HLG Full Year Results for the period ending 1 August 2020
New Zealand Stock Exchange Listing Rules
Disclosure Full Year Report
For the year ending 1 August 2020
Contents
Press Release
Results Announcement
Distribution Notice
Audited Financial Statements & Audit Report
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Results announcement
Results for announcement to the market
Name of issuer Hallenstein Glasson Holdings Limited
Reporting Period 12 months to 1 August 2020
Previous Reporting Period 12 months to 1 August 2019
Currency NZD
Amount (000s) Percentage change
Revenue from continuing operations $287,763 0.1%
Total Revenue $287,763 0.1%
Net profit/(loss) from continuing
operations
$27,774 4.3%
Total net profit/(loss) $27,774 4.3%
Final Dividend
Amount per Quoted Equity Security $ 0.24
Imputed amount per Quoted Equity
Security
$0.09333 cents
Record Date 08 December 2020
Dividend Payment Date 15 December 2020
Current period Prior comparable period
Net tangible assets per Quoted
Equity Security
$1.45 $1.25
A brief explanation of any of the
figures above necessary to enable
the figures to be understood
For further information refer to the attached:
Group Managing Director’s announcement
Financial Statements and the Auditors
Independent Review Report
Authority for this announcement
Name of person
authorised to make
this announcement
Stuart Duncan
Contact person for this
announcement
Stuart Duncan
Contact phone number +64 21 528 184
Contact email address Stuartd@glassons.com
Date of release through MAP
25 September 2020
Audited financial statements accompany this announcement.
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Distribution Notice
Section 1: Issuer information
Name of issuer Hallenstein Glasson Holdings Limited
Financial product name/description Ordinary Shares
NZX ticker code HLG
ISIN (If unknown, check on NZX
website)
NZHLGE 0001S4
Type of distribution
(Please mark with an X in the
relevant box/es)
Full Year X Quarterly
Half Year Special
DRP applies
Record date 8/12/2020
Ex-Date (one business day before the
Record Date)
7/12/2020
Payment date (and allotment date for
DRP)
15/12/2020
Total monies associated with the
distribution
1
$14,315,775 based on the number of units on issue at
the date of the form
Source of distribution (for example,
retained earnings)
Retained Earnings
Currency NZD
Section 2: Distribution amounts per financial product
Gross distribution
2
$0.33333333
Total cash distribution
3
$0.24000000
Excluded amount (applicable to listed
PIEs)
$nil
Supplementary distribution amount $0.04235299
Section 3: Imputation credits and Resident Withholding Tax
4
Is the distribution imputed Fully imputed
If fully or partially imputed, please
state imputation rate as % applied
28%
1
Continuous issuers should indicate that this is based on the number of units on issue at the date of the form
2
“Gross distribution” is the total cash distribution plus the amount of imputation credits, per financial product, before the deduction of
Resident Withholding Tax (RWT).
3
“Total cash distribution” is the cash distribution excluding imputation credits, per financial product, before the deduction of RWT.
This should include any excluded amounts, where applicable to listed PIEs.
4
The imputation credits plus the RWT amount is 33% of the gross distribution for the purposes of this form. If the distribution is fully
imputed the imputation credits will be 28% of the gross distribution with remaining 5% being RWT. This does not constitute advice
as to whether or not RWT needs to be withheld.
Imputation tax credits per financial
product
$0.09333333
Resident Withholding Tax per
financial product
$0.01666667
Section 4: Distribution re-investment plan (if applicable)
DRP % discount (if any)
N/A
Start date and end date for
determining market price for DRP
Date strike price to be announced (if
not available at this time)
Specify source of financial products to
be issued under DRP programme
(new issue or to be bought on market)
DRP strike price per financial product
Last date to submit a participation
notice for this distribution in
accordance with DRP participation
terms
Section 5: Authority for this announcement
Name of person
authorised to make
this announcement
Stuart Duncan
Contact person for this
announcement
Stuart Duncan
Contact phone number +64 21 528 184
Contact email address stuartd@glassons.com
Date of release through MAP
25/09/2020
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25 September 2020
HALLENSTEIN GLASSON HOLDINGS LIMITED
RESULTS FOR FULL YEAR ENDED 1 AUGUST 2020
The Company advises that Group sales for the 12 months to 1 August 2020 were $287.76 million which
were +0.1% up on the prior year ($287.55 million).
The audited net profit after tax for the 12 months was $27.77 million, a decrease of 4.29% on the prior
corresponding period ($29.02 million).
Overall sales were maintained in an extremely challenging environment, predominantly due to the
increased level of online sales from April 2020 onwards. During the last six months stores in both New
Zealand and Australia were closed on 26 March with New Zealand stores opening on 14 May and
Australian stores opening during May. The web shops in New Zealand for both brands were closed from
26 March 2020 but did reopen to sell essential products from 4 April and then all product from 27
April.
The Gross Margin was affected by a number of issues throughout the financial year including
unfavourable exchange rates with the US Dollar in both New Zealand and Australia as well as challenges
with freight costs resulting from the impact of COVID-19. Over the financial period, costs were well
controlled with additional controls implemented post the lockdowns including reducing operating costs,
claiming of government wage subsidies, extending supplier terms were appropriate, placing capital
projects on hold, negotiating rent relief with landlords and the Directors, Executives and support office
staff taking short term reductions to their salaries.
The Group continues to take steps to preserve liquidity, particularly managing stock levels and costs
across the business. The rental negotiations with landlords for the lock down period are still ongoing.
Glassons – New Zealand & Australia
Sales in New Zealand for the year were $102.60 million, an increase of 1.86% on the prior year.
Over the last year the outlet store in Hornby, Christchurch was refurbished and the Cuba Mall, Wellington
store was moved to a brand-new location and fully refurbished. In July, the store in Tauranga CBD was
closed.
Sales in Australia were $96.69 million which was an increase of 8.03% on the corresponding period.
During the year, a new store was opened in Robina on the Gold Coast, a pop-up site in Birkenhead Point,
Sydney and the Eastgardens store in Sydney was increased in size and completely refurbished. In the last
12 months stores in Chatswood and Hurstville, both in Sydney, were closed. There are currently further
sites being reviewed for potential openings around Australia to support the planned growth.
A new larger Fulfilment Centre was opened in Christchurch towards the end of 2019 and the new
Fulfilment Centre in Sydney was opened in February. These facilities were instrumental to support the
significant growth in online sales.
With the trajectory in online sales there has been significant investment in digital including relaunching
the website and a planned launch of an omni-channel Glassons app later in the year.
Glassons maintains a key focus on fashion, bringing the latest trends that customers want to the market.
The team are doing this with agility and an increasing emphasis on sustainability. We continue to focus
on customer centricity, engaging customers regularly and evolving product to meet customer demand.
This helps Glassons to maintain a strong brand position in both markets.
Hallenstein Brothers
Sales for the 12 month period were $88.48 million (including Australia), a decrease of 9.09% on the prior
period.
Sales were more challenging in the second half of the year as demand for Tailored product diminished
with the impact of lockdowns on people working remotely and restrictions on gatherings. However, sales
results in the casual categories are encouraging and have outperformed over the financial year.
In New Zealand, the outlet store in Hornby, Christchurch was refurbished in the last 12 months and the
CBD store in Tauranga was closed.
The journey continues with the repositioning of the brand and improving profitability with a successful
New Zealand based marketing campaign and increasing local digital content. Product also remains
integral to our performance with a sustainable focus and improvements in product quality across core
categories. Customer engagement is at the forefront of service delivery both instore and online.
E-Commerce
Online sales grew over the period by 46.87% against last year with an exceptional growth of 80.1% within
the second six months of the financial year. Online sales now represent 21.88% of total sales for the full
financial year but represented 30.30% of the total sales for the second half of the year. The growth in
online sales have continued into the new financial year being ahead of last year.
The previous investment in fulfilment centres has been effective in supporting the Groups online sales
growth. There will be continued investment in digital as we continue to accelerate online sales growth
and focus on an omni-channel experience for our customers.
Dividend
The Directors have declared a final dividend of 24 cents per share (fully imputed) (24 cents per share last
year) to be paid on 15th December 2020. Together with the interim dividend of 15 cents per share that
was paid on 4 September 2020, the full year dividend is 39 cents per share. The final dividend payment is
able to be maintained as the Company’s balance sheet continues to be strong, and inventories well
controlled.
Future Outlook
Following Auckland moving to Level 3 on Wednesday 12 August, thirteen Hallenstein Brothers stores and
twelve Glassons stores were closed and reopened on 31 August 2020. Eleven stores in Victoria Australia
have been closed since July with the current planned opening to be 26
th
October 2020 in line with State
Government guidelines. Despite these closures the Glassons Australia business continues to perform
ahead of last year.
The first eight weeks of the new financial year have seen Group sales grow +10.71% on the prior year,
this has been driven predominantly by online sales as physical store growth has been slower, particularly
in CBD locations. Whilst this is a positive result the Company will continue to be cautious in regard to the
future impacts of COVID-19.
An update will be provided at the Annual Meeting of Shareholders in December 2020.
Mary Devine
Group Managing Director
+64 21 998 351
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1
HALLENSTEIN GLASSON HOLDINGS LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 1 AUGUST 2020
Note
2020
2019
$'000
$'000
Sales Revenue
2.1
287,763
287,550
Cost of Sales
2.1
(118,514)
(114,999)
Gross Profit
169,249
172,551
Other Operating Income
2.2
1,498
2,197
Selling Expenses
(99,221)
(101,674)
Distribution Expenses
(8,609)
(8,351)
Administration Expenses
(23,742)
(25,502)
Total Expenses
(131,572)
(135,527)
Operating Profit
39,175
39,221
Finance Income
2.1
125
221
Finance Expense
2.1, 2.2
(2,569)
-
Profit Before Income Tax
36,731
39,442
Income Tax Expense
6.1
(8,957)
(10,422)
Net Profit after Tax attributable to the Shareholders
of the Holding Company
2.1
27,774
29,020
Other Comprehensive Income
- Items that will not be reclassified to profit or loss
Gains (net of tax) on Revaluation of Land and Buildings
6.1
1,506
2,810
Increase in Share Option Reserve
6.1
26
98
- Items that may be subsequently reclassified to profit or loss
Fair Value Gain / (Loss) (net of tax) in Cash Flow Hedge Reserve
6.1
(2,973)
(644)
Total Comprehensive Income for the year attributable to the Shareholders
of the Holding Company
26,333
31,284
Earnings Per Share
Basic and diluted Earnings per Share
2.4
46.56
48.65
The Notes to the Financial Statements f orm an integral part of and are to be read in conjunction w ith these Financial Statements.
2
HALLENSTEIN GLASSON HOLDINGS LIMITED
STATEMENT OF FINANCIAL POSITION
AS AT 1 AUGUST 2020
Note20202019
$'000$'000
Equity
Contributed Equity5.129,05928,974
Asset Revaluation Reserve19,92518,419
Cashflow Hedge Reserve(1,878)1,095
Share Option Reserve6458
Retained Earnings39,93226,454
Total Equity87,10275,000
Represented by
Current Assets
Cash and Cash Equivalents3.149,64216,506
Trade and Other Receivables2,3431,652
Advances to Employees291372
Prepayments1,0404,535
Inventories3.224,63724,011
Derivative Financial Instruments7.5191,534
Total Current Assets77,97248,610
Non-Current Assets
Property, Plant and Equipment4.248,95849,539
Right of use assets4.173,628-
Investment Property4.33,2122,968
Intangible Assets420439
Deferred Tax6.27,2343,024
Total Non-Current Assets133,45255,970
Total Assets211,424104,580
Current Liabilities
Trade Payables12,7716,798
Employee Benefits7.15,5864,775
Other Payables14,19614,110
Lease Liabilities4.127,027-
Derivative Financial Instruments7.52,661-
Taxation Payable3,4453,897
Total Current Liabilities65,68629,580
Non-Current Liabilities
Lease Liabilities4.158,636-
Total Liabilities124,32229,580
Net Assets87,10275,000
______________________________Director Date25 September 2020
______________________________Director Date25 September 2020
The Notes to the Financial Statements f orm an integral part of and are to be read in conjunction w ith these Financial Statements.
The Financial Statements are signed f or and on behalf of the Board and w ere authorised f or issue on 25 September 2020.
3
HALLENSTEIN GLASSON HOLDINGS LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 1 AUGUST 2020
Note
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 2018
29,279
(1,461)
15,609
1,739
155
23,019
68,340
Comprehensive Income
Profit for Year
-
-
-
-
-
29,020
29,020
Revaluation net of Tax
6.1
-
-
2,810
-
-
-
2,810
Cash Flow Hedges net of Tax
6.1
-
-
-
(644)
-
-
(644)
Increase in Share Option Reserve
6.1
-
-
-
-
98
-
98
Total Comprehensive Income
-
-
2,810
(644)
98
29,020
31,284
Transactions with Owners
Sale of Treasury Stock
5.1, 5.2
-
1,289
-
-
-
-
1,289
Dividends
2.3, 5.1
-
160
-
-
-
(26,246)
(26,086)
Transfer to Employee Advances
5.1
-
173
-
-
-
-
173
Transfer of Share Option Reserve to
Retained Earnings
-
-
-
-
(195)
195
-
(Gain) / Loss on Sale of Treasury Stock
transferred to Retained Earnings
5.1
-
(466)
-
-
-
466
-
Total Transactions with Owners
-
1,156
-
-
(195)
(25,585)
(24,624)
Balance at 1 August 2019
29,279
(305)
18,419
1,095
58
26,454
75,000
Comprehensive Income
Profit for Year
-
-
-
-
-
27,774
27,774
Revaluation net of Tax
6.1
-
-
1,506
-
-
-
1,506
Cash Flow Hedges net of Tax
6.1
-
-
-
(2,973)
-
-
(2,973)
Increase in Share Option Reserve
6.1
-
-
-
-
26
-
26
Total Comprehensive Income
-
-
1,506
(2,973)
26
27,774
26,333
Transactions with Owners
Dividends
2.3, 5.1
-
27
-
-
-
(14,316)
(14,289)
Transfer to Employee Advances
5.1
-
58
-
-
-
-
58
Transfer of Share Option Reserve to
Retained Earnings
-
-
-
-
(20)
20
-
Total Transactions with Owners
-
85
-
-
(20)
(14,296)
(14,231)
Balance at 1 August 2020
29,279
(220)
19,925
(1,878)
64
39,932
87,102
The Notes to the Financial Statements f orm an integral part of and are to be read in conjunction w ith these Financial Statements.
4
HALLENSTEIN GLASSON HOLDINGS LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 1 AUGUST 2020
Note
2020
2019
Cash Flows from Operating Activities
$'000
$'000
Cash was provided from:
Sales to Customers
287,780
287,643
Rent Received
2.2
229
802
Government Grants
2.2
8,424
-
Interest Income
2.1
113
205
Interest on Debtors
2.1
12
16
296,558
288,666
Cash was applied to:
Payments to Suppliers
156,025
190,754
Payments to Employees
54,241
51,737
Interest Paid on Leases
2.2
2,569
-
Taxation Paid
12,408
10,183
225,243
252,674
Net Cash Flows from Operating Activities
71,315
35,992
Cash Flows from Investing Activities
Cash was provided from:
Proceeds from Sale of Property, Plant and Equipment and Intangible Assets
4,798
65
Proceeds from Sale of Investment Property
-
7,750
Repayment of Employee Advances
139
266
4,937
8,081
Cash was applied to:
Purchase of Property, Plant and Equipment and Intangible Assets
4.2
11,835
20,223
11,835
20,223
Net Cash Flows (applied to) Investing Activities
(6,898)
(12,142)
Cash Flows from Financing Activities
Cash was provided from:
Sale of Treasury Stock and Dividends
5.1, 5.2
27
1,449
27
1,449
Cash was applied to:
Dividend Paid
2.3
14,316
26,246
Lease liability payments
4.1
16,992
-
31,308
26,246
Net Cash Flows (applied to) Financing Activities
(31,281)
(24,797)
Net Increase / (Decrease) in Funds held
33,136
(947)
Cash and cash equivalents at the beginning of the year
16,506
17,453
Cash and cash equivalents at the end of the year
3.1
49,642
16,506
The Notes to the Financial Statements f orm an integral part of and are to be read in conjunction w ith these Financial Statements.
5
HALLENSTEIN GLASSON HOLDINGS LIMITED
STATEMENT OF CASH FLOWS (continued)
FOR THE YEAR ENDED 1 AUGUST 2020
RECONCILIATION OF PROFIT AFTER TAXATION
Note
2020
2019
TO CASH FLOWS FROM OPERATING ACTIVITIES
$'000
$'000
Net Profit after Taxation
27,774
29,020
Add / (deduct) items classified as Investing or Financing activities
(Gain)/loss on Sale of Plant and Equipment
2.2
(947)
158
Gain on Sale of Investment Property
2.2
-
(1,187)
Add / (deduct) Non Cash Items
Depreciation and Amortisation
2.2
31,725
8,446
Net Fair Value Gain on Investment Property
2.2
(244)
(208)
Deferred Taxation
6.2
(2,998)
(948)
Share Option Expense
26
98
Add / (deduct) movements in Working Capital Items
Taxation Payable
(452)
1,185
Trade and Other Receivables and Prepayments
2,804
(2,134)
Trade and Other Payables and Employee Benefits
14,253
4,614
Inventories
(626)
(3,052)
Net Cash Flows from Operating Activities
71,315
35,992
The Notes to the Financial Statements f orm an integral part of and are to be read in conjunction w ith these Financial Statements.
HALLENSTEIN GLASSON HOLDINGS LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 1 AUGUST 2020
6
1. Basis of preparation
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. Accounting policies specific to notes shown in other
sections are disclosed in a shaded box and are included as part of that particular note.
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 25 September 2020.
HALLENSTEIN GLASSON HOLDINGS LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 1 AUGUST 2020
7
1.2 General accounting policies
Statement of compliance
These financial statements for the year ended 1 August 2020 have been prepared in accordance with Generally Accepted
Accounting Practice (GAAP). They comply with New Zealand equivalents to International Financial Reporting Standards
(NZ IFRS), other New Zealand accounting standards and authoritative notices that are applicable to entities that apply NZ
IFRS. The financial statements comply with International Financial Reporting Standards (IFRS).
Basis of preparation of financial statements
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies
have been consistently applied to all the periods presented, unless otherwise stated.
The reporting currency used in the preparation of these financial statements is New Zealand dollars, rounded where
necessary to the nearest thousand dollars.
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.
Principles of consolidation
Subsidiaries
Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to,
or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its
power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They
are deconsolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains and losses on transactions between Group companies are
eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies
adopted by the Group.
Investments in subsidiaries
Principal SubsidiariesPrincipal activities
20202019
Hallenstein Bros Limited100%100%Retail of menswear in New Zealand
Hallenstein Brothers Australia Limited100%100%Retail of menswear in Australia
Glassons Limited100%100%Retail of womenswear in New Zealand
Glassons Australia Limited100%100%Retail of womenswear in Australia
Retail 161 Limited100%100%Non trading company
Retail 161 Australia Limited100%100%Non trading company
Hallenstein Properties Limited100%100%Property ownership in New Zealand
Interest held by parent
and group
HALLENSTEIN GLASSON HOLDINGS LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 1 AUGUST 2020
8
Historical cost convention
These financial statements have been prepared under the historical cost convention, as modified by the revaluation of land
and buildings and financial assets and liabilities (including derivative instruments) measured at fair value.
Critical accounting estimates, judgements and assumptions
The preparation of financial statements in conformity with NZ IFRS 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.
Property, plant and equipment: The Group has assessed whether the carrying value of its property, plant and equipment
have suffered any impairment since they were acquired. The recoverable amounts of cash generating units (at a subsidiary
level) are determined based on value in use calculations. These calculations require the use of estimates and projections of
future operating performance.
Inventory provision: The Group assess the inventory provision using management judgement which considers a range of
factors including the review of historical data, the age of inventory and current selling price trends to determine the
appropriateness of the provision.
Revaluation of Land and Buildings: The fair value of the Group’s land and buildings is determined by the Board following
an independent valuation undertaken at least every three years. The basis of the valuation is assessed within a range
indicated by two valuation approaches: discounted cash flow analysis and an income capitalisation approach. The key
assumptions are disclosed in note 4.2. Due to the impact of COVID-19 on the local and global economy, valuations have
been completed on the basis of “material valuation uncertainty”.
Revaluation of Investment Property: The fair value of the Group’s investment property is determined by the Board following
an independent valuation undertaken annually. The basis of the valuation is assessed within a range indicated by two
valuation approaches: discounted cash flow analysis and an income capitalisation approach. The key assumptions are
disclosed in note 4.3. Due to the impact of COVID-19 on the local and global economy, valuations have been completed on
the basis of “material valuation uncertainty”.
Foreign currency translation
Functional and presentation currency
Items included in the financial statements of each of the Group’s operations are measured using the currency of the primary
economic environment in which it operates (‘the functional currency’). The financial statements are presented in New
Zealand dollars, which is the Group’s presentational currency.
Transactions and balances
The results and financial position of all the Group entities that have a functional currency different from the presentation
currency are translated into the presentation currency as follows:
(a) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
and
(b) income and expenses for each statement of comprehensive income are translated at average exchange rates.
All resulting exchange differences are recognised in the statement of comprehensive income.
1.3 Significant Events and Transactions
On 11 March 2020, the World Health Organisation declared COVID-19 to be a global pandemic. COVID-19 has impacted the health
and wellbeing of people around the world and in turn the outbreak and the associated restrictions put in place to fight the virus have
had a significant adverse impact on the global economy.
The New Zealand Government’s overall public health strategy in respect of the COVID-19 pandemic affecting New Zealand was
elimination with the overall goal to stop community transmission in New Zealand:
– On 24 March 2020 the Government announced a number of Orders under the Health Act 1956 and the Epidemic Preparedness
Act 2006 to restrict certain activities for the purposes of preventing the outbreak and spread of COVID-19.
HALLENSTEIN GLASSON HOLDINGS LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 1 AUGUST 2020
9
At 11:59pm on 25 March 2020 New Zealand entered Alert Level 4 lockdown. Only essential services were permitted to trade, and
people were requested to remain at home other than to access essential services. The Group announced that all stores and the
web-based store in New Zealand were to close.
– In Australia while the Government did not declare a lockdown, due to public health concerns, footfall in shopping malls was
severely impacted in turn affecting sales in our stores. The Group took the decision in order to protect team members and
customers to close stores in Australia at 5pm on 26 March 2020. The web store in Australia continued to trade.
– The Group 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 introduced a number of initiatives as detailed further
below.
– On 4 April 2020, following approval from the New Zealand Government, the Group opened both Glassons.com and
Hallensteins.com web shops in New Zealand to sell essential product.
– At 11:59pm on 27 April 2020 New Zealand entered Alert Level 3 lockdown. On 28 April 2020 both Glassons.com and
Hallensteins.com web shops were able to sell their full product offering.
– At 11:59pm on 13 May 2020 New Zealand entered Alert Level 2. Contract tracing, strict social distancing measures and mass
gathering restrictions were introduced. The Group announced that from 14 May 2020 there would be a phased reopening of our
New Zealand store network for both the Glassons and Hallenstein Brothers brands with strict protocols in place. In Australia, we
started to progressively open stores as we navigated the various restrictions and consumer dynamics at a State level. Across our
retail networks we adhered to the respective Government directives and our priority was the health and safety of our team
members and our customers.
– At 11:59pm on 8 June 2020 Alert Level 1 was entered in New Zealand. Strict border restrictions remained in place and contact
tracing was encouraged.
– On 20 July 2020 the Group advised that due to the Government in Victoria announcing the return to stay at home restrictions for
metropolitan Melbourne, that 10 stores were to close in Melbourne. The Chapel Street store closed on 3 August 2020. All other
stores in Australia, including the web, continued to trade as normal. At this time the Victoria stores remain closed.
– Post balance date, at 11:59pm on 12 August 2020 Auckland re-entered Level 3 lockdown. The Group announced it had closed
thirteen Hallenstein Brothers stores and twelve Glassons stores in Auckland until a return to Level 2 was possible.
– On 31 August 2020 Auckland entered level 2.5 and the Auckland stores for both Hallensteins Brothers and Glassons were re-
opened with strict protocols in place in line with the Governments recommendations.
Certain key judgements and estimates are applied in the annual financial statements. The Directors have assessed the impact of
COVID-19 on these judgements and estimates and concluded that limited changes are necessary. The following key matters were
considered and undertaken with regards to the financial impact of COVID-19 on the 1 August 2020 consolidated financial
statements:
– Colliers International, Fordbaker Valuation and TelferYoung Property Valuers & Advisors undertook valuations of the Groups
owned land and buildings as at 1 August 2020. All valuers concluded their valuation on the basis of “material valuation
uncertainty”. In the current extraordinary circumstances there is a higher degree of uncertainty than would otherwise be the case
however the valuation can still be relied upon. The full scale of the impact at the point of time of the valuation is unknown and will
largely depend on the scale and longevity of the pandemic and the consequential ongoing impact on the economy with limited
market evidence since the outbreak. As a result, although the methodology applied in the valuation is consistent with prior years,
certain key estimates have been adjusted. Further details are included in note 4.2 Property, plant & equipment, and note 4.3
Investment property.
– As part of its response to COVID-19, the New Zealand and Australian Governments provided wage subsidies over a specific
calendar period to eligible businesses to allow those businesses to retain employees when they were closed or suffered reduced
trading due to COVID-19. The Group have applied NZ IAS 20 Accounting for Government Grants and Disclosure of Government
Assistance in accounting for the funds received from the COVID-19 Wage Subsidy. Government wage subsidies received have
been accounted for as government grants and offset against the expenses to which they relate in the same period as they are
incurred as disclosed in note 2.2.
– Given the impact of COVID-19 the Group performed impairment testing at a store level to ensure there was no risk to the
recoverability of the carrying value of fixed assets and right of use assets. The Group used discounted cash flow forecasts as
required. No risk of impairment was identified.
HALLENSTEIN GLASSON HOLDINGS LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 1 AUGUST 2020
10
– The enactment of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 has resulted in the
reintroduction of depreciation on buildings. The impact of this change is detailed in note 6.1 Income tax expense.
Since March the business has taken a number of steps to preserve liquidity including:
• Monitoring closely the planned stock intake and aligning it with the sales demand.
• Reducing operating and labour costs.
• Supplier payment terms were extended where appropriate.
• Applying for the New Zealand Government funded wage subsidy and Australian Jobkeeper payments.
• Placing capital projects on hold awaiting a better understanding of future performance.
• Rent relief was applied for from all landlords for the period the stores were unable to trade. At year end there were still a
number of these negotiations to conclude.
• Negotiating with landlords to align appropriate arrangements to reflect the changing market conditions.
• Directors, Executives and Leadership Teams agreed to a short-term reduction of their salaries.
• No interim dividend was declared in April. The interim dividend was reassessed after the end of the Groups financial year,
and was paid on 4 September 2020.
The above actions have resulted in a strong liquidity position as disclosed in note 3.1 Cash and cash equivalents.
2. Performance
2.1 Segment information
Operating segments are reported in a manner consistent with the internal reporting provided to the Board of Directors. The
Board of Directors is the chief operating decision maker and is responsible for allocating resources and assessing
performance of the operating segments and they delegate that authority through the Group Managing Director.
The Board of Directors considers the business from both a product and geographic perspective as follows:
- Hallenstein Bros Limited (New Zealand) and Hallenstein Brothers Australia Limited (Australia)
- Glassons Limited (New Zealand)
- Glassons Australia Limited (Australia)
- Hallenstein Properties Limited (New Zealand) (Property)
The reportable segments derive their revenues primarily from the retail sale of clothing. The revenues from external parties reported
to the Board of Directors are measured in a manner consistent with that in the statement of comprehensive income. There are no
significant revenues derived from a single external customer.
HALLENSTEIN GLASSON HOLDINGS LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 1 AUGUST 2020
11
Segment results
For the year ended 1 August 2020
Glassons
New Zealand
Glassons
Australia
Hallensteins
Property
Parent
Total Group
$000's
$000's
$000's
$000's
$000's
$000's
INCOME STATEMENT
Sales Revenue from External Customers
102,597
96,686
88,480
-
-
287,763
Cost of Sales
(43,918)
(37,777)
(36,819)
-
-
(118,514)
Finance Income
37
20
65
-
3
125
Finance Expenses
(1,110)
(647)
(812)
-
-
(2,569)
Depreciation and Software Amortisation
10,032
11,272
10,064
357
-
31,725
Profit before Income Tax
16,336
13,413
6,228
735
19
36,731
Income Tax Expense
(4,136)
(4,057)
(1,746)
986
(4)
(8,957)
Net Profit after Income Tax
12,200
9,356
4,482
1,721
15
27,774
BALANCE SHEET
Current Assets
24,395
18,126
26,490
5,385
3,576
77,972
Non Current Assets
50,095
33,547
31,092
18,706
12
133,452
Current Liabilities
22,748
22,261
20,230
376
71
65,686
Non Current Liabilities
26,170
15,671
16,795
-
-
58,636
Purchase of Property, Plant and Equipment and
Intangibles
6,367
3,959
1,502
7
-
11,835
For the year ended 1 August 2019
Glassons
New Zealand
Glassons
Australia
Hallensteins
Property
Parent
Total Group
$000's
$000's
$000's
$000's
$000's
$000's
INCOME STATEMENT
Sales Revenue from External Customers
100,728
89,496
97,326
-
-
287,550
Cost of Sales
(41,274)
(33,492)
(40,233)
-
-
(114,999)
Finance Income
48
48
109
-
16
221
Depreciation and Software Amortisation
2,266
2,898
2,988
294
-
8,446
Profit / (Loss) before Income Tax
15,794
11,364
10,036
2,144
104
39,442
Income Tax Expense
(4,434)
(3,291)
(2,839)
75
67
(10,422)
Net Profit / (Loss) after Income Tax
11,360
8,073
7,197
2,219
171
29,020
BALANCE SHEET
Current Assets
10,180
10,268
18,646
6,018
3,498
48,610
Non Current Assets
18,488
10,044
10,734
16,687
17
55,970
Current Liabilities
9,312
10,716
8,947
506
99
29,580
Purchase of Property, Plant and Equipment and
Intangibles
10,186
3,734
4,617
1,686
-
20,223
HALLENSTEIN GLASSON HOLDINGS LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 1 AUGUST 2020
12
2.2 Income and expenses
Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services, excluding
Goods and Services Tax, rebates and discounts and after eliminating sales within the Group.
Revenue is recognised as follows:
Sales of goods - retail
Sales of goods are recognised when a Group entity has delivered a product to the customer. For in-store sales, control
passes to the customer at point of sale. For online sales, the order and the delivery to the customer are considered to
comprise a single performance obligation, therefore control passes to the customer when the goods are delivered. Retail
sales are usually in cash, credit card, debit card or by various pay later services. The recorded revenue is the gross amount
of sale (excluding GST), including credit card fees and service fees payable for the transaction. Such fees are included in
selling expenses.
Interest income
Interest income is recognised using the effective interest method.
Rental income
Rental income from operating leases (net of any incentives) is recognised on a straight line basis over the lease term.
1
Amount paid in respect of tax compliance and tax advisory services provided in New Zealand.
2
Amount paid in respect of tax compliance and tax advisory services provided in Australia.
3
Occupancy costs have decreased significantly from the prior year due to the adoption of IFRS 16. Rental expense which was
previously disclosed as occupancy costs has been replaced by depreciation of right of use assets and interest on leases.
4
Wages, salaries and other short term benefits includes wage subsidy benefit from the New Zealand government of $5.079M and
job keeper benefit from the Australian government of $4.980M.
Income and expenses
Profit before income tax includes the following specific income and expenses:
20202019
$000$000
Other Operating Income
Rental Income229802
Insurance Proceeds19-
Net Fair Value Gain on Investment Property244208
Gain on Sale of Land and Buildings1,006-
Gain on Sale of Investment Property-1,187
Expenses
Occupancy Costs
3
5,73129,873
Audit of Financial Statements
PwC New Zealand169145
Other Services
Performed by PwC New Zealand
1
1210
Performed by PwC Australia
2
2522
Directors' Fees585647
Wages, Salaries and other Short Term Benefits
4
44,96551,727
Depreciation of Property, Plant & Equipment9,8168,164
Depreciation of Right of Use Assets21,644-
Amortisation of Software265282
Total Depreciation and Amortisation31,7258,446
Interest on Leases2,569-
Loss on Sale of Property, Plant and Equipment59158
Group
HALLENSTEIN GLASSON HOLDINGS LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 1 AUGUST 2020
13
2.3 Dividends
Provision is made for the amount of any dividend declared on or before the balance date but not distributed at balance date.
All dividends paid were fully imputed. Supplementary dividends of $175,065 (2019: $488,875) were paid to shareholders not resident
in New Zealand for tax purposes for which the Group received a foreign investor tax credit.
2.4 Earnings per share
Basic and diluted earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the
weighted average number of ordinary shares outstanding during the period, adjusted for bonus elements in ordinary shares
issued during the period.
Basic
Basic earnings per share is calculated by dividing the profit after tax of the Group by the weighted average number of ordinary shares
outstanding during the year.
Diluted
Diluted earnings per share is calculated by adjusting profit after tax and the weighted average number of ordinary shares outstanding
to assume conversion of all dilutive potential ordinary shares. There are no options convertible into shares as at 1 August 2020 (2019:
Nil).
Dividends
2020
2019
2020
2019
cents per
Share
cents per
Share
$000's
$000's
Final dividend for the year ended 1 August 2019
24.00
14,316
Interim dividend for the year ended 1 August 2019
20.00
11,930
Final dividend for the year ended 1 August 2018
24.00
14,316
Total
24.00
44.00
14,316
26,246
Earnings per share
20202019
$000's $000's
Profit after tax27,77429,020
Weighted average number of ordinary shares outstanding59,64959,649
Basic and diluted earnings per share (cents per share)46.5648.65
HALLENSTEIN GLASSON HOLDINGS LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 1 AUGUST 2020
14
3. Working Capital
3.1 Cash and cash equivalents
Cash and cash equivalents include 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.
Statements of Cash flows
The following are the definitions of the terms used in the statement of cash flows:
(I.) Cash comprises cash and cash equivalents.
(II.) Investing activities are those activities relating to the acquisition, holding and disposal of property, plant and equipment,
investments and employee advances.
(III.) Financing activities are those activities which result in changes in the size and composition of the capital structure of
the Group. This includes both equity and debt not falling within the definition of cash. Dividends paid are included in
financing activities.
(IV.) Operating activities include all transactions and other events that are not investing or financing activities.
The carrying amount of cash and cash equivalents equals the fair value.
3.2 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average method
and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. Net
realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses,
excluding borrowing costs.
Inventory adjustments are provided at year end for stock obsolescence within cost of sales in the Statement of Comprehensive
Income.
The cost of inventories recognised as an expense and included in cost of sales amounted to $118,256,459 (2019: $114,717,733).
Cash and cash equivalents
2020
2019
$000's
$000's
Cash at Bank
37,237
15,439
Short Term Bank Deposits
12,342
1,004
Cash on Hand
63
63
Total Cash and Cash Equivalents
49,642
16,506
Inventories
20202019
$000's $000's
Finished goods25,06324,308
Inventory adjustments(426)(297)
Net inventories24,63724,011
HALLENSTEIN GLASSON HOLDINGS LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 1 AUGUST 2020
15
4. Long term Assets
4.1 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.
The group leases retail stores under non-cancellable operating leases expiring within one to eight years. There is a small
portion of lease contracts which contain renewal rights. In considering the lease term for these contracts, the Group has
determined that rights of renewals are not reasonably certain to be exercised due to the nature and location of the stores and
the changing retail environment. It is the Group’s strategy to renegotiate the terms of all leases at their expiry instead of
exercising renewal rights. This agile strategy is enabled by having stores relatively small in size and not highly customised,
and therefore relatively straight forward to move locations. In addition, with the current retail market uncertainty and the
continuing growth of online sales compared to store sales, the Group needs to maintain a degree of flexibility.
Both right-of-use assets and lease liabilities are discounted applying the 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;
• 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.
In response to the COVID-19 pandemic the International Accounting Standards Board has issued amendments to IFRS 16
Leases to allow lessees not to account for rent concessions as lease modifications if they are a direct consequence of COVID-
19 and meet certain conditions.
The practical expedient will only apply if:
• the revised consideration is substantially the same or less than the original consideration;
• the reduction in lease payments relates to payments due on or before 30 June 2021; and
• no other substantive changes have been made to the terms of the lease.
The Group has early adopted this practical expedient for the year ended 1 August 2020 and has applied it to all eligible rent
concessions.
Short term leases where the Group is the lessee
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as
operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the
profit and loss in the Statement of Comprehensive Income on a straight line basis over the period of the lease.
The Group is the lessor
Assets leased to third parties under operating leases are included in Investment Property in the Statement of Financial
Position. Rental income (net of any incentives given to lessees) is recognised on a straight line basis over the lease term.
Lease receivables are disclosed under Note 4.3 Investment Property.
HALLENSTEIN GLASSON HOLDINGS LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 1 AUGUST 2020
16
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
2020
$000
Opening net book value 2 August 2019
75,845
Depreciation
(21,644)
Additions
18,805
FX impact
622
Carrying amount 1 August 2020
73,628
Lease liabilities
2020
$000
Operating lease commitment at 1 August 2019 as disclosed in the Group's financial statements
96,611
As at 2 August 2019
Discounted at the incremental borrowing rate at the date of initial application
91,457
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 2019
82,796
Lease modifications and additions
20,411
Interest for the period
2,569
Lease payments made
(19,561)
Covid-19 rent abatements received to date
(1,281)
FX impact
729
Lease liabilities 1 August 2020
85,663
Lease liabilities maturity analysis
Minimum
lease
payments
Interest
Present
value
$000's
$000's
$000's
Due within one year
29,097
(2,070)
27,027
One to two years
21,411
(1,434)
19,977
Two to five years
35,307
(1,641)
33,666
Later than five years
5,122
(129)
4,993
Total
90,937
(5,274)
85,663
Current
27,027
Non-current
58,636
Total
85,663
Lease related expenses included in the income statement:
2020
$000
Depreciation21,644
Rent on short-term leases7,012
Covid-19 rent abatements received to date(1,281)
Interest on leases2,569
Total
29,944
HALLENSTEIN GLASSON HOLDINGS LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 1 AUGUST 2020
17
Lease commitments:
The Group leases various retail outlets under non-cancellable short-term operating lease agreements. Leases reflect normal
commercial arrangements with varying terms.
Lease payments included in the cash flow statement:
2020
$000
Interest paid on leases (operating activities)
2,569
Payments for lease liabiities principal (financing activities)
16,992
Total cash outflows from leases
19,561
Lease commitments
2020
2019
At balance date the future aggregate minimum lease commitments was as follows:
$000's
$000's
Due within one year
1,286
25,422
One to two years
-
22,959
Two to five years
-
41,086
Later than five years
-
7,144
Total operating lease commitments
1,286
96,611
HALLENSTEIN GLASSON HOLDINGS LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 1 AUGUST 2020
18
4.2 Property, plant and equipment
Recognition and measurement
Land and buildings were valued on 1 August 2020 by Telfer Young (Hawkes Bay) Ltd, Fordbaker Valuation Limited and Colliers
International who are independent registered valuers and associates of The New Zealand Institute of Valuers. The valuers have
recent experience in the location and category of the item being valued. The fair values of the assets represent the estimated
price for which a property could be sold on the date of valuation in an orderly transaction between market participants.
The adopted valuation has been assessed within a range indicated by two valuation approaches: Income capitalisation
approach and discounted cash flow analysis.
The following table summarises the valuation approach and key assumptions used by the valuers to arrive at fair value.
Valuation approach Description of the valuation approach
Income Capitalisation Approach
A valuation methodology which determines fair value by capitalising a property’s
sustainable net income at an appropriate, market derived capitalisation rate (yield).
Unobservable inputs within the income capitalisation approach include:
a) Net Market Rent which is the annual amount for which a tenancy within property
is expected to achieve under a new arm’s length leasing transaction after
deducting a fair share of property operating expenses
b) Capitalisation Rate (yield) which is the rate of return, determined through analysis
of comparable, market related sales transactions which is applied to a property’s
sustainable net income to derive value.
Discounted Cash Flow analysis With the discounted cash flow approach (DCF) a cash flow budget is established for the
property over a ten-year time horizon. Within the cash flow an allowance is made for rental
growth as well as deducting costs associated with property ownership. A terminal value is
also estimated and the cash flows are discounted at a market rate to arrive at a net
present value.
Unobservable inputs within the discounted cash flow approach include:
a) The discount rate which is the rate determined through analysis of comparable
market related sales transactions which is applied to a property’s future net cash
flows to convert those cash flows into a present value.
b) The terminal capitalisation rate which is the rate which is applied to a property’s
sustainable net income at the end of an assumed holding period to derive an
estimated market value.
c) Rental growth rate which is the annual growth rate applied to market rent over an
assumed holding period.
d) Expenses growth which is the annual amount applied to property operating
expenses over an assumed holding period
The revaluation surplus net of applicable deferred income taxes was credited to other comprehensive income and is shown in
the asset revaluation reserve in shareholders’ equity.
At each reporting date, where a valuation report is not obtained the most recent valuation reports are reviewed by the
management team. The review focuses on checking material movements and ensuring all additions and disposals are captured
and that there have been no material changes to the underlying assumptions on which the valuations are based.
Land and building measurements are categorised as Level 3 in the fair value hierarchy. During the year there were no transfers
between levels of the fair value hierarchy.
Both the income capitalisation approach and discounted cash flow analysis contain unobservable inputs in determining fair
value. These are summarised in the table below:
Description Fair Value at 1
August 2020
$000’s
Valuation
Technique
Unobservable
inputs
Range of
unobservable
inputs
Relationship of
unobservable inputs to fair
value
Land and
Buildings - retail
4,818 Income
capitalisation
approach and
discounted
Net Market Rent
Capitalisation
Rate (yield)
$433 per m2
6.24%
The higher the rent per square
metre the higher the fair value
The lower the yield the higher
the fair value
HALLENSTEIN GLASSON HOLDINGS LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 1 AUGUST 2020
19
cash flow
analysis
Discount rate
Terminal
capitalisation rate
Rental growth
rate
Expenses growth
8.05%
6.75%
0.0% - 2.50%
0.40% - 2.50%
The higher the discount rate
the lower the fair value
The higher the terminal rate
the lower the fair value
The higher the rental growth
rate the higher the fair value
The higher the expenses the
lower the fair value
Land and
buildings -
warehouse
19,701 Income
capitalisation
approach and
discounted
cash flow
analysis
Net Market Rent
Capitalisation
Rate (yield)
Discount rate
Terminal
capitalisation rate
Rental growth
rate
Expenses growth
$104 - $143 per
m2
5.00% - 6.37%
6.63% - 6.75%
5.25% - 6.75%
0.0% - 5.50%
1.06% - 4.21%
The higher the rent per square
metre the higher the fair value
The lower the yield the higher
the fair value
The higher the discount rate
the lower the fair value
The higher the terminal rate
the lower the fair value
The higher the rental growth
rate the higher the fair value
The higher the expenses the
lower the fair value
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.
Increases in the carrying amount arising on revaluation of land and buildings are credited to other comprehensive income and
shown as an asset revaluation reserve in shareholders’ equity. Decreases that offset previous increases of the same asset are
charged in other comprehensive income and debited against the asset revaluation reserve directly in equity; all other decreases
are charged to the statement of comprehensive income. Each year on revaluation, the difference between depreciation based
on the revalued carrying amount of the asset charged to the statement of comprehensive income, and depreciation based on
the asset’s original cost is transferred from ‘other reserves’ to ‘retained earnings’.
Valuation uncertainty
The property valuations include a ‘valuation uncertainty’ clause. The registered valuers have regarded the impact on market
activity due to COVID-19 and the unprecedented set of circumstances on which to base a value judgement and consider there
to be a significant market uncertainty.
Less certainty exists than normal and a higher degree of caution should be attached to the valuation than normally would be
the case. Given the unknown future impact that COVID‐19 might have on real estate markets, the registered valuers
recommend that the users of the valuation report should review the valuation periodically.
The Group has recorded valuation of land and building according to the valuation report but will continue monitoring the macro
or microeconomic events that may result in change in the value.
Depreciation
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 67 years
- Plant and equipment 2 - 5 years
- Furniture, fittings and office equipment 5 - 10 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate at each balance date.
HALLENSTEIN GLASSON HOLDINGS LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 1 AUGUST 2020
20
Impairment
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. Assets that are subject to amortisation are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable, for example a planned store closure,
withdrawal from a business segment, or assessment of loss making stores. Assets are grouped at the lowest levels for which
there are separately identifiable cash flows (cash generating units).
Disposal
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These are included in the
Statement of Comprehensive Income.
If land and buildings were stated on a historical cost basis, the amounts would be as follows:
Year ended 1 August 2020
$000's
Land at fair
value
Buildings at fair
value
Fixtures &
Fittings
Plant &
Equipment
TOTAL
Opening NBV
9,487
15,633
18,520
5,899
49,539
Additions
-
2,014
6,632
2,943
11,589
Disposals
(1,650)
(2,059)
(68)
(74)
(3,851)
Depreciation
-
(403)
(6,601)
(2,812)
(9,816)
Revaluations
466
1,031
-
-
1,497
Closing NBV
8,303
16,216
18,483
5,956
48,958
Cost/Valuation
8,303
16,216
62,634
22,495
109,648
Accumulated depreciation
-
-
(44,151)
(16,539)
(60,690)
Closing NBV
8,303
16,216
18,483
5,956
48,958
Year ended 1 August 2019
$000's
Land at fair
value
Buildings at fair
value
Fixtures &
Fittings
Plant &
Equipment
TOTAL
Opening NBV
6,097
10,844
15,210
4,660
36,811
Additions
1,875
5,477
9,163
3,555
20,070
Disposals
-
-
(185)
(46)
(231)
Depreciation
-
(297)
(5,597)
(2,270)
(8,164)
Transfers
(49)
(739)
(71)
-
(859)
Revaluations
1,564
348
-
-
1,912
Closing NBV
9,487
15,633
18,520
5,899
49,539
Cost/ Valuation
9,487
15,633
60,275
22,469
107,864
Accumulated depreciation
-
-
(41,755)
(16,570)
(58,325)
Closing NBV
9,487
15,633
18,520
5,899
49,539
20202019
$000's$000's
Land4,2705,580
Buildings12,79212,794
Cost17,06218,374
Accumulated depreciation(1,970)(1,714)
Net book amount15,09216,660
HALLENSTEIN GLASSON HOLDINGS LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 1 AUGUST 2020
21
4.3 Investment property
Recognition and measurement
Land and buildings were valued on 1 August 2020 by Telfer Young (Hawkes Bay) Ltd who are independent registered valuers and
associates of The New Zealand Institute of Valuers. The valuers have recent experience in the location and category of the item
being valued. The fair values of the assets represent the estimated price for which a property could be sold on the date of
valuation in an orderly transaction between market participants.
The adopted valuation has been assessed within a range indicated by two valuation approaches: Income capitalisation approach
and discounted cash flow analysis.
The following table summarises the valuation approach and key assumptions used by the valuers to arrive at fair value.
Valuation approach Description of the valuation approach
Income Capitalisation Approach
A valuation methodology which determines fair value by capitalising a property’s
sustainable net income at an appropriate, market derived capitalisation rate (yield).
Unobservable inputs within the income capitalisation approach include:
a) Net Market Rent which is the annual amount for which a tenancy within
property is expected to achieve under a new arm’s length leasing transaction
after deducting a fair share of property operating expenses.
b) Capitalisation Rate (yield) which is the rate of return, determined through
analysis of comparable, market related sales transactions which is applied to
a property’s sustainable net income to derive value.
Discounted Cash Flow analysis With the discounted cash flow approach (DCF) a cash flow budget is established for
the property over a ten-year time horizon. Within the cash flow an allowance is made
for rental growth as well as deducting costs associated with property ownership. A
terminal value is also estimated and the cash flows are discounted at a market rate to
arrive at a net present value.
Unobservable inputs within the discounted cash flow approach include:
a) The discount rate which is the rate determined through analysis of
comparable market related sales transactions which is applied to a property’s
future net cash flows to convert those cash flows into a present value.
b) The terminal capitalisation rate which is the rate which is applied to a
property’s sustainable net income at the end of an assumed holding period to
derive an estimated market value.
c) Rental growth rate which is the annual growth rate applied to market rent over
an assumed holding period.
d) Expenses growth which is the annual amount applied to property operating
expenses over an assumed holding period.
The revaluation surplus was credited to other income in the Statement of Comprehensive Income. Subsequent revaluation
surpluses or losses will be recognised through Statement of Comprehensive Income.
Land and building measurements are categorised as Level 3 in the fair value hierarchy. During the year there were no transfers
between levels of the fair value hierarchy.
Both the income capitalisation approach and discounted cash flow analysis contain unobservable inputs in determining fair value.
These are summarised in the table below:
Description Fair Value at 1
August 2020
$000’s
Valuation
Technique
Unobservable
inputs
Range of
unobservable
inputs
Relationship of
unobservable inputs to
fair value
Land and
Buildings - retail
3,212 Income
capitalisation
approach and
discounted cash
flow analysis
Net Market Rent
Capitalisation
Rate (yield)
Discount rate
$433 per m2
6.24%
8.05%
The higher the rent per
square metre the higher the
fair value
The lower the yield the
higher the fair value
The higher the discount
rate the lower the fair value
HALLENSTEIN GLASSON HOLDINGS LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 1 AUGUST 2020
22
Terminal
capitalisation rate
Rental growth
rate
Expenses growth
6.75%
0.0% - 2.50%
0.40% - 2.50%
The higher the terminal rate
the lower the fair value
The higher the rental
growth rate the higher the
fair value
The higher the expenses
the lower the fair value
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.
Valuation uncertainty
The property valuations include a ‘valuation uncertainty’ clause. The registered valuers have regarded the impact on market
activity due to COVID-19 and the unprecedented set of circumstances on which to base a value judgement and consider there to
be a significant market uncertainty.
Less certainty exists than normal and a higher degree of caution should be attached to the valuation than normally would be the
case. Given the unknown future impact that COVID‐19 might have on real estate markets, the registered valuers recommend that
the users of the valuation report should review the valuation periodically.
The Group has recorded valuation of land and building according to the valuation report but will continue monitoring the macro or
microeconomic events that may result in change in the value.
Lease receivables:
The Group owns rental property that it leases under non-cancellable operating lease agreements to external parties. Leases reflect
normal commercial arrangements with varying terms and renewal rights.
The future minimum rental payments receivable under these leases is as follows:
Investment Property
2020
2019
$000's
$000's
Opening balance
2,968
8,464
Transfer from property, plant & equipment
-
859
Sale of investment property
-
(6,563)
Net gain / (loss) from fair value adjustment
244
208
Closing balance
3,212
2,968
Lease receivables
20202019
$000's $000's
Due within one year193174
One to two years14880
Two to five years30423
Total lease receivables645277
HALLENSTEIN GLASSON HOLDINGS LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 1 AUGUST 2020
23
5. Equity
5.1 Share capital
Ordinary shares are classified as capital, net of treasury stock.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax,
from the proceeds.
Treasury stock
Shares purchased on market under the executive share scheme are treated as treasury stock on acquisition at cost. On
vesting to the employee, treasury stock shares are credited to equity and an employee loan is recorded initially at fair value
and subsequently at amortised cost.
Reserves
The asset revaluation reserve records revaluations of property, net of tax. The cash flow hedge reserve records the fair value
of derivative financial instruments, net of tax that meet the hedge accounting criteria. The Share Option reserve is used to
record the accumulated value of unvested share rights arising from the executive share scheme which have been recognised
in the statement of comprehensive income.
All shares are fully paid and rank equally.
Contributed Equity
2020
2019
2020
2019
Shares
Shares
$000's
$000's
Balance at beginning of year
59,529,827
59,185,563
28,974
27,818
Purchase of Treasury stock
-
-
-
-
Sale of Treasury Stock
-
267,735
-
1,289
Dividends
-
-
27
160
Share Options Exercised
33,233
76,529
58
173
Gain on sale of Treasury Stock transferred to Retained Earnings
-
-
-
(466)
Balance at end of year
59,563,060
59,529,827
29,059
28,974
Representing:
Share Capital
59,649,061
59,649,061
29,279
29,279
Treasury Stock (net of Dividends)
(86,001)
(119,234)
(220)
(305)
Total
59,563,060
59,529,827
29,059
28,974
HALLENSTEIN GLASSON HOLDINGS LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 1 AUGUST 2020
24
5.2 Executive Share Scheme
Equity settled share-based compensation benefits are provided to employees in accordance with the Group’s executive share
scheme. The fair value of share rights granted under the scheme is recognised as an employee benefit expense with a
corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the
employees become unconditionally entitled to the share rights.
The fair value at grant date of the share rights are determined using a Black Scholes Pricing model that takes into account the
exercise price, the term of the share right, the vesting and performance criteria, the non-tradable nature of the share right, 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 share right.
At each balance date, the Group revises its estimate of the number of share rights that are expected to become exercisable.
The employee benefit expense recognised each period takes into account the most recent estimate.
Upon the vesting of share rights, the balance of the share option reserve relating to the share rights is transferred to retained
earnings.
The Company operates an employee share scheme for certain senior executives to purchase ordinary shares in the Company.
The Company provides the employees with limited recourse loans on an interest free basis to assist employees’ participation.
The loans are applied to purchase shares on market and the shares are treated as treasury stock.
The loan amount is the total market value of the shares plus any commission applicable on the date of purchase.
Any dividends payable on the shares are applied towards the repayment of the advance.
Shares purchased under the scheme are held by two directors as custodians and vest three years from the date of purchase. In
the event the employee leaves the company during the vesting period, the loan is repaid by selling the shares on market. Any
gain or loss arising from the sale of shares is included in equity. Refer to note 5.1 for further detail on treasury stock.
In accordance with NZ IFRS 2 this scheme is an equity-settled scheme.
There were no share issues during the 2020 financial year (2019: Nil).
Executive share scheme
Year ended 1 August 2020
Year ended 1 August 2019
Number of
shares
Purchase /
(sale) price
Number of
shares
Purchase /
(sale) price
Balance at beginning of financial year
119,234
463,498
Forfeited during the year
-
-
(267,735)
(4.81)
Exercised during the year
(33,233)
(76,529)
Balance at end of financial year
86,001
119,234
Percentage of total shares held by scheme
0.14%
0.20%
HALLENSTEIN GLASSON HOLDINGS LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 1 AUGUST 2020
25
6. Taxation
6.1 Income tax expense
The income tax expense or revenue for the period is the tax payable or receivable on the current period’s taxable income
based on the notional income tax rate for each jurisdiction, 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 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 for each
jurisdiction. 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 exception is made for certain temporary differences arising from the initial
recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences
if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either
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 liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases
of investments in operations where the company is able to control the timing of the reversal of the temporary differences and
it is probable that the differences will not reverse in the foreseeable future.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.
Goods and Services Tax (GST)
The statement of comprehensive income and statement of cash flows have been prepared so that all components are stated
exclusive of GST. All items in the statement of financial position are stated net of GST, with the exception of receivables and
payables, which include GST invoiced.
The effective tax rate for the year was 24.6% (2019: 26.4%).
The Group has no tax losses (2019: Nil) and no unrecognised temporary differences (2019: Nil).
20202019
$000's $000's
Income tax expense
The tax expense comprises:
Current tax expense 11,94111,370
Deferred tax expense (note 6.2)
- Future tax benefit current year(3,036)(493)
- Prior period adjustment52(455)
Total income tax expense8,95710,422
Reconciliation of income tax expense to tax rate applicable to profits
Profit before income tax expense36,73139,442
Tax at 28% (2019: 28%)10,28511,044
Tax effect of:
- Income not subject to tax(236)(346)
- Expenses not deductible for tax2680
- Adjustment due to different rate in different jurisdictions28099
- Prior period adjustment52(455)
- Reinstatement of tax base on buildings(1,450)-
Total income tax expense8,95710,422
HALLENSTEIN GLASSON HOLDINGS LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 1 AUGUST 2020
26
The tax (charge)/credit relating to components of other comprehensive income are as follows:
6.2 Deferred tax
6.3 Imputation credits
The above amounts represent the balance of the imputation account as at the end of the reporting period, adjusted for:
• Imputation credits that will arise from the payment of the provision for income tax;
• Imputation debits that will arise from the payment of dividends recognised as liabilities at the reporting date; and
• Imputation credits that will arise from the receipt of dividends recognised as receivables at the reporting date.
2020
2019
$000's
$000's
Before Tax
Tax
(charge) /
Credit
After Tax
Before Tax
Tax (charge)
/ Credit
After Tax
Gains (net of tax) on revaluation of land and buildings
1,497
9
1,506
1,912
898
2,810
Fair Value Gain / (Loss) (net of tax) in Cash Flow Hedge Reserve
(4,176)
1,203
(2,973)
(882)
238
(644)
Increase in Share Option Reserve
26
-
26
98
-
98
2020
2019
$000's
$000's
Amounts recognised in profit or loss
Depreciation
3,888
1,058
Amortisation - fixed rent
-
438
Provisions and accruals
1,698
1,069
Net lease liability
876
-
6,462
2,565
Amounts recognised directly in equity
Asset revaluation reserve
9
898
Cash flow hedges
763
(439)
Total amount recognised
7,234
3,024
Movements
Balance at beginning of year
3,024
940
Credited / (charged) to the Income Statement
2,998
948
Credited / (charged) to equity
1,212
1,136
Balance at end of the year
7,234
3,024
2020
2019
$000's
$000's
Imputation credits available for subsequent reporting periods
17,131
14,167
HALLENSTEIN GLASSON HOLDINGS LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 1 AUGUST 2020
27
7. Other
7.1 Employee benefits
Wages and salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be
settled within 12 months of the reporting date are recognised in other payables in respect of employees' services up to the
reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for
non-accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable.
7.2 Capital expenditure commitments
7.3 Contingencies
Contingent liabilities under contracts, guarantees and other agreements arising in the ordinary course of business on which no loss
is anticipated are as follows:
Letters of Credit
Bank letters of credit issued to secure future purchasing requirements are matched to a contingent asset of the same value
representing inventories purchased.
7.4 Related party transactions
During the year, the Company advanced and repaid loans to its subsidiaries by way of internal current accounts. In presenting the
financial statements of the Group, the effect of transactions and balances between fellow subsidiaries and those with the Parent
have been eliminated. All transactions with related parties were in the normal course of business and provided on commercial terms.
Employee benefits
2020
2019
$000's
$000's
Holiday pay accrual and other benefits
5,586
4,775
Capital Commitments
20202019
$000's $000's
Commitments in relation to store fitouts and warehouse construction-2,688
2020
2019
$000's
$000's
Financial guarantee
466
678
Bank guarantee provided to the New Zealand Stock Exchange Limited
75
75
HALLENSTEIN GLASSON HOLDINGS LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 1 AUGUST 2020
28
The Group undertook transactions with the related interests of the majority shareholder as detailed below:
The following Directors received Directors’ fees and dividends in relation to shares held personally as follows:
Key management compensation was as follows:
The Company operates an employee share scheme for certain senior executives and is outlined in Note 5.2.
2020
2019
T C Glasson
$000
$000
Rent on retail premises based on independent valuations
1,800
2,070
Related party transactions
2020
2019
2020
2019
$000
$000
$000
$000
Mr T C Glasson
89
90
2,669
4,893
Mr W J Bell
133
135
2
8
Ms K Bycroft
93
95
-
-
Mr M Donovan
84
85
22
41
Mr G Popplewell
84
85
45
83
Mr M Ford
103
105
2
4
Ms M Devine*
-
60
-
-
Directors' fees
Dividends
* Ms M Devine received Directors' Fees up to 1 April 2019, the date which she was appointed Group Managing Director. From this
date, short term employee benefits paid to Ms M Devine are included in key management compensation below.
Payments to Mr G Popplewell
2020
2019
$000
$000
Consulting fees
103
48
2020
2019
$000
$000
Short term employee benefits
2,865
3,120
Termination benefits
334
546
Share Scheme Benefit
26
98
HALLENSTEIN GLASSON HOLDINGS LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 1 AUGUST 2020
29
7.5 Financial risk management
Fair value estimation
Fair value estimates are classified in a hierarchy based on the inputs to valuation techniques used to measure fair value.
The different levels have been defined as follows:
- Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).
- Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (Level 2).
- Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).
The Group’s policy is to recognise transfers into and out of fair value hierarchy levels as of the date of the event or change in
circumstances that caused the transfer.
The Group has financial instruments that are classified as Level 2 within the fair value hierarchy. The fair value of financial
instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using
valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely
as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable,
the instrument is included within Level 2. Under Level 2 the Group holds forward foreign exchange contracts. The fair value
of these forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date, with the
resulting value discounted back to present value. Refer to note 7.5.4.
The Group's land and buildings within property, plant and equipment and investment property is classified as Level 3 in the
fair value hierarchy as one or more of the significant inputs into the valuation are not based on observable market data.
Refer to notes 4.2 and 4.3 for more information.
Derivatives
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-
measured to their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is
designated as a hedging instrument, and if so, the nature of the item being hedged. The company designates certain
derivatives as either; (1) hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge);
or (2) hedges of highly probable forecast transactions (cash flow hedges).
The Group documents at the inception of the 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 assessment, both at hedge inception and on an ongoing basis, 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.
Cash flow hedge
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 cash flow hedge reserve. The gain or loss relating to the ineffective portion is recognised
immediately in the profit and loss component of Statement of Comprehensive Income.
Amounts accumulated in equity are recycled in the Statement of Comprehensive Income in the periods when the hedged
item will affect profit or loss (for instance when the forecast sale that is hedged takes place). However, when the forecast
transaction that is hedged results in the recognition of a non-financial asset (for example, inventory) or a non-financial liability,
the gains and losses previously deferred in equity are transferred from equity and included in the measurement of the initial
cost or carrying amount of the asset or liability.
When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge
accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast
transaction is ultimately recognised in the Statement of Comprehensive Income. When a forecast transaction is no longer
expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the profit and loss
component of the Statement of Comprehensive Income.
Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of these derivative instruments
are recognised immediately in the Statement of Comprehensive Income.
HALLENSTEIN GLASSON HOLDINGS LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 1 AUGUST 2020
30
7.5.1 Financial risk factors
The Group’s activities expose it to various financial risks including, liquidity risk, credit risk, and market risk (including currency risk
and cash flow interest rate risk). The Group’s risk management strategy is to minimise adverse effects on Comprehensive Income.
Derivative financial instruments are used to hedge currency risk.
7.5.2 Liquidity Risk
Liquidity risk is the risk that the Group will be unable to meet its financial obligations as they fall due. The Group’s approach to
managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under
both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
The Group manages liquidity risk by maintaining adequate reserves, and by regularly monitoring cash flow.
At balance date, the Group had $49.642 million (2019: $16.506 million) in cash reserves and accordingly, management consider
liquidity risk to be relatively low.
The table below analyses the Group’s financial liabilities and gross-settled derivatives into relevant maturity groupings based on the
remaining period from the statement of financial position to the contractual maturity date. The cash flow hedge “outflow” amounts
disclosed in the table are the contractual undiscounted cash flows liable for payment by the Group in relation to all forward foreign
exchange contracts in place at balance date. The cash flow hedge “inflow” amounts represent the corresponding inflow of foreign
currency back to the Group as a result of the gross settlement on those contracts, converted using the spot rate at balance date.
The carrying value shown is the net amount of derivative financial liabilities and assets as shown in the statement of financial
position.
Trade payables are shown at carrying value in the table. No discounting has been applied as the impact of discounting is not
significant.
HALLENSTEIN GLASSON HOLDINGS LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 1 AUGUST 2020
31
7.5.3 Credit Risk
Credit risk is the risk of the failure of a debtor or counterparty to honour its contractual obligations resulting in financial loss to the
Group. The Group incurs credit risk from trade receivables and transactions with financial institutions. The Group places its cash,
short-term investments and derivative financial instruments with high credit quality financial institutions. Retail sales are
predominantly settled in cash or by using major credit cards. 0.2% (2019: 0.2%) of sales give rise to trade receivables. This
maximum exposure to credit risk is the carrying amount of trade receivables.
Concentration of credit risk with respect to debtors is limited due to the large number of customers included in the Group’s customer
base.
The Group does not require collateral or other security to support financial instruments with credit risk.
As at 1 August 2020
Less than 3
months
3-12
months
Total
Carrying
value
$000's
$000's
$000's
$000's
Trade and other payables
26,967
-
26,967
26,967
26,967
-
26,967
26,967
Forward foreign exchange contracts
Cash flow hedges:
- outflow
(22,463)
(49,888)
(72,351)
(72,351)
- inflow
21,906
47,718
69,624
69,709
- Net
(557)
(2,170)
(2,727)
(2,642)
As at 1 August 2019
Less than 3
months
3-12
months
Total
Carrying
value
$000's
$000's
$000's
$000's
Trade and other payables
20,908
-
20,908
20,908
20,908
-
20,908
20,908
Forward foreign exchange contracts
Cash flow hedges:
- outflow
(19,129)
(26,586)
(45,715)
(45,715)
- inflow
19,899
27,468
47,367
47,249
- Net
770
882
1,652
1,534
HALLENSTEIN GLASSON HOLDINGS LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 1 AUGUST 2020
32
7.5.4 Market Risk
Foreign exchange risk
The Group is exposed to foreign exchange risk arising from currency exposure predominantly with the US dollar with the purchase
of inventory from overseas suppliers.
The Board has established a Treasury Risk Policy to manage the foreign exchange risk. The policy is reviewed on a regular basis,
and management report monthly to the Board to confirm policy is adhered to. All committed foreign currency requirements are fully
hedged, and approximately 59% (2019: 50%) of anticipated foreign currency requirements are hedged on a rolling twelve month
basis.
The Group uses forward exchange contracts with major retail banks only to hedge its foreign exchange risk arising from future
purchases.
Forward exchange contracts – cash flow hedges
These contracts are used for hedging committed or highly probable forecast purchases of inventory. The contracts are timed to
mature during the month the inventory is shipped and the liability settled. The cash flows are expected to occur at various dates
within one year from balance date.
When forward exchange contracts have been designated and tested as an effective hedge the portion of the gain or loss on the
hedging instrument that is determined to be an effective hedge is recognised directly in equity. These gains or losses will be released
in the profit and loss in the Statement of Comprehensive Income at various dates over the following year as the hedged risk
crystallises.
At balance date the Group had entered into forward exchange contracts to sell the equivalent of NZ$72.351 million (2019:
NZ$45.715 million), primarily in US Dollars. At balance date these contracts are represented by net liabilities of $2.642 million (2019:
assets of $1.534 million). When foreign exchange contracts are not designated and tested as an effective hedge, the gain or loss
on the foreign exchange contract is recognised in the profit and loss in the Statement of Comprehensive Income.
At balance date there are no such contracts in place (2019: $Nil).
Interest rate risk
The Group has no interest bearing liabilities. Exposure to interest rate risk arises only from the impact on income from operating
cash flows as a result of interest bearing assets, such as cash deposits.
Sensitivity analysis
Based on historical movements and volatilities and management’s knowledge and experience, management believes that the
following movements are ‘reasonably possible’ over a 12 month period:
• Proportional foreign exchange movement of -10% (depreciation of NZD) and +10% (appreciation of NZD) against the
USD, from the year end rate of $0.6706 (2019: $0.6553).
• Proportional foreign exchange movement of -10% (depreciation of NZD) and +10% (appreciation of NZD) against the
AUD, from the year end rate of $0.9283 (2019: $0.9571).
• A parallel shift of +1% / -1% in the market interest rates from the year end deposit rate of 0.25% (2019: 1.00%).
HALLENSTEIN GLASSON HOLDINGS LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 1 AUGUST 2020
33
If these movements were to occur, the post-tax impact on profit and loss and equity for each category of financial investment:
The parent is not exposed to any interest rate or foreign exchange risk.
7.5.5 Capital risk management
The Group’s objectives when managing capital are to maximise the value of shareholder equity and ensure that the Group continues
to safeguard its ability to continue as a going concern. Group capital consists of share capital, reserves and retained earnings. In
order to meet these objectives, the Group may adjust the amount of dividend payment made to shareholders. The Group has no
specific banking or other arrangements which require that the Group maintain specific equity levels.
As at 1 August 2020
Profit
Equity
Profit
Equity
Profit
Equity
Profit
Equity
$000's
$000's
$000's
$000's
$000's
$000's
$000's
$000's
$000's
Financial assets
Loans and receivables
Cash and cash equivalents
49,642
(496)
(496)
496
496
2,261
2,261
(1,850)
(1,850)
Accounts receivable
2,343
-
-
-
-
-
-
-
-
Advances to Employees
291
-
-
-
-
-
-
-
-
Financial liabilities
Liabilities at amortised cost
Trade and other payables
26,967
-
-
-
-
(1,457)
(1,457)
1,192
1,192
Derivatives used for Hedging
Derivatives designated as cash flow hedges
(forward foreign exchange contracts)
2,642
-
-
-
-
-
5,508
-
(4,619)
TOTAL INCREASE/DECREASE
(496)
(496)
496
496
804
6,312
(658)
(5,277)
As at 1 August 2019
Carrying
amount
-1%
+1%
-10%
+10%
Profit
Equity
Profit
Equity
Profit
Equity
Profit
Equity
$000's
$000's
$000's
$000's
$000's
$000's
$000's
$000's
$000's
Financial assets
Loans and receivables
Cash and cash equivalents
16,506
(165)
(165)
165
165
1,069
1,069
(875)
(875)
Accounts receivable
1,652
-
-
-
-
-
-
-
-
Advances to Employees
372
-
-
-
-
-
-
-
-
Financial liabilities
Liabilities at amortised cost
Trade and other payables
20,908
-
-
-
-
(895)
(895)
733
733
Derivatives used for Hedging
Derivatives designated as cash flow hedges
(forward foreign exchange contracts)
1,534
-
-
-
-
-
3,874
-
(3,015)
TOTAL INCREASE/DECREASE
(165)
(165)
165
165
174
4,048
(142)
(3,157)
Carrying
amount
Interest rate
Foreign exchange rate
-1%
+1%
-10%
+10%
Foreign exchange rate
Interest rate
HALLENSTEIN GLASSON HOLDINGS LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 1 AUGUST 2020
34
7.6 Events subsequent to balance date
Subsequent to year end, the Board has resolved to pay an interim dividend of 15.0 cents per share (fully imputed). The dividend
was paid on the 4th of September 2020 to all shareholders on the Company’s register as at 5:00pm, 28th August 2020.
The Board has additionally resolved to pay a final dividend of 24.0 cents (2019: 24.0 cents) per share (fully imputed). The
dividend will be paid on 15 December 2020 to all shareholders on the Company’s register as at 5:00pm, 8th December 2020.
At 11:59pm on 12 August 2020 Auckland re-entered Level 3 lockdown. The Group announced it had closed thirteen Hallenstein
Brothers stores and twelve Glassons stores in Auckland. On 31 August 2020 Auckland entered level 2.5 and the Auckland stores
for both Hallensteins Brothers and Glassons were re-opened with strict protocols in place in line with the Governments
recommendations.
At the time of signing these accounts the Glassons stores in Victoria remain closed. The stores are currently expected to reopen
in line with Australian Government recommendations on 26 October 2020.
7.7 Standards, amendments and interpretations to existing 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 and one new practical expedient 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.
• NZ IFRS 16: Leases – Practical expedient for rent concessions as a direct consequence of COVID-19 (effective for
reporting periods beginning on or after 1 June 2020, with early adoption permitted).
The Group adopted NZ IFRS 16 Leases on 2 August 2019 and the impacts of this adoption were disclosed in the interim financial
statements of the Group for the period ended 1 February 2020. The Group has early adopted the practical expedient for lease
concessions in the year ended 1 August 2020 and has applied it to all eligible rent concessions. The impacts of this adoption are
disclosed in note 4.1 Leases.
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.
HALLENSTEIN GLASSON HOLDINGS LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 1 AUGUST 2020
35
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.
• Applied a single discount rate to a portfolio of leases with reasonably similar characteristics (such as leases with a similar
remaining lease term for a similar class of underlying asset in a similar economic environment).
• Elected to exclude initial direct costs from the measurement of the right-of-use asset at the date of initial application.
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.
The change in accounting policy affected the following items in the balance sheet on 2 August 2019:
• Right of use assets – increase by $75,845,000
• Lease liabilities – increase by $82,796,000
• Other payables – decrease by $6,951,000 relating to lease incentives and accrued rent for fixed increases.
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’, ‘distribution 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.
PricewaterhouseCoopers, 15 Customs Street West, Auckland, Private Bag 92162, Auckland 1142, New Zealand
T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz
Independent auditor’s report
To the shareholders of Hallenstein Glasson Holdings Limited
We have audited the financial statements which comprise:
● the statement of financial position as at 1 August 2020;
● the statement of comprehensive income for the year then ended;
● the statement of changes in equity for the year then ended;
● the statement of cash flows for the year then ended; and
● the notes to the financial statements, which include significant accounting policies.
Our opinion
In our opinion, the accompanying financial statements of Hallenstein Glasson Holdings Limited (the
Company), including its subsidiaries (the Group), present fairly, in all material respects, the financial
position of the Group as at 1 August 2020, its financial performance and its cash flows for the year
then ended in accordance with New Zealand Equivalents to International Financial Reporting
Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the financial statements section of
our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1
International Code of Ethics for Assurance Practitioners (including International Independence
Standards) (New Zealand) (PES 1) issued by the New Zealand Auditing and Assurance Standards
Board and the International Code of Ethics for Professional Accountants (including International
Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA
Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements.
Our firm carries out other services for the Group in the areas of tax advisory and tax compliance
services. The provision of these other services has not impaired our independence as auditor of the
Group.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial statements of the current year. These matters were addressed in the context
of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
PwC 37
Description of the key audit matter How our audit addressed the key audit
matter
Inventory valuation, including the impact of
COVID-19
As at 1 August 2020, the Group held $24.6
million of inventories. Given the size of
the inventory balance relative to the
total assets of the Group and the estimates
and judgements described below, the
valuation of inventory required significant
audit effort.
As disclosed in Note 3.2 of the financial
statements, inventories are held at the lower
of cost and net realisable value determined
using the weighted average cost method. At
year end, the valuation of inventory is
reviewed by management and the cost of
inventory is reduced to its Net Realisable
Value (NRV) where inventory is forecast to
be sold below cost.
As described under Critical accounting
estimates, judgements and assumptions in
note 1.2 of the financial statements, the
Group assesses the inventory provision using
management judgement which considers a
range of factors including the review of
historical data, the age of inventory and the
current selling price trends to determine the
appropriateness of the provision.
As disclosed in note 1.3 of the financial
statements, the Group has taken steps since
March in response to COVID-19, including
closely monitoring planned stock intake and
alignment with sales demand which meant
that COVID-19 did not have a material
impact on the valuation.
We have performed the following procedures over
the valuation of inventory:
● For a sample of inventory items, tested
inventory costing to supplier invoices and
shipping documentation;
● We tested that the ageing report used by
management correctly aged inventory items by
agreeing a sample of aged inventory items to
the invoices;
● On a sample basis we tested the NRV of
inventory lines to recent selling prices;
● We assessed the percentage write down applied
to older inventory with reference to historic
inventory write downs and recoveries on slow
moving inventory;
● We re-performed the calculation of the
inventory write down;
● Considered the impact of COVID-19 on the
inventory valuation by discussing the impact
with management, considering the impact on
slow moving items and the impact of reduction
in purchase levels on the NRV calculations;
● We also made enquires of management,
including those outside of the finance function,
and considered the results of our testing above
to determine whether any specific write downs
were required; and
● Reviewed the appropriateness of disclosures in
the financial statements.
From the procedures performed we have no
matters to report.
PwC 38
Description of the key audit matter How our audit addressed the key audit
matter
Adoption of NZ IFRS 16 Leases
The Group adopted NZ IFRS 16 Leases on 2
August 2019. The standard requires the
recognition of a right of use asset and lease
liability on the balance sheet for all leases.
Previously operating leases were not
recognised on the balance sheet. The
adoption of the standard has resulted in the
recognition of a right of use asset of $75.8
million and a lease liability of $82.8 million.
As outlined in Note 4.1 of the financial
statements, a number of judgements and
estimates have been made by management in
establishing these opening values. These
comprise of the:
● Incremental borrowing rates at the time
of adoption;
● Lease terms, including the judgement
that no rights of renewal are expected to
be exercised; and
● Application of practical expedients in
respect of short-term lease exemptions.
This was considered an area of focus for our
audit due to the number of leases and the
significant judgements and estimates
inherent in the calculation.
We have performed the following audit procedures:
● Held discussions with management to
understand the adoption process, including the
basis for key assumptions used in the
calculation of opening balances and
management's process;
● Performed testing, on a sample basis, of the
accuracy of information included in the
calculations by comparing them to the terms in
the underlying lease contracts;
● Tested completeness of the identified lease
contracts by checking that leased stores were
included in the calculation;
● Engaged our valuation experts to assess the
appropriateness of the incremental borrowing
rates used;
● On a sample basis, recalculated the right of use
asset and lease liability for individual leases;
● Reviewed assumptions used to determine the
lease term, including no rights of renewal being
assumed, and assessed whether they were
supported by past practice and current business
plans;
● Reviewed the appropriateness of practical
expedients applied, including exclusion of
short-term lease exemptions;
● On a sample basis, assessed the appropriate
treatment of rent abatements received from
landlords; and
● Reviewed the appropriateness of disclosures in
the financial statements.
From the procedures performed we have no
matters to report.
PwC 39
Our audit approach
Overview
An audit is designed to obtain reasonable assurance whether the financial
statements are free from material misstatement.
Overall Group materiality: $1.8 million, which represents approximately
5% of Group profit before tax.
We chose Group profit before tax as the benchmark because, in our view,
it is the benchmark against which performance of the Group is most
commonly measured by users, and is a generally accepted benchmark.
We agreed with the Audit and Risk Committee that we would report to
them any misstatements identified during our audit above $100,000 as
well as misstatements below that amount that, in our view, warranted
reporting for qualitative reasons.
As reported above, we have two key audit matters, being:
● Inventory valuation, including the impact of COVID-19
● Adoption of NZ IFRS 16 Leases
Materiality
The scope of our audit was influenced by our application of materiality.
Based on our professional judgement, we determined certain quantitative thresholds for materiality,
including the overall Group materiality for the financial statements as a whole as set out above. These,
together with qualitative considerations, helped us to determine the scope of our audit, the nature,
timing and extent of our audit procedures and to evaluate the effect of misstatements, both
individually and in aggregate on the financial statements as a whole.
Audit scope
We designed our audit by assessing the risks of material misstatement in the financial statements and
our application of materiality. As in all of our audits, we also addressed the risk of management
override of internal controls including among other matters, consideration of whether there was
evidence of bias that represented a risk of material misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an
opinion on the financial statements as a whole, taking into account the structure of the Group, the
accounting processes and controls, and the industry in which the Group operates.
Our Group audit scope focused on the major operating locations. In aggregate, the locations selected
as part of our audit scoping contributed 98% of the Group’s Revenue and 94% of the Group’s profit
before tax.
Audits of each major operating location are performed by PwC New Zealand at a materiality level
calculated by reference to a proportion of Group materiality appropriate to the relative scale of the
operations concerned. The remaining operations were not considered significant to the Group and
were subject to other procedures including analytical procedures.
PwC 40
Information other than the financial statements and auditor’s report
The Directors are responsible for the annual report. Our opinion on the financial statements does not
cover the other information included in the annual report and we do not and will not express any form
of assurance conclusion on the other information. At the time of our audit, there was no other
information available to us.
In connection with our audit of the financial statements, if other information is included in the annual
report, our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the
other information that we obtained prior to the date of this auditor’s report, we conclude that there is a
material misstatement of this other information, we are required to report that fact.
Responsibilities of the Directors for the financial statements
The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of
the financial statements in accordance with NZ IFRS and IFRS, and for such internal control as the
Directors determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements, as a whole,
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (NZ) and ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located at the
External Reporting Board’s website at:
https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-1/
This description forms part of our auditor’s report.
PwC 41
Who we report to
This report is made solely to the Company’s shareholders, as a body. Our audit work has been
undertaken so that we might state those matters which we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s shareholders, as a body, for our
audit work, for this report or for the opinions we have formed.
The engagement partner on the audit resulting in this independent auditor’s report is Keren Blakey.
For and on behalf of:
Chartered Accountants
25 September 2020
Auckland
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.
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