Annual
Report 2020
Contents
P2
Summary
P4
Chairperson’s Report
P5
CEO’s Report
P7
Financial Report
P8
Director’s Report
P11
Remuneration Report
Temple & Webster Group Ltd ABN 69 608 595 660
P19
Auditor’s Independence
Declaration
P20
Consolidated Financial
Statements
The
furniture
of your
dreams,
Delivered
P24
Notes to the Consolidated
Financial Statements
P52
Directors’ Declaration
P53
Independent Auditor’s Report
P58
Shareholder Information
P60
Corporate Directory
Annual Report 2020
1
Summary
FY20 Revenue
FY19 Revenue
$176.3m
74% growth YoY
$101.6m
FY20 EBITDA
$8.5m
483% growth YoY
FY19 EBITDA
$1.5m
June 20 Cash
June 19 Cash
$38.1m
$13.5m
June 20 cash balance excludes proceeds from recent $40 million placement.
Both FY19 and FY20 numbers take into consideration the new lease accounting standard AASB16.
2
Temple & Webster Group Ltd
• H2 revenue up 96% vs
pcp; Q4 revenue up
130% vs pcp
• Temple & Webster is the
online market leader in
furniture & homewares
• Large addressable
market with accelerating
online adoption
• Business is profitable
with strong top-line
growth and a debt free
balance sheet
Sources: Euromonitor International Limited; Home Furnishings and Homewares System 2019 edition. IBISWorld Industry
Report OD4176 Online Household Furniture Sales in Australia.
3
Annual Report 2020 Chairperson’s
Report
Strong Balance Sheet
Our strong bottom line result combined with the negative
working capital nature of the business, meant we finished the
year with $38.1 million in cash and zero debt, which excludes
the proceeds from the $40 million raise conducted at the
beginning of FY21. We believe we have one of the strongest
balance sheets of our peers, which will not only protect us in
any down-side scenario, but also allow us to pursue strategic
opportunities, both organic and inorganic as they arise.
During this period of significant uncertainty, we believe there
will be opportunities for the strong to get stronger.
Looking ahead
While it is impossible to predict the future, millions of
Australians are now experiencing the benefits of online
shopping, including range, convenience and value. We
believe now is the time to invest in our customer proposition
and brand awareness to ensure that we are the first place
Australians turn to when shopping for their homes for the
next generation of furniture buyer. As such our strategy
remains to deliver a high growth business while remaining
profitable.
On behalf of the directors of the Group, I would like to thank
you, our shareholders, for your continued support and
contribution. We look forward to another great year in FY21.
stephen heath
Non-Executive Chairperson
Dear shareholders,
On behalf of the Board of Directors, it gives me great
pleasure to present the 2020 Annual Report.
Significant growth in challenging times
FY20 has certainly been a challenging year for the country,
however we are proud to say that Temple & Webster has
been able to support Australia through these tough times.
This year saw our fastest growth since listing, with top line
revenue growth of 74% year on year. This growth accelerated
during the year, with the second half growing 96% and the
fourth quarter up 130% vs pcp. While the COVID-19 crisis
accelerated our growth, it is important to remember that we
started the year growing more than 50% year on year which
speaks to the underlying strong fundamentals of our market
and competitive positioning.
Temple & Webster’s core furniture and homewares retail
market is worth ~$15b. While the Australian online retail
market continues to grow, it remains underpenetrated
compared to other markets. Euromonitor estimates only 5.1%
of sales are made online (vs 16.6% in the UK and 15.2% in the
US). The lock-downs and forced offline retail closures have
no doubt accelerated the adoption of online shopping in
our category, however we believe these trends were already
at play as the oldest millennials enter their prime furniture
buying years (35-65 years). This generation of shopper has
already adopted online shopping to a high degree in other
categories such as fashion and appliances, and we believe the
furniture and homewares category is next.
It is also important to remember that the above market size
is just our core furniture & homewares categories. As we
continue to expand our efforts into new addressable markets
such as home improvement and the B2B market (e.g. offices,
developers, hospitality businesses), our addressable market
becomes larger. With these additional markets, we estimate
our total addressable market is closer to ~$30 billion. This
large addressable market and underlying consumer shift from
offline to online, should help us deliver strong growth for
many years to come.
Visible Operating Leverage
Pleasingly, the strong top line revenue growth has made
visible the inherent operating leverage in our business with
EBITDA growing 483% year on year to $8.5 million for the
year. While we continue to make investments into areas such
as our technology, private label and logistics, as an online-
only company we are able to scale our revenue without
needing to scale costs proportionately leading to leverage
of the fixed cost base. This has meant our adjusted EBITDA
margins improved from 2.5% in FY19 to 5.3% in FY20.
4
Temple & Webster Group Ltd CEO’s
Report
Dear fellow shareholders,
FY20 was certainly a year to remember. From suffering
through one of the worst bushfire seasons on record, to
fighting a global pandemic, it has been an incredibly rough
period for the country. It’s also times like these which remind
us of the importance of our homes. Whether it’s the fear
of losing them, or the long days being locked down inside
them, our homes have never been more important. Temple
& Webster’s core belief has always spoken to the desire of
humans to have safe, beautiful spaces in which to live and
work. We are proud that we have been able to keep helping
our customers achieve that during these tough times.
Scaling the business while focusing on the
customer
Most of our efforts during the second half concentrated on
scaling the business during these unprecedented times. We
worked hard on ensuring all of our key vendors were stable;
we deployed our buying teams to work with onshore and
offshore suppliers to secure stock; we added 180 people
across the business, all while moving to a work from home
environment both onshore and offshore. We also raised
$40 million in July 2020 to secure our balance sheet and
provide us the flexibility to act on strategic plays as they
develop.
I am most proud of the fact that we did everything
aforementioned while significantly improving our customer
satisfaction which is running at record levels. We actually
could have grown faster during the last quarter however we
chose to prioritise the customer experience over short term
revenue growth, to ensure the customers who were trialing
online shopping for their homes for the first time had a great
experience with us, and therefore come back.
Active customers up 77%
Our Active Customers grew 77% year on year to almost
half a million with growth across both first time and repeat
customers. Pleasingly, our customer and marketing metrics
stayed strong and our 12 month marketing ROI remained at
2.6x which means our marketing budget is being deployed
profitably. Our conversion rate also grew, even in the face of
massive increases in traffic to the site.
Our aided brand awareness grew to 35% over the year,
and continuing that growth to ensure Temple & Webster
becomes a national brand remains a key focus. At the end of
the financial year we trialled our first (at scale) TV advertising
campaign, with a free to air campaign on the Eastern
seaboard backed by a national Foxtel campaign. While
we remain a digital performance marketer at heart, we will
continue to look at channels which may increase our reach
provided the return makes sense.
Growing market share
The good news is that we are growing our market share
even as our competitors take online more seriously. The NAB
online sales index suggests our category grew around 50%
during the months of April and May, while we grew more
than 130%. We believe this is due to the increasing benefits
of scale as we get larger. We are forging closer relationships
with our suppliers as we become a more significant part of
their business which allows us to obtain stock security, better
terms and exclusive product ranges.
We are also making larger investments in areas such as
technology and data, brand awareness and our private label
products; and we can produce more content by having more
studios and creative resources. In effect the bigger we get,
the better and stronger our customer proposition becomes,
which is a virtuous cycle.
Launch of Mobile App
During the second half, we received approval from the iOS
store for the launch of Temple & Webster’s first mobile
app. The app is now available in the app store and we are
monitoring how our customers are using it to understand
whether to invest more into this space. Subject to the iOS
version being a success, we will begin work on an Android
version in FY21. We already see more than half of our traffic
coming from mobile devices to use our mobile optimised
website, so a mobile app is the next step to capitalise on this
shift in consumer behaviours.
Investing in our digital capabilities
We completed a small investment into an offshore AI based
interior design start-up, along with a long term commercial
partnership. We are working on the first product launch being
AI generated room ideas, allowing customers to complete a
room look based on the product they are shopping. Shopping
for your home can be tricky and our job is to make it as easy
and as risk free as possible for our customers. Tools such as
these can only help with that goal.
Range Expansion
Over the year we grew our range from ~150,000 to over
180,000 products. We also have expanded our range into
home improvement categories such as bathroom and kitchen
fittings and fixtures and window coverings. While early days,
we see our brand naturally extending to these categories
as a place to make your home beautiful. We have made
investments into our private label team including adding
buyers and planning support, and have expanded both the
breadth and depth of our private label range, growing the
share of private label from 17% in 2HFY19 to over 20% in the
second half of FY20. Our preference remains to work with a
great and diverse set of drop ship suppliers, however we will
continue to use our private label offer to fill product and price
gaps, and further differentiate our offer.
5
Annual Report 2020 CEO’s
Report (cont.)
Inspiring customers through new formats
During the year we added a second studio space to allow us
to increase our inspirational content output including adding
more video. We have also started building our library of 3D
models of our best sellers, as we believe 3D has significant
applications in our space. Whether it be from generating
lifestyle rendered images, to being able to see products at
scale in the home using augmented reality, there are many
uses which we are excited about and should help improve
conversion rates and basket size.
Improving the delivery experience
Our net promoter score improvements speak to some
significant improvements we have made in our logistics and
operations function. One of the main projects completed
this year was the data integration with our main carriers
which allows us to provide end to end tracking of each order,
allowing a better customer experience and early identification
and resolution of problems. We have also opened our
second distribution centre (3PL) for our private label range,
allowing orders to be delivered to customers faster and more
efficiently. In FY21 our focus is on launching new delivery
options in checkout.
B2B Division grew 68%
Our Trade & Commercial division (B2B) grew a healthy
68% over the year despite a tough Q4 in which many
businesses reduced their capital spends. Over the half, the
team launched our full service offering in Queensland which
includes preparing design concepts, installing and assembling
the product, and styling the space. We also reorganised
ourselves into sector specific teams which allows a greater
focus on the client’s needs and ensures we have the right
products for that vertical. We remain bullish about the long
term potential of this area of the business.
Giving back
As previously announced, Temple & Webster has partnered
with Women’s Community Shelters (WCS), the leading
sector expert in establishing and running shelters for victims
of domestic violence and homelessness in NSW. During the
year, Temple & Webster worked with WCS on a new shelter in
Mosman which involved furnishing 18 apartments as transition
spaces for women over 55. We also participated in the ‘All In’
Bushfire shopping event, where we raised more than $60,000
for the Red Cross to help those affected by the terrible
bushfires over summer.
Thanking our employees
This year, the adaptability and resilience of the Temple &
Webster team really shone through. Doubling the size of the
business in the space of a couple of months, while dealing
with all of the pain that goes with working from home, while
improving our customer experience is no mean feat and I am
6
proud of the entire team for stepping up during this time.
As a thank you to our team’s hard work, this year all of our
employees received $1,000 in shares, and for those employed
for more than 6 months an extra $2,000 in cash. Without the
team we have, we would not be in the position we are in today.
Where to from here
Our strategy is simple;
• We will keep improving our range to ensure it remains
the biggest and best, including expanding our private
label range.
• We will continue to drive our digital advantage, including
making better use of our immense amounts of data
through initiatives such as personalisation.
• We will continue the march towards national brand
status to ensure we are the first place Australians turn to
when shopping for their homes, through both online and
offline channels.
• One of our key pillars is inspiration, and this year we are
increasingly turning to 3D, and we are in the process of
building our 3D model library and adding resources and
tools to make use of those assets.
• We will continue to improve our customer care team
through better training and platforms. We will also be
adding more delivery options such as after hours and
weekend delivery to continue to improve our offer.
• And of course, Trade & Commercial provides another
growth opportunity outside of our core B2C market,
and we will continue to invest into our team, range and
service proposition to win market share in this segment.
Our primary focus is to build on each of our strategic pillars
organically, although the recent capital raise has allowed us to
consider inorganic investments, where they make sense and
align to these pillars.
Even though the world is in uncertain times, we remain
committed to our longer term strategy of investing to ensure
Temple & Webster is the brand for the next generation of
furniture shoppers. We want Temple & Webster to be the
first place Australians turn to when shopping for their homes
and work spaces. We believe that online shopping habits are
right now being formed, and provided we keep putting the
customer at the heart of everything we do, those habits will
remain.
mark coulter
Chief Executive Officer
Temple & Webster Group Ltd Financial
Report 2020
The Directors of the Temple & Webster Group
present their report, together with the consolidated
financial report for the year ended 30 June 2020.
7
Annual Report 2020 Temple & Webster Group Ltd
Directors' report
30 June 2020
The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'Group')
consisting of Temple & Webster Group Ltd (referred to hereafter as the 'Company' or 'parent entity') and the entities it controlled at the
end of, or during, the year ended 30 June 2020.
Directors
The following persons were directors of Temple & Webster Group Ltd during the whole of the financial year and up to the date of this
report, unless otherwise stated:
Stephen Heath
Susan Thomas
Conrad Yiu
Mark Coulter (appointed on 23 October 2019)
Principal activities
Temple & Webster is Australia’s leading online retailer of furniture and homewares.
Temple & Webster has over 180,000 products on sale from hundreds of suppliers. The business runs an innovative drop-shipping model,
where products are sent directly to customers by suppliers, enabling a larger product range, faster delivery times and reducing the need
to hold inventory.
The drop-ship range is complemented by a private label range which is sourced directly by Temple & Webster from overseas suppliers.
The Temple & Webster Group is headquartered in Sydney, Australia and is listed on the Australian Securities Exchange under the code
TPW.
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Financial and operational review
Revenue for financial year 2020 was $176,342,000 (2019: $101,613,000) with a net profit after tax of $13,909,000 (2019: $3,764,000).
Revenue
Gross margin
%
EBITDA
Net profit after tax
Cash balance
30/06/2020
$m
30/06/2019
$m
176.3
78.6
44.6%
8.5
13.9
38.1
101.6
45.3
44.6%
1.1
3.8
13.5
Key financial and operational metrics for the year ended 30 June 2020 include:
• Revenue growth of 74% with H2 delivering 96% vs pcp, driven primarily by growth in active customers.
• EBITDA increased by 673% (483% if FY19 restated for AASB 16 purposes) as a result of higher gross margin dollars and tight
management of fixed costs.
• Gross margin % in line with last year at 44.6%
• Cash flow positive with an ending cash balance of $38.1m and no debt (ending cash balance excludes proceeds from
placement undertaken in July 2020)
• Active customer growth of 77%
• Customer satisfaction reached record levels in Q4 (NPS 65%+)
The Group has adopted the new lease accounting standard AASB 16 using the modified retrospective method, resulting in an adjustment
to the opening balance of retained earnings. The comparative period has not been adjusted. The implementation of AASB 16 resulted
in a decrease in other expenses and an increase in depreciation and finance costs in the current financial year. Therefore, the current
year EBITDA is higher by $0.4 million than it would have been if the new standard had not been implemented. Refer to the Group’s FY20
results presentation for like comparisons and further commentary on the Group’s financial results.
The Group acknowledges that there are business risks that could have a material impact on future financial position and performance for
which management have established business continuity plans and risk mitigation strategies to manage key risks across the Group.
Refer to the Group’s ASX announcement issued on 1 July 2020 for further details on the key business risks associated with Temple &
Webster.
8
2
Temple & Webster Group Ltd Temple & Webster Group Ltd Directors’ Report
Temple & Webster Group Ltd
Directors' report
30 June 2020
Significant changes in the state of affairs
There were no significant changes in the state of affairs of the Group during the financial year.
Matters subsequent to the end of the financial year
The Group successfully completed a $40 million placement on 2 July 2020 via the issue of approximately 7.0 million new fully paid
ordinary shares. The purpose of this raise was to strengthen the balance sheet and enable the Group to pursue organic and inorganic
growth opportunities.
The Group also made a small investment into a start-up company developing AI interior design tools.
No other matter or circumstance has arisen since 30 June 2020 that has significantly affected, or may significantly affect the Group's
operations, the results of those operations, or the Group's state of affairs in future financial years.
Likely developments and expected results of operations
Likely developments in the operations of the consolidated entity and expected results of those operations are contained in the
Chairperson’s and the CEO’s reports.
Environmental regulation
The Group is not subject to any significant environmental regulation under Australian Commonwealth or State law.
Share Options
Unissued shares
As at the date of this report and at the reporting date, there were 5,543,078 unissued ordinary shares under options. Refer to the
remuneration report for further details of the options outstanding for Key Management Personnel (‘KMP’).
Information on directors
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interest in options over shares:
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interest in options over shares:
Stephen Heath
Independent Non-Executive Director and Chairperson
Graduate of the Australian Institute of Company Directors.
Stephen is a specialist in consumer goods brand management with over 25 years of
manufacturing/wholesale distribution and retail experience. Stephen spent 16 years as CEO
of some of Australia’s best-known consumer brands that includes Rebel Sport, Godfrey’s and
Fantastic Holdings with operations experience in Australia, New Zealand, and Asia.
His experience includes working for both ASX Listed and Private Equity owned companies.
Board Chairperson of Shiro Holdings Limited (appointed on 24 October 2019) and Director of
Redhill Education Limited (appointed on 1 September 2019).
Non-Executive Director of Funtastic Limited (appointed on 18 October 2010 and resigned on 6
February 2019).
Chair of the Board and the Nomination and Remuneration Committee
184,000
181,026
Susan Thomas
Independent Non-Executive Director
Bachelor of Commerce and Bachelor of Law from the University of New South Wales.
Susan is an experienced company director and audit and risk committee chair. Susan has
expertise in technology and law. Susan founded and was the Managing Director at FlexiPlan
Australia, an investment administration platform sold to MLC.
Director of Fitzroy River Holdings Limited (appointed on 26 November 2012)
Board Chairperson of Alexium International Group Limited (appointed to Board on 10 December
2017, Chairperson on 8 May 2018 and resigned on 31 March 2019). In February 2020, Fitzroy
River Holdings Limited acquired 100% of Royalco Resources Limited (‘Royalco’). Accordingly,
Royalco is no longer a listed entity, however, Susan Thomas is still a director of Royalco
(appointed on 22 February 2017).
Chair of the Audit and Risk Management Committee
Nil
181,026
3
9
Annual Report 2020 Annual Report 2020
Temple & Webster Group Ltd
Directors' report
30 June 2020
Information on directors (continued)
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interest in options over shares:
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interest in options over shares:
Conrad Yiu
Non-Executive Director
Bachelor of Commerce from the University of New South Wales and a Master of Business
Administration from the University of Cambridge.
Conrad is a co-founder of Temple & Webster and joined the Board on its formation in July 2011.
Conrad was Chairperson of the Company until immediately prior to the IPO. Conrad has over
25 years commercial and advisory experience with a focus on investing in, acquiring and
building high growth businesses in the consumer and technology sectors. Conrad was
previously Director of Corporate Development with the digital division of Newscorp Australia
(formerly News Digital Media), co-founder and Director of a London-based mobile technology
company, a manager at Arthur Andersen and is a principal of ArdenPoint, an investment firm
which he co-founded with Mark Coulter in 2011, the CEO of Temple & Webster Group Ltd.
Conrad is currently a co-founder and partner of AS1 Growth Partners, a private investment firm
focused on growth & technology investments in public and private markets.
None
None
None
2,807,018 ordinary shares
181,026
Mark Coulter
Executive Director
Bachelor of Laws and Bachelor of Science (Biochemistry) from the University of Sydney.
Mark is a co-founder of Temple & Webster and has been involved as an advisor to the Group
since its inception. Previously, Mark worked at News Limited where he was Director of Strategy
for the Digital Media properties and managed a portfolio of businesses including Moshtix, a
digital ticketing company. Mark was also a solicitor at Gilbert + Tobin and management
consultant at McKinsey & Company. Mark co-founded the National Online Retailers Association
and is a co-founder of ParcelPoint/Fluent Retail, a logistics and technology company servicing
many of Australia's largest online and omni-channel retailers.
None
None
Chief Executive Officer
4,671,312 ordinary shares
5,000,000
'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all other types of
entities, unless otherwise stated.
'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and excludes
directorships of all other types of entities, unless otherwise stated.
Company secretary
Michael Egan is Company Secretary of Temple & Webster Group Ltd. He has a range of experience in the Chartered Accounting
profession, business and consulting. Michael has held Directorships and has been Company Secretary in ASX listed companies and in
Australian subsidiaries of multi-national companies including Anglo-Australian Group, Rio Tinto and Hoechst (Germany).
Meetings of directors
The number of meetings of the Group’s Board of Directors ('the Board') held during the year ended 30 June 2020, and the number of
meetings attended by each director were:
Full Board
Nomination and Remuneration
Committee
Audit and Risk Management
Committee
Attended
Held
Attended
Held
Attended
Held
Stephen Heath
Susan Thomas
Conrad Yiu
Mark Coulter
7
7
7
5
7
7
7
5
3
3
-
-
3
3
-
-
4
4
4
-
4
4
4
-
Held: represents the number of meetings held during the time the director held office.
10
4
Temple & Webster Group Ltd Temple & Webster Group Ltd Directors’ Report continued
Temple & Webster Group Ltd
Directors' report
30 June 2020
Remuneration report (audited)
The Directors of Temple & Webster Group Ltd present the Remuneration Report (the Report) for the Company and its controlled entities
for the year ended 30 June 2020. This Report forms part of the Directors’ Report and has been audited in accordance with section 300A
of the Corporations Act 2001.The Report provides an explanation of the remuneration strategy of the Group for non-executive directors
and executives. The strategy complies with the requirements of the Corporations Act 2001 and takes into account the ASX Corporate
Governance Principles.
For the purposes of this report, “executive” means the Chief Executive Officer (‘CEO’), the Chief Financial Officer (‘CFO’) and the Chief
Experience Officer (‘CXO’). Key Management Personnel (‘KMP’) are defined as those persons having authority and responsibility for
planning, directing and controlling the major activities of the Group, directly or indirectly, including any director (whether executive or
otherwise) of the Group.
Key Management Personnel
Non-Executive Directors
Stephen Heath
Sue Thomas
Conrad Yiu
Executives
Mark Coulter
Mark Tayler
Adam McWhinney
Chairperson (Board and Nomination and Remuneration Committee)
Non-Executive Director and Audit and Risk Management Committee Chairperson (Independent)
Non-Executive Director
Chief Executive Officer/Executive Director
Chief Financial Officer
Chief Experience Officer
The remuneration report is set out under the following main headings:
• Principles used to determine the nature and amount of remuneration
• Details of remuneration
• Share-based compensation
• Additional disclosures relating to KMP
• Security dealing policy
Principles used to determine the nature and amount of remuneration
Nomination and Remuneration Committee
The Nomination and Remuneration Committee provides advice, recommendations and assistance to the Board on all matters relating to
executive and non-executive director remuneration.
The objective of the Committee is to ensure that the Group attracts and secures the appropriate level of talent, skills and expertise to its
Board and executive leadership team to lead and govern the Group’s strategic, operational and financial objectives.
Executive remuneration
The Board’s remuneration strategy and framework is designed to link executive remuneration to the achievement of the Group’s major
strategic objectives and ultimately to the creation of shareholder value.
The remuneration policy is focused on the delivery of a strategy for the successful recruitment, retention and development of its executives
and KMP. Accordingly, the Board ensures that remuneration packages are competitive with comparable roles in similar companies. This
is essential in attracting the calibre of executive required to achieve the objectives of the Group.
Remuneration framework
The Group adopts an executive remuneration framework that promotes:
•
•
a performance and success culture, and
incentive and reward for achieving the Group’s major strategic objectives which are aligned to the creation of shareholder value.
Guiding principles
The underlying guiding principles of the Board’s remuneration strategy in establishing executive packages are:
1. Market competitive and fair
Total fixed remuneration (base salary and superannuation) is both competitive in the market and fair to the executive when
considering the responsibilities of the role.
2. Performance orientated
An “At Risk” component of remuneration is rewarded for performance through the achievement of the Group’s major strategic
objectives. Each executive has individual performance hurdles and measures that are aligned to the Group’s objectives.
5
11
Annual Report 2020 Annual Report 2020
Temple & Webster Group Ltd
Directors' report
30 June 2020
Principles used to determine the nature and amount of remuneration (continued)
3. Aligned with shareholders and encourage ownership
The majority of the “At Risk” component of remuneration is rewarded through shares in the Company. This encourages executives
to adopt principles that will support long-term sustainable performance and growth of the Group.
4. Founded on integrity and transparency
Future business and market developments may support innovation in the Board’s remuneration strategy in response to change. All
enhancements to executive package design will be established with integrity and transparency.
Package components
The Remuneration Framework consists of the following components:
•
• At risk annual short-term incentive (‘STI’)
• At risk long-term incentive (‘LTI’)
Fixed annual remuneration - Includes base salary including any non-cash benefits paid in lieu of salary and superannuation.
Benchmarking remuneration
Short term incentive
Long term incentive
Ensures employees are rewarded fairly
and appropriately for their contribution to
the Group’s success by benchmarking
against comparable positions in
comparable organisations.
Independent remuneration advice and
guidance is sought to ensure
remuneration is set competitively relative
to industry peers and similarly sized
publicly listed companies.
Gender remuneration analysis is
undertaken and corporate objectives are
established to achieve parity between
male and female remuneration for like
roles.
The STI is tied to achievement of business
objectives over the short term (12
months).
The STI could be a combination of equity
in the Company and/or cash, the make-up
of which is determined at the Board’s
discretion.
STIs are measured on achievement of
both financial and non-financial KPIs to
create innovation and growth.
STI performance targets are based on
Group and Individual KPIs, which are set
at the beginning of the performance period
and are aligned to business level strategic
priorities.
Each participant might need to meet a
service condition for STI (performance
rights) to vest.
The LTI aims to motivate, retain and
reward senior management, and has been
designed to align the interests of
executives and senior management with
the interests of shareholders.
The LTI is in the form of equity in the
Company.
LTI performance targets might be based
on share price hurdles, which are set at
the beginning of the performance period
and are aligned to business level strategic
priorities.
Each participant might need to meet a
service condition for LTI (performance
rights) to vest.
Employee equity plans
The Board has at its disposal the following plans available for the benefit of employees and directors:
• Employee Performance Rights Plan
• Employee Share Options Plan
• Non-executive Directors Equity Plan
Use of remuneration consultants
In the previous financial year, remuneration consultants were engaged to assist the Board to ensure employment contracts are
contemporary in nature to attract and retain executive talent whilst being totally aligned to creating shareholder value. The
recommendations from this consulting pertained to the previous financial year and the current financial year. No further recommendations
were obtained in this financial year.
An agreed set of protocols were put in place to ensure that the remuneration recommendations would be free from undue influence from
KMP. These protocols include requiring that the consultant not communicate with affected KMP without a member of the Nomination and
Remuneration Committee being present, and that the consultant not provide any information relating to the outcome of the engagement
with the affected KMP. The Board is also required to make inquiries of the consultant's processes at the conclusion of the engagement
to ensure that they are satisfied that any recommendations made have been free from undue influence. The Board is satisfied that these
protocols were followed and as such there was no undue influence.
12
6
Temple & Webster Group Ltd Temple & Webster Group Ltd Directors’ Report continued
Temple & Webster Group Ltd
Directors' report
30 June 2020
Details of remuneration
Executive employment agreements
Remuneration arrangements for executives are formalised in employment agreements. The following outlines the details of contracts
with executives:
Chief Executive Officer (CEO) and Co-founder
Mark Coulter is a founder of the business and was employed on a permanent basis from 1 September 2016. His permanent contract was
renewed on 1 September 2018:
Under the terms of the current contract, as disclosed to the ASX on 10 September 2018:
•
•
the CEO receives fixed remuneration of $374,469 per annum which increased on 1 September 2019 from $329,469, and in
addition, 9.5% in superannuation entitlements (up to the Upper Superannuation Guarantee Limit),
the CEO is eligible to participate in an LTI plan on terms determined by the Board, in accordance with the rules of the Share
Options Plan. The number of options awarded will be a maximum of 5 million, based on meeting a service condition of being
employed to the date of the FY22 Annual Accounts being release to the ASX.
Chief Financial Officer (CFO)
Mark Tayler has been employed on a permanent basis since 24 October 2016.
Under the terms of the current contract:
•
•
•
the CFO receives fixed remuneration of $273,997 per annum which increased on 1 September 2019 from $245,469, and in
addition, 9.5% in superannuation entitlements (up to the Upper Superannuation Guarantee Limit),
the CFO may be eligible to participate in the Group’s STI plan in accordance with the rules of the Plan, to be paid in either cash
or shares,
the CFO may be eligible to participate in an LTI plan on terms determined by the Board, in accordance with the rules of the
Group’s Performance Rights Plan.
Chief Experience Officer (CXO) and Co-founder
Adam McWhinney is employed on a permanent basis with the current contract taking effect 1 September 2018.
Under the terms of the current contract:
•
•
the CXO receives fixed remuneration of $282,847 per annum which increased on 1 September 2019 from $274,469, and in
addition, 9.5% in superannuation entitlements (up to the Upper Superannuation Guarantee Limit),
the CXO may be eligible to participate in an LTI plan on terms determined by the Board, in accordance with the rules of the
Group’s Performance Rights Plan.
Other key terms of the executive employment arrangements for the CEO, CFO and CXO are summarised below:
Mark Coulter
Mark Tayler
Adam McWhinney
Contract term
No fixed term
No fixed term
No fixed term
Resignation
3 months
3 months
2 months
Notice Period
Termination for cause
Nil
Nil
Nil
Termination payment
3 months
3 months
2 months
Non-executive director remuneration
Non-executive director fees are established relative to the size of the Group and the responsibilities, skills and experience of the directors.
In accordance with the Constitution of Temple & Webster Group Ltd, the total amount provided to all non-executive directors must not
exceed in aggregate in any financial year $700,000 as the amount fixed by General Meeting. Additional fees may be payable for
consulting services provided by non-executive directors. The Nomination and Remuneration Committee reviews the performance, skills
and experience of the Board, and the directors’ fees on an annual basis. This process considers remuneration survey data for comparably
sized companies and relativity of skills and experience held by the Board.
Directors do not qualify for performance-based incentives or retirement benefits other than statutory requirements.
7
13
Annual Report 2020 Annual Report 2020
Temple & Webster Group Ltd
Directors' report
30 June 2020
Details of remuneration (continued)
The current non-executive directors’ fee structure is set out below.
Board
Audit and Risk Management Committee
Nomination and Remuneration Committee
$80,000
$30,000
$30,000
$50,000
$10,000
$10,000
Cash fee paid to chair
Cash fee paid to member
In addition to the above, as stated in the notice of Annual General Meeting and the explanatory statement dated on 23 October 2018,
the Group established a non-executive directors equity plan to assist in motivation, retention and reward of non-executive directors of the
Group. Pursuant to the plan, non-executive directors were entitled to receive options in lieu of an increase in the cash amount payable
to the non-executive directors. The resolution from the shareholders’ votes resulted in favour of this equity plan per the results of Annual
General Meeting report dated on 27 November 2018. Refer below for details on this plan.
Amounts of remuneration
Details of the remuneration of KMP of the Group are set out in the following tables.
2020
Non-Executive
Directors:
Susan Thomas
Stephen Heath
Conrad Yiu (3)
Other Key
Management
Personnel:
Mark Coulter
Mark Tayler
Adam McWhinney
Salary and
fees
$
Short-term benefits
Cash
bonus (1)
$
Non-
monetary
$
Post-
employment
benefits
Super-
annuation
$
Termination
payments
$
Long-term
benefits
Long service
leave
$
Share-based
payments (2)
$
Total
$
82,192
109,589
82,192
-
-
-
366,576
270,743
281,451
-
82,969
-
1,192,743
82,969
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,808
10,411
7,808
21,003
21,003
21,003
89,036
-
-
-
-
-
-
-
35,843
35,843
35,843
125,843
155,843
125,843
422,955
24,171
186,014
810,534
398,886
488,468
740,669 2,105,417
(1) Share-based payment settled in cash.
(2) The value of the options and performance rights granted to key management personnel as part of their remuneration is calculated as at the grant date.
The amounts disclosed as part of remuneration for the financial year have been determined by allocating the grant date value on a straight-line basis
over the period from grant date to vesting date.
(3) Conrad Yiu’s short-term benefits include fees for consulting services of $30,000 (including superannuation).
In addition to the total benefits above, these KMPs accrued leave entitlements during the year as follows:
• Mark Coulter; net decrease of $8,187 in accrued leave entitlements (2019: $14,495 increase)
• Mark Tayler; net decrease of $843 in accrued leave entitlements (2019: $2,762 decrease)
• Adam McWhinney; net increase of $6,965 in accrued leave entitlements (2019: $6,406 decrease)
14
8
Temple & Webster Group Ltd Temple & Webster Group Ltd Directors’ Report continued
Temple & Webster Group Ltd
Directors' report
30 June 2020
Details of remuneration (continued)
2019
Non-Executive
Directors:
Susan Thomas (3)
Stephen Heath (3)
Conrad Yiu (3) (4)
Other Key
Management
Personnel:
Mark Coulter
Mark Tayler
Adam McWhinney
Salary and
fees
$
Short-term benefits
Cash
bonus (1)
$
Non-
monetary
$
Post-
employment
benefits
Super-
annuation
$
Termination
payments
$
Long-term
benefits
Long service
leave
$
Share-based
payments (2)
$
Total
$
82,192
109,589
82,192
-
-
-
323,724
252,081
265,390
-
69,734
-
1,115,168
69,734
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,808
10,411
7,808
20,531
20,531
20,531
87,620
-
-
-
-
-
-
-
35,843
35,843
35,843
125,843
155,843
125,843
487,115
33,874
198,431
831,370
376,220
484,352
826,949 2,099,471
(1) Share-based payment settled in cash.
(2) The value of the options and performance rights granted to key management personnel as part of their remuneration is calculated as at the grant date.
The amounts disclosed as part of remuneration for the financial year have been determined by allocating the grant date value on a straight-line basis
over the period from grant date to vesting date.
(3) In the notice of Annual General Meeting and the explanatory statement dated on 23 October 2018, the number of options to be issued were equivalent
to $25,000 in annual salary sacrifice per year for 3 years. The formula for calculating the number of options to be issued was based on a Black-Scholes
model prepared for the purpose of the notice, which resulted in 181,026 options per non-executive director for 3 years. As per Group’s accounting
policy, the options value disclosed in these financial statements was calculated based the Black-Scholes model prepared on 27 November 2018, i.e.
the date when the non-executive directors equity plan was approved by the shareholders on the Annual General Meeting. As a result, the inputs used
in the model changed the annual accounting value for options issued to each non-executive director to $35,843.
(4) Conrad Yiu’s short-term benefits include fees for consulting services of $30,000 (including superannuation).
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Fixed remuneration
2020
Remuneration linked
to performance
2020
Fixed remuneration
2019
Remuneration linked
to performance
2019
Non-Executive Directors:
Susan Thomas
Stephen Heath
Conrad Yiu
Other Key Management
Personnel:
Mark Coulter
Mark Tayler
Adam McWhinney
100%
100%
100%
48%
73%
62%
-
-
-
52%
27%
38%
100%
100%
100%
41%
72%
59%
-
-
-
59%
28%
41%
The proportion of the cash bonus paid/payable or forfeited as a percentage (%) of fixed remuneration is as follows:
Cash bonus paid/payable Cash bonus forfeited
Name
Mark Coulter
Mark Tayler
Adam McWhinney
2020
-
28%
-
2020
-
-
-
Cash bonus
paid/payable
2019
-
26%
-
Cash bonus
forfeited
2019
-
-
-
Bonuses are paid based on short term incentives as outlined in the ‘Principles used to determine the nature and amount of remuneration’
section above.
9
15
Annual Report 2020 Annual Report 2020
Temple & Webster Group Ltd
Directors' report
30 June 2020
Share-based compensation
Issue of shares
Details of shares issued to key management personnel during the year ended 30 June 2020 as a result of performance rights vesting
are as follows:
Name
Mark Tayler
Adam McWhinney
Shares issued
213,663
43,449
Class of shares
Ordinary
Ordinary
Performance rights
Details of performance rights over ordinary shares granted, vested and replaced for directors and other KMP as part of compensation up
until 30 June 2020 are set out below:
Name
STI
Mark Tayler
Adam McWhinney
Name
LTI
Mark Tayler (1)
Mark Tayler
Mark Tayler (2)
Adam McWhinney
Adam McWhinney
Service
period
start
Grant date
Vesting
date
Number of
rights
granted
Value of
rights
granted
$
Number
of rights
Vested
Value of
rights
vested
$
Number
of rights
replaced
01/07/2017
01/07/2017
31/08/2017 31/08/2019
31/08/2017 31/08/2019
46,997
43,449
34,920
32,284
46,997
43,449
34,920
32,284
-
-
Service
period
start
Grant date
Vesting
date
Number of
rights
granted
01/11/2016
01/07/2018
01/07/2019
01/07/2018
01/07/2018
01/09/2016 30/09/2019
01/07/2018 31/08/2021
01/07/2019 31/08/2022
01/07/2018 31/08/2022
01/07/2018 31/08/2022
500,000
92,905
50,514
500,000
1,300,000
Value of
rights
granted
$
37,258
34,561
30,308
380,000
514,800
Number
of rights
vested
500,000
-
-
-
-
Value of
rights
vested
$
37,258
-
-
-
-
Number of
rights
replaced
-
-
-
-
-
(1) This LTI scheme from the prior year consists of three tranches which vest over the life of the scheme. As at 30 June 2019, 333,334 vested and the
last remaining rights vested on 30 September 2019.
(2) This LTI plan issued in the current year had an exercise price of nil and fair value at grant date of $0.60.
Options
Details of options over ordinary shares granted, vested and lapsed for directors and other KMP as part of compensation up until 30 June
2020 are set out below:
Name
Service
period
start
Grant date
Vesting
date
Number of
options
granted
Value of
options
granted
$
Number
of options
Vested
Value of
options
vested
$
Number
of options
lapsed
LTI / salary sacrifice
Mark Coulter
Stephen Heath (1)
Conrad Yiu (1)
Susan Thomas (1)
01/07/2018
01/07/2018
01/07/2018
01/07/2018
01/07/2018 31/08/2022
27/11/2018 30/06/2021
27/11/2018 30/06/2021
27/11/2018 30/06/2021
5,000,000
181,026
181,026
181,026
1,760,000
107,529
107,529
107,529
-
120,684
120,684
120,684
-
71,686
71,686
71,686
-
-
-
-
(1) This salary sacrifice scheme from the prior year contains a progressive vesting pattern which vest over the life of the scheme. As at 30 June 2019,
60,342 had vested, as at 30 June 2020, 120,684 had vested.
Share-based compensation paid in cash
Details of share-based payments compensation payable in cash to KMP as part of their compensation during the year ended 30 June
2020 are set out below:
Name
STI
Mark Tayler
16
Service
period
start
Grant date
Vesting date
Cash
bonus
$
01/07/2019
01/07/2019
30/06/2020
82,969
10
Temple & Webster Group Ltd Temple & Webster Group Ltd Directors’ Report continued
Temple & Webster Group Ltd
Directors' report
30 June 2020
Additional disclosures relating to KMP
Shareholding (1)
The number of shares in the Company held during the financial year by each director and other members of KMP of the Group, including
their personally related parties, is set out below:
Ordinary shares
Conrad Yiu
Mark Coulter
Stephen Heath
Mark Tayler
Adam McWhinney
Balance at
the start of
the year
3,232,018
6,562,312
184,000
614,584
2,417,448
13,010,362
Granted as Net change (2)
remuneration
-
-
-
213,663
43,449
257,112
(425,000)
(1,891,000)
-
(298,853)
-
(2,614,853)
Balance at
the end of
the year
2,807,018
4,671,312
184,000
529,394
2,460,897
10,652,621
(1) Includes shares held directly, indirectly and beneficially by KMP.
(2) All equity transactions with KMP other than those arising from the exercise of remuneration options have been entered into under terms and
conditions no more favourable than those the Group would have adopted if dealing at arm's length.
Performance rights holding
The number of performance rights over ordinary shares in the Company held during the financial year by each director and other members
of KMP of the Group, including their personally related parties, is set out below:
Performance rights over ordinary shares
Mark Tayler
Adam McWhinney
Balance at
the start of
the year
306,568
1,843,449
2,150,017
Granted as
remuneration
Vested/
Exercised
Expired/
forfeited/
replaced
Balance at
the end of
the year
50,514
-
50,514
(213,663)
(43,449)
(257,112)
-
-
-
143,419
1,800,000
1,943,419
Options holding
The number of options over ordinary shares in the Company held during the financial year by each director and other members of KMP
of the Group, including their personally related parties, is set out below:
Options over ordinary shares
Mark Coulter
Stephen Heath
Conrad Yiu
Susan Thomas
Security dealing policy
Balance at
the start of
the year
5,000,000
181,026
181,026
181,026
5,543,078
Granted as
remuneration
Exercised
Balance at
the end of
the year
Vested
and
exercisable
Vested but
not
exercisable
-
-
-
-
-
-
-
-
-
-
5,000,000
181,026
181,026
181,026
5,543,078
-
120,684
120,684
120,684
362,052
-
-
-
-
-
The Group securities trading policy applies to all directors and employees. The policy prohibits KMPs from dealing in Temple & Webster
Group Ltd securities while in possession of material non-public information relevant to the Group, as originally disclosed to the ASX on
9 December 2015. This policy was subsequently updated as disclosed to the ASX on 16 July 2020.
This concludes the remuneration report, which has been audited.
11
17
Annual Report 2020 Annual Report 2020
Temple & Webster Group Ltd
Directors' report
30 June 2020
Shares issued on the exercise of performance rights
During the financial year, employees and executives have exercised performance rights to acquire 866,190 fully paid ordinary shares in
Temple & Webster Group Ltd (refer to note 18).
Indemnity and insurance of officers
The Company has indemnified the directors and executives of the Company for costs incurred, in their capacity as a director or executive,
for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the Company paid a premium in respect of a contract to insure the directors and executives of the Company
against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the
liability and the amount of the premium.
Indemnity and insurance of auditor
To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of its audit engagement
agreement against claims by third parties arising from the audit (for an unspecified amount), other than a loss arising from Ernst & Young's
negligent, wrongful or wilful acts or omissions. No payment has been made to indemnify Ernst & Young during the financial year and up
to the date of this report.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the
Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the
Company for all or part of those proceedings.
Non-audit services
The amounts paid or payable to the auditor for non-audit services during the financial year was $51,075 (2019: $44,805). This is outlined
in note 23 to the financial statements.
The directors are of the opinion that the services as disclosed in note 23 to the financial statements do not compromise the external
auditor's independence requirements of the Corporations Act 2001 for the following reasons:
• all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the
auditor; and
• none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for
Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the
auditor's own work, acting in a management or decision-making capacity for the Company, acting as advocate for the Company
or jointly sharing economic risks and rewards.
Officers of the Company who are former partners of Ernst & Young
There are no officers of the Company who are former partners of Ernst & Young.
Rounding of amounts
Amounts in this report have been rounded off to the nearest thousand dollars, or in certain cases, the nearest dollar, under the option
available to the Company under ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191. The Company is an
entity to which this legislative instrument applies.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on the following
page.
Auditor
Ernst & Young continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001.
On behalf of the directors
______________________________
Stephen Heath
Chairperson
31 August 2020
18
12
Temple & Webster Group Ltd Temple & Webster Group Ltd Directors’ Report continued
Ernst & Young
200 George Street
Sydney NSW 2000 Aust ralia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Audit or’s Independence Declarat ion t o t he Dir ect ors of Temple &
Webst er Group Lt d
As lead auditor for the audit of the financial report of Temple & Webster Group Ltd for the financial year
ended 30 June 2020, I declare to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Temple & Webster Group Ltd and the entities it controlled during the
financial year.
Ernst & Young
Graham Leonard
Partner
31 August 2020
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
19
Annual Report 2020 Annual Report 2020Auditor’s Independence Declaration Temple & Webster Group Ltd
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2020
Revenue
Revenue from contracts with customers
Cost of goods sold
Gross margin
Net foreign exchange gain
Interest income
Other operating income
Expenses
Distribution
Merchant Fees
Marketing
Employee benefits
Depreciation and amortisation
Finance costs
Other
Profit before income tax benefit
Income tax benefit
Profit after income tax benefit for the year attributable to the owners of Temple &
Webster Group Ltd
Other comprehensive income
Note
Consolidated
2019
$'000
2020
$'000
4
5
5
5
5
6
176,342
(97,697)
78,645
101,613
(56,316)
45,297
284
229
1
(24,728)
(2,646)
(21,037)
(17,921)
(637)
(59)
(4,114)
18)
142
32
(14,746)
(1,607)
(11,121)
(13,583)
(266)
(3)
(3,181)
8,017
982
5,892
2,782
13,909
3,764
Other comprehensive income for the year, net of tax
-
-
Total comprehensive income for the year attributable to the owners of Temple &
Webster Group Ltd
Basic earnings per share
Diluted earnings per share
13,909
3,764
Cents
Cents
31
31
12.28
11.67
3.37
3.18
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
20
14
Temple & Webster Group Ltd Temple & Webster Group Ltd Statement of Profit or Loss and Other Comprehensive Income For the year ended 30 June 2020
Temple & Webster Group Ltd
Statement of financial position
For the year ended 30 June 2020
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other
Total current assets
Non-current assets
Right-of-use assets
Property, plant and equipment
Intangibles
Other
Deferred tax assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Lease liabilities
Employee benefits
Provisions
Deferred revenue
Other
Total current liabilities
Non-current liabilities
Employee benefits
Lease liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed capital
Reserves
Accumulated losses
Total equity
Note
Consolidated
2019
$'000
2020
$'000
7
8
9
10
11
6
12
5
13
14
15
20
5
16
17
38,082
55
6,619
3,492
48,248
1,393
453
7,859
-
9,356
19,061
67,309
22,130
504
752
2,386
10,025
46
35,843
462
885
135
1,482
13,539
103
4,240
1,609
19,491
-
471
7,596
22
3,464
11,553
31,044
9,610
-
528
947
4,331
30
15,446
300
-
85
385
37,325
15,831
29,984
15,213
76,566
3,513
(50,095)
76,566
2,615
(63,968)
29,984
15,213
The above statement of financial position should be read in conjunction with the accompanying notes
15
21
Annual Report 2020 Annual Report 2020Statement of Financial Position As at 30 June 2020
Temple & Webster Group Ltd
Statement of changes in equity
For the year ended 30 June 2020
Consolidated
Balance at 1 July 2018
Contributed
capital
$'000
Reserves
$'000
Accumulated
losses
$'000
Total equity
$'000
76,566
1,586
(67,330)
10,822
Effect of adoption of new accounting standard (AASB 15)
-
-
(402)
(402)
Balance at 1 July 2018 (restated)
76,566
1,586
(67,732)
10,420
Profit after income tax benefit for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Share-based payments (note 18)
Transaction cost
Balance at 30 June 2019
-
-
-
-
-
-
-
-
1,047
(18)
3,764
-
3,764
-
-
3,764
-
3,764
1,047
(18)
76,566
2,615
(63,968)
15,213
Consolidated
Balance at 1 July 2019
Contributed
capital
$'000
Reserves
$'000
Accumulated
losses
$'000
Total equity
$'000
76,566
2,615
(63,968)
15,213
Effect of adoption of new accounting standard (AASB 16)
-
-
(36)
(36)
Balance at 1 July 2019 (restated)
76,566
2,615
(64,004)
15,177
Profit after income tax benefit for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Share-based payments (note 18)
Transaction cost
Balance at 30 June 2020
-
-
-
-
-
-
-
-
909
(11)
13,909
-
13,909
-
13,909
13,909
-
-
909
(11)
76,566
3,513
(50,095)
29,984
The above statement of changes in equity should be read in conjunction with the accompanying notes
22
16
Temple & Webster Group Ltd Temple & Webster Group Ltd Statement of Changes in Equity For the year ended 30 June 2020
Temple & Webster Group Ltd
Statement of cash flows
For the year ended 30 June 2020
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Interest and other finance costs paid
Note
Consolidated
2019
$'000
2020
$'000
200,889
(175,556)
229
(59)
112,553
(108,533)
142
-
Net cash from operating activities
30
25,503
4,162
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intangibles
Proceeds from disposal of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Transaction costs of issue of shares
Payment of principal portion of lease liabilities
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
11
5
(231)
(339)
- -
(315)
(223)
30
(570)
(508)
(11)
(379)
(390)
(18)
(30)
(48)
24,543
13,539
3,606
9,933
Cash and cash equivalents at the end of the financial year
7
38,082
13,539
The above statement of cash flows should be read in conjunction with the accompanying notes
17
23
Annual Report 2020 Annual Report 2020Statement of Cash Flows For the year ended 30 June 2020
Temple & Webster Group Ltd
Notes to the financial statements
30 June 2020
Note 1. Corporate information
The financial statements cover Temple & Webster Group Ltd (referred to as 'Company' or 'parent entity') as a Group consisting of Temple
& Webster Group Ltd and the entities it controlled at the end of, or during, the year (collectively referred to in these financial statements
as the 'Group’). The financial statements are presented in Australian dollars, which is Temple & Webster Group Ltd's functional and
presentation currency.
Temple & Webster Group Ltd is a for profit company incorporated and domiciled in Australia whose shares are publicly traded on the
Australian Stock Exchange. The Group’s principal place of business is:
1A / 1-7 Unwins Bridge Road
St Peters, NSW 2044
A description of the nature of the Group's operations and its principal activities are included in the directors' report, which is not part of
the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 31 August 2020. The directors have
the power to amend and reissue the financial statements.
Note 2. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the
reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets,
liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical
experience and on other various factors, including expectations of future events, management believes to be reasonable under the
circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements,
estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
(refer to the respective notes) within the next financial year are discussed below.
Goodwill and other indefinite life intangible assets
The Group tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill and other
indefinite life intangible assets have suffered any impairment, in accordance with the stated accounting policy. The recoverable amount
of the cash-generating unit has been determined based on a value-in-use calculation. This calculation requires the use of assumptions,
including estimated discount rates based on the current cost of capital and growth rates of the estimated future cash flows.
Share-based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the
date at which they are granted. The fair value of LTI performance rights is determined by using either the Trinomial, Monte Carlo or Black-
Scholes models, as appropriate, taking into account the terms and conditions upon which the instruments were granted. The fair value
of STI performance rights is based on the market value of Temple & Webster Group Ltd shares less dividend yield at the date each
performance right is accepted by the participant, or a fixed percentage of remuneration as determined by the Performance Rights Plan.
The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying
amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity.
Refunds provision
In determining the level of the provision, the Group has made judgements in respect of the expected return of products, number of
customers who will actually return the products and how often, and the costs of fulfilling the return. Historical experience and current
knowledge of the performance of the products have been used in determining this provision. Refer to note 14 for further details.
Deferred Tax Asset
Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available against which
the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be
recognised, based upon the likely timing and the level of future taxable profits, together with future tax planning strategies. Refer to note
6 for further details.
Note 3. Operating segments
Identification of reportable operating segments
The Group operates in one segment being the sale of furniture, homewares, and other lifestyle products through its online platform. This
operating segment is based on the internal reports that are reviewed and used by the Board of Directors (who are identified as the Chief
Operating Decision Makers ('CODM')) in assessing performance and in determining the allocation of resources. There is no aggregation
of operating segments.
The operating segment information is the same information as provided throughout the financial statements and therefore not duplicated.
The information reported to the CODM is on at least a monthly basis.
24
18
Temple & Webster Group Ltd Temple & Webster Group Ltd Notes to the Financial Statements
Temple & Webster Group Ltd
Notes to the financial statements
30 June 2020
Note 4. Revenue from contracts with customers
Set out below is the disaggregation of the Group’s revenue from contracts with customers:
Sale of goods
Purchase protection
Accounting policy for revenue
2020
$'000
Consolidated
2019
$'000
175,565
777
100,900
713
176,342
101,613
Revenue recognition
AASB 15 establishes a five-step model to account for revenue arising from contracts with customers. Under the standard, revenue is
recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or
services to a customer. AASB 15 requires entities to exercise judgement, taking into consideration all of the relevant facts and
circumstances when applying each step of the model to contracts with their customers. The standard also specifies the accounting for
the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract.
Contracts with customers and performance obligations
The Group sells furniture and homewares online to both end consumers and commercial customers. Each sale represents a separate
identified contract with a customer for which generally two performance obligations are expected: sales of goods and purchase protection
revenue. For sales of goods, the revenue is recognised at a point in time when control of the asset is transferred to the customer, generally
on delivery of the goods, whilst purchase protection is recognised over time.
Transaction price and variable consideration
In accordance with the standard, when a performance obligation is satisfied, the Group recognises revenue to the extent of the transaction
price allocated to that performance obligation taking into account the impact of constraints arising from variable consideration. If the
consideration in a contract includes a variable amount, the Group estimates the amount of consideration to which it will be entitled in
exchange for transferring the goods to the customer. The variable consideration is estimated at inception and constrained until it is highly
probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated
uncertainty with the variable consideration is subsequently resolved. Some contracts provide customers with a right of return and/or trade
discounts. Such provisions might give rise to variable consideration.
Right of return
When a contract with a customer provides a right to return the good within a specified period, a provision for the amount of revenue
related to the expected returns is recognised in the statement of financial position and an asset for the right to recover products from
customers on settling the refund liability.
Advances received from customers – gift cards / store credits
When a customer purchases a gift card, it is pre-paying for goods or services to be delivered in the future. The Group has an obligation
to transfer, or stand ready to transfer, the goods or services in the future – creating a performance obligation. The Group recognises a
contract liability for the prepayment and derecognises the liability (and recognises revenue) when it fulfils the performance obligation. As
a result, revenue from the sale of a gift card is recognised when the Group supplied the goods upon exercise of the gift card. Store credits
are treated in a similar way with the difference that no cash was received from customers when they are issued. Breakage (i.e. the
customer’s unexercised right) to be estimated and recognised as revenue in proportion to the pattern of rights exercised by the customer.
Advances received from customers – other
Generally, the Group receives only short-term advances from its customers. The Group does not receive material long term advances.
The Group has decided to use the practical expedient provided under the standard to not adjust the promised amount of consideration
for the effects of a significant financing component in the contracts, where the Group expects, at contract inception, that the period
between the Group transfer of a promised good or service to a customer and when the customer pays for that good or service will be
one year or less. The Group concludes this does not have a material impact on the Group’s financial statements.
Presentation and disclosure requirements
As required for the financial statements, the Group disaggregated revenue recognised from contracts with customers into categories that
depict the nature and amount. Refer above for the disclosure on disaggregated revenue.
19
25
Annual Report 2020 Annual Report 2020
Temple & Webster Group Ltd
Notes to the financial statements
30 June 2020
Note 5. Expenses
Profit/ (loss) before income tax includes the following specific expenses:
Depreciation
Right-of-use assets – buildings
Right-of-use assets – motor vehicles
Plant and equipment
Leasehold improvements
Motor vehicles
Total depreciation
Amortisation
Software and websites
Customer relationships
Total amortisation
Total depreciation and amortisation
Finance costs
Interest on lease liabilities
Other interest and finance charges
Total finance costs
Other expenses
Hosting and other IT
Consulting
Rent, occupancy and property insurance
Business and other insurance
Travelling expenses
Other
Total other expenses
Employee benefits expense
Employee benefits expense excluding superannuation
Equity-settled share-based payment expense (refer to note 18)
Cash-settled share-based payment expense (refer to note 18)
Superannuation contribution expense
Employee benefits paid on termination
2020
$'000
Consolidated
2019
$'000
395
9
80
77
-
-
-
59
56
8
561
123
39
37
76
637
59
-
59
1,546
1,126
254
551
112
525
4,114
15,538
909
284
1,115
75
59
84
143
266
-
3
3
1,160
517
614
399
161
330
3,181
11,297
1,047
242
871
126
Total employee benefits expense
17,921
13,583
26
20
Temple & Webster Group Ltd Temple & Webster Group Ltd Notes to the Financial Statements continued
Temple & Webster Group Ltd
Notes to the financial statements
30 June 2020
Note 5. Expenses (continued)
Accounting policy for leases
AASB 16 supersedes AASB 117 ‘Leases’. The new standard sets out the principles for the recognition, measurement, presentation and
disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model.
Method of adoption
The Group adopted AASB 16 using the modified retrospective method of adoption, with the date of initial application of 1 July 2019.
Under this method, the standard is applied retrospectively with the cumulative effect of initially applying the standard recognised at the
date of initial application.
The Group elected to use the transition practical expedient allowing the standard to be applied only to contracts that were previously
identified as leases applying IAS 17 at the date of initial application. The group also applied the available practical expedients wherein it:
• Used the recognition exemptions for lease contracts that, at the commencement date, have a lease term of 12 months or less
and do not contain a purchase option (‘short-term leases’), and lease contracts for which the underlying asset is of low value
(‘low-value assets’)
• Used a single discount rate to a portfolio of leases with reasonably similar characteristics
• Excluded the initial direct costs from the measurement of the right-of-use asset at the date of initial application
Nature of the effect of adoption of AASB 16
The Group has lease contracts for buildings, machinery and a vehicle. Before the adoption of AASB 16, the Group classified each of its
leases (as lessee) at the inception date as either a finance lease or an operating lease. A lease was classified as a finance lease if it
transferred substantially all of the risks and rewards incidental to ownership of the leased asset to the Group, otherwise it was classified
as an operating lease. Finance leases were capitalised at the commencement of the lease at the inception date fair value of the leased
property or, if lower, at the present value of the minimum lease payments. Lease payments were apportioned between interest
(recognised as finance costs) and reduction of the lease liability. In an operating lease, the leased property was not capitalised and the
lease payments were recognised as rent expense in profit or loss on a straight-line basis over the lease term. Upon adoption of AASB
16, the Group applied a single recognition and measurement approach for all leases, except for short-term leases and leases of low-
value assets. The standard provides specific transition requirements and practical expedients, which has been applied by the Group.
For leases previously classified as finance leases, the Group did not change the initial carrying amounts of recognised assets and
liabilities at the date of initial application (i.e. the right-of-use assets and lease liabilities equal the lease assets and liabilities recognised
under AASB 117). The requirements of AASB 16 was applied to these leases from 1 July 2019.
For leases previously accounted for as operating leases, the Group recognised right-of-use assets and lease liabilities, except for short-
term leases and leases of low-value assets. The right-of-use assets for most leases were recognised based on the carrying amount as
if the standard had always been applied, apart from the use of incremental borrowing rate at the date of initial application. Lease liabilities
were recognised based on the present value of the remaining lease payments, discounted using the incremental borrowing rate of 6.5%
at the date of initial application.
The effect of adoption AASB 16 as at 1 July 2019 (increase/(decrease)) is as follows:
Right-of-use assets
Property, plant and equipment
Total assets
Lease liabilities
Trade and other payables
Total current liabilities
Net assets
Accumulated losses
Total Equity
1
3
,
3
1
0
,
4
1
0
0
2
,
9
6
3
3
21
$'000
464
(92)
372
488
(80)
408
(36)
(36)
(36)
27
1
6
,
3
5
8
1
2
,
7
5
5
Annual Report 2020 Annual Report 2020
Temple & Webster Group Ltd
Notes to the financial statements
30 June 2020
Note 5. Expenses (continued)
Summary of new accounting policies
Set out below are the new accounting policies of the Group upon adoption of AASB 16, which have been applied from the date of initial
application:
Group as a lessee
The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value
assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying
assets.
Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for
use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any
remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs
incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Group is
reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are depreciated
on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment,
consistent with the Group’s property, plant and equipment.
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be
made over the lease term. The lease payments include fixed payments less any lease incentives receivable, variable lease payments
that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include
the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a
lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index
or a rate are recognised as expense in the period on which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if
the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased
to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is
remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the
assessment to purchase the underlying asset.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease term of 12
months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets
recognition exemption to leases of equipment that are considered of low value. Lease payments on short term leases and leases of low-
value assets are recognised as expense on a straight-line basis over the lease term. The amount recognised in the profit and loss for
these leases totalled to $54,000.
Significant judgement in determining the lease term of contracts with renewal options
The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend
the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain
not to be exercised. The Group has the option, under all of its leases to lease the assets for additional terms of three years. The Group
applies judgement in evaluating whether it is reasonably certain to exercise the option to renew. That is, it considers all relevant factors
that create an economic incentive for it to exercise the renewal. After the commencement date, the Group reassesses the lease term if
there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the
option to renew (e.g., a change in business strategy). The Group has not included the renewal period as part of the lease term for leases
of buildings due to uncertainty around the current capacity meeting future Group’s requirements. The undiscounted potential future rental
payments pertaining to extension options not reflected in the lease liabilities total to $1,903,000.
28
22
Temple & Webster Group Ltd Temple & Webster Group Ltd Notes to the Financial Statements continued
Temple & Webster Group Ltd
Notes to the financial statements
30 June 2020
Note 5. Expenses (continued)
Presentation and disclosure requirements
As required for the financial statements, the Group has recognised the relevant Right-of-use asset and Lease liabilities in relation to the
leases the Group currently holds.
The lease liabilities as at 1 July 2019 can be reconciled to the operating lease commitments as of 30 June 2019 as follows:
Minimum lease payments under operating leases as of 30 June 2019
Effect from discounting at the incremental borrowing rate
Liabilities additionally recognised based on initial application of AASB 16
Other
Liabilities from finance leases as of 30 June 2019
Liabilities from leases as of 1 July 2019
The changes in lease liabilities from financing activities are set out below:
Consolidated
Balance at 30 June 2019
Effect of adoption of new accounting standard (AASB 16)
Balance at 1 July 2019
Cash flows
New leases
Other
Balance at 30 June 2020
$'000
413
(17)
396
39
53
488
$’000
Total
-
488
488
(379)
1,280
-)
1,389
$’000
Current
-
$’000
Non-current
-
392
392
(379)
-)
491)
504)
96)
96)
-)
1,280)
(491))
885)
The ‘Other’ row includes the effect of reclassification of non-current portion of lease liabilities to current due to the passage of time. The
Group classifies interest paid as cash flows from operating activities.
23
29
Annual Report 2020 Annual Report 2020
Temple & Webster Group Ltd
Notes to the financial statements
30 June 2020
Note 6. Income tax benefit
The Group calculates the income tax benefit for the period using the tax rate that would be applicable to the expected total annual
earnings. The major components of income tax benefit in the consolidated statement of profit or loss are:
Deferred income tax benefit
Income tax benefit
Deferred tax - origination and reversal of temporary differences and carry-forward tax losses
Income tax benefit reported in the statement of profit or loss
Reconciliation of income tax benefit and the accounting loss at the statutory tax rate
Accounting profit before income tax benefit
Income tax expense at the statutory tax rate of 30%
Adjustments in respect of current income tax of previous years
Net non-deductible expenses for tax purposes
Tax losses utilised, not previously recognised
Carry-forward tax losses not previously recognised
2020
$'000
Consolidated
2019
$'000
5,892
2,782
5,892
2,782
2020
$'000
Consolidated
2019
$'000
5,892
5,892
8,017))
2,405))
(30))
271)
(3,362)
(5,176))
2,782
2,782
982))
295))
(6))
203)
(377)
(2,897)
Income tax benefit reported in the statement of profit or loss
(5,892)
(2,782)
Deferred tax
Deferred tax asset recognised comprises temporary differences attributable to:
Deductible capital raising costs
Provisions for returns, refunds, inventory and bad debtors
Employee benefits
Deferred revenue
Accrued expenses
Right-of-use assets
Lease liabilities
Intangibles
Foreign exchange
Prepayments
Fair value adjustment
Carry-forward tax losses not previously recognised
2020
$'000
Consolidated
2019
$'000
-)
751)
393)
1,456)
(554)
(385))
403))
(680))
(97))
(18))
14))
8,073))
217)
338)
314)
560)
(190)
-))
-))
(667))
(1))
(4))
-_
2,897)
9,356)
3,464)
Deferred tax assets have been recognised to the extent the Group has estimated it will be probable that future taxable amounts will be
available to utilise those temporary differences. The deferred tax asset on unrecognised tax losses amounting to $8,073,000 was
recognised for the year ended 30 June 2020. The carry-forward tax losses have been recognised to the extent that it is probable that
future taxable amounts with be able to be utilised in the foreseeable future.
30
24
Temple & Webster Group Ltd Temple & Webster Group Ltd Notes to the Financial Statements continued
Temple & Webster Group Ltd
Notes to the financial statements
30 June 2020
Note 6. Income tax benefit (continued)
The below potential tax benefit resulting from accumulated tax losses has not been recognised in the statement of financial position as
the recovery of this benefit is uncertain. These tax losses can only be utilised in the future if the continuity of ownership test is passed,
or failing that, the same business test is passed.
Tax losses not recognised
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit @ 30%
2020
$'000
Consolidated
2019
$'000
10,111
38,465
3,033
11,540
Accounting for tax
Income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable income tax rate
for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses
and the adjustment recognised for prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are
recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for:
(i) when the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that
is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or
(ii) when the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the
reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
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 assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current
deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which
intend to settle simultaneously.
Tax consolidated group
Temple & Webster Group Ltd (the 'head entity') and its wholly-owned Australian subsidiaries formed an income tax consolidated group
('tax group') under the tax consolidation regime with effect from 4 December 2015. Each entity in the tax group continues to account
for their own current and deferred tax amounts. The tax group has applied the 'group allocation' approach in determining the
appropriate amount of taxes to allocate to group members. In addition to its own tax amounts, the head entity also recognises the tax
arising from unused tax losses and tax credits assumed from each subsidiary in the tax group.
Assets or liabilities arising under tax funding agreements are recognised as amounts receivable from or payable to other entities in the
tax group. The tax funding arrangement ensures that the intercompany charge equals the current tax liability or benefit of each tax
group member, resulting in neither a contribution by the head entity to the subsidiaries nor a distribution by the subsidiaries to the head
entity.
Note 7. Current assets - cash and cash equivalents
Cash at bank
Cash on deposit
2020
$'000
Consolidated
2019
$'000
10,821
27,261
5,169
8,370
38,082
13,539
Accounting policy for cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid
investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject
to an insignificant risk of changes in value. For cash flow purposes, cash and cash equivalents consist of cash and cash equivalents as
defined above, net of outstanding bank overdrafts.
25
31
Annual Report 2020 Annual Report 2020
Temple & Webster Group Ltd
Notes to the financial statements
30 June 2020
Note 8. Current assets - inventories
Stock in transit (1)
Stock on hand
Less: Provision for impairment
2020
$'000
Consolidated
2019
$'000
4,195
2,610
(186)
2,424
6,619
1,499
2,930
(189)
2,741
4,240
Inventory that was recognised as an expense in profit or loss amounted to $97,697,000 (2019: $56,316,000) for the year ended 30
June 2020.
(1) Additional stock in transit of $719,000 was recognised in the statement of financial position in the comparatives in the current financial statements.
Accounting policy for inventories
Stock in transit and stock on hand are stated at the lower of cost and net realisable value. The costs of purchase of inventories comprise
the purchase price, import duties and other taxes (other than those subsequently recoverable by the entity from the taxing authorities),
and transport, handling and other costs directly attributable to the acquisition of finished goods, materials and services. Trade discounts,
rebates and other similar items are deducted in determining the costs of purchase.
Both stock in transit and stock on hand are finished goods for which net realisable value is the estimated selling price in the ordinary
course of business less the estimated selling costs necessary to make the sale.
Note 9. Current assets - other
Prepayments
Right of return assets
Security deposits
Note 10. Non-current assets – right-of-use assets
Buildings - at cost
Less: Accumulated depreciation
Motor vehicle - at cost
Less: Accumulated depreciation
32
26
2020
$'000
Consolidated
2019
$'000
3,178
219
95
3,492
1,368
128
113
1,609
Consolidated
2020
$'000
1,791
(447)
1,344
66)
(17)
49)
1,393
Temple & Webster Group Ltd Temple & Webster Group Ltd Notes to the Financial Statements continued
Temple & Webster Group Ltd
Notes to the financial statements
30 June 2020
Note 10. Non-current assets – right-of-use assets (continued)
Reconciliations of the written down values at the beginning and end of the current are set out below:
Consolidated
Balance at 30 June 2019
Effect of adoption of new accounting standard (AASB 16)
Balance at 1 July 2019
Additions
Depreciation expense
Balance at 30 June 2020
Refer to note 5 for the accounting policies on right-of-use assets.
Note 11. Non-current assets - intangibles
Goodwill - at cost
Less: Accumulated Impairment
Brands - at cost
Software and websites - at cost
Less: Accumulated amortisation
Less: Accumulated Impairment
Development costs
Customer relationships - at cost
Less: Accumulated amortisation
Buildings
$’000
Motor
vehicle
$’000
-
406
406
1,333
(395)
1,344
-
58
58
-
(9)
49
Total
$’000
-
464
464
1,333
(404)
1,393
2020
$'000
Consolidated
2019
$'000
22,434
(17,902)
4,532
22,434
(17,902)
4,532
2,781
2,781
2,000
(466))
(1,474)
60
486
338
(338)
-
1,967
(429)
(1,474)
64
182
338
(301)
37
7,859
7,596
27
33
Annual Report 2020 Annual Report 2020
Temple & Webster Group Ltd
Notes to the financial statements
30 June 2020
Note 11. Non-current assets – intangibles (continued)
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
Consolidated
Goodwill
$’000
Brands
$’000
Software and Development
costs
$’000
websites
$’000
Customer
relationships
$’000
Balance at 1 July 2018
4,532
2,781
Additions
Amortisation expense
-
-
Balance at 30 June 2019
4,532
Additions
Amortisation expense
-
-
Balance at 30 June 2020
4,532
-
-
2,781
-
-
2,781
82
41
(59)
64
35
(39)
60
-
182
182
304
-
486
121
-
(84)
37
-
(37)
-
Total
$’000
7,516
223
(143)
7,596
339
(76)
7,859
Impairment testing
For impairment testing, goodwill and brands acquired through business combinations are allocated to the Temple and Webster CGU
(‘TPW’) and amounted to $7,313,000 in the current and previous financial year. The Group performed its annual impairment test in June
2020 and 2019. The recoverable amount of the TPW CGU has been determined based on a value-in-use calculation, using a discounted
cash flow model, based on a five-year projection period including the budget approved by the board for the financial year ended 30 June
2021. The key assumptions used to determine the value-in-use of the TPW CGU are based on the Directors’ current expectations. They
are considered to be reasonably achievable, however, significant changes in any of these key estimates, assumptions or regulatory
environments may result in the TPW CGU carrying value exceeding its recoverable value, requiring an impairment charge to be
recognised. Any reasonably possible change in any of the assumptions used does not result in an impairment charge at 30 June 2020.
The key assumptions are those to which the recoverable amount of an asset or CGU is most sensitive.
The following key assumptions were used in the value-in-use calculation for the TPW CGU:
a) 15.4% pre-tax discount rate (15.4% in the previous financial year),
b)
revenue growth in year 1 as per the next financial year budget approved by the board (consistent approach with the previous
financial year),
revenue growth in years 2 to 5 calculated based on the combination of the historical growth rates over the past 4 years as well
as external industry data (consistent approach with the previous financial year),
c)
d) 4% terminal growth rate in the current and the previous financial year.
In accordance with AASB 136 'Impairment of assets', forecasts do not include estimated future cash inflows or outflows that are expected
to arise from improving or enhancing the CGU's performance.
Based on the above assumptions, the calculated recoverable amount was higher than the carrying value of the TPW CGU and therefore
no impairment charge was expensed to profit or loss for the year ended 30 June 2020.
No changes to the CGU structure have been made in the current financial year.
Accounting policy for impairment of non-financial assets
Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for
impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-financial assets
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.
Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the present value
of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which
the asset belongs. Assets that do not have independent cash flows are grouped together with a cash-generating unit.
34
28
Temple & Webster Group Ltd Temple & Webster Group Ltd Notes to the Financial Statements continued
Temple & Webster Group Ltd
Notes to the financial statements
30 June 2020
Note 11. Non-current assets – intangibles (continued)
Accounting policy for intangible assets
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the date of
the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not amortised
and are subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured at cost less
amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of intangible assets are
measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. The method and useful lives
of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for
prospectively by changing the amortisation method or period.
Goodwill
Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for impairment, or more
frequently if events or changes in circumstances indicate that it might be impaired and is carried at cost less accumulated impairment
losses. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed.
Brands
Brand costs acquired are capitalised as an asset. These costs are not subsequently amortised as they have an indefinite useful life,
instead they are tested annually for impairment.
Software and websites
Significant costs associated with software are deferred and amortised on a straight-line basis over the period of their expected benefit,
being their finite useful lives of between two to seven years.
Research and development
Research costs are expensed in the period in which they are incurred. Development costs are capitalised when it is probable that the
project will be a success considering its commercial and technical feasibility, the Group is able to use or sell the asset, the Group has
sufficient resources and intent to complete the development and its costs can be measured reliably. Capitalised development costs are
amortised on a straight-line basis over the period of their expected benefit, being their finite useful life of three years.
Customer relationships
Customer contracts acquired in a business combination are amortised on a straight-line basis over the period of their expected benefit,
being their finite useful life of four years.
Note 12. Current liabilities - trade and other payables
Trade payables
Accrued payables (1)
Employee related payables
Cash-settled share-based payments (refer to note 18)
On-costs on share-based payments (refer to note 18)
Other payables
2020
$'000
Consolidated
2019
$'000
11,524
7,907
959
284
88
1,368
22,130
6,553
1,447
922
242
133
313
9,610
Accounting policy for trade and other payables
These amounts represent liabilities for wages, salaries and goods and services provided to the Group prior to the end of the reporting
period and which are unpaid. Due to their short-term nature, they are measured at amortised cost and are not discounted. The amounts
are unsecured and are usually paid within 30 days of recognition. Gains and losses are recognised in profit or loss when the liabilities
are derecognised.
(1) Additional accrued payables of $719,000 were recognised in the statement of financial position in the comparatives in the current financial
statements.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred.
29
35
Annual Report 2020 Annual Report 2020
Temple & Webster Group Ltd
Notes to the financial statements
30 June 2020
Note 13. Current liabilities - employee benefits
Annual leave
Accounting policy for employee benefits
Employee benefits
2020
$'000
752
Consolidated
2019
$'000
528
Annual leave
Liabilities for annual leave are calculated based on remuneration rates the Group expects to pay when the liability is expected to be
settled. Annual leave is a long-term benefit and is measured using the projected credit unit method.
Long service leave
The Group's net obligation in respect of long-term service benefits is the amount of future benefit that employees have earned in return
for their service in the current and prior periods. The obligation is calculated using the expected future increases in wage and salary rates
including related on-costs and expected settlement dates, and is discounted using rates attached to bonds with sufficiently long maturities
at the balance sheet date, which have maturity dates approximating to the terms of the Group's obligations.
Note 14. Current liabilities - provisions
Lease make good
Refunds and replacements
Movements in provisions
Movements in each class of provision during the current financial year are set out below:
Consolidated
Carrying amount at 30 June 2018
Additional provisions recognised
Amounts used
Unused amounts reversed
Carrying amount at 30 June 2019
Additional provisions recognised
Amounts used
Unused amounts reversed
Carrying amount at 30 June 2020
2020
$'000
Consolidated
2019
$'000
-
2,386
2,386
24
923
947
Lease make
good
$'000
Refunds and
replacements
$'000
24
-
-
-
24
-
(24)
-
-
1,005
7,562
(6,876)
(768)
923
13,398)
(11,115)
(820)
2,386
36
30
Temple & Webster Group Ltd Temple & Webster Group Ltd Notes to the Financial Statements continued
Temple & Webster Group Ltd
Notes to the financial statements
30 June 2020
Note 14. Current liabilities – provisions (continued)
Accounting policy for provisions
Lease make good
The provision represents the present value of the estimated costs to make good the premises leased by the Group at the end of the
respective lease terms.
Refunds and replacements
The refunds provision represents the value of goods expected to be returned by customers as a result of ‘change of mind’ or defective
goods receipted by customers. The replacement provision represents the value of goods expected to be replaced by the Group as a
result of defective goods receipted by customers. The provisions are estimated based on historical data using the percentage of actual
refunds and replacements against sales revenue and cost of goods sold.
Provisions are recognised when the Group has a present (legal or constructive) obligation as a result of a past event, it is probable the
Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised
as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account
the risks and uncertainties surrounding the obligation. If the time value of money is material, provisions are discounted using a current
pre-tax rate specific to the liability. The increase in the provision resulting from the passage of time is recognised as a finance cost in
profit or loss.
Note 15. Current liabilities – deferred revenue
Deferred revenue
Movements in deferred revenue during the current financial year are set out below:
Carrying amount at 1 July 2018
Additional revenue deferred
Amounts used
Carrying amount at 30 June 2019
Additional revenue deferred
Revenue recognised
Carrying amount at 30 June 2020
Refer to note 4 for the accounting policies on deferred revenue.
2020
$'000
Consolidated
2019
$'000
10,025
4,331
Deferred
revenue
$'000
1,936
104,008
(101,613)
4,331
182,036
(176,342)
10,025
31
37
Annual Report 2020 Annual Report 2020
Temple & Webster Group Ltd
Notes to the financial statements
30 June 2020
Note 16. Equity - contributed capital
2020
Shares
Consolidated
2019
Shares
2020
$'000
2019
$'000
Ordinary shares - fully paid
113,442,884
112,556,694
76,566
76,566
Movements in ordinary share capital
Details
Balance
Date
Shares
Issue price
$'000
1 July 2018
108,681,225
76,566
Shares issued to employees under STI and LTI scheme
29 August 2018
3,196,982
Shares issued to employees under LTI scheme
20 September 2018
633,333
Shares issued to employees under STI scheme
15 February 2019
45,154
$0.00
$0.00
$0.00
-
-
-
Balance
1 July 2019
112,556,694
76,566
Shares issued to employees under STI scheme
29 August 2019
Shares issued to employees under STI scheme
18 September 2019
Shares issued to employees under LTI scheme
30 September 2019
190,810
42,048
633,332
$0.00
$0.00
$0.00
-
-
-
Balance
30 June 2020
113,422,884
76,566
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in proportion to the
number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the Company does not have a
limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have
one vote.
Capital risk management
The Group's objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide returns for
shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. Capital is
regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated as total borrowings,
trade and other payables, less cash and cash equivalents.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to
shareholders or issue new shares.
The Group would look to raise capital when an opportunity to invest in a business or company is seen as value adding relative to the
current Company's share price at the time of the investment. The Group has pursued investments to integrate and grow its existing
businesses in order to maximise synergies, refer to note 34 for further details.
No changes were made in the objectives, policies or processes for managing capital during the years ended 30 June 2020 and 30 June
2019.
The group used the cash and assets in a form readily convertible to cash that it had at the time of admission in a way consistent with its
business objectives in the financial year ended 30 June 2020 and 30 June 2019.
Accounting policy for contributed capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity
as a deduction, net of tax, from the proceeds.
38
32
Temple & Webster Group Ltd Temple & Webster Group Ltd Notes to the Financial Statements continued
Temple & Webster Group Ltd
Notes to the financial statements
30 June 2020
Note 17. Equity - reserves
Share-based payments reserve
Accounting policy for reserves
2020
$'000
Consolidated
2019
$'000
3,513
3,513
2,615
2,615
Share-based payments reserve
The reserve is used to recognise the value of equity benefits provided to employees and directors as part of their remuneration, and to
other parties as part of their compensation for services.
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2018
Transaction Cost
Share-based payments
Balance at 30 June 2019
Transaction Cost
Share-based payments
Balance at 30 June 2020
Note 18. Share-based payments
Share-based
payments
$'000
1,586
(18)
1,047
2,615
(11)
909
3,513
Long-term incentive ('LTI') plans were established by the Group and approved by the Board, whereby the Group may, at the discretion
of the Nomination and Remuneration Committee, grant performance rights or options over ordinary shares in the Company to employees
and directors of the Group. The LTI performance rights are issued for nil consideration and are granted in accordance with performance
guidelines established by the Nomination and Remuneration Committee. The LTI options are issued at a pre-determined consideration
amount and are granted in accordance with performance guidelines established by the Nomination and Remuneration Committee. The
LTI performance targets are based on share price hurdles, which are set at the beginning of the performance period and are aligned to
business level strategic priorities. Each participant is required to meet a service condition for performance rights to vest.
Set out below are summaries of performance rights granted under the LTI plans as at 30 June 2020:
Grant date
Vesting date
01/11/2016
1/07/2018
15/02/2019
1/07/2018
1/07/2018
1/07/2019
30/09/2019
31/08/2021
31/08/2021
31/08/2022
31/08/2022
31/08/2022
Exercise
price
Balance at
the start of
the year
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
633,334
402,909
50,000
500,000
1,300,000
-
2,886,243
Granted
-
-
-
-
-
114,898
114,898
Vested/
Exercised
(633,334)
-
-
-
-
-
(633,334)
Expired/
forfeited/
replaced
Balance at
the end of
the year
-
-
-
-
-
-
-
-
402,909
50,000
500,000
1,300,000
114,898
2,367,807
The weighted average remaining contractual life of performance rights outstanding at the end of the financial year was 1.98 years.
33
39
Annual Report 2020 Annual Report 2020
Temple & Webster Group Ltd
Notes to the financial statements
30 June 2020
Note 18. Share-based payments (continued)
Set out below are summaries of performance rights granted under the LTI plans as at 30 June 2019:
Grant date
Vesting date
09/12/2015(1) 09/12/2020
01/11/2016(2)
30/09/2019
31/08/2021
15/02/2019
31/08/2021
1/07/2018
31/08/2022
1/07/2018
31/08/2022
1/07/2018
Exercise
price
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Balance at
the start of
the year
818,182
1,266,667
-
-
-
-
2,084,849
Granted
-
-
50,000
402,909
500,000
1,300,000
2,252,909
Vested/
Exercised
-
(633,333)
-
-
-
-
(633,333)
Expired/
forfeited/
replaced
Balance at
the end of
the year
(818,182)
-
-
-
-
-
(818,182)
-
633,334
50,000
402,909
500,000
1,300,000
2,886,243
(1) This LTI scheme, granted to the CXO, has been replaced with the new scheme granted on 1 July 2018. Refer to the Remuneration Report for more
information.
(2) This LTI scheme from the prior year consists of three tranches which vest over the life of the scheme. As at 30 June 2019, 1,316,666 had already
vested and the last remaining rights vested on 30 September 2019.
The weighted average remaining contractual life of performance rights outstanding at the end of the financial year was 2.37 years.
For the LTI performance rights granted during the current financial year, the valuation model inputs used to determine the fair value at
the grant date are as follows:
Grant date
Vesting date
Share price
at grant date
Exercise
price
Expected
volatility
Dividend
yield
Risk-free
interest rate
Fair value
at grant date
1/07/2019
31/08/2022
$1.38
$0.00
60.00%
-
0.95%
$0.60
For the LTI performance rights granted during the previous financial years, the valuation model inputs used to determine the fair value at
the grant date, are as follows:
Grant date
Vesting date
9/12/2015
9/12/2015
1/11/2016
1/07/2018
1/07/2018
1/07/2018
31/08/2020
31/08/2018
30/09/2019
31/08/2021
31/08/2022
31/08/2022
Share price
at grant date
Exercise
price
Expected
volatility
Dividend
yield
Risk-free
interest rate
Fair value
at grant date
$0.90
$0.90
$0.16
$0.76
$0.76
$0.76
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
50.00%
34.75%
65.00%
60.00%
58.00%
58.00%
-
-
-
-
-
-
2.12%
2.12%
1.68%
2.20%
2.19%
2.19%
$0.432
$0.900
$0.075
$0.372
$0.760
$0.396
Set out below are summaries of options granted under the LTI and salary sacrifice plans as at 30 June 2020:
Grant date
Vesting date
1/07/2018
27/11/2018
31/08/2022
30/06/2021
Exercise
price
$0.74
$0.99
Balance at
the start of
the year
5,000,000
543,078
5,543,078
Granted
Vested/
Exercised
Expired/
forfeited/
lapsed
Balance at
the end of
the year
-
-
-
-
-
-
-
-
-
5,000,000
543,078
5,543,078
For the LTI and salary sacrifice options granted during the previous financial year to the CEO and non-executive directors (‘NED’), the
valuation model inputs used to determine the fair value at the grant date, are as follows:
Grant date
Vesting date
Share price
at grant date
Exercise
price
Expected
volatility
Dividend
yield
Risk-free
interest rate
Fair value
at grant date
1/07/2018
27/11/2018
31/08/2022
30/06/2021
$0.76
$1.15
$0.74
$0.99
58.00%
60.00%
-
-
2.19%
2.20%
$0.352
$0.594
40
34
Temple & Webster Group Ltd Temple & Webster Group Ltd Notes to the Financial Statements continued
Temple & Webster Group Ltd
Notes to the financial statements
30 June 2020
Note 18. Share-based payments (continued)
Nil dividend yield was used in the valuation of the share-based payments granted in the current financial year.
A short-term incentive ('STI') plan was also established by the Group and approved by the Board, whereby the Group may, at the
discretion of the Nomination and Remuneration Committee, grant performance rights over ordinary shares in the Company to employees
and directors of the Group. The rights are issued for nil consideration and are granted in accordance with performance guidelines
established by the Nomination and Remuneration Committee. STI performance targets are based on Group and Individual KPIs, which
are set at the beginning of the performance period and are aligned to business level strategic priorities. Each participant might need to
meet the service condition for STI performance rights to vest.
Set out below are summaries of performance rights granted under the STI plan as at 30 June 2020:
Grant date
Vesting date
Exercise
price
31/08/2017
31/08/2019
$0.00
Balance at
the start of
the year
190,810
190,810
Granted
Vested/
exercised
Expired/ Balance at
forfeited/
lapsed
Fair
Value
the end of at grant
date
the year
-
-
(190,810)
(190,810)
-
-
-
-
$0.740
-
Set out below are summaries of performance rights granted under the STI plan as at 30 June 2019:
Grant date
Vesting date
01/11/2016
01/09/2017
31/08/2017
31/08/2018
31/08/2018
31/08/2019
Exercise
price
$0.00
$0.00
$0.00
Balance at
the start of
the year
1,082,902
1,428,775
235,964
2,747,641
Granted
Vested/
exercised
-
-
-
-
(1,082,902)
(1,428,775)
(45,154)
(2,556,831)
Expired/ Balance at
forfeited/
lapsed
Fair
Value
the end of at grant
date
the year
-
-
-
-
-
-
190,810
190,810
$0.160
$0.320
$0.740
-
Cash-settled share-based payments of $284,000 were granted under the STI Plan on 1 July 2019 and vested on 30 June 2020 ($242,000
in the previous financial year).
A short-term incentive ('STI') plan was established by the Group during the previous financial year, whereby non-executive employees
receive $1,000 of ordinary shares in the Company if the STI performance targets, based on Group KPIs, are met. The Group KPIs were
met for year ended 30 June 2019, hence the STI plan vested and the shares were issued to the employees. This STI plan was repeated
in the current financial year with consistent structure as the previous year. As at 30 June 2020, the Group’s KPIs were met.
Accounting policy for share-based payments
Equity-settled transactions
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the rendering
of services. The cost of equity-settled transactions is measured at fair value on grant date. For the LTI performance rights or options, fair
value is independently determined using either the Trinomial, Monte Carlo or Black-Scholes 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, together with non-vesting conditions and
hurdles that do not determine whether the Group receives the services that entitle the employees to receive payment. For the STI
performance rights the valuation model used to determine the fair value at the issue date is based on the market value of Temple &
Webster Group Ltd shares less dividend yield at the date each performance right was accepted by the participant, or a fixed percentage
of remuneration as determined by the Performance Rights Plan.
The cost of equity-settled transactions is recognised as an expense with a corresponding increase in equity over the vesting period. The
cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards
that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative
amount calculated at each reporting date less amounts already recognised in previous periods.
Market conditions are taken into consideration in determining fair value. Therefore, any awards subject to market conditions are
considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional
expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share-based
compensation benefit as at the date of modification.
35
41
Annual Report 2020 Annual Report 2020
Temple & Webster Group Ltd
Notes to the financial statements
30 June 2020
Note 18. Share-based payments (continued)
If the non-vesting condition is within the control of the Group or employee, the failure to satisfy the condition is treated as a cancellation.
If the condition is not within the control of the Group or employee and is not satisfied during the vesting period, any remaining expense
for the award is recognised over the remaining vesting period, unless the award is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised
immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award are treated as if they were
a modification.
Cash-settled transactions
A liability is recognised for the fair value of cash-settled transactions. The fair value is measured initially and at each reporting date up to
and including the settlement date, with changes in fair value recognised in employee benefits expense (refer to note 5). The fair value is
expensed over the period until the vesting date with recognition of a corresponding liability and is determined as a percentage of the fixed
remuneration.
Note 19. Equity - dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Note 20. Financial instruments
Financial risk management objectives
The Group's activities expose it to a variety of financial risks: market risk (including foreign currency risk) and liquidity risk. The Group's
overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on
the financial performance of the Group.
Risk management is carried out by senior finance executives ('finance') under policies approved by the Board of Directors ('the Board').
These policies include identification and analysis of the risk exposure of the Group and appropriate procedures, controls and risk limits.
Finance identifies, evaluates and hedges financial risks within the Group's operating units. Finance reports to the Board on a monthly
basis.
Market risk
Foreign currency risk
The Group undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk through foreign
exchange rate fluctuations.
Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated
in a currency that is not the entity's functional currency. The risk is measured using sensitivity analysis and cash flow forecasting.
The Group uses foreign exchange forward contracts to manage some of its transaction exposures resulting from purchases in USD. The
foreign exchange forward contracts are not designated as cash flow hedges and are entered into for periods consistent with foreign
currency exposure of the underlying transactions, generally from one to 3 months. The foreign exchange forward contract balances vary
with the level of expected foreign currency purchases and changes in foreign exchange forward rates. The foreign exchange forward
contracts are measured at fair value through profit or loss.
The carrying amount of the Group's foreign currency denominated financial assets and financial liabilities at the reporting date were as
follows:
Consolidated
US dollars
NZ dollars
2020
$'000
-
-
-
Assets
2019
$'000
-
-
-
2020
$'000
901
-
901
Liabilities
2019
$'000
142
3
145
Based on this position, the Group is not exposed to any significant foreign currency sensitivity from its existing liabilities.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market
interest rates. The Group is not materially exposed to any significant interest rate risk.
42
36
Temple & Webster Group Ltd Temple & Webster Group Ltd Notes to the Financial Statements continued
Temple & Webster Group Ltd
Notes to the financial statements
30 June 2020
Note 20. Financial instruments (continued)
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group
is not materially exposed to any significant credit risk. All cash and cash equivalents are held by well-established banks, hence the
expected default rate for these institutions is highly unlikely based on both financial and non-financial data available. All receivables are
neither past due nor impaired.
Liquidity risk
Vigilant liquidity risk management requires the Group to maintain sufficient liquid assets (mainly cash and cash equivalents) to be able
to pay debts as and when they become due and payable.
The Group manages liquidity risk by maintaining adequate cash reserves by continuously monitoring actual and forecast cash flows and
matching the maturity profiles of financial assets and liabilities.
Remaining contractual maturities
The following tables detail the Group's remaining contractual maturity for its financial instrument liabilities. The tables have been drawn
up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are required to
be paid. The tables include both interest and principal cash flows disclosed as remaining contractual maturities and therefore these totals
may differ from their carrying amount in the statement of financial position.
Consolidated - 2020
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Lease liabilities
Total non-derivatives
Derivatives
Foreign exchange forward contracts
Total derivatives
Consolidated - 2019
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Total non-derivatives
Derivatives
Foreign exchange forward contracts
Total derivatives
Weighted
average
interest rate
%
1 year or less
$'000
Between 1 and
2 years
$'000
Between 2 and
5 years
$'000
Over 5 years
$'000
-
-
6.5
-
-
11,524
1,368
504
13,396
46
46
-
-
504
504
-
-
-
-
381
381
-
-
-
-
-
-
-
-
Weighted
average
interest rate
%
1 year or less
$'000
Between 1 and
2 years
$'000
Between 2 and
5 years
$'000
Over 5 years
$'000
Remaining
contractual
maturities
$'000
11,524
1,368
1,389
14,281
46
46
Remaining
contractual
maturities
$'000
-
-
-
-
6,553
313
6,866
30
30
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,553
313
6,866
30
30
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above.
AASB 9 Financial Instruments
A financial asset shall be measured at amortised cost, if it is held within a business model whose objective is to hold assets in order to
collect contractual cash flows, which arise on specified dates and solely principal and interest. All other financial assets are to be classified
and measured at fair value through profit or loss unless the entity makes an irrevocable election on initial recognition to present gains
and losses on equity instruments (that are not held-for-trading) in other comprehensive income ('OCI').
37
43
Annual Report 2020 Annual Report 2020
Temple & Webster Group Ltd
Notes to the financial statements
30 June 2020
Note 20. Financial instruments (continued)
With regard to the measurement of financial liabilities designated as at fair value through profit or loss, in accordance with AASB 9, the
amount of change in fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other
comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would
create or enlarge an accounting mismatch in profit or loss. New impairment requirements will use an 'expected credit loss' ('ECL') model
to recognise an allowance. Impairment will be measured under a 12-month ECL method unless the credit risk on a financial instrument
has increased significantly since initial recognition in which case the lifetime ECL method is adopted.
Accounting policy for financial instruments
Financial assets - classification and measurement
The Group classifies its financial assets into the following categories: those to be measured subsequently at fair value (either through
OCI, or profit or loss) and those to be held at amortised cost. Classification depends on the business model for managing the financial
assets and the contractual terms of the cash flows.
At initial recognition, the Group measures its financial assets at amortised cost at its fair value plus transaction costs. These financial
assets are subsequent measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are
recognised in the profit or loss when the asset is derecognised, modified or impaired.
For Trade and other receivables, the Group has applied the standard’s simplified approach and has calculated ECLs based on lifetime
expected credit losses. The Group has established a provision matrix that is based on the Group’s historical credit loss experience,
adjusted for forward-looking factors specific to the debtors and the economic environment.
Financial liabilities
Financial liabilities are classified, at initial recognition, as payables at amortised cost or as derivatives at fair value through profit or loss.
The Group’s financial liabilities include trade and other payables and derivative financial instruments.
The Trade and other payables are recognised initially at fair value plus transaction costs. These financial liabilities are subsequently
measured at amortised cost using the EIR method.
Derivatives
The Group uses derivative financial instruments to hedge its risks associated with foreign currency fluctuations arising from operating
activities. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered
into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as
financial liabilities when the fair value is negative.
Note 21. Fair value measurement
The carrying amounts of trade and other receivables, trade and other payables and other financial liabilities approximate their fair values
due to their short-term nature.
Accounting policy for fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is
based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal
market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in
their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation
techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used,
maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that reflects the significance of
the inputs used in making the measurements. Derivatives held by the Group are considered to be level 2. Classifications are reviewed
at each reporting date and transfers between levels are determined based on a reassessment of the lowest level of input that is significant
to the fair value measurement.
For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available or
when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where there
is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which i ncludes a
verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data.
44
38
Temple & Webster Group Ltd Temple & Webster Group Ltd Notes to the Financial Statements continued
Temple & Webster Group Ltd
Notes to the financial statements
30 June 2020
Note 22. Key management personnel disclosures
Compensation
The aggregate compensation made to directors and other members of KMP of the Group is set out below:
Short-term employee benefits
Post-employment benefits
Share-based payment
Note 23. Remuneration of auditors
2020
$
Consolidated
2019
$
1,275,712
89,036
740,669
1,184,902
87,620
826,949
2,105,417
2,099,471
During the financial year the following fees were paid or payable for services provided by Ernst & Young Australia, the auditor of the
Group:
Audit services - Ernst & Young Australia
Audit or review of the financial report
Other services - Ernst & Young Australia
Assurance services
Tax compliance
Note 24. Contingent liabilities
The Group had no contingent liabilities at 30 June 2020 and 30 June 2019.
Note 25. Commitments
The Group had no capital commitments at 30 June 2020 and 30 June 2019.
2020
$
Consolidated
2019
$
206,681
197,600
9,360
41,715
-
44,805
257,756
242,405
39
45
Annual Report 2020 Annual Report 2020
Temple & Webster Group Ltd
Notes to the financial statements
30 June 2020
Note 26. Related party transactions
Parent entity
Temple & Webster Group Ltd is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 28.
Key management personnel
Disclosures relating to key management personnel are set out in note 22 and the remuneration report included in the directors' report.
Transactions with related parties
No transactions with related parties other than key management personnel occurred in the current and previous financial year.
Receivable from and payable to related parties
There were no outstanding balances in relation to transactions with related parties at the current and previous reporting date.
Loans to/from related parties
There were no loans to or from related parties at the current and previous reporting date.
Note 27. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Loss after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Net assets
Equity
Contributed capital
Reserves
Accumulated losses
Total equity
2020
$'000
2019
$'000
(1,972)
(1,972)
(1,972)
(1,972)
2020
$'000
2019
$'000
27,672
27,672
33,712
33,712
5,561
5,561
4,499
4,499
28,151
29,213
94,878
3,542
(70,269)
94,878
2,632
(68,297)
28,151
29,213
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2020 and 30 June 2019.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2020 and 30 June 2019.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2020 and 30 June 2019.
46
40
Temple & Webster Group Ltd Temple & Webster Group Ltd Notes to the Financial Statements continued
Temple & Webster Group Ltd
Notes to the financial statements
30 June 2020
Note 27. Parent entity information (continued)
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 32, except for the following:
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
•
• Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an indicator of an
impairment of the investment.
Deed of cross guarantee
The parent entity is a party to a deed of cross guarantee (refer to note 29).
Note 28. Interests in subsidiaries
The consolidated financial statements of the Group include the following subsidiaries:
Name
Temple & Webster Pty Ltd
Temple & Webster Services Pty Ltd
TPW Group Services Pty Ltd
Milan Direct Group Investments Pty Ltd
Milan Direct Pty Ltd
Milan Direct UK Pty Ltd
Temple & Webster NZ Ltd
Principal place of business /
Country of incorporation
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Ownership interest
2019
2020
%
%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
The principal continuing activities of the Group consisted of the sale of furniture, homeware, and other lifestyle products.
Note 29. Deed of cross guarantee
The following entities are party to a deed of cross guarantee under which each company guarantees the debts of the others:
Temple & Webster Group Ltd (Holding Entity)
Temple & Webster Pty Ltd
Temple & Webster Services Pty Ltd
TPW Group Services Pty Ltd
Milan Direct Group Investments Pty Ltd
Milan Direct Pty Ltd
Milan Direct UK Pty Ltd
By entering into the deed, the wholly-owned Australian entities have been relieved from the requirement to prepare financial statements
and directors' report under ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 issued by the Australian Securities and
Investments Commission ('ASIC').
The above companies represent a 'Closed Group' for the purposes of the ASIC Instrument, and as there are no other parties to the deed
of cross guarantee that are controlled by Temple & Webster Group Ltd, they also represent the 'Extended Closed Group'.
The statement of profit or loss and other comprehensive income and statement of financial position are substantially the same as the
Group and therefore have not been separately disclosed.
41
47
Annual Report 2020 Annual Report 2020
Temple & Webster Group Ltd
Notes to the financial statements
30 June 2020
Note 30. Reconciliation of profit or loss after income tax to net cash used in operating activities
Profit/ (loss) after income tax benefit for the year
Adjustments for:
Share based payment expense
Depreciation and amortisation
Movements in make good provision
Income tax benefit
Retained earnings effect of adoption of AASB 15
Gain on disposal of property, plant and equipment
Change in operating assets and liabilities:
(Increase)/decrease in trade and other receivables
(Increase)/decrease in inventories
(Increase)/decrease in other assets
Increase/(decrease) in trade and other payables
Increase/(decrease) in employee benefits
(Decrease)/increase in other provisions
Increase/(decrease) in deferred revenue
2020
$'000
Consolidated
2019
$'000
13,909
3,764
909
637
(50)
(5,892)
-
-
48)
(2,379)
(1,861)
12,613
386
1,489
5,694
1,047
266
(25)
(2,782)
(402)
(32)
(73)
(1,303)
(474)
1,709
129
(57)
2,395
Net cash from operating activities
25,503
4,162
Note 31. Earnings per share
Profit after income tax attributable to the owners of Temple & Webster Group Ltd
13,909
3,764
Weighted average number of ordinary shares used in calculating basic earnings per share
113,225,581
111,871,045
Effects of dilution from share based payments
5,931,478
6,636,884
Weighted average number of ordinary shares used in calculating diluted earnings per share
119,157,059
118,507,929
Number
Number
2020
$'000
Consolidated
2019
$'000
Basic earnings per share
Diluted earnings per share
Accounting policy for earnings per share
Cents
Cents
12.28
11.67
3.37
3.18
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Temple & Webster Group Ltd, 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 financial year.
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.
48
42
Temple & Webster Group Ltd Temple & Webster Group Ltd Notes to the Financial Statements continued
Temple & Webster Group Ltd
Notes to the financial statements
30 June 2020
Note 32. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out either in the respective notes or below.
These policies have been consistently applied to all the years presented, unless otherwise stated.
New, revised or amending Accounting Standards and Interpretations adopted
The accounting policies adopted in the preparation of the Group’s annual consolidated financial statements are consistent with those
following in the preparation in the previous period, expect for the adoption of new standards effective for the Group as of 1 July 2019.
The group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.
The Group applies, for the first time, AASB 16 Leases. Refer to the note 5 for details of the new accounting policies.
Several other amendments and interpretations apply for the first time in the current financial year, but do not have an impact on the
annual consolidated financial statements of the Group.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations
issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as appropriate for for-profit oriented
entities. These financial statements also comply with International Financial Reporting Standards as issued by the International
Accounting Standards Board ('IASB').
The consolidated financial statements provide comparative information in respect of the previous period with the exception of new
accounting standards adopted in the period.
From 1 July 2019, the group has adopted AASB 16 Leases to replace AASB 117 Leases. The Group has adopted this standard by
using the modified retrospective method, and therefore the comparatives have not been adjusted.
Historical cost convention
The financial statements have been prepared under the historical cost convention except for derivative financial instruments, which are
measured at fair value.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the consolidated entity's accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 2.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the Group only. Supplementary
information about the parent entity is disclosed in note 27.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Temple & Webster Group Ltd as at 30
June 2020 and the results of all subsidiaries for the year then ended.
Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has
rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the
activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-
consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated. Unrealised
losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of
subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the
loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value
of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent.
Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in
the subsidiary together with any cumulative translation differences recognised in equity. The Group recognises the fair value of the
consideration received and the fair value of any investment retained together with any gain or loss in profit or loss.
43
49
Annual Report 2020 Annual Report 2020
Temple & Webster Group Ltd
Notes to the financial statements
30 June 2020
Note 32. Significant accounting policies (continued)
Foreign currency translation
Foreign currency transactions
Foreign currency transactions are translated into Australian dollars 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 financial year-end
exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.
Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting date. The
revenues and expenses of foreign operations are translated into Australian dollars using the average exchange rates, which approximate
the rates at the dates of the transactions, for the period. All resulting foreign exchange differences are recognised in other comprehensive
income through the foreign currency reserve in equity.
The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the Group's normal
operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or
the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the
reporting period. All other assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled in the Group's normal operating cycle; it is held primarily for the
purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the
settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Investments and other financial assets
Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the initial
measurement, except for financial assets at fair value through profit or loss. They are subsequently measured at either amortised cost or
fair value depending on their classification. Classification is determined based on the purpose of the acquisition and subsequent
reclassification to other categories is restricted.
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.
Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from
the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from,
or payable to, the tax authority is included in other receivables or other payables in the statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are
recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.
Rounding of amounts
The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments
Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that Corporations Instrument to
the nearest thousand dollars, or in certain cases, the nearest dollar.
50
44
Temple & Webster Group Ltd Temple & Webster Group Ltd Notes to the Financial Statements continued
Temple & Webster Group Ltd
Notes to the financial statements
30 June 2020
Note 33. New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not
been early adopted by the Group for the annual reporting period ended 30 June 2020. The Group's assessment deems these standards
will not be relevant to the Group.
Note 34. Events after the reporting period
The Group successfully completed a $40 million placement on 2 July 2020 via the issue of approximately 7.0 million new fully paid
ordinary shares. The purpose of this raise was to strengthen the balance sheet and enable the Group to pursue organic and inorganic
growth opportunities.
The Group also made a small investment into a start-up company developing AI interior design tools.
No other matter or circumstance has arisen since 30 June 2020 that has significantly affected, or may significantly affect the Group's
operations, the results of those operations, or the Group's state of affairs in future financial years.
45
51
Annual Report 2020 Annual Report 2020
Temple & Webster Group Ltd
Directors' declaration
30 June 2020
In the directors' opinion:
●
●
●
●
●
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations
Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International
Accounting Standards Board as described in note 32 to the financial statements;
the attached financial statements and notes give a true and fair view of the Group's financial position as at 30 June 2020 and of its
performance for the financial year ended on that date;
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 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 29 to the financial statements.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the directors
___________________________
Stephen Heath
Chairperson
31 August 2020
Sydney
52
46
Temple & Webster Group Ltd Temple & Webster Group Ltd Directors’ Declaration
Ernst & Young
200 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Independent Audit or's Report t o t he Members of Temple & Webst er
Group Lt d
Report on t he Audit of t he Financial Report
Opinion
We have audited the financial report of Temple & Webster Group Ltd (the Company), which comprises the
statement of financial position as at 30 June 2020, the statement of profit or loss and other
comprehensive income, statement of changes in equity and statement of cash flows for the year then
ended, notes to the financial statements, including a summary of significant accounting policies, and the
directors’ declaration.
In our opinion, the accompanying financial report of the Company is in accordance with the Corporations
Act 2001, including:
a)
giving a t rue and fair view of the Company's financial position as at 30 June 2020 and of its
financial performance for the year ended on that date; and
b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
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 are independent of the Company 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
(including Independence Standards) (t he Code) that are relevant to our audit of the financial report in
Australia. We have also fulfilled our other et hical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Key Audit Mat t ers
Key audit matters are those matters that , in our professional judgment, were of most significance in our
audit of the financial report of the current year. These matters were addressed in the context of our audit
of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate
opinion on these matters. For each matter below, our description of how our audit addressed the matter
is provided in that context.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
A
53
Annual Report 2020 Annual Report 2020Independent Auditor’s Report 2
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of material
misstatement of the financial report. The results of our audit procedures, including the procedures
performed to address the matt er below, provide the basis for our audit opinion on the accompanying
financial report.
Revenue Recognit ion
Why significant
How our audit addressed t he key audit mat t er
As disclosed in note 4 to the financial report,
revenue is recognised at an amount that reflects
the consideration to which an entit y expects to
be entitled in exchange for transf erring goods or
services to a customer.
The majority of the Group’s sales transactions
are completed through the “ drop-ship” model
whereby suppliers deliver goods directly to the
Group’s customers. The group is the principal in
these transactions and therefore revenue is
recognised as the gross selling price net of
rebates and discounts.
Revenue is only recognised when delivery is
made to the customer which requires an
assessment at the end of the accounting period
for all orders shipped but not yet processed as
delivered.
Due to the judgement involved in this
assessment, the volume of online retail
transactions processed on a daily basis, and the
arrangements in place with suppliers, the
timing of when revenue is recognised is
considered to be a key audit matter.
Our audit procedures included the following:
-
-
-
-
-
Testing the operating effectiveness of controls
over the capt ure and measurement of revenue
transactions;
For a sample of revenue transactions during the
year, near year-end and subsequent to year-end,
testing whether the revenue was recorded in the
appropriate period including testing whether the
sale transactions not delivered to the cust omer
were appropriately included as deferred revenue
at balance date;
Considering whether customer returns, and
credit notes issued post balance date that related
to sales recognised in the 2020 financial year
were recorded in the proper period;
Assessing whether the revenue recognition
policy applied to the terms and conditions of sale
was in accordance with Australian Accounting
Standards; and
Considering the adequacy of the revenue
recognition policy disclosure contained in note 4.
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Temple & Webster Group Ltd Temple & Webster Group Ltd Independent Auditor’s Report continued 3
Informat ion Ot her t han t he Financial Report and Audit or’s Report Thereon
The directors are responsible for the other informat ion. The other information comprises the information
included in the Company’s 2020 Annual Report but does not include the financial report and our auditor’s
report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon, with the exception of the Remuneration Report and
our related assurance opinion.
In connection wit h our audit of the financial report, our responsibility is to read the other information and,
in doing so, consider whether the other informat ion is materially inconsistent with the financial report or
our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilit ies of t he Direct ors for t he Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal control as the directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or
error.
In preparing the financial report, the directors are responsible for assessing the Company’s ability to
continue as a going concern, disclosing, as applicable, matters relating to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
Audit or's Responsibilit ies for t he Audit of t he Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whet her 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. Misst atements 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 this financial report.
As part of an audit in accordance wit h the Australian Auditing Standards, we exercise professional
judgment and maintain professional scepticism throughout the audit. We also:
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Annual Report 2020 Annual Report 2020 4
Identify and assess the risks of material misstatement of the financial report, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud
may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
Obtain an understanding of internal control relevant to t he audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal cont rol.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the financial report or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the Company to cease to
continue as a going concern.
Evaluate the overall presentation, st ructure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events in a
manner that achieves fair presentation.
We communicate wit h the directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate
threats or safeguards applied.
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should
not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
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56
Temple & Webster Group Ltd Temple & Webster Group Ltd Independent Auditor’s Report continued 5
Report on t he Audit of t he Remunerat ion Report
Opinion on t he Remunerat ion Report
We have audited the Remuneration Report included in pages 5 to 11 of the Annual Report for the year
ended 30 June 2020.
11 to 17 of the Annual Report for the year
In our opinion, the Remuneration Report of Temple & Webster Group Ltd for the year ended 30 June
2020, complies wit h section 300A of the Corporations Act 2001.
Responsibilit ies
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.
Ernst & Young
Graham Leonard
Partner
Sydney
31 August 2020
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57
Annual Report 2020 Annual Report 2020 Temple & Webster Group Ltd
Shareholder information
30 June 2020
The shareholder information set out below is applicable as at 30 July 2020.
Number of Equity Security Holders
The number of holders of Ordinary equity securities was 5,170.
The number of holders of unquoted performance rights was 8.
The number of holders of unquoted Options was 4.
Voting rights
The voting rights attaching to each class of equity securities are set out below:
Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall
have one vote.
Performance rights
Holders of Performance Rights do not have any voting rights.
Options
Holders of Options do not have any voting rights.
Distribution of Equity Securities
Analysis of number of equity security holders by size of holding:
Range
100,001 and Over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
Securities
108,168,425
6,032,152
1,635,229
3,167,538
1,437,084
120,440,428
% No. of holders of
ordinary shares
54
201
221
1,391
3,303
5,170
89.81
5.01
1.36
2.63
1.19
100.00
Distribution of unquoted equity securities
Analysis of number of unquoted performance rights holders by size of holding:
Range
100,001 and Over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
Securities
2,057,131
310,674
-
-
-
2,367,805
% No. of holders of
ordinary shares
3
5
-
-
-
8
86.88
13.12
-
-
-
100.00
Analysis of number of unquoted option holders by size of holding:
Range
100,001 and Over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
58
% No. of holders of
ordinary shares
4
-
-
-
-
4
100.00
-
-
-
-
100.00
Securities
5,543,078
-
-
-
-
5,543,078
52
%
1.04
3.89
4.27
26.91
63.89
100.00
%
37.50
62.50
-
-
-
100.00
%
100.00
-
-
-
-
100.00
Temple & Webster Group Ltd Temple & Webster Group Ltd Shareholder Information
Temple & Webster Group Ltd
Shareholder information
30 June 2020
Substantial holders
Substantial holders as disclosed in substantial holding notices given to the Company are:
Kinderhook 2 LP
Morgan Stanley and its subsidiaries
Tackelly Pty Limited as Trustee for Tackelly Trust
Super Properties Pty Ltd as Trustee for Shayne Smyth Trust
Ordinary shares
held
17,875,662
8,966,324
5,988,884
5,880,810
% of issued
shares
15.76
7.91
5.28
5.18
Marketable parcel
The number of holders holding less than a marketable parcel of Ordinary securities was 62.
Twenty largest quoted equity security holders
The names of the twenty largest holders of quoted equity securities as per the Company’s share register are listed below:
Name
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Pty Limited
Netwealth Investments Limited
AP Ecommerce Pty Ltd
HSBC Custody Nominees (Australia) Limited - A/C 2
Mark Coulter
Adam Richard McWhinney
National Nominees Limited
BNP Paribas Nominees Pty Ltd - IB AU NOMS RETAILCLIENT DRP
Hingtai Pty Limited
BNP Paribas Nominees Pty Ltd - AGENCY LENDING DRP A/C
Brian Shanahan & Jaccqueline Shanahan
Bariloche Investments Pty Limited
UBS Nominees Pty Ltd
CS Fourth Nominees Pty Limited
Mr King Shun Tam
Ms Mandy Hung Ko
Mr Jack Wu
Jam Hole LP
Total
Balance of register
Grand total
On-market buy-back
There is no current on-market buy-back.
Ordinary Shares
held
40,764,362
19,444,143
7,028,756
6,733,983
3,427,828
3,181,301
2,912,775
2,205,389
2,071,763
1,735,295
1,495,000
1,488,415
1,405,324
1,042,623
1,022,351
976,126
915,000
830,000
711,000
624,718
100,016,152
20,424,276
% of issued
shares
33.85
16.14
5.84
5.59
2.85
2.64
2.42
1.83
1.72
1.44
1.24
1.24
1.17
0.87
0.85
0.81
0.76
0.69
0.59
0.52
83.06
16.94
120,440,428
100.00
53
59
Annual Report 2020 Annual Report 2020
Temple & Webster Group Ltd
Corporate directory
30 June 2020
Directors
Stephen Heath, chairperson and independent non-executive director
Susan Thomas, independent non-executive director
Conrad Yiu, non-executive director
Mark Coulter, chief executive officer and executive director
Company secretary
Michael Egan
Registered office / principal place
of business
1A/1-7 Unwins Bridge Road
St Peters, NSW 2044
Share register
Auditor
Link Market Services Limited
Level 12
680 George Street
Sydney, NSW 2000
Share registry telephone: 1300 554 474
Ernst & Young
200 George Street
Sydney, NSW 2000
Stock exchange listing
Temple & Webster Group Ltd shares are listed on the Australian Securities Exchange (ASX code:
TPW)
Website
www.templeandwebstergroup.com.au
Corporate Governance Statement
Refer to the Company’s website for all corporate governance information
www.templeandwebstergroup.com.au/Home/?page=corporate-governance
60
54
Temple & Webster Group Ltd Temple & Webster Group Ltd Corporate Directory