Appendix 4E
The Reject Shop Limited
(ABN 33 006 122 676)
Consolidated preliminary final report
For the 52 week financial period ended 2 July 2023
Compared to the 53 week financial period ended 3 July 2022
Results for announcement to the market
Sales revenue from continuing operations
Profit from continuing operations after tax attributable to
shareholders of The Reject Shop
Net profit for the period attributable to shareholders of
The Reject Shop
up
up
up
Percentage
Change
%
3.9%
30.5%
to
to
Amount
$’000
819,340
10,310
30.5%
to
10,310
Dividends
Interim dividend
Final dividend
Special dividend
Total dividends
Amount per share
nil
6.5 cents
9.5 cents
16.0 cents
Franked amount per
share
nil
6.5 cents
9.5 cents
16.0 cents
Record date for determining entitlements to final
dividend
Friday, 20 October 2023
Dividend payment date
Friday, 3 November 2023
Commentary on the Group’s trading results is included in the FY23 result announcement and FY23 results
presentation, as well as in the annual report enclosed.
Annual
Report
FY2023
About The Reject Shop
The Reject Shop has been delivering value
and amazing prices to shoppers for over
40 years. The Reject Shop helps all
Australians save money every day by
offering our customers the lowest
everyday prices on household essentials
as well as unique and exciting products at
compelling value for every event and
occasion in approximately 380 convenient
store locations across Australia.
40
STORES
29
STORES
80
STORES
116
STORES
92
STORES
5
STORES
18
STORES
380
4,000
Contents
Chair’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
3
5
6
8
10
11
20
33
34
35
36
37
38
62
63
69
71
Notice of Annual General Meeting: 9.30 am, 18 October 2023
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
24 August 2023. The Company has the power to amend and
re-issue these financial statements.
s
t
n
e
t
n
o
C
1
2
Chair’s Review
Dear Shareholders,
The FY23 financial year saw the Company deliver a strong result in the midst of challenging macroeconomic
conditions.
The Company delivered sales of $819.3 million through an improving merchandise offer, which is now more closely
aligned to the Company’s core customer. Management is working hard to further implement the new merchandise
strategy. The new strategy is primarily focused on offering customers low prices on branded household essentials as
well as more newness and greater variety, at lower price points, across the general merchandise range and seasonal
offering.
I want to reiterate that The Reject Shop has an important role to play in helping Australians save money in a high
cost of living environment. The Company is well positioned for growth with an improved cost base, strong balance
sheet and growing national store network.
I am confident the Company will make further progress in the period ahead under the leadership of our new Chief
Executive Officer, Clinton Cahn, and the Company’s experienced and talented executive leadership team. The Board
selected Clinton to lead the Company having regard to his track record as a leader of The Reject Shop over the past
three years as well as his experience, skill and knowledge which all position him well to implement the Company’s
growth strategy, further embed the Company’s culture and create value for customers and shareholders.
The Company recorded earnings before interest and tax (“EBIT”) of $20.8 million and net profit after tax (“NPAT”) of
$10.3 million.
The Company’s balance sheet is strong with $77.3 million in cash at year end with no drawn debt.
Having regard to the Company’s strong balance sheet, the Board has decided that it is the appropriate time to
declare a final dividend and a special dividend while also undertaking a further on-market share buy-back as
outlined in the announcement to the market dated 24 August 2023.
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 Chair
i
w
e
v
e
R
s
’
r
i
a
h
C
3
4
CEO’s Update
Dear Shareholders,
It is a privilege to be given the opportunity to lead a team of over 4,000 dedicated team members across our
stores, distribution centres and store support centre. I look forward to spending even more time with our team
members and customers to listen and learn as we continue to evolve our merchandise offering to more closely
align to the wants and needs of our core customer.
The Company achieved its strongest profit result in the last five financial years, delivered comparable store sales
growth for the year and resumed the payment of dividends. Each of our team members have played a key part in
delivering the FY23 results for our shareholders and remain committed to bringing joy to our customers on every
visit to The Reject Shop while also helping them save money. I would like to thank each and every one of our team
members for their contribution and hard work during FY23.
The macroeconomic environment is challenging and the Company, like most Australian retailers, is facing a
number of cost pressures. While we are focused on managing the challenges associated with operating in a rising
cost environment, we also recognise the important role that The Reject Shop plays in helping our customers save
money during a time when so many Australians and their families are facing significant cost of living pressures. In
addition, our strong balance sheet positions us well to navigate through the uncertain macroeconomic and
consumer environment.
The Company’s priorities in FY24 are simple: continue growing sales by executing our new merchandise strategy
and continuing to expand our national store network all underpinned by a strong culture that is closely aligned to
the Company’s purpose and values. As usual, the Company will continue to work hard to improve gross profit
margin and manage the cost of doing business, particularly having regard to the high inflation environment that
presently exists. During the period ahead, we will also continue to explore and invest in strategic projects across
the business, particularly in supply chain and technology, to minimise risk and enable efficiencies and growth.
As Australia’s largest discount variety retailer, and with a track record of helping customers save money for over
40 years, we are committed to ensuring that every visit to The Reject Shop brings joy and savings to our
customers. I would like to invite all Australians, including our shareholders and customers, to shop at any one of
our more than 380 stores across Australia to experience our new product offering and save money.
And to our shareholders, thank you for your patience and long-term commitment to our business. We are
determined to continuously improve The Reject Shop’s performance and deliver sustainable long-term value for
all of our shareholders.
Yours sincerely,
Clinton Cahn
Chief Executive Officer and Chief Financial Officer
e
t
a
d
p
U
s
O
E
C
’
5
Board of Directors
Steven Fisher
Non-Executive Chair
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
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
2004 to 2021)
• Laybuy Group Holdings Limited
(director since 2020, and the
entity was delisted in March
2023) #
• BWX Limited (director
December 2022 to April 2023)
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 two other publicly listed
entities and is the chair of the audit
and risk committee of both 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:
• EVT Limited (director since
2013) #
• Retail Food Group Limited
(director since 2018) #
• A2B Australia Limited (director
June 2020 to October 2022)
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 19 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.
6
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 and resigned
on 2 July 2023.
# denotes current directorship
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 is currently a non-
executive director of two other
publicly listed entities and is the
chair of the people and culture
committee of both of these entities.
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 companies:
• G8 Education Limited (director
since 2017) #
• Select Harvest Limited (since
2022) #
s
r
o
t
c
e
r
i
D
f
o
d
r
a
o
B
7
Executive Leadership Team
Clinton Cahn
Chief Executive Officer and Chief Financial Officer
Michael Freier
General Counsel & Company Secretary
Clinton has experience across investment banking at
UBS, private equity at TPG Capital and corporate
strategy at Crown Resorts.
Clinton Cahn was appointed Chief Financial Officer on
1 May 2020 and was appointed Chief Executive Officer
on 24 August 2023. As CFO, Clinton has overseen The
Reject Shop’s Accounting, Commercial Finance,
Supply Chain and Technology teams, and has been
responsible for investor relations.
Clinton has held the role of Acting CEO from April
2022 to July 2022 and again from February 2023 to
August 2023.
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 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.
Kate Lewis
General Manager, People & Culture
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.
8
Martha O’Sullivan
General Manager, Technology
Andrew Stein
Chief Customer Officer
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
General Manager, Property
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 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.
John Bacon
General Manager, Supply Chain
John Bacon has over 25 years of retail experience
having worked at Coles, Coles Liquor, Lovisa and, as a
supply chain consultant with a variety of other
retailers. As a consultant, John has worked on a
variety of supply chain transformation projects with
each of Woolworths, Bras N Things and Pillow Talk
while also assisting Forever New and Cotton On.
Since 2017, John has developed his skillset to include
managing supply chains in domestic and international
contexts where he provides proactive leadership to
build supply chain capacity, capability and resilience.
John is keen to contribute to the learning and
development of the next generation of retailers
through education and mentoring. John is a sessional
lecturer at the University of Melbourne in e-commerce
and supply chain.
John joined The Reject Shop in December 2022.
i
m
a
e
T
p
h
s
r
e
d
a
e
L
e
v
i
t
u
c
e
x
E
9
Corporate Governance,
Environmental and Social Statement
Energy Efficiency Initiatives
The Company is committed to being responsible for
the impact it has on our environment. 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 2 July 2023, the Company has installed high
efficiency LED lighting, timers and automated energy
management systems into at least 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/corporate-governance
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/
corporate-governance
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 its 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, a
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 26 million reusable plastic bags, which
are made from at least 80% recycled material.
10
Directors’ Report
The directors present their report on The Reject Shop
Limited and its subsidiaries (“the Company”) for the
financial period ended 2 July 2023.
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
Chair of the Board, Member of the Audit and Risk
Committee and Member of the People and Culture
Committee.
David Grant
Non-Executive Director
Chair of the Audit and Risk Committee and Member of
the People and Culture Committee.
Nicholas Perkins
Non-Executive Director
Member of the Audit and Risk Committee and
Member of the People and Culture Committee.
Mark Ward (resigned on 2 July 2023)
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 and
Member of the Audit and Risk Committee.
For the financial period ended 2 July 2023, 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 2 July 2023,
and the number of meetings attended by each
director, were:
Director
Director
meetings
S Fisher
D Grant
N Perkins
M Ward
M Zabel
A
17
16
17
16
17
B
17
17
17
17
17
Audit & Risk
Committee
meetings
People &
Culture
Committee
meetings
A
4
4
4
4
4
B
4
4
4
4
4
A
2
2
2
2
2
B
2
2
2
2
2
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 13 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 2024
(previously August 2023). 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).
Since the end of the financial period, the directors
have declared a final dividend of 6.5 cents per
ordinary share and a special dividend of 9.5 cents per
ordinary share. The final dividend and the special
dividend will be fully franked at a tax rate of 30%.
On 24 August 2023, Clinton Cahn was appointed as
Chief Executive Officer of the Company.
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
11
DirECTOrS’ rEPO rT CONTINUED
Otherwise no other matters or circumstances have
arisen since the end of the financial period which
significantly affect or may significantly affect the
operations of the Company, the results of those
operations, or the state of affairs of the Company in
future financial periods.
Likely Developments and Expected Results
of Operations
Likely developments in the operations of the Group
and the expected results of those operations in future
financial periods are contained in the Operating and
Financial Review on pages 13 to 14 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.
Reinstatement of Dividends
No dividends were paid to shareholders during the
financial period.
Since the end of the financial period, the directors
have declared a final dividend of 6.5 cents per
ordinary share and a special dividend of 9.5 cents per
ordinary share. The final dividend and the special
dividend will be fully franked at a tax rate of 30% and
are payable to shareholders registered at 5.00pm on
Friday, 20 October 2023. The dividends are due to be
paid to shareholders on Friday, 3 November 2023.
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 (Cth). During the financial
period, the Company paid a premium of $506,000 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’ reports)
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.
12
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 loss-making or where
landlords seek rent that does not reflect customer foot traffic.
During the year, the Company opened 15 new stores, representing approximately 4% of the overall portfolio.
Overview of Financial Performance
$ Amounts are $m / %s are to Sales
Sales
Gross Profit(ii)
Cost of doing business(ii)
EBITDA(ii)
Depreciation and Amortisation
EBIT(ii)
Net Interest Expense
Profit Before Tax
Income Tax Expense
Net Profit After Tax
FY23
(52 weeks)
Statutory
FY22
(53 weeks)
Statutory (i)
819.3
40.9%
25.3%
127.8
(107.0)
20.8
(6.2)
14.6
(4.3)
10.3
788.2
41.4%
25.5%
125.5
(107.9)
17.6
(6.4)
11.3
(3.4)
7.9
(i) 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 FY23, like most financial years, was a 52-week period. For context, 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: (a) additional Gross Profit associated with the Sales generated in Week 53 of $13.7
million; and, (b) additional variable costs associated with generating such Sales, which primarily include wages to operate stores as well as
variable store operating expenses.
(ii) Non IFRS measure and unaudited
FY23 Performance
Sales in FY23 were $819.3 million, up 3.9% on the prior period. Excluding the 53rd trading week in FY22, overall sales
were up 5.8% on the prior period.
As cost of living pressures increased throughout the year, customers continued to gravitate towards low-priced
consumables that represent great value. The Company improved in-store availability and continued to see strong
sales performance across a number of consumables categories by offering customers compelling value, particularly
on branded products.
The Company was pleased to report its strongest Christmas trading period on record and a new merchandise
strategy has been developed with an improved product offer, which is more closely aligned to our core customer.
Pleasingly, these new product ranges started to arrive in-store during the second half of FY23 and the customer
response has been positive, particularly in relation to the new Easter range.
Gross Profit was $335.3 million or 40.9% of sales, which is down approximately 50 basis points on the prior period.
The reduction in gross profit margin was driven by a number of factors, including the shift in sales mix towards
low-priced consumables and higher domestic supply chain costs.
The Cost of Doing Business (CODB, which consists of store and administrative expenses but excludes depreciation
and amortisation) was $207.5 million and continues to be well managed. The CODB as a percentage of sales in FY23
was lower than the prior period.
The Company generated EBITDA of $127.8 million and EBIT of $20.8 million.
Statutory NPAT was $10.3 million, which compares to $7.9 million in the prior period.
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
13
DirECTOrS’ rEPO rT CONTINUED
Outlook
Management is focused on continuing to generate
comparable store sales growth in FY24, supported by a
new product offering with more great deals on branded
consumables as well as new and exciting general
merchandise, all at great value. The Company looks
forward to offering its customers compelling value,
more special buys, improved newness and greater
variety throughout FY24. The Company also remains
focused on continuing to open new stores.
Management is targeting to improve its profit margin in
FY24, noting that, like most Australian retailers, the
Company is subject to a number of inflationary
headwinds which are putting pressure on its cost base.
Further On-Market Share Buy-Back
On 23 August 2022, the Company announced an
on-market share buy-back of up to $10 million. Between
September 2022 and February 2023, the Company
purchased 647,222 shares at a total cost of $2,727,948
(average $4.21 per share).
Further to its announcement on 24 August 2023, and
given its strong balance sheet, the Company intends to
undertake a further on-market share buy-back of up to
$10 million. The buy-back is expected to commence in
mid-September 2023. 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.
Dividends
No dividends were paid to shareholders during the
financial period.
The Company has reinstated its previous dividend
policy to maintain a minimum dividend payout ratio of
60% of net profit after tax, subject to the underlying
profitability and financial requirements of the Company
which will be assessed periodically. Going forward, the
Company will retain the flexibility in deciding how
much of the dividend is declared as an interim or a final
dividend.
The Company has declared a final dividend of 6.5 cents
per ordinary share and a special dividend of 9.5 cents
per ordinary share (the “Dividends”). The Dividends
declared in respect of FY23 total 16.0 cents per
ordinary share (compared to nil in FY22), which
represents approximately 60% of FY23 NPAT. The
Dividends will be fully franked at a tax rate of 30% and
are payable to shareholders registered at 5.00pm on
Friday, 20 October 2023. The Dividends are due to be
paid to shareholders on Friday, 3 November 2023.
Balance Sheet
The Company’s balance sheet remains strong with a
net cash position at 2 July 2023 of $77.3 million. This
compares to a net cash position of $77.5 million at 3
July 2022. As at the balance date, and consistent with
the position at 3 July 2022, the Company does not have
any drawn debt.
Store Network Plans
During the period, the Company opened 15 new stores
and closed four stores. At the end of the period, The
Reject Shop’s national store network included 380
stores, up from 369 at the end of FY22, 361 at the end
of FY21 and 354 at the end of FY20.
The Company is planning to open approximately 15
new stores, including approximately seven new stores
in the first half, and to close 8-10 stores in FY24.
Class action
The Company is named as the respondent in a class
action commenced by a former store manager (the
applicant) in the Federal Court of Australia on behalf of
store managers and assistant store managers
employed by the Company between 24 April 2017 to 18
April 2023. The applicant is represented by Adero Law.
The premise of the proceeding is that the General
Retail Industry Award 2010 applied to the relevant store
manager’s employment and that there were alleged
underpayments under that award together with alleged
associated contraventions of the Fair Work Act 2009
(Cth). The applicant is currently considering amending
its statement of claim.
The Company is defending the proceeding and filed its
defence on 7 July 2023.
Overview of Retail Industry Trends and
Supply Chain
The Australian retail sector continues to be in a state of
flux due to challenging economic conditions. It is
expected that economic conditions will remain
challenging in the short to medium term. Australians
are facing significant cost of living pressures driven by
interest rate rises and broad-based consumer goods
inflation. Within this context, the Australian retail sector
is likely to face significant headwinds.
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 new and unique
general merchandise at low prices.
The Company’s dividend reinvestment plan is not
currently active.
The discount variety sector contains a range of
challenges. The greatest challenge concerns
14
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;
d) supermarkets, particularly larger national chains;
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.
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
and
2. Competition
e)
various e-commerce participants, including
international and national businesses.
Competitor activity is focused on price competition and
store location. The Company remains determined to be
a leader in providing every day low prices on our core
merchandise offerings in convenient locations. The
Company is well positioned to respond to changing
levels of consumer spending amid an 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. 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
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 FY24 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.
3. 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.
15
DirECTOrS’ rEPO rT CONTINUED
4. Financial performance and costs
The Company earns the majority of its EBIT and NPAT
in the first half 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.
5. 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
2024 (previously August 2023). 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’s balance sheet remains strong with a
net cash position at 2 July 2023 of $77.3 million. This
compares to a net cash position of $77.5 million at end
of 3 July 2022. As at the balance date, and consistent
with the position at 3 July 2022, the Company does not
have any drawn debt.
6. 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.
As noted on page 14, the Company is named as a
defendant in a class action filed in the Federal Court of
Australia on behalf of store managers and assistant
store managers employed by the Company between 24
April 2017 to 18 April 2023. The Company intends to
defend the proceeding.
7. 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 may
potentially have a detrimental financial impact on the
Company’s business.
The Company remains focused on risks relating to its
international supply chain. During the outbreak of the
COVID-19 pandemic in China and other countries, the
Company experienced some limited delays or
cancellations of orders from international suppliers or
manufacturers of products to be purchased by the
Company. In FY22 and part of FY23, the Company
experienced elevated international shipping costs,
which have normalised to pre-COVID-19 levels in recent
times.
In FY22 and FY23, the Company experienced elevated
domestic fuel costs, which are expected to remain
elevated during FY24. 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
16
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
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.
8. Property portfolio
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, opening new stores to replace closures, and
building a pipeline of new stores to drive growth in the
medium-term. The Company employs experienced
leasing and store development teams to support the
execution of this strategy.
During the year, the Company extended its lease at its
Perth distribution centre (DC) from August 2024 to
August 2029. The Company’s leases at its Brisbane and
Melbourne DCs expire in February 2025 and November
2026 respectively. Management is in the process of
developing its long-term plan for its DC network, having
regard to its expanding store network and the lease
expiry profile of its DCs.
9. Weather events
The Company’s operations may be adversely impacted
by extreme weather events, particularly flood,
earthquake, cyclone and bushfire, from time to time.
Extreme weather events may impact various aspects of
the Company’s operations, including international and
domestic freight and logistics causing delays, adding
costs, impacting product availability and lost sales. The
company has plans and insurance in place to manage
the risk caused by extreme weather events although
there is no guarantee that any mitigation steps and
insurance will adequately address that risk. If the
frequency and intensity of extreme weather events
continue to increase, the Company expects the cost
and availability of insurance to be adversely impacted.
For context, the Company’s distribution centre at
Ipswich was subject to flooding in January 2011, and in
calendar year 2022 four stores were subject to flooding
events.
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
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
17
DirECTOrS’ rEPO rT CONTINUED
day-to-day operations and the management of the
Company is concentrated amongst a number of key
personnel. The loss of the services of any of those key
team members (for any reason whatsoever) or the
inability to attract new qualified personnel, could
adversely affect the Company’s operations.
Additionally, successful operation of each of the
Company’s stores depends on its ability to attract and
retain quality team members. The Company has over
4,000 team members across its stores and distribution
centre network. Competition within the Australian retail
market, as well as other factors such as changing
demographics or employment laws could increase the
demand for, and cost of employing, 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 an established, experienced and
talented executive leadership team to 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.
In May 2023, the Company received an infringement
notice from the Australian Competition and Consumer
Commission in connection with two button battery
products, which resulted in the Company paying a fine
of $133,200.
The Company’s success in generating profits and
increasing its market share is also based on the success
of the key brands which it distributes and sells,
including third party branded products. Reliance on
these key brands has the potential to make the
Company vulnerable to brand or reputational damage
from any negative publicity, product tampering or
recalls. This may also increase the rise of inventory and
asset write downs.
14. Occupational health and safety
The Company has over 4,000 team members across its
stores and distribution centre network, as well as
thousands of customers who visit its stores nationwide.
The business has a national occupational health and
safety (“OH&S”) function, supported by OH&S
representatives in appropriate geographic locations to
oversee the application of OH&S policies and work safe
procedures across the business.
Notwithstanding the above, given that the Company
operates approximately 380 stores in Australia, there is
always a risk that a personal injury claim or otherwise
may occur to a customer or team member 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 is reliant on technology in a rapidly
changing digital environment. To this end, there is a risk
that the malfunction of technology, cyber-security
breaches, outdated infrastructure, an inability to attract
and retain qualified team members may have a
detrimental effect on the Company’s sales, business
efficiencies and brand reputation.
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 sales,
operations and its reputation. The Company actively
manages its information technology systems to reduce
the risk of system disruption, especially during peak
trading periods.
18
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.
As noted on page 14, the Company is named as a
defendant in a class action filed in the Federal Court of
Australia on behalf of store managers and assistant store
managers employed by the Company between 24 April
2017 to 18 April 2023. The Company intends to defend the
proceeding.
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.
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
19
Remuneration Report
The directors present The Reject Shop Limited FY23 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 FY23
Steven Fisher
David Grant
Nicholas (‘Nick’) Perkins
Mark Ward
Margaret Zabel
Chair
Member, Audit & Risk Committee
Member, People & Culture Committee
Director
Chair, Audit & Risk Committee
Member, People & Culture 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
Nil
Nil
Nil
Resigned on 2 July 2023
Nil
Other KMP
Role(s)
Changes during FY23
Phillip (‘Phil’) Bishop
Chief Executive Officer
From 11 July 2022 to 31 January 2023
Clinton Cahn
Chief Financial Officer
Acting Chief Executive Officer
Until 10 July 2022, and from 1 February
2023 to 23 August 2023
Amy Eshuys
Chief Operating Officer
Appointed as a KMP from 1 February 2023
Changes since the end of the reporting period
Other KMP
Clinton Cahn
Role(s)
Chief Executive Officer (in addition
to the role of Chief Financial Officer)
Changes during FY24
From 24 August 2023
20
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 nature of the Company’s business.
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 FY23 is within the
approved fee pool and no increase to the directors’ fee pool is being sought at the FY23 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 FY23
Reviewed in line
with market
positioning, scope of
role and
performance
The superannuation
guarantee increased
to 10.5% on 1 July
2022 and increased
further to 11.0% on
1 July 2023
Base (or fixed)
remuneration
Provide competitive market
salary including non-
monetary benefits
Nil
Positioned at median
market rate
Other remuneration
(such as
superannuation
payments)
Provide consistent with
statutory obligations
Nil
Not applicable
Short-term
incentive (STI)
Cash reward for in-year
performance
Alignment to long-term
shareholder value
Long-term incentive
(LTI) through
participation in the
Company’s
Performance Rights
Plan
Achieving
targeted EBIT,
individual
performance
ratings and safety
related measures
CEO: 50% of base at
target performance
CFO: 40% of base at
target performance
COO: 50% of base at
target performance
3 year Earnings
Per Share (“EPS”)
performance
CEO: 100% of base
CFO: 75% of base
COO: 50% of base
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.
t
r
o
p
e
R
n
o
i
t
a
r
e
n
u
m
e
R
21
rEMuNE raTiON rEPOr T CONTINUED
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.
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 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 FY23, 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 50% of
total fixed remuneration are made. The Company’s
overperformance against stretch targets may
potentially result in cash payments increasing above
the target level.
The audited financial report remains the basis for
measuring achievement against the financial
performance targets.
For FY23, the People and Culture Committee has
determined that neither executive KMP will receive
an 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 FY23:
Consistent with the approach adopted in FY22, in
FY23 the Company continued to further progress its
turnaround strategy, which necessitated the
Company maintaining the financial criteria for the
long-term incentive scheme for relevant 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.
If the vesting conditions are satisfied, the relevant
performance rights will vest within 5 business days
of the date of the FY25 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 10% to 75%)
divided by the volume weighted average market
price between 1 June 2022 and 31 July 2022.
For financial reporting purposes, the value of each
right granted at grant date is measured using a
Black-Scholes option pricing model.
For FY24:
The People and Culture Committee continues to
work through a revised incentive scheme for
relevant team members, including KMP (other than
the non-executive directors), in relation to FY24. The
incentive scheme will 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.
22
One-off allocation for former CEO:
As announced on 16 June 2022, the Company’s former Chief Executive Officer, Phil Bishop (who was a KMP),
received a one-off allocation of 100,000 performance rights. Phil Bishop left the Company on 31 January 2023 and all
of his performance rights were lapsed.
One-off allocation:
In early February 2023, the Board granted performance rights with no financial criteria as a one-off allocation to
certain team members (including Clinton Cahn (150,000 performance rights in total) and Amy Eshuys (75,000
performance rights in total) who are each a KMP) in order to ensure the retention of their services for specified
periods. The performance rights will generally vest as follows:
• one third of the performance rights are exercisable after the FY23 results announcement in August 2023;
• one third of the performance rights are exercisable after the 1H24 results announcement in February 2024;
and
• one third of the performance rights are exercisable after the 1H25 results announcement in February 2025.
C – Details of remuneration
Directors’ fees
The current annual base fees were reviewed with effect from 1 July 2023, unless otherwise indicated.
Base fees (inclusive of superannuation)
Chair
Other directors
Additional fees (inclusive of superannuation)
Audit & Risk Committee – Chair
Audit & Risk Committee – member
People & Culture Committee – Chair
People & Culture Committee – member
Executive remuneration
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
FY24
$240,000
$120,438
$20,000
No fee
$20,000
No fee
The following executives, along with the directors, as detailed on page 11 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:
P Bishop
– Chief Executive Officer (from 11 July 2022 and ceased to be a member of the KMP on
C Cahn
– Chief Financial Officer;
31 January 2023)
– Acting Chief Executive Officer (from 27 April 2022 to 10 July 2022, and from 1 February
2023 to 23 August 2023); and
– Chief Executive Officer
(from 24 August 2023)
A Eshuys
– Chief Operating Officer (appointed as a KMP from 1 February 2023)
Clinton Cahn did not receive any additional remuneration while acting in the role of Chief Executive Officer.
These persons were employed by the Company and were KMP for the entire period ended 2 July 2023 unless
otherwise stated.
t
r
o
p
e
R
n
o
i
t
a
r
e
n
u
m
e
R
23
rEMuNE raTiON rEPOr T CONTINUED
For FY24, the summary of the remuneration for each of the executive KMPs is as follows:
Clinton Cahn – Chief Executive Officer and Chief Financial Officer
Component
Description
Fixed remuneration
$600,000 per annum
Short term incentive
Long term incentive
50% of fixed remuneration subject to satisfaction of relevant key performance
indicators, as determined by the Board
100% of fixed remuneration subject to applicable vesting conditions determined by
the Board
Contract duration
Ongoing contract
Notice by the individual/
company
Either party may terminate employment at any time on six months’ notice (or by the
Company making a payment in lieu of notice).
Termination of employment
(without cause)
In that situation, STI will be forfeited and LTI (unvested) will lapse, unless the Board
determines otherwise. On cessation of employment for any reason, vested but
unexercised performance rights will remain on foot subject to the original offer terms,
including discretion in relation to malus and clawback.
Termination of employment
(with cause)
The Company may terminate immediately without notice in circumstances justifying
summary dismissal.
In that situation, STI will be forfeited and LTI (unvested) will lapse, unless the Board
determines otherwise. On cessation of employment for any reason, vested but
unexercised performance rights will remain on foot subject to the original offer terms,
including discretion in relation to malus and clawback.
The following applies:
a) summary termination by the Company: unvested rights will lapse;
b) termination by the Company (other than summary termination): accelerated vesting of
unvested rights;
c) termination by employee: the Board has absolute discretion to lapse or vest rights; and
d) change of control of the Company: accelerated vesting of unvested rights.
In relation to the one-off
allocation (for sign-on
purposes) of performance
rights granted in August 2023
(150,000 rights)
Amy Eshuys – Chief Operating Officer
Component
Description
Fixed remuneration
$500,000 per annum
Short term incentive
50% of fixed remuneration subject to hurdles
Long term incentive
75% of fixed remuneration subject to hurdles and service
Contract duration
Ongoing contract
Notice by the individual/
Either party may terminate employment at any time on six months’ notice (or by the
company
Company making a payment in lieu of notice). In certain circumstances, the Company
may reduce the notice period by a period of one to two months in duration.
Termination of employment
In that situation, STI will be forfeited and LTI (unvested) will lapse, unless the Board
(without cause) or by the
determines otherwise. On cessation of employment for any reason, vested but
individual
unexercised performance rights will remain on foot subject to the original offer terms,
including discretion in relation to malus and clawback.
Termination of employment
(with cause)
The Company may terminate immediately without notice in circumstances justifying
summary dismissal.
In that situation, STI will be forfeited and LTI (unvested) will lapse, unless the Board
determines otherwise. On cessation of employment for any reason, vested but
unexercised performance rights will remain on foot subject to the original offer terms,
including discretion in relation to malus and clawback.
24
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:
2023
SHORT-TERM BENEFITS
POST-
EMPLOYMENT
BENEFITS
OTHER
BENEFITS
LONG-TERM
SHARE-BASED
BENEFITS
Cash salary
and fees
Cash STI
Superannuation
$
$
$
Other
$
217,084
140,438
120,323
109,489
127,566
714,900
348,394
526,432
184,261
1,059,087
1,773,987
-
-
-
-
-
-
-
-
-
-
-
22,794
-
-
11,496
13,394
47,684
18,112
25,292
8,984
52,388
100,072
-
-
-
-
-
-
325,000
-
-
325,000
325,000
Name
Non-executive
Directors
S Fisher
D Grant
N Perkins
M Ward (ii)
M Zabel
Total Non-
Executive
Directors
Other KMP
P Bishop (iii)
C Cahn
A Eshuys (iv)
Total Other KMP
Total
Performance
Rights (i)
Total
Remuneration
Proportion of
Annualised
Remuneration
at risk
$
-
-
-
-
-
-
-
578,792
196,456
775,248
775,248
$
%
239,878
140,438
120,323
120,985
140,960
762,584
691,506
1,130,516
389,701
2,211,723
2,974,307
-
-
-
-
-
-
-
51%
50%
35%
(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) M Ward resigned as a Director on 2 July 2023.
(iii) P Bishop left the Company on 31 January 2023. As part of his departure, P Bishop was paid $325,000 (inclusive of superannuation) in lieu
of his six-month notice period, which is included in ‘other benefits’ above. In addition, P Bishop was paid $14,786 of annual leave entitlements,
which is excluded from the table above. On P Bishop’s departure all of his performance rights were lapsed.
(iv) A Eshuys became a KMP on 1 February 2023.
t
r
o
p
e
R
n
o
i
t
a
r
e
n
u
m
e
R
25
rEMuNE raTiON rEPOr T CONTINUED
2022
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)
Cash salary
and fees
$
188,315
133,722
33,454
120,323
36,496
119,264
631,574
402,994
639,609
Total Other KMP
1,042,603
Total
1,674,177
SHORT-TERM
BENEFITS
POST-
EMPLOYMENT
BENEFITS
OTHER
BENEFITS
LONG-TERM
SHARE-BASED
BENEFITS
Cash STI
Superannuation
$
-
-
-
-
-
-
-
140,000
-
140,000
140,000
$
18,831
-
3,345
-
3,650
11,926
37,752
23,568
23,568
47,136
84,888
Performance
Rights (i)
Total
Remuneration
Proportion of
Annualised
Remuneration
at risk
$
-
-
-
-
-
-
-
736,476
(560,391)
176,085
176,085
$
%
207,146
133,722
36,799
120,323
40,146
131,190
669,326
1,303,038
504,585
1,807,623
2,476,949
-
-
-
-
-
-
-
67%
(111)%
17%
Other
$
-
-
-
-
-
-
-
-
401,799
401,799
401,799
(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 of his performance rights were lapsed.
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 option pricing 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.
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 six months is
required by the Company, or the relevant team member, to terminate their employment.
26
E – Share-based compensation
The Board granted performance rights with no financial criteria as a one-off allocation to certain team members
(including Clinton Cahn and Amy Eshuys who are each a KMP) in order to retain their services for specified periods
and 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
performance
rights granted
in prior
periods
vested during
the period
-
-
-
-
-
-
-
-
150,000
-
-
-
-
2023
KMP
P Bishop (i)
P Bishop (i)
P Bishop (i)
P Bishop (i)
C Cahn
C Cahn
C Cahn
C Cahn
C Cahn
A Eshuys (ii)
A Eshuys (ii)
A Eshuys (ii)
A Eshuys (ii)
Total
Number of
rights
granted
during the
period
Date
exercisable
Expiry date
Fair value of
performance
rights at
grant date
Total fair value
of performance
rights at grant
date
Grant date
22 July 2022
22 July 2022
22 July 2022
40,000
40,000
20,000
31 August 2024 31 October 2024
31 August 2025 31 October 2025
31 August 2026 30 October 2026
21 September 2022
189,000
31 August 2025 31 October 2025
21 September 2022
120,300
31 August 2025 31 October 2025
2 February 2023
50,000
31 August 2023 31 October 2023
2 February 2023
50,000 29 February 2024
30 April 2024
2 February 2023
50,000 28 February 2025
30 April 2025
27 March 2020
-
27 March 2023
28 March 2025
$2.76
$2.72
$2.68
$3.71
$3.71
$4.06
$4.03
$3.97
$4.05
$3.71
110,395
108,751
53,566
701,629
446,592
203,230
201,716
198,713
606,758
243,899
21 September 2022
2 February 2023
65,700
25,000
31 August 2025 31 October 2025
31 August 2023 31 October 2023
$4.06
101,615
2 February 2023
25,000 29 February 2024
30 April 2024
2 February 2023
25,000 28 February 2025
30 April 2025
$4.03
$3.97
100,858
99,356
700,000
$3,177,078
150,000
(i) P Bishop left the Company on 31 January 2023 and ceased to be a KMP on that date. On P Bishop’s departure, all of his performance rights
were lapsed.
(ii) A Eshuys became a KMP on 1 February 2023.
All performance rights granted during the current period will vest on the exercise dates above provided the required
performance hurdles are achieved (if applicable) and the team member remains employed with the Company at the
vesting date unless otherwise determined by the Board. The total payable on the exercise of one or more
performance rights on a particular day is $1.00 regardless of the number exercised on that day. The minimum
possible value to be received by KMP under each grant of performance rights is $Nil.
Subsequent to period end there has been no further grant of performance rights to KMPs.
t
r
o
p
e
R
n
o
i
t
a
r
e
n
u
m
e
R
27
rEMuNE raTiON rEPOr T CONTINUED
Shares Issued to Key Management Personnel on Exercise of Options or Performance Rights
Directors have not been granted performance rights in any period.
During the year, 75,000 ordinary shares were issued to C Cahn as a result of the exercise of the performance rights
that were granted and vested on 11 May 2022 (i.e. in FY22).
It is expected that, following the release of the FY23 Annual Results, C Cahn will exercise 150,000 performance rights
that were granted on 27 March 2020 and vested on 27 March 2023.
Other than indicated above, there have been no further shares issued during the year as a result of the exercises of
the performance rights.
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.
2023
Cash Incentive
Performance Rights
Paid
#
Forfeited
%
Vested
Forfeited
#
%
#
%
Date
Granted
Financial
Periods in
which
rights
may vest
Maximum
total
number
of rights
may vest
Maximum
total value
of grants
may vest
KMP
P Bishop (i)
C Cahn
C Cahn
C Cahn
C Cahn
A Eshuys (ii)
-
-
100% FY23
100% FY23
-
-
-
-
$140,000
13% FY22
75,000
37%
-
-
-
100% FY21
-
-
-
FY20
150,000 100%
100% FY23
-
-
289,000 100%
n/a
n/a
n/a
-
-
-
-
-
-
-
-
-
-
FY24-26
270,300 $1,050,250
FY23-25
129,400 $584,407
FY24
FY23
63,700 $392,758
-
-
FY24-26
140,700 $545,729
(i) P Bishop left the Company on 31 January 2023. On P Bishop’s departure all of his performance rights were lapsed.
(ii) A Eshuys became a KMP on 1 February 2023.
28
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:
Balance at the
start of the period
Performance
rights granted
during
the period
Performance rights
vested & exercised
during the period
Other changes
during the period
Balance at the end
of the period
-
418,100
42,500
460,600
289,000
270,300
140,700
700,000
-
(289,000)
(75,000)
-
-
-
(75,000)
(289,000)
-
613,400
183,200
796,600
2023
KMP
P Bishop (i)
C Cahn
A Eshuys (ii)
Total
(i) P Bishop left the Company on 31 January 2023. On P Bishop’s departure all of his performance rights were lapsed.
(ii) A Eshuys became a KMP on 1 February 2023.
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
2023
Directors
S Fisher
D Grant
N Perkins
M Ward (i)
M Zabel
Total
KMP
99,039
14,000
37,199
12,987
3,000
166,225
P Bishop (ii)
-
C Cahn
A Eshuys (iii)
Total
-
649
166,874
75,000
-
75,000
-
-
-
-
-
-
-
35,000
3,000
4,739
(12,987)
3,000
32,752
-
-
-
32,752
134,039
17,000
41,938
-
6,000
198,977
-
75,000
649
274,626
(i) M Ward resigned as a Director on 2 July 2023. During FY23, M Ward acquired 9,708 shares (i.e. a total of 22,695 shares at the time of his
resignation). For reporting purposes only, 22,695 shares were treated as having been disposed of during the period to leave a nil balance.
M Ward may or may not continue to hold shares in the Company.
(ii) P Bishop left the Company on 31 January 2023. When P Bishop left the Company, he held 19,442 shares that he acquired on-market during
FY23 (i.e. he held no shares at the start of the period). For reporting purposes only, P Bishop’s 19,442 shares were treated as having been
disposed of during the period to leave a nil balance. P Bishop may or may not continue to hold shares in the Company.
(ii) A Eshuys became a KMP on 1 February 2023.
t
r
o
p
e
R
n
o
i
t
a
r
e
n
u
m
e
R
29
rEMuNE raTiON rEPOr T CONTINUED
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 61 of this annual report), or are outstanding as of 2 July 2023 (FY2022
- $Nil).
No other transactions were undertaken with directors or other KMP, including related parties, during the period
(FY2022 - $Nil).
Company Performance
The following table outlines the Company’s earnings and share performance over the last ten years:
EPS cents
per share
Share price at
start of period
Share price
at end of period
Share price
growth
Ordinary &
special dividends
paid or declared
per share
NPAT
$14.5m
$14.2m
$17.1m
$12.3m
$16.6m
50.3
49.4
59.3
42.8
57.4
($16.9m)
(58.5)
$1.1m
$8.3m
$7.9m
$10.3m
3.6
21.7
20.6
27.2
$17.19
$8.82
$5.40
$12.45
$4.16
$5.68
$1.83
$7.46
$5.37
$3.23
$8.82
$5.40
$12.45
$4.16
$5.68
$1.83
$7.46
$5.37
$3.23
$4.55
(48.7%)
(38.8%)
130.6%
(66.6%)
36.5%
(67.8%)
307.7%
(28.0%)
(39.9%)
40.9%
$0.30
$0.30
$0.44
$0.24
$0.35
$0.10
-
-
-
$0.16
Period
FY2014
FY2015
FY2016(i)
FY2017
FY2018
FY2019
FY2020
FY2021
FY2022(i)
FY2023
(i) 53-week period.
30
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
27 March 2020
28 March 2025
Vesting Date
27 March 2023
30 September 2020
31 August 2025
31 August 2023
5 November 2021
31 August 2025
31 August 2023
5 November 2021
1 November 2024
5 November 2023
5 November 2021
31 August 2026
31 August 2024
11 May 2022
11 May 2022
11 May 2022
11 May 2022
11 May 2022
11 May 2022
28 February 2025
31 August 2023
14 September 2023
31 August 2023
13 September 2024
31 August 2023
28 February 2025
29 February 2024
13 September 2024
31 August 2024
12 September 2025
29 August 2025
21 September 2022
31 October 2025
31 August 2025
28 November 2022
31 October 2025
31 August 2025
2 February 2023
31 October 2023
31 August 2023
2 February 2023
30 April 2024
29 February 2024
2 February 2023
30 April 2025
28 February 2025
Total
Value at
Grant Date $
Exercise
Price $
Total number
on Issue
Number on
issue to key
management
personnel
$4.05
$6.17
$5.95
$5.92
$5.86
$3.53
$3.53
$3.53
$3.50
$3.48
$3.43
$3.71
$4.37
$4.06
$4.03
$3.97
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
150,000
185,300
65,767
66,000
131,533
50,000
55,000
166,875
25,000
95,000
17,500
638,100
28,700
87,500
87,500
87,500
150,000
63,700
18,133
-
36,267
50,000
-
15,000
25,000
10,000
17,500
186,000
-
75,000
75,000
75,000
1,937,275
796,600
Subsequent to period end, the Board has not granted any further performance rights under the Performance Rights
Plan.
Shares issued and the exercise of options and performance rights
The following shares of the Company were issued during FY23 on the exercise of performance rights:
Date of Grant
Vesting Date
Exercise date
Issue price of
shares (i)
Total number of
shares issued
Number of shares
issued to KMP
18 October 2019
11 May 2022
Total
1 July 2023
11 May 2022
23 August 2022
23 August 2022
–
–
21,675
75,000
96,675
–
75,000
75,000
(i) In order to exercise performance rights, participants must pay an exercise price of $1.00 for each tranche granted and exercised on a
particular day, regardless of the number of rights exercised on that day.
t
r
o
p
e
R
n
o
i
t
a
r
e
n
u
m
e
R
31
32
Auditor’s Independence Declaration
Auditor’s Independence Declaration
As lead auditor for the audit of The Reject Shop Limited for the 52 week period ended 2 July 2023, 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
24 August 2023
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.
l
n
o
i
t
a
r
a
c
e
D
e
c
n
e
d
n
e
p
e
d
n
I
s
’
r
o
t
i
d
u
A
33
Consolidated Statement
of Comprehensive Income
For the 52 week period ended 2 July 2023
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
Earnings per share
Basic earnings per share
Diluted earnings per share
Note
2023
$’000
2022
$’000
2
3
4
5
27
27
819,340
788,241
6,062
128
825,402
788,369
494,167
261,204
47,350
802,721
8,050
14,631
4,321
10,310
(6,902)
2,071
(4,831)
5,479
Cents
27.2
26.4
467,789
260,828
41,996
770,613
6,502
11,254
3,352
7,902
16,569
(4,971)
11,598
19,500
Cents
20.6
20.2
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
34
Consolidated Balance Sheet
As at 2 July 2023
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
Tax liabilities
Provisions
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
2023
$’000
2022
$’000
6
7
22
8
9
10
11
12
10
14
15
10
14
77,335
77,469
135,550
113,014
-
1,893
5,864
12,766
4,056
4,481
222,805
209,623
50,631
51,143
205,786
198,717
20,050
17,712
276,467
267,572
499,272
477,195
59,765
56,398
84,305
78,020
3,300
-
11,080
10,437
11,428
11,560
169,878
156,415
144,124
139,645
3,335
4,332
147,459
143,977
317,337
300,392
181,935
176,803
16
17
18
67,598
70,326
13,829
16,279
100,508
90,198
181,935
176,803
The above Consolidated Balance Sheet should be read in conjunction with the accompanying notes.
t
e
e
h
S
e
c
n
a
a
B
d
e
t
a
d
l
i
l
o
s
n
o
C
35
Consolidated Statement of
Changes in Equity
For the 52 week period ended 2 July 2023
2023
Contributed
Equity
$’000
Capital
Profits
$’000
Share Based
Payments
$’000
Hedging
Reserve
$’000
Foreign
Currency
Translation
Reserve
$’000
Balances as at 3 July 2022
70,326
739
6,603
8,937
Profit for the period
Other comprehensive income
Foreign exchange translation
Transaction with owners in
their capacity as owners:
-
-
-
Shares bought back
(2,728)
Share based remuneration
Tax credited directly to equity
-
-
-
-
-
-
-
-
Balances as at 2 July 2023
67,598
739
-
-
-
-
2,025
356
8,984
-
(4,831)
-
-
-
-
4,106
-
-
-
-
-
-
-
-
Retained
Earnings
$’000
Total
$’000
90,198
176,803
10,310
-
-
-
-
-
10,310
(4,831)
-
(2,728)
2,025
356
100,508
181,935
2022
Contributed
Equity
$’000
Capital
Profits
$’000
Share Based
Payments
$’000
Hedging
Reserve
$’000
Balances as at 27 June 2021
70,326
739
6,019
(2,661)
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
-
-
-
-
-
-
-
-
-
-
Balances as at 3 July 2022
70,326
739
-
-
-
959
(375)
6,603
-
11,598
-
-
-
8,937
Foreign
Currency
Translation
Reserve
$’000
12
-
-
(12)
-
-
-
Retained
Earnings
$’000
Total
$’000
82,296
156,731
7,902
-
-
-
-
7,902
11,598
(12)
959
(375)
90,198
176,803
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 52 week period ended 2 July 2023
Cash flows from operating activities
Receipts from customers (inclusive of goods and services tax)
901,274
867,065
Payments to suppliers and employees (inclusive of goods and services tax)
(789,302)
(745,255)
Note
2023
$’000
2022
$’000
Interest received
Insurance income received
Borrowing costs and facilities fees paid
Interest on lease liabilities
Income tax received (net of tax 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
Payments for shares bought back
Net cash outflows used in financing activities
Net (decrease) / increase in cash held
Cash at the beginning of the financial period
Cash at the end of the financial period
3
3
4
4
21
1,842
4,220
(279)
(7,771)
1,036
111,020
128
-
(96)
(6,406)
704
116,140
(12,126)
(12,126)
(16,451)
(16,451)
(96,300)
(95,266)
(2,728)
-
(99,028)
(95,266)
(134)
77,469
77,335
4,423
73,046
77,469
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
l
s
w
o
F
h
s
a
C
f
o
t
n
e
m
e
t
a
t
S
d
e
t
a
d
i
l
o
s
n
o
C
37
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 stated.
(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 (Cth), as appropriate for for-profit oriented
entities.
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 2 July 2023 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 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 deregister
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 30 for
information.
38
(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 Office
5 – 13 years
Equipment
- Fixtures and Fittings
- Computer Equipment
5 – 13 years
3 years
(g) Leases
The Group leases various retail stores, distribution
centres, offices and vehicles. Lease agreements are
typically made for fixed periods of tenure (usually
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 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.
s
t
n
e
m
e
t
a
t
S
l
i
i
a
c
n
a
n
F
d
e
t
a
d
i
l
o
s
n
o
C
e
h
t
o
t
s
e
t
o
N
39
NOTES TO T hE CONSOLiDaTED FiNaNCiaL STaTEMENTS CONTINUED
(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 option pricing model that takes into
account:
– exercise price;
–
term of the Performance Rights;
– vesting and performance criteria;
–
impact of dilution;
– non-tradeable nature of the Performance Rights;
– share price at the grant date and expected price
volatility of the underlying share;
– expected dividend yield; and
–
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, cash in transit 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
40
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 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
s
t
n
e
m
e
t
a
t
S
l
i
i
a
c
n
a
n
F
d
e
t
a
d
i
l
o
s
n
o
C
e
h
t
o
t
s
e
t
o
N
41
NOTES TO T hE CONSOLiDaTED FiNaNCiaL STaTEMENTS CONTINUED
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.
(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’ Reports) 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 2 July 2023 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 380 stores
(FY2022: 369) 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.
42
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 9 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.
(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 estimated
inventory weeks cover and incorporates information
on known loss-making products.
(v) Provisioning for shrinkage expense
The Group provides for shrinkage expense for the
period by applying an estimated shrink loss
percentage to the sales since the date of the last stock
count to period-end, on a store-by-store basis. Stock
counts are performed across stores to calculate the
estimated shrink loss percentage for the whole store
network. This estimate includes stock count
information obtained from counts performed during
the financial period and those completed post
period-end. Factors that could impact the estimated
provision include the length of the time period since a
store last completed a stock take or a change in the
actual stocktake results ultimately recognised. Other
than the matters outlined above, there are no other
accounting estimates or judgements within these
accounts which have a significant effect on the
amounts recognised in the Financial Statements.
(ab) New Accounting Standards and Interpretations
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.
s
t
n
e
m
e
t
a
t
S
l
i
i
a
c
n
a
n
F
d
e
t
a
d
i
l
o
s
n
o
C
e
h
t
o
t
s
e
t
o
N
43
NOTES TO T hE CONSOLiDaTED FiNaNCiaL STaTEMENTS CONTINUED
Note 2: Revenue from Continuing Operations
Sales of goods
Note 3: Other Income
Interest
Insurance recovery(i)
2023
$’000
819,340
2023
$’000
1,842
4,220
6,062
2022
$’000
788,241
2022
$’000
128
-
128
(i) Insurance recoveries relate to insured losses of property, plant and equipment, inventory and loss of profit from four stores that were flood/
water damaged in FY2022 and one in FY2023.
Note 4: Expenses
Profit before income tax expense includes the following expenses:
Finance Costs:
Interest and finance charges paid/payable for borrowing 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
Employee benefits expense
Store opening and relocation costs
2023
$’000
279
7,771
8,050
72
11,387
601
12,060
5,820
88,303
772
94,895
117
166,028
796
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
44
Note 5: Income tax expense
(a) Income tax expense
Current tax
Deferred tax
Adjustments for current tax of prior periods
2023
$’000
4,140
188
(7)
4,321
2022
$’000
266
3,114
(28)
3,352
Deferred income tax expense included in income tax expense
comprises:
Decrease in net deferred tax assets
188
3,114
(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% (FY2022: 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
(d) Income tax relating to items of other comprehensive income
Cash flow hedges
Note 6: Current Assets – Cash and cash equivalents
Cash on hand
Cash at bank
Note 7: Current Assets – Inventories
Inventory at cost
Inventory at net realisable value
14,631
4,389
(61)
(7)
4,321
11,254
3,376
4
(28)
3,352
356
(375)
(2,071)
2023
$’000
1,607
75,728
77,335
2023
$’000
129,945
5,605
135,550
4,971
2022
$’000
1,577
75,892
77,469
2022
$’000
109,689
3,325
113,014
Inventories recognised as an expense during the period ended 2 July 2023 amounted to $429,191,000 (FY2022:
$407,325,000). These were included in the ‘Cost of sales’. Write-downs of inventories to net realisable value
amounted to $3,179,000 (FY2022: $5,114,000). These were recognised as an expense during the period ended 2 July
2023 and included in ‘Cost of sales’.
s
t
n
e
m
e
t
a
t
S
l
i
i
a
c
n
a
n
F
d
e
t
a
d
i
l
o
s
n
o
C
e
h
t
o
t
s
e
t
o
N
45
NOTES TO T hE CONSOLiDaTED FiNaNCiaL STaTEMENTS CONTINUED
Note 8: Current Assets – Other assets
Prepayments
Other current assets
Note 9: 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
2023
$’000
2,961
1,095
4,056
2023
$’000
95,135
(80,447)
14,688
177,460
(141,517)
35,943
50,631
2022
$’000
3,151
1,330
4,481
2022
$’000
90,733
(76,031)
14,702
172,635
(136,194)
36,441
51,143
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 3 July 2022
Additions at cost
Asset write offs
Depreciation expense
Balances as at 2 July 2023
Balances as at 27 June 2021
Additions at cost
Asset write offs
Depreciation expense
Balances as at 3 July 2022
Leasehold
improvements
Plant and
equipment
$’000
14,702
5,760
(221)
(5,553)
14,688
$’000
36,441
6,366
(357)
(6,507)
35,943
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
Total
$’000
51,143
12,126
(578)
(12,060)
50,631
Total
$’000
47,342
17,805
(1,602)
(12,402)
51,143
During the period, there was no impairment recognised by the Group in relation to stores (FY2022: $Nil).
46
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 10) 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 10: Leases
Right-of-use assets
Property
Vehicles
Lease Liabilities
Current
Non-current
2023
$’000
205,725
61
205,786
84,305
144,124
228,429
2022
$’000
198,575
142
198,717
78,020
139,645
217,665
Interest expense (included in finance costs)
7,771
6,406
Additions to the right-of-use assets during the year ended 2 July 2023 were $100,928,000 (3 July 2022:
$140,855,000).
Expenses relating to short-term leases of $1,671,000 (FY2022: $2,301,000) are included in store expenses.
The total cash outflow for leases during the year was $100,057,000 (FY2022: $99,669,000).
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 9.
s
t
n
e
m
e
t
a
t
S
l
i
i
a
c
n
a
n
F
d
e
t
a
d
i
l
o
s
n
o
C
e
h
t
o
t
s
e
t
o
N
47
NOTES TO T hE CONSOLiDaTED FiNaNCiaL STaTEMENTS CONTINUED
Note 11: Non-current Assets – Deferred tax assets
The balance comprises temporary differences attributable to:
Amounts recognised in profit or loss
Employee benefits
Leases
Inventories
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
Credited / (charged) to profit or loss and direct to equity
Credited / (charged) to other comprehensive income
Under / (over) provision from prior years
Carrying amount at end of period
Note 12: Current Liabilities – Trade and other payables
Trade payables
Payroll tax and other statutory liabilities
Sundry payables
2023
$’000
7,022
6,793
1,249
5,469
1,282
1,294
57
23,166
-
75
(1,760)
(1,431)
20,050
17,712
173
2,071
94
20,050
2023
$’000
52,202
4,031
3,532
59,765
2022
$’000
6,942
5,684
871
8,660
1,514
457
114
24,242
(22)
(1,151)
(3,831)
(1,526)
17,712
27,701
(3,492)
(4,971)
(1,526)
17,712
2022
$’000
43,105
6,265
7,028
56,398
Note 13: 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.
The Group has fully complied with all of its banking covenants at the balance sheet date.
In August 2023, subsequent to the period-end, the Group extended its existing banking facilities with ANZ Bank
from August 2023 to August 2024.
All secured liabilities listed within Notes 13 and 21, 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.
48
Note 14: Liabilities – Provisions
Provision for make good
Employee entitlement
2023
Current
$’000
Non-current
$’000
350
10,730
11,080
2,067
1,268
3,335
Total
$’000
2,417
11,998
14,415
2022
Current
$’000
Non-current
$’000
370
10,067
10,437
2,212
2,120
4,332
Total
$’000
2,582
12,187
14,769
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 15: Current Liabilities – Other Liabilities
Accrued expenses
Deferred income
Note 16: Contributed Equity
Movements in ordinary share capital:
2023
$’000
4,031
2023
$’000
11,203
225
11,428
2022
$’000
4,942
2022
$’000
11,123
437
11,560
Number of
issued shares
Issue price
per share $
Contributed
Equity $’000
38,276,622
-
-
70,326
-
Date
27 June 2021
1 July 2021
3 July 2022
Details
Balance
Exercise of performance rights
50,000
Balance
38,326,622
-
70,326
24 August 2022
Exercise of performance rights
96,675
9 September 2022 to
3 February 2023
Shares bought back
(647,222)
-
-
2 July 2023
Balance
37,776,075
-
-
(2,728)
67,598
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.
Between September 2022 and February 2023, the Company purchased 647,222 shares through an on-market
buy-back. The on-market buy-back was announced on 23 August 2022. The shares were acquired at an average
price of $4.21 per share, with prices ranging from $3.87 to $4.92 per share. The total cost of the shares purchased
was $2,727,948. All the acquired shares were cancelled prior to the end of the period.
The on-market buy-back is proposed to end on or before 22 August 2023.
s
t
n
e
m
e
t
a
t
S
l
i
i
a
c
n
a
n
F
d
e
t
a
d
i
l
o
s
n
o
C
e
h
t
o
t
s
e
t
o
N
49
NOTES TO T hE CONSOLiDaTED FiNaNCiaL STaTEMENTS CONTINUED
Note 17: 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
2023
$’000
739
8,984
4,106
-
13,829
6,603
2,025
356
8,984
8,937
(8,937)
4,106
2022
$’000
739
6,603
8,937
-
16,279
6,019
959
(375)
6,603
(2,661)
2,661
8,937
4,106
8,937
-
-
-
12
(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 22. 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.
Note 18: 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
2023
$’000
90,198
10,310
100,508
2022
$’000
82,296
7,902
90,198
Note 19: Capital Commitments
The Group has capital commitments totalling $5,287,000 (FY2022: $2,600,000) all payable within one year.
50
Note 20: Contingent Assets and Liabilities
The Company is named as the respondent in a class action commenced by a former store manager (the applicant) in
the Federal Court of Australia (filled on 18 April 2023) on behalf of store managers and assistant store managers
employed by the Company between 24 April 2017 to 18 April 2023. The applicant is represented by Adero Law.
The premise of the proceeding is that the General Retail Industry Award 2010 applied to the relevant store manager’s
employment and that there were alleged underpayments under that award together with alleged associated
contraventions of the Fair Work Act 2009 (Cth). The applicant is currently in the process of amending its statement of
claim.
The Company is defending the proceeding and filed its defence on 7 July 2023.
Note 21: Consolidated Statement of Cash Flow Information
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 credited / (debited) directly to equity
Changes in assets and liabilities
Decrease / (increase) in other assets
(Increase) in inventories
Decrease in right-of-use assets net of lease liabilities
(Increase) / decrease in deferred tax assets
Decrease in trade and other payables, provisions and other liabilities
Increase / (decrease) in tax liabilities
Net cash provided by operations
2023
$’000
10,310
12,060
94,895
578
2,025
356
2,496
(22,536)
3,695
(2,338)
4,286
5,193
111,020
2022
$’000
7,902
12,402
95,514
1,602
959
(375)
(2,430)
(13,180)
396
9,989
3,938
(577)
116,140
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
2023
2022
Limit
$’000
10,000
-
550
10,550
Utilised
$’000
-
-
420
420
Limit
$’000
10,000
-
550
10,550
Utilised
$’000
-
-
420
420
(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 2022. The Group was required to deposit
$5,000,0000 with ANZ Bank if the seasonal facility was drawn. The facility was unutilised during the period (FY2022: unutilised).
(iii) Other facilities include an ANZ Bank indemnity guarantee of $550,000 of which $420,000 (FY2022: $420,000) was utilised in relation to
property leases at 2 July 2023.
s
t
n
e
m
e
t
a
t
S
l
i
i
a
c
n
a
n
F
d
e
t
a
d
i
l
o
s
n
o
C
e
h
t
o
t
s
e
t
o
N
51
NOTES TO T hE CONSOLiDaTED FiNaNCiaL STaTEMENTS CONTINUED
Note 22: Financial Instruments and Financial Risk Management
Derivative Financial Instruments
Current assets and (liabilities)
2023
$’000
2022
$’000
Forward foreign exchange contracts – cash flow hedges
5,864
12,766
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 most 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
2023
$’000
2022
$’000
Australian Dollars
United States Dollars
131,672
151,167
Average Exchange
Rate
2023
$
0.70
2022
$
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 $5,864,000 (FY2022:
asset of $12,766,000).
During the period, $8,937,000 (FY2022: $2,662,000) was transferred from equity and included in inventory and a net
gain of $Nil (FY2022: net $Nil) was transferred to the Consolidated Statement of Comprehensive Income.
Exposure to Foreign Currency Risk
The Group’s exposure to foreign currency risk at the end of the reporting period was as follows:
Cash at bank
Trade and other payables
2023
USD
$’000
532
9,920
2022
USD
$’000
7
8,087
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:
52
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
2023
$’000
210
(2,062)
(217)
2,125
2022
$’000
171
(2,366)
(176)
2,437
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)
2023
Financial Assets
Cash and cash equivalents
3.17%
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.
Weighted
Average
Effective
Interest
Rate(i)
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
-
-
-
-
-
Fixed
Interest
Rate
Maturing
within 1 Year
$’000
Fixed
Interest
Rate
Maturing
1 to 5 Years
$’000
-
-
-
-
-
-
-
-
-
-
-
-
Fixed
Interest
Rate
Maturing
within 1 Year
$’000
Fixed
Interest
Rate
Maturing
1 to 5 Years
$’000
-
-
-
-
-
-
-
-
-
-
-
-
Floating
Interest
Rate
$’000
69,477
69,477
-
-
-
-
Floating
Interest
Rate
$’000
71,343
71,343
-
-
-
-
Non-
Interest
Bearing
$’000
Total
$’000
7,858
7,858
77,335
77,335
-
-
70,968
70,968
228,429
228,429
299,397
299,397
Non-
Interest
Bearing
$’000
Total
$’000
6,126
6,126
77,469
77,469
-
-
67,521
67,521
217,665
217,665
285,186
285,186
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.
s
t
n
e
m
e
t
a
t
S
l
i
i
a
c
n
a
n
F
d
e
t
a
d
i
l
o
s
n
o
C
e
h
t
o
t
s
e
t
o
N
53
NOTES TO T hE CONSOLiDaTED FiNaNCiaL STaTEMENTS CONTINUED
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 2 July 2023 and 3 July 2022 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
2023
$’000
(77,335)
181,935
0%
2022
$’000
(77,469)
176,803
0%
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
6 – 12
months
Between 1
and 2 years
Between 2
and 5 years
2 July 2023
$’000
$’000
$’000
$’000
Total
contractual
cash flows
Carrying
Amount
(assets) /
liabilities
$’000
$’000
Over 5
years
$’000
Non-derivatives
Non-interest bearing
(including lease
liabilities)
Total
non-derivatives
Derivatives
Gross settled
- (inflow)
- outflow
Total derivatives
54
137,665
43,089
67,848
77,962
1,374
327,938
317,015
137,665
43,089
67,848
77,962
1,374
327,938
317,015
(95,519)
(42,018)
91,588
(3,931)
40,085
(1,933)
-
-
-
-
-
-
-
-
-
(137,537)
(5,864)
131,673
-
(5,864)
(5,864)
Less than 6
months
6 – 12
months
Between 1
and 2 years
Between 2
and 5 years
3 July 2022
$’000
$’000
$’000
$’000
Total
contractual
cash flows
Carrying
Amount
(assets) /
liabilities
$’000
$’000
Over 5
years
$’000
s
t
n
e
m
e
t
a
t
S
l
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
Non-derivatives
Non-interest bearing
(including lease
liabilities)
Total
non-derivatives
Derivatives
Gross settled
- (inflow)
- outflow
Total derivatives
(8,596)
(4,170)
(102,472)
(61,461)
93,876
57,291
-
-
-
-
-
-
-
-
(163,933)
(12,766)
151,167
-
-
(12,766)
(12,766)
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) 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
(c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).
No financial assets and financial liabilities are readily traded on organised markets in standardised form other than
listed investments, forward exchange contracts and interest rate swaps.
The following table presents the Group’s assets and liabilities measured and recognised at fair value.
Derivatives used for hedging
2023
$’000
Level 2
5,864
2022
$’000
Level 2
12,766
i
i
a
c
n
a
n
F
d
e
t
a
d
i
l
o
s
n
o
C
e
h
t
o
t
s
e
t
o
N
55
NOTES TO T hE CONSOLiDaTED FiNaNCiaL STaTEMENTS CONTINUED
Note 23: Key Management Personnel (KMP) Disclosures
Non-Executive Directors
Steven Fisher (Chair)
David Grant
Nicholas Perkins
Mark Ward(i)
Margaret Zabel
(i) M Ward resigned as a Director on 2 July 2023.
All of the above persons were directors of The Reject Shop Limited for the entire period ended 2 July 2023, 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:
Phil Bishop
– Chief Executive Officer(i)
Clinton Cahn
– Chief Financial Officer and Acting Chief Executive Officer(ii)
Amy Eshuys – Chief Operating Officer(iii)
(i) P Bishop was appointed Chief Executive Officer on 11 July 2023 and left the Group on 31 January 2023.
(ii) C Cahn appointed Acting Chief Executive Officer from 27 April 2022 to 10 July 2022, and from 1 February 2023 to 23 August 2023.
(iii) A Eshuys appointed as key management personnel from 1 February 2023.
All of the above persons were employed by The Reject Shop Limited and were key management personnel for the
entire period ended 2 July 2023 unless otherwise stated.
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)
2023
$
-
1,773,987
100,072
325,000
775,248
2,974,307
2022
$
140,000
1,674,177
84,888
401,799
176,085
2,476,949
(i) P Bishop left the Company on 31 January 2023. As part of P Bishop’s departure, he was paid $325,000 (inclusive of superannuation) in lieu of
a six-month notice period, which is included in ‘termination benefits’ above. In addition, P Bishop was paid $14,786 of annual leave entitlement,
which is excluded from the table above. On P Bishop’s departure all of his performance rights were lapsed.
No other long-term or termination benefits were paid or payable with respect to the current or prior period.
56
Note 24: 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:
2023
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 October 2019
16 October 2023
1 July 2022
27 March 2020
28 March 2025
27 March 2023
30 September 2020 31 August 2025
31 August 2023
5 November 2021 31 August 2025
31 August 2023
5 November 2021
1 November 2024 5 November 2023
5 November 2021 31 August 2026
31 August 2024
11 May 2022
31 August 2022
31 August 2022
11 May 2022
28 February 2025 31 August 2023
11 May 2022
14 September 2023 31 August 2023
11 May 2022
13 September 2024 31 August 2023
11 May 2022
28 February 2025 28 February 2024
11 May 2022
13 September 2024 31 August 2024
11 May 2022
12 September 2025 29 August 2025
22 July 2022
31 October 2024
31 August 2024
22 July 2022
31 October 2025
31 August 2025
22 July 2022
31 October 2026
31 August 2026
21 September 2022 31 October 2025
31 August 2025
28 November 2022 31 October 2025
31 August 2025
2 February 2023
31 October 2023
31 August 2023
2 February 2023
30 April 2024
29 February 2024
2 February 2023
30 April 2025
28 February 2025
2.07
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
3.71
4.37
4.06
4.03
3.97
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
869,600
28,700
87,500
87,500
87,500
(21,675)
-
-
-
-
-
(75,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(12,900)
(3,700)
-
(7,400)
-
-
(20,000)
(23,125)
-
(15,000)
-
(40,000)
(40,000)
(20,000)
-
150,000
185,300
65,767
66,000
131,533
-
50,000
55,000
166,875
25,000
95,000
17,500
-
-
-
(231,500)
638,100
-
-
-
-
28,700
87,500
87,500
87,500
-
150,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
1,186,775
1,260,800
(96,675)
(413,625)
1,937,275
150,000
s
t
n
e
m
e
t
a
t
S
l
i
i
a
c
n
a
n
F
d
e
t
a
d
i
l
o
s
n
o
C
e
h
t
o
t
s
e
t
o
N
57
NOTES TO T hE CONSOLiDaTED FiNaNCiaL STaTEMENTS CONTINUED
2022
Date of Grant
Expiry Date
Date Exercisable
1 September 2019 31 August 2022
31 August 2021
18 October 2019
16 October 2023
1 July 2022
13 January 2020
12 January 2025
14 January 2023
13 January 2020
12 January 2026
14 January 2024
13 January 2020
12 January 2027
14 January 2025
27 March 2020
28 March 2025
27 March 2023
30 September 2020 31 August 2025
31 August 2023
30 September 2020 31 August 2026
31 August 2024
30 September 2020 31 August 2027
31 August 2025
5 November 2021 31 August 2025
31 August 2023
5 November 2021
1 November 2024 5 November 2023
5 November 2021 31 August 2026
31 August 2024
11 May 2022
31 August 2022
31 August 2022
11 May 2022
28 February 2025 31 August 2023
11 May 2022
14 September 2023 31 August 2023
11 May 2022
13 September 2024 31 August 2023
11 May 2022
28 February 2025 28 February 2024
11 May 2022
13 September 2024 31 August 2024
11 May 2022
12 September 2025 29 August 2025
Fair Value
at Grant
Date
Balance at
the Start of
Period
Granted
During
Period
1.74
2.07
1.91
1.82
1.74
4.05
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
50,000
21,675
150,000
75,000
75,000
150,000
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
Lapsed
Forfeited or
Cancelled
During the
Period
Balance at
the End of
the Period
Vested and
Exercisable
at the End
of Period
-
-
-
-
21,675
21,675
(150,000)
(75,000)
(75,000)
-
(140,750)
(42,475)
(42,475)
(48,167)
-
(96,333)
-
-
-
-
-
-
-
-
-
-
150,000
198,200
-
-
69,466
66,000
138,934
75,000
50,000
75,000
190,000
25,000
110,000
17,500
-
-
-
-
-
-
-
-
-
-
75,000
-
-
-
-
-
-
Exercised
During the
Period
(50,000) (i)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
945,575
961,400
(50,000)
(670,200)
1,186,775
96,675
(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
22 July 2022 21 September 2022
28 November 2022
2 February 2023
Exercise price
Share price
Expected dividend yield
-
$2.85
1.5%
-
$3.88
1.5%
-
$4.55
1.5%
-
$4.10
1.5%
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.
Remuneration Expense arising from share-based payment transactions
Performance rights granted
58
2023
$
2022
$
2,025,141
959,405
Note 25: 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 Assuarance Related Services
Audit and review work
Other assurance services
Tax Compliance and Consulting Services
Tax compliance
Tax consulting advice
Total remuneration
Note 26: Dividends
Dividend declared subsequent to the period end(i)
Balance of franking account at period end(ii)
2023
$
389,000
51,000
440,000
2022
$
330,000
42,000
372,000
144,755
77,500
81,406
20,000
226,161
97,500
666,161
469,500
2023
$’000
6,044
62,614
2022
$’000
-
59,294
(i) Subsequent to year-end, the Directors have declared the payment of a final dividend of 6.5 cents per ordinary share and a special dividend
of 9.5 cents per ordinary share. These dividends will be fully franked. They are not recognised as a liability at year end. The amount payable is
estimated based on the number of shares on issue at 2 July 2023.
(ii) 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 (FY2022: $Nil).
Note 27: Earnings per share
Basic earnings per share
Diluted earnings per share
2023
Cents
27.2
26.4
2022
Cents
20.6
20.2
Weighted average number of ordinary shares used as the denominator in
calculating basic earnings per share
Adjustments for dilutive portion of performance rights
37,965,407
38,325,547
1,078,176
821,293
Weighted average number of ordinary shares and potential ordinary shares used as
the denominator in calculating diluted earnings per share.
39,043,583
39,146,840
s
t
n
e
m
e
t
a
t
S
l
i
i
a
c
n
a
n
F
d
e
t
a
d
i
l
o
s
n
o
C
e
h
t
o
t
s
e
t
o
N
59
NOTES TO T hE CONSOLiDaTED FiNaNCiaL STaTEMENTS CONTINUED
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 24.
Note 28: 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 29: 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
Refer to Notes 19 and 20 for disclosures concerning contractual commitments
and contingent assets and liabilities for the parent entity.
2023
Cents
481.6
Parent Entity
2023
$’000
2022
Cents
461.3
2022
$’000
222,806
210,272
499,273
477,843
170,532
158,165
318,341
302,509
67,598
70,326
13,862
16,366
99,472
88,642
180,932
175,334
10,828
7,902
5,997
19,500
-
-
60
Note 30: Segment Information
The Group operates within one reportable segment (retailing of discount variety merchandise). Total revenues of
$819,340,000 (FY2022: $788,241,000) all relate to the sale of discount variety merchandise in the Group’s country of
domicile (Australia), in this single reportable segment. The Group is not reliant on any single customer.
Note 31: 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 The Reject Shop Limited and charged a fee for those services.
The subsidiary is in the process of being deregistered.
Fees paid to TRS Sourcing Co. Limited
Parent Entity
2023
$’000
-
2022
$’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 subsidiary during the period (FY2022: 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 32: Matters Subsequent to the End of the Financial Period
In August 2023 the Group extended its existing banking facilities with ANZ Bank from August 2023 to August 2024.
See Note 13 for further information.
Since the end of the financial period, the directors have declared a final dividend of 6.5 cents per ordinary share and
a special dividend of 9.5 cents per ordinary share. The final dividend and the special dividend will be fully franked at
a tax rate of 30%.
On 24 August 2023, Clinton Cahn was appointed as Chief Executive Officer of the Group.
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 33: Related Party Transactions
During the period, the Group transacted with related parties of Kin Group Pty Ltd to purchase goods. Transactions
totalled $1,380,035 (FY2022: $581,417). 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 2 July 2023.
s
t
n
e
m
e
t
a
t
S
l
i
i
a
c
n
a
n
F
d
e
t
a
d
i
l
o
s
n
o
C
e
h
t
o
t
s
e
t
o
N
61
Directors’ Declaration
In the directors’ opinion:
(a) The Financial Statements and notes set out on pages 34 to 61 are in accordance with the Corporations Act 2001,
including:
(i)
(ii)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements; and
giving a true and fair view of the Group’s financial position as at 2 July 2023 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 a declaration 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
Chair
Dated this 24 August 2023
62
Independent Auditor’s Report to the
Members of The Reject Shop Limited
d
e
t
i
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 2 July 2023 and of its financial
performance for the 52 week period ended 2 July 2023
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
●
●
●
●
●
●
the consolidated statement of comprehensive income for the 52 week period ended 2 July 2023
the consolidated balance sheet as at 2 July 2023
the consolidated statement of changes in equity for the 52 week period ended 2 July 2023
the consolidated statement of cash flows for the 52 week period ended 2 July 2023
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.
j
i
m
L
p
o
h
S
t
c
e
e
R
e
h
T
f
o
s
r
e
b
m
e
M
e
h
t
o
t
t
r
o
p
e
R
s
’
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
63
iNDEPENDENT auD iTOr’ S rEPOr T TO T hE MEMb ErS OF ThE rE jECT ShOP LiMi TED CONTINUED
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
Materiality
Audit scope
● For the purpose of our audit we used overall
● Our audit focused on where the Group made
Group materiality of $0.758m, which represents
approximately 5% of the Group’s profit before
income tax.
subjective judgements; for example, significant
accounting estimates involving assumptions and
inherently uncertain future events.
● We applied this threshold, together with qualitative
considerations, to determine the scope of our audit
and the nature, timing and extent of our audit
procedures and to evaluate the effect of
misstatements on the financial report as a whole.
● The Group is principally involved in retailing
through discount variety stores across Australia.
The accounting processes are structured around
the Group finance function at the Group’s head
office in Melbourne.
● We chose Group profit before income tax
because, in our view, it is the benchmark against
which the performance of the Group is most
commonly measured.
● We utilised a 5% threshold based on our
professional judgement, noting it is within the
range of commonly acceptable thresholds.
64
iNDEPENDENT auD iTOr’ S rEPOr T TO T hE MEMb ErS OF ThE rE jECT ShOP LiMi TED CONTINUED
d
e
t
i
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 1aa(i) & (ii), Note 9 and Note 10)
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.
j
i
m
L
p
o
h
S
t
c
e
e
R
e
h
T
f
o
s
r
e
b
m
e
M
e
h
t
o
t
t
r
o
p
e
R
s
’
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
65
iNDEPENDENT auD iTOr’ S rEPOr T TO T hE MEMb ErS OF ThE rE jECT ShOP LiMi TED CONTINUED
Key audit matter
How our audit addressed the key audit matter
Inventory provision - net realisable value (NRV)
(Refer to Note 1aa(iv) and Note 7)
A provision was recognised net of the inventory
balance at 2 July 2023 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 2 July 2023 and therefore the
potential impact of the provision for NRV on
the consolidated statement of comprehensive
income and consolidated balance sheet
the subjective nature of the provision on the
calculation due to the judgement involved in
estimating the expected selling price of
inventory.
Inventory provision - shrinkage
(Refer to Note 1aa(v) and Note 7)
The Group recognised a provision against inventory at
2 July 2023 for the estimated loss related to shrinkage.
Shrinkage is physical losses of inventory at each store
since the date of the last stock count.
The provision is calculated by applying an estimated
shrink loss percentage to the sales since the date of
the last stock count to the end of the financial period.
This was a key audit matter because of:
●
●
the financial significance of the inventory
balance as at 2 July 2023 and therefore the
potential impact of the provision for shrinkage
on the consolidated statement of
comprehensive income and consolidated
balance sheet
the subjective nature of the provision on the
calculation due to the judgement involved in
estimating the shrink loss percentage to apply
to sales.
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
o
aggregate inventory sold below cost
during the financial period
aggregate inventory wastage
incurred during the financial period
inventory written-off subsequent to
the end of the financial period and up
to the completion of our audit.
We performed the following procedures amongst
others:
●
●
●
obtained an understanding of how the Group
determines the shrinkage provision
attended stock counts for a selection of stores
and developed an understanding of the
Group’s process for reviewing stock count
results for other stores
compared the shrink loss percentage applied
against the results of the stock counts
completed prior to the end of the financial
period and the historical data on the Group’s
shrinkage result.
66
iNDEPENDENT auD iTOr’ S rEPOr T TO T hE MEMb ErS OF ThE rE jECT ShOP LiMi TED CONTINUED
d
e
t
i
Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report for the 52 week period ended 2 July 2023, 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 through our opinion on the financial report. We
have issued a separate opinion on the remuneration report.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
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.
j
i
m
L
p
o
h
S
t
c
e
e
R
e
h
T
f
o
s
r
e
b
m
e
M
e
h
t
o
t
t
r
o
p
e
R
s
’
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
67
iNDEPENDENT auD iTOr’ S rEPOr T TO T hE MEMb ErS OF ThE rE jECT ShOP LiMi TED CONTINUED
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 20 to 31 of the directors’ report for the 52
week period ended 2 July 2023.
In our opinion, the remuneration report of The Reject Shop Limited for the 52 week period ended 2
July 2023 complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance with
Australian Auditing Standards.
PricewaterhouseCoopers
Brad Peake
Partner
Melbourne
24 August 2023
68
Shareholders’ Information
The shareholder information set out below was applicable as at 8 August 2023.
(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
3,107
1,134
211
162
17
(b) 594 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
Wilson Asset Management Group
Castle Point Funds Management
Total Substantial Shareholders
Number
7,751,495
6,359,491
2,681,179
2,347,524
19,139,689
% Held
20.52%
16.83%
7.10%
6.21%
50.67%
(d) The fully paid issued capital of the Company consisted of 37,776,075 shares held by 4,631 shareholders.
Each share entitles the holder to one vote.
(e) Unquoted Equity Securities
Performance Rights issued under The Reject Shop Performance Rights
Plan
1,937,275
42
Number on
Issue Number of holders
n
o
i
t
a
m
r
o
f
n
I
’
l
s
r
e
d
o
h
e
r
a
h
S
69
Shareholders’ Information
As at 8 August 2023
(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 Limited
HSBC Custody Nominees (Australia) Limited
Dorothy Productions Pty Ltd
Mike Fegelson
NCH Pty Ltd
Bond Street Custodians Limited
Macren Pty Ltd
Danlar Nominees Pty Ltd
Kgari Investments Pty Ltd
Ace Property Holdings Pty Ltd
BNP Paribas Nominees Pty Ltd
Neweconomy Com AU Nominees Pty Limited
Brendan Francis Niclasen & Cora Lyn Niclasen
HLJT Nominees Pty Ltd
Number
10,291,057
7,751,495
3,991,564
1,500,000
1,150,000
709,912
533,297
530,157
360,000
270,500
266,868
150,000
149,860
134,039
123,600
120,000
116,778
84,148
81,000
75,000
% Held
27.24
20.52
10.57
3.97
3.04
1.88
1.41
1.40
0.95
0.72
0.71
0.40
0.40
0.35
0.33
0.32
0.31
0.22
0.21
0.20
The twenty members holding the largest number of shares together held a total of 75.15% of the issued capital.
(g) Restricted Shares
There are no restricted shares on issue.
70
Corporate Directory
THE REJECT SHOP LIMITED
ABN 33 006 122 676
AND SUBSIDIARIES
Directors
Steven Fisher
Non-Executive Chair
David Grant
Non-Executive Director
Nicholas Perkins
Non-Executive Director
Margaret Zabel
Non-Executive Director
Company Secretary
Michael Freier
BA, BCom, LLB, LLM, MA (Theol) & Grad Dip Leg Prac
Principal Registered Office
245 Racecourse Road
Kensington, Victoria 3031
Share Registry
Link Market Services Ltd
Tower 4, 727 Collins St
Melbourne, Victoria 3008
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
y
r
o
t
c
e
r
i
D
e
t
a
r
o
p
r
o
C
71
This page is intentionally left blank
72
www.rejectshop.com.au