Appendix 4E
The Reject Shop Limited
(ABN 33 006 122 676)
Consolidated preliminary final report
For the 53 week financial period ended 3 July 2022
Compared to the 52 week financial period ended 27 June 2021
Results for announcement to the market
Percentage
Change
%
Sales revenue from continuing operations
up
1.2%
Profit from continuing operations after tax attributable to
shareholders of The Reject Shop
down
(5.0%)
Amount
$’000
788,241
7,902
to
to
Net profit for the period attributable to shareholders of The
Reject Shop
down
(5.0%)
to
7,902
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 FY22 result announcement and FY22 results
presentation, as well as in the annual report enclosed.
Annual
Report
FY2022
About The Reject Shop
The Reject Shop has been delivering value to shoppers for more than 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 369(i) convenient store locations across Australia.
(1) 369 stores as at 3 July 2022
Contents
Chairman’s Review
CEO’s Update
Board of Directors
Executive 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
Shareholders’ Information
Corporate Directory
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Notice of Annual General Meeting: 9.30 am, 19 October 2022
The Reject Shop Limited (“The Reject Shop” or “Company”)
(Australian Business Number 33 006 122 676) is a company
limited by shares, incorporated and domiciled in Australia.
The address of the Company’s registered office is 245
Racecourse Road, Kensington, Victoria, Australia, 3031.
These financial statements are presented in Australian
currency and were authorised for issue by the directors of
the Company on 23 August 2022. The Company has the
power to amend and re-issue these financial statements.
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3 Chairman’s Review
Dear Shareholders,
The FY22 financial year saw the Company deliver further value for shareholders through the significant
and sustained efforts of all of our team members.
The Company delivered sales of $788.2 million (including the 53rd week) although that result was adversely
impacted by a number of COVID-19 related events, including lockdowns and the disruption associated
with the emergence of the Omicron variant. Management has worked hard to navigate through these
challenges, and we enter FY23 in a strong financial position and with positive sales momentum.
The Reject Shop has an important role to play in helping Australians save money in a high cost of living
environment and we are well positioned for growth with our improved cost base, strong balance sheet,
experienced and talented senior leadership team and growing national store network.
The Company recorded earnings before interest and tax (“EBIT”) of $17.6 million and net profit after tax
(“NPAT”) of $7.9 million.
The Company’s balance sheet is strong with $77.5 million in cash at year end with no drawn debt.
Having regard to the Company’s strong balance sheet and based on the view that the recent share price
has not appropriately reflected the value of The Reject Shop’s business, the Board has decided to undertake
an on-market share buy-back as outlined in the announcement to the market dated 23 August 2022.
I am confident the Company will make further progress during FY23 under the leadership of our new Chief
Executive Officer, Phil Bishop, and the senior leadership team.
On behalf of the Board, I would like to take the opportunity to thank 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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6 CEO’s Update
Dear Shareholders,
I reiterate my thanks to the Board of The Reject Shop for appointing me to the role of Chief Executive Officer,
and I look forward to the opportunity to create value for shareholders.
Since joining the Company on 11 July 2022, I have come to recognise that The Reject Shop is at a pivotal
point in its journey. While there is still lots to do, I am pleased at how well positioned the Company is thanks to
the work that the team has undertaken over the past two years to improve the cost base, strengthen the
balance sheet and grow the national store network.
During FY22, our customers, our team and our business were challenged by the uncertainty and volatility
associated with COVID-19. During the first half, we endured lockdowns in almost every State and Territory, we
temporarily closed certain stores due to team member illness and have been dealing with unprecedented
disruption right across our domestic and international supply chains, from the factory all the way to the store
shelf. However, we were pleased to be able to continue trading throughout each lockdown.
The emergence of the Omicron variant saw large parts of the community limiting their movement or
self-imposing their own form of lockdowns during the key Christmas trading period and the January summer
holidays, which adversely impacted sales during December and January. This was quickly followed by
flooding in February and March that impacted communities in South East Queensland and many parts of
New South Wales while also disrupting our supply chain in that part of the country. Finally, as is being seen
globally, the cost of goods continues to increase due to higher raw material costs and elevated supply
chain costs.
While our team is working hard to ensure our business can manage these elevated costs, we also know that
inflation, together with interest rate rises and elevated petrol prices, means that our customers, and many
other Australians, are facing significant cost of living pressures. This represents an opportunity for The Reject
Shop as I believe that the discount variety sector has an important role to play in helping Australians
navigate this difficult economic time and, as Australia’s largest discount variety retailer, I believe The Reject
Shop can have a meaningful impact by offering our customers both branded consumables as well as
exciting general merchandise at a low price.
In FY23, The Reject Shop will:
• continue to evolve our merchandise offer for our customers, ensuring we maintain and build their trust
and effectively communicate our value proposition to them, which is expected to drive comparable store
sales growth through bigger baskets and more frequent visits;
• continue to expand our national store network with a focus on providing customers with even more
convenient locations throughout Australia where they can shop and save;
• continue to work hard to maintain gross profit margin and manage the cost of doing business in a high
inflation environment; and
• continue to explore and invest in strategic projects across the business, particularly in supply chain and
technology to enable growth and improve our customers’ experience.
I look forward to The Reject Shop delivering an improved and differentiated merchandise offer that strongly
appeals to customers, which I am confident will deliver comparable store sales growth and create value
for all shareholders.
I would like to thank all of our team members for their efforts over the past year and I am excited to work with
our team in FY23, and beyond, to serve our customers and help them save every day. Thank you to all of our
team members across the country!
And to our shareholders, thank you for your patience and long-term commitment to our business. We are
determined to deliver sustainable growth.
Yours sincerely,
Phil Bishop
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
Nicholas (Nick) Perkins
Non-Executive Director
Bachelor of Arts, Bachelor of
Laws 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 18 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.
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.
Steven joined the Board of The
Reject Shop in June 2019.
During the last three years,
Steven has served as a director
of the following other listed
companies:
• Breville Group Limited (director
since 2004 to 2021)
• Laybuy Group Holdings
Limited (director since 2020)#.
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.
David joined the Board of The
Reject Shop in May 2020.
During the last three years, David
has served as a director of the
following other listed companies:
• Event Hospitality and
Entertainment Limited (director
since 2013)#
• 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).
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Mark Ward
Non-Executive Director
Margaret Zabel
Non-Executive Director
Graduate of the Australian
Institute of Company Directors
Mark Ward is an experienced
retailer with more than 40 years
of retail experience, including 18
years of senior executive
experience at Bunnings and
Officeworks.
In 2007, Mark was appointed
Managing Director of Officeworks
where he transitioned that
business into the Wesfarmers
group, developing a strong team
that reset the strategy and
delivered strong growth for over a
decade. In 2019, Mark left
Officeworks.
Mark is currently a non-executive
director of each of the Richmond
Football Club (appointed January
2018) and Bunnings Australia &
New Zealand (appointed 2019)
and acts as a strategic advisor to
Bunnings.
During the last three years, Mark
has not served as a director of
any other listed company.
Mark joined the Board of The
Reject Shop in March 2022.
Bachelor of Mathematics,
Masters of Business
Administration and Graduate of
the Australian Institute of
Company Directors
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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Executive Leadership Team
Phil Bishop
Chief Executive Officer
Phil Bishop is an experienced retailer with 30 years of
experience.
Phil’s retail journey started (as a teenager) when he
joined his local Target (Australia) store as a people
greeter. Since that time, Phil has had opportunity to
work across a variety of segments from department
stores to hardware, from wholesale to B2B.
Most recently, Phil has held senior roles at Bunnings,
including the role of Director Merchandise &
Marketing, and prior to that in various senior roles at
Officeworks, including the role of Chief Operating
Officer. In these various roles, Phil has helped to
deliver sustained growth through successfully
developing strategies that allow alignment and
purpose for the team to support and believe in.
Phil joined The Reject Shop in July 2022.
Clinton Cahn
Chief Financial Officer
Clinton Cahn was appointed Chief Financial Officer
of The Reject Shop on 1 May 2020 with experience
across investment banking at UBS, private equity at
TPG Capital and corporate strategy at Crown Resorts.
Clinton oversees The Reject Shop’s Accounting,
Commercial Finance, Technology and Supply Chain
teams, is responsible for investor relations and held
the role of Acting Chief Executive Officer between
May and July 2022.
Clinton joined The Reject Shop in March 2020.
Amy Eshuys
Chief Operating Officer
Amy Eshuys is an experienced retail professional, with
extensive international merchandise experience and
deep knowledge of discount variety retail, having
worked in both Australia and the United States.
Prior to joining The Reject Shop, Amy held the
combined role of Vice President and General
Merchandise Manager for Buying, Merchandising &
Sourcing at CTS (formerly known as Christmas Tree
Shops) based in New Jersey. CTS is a specialty retailer
with 80 stores that combines low price every day and
seasonal merchandise. In her time with CTS, Amy was
responsible for developing and executing a
compelling merchandise offer to meet the needs and
wants of customers in a very competitive and
challenging marketplace.
Amy joined The Reject Shop in April 2022.
Michael Freier
General Counsel & Company Secretary
Michael Freier 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.
Paul Calvert
General Manager, Operations
Paul Calvert 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.
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Kate Lewis
General Manager, People & Culture
Paul Rose
General Manager, Property
Kate Lewis 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.
Martha O’Sullivan
General Manager, Technology
Martha O’Sullivan is a technology executive with a
diverse range of experience across several sectors,
including telecommunications, marketing, utilities,
insurance and retail. Martha’s retail technology
experience involved over seven years at Target
Australia.
During her career, Martha has had experience in
executing technology strategies and leading
technology transformations across infrastructure,
software and services functions.
Martha actively uses her experience and background
to mentor and encourage others with a view to
improving diversity and participation.
Martha joined The Reject Shop in June 2020 and she
was promoted to General Manager, Technology in
July 2022.
Paul Rose 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.
Andrew Stein
Chief Customer Officer
Andrew Stein has more than 25 years of experience in
discount variety retail in the United States, New
Zealand and Australia.
In the US, Andrew was Chief Marketing Officer at
Kmart (US) where he led the brand repositioning, the
development of the loyalty program and creating
Cannes Lion award winning advertising. At Big Lots
(US), Andrew was the Chief Customer Officer and led
the brand reinvention, the launch and building of
e-commerce, the redevelopment of the loyalty
program and several years of comparable store sales
growth.
Andrew then moved to The Warehouse Group in New
Zealand to lead Customer Strategy and Demand
Generation in the new agile structure for The
Warehouse, Warehouse Stationery and Noel Leeming
brands.
Andrew joined the Reject Shop in March 2022.
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Today, Thursday 30 June, marks the Grand Opening of our Morayfield Super Centre store in Queensland!At TRS Morayfield Super Centre, you will be welcomed by Bekand her incredible, hard working team who are excited to serve the community. Some of the Morayfield Super Centre store’s features include Ausmartfixturing, an open ceiling (adding to the trendy look and feel of the store!), ‘Cheapest Brands Everyday’ Entry Headers and big red signage on the wall behind registers, ‘Winter Holiday Savings’ Overheads on Event Bays,a Cleaning Bulk Wall towards the back of the store, ‘New’ Headers on the front of Six Ways, our colourful Dump Bins outside the store, and yellow A5 ticketing in Section and on Ends to call out our low pricing to customers.2“Hi, my name is Bekand I am the Store Manager of our new Morayfield Super Centre store which opened today.I celebrated my 10 Years at TRS during the setup of the store!I have held many different positions in my time with TRS, including SM of numerous stores across Brisbane, a secondment within Space Planning, being a State Lead for Card Factory implementation, as well as involvement in the Women in Leadership Program. I am really looking forward to leading my team and helping our customers in Morayfield save every day!” 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 20 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.
Energy Efficiency Initiatives
The Company is 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 3 July 2022, the Company has installed high
efficiency LED lighting, timers and automated
energy management systems into 326 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
modern slavery statement, which is available at
https://www.rejectshop.com.au/about/
policies-and-charters.
Sustainable Awareness
The Company continues to review and implement
more sustainable options across its business. 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.
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Today, Thursday 30 June, marks the Grand Opening of our Morayfield Super Centre store in Queensland!At TRS Morayfield Super Centre, you will be welcomed by Bekand her incredible, hard working team who are excited to serve the community. Some of the Morayfield Super Centre store’s features include Ausmartfixturing, an open ceiling (adding to the trendy look and feel of the store!), ‘Cheapest Brands Everyday’ Entry Headers and big red signage on the wall behind registers, ‘Winter Holiday Savings’ Overheads on Event Bays,a Cleaning Bulk Wall towards the back of the store, ‘New’ Headers on the front of Six Ways, our colourful Dump Bins outside the store, and yellow A5 ticketing in Section and on Ends to call out our low pricing to customers.2“Hi, my name is Bekand I am the Store Manager of our new Morayfield Super Centre store which opened today.I celebrated my 10 Years at TRS during the setup of the store!I have held many different positions in my time with TRS, including SM of numerous stores across Brisbane, a secondment within Space Planning, being a State Lead for Card Factory implementation, as well as involvement in the Women in Leadership Program. I am really looking forward to leading my team and helping our customers in Morayfield save every day!”
Directors’ Report
The directors present their report on The Reject
Shop Limited and its subsidiaries (“the Company”)
for the financial period ended 3 July 2022.
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
Chairman of the Audit and Risk Committee and
Member of the People and Culture Committee.
Selina Lightfoot (Retired on 20 October 2021)
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.
Mark Ward (Appointed on 1 March 2022)
Non-Executive Director
Member of the Audit and Risk Committee and
Member of the People and Culture Committee.
Margaret Zabel
Non-Executive Director
Chair of the People and Culture Committee (from
1 November 2021) and Member of the Audit and
Risk Committee.
For the financial period ended 3 July 2022, 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.
Meetings of Directors
The number of meetings of the Board of Directors
and Committees held during the period ended 3
July 2022, and the number of meetings attended
by each director, were:
Director
meetings
Audit & Risk
Committee
meetings
People &
Culture
Committee
meetings
A
14
3
14
14
6
14
B
14
3
14
14
6
14
A
4
1
4
4
1
4
B
4
1
4
4
1
4
A
3
1
3
3
2
3
B
3
1
3
3
2
3
Director
S Fisher
S Lightfoot
D Grant
N Perkins
M Ward
M Zabel
A – Number of meetings attended
B – Number of meetings held during the time the
director held office during the period
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
2023 (previously August 2022). 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).
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.
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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.
Pursuant to the terms of the engagement letter
with its auditors, PricewaterhouseCoopers
(“PwC”), the Company has agreed to reimburse
PwC for any liability (including reasonable legal
costs) PwC incurs in connection with any claim by
a third party arising from the Company’s breach of
the terms of the engagement letter. No payment
with respect to that obligation 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 $521,000 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.
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 a differentiated
merchandise offer that strongly appeals to
customers 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. The
Company expects to continue to open new stores
in locations that reach new customers and close
mostly underperforming stores. In general, the
Company intends to close stores that are
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DiRECTORS ’ REPORT CONTINUED
loss-making or where landlords seek rent that does not reflect customer foot traffic, especially at large
shopping centres and CBD locations.
During the year, the Company opened 22 new stores (including seven in the fourth quarter), representing
approximately 6% of the overall portfolio. Consistent with the Company’s future growth strategy, these new
store openings were predominantly in neighbourhood and strip locations in both metro and country areas.
Overview of Financial Performance
$ Amounts are $m / %s are to Sales
Sales
Gross Profit(i)
Cost of Doing Business(i)
EBITDA(i)
Depreciation and Amortisation
EBIT(i)
Net Interest Expense
Profit Before Tax
Income Tax Expense
Net Profit After Tax
(i) Non IFRS measure and unaudited
FY22
(53 weeks)
Statutory
FY21
(52 weeks)
Statutory
788.2
41.4%
25.5%
125.5
(107.9)
17.6
(6.4)
11.3
(3.4)
7.9
778.7
41.2%
24.7%
128.5
(109.9)
18.6
(6.4)
12.1
(3.8)
8.3
The Company, similar to other retailers, bases its financial year and reporting calendar on a retail calendar,
with the annual reporting period ending on the Sunday closest to 30 June. Periodically that reporting
calendar results in a 53-week period rather than the usual 52-week period. FY22 was a 53-week period while
FY21 was 52-week period. The Company’s previous 53-week period was FY16.
The FY22 reported results include the positive effects of a 53rd trading week. The company has determined
that the positive impact on its reported Earnings Before Interest and Tax (EBIT) is approximately $2.3 million,
reflecting the net of:
• additional Gross Profit associated with the Sales generated in Week 53 of $13.7 million; and
• additional variable costs associated with generating such sales, which primarily include wages to
operate stores as well as variable store operating expenses.
FY22 Performance
Sales in FY22 were $788.2 million, up 1.2% on the prior period. Excluding the 53rd trading week, overall sales
were down 0.5% and comparable store sales were down 2.2% on the prior period.
Sales were down primarily due to the adverse impact of Omicron on customer behaviour during the key
Christmas trading period. In addition, sales during the first half of the period were impacted—in some
instances unfavourably and in others favourably—by government-imposed lockdowns in each of New South
Wales, Victoria, Queensland, Western Australia, South Australia and the Australian Capital Territory.
Sales have been steadily improving since March as the impact of COVID-19 on customer behaviour
appears to be diminishing. The Company generated positive comparable store sales growth during the
period between March and June 2022.
Gross profit was $326.3 million with gross margin of 41.4%, up 16 basis points on the prior period. Gross margin
was well maintained, notwithstanding higher raw material prices and rising supply chain costs.
The Cost of Doing Business (CODB, which consists of store and administrative expenses but excludes
depreciation and amortisation) was $200.7 million. CODB as a percentage of sales was 25.5%, up 73 basis
points on the prior period. The increase in CODB predominantly relates to higher administrative expenses to
support growth, which includes investment in technology as well as bolstering our teams. This was partially
offset by savings in store expenses.
The Company generated EBITDA of $125.5 million and EBIT of $17.6 million.
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Statutory NPAT for FY22 was $7.9 million, which
compares to $8.3 million in the prior period.
The Company did not receive any wage subsidies
under the JobKeeper program during the period
or during the prior period.
Outlook
At this stage, it appears that customer concerns
around COVID-19 continue to decline and
customers are becoming increasingly confident to
go out and shop, albeit customer foot traffic is still
below pre COVID-19 levels. The Company remains
cautious in relation to how rising COVID-19 cases
may impact customer behaviour and confidence.
Management is focused on the challenges of
operating in a rising cost environment but also
recognises the opportunity for The Reject Shop to
play a more significant role in offering low-priced
products to its customers at a time when so many
Australians are facing significant cost of living
pressures.
Management’s focus in FY23 will be on generating
comparable store sales growth, which is expected
to be supported by an improved product offering
with more great deals on branded consumables
as well as new and exciting general merchandise.
In addition, the Company remains focused on
opening new stores in neighbourhood and strip
locations (both metro and country) and managing
the impact of inflation on gross profit margin and
operating costs.
Capital Management
Further to its announcement on 23 August 2022,
and given its strong balance sheet, the Company
intends to undertake an on-market share buy-
back of up to $10 million. The buy-back is
expected to commence in September 2022. The
total number of shares to be purchased under the
buy-back will be dependent on business and
market conditions. The Company may, at its
discretion, vary the size of the on-market share
buy-back to up to 10% of its issued capital.
In light of the Board’s decision to undertake an
on-market share buy-back, the Company has
decided that no final dividend will be declared in
FY22. The Company will continue to assess its
dividend policy, including in the context of its
broader capital management strategy, and will
provide its next update on dividends at its 1H23
results in February 2023.
of $73.0 million at 27 June 2021. As at the balance
date, and consistent with the position at 27 June
2021, the Company does not have any drawn debt.
Store Network Plans
During the period, the Company opened 22 new
stores and closed 14 mainly underperforming
stores. At the end of the period, The Reject Shop’s
national store network included 369 stores, up from
361 at the end of June 2021 and 354 at the end of
June 2020.
Currently, the Company is planning to open up to
25 new stores, including approximately seven new
stores in the first half, and to close 5–10
unprofitable or underperforming stores in FY23.
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
while for others the COVID-19 pandemic has
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. Australians
are facing significant cost of living pressures driven
by interest rate rises, elevated petrol prices and
broad-based consumer goods inflation. Within this
context, the Australian retail sector is likely to face
headwinds on its path to recovery to pre-COVID-19
levels.
The discount variety sector has an important role
to play in helping Australians navigate this difficult
economic time and, as Australia’s largest discount
variety retailer, The Reject Shop can have a
meaningful impact by offering our customers both
branded consumables as well as exciting general
merchandise at a low price.
The discount variety sector contains a range of
challenges. The greatest challenge concerns
competitor activity. Competition comes from a
range of areas, including:
a) regionally based discount variety chains;
b) a multitude of single owner-operator
discount variety businesses;
c) discount department stores;
Balance Sheet
The Company’s balance sheet remains strong
with a net cash position at 3 July 2022 of
$77.5 million. This compares to a net cash position
d) supermarkets, particularly larger national
chains; and
e) various e-commerce participants, including
international and national businesses.
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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 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 and supply chain impacts. 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: restrictions
imposed by the government to deal with
COVID-19; international and domestic economic
conditions; employment levels; consumer demand;
consumer and business sentiment; government
fiscal, monetary and regulatory policies.
Additionally, the duration and severity 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 2021, 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.
During the course of 1H22, and as various State
governments in Australia implemented restrictions
and lockdowns which varied by State, the
Company reviewed each public health order/
directive to ensure that the Company was able to
continue to trade. During that period, the
Company was able to trade through each
lockdown. However, there is no guarantee that the
Company will be able to continue to trade during
any future lockdown.
Sales during 1H22 were impacted—in some
instances unfavourably and in others favourably—
by government imposed lockdowns in each of
New South Wales, Victoria, Queensland, Western
Australia, South Australia and the Australian
Capital Territory as well as changing State border
and travel restrictions. The emergence of the
Omicron variant during the lead up to the key
Christmas trading period resulted in reduced store
foot traffic with customers concerned about
increasing case numbers in some States. As the
COVID-19 pandemic continues to evolve, these
trends may change which may impact the
Company’s financial performance.
In general, the Company has been 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.
Outbreaks of COVID-19, particularly internationally,
have 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 COVID-19 variants,
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.
COVID-19 may adversely impact the Company’s
domestic supply chain, including through lost
productivity at the Company’s distribution centres
due to team member absenteeism and disruptions
experienced by third party service providers
(freight companies). The Company continues to
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monitor the impact of COVID-19 on both the
international and domestic supply chain.
While the future impact, duration and severity of
the COVID-19 pandemic (and any associated
State government restrictions and 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 the merchandise offer,
supply chain efficiencies, maintaining appropriate
inventory levels and scalable technology. The
opening of new stores will depend on the
availability of suitable sites and the ability of the
Company to negotiate acceptable lease terms.
These factors will therefore impact on the ability of
the Company to successfully implement its growth
strategy.
The Company has established an experienced
and capable property team to manage its
property portfolio, including its growth 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 continues to respond to the
competitive environment. The Company’s focus in
FY23 will be on generating comparable store sales
growth, which is expected to be supported by an
improved product offering with more great deals
on branded consumables as well as new and
exciting general merchandise.
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 plans 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 a
range of commercial agreements (eg. 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.
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DiRECTORS ’ REPORT CONTINUED
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 to
August 2023 (previously August 2022). 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).
The Company’s balance sheet remains strong with
a net cash position at 3 July 2022 of $77.5 million.
This compares to a net cash position of $73.0
million at the end of June 2021. As at the balance
date, and consistent with the position at the end
of June 2021, the Company does not have any
drawn debt.
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, including
periodic audits with support from external parties
as required. The Company takes its employment
law 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 FY22, the Company experienced
expected elevated international shipping costs,
which are expected to remain elevated during
FY23. The Company continues to monitor the
situation.
In FY22, the Company experienced elevated
domestic fuel costs, which are expected to remain
elevated during FY23. 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
geopolitical changes, 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
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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 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 3,500 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 recently appointed a new Chief
Executive Officer, Phil Bishop, who together with an
established, experienced and talented executive
leadership team will implement the Company’s
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.
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DiRECTORS ’ REPORT CONTINUED
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 3,500 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.
Notwithstanding the above, given that the Company
operates approximately 370 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.
In addition, the Company is exposed to the risk of
malicious attacks, system failures, network disruptions
and other malicious or non-malicious incidents, which
could have an adverse impact on the Company’s
operations and its reputation. The Company actively
manages its information technology systems to
reduce the risk of system disruption, especially during
peak trading periods.
There is a risk that a general technological
development will involve costs which are
disproportionate to previous generation
technologies. The Company continually reviews its
information technology systems to ensure that those
systems will enable the Company to pursue its
strategic plans.
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.
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.
20
Remuneration Report
The directors present The Reject Shop Limited FY22 remuneration report, outlining key aspects of the
remuneration policy and framework, and remuneration awarded this year.
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 company’s policies for determining
the nature and amount of remuneration paid to Key Management Personnel (which includes any non-
executive 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 (or referred to as “directors”) and other KMP:
A – KMP covered in this report
B – Principles used to determine the nature and amount of remuneration
C – Details of remuneration
D – Service agreements
E – Share-based compensation
F – Additional information
The information provided in this remuneration report has been audited as required by section 308(3C) of
the Corporations Act 2001.
A – KMP covered in this report
Non-Executive Directors
Roles
Changes during FY22
Steven Fisher
David Grant
Selina Lightfoot (retired on
20 October 2021)
Nicholas (‘Nick’) Perkins
Mark Ward (from 1 March
2022)
Margaret Zabel
Chair
Member, Audit & Risk Committee
Member, People & Culture Committee
Director
Chair, Audit & Risk Committee
Member, People & Culture Committee
Director
Chair, People & Culture Committee
Member, Audit & Risk Committee
Director
Member, Audit & Risk Committee
Member, People & Culture Committee
Director
Member, Audit & Risk Committee
Member, People & Culture Committee
Director
Chair, People & Culture Committee
Member, Audit & Risk Committee
Member, People & Culture Committee
Until 20 October 2021
Until 20 October 2021
Until 20 October 2021
From 1 March 2022
From 1 March 2022
From 1 March 2022
From 1 November 2021
Until 31 October 2021
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Other key management personnel
Role(s)
Changes during FY22
Andre Reich
Clinton Cahn
Chief Executive Officer
Until 26 April 2022
Chief Financial Officer
Acting Chief Executive Officer
From 27 April 2022 to 10 July 2022
Changes since the end of the reporting period
Phillip (‘Phil’) Bishop
Chief Executive Officer
From 11 July 2022
Role
Changes during FY23
B – 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.
Director remuneration structure
Fees for directors are based on the nature of the directors’ work and their responsibilities. The remuneration rates
reflect the strategic imperatives of the Company and the extent of the number of geographical locations in
which the business operates.
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.
Directors do not participate in the short or long-term incentive schemes.
The maximum annual aggregate directors’ fee pool is $950,000 per annum, and was approved by shareholders at the
annual general meeting on 14 October 2015. The total amount of fees paid to directors in FY22 is within the approved
fee pool and no increase to the directors’ fee pool is being sought at the FY22 AGM.
Executive remuneration structure
The Company’s executive remuneration policies are designed to attract, motivate and retain a qualified,
experienced and high performing group of executives with complementary skills.
The executive remuneration and reward framework consists of four components:
Element
Purpose
Performance metrics
Potential value
Changes for FY22
Base (or fixed)
remuneration
Other
remuneration
(such as
superannuation
payments)
Short-term
incentive (STI)
Long-term
incentive (LTI)
through
participation in the
Company’s
Performance
Rights Plan
22
Provide competitive
market salary
including non-
monetary benefits
Provide consistent
with statutory
obligations
Nil
Nil
Positioned at median
market rate
Not applicable
Reviewed in line with
market positioning,
scope of role and
performance
The superannuation
guarantee increased
to 10% on 1 July 2021
and increased further
to 10.5% on 1 July 2022
Cash reward for
in-year
performance
Achieving targeted
EBIT, individual
performance ratings
and safety related
measures
CEO: 50% of base at
target performance
CFO: 40% of base at
target performance
Alignment to long-
term shareholder
value
3 year Earnings Per
Share (“EPS”)
performance
CEO: 100% of base
CFO: 75% of base
Usual three-year
hurdle although with
the ability to
accelerate (33% of
rights) at year two if
specified hurdle
achieved
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
when appropriate, including on promotion.
Short-term incentive (STI)
For FY22, the STI for executives consisted of
various performance hurdles, including safety
related measures and Company financial
performance through achieving targeted EBIT
as well as individual performance ratings. If
these STI targets are achieved, cash payments
of 22.5% to 40% of total fixed remuneration are
made. Overperformance against stretch
targets may potentially result in cash payments
of 80% to 140% of total fixed remuneration.
The audited financial report remains the basis
for measuring achievement against the
financial performance targets.
For FY22, the People and Culture Committee
has determined that one member of the
executive KMP will receive part of their STI.
Long Term Rewards (LTI)
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.
Criteria for FY22:
In FY22, 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 directors).
The financial criteria upon which the
performance rights are eligible to vest concern
achieving EPS growth measured over a three-
year period with the ability to accelerate (33%
of rights) at year two if a specified EPS hurdle is
achieved.
If the vesting conditions are satisfied, the
relevant performance rights will vest within 5
business days of the date of the FY23 or FY24
results announcement.
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 between 1
June 2021 and 31 July 2021. For financial
reporting purposes, the value of each right
granted at grant date is measured using a
Black-Scholes option pricing model.
For FY23:
The People and Culture Committee is currently
working through a revised incentive scheme for
a small number of team members, including
KMP (other than the non-executive directors), in
relation to FY23. The incentive scheme will
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REMUNERATiON REPORT CONTINUED
include both STI as well as LTI through participation in the Company’s Performance Rights Plan. The revised
incentive scheme is being designed to:
• incentivise key executives to outperform Board approved objectives and performance targets;
• 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 for longer-term growth.
One-off allocation:
In FY22, the Board granted performance rights with no financial criteria as a one-off allocation to certain
team members (including Clinton Cahn who is a KMP) in order to ensure the retention of their services for
specified periods. The performance rights will generally vest over a 12-month to three-year period,
depending on the specific arrangements negotiated with each relevant team member.
In relation to the performance rights granted to Clinton Cahn, who is a KMP (and strictly in his capacity as
Chief Financial Officer of the Company), the following specific arrangements apply provided Clinton
remains employed by the Company when the performance rights vest:
• 75,000 performance rights were granted and vested on 11 May 2022, and may be exercised on or
before 31 August 2022;
• 50,000 performance rights exercisable after the FY23 results announcement in August 2023; and
• 25,000 performance rights exercisable after the 1H24 results announcement in February 2024.
In relation to the total performance rights granted to all non-KMPs, the summary of the arrangements is as
follows:
• 66,000 performance rights exercisable by a number of participants on 5 November 2023 subject to the
relevant participants being employed by the Company when the performance rights vest;
• 265,000 performance rights exercisable by a number of participants after the FY23 results
announcement in August 2023 subject to the relevant participants being employed by the Company
when the performance rights vest;
• 110,000 performance rights exercisable by a number of participants after the FY24 results
announcement in August 2024 subject to the relevant participants being employed by the Company
when the performance rights vest; and
• 17,500 performance rights exercisable by a participant on 29 August 2025 subject to the relevant
participant being employed by the Company when the performance rights vest.
One-off allocation for new CEO:
As announced on 16 June 2022, the Company’s new Chief Executive Officer, Phil Bishop (who is a KMP),
received a one-off allocation of 100,000 performance rights, which will vest as follows:
• 40,000 rights will vest after the FY24 results announcement in August 2024;
• 40,000 rights will vest after the FY25 results announcement in August 2025; and
• 20,000 rights will vest after the FY26 results announcement in August 2026.
The Board may lapse any unvested performance rights if Phil Bishop ceases employment prior to the rights
vesting.
The Company granted 100,000 performance rights to Phil Bishop as outlined above on 22 July 2022.
24
C – Details of remuneration
Directors’ fees
The annual base fees (inclusive of superannuation) are as follows:
Chair
Other directors
Additional fees (inclusive of superannuation)
Audit & Risk Committee – Chair
Audit & Risk Committee – member
People & Culture Committee – Chair
People & Culture Committee – member
FY21
$206,205
$120,438
$6,180
No fee
$5,150
No fee
FY22
$206,205
$120,438
$20,000*
No fee
$20,000*
No fee
FY23
$240,000
$120,438
$20,000
No fee
$20,000
No fee
* Effective from 1 January 2022, the Board resolved to set the fees paid to the Chair of each of the Audit and Risk Committee
and the People and Culture Committee at $20,000 (inclusive of superannuation) per annum.
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 (ceased to be a member of the KMP on 26 April 2022)
C Cahn – Chief Financial Officer; and
– Acting Chief Executive Officer (from 27 April 2022 to 10 July 2022)
Clinton Cahn did not receive any additional remuneration in relation to the role of Acting Chief Executive
Officer.
These persons were employed by the Company and were KMP for the entire period ended 3 July 2022
unless otherwise stated.
Following the end of the financial period, Phil Bishop commenced as Chief Executive Officer on 11 July
2022.
For FY23, the summary of the remuneration for each of the executive KMPs is as follows:
Phil Bishop – Chief Executive Officer
Component
Description
Fixed remuneration
$650,000 per annum (inclusive of superannuation)
Short term incentive
50% of fixed remuneration (at target), subject to hurdles
Long term incentive
100% of fixed remuneration, subject to hurdles and service
Clinton Cahn – Chief Financial Officer
Component
Description
Fixed remuneration
$550,000 per annum (inclusive of superannuation)
Short term incentive
40% of fixed remuneration (at target), subject to hurdles
Long term incentive
75% of fixed remuneration, subject to hurdles and service
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REMUNERATiON REPORT CONTINUED
Summary of remuneration
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:
2022
SHORT-TERM BENEFITS
POST-
EMPLOYMENT
BENEFITS
OTHER
BENEFITS
LONG-TERM
SHARE-BASED
BENEFITS
Cash salary
and fees
Cash STI
Superannuation
$
$
$
Other
$
Performance
Rights(i)
Total
Remuneration
Proportion of
Annualised
Remuneration
at risk
$
%
Name
Non-executive
Directors
S Fisher
D Grant
S Lightfoot (ii)
N Perkins
M Ward (iii)
M Zabel
Total Non-
Executive
Directors
Other KMP
C Cahn
A Reich (iv)
188,315
133,722
33,454
120,323
36,496
119,264
631,574
-
-
-
-
-
-
-
402,994
140,000
639,609
-
Total Other KMP
1,042,603
140,000
Total
1,674,177
140,000
18,831
-
3,345
-
3,650
11,926
37,752
23,568
23,568
47,136
84,888
$
-
-
-
-
-
-
-
207,146
133,722
36,799
120,323
40,146
131,190
669,326
-
-
-
-
-
-
-
-
736,476
1,303,038
401,799
(560,391)
504,585
401,799
401,799
176,085
176,085
1,807,623
2,476,949
-
-
-
-
-
-
-
67%
(111)%
17%
(i)
The value of the performance rights shown in the table above for accounting purposes is determined using the Black-
Scholes option pricing model and is generally subject to performance and/or service conditions.
(ii) S Lightfoot retired as a Director on 20 October 2021.
(iii) M Ward was appointed as a Director on 1 March 2022.
(iv)
A Reich left the Company on 26 April 2022. As part of his departure, A Reich was paid $401,799 (inclusive of
superannuation) in lieu of a six-month notice period, which is included in ‘other benefits’ above. In addition, A Reich
was paid $74,302 of annual leave entitlements which is excluded from the table above. On A Reich’s departure, all
performance rights were lapsed.
26
2021
SHORT-TERM BENEFITS
POST-
EMPLOYMENT
BENEFITS
OTHER
BENEFITS
LONG-TERM
SHARE-BASED
BENEFITS
Cash salary
and fees
Cash STI
Superannuation
$
$
$
Other
$
Performance
Rights
Total
Remuneration
Proportion of
Annualised
Remuneration
at risk
Name
Non-executive
Directors
S Fisher (i)
D Grant
S Lightfoot
N Perkins
M Teague (ii)
M Zabel (iii)
Total Non-
Executive
Directors
Other KMP
D Aquilina (iv)
C Cahn (v)
A Reich
224,289
118,202
114,408
119,775
33,656
7,572
617,902
503,146
378,266
778,306
Total Other KMP
1,659,718
Total
2,277,620
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13,416
8,226
10,872
-
3,197
719
36,430
21,694
21,694
21,694
65,082
101,512
125,826
-
-
125,826
125,826
34,461
316,526
488,114
839,101
839,101
$
-
-
-
-
-
-
-
$
%
237,705
126,428
125,280
119,775
36,853
8,291
654,332
685,127
716,486
1,288,114
2,689,727
3,344,059
-
-
-
-
-
-
-
5%
44%
38%
31%
(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.
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.
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REMUNERATiON REPORT CONTINUED
D – Service agreements
All KMP are on employment terms consistent with the remuneration framework outlined in this report.
All directors enter into a service agreement with the company in the form of a letter of appointment. The
letter summarises the board policies and terms, including remuneration, relevant to the office of director.
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.
E – Share-based compensation
As indicated above, the Board granted performance rights with no financial criteria as a one-off
allocation to certain team members (including Clinton Cahn who is a KMP) in order to retain their services
for specified periods.
In relation to the performance rights granted to Clinton Cahn who is a KMP (and strictly in his capacity as
Chief Financial Officer of the Company) the arrangements that apply are as indicated on page 24.
The following information has been prepared on 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
during
period
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
Grant date
Key Management Personnel
A Reich (i)
5 November 2021
48,167 31 August 2023
31 August 2025
$5.95
$286,448
A Reich (i)
5 November 2021
96,333 31 August 2024
31 August 2026
$5.86
$564,344
C Cahn
C Cahn
C Cahn
C Cahn
C Cahn
Total
5 November 2021
18,133 31 August 2023
31 August 2025
$5.95
$107,839
5 November 2021
36,267 31 August 2024
31 August 2026
$5.86
$212,459
11 May 2022
75,000 31 August 2022
31 August 2022
$3.60
$269,989
11 May 2022
50,000 31 August 2023 28 February 2025
$3.53
$176,513
11 May 2022
25,000 29 February 2024 28 February 2025
$3.50
$87,595
348,900
$1,705,189
-
-
-
-
-
-
-
-
(i) A Reich left the Company on 26 April 2022 and ceased to be a KMP on that date. On A Reich’s departure, all of his
performance rights were lapsed.
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, and other than the performance rights granted to Phil Bishop as indicated on
page 24, there has been no further grant of performance rights to KMPs.
28
Shares Issued to Key Management Personnel on Exercise of Options or Performance Rights
Directors have not been granted performance rights in any period.
There are no further shares issued during the year as a result of the exercises of the performance rights. It is
expected that, following the release of the FY22 financial results, that C Cahn will exercise 75,000
performance rights that vested on 11 May 2022.
F – 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.
2022
Cash Incentive
Performance Rights
Paid Forfeited
#
%
Vested
Forfeited
#
%
#
%
Financial
Periods in
which
rights may
vest
Maximum
total
number
of rights
may vest
Maximum
total
value of
grants
may vest
Key Management Personnel
C Cahn
C Cahn
C Cahn
A Reich (i)
A Reich (i)
A Reich (i)
$140,000
-
-
-
-
-
13%
100%
-
100%
100%
-
Date
Granted
FY22
FY21
FY20
FY22
FY21
FY20
75,000
37%
-
-
-
-
-
-
FY22-FY25
204,400 $854,396
FY24
63,700 $392,758
FY23
150,000 $606,758
-
-
- 144,500
100% FY24-FY25
- 169,900
100% FY24-FY26
- 300,000
100% FY23-FY25
-
-
-
-
-
-
-
-
-
-
-
(i) A Reich left the Company on 26 April 2022 and ceased to be a KMP on that date. On A Reich’s departure, all performance
rights were lapsed.
Performance Rights Holdings
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:
2022
Balance at the
start of the period
Key Management Personnel
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
C Cahn
A Reich (i)
Total
213,700
204,400
469,900
144,500
683,600
348,900
-
-
-
-
(614,400)
(614,400)
418,100
-
418,100
(i) A Reich left the Company on 26 April 2022 and ceased to be a KMP on that date. On A Reich’s departure, all performance
rights were lapsed.
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REMUNERATiON REPORT CONTINUED
Other than the performance rights granted to Phil Bishop as indicated on page 24, no other performance
rights have been 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
99,039
-
-
99,039
7,000
-
7,000
20,375
-
(20,375)
2022
Directors
S Fisher
D Grant
S Lightfoot(i)
N Perkins
M Ward (ii)
M Zabel
Total
29,151
-
-
155,565
Key Management Personnel
C Cahn
A Reich(iii)
Total
-
536,842
692,407
-
-
-
-
-
-
-
8,048
12,987
3,000
10,660
-
(536,842)
(526,182)
14,000
-
37,199
12,987
3,000
166,225
-
-
166,225
(i)
S Lightfoot retired as a Director on 20 October 2021. For reporting purposes only, 20,375 shares were treated as “other
changes during the period” to leave a nil balance. S Lightfoot may or may not continue to retain shares in the Company.
M Ward was appointed as a Director on 1 March 2022.
(ii)
(iii) A Reich left the Company on 26 April 2022. For reporting purposes only, 536,842 shares were treated as “other changes
during the period” to leave a nil balance. A Reich may or may not continue to retain shares in the Company.
Minimum shareholding requirements
To assist in aligning the interests of the directors with the interests of shareholders of the Company, the
directors are encouraged to acquire and hold a minimum shareholding in the Company approximately
equivalent to at least 100% of the annual base fees paid to directors. The annual base fee excludes any
committee fees, superannuation contributions and higher duties fees (e.g. Chair of the Board fee). The
directors are encouraged to commence acquiring shares as soon as practicable and reach the minimum
shareholding within a reasonable timeframe (approximately 5 years) from time of appointment (or the
effective date of the policy, whichever is the later).
The Minimum Shareholding Policy was approved by the Board on 16 February 2022.
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 62 of this annual report), or are outstanding
as of 3 July 2022 (FY2021 - $Nil).
No other transactions were undertaken with directors or other KMP, including related parties, during the
period (FY2021 - $Nil).
30
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
73.4
50.3
49.4
59.3
42.8
57.4
(58.5)
3.6
21.7
20.6
$9.15
$17.19
$8.82
$5.40
$12.45
$4.16
$5.68
$1.83
$7.46
$5.37
$17.19
$8.82
$5.40
$12.45
$4.16
$5.68
$1.83
$7.46
$5.37
$3.23
87.9%
(48.7%)
(38.8%)
130.6%
(66.6%)
36.5%
(67.8%)
307.7%
(28.0%)
(39.9%)
$0.37
$0.30
$0.30
$0.44
$0.24
$0.35
$0.10
-
-
-
Period
FY2013
FY2014
FY2015
FY2016(i)
FY2017
FY2018
FY2019
FY2020
FY2021
FY2022(i)
(i) 53-week period.
NPAT
$19.5m
$14.5m
$14.2m
$17.1m
$12.3m
$16.6m
($16.9m)
$1.1m
$8.3m
$7.9m
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 2023
27 Mar 2020
28 Mar 2025
27 Mar 2023
30 Sep 2020
31 Aug 2025
5 Nov 2021
5 Nov 2021
5 Nov 2021
31 Aug 2025
1 Nov 2024
31 Aug 2026
11 May 2022
31 Aug 2022
11 May 2022
28 Feb 2025
11 May 2022
14 Sep 2023
11 May 2022
13 Sep 2024
11 May 2022
28 Feb 2025
11 May 2022
13 Sep 2024
11 May 2022
12 Sep 2025
22 July 2022
13 Sep 2024
22 July 2022
12 Sep 2025
22 July 2022
14 Sep 2026
Total
31 Aug 2023
31 Aug 2023
5 Nov 2023
31 Aug 2024
31 Aug 2022
31 Aug 2023
31 Aug 2023
31 Aug 2023
29 Feb 2024
31 Aug 2024
29 Aug 2025
30 Aug 2024
29 Aug 2025
31 Aug 2026
Value at Grant
Date $
Exercise
Price $
Total number on
Issue
Number on issue
to key
management
personnel
$2.70
$4.05
$6.17
$5.95
$5.92
$5.86
$3.60
$3.53
$3.53
$3.53
$3.50
$3.48
$3.43
$2.76
$2.72
$2.68
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
21,675
150,000
198,200
69,467
66,000
138,933
75,000
50,000
75,000
190,000
25,000
110,000
17,500
40,000
40,000
20,000
-
150,000
63,700
18,133
-
36,267
75,000
50,000
-
-
25,000
-
-
40,000
40,000
20,000
1,286,775
518,100
Subsequent to period end, and other than the performance rights granted to Phil Bishop as indicated on
page 24, 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.
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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
2022
$
2021
$
330,000
355,000
42,000
42,788
372,000
397,788
77,500
67,500
20,000
35,000
97,500
102,500
469,500
500,288
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 33 of this annual report.
This report is made in accordance with a resolution of the directors.
Steven Fisher
Chairman
23 August 2022
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Auditor’s independence Declaration
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Auditor’s Independence Declaration
As lead auditor for the audit of The Reject Shop Limited for the 53 week period ended 3 July 2022, 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.
Brad Peake
Partner
PricewaterhouseCoopers
Melbourne
23 August 2022
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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Consolidated Statement
of Comprehensive income
For the 53 week period ended 3 July 2022
Note
2022
$’000
2021
$’000
Revenue from continuing operations
Sales revenue
Other income
Expenses
Cost of sales
Store expenses
Administrative 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 for the period, net of tax
Total comprehensive income attributable to shareholders of The Reject Shop
2
2
3
4
788,241
778,688
128
63
788,369
778,751
467,789
260,828
41,996
770,613
6,502
11,254
3,352
7,902
16,569
(4,971)
11,598
19,500
464,212
259,388
36,536
760,136
6,477
12,138
3,819
8,319
5,579
(1,674)
3,905
12,224
Earnings per share
Basic earnings per share
Diluted earnings per share
Note
Cents
Cents
26
26
20.6
20.2
21.7
21.4
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
34
Consolidated Balance Sheet
As at 3 July 2022
Current Assets
Cash and cash equivalents
Inventories
Tax receivables
Derivative financial instruments
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
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
2022
$’000
2021
$’000
5
6
21
7
8
9
10
11
9
13
21
14
9
13
15
16
17
77,469
73,046
113,014
99,834
1,893
1,315
12,766
-
4,481
3,231
209,623
177,426
51,143
47,342
198,717
148,574
17,712
27,701
267,572
223,617
477,195
401,043
56,398
46,677
78,020
77,303
10,437
10,766
-
3,802
11,560
12,029
156,415
150,577
139,645
89,823
4,332
3,912
143,977
93,735
300,392
244,312
176,803
156,731
70,326
70,326
16,279
4,109
90,198
82,296
176,803
156,731
The above Consolidated Balance Sheet should be read in conjunction with the accompanying notes.
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Consolidated Statement of
Changes in Equity
For the 53 week period ended 3 July 2022
2022
Balances as at 27 June 2021
Profit for the period
Other comprehensive
income
Foreign exchange
translation
Transaction with owners in
their capacity as owners:
Share based remuneration
Tax debited directly to
equity
Contributed
Equity
Capital
Profits
Share Based
Payments
$’000
70,326
$’000
739
$’000
6,019
-
-
-
-
-
-
-
-
-
-
-
-
-
959
(375)
6,603
Balances as at 3 July 2022
70,326
739
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 directly
to equity
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
12
82,296
156,731
-
-
(12)
-
-
-
7,902
7,902
-
-
-
-
11,598
(12)
959
(375)
90,198
176,803
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
(2,661)
-
11,598
-
-
-
8,937
Hedging
Reserve
$’000
(6,566)
-
3,905
-
-
-
Balances as at 27 June 2021
70,326
739
6,019
(2,661)
12
82,296
156,731
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
36
Consolidated Statement of
Cash Flows
For the 53 week Period Ended 3 July 2022
Cash flows from operating activities
Receipts from customers (inclusive of goods and services tax)
Payments to suppliers and employees (inclusive of goods and services tax)
Interest received
Borrowing costs and facilities fees paid
Interest on lease liabilities
Income tax received / (paid)
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
Principal elements of lease payments
Net cash outflows used in financing activities
Net increase / (decrease) in cash held
Cash at the beginning of the financial period
Cash at the end of the financial period
Note
2022
$’000
2021
$’000
867,065
856,557
(745,255)
(752,633)
128
(96)
(6,406)
704
116,140
63
(129)
(6,348)
(10,415)
87,095
3
3
20
(16,451)
(16,451)
(10,777)
(10,777)
(95,266)
(95,266)
(95,761)
(95,761)
4,423
73,046
77,469
(19,443)
92,489
73,046
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
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Notes to the Consolidated
Financial Statements
Note 1: Summary of Significant
Accounting Policies
The principal accounting policies adopted in the
preparation of the Consolidated Financial
Statements (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. 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, including 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
$77,469,000 (FY2021: $73,046,000) and no drawn
debt. Subsequent to period end, the Group
extended its banking facilities with the ANZ Bank
from August 2022 to August 2023, 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 3 July 2022 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
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
38
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 (ABN: 20059935465), 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
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 as follows:
Class of fixed asset
Useful Life
- Leasehold Improvements and
5 – 12 years
Office Equipment
- Fixtures and Fittings
5 – 12 years
- Computer Equipment
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 three to six years) and 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
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NOTES TO THE C ONSOLiDATED FiNANCiAL STATEMENTS CONTINUED
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 reasonably
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 Consolidated 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
Statements; 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.
(iv) Equity-based compensation benefits
Equity-based compensation benefits are
provided to selected employees through 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 the grant date and recognised
over the period during which the employees
become unconditionally entitled to exercise
those rights, adjusted for the fair value of any
rights which do not ultimately vest.
The fair value at the 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;
40
–
–
–
the share price at the 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 Consolidated 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
Consolidated Balance Sheet.
(j) Revenue
Revenue from the sale of goods is recognised at
the point in time the sale occurs. All revenue is
stated net of the amount of goods and services
tax (GST), returns and 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.
(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
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NOTES TO THE C ONSOLiDATED FiNANCiAL STATEMENTS CONTINUED
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 and cloud computing, 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.
(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 with the asset amortised over the lease
life.
(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.
42
(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 Consolidated
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’ Report 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 3 July 2022 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 369 stores
(FY2021: 361) and store assets, including the
right-of-use asset, which represents one of the
largest amounts on the Consolidated 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
these assumptions could result in a different
outcome. Refer to Note 8 for details.
(ii) Impairment test for corporate and distribution
centre assets
Due to impairment indicators at year end,
corporate and distribution centre assets were
tested for impairment using a discounted cash
flow model. The Group determines value in use
by making certain assumptions relating to
forecast future cash flows and discount rates,
giving regard to past performance, external
industry forecasts and board approved budgets.
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
these assumptions could result in a different
outcome.
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NOTES TO THE C ONSOLiDATED FiNANCiAL STATEMENTS CONTINUED
(iii) 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 an 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.
(iv) 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.
(ab) New accounting standards and interpretations
There are no new standards that are not yet effective and that would be expected to have a material
impact on the Group in the current or future reporting periods.
Note 2: Revenue from Continuing Operations and
Other Income
Revenue from continuing operations
Sales of goods
Interest
2022
$’000
788,241
128
788,369
2021
$’000
778,688
63
778,751
44
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 included in:
Cost of sales
Store expenses
Administrative expenses
Store exit costs(i)
Employee benefits expense
Store opening and relocation costs
2022
$’000
96
6,406
6,502
18
12,050
334
12,402
5,820
88,920
774
95,514
2,164
156,992
1,587
2021
$’000
129
6,348
6,477
739
12,285
684
13,708
5,849
89,483
880
96,212
1,452
153,842
533
(i) ‘Store exit costs’ above include asset write-offs totalling $552,000, which relate to four stores that were flood/water
damaged during the period (including three stores that were damaged during the major flood event in South East
Queensland and New South Wales). The value of inventory lost due to the flood/water damage ($846,000) has been
excluded from ‘Store exit costs’ above and accounted for in ‘Cost of sales’. Of the four flood/water damaged stores, one
has re-opened with another due to re-open in FY2023. The other two stores have been permanently closed.
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NOTES TO THE C ONSOLiDATED FiNANCiAL STATEMENTS CONTINUED
Note 4: Income tax expense
(a) Income tax expense
Current tax
Deferred tax
Adjustments for current tax of prior periods
2022
$’000
266
3,114
(28)
3,352
2021
$’000
4,608
(967)
178
3,819
Deferred income tax expense included in income tax expense
comprises:
Decrease / (increase) in net deferred tax assets
3,114
(967)
(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% (2021 – 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
11,254
3,376
4
(28)
3,352
12,138
3,641
-
178
3,819
(375)
242
(d) Income tax relating to items of other comprehensive income
Cash flow hedges
4,971
(1,674)
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
2022
$’000
1,577
75,892
77,469
2022
$’000
109,689
3,325
113,014
2021
$’000
1,595
71,451
73,046
2021
$’000
96,011
3,823
99,834
Inventories recognised as an expense during the period ended 3 July 2022 amounted to $407,325,000
(FY2021: $399,452,000). These were included in the ‘Cost of sales’. Write-downs of inventories to net
realisable value amounted to $5,114,000 (FY2021: $3,138,000). These were recognised as an expense during
the period ended 3 July 2022 and included in ‘Cost of sales’.
46
Note 7: Current Assets – Other assets
Prepayments
Other current 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
2022
$’000
3,151
1,330
4,481
2022
$’000
90,733
(76,031)
14,702
172,635
(136,194)
36,441
51,143
2021
$’000
1,793
1,438
3,231
2021
$’000
86,317
(72,422)
13,895
166,174
(132,727)
33,447
47,342
Movements in carrying amounts
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 27 June 2021
Additions at cost
Asset write offs
Depreciation expense
Balances as at 3 July 2022
Balances as at 28 June 2020
Additions at cost
Asset write offs
Depreciation expense
Balances as at 27 June 2021
Leasehold
improvements
Plant and
equipment
$’000
13,895
7,931
(989)
(6,135)
14,702
$’000
33,447
9,874
(613)
(6,267)
36,441
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
Total
$’000
47,342
17,805
(1,602)
(12,402)
51,143
Total
$’000
51,277
10,777
(1,004)
(13,708)
47,342
During the period, there was no impairment recognised by the Group in relation to stores (FY2021: $Nil).
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NOTES TO THE C ONSOLiDATED FiNANCiAL STATEMENTS CONTINUED
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. This consists 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 store 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 board approved budgets.
For testing of the distribution centre and corporate assets, the Group determined a CGU comprising these
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 calculated the recoverable amount of the Corporate CGU using a VIU
discounted cash flow model. The model uses cash flow projections based on board approved budgets.
The Group determined that no reasonable change in the key assumptions used in the impairment
assessments would result in an impairment charge at the reporting date.
Note 9: Leases
Right-of-use assets
Property
Vehicles
Lease Liabilities
Current
Non-current
2022
$’000
198,575
142
198,717
78,020
139,645
217,665
2021
$’000
148,341
233
148,574
77,303
89,823
167,126
Interest expense (included in finance costs)
6,406
6,348
Additions to the Right-of-use assets during the year ended 3 July 2022 were $140,855,000 (27 June 2021:
$68,728,000).
Expenses relating to short-term leases of $2,301,000 (FY2021: $3,232,000) are included in store expenses.
The total cash outflow for leases during the year was $99,669,000 (FY2021: $101,603,000).
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.
48
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:
Receivables
Other current assets
Derivative financial instrument
Sundry items
Net deferred tax assets
Movements:
Carrying amount at beginning of period
(Charged) / credited to profit or loss and direct to equity
Charged to other comprehensive income
Under / (over) provision from prior years
Carrying amount at end of period
Note 11: Current Liabilities – Trade and other payables
Trade payables
Payroll tax and other statutory liabilities
Sundry payables
2022
$’000
6,942
5,684
871
-
8,660
1,514
457
114
2021
$’000
7,749
5,566
961
1,140
11,156
1,100
626
170
24,242
28,468
(22)
(1,151)
(3,831)
(1,526)
(21)
(746)
-
-
17,712
27,701
27,701
(3,492)
(4,971)
(1,526)
17,712
2022
$’000
43,105
6,265
7,028
56,398
28,171
1,204
(1,674)
-
27,701
2021
$’000
36,555
4,846
5,276
46,677
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NOTES TO THE C ONSOLiDATED FiNANCiAL STATEMENTS CONTINUED
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 the balance sheet date.
In August 2022, subsequent to period-end, the Group extended its existing banking facilities with ANZ Bank
from August 2022 to August 2023.
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.
Note 13: Liabilities – Provisions
Provision for make good
Employee entitlements
2022
Non-
Current
$’000
2,212
2,120
4,332
Current
$’000
370
10,067
10,437
Total
Current
$’000
2,582
12,187
14,769
$’000
-
10,766
10,766
2021
Non-
Current
$’000
1,107
2,805
3,912
Total
$’000
1,107
13,571
14,678
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
2022
$’000
4,942
2022
$’000
11,123
437
11,560
2021
$’000
5,923
2021
$’000
11,542
487
12,029
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Note 15: Contributed Equity
Movements in ordinary share capital:
Date
Details
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
Issue price
per share $
Contributed
Equity $‘000
38,176,622
50,000
50,000
38,276,622
-
-
-
-
-
70,326
-
-
70,326
-
1 July 2021
3 July 2022
Exercise of performance rights
50,000
Balance
38,326,622
-
70,326
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.
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
2022
$’000
739
6,603
8,937
-
16,279
6,019
959
(375)
6,603
(2,661)
2,661
8,937
2021
$’000
739
6,019
(2,661)
12
4,109
4,553
1,224
242
6,019
(6,566)
6,566
(2,661)
8,937
(2,661)
12
(12)
-
34
(22)
12
(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.
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NOTES TO THE C ONSOLiDATED FiNANCiAL STATEMENTS CONTINUED
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 end of financial period
2022
$’000
82,296
7,902
90,198
2021
$’000
73,977
8,319
82,296
Note 18: Capital Commitments
The Group has capital commitments totalling $2,600,000 (FY2021: $4,252,000) all payable within one year.
Note 19: Contingent Assets and Liabilities
As at 3 July 2022, the Group has no contingent liabilities (FY2021: $Nil).
As detailed in Note 3, four stores were flood/water damaged during the year. This resulted in the write-off
of store assets and inventory totalling $1,398,000. These assets, and the resulting loss of profits, are covered
by the Group’s insurance program. The Group has lodged a claim in respect of each impacted store with
its insurers and the Group believes that the likelihood of insurance recoveries is probable. However, the
contingent asset has not been recognised as a receivable at 3 July 2022 as receipt of the amount is
dependent on finalising the insurance claim process.
Note 20: Consolidated Statement of Cash Flow
Information
2022
$’000
2021
$’000
Reconciliation of Cash Flow from operating activities with profit after
income tax from ordinary activities:
Profit from ordinary activities after income tax
Non-cash items in profit from ordinary activities
Depreciation – Property, plant and equipment
Depreciation – Right-of-use assets
Assets written off
Non-cash share-based payments expense
Tax (debited) / credited directly to equity
Changes in assets and liabilities
(Increase) / decrease in other assets
(Increase) in inventories
Decrease / (increase) in right-of-use assets net of lease liabilities
Decrease in deferred tax assets
(Increase) / decrease in trade and other payables, provisions and
other liabilities
(Decrease) in tax liabilities
Net cash provided by operations
7,902
8,319
12,402
95,514
1,602
959
(375)
(2,430)
(13,180)
396
9,989
3,938
(577)
116,140
13,708
96,212
1,004
1,224
242
3,398
(28,984)
(2,472)
470
(416)
(5,610)
87,095
52
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
2022
2021
Limit
$’000
10,000
-
550
10,550
Utilised
$’000
-
-
420
420
Limit
$’000
10,000
-
550
10,550
Utilised
$’000
-
-
441
441
(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 2021. 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
(FY2021: unutilised).
(iii) Other facilities include an ANZ Bank indemnity guarantee of $550,000 of which $420,000 (FY2021: $441,000) was utilised in
relation to property leases at 3 July 2022.
Note 21: Financial Instruments and Financial Risk Management
Derivative Financial Instruments
Current assets and (liabilities)
2022
$’000
2021
$’000
Forward foreign exchange contracts – cash flow hedges
12,766
(3,802)
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
2022
$’000
2021
$’000
Australian Dollars
United States Dollars
151,167
116,427
Average Exchange Rate
2022
$
0.74
2021
$
0.74
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 Consolidated Balance Sheet by the related amount
deferred in equity.
At the balance sheet date, the revaluation of these contracts to fair value resulted in an asset of
$12,766,000 (FY2021: liability of $3,802,000).
During the period, $2,662,000 (FY2021: $6,567,000) was transferred from equity and included in inventory
and a net gain of $Nil (FY2021: net $Nil) was transferred to the Consolidated Statement of Comprehensive
Income.
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NOTES TO THE C ONSOLiDATED FiNANCiAL STATEMENTS CONTINUED
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
2022
USD
$’000
7
8,087
2021
USD
$’000
19
6,060
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 (increase)
/ decrease by:
Income Statement
Equity
For every 1c decrease in AUD:USD rate, total exposures
(increase) / decrease by:
Income Statement
Equity
2022
$’000
171
(2,366)
(176)
2,437
2021
$’000
103
(1,465)
(106)
1,504
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
2022
Financial Assets
Cash and cash equivalents
0.17%
Total Financial Assets
Financial Liabilities
Bank loans and overdrafts
Trade, sundry and other
creditors
Lease liabilities
Total Financial Liabilities
-
-
-
-
-
(i) There were no borrowings throughout the period.
71,343
71,343
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,126
77,469
6,126
77,469
-
-
67,521
67,521
217,665
217,665
285,186
285,186
54
Weighted
Average
Effective
Interest Rate
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%
Total Financial Assets
Financial Liabilities
Bank loans and overdrafts
Trade, sundry and other
creditors
Lease liabilities
Total Financial Liabilities
-
-
-
-
-
67,970
67,970
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,076
5,076
73,046
73,046
-
-
56,823
56,823
167,126
167,126
223,949
223,949
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.
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 Consolidated Balance Sheet and Notes to the
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 ratios at 3 July 2022 and 27 June 2021 were as follows:
Net debt/ (cash and cash equivalents)
Total equity
Net debt to equity ratio(i)
(i) The Group has no net debt so debt to equity ratio is not applicable
2022
$’000
(77,469)
176,803
0%
2021
$’000
(73,046)
156,731
0%
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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.
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
$’000
6 – 12
months
$’000
Between
1 and 2
years
Between 2
and 5 years
$’000
$’000
Total
contractual
cash flows
Carrying
Amount
(assets) /
liabilities
$’000
$’000
Over
5 years
$’000
132,365
38,313
60,774
76,663
1,114
309,229
304,738
132,365
38,313
60,774
76,663
1,114
309,229
304,738
Total derivatives
(8,596)
(4,170)
(102,472)
(61,461)
93,876
57,291
-
-
-
-
-
-
-
-
(163,933)
151,167
-
-
-
(12,766)
(12,766)
Less than
6 months
$’000
6 – 12
months
$’000
Between
1 and 2
years
Between 2
and 5 years
$’000
$’000
Total
contractual
cash flows
Carrying
Amount
(assets) /
liabilities
$’000
$’000
Over
5 years
$’000
113,363
36,043
43,522
45,253
1,385
239,566
234,040
113,363
36,043
43,522
45,253
1,385
239,566
234,040
3 July 2022
Non-derivatives
Non-interest
bearing (including
lease liabilities)
Total
non-derivatives
Derivatives
Gross settled
- (inflow)
- outflow
27 June 2021
Non-derivatives
Non-interest
bearing (including
lease liabilities)
Total
non-derivatives
Derivatives
Gross settled
- (inflow)
- outflow
(81,662)
(23,675)
85,964
23,175
-
-
-
-
-
-
-
-
-
(105,337)
109,139
-
-
3,802
3,802
Total derivatives
4,302
(500)
56
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:
2022
$’000
Level 2
12,766
2021
$’000
Level 2
(3,802)
Derivatives used for hedging
Note 22: Key Management Personnel (KMP) Disclosures
Non-Executive Directors
Steven Fisher (Chairman)
David Grant
Selina Lightfoot (retired as a Director on 20 October 2021)
Nicholas Perkins
Mark Ward (appointed as a Director on 1 March 2022)
Margaret Zabel
All of the above persons were directors of The Reject Shop Limited for the entire period ended 3 July 2022,
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
– Chief Executive Officer(i)
Clinton Cahn
– Chief Financial Officer and Acting Chief Executive Officer (from 27 April 2022 to 10 July
2022)
(i) A Reich left the Group on 26 April 2022.
All of the above persons were employed by The Reject Shop Limited and were key management personnel
for the entire period ended 3 July 2022 unless otherwise stated.
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NOTES TO THE C ONSOLiDATED FiNANCiAL STATEMENTS CONTINUED
Remuneration of Directors and Key Management Personnel
Short-term cash rewards
Short-term employee benefits
Post-employment benefits
Termination benefits(i)
Share-based payments(i)
2022
$
140,000
1,674,177
84,888
401,799
176,085
2,476,949
2021
$
-
2,277,620
101,512
125,826
839,101
3,344,059
(i) A Reich left the Company on 26 April 2022. As part of A Reich’s departure, he was paid $401,799 (including superannuation)
in lieu of a six-month notice period, which is included in ‘termination benefits’ above. In addition, A Reich was paid $74,302
of annual leave entitlement, which is excluded from the table above. On A Reich’s departure all performance rights were
lapsed.
No other long-term or termination benefits were paid or payable with respect to the current or prior period.
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:
2022
Date of Grant
Expiry Date
Date
Exercisable
Fair Value
at Grant
Date
Balance at
the Start
of Period
Granted
During
Period
Exercised
During The
Period
Lapsed
forfeited
or
cancelled
during the
Period
Balance at
the End of
the Period
Vested and
Exercisable
at the End
of Period
1 Sep 2019
31 Aug 2022
31 Aug 2021
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
1.74
2.07
1.91
1.82
1.74
50,000
21,675
150,000
75,000
75,000
27 Mar 2020
28 Mar 2025
27 Mar 2023
4.05
150,000
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
5 Nov 2021
31 Aug 2025
31 Aug 2023
5 Nov 2021
1 Nov 2024
5 Nov 2023
5 Nov 2021
31 Aug 2026
31 Aug 2024
11 May 2022
31 Aug 2022
31 Aug 2022
11 May 2022
28 Feb 2025
31 Aug 2023
11 May 2022
14 Sep 2023
31 Aug 2023
11 May 2022
13 Sep 2024
31 Aug 2023
11 May 2022
28 Feb 2025
28 Feb 2024
11 May 2022
13 Sep 2024
31 Aug 2024
11 May 2022
12 Sep 2025
29 Aug 2025
6.17
6.17
6.17
5.95
5.92
5.86
3.60
3.53
3.53
3.53
3.50
3.48
3.43
338,950
42,475
42,475
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
117,633
66,000
235,267
75,000
50,000
75,000
190,000
25,000
110,000
17,500
(50,000)(i)
-
-
-
-
-
21,675
21,675
- (150,000)
(75,000)
(75,000)
-
-
-
-
150,000
- (140,750)
198,200
(42,475)
(42,475)
-
-
(48,167)
69,466
-
66,000
(96,333)
138,934
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
75,000
75,000
50,000
75,000
190,000
25,000
110,000
17,500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
945,575
961,400
(50,000) (670,200) 1,186,775
96,675
58
(i) 50,000 performance rights vested on 2 July 2021.
2021
Date of Grant
Expiry Date
Date
Exercisable
Fair Value
at Grant
Date
Balance at
the Start
of Period
Granted
During
Period
Exercised
During The
Period
Lapsed
forfeited
or
cancelled
during the
Period
Balance at
the End of
the Period
Vested and
Exercisable
at the End
of Period
18 Oct 2018
17 Oct 2022
1 Jul 2021
1 Sep 2019
31 Aug 2022
31 Aug 2020
1 Sep 2019
31 Aug 2022
31 Aug 2021
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
1.84
1.83
1.74
2.07
1.91
1.82
1.74
28,000
75,000
75,000
87,600
150,000
75,000
75,000
27 Mar 2020
28 Mar 2025
27 Mar 2023
4.05
150,000
-
-
-
-
-
-
-
-
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
6.17
6.17
6.17
-
-
-
364,050
42,475
42,475
-
(28,000)
(75,000)
(25,000)
-
-
-
-
50,000(i)
-
-
-
-
-
-
-
-
(65,925)
21,675
-
-
-
-
150,000
75,000
75,000
150,000
(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.
For the grants made during the period, the fair value was determined using the Black-Scholes option
pricing model, taking into account the following inputs:
-
-
-
-
-
-
-
-
-
-
-
-
Date of new grants
Exercise price
Share price
Expected dividend yield
Risk free rate
5 November 2021
11 May 2022
-
$6.10
1.5%
2.0%
-
$3.60
1.5%
2.0%
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.
On 22 July 2022, subsequent to the period end, the Company’s new Chief Executive Officer, Phil Bishop
(who is a KMP effective from 11 July 2022), received a one-off allocation of 100,000 performance rights.
Remuneration Expense arising from share-based payment transactions
Performance rights granted
2022
$
2021
$
959,405
1,224,197
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NOTES TO THE C ONSOLiDATED FiNANCiAL STATEMENTS CONTINUED
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
Note 25: Dividends
Dividend declared subsequent to the period end
Balance of franking account at period end(i)
2022
$
2021
$
330,000
42,000
372,000
77,500
20,000
97,500
469,500
2022
$’000
-
59,294
355,000
42,788
397,788
67,500
35,000
102,500
500,288
2021
$’000
-
60,575
(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 (FY2021: $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.
2022
Cents
20.6
20.2
2021
Cents
21.7
21.4
38,325,547
38,264,841
821,293
39,146,840
657,142
38,921,983
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.
60
Note 27: Net Tangible Assets
Net tangible asset backing per ordinary share(i)
(i) Net tangible assets backing per ordinary share include right-of-use assets.
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 for the financial period
(b) Guarantees entered into by the parent entity
Carrying amount included in current liabilities
2022
Cents
461.3
Parent Entity
2022
$’000
2021
Cents
409.5
2021
$’000
210,272
477,843
158,165
302,509
70,326
16,366
88,642
175,334
7,902
19,500
178,073
401,690
153,702
246,328
70,326
4,292
80,744
155,362
8,321
12,226
-
-
Refer to Notes 18 and 19 for disclosures concerning contractual commitments and contingent assets and
liabilities for the parent entity.
Note 29: Segment Information
The Group operates within one reportable segment (retailing of discount variety merchandise). Total
revenues of $788,241,000 (FY2021: $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.
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NOTES TO THE C ONSOLiDATED FiNANCiAL STATEMENTS CONTINUED
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
2022
$’000
-
2021
$’000
-
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 subsidiaries during the period (FY2021: 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
Following the end of the financial period, Phil Bishop commenced as Chief Executive Officer of the Group
on 11 July 2022 and became a KMP on that date.
In August 2022 the Group extended its existing banking facilities with ANZ Bank from August 2022 to August
2023. 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 $581,417 (FY2021: $861,197). 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 3 July 2022.
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Directors’ Declaration
In the directors’ opinion:
(a)
The Financial Statements and notes set out on pages 34 to 62 are in accordance with the
Corporations Act 2001, including:
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other
mandatory professional reporting requirements; and
(ii) giving a true and fair view of the Group’s financial position as at 3 July 2022 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 23 August 2022
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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 3 July 2022 and of its financial
performance for the 53 week period ended 3 July 2022
(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 53 week period ended 3 July 2022
the consolidated balance sheet as at 3 July 2022
the consolidated statement of changes in equity for the 53 week period ended 3 July 2022
the consolidated statement of cash flows for the 53 week period ended 3 July 2022
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
Liability limited by a scheme approved under Professional Standards Legislation.
64
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
o 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.
o Our audit focused on where the Group made
subjective judgements; for example, significant
accounting estimates involving assumptions and
inherently uncertain future events.
o 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.
o 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.
o We chose Group profit before income tax
because, in our view, it is the benchmark against
which the performance of the Group is most
commonly measured.
o We utilised a 5% threshold based on our
professional judgement, noting it is within the
range of commonly acceptable thresholds.
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iNDEPENDENT AUDiTOR’S REPORT TO THE M EMBERS OF T HE REjECT SHOP LiMiTED CONTINUED
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 Property, plant and equipment
and Right of use assets
(Refer to note 8 and note 9)
Due to impairment indicators at period end, the
Group has tested Property, plant and equipment and
Right of use assets for impairment. The Group
assesses impairment of these assets by preparing
models for each cash generating units which estimate
future cash flows discounted to their present value
("the models").
This was a key audit matter because of:
●
●
the financial significance of the Property,
plant and equipment and Right of use 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 and the discount rate.
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 key
data in the models and compared key data
to the latest budget
assessed the appropriateness of selected
assumptions used to estimate the future
cash flows
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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Key audit matter
How our audit addressed the key audit matter
Inventory provision - net realisable value (NRV)
(Refer to note 1(aa)(iv) and Note 6)
A provision was recognised net of the inventory
balance at 3 July 2022 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.
This was a key audit matter because of:
●
●
the financial significance of the inventory
balance as at 3 July 2022 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.
We performed the following procedures, amongst
others:
●
●
developed an understanding of how the
Group determines 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
o
aggregate inventory sold below
cost during the financial period
aggregate inventory wastage
incurred during the financial period
o inventory written-off subsequent to
the end of the financial period and
up to the completion of our audit.
Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report for the 53 week period ended 3 July 2022, 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.
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iNDEPENDENT AUDiTOR’S REPORT TO THE M EMBERS OF T HE REjECT SHOP LiMiTED CONTINUED
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an 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 31 of the directors’ report for the 53
week period ended 3 July 2022.
In our opinion, the remuneration report of The Reject Shop Limited for the 53 week period ended 3
July 2022 complies with section 300A of the Corporations Act 2001.
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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
Brad Peake
Partner
Melbourne
23 August 2022
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Shareholders’ information
As at 1 August 2022
The shareholder information set out below was applicable as at 1 August 2022.
(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
3,362
1,281
241
182
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(b) 853 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
Bennamon Pty Ltd
Bennelong Australian Equity Partners Ltd
Castle Point Funds Management
Wilson Asset Management Group
Number
7,751,495
6,288,378
3,200,179
2,160,812
% Held
20.22%
16.41%
8.35%
5.64%
(d) The fully paid issued capital of the Company consisted of 38,326,622 shares held by 5,086 shareholders.
Each share entitles the holder to one vote.
(e) Unquoted Equity Securities
Performance Rights issued under The Reject Shop Performance Rights Plan
1,286,775
33
Number on
Issue
Number of
holders
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Shareholders’ information
As at 1 August 2022
(f) Twenty largest shareholders
Shareholder
Citicorp Nominees Pty Ltd
Bennamon Pty Ltd
National Nominees Limited
SCJ Pty Limited
Bond Street Custodians Limited
BNP Paribas Noms (NZ) Limited
J P Morgan Nominees Australia Pty Ltd
HSBC Custody Nominees (Australia) Limited
Andre Reich
Dorothy Productions Pty Ltd
NCH Pty Ltd
Mike Fegelson
Wyong Rugby League Club Limited
BNP Paribas Nominees Pty Ltd
Bond Street Custodians Limited
Macren Pty Ltd
Andre Reich & Veronica Angelidis-Reich
Kgari Investments Pty Ltd
Ace Property Holdings Pty Ltd
BNP Paribas Noms Pty Ltd
Number
9,079,778
7,751,495
4,032,889
1,500,000
925,000
723,489
493,106
461,401
406,540
400,000
273,966
270,000
200,000
165,686
150,000
149,860
130,302
123,600
120,000
105,103
% Held
23.69
20.22
10.52
3.91
2.41
1.89
1.29
1.20
1.06
1.04
0.71
0.70
0.52
0.43
0.39
0.39
0.34
0.32
0.31
0.27
The twenty members holding the largest number of shares together held a total of 71.65% of the issued
capital.
(g) Restricted Shares
There are no restricted shares on issue.
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Corporate Directory
THE REJECT SHOP LIMITED
ABN 33 006 122 676
AND SUBSIDIARIES
Directors
Steven Fisher
Non-Executive Chairman
David Grant
Non-Executive Director
Nicholas Perkins
Non-Executive Director
Mark Ward
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 Street
Melbourne, Victoria 3008
Auditor
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
72
www.rejectshop.com.au