HLG Annual Report for the year ended 1 August 2020
HALLENSTEIN GLASSON HOLDINGS LIMITED | ANNUAL REPORT 2020
2020
ANNUAL REPORT
A SOLID PERFORMANCE IN A CHALLENGING MARKET
WE ARE PLEASED AND GRATEFUL FOR THE RESILIENCE AND COMMITMENT
SHOWN BY OUR PEOPLE IN A CHALLENGING ENVIRONMENT.
THE COMPANY ADJUSTED QUICKLY TO THE CHANGING RETAIL AND CONSUMER
LANDSCAPE TO DELIVER A SOLID PERFORMANCE FOR THE YEAR.
THE INVESTMENT IN DIGITAL, RETAIL INNOVATION AND FOCUS ON
FASHIONABLE PRODUCT REMAIN PILLARS TO MAINTAINING
OUR MANDATE FOR SUSTAINABLE LONG-TERM GROWTH.
CONTENTS
HIGHLIGHTS
CHAIRMAN’S REPORT CHAIRMAN’S REPORT
GROUP MANAGING GROUP MANAGING
DIRECTOR’S REPORTDIRECTOR’S REPORT
SUSTAINABILITY SUSTAINABILITY
MATTERS MATTERS
HALLENSTEIN HALLENSTEIN
BROTHERSBROTHERS
GLASSONSGLASSONS
INDEPENDENT INDEPENDENT
AUDITOR’S REPORTAUDITOR’S REPORT
FINANCIAL
STATEMENTS
GENERAL DISCLOSURES GENERAL DISCLOSURES
CORPORATE CORPORATE
GOVERNANCE GOVERNANCE
STATEMENTSTATEMENT
SHAREHOLDER SHAREHOLDER
INFORMATION INFORMATION
DIRECTORY & DIRECTORY &
CALENDARCALENDAR
16
20
26
60
64
70
73
02
04
06
10
14
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A SOLID PERFORMANCE IN A CHALLENGING MARKET
WE ARE PLEASED AND GRATEFUL FOR THE RESILIENCE AND COMMITMENT
SHOWN BY OUR PEOPLE IN A CHALLENGING ENVIRONMENT.
THE COMPANY ADJUSTED QUICKLY TO THE CHANGING RETAIL AND CONSUMER
LANDSCAPE TO DELIVER A SOLID PERFORMANCE FOR THE YEAR.
THE INVESTMENT IN DIGITAL, RETAIL INNOVATION AND FOCUS ON
FASHIONABLE PRODUCT REMAIN PILLARS TO MAINTAINING
OUR MANDATE FOR SUSTAINABLE LONG-TERM GROWTH.
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HIGHLIGHTS
”
“
A particular highlight is
the ongoing growth of the
Glassons Australia business,
which continues to go from
strength to strength.
MARY DEVINE
GROUP MANAGING DIRECTOR
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HIGHLIGHTS
1,734
TEAM MEMBERS
114
TOTAL STORES
288
SALES
UP 0.1%
M
$
87
TOTAL EQUITY
M
$
21.9
% OF TOTAL REVENUE
THROUGH ONLINE SALES
UP FROM
15.2% IN 2019
211
TOTAL ASSETS
M
$
46.56
EARNINGS PER ORDINARY SHARE
%
28
PROFIT AFTER TAX
DOWN 4.3%
M
$
CENTS
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CHAIRMAN’S
REPORT
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 where 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.
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GROUP SALES
$
287.76
ONLINE SALES
21.9
%
OF GROUP TURNOVER
M
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 in store 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 26th
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.
WARREN BELL
CHAIRMAN
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THIS YEAR HAS BEEN A
YEAR OF TWO HALVES,
WITH DISTINCT MARKET
CONDITIONS.
The first half saw strong sales
but the past six months has
had a significant impact on
the overall performance of
the business for the financial
year. Despite the challenges
faced, delivering sales on
par with last year has been
commendable. From the initial
lockdown in China and impact
on supply chain, to the various
geographical lockdowns in
New Zealand and Australia,
impacting both physical retail
and limitations on product offer
online, the Company responded
with agility and speed to
maintain customer connectivity
and optimise sales.
Digital was at the forefront
of the Company’s ability to
respond with the limitations of
lockdowns. Innovative social
media campaigns provided
connectivity to our customers.
The Glassons ‘Keeping
Connected’ Instagram series
and for Hallenstein Brothers
the ‘Live in the Lounge’ were
both unique ways of staying
connected and relevant to our
customer base.
It was also fortuitous the
investment in the three
distribution facilities over the
past 18 months, the purpose
built Glassons facilities in
Christchurch and Sydney
were specifically designed to
accommodate significant
online growth.
In addition, the Hallenstein
Brothers Distribution Centre in
Auckland had been expanded
with technology implemented
to enhance the pick efficiency
of online orders. These facilities
were instrumental to support
the significant growth in the
online channel.
The Glassons brand, despite
the market environment
continues to go from strength
to strength. The Glassons team
maintain constant engagement
with the customer which
provides valuable insights to
ensure product is relevant to
customer segments. Uniqueness
of design and being able to
respond quickly to market
demands is providing a
competitive advantage. We
remain optimistic of the growth
potential of the Glassons brand,
particularly in the Australian
market.
The Hallenstein Brothers brand
is being refined, moving away
from a historical promotionally
driven strategy, to a greater
focus on quality product across
core categories overlayed
with fashion capsules. The
customer and staff response
to the repositioning has been
positive. However, the challenge
for the brand in recent times is
acknowledgment that demand
for the Tailored product
category has been diminished
with the impact of lockdowns
and restrictions on gatherings.
GROUP MANAGING
DIRECTOR’S
REPORT
114
STORES
ACROSS THE GROUP
2
NEW
STORES
3
STORES
REFURBISHED
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”
“
The resilience and
commitment of our people
has been exemplary in
challenging circumstances.
The ability to adjust
and adapt our trading
environment to keep
customer engagement at
the forefront has been
exceptional.
MARY DEVINE
GROUP MANAGING DIRECTOR
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PRODUCT
The restrictions on global travel has facilitated
the opportunity to enhance design capability
within the businesses. This has led to the
respective Design teams identifying unique
ways of responding to global fashion trends.
With the variability in customer demand at
category level we are mindful of staying close
to the market, to ensure we are delivering the
right mix of product in a timely manner.
Another key product initiative in the business is
progress on our sustainability journey. Over the
past 18 months we have been increasingly sourcing
textiles that align with respected certification
programmes. Using recycled, organic, and
traceable fabric, in addition to building upon the
vintage product lines, which are offered in select
Hallenstein Brothers and Glassons stores.
SUPPLY CHAIN
Both Hallenstein Brothers and Glassons have
long standing supply arrangements. We are
grateful for the support shown by many of our
suppliers through the lockdowns, which allowed
us to effectively manage our stock levels.
We have also been working with our suppliers
partnering on our sustainability journey as we
increase transparency in our supply chain.
The investment in two new fulfilment centres:
Glassons New Zealand (Christchurch) and
Glassons Australia (Sydney) and the refurbishment
Hallensteins (Auckland) have enabled pivotal
infrastructure to support the omni-channel growth of
the business. In addition, our logistics partners have
also provided strong support as we have weaved
through the varying supply chain challenges.
RETAIL
Customer experience in our physical stores
remains pivotal to our Brands success.
Continuing to re-fresh store fitouts and
introducing new elements to stay relevant
to fashion trends and functionality. We also
have on-going investment in technology
in-store that both enhances our retail team’s
ability to assist customer needs, in addition
to delivering productivity efficiency.
During the last financial year we opened 2
new Glassons stores Robina (Gold Coast)
and Cuba Mall (Wellington). In addition,
a number of stores through both the
Glassons and Hallenstein Brothers
network were updated or refurbished.
Negotiations continue with landlords on the
impact of COVID-19. Moving forward we will
continue to maintain a watching brief on the
retail landscape and what will evolve post
the impact of COVID-19. We are mindful
that across retail precincts there will be
variability on the future outlook, but also
believe it may be an opportune time for select
investment in key retail locations in Australia.
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DIGITAL
It was pleasing to see for the Group the annual
growth in online of 47%. Online sales accounted
for 22% of total sales for the year, and to note
were 30% of total sales for the second six months.
In particular, the performance of the Glassons
online channel in the past six months has
been exemplary.
We continue to build on the expertise of the
in-house Digital teams, with a number of key
appointments over the past twelve months.
The areas which have been a focus for both
Digital teams include:
— Customer Relationship Management —
the implementation of a new CRM system
which is allowing greater sophistication on
customer segments and understanding their
communication profiles. Whilst still in its
infancy we are confident that gaining greater
insights to our customer preferences will
enhance our execution.
— Website functionality — both Brands have
embarked on further enhancement on the
functionality and aesthetics of the respective
websites. This will continue to evolve in this
coming year.
— Content — the ability of the in-house teams
to develop creative content to support the
Brands has been pivotal in context of travel
restrictions. The increasing demand for relevant
and creative content across digital formats is
driving innovative solutions.
There are a number of projects underway for
both Digital teams, and we are particularly excited
about the opportunities that lie ahead for the
Glassons brand online.
OUTLOOK
We are prepared to manage the ever-changing
dynamics of the market. We know that there
will be challenges ahead, but the commitment
of our people and ability to adapt will allow us
to be responsive to the market. The ongoing
investment in digital will remain a priority,
with continued opportunity to grow the online
channel for both brands.
We also believe there is potential for additional
physical stores in Australia. However, we will
take a prudent approach in assessing viability.
On a personal note, I would like to thank all
stakeholders for their support of the business
throughout the year. Our staff have been
amazing, but also the support of our suppliers,
landlords and shareholders has allowed the
Company to continue to deliver commendable
results in unprecedented times.
MARY DEVINE
GROUP MANAGING DIRECTOR
SUSTAINABILITY
We are pleased to release our first full
Sustainability Report — Made with Care. As a
Group we are committed to act more sustainably
to make a positive impact on people and the
environment. We acknowledge we are very much
on a journey, and the Made with Care report puts
voice to our responsibility to bring affordable
fashion to our customers ethically and sustainably.
The report covers our actions over the past
12 months, and the strategies and initiatives
that we have in place to make a difference.
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SUSTAINABILITY
MATTERS
HALLENSTEIN GLASSON HOLDINGS SUSTAINABILITY FRAMEWORK
VISION
TO BUILD A SUSTAINABLE BUSINESS ON A FIRM FOUNDATION OF INTEGRITY
PILLARS
AREAS OF
FOCUS
Staff
wellbeing and
empowerment
Community
support
Sustainable
stores and
operations
Climate
change
Sustainable
Fabrics and
products
Ethical and
transparent
supply chains
IMPORTANT
ISSUES
Engaged and
empowered
diverse
workforce
Meaningful
investment
Plastics and
packaging
Our carbon
footprint
Certified
fabrics
Supplier
partnerships
Safe working
environment
Reducing
waste
Preparing for
climate change
Pre-loved
garments
Ethical
factories
Career
development
Energy
efficiency
Cruelty-free
fashion
Effective &
transparent
communication
Product
stewardship
COMMUNICATE OUR STRATEGY CLEARLY TO STAFF, CUSTOMERS & SHAREHOLDERS
PeoplePlantProduct
THIS YEAR WE HAVE RELEASED THE FIRST HALLENSTEIN
GLASSONS HOLDINGS (HGH) SUSTAINABILITY REPORT.
Below is a summary of the report but you can read the full version on the
Group website at www.hallensteinglasson.co.nz/sustainability
There’s a drive from within the fashion industry to act more sustainably — to
have a more positive impact on people and the environment. We want to be
at the forefront of that discussion, but at the same time, be honest about
what we’ve done and how we plan to improve.
We are excited to introduce our commitment — Made with Care. Made with
Care lays out our responsibility to bring affordable fashion to our customers
ethically and sustainably — not shying away from the challenges we face —
but meeting them head on.
WE HAVE DEVELOPED A STRUCTURE AND FRAMEWORK AROUND OUR SUSTAINABILITY PLAN.
The combined responses of our staff and customers, coupled with our own knowledge of the issues,
led us to develop the framework. This is what we use to measure our progress to being a more
sustainable business and delivering on our commitments. Under each pillar we have developed
areas of focus and under those we have determined the important issues for us to address.
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COVID-19: OUR SUPPLIERS AND
OUR RESPONSE
The COVID-19 pandemic has had a severe effect
on global health and economies. The fashion
industry has been hit hard. We have witnessed
first-hand the challenges faced by factories who
were left with unpaid goods and cancelled orders.
We look out for our suppliers and their workers,
and we’ve made a commitment to honour our
contracts.
We’ve signed up to the Tearfund 6
Commitments to underline this commitment.
1. Support workers’ wages by honouring supplier
commitments.
2. Identify and support the workers at
greatest risk.
3. Listen to the voices and experiences
of workers.
4. Ensure workers’ rights and safety are
respected.
5. Collaborate with others to protect vulnerable
workers.
6. Build back better for workers and the world.
ETHICAL AND TRANSPARENT
SUPPLY CHAINS
We don’t own or manage factories ourselves
and our manufacturing is outsourced to selected
partners who meet our high ethical and quality
standards. Most of our suppliers have been on our
journey with us for more than 15 years. Because
we build long term supplier relationships we can,
and do, demand high standards and transparency
from those suppliers.
Our Social & Ethical Compliance Auditing
programme operates across our entire supplier-
base. This programme consists of conducting
annual factory audits to ensure our suppliers are
following our Supplier Code of Conduct which
include the below areas:
— No child labour.
— No forced labour or human trafficking.
— No discrimination.
— Safe and healthy work environments.
— Wages, working hours and benefits comply
with local industry requirements.
— Prohibition of excessive overtime.
— No harsh or inhumane treatment.
— Freedom of association and the right to
collective bargaining.
— Compliance with environmental laws.
— Raw materials are ethically sourced.
INNO COMMUNITY DEVELOPMENT ORGANISATION (INNO)
We have partnered with Chinese Non-governmental organisations (NGO) INNO — by implementing
the ‘Handshake Workers Programme’ which supports worker voices and grievances. We believe this is
a perfect fit, as INNO is Chinese based, providing support right where the majority of our suppliers are
located. INNO is a whistle blower hotline that workers can access via QR code posted in the factory,
enabling direct communication to INNO employees.
ETHICAL AND
TRANSPARENT
SUPPLY CHAINS
SUSTAINABLE
FABRICS AND
PRODUCTS
SUSTAINABLE
STORES AND
OPERATIONS
STAFF
WELLBEING AND
EMPOWERMENT
OUR FOUR KEY FOCUS AREAS ARE
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SUSTAINABLE FABRICS
AND PRODUCTS
It will come as no surprise that fabric is the
cornerstone of our business. Without it, we would
not exist. It comes in many forms, some of it
sustainable, some not. So our goal is two-fold:
make product as sustainable as possible, and
ensure that product is affordable and accessible
for our customers, so they can make a sustainable
choice without compromise.
These are the key issues for us, under our
‘sustainable fabrics and products’ area of focus:
— Certified Fabrics.
— Vintage Garments.
— Cruelty Free Fashion.
— No Harm Waste Management.
Over the last 18 months, we have focused
more on sourcing textiles responsibly; aligning
ourselves with globally recognised and respected
certification programmes, so we know our fabrics
are aligned with our sustainability framework.
You can learn more about our certified fabrics
in our Sustainability Report.
Glassons and Hallenstein Brothers are
incorporating vintage and upcycled products
into stores to complement our main ranges.
We 100% support Cruelty Free Fashion that
respects biodiversity, animal welfare and
protection of our oceans.
The fashion industry generates a lot of waste and
HGH is no different. It’s something we’ve been
focused on for a number of years as we look for
ways to reduce it.
— We send fabric swatches to preschool
centres for art and craft projects.
— We donate product samples to Women’s
Refuge.
— Faulty products and recalls are made into rags.
— We send faulty but completely wearable stock
to the Salvation Army.
MY FIBRES ARE
TRACEABLE
I’M MADE OF RECYCLED FIBERS
ORGANIC COTTON
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As good as these initiatives have been for us
over the past five years, we are always looking
for better solutions, and one of those is our
partnership with The Formary, New Zealand’s
leading specialists, supporting organisations like
ours to develop a strategic approach to reduce
textile waste.
SUSTAINABLE STORES
AND OPERATIONS
Our 114 retail stores, 3 distribution centres and
head offices in Auckland and Sydney all generate
waste, consume electricity and use resources,
so we are continually exploring ways to make
our stores and operations more efficient, and
constantly refining to adopt ethically sound and
environmentally sustainable practices across our
operations; for our own team, our customers and
all our stakeholders.
The three areas we concentrate on are:
— Packaging and Plastics.
— Reducing Waste.
— Energy Efficiency.
We have replaced plastic bags in store with paper
bags. For our online customers, the courier bags
and the polybags we use to ship goods to them,
will shortly all be compostable.
We are proud of our current initiative, but we’re
always open to improvements to our sustainable
packaging. Therefore our current Compostables
Programme is flexible enough to allow for better
solutions as sustainability practices evolve.
At Hallenstein Brothers and Glassons we
recognise that sustainable business practices
are fundamental to our future as they minimise
the impact on our environment.
Our main objectives are to REDUCE, REUSE,
RECYCLE our WASTE.
We are rapidly moving toward packaging
that’s disposed of properly and has less
environmental impact.
But we are also reducing the amount of
packaging we use, and the amount of waste
we generate. And where we cannot eliminate
waste, we’re doing all we can to reuse
or recycle.
Clothing retail stores rely on good lighting for
optimal display and safety. Lighting is the
main consumer of energy in all our stores and
contributes significantly to our carbon footprint.
We are currently installing LED store lighting
across our retail network.
STAFF WELLBEING AND
EMPOWERMENT
We recognise our people are entitled to feel
valued, respected and appreciated. We also
want to make sure they feel safe and happy
whilst at work.
Our focus on staff wellbeing and empowerment
has four themes:
— An engaged and empowered diverse
workforce.
— A safe workforce.
— Career development.
— Effective and transparent communication.
We firmly believe an empowered workforce
makes for a happy crew — and we are committed
to supporting empowerment by promoting our
values of respect, dignity, non-discrimination and
providing safe workplaces.
Once a staff member is part of the HGH family,
we provide ongoing professional development
support through numerous training opportunities.
Good communication is important for any
company to function effectively. Our staff
and management should feel they can easily
communicate with each other — and our other
stakeholders should feel we communicate
clearly with them.
If you want to read further about our
sustainability journey and targets please visit
our website www.hallensteinglasson.co.nz
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”
“
The focus on quality
across the casual product
categories is resonating
strongly with customers.
MARY DEVINE
GROUP MANAGING DIRECTOR
43.4
INSTAGRAM
FOLLOWERS
K
88
TOTAL SALES
DOWN 9.1%
$
M
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43
STORES
IN NEW ZEALAND
4
STORES
IN AUSTRALIA
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”
“
The growth of the
Glassons online channel
in the past 12 months
has been exceptional.
MARY DEVINE
GROUP MANAGING DIRECTOR
103
NEW ZEALAND SALES
M
$
97
AUSTRALIAN SALES
M
$
UP 1.9%
UP 8.0%
534
INSTAGRAM
FOLLOWERS
K
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36
STORES
IN NEW ZEALAND
32
STORES
IN AUSTRALIA
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19
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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.
TO THE SHAREHOLDERS OF HALLENSTEIN GLASSON HOLDINGS LIMITED
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.
INDEPENDENT AUDITOR’S REPORT
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.
21
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
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 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.
TO THE SHAREHOLDERS OF HALLENSTEIN GLASSON HOLDINGS LIMITED
INDEPENDENT AUDITOR’S REPORT
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.
22
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
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 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.
TO THE SHAREHOLDERS OF HALLENSTEIN GLASSON HOLDINGS LIMITED
INDEPENDENT AUDITOR’S REPORT
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.
23
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
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 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.
TO THE SHAREHOLDERS OF HALLENSTEIN GLASSON HOLDINGS LIMITED
INDEPENDENT AUDITOR’S REPORT
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.
24
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
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 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.
TO THE SHAREHOLDERS OF HALLENSTEIN GLASSON HOLDINGS LIMITED
INDEPENDENT AUDITOR’S REPORT
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.
25
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
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
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.
TO THE SHAREHOLDERS OF HALLENSTEIN GLASSON HOLDINGS LIMITED
INDEPENDENT AUDITOR’S REPORT
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.
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 1 AUGUST 2020
$’000
NOTE20202019
Sales revenue
2.1
287,763
287,550
Cost of sales2.1
(118,514)
(114,999)
Gross profit169,249
172,551
Other operating income2.2
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 profit39,175
39,221
Finance income2.1
125
221
Finance Expense2.1, 2.2
(2,569)
-
Profit before income tax36,731
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 buildings6.1
1,506
2,810
Increase in share option reserve6.1
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 share2.4
46.56
48.65
The Notes to the Financial Statements form an integral part of and are to be read in conjunction with these Financial Statements.
26
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
STATEMENT OF FINANCIAL POSITION
AS AT 1 AUGUST 2020
$’000
NOTE20202019
Equity
Contributed equity5.1
29,059
28,974
Asset revaluation reserve
19,925
18,419
Cashflow hedge reserve
(1,878)
1,095
Share option reserve
64
58
Retained earnings
39,932
26,454
Total equity87,102
75,000
Represented by
Current assets
Cash and cash equivalents3.1
49,642
16,506
Trade and other receivables
2,343
1,652
Advances to employees
291
372
Prepayments
1,040
4,535
Inventories3.2
24,637
24,011
Derivative financial instruments7.5
19
1,534
Total current assets77,972
48,610
Non-current assets
Property, plant and equipment4.2
48,958
49,539
Right of use assets4.1
73,628
-
Investment property4.3
3,212
2,968
Intangible assets
420
439
Deferred tax6.2
7,234
3,024
Total non-current assets133,452
55,970
Total assets211,424
104,580
Current liabilities
Trade payables
12,771
6,798
Employee benefits7.1
5,586
4,775
Other payables
14,196
14,110
Lease liabilities4.1
27,027
-
Derivative financial instruments7.5
2,661
-
Taxation payable
3,445
3,897
Total current liabilities65,686
29,580
Non-current liabilities
Lease liabilities4.1
58,636
-
Total liabilities124,322
29,580
Net assets87,102
75,000
The Notes to the Financial Statements form an integral part of and are to be read in conjunction with these Financial Statements.
The Financial Statements are signed for and on behalf of the board and were authorised for issue on 25 September 2020.
GRAEME POPPLEWELL
DIRECTOR
25 SEPTEMBER 2020
MALCOM FORD
DIRECTOR
25 SEPTEMBER 2020
27
HALLENSTEIN GLASSON HOLDINGS LIMITED | ANNUAL REPORT 2020
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 1 AUGUST 2020
$’000
NOTE
SHARE
CAPITAL
TREASURY
STOCK
ASSET
REVALUATION
RESERVE
CASH
FLOW
HEDGE
RESERVE
SHARE
OPTION
RESERVE
RETAINED
EARNINGS
TOTAL
EQUITY
Balance at 1 August 201829,279(1,461)15,6091,73915523,01968,340
Comprehensive income
Profit for Year-----29,02029,020
Revaluation net of Tax6.1--2,810---2,810
Cash flow hedges net of tax6.1---(644)--(644)
Increase in share option reserve6.1----98-98
Total comprehensive income
--2,810(644)9829,02031,284
Transactions with owners
Sale of treasury stock5.1, 5.2-1,289----1,289
Dividends 2.3, 5.1-160---(26,246)(26,086)
Transfer to employee advances5.1-173----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)18,4191,0955826,45475,000
Comprehensive income
Profit for year
-----27,77427,774
Revaluation net of tax6.1
--1,506---1,506
Cash flow hedges net of tax6.1
---(2,973)--(2,973)
Increase in share option reserve6.1
----26-26
Total comprehensive income --1,506(2,973)2627,77426,333
Transactions with owners
Dividends 2.3, 5.1-27---(14,316)(14,289)
Transfer to employee advances5.1
-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 202029,279(220)19,925(1,878)6439,93287,102
The Notes to the Financial Statements form an integral part of and are to be read in conjunction with these Financial Statements.
28
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 1 AUGUST 2020
$’000
NOTE2020
Cash flows from operating activities
Cash was provided from:
Sales to customers
287,780
287,643
Rent received2.2
229
802
Government grants2.2
8,424
-
Interest income2.1
113
205
Interest on debtors2.1
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 leases2.2
2,569
-
Taxation paid
12,408
10,183
225,243
252,674
Net cash flows from operating activities71,315
35,992
Cash flows from investing activities
Cash was provided from:
Proceeds from sale of property, plant and equipment
4,798
65
Proceeds from sale of investment property-7,750
Repayment of employee advances139266
4,9378,081
Cash was applied to:
Purchase of property, plant and equipment and intangible assets4.2
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 dividends5.1, 5.2271,449
27
1,449
Cash was applied to:
Dividend paid2.3
14,316
26,246
Lease liability payments4.1
16,992
-
31,308
26,246
Net cash flows (applied to) financing activities(31,281)
(24,797)
Net increase / (decrease) in funds held33,136
(947)
Cash and cash equivalents at the beginning of the year16,506
17,453
Cash and cash equivalents at the end of the year
3.1
49,642
16,506
The Notes to the Financial Statements form an integral part of and are to be read in conjunction with these Financial Statements.
2019
29
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
STATEMENT OF CASH FLOWS CONTINUED
FOR THE YEAR ENDED 1 AUGUST 2020
$’000
NOTE20202019
Net profit after taxation27,774
29,020
Add/(deduct) items classified as investing or financing activities
(Gain)/loss on sale of plant and equipment2.2
(947)
158
Gain on sale of investment property2.2
-
(1,187)
Add/(deduct) non cash items
Depreciation and amortisation
2.2
31,725
8,446
Net fair value gain on investment property2.2
(244)
(208)
Deferred taxation6.2
(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 activities71,315
35,992
RECONCILIATION OF PROFIT AFTER TAXATION TO CASH FLOWS FROM OPERATING ACTIVITIES
The Notes to the Financial Statements form an integral part of and are to be read in conjunction with these Financial Statements.
30
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
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.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 1 AUGUST 2020
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.
1.2 GENERAL ACCOUNTING POLICIES
31
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 1 AUGUST 2020
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.
20202019
Hallenstein Bros Limited100%100%Retail of menswear in New Zealand
Hallenstein Brothers Australia Limited100%100%Retail of menswear in Australia
Glassons Limited
100%
100%Retail of womenswear in New Zealand
Glassons Australia Limited
100%
100%Retail of womenswear in Australia
Retail 161 Limited
100%
100%Non trading company
Retail 161 Australia Limited
100%
100%Non trading company
Hallenstein Properties Limited
100%
100%Property ownership in New Zealand
PRINCIPAL SUBSIDIARIES
INTEREST HELD BY
PARENT AND GROUP
PRINCIPAL ACTIVITIES
INVESTMENTS IN SUBSIDIARIES
1. BASIS OF PREPARATION (CONTINUED)
32
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 1 AUGUST 2020
1. BASIS OF PREPARATION (CONTINUED)
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.
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.
33
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
1. BASIS OF PREPARATION (CONTINUED)
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.
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.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 1 AUGUST 2020
34
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 1 AUGUST 2020
2. PERFORMANCE
2.1 SEGMENT INFORMATION
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.
SEGMENT RESULTS
For the year ended 1 August 2020
$’000
GLASSONS
NEW ZEALAND
GLASSONS
AUSTRALIA
HALLENSTEINSPROPERTYPARENTTOTAL GROUP
INCOME STATEMENT
Sales revenue from
external customers
102,59796,68688,480--287,763
Cost of sales
(43,918)(37,777)(36,819)--(118,514)
Finance income
3720 65-3125
Finance expenses
(1,110)(647)(812)--(2,569)
Depreciation and
software amortisation
10,03211,27210,064357-31,725
Profit before income tax
16,33613,4136,2287351936,731
Income tax expense
(4,136)(4,057)(1,746)986(4)(8,957)
Net profit after income tax
12,2009,3564,4821,7211527,774
BALANCE SHEET
Current assets
24,39518,12626,4905,3853,57677,972
Non-current assets
50,09533,54731,09218,70612133,452
Current liabilities
22,74822,26120,2303767165,686
Non-current liabilities
26,17015,67116,795--58,636
Purchase of property, plant and
equipment and intangibles
6,3673,9591,5027-11,835
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.
35
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 1 AUGUST 2020
2. PERFORMANCE (CONTINUED)
SEGMENT RESULTS
FOR THE YEAR ENDED 1 AUGUST 2019
2.2 INCOME AND EXPENSES
$’000
GLASSONS
NEW ZEALAND
GLASSONS
AUSTRALIAHALLENSTEINSPROPERTYPARENTTOTAL GROUP
INCOME STATEMENT
Sales revenue from
external customers
100,72889,49697,326--287,550
Cost of sales
(41,274)(33,492)(40,233)--(114,999)
Finance income
4848109-16221
Depreciation and
software amortisation
2,2662,8982,988294-8,446
Profit/(loss) before income tax
15,79411,36410,0362,14410439,442
Income tax expense
(4,434)(3,291)(2,839)7567(10,422)
Net profit after income tax
11,3608,0737,1972,21917129,020
BALANCE SHEET
Current assets
10,18010,26818,6466,0183,49848,610
Non current assets
18,48810,04410,73416,6871755,970
Current liabilities
9,31210,7168,9475069929,580
Purchase of property, plant and
equipment and intangibles
10,1863,7344,6171,686-20,223
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.
36
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 1 AUGUST 2020
2. PERFORMANCE (CONTINUED)
INCOME AND EXPENSES
Profit before income tax includes the following specific income and expenses:
$’00020202019
Other operating income
Rental income
229
802
Insurance proceeds
19
-
Net fair value gain on investment property
244
208
Gain on sale of land and buildings
1,006
-
Gain on sale of investment property
-
1,187
Expenses
Occupancy costs
3
5,731
29,873
Audit of financial statements
PwC New Zealand
169
145
Other services
Performed by PwC New Zealand
1
12
10
Performed by PwC Australia
2
25
22
Directors’ fees
585
647
Wages, salaries and other short term benefits
4
44,965
51,727
Depreciation of property, plant and equipment
9,816
8,164
Depreciation of right of use assets
21,644
-
Amortisation of software
265
282
Total depreciation and amortisation
31,725
8,446
Interest on leases
2,569
-
Loss on sale of property, plant and equipment
59
158
DIVIDENDS2020201920202019
Cents per
share
Cents per
share
$’000
$’000
Final dividend for the year ended 1 August 2019
24.0014,316
Interim dividend for the year ended 1 August 201920.0011,930
Final dividend for the year ended 1 August 201824.0014,316
Total24.00
44.00
14,316
26,246
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.
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.
37
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 1 AUGUST 2020
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).
The carrying amount of cash and cash equivalents equals the fair value.
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.
Earnings per share
$’00020202019
Profit after tax
27,774
29,020
Weighted average number of ordinary shares outstanding
59,649
59,649
Basic and diluted earnings per share (cents per share)
46.56
48.65
Cash and cash equivalents
$’00020202019
Cash at bank
37,237
15,439
Short term bank deposits
12,342
1,004
Cash on hand
63
63
Total cash and cash equivalents49,642
16,506
2. PERFORMANCE (CONTINUED)
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.
2.4 EARNINGS PER SHARE
38
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 1 AUGUST 2020
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.
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.
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).
Inventories
$’00020202019
Finished goods
25,063
24,308
Inventory adjustments
(426)
(297)
Net inventories24,637
24,011
3. WORKING CAPITAL (CONTINUED)
4. LONG TERM ASSETS
4.1 LEASES
39
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
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.
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.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 1 AUGUST 2020
4. LONG TERM ASSETS (CONTINUED)
Right of use assets
$’0002020
Opening net book value 2 August 2019
75,845
Depreciation
(21,644)
Additions
18,805
FX impact
622
Carrying amount 1 August 202073,628
Lease liabilities
$’0002020
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 201982,796
Lease modifications and additions
20,411
Interset for the period
2,569
Lease payments made
(19,561)
Covid-19 rent abatements recieved to date
(1,281)
FX impact
729
Lease liabilities 1 August 202085,663
40
HALLENSTEIN GLASSON HOLDINGS LIMITED | ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 1 AUGUST 2020
Lease liability maturity analysis
$’000
MINIMUM LEASE
PAYMENTS
INTERESTPRESENT
VALUE
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
Total90,937(5,274)85,663
Current
27,027
Non-current
58,636
Total85,663
Lease related expenses included in the income statement
$’000
2020
Depreciation
21,644
Rent on short-term leases
7,012
Covid-19 rent abatements received to date
(1,281)
Interest on leases
2,569
Total29,944
Lease commitments
$’000
2020
2019
At balance date the future aggregate minimum
lease commitments was as follows:
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 commitments1,286
96,611
Lease payments included in the cashflow statement
$’000
2020
Interest paid on leases (operating activities)
2,569
Payments for lease liabilities principal (financing activities)
16,992
Total cash outflows from leases19,561
4. LONG TERM ASSETS (CONTINUED)
Lease commitments
The Group leases various retail outlets under non-cancellable short-term operating lease agreements.
Leases reflect normal commercial arrangements with varying terms.
41
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
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 approachDescription 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
a 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 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.
4.2 PROPERTY, PLANT AND EQUIPMENT
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 1 AUGUST 2020
4. LONG TERM ASSETS (CONTINUED)
42
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 1 AUGUST 2020
Land and
buildings —
warehouse
19,701Income
capitalisation
approach and
discounted
cash flow
analysis
Net market
rent
$104 -
$143 per m2
The higher the rent
per square metre the
higher the fair value
Capitalisation
rate (yield)
5.00% -
6.37%
The lower the yield the
higher the fair value
Discount rate6.63% -
6.75%
The higher the discount
rate the lower the fair
value
Terminal
capitalisation
rate
5.25% -
6.75%
The higher the terminal
rate the lower the fair
value
Rental growth
rate
0.0% -
5.50%
The higher the rental
growth rate the higher
the fair value
Expenses
growth
1.06% -
4.21%
The higher the expenses
the lower the fair value
DESCRIPTIONFAIR VALUE AT
1 AUGUST 2020
$’000
VALUATION
TECHNIQUE
UNOBSERVABLE
INPUTS
RANGE OF
UNOBSERVABLE
INPUTS
RELATIONSHIP OF
UNOBSERVABLE
INPUTS TO FAIR VALUE
Land and
buildings — retail
4,818Income
capitalisation
approach and
discounted
cash flow
analysis
Net market
rent
$433 per m2The higher the rent
per square metre the
higher the fair value
Capitalisation
rate (yield)
6.24%The lower the yield the
higher the fair value
Discount rate8.05%The higher the discount
rate the lower the fair
value
Terminal
capitalisation
rate
6.75%The higher the terminal
rate the lower the fair
value
Rental growth
rate
0.0% -
2.50%
The higher the rental
growth rate the higher
the fair value
Expenses
growth
0.40% -
2.50%
The higher the expenses
the lower the fair value
4. LONG TERM ASSETS (CONTINUED)
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:
43
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 1 AUGUST 2020
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.
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.
4. LONG TERM ASSETS (CONTINUED)
44
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 1 AUGUST 2019
FOR THE YEAR ENDED 1 AUGUST 2020
$’000
LAND AT FAIR
VALUE
BUILDINGS AT
FAIR VALUE
FIXTURES &
FITTINGS
PLANT &
EQUIPMENTTOTAL
Opening NBV9,48715,63318,5205,89949,539
Additions
-2,0146,6322,94311,589
Disposals
(1,650)(2,059)(68)(74)(3,851)
Depreciation
-(403)(6,601)(2,812)(9,816)
Revaluations
4661,031--1,497
Closing NBV8,30316,21618,4835,95648,958
Cost/valuation8,30316,21662,63422,495109,648
Accumulated depreciation
--(44,151)(16,539)(60,690)
Closing NBV8,30316,21618,4835,95648,958
$’000
LAND AT FAIR
VALUE
BUILDINGS AT
FAIR VALUE
FIXTURES &
FITTINGS
PLANT &
EQUIPMENTTOTAL
Opening NBV6,09710,84415,2104,66036,811
Additions1,875
5,4779,1633,55520,070
Disposals-
-(185)(46)(231)
Depreciation-
(297)(5,597)(2,270)(8,164)
Transfers(49)
(739)(71) - (859)
Revaluations1,564
348 - - 1,912
Closing NBV9,48715,63318,5205,89949,539
Cost/valuation9,48715,63360,27522,469107,864
Accumulated depreciation-
-(41,755)(16,570)(58,325)
Closing NBV9,48715,63318,5205,89949,539
$’000
20202019
Land
4,270
5,580
Buildings
12,792
12,794
Cost
17,062
18,374
Accumulated depreciation
(1,970)
(1,714)
Net book amount15,092
16,660
If land and buildings were stated on a historical cost basis, the amounts would be as follows:
FOR THE YEAR ENDED 1 AUGUST 2020
4. LONG TERM ASSETS (CONTINUED)
45
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 1 AUGUST 2020
4.3 INVESTMENT PROPERTY
Valuation approachDescription 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
a 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.
4. LONG TERM ASSETS (CONTINUED)
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.
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.
46
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 1 AUGUST 2020
DESCRIPTIONFAIR VALUE AT
1 AUGUST 2020
$’000
VALUATION
TECHNIQUE
UNOBSERVABLE
INPUTS
RANGE OF
UNOBSERVABLE
INPUTS
RELATIONSHIP OF
UNOBSERVABLE
INPUTS TO FAIR VALUE
Land and
buildings – retail
3,212Income
capitalisation
approach and
discounted
cash flow
analysis
Net market rent$433 per m2The higher the rent per
square metre the higher
the fair value
Capitalisation rate
(yield)
6.24%The lower the yield the
higher the fair value
Discount rate8.05%The higher the discount
rate the lower the fair
value
Terminal
capitalisation rate
6.75%The higher the terminal
rate the lower the fair
value
Rental growth rate0.0% -
2.50%
The higher the rental
growth rate the higher
the fair value
Expenses growth0.40% -
2.50%
The higher the expenses
the lower the fair 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
$’000
20202019
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 balance3,212
2,968
Lease receivables
$’000
20202019
Due within one year
193
174
One to two years
148
80
Two to five years
304
23
Total lease receivables645
277
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.
Both the income capitalisation approach and discounted cash flow analysis contain unobservable inputs in
determining fair value. These are summarised in the table below:
47
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 1 AUGUST 2020
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.
2020201920202019
Shares
Shares
$000’s
$000’s
Balance at beginning of year59,529,827
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 year59,563,060
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)
Total59,563,060
59,529,827
29,059
28,974
CONTRIBUTED EQUITY
All shares are fully paid and rank equally.
48
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 1 AUGUST 2020
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 schemeYEAR ENDED 1 AUGUST 2020YEAR ENDED 1 AUGUST 2019
Number
of shares
Purchase /
(sale) price
Number
of shares
Purchase /
(sale) price
Balance at beginning of financial year
119,234
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%
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.
5. EQUITY (CONTINUED)
5.2 EXECUTIVE SHARE SCHEME
49
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 1 AUGUST 2020
6. TAXATION
6.1 INCOME TAX EXPENSE
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.
GOODS AND SERVICES TAX (GST)
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.
Income tax expense
$’000
20202019
The tax expense comprises:
Current tax expense
11,941
11,370
Deferred tax expense (note 6.2)
– Future tax benefit current year
(3,036)
(493)
– Prior period adjustment
52
(455)
Total income tax expense8,957
10,422
Reconciliation of income tax expense to tax rate applicable to profits
Profit before income tax expense
36,731
39,442
Tax at 28% (2019: 28%)
10,285
11,044
Tax effect of:
– Income not subject to tax
(236)
(346)
– Expenses not deductible for tax
26
80
– Adjustment due to different rate in different jurisdictions
280
99
– Prior period adjustment
52
(455)
– Reinstatement of tax base on buildings
(1,450)
-
Total income tax expense8,957
10,422
The effective tax rate for the year was 24.4% (2019: 26.4%). The Group has no tax losses (2019: Nil) and no
unrecognised temporary differences (2019: Nil).
50
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 1 AUGUST 2020
The tax (charge)/credit relating to components of other comprehensive income are as follows:
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.
$’00020202019
BEFORE
TAX
TAX
(CHARGE)
/ CREDITAFTER TAX
BEFORE
TAX
TAX
(CHARGE)
/ CREDITAFTER TAX
Gains (net of tax) on revaluation
of land and buildings
1,49791,506
1,9128982,810
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
6.2 DEFERRED TAX
$’000
20202019
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 recognised7,234
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 year7,234
3,024
6.3 IMPUTATION CREDITS
$’000
20202019
Imputation credits available for subsequent reporting periods
17,131
14,167
6. TAXATION (CONTINUED)
51
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 1 AUGUST 2020
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.
The Group undertook transactions with the related interests of the majority shareholder as detailed below:
Employee benefits
$’000
20202019
Holiday pay accrual and other benefits
5,586
4,775
20202019
T C Glasson
Rent on retail premises based on independent valuations
1,800
2,070
Capital commitments
$’000
20202019
Commitments in relation to store fitouts and warehouse construction
-
2,688
Contingencies
$’000
20202019
Financial guarantee
466
678
Bank guarantee provided to the New Zealand Stock Exchange Limited
75
75
52
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 1 AUGUST 2020
The following Directors received Directors’ fees and dividends in relation to shares held personally as follows:
DIRECTORS’ FEESDIVIDENDS
$’000
2020201920202019
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
-
-
Payments to Mr G Popplewell
$’000
20202019
Consulting fees
103
48
$’000
20202019
Short term employee benefits
2,865
3,120
Termination benefits
334
546
Share scheme benefit
26
98
*
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.
Key management compensation was as follows:
7. OTHER (CONTINUED)
The company operates an employee share scheme for certain senior executives which is outlined in note 5.2.
53
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 1 AUGUST 2020
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.
7. OTHER (CONTINUED)
54
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 1 AUGUST 2020
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.
AS AT 1 AUGUST 2020
$’000
LESS THAN 3
MONTHS
3-12
MONTHS
TOTALCARRYING
VALUE
Trade and other payables
26,967-26,96726,967
26,967-26,96726,967
Forward foreign exchange contracts
Cash flow hedges:
- Outflow
(22,463)(49,888)(72,351)(72,351)
- Inflow
21,90647,71869,62469,709
Net(557)(2,170)(2,727)(2,642)
AS AT 1 AUGUST 2019
$’000
LESS THAN 3
MONTHS
3-12
MONTHSTOTAL
CARRYING
VALUE
Trade and other payables
20,908-20,90820,908
20,908-20,90820,908
Forward foreign exchange contracts
Cash flow hedges:
— Outflow(19,129)(26,586)(45,715)(45,715)
— Inflow19,89927,46847,36747,249
Net
7708821,6521,534
7. OTHER (CONTINUED)
55
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 1 AUGUST 2020
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.
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%).
7. OTHER (CONTINUED)
56
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 1 AUGUST 2020
AS AT 1 AUGUST 2020INTEREST RATEFOREIGN EXCHANGE RATE
-1% +1%-10%+10%
$’000
CARRYING
AMOUNT
PROFITEQUITYPROFITEQUITYPROFITEQUITYPROFITEQUITY
FINANCIAL ASSETS
Loans and receivables
Cash and cash equivalents
49,642(496)(496)4964962,2612,261(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)1,1921,192
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)4964968046,312(658)(5,277)
AS AT 1 AUGUST 2019INTEREST RATEFOREIGN EXCHANGE RATE
-1% +1%-10%+10%
$’000
CARRYING
AMOUNT
PROFITEQUITYPROFITEQUITYPROFITEQUITYPROFITEQUITY
FINANCIAL ASSETS
Loans and receivables
Cash and cash equivalents
16,506(165)(165)1651651,0691,069(875)(875)
Accounts receivable
1,652--------
Advances to employees
372--------
FINANCIAL LIABILITIES
Liabilities at amortised cost
Trade and other payables
20,908----(895)(895)733733
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)1651651744,048(142)(3,157)
The parent is not exposed to any interest rate or foreign exchange risk.
If these movements were to occur, the post-tax impact on profit and loss and equity for each category of
financial investment:
7. OTHER (CONTINUED)
57
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 1 AUGUST 2020
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.
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.
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.
7. OTHER (CONTINUED)
58
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 1 AUGUST 2020
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.
7. OTHER (CONTINUED)
59
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
GENERAL DISCLOSURES
Board of Directors
Directors of the Company in office at the end of the year or who ceased to hold office during the year:
Principal activities of the Group
Hallenstein Glasson Holdings Limited is a non-trading Holding Company. The principal trading subsidiaries are
Glassons Limited, Glassons Australia Ltd (involved in the retail of women’s apparel), Hallenstein Bros Limited and
Hallenstein Brothers Australia Limited (retail of men’s apparel). The subsidiaries are 100% owned by Hallenstein
Glasson Holdings Limited.
DirectorQualifications / ExperienceSpecial Responsibilities
Warren James Bell
M Com FCA. Appointed December 1986.
Mr Bell holds appointments on a number
of boards of both public and private
companies, and is a professional director.
Chairman of the Board
Non-executive Director
Timothy Charles Glasson
Founder of Glassons womenswear retail
chain. Appointed November 1985 on
merger with Hallensteins.
Non-executive Director
Michael John Donovan
ANZIM. Appointed May 1990. Founder
and Director of Wild Pair, and Lippy
retail stores.
Non-executive
Independent Director
Graeme James Popplewell
Former CEO, B Com FCA.
Appointed March 1985.
Non-executive Director
Malcolm Ford
Appointed June 2010. Background
includes 20 years with experience in direct
sourcing particularly in Asia. Mr Ford also
has experience in brand management
across wholesale and retail markets.
Non-executive
Independent Director
Karen Bycroft
BSC, Postgrad Marketing. Appointed
November 2014. Background includes
25 years in Retail in the UK and
Australia with Marks and Spencer,
Sears, Woolworths, Spotlight and
Country Road. Experience in Strategy,
Marketing, and Leadership. Also an
Associate of Melbourne Business
School and Executive Coach.
Non-executive
Independent Director
Mary Devine
ONZM, BCom, MBA, CFInstD.
Appointed to the Board July 2018
and as Group Managing Director April
2019. Mary has extensive executive
experience with specific expertise in
strategy, transformation and multi
channel retailing. She has also had a
distinguished governance career, with
previous directorships on a number of
significant New Zealand companies.
Group Managing Director
60
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
GENERAL DISCLOSURES
Review of operations
(a) Consolidated results for the year ended 1 August 2020
Directors
(a) Remuneration and all other benefits
(b) Dividend
Subsequent to balance date the Directors declared an interim dividend of 15.0 cents per share together with
a supplementary dividend of 2.6471 cents per share to non-resident shareholders. The interim dividend was
paid on 4th September 2020.
Subsequent to balance date the Directors have declared a final dividend of 24.0 cents per share payable 15th
December 2020. Non-resident shareholders of the Company will also receive a supplementary dividend of
4.2353 cents per share. Dividends are fully imputed to New Zealand resident shareholders.4.2353 cents per
share. Dividends are fully imputed to New Zealand resident shareholders.
* 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 the other
payments/benefits above.
(b) Shareholdings
$’000
20202019
Operating revenue
287,763287,550
Profit before income tax
36,731
39,442
Income tax
(8,957)
(10,422)
Profit for the year27,774
29,020
Remuneration of
Directors
20202019
$’000
DIRECTORS
FEES
OTHER
PAYMENTS/
BENEFITS
TOTAL
REMUNERATION
DIRECTORS
FEES
OTHER
PAYMENTS/
BENEFITS
TOTAL
REMUNERATION
Mr T C Glasson89-8990-90
Mr W J Bell
133-133
135-135
Mr M Donovan
84-84
85-85
Mr M Ford
103-103
105-105
Mr G Popplewell
84103187
8548133
Ms K Bycroft
93-93
95-95
Ms M Devine
*
-688688
60244304
Total5867911,377
655292947
Beneficially held20202019
W J Bell7,6437,643
T C Glasson
11,950,588
11,950,588
M J Donovan
100,000
100,000
G J Popplewell
203,604
203,604
M Ford
10,000
10,000
Non-beneficially held
M Ford and M J Donovan as custodians for Staff Share Scheme
86,001
119,234
61
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
GENERAL DISCLOSURES
DATE
PURCHASE / (SALE)
NUMBER OF SHARES$
Transfer to employees
(off market)(33,233)-
(c) Interests in share dealing
M Ford and M Donovan as Trustees for the share purchase scheme
e) Directors’ insurance
As provided by the Company’s Constitution and in accordance with Section 162 of the Companies Act 1993
the Company has arranged Directors’ and Officers’ Liability Insurance that ensures Directors will incur no
monetary loss as a result of actions undertaken by them as Directors provided they act within the law.
(f) Directors’ and Officers’ use of company information
During the period the Board received no notices pursuant to Section 145 of the Companies Act 1993 relating
to use of Company information.
State of Affairs
The Directors are of the opinion that the state of affairs of the Company is satisfactory. Details of the period
under review are included in the Chairman’s Report and the audited Statement of Comprehensive Income.
d) Disclosures of interests by Directors
W J Bell
Chairman St Georges Hospital Inc
Director Ryman Healthcare Group of Companies
Director Cyprus Enterprises and Meadow
Mushrooms Group of Companies
Director Sabina Ltd
Director Glasson Trustee Limited
Director 152 Hereford Limited
Director CHC Properties Ltd
Director Warren Bell Ltd
Director Poraka Ltd
Director Hickman Family Trustees Limited
M Donovan
Director Mike and Carol Donovan Trustee Limited
Director Donovan’s Limited
T C Glasson
Director Sabina Ltd
Director Mantles Ltd
Director Glasson Trustee Limited
Director CHC Properties Limited
Director JCG Trustee Limited
Director 152 Hereford Limited
Director SIG Trustee Limited
Trustee Hallenstein Glasson Staff Benefit Trust
M Ford
Trustee Hallenstein Glasson Staff Benefit Trust
K Bycroft
None
G J Popplewell
Trustee Hallenstein Glasson Staff Benefit Trust
M Devine
Director Foodstuffs South Island Ltd
Director Foodstuffs New Zealand Ltd
Director Devine Consultancy (2014) Ltd
62
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
GENERAL DISCLOSURES
Employee Remuneration
The number of employees with the Group (other than Directors) receiving remuneration and benefits above
$100,000 in relation to the year ended 1 August 2020 was:
Chief Executive and Managing Director Remuneration
The remuneration of the Group Managing Director for the year ended 1 August 2020 was:
The remuneration of the Group Managing Director comprises fixed payments. Fixed remuneration includes a
base salary, contributions to Kiwisaver, car allowance and a carpark.
Remuneration to Auditors
The fee for the audit of the Holding Company and subsidiaries, paid to PricewaterhouseCoopers, was $169,000.
Employee Remuneration
100,000-109,999
110,000-119,999
120,000-129,999
130,000-139,999
140,000-149,999
150,000-159,999
160,000-169,999
170,000-179,999
180,000-189,999
190,000-199,999
200,000-209,999
210,000-219,999
220,000-229,999
230,000-239,999
240,000-249,999
250,000-259,999
270,000-279,999
310,000-319,999
330,000-339,999
350,000-359,999
370,000-379,999
380,000-389,999
390,000-399,999
500,000-509,999
520,000-529,999
540,000-549,999
570,000-579,999
690,000-699,999
730,000-739,999
1,150,000-1,159,999
2020
7
4
6
3
3
1
2
2
-
1
-
2
5
1
1
-
1
1
1
3
-
-
-
1
1
-
-
1
1
-
2019
6
4
4
3
4
-
1
2
2
2
2
2
1
1
2
1
-
1
-
1
1
2
1
-
-
1
1
-
-
1
SALARYKIWISAVER
SHORT-TERM
INCENTIVE
OTHER
BENEFITSSUBTOTAL
LONG-TERM
INCENTIVE
TOTAL
REMUNERATION
Group Managing
Director – Mary Devine656,47420,645-29,000706,119-706,119
63
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
CORPORATE GOVERNANCE STATEMENT
The Board of Directors of Hallenstein Glasson Holdings Limited (HGHL) is committed to maintaining the
highest standards of corporate governance. This statement gives an overview of the policies and processes
that are in place throughout the Company and how best-practice standards of corporate governance are
followed. This statement is current at 25 September 2020 and follows the principles outlined in the NZX
Corporate Governance Code (the Code) and outlines how HGHL is applying the recommendations in the
Code or where it is not currently following a certain code recommendation (and the reason for this).
The key HGHL corporate governance policy documents including the Board and Board committee charters
are available at www.hallensteinglasson.co.nz/investment-centre.
PRINCIPLE 1 — CODE OF ETHICAL BEHAVIOUR
“Directors should set high standards of ethical behaviour, model this behaviour and hold management
accountable for these standards being followed throughout the organisation.”
CODE OF ETHICS
The Board is committed to the highest standards of conduct and ethical behaviour in all business activities,
and has adopted a code of ethics to promote and support a culture of honest and ethical behaviour,
corporate compliance and good corporate governance.
The Code of Ethics sets out the standards of conduct expected of the Directors, senior management
and employees in carrying out their day to day duties. This code provides a guide to the conduct that is
consistent with the Company’s values, business goals and legal obligations. The code contains the internal
reporting procedures for any breaches.
New employees receive a copy of the Code of Ethics as part of their induction and it is available on the
Group’s website. The Board reviews the Code of Ethics annually.
FINANCIAL PRODUCT TRADING POLICY
HGHL is committed to transparency and fairness in dealing with all of its stakeholders and to ensuring
adherence to all applicable laws and regulations. The Financial Product Trading Policy details the Company’s
policy in relation to trading HGHL shares and includes restrictions on and procedures for Directors and
employees.
The policy details the procedure which must be followed when Directors and senior management (or their
related parties) wish to trade in the Company’s shares. They must notify HGHL and obtain consent prior to
trading in HGHL shares, and are only permitted to trade within the periods of two windows. These windows
are from the day on which HGHL’s half year results are released (during March) and 1 July and between the
full year announcement (during September) and 1 January. Trading by an individual holding non-public
material information about the Company is prohibited.
Directors or senior managers must advise the NZX promptly if they trade in the company’s shares within the
timeframes required by law.
PRINCIPLE 2 — BOARD COMPOSITION AND PERFORMANCE
“To ensure an effective Board, there should be a balance of independence, skills, knowledge, experience
and perspectives.”
THE BOARD
The Board of Directors is elected by shareholders to oversee the management of the Company and is
responsible for all corporate governance matters and reporting to shareholders. The Board has adopted a
board charter which sets out the roles and responsibilities of the Board and outlines how this interacts with
the role of the Group’s management. The Board Charter is available on the Group’s website.
The Board establishes the Company’s objectives, determines the strategies for achieving those objectives,
and monitors management performance. It also establishes delegated authority limits for capital expenditure,
treasury, and remuneration.
Glassons and Hallensteins operate as separate subsidiaries, each with its own management team. The Board
delegates the responsibility for the day-to-day management of each subsidiary to the management of that
subsidiary. The Board is responsible for the appointment of, and assessment of the performance of, the
Group Managing Director and the members of the senior management team.
The Board meets at least ten times each year, and in addition a full corporate strategy meeting is held each
year. Directors receive monthly reporting including profit and loss and balance sheets for each operating
subsidiary, together with operations reports from the senior executive from each business unit.
64
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
CORPORATE GOVERNANCE STATEMENT
BOARD MEMBERSHIP
At the date of this annual report the Board comprises six non-executive Directors and one executive Director
(being Mary Devine, the Group Managing Director). The Chairperson is a non-executive Director and is a
different person to the Group Managing Director for the purposes of Code Recommendation 2.9.
INDEPENDENT DIRECTORS AT THE DATE OF THIS REPORT ARE:
Michael Donovan
Malcolm Ford
Karen Bycroft
OTHER NON-EXECUTIVE DIRECTORS ARE:
Warren Bell (Chairman)
Timothy Glasson
Graeme Popplewell
EXECUTIVE DIRECTOR IS:
Mary Devine
Although the Board does not currently comprise a majority of independent Directors (Code
Recommendation 2.8), since Mary Devine was appointed as Group Managing Director on April 2019, the
Board is of the view it has an optimal mix of skills and experience to govern the Group. The high proportion
of non-executive Directors allows for robust oversight of the management of the Group and the Board is
satisfied that it operates in an effective independent manner notwithstanding a number of its Directors are
technically considered to not be independent for the purpose of the NZX Listing Rules.
Under the NZX Listing Rules a director must not hold office past the later of three years and the third annual
meeting after their appointment without being re-elected by shareholders.
The Board may at any time appoint a person to be a Director either as an additional Director or to fill a casual
vacancy. Any person who is appointed a Director by the Board shall retire from office at the next annual
meeting of the Company but shall be eligible for election by shareholders at that next meeting.
A list of the Directors and their profiles, experience and qualifications is on page 60 of this report. A list of
their relevant ownership interests is on page 61 of this report.
NOMINATION AND APPOINTMENT OF DIRECTORS
The Nominations Committee identifies suitably qualified people who could be considered for nomination
or appointment as a Director in the event of a vacancy on the Board. The Nominations Committee Charter
includes guidelines relating to Board composition, considerations for new Director appointments and the
process by which potential Directors are nominated and assessed. All new Directors will enter into a written
agreement with HGHL setting out the terms of their appointment.
DIVERSITY
HGHL believe that all eligible people get an equal opportunity and are all treated fairly regardless of
backgrounds, views, experiences and capabilities as well as their beliefs, physical differences, ethnicity,
gender, age, thinking style or preferences. The Company has adopted a Diversity and Inclusion Policy that
ensures it is continually developing a work environment that supports equality and inclusion regardless of
difference.
In accordance with HGHL’s Diversity and Inclusion Policy, the Board has established measurable objectives,
including Senior Management gender diversity, and are making good progress in achieving these objectives.
The Board has responsibility for implementing, reviewing, reporting and overseeing the policy.
Details of gender composition of the Group’s Directors and senior managers as at the balance date are as
follows:
Gender diversity as at 1 August20202019
Directors
Female
2
2
Male
5
5
Officers
Female
1
1
Male
3
4
65
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
CORPORATE GOVERNANCE STATEMENT
The Board will ensure that new Directors are appropriately inducted to their role. Continuous education is
also undertaken by Directors as appropriate to ensure that they have skills that are relevant and up to date,
and that allow them to perform their role as Directors.
The Board evaluates its own performance and that of its committees annually. The Chairperson also meets
with Directors individually to discuss their individual performance during the year.
PRINCIPLE 3 — BOARD COMMITTEES
“The Board should use committees where this will enhance effectiveness in key areas, while retaining
Board responsibility.”
REMUNERATION COMMITTEE
The Remuneration Committee is comprised of non-executive members of the Board, and is chaired by
Tim Glasson. The other members of the Committee are Warren Bell and Michael Donovan. The function of
the Committee is to make specific recommendations on remuneration packages and other terms of
employment for Directors and senior management. Management may only attend Committee meetings
at the Committee’s invitation. The Committee utilises independent advice where necessary to ensure
remuneration practices are appropriate for the Company, and to ensure the best possible people are
recruited and retained. Although the Committee does not currently have a majority of independent Directors
in line with Code recommendation 3.3, and did not during the accounting period, the Board believes the
current membership has an optimal mix of skills and experience to ensure the Committee achieves its
objectives. In addition, the Committee makes recommendations to the full Board for consideration.
The Remuneration Committee Charter is available on the Group’s website.
AUDIT COMMITTEE
The Audit Committee is comprised of non-executive members of the Board, and is chaired by Malcolm Ford.
The other members of the Committee are Warren Bell and Graeme Popplewell. Although the Committee
does not currently have a majority of independent Directors in line with Code recommendation 3.1, and did
not during the accounting period, the Board believes the current membership has an optimal mix of skills and
experience to ensure the Committee achieves its objectives. The Committee meets directly with the external
auditors at least twice a year, and receives all correspondence between the Company and its auditors. The
main responsibility of the Committee is to ensure internal controls are effective, financial reporting is reliable,
and applicable laws and regulations are complied with. Management may only attend Committee meetings at
the Committee’s invitation. The Audit Committee Charter is available on the Group’s website.
NOMINATIONS COMMITTEE
The Nominations Committee is comprised of non-executive members of the Board, and is chaired by
Mr Michael Donovan. The other members of the Committee are Timothy Glasson and Warren Bell. When
appropriate, the Committee will make recommendations to the Board on the appointment of Directors.
The Nominations Committee Charter is available on the Group’s website. Although the Committee does
not currently have a majority of independent Directors in line with Code recommendation 3.4, and did not
during the accounting period, the Board believes the current membership has an optimal mix of skills and
experience to ensure the Committee achieves its objectives.
HEALTH AND SAFETY COMMITTEE
HGHL has also established a Health and Safety Committee. The Committee is not a Committee of the Board,
although its members include Directors as well as employees of the Group.
The Committee is chaired by Ms Karen Bycroft. The Committee oversees the:
— Group’s existing health and safety systems and processes.
— Approval of health & safety policies and procedures for the Group.
— Monitoring of any incidents, hazards and risks within the Group’s business.
— Communication to the Board on health and safety matters and ensures the Board is informed on matters
relating to health and safety governance, performance and compliance.
— Regular assessments on health and safety systems.
— The Health and Safety Committee Charter is available on the Group’s website.
TAKEOVER RESPONSE
The Board has implemented protocols that set out the procedures to be followed if a takeover offer is
received by HGHL.
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20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
CORPORATE GOVERNANCE STATEMENT
PRINCIPLE 4 — REPORTING AND DISCLOSURE
“The Board should demand integrity in financial and non-financial reporting and in the timeliness and balance of
corporate disclosures.”
Financial reporting to shareholders and the market is in accordance with generally accepted accounting
principles applied in New Zealand, and in compliance with relevant legislation and NZX requirements.
The Group’s Sustainability report is on page 10. The Group has appointed a sustainability steering group to
consider risks on environmental, social and governance factors. The steering group has developed the current
Group initiatives which include:
— Significantly reduce HGHL’s environmental footprint;
— Zero tolerance to child / forced labour;
— Actively support freedom of association and non-discrimination.
The Board is responsible for ensuring it meets its obligation for continuous disclosure in accordance with the
NZX Listing Rules and acknowledges that the intent of these rules is to enable shareholders and the investment
market generally to be promptly informed of any events that may be price sensitive in regards to the Company’s
share price.
The Board has adopted a market disclosure policy which outlines the obligations of HGHL and relevant HGHL
personnel in satisfying HGHL’s continuous disclosure requirements. A copy of the policy is available on the
Group’s website.
The Directors’ shareholdings, trading of shares, together with other relevant matters for disclosure are set out
on page 61 of this report.
All key corporate governance documents, including charters and policies, are available on the Group’s website
at www.hallensteinglasson.co.nz/about-us.
PRINCIPLE 5 — REMUNERATION
“The remuneration of Directors and executives should be transparent, fair and reasonable.”
Details of Directors’ and Group Managing Director’s remuneration are shown on page 61 of this report.
Shareholders are asked to approve any increases to the pool of Directors’ fees from time to time as required by
the NZX Listing Rules. Fees are generally established using independent surveys covering New Zealand based
organisations of a similar scope and size.
Key executive remuneration comprises a base salary together with short term and long term incentives that are
based on performance which are earned subject to company profitability. The Remuneration Committee seeks
independent advice where appropriate when setting key executive remuneration.
HGHL has adopted a Remuneration Policy which outlines the principles that apply to the remuneration of all
Non-executive Directors and senior management with the aim of ensuring that remuneration is fair and
appropriate. A copy of the policy is available on the Group’s website.
Details of the Group employees who have earned over $100,000 during the financial year and the Group
Managing Director’s remuneration are shown on page 63 of this report.
PRINCIPLE 6 — RISK MANAGEMENT
“Directors should have a sound understanding of the material risks faced by the issuer and how to manage them.
The Board should regularly verify that the issuer has appropriate processes that identify and manage potential
and material risks.”
The Board is responsible for reviewing and approving the Company’s risk management strategy, and maintains
a risk framework that identifies and seeks to manage risks throughout the HGHL Group. It also seeks to
identify new and emerging risks to the HGHL Group through this framework. The Board delegates day-to-day
management of risk to the Group Managing Director who may further delegate such responsibilities to his or her
executives and other officers. Significant risks are discussed at Board meetings as required.
While the Board is ultimately responsible for oversight of the risk management of the Group, the Audit
Committee reviews the reports of management and the external auditors on the effectiveness of systems for
internal control, financial reporting and risk management. To assist in discharging this responsibility, the Board
has in place a number of strategies designed to safeguard the Company’s assets and interests and to ensure the
integrity of reporting.
The Company maintains insurance cover with reputable insurers for most types of insurance risk. All HGHL
Group Directors and senior managers have the benefit of an indemnity as permitted by the Companies Act 1993
and HGHL’s constitution. The HGHL Group has also implemented Director and Officer (D&O) insurance cover at
HGHL’s cost. Details of these indemnities and insurance are disclosed in HGHL’s interests register as required.
67
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
CORPORATE GOVERNANCE STATEMENT
HEALTH & SAFETY
The Company has health and safety systems and processes in place that includes training employees and
recording any incidents, hazards and risks. These systems ensure we continue to provide a safe working
environment for staff, contractors and customers. HGHL has also established a Health and Safety Committee
as part of its commitment to protecting the health, safety and wellbeing of HGHL Group employees – see
details of the Committee and its role above.
The Health & Safety Committee, along with senior management, is responsible for ensuring that Health
and Safety has appropriate focus and is sufficiently resourced within the Group. Senior management work
with the Health & Safety committee to investigate incidents, analyse hazard/incident trends to identify and
mitigate potential health and safety risks and review, develop and monitor compliance with health and safety
processes and procedures. Health & Safety is a consistent item on the Board meeting agendas to keep all
Directors informed of the Group’s performance across a range of measures.
The Board and the Committee receive detailed reporting on health and safety performance including health
and safety incidents, injury rates by severity, identified hazards and outputs from the workers’ health and
safety forum meetings. There has been minimal lost time due to incidents or injuries over the last financial
year. The company continues to work to mitigate risk both in store and in our Fulfilment Centres.
All staff are trained on Health & Safety procedures at induction, some examples of these include working
from height, manual lifting and personal safety. Registers are kept of potential hazards at each store and
regular reviews/audits of compliance with health and safety processes and procedures are carried out.
Particular focus is placed on safety in our Distribution Centres and regular risk assessments are carried out.
The Group also provides an Employee Assistance Programme to support with employee wellbeing.
PRINCIPLE 7 — AUDITORS
“The Board should ensure the quality and independence of the external audit process.”
The Audit Committee is responsible for overseeing the external audit arrangements. Ensuring that external
audit independence is maintained is one of the key aspects in discharging this responsibility. An Audit
Independence Policy has been adopted by the Committee to assist in meeting this responsibility.
The Audit Independence Policy covers the following areas:
— Provision of related assurance services by the external auditors.
— Audit partner rotation.
— Relationships between the auditor and the Company.
— Approval of Auditor.
The Audit Committee shall only recommend the appointment of a firm to be auditor if that firm would be
regarded by a reasonable investor with full knowledge of all relevant facts and circumstances as capable of
exercising objective and impartial judgement on all issues encompassed within the auditor’s engagement.
The Audit Committee must recommend the approval of significant permissible non-audit work assignments
that are awarded to an external auditor. A copy of the policy is available on the Group’s website.
The external auditors are required to be available at each annual meeting.
INTERNAL AUDIT
The Company does not have an internal audit function. The Board is confident the key risks of the business
are being adequately managed and the internal control framework is operating effectively, including through
the risk identification and management processes outlined above.
68
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
CORPORATE GOVERNANCE STATEMENT
PRINCIPLE 8 — SHAREHOLDERS’ RIGHTS AND RELATIONS
“The Board should respect the rights of shareholders and foster constructive relationships with shareholders
that encourage them to engage with the issuer.”
The Company releases all material information to the NZX as required by the NZX Listing Rules, and
also posts any key announcements to the Company website at www.hallensteinglasson.co.nz. Other key
information, including annual reports, the constitution and key corporate governance documents are also
posted for ease of reference. Consistent with best practice and the Company’s continuous disclosure
obligations under the NZX Listing Rules, external communications that may contain market sensitive data are
released through NZX in the first instance. The Board approves all communications with shareholders.
Shareholders are provided with the option of receiving communications from the Company electronically.
The Company’s website includes a section on investor communications and the Company welcomes investor
enquiries.
Notice of the AGM is sent to shareholders and is posted on the Company’s website at least 4 weeks prior to
the meeting.
The Company refers any significant matters, as required by the Companies Act and NZX Listing Rules, to
shareholders for approval at the AGM, and shareholders are given the opportunity to vote by proxy ahead
of the meeting or by polling if attending the meeting in person.
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20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
SHAREHOLDER INFORMATION
ANALYSIS OF SHAREHOLDING AS AT 25 SEPTEMBER 2020
RANGE
HOLDER
COUNT
HOLDER
COUNT %
HOLDING
QUANTITY
HOLDING
QUANTITY %
1 to 499592 10.1 129,261 0.22
500 to 999510 8.7 346,343 0.58
1,000 to 1,9991,07618.3 1,393,851 2.34
2,000 to 4,999 1,750 29.7 5,232,676 8.77
5,000 to 9,999999 17.0 6,497,448 10.89
10,000 to 49,999846 14.4 14,546,683 24.39
50,000 to 99,99965 1.1 4,216,714 7.07
100,000 to 499,99941 0.7 7,753,840 13.00
500,000 to 999,9994 0.1 2,334,839 3.91
1,000,000 to 9,999,999,999,9994 0.1 17,197,406 28.83
Total5,887 59,649,061 100
70
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
SHAREHOLDER INFORMATION
RANKNAMEADDRESSUNITS% OF UNITS
1.
Timothy Charles GlassonPO Box 248, Christchurch, 814011,950,588 20.03
2.
Accident Compensation
Corporation — NZCSD
c/- Jp Morgan Att: Asset Services,
PO Box 5652, Wellington, 6140
2,589,250 4.34
3
FNZ Custodians LimitedPO Box 396, Wellington, 61401,410,679 2.36
4
FNZ Custodians Limited
National Nominees Limited —
NZCSD
PO Box 105390 Auckland City
Auckland, 1143
1,246,889 2.09
5
HSBC Nominees (New
Zealand) Limited — NZCSD
PO Box 5947 Victoria Street West
Auckland, 1142
692,346 1.16
6
Citibank Nominees (New
Zealand) Limited — NZCSD
GPO Box 764g Melbourne Vic,
Australia, 3000
577,493 0.97
7
Hickman Family Trustees
Limited — Hickman Family
PO Box 79084 Avonhead
Christchurch, 8446
565,000 0.95
8
Kevin James Hickman &
Joanna Hickman
24 Waiwetu Street Fendalton
Christchurch, 8052
500,000 0.84
9
New Zealand Depository
Nominee Limited
PO Box 2959 Wellington, 6140482,559 0.81
10
Custodial Services Limited
C/- Craigs Investment Partners
PO Box 13155 Tauranga, 3141
453,192 0.76
11
Investment Custodial Services
Limited
PO Box 105183 Auckland City
Auckland, 1143
425,568 0.71
12
Jbwere (NZ) Nominees
Limited
Private Bag 92085 Victoria Street
West Auckland, 1142
371,316 0.62
13
Forsyth Barr Custodians
Limited
Private Bag 1999 Dunedin, 9054 365,984 0.61
14
Custodial Services LimitedPO Box 13155 Tauranga, 3141283,647 0.48
15
Custodial Services Limited
C/- Craigs Investment Partners
PO Box 13155 Tauranga, 3141
268,108 0.45
16
BNP Paribas Nominees (NZ)
Limited — NZCSD
Level 13 PwC Tower 113-119
The Terrace Wellington, 6011
241,658 0.41
17
Jpmorgan Chase Bank NA
NZ Branch-Segregated
Clients ACCT — NZCSD
Att: Asset Services PO Box
5652 Wellington, 6140
224,025 0.38
18
ASB Nominees Limited
PO Box 35 Shortland Street
Auckland, 1140
219,577 0.37
19
Graeme James Popplewell
26 Lemington Road
Westmere Auckland, 1022
203,604 0.34
20
Brian William Drummond
1890 Avondale Road Rd 3
Winton, 9783
200,680 0.34
Totals: Top 20 holders of Ordinary Shares23,272,163 39.02
Total Remaining Holders Balance36,376,898 60.98
71
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
72
20 ANULARNEP 0UUONE2O TRNPUE RSRLATEIEANNUAL REPORT 2020
DIRECTORY
AUDITORS
PRICEWATERHOUSECOOPERS
BANKERS
ANZ BANK
NEW ZEALAND LTD.
REGISTERED OFFICE
LEVEL 3
235 – 237 BROADWAY
NEWMARKET
AUCKLAND 1023
TEL +64 9 306 2500
FAX +64 9 306 2523
POSTAL ADDRESS
PO BOX 91 – 148
AUCKLAND MAIL CENTRE
AUCKLAND 1141
SHARE REGISTRAR
COMPUTERSHARE INVESTOR
SERVICES LIMITED
PRIVATE BAG 92119
AUCKLAND 1142
TEL +64 9 488 8700
WEBSITES
HALLENSTEINGLASSON.CO.NZ
GLASSONS.COM
HALLENSTEINS.COM
ANNUAL BALANCE DATE
PRELIMINARY PROFIT
ANNOUNCEMENT
REPORTS AND ACCOUNTS
PUBLISHED
HALF YEAR RESULTS
INTERIM DIVIDEND
FINAL DIVIDEND
ANNUAL GENERAL MEETING
01 AUGUST
SEPTEMBER
OCTOBER
MARCH
APRIL
15 DECEMBER 2020
9 DECEMBER 2020
CALENDAR
73
HALLENSTEIN GLASSON HOLDINGS LIMITED | ANNUAL REPORT 2020
HALLENSTEINS.COM
GLASSONS.COM
HALLENSTEINGLASSON.CO.NZ
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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