HGH Ltd Results for the 6 months ended 1 February 2020

30 March 2020
HALLENSTEIN GLASSON HOLDINGS LIMITED

UNAUDITED RESULTS FOR 6 MONTHS ENDED 1 FEBRUARY 2020

The Company advises that Group sales for the six months to 1 February 2020 were $160.27 million,
an increase of 5.7% over the corresponding period last year ($151.66 million). Net profit after tax
was $15.44 million, a decrease of 3.8% over the corresponding period last year ($16.04 million). The
result is in line with the guidance announced to the NZX on 17 February 2019. The Group profit after
tax is impacted by the new IFRS 16 leasing standard by approximately $0.515 million.

Gross margin on sales was 58.3% compared with 59.8% in the prior corresponding period. This was
mainly the result of the exchange rate against the US dollar in both New Zealand and Australia as
well as higher promotional activity due to the competitive market place particularly during
November and December. The cost of doing business fell marginally over the six-month period,
continuing to be well controlled into the current trading period.

Segment Results

Glassons

Sales in Australia were $53.91 million for the six month period, which were up 10.9% against the
prior corresponding period. During the season a new store was opened in Robina on the Gold Coast
and the Eastgardens store, Sydney was increased in size and refurbished to the new format. The
new Fulfillment Centre was opened in Botany, Sydney during February which will support the stores
and growing digital business in Australia.

Sales in New Zealand were $54.00 million, which was up 5.3% against the same period last year.
During the season the outlet store in Hornby, Christchurch was refurbished and in October the new
Fulfillment Centre was opened for operations. The old Glassons Distribution Centre was sold at the
end of the season with a gain on sale of $0.9 million after costs. We remain pleased with the
continued progress and sophistication of the digital offer of the Glassons brand.


Hallenstein Brothers

Sales for were $52.35 million for the six month period (including Australia), with sales growing 1.1%
against the same period last year. Work continued throughout the season on the repositioning of
the Hallenstein Brothers brand and improving the product offer. During the period, the Hornby
Outlet store in Christchurch was refurbished.

E-Commerce

Investment in this area has seen digital sales increase to over 15% of total Group sales. As a business
we remain focused on continued investment in digital and social channels to deliver inspiring and
relevant content to our customers. Glassons New Zealand, Glassons Australia and Hallenstein
Brothers now all have larger fulfillment centers to allow for continued online growth.

Future Outlook - COVID-19

For the first 7 weeks of the new season sales were +3.8%. However due to the COVID-19 alert
system in New Zealand moving to Level 4 from midnight on 26 March 2020 all stores and the web-
based store in New Zealand are now closed. Also due to the impact of Covid-19 in Australia and the
adverse impact on sales, stores in Australia also closed at 5pm on 26 March 2020. The web store in
Australia will continue to trade as long as permitted. This has resulted in unprecedented level of
uncertainty and it is challenging to forecast the extent of these events on the business. The Group
has applied for the New Zealand government wage subsidy scheme in order to support employees
wages during this uncertain time.

The Group has activated its pandemic management programme, to ensure the safety of our
employees and to make the changes required to reshape the business during the evolving situation.
The Group has introduced a number of initiatives including reducing operating and labour costs,
managing inventory levels and putting capital projects on hold.

The Group will continue to follow advice and monitor the situation closely to ensure an agile
approach to reduce the adverse impact on trading and protect our team and customers.


Dividend

Due the uncertainty around the impact of Covid-19 and announcements made by the Prime Minister
last week on moving New Zealand to Alert level 4 and after careful consideration the Board feels it
would be prudent not to pay an interim dividend. This will be reassessed at the end of our financial
year, August 2020, when the Board will consider whether to pay a dividend at that time.



Mary Devine
Group Managing Director
+64 21 998 351

---

STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 1 February 2020 (unaudited)
1


Note
Half Year
ended
1/2/20
Half Year
ended
1/2/19
(Restated)*
$000
$000
Sales revenue
160,266


151,663


Cost of sales
(66,813)


(60,995)


Gross profit
93,453


90,668


Other operating income
142


399


Selling expenses
(55,171)


(52,041)


Distribution expenses
(3,683)


(4,252)


Administration expenses
(12,521)


(12,373)


Total expenses
2.2
(71,375)


(68,666)


Operating profit
22,220


22,401


Finance income
77


133


Finance expense
7
(1,223)


-


Profit before income tax
21,074


22,534


Income tax expense
(5,639)


(6,494)


Net profit after tax attributable to the shareholders of the Holding Company
15,435


16,040


Other comprehensive income
- Items that will not be reclassified to profit or loss
Increase in share option reserve
14


62


- Items that may be subsequently reclassified to profit or loss
Fair value (loss)/gain (net of tax) in cash flow hedge reserve
(438)


(2,470)


Total comprehensive income for the year
15,011


13,632


Earnings per share
Basic and diluted earnings per share
25.88


26.89


The notes to the financial statements form an integral part of and are to be read in conjunction with these financial statements.


* Refer to Note 8 for details of the prior year restatement relating to the reclassification of freight
income.

STATEMENT OF FINANCIAL POSITION
As at 1 February 2020 (unaudited)
2


Note
As at 1/2/20
As at 1/2/19
As at 1/8/19
$000
$000
$000
EQUITY
Contributed equity
29,059


27,955


28,974


Asset revaluation reserve
18,717


15,609


18,419


Cashflow hedge reserve
657


(731)


1,095


Share option reserve
72


204


58


Retained earnings
27,573


24,756


26,454


Total equity
76,078


67,793


75,000


Represented by
CURRENT ASSETS
Cash and cash equivalents
12,808


9,223


16,506


Trade and other receivables
5,257


580


1,652


Advances to employees
291


275


372


Prepayments
1,040


4,295


4,535


Inventories
3
25,881


23,915


24,011


Derivative financial instruments
1,030


77


1,534


Total current assets
46,307


38,365


48,610


NON-CURRENT ASSETS
Property, plant and equipment
4
48,565


42,436


49,539


Right of Use Assets
7
72,212


-


-


Investment property
2,968


8,464


2,968


Intangible assets
319


462


439


Deferred tax
4,399


2,321


3,024


Total non-current assets
128,463


53,683


55,970


Total assets
174,770


92,048


104,580


CURRENT LIABILITIES
Trade payables
6,634


4,004


6,798


Employee benefits
4,739


4,383


4,775


Other payables
5,475


11,511


14,110


Lease liabilities
7
21,685


-


-


Derivative financial instruments
104


1,092


-


Taxation payable
1,517


3,265


3,897


Total current liabilities
40,154


24,255


29,580


NON-CURRENT LIABILITIES
Lease liabilities
7
58,538


-


-


Total liabilities
98,692


24,255


29,580


Net assets
76,078


67,793


75,000


The notes to the financial statements form an integral part of and are to be read in conjunction with these financial statements.

STATEMENT OF CHANGES IN EQUITY
For the six months ended 1 February 2020 (unaudited)
3


SHARE
CAPITAL
TREASURY
STOCK
ASSET
REVALUATION
RESERVE
CASH FLOW
HEDGE
RESERVE
SHARE
OPTION
RESERVE
RETAINED
EARNINGS
TOTAL
EQUITY
$000$000$000$000$000$000$000
Balance at 1 August 201829,279 (1,461) 15,609 1,739 155 23,019 68,340
COMPREHENSIVE INCOME
Profit for year - - - - - 16,040 16,040
Cash flow hedges net of tax - - - (2,470) - - (2,470)
Increase in share option reserve - - - - 62 - 62
Total comprehensive income - - - (2,470) 62 16,040 13,632
TRANSACTIONS WITH OWNERS
Transfer of share option reserve to
retained earnings - - - - (13) 13 -
Dividends - 100 - - - (14,316) (14,216)
Transfer to employee advances - 37 - - - - 37
Total transactions with owners - 137 - - (13) (14,303) (14,179)
Balance at 1 February 201929,279 (1,324) 15,609 (731) 204 24,756 67,793
COMPREHENSIVE INCOME
Profit for year - - - - - 12,980 12,980
Revaluation net of tax - - 2,810 - - - 2,810
Cash flow hedges net of tax - - - 1,826 - - 1,826
Increase in share option reserve - - - - 36 - 36
Total comprehensive income - - 2,810 1,826 36 12,980 17,652
TRANSACTIONS WITH OWNERS
Sale of treasury stock - 1,289 - - - - 1,289
Transfer of share option reserve to
retained earnings - - - - (182) 182 -
Dividends - 60 - - - (11,930) (11,870)
Transfer to employee advances - 136 - - - - 136
Gain/loss on sale of treasury stock
transferred to retained earnings - (466) - - - 466 -
Total transactions with owners - 1,019 - - (182) (11,282) (10,445)
Balance at 1 August 201929,279 (305) 18,419 1,095 58 26,454 75,000
COMPREHENSIVE INCOME
Profit for year - - - - - 15,435 15,435
Deferred tax on sale of property - - 298 - - - 298
Cash flow hedges net of tax - - - (438) - - (438)
Increase in share option reserve - - - - 14 - 14
Total comprehensive income - - 298 (438) 14 15,435 15,309
TRANSACTIONS WITH OWNERS
Dividends - 27 - - - (14,316) (14,289)
Transfer to employee advances - 58 - - - - 58
Total transactions with owners - 85 - - - (14,316) (14,231)
Balance at 1 February 202029,279 (220) 18,717 657 72 27,573 76,078
The notes to the financial statements form an integral part of and are to be read in conjunction with these financial statements.

STATEMENT OF CASH FLOWS
For the six months ended 1 February 2020 (unaudited)
4


Half Year
ended 1/2/20
Half Year
ended 1/2/19
(Restated)
$000$000
CASH FLOWS FROM OPERATING ACTIVITIES
Cash was provided from:
Sales to customers160,093 151,265
Rent received142 399
Interest received70 125
Interest on debtors7 8
160,312 151,797
Cash was applied to:
Payments to suppliers93,194 104,115
Payments to employees28,992 25,914
Interest paid on leases1,223 -
Taxation paid8,926 6,360
132,335 136,389
Net cash flows from operating activities27,977 15,408
CASH FLOWS FROM INVESTING ACTIVITIES
Cash was provided from:
Proceeds from sale of property, plant and equipment and intangible assets303 46
Repayment of employee advances139 226
442 272
Cash was applied to:
Purchase of property, plant and equipment and intangible assets7,630 9,694
7,630 9,694
Net cash flows applied to investing activities(7,188) (9,422)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash was provided from:
Proceeds from sale of treasury stock and dividends27 100
27 100
Cash was applied to:
Dividend paid14,316 14,316
Lease liability payments10,198 -
24,514 14,316
Net cash flows applied to financing activities(24,487) (14,216)
Net (decrease)/increase in funds held(3,698) (8,230)
Cash and cash equivalents at the beginning of the period16,506 17,453
Cash and cash equivalents at the end of the period12,808 9,223
The notes to the financial statements form an integral part of and are to be read in conjunction with these financial statements.

STATEMENT OF CASH FLOWS (CONTINUED)
For the six months ended 1 February 2020 (unaudited)
5


RECONCILIATION OF PROFIT AFTER TAXATION TO CASH FLOWS FROM OPERATING
ACTIVITIES
Half Year
ended
1/2/20
Half Year
ended
1/2/19
$000
$000
NET PROFIT AFTER TAXATION
15,435


16,040


ADD/(DEDUCT) ITEMS CLASSIFIED AS INVESTING OR FINANCING ACTIVITIES
(Gain)/loss on sale of plant and equipment
29


(34)


ADD/(DEDUCT) NON CASH ITEMS
Depreciation and amortisation
15,201


4,155


Deferred taxation
(1,205)


(419)


Share option expense
14


62


ADD/(DEDUCT) MOVEMENTS IN WORKING CAPITAL ITEMS
Taxation payable
(2,380)


553


Trade and other receivables and prepayments
(110)


(822)


Movement in trade and other receivables from proceeds due on sale of property
4,477


-


Trade and other payables and employee benefits
(8,835)


(1,171)


Movement in other payables due to IFRS 16 transition
7,221


-


Inventories
(1,870)


(2,956)


NET CASH FLOWS FROM OPERATING ACTIVITIES
27,977


15,408


The notes to the financial statements form an integral part of and are to be read in conjunction with these financial statements.

NOTES TO THE FINANCIAL STATEMENTS
For the six months ended 1 February 2020 (unaudited)
6


1 Basis of preparation of financial statements
This section presents a summary of information considered relevant and material to assist the reader
in understanding the foundations on which the financial statements as a whole have been compiled.

1.1 General information
Reporting entity
Hallenstein Glasson Holdings Limited (“Company” or “Parent”) together with its subsidiaries (the
“Group”) is a retailer of men’s and women’s clothing in New Zealand and Australia.
The Company is a limited liability company incorporated and domiciled in New Zealand. The address
of its registered office is Level 3, 235-237 Broadway Newmarket, Auckland.

Statutory base
Hallenstein Glasson Holdings Limited is a company registered under the Companies Act 1993 and is
a FMC reporting entity under Part 7 of the Financial Markets Conduct Act 2013. The Company is also
listed on the New Zealand Stock Exchange (NZX). The financial statements of the Group have been
prepared in accordance with the requirements of Part 7 of the Financial Markets Conduct Act 2013
and the NZX Main Board Listing Rules.
The financial statements were approved for issue by the Board of Directors on 30 March 2020.

1.2 General accounting policies
Statement of compliance
These interim financial statements for the half year ended 1 February 2020 have been prepared in
accordance with Generally Accepted Accounting Practice in New Zealand (NZ GAAP), NZ IAS 34 and
IAS 34 Interim Financial Reporting and should be read in conjunction with the 2019 Annual Report.

Basis of preparation of financial statements
The accounting policies used in the preparation of these financial statements are consistent with
those used in the previously published interim financial statements to 1 February 2019, and the
audited financial statements to 1 August 2019, except for the adoption of the new NZ IFRS 16 Leases
standard.
NZ IFRS 16 Leases was effective for the first time in the FY20 half year results, refer to note 7 for the
impact of this standard on these financial statements.
The financial statements for the six months ended 1 February 2020 and 1 February 2019 are
unaudited. The comparative information for the year ended 1 August 2019 is audited.

Entities reporting
The financial statements are the Consolidated Financial Statements of the Group comprising
Hallenstein Glasson Holdings Limited and subsidiaries, together they are referred to in these financial
statements as ‘the Group’. The parent and its subsidiaries are designated as for-profit entities for
financial reporting purposes.

NOTES TO THE FINANCIAL STATEMENTS
For the six months ended 1 February 2020 (unaudited)
7


2 Performance information
2.1 Segment information
The Board of Directors considers the business from both a product and geographic perspective as
follows:
• Hallenstein Brothers (Hallenstein Bros Ltd (New Zealand) and Hallenstein Brothers Australia
Limited (Australia))
• Glassons Limited (New Zealand)
• Glassons Australia Limited (Australia)
• Hallenstein Properties Limited (New Zealand)
• Hallenstein Glasson Holdings Limited – Parent (New Zealand)

Segment results and key balances are shown below. Segment assets and liabilities are measured
in the same way as in the financial statements. Assets and liabilities are allocated based on the
operations of the segment.

Segment results
For the period ended
1 February 2020
GLASSONS
NEW ZEALAND
GLASSONS
AUSTRALIA
HALLENSTEIN
BROTHERS
HALLENSTEIN
PROPERTY
PARENT
TOTAL
SEGMENTS
$000
$000
$000
$000
$000
$000
INCOME STATEMENT
Sales revenue from external
customers
54,000


53,914


52,352


-


-


160,266


Cost of sales
(23,618)


(20,925)


(22,270)


-


-


(66,813)


Gross profit
30,382


32,989


30,082


-


-


93,453


Finance income
21


13


40


-


3


77


Finance expenses
(492)


(304)


(427)


-


-


(1,223)


Depreciation and software
amortisation
4,682


5,240


5,100


179


-


15,201


Profit/(loss) before income tax
7,561


8,532


4,696


260


25


21,074


Income tax expense
(1,672)


(2,566)


(1,321)


(73)


(7)


(5,639)


Profit/(loss) after income tax
5,889


5,966


3,375


187


18


15,435


BALANCE SHEET
Current assets
11,187


8,875


17,596


5,066


3,583


46,307


Non-current assets
45,179


31,559


35,154


16,561


10


128,463


Current liabilities
13,430


13,831


12,465


354


74


40,154


Purchase of property, plant and
equipment and intangibles
3,762


2,672


1,189


7


-


7,630

NOTES TO THE FINANCIAL STATEMENTS
For the six months ended 1 February 2020 (unaudited)
8


2 Performance information (continued)

For the period ended
1 February 2019
GLASSONS
NEW ZEALAND
GLASSONS
AUSTRALIA
HALLENSTEIN
BROTHERS
HALLENSTEIN
PROPERTY
PARENT
TOTAL
SEGMENTS
$000
$000
$000
$000
$000
$000
INCOME STATEMENT
Sales revenue from external
customers
51,261


48,636


51,766


-


-


151,663


Cost of sales
(21,373)


(18,264)


(21,358)


-


-


(60,995)


Gross profit
29,888


30,372


30,408


-


-


90,668


Finance income
34


25


65


-


9


133


Depreciation and software
amortisation
1,112


1,429


1,427


187


-


4,155


Profit before income tax
7,870


7,485


6,862


368


(51)


22,534


Income tax expense
(2,212)


(2,252)


(1,942)


(103)


15


(6,494)


Profit after income tax
5,658


5,233


4,920


265


(36)


16,040


BALANCE SHEET
Current assets
10,491


9,284


18,396


(1,822)


2,016


38,365


Non-current assets
14,045


10,836


9,238


19,622


(58)


53,683


Current liabilities
7,111


9,686


6,810


413


235


24,255


Purchase of property, plant and
equipment and intangibles
3,731


3,076


1,282


1,605


-


9,694




2.2 Income and expenses
Profit before income tax includes the following specific expenses:
Half Year
ended
1/2/20
Half Year
ended
1/2/19
$000
$000
Occupancy costs
4,251


15,113


Wages, salaries and other short term benefits
27,783


25,573


Depreciation, amortisation and impairment of property, plant and equipment
4,964


4,155


Depreciation on right of use assets
10,237


-


Interest on leases
1,223


-


Gain on sale of property, plant and equipment
(1,020)
(34)


2.3 Dividends
Half Year
ended
1/2/20
Half Year
ended
1/2/19
Half Year
ended
1/2/20
Half Year
ended
1/2/19
cents/share
cents/share
$000
$000
Final dividend for the period ended 1 August 2019
24.00


-


14,316


-


Final dividend for the period ended 1 August 2018
-


24.00


-


14,316


Total
24.00


24.00


14,316


14,316

NOTES TO THE FINANCIAL STATEMENTS
For the six months ended 1 February 2020 (unaudited)
9


3 Inventories
During the period ended 1 February 2020, the Group recognised in the Statement of Comprehensive
Income, a write down of finished goods inventory to provide for obsolescence of $127,000 (2019:
$231,000).

4 Property, plant and equipment
Acquisitions and disposals
During the six months ended 1 February 2020, the Group acquired assets with a total cost of
$7,630,000 (2019: $9,694,000).
Assets with a net book value of $3,760,000 were disposed of during the six months ended 1 February
2020 (2019: $12,000), resulting in a net gain on disposal of $1,020,000 (2019: gain on disposal of
$34,000).

5 Related party transactions
The Group enters into transactions with related parties. Details of related parties, and the types of
transactions entered into during the period ended 1 February 2020, are consistent with those
disclosed in the audited financial statements for the year ended 1 August 2019.

6 Commitments
6.1 Capital expenditure commitments
Half Year
ended
1/2/20
Half Year
ended
1/2/19
Full Year
ended
1/8/19
$000
$000
$000
Commitments in relation to store fitouts and warehouse expansion
3,223


7,998


2,688




6.2 Operating lease commitments
Half Year
ended
1/2/20
Half Year
ended
1/2/19
Full Year
ended
1/8/19
$000
$000
$000
Total operating lease commitments
468


89,623


96,611




7 Leases
Right-of-use assets and lease liabilities arising from a lease are initially measured on a present value
basis. Lease liabilities include the net present value of the remaining lease payments.

Right-of-use assets are initially recognised on commencement of lease at cost, comprising the initial
amount of the lease liabilities less any lease incentives received. Right-of-use assets are
subsequently depreciated using the straight-line method from the commencement date to the end of
the lease term.

In considering the lease term, the Group has determined that right of renewal options will not be
exercised as the Group will renegotiate the terms of all leases at their expiry.

NOTES TO THE FINANCIAL STATEMENTS
For the six months ended 1 February 2020 (unaudited)
10


7 Leases (continued)
Both right-of-use assets and lease liabilities are discounted applying interest rate implicit in the lease.
If that rate cannot be determined, the lessee’s incremental borrowing rate is used, being the rate that
the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a
similar economic environment with similar terms and conditions.

In the process of adopting NZ IFRS 16, a number of judgements and estimates have been made.
These include:
• incremental borrowing rate at the time of adoption;
• lease terms, including any rights of renewal expected to be exercised. The Group has
determined that right of renewal options will not be exercised as the Group will renegotiate the
terms of all leases at their expiry;
• foreign exchange conversion rates;
• application of practical expedients and recognition exemptions allowed by the new standards,
including in respect of low value assets and short-term lease exemptions.

The following tables show the movements and analysis in relation to the right-of-use assets and lease
liabilities, created on the adoption of NZ IFRS 16.

Right of use Assets:
As at 1/2/20
$000
Opening net book value 2 August 2019
75,845


Depreciation
(10,237)


Lease modifications and additions
6,604


Carrying amount 1 February 2020
72,212


Cost
82,449


Accumulated depreciation
(10,237)


Carrying amount 1 February 2020
72,212





Lease liabilities:
As at 1/2/20
$000
Operating lease commitment at 1 August 2019 as disclosed in the Group's financial statements96,611
As at 2 August 2019
Discounted at the incremental borrowing rate at the date of initial application91,457
Recognition exemption for:
Short term leases(2,966)
Lease contracts committed to but not yet available for use(5,695)
Opening lease liabilities recognised 2 August 201982,796
Additions7,625
Interest for the period1,223
Lease payments made(11,421)
Lease liabilities 1 February 202080,223
Current lease liability21,685
Non-current lease liability58,538
Total future lease liabilities as at 1 February 202080,223

NOTES TO THE FINANCIAL STATEMENTS
For the six months ended 1 February 2020 (unaudited)
11


7 Leases (continued)
Lease related expenses included in the income statement:
Half Year
ended
1/2/20
$000
Depreciation
10,237


Rent on short-term leases
4,251


Interest on leases
1,223


Total
15,711





Lease payments included in the cash flow statement:
Half Year
ended
1/2/20
$000
Interest paid on leases (operating activities)
1,223


Payments for lease liabiities principal (financing activities)
10,198


Total cash outflows from leases
11,421





8 Accounting standards
Except as described below, the accounting policies applied are consistent with those of the annual
financial statements for the period ended 1 August 2019, as described in those annual financial
statements.

There was one new standard applied during the period which had a material impact.

• NZ IFRS 16: Leases (effective from annual periods beginning on or after 1 January 2019)
This standard replaces the current guidance in NZ IAS 17.

Transition
For the reporting period commencing 2 August 2019 the Group has elected to apply the modified
retrospective transition method. Under this method the Group has not restated comparatives therefore
reclassifications and adjustments are recognised in the opening balance sheet on 2 August 2019.

Lease liabilities are measured at the present value of remaining lease payments. The weighted
average incremental borrowing rate applied to the lease liabilities on 2 August 2019 was 3.01%.

Leases entered into and identified by the Group are all property leases. The associated right-of-use
assets for property leases were measured on a consistent basis with the lease liabilities, but have
been adjusted by the amount of any prepaid or accrued lease payments and lease incentives.

On transition, the Group applied the following practical expedients:
• Non-capitalisation of leases that expire within twelve months from adoption date. Costs
relating to these leases have been recognised in the income statement within selling,
distribution, and administration expenses.

The Group has not recognised any right-of-use assets or liabilities for leases that it was committed to
but were not yet available for use by the Group at the date of transition.

In addition to the opening balance sheet lease liabilities and right-of-use assets impact on transition
disclosed below, the Group has recognised $790,000 of deferred tax assets as a result of the
accounting standard adoption.

NOTES TO THE FINANCIAL STATEMENTS
For the six months ended 1 February 2020 (unaudited)
12


8 Accounting standards (continued)

For comparative period analysis purposes, the adoption of the accounting standard has affected the
following items of the income statement and statement of cash flows:

• In the income statement ‘finance expense’ includes interest expense associated with lease
liabilities, and ‘selling expenses’ and ‘administration expenses’ includes depreciation
associated with right-of-use assets.
• In the statement of cash flows lease payments are now split between principal repayments
classified within ‘financing activities’ and interest repayments classified within ‘operating
activities’. Previously lease payments were included within ‘payments to suppliers’ within
operating activities.


The tables below provide further detail in relation to the impacts of NZ IFRS 16 on the consolidated
income statement and the consolidated balance sheet.

Income statement – Impacts of NZ IFRS 16:
Half Year ended 1 February 2020
Pre NZ
IFRS 16
Adjustments
NZ IFRS 16
$000
$000
$000
Sales revenue
160,266


-


160,266


Cost of sales
(66,813)


-


(66,813)


Gross profit
93,453


-


93,453


Other operating income
142


-


142


Selling expenses
(55,670)


499


(55,171)


Distribution expenses
(3,683)


-


(3,683)


Administration expenses
(12,530)


9


(12,521)


Total expenses
(71,883)


508


(71,375)


Operating profit
21,712


508


22,220


Finance income
77


-


77


Finance expense
-


(1,223)


(1,223)


Profit before income tax
21,789


(715)


21,074


Income tax expense
(5,839)


200


(5,639)


Net profit after tax attributable to the shareholders of the Holding Company
15,950


(515)


15,435


Earnings per share
Basic and diluted earnings per share
26.74


0.86
-

25.88




Balance sheet – Impacts of NZ IFRS 16:
As at 1 February 2020
Pre NZ
IFRS 16AdjustmentsNZ IFRS 16
$000$000$000
Right of use assets- 72,212 72,212
Deferred tax3,609 790 4,399
Impact on total assets3,609 73,002 76,611
Other payables12,696 (7,221) 5,475
Current lease liabilities- 21,685 21,685
Non-current lease liabilities- 58,538 58,538
Impact on total liabilities12,696 73,002 85,698
Impact on net assets-

NOTES TO THE FINANCIAL STATEMENTS
For the six months ended 1 February 2020 (unaudited)
13


8 Accounting standards (continued)

NZ IFRS 15: Revenue from contracts with customers

Adoption of NZ IFRS 15 has given rise to the reclassification of delivery fees charged to customers.
Delivery fees charged to customers are considered to be part of the same performance obligation as
the sale of the goods, as control of the goods only passes to customers when they physically receive
the goods. Previously, the delivery fees charged to customers by the Group have been offset against
the delivery costs incurred by the Group, and the net cost has been shown under selling expenses.
Under NZ IFRS 15, it has been determined that control of the goods does not pass to the customer
until delivery, because the customer cannot use or otherwise benefit from the goods until obtaining
possession of the goods, which occurs on delivery.

The Group’s income statement for the comparative period shown in these consolidated financial
statements has been restated to reflect the reclassification outlined above. A reconciliation showing
the adjustments made to the income statement to restate the prior period comparatives is shown
below:
$'000
$'000
$'000
Sales Revenue
151,244
419
151,663
Cost of Sales
(60,995)
-
(60,995)
Gross Profit
90,249
419
90,668
Other Operating Income
399
-
399
Selling Expenses
(51,622)
(419)
(52,041)
Distribution Expenses
(4,252)
-
(4,252)
Administration Expenses
(12,373)
-
(12,373)
Total Expenses
(68,247)
(419)
(68,666)
Operating Profit
22,401
-
22,401
Finance Income
133
-
133
Finance Expense
-
-
-
Profit Before Income Tax
22,534
-
22,534
Income Tax Expense
(6,494)
-
(6,494)
Net Profit after Tax attributable to the Shareholders of the Holding Company
16,040
-
16,040
Half Year
Ended 1 Feb
2019
Increase /
(decrease)
Half Year
Ended 1 Feb
2019
(Restated)


As a result of the above reclassification the statement of cash flows for the half year ended 1
February 2019 has been restated to increase receipts from customers and payments made to
suppliers by $0.42 million.

NOTES TO THE FINANCIAL STATEMENTS
For the six months ended 1 February 2020 (unaudited)
14


9 Events subsequent to balance date
On the 26
th
March 2020 the Group announced that due to the COVID-19 alert system in New Zealand
moving to Level 4 from midnight on 26 March 2020, all stores and the web-based store in New
Zealand are now closed. Also due to the impact of COVID-19 in Australia and the adverse impact on
sales, stores in Australia closed at 5pm on 26 March 2020. The web store in Australia will continue to
trade as long as permitted.

The Group has activated its pandemic management programme, to ensure the safety of our
employees and to make the changes required to reshape the business during the evolving situation.

The Group has introduced a number of initiatives including reducing operating and labour costs,
managing inventory levels and putting capital projects on hold. The Group has applied for the New
Zealand government wage subsidy scheme in order to support employees wages during this
uncertain time.

The Group will continue to follow advice and monitor the situation closely to ensure an agile approach
to reduce any adverse impact on trading and to protect our team and customers.

Dividend
Due the uncertainty around the impact of Covid-19 and announcements made by the Prime Minister
last week on moving New Zealand to Alert level 4 and after careful consideration the Board feels it
would be prudent not to pay an interim dividend. This will be reassessed at the end of our financial
year, August 2020, when the Board will consider whether to pay a dividend at that time.