Annual Report
2013
Delighting and inspiring our customers
Our five-point plan underpins the business to ensure sustainability. We are also adapting the business to meet current challenges, and with an eye to the future we are embracing innovation and engaging with our customers in new and exciting ways.
Annual General Meeting
The fourth Annual General Meeting of Myer Holdings
Limited will be held on Wednesday 20 November 2013 at 11.00am (Melbourne time) in Mural Hall.
Mural Hall
Level 6, Myer Melbourne Store
Bourke Street Mall
Melbourne VIC 3000
Myer Holdings Limited ABN 14 119 085 602
Front cover image: JAG Handbags – Melbourne City Store
Right: MAC Cosmetics – Melbourne City Store
Improve customer service
Enhance our merchandise offer
PA G E 0 8
PA G E 1 1
Strengthen our loyalty offer
PA G E 1 3
Build a leading omni-channel offer
Optimise our store network
PA G E 1 6
PA G E 1 4
Contents
02 About Myer
04 Report by Chairman
Joint
and Chief Executive Officer
06 Operating and Financial Review
18 Sustainability
24
26
28
40
47
Board of Directors
Management Team
Corporate Governance Statement
Directors’ Report
Remuneration Report
66 Financial Report
112 Auditor’s Independence Declaration
113 Independent Auditor’s Report
115 Shareholder Information
IBC Corporate Directory
02
MYER Annual Report 2013
66 brands which are owned or licensed and distributed exclusively by Myer, known as ‘Myer Exclusive Brands’.
Our vertically-integrated Myer Exclusive Brand model of managing the design, development and sourcing of wanted brands provides us with significant control and flexibility. This model, together with our two sourcing offices in Asia, our world-class supply chain, and updated
IT and merchandise systems, delivers speed to market and effective inventory control. This gives us a key competitive advantage.
About Myer
Myer is an iconic Australian brand with a rich heritage of style, fashion and community engagement spanning over 100 years.
Our focus on providing inspiration to everyone includes our customers, our 12,500 team members, our 51,000 shareholders, our 1,200 suppliers globally and the many communities that we engage with our strong brand.
Myer is a significant employer and has a long history of philanthropy and local community engagement.
The store network includes a footprint of 67 stores in prime retail locations across Australia.
The Myer merchandise offer includes 11 core product categories: Womenswear; Menswear; Miss Shop (Youth);
Childrenswear; Intimate apparel; Beauty, fragrance and cosmetics; Homewares; Electrical goods; Toys; Footwear, handbags and accessories; and General merchandise.
Myer’s five-point plan
Myer’s well-established operational strategy is comprised of five key elements:
1. Improve customer service
2. Enhance our merchandise offer
3. Strengthen our loyalty offer
4. Build a leading omni-channel offer
5. Optimise our store network
The strategy continues to be adapted to meet changing customer preferences and embrace retail innovation.
Improve customer service
We are focused on delighting our customers however they choose to shop with us. Our strategy is driven by customer and team member feedback as well as initiatives to optimise productivity. We are building a customer service and performance-based culture across the business.
Service improvement initiatives include training and selling skills programs, reward and recognition, and improving staff availability. Efficiency initiatives include ensuring faster delivery of stock to the shop floor, and reducing the level of theft and fraud in our stores. We are leveraging recent technology investment across the business to deliver an improved experience for our customers in stores, online and through our customer service centre.
Enhance our merchandise offer
We are focused on inspiring and delighting our customers and want to be the first choice when shopping for fashion, cosmetics and the home. We have the largest range of desired brands and styles that offer newness, fashionability, quality and value.
The Myer merchandise offering includes well-known national brands, Australian and international designers, as well as
We also seek to acquire wanted brands where the addition of the brand will further strengthen our merchandise offer.
Strengthen our loyalty offer
The MYER one loyalty program is one of Australia’s leading loyalty programs, with over five million members and six million cards in circulation.
There are four reward levels within MYER one, being
Member, Silver, Gold and Platinum, based on annual spend with Myer. The premium Platinum tier is by Chief
Executive Officer invitation only.
Members receive two shopping credits for every dollar spent in Myer stores, with a $20 MYER one rewards gift card for every 2,000 Shopping Credits.
On average, customers spend 3.8 times the value of their Rewards Card on redemption. Members can also earn shopping credits through MYER one affiliates and the MYER Visa Card.
Sales using the MYER one card represent approximately
70 percent of total sales. The data from the program provide insights into customer shopping preferences and assist in the evaluation of the success of stores, brands, space, marketing, products and services mix.
Build a leading omni-channel offer
Our customers’ expectations have evolved in line with increasing online inspiration, information and digital commerce, and Myer now operates in a global marketplace. Against this backdrop, our focus is on building a leading omni-channel offer that is inspiring, compelling and available to our customers wherever and whenever they choose to engage with us.
Our previous investments in a merchandise management system, a point-of-sale system, and a world-class supply chain have set the foundations for effective inventory management. This provides us with a significant competitive advantage in the development of our omnichannel offer.
We are capitalising on our strong brand, depth of offer, store network and popular loyalty program in order to become Australia’s leading omni-channel retailer.
We increasingly integrate our marketing, balancing traditional media with innovation and digital marketing opportunities. Digital marketing and social media are now part of our everyday marketing focus on all campaigns.
Optimise our store network
We recognise that our customers want to be able to touch and feel products in store, as well as engage with knowledgeable and helpful staff. Our store network gives us a competitive advantage in our omni-channel offer and is integral to delivering a seamless customer experience across all digital and retail touch points.
We have a network of 67 stores across the country, with a strategy to optimise the store network and maximise returns per square metre while creating an inspiring shopping environment for our customers.
We are focused on productivity through enhanced store layouts, new and replacement stores, and improving efficiency of floor space through refurbishments.
03
About Myer
Darwin
Darwin
Cairns
Townsville
Cairns
NT
Mackay
NT
arousel
QLD
ty
Carousel
City
QLD
WA
WA
Perth
beth
SA
zabeth
Mackay
Townsville
Brisbane Maroochydore
Toowoomba
SA
Brisbane Maroochydore
Toowoomba
Darwin
Joondalup
NSW Dubbo Hills
& ACT
Green
Green
1
e Plaza
1
Perth
ree Plaza
Karrinyup
y
Adelaide
Morley
Adelaide
Tuggerah Sydney
Orange
Erina
Wollongong Shellharbour
Sydney
Belconnen
WollongongWagga
Shellharbour
Canberra
Wagga
Belconnen
Canberra
Albury Woden
Bendigo Woden
Albury
Ballarat Melbourne
Melbourne
Geelong
VIC
Bendigo
Ballarat
Geelong
Perth City
Carousel
hland
Doncaster
Eastland
Doncaster
astland
Knox City
Chadstone
Knox City
hadstone
outhland
uthland
Fountain
Gate
Brisbane
Brisbane
Elizabeth
Hornsby
Castle Hill Hornsby Warringah
Blacktown
Blacktown
Parramatta
Parramatta
Brookside
Warringah
Castle Hill
Penrith
thland
North Lakes
Loganholme
Coomera
Pacific Fair
Robina
Pacific Fair
Robina
Miranda
Perth
Sydney
Melbourne
Plenty Valley1
Penrith
Highpoint
Melbourne City
Werribee
Northland
Doncaster
Eastland
Fountain
Gate
Warringah
Macquarie
Top Ryde
Karrinyup
Parramatta
Chatswood
Blacktown
Sydney City
Morley
Bankstown
Knox City
Chadstone
Southland
Adelaide
Brisbane
Adelaide
Joondalup
Hornsby
Castle Hill
By anticipated opening*
2015 2016 2017
Darw
Brisbane City
Tea Tree Plaza
Carindale
Indooroopilly
Mt GravattAdelaide City
Loganholme
Bondi
Eastgardens
Coomera
Carousel
Colonnades
Pacific Fair
Robina
Miranda
Adelaide
Store closures
Dandenong (Oct 2013)
Elizabeth (Feb 2014)
Launcesto
TAS
Hobart
Chermside
Garden City
New stores
VIC
Bendigo
Ballarat
Geelong
North Lakes
Elizabeth
Brookside
Wollongong
Wagga
B
C
Albury Wode
Melbourne
Marion
Roselands City
Perth
Liverpool
Hurstville
Frankston
G
Orange
Karrinyup
Carousel
MYER stores
Garden City across Australia
Coomera
Miranda
Frankston
NSW Dubbo H
& ACT
Perth City
Eastgardens
Toow
SA
Morley
Loganholme
Bondi
Bondi
Bankstown
Roselands Marion
Liverpool
Roselands
Eastgardens
Hurstville
Liverpool
Frankston
QLD
Joondalup
Chermside
Mt Gravatt
Sydney City
Colonnades
Hurstville
67
Perth
North Lakes
Chermside
Brookside Brisbane City
Perth
Brisbane City
Indooroopilly
Carindale
Indooroopilly
Carindale
Mt Gravatt
Macquarie Tree Plaza
Chatswood
Tea
Macquarie
Chatswood
Top Ryde
Top City
AdelaideRyde Sydney City
Bankstown
Fountain
Gate
M
Launceston Launceston
Adelaide
Sydney
Sydney
Penrith
Townsvi
NT
WA
enty Valley
Cairns
VIC
TAS TAS
Hobart
Hobart
Garden City
Plenty Valley1
1
Charlestown
NSW Dubbo Hills CharlestownTuggerah
& ACT
Orange
Erina
Perth
Elizabeth
Melbourne Existing stores.
* Subject to variation and review.
1
Under review.
WA
Syd
Plenty Valley1
Penr
Tea Tree Plaza
Adelaide City
Highpoint
Melbourne City
Perth
Northland
Doncaster
Eastland
B
04
MYER Annual Report 2013
Joint Report by Chairman and Chief Executive Officer
The retail environment
The consumer environment continues to be challenging, despite Australia being relatively well positioned compared to Europe and the United States. The sector would benefit from reform to help drive productivity and become more competitive in a global marketplace.
Paul McClintock AO (left) and Bernie Brookes (right)
The story of the past year has been the consistent execution of our five-point plan, while having an eye to the future and adapting the business to capitalise on the changing structure of retail. In the face of a number of external challenges, our focus on the things that we can control yielded solid results.
Total sales for the full year ended 27 July 2013 were up
0.8 percent to $3,145 million. Reflecting our focus on fashionability, sales in our key categories of Womenswear,
Cosmetics, and Menswear were all up on last year.
A highlight of our financial performance was a further improvement in our operating gross profit margin, up 40 basis points to 41.7 percent.
While we maintained a disciplined focus on costs throughout the year, significant cost increases relating to wages, occupancy costs and utilities impacted the result. While we anticipate that costs will step up again in financial year 2014, a proportion of the increase will be one-off costs associated with the major refurbishments of three of our top 20 stores and investment in omni‑channel that will not be repeated in future years.
We reported net profit after tax (NPAT) of $127 million, down 8.7 percent on last year. This included a non-cash charge of $2 million relating to the sass & bide put option revaluation. Excluding this charge, NPAT was $129 million.
The Board was pleased to determine a fully franked final dividend of 8.0 cents per share, taking the full year dividend to 18.0 cents per share.
During the year, we refinanced $625 million debt facilities at a reduced interest rate margin with continued support from our lending syndicate. We remain confident in the strength of our balance sheet and continued strong cash generation.
Retail continues to be the biggest private employment sector in the country. All Australian retailers are being impacted by rising employment costs, escalating utilities costs and a GST loophole providing an unfair advantage to foreign retailers.
We continue to adapt our business in line with customer expectations and to meet current challenges. We are responding to the ways our customers shop with us through the execution of our omni-channel strategy and revitalising our store environments.
We continue to research and survey our customers to better understand their needs.
Strategy to deliver shareholder value
We have a clear five-point plan that has guided us through the recent challenges and continues to provide a clear roadmap. We have been adapting systems and processes to meet the challenges of the current environment and are making strategic investments to position the business for the future.
We continued our focus on improving customer service with a cultural change program to ‘delight’ our customers.
As the focus on improving margins is now embedded into all areas of the business, store key performance indicators have been revised with an increased focus on service and sales. A new customer feedback system has been implemented, providing immediate comments and identifying areas for improvement. Our cultural change program is yielding results with improved customer compliment metrics.
Our focus on newness, innovation and inspiration for our broad customer base remains key to our efforts. During the year, we successfully integrated a number of strategic brands we had purchased in 2012 to further strengthen our merchandise offer. Our vertically-integrated Myer
Exclusive Brands model, supported by our global sourcing offices, continued to grow and now represents 20 percent of the sales mix. We announced a number of important new brands and department store exclusives, including
Napoleon Perdis, Peter Alexander and Seafolly.
J oi n t r e por t b y C h airma n a n d C h i e f E x e c u t i v e O f f ic e r
05
We are delighted to have acquired the remaining 35 percent of the highly successful sass & bide business. Since Myer acquired a 65 percent stake in the business in February 2011, sass & bide has delivered a consistently strong performance, growing sales by 45 percent and doubling profit over the period. This has been an outstanding achievement.
We made significant progress in strengthening our loyalty offer during the year, including the restructuring of the rewards levels to include a premium Platinum tier, and the launch of a MYER one smart phone app. This leading loyalty program continues to be a key competitive advantage with access to rich data for decision-making.
The strength of our brand and store network is key as we build a leading omni-channel offer. We recognise the significant opportunity in online retailing, and sales and key customer metrics all more than doubled on last year. We recently implemented a new order management system to deliver a much improved customer experience across all our retail channels as well as significant efficiencies in fulfilment.
We opened new stores at Fountain Gate (Victoria),
Townsville (Queensland) and Shellharbour (New South
Wales). Significant refurbishments at three of our top 20 stores in Adelaide (South Australia), Miranda (New South
Wales) and Indooroopilly (Queensland) impacted sales during the second half, but will deliver more productive stores that are inspiring for our customers on completion.
Our people and social licence to operate
Our 12,500 strong team are core to our success. We would like to thank all team members for their commitment and focus. Their passion draws on the proud heritage of our iconic brand, and the philanthropic and community service legacy on which Myer was established. Myer is committed to sustainable business practices, and we recognise the importance of supporting the communities we serve every day in our stores. Through the Myer Stores Community
Fund, we have assisted over 80 local and national charities this year. This year we have published our first Sustainability
Report, which is available online.
41.7%
Operating gross profit margin – increased by 40 basis points
We embrace diversity right across the business and strive for an inclusive and fair environment in which to work for all team members.
The Board has capitalised on the change in leadership with a new Chairman and the appointment of Rupert Myer AM as Deputy Chairman giving renewed focus.
The Board will focus on a CEO succession plan into the new year and will provide an update to shareholders in due course.
Looking to the future
We see these as exciting times as the industry faces challenges and we adapt our business to the changing structure of retail. We have a robust operational five-point plan in place and we consistently look for opportunities to drive the long-term sustainability of the Myer business.
However, we remain cautious about the year ahead given the challenges of the economic outlook and consumer confidence. During FY2014, the business will transition through the impact of major refurbishments and face increased operating costs.
We are confident that our strategy remains the right one to grow the business and maximise shareholder returns.
As we move into FY2015, we expect to benefit from improved operating leverage and stronger fundamentals as a result of the completion of major refurbishments, the online business becoming profitable, and the ongoing optimisation of our store network. We thank all our shareholders for their ongoing support, and look forward to seeing you at our
Annual General Meeting in November.
Paul McClintock AO
Chairman
Bernie Brookes
Chief Executive Officer and Managing Director
06
MYER Annual Report 2013
Operating gross profit margin (%)
42.0
42.0
41.5
41.5
41.0
40.5
40.0
40.0
39.5
39.0
FY 0 9
3.28 3.28
3.26
39.5
39.0
3.26
41.0
40.5
Total sales ($b)
41.31 41.31
3.16
3.16
3.14 3.14
3.12 3.12
40.26 40.26
39.63 39.63
39.18 39.18
FY0 9 FY1 0
FY1 0 FY11
FY11 FY12
Net profit after tax ($m)
168.7
168.7
162.7
162.7
139.3
127.2
7
41.71 41.71
FY12 FY13
FY09
FY 13
FY10 FY11 FY12 FY13
FY09 FY10 FY11 FY12
Earnings per share (cents)
29.0
23.9
139.3
127.2
127.2
Full year dividends (cents)
29.0
27.9
22.0 22.5
FY13
27.9
29.0
23.9
21.8
27.9
21.8
23.9
22.0 22.5 22.0 22.5
19.0
21.8
18.0
19.0
18.0
19.0
18.0
108.7
FY10 FY09 FY10 FY11 FY12
FY11 FY12 FY13
9 FY13
FY13
FY10
FY11
FY12
FY13
FY10
FY11 FY10 FY11 FY12
FY12 FY13
FY13
FY10
$3,144.9m
Total sales +0.8% in 2013
Financial Summary
FY2013
FY2012
Change
Sales (million)
$3,144.9
$3,119.1
+0.8%
Operating gross profit (million)
$1,311.6
$1,288.4
+1.8%
41.71
41.31
+40 bps
$1,007.0
$976.6
+3.1%
Earnings before interest, tax, depreciation, amortisation (EBITDA) (million)
$304.6
$311.8
-2.3%
Earnings before interest and tax (EBIT) (million)
$214.9
$230.0
-6.6%
NPAT (million) after non-controlling interest
$127.2
$139.3
-8.7%
Operating gross profit margin (%)
Cash cost of doing business (million)
FY11
FY12
FY13
FY10
FY11 FY10 FY11 FY12
FY12 FY13
FY13
O perating and financial R eview
07
Operating and
Financial Review
Total sales grew by 0.8% to $3,145 million in 2013. Sales and gross profit growth was achieved across key categories including
Cosmetics, Womenswear, Menswear, Childrenswear, and Accessories.
Sales
The best performing states were Queensland, Western
Australia, Victoria and New South Wales. Myer Exclusive
Brands continued to perform well, growing by $40 million, and now account for 20.0 percent of sales, up from
18.9 percent in 2012.
Online sales enjoyed a second consecutive year of strong growth of over 200 percent. This trend is very encouraging, and online continues to present a significant growth opportunity given that online sales remain a small proportion of total sales.
Depreciation, net finance costs and tax
Reflecting significant capital investments in previous years, our NPAT result was impacted by a 9.7 percent increase in depreciation to $90 million.
While foot traffic in our stores remained soft, the trend improved, and importantly both the average transaction value size and conversion rate improved over the year, aided by an improvement in customer service. Softer foot traffic has been offset by increasing online engagement, reflecting the changing customer behaviour towards omni-channel shopping and increasing online research before shopping in store.
Net interest expense, pre sass & bide put option revaluation, reduced from $33 million to $26 million principally due to a reduction in average net debt and lower interest rates.
Margins and costs
In addition to sales growth, the continued improvement in operating gross profit was a highlight of the result, with a 40 basis point improvement in the operating gross profit margin. This was underpinned by Myer Exclusive Brands sales growth and margin expansion, a further reduction in shrinkage and improved mark-down management.
A tax expense of $57 million represents an effective tax rate of 30.4 percent.
Whilst operating costs continued to be well managed, the gross profit margin expansion was not sufficient to offset the increase in operating costs during the year. Cash cost of doing business (CODB) increased by $30 million to
$1,007 million. The increase was attributable to:
›› cost of labour;
›› store occupancy costs (rent, utilities, rates and taxes); and
›› operating expenses associated with growth initiatives including refurbishment of three of our top 20 stores, as well as investment in our omni-channel capability and Myer Exclusive Brands development.
A disciplined focus on inventory management was the key driver of the working capital improvement and was underpinned by prior technology investments. We have been focused on creating a fast fashion environment with stock turns up and underlying inventory, excluding new and closed stores, decreasing by 7.4 percent to
$333 million. Creditor days were stable at 70 days.
The increase in operating costs was partially offset by a reduction in support office costs.
The movement in the valuation of the put option liability for sass & bide on the balance sheet resulted in a non‑cash charge to net finance costs of $2 million.
Excluding this charge, NPAT was $129 million.
Cash generation and working capital
The business continues to be highly cash generative, reporting a strong 11.4 percent increase in operating cash flow to $300 million.
Strong balance sheet
Net debt reduced by $43 million to $340 million and resulted in a lower net debt to EBITDA ratio of 1.11 times.
In July 2013, the Company’s $625 million debt facility was refinanced with improved interest margins and strong support from lenders. We refinanced early to take advantage of favourable pricing in the market.
08
MYER Annual Report 2013
1 Improve customer service
We continued to invest in service initiatives and innovation in order to improve our customers’ shopping experience.
During the year, we were delighted to have been recognised for improvement in customer service, winning the Australian Department Store of the Year in the Roy Morgan Customer Satisfaction Awards 2012 and being finalist in the 2013 ARA Australian Retail
Customer Satisfaction Award based upon customer satisfaction feedback over the previous 12 months.
We have also been announced as a finalist in the
2013 ICSP International Customer Service Award.
Service initiatives
We continued to develop and coach our team members on best practice customer service during the year. We introduced a new customer service training program focused on enhancing our customer service culture, with
90 percent of the store management team completing the program.
We implemented a customer engagement program for our premium Platinum and Gold MYER one members to ensure that these loyal customers enjoy the best possible experience when shopping with Myer.
Our Womenswear personal shopping service was expanded, with personal shopping assistants now available in 14 stores nationally. The sales productivity of these assistants is over 20 percent higher than that of the average Myer team member, and we have had very positive feedback from customers about this service.
As a result of this success, we launched a personal shopping service for our discerning male shoppers in Menswear in 14 stores.
An upgrade of Customer Service Centre technology during the year has enabled full integration with our online service and has delivered a significantly improved customer service model for online customers.
We continue to benefit from our leading point-of-sale system investment.
Efficiency initiatives
Stock theft and fraud, known as shrinkage, was further reduced, remaining below world-wide department store best practice. This is a clear reflection of our previous investment in leading closed-circuit TV system technology, security tags and a comprehensive communication program for our team members.
We have implemented a new feedback program which delivers customer voice feedback directly to team members.
We achieved double-digit improvement in the compliance of ‘floor-ready’ stock from suppliers, that is, stock which is already security tagged, price ticketed and on hangers. This allows team members to reallocate time to serving our customers.
A review of all process and resource requirements has been initiated to improve the management of stock and the speed of getting merchandise to the selling floor in stores. Any efficiency gains made are reinvested in customer facing hours in stores.
Customer feedback is pivotal to our strategy to improve customer service, and we have continued to innovate in this area with a new feedback program, Feedback ASAP, which delivers customer voice feedback directly to team members. The trial results were remarkable, and in August
2013 we commenced a national rollout of this program, which will provide an independent Net Promoter Score for our stores.
Our 12,500 team members are to be commended for delivering significant improvements in customer service during the year. We are encouraged by the increasingly positive customer feedback we have received about our service levels. Excellent customer service, the right merchandise offer, an inspiring shopping experience together with our trusted brand are key competitive advantages in an omni-channel environment where customers are increasingly discerning about where and when they choose to shop.
O perating and financial R eview
09
Increasingly recognised for improvements in customer service The latest and most sought after fragrances and cosmetics
10
MYER Annual Report 2013
Newness, fashionability, quality and value
Significant range of desired brands including Piper,
Cue, Trent Nathan and Australian House & Garden
O perating and financial R eview
11
2 Enhance our merchandise offer
We are focused on inspiring and delighting our customers and want to be the first choice when shopping for fashion, cosmetics and the home.
Myer has a significant range of desired brands and styles that offer newness, fashionability, quality and value.
The Myer merchandise offering includes well-known national brands, Australian and international designers, as well as 66 brands which are owned or licensed and distributed exclusively by Myer, known as ‘Myer
Exclusive Brands’.
Our Myer Exclusive Brands are comprised of brands developed by Myer, Designers @ Myer, national brands owned by Myer, and licensed national brands. Myer
Exclusive Brands are now represented across a wide range of price points and all categories. Key brands that are well established with strong customer advocacy have been successfully extended into new categories. Myer Exclusive
Brands deliver a significantly higher profit margin through the vertical-integration of design, development, sourcing, supply chain, and marketing.
During the year, our merchandise offer continued to be refreshed with exciting new brands and inspiring new season fashion.
The best performing brands during the year were
Basque, Cue, Sportscraft, Regatta, TS 14+, Review,
MAC Cosmetics, Chanel, Blaq, Reserve, Breville,
Apple and Sunglass Hut.
Sourcing offices deliver a key competitive advantage
We are looking forward to launching Napoleon Perdis to our customers in 65 Myer stores from October, with a national launch program planned for November.
We have a significant number of new brands arriving in store including Dita Von Teese, Superdry, Orla Keily,
Dualit, Kate Spade New York and Bang & Olufsen.
Growth in our Myer Exclusive Brands was driven by key brands including Basque, Regatta, Reserve, Blaq, Trent
Nathan, Bauhaus and Australian House & Garden as well as the extension of established brands into new categories such as sass & bide intimates, Jayson
Brundson Home, and Leona Edmiston Home.
We have enhanced our climatic ranging to ensure that our merchandise offering is appropriate for the different climates right across the country, from Hobart to Perth to Mackay.
Strong growth was achieved in small appliances due to premium brands including Vitamix, Bamix and
Delonghi, as well as innovative in-store concept displays from KitchenAid and Nespresso.
An agreement was reached with the shareholders of sass
& bide to acquire the remaining 35 percent stake in the business, taking Myer’s ownership to 100 percent. Since
Myer acquired an initial stake in the business in February
2011, sass & bide has delivered consistently strong performance. We continued to attract significant new brands including
Napoleon Perdis, which will add over $10 million in sales, as well as Peter Alexander and Seafolly. Brands recently purchased or licensed including Australian House &
Garden, Bauhaus and Trent Nathan, which each add over $5 million in sales per annum, continued to grow.
The launch of Piper with Jodi Anasta as Ambassador in
August 2013 is an example of our strategy to strengthen our Myer Exclusive Brands offer through the creation of stronger brands with more depth of range that stretch across multiple categories.
Double-digit sales and profit growth was achieved in the highly successful sass & bide business for FY2013.
sass & bide is well placed to continue building on this strong platform and has an exciting pipeline of growth initiatives to deliver, including new store openings and brand extensions into new categories.
Over the course of the year, our sourcing offices in Asia performed ahead of expectations in volume and margin improvement and speed to market. We have invested across all aspects of direct sourcing, driving value and volume growth within a strong governance framework.
12
MYER Annual Report 2013
Footwear department – Sydney City Store
O perating and financial R eview
3 Strengthen our loyalty offer
Our MYER one loyalty program is one of
Australia’s most successful loyalty programs and represents approximately 70 percent of Myer’s sales.
13
The data from this program is highly valuable and enables critical evaluation of key aspects of our business including store locations, brands, space, product, service and marketing.
The program reached a milestone with the five millionth member joining the program.
During the year, membership tiers and rewards levels were restructured to include a premium Platinum tier.
We now have four reward levels within MYER one, being Member, Silver, Gold and Platinum, based on annual spend with Myer. The Platinum tier was launched for our top 2,000 customers, by CEO invitation only.
Platinum Members are rewarded with ‘money can’t buy’ experiences, a concierge and private shopping parties.
Launch events were held around the country in August
2013. New silver cards were also issued to our Silver tier members throughout August 2013.
The MYER one app was launched before Christmas 2012, and has been updated and improved over the course of the year, giving members smartphone access to shopping credit balances, Rewards Cards balances, and notifications about events and exclusive news. The app now has been downloaded over 200,000 times.
Over $50 million in Rewards Cards were distributed to members during the year, with an average spend on redemption of 3.8 times the value of the card.
The new MYER one Wine Club was launched in
November 2012 with over 15 million shopping credits earned by members and a growing interest in the compelling offer by our MYER one members.
During the year, the MYER one affiliates strategy was strengthened with the very well received introduction of key partner Caltex. This is a reflection of our refocus on key partners with a national reach and over 80 million shopping credits earned since April 2013. Building on this success, we will continue to build relationships with meaningful key partners to enhance the MYER one affiliates program.
MYER one provides incredible insights through data analysis
The Myer Visa card, rated five stars by CANSTAR for outstanding value (with annual spend of $12,000) continues to be an important part of our loyalty offer with cardholders earning MYER one shopping credits for their purchases.
The Commonwealth Bank ‘pay-with-points’ collaboration, launched in December 2012, has been well received by customers and uses market-leading technology to allow instant redemption of Commonwealth Awards points at
Myer point-of-sale.
Our award-winning Emporium magazine is now available each month in a digital format that goes out to 1.3 million MYER one members. 80,000 editions have been downloaded to iPads and tablets. The printed magazine is available free of charge for our valued MYER one members, with over 250,000 editions distributed each quarter.
We have a pipeline of further enhancements for our
MYER one loyalty program, as it is a key competitive advantage providing incredible insights through sophisticated data analysis.
14
MYER Annual Report 2013
4 Build a leading omni-channel offer
Our customers’ expectations have evolved in line with increasing online inspiration, information and digital commerce, and Myer now operates in a global marketplace.
Our focus is on building a leading omni-channel offer that is inspiring, compelling and available to our customers wherever and whenever they choose to engage with us.
Our previous investments in a merchandise management system, a point-of-sale system, and a world-class supply chain have set the foundations for effective inventory management. This provides us with a significant competitive advantage in the development of our omni‑channel offer.
During the year, we enjoyed significant growth in key customer metrics with online sales growth of over
200 percent, the doubling of average monthly website visits and solid growth in the online basket size and average online order value.
Our online business continues to climb the store rankings, and in some weeks it trades in the top 25 largest stores in the Myer network.
The expansion of our online range has been a priority, with a significant increase in stock-keeping units (SKUs) during the year to over 70,000.
In August, we successfully implemented a further phase of our new order management system to deliver substantial improvements to the customer experience when shopping online, including improved flexibility and efficiency benefits for stores, customer service and supply chain.
Fulfilling online order for Vue homewares
This has delivered more detailed product information with real-time product availability, stock availability by store, customer login to store MYER one information, address book and check on progress of current online orders; and delivery options – home delivery, ‘click and collect’ and multi-delivery, which allows customers to order for more than one person at a time, and potential for delivery from all stores.
O perating and financial R eview
‘Click and collect’ has been available since
December 2012, and we have plans to accelerate this offer for Christmas. Customers can shop online or on their smartphone and then pick up their order in store, delivering a truly flexible way for our customers to shop with us.
From September 2013, Cargo Services has provided logistics services for the online business to meet projected fulfilment volumes, particularly over peak trading periods.
It will hold the 15,000 fastest turning SKUs, with 500,000 units expected to be dispatched in the first 12 months at a significantly lower cost than store‑based fulfilment.
A digital services team has been successfully established in-house and includes team members with significant international experience from some of the world’s leading retailers. Digital services being delivered include social media, e-commerce, digital advertising, web design and email marketing.
15
Website visits doubled
Online
order value up
We are increasingly integrating our marketing and sponsorship activities, balancing traditional media with innovation and digital marketing opportunities. Digital marketing and social media are now part of our everyday marketing focus on all campaigns.
Digital channels play an ever more important role in the way we connect with our diverse customer base, including with live streaming of our seasonal fashion launch parades, driving significant engagement through social media channels including Facebook,
Twitter and Instagram.
During the year, we were delighted to announce the five-year extension of our significant partnership with the
Victoria Racing Club including the iconic Fashions on the
Field, and a new partnership with the Australian Turf Club for three years. Myer is synonymous with racing across the country and now sponsors 23 race days across
14 turf clubs.
Our racing sponsorship is also leveraged for our customers through in-store shopping events, designer workshops, exclusive competitions, visual merchandising displays and online and social media content.
We also announced that Ambassador Laura Dundovic has extended her contract with Myer.
We continued to innovate, with pop-up shops offering a dynamic product range trialled in high traffic areas such as CBD railway stations and shopping centres.
Our stores will be alive this Christmas with an integrated, interactive Christmas experience for our customers. This exciting development will ensure the magic of Christmas truly shines at Myer.
The progress made during the year is evidence that our strategy to become a leading omni-channel retailer has real momentum and has prompted us to bring our marketing, MYER one, online, commercial services and digital teams together into a new business group, and prioritise investment in omni-channel in order to accelerate growth, scale and profitability.
Omni-channel: an offer that is inspiring, compelling and available whenever and wherever our customers choose to engage with us
16
MYER Annual Report 2013
5 Optimise our store network
Our focus is on maximising returns per square metre by improving productivity through enhanced store layouts, new stores, improved efficiency of floor space through refurbishments and the closure of a handful of stores.
We have for the first time in ten years increased our sales per square metre with the early work on space delivering benefits.
In this context, we continue to review the merits of all existing and planned stores in our portfolio, including proactive lease negotiations which have yielded pleasing outcomes.
During the year we successfully opened new stores at
Fountain Gate (Victoria) in September 2012, Townsville
(Queensland) in October 2012, and Shellharbour
(New South Wales) in May 2013. All stores are well on track to achieve their return on investment hurdles.
The Fremantle (Western Australia) store closed in
January 2013. All team members were redeployed to nearby stores. We announced the closure of our
Elizabeth (South Australia) store and our Dandenong
(Victoria) store, with both scheduled to close in FY2014.
Our MYER one data shows us that customers are also shopping at nearby stores.
We continued to invest in revitalising our stores for our customers with a number of refurbishments. The
Highpoint (Victoria) store was refurbished and relaunched in March 2013 with a number of new brands, refreshed fixtures and fittings, and an improved floor layout.
A significant refurbishment of our store at Indooroopilly
(Queensland) commenced during the year and is scheduled to be completed in 2014.
During the year a major upgrade of our CBD store in
Adelaide (South Australia) commenced. We launched a new ‘lifestyle’ zoned homewares floor to a great customer response in July 2013. The refurbishment will be completed early 2014, reflecting the significant scope of works in our store as well as the concurrent centre refurbishment and Rundle Mall upgrade.
A refurbishment of our Miranda (New South Wales) store also commenced and is scheduled to be completed for
Christmas 2014, with one floor handed back to the landlord to reduce footprint while maximising productivity.
Continue to invest in revitalising our stores for our customers
We have a ‘space optimisation’ project underway for eight of our stores, realigning space to maximise the available floor space for additional brands and more profitable categories including women’s and men’s fashion. This will complete the reallocation of floor space that was previously occupied by electronics categories we have exited or rationalised, including white goods, gaming and consoles, music and DVDs, and navigation systems, to more profitable categories.
We continue to adapt our business in line with customer expectations to meet current and future challenges.
We have changed processes and systems to improve productivity, leveraging our previous IT investments.
We are responding to the ways our customers want to shop with us through the execution of our omni-channel strategy and revitalising our store environments.
We will continue to review base leases as a normal part of doing business and ahead of lease expiry to ensure that we optimise our store network.
O perating and financial R eview
17
Three new stores
Fountain Gate
Townsville
Shellharbour
Successful personal shopping service extended to Menswear in selected stores
18
MYER Annual Report 2013
Sustainability
Myer is committed to building a socially responsible business and integrating sustainability into everyday business activities.
My Customer
My Team
My Community
My Environment
My Business
›› Customer service and satisfaction
›› Attraction and retention
›› Myer Stores
Community Fund
›› Energy and emissions
›› Ethical sourcing
›› Packaging stewardship
›› Corporate governance
›› Volunteering
›› Waste and recycling
›› Shrinkage
›› MYER one loyalty rewards ›› Capability and development ›› Reward and recognition
›› Workplace safety
›› Strategic community partnerships At Myer, sustainability is about responsible business growth and development that considers and addresses the environmental, ethical, economic and social impacts of our business operations and strategies. Sustainability is about maximising the positive outcomes and influence we can have on our internal and external stakeholders including our people, our communities, suppliers, customers, investors and the environment.
Myer’s approach to sustainability management is to integrate responsibility and action into the business as part of our ‘everyday’ operations and management.
Myer has developed a Sustainability Strategy focusing our activities into ‘five pillars,’ with key areas of focus identified through consideration of Myer’s business activities and impacts, internal risk assessment and in response to our stakeholder concerns and interests.
For each key area, we have identified measures to track our performance. It is our intention to set that performance benchmark for each of these measures to develop targets and track performance over time.
We welcome stakeholder feedback – if you think we have missed a key issue for our business, please let us know at sustainability@myer.com.au.
›› Product responsibility
S ustainability
19
My Customer
Myer’s customers are key to our sustainability as a business.
We continue to inspire and delight them with our service, and reward them for their loyalty, as a key element of Myer’s business strategy.
Homewares –
Sydney City Store
50million
$
Over
Myer one Rewards
Cards distributed
Customer service and satisfaction
In July 2013, Myer launched a new program to capture customer satisfaction and feedback from all stores.
Through an SMS message, MYER one customers are prompted to provide feedback regarding their experience in store. Feedback and comments are recorded and forwarded to the Store Management team for action.
Through this program, Myer has the ability to measure the Company’s ‘Net Promoter Score’, which has become one of our five store imperatives.
Tracking the Net Promoter Score and having proactive and immediate feedback will enable us to understand how well customer service is being delivered, gain insights in real time, and identify opportunities for improvement. From next year, we will publish results from this customer satisfaction and feedback program.
MYER one loyalty rewards
Myer seeks to reward our customers through the
MYER one loyalty program. For more information on the program and the rewards delivered this year, please refer to page 13.
20
MYER Annual Report 2013
My Team
Myer team members are our most important resource. We are committed to offering our more than 12,500 team members a supportive, challenging and rewarding workplace that enables them to contribute and develop to their full potential.
Attraction and retention
Having a motivated team of people who enjoy what they do is essential to the success of our business. At the end of the year, we had a total of more than 12,500 team members with a retention rate for the year of 74.4 percent.
Over the peak Christmas trading period, Myer employs additional casual employees, increasing the team member numbers in this period to over 15,000.
Myer offers an exciting, rewarding and supportive workplace. Team member benefits include store merchandise discounts, flexible work options and a range of paid and unpaid leave options.
Myer supports gender, age, language, disability and cultural diversity through our diversity policy. For more information on our diversity performance and team member profile, please refer to pages 35 to 38.
Capability and development
Myer supports the development of all our team through regular performance feedback, goal setting and career development sessions. Further skill and capability development opportunities are offered through on the job training, instructor-led training and online learning modules.
During the year, 9,810 team members took part in
8,734 hours of instructor-led development training and a further 38,228 online enrolments resulted in
18,265 online training hours.
Reward and recognition
We recognise and celebrate individual and team performance through a range of recognition programs.
The annual Myer Inspirational People Awards recognise individuals and teams who have contributed to Myer achieving our Company goals, including sustainability, safety and community contribution. The CEO’s
High Performers Club recognises excellence in sales performance, and 46 people were added this year to the Club, which had 853 members in FY2013. The Myer
25 Year Club recognises the loyalty of our longstanding team members, with 182 new members added this year.
Shellharbour
Store opening
Workplace safety
Safety is a key performance measure across our business, for our stores, distribution warehouses and support office.
We are proud of our ongoing improvements in safety performance. Our Lost Time Injury Frequency Rate (LTIFR) has shown consistent reduction over the past five years, from 20 in 2009 down to 8.6 this year. There were 118 lost time injuries in the year, down from 147 last year. The ongoing improvement on LTIFR is driven by the focus on safety through implementation of Myer’s safety system.
Team members are well supported following injury with programs such as incident reporting and InjuryNET, which provides early access to health providers.
All Myer team members receive safety induction and ongoing training, and all site contractors must undergo safety induction training. Over 10,000 team members were trained in the ‘MySafety Matters’, ‘MyMoves’ manual handling and ‘Safe Work Practices’ modules during the year. We also invested in upgrades to manual handling equipment such as garment rails and roll cages.
Our self-insurance licences require Myer to be able to demonstrate compliance and good practice in safety.
In 2013 we successfully completed work health and safety (WHS) audits in Queensland, and passed the
WHS audit for New South Wales in August 2013.
Total team members
Female team members
Retention rate
Development training hours
12,784 78.8%
74.4% 26,999
Workplace safety
8.6 LTIFR
S ustainability
21
Myer’s total contribution to our local communities over
2.1million
$
My Community
Myer has a longstanding history of local community support and engagement, and we continue to be committed to maintaining strong and meaningful relationships with our local communities.
This year, Myer worked with our stakeholders to contribute a total of $2,163,297 to our local communities; including $276,019 direct cash and product donations, $1,319,437 in fundraising and $567,840 worth of donated time.
Myer Stores Community Fund
The Myer Stores Community Fund is committed to building on Myer’s philanthropic tradition of supporting the community since 1924. The Fund supports innovative projects for sick and disadvantaged children and youth, which enrich their life experiences and allow for daily comforts and security, as well as projects for women’s health.
This year, the Myer Stores Community Fund supported
92 charities, donating over $1.3 million.* Myer team members raised money for 60 local charities, with the monies raised matched by the Fund. The Fund also directly supported Redkite; the Olivia Newton-John
Cancer and Wellness Centre and the SMILE Foundation.
Myer stores also support The Salvation Army through sales of its Christmas CD, and other merchandise fundraising for the National Breast Cancer Foundation, the Starlight
Children’s Foundation, and the Cancer Patients
Foundation with its Look Good Feel Better program.
Volunteering
Team members spent $567,840 worth of paid time this year supporting the Myer Stores Community Fund and other charity activities. In addition, a Volunteer
Leave program was introduced in February 2013, with permanent team members able to access one day of paid volunteer leave each year.
Strategic community partnerships
Myer has established strategic community partnerships that strongly align with our business focus, impacts, operations and customers – The Salvation Army, Fitted
For Work and the Myer and Salvos Stores Fashion Rescue.
The Salvation Army
Myer’s support of The Salvation Army will be further strengthened in FY2014 with the launch of a new
Christmas partnership supporting their valuable work at this time of year, as well as the 20th anniversary of Myer’s support of the Spirit of Christmas CD.
Fitted for Work
Fitted for Work assists women experiencing disadvantage to find work and keep it, by providing free personal outfitting, interview coaching, mentoring and transition to work programs. Its most recent Melbourne survey revealed that 75 percent of the women dressed by Fitted for Work were employed within three months of their visit.
Myer assists Fitted for Work through team member clothing donations, engaging suppliers to make clothing and accessories donations, expert pro-bono assistance, and volunteering opportunities.
Myer and Salvos Stores Fashion Rescue
With the aim of increasing textiles recycling, in 2013 we are trialling a relationship with Salvos Stores in Victoria, where community members who donate clothing in
Salvos Stores receive a $10 Myer voucher. Myer and
Salvos Stores intend to extend the initiative into 2014.
Cheque presentation
Shellharbour Store
* Myer Stores Community Fund financial year and audited results
are 1 July to 30 June.
22
MYER Annual Report 2013
Energy and emissions
With a network of 67 stores, four distribution centres and our Melbourne support office, energy use is our key environmental impact, and a significant cost to our business. This year, we developed an Energy Management
Strategy, with a target of 10 percent reduction in energy intensity (energy use by area and opening hour) by 2018.
Site assessment audits were undertaken to identify energy efficiency opportunities, including building management system upgrades, heating and cooling system upgrades, lighting upgrades, education and improved reporting. In
July 2013 we implemented the first of these projects.
Myer’s Energy Management Strategy and reporting facilitates our action and reporting against our Energy Efficiencies
Opportunities (EEO) requirements and our National
Greenhouse and Energy Reporting (NGER) obligations.
My Environment
Measures
Packaging stewardship
Myer is a signatory to the Australian Packaging Covenant, and we are focused on reducing transport and consumer packaging and using recyclable packaging materials.
‘Floor Ready’ is Myer’s key program to achieve in-store product handling efficiencies and drive packaging design and minimisation. A six-criteria checking process is established to report on the compliance levels of arriving merchandise:
›› garment swing and security tags;
›› price marking;
›› hanger requirements;
›› minimal and uniform product packaging;
›› product folding and packing; and
›› reduction of individual product plastic bags.
182,320 TCO e
2
Recycling rate
55%
182,320 TCO2e
0.05 kgCO2e/m2/opening hour
* nergy emission data were measured 1 July 2012 to 30 June 2013.
E
Emissions
73%
*
Emissions intensity
737,964 GJ
Floor Ready compliance
190.19 kJ/m2/opening hour
Emissions
Energy use
-4.8%
737,964 GJ
Energy intensity
We focus our efforts on our most significant environmental impacts of energy use and associated carbon emissions, packaging and waste management, and recycling of packaging materials.
Emissions reduction from FY2012
FY2013 Performance
Energy use*
Myer is committed to minimising the impact of our operations on the environment, and integrating environmental management and accountability throughout our business.
Overall, ‘Floor Ready’ compliance for the year was an average of 55 percent, with a significant improvement over the year, to 73 percent in July 2013. More than 77 percent of Myer’s active suppliers are signed on to the program, and we continue to engage more suppliers and work to improve compliance.
Waste and recycling
Myer has established recycling systems for security tags, clothes hangers, paper, cardboard and film plastics at all our sites. Our head office also recycles organics, paper towel and commingled containers; and our distribution centres recycle pallets, pallet sheets and metals.
Excess stock, damaged stock, samples and returns are recycled and reused through a third party, who on-sold more than 424.1 tonnes of stock and recycled a further
42.1 tonnes this year.
Material
Tonnes
Recycling
Cardboard and paper
Plastic film (LDPE)
Printer cartridges
Damaged stock
Hangers reuse (24.4 million hangers)
Security tags (3,885,692 tags)
Bottles and cans
Organics
3,914.7
420.3
0.4
42.1
494.0
69.9
58.0
6.1
Total recycling
5,005.5
Waste
General waste*
4,166.4
Diversion rate
* ased on waste density of 50kg/m3 at sites where volume only
B
is recorded.
55%
S ustainability
23
Our ethical sourcing focus in 2014 will be:
›› audit engagement of existing local Myer Exclusive
Brands suppliers;
›› inclusions of factory details on supplier merchandise registration forms;
›› re-audits on a risk-weighted basis in line with our two‑year audit cycle;
›› review audits for the top 100 Myer Exclusive
Brands suppliers;
›› re-audits where moderate findings from Myer-initiated audits were determined;
›› meeting with our key national and international brand suppliers to review their ethical sourcing policies and frameworks; and
›› introduction of ethical sourcing awareness sessions at our half‑yearly supplier updates.
My Business
Myer considers the ethical and social implications of our business decisions, and we aim to meet the reasonable expectations of all our stakeholders, including customers, investors, suppliers and the community.
Key Focus Area
Measures
FY2013 Performance
Ethical sourcing
Suppliers engaged in ethical sourcing policy (%)
100% of direct suppliers
Supply chain audits (number)
136 audits
Audit non-conformances
69 low and 22 moderate non-conformances Corporate governance
Code of Conduct training
(% of staff in past 24 months)
75.5%
Shrinkage
Shrinkage loss prevention
11% reduction on last year
Product responsibility
Quality assurance and merchandise compliance (%)
95.9%
Ethical sourcing
The Myer Ethical Sourcing Policy supports our commitment to sourcing merchandise that is produced in safe working conditions, where the human rights of workers are respected. A framework designed to measure supplier adherence, identify breaches, and continuously improve the ethical performance of our supply chain supports the Policy. The framework includes:
›› transparency on the location of factories by all new suppliers;
›› ranking of suppliers according to risk profile;
›› determining which suppliers are to be audited under the Policy;
›› detail of the audit process and two-year cycle;
›› assessment of the risk level of issues identified during audits; and
›› remedial action plan or withdrawal of supply for non‑compliant suppliers, depending on the severity of the breach.
Myer’s global sourcing offices in Hong Kong and
Shanghai have responsibility for sourcing Myer
Exclusive Brands merchandise.
In 2013, Myer has engaged with merchandise suppliers to ensure that they are aware of their responsibilities to adhere to the Myer Ethical Sourcing
Policy. Myer undertook 136 audits of direct supplier factories. As a result of these audits, 91 non-conformances were identified, of which 69 rated as ‘low’ (isolated minor breach), 22 as ‘moderate’ (not a serious breach, but needs to be addressed), and none as ‘high’ (significant and in breach of the Policy). Remedial action plans are required from non‑conforming suppliers, and follow-up contacts were undertaken to ensure that corrective actions were initiated.
No Fur policy
In November 2012, Myer implemented a merchandisewide ‘No Fur’ policy, with only faux (fake) fur trims or garments being sold in Myer stores.
Corporate governance
Myer is committed to the highest levels of integrity and ethics in our business operations and interactions with our stakeholders. This is supported by our Code of Conduct, team member training and a whistleblower program.
Team members are required to acknowledge acceptance of the Code of Conduct prior to commencing work, and then annually refresh their Code of Conduct training.
In the past 24 months, 75.5 percent of team members completed the Code of Conduct training. Efforts are being made to increase compliance through email contacts for team members, regular compliance level reporting to the managers and a proposed escalation process. The Myer confidential whistleblower hotline service is also widely promoted to team members, contractors and suppliers.
For more information on our corporate governance commitment and performance, please refer to page 28.
Shrinkage
‘Shrinkage’ is the loss of product and associated profit due to product theft or loss through product handling processes. Myer has a dedicated shrinkage cultural and process-based program to focus on reducing these losses.
In FY2013, shrinkage reduced by 11 percent. These results were delivered through:
›› embedding shrinkage management in store and corporate business operations;
›› a continued focus on high-risk stores and merchandise categories;
›› the deployment of Loss Prevention employees and utilisation of CCTV;
›› improvements in merchandise protection, including source tagging of merchandise by suppliers; and
›› an ongoing focus on compliance.
Product responsibility
Myer works with our suppliers to source and develop high quality and safe products, and we take our responsibilities regarding product safety and compliance seriously. We have a team of merchandise compliance specialists to monitor our product range for safety and labelling compliance.
In FY2013, we achieved a 95.9 percent conformance rate.
The merchandise compliance team audited 15,566 products, and 628 non-conformances were identified and products removed from sale until issues were resolved with our supply chain. The product audits focused on cosmetics, candles, sunglasses, toys, and specialty food items.
Myer also works with government agencies to promote responsible product use and disposal, such as star ratings and recycling options for electrical appliances.
24
MYER Annual Report 2013
Board of Directors
Left to right: Chris Froggatt, Peter Hay, Paul McClintock AO, Bernie Brookes, Anne Brennan and Rupert Myer AM in the Myer Sydney Store
Paul McClintock AO
Chairman
Independent non-executive director
Member of the Board since 8 August 2012
Appointed Chairman 10 October 2012
Chairman – Nomination Committee
Paul has considerable experience as a director, having held significant chairman and advisory positions across a broad range of industries, as well as government.
He is a professional Board member and is highly regarded for his wide and varied experience. From July 2000 to March 2003, he served as the Secretary to Cabinet and
Head of the Cabinet Policy Unit reporting directly to the Prime Minister as Chairman of Cabinet with responsibility for supervising
Cabinet processes and acting as the Prime
Minister’s most senior personal adviser on strategic directions in policy formulation.
Paul’s former positions include Chairman of
Medibank Private Limited, the COAG Reform
Council, the Expert Panel of the Low Emissions
Technology Demonstration Fund, Intoll
Management Limited, Symbion Health, Affinity
Health, Ashton Mining, Plutonic Resources and the Woolcock Institute of Medical Research.
He was also a director of the Australian
Strategic Policy Institute and Perpetual Limited, a Commissioner of the Health Insurance
Commission and a member of the AustraliaMalaysia Institute Executive Committee.
Paul graduated in Arts and Law from the
University of Sydney and is an honorary fellow of the Faculty of Medicine of that University, and a Life Governor of the Woolcock Institute of Medical Research. He resides in New South
Wales and is 64 years of age.
Other current directorships
Paul is Chairman of Thales Australia, NSW
Ports, I-MED Network, and the Institute of
Virology. He is also a director of St Vincent’s
Health Australia and The George Institute for Global Health.
Rupert Myer AM
Deputy Chairman
Independent non-executive director
Member of the Board since 12 July 2006
Appointed Deputy Chairman 8 August 2012
Member – Audit, Finance and Risk Committee
Member – Human Resources and
Remuneration Committee
Member – Nomination Committee
Rupert serves as a non-executive Chairman and director of a number of public, private and government entities. His background includes serving in roles in the retail and property sector, investment, family office and wealth management services, the arts and community sector.
Rupert holds a Bachelor of Commerce
(Honours) degree from the University of
Melbourne and a Master of Arts from the
University of Cambridge and is a Fellow of the Australian Institute of Company
Directors. He became a Member of the Order of Australia in January 2005 for service to the arts, for support of museums, galleries, and the community through a range of philanthropic and service organisations.
Rupert resides in Victoria and is 55 years of age.
Other current directorships
Rupert is Chairman of the Australia Council for the Arts and Nuco Pty Ltd. He is a director of AMCIL Limited. He serves as a member of the Felton Bequests’ Committee, and as a board member of Jawun – Indigenous
Corporate Partnerships, The Myer Foundation, the University of Melbourne Faculty of
Business and Economics Advisory Board and Creative Partnerships Australia.
Boar d o f Dir e c t ors
Bernie Brookes
Chief Executive Officer and
Managing Director
Member of the Board since 12 July 2006
Bernie was appointed Chief Executive Officer and Managing Director of the Myer Group on 2 June 2006.
Since his appointment, Bernie has been responsible for the turnaround and rebuilding of the Myer business. He has led the development and implementation of the
Myer five-point strategic plan, repositioning the business to meet today’s challenges and investing for the future. Bernie has spent over
36 years working within the retail industry in local and international roles in India and China.
Bernie previously held numerous executive roles with Woolworths and was instrumental in Woolworths’ Project Refresh, reducing costs by more than $5 billion over five years. He also held a variety of general management positions in three states across buying, IT, marketing and operations.
Bernie has held executive roles of industry organisations including the Retail Traders
Association in Queensland and Victoria and President of the Queensland Grocery
Association. He supports numerous charitable organisations, including The
Salvation Army, and is patron of the Myer
Stores Community Fund and patron of the
Australian Joe Berry Memorial Award.
Bernie was awarded the Sir Charles McGrath award for marketing excellence by the
Australian Marketing Institute in 2012, and in 2013 was inducted into the Australian
Retailers Association Hall of Fame, was awarded the William Booth Medal by The
Salvation Army and the Paul Harris Fellow for Service to the Community for the Rotary
Club, Sydney. Bernie is also currently the
Australian representative judge of the World
Retail Awards.
Bernie holds a Bachelor of Arts degree and a Diploma of Education from Macquarie
University. He is also a Fellow of AIM. Bernie resides in Victoria and New South Wales and is 53 years of age.
Other current directorships
Bernie is currently a Territorial Advisory Board
Member of The Salvation Army Australia and on the Advisory Boards of Inghams
Enterprises/TPG and First Unity Financial
Group. He is a director of Intercontinental
Group of Department Stores.
Anne Brennan
Independent non-executive director
Member of the Board since 16 September 2009
Chairman – Audit, Finance and Risk Committee
Member – Human Resources and
Remuneration Committee
Member – Nomination Committee
Anne brings to the Myer business strong financial credentials and business experience.
Anne has worked in a variety of senior management roles in both large corporates and professional services firms.
During Anne’s executive career, she was the
CFO at CSR and the Finance Director at the
Coates Group. Prior to her executive roles,
Anne was a partner in three professional services firms: KPMG, Arthur Andersen and
Ernst & Young. She has more than 20 years experience in audit, corporate finance and transaction services. Anne was also a member of the national executive team and a board member of Ernst & Young.
Anne was formerly a director of Cuscal Limited.
Anne holds a Bachelor of Commerce
(Honours) degree from University College
Galway. She is a Fellow of the Institute of
Chartered Accountants in Australia and a
Fellow of the Australian Institute of Company
Directors. Anne resides in New South Wales and is 53 years of age.
Other current directorships
Anne is currently the Deputy Chair of Echo
Entertainment Group Limited, and is a director of Argo Investments Limited, Charter Hall
Group, Nufarm Limited, Rabobank Australia
Limited and Rabobank New Zealand Limited.
Chris Froggatt
Independent non-executive director
Member of the Board since 9 December 2010
Chairman – Human Resources and
Remuneration Committee
Member – Nomination Committee
Chris was appointed as a non-executive director of Myer Holdings Limited in
December 2010. Chris has a broad industry background, including consumer branded products, retailing and hospitality, and covering industries such as beverage, food and confectionery through her appointments at Britvic, Whitbread, Diageo and Mars.
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She has over 20 years executive experience as a human resources specialist in leading international companies, including Brambles
Industries plc and Brambles Industries Ltd,
Whitbread Group plc, Diageo plc, Mars Inc. and Unilever NV. Chris has recently served on the boards of Britvic plc and Sports Direct
International plc and as an independent trustee director of Berkeley Square Pension
Trustee Company Limited.
Chris holds a Bachelor of Arts (Honours) in English Literature from the University of
Leeds (UK). Chris is a Fellow of the Chartered
Institute of Personnel Development and a member of the Australian Institute of
Company Directors. Chris resides in New
South Wales and is 55 years of age.
Other current directorships
Chris currently serves on the board of
Goodman Fielder Limited and is currently a director on the board of the Australian
Chamber Orchestra.
Peter Hay
Independent non-executive director
Member of the Board since 3 February 2010
Member – Audit, Finance and Risk Committee
Peter has experience in transformational business leadership and a strong background in company law and investment banking work, with particular expertise in relation to mergers and acquisitions. He has also had significant involvement in advising governments and government-owned enterprises. Peter was the
Chief Executive of law firm Freehills (2000 to
2005), where he had been partner since 1977.
Peter holds a Law Degree from the University of Melbourne and is a Fellow of the Australian
Institute of Company Directors. Peter resides in Victoria and is 63 years of age.
Other current directorships
Peter is currently Chairman of Lazard Pty Ltd’s
Advisory Board, and a director of Alumina
Limited. He is a director of Australia and New
Zealand Banking Group Limited, a director of GUD Holdings Limited, and a director of Newcrest Mining Limited. Peter is also a director of Epworth Foundation and Landcare
Australia Ltd.
Peter is also a director of the Australian
Institute of Company Directors, a member of the Australian Institute of Company Directors’
Corporate Governance Committee, and a part-time member of the Takeovers Panel.
26
MYER Annual Report 2013
Management Team
Left to right: Anthony Coelho, Tony Sutton, Bernie Brookes, Marion Rodwell, Mark Ashby, Adam Stapleton, Greg Travers, Louise Tebbutt, Megan Foster, Timothy Clark,
Graham Dean, Nicole Naccarella, Richard Harrison
Bernie Brookes
Chief Executive Officer and
Managing Director
Greg Travers
Executive General Manager Business
Services and Strategic Planning
Bernie was appointed Chief Executive
Officer and Managing Director of Myer in
June 2006. He has been responsible for the turnaround and rebuilding of the Myer business. Bernie has led the development and implementation of the Myer five-point strategic plan, repositioning the business to meet today’s challenges and investing for the future. He has spent over 36 years working within the retail industry in local and international roles.
Greg was appointed Myer’s Director of
Strategic Planning and Human Resources in
June 2006 and then EGM Business Services in November 2010. In August 2012, he was also appointed to lead the Office of the CEO.
In his role, Greg is responsible for the review and delivery of new business opportunities, the development of Myer‘s strategic planning framework, Myer’s program management office and business efficiency objectives.
He also oversees Myer’s Corporate Affairs and
Public Relations. Greg has over 30 years of experience including with WMC Resources
Ltd, Pratt Group and BHP.
Mark Ashby
Chief Financial Officer
Mark was appointed Chief Financial Officer
(CFO) of Myer in January 2008. As CFO,
Mark’s responsibilities cover all accounting, treasury management, taxation, compliance and internal audit, investor relations and procurement aspects of the business.
Prior to joining Myer, Mark was CFO of
Mitre 10, the Finance Director of Motorola and a Finance Director in a number of domestic and international organisations in retail and technology. Mark is a fellow of CPA Australia and a member of the
Australian Institute of Company Directors.
Adam Stapleton
Executive General Manager Merchandise
Adam has 18 years of industry experience.
He was appointed to the role of EGM
Merchandise in February 2013. Adam is responsible for all of Myer’s merchandise teams and functions, including Women’s fashion and accessories, Youth and Childrens,
Mens, Home, Furniture, Entertainment,
General Merchandise and Toys businesses as well as International and Domestic Logistics,
Merchandise Planning and Store and
Business Support. Adam joined Myer in 2003, and has held a number of positions including
National Manager of Advertising and Loyalty and General Manager Marketing. Prior to joining Myer, Adam worked for a number of organisations across a diverse range of industries, including Kodak, Accenture and ANZ.
Tony Sutton
Executive General Manager Stores
Tony oversees all of the operations of the
Myer store network, including our customer service strategy, and has a focus on operational efficiencies. Tony was appointed to lead the Stores team from September
2012. Tony is a career retailer, and joined Myer in 1992. He has worked cross-functionally in a number of roles, including store management, merchandise and marketing.
He has held a number of senior roles in store management, including his most recent role leading the State General Manager stores team.
M a n ag e m e n t t e am
Timothy Clark
Group General Manager Property,
Store Development and Services
Tim has 30 years of retail experience and was appointed Director of IT in June 2006.
Tim was responsible for IT separation of Myer from Coles Myer, including the replacement of Myer’s merchandise, POS/
EFT, supply chain, CCTV, and payroll systems.
Tim was appointed as GGM Property, Store
Development and Services in December
2010 and is responsible for Myer’s property network, including new stores, in-store design developments, space productivity, store refurbishments and facilities management. Tim has also held executive roles at both Gazman Menswear and
Crown Ltd.
Graham Dean
Group General Manager Home and Entertainment
Graham is responsible for Myer’s home lifestyle categories, including Homewares,
Furniture, General Merchandise, Home
Entertainment and Small Electrical. He has been leading the Home and Entertainment businesses since September 2011, and was appointed to the Myer Executive
Management Group in February 2013.
Prior to his current role, Graham was General
Manager of Cosmetics at Myer. Graham has 28 years experience working with leading Australian retail businesses and internationally in the UK, across a diverse portfolio including logistics, retail operations, property and trading terms.
Megan Foster
Managing Director sass & bide, Group
General Manager Freestanding Stores
Megan was appointed MD sass & bide and GGM Freestanding Stores in August
2013. She previously held the role of GGM
Marketing and Brand Development where she was responsible for advertising and direct marketing, visual merchandising, public relations and events, Emporium magazine, myer.com.au creative, and social media, as well as brand strategy.
Megan has 23 years of retail experience and joined Myer in June 2006 as a management consultant. In April 2008, Megan was appointed to the role of Director Store
Concepts and Design and as part of this role oversaw the redevelopment of the flagship
Myer Melbourne store.
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Nicole Naccarella
Group General Manager Women’s Fashion
Anthony Coelho
General Manager IT
Nicole Naccarella has over 30 years experience in the fashion industry.
She was appointed to her current role in
February 2013, encompassing the Women’s
Apparel Business, Womenswear, Footwear and Accessories, Intimate Apparel, as well as Youth and Childrenswear.
Anthony joined the business in April 2012 and was appointed General Manager IT in
October 2012. Anthony has over 20 years experience, having worked in a diverse range of organisations with both in-house and outsourced IT delivery models. With a strong background in retail banking, Anthony most recently worked at Apple before joining Myer and has previously worked for EDS Australia,
NAB and Commonwealth Bank. With an extensive IT background, Anthony has responsibility for development and execution of Myer’s IT strategy as an enabler of the wider business strategy.
She started in stores at Myer and has held various buying and planning roles, as well as Business Manager of Women’s Myer
Exclusive Brands and General Manager
Women’s Apparel.
Nicole has extensive knowledge of the women’s fashion industry having worked in both retail and wholesale, including at
Australian Horizons, and with some of the world’s largest department store chains in the US.
Louise Tebbutt
Group General Manager Human Resources,
Risk and Safety
Louise was appointed to the role of GGM
Human Resources, Risk and Safety in August
2012, after leading the Human Resources function as General Manager and has over
18 years of industry experience. Louise is responsible for all aspects of Myer’s human resources including organisational development, recruitment and training, and employee relations, as well having accountability for risk and safety for the organisation. Louise joined Myer from the
Coles Group in 2006, where she held senior roles in a number of businesses including
Coles Supermarkets and Target. Louise is a director of the Myer Stores Community Fund and Chairman of the Myer Superannuation
Policy Committee.
Marion Rodwell
General Counsel and Company Secretary
Marion was appointed Group General
Counsel and Company Secretary in 2008.
Marion manages the Group legal function.
She is also the Company Secretary of all companies in the Group. Marion has over
20 years of corporate, commercial, dispute resolution and governance experience.
Prior to joining Myer, Marion held General
Counsel and Company Secretary roles in the financial services, gaming and retail industries, including with Tattersall’s and IOOF.
Marion holds a Bachelor of Laws and a
Bachelor of Economics from Monash
University, and is a member of the Law
Institute of Victoria and the Australian
Corporate Lawyers Association (ACLA).
In 2010, Marion was awarded ACLA Australian
Corporate Lawyer of the Year.
Richard Harrison
General Manager Online
Richard was appointed General Manager
Online in February 2013. He is responsible for implementing the online strategy and driving the development of Myer’s leading omni-channel offer. Richard has significant specialist experience in developing and executing successful online strategies for a number of retail businesses for over 20 years.
His most recent role was General Manager
Multi-channel with the Warehouse Group
(NZ), and he has also held senior online and store roles with Woolworths (NZ) and a direct to consumer online/catalogue business (Canada).
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M YE R A n n u al R e por t 2 0 1 3
Corporate Governance Statement
Introduction
The Board of the Company is committed to achieving the highest standards of corporate governance. The Board is concerned to ensure that the Group is properly managed to protect and enhance shareholder interests, and that the Company, its directors, officers and employees operate in an appropriate environment of corporate governance.
The Board has adopted a corporate governance framework comprising principles and policies that are consistent with the
ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations with 2010 Amendments (2nd Edition)
(ASX Principles). This framework is designed to promote responsible management and assists the Board to discharge its corporate governance responsibilities on behalf of the Company’s shareholders.
The Group regularly reviews its policies and charters to ensure that they remain consistent with the Board’s objectives, current laws and best practice. The policies and charters referred to in this statement are available from the Corporate Governance page in the Investor
Centre section of Myer’s website (www.myer.com.au/investor).
This statement outlines the Group’s main corporate governance practices and policies in place throughout the financial year and at the date of this report. It is structured as follows:
›› the Board and management;
›› Board composition and director tenure;
›› Board Committees;
›› risk management;
›› key governance policies; and
›› diversity at Myer.
The Company has followed the recommendations set out in the ASX
Principles during the reporting period. The table on page 39 indicates where specific ASX Principles are discussed in this statement.
Part 1 – The Board and management
Relevant documents – available from myer.com.au/investor
›› Board Charter and relationship with management
›› Nomination Committee Charter
1.1 Role and responsibilities of the Board
The Board has ultimate responsibility for setting policy regarding the business and affairs of the Company for the benefit of shareholders and other stakeholders.
The role of the Board is to:
›› represent and serve the interests of shareholders by overseeing and appraising the Company’s strategies, policies and performance. This includes overseeing the financial and human resources the Company has in place to meet its objectives and reviewing management performance;
›› protect and optimise Company performance and build sustainable value for shareholders in accordance with any duties and obligations imposed on the Board by law and the Company’s
Constitution and within a framework of prudent and effective controls that enable risk to be assessed and managed;
›› set, review and ensure compliance with the Company’s values and governance framework (including establishing and observing high ethical standards); and
›› ensure that shareholders are kept informed of the Company’s performance and major developments affecting its state of affairs.
The Board has adopted the Board Charter and relationship with management (Board Charter) to provide a framework for its effective operation. The Board Charter outlines the manner in which the Board’s constitutional powers and responsibilities will be exercised and discharged, having regard to principles of good corporate governance, best practice and applicable laws.
The Board Charter addresses the following:
›› Board composition and process;
›› the role and responsibilities of the Board, the directors, the
Chairman and the CEO;
›› matters which are specifically reserved for the Board or the
Board Committees;
›› the relationship between the Board and management; and
›› delegation by the Board to Board Committees and management.
As set out in the Board Charter, the responsibilities and functions of the Board include:
›› selecting, appointing and evaluating the performance of, determining the remuneration of, and planning the succession of the CEO;
›› on recommendation of the CEO, selecting, appointing and reviewing the performance of the Chief Financial Officer (CFO) and other senior executives;
›› setting the remuneration policy for the Company, within which the CEO has authority to operate;
›› contributing to and approving management development of corporate strategy, including setting performance objectives and approving operating budgets;
›› reviewing, ratifying and monitoring systems of risk management and internal control and ethical and legal compliance;
›› monitoring corporate performance and implementation of strategy and policy;
›› approving major capital expenditure, acquisitions and divestments, and monitoring capital management;
›› monitoring and reviewing management processes aimed at ensuring the integrity of financial and other reporting;
›› developing and reviewing corporate governance principles and policies;
›› in respect of ethical sourcing:
–– approving and reviewing the Company’s ethical sourcing policy; and
–– reviewing and monitoring ethical sourcing risks;
›› in respect of diversity:
–– approving and reviewing the Company’s diversity policy; and
–– establishing measurable objectives for achieving diversity across the Group, and annually assessing both the objectives and progress towards achieving them.
1.2 The Chairman, CEO and management
The roles of Chairman and CEO are separate, and the Board Charter sets out the responsibilities of each office. The roles of Chairman and CEO are not exercised by the same individual.
The Board Charter states that the Chairman should be an independent non-executive director. Paul McClintock AO (Chairman from 10 October 2012) is an independent non-executive director.
The Company’s former Chairman, Howard McDonald, was also an independent non-executive director.
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The Chairman’s responsibilities include:
›› chairing meetings of the Board and shareholders, including the
Annual General Meeting;
›› ensuring that the Board’s decisions have been implemented;
›› ensuring that the Board fulfils its obligations under the Board
Charter and relevant legislation;
›› representing the Board to shareholders and communicating the
Board’s position;
›› providing leadership to the Board and Myer;
›› leading the Board to ensure that it operates efficiently and effectively; and
›› promoting constructive and respectful relationships between the Board and management.
The management of the Company is conducted by, or under the supervision of, the CEO as directed by the Board. The CEO is responsible for implementing strategic objectives, plans and budgets approved by the Board. The Board approves corporate objectives for the CEO to satisfy and, jointly with the CEO, develops the duties and responsibilities of the CEO.
Management is accountable to the Board, and is required to provide the Board with information in a form, timeframe and quality that enables the Board to discharge its duties effectively. Directors are entitled to request additional information at any time that they consider appropriate.
1.3 Performance assessments
Review of the Board, Board Committees and individual directors
The Board recognises that regular reviews of its effectiveness and performance are key to the improvement of the governance of the Company. Accordingly, the Board has committed to reviewing and evaluating:
›› the performance of the Board, including against the requirements of the Board Charter;
›› the performance of the Board Committees; and
›› the performance of individual directors, on an annual basis against both measurable and qualitative indicators.
The review and evaluation undertaken in the reporting period is described below.
During the reporting period, Paul McClintock AO was appointed as
Chairman of the Company. The Chairman is working closely with the
Board and the Board Committees in relation to their effectiveness, and has reviewed the procedures of the Board and Board Committees.
The Board and each Board Committee has conducted a review of their effectiveness and performance. During the reporting period, the
Board and each Board Committee also reviewed and updated their respective Charters.
During the reporting period, the Company appointed Rupert Myer AM as the Deputy Chairman of the Company. The Deputy Chairman is responsible for the performance review of the Chairman.
A formal performance evaluation and assessment of the effectiveness of the Board, the Board Committees and individual directors was conducted in 2012 by an external adviser with corporate governance expertise. Action items identified in this review are continuing to be implemented as part of a process of ongoing communication between the Board and management.
In September 2013, the Chairman conducted the annual review of individual directors for the reporting period. Each director completed a Board review and assessment document, and met privately with the Chairman to discuss the assessment. In addition to the annual review, the Chairman regularly provides informal feedback to individual directors.
The Nomination Committee assists the Board in developing and implementing plans for identifying, assessing and enhancing director competencies.
The Human Resources and Remuneration Committee assists in the review and recommendation of arrangements for directors, the CEO and executives in relation to remuneration and benefits, and reviews the performance of those individuals and the reward structure.
The Committee also reviews all significant human resource issues, including development and succession planning.
Review of senior executives
The Human Resources and Remuneration Committee is responsible for the review of the senior management assessment processes from time to time to ensure that they remain consistent with the Board’s overall objectives for the business.
All senior executives undergo a performance and development review on an annual basis. This review process involves the following:
›› each senior executive is assessed against a set of key performance criteria which include both financial and non-financial performance measures; ›› at the end of each financial year, all senior executives meet with their manager to discuss their performance over the previous year; and
›› upon the completion of the performance appraisal meeting, each senior executive is provided with feedback on their performance, and a rating is determined based on that performance. As well as the review of performance, where appropriate, a development plan is also agreed to support the ongoing contribution of the executive to the needs of the business.
A performance evaluation for senior executives which accords with the process described above has taken place during this reporting period.
It is the role of the Board to review the performance of the CEO and to review the assessments made by the CEO of the performance of his direct reports.
1.4 Remuneration arrangements
The remuneration of each director is set out in the Remuneration
Report, which forms part of the Directors’ Report and is presented on pages 47 to 65.
The Company distinguishes the structure of non-executive directors’ remuneration from that of executive directors and senior executives.
The Company does not have any schemes for retirement benefits for non-executive directors.
Please refer to the Remuneration Report for further information.
1.5 Board and Board Committee meetings
The number of meetings of the Board and of each Board Committee held during the period ended 27 July 2013, and the number of meetings attended by each director and committee member are set out in the Directors’ Report, at page 41.
1.6 Independent professional advice
Under the Board Charter, the Board collectively and each director individually has the right to seek independent professional advice, subject to the approval of the Chairman or the Board.
Under their respective Charters, each Board Committee is entitled to seek the advice of the Company’s auditors, solicitors or other independent advisers as to any matter pertaining to the powers, duties or responsibilities of the Committee.
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Corporate Governance Statement continued 1.7 Company Secretary
The Company Secretary has an important role in supporting the effectiveness of the Board by monitoring that Board policy and procedures are followed. The Company Secretary is accountable to the Board. All directors have direct access to the Company Secretary.
The Company Secretary is responsible for coordination of all Board business, including agendas, Board papers and minutes. The Company
Secretary is responsible for communication with regulatory bodies and the ASX, and all statutory and other filings.
Marion Rodwell is the Company Secretary of the Company.
Her experience and qualifications are set out on page 27 of this
Annual Report.
Part 2 – Board composition and director tenure
Relevant documents – available from myer.com.au/investor
›› Board Charter and relationship with management
›› Nomination Committee Charter
2.1 Composition of the Board
As at the date of this Report, the Board comprises six directors.
The majority of the Board are independent non-executive directors.
Name
Position
Appointed
Paul McClintock AO Chairman from
10 October 2012
8 August 2012
Independent non‑executive director
Rupert Myer AM
Deputy Chairman from 8 August 2012
The Board recognises that a Board comprising directors with a diverse range of backgrounds, skills and experience facilitates robust discussion and decision-making, and enables the Board to discharge its responsibilities effectively. It is intended that the Board will comprise a majority of independent non-executive directors and comprise directors with a broad range of skills, expertise and experience from a diverse range of backgrounds. This will ensure that the composition of the Board continues to reflect a range of expertise, experience and diversity appropriate to the Group’s business and strategies.
On 8 August 2012, the Company appointed Mr Paul McClintock AO as an independent non-executive director. Mr McClintock has considerable experience as a director, having held significant chairman and advisory positions across a broad range of industries, as well as government. Mr McClintock succeeded Mr Howard
McDonald as Chairman of the Board from 10 October 2012.
The range of backgrounds, skills and expertise currently represented on the Board includes experience in senior roles in retail, finance, government, human resources, law, and mergers and acquisitions, as well as qualifications across a range of fields, including commerce, law and the humanities. The directors also have expertise in brand building and marketing, as well as international experience.
2.3 Appointment of new directors and re-election of directors
The Company’s policy and procedure for selection and appointment of new directors and re-election of directors is set out in the
Nomination Committee Charter.
When identifying potential candidates for Board appointment, factors that may be considered include:
›› the skills, experience, expertise and personal qualities that will best complement Board effectiveness;
›› the capability of the candidate to devote the necessary time and commitment to the role; and
›› potential conflicts of interest and independence.
12 July 2006
Independent non‑executive director
Bernie Brookes
CEO and Managing
Director
12 July 2006
Anne Brennan
Independent non-executive director
16 September 2009
Chris Froggatt
Independent non-executive director
9 December 2010
Peter Hay
Independent non-executive director
3 February 2010
Paul McClintock AO and Ian Morrice were appointed as directors on 8 August 2012. Howard McDonald retired as Chairman and as a director with effect from 10 October 2012. Ian Morrice retired from the Board with effect from 1 March 2013. All other directors served as directors for the entire reporting period.
Details of the skills, qualifications, experience, expertise and special responsibilities of each current director are set out on pages 24 to 25 of this Annual Report.
2.2 Skills, experience, expertise and diversity of directors
The Board, together with the Nomination Committee, determines the size and composition of the Board, subject to the Company’s
Constitution. The Company’s Constitution states that the minimum number of directors is four and the maximum is fixed by the directors, but may not be more than 12.
The Board, together with the Nomination Committee, reviews the composition of the Board and the skills, experience, expertise and diversity represented by the directors on the Board, and determines whether the composition and mix of those skills remain appropriate for the Company’s strategy. Additional information about the
Nomination Committee’s responsibilities in relation to the size and composition of the Board is set out at section 3.4.
The identification of potential director candidates may be assisted by the use of external search organisations as appropriate. All directors are consulted and provided with detailed information about potential new directors. Any new appointment is approved by the Board in accordance with the Company’s Constitution. Any new directors appointed by the Board must retire at the next Annual General
Meeting (AGM) after their appointment and offer themselves for election by the Company’s shareholders.
There is no specific term of office for non-executive directors.
In accordance with the ASX Listing Rules and the Company’s
Constitution, no director other than the CEO may hold office without re-election beyond the third AGM following their last election. Where eligible, a director may stand for re-election at the AGM. The CEO will not retire by rotation.
Prior to each AGM, the Board determines whether to recommend to shareholders to vote in favour of the election or re-election of each director standing for election or re-election, or any other candidate standing for election, having regard to any matters that the Board considers relevant.
Induction and education
New directors are provided with a letter of appointment setting out the Company’s expectations, their responsibilities and rights and the terms and conditions of their tenure.
All new directors and senior executives participate in an induction program. New directors receive an induction appropriate to their experience to enable them to actively participate in decision-making as soon as possible, including familiarisation with the operation of the Board and its Committees and the Company’s financial, strategic, operations and risk management issues. In addition, the Company arranges continuing education and training for the directors.
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The Nomination Committee is responsible for ensuring that an effective induction process is in place for any newly appointed director, and for regularly reviewing its effectiveness.
2.4 Independence of directors
The Board considers the independence of its non-executive directors each year.
Guidelines and materiality thresholds for determining independence
The Board Charter sets out guidelines and materiality thresholds that the Board has adopted to assist in determining the independence of directors.
The Board only considers directors to be independent where they are independent of management and free of any business or other relationship that could materially interfere with, or could reasonably be perceived to interfere with, the exercise of their unfettered and independent judgement.
As a guideline for determining the independence of directors, the Board has regard to the relationships set out in Box 2.1 of the ASX Principles. In general, directors will be considered to be
‘independent’ if they are not members of management and they:
›› are not a substantial shareholder of the Company, or an officer of, or otherwise associated directly with, a substantial shareholder of the Company;
›› have not within the last three years been employed in an executive capacity by the Company or another Group member;
›› except in connection with reorganisations within the Group, have not within the last three years been a principal or employee of a material professional adviser or a material consultant to the
Company or another Group member;
›› are not a material supplier to or customer of the Company or another Group member or an officer of or otherwise associated directly or indirectly with a material supplier or customer of the
Company; and
›› have no material contractual relationship with the Company or another Group member, other than as a director of the Company.
The Board considers thresholds of materiality for the purposes of assessing ‘independence’ on a case-by-case basis, having regard to both quantitative and qualitative principles. Without limiting the Board’s discretion, the Board has adopted the following quantitative guidelines:
›› the Board will determine the appropriate base to apply
(e.g. revenue, equity or expenses) in the context of each situation;
›› in general, the Board will consider an affiliation with a business that accounts for less than five percent of the relevant base to be immaterial for the purposes of determining independence. Where this threshold is exceeded, the Board will review the materiality of the particular circumstance with respect to the independence of the particular director; and
›› the Board will review any holding of five percent or more of the Company’s shares, and will generally consider a holding of
10 percent or more of the Company’s shares to be material.
The Board will also undertake a qualitative assessment of independence, which is an overriding requirement for independence. Specifically, the
Board will consider whether there are any factors or considerations which may mean that the director’s interest, business or relationship
(even if it does not trigger the quantitative requirements discussed above) could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of the Company.
Assessment of the independence of the Company’s directors
The Board currently comprises six directors, five of whom are non‑executive directors. At the date of signing the Directors’
Report, it is the Board’s view that each of its non-executive directors is independent. There are no relationships affecting director independence or independent status. Directors did not participate in deliberations about or vote in relation to their own independence.
Part 3 – Board Committees
Relevant documents – available from myer.com.au/investor
›› Board Charter and relationship with management
›› Audit, Finance and Risk Committee Charter
›› Human Resources and Remuneration Committee Charter
›› Nomination Committee Charter
3.1 Introduction
The Board has established three Committees to streamline the discharge of its duties and responsibilities. The current Board
Committees are:
›› the Audit, Finance and Risk Committee;
›› the Human Resources and Remuneration Committee; and
›› the Nomination Committee.
Each Board Committee has a written Charter that sets out its role and responsibilities, composition and membership requirements, and the manner in which the Committee is to operate.
Each Charter requires that the Committee consist only of non‑executive directors, with a majority of independent directors. The current members of all three Board Committees are all independent non-executive directors.
Details of Committee members’ attendance at Committee meetings are set out in the Directors’ Report at page 41.
All directors are invited to attend Committee meetings. Most Board
Committee meetings are attended by all directors. Non-committee members, including members of management, may also attend all or part of a meeting of the Committee at the invitation of the
Committee Chairman.
3.2 Audit, Finance and Risk Committee
Composition
The current composition of the Audit, Finance and Risk Committee is:
Chairman
Anne Brennan
Members
Peter Hay
Rupert Myer AM
All Committee members are financially literate and have an appropriate understanding of the industries in which the Group operates. The
Chairman of the Committee is an independent non-executive director, and is not the Chairman of the Board.
Role and responsibilities
The Committee’s key responsibilities and functions are to:
›› oversee the Company’s relationship with the external auditor and the external audit function generally;
›› oversee the Company’s relationship with the internal auditor and the internal audit function generally;
›› oversee the preparation of financial statements and reports;
›› oversee the Company’s financial controls and systems; and
›› manage the process of identification and management of risk.
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Corporate Governance Statement continued Further information about the Company’s risk management framework, external auditor, internal audit and Board assurances on financial reporting risks is set out in Part 4.
Rights of access and authority
The Committee has rights of access to management and to auditors
(external and internal) without management present, and rights to seek explanations and additional information from both management and auditors. Whilst the internal audit function reports to the CFO, it is acknowledged that the internal auditors also report directly to the Committee.
In addition, the Committee is entitled to seek independent professional advice (discussed at section 1.6 above).
3.3 Human Resources and Remuneration Committee
Composition
The current composition of the Human Resources and Remuneration
Committee is:
Chairman
Chris Froggatt
Members
Anne Brennan
Rupert Myer AM
Howard McDonald was a member of the Committee until his retirement from the Board on 10 October 2012.
Role and responsibilities
The responsibilities of the Committee include:
›› in relation to human resources policies:
–– to review the Company’s policies and performance to assess the effectiveness of the policies and their compliance with relevant legislative, regulatory and governance requirements;
–– to review and report to the Board on the diversity-related measurable objectives for the Company and the Company’s progress against objectives;
›› in relation to organisational effectiveness and capability, to undertake an annual review of how the human resources strategy is supporting the business strategy;
›› in relation to superannuation, to review and recommend to the
Board superannuation arrangements for the Company, having regard to matters of compliance and legislative change;
›› in relation to remuneration and incentives:
–– to review and recommend to the Board remuneration arrangements for the CEO, executives reporting to the CEO, and senior management;
–– to review major changes and developments in the Company’s remuneration framework, recruitment, retention and termination policies and procedures for senior management, remuneration policies, superannuation arrangements, human resource practices and employee relations strategies for the Group;
–– to review performance assessment processes for the CEO and his direct reports, and the annual results of those assessments;
–– to review and recommend to the Board in respect of the
Company’s employee equity incentive plans;
–– to review and recommend to the Board the remuneration arrangements for the Chairman and the non-executive directors;
–– to review and recommend to the Board the Remuneration Report;
–– to review and facilitate shareholder and other stakeholder engagement in relation to the Company’s remuneration policies and practices;
–– at least annually, to review and report on the relative proportion of women and men in the workforce at all levels of Myer; and
–– to review remuneration by gender and consider whether any pay gap exists as a result of gender difference and, where relevant, provide any recommendations to the Board.
Remuneration policy
In discharging its responsibilities, the Committee must have regard to the following policy objectives:
›› to ensure that the Company’s remuneration structures are equitable and aligned with the long-term interests of the Company and its shareholders;
›› to attract and retain skilled executives;
›› to structure short and long-term incentives that are challenging and linked to the creation of sustainable shareholder returns; and
›› to ensure that any termination benefits are justified and appropriate.
Access to senior executives
In addition to access to independent advisers (discussed at section
1.6 above), the Committee may seek input from senior executives of the Company on remuneration policies, subject to the principle that no senior executive should be directly involved in deciding their own remuneration.
3.4 Nomination Committee
Composition
The current composition of the Nomination Committee is:
Chairman
Paul McClintock AO
(from 10 October 2012)
Members
Anne Brennan
Chris Froggatt
Rupert Myer AM
Howard McDonald was Chairman of the Committee until his retirement as a director on 10 October 2012.
Role and responsibilities
The responsibilities of the Committee include:
›› to review and recommend to the Board the size and composition of the Board, including the succession of the Chairman and the
CEO, and to review whether Board succession plans are in place to maintain an appropriate mix of skills, experience, expertise and diversity on the Board;
›› to review and recommend to the Board the criteria for Board membership, including assessment of necessary and desirable competencies of Board members to maintain an appropriate mix of skills, experience, expertise and diversity on the Board;
›› to review and recommend to the Board membership of the Board, including recommendations for the appointment and re-election of directors, and where necessary to propose additional candidates for consideration by the Board;
›› to assist the Board in assessing the performance of the Board, its Committees and individual directors, and in developing and implementing plans for identifying, assessing and enhancing director competencies; and
›› to ensure that an effective induction process is in place for any newly appointed director and regularly review its effectiveness.
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Part 4 – Risk management
Relevant documents – available from myer.com.au/investor
›› Risk Management Policy
›› Audit, Finance and Risk Committee Charter (including External
Audit Policy)
4.1 Recognition and management of risk
The Company recognises risk management as an integral component of good corporate governance and fundamental in achieving its strategic and operational objectives.
The Board is ultimately responsible for identifying and assessing internal and external risks that may impact the Company in achieving its strategic objectives. The Board is responsible for determining the Company’s risk appetite, overseeing the development and implementation of the risk management framework and maintaining an adequate monitoring and reporting mechanism.
The Board has delegated coordination of risk oversight to the Audit,
Finance and Risk Committee. The Committee’s risk management responsibilities are to review and report to the Board as to whether:
›› the Company’s ongoing risk management program effectively identifies all areas of potential risk;
›› adequate policies and procedures have been designed and implemented to manage identified risks;
›› a regular program of audits is undertaken to test the adequacy of and compliance with prescribed policies; and
›› proper remedial action is undertaken to redress areas of weakness.
The Company has adopted a Risk Management Policy that applies to all Group employees, and to contractors and consultants working on behalf of the Group. Management monitors and reports on material risks identified through the internal and external audit process.
4.2 Risk management framework
The Company has adopted an enterprise-wide framework that incorporates a system of risk oversight, risk management and internal control designed to identify, assess, monitor and manage risks consistent with AS/NZS ISO 31000:2009 Risk Management Principles and Guidelines and provides Myer management with a consistent approach to recognising and managing risks. The Company applies risk management in a well-defined, integrated framework that promotes awareness of risks and an understanding of the Company’s risk tolerances. This enables a systematic approach to risk identification and leverage of any opportunities, and provides treatment strategies to manage, transfer and avoid risks.
The Board reviews and approves the risk management framework and risk appetite on an annual basis.
4.3 External auditor
The Audit, Finance and Risk Committee is responsible for overseeing the Company’s External Audit Policy. The Committee has the responsibility and authority for the appointment, removal or re‑appointment and remuneration of the external auditor, as well as evaluating its effectiveness and independence.
The Committee reviews the appointment of the external auditor annually. In addition, the Committee reviews and assesses the independence of the external auditor, including any relationships with the Company or any other entity that may impair, or appear to impair, the external auditor’s independent judgement or independence in respect of the Company.
The external auditor will attend the AGM and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the Auditor’s Report.
4.4 Internal audit
A separate internal audit division has been established and is overseen by a National Assurance Manager who reports to the CFO and liaises directly with the Audit, Finance and Risk Committee.
The internal audit division carries out regular systematic monitoring of control activities and reports to relevant business unit management and the Audit, Finance and Risk Committee.
4.5 Board assurances on financial reporting risks
The Board has received assurance from the CEO and the CFO that the declaration provided in accordance with section 295A of the
Corporations Act 2001 (Cth) (Corporations Act) is founded on a sound system of risk management and internal compliance and control systems, and that the systems are operating effectively in all material respects in relation to financial reporting risks.
The CEO and the CFO made declarations to the Board (among other things) to the following effect:
›› that, in their opinion, the Group’s financial statements and notes for the financial year give a true and fair view of the financial position and the performance of the Company and the Group and are in accordance with the Corporations Act and relevant accounting standards;
›› that the above statement is founded on a sound system of risk management and internal compliance and control systems which implement the policies adopted by the Board (either directly or through delegation to senior executives); and
›› that the Company’s risk management and internal compliance and control systems, to the extent that they relate to financial reporting, are operating efficiently and effectively in all material respects.
Part 5 – Key governance policies
Relevant documents – available from myer.com.au/investor
›› Code of Conduct
›› Continuous Disclosure Policy
›› Guidelines for Dealing in Securities
›› Shareholder Communication Strategy
5.1 Code of Conduct
The Company is committed to the highest level of integrity and ethical standards in all business practices. All Group employees, directors and contractors must comply with the Company’s Code of Conduct (Code). The Code applies to all business activities and dealings with employees, customers, suppliers, shareholders and other external stakeholders.
The objectives of the Code are to:
›› provide clear guidance on and benchmarks for appropriate professional and ethical behaviour;
›› reinforce the requirement for compliance with Company policies and legal requirements;
›› support Myer’s business reputation through the behaviour of its people; and
›› make directors and team members aware of their responsibilities and consequences if they breach the Code.
The external audit engagement partner is required to rotate at least once every five years. PricewaterhouseCoopers (PwC) was reappointed as the external auditor in 2012.
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Corporate Governance Statement continued The Code outlines how the Group expects its directors and employees to behave and conduct business in a range of circumstances, including actual or potential conflicts of interest. The Code requires awareness of, and compliance with, laws and regulations relating to the Group’s operations, including fair trading, occupational health and safety, equal opportunity and anti-discrimination, privacy, employment practices and securities trading.
The Code encourages employees to report unethical practices, or breaches of the Code, Company policies or the law. The Company has ‘whistleblower’ protections for those who report unacceptable behaviour in good faith.
The Company regularly reviews the Code, and adopted a revised Code in May 2013. Team members are required to undertake training and acknowledge acceptance of the Code on an annual basis.
5.2 Continuous disclosure
The Company’s policy is to strictly comply with its obligations under the Corporations Act and the ASX Listing Rules to keep the market fully informed of information which may have a material effect on the price or value of the Company’s securities. The Company discharges these obligations by releasing information in ASX announcements and by disclosure of other relevant documents to the ASX and to shareholders (e.g. annual reports).
The Company’s Continuous Disclosure Policy is designed to ensure the timely release of material price-sensitive information to the market. This policy establishes procedures to ensure that directors and management are aware of the Company’s disclosure obligations and procedures, and have accountability for the Company’s compliance with those obligations.
The Company provides continuous disclosure training to all directors and senior management. It is a standing agenda item at all Board meetings, Board Committee meetings and senior management meetings to consider whether any matters reported to or discussed at the meeting should be disclosed to the market pursuant to the
Company’s continuous disclosure obligations.
All general managers and divisional heads are required to have appropriate procedures in place within their areas of responsibility to ensure that all relevant information is reported to them immediately to be considered in accordance with the Continuous Disclosure Policy.
The Company has established a Continuous Disclosure Committee, which is comprised of the CEO, the CFO and the General Counsel and Company Secretary. The role of the Continuous Disclosure
Committee is to:
›› review all potentially material price-sensitive information of which management or the Board become aware;
›› determine whether any of that information is required to be disclosed to the ASX;
›› co-ordinate the actual form of disclosure with the relevant members of management; and
›› review and respond to any infringement notice or written statement of reasons issued to the Company by ASIC.
All deliberations of the Committee are shared without delay with the
Chairman or, in the Chairman’s absence, the Chairman of the Audit,
Finance and Risk Committee.
The Company has nominated the Company Secretary as the person with the primary responsibility for all communication with the ASX.
The Board regularly reviews the Continuous Disclosure Policy, and adopted a revised policy in May 2013.
5.3 Securities trading
The Company’s Guidelines for Dealing in Securities (Guidelines) apply to all directors and employees of the Group. The purpose of the
Guidelines is to:
›› explain the types of conduct prohibited under the Corporations
Act in relation to dealing in securities; and
›› establish a best practice procedure for dealing in the
Company’s securities.
As an overriding principle, directors, employees and their associates must not deal in the Company’s securities if they are in possession of price-sensitive or ‘inside’ information.
In addition, directors, specified senior executives and their associates
(Relevant Persons) must not deal in the Company’s securities during
‘blackout periods’. ‘Blackout periods’ include periods prior to the release of the Company’s half year and full year results.
Relevant Persons are permitted to deal in the Company’s securities during certain ‘trading windows’, subject to complying with notification requirements. ‘Trading windows’ include periods following the release of the Company’s half year and full year results, and the
AGM. Outside of ‘trading windows’, Relevant Persons may only deal in the Company’s securities in exceptional circumstances and subject to obtaining prior approval.
The Guidelines prohibit directors, senior executives and their closely related parties from entering into hedging arrangements with respect to securities in the Company (including any shares, options and rights).
Hedging arrangements include entering into transactions in financial products that operate to limit the economic risk associated with holding Company securities.
The Board regularly reviews the Guidelines, and adopted a revised policy effective from 1 August 2012.
5.4 Shareholder communication
As set out in the Company’s Shareholder Communication Strategy, the
Company aims to ensure that shareholders are kept informed of all major developments affecting the state of affairs of the Company.
The Company aims to promote communication with shareholders and to encourage effective participation at general meetings. In addition, the Company recognises that potential investors and other interested stakeholders may wish to obtain information about the Company.
To achieve this, the Company communicates information to shareholders and other stakeholders through a range of forums and publications.
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One of the Company’s key communication tools is the Myer website
(www.myer.com.au). The Company has a dedicated investor section of its website (www.myer.com.au/investor). The Myer investor website includes information about the Company relevant to shareholders, including:
›› all announcements lodged with the ASX within the last three years, including annual and half year financial results;
›› the Board and Board Committee Charters, the Company’s
Constitution, and key corporate governance policies;
›› the Company’s Annual Reports and sustainability reports;
›› information about the Company’s AGM (including the Notice of
Meeting, and a webcast of the meeting); and
›› financial information about the Company.
The Company provides a telephone helpline facility and an online email enquiry service to assist shareholders with any queries. Information is also communicated to shareholders via periodic mail-outs, or by email to shareholders who have provided their email address.
Part 6 – Diversity at Myer
Relevant documents – available from myer.com.au/investor
›› Diversity Policy
The Company’s Diversity Policy outlines our approach to creating and maintaining an inclusive and collaborative workplace culture.
The Diversity Policy sets out the Company’s diversity principles.
In this context, diversity covers gender, age, ethnicity, cultural background, language and disability.
It also includes differences in backgrounds, education and life experiences.
Having a diverse range of employees better enables the Company to provide the best in service to its customers. It enables it to foster greater innovation, stronger problem solving capability, greater customer connection and increased morale, motivation and engagement.
6.2 Diversity objectives
The Company’s diversity objectives are to ensure that Myer:
›› has an inclusive workplace where every individual can shine regardless of gender, cultural identity, age, disability, work style or approach;
›› leverages the value of diversity for all our stakeholders to deliver the best customer experience, improved financial performance and a stronger corporate reputation; and
›› continues to take a leadership position on diversity practices.
To achieve these objectives, the Company:
›› has determined measurable objectives for achieving gender diversity, the Board has endorsed these objectives and both the objectives and progress in achieving them will be assessed annually;
›› will assess pay equity on an annual basis;
›› will encourage and support the application of workplace flexibility policy into practice across the business; and
›› will meet our commitment to the Australian Employment
Covenant to assist Indigenous Australians to access employment.
6.3 Female representation
At 27 July 2013, the proportion of women employed by the
Company was as follows:
Board of Directors
33.3%
Leadership roles
60.8%
Total Myer workforce
78.8%
The following charts outline female leadership representation
(as defined by the Workplace Gender Equality Agency – WGEA) across the Company, which is also included in the Company’s annual report to WGEA.
The Company’s diversity and inclusion framework has five core tenets:
›› meritocracy;
›› fairness and equality;
›› contribution to commercial success;
›› that it’s everyone’s business; and
›› for Myer, it’s a part of who we are.
6.1 Key principles
The Company’s approach to diversity is underpinned by key principles including:
›› maintaining a safe and inclusive working environment that is respectful of individual differences and attributes (including family responsibilities);
›› eliminating artificial barriers to career progression by providing support and mentoring, and by developing flexible work practices to meet the differing needs of employees in the context of business requirements;
›› recruiting and retaining a skilled and diverse workforce;
›› employing a fair and effective process for appointment to roles based on relative ability, performance and potential; and
›› fostering a culture, including through education and training, that rewards people for furthering diversity.
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Corporate Governance Statement continued A copy of the Company’s annual WGEA report is available on the Investor Centre of the Company’s website at www.myer.com.au/investor.
Women in leadership positions at Myer as at 27 July 2013
36%
Strategic leadership
4 females
44%
Business/functional leadership
40 females
551 females
63%
9,439 females
80%
Operational leadership
Self-leadership
Women in leadership positions at Myer as at 28 July 2012
27%
41%
Strategic leadership
3 females
Business/functional leadership
34 females
553 females
62%
9,433 females
80%
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Self-leadership
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6.4 Measurable objectives
The Board has assessed the Company’s performance against the measurable objectives for achieving diversity at all levels of the Company established by the Board in respect of FY2013. Details on the Company’s progress in achieving those objectives, and the measurable objectives which have been set by the Board in respect of FY2014, are outlined below:
FY2013 and FY2014 measurable objectives
Objective
Progress
The Company aims to maintain a 50% proportion of female candidates identified in succession plans. We aim to ensure that within each job grade level there are an equal number of senior women who are ready to move into leadership roles.
The career development plans of all female middle management employees are assessed annually to ensure their appropriateness in developing and retaining the
Company’s female talent.
›› The percentage of females represented in the Company’s Top Talent Group is 46.1%, up from 40% in FY2012.
›› At store level, females represent 44.6% of those identified as having potential for further leadership positions.
The Company aims to maintain a return rate of more than 70% for team members returning from parental leave.
The Company is committed to ensuring that team members returning to work after a period of parental leave can do so under a graduated return program. Regardless of any business need, returning team members have a minimum six-month period of graduated return to enable their re-introduction to the workplace.
›› During the reporting period, 85.7% of the Company’s team members who commenced parental leave returned from parental leave.
The Company aims for senior managers to meet or formally contact women on parental leave at least quarterly.
The Company has had a formal Keeping in Touch program in place since 2010.
It aids both employees and managers with the transition to and from parental leave.
It specifically provides flexibility for women to determine the level of contact they wish to maintain while on parental leave. This means women set contact levels they are comfortable with, which may be more or less frequently than quarterly, dependent upon their wishes.
The Company aims to maintain 50/50 gender balance in its Managers In Training Programs to facilitate the creation of a pool of qualified female candidates for manager role opportunities.
The Management Development Program (MDP) continues to be our main internal development program for entry-level management positions. The program is aimed at recognising and rewarding internal team members by supporting their career goals, as well as assisting, retaining and promoting entry-level female team members through comprehensive training and skills development.
›› During the reporting period, 57.1% of participants in the MDP program were female and 42.9% of the participants were male.
›› The Royal Melbourne Institute of Technology (RMIT) intern program currently has
80% female representation.
›› The Graduate Development Program was not run in 2013.
Our Merchandise In Training Program is our key middle management program, which has continued throughout the reporting period and is aimed at developing team members for senior roles within our merchandise areas. During the reporting period, 84.6% of the participants in this program were female.
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MYER Annual Report 2013
Corporate Governance Statement continued 6.5 Other initiatives
The Company’s commitment to, and work in, other areas of diversity and inclusion during FY2013 have also resulted in achievements in each of the following areas:
Indigenous participation – The Company commenced developing its specific Indigenous employment strategy. This has included identifying opportunities to increase Indigenous career pathways and job readiness programs. The strategy outlines how it will achieve this through various career pathways.
Flexible arrangements and parental leave – Diversity has always been valued and encouraged at the Company. With a workforce comprising predominantly female team members, the Company was proud to be the first major Australian retailer to introduce paid parental leave in 2009 and has maintained this level of support in addition to more recent Federal Government initiatives regarding parental leave. The nature of retail requires the Company to have a flexible and responsive workforce that is available to meet the variable shopping habits of our customers. This flexibility has afforded team members the opportunity to balance work and family responsibilities, including graduated return to work from parental leave, whilst establishing a long, and fulfilling career at the Company.
We recognise that periods of parental leave represent an interruption in career progression. Therefore, the Company has introduced a number of initiatives to encourage our team members to return to work and to enable them to balance their family and work responsibilities.
The Company offers flexible work arrangements for all team members returning from parental leave. This includes targeted support in special circumstances to help balance life priorities with work and to manage careers, including compressed work weeks (where employees work the usual number of hours in fewer days), flexible start and finish times, job sharing, telecommuting, part-time work arrangements, and unpaid leave for any purpose.
These policies provide a platform for further promotion of flexible work and careers and active practice of inclusion, particularly for women and men with caring responsibilities.
The Company believes that the benefits of its activities and initiatives around diversity and inclusion accrue in many ways in its business.
Most importantly, improving diversity and flexibility within its workforce has seen increased employee engagement, which is a key driver for productivity and providing great customer service. It also helps the Company remain innovative in the ever-changing markets in which it operates. In addition, improving the diversity of its workforce and being an inclusive place to work has meant that the Company has been able to build stronger connections in the communities it serves and in which its employees live. The Company’s plans in these areas are focused on continuing to connect with its diverse customer base, contributing within the community and being a place where diverse people can be engaged and productive in delivering against the
Company’s strategy.
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Compliance with ASX Principles
The table below is provided to facilitate your understanding of the Company’s compliance with the recommendations in the ASX Principles and indicates where each recommendation is discussed in this statement.1
Reference in Corporate
Governance Statement
Recommendation
Principle 1 – Lay solid foundations for management and oversight
1.1 Disclose the functions reserved to the Board and those delegated to senior executives
See sections 1.1 and 1.2
1.2 Disclose the process for evaluating the performance of senior executives
See section 1.3
Principle 2 – Structure the Board to add value
2.1 A majority of the Board should be independent directors
See sections 2.1 and 2.4
2.2 The chair should be an independent director
See sections 1.2 and 2.1
2.3 The roles of chair and CEO should not be exercised by the same individual
See sections 1.2 and 2.1
2.4 The Board should establish a nomination committee
See sections 3.1 and 3.4
2.5 Disclose the process for evaluating the performance of the Board, its committees and individual directors
See section 1.3
Principle 3 – Promote ethical and responsible decision-making
3.1
Establish a code of conduct which sets out the Company’s key rules, values and guidelines to guide the directors, the CEO, the CFO and any other senior executives
See section 5.1
3.2
Establish and disclose a diversity policy which requires the Board to establish measurable objectives for achieving gender diversity for the Board
See part 6, sections 6.1 and 6.2
3.3
Disclose the Company’s measurable objectives for achieving gender diversity set by the Board and progress towards achieving them
See section 6.4
3.4
Disclose the proportion of women employees in the whole organisation, in senior executive positions and on the Board
See section 6.3
Principle 4 – Safeguard integrity in financial reporting
4.1 Establish an audit committee
See sections 3.1 and 3.2
4.2 audit committee should have at least three members, consist only of non-executive directors
The
(a majority of whom should be independent) and be chaired by an independent chair who is not the chair of the Board
See sections 3.1 and 3.2
4.3 The audit committee should have a formal charter
See section 3.1
Principle 5 – Make timely and balanced disclosure
5.1
Establish and disclose a policy to ensure compliance with ASX Listing Rule disclosure requirements and accountability at a senior executive level for that compliance
See section 5.2
Principle 6 – Respect the rights of shareholders
6.1 Establish and disclose a shareholder communications policy
See section 5.4
Principle 7 – Recognise and manage risk
7.1 Establish and disclose policies for the oversight and management of material business risks
See sections 4.1 and 4.2
7.2 Board should require management to design and implement risk management and internal
The
control systems to manage material business risks and to report on whether those risks are being managed effectively
See sections 4.1, 4.2, 4.4 and 4.5
7.3
Disclose whether the Board has received assurance from the CEO and the CFO that the declaration provided in accordance with s295A of the Corporations Act is founded on a sound system of risk management and internal control that is operating effectively in all material respects in relation to financial reporting risks
See section 4.5
Principle 8 – Remunerate fairly and responsibly
8.1 Establish a remuneration committee
See sections 3.1 and 3.3
8.2 remuneration committee should have at least three members, a majority of whom are independent,
The
and be chaired by an independent chair
See sections 3.1 and 3.3
8.3
Distinguish the structure of non-executive directors’ remuneration from that of executive directors and senior executives
See section 1.4 and the
Remuneration Report
1. The table includes all recommendations in the ASX Principles and Recommendations other than the ‘Guide to Reporting’ recommendations.
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MYER Annual Report 2013
Directors’ Report
Your directors present their report on the consolidated entity consisting of the Company and the entities it controlled (collectively referred to as the Group) at the end of, or during, the period ended 27 July 2013.
1. Directors
The following persons were directors of the Company during the financial year and/or up to the date of this Directors’ Report:
Director
Position
Date appointed as director
Paul McClintock AO
Chairman from 10 October 2012
Independent non-executive director
8 August 2012
Rupert Myer AM
Deputy Chairman from 8 August 2012
Independent non-executive director
12 July 2006
Bernie Brookes
CEO and Managing Director
12 July 2006
Anne Brennan
Independent non-executive director
16 September 2009
Chris Froggatt
Independent non-executive director
9 December 2010
Peter Hay
Independent non-executive director
3 February 2010
Howard McDonald
Chairman until 10 October 2012
Independent non-executive director
6 November 2006
Ian Morrice
Independent non-executive director
8 August 2012
Paul McClintock AO and Ian Morrice were appointed as directors on 8 August 2012. Howard McDonald retired as Chairman and as a director with effect from 10 October 2012. Ian Morrice retired as a director with effect from 1 March 2013. All other directors served as directors of the
Company for the whole financial year and until the date of this Directors’ Report.
Details of the qualifications, experience and special responsibilities of each current director are set out on pages 24 to 25 of this Annual Report.
2. Directorships of other listed companies
The following table shows, for each person who served as a director during the financial year and/or up to the date of this Directors’ Report, all directorships of companies that were listed on the ASX, other than the Company, since 31 July 2010, and the period for which each directorship has been held.
The information provided in relation to former directors Mr Howard McDonald and Mr Ian Morrice is current as at the date that they retired as directors of the Company.
Director
Listed entity
Period directorship held
Paul McClintock AO
Intoll Management Limited
May 2003 – December 2010
Perpetual Limited
April 2004 – November 2012
AMCIL Limited
January 2000 – present
Diversified United Investment Limited
November 2002 – January 2012
Bernie Brookes
Nil
–
Anne Brennan
Charter Hall Group
October 2010 – present
Nufarm Limited
February 2011 – present
Argo Investments Limited
September 2011 – present
Rupert Myer AM
Echo Entertainment Group Limited
March 2012 – present
Chris Froggatt
Goodman Fielder Limited
August 2009 – present
Peter Hay
Alumina Limited
December 2002 – present
Australia and New Zealand Banking Group Limited
November 2008 – present
GUD Holdings Limited
May 2009 – present
Newcrest Mining Limited
August 2013 – present
Howard McDonald
Nil
–
Ian Morrice
Metcash Limited
June 2012 – present
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D irectors ' R eport
3. Meetings of directors and Board Committees
The number of meetings of the Board and of each Board Committee held during the period ended 27 July 2013, and the numbers of meetings attended by each director are set out below.
All directors are invited to attend Board Committee meetings. Most Board Committee meetings are attended by all directors.
Meetings of directors Director
A
Audit, Finance and
Risk Committee
Human Resources and
Remuneration Committee
B
A
B
A
B
Nomination
Committee
A
B
Paul McClintock AO*
10
10
–
–
–
–
2
2
Rupert Myer AM
11
11
5
5
5
5
3
3
Bernie Brookes
11
11
–
–
–
–
–
–
Anne Brennan
11
11
5
5
5
5
3
3
Chris Froggatt
11
11
–
–
5
5
3
3
Peter Hay
10
11
4
5
–
–
–
–
Howard McDonald**
3
3
–
–
2
2
1
1
Ian Morrice***
5
5
–
–
–
–
–
–
Notes:
A = Number of meetings attended.
B = Number of meetings held during the time the director held office or was a member of the Committee during the year.
* = Paul McClintock AO was appointed as a director on 8 August 2012.
** = Howard McDonald retired as a director on 10 October 2012.
*** = Ian Morrice was appointed as a director on 8 August 2012, and retired as a director on 1 March 2013.
4. Directors’ relevant interests in shares
The following table sets out the relevant interests that each director has in the Company’s ordinary shares or other securities as at the date of this
Directors’ Report.
No director has a relevant interest in a related body corporate of the Company.
Director
Ordinary shares
Options
Performance rights
106,000
Nil
Nil
Paul McClintock AO
Rupert Myer AM
733,999
Nil
Nil
Bernie Brookes
10,004,399
7,380,394
2,058,383
Anne Brennan
53,658
Nil
Nil
Chris Froggatt
10,040
Nil
Nil
Peter Hay
12,195
Nil
Nil
Howard McDonald retired as a director of the Company with effect from 10 October 2012. At the date of his retirement, Mr McDonald had a relevant interest in 2,074,390 ordinary shares in the Company.
Ian Morrice retired as a director of the Company with effect from 1 March 2013. At the date of his retirement, Mr Morrice had a relevant interest in 82,000 ordinary shares in the Company.
5. Company Secretary
Marion Rodwell is the Company Secretary of the Company. She was appointed Group General Counsel and Company Secretary in 2008.
Ms Rodwell’s experience and qualifications are set out on page 27 of this Annual Report.
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Directors’ Report continued 6. Principal activities
During the financial year, the principal activity of the Group was the operation of the Myer department store business.
7. Operating and financial review
A detailed review of the Group’s operations for the financial year and the results of those operations is set out on pages 2 to 17 of this
Annual Report in About Myer (pages 2 and 3), the Joint Report by
Chairman and CEO (pages 4 and 5) and the Operating and Financial
Review (pages 6 to 17).
8. Significant changes in the state of affairs
The following significant changes to the Group’s state of affairs have occurred since the commencement of the financial year:
›› a continuing challenging retail environment;
›› the appointment of Mr Paul McClintock AO as Chairman of the Company, and the appointment of Mr Rupert Myer AM as
Deputy Chairman;
›› the retirement of Mr Howard McDonald as Chairman of the Company, and the retirement of Mr Ian Morrice as a non‑executive director;
›› the successful refinancing of debt facilities with improved interest margins and strong support from lenders;
›› the opening of our new stores in Fountain Gate (Victoria) in
September 2012, Townsville (Queensland) in October 2012 and Shellharbour (New South Wales) in May 2013, and the refurbishment and relaunch of our store at Highpoint (Victoria) in
March 2013;
›› major refurbishments of three of our top 20 stores in Adelaide
(South Australia), Indooroopilly (Queensland) and Miranda (New
South Wales), which are currently in progress and will continue into the next financial year;
›› the closure of our store in Fremantle (Western Australia);
›› reached an agreement to acquire remaining 35 percent of the shares in the sass & bide business, taking ownership to 100 percent; and
›› the continued strengthening of our merchandise offer with significant new brands including Napoleon Perdis and a department store exclusive agreement with Peter Alexander and Seafolly.
These matters are discussed on pages 2 to 17 of this Annual Report.
Other than the above, there were no significant changes in the state of affairs of the Group during the financial year or up to the date of this
Directors’ Report.
9. Business strategies and future developments
A summary of the Group’s strategic plan is set out on pages 2 and 3 of this Annual Report.
Discussion of the Group’s business strategies and comments on the likely developments in the Group’s operations are included in the
Joint Report by Chairman and CEO (pages 4 and 5) and the Operating and Financial Review (pages 6 to 17).
Further information on likely developments in the Group’s operations and the expected results of those operations has not been included in this Annual Report. The directors believe that the inclusion of such information would be likely to result in unreasonable prejudice to the Group.
10. Key risks and uncertainties
The Group’s strategies take into account the expected operating and retail market conditions, together with general economic conditions, which are inherently uncertain.
The Group has structured and proactive risk management and internal control systems in place to manage material risks. The key risks and uncertainties that may have an effect on the Group’s ability to execute its business strategies and the Group’s future growth prospects, and how the Group manages these risks, include:
›› Consumer discretionary spending
The Australian retail environment in which Myer operates is currently experiencing challenging conditions. There is a risk that
Myer’s revenue will be impacted by any reduction in consumer spending or a change in consumer spending patterns.
›› Competition
The Australian retail industry in which Myer operates is highly competitive, has low barriers to entry and is subject to changing customer preferences.
Myer’s competitors include traditional department stores, discount department stores, specialty retailers, supermarkets, discount stores, independent local operators, mail order catalogues, online retailers, suppliers operating direct to customer channels and international retailers.
Myer’s competitive position may deteriorate as a result of factors including actions by existing competitors, the entry of new competitors or a failure by Myer to position itself successfully as the retail environment changes. Any deterioration in Myer’s competitive position may result in a decline in financial performance and a loss of market share.
In order to manage risks associated with consumer discretionary spending and competition, Myer continues to adapt its five‑point plan to meet changing customer preferences and embrace retail innovation.
We are continuing to adapt our business in line with customer expectations and to meet current challenges. The Group is responding to the ways in which our customers shop through the execution of our omni-channel strategy and revitalising our store environments. Further details are set out in About Myer (pages 2 and 3), the Joint Report by
Chairman and CEO (pages 4 and 5) and the Operating and Financial
Review (pages 6 to 17).
›› Relationships with suppliers and ethical sourcing
There is a risk that Myer’s relationships with suppliers, key brand owners, designers or concession operators may deteriorate.
The loss or impairment of such relationships or an inability to renew existing contractual arrangements with such parties on terms which are no less favourable to Myer is likely to result in a reduction in Myer’s financial performance.
Supplier relationship management is an integral component to the success of the Myer business model. Myer undertakes a wide variety of mitigating strategies to cultivate supplier relationships for the long-term benefit of both parties.
There are risks associated with Myer’s suppliers not complying with
Myer’s ethical sourcing requirements, posing risks to reputation, merchandise supply and potential damages claims.
Myer’s Ethical Sourcing Policy is supported by a framework designed to measure supplier adherence, identify breaches and to continually improve the ethical performance of our supply chain. Further information is provided in the Sustainability section
(at page 23).
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›› Financial risk management
The Company’s activities expose it to a number of financial risks.
The Group adopts a financial risk management program which seeks to minimise the potential adverse impacts on the financial performance of the Group.
A detailed discussion of the Company’s financial risk management and risk management generally is set out in the Financial Report
(at note 2) and Part 4 of the Corporate Governance Statement
(at page 33).
13. ptions and performance rights granted over
O
unissued shares
The ‘Myer Equity Incentive Plan’ (MEIP) operates for selected senior executives and has been in operation since December 2006. Under the MEIP, the Company has granted eligible executives options and performance rights over unissued ordinary shares of the Company, subject to certain vesting conditions. Each option or performance right entitles the holder to acquire one ordinary fully paid share in the Company (subject to the adjustments outlined below).
11. Matters subsequent to the end of the financial year
Myer has exercised the call option to acquire the remaining 35% in sass & bide. The acquisition was settled on 24 September 2013 at an acquisition price of $30.2 million, net of cash acquired. Further information is provided in the Financial Report (at note 30), in the
Joint Report by Chairman and CEO (pages 4 and 5) and in the
Operating and Financial Review (at page 11).
Options
No options were granted under the MEIP in the financial year ended
27 July 2013 and no options have been granted since the end of the year. The following table sets out the details of options that have been granted under the MEIP over unissued shares of the Company and that remain on issue as at the date of this Directors’ Report.
No other matter or circumstance has arisen since the end of the financial year which has not been dealt with in this Directors’ Report or the Financial Report, that has significantly affected, or may significantly affect:
Date options granted Expiry date
17 December 2008
24 October 2013
$2.14
1,349,313
(a) the Group’s operations in future financial years;
30 June 2009
24 October 2014
$2.34
2,609,650
Exercise price of Number of options1 options2
(b) the results of those operations in future financial years; and
6 November 2009
31 December 2013
$5.74
2,227,723
(c) the Group’s state of affairs in future financial years.
6 November 2009
31 December 2013
$4.10
5,152,671
12. Dividends
The following dividends have been paid to shareholders during the financial year:
Closing balance
2012 Final Dividend
$’000
Final dividend for the period ended 28 July 2012 of
9.0 cents per fully paid ordinary share, fully franked, paid on 14 November 2012
52,502
2013 Interim Dividend
$’000
Interim dividend for the period ended 27 July 2013 of
10.0 cents per fully paid ordinary share, fully franked, paid on 9 May 2013
58,345
In addition to the above dividends, since the end of the financial year, the Board of Directors has determined a final fully franked dividend of
8.0 cents per fully paid share, to be paid on 14 November 2013.
Further information regarding dividends is set out in the Financial
Report (at note 22).
1 To calculate the issue price of shares when options are exercised, the Company uses the 7-Day Volume Weighted Average Share Price on the date of issue.
2 Each option entitles the holder to receive one fully paid ordinary share in the
Company, subject to the satisfaction of the relevant performance conditions and the payment of the exercise price.
The number of shares that option holders are entitled to receive on the exercise of an option, or the exercise price of those options, may be adjusted in a manner consistent with the ASX Listing Rules if:
›› there is a pro-rata issue of shares to the Company’s shareholders
(such as a bonus issue); or
›› any reconstruction of the capital of the Company (such as a subdivision or return of capital).
If the manner of adjustment is not prescribed by the ASX Listing
Rules, the Board can determine the adjustment to ensure that option holders are not advantaged or disadvantaged as a result of any such capital action.
Further information about options granted under the MEIP (including the details of the options granted to the Key Management Personnel
(KMP) of the Company) is included in the Remuneration Report
(at pages 54 and 61 to 65).
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MYER Annual Report 2013
Directors’ Report continued Performance rights
Following a review of the Company’s remuneration structure in 2011, the Board revised the Company’s long term incentive plan for selected senior executives. As part of that review, the Board approved a change from the grant of options under the MEIP, to the grant of performance rights under the MEIP.
14.
Shares issued on the exercise of options and performance rights
Options
From time to time, the Company issues fully paid ordinary shares in the Company to the Myer Equity Plans Trust (Trust) for the purposes of meeting anticipated exercises of securities granted under the MEIP.
During the financial year, the Company granted a total of 2,308,824 performance rights under the MEIP to selected senior executives.
These performance rights were granted under two offers – 973,981 performance rights were granted under an ‘Executive Equity Incentive
Plan’ (EEIP) offer and 1,334,843 performance rights were granted under a ‘Myer Equity Incentive Plan’ (MEIP) offer. The performance rights granted under each offer are subject to different performance conditions.
During the period ended 27 July 2013, 210,000 fully paid ordinary shares of the Company were issued to the Trust for this purpose. To calculate the issue price of shares issued to the Trust, the Company uses the 7-Day Volume Weighted Average Share Price of the
Company’s shares as at the close of trading on the date of issue.
The Trust held 29,700 fully paid ordinary shares of the Company as at 28 July 2013.
No performance rights have been granted since the end of the financial year ended 27 July 2013.
On exercise of securities granted under the MEIP, shares may be transferred to the relevant participants, or the Company may issue fully paid ordinary shares directly to MEIP participants.
The following table sets out the details of performance rights that have been granted under the MEIP and that remain on issue as at the date of this Directors’ Report.
During the period, 205,500 shares were transferred from the
Trust to participants on the exercise of options under the MEIP, as detailed below.
Date performance rights granted
Date options granted Expiry date
Issue price Number of performance rights1
21 October 2011
(grant to senior executives) 31 December 2014
Nil
2,750,109
9 December 2011
(grant to CEO)
31 December 2014
Nil
2,058,383
29 January 2013
(grant to senior executives under the EEIP offer)
29 January 2013
(grant to senior executives under the MEIP offer)
17 December 2008
Exercise price of options
Number of shares provided on exercise of options
$2.14
205,500
Post balance date events
Since 27 July 2013, 1,050,000 further shares have been issued to, or otherwise acquired by, the Myer Equity Plans Trust.
Since 27 July 2013, 956,000 fully paid ordinary shares of the Company held by the Myer Equity Plans Trust were transferred to participants on the exercise of options granted under the MEIP, as detailed below.
31 October 2015
Nil
838,234
Date options granted 31 October 2015
Nil
Closing balance
1,319,006
6,965,732
1 Each performance right entitles the holder to receive one fully paid ordinary share in the Company, subject to the satisfaction of the relevant performance conditions.
17 December 2008
Number of shares provided on exercise of options
$2.14
956,000
Performance rights
No performance rights were eligible to vest or be exercised during the financial year or up to the date of this Directors’ Report.
A holder of a performance right may only participate in new issues of securities of the Company if the performance right has been exercised, if participation is permitted by its terms and the shares in respect of the performance right have been allocated and transferred to the performance right holder before the record date for determining entitlements to the new issue.
Further information about performance rights granted under the MEIP
(including the performance conditions attached to the performance rights granted under the EEIP offer and the MEIP offer, and the performance rights granted to the KMP of the Company) is included in the Remuneration Report (at pages 54 to 55 and 59 to 63).
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D irectors ' R eport
15. Remuneration Report
The Remuneration Report, which comprises part of this Directors’
Report, is presented separately on pages 47 to 65.
16. Indemnification and insurance of directors and officers
The Company’s Constitution requires the Company to indemnify current and former directors, alternate directors, executive officers and officers of the Company on a full indemnity basis and to the full extent permitted by law against all liabilities incurred as an officer of the Group, except to the extent covered by insurance. Further, the
Company’s Constitution permits the Company to maintain and pay insurance premiums for director and officer liability insurance, to the extent permitted by law.
Consistent with (and in addition to) the provisions in the Company’s
Constitution outlined above, the Company has also entered into deeds of access, indemnity and insurance with all directors of the
Company which provide indemnities against losses incurred in their role as directors, subject to certain exclusions, including to the extent that such indemnity is prohibited by the Corporations Act or any other applicable law. The deeds stipulate that the Company will meet the full amount of any such liabilities, costs and expenses (including legal fees).
During the financial year, the Company paid insurance premiums for a directors’ and officers’ liability insurance contract that provides cover for the current and former directors, alternate directors, secretaries, executive officers and officers of the Company and its subsidiaries.
The directors have not included details of the nature of the liabilities covered in this contract or the amount of the premium paid, as disclosure is prohibited under the terms of the contract.
17. Proceedings on behalf of the Company
No person has applied to the court under section 237 of the
Corporations Act for leave to bring proceedings on behalf of the
Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the
Company for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of the Company with the leave of the court under section 237 of the
Corporations Act.
18. Environmental regulation
The Group is subject to and has complied with the reporting and compliance requirements of both the Energy Efficiency Opportunities
Act 2006 (Cth) and the National Greenhouse and Energy Reporting Act
2007 (Cth) (NGER Act). No significant environmental incidents have been reported internally, and no breaches have been notified to the
Group by any government agency.
The Energy Efficiency Opportunities Act 2006 (Cth) requires the Group to assess its energy usage, including the identification, investigation and evaluation of energy saving opportunities, and to report publicly on the assessments undertaken, including action the Group intends to take as a result of such assessments. As required under this Act, the
Group submitted its fifth public report for financial year 2012, and its second cycle Energy Efficiency Opportunities Assessment Plan, which was approved by the Department of Resources, Energy and Tourism in
May 2013. The Group has published its Energy Efficiency Opportunities
(EEO) public reports on the Investor Centre section of its website, www.myer.com.au/investor (under Reporting – Sustainability).
The NGER Act requires the Group to report its annual greenhouse gas emissions and energy use. The Group has implemented systems and processes for the collection and calculation of the data required.
In compliance with the requirements of the NGER Act, the Group submitted its fourth report to the Greenhouse and Energy Data
Officer in October 2012, and is due to submit its fifth report by
31 October 2013.
19. Non-audit services
The Company may decide to employ its external auditor on assignments additional to its statutory audit duties where the auditor’s expertise and experience with the Company and/or the Group are important.
Details of the amounts paid or payable to the auditor (PwC) for audit and non-audit services provided during the year are set out in the
Financial Report (at note 24).
The Board has considered the position and, in accordance with advice received from the Audit, Finance and Risk Committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations
Act. The directors are satisfied that the provision of non-audit services by the auditor did not compromise the auditor independence requirements of the Corporations Act for the following reasons:
›› all non-audit services have been reviewed by the Audit, Finance and Risk Committee to ensure they do not impact on the impartiality and objectivity of the auditor; and
›› none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants.
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MYER Annual Report 2013
Directors’ Report continued 20. Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act is set out on page 112 of this
Annual Report.
21. Rounding of amounts
The Group has taken advantage of ASIC Class Order 98/100 relating to the ‘rounding off’ of amounts in the Directors’ Report. Amounts in the Directors’ Report have been rounded off to the nearest thousand dollars, or in certain cases, to the nearest dollar.
This Directors’ Report is made in accordance with a resolution of directors.
Paul McClintock AO
Chairman
Melbourne, 8 October 2013
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47
Remuneration Report
This Remuneration Report sets out the strategy, framework and conditions of employment for Myer Holdings Limited non-executive directors, Executive Directors and other Key Management Personnel (KMP) of the Group and the Company. The report also details the role and accountability of the Board and the relevant Committees established to support the Board on these matters.
Contents
This report provides details on the following matters:
›› FY2013 remuneration overview
›› Future focus for executive reward
›› Human Resources and Remuneration Committee and remuneration governance
›› Use of remuneration consultants
›› Directors and executives disclosed in this report
›› Policies for remuneration of directors and other Key Management Personnel
›› Remuneration and Company performance
›› Remuneration outcomes for directors and other Key Management Personnel
›› Equity arrangements with directors and other Key Management Personnel
FY2013 remuneration overview
During FY2013, the Board continued to review Myer’s approach to executive remuneration with a view to ensuring ongoing alignment between executive remuneration, Group performance and shareholder returns.
The Human Resources and Remuneration Committee’s overarching objective is to have policies and practices which encourage employees to achieve sustainable financial and customer outcomes, while attracting and retaining high quality senior executives. During the year, the Board made a number of decisions in support of this objective, including:
›› A review of base salaries with increases applied to move closer to market median for comparable roles.
›› A decision that no STI payments should be made given the overall profit achieved by the Company, not withstanding the fact that the executives performed well against the targets set and most of their KPIs were met.
The reward potential of the STI plan was significantly affected by the prevailing economic conditions which impacted the retail sector.
Executives were set challenging KPIs including achieving budgeted NPAT to drive performance for shareholders.
In terms of Long Term Incentive (LTI), performance rights and options granted to KMP in previous years that have the potential to vest
(following the end of the reporting year) if applicable hurdles were met. However, these options and performance rights are unlikely to vest in full, as the Earnings Per Share (EPS) hurdle is unlikely to be achieved.
Executive reward incorporates three elements: base salary; STI; and LTI. Given the combination of outcomes for these three aspects for the current year, the Board has determined some structural changes will need to occur in this area in the coming year. Details are provided on pages 49 and 50 of this report.
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Remuneration Report continued Key developments/changes for the year ended 27 July 2013 were:
Organisational changes
Governance and non-executive director remuneration Key development/remuneration outcomes
Howard McDonald retired as a non-executive director and as Chairman on 10 October 2012.
No change to the aggregate directors’ fee pool limit.
Paul McClintock AO appointed as non-executive director on 8 August 2012 and as Chairman on 10 October 2012.
Rupert Myer AM appointed as Deputy Chairman on 8 August 2012.
Ian Morrice appointed as non-executive director on 8 August 2012 and retired as non-executive director on 1 March 2013.
Chairman’s fee of $400,000 per annum payable to Paul McClintock.
Deputy Chairman’s fee of $30,000 per annum payable to Rupert Myer.
Ernst & Young appointed as the Remuneration
Adviser to the Human Resources and Remuneration
Committee/Board in December 2012.
Human Resources and Remuneration Committee
Charter expanded to include:
›› review of learning and development priorities and alignment to the business strategy; and
›› review of culture and effectiveness of communication.
CEO and
Managing Director remuneration There were no changes to the CEO contract including
CEO Total Fixed Compensation (TFC).
No STI payment rewarded.
No LTI reward delivered as the performance hurdles for the performance rights due to vest in FY2013 were not satisfied.
Other KMP remuneration Nick Abboud ceased employment on
18 September 2012.
Mark Goddard ceased employment on 4 February 2013.
Adjustments between 5.26% and 16.67% applied for
KMP effective from February 2013 to move closer to market median for comparable roles.
Adam Stapleton promoted as Executive General
Manager Merchandise on 4 February 2013.
Introduction of clawback provisions for STI and LTI plans which apply to KMP.
Tony Sutton promoted as Executive General Manager
Stores on 14 February 2013.
No STI payment rewarded.
Reduction in STI Executive Incentive Plan (EIP) target percentage of TFC from 70% to 60% for KMP to align with market standards.
Additional performance hurdles introduced to the
STI (EIP) – NPAT, Total Sales and Omni-Channel.
No LTI reward delivered as the performance hurdles for the performance rights due to vest in FY2013 were not satisfied. This is the fourth consecutive year of non‑vesting of options/performance rights.
LTI – 2013 grant of 657,805 performance rights offered to KMP in December 2012.
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The Board is committed to a direct, transparent link between performance and reward. Executive reward outcomes are dependent on delivering results to shareholders. We have a talented executive team and the approach taken by the Board in relation to remuneration is to ensure these individuals are retained and motivated to drive the future success of our Company.
As outlined in the 2012 Annual Report, the Board had determined that the current mix of reward for the KMP was not delivering the outcomes the Board had desired. These objectives were to ensure attraction and retention of KMP, alignment of KMP remuneration with shareholder interests and a reasonable likelihood of achievement of STI and LTI performance hurdles as well as delivery of STI and
LTI rewards.
For several years, base rates of fixed remuneration for KMP remained relatively static compared to overall market comparators. In some cases rates have remained below our target objective of a median market level. STI opportunity remained above market level as a percentage of Total Fixed Compensation; however, due to challenging market conditions, the performance hurdles for STI have not been satisfied since 2010. Accordingly, STI plans have failed to deliver any reward at all for three consecutive years. Similarly, LTI offers of equity have failed to deliver any reward to KMP as the performance targets set at the time of grant have not been met.
While in isolation the Board may have determined that one element of KMP reward ‘underperforming’ was sustainable in the short-term, having each element consistently underperforming is unsustainable and not in the interests of either the KMP or shareholders.
In an effort to rebalance the remuneration components as identified in the 2012 Annual Report, there were some adjustments made to the three elements of executive reward.
Increases to the fixed remuneration component were applied to create a more balanced overall reward structure aligned at the median market level and as considered by the Board to be appropriate. This resulted in larger base adjustments during FY2013 than may otherwise have been applied. The decision to increase base salary for these key executives was not taken lightly. Two main factors contributed to the Board’s decision to award these increases:
›› Since 2009 the personnel performing these roles have taken on increased responsibilities and accountabilities as a result of public listing.
›› External benchmarking showed that base salaries for these roles had fallen below comparative market rates.
The STI opportunity as a portion of total annual remuneration has been reduced from 70% of TFC to 60% of TFC for certain executives in FY2013. Additional hurdles were included in the STI plan for the
Executive Management Group. In FY2012 STI was eligible to be rewarded on satisfaction of a single metric, being NPAT.
For FY2013 three metrics were used to determine any short term incentive payment. These were:
›› NPAT: which remained the primary metric weighted at 40% of the total potential reward
›› Total Sales: sales growth was the second metric also weighted at 40%
›› Omni-Channel: omni-channel development with various objectives to be achieved was weighted at 20%
The percentage of TFC for the CEO applying to STI remained unchanged at 100% of TFC. This rate was determined as part of the review of the CEO contract during 2011 and remains appropriate for the duration of the contract term. The revised metrics of NPAT,
Total Sales and Omni-Channel were also applied to the CEO annual incentive in FY2013.
In terms of LTI, in FY2013, grants of performance rights were separated into two offers – for executives, the Executive Equity Incentive Plan
(EEIP) offer and for senior managers, the Myer Equity Incentive Plan
(MEIP) offer. Further details about the MEIP offer are outlined on page 54 of this report. KMP were granted performance rights under the EEIP offer in FY2013. As with last year’s performance rights granted to KMP, the performance rights granted under the EEIP offer are subject to two performance hurdles. Relative TSR performance against index of comparator companies will be used to determine vesting of
50% of the rights after the conclusion of the three-year performance period. The second metric is the compound annual growth rate in earnings per share (CAGR EPS) for Myer shares over the same three‑year performance period. The CAGR EPS metric was altered for the FY2013 EEIP offer to reflect the more challenging environment for retail businesses and the circumstances faced by Myer. This range for the EEIP offer is between 2% and 7% CAGR EPS with zero vesting below 2% and 100% vesting at 7% CAGR EPS, reflecting the changing nature of both the economic and retail environment.
The Board considers the changes made to each of the elements of reward for the KMP to be appropriate and a better reflection of the overall reward objectives, relevant market comparators and in the interests of shareholders.
Future focus for executive reward
In consideration of the year ahead, given the challenges of the economic outlook and consumer confidence, the Board will continue to review each element of the executive remuneration to ensure the structures are equitable and aligned with the long-term interests of shareholders.
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MYER Annual Report 2013
Remuneration Report continued The Company’s intention is to continually improve the alignment between its strategy and its remuneration framework to drive shareholder value and motivation of its people.
The Board considers each element of KMP reward annually, having regard to the experience and outcomes achieved and advice from its independent adviser Ernst & Young on the relative position of
KMP at Myer to relevant comparator companies. In framing the remuneration structure for FY2014, the Board has assessed the
Company’s remuneration arrangements in the context of the ongoing difficult trading conditions being experienced by the retail sector. The
Board has determined that the following changes will be made to the Company’s remuneration structure for the 2014 financial year:
›› Base Pay – Given the challenges of the economic outlook and increasing operating costs, the Board has determined that senior executives, including the CEO and KMP of the Company, will not receive any fixed pay adjustments for the 2014 financial year, except where a senior executive moves into a new and/or more complex role.
›› Short Term Incentive – At the beginning of the financial year the Board determines the performance targets and measures that should apply to KMP and other executives for the year. The performance measure selected for STI Plan for executives focus in
FY2014 is NPAT, ensuring that an STI reward is only available when profit is consistent with or ahead of the business plan approved by the Board. The NPAT hurdle was selected on the basis that it has a direct correlation to the financial performance of the Company.
›› Long Term Incentive – Performance rights will be granted to KMP under a revised EEIP offer in FY2014.
The performance rights granted under the EEIP offer will continue to be subject to the same two hurdles of relative TSR against an index of comparator companies (weighted at 50%) and CAGR EPS
(weighted at 25%).
The performance rights granted in FY2013 were subject to the same performance hurdles; however, the CAGR EPS hurdle was weighed at
50% and not 25%.
A third metric will be introduced under the FY2014 plan relating to the successful delivery of the five-point plan over the performance period, and is weighted at 25%. This was chosen by the Board as a way of measuring the Company’s transformation through the structural changes of the retail industry and in recognition of the important delivery of the strategic plan to the Company. This business transformation hurdle will be tested at the end of the
Performance Period by comparing the Company’s actual results against the measures set out in the five-point business plan.
In light of the fact that the CEO’s fixed term contract is due to expire in August 2014, the Board believes it important to ensure that the CFO remains with the business during a time of transition to a new CEO. With that objective in mind, additional performance rights will be offered to the CFO in FY2014. The potential value of the performance rights granted to the CFO under the EEIP will be equivalent to 75% of his TFC. The performance rights comprising 45% of TFC will be subject to the three metrics outlined above (applied in the same way as other executives covered by the
EEIP offer), and 30% of TFC subject to a condition of continuous employment with the Company through to the vesting date.
Clawback arrangements have been incorporated into both STI and
LTI plans for the KMP where the Board determines that a payment was granted under the plans for a KMP on the basis of, or has become eligible as a result of, a material misstatement or omission in Myer’s financial statements.
Other than clawback arrangements, no changes will apply to the equity grant made to the CEO in 2011. The terms of that one-off grant, including performance metrics agreed at that time, will remain as originally determined.
The Board considers the changes made to each of the elements of reward for the KMP to be an appropriate reflection of the overall reward objectives, relevant market comparators and in the interests of shareholders.
Human Resources and Remuneration Committee and remuneration governance
The Board reviews annually its role, responsibilities and performance to ensure that the Company continues to maintain and improve its governance standards.
The Board is responsible for ensuring the Group’s remuneration strategy is equitable and aligned with Company performance and shareholder interests. The Board conducts an annual review of the remuneration strategy of the business. To assist with this, the Board has established a Human Resources and Remuneration
Committee (Committee) made up of non-executive directors only.
The Committee charter is available on the Company’s website www.myer.com.au/investor. To ensure the Committee is fully informed when making remuneration decisions, it draws on the services of independent remuneration advisers. Independent remuneration advisers are engaged by and report directly to the Committee and provide advice and assistance on a range of matters including but not limited to:
›› updates on remuneration trends, regulatory developments and shareholder views;
›› the review, design or implementation of the executive remuneration strategy and its underlying components
(such as incentive plans); and
›› market remuneration analysis and comparative conditions relevant to Myer.
When making remuneration decisions, the Committee will also give consideration to the Company’s internal succession plan and capability profile.
The Human Resources and Remuneration Committee is chaired by Ms Chris Froggatt. Other members of the Committee are
Mr Rupert Myer AM and Ms Anne Brennan.
The Committee has the responsibility to make recommendations to the Board on:
›› non-executive director fees;
›› executive remuneration (directors and other executives) including specific recommendations on remuneration packages and other terms of employment for the Chairman, non-executive directors, the CEO and other senior executives; and
›› the over-arching remuneration framework including the policy, strategy and practices for fixed reward and both short and long term incentive plans and performance hurdles.
The Committee has been established under rule 8.15 of the
Constitution of the Company.
Further information on the role of the Committee, its membership and meetings held throughout the year are set out in the Corporate
Governance Statement and the Directors’ Report.
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The Committee has regard to the following policy objectives:
›› to ensure that the Company’s remuneration structures are equitable and aligned with the long-term interests of the Company and its shareholders;
›› to attract and retain skilled executives;
›› to structure short and long-term incentives that are challenging and linked to the creation of sustainable shareholder returns; and
›› to ensure that any termination benefits are justified and appropriate.
The Chairman, the CEO and the head of the Human Resources function are regular attendees at the Human Resources and Remuneration
Committee meetings. The CEO was not present during any Committee or Board agenda items where his remuneration was considered or discussed.
The Committee must at all times have regard to, and notify the Board as appropriate, of all legal and regulatory requirements, including any shareholder approvals required in connection with remuneration matters.
The Committee Chairman or if they are not available, a Committee member, will attend the Annual General Meeting and make themselves available to answer any questions from shareholders about the Committee’s activities or, if appropriate, the Company’s remuneration arrangements.
Use of remuneration consultants
To ensure it is fully informed when making remuneration decisions, the Committee draws on services from a range of external sources, including remuneration consultants where appropriate. Myer’s guidelines on the use of remuneration consultants set out requirements to ensure the independence of remuneration consultants from Myer’s management, including the process for the selection of consultants and their terms of engagement.
Remuneration consultants are engaged by, and report directly to, the Committee.
The Board directly engages external advisers to provide input to the process of reviewing non-executive director, executive director and executive remuneration. During 2013, the Board approved the engagement of Ernst & Young (EY) to provide remuneration advice, benchmarking data, market commentary and professional guidance regarding Myer’s executive remuneration and incentive plans. During this engagement no remuneration recommendations (as defined by the Corporations Amendment (Improving Accountability on Director and Executive
Remuneration) Act 2011 (Cth)) was provided to the Company by EY.
Mercer Consulting provided market data and a recommendation in regard to non-executive director fees in 2012. Mercer Consulting also provided market data and a recommendation in November 2012 in relation to the remuneration of the CEO and KMP. In both cases, the market data reports and the recommendations were provided directly to the Committee chairman. Mercer Consulting provided a statement to the Committee that the reports had been prepared free of undue influence from KMP. The Committee had full oversight of the review process and therefore it, and the Board, were satisfied that the information provided by Mercer Consulting was free from undue influence by KMP. Myer’s superannuation arrangements for all participating employees are provided through Myer’s participation in the Mercer Master Trust. During this engagement no remuneration recommendation (as defined by the Corporations
Amendment (Improving Accountability on Director and Executive Remuneration) Act 2011 (Cth)) was provided to the Company by Mercer.
Directors and executives disclosed in this report
Name
Position
Name
Position
Name
Position
Non-executive directors
Executive director
Other Key Management Personnel
P McClintock Chairman (from 10 October 2012),
Independent non‑executive director1
B Brookes CEO and
Managing Director
M Ashby
Chief Financial Officer
H McDonald Chairman (retired 10 October 2012),
Independent non‑executive director2
A Stapleton Executive General
Manager Merchandise6
R Myer
Deputy Chairman
Independent non‑executive director3
T Sutton
Executive General
Manager Stores7
A Brennan
Independent non-executive director
G Travers
Executive General Manager Business
Services and Strategic Planning
C Froggatt
Independent non-executive director
N Abboud Executive General Manager Stores8
T Flood
Independent non-executive director4
M Goddard Executive General Manager
Retail Development9
P Hay
Independent non-executive director
P Winn
I Morrice
Independent non-executive director
5
Executive General Manager
Merchandise10
1. P McClintock was appointed as a director on 8 August 2012 and appointed Chairman on 10 October 2012.
2. H McDonald retired on 10 October 2012. H McDonald was appointed as a director on 6 November 2006 and Chairman on 4 August 2009.
3. R Myer was appointed Deputy Chairman on 8 August 2012.
4. T Flood was appointed as a director on 26 July 2007 and retired on 11 April 2012.
5. I Morrice was appointed as a director on 8 August 2012 and retired on 1 March 2013.
6. A Stapleton was promoted to Executive General Manager Merchandise on 4 February 2013.
7. T Sutton was promoted to Executive General Manager Stores on 14 February 2013.
8. N Abboud was promoted to Executive General Manager Stores on 22 February 2010 and ceased employment on 18 September 2012.
9. M Goddard was appointed as Executive General Manager Retail Development on 13 March 2012 and ceased employment on 4 February 2013.
10. P Winn was appointed as Executive General Manager Merchandise on 31 March 2008 and ceased employment on 8 December 2011.
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MYER Annual Report 2013
Remuneration Report continued Policies for remuneration of directors and other KMP
Executive Director and other KMP remuneration
The remuneration structure seeks to ensure that executive rewards deliver an appropriate balance between shareholder and executive interests.
The remuneration structure provides a mix of fixed and variable (or ‘at risk’) pay, and a blend of short and longer-term incentives. As executives gain seniority within the Group, the balance of this mix shifts to a higher proportion of ‘at risk’ pay.
The diagram below illustrates how Myer’s remuneration strategy, and the structures the Board has put in place to achieve this strategy, align with the Company’s business objectives.
Five-point plan
Improve
customer service
Enhance our merchandise offer
Strengthen our loyalty program
Build a leading omni‑channel offer
Optimise our store network
Remuneration strategy
Attract and retain high calibre executives
Align executive rewards with Myer’s performance
›› reward competitively in the markets in which Myer operates
›› provides a balance of fixed and ‘at risk’ remuneration
›› assess rewards against objective financial measures
›› make short-term and long-term components of remuneration ‘at risk’
›› based on performance
Remuneration components
Total fixed annual remuneration
Short Term Incentive
Long Term Incentive
›› provides ‘predictable’ base level of reward
›› set at market median using external benchmark data
›› varies based on employee’s experience, skills and performance
›› consideration given to both external and internal relativities
›› entirely focused on financial targets linked to objective measures
›› delivered in equity to align executives with shareholder interests
›› tested after three years
›› focussed on long-term business strategy and aligns KMP and shareholder interests to support the creation of long-term shareholder value
›› full vesting when Myer achieves top quartile performance and when the EPS hurdle is achieved
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In order to align shareholder and executive interests and attract and retain talent, the remuneration structure is designed to:
During FY2013, the Board considered a report from independent advisers in relation to non-executive director fees generally, and decided not to change the base or additional fees.
›› encourage a performance-based workplace culture and recognition for contribution to meeting business objectives;
›› have profit as a core component of reward design;
›› through long term incentive, focus on sustained growth in shareholder returns, consisting of dividends, share price and growth in earnings per share;
›› deliver consistent financial returns as well as focusing the executives on key non-financial drivers of value;
›› attract and retain high-calibre executives; and
›› reward capability and performance.
Non-executive directors do not receive performance-based pay.
However, they are able to purchase shares in the Company, which can be acquired on market during approved ‘windows’ for share trading consistent with the Company’s Guidelines for Dealing in Securities.
Non-executive directors are not entitled to any additional remuneration upon retirement. Superannuation contributions required by legislation are made from the fee paid to directors and fall within the aggregate fee pool limit.
As a general guide, the Company targets a median fixed remuneration position having regard to a comparator group of companies.
Non-executive director remuneration
Fees and payments to non-executive directors reflect the demands and responsibilities of those directors. The Board, on recommendation of the Committee, reviews non-executive directors’ fees and payments at least once a year. As part of that review the Board considers the advice of independent remuneration consultants in relation to:
›› Chairman’s fees and payments;
›› Non-executive directors’ fees and payments; and
›› payments made in relation to the Chairman of committees or for other specific tasks that may be performed by directors.
Non-executive directors’ fees are determined within an aggregate directors’ fee pool limit as approved from time to time by Myer shareholders at the Annual General Meeting. The maximum aggregate limit excludes special and additional remuneration for special exertions and additional services performed by a director as determined appropriate by the Board but includes superannuation as is required by the ASX Listing Rules as well as committee fees.
The Constitution also makes provision for Myer to pay all expenses incurred by directors in attending meetings and carrying out their duties. The current maximum aggregate fee pool limit is $2,150,000 per annum. The aggregate fee pool limit has not changed since the
Company was listed in November 2009. Non-executive directors who chair a committee also receive additional yearly fees for their role in serving that committee. The following yearly fees currently apply:
Base annual fees
$
Chairman
400,0001
Other non-executive directors
150,000
Additional annual fees
Deputy Chairman
30,0002
Audit, Finance and Risk Committee – Chairman
30,000
Audit, Finance and Risk Committee – member
–
Human Resources and Remuneration
Committee – Chairman
15,000
Human Resources and Remuneration
Committee – member
–
Nomination Committee – Chairman
Nomination Committee – member
Executive remuneration
The Company’s remuneration principles and policies have been applied during the year to ensure remuneration outcomes for executives reflect the prevailing market conditions, the need to attract and retain talented executives and Company performance.
The executive pay and reward framework has three components:
›› Total Fixed Compensation – base pay and benefits, including superannuation;
›› Short Term Incentives through participation in the
Executive Incentive Plan; and
›› Long Term Incentives through participation in the offers under the Myer Equity Incentive Plan (MEIP).
The combination of these three components comprises an executive’s total remuneration reflected by percentage in the following charts:
27.3%
20%
CEO
40%
40%
TFC
KMP
27.3% 45.5%
STI
LTI
1. The target LTI remuneration for the CEO reflects one third of the $2.7 million allocation of performance rights approved in 2011 assessed over a three-year period.
Total Fixed Compensation
TFC was structured as a total fixed employment compensation package, made up of base salary, superannuation and other benefits.
Base salary levels for each executive were set with reference to the market conditions and the scope and nature of each individual’s role, the experience of the individual and performance in that role.
Base salaries were reviewed during the year with adjustments between 5.26% and 16.67% applied for KMP effective February
2013. Adjustments were made to ensure the base salaries of select
KMP are positioned at the market level the Board considers to be appropriate, particularly in light of market comparator rates.
Superannuation provided to KMP was adjusted to reflect the new
Superannuation Guarantee Charge (SGC) arrangements required under the Superannuation Guarantee (Administration) Amendment
Act 2012 (Cth). These SGC adjustments were accommodated within (i.e. not additional to) the TFC adjustment made.
–
–
1. Prior to October 2012 the fee for the Chairman was $500,000 per annum.
2. The new fee applicable to the role of Deputy Chairman applied from August 2012.
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MYER Annual Report 2013
Remuneration Report continued Short Term Incentive
Short-term variable reward for the CEO and other KMP are determined based on the achievement of established key performance indicators
(KPIs). These KPIs are set by reference to the Company’s overall performance and individual performance objectives established for the year. In the case of the CEO, these objectives are set by the
Chairman and endorsed by the Board. KPIs for the other KMP are set by the CEO and endorsed by the Committee for approval by the Board.
In the 2013 financial year, despite a number of strategic and operational objectives being met, the Board determined that it would not approve the payment of STI to any of the Myer management team, as key pre-determined financial criteria, particularly NPAT and Sales were less than the targets set for FY2013. While the returns generated from the business were down on expectations they were reflective of the general retail environment. The Board has, however, determined that the overall profit of the Company for FY2013 did not warrant the payment of the STI for the year.
Myer’s STI plan for members of the Executive Management Group
(Executive Incentive Plan – EIP) operates on an annual basis subject to Board review and approval. The FY2013 EIP applied to all eligible
Executive Management Group team members including the KMP, subject to certain conditions and performance criteria being met which are reviewed and approved annually by the Board.
The current quantum of an executive’s EIP reward varies depending on the specific role, with a potential reward of 100% of base pay at the CEO level for ‘at target’ performance, up to 60% for Executive
General Managers and 45% for Group General Managers. If the Group achieves the pre-determined performance targets set by the Board, a short term incentive will be paid. The target reward is the maximum total STI payment for achieving target objectives. A minimum threshold is also set, below which no STI reward is provided.
The Board retains the discretion to provide an award greater than the target maximum reward where performance against the performance criteria warrants such a reward.
EIP rewards are generally payable in October each year after the final determination and release of audited full-year results.
Each year, the Committee considers the appropriate performance criteria and recommends any payout level under the EIP, if targets are met, for Board approval.
The Committee is responsible for assessing whether the performance criteria are met. To help make this assessment, the Committee receives reports on performance from management. All proposed
EIP payments are verified by internal audit review prior to any payment being made. The Committee has the discretion to recommend to the
Board an adjustment to short term incentives in light of unexpected or unintended circumstances. This discretion has not been applied this year despite the factors impacting the overall result being largely macro in nature and affecting many retail and other businesses generally.
Long Term Incentive
KMP and members of the Executive Management Group received performance rights under the EEIP offer (which is also administered through the Myer Equity Incentive Plan). An allocation of performance rights for each executive through the EEIP offer is determined as part of the Total Remuneration for an executive role. The Committee determines LTI awards by assessing the quantum required to provide a market competitive Total Remuneration reward structure including base salary and STI amounts.
The purpose of the performance rights granted under the EEIP offer is to focus senior executives’ efforts on the achievement of sustainable long-term growth and success of the Company and to align senior executive rewards with sustained shareholder returns through metrics such as EPS performance and relative Total Shareholder Return
(TSR) performance.
The performance conditions for the EEIP offer are designed to create and deliver sustained shareholder returns and to reward executives when shareholders benefit.
In 2012, the Board decided to rationalise the participation in the LTI
Plan, in line with market practice. As part of this change, the Board made an offer of performance rights to senior managers below KMP in order to reward performance and encourage retention during this challenging retail environment. The granting of performance rights was made under the LTI plan to non‑KMP employees who are continually evaluated as high performers. The offer of performance rights was made to these non-KMP employees is known as the MEIP offer. The performance rights granted under the MEIP offer require the approval first from the CEO, and then the Board. The value of each allocation under the MEIP offer reflects the employee’s performance, future capability and retention risk. The MEIP offer was introduced in FY2013 with 52 executives receiving performance rights that will vest in FY2016 provided the executive remains in the employment of the Company.
Myer’s LTI plan operates for selected senior executives and has been in operation since December 2006. Under the MEIP, eligible senior executives have in the past been granted options, each option entitling them to acquire one fully paid ordinary share in the Company, subject to the satisfaction of vesting terms and conditions determined by the Board. In 2011, the Board reviewed the long term incentives provided to the senior executives as part of its annual review of the remuneration structure. As part of that review, the Board approved a change from the grant of options to the grant of performance rights.
Under the MEIP (which for FY2013 included the MEIP offer and the
EEIP offer), performance rights are granted to each participant. Each performance right is a conditional right to one ordinary Myer share on satisfaction of the performance conditions that apply to that performance right at the end of the relevant performance period. The performance right will therefore not provide any value to the holder between the year the performance right is granted until the end of the performance period and then only if the performance conditions are achieved. The Committee regards it as an important principle that performance rights will be forfeited by the individual in specific circumstances, including if they resign from the Company within the three-year performance period or where the claw back arrangements would apply (in the case where a payment was granted under the plans for a KMP on the basis of, or has become eligible as a result of, a material misstatement or omission in Myer’s financial statements).
Performance rights do not carry entitlements to ordinary dividends or other shareholder rights. Dividends are not received by the executives during the performance period.
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Upon vesting, performance rights are automatically exercised and shares are provided (at no cost to the participant) in accordance with the terms of the grant and Myer’s Guidelines for Dealing in Securities.
LTI awards only vest to the extent that performance conditions are met. The awards are governed by the rules of the MEIP and terms of the relevant offer. Any Board discretion, such as vesting in the event of a change of control, is clearly prescribed under the offer terms. Options or rights under the MEIP may vest prior to the vesting date on a change of control or on a pro-rata basis, at the discretion of the Board.
The remuneration of the CEO is governed by his contract of employment. At the 2011 Annual General Meeting, shareholders approved a one off allocation of performance rights valued at $2.7 million as part of the contract. The rights will vest subject to meeting a range of objectives including: a TSR hurdle, a CAGR EPS hurdle (described on page 59 and 60 of this report), a service hurdle and the delivery of a Board endorsed succession plan for the CEO role. The CEO has not been offered any further performance rights since the renewal of his contract in 2011.
Service agreements
On appointment to the Board, all non-executive directors sign a letter of appointment. The letter summarises the Board policies and terms relevant to the office of director (including remuneration).
Remuneration and other terms of employment for the CEO and the other executive KMPs are also formalised in service agreements. Each of these agreements prescribes a base or fixed remuneration amount, a STI reward subject to the EIP, other benefits including salary sacrificing for vehicle leasing and, when eligible, LTI reward through participation in the MEIP through the EEIP offer. Other key provisions of the agreements relating to remuneration are summarised below.
The termination provisions for the KMP are described below:
Name
Contract type
B Brookes2
Base salary including Termination notice superannuation1 period initiated
$
by KMP
Fixed term – ending on 31 Aug 2014
Termination notice period initiated by Company
Termination payment where initiated by the
Company
1,800,000
6 months
12 months
12 months2
Rolling contract
700,000
3 months
6 months
6 months
A Stapleton
Rolling contract
475,000
3 months
6 months
6 months
4
T Sutton
Rolling contract
425,000
3 months
6 months
6 months
G Travers
Rolling contract
700,000
3 months
6 months
6 months
M Ashby
3
1. Base salaries (TFC) quoted as at 27 July 2013.
2. B Brookes’ contract provides that, subject to certain performance conditions being satisfied, if the contract runs through to term (31 August 2014) a cessation payment of
12 months average base TFC over the last three years may be made. B Brookes’ LTI offer contained in his contract of employment provides for entitlements on termination in certain circumstances. These provisions were approved by shareholders at the 2011 Annual General Meeting.
3. A Stapleton was appointed to Executive General Manager Merchandise on 4 February 2013.
4. T Sutton was appointed to Executive General Manager Stores on 14 February 2013.
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MYER Annual Report 2013
Remuneration Report continued Remuneration and Company performance
The following graph shows the average individual total STI payment (as a % of each individual’s target STI, where 100% is the target) for the KMP group and its relationship to Group EBITDA and NPAT outcomes over four financial years.
NPAT
EIP
$300
$ millions
40%
$200
20%
$100
$0
0%
FY2010
FY2011
FY2012
% of target EIP paid to senior executives
60%
$400
$300
$ Millions
EBITDA
$400
$200
$100
$0
FY2013
FY2010
FY2011
FY2012
$400
$350
The following table shows the Company’s annual performance against a range of metrics since 2010. The table shows the impact of Company performance on shareholder returns, taking into account dividend payments, share price changes, and other capital adjustments during the period.
$300
$ Millions
31 July
2010
Basic EPS (cents)1
29.0
$200
28 July
2012
27.9
$150
21.8
139,365
127,212
22.0
$100
22.5
19.0
18.0
Share price at beginning of year3 ($)
4.10
$50
3.45
2.31
1.83
Share price at end of year ($)
3.45
$0
2.31
2
4
162,657
27 July
2013
23.9
2011
Dividends (cents per share)
NPAT ($’000s)
168,702
30
$250 July
5
1.83
FY2010
2.66
FY2011
1. 2010 Basic EPS is calculated using pro-forma NPAT and divided by the closing shares on issue. 2011 Basic EPS is calculated using normalised NPAT and divided by the weighted average shares.
2. For details of 2011 to 2013 NPAT refer to page 6.
3. 2010 share price at the beginning of the year is the share price at listing.
4. 2010 NPAT is pro-forma NPAT excluding IPO costs.
5. 2011 NPAT excludes IPO and one-off costs.
Remuneration outcomes for directors and other KMP
The following tables have been prepared in accordance with section 300A of the Corporations Act. They show details of the nature and amount of each element of the remuneration paid or awarded for services provided in this period. In the case of share-based payments and retention incentives, the amounts disclosed reflect the amount expensed during the year in accordance with relevant accounting standards and accordingly this does not necessarily reflect the amount actually paid to the individual during the year, which may be more or less than the amount shown in the table.
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The following table shows the remuneration amounts recorded in the financial statements in the period.
Post
employment benefits Short-term employee benefits
Name
Cash salary and fees1
$
Bonus/ incentive STI2
$
Other3
$
Nonmonetary benefits $
Superannuation4
$
Total remuneration expense
Long-term benefits
Subtotal
$
Long service leave
$
Retention bonus $
Termination and other payments $
Excluding sharebased payments5
$
Sharebased payments Options6
$
Total remuneration expense
$
Non-executive directors
P McClintock7
2013
301,659
2012
–
–
–
–
–
–
–
14,283
–
315,942
–
–
–
–
–
–
–
315,942
–
–
–
315,942
–
H McDonald8
2013
2012
134,898
484,225
–
–
–
–
–
–
4,595
15,775
139,493
500,000
–
–
–
–
–
–
139,493
500,000
–
–
139,493
500,000
R Myer9
2013
2012
163,457
136,500
–
–
–
–
–
–
13,500
13,500
176,957
150,000
–
–
–
–
–
–
176,957
150,000
–
–
176,957
150,000
A Brennan
2013
2012
163,800
164,225
–
–
–
–
–
–
16,200
15,775
180,000
180,000
–
–
–
–
–
–
180,000
180,000
–
–
180,000
180,000
T Flood10
2013
2012
–
106,708
–
–
–
–
–
–
–
10,554
–
117,262
–
–
–
–
–
–
–
117,262
–
–
–
117,262
C Froggatt
2013
2012
150,150
150,150
–
–
–
–
–
–
14,850
14,850
165,000
165,000
–
–
–
–
–
–
165,000
165,000
–
–
165,000
165,000
I Morrice11
2013
2012
77,694
–
–
–
–
–
–
–
7,684
–
85,378
–
–
–
–
–
–
–
85,378
–
–
–
85,378
–
136,500
136,500
–
–
–
–
–
–
13,500
13,500
150,000
150,000
–
–
–
–
–
–
150,000
150,000
–
–
150,000
150,000
Executive directors
B Brookes
2013
1,783,530
2012
1,738,700
–
–
109,805
131,776
–
–
16,470
46,200
1,909,805
1,916,676
29,351
84,623
–
–
–
–
1,939,156
2,001,299
604,616
1,083,421
2,543,772
3,084,720
Key Management Personnel
N Abboud12
2013
89,127
2012
451,250
–
–
184
2,080
–
–
13,936
25,000
103,247
478,330
–
22,729
–
41,250
–
–
103,247
542,309
-185,840
84,969
-82,593
627,278
M Ashby
2013
2012
601,617
511,231
–
–
1,313
2,442
–
40,050
47,935
642,980
561,608
11,387
22,561
–
41,250
–
–
654,367
625,419
95,997
71,944
750,364
697,363
M Goddard13
2013
2012
241,160
139,159
–
–
684
103
–
–
22,097
4,780
263,941
144,042
–
979
–
–
–
–
263,941
145,021
–
–
263,941
145,021
A Stapleton14
2013
2012
188,595
–
–
–
255
–
–
–
9,321
–
198,171
–
19,349
–
–
–
–
–
217,520
–
55,223
–
272,743
–
T Sutton15
2013
2012
167,783
–
–
–
295
–
–
–
6,863
–
174,941
–
30,711
–
–
–
–
–
205,652
–
55,535
–
261,187
–
G Travers
2013
2012
623,064
566,725
–
–
1,313
2,080
–
–
18,602
15,775
642,979
584,580
21,612
27,995
–
41,250
–
–
664,591
653,825
95,997
45,203
760,588
699,028
P Winn16
2013
2012
–
313,138
–
–
–
917
–
–
–
6,932
–
320,987
–
-14,499
–
41,250
–
–
–
347,738
–
-127,021
–
220,717
Totals 2013 4,823,034
–
113,849
–
211,951 5,148,834
112,410
–
Totals 2012 4,898,511
–
139,398
–
230,576 5,268,485
144,388
165,000
P Hay
2013
2012
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721,528 5,982,772
– 5,577,873 1,158,516 6,736,389
58
MYER Annual Report 2013
Remuneration Report continued 1. Cash salary includes short-term compensated absences, consideration for vehicle salary sacrifice and fees including allowances for Committee ‘chairman’ responsibilities for A Brennan and C Froggatt and Deputy Chairman fee for R Myer.
2. STI payments relate to program performance and conditions for the year they were earned, not the year of actual payment. Due to performance, no STI payments were earned in the FY2013 year under the MAIP/EIP.
3. Other payments for B Brookes include payments for rental subsidy and certain other services in relation to provision of accommodation. Other payments also includes
Company‑paid FBT expenses.
4. There were no post-employment benefits paid other than superannuation.
5. Total remuneration expense excluding share-based payments reflects the accounting expense treatment of base salary, any bonuses or short term incentive payments,
Fringe Benefit Tax expenses, superannuation, the balance of long service leave accruals, retention payments and any termination benefits in the reporting period.
6. Remuneration in relation to share options represents the amount expensed for the period based on valuations determined under AASB 2 Share-based Payment.
This expense is based on the fair value at grant date, and reflects expectations of the number of options expected to vest. Where expectations change in relation to vesting, adjustment is made in the current period to reflect this change. As the
equity grant may fully vest, partially vest or not vest at all, the benefit that the KMP ultimately realises is likely to be different to the amount disclosed in a particular year.
The amount disclosed does not represent cash payments received in the period, and if vesting conditions are not met may result in reversal of the remuneration amount in a future period. There were no other equity-settled share-based payments and there were no cash-settled share-based payments.
7. P McClintock was appointed as an Independent non-executive director on 8 August
2012 and appointed Chairman on 10 October 2012.
8. H McDonald retired on 10 October 2012. H McDonald was appointed as a director on 6 November 2006 and Chairman on 4 August 2009.
9. R Myer was appointed Deputy Chairman on 8 August 2012.
10. T Flood was appointed as a director on 26 July 2007 and retired on 11 April 2012.
11. I Morrice was appointed as a director on 8 August 2012 and retired on 1 March 2013.
12. N Abboud ceased employment on 18 September 2012.
13. M Goddard ceased employment on 4 February 2013.
14. A Stapleton promoted to Executive General Manager Merchandise on 4 February 2013.
15. T Sutton promoted to Executive General Manager Stores on 14 February 2013.
16. P Winn ceased employment on 8 December 2011.
STI and LTI remuneration
The table below sets out the relative proportion of remuneration for the Executive Directors and other KMP that is linked to performance and the proportion which is fixed.
Total
remuneration expense Total fixed remuneration
At risk – STI
At risk – LTI1
Share options
Name
Retention incentive
$
$
%
$
%
$
%
$
%
Executive Directors
B Brookes
2013
2,543,772
2012
3,084,720
1,939,156
2,001,299
76
65
–
–
0
0
604,616
1,083,421
24
35
–
–
0
0
Key Management Personnel
N Abboud2
2013
-82,593
2012
627,278
103,247
501,059
-125
80
–
–
0
0
-185,840
84,969
225
14
–
41,250
0
7
M Ashby
2013
2012
750,364
697,363
654,367
584,169
87
84
–
–
0
0
95,997
71,944
13
10
–
41,250
0
6
M Goddard3
2013
2012
263,941
145,021
263,941
145,021
100
0
–
–
0
0
–
–
0
0
–
–
0
0
A Stapleton4
2013
2012
272,743
–
217,520
–
80
0
–
–
0
0
55,223
–
20
0
–
–
0
0
T Sutton5
2013
2012
261,187
–
205,652
–
79
0
–
–
0
0
55,535
–
21
0
–
–
0
0
G Travers
2013
2012
760,588
699,028
664,591
612,575
87
88
–
–
0
0
95,997
45,203
13
6%
–
41,250
0
6
P Winn6
2013
2012
–
220,717
–
306,488
0
139
–
–
0
0
–
-127,021
0
-58
–
41,250
0
19
Totals 2013
4,770,002
4,048,474
85
–
0
721,528
15
–
0
Totals 2012
5,474,127
4,150,611
76
–
0
1,158,516
21
165,000
3
1. LTI was provided through the issue of options to individual executives under the MEIP. LTI allotments have been independently valued as at the date the option was granted to the executive. The proportions shown represent the amount expensed for the period under AASB 2 Share-based Payment as a proportion of total remuneration expense for the period. This amount also includes the current expense in relation to the retention bonuses. It does not reflect a cash payment to the executive under MEIP.
2. N Abboud ceased employment on 18 September 2012.
3. M Goddard ceased employment on 4 February 2013.
4. A Stapleton promoted to Executive General Manager Merchandise on 4 February 2013.
5. T Sutton promoted to Executive General Manager Stores on 14 February 2013.
6. P Winn ceased employment on 8 December 2011.
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Equity arrangements with directors and other KMP
Long Term Incentives – FY2013 EEIP offer
The Board approved an LTI plan, which is designed to encourage Myer’s senior executives to create and deliver sustained shareholder returns and to reward executives. The plan involves the grant of performance rights under the MEIP through the EEIP offer, which provide the executive with the right to acquire a share in the Company if certain performance conditions are satisfied.
The number of performance rights that vest will depend on how well Myer has performed during the performance period. For superior performance, 100 percent of the performance rights will vest. Only a percentage of performance rights will vest for performance below that level. If Myer does not achieve certain minimum thresholds then all the performance rights will lapse and no performance rights can vest.
The following table summarises the 2013 performance rights grants made to KMP in December 2012.
Value of performance rights at grant date
$
Valuation of each performance right at grant date
M Ashby
420,000
M Goddard1
A Stapleton2
KMP
Number of performance rights granted Exercise price $
Applicable hurdles Potential time of vesting
EPS $2.08
TSR $1.56
190,045
0
50% EPS Hurdle
End of Perf. Period – July 2015
300,000
EPS $2.08
TSR $1.56
135,747
0
50% EPS Hurdle
213,750
EPS $2.08
TSR $1.56
96,719
0
50% EPS Hurdle
50% TSR Hurdle
End of Perf. Period – July 2015
50% TSR Hurdle
End of Perf. Period – July 2015
50% TSR Hurdle
3
100,000
$2.08
45,249
0
Retention Hurdle4
End of Perf. Period – July 2015
G Travers
420,000
EPS $2.08
TSR $1.56
190,045
0
50% EPS Hurdle
End of Perf. Period – July 2015
T Sutton
1.
2.
3.
4.
50% TSR Hurdle
M Goddard ceased employment with Myer on 4 February 2013 and all options lapsed.
A Stapleton was promoted to Executive General Manager Merchandise on 4 February 2013.
T Sutton was promoted to Executive General Manager Stores on 14 February 2013.
T Sutton offered performance rights under the MEIP offer in FY2013, prior to his appointment as Executive General Manager Stores in February 2013.
The plan involved the grant of performance rights under the MEIP through the EEIP offer, which provide the executive with the right to acquire a share in the Company if certain performance conditions are satisfied. The performance rights were granted to the executives participating in the EEIP offer at no cost and there is no cost to those executives if the performance rights are exercised.
Before the performance rights can be exercised, certain performance conditions need to be satisfied. These performance conditions are based on Myer’s performance over a three-year period. If Myer performs better than its identified peer companies and certain minimum thresholds over that period are met then shareholders will benefit and executives will benefit as well by being provided with shares in the Company when the performance rights are exercised. The number of performance rights that vest will depend on how well Myer has performed during the performance period. For superior performance, 100 percent of the performance rights will vest. Only a percentage of performance rights will vest for performance below that level. If Myer does not achieve certain minimum thresholds then all the performance rights will lapse and no performance rights can vest. If a portion of the performance rights do not vest following the end of the performance period, then that portion of the performance rights that are unvested will lapse immediately and there will be no re-testing at a later date.
During the performance period, participants will not be able to sell, assign or otherwise deal in their performance rights. They will not be entitled to any dividends or distributions or exercise any voting rights. Generally, the performance rights will lapse on cessation of employment if they have not been exercised (whether vested or unvested before that time). Subject to applicable law, the Board has the power to allow an executive to keep some, or all of their performance rights on cessation (although the discretion is only likely to be exercised, if at all, in exceptional circumstances).
FY2013 EEIP offer performance conditions
Other than for the CEO, who has additional hurdles as noted below, there are two performance conditions that apply to the FY2013 performance rights based on EPS and TSR performance. The performance rights are intended to be allocated on an equal weighting of
50 percent to each of the EPS Hurdle and the TSR Hurdle which are described below. These are assessed separately, meaning that both hurdles do not need to be satisfied for any of an executive’s performance rights to vest. This means that it is possible for some or all of the performance rights with an EPS Hurdle to vest, while none of the performance rights with a TSR Hurdle vest (and vice versa).
The EPS Hurdle
The EPS Hurdle seeks to align the interests of the holders of performance rights with the financial performance of the Company. It does this by providing that the EPS performance rights can only vest and be exercised if the Company achieves the EPS Hurdle that has been set by the
Board. The EPS Hurdle is based on a minimum achieved CAGR in the Company’s fully diluted EPS over the performance period. The base number will be the Company’s fully diluted EPS calculated on the Company’s final audited results for the financial year ended 28 July 2012. The CAGR from this base will be calculated on the Company’s fully diluted EPS using the Company’s final audited results for the financial year ending
25 July 2015. The resulting CAGR will be used to determine the level of vesting for the performance rights with an EPS Hurdle.
The table below sets out the percentage of performance rights that will vest depending on the Company’s performance against the EPS Hurdle over the performance period, with a linear progression through the various threshold points.
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MYER Annual Report 2013
Remuneration Report continued EPS Hurdle rate (compound annual growth over the performance period) Proportion of EPS performance rights that will vest:
EPS Hurdle rate (compound annual growth over the performance period)
% of EPS performance rights that will vest1
Less than 2%
Nil
At 2%
50% of the number of EPS performance rights
From 2% to 7% pro-rata vesting of rights
Pro-rata with a linear progression between 50% and up to 100% of the number of EPS performance rights
7% or greater
100% of the number of EPS performance rights
1. The number of performance rights will be rounded down to the nearest whole number.
For the FY2014 grant of performance rights the Board has considered the CAGR EPS Hurdle with regard to the operating plan and financial objectives and the CAGR EPS Hurdle will be maintained at the same rates as the FY2013 rates with CAGR EPS annual rates between 2 percent and 7 percent.
The TSR Hurdle
The TSR Hurdle also seeks to align the interests of the holders of performance rights with the interests of the Company’s shareholders. It does this by providing that the performance rights will only vest and be exercised if the TSR for shares compares favourably to the TSR for investments in a peer group of companies. The Board has established a peer group of companies against which the Company’s TSR performance will be compared. TSR is the combined return from changes in the market value of a share and dividend paid to shareholders (expressed as a percentage of the opening value) and relative TSR is the ranking of the compound growth in the Company’s TSR over the performance period against the TSR of comparison companies. It is the annualised return to shareholders, including all share price changes and reinvestment of distributions (including dividends). This figure is calculated pre-tax and combines share price and distributions (including dividends) paid to show the total return to the shareholder. The calculation assumes that the distribution is reinvested into shares on the day it is paid and at the close price on that day.
TSR was chosen as a performance measure after the Board sought independent remuneration advice during the 2011 financial year from independent remuneration consultants. TSR was considered a relevant market-based performance measure used by many ASX listed companies.
The Board has recently considered the TSR Hurdle and determined that the current metric remains relevant for FY2014.
The TSR peer group
The table below sets out the peer group for the FY2013 EEIP offer. If any of these organisations cease to exist as entities at any time during the performance period, the size of the peer group may be maintained by additions determined by the Board.
In selecting the TSR peer group, the Board sought independent advice. The composition of the group reflects measures of relative sales and market capitalisation as well as industry type that is complementary in nature to the Company’s business. It includes companies that are consumer facing, have a service orientation and/or are retail in nature with either product or services provided as part of their core offer.
Entity – peer group
Air New Zealand Ltd
AP Eagers Ltd
Australian Pharmaceutical Industries Ltd
Automotive Holdings Group Ltd
Bendigo and Adelaide Bank Ltd
Billabong International Ltd
Coca-Cola Amatil Ltd
David Jones Ltd
Flight Centre Ltd
Harvey Norman Holdings Ltd
JB Hi-Fi Ltd
Metcash Ltd
Pacific Brands Ltd
Premier Investments Ltd
Tabcorp Holdings Ltd
Tatts Group Ltd
Oroton Group Ltd
Specialty Fashion Group Ltd
Woolworths Ltd
Wesfarmers Ltd
GUD Holdings Ltd
Breville Group Ltd
STW Communications Group Ltd
Under the terms of the plan if any of the peer group organisations cease to exist as entities at any time during the performance period, the size of the peer group may be maintained by additions determined by the Board. The Board considered the organisations in the peer group and determined that the size of the peer group (23) did not warrant any additions. No changes have been made to this peer group in FY2013.
For the FY2014 EEIP, the Board has reviewed the peer group of companies and determined a change to the peer group. For FY2014,
Air New Zealand Ltd will be removed from the peer group and Super Retail Group Ltd will be added to the peer group.
The table below sets out the percentage of the performance rights subject to a TSR Hurdle that will vest depending on the Company’s performance against the TSR Hurdle over the performance period. For any of these performance rights to vest, the Company’s
TSR performance needs to be at least at the 50th percentile of the peer group for the performance period.
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TSR percentile ranking and proportion of TSR performance rights that will vest:
TSR percentile ranking
% of TSR performance rights that will vest
Below 50th
Nil
From 50th to 75th
Pro-rata with a linear progression between 50% and up to 100% of the number of
TSR performance rights
75th and above
100%
Testing the TSR and EPS Hurdles
Following the end of the performance period for performance rights and after the Company has lodged its full year audited financial results for
2015 with the ASX, the Board will test the performance conditions that apply to the FY2013 EEIP offer and will determine how many performance rights (if any) are eligible to vest. There will be no retesting of the performance conditions at a later date if they are not fully satisfied.
Historical grants to KMP and senior executives:
Year
2013 EEIP offer
2013 MEIP offer
2012 MEIP
Vehicle
Performance Rights
Performance Rights
Performance Rights
Options
Performance
Period
Three years (vesting following lodgement of the Company’s audited results with the ASX for the period ending 25/7/2015) with no retesting thereafter. Offered to senior executives (other than the
CEO) in December 2012.
Three years (vesting following lodgement of the Company’s audited results with the ASX for the period ending 25/7/2015) with no retesting thereafter. Offered to invited senior managers in
December 2012.
Three years (vesting following lodgement of the Company’s audited results with the ASX for the period ending 26/7/2014) with no retesting thereafter. Offered to senior executives (other than the
CEO) in October 2011.
Three years (vesting on 30/6/12) with no retesting thereafter.
Offered to senior executives (other than the CEO) in November 2009.
Performance
Conditions
50% of the award is tested with reference to EPS targets. 50% of the award is tested with reference to the Company’s
TSR performance.
Must continue to be an ongoing, permanent employee of
Myer until the end of the performance period and maintain an acceptable level of individual performance over the performance period.
50% of the award is tested with reference to EPS targets.
An EPS performance hurdle based on a compound annual growth rate in EPS of 10% over the performance period ended
28 July 2012.
50% of the award is tested with reference to the Company’s
TSR performance.
Hurdle Rate
< 2%
At 2%
2% to 7%
Vesting Level
Nil
50%
Pro-rata
with a linear progression between 50% and up to 100%
100% vesting if the continuous service and acceptable individual performance hurdles are satisfied.
CAGR EPS
(weighted
at 50%)
Hurdle Rate
< 5%
At 5%
5% to 10%
Vesting Level
Nil
50%
Pro-rata
with a linear progression between 50% and up to 100%
>7%
100%
>10%
Vesting Level
Nil
Pro-rata with a linear progression between 50% and up to 100%
TSR
(weighted
at 50%)
2010 MEIP
Subject to the satisfaction of the relevant CAGR EPS condition and the payment of the exercise price.
100%
TSR
(weighted
at 50%)
No grants were made in FY2011.
Vesting Schedule:
CAGR EPS
(weighted
at 50%)
2011
Vesting Level
Nil
Pro-rata with a linear progression between 50% and up to 100%
Percentile
< 50th
50th to 75th
>75th
Percentile
< 50th
50th to 75th
100%
>75th
100%
Fair Value
EPS: $2.08
TSR: $1.56
$2.08
EPS: $1.67
TSR: $1.08
$1.19
Exercise Price
Nil
Nil
Nil
$4.10
The performance rights offered to the CEO in 2011 under the LTI Plan have the same EPS Hurdle and TSR Hurdle in the table above under the
2012 column, although there will be two additional hurdles that the CEO must satisfy before any of these performance rights can be exercised, regardless of performance against the TSR and EPS Hurdles. These additional hurdles require the CEO to develop and deliver a succession plan for the role of the CEO by the conclusion of the performance period and to comply with the terms of his employment contract.
The Board has established a framework with the CEO that sets out the Board’s expectations on delivery of a succession plan. This includes regular milestone reviews to assess progress against the succession plan.
If the succession plan is delivered before the expiry of the performance period and the Board elects to terminate the CEO’s new contract early, the CEO may retain a pro-rated number of performance rights based on completed months of service of the contract period. Any pro-rata performance rights earned by the CEO must be retained until the expiry of the full performance period of three years, unless, subject to Board approval, there is a request by the CEO to exercise a proportion of his rights to meet any tax liability from the vesting of the rights.
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MYER Annual Report 2013
Remuneration Report continued Options and performance rights have been granted under the Company’s LTI plan . Under the terms of the plans, senior executives can only exercise their options or performance rights once the vesting conditions are satisfied. Executives who then wish to exercise any of their vested options must pay the relevant exercise price after which shares in the Company are provided to them. In the case of performance rights, if vesting conditions are met, the right automatically vests and a share in the Company is provided to them at no cost. Option or rights holders do not have the right to participate in any securities issues made by the Company although, consistent with the ASX Listing Rules; there is provision for adjustments in the event of certain capital actions made by the Company.
Since 2006, six offers of options and two offers of performance rights have been made to selected executives under the MEIP (which includes the FY2013 EEIP offer). Details of options granted under the MEIP that remain unvested as at 27 July 2013 are set out in the table below.
Number of options1 Exercise price $
Value per option at grant date
$
Vesting date (if option holder remains employed by a Myer
Group company)
Expiry date
Grant type (Options/Performance
Rights)
Grant date
Options
23 Jan 2008
–
3.00
0.37
31 Jul 2012
21 Dec 2012
Options
17 Dec 2008
2,310,313
2.14
0.43
31 Jul 2013
24 Oct 2013
Options
30 Jun 2009
2,634,650
2.34
0.49
31 Jul 2014
24 Oct 2014
Options (CEO only EPS hurdle)
6 Nov 2009
5,152,671
4.10
1.31
End of Perf. Period
31 Dec 2013
Options (CEO only share price hurdle)
6 Nov 2009
2,227,723
5.74
1.01
End of Perf. Period
31 Dec 2013
Options (EPS hurdle)
6 Nov 2009
–
4.10
1.19
End of Perf. Period
31 Dec 2012
No grants were made
FY2011
Perf. Rights (CEO only EPS hurdle)
9 Dec 2011
808,383
nil
1.67
End of Perf. Period
31 Oct 2014
Perf. Rights (CEO only TSR hurdle)
9 Dec 2011
1,250,000
nil
1.08
End of Perf. Period
31 Oct 2014
Perf. Rights (EPS hurdle)
21 Oct 2011
1,089,102
nil
1.67
End of Perf. Period
31 Oct 2014
Perf. Rights (TSR hurdle)
21 Oct 2011
1,683,874
nil
1.08
End of Perf. Period
31 Oct 2014
Perf. Rights (EPS hurdle)
25 Jan 2013
419,114
nil
2.08
End of Perf. Period
31 Oct 2015
Perf. Rights (TSR hurdle)
25 Jan 2013
419,120
nil
1.56
End of Perf. Period
31 Oct 2015
2.08
End of Perf. Period
31 Oct 2015
Perf. Rights (continuous service hurdle) 25 Jan 2013
Total
1,330,318
19,325,268
1. Of the options noted above, 681,300 options are vested and remain unexercised. Refer Financial Report (note 34) for details.
2010 grants Tranche A to D (CEO only)
›› In November 2009, the Board approved an additional grant of options under the MEIP to Mr Brookes to the value of $9,000,000 (valued as at the grant date of 6 November 2009). The options were granted in four tranches, at no cost to Mr Brookes, and formed the long term incentive component of Mr Brookes’ remuneration under his then new long term incentive arrangements. In total Mr Brookes was granted
7,380,394 options under these LTI arrangements.
›› Three-quarters of the options are subject to a performance hurdle based on Myer’s fully diluted earnings per share (EPS) (EPS Options) and one quarter of the options are subject to a performance hurdle based on Myer’s share price (Share Price Options). Vesting of the options is also subject to a service condition – vesting will be subject to Mr Brookes remaining employed by the Group until the end of the relevant performance period. Each option is an entitlement to one share upon payment of the exercise price. For the EPS Options, the exercise price is $4.10 per option and for the Share Price Options, the exercise price $5.74 per option. Options which do not satisfy the vesting conditions will lapse on the expiry date being 31 December 2013.
Assessment
At the end of each performance period, the Committee reviews the Company’s audited financial results and the results of the other performance measures and assesses performance against each measure to determine the percentage of the options (if any) that will vest.
As at the date of this report these options are not likely to vest as the EPS and share price targets are unlikely to be achieved.
Details of options over ordinary shares in the Company currently provided as remuneration and granted during the current year to each director and each of KMP are set out below. Further information on the MEIP is set out in note 34 to the Financial Report.
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remuneration report
Summary of options granted, vested and lapsed for the reporting period:
Value of performance rights at grant date
$
Number of performance rights granted during the period
Name
Number of options vested during the period
Number of options lapsed during the period
Value at lapsed date
$
Directors of Myer Holdings Limited
P McClintock1
–
–
–
–
–
H McDonald2
–
–
–
–
–
R Myer
–
–
–
–
–
B Brookes
–
–
–
–
–
A Brennan
–
–
–
–
–
T Flood3
–
–
–
–
–
C Froggatt
–
–
–
–
–
P Hay
–
–
–
–
–
–
–
–
–
–
–
–
–
1,195,154
368,405
I Morrice
4
Key Management Personnel of the Company
N Abboud5
M Ashby
190,045
420,000
–
–
–
6
135,747
300,000
–
135,747
247,059
A Stapleton
96,719
213,750
–
–
–
T Sutton8
45,249
100,000
–
–
–
G Travers
190,045
420,000
–
–
–
–
–
–
–
–
M Goddard
7
P Winn
9
1.
2.
3.
4.
5.
6.
7.
8.
9.
P McClintock was appointed as a director on 8 August 2012 and appointed Chairman on 10 October 2012.
H McDonald retired on 10 October 2012. H McDonald was appointed as a director on 6 November 2006 and Chairman on 4 August 2009.
T Flood was appointed as a director 26 July 2007 and retired on 11 April 2012.
I Morrice was appointed as a director on 8 August 2012 and retired on 1 March 2013.
N Abboud ceased employment on 18 September 2012.
M Goddard ceased employment on 4 February 2013.
A Stapleton was promoted to Executive General Manager Merchandise on 4 February 2013.
T Sutton was promoted to Executive General Manager Stores on 14 February 2013.
P Winn ceased employment on 8 December 2011.
The assessed fair value at grant date of options granted to KMP is allocated equally over the period from grant date to vesting date, and the amount is included in the remuneration tables above. Fair values at grant date are independently determined using an option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.
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MYER Annual Report 2013
Remuneration Report continued Shares provided on exercise of options
Details of ordinary shares in the Company provided as a result of the exercise of options to each director of the Company and KMPs are set out below.
Number of ordinary shares provided on exercise of options during the period2
Name
Value at exercise date1
$
Directors of Myer Holdings Limited
P McClintock
–
–
H McDonald
–
–
R Myer
–
–
B Brookes
–
–
A Brennan
–
–
T Flood
–
–
C Froggatt
–
–
P Hay
–
–
I Morrice
–
–
N Abboud
–
–
M Ashby
–
–
M Goddard
–
–
A Stapleton
–
–
T Sutton
–
–
G Travers
–
–
P Winn
–
–
Key Management Personnel of the Company
1. The value at exercise date of options that were granted in prior periods as part of remuneration and were exercised during the year has been determined as the intrinsic value of the options at that date. This represents the excess of market value of the share acquired over the exercise price paid.
2. The number of shares provided on exercise of options are on a one for one basis.
There were no amounts paid per ordinary share by directors and other KMP on the exercise of options.
No amounts are unpaid on any shares provided on the exercise of options.
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remuneration report
Details of remuneration: bonuses and share-based compensation benefits
For each bonus, grant of options or grant of performance rights included in this report, the percentage of the available bonus or grant that was paid, or that vested, in the financial year, and the percentage and value that was forfeited because the person did not meet the service and performance criteria is set out below. Bonuses are payable in the year following the period in which they are earned. Options and performance rights vest provided the vesting conditions or performance hurdles are met (see pages 59 to 62). No options or performance rights will vest if the conditions (either service or performance) are not satisfied, therefore the minimum value of the options or performance rights yet to vest is nil. The maximum value of the options or performance rights yet to vest has been determined as the amount of the grant date fair value of the options or performance rights that is yet to be expensed.
STI/Bonus1
Name
B Brookes
Share-based compensation benefits (options)
Achieved
2013
%
Forfeited
2013
%
Target value 2013
$
0
100
1,800,000
Forfeited value 2013
$
1,800,000
Maximum total value of grant yet to vest
$
Year granted Vested
%
Forfeited
%
The remaining financial years in which options may vest
2012
2010
0
0
100
2015
2013-2014
556,508
–
N Abboud2
0
100
–
–
2012
2010
2009
2008
0
0
0
100
100
100
100
0
2015
2013
2014-2015
2012-2013
–
–
–
–
M Ashby
0
100
420,000
420,000
2013
2012
2010
2008
0
0
0
0
0
0
100
100
2016
2015
2013
2012-2013
280,393
67,242
–
–
A Stapleton3
0
100
226,875
226,875
2013
2012
2010
0
0
0
0
0
0
2016
2015
2014
141,680
29,692
9,148
T Sutton4
0
100
196,425
196,425
2013
2010
0
0
0
0
2016
2014
76,289
27,443
G Travers
0
100
420,000
420,000
2013
2012
0
0
0
0
2016
2015
280,393
67,242
2010
0
100
2013
–
1.
2.
3.
4.
The % of STIs achieved and forfeited for 2013 are based on performance against ’at target’ performance as explained on page 54.
N Abboud ceased employment on 18 September 2012.
A Stapleton was promoted to Executive General Manager Merchandise on 4 February 2013.
T Sutton was promoted to Executive General Manager Stores on 14 February 2013.
Loans to directors and executives
Information on any loans to directors and executives, including amounts, interest rates and repayment terms are set out in note 23(c) to the
Financial Report.
Dealing in securities
Under the Company’s Guidelines for Dealing in Securities, directors and senior executives are prohibited from entering into hedging arrangements with respect to the Company’s securities. A copy of the Guidelines for Dealing in Securities is available on the Myer website.
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MYER Annual Report 2013
Financial Report
for the period ended 27 July 2013
Myer Holdings Limited
ABN 14 119 085 602
Contents
Consolidated income statement
67
Consolidated statement of comprehensive income
68
Consolidated balance sheet
69
Consolidated statement of changes in equity
70
Consolidated statement of cash flows
71
Notes to the consolidated financial statements
1 Summary of significant accounting policies
2 Financial risk management
3 Critical accounting estimates and judgements
4 Segment information
5 Revenue and other income
6 Expenses
7 Income tax expense
8 Cash and cash equivalents
9 Trade and other receivables
10 Inventories
11 Derivative financial instruments
12 Property, plant and equipment
13 Deferred tax assets
14 Intangible assets
15 Trade and other payables
16 Provisions
17 Borrowings
18 Deferred tax liabilities
19 Other liabilities
20 Contributed equity
21 Retained earnings and reserves
22 Dividends
23 Key Management Personnel disclosures
24 Remuneration of auditors
25 Contingencies
26 Commitments
27 Related party transactions
28 Subsidiaries and transactions with non-controlling interests
29 Deed of cross guarantee
30 Events occurring after the reporting period
31 Reconciliation of profit after income tax to net cash inflow from operating activities
32 Parent entity financial information
33 Earnings per share
34 Share-based payments
72
80
84
84
85
85
86
86
87
88
88
89
90
91
92
92
93
94
94
95
96
98
98
101
102
102
102
103
104
105
106
106
107
108
Directors’ Declaration
111
Auditor’s Independence Declaration
112
Independent Auditor’s Report
113
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Myer Holdings Limited is a company limited by shares, incorporated and domiciled in
Australia. Its registered office is:
Myer Holdings Limited
Level 7, 800 Collins Street
Docklands VIC 3008
A description of the nature of the consolidated entity’s operations and its principal activities is included in the Directors’
Report on pages 40 to 46, which is not part of this Financial Report.
This Financial Report was authorised for issue by the directors on 8 October 2013.
The directors have the power to amend and reissue this Financial Report.
F inancial report
67
Consolidated income statement for the period ended 27 July 2013
Notes
2013
52 weeks
$’000
2012
52 weeks
$’000
Total sales value (excluding GST)
Concession sales
5
3,144,904
(485,720)
3,119,119
(467,207)
Sale of goods (excluding GST)
Sales revenue deferred under customer loyalty program
5
2,659,184
(37,942)
2,651,912
(39,212)
Revenue from sale of goods (excluding GST)
Other operating revenue (excluding finance revenue)
Cost of goods sold
Other income
5
5
5
2,621,242
116,414
(1,450,678)
24,633
2,612,700
113,451
(1,464,574)
26,844
Operating gross profit
Selling expenses
Administration expenses
Store closure and restructuring costs
Write-back of fixed lease rental increases provision
6
6
1,311,611
(794,584)
(302,178)
–
–
1,288,421
(756,035)
(302,413)
(18,450)
23,109
Earnings before interest and tax
Finance revenue
Finance costs
5
6
214,849
1,417
(29,782)
234,632
1,499
(31,263)
Net finance costs
(28,365)
(29,764)
Profit before income tax
Income tax expense
7
186,484
(56,607)
204,868
(63,801)
Profit for the period
129,877
141,067
Profit is attributable to: Owners of Myer Holdings Limited Non-controlling interests
127,212
2,665
139,365
1,702
129,877
141,067
Cents
Cents
21.8
21.6
23.9
23.7
Earnings per share attributable to the ordinary equity holders of the Company:
Basic earnings per share
Diluted earnings per share
The above consolidated income statement should be read in conjunction with the accompanying notes.
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68
MYER Annual Report 2013
Consolidated statement of comprehensive income for the period ended 27 July 2013
Profit for the period
Other comprehensive income
Items that may be reclassified to profit or loss: Cash flow hedges Exchange differences on translation of foreign operations Income tax relating to components of other comprehensive income
Other comprehensive income for the period, net of tax
7(d)
2012
52 weeks
$’000
129,877
Notes
2013
52 weeks
$’000
141,067
9,241
(567)
800
(509)
66
(535)
9,474
(978)
Total comprehensive income for the period
139,351
140,089
Total comprehensive income for the period is attributable to: Owners of Myer Holdings Limited Non-controlling interests
136,485
2,866
138,317
1,772
139,351
140,089
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
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F inancial report
69
Consolidated balance sheet as at 27 July 2013
Notes
2013
$’000
2012
$’000
8
9
10
11
81,470
24,384
363,880
9,442
38,058
17,712
385,702
–
479,176
441,472
508,974
16,846
931,017
3,692
515,482
21,115
936,149
3,975
Total non-current assets
1,460,529
1,476,721
Total assets
1,939,705
1,918,193
387,673
–
19,042
84,304
31,710
397,137
2,490
15,191
85,957
2,094
522,729
502,869
420,824
2,331
13,243
73,583
1,353
421,193
1,785
15,439
69,821
29,406
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Total current assets
Non-current assets
Property, plant and equipment
Deferred tax assets
Intangible assets
Other non-current assets
12
13
14
LIABILITIES
Current liabilities
Trade and other payables
Derivative financial instruments
Current tax liabilities
Provisions
Other liabilities
15
11
16
19
Total current liabilities
Non-current liabilities
Borrowings
Derivative financial instruments
Provisions
Deferred income
Other liabilities
17
11
16
19
Total non-current liabilities
511,334
537,644
1,034,063
1,040,513
905,642
877,680
520,216
379,722
(4,024)
519,776
363,357
(14,800)
Capital and reserves attributable to owners of Myer Holdings Limited
Non-controlling interests
895,914
9,728
868,333
9,347
Total equity
905,642
877,680
Total liabilities
Net assets
EQUITY
Contributed equity
Retained earnings
Reserves
20
21
21
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
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MYER Annual Report 2013
Consolidated statement of changes in equity for the period ended 27 July 2013
Reserves
$’000
Retained earnings $’000
Noncontrolling interests $’000
Total
$’000
519,479
(15,120)
349,396
7,575
861,330
–
(1,048)
139,365
1,772
140,089
297
–
–
–
–
1,368
–
(125,404)
–
–
–
–
297
(125,404)
1,368
297
1,368
(125,404)
–
(123,739)
519,776
(14,800)
363,357
9,347
877,680
–
9,273
127,212
2,866
139,351
440
–
–
–
–
1,503
–
(110,847)
–
–
(2,485)
–
440
(113,332)
1,503
1,503
(110,847)
(2,485)
(111,389)
(4,024)
379,722
9,728
905,642
Contributed equity Notes
$’000
Balance as at 30 July 2011
Total comprehensive income for the period
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs Dividends paid Employee share schemes
20
22
21
Balance as at 28 July 2012
Total comprehensive income for the period
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs Dividends paid Employee share schemes
20
22
21
440
Balance as at 27 July 2013
520,216
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
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71
Consolidated statement of cash flows for the period ended 27 July 2013
2013
52 weeks
$’000
2012
52 weeks
$’000
3,041,594
(2,767,819)
3,034,529
(2,792,188)
273,775
26,443
(26,411)
(48,282)
242,341
27,105
(32,169)
(57,363)
225,525
179,914
Cash flows from investing activities
Payments for property, plant and equipment
Acquisition of brands
Payments for intangible assets
Proceeds from sale of software
Lease incentives received
Interest received
(54,768)
(906)
(18,670)
–
5,991
1,397
(48,715)
(8,413)
(10,189)
2,696
16,750
1,462
Net cash outflow from investing activities
(66,956)
(46,409)
(2,015)
(250)
440
–
(110,847)
(2,485)
(115)
3
297
(7,502)
(125,404)
–
(115,157)
(132,721)
43,412
38,058
784
37,274
81,470
38,058
Notes
Cash flows from operating activities
Receipts from customers (inclusive of goods and services tax)
Payments to suppliers and employees (inclusive of goods and services tax)
Other income
Interest paid
Tax paid
Net cash inflow from operating activities
31
Cash flows from financing activities
Repayment of borrowings net of transaction costs
(Loans to)/repayment of loans by employees
Proceeds from the issue of shares
Payment of costs of Initial Public Offering
Dividends paid to equity holders of the parent
Dividends paid to non-controlling interests
22
Net cash outflow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial period
Cash and cash equivalents at end of period
8
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
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MYER Annual Report 2013
Notes to the consolidated financial statements
27 July 2013
1 Summary of significant accounting policies
The principal accounting policies adopted in the preparation of these consolidated 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 Myer Holdings Limited and its subsidiaries.
(a) Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board and the
Corporations Act 2001. Myer Holdings Limited is a for-profit entity for the purpose of preparing the financial statements.
Compliance with IFRS
The consolidated financial statements of Myer Holdings Limited 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, except for financial assets and liabilities (including derivative instruments) which have been measured at fair value through profit or loss.
Critical accounting estimates
The preparation of financial statements in conformity with accounting standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3.
(b) Principles of consolidation
(i) Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Myer Holdings Limited (‘Company’ or
‘parent entity’) as at 27 July 2013 and the results of all subsidiaries for the period then ended. Myer Holdings Limited and its subsidiaries together are referred to in this financial report as the Group or the consolidated entity.
Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another 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 (refer note 1(h)).
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
(ii) Employee Share Trust
The Group has formed the Myer Equity Plans Trust to administer the Group’s employee share scheme. This trust is consolidated, as the substance of the relationship is that the trust is controlled by the Group.
Shares in Myer Holdings Limited held by the trust are disclosed as treasury shares and deducted from contributed equity.
(c) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer.
(d) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’).
The consolidated financial statements are presented in Australian dollars, which is Myer Holdings Limited’s 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 year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss on a net basis within other income or other expenses, except when they are deferred in equity as qualifying cash flow hedges.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss and translation differences on non-monetary assets such as equities classified as available-for-sale financial assets are recognised in other comprehensive income.
(iii) Group companies
The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
›› assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
›› income and expenses for each income statement and statement of comprehensive income are translated at the rates prevailing on the transaction dates; and
›› all resulting exchange differences are recognised in other comprehensive income.
On consolidation, when a foreign operation is sold, the associated exchange difference is reclassified to profit or loss, as part of the gain or loss on sale.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated income statement, statement of comprehensive income, balance sheet and statement of changes in equity respectively.
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(e) Revenue recognition
Total sales value presented on the income statement represents proceeds from sale of goods from sales (both by Myer and concession operators) and prior to the deferral of revenue under the customer loyalty program. Concession sales presented in the income statement represents sales proceeds of concession operators within Myer stores. Total sales value is disclosed to show the total sales generated in Myer stores and provide a basis of comparison with similar department stores.
Revenue from the sale of goods, excluding lay-by transactions, is recognised at the point of sale and is after deducting taxes paid, and does not include concession sales. Allowance is made for expected sales returns based on past experience of returns and expectations about the future. A provision for sales returns is recognised based on this assessment. Revenue from lay-by transactions is recognised as part of revenue from the sale of goods at the date upon which the customer satisfies all payment obligations and takes possession of the merchandise.
Revenue from sale of goods excludes concession sales on the basis that the inventory sold is owned by the concession operator at the time of sale and not Myer. Myer’s share of concession sales is recognised as income within other operating revenue at the time the sale is made.
Interest income is recognised on a time proportion basis using the effective interest method. Dividends are recognised as revenue when the right to receive payment is established.
Customer loyalty program
The Group operates a loyalty program where customers accumulate points for purchases made which entitle them to discounts on future purchases. The award points are recognised as a separately identifiable component of the initial sale transaction, by allocating the fair value of the consideration received between the award points and the other components of the sale such that the award points are recognised at their fair value. Revenue from the award points is recognised when the points are redeemed. The amount of revenue is based on the number of points redeemed relative to the total number expected to be redeemed. Award points expire 24 months after the initial sale.
(f ) Income tax
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exemption is made for certain temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect accounting profit or taxable profit or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax balances attributable to amounts recognised in other comprehensive income or directly in equity are also recognised directly in other comprehensive income or equity.
(g) Leases
Leases of property, plant and equipment in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases (note 26). Lease incentives received on entering into operating leases are recognised as deferred income and are amortised over the lease term. Payments made under operating leases (net of any amortised deferred income) are charged to the income statement on a straight line basis over the period of the lease.
Leases where the Group has substantially all the risks and rewards of ownership are classified as finance leases.
(h) Business combinations
The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are expensed as incurred.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets.
The excess of the consideration transferred and the amount of any non-controlling interest in the acquiree over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss.
(i) Impairment of non-current assets
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-current assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. 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 inflows which are largely independent of the cash inflows from other assets or groups of assets (cash generating units). For store assets, the appropriate cash-generating unit is an individual store. Non-financial assets other than goodwill that have previously suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.
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(j) Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts.
(k) Trade receivables
Collectibility of trade receivables is reviewed on an ongoing basis.
Debts which are known to be uncollectible are written off by reducing the carrying amount directly. An allowance account (provision for impairment of trade receivables) is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial.
The amount of the impairment loss is recognised in the income statement within other expenses. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account.
Subsequent recoveries of amounts previously written off are credited against other expenses in the income statement.
(l) Inventories
Inventories are valued at the lower of cost and net realisable value.
Cost is determined using the weighted average cost method, after deducting any purchase settlement discount and including logistics expenses incurred in bringing the inventories to their present location and condition.
Volume related supplier rebates and supplier promotional rebates are recognised as a reduction in the cost of inventory and are recorded as a reduction of cost of goods sold when the inventory is sold.
(m) Investments and other financial assets
Classification
The Group classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and receivables, held to maturity investments, and available for sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and, in the case of assets classified as held to maturity, re-evaluates this designation at the end of each reporting period.
(i) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading which are acquired principally for the purpose of selling in the short term with the intention of making a profit.
Derivatives are also categorised as held for trading unless they are designated as hedges.
(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
They arise when the Group provides money, goods or services directly to a debtor with no intention of selling the receivable. They are included in current assets, except for those with maturities greater than 12 months after the reporting period which are classified as non‑current assets. Loans and receivables are included in receivables in the balance sheet (note 9).
(iii) Held to maturity investments
Held to maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group’s management has the positive intention and ability to hold to maturity.
(iv) Available for sale financial assets
Available for sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the end of the reporting period.
Recognition and derecognition
Purchases and sales of investments are recognised on trade-date, the date on which the Group commits to purchase or sell the asset.
Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss.
Financial assets carried at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed in profit or loss. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.
Measurement
Available for sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value, unless they are equity securities that do not have a market price quoted in an active market and whose fair value cannot be reliably measured.
In that case they are carried at cost.
Loans and receivables and held to maturity investments are carried at amortised cost using the effective interest method. Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category, including interest and dividend income, are presented in profit or loss within other income or other expenses in the period in which they arise.
Changes in the fair value of monetary securities denominated in a foreign currency and classified as available for sale are analysed between translation differences resulting from changes in amortised cost of the security and other changes in the carrying amount of the security. The translation differences are recognised in profit or loss and other changes in carrying amount are recognised in equity. Changes in the fair value of other monetary and non-monetary securities classified as available for sale are recognised in equity.
When securities classified as available for sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in profit or loss as gains and losses from investment securities.
Details on how the fair value of financial instruments is determined are disclosed in note 2.
Impairment
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. In the case of equity securities classified as available for sale, a significant or prolonged decline in the fair value of a security below its cost is considered in determining whether the security is impaired. If any such evidence exists for available for sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss
– is reclassified from equity and recognised in profit or loss as a reclassification adjustment. Impairment losses recognised in profit or loss on equity instruments classified as available for sale are not reversed through profit or loss.
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(n) Derivatives and hedging activities
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as either:
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 profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately reclassified to profit or loss.
›› hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedges); or
›› hedges of the cash flows or recognised assets or liabilities and highly probable forecast transactions (cash flow hedges).
(iii) Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting.
Changes in the fair value of any derivative instrument that does not qualify for hedge accounting are recognised immediately in profit or loss.
The Group documents at the inception of the hedging transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessments, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items.
The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months. It is classified as a current asset or liability when the remaining maturity of the hedged item is less than 12 months.
(i) Fair value hedge
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The gain or loss relating to the effective portion of interest rate swaps hedging fixed rate borrowings is recognised in profit or loss within finance costs, together with changes in the fair value of the hedged fixed rate borrowings attributable to interest rate risk. The gain or loss relating to the ineffective portion is recognised in profit or loss.
If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedge item for which the effective interest method is used is amortised to profit or loss over the period to maturity using a recalculated effective interest rate.
(ii) Cash flow hedge
The Group uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from operational and financing activities.
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 profit or loss.
Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss. When the forecast transaction that is hedged results in the recognition of a non-financial asset (for example, inventory or fixed assets) the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset. The deferred amounts are ultimately recognised in profit or loss as cost of goods sold in the case of inventory, or as depreciation in the case of fixed assets.
The gain or loss relating to the effective portion of the interest rate swaps hedging variable rate borrowings is recognised in profit or loss within finance costs.
(o) Property, plant and equipment
Property, plant and equipment is stated at cost less depreciation. Cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains/ losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.
Land is not depreciated. Depreciation on other assets is calculated using the straight line method to allocate their cost net of their residual values, over their estimated useful lives, as follows:
›› Buildings 40 years
›› Fixtures and fittings
3 – 12.5 years
›› Plant and equipment, including leasehold improvements 10 – 20 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (note 1(i)).
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss.
(p) Intangible assets
(i) Goodwill
Goodwill is measured as described in note 1(h). Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill is not amortised but it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses.
Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
(ii) Brand names and trademarks
The Group’s brands are considered to have indefinite lives. These brands are not considered to have foreseeable brand maturity dates, and have accordingly been assessed as having indefinite useful lives and are therefore not amortised. Instead, the brand names are tested for impairment annually, or more frequently if events or changes in circumstances indicate that they might be impaired, and are carried at cost less accumulated impairment losses.
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Notes to the consolidated financial statements continued 1 Summary of significant accounting policies continued
(p) Intangible assets continued
(iii) Computer software
All costs directly incurred in the purchase or development of major computer software or subsequent upgrades and material enhancements, which can be reliably measured and are not integral to a related asset, are capitalised as intangible assets. Direct costs may include internal payroll and on-costs for employees directly associated with the project. Costs incurred on computer software maintenance or during the planning phase are expensed as incurred. Computer software is amortised over the period of time during which the benefits are expected to arise, being 5 to 10 years.
(iv) Lease rights
Lease rights represent the amount paid up-front to take over store site leases from the existing lessee where such payments are in addition to the ongoing payment of normal market lease rentals. Lease rights are amortised over the term of the lease plus any renewal options reasonably certain to be utilised at the time of acquisition of the lease rights, being 13 to 17 years.
(q) Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of financial period which are unpaid.
The amounts are unsecured and are usually paid within 30 to 90 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months from the reporting date.
(r) 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 profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least
12 months after the reporting period.
(s) Borrowing costs
Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed.
(t) Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability.
The Group is self-insured for costs relating to workers’ compensation and general liability claims in certain states. Provisions are recognised based on claims reported, and an estimate of claims incurred but not yet reported, prior to balance date. These provisions are determined utilising an actuarially determined method, which is based on various assumptions including but not limited to future inflation, average claim size and claim administrative expenses. These assumptions are reviewed annually and any reassessment of these assumptions will affect the workers’ compensation expense.
(u) Employee benefits
(i) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liability for annual leave is recognised in the provision for employee benefits. All other short-term employee benefit obligations are presented as payables.
(ii) Other long-term employee benefit obligations
The liability for long service leave which is not expected to be settled within 12 months after the end of the period in which the employees render the related service is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service.
Expected future payments are discounted using market yields at the end of the reporting period on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least 12 months after the reporting date, regardless of when the actual settlement is expected to occur.
(iii) Retirement benefit obligations
The Group contributes to a number of superannuation funds that have been established to provide benefits for employees. Apart from one defined benefit fund, with a range of member categories, all funds are defined contribution funds, and contributions to them are recognised as an expense as they become payable.
The defined benefit fund that the Group contributes to is currently administered through Mercer Human Resource Consulting within a Mercer Master Trust arrangement on behalf of Myer. The defined benefit fund provides defined lump sum pension benefits based on years of service and final average salary. Myer defined benefit members who were members of the Coles Myer Defined Benefit Fund were transferred to the Myer Fund effective 2 June 2006. The fund is closed to new members and only existing Defined Benefit members were eligible for membership.
A liability or asset in respect of the defined benefit fund is recognised in the balance sheet, and is measured as the present value of the defined benefit obligation at the end of the reporting period less the fair value of the fund’s assets at that date and any unrecognised past service cost. The present value of the defined benefit obligation is based on expected future payments that arise from membership of the fund to the end of the reporting period, calculated annually by independent actuaries using the projected unit credit method.
Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service.
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Expected future payments are discounted using market yields at the end of the reporting period on government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
(v) Contributed equity
Ordinary shares are classified as equity.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, outside profit or loss directly in the statement of comprehensive income.
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Where any Group company purchases the Company’s equity instruments, for example as the result of a share buy-back or a share‑based payment plan, the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the owners of Myer Holdings
Limited as treasury shares until the shares are cancelled or reissued.
Where such ordinary shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the owners of Myer Holdings Limited.
(iv) Profit sharing and bonus plans
The Group recognises a liability and an expense for bonuses and profit sharing based on a formula that takes into consideration the profit attributable to the Group’s shareholders after certain adjustments. The
Group recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation.
(v) Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement date, or when an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after the end of the reporting period are discounted to present value.
(vi) Share-based payments
Share-based compensation benefits are provided to employees via the Myer Equity Incentive Plan. Information relating to these schemes is set out in note 34.
The fair value of options granted under the plan is recognised as an employee benefit expense with a corresponding increase in equity.
The total amount to be expensed is determined by reference to the fair value of the options granted, which includes any market performance conditions but excludes the impact of any services and non-market performance vesting conditions and the impact of any non-vesting conditions.
Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all the specified vesting conditions are to be satisfied. At the end of each period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of revisions to original estimates, if any, in profit or loss, with a corresponding adjustment to equity.
The Myer Equity Incentive Plan is administered by the Myer Equity
Incentive Plan Trust (see note 1(b)(ii)). When options are exercised, the trust transfers the appropriate number of shares to the employee. The proceeds received net of any directly attributable transaction costs are credited directly to equity.
Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.
(w) Dividends
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the financial period but not distributed at balance date.
(x) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
›› the profit attributable to owners of the Company
›› by the weighted average number of ordinary shares outstanding during the financial period, adjusted for bonus elements in ordinary shares issued during the period and excluding treasury shares.
(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; and
›› the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.
(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 in the balance sheet.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities, which are recoverable from, or payable to the taxation authority, are presented as operating cash flow.
(z) Rounding of amounts
The Group has taken advantage of Class Order 98/100, issued by the
Australian Securities and Investments Commission, relating to the
‘’rounding off’’ of amounts in the financial statements. Amounts in the financial statements have been rounded off to the nearest thousand dollars, or in certain cases, to the nearest dollar.
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MYER Annual Report 2013
Notes to the consolidated financial statements continued 1 Summary of significant accounting policies continued
(aa) New accounting standards and interpretations
Certain new accounting standards and interpretations have been published that are not mandatory for the 27 July 2013 reporting period.
The Group’s assessment of the impact of these new standards and interpretations, that were considered relevant for the consolidated entity, is set out below.
Application date of
Standard
Reference
Title
Summary
AASB 9
Amendments
were made to this and other standards via
AASB 2009‑11 and AASB
2010-7
Financial
Instruments
AASB 9 includes requirements for the
1 January 2015 classification and measurement of financial assets.
It was further amended by AASB 2010-7 to reflect amendments to the accounting for financial liabilities. The main changes are described below:
›› standard will affect the accounting of
The
available for sale financial assets, since AASB
9 only permits the recognition of fair value gains and losses in other comprehensive income if they relate to equity investments that are not held for trading.
››
Where the fair value option is used for financial liabilities, the change in fair value is accounted for in other comprehensive income if it relates to changes in credit risk.
The remaining change is presented in the income statement.
AASB 10
Amendments
were made to this and other standards via
AASB 2011‑7 and AASB
2012-10
Consolidated
Financial
Statements
AASB 10 establishes a new control model that applies to all entities. It replaces parts of
AASB 127 Consolidated and Separate Financial
Statements dealing with the accounting for consolidated financial statements and UIG-112
Consolidation – Special Purpose Entities.
The new control model broadens the situations when an entity is considered to be controlled by another entity. Control exists when the investor can use its power to affect the amount of its returns.
1 January 2013
Power is the current ability to direct the activities that significantly influence returns. Returns must vary and can be positive, negative or both.
There is also new guidance on participating and protective rights and on agent/principal relationships, including when acting as a manager may give control, the impact of potential voting rights and when holding less than a majority voting rights may give control.
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Impact on
Group’s
Financial
Statements
Application date for
Group for financial year ending
30 July 2016
There will be no material impact on the Group’s accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the Group does not have any such liabilities. The Group also does not have any available for sale financial assets.
The Group does not expect the new standard to have a significant impact on its composition.
26 July 2014
Financial report
Reference
Title
Application date of
Standard
Summary
AASB 11
Joint
Amendments
Arrangements
were made to this and other standards via
AASB 20117 and AASB
2012-10 and amendments to
AASB 128
AASB 11 replaces AASB 131 Interests in Joint
Ventures and UIG-113 Jointly controlled Entities
– Non-monetary Contributions by Ventures and introduces a principles based approach to accounting for joint arrangements. The focus is no longer on the legal structure of joint arrangements, but rather on how rights and obligations are shared by the parties to the joint arrangement. Based on the assessment of rights and obligations, a joint arrangement will be classified as either a joint operation or a joint venture. Joint ventures are accounted for using the equity method, and the choice to proportionately consolidate will no longer be permitted. Joint operations that give the venturers a right to the underlying assets and obligations is accounted for by recognising the share of those assets and obligations.
AASB 12
Application date for
Group for financial year ending
No impact identified as the Group does not have any joint arrangements. 26 July 2014
1 January 2013
AASB 12 sets out the required disclosures for entities reporting under the two new standards,
AASB 10 and AASB 11, and replaces the disclosure requirements currently found in AASB 127 and
AASB 128. New disclosures have been introduced about the judgements made by management to determine whether control exists, and to require summarised information about joint arrangements, associates and structured entities and subsidiaries with non-controlling interests.
The Group does not expect the new standard to have a significant impact.
26 July 2014
AASB 13
Fair Value
Amendments
Measurement were made to this standard via AASB 2011-8
AASB 13 provides guidance on how to determine fair value when fair value is required or permitted. Application of this definition may result in different fair values being determined for the relevant assets. AASB 13 also expands the disclosure requirements for all assets or liabilities carried at fair value. This includes information about the assumptions made and the qualitative impact of those assumptions on the fair value determined.
The Group does not expect the new standard to have a significant impact.
26 July 2014
AASB 119
Amendments
were made to this and other standards via
AASB 2011-10
1 January 2013
The amended AASB 119 requires the recognition of all remeasurements of defined benefit liabilities/assets immediately in other comprehensive income and the calculation of a net interest expense or income by applying the discount rate to the net defined benefit liability or asset. This replaces the expected return on plan assets that is currently included in profit or loss.
The revised standard also changes the definition of short-term employee benefits. The distinction between short-term and long-term employee benefits is now based on whether the benefits are expected to be settled wholly within
12 months after the reporting date.
The Group does not expect the amended standard to have a significant impact.
26 July 2014
Disclosure of
Interests in
Other Entities
Employee
Benefits
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Impact on
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1 January 2013
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MYER Annual Report 2013
Notes to the consolidated financial statements continued 1 Summary of significant accounting policies continued
(ab) Parent entity financial information
The financial information for the parent entity, Myer Holdings Limited, disclosed in note 32 has been prepared on the same basis as the consolidated financial statements, except as set out below.
(i) Investments in subsidiaries
Investments in subsidiaries are accounted for at cost in the financial statements of Myer Holdings Limited.
(ii) Tax consolidation legislation
Myer Holdings Limited and its wholly owned Australian controlled entities have implemented the tax consolidation legislation.
The head entity, Myer Holdings Limited, and the controlled entities in the tax consolidated Group continue to 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 stand-alone taxpayer in its own right.
In addition to its own current and deferred tax amounts, Myer Holdings Limited also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated Group.
The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate Myer Holdings Limited for any current tax payable assumed and are compensated by Myer Holdings Limited for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Myer Holdings Limited under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the wholly-owned entities’ financial statements.
The funding amounts are recognised as current intercompany receivables or payables.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the Group.
Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities.
(ac) Comparative amounts
Where current period balances have been classified differently within current period disclosures when compared to the prior period, comparative disclosures have been restated to ensure consistency of presentation between periods.
2 Financial risk management
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk and cash flow and fair value interest rate risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses derivative financial instruments such as foreign exchange contracts and interest rate swaps to hedge certain risk exposures. Derivatives are exclusively used for hedging purposes, i.e. not as trading or other speculative instruments. The Group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate and foreign exchange risk, and an aging analysis for credit risk.
Risk management is carried out by the Company under policies approved by the Board of Directors. The Company identifies, evaluates and hedges financial risks. The Board provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, and use of financial instruments and non-derivative financial instruments.
(a) Market risk
(i) Foreign exchange risk
Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the entity’s functional currency.
The Group sources inventory purchases overseas and is exposed to foreign exchange risk, particularly in relation to currency exposures to the
US dollar.
To minimise the effects of a volatile and unpredictable exchange rate Group policy is to enter into forward exchange contracts in relation to the Group’s overseas purchases for any 12-month period. The actual level of cover taken fluctuates depending on the period until settlement of the foreign currency transaction, within the Board approved hedging policy. This policy allows cover to be taken on a sliding scale between
25 – 100% depending on the period to maturity (up to 12 months).
The Group’s exposure to foreign currency risk at the end of the reporting period, expressed in Australian dollars, was as follows:
2013
2012
USD
$’000
EURO
$’000
HKD
$’000
USD
$’000
EURO
$’000
GBP
$’000
21,873
863
82
11,987
350
15
108,982
–
–
113,550
–
–
Trade payables
Forward exchange contracts
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Group sensitivity
Based on the financial instruments held at 27 July 2013, had the Australian dollar strengthened/weakened by 10% against the US dollar with all other variables held constant, the Group’s post-tax profit for the period would have been $1.5 million higher/$1.8 million lower (2012: $0.7 million higher/$0.9 million lower), mainly as a result of foreign exchange gains/losses on translation of US dollar denominated financial instruments as detailed in the above table.
Other components of equity would have been $6.3 million lower/$7.8 million higher (2012: $6.4 million lower/$7.0 million higher) had the
Australian dollar strengthened/weakened by 10% against the US dollar, arising from foreign exchange contracts designated as cash flow hedges.
The Group’s exposure to other foreign exchange movements is not material.
These sensitivities were calculated based on the Group’s period end spot rate for the applicable reporting period.
(ii) Cash flow and fair value interest rate risk
The Group is exposed to interest rate risk as it borrows funds at floating interest rates. Borrowings issued at floating rates expose the Group to cash flow interest rate risk. The risk is managed by the use of floating to fixed interest rate swap contracts. During the period, the Group policy was to fix the rates between 0 to 50% of its Term Debt Facility. The Group complied with this policy during the period.
Interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates. Generally, the Group raises long-term borrowings at floating rates and swaps them into fixed rates that are lower than those available if the Group borrowed at fixed rates directly.
Under the interest rate swaps, the Group agrees with other parties to exchange, at specified intervals (mainly quarterly), the difference between fixed contract rates and floating rate interest amounts calculated by reference to the agreed notional principal amounts.
As at the end of the reporting period, the Group had the following variable rate borrowings and interest rate swap contracts outstanding: 2013
Weighted
average interest rate
%
4.2%
4.9%
Borrowings – variable
Interest rate swaps (notional principal amount)
2012
Balance
$’000
Weighted average interest rate
%
Balance
$’000
420,824
(200,000)
5.2%
5.6%
421,193
(100,000)
220,824
Net exposure to cash flow interest rate risk
321,193
The weighted average interest rates noted above for both borrowings and swaps are inclusive of margins applicable to the underlying variable rate borrowings.
An analysis by maturities is provided in (c) below.
Interest rate exposure is evaluated regularly to confirm alignment with Group policy and to ensure the Group is not exposed to excess risk from interest rate volatility.
At 27 July 2013, if interest rates had changed by +/ – 10% from the period end rates with all other variables held constant, post-tax profit for the period would have been $0.4 million lower/$0.4 million higher (2012: $0.8 million lower/$0.8 million higher), mainly as a result of higher/lower interest expense on borrowings.
Other components of equity would have been $0.6 million higher/$0.6 million lower (2012: $0.6 million higher/$0.6 million lower) mainly as a result of an increase/decrease in the fair value of the cash flow hedges of borrowings.
The range of sensitivities has been assumed based on the Group’s experience of average interest rate fluctuations in the applicable reporting period.
(b) Credit risk
Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to customers, including receivables and committed transactions. For banks and financial institutions, only independently rated parties with a minimum rating of ‘A’ are accepted. Sales to retail customers are primarily required to be settled in cash or using major credit cards, mitigating credit risk. Where transactions are settled by way of lay-by arrangements, revenue is not recognised until full payment has been received from the customer and goods collected.
The maximum exposure to credit risk at the end of the reporting period is the carrying amount of the financial assets as disclosed in notes 8, 9, and 11.
The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings as detailed below, historical information about receivables default rates and current trading levels.
Based on the credit history of these classes, it is expected that these amounts will be received and are not impaired.
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Notes to the consolidated financial statements continued 2
Financial risk management continued
(b) Credit risk continued
2013
$’000
–
81,470
–
38,058
–
9,442
–
–
–
–
9,442
Derivative financial assets
AAA
AA
A
–
38,058
–
81,470
Cash at bank and short-term bank deposits
AAA
AA
A
2012
$’000
–
(c) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and due to close out market positions. Due to the seasonal nature of the retail business, the Group has in place flexible funding facilities to ensure liquidity risk is minimised.
Financing arrangements
The Group had access to the following undrawn borrowing facilities at the end of the reporting period:
2013
$’000
–
200,000
30,000
200,000
200,000
Floating rate
Expiring within one year (revolving credit facility)
Expiring beyond one year (revolving cash advance facility)
2012
$’000
230,000
The long-term revolving cash advance facility comprises the following 3 tranches totalling $625 million:
›› Tranche A $75 million, fully drawn expires on 21 August 2015
›› Tranche B $275 million, fully drawn expires on 22 August 2016
›› Tranche C $75 million drawn, $200 million undrawn expires on 21 August 2017
In addition to the above, the Group had a $30 million revolving credit facility which expired in April 2013.
Maturities of financial liabilities
The tables below analyse the Group’s financial liabilities into relevant maturity groupings based on their contractual maturities for:
(a) all non-derivative financial liabilities; and
(b) and gross settled derivative financial instruments for which the contractual maturities are essential for an understanding of the timing of net the cash flows.
The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying amounts as the impact of discounting is not significant. For interest rate swaps the cash flows have been estimated using forward interest rates applicable at the end of the reporting period.
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Over
5 years
$’000
Carrying amount (assets)/ liabilities $’000
Less than
6 months
$’000
6–12 months $’000
2013
Non-derivatives
Non-interest bearing
Variable rate
Fixed rate
316,859
8,992
–
–
8,290
–
–
18,118
–
–
452,161
–
–
–
–
316,859
487,561
–
316,859
420,824
–
Total non-derivatives
325,851
8,290
18,118
452,161
–
804,420
737,683
761
992
649
–
–
2,402
2,331
(80,436)
72,947
(38,038)
36,035
–
–
–
–
–
–
(118,474)
108,982
(9,442)
–
(6,728)
(1,011)
649
–
–
(7,090)
(7,111)
Contractual maturities of financial liabilities
Derivatives
Net settled (interest rate swaps)
Gross settled
– (inflow)
– outflow
Total derivatives
Between
2 and 5 years $’000
Total contractual cash flows
$’000
Between
1 and 2 years $’000
2012
Non-derivatives
Non-interest bearing
Variable rate
Fixed rate
300,152
11,247
–
–
11,219
–
27,553
22,938
–
–
443,649
–
–
–
–
327,705
489,053
–
327,705
421,193
–
Total non-derivatives
311,399
11,219
50,491
443,649
–
816,758
748,898
195
193
226
(42)
–
572
1,785
(74,075)
75,952
(35,197)
36,277
(445)
449
–
–
–
–
(109,717)
112,678
–
2,490
2,072
1,273
230
(42)
–
3,533
4,275
Derivatives
Net settled (interest rate swaps)
Gross settled
– (inflow)
– outflow
Total derivatives
(d) 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) uoted prices (unadjusted) in active markets for identical assets or liabilities (level 1); q (b) nputs other than quoted prices included within level 1 that are observable for the asset or liabilities either directly (as prices) or indirectly i (derived from prices) (level 2); and
(c) nputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3). i The following tables present the Group’s assets and liabilities measured and recognised at fair value at 27 July 2013 and 28 July 2012.
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Notes to the consolidated financial statements continued 2
Financial risk management continued
(d) Fair value measurements continued
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
2013
Assets
Derivatives used for hedging
–
9,442
–
9,442
Total assets
–
9,442
–
9,442
Liabilities
Derivatives used for hedging
–
2,331
–
2,331
Total liabilities
–
2,331
–
2,331
2012
Assets
Derivatives used for hedging
–
–
–
–
Total assets
–
–
–
–
Liabilities
Derivatives used for hedging
–
4,275
–
4,275
Total liabilities
–
4,275
–
4,275
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows. The fair value of forward exchange contracts is determined using forward exchange market rates at the end of the reporting period. These instruments are included in level 2 and comprise of derivative financial instruments.
The carrying amounts of trade receivables and payables are assumed to approximate their fair values due to their short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.
3 Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances.
Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are discussed below.
(i) Income taxes
The Group is subject to income taxes in Australia and jurisdictions where it has foreign operations. Significant judgement is required in determining the worldwide provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Group recognises tax assets and liabilities based on its best estimate of the tax implications of the underlying transactions. Where the final tax outcome is different from the amounts that were initially recorded, such differences will impact the current tax provision and deferred tax assets and liabilities in the period in which the final determination is made.
(ii) Impairment
The Group tests annually whether goodwill and indefinite lived intangibles have suffered any impairment, in accordance with the accounting policy stated in note 1(i). The recoverable amount of cash generating units have been determined based on value in use calculations at a store level. Goodwill and certain intangibles can only be tested for impairment at the level of the Group as a whole. These calculations require the use of assumptions. Refer to note 14 for details of these assumptions. Should assumptions about future cash flows prove incorrect, the Group may be at risk of impairment write-downs.
(iii) Recoverable amount of inventory
Management has assessed the value of inventory that is likely to be sold below cost using past experience and judgement on the likely sell through rates of various items of inventory, and booked a provision for this amount. To the extent that these judgements and assumptions prove incorrect, the Group may be exposed to potential additional inventory write-downs in future periods.
4 Segment information
Management has determined the operating segments based on the reports reviewed by the Chief Executive Officer that are used to make strategic decisions about the allocation of resources.
The Chief Executive Officer considers the business based on total store and product portfolio, and has identified that the Group operates in
Australia in the department store retail segment.
The Group also undertakes activities outside the department store retail business through its subsidiary, sass & bide. On the basis that this aspect of the business represents less than 10% of the total Group’s operations, it has not been disclosed as a separate reporting segment.
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5 Revenue and other income
2013
52 weeks
$’000
2012
52 weeks
$’000
Revenue
Sales revenue
Total sales value (excluding GST)
Concession sales
3,144,904
(485,720)
3,119,119
(467,207)
Sale of goods (excluding GST)
Sales revenue deferred under customer loyalty program
2,659,184
(37,942)
2,651,912
(39,212)
Revenue from sale of goods (excluding GST)
Other operating revenue
Concessions revenue
Rental revenue
2,621,242
2,612,700
116,302
112
113,305
146
116,414
113,451
1,417
1,499
Finance revenue
Interest revenue
1,417
26,844
24,633
Other income
Other
2,727,650
24,633
Total revenue
1,499
2,739,073
Finance revenue
26,844
Other income includes revenue in relation to the financial services business, forfeited lay-by deposits, customer delivery fees, commission on EFT transactions and gift card non-redemption income.
6 Expenses
2013
52 weeks
$’000
2012
52 weeks
$’000
Profit before income tax includes the following specific expenses:
Employee benefits expenses
Defined contribution superannuation expense
Other employee benefits expenses
37,706
423,876
35,443
407,225
Total employee benefits expenses
461,582
442,668
Depreciation, amortisation and write-off expense
89,787
81,858
Finance costs
Interest and finance charges paid/payable
Fair value losses on interest rate swap cash flow hedges, transferred from equity
Loss/(gain) on remeasurement of financial liability
26,808
768
2,206
34,113
150
(3,000)
Finance costs expensed
29,782
31,263
Rental expense relating to operating leases
Minimum lease payments
Contingent rentals
202,655
6,557
193,142
6,249
Total rental expense relating to operating leases
209,212
199,391
Net foreign exchange losses
(4,285)
(8,320)
Impairment of assets – inventory
14,148
15,413
–
18,450
–
(23,109)
Store closure costs and restructuring costs
Store closure and restructuring costs represents redundancy costs and the write-down or impairment of assets and inventory associated with the decision to exit stores and certain business categories.
Write-back of fixed lease rental increases provision
Due to the signing of a new lease for a store, the fixed lease rental increase provision for this store was written back to the income statement in 2012.
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Notes to the consolidated financial statements continued 7 Income tax expense
2013
52 weeks
$’000
2012
52 weeks
$’000
(a) Income tax expense
Current tax
Deferred tax
51,454
5,153
38,071
25,730
Income tax expense
56,607
63,801
Deferred income tax expense included in income tax expense comprises:
(Increase) decrease in deferred tax assets (note 13)
(Decrease) increase in deferred tax liabilities (note 18)
9,765
(4,612)
16,679
9,051
5,153
25,730
186,484
204,868
55,945
61,460
(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% (2012: 30%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Non-deductible entertainment Non-assessable (gain)/loss on remeasurement of financial liability Impairment loss on intangible assets Sundry items
67
662
–
(668)
32
(900)
3,226
176
Adjustments for current tax of prior periods
56,006
601
63,994
(193)
Income tax expense
56,607
63,801
(c) Deferred tax relating to items recognised directly in equity
Aggregate current and deferred tax arising in the reporting period and not recognised in net profit or loss or other comprehensive income but directly debited or credited to equity
(594)
(587)
800
(535)
2013
$’000
2012
$’000
2,845
78,625
2,945
35,113
81,470
Net deferred tax – debited (credited) directly to equity (note 21(b))
38,058
(d) Deferred tax relating to items charged or credited directly to other comprehensive income
Cash flow hedges (note 21(b))
8 Cash and cash equivalents
Cash on hand
Cash at bank
Risk exposure
The Group’s exposure to interest rate risk is discussed in note 2. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of cash and cash equivalents mentioned above.
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9 Trade and other receivables
2013
$’000
2012
$’000
4,353
(718)
Trade receivables
Provision for impairment of receivables (note (a))
5,235
(411)
3,635
10,186
10,563
4,824
4,803
8,085
20,749
12,888
24,384
Other receivables
Prepayments
17,712
(a) Impaired trade receivables
As at 27 July 2013 current trade receivables of the Group with a nominal value of $718 thousands (2012: $411 thousands) were impaired. The amount of the provision was $718 thousands (2012: $411 thousands).
The ageing of these receivables is as follows:
2013
$’000
2012
$’000
57
661
19
392
718
411
Movements in the provision for impairment of receivables are as follows:
Carrying amount at beginning of period
Provision for impairment recognised during the period
Receivables written off during the period as uncollectible
Unused amount reversed
411
360
(53)
–
702
58
(309)
(40)
Carrying amount at end of period
718
411
Up to 3 months
Over 3 months
The creation and release of the provision for impaired receivables has been included in ‘administration expenses’ in the income statement.
Amounts charged to the allowance account are generally written off when there is no expectation of recovering additional cash.
(b) Past due but not impaired
As of 27 July 2013, trade receivables of $169 thousands (2012: $1,806 thousands) were past due but not impaired. These relate to a number of independent debtors for whom there is no recent history of default. The ageing analysis of these trade receivables is as follows:
2013
$’000
65
104
1,720
86
169
Up to 3 months
Over 3 months
2012
$’000
1,806
Based on the credit history of these classes, it is expected that these amounts will be received and are not impaired.
(c) Foreign exchange and interest rate risk
Information about the Group’s exposure to foreign currency risk and interest rate risk in relation to trade and other receivables is provided in note 2.
(d) Fair values and credit risk
Due to the short-term nature of these receivables, their carrying amount is assumed to approximate their fair value.
The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of receivables mentioned above.
Refer to note 2 for more information on the financial risk management policy of the Group and the credit quality of the entities’ trade receivables.
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Notes to the consolidated financial statements continued 10 Inventories
2013
$’000
2012
$’000
363,880
385,702
2013
$’000
2012
$’000
Current assets
Forward foreign exchange contracts (i)
9,442
–
Total current derivative financial instrument assets
Retail inventories
11 Derivative financial instruments
9,442
–
Current liabilities
Forward foreign exchange contracts (i)
–
2,490
Total current derivative financial instrument liabilities
–
2,490
Non-current liabilities
Interest rate swap contracts (ii)
2,331
1,785
Total non-current derivative financial instrument liabilities
2,331
1,785
(a) Instruments used by the Group
The Group is party to derivative financial instruments in the normal course of business in order to hedge exposure to fluctuations in interest and foreign exchange rates in accordance with the Group’s financial risk management policies (refer to note 2).
(i) Forward exchange contracts – cash flow hedges
The Group makes purchases in numerous currencies, primarily US dollars. In order to protect against exchange rate movements, the Group has entered into forward exchange contracts to purchase US dollars.
These contracts are hedging highly probable forecasted purchases for the ensuing financial period. The contracts are timed to mature when payments for shipments of inventory are scheduled to be made.
The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised directly in equity. When the cash flows occur, the Group adjusts the initial measurement of the inventory recognised in the balance sheet by the related amount deferred in equity.
During the period ended 27 July 2013 nil (2012: gain of $0.1 million) was reclassified from equity and included in the cost of inventory. There was no hedge ineffectiveness in the current or prior period.
(ii) Interest rate swap contracts
Bank loans of the Group currently bear an average variable interest rate of 4.25% (2012: 5.19%). It is the Group’s policy to protect part of the loans from exposure to increasing interest rates. Accordingly, the Group has entered into interest rate swap contracts under which it is obliged to receive interest at variable rates and to pay interest at fixed rates.
Swaps currently in place cover approximately 47% (2012: 24%) of the Group’s debt facility (refer to note 17 for details of the Group’s borrowings).
The notional principal amounts used in the swap agreements match the terms of the debt facilities. In relation to the debt facilities the fixed interest rates range between 2.908% and 3.99% (2012: 3.985% and 3.990%) and the variable rates under the swap agreements are the Bank Bill
Swap Rate bid (BBSY Bid).
The contracts require settlement of net interest receivable or payable each 3 months. The contracts are settled on a net basis.
The gain or loss from remeasuring the hedging instruments at fair value is deferred in equity in the hedging reserve, to the extent that the hedge is effective, and reclassified into the income statement when the hedged interest expense is recognised. In the period ended 27 July
2013 $0.8 million was reclassified in profit and loss (2012: $0.2 million) and included in finance cost. There was no hedge ineffectiveness in the current period.
(b) Risk exposures
Information about the Group’s exposure to credit risk, foreign exchange and interest rate risk is provided in note 2. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of derivative financial assets mentioned above.
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12 Property, plant and equipment
Freehold
land
$’000
Freehold buildings $’000
Fixtures and fittings
$’000
Plant and equipment
$’000
Capital works in progress $’000
Total
$’000
At 30 July 2011
Cost
Accumulated depreciation
10,100
–
19,500
(2,519)
455,088
(153,524)
262,864
(75,871)
19,501
–
767,053
(231,914)
Net book amount
10,100
16,981
301,564
186,993
19,501
535,139
Period ended 28 July 2012
Carrying amount at beginning of period
Additions
Transfer between classes
Assets written off – cost
Assets written off – accumulated depreciation
Depreciation charge
Impairment loss
10,100
–
–
–
–
–
–
16,981
–
–
–
–
(487)
–
301,564
14,378
(48,224)
(37,022)
36,261
(28,616)
(1,000)
186,993
14,340
59,782
(2,845)
2,589
(29,655)
–
19,501
22,510
(21,668)
–
–
–
–
535,139
51,228
(10,110)
(39,867)
38,850
(58,758)
(1,000)
Carrying amount at end of period
10,100
16,494
237,341
231,204
20,343
515,482
At 28 July 2012
Cost
Accumulated depreciation
10,100
–
19,500
(3,006)
384,220
(146,879)
334,140
(102,936)
20,343
–
768,303
(252,821)
Net book amount
10,100
16,494
237,341
231,204
20,343
515,482
Period ended 27 July 2013
Carrying amount at beginning of period
Additions
Transfer between classes
Assets written off – cost
Assets written off – accumulated depreciation
Depreciation charge
Exchange differences
10,100
–
–
–
–
–
–
16,494
–
–
–
–
(488)
–
237,341
3,198
25,598
(2,549)
1,683
(36,955)
7
231,204
5,787
19,137
(1,199)
888
(26,539)
(63)
20,343
49,663
(44,821)
–
–
–
145
515,482
58,648
(86)
(3,748)
2,571
(63,982)
89
Carrying amount at end of period
10,100
16,006
228,323
229,215
25,330
508,974
At 27 July 2013
Cost
Accumulated depreciation
10,100
–
19,500
(3,494)
410,474
(182,151)
357,863
(128,648)
25,330
–
823,267
(314,293)
Net book amount
10,100
16,006
228,323
229,215
25,330
508,974
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Notes to the consolidated financial statements continued 13 Deferred tax assets
2013
$’000
2012
$’000
21,232
1,881
79
4,280
13,937
1,463
19,839
5,805
640
9,090
15,697
332
42,872
(26,026)
51,403
(30,288)
Net deferred tax assets
16,846
21,115
Movements:
Carrying amount at beginning of period
Credited/(charged) to income statement (note 7)
Credited/(charged) to other comprehensive income
51,403
(9,765)
1,234
68,082
(16,679)
–
Carrying amount at end of period
42,872
51,403
Deferred tax assets comprise temporary differences attributable to:
Employee benefits
Non-employee provisions
Deferred income
Amortising deductions
Other
Tax losses
Total deferred tax assets
Set off of deferred tax liabilities pursuant to set off provisions (note 18)
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14 Intangible assets
Goodwill
$’000
Brand names and trademarks $’000
Software
$’000
Lease rights $’000
Total
$’000
At 30 July 2011
Cost
Accumulated amortisation
376,631
–
420,202
(1,846)
172,092
(52,498)
48,540
(19,241)
1,017,465
(73,585)
Net book amount
376,631
418,356
119,594
29,299
943,880
Period ended 28 July 2012
Carrying amount at beginning of period
Additions
Transfer between classes
Assets written off – cost
Assets written off – accumulated amortisation
Amortisation charge*
Impairment loss**
376,631
–
–
–
–
–
–
418,356
7,913
–
–
–
(359)
–
119,594
10,226
10,104
(8,862)
6,248
(19,839)
–
29,299
–
–
–
–
(2,408)
(10,754)
943,880
18,139
10,104
(8,862)
6,248
(22,606)
(10,754)
Carrying amount at end of period
376,631
425,910
117,471
16,137
936,149
At 28 July 2012
Cost
Accumulated amortisation
376,631
–
428,115
(2,205)
183,560
(66,089)
48,540
(32,403)
1,036,846
(100,697)
Net book amount
376,631
425,910
117,471
16,137
936,149
Period ended 27 July 2013
Carrying amount at beginning of period
Additions
Transfer between classes
Assets written off – cost
Amortisation charge*
Exchange differences
376,631
–
–
–
–
–
425,910
406
–
–
(14)
–
117,471
18,860
86
(1,991)
(20,984)
117
16,137
–
–
–
(1,612)
–
936,149
19,266
86
(1,991)
(22,610)
117
Carrying amount at end of period
376,631
426,302
113,559
14,525
931,017
At 27 July 2013
Cost
Accumulated amortisation and impairment
376,631
–
428,520
(2,218)
200,632
(87,073)
48,540
(34,015)
1,054,323
(123,306)
Net book amount
376,631
426,302
113,559
14,525
931,017
* Amortisation of $22.6 million (2012: $22.6 million) is included in administration and selling expenses in the income statement.
** In FY12 impairment of $10.8 million was included in store closure and restructuring costs in the income statement.
(a) Impairment tests for goodwill and intangibles with an indefinite useful life
The goodwill arising on the acquisition of the Myer business amounting to $349.5 million cannot be allocated to the Group’s individual cash generating units (the Group’s stores), and hence has been allocated to the business as a whole. Similarly, brand names which have an indefinite useful life and amounting to $402.8 million have been allocated to the business as a whole.
The goodwill arising on the acquisition of the sass & bide business amounting to $27.1 million cannot be allocated to the individual cash generating units (the sass & bide stores), and hence has been allocated to the sass & bide business as a whole. Similarly, the sass & bide brand name, which has an indefinite useful life and amounting to $23.5 million has been allocated to the sass & bide business as a whole.
AASB 136 Impairment of Assets requires goodwill and intangible assets with an indefinite useful life to be tested annually for impairment. In testing these assets for impairment, the recoverable amount of each business has been determined using a value in use calculation. This calculation uses cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond five year periods are extrapolated using a terminal growth rate of 2.5%. Key assumptions used in the calculation were as follows:
›› discount rate (pre tax) 14.4% (2012: 14.4%)
›› terminal growth rate 2.5% (2012: 2.5%)
›› operating gross profit margin 42% (2012: 41%)
Neither goodwill nor indefinite lived intangibles were impaired at the end of the reporting period. Sensitivity analysis on reasonably possible changes in assumptions did not result in an outcome where an impairment would be required.
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MYER Annual Report 2013
Notes to the consolidated financial statements continued 15 Trade and other payables
2013
$’000
189,856
197,817
201,163
195,974
387,673
397,137
2013
$’000
2012
$’000
61,261
18,781
2,763
1,499
59,590
19,839
3,867
2,661
84,304
85,957
5,961
7,266
16
5,243
10,196
–
13,243
Trade payables
Other payables
2012
$’000
15,439
Trade and other payables are non-interest bearing.
16 Provisions
Current
Employee benefits
Workers’ compensation (a)
Sales returns (b)
Other
Non current
Employee benefits
Fixed lease rental increases (c)
Other
(a) Workers’ compensation
The amount represents a provision for workers’ compensation claims in certain states, for which the Group is self insured.
(b) Sales returns
The amount represents a provision for potential sales returns under the Group’s returns policy.
(c) Fixed lease rental increases
The Group is party to a number of leases that include fixed rental increases during their term. In accordance with AASB 117 Leases, the total rentals over these leases are being expensed over the lease term on a straight-line basis. The above provision reflects the difference between the future committed payments under these leases and the total future expense.
(d) Movement in provisions
Movement in each class of provision during the financial period, other than employee benefits, are set out below:
Other
$’000
Fixed lease rental increases
$’000
Total
$’000
3,867
2,763
(3,867)
2,661
6,523
(7,669)
10,196
1,468
(4,398)
36,563
13,843
(20,081)
2,763
1,515
7,266
30,325
Workers’ compensation $’000
Sales returns $’000
2013
Carrying amount at beginning of period
Additional provisions recognised during the period
Amounts utilised during the period
19,839
3,089
(4,147)
Carrying amount at end of period
18,781
(e) Amounts not expected to be settled within the next 12 months
The current provision for employee benefits includes accrued annual leave and long service leave. For long service it covers all unconditional entitlements where employees have completed the required period of service. The entire annual leave amount and current portion of the long service leave provision is presented as current since the Group does not have an unconditional right to defer settlement for any of these obligations. However, based on past experience, the Group does not expect all employees to take the full amount of accrued long service leave or require payment within the next 12 months. The following amounts reflect leave that is not expected to be taken or paid within the next
12 months.
2013
$’000
Current long service leave obligations expected to be settled after 12 months
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2012
$’000
28,615
28,658
93
Financial report
17 Borrowings
2013
$’000
2012
$’000
Non-current borrowings
Bank loans
420,824
421,193
Total borrowings
420,824
421,193
(a) Structure of debt
The debt funding of the Group at 27 July 2013 comprised of a revolving cash advance syndicated facility of $625 million. This facility was established on 29 October 2009, drawn down on 6 November 2009 and amended and restated on 3 June 2011. On 9 July 2013 the facility went through a second amendment and restatement which included extending the tenor and changing the facility to be entirely a revolving cash advance facility. In addition, the Group had a $30 million revolving credit facility which expired in April 2013. At balance date the following amounts were drawn:
2013
$’000
2012
$’000
Bank loans
Less transaction costs
425,000
(4,176)
425,000
(3,807)
Borrowings
420,824
421,193
The terms and conditions of the Group’s revolving cash advance facility is as follows:
Amount
Expiry Date
$75 million
$275 million
$275 million
Revolving cash advance facility – Tranche A
Revolving cash advance facility – Tranche B
Revolving cash advance facility – Tranche C
Term
2 years
3 years
4 years
21 August 2015
22 August 2016
21 August 2017
The revolving cash advance facility is revolving, so that amounts repaid may be redrawn during their terms.
(b) Security
The revolving cash advance facility in place at 27 July 2013 is unsecured, subject to various representations, undertakings, events of default and review events which are usual for a facility of this nature.
(c) Fair value
The fair value of existing borrowings approximates their carrying amount, as the impact of discounting is not significant.
(d) Risk exposures
Details of the Group’s exposure to risks arising from current and non-current borrowings are set out in note 2.
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Notes to the consolidated financial statements continued 18 Deferred tax liabilities
2013
$’000
Set off of deferred tax liabilities pursuant to set off provisions (note 13)
14,523
991
8,465
350
1,202
495
19,858
1,141
8,465
535
–
289
26,026
Deferred tax liabilities comprise temporary differences attributable to:
Property, plant, equipment and software
Deferred stamp duty
Brand names
Derivative financial instruments
Deferred income
Sundry items
2012
$’000
30,288
(26,026)
(30,288)
–
Net deferred tax liabilities
–
Movement:
Carrying amount at beginning of period
Charged/(credited) to income statement (note 7)
Charged/(credited) to other comprehensive income
30,288
(4,612)
350
20,702
9,051
535
Carrying amount at end of period
26,026
30,288
2013
$’000
2012
$’000
29,758
1,952
–
2,094
31,710
2,094
–
1,000
353
27,553
1,500
353
1,353
29,406
19 Other liabilities
Current
Financial liability (note 21(b) (iii))
Short-term payable
Non current
Financial liability (note 21(b) (iii))
Long-term payable
Retirement benefit obligations
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20 Contributed equity
2013
Number of shares
2013
$’000
2012
$’000
583,384,551
–
210,000
583,147,884
36,667
200,000
558,107
–
621
557,635
47
425
583,594,551
583,384,551
558,728
558,107
(25,200)
(210,000)
–
–
205,500
(306,405)
(200,000)
316,809
120,396
44,000
(38,331)
(621)
–
–
440
(38,156)
(425)
3
153
94
(29,700)
Opening balance
Options exercised at $2.14 per ordinary share
Shares issued to Myer Equity Plans Trust at market value
2012
Number
of shares
(25,200)
(38,512)
(38,331)
520,216
519,776
Treasury shares
Opening balance
Shares issued to Myer Equity Plans Trust
Shares allocated on exercise of options at $0.01
Shares allocated on exercise of options at $1.27
Shares allocated on exercise of options at $2.14
Closing balance of Treasury shares
583,564,851
Closing balance
583,359,351
(a) Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.
(b) Treasury shares
Treasury shares are shares in Myer Holdings Limited that are held by the Myer Equity Plans Trust for the purposes of issuing shares under the Equity Incentive Plans (see note 34 for further information).
(c) Employee share and option schemes
Information relating to the employee share-based payment schemes, including details of shares issued under the schemes, is set out in note 34.
(d) Capital risk management
The Group’s objectives when managing capital are to safeguard its 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 optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
Consistently with others in the industry, the Group monitors capital on the basis of various balance sheet ratios including the gearing ratio.
This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings less cash and cash equivalents. Total capital is calculated as ‘equity’ as shown in the balance sheet plus net debt.
The gearing ratios at 27 July 2013 and 28 July 2012 were as follows:
2013
$’000
2012
$’000
Total borrowings (note 17)
Less: cash and cash equivalents (note 8)
420,824
(81,470)
421,193
(38,058)
Net debt
Total equity
339,354
905,642
383,135
877,680
Total capital
1,244,996
1,260,815
27%
30%
Gearing ratio
The decrease in the gearing ratio during 2013 was primarily driven by an increase in cash and the increase in equity associated with surplus retained earnings over dividends paid during the year.
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Notes to the consolidated financial statements continued 21 Retained earnings and reserves
2013
$’000
(a) Retained earnings
Movement in retained earnings were as follows:
Balance at beginning of period
Profit for the period
Dividends
2012
$’000
363,357
127,212
(110,847)
349,396
139,365
(125,404)
Balance at end of period
379,722
363,357
(b) Reserves
Share-based payments (i)
Cash flow hedges (ii)
Other reserve (iii)
Foreign currency translation (iv)
22,185
6,039
(31,650)
(598)
20,682
(3,837)
(31,650)
5
(4,024)
(14,800)
Movement in reserves were as follows:
Share-based payments
Balance at beginning of period
Share-based payments expense recognised
Income tax (note 7)
20,682
2,097
(594)
19,314
1,955
(587)
Balance at end of period
22,185
20,682
Cash flow hedges
Balance at beginning of period
Net gain on revaluation
Transfer to net profit
Transfer to inventory and other assets
Deferred tax (notes 13 and 18)
(3,837)
12,305
(3,229)
–
800
(2,699)
2,699
(3,442)
140
(535)
6,039
(3,837)
Other reserve
Balance at beginning of period
Other reserve recognised
(31,650)
–
(31,650)
–
Balance at end of period
Balance at end of period
(31,650)
(31,650)
Foreign currency translation
Balance at beginning of period
Currency translation differences arising during the period
5
(603)
(85)
90
Balance at end of period
(598)
5
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(i) Share-based payments
The share-based payments reserve is used to recognise the fair value of options and rights granted to employees under the employee share plans. Further information on share-based payments is set out in note 34.
(ii) Cash flow hedges
The hedging reserve is used to record gains or losses on a hedging instrument in a cash flow hedge that are recognised directly in equity, as described in note 1(n). Amounts are recognised in the income statement when the associated hedged transaction affects profit or loss.
(iii) Other reserve
Under the shareholders’ agreement entered into with the non-controlling shareholders at the time of acquisition in 2011, the Group holds a call option over the non-controlling shareholders’ 35% interest in Boogie & Boogie Pty Ltd, the owner of sass & bide, and the non-controlling shareholders have a corresponding put option. These options are exercisable at any time after two years from acquisition date at a market value of the shares at that time based on a formula contained within the shareholders’ agreement. The potential liability of the Group under the put option has been estimated at acquisition date based on expectations on the timing of exercise and the exercise price at that future point in time, discounted to present value using the Group’s incremental borrowing rate. The recognition of the put option liability at acquisition date has resulted in the recognition of an amount to the other reserve within shareholders’ equity and a financial liability within non-current liabilities other. This liability has been reclassified to current liabilities in 2013.
This liability is reassessed each reporting date for any change in the expected liability on exercise, with the impact recognised within net finance costs within the income statement.
(iv) Foreign currency translation
Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive income as described in note 1(d) and accumulated in a separate reserve within equity. The cumulative amount is reclassified to the income statement when the net investment is disposed of.
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Notes to the consolidated financial statements continued 22 Dividends
2013
$’000
52,502
(a) Ordinary shares
Final fully franked dividend for the period ended 28 July 2012 of 9.0 cents
(2011: 11.5 cents) per fully paid share paid 14 November 2012 (2011: 16 November 2011)
Interim fully franked dividend for the period ended 27 July 2013 of 10.0 cents
(2012: 10.0 cents) per fully paid share paid 9 May 2013 (2012: 10 May 2012)
2012
$’000
67,068
58,345
125,404
46,685
52,502
19,094
(b) Dividends not recognised at the end of the reporting period
In addition to the above dividends, since period end the directors have recommended the payment of a final dividend of 8.0 cents per fully paid ordinary share, (2012: 9.0 cents) fully franked based on tax paid at 30%. aggregate amount of the proposed dividend expected to be paid on 14 November 2013,
The
but not recognised as a liability at period end, is:
58,336
110,847
Total dividends paid
14,619
(c) Franked dividends
The franked portions of the final dividends recommended after 27 July 2013 will be franked out of existing franking credits or out of franking credits arising from the payment of income tax in the period ending 26 July 2014.
Franking credits available for subsequent financial periods based on a tax rate of 30% (2012 : 30%)
The above amounts represent the balance of the franking account as at the reporting date, adjusted for:
(a) franking credits that will arise from the payment of the amount of the provision for income tax;
(b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date; and
(c) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.
The consolidated amounts include franking credits that would be available to the parent entity if distributable profits of subsidiaries were paid as dividends.
The impact on the franking account of the dividend recommended by the directors since the end of the reporting period, but not recognised as a liability at the reporting date, will be a reduction in the franking account of $20 million (2012: reduction of $22 million).
23 Key Management Personnel disclosures
(a) Compensation
Key Management Personnel compensation for the period ended 27 July 2013 is set out below. The Key Management Personnel of the Group are persons having the authority and responsibility for planning, directing and controlling the Company’s activities directly or indirectly, including the directors of Myer Holdings Limited.
2013
$
4,936,883
211,951
112,410
721,528
Detailed remuneration disclosures are provided in the Remuneration Report on pages 47 to 65.
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5,037,909
230,576
309,388
1,158,516
5,982,772
Short term employee benefits
Post employment benefits
Long-term benefits
Share-based payments
2012
$
6,736,389
99
Financial report
(b) Equity instruments
(i) Option and performance rights holdings
The number of options and rights over ordinary shares in the Company held during the financial period by each director of Myer Holdings
Limited and other Key Management Personnel of the Group, including their personally related parties, are set out below.
Opening
balance
Granted as compensation1 2013
Directors of Myer Holdings Limited
–
Paul McClintock AO4
–
Howard McDonald5
–
Rupert Myer AM
9,438,777
Bernie Brookes
–
Anne Brennan
–
Tom Flood6
–
Chris Froggatt
–
Peter Hay
–
Ian Morrice7
Other Key Management Personnel of the Group
1,195,154
Nick Abboud8
1,600,896
Mark Ashby
–
Mark Goddard9
10
–
Adam Stapleton
–
Tony Sutton11
680,896
Greg Travers
Exercised
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
190,045
135,747
96,719
45,249
190,045
–
–
–
–
–
–
–
–
2,058,383
–
–
–
–
(26,667)
–
–
–
(10,000)
–
–
214,986
260,728
–
260,728
–
2012
Directors of Myer Holdings Limited
26,667
Howard McDonald
–
Rupert Myer AM
7,380,394
Bernie Brookes
–
Anne Brennan
10,000
Tom Flood
–
Chris Froggatt
–
Peter Hay
Other Key Management Personnel of the Group
986,036
Nick Abboud
1,340,168
Mark Ashby
–
Mark Goddard
478,836
Greg Travers
1,320,168
Penny Winn12
Other changes2 –
–
–
–
–
–
–
–
–
(5,868)
–
–
(58,668)
–
Closing balance Vested and exercisable3
–
–
–
9,438,777
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9,438,777
–
–
–
–
–
–
450,773
–
326,073
483,119
450,773
–
–
–
–
–
–
–
450,773
–
326,073
483,119
450,773
–
–
–
–
–
–
–
–
–
9,438,777
–
–
–
–
–
–
–
–
–
–
–
–
–
9,438,777
–
–
–
–
–
–
–
–
(1,320,168)
1,195,154
1,600,896
–
680,896
–
30,000
586,666
–
–
–
1,165,154
1,014,230
–
680,896
–
(1,195,154)
(1,340,168)
(135,747)
229,354
437,870
(420,168)
1. Options and rights granted during the year are outlined in note 34.
2. Other changes comprise of (i) options and rights which have expired or forfeited during the period, (ii) balances held by new Key Management Personnel from the date of appointment and (iii) removes balances for those no longer regarded as Key Management Personnel.
3. All vested options are exercisable at the end of the period.
4. Appointed Director on 8 August 2012 and appointed Chairman of the Company on 10 October 2012.
5. Retired as Chairman and Director on 10 October 2012.
6. Retired as Director effective 11 April 2012.
7. Appointed Director on 8 August 2012. Resigned effective 1 March 2013.
8. Ceased employment on 18 September 2012.
9. Ceased employment on 4 February 2013.
10. Promoted to Executive General Manager Merchandise on 4 February 2013.
11. Promoted to Executive General Manager Stores on 14 February 2013.
12. Resigned effective 8 December 2011.
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Notes to the consolidated financial statements continued 23 Key Management Personnel disclosures continued
(b) Equity instruments continued
(ii) Ordinary share holdings
The number of shares in the Company held during the financial period by each director of Myer Holdings Limited and other Key Management
Personnel of the Group, including their personally related parties, are set out below. There were no shares granted during the reporting period as compensation.
Opening
balance
2013
Directors of Myer Holdings Limited
Paul McClintock AO2
Howard McDonald3
Rupert Myer AM
Bernie Brookes
Anne Brennan
Tom Flood4
Chris Froggatt
Peter Hay
Other Key Management Personnel of the Group
Nick Abboud5
Mark Ashby
Mark Goddard6
Greg Travers
Adam Stapleton7
Tony Sutton8
Exercise
Ceased
of options employment
Closing balance 106,000
–
–
(604,428)
–
–
–
–
106,000
–
733,999
10,178,952
53,658
–
10,040
12,195
–
2,074,390
733,999
10,783,380
53,658
400,000
10,040
12,195
–
–
–
–
–
–
–
–
–
245,257
–
1,515,808
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(190,000)
–
–
–
245,257
–
1,325,808
–
–
2,047,723
725,710
11,546,630
53,658
390,000
10,040
12,195
26,667
–
–
–
10,000
–
–
–
–
–
–
–
–
–
–
8,289
(763,250)
–
–
–
–
2,074,390
733,999
10,783,380
53,658
400,000
10,040
12,195
–
245,257
–
1,537,140
200,000
2012
Directors of Myer Holdings Limited
Howard McDonald
Rupert Myer AM
Bernie Brookes
Anne Brennan
Tom Flood
Chris Froggatt
Peter Hay
Other Key Management Personnel of the Group
Nick Abboud
Mark Ashby
Mark Goddard
Greg Travers
Penny Winn9
–
(2,074,390)
–
–
–
(400,000)
–
–
Other changes1 5,868
–
–
58,668
–
–
–
–
–
(200,000)
(5,868)
–
–
(80,000)
–
–
245,257
–
1,515,808
–
1. Other changes comprise of (i) shares which have been purchased or sold during the period, (ii) balances held by new Key Management Personnel from the date of appointment and (iii) removes balances for those no longer regarded as Key Management Personnel.
2. Appointed Director on 8 August 2012 and appointed Chairman of the Company on 10 October 2012.
3. Retired as Chairman and Director on 10 October 2012.
4. Retired as Director effective 11 April 2012.
5. Ceased employment on 18 September 2012.
6. Ceased employment on 4 February 2013.
7. Promoted to Executive General Manager Merchandise on 4 February 2013.
8. Promoted to Executive General Manager Stores on 14 February 2013.
9. Resigned effective 8 December 2011.
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(c) Loans
Details of loans made to directors of Myer Holdings Limited and other Key Management Personnel of the Group, including their personally related parties, are set out below.
(i) Aggregates for Key Management Personnel
In 2013 and 2012 there were no loans to individuals at any time.
(ii) Individuals with loans above $100,000 during the financial period
In 2013 and 2012 there were no loans to individuals that exceeded $100,000 at any time.
(d) Other transactions
There were no transactions with Key Management Personnel or entities related to them, other than compensation.
24 Remuneration of auditors
During the period the following fees were paid or payable for services provided by the auditor of the Group, and its related practices:
2013
$
2012
$
396,510
383,075
43,125
6,150
41,400
6,000
Total remuneration for other assurance services
Total remuneration for assurance services
(ii) Taxation services Tax consulting and tax advice
(iii) Other services Other services
49,275
445,785
47,400
430,475
183,253
166,946
–
40,000
Total remuneration of PwC Australia
629,038
637,421
65,857
37,026
28,786
16,712
(a) PwC Australia
(i) Assurance services
Audit services Audit and review of financial statements and other audit work under the Corporations Act 2001
Other assurance services Audit of rent certificates Other services
(b) Overseas practices of PwC
(i) Assurance services
Audit services Audit and review of financial statements and other audit work under the Corporations Act 2001
(ii) Taxation services Tax consulting and tax advice
(iii) Other services Other services
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6,546
94,643
Total remuneration for overseas practices of PwC
60,284
102
MYER Annual Report 2013
Notes to the consolidated financial statements continued 25 Contingencies
Contingent liabilities
The Group had contingent liabilities at 27 July 2013 in respect of:
Guarantees
The Group has issued bank guarantees amounting to $51.5 million (2012: $46.9 million), of which $33.9 million (2012: $31.9 million) represents guarantees supporting workers’ compensation self insurance licences in various jurisdictions.
For information about other guarantees given by entities within the Group, including the parent entity, please refer to notes 29 and 32.
While the amount and timing of any contingencies are uncertain, no material losses are anticipated in respect of the above contingent liabilities.
26 Commitments
(a) Capital commitments
Capital expenditure contracted for at the end of the reporting period but not recognised as liabilities is as follows:
2013
$’000
16,754
–
–
7,481
–
–
16,754
Property, plant, equipment and software
Payable:
Within one year
Later than one year but not later than five years
Later than five years
2012
$’000
7,481
(b) Operating lease commitments
The Group leases the majority of its stores and warehouses under non-cancellable operating leases expiring within one to 30 years. The leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated.
2013
$’000
209,975
798,279
1,936,273
201,016
700,046
1,825,835
2,944,527
Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:
Within one year
Later than one year but not later than five years
Later than five years
2012
$’000
2,726,897
Not included in the above commitments are contingent rental payments that may arise in the event that sales made by certain leased stores exceed a pre-determined amount. The contingent rentals payable as a percentage of sales revenue and the relevant thresholds vary from lease to lease.
27 Related party transactions
(a) Parent entities
The parent entity within the Group is Myer Holdings Limited, a listed public company, incorporated in Australia.
(b) Subsidiaries
Interests in subsidiaries are set out in note 28.
(c) Key Management Personnel
Disclosures relating to Key Management Personnel are set out in note 23.
(d) Transactions with other related parties
There were no transactions with other related parties during the current period.
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28 Subsidiaries and transactions with non-controlling interests
(a) Investments in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 1(b):
Name of entity
Notes
NB Elizabeth Pty Ltd
NB Russell Pty Ltd
NB Lonsdale Pty Ltd
NB Collins Pty Ltd
Warehouse Solutions Pty Ltd
Myer Group Pty Ltd
Myer Pty Ltd
Myer Group Finance Limited
The Myer Emporium Pty Ltd
ACT Employment Services Pty Ltd
Myer Employee Share Plan Pty Ltd
Myer Travel Pty Ltd
Myer Sourcing Asia Ltd
Shanghai Myer Service Company Ltd
Boogie & Boogie Pty Ltd sass & bide Pty Ltd sass & bide Retail Pty Ltd sass & bide Retail (NZ) Pty Ltd
(1), (3)
(2), (3)
(2), (3)
(1), (3)
(2), (3)
(1), (3)
(1), (3)
(1), (3)
(1), (3)
(2)
(2)
(2)
(2)
(2)
(2)
sass & bide UK Limited sass & bide USA inc. sass & bide inc.
Equity holdings(4) 2013
%
Equity holdings(4) 2012
%
Country of incorporation Class of shares Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Hong Kong
China
Australia
Australia
Australia
Australia
United
Kingdom
USA
USA
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
100
100
100
100
100
100
65
65
65
65
100
100
100
100
100
100
100
100
100
100
100
100
100
100
65
65
65
65
Ordinary
Ordinary
Ordinary
65
65
65
65
65
65
(1) Each of these entities has been granted relief from the necessity to prepare financial statements in accordance with Class Order 98/1418 issued by the Australian Securities and Investments Commission (ASIC).
(2) Each of these entities is classified as small proprietary and therefore relieved from the requirement to prepare and lodge financial reports with ASIC.
(3) Each of these entities is party to a deed of cross guarantee, refer note 29.
(4) The proportion of ownership interest is equal to the proportion of voting power held.
(b) Transactions with non-controlling interests
There were no transactions with non-controlling interests in 2013 or 2012.
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Notes to the consolidated financial statements continued 29 Deed of cross guarantee
Myer Holdings Limited, NB Elizabeth Pty Ltd, NB Collins Pty Ltd, NB Russell Pty Ltd, Myer Group Pty Ltd, NB Lonsdale Pty Ltd, Warehouse
Solutions Pty Ltd, Myer Group Finance Limited, Myer Pty Ltd and The Myer Emporium Pty Ltd are parties to a deed of cross guarantee under which each company guarantees the debts of the others. By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare a financial report and directors’ report under Class Order 98/1418 (as amended) issued by the Australian Securities and Investments Commission.
Each of the members of the extended ‘closed group’ are considered to be solvent at 27 July 2013.
(a) Consolidated income statement, statement of comprehensive income and summary of movements in consolidated retained earnings
The above companies represent a ‘closed group’ for the purposes of the Class Order, and as there are no other parties to the deed of cross guarantee that are controlled by Myer Holdings Limited, they also represent the ‘extended closed group’.
As certain Group entities are not members of the closed group additional disclosure has been made in relation to the closed group.
Set out below is a consolidated income statement, a consolidated statement of comprehensive income and a summary of movements in consolidated retained earnings for the year ended 27 July 2013 of the closed group.
2013
52 weeks
$’000
2012
52 weeks
$’000
Income statement
Total sales value (excluding GST)
Concession sales
3,100,100
(501,692)
3,080,111
(478,905)
Sale of goods (excluding GST)
Sales revenue deferred under customer loyalty program
2,598,408
(37,942)
2,601,206
(39,211)
2,560,466
119,658
(1,431,003)
4,615
23,505
2,561,995
115,853
(1,448,141)
–
25,908
1,277,241
(777,896)
(287,228)
–
–
1,255,615
(738,701)
(293,966)
(18,450)
23,109
212,117
1,379
(29,767)
227,607
1,460
(31,174)
Revenue from sale of goods (excluding GST)
Other operating revenue (excluding finance revenue)
Cost of goods sold
Dividend received
Other income
Operating gross profit
Selling expenses
Administration expenses
Store closure and restructuring costs
Write back of fixed lease rental increases provision
Earnings before interest and tax
Finance revenue
Finance costs
Net finance costs
(28,388)
(29,714)
Profit before income tax
Income tax expense
183,729
(54,246)
197,893
(61,617)
Profit for the period
129,483
136,276
Statement of comprehensive income
Profit for the period
129,483
136,276
Other comprehensive income
Items that may be reclassified to profit or loss: Cash flow hedges Exchange differences on translation of foreign operations Income tax relating to components of other comprehensive income
7,704
(706)
1,235
Other comprehensive income for the period, net of tax
8,233
(1,007)
137,716
135,269
360,762
129,483
(110,847)
349,890
136,276
(125,404)
379,398
360,762
Total comprehensive income for the period
Summary of movements in retained earnings
Opening balance
Profit for the period
Dividends paid
Closing balance
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(b) Consolidated balance sheet
Set out below is a consolidated balance sheet as at 27 July 2013 of the closed group.
2013
$’000
2012
$’000
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
69,555
33,273
356,268
8,438
30,790
23,726
378,089
–
Total current assets
467,534
432,605
Non-current assets
Other financial assets
Property, plant and equipment
Deferred tax assets
Intangible assets
Other
41,374
504,559
21,265
879,544
3,310
41,374
510,760
27,066
884,193
3,812
Total non-current assets
1,450,052
1,467,205
Total assets
1,917,586
1,899,810
LIABILITIES
Current liabilities
Trade and other payables
Derivative financial instruments
Current tax liabilities
Provisions
Other
381,180
–
17,165
82,506
30,802
394,334
2,207
14,549
84,899
1,119
Total current liabilities
511,653
497,108
Non-current liabilities
Borrowings
Derivative financial instruments
Provisions
Deferred income
Other
420,824
2,331
12,763
73,583
1,354
421,193
1,785
15,023
69,821
29,406
Total non-current liabilities
510,855
537,228
Total liabilities
1,022,508
1,034,336
Net assets
895,078
865,474
EQUITY
Contributed equity
Retained earnings
Reserves
520,216
379,398
(4,536)
519,776
360,762
(15,064)
Total equity
895,078
865,474
30 Events occurring after the reporting period
Subsequent to 27 July 2013, the directors have determined to pay a final dividend of 8.0 cents per share, fully franked at the 30% corporate income tax rate, payable on 14 November 2013. The record date for this dividend is 30 September 2013.
The financial effect of the final ordinary dividend for 2013 has not been recognised in the annual financial statements for the period ended 27 July 2013 and will be recognised in subsequent financial statements.
Post year end Myer exercised the call option to acquire the remaining 35% in sass & bide. The acquisition was settled on 24 September 2013 at $30.2 million, net of cash acquired.
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Notes to the consolidated financial statements continued 31 Reconciliation of profit after income tax to net cash inflow from operating activities
2013
52 weeks
$’000
2012
52 weeks
$’000
Profit for the period
Depreciation and amortisation, including lease inducements
Interest income
Interest expense
Share-based payments expense
Net exchange differences
Change in operating assets and liabilities Decrease (increase) in trade and other receivables Decrease (increase) in inventories Decrease (increase) in deferred tax asset Decrease (increase) in derivative financial instruments (Decrease) increase in trade and other payables (Decrease) increase in current tax payable (Decrease) increase in provisions (Decrease) increase in other liabilities
129,877
83,559
(1,402)
1,646
2,097
(567)
141,067
88,124
(4,499)
1,717
1,955
66
(2,289)
22,002
4,475
(2,168)
(13,768)
3,850
(3,849)
2,062
7,158
(4,306)
25,144
(3,505)
(21,010)
(18,706)
(31,080)
(2,211)
Net cash inflow from operating activities
225,525
179,914
2013
$’000
2012
$’000
211,255
1,104,911
69,960
493,116
176,071
1,073,806
38,320
488,850
520,216
519,776
(1,648)
(31,650)
15,282
109,595
136,264
136,953
(1,785)
(31,650)
13,185
85,430
268,641
267,275
32 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
Cash flow hedges Other reserve Share-based payments
Retained earnings
Profit for the period
Total comprehensive income
(b) Guarantees entered into by the parent entity
–
–
–
Carrying amount included in current liabilities
–
The parent entity is the borrowing entity under the Group’s financing facilities. Under these facilities, the parent entity is party to a cross‑guarantee with various other Group entities, who guarantee the repayment of the facilities in the event that the parent entity is in default.
The parent entity is also party to a deed of cross guarantee entered into on 10 May 2010. The details of the deed of cross guarantee are set out in note 29. At balance date no liability has been recognised in relation to these guarantees on the basis that the potential exposure is not considered material.
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(c) Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 27 July 2013 or 28 July 2012. For information about guarantees given by the parent entity, please see above.
(d) Contractual commitments for the acquisition of property, plant or equipment
The parent entity did not have any contractual commitments for the acquisition of property, plant or equipment as at 27 July 2013 or 28 July 2012.
33 Earnings per share
2013
cents
2012 cents (a) Basic earnings per share
Total basic earnings per share attributable to the ordinary equity holders of the Company
21.8
23.9
(b) Diluted earnings per share
Total diluted earnings per share attributable to the ordinary equity holders of the Company
21.6
23.7
$’000
$’000
127,212
139,365
Number
Number
583,425,804
583,288,348
5,996,592
4,578,147
589,422,396
587,866,495
(c) Reconciliations of earnings used in calculating earnings per share
Earnings used in calculation of basic and diluted EPS attributable to ordinary shareholders
(d) Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share Adjustments for calculation of diluted earnings per share: Options
Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share
(e) Information concerning the classification of securities
(i) Options and performance rights
Options granted to employees under the Myer Equity Incentive Plan are considered to be potential ordinary shares and have been included in the determination of diluted earnings per share to the extent to which they are dilutive. The options have not been included in the determination of basic earnings per share. Details relating to the options are set out in note 34.
10,015,044 options outstanding at period end are not included in the calculation of diluted earnings per share because they are antidilutive for the period ended 27 July 2013. These options could potentially dilute basic earnings per share in the future.
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Notes to the consolidated financial statements continued 34 Share-based payments
(a) Equity Incentive Plans
The Myer Equity Incentive Plan (MEIP) and Executive Equity Incentive Plan (EEIP) were established to help ensure retention of senior management and key staff and to provide incentives for the delivery of both short and long term shareholder returns.
Options and rights are granted under the plan for no consideration, and carry no dividend or voting rights. When exercisable, each option or right is convertible into one ordinary share in the Company. Participation in the plan is at the Board’s discretion and no individual has a contractual right to participate in the plan or to receive any guaranteed benefits.
Set out below is a summary of options and rights granted under the plan:
Grant type/
Grant date
2013
Option
23 Jan 2008
Option
17 Dec 2008
Option
30 Jun 2009
Option
06 Nov 2009
Option CEO EPS
06 Nov 2009
Option CEO share price
06 Nov 2009
Right EPS
21 Oct 2011
Right TSR
21 Oct 2011
Right CEO EPS
9 Dec 2011
Right CEO TSR
9 Dec 2011
Right EPS
25 Jan 2013
Right TSR
25 Jan 2013
Right
25 Jan 2013
Expiry date
Exercise price ($)
Balance
28 July
2012
Granted
Exercised
Expired and lapsed
Balance
27 July
2013
Vested and exercisable
21 Dec 2012
$3.00
6,221,180
–
–
(6,221,180)
–
–
24 Oct 2013
$2.14
3,016,663
–
(205,500)
(500,850)
2,310,313
512,500
24 Oct 2014
$2.34
3,153,900
–
–
(519,250)
2,634,650
168,800
31 Dec 2012
$4.10
2,521,009
–
–
(2,521,009)
–
–
31 Dec 2013
$4.10
5,152,671
–
–
–
5,152,671
–
31 Dec 2013
$5.74
2,227,723
–
–
–
2,227,723
–
31 Oct 2014
$0.00
1,297,858
–
–
(208,756)
1,089,102
–
31 Oct 2014
$0.00
2,006,646
–
–
(322,772)
1,683,874
–
31 Oct 2014
$0.00
808,383
–
–
–
808,383
–
31 Oct 2014
$0.00
1,250,000
–
–
–
1,250,000
–
31 Oct 2015
$0.00
–
486,987
–
(67,873)
419,114
–
31 Oct 2015
$0.00
–
486,994
–
(67,874)
419,120
–
31 Oct 2015
$0.00
–
1,334,843
–
(4,525)
1,330,318
–
27,656,033
2,308,824
(205,500) (10,434,089)
19,325,268
681,300
$2.78
$0.00
$2.33
$2.19
Total
Weighted average exercise price
$2.14
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Grant type/
Grant date
2012
Option
1 Dec 2006
Option
1 Aug 2007
Option
23 Jan 2008
Option
17 Dec 2008
Option
30 Jun 2009
Option
06 Nov 2009
Option CEO EPS
06 Nov 2009
Option CEO share price
06 Nov 2009
Right EPS
21 Oct 2011
Right TSR
21 Oct 2011
Right CEO EPS
9 Dec 2011
Right CEO TSR
9 Dec 2011
Expiry date
Exercise price ($)
Balance
30 July
2011
Granted
Exercised
Expired and lapsed
Balance
28 July
2012
Vested and exercisable
15 Oct 2011
$0.01
316,809
–
(316,809)
–
–
–
15 Oct 2011
$1.27
157,063
–
(157,063)
–
–
–
21 Dec 2012
$3.00
7,440,580
–
–
(1,219,400)
6,221,180
3,979,675
24 Oct 2013
$2.14
3,705,863
–
(44,000)
(645,200)
3,016,663
448,600
24 Oct 2014
$2.34
4,153,900
–
–
(1,000,000)
3,153,900
–
31 Dec 2012
$4.10
3,193,278
–
–
(672,269)
2,521,009
–
31 Dec 2013
$4.10
5,152,671
–
–
–
5,152,671
–
31 Dec 2013
$5.74
2,227,723
–
–
–
2,227,723
–
31 Oct 2014
$0.00
–
1,411,330
–
(113,472)
1,297,858
–
31 Oct 2014
$0.00
–
2,182,073
–
(175,427)
2,006,646
–
31 Oct 2014
$0.00
–
808,383
–
–
808,383
–
31 Oct 2014
$0.00
–
1,250,000
–
–
1,250,000
–
26,347,887
5,651,786
(517,872)
(3,825,768)
27,656,033
4,428,275
$3.31
$0.00
$0.57
$2.65
$2.78
$2.91
Total
Weighted average exercise price
The number of options which expired during the period was 8,267,021 (2012: nil).
The weighted average share price at the date of exercise of options exercised during the period ended 27 July 2013 was $3.04 (2012: $2.16).
The weighted average remaining contractual life of share options and rights outstanding at the end of the period was 0.9 years (2012: 1.4 years).
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110
MYER Annual Report 2013
Notes to the consolidated financial statements continued 34 Share-based payments continued
Fair value of performance rights granted
The assessed fair value at grant date of rights granted during the period is noted below. Fair value varies depending on the period to vesting date. The fair values at grant dates were independently determined using a Monte-Carlo simulation pricing model that takes into account the exercise price, the term of the rights, the impact of dilution, the fair value of shares in the Company at grant date and expected volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the right. The fair values and model inputs for performance rights granted during the period included:
2013
2013
EEIP
EEIP
Rights (EPS) Rights (TSR)
(a) Fair value of performance rights granted
(b) Exercise price at grant date
(c) Grant date
(d) Expiry date
(e) Share price at grant date
(f ) Expected price volatility of the Group’s shares
(g) Expected dividend yield
(h) Risk-free interest rate
$2.08
$0.00
25-Jan-13
31-Oct-15
$2.50
30%
7.6%
2.70%
$1.56
$0.00
25-Jan-13
31-Oct-15
$2.50
30%
7.6%
2.70%
2013
MEIP
Rights
$2.08
$0.00
25-Jan-13
31-Oct-15
$2.50
30%
7.6%
2.70%
The expected price volatility is based on the historic volatility (based on the remaining life of the performance rights), adjusted for any expected changes to future volatility due to publicly available information.
Where rights are issued to employees of subsidiaries within the Group, the subsidiaries compensate the Company for the amount recognised as expense in relation to these rights.
(b) Expenses arising from share-based payment transactions
Total expenses arising from share-based payments transactions recognised during the period as part of employee benefit expense were as follows:
2013
$’000
2,097
Options and rights issued under the MEIP and EEIP
2012
$’000
1,955
Share-based payment transaction expenses represent the amount recognised in the period in relation to share-based remuneration plans. Where expectations of the number of options or rights expected to vest changes, the life to date expense is adjusted which can result in a negative expense for the period due to the reversal of amounts recognised in prior periods.
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F inancial report
111
Directors’ Declaration
In the directors’ opinion:
(a) the financial statements and notes set out on pages 67 to 110 are in accordance with the Corporations Act 2001, including:
(i) omplying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting c requirements; and
(ii) iving a true and fair view of the consolidated entity’s financial position as at 27 July 2013 and of its performance for the financial year g 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, and
(c) t the date of this declaration, there are reasonable grounds to believe that the members of the extended closed group identified in note 29 a will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee described in note 29.
Note 1 (a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International
Accounting Standards Board.
The directors have been given the declarations by the 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.
Paul McClintock AO
Chairman
Melbourne
8 October 2013
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MYER Annual Report 2013
Auditor’s Independence Declaration
Liability limited by a scheme approved under Professional Standards Legislation.
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I ndependent A uditor ’ s R eport
Independent Auditor’s Report
Liability limited by a scheme approved under Professional Standards Legislation.
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114
MYER Annual Report 2013
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S hareholder I nformation
115
Shareholder information as at 20 September 2013
Myer Holdings Limited has one class of shares on issue (being ordinary shares). All the Company’s shares are listed on the Australian
Securities Exchange.
Number
Issued capital
584,294,551
Number of shareholders
51,169
Minimum parcel price
$2.78 per unit
Holders with less than a marketable parcel
6,945 (1,182,169 shares)
Distribution of shareholders and shareholdings
Total holders of ordinary shares
Units
% of issued capital 1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
25,623
18,969
3,485
2,943
149
12,534,383
43,082,370
26,719,863
70,078,170
431,879,765
2.15
7.37
4.57
11.99
73.92
Total
51,169
584,294,551
100.00
Minimum parcel size
Holders
Units
180
6,945
1,182,169
Range
Unmarketable parcels
Minimum $500.00 parcel at $2.78 per unit
Twenty largest shareholders
Units
% of issued capital 113,825,913
19.48
87,471,175
14.97
NATIONAL NOMINEES LIMITED
67,478,112
11.55
4.
CITICORP NOMINEES PTY LIMITED
38,392,340
6.57
5.
CITICORP NOMINEES PTY LIMITED
21,095,264
3.61
Rank
Name
1.
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
2.
J P MORGAN NOMINEES AUSTRALIA LIMITED
3.
6.
BNP PARIBAS NOMS PTY LTD
16,463,047
2.82
7.
AMP LIFE LIMITED
10,406,148
1.78
8.
BERNARD JOSEPH BROOKES
9,995,054
1.71
9.
NEWECONOMY COM AU NOMINEES PTY LIMITED
6,580,691
1.13
10.
JP MORGAN NOMINEES AUSTRALIA LIMITED
6,474,390
1.11
11.
WARBONT NOMINEES PTY LTD
4,920,025
0.84
12.
BAINPRO NOMINEES PTY LIMITED
2,955,150
0.51
13.
QIC LIMITED
2,525,802
0.43
14.
HOWARD JOHN MCDONALD
1,824,390
0.31
15.
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED – GSCO ECA
1,631,003
0.28
16.
MR RICHARD WILLMOT CHADWICK + MRS GWENDA ANN CHADWICK
1,335,000
0.23
17.
GREGORY JAMES TRAVERS
1,325,808
0.23
18.
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
1,248,797
0.21
19.
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED – A/C 2
1,088,124
0.19
20.
BOND STREET CUSTODIANS LIMITED
1,084,328
0.19
Top 20 holders of fully paid ordinary shares
398,120,561
68.14
Total remaining holders balance
186,173,990
31.86
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MYER Annual Report 2013
Shareholder information continued Substantial shareholders
As at 20 September 2013, there are four substantial shareholders that Myer is aware of:
Name
Date of most recent notice
Relevant interest
27 June 2013
29,410,764 shares
Harris Associates L.P.
LSV Asset Management
27 June 2013
57,053,271 shares
6 September 2013
Commonwealth Bank of Australia
30,649,581 shares
26 August 2013
UBS AG
47,286,637 shares
Voting rights
Shareholders may vote at a meeting of shareholders in person, directly or by proxy, attorney or representative, depending on whether the shareholder is an individual or a company. Subject to any rights or restrictions attaching to shares, on a show of hands each shareholder present in person or by proxy, attorney or representative has one vote and, on a poll, has one vote for each fully paid share held. Presently, Myer has only one class of fully paid ordinary shares and these do not have any voting restrictions. If shares are not fully paid, on a poll the number of votes attaching to the shares is pro-rated accordingly. Options and performance rights do not carry any voting rights.
Options and performance rights
Myer has unlisted options and performance rights on issue. As at 20 September 2013, there were 200 holders of options and 277 holders of performance rights.
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Corporate Directory
Registered Office
Myer Holdings Limited
Level 7
800 Collins Street
Docklands VIC 3008
Phone: +61 (0) 3 8667 6000
Myer Customer Service Centre
PO Box 869J
Melbourne VIC 3001
Phone: 1800 811 611 (within Australia) or
+61 (0) 3 8667 6000 (outside Australia)
Fax: +61 (0) 3 8667 6091
Myer Support Office
800 Collins Street
Docklands VIC 3008
Auditor
PricewaterhouseCoopers
Level 19, Freshwater Place
2 Southbank Boulevard
Southbank VIC 3006
Myer Postal Address
Myer Holdings Limited
PO Box 869J
Melbourne VIC 3001
Securities Exchange Listing
Myer Holdings Limited (MYR) shares are listed on Australian Securities Exchange (ASX)
Company Secretary
Marion Rodwell
General Counsel and Company Secretary
Websites www.myer.com.au www.myerone.com.au
Shareholder Enquiries
Share Registry
Computershare Investor Services Pty Ltd
GPO Box 2975
Melbourne VIC 3001
About this Annual Report
The Myer Holdings Limited Annual Report is available online at www.myer.com.au/investor. Hard copies can be obtained by contacting our share registry.
Myer Shareholder Information Line
1300 820 260
+61 (0) 3 9415 4332 (outside Australia) www.investorcentre.com Annual General Meeting
The 2013 Annual General Meeting of
Myer Holdings Limited will be held at
Mural Hall, Level 6, Myer Melbourne,
Bourke Street Mall, Melbourne, Victoria on
Wednesday, 20 November 2013 at 11.00am.
Investor Relations
Olivia Reith
Investor Relations Manager
Phone: +61 (0) 3 8667 7820
Mobile: +61 (0) 438 101 789
Email: myer.investor.relations@myer.com.au
Media Relations
Jo Lynch
General Manager Corporate Affairs
Phone: +61 (0) 3 8667 7571
Mobile: +61 (0) 438 101 793
Email: myer.corporate.affairs@myer.com.au
Shop online
myer.com.au
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Myer Holdings Limited ABN 14 119 085 602
Annual Report 2013
www.myer.com.au
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