ANNUAL REPORT 2018
Inspiring you to live your passion
CONTENTS
Sustainability
Board of Directors
Performance Overview
001 About Us
002 Our Business
007 Chair’s Message
009 CEO’s Message
013
030
034
036 Group Executive Team
038 Our Team
041 Corporate Governance
045 Directors’ Report
074
Financial Statements
126 Directors’ Declaration
127
135
137
Shareholder Information
Independent Auditor’s Report
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 45 to 72.
The financial report was authorised for issue by the Directors on 20 August 2018. 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
ABOUT US
Super Retail Group is one of
Australasia’s largest retailers
and is listed on the Australian
Securities Exchange (ASX).
We have over 670 stores, an annualised turnover of more than $2.5 billion, and
operations in Australia, New Zealand and China.
Our retail portfolio includes BCF Boating Camping Fishing, Macpac, Rebel and
Supercheap Auto. Our online and digital presence complements our physical store
footprint to enable our customers to shop whenever and however they prefer.
In addition to our extensive retail network, our commercial entities – Supercheap
Auto Trade Direct, Infinite Retail and Super Retail Commercial – offer opportunities
for businesses to use our sourcing and supply chain capabilities to buy the products
they need, when they need them.
We have a clear view of the future, a solid strategic roadmap and a passionate
team of more than12,000 members – all committed to delivering solutions that
engage and inspire our customers.
Super Retail Group Limited • Annual Report 2018 1
OUR BUSINESS
OUR VALUES
OUR PURPOSE
To provide solutions and engaging
experiences that inspire our customers
to make the most of their leisure time.
OUR VISION
Inspiring you
to live your passion.
OUR STRATEGY
Customer engagement, inspiring
customer solutions, a world class supply
chain and an engaged and capable
team are critical to our future.
We remain focused on our strategy
to ensure we continue to foster
sustainable value creation in a
changing retail environment.
Growing businesses in high
involvement categories
Engaging capable
team members who share our
customers’ passions
Building a world class
omni-retail organisation
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.
HEALTHY,
PASSIONATE AND
HIGH PERFORMING
TEAM MEMBERS
INSPIRED,
ENGAGED AND
SATISFIED
CUSTOMERS
SUSTAINABLE
OMNI-RETAIL
CAPABILITIES
TOP
QUARTILE
SHAREHOLDER
RETURNS
2 Super Retail Group Limited • Annual Report 2018
PASSION INTEGRITYCAREOPENNESSDISCIPLINE132 OUR CUSTOMER
PROMISE
At the core of our strategy is our
Group-wide Customer Promise,
which ensures we have a clear and
common view of the standards
customers can expect us to deliver.
These standards guide the capabilities
we need to build as a world class
omni-retailer and align to our
purpose of providing solutions and
engaging experiences that inspire
our customers to make the most of
their leisure time.
INSPIRATION
EXPERIENCE
SOLUTIONS
DELIVERY
CONFIDENCE
Inspiring our
communities with
our passion
Engaging you
and providing
outstanding service
and expertise
Determining the
best solution for
your needs
Delivering how,
when and where
you choose
Guaranteeing
the competitive value
of our solutions
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
OUTDOOR
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 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
quality, branded sporting and leisure
goods for the casual enthusiast and
serious competitor, including fitness
equipment, sports equipment, apparel
and associated accessories.
Macpac has designed apparel and
equipment that has inspired a life out-
doors since 1973. Designed, tested and
proven in the ultimate outdoor test lab -
New Zealand, Macpac’s wide range
of products are made for adventurers,
by adventurers.
Super Retail Group Limited • Annual Report 2018 3
12345 2018 PERFORMANCE HIGHLIGHTS
TEAM
~12,000
5 SUPPORT
TEAM MEMBERS
670 STORES
OFFICES
70%
TEAM
ENGAGEMENT
CENTRES
7 DISTRIBUTION
6.4
SAFETY
LTIFR – Lost Time Injury Frequency Rate
AUSTRALIA, NZ & CHINA
3 COUNTRIES OF OPERATION:
74%
TEAM
RETENTION
2016
71%
2017
71%
2016
8.8
2017
6.5
2016
75%
2017
74%
FINANCIAL
SALES ($M)
829
938
1,092
2,422
2,466
2,570
2,020
2,112
2,239
1,654
TOTAL SEGMENT EBIT ($M)
172.3
182.6
170.2
175.3
140.7
207.3
219.6
55.1
65.8
87.5
JUN 09
JUN 10
JUN 11
JUN 12
JUN 13
JUN 14
JUN 15
JUN 16
JUN 17
JUN 18
JUN 09
JUN 10
JUN 11
JUN 12
JUN 13
JUN 14
JUN 15
JUN 16
JUN 17
JUN 18
EPS (C)
DIVIDEND (C)
55.1
52.3
49.4
51.6
65.0
31.8
46.4
40.9
32.1
28.1
38.0
40.0
40.0
41.5
46.5
49.0
32.0
29.0
18.0
21.5
JUN 09
JUN 10
JUN 11
JUN 12
JUN 13
JUN 14
JUN 15
JUN 16
JUN 17
JUN 18
JUN 09
JUN 10
JUN 11
JUN 12
JUN 13
JUN 14
JUN 15
JUN 16
JUN 17
JUN 18
POST TAX ROC ( PER CENT)
POST TAX ROE ( PER CENT)*
16.8
17.3
15.9
15.4
12.6
11.3
10.6
10.7
13.0
13.1
22.0
18.8
19.4
19.5
16.1
14.5
13.9
14.5
18.2
18.6
JUN 09
JUN 10
JUN 11
JUN 12
JUN 13
JUN 14
JUN 15
JUN 16
JUN 17
JUN 18
JUN 09
JUN 10
JUN 11
JUN 12
JUN 13
JUN 14
JUN 15
JUN 16
JUN 17
JUN 18
* Normalised
4 Super Retail Group Limited • Annual Report 2018
2018 PERFORMANCE HIGHLIGHTS
DELIVERING OUR FINANCIAL TARGETS
5 YEAR TARGETS
CUSTOMER
SALES GROWTH PER CENT
AUTO
OUTDOOR (BCF ONLY)
SPORTS
5.3%
3.7%
3.2%
0
1
2
3
4
5
6
(percentage)
PRE TAX ROC PER CENT*
AUTO
44%
OUTDOOR (BCF ONLY)
21%
SPORTS
12%
57.9%
8.2%
AVERAGE NPS
5.5M
5.8%
0
(percentage) *excludes acquired goodwill and brand names
10
20
30
40
50
ACTIVE CLUB MEMBERS
EBIT MARGIN
AUTO
OUTDOOR (BCF ONLY)
5.5%
SPORTS
0
(percentage)
3
11.6%
9.3%
6
9
12
15
45.6M
2.5%
CUSTOMER TRANSACTIONS
OMNI-RETAIL TRANSFORMATION
TOTAL ONLINE
SALES GROWTH
STORE
NUMBERS
CLICK &
COLLECT %
AUTO
OUTDOOR (BCF)
SPORTS
85%
76%
152%
319
134
159
>50%
>50%
>30%
Super Retail Group Limited • Annual Report 2018 5
6 Super Retail Group Limited • Annual Report 2018
CHAIR’S MESSAGE
DEAR SHAREHOLDER,
It is a honour to be able to write my first message to
you as the Chair of Super Retail Group.
Good governance provides the
foundation for all our activities, and
is essential to the realisation of our
goals. Your Board is committed to
sound governance practices, based
on an ethical approach to decision
making, and a healthy organisational
culture that values engagement,
transparency, diversity and inclusion.
We recognise that what we do as a
Group affects our team members,
our customers, our suppliers, our
investors, and the communities we
are connected with. By engaging
with our stakeholders, and being
transparent about our approach
and our actions, we aim to make
good decisions which will support the
continued success of the Group.
The Group’s financial results for the
year were strong, with growth in
sales and earnings before interest
and tax in all divisions. Our financial
performance and effective capital
management supported the Board’s
decision to declare a final dividend
of 27.5 cents per share fully franked,
bringing the full year dividend to
49 cents per share fully franked, an
increase of 5.4 per cent on the prior
year. The dividend was in line with the
Group’s Dividend Policy to maintain
a dividend payout ratio of between
55 per cent and 65 per cent of
underlying net profit after tax.
Super Retail Group has a clear
purpose, and a capable team led
by Peter Birtles. We will continue to
execute on our omni-retail strategy,
responding to the dynamic retail
environment and striving to provide
solutions and experiences for
customers so they can make the
most of their leisure time.
Your Board has a deep
understanding of the Group’s
businesses, and spends time outside
Board and Committee meetings
engaging with stakeholders and
visiting stores, support offices,
distribution centres and other parts of
our supply chain. This understanding
enables the Board to provide
effective support to the senior
leadership team, and have effective
oversight of business operations.
During the year, my predecessor,
Robert Wright, retired after leading
the Board for eight years. John
Skippen also retired as a Non-
Executive Director after nine years of
service. I thank Robert and John for
their significant and long-standing
service to the Board and the Group,
and wish them the best for the future.
In line with our planned and rigorous
approach to Board succession
planning, Peter Everingham was
appointed to the Board as a Non-
Executive Director in December
2017, bringing his extensive executive
experience in the digital sector to
the Board.
I thank my Board colleagues for
their commitment and guidance.
I welcome the Macpac team to
the Group, and thank the entire
Super Retail Group team for their
tireless efforts to inspire and support
our customers, and engage with
our stakeholders. I look forward to
continuing to work with them as we
strive for long-term value creation for
you, our shareholders.
Thank you for your continuing support
of Super Retail Group.
Sally Pitkin
Independent Non-Executive Chair
Super Retail Group Limited • Annual Report 2018 7
8 Super Retail Group Limited • Annual Report 2018
CEO’S MESSAGE
DEAR SHAREHOLDER,
2018 has been a highly successful year for Super Retail Group and
we are pleased to report a record result. We measure our overall
performance against four Group goals, which provide a broader
perspective on the progress of the Group.
The scorecard at June 2018 read as
follows:
Healthy, passionate and high
performing team
•
•
•
Top quartile team engagement
at 70 per cent
Team retention at 73.8 per cent
– significantly higher than the
industry average
Lost Time Injury Frequency Rate
(LTIFR) at 6.4 – a more than
50 per cent improvement
since 2015
• Net Promoter Score (NPS)
highlights a positive trend in
team expertise and service.
Inspired, engaged and satisfied
customers
•
5.50 million active club
members as at June 2018 (up
from 4.0 million at June 2015)
• Club members NPS of 57.9 as
at June 2018 (up from 36.9 at
June 2015)
•
•
45.6 million customer
transactions in the 12 months to
June (up 2.5 per cent on
the PCP)
9.8 million active website visits
as at June 2018 (up 26 per cent
on the PCP).
Sustainable omni-retail capabilities
•
Supercheap Auto, BCF and
Rebel websites relaunched on
Salesforce Commerce Cloud
• Core information systems
migrated to new platform to
be more flexible, scalable
and secure
Investment in supply chain
delivering productivity and
working capital savings
Focus on enhancing direct-to-
customer delivery and customer
management.
•
•
Top quartile shareholder returns
• Compound Annual Growth
Rate (CAGR) in normalised EPS
of 5 per cent (five years to
June 2018)
• Average post-tax Return On
Capital of 11.7 per cent (five
years to June 2018)
• Average Group normalised
Earnings Before Interest and Tax
(EBIT) margin of 8.1 per cent (five
years to June 2018)
• Average Group like-for-like sales
growth of 3.3 per cent (five years
to June 2018).
Operating cash flow performance
was again strong, demonstrating the
Group’s ability to generate working
capital savings to fund its investment
in new and refurbished stores and to
build its omni-retail capabilities. As
a result, net debt increased by only
$42.2 million, even with the debt-
funded $133.8 million acquisition
of Macpac.
Performance against the non-
financial measures that we use as
an indicator of the Group’s health
was also strong. From the customer
perspective, we saw an increase
in customer traffic online and an
increase in average club NPS. From
a team member perspective, there
was a strong improvement in our
safety performance and we have
maintained engagement levels
within the top quartile of all
Australian businesses.
In addition, we are increasingly
challenging ourselves to adopt a
sustainable approach to all aspects
of Group operations. Further details
on our environmental and social
initiatives and performance will be
available in our 2018 Sustainability
Report. In addition, please refer
to the Corporate Governance
Statement on page 41 for details
about our governance practices.
Super Retail Group Limited • Annual Report 2018 9
OPERATING CASH FLOW PERFORMANCE WAS AGAIN
STRONG, DEMONSTRATING THE GROUP’S ABILITY TO
GENERATE WORKING CAPITAL SAVINGS TO FUND ITS
INVESTMENT IN NEW AND REFURBISHED STORES AND
TO BUILD ITS OMNI-RETAIL CAPABILITIES.
DELIVERING ON OUR STRATEGY
We have made significant progress in
delivering on three core elements of
our strategy.
• Growing businesses in high
involvement categories:
We have strengthened our
portfolio of businesses in high
engagement categories with the
merger of the Rebel and Amart
Sports businesses, the acquisition
of Macpac, and the merger of
Macpac with Rays.
•
•
Engaging capable team
members who share our
customers’ passions: The
introduction of new learning
and recognition programs has
contributed to our top quartile
team member engagement and
retention. Our customers have
also increased their ratings of
our team members’ expertise
and service.
Building a world class omni-retail
organisation: Our investment
in building our omni-retail
capabilities has underpinned
strong growth in online sales. We
continue to extend our offering
to customers through new
product ranges and services,
and by investing in both the
online and in-store customer
experience.
GROWING BUSINESSES IN HIGH
INVOLVEMENT CATEGORIES
All three of our divisions grew sales
and EBIT in 2018, with the Outdoor
(formerly Leisure) and Sports divisions
benefitting from the transformation
initiatives undertaken during the year.
The acquisition of Macpac was
completed with an effective
date of 31 March 2018, with the
business performing strongly over
the subsequent three months,
contributing $7.8 million in EBIT. We
have closed six Rays stores, and will
be converting the remaining nine to
Macpac large format stores in the
fourth quarter of FY2019. The total
integration of Rays into Macpac will
eliminate the losses contributed by
the Rays business over recent years.
We completed the conversion of
68 Amart Sports stores to the Rebel
brand and restructured the division’s
10 Super Retail Group Limited • Annual Report 2018
support functions over a 68-day
period in the first half of the year.
As anticipated, the conversion
process had some impact on sales
and margin performance over
the following six months as the
Sports division consolidated the
product range across all stores
and relaunched the former Amart
Sports stores under the Rebel
brand. Pleasingly, customer NPS has
improved through the transition and
sales momentum rebounded strongly
in the final quarter.
ENGAGING CAPABLE TEAM MEMBERS
WHO SHARE OUR CUSTOMERS’
PASSIONS
On behalf of the Group leadership
team, I would like to thank every
one of our current and former team
members for their contribution to
the ongoing success of the Group.
It is a clear business principle that
everything starts with team.
It was therefore very disappointing
that an internal investigation
confirmed that we have not paid
team members who worked on store
set up projects in accordance with
the correct modern award, and
that we have had an inconsistent
approach in how time-in-lieu,
overtime payments and allowances
were applied to additional hours
worked during store set ups.
While we believed that we were
following the right approach, we
were wrong, and we are very sorry
for the impact on our team. We are
committed to back paying all team
members who have been impacted
back to July 2010, and we will be
adding interest to the back-payment.
It is important that we improve our
approach to ensure we meet all our
obligations. We have strengthened
the governance of our remuneration
arrangements across the Group
and are increasing the training of
our team and the auditing of our
practices.
Despite this serious oversight, we are
proud that our team engagement
continues to stand within the top
quartile of Australian companies.
While this is a good result, we did
see a one per cent decline in our
score over the year. Our teams have
identified a number of areas, such
as change leadership and more
effective systems, in which we can
improve their experience. These
areas have been incorporated into
our strategic program.
During the year we introduced a real-
time recognition platform, accessible
via app or web browser, to respond
to feedback from our team that
they wanted to see more immediate
recognition of their achievements.
We were pleased to have been the
fastest Australian organisation to
reach 100,000 recognitions on the
platform (in less than six months),
according to the service provider,
which demonstrates the passion of
our team.
It was also pleasing that our team
recognised the strong focus on
safety across the Group in our most
recent engagement survey. We saw
a small improvement in the rate of
workplace injuries in 2018, with our
LTIFR at 6.4 per million hours worked,
down from 6.5 per million hours
worked in the previous year. We
recognise the need in the coming
year to expand our focus beyond
output measures, such as LTIFR,
and increase the attention given to
measuring and improving our
safety behaviours.
We continue to build gender diversity
across the Group with 37.6 per cent
of our senior leadership positions held
by females which is up from 34 per
cent in the prior period. We are proud
that females represent 43 per cent
of our directors and the number of
women within the Group Executive
Team is at 36.4 per cent.
BUILDING A WORLD CLASS OMNI-
RETAIL ORGANISATION
Growing our share of customer
spending is a key priority as the retail
industry responds to the impacts of
new competitors and technologies.
Our omni-retail strategy aims to
incrementally grow our share of
customer spending in-store, while
significantly increasing our share
of customer spending in online
channels. We are therefore pleased
with the strong growth in the share of
customer spending online that each
division achieved this year.
We will continue to invest in the
technology we need to underpin
the organisation. Major programs
Super Retail Group Limited • Annual Report 2018 11
over the next two years include
optimising our technology network,
implementing improved product
information management, order
management and customer
management systems, and
continuing to strengthen our cyber
security. For a more detailed
overview of progress on the
execution of our omni-retail strategy,
please refer to the section entitled
Strategic Execution and Progress.
DELIVERING ON OUR CUSTOMER
PROMISE
We believe that much of our
success in 2018 stemmed from
an ongoing commitment to our
purpose of providing solutions and
engaging experiences that inspire
our customers to make the most of
their leisure time. We have had the
advantage of observing for a number
of years now, how changes have
reshaped US and European retailing,
and have been able to learn from
those overseas retailers which have
most successfully responded.
One key lesson we have drawn is the
importance of being clear on where
you compete and where you win. In
light of this insight, we are confident
that we can win by inspiring our
customer communities, through
providing an outstanding customer
experience, and through determining
the right solutions for our customers.
We compete by delivering in line
with our customer expectations and
through ensuring that our customers
are confident that the value of our
solutions is competitive. These five
elements of our customer promise
– Inspiration, Experience, Solutions,
Delivery and Confidence – are
increasingly shaping the initiatives
that we implement across the Group,
as outlined below:
INSPIRATION:
• Digital content
•
•
•
Social activation
Extending the features of our
loyalty programs
Relevant and targeted
marketing.
cost of capital. We will continue
to build the capabilities we need
to become a world class omni-
retailer, with a particular emphasis
on our omni-fulfilment capabilities.
To assist in the execution of this
strategy, we have initiated a
number of Group-wide programs
to improve capability across
the organisation. ‘Our Super
Team’ will continue to focus
on building the engagement
and skills of our team members,
while reinforcing safety as our
number one priority. ‘One
Super Way’ will deliver our team
members increased capabilities
in customer management,
merchandise management,
order management and data
management.
We also recognise the need
to respond in the face of an
increasingly competitive retail
environment. While we have
always been a cost-conscious
company, we will review all of
our core business processes to
ensure our cost investments are
optimised. We have commenced
a ‘Competitive Organisation’
program to oversee this work.
We are confident that our
commitment to providing solutions
and engaging experiences that
inspire our customers to make
the most of their leisure time will
ensure that we build a business
that continues to prosper in a
changing retail environment. We
look forward to reporting on our
progress.
EXPERIENCE:
•
•
•
Flexible and engaging training to
build team member knowledge
Store refurbishments to improve
layout and displays
Improving the usability and
functionality of our websites
•
Extending our store network.
SOLUTIONS:
•
•
•
•
•
Range optimisation
Extending the product
catalogue online
Innovative and exclusive
products
Private brand development
In-house and third-party services.
DELIVERY:
• Developing our omni-fulfilment
capabilities
• More efficient arrangements with
our delivery partners
•
•
Supply chain optimisation
Inventory optimisation.
CONFIDENCE:
•
•
Price and promotion optimisation
Sourcing and quality.
LOOKING AHEAD
Our overriding focus for the year
ahead is on the execution of our
strategy. In particular, we will focus
on growing market share in order
to sustain our position as one of
Australasia’s leading retailers.
Supercheap Auto, BCF and Rebel
are the leading businesses in their
respective categories and we
have a plan to grow Macpac into
a leadership position. There are
opportunities to grow sales and
margins in BCF and Rebel through
better operational execution.
The management teams of those
businesses will be concentrating on
these opportunities.
Following a period of restructuring
which is now complete, we have four
strong and profitable businesses that
are all generating returns above their
Peter Birtles
Group Managing Director and
Chief Executive Officer
12 Super Retail Group Limited • Annual Report 2018
PERFORMANCE
OVERVIEW
Super Retail Group Limited • Annual Report 2018 13
STRATEGIC EXECUTION
AND PROGRESS
In transitioning to an omni-retail strategy, we have drawn on the
experiences of North American retailers, which were the first to face
major technological disruption.
EXECUTING OUR OMNI-RETAIL
STRATEGY
Our analysis found that in almost
every area of US and Canadian
specialty retail, including in the Auto,
Sports and Outdoor segments, an
existing incumbent was able to grow
market share in the face of new
entrants and industry consolidation.
We are confident the retail
landscape is evolving similarly in
Australia. While it’s true that digital
innovation, increased competition
and changes in consumer behaviour
will create more losers than winners,
the North American experience
shows that retailers with leading
market positions and strong free cash
flows are best positioned to benefit
from the opportunities that disruption
inevitably presents.
Our omni-retail strategy was
designed with this in mind. It allows
us to take advantage of industry
consolidation by shifting away from
a store-based approach to one that
prioritises growth of market share in
all categories, focusing on growing
our customer base, increasing
total customer lifetime value and
increasing our share of their wallet.
It recognises customers want to shop
their way, and that preferences
might change from day-to-day.
For example, a customer might
choose to browse online before
purchasing through click-and-
collect. On another occasion,
they might purchase in-store and
arrange for home delivery. Our
strategic objective is to create an
enjoyable and convenient shopping
experience every time, reinforced by
a seamless connection between our
digital channels and conveniently
located stores.
We have already seen encouraging
signs of traction. Supercheap Auto,
Rebel and BCF have cemented
their position as market leaders, and
we have the right plan to grow the
recently acquired Macpac business.
Key elements of the omni-strategy
include:
•
•
•
•
•
Inspiring our customers to live
their passions by providing
solutions and engaging
experiences – not just selling
products based on price
Having engaged and capable
team members who share our
customers’ passions
Investing in our own supply chain
to lower prices and control what
we bring to market
Investing in a single cloud-
based platform to house all our
websites
Expanding private label ranges
across our businesses
• Creating and supporting
communities of like-minded
customers
• Driving cost efficiencies by
realising synergies in our Sports
and Outdoor divisions
•
Building our delivery capabilities,
both internally and with partners.
‘CUSTOMER PROMISE’ AS COMPETITIVE
ADVANTAGE
Price/earnings multiples compressed
across the Australian retail sector
earlier in 2018, as the market became
increasingly concerned about
the arrival of large international
competitors. A number of analysts
wondered how our Sports and
Outdoor businesses in particular
could successfully retain and grow
market share in a rapidly changing
environment.
While we remain competitive on
price and delivery, our Group
strategy has never attempted to
engage in the ultimately futile task
of trying to ‘out-Amazon’ Amazon.
Our competitive advantage is based
on a promise of providing inspiration,
experience and solutions to our
customers, and is equally applicable
across all our businesses.
Deepening our knowledge of our
customers will position us to fend off
competition on both fronts. On one
hand, we are achieving significant
growth online, outperforming
traditional competitors. On the other,
we are focused on high involvement
strategies, like in-store experiences
and services, that new market
entrants will find difficult to match.
Our competitive advantage – the
reason we will grow and maintain
our market leadership – ultimately
revolves around the fact that
customers want to transact with us
because we provide solutions and
experiences that allow them to
pursue their passion, delivered
14 Super Retail Group Limited • Annual Report 2018
by team members who share those
same passions.
Of course, our customer promise
alone will not be sufficient to
differentiate our offering from our
competitors and therefore enhancing
our digital capabilities remains
critical. That’s why we’ve recently
invested in a new cloud-based
web platform provided by the
Salesforce Commerce Cloud.
All our brand websites are now live
on the platform. The new web
platform also provides more flexibility
for enhanced delivery options as
they become available.
This ability to respond quickly to
changing consumer expectations
is another strategic priority, and
we are already seeing the benefits
of investing heavily in our delivery
capabilities. Supercheap Auto
recently extended their market
leading 60-minute click-and-collect
service by reducing pick-up times
to as little as 30 minutes (see case
study on page 33). Click-and-collect
times for BCF currently stand at two
hours – with Rebel at four hours – and
there are plans to reduce these times
further in future.
BUILDING CUSTOMER CONNECTIONS
The omni-retail strategy will only
be successful over the longer term
if we retain our focus on inspiring
and delighting customers. As a
consequence, we are building
connections with and between
our customers of which over five
million are club members across our
different brands.
We are now taking our expertise in
building communities into the digital
world, through initiatives such as the
Fisho app – where members of our
angling community can connect;
through ‘how-to’ videos on YouTube
to assist customers make the most
of their purchases; and through
Supercheap Auto’s partnership with
Mighty Car Mods – a series for car
enthusiasts which sees over three
million views per week.
BENEFITS OF A CONSISTENT
GROUP STRATEGY
We believe there are significant
advantages in taking a Group-wide
approach to strategy, as opposed to
individually tailored strategies for the
Auto, Sports and Outdoor divisions.
A consistent Group strategy allows
us to continue to invest in the growth
of our individual businesses at the
same time as investing in building the
omni-retail capabilities all our divisions
require – the timely and effective
roll-out of our new cloud-based web
platform being one example.
The scale and interoperability of
our organisation also helps attract
and retain strong talent, given
the greater opportunities on offer
for team member promotion and
development. Finally, there is a
commonality across all our brands
in terms of their customer-centric
vision and purpose. All are substantial
businesses in their own right and
share a common goal in aspiring to
market leadership in their category.
In conclusion, the retail landscape is
changing, and our Group strategy is
changing with it. We are confident
in our omni-retail capabilities and
executing our customer promise
will see us benefit from industry
consolidation, keeping us ahead of
our competition and delivering strong
operating cash flows and reliable
returns for shareholders.
Super Retail Group Limited • Annual Report 2018 15
16 Super Retail Group Limited • Annual Report 2018
CASE STUDY
Octane Island campaign
delivers big lift for lubes
Supercheap Auto is a thriving specialty business and Australia and New
Zealand’s biggest retailer of automotive parts and accessories. The business
has grown off the back of DIY motoring enthusiasts – men and women who
enjoy restoring, maintaining and improving their cars.
TINKER-PROOF CARS
Due to innovations in automotive
technology, cars have evolved
over the last decade to be much
more complicated than they once
were. As far back as 2005, research
from the Australian Automotive
Aftermarket Association indicated
that cars were becoming too
sophisticated for those DIY enthusiasts
who were concerned about their
understanding of electronics and
the complexities of modern vehicle
design. As a result, the general
auto market has become a more
important driver
of growth than repair and DIY-related
products.
THE IMPORTANCE OF ‘ANCHOR’
CATEGORIES
Business success is now more
dependent upon the brand
becoming relevant to a broader
audience, who might visit the store
for auto necessities but leave with
much more. Engine oil is one of the
most important of these ‘anchor’
categories for Supercheap Auto, and
a key catalyst for customers to visit
a store when it’s time to service their
vehicles. Once inside, they are much
more likely to purchase other
products, including those required for
completing a basic service.
KEEPING SUPERCHEAP AUTO
TOP-OF-MIND
The engine oil category is dominated
by four competitive brands with wide
distribution: Gulf Western, Castrol,
Nulon and Penrite. Our challenge
was to find a way to support the
category as a whole by creating a
campaign that would encourage
customers to keep Supercheap Auto
top-of-mind when it came to making
their next engine oil purchase.
The campaign would also need to
capture the perceived benefit of
truly responsive performance in a
way that reflected our audience’s
enthusiasm for cars, while allowing
the featured brands to retain their
individual identities.
In collaboration with The Dreamers,
a film production company, we
created an engaging piece of
entertainment – more a mini-movie
than ad – with the longer clip used on
social media and digital outlets, and
a more traditional 30-second piece
featured on Australian free-to-air TV
networks.
‘Octane Island’ features the iconic
American actor Danny Trejo and
Australian muscle cars, prominently
displaying the four oil brands, racing
through the now-decommissioned
Wangi Power Station in New South
Wales, on Calder Raceway in
Victoria, and on Hashima Island – an
islet off Nagasaki in Japan.
The campaign was in the market
for six weeks from mid-October to
December 2017, and briefly again in
the New Year.
DRIVING STRONG SALES
PERFORMANCE
The campaign was a success by
every measure. It resulted in
73.1 million impressions (views on
TV, social media and elsewhere),
and generated a strong like-for-like
sales performance in a traditionally
non-elastic category.
‘Octane Island’ was voted as being
in the top 10 Australian ads of 2017 by
the publication AdNews. In addition,
it was picked up by the US social
media channel Hot Rod Network,
the leading American automotive
content hub, and the full online piece
was broadcast on Channel Seven’s
Sunrise program as an editorial.
Super Retail Group Limited • Annual Report 2018 17
STRONG CASH GENERATION
THROUGH A PERIOD OF CHANGE
The Group’s strong cash generation over recent years has largely contributed
to our robust financial performance in 2018, enabling us to invest in our
strategic initiatives and transform our business to become a world class
omni-retail organisation.
This is demonstrated through the
substantial increase in our net cash
inflow from operating activities which
lifted from $182.0 million in 2015 to
$308.4 million in 2018.
Pre-tax cash flow after adjusting for
timing benefits has consistently been
near normalised EBITDA, highlighting
our continuing ability to deliver
consistent growth for shareholders
over time. This has increased in 2018
due to improvements in working
capital performance through
improved supply chain efficiencies
and trade partner payment terms.
CONTINUED STRONG CASH
GENERATION
The strong underlying cash flow
performance for the Group provides
scope for our capital management
to focus on maximising shareholder
returns, maintain financial strength
and retain financial flexibility. This
allows the Group to:
•
Pay dividends to shareholders of
between 55 per cent and
65 per cent of underlying Net
Profit After Tax
to take advantage of opportunities
for future growth. These include:
•
•
Invest capital above the
Group’s investment hurdles of
15 per cent after tax
Invest in the strategic growth of
the business.
STRONG CASHFLOW SUPPORTED BY
STRATEGIC INITIATIVES
Reshaping Super Retail Group to
stay ahead of the competition and
respond to changing customer
expectations and preferences has
required investment. But strong cash
flow and good capital allocation has
allowed us to reposition our business
•
Historical investment in stores
to drive revenue growth has
positioned the store network
to be of a high standard of
presentation and an engaging
customer experience
• Our investment has shifted
to improve the omni-retailing
experience by investing in
digital capability and underlying
systems.
Although debt has been taken on
to fund the Macpac acquisition of
NZ$144 million, based on our track-
record the Group plans to reduce our
debt profile over the next few years.
CONTINUED STRONG CASH GENERATION
$m
2017/18
2016/17
2015/16
2014/15
Pre tax operating cash flow
Timing benefits
Underlying pre tax operating
cash flow
Cash conversion ratio to
normalised EBITDA
352
(17)
335
288
288
203
38
241
114%
104%
98%
228
228
99%
18 Super Retail Group Limited • Annual Report 2018
Super Retail Group Limited • Annual Report 2018 19
20 Super Retail Group Limited • Annual Report 2018
CASE STUDY
Building a legacy at
Moreton Bay
How BCF and our customers are driving shellfish habitat restoration along the
Pumicestone Passage.
There are few places on earth
as beautiful as the Pumicestone
Passage, a waterway in the Moreton
Bay Marine Park that stretches
for 35 kilometres from Caloundra
to Deception Bay. As the oldest
registered fish habitat in Queensland,
the passage plays host to boaters,
swimmers and anglers seeking
to escape daily life in a natural
wonderland of channels, sandbanks
and islands. The marine park invites
other visitors too – breeding fish,
turtles, dolphins and migratory birds
– as well as dugongs; gentle giants
of the ocean who visit seasonally to
feast on pastures of sea grass.
Yet under the blue waters, all was
not well. Years of commercial oyster
dredging had degraded the shellfish
beds for which the passage was
famous. Unsustainable harvesting
along with pollution, has led to
significant damage to habitat in
the region resulting in reduced fish
stocks, disruption to the food web,
and so on. The ecosystem of
the passage was beginning to
break down.
At BCF we have always understood
that waterways play a major role
in the outdoor leisure activities
that both our customers and team
members enjoy – almost 3.5 million
Australians go fishing every year. So
when we heard about what was
happening to the waters around
Moreton Bay, we were determined
to lend nature a hand.
In 2017, we partnered with fishing
conservation organisation OzFish
Unlimited to get to work on restoring
the once-magnificent shellfish beds
of the passage. Our plan involved
designing three types of shellfish
reefs, which would replicate ideal
growing conditions for oysters and
other molluscs. One ‘patch’ reef was
made from shell, another ‘string’ reef
was made from steel cages filled
with shell, and a third ‘string’ reef was
fashioned from a biodegradable
potato starch matrix developed in
the Netherlands – the first of its kind
in Australia.
The reefs were seeded with shellfish
and installed in a one-hectare
location, close to Bribie Island, with
the aim of restoring the marine
ecosystem to balance, increasing
the fish population and improving
water quality over time.
The project was not easy. The
physical creation of the reefs
and their installation required the
help and cooperation of many
stakeholders, including the local
community and government.
To ensure proper funding was
in place, BCF donated $20,000,
which helped facilitate $150,000
in cash contributions and a further
$230,000 of in-kind support from other
partners. BCF also provided a further
$50,000 contribution to engage a
Senior Project Manager in Dr Ben
Diggles – who has since encouraged
recreational anglers to become
involved in this and similar initiatives
in Queensland.
The Pumicestone Passage project
will be monitored by the University of
the Sunshine Coast marine science
team to assess the effects on water
quality and fish stocks, with the hope
that a successful outcome can be
replicated elsewhere in the Moreton
Bay Marine Park.
Looking ahead, and empowered by
our partnership with OzFish and the
support of recreational anglers, we
are determined to build a legacy
of healthy waterways for future
generations. Importantly, we are
committed to driving this cause,
not just funding it. With this
responsibility in mind, we have
identified three ways through which
we can implement real change:
giving, raising awareness and
team mobilisation.
Restoring the natural environment
obviously needs funding. Our
generous customers contributed
$155,902 in 2018 – donations which
helped fund both the Pumicestone
Passage work and the initial
restoration project we coordinated
with OzFish at the Merri River in
Victoria last year.
Raising community awareness
is also key. We believe that our
customers love Aussie waterways
as much as our team members
do, and that initiatives such as
BCF’s Round Up campaign – which
encourages customers to round up
their purchases with the additional
amount going to OzFish – help
customers connect with our mission.
Finally, team members will also have
the opportunity to engage in the
initiative through a team advocacy
program. This will include a chance
to get hands-on in providing
practical assistance at the
project sites.
Our ultimate goal is to build a
community of environmental
stewards who are empowered to
actively manage the health of our
waterways. Australia is a beautiful
place, and we want to do our part
to keep it that way for generations
to come.
Super Retail Group Limited • Annual Report 2018 21
STRENGTHS OF OUR
INDIVIDUAL BUSINESSES
Supercheap Auto, Rebel and BCF cemented their positions as leaders in their
categories in 2018, with the Auto, Sports and Outdoor divisions benefitting from
major investments in our digital capabilities and store network.
We are confident that the continuing
transition from a bricks-and-mortar
strategy to an omni-retail strategy
will cement the Group as a premier
Australasian retailer.
STRENGTH IN AUTO
Supercheap Auto continues to lead
the automotive sector in providing
omni-retail solutions for customers,
growing its share of customer
spending among auto retailers. In
line with our consistent track record
of strong financial performance, we
achieved year-on-year sales growth
of 5.3 per cent in 2018, an improving
customer NPS and significant growth
in online sales, outperforming
traditional competitors.
SUPERCHEAP AUTO:
KEY STATISTICS FOR 2018
j 1.47m
Active club
members
Club members NPS j 59%
Club sales %
total sales
Store numbers
Share of online
spending among
auto retailers (1)
Online sales
% total sales
j 37%
j 319
j 24%
j 5%
j >50%
Click-and-collect
% online sales
Private brand mix j 44%
Inspired by its motto – Everything auto
and much much more! – Supercheap
Auto continues to evolve its offer
to respond to changing customer
preferences. We’ve added to
our 10,000-plus product range,
which now covers everything from
automotive, basic marine and
motorbike parts and accessories,
to handyman items, tools and
equipment.
To expand the range, we are
focusing on higher growth categories.
This includes products related to car
travel, such as roof bars and solar
batteries for camping and outdoor
activities. Our services offering has
also been extended. Supercheap
Auto stores now offer the expert
fitment of lightbulbs, seat covers and
roof racks, as well as more involved
services like batteries, in-car stereo
and windscreen repair.
Despite the view in some quarters
that automotive retail is a low-growth
and defensive industry, we believe
there are significant opportunities
to grow profits in the years
ahead. For example, as internet-
of-things technologies become
commonplace, customers will enjoy
increased visibility and control over
how their car is serviced. Their smart
device will connect to their car,
telling them exactly what needs
to be fixed and how much it
should cost.
We have made some controlled
investments to position ourselves
for the future, allowing us to test
and learn in a cost-effective and
methodical way as the automotive
market changes. One example is
our partnership with AutoGuru, a
Gold Coast-based auto mechanic
marketplace which harvests
service times and parts data before
combining it with a mechanic’s rates
to provide a quotation for service.
Users can then make an instant
booking through the AutoGuru app.
STRENGTH IN SPORTS
Our Sports division experienced
another strong year, with the
integration of Amart and Rebel
strengthening our position as
Australia’s largest and most
successful sports retailer. The synergies
created by the integration have
allowed us to reinvest back into the
Rebel brand, which continues to
deliver on its strategy of connecting
customers and their communities with
REBEL:
KEY STATISTICS FOR 2018
j 2.47m
Active club
members
Club members NPS j 55%
Club sales %
total sales
Store numbers
Share of online
spending among
auto retailers (1)
Online sales
% total sales
Click-and-collect
% online sales
j 61%
j 159
j
j 25%
j 8%
j >30%
Private brand mix j 16%j
(1) SOURCE: Compared to key category competitors - Quantium NAB Data: 12 months ending June 2018. Refer to page 137.
22 Super Retail Group Limited • Annual Report 2018
WE ARE
CONFIDENT THAT
THE CONTINUING
TRANSITION
FROM A BRICKS-
AND-MORTAR
STRATEGY TO
AN OMNI-
RETAIL STRATEGY
WILL CEMENT
THE GROUP
AS A PREMIER
AUSTRALASIAN
RETAILER.
their sporting passions and an active
way of life. With an unmatched store
footprint, the leading share of online
spending among sports retailers,
the biggest range of products and
services, and an innovative and
constantly evolving customer offer,
Rebel does not have an equivalent
competitor nationally.
We consolidated this market
leadership by pursuing a number of
strategic opportunities during the
year under review. For instance, we
extended the footprint of Rebel’s
own range of sports apparel, Ell &
Voo. Growing our running, gym/
fitness and football offerings was
also a priority as these are the three
fastest growing categories in sporting
retail, and we are determined to
strengthen our leadership in each.
Finally, we continued to build Rebel’s
‘experience, inspiration and solutions’
ecosystem, which differentiates
our offering by delivering a superior
customer experience both online
and in-store.
We are also looking for ways to
deepen our engagement with
customers after purchase, and
growing the number of player
appearances in-store by leveraging
our strong relationships with all the
major sporting codes.
STRENGTH IN OUTDOOR
The year under review was a
transformative one for our Outdoor
division, with the NZ$144 million
acquisition of outdoor adventure
retailer Macpac in April 2018.
Macpac has a strong heritage with
a pipeline of new stores and product
development that will generate solid
growth in the coming years. The
Group will convert the remaining nine
Rays stores to Macpac large format
stores in the coming year.
We identified the adventure segment
as a high-growth opportunity for
the Group (over five per cent
annualised revenue growth), and
were further encouraged by our view
that a comprehensive adventure
solution in apparel, footwear and
equipment was missing from the
market. In particular, we believed an
opportunity existed to target affluent
urban consumers, who are interested
(but currently underserviced) in this
category.
As a vertically integrated adventure
retailer with a strong brand and
compatible culture, we believe
the acquisition of Macpac will
accelerate our strategy to build
the leading adventure outdoors
retail business across Australia and
New Zealand. See the section
entitled Growing Businesses in High
Involvement Categories for more on
the rationale behind the Macpac
acquisition.
The BCF loyalty club program remains
a key strength for the business with
79 per cent of total sales in 2018
generated from our 1.36 million
active club members. BCF customers
continue to be exceptionally loyal, as
evidenced by strong attendance at
club member nights.
To drive customer engagement
even further, we’ve introduced
an Experts program, which
allows our team members to have
better conversations with customers
about their passions. The value
proposition of BCF is built on a level
of customer service and community
engagement that cannot be faked
or bought. We are confident of our
ability to win in Outdoor because our
team is genuinely motivated to help
our customers catch the fish they’ve
always wanted to… not just to sell
them the fishing rod.
BCF:
KEY STATISTICS FOR 2018
Active club
members
j 1.36m
Club members NPS j 57%
Club sales %
total sales
Store numbers
Share of online
spending among
auto retailers (1)
Online sales
% total sales
j 79%
j 134
j 12%
j 6%
j >50%
Click-and-collect
% online sales
Private brand mix j 31%
Super Retail Group Limited • Annual Report 2018 23
24 Super Retail Group Limited • Annual Report 2018
CASE STUDY
Delivering Rebel 2.0 and
supporting women in sport
Rebel is a business that never stands still. We have always recognised that to
grow and prosper, our strategy must evolve with the times.
DELIVERING REBEL 2.0
In July 2017, we announced our
decision to combine the best parts
of Rebel with the best parts of Amart
Sports under the Rebel brand. In less
than three months, 68 Amart Sports
stores were converted into Rebel
stores, alongside the merging of
our operations, merchandise and
marketing teams.
While Rebel has long been an
unchallenged market leader in
its category, after merging Amart
into Rebel we determined that a
revitalised strategy was needed to
ward off the impending arrival of
new international competitors. Rebel
2.0 was our response – an ambitious,
omni-retail strategy that re-imagines
what it means to connect our
customers and their communities
with their sporting passions and an
active way of life.
The strategy behind Rebel 2.0
doesn’t seek to categorise customers
based on age, gender, geography
or income level. Instead, it
specifically tailors products, services
and experiences to customers
based on their passion for sport.
This approach, which is helping us
maintain and extend our market
leadership, is underpinned by
four themes:
• Customer profiling: grouping our
highest target customers (65 per
cent of the total sports market)
into one of four categories
– All Rounders, Balancers,
Competitors and Socialisers.
• A new motto: “start right @
Rebel” – putting our size,
intelligence and care into
making sure our customers
start their sporting journey right,
whatever their age or ability.
•
•
HERO categories: a focus on the
‘HERO’ categories of running,
gym/fitness and football with
a secondary focus on ‘Win’
categories (netball, tennis,
basketball, swimming, cricket)
and ‘Play’ categories (e.g. golf,
darts, skiing).
The Rebel way: our offer is about
more than product and price.
For instance, we can help a
football player with everything
they need – from balls, to boots,
to shin-pads, to training, fitness,
recovery and diet advice.
SUPPORTING WOMEN IN SPORT
football, netball, rugby league and
AFL – because we want to inspire the
stars of tomorrow by lifting the profile
of female stars today.
We’re proud of our role in helping
girls appreciate that sport is not just
a hobby, but a viable career path.
In October 2017, Football Federation
Australia announced Rebel would
be the supporting partner of the
Westfield W-League as well as the
naming rights partner for the Play
Football campaign and Female
Football week for three years. In
December 2017, we extended our
naming rights sponsorship of the
Rebel Women’s Big Bash League
(WBBL), also for three years.
This large-scale financial support
has been reinforced by further
initiatives such as the ‘Rebel Women’
video series – which serves as a
platform for female stars to share
their sporting journey, the Rebel
Young Gun Award – which promotes
up-and-coming talent in the WBBL,
and the Rebel Role Model Award,
which recognises excellence both on
and off the pitch.
Rebel is committed to women in
sport. From supporting grass-roots
participation to elite athletes, we’ve
made investments across all the
major codes – including cricket,
Finally, Rebel doesn’t just talk about
female empowerment – we live it.
Forty-four per cent of our leaders are
women, as is our Managing Director,
Erica Berchtold.
Super Retail Group Limited • Annual Report 2018 25
GROWING BUSINESSES IN HIGH
INVOLVEMENT CATEGORIES
One of the core elements of our Group Strategy is growing businesses in high
involvement categories. We have made a clear choice to build retail businesses
that supply their customers with products and services that inspire them to live
their passion.
We believe that our customers will
always be looking for more than the
cheapest price – they value advice,
service, value, ideas and innovation.
July 2018. We are on track to fully
deliver the potential operational
savings we previously identified by
the end of FY2019.
We aim to build businesses that are
the market leaders in their categories.
We are proud that Supercheap Auto,
BCF and Rebel already hold that
position and have a plan to grow the
recently acquired Macpac business
to also become a market leader.
COMBINING REBEL AND
AMART SPORTS
The impending entry of new
international competitors into
the sporting goods retail market
necessitated a review of our strategy
for our Sports division. We asked our
customers what they valued in the
Rebel and Amart Sports businesses
and what improvements they would
like to see. We analysed buying
patterns which confirmed that much
of the product range sold equally
well in both stores. We also found that
many Amart Sports customers also
shopped in Rebel.
In order to differentiate our offer
in the market and to meet our
customers’ expectations, it was clear
we would need to add Amart Sports-
style promotional offers to the Rebel
business and more of the experience
and innovative range of Rebel to
the Amart Sports business. We also
determined we could generate up
to $15 million in operational savings
through merging the two businesses,
which could be used to reinvest in
price competitiveness and marketing
the combined business.
We announced our decision to
merge the Rebel and Amart Sports
businesses under the Rebel brand
in July 2017. Over the next three
months we converted all 68 Amart
Sports stores to Rebel stores and
merged the supporting operations,
merchandise and marketing teams.
The merchandise team commenced
integrating the product range
with the target of presenting one
consistent offer across all stores by
Importantly, our team have
embraced the change and our
customer net promoter scores have
improved through the year. Rebel is
the clear market leader in sporting
goods retail across Australia.
Now the integration is complete,
the focus is on enhancing the
customer experience and offer
across all Rebel stores, consistent with
our mission of creating Australia’s
most loved sporting brand. We are
testing a number of new ideas at
our Macquarie Centre store in North
Ryde, Sydney and will be rolling out
the most successful of these to other
stores over the coming year.
OUTDOOR ADVENTURE STRATEGY –
ACQUISITION OF MACPAC
The acquisition of Macpac and
the acceleration of the adventure
outdoors retailing strategy is
consistent with the Group’s strategy
of providing solutions and engaging
experiences that inspire its customers
to make the most of their leisure time.
While the Macpac business has
performed extremely well over recent
years, there remains a significant
opportunity to grow the business in
the near future through opening new
stores and growing its digital and
commercial channels.
The heritage of the business and
the quality of its products are
assets that have not yet been fully
leveraged, and we believe there
is an opportunity to develop an
experience for customers that brings
these assets to the fore. The Macpac
team are passionate, knowledgeable
and proud of their heritage, their
brand and their products.
Importantly, they have a very similar
culture to Super Retail Group. While
cultural fit is not always quantifiable
in the short term, we believe it to be
26 Super Retail Group Limited • Annual Report 2018
a critical factor in determining the
ultimate success of an acquisition.
The cultural alignment that exists
between Macpac and the other
Group businesses adds to our
confidence that the acquisition will
prove value accretive.
What’s more, the integration of
the business with Rays provides an
opportunity to position Macpac
as the leading outdoor adventure
specialist across Australia and
New Zealand by providing a much
broader range of quality products,
information and services than any
other retail business.
The Group intends to consolidate the
Rays and Macpac businesses under
the Macpac brand. The combined
business will include:
•
•
Small format stores focusing
on apparel, with limited
footwear, equipment and
accessories. The goods sold
are likely to be predominantly
Macpac branded
Large format stores retailing
an extensive range of apparel,
footwear, equipment and
accessories under the Macpac
brand. Major global brands
will be included to provide
a complete solution for the
outdoor adventure customer
• A digital channel offering the
complete product range,
extensive information and
advice, and access to services
• A commercial channel.
The acquisition will also help realise
synergies across the Group. For
instance, the Group will be able to
leverage its capabilities in supply
chain, marketing, procurement
and retail operations to add value
to Macpac, while Macpac’s
capabilities in design and apparel
sourcing will add value to BCF
and Rebel.
Super Retail Group Limited • Annual Report 2018 27
28 Super Retail Group Limited • Annual Report 2018
CASE STUDY
Improving team member recognition…
and the bottom line.
While many organisations talk of making sure their team is happy, healthy
and fulfilled in their work, we knew the passion we have for our people
was exceptional.
But striving for continuous
improvement is a part of our Group
culture, and we believed we could
do even better.
In 2017, we identified ‘recognition’
as a potential stumbling block
for higher levels of team
member engagement. Indeed,
only 56 per cent of our team
members felt they were getting
appropriately recognised for their
customer service.
Their concerns weren’t misplaced.
With a dispersed workforce of more
than 12,000 team members across
Australia, New Zealand and China
working across three retail divisions,
we found that recognition was an
inconsistent experience across
the Group.
While there were formal recognition
programs, they involved manual
processes with no measurement
of ROI. This lack of technology also
caused accessibility issues for
our team members who had
no platform to encourage
collaboration, innovation and
creativity, despite this being a
strategic focus across the Group.
To improve our culture of recognition,
we needed a technology-based
solution to support the ability to
recognise and reward the everyday
behaviour of our team members, as
well as regularly reinforce desired
behaviours, like customer-centricity.
To achieve this our Human Resources
and Technology teams partnered
to deliver a real-time recognition
platform called SOULmoments.
Accessible via app or web browser,
SOULmoments allows team members
and leaders to virtually connect,
collaborate and share achievements
with one another across all divisions
and locations. To give a practical
example, a senior leader visiting a
Rebel store might take a photo of
an innovative store set-up and share
this on the platform. Team members
at other locations can then like or
comment on the post, before using
it as inspiration to refresh their own
store set-ups.
Early adoption of the platform was
encouraged by champions, who
were involved in launch activities
as advocates and experts. Team
members were encouraged to
provide feedback to ensure the
platform was refined and improved
as required.
Within three months, we had
70 per cent of team members
activated and a recognition index
above best practice. After six
months, we experienced a three-
point uplift in our engagement survey
recognition question, with 84 per
cent of team members activated.
We became the fastest Australian
organisation to reach 100,000
recognitions on the platform (in less
than six months), according to the
service provider.
We also found the benefits of higher
recognition extended beyond team
member morale. We analysed the
impact of recognition on average
transaction values and found that
stores with more recognition (i.e.
top quartile) had a 21 per cent
higher average transaction value
than stores with less recognition (i.e.
bottom quartile).
In conclusion, SOULmoments
addresses an important engagement
need in the Group by helping our
team members stay focused, fulfilled
and happy. It also strengthens our
purpose by creating a community
where team members can
recognise and celebrate one
another for providing inspiring
solutions and experiences for our
customers. Through the power of
instant recognition, our large and
geographically dispersed workforce
is brought closer together, and
leaders can immediately reinforce
the behaviours and culture that
makes us unique.
Super Retail Group Limited • Annual Report 2018 29
SUSTAINABILITY
At Super Retail Group we recognise the important role we have to play in
contributing to the well-being of the environment and the communities in
which we operate.
Our customers expect us to do the
right thing and we aim to meet their
expectations by committing to high
standards of governance, promoting
responsible business practices
across our supply chain, fostering
an engaged workforce to create a
diverse and high-performing team,
and managing our environmental
impacts to minimise our carbon
footprint. Sustainability is a key
strategic area for our business, and
during the reporting period, our
efforts were publicly recognised by
the following organisations:
• Dow Jones Sustainability
Indices (DJSI): Achieved the
highest score in the Dow Jones
Sustainability Index Assessment in
the Australian Retail category.
•
Institutional Shareholder Services
Inc. (ISS): Achieved the highest
rating on social disclosure and
received a QualityScore Award
Badge (June 2018).
• Australian Council of
Superannuation Investors (ACSI):
Recognised Super Retail Group’s
sustainability disclosure as
‘Leading’ among our ASX
listed peers.
MANAGING WHAT MATTERS
Understanding the issues that
matter most to our business and
stakeholders allows us to evolve our
business strategy, manage risks and
opportunities, and build the right
foundations to deliver a sustainable
omni-retail organisation.
We identify our most material
sustainability issues through regular
assessments of industry trends,
research, media reports and
the information we gather from
stakeholder engagement.
Environmental, Social and
Governance (ESG) risks are
considered and included in our
Group strategy and risk management
frameworks. The issues identified
during the 2018 reporting period
remained consistent with last year’s
review. This reflects the fact that the
issues we face remain ongoing and
complex. There are no quick fixes and
we are aware of the need to invest
time and resources in addressing
them.
These issues have been grouped
into the following three focus areas,
and are aligned to our vision and
purpose, brand portfolio and business
strategy:
•
•
Promoting the well-being of our
team members and the broader
community: Fundamental to
our success as a sustainable
business is building a safe and
inclusive work environment. We
also want team members to feel
engaged and inspired so that
they can share our customers’
passions and meet their needs.
As well as making Super Retail
Group a great place to work,
we aim to provide opportunities
for our people to help support
their local communities and
the issues that matter to them.
Our commitment to positive
ESG outcomes is reflected
through corporate philanthropy
– including through supporting
community groups and other
NGOs – our active participation
in improving community well-
being, and our provision of
on-the-ground assistance during
and after natural disasters, such
as fires, floods and earthquakes.
•
Ensuring our business practices
are responsible: The pace of
change in how we work, live,
shop and enjoy our leisure time
is accelerating. In response,
we must rethink the ways
in which we connect with
customers and address their
expectations. A key customer
expectation is for our products
to be sourced sustainably. We
maintain an ethical sourcing
program that promotes
better working conditions,
sustainable packaging and
lower environmental impacts
associated with our private
brand products.
Reducing our environmental
footprint: We view the task of
building a more sustainable
business as a shared
responsibility, and our focus
is to work with trade partners,
customers and team members
to reduce the impacts of our
products and activities on the
environment. As a significant
retailer, we are also beginning
to adapt our business model
to reflect the societal shift
towards a circular economy.
This includes building a more
sustainable supply chain,
strengthening initiatives already
in place relating to packaging,
energy use, waste production
and transport emissions, and
adopting programs and plans
to address environmental
challenges and mitigate the
effects of climate change.
We remain proud of our
achievements to date, but recognise
there is still more we can do to
embed our sustainability goals and
values across the business. Detailed
information on our sustainability
performance will be set out in the
Group’s 2018 Sustainability Report,
which will be published on our
corporate website.
30 Super Retail Group Limited • Annual Report 2018
Super Retail Group Limited • Annual Report 2018 31
32 Super Retail Group Limited • Annual Report 2018
CASE STUDY
A retail revolution at
Supercheap Auto
In July 2017, Supercheap Auto took a major step in revolutionising automotive
retail in Australia through the opening of a flagship Customer Experience
Centre in Penrith.
The flagship will serve as a prototype
for the next generation of stores,
allowing us to test and learn before
rolling out changes across our
network of 319 stores.
In combining a world class in-store
experience with the convenience of
digital shopping channels and our
industry-leading 30-minute click-and-
collect, the Centre is Supercheap
Auto’s biggest investment yet in a
single store and an example of
the continued development of
our physical and digital omni-
retail platform.
Following the arrival of new
international competitors into
the Australian market, we remain
confident that the future of
automotive retail will be won – not
just by delivering on price and
convenience – but through the
offering of unique services and
experiences to customers that also
serve to celebrate and strengthen
local communities.
According to Customers 2020, a
study by customer intelligence
consultancy Walker, customer
experience will overtake price
and product as the key brand
differentiator by 2020. The Walker
study predicts that companies which
develop strategies to anticipate
the future needs of customers
today are much more likely to build
and maintain their competitive
advantage over time.
With a suite of new services, digital
experiences and unique design
features to better serve customer
needs, the Penrith Experience Centre
was designed with the evolution of
the retailer-customer relationship
in mind. On approaching the
store, customers are welcomed
by a massive 36 square metre
outdoor LED screen which provides
information and advice, including on
out-of-hours events.
Upon entry, shoppers are wowed
by a floor-to-ceiling video wall with
over 70 unique pieces of localised
content which responds to their
movements. Time-poor customers
can use our digital wayfinder, which
provides an animated map to
quickly guide them to the products
they need.
The undoubted centrepiece of the
store is the Experience Centre’s
central grandstand, which serves
as a focal point for increasing
dwell times and engaging with the
local community. Grandstand-style
seating allows customers to watch
and learn from over 700 product-
education videos on eight 84-inch
LED screens, while offering others the
chance to watch live motorsport at
the same time.
Below these screens is an exhibition
space for hosting trade events
and special appearances with
motorsport professionals. The
centre stage is even big enough
for a vehicle to be used in live
demonstrations.
Product displays feature throughout
the store to showcase solutions and
provide inspiration for customers.
One example is the ‘Dream
Garage’ – an area set aside to show
customers what a perfect home
garage might look like.
The physical innovations found
within store are complemented by
Supercheap Auto’s unparalleled
service and advice. This includes the
introduction of the ‘Guru Concept’,
which sees ‘gurus’ with specialised
product knowledge available to help
customers throughout the store.
Other services include a full-time
concierge to assist with general
queries, two car clinic advice bars to
help customers find solutions to their
automotive problems, a cafe-style
lounge called the ‘Pit-Stop’ where
shoppers can browse the online
catalogue over coffee, a 24-hour
parcel collection service, and new
offers like Tesla electric vehicle
charging, nitrogen tyre inflation,
windscreen repair and baby seat
fitment demonstrations.
The success of the flagship store
gives us the confidence we need
to accelerate the rollout of many
of the elements we trialled into our
broader network. It also confirms
that the Experience Centre will be
the next evolution of our physical
footprint across our network, as we
progressively refurbish all our stores
over the coming years.
Super Retail Group Limited • Annual Report 2018 33
BOARD OF DIRECTORS
SALLY PITKIN
Independent
Non-Executive Chair
PETER BIRTLES
Group Managing Director
and Chief Executive Officer
DIANA EILERT
Independent
Non-Executive Director
Dr Sally Pitkin was appointed
a Director of the Company
on 1 July 2010 and Chair
following the 2017 Annual
General Meeting. Dr Pitkin
is an ex-officio member
of the Audit and Risk
Committee, and the Human
Resources and Remuneration
Committee. Sally has more
than 20 years’ experience
as a Non-Executive Director
in the listed, private, public
and non-profit sectors,
including experience in
international markets, and
over 14 years’ experience as
a Non-Executive Director of
ASX200 companies. She is a
lawyer and former partner
of a national law firm 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 Chair of
the Institute’s Corporate
Governance Committee.
Sally is presently a Director of
ASX listed companies The Star
Entertainment Group Limited
and Link Administration
Holdings Limited. Sally holds
a Doctor of Philosophy
(Governance), a Master of
Laws and Bachelor of Laws.
Peter Birtles was appointed
a Director of the Company
on 5 January 2006. Peter
has more than 28 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, and a member of
the Australian Institute of
Company Directors.
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
also currently appointed to
the boards of Domain, Elders
and Navitas. With 25 years
in executive roles, Diana
was Group Executive with
Suncorp and Citibank and
also as a Partner with IBM,
where she gained further
technology experience.
In her final executive
role, Diana was Head of
Strategy and Corporate
Development for News Ltd,
where her focus was on
digital transformation and
emerging business models.
34 Super Retail Group Limited • Annual Report 2018
LAUNA INMAN
Independent
Non-Executive Director
PETER EVERINGHAM
Independent
Non-Executive Director
REG ROWE
Non-Executive Director
HOWARD MOWLEM
Independent
Non-Executive Director
Launa Inman was appointed
a Director of the Company on
21 October 2015, and chairs
the Human Resources and
Remuneration Committee.
Launa brings to the Board
extensive experience in
retailing, marketing (including
digital technology and
social media), finance
and logistics. Her diverse
experience includes terms as
Managing Director and CEO
of Billabong International
(May 2012 to August 2013),
Managing Director of Target
Australia Pty Ltd (2005 to
2011) and Managing Director
of Office Works (2004 to
2005). Launa is a member
of the Australian Institute
of Company Directors and
has completed the Wharton
Business School executive
program. Launa is a Non-
Executive Director of Precinct
Properties New Zealand, and
a member of the boards of
the Alannah and Madeline
Foundation and Virgin
Australia Melbourne Fashion
Festival. Launa was formerly a
Non-Executive Director of the
Commonwealth Bank
of Australia.
Mr Peter Everingham was
appointed a Director of the
Company in December
2017. Mr Everingham is a
member of the Audit and
Risk Committee and the
Human Resources and
Remuneration Committee.
Peter is an experienced
executive with more
than 25 years’ corporate
experience, including 18
years in senior executive
roles in the digital sector
experiencing and initiating
disruption. He is the former
Managing Director of SEEK
Limited’s International
Division, including being
the former Chairman of the
China business, Zhaopin
Limited, and Director of
the education business,
IDP Education, Online
Education Services and
THINK Education. Peter is a
former Director of Strategy
for Yahoo! in Australia and
Southeast Asia. Peter is
presently a Non-Executive
Director of iCar Asia Limited,
an ASEAN network of digital
automotive portals, and
WWF-Australia, Australia’s
largest conservation
organisation. Peter holds
a Master of Business
Administration and a
Bachelor of Economics, and
is a Graduate Member of
the Australian Institute of
Company Directors.
Reg Rowe was appointed
a Director of the Company
on 8 April 2004. Reg and
Hazel Rowe founded an
automotive accessories
mail order business in 1972
which they ran from their
Queensland home. In
1974 they commenced
retail operations of the
business which evolved
into Supercheap Auto. Reg
served as Managing Director
until 1996 and then Chairman
from 1996 to 2004. Prior
to this, Reg had 13 years’
experience in various retail
and merchandise roles at
Myer department stores.
Reg brings to the Board
extensive retail industry
and general management
expertise and skills in retail
and merchandise operations,
property and strategy. Reg
is a Director of a number of
private family companies.
Howard Mowlem was
appointed a Director of the
Company on 13 June 2017,
and is Chair of the Audit and
Risk Committee. 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
(FMCG) sector. Prior to that,
he held a range of financial
management positions
with the Coles Myer Group,
including as Finance Director
for Coles Supermarkets, for
over 12 years. Howard brings
extensive experience in
corporate finance, mergers
and acquisitions, financial
reporting, treasury, tax, audit
and governance. He holds
a Bachelor of Economics
(Hons), Master of Business
Administration and Securities
Industry Diploma. He is a
Fellow of CPA Australia.
Howard was formerly a Non-
Executive Director of Billabong
International Ltd.
Super Retail Group Limited • Annual Report 2018 35
GROUP EXECUTIVE TEAM
DAVID AJALA
Managing Director – Super
Retail Commercial
ERICA BERCHTOLD
Managing Director –
Sports Retailing
DAVID BURNS
Chief Financial Officer
David Ajala joined Super Retail Group
in July 2005 as General Manager of
Merchandise and Marketing, before
serving as the Chief Operating
Officer and Managing Director of
the Auto division for nine years.
David is currently Managing Director
of our Commercial Division. Prior to
joining Super Retail Group, he held a
number of senior management roles
with Coles Supermarkets, including in
merchandise and retail operations.
Erica Berchtold joined Super Retail
Group in November 2011 as Managing
Director – Sports Retailing, following
the acquisition of Rebel Group, and
continues to lead the Rebel business.
She has over 15 years of Australian
retail experience and has served in
a number of senior management
positions, including General Manager
of two women’s apparel businesses
for Specialty Fashion Group and
National Product Management roles
at Harvey Norman.
David Burns joined Super Retail
Group in December 2012 as Chief
Financial Officer (CFO). He has
overall responsibility for the finance,
risk management and customer
relationship management functions
for the Group. David has over
25 years of finance experience in
a number of industries, including
in senior management positions at
Qantas, Spotless and Lend Lease.
He holds a degree in Economics
from the University of Sydney, and
is a FCPA.
ANTHONY HERAGHTY
Managing Director –
Outdoor Retailing
JANE KELLY
Chief Human
Resources Officer
DEANNA LOMAS
Chief Supply Chain Officer
Anthony Heraghty joined Super Retail
Group in April 2015 and is responsible
for leading BCF and the recently
acquired Macpac. Prior to joining
the Group, he served as Group
General Manager of Underwear at
Pacific Brands Limited. Anthony was
also the Global Marketing Director
for Foster’s Group Limited and spent
more than ten years at advertising
agencies George Patterson and
McCannErickson, where he served as
Managing Director.
Jane Kelly joined Super Retail
Group in July 2016 as Chief Human
Resources Officer (CHRO) and is
responsible for advancing our strong
focus on team engagement, culture
and capability development. She
was previously the Human Resources
and Corporate Affairs Director at BT
Financial Group, and also held senior
roles as Head of Reward at 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.
Deanna Lomas joined Super Retail
Group in 2016 as Chief Supply
Chain Officer. She was previously
the Director of Supply Chain at
Telstra, and also held senior roles
with MMG, Carlton United Breweries
and BP. Deanna 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 US at the Kellogg School of
Management and the Massachusetts
Institute of Technology, as well as with
the WHU School of Management
in Germany. She holds bachelor’s
degrees in Engineering, Business and
Arts and a MBA.
36 Super Retail Group Limited • Annual Report 2018
ROBERT DAWKINS
Company Secretary,
Chief Legal & Property Officer
AMANDA FLEMING
Chief Transformation
Officer
PAUL HAYES
Chief Information Officer
Robert Dawkins 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 Super Retail Group,
Robert was Property Manager
for Bank of Queensland Limited.
Robert is a Chartered Secretary
and a Director of the Large Format
Retail Association, and holds a
Bachelor of Business from QUT and
a Postgraduate Diploma in Applied
Corporate Governance.
Amanda Fleming was appointed
Chief Transformation Officer (CTO) in
June 2017 from Coles Supermarkets,
where she was Director of Human
Resources. Other previous senior roles
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 of Organisational Change
from Hult International Business
School and a Bachelor of Business
from Deakin University.
Paul Hayes 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. He was previously
a senior IT consultant with IBM,
leading multi-million dollar projects
for premier retailers including Tesco,
Argos and Woolworths. Prior to that
Paul held a variety of roles with British
Home Stores.
WE AIM
TO BUILD
BUSINESSES
THAT ARE
THE MARKET
LEADERS
IN THEIR
CATEGORIES.
STEVE TEWKESBURY
Managing Director –
International Operations
CHRIS WILESMITH
Managing Director –
Auto Retailing
Steve Tewkesbury joined 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.
Chris Wilesmith joined Super Retail
Group in 2007 and is responsible
for running the Supercheap Auto
Retail Stores, Trade, Online and
Auto Trade Direct and AutoCrew
businesses. He has over 25 years retail
and wholesale experience across
Australasia, US and the greater Asia
Pacific region. Chris was previously
General Manager at Toys ‘R’ Us,
and spent 13 years with Woolworths,
where he held senior management
roles in merchandise, as well as in
retail operations within Dick Smith
and Big W. He is a graduate of
the Australian Graduate School of
Management.
Super Retail Group Limited • Annual Report 2018 37
OUR TEAM
At Super Retail Group, everything starts with our team. Having healthy, happy
and passionate team members is a key organisational priority and essential to
providing inspiring solutions and experiences for our customers.
ENGAGEMENT
We are proud of the high levels of
team member engagement across
the Group. Results from the 2018 Pulse
Engagement Survey revealed that
70 per cent of our team members
are engaged – which places Super
Retail Group in the top quartile for
Australian and New Zealand (ANZ)
organisations.*
The engagement levels of retail team
members remains particularly high,
and we continue to see the benefits
that flow from working with brands
that both our team and customers
are passionate about. Increasing
team engagement scores will remain
a focus over the coming year, with
a specific focus on senior leadership
capability and visibility.
* Aon’s Global Engagement Research
Database 2018
RECOGNITION
In 2017, team members told us
they wanted more recognition
for delivering excellent customer
service and living our values. In
direct response to this feedback, we
created SOULmoments.
This recognition platform addressed
a critical engagement need at
Super Retail Group. Through the
power of ‘instant recognition’, a
geographically dispersed workforce
can now be instantly recognised and
rewarded for living our values and
passionate service to our customers,
and leaders can instantly reinforce
desired behaviours and culture.
Within three months of launching
SOULmoments, we had 70 per cent
of team members active on the
platform and achieved a recognition
index above best practice (53,000+).
In less than six months we reached
100,000 recognitions.
Our 2018 Pulse Engagement Survey
results indicate that this platform is
clearly meeting a need, resulting
in a three point uplift in our key
recognition question. We will
continue to enhance and evolve the
SOULmoments platform over the next
year (see the case study on page 29
for more).
CAPABILITY
Developing the skills and knowledge
of our team members has been
a key focus over the last year. We
know how important team member
capability is to the organisation:
our highly capable and dedicated
team members deliver the customer
experience; help us gain market
share; drive innovation; develop
new products and experiences;
and remain critical to building
and maintaining our unique
organisational culture.
In 2017, we established the School
of Ultimate Learning and Leadership
(SOUL). This broad program of work is
a three-year strategy that will ensure
we attract, retain and develop our
talent. It will invest in our team by
growing their skills and knowledge,
and reward and recognise them for
living our values, passionate service
and performance. It will also include
targeted strategies that keep our
team members safe, encourage
diversity of thought and opinion, and
build pride in what we do and who
we are.
This program of work started with a
specific focus on the capability of
our senior leaders. We knew that our
senior leaders are the organisation’s
narrators of change and need to
drive our strategy. At the same time,
the execution of our organisation’s
strategy and the delivery of our
customer promise relies on our team
members’ expertise and knowledge.
That’s why, in 2017, SOUL started
rolling out a targeted senior
leadership development program. It
included three specific group-wide
learning experiences that focused
38 Super Retail Group Limited • Annual Report 2018
on commercial acumen across the
value chain, leading with customer-
focus, and what it means to be an
adaptive leader at Super Retail
Group.
The SOUL leadership development
program delivered more than 4,500
organisational training hours to
our senior leaders in 2018. Other
initiatives to promote and improve
leadership capabilities across the
Group include programs for high-
potential team members, inclusive
leadership sessions, and our women
in leadership program.
Our Learning and Development
commitment extends to our
Accredited Learning programs
where we partner with a Registered
Training Organisation that facilitates
training and conducts assessments
for a range of nationally-recognised
qualifications for retail team
members.
Over the last three years
approximately 15 per cent of trainees
who completed the program have
progressed into higher duty roles.
Of the trainees who completed the
Certificate III program and have
progressed into higher roles, over 60
per cent have been female team
members.
In the year ahead, we will continue
to prioritise investment in our team
by delivering more contemporary
learning to our team. This focus on
‘continuous learning’ will continue to
build leadership capability while also
building the knowledge and skills of
all our team members so they can
deliver our customer promise.
DIVERSITY AND INCLUSION (D&I)
At Super Retail Group we believe in
fostering an inclusive work culture
and maintaining an environment that
embraces the diversity of our people.
We believe that an ability to build
and maintain a talented and diverse
workforce is a key competitive
advantage and essential to our
organisation’s growth. We achieve
diversity by creating an inclusive
environment; a workplace where all
different kinds of people can thrive
and succeed by bringing their ‘whole
self’ to work.
We are firmly committed to ways of
working, policies and practices that
support D&I. Examples include an
improved parental leave offering
for both primary and secondary
carers launched in March 2018,
which provides better support for all
types of growing families: primary
and secondary carers, female
and male. We also launched the
Support for Victims of Domestic and
Family Violence Policy in November
2017 and offer flexible working
arrangements to support our team
members to pursue their leisure
passions and meet personal and
family needs.
GENDER DIVERSITY
In 2018, the Group achieved a higher
participation of women than ever
before, with a total team mix of
47 per cent women and 53 per cent
men. Pleasingly, overall levels of
women in leadership increased from
34 per cent in 2017 to 37.6 per cent in
2018 for key senior management roles
(Bands 1-3), with a rise of 4.3 per cent
(to 38.4 per cent) for management
roles (Band 1-4).
Female representation on our Board
remained consistent with the previous
year’s level of 43 per cent, while the
number of women within the Group
Executive Team is at 36.4 per cent.
We remain committed to 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 2020. Workplace diversity
continues to be fostered through
a monthly Achieving Women in
Leadership Targets forum, Divisional
Diversity committees and the Group’s
learning and development programs.
We encourage all team members
across the Group to be strong
advocates for D&I in the business and
retail sectors. 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 2018 Workplace
Gender Equality Agency (WGEA)
report is available via the WGEA
website: https://www.wgea.gov.au.
TEAM MEMBER SAFETY AND
WELLBEING
We are committed to providing a
healthy and safe work environment
for all our team members,
contractors, customers and visitors.
In 2018, the Group renewed its focus
on a holistic safety measure of Total
Recordable Injury Frequency Rate
(TRIFR). TRIFR describes a work-related
injury or illness which results in medical
treatment (including any attendance
at a medical facility, regardless
of treatment provided), restricted
duties and/or hours, lost time injury or
fatality. We are pleased to report that
TRIFR reduced 21.2 per cent this year
with a measure of 23.84 incidents per
million hours worked.
In 2018, our Lost Time Injury Frequency
Rate (LTIFR) was 6.4 per million
hours worked, down from 6.5 per
million hours worked in the previous
year. Our LTIFR result for the 2017
financial year was adjusted from
the previous report to reflect the
clarification of key definitions and
the ongoing maturation of our data
measurement.
There were no work-related fatalities
recorded during the reporting period.
The continued decrease in TRIFR and
LTIFR was supported by a whole-of-
business focus on safety leadership,
a more proactive approach to risk
management, and increasing team
member awareness and education.
Our focus in the year ahead is
on mental health support, with
a continued focus on safety
awareness and education for our
team members. We will enhance
proactive safety leadership and risk
management to provide a healthy
and safe work environment.
Super Retail Group Limited • Annual Report 2018 39
40 Super Retail Group Limited • Annual Report 2018
CORPORATE GOVERNANCE
Super Retail Group is committed to adopting and implementing rigorous
corporate governance policies and practices that protect and enhance the
long-term performance of the Group and to generate appropriate levels
of shareholder value and financial return, taking proper account of other
stakeholder interests.
The Group supports this commitment
through the transparent and
informative reporting of its
governance framework. The Group
has followed the recommendations
of the ASX Corporate Governance
Council’s Principles and
Recommendations (3rd Edition)
throughout the reporting period.
Further details are set out in the
Group’s Appendix 4G and Corporate
Governance Statement, authorised
for issue by the Directors on 20 August
2018, which are available on the
Australian Securities Exchange (ASX)
and the Group’s website at
www.superretailgroup.com/investors-
and-media/corporate-governance.
ACT ETHICALLY AND RESPONSIBLY
We recognise that long-term and
sustainable value creation is founded
on the trust that the Group has
earned from a broader range of
stakeholders and that the trust can
be lost or seriously damaged if the
Group, its Directors or team members
are perceived to have acted
unlawfully, unethically or irresponsibly.
This trust is an essential component of
our relationship with our customers,
supporting the realisation of our
mission to provide solutions and
engaging experiences that enable
our customers to make the most of
their leisure time.
GROUP VALUES
To preserve this trust, the Group is
committed to the development of a
culture that:
•
•
Promotes ethical and
responsible behaviour;
Engages and inspires its team
members to live their passions;
and
•
Underpins a successful customer
and team member centric retail
organisation.
Our culture is built around a set of
five values that define the type of
company that we aspire to be and
what is required of all Directors and
team members to achieve that
aspiration.
•
Passion: We create an
environment in which we share
our passion for what we do, and
our contributions and successes
are recognised.
• Openness: We are committed
to open and constructive
communication.
•
Integrity: We act with honesty
and we deliver on our
commitments.
• Care: We value our team, our
customers, our trade partners
and the communities in which
we operate.
• Discipline: We commit to the
plan, resource effectively and
follow the agreed processes
and standards.
For more information visit:
www.superretailgroup.com/about-
us/our-values.
CODE OF CONDUCT
Our customers, trade partners,
shareholders and the communities
in which we operate all have
expectations of how we behave as
a business. It’s important to protect
those relationships, our reputation
and the Group’s ability to continue
to be part of those communities.
Our reputation influences so many
aspects of our business including
how our team members, customers
and investors feel about Super Retail
Group.
The Group’s Code of Conduct
applies to all Directors and
team members and sets out the
responsibilities and standards of
behaviour that apply to daily
business activities and help our team
members to carry out our legal and
ethical obligations. It also provides
guidance as to how to conduct our
activities in a manner consistent with
the Group’s Values and achieving
our aim to provide a safe, fair and
equitable working environment
and to empower our teams to fulfil
their potential and achieve the
best outcomes for our customers
and shareholders.
The Code is supported by the
Group’s Whistleblowing Policy and
practices that encourages our
team members to raise concerns
about suspected unethical, illegal
or fraudulent activity and seeks
to safeguard those persons who
make a report in good faith to do so
without fear of disadvantage
or reprisal.
CONFLICTS OF INTEREST
Our conflicts of interest framework
comprises a number of components,
including our Anti-Corrupt Practices
Policy and various supporting
procedures and registers, including
in respect of the disclosure and
appropriate management of related
party transactions and the material
personal interests and other relevant
interests of Directors.
The framework seeks to encourage
all actual, perceived or potential
conflicts of interest are identified
and disclosed, and then avoided or
effectively managed, as appropriate.
In addition, our team members
may make disclosures directly to a
regulator at any time.
SECURITIES TRADING
Consistent with the legal prohibitions
Super Retail Group Limited • Annual Report 2018 41
on insider trading, our Securities
Trading Policy prohibits our Directors
and team members from dealing in
the Group’s securities at any time
while in possession of price sensitive
information not available to the
market.
The Policy prohibits Directors, Senior
Executives and other designated
team members from dealing in the
Group’s securities except during
specified trading windows and
only upon receipt of approval in
accordance with the Policy. There
are also prohibitions in respect of
margin lending, short-term trading,
short selling and the hedging of
economic risk of options or other
unvested entitlements.
BOARD COMPOSITION,
PERFORMANCE AND COMMITTEES
The Board’s role, as set out in the
Board Charter, includes responsibility
to set and to oversee the strategic
direction of the Group, to select
and appoint the CEO/Managing
Director and to oversee the overall
management, performance and
governance of the Group.
The Board delegates responsibility
for the day to day management of
the Group to the CEO/Managing
Director. The CEO/Managing Director
manages the Group in accordance
with the strategy, business plans and
delegations approved by the Board
and is accountable to the Board
for the exercise of the delegated
authority.
BOARD COMPOSITION
The Board is comprised of highly
experienced business leaders
who each meet the fundamental
requirements necessary to govern
an ASX listed company in the
retail industry.
Our Board utilises a board skills
matrix, together with the policy
and procedure for selection and
appointment of new Directors and
re-election of Directors when
reviewing Board succession plans,
including succession of the Chair, in
order to maintain an appropriate
balance of skills, knowledge,
experience, independence and
diversity on the Board.
INDEPENDENCE
A Director is considered to be
independent if they are free of
any interest or relationship that
might influence, or reasonably be
perceived to influence, in a material
respect their capacity to exercise
independent judgement on issues
before the Board and to act in the
best interests of the Group and its
shareholders generally.
It is the Board Policy that it shall
be composed of a majority of
Independent Non-Executive Directors
and that the Chair shall be an
Independent Non-Executive Director.
As at the date of this report, the
Board comprised six non-executive
directors (five of whom were
considered to be independent) and
the CEO/Managing Director.
BOARD COMMITTEES
Whilst retaining ultimate responsibility
for the affairs of the Group,
throughout the reporting period
and as at the date of this report, the
Board has established three standing
Board Committees to perform
certain functions and provide it with
recommendations and advice.
Each Committee has its own Charter
setting out its role and responsibilities,
composition, structure, membership
requirements and the manner
in which the Committee is to
AN OVERVIEW OF COMMITTEE
RESPONSIBILITIES:
NOMINATION
COMMITTEE
Board size and composition
Director recruitment and
re-election
Director induction and
ongoing development
Board and Committee
performance evaluation
AUDIT & RISK
COMMITTEE
Financial management
and reporting
Risk management and
internal control systems
External audit performance
and independence
Compliance systems
and disclosure
Corporate Governance
HUMAN RESOURCES &
REMUNERATION COMMITTEE
Human Resources strategy
Remuneration governance
and strategy
Development and
succession
Diversity strategy
Workplace Health & Safety
operate. All matters determined by
Committees are submitted to the full
Board as recommendations for Board
decision.
PERFORMANCE REVIEW
The Board undertakes an annual
performance evaluation of the
Board and its Committees. Matters
covered by the review include
the role, structure, procedures,
behaviours, performance, Directors’
understanding of the strategy,
objectives and key risks to the
business and achievement of those
objectives, succession planning and
the effectiveness of the Chair.
SHAREHOLDER ENGAGEMENT
The Group is committed to
maintaining high standards of
disclosure, providing shareholders
and the investment community
with the same access to full and
accurate information about its
activities in an accessible and timely
manner. Further, we are committed
to the provision of facilities to allow
shareholders to effectively exercise
their rights as owners.
SHAREHOLDER COMMUNICATION
The Group’s investor relations
program facilitates two-way
communication with investors and
fosters participation of shareholders in
shareholder meetings. The program
aims to allow investors and other
financial market participants to
gain a greater understanding of
the Group’s business, governance,
financial performance and prospects
and to provide an opportunity for the
Group to note their views on matters
of concern or interest to them.
PERIODIC AND CONTINUOUS
DISCLOSURE
The Group releases all material
information, including our Annual
Report, full-year and half-year
financial results, to the ASX in
compliance with our continuous
disclosure obligations under the ASX
Listing Rules and the Corporations Act
2001. Material information released to
the ASX is also made available on the
Group’s website.
Our Continuous Disclosure Policy
supports the Group’s compliance
with its disclosure obligations to make
timely and balanced disclosure
of all matters concerning it that a
reasonable person would expect to
have a material effect on the price
or value of its securities, in addition
to the Group’s periodic disclosure
obligations.
42 Super Retail Group Limited • Annual Report 2018
WE RECOGNISE
THAT LONG-
TERM AND
SUSTAINABLE
VALUE CREATION
IS FOUNDED ON
THE TRUST THAT
THE GROUP HAS
EARNED.
GENERAL MEETINGS
The Group conducts its general
meetings in accordance with its
constitution, the Corporations
Act and the Listing Rules. General
meetings are used to communicate
with shareholders and allow an
opportunity for informed shareholder
participation. Shareholders are
encouraged to attend and
participate fully at its general
meetings and shareholders will
have a reasonable opportunity to
ask questions or make comments
about each motion in the notice of
meeting, the annual report, and the
management of the Group.
Shareholders are, unless specifically
stated in a notice of meeting,
eligible to vote on all resolutions. If
shareholders are unable to attend
the Annual General Meeting they
are able to vote on the proposed
motions, by appointing a proxy or
using any other means included in
the notice of meeting. Online proxy
voting is available to shareholders.
The external auditor attends the
annual general meeting and is
available to answer questions about
the conduct of the audit and the
preparation and content of the
auditor’s report.
RISK MANAGEMENT
The Group recognises that risk is
characterised by both threat and
opportunity, and manages risk in
order to enhance opportunities. The
Group fosters a risk aware culture
in decision making through the
application of integrated risk analysis
and management.
RISK MANAGEMENT FRAMEWORK
The risk management framework
(RMF) is an essential component of
the Group’s corporate governance
framework and consideration of
strategic risks and the adequacy
of the RMF is integral to the
development of the Group’s strategy
and the decision-making process for
key business initiatives.
The Board reviews the RMF in
conjunction with the annual strategic
planning process and has regard for
the RMF in endorsing the Group’s
strategic direction and approving
the annual Operating and Financial
Review.
The Group’s RMF describes
our chosen approach to risk
management and is comprised of
three key components:
• A Board approved Risk Appetite
Statement, linked to strategic
and financial plans.
•
•
The Three Lines of Defence
Model outlining accountabilities
and governance arrangements
for risk management.
The Group’s risk management
policy, processes and strategy.
RISK APPETITE STATEMENT
The risk appetite statement defines
the type and degree of risk that our
Board is prepared to tolerate in order
to meet our strategic objectives and
the maximum level of risk for each risk
type within which we must operate.
THE THREE LINES OF DEFENCE MODEL
Within the Three Lines of Defence
Model:
•
•
•
The First line means the Functions
that own and manage risk.
The Second line means the
Functions that oversee or
specialise in risk management
and compliance.
The Third line means the Internal
Audit Function.
RISK MANAGEMENT STRATEGY
The risk management strategy
describes each material risk and our
approach to managing those risks,
including the applicable policies and
procedures.
There are a number of material
risks, including economic and
environmental, faced by the Group
that may have a material effect
on the Group’s financial prospects.
Those risks and an overview of the
Group’s mitigating actions are
described in the Directors’ Report,
Operating and Financial Review on
pages 52 to 53 of this Report.
In addition, further information
regarding economic and
environmental matters is available in
the Sustainability section on page 30
of this Report.
INTERNAL AUDIT
The role of Internal Audit as part of
the Group’s RMF is to understand the
key risks of the Group and to examine
and evaluate the adequacy and
effectiveness of the system of risk
management and internal controls
used by management. Internal
Audit carries out regular systematic
monitoring of control activities and
reports to both relevant business unit
management and the Audit and
Risk Committee.
Super Retail Group Limited • Annual Report 2018 43
44 Super Retail Group Limited • Annual Report 2018
2018
DIRECTORS’ AND
FINANCIAL REPORTS
Super Retail Group Limited • Annual Report 2018 45
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 30 June 2018.
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:
S A Pitkin
(Independent Non-Executive Chair) (appointed as Chair 23 October 2017)
P A Birtles
(Group Managing Director and Chief Executive Officer)
R A Rowe
(Non-Executive Director)
D J Eilert
(Independent Non-Executive)
L K Inman
(Independent Non-Executive)
H L Mowlem
(Independent Non-Executive)
P D Everingham
(Independent Non-Executive) (appointed 19 December 2017)
Former:
R J Wright
(Independent Non-Executive Chair) (retired 23 October 2017)
Details of the qualifications, experience and responsibilities of the Directors are on pages 34 to 35 of this annual report.
Special Responsibilities of Directors:
Director
Audit & Risk Committee
Nomination Committee
Human Resources &
Remuneration Committee
S A Pitkin(2)
P A Birtles
R A Rowe
D J Eilert
L K Inman(3)
H L Mowlem(4)
P D Everingham(5)
(cid:1)
n/a
n/a
(cid:1)
(cid:1)
(cid:1)(1)
n/a
(cid:1)(1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
n/a
n/a
(cid:1)
(cid:1)(1)
(cid:1)
n/a
(1) Denotes Chair of Committee.
(2) Appointed as Chair of Nomination Committee 23 October 2017
(3) Appointed as Chair of Human Resources & Remuneration Committee 23 October 2017
(4) Appointed as Chair of Audit & Risk Committee 23 October 2017
(5) Appointed 19 December 2017.
1.1
Directorships of listed companies held by members of the Board
Current directors:
Director
S A Pitkin
P A Birtles
Listed Company
Directorship
Key Dates
Super Retail Group
Limited
Star Entertainment
Group Limited
Link Administration
Holdings Limited
Former directorships:
IPH Limited
Billabong International
Limited
Super Retail Group
Limited
GWA Group Limited
Independent Non-Executive Chair
Independent Non-Executive Director
Independent Non-Executive Director
Current, appointed 23 October 2017
Appointed 01 July 2010
Current, appointed 31 July 2014
Independent Non-Executive Director
Current, appointed 23 September
2015
Independent Non-Executive Director
Independent Non-Executive Director
Group Managing Director and Chief
Executive Officer
Independent Non-Executive Director
Former, appointed 23 September
2014 and ceased 20 November 2017
Former, appointed 28 February 2012
and ceased 15 August 2016
Current, appointed 05 January 2006
Current, appointed 24 November
2010
Current, appointed 08 April 2004
R A Rowe
Super Retail Group
Limited
Non-Executive Director
46 Super Retail Group Limited • Annual Report 2018
DIRECTORS’ REPORT (continued)
1.
1.1
Directors (continued)
Directorships of listed companies held by members of the Board (continued)
Current directors:
Director
D J Eilert
L K Inman
H L Mowlem
P D Everingham
Former director:
Director
R J Wright
Listed Company
Directorship
Key Dates
Super Retail Group
Limited
Navitas Limited
Elders
Domain Holdings
Former directorships:
Veda Group Limited
Super Retail Group
Limited
Precinct Properties
New Zealand Limited
Former directorships:
Commonwealth Bank
of Australia
Bellamy’s Australia
Limited
Super Retail Group
Limited
Former directorships:
Billabong International
Limited
Super Retail Group
Limited
iCar Asia Limited
Independent Non-Executive Director
Current, appointed 21 October 2015
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Independent Non-Executive Director
Current appointed 28 July 2014
Current appointed 14 November 2017
Current appointed 16 November 2017
Former, appointed 4 October 2013
and delisted 26 February 2016
Current, appointed 21 October 2015
Independent Non-Executive Director
Current, appointed 28 October 2015
Non-Executive Director
Non-Executive Director
Former, appointed 16 March 2011 and
ceased 16 November 2017
Former, appointed 15 February 2015
and ceased 28 February 2017
Independent Non-Executive Director Current, appointed 13 June 2017
Independent Non-Executive Director
Independent Non-Executive Director
Former, appointed 24 October 2012
and delisted 26 April 2018
Current, appointed 19 December 2017
Independent Non-Executive Director
Current, appointed 1 July 2017
Listed Company
Directorship
Key Dates
Super Retail Group
Limited
Independent Non-Executive Chair
Independent Non-Executive Director
APA Ethane Limited
Chair and Non-Executive Director
Australian Pipeline
Limited
Independent Non-Executive Director
Former, appointed 28 October 2009
and ceased 23 October 2017
Former, appointed 19 May 2004 and
ceased 23 October 2017
Former, appointed 10 July 2008 and
ceased September 2016
Former, appointed 10 Feb 2000 and
ceased October 2015
1.2
Directors’ Meetings
The number of meetings of the Company’s Board of Directors and each Board Committee held during the period ended 30
June 2018 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
S A Pitkin
P A Birtles
R A Rowe
D J Eilert
L K Inman
H L Mowlem
P D Everingham
4
13
13
13
13
13
13
8
4
13
13
13
13
13
13
8
1
4
4
4
4
4
4
2
1
4
4
4
4
4
4
2
n/a
n/a
1
1
1
1
1
1
1
1
1
1
1
1
n/a
n/a
3
5
5
5
5
5
5
1
3
5
5
5
5
5
5
1
(1)Number of meetings held during the time the Director held office during the year.
Super Retail Group Limited • Annual Report 2018 47
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
S A Pitkin
P A Birtles
R A Rowe
D J Eilert
L K Inman
H L Mowlem
P D Everingham
2.
Company Secretary
Number of Ordinary Shares
Options over Ordinary Shares
39,153
1,392,596
59,925,001
8,500
22,175
10,000
10,000
-
-
-
-
-
-
-
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 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)
2018
$m
2,570.4
294.1
219.6
145.3
128.3
127.3
308.4
65.0
49.0
2017
$m
2,465.8
278.0
207.3
135.8
101.8
100.5
234.5
51.6
46.5
The Group has delivered another robust result for the financial year with a 7.0% increase in normalised net profit after tax. Profit
for the period increased by 26.7% and operating cash flows increased by 31.5%. The financial results reflect an improvement in
underlying divisional performance, the successful acquisition of Macpac and the benefits of working capital initiatives.
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 had 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 becoming less distinctive
over time. A decision was made and announced in July 2017 to operate a single brand strategy for Sports. During 2018, the
Group completed the program of converting all the Amart Sports stores to Rebel in line with the strategy to sustain the Group’s
position as the market leader in sports retailing.
The Group recognised after tax costs of $34.0 million in the 2017 financial period associated with the Sports business
transformation. A further $2.7 million of after tax restructuring costs have been incurred during the current reporting period
consistent with the announcement made to the market on 25 July 2017.
During the current year the Group acquired the Macpac group of companies as announced to the market on 20 February
2018. Following the acquisition of Macpac, the Group has completed the trial of the Rays business and will integrate its
profitable stores into the Macpac business in the fourth quarter of the coming financial year. Costs associated with the business
restructuring and integration incurred to date total $9.1 million after tax. Transaction costs to complete the acquisition of
Macpac total $3.9 million after tax.
48 Super Retail Group Limited • Annual Report 2018
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 $128.3 million compared to $101.8 million in the prior period. Normalised
NPAT was $145.3 million compared to $135.8 million in the prior period, an increase of 7.0%. 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
Macpac acquisition costs(1)
Business restructuring costs(1)
Prior year store set-up costs(1)
Autoguru net gain on divestment(2)
Impairment of Amart Sports and Goldcross Cycles brand names(1)
Normalised net profit after tax
Other items not included in normalised net profit comprise (refer note 4):
- Macpac acquisition costs
- Outdoor business restructuring
- Sports business restructuring
- Prior year store set-up costs
- Autoguru net gain on divestment
- Tax effect
Total other items not included in normalised net profit (after tax)
(1) Net of tax
(2) Net of tax and share of trading losses
2018
$m
127.3
1.0
128.3
3.9
11.8
6.0
(4.7)
-
145.3
4.0
13.0
3.9
8.6
(4.7)
(7.8)
17.0
2017
$m
100.5
1.3
101.8
-
7.8
-
-
26.2
135.8
-
-
48.5
-
-
(14.5)
34.0
Basic earnings per share (EPS) was 65.0 cents compared to 51.6 cents in the prior comparable period, an increase of 26.0%.
Total sales have increased 4.2% to $2,570.4 million on the prior comparative period. Included in the sales result for the first time is
$31.4 million of Macpac revenue for the period 1 April 2018 to 30 June 2018. The increase excluding Macpac was 3.0%
compared to the prior comparative period driven by new store sales and sound like for like growth in all divisions. Sales growth
was strongest in the on-line channel as customers shift to the omni-channel experience allowing them to shop online and
receive their purchases either in store or at the location of their choice.
The Group remains focused on increasing market share through growing the customer base, increasing customer lifetime value
and increasing customer share of wallet. To achieve this the Group continues to invest in omni-retailing capability through
investment in new stores, refurbishment of the store network and developing customer solutions and experiences in both the
physical and digital networks.
(b)
Division Results
Auto
Outdoor
Sports
Unallocated
Auto Retailing
Sales
EBITDA
EBIT
2018
$m
1,006.4
579.8
979.2
5.0
2,570.4
2017
$m
955.9
553.5
949.2
7.2
2,465.8
2018
$m
148.2
47.9
115.7
(17.7)
294.1
2017
$m
139.4
43.1
115.1
(19.6)
278.0
2018
$m
116.4
29.6
91.5
(17.9)
219.6
2017
$m
111.0
25.4
91.3
(20.4)
207.3
Divisional sales at $1,006.4 million were 5.3% higher than the prior comparative period, supported by new store growth and
strong like for like growth of 3.6%. Segment EBIT at $116.4 million was 4.9% higher than the prior comparative period.
The like for like sales growth of 3.6% was driven by increased average item value, increased average units per transaction and
an increase in transactions. Gross margins improvements were driven by ranging and sourcing benefits plus benefits from supply
chain efficiencies. Operating costs increased due to an investment in store services and solutions and digital initiatives to
improve customer experience and engagement.
All major categories were in growth in the financial period and increased gross margin performance. Strong growth was
achieved in Auto Accessories and Auto Maintenance, and pleasingly the Tools and Outdoors category was also in growth.
Sales growth was achieved in all Australian states. New Zealand also delivered strong growth.
Super Retail Group Limited • Annual Report 2018 49
DIRECTORS’ REPORT (continued)
3.
3.2
(b)
Operating and Financial Review (continued)
Review of Financial Condition (continued)
Division Results (continued)
Auto Retailing (continued)
The Supercheap Auto Club Plus membership increased during the year with 1.47 million active members. Sales attributable to
club members increased to 37% and customer lifetime value increased by 5.2%. Club customers continue to have a higher
average transaction value than non-club members.
The business opened five new Supercheap Auto Stores and closed two stores in the financial period. The store refurbishment
program completed 23 refurbishments, relocations and closures plus an additional 15 layout changes. The network of stores
total 275 stores in Australia and 44 stores in New Zealand at 30 June 2018, with store growth planned for the next 5 years.
Customer traffic to the Supercheap Auto website grew significantly in the financial period combined with an improvement in
on-line conversion, resulting in on-line sales growing 85%. This represents an increase of over 80% over the last two financial
periods to now represent just under 5% of total sales. Supercheap Auto has extended its on-line offering by introducing market
leading click and collect performance as low as 30 minutes. During the period the business prepared to transition from the
legacy website to a new platform which went live on the 14 August 2018.
On the 21 August 2017, the Group announced a partnership with Bosch to establish a new business, Autocrew, to provide car
servicing within the Australian market place. The first site in Narellan, western Sydney, has opened on the 18 June 2018 with a
further 3 sites expected to open in the next financial year.
Outdoor Retailing
Divisional sales of $579.8 million were 4.8% higher than the prior comparative period. Included in the sales result for the first time
was $31.4 million of Macpac revenue for the period 1 April 2018 to 30 June 2018. Sales excluding Macpac decreased by 0.9%
compared to the prior comparative period due to the reduced size of the Rays business which delivered $50.1 million of sales, a
reduction of $23.0 million on the prior comparative period.
Segment EBIT at $29.6 million was an increase on the prior comparative period of 16.5% due to the inclusion of $7.8 million of
Macpac EBIT. The divisional EBIT excluding Macpac declined by $3.6 million.
BCF sales of $498.3 million increased 3.7% on the prior comparative period. Sales growth was delivered through new stores and
like for like growth of 1.1%. Sales growth was driven by an increase in average transaction value and transactions.
Key categories of Camping, Fishing and Apparel were in growth for the financial period and Boating declined due to the
reduction in range and store space allocated to it. Victoria, Tasmania and New South Wales were in growth. The most
challenging state was Western Australia followed by Queensland which experienced increased competitive intensity and
unfavourable weather conditions.
BCF gross margins declined slightly due to the increased competitive environment driving a higher mix of promotional sales.
Operating cost increases at a store level were partially mitigated by lower support costs, however at a margin level, cost
leverage declined due to the lower like for like sales delivery. Overall, operating margin declined from 6.5% to 5.5%.
BCF opened two new stores and closed three stores in the period. As at 30 June 2018, BCF had 134 stores. All stores were
‘relayed’ in the first half of the year to reduce space allocation to Boating and increase space allocation to Apparel and
Camping.
The BCF club loyalty program continued to grow in the financial year with active club members totalling 1.36 million. BCF Club
members’ sales represent 79% of total sales and club members have significantly higher average transaction value than non-
club members.
BCF has continued to invest in developing omni-retailing capability including improving click and collect delivery to within two
hours and launching a new web platform in April 2018. We have seen a significant increase in on-line traffic and conversion to
support an increase in online sales of 76% above the prior comparative period. Total on-line sales now represent 6% of total
sales.
Macpac was effectively acquired on 31 March 2018. The period from 1 April 2018 to 30 June 2018 is one of its busiest quarters
representing one third of sales for the year ended 30 June 2018. The business has traded well with sales of $31.4 million 17.7%
higher than the same period last year. Sales growth was supported by new stores, like for like growth of 4.4% in New Zealand
and 6.2% in Australia and webstore growth of 52%. Underlying gross margins increased and operating expenses increased
resulting in no net improvement on operating margin. Operating expenses for the current reported period are higher due to
elevated sales activity in the quarter. Macpac has 54 stores as at 30 June 2018.
50 Super Retail Group Limited • Annual Report 2018
DIRECTORS’ REPORT (continued)
3.
3.2
(b)
Operating and Financial Review (continued)
Review of Financial Condition (continued)
Division Results (continued)
Outdoor Retailing (continued)
The Rays trial was operating during the financial reporting period and has now been completed. At balance date there are
nine Rays stores which have traded well through the year and will be transitioned to Macpac in the fourth quarter of the next
financial year. The Rays business delivered sales of $50.1 million and contributed an EBIT loss of $5.5 million in the financial
reporting period. The loss was in line with the prior comparative period loss.
Sports Retailing
Divisional sales at $979.2 million were 3.2% higher than the prior comparable period supported by new stores and like for like
sales growth of 2.0%. Segment EBIT at $91.5 million was 0.2% higher the prior comparative period.
On the 25 July 2017, the Group announced a decision to convert the Amart Sports stores to Rebel bringing a single national
brand under Rebel which was completed by the end of October 2017. The division converted 68 Amart Sports stores to Rebel
stores within 68 days. This resulted in some business disruption through the key Christmas trading period through to the end of
the financial year when the range for all stores was able to be aligned.
The sound sales growth in the financial period has been supported by increased transaction growth offset by lower average
transaction value attributable to increased promotional activation to support the brand transition undertaken in the year.
The key categories of clothing and footwear delivered strong growth in the financial period offset by a small decline in hard
goods and cycling which has been significantly reduced as a result of the Amart Sports integration.
Rebel has continued to invest in developing omni-retailing capability in the year including launching click and collect in
October 2017. Click and collect sales for the financial period represent 25% of total on-line sales. In the financial period website
visits have increased 36%, conversion has increased by a third and on-line sales have increased by 152% to represent 8% of total
sales. In the financial period Rebel invested in a new web platform which went live in July 2018.
The Rebel Active club program continued to grow this financial period with active club members totalling 2.47 million. Sales to
club members represent 61% of total sales.
As a result of the Amart Sports integration to Rebel the RebelFit stores were closed and the RebelFit brand has been brought
within the store platform to showcase the fitness category. In the financial period the business has opened three stores and
closed eight stores. The total store network at 30 June 2018 was 159 stores.
Infinite Retail operated consistently with the prior reported period delivering a break even result.
Group Costs
Group costs for the period were $17.9 million, down 12.3% compared to the prior period. The Group costs include Corporate
costs of $10.4 million, $3.1 million of un-allocated distribution centre costs, $4.1 million of omni-retail development costs and
digital investment of $0.3 million.
(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
Other financial assets
Derivatives
Provisions
Deferred taxes
NET ASSETS
2018
$m
23.8
545.5
(391.4)
(9.6)
168.3
15.2
(438.1)
(422.9)
270.4
891.6
9.3
5.3
(92.7)
(30.1)
799.2
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
Super Retail Group Limited • Annual Report 2018 51
DIRECTORS’ REPORT (continued)
3.
3.2
(c)
Operating and Financial Review (continued)
Review of Financial Condition (continued)
Financial Position and Cash Flow (continued)
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
308.4
(241.2)
(71.8)
(4.6)
19.9
(0.1)
15.2
234.5
(101.2)
(129.0)
4.3
15.6
-
19.9
Net assets for the Group increased $44.6 million as a result of strong profitability and the acquisition of Macpac.
Group Net Debt was $422.9 million, which was a $42.2 million net increase on 2017, impacted by additional amounts borrowed
to fund the acquisition of Macpac. The Group remains comfortably within its banking covenants.
Cash flow from operations of $308.4 million was $73.9 million higher than the prior year. This is due to both higher sales and
working capital initiatives.
Group capital expenditure cash flow was $107.1 million which included $46.6 million in new and refurbished store fit out, and
$60.5 million in building omni-retail capabilities (new web platform, data and cyber), inventory management projects and other
information technology projects.
(d)
Dividends
Super Retail Group has declared a 27.5 cents per share fully franked final dividend for 2018. This will result in a full year dividend
of 49.0 cents per share fully franked, an increase of 5.4% over the prior year. This represents a dividend payout ratio of 65.4% of
underlying NPAT.
(e)
Material Business Risks
The Group recognises that all of its businesses operate in an environment of change and uncertainty and is committed to
managing the potential risks associated with this uncertainty in a continuous, proactive and systematic way. The Group
regularly reviews the possible impact of these risks and seeks to minimise this impact through a commitment to its corporate
governance principles and its 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 intensity - The growth and intensity of competition in the increasingly globalised retail market continues to
impact the Group. By focussing on our Customer Promise, notably Inspiration, Experience and Solutions, the Group will
continue to build an emotional connection with the customer that will differentiate each Brand in market. The Group sees
the risk increasing in the future as competitors continue to enter the market.
Customer expectations - Customer expectations have changed significantly over the last few years and will continue to
do so in the future. The Group recognises significant changes to consumer behaviour and the way in which consumers
want to be engaged and this will require the Group to ‘earn the right’ to meet a customer’s 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 an established Customer Promise across all Brands with a focus on inspiration, experience and solutions. 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.
Omni-retail transformation - Traditional retail business models are being disrupted and the cost of doing business is
increasing. The Group Operating Model and the strategic investment must support the required capability uplift and
project delivery. The Group expects the risk to continue to develop in the short and medium term, aligned to changes in
the retail market.
Supply chain and inventory agility for omni-retail - Supply Chain and inventory agility are critical requirements of a world
class omni-retailer in order to meet evolving customer expectations. The Group has made substantial investments in an
updated supply chain network and supporting information systems to improve agility and meet changing customer
expectations. The Group continues to pursue opportunities to reduce the cost of the supply chain and capital employed
through improved delivery models with its major trade partners including the development of mutual business
opportunities. Risks associated with the supply chain and inventory management remain constant in the current retailing
environment, and increased flexibility is key to future success.
Compliance - The Group is required to maintain compliance with all applicable regulations, including product, ethical
sourcing and product transport regulations. Where the Group is found to be non-compliant with regulations, the Group
would be exposed to financial and non-financial penalties. The Group has in place compliance programs to mitigate the
associated risks and a Compliance Team to provide oversight.
52 Super Retail Group Limited • Annual Report 2018
DIRECTORS’ REPORT (continued)
3.
3.2
(e)
•
•
•
•
Operating and Financial Review (continued)
Review of Financial Condition (continued)
Material Business Risks (continued)
Cyber and information security - The digital economy and associated 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 provide protection against deliberate exploitation of computer systems, technology-dependent enterprises
and networks by internal and external parties. Cyber security is an evolving and significant risk to all retailers and the
Group will need to maintain ongoing vigilance and adopt appropriate responses (technological / physical / other) to
protect its information assets. 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 proactive management.
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 and support our transition to
becoming an omni-retailer. 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.
Breach of industrial practices - The Group, like all retailers is exposed to industrial relations risk that can impact the
reputation and financial performance of the business. There are dedicated programs of work in place to mitigate these
risks.
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.
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:
2017 final fully franked dividend
2018 interim fully franked dividend
Declared after end of year:
2018 final fully franked dividend
3.4
Significant Changes in the State of Affairs
Cents per share
Total amount
$m
Payment date
25.0
21.5
49.3
42.4
6 October 2017
3 April 2018
27.5
54.2
2 October 2018
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
Since 30 June 2018 Super Retail Group limited does not have any matters subsequent to the end of the financial year to be
disclosed.
3.6
Likely Developments and Future Prospects
Information on likely developments in the operations of the Group is set out in this report under the section Review of Financial
Condition. Further information on the expected results of operations has not been included in this 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 30 June 2018.
Super Retail Group Limited • Annual Report 2018 53
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited
The Directors of Super Retail Group present this Remuneration Report for the period ended 30 June 2018. The Remuneration
Report outlines the Group’s remuneration philosophy and practices, explains how the Group’s 2018 performance has driven
executive remuneration outcomes, and provides the details of specific remuneration arrangements that apply to Key
Management Personnel (executive 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
Executive KMP Remuneration Structure
Non-Executive Directors Remuneration Structure
Relationship of Remuneration to Group Performance
Remuneration Outcomes for 2018
Remuneration Changes for 2019
Service Agreements
Period of Restraint
Additional Information
Section 1: Remuneration Governance
1.1
Role of the Human Resources and Remuneration Committee
The Human Resources and Remuneration Committee (the Committee) has the delegated responsibility from the Board to
review and make recommendations to the Board in relation to the overall human resources and remuneration practices of the
Company. This includes, but is not limited to, supporting and advising the Board in relation to the Company's human resources
strategy including human resource policies; remuneration policies; health and safety; talent management; and otherwise
assisting the Board to comply with legal and statutory requirements in respect of human resources and remuneration matters.
Without limiting its role, the remuneration responsibilities of the Committee include the following:
Remuneration Policy
a)
b)
c)
•
Reviewing and making recommendations to the Board regarding the Company’s remuneration policy objectives.
Subject to amendment, the Committee shall have regard to the following policy objectives:
•
•
•
To align remuneration policy with the achievement of Company strategy and objectives;
To attract, retain and motivate skilled Directors and Management;
To provide an equitable remuneration framework, providing a reasonable balance between fixed, short-term and
long-term remuneration components;
To align remuneration to individual and Company performance, including incentive programs that are challenging
and are linked to the creation of value for Shareholders;
To align remuneration to Company values; and
To align remuneration with prudent risk taking and the Company’s long term financial soundness.
•
•
Reviewing and making recommendations to the Board regarding the Company’s remuneration policy including but not
limited to, in respect of:
•
•
•
Alignment of the Company’s remuneration framework with the Company's business strategy and objectives;
The remuneration framework, including alignment with industry standards and trends in remuneration policy;
The structure of short-term and long-term incentive plans, including equity plans, performance targets, and an
assessment of the effectiveness of rewarding the achievement of Company and individual objectives;
Performance based remuneration and the reduction, cancellation, or claw-back of performance based
remuneration in the event of serious misconduct or material misstatement in the financial statements;
The broad level and nature of participation by senior executives and other management in incentive plans, including
equity plans;
The administration of an equity plan, including amendments to terms of existing equity plans and/or any trust deed
applying in relation to an equity plan; and
•
•
•
• Compliance with legislative and regulatory requirements.
Chief Executive Officer and Executive Director Remuneration
a)
Reviewing and making recommendations to the Board regarding the remuneration arrangements and terms of
appointment for the Chief Executive Officer [CEO], including contract term, annual remuneration adjustments and
participation in the Company’s short-term and long-term incentive plans.
Reviewing and making recommendations to the Board regarding the objectives and performance assessments of the
CEO, including development plans.
b)
c) Advising the legal and regulatory requirements, including any shareholder approvals which are necessary to obtain in
respect of Executive Director remuneration.
54 Super Retail Group Limited • Annual Report 2018
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
Senior Executive Remuneration
a)
Reviewing and making recommendations to the Board, having regard to the CEO’s recommendations, regarding the
remuneration arrangements and terms of appointment for senior executives, including contract term, annual
remuneration adjustments and participation in the Company’s short-term and long-term incentive plans.
Reviewing and making recommendations to the Board regarding the objectives and performance assessments of senior
executives, including development plans.
b)
Non-Executive Directors Remuneration
a)
Reviewing and making recommendations to the Board on remuneration of Non-Executive Directors of the Company,
including but not limited to Director fees, Committee fees, travel and other expense reimbursement, and other benefits.
b) Advising the legal and regulatory requirements, including any shareholder approvals which are necessary to obtain in
respect of non-executive Director remuneration.
Disclosure and Reporting
a)
The Remuneration Report for inclusion in the annual Directors’ Report;
Reviewing and making recommendations to the Board in relation to disclosures applicable to the Committee’s Charter,
processes and activities during each reporting period, including but not limited to in respect of:
•
• Diversity reporting, including as required under ASX Listing Rules and the Workplace Gender Equality Act; and
•
The existence and terms of any scheme for retirement benefits (other than statutory superannuation) for Non-
Executive Directors.
b)
Review and facilitate shareholder engagement in relation to the Company’s remuneration policies and practices.
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. The membership of the Committee is noted in section 1 of the Directors’ report, as is
the number of meetings and individual attendance during the period ended 30 June 2018.
1.2
Involvement of Independent Advisors
The 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 2018, external advice was received from Ernst & Young related to market remuneration
benchmarking, and market remuneration practices for remuneration structures.
No remuneration recommendations as defined by the Corporations Act 2001 were provided.
1.3
Remuneration Report approval at 2017 Annual General Meeting (AGM)
The Remuneration Report for the 2017 financial year received positive shareholder support at the 2017 AGM, with 98.57% of
votes in favour of the resolution.
1.4
Gender Pay Equity
The Group is committed to remunerating all employees fairly and equitably. The Group conducts annual gender pay equity
reviews that are presented to the Committee. No significant gaps were identified at the point of last review.
Section 2: Key Management Personnel (KMP)
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.
2.1
Non-Executive Directors
Current:
S A Pitkin
R A Rowe
D J Eilert
L K Inman
H L Mowlem
P D Everingham
Former:
R J Wright
Chair and Independent Non-Executive Director (appointed as Chair 23 October 2017)
Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director (appointed 19 December 2017)
Chair and Independent Non-Executive Director (retired 23 October 2017)
Super Retail Group Limited • Annual Report 2018 55
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
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
A M Heraghty Managing Director – Outdoor Division
C D Wilesmith Managing Director – Auto Division
Chief Financial Officer
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;
To provide equitable, fair and consistent pay arrangements across the Group through a systematic methodology involving
job value and market positioning;
To align remuneration to Company values; and
To align remuneration with prudent risk taking and the Company’s long term financial soundness.
•
•
•
•
•
•
•
•
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 2018 financial year, remuneration benchmarking for all executive KMP was sourced from Ernst & Young (EY)
Remuneration Consultants. The Board referenced two sets of comparator groups to benchmark remuneration, being:
•
Market Capitalisation comparator group: S&P/ASX 200 companies within 50% to 150% of Super Retail Group’s 12 month
average market capitalisation; and
Market Capitalisation and GICS comparator group: S&P/ASX 200 companies within the ‘Consumer Discretionary Sector’
Global Industry Classification Standard (GICS).
•
The intent for the 2018 financial year was to use S&P/ASX 200 companies within 50% to 150% of Super Retail Group’s 12 month
average market capitalisation as one of two referenced sets of comparator groups. However, due to sample size returning
insufficient data, EY’s assessment of the comparator groups showed that the market capitalisation (50% - 200%) comparator
group included a broader set of companies which aids ongoing remuneration management and provides balance in the peer
group (between companies with larger, and those with lower, market capitalisation). For this reason, the market capitalisation
(50% - 200%) comparator group was also referenced during the 2018 financial year.
56 Super Retail Group Limited • Annual Report 2018
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
Section 4: Executive KMP Remuneration Structure
The executive KMP remuneration structure is reviewed annually by the 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, 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, divisional EBIT,
working capital efficiency
and individual performance
targets relevant to the
specific position.
Cash only with no deferral.
Performance incentive is
directed to achieving Board
approved targets, in support
of the execution of the
Group’s strategy during the
performance period.
Combined, base salary
package and STI is intended
to be positioned within the
3rd quartile of 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
conditions for 3 to 5 years
from grant date. The equity
is at risk until vesting.
Performance is tested once
at the vesting date (3 years
after the grant date).
LTI is intended to reward
executive KMP for
sustainable long-term
growth aligned to
shareholders interests.
Combined, base salary
package, STI and LTI is
intended to be positioned
within the 3rd quartile of
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 third 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.
The diagrams below (Figure 1) show the remuneration based on the base salary package (as at July 2017), and the incentives
payable assuming maximum STI is received and full vesting of the LTI plan. It shows 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.
Super Retail Group Limited • Annual Report 2018 57
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
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 targets the median market base salary package
for a comparable role in a similarly sized S&P/ASX 200 company. 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)
Short Term Incentive (STI)
Consistent with the prior year, the 2018 STI scheme (the Scheme) for all executive KMP is based on a balanced scorecard. The
Committee governs the design of the STI scheme, KPI and target setting, and holds discretion over the outcomes.
The Scheme is designed to ensure executive KMP performance is directed towards Board approved targets, in support of the
execution of the Group’s strategy. Taking a balanced scorecard approach allows executive KMP performance to be assessed
in a holistic way for four key drivers of performance, namely:
•
•
•
•
Financial (50%)
Strategy / Business Improvement (20% - 30%)
Customer (10% - 15%)
People (10% - 15%)
The significant weighting of financial outcomes with a minimum of 50% maintains a strong link between actual financial
performance and incentive paid. 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.
(i)
Performance-based ‘At Risk’ Remuneration and Evaluating the Performance of executive KMPs in 2018
Variable or ‘at-risk’ remuneration forms a significant portion of the executive KMP remuneration opportunity. The purpose of
variable remuneration is to focus executives on the execution of the Group’s strategy. The key aspects are summarised in the
scheme construct shown in Table 2 below:
Table 2:
Plan
Participation
Purpose
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.
58 Super Retail Group Limited • Annual Report 2018
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
Performance Period
Financial Gateway
Performance Targets
The performance period is for 12 months ending 30 June 2018.
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.
The achievement of individual KPI targets (independent of profit performance) shall
determine the proportion of the potential bonus entitlement that will be granted.
For 2018 financial year, the following performance goals and weightings were selected. 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%
• Net Profit Before Tax (PBT)
• Working Capital Efficiency
• Implement new operating model
• Sports transformation
• Leisure transformation, including Macpac
acquisition
• Net Promotor Score (NPS)
• Total Recordable Injury Frequency Rate
People
10-15%
(TRIFR)
• Employee Engagement
2018 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 the prior year performance
thereby maintaining a key principle of year on year improvement.
The 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. By way of illustration, the Board may take into consideration the executive
KMP’s alignment to Company values, prudent risk taking and the Company’s long term
financial soundness.
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.
(ii)
Company and Divisional Performance Measures
In designing the measures relating to the financial performance of the Group, three core drivers are considered – sustainable
growth, profitability and operating efficiency. Net profit, earnings growth and working capital efficiency are determined to be
the most appropriate and therefore all or a combination of them, 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 financial metrics and contain an objective on Group financial performance.
Divisional EBIT is also included in the financial measures of scorecards for the Managing Directors of each Division.
An important consideration in the Business Improvement category is 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 30 June 2018, the normalised profit before tax target was set at $206.6 million, 8.4% higher than the normalised
profit before tax achieved in the period to 1 July 2017 of $190.5 million. The financial gateway for STI awards of $185.9 million
was exceeded and, as per scheme rules, executive KMP scorecards were activated. The profit before tax contribution of
Macpac to the 30 June 2018 result has been excluded from the assessment of the achievement of this target. The Divisional
profit is measured by segment EBIT performance against budget. In the year to 30 June 2018, the Auto Division achieved its EBIT
budget, while the Outdoor and Sports Divisions did not achieve budgeted EBIT.
Super Retail Group Limited • Annual Report 2018 59
DIRECTORS’ REPORT (continued)
4.
(iii)
Remuneration Report – Audited (continued)
Executive Performance Objectives and Outcomes for 2018 including Board Discretionary Override
Set out below are the individual KPIs and 2018 achievement for each of the executive KMP. These outcomes will be moderated
because of the mistake the Company has made in its approach to store set-up projects. Accountability for this significant
mistake should be reflected in remuneration outcomes for the 2018 financial year. The Group Managing Director and Chief
Executive Officer has recommended, and the Board has accepted the recommendation, that the Group Managing Director
and Chief Executive Officer receive no STI payment for the 2018 financial year, and the other executive KMP have their STI
payments reduced by 25%.
The Board has reviewed the impact of the mistake on STI and LTI arrangements over the prior seven years and has determined
that the mistake will not have altered STI payments or LTI vesting made to KMP over those years.
The individual KPIs and 2018 achievement as determined by the Board for the Group Managing Director and Chief Executive
Officer were as per Table 3 below:
Table 3:
Measure
Description of
Measure
Weighting
Actual Performance Range
Commentary on Performance
T
h
r
e
s
h
o
d
l
l
B
e
o
w
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
1.
Financial Measures:
Net Profit Before
Tax (PBT)
35%
(cid:1)
Financial
Working Capital
Efficiency
15%
(cid:1)
Implement new
operating model
Business
Improvement
AMART re-
branding
20%
Leisure
transformation
2. Non-Financial Measures:
Customer
People
Customer
Centricity - Net
Promotor Score
(NPS)
Omni Retail
Customer Offer
Total Recordable
Injury Frequency
Rate (TRIFR)
Level of Employee
Engagement
15%
15%
(cid:1)
In 2018, the Group’s normalised profit
before tax outcome, excluding the
impact of Macpac, was $194.1m
Although this represented a 1.9% year-on-
year performance improvement, the result
was below target
This is a good result for the Group
representing a 12.5% improvement in
average net inventory (excluding
Macpac) due to strong inventory
management execution in Auto and
Outdoor offset by a softer performance
from the Sports division
Board endorsed operating model,
implementation captured in budgets for
2019
Rebranding of all Amart stores within the
agreed timeframe (before 1st November)
and within the approved capex budget
Board endorsed value creation strategy
for Rays transformation, Macpac
acquisition delivered
NPS result represents a significant
improvement of 8.2% year-on-year
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
Board endorsed business case for omni-
retail customer experience, deliver project
and commercial milestones per plan
(cid:1)
TRIFR result represents a significant
improvement of 21.2% year-on-year
Engagement levels marginally declined
year-on-year, but maintains top quartile
engagement performance for Australian /
New Zealand companies
The overall outcome for the Group Managing Director and Chief Executive Officer was assessed by the Board to be a
performance level of 62%, driven by outperformance in the Business Improvement, Customer, and Safety measures and
impacted by underperformance in PBT and the stable result in the Employee Engagement score. As a point of calibration, in
the 2018 financial year, the Group’s normalised profit before tax outcome, excluding the impact of Macpac, was $194.1 million.
Although this result represented a 1.9% year-on-year performance improvement, it was below the target by 6.1%.
A scorecard outcome of 62% is a below target ($1,000,000) outcome which would have resulted in a payment of $620,000. As
explained above no STI payment will be made to the Group Managing Director and Chief Executive Officer for the 2018
financial year.
60 Super Retail Group Limited • Annual Report 2018
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
The individual KPIs and 2018 achievement as determined by the Board for the other executive KMP were as per Table 4 below:
Table 4:
Name
Company Measures
Financial (50%)
Business Improvement
(20%)
Customer (15%)
People (15%)
STI Total %
D J Burns
Threshold to Target
Target to Stretch
Target to Stretch
Target to Stretch
E A Berchtold
Below Threshold
Target to Stretch
Target to Stretch
Threshold to Target
A M Heraghty
Threshold to target
Target to Stretch
Target to Stretch
Target to Stretch
C D Wilesmith
Threshold to Target
Threshold to Target
Target to Stretch
Target to Stretch
75%
58%
88%
66%
As explained above the other executive KMP have had their STI reduced by 25%. These outcomes are reflected in Table 9 and
Figure 4.
In considering the 2018 achievements for the other executive KMP and STI outcomes, the following is noted:
•
Position to Market – As a result of the 25% reduction, the collective outcomes will position the executive KMP (excluding
the Group Managing Director and Chief Executive Officer) at between the first quartile and the median for awarded STI
(market capitalization comparator group).
In the 2018 financial year no portion of the STI award was deferred into equity, because of 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; and
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.
However, the Committee is reviewing whether a deferral of a portion of STI into equity may be appropriate in the future.
(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 5 below:
Table 5:
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 normalised 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 package. 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 2018 awards, this is the three year period from 1 July 2018 to 30 June 2021.
Super Retail Group Limited • Annual Report 2018 61
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 within the Employee Performance Rights Plan to meet
good governance practice. The plan document 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.
62 Super Retail Group Limited • Annual Report 2018
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
The 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 are not eligible for termination payments or to receive retirement benefits other than
superannuation on resignation or retirement from the Board.
Non-Executive Directors’ Fees are determined within an aggregate Directors’ fee pool approved by shareholders. The 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 2019 financial year.
(a)
Directors’ Fees
The fees paid to Non-Executive Directors are set out in Table 6 below and are annual fees, inclusive of superannuation, unless
otherwise stated.
Table 6:
Annual Fees
Chair(1)
Members
Board
$313,650
$141,143
Audit and Risk Committee(2)
Human Resources and
Remuneration Committee(2)
$25,000
$10,000
$25,000
$10,000
(1) Committee fees are not paid to the Chair.
(2) Committee fees are not paid to members of the Nomination Committee.
Section 6: Relationship of Remuneration to Group Performance
The STI scheme operates to create a clear link between executive remuneration and the Group’s annual performance,
motivating and rewarding the Managing Director and Chief Executive Officer and executive KMP for performance during the
year.
The performance of the Group and remuneration paid to executive KMP over the last 6 years is summarised in Table 7 below:
Table 7:
Financial performance
2013
2014
2015(1)
Sales ($m)
2,020.0
2,112.1
2,238.7
2017
2018
CAGR(3)
2016(2)
2,422.2
155.9
10.7
2,465.8
2,570.4
190.5
13.0
201.9
13.1
158.6
11.3
148.6
10.6
55.1
40.0
8.46
54.0
40.0
9.40
55.1
41.5
8.77
68.9
46.5
8.20
73.7
49.0
8.10
(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 8:
Remuneration Expense of Directors and Executive Key Management Personnel
2013
$m
3.9
Base Salary Package
2015
$m
4.9
2014
$m
4.8
2016(1)
$m
5.4
Short Term Incentive
Long Term Incentive
Total
1.5
1.5
6.9
0.4
0.4
5.6
0.4
0.1
5.4
0.8
0.5
6.7
2017(2)
$m
5.1
2.1
1.1
8.3
2018
$m
5.2
0.8
0.5
6.5
(1) 2016 is a 53 week reporting period compared to 52 weeks for the other 5 years and excludes “Other” remuneration.
(2) During 2017 the number of executive KMP decreased from 6 to 5 which impacts year on year comparisons.
Since 2013 normalised earnings per share have increased by 26.9% and dividends per share have increased by 28.9%.
During the same period, total remuneration paid to executive KMP has decreased by 5.8%. The amount of total remuneration is
significantly impacted by the value of incentive payments which have varied over the years in line with Group performance.
Total remuneration paid to executive KMP as a proportion of normalised profit before tax was 4.2% in 2013 and has decreased
to 3.2% in 2018.
Super Retail Group Limited • Annual Report 2018 63
Normalised Profit before tax
($m)
Normalised Post Tax ROC (%)
Shareholder value created
Normalised Earnings Per
Share(¢)
Dividends Per Share (¢)
Closing June Share Price ($)
163.0
12.6
58.1
38.0
11.97
5%
4%
5%
5%
(8%)
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
Executive KMP STI paid compared to EPS over the last 6 financial years:
Figure 2:
Executive KMP LTI expense compared to EPS over the last 6 financial years:
Figure 3:
64 Super Retail Group Limited • Annual Report 2018
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
Section 7: Remuneration Outcomes for 2018
Details of the remuneration of the Directors and executive KMP of the Group are set out in Table 9 below:
Table 9:
2018
Name
Short-term Benefits
Post-
employment
Share-based
Cash
salary
and fees
$
Cash
bonus
$
Non-
monetary
benefits
$
Super-
annuation
$
Performance
Rights
$
Other (1)
Total
$
$
Non-Executive
S A Pitkin(2)
R A Rowe
D J Eilert
L K Inman(3)
H L Mowlem(4)
P D Everingham(5)
R J Wright(6)
Subtotal
Executive Director
P A Birtles
Other executive KMP
D J Burns
E A Berchtold(7)
A M Heraghty
C D Wilesmith
Subtotal
Total
252,928
118,761
147,162
176,143
156,944
68,911
97,867
1,018,716
1,230,911
637,851
629,072
738,343
631,951
3,868,128
4,886,844
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
18,857
22,382
13,980
-
14,910
6,547
7,337
84,013
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
271,785
141,143
161,142
176,143
171,854
75,458
105,204
1,102,729
3,640
20,049
241,391
7,789.
1,503,780
168,750
195,750
254,100
222,750
841,350
841,350
-
4,154
11,608
48,000
67,402
67,402
20,049
20,049
20,049
20,049
100,245
184,258
65,598
76,400
83,716
76,044
543,149
543,149
4,077.
(21,740).
43,687.
(7,019)
26,794.
26,794.
896,325
903,685
1,151,503
991,775
5,447,068
6,549,797
2017
Name
Short-term Benefits
Post-
employment
Share-based
Cash
salary
and fees
$
Cash
bonus
$
Non-
monetary
benefits
$
Super-
annuation
$
Performance
Rights
$
Other (1)
Total
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
15,042
34,301
13,740
-
693
19,616
5,014
88,406
158,333
104,074
144,635
168,657
7,296
287,884
52,778
923,657
Non-Executive
S A Pitkin
R A Rowe
D J Eilert
L K Inman(3)
H L Mowlem(4)
R J Wright
R J Skippen(8)
Subtotal
Executive Director
P A Birtles
Other executive KMP
625,384
D J Burns
635,384
E A Berchtold
648,351
A M Heraghty
612,384
C D Wilesmith
28,886
G G Carroll(9)
3,757,133
Subtotal
Total
4,680,790
(1) Includes accruals for annual leave and long service leave entitlements.
(2) S A Pitkin commenced as Board Chair on 23 October 2017.
(3) L K Inman commenced as Chair of the Audit & Risk Committee from 24 October 2016, ceased as Chair on 23 October 2017, and subsequently
173,375
138,375
158,375
168,657
7,989
307,500
57,792
1,012,063
1,050,092
1,172,325
1,258,910
1,317,510
32,875
7,317,046
8,329,109
272,500
331,100
279,000
428,000
-
2,155,200
2,155,200
122,121
163,274
222,476
159,488
-
1,085,428
1,085,428
10,471
(7,049)
(12,566)
50,022
-
33,543
33,543
19,616
19,616
19,616
19,616
3,989
102,069
190,475
-
30,000
102,033
48,000
-
183,673
183,673
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,485,334
1,206,744
844,600
418,069
(7,335)
19,616
3,640
commenced as Chair of the Human Resources & Remuneration Committee from 23 October 2017.
(4) H L Mowlem commenced as Director on 13 June 2017, and commenced as Chair of the Audit & Risk Committee from 23 October 2017.
(5) P D Everingham commenced as Director on 19 December 2017.
(6) R J Wright retired at the conclusion of the 2017 Annual General Meeting on 23 October 2017.
(7) E A Berchtold adjusted cash salary is reflective of a period of unpaid leave taken during the 2018 financial year.
(8) R J Skippen retired effective 24 October 2016.
(9) G G Carroll resigned effective 22 July 2016 and ceased as executive KMP on this date.
Super Retail Group Limited • Annual Report 2018 65
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
Figure 4 reflects the final value of STI paid to KMP in the 2018 financial year.
Figure 4:
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.
Short Term Incentives
(i)
STI is dependent on the satisfaction of performance conditions as set out in Section 4(b). The 2018 STI payment was awarded on
13 August 2018. No part of the STI payments are payable in future years.
The Committee reviewed the performance objectives and weightings for 2018 to ensure continued alignment with the Group’s
strategy.
(ii)
LTI is dependent on the satisfaction of performance conditions and service conditions as set out in Section 4(c).
Long Term Incentives
Vesting Outcomes for LTI Performance Rights Granted for the 2014 to 2016 financial periods
Table 10:
Grant Date
September 2013
September 2014
September 2015
Financial Results
determining vesting
June 2016
June 2017
June 2018
EPS 3 Year
CAGR
1.7%
7.7%
10.9%
Vested
Forfeited
ROC
Averaged
Vested
Forfeited
nil
nil
29.5%
100%
100%
20.5%
10.9%
11.4%
12.2%
nil
nil
26.7%
100%
100%
23.3%
66 Super Retail Group Limited • Annual Report 2018
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
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 executive KMP, including their related parties is as per Table 11 below:
Table 11:
Held at
1 July 2017 Granted(1) Vested
Number
Number
Number
Other
Changes(2)
Number
Held at
30 June 2018(3)
Number
Value of Performance
Rights granted in year
$
Financial year in
which grant vests
Year
-
-
-
-
-
-
-
-
-
-
-
50,860
-
34,994
30,685
50,860
32,017
34,994
30,685
-
-
-
-
156,433
n/a
n/a
n/a
997,925
100,000
104,516
117,031
-
-
104,516
117,031
156,433
(32,017)
-
-
-
(100,000)
-
-
-
2018, 2019, 2020
2019, 2020, 2021
2020, 2021, 2022
2021, 2022, 2023
2018
P A Birtles
2015
2016(4)
2017
2018
D J Burns
2015
2016(4)
2017
2018
E A Berchtold
2015
2016(4)
2017
2018
A M Heraghty
2016(4)
2017
2018
C D Wilesmith
2015
2016(4)
2017
2018
(1) Performance Rights provided as remuneration to each of the executive 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
2018, 2019, 2020
2019, 2020, 2021
2020, 2021, 2022
2021, 2022, 2023
2018, 2019, 2020
2019, 2020, 2021
2020, 2021, 2022
2021, 2022, 2023
2018, 2019, 2020
2019, 2020, 2021
2020, 2021, 2022
2021, 2022, 2023
2019, 2020, 2021
2020, 2021, 2022
2021, 2022, 2023
(37,519)
-
-
-
(35,859)
-
-
-
n/a
n/a
n/a
324,449
n/a
n/a
n/a
345,207
n/a
n/a
n/a
345,207
-
43,897
39,666
54,114
-
45,291
40,554
54,114
35,859
43,897
39,666
-
37,519
45,291
40,554
-
-
-
-
54,114
-
-
-
54,114
n/a
n/a
379,731
52,258
45,586
59,526
52,258
45,586
-
-
-
59,526
-
-
-
-
-
-
-
-
-
-
-
-
-
-
value is nil.
(4) These performance rights will partially vest with the announcement of the June 2018 financial results.
The Performance Rights granted in the current reporting period were valued for the purpose of the financial statements using a
fair value of $6.38. 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. Performance Rights are granted using a face
value methodology. 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 2018 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 2019
(a)
Approach for 2019
In the 2019 year, the Committee will continue to assess all elements of executive KMP total reward to achieve continuing
alignment to the Group’s remuneration objectives (refer to Table 1).
(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 and determined
there will be no changes for the 2019 financial year.
(c)
Total Reward Structure - executive KMP
This year, the comparator benchmarks show that overall executive KMP base salary package and short term incentive
packages for the 2019 year will be at market median with individual executive KMP base salary and short term incentive
packages varying from 96% to 110% of the respective market median. Overall executive KMP base salary packages will
increase by 1.3% in the 2019 year.
Super Retail Group Limited • Annual Report 2018 67
DIRECTORS’ REPORT (continued)
4.
(d)
Remuneration Report – Audited (continued)
Long Term Incentive (LTI) – Performance Hurdle Review
During 2018 financial year, the Board reviewed the LTI performance conditions (refer to section 4(c)) to ensure alignment with
our performance expectations. To ensure alignment with the growth assumptions for the next three years as outlined in our May
2018 market presentation, the Board has determined that for future grants of performance rights, the EPS hurdle will be as
follows:
•
•
•
If the EPS compound annual growth is 8%, then 30% of the Performance Rights will be available to vest;
If the EPS compound annual growth is 10%, then 50% of the Performance Rights will be available to vest; or
If the EPS compound annual growth is 13%, then 100% of the Performance Rights will be available to vest.
Performance Rights will vest on a pro rata basis between these EPS compound annual growth ranges.
The Board considers the revised EPS CAGR measures are appropriately challenging in the context of the Company’s strategic
objectives, targets and the changing retail environment.
For those performance rights with the vesting percentage determined on the June 2018 financial performance, an EPS
compound annual growth of 10.9% was achieved resulting in a vesting percentage of 29.5 (refer table 10). Under the revised
performance conditions, the vesting percentage would have been 32.5. Based on the number of rights for this plan unvested
as at 30 June 2018, an additional 15,333 performance rights would have vested.
No other changes are proposed to the LTI plan, and there is no change proposed to the maximum opportunity that executive
KMP can earn. The revised LTI Plan EPS CAGR performance hurdle will apply for grants to be made in September 2018.
(e)
Long Term Incentive (LTI) - Scheme Review
In 2019, the Board will continue its review of the LTI scheme.
(f)
Non-Executive Directors’ Fees
There will be no change to Non–Executive Directors’ board fees (including committee fees) during the 2019 financial year. No
increase in the fee pool for Non-Executive Directors is proposed for the 2019 financial year.
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 as detailed in Table 12 below:
Table 12:
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
A M Heraghty
4 years, 8 months
27 April 2015
C D Wilesmith
5 years, 3 months
1 July 2013
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(3)
5 November 2011
6 months(4)
27 April 2015
6 months(4)
18 September 2007
(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.
There are three KMP currently on fixed term agreements. As these fixed terms expire, the intent is to transition the executive to
an ongoing employment contract with appropriately updated terms and a 6 month notice period. All contracts are
recommended by the Committee for approval by the Board.
Section 10: Period of Restraint
Executive KMP have post-employment restraints within their service contracts.
After cessation of employment for any reason, for the period set out in Table 13 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.
68 Super Retail Group Limited • Annual Report 2018
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
Table 13:
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 executive KMP
Shares provided on exercise of Performance Rights and Options
Table 14 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 30 June 2018 on the exercise of Options.
Table 14:
Name(1)
Incentive Scheme(2)
Number of Ordinary Shares Issued on
Exercise of Share Plans During the Year(3)
Market Value at Exercise
Date(4)
P A Birtles
D J Burns
E A Berchtold
A M Heraghty
C D Wilesmith
Total
Performance Rights
Performance Rights
Performance Rights
n/a
Performance Rights
-
-
-
n/a
-
-
-
-
-
n/a
-
-
(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 2013, 2014 and 2015 grants lapsing due to hurdles not being met.
(4) The value at exercise date for Performance Rights is determined using the Group share price.
Super Retail Group Limited • Annual Report 2018 69
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 executive KMP, including their related parties is as per Table 15 below:
Table 15:
2018
Non-Executive
Directors:
S A Pitkin
R A Rowe
D J Eilert
L K Inman
H L Mowlem
P D Everingham
Executive Director:
P A Birtles
Other executive
KMP:
D J Burns
E A Berchtold
A M Heraghty
C D Wilesmith
Held at
1 July 2017
Purchases
In lieu of
dividends(1)
Sales
Held at
30 June 2018
26,453
59,912,667
4,500
5,241
-
-
12,700
-
4,000
16,934
10,000
10,000
-
16,176
-
-
-
-
-
(3,842)
-
-
-
-
39,153
59,925,001
8,500
22,175
10,000
10,000
1,408,421
-
-
(15,825)
1,392,596
1,000
-
-
3,550
10,000
-
-
-
-
-
-
226
-
-
-
-
11,000
-
-
3,776
(1) 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 16 below:
Table 16:
Grant date
Vesting Date
1 September 2012
1 September 2013
1 September 2014
1 September 2015
1 September 2016
1 September 2017
Total
(1)
(1)
(1)
(1)
(1)
(1)
Value per Performance
Right at Grant Date
$7.95
$10.83
$6.03
$8.17
$7.99
$6.38
Number of Performance
Rights
-
-
-
511,500
536,775
724,862
1,773,137
(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 executive KMP and their Related Parties
There are no loans to executive KMP and their related parties as at 30 June 2018 and no loans were made during the financial
year.
(d)
Other Transactions with executive KMP
Executive 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 $202,880 (2017: $118,597) 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.
70 Super Retail Group Limited • Annual Report 2018
DIRECTORS’ REPORT (continued)
4.
Remuneration Report – Audited (continued)
The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against
the officers in their capacity as Officers of entities in the Group, and any other payments arising from liabilities incurred by the
Officers in connection with such proceedings, other than where such liabilities arise out of conduct involving a wilful breach of
duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or
someone else or to cause detriment to the Group. It is not possible to apportion the premium between amounts relating to the
insurance against legal costs and those relating to other liabilities.
5.
Non-Audit Services
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s
expertise and experience with the Company and/or the Group are important.
The Board of Directors has considered the position and, in accordance with the advice received from the Audit and Risk
Committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence for
auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the
auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the
following reasons:
• all non-audit services have been reviewed by the Audit and Risk Committee to ensure they do not impact the impartiality
and objectivity of the auditor;
• none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of
Ethics for Professional Accountants, including reviewing or auditing the auditor’s own work, acting in a management or a
decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic risk and
rewards.
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
Other assurance(1)
Total remuneration for audit and review services
Taxation and Other Services
PricewaterhouseCoopers Australian firm:
Taxation Services
Customs prudential review
Digital advertising advisory
Workshop facilitation
Business review of subsidiary
Network firms of PricewaterhouseCoopers Australia:
Taxation Services
Total remuneration for non-audit services
(1) Cyber security audit in 2018 and Risk Appetite assurance services in 2017.
2018
$
2017
$
585,570
44,721
630,291
394,329
18,500
49,572
51,601
-
66,924
580,926
492,100
191,700
683,800
113,368
-
-
-
50,000
66,803
230,171
Super Retail Group Limited • Annual Report 2018 71
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 73.
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.
S A Pitkin
Chair
Brisbane
20 August 2018
P A Birtles
Group Managing Director and
Chief Executive Officer
72 Super Retail Group Limited • Annual Report 2018
Auditor’s Independence Declaration
As lead auditor for the audit of Super Retail Group Limited for the year ended 30 June 2018, I
declare that to the best of my knowledge and belief, there have been:
(a)
(b)
no contraventions of the auditor independence requirements of the Corporations Act
2001 in relation to the audit; and
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
20 August 2018
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 2018 73
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period ended 30 June 2018
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
Share of net loss of associates and joint ventures
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 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
2018
$m
2,570.4
8.5
2,578.9
2017
$m
2,465.8
1.4
2,467.2
(1,415.5)
(1,364.8)
(332.3)
(83.9)
(213.0)
(339.4)
(17.7)
(1.0)
(322.7)
(83.8)
(194.8)
(343.5)
(16.9)
-
(2,402.8)
(2,326.5)
176.1
(48.8)
127.3
128.3
(1.0)
127.3
6.2
(0.9)
5.3
132.6
133.6
(1.0)
132.6
65.0
64.5
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
6
6
13
18
18
16
16
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
74 Super Retail Group Limited • Annual Report 2018
CONSOLIDATED BALANCE SHEET
As at 30 June 2018
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Other financial 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
15
9
10
23(b)
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.
2018
$m
15.2
23.8
545.5
6.8
591.3
270.4
891.6
9.3
1,171.3
1,762.6
342.3
3.0
9.6
71.0
1.5
427.4
49.1
435.1
30.1
21.7
536.0
963.4
799.2
542.3
10.3
247.3
799.9
(0.7)
799.2
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
Super Retail Group Limited • Annual Report 2018 75
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the period ended 30 June 2018
Contributed
Equity
Reserves Retained
Earnings
Total
Notes
$m
$m
$m
$m
Non-
Controlling
Interests
$m
Total
Equity
$m
Balance at 2 July 2016
542.3
(0.9)
193.7
735.1
(1.1)
734.0
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(a)
-
-
-
-
-
-
-
Balance at 1 July 2017
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
Transactions with non-controlling interests
23(b)
Change in ownership interest in controlled entities 23(a)
-
-
-
-
-
-
-
-
Balance at 30 June 2018
542.3
-
2.9
2.9
101.8
-
101.8
101.8
2.9
104.7
(1.3)
100.5
-
2.9
(1.3)
103.4
-
2.0
(0.5)
1.5
3.5
-
5.3
5.3
-
1.1
0.6
(0.2)
1.5
10.3
(84.8)
(84.8)
-
-
(84.8)
210.7
128.3
-
128.3
2.0
(0.5)
(83.3)
756.5
128.3
5.3
133.6
-
-
0.5
0.5
(1.9)
(84.8)
2.0
-
(82.8)
754.6
(1.0)
127.3
-
5.3
(1.0)
132.6
(91.7)
(91.7)
-
-
-
(91.7)
247.3
1.1
0.6
(0.2)
(90.2)
799.9
-
-
2.0
0.2
2.2
(0.7)
(91.7)
1.1
2.6
-
(88.0)
799.2
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
76 Super Retail Group Limited • Annual Report 2018
CONSOLIDATED STATEMENT OF CASH FLOWS
For the period ended 30 June 2018
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)
2,850.1
(2,268.6)
2,733.7
(2,203.1)
Notes
2018
$m
2017
$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
Payments for acquisitions of investments in associates/joint ventures
Acquisition of subsidiary, net of cash acquired
Net cash (outflow) from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Finance lease payments
Borrowing costs paid
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
23(b)
23(a)
21
(218.5)
(10.8)
(43.8)
308.4
(107.1)
-
(0.3)
(133.8)
(241.2)
994.5
(955.5)
(2.7)
(0.3)
(16.2)
0.1
(91.7)
(71.8)
(4.6)
19.9
(0.1)
15.2
(231.0)
(11.4)
(53.7)
234.5
(102.1)
0.9
-
-
(101.2)
930.0
(955.0)
(0.9)
(1.3)
(17.1)
0.1
(84.8)
(129.0)
4.3
15.6
-
19.9
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Super Retail Group Limited • Annual Report 2018 77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the period ended 30 June 2018
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
79
79
79
82
83
83
85
86
87
87
88
88
90
93
93
94
99
101
104
104
105
106
107
108
114
115
115
116
118
120
121
122
122
122
124
124
125
125
125
78 Super Retail Group Limited • Annual Report 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
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 30 June 2018 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 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 30 June 2018 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.
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 (refer note 23 - 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 2018 79
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
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.
Investments in associates and joint ventures
(iv)
Associates and joint ventures are entities over which the Group has significant influence or joint control but not control. They
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:
80 Super Retail Group Limited • Annual Report 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
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 30 June 2018, the Group is reporting on the 52 week
period that began 2 July 2017 and ended 30 June 2018. 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.
(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:
AASB 9 Financial Instruments – effective 1 July 2018
This standard addresses the classification, measurement and de-recognition of financial assets and financial liabilities and
new rules for hedge accounting. There are no significant impacts on the Group’s consolidated financial statements resulting
from the application of AASB 9.
IFRS 15 Revenue from Contracts with Customers – effective 1 July 2018
This standard establishes the reporting principles relating to the nature, amount, timing, and uncertainty of revenue and cash
flows arising from a contract with a customer. There are no significant impacts on the Group’s consolidated financial
statements resulting from the application of IFRS 15.
IFRS 16 Leases – effective 1 July 2019
IFRS 16 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.
The classification of cash flows will also be affected as operating lease payments under AASB 117 (which will be superseded
by IFRS 16) are presented as operating cash flows, whereas under IFRS 16, the lease payments will be split into a principal and
an interest portion which will be presented as financing and operating cash flows respectively.
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, office leases and motor vehicles) are recognised
on balance sheet.
During the financial year, the implementation plan for the new leases standard has commenced in a number of areas
including:
•
•
Identification of leases and contracts that could be determined to include a lease;
Collation of lease data required for the calculation of the impact assessment;
Super Retail Group Limited • Annual Report 2018 81
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
2.
Summary of significant accounting policies (continued)
(g)
New and amended standards adopted by the Group (continued)
•
•
Identification of areas of complexity or judgement relevant to the Group; and
Identification of necessary changes to systems and processes required to enable reporting and accounting in
accordance with the new standard.
Note 31 reflects that as at 30 June 2018, the Group had lease commitments for property and motor vehicles before the
straight lining adjustment of $1,009.1 million (2017: $993.1 million). A preliminary assessment indicates that these
arrangements will meet the definition of a lease under IFRS 16, and hence the Group will recognise a right-of-use asset and a
corresponding liability in respect of all these leases unless they qualify for low value or short-term leases upon the application
of IFRS 16.
A reliable estimate of the financial impact on the Group is dependent the finalisation of a number of areas, including:
•
•
•
•
Choice of transition method;
Selection of discount rates;
Estimates of lease-term for leases with options; and
Assessment of completeness of data.
The financial impact is dependent on the composition of the lease portfolio at the time of transition. Therefore it is not yet
practicable to determine a reliable estimate of the financial impact on the Group.
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;
Note 14 – Provisions;
Note 23 – Business combinations.
82 Super Retail Group Limited • Annual Report 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
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;
Outdoor: retailing of boating, camping, outdoor equipment, fishing equipment and apparel; and
Sports: retailing of sporting equipment and apparel.
With the addition of the Macpac business, the previous segment of Leisure has been renamed during the year as Outdoor.
(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, acquisitions, divestments and prior year store set-up costs.
For the period ended 30 June 2018
Auto
$m
Outdoor
$m
Sports
$m
Total
continuing
operations
$m
Inter-segment
eliminations/
unallocated
$m
Consolidated
$m
1,007.0
148.2
1,006.4
-
0.6
Segment Revenue and Other Income
External segment revenue(1)
Inter segment sales
Other income(2)
Total segment revenue and other
income
Segment EBITDA(3)
Segment depreciation and
amortisation(4)
Segment EBIT result
Net finance costs
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
(31.8)
116.4
Profit for the period
579.8
-
0.2
580.0
47.9
(18.3)
29.6
979.2
-
0.7
979.9
115.7
(24.2)
91.5
2,565.4
-
1.5
2,566.9
311.8
(74.3)
237.5
5.7
(0.7)
0.1
5.1
(17.7)
(0.2)
(17.9)
2,571.1
(0.7)
1.6
2,572.0
294.1
(74.5)
219.6
(17.7)
201.9
(56.6)
145.3
(17.0)
128.3
(1.0)
127.3
(1) Includes non-controlling interest (NCI) revenue of $1.6 million.
(2) Excludes gain on divestment of controlled entities $6.9 million.
(3) Adjusted for NCI operating result of $1.0 million, $16.9 million of business restructuring costs, $4.0 million of acquisition costs, $8.6 million of prior
year store set-up costs and net gain on divestment of $4.7 million.
(4) Adjusted for $5.2 million provision for asset depreciation and impairment relating to business restructuring costs.
(5) Segment income tax expense of $56.6 million excludes $7.8 million relating to the tax effect of prior year store set-up costs and business
restructuring costs.
(6) Includes $24.8 million of costs consisting of business restructuring costs $16.9 million, acquisition costs $4.0 million, prior year store set-up costs
$8.6 million and net gain on divestment of $4.7 million and the related income tax effect of $7.8 million.
Other items not included in total segment NPAT - 2018
Sports
During the reporting period the Group completed the program of converting all Amart Sports stores to Rebel in line with the
strategy to sustain the Group’s position as the market leader in sports retailing. In June 2017 the Group recognised $34.0
million of after tax restructuring costs associated with the rebranding. A further $2.7 million of after tax costs have been
incurred during the current reporting period consistent with the announcement made to the market on 25 July 2017.
Outdoor
During the reporting period the Group acquired the Macpac group of companies as announced to the market on 20
February 2018. Following the acquisition of Macpac, the Group has completed the trial of the Rays business and will
integrate its profitable stores into the Macpac business in the fourth quarter of the coming financial year. Costs associated
with the business restructuring and integration incurred during the current reporting period total $13.0 million before tax ($9.1
million after tax), consistent with that announced to the market. Transaction costs to complete the acquisition of Macpac
total $4.0 million before tax ($3.9 million after tax).
Super Retail Group Limited • Annual Report 2018 83
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
4.
(b)
Segment information (continued)
Segment information provided to the Group Managing Director and Chief Executive Officer (continued)
Gain on divestment – Autoguru
During the period the Group’s investment in Autoguru decreased to 49.5% - refer note 23 (b). The net gain on divestment
partially offset by associated trading losses was $4.7 million before tax (nil tax) and has been excluded from normalised NPAT.
Prior year store set-up costs
The Group has identified that team members involved in store set-up activities should have received additional amounts to
the amounts paid. A remediation program is underway and will be completed in the next financial period. The amount
relating to prior periods of $8.6 million, ($6.0 million after tax) is not included in normalised NPAT.
For the period ended 1 July 2017
Auto
$m
Outdoor
$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.
Other items not included in total segment NPAT - 2017
Sports
During the 2017 year, the Group undertook 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 a result, the Group concluded that the optimal strategy to
sustain its position as the market leader in sports retailing would be to focus on building one retail brand. Therefore the Group
commenced a program to convert all Amart Sports stores to Rebel by November 2017. As a result there were $48.5 million of
before tax business restructuring costs associated with the rebranding during 2017, 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.
(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;
Outdoor: retailing of boating, camping, outdoor equipment, fishing equipment and apparel; and
Sports: retailing of sporting equipment and apparel.
New Zealand
Auto: retailing of auto parts and accessories, tools and equipment; and
Outdoor: retailing of outdoor equipment and apparel.
84 Super Retail Group Limited • Annual Report 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
4.
Segment information (continued)
(c)
Other information (continued)
Total revenue and other income from continuing operations
(i)
Australia
New Zealand
Total non-current assets
(ii)
Australia
New Zealand
Significant Accounting Policies
2018
$m
2,442.7
136.2
2,578.9
1,093.1
78.2
1,171.3
2017
$m
2,354.8
112.4
2,467.2
1,002.3
12.3
1,014.6
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
Gain on divestment
Sundry
2018
$m
2,570.4
0.5
-
6.9
1.1
2017
$m
2,465.8
0.6
0.1
-
0.7
Total revenues and other income
2,578.9
2,467.2
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 2018 85
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
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
Share of net loss from associates and joint ventures accounted for using the equity
method
Depreciation
Plant and equipment
Motor vehicles
Computer equipment
Total depreciation
Amortisation and impairment
Computer software amortisation
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 loss / (gain)
Significant Accounting Policies
Depreciation, amortisation and impairment
Refer to notes 9 and 10 for details on depreciation, amortisation and impairment.
2018
$m
-
1.0
40.9
0.1
14.1
55.1
22.2
-
-
2.4
24.6
17.8
(0.1)
17.7
36.1
474.7
510.8
229.2
3.4
232.6
2017
$m
(0.6)
-
39.7
0.1
12.4
52.2
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
2.4
(1.2)
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.
86 Super Retail Group Limited • Annual Report 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
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
2018
$m
10.0
(0.6)
9.4
7.7
6.7
23.8
2017
$m
14.2
(0.8)
13.4
5.9
23.3
42.6
As at 30 June 2018 current trade receivables of the Group with a nominal value of $0.6 million (2017: $0.8 million) were
impaired and provided for. The individually impaired receivables mainly relate to wholesalers with whom the Group no
longer trade.
(b)
Past due but not impaired
As at 30 June 2018, trade receivables of $2.4 million (2017: $3.8 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
2018
2017
$m
0.2
0.7
1.5
2.4
$m
1.1
1.0
1.7
3.8
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.
Super Retail Group Limited • Annual Report 2018 87
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
8.
Inventories
Finished goods, at lower of cost or net realisable value
(a)
Inventory expense
2018
$m
545.5
2017
$m
481.5
Inventories recognised as expense during the period ended 30 June 2018 amounted to $1,338.7 million (2017: $1,291.2
million).
Write-downs of inventories to net realisable value recognised as an expense during the period ended 30 June 2018
amounted to $9.4 million (2017: $2.7 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
2018
$m
407.3
(180.4)
226.9
0.6
(0.4)
0.2
104.7
(61.4)
43.3
2017
$m
373.1
(155.9)
217.2
0.7
(0.5)
0.2
97.9
(50.8)
47.1
Total net property, plant and equipment
270.4
264.5
88 Super Retail Group Limited • Annual Report 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
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:
2018
Carrying amounts at 1 July 2017
Additions
Acquisition of subsidiary (note 23(a))
Depreciation
Impairment(1)
Divestment of subsidiary (note 23(b))
Foreign currency exchange differences
Carrying amounts at 30 June 2018
2017
Carrying amounts at 2 July 2016
Additions
Disposals
Depreciation
Impairment(1)
Foreign currency exchange differences
Carrying amounts at 1 July 2017
Plant and
equipment
$m
Motor vehicles
$m
Computer
equipment
$m
217.2
47.9
5.6
(40.9)
(2.4)
(0.1)
(0.4)
226.9
203.3
60.9
(0.3)
(39.7)
(7.7)
0.7
217.2
0.2
-
0.1
(0.1)
-
-
-
0.2
0.3
-
-
(0.1)
-
-
0.2
47.1
10.2
0.2
(14.1)
-
-
(0.1)
43.3
33.3
26.2
-
(12.4)
-
-
47.1
Total
$m
264.5
58.1
5.9
(55.1)
(2.4)
(0.1)
(0.5)
270.4
236.9
87.1
(0.3)
(52.2)
(7.7)
0.7
264.5
(1) During 2018 certain items of Plant and equipment relating to assets in leased locations associated with the Outdoor business transformation
activities were considered to be impaired (2017: Sports business transformation activities) – refer note 4 – Segment information.
Finance Leases
The carrying value of computer equipment held under finance leases as at 30 June 2018 was $9.9 million (2017: $11.2 million).
Additions during the year were $1.0 million (2017: $11.2 million). 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 2018 89
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
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 depreciation 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
2018
$m
528.0
(2.1)
525.9
213.9
(101.5)
112.4
311.8
(58.5)
253.3
2017
$m
449.7
(2.1)
447.6
174.3
(80.8)
93.5
267.5
(58.5)
209.0
891.6
750.1
2018
Carrying amounts at 1 July 2017
Additions
Acquisition of subsidiary (note 23(a))
Divestment of subsidiary (note 23(b))
Amortisation charge
Carrying amounts at 30 June 2018
90 Super Retail Group Limited • Annual Report 2018
Goodwill
$m
Computer
Software
$m
Brand Name
$m
447.6
-
79.0
(0.7)
-
525.9
93.5
41.1
0.2
(0.2)
(22.2)
112.4
209.0
-
44.3
-
-
253.3
Totals
$m
750.1
41.1
123.5
(0.9)
(22.2)
891.6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
10.
Intangible assets (continued)
(a)
Reconciliations (continued)
2017
Carrying amounts at 2 July 2016
Additions
Impairment
Amortisation charge
Carrying amounts at 1 July 2017
(b)
Impairment tests for goodwill
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
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
Outdoor
Sports
Group
Total
2018
$m
45.3
104.1
376.5
-
525.9
2017
$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% (2017: 14.0%) and terminal growth rate of 3.0% (2017: 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. Management does not consider that
a reasonably possible change in any of the key assumptions would cause the carrying value of any of the CGU’s to exceed
their recoverable amounts.
(c)
Impairment tests for the useful life for brands
No amortisation is provided against the carrying value of the purchased brand names on the basis that they are considered
to have indefinite useful lives.
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
Macpac
Total
2018
$m
209.0
44.3
253.3
2017
$m
209.0
-
209.0
Super Retail Group Limited • Annual Report 2018 91
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
10.
Intangible assets (continued)
(c)
Impairment tests for the useful life for brands (continued)
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% (2017: 14.0%) and terminal growth rate of 3.0% (2017: 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 brand names currently exceeds their carrying values. Management does not consider that
a reasonably possible change in any of the key assumptions would cause the carrying value of any of the brand names to
exceed their recoverable amounts.
2017 impairment
The Group 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 was 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
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. Brand names are determined to have indefinite useful lives and therefore do not attract
amortisation.
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.
92 Super Retail Group Limited • Annual Report 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
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
2018
$m
255.6
81.2
5.5
342.3
49.1
49.1
2017
$m
179.5
70.1
4.1
253.7
44.2
44.2
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.
12.
Interest-bearing liabilities
Current
Finance leases - secured by leased asset
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
(1)Net of borrowing costs capitalised of $1.4 million (2017: $1.7 million).
2018
$m
3.0
3.0
6.5
-
428.6
435.1
2017
$m
2.6
2.6
8.6
0.1
389.3
398.0
Super Retail Group Limited • Annual Report 2018 93
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
12.
(a)
Interest-bearing liabilities (continued)
Reconciliation of liabilities arising from financing activities
1 July 2017
$m
Cash flows
$m
11.2
389.4
400.6
(2.7)
38.7
36.0
2 July 2016
$m
Cash flows
$m
0.8
415.0
415.8
(0.8)
(26.3)
(27.1)
Non-cash –
Amortisation and
additions
$m
1.0
0.5
1.5
Non-cash –
Amortisation and
additions
$m
11.2
0.7
11.9
30 June 2018
$m
9.5
428.6
438.1
1 July 2017
$m
11.2
389.4
400.6
Finance leases
Bank debt funding facility(1)
Total
Finance leases
Bank debt funding facility(1)
Total
(1)Net of borrowing costs paid
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:
(Increase) / decrease in deferred tax assets (note 13(e))
Increase / (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% (2017: 30%)
Tax effect of amounts which are not deductible / (taxable) in
calculating taxable income:
Tax consolidation adjustments regarding NZ branches
Gain on divestment of subsidiary
Non-deductible acquisition costs
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
94 Super Retail Group Limited • Annual Report 2018
2018
$m
51.9
(2.4)
(0.7)
48.8
(3.6)
1.2
(2.4)
176.1
52.8
(3.2)
(2.0)
1.1
0.4
49.1
(0.3)
0.7
(0.7)
48.8
29.1%
27.7%
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
28.2%
28.6%
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
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 directly to equity (note 13(e))
Tax expense 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
2018
$m
2017
$m
(48.8)
(40.2)
(1.6)
(4.4)
2.6
(1.1)
(53.3)
43.7
(9.6)
2.6
2.6
2.6
2.6
41.3
4.3
13.7
2.6
61.9
-
61.9
(61.9)
-
76.0
14.4
90.4
1.6
92.0
(61.9)
30.1
(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
Net deferred tax assets / (liabilities)
(30.1)
(17.1)
Super Retail Group Limited • Annual Report 2018 95
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
13.
(e)
Income taxes (continued)
Deferred tax assets and liabilities (continued)
Movements in deferred tax assets:
Opening balance
Acquisition of subsidiary (note 23(a))
Credited / (charged) 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
Acquisition of subsidiary (note 23(a))
Charged / (credited) to the income statement
Charged / (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)
Unrecognised deferred tax assets
2018
$m
57.8
0.5
3.6
-
61.9
35.0
26.9
61.9
74.9
13.3
1.2
2.6
92.0
92.0
-
92.0
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
Tax losses
13.6
13.9
Deferred tax assets have not been recognised in respect of these tax losses because it is not considered probable that
future taxable profit will be available against which they can be realised.
(g)
Tax transparency report
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
96 Super Retail Group Limited • Annual Report 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
13.
Income taxes (continued)
(g)
Tax transparency report (continued)
Part B discloses the Australian income tax paid by the Group in the 2018 and 2017 financial years and provides qualitative
information about our approach to tax risk and international related party dealings.
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’s 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’s 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 Macpac) 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 and Macpac 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 BCF, Rays, Rebel, SCA
Active trading operations (SCA and Macpac) 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 per cent Australian corporate tax rate. For the 2018 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 $43.7 million in 2018 and $44.4 million in 2017.
Super Retail Group Limited • Annual Report 2018 97
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
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.
98 Super Retail Group Limited • Annual Report 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
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
2018
$m
60.6
4.3
5.0
1.1
71.0
8.7
4.5
8.5
21.7
2017
$m
54.1
4.9
2.3
1.0
62.3
8.2
5.5
7.8
21.5
Provisions for employee benefits includes accrued annual leave, long service leave and accrued bonuses. In addition the
Group has identified that team members involved in store set-up activities should have received additional amounts to the
amounts paid. A remediation program is underway and will be completed in the next financial period. At 30 June 2018
there is a provision to recognise payments for additional overtime and allowances to current and former team members of
an estimated $7.9 million (2017: nil). In addition there is a provision of $2.7 million (2017: nil) for interest and on-costs.
(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 30 June 2018 $6.8 million associated with the transformation relates to surplus lease space (2017: $8.3
million). During the reporting period the Group completed the program of converting all Amart Sports stores to Rebel in line
with the strategy to sustain the Group’s position as the market leader in sports retailing. As at 30 June 2018 $1.2 million
associated with this conversion relates to surplus lease space (2017: nil).
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 30 June 2018 $0.7 million is provided for loss making contracts related to Infinite Retail (2017: $1.7 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 other, are set out below:
2018
Opening balance as at 1 July 2017
Increase through acquisition
Provisions made
Indexing of provisions
Provisions used
Closing balance as at 30 June 2018
Employee benefits
$m
62.3
0.8
57.9
-
(51.7)
69.3
Onerous contracts
$m
Make good
$m
10.4
-
4.4
-
(6.0)
8.8
10.1
1.1
2.1
1.8
(1.6)
13.5
Total
$m
82.8
1.9
64.4
1.8
(59.3)
91.6
Super Retail Group Limited • Annual Report 2018 99
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
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.
Employee benefits – set-up activities
Judgements have been made in the calculations as to the number of overtime hours, allowance payments and the
valuation based on assumed work patterns.
100 Super Retail Group Limited • Annual Report 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
15.
Financial assets and financial liabilities
(a)
Financial instruments
The Group holds the following financial instruments:
2018
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
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
Derivatives used for
hedging
$m
Notes
Financial assets and
liabilities at
amortised cost
$m
7
20
11
12
20
-
-
6.8
6.8
-
-
1.5
1.5
15.2
23.8
-
39.0
391.4
438.1
-
829.5
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
Total
$m
15.2
23.8
6.8
45.8
391.4
438.1
1.5
831.0
Total
$m
19.9
42.6
-
62.5
297.9
400.6
3.1
701.6
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 2018 101
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
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.
2018
Financial assets
Derivatives used for hedging
Total
Financial liabilities
Derivatives used for hedging
Total
2017
Financial assets
Derivatives used for hedging
Total
Financial liabilities
Derivatives used for hedging
Total
Level 1
$m
Level 2
$m
Level 3
$m
-
-
-
-
6.8
6.8
1.5
1.5
-
-
-
-
Level 1
$m
Level 2
$m
Level 3
$m
-
-
-
-
-
-
3.1
3.1
-
-
-
-
Total
$m
6.8
6.8
1.5
1.5
Total
$m
-
-
3.1
3.1
There were no transfers between any levels for recurring fair value measurements during the year. The Group’s policy is to
recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period.
Level 1: The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading
and available-for-sale securities) is based on quoted market prices at the end of the reporting period. The quoted market
price used for financial assets held by the Group is the current bid price. These instruments are included in level 1.
Level 2: The fair value of financial instruments that are not traded in an active market (for example, over-the-counter
derivatives) is determined using valuation techniques which maximise the use of observable market data and rely as little
as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the
instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level
3. This is the case for unlisted equity securities.
Valuation techniques used to determine fair value
(ii)
Specific valuation techniques used to value financial instruments include:
•
•
the use of quoted market prices or dealer quotes for similar instruments;
the fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on
observable yield curves;
the fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance
sheet date;
the fair value of the remaining financial instruments is determined using discounted cash flow analysis.
•
•
All of the resulting fair value estimates are included in level 2, where the fair values have been determined based on
present values and the discount rates used were adjusted for counterparty or own credit risk.
102 Super Retail Group Limited • Annual Report 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
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 2018 103
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
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 $145.3 million (2017: $135.8 million) – note 4(b).
2018
Cents
65.0
2017
Cents
51.6
64.5
51.3
73.7
68.9
104 Super Retail Group Limited • Annual Report 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
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
2018
Number
2017
Number
197,240,020
197,229,369
1,773,137
1,078,275
199,013,157
198,307,644
2018
$m
2017
$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
128.3
101.8
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 30 June 2018)
2018
$m
542.3
(i)
Movement in ordinary share capital
Opening Balance 2 July 2016
Shares issued under performance rights
Balance 1 July 2017
Shares issued under performance rights
Closing balance 30 June 2018
Number of Shares
Issue Price
197,177,318
62,702
197,240,020
-
197,240,020
-
-
2017
$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 2018 105
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
17.
Contributed equity (continued)
(a)
Share capital (continued)
Performance rights over 734,862 (2017: 571,775) ordinary shares were issued during the period with no (2017: 62,702)
performance rights vesting during the period. Under the share option plan, nil (2017: 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
106 Super Retail Group Limited • Annual Report 2018
2018
$m
2.5
11.6
4.0
(7.8)
10.3
3.4
(0.9)
2.5
10.5
1.1
11.6
(2.2)
8.8
(2.6)
4.0
(8.2)
0.4
(7.8)
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)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
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
2018
$m
210.7
128.3
(91.7)
247.3
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
Gain on divestment
Equity accounting loss
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 in receivables
- decrease / (increase) in net current tax liability
- (increase) / decrease in inventories
- increase / (decrease) in payables
- increase / (decrease) in provisions
- increase / (decrease) in deferred tax liability
Net cash inflow from operating activities
Significant Accounting Policies
2018
$m
128.3
77.3
2.4
-
1.1
(6.9)
1.0
(1.0)
17.7
19.6
7.3
(37.0)
94.0
7.0
(2.4)
308.4
2017
$m
193.7
101.8
(84.8)
210.7
2017
$m
101.8
70.8
45.0
(0.6)
2.0
-
-
(1.3)
16.9
0.1
(4.7)
20.4
(2.7)
(4.1)
(9.1)
234.5
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 2018 107
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
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
2018
$m
6.8
6.8
-
1.5
1.5
2017
$m
-
-
1.4
1.7
3.1
Classification of derivatives
(i)
Derivatives are classified as held for trading and accounted for at fair value through profit or loss unless they are designated
as hedges. They are presented as current assets or liabilities if they are expected to be settled within 12 months after the end
of the reporting period.
The Group’s accounting policy for its cash flow hedges is set out in note 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.
108 Super Retail Group Limited • Annual Report 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
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/New Zealand dollars with maturity
- 0 to 4 months
- 5 to 12 months
Trade receivables
Trade payables
2018
USD
$m
1.9
28.7
41.8
46.5
88.3
2018
CNY
$m
0.2
7.9
2017
USD
$m
1.1
12.0
56.0
56.0
112.0
2017
CNY
$m
0.1
5.4
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 30 June 2018, no hedges were
designated as ineffective (2017: 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 gains / (losses) on USD foreign exchange contracts
- unrealised (losses) on interest rate swaps
Total unrealised gains / (losses)
2018
$m
6.8.
(1.5)
5.3.
2017
$m
(1.4)
(1.7)
(3.1)
Super Retail Group Limited • Annual Report 2018 109
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
20.
Financial risk management (continued)
(b) Market risk (continued)
(i) Foreign exchange risk (continued)
Group sensitivity
Based on the financial instruments held at 30 June 2018, 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 $7.2 million lower/$8.8 million higher (2017: $9.4 million lower/$11.5 million higher) had the Australian
dollar weakened/strengthened by 10% against other currencies, arising mainly from forward foreign exchange contracts
designated as cash flow hedges. The impact on other Group assets and liabilities as a result of movements in exchange
rates are not material.
A sensitivity of 10% was selected following review of historic trends.
(ii) Cashflow and fair value interest rate risk
Instruments used by the Group - interest rate swap contracts
Bank loans of the economic entity currently bear an average variable interest rate of 3.36% (2017: 3.08%). 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 $240.0 million (2017: $125.0
million). The Group also has $260.0 million (2017: $245.0 million) interest rate swaps in place for future periods up until May
2021 at an average rate of 2.42%.
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 56.0%
(2017: 32.0%) of the loan principal outstanding. The average fixed interest rate is 2.43% (2017: 2.75%).
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
2018
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
13.4
-
13.4
1.50%
-
428.6
-
428.6
3.36%
-
-
-
-
3.0
-
3.0
-
-
-
-
6.5
-
6.5
Net financial (liabilities) / assets
(415.2)
(3.0)
(6.5)
-
-
-
-
-
-
-
-
Non-
interest
bearing
$m
1.8
23.8
25.6
391.4
-
69.3
460.7
Total
$m
15.2
23.8
39.0
391.4
438.1
69.3
898.8
(435.1)
(859.8)
110 Super Retail Group Limited • Annual Report 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
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
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)
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 2018
and 2017 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.
2018
$m
430.0
240.0
2017
$m
391.0
125.0
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 30 June 2018, 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 $1.3 million lower/higher (2017: $1.9 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 2018 111
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
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(1)
- 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
2018
$m
640.0
20.0
660.0
430.0
3.3
433.3
210.0
16.7
226.7
2017
$m
540.0
20.0
560.0
391.0
3.4
394.4
149.0
16.6
165.6
(1) As at 30 June 2018, $20.7 million (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 3.25% - 3.51% (2017: 2.97% - 3.19%).
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.
112 Super Retail Group Limited • Annual Report 2018
2018
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.
2017
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
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
336.8
7.2
1.6
345.6
-
7.2
1.6
8.8
-
259.7
3.3
263.0
-
183.4
3.5
186.9
Net settled (Interest Rate Swaps)
0.4
0.3
0.2
0.2
-
-
-
-
-
-
-
-
336.8
457.5
10.0
804.3
336.8
430.0
9.5
776.3
1.1
1.5
(120.1)
112.6
(6.4)
(6.8)
-
(5.3)
(82.0)
(38.1)
77.1
(4.5)
35.5
(2.3)
-
-
0.2
-
-
0.2
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
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
1.0
1.0
1.0
(98.8)
100.0
2.2
(46.8)
47.4
1.6
-
-
1.0
-
-
-
-
-
-
-
-
-
-
-
-
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
Super Retail Group Limited • Annual Report 2018 113
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
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 2018 the Group’s strategy, which was unchanged from 2017, 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 30 June 2018 and 1 July
2017 were as follows:
Total borrowings
Less: Cash & cash equivalents
Net Debt
Total Equity
Total Capital
Gearing Ratio
2018
$m
438.1
(15.2)
422.9
799.2
1,222.1
34.6%
2017
$m
400.6
(19.9)
380.7
754.6
1,135.3
33.5%
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 2018 the Group’s strategy, which was unchanged from 2017, 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 30 June 2018
and 1 July 2017 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 $521.2m (2017: $495.1m) and normalised EBITDA is $294.2m (2017: $278.2m)
2018
$m
128.3
48.8
17.7
77.3
272.1
232.6
504.7
17.7
232.6
250.3
2.02
1.55
2.13
1.44
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
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 2018 and
2017 financial years. There are no assets pledged as security in relation to the unsecured debt in the 2018 financial year
(2017: nil).
114 Super Retail Group Limited • Annual Report 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
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 1 July 2017 of 25.0 cents per share (2016: 21.5
cents per share) paid on 6 October 2017. Fully franked based on tax paid @ 30%
Interim dividend for the period ended 31 December 2017 of 21.5 cents (2017: 21.5
cents per share) paid on 3 April 2018. 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 27.5 cents per ordinary share (2017: 25.0 cents per ordinary share), fully franked
based on tax paid at 30%.
The aggregate amount of the dividend expected to be paid on 2 October 2018, out
of retained profits as at 30 June 2018, but not recognised as a liability at year end, is
Franking credits
The franked portions of dividends paid after 30 June 2018 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 30 June 2018.
Franking credits remaining at balance date available for dividends declared after the
current balance date based on a tax rate of 30%
2018
$m
2017
$m
49.3
42.4
91.7
87.0
4.7
91.7
42.4
42.4
84.8
76.0
8.8
84.8
54.2
49.3
142.7
132.3
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 $23,246,145 (2017: $21,132,859). 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 2018 115
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
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 S A Pitkin, R J
Wright, R A Rowe, D J Eilert, L K Inman, H L Mowlem, P D Everingham 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)
2018
$
2017
$
282,523
321,094
(1) Loans to Australian Creatives Online Pty Ltd, an entity with a non-controlling interest in Autoguru Australia Pty Ltd, an associate of the Group.
These loans were extended as part of the Group’s acquisition arrangements with Autoguru Australia Pty Ltd. These loans are deemed to be
on an arms-length basis, attracting interest at a rate of 7.0% (2017: 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)
2018
$
2017
$
10,789,552
11,372,354
(1) Rent on properties, with rates which are deemed to be on an arms-length basis. Rent payable at year-end was nil (2017: nil).
23.
Business combinations
(a)
Subsidiaries
2018
The Group’s subsidiaries at 30 June 2018 are as detailed in note 26 - Investments in controlled entities. With the exception of
the acquisition of the Macpac group of entities and changes to the Group’s ownership interest in Youcamp Pty Ltd and
Autoguru Australia Pty Ltd as detailed below, there were no other changes to the Group’s ownership interest in these entities.
Macpac Holding Pty Ltd – March 2018
On 20 February 2018, the Group entered into an agreement to acquire 100% of the Macpac group of companies.
Settlement was completed on 5 April 2018 with an effective date of 31 March 2018. The Macpac group of companies is
consolidated as part of the Group from this date.
Macpac is a vertically integrated outdoor apparel and equipment retailer with 54 stores throughout New Zealand and
Australia. In addition to its retail stores, Macpac sells to commercial customers and export distributors in Europe, Japan and
in the USA.
The acquired business contributed revenue and net profit after tax (NPAT) to the Group for the year ended 30 June 2018 of
$31,391,000 and $5,718,000 respectively. If the acquisition had occurred on 2 July 2017 the Group’s revenue and NPAT for
the year would have been $2,633,701,000 and $132,477,000 respectively.
Purchase consideration:
Cash
Total
Assets acquired and liabilities assumed at the date of acquisition:
Cash and cash equivalents
Trade and other receivables
Inventories
Property, plant and equipment
Intangible assets
Payables and provisions
Deferred taxes
Derivative financial instruments
Total
116 Super Retail Group Limited • Annual Report 2018
2018
$m
138.3
138.3
2018
$m
4.5
1.0
27.0
5.9
44.5
(10.5)
(12.8)
(0.3)
59.3
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
23.
Business combinations (continued)
(a)
Subsidiaries (continued)
The fair value of receivables acquired includes trade receivables with a fair value of $461,000. The gross amount due is
$473,000 of which $12,000 is considered doubtful.
At 30 June 2018, in accordance with accounting standards, the accounting for the Macpac acquisition has been
completed on a provisional basis.
Goodwill arising on acquisition:
Consideration transferred
Less: fair value of net identifiable assets acquired
Goodwill arising on acquisition
2018
$m
138.3
(59.3)
79.0
The goodwill recognised in relation to the acquisition of Macpac is attributable to the skills and technical talent of the
employees of the acquisition and the synergies expected to be achieved from integrating the business into the Group’s
existing operations. Goodwill is not expected to be deductible for tax.
Net cash outflow on acquisition of subsidiaries:
Transaction costs (included in operating cash flows)
Cash consideration paid
Cash balance acquired
Outflow of cash
2018
$m
4.0
138.3
(4.5)
137.8
Youcamp Pty Ltd – October 2017
On 13 October 2017, the shareholders of Youcamp Pty Ltd, entered into an agreement to issue shares resulting in an increase
in the Group’s ownership interest from 51.0% to 58.68%. 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, 13 October 2017, to reflect the
change in NCI from 49.0% to 41.32%. The differential was transferred to a separate NCI Equity Reserve.
2017
During the 2017 financial year the Group changed its ownership interest in Autoguru Australia Pty Ltd as detailed below.
Autoguru Australia Pty Ltd – August 2016
On 5 August 2016, the shareholders of Autoguru Australia Pty Ltd, entered into an agreement to issue shares resulting in an
increase in the Group’s ownership interest from 61.85% to 63.1%. 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.
Ownership interest in Autoguru changed in 2018, refer to note 23(b) below.
(b)
Associates and joint ventures
Autoguru Australia Pty Ltd – February 2018
On 19 February 2018, the shareholders of Autoguru Australia Pty Ltd, entered into an agreement with OUTsurance Holdings
Limited to subscribe for and acquire shares in Autoguru Australia Pty Ltd. The transaction has resulted in a decrease in the
Group’s ownership interest from 63.1% to 49.5% and loss of control.
As a result of the loss of control of Autoguru the entity has been deconsolidated from March 2018 and equity accounted as
an associate. On loss of control the Group has deconsolidated Autoguru by derecognising the assets and liabilities and
revaluing its investment in Autoguru to fair value resulting in a gain of $6.9 million which has been recognised in other income
in the Group’s consolidated statement of comprehensive income. Trading and equity accounted losses of $2.2 million are
also included in the Group’s consolidated statement of comprehensive income.
Autocrew Australia Pty Ltd – August 2017
During the period the Group acquired a 50% ownership interest in Autocrew Australia Pty Ltd in joint venture with Robert
Bosch (Australia) Pty Ltd for $325,000. The joint venture has been established to open full service auto workshops initially in
the Greater Sydney area. The first ‘AutoCrew – Powered by Supercheap Auto’ pilot workshop opened in June 2018 and
offers drivers a full automotive service powered by Bosch’s superior diagnostic and workshops technology.
There were no investments in associates or joint ventures held by the Group as at 1 July 2017.
Super Retail Group Limited • Annual Report 2018 117
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
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 30 June 2018 of the Closed Group.
2018
$m
2,395.4
5.8
2,401.2
2017
$m
2,323.9
1.3
2,325.2
(1,323.8)
(1,281.5)
(312.6)
(78.4)
(202.5)
(304.3)
(16.9)
(1.0)
(306.6)
(79.0)
(186.4)
(317.2)
(16.3)
-
(2,239.5)
(2,187.0)
161.7
(45.1)
116.6
138.2
(39.0)
99.2
116.6
99.2
4.8
4.8
121.4
208.6
116.6
(91.7)
233.5
3.4
3.4
102.6
194.2
99.2
(84.8)
208.6
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
Share of net loss of associates and joint ventures
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
118 Super Retail Group Limited • Annual Report 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
24.
Deed of cross guarantee (continued)
(b)
Consolidated Balance Sheet
Set out below is a consolidated balance sheet as at 30 June 2018 of the Closed Group.
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
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
2018
$m
-
17.9
491.5
5.2
514.6
182.9
250.3
761.1
1,194.3
1,708.9
316.3
5.7
6.8
1.5
66.1
396.4
48.3
435.1
17.9
21.2
522.5
918.9
790.0
542.3
14.2
233.5
790.0
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
Super Retail Group Limited • Annual Report 2018 119
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
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
2018
$m
274.2
1,078.9
14.7
443.4
635.5
542.3
11.6
(1.0)
82.6
635.5
136.6
136.8
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
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.
120 Super Retail Group Limited • Annual Report 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
26.
Investments in controlled entities
The Group’s subsidiaries at 30 June 2018 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.
Equity Holding
Name of Entity
A-Mart All Sports Pty Ltd(1)
Autoguru Australia Pty Ltd(6)
Auto Trade Direct (NZ) Limited
Auto Trade Direct Pty Ltd(1)
BCF New Zealand Limited
Workout World Pty Limited(1)(2)
Coyote Retail Pty Limited(1)
Country of
Incorporation
Australia
Australia
New Zealand
Australia
New Zealand
Australia
Australia
Principal Activities
Sports retail
Auto services
Auto retail
Auto retail
Outdoor retail
Sports retail
Sports retail
Macpac New Zealand Limited(5)
New Zealand
Outdoor retail
Foghorn Holdings Pty Ltd(1)
Goldcross Cycles Pty Ltd(1)
Infinite Retail Pty Ltd
VBM Retail (HK) Limited(3)
Infinite Retail UK Limited(3)
VBM Retail NZ Limited(3)
Macpac Holdings Pty Ltd
Macpac Group Holdings Limited
Macpac Retail Pty Ltd
Macpac Limited
Macpac Enterprise
MP Finco Limited
Mouton Noir Management Pty Ltd
Mouton NOIR IP Limited
Oceania Bicycles Pty Ltd
Oceania Bicycles Limited(4)
Ray’s Outdoors New Zealand Limited
Ray’s Outdoors Pty Ltd(1)
Rebel Pty Ltd(1)
Rebel Group Limited(1)
Rebel Management Services Pty Limited(1)
Rebel Sport Limited(1)
Rebel Wholesale Pty Limited(1)
Rebelsport.com Pty Limited(1)
SCA Equity Plan Pty Ltd
SRG Leisure Retail Pty Ltd(1)
SRGS (New Zealand) Limited
SRGS Pty Ltd(1)
Australia
Australia
Australia
Hong Kong
United Kingdom
New Zealand
Australia
New Zealand
Australia
New Zealand
New Zealand
New Zealand
Australia
New Zealand
Australia
New Zealand
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Sports retail
Sports retail
Sports retail
Sports retail
Sports retail
Sports retail
Outdoor retail
Outdoor retail
Outdoor retail
Outdoor retail
Outdoor retail
Outdoor retail
Outdoor retail
Outdoor retail
Sports retail
Sports retail
Outdoor retail
Outdoor retail
Sports retail
Sports retail
Sports retail
Sports retail
Sports retail
Sports retail
Investments
Outdoor 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)
Australia
Australia
Super Retail Group Services (New Zealand) Limited
New Zealand
Super Retail Group Services Pty Ltd(1)
Super Retail Group Trading (Shanghai) Ltd
Australia
China
Auto retail
Auto retail
Auto retail
Support services
Support services
Product sourcing
2018
%
100
48.5
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
2017
%
100
63.1
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
51
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
58.68
(Wholly-owned Companies) Instrument 2016/785 issued by the Australian Securities and Investments Commission.
(2) Previously known as Coyote Retail Investments Pty Limited.
(3) Investment is held directly by Infinite Retail Pty Ltd.
(4) Investment is held directly by Oceania Bicycles Pty Ltd.
(5) Previously known as FCO New Zealand Limited.
(6) Ceased to be a subsidiary in March 2018 – refer note 23(b) - Business combinations.
Super Retail Group Limited • Annual Report 2018 121
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
27.
Key management personnel disclosures
(a)
Key management personnel compensation
Short-term employee benefits
Long-term employee benefits
Post-employment benefits
Share-based payments
2018
$
2017
$
5,768,055
7,003,923
54,336
184,258
543,148
6,549,797
49,283
190,475
1,085,428
8,329,109
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
2018
$
2017
$
28,538,241
26,392,262
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
2018
1 September 2014
1 September 2015
1 September 2016
1 September 2017
2017
1 September 2011
1 September 2012
1 September 2013
1 September 2014
1 September 2015
1 September 2016
Balance at
start of the
year
(Number)
479,724
546,500
571,775
-
1,597,999
62,702
-
368,508
506,405
575,615
-
1,513,230
Granted
during the
year
(Number)
-
-
-
734,862
734,862
-
-
-
-
-
571,775
571,775
Exercised
during the
year
(Number)
-
-
-
-
-
(62,702)
-
-
-
-
-
(62,702)
Forfeited
during the
year
(Number)
(479,724)
(35,000)
(35,000)
(10,000)
(559,724)
-
-
(368,508)
(26,681)
(29,115)
-
Balance at
the end of
the year
(Number)
-
511,500
536,775
724,862
1,773,137
Unvested at
the end of
the year
(Number)
-
511,500
536,775
724,862
1,773,137
-
-
-
479,724
546,500
571,775
-
-
-
479,724
546,500
571,775
(424,304)
1,597,999
1,597,999
122 Super Retail Group Limited • Annual Report 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
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 2018 financial year (2017: 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
2018
$m
1.1
2017
$m
2.0
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.
Super Retail Group Limited • Annual Report 2018 123
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
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.
2018
$
2017
$
(a)
(i)
PricewaterhouseCoopers Australia
Assurance services
Audit and review of financial statements
Other assurance(1)
Total remuneration for audit and other assurance services
(ii)
Taxation services
Tax compliance services, including review of Company income tax returns
Total remuneration for taxation services
(iii)
Other services
Customs prudential review
Digital advertising advisory
Workshop facilitation
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
585,570
44,721
630,291
394,329
394,329
18,500
49,572
51,601
-
119,673
1,144,293
66,924
66,924
66,924
492,100
191,700
683,800
113,368
113,368
-
-
-
50,000
50,000
847,168
66,803
66,803
66,803
Total auditors’ remuneration
(1) Cyber security audit in 2018 and Risk Appetite assurance services in 2017.
1,211,217
913,971
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. The Board has
considered the non-audit services provided during the year by the auditor, and in accordance with written advice provided
by resolution of the Audit and Risk Committee, is satisfied that the provision of those non-audit services during the year by the
auditor is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001.
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:
5.5
3.4
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.
2018
$m
2017
$m
124 Super Retail Group Limited • Annual Report 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2018
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
2018
$m
2017
$m
2.9
2.9
3.5
3.5
222.1
654.2
132.8
(54.6)
954.5
3.1
205.4
625.7
162.0
(48.3)
944.8
3.9
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 $9.9 million (2017: $11.2 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
2018
$m
3.2
6.8
10.0
(0.5)
9.5
3.0
6.5
9.5
2018
Cents
($0.08)
2017
$m
2.9
9.0
11.9
(0.7)
11.2
2.6
8.6
11.2
2017
Cents
$0.34
Net tangible asset per ordinary share is calculated based on Net Assets of $799.2 million (2017: $754.6 million) less intangible
assets of $891.6 million (2017: $750.1 million) adjusted for the associated deferred tax liability of $76.2 million (2017: $62.9
million). The number of shares used in the calculation was 197,240,020 (2017: 197,240,020).
33.
Events occurring after balance date
No matter or circumstance has arisen since 30 June 2018 that has significantly affected, or may significantly affect:
(a)
(b)
(c)
the Group’s operations in future financial years; or
the results of those operations in future financial years; or
the Group’s state of affairs in future financial years.
Super Retail Group Limited • Annual Report 2018 125
DIRECTORS’ DECLARATION
In the Directors’ opinion:
(a)
(b)
(c)
the financial statements and notes set out on pages 74 to 125 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 30 June 2018 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.
S A Pitkin
Director
Brisbane
20 August 2018
P A Birtles
Director
126 Super Retail Group Limited • Annual Report 2018
Independent auditor’s report
To the members 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:
(a)
giving a true and fair view of the Group's financial position as at 30 June 2018 and of its financial
performance for the year then ended
(b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
the consolidated balance sheet as at 30 June 2018
the consolidated statement of comprehensive income for the year then ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the notes to the consolidated financial statements, which include a summary of significant accounting
policies
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor’s responsibilities for the audit of the financial report section
of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards
Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the
Code.
PricewaterhouseCoopers, ABN 52 780 433 757
480 Queen Street, BRISBANE QLD 4000, GPO Box 150, BRISBANE QLD 4000
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 2018 127
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 $8.8 million, which represents approximately 5%
of the Group’s profit before tax.
We applied this threshold, together with qualitative considerations, to determine the scope of our audit and the
nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the financial report
as a whole.
We chose Group profit before tax from continuing operations because, in our view, it is the benchmark against which
the performance of the Group is most commonly measured.
We utilised a 5% threshold based on our professional judgement, noting it is within the range of commonly
acceptable 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, Outdoor 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.
Our audit procedures were mostly performed at this head office 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.
128 Super Retail Group Limited • Annual Report 2018
Key audit matter
How our audit addressed the key audit matter
Inventory valuation and provisions
Refer to Note 8 (Inventories), $545.5 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
year, rather than in full at the end of the year, the stock loss provision at
30 June 2018 contained a degree of estimation as to the quantity and
value of projected stock items for items not counted at the year 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 as part of the cost of inventory.
We attended a sample of 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 where we
attended cyclical counts, we obtained roll-
forward schedules showing activity in the
period between the stock count date and year
end date. We used the results of our cyclical
counts to reconcile opening balances, and year
end closing balances were reconciled to the
general ledger.
We re-performed the calculation for the
projected stock variance.
Stock valuation provision
For a sample of individual products, we
compared the recognised costs to the relevant
invoice and recalculated the allocation of
directly attributable costs.
We compared the carrying value at year end
date to the most recent sales price for a
sample of inventory items.
For a sample of seasonal and discontinued
inventory items, we compared 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 the items in stores.
Attributable overheads
On a sample basis, we considered the nature
of overhead costs capitalised by reading their
description on supporting documentation,
having regards 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 compared the amount to the
accounting records.
Super Retail Group Limited • Annual Report 2018 129
Key audit matter
How our audit addressed the key audit matter
Macpac business combination
Note 23 (Business Combinations), $79.0 million goodwill
To evaluate the accounting for Macpac we performed a
number of procedures, including the following:
During the year, the Group completed the acquisition accounting in
respect of the acquisition of Macpac Holdings Pty Ltd (“Macpac”).
Macpac is a vertically integrated outdoor apparel and equipment
retailer with 54 stores across Australia and New Zealand. The Group
acquired 100% of Macpac’s net assets on 5 April 2018 (effective date 31
March 2018) for a purchase consideration of $138.3 million. As part of
this acquisition, tangible assets of $27.8 million, the brand name of
$44.3 million and net deferred tax liabilities of $12.8 million have been
recognised in the financial report.
The accounting for the acquisition of Macpac was a key audit matter
because it is a financially significant transaction for the Group, and the
level of judgement in the value of the brand asset recognised at
acquisition date.
Valuation of tangible and intangible assets
Note 10 (Intangible assets), $525.9 million goodwill, $253.3 million
brand names and $112.4 million computer software
Developed an understanding of the
transaction through discussions with
management, reading the acquisition
accounting paper, share sale agreement and
attending Macpac stores and distribution
centres (as part of stock count procedures).
Compared the consideration paid as per the
share sale agreement to relevant bank
statements.
Assessed management’s expert valuation
methodology for the recognition of the brand
intangible asset valued using the relief from
royalty method in light of the requirements of
Australian Accounting Standards, and the key
assumptions therein, including forecast future
financial performance, discount rate and
royalty rate.
Evaluated the Group’s assumptions on the
useful life of the brand asset, this included
discussions with management on the history
of the brand and the Group’s intentions for the
future use of the brand.
Assessed the competence and capability of
management’s expert.
Assessed the mathematical accuracy of the
Group’s calculation of the resulting goodwill
arising on the purchase price allocation (PPA)
calculation.
Evaluated the Group’s assumptions on the
deferred tax liability recognised on the brand
asset in light of the requirements of Australian
Accounting Standards.
Considered the completeness of the
recognition of intangible assets by reference to
the share sale agreement and the
requirements of the Australian Accounting
Standards
Considered the related provisional business
combination disclosures in the financial
report in light of the requirements as set out in
the Australian Accounting Standards.
Goodwill and the Rebel Sport & Macpac brand name
We assessed the valuation models by:
Note 9 (Property, plant and equipment), $270.4 million
Checking the mathematical accuracy of all
calculations in the models.
Assessing the discount rates used in the
130 Super Retail Group Limited • Annual Report 2018
Key audit matter
How our audit addressed the key audit matter
Goodwill and the Rebel Sport brand name $734.9 million
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
Macpac brand name $44.3 million
Upon acquisition, the directors determined that Macpac’s goodwill
should be allocated to the Outdoor CGU.
The methodology applied in the valuation model is consistent with the
models described above for Rebel Sports.
The valuation of goodwill and brand names 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 $112.4 million
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
sensitivities was within an acceptable range,
which was determined taking into account
market data and historical data.
Evaluated the Group’s assessment that the
useful lives of indefinite life brand name
remained appropriate at year end. This
included discussions with management to
understand the Group’s future strategy.
The Group has undertaken significant development of software in
relation to the omni-channel customer programme and omni-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.
Property Plant & Equipment $270.4 million
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).
Computer software
For a sample of software capitalised during the year, we
performed the 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
useful life estimated for software by
comparing it to industry benchmark data.
Property Plant & Equipment
The key assumptions and judgements applied by the directors in the
impairment tests were:
We performed the following procedures, amongst
others:
The individual retail store contribution margin
The strategic initiatives in place for individual stores with
negative Group contribution margins.
Obtained management’s assessment of the
profitability of all individual stores and their
contribution margin 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.
Super Retail Group Limited • Annual Report 2018 131
Key audit matter
How our audit addressed the key audit matter
Outdoor restructuring
Directors’ Report (Operating and Financial Review), $13.0 million
As part of the Macpac acquisition plan, the Group will integrate its
profitable Ray’s stores into the Macpac business in the fourth quarter of
the coming financial year. Costs associated with the business
restructuring and integration incurred during the reporting period total
$13.0 million before tax.
The outdoor restructuring provision was a key audit matter because of
the judgements used in calculating the restructuring provision,
specifically onerous leases and associated fixed asset impairment.
For the fixed assets and leasehold improvements we
ensured completeness of the listing by ensuring only
items from onerous stores had been written off.
For the Ray’s onerous lease provision, we performed
the following procedures over the Group’s calculations
and assumptions:
We 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 the remaining leases
Compared the discount rate applied in the
calculation to the government bond rate,
which we consider was an appropriate
benchmark rate.
Provision for store set-up activities
Note 14 (Provisions) $7.9 million for estimated additional overtime
and allowances and $2.7 million for interest and on-costs.
In assessing the provision for additional overtime and
allowance payments, our procedures included the
following:
The Group has identified that team members involved in store set-up
activities should have received additional amounts to the amounts paid.
The Group expects that remediation of this issue will be completed in
the next financial period.
The Group has determined an estimate of the impact for this payment
of $7.9 million for estimated additional overtime and allowances to
current and former team members, and $2.7 million for interest and on-
costs.
The provision for store set-up activities was a key audit matter because
of the estimation uncertainty and judgements used in determining the
overtime and allowance payments to be considered and calculating the
provision and the nature of the matter.
Developed an understanding of the basis for
management’s best estimate of the provision
and the nature of the estimation uncertainty at
balance date
Tested the accuracy and completeness of
management’s model by agreeing the model
inputs to the supporting documentation and
checking inclusion in the model of data from
relevant source.
Stress-tested the key assumptions in the
models, being overtime hours and work
patterns, noting that the valuation under these
sensitivities was within an acceptable range,
which was determined by us, taking into
account historical data and professional
judgement.
Tested the mathematical accuracy of the
provision and its appropriateness in light of
the requirements of Australian Accounting
Standards.
We also considered the adequacy of the disclosures
made in the financial statements, including their
appropriateness under Australian Accounting
Standards.
132 Super Retail Group Limited • Annual Report 2018
Other information
The directors are responsible for the other information. The other information comprises the information
included in the Group’s annual report for the year ended 30 June 2018, but does not include the financial
report and our auditor’s report thereon. Prior to the date of this auditor’s report, the other information we
obtained included the Director’s report. We expect the remaining other information to be made available to
us after the date of this auditor’s report, including Our business, Chairman's and CEO's messages, Group
strategy, Board of Directors and Group Leadership Team, Our people, Sustainability, Directors' report and
Shareholder information.
Our opinion on the financial report does not cover the other information and we do not and will not express
an opinion or any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent with the
financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of this
auditor’s report, we conclude that there is a material misstatement of this other information, we are required
to report that fact. We have nothing to report in this regard.
When we read the other information not yet received as identified above, if we conclude that there is a
material misstatement therein, we are required to communicate the matter to the directors and use our
professional judgement to determine the appropriate action to take.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a true and
fair view in accordance with Australian Accounting Standards and Corporations Act 2001 and for such
internal control as the directors determine is necessary to enable the preparation of the financial report that
gives a true and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations,
or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with the Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of the
financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and
Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This
description forms part of our auditor's report.
Super Retail Group Limited • Annual Report 2018 133
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 54 to 71 of the directors’ report for the year
ended 30 June 2018.
In our opinion, the remuneration report of Super Retail Group Limited for the year ended 30 June 2018
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
20 August 2018
134 Super Retail Group Limited • Annual Report 2018
SHAREHOLDER INFORMATION
For the period ended 30 June 2018
The shareholder information set out below was applicable as at 16 August 2018.
Number of Shareholders
There were 10,077 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
4,950
4,152
620
311
44
10,077
-
11
10
36
5
62
There were 543 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
CITICORP NOMINEES PTY LIMITED
SCCASP HOLDINGS PTY LTD
BNP PARIBAS NOMINEES PTY LTD
BNP PARIBAS NOMS (NZ) LTD
MR PETER ALAN BIRTLES
MR PETER ALAN BIRTLES
EQUITAS NOMINEES PTY LIMITED
AMP LIFE LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
EQUITAS NOMINEES PTY LIMITED
EQUITAS NOMINEES PTY LIMITED
EQUITAS NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
Ordinary shares
Number held
Percentage of
issued shares
56,575,423
41,813,461
24,815,937
14,857,978
9,069,817
7,104,950
5,184,015
1,257,455
1,078,703
789,500
722,258
675,000
665,000
602,372
579,907
575,364
567,302
547,135
535,391
535,086
28.68%
21.20%
12.58%
7.53%
4.60%
3.60%
2.64%
0.64%
0.55%
0.40%
0.37%
0.34%
0.34%
0.31%
0.29%
0.29%
0.29%
0.28%
0.27%
0.27%
168,552,054
85.46%
Super Retail Group Limited • Annual Report 2018 135
SHAREHOLDER INFORMATION (continued)
For the period ended 30 June 2018
C.
Substantial shareholdings
As at 16 August 2018, there are four substantial shareholders that the Company is aware of:
Name
SCA FT PTY LTD
MACQUARIE GROUP LIMITED
YARRA FUNDS MANAGEMENT
VINVA INVESTMENT MANAGEMENT
D.
Unquoted equity securities
Ordinary shares
Number held
Percentage of issued
shares
Date of most
Recent notice
56,954,670
10,720,317
12,841,080
12,007,196
28.99%
5.43%
6.51%
6.09%
02/08/2013
30/11/2017
29/06/2018
02/08/2018
As at 16 August 2018, there were 1,773,137 unlisted performance rights, granted to 62 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.
136 Super Retail Group Limited • Annual Report 2018
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: +61 7 3482 7900
Facsimile: +61 7 3205 8522
Website Address
www.superretailgroup.com
KEY DATES FOR SHAREHOLDERS
Event
Date(1)
Annual General Meeting (2)
24 October 2018
Final Dividend Ex-Date
29 August 2018
Final Dividend Record Date
30 August 2018
DRP Election Date
31 August 2018
Final Dividend Payment Date
2 October 2018
Interim Results Announcement
13 February 2019
Interim Dividend Ex-Date
21 February 2019
Interim Dividend Record Date
22 February 2019
DRP Election Date
25 February 2019
Interim Dividend Payment Date
27 March 2019
Securities Exchange
Super Retail Group Limited (SUL) shares are
quoted on the Australian Securities Exchange
(1) If there are any changes to these dates, the Australian Securities
Exchange will be notified accordingly.
(2) The 2018 Annual General Meeting of the Shareholders of Super Retail
Group Limited will be held at the PwC Offices, Apollo Room Level 23,
480 Queen Street, Brisbane Queensland.
Share Registry
Link Market Services
Level 12, 680 George Street
SYDNEY NSW 2000 Australia
Telephone: 1300 554 474
+61 2 8280 7100
www.linkmarketservices.com.au
Solicitors
King & Wood Mallesons
Auditors
PricewaterhouseCoopers
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