Appendix 4E
The Reject Shop Limited
(ABN 33 006 122 676)
Consolidated preliminary final report
For the 52 week financial period ended 27 June 2021
Compared to the 52 week financial period ended 28 June 2020
Results for announcement to the market
$A'000
Sales revenue from continuing operations
down
(5.1%)
to
778,688
Profit from continuing operations after tax attributable to
shareholders of The Reject Shop
Net profit for the period attributable to shareholders of The
Reject Shop
up
up
642.8%
to
8,319
642.8%
to
8,319
Dividends
Interim dividend
Final dividend
Amount per share
nil
nil
Franked amount per
share
n/a
n/a
Record date for determining entitlements to final
dividend
Dividend payment date
n/a
n/a
Commentary on the Group’s trading results is included in the FY21 result announcement and FY21 results
presentation, as well as in the annual report enclosed.
Annual
Report
2020– 2021
About The Reject Shop
The Reject Shop has been delivering value to shoppers for almost 40 years. The Reject Shop
helps all Australians save money everyday by offering products frequently used and
replenished such as food, snacks, greeting cards, party, health and beauty, cleaning
supplies, storage, kitchenware, homewares, pet care and seasonal products at low prices
in 361 convenient store locations across Australia.
Contents
Chairman’s Review
CEO’s Review
Board of Directors
Leadership Team
Corporate Governance, Environmental and
Social Statement
Directors’ Report
Remuneration Report
Auditor’s Independence Declaration
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report to the Members of
The Reject Shop Limited
Shareholders’ Information
Corporate Directory
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Notice Of Annual General Meeting:
10.00am, 20 October 2021
The Reject Shop Limited is a Company limited by shares,
incorporated and domiciled in Australia. The address of
the Company’s registered office is 245 Racecourse Road,
Kensington VIC 3031. These financial statements are
presented in Australian currency and were authorised for
issue by the directors on 19 August 2021. The Company
has the power to amend and re-issue these financial
statements.
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Chairman’s Review
“Progress is being made in turning around The Reject Shop
in an uncertain and volatile operating environment.”
The FY21 financial year saw further progress ‘fixing’ The Reject Shop under the leadership of our Chief
Executive Officer, Andre Reich, together with the contribution of all of our team members.
The Company delivered sales of $778.7 million. The Company again traded strongly through the Christmas
period, navigated through the disruption caused by the COVID-19 pandemic and managed the
unexpected elevated international shipping costs while maintaining a customer-centric approach.
Earnings before interest and tax (“EBIT”) of $18.6 million and net profit after tax (“NPAT”) of $8.3 million
showed further improvement on the prior year and underscores the stabilisation of the Company in recent
times.
The Company’s balance sheet is strong with $73.0 million in cash at year end with no drawn debt.
In the coming year, I hope to report further progress as the Company begins to transition into the ‘reset’
and ‘grow’ phases of the turnaround strategy.
On behalf of the Board, I would like to take the opportunity to thank Andre and our committed and
passionate team members for their work in delivering this year’s results.
Finally, I would like to express my gratitude to my Board colleagues, our shareholders, customers, suppliers
and other stakeholders for your continued support and encouragement throughout the year.
Yours sincerely,
Steven Fisher
Non-executive Chairman
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CEO’s Review
“I would like to again
acknowledge the hard work
and dedication
demonstrated by our store
teams who continue to
provide a safe and clean
shopping environment for
our customers during the
COVID-19 pandemic and
lockdowns in particular.”
Turnaround progressing well
Our objective in FY21 was to progress through the
‘fix’ phase of the business turnaround while
improving profitability through cost reduction. This
objective was achieved through further business
simplification and operational efficiency.
During FY21, I am pleased to report that The
Reject Shop has reduced the cost of doing
business by approximately $27 million (or $23
million on a pre-AASB 16 basis), which is a
significant achievement and exceeded stated
targets for FY21.
The Reject Shop turnaround is progressing as
expected despite operating in a very uncertain
and challenging macro environment.
COVID-19
The COVID-19 pandemic has adversely impacted
all Australians in one way or another. In the midst
of uncertainty and complexity, The Reject Shop
has simply focused on living out its purpose,
which is centred on helping all Australians save
money. Our purpose has assisted us well,
especially as we responded to rolling and, at
times, extended lockdowns throughout the
country. During the year, our team has stepped
up and served our customers in a way that
continues to encourage and inspire me. I am
deeply thankful for their efforts on the frontline of
the COVID-19 pandemic. The dedication of our
team to go above and beyond continues to be
our competitive advantage.
COVID-19 has had a significant impact on
customer behaviour. In general, and consistent
with other retailers, customer shopping behaviour
has tended to shift towards less frequent
shopping visits with increased basket size. In
addition, stores in large shopping centres and
CBD locations have seen a significant reduction
in footfall with comparable store transactions
down approximately 19% on FY19.(i)
In response to these changes, we continue to
refine our merchandise offer to consistently
deliver great value on products that customers
need and want. We continue to improve our
selection of known national brands from leading
local and overseas manufacturers, supported by
private brands offering even greater value. Our
prices and range width continues to reduce as
we realise cost savings achieved by buying at
scale from our suppliers and passing those
savings onto our customers through lower prices.
Operations
During FY21, I managed to travel to a number of
our 361 stores, which enabled me to spend time
with our committed and passionate team
members and customers. These interactions are
often inspirational with our purpose well
understood and our role within the community
recognised and appreciated. To support our
team, our priority will be to ensure we have the
right people in the right roles with our objective to
create meaningful long-term employment with
The Reject Shop. We will ensure that even more of
our team members are given promotion
opportunities, particularly for store manager
roles.
We believe that a strong focus on efficiency and
scale will support our expansion into many more
(i) FY19 has been used to enable a comparison with pre-COVID-19 trading conditions given the second half of the prior
corresponding period (2H20) included the benefit from COVID-19 related panic buying
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suburban and rural locations across Australia,
allowing us to help more Australians save every
day.
During FY21, The Reject Shop incurred higher than
anticipated and unbudgeted international
supply chain costs as a result of international
shipping rates being significantly higher than
historical levels. In response, we have been
focused on optimising all aspects of our supply
chain to ensure that products move as quickly as
possible from suppliers to customers. There is
further work to be done to continue to manage
these elevated costs.
Looking forward
As I have said previously, we believe the discount
variety sector presents a significant opportunity
for growth over the medium to long term. As
Australia’s largest discount variety retailer, and
with our strong balance sheet, The Reject Shop is
well positioned to navigate the uncertain trading
environment, though there is further work to do to
reset and grow.
I would like to thank the Board for their continued
support throughout FY21 and for sharing their
experience, encouragement and governance.
With great thanks and respect, I recognise our
more than 4,000 committed and passionate
team members in our stores, distribution centres
and the Store Support Centre. Their determination
and commitment to making a positive
contribution to The Reject Shop is greatly
appreciated.
To our suppliers and business partners who
continue to support our purpose and who are by
our side every day – thank you for your
partnership. We look forward to continuing to
develop our partnership.
To our customers, we recommit to making
continual improvements to satisfy your shopping
needs and bring some fun to your shopping
experience while saving you money on everyday
items, every single day.
And to our shareholders, thank you for your
patience and long-term commitment to our
business. We are determined to transform The
Reject Shop and deliver sustainable growth.
Yours sincerely,
Andre Reich
Chief Executive Officer
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Board of Directors
Steven Fisher
Non-Executive Chairman
Bachelor of Accounting,
Chartered Accountant
(South Africa)
David Grant
Non-Executive Director
Bachelor of Commerce,
Chartered Accountant (Australia
& New Zealand) and Graduate
of the Australian Institute of
Company Directors
Selina Lightfoot
Non-Executive Director
Bachelor of Arts, Bachelor of
Laws, Graduate Diploma in
Applied Finance & Investment
and Graduate of the Australian
Institute of Company Directors
Steven Fisher has more than 30
years’ experience in general
management positions in the
wholesale consumer goods
industry and was the former
Managing Director of the
Voyager Group. Prior to entering
the consumer goods industry,
Steven was a practising
chartered accountant having
qualified with a Bachelor of
Accounting degree in South
Africa.
David Grant is a Chartered
Accountant with extensive
experience in the accounting
profession and the commercial
sector. David’s executive career
included roles with Goodman
Fielder Limited and Iluka
Resources Limited.
David is currently a non-executive
director of three other publicly
listed entities and is the chair of
the audit and risk committee of
all of these entities.
Steven joined the Board of The
Reject Shop in June 2019.
David joined the Board of The
Reject Shop in May 2020.
During the last three years Steven
has served as a director of the
following other listed companies:
During the last three years, David
has served as a director of the
following other listed companies:
• Breville Group Limited (director
• Event Hospitality and
since 2004) #
• Laybuy Group Holdings
Entertainment Limited (director
since 2013) #
Limited (director since 2020) #
• Retail Food Group Limited
(director since 2018) #
• A2B Australia Limited (director
since 2020) #
• The responsible entity of the
MG Listed Unit Trust (Murray
Goulburn Co-operative Co.
Limited) (director 2017 to 2020)
Selina Lightfoot is an
experienced company director
and consultant; her previous
executive experience includes
over 25 years as a corporate
legal advisor, including 10 years
as a partner at a major Australian
law firm.
Selina’s areas of expertise include
corporate governance, mergers
and acquisitions, business
integration, outsourcing and
commercial contracting. Through
her legal roles and other
directorships, Selina has been
exposed to a broad range of
industries, including technology,
retail and manufacturing.
Selina joined the Board of The
Reject Shop in August 2018 and
she is a director of Hydro
Tasmania, Victorian Opera and
JDRF Australia.
During the last three years, Selina
has served as a director of the
following other listed companies:
• Nuchev Limited (director since
2016 – the entity was listed on
9 December 2019) #
• DWS Limited (director 2016 to
2020)
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Nicholas (Nick) Perkins
Non-Executive Director
Margaret Zabel
Non-Executive Director
Bachelor of Arts, Bachelor of
Laws and Graduate of the
Australian Institute of Company
Directors
Bachelor of Mathematics,
Masters of Business
Administration and Graduate of
the Australian Institute of
Company Directors
Nick Perkins is the Managing
Director and General Counsel of
Kin Group Pty Ltd, which is a
substantial shareholder of The
Reject Shop. The Kin Group is a
diversified, global, long-term
focused investor with offices in
Melbourne and New York.
Nick has held a variety of roles
within the Kin Group, and its
subsidiary businesses, for over a
period of 17 years, including 10
years as the General Counsel of
Pact Group Limited.
Nick joined the Board of The
Reject Shop in May 2020.
During the last three years, Nick
has not served as a director of
any other listed company.
Margaret Zabel is a specialist in
customer centred business
transformation, brand strategy,
innovation, digital
communications, customer
experience and change
leadership. Margaret has more
than 20 years of senior executive
experience working across major
companies and brands in fast
moving consumer goods, food,
technology and communications
industries including
multinationals, ASX 100
companies and not-for-profits.
Margaret’s executive experience
includes National Marketing
Director for Lion Nathan, Vice
President of Marketing for
McDonald’s Australia and Chief
Executive Officer of Advertising
Council Australia (formerly known
as The Communications Council).
Margaret has also served as a
non-executive board director for
mental health charity R U OK? for
5 years and is currently a non-
executive director on the board
of Collective Wellness Group and
Fairtrade AU/NZ.
Margaret joined the Board of The
Reject Shop in June 2021.
During the last three years,
Margaret has served as a director
of the following other listed
company:
• G8 Education Limited (director
since 2017) #
# denotes current directorship
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Leadership Team
Andre Reich
Chief Executive
Officer
Clinton Cahn
Chief Financial
Officer
Paul Calvert
General Manager,
Operations
Michael Freier
General Counsel &
Company Secretary
Clinton was appointed
Chief Financial Officer
of The Reject Shop from
1 May 2020.
Clinton has an extensive
investment and finance
background following
roles at Crown Resorts,
TPG Capital and UBS
Investment Bank. At
Crown Resorts, Clinton
had significant strategic
and financial involvement
in key projects and
transactions both in
Australia and overseas,
including the $2.2 billion
Crown Sydney Hotel
Resort. Clinton was also
heavily involved in
Crown’s digital strategy
and headed Crown’s
investor relations.
Clinton joined The Reject
Shop in March 2020.
Paul has more than 25
years of retail experience
in the United Kingdom
and Australia. Paul started
his retail journey as a team
member with his local
Asda store where he filled
the shelves whilst studying
before working his way
through the ranks to
become a store manager.
Paul went on to hold a
variety of leadership
positions in Sainsburys in
both their supermarket
and convenience teams.
Paul moved to Australia in
November 2015 where he
initially worked for
Woolworths in Western
Australia before moving to
Coles where he held
several roles both in
operations and store
support.
Paul joined The Reject
Shop in May 2020.
Michael is an experienced
legal practitioner with
private practice (King &
Wood Mallesons in
Melbourne and
McCullough Robertson in
Brisbane) and in-house
experience (Repco in
Melbourne). In private
practice, Michael worked
on a wide range of
property transactions
around the country. Since
moving in-house, Michael
has demonstrated
experience managing
property transactions, risk,
corporate governance
and product safety issues.
Michael has held the role
of General Counsel of The
Reject Shop since August
2016 and he was
appointed Company
Secretary on 1 September
2019.
Andre is recognised
across the market as a
high performing retail
executive with extensive
experience in low price
general merchandise and
apparel retail formats.
Andre’s retail experience
commenced at Myer in
the mid-1990s with time in
a number of roles
spanning business growth
roles, concessions and
buying. In 2007, Andre
became the CEO of
Review (an Australian
womenswear retail brand)
and he successfully
transitioned that business
to new ownership.
In 2009, Andre joined
Wesfarmers and played a
key role in Kmart
Australia’s successful
turnaround through his
leadership of the
merchandise and
marketing functions.
Andre was transferred to
Target Australia as Chief
Operating Officer in 2016
with responsibility for
merchandise, sourcing,
quality and marketing.
Andre spent three years
resetting the Target
Australia business.
Andre commenced as
Chief Executive Officer of
The Reject Shop in
January 2020.
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Kate Lewis
General Manager,
People & Culture
Paul Rose
General Manager,
Property
Carl Wilson
General Manager,
Merchandise
Kate has more than 25
years of experience
working across large
supermarket retailers
where she has held both
operational and human
resource positions. Kate
has had extensive
experience in driving and
executing human
resource strategy across
these large complex
businesses. Kate’s
experience includes
developing capability,
sourcing great talent,
transformation, fostering
high performing teams,
driving process and
organisational
improvement as well as
achieving results in fast
paced environments.
Kate joined The Reject
Shop in February 2020.
Carl is a highly
experienced retailer with
extensive experience in
the United Kingdom (Ted
Baker and Debenhams)
and Australia (Jeans West
and Wesfarmers Group)
working within
Merchandise and Supply
Chain.
For the past 13 years, Carl
has worked within the
Wesfarmers Group where
he contributed to the
successful turnaround of
Kmart Australia and the
transformation of Target
Australia, where he held
the positions of General
Manager of Planning and
General Manager of
Transformation.
Carl joined The Reject
Shop in February 2020.
Paul is an experienced
senior level professional
with over 20 years’
experience in retail
property, working with
major retailers and major
landlords throughout
Australia.
Paul held senior roles for
10 years with leading ASX
listed property trusts and
commercial agencies in
centre management,
leasing and development.
Paul then held senior
property roles with
Wesfarmers-owned Kmart
Australia from 2009 and
Target Australia from 2016.
During this time, Paul was
part of the property
leadership team that
delivered major store
network growth to assist
with positioning Kmart
Australia.
Paul joined The Reject
Shop in February 2020.
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Corporate Governance,
Environmental and Social Statement
Corporate Governance
The Company and the Board are committed to
maintaining high standards of corporate
governance. The Company supports the intent
and purpose of the ASX Corporate Governance
Council’s Principles and Recommendations (“ASX
Principles”) and complies with the requirements
of the 4th Edition, as outlined in the Corporate
Governance Statement.
A summary of the Company’s corporate
governance framework and practices is outlined
in the Corporate Governance Statement, which is
available in the corporate governance section
on the Company’s website https://www.
rejectshop.com.au/about/policies-and-charters.
Environmental and Social Statement
The Company recognises the importance of
environmental and social issues and managing
the risks associated with those issues. The
Company wants to contribute to the community
through adopting policies and processes that
positively assist customers and the community.
Reducing Waste and Recycling
The Company has been focused on initiatives
aimed at simplifying the ways of doing business.
The simple to serve initiative consists of ‘one
touch’ merchandising and ‘pallet to place’ for
high volume products. In terms of ‘one touch’
merchandising, an increasing proportion of
products are delivered to the Company in
shelf-ready trays, which can be easily and quickly
put on to shelves while also reducing the
packaging requirements for such products. The
use of pallets for high volume products further
reduces the packaging requirements and
simplifies the customer experience. Further
reductions in the usage of plastic and cardboard
are also being sought in the supply chain.
Since November 2013, the Company has
positively responded to the phasing out of
single-use plastic bags for customers. Since 2019,
the Company estimates that it has supplied
customers with approximately 14 million reusable
plastic bags, which are made from at least 80%
recycled material.
The Company is increasing its engagement with
its contracted waste company in order to
improve its recycling capabilities. Increased
plastic and cardboard recycling across the store
network has been a focus.
Sustainable Awareness and Fit-out
The Company continues to review more
sustainable material options for use in building,
fitting out and refurbishing our stores. Multiple
programs to increase the efficiency of inventory
delivery and reducing packaging wastage are
currently being reviewed.
The Company recognises that it is on a journey to
continually improve its response to environmental
and social issues, and this will be an ongoing
focus.
Energy Efficiency Initiatives
The Company is also committed to being
responsible for the impact it has on our
environment and, wherever possible, engaging
with our community to research and implement
positive environmental outcomes.
The Company is committed to reducing our
environmental footprint and our greenhouse gas
emissions. Our focus is on providing a more
sustainable and holistic approach to energy
usage, waste disposal, recycling and the positive
education of our team members in relation to the
environment.
Since mid-2015, the Company has made a
multi-million dollar investment into an energy
saving project with a view to reducing our
environmental footprint while reducing operating
costs.
As of 27 June 2021, we have installed high-
efficiency LED lighting and automated energy
management systems into 319 stores. This
equipment regulates lighting levels and run times.
This energy reduction equipment now forms part
of our standard fit-out and will be rolled out to all
new stores in the future.
Modern Slavery
For many years, the Company has sourced
products from a variety of locations nationally
and internationally. Inherent in our practices has
been the objective of sourcing product from
suppliers which we believe support workplace
safety and ensure appropriate employment
conditions are in place (including fair pay).
The Company is committed to respecting human
rights with that commitment outlined in our first
modern slavery statement available at https://
www.rejectshop.com.au/about/
policies-and-charters
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Directors’ Report
The directors present their report on The Reject
Shop Limited and its subsidiaries (“the
Company”) for the financial period ended 27
June 2021.
Directors
The directors of The Reject Shop Limited during
the whole of the financial period and up to the
date of this annual report, unless otherwise stated
below, were:
Steven Fisher
Non-Executive Director
Chairman of the Board, Member of the Audit and
Risk Committee and Member of the People and
Culture Committee.
David Grant
Non-Executive Director
Meetings of Directors
The number of meetings of the Board of Directors
and Committees held during the period ended 27
June 2021, and the number of meetings attended
by each director, were:
Director
meetings
Audit & Risk
Committee
meetings
People &
Culture
Committee
meetings
A
15
15
15
15
4
1
B
15
15
15
15
5
1
A
5
5
5
5
2
1
B
5
5
5
5
2
1
A
3
3
3
3
1
1
B
3
3
3
3
1
1
S Fisher
S Lightfoot
D Grant
N Perkins
M Teague
M Zabel
Chairman of the Audit and Risk Committee and
Member of the People and Culture Committee.
A – Number of meetings attended
B – Number of meetings held during the time the director
held office during the period
Selina Lightfoot
Non-Executive Director
Chair of the People and Culture Committee and
Member of the Audit and Risk Committee.
Nicholas Perkins
Non-Executive Director
Member of the Audit and Risk Committee and
Member of the People and Culture Committee.
Margaret Zabel (Appointed on 4 June 2021)
Non-Executive Director
Member of the Audit and Risk Committee and
Member of the People and Culture Committee.
Michele Teague (Retired on 21 October 2020)
Non-Executive Director
Member of the Audit and Risk Committee and
Member of the People and Culture Committee.
For the financial period ended 27 June 2021, the
details of the experience and expertise of the
current directors and the Company Secretary are
outlined on pages 6 to 8 of this annual report.
Principal Activities
The principal activities of the Company during
the financial period were the retailing of discount
variety merchandise and no significant change in
the nature of these activities occurred during the
period.
Operating and Financial Review
The Operating and Financial Review forms part of
the Directors’ Report on pages 14 to 15.
Significant Changes in the State of
Affairs
There has been no material change in the state
of affairs of the Company or the consolidated
entity.
Matters Subsequent to the End of the
Financial Period
The Company and the Australia and New
Zealand Banking Group (ANZ) have agreed to
extend the Company’s existing banking facilities
to August 2022 (previously August 2021). The limits
for the banking facilities are as follows:
• working capital facility: $10 million; and
• seasonal facility: $20 million (the seasonal
facility can only be used between October
and December each year; the Company is
required to deposit $5 million with ANZ when
the seasonal facility is being used).
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The COVID-19 pandemic continues to impact the
Australian economy and retail sector. During July
and August 2021, various State and Territory
governments in Australia implemented new
restrictions and lockdowns, which vary by State
and Territory. While the future impact and
duration of the COVID-19 pandemic (and any
associated State and Territory government
restrictions) on the Company is currently
unknown, the pandemic may continue to affect
the Company’s operations and results.
Otherwise no other matters or circumstances
have arisen since the end of the financial period
which significantly affect or may significantly
affect the operations of the Company, the results
of those operations, or the state of affairs of the
Company in future financial periods.
Likely Developments and Expected
Results of Operations
Likely developments in the operations of the
Group and the expected results of those
operations in future financial periods are
contained in the Operating and Financial Review
on pages 14 to 15 of this annual report.
Environmental Regulation
The Company is not involved in any direct
activities that have a marked influence on the
environment within its area of operation. As such,
the directors are not aware of any material issues
affecting the Company or its compliance with
the relevant environmental agencies or
regulatory authorities.
Dividends
No dividends were paid to shareholders during
the financial period. Since the end of the
financial period, no dividend has been declared.
The Company’s dividend reinvestment plan is not
currently active.
Indemnities and Insurance Premiums
The Company’s Constitution provides that the
Company may indemnify any current or former
director, secretary, or officer of the Company
against every liability incurred by the person in
that capacity (except a liability for legal costs)
and all legal costs incurred in defending or
resisting (or otherwise in connection with)
proceedings, whether civil or criminal or of an
administrative or investigatory nature, in which
the person becomes involved because of that
capacity. The indemnity does not apply to the
extent that the Company is forbidden by statute
to indemnify the person or the indemnity would, if
given, be made void by statute.
In addition, each director has entered into a
deed of indemnity and access which provides for
indemnity against liability as a director, except to
the extent of indemnity under an insurance
policy or where prohibited by statute. The deed
also entitles the director to access Company
documents and records, subject to undertakings
as to confidentiality.
To the extent permitted by law, the Company has
agreed to indemnify its auditors,
PricewaterhouseCoopers (“PwC”), as part of the
standard terms of its audit engagement against
claims by third parties arising from the audit (for
an unspecified amount). No payment with
respect to such indemnity has been made to
PwC during or since the financial year.
The Company has paid premiums for directors’
and officers’ liability insurance in respect of
directors and officers of the Company as
permitted by the Corporations Act 2001. During
the financial period, the Company paid a
premium of $497,297 to insure the directors and
officers of the Company.
Options
No options were issued by the Company during
or since the end of the financial year and no
director or officer holds options over issued or
unissued securities of the Company.
Details of the Performance Rights held by the Key
Management Personnel are set out in the
Remuneration Report.
Proceedings on Behalf of the Company
No proceedings have been brought or
intervened in on behalf of the Company with
leave of the court under section 237 of the
Corporations Act 2001.
Rounding of Amounts
The Company is a kind referred to in ASIC
Corporations (rounding in financial/directors’
report) Instrument 2016/191, issued by the
Australian Securities and Investment Commission,
relating to the “rounding off” of amounts in the
directors’ and financial reports. Amounts in these
reports have been rounded off in accordance
with that Class Order to the nearest thousand
dollars, or in certain specified cases, to the
nearest dollar.
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DiRECTORS ’ REPORT CONTINUED
Overview of Operations
The Company operates in the discount variety retail sector in Australia.
The Company’s Australian and New Zealand Standard Industrial Classification (ANZSIC) is class 4110
(Supermarket and Grocery Stores).
The ongoing development of the merchandise product ranges to meet customer needs continues to be a
key focus.
Our store locations continue to be one of the key strengths of the Company, providing our customers with
convenient access to our offer. We expect to continue to open new stores in locations that reach new
customers and close non-profitable locations. We continue to focus on capturing improved lease terms
and new store locations for the Company to ensure we are well positioned to meet the needs of our
customers into the future.
During the year, the Company opened ten new stores, relocated one store and closed three stores,
resulting in a national store footprint totalling 361 stores by the end of the year.
Overview of Financial Performance
$ Amounts are $m / % are to Sales
Sales
Gross Profit(i)
Cost of doing business(i) (ii)
EBITDA(i) (ii)
Depreciation and Amortisation
EBIT(i)(ii)
Net Interest Expense
Profit Before Tax
Income Tax Expense
Net Profit After Tax
FY21
Statutory
FY20
Statutory
778.7
41.2%
24.7%
128.5
(109.9)
18.6
(6.4)
12.1
(3.8)
8.3
820.6
41.7%
26.8%
122.7
(113.4)
9.3
(7.7)
1.6
(0.5)
1.1
(i) Non IFRS measure and unaudited
(ii) FY20 includes a prior period impairment charge of $0.7m
FY21 Performance
Sales in FY21 were $778.7 million, down 5.1% on the prior period. Comparable store sales were down 5.0%
on the prior period.
Sales were impacted – both favourably and unfavourably – by various State Government restrictions and
lockdowns relating to the COVID-19 pandemic.
Stores in large shopping centres and CBD locations saw a significant reduction in footfall and transactions.
Gross profit was $321.1 million with gross margin of 41.2%. During the period, the Company incurred higher
than anticipated international supply chain costs as a result of international shipping rates being
significantly higher than historical levels.
The cost of doing business (“CODB” consists of store and administrative expenses but excluding
depreciation and amortisation) was $192.6 million, which represents a reduction of $27.2 million on the prior
period. CODB as a percentage of sales was 24.7%. The significant cost savings are predominantly due to
simplification and standardisation of in-store processes leading to labour savings as well as further
administrative costs savings with the full year benefit of the April 2020 head office restructure being
realised.
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The Company generated EBIT of $18.6 million.
Statutory NPAT for FY21 was $8.3 million, which
compares to $1.1 million in the prior period.
The Company did not receive any wage subsidies
under the JobKeeper program during the period.
Outlook
COVID-19 continues to impact sales performance
with July and August sales impacted by
lockdowns in New South Wales, Victoria,
Queensland, South Australia and Australian
Capital Territory. Stores in CBD locations and
large shopping centres continue to be negatively
impacted by reduced footfall.
Ongoing challenges in the international supply
chain are expected to result in shipping costs
remaining elevated during FY22.
Management’s focus in FY22 will be on
generating comparable store sales growth in its
existing network (subject to the ongoing
disruption from COVID-19), opening new stores in
neighbourhood and strip locations (both metro
and country), and continuing to optimise costs
across the business. Management will also focus
on managing gross profit margin given the
headwinds in the global supply chain, the cost of
which is expected to be partially offset by
improved foreign exchange rates.
Dividends
The Company did not declare any dividends
during the period.
Financial Position and Capital
Investment
The Company’s balance sheet remains strong
with a net cash position at 27 June 2021 of $73.0
million. This compares to a net cash position of
$92.5 million at 28 June 2020 and $6.8 million at 30
June 2019. As at the balance date, and
consistent with the position at 28 June 2020, the
Company does not have any drawn debt.
The reduction in cash is primarily due to higher
inventory, which closed at $99.8 million, up
approximately $29 million from $70.9 million at 28
June 2020.
Store Network Plans
The Company will continue to restructure its store
portfolio. Currently, the Company is targeting to
open a further 20 new stores and to close at least
five unprofitable or underperforming stores in
FY22.
Overview of Retail Industry Trends and
Supply Chain
The Australian retail sector continues to be in a
state of flux with the COVID-19 pandemic
creating uncertainty and volatility. The COVID-19
pandemic has adversely impacted a number of
retailers and, in a number of prominent and well
publicised cases, some retailers have closed. For
others, the COVID-19 pandemic created an
opportunity.
E-commerce continues to evolve and become
more prominent although bricks and mortar
remains the largest component of the retail
landscape.
It is expected that economic conditions will
remain challenging in the short-term with
consumer confidence potentially weakening,
traditional spending and shopping behaviour
changing and supply chains remaining
challenged. The Australian Government’s
four-phase plan out of the COVID-19 pandemic is
centred on increasing vaccination rates which
may then result in the easing of restrictions. Within
this context, the Australian retail sector is likely to
face headwinds on its path to recovery.
The discount variety sector contains a range of
challenges. The greatest challenge concerns
competitor activity. Competition comes from a
range of areas, including:
a)
b)
c)
d)
e)
regionally based discount variety chains;
a multitude of single owner-operator
discount variety businesses;
discount department stores;
supermarkets, particularly larger
national chains; and
various e-commerce participants,
including international and national
businesses.
Competitor activity is focused on price
competition and store location. The Company
remains determined to be a leader in providing
every day low prices on our core merchandise
offerings in convenient locations. The Company is
well positioned to respond to changing levels of
consumer spending amid a potential economic
downturn.
Business Risks
There are a number of factors, both specific to
the Company and of a general nature, which
may threaten both the future operating and
financial performance of the Company and the
outcome of an investment in the Company. There
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DiRECTORS ’ REPORT CONTINUED
can be no guarantee that the Company will
achieve its stated objectives, that it will meet
trading performance expectations, or that any
forward-looking statements contained in this
annual report will be realised or otherwise
eventuate.
The operating and financial performance of the
Company is influenced by a variety of general
economic and business conditions, including
levels of consumer spending, inflation, interest
and exchange rates, access to debt and capital
markets and government fiscal, monetary and
regulatory policies. A prolonged deterioration in
general economic conditions, including
increases in interest rates or a decrease in
consumer and business demand, may have an
adverse effect on the Company’s business or
financial position.
The specific material business risks faced by the
Company, and how the Company manages
these risks, are set out below:
1. COViD-19
The COVID-19 pandemic has created uncertainty
and volatility internationally and domestically.
This uncertainty and volatility includes: the
evolving restrictions imposed by the government
to deal with COVID-19; international and
domestic economic conditions; interest rates;
employment levels; consumer demand;
consumer and business sentiment; government
fiscal, monetary and regulatory policies.
Additionally, the duration of the pandemic is
uncertain.
The impact of COVID-19 on the Company has
taken a number of different forms in different
parts of the Company’s operations. The initial
outbreak of COVID-19 in 2020 impacted the
Company’s international supply chain in China,
which resulted in short delays or cancellations of
orders from international suppliers or
manufacturers of products to be purchased by
the Company. The spread of COVID-19
throughout Australia in 2020, and the associated
restrictions imposed by authorities, created
challenges for the Company to source products
domestically and around its ability to continue to
operate from its retail network and distribution
centres.
As various State governments in Australia
implement new restrictions and lockdowns, which
vary by State, the Company reviews each public
health order/directive to ensure that the
Company may continue to trade. The Company
has been able to trade through the majority of
lockdowns although there is no guarantee that
the Company will be able to continue to trade
during any future lockdown.
Lockdowns tend to impact customer shopping
behaviour, which generally sees customers
shopping less frequently although customers tend
to increase their basket size. In addition, stores in
large shopping centres and CBD locations have
seen a significant reduction in footfall with
comparable store transactions down. As the
COVID-19 pandemic continues to evolve, these
trends may change which may impact the
Company’s financial performance.
In general, the Company was able to successfully
operate through the COVID-19 pandemic due to
being able to provide a safe and clean shopping
environment for team members and customers
through additional cleaning, taking additional
safety measures and complying with the health
advice provided by authorities.
The recent outbreak of COVID-19 (Delta Variant)
in 2021 has the potential to further impact the
Company’s operation. The international supply
chain may be impacted as China and other
countries deal with outbreaks of the Delta
Variant, which may result in delays or
cancellations of orders from international
suppliers or manufacturers of products to be
purchased by the Company. The closure of
factories and ports has the potential to disrupt
the flow of products. The Company continues to
monitor the situation.
While the future impact and duration of the
COVID-19 pandemic (and any associated State
government restrictions and international supply
chain impacts) on the Company is currently
unknown, the pandemic may affect the
Company’s financial performance although, to
date, the Company has managed this
uncertainty across its entire operation.
2. New and existing store growth
The growth strategy of the Company is
dependent upon its ability to generate growth
from its existing stores and to open new stores in
accordance with its expansion strategy.
Generating growth from existing stores will be
dependent on a number of factors, including
improving supply chain efficiencies, inventory
levels and appropriate sourcing of products. The
opening of new stores from time to time will
depend on the availability of suitable sites and
the ability of the Company to negotiate
acceptable lease terms. These factors will
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therefore impact on the ability of the Company
to successfully implement its growth strategy.
The Company has appointed an experienced
and capable property team to manage its
property expansion strategy.
3. Competition
The Company operates a retail model where
price and value are critical to the customers it
serves. The market in which the Company
operates is highly competitive and is subject to
changing customer demand and preferences,
with competition based on a variety of factors
including merchandise selection, price, parallel
importing, marketing and customer service. The
Company closely monitors price and quality to
ensure it maintains its competitive stance. The
Company’s financial performance or operating
margins could be adversely affected if its
competitors develop competitive advantages
over it or engage in aggressive product
discounting, if new competitors enter the market
or if the Company fails to successfully respond to
changes in the market. Market consolidation or
future acquisitions could also result in further
competition and changes to retail margins and
market share, which could negatively impact the
Company’s financial performance or operating
margins.
The Company has developed a comprehensive
three-phase strategy to respond to the
competitive environment. A key component of
the three-phase strategy concerns the ongoing
development of the merchandise range to meet
customer needs.
4. Consumer discretionary spending
The Company is exposed to consumer spending
patterns but operates an everyday low price
proposition and positions itself in convenient
locations to maximise sales potential at all times.
As many of the Company’s products are
consumable goods, sales levels are sensitive to
customer sentiment. The Company’s product
range and its financial operation and
performance may be affected by changes in
consumer disposable incomes, confidence and
demand, including as a result of changes to
economic outlook and interest rates.
As indicated above, a key component of the
Company’s three-phase strategy concerns the
ongoing development of the merchandise range
to meet customer needs and respond to changes
in consumer discretionary spending.
5. Financial performance and costs
The Company earns the majority of its EBIT and
NPAT in the first six months of the financial year.
This is due mainly to significant sales attributable
to the number of high-profile seasonal events in
the first half of the financial year. Sustained poor
trading performance at any time during major
seasonal events, such as Christmas, may have a
material impact on the profitability of the
Company. A significant proportion of the
Company’s operating costs are fixed in nature. As
a result, a significant shortfall in sales during any
period could result in an adverse impact on the
Company’s profitability. At the same time, the
Company is subject to increases in the cost of
operating its business, with annual cost
escalations generally being built into the
enterprise agreements in place for its store and
distribution centre staff as well as its lease
agreements for both stores and distribution
centres. While the Company’s increasing scale as
well as improving operating efficiencies and
strong lease negotiations have, to some extent,
offset some of these cost increases, such
increases would also impact on profitability.
The Company’s future financial performance is
dependent, to a certain extent, on the level of
capital expenditure that is required to maintain its
business. Any significant unforeseen increase in
the capital expenditure would impact its future
cash flow.
6. Financing risks
Historically, the Company has relied on a working
capital facility with the ANZ Bank, which requires
an annual review. While the annual review
requirement is consistent with the terms on which
the Company’s bank facilities have been made
available in recent years, there is a risk that the
financier will not agree to renew its bank facilities
with the Company in the future. Likewise, the
bank may only renew such bank facilities on
terms which are not acceptable to the Company.
An inability of the Company to renew these
facilities may affect the Company’s financial
performance and position in the future. Further,
should the Company be unable to satisfy the
terms, conditions and relevant covenants under
its bank facilities, the Company would be in
breach of those facilities and, amongst other
things, may need to source funding from
alternative sources.
The Company and the ANZ Bank have agreed to
extend the Company’s existing banking facilities
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DiRECTORS ’ REPORT CONTINUED
to August 2022 (previously August 2021). The limits
for the banking facilities are as follows:
• working capital facility: $10 million; and
• seasonal facility: $20 million (the seasonal
facility can only be used between October
and December each year; the Company is
required to deposit $5 million with ANZ when
the seasonal facility is being used).
7. Employment laws
The Company is mindful of recent instances in the
Australian retail and hospitality sectors where
there has been non-compliance with statutory
and award obligations (including payment
obligations) owed by employers to employees.
The Company has processes in place to monitor
compliance with employment laws and takes its
obligations to its workforce seriously.
8. Supply risk
The Company and its suppliers are subject to
various risks which could limit the Company’s
ability to procure sufficient supply of products. As
a consequence of the fact that the Company
relies significantly on a mixture of Australian
sourced and imported products from outside
Australia, the Company is exposed to various risks
in relation to raw material costs and supply chain
delays. Outbreaks of pandemics or diseases and,
in particular, the outbreak of COVID-19, could
potentially have a detrimental financial impact
on the Company’s business.
The Company remains focussed on risks relating
to its international supply chain. In particular,
outbreaks of COVID-19 in China and other
countries may result in delays or cancellations of
orders from international suppliers or
manufacturers of products to be purchased by
the Company. In FY21, the Company experienced
unexpected elevated international shipping
costs, which are expected to remain elevated
during FY22. The Company continues to monitor
the situation.
Other risks include modern slavery, political
instability, increased security requirements for
foreign goods, elevated costs and delays in
international shipping arrangements, imposition
of taxes and other charges as well as restrictions
on imports.
The Company is also exposed to risks related to
labour practices, environmental matters,
disruptions to production and ability to supply,
and other issues in the foreign jurisdictions where
suppliers operate. More generally, risks which
could limit the Company’s ability to procure
sufficient supply of products include raw material
costs, inflation, labour disputes, union activities,
boycotts, financial liquidity, product
merchantability, safety issues, natural disasters,
disruptions in exports, trade restrictions, currency
fluctuations and general economic and political
conditions. Any of these risks, individually or
collectively, could materially adversely affect the
Company’s financial and operational
performance.
Separately, there is a risk that any change in the
Company’s relationships with key suppliers
(including a supplier seeking to terminate the
relevant agreement) may result in the Company
being unable to continue to source products from
existing suppliers, and in the future, to source
products from new suppliers, at favourable
prices, on favourable terms, in a timely manner
and in sufficient volume. The Company cannot
guarantee that its existing arrangements with key
suppliers will be renewed, or renewed on terms
similar to their current terms. The loss or
deterioration of the Company’s relationships with
suppliers, or an inability to negotiate agreements
with new suppliers on terms which are not
materially less favourable than existing
arrangements, may have a material adverse
effect on the Company’s financial and
operational performance.
9. Property portfolio management
Lease costs represent a significant proportion of
the overall operating cost base of the Company.
The Company’s stores and distribution centres are
leased and therefore subject to negotiation at
the end of each lease term. While the potential
impact of a single store closure is mitigated by
the number of stores the Company now operates,
there is no guarantee any store or distribution
centre will be renewed at the end of each lease
term on terms acceptable to the Company.
The Company actively manages its store portfolio
against established financial and operational
criteria which must be met for both new and
existing stores.
Each of the Company’s distribution centres are
operated either by the Company itself or by a
third party. In either case, there is a risk that, due
to circumstances outside the control of the
Company, inventory located at the distribution
centre could be damaged, or that access to the
distribution centre could be restricted, meaning
18
that such inventory is unable to be retrieved. This
could have a material adverse effect on the
Company’s financial and operational
performance.
The Company’s property strategy is centred
around: renegotiating expired leases to better
reflect the current sales opportunity at each
location, closing unprofitable stores (particularly
in CBD locations and large shopping centres),
opening new stores in neighbourhood and strip
locations to replace closures, and building a
pipeline of new stores to drive growth in the
medium-term. New leasing and store
development teams have been formed to
support the execution of this strategy.
10. Merchandising sourcing and
management
The Company relies on its ability to anticipate
and meet the needs of its target customers and
purchases products accordingly. Misjudgements
in demand and trends or changes in consumer
preferences could result in overstocked inventory
and the sale of products below originally
anticipated selling prices, which may in turn have
an adverse impact on cash flows and
profitability.
11. Reliance on key personnel
The Company is reliant on retaining and
attracting quality executives and other team
members who provide expertise, experience and
strategic direction in operating the business. The
responsibility of overseeing day-to-day
operations and the management of the
Company is concentrated amongst a number of
key personnel. The loss of the services of any of
those key team members (for any reason
whatsoever) or the inability to attract new
qualified personnel, could adversely affect the
Company’s operations.
Additionally, successful operation of each of the
Company’s stores depends on its ability to attract
and retain quality team members. The Company
has over 4,000 team members across its stores
and distribution centre network. Competition
within the Australian retail market, as well as other
factors such as changing demographics or
employment laws could increase the demand
for, and cost of hiring, quality team members. The
Company’s financial and operational
performance could be materially adversely
affected if it cannot attract and/or retain quality
team members for its stores.
The Company has appointed a capable Chief
Executive Officer, Andre Reich, and leadership
team to implement the Company’s three-phase
strategy. The Company continues to have
success attracting and retaining quality team
members to run its operations.
12. Exchange rate
The Company relies significantly on imported
products (either directly purchased by the
business or indirectly through local or overseas
wholesalers) the costs of which are denominated
in foreign currencies and as a result the cost of
product and retail sales prices can be subject to
movements in exchange rates.
The Company mitigates against movements in
exchange rates through the use of forward cover.
If the Company is unable to alter pricing due to
uncovered movements in exchange rates, this
may have a material impact on its financial
performance.
13. Product liability exposure
The Company purchases and sells thousands of
different products on an annual basis, all of
which must be fit for purpose and compliant with
the Australian Consumer Law. Notwithstanding
the compliance protocols established by the
Company and insurance arrangements, there is
a risk that a product may breach relevant
consumer law, the implication of which could
have a material impact on the Company’s
business and performance.
The Company’s success in generating profits and
increasing its market share is also based on the
success of the key brands which it distributes and
sells, including third party branded products.
Reliance on these key brands has the potential to
make the Company vulnerable to brand or
reputational damage from any negative
publicity, product tampering or recalls. This may
also increase the rise of inventory and asset write
downs.
14. Occupational health and safety
The Company has over 4,000 team members
across its stores and distribution centre network,
as well as thousands of customers who visit its
stores nationwide. The business has a national
occupational health and safety (“OH&S”)
function, supported by OH&S representatives in
appropriate geographic locations to oversee the
application of OH&S policies and work safe
procedures across the business.
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17. Litigation
The Company is subject to the usual business risk
that litigation or disputes may arise from time to
time in the course of its business activities. These
may include claims, disputes, inquiries and
investigations involving customers, team
members, landlords, suppliers, government
agencies/authorities, regulators or other third
parties. There can be no assurance that legal
claims will not be made against the Company, or
that the Company’s insurance will be adequate
to cover liabilities resulting from any such claims.
Any successful claim against the Company may
adversely impact its future financial performance
or position as well as its reputation and brand.
18. Reputational risk
The risks that have been identified in this annual
report may individually or collectively materially
affect the Company’s brand and reputation,
which may in turn adversely impact on the
Company’s operating and financial
performance. The Company has developed a
comprehensive system of managing risk to
protect its people, its customers, the environment,
the Company’s assets and reputation as well as
to realise business opportunities. The Company
has a very low tolerance for any activities that
could materially damage its brand or reputation
although the Company accepts that it may
periodically have temporary negative publicity.
DiRECTORS ’ REPORT CONTINUED
Notwithstanding the above, given that the
Company operates more than 360 stores in
Australia, there is always a risk that a personal
injury claim or otherwise may occur to a customer
or employee due to unforeseen circumstances.
Any claim relating to an accident which occurs in
any of the Company’s stores could materially
affect the Company’s brand and reputation, as
well as its businesses, operating and financial
performance.
15. information technology
The Company’s management information system
and other information technology systems are
designed to enhance the efficiency of the
Company’s operations. If any of these systems are
not maintained sufficiently or updated when
required, or if disaster recovery processes are not
adequate, system failures may negatively impact
on the Company’s business and performance.
There is a risk that a general technological
development will involve costs which are
disproportionate to previous generation
technologies.
16. Markets and liquidity
The market price of the Company’s shares will
fluctuate due to various factors, many of which
are non-specific to the Company, including the
number of potential buyers or sellers of the
Company’s shares on the Australian Securities
Exchange (“ASX”) at any given time,
recommendations by brokers and analysts,
Australian and international general economic
conditions, inflation rates, interest rates, changes
in government, fiscal, monetary and regulatory
policies, commodity prices, global geo-political
events and hostilities and acts of terrorism, and
investor perceptions. In the future, these factors
may cause the Company’s shares to trade at a
lower price.
In addition, the Company currently has a small
number of substantial shareholders on its share
register. There is a risk that these shareholders
may sell their shares at a future date. This could
cause the price of the Company’s shares to
decline.
There may be few or many potential buyers or
sellers of the Company’s shares on the ASX at any
given time. This may affect the volatility and/or
the market price of the Company’s shares and/or
the prevailing market price at which shareholders
are able to sell their shares in the Company.
20
Remuneration Report
Under section 300A of the Corporations Act 2001
(Cth), listed companies must present a
remuneration report to shareholders at every
annual general meeting showing the Board’s
policies for determining the nature and amount
of remuneration paid to Key Management
Personnel (which includes any director) (“KMP”),
the relationship between the policies and
company performance, an explanation of
performance hurdles and actual remuneration
paid to KMP.
The remuneration report is set out in the following
sections and includes remuneration information
for the Company’s non-executive directors and
other KMP:
A – Principles used to determine the nature and
amount of remuneration
B – Details of remuneration
C – Service agreements
D – Share-based compensation
E – Additional information
The information provided in this remuneration
report has been audited as required by section
308(3C) of the Corporations Act 2001.
A – Principles used to determine the
nature and amount of remuneration
The objective of the Company’s People and
Culture Committee is to ensure that directors and
executives are remunerated fairly and within
accepted market and industry ranges. The
composition, role and responsibility of this
Committee is outlined in the Corporate
Governance Statement on page 10.
Officers and executive remuneration structure
The executive remuneration and reward
framework has four components:
• base pay and benefits;
• other remuneration such as superannuation
payments;
• short-term cash rewards; and
• long-term rewards through participation in the
Company’s Performance Rights Plan.
The framework seeks to align executive reward
with achievement of the Company’s strategic
objectives and the creation of value for
shareholders. The objective of the Company’s
executive reward framework is to ensure every
payment, either monetary or in the form of
equity, is on the basis of reward for performance
and is appropriate for the results delivered. The
People and Culture Committee ensures the
Company follows appropriate corporate
governance in establishing executive
remuneration, including reference to external
remuneration consultants and/or available
market information.
Base pay and benefits
Executive salaries are structured as a total
employment cost package which may be
delivered as a mix of cash and non-monetary
benefits at the executive’s discretion.
Executives are offered a competitive base pay
that comprises the fixed component of pay and
rewards. External remuneration consultants
provide analysis and advice to ensure base pay
is set to reflect the market for a comparable role.
Base pay for executives is reviewed annually to
ensure competitiveness with the market. There
are no guaranteed base pay increases in the
contracts of any of the executives. The Company
has a formal process by which the performance
of all executives is reviewed. An executive’s pay is
also reviewed on promotion.
Executive benefits made available may include
car allowances and salary sacrifice
superannuation arrangements.
Short-term cash rewards (STR)
For FY21, the STR for executives consisted of
various performance hurdles, including safety
related measures and Company financial
performance through achieving budgeted EBIT
as well as individual performance ratings. If these
STR targets are achieved, cash payments of 22.5%
to 40% of total fixed remuneration are made. The
audited financial report remains the basis for
measuring achievement against the financial
performance targets.
For FY21, the People and Culture Committee has
determined that no member of KMP will receive
an STR due to the financial hurdle not being
achieved.
Long Term Rewards – Performance Rights
Plan
The Company implemented the Performance
Rights Plan on 27 April 2004, to form the basis of
The Reject Shop’s ongoing long-term incentive
scheme for selected team members. These
performance rights involve the payment of a total
of $1.00 exercise price for each tranche granted
and exercised on a particular day, regardless of
the number of rights exercised on that day.
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21
RE MuN ERATiON REPORT CONTINUED
Criteria for FY21:
In FY21, the Company continued with its three-phase turnaround strategy, which necessitated the
Company implementing new criteria for the long-term incentive scheme for a small number of team
members, including the KMP (other than the non-executive directors).
The financial criteria upon which the performance rights are eligible to vest concern achieving earnings
per share growth measured over a three-year period (i.e. in FY23). The audited financial report is the basis
for measuring achievement against the financial performance target.
The People and Culture Committee, and the Board, retain the right to assess all aspects of the vesting
conditions for future performance rights grants.
The number of performance rights issued is based on a specified percentage of each participant’s total
fixed remuneration (ranging from 22.5% to 100%) divided by the volume weighted average market price for
the six month period at 30 June 2020. For financial reporting purposes, the value of each right granted at
grant date is measured using a Black-Scholes option pricing model.
For FY22:
The People and Culture Committee is currently in the process of implementing a revised incentive scheme
for a small number of team members, including KMP (other than the non-executive directors), in relation to
FY22. The incentive scheme will include both a short-term cash rewards component as well as a long-term
rewards component through participation in the Company’s Performance Rights Plan. The revised
incentive scheme is being designed to:
• incentivise key executives to outperform People and Culture Committee and Board expectations during
the turnaround;
• align the interests of key executives with shareholders by rewarding for long-term share price
appreciation; and
• incentivise key executives to remain with the Company during the turnaround and for longer-term
growth.
B – Details of remuneration
Directors’ fees
The current aggregate limit for directors’ fees is $950,000 per annum (p.a.) with a base fee payable
(including superannuation) to the Chairman of $206,205 p.a. (FY2020: $206,205) and to a non-executive
director of $120,438 p.a. (FY2020: $120,438). The Chairman’s remuneration is inclusive of Committee fees
while non-executive directors who take on additional responsibilities receive additional fees (Chair of
Audit and Risk Committee: $6,180 (FY2020: $6,180); and Chair of People and Culture Committee: $5,150
(FY2020: $5,150)).
Directors’ fees are reviewed annually, with external remuneration consultants providing advice, as the
need arises, to ensure fees reflect market rates. There are no guaranteed annual increases in any director’s
fees. Any increase in the aggregate limit for directors’ fees must be approved at the Company’s Annual
General Meeting.
Non-executive directors do not participate in the short or long-term incentive schemes.
Executive Remuneration
The following executives, along with the directors, as detailed on page 12 of the Directors’ report, were the
KMP with the responsibility and authority for planning, directing and controlling the activities of the
Company during the financial period:
A Reich
– Chief Executive Officer
C Cahn
– Chief Financial Officer (appointed a member of the KMP on 29 June 2020)
D Aquilina
– Chief Operating Officer (ceased to be a member of the KMP on 20 May 2021 and then left the Company
on 1 July 2021)
22
These persons were employed by the Company and were KMP for the entire period ended 27 June
2021 unless otherwise stated.
Details of the remuneration of the directors and other KMP of the Company, including related parties,
for the current and prior financial periods are set out in the following tables:
2021
SHORT-TERM BENEFITS
POST-
EMPLOY-
MENT
BENEFITS
OTHER
BENEFITS
SHARE-BASED
BENEFITS
t
r
o
p
e
R
n
o
i
t
a
r
e
n
u
m
e
R
Cash
salary and
fees
Cash
rewards
Non-
monetary
benefits
Super-
annuation
Name
$
$
$
$
Perform-
ance
rights
Other
$
$
Other
$
Non-executive
Directors
S Fisher (i)
D Grant
S Lightfoot
N Perkins
M Teague (ii)
M Zabel (iii)
Total Non-
Executive
Directors
Other Key
Management
Personnel
224,289
118,202
114,408
119,775
33,656
7,572
617,902
D Aquilina (iv)
503,146
C Cahn (v)
A Reich
378,266
778,306
Total Other Key
Management
Personnel
Total
1,659,718
2,277,620
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13,416
8,226
10,872
-
3,197
719
36,430
-
-
-
-
-
-
-
-
-
-
-
-
-
-
21,694
125,826
34,461
21,694
21,694
-
-
316,526
488,114
-
-
-
-
-
-
-
-
-
-
Proportion of
annualised
remuneration
as
performance
related
%
-
-
-
-
-
-
-
Total
$
237,705
126,428
125,280
119,775
36,853
8,291
654,332
685,127
716,486
1,288,114
5.0%
44.2%
37.9%
65,082
125,826
839,101
- 2,689,727
101,512
125,826
839,101
- 3,344,059
-
-
(i) S Fisher’s fees consist of a base fee ($192,789) plus additional remuneration of $31,500 on account of additional
responsibilities due to the equity raise in 2H20 and contribution to developing the three-phase turnaround strategy.
(ii) M Teague retired as a Director on 21 October 2020.
(iii) M Zabel was appointed as a Director on 4 June 2021.
(iv) D Aquilina ceased to be a KMP on 20 May 2021. D Aquilina left the company on 1 July 2021. During FY21, D Aquilina
was paid out annual leave entitlements of $38,714, which are excluded from the table above. On her departure,
D Aquilina was paid $189,962 of annual leave and long service leave entitlements in cash, plus superannuation of
$5,892, which are excluded from the table above. In addition, on her departure, D Aquilina was paid $125,826 in lieu
of a three-month notice period, which is included in ‘other benefits’ above.
(v) C Cahn became a KMP on 29 June 2020.
23
RE MuN ERATiON REPORT CONTINUED
2020
SHORT-TERM BENEFITS
POST
EMPLOY-
MENT
BENEFITS
OTHER
BENEFITS
SHARE-BASED
BENEFITS
Cash salary
and fees
Cash
Rewards
$
52,127
109,989
115,149
36,411
168,582
99,813
18,737
19,962
620,770
Name
Non-executive
Directors
WJ Stevens (i)
M Teague
S Lightfoot
J Hanrahan (ii)
S Fisher
Z Midalia (iii)
D Grant (iv)
N Perkins (iv)
Total Non-
Executive
Directors
Other Key
Management
Personnel
A Reich (v)
369,523
$
-
-
-
-
-
-
-
-
-
-
Perform-
ance
Rights
$
-
-
-
-
-
-
-
-
-
72,276
117,621
-
-
-
-
-
-
-
-
-
-
-
-
4,952
-
-
-
-
-
-
-
-
10,449
10,939
-
16,015
-
1,780
-
44,135
-
10,501
21,003
Non-
monetary
benefits
Super-
annuation
$
$
Other
$
Proportion of
Annualised
Remuneration
as performance
related
%
Other
$
Total
$
-
57,079
-
-
-
-
-
-
-
120,438
126,088
36,411
184,597
99,813
20,517
19,962
- 664,905
-
452,300
-
-
849,779
554,971
-
-
-
-
-
-
-
-
-
16.0%
13.8%
11.4%
-
-
D Aquilina (vi)
542,765 168,390
D Briggs (vii)
355,157
-
Total Other Key
Management
Personnel
1,267,445 168,390
Total
1,888,215 168,390
-
-
-
-
21,002
115,427
63,385
52,506
115,427
253,282
96,641
115,427
253,282
- 1,857,050
- 2,521,955
(i) WJ Stevens retired as a Director on 16 October 2019.
(ii) J Hanrahan resigned as a Director on 15 October 2019.
(iii) Z Midalia resigned as a Director on 30 April 2020.
(iv) D Grant and N Perkins were each appointed Directors on 1 May 2020.
(v) A Reich was appointed Chief Executive Officer on 13 January 2020.
(vi) D Aquilina concluded the role of Acting Chief Executive Officer on 12 January 2020 and commenced as Chief Operating
Officer on 13 January 2020. D Aquilina’s cash rewards during the period included a retention payment of $100,000 and
short term cash rewards of $68,390.
(vii) D Briggs left the Company on 30 April 2020 and received an exit payment of $115,427.
For remuneration report purposes, the amount reported as “Share-based Benefits” is the accounting
expense under AASB 2 (referred to in AASB 2 as “Share-based Payments”).
The fair value of Share-based Benefits is determined using a Black Scholes model and will generally be
different to the volume weighted average market price, which is used to determine the number of rights
that are granted. No adjustment to the reported remuneration amounts is made in the event that the
actual market price of shares on the vesting of Performance Rights exceeds the fair value of those
Performance Rights on their grant date. Similarly, no reduction is made to remuneration where the market
price of shares on the vesting of Performance Rights is lower than the market price of shares on the date
that Performance Rights are granted.
No other long-term or remuneration benefits were paid, or are payable, with respect to the current and
prior period.
24
C – Service agreements
All KMP are on employment terms consistent with the remuneration framework outlined in this report.
In addition, all executive KMP have service agreements which provide that a period of notice of three to
six months is required by the Company, or the relevant team member, to terminate their employment.
D – Share-based compensation
As outlined in the Annual Report 2019-2020 (page 27), the Board granted performance rights in September
2019 with no financial criteria as a one-off allocation to certain KMP in order to retain their services for at
least a one to two year period. D Aquilina received 100,000 performance rights in two tranches as part of
that allocation. The first tranche (50,000 performance rights) vested on 1 September 2020, and the second
tranche (50,000 performance rights) vested on 2 July 2021 at the Board’s discretion. The following
information has been prepared as at 27 June 2021 (i.e. the last day of the financial period).
The number of performance rights over shares in the Company granted to KMP during the current financial
period, together with prior period grants which vested during the period (unless otherwise stated), is set
out below:
Number
of rights
granted
Date
exercisable
Expiry date
Fair value of
performance
rights at
grant date
Total
fair value of
performance
rights at
grant date
Number of
performance
rights granted in
prior periods
vested
2021
Grant date
Key Management Personnel
D Aquilina (i)
1 Sep 2019
50,000
31 Aug 2020
31 Aug 2021
D Aquilina (i)(ii)
1 Sep 2019
50,000
31 Aug 2021
31 Aug 2022
D Aquilina (iii)
30 Sep 2020
25,100
31 Aug 2023
31 Aug 2025
A Reich
A Reich
A Reich
30 Sep 2020
84,950
31 Aug 2023
31 Aug 2025
30 Sep 2020
42,475
31 Aug 2024
31 Aug 2026
30 Sep 2020
42,475
31 Aug 2025
31 Aug 2027
C Cahn (iv)
30 Sep 2020
63,700
31 Aug 2023
31 Aug 2025
$1.83
$1.74
$6.17
$6.17
$6.17
$6.17
$6.17
91,627
87,001
154,760
523,780
261,890
261,890
392,758
50,000
-
-
-
-
-
-
Total
358,700
$1,773,706
50,000
(i) D Aquilina ceased to be a KMP on 20 May 2021. D Aquilina left the company on 1 July 2021.
(ii) Performance rights vested on 2 July 2021, subsequent to the period end, are included in the above table.
(iii) Performance rights lapsed because D Aquilina will not meet the service criteria.
(iv) C Cahn became a KMP on 29 June 2020.
All performance rights granted during the current period will vest on the exercise dates above provided
the required performance hurdles are achieved (if applicable) and the team member remains employed
with the Company at the vesting date unless otherwise determined by the Board. The total payable on the
exercise of one or more performance rights on a particular day is $1.00 regardless of the number exercised
on that day. The minimum possible value to be received by KMP under each grant of performance rights is
$Nil.
Subsequent to period end there has been no grant of performance rights to KMP.
On 2 July 2021 (subsequent to the period end), the Company vested 50,000 performance rights to D
Aquilina, which were exercised on 2 July 2021.
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25
RE MuN ERATiON REPORT CONTINUED
Shares Issued to Key Management Personnel on Exercise of Options or Performance Rights
Non-executive directors have not been granted performance rights in any period.
No shares were issued to KMP on exercise of performance rights during the current year.
E – Additional information
Cash Incentives and Performance Rights
For each cash incentive and grant of performance rights included in the table below, the percentage of
the grant that vested in the financial period as well as the percentage that was forfeited, because the
performance criteria were not achieved or the person did not meet the service criteria, is as listed. The
performance rights vest on a specified vesting date provided the vesting conditions are met. No
performance rights will vest if the conditions are not satisfied, hence the minimum value of each
performance right yet to vest is $Nil. The maximum value of performance rights yet to vest has been
determined as the total number of performance rights still to vest multiplied by the fair value of each
performance right at grant date. The fair value for accounting purposes is determined using the Black-
Scholes option pricing model.
Cash Incentive
Performance Rights
2021
Paid
%
Forfeited
%
Date
Granted
Key Management Personnel
D Aquilina (i)(ii)
-
100%
FY21
#
-
Vested
Forfeited
%
#
-
25,100
100%
FY24
-
-
Financial
Periods
in which
rights
Maximum
total
number
of rights
% may vest may vest
Maximum
total value
of grants
may vest
$
C Cahn (iii)
A Reich
-
-
100%
100%
FY20
50,000
32%
58,700
37% FY21-23
50,000
87,001
FY19
FY21
FY20
FY21
FY20
-
-
-
-
-
-
-
-
-
-
28,000
100%
-
-
-
-
-
-
-
-
FY22
FY24
-
-
63,700
392,758
FY23
150,000
606,758
FY24-26
169,900
1,047,360
FY23-25
300,000
553,914
(i) D Aquilina ceased to be a KMP on 20 May 2021. D Aquilina left the company on 1 July 2021.
(ii) 50,000 performance rights vested to D Aquilina on 2 July 2021, subsequent to the period end, which are included in the
above table.
(iii) C Cahn became a KMP on 29 June 2020.
26
Performance Rights Holdings
Non-executive directors do not participate in long-term incentives and have not been granted
performance rights in any period.
The number of performance rights over shares in the Company held during the current and prior financial
period by each KMP of the Company, including related parties, are set out below:
2021
Balance at the start
of the period
Performance rights
granted during the
period
Performance rights
vested & exercised
during the period
Other changes
during the period
Balance at the
end of the period
Key Management Personnel
D Aquilina (i)
C Cahn (ii)
A Reich
Total
186,700
150,000
300,000
636,700
25,100
63,700
169,900
258,700
(50,000)
(111,800)
-
-
-
-
(50,000)
(111,800)
50,000
213,700
469,900
733,600
(i) D Aquilina ceased to be a KMP on 20 May 2021. D Aquilina left the company on 1 July 2021. 50,000 performance rights
vested on 2 July 2021, subsequent to the period end, which are included in her balance at the end of the period in the table
above.
(ii) C Cahn became a KMP on 29 June 2020.
On 2 July 2021 (subsequent to the period end), the Company vested 50,000 performance rights to D
Aquilina, which were exercised on 2 July 2021. The fair value of the performance rights at the grant date
on 1 September 2019 was $87,001. Otherwise there have been no performance rights granted or vested to
KMP subsequent to the period end.
Share Holdings
The number of shares in the Company held during the current and prior financial period by each director
and other KMP of the Company, including related parties, is set out below:
Balance at
the start of the period
Received during
the period on the
exercise of performance
rights and options
Other changes
during the period
Balance at the
end of the period
2021
Directors
S Fisher
D Grant
S Lightfoot
N Perkins
M Teague (i)
M Zabel (ii)
Key Management Personnel
D Aquilina (iii)
C Cahn (iv)
A Reich
Total
99,039
-
12,875
7,799
1,500
-
9,000
-
536,842
667,055
-
-
-
-
-
-
-
7,000
7,500
21,352
(1,500)
-
50,000
(59,000)
-
-
-
-
50,000
(24,648)
99,039
7,000
20,375
29,151
-
-
-
-
536,842
692,407
(i) M Teague retired as a Director on 21 October 2020.
(ii) M Zabel was appointed as a Director on 4 June 2021.
(iii) D Aquilina ceased to be a KMP on 20 May 2021. D Aquilina left the company on 1 July 2021.
(iv) C Cahn became a KMP on 29 June 2020.
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27
RE MuN ERATiON REPORT CONTINUED
Loans to, or other transactions with, Key Management Personnel
No loans were made to or from directors of the Company or to or from other KMP of the Company,
including related parties unless otherwise disclosed (see page 61 of this annual report), or are outstanding
as of 27 June 2021 (FY2020 - $Nil).
No other transactions were undertaken with directors or other KMP, including related parties, during the
period (FY2020 - $Nil).
Company Performance
The following table outlines the Company’s earnings and share performance over the last ten years:
EPS cents
per share
Share price at
start of period
Share price at
end of period
Share price
growth
Ordinary & special
dividends paid or
declared per share
Period
FY2012(i)(ii)
FY2013
FY2014
FY2015
FY2016(i)
FY2017
FY2018
FY2019
FY2020
FY2021
NPAT
$21.9m
$19.5m
$14.5m
$14.2m
$17.1m
$12.3m
$16.6m
84.1
73.4
50.3
49.4
59.3
42.8
57.4
($16.9m)
(58.5)
$1.1m
$8.3m
3.6
21.7
$11.66
$9.15
$17.19
$8.82
$5.40
$12.45
$4.16
$5.68
$1.83
$7.46
$9.15
$17.19
$8.82
$5.40
$12.45
$4.16
$5.68
$1.83
$7.46
$5.37
(21.5%)
87.9%
(48.7%)
(38.8%)
130.6%
(66.6%)
36.5%
(67.8%)
307.7%
(28.0%)
$0.42
$0.37
$0.30
$0.30
$0.44
$0.24
$0.35
$0.10
-
-
(i) 53-week period.
(ii) In FY2012, a special dividend of 8.5 cents was also paid.
Shares under performance rights
Unissued ordinary shares of the Company under performance rights at the date of this report are as
follows:
Date of Grant
Expiry Date
Vesting Date
18 Oct 2019
16 Oct 2023
1 Jul 2022
13 Jan 2020
12 Jan 2025
14 Jan 2023
13 Jan 2020
12 Jan 2026
14 Jan 2024
13 Jan 2020
12 Jan 2027
14 Jan 2025
27 Mar 2020
28 Mar 2025
27 Mar 2023
30 Sep 2020
31 Aug 2025
31 Aug 2023
30 Sep 2020
31 Aug 2026
31 Aug 2024
30 Sep 2020
31 Aug 2027
31 Aug 2025
Total
Value at
Grant Date $
Exercise
Price $
Total number
on Issue
Number on issue to key
management personnel
2.07
1.91
1.82
1.74
4.05
6.17
6.17
6.17
-
-
-
-
-
-
-
-
21,675
150,000
75,000
75,000
150,000
338,950
42,475
42,475
895,575
-
150,000
75,000
75,000
150,000
148,650
42,475
42,475
683,600
Subsequent to period end, the Board has not granted any further performance rights under the
Performance Rights Plan.
Shares issued and the exercise of options and performance rights
There were no further shares issued during the year as a result of the exercise of performance rights. On 2
July 2021 (subsequent to the period end), the Company vested 50,000 performance rights to D Aquilina,
which were exercised on 2 July 2021.
28
Remuneration of Auditors
During the period, the following fees for services were paid or payable to PricewaterhouseCoopers
Australia and its related parties as the auditor:
Audit and Assurance Related Services
Audit and review work
Other assurance services
Tax Compliance and Consulting Services
Tax compliance
Tax consulting advice
Total remuneration
Independence of Auditors
2021
$
355,000
42,788
397,788
67,500
35,000
102,500
2020
$
425,720
43,615
469,335
44,136
37,500
81,636
500,288
550,971
PricewaterhouseCoopers was appointed auditor in FY2002 and whilst their main role is to provide audit
services to the Company, the Company does employ their specialist advice where appropriate. In each
instance, the Board has considered the nature of the advice sought in the context of the audit relationship
and in accordance with the advice received from the Audit and Risk Committee, does not consider these
services compromise the auditor’s independence requirements of the Corporations Act for the following
reasons:
• No non-audit services provided to the Company and reviewed by the Board were considered to impact
upon the impartiality and objectivity of the auditor; and
• None of the services undermined the general principles relating to auditor independence as set out in
APES 110 – Code of Ethics for Professional Accountants, including not reviewing or auditing the auditor’s
own work, not acting in a management or a decision making capacity for the Company, not acting as
advocate for the Company or not jointly sharing economic risk or rewards.
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act
2001 is contained on page 30 of this annual report.
This report is made in accordance with a resolution of the directors.
Steve Fisher
Chairman
19 August 2021
29
Auditor’s independence Declaration
Auditor’s Independence Declaration
As lead auditor for the audit of The Reject Shop Limited for the 52 week period ended 27 June 2021, I
declare that to the best of my knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of The Reject Shop Limited and the entities it controlled during the
period.
Sam Lobley
Partner
PricewaterhouseCoopers
Melbourne
19 August 2021
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
30
Consolidated Statement
of Comprehensive income
For the 52 week period ended 27 June 2021
Revenue from continuing operations
Sales revenue
Other income
Expenses
Cost of sales
Store expenses
Administrative expenses
Impairment expenses
Finance costs
Profit before income tax
Income tax expense
Profit for the period attributable to shareholders of The Reject Shop
Other comprehensive income
Items that may be re-classified to profit or loss
Changes in the fair value of cash flow hedges
Income tax relating to components of other comprehensive income
Other comprehensive income / (loss) for the period, net of tax
Total comprehensive income / (loss) attributable to shareholders of The
Reject Shop
Note
2021
$’000
2020
$’000
2
2
3
3
4
778,688
820,645
63
17
778,751
820,662
464,212
259,388
36,536
-
487,713
275,846
47,042
727
760,136
811,328
6,477
12,138
3,819
8,319
7,708
1,626
506
1,120
5,579
(1,674)
3,905
12,224
(11,489)
3,447
(8,042)
(6,922)
Earnings per share
Basic earnings per share
Diluted earnings per share
26
26
Cents
Cents
21.7
21.4
3.6
3.5
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
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Consolidated Balance Sheet
As at 27 June 2021
Current Assets
Cash and cash equivalents
Inventories
Tax receivables
Other assets
Total Current Assets
Non Current Assets
Property, plant and equipment
Right-of-use assets
Deferred tax assets
Total Non Current Assets
Total Assets
Current Liabilities
Trade and other payables
Lease liabilities
Tax liabilities
Provisions
Derivative financial instruments
Other liabilities
Total Current Liabilities
Non Current Liabilities
Lease liabilities
Provisions
Total Non Current Liabilities
Total Liabilities
Net Assets
Equity
Contributed equity
Reserves
Retained profits
Total Equity
Note
2021
$’000
2020
$’000
5
6
7
8
9
10
11
9
13
21
14
9
13
15
16
17
73,046
99,834
1,315
3,231
177,426
47,342
148,574
27,701
223,617
92,489
70,850
-
6,629
169,968
51,277
172,698
28,171
252,146
401,043
422,114
46,677
77,303
-
10,766
3,802
12,029
150,577
89,823
3,912
93,735
45,042
83,557
4,295
11,795
9,382
11,411
165,482
110,165
3,404
113,569
244,312
279,051
156,731
143,063
70,326
4,109
82,296
156,731
70,326
(1,240)
73,977
143,063
The above Consolidated Balance Sheet should be read in conjunction with the accompanying notes.
32
Consolidated Statement of
Changes in Equity
For the 52 week period ended 27 June 2021
2021
Balances as at 28 June 2020
Profit for the period
Other comprehensive
income
Foreign exchange
translation
Transaction with owners in
their capacity as owners:
Share based remuneration
Tax credited/(debited)
directly to equity
Balances as at
27 June 2021
2020
Balances as at 30 June 2019
Profit for the period
Other comprehensive
income
Foreign exchange
translation
Transaction with owners in
their capacity as owners:
Issue of ordinary shares, net
of transaction costs
Dividends Paid
Share based remuneration
Tax credited/(debited)
directly to equity
Balances as at
28 June 2020
Contributed
Equity
Capital
Profits
Share Based
Payments
$’000
70,326
$’000
739
$’000
4,553
-
-
-
-
-
-
-
-
-
-
-
-
-
1,224
242
Foreign
Currency
Translation
Reserve
Retained
Earnings
$’000
$’000
Total
$’000
34
73,977
143,063
-
-
(22)
-
-
8,319
8,319
-
-
-
-
3,905
(22)
1,224
242
Hedging
Reserve
$’000
(6,566)
-
3,905
-
-
-
70,326
739
6,019
(2,661)
12
82,296
156,731
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Contributed
Equity
Capital
Profits
Share Based
Payments
Hedging
Reserve
$’000
46,247
$’000
739
$’000
4,004
-
-
-
24,079
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
305
244
$’000
1,476
-
(8,042)
-
-
-
-
-
Foreign
Currency
Translation
Reserve
$’000
(1)
-
-
35
-
-
-
-
Retained
Earnings
$’000
Total
$’000
72,857
125,322
1,120
1,120
-
-
-
-
-
-
(8,042)
35
24,079
-
305
244
70,326
739
4,553
(6,566)
34
73,977
143,063
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
33
Consolidated Statement of
Cash Flows
For the 52 Week period ended 27 June 2021
Cash flows from operating activities
Receipts from customers (inclusive of goods and services tax)
856,557
902,710
Payments to suppliers and employees (inclusive of goods and
services tax)
(752,633)
(729,841)
Note
2021
$’000
2020
$’000
Interest received
Borrowing costs and facilities fees paid
Interest on lease liabilities
Income tax (paid) / received
Net cash inflows from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Net cash outflows used in investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Principal elements of lease payments
Proceeds from issue of shares
Share issue costs
Net cash outflows used in financing activities
Net (decrease) / increase in cash held
Cash at the beginning of the financial period
Cash at the end of the financial period
3
3
20
63
(129)
(6,348)
(10,415)
87,095
17
(567)
(7,141)
2,202
167,380
(10,777)
(10,777)
(10,681)
(10,681)
-
-
(95,761)
-
-
(95,761)
(19,443)
92,489
73,046
134,000
(153,500)
(95,097)
25,000
(921)
(90,518)
66,181
26,308
92,489
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
34
Notes to the Consolidated
Financial Statements
Note 1: Summary of significant
accounting policies
The principal accounting policies adopted in the
preparation of the Financial Statements are set
out below. These policies have been consistently
applied to all the periods presented, unless
otherwise stated. The Financial Statements are for
the consolidated entity, consisting of The Reject
Shop Limited and its subsidiaries (the Group). All
information presented within these Financial
Statements relates to the Group, unless otherwise
noted.
(a) Basis of Preparation
The general purpose Financial Statements have
been prepared in accordance with Australian
Accounting Standards and Interpretations issued
by the Australian Accounting Standards Board
and the Corporations Act 2001, as appropriate for
for-profit oriented entities.
Going Concern and COViD-19
In preparing the Financial Statements, the
Directors have considered the ongoing impact of
the COVID-19 pandemic on the Group as well as
the general economic and business conditions in
which the Group operates. During the period, the
Group traded through State Government
imposed lockdowns associated with the
COVID-19 pandemic with minimal forced store
closures. However, trading activity was
challenging, particularly in CBD locations and
large shopping centres, which continue to trade
well below pre-COVID-19 levels. In addition, the
Group has incurred materially increased supply
chain costs, predominantly due to higher
international shipping costs.
The Group did not require any wage subsidies
under the Federal Government’s JobKeeper
Program during the period.
The Directors are unable to predict the potential
future impact on the Group, whether positive or
negative, of the COVID-19 pandemic and its
associated impact on the Australian economy
and the retail sector as well as any other direct or
indirect consequence of the COVID-19
pandemic.
At period end, the Group had cash reserves of
$73,046,000 (FY2020: $92,489,000) and no drawn
debt. Subsequent to period end, the Group
extended its banking facilities with the ANZ Bank
from August 2021 to August 2022, which provides
further certainty in relation to debt funding. For
details on the Group’s banking arrangements see
Notes 12 and 20.
Given the Group’s strong liquidity position, and
having regard to the current known impact of the
COVID-19 pandemic on the Group, the Directors
are satisfied that the Group will continue as a
going concern and have prepared the Financial
Statements on that basis.
Compliance with iFRS
Additionally, the Financial Statements of the
Group also comply with International Financial
Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB).
Historical cost convention
These Financial Statements have been prepared
under the historical cost convention, as modified
for:
– certain financial assets and liabilities
(including derivative instruments) that are
measured at fair value; and
– certain classes of property, plant and
equipment and right-of-use assets that are
measured at historical cost less depreciation
and impairment (where applicable).
Critical accounting estimates
The preparation of Financial Statements requires
the use of certain critical accounting estimates. It
also requires management to exercise its
professional judgement in the process of applying
the Group’s accounting policies. The areas
involving a higher degree of judgement and
complexity, or areas where assumptions and
estimates are significant to the Financial
Statements, are disclosed further in note 1 (aa).
(b) Principles of Consolidation
(i) Subsidiaries
The Financial Statements incorporate all the
assets and liabilities of the subsidiaries of The
Reject Shop Limited as at 27 June 2021 and the
results of the subsidiaries for the period. As
previously indicated, The Reject Shop Limited and
its subsidiaries are referred to in the Financial
Statements as the Group.
Subsidiaries are all entities (including structured
entities) over which the Group has control. The
Group controls an entity when the Group is
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NOTES TO THE C ONSOLiDATED FiNANCiAL STATEMENTS CONTINUED
exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability
to affect those returns through its power to direct
the activities of the entity. Subsidiaries are fully
consolidated from the date on which control is
transferred to the Group. They are
deconsolidated from the date that control
ceases.
The acquisition method of accounting is used to
account for business combinations by the Group.
Intercompany transactions, balances and
unrealised gains on transactions between Group
companies are eliminated. Unrealised losses are
also eliminated unless the transaction provides
evidence of an impairment of the transferred
asset. Accounting policies of subsidiaries have
been changed where necessary to ensure
consistency with the policies adopted by the
Group.
The Reject Shop Limited has a 100% owned
non-operating subsidiary, TRS Trading Group Pty
Ltd, which has not traded since 2003 and is
domiciled in Australia.
The Reject Shop Limited has a 100% owned
operating subsidiary, TRS Sourcing Co. Limited,
which is domiciled in Hong Kong. This subsidiary
last provided procurement services to the Group
in 2019. The Group is currently working through a
process to wind up TRS Sourcing Co. Limited.
(ii) Employee Share Trust
The Reject Shop Limited has formed a trust to
administer the Group’s Performance Rights Plan.
This trust is consolidated as it is controlled by the
Group.
(c) Segment Reporting
Operating segments are reported in a manner
consistent with the internal reporting provided to
the senior management personnel. The Group
has only one operating business segment. Refer
to Note 29 for information.
(d) Income Tax
The income tax expense for the period is the tax
payable on the current period’s taxable income
based on the current income tax rate adjusted by
changes in deferred tax assets and liabilities
attributable to temporary differences between
the tax bases of assets and liabilities and their
carrying amounts in the Financial Statements.
Deferred tax assets and liabilities are recognised
for temporary differences at the tax rates
expected to apply when the assets are recovered
or liabilities are settled. The relevant tax rates are
applied to the cumulative amounts of deductible
and taxable temporary differences to measure
the deferred tax asset or liability.
Deferred tax assets and liabilities 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 when
there is a legally enforceable right to offset
current tax assets and liabilities and when the
deferred tax balances relate to the same taxation
authority. Current tax assets and tax liabilities are
offset where the Group has a legally enforceable
right to offset and intends either to settle on a net
basis, or to realise the asset and settle the liability
simultaneously.
Current and deferred tax balances attributable
to amounts recognised directly in equity are also
recognised directly in equity.
The head entity, The Reject Shop Limited, and the
controlled entity in the tax consolidated Group
account for their own current and deferred tax
amounts. These tax amounts are measured as if
each entity in the tax consolidated Group
continues to be a standalone taxpayer in its own
right.
(e) Inventories
Inventories are measured at the lower of cost and
net realisable value. Costs are assigned on a
weighted average basis and include an
appropriate proportion of freight inwards,
logistics, discounts, supplier rebates and foreign
exchange.
Storage, administrative overheads, selling and
abnormal costs are expensed in the period when
they are incurred.
Net realisable value is the estimated selling price
in the ordinary course of business less the
estimated costs necessary to make the sale.
(f) Property, Plant and Equipment
Each class of property, plant and equipment is
carried at historical cost less any accumulated
depreciation and impairment. The depreciable
36
amount of all fixed assets, including capitalised
leased assets, is depreciated on a straight-line
basis over their estimated useful lives. The useful
life for each class of asset is:
Class of fixed asset
Useful Life
- Leasehold Improvements and
5 – 12 years
Office Equipment
- Fixtures and Fittings
- Motor vehicles
- Computer Equipment
5 – 12 years
3 – 5 years
3 years
(g) Leases
The Group leases various retail stores, distribution
centres, offices and vehicles. Lease agreements
are typically made for fixed periods of tenure
usually two to five years but the arrangements
may have an option for a further term as
described below. Lease terms are negotiated on
an individual basis and contain a wide range of
different terms and conditions. The lease
agreements do not impose any covenants, but
leased assets may not be used as security for
borrowing purposes.
Assets and liabilities arising from a lease are
initially measured on a present value basis. Lease
liabilities include the net present value of the
fixed payments (including in-substance fixed
payments), less any landlord incentives
receivable.
The lease payments are discounted using the
interest rate implicit in the lease. If that rate
cannot be determined, the Group’s incremental
borrowing rate is used, being the rate that the
Group would have to pay to borrow the funds
necessary to obtain an asset of similar value in a
similar economic environment with similar terms
and conditions.
Right-of-use assets are measured at cost,
comprising the following:
–
the amount of the initial measurement of
lease liability;
– any lease payments made at or before the
commencement date less any landlord
incentives received; and
– any initial direct costs.
Payments associated with short-term leases and
leases of low-value assets are recognised on a
straight-line basis as an expense in profit or loss.
Short-term leases are those leases with a term of
12 months or less.
(h) Employee Benefits
(i) Wages and salaries, annual leave and sick
leave
Liabilities for wages and salaries, annual leave
and vested sick leave are recognised in respect
of employees’ services up to the reporting date
and are measured at the amounts expected to
be settled.
(ii) Long service leave
The liabilities for long service leave are not
expected to be settled wholly within 12 months
after the end of the period in which the
employees render the related service. They are
therefore measured as the present value of
expected future payments to be made in respect
of services provided by employees up to the end
of the reporting period using the projected unit
credit method. Consideration is given to
expected future wage and salary levels,
experience of employee departures and periods
of service. Expected future payments are
discounted using market yields at the end of the
reporting period on corporate bonds with terms
and currencies that match, as closely as possible,
the estimated future cash outflows.
The obligations are presented as current liabilities
on the Balance Sheet if the Group does not have
an unconditional right to defer settlement for at
least 12 months after the reporting date,
regardless of when the actual settlement is
expected to occur.
(iii) Bonus plans
A liability for employee benefits in the form of
bonus plans is recognised when there is a
contractual or constructive liability and at least
one of the following conditions are met:
–
–
there are formal terms in the plan for
determining the amount of the benefit,
including relevant hurdles;
the amounts to be paid are determined
before the time of completion of the Financial
Statement; or
– past practice has created a constructive
obligation.
Liabilities for short term cash incentives are
expected to be settled within 12 months and are
measured at amounts expected to be paid when
settled.
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NOTES TO THE C ONSOLiDATED FiNANCiAL STATEMENTS CONTINUED
(iv) Equity-based compensation benefits
Equity-based compensation benefits are
provided to selected employees via the
Performance Rights Plan.
The fair value of performance rights granted is
recognised as an employee benefit expense with
a corresponding increase in equity. The fair value
is measured at grant date and recognised over
the period during which the employees become
unconditionally entitled to the shares, adjusted
for the fair value of any rights which do not
ultimately vest.
The fair value at grant date is determined using a
Black-Scholes options pricing model that takes
into account:
–
–
–
–
–
–
–
–
the exercise price;
the term of the Performance Rights;
the vesting and performance criteria;
the impact of dilution;
the non-tradeable nature of the Performance
Rights;
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
Performance Rights.
The fair value of the Performance Rights granted
excludes the impact of any non-market vesting
conditions (for example, profitability and sales
growth targets). Non-market vesting conditions
are included in assumptions about the number of
rights that are expected to vest. At each balance
sheet date, the Group revises its estimates of the
number of Performance Rights that are expected
to vest, net of any Performance Rights that have
been forfeited or lapsed throughout the period.
The employee benefit expense recognised each
period takes into account the most recent
estimate.
(i) Cash and cash equivalents
For presentation of statement of cash flows, cash
and cash equivalents includes cash on hand and
at call, short-term deposits with banks and
financial institutions, and investments in money
market instruments maturing within two months,
net of bank overdrafts. Bank overdrafts are shown
with borrowings in current liabilities on the
Balance Sheet.
(j) Revenue
Revenue from the sale of goods is recognised at
the point of sale (i.e. at a point in time). All
revenue is stated net of the amount of goods and
services tax (GST), returns and staff discounts.
(k) Derivatives
Derivatives are initially recognised at fair value on
the date a derivative contract is entered into and
are subsequently remeasured to their fair value.
The method of recognising the resulting gain or
loss depends on whether the derivative is
designated as a hedging instrument, and if so,
the nature of the item being hedged. The Group
designates derivatives as hedges of the cash
flows of highly probable forecast transactions
(cash flow hedges).
At the inception of the transaction, the Group
documents the relationship between the hedging
instrument and hedged items, as well as its risk
management objective and strategy for
undertaking various hedge transactions. The
Group also documents its assessment, both at
hedge inception and on an ongoing basis, of
whether the derivatives that are used in hedging
transactions have been and will continue to be
effective in offsetting changes in cash flows of
hedged items.
Cash flow hedges
The effective portion of changes in the fair value
of derivatives that are designated and qualify as
cash flow hedges is recognised in equity in the
hedging reserve. The gain or loss relating to the
ineffective portion is recognised immediately in
the income statement.
Amounts accumulated in equity are transferred
out of equity and included in the cost of the
hedged item when the forecast purchase that is
hedged takes place.
When a hedging instrument expires or is sold or
terminated, or when a hedge no longer meets
the criteria for hedge accounting, any
cumulative gain or loss existing in equity at that
time remains in equity and is recognised when
the forecast transaction is ultimately recognised
in the income statement. When a forecast
transaction is no longer expected to occur, the
cumulative gain or loss that was reported in
equity is immediately transferred to the income
statement.
38
(l) Foreign Currency Translation
(i) Functional and presentation currency
Items included in the Financial Statements of the
Group are measured using the currency of the
primary economic environment in which the Group
operates (“the functional currency”). The Financial
Statements are presented in Australian dollars,
which is the Group’s primary functional and
presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into
the functional currency using the exchange rates
prevailing at the dates of the transactions. Foreign
exchange gains and losses resulting from the
settlement of such transactions and from the
translation at period end exchange rates of
monetary assets and liabilities denominated in
foreign currency are recognised in the income
statement, except derivatives which comprise
effective hedges.
(m) Trade and Other Payables
These amounts represent liabilities for goods and
services provided to the Group prior to the end of
the financial period and which are unpaid. The
amounts are unsecured and are usually paid
within 30-60 days of recognition.
(n) Borrowing Costs
Borrowing costs are recognised as expenses in the
period in which they are incurred. Borrowing costs
incurred for the construction of a qualifying asset
are capitalised during the period of time that is
required to complete and prepare the asset for its
intended use.
(o) Impairment of Property, Plant and Equipment
and Right-Of-Use assets
Assets that are subject to amortisation are
reviewed for impairment at each reporting date
and when events or changes in circumstances
indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for
the amount by which the asset’s carrying amount
exceeds its recoverable amount. The recoverable
amount is the higher of an asset’s fair value less
costs to sell and value in use. For the purposes of
assessing impairment, assets are grouped at the
lowest levels for which there are separately
identifiable cash flows (cash generating units).
(p) Dividends
Provision is made for the amount of any dividends
declared, determined or publicly recommended
by the Directors on or before the end of the
financial period but not distributed at balance
date.
(q) Borrowings
Borrowings are initially recognised at fair value, net
of transaction costs incurred. Borrowings are
subsequently measured at amortised cost. Any
difference between the proceeds (net of
transaction costs) and the redemption amount is
recognised in the income statement over the
period of the borrowings using the effective
interest rate.
(r) Contributed Equity
Ordinary shares are classified as equity.
(s) Earnings per Share
(i) Basic earnings per share
Basic earnings per share is determined by dividing
net profit after income tax attributable to members
of the Group, excluding any costs of servicing
equity other than ordinary shares, by the weighted
average number of ordinary shares outstanding
during the financial period, adjusted for bonus
elements in ordinary shares issued during the
period.
(ii) 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 (including
Performance Rights) and the weighted average
number of shares assumed to have been issued for
no consideration in relation to dilutive potential
ordinary shares.
(t) Software Costs
Costs in relation to software development,
including website costs, are charged as expenses
in the period in which they are incurred unless they
relate to the acquisition or development of a
Group controlled asset, in which case they are
capitalised and amortised over the useful life
which is generally three years.
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(u) Restoration Costs
An expense is provided for in the period in which
the legal, equitable or constructive obligation
arises, usually on a lease being agreed. The
provision is measured at the present value of
management’s best estimate of make-good
costs with a corresponding asset added to the
cost of the fit out.
(v) Store Opening Costs
Non-capital costs associated with the setup of a
new store are expensed in the period in which
they are incurred.
(w) Training Subsidies
Government subsidies for employees undertaking
external traineeships are treated as income in the
period they are received and after all costs to
which they relate have been incurred.
(x) Cost of Sales
The Group includes warehousing and logistics
costs as part of its “Cost of Sales” line in the
Consolidated Statement of Comprehensive
Income.
The Group considers that all costs associated with
getting stock to stores ready for sale is a cost
attributable to the sale of such inventory.
(y) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised
net of the amount of associated GST, unless the
GST incurred is not recoverable from the taxation
authority. In this case it is recognised as part of
the cost of acquisition of the asset or as part of
the expense.
Receivables and payables are stated inclusive of
the amount of GST receivable or payable. The net
amount of GST recoverable from, or payable to,
the taxation authority is included with other
receivables or payables on the Balance Sheet.
Cash flows are presented on a gross basis. The
GST components of cash flows arising from
investing or financing activities which are
recoverable from, or payable to the taxation
authority, are presented as operating cash flows.
(z) Rounding of Amounts
The Group is a kind referred to in ASIC
Corporations (Rounding in Financial/Directors’
Report) Instrument 2016/191, issued by the
Australian Securities and Investments
Commission, relating to the “rounding off” of
amounts in the directors’ and Financial
Statements. Amounts in these reports have been
rounded off in accordance with that Class Order
to the nearest thousand dollars, or in certain
cases, to the nearest dollar.
(aa) Critical Accounting Estimates and
Judgements
For the 27 June 2021 reporting period, certain
accounting estimates and judgements were
made in relation to the following:
(i) Impairment of store assets
The Group offers a wide range of discount variety
merchandise through its network of 361 stores
(FY2020: 354) and store assets, including the
right-of-use asset, which represents one of the
largest amounts on the Balance Sheet.
The assessment of impairment on store assets is a
critical judgement. A test for impairment is
triggered by a change in a number of indicators,
both internal and external. These indicators
include, but are not limited to, physical damage
to the asset, declining economic performance of
the asset, technological changes, market or
economic changes and plans to discontinue or
restructure operations.
Impairment testing can only be done for an
individual asset that generates cash inflows that
are largely independent of cash inflows from
other assets. A ‘cash generating unit’ (CGU) is the
smallest identifiable group of assets that
generates cash inflows that are largely
independent of the cash inflows of other assets or
groups of assets. The Group has defined each
individual store as a CGU as the cash inflows from
an individual store are largely independent from
the inflows of any other store. Accordingly, the
assessment of the carrying value of the relevant
assets is on an individual store basis for store
fixtures and fittings and right-of-use assets.
The recoverable amount is defined as the higher
of the asset’s fair value less costs of disposal or its
value in use. The Group determines value in use
by making certain assumptions relating to
forecast future cash flows and discount rates. The
assumptions on future cash flows have been
developed based on past performance and
reasonable expectations in relation to the future.
The discount rate has been determined using
market information relevant to the industry in
which the Group operates.
The impairment assessments could be sensitive to
the judgements made in the impairment test and
the assumptions outlined above. Changes to
40
(iv) Provisioning for shrinkage expense
The Group provides for shrinkage expense for the
period by applying an estimated shrink loss
percentage to the sales since the date of the last
stock count to period-end, on a store-by-store
basis. Stock counts are performed across stores to
calculate the estimated shrink loss percentage
for the whole store network. This estimate includes
stock count information obtained from counts
performed during the financial period and those
completed post period-end. Factors that could
impact the estimated provision include the
length of the time period since a store last
completed a stock take or a change in the
actual stocktake results ultimately recognised.
Other than the matters outlined above, there are
no other accounting estimates or judgements
within these accounts which have a significant
effect on the amounts recognised in the Financial
Statements.
(ab) New accounting standards and
interpretations
The Group has noted the IFRIC decision on cloud
computing arrangements accounting and the
interpretation has no material impact on the
Group. There are no new standards that are not
yet effective that would be expected to have a
material impact on the Group in the current or
future reporting periods.
these assumptions could result in a different
outcome. Refer to Note 8 for details.
(ii) Determining the lease term for the lease
liability
In determining the lease term, management
considers all facts and circumstances that create
an economic incentive to exercise an option for
a further term, or vacate the premises at lease
expiry. An option for a further term is only
included in the lease term if the lease is
reasonably certain to be extended (or not
terminated). For leases of distribution centres and
stores, the following factors are most relevant:
–
–
If there are significant penalties to terminate
(or not extend), the Group is typically
reasonably certain to extend (or not
terminate);
If any leasehold improvements are expected
to have a significant remaining value, the
Group is typically reasonably certain to
extend (or not terminate); and
– Otherwise, the Group considers other factors
including historical lease durations and the
costs and business disruption required to
replace the leased asset.
The Group’s policy is not to exercise its option for
a further term, unless there is a site-specific and
commercial rationale for doing so.
The lease term is reassessed if an option for a
further term is actually exercised (or not
exercised) or the Group becomes obliged to
exercise (or not exercise) it. The assessment of
reasonable certainty is only revised if a significant
event or a significant change in circumstances
occurs, which affects this assessment, and that is
within the control of the Group.
(iii) Net realisable value of inventory
The net realisable value of inventories is the
estimated selling price in the ordinary course of
business less estimated costs to sell. The key
assumptions require the use of management’s
judgement. These key assumptions are the
variables affecting the expected selling price.
Any reassessment of the selling price in a
particular period will affect the cost of goods
sold.
This provision is calculated by applying an
assumed percentage markdown to certain
inventory on hand at period end. The specific
write-down amount depends, in part, on the age
of the inventory and incorporates information on
known loss-making products.
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NOTES TO THE C ONSOLiDATED FiNANCiAL STATEMENTS CONTINUED
Note 2: Revenue from Continuing Operations and
Other Income
2021
$’000
2020
$’000
Revenue from continuing operations
Sales of goods
Interest
Note 3: Expenses
Profit before income tax expense includes the following expenses:
Finance Costs:
Interest and finance charges paid/payable for borrowings costs and
facilities fees
Interest and finance charges paid/payable for lease liabilities
Depreciation of Property, plant and equipment included in:
Cost of sales
Store expenses
Administrative expenses
Depreciation of Right- of- use assets expenses included in:
Cost of sales
Store expenses
Administrative expenses
Impairment of Store Cash Generating Unit assets – Property, plant and
equipment and Right-of-use assets
Store exit costs(i)
Employee benefits expense
Store opening and relocation costs
(i) Included within store exit costs are assets written off and provisions for future store closures.
778,688
820,645
63
17
778,751
820,662
2021
$’000
2020
$’000
129
6,348
6,477
739
12,285
684
13,708
5,849
89,483
880
96,212
-
1,452
153,842
533
567
7,141
7,708
3,302
12,817
2,366
18,485
6,214
87,761
891
94,866
727
1,080
170,801
409
42
Note 4: Income tax expense
(a) Income tax expense
Current tax
Deferred tax
Adjustments for current tax of prior periods
2021
$’000
4,608
(967)
178
3,819
2020
$’000
4,790
(4,284)
-
506
Deferred income tax expense included in income tax expense
comprises:
(Increase) / decrease in net deferred tax assets
(967)
(4,284)
(b) Numerical reconciliation of income tax expense to prima facie
tax payable
Profit before income tax expense
Tax at the Australian tax rate of 30% (2020 – 30%)
Tax effect of amounts which are not deductible in calculating
taxable income:
Other
Adjustments for current tax of prior periods
Income tax expense
(c) Amounts recognised directly in equity
Aggregate current and deferred tax arising in the reporting period
and not recognised in net profit or loss but directly debited or
credited in equity
12,138
3,641
-
178
3,819
1,626
488
18
-
506
242
244
(d) Income tax relating to items of other comprehensive income
Cash flow hedges
(1,674)
3,447
Note 5: Current Assets – Cash and cash equivalents
Cash on hand
Cash at bank
Note 6: Current Assets – Inventories
Inventory at cost
Inventory at net realisable value
2021
$’000
1,595
71,451
73,046
2021
$’000
96,011
3,823
99,834
2020
$’000
1,546
90,943
92,489
2020
$’000
65,345
5,505
70,850
Inventories recognised as an expense during the period ended 27 June 2021 amounted to $399,452,000
(FY2020: $415,868,000). These were included in the cost of sales. Write-downs of inventories to net
realisable value amounted to $3,138,000 (FY2020: $6,147,000). These were recognised as an expense during
the period and included in cost of sales.
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NOTES TO THE C ONSOLiDATED FiNANCiAL STATEMENTS CONTINUED
Note 7: Current Assets – Other assets
Prepayments
Other assets
Note 8: Non-Current Assets – Property, plant and
equipment
Leasehold improvements
At cost
Less accumulated depreciation and impairment
Net book amount
Plant and equipment
At cost
Less accumulated depreciation and impairment
Net book amount
Total Property, plant and equipment
Movements in carrying amounts
2021
$’000
1,793
1,438
3,231
2021
$’000
86,317
(72,422)
13,895
166,174
(132,727)
33,447
47,342
2020
$’000
1,765
4,864
6,629
2020
$’000
84,539
(66,422)
18,117
158,931
(125,771)
33,160
51,277
Movements in the carrying amounts for each class of property, plant and equipment between the
beginning and the end of the current financial period are as follows:
Balances as at 28 June 2020
Additions at cost
Assets written off
Depreciation expense
Balances as at 27 June 2021
Balances as at 30 June 2019
Additions at cost
Assets written off
Impairment
Depreciation expense
Balances as at 28 June 2020
Leasehold
improvements
Plant and
equipment
$’000
18,117
2,550
(84)
(6,688)
13,895
$’000
33,160
8,227
(920)
(7,020)
33,447
Leasehold
improvements
Plant and
equipment
$’000
24,140
2,246
(730)
(265)
(7,274)
18,117
$’000
36,835
9,330
(1,332)
(462)
(11,211)
33,160
Total
$’000
51,277
10,777
(1,004)
(13,708)
47,342
Total
$’000
60,975
11,576
(2,062)
(727)
(18,485)
51,277
During the period, there was no impairment recognised by the Group (FY2020 : $727,000).
44
Impairment testing of Property, plant and equipment (PP&E) and Right-of-use assets
The Group assesses property, plant and equipment and the right-of-use assets (see Note 9) for indicators
of impairment at each reporting date in accordance with AASB 136 Impairment of Assets.
The Group performed the review for indicators of impairment first at the CGU level consisting of individual
stores as this is the smallest group of assets for which independent cash flows can be determined (the
“Stores CGU”). For indicators at the individual stores level, the Group calculated the recoverable amount
of the Stores CGU using a value-in-use (VIU) discounted cash flow model. The model uses cash flow
projections based on forecasts approved by the Directors.
For testing of the distribution centre and corporate assets, the Group determined a CGU comprising their
assets along with the store assets as it is only at this level that independent cash flows can be determined
(the “Corporate CGU”). The Group determined there were no indicators of impairment at the Corporate
CGU level.
In performing the review for indicators of impairment, the Group considered the known ongoing impact of
the COVID-19 pandemic on the Group (further information is included in Note 1(a)) as well as the general
economic and business conditions in which the Group operates. Other than unknown impacts of the
COVID-19 pandemic, the Group determined that no reasonable possible change in the key assumptions
used in the impairment indicator assessment would result in an impairment charge at the reporting date.
Note 9: Leases
Right-of-use assets
Property
Vehicles
Lease Liabilities
Current
Non-current
2021
$’000
2020
$’000
148,341
233
148,574
77,303
89,823
167,126
172,533
165
172,698
83,557
110,165
193,722
Interest expense (included in finance costs)
6,348
7,141
Additions to the right-of-use assets during the period ended 27 June 2021 were $68,728,000 (FY2020:
$42,962,000).
Expenses relating to short term leases of $3,232,000 (FY2020: $3,299,000) are included in cost of goods sold
and administrative expenses.
The total cash outflow for leases during the year (excluding leases in holdover) was $101,603,000 (FY2020:
$101,886,000).
The Group assesses these assets with property, plant and equipment for indicators of impairment at each
reporting date in accordance with AASB 136 Impairment of Assets. For details of this assessment see
Note 8.
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45
NOTES TO THE C ONSOLiDATED FiNANCiAL STATEMENTS CONTINUED
Note 10: Non-Current Assets – Deferred tax assets
The balance comprises temporary differences attributable to:
Amounts recognised in profit or loss
Employee benefits
Leases
Inventories
Derivative financial instruments
Property, plant and equipment
Other provisions and accruals
Employee share trust
Sundry items
Set-off of deferred tax liabilities of Group pursuant to set-off provisions:
Property, plant and equipment
Receivables
Other current assets
Net deferred tax assets
Movements:
Carrying amount at beginning of period
Credited to profit or loss and direct to equity
(Charged) / credited to other comprehensive income
Carrying amount at end of period
Note 11: Current Liabilities – Trade and other payables
Trade payables
Payroll tax and other statutory liabilities
Sundry payables
2021
$,000
7,749
5,566
961
1,140
11,156
1,100
626
170
28,468
-
(21)
(746)
27,701
28,171
1,204
(1,674)
27,701
2021
$’000
36,555
4,846
5,276
46,677
2020
$’000
5,151
6,307
771
2,814
13,093
1,608
438
3
30,185
(1,804)
(27)
(183)
28,171
20,196
4,528
3,447
28,171
2020
$’000
34,833
5,917
4,292
45,042
Note 12: Current Liabilities – Borrowings
The Group has banking facilities with ANZ Bank. These facilities include an interchangeable facility with a
limit of $10 million while the limit for the seasonal facility is $20 million. The seasonal facility can only be
drawn between October and December each year and the Group is required to deposit $5 million with
ANZ Bank when the seasonal facility is drawn.
The Group has fully complied with all of its banking covenants at 27 June 2021.
In August 2021, subsequent to period-end, the Group agreed to extend its existing banking facilities with
ANZ Bank from 31 August 2021 to 28 August 2022.
All secured liabilities listed within Notes 12 and 20, including bank overdraft and bank loans, finance
purchases and hire purchase agreements, are secured by a Cross Guarantee and Indemnity between The
Reject Shop Limited and TRS Trading Group Pty Ltd.
46
Note 13: Liabilities – Provisions
Provision for make good
Employment entitlements
2021
Non
Current
$’000
1,107
2,805
3,912
Current
$’000
-
10,766
10,766
2020
Non
Current
$’000
-
526
Total
$’000
526
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Total
Current
$’000
$’000
1,107
13,571
14,678
11,795
11,795
2,878
14,673
3,404
15,199
Amounts not expected to be settled within the next 12 months
The current provision for employee entitlements includes annual leave, long service leave and bonus
accruals. For long service leave, it covers all unconditional entitlements where employees have
completed the required period of service and where employees are entitled to pro-rata payments in
certain circumstances. The entire amount of the provision for annual leave is presented as current, since
the Group does not have an unconditional right to defer settlement for any of these obligations. The
provision for long service leave has both a current and non-current portion. However, based on past
experience, the Group does not expect all employees to take the full amount of accrued annual leave or
require payment within the next 12 months. Expected future payments are discounted using appropriate
market yields at the end of the reporting period that match, as closely as possible, the estimated future
cash outflows. The following amounts reflect leave that is not expected to be taken or paid within the next
12 months.
Leave obligations expected to be settled after 12 months
Note 14: Current Liabilities – Other liabilities
Accrued expenses
Deferred income
Note 15: Contributed Equity
Movements in ordinary share capital:
2021
$’000
5,923
2021
$’000
11,542
487
12,029
2020
$’000
5,996
2020
$’000
9,519
1,892
11,411
Date
30 June 2019
27 March 2020
Details
Balance
Issue of ordinary shares net of
transaction costs(i)
28 June 2020
Balance
17 July 2020
Exercise of performance rights
1 September 2020
Exercise of performance rights
27 June 2021
Balance
Number of
issued shares
28,908,148
9,268,474
38,176,622
50,000
50,000
38,276,622
Issue price
per share
$
Contributed
Equity
$‘000
-
$2.70
-
-
-
-
46,247
24,079
70,326
-
-
70,326
(i) On 27 March 2020, the Group completed a 1 for 3.12 traditional non-renounceable pro rata entitlement offer for fully paid
ordinary shares at an offer price of $2.70. The entitlement offer resulted in the issue of 9,268,474 fully paid ordinary shares
and raised proceeds of $25,025,000 or $24,079,000 net of transaction costs
All shares carry one vote per share and rank equally in terms of dividends and on winding up. Ordinary
shares have no par value and the Group does not have a limited amount of authorised capital.
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47
NOTES TO THE C ONSOLiDATED FiNANCiAL STATEMENTS CONTINUED
Note 16: Equity – Reserves
Capital profits reserve
Share based payments reserve(i)
Hedging reserve – cash flow hedges(ii)
Foreign currency translation reserve(iii)
Movements:
Share based payments reserve(i)
Balance at beginning of period
Performance Rights expense
Deferred tax – share based payments
Hedging reserve – cash flow hedges(ii)
Balance at beginning of period
Transfer to inventory
Revaluation of cash flow hedges
Foreign currency translation reserve(iii)
Balance at beginning of period
Currency translation differences
2021
$’000
739
6,019
(2,661)
12
4,109
4,553
1,224
242
6,019
(6,566)
6,566
(2,661)
(2,661)
34
(22)
12
2020
$’000
739
4,553
(6,566)
34
(1,240)
4,004
305
244
4,553
1,476
(1,476)
(6,566)
(6,566)
(1)
35
34
(i) The share-based payments reserve is used to recognise the fair value of performance rights issued.
(ii) The hedging reserve is used to record gains or losses on a hedging instrument in a cash flow hedge that are recognised
directly in equity, as described in Note 21. Amounts accumulated in equity are included in the cost of the hedged item
when the forecast purchase that is hedged takes place.
(iii) The foreign currency translation reserve is used to record exchange differences arising from the translation of the Financial
Statements of foreign subsidiaries.
48
Note 17: Equity – Retained Profits
Retained profits at the beginning of the financial period
Net profit attributable to the shareholders of the Group
Retained profits at the end of financial period
2021
$’000
73,977
8,319
82,296
2020
$’000
72,857
1,120
73,977
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Note 18: Capital Commitments
The Group has capital commitments totalling $4,252,000 (FY2020: $4,225,000) all payable within one year.
Note 19: Contingent Liabilities
As at 27 June 2021, the Group has no contingent liabilities (FY2020: $Nil).
Note 20: Consolidated Statement of Cash Flow
Information
2021
$’000
2020
$’000
Reconciliation of Cash Flow from operating activities with profit
after income tax from ordinary activities:
Profit from ordinary activities after income tax
8,319
1,120
Non cash items in profit from ordinary activities
Depreciation – Property, plant and equipment
Depreciation – Right-of-use assets
Impairment of assets
Assets written off
Non-cash share-based payments expense
Tax credited directly to equity
Changes in assets and liabilities
Decrease / (increase) in other assets
(Increase) / decrease in inventories
(Increase) / decrease in right-of-use assets net of lease liabilities
Decrease / (increase) in deferred tax assets
(Decrease) / increase in trade and other payables, provisions
and other liabilities
(Decrease) / increase in tax liabilities
Net cash provided by operations
13,708
96,212
-
1,004
1,224
242
3,398
(28,984)
(2,472)
470
(416)
(5,610)
87,095
18,485
94,866
727
594
305
244
(4,384)
39,941
21,024
(7,974)
(4,559)
6,991
167,380
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NOTES TO THE C ONSOLiDATED FiNANCiAL STATEMENTS CONTINUED
Credit standby arrangement and loan facilities
The ongoing funding requirements of the Group, reviewed annually, are provided under the terms of a
facility agreement. The key facilities and their utilisation are as follows:
Interchangeable Facility(i)
Seasonal facility(ii)
Other Facilities(iii)
Total Facilities
2021
2020
Limit
$’000
10,000
-
550
10,550
Utilised
$’000
-
-
441
441
Limit
$’000
10,000
-
550
10,550
Utilised
$’000
-
-
460
460
(i) The interchangeable facility may be allocated to the following sub-facilities: documentary credit issuance/documents
surrendered facility, foreign currency overdraft facility and loan facility.
(ii) A seasonal facility of $20,000,000 was available to the Group from October to December 2020. The Group is required
to deposit $5,000,0000 with ANZ Bank when the seasonal facility is drawn. The facility was unutilised during the period
(FY2020: utilised).
(iii) Other facilities include an ANZ Bank indemnity guarantee of $550,000 of which $441,000 (FY2020: $460,000) was utilised in
relation to property leases at 27 June 2021.
Note 21: Financial Instruments and Financial Risk Management
Derivative Financial Instruments
Current liabilities
2021
$’000
2020
$’000
Forward foreign exchange contracts – cash flow hedges
3,802
9,382
Forward exchange contracts – cash flow hedges
The Group imports product from overseas. In order to protect against exchange rate movements, the
Group enters into forward exchange contracts to purchase foreign currency for all overseas purchases.
These contracts are hedging contracts for highly probable forecast purchases for the ensuing financial
period. The contracts are timed to mature when payments for shipments of products are scheduled to be
made.
At the balance date, the details of outstanding forward exchange contracts to be settled within 12 months
are:
Sell
Buy
2021
$’000
2020
$’000
Australian Dollars
United States Dollars
116,427
240,695
Australian Dollars
Euros
-
1,028
Average Exchange Rate
2021
$
0.74
-
2020
$
0.66
0.58
The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is
recognised in other comprehensive income. When the cash flows occur, the Group adjusts the initial
measurement of the component recognised in the Balance Sheet by the related amount deferred in
equity.
50
At the balance date, the revaluation of these contracts to fair value resulted in a liability of $3,802,000
(FY2020: liability of $9,382,000).
During the period, $6,567,000 (FY2020: $1,475,000) was transferred from equity and included in inventory
and a net gain of $Nil (FY2020: net $Nil) was transferred to the Consolidated Statement of Comprehensive
Income.
Exposure to Foreign Currency Risk
The Group’s exposure to foreign currency risk at the end of the reporting period was as follows:
Cash at bank
Trade and other payables
2021
USD
$’000
19
6,060
2020
USD
$’000
3,302
5,747
Forward exchange contracts – Balance Date Sensitivity Analysis
The following table summarises the sensitivity of the Group as at balance date to movements in the value
of the Australian Dollar compared to the United States Dollar, the principal currency that the Group has an
exposure to. The sensitivity analysis as at balance date relates to the conversion of the United States Dollar
foreign currency bank account and foreign currency payables and the impact on other components of
equity arises from foreign forward exchange contracts designated as cash flow hedges as follows:
Sensitivity Analysis – foreign exchange AUD/USD
For every 1c increase in AUD:USD rate, total exposures
decrease by:
Income Statement
Equity
For every 1c decrease in AUD:USD rate, total exposures
(increase) by:
Income Statement
Equity
2021
$’000
103
(1,465)
(106)
1,504
2020
$’000
51
(3,221)
(52)
3,246
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NOTES TO THE C ONSOLiDATED FiNANCiAL STATEMENTS CONTINUED
Interest Rate Risk
The Group’s exposure to interest rate risk, which is the risk that a financial instrument’s value will fluctuate
as a result of changes in market interest rates and the effective weighted average interest rates on classes
of financial assets and financial liabilities, is as follows:
Weighted
Average
Effective
Interest
Rate(i)
Floating
Interest Rate
$’000
Fixed Interest
Rate
Maturing
within
1 Year
$’000
Fixed Interest
Rate
Maturing
1 to 5 Years
$’000
Non-Interest
Bearing
$’000
Total
$’000
2021
Financial Assets
Cash and cash equivalents
0.08%
67,970
Receivables and other
debtors
Total Financial Assets
Financial Liabilities
Bank loans and overdrafts
Trade, sundry and other
creditors
Lease liabilities
Total Financial Liabilities
-
-
-
-
-
-
-
67,970
-
-
-
-
(i) There were no borrowings throughout the period.
-
-
-
-
-
-
-
-
-
5,076
73,046
-
-
-
5,076
73,046
-
-
-
-
-
-
56,823
56,823
167,126
167,126
223,949
223,949
Weighted
Average
Effective
Interest
Rate(i)
Floating
Interest Rate
$’000
Fixed Interest
Rate
Maturing
within
1 Year
$’000
Fixed Interest
Rate
Maturing
1 to 5 Years
$’000
Non-Interest
Bearing
$’000
Total
$’000
2020
Financial Assets
Cash and cash equivalents
0.04%
82,103
Receivables and other
debtors
Total Financial Assets
Financial Liabilities
-
-
-
82,103
Bank loans and overdrafts
2.21%
Trade, sundry and other
creditors
Lease liabilities
Total Financial Liabilities
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10,386
2,462
92,489
2,462
12,848
94,951
-
-
49,903
49,903
193,722
193,722
243,625
243,625
Applying a sensitivity of 50 basis points to the Group’s period end interest rate results in an immaterial
impact on post tax profit and equity.
52
Credit Risk
The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance
date in respect of recognised financial assets is the carrying amount of those assets, net of any provisions
for doubtful debts of those assets, as disclosed in the Balance Sheet and Notes to the Consolidated
Financial Statements.
Credit risk for derivative financial instruments arises from the potential failure by counterparties to the
contract to meet their obligations. The credit risk exposure to forward exchange contracts is the net fair
value of these contracts.
The Group does not have any material credit risk exposure to any single debtor or group of debtors under
financial instruments entered into by the Group.
Capital Risk Management
The Group’s objectives when managing capital are to safeguard the ability to continue as a going
concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders
and to maintain an optimal capital structure to reduce cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The gearing ratio at period end was as follows:
Net debt/ (cash and cash equivalents)
Total equity
Net debt to equity ratio(i)
(i) The Group has no debt so debt to equity ratio is not applicable
2021
$’000
(73,046)
156,731
0%
2020
$’000
(92,489)
143,063
0%
s
t
n
e
m
e
t
a
t
S
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n
a
n
F
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a
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o
s
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o
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h
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o
t
s
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t
o
N
53
NOTES TO THE C ONSOLiDATED FiNANCiAL STATEMENTS CONTINUED
Liquidity Risk
The Group manages liquidity risk by continuously monitoring forecast and actual cashflow and matching
the maturity profiles of financial assets and liabilities. Such cashflow forecasting ranges from daily to
weekly to monthly to quarterly, with periodic, and an annual forecast, to ensure funding facilities are
sufficient to service the business.
The tables below analyse the Group’s financial liabilities as well as net and gross settled derivative
financial instruments into relevant maturity groupings based on the remaining period at the reporting date
to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted
cash flows.
Less than
6 months
6 – 12
months
Between 1
and 2 years
Between 2
and 5 years
Over
5 years
Total
contractual
cash flows
Carrying
Amount
(assets) /
liabilities
$’000
$’000
$’000
$’000
$’000
$’000
$’000
113,363
36,043
43,522
45,253
1,385
239,566
234,040
-
-
-
-
-
-
-
-
-
-
-
-
-
-
27 June 2021
Non-derivatives
Non-interest bearing
(including lease
liabilities)
Variable rates
Fixed rate
Total non-derivatives
113,363
36,043
43,522
45,253
1,385
239,566
234,040
Derivatives
Net settled
Gross settled
- (inflow)
- outflow
-
-
(81,662)
(23,675)
85,964
23,175
Total derivatives
4,302
(500)
-
-
-
-
-
-
-
-
-
-
-
-
(105,337)
109,139
-
-
-
-
3,802
3,802
Less than
6 months
6 – 12
months
Between 1
and 2 years
Between 2
and 5 years
Over
5 years
Total
contractual
cash flows
Carrying
Amount
(assets) /
liabilities
$’000
$’000
$’000
$’000
$’000
$’000
$’000
110,373
42,286
59,763
49,787
4,777
266,986
256,347
-
-
-
-
-
-
-
-
-
-
-
-
-
-
28 June 2020
Non-derivatives
Non-interest bearing
(including lease
liabilities)
Variable rates
Fixed rate
Total non-derivatives
110,373
42,286
59,763
49,787
4,777
266,986
256,347
Derivatives
Net settled
Gross settled
- (inflow)
- outflow
-
-
-
(102,699)
(41,549)
2,960
102,819
50,280
(2,429)
Total derivatives
120
8,731
531
-
-
-
-
-
-
-
-
-
(141,288)
150,670
-
-
-
9,382
9,382
54
Net Fair Values
For other assets and other liabilities the net fair value approximates their carrying value.
Fair Value Measurements
The fair value of financial assets and financial liabilities must be estimated for recognition and
measurement or for disclosure purposes.
AASB 7 Financial Instruments: Disclosures requires disclosure of fair value measurements by level of the
following fair value measurement hierarchy:
(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
(b)
(c)
inputs other than quoted prices included within level 1 that are observable for the asset or
liability, either directly (as prices) or indirectly (derived from prices) (level 2); and
inputs for the asset or liability that are not based on observable market data (unobservable
inputs) (level 3).
No financial assets and financial liabilities are readily traded on organised markets in standardised form
other than listed investments, forward exchange contracts and interest rate swaps.
The following table presents the Group’s assets and liabilities measured and recognised at fair value.
Derivatives used for hedging
Balance at 30 June 2019
Cash flows
Foreign exchange adjustments
Balance at 28 June 2020
Cash flows
Foreign exchange adjustments
Balance at 27 June 2021
2021
$’000
Level 2
(3,802)
2020
$’000
Level 2
(9,382)
Borrowings due within 1 year
$’000
(19,500)
19,500
-
-
-
-
-
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55
NOTES TO THE C ONSOLiDATED FiNANCiAL STATEMENTS CONTINUED
Note 22: Key Management Personnel (KMP) Disclosures
Non-Executive Directors
Steven Fisher (Chairman)
David Grant
Selina Lightfoot
Nicholas Perkins
Michele Teague (retired as a Director on 21 October 2020)
Margaret Zabel (appointed as a Director on 4 June 2021)
All of the above persons were directors of The Reject Shop Limited for the entire period ended 27 June
2021, unless otherwise stated.
Other Key Management Personnel
The following persons had authority and responsibility for planning, directing, and controlling the activities
of the Group directly or indirectly during the financial period:
Andre Reich
Dani Aquilina
–
–
Chief Executive Officer
Chief Operating Officer(i)
Clinton Cahn –
Chief Financial Officer
(i) Dani Aquilina ceased to be a KMP on 20 May 2021 and left the Group on 1 July 2021.
All of the above persons were employed by The Reject Shop Limited and were key management personnel
for the entire period ended 27 June 2021 unless otherwise stated.
Remuneration of Directors and Key Management Personnel
Short-term cash rewards
Short-term employee benefits
Post-employment benefits
Termination benefits
Share-based payments
2021
$
-
2,277,620
101,512
125,826
839,101
2020
$
168,390
1,888,215
96,641
115,427
253,282
3,344,059
2,521,955
Dani Aquilina ceased to be a KMP on 20 May 2021 and left the Group on 1 July 2021. During the period, Ms
Aquilina was paid out annual leave entitlements of $38,714, which are excluded from the table above. On
her departure, Ms Aquilina was paid $189,962 of annual leave and long service leave entitlements in cash,
plus superannuation of $5,892, which are excluded from the table above. In addition, on her departure,
Ms Aquilina was paid $125,826 in lieu of a three-month notice period, which is included in ‘termination
benefits’ above.
No other long-term or termination benefits were paid or payable with respect to the current or prior
period.
56
Note 23: Share-based payments
Performance Rights Plan (PRP)
The PRP is the basis of the Group’s long-term reward scheme for selected employees. In summary, eligible
employees identified by the Directors may be granted performance rights, which is an entitlement to a
share subject to satisfaction of exercise conditions on terms determined by the Directors.
The details of all grants made and outstanding for each financial period are detailed in the tables below:
2021
Date of Grant
Expiry Date
Date
Exercisable
Fair
Value at
Grant Date
Balance
At Start
of Period
Granted
During
Period
Exercised
During The
Period
Lapsed,
forfeited
or
cancelled
The Period
during
Balance at
End of The
Period
Vested and
Exercisable
At The End
of Period
18 Oct 2018
17 Oct 2022
1 Jul 2021
1.84
28,000 -
-
(28,000)
- -
1 Sep 2019
31 Aug 2022
31 Aug 2020
1.83 75,000 - (75,000)
-
- -
1 Sep 2019
31 Aug 2022
31 Aug 2021
1.74 75,000 -
(25,000)
-
50,000(i) -
18 Oct 2019
16 Oct 2023
1 Jul 2022
2.07 87,600 -
-
(65,925)
21,675 -
13 Jan 2020
12 Jan 2025
14 Jan 2023
1.91 150,000 -
-
-
150,000 -
13 Jan 2020
12 Jan 2026
14 Jan 2024
1.82 75,000 -
-
-
75,000 -
13 Jan 2020
12 Jan 2027
14 Jan 2025
1.74 75,000 -
-
-
75,000 -
27 Mar 2020
28 Mar 2025
27 Mar 2023
4.05 150,000 -
-
-
150,000 -
30 Sep 2020
31 Aug 2025
31 Aug 2023
6.17 -
364,050
30 Sep 2020
31 Aug 2026
31 Aug 2024
6.17 -
42,475
30 Sep 2020
31 Aug 2027
31 Aug 2025
6.17 -
42,475
-
-
-
(25,100)
338,950
-
-
-
42,475 -
42,475 -
Total
715,600
449,000 (100,000)
(119,025)
945,575
-
(i) 50,000 performance rights vested on 2 July 2021, subsequent to the period end.
2020
Date of Grant
Expiry Date
Date
Exercisable
Fair
Value at
Grant Date
Balance
At Start
of Period
Granted
During
Period
Exercised
During The
Period
Lapsed,
forfeited
or
cancelled
The Period
during
Balance at
End of The
Period
Vested and
Exercisable
At The End
of Period
19 Oct 2017
18 Oct 2021
1 Jul 2020
18 Oct 2018
17 Oct 2022
1 Jul 2021
3.86
1.84
138,500 -
- (138,500)
- -
102,000 -
-
(74,000) 28,000 -
1 Sep 2019
31 Aug 2022
31 Aug 2020
1.83 - 75,000
-
- 75,000 -
1 Sep 2019
31 Aug 2022
31 Aug 2021
1.74 - 75,000
-
- 75,000 -
18 Oct 2019
16 Oct 2023
1 Jul 2022
2.07 - 168,000
-
(80,400) 87,600 -
13 Jan 2020
12 Jan 2025
14 Jan 2023
1.91 - 150,000
-
- 150,000 -
13 Jan 2020
12 Jan 2026
14 Jan 2024
1.82 - 75,000
-
- 75,000 -
13 Jan 2020
12 Jan 2027
14 Jan 2025
1.74 - 75,000
-
- 75,000 -
27 Mar 2020
28 Mar 2025
27 Mar 2023
4.05 - 150,000
-
- 150,000 -
Total
240,500 768,000
-
(292,900)
715,600
-
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57
NOTES TO THE C ONSOLiDATED FiNANCiAL STATEMENTS CONTINUED
For the grants made during the period, the fair value was determined using Black-Scholes option pricing
model taking into account the following inputs:
Date of new grants
1 Sep 2019
18 Oct 2019
13 Jan 2020
27 Mar 2020
30 Sep 2020
Exercise price
Share price at grant date
Expected dividend yield
Risk free rate
-
1.93
5.2%
3.0%
-
2.33
4.3%
3.0%
-
2.19 (i)
4.6%
3.0%
-
4.35
2.3%
3.0%
-
6.17
1.5%
2.0%
(i) Share price based on date of signing of contract and market announcement of CEO appointment.
The expected price volatility is based on the historic volatility, adjusted for any expected changes to
future volatility due to publicly available information.
Performance rights do not carry voting or dividend entitlements.
Subsequent to period end, the Directors have not granted any further performance rights under the PRP.
Remuneration Expense / (Income) arising from share-based payment transactions
Performance rights granted
2021
$
1,224,197
2020
$
305,338
Note 24: Remuneration of auditors
During the period, the following fees for services were paid or payable to PricewaterhouseCoopers
Australia and its related parties as the auditor:
Audit and Assurance Related Services
Audit and review work
Other assurance services
Tax Compliance and Consulting Services
Tax compliance
Tax consulting advice
Total remuneration
2021
$
355,000
42,788
397,788
67,500
35,000
102,500
500,288
2020
$
425,720
43,615
469,335
44,136
37,500
81,636
550,971
58
Note 25: Dividends
Dividend declared subsequent to the period end
Balance of franking account at period end(i)
2021
$’000
-
60,575
2020
$’000
-
55,724
(i) Adjusted for franking credits arising from payment of provision for income tax and dividends recognised as receivables,
franking debits arising from payment of proposed dividends and any credits that may be prevented from distribution in
subsequent periods based on a tax rate of 30%.
Dividends recognised during the reporting period:
There were no dividends paid to members during the financial period (FY2020: $Nil).
Note 26: Earnings per share
Basic earnings per share
Diluted earnings per share
Weighted average number of ordinary shares used as the
denominator in calculating basic earnings per share
Adjustments for dilutive portion of performance rights
Weighted average number of ordinary shares and potential
ordinary shares used as the denominator in calculating diluted
earnings per share
2021
Cents
21.7
21.4
2020
Cents
3.6
3.5
38,264,841
31,276,192
657,142
38,921,983
372,952
31,649,144
Performance Rights granted under the Performance Rights Plan are considered to be potential ordinary
shares and have been included in the determination of diluted earnings per share but to the extent they
are not anti-dilutive. Details relating to the performance rights are set out in note 23.
Note 27: Net Tangible Assets
Net tangible asset backing per ordinary share(i)
(i) Net tangible assets backing per ordinary share includes right of use assets
2021
Cents
409.5
2020
Cents
374.7
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59
NOTES TO THE C ONSOLiDATED FiNANCiAL STATEMENTS CONTINUED
Note 28: Parent Entity Financial Information
(a) Summary financial information
The individual financial statements for the parent entity show the
following aggregate amounts:
Balance Sheet
Current assets
Total assets
Current liabilities
Total liabilities
Shareholders’ equity
Issued capital
Reserves
Retained earnings
Profit for the financial period
Total Comprehensive Profit / (Loss) for the financial period
(b) Guarantees entered into by the parent entity
Parent Entity
2021
$’000
2020
$’000
178,073
156,947
401,690
409,056
153,702
154,427
246,328
267,468
70,326
70,326
4,292
(1,122)
80,744
155,362
8,321
12,226
72,384
141,588
963
(7,079)
Carrying amount included in current liabilities
-
-
Refer to Notes 18 and 19 for disclosures concerning capital commitments and contingent liabilities for the
parent entity.
60
Note 29: Segment information
The Group operates within one reportable segment (retailing of discount variety merchandise). Total
revenues of $778,688,000 all relate to the sale of discount variety merchandise in the Group’s country of
domicile (Australia), in this single reportable segment. The Group is not reliant on any single customer.
Note 30: Subsidiaries
The Reject Shop Limited has a 100% owned operating subsidiary based in Hong Kong, TRS Sourcing Co.
Limited. This subsidiary provided procurement services for TRS Limited and charged a fee for those
services.
Fees paid to TRS Sourcing Co. Limited
Parent Entity
2021
$’000
-
2020
$’000
1,717
The Reject Shop Limited has a 100% owned non-operating subsidiary, TRS Trading Group Pty Ltd,
incorporated in Australia. There were no transactions between the parent entity and its subsidiary during
the period (FY2020: Nil).
In addition, The Reject Shop Limited has effective control over The Reject Shop Limited Employee Share
Trust, which administers shares issued through the Group’s Performance Rights Plan. This entity is also
consolidated.
Note 31: Matters Subsequent to the End of the Financial Period
In August 2021, the Group agreed to extend its existing banking facilities with ANZ Bank from 31 August
2021 to 28 August 2022. See Note 12 for further information.
No other matters or circumstances have arisen since the end of the financial period which have
significantly affected or may significantly affect the operations of the Group, the results of those
operations, or the state of affairs of the Group in future financial periods.
Note 32: Related Party Transactions
During the period, the Group transacted with related parties of Kin Group Pty Ltd to purchase goods.
Transactions totalled $861,197 (FY2020 : $9,415). All transactions were on commercial terms and on an
arms-length basis. There were no other related party transactions, other than those with key management
personnel in the normal course of business, during the period ended 27 June 2021.
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61
Directors’ Declaration
In the Directors’ opinion:
(a)
The Financial Statements and notes set out on pages 31 to 61 are in accordance with the
Corporations Act 2001, including:
(i)
(ii)
complying with Accounting Standards, the Corporations Regulations 2001 and other
mandatory professional reporting requirements; and
giving a true and fair view of the Group’s financial position as at 27 June 2021 and of its
performance for the financial period ended on that date; and
(b)
there are reasonable grounds to believe that the company will be able to pay its debts as and
when they become due and payable.
The directors draw attention to Note 1(a) to the Financial Statements, which includes a statement of
compliance with International Financial Reporting Standards, as issued by the International Accounting
Standards Board.
The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer
required by Section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.
Steven Fisher
Chairman
Dated this 19 August 2021
62
independent Auditor’s Report to the
Members of The Reject Shop Limited
Independent auditor’s report
To the members of The Reject Shop Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of The Reject Shop Limited (the Company) and its controlled
entities (together the Group) is in accordance with the Corporations Act 2001, including:
(a) giving a true and fair view of the Group's financial position as at 27 June 2021 and of its
financial performance for the 52 week period ended 27 June 2021
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
the consolidated statement of comprehensive income for the 52 week period ended 27 June
2021
the consolidated balance sheet as at 27 June 2021
the consolidated statement of changes in equity for the 52 week period ended 27 June 2021
the consolidated statement of cash flows for the 52 week period ended 27 June 2021
the notes to the consolidated financial statements, which include significant accounting policies
and other explanatory information
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence
Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
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63
iNDEPENDENT AuDiTOR’S REPORT TO THE MEMBERS OF THE REJECT SHOP LiMiTED CONTINUED
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
Materiality
Audit scope
For the purpose of our audit we used overall
Group materiality of $0.6 million, which
represents approximately 5% of the Group’s
profit before income tax.
Our audit focused on where the Group made
subjective judgements; for example, significant
accounting estimates involving assumptions and
inherently uncertain future events.
We applied this threshold, together with
qualitative considerations, to determine the scope
of our audit and the nature, timing and extent of
our audit procedures and to evaluate the effect of
misstatements on the financial report as a whole.
The Group is principally involved in retailing
through discount variety stores across Australia.
The accounting processes are structured around
the Group finance function at the Group’s head
office in Melbourne.
We chose Group profit before income tax
Our audit evidence was derived through a
because, in our view, it is the benchmark against
which the performance of the Group is most
commonly measured.
We utilised a 5% threshold based on our
professional judgement, noting it is within the
range of commonly acceptable thresholds.
combination of:
o developing an understanding of the control
environment and tests of specific automated
and manual controls
o
substantive procedures such as use of data
analysis techniques, together with
substantive analytical procedures and tests
of detail.
64
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context. We communicated the key audit matters to the
Audit and Risk Committee.
Key audit matter
How our audit addressed the key audit
matter
Carrying value of store assets, including
right of use assets
(Refer to note 8 and note 9)
The Group offers a wide range of discount
merchandise through its network of more than 360
stores. Store assets represent one of the largest assets
on the consolidated balance sheet.
Given the challenging retailing conditions in the
Australian retail industry and the impact of the
COVID-19 pandemic, there is risk the carrying
amount of the store assets may be higher than their
recoverable amount.
The Group assesses impairment of store assets, on a
store-by-store basis, by calculating the recoverable
amount of each store and comparing it to the store’s
carrying amount. This is achieved by preparing
models with estimates of future cash flows discounted
to their present value (“the model”).
This was a key audit matter because of:
the financial significance of the store assets
to the consolidated balance sheet
the subjective factors involved in the Group
assessing impairment, in particular,
estimating future cash flows over the forecast
period.
We performed the following procedures, amongst
others:
evaluated the Group’s assessment of the
determination of cash generating units
assessed the appropriateness of the models
by comparing them to the requirements of
the Australian Accounting Standards
tested the mathematical accuracy of the
models and compared key data to Board
approved budgets
assessed the appropriateness of selected
assumptions used to estimate the future cash
flows and considering the ongoing impact of
COVID-19
considered the appropriateness of the period
over which cash flows were projected based
on our knowledge of the business and the
Group’s lease portfolio management strategy
engaged internal experts to assess the
appropriateness of the discount rate used in
the models
evaluated the appropriateness of the
disclosures made in the financial statements
against the requirements of Australian
Accounting Standards.
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iNDEPENDENT AuDiTOR’S REPORT TO THE MEMBERS OF THE REJECT SHOP LiMiTED CONTINUED
Key audit matter
How our audit addressed the key audit
matter
Inventory provision - net realisable value
(NRV)
(Refer to note 1(aa)(iii))
A provision was recognised as at 27 June 2021 in the
financial report to provide for inventory expected to
be sold below cost.
The Group undertakes a process to identify inventory
which is likely to be sold below cost. The provision is
then recognised by applying the expected markdown
required to clear this inventory.
The identification of the provision depends, in part,
on sales sold below cost throughout the financial
period and incorporates information on known loss-
making products as well as the impact of planned
markdowns.
This was a key audit matter because of:
the financial significance of the inventory
balance as at 27 June 2021 and therefore the
potential impact of the provision for NRV on
the consolidated statement of comprehensive
income and consolidated balance sheet
the subjective nature of the provision on the
calculation due to the judgement involved in
estimating the expected selling price of
inventory.
Inventory provision - shrinkage
(Refer to note 1(aa)(iv))
We performed the following procedures, amongst
others:
developed an understanding of how the
Group determines the NRV provision
considered the potential impact of the
COVID-19 pandemic on the Group’s estimate
of the NRV provision
evaluated the appropriateness of significant
assumptions used to develop the provision
for NRV in the context of Australian
Accounting Standards, by having regard to:
o
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aggregate inventory sold below cost
during the financial period
aggregate inventory in excess of
future sales quantities
aggregate inventory wastage
incurred during the financial period
inventory written-off subsequent to
the end of the financial period and
up to the completion of our audit.
The Group recognised a provision against inventory as
at 27 June 2021 for the estimated loss related to
shrinkage. Shrinkage is physical losses of inventory at
each store since the date of the last stock count.
The provision is calculated by applying an estimated
shrink loss percentage to the sales since the date of
the last stock count to the end of the financial period.
We performed the following procedures, amongst
others:
obtained an understanding of how the Group
determines the shrinkage provision
attended stock counts for a selection of
stores and developed an understanding of
66
Key audit matter
How our audit addressed the key audit
matter
the Group’s process for reviewing stock
count results for other stores
compared the shrink loss percentage applied
against the results of the stock counts
completed prior to the end of the financial
period and the historical data on the Group’s
shrinkage result.
This was a key audit matter because of:
the financial significance of the inventory
balance as at 27 June 2021 and therefore the
potential impact of the provision for
shrinkage on the consolidated statement of
comprehensive income and consolidated
balance sheet
the subjective nature of the provision on the
calculation due to the judgement involved in
estimating the shrink loss percentage to
apply to sales.
Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report for the 52 week period ended 27 June 2021, but does not
include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
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Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of
our auditor's report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 21 to 28 of the directors’ report for the 52
week period ended 27 June 2021.
In our opinion, the remuneration report of The Reject Shop Limited for the 52 week period ended 27
June 2021 complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance with
Australian Auditing Standards.
PricewaterhouseCoopers
Sam Lobley
Partner
Melbourne
19 August 2021
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Shareholders’ information
As at 5 August 2021
The shareholder information set out below was applicable as at 5 August 2021.
(a) The distribution of shareholding was as follows:
Size of Shareholding
Shareholders
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
3,590
1,365
236
185
20
(b) 670 shareholders hold less than a marketable parcel of shares, being a market value of less than $500.
(c) Substantial shareholders based on notifications to the Company were:
Shareholder
Allensford Pty Ltd
Bennelong Australian Equity Partners Ltd
Wilson Asset Management Group
Castle Point Funds Management
Number
7,651,495
5,340,815
3,456,359
2,378,079
% Held
19.96%
13.94%
9.02%
6.20%
(d) The fully paid issued capital of the Company consisted of 38,326,622 shares held by 5,396 shareholders.
Each share entitles the holder to one vote.
(e) Unquoted Equity Securities
Performance Rights issued under The Reject Shop Performance Rights Plan
Number
on Issue
895,575
Number of
holders
8
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SH AREHOLDERS’ iNFORMATiON CONTINUED
(f) Twenty largest shareholders
Shareholder
Citicorp Nominees Pty Ltd
Allensford Pty Ltd
National Nominees Limited
J P Morgan Nominees Australia Pty Limited
HSBC Custody Nominees (Australia) Limited
SCJ Pty Ltd
BNP Paribas Noms(NZ) Ltd
Andre Reich
Dorothy Productions Pty Ltd
Bennamon Pty Ltd
Bond Street Custodians Limited
NCH Pty Ltd
Wyong Rugby League Club Ltd
Mike Fegelson
BNP Paribas Nominees Pty Ltd
Andre Reich & Veronica Angelidis-Reich
Kgari Investments Pty Ltd
Dani Aquilina
BNP Paribas Nominees Pty Ltd & Hub24 Custodial Services Ltd
Sarah Acton
Number
10,379,267
7,273,018
4,153,712
% Held
27.08
18.98
10.84
792,580
705,109
600,000
452,548
406,540
400,000
378,477
350,000
273,966
255,000
157,700
151,860
130,302
123,600
109,000
105,772
100,207
2.07
1.84
1.57
1.18
1.06
1.04
0.99
0.91
0.71
0.67
0.41
0.40
0.34
0.32
0.28
0.28
0.26
The twenty members holding the largest number of shares together held a total of 71.23% of the issued
capital.
(g) Restricted Shares
There are no restricted shares on issue.
70
Corporate Directory
THE REJECT SHOP LIMITED
ABN 33 006 122 676
AND SUBSIDIARIES
Directors
Steven Fisher
Non-Executive Chairman
Selina Lightfoot
Non-Executive Director
David Grant
Non-Executive Director
Nicholas Perkins
Non-Executive Director
Margaret Zabel
Non-Executive Director
Company Secretary
Michael Freier
BA, BCom, LLB, LLM, MA (Theol) & Grad Dip Leg Prac
Principal Registered Office
245 Racecourse Road
Kensington, Victoria 3031
Share Registry
Link Market Services Ltd
Tower 4, 727 Collins St
Melbourne, Victoria 3008
Auditors
PricewaterhouseCoopers
2 Riverside Quay
Southbank, Victoria 3006
Stock Exchange Listing
The Reject Shop Limited shares are listed on
the Australian Securities Exchange (ASX code: TRS)
Website
www.rejectshop.com.au
71
www.rejectshop.com.au