leaders
Investment Limited (delisted
19/06/2014)
Non-Executive Director
Former, appointed 21 October 2015
and ceased 24 October 2016
Current, appointed 26 May 2010
Current, appointed 20 November
2006
Former, appointed 12 October 2010
and ceased 15 September 2014
1.2
Directors’ Meetings
The number of meetings of the Company’s Board of Directors and each Board Committee held during the period ended 1 July
2017 is set out below:
Board Meetings
Audit and Risk
Nomination
Human Resources and
Remuneration
Attended
Held(1)
Attended
Held(1)
Attended
Held(1)
Attended
Held(1)
Meetings of Committees
R J Wright
P A Birtles
R A Rowe
R J Skippen
S A Pitkin
D J Eilert
L K Inman
H L Mowlem
10
10
10
4
10
10
10
1
10
10
10
4
10
10
10
1
4
4
4
1
4
4
4
4
4
4
1
4
4
4
n/a
n/a
2
2
2
1
2
2
2
1
(1)Number of meeting held during the time the Director held office during the year.
2
2
2
1
2
2
2
1
4
4
4
1
4
4
4
4
4
4
1
4
4
4
n/a
n/a
38 Super Retail Group Limited • Annual Report 2017
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
S A Pitkin
D J Eilert
L K Inman
H L Mowlem
Number of Ordinary Shares
Options over Ordinary Shares
69,001
1,408,421
59,912,667
26,453
4,500
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, bicycle accessories and apparel.
3.2
(a)
Review of Financial Condition
Group Results
Revenue from continuing operations
Segment earnings before interest, taxes, depreciation and amortisation (EBITDA)
Segment earnings before interest and taxes (EBIT)
Normalised NPAT
Profit for the period attributable to owners
Profit for the period
Operating cash flow
EPS – basic (cents)
Dividends per share (cents)
2017
$m
2,465.8
278.0
207.3
135.8
101.8
100.5
234.5
51.6
46.5
2016
$m
2,422.2
245.7
175.3
108.6
62.8
58.0
159.2
31.8
41.5
The 2016 comparison period represents a 53 week period end of 2 July 2016 compared to the 2017 financial period which
represents a 52 week trading period end of 1 July 2017. All comparatives to the prior period need to factor in the additional
week of trading with the exception of like for like sales comparisons which have been adjusted.
The Group has delivered a strong result for the financial year with a 25.0% increase in normalised net profit after tax as all
divisions delivered robust performances. Profit for the period increased by 73.3% and operating cash flows increased by 47.3%.
The financial results reflect an improvement in underlying divisional performance, the benefits of restructuring activities
announced in the 2016 financial period and the benefits of strategic programmes including the supply chain transformation.
During the 2017 year the Group undertook a strategic review of the Sports Retailing Division. The existing strategy since
acquisition, to leverage two brands with distinct identities has been successful in delivering growth for the Sports Division. The
review though identified that changes in customer expectations would result in the two brand strategy to be less distinctive over
time. A decision was made and announced in July 2017 to operate a single brand strategy for Sports. All Amart Sports stores will
be converted to Rebel by November 2017 with a full integration of ranges complete by June 2018. The conversion of Amart
Sports stores to Rebel means that future cash flow from these stores will be attributed to the Rebel brand and as a result the
Amart Sports brand has been fully impaired.
The converted stores will no longer include a dedicated Goldcross store-in-store and the remaining unamortised Goldcross
brand name has been fully impaired. The Group has therefore recognised after tax costs of $34.0 million in the 2017 financial
period associated with the Sports business transformation. A further $3.0 million of after tax costs will be incurred in the 2018
financial period. The capital investment in fitting out the converted stores are expected to be circa $9.0 million.
Super Retail Group Limited • Annual Report 2017 39
DIRECTORS’ REPORT (continued)
3.
3.2
(a)
Operating and Financial Review (continued)
Review of Financial Condition (continued)
Group Results (continued)
Net profit after tax (NPAT) attributable to owners was $101.8 million compared to $62.8 million in the prior period. After excluding
the Sports restructuring activities, the normalised NPAT was $135.8 million compared to $108.6 million in the prior period, an
increase of 25.0%. 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 from
continuing operations
Business restructuring costs(1)
Impairment of Amart Sports and Goldcross Cycles brand names(1)
Impairment of Ray’s Outdoors brand name(1)
Normalised net profit after tax
Business restructuring costs comprise:
- Sports business restructuring
- Ray’s Outdoors
- Infinite Retail
- Tax effect
Total business restructuring costs
(1) Net of tax
2017
$m
100.5
1.3
101.8
7.8
26.2
-
135.8
48.5
-
-
(14.5)
34.0
2016
$m
58.0
4.8
62.8
31.8
-
14.0
108.6
-
38.3
5.0
(11.5)
31.8
Basic earnings per share (EPS) was 51.6 cents compared to 31.8 cents in the prior comparable period, an increase of 62.3%
reflecting the robust performance of all divisions.
Total sales increased 1.8% to $2,465.8 million on the prior comparative period. Normalising for a 52 week comparison the sales
have increased 3.5%.
Like for like sales growth was achieved in each division with total revenue growth for Auto Retailing, BCF and Sports Retailing. 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 an improvement in like for like sales and gross margin expansion. The Sports Retailing
Division reported sales increases due to strong underlying like for like sales growth, new stores and improved EBITDA margins.
Infinite Retail is included in the Sports Retailing result.
The Group continues to invest in the development of its businesses through the expansion and improvements to the retail store
network and supporting omni-retailing capability through information technology, digital initiatives and inventory management
projects.
(b)
Division Results
Auto
Leisure
Sports
Unallocated
Auto Retailing
Sales
EBITDA
EBIT
2017
$m
955.9
553.5
949.2
7.2
2,465.8
2016
$m
922.8
581.9
910.2
7.3
2,422.2
2017
$m
139.4
43.1
115.1
(19.6)
278.0
2016
$m
133.2
37.5
100.3
(25.3)
245.7
2017
$m
111.0
25.4
91.3
(20.4)
207.3
2016
$m
104.6
18.6
77.8
(25.7)
175.3
Divisional sales at $955.9 million were 3.6% higher than the prior comparative period with like for like sales growth of 3.5%.
Segment EBIT at $111.0 million was 6.1% higher than the comparative period.
Like for like sales growth of 3.5% was driven by improvement in average item value and growth in total transactions. Gross
margin improvements were again driven by ranging and sourcing initiatives plus benefits from supply chain efficiencies.
Operating costs leverage was achieved after accommodating increased investment in store services standards and omni-
retailing customer experience initiatives.
The Supercheap Auto Club Plus membership increased during the year, with active members totalling over 1.3 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.
40 Super Retail Group Limited • Annual Report 2017
DIRECTORS’ REPORT (continued)
3.
3.2
(b)
Operating and Financial Review (continued)
Review of Financial Condition (continued)
Division Results (continued)
Auto Retailing (continued)
Key major product categories delivered positive growth during the financial period with particularly strong growth being
achieved in the audio, power, car care, lubricants and spare parts categories. The tools and outdoor category delivered
negative growth due to the impact of the closure of Masters and the resultant discounting. The strongest like for like sales growth
was achieved in New Zealand. All Australian states achieved like for like growth with the exception of Western Australia which
remained flat.
The business opened 12 new stores and closed three stores during the year. The store refurbishment program increased this year
to 28 stores including eight superstores. At 1 July 2017, there were 316 stores across Australia and New Zealand with the business
targeting additional store growth over the next five years.
The Penrith Customer Experience Centre opened in June 2017 and has experienced strong sales and exceptional customer
feedback. The business will continue to trial this format in other locations and is planning to refurbish around 46 stores and open
10 new stores in the coming year.
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 75%
above the prior comparable period.
Leisure Retailing
Divisional sales at $553.5 million decreased by $28.4 million as BCF grew and Rays executed its restructuring and market
repositioning activities.
BCF experienced like for like sales growth of 5.1% (weeks 11 to 52) and total sales growth of 8.8%. Margin improvement was
achieved through improvements in pricing and promotions management in the key Christmas trading period combined with
sourcing and private brand development initiatives.
Operating cost leverage was less significant for BCF as the converted Rays stores operate at a higher cost to sales than the
existing BCF stores. This is expected to improve over the next few years as sales intensity increases. During the year the business
invested in improving brand saliency with the launch of the BCFing campaign which increased marketing costs compared to
the prior comparative period.
The BCF club loyalty program continued to grow in the financial year with active membership totalling over 1.3 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, closed one store and converted 12 stores from Rays to BCF during the year taking total
store numbers to 135. BCF expects to extend the store network in the next five years.
Rays repositioning continued during the period with there being 15 stores at the end of the period after commencing the year
with 53 stores. The store network is below the level expected 12 months ago as one site was identified to be more suited to BCF
and another site was closed. The new Rays business has delivered strong growth in key win categories which will need to be
compounded in the next financial year for the strategy to be validated.
Sports Retailing
Divisional sales at $949.2 million were 4.3% higher than the prior period and Segment EBIT at $91.3 million was 17.4% higher than
the prior period. Like for like sales growth for Rebel and Amart Sports was 4.4%.
Like for like sale growth in Rebel and Amart Sports was driven by growth in transaction volume and average transaction value.
The major categories all delivered strong like for like growth. Gross margin improvements were strongest in Apparel. The business
experienced its strongest growth in the key Christmas trading period with sales growth slowing in the second half of the year.
Pleasingly the business experienced more robust growth in late May and June.
The Sports division remains focused on building customer engagement with the key brands. Loyalty programs have grown
strongly during the financial period with active members now totalling 2.4 million.
The Sports Division increased total store numbers by five stores during the period with a total of 166 at the end of the period. Of
these, 68 are Amart Sports stores which will be rebranded to Rebel by November 2017.
The Sports Division has continued to build its omni-retailing capability through improvements to websites, fulfilment and in store
digital engagement. These improvements have supported on-line sales growth of 73% in the financial period.
Super Retail Group Limited • Annual Report 2017 41
DIRECTORS’ REPORT (continued)
3.
3.2
(b)
Operating and Financial Review (continued)
Review of Financial Condition (continued)
Division Results (continued)
Sports Retailing (continued)
The Infinite Retail business restructure was completed in the financial year with the business delivering a small EBIT contribution,
compared to a $5.6 million EBIT loss in the prior comparative period. The majority of poor performing contracts have been
renegotiated or terminated during the year.
Group Costs
Group costs for the period were $20.4 million, down 20.6% compared to the prior period. Included in Group costs is $10.6 million
in corporate costs, $4.1 million related to un-utilised distribution centre space, $4.8 million related to digital including investment
in digital businesses and $0.9 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
2017
$m
42.6
481.5
(297.9)
(1.5)
224.7
19.9
(400.6)
(380.7)
264.5
750.1
(3.1)
(83.8)
(17.1)
754.6
234.5
(101.2)
(129.0)
4.3
15.6
-
19.9
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
Net assets for the Group increased $20.6 million as strong profitability and operating cash flows were invested into strategic
initiatives.
Group Net Debt was $380.7 million, which was a $19.5 million net reduction on 2016. The Group remains comfortably within its
banking covenants.
Cash flow from operations of $234.5 million was $75.3 million higher than the prior year. This is due to both higher sales and
improvement in inventory management. In addition, 2016 was a 53 week year ending on 2 July 2016 impacting 2016 only in
terms of timing of cash outflows. Net cash outflows relating to the 53rd week in 2016 equated to $37.9 million.
Group capital expenditure cash flow was $101.2 million which included $64.7 million in new and refurbished store fit out, and
$36.5 million in information technology projects, inventory management projects and building omni-retail capabilities.
(d)
Dividends
Super Retail Group has declared a 25.0 cents per share fully franked final dividend for 2017. This will result in a full year dividend
of 46.5 cents per share fully franked, an increase of 12.0% over the prior year. This represents a dividend payout ratio of 64.9% of
underlying NPAT.
42 Super Retail Group Limited • Annual Report 2017
DIRECTORS’ REPORT (continued)
3.
3.2
(e)
Operating and Financial Review (continued)
Review of Financial Condition (continued)
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 business risks faced by the Group that are likely to have a material effect on its financial prospects are listed below,
including an overview of the Group’s mitigating actions:
•
•
•
•
•
•
•
•
Competition - The Retail market is becoming increasingly globalised through the growing impact of on-line shopping and
overseas retailers’ investment into Australasia, which expose the Group to more intense competition. The Group continues
to develop strategies to build a stronger emotional connection with customers around their passions for their leisure
activities rather than historical levers or range and price differentiation. 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 - Traditional retail business models are being disrupted through increasing
vertical integration of the end-to-end supply chain. This 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 expects this risk to continue to develop as market aggregators enter and disrupt the market.
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 has established an organisation wide customer
centricity program to place the customer at the centre of every action and its strategies will show greater alignment to
changing customer expectations and build greater agility in the organisation’s operating model to address future
changes to customer expectations. 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 - Supply Chain maturity and agility are critical to the requirements of a world
class omni-retailer and for the Group to meet evolving customer expectations. 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 remain constant.
Product compliance achievement, including the production of inventory at agreed quality standards, compliance with
consumer law, dangerous goods legislation etc is a risk that is managed through the Group’s integrated risk management
plan via a cyclical audit programme. Ineffective or inefficient management of inventory is a significant risk to all retailers.
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. A review of the Group’s operating model is underway and will
identify the design requirements and transformation to a new way of working to support the Group’s strategy to be a
world class omni-retailer. Transitioning the organisation to a new operating model will increase risk in the near term,
however reduce risk in the medium to long term.
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. Ethical sourcing, ensuring that products are sourced within
acceptable community standards, requires dedicated focus. 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 the Notes to the Consolidated
Financial Statements.
Super Retail Group Limited • Annual Report 2017 43
DIRECTORS’ REPORT (continued)
3.
3.2
(e)
•
Operating and Financial Review (continued)
Review of Financial Condition (continued)
Material Business Risks (continued)
Cyber & Emerging Technology risk - The digital economy and transformation in retail delivery creates new challenges for
all companies in relation to maintaining a strong cyber resilience program. The Group is implementing strategies to
prevent deliberate exploitation of computer systems, technology-dependent enterprises and networks by internal and
external parties. 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:
2016 final fully franked dividend
2017 interim fully franked dividend
Declared after end of year:
2017 final fully franked dividend
3.4
Significant Changes in the State of Affairs
Cents per share
Total amount
$m
Payment date
21.5
21.5
42.4
42.4
7 October 2016
7 April 2017
25.0
49.3
6 October 2017
There were no significant changes in the Group’s state of affairs during the period other than that described in section 3.5
below.
3.5
Matters Subsequent to the End of the Financial Year
The Group has undertaken a review of the strategy for its Sports Division recognising that the dynamics of the sports retail market
are set to evolve in the next few years. As such the Group has concluded that the optimal strategy to sustain its position as the
market leader in sports retailing will be to focus on building one retail brand. Therefore the Group will commence a program of
converting all Amart Sports stores to Rebel with a target of presenting one brand to market by November 2017 as announced to
the market on 25 July 2017. This is considered to be an adjusting event for the purposes of the 2017 financial statements and as
such the Group has recognised after tax costs of $34.0 million in the 2017 financial year associated with the Sports business
transformation.
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 1 July 2017.
44 Super Retail Group Limited • Annual Report 2017
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited
The Directors of Super Retail Group present this Remuneration Report for the period ended 1 July 2017. The Remuneration Report
outlines the Group’s remuneration philosophy and practices, explains how the Group’s 2017 performance has driven executive
remuneration outcomes, and provides the details of specific remuneration arrangements that apply to Key Management
Personnel (KMP) in accordance with section 300A of the Corporations Act 2001 (Cth) (Corporations Act) and applicable
accounting standards.
The structure of the Remuneration Report is outlined below.
Contents
Section 1
Section 2
Section 3
Section 4
Section 5
Section 6
Section 7
Section 8
Section 9
Section 10
Section 11
Remuneration Governance
Key Management Personnel
Remuneration Strategy and Policy
Senior Executive Remuneration Structure
Non-Executive Directors Remuneration Structure
Relationship of Remuneration to Group Performance
Remuneration Outcomes for 2017
Remuneration Changes for 2018
Service Agreements
Period of Restraint
Additional Information
Section 1: Remuneration Governance
1.1
Role of the Human Resources and Remuneration Committee
The primary objective of the Human Resources and Remuneration Committee (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’s duties and responsibilities are:
•
Undertake 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;
Review and recommend 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;
Undertake 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;
Establish the policy for the remuneration arrangements for Non-Executive Directors, reviewing remuneration arrangements
annually and obtaining independent external remuneration advice where appropriate; and
Review and recommend 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. The Corporate Governance Statement (available in the
Investor Centre, Corporate Governance section of the Group’s website at www.superretailgroup.com) provides further
information on the role of the Committee.
1.2
Involvement of Independent Advisors
The Human Resources and Remuneration Committee operates independently of senior executives and engages directly with
remuneration consultants. The requirements for external consultants’ services are assessed annually in the context of
remuneration matters that the Committee requires to address. During 2017, external advice was received from Ernst & Young
related to market remuneration benchmarking, and market remuneration practices around remuneration structures.
No remuneration recommendations as defined by the Corporations Act 2001 were provided.
Section 2: Key Management Personnel
The names and titles of the Group’s KMP, being those persons having authority and responsibility for planning, directing and
controlling the activities of the entity, are set out below.
Super Retail Group Limited • Annual Report 2017 45
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
2.1
Non-Executive Directors
Current:
R J Wright
R A Rowe
S A Pitkin
D J Eilert
L K Inman
H L Mowlem
Former:
R J Skippen
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 (appointed 13 June 2017)
Independent Non-Executive Director (retired 24 October 2016)
2.2
Executive Director
P A Birtles
Group Managing Director and Chief Executive Officer
2.3
Other Executive KMP
Current:
D J Burns
E A Berchtold Managing Director – Sports Division
C D Wilesmith Managing Director – Auto Division
A M Heraghty Managing Director – Leisure Division
Chief Financial Officer
Former:
G G Carroll
Chief Supply Chain Officer (resigned effective 22 July 2016)
Section 3: 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 3rd 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.
•
•
•
•
•
•
The Group is committed to ensuring all employees are remunerated fairly and equitably. The Group conducts annual gender
pay equity reviews that are presented to the Remuneration Committee. No significant gaps were identified during 2017.
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 Target Remuneration structure.
For the 2017 financial year, remuneration benchmarking for all KMP was sourced from Ernst & Young (EY) Remuneration
Consultants. The Board referenced three sets of comparator groups to benchmark remuneration, being:
46 Super Retail Group Limited • Annual Report 2017
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
• Market Capitalisation comparator group: S&P/ASX 200 companies within 50% to 200% of Super Retail Group’s 12 month
average market capitalisation;
• 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; and
• 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.
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 KMP, are remunerated under a
Total Target Remuneration (TTR) structure consisting of three elements:
•
•
•
Base Salary Package (inclusive of superannuation contributions, car allowance and other non-monetary benefits);
Short Term Incentive (STI); and
Long Term Incentive (LTI).
In line with the Group’s Remuneration Policy, these remuneration categories are illustrated in Table 1 below:
Table 1:
Market Competitive
Aligned to
Shareholders’
Sustainable Value
Super Retail Group’s Remuneration Policy
Pay-for-Performance
Environment – Specific
and Measurable
Equitable, fair and
consistent across the
Group
Flexible – Recognise
Performance,
Experience and
Qualifications
Super Retail Group’s Executive Remuneration Objectives
Attract, motivate, and retain
executive talent
Differentiate reward to drive
performance including
values and behaviours
An appropriate balance of
fixed and ‘at-risk’
components focused on
long-term strategy and short-
term milestones
Alignment to shareholder
interests and value creation
through equity components
Group Managing Director & Chief Executive Officer and Senior Executive Remuneration Structure
Determination
Delivery
Strategic Intent and Market
Positioning
Fixed
Base Salary Package
Base salary package is set
based on relevant market
data relativities, reflecting
responsibilities, performance,
qualifications and
experience.
Base pay and
superannuation and may
include prescribed non-
financial benefits at the
executives’ discretion on a
salary sacrifice basis.
Base salary package will
generally be positioned at
the median compared to
relevant market-based data,
taking into account
expertise and performance
in the role.
At Risk
Short Term Incentive (STI)
STI performance criteria are
set by reference to the
Group PBT and divisional
revenue and EBIT, and
individual performance
targets relevant to the
specific position.
Cash only.
Performance incentive is
directed to achieving Board
approved targets, reflective
of market circumstances.
Combined, base salary
package and STI is intended
to be positioned in the 3rd
quartile of the relevant
benchmark comparisons.
Long Term Incentive (LTI)
LTI targets are linked to both
Earnings per Share (EPS) and
Return on Capital (ROC)
performance measures, over
a three year vesting period.
Equity in performance rights.
All equity is held subject to
service and performance for
3 to 5 years from grant date.
The equity is at risk until
vesting. Performance is
tested once at the vesting
date.
LTI is intended to reward
executive KMP for
sustainable long-term
growth aligned to
shareholders interests. LTI
allocation values are
intended to be positioned at
the top of the 3rd quartile of
the relevant benchmark
comparisons.
Total Target Remuneration (TTR)
TTR is positioned to achieve the remuneration objectives outlined above. Outperformance generates higher reward.
The remuneration structure is designed to ensure top quartile executive KMP remuneration and is only achieved if Super
Retail Group outperforms against stated targets.
Target Remuneration Mix
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, developing and implementing business strategy and external
remuneration practices.
Super Retail Group Limited • Annual Report 2017 47
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
The diagrams below (Figure 1), show the mix of fixed and at-risk components of remuneration, as a percentage of total annual
remuneration, for the Group Managing Director and Chief Executive Officer and other executive KMPs disclosed in the
Remuneration Report. Remuneration is based on the base salary package as at July 2016 and the incentive payable if all
performance conditions are met, and assumes maximum STI is received and full vesting of the LTI plan.
Figure 1:
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.
(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
executive 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.
No guaranteed base salary increases are included in any executive KMP’s service contract. Approved amendments to base
salary packages are effective from the commencement of the new financial year.
(b)
(i)
Short Term Incentive (STI)
Review of the STI Scheme
As indicated in the 2016 Remuneration Report, the Human Resources and Remuneration Committee undertook a review of the
incentive component of the executive remuneration framework as part of the Board’s commitment to achieve stronger
alignment of the Group’s approach to remuneration with its strategic objectives.
Central to the review was an acknowledgement that the previous profit share structure that was put in place 5 years ago, was
fit for purpose then as it was strongly aligned to the strategy of the business. However, evolving internal and market challenges
since then precipitated a change in approach. The complexity of the operating environment requires executives to drive
performance in a non linear manner and to be accountable for creating short and long term shareholder value. Accordingly, a
single measure of profit whilst always a primary consideration needs to be balanced with all stakeholder interests and
competing priorities. This approach resulted in the introduction of a new STI scheme (the Scheme) based on a balanced
scorecard. Taking a balanced scorecard approach allows us to assess performance in a holistic way by measuring the four key
drivers of performance, namely:
Financial (50%)
Strategy / Business Improvement (20% - 30%)
•
•
• Customer (10% - 15%)
•
People (10% - 15%)
48 Super Retail Group Limited • Annual Report 2017
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
In considering the needs of the shareholder this approach takes a prospective view of performance and rewards not only for
the financial performance in any given year but also for ensuring those results are sustainable and in the long term interest of
shareholders.
The significant weighting of financial outcomes with a minimum of 50% ensures the strong link between actual financial
performance and incentive paid is maintained. A minimum Group Profit Before Tax (PBT) of at least 90% of target must be met
before any short term incentives are payable. If this level is not reached, the Scheme is deemed to be discretionary and any
payment made to executives will be at the Board’s discretion.
Setting performance levels at target and stretch is a critical element of the STI scheme. They support continuous improvement
and are correlated with the overall Group target and the contribution of each executive. Accordingly, the performance
required at each “target” (100%) level, is equivalent to the budget for each available measure. The performance required at
the “Stretch” level (150%) is equivalent to the strategic plan levels for each available measure.
The Committee governed the scheme design, KPI and target setting and held discretion over the outcomes.
The principles and key elements of the Scheme are as per Table 2 below:
Table 2:
Principles
Alignment of remuneration arrangements with
the delivery of sustainable value to the
Group’s shareholders.
Market competitiveness.
Maintain a pay for performance environment
through linking incentive pay opportunities to
the achievement of specific, measurable
business goals.
Be fair and valued by executives, reflect
performance both at the individual and
company level but must not reward
executives for failure.
•
•
Elements of the scheme satisfies the principles
•
The induction of a formulaic scorecard allows the Group to appropriately
balance short and long term financial outcomes and have this
recognised in the reward to executives. The Board’s discretion to take
into account extraordinary items provides the ability to support that
appropriate outcomes are achieved.
• Decouples the link between fixed remuneration and STI target.
•
The use of year-on-year financial hurdles are designed to ensure that
incentives are affordable and not disproportionately dilutive to overall
profit. Minimum performance hurdle established.
• Capping of STI payments at 150% of target.
•
The application of targets will anchor STI and therefore total cash at the
desired market position with potential upside to a more aggressive
position.
The creation of measurable scorecards coupled with the use of target
and stretch elements to encourage outperformance.
STI targets are common at an executive level and provide transparent
line of sight between performance at target and stretch and reward
opportunity. It provides the optimum balance between achievability and
performance.
• Having a minimum Group performance standard across all scorecards
supports the appropriate mix of Group and individual measures.
Importantly, target does not equate to minimum and under-performance
will be reflected in the scorecard with zero possible.
•
(ii)
Performance-based ‘At Risk’ Remuneration and Evaluating the Performance of Senior Executives in 2017
Variable or ‘at-risk’ remuneration forms a significant portion of the executive KMP remuneration opportunity. The purpose of
variable remuneration is to direct executives’ behaviours towards maximising the Group’s short-term performance. The key
aspects are summarised in Table 3 below:
Table 3:
Plan
Participation
Purpose
Performance Period
Financial Gateway
STI awards are made under the Super Retail Group Short Term Incentive Scheme.
The Group Managing Director and Chief Executive Officer and other executive KMP are
invited to participate in the Scheme.
The Scheme rewards a combination of Board approved financial and non-financial
performance measures that articulate performance expectations at both target and over-
achievement that are aligned to the creation of shareholder value.
The primary financial measure is Group PBT combined with Divisional EBIT (where
appropriate). In addition, a balance of non-financial measures are included on executing
key objectives such as business improvement, customer and people, which are aligned to
the Group’s business plan.
The performance period is for 12 months ending 1 July 2017.
A minimum Group PBT of at least 90% of target must be met before any short term incentives
are payable. If this level is not reached, the Scheme is deemed to be discretionary and any
payment made to executives will be at the Board’s discretion.
Super Retail Group Limited • Annual Report 2017 49
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
Performance Targets
The achievement of individual KPI targets (independent of profit performance) shall
determine the proportion of the potential bonus entitlement that will be granted.
During the 2017 financial year, following the review of the scheme, existing 2017 business
performance targets were translated into the new scheme KPIs. These goals are specific to
the individual and aligned to the Group’s strategic plan.
Measures
Category
Weighting
(% of STI)
Performance Goals
Financial
Non-
Financial
Financial
50%
Business
Improvement
20-30%
Customer
10-15%
People
10-15%
Net Profit Before Tax (PBT)
Working Capital Efficiency
Supply Chain Optimisation
Business Transformation
BCF Earnings (EBIT)
Net Promotor Score (NPS)
Lost Time Injury Frequency Rate (LTIFR)
Employee Engagement
2017 Target & Maximum
Stretch Opportunity
Use of Discretion
Governance and Approval
Process
Payment Vehicle
Payment Frequency
For the Group Managing Director and Chief Executive Officer and other executive KMP, the
target STI opportunity is 100% of target, and the maximum stretch STI opportunity is 150% of
target. For each measure, a threshold level of performance is set. This level must be met to
achieve a score. Importantly, the threshold is set higher than prior year performance thereby
maintaining a key principle of year on year improvement.
The Human Resources and Remuneration Committee, in its advisory role, reviews proposed
adjustments to STI outcomes where there are exceptional, unforeseen and uncontrollable
impacts on the agreed performance measures and makes recommendations for any
changes to performance measures, which may only be approved by the Board.
The Group Managing Director and Chief Executive Officer’s STI is recommended by the
Committee based on his balanced scorecard performance and is approved by the Board.
The amount of STI paid to other executive KMP is recommended by the Group Managing
Director and Chief Executive Officer to the Committee based on each executive’s balanced
scorecard performance and is recommended by the Committee for approval by the Board.
The Board may apply discretion in determining the STI outcomes to ensure they are
appropriate.
STI awards are delivered in cash with no deferral.
STI awards are paid annually. Payments are made in September following the end of the
performance period.
(iii)
Company and Divisional Performance Measures
In designing the measures relating to the financial performance of the Group, three core drivers were considered – sustainable
growth, profitability and operating efficiency. Net profit, earnings growth and working capital efficiency were determined to be
the most appropriate and therefore all or a combination of, are detailed in each scorecard.
Insofar as profit is concerned, all executives hold PBT as the primary performance measure, noting that NPAT is a key driver of LTI
outcomes and is used judiciously in that instrument as it provides a purer alignment to the returns to shareholders.
All scorecards carry a weighting of 50% for pure financial metrics and all scorecards have an element of Group financial
performance and for the Managing Directors of each Division, Divisional EBIT.
An important consideration in the Business Improvement category was for the measures to be appropriately balanced between
immediate business priorities and longer term strategic initiatives. Each executive KMP has measures accordingly.
For the year to 1 July 2017, the normalised profit before tax target was set at $184.1 million, 18.1% higher than the normalised
profit before tax achieved in the period to 2 July 2016 of $155.9 million. This target was exceeded and therefore the gateway
was also met. The Divisional profit is measured by segment EBIT performance against budget. In the year to 1 July 2017, the
Auto and Sports Divisions achieved their budgets while the Leisure Division did not achieve its budgeted EBIT.
(iv)
Executive Performance Objectives and Outcomes for 2017
The individual KPIs and 2017 achievement as determined by the Human Resources and Remuneration Committee for the Group
Managing Director and Chief Executive Officer were as per Table 4 below:
50 Super Retail Group Limited • Annual Report 2017
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
Table 4:
Measure
Description of
Measure
Weighting
Actual Performance Range
Commentary on Performance
1.
Financial Measures:
Net Profit Before Tax
(PBT)
Financial
Business
Improvement
Working Capital
Efficiency –
Inventory Investment
to Sales
Supply Chain
Optimisation – Cost
per Unit
Transformation of
Rays
2. Non-Financial Measures:
BCF Earnings (EBIT)
Customer
People
Customer Centricity
- Net Promotor
Score (NPS)
Lost Time Injury
Frequency Rate
(LTIFR)
Level of Employee
Engagement
35%
15%
20%
15%
15%
T
h
r
e
s
h
o
d
l
l
B
e
o
w
(cid:1)
t
o
T
a
g
e
r
t
T
h
r
e
s
h
o
d
l
r
T
a
g
e
t
S
t
r
e
c
h
t
r
T
a
g
e
t
t
o
S
t
r
e
c
h
t
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
In 2017, the Group’s normalised profit
before tax outcome was $190.5m. This
exceeded the target and represents a
22% year-on-year performance
improvement. This is a significant
improvement to performance from
prior years.
Year-end result was slightly hampered
by stock investment in stores yet to
open.
Whilst there was a 10% year-on-year
improvement it fell slightly below
target.
Successful execution of the closure of
Ray’s Outdoors and trialling of new
Rays format.
Earnings up 19% year-on-year.
NPS result represents a significant
improvement of 23% year-on-year.
Whilst slightly below target, a 17% year-
on-year improvement has been
achieved.
Engagement levels remain flat from
the prior corresponding period.
The overall outcome for the Group Managing Director and Chief Executive Officer was assessed by the Board to be a
performance level of 103%, driven by outperformance in the financial measures and impacted by underperformance in LTIFR
and no movement in the Employee Engagement score. As a point of calibration, in the 2017 financial year, the Group’s
normalised profit before tax outcome was $190.5m. This exceeded the target by 3.4% and represents a 22% year-on-year
performance improvement.
In considering the outcomes, the following are noted:
•
Performance – A scorecard outcome of 103% is an above target ($820,000) outcome resulting in a payment of $844,600.
This result is 69% of earning potential (100% of fixed at $1.23 million) for delivering a 20% year-on-year improved profit
performance and therefore the result is robust, fair and appropriate.
• Comparison to Prior Scheme – A key feature of the Board’s decision to implement a new scheme was that in the first year
(2017), a no disadvantage test would be applied by considering what the same result would return on the prior scheme.
Under the previous STI scheme, this same PBT outcome would translate into a bonus outcome of $738,000 or 60% of the
maximum earning potential.
The individual KPIs and 2017 achievement as determined by the Human Resources and Remuneration Committee for the
executive KMP were as per Table 5 below:
Table 5:
Name
Company Measures
Financial (50%)
Business Improvement
(20%)
Customer (15%)
People (15%)
STI Total %
D Burns
E Berchtold
C Wilesmith
A Heraghty
Target
Target to stretch
Target to stretch
Threshold to target
Threshold to target
Threshold to target
Target to stretch
Threshold to target
Threshold to target
Target to stretch
Target
Stretch
Target
Threshold to target
Threshold to target
Threshold to target
109%
86%
107%
90%
Super Retail Group Limited • Annual Report 2017 51
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
Tables 4 and 5 are shown graphically in Figure 2.
Figure 2:
In considering the outcomes, the following is noted:
•
Position to Market – The collective average outcome will position the executive KMP between the median and the 3rd
quartile for awarded STI (market capitalization comparator group). This positioning is in line with our Remuneration
philosophy and recognises the strong performance in a challenging year for the sector.
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 reasonable and the Group can demonstrate a clear link between STI payments and the
Group 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 executive KMPs and other
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 is an at-risk component of executive remuneration under which an equity award may be provided to
executives based on the achievement of specific performance measures, linking the long-term remuneration of executive KMP
and other executives with the economic benefit derived by shareholders over a three to five year performance period.
Participation in the Plan is by invitation only as determined by the Board. The key attributes of the Group’s LTI Plan are provided
in Table 6 below:
Table 6:
Plan
Participation
Purpose
LTI Instrument
Allocation
Methodology
Performance Period
LTI awards are granted under the Super Retail Group Employee Performance Rights Plan.
The Plan allows for the annual grant of Performance Rights to executive KMP and other executives.
The Plan aligns executive remuneration with the creation of shareholder value. This is achieved
through the use of both Earnings Per Share (EPS) Compound Annual Growth and Return on Capital
(ROC). The Plan has also been designed to act as a retention mechanism, and to encourage
executive KMP and other executives to build and retain the Group’s shares over the long term. The
Super Retail Employee Performance Rights Plan Rules are available on the Group’s website.
Performance Rights are granted by the Group for nil consideration. Each performance right is a
right to receive a fully-paid ordinary share at no cost if service-based and performance-based
vesting conditions are met.
The number of Performance Rights granted to each executive KMP is determined in accordance
with the Executive Remuneration Structure outlined above, and have a value of between 50% and
100% of their base salary. The notional value of Performance Rights granted to executive KMP and
other executives is determined on a face value basis using the volume weighted average price
(VWAP) for Super Retail Group 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 value of
Performance Rights for grant purposes may differ from the accounting valuation which considers
probability of vesting and other factors.
The performance period is three years commencing on 1 July in the year the award is made. For
the 2017 awards, this is the three year period from 1 July 2017 to 30 June 2020.
52 Super Retail Group Limited • Annual Report 2017
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
Performance Hurdles
and Vesting
Schedules
Testing and Time
Restrictions
Dividends and Voting
Rights
Hedging
Arrangements
Clawback Policy
Termination Provisions
Change of Control
Provisions
Equity grants to executive KMP and other executives are in two equal tranches of 50% to growth in
EPS and 50% to averaged ROC. The performance conditions are:
Measure
Weight
Nature
Performance Zone
(Threshold to Maximum)
Payout
Normalised EPS CAGR
50%
Growth of Group
10% to 15% compound annual
growth
Below threshold (<10%):
0% of elements vested
Threshold (10%):
50% of elements vested
Maximum of above (15%):
100% of elements vested
Straight-line vesting:
Between threshold (10%) and
maximum (15%)
Averaged ROC
50%
Group Absolute
12% to 15% annual average
Below threshold (<12%):
0% of elements vested
Threshold (12%):
50% of elements vested
Maximum of above (15%):
100% of elements vested
Straight-line vesting:
Between threshold (12%) and
maximum (15%)
Performance Period
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
Percentage of Performance
Rights that vest:
50%
25%
25%
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.
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%.
For performance rights granted since 2016 the averaged ROC performance hurdle has changed
as follows:
•
•
•
Performance Rights will vest on a pro rata basis between these averaged ROC ranges.
At the end of three financial years, equity grants are tested against the performance hurdles set. If
the performance hurdles are not met at the vesting date, the Performance Rights will lapse. There is
no retesting of performance hurdles under the Plan.
Performance Rights do not carry voting or dividend rights.
Participating executives are prohibited from entering into any hedging arrangements in relation to
Performance Rights.
The Group implemented a Clawback Policy to meet good governance practice. The policy is
available on the Group’s website. There have been no circumstances to date where the policy
was invoked.
Executive KMP must be employed at the time of vesting to receive the allotment of shares. 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 pro-rated 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.
Any unvested Performance Rights may vest at the Board’s discretion, having regard to pro-rated
performance.
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 and can be viewed in the Investor Centre, Corporate Governance
section of the Group’s website, www.superretailgroup.com.
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. Non-
Executive Directors receive fees to recognise their contribution to the work of the Board and the associated Committees that
they serve.
Super Retail Group Limited • Annual Report 2017 53
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
The Human Resources and Remuneration Committee reviews the level of fees annually. Under the current fee framework, Non-
Executive Directors are remunerated by way of a base fee, with additional fees paid to the Chairs and members of committees
namely 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. Fees are inclusive of superannuation contributions
required by the Superannuation Guarantee legislation. Non-Executive Directors do not receive any performance-related
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.
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 facilitates board
succession and regeneration. No increase in the pool is proposed for the 2018 financial year.
(a)
Directors’ Fees
The fees paid to Non-Executive Directors are set out in Table 7 below and are annual fees, inclusive of superannuation, unless
otherwise stated.
Table 7:
Annual Fees
Chair(1)
Members
Board
$307,500
$138,375
Audit and Risk Committee(2)
Human Resources and
Remuneration Committee(2)
$25,000
$10,000
$25,000
$10,000
(1) Committee fees are not paid to the Chair.
(2) Committee fees are not paid to members of the Nomination Committee.
Section 6: Relationship of Remuneration to Group Performance
The STI scheme operates to create a clear link between executive remuneration and the Group’s annual performance,
motivating and rewarding the Managing Director and Chief Executive Officer and executive KMP for performance during the
year.
The performance of the Group and remuneration paid to KMP over the last 6 years is summarised in Table 8 below:
Table 8:
Financial performance
2012
2013
2014
2015(1)
2016(2)
2017
CAGR(3)
Sales ($m)
1,654.1
2,020.0
2,112.1
2,238.7
2,422.2
2,465.8
Normalised Profit before tax
($m)
Normalised Post Tax ROC (%)
Shareholder value created
Normalised Earnings Per
Share(¢)
Dividends Per Share (¢)
June Share Price ($)
134.3
15.9
53.7
32.0
7.19
163.0
12.6
58.1
38.0
11.97
158.6
11.3
148.6
10.6
155.9
10.7
190.5
13.0
55.1
40.0
8.46
54.0
40.0
9.40
55.1
41.5
8.77
68.9
46.5
8.20
8%
7%
5%
8%
3%
(1) Results from continuing operations.
(2) 2016 is a 53 week reporting period compared to 52 weeks for the other 5 years.
(3) Percentage movement shown is the Compound Annual Growth Rate over the last 5 years.
Table 9:
Remuneration Expense of Key Management Personnel
2013
$m
3.9
Base Salary Package
2012
$m
3.1
Short Term Incentive
Long Term Incentive
Total
1.1
1.1
5.3
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
2017
$m
5.1
2.1
1.1
8.3
(1) 2016 is a 53 week reporting period compared to 52 weeks for the other 5 years and excludes “Other” remuneration.
Since 2012 normalised earnings per share has increased by 28.1%, dividends per share have increased by 34.4% and the share
price has increased by 14.0% demonstrating a balance between strategic growth and shareholder value.
During the same period, total remuneration paid to KMP has increased by 56.6% whilst total base salary has increased by 64.5%.
During this period the number of executive KMP decreased from 6 to 5 which impacts year on year comparisons. 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 3.9% in 2012 and has increased to 4.4% in
2017.
54 Super Retail Group Limited • Annual Report 2017
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
KMP STI paid compared to EPS over the last 6 financial years:
Figure 3:
KMP LTI expense compared to EPS over the last 6 financial years:
Figure 4:
Super Retail Group Limited • Annual Report 2017 55
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
Section 7: Remuneration Outcomes for 2017
Details of the remuneration of the Directors and KMP of the Group are set out in Table 10 below:
Table 10:
2017
Name
Non-Executive
R J Wright
R A Rowe
R J Skippen(4)
S A Pitkin
D J Eilert
L K Inman(5)
H L Mowlem(6)
Subtotal
Executive Director
P A Birtles
Other KMP
D J Burns
E A Berchtold
C D Wilesmith
A M Heraghty
G G Carroll(7)
Subtotal
Total
2016
Name
Short-term Benefits
Post-
employment
Share-based
Cash
salary
and fees
$
Cash
bonus
$
Non-
monetary
benefits
$
Super-
annuation
$
Performance
Rights (1)
$
Other (2)
Total (3)
$
$
287,884
104,074
52,778
158,333
144,635
168,657
7,296
923,657
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19,616
34,301
5,014
15,042
13,740
-
693
88,406
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
307,500
138,375
57,792
173,375
158,375
168,657
7,989
1,012,063
1,206,744
844,600
3,640
19,616
418,069
(7,335)
2,485,334
625,384
635,384
612,384
648,351
28,886
3,757,133
4,680,790
272,500
331,100
428,000
279,000
-
2,155,200
2,155,200
-
30,000
48,000
102,033
-
183,673
183,673
19,616
19,616
19,616
19,616
3,989
102,069
190,475
122,121
163,274
159,488
222,476
-
1,085,428
1,085,428
10,471
(7,049)
50,022
(12,566)
-
33,543
33,543
1,050,092
1,172,325
1,317,510
1,258,910
32,875
7,317,046
8,329,109
Short-term Benefits
Post-
employment
Share-based
Cash
salary
and fees
$
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
280,692
105,215
155,251
150,685
96,640
105,821
894,304
Non-Executive
R J Wright
R A Rowe
R J Skippen
S A Pitkin
D J Eilert(8)
L K Inman(8)
Subtotal
Executive Director
P A Birtles
Other KMP
D J Burns
E A Berchtold
C D Wilesmith
A M Heraghty
G G Carroll
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
617,340
612,244
567,513
690,431
510,321
4,197,537
5,091,841
819,745
998,021
870,965
1,300,442
561,681
6,099,023
7,084,832
3,833
33,354
(14,887)
340,297
18,561
410,143
410,143
53,158
72,131
72,980
120,024
(39,424)
453,190
453,190
125,000
229,255
170,100
75,000
52,000
771,355
771,355
20,414
20,460
26,336
20,643
20,223
129,541
221,046
300,000
139,167
170,000
165,000
105,821
105,821
985,809
-
30,577
48,923
54,047
-
137,257
137,257
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,199,688
1,548,169
120,000
174,321
21,465
28,985
3,710
amounts reported in prior periods. This results in certain positions displaying as negative values.
(2) Includes accruals for annual leave and long service leave entitlements, and a 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.
(3) The reporting period of 3 July 2016 to 1 July 2017 is a period representing 52 weeks, compared to the comparative reporting period 28 June 2015
to 2 July 2016 representing 53 weeks, which has resulted in a $0.1 million decrease in expense for the period.
(4) R J Skippen retired effective 24 October 2016.
(5) L K Inman commenced as Chair of the Audit & Risk Committee on 24 October 2016.
(6) H L Mowlem commenced as KMP on 13 June 2017.
(7) G G Carroll resigned effective 22 July 2016 and ceased as KMP on this date.
(8) D J Eilert and L K Inman commenced as KMP on 21 October 2015.
(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.
56 Super Retail Group Limited • Annual Report 2017
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
Short Term Incentives
(i)
STI is dependent on the satisfaction of performance conditions as set out in Section 4(b). The 2017 STI cash bonus was awarded
on 24 August 2017. No part of the bonuses are payable in future years.
As noted previously, the Committee reviewed the performance objectives and weightings for 2017 to ensure continued
alignment with the Group’s strategy. During the transition, the reward outcomes for 2017 took into account both the new
arrangements and what would have been payable previously to ensure no disadvantage, and calculated the final outcome
using the old scheme as a reference point.
(ii)
LTI is dependent on the satisfaction of performance conditions and service conditions as set out in Section 4(c).
Long Term Incentives
Table 11:
Vesting Outcomes for LTI Performance Rights Granted for the 2013 to 2015 financial periods
Grant Date
August 2012
August 2013
August 2014
Financial Results
determining vesting
June 2015
June 2016
June 2017
EPS 3 Year
CAGR
5.2%
1.7%
7.7%
Vested
Forfeited
ROC
Averaged
Vested
Forfeited
nil
nil
nil
100%
100%
100%
11.5%
10.9%
11.4%
nil
nil
nil
100%
100%
100%
Performance Rights have not vested for the last three years due to the EPS and ROC performance conditions not being
achieved.
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 Table 12 below:
Table 12:
Held at
2 July 2016 Granted(1)
Vested
Number
Other
Changes(2)
Number
Held at
1 July 2017(3)
Number
Value of Performance
Rights granted in year
$
Financial year in
which grant vests
Year
-
-
-
-
Number
Number
-
-
-
30,685
21,615
32,017
34,994
-
-
32,017
34,994
30,685
26,137
37,519
45,291
-
n/a
n/a
n/a
245,173
(21,615)
-
-
-
-
-
-
-
117,031
-
-
100,000
104,516
117,031
15,825
110,000
100,000
104,516
-
n/a
n/a
n/a
n/a
935,078
(15,825)
-
-
-
-
-
(110,000)
-
-
-
2017, 2018, 2019
2018, 2019, 2020
2019, 2020, 2021
2020, 2021, 2022
2017
2017, 2018, 2019
2018, 2019, 2020
2019, 2020, 2021
2020, 2021, 2022
2017
P A Birtles
2012
2014
2015(4)
2016
2017
D J Burns
2014
2015(4)
2016
2017
E A Berchtold
2014
2015(4)
2016
2017
C D Wilesmith
2012
2014
2015(4)
2016
2017
A M Heraghty
2016
2017
G G Carroll
2012
2014
2015(4)
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
2017
2017, 2018, 2019
2018, 2019, 2020
2019, 2020, 2021
2020, 2021, 2022
2017, 2018, 2019
2018, 2019, 2020
2019, 2020, 2021
2020, 2021, 2022
2017
2017, 2018, 2019
2018, 2019, 2020
2019, 2020, 2021
-
(22,838)
-
-
-
n/a
n/a
n/a
n/a
316,931
(2,167)
-
-
-
-
-
-
35,859
43,897
39,666
2,167
22,838
35,859
43,897
-
-
-
-
-
39,666
(26,137)
-
-
-
-
(18,760)
(26,681)
(29,115)
n/a
n/a
n/a
324,026
2019, 2020, 2021
2020, 2021, 2022
(4,872)
-
-
-
-
37,519
45,291
40,554
4,872
18,760
26,681
29,115
-
-
-
40,554
n/a
n/a
n/a
n/a
n/a
364,232
52,258
45,586
52,258
-
-
45,586
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
value is nil.
(4) These performance rights will be forfeited in August 2017 due to performance conditions not being satisfied.
Super Retail Group Limited • Annual Report 2017 57
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
The Performance Rights granted in the current reporting period were valued using a fair value of $7.99. 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), 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 2017 financial year.
Option over equity instruments of Super Retail Group Limited
No Options were granted or vested during the financial year.
Section 8: Remuneration Changes for 2018
(a)
Approach for 2018
In the 2018 year, the Human Resources and Remuneration Committee will continue to refine all elements of total reward to
ensure they are aligned to the creation of short and long term shareholder value and that they are market competitive.
(b)
Total Reward Structure – Group Managing Director and Chief Executive Officer
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. A 2% pay increase will apply for 2018. The maximum earning
potential for STI has increased by 2% at the stretch level. In determining the target level for STI, the Board determined the target
would be $1.0 million.
(c)
Base Salary and Short Term Incentive Package
This year, the comparator benchmarks show that overall executive KMP base salary and short term incentive packages for the
2018 year will be in line with the market median with individual KMP base salary and short term incentive packages varying from
108% to 111% of the respective market median. Overall executive KMP base salary packages will increase by 2.1% in the 2018
year.
(d)
Long Term Incentive (LTI) – Performance Hurdle
A review of the Long Term Incentive Plan will be undertaken by the Human Resources and Remuneration Committee during the
next twelve months. This will ensure that key features of the plan, such as measures and targets, are balanced and appropriate,
achieve continuing alignment of the Group’s approach to remuneration with its business objectives, and remain challenging
and in line with financial forecasts.
(e)
Non-Executive Directors’ Fees
Directors board fees (excluding committee fees) will increase by 2%.
Section 9: Service Agreements
Remuneration and other terms of employment for executive 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 executive KMP may be terminated early by either party with three months notice, subject to termination
payments as detailed in Table 13 below:
Table 13:
Name
Term of Agreement
Agreement
Commencement Date(1)
P A Birtles
D J Burns
Ongoing
1 December 2016
5 years, 10 months
3 December 2012
E A Berchtold
Ongoing
15 May 2017
C D Wilesmith
5 years, 3 months
1 July 2013
A M Heraghty
4 years, 8 months
27 April 2015
Review
Term(2)
Annual
Annual
Annual
Annual
Annual
Termination
payment
Commencement
date with Super
Retail Group
12 months(3)
30 April 2001
6 months(4)
3 December 2012
6 months(4)
5 November 2011
6 months(4)
18 September 2007
6 months(3)
27 April 2015
(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.
58 Super Retail Group Limited • Annual Report 2017
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
Section 10: Period of Restraint
The majority of the above executive KMP have the following post-employment restraints within their service contracts.
After cessation of employment for any reason, for the period set out in Table 14 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.
Table 14:
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
Period
12 months
9 months
6 months
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.
3 months
Section 11: Additional Information
(a)
Minimum Securities Holding Policy
Commencing from the 2015 financial year, the Board introduced a minimum shareholding requirement for Non-Executive
Directors valued at a minimum of 100% of one year’s pre-tax base fees, the Group Managing Director and Chief Executive
Officer to be 150% of one year’s pre-tax base salary, and for other executive KMP 100% of one year’s pre-tax base salary. 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.
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)
(i)
Equity instruments held by KMP
Shares provided on exercise of Performance Rights and Options
Table 15 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 1 July 2017 on the exercise of Options.
Table 15:
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
Performance Rights
Performance Rights
Performance Rights
n/a
Performance Rights
Number of Ordinary Shares Issued on
Exercise of Share Plans During the Year(3)
15,825
-
-
2,167
n/a
4,872
22,864
Market Value at Exercise
Date(4)
162,523
-
-
22,255
n/a
50,035
234,813
(1) A M Heraghty was not an employee of the Company at the time of the grant of performance rights detailed above and was therefore not
eligible to participate in these incentive schemes.
(2) Refer to Section 4(c) - Long Term Incentives.
(3) The 2012 grant was exercised on 1 September 2016, with the 2013 and 2014 grants lapsing due to hurdles not being met.
(4) The value at exercise date for Performance Rights was determined using the Group share price of $10.27.
Super Retail Group Limited • Annual Report 2017 59
DIRECTORS’ REPORT (continued)
4.
(ii)
Remuneration Report – Audited (continued)
Movement in shares
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 per Table 16 below:
Table 16:
2017
Non-Executive
Directors:
R J Wright
R A Rowe
S A Pitkin
D J Eilert
L K Inman
H L Mowlem
Executive Director:
P A Birtles
Other KMP:
D J Burns
E A Berchtold
C D Wilesmith
A M Heraghty
G G Carroll
Held at
2 July 2016
Granted(1)
Purchases
In lieu of
dividends(2)
Sales
Held at
1 July 2017
107,001
59,876,285
26,453
-
5,241
-
-
-
-
-
-
-
-
-
-
4,500
-
-
-
547,132
-
-
-
-
(38,000)
(510,750)
-
-
-
-
69,001
59,912,667
26,453
4,500
5,241
-
1,392,596
15,825
-
-
-
1,286
-
60,000
-
-
2,167
-
4,872
1,000
-
-
-
-
-
-
-
97
-
-
-
1,408,421
-
-
-
-
(44,872)
1,000
-
3,550
-
20,000
(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.
(iii)
Unissued shares under Performance Rights and Options plans
Unissued ordinary shares of Super Retail Group Limited under the Performance Rights Plan at the date of this report are set out in
Table 17 below:
Table 17:
Grant date
Vesting Date
1 September 2012
1 September 2013
1 September 2014
1 September 2015
1 September 2016
Total
(1)
(1)
(1)
(1)
(1)
Value per Performance
Right at Grant Date
$7.95
$10.83
$6.03
$8.17
$7.99
Number of Performance
Rights
-
-
-
526,500
551,775
1,078,275
(1) Performance Rights vest progressively three to five years after grant date and have no expiry date. Refer to Section 4(c), 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 1 July 2017 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 22 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 $118,597 (2016: $91,839) 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.
60 Super Retail Group Limited • Annual Report 2017
DIRECTORS’ REPORT (continued)
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.
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(2)
Total remuneration for audit and review services
Taxation and Other Services
PricewaterhouseCoopers Australian firm:
Taxation Services(3)
Digital Innovation Support(4)
Business review of subsidiary
Network firms of PricewaterhouseCoopers Australia:
Taxation Services
Total remuneration for non-audit services
(1) Audit and review of subsidiaries included in Group audit and review of financial statements in 2017.
(2) Increase due to Risk Appetite design services performed in 2017.
(3) Decrease due to indirect taxes review conducted in 2016.
(4) Engagement in relation to digital capability analysis and support awarded under a competitive tender.
2017
$
2016
$
492,100
-
191,700
683,800
113,368
-
50,000
66,803
230,171
423,700
88,230
53,500
565,430
215,834
340,290
-
33,845
589,969
Super Retail Group Limited • Annual Report 2017 61
DIRECTORS’ REPORT (continued)
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 63.
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
Chair
Brisbane
24 August 2017
P A Birtles
Group Managing Director and
Chief Executive Officer
62 Super Retail Group Limited • Annual Report 2017
Auditor’s Independence Declaration
As lead auditor for the audit of Super Retail Group Limited for the year ended 1 July 2017, I declare
that to the best of my knowledge and belief, there have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Super Retail Group Limited and the entities it controlled during the
period.
Kim Challenor
Partner
PricewaterhouseCoopers
Brisbane
24 August 2017
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 2017 63
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period ended 1 July 2017
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
Income tax expense
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 income/(loss) for the period, net of tax
Total comprehensive income for the period
Total comprehensive income for the period is attributable to:
Owners of Super Retail Group Limited
Non-controlling interests
Earnings per share for profit attributable to the ordinary equity holders
of the Company:
Basic earnings per share
Diluted earnings per share
Notes
5
2017
$m
2,465.8
1.4
2,467.2
2016
$m
2,422.2
1.6
2,423.8
(1,364.8)
(1,372.4)
(322.7)
(83.8)
(194.8)
(343.5)
(16.9)
(313.5)
(86.8)
(215.9)
(328.0)
(19.4)
(2,326.5)
(2,336.0)
140.7
(40.2)
100.5
101.8
(1.3)
100.5
3.4
(0.5)
2.9
103.4
104.7
(1.3)
103.4
51.6
51.3
87.8
(29.8)
58.0
62.8
(4.8)
58.0
(7.5)
0.4
(7.1)
50.9
55.7
(4.8)
50.9
31.8
31.6
6
13
18
18
16
16
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
64 Super Retail Group Limited • Annual Report 2017
CONSOLIDATED BALANCE SHEET
As at 1 July 2017
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
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
Provisions
Derivative financial instruments
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
Notes
7
8
9
10
11
12
13
14
15
11
12
13
14
17
18
18
Capital and reserves attributable to owners of Super Retail Group Limited
Non-controlling interests
TOTAL EQUITY
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
2017
$m
19.9
42.6
481.5
544.0
264.5
750.1
1,014.6
1,558.6
253.7
2.6
1.5
62.3
3.1
323.2
44.2
398.0
17.1
21.5
480.8
804.0
754.6
542.3
3.5
210.7
756.5
(1.9)
754.6
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
58.7
8.0
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
Super Retail Group Limited • Annual Report 2017 65
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the period ended 1 July 2017
Contributed
Equity
Reserves Retained
Earnings
Total
Notes
$m
$m
$m
$m
Non-
Controlling
Interests
$m
Total
Equity
$m
Balance at 27 June 2015
542.3
13.2
212.8
768.3
(3.0)
765.3
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
21
18
Change in ownership interest in controlled entities 23
-
-
-
-
-
-
-
Balance at 2 July 2016
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
21
18
Change in ownership interest in controlled entities 23
-
-
-
-
-
-
-
Balance at 1 July 2017
542.3
-
(7.1)
(7.1)
-
0.7
(7.7)
(7.0)
(0.9)
-
2.9
2.9
-
2.0
(0.5)
1.5
3.5
62.8
-
62.8
62.8
(7.1)
55.7
(81.9)
(81.9)
-
-
(81.9)
193.7
101.8
-
101.8
0.7
(7.7)
(88.9)
735.1
101.8
2.9
104.7
(4.8)
-
(4.8)
-
-
6.7
6.7
(1.1)
58.0
(7.1)
50.9
(81.9)
0.7
(1.0)
(82.2)
734.0
(1.3)
100.5
-
2.9
(1.3)
103.4
(84.8)
(84.8)
-
-
(84.8)
210.7
2.0
(0.5)
(83.3)
756.5
-
-
0.5
0.5
(1.9)
(84.8)
2.0
-
(82.8)
754.6
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
66 Super Retail Group Limited • Annual Report 2017
CONSOLIDATED STATEMENT OF CASH FLOWS
For the period ended 1 July 2017
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)
2,733.7
(2,203.1)
2,678.4
(2,216.3)
Notes
2017
$m
2016
$m
Rental payments
- external
- related parties
Income taxes paid
Net cash inflow from operating activities
19
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
21
(231.0)
(11.4)
(53.7)
234.5
(102.1)
0.9
(101.2)
930.0
(955.0)
(0.9)
(18.4)
0.1
(84.8)
(129.0)
4.3
15.6
-
19.9
(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
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Super Retail Group Limited • Annual Report 2017 67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the period ended 1 July 2017
TABLE OF CONTENTS
Segment information
Revenue and other income from continuing operations
Expenses from continuing operations
Reporting entity
Summary of significant accounting policies
Critical accounting estimates and judgements
Basis of Preparation
1.
2.
3.
Group Performance
4.
5.
6.
Assets and Liabilities
Trade and other receivables
7.
Inventories
8.
Property, plant and equipment
9.
Intangible assets
10.
Trade and other payables
11.
Interest-bearing liabilities
12.
Income taxes
13.
Provisions
14.
15.
Financial assets and financial liabilities
Capital Structure, Financing and Risk Management
16.
Earnings per share
17. Contributed equity
18.
19.
20.
21. Capital management
Group Structure
22.
23.
24. Deed of cross guarantee
25.
26.
Other
27.
28.
29.
30. Contingencies
31. Commitments
32. Net tangible asset backing
33.
Key management personnel disclosures
Share-based payments
Remuneration of auditors
Parent entity financial information
Investments in controlled entities
Related party transactions
Business combinations
Events occurring after balance date
Reserves and retained earnings
Reconciliation of profit from ordinary activities after income tax to net cash inflow from operating activities
Financial risk management
69
69
69
72
73
73
75
76
77
77
78
78
80
83
84
84
89
91
94
94
95
96
97
98
104
105
105
106
107
109
110
111
111
111
113
113
114
114
114
68 Super Retail Group Limited • Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
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 1 July 2017 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
This section sets out the principal accounting policies upon which the Group’s consolidated financial statements are prepared
as a whole. Specific accounting policies are described in their respective Notes to the consolidated financial statements.
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 1 July 2017 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 23 - 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.
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.
Super Retail Group Limited • Annual Report 2017 69
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
2.
Summary of significant accounting policies (continued)
(b)
Principles of consolidation (continued)
Business combinations (continued)
(iii)
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.
(c)
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.
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:
70 Super Retail Group Limited • Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
2.
Summary of significant accounting policies (continued)
(c)
Foreign currency translation (continued)
(iii)
• assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of
Group companies (continued)
•
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.
(d)
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.
(e)
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.
(f)
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 1 July 2017, the Group is reporting on the 52 week period
that began 3 July 2016 and ended 1 July 2017. 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.
(g)
New and amended standards adopted by the Group
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
Applicable to
the Group
1 July 2018
1 July 2018
New
Accounting
Standard
AASB 9
Financial
Instruments
IFRS 15
Revenue from
Contracts with
Customers
IFRS 16 Leases
1 July 2019
Summary of Changes
Group Impact
Addresses the classification, measurement
and de-recognition of financial assets and
financial liabilities and new rules for hedge
accounting.
Establishes the reporting principles relating to
the nature, amount, timing, and uncertainty
of revenue and cash flows arising from a
contract with a customer.
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 significant impacts on its
consolidated financial statements resulting
from the application of AASB 9.
There are no significant impacts on its
consolidated financial statements resulting
from the application of IFRS 15.
This standard will materially impact the
Group’s consolidated financial statements
at transition and in future years, as the
Group’s operating leases (primarily in
relation to store, distribution centre and
office leases) are recognised on balance
sheet. Rental expense currently recognised
in the statement of financial performance
will be replaced with depreciation and
interest. Initial assessment activities have
been undertaken on the Group’s current
leases, however the impact of the standard
will depend on the leases in place on
transition. Detailed review of contracts,
financial reporting impacts and system
requirements will continue.
Super Retail Group Limited • Annual Report 2017 71
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
2.
Summary of significant accounting policies (continued)
(g)
New and amended standards adopted by the Group (continued)
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.
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 included in the following Notes
to the consolidated financial statements:
•
•
•
•
Note 8 – Inventories;
Note 9 – Property, plant and equipment;
Note 10 – Intangible assets; and
Note 14 – Provisions.
72 Super Retail Group Limited • Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
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 1 July 2017
Auto
$m
Leisure
$m
Sports
$m
Total
continuing
operations
$m
Inter-segment
eliminations/
unallocated
$m
Consolidated
$m
956.1
139.4
955.9
-
0.2
Segment Revenue and Other Income
External segment revenue(1)
Inter segment sales
Other income
Total segment revenue and other
income
Segment EBITDA(2)
Segment depreciation and
amortisation(3)
Segment EBIT result
Net finance costs(4)
Total segment NPBT
Segment income tax expense(5)
Normalised NPAT
Other items not included in the total segment NPAT(6)
Profit for the period attributable to:
Owners of Super Retail Group Limited
Non-controlling interests
(28.4)
111.0
Profit for the period
553.5
-
0.3
553.8
43.1
(17.7)
25.4
949.2
-
0.5
949.7
115.1
(23.8)
91.3
2,458.6
-
1.0
2,459.6
297.6
(69.9)
227.7
7.9
(0.7)
0.4
7.6
(19.6)
(0.8)
(20.4)
2,466.5
(0.7)
1.4
2,467.2
278.0
(70.7)
207.3
(16.8)
190.5
(54.7)
135.8
(34.0)
101.8
(1.3)
100.5
(1) Includes non-controlling interest (NCI) revenue of $1.5 million.
(2) Adjusted for NCI operating result of $1.8 million, business restructuring costs of $3.5 million and $37.3 million impairment charge for the Amart
Sports and Goldcross Cycles brand names, refer note 10 – Intangible assets.
(3) Adjusted for NCI depreciation of $0.1 million, $7.7 million provision for asset impairment relating to business restructuring and $37.3 million of
brand name impairment.
(4) Adjusted for NCI interest of $0.1 million.
(5) Segment income tax expense of $54.7 million excludes $14.5 million relating to the tax effect of business restructuring costs with a value of
$48.5 million.
(6) Includes $48.5 million of business restructuring costs and the related income tax effect of $14.5 million.
Business restructuring - Sports
The Group has been undertaking a review of the strategy for its Sports Division recognising that the dynamics of the sports
retail market are set to evolve in the next few years. As such the Group has concluded that the optimal strategy to sustain its
position as the market leader in sports retailing will be to focus on building one retail brand. Therefore the Group will
commence a program of converting all Amart Sports stores to Rebel with a target of presenting one brand to market by
November 2017. As a result there have been $48.5 million of before tax business restructuring costs associated with the
rebranding, comprising $37.3 million of brand name impairment, $7.7 million of Property, plant and equipment impairment
and $3.5 million of other restructuring costs.
Super Retail Group Limited • Annual Report 2017 73
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
4.
(b)
Segment information (continued)
Segment information provided to the Group Managing Director and Chief Executive Officer (continued)
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
133.2
922.8
-
-
Segment Revenue and Other Income
External segment revenue(1)
Inter segment sales
Other income
Total segment revenue and other
income
Segment EBITDA(2)
Segment depreciation and
amortisation(3)
Segment EBIT result
Net finance costs
Total segment NPBT
Segment income tax expense(4)
Normalised NPAT
Other items not included in the total segment NPAT(5)
Profit for the period attributable to:
Owners of Super Retail Group Limited
Non-controlling interests
(28.6)
104.6
Profit for the period
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) Includes non-controlling interest (NCI) revenue of $7.4 million.
(2) 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
10 – Intangible assets.
(3) Adjusted for NCI depreciation of $0.9 million and $14.9 million provision for depreciation relating to business restructuring.
(4) Excludes $17.5 million relating to the tax effect of business restructuring costs with a value of $63.3 million.
(5) 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, the Group continued its strategic review of 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 closed as a result of this decision and 17 stores have or 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 $20.0 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 $3.1 million provision for onerous contracts, $1.7 million of Property, plant and equipment and
Computer software write-offs, and $0.2 million other costs.
(c)
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.
74 Super Retail Group Limited • Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
4.
(c)
(i)
Segment information (continued)
Other information (continued)
Total revenue and other income from continuing operations
Australia
New Zealand
Significant Accounting Policies
2017
$m
2,354.8
112.4
2,467.2
2016
$m
2,320.3
103.5
2,423.8
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).
5.
Revenue and other income from continuing operations
Revenue from the sale of goods
Other income
Insurance claims
Commission
Sundry
2017
$m
2,465.8
0.6
0.1
0.7
2016
$m
2,422.2
-
0.5
1.1
Total revenues and other income
2,467.2
2,423.8
Significant Accounting Policies
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
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
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.
Super Retail Group Limited • Annual Report 2017 75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
6.
Expenses from continuing operations
Profit before income tax includes the following specific gains and expenses:
Expenses
Net (gain) on disposal of property, plant and equipment
Depreciation
Plant and equipment
Motor vehicles
Computer equipment
Total depreciation(1)
2017
$m
(0.6)
39.7
0.1
12.4
52.2
2016
$m
-
56.2
0.3
10.4
66.9
(1) Included in depreciation expense for 2016 is $14.9 million related to accelerated depreciation on fixed assets for Ray’s Outdoors and
Infinite Retail in respect of business restructuring activities. Refer Note 4 – Segment Information.
Amortisation and Impairment
Computer software
Brand name amortisation
Brand name impairment
Plant and equipment 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
Rental expense relating to operating leases
Lease expenses
Equipment hire
Total rental expense relating to operating leases
Foreign exchange gains and losses
Net foreign exchange (gain)
Significant Accounting Policies
Depreciation, amortisation and impairment
Refer to notes 9 and 10 for details on depreciation, amortisation and impairment.
18.4
0.2
37.3
7.7
63.6
17.0
(0.1)
16.9
35.0
449.2
484.2
211.8
5.1
216.9
19.2
0.1
20.0
-
39.3
19.5
(0.1)
19.4
34.0
438.3
472.3
233.1
8.1
241.2
(1.2)
(2.8)
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:
•
• amortisation of discounts or premiums relating to borrowings;
• amortisation of ancillary costs incurred in connection with the arrangement of borrowings;
•
•
interest on bank overdrafts and short-term and long-term borrowings;
finance lease charges; and
interest revenue.
Employee benefits
Refer to note 14 for details on employee provisions and superannuation.
76 Super Retail Group Limited • Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
6.
Expenses from continuing operations (continued)
Significant Accounting Policies (continued)
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.
Foreign exchange gains and losses
Refer to note 2 (c) for details on foreign exchange gains and losses.
7.
Trade and other receivables
Current
Trade receivables
Provision for impairment of receivables
Net trade receivables
Other receivables
Prepayments
Net current trade and other receivables
(a)
Impaired trade receivables
2017
$m
14.2
(0.8)
13.4
5.9
23.3
42.6
2016
$m
11.6
(0.6)
11.0
6.8
24.9
42.7
As at 1 July 2017 current trade receivables of the Group with a nominal value of $0.8 million (2016: $0.6 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
2017
$m
(0.6)
(0.5)
0.1
0.2
(0.8)
2016
$m
(0.3)
(0.5)
0.2
-
(0.6)
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 1 July 2017, trade receivables of $3.8 million (2016: $5.6 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
2017
2016
$m
1.1
1.0
1.7
3.8
$m
1.7
1.5
2.4
5.6
Super Retail Group Limited • Annual Report 2017 77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
7.
Trade and other receivables (continued)
Significant Accounting Policies
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.
Impairment of trade receivables
Refer to note 15 for details of impairment of financial assets including trade receivables.
8.
Inventories
Finished goods, at lower of cost or net realisable value
(a)
Inventory expense
2017
$m
481.5
2016
$m
501.9
Inventories recognised as expense during the period ended 1 July 2017 amounted to $1,291.2 million (2016: $1,291.9 million).
Write-downs of inventories to net realisable value recognised as an expense during the period ended 1 July 2017 amounted
to $2.7 million (2016: $4.3 million). This expense has been included in cost of sales of goods within the consolidated statement
of comprehensive income.
Significant Accounting Policies
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.
Critical accounting estimates and assumptions
Net realisable value
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.
9.
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
2017
$m
373.1
(155.9)
217.2
0.7
(0.5)
0.2
97.9
(50.8)
47.1
2016
$m
383.2
(179.9)
203.3
0.7
(0.4)
0.3
88.1
(54.8)
33.3
Total net property, plant and equipment
264.5
236.9
78 Super Retail Group Limited • Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
9.
(a)
Property, plant and equipment (continued)
Reconciliations
Reconciliations of the carrying amounts for each class of property, plant and equipment are set out below:
2017
Carrying amounts at 2 July 2016
Additions
Disposals
Depreciation
Impairment(1)
Foreign currency exchange differences
Carrying amounts at 1 July 2017
2016
Carrying amounts at 27 June 2015
Additions
Disposals
Depreciation(2)
Foreign currency exchange differences
Carrying amounts at 2 July 2016
Plant and
equipment
$m
Motor vehicles
$m
Computer
equipment
$m
203.3
60.9
(0.3)
(39.7)
(7.7)
0.7
217.2
199.5
59.5
-
(56.2)
0.5
203.3
0.3
-
-
(0.1)
-
-
0.2
0.2
0.4
-
(0.3)
-
0.3
33.3
26.2
-
(12.4)
-
-
47.1
24.4
19.3
(0.2)
(10.4)
0.2
33.3
Total
$m
236.9
87.1
(0.3)
(52.2)
(7.7)
0.7
264.5
224.1
79.2
(0.2)
(66.9)
0.7
236.9
(1) During 2017 certain items of Plant and equipment relating to assets in leased locations associated with the Sports business transformation
activities were considered to be impaired – refer note 4 – Segment information.
(2) 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.
Finance Leases
The carrying value of computer equipment held under finance leases as at 1 July 2017 was $11.2 million (2016: $1.2 million).
There were no additions during the year (2016: nil). Leased assets are pledged as security for the related finance lease
liability.
Significant Accounting Policies
Carrying value
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
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
7.5% – 37.5%
Capitalised leased plant and equipment
10% – 37.5%
Motor vehicles
Computer equipment
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.
Super Retail Group Limited • Annual Report 2017 79
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
9.
Property, plant and equipment (continued)
Significant Accounting Policies (continued)
Gains and losses
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.
Make good requirements in relation to leased premises
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.
Leases
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.
Critical accounting estimates and assumptions
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).
10.
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 of the carrying amounts for each class of intangible asset are set out below:
Reconciliations
2017
$m
449.7
(2.1)
447.6
174.3
(80.8)
93.5
267.5
(58.5)
209.0
2016
$m
449.7
(2.1)
447.6
146.5
(68.2)
78.3
267.5
(21.0)
246.5
750.1
772.4
2017
Carrying amounts at 2 July 2016
Additions
Impairment
Amortisation charge
Carrying amounts at 1 July 2017
80 Super Retail Group Limited • Annual Report 2017
Goodwill
$m
Computer
Software
$m
Brand Name
$m
447.6
-
-
-
447.6
78.3
33.6
-
(18.4)
93.5
246.5
-
(37.3)
(0.2)
209.0
Totals
$m
772.4
33.6
(37.3)
(18.6)
750.1
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
10.
Intangible assets (continued)
(a)
Reconciliations (continued)
2016
Carrying amounts at 27 June 2015
Additions
Impairment
Amortisation charge
Carrying amounts at 2 July 2016
(b)
Impairment tests for goodwill
Goodwill
$m
Computer
Software
$m
Brand Name
$m
447.6
-
-
-
447.6
87.1
10.4
-
(19.2)
78.3
266.6
-
(20.0)
(0.1)
246.5
Totals
$m
801.3
10.4
(20.0)
(19.3)
772.4
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
2017
$m
45.3
25.1
376.5
0.7
447.6
2016
$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% (2016: 14.0%) and terminal growth rate of 3.0% (2016: 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 brand name on the basis that it is
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 carrying values of the purchased brand names are:
Brand
Rebel Sport
Amart Sports
Ray’s Outdoors
Goldcross Cycles
Total
2017
$m
209.0
-
-
-
209.0
2016
$m
209.0
36.0
-
1.5
246.5
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% (2016: 14.0%) and terminal growth rate of 3.0% (2016: 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 Rebel brand name currently exceeds its carrying value.
Super Retail Group Limited • Annual Report 2017 81
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
10.
Intangible assets (continued)
(c)
Impairment tests for the useful life for brands (continued)
2017 impairment
The Group has recognised an impairment charge of $37.3 million against the Amart Sports and Goldcross Cycles brand
names following the decision to commence a program of converting all Amart Sports stores to Rebel with a target of
presenting one brand to market by November 2017. Based on this decision, the recoverable amount was determined to be
nil based on a fair value less costs to sell calculation for the remaining four months that the brands will be operating. This
impairment charge has been included in administration expenses in the consolidated income statement.
2016 impairment
As a result of the ongoing restructure of the Rays business, the Group continued to reassess the recoverable amount of the
associated brand name as at 26 December 2015. Following an analysis, 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 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.
Significant Accounting Policies
Goodwill
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 is not amortised. Instead, it is 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
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 are amortised over their useful lives.
Other intangible assets
Amortisation is calculated on a straight line basis. The amortisation rates used for each class of intangible assets are as
follows:
Computer software
Brand names
10% – 33.3%
Nil to 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.
Research and development
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.
82 Super Retail Group Limited • Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
10.
Intangible assets (continued)
Significant Accounting Policies (continued)
Other items of expenditure
Significant items of expenditure, such as costs incurred in store set-ups, are expensed in the financial period in which these
costs are incurred.
Critical accounting estimates and assumptions
Capitalised software costs and useful lives
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 impairment of indefinite useful life non-financial assets
The Group tests annually whether indefinite useful life non-financial assets have suffered any impairment, in accordance
with the accounting policy stated above. The recoverable amounts of cash-generating units have been determined
based on value-in-use calculations. These calculations require the use of assumptions. Refer above for details of these
assumptions.
11.
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
Significant Accounting Policies
2017
$m
179.5
70.1
4.1
253.7
44.2
44.2
2016
$m
167.4
79.6
4.1
251.1
41.7
41.7
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.
Leases
Refer to note 6 for details on the straight lining of lease expenses.
Super Retail Group Limited • Annual Report 2017 83
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
12.
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 leases - secured by leased asset
Bank debt funding facility - secured
Bank debt funding facility - unsecured(1)
Total non-current interest-bearing liabilities
2017
$m
2.6
-
-
2.6
8.6
0.1
389.3
398.0
2016
$m
0.8
0.1
4.8
5.7
-
0.1
410.0
410.1
(1)Net of borrowing costs capitalised of $1.7 million (2016: $1.2 million).
Significant Accounting Policies
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.
13.
Income taxes
(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:
Decrease / (increase) in deferred tax assets (note 13(e))
(Decrease) in deferred tax liabilities (note 13(e))
(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% (2016: 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
Adjustments to tax expense of prior periods
Income tax expense
Effective tax rate:
Australia
Consolidated group
84 Super Retail Group Limited • Annual Report 2017
2017
$m
49.5
(9.0)
(0.3)
40.2
3.3
(12.3)
(9.0)
140.7
42.2
(2.3)
(0.1)
39.8
(0.1)
0.8
(0.3)
40.2
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
28.2%
28.6%
33.3%
33.9%
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
13.
Income taxes (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)
(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 debited / (credited) directly to equity (note 13(e))
Tax expense / (income) relating to items of other comprehensive income
Cash flow hedges
(e)
Deferred tax assets and liabilities
Assets
Amounts recognised in profit or loss
Provisions
Accruals and prepayments
Depreciation
Sundry temporary differences
Amounts recognised directly in equity
Cash flow hedges
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
2017
$m
2016
$m
(40.2)
(29.8)
(8.7)
1.4
(0.6)
(0.2)
(48.3)
46.8
(1.5)
1.4
1.4
1.4
1.4
35.8
7.0
12.7
1.3
56.8
1.0
57.8
(57.8)
-
62.9
12.0
74.9
-
74.9
(57.8)
17.1
(9.0)
(8.6)
(4.7)
2.0
(50.1)
43.8
(6.3)
(2.8)
(2.8)
(3.2)
(3.2)
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
Net deferred tax assets (liabilities)
(17.1)
(24.7)
Super Retail Group Limited • Annual Report 2017 85
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
13.
(e)
Income taxes (continued)
Deferred tax assets and liabilities (continued)
Movements in deferred tax assets:
Opening balance
(Charged) / credited to the income statement
(Charged) / credited 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
(Credited) to equity
Closing balance
Deferred tax liabilities to be settled after more than 12 months
Deferred tax liabilities to be settled within 12 months
(f)
Tax transparency report
2017
$m
62.5
(3.3)
(1.4)
57.8
31.7
26.1
57.8
87.2
(12.3)
-
74.9
74.9
-
74.9
2016
$m
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
In May 2016, the government announced the release of the Board of Taxation’s final report on the voluntary Tax
Transparency Code. The aim of the Code is to provide a mechanism by which medium and large companies can be held
accountable for their Australian tax affairs, and to give stakeholders confidence that companies are compliant with their
statutory obligations.
Currently the Code is voluntary. Super Retail Group supports the concept of voluntary tax transparency as an important
measure for all large companies to provide assurance to the Australian community that their tax obligations are being
appropriately met. We know that Super Retail Group’s success is dependent on the wellbeing of the economies and
communities where our businesses operate and our conservative approach to tax strategy is one of the many ways we act
to ensure sustainability of our operations. We are pleased to disclose our taxes paid in Australia and to detail our approach
to tax planning for the first time.
The requirements of the Code are broken into Part A which forms part of the tax note as referenced below and Part B as
disclosed below. The make-up of the respective parts is as follows:
(i)
•
•
•
(ii)
•
•
•
Part A:
Effective company tax rates for our Australian and global operations (Note 13 (b))
A reconciliation of accounting profit to tax expense and to income tax payable (Note 13 (c))
Identification of material temporary (Note 13 (b)) and non-temporary differences (Note 13 (c))
Part B:
Tax policy, tax strategy and governance
Information about international related party dealings
A tax contribution summary of Income tax paid
Part B discloses the Australian income tax paid by the Group in the 2017 and 2016 financial years and provides qualitative
information about our approach to tax risk and international related party dealings.
86 Super Retail Group Limited • Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
13.
Income taxes (continued)
(f)
Tax transparency report (continued)
Tax policy, tax strategy and governance
Super Retail Group is committed to full compliance with its statutory obligations and takes a conservative approach to tax
risk. Super Retail Group Tax Policy includes an internal escalation process for referring tax matters to the corporate Group Tax
function. The CFO must report any material tax issues to the Board. Tax strategy is implemented through Super Retail Group
Tax Governance Policy. Super Retail Group’s approach to tax planning is to operate and pay tax in accordance with the
tax law in each relevant jurisdiction. The Group aims for certainty on all tax positions it adopts. Where the tax law is unclear
or subject to interpretation, advice is obtained, and when necessary the Australian Taxation Office (ATO) (or other relevant
tax authority) is consulted for clarity.
International related party dealings
Super Retail Group is an Australian based group, with some trading operations in other countries, including New Zealand
(Super Cheap Auto (SCA)) and China (Sourcing assistance). Given its current profile, the Group has very limited international
related party dealings. Super Retail Group always seeks to price international related party dealings on an arm’s length basis
to meet the regulatory requirements of the relevant jurisdictions.
Super Retail Group’s international related party dealings are summarised below:
•
•
•
•
Super Retail Group’s Australian retail businesses source material amounts of trading stock from overseas, particularly
through Asian based third-party suppliers. To facilitate this the Group has a Chinese based subsidiary that co-ordinates
these supplies. Super Retail Group’s Australian businesses pay the overseas subsidiaries for these services.
Super Retail Group SCA retail businesses operate across Australia and New Zealand. To meet customer demand and
manage stock levels, trading stock is occasionally transferred between jurisdictions, for which arm’s length
consideration is paid by the recipient of the trading stock.
Certain Super Retail Group businesses operating outside of Australia are utilising intellectual property developed by
Super Retail Group businesses in Australia. Where appropriate, and as required by international cross border tax rules, a
royalty payment is made by the off-shore subsidiary to the relevant Super Retail Group business in Australia.
Various administrative and support services are provided by Super Retail Group head office and divisional parent
entities to offshore subsidiary businesses. As required by international cross border tax rules, arm’s length consideration is
paid for these services.
Other jurisdictions
The Super Retail Group includes a few subsidiary companies that are incorporated in jurisdictions outside of Australia as
summarised in the table below:
Country
China(1)
New Zealand
Nature of activities
Co-ordinating the sourcing of trading stock for AMART Sports, BCF, Rays, Rebel, SCA
Active trading operations (SCA) and dormant entities
(1) These companies are subject to the Australian Controlled Foreign Company rules. Under these rules profits generated by these subsidiaries
from trading with Super Retail Group are taxable in Australia at the 30% Australian corporate tax rate.
For the 2017 year, the gross value of international related party transactions in and out of Australia represented less than 0.5 per cent of
revenue.
Australian income taxes paid
Super Retail Group is a large taxpayer and paid Corporate Income Tax of $44.4 million in 2017 and $41.2 million in 2016.
Super Retail Group Limited • Annual Report 2017 87
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
13.
Income taxes (continued)
Significant Accounting Policies
Current and deferred 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
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
Super Retail Group Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation
legislation as of 1 July 2003 and account for current and deferred tax amounts under the Separate taxpayer within Group
approach in accordance with AASB Interpretation 1052, Tax Consolidation Accounting.
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.
13.
Income taxes (continued)
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.
88 Super Retail Group Limited • Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
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
(a)
Employee benefits
2017
$m
54.1
4.9
2.3
1.0
62.3
8.2
5.5
7.8
21.5
2016
$m
45.1
10.1
2.6
0.9
58.7
8.7
13.0
7.5
29.2
Provisions for employee benefits includes accrued annual leave, long service leave and accrued bonuses.
(b)
Onerous contracts
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 2016 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. As at 1 July 2017 $8.3 million associated with the transformation relates to surplus lease space (2016: $17.7
million).
Onerous contracts also includes the provision for loss making contracts which represents the present value of the forecasted
loss. During the 2016 year the Group performed a review of key contracts relating to Infinite Retail that were loss making. As
at 1 July 2017 $1.7 million is provided for loss making contracts related to Infinite Retail (2016: $3.1 million).
(c)
Make good provision
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.
(d)
Other provisions
The current provision for other items includes the provision for store refunds.
(e)
Movement in provisions
Movements in each class of provision during the period, except for employee benefits and other, are set out below:
2017
Opening balance as at 2 July 2016
Provisions made
Indexing of provisions
Provisions used
Closing balance as at 1 July 2017
2016
Opening balance as at 27June 2015
Provisions made
Indexing of provisions
Provisions used
Closing balance as at 2 July 2016
Onerous contracts
$m
Make good
$m
23.1
0.7
-
(13.4)
10.4
10.1
1.3
1.4
(2.7)
10.1
Onerous contracts
$m
Make good
$m
9.4
20.8
-
(7.1)
23.1
8.0
2.8
0.9
(1.6)
10.1
Total
$m
33.2
2.0
1.4
(16.1)
20.5
Total
$m
17.4
23.6
0.9
(8.7)
33.2
Super Retail Group Limited • Annual Report 2017 89
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
14.
Provisions (continued)
Significant Accounting Policies
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.
Employee benefits - short-term obligations
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.
Employee benefits – long term obligations
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.
Retirement benefit obligations
Contributions are made by the economic entity to an employee superannuation fund and are charged as expenses
when incurred.
Profit-sharing and bonus plans
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.
Make good requirements in relation to leased premises
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.
Critical accounting estimates and assumptions
Estimated value of make good provision
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.
Long service leave
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
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.
90 Super Retail Group Limited • Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
15.
Financial assets and financial liabilities
(a)
Financial instruments
The Group holds the following financial instruments:
2017
Financial assets
Cash and cash equivalents
Trade and other receivables
Derivative financial instruments
Total
Financial liabilities
Trade and other payables
Interest-bearing liabilities
Derivative financial instruments
Total
2016
Financial assets
Cash and cash equivalents
Trade and other receivables
Derivative financial instruments
Total
Financial liabilities
Trade and other payables
Interest-bearing liabilities
Derivative financial instruments
Total
Derivatives used for
hedging
$m
Notes
Financial assets and
liabilities at
amortised cost
$m
7
20
11
12
20
-
-
-
-
-
-
3.1
3.1
19.9
42.6
-
62.5
297.9
400.6
-
698.5
Derivatives used for
hedging
$m
Notes
Financial assets and
liabilities at
amortised cost
$m
7
20
11
12
20
-
-
-
-
-
-
8.0
8.0
15.6
42.7
-
58.3
292.8
415.8
-
708.6
Total
$m
19.9
42.6
-
62.5
297.9
400.6
3.1
701.6
Total
$m
15.6
42.7
-
58.3
292.8
415.8
8.0
716.6
The Group’s exposure to various risks associated with the financial instruments is discussed in note 20 – 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.
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.
Super Retail Group Limited • Annual Report 2017 91
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
15.
Financial assets and financial liabilities (continued)
(b)
(i)
Recognised fair value measurements (continued)
Fair value hierarchy (continued)
The following tables present the Group’s entity’s assets and liabilities measured and recognised at fair value.
2017
Financial assets
Derivatives used for hedging
Total
Financial liabilities
Derivatives used for hedging
Total
2016
Financial assets
Derivatives used for hedging
Total
Financial liabilities
Derivatives used for hedging
Total
Level 1
$m
Level 2
$m
Level 3
$m
-
-
-
-
-
-
3.1
3.1
-
-
-
-
Level 1
$m
Level 2
$m
Level 3
$m
-
-
-
-
-
-
8.0
8.0
-
-
-
-
Total
$m
-
-
3.1
3.1
Total
$m
-
-
8.0
8.0
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.
92 Super Retail Group Limited • Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
15.
Financial assets and financial liabilities (continued)
Significant Accounting Policies
Financial assets classification
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.
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.
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.
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.
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.
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.
Super Retail Group Limited • Annual Report 2017 93
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
15.
Financial assets and financial liabilities (continued)
Significant Accounting Policies (continued)
Derivative financial instruments and hedging activities (continued)
Cash flow hedges
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.
Net investment hedges
Hedges of net investments in foreign operations are accounted for similarly to cash flow 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
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.
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.
16.
Earnings per share
Basic earnings per share
(a)
Total basic earnings per share attributable to the ordinary equity holders of the
company
Diluted earnings per share
(b)
Total diluted earnings per share attributable to the ordinary equity holders of the
company
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 $135.8 million (2016: $108.6 million) – note 4(b).
2017
Cents
51.6
2016
Cents
31.8
51.3
31.6
68.9
55.1
94 Super Retail Group Limited • Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
16.
Earnings per share (continued)
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 – performance rights
Weighted average potential ordinary shares used as the denominator in
calculating diluted earnings per share
(e)
Basic earnings and diluted earnings per share
Reconciliations of earnings used in calculating earnings per share
2017
Number
2016
Number
197,229,369
197,152,793
1,078,275
1,513,230
198,307,644
198,666,023
2017
$m
2016
$m
Profit attributable to the ordinary equity holders of the company used in EPS
calculating basic earnings per share:
(f)
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.
Information concerning the classification of securities
101.8
62.8
Significant Accounting Policies
Basic earnings per share
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.
Diluted earnings per share
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.
17.
Contributed equity
(a)
Share capital
Ordinary shares fully paid (197,240,020 ordinary shares as at 1 July 2017)
2017
$m
542.3
(i)
Movement in ordinary share capital
Opening Balance 27 June 2015
Shares issued under performance rights
Balance 2 July 2016
Shares issued under performance rights
Closing balance 1 July 2017
Number of Shares
Issue Price
197,030,571
146,747
197,177,318
62,702
197,240,020
-
-
2016
$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.
Super Retail Group Limited • Annual Report 2017 95
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
17.
Contributed equity (continued)
(a)
Share capital (continued)
Performance rights over 571,775 (2016: 621,365) ordinary shares were issued during the period with 62,702 (2016: 146,747)
performance rights vesting during the period. Under the share option plan, nil (2016: 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 28 – Share-based payments.
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.
Significant Accounting Policies
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.
18.
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
96 Super Retail Group Limited • Annual Report 2017
2017
$m
3.4
10.5
(2.2)
(8.2)
3.5
3.9
(0.5)
3.4
8.5
2.0
10.5
(5.6)
4.8
(1.4)
(2.2)
(7.7)
(0.5)
(8.2)
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)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
18.
Reserves and retained earnings (continued)
(a)
Reserves (continued)
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 15 – Financial assets and financial liabilities. 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(c). 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.
(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
2017
$m
193.7
101.8
(84.8)
210.7
19.
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
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
- decrease /(increase) in receivables
- (increase) / decrease in net current tax liability
- decrease in inventories
- (decrease) in payables
- (decrease) / increase in provisions
- (decrease) in deferred tax liability
Net cash inflow from operating activities
Significant Accounting Policies
2017
$m
101.8
78.5
37.3
(0.6)
2.0
(1.3)
16.9
0.1
(4.7)
20.4
(2.7)
(4.1)
(9.1)
234.5
2016
$m
212.8
62.8
(81.9)
193.7
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
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.
Super Retail Group Limited • Annual Report 2017 97
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
20.
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
Foreign exchange
Interest rate
Credit risk
Liquidity risk
Exposure
arising from
Future commercial
transactions
Recognised financial
assets and liabilities not
denominated in AUD
Long-term borrowings at
variable rates
Cash and cash
equivalents, trade and
other receivables and
derivative financial
instruments
Measurement
Cash flow forecasting
Sensitivity analysis
Sensitivity analysis
Aging analysis
Credit ratings
Management
Forward foreign
exchange contracts
and options
Interest rate swaps
Rolling cash flow
forecasts
Borrowings and other
liabilities
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
2017
$m
-
-
1.4
1.7
3.1
2016
$m
-
-
4.2
3.8
8.0
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 15 – Financial assets and financial liabilities. 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.
Fair value measurement
(ii)
For information about the methods and assumptions used in determining the fair value of derivatives please refer to note 15 –
Financial assets and financial liabilities.
(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.
98 Super Retail Group Limited • Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
20.
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
2017
USD
$m
1.1
12.0
56.0
56.0
112.0
2017
CNY
$m
0.1
5.4
2016
USD
$m
2.3
16.9
47.0
74.0
121.0
2016
CNY
$m
0.4
2.0
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 1 July 2017, no hedges were
designated as ineffective (2016: 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) on USD foreign exchange contracts
- unrealised (losses) on interest rate swaps
Total unrealised (losses)
2017
$m
(1.4)
(1.7)
(3.1)
2016
$m
(4.2)
(3.8)
(8.0)
Super Retail Group Limited • Annual Report 2017 99
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
20.
Financial risk management (continued)
(b) Market risk (continued)
(i) Foreign exchange risk (continued)
Group sensitivity
Based on the financial instruments held at 1 July 2017, 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 $9.4 million lower/$11.5 million higher (2016: $10.7 million lower/$13.1 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 3.08% (2016: 3.28%). 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 $125.0 million (2016: $155.0
million). The Group also has $245.0 million (2016: $200.0 million) interest rate swaps in place for future periods up until June
2020 at an average rate of 2.38%.
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 32.0%
(2016: 37.0%) of the loan principal outstanding. The average fixed interest rate is 2.75% (2016: 3.35%).
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:
Fixed interest maturing in
Floating
interest rate
$m
1 year or
less
$m
Over 1 to 5
years
$m
More than
5 years
$m
Notes
2017
Financial assets
Cash and cash equivalents
Trade and other receivables
7
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
11
12
14
18.1
-
18.1
1.50%
-
389.4
-
389.4
3.08%
-
-
-
-
2.6
-
2.6
-
-
-
-
8.6
-
8.6
Net financial (liabilities) / assets
(371.3)
(2.6)
(8.6)
-
-
-
-
-
-
-
-
Non-
interest
bearing
$m
1.8
42.6
44.4
297.9
-
62.3
360.2
Total
$m
19.9
42.6
62.5
297.9
400.6
62.3
760.8
(315.8)
(698.3)
100 Super Retail Group Limited • Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
20.
Financial risk management (continued)
(b) Market risk (continued)
(ii) Cashflow and fair value interest rate risk (continued)
Fixed interest maturing in
Floating
interest rate
$m
1 year or
less
$m
Over 1 to
5 years
$m
More than
5 years
$m
Notes
2016
Financial assets
Cash and cash equivalents
Trade and other receivables
7
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
11
12
14
13.8
-
13.8
1.75%
-
415.0
-
415.0
3.28%
-
-
-
-
0.8
-
0.8
-
-
-
-
-
-
-
Net financial (liabilities) / assets
(401.2)
(0.8)
-
-
-
-
-
-
-
-
-
Non-
interest
bearing
$m
1.8
42.7
44.5
292.8
-
53.8
346.6
Total
$m
15.6
42.7
58.3
292.8
415.8
53.8
762.4
(302.1)
(704.1)
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 2017
and 2016 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.
2017
$m
391.0
125.0
2016
$m
416.2
155.0
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 1 July 2017, 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 $1.9 million lower/higher (2016: $1.8 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.
Super Retail Group Limited • Annual Report 2017 101
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
20.
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
2017
$m
540.0
20.0
560.0
391.0
3.4
394.4
149.0
16.6
165.6
2016
$m
615.0
20.0
635.0
416.0
3.7
419.7
199.0
16.3
215.3
*As at 1 July 2017, $20.2 million of the overdraft facility has been drawn and in accordance with financing arrangements this is offset by cash
funds in transit.
Current interest rates on bank loans of the economic entity are 2.97% - 3.19% (2016: 2.88% - 3.33%).
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.
102 Super Retail Group Limited • Annual Report 2017
Net settled (Interest Rate Swaps)
1.0
1.0
1.0
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
20.
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
Carrying
amount
(assets) /
liabilities
$m
2017
Non-derivatives
Trade and other payables
Interest-bearing liabilities(1)
Finance lease liabilities
Total non-derivatives
Derivatives
Forward exchange contracts used
for hedging:
Gross settled
- (inflow)
- outflow
Total derivatives
(1)Excludes finance leases.
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.
249.6
6.0
1.5
257.1
-
6.0
1.5
7.5
-
12.0
2.9
14.9
-
403.6
6.0
409.6
-
-
-
-
-
-
-
-
249.6
427.6
11.9
689.1
249.6
391.0
11.2
651.8
3.0
1.7
(145.6)
147.4
4.8
-
1.4
3.1
-
-
-
-
(98.8)
100.0
2.2
(46.8)
47.4
1.6
-
-
1.0
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
Carrying
amount
(assets) /
liabilities
$m
247.0
6.8
0.4
254.2
-
11.5
0.4
11.9
-
-
221.7
210.2
-
-
221.7
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
-
-
-
-
-
-
-
-
247.0
450.2
0.8
698.0
247.0
416.2
0.8
664.0
3.8
3.8
(162.5)
167.9
9.2
-
4.2
8.0
Super Retail Group Limited • Annual Report 2017 103
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
21.
Capital management
(a)
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 2017 the Group’s strategy, which was unchanged from 2016, 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 1 July 2017 and 2 July 2016
were as follows:
Total borrowings
Less: Cash & cash equivalents
Net Debt
Total Equity
Total Capital
Gearing Ratio
2017
$m
400.6
(19.9)
380.7
754.6
1,135.3
33.5%
2016
$m
415.8
(15.6)
400.2
734.0
1,134.2
35.3%
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 2017 the Group’s strategy, which was unchanged from 2016, 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 1 July 2017 and 2
July 2016 were as follows:
Profit attributable to Owners of Super Retail Group Limited
Add: Taxation expense
Net finance costs
Depreciation and amortisation (excludes impairment)
EBITDA
Rental expense
EBITDAR
Net finance costs
Rental expense
Fixed charges
Fixed charge cover ratio
Net debt to EBITDA ratio
Fixed charge cover ratio from normalised net profit after tax(1)
Net debt to EBITDA ratio from normalised net profit after tax(1)
(1) Normalised EBITDAR is $495.1m (2016: $470.0m) and normalised EBITDA is $278.2m (2016: $245.7m)
2017
$m
101.8
40.2
16.9
70.8
229.7
216.9
446.6
16.9
216.9
233.8
1.91
1.66
2.12
1.37
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
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 2017 and
2016 financial years. There are no assets pledged as security in relation to the unsecured debt in the 2017 financial year
(2016: nil).
104 Super Retail Group Limited • Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
21.
Capital management (continued)
(b)
Dividends
Ordinary shares
Dividends paid by Super Retail Group Limited during the financial year were as
follows:
Final dividend for the period ended 2 July 2016 of 21.5 cents per share (2015: 21.5
cents per share) paid on 7 October 2016. Fully franked based on tax paid @ 30%
Interim dividend for the period ended 31 December 2016 of 21.5 cents (2016: 20.0
cents per share) paid on 7 April 2017. 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 25.0 cents per ordinary share (2016: 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 6 October 2017, out
of retained profits as at 1 July 2017, but not recognised as a liability at year end, is
Franking credits
The franked portions of dividends paid after 1 July 2017 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 1 July 2017.
Franking credits remaining at balance date available for dividends declared after the
current balance date based on a tax rate of 30%
2017
$m
2016
$m
42.4
42.4
84.8
76.0
8.8
84.8
42.4
39.5
81.9
72.3
9.6
81.9
49.3
42.4
132.3
121.9
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 $21,132,859 (2016: $18,168,481). The recommended dividend has not been recognised as a
liability at year end.
Significant Accounting Policies
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.
22.
Related party transactions
Transactions with related parties are at arm’s length unless otherwise stated.
(a)
The parent entity within the Group is Super Retail Group Limited, which is the ultimate Australian parent.
Parent entities
(b)
Interests in subsidiaries are set out in note 26 – Investments in controlled entities.
Subsidiaries
(c)
Disclosures relating to key management personnel are set out in note 27 – Key management personnel disclosures.
Key Management Personnel
Super Retail Group Limited • Annual Report 2017 105
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
22.
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, H L Mowlem and P A Birtles.
(e)
Amounts due from Directors of the consolidated entity and their director-related entities are shown below in note 22(f).
Amounts due from related parties
(f)
Loans to / (from) Related Parties
Loans to / (from) Related Parties
Loan to related parties(1)
2017
$
2016
$
321,094
259,088
(1) 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 Autoguru Australia Pty Ltd (previously 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 Autoguru Australia Pty Ltd, refer to note 23(c) - Business combinations. These loans are deemed to be on an arms-length basis,
attracting interest at a rate of 7.0% (2016: 7.0%).
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)
2017
$
2016
$
11,372,354
12,064,672
(1) Rent on properties, with rates which are deemed to be on an arms-length basis. Rent payable at year-end was nil (2016: nil).
23.
Business combinations
2017
The Group’s subsidiaries at 1 July 2017 are as detailed in note 26 - Investments in controlled entities. With the exception of
changes to the Group’s ownership interest in Autoguru Australia Pty Ltd (previously Fixed Price Car Service Australia Pty Ltd)
detailed below, there were no other changes to the Group’s ownership interest in these entities.
Autoguru Australia Pty Ltd (previously Fixed Price Car Service Australia Pty Ltd)
(a)
On 5 August 2016, the shareholders of Autoguru Australia Pty Ltd (previously 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 63.1% from 61.85%. 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, 5 August 2016, to reflect the change in NCI from 38.15% to 36.9%. The differential was
transferred to a separate NCI Equity Reserve.
2016
During the 2016 financial year the Group changed its ownership interest in Infinite Retail Pty Ltd and Autoguru Australia Pty
Ltd as detailed below.
Infinite Retail Pty Ltd
(b)
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%. 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.
Autoguru Australia Pty Ltd (previously Fixed Price Car Service Australia Pty Ltd)
(c)
On 12 May 2016, the shareholders of Auto Guru Pty Ltd, entered into an agreement to issue shares resulting in an increase in
the Group’s ownership interest to 61.5% 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.
106 Super Retail Group Limited • Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
24.
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, Ray’s Outdoors Pty Ltd, Rebel 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 ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 issued by the
Australian Securities and Investments Commission.
(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 1 July 2017 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
2017
$m
2,323.9
1.3
2,325.2
2016
$m
2,284.4
1.5
2,285.9
(1,281.5)
(1,278.2)
(306.6)
(79.0)
(186.4)
(317.2)
(16.3)
(299.1)
(82.0)
(207.4)
(299.0)
(19.1)
(2,187.0)
(2,184.8)
138.2
(39.0)
99.2
101.1
(28.8)
72.3
99.2
72.3
3.4
3.4
102.6
194.2
99.2
(84.8)
208.6
(7.5)
(7.5)
64.8
203.8
72.3
(81.9)
194.2
Super Retail Group Limited • Annual Report 2017 107
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
24.
Deed of cross guarantee (continued)
(b)
Consolidated Balance Sheet
Set out below is a consolidated balance sheet as at 1 July 2017 of the Closed Group.
2017
$m
13.9
44.3
454.1
512.3
37.7
250.9
742.1
1,030.7
1,543.0
237.6
2.6
2.2
3.1
58.8
304.3
43.3
397.9
18.2
20.1
479.5
783.8
759.2
542.3
8.3
208.6
759.2
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
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
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
108 Super Retail Group Limited • Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
25.
Parent entity 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
Significant Accounting Policies
2017
$m
201.0
1,005.7
27.0
416.4
589.3
542.3
10.5
(1.2)
37.7
589.3
96.5
98.0
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
Parent entity financial information
The financial information for the parent entity, Super Retail Group Limited has been prepared on the same basis as the
consolidated financial statements, except as set out below.
Investments in subsidiaries
Investments in subsidiaries are accounted for at cost in the financial statements of Super Retail Group Limited.
Tax consolidation legislation
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.
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
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.
Super Retail Group Limited • Annual Report 2017 109
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
26.
Investments in controlled entities
The Group’s subsidiaries at 1 July 2017 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)
Autoguru Australia Pty Ltd(2)(3)
Auto Trade Direct (NZ) Limited
Auto Trade Direct Pty Ltd(1)
BCF New Zealand Limited
Workout World Pty Limited(1)(4)
Coyote Retail Pty Limited(1)
FCO New Zealand Limited
Foghorn Holdings Pty Ltd(1)
Goldcross Cycles Pty Ltd(1)
Infinite Retail Pty Ltd
VBM Retail (HK) Limited(5)
Infinite Retail UK Limited(5)
VBM Retail NZ Limited(5)
Oceania Bicycles Pty Ltd(1)
Oceania Bicycles Limited (6)
Ray’s Outdoors New Zealand Limited
Ray’s Outdoors Pty Ltd(1)
Rebel Pty Ltd(1)(7)
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)
Country of
Incorporation
Australia
Australia
New Zealand
Australia
New Zealand
Australia
Australia
New Zealand
Australia
Australia
Australia
Hong Kong
United Kingdom
New Zealand
Australia
New Zealand
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Principal Activities
Sports retail
Auto services
Auto retail
Auto retail
Leisure retail
Sports retail
Sports retail
Leisure 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
Sports retail
Investments
Leisure retail
New Zealand
Product acquisition and distribution
Australia
Product acquisition and distribution
Super Cheap Auto (New Zealand) Pty Ltd
New Zealand
Super Cheap Auto Pty Ltd(1)
Super Retail Commercial Pty Ltd(1)
Super Retail Group Services (New Zealand)
Limited
Australia
Australia
Auto retail
Auto retail
Auto retail
New Zealand
Support services
Super Retail Group Services Pty Ltd(1)
Super Retail Group Trading (Shanghai) Ltd
Australia
China
Support services
Product sourcing
Equity Holding
2017
%
100
63.1
2016
%
100
61.85
100
100
100
100
100
100
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
100
100
100
100
100
100
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
Youcamp Pty Ltd
(1) These controlled entities have been granted relief from the necessity to prepare financial reports in accordance with ASIC Corporations
Leisure services
Australia
51
51
(Wholly-owned Companies) Instrument 2016/785 issued by the Australian Securities and Investments Commission.
(2) Previously known as Fixed Price Car Service Australia Pty Ltd.
(3) On 5 August 2016, the shareholders of Autoguru Australia Pty Ltd (previously Fixed Price Car Service Australia Pty Ltd), entered into an
agreement resulting in an increase in the Group’s ownership interest to 63.1% from 61.85%. Refer to note 23 - Business combinations.
(4) Previously known as Coyote Retail Investments Pty Limited.
(5) Investment is held directly by Infinite Retail Pty Ltd.
(6) Investment is held directly by Oceania Bicycles Pty Ltd.
(7) Previously known as Quinns Rock Pty Ltd.
110 Super Retail Group Limited • Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
27.
Key management personnel disclosures
(a)
Key management personnel compensation
Short-term employee benefits
Long-term employee benefits
Post-employment benefits
Share-based payments
2017
$
2016
$
7,003,923
6,358,770
49,283
190,475
1,085,428
8,329,109
51,826
221,046
453,190
7,084,832
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.
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:
Amounts paid to key management personnel as shareholders
Dividends
2017
$
2016
$
26,392,262
25,261,350
28.
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
2017
1 September 2011
1 September 2012
1 September 2013
1 September 2014
1 September 2015
1 September 2016
2016
1 September 2010
1 September 2011
1 September 2012
1 September 2013
1 September 2014
1 September 2015
Balance at
start of the
year
(Number)
62,702
-
368,508
506,405
575,615
-
Granted
during the
year
(Number)
-
-
-
-
-
571,775
Exercised
during the
year
(Number)
(62,702)
-
-
-
-
-
Forfeited
during the
year
(Number)
-
-
(368,508)
(26,681)
(29,115)
-
Balance at
the end of
the year
(Number)
-
-
-
479,724
546,500
571,775
Unvested at
the end of
the year
(Number)
-
-
-
479,724
546,500
571,775
1,513,230
571,775
(62,702)
(424,304)
1,597,999
1,597,999
80,980
131,535
448,156
403,999
561,081
-
1,625,751
-
-
-
-
-
621,365
621,365
(80,980)
(65,767)
-
-
-
-
-
(3,066)
(448,156)
(35,491)
(54,676)
(45,750)
-
62,702
-
368,508
506,405
575,615
-
62,702
-
368,508
506,405
575,615
(146,747)
(587,139)
1,513,230
1,513,230
Super Retail Group Limited • Annual Report 2017 111
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
28.
Share-based payments (continued)
(b)
Executive Option Plan
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.
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 2017 financial year (2016: 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
Significant Accounting Policies
2017
$m
2.0
2016
$m
0.7
Share-based payments
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.
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.
112 Super Retail Group Limited • Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
29.
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.
(a)
(i)
PricewaterhouseCoopers Australia
Assurance services
Audit and review of financial statements
Audit and review of subsidiaries(1)
Other assurance(2)
Total remuneration for audit and other assurance services
(ii)
Taxation services
Tax compliance services, including review of Company income tax returns(3)
Customs Advice
Total remuneration for taxation services
(iii)
Other services
Digital innovation support(4)
Business review of subsidiary
Total remuneration for advisory services
Total remuneration of PricewaterhouseCoopers Australia
(b) Network firms of PricewaterhouseCoopers Australia
(i)
Taxation services
Tax compliance services, including review of Company income tax returns
Total remuneration for taxation services
Total remuneration of network firms of PricewaterhouseCoopers Australia
Total auditors’ remuneration
(1) Audit and review of subsidiaries included in Group audit and review of financial statements in 2017.
(2) Increase due to Risk Appetite design services in 2017.
(3) Decrease due to indirect taxes review conducted in 2016.
(4) Engagement in relation to digital capability analysis and support awarded under a competitive tender.
2017
$
2016
$
492,100
-
191,700
683,800
113,368
-
113,368
423,700
88,230
53,500
565,430
211,244
4,590
215,834
-
340,290
50,000
50,000
847,168
-
340,290
1,121,554
66,803
66,803
66,803
33,845
33,845
33,845
913,971
1,155,399
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.
30.
Contingencies
Guarantees
Guarantees issued by the bankers of the Group in support of various rental
arrangements.
The maximum future rental payments guaranteed amount to:
3.4
3.7
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.
2017
$m
2016
$m
Super Retail Group Limited • Annual Report 2017 113
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 1 July 2017
31.
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 11)
Total lease commitments
Future minimum lease payments expected to be received in relation to non-
cancellable sub-leases of operating leases
2017
$m
2016
$m
3.5
3.5
4.0
4.0
205.4
625.7
162.0
(48.3)
944.8
3.9
202.0
596.7
157.1
(45.8)
910.0
2.5
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 $11.2 million (2016: $1.2 million) under finance
leases expiring within five years.
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 12)
Non-current (note 12)
32.
Net tangible asset backing
Net tangible asset per ordinary share
2017
$m
2.9
9.0
11.9
(0.7)
11.2
2.6
8.6
11.2
2017
Cents
$0.34
2016
$m
0.8
-
0.8
-
0.8
0.8
-
0.8
2016
Cents
$0.18
Net tangible asset per ordinary share is calculated based on Net Assets of $754.6 million (2016: $734.0 million) less intangible
assets of $750.1 million (2016: $772.4 million) adjusted for the associated deferred tax liability of $62.9 million (2016: $74.1
million). The number of shares used in the calculation was 197,240,020 (2016: 197,177,318).
33.
Events occurring after balance date
The Group has undertaken a review of the strategy for its Sports Division recognising that the dynamics of the sports retail
market are set to evolve in the next few years. As such the Group has concluded that the optimal strategy to sustain its
position as the market leader in sports retailing will be to focus on strengthening one retail brand. Therefore the Group will
commence a program of converting all Amart Sports stores to Rebel with a target of presenting one brand to market by
November 2017 as announced to the market on 25 July 2017. This is considered to be an adjusting event for the purposes of
the 2017 financial statements and as such the Group has recognised after tax costs of $34.0 million in the 2017 financial year
associated with the Sports business transformation.
114 Super Retail Group Limited • Annual Report 2017
DIRECTORS’ DECLARATION
In the Directors’ opinion:
(a)
(b)
(c)
the financial statements and notes set out on pages 64 to 114 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 1 July 2017 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 24 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 24.
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
24 August 2017
P A Birtles
Director
Super Retail Group Limited • Annual Report 2017 115
Independent auditor’s report
To the shareholders of Super Retail Group Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Super Retail Group Limited (the Company) and its controlled
entities (together the Group) is in accordance with the Corporations Act 2001, including:
•
•
giving a true and fair view of the Group's financial position as at 1 July 2017 and of its financial
performance for the period 3 July 2016 to 1 July 2017
complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
•
•
•
•
•
•
the consolidated balance sheet as at 1 July 2017
the consolidated statement of comprehensive income for the period 3 July 2016 to 1 July 2017
the consolidated statement of changes in equity for the period 3 July 2016 to 1 July 2017
the consolidated statement of cash flows for the period 3 July 2016 to 1 July 2017
the notes to the consolidated financial statements, which include a summary of significant
accounting policies
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant
to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities
in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
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.
116 Super Retail Group Limited • Annual Report 2017
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
Materiality
•
For the purpose of our audit we used overall Group materiality of $9.2 million, which represents
approximately 5% of the Group’s profit before tax, adjusted for the impact of unusual occurring items (as
described below).
• We applied this threshold, together with qualitative considerations, to determine the scope of our audit and
the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the
financial report as a whole.
• We chose Group profit before tax from continuing operations because, in our view, it is the benchmark
against which the performance of the Group is most commonly measured. We adjusted for the pre-tax
business restructuring costs as this is an unusual occurring item impacting profit and loss.
• We utilised a 5% threshold based on our professional judgement, noting it is within the range of commonly
acceptable profit-related thresholds.
Audit Scope
• Our audit focused on where the Group made subjective judgements; for example, significant accounting
estimates involving assumptions and inherently uncertain future events.
•
The Group is segmented into three divisions – Auto, Leisure and Sports, and operates in three countries –
Australia, New Zealand and China. The financial report is a consolidation of wholly owned and controlled
subsidiaries. The accounting processes happen at the Group finance function at its head office in Brisbane.
Super Retail Group Limited • Annual Report 2017 117
Our audit procedures were mostly performed at this head office and the support office in Sydney and also
included site visits to stores and distribution centres in Australia and New Zealand to perform audit
procedures over inventory. Our team included specialists in information technology and taxation and experts
in actuarial and valuation.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context. We communicated the key audit matters to the
Audit and Risk Committee.
Key audit matter
How our audit addressed the key audit matter
Inventory valuation and provisions
Refer to Note 8 (Inventories), $481.5 million
Stock loss provision
The valuation of inventory and provisions for stock
loss, stock valuation and attributable overheads was a
key audit matter because of the judgements involved in
the areas described below.
Stock loss provision
As inventory was counted by the Group on a cyclical
basis during the period, rather than in full at the end of
the period, the stock loss provision at 1 July 2017
contained a degree of estimation as to the quantity and
value of projected stock variances for items not counted
at the period end date.
Stock valuation provision
Inventory was recognised at the lower of cost and net
realisable value based on a rolling average selling price.
The determination of the net realisable value of
inventory of a seasonal and discontinued nature
required a degree of estimation as to the clearance
margin for these stock items at balance date.
Attributable overheads
There is judgement involved in how much of the
directly attributable overheads associated with bringing
inventory to its final destination for sale are recognised
• We attended a sample of store stock counts
throughout the year at the Group’s retail stores
and considered the results of stock counts not
observed.
•
For a sample of retail stores, we agreed the last
count date and inventory write down (at that date)
used in the calculation of the period end provision,
to the records of the last cycle count.
• We checked the mathematical accuracy of the
calculation of the projected stock variance.
Stock valuation provision
•
For a sample of individual products, we agreed the
recognised costs to the relevant invoice and
recalculated the allocation of directly attributable
costs.
• We compared the carrying value at period end date
to the most recent sales price for a sample of
inventory items.
•
For a sample of seasonal and discontinued
inventory items, we agreed the last stock
movement date to the relevant invoice and
assessed the mark down margin assigned to that
stock item by checking the current retail prices of
118 Super Retail Group Limited • Annual Report 2017
Key audit matter
How our audit addressed the key audit matter
as part of the cost of inventory.
the items in stores.
Valuation of goodwill, brand names and
computer software
Note 10 (Intangible assets) $447.6 million goodwill,
$209.0 million brand names and $93.5 million
computer software
Goodwill and the Rebel Sport brand name $656.6m
When the annual review for impairment was
conducted, the recoverable amount for each cash
generating unit (CGU) was determined based on a
discounted cash flow valuation model which relied on
the directors’ assumptions and estimates of future
trading performance. The directors consider that each
segment and brand name constitutes its own CGU.
The key assumptions applied by the directors in the
valuation models were:
• CGU-specific discount rates
•
•
future revenue growth
gross margin
Amart Sports brand name $Nil
The directors performed a strategic review of Amart
Sports during 2017 and as a result, the Group will
convert all Amart Sports stores to the Rebel brand with
Attributable overheads
• On a sample basis, we considered the nature of
overhead costs capitalised by reading their
description on supporting documentation, having
regard to the types of costs allowable by the
accounting standards.
• We checked the mathematical accuracy of the
calculation of the overhead costs attributed to
inventory and agreed the amount to the accounting
records.
Goodwill and the Rebel Sport brand name
We assessed the valuation models by:
•
•
•
•
•
•
checking the mathematical accuracy of all
calculations in the models
assessing the discount rates used in the
valuation models, with support from PwC
valuation experts, by comparing the rates to
our internal benchmark data
comparing the forecasted growth rates to
relevant historical Group and industry data
and industry forecasts
comparing the gross margins to historical
Group data
evaluating the information included in the
valuation models against our knowledge of the
Group gained through reviewing the strategic
initiatives and meeting with managing
directors and commercial managers from each
segment
stress-testing the key assumptions in the
models, including: future revenue growth,
trading margins and discount rates; and
noting that the valuation under these
Super Retail Group Limited • Annual Report 2017 119
Key audit matter
How our audit addressed the key audit matter
a target of presenting one brand to market by 31
October 2017. The recoverable amount for the Amart
Sports brand name was determined based on a
valuation model adopting a ‘relief from royalty’ method
commonly applied to the valuation of brand names.
The Group engaged an external expert to assist with the
valuation of this brand.
This was a key audit matter because of the judgements
involved in determining the discount rate, the
estimated future revenue growth and the potential
future return from use of the brand name.
Computer software $93.5m
The Group has undertaken significant development of
software in relation to the multi-channel customer
programme and multi-channel supply chain and
inventory programme. The valuation of computer
software was a key audit matter because of the
judgments involved in assessing whether the
recognition criteria of Australian Accounting Standards
had been met and in estimating the useful life of
software.
sensitivities was within an acceptable range,
which was determined taking into account
market data and historical data.
Amart Sports brand name
We performed the following word in respect of the
Group’s recoverable value of the brand:
• we checked the mathematical accuracy of the
model
• we assessed the discount rates applied in the
valuation model, by comparing the rates to
our internal benchmark data
• we compared the forecasted revenue growth
rate used in the model to relevant industry
data
• we assessed the potential future return rate
used in the model by comparing it to industry
benchmark data
• we assessed the competence, capabilities,
objectivity and independence of external
expert engaged by the Group
• we considered the valuation approach and
methodology adopted by the external expert
and found them to be consistent with
commonly accepted valuation approaches
used in the industry.
Computer software
For a sample of software capitalised during the period,
we performed he following procedures, amongst
others:
•
•
assessed the nature of the costs capitalised in
light of the requirements of Australian
Accounting Standards
evaluated the reasonableness of the estimated
120 Super Retail Group Limited • Annual Report 2017
Key audit matter
How our audit addressed the key audit matter
useful life estimated for software by
comparing it to industry benchmark data.
Valuation of property, plant and equipment
Note 9 (Property, plant and equipment) $264.5 million
We performed the following procedures, amongst
others:
•
•
obtained management’s assessment of the
profitability of all individual stores and their
contribution to the Group
considered and discussed the strategic
initiatives for stores with negative
contributions to the Group during meetings
with commercial managers for each brand.
In light of the continued competitive environment in
which the Group operated, there was a risk that the
carrying value of store fixed assets and corporate assets
may have been higher than the recoverable amount and
therefore the Group performed impairment tests of its
CGUs. The directors determined that each retail store
represented a separate CGU when undertaking the
impairment tests. Corporate assets were included
within the valuation assessment of the key segments
(sports, leisure and auto).
The key assumptions and judgements applied by the
directors in the impairment tests were:
•
•
the individual retail store contribution margin
the strategic initiatives in place for individual
stores with negative Group contribution
margins.
Onerous contracts
Note 14 (Provisions) $10.4 million
We performed the following procedures, among other
things, over the Group’s calculations and assumptions:
The directors performed a strategic review of the
Group’s brands at 2 July 2016 and recognised a
provision for onerous contracts relating to the Ray’s
Outdoors brand for leases on closed retail stores.
The key assumptions applied by the directors in the
onerous contract provision were:
•
•
the estimate of unavoidable costs relating to
the store leases
the lease expiry period
•
•
•
•
for a sample of store leases, checked that the
costs included within the provision were
unavoidable future costs based on the
nature/description and our knowledge of the
contracts
agreed a sample of estimates of unavoidable
costs to relevant invoices and lease
agreements
checked the lease expiry period to the lease
agreements for a sample of leases
compared the discount rate applied in the
Super Retail Group Limited • Annual Report 2017 121
Key audit matter
How our audit addressed the key audit matter
•
the discount rate used.
calculation to the government bond rate,
which we consider was an appropriate
benchmark rate.
Other information
The directors are responsible for the other information. The other information comprises Performance
Trends, Contents, Our Business, Our Network, Chair’s Message, CEO’s Message, Strategy &
Performance, Our Customer Journey, Board of Directors, Group Executive Team, Our Team,
Sustainability, Directors’ Report, Shareholder Information and Corporate Directory included in the
Group’s annual report for the period from 3 July 2016 to 1 July 2017 but does not include the financial
report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
122 Super Retail Group Limited • Annual Report 2017
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor's report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 45 to 60 of the Directors’ Report for the
period 3 July 2016 to 1 July 2017.
In our opinion, the remuneration report of Super Retail Group Limited for the period 3 July 2016 to 1
July 2017 complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance with
Australian Auditing Standards.
PricewaterhouseCoopers
Kim Challenor
Partner
Brisbane
24 August 2017
Super Retail Group Limited • Annual Report 2017 123
SHAREHOLDER INFORMATION
For the period ended 1 July 2017
The shareholder information set out below was applicable as at 21 August 2017.
Number of Shareholders
There were 9,509 shareholders, holding 197,240,020 fully paid ordinary shares.
A.
Distribution of equity securities
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
4,606
3,949
601
308
45
9,509
-
4
38
10
1
53
There were 593 holders of less than a marketable parcel of ordinary shares.
B.
Equity security holders
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
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMS PTY LTD
BNP PARIBAS NOMINEES PTY LTD
BOND STREET CUSTODIANS LIMITED(MACQ HIGH CONV FUND) & BOND STREET
CUSTODIANS LIMITED
CITICORP NOMINEES PTY LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
BNP PARIBAS NOMS (NZ) LTD
MR PETER ALAN BIRTLES
MR PETER ALAN BIRTLES
SBN NOMINEES PTY LIMITED
UBS NOMINEES PTY LTD
EQUITAS NOMINEES PTY LIMITED
SCCASP HOLDINGS PTY LTD
EQUITAS NOMINEES PTY LIMITED
EQUITAS NOMINEES PTY LIMITED
Ordinary shares
Number held
Percentage of
issued shares
57,075,423
33,214,668
26,694,854
13,626,068
10,956,655
7,862,255
6,918,436
2,378,729
1,945,086
1,194,300
1,149,829
851,295
675,000
665,000
626,900
604,368
591,159
578,703
567,302
547,135
28.94%
16.84%
13.53%
6.91%
5.55%
3.99%
3.51%
1.21%
0.99%
0.61%
0.58%
0.43%
0.34%
0.34%
0.32%
0.31%
0.30%
0.29%
0.29%
0.28%
168,723,165
85.54%
124 Super Retail Group Limited • Annual Report 2017
SHAREHOLDER INFORMATION (continued)
For the period ended 1 July 2017
C.
Substantial shareholdings
As at 21 August 2017, there are two substantial shareholders that the Company is aware of:
Name
SCA FT PTY LTD
UBS GROUP AG & ITS RELATED BODIES CORPORATE
D.
Unquoted equity securities
Ordinary shares
Number held
Percentage of issued
shares
Date of most
Recent notice
56,954,670
10,146,973
28.99%
5.14%
02/08/2013
03/04/2017
As at 21 August 2017, there were 1,078,275 unlisted performance rights, granted to 53 holders, over unissued ordinary shares
in the Company.
E.
Voting rights
The voting rights relating to each class of equity securities is as follows:
a) Ordinary Shares
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.
b) Options and Performance Rights
Performance Rights and Options do not have any voting rights.
F.
Market buy-back
There is currently no on market buy-back.
Super Retail Group Limited • Annual Report 2017 125
PERFORMANCE TRENDS
FINANCIAL
REPORTED SALES
($M)
REPORTED TOTAL
SEGMENT EBIT
($M)
REPORTED EPS
(C)
DIVIDEND
(C)
REPORTED
POST TAX ROC
(%)
NORMALISED ROE
(%)
JUN 08
JUN 09
JUN 10
JUN 11
JUN 12
JUN 13
JUN 14
JUN 15
JUN 16
JUN 17
715
829
938
1,092
1,654
2,020
2,112
2,239
2,422
2,466
45.7
55.1
65.8
87.5
140.7
172.3
182.6
170.2
175.3
207.3
22.6
28.1
32.1
40.9
46.4
52.3
55.1
49.4
31.8
51.6
13.0
18.0
21.5
29.0
32.0
38.0
40.0
40.0
41.5
46.5
14.1
15.4
16.8
17.3
15.9
12.6
11.3
10.6
10.7
13.0
19.8
22.0
18.8
19.4
19.5
16.1
14.5
13.9
14.5
18.2
CUSTOMER
TEAM
JUN 15
JUN 16
JUN 17
JUN 15
JUN 16
JUN 17
AVERAGE NPS
36.9%
43.1%
53.5%
TEAM
ENGAGEMENT
68%
71%
71%
ACTIVE CLUB
MEMBERS
CUSTOMER
TRANSACTIONS
3.9M
4.5M
5.2M
SAFETY - LTIFR
13.2
8.8
6.3
42.8M 44.0M
44.5M
TEAM
RETENTION
75%
75%
74%
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)
23 October 2017
Final Dividend Ex-Date
4 September 2017
Final Dividend Record Date
5 September 2017
DRP Election Date
6 September 2017
Final Dividend Payment Date
6 October 2017
Interim Results Announcement
16 February 2018
Interim Dividend Ex-Date
26 February 2018
Interim Dividend Record Date
27 February 2018
DRP Election Date
28 February 2018
Interim Dividend Payment Date
30 March 2018
(1)If there are any changes to these dates, the Australian Securities Exchange will be notified accordingly.
(2) The 2017 Annual General Meeting of the Shareholders of Super Retail Group Limited will be held at the Kedron Wavell
Services Club, 375 Hamilton Road, Chermside South, Queensland.
A4 5 mm A4
A4 5 mm A4
5mm and 10mm guides
5mm and 10mm guides
ANNUAL REPORT 2017
ANNUAL REPORT 2017
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www.superretailgroup.com
www.superretailgroup.com
Inspiring you to live you passion
Inspiring you to live you passion