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MySale Group PLC (MYSL)

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Thursday 26 November, 2020

MySale Group PLC

Final Results

RNS Number : 5472G
MySale Group PLC
26 November 2020
 

 

MySale Group Plc

 

Final results for the financial year to 30 June 2020

 

A recapitalised, restructured and repositioned business with firm foundations for future growth

 

MySale Group plc (AIM: MYSL) (the "Group''), the leading international online retailer, is pleased to announce its audited final results for the year to 30 June 2020.

 

Commenting on the results, Carl Jackson, Chief Executive Officer; said:

 

"It has been a transformative year for MySale, with our operations today very different to last year. We have successfully recapitalised, restructured and repositioned our business, significantly reducing the cost base, enhancing our quality of revenue, increasing product margins, and as of Q4-FY20 we are  operating on a profitable, cash generative and debt free basis. The Group is now trading profitability with a cash balance of A$15.9 million as at 31 October 2020.

 

"Our platform is being used by even more international brands, looking to take advantage of our Southern Hemisphere customer base and the associated counter seasonal inventory opportunity. The Group is now in an excellent position to accelerate the execution of its ANZ First Strategy, scaling the restructured business to deliver operational gearing which will flow through to the bottom line.

 

"As a consequence of MySale's focus on its 'ANZ First' strategy, the Group is evaluating the potential benefits of dual listing the Group on the Australian Stock Exchange.  This review is at a preliminary stage and MySale will keep investors updated should any formal decisions be reached."

 

 

Year to 30 June (A$ million)

FY20

FY19

 

 

 

Revenue

131.0

208.6

Gross Profit

43.9

52.4^

Gross Margin

33.5%

25.1%

Underlying EBITDA*

(2.7)

(18.8)

Reported loss before tax

(3.4)

(58.2)

 

* Underlying EBITDA is calculated as EBITDA adjusted for certain items including impairment losses/reversals related to goodwill and receivables, share-based payments and unrealised foreign exchange loss/gain

^ Delivery costs to customers for the year ended 30 June 2019 of A$33.8 million have been reclassified from Cost of sale of goods to Selling and distribution expenses to be in line with the online retail industry

 

 Progress against strategic initiatives  

 

· Raised A$23.3 million to repay and restructure existing bank facilities, leaving the Group bank debt free and with a year end cash balance of A$6.7 million, operating a negative working capital model

· Underlying EBITDA loss significantly reduced to A$2.7 million (FY19: A$18.8 million)

· Substantial improvement to gross margin, which increased by 8.4 percentage points to 33.5% (FY19: 25.1%)

· Completed cost reduction programme established as part of the restructure and repositioning, with the cost base reduced by 48.1% to A$50.2 million (FY19 A$96.7 million) and rightsizing of the headcount to 123 Full Time Equivalents ('FTEs') as of 30 September 2020 (FY19: 307).Capex reduced to A$2.6m (FY19: A$5.0m)

· Significant progress executing the ANZ First Strategy which has delivered significant costs savings and higher margins, ensuring the Group is well positioned to scale its platform

· Strengthened management and board with the appointments of Mats Weiss as Chief Financial & Operations Officer and two new Non-Executive Directors

· Developed MYSALE Solutions, the Group's proprietary end-to-end technology and operating platform

· Good progress in re-engaging and renegotiating commercial contracts, providing international partners with an efficient counter seasonal solution for their excess inventory

· Closure of the UK and US warehouses and relocation of Australian Fulfilment Centre which has delivered significant cost reductions and improved efficiencies

· Launched MYSALE Way, a new operational purpose for the Group, resulting in improved customer satisfaction scores

· Increased the number of new active international partners; total active partners 982

  Post financial year end

 

· Raised A$9.3 million from entities associated with the founders and former CEO of Catch.com.au, one of Australia's most successful online retailers

· Further strengthened management team through appointments of new Head of Buying, Head of Marketing and Head of Customer

· Group now operating on a profitable, cash generative and bank debt free basis following post year end capital raise, with net cash balances of A$15.9 million as at 31 October 2020

Outlook

 

· Trading in the first four months of the current financial year has been profitable and cash positive, underpinned by strong gross margins and a right-sized, scalable cost base

· Decisive actions taken to recapitalise, restructure and reposition the business have left the Group in a stronger, more resilient position

· Increasing the amount of high margin own-stock inventory, adopting a breadth not depth "test and repeat strategy" 

· The Group is well positioned to benefit from ongoing supply chain disruption and the continued strengthening of the ANZ off-price channel

· Confident in the resilience of the Group's inventory-light business model and MySale's ability to harness the longer-term structural shift from offline to online

 

  Enquiries :

 

MySale Group plc

 

Carl Jackson, Chief Executive Officer

Mats Weiss, Chief Financial Officer

+61 (0) 414 817 843

 

 

N+1 Singer (Nominated Adviser and Broker)

+44 (0) 20 7496 3000

Mark Taylor

Justin McKeegan

Carlo Spingardi

 

 

Zeus Capital (Joint Broker)

 

+44 (0) 20 3829 5000

Daniel Harris, Corporate Finance

John Goold, Corporate Broking 

 

 

 

MHP Communications (Financial PR Adviser)

+44 (0) 20 3128 8570

Simon Hockridge

Giles Robinson

Pete Lambie

 

 

 

 

 

Chairman's statement

 

I am pleased to say that the last quarter of the financial year was both profitable and cash flow positive. The company is highly focused on the high growth ANZ e-commerce market with the right size cost base and a strong management team with which to deliver future growth.

 

Throughout the year we have actioned all the key strategic initiatives we set out as part of our restructure and refocus of the business. The opportunity we face is big and the team have all pulled together to transform the business into an inventory light e-commerce technology platform for brand and retail partners both domestic and international to access customers in ANZ.

 

Like every other company we have faced challenges brought about by the COVID-19 pandemic and our number one priority has been to adapt our working practices to ensure the welfare of our employees. The world of e-commerce has changed off the back of the pandemic and it has caused the structural shift from physical retail to online to accelerate significantly with many people shopping online for the first time. I believe this change is here to stay and e-commerce will continue to see strong continued growth for a long time to come.

 

During the year we closed our UK operations to refocus on the ANZ market. We also strengthened our balance sheet by raising equity and paying off our debt leaving the Group debt free and cashflow positive (Q4 FY20).  We have made changes to our business enabling us to work more efficiently with a lower cost base and in-turn these changes have led to an improved quality of revenue and  jump in gross margin to 33.5% (FY19 25.1%). This strengthening of the margin has continued to into the current year.

 

Trading in the current year has started well and with the continued focus on customer experience and providing brands and retailers with a world class platform to access that customer, we are excited about the journey ahead.

 

_____________________________

Charles Butler

Chairman

25 November 2020

 

Review of operations by the Chief Executive Officer

 

A recapitalised, restructured and repositioned business with firm foundations for future growth

Last year's strategic review concluded that the Group needed to reduce its costs, generate cash by selling down excess inventory and execute its ANZ First Strategy. I am pleased to report that we have completed all these actions and we now have a recapitalised, restructured, and repositioned business operating a world class platform providing unique solutions for our retail and brand partners.

 

Year to 30 June (A$ million)

FY20

FY19

 

 

 

Revenue

131.0

208.6

Gross Profit

43.9

52.4^

Underlying EBITDA(*)

(2.7)

(18.8)

Depreciation and Amortisation

7.5

6.9

Interest

(0.4)

(0.5)

Reported loss before tax

(3.4)

(58.2)

 

*Underlying EBITDA is calculated as EBITDA adjusted for certain items including impairment losses/reversals related to goodwill and receivables, share-based payments and unrealised foreign exchange loss/gain. Refer to note 6 for reconciliation to reported loss.

 

^Delivery costs to customers for the year ended 30 June 2019 of A$33,831,000 have been reclassified from Cost of sale of

  goods to Selling and distribution expenses to be in line with the online retail industry

 

Whilst we have made substantial progress over the year, it has undoubtedly been a period of unprecedented challenges, and the environment that MySale operates in today is also very different from the environment MySale operated in last year.

 

COVID-19

Since the onset of the pandemic we have closely followed government guidance on safe working practices for all our employees, which remains our top priority. To date, colleagues who are able to work from home are doing so. Where this in not possible,we have put in place social-distancing procedures for our office an warehouse team.  To date, we have not had any major operational business disruption as a result of these measures, and I am proud of the way that MYSALE has met this challenge head on,  putting our duty to our stakeholders to act as a responsible business at the heart of our approach.Like most businesses, we have experienced some minor operational issues during this period of uncertainty, including the supply of inventory and reliability of international shipping, though we have carefully managed these challenges to ensure business continuity. The flexibility of our business model has been key here, allowing us to adapt quickly. In response to the pandemic, we sourced more product locally to ensure we remained relevant, while pivoting into complimentary categories including homewares, activewear and leisurewear to meet customer demand from the growing work from home market. Our inventory light platform allowed us to react quickly in line with this evolving trend ensuring we have the right merchandise mix.

 

Whilst the duration, severity and long-term impact of the pandemic remain unknown, we believe that there are a number of opportunities for Mysale as a result of our unique operating model. We have already seen an accelerated shift in consumer spending from physical retail to online; a trend which we expect will continue long after the pandemic is offer. There are also signs that COVID-19 has further strengthened the ANZ off-price channel1, particularly online.

 

MySale is well positioned to take advantage of these long-term trends.

 

Progress against strategic initiatives

 

While there have been some operational benefits to the Group as a result of widespread supply chain disruption across the global retail industry due to COVID 19, we had already made significant progress against our strategic initiatives as we entered our final quarter. This included a great deal of work to ensure we had the right financial and organizational structures to fulfil our ambitions.

 

Executing against our ANZ First strategy2 required focus, making decisions at pace in order to resolve legacy issues, while prioritising some goals in favour of others. This meant we had to become a much smaller and nimble company with solid foundations before we could start to grow again.

 

We completed the cost reduction programme in the period, as outlined in the strategic review, including a significant reduction in fixed overheads and international freight, while reducing the Groups headcount from 307 in FY19 to 170 in FY20. The Group's cost base3 has been significantly reduced to A$50.2 million (FY19: A$96.7 million).

 

The restructuring of our supply chain and decisive cost control measures put in place are now benefiting the Group, more than offsetting the reduction in revenues for the period (see page 10 for detail). We have rightsized the business and have been able to leverage the benefits of closing our UK and US warehouses and offices, reducing the headcount and centralising the Group structure into ANZ.

 

We are confident that the decisive action taken to recapitalise, restructure and reposition the business have left us in a stronger, more resilient position. Our underlying EBITDA loss improved from A$18.8 million to A$2.7 million, with profitable trading during the final quarter. We exited FY20 with substantially less inventory, having increased the cadence of own-buy promotional activity.

 

Although revenues have declined, the quality of revenues have improved with substantial improvements to our gross margin, which increased to 33.5% (FY19: 25.1%). We anticipate further improvement in gross margin during FY21.

 

We have also made significant progress in selling down aged owned inventory which will continue albeit at a reduced rate into FY21. In FY19, as a result in the changes to the Australian GST legislation, we restructured the supply chain and closed the UK and US warehouses which had an immediate negative impact on revenues. However, during the period we made good progress in re-engaging and renegotiating the commercial contracts with our international partners which  allows us to provide them with either a direct shipment or third party freight solution ensuring they have an efficient counter seasonal solution for their excess inventory. 

 

1 Off-price is a trading format based on discount pricing

2 Refer to page 16 for ANZ First Strategy

3 Cost base is total expenses less depreciation & amortisation

 

Cash and Working capital

 

In September 2019 we raised A$23.3 million to repay and restructure existing bank facilities, leaving the Group debt free and with a cash balance of A$6.7 million.

 

The business is now operating a negative working capital model where it is able to generate cash quickly by selling products to customers before it has to pay its suppliers, reducing the cash risk on the Group's operating results and financial condition.

 

Post year- end we also raised A$9.3m from entities associated with both founders as well as the former CEO of Catch.com.au who built that business into one of Australia's most successful online retailers. The net proceeds will be used to expand and develop the Company's marketplace platform, as well as take advantage of excess inventory available around the world, to continue to improve the brand and inventory mix.

 

Cash generation and conservation was a key focus for us in FY20. Strict working capital management and the conversion into cash of the aged inventory resulted in a strong cash flow performance.

 

Going forward the Group has the right cost base, aligned to the new simplified business, to ensure future profitability. We are able to scale the revenue, leveraging efficiencies, with increased margins on a stable cost base.

 

A repositioned business

 

ANZ First Strategy and Partner Programme

Focusing on our ANZ First Strategy and developing our inventory light marketplace platform will further allow the Group to leverage operational efficiencies.

 

In line with our Platform Strategy, we have developed and launched MYSALE Solutions which is the engine of the business, providing Partner and Wholesale Solutions supported by three key service pillars: Technology, Operations and Data.

 

· Technology: Our proprietary technology platform provides a modern, flexible and highly scalable solution that is designed to support the culture of continuous improvement, enabling us to react to partner requirements quickly. The platform capabilities are optimised to support our unique partner solutions effectively.

 

· Data: Our Proprietary data platform provides in-depth analytics with real time business intelligence tools enabling MYSALE and our partners to respond quickly to data insights.

 

· Operations: We offer our partners access to the MYSALE Fulfillment centers which provide them with flexibility, scalability and access to international customers.

 

We pride ourselves on offering flexible solutions for our partners. We will continue to scale, at pace, the number of new partners selling on the platform, focusing on delivering a daily discovery experience for discounted fashion, beauty, and homeware products to our customers. 

· 3RD Part Partner Programme 

· Wholesale Programme - Own Stock

 

Own-stock inventory delivers significantly higher margins and an improved level of customer satisfaction. While we will increase the amount of In-Stock inventory, we will not repeat the mistakes of the past and have adopted a "test and repeat strategy"; buying width and not depth of product, thereby allowing us to turn the inventory very quickly.

 

In final quarter, over 85% of our revenue was delivered from our 3rd party platform partners compared to 2.9% from our "test and repeat" own stock inventory.

 

We are already making good progress scaling the amount of own-stock product and brands which represented 7.8% of sales in Q1 of the new financial year. 

 

MYSALE Solutions resonates well with our UK and US partners as it provides them with a perfect counter seasonal platform solution to what has been a very difficult trading period due to Covid-19. We have faced some challenges securing inventory, due to key staff at retail partners being furloughed, while we have also experienced an increase in international freight costs due to reduced global air freight capacity.

 

As we enter FY21 more UK and US brands are now working on the MySale platform as we provide an efficient counter seasonal solution for their excess inventory.

 

The business will scale with a different cost base structure, as historically the fixed costs were too high relative to the variable costs and revenue growth. At its peak, in FY18, our fixed annual cost base was A$39.7m of which the UK and US overhead base was A$11.9m and did not deliver operational leverage. As part of the strategic review we closed our UK and US warehouse, exited our UK business and relocated the management team back to ANZ which has already delivered material benefits with our fixed cost base now reduced to A$15.8m in FY20.

 

The Market Opportunity

The Facts:

· Australian eCommerce April online retail spend: 17.2%1

· New Zealand online retail spend: 9.8%2

 

Both markets significantly lag the UK (30%3) and US (22%4) eCommerce online retail spend.

 

Original industry forecasts were that by 2025 online shopping would account for 16-18%1 of total retail spend. However, since the onset of the COVID-19 pandemic it is anticipated that this will accelerate significantly.

 

For our customers, our mission is to offer a daily discovery experience for discounted fashion, home and beauty brands; a place that our customers check every day before buying for themselves, family or friends. 

 

For our retail and brand partners we continue to provide an efficient platform solution to accelerate their sales of previous seasons and excess current season merchandise. For our international partners it is an even more compelling solution as it allows them to take advantage of the counter seasonal opportunity selling into ANZ while not disrupting their core market.

 

This presents the opportunity for Mysale to continue targeting large pool of international supplier who will be interested in the counter seasonal opportunity as well as growing ANZ market.

 

1 https://auspost.com.au/content/dam/auspost_corp/media/documents/2020-ecommerce-industry-report.pdf

2 https://thefulldownload.co.nz/

3 https://www.ben-evans.com/benedictevans/2020/8/18/the-ecommerce-surge

4 https://www.ben-evans.com/benedictevans/2020/8/18/the-ecommerce-surge

 

The MySale Way

We have developed and launched The MySale Way, a new operational purpose for the Group that is encapsulated in the following core principles: Customer and Partners First, Entrepreneurial Thinking, Opportunities not Problems, Earn Trust, keep it Simple and Operate at Pace.

 

We aim to embed The MySale Way within the organization, to build a company culture that challenges everyone to operate at pace and think bigger putting our Customers and Partners First.

 

We have been very disciplined with our suppliers as we increase the focus on the customer experience and are already seeing improvements in our customer satisfaction scores driven by improved data and management focus. While there is still work to do, we are confident this will continue to improve. 

 

 

Board and Management Changes

During the period, there have been a number of changes to the senior management team, including the appointment of  Mats Weiss as new Chief Financial & Operations Officer and two new Non-Executive Directors. Subsequent to the year end, the management team has been strengthened through the appointment of a new Head of Buying, Head of Marketing, Head of Customer as well a number of appointments that have enhanced the buying teams.   

 

Current Trading and Future Outlook

I am very proud of what our team has achieved this year. As a business, we finished FY20 in a strong position and in far better shape than when we started it, as the actions taken from the strategic review flowed into our financial results.

 

The Group is now operating on a cash generative and debt free basis following the post year end capital raise with  cash balances of A$15.9 million as 31st October 2020 and further improvements to our gross margin during the first quarter of the new financial year.

 

While the Board is conscious of the ongoing uncertainty and operational risk caused by COVID-19 pandemic, for both our business and the global retail industry as a whole, it is pleasing to see the Group's  strong trading momentum and increased interest from international partners in our unique offering has continued into the new financial year.

 

We have built a highly scalable low-cost business model and are now in a position where we can grow our business and execute our strategy as an off-price specialist, with a clear customer offering built around MySale Solutions. Our talented team is now re-focused on delivering growth through scaling our Partner Program and increasing the amount of high margin own inventory stock to deliver operational leverage as we further accelerate the ANZ First Strategy.

 

_____________________________

Carl Jackson

Chief Executive Officer

25 November 2020

 

Financial review by the Chief Financial Officer

 

FY20 has truly been a transformational year where we have exited non-core businesses, delivered a step-change in working capital and materially improved profitability. We have a continued focus on reducing our overall cost base, and during the financial year 2020 we have decreased operating expenses by 48.1%, to A$52.2m (FY19: A$96.7m).

The Inventory position on June 30, 2020 was A$2.8m, down A$13.2m vs. prior year (FY19: A$16.0m) due to transitioning the business to an inventory-light platform by selling down the aged ownbuy stock.

The business is now debt free and with a net cash balance of A$6.7m, operating a negative working capital model.

 

Revenue and gross profit^ 

For the year ended 30 June 2020 Group revenue decreased by 37.2% to A$131.0 million (FY19: A$208.6 million) and gross profit decreased, by 16.2%, to A$43.9 million (FY19: A$52.4 million). Gross margin has increased in FY20 by 8.4ppt, to 33.5%.

Executing against our ANZ First strategy required focus, making decisions at pace in order to resolve legacy issues, while prioritising some goals in favour of others. This meant we had to become a much smaller and nimble company with solid foundations before we could start to grow again. We have also made significant progress in selling down aged owned inventory which will continue albeit at a reduced rate into FY21. In FY19, as a result of the changes to the Australian GST legislation, we restructured the supply chain and closed the UK and US warehouses which had an immediate negative impact on revenues.

The gross margin has continuously improved throughout the financial year ending the overall gross margin at 33.5% (FY19: 25.1%), this is a trend that has continued into the first quarter in FY21. This is a result of focusing on core revenue with stronger margins and holding our suppliers responsible for key KPI's.

Further to that, we have managed to decrease our freight costs as a share of revenue from 12.8% in the first quarter to 9.8% in Q4.

Operating expenses

The operating expenses reduced by 48.1% to A$50.2 million (FY19: A$96.7 million). In the FY20, the group received a government COVID-19 grant of A$0.9m.

 

The significant reduction of operating expenses has been achieved through automation and simplification of processes, closing of UK & US warehouses and relocation of the Australian Fulfilment Centre.

 

Variable costs have decreased in line with revenue, whilst we have successfully reduced the fixed costs share of revenue from 13.6% in FY19 to 12.1% in FY20. The reduction of fixed costs is a result of aligning the structure to fit the ANZ First Strategy, operating on an inventory light model. Headcounts have been reduced from 307 in FY19 to 170 in FY20.

 

Profit/loss before tax 

The reported loss before tax for the year is A$3.4 million (FY19: A$58.2 million loss). This reported loss is after the inclusion of a number of one-off and non-cash items such as debt forgiveness and net foreign currency gain.

 

Profit/loss after tax and earnings per share

The reported loss after tax for the year is A$3.6 million (FY19: A$69.3 million loss). This reported loss for the prior year 2019 is after the inclusion of a number of one-off and non-cash items which are shown in more detail in note 6 to the financial statements in order to provide greater insight as to the underlying profitability of the Group.

 

Note 38 to the financial statements shows the detailed calculations of basic loss per share for the financial year which after tax was 0.53 cents per share loss (FY19: 44.92 cents loss) and was 0.41 cents loss (FY19: 12.21 cents loss) on underlying EBITDA.

 

Taxation

The group has recorded a tax expense of A$0.2 million for the year (FY19:A$11.1 million expense). Further detail of the tax expense is provided in note 9 to the financial statements. The Group has A$103.6 million (FY19: A$83.9 million) of carried forward tax losses that may be available to use for further offset. A deferred tax asset is only recorded where it is probable that these losses will be recoverable.

 

Balance sheet, cash and working capital

The Group's closing cash balance was A$6.7 million (FY19: A$0.8 million) and a borrowing of A$nil (FY19: A$18.4 million). The Group finalised a share placement of 640.4 million shares for A$23.3 million in September 2019. As part of the share placement, the Group agreed with its financier Hong Kong and Shanghai Banking Corporation Plc ('HSBC') to extinguish all borrowing facilities, Corporate Guarantees and Indemnities with a repayment of A$10.9 million. As part of this repayment HSBC agreed to provide the Group with a debt forgiveness amount of A$7.7 million. After these actions the business is debt free.

Capital investment was reduced on prior year investment levels as we focused on conserving cash and prioritizing the development projects in line with the business priorities. Whilst the majority of the capex is allocated to technology the business did relocate its warehouse which accounted for 37.5% of capital expenditure. Total capital expenditure was A$2.6m (FY19 A$5.0m). No impairment was considered necessary.

 

Trade & Other Receivables has been reduced to A$4.1m (FY19: A$10.0m) as a result of exiting the wholesale business and scaling down the share of business on Ourpay, the Groups owned BNPL solution.

 

Inventory value was recognised at the year-end as A$2.8 million (FY19: A$16.0 million). The significant decrease is a result of the continued focus on the ANZ First Strategy and developing our inventory light platform and successfully reducing the aged own-buy inventory.

 

Trade and other payables have also been significantly reduced, from A$33.0m in FY19 to A$19.0m in FY20. Trade payables has reduced as a natural consequence of revenue declining and the company being in a stronger cash position.

 

Post the FY20 year-end closing, the group raised A$9.1 million from entities associated with both founders as well as the former CEO of Catch.com.au who successfully built that business into one of Australia's most successful online retailers. 

 

Banking facilities

Subsequent to the refinancing the Group are no longer relying on trade and overdraft financing to support the business operations. The sell down of 'ownbuy' inventory and the transition to an inventory light business model has reduced the overall reliance on external financing to support inventories and other working capital requirements.

 

Underlying basis

As noted above the Group manages its operations by looking at the underlying EBITDA which excludes the impact of a number of one-off and non-cash items of a non-trading nature as this, in the Board's opinion, provides a more representative measure of the Group's performance.

 

Year to 30 June (A$ million)

  FY20

  FY19

 

 

 

Reported loss before tax

(3.4)

(58.2)

 

Interest

0.4

0.5

Depreciation

7.5

6.9

Impairment of goodwill

-

2.8

(Recovery) / Impairment of receivables

(1.5)

6.8

Net gain on Cocosa websites

-

(2.7)

Debt forgiveness

(7.7)

-

Share based payments

0.3

(1.0)

Reorganisation

1.8

2.5

Non-trading one-off costs

(0.3)

3.1

Unrealised foreign exchange (gain)/loss

(0.7)

1.6

Inventory write down

0.9

18.9

 

Underlying EBITDA*

(2.7)

(18.8)

 

 

 

 

*Underlying EBITDA is calculated as EBITDA adjusted for certain items including impairment losses/reversals related to goodwill and receivables, share-based payments and unrealised foreign exchange loss/gain.

^Delivery costs to customers for the year ended 30 June 2019 of A$33.8 million have been reclassified from Cost of sale of

  goods to Selling and distribution expenses to be in line with the online retail industry

 

Key performance indicators

The Group manages its operations through the use of a number of key performance indicators ('KPI's') including revenue growth, gross margin %, Underlying EBITDA.

 

_____________________________

Mats Weiss

Chief Financial Officer

25 November 2020

 

MySale Group Plc

 

 

 

 

 

 

Statement of profit or loss and other comprehensive income

 

 

 

 

 

 

For the year ended 30 June 2020

 

 

 

 

 

 

 

 

 

 

Consolidated

 

 

Note

 

2020

 

2019

 

 

 

 

A$'000

 

A$'000

 

 

 

 

 

 

 

Revenue from contracts with customers

 

4

 

131,032

 

208,596

Cost of sale of goods*

 

 

 

(87,152)

 

(156,178)

 

 

 

 

 

 

 

Gross profit

 

4

 

43,880

 

52,418

 

Other operating gain, net

 

5

 

8,626

 

1,591

Interest income

 

 

 

4

 

 

Expenses

 

 

 

 

 

 

Selling and distribution expenses

 

 

 

(37,015)

 

(71,795)

Administration expenses

 

 

 

(20,746)

 

(31,814)

Impairment/(recovery) of receivables

 

11

 

2,262

 

(5,261)

Impairment of assets

 

16

 

 

(2,832)

Finance costs

 

7

 

(400)

 

(547)

 

Loss before income tax benefit/(expense)

 

 

 

(3,389)

 

(58,240)

 

Income tax benefit/(expense)

 

9

 

(171)

 

(11,090)

 

Loss after income tax benefit/(expense) for the year attributable to the owners of MySale Group Plc

 

 

 

(3,560)

 

(69,330)

 

 

Other comprehensive (loss)/income

 

 

 

 

 

 

 

 

 

 

 

 

 

Items that may be reclassified subsequently to profit or loss

 

 

 

 

 

 

Net change in the fair value of cash flow hedges taken to equity, net of tax

 

28

 

 

(38)

Exchange differences on translation of foreign operations

 

28

 

(2,125)

 

932

 

Other comprehensive (loss)/income for the year, net of tax

 

 

 

(2,125)

 

894

 

Total comprehensive loss for the year attributable to the owners of MySale Group Plc

 

 

 

(5,685)

 

(68,436)

 

 

 

 

 

Cents

 

Cents

 

 

 

 

 

 

 

Basic and diluted earnings per share

 

38

 

(0.53)

 

(44.92)

 

 

 

 

 

 

 

 

* Delivery costs to customers for the year ended 30 June 2019 of A$33,831,000 have been reclassified from Cost of sale of goods to Selling and distribution expenses to be in line with the online retail industry.

 

The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes

 

 

MySale Group Plc

 

 

 

 

 

 

Balance sheet

 

 

 

 

 

 

As at 30 June 2020

 

 

 

 

 

 

 

 

 

 

Consolidated

 

 

Note

 

2020

 

2019

 

 

 

 

A$'000

 

A$'000

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

10

 

6,660

 

814

Trade and other receivables

 

11

 

4,107

 

9,985

Inventories

 

12

 

2,761

 

15,963

Income tax receivable

 

 

 

15

 

Other current assets

 

13

 

634

 

4,766

Total current assets

 

 

 

14,177

 

31,528

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

Property, plant and equipment

 

14

 

1,216

 

1,186

Right-of-use assets

 

15

 

5,362

 

Intangibles

 

16

 

30,168

 

34,480

Other non-current assets

 

17

 

1,629

 

-

Deferred tax

 

18

 

3,407

 

3,369

Total non-current assets

 

 

 

41,782

 

39,035

 

 

 

 

 

 

 

Total assets

 

 

 

55,959

 

70,563

 

Liabilities

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Trade and other payables

 

19

 

18,985

 

32,968

Contract liabilities

 

20

 

6,186

 

10,408

Borrowings

 

21

 

 

18,357

Lease liabilities

 

22

 

1,581

 

Income tax payable

 

 

 

 

96

Provisions

 

23

 

2,428

 

4,415

Total current liabilities

 

 

 

29,180

 

66,244

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

Lease liabilities

 

24

 

5,048

 

Provisions

 

25

 

450

 

231

Total non-current liabilities

 

 

 

5,498

 

231

 

 

 

 

 

 

 

Total liabilities

 

 

 

34,678

 

66,475

 

Net assets

 

 

 

21,281

 

4,088

 

Equity

 

 

 

 

 

 

Share capital

 

26

 

 

Share premium account

 

27

 

328,971

 

306,363

Other reserves

 

28

 

(124,979)

 

(123,125)

Accumulated losses

 

 

 

(182,691)

 

(179,130)

Equity attributable to the owners of MySale Group Plc

 

 

 

21,301

 

4,108

Non-controlling interests

 

29

 

(20)

 

(20)

 

 

 

 

 

 

 

Total equity

 

 

 

21,281

 

4,088

 

The financial statements of MySale Group Plc (company number 115584) (Jersey) were approved by the Board of Directors and authorised for issue on 25 November 2020. They were signed on its behalf by:

 

___________________________

 

___________________________

Carl Jackson

 

Charles Butler

Director

 

Chairman

 

 

 

25 November 2020

 

 

 

The above balance sheet should be read in conjunction with the accompanying notes

MySale Group Plc

 

 

 

 

 

 

 

 

 

 

Statement of changes in equity

 

 

 

 

 

 

 

 

 

For the year ended 30 June 2020

 

 

 

 

 

 

 

 

 

 

 

 Share premium

 

 Other

 

Accumulated

 

Non-controlling 

 

 

 

account

 

reserves

 

losses

 

interest 

 

Consolidated

 

A$'000

 

A$'000

 

A$'000

 

A$'000

 

A$'000

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 July 2018

 

306,363

 

(122,983)

 

(109,800)

 

(20)

 

73,560

 

 

 

 

 

 

 

 

 

 

 

Loss after income tax expense for the year

 

-

 

-

 

(69,330)

 

-

 

(69,330)

Other comprehensive income for the year, net of tax

 

-

 

894

 

-

 

-

 

894

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive (loss)/income for the year

 

-

 

894

 

(69,330)

 

-

 

(68,436)

 

 

 

 

 

 

 

 

 

 

 

Transactions with owners in their capacity as owners:

 

 

 

 

 

 

 

 

 

 

Share-based payments (note 39)

 

-

 

(1,036)

 

-

 

-

 

(1,036)

 

 

 

 

 

 

 

 

 

 

 

Balance at 30 June 2019

 

306,363

 

(123,125)

 

(179,130)

 

(20)

 

4,088

 

 

 

 Share premium

 

 Other

 

Accumulated

 

Non-controlling 

 

Total equity

 

 

account

 

reserves

 

losses

 

interest 

 

Consolidated

 

A$'000

 

A$'000

 

A$'000

 

A$'000

 

A$'000

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 July 2019

 

306,363

 

(123,125)

 

(179,130)

 

(20)

 

4,088

 

 

 

 

 

 

 

 

 

 

 

Loss after income tax expense for the year

 

-

 

-

 

(3,561)

 

-

 

(3,561)

Other comprehensive loss for the year, net of tax

 

-

 

(2,125)

 

-

 

-

 

(2,125)

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive (loss)/income for the year

 

-

 

(2,125)

 

(3.561)

 

-

 

(5,686)

 

 

 

 

 

 

 

 

 

 

 

Transactions with owners in their capacity as owners:

 

 

 

 

 

 

 

 

 

 

Issue of ordinary shares, net of transaction costs (note 27)

 

22,608

 

-

 

-

 

-

 

22,608

Share-based payments (note 39)

 

-

 

271

 

-

 

-

 

271

 

 

 

 

 

 

 

 

 

 

 

Balance at 30 June 2020

 

328,971

 

(124,979)

 

(182,691)

 

(20)

 

21,281

 

The above statement of changes in equity should be read in conjunction with the accompanying notes

MySale Group Plc

 

 

 

 

 

 

Statement of cash flows

 

 

 

 

 

 

For the year ended 30 June 2020

 

 

 

 

 

 

 

 

 

 

Consolidated

 

 

Note

 

2020

 

2019

 

 

 

 

A$'000

 

A$'000

Cash flows from operating activities

 

 

 

 

 

 

Loss before income tax benefit/(expense) for the year

 

 

 

(3,389)

 

(58,240)

 

 

 

 

 

 

 

Adjustments for:

 

 

 

 

 

 

Depreciation and amortisation

 

 

 

7,520

 

6,937

Impairment of goodwill

 

 

 

 

2,832

Net loss on disposal of property, plant and equipment

 

 

 

390

 

487

Net loss/(gain) on disposal of intangibles

 

 

 

128

 

(2,655)

Interest income

 

 

 

(4)

 

Interest expense

 

 

 

400

 

547

 

 

 

 

 

 

 

 

 

 

 

5,045

 

(50,092)

 

 

 

 

 

 

 

Change in operating assets and liabilities:

 

 

 

 

 

 

Decrease in trade and other receivables

 

 

 

7,320

 

20,153

Decrease in inventories

 

 

 

13,202

 

17,687

Decrease/(increase) in other operating assets

 

 

 

2,502

 

(399)

(Decrease)/increase in trade and other payables

 

 

 

(17,307)

 

986

(Decrease)/increase in contract liabilities

 

 

 

(4,222)

 

1,787

(Decrease)/increase in other provisions

 

 

 

(578)

 

1,558

 

 

 

 

 

 

 

 

 

 

 

5,962

 

(8,320)

Interest received

 

 

 

4

 

Interest paid

 

 

 

(51)

 

(547)

Income taxes paid

 

 

 

(321)

 

(136)

 

 

 

 

 

 

 

Net cash from/(used in) operating activities

 

 

 

5,594

 

(9,003)

 

Cash flows from investing activities

 

 

 

 

 

 

 

Payments for property, plant and equipment

 

 

 

 

(980)

 

(94)

Payments for intangibles

 

 

 

 

(1,633)

 

(4,865)

Proceeds from disposal of property, plant and equipment

 

 

 

 

 

177

Proceeds from disposal of intangibles

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

 

 

 

(2,613)

 

(2,127)

 

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from issue of shares

 

26

 

22,608

 

Repayment of borrowings

 

 

 

(5,200)

 

Repayment of leases

 

 

 

(1,163)

 

(124)

 

 

 

 

 

 

 

Net cash (used in)/from financing activities

 

 

 

16,245

 

(124)

 

Net increase/(decrease) in cash and cash equivalents

 

 

 

19,226

 

(11,254)

Cash and cash equivalents at the beginning of the financial year

 

 

 

(12,323)

 

(938)

Effects of exchange rate changes on cash and cash equivalents

 

 

 

(243)

 

(131)

 

 

 

 

 

 

 

Cash and cash equivalents at the end of the financial year

 

10

 

6,660

 

(12,323)

 

The above statement of cash flows should be read in conjunction with the accompanying notes

MySale Group Plc

Notes to the financial statements

30 June 2020

 

Note 1. General information

 

MySale Group Plc is a group consisting of MySale Group Plc (the 'Company' or 'parent entity') and its subsidiaries (the 'Group'). The financial statements of the Group, in line with the location of the majority of the Group's operations and customers, are presented in Australian dollars and generally rounded to the nearest thousand dollars.

 

The principal business of the Group is the operating of online shopping outlets for consumer goods like ladies, men's and children's fashion clothing, accessories, beauty and homeware items.

 

MySale Group Plc is a public company, limited by shares, listed on the AIM (Alternate Investment Market), a sub-market of the London Stock Exchange. The company is incorporated and registered under the Companies (Jersey) Law 1991. The company is domiciled in Australia.

 

Whilst the financial information included in this preliminary announcement has been prepared on the basis of the requirements of International Financial Reporting Standards ("IFRSs") in issue, as adopted by the European Union ("EU") and effective at 30 June 2020, this announcement does not itself contain sufficient information to comply with IFRS.

 

The financial information set out in this preliminary announcement does not constitute the Group's Consolidated financial statements for the years ended 30 June 2020 or 30 June 2019.

 

The financial information for 2020 and 2019 is derived from the consolidated financial statements for the year ended 30 June 2020 , which includes the comparatives for year ended 30 June 2019 . The consolidated financial statements for the year ended 30 June 2019 have been audited and delivered to the registrar of companies with the Jersey Financial Services Commission ("JFSC").  The financial statements for the year ended 30 June 2020 have been audited and will be filed with the registrar of companies with the JFSC following the Company's Annual General Meeting. The Independent Auditors Reports have reported on the financial statements for the year ended 30 June 2020 and the year ended 30 June 2019; the audit reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 113B (3) or (6) of the Companies (Jersey) Law 1991. 

 

The registered office of the company is Ogier House, The Esplanade, 44 Esplanade Street. Helier, JE4 9WG, Jersey and principal place of business is at 3/120 Old Pittwater Road, Brookvale, NSW 2100, Australia.

 

The financial statements were authorised for issue, in accordance with a resolution of the Board of Directors, on 25 November 2020.

 

Note 2. Significant accounting policies

 

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 years presented, unless otherwise stated.

 

New or amended Accounting Standards and Interpretations adopted

The Group has adopted all of the new or amended Accounting Standards and interpretations issued by the international Accounting Standard Board ("IASB') which have been endorsed by the European Union that are mandatory for the current reporting period.  

The following Accounting Standards and Interpretations are most relevant to the Group:

 

IFRS 16 Leases

The Group has adopted IFRS 16 from 1 July 2019. The standard replaces IAS 17 'Leases' and for lessees eliminates the classifications of operating leases and finance leases. Except for short-term leases and leases of low-value assets, right-of-use assets and corresponding lease liabilities are recognised in the statement of financial position. Straight-line operating lease expense recognition is replaced with a depreciation charge for the right-of-use assets (included in administrative expenses) and an interest expense on the recognised lease liabilities (included in finance costs). In the earlier periods of the lease, the expenses associated with the lease under IFRS 16 will be higher when compared to lease expenses under IAS 17. However, EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results improve as the operating expense is now replaced by interest expense and depreciation in profit or loss. For classification within the statement of cash flows, the interest portion is disclosed in operating activities and the principal portion of the lease payments are separately disclosed in financing activities. For lessor accounting, the standard does not substantially change how a lessor accounts for leases.

 

The Group lease portfolio is principally comprised of property leases of buildings in relations to fulfilment centres and office space. The term of the lease's ranges between 2 to 5 years.

 

Impact of adoption

IFRS 16 was adopted using the modified retrospective approach which does not require the comparatives to be restated and the cumulative effect of initially applying the standard is recognised in the opening balance of accumulated losses at the transition date. The impact of adoption on opening accumulated losses as at 1 July 2019 was as follows:

 

 

 

1 July

 

 

2019

 

 

A$'000

 

 

 

Operating lease commitments as at 1 July 2019 (IAS 17)

 

5,835

Finance lease commitments as at 1 July 2019 (IAS 17)

 

20

Operating lease commitments discount based on the weighted average incremental borrowing rate of 5% (IFRS 16)

 

(181)

Short-term leases not recognised as a right-of-use asset (IFRS 16)

 

(3,945)

Low-value assets leases not recognised as a right-of-use asset (IFRS 16)

 

(5)

Right-of-use assets (IFRS 16)

 

1,724

 

 

 

Lease liabilities - current (IFRS 16)

 

(541)

Lease liabilities - non-current (IFRS 16)

 

(1,183)

 

 

(1,724)

 

 

 

Net change in opening accumulated losses as at 1 July 2019

 

-

 

Practical expedients applied:
In adopting IFRS 16, the Group has used the following practical expedients permitted by the standard:

 

applied a single discount rate to a portfolio of leases with reasonably similar characteristics;

 

accounted for operating leases with a remaining lease term of less than 12 months as at 1 July 2019 as short-term leases;

 

excluded initial direct costs for the measurement of the right-of-use asset at the date of initial application;

 

used hindsight in determining the lease term where the contract contains options to extend or terminate the lease; and

 

not apply IFRS 16 to contracts that were not previously identified as containing a lease.

 

IFRIC 23 - Uncertainty over Income Tax Treatments

The Group has adopted Interpretation 23 from 1 July 2019. The interpretation clarifies how to apply the recognition and measurement requirements of IAS 12 'Income Taxes' in circumstances where uncertain tax treatments exists. The interpretation requires: the Group to determine whether each uncertain tax treatment should be treated separately or together, based on which approach better predicts the resolution of the uncertainty; the Group to consider whether it is probable that a taxation authority will accept an uncertain tax treatment; and if the Group concludes that it is not probable that the taxation authority will accept an uncertain tax treatment, it shall reflect the effect of uncertainty in determining the related taxable profit (tax loss), tax bases, unused tax losses, unused tax credits or tax rates, measuring the tax uncertainty based on either the most likely amount or the expected value. In making the assessment it is assumed that a taxation authority will examine amounts it has a right to examine and have full knowledge of all related information when making those examinations. IFRIC 23 was adopted using the modified retrospective approach and as such comparatives have not been restated. There was no impact of adoption on opening retained profits as at 1 July 2019.

 

New Accounting Standards and Interpretations not yet mandatory or early adopted

International Financial Reporting Standards ('IFRS') and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the Group for the annual reporting period ended 30 June 2020. The Group's assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant and material to the Group, are set out below:

 

IASB new Conceptual Framework for Financial Reporting
The new framework is applicable for annual reporting periods beginning on or after 1 January 2020 and the application of the new definition and recognition criteria may result in future amendments to several accounting standards. Furthermore, entities who rely on the conceptual framework in determining their accounting policies for transactions, events or conditions that are not otherwise dealt with under IFRS may need to revisit such policies. The Group will apply the revised conceptual framework from 1 July 2020 and at this time, the application of the Conceptual Framework is not expected to have a material impact on the Group's financial statements. 

 

Basis of preparation

These financial statements have been prepared in accordance with applicable Jersey Law and International Financial Reporting Standards ('IFRS' or 'IFRSs') as adopted for use in the European Union (the 'EU') and IFRS Interpretations Committee interpretations (together 'EUIFRS').

 

Under Article 105(11) of the Companies (Jersey) Law 1991, a parent company preparing consolidated financial statements need not present solus (parent company only) financial information, unless required to do so by an ordinary resolution of the Company's members. The Company's members did not pass an ordinary resolution on this matter and hence Parent Company financial information has not been presented for the year.

 

Historical cost convention
The financial statements have been prepared under the historical cost convention.

 

Going concern

The consolidated financial statements have been prepared on a going concern basis. In reaching their assessment, the Directors have considered a period extending at least 12 months from the date of approval of these financial statements.

 

The Group's business activities and financial position, together with the factors likely to affect its future development, performance and position, are set out in section 4 of the Strategic Report. In addition, note 31 to the financial statements includes the Company's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments; and its exposures to credit risk and liquidity risk. The Group prepare budgets and cashflow forecasts to ensure that the Group can meet its liabilities as they fall due.

 

As at 30 June 2020, the Group's current liabilities exceeds current assets by A$15,003,000 (2019: A$34,716,000) and the Group has incurred a loss before tax of A$3,389,000 (2019: A$58,240,000) and generated operating cash inflows of A$5,594,000 (2019: cash outflows of A$9,003,000).

 

During the year, the Group finalised a share placement for A$23,329,000. The Group also agreed with its financier Hong Kong and Shanghai Banking Corporation Plc ('HSBC') to extinguish all borrowing facilities, Corporate Guarantees and Indemnities with a repayment of A$10,914,000 in September 2019. As part of this repayment HSBC agreed to provide the Group with debt forgiveness amount of A$7,753,000.

 

The uncertainty as to the future impact on the Group of the COVID-19 pandemic has been considered as part of the Group's adoption of the going concern basis. Subsequent to the end of the financial year, the Directors continue to monitor developments and the potential impact of Covid-19 on the operational and financial risks of the Group.

 

Immediate action has been taken to protect the cash resources of the business until further certainty is gained. These measures include, but are not limited to:

 

· strengthening the cash position by raising an additional A$9,300,000 as of 8 October 2020

· obtaining government support as part of various economic stimulus initiatives

 

The Directors have prepared cash flow forecasts covering a period to 30 June 2022. This assessment has included consideration of the forecast performance of the business for the foreseeable future and the cash available to the Group. In preparing these forecasts, the Directors have considered a number of detailed sensitivities, including a worst case scenario considering the potential impact of Covid-19.

 

If revenue were to fall in line with the worst case model, the Group would take further remedial action to counter the reduction in profit and cash through a cost cutting exercise that would include staff redundancies and general cost control measures.

 Based on current trading, the worst case scenario is considered unlikely. However, it is difficult to predict the overall impact and outcome of COVID-19 at this stage, particularly if the second wave continues in to 2021. Nevertheless, after making enquiries, and considering the uncertainties described above, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis in preparing the annual report and accounts. 

 

Critical accounting estimates

The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3.

 

Principles of consolidation

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of MySale Group Plc as at 30 June 2020 and the results of all subsidiaries for the year then ended.

 

Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

 

Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

 

The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent.

 

Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The Group recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss.

 

Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of profit or loss and other comprehensive income, balance sheet and statement of changes in equity of the Group. Losses incurred by the Group are attributed to the non-controlling interest in full, even if that results in a deficit balance.

 

Operating segments

Operating segments are presented using the 'management approach', where the information presented is on the same basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the allocation of resources to operating segments and assessing their performance.

 

Foreign currency translation
 

Foreign currency transactions

Foreign currency transactions are translated into the Company's functional currency in Australian dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at reporting date exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.

 

Foreign operations

The assets and liabilities of foreign operations are translated into the Group's presentational currency using the exchange rates at the reporting date. The revenues and expenses of foreign operations included in each of the Statement of Profit or Loss and Statement of Comprehensive income are translated into Australian dollars using the average exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences are recognised in other comprehensive income through the foreign currency reserve in equity.

 

The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of.

 

Revenue recognition

The Group recognises revenue as follows:

 

Revenue from contracts with customers

Revenue is recognised at an amount that reflects the consideration to which the Group is expected to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the Group: identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction price; allocates the transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised.

 

Sale of goods

The Group's revenue mainly comprises the sale of goods online, in-store, and by wholesale to businesses. Revenue is recognised when control of the goods has transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled. 

 

The Group operates mostly an online retail business selling men's, ladies and children's apparel, accessories, beauty and homeware items. Revenue from sale of goods is recognised at the point in time when the customer obtains control of the goods, which is generally at the time of delivery. Sales represent product delivered less actual and estimated future returns, and slotting fees, rebates and other trade discounts accounted for as reductions of revenue. Online sales are usually by credit card or online payment.

 

It is the Group's policy to sell its products to the customer with a right of return within 30 days.  Accruals for sales returns are estimated on the basis of historical returns and are recorded so as to allocate them to the same period in which the original revenue is recorded. The accrual for return totalled A$387k at 30 June 2020 (FY19:A$407k)

 

Interest

Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.

 

Other revenue

Other revenue is recognised when it is received or when the right to receive payment is established.

 

Government grants

Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions. Government grants are recognised in profit or loss over the period necessary to match with the costs that they are intended to compensate. The Group received government grants relating to COVID-19 wage subsidies in Australia, New Zealand and Singapore during the year. The grants are netted off against employee costs in the statement of profit or loss and are detailed in note 8.

 

Income tax

The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable.

 

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for:

 

When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or

 

When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

 

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 tax losses.

 

The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset.

 

Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously.

 

MySale Group Plc (the 'head entity') and its wholly-owned Australian subsidiaries plus Apac Sale Group Pte. Ltd. have formed an income tax consolidated group under the tax consolidation regime. The head entity and each subsidiary in the tax consolidated group continue to account for their own current and deferred tax amounts. The tax consolidated group has applied the 'separate taxpayer within group' approach in determining the appropriate amount of taxes to allocate to members of the tax consolidated group.

 

Current and non-current classification

Assets and liabilities are presented in the balance sheet based on current and non-current classification.

 

An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the Group's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current.

 

A liability is current when: it is expected to be settled in the Group's normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current.

 

Deferred tax assets and liabilities are always classified as non-current.

 

Cash and cash equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the statement of cash flows presentation purposes, cash and cash equivalents also includes bank overdrafts, which are shown within borrowings in current liabilities on the balance sheet.

 

Trade and other receivables

Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses. Trade receivables consist of wholesale debtor and online customer. Wholesale debtor are generally due for settlement within 30 days of recognition and online customer are generally due for settlement within 3-43 days

 

The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue.

 

Other receivables are recognised at amortised cost, less any allowance for expected credit losses.

 

Right of return assets

Right of return assets represents the right to recover inventory sold to customers and is based on an estimate of customers who may exercise their right to return the goods and claim a refund. Such rights are measured at the value at which the inventory was previously carried prior to sale, less expected recovery costs and any impairment.

 

Inventories

Goods for resale are stated at the lower of cost and net realisable value on a 'weighted average cost' basis. Cost comprises purchase, delivery and direct labour costs, net of rebates and discounts received or receivable.

 

Stock in transit is stated at the lower of cost and net realisable value. Cost comprises of purchase and delivery costs, net of rebates and discounts received or receivable.

 

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale.

 

A provision is made to write down any obsolete or slow-moving inventory to net realisable value, based on management's assessment of the expected future sales of that inventory, the condition of the inventory and the seasonality of the inventory.

 

Property, plant and equipment

Property, plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

 

Subsequent expenditure relating to plant and equipment that has already been recognised is added to the carrying amount of the asset only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repair and maintenance expenses are recognised in profit or loss when incurred.

 

Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment over their expected useful lives as follows:

 

Leasehold improvements

 

5-7 years

Plant and equipment

 

3-7 years

Fixtures and fittings

 

5-10 years

Motor vehicles

 

4-5 years

 

The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date.

 

Leasehold improvements are depreciated over the unexpired period of the lease or the estimated useful life of the assets, whichever is shorter.

 

An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the Group. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss.

 

Right-of-use assets

A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset.

 

Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities.

 

The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred.

 

Intangible assets

Externally acquired intangible assets are initially recognised at cost. Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. Useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period.

 

Goodwill

Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed.

 

Customer relationships

Customer relationships acquired in a business combination are amortised on a straight-line basis over the period of their expected benefit, being their finite useful life of three years.

 

ERP system and software

Acquired enterprise resource planning ('ERP') systems and software costs are initially capitalised at cost which includes the purchase price, net of any discounts and rebates, and other directly attributable cost of preparing the asset for its intended use. Direct expenditure including employee costs, which enhances or extends the performance of these systems beyond its specifications and which can be reliably measured, is added to the original costs incurred. These costs are amortised on a straight-line basis over the period of their expected benefit, being their finite useful lives of between three and five years.

 

Costs associated with maintenance are recognised as an expense in profit or loss when incurred.

 

Impairment of non-financial assets

Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount.

 

Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit.

 

Trade and other payables

These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and which are unpaid. Trade and other payables are initially recognised at fair value and subsequently measured at amortised cost. Due to their short-term nature they are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition.

 

Contract liabilities

Contract liabilities represent the Group's obligation to transfer goods or services to a customer and are recognised when a customer pays consideration, or when the Group recognises a receivable to reflect its unconditional right to consideration (whichever is earlier) before the Group has transferred the goods or services to the customer.

 

Borrowings

Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method.

 

Lease liabilities

A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred.

 

Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down.

 

Finance costs

Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the period in which they are incurred.

 

Provisions

Provisions are recognised when the Group has a present (legal or constructive) obligation as a result of a past event, it is probable the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision resulting from the passage of time is recognised as a finance cost.

 

Refund liabilities
Refund liabilities are recognised where the Group receives consideration from a customer and expects to refund some, or all, of that consideration to the customer. A refund liability is measured at the amount of consideration received or receivable for which the Group does not expect to be entitled and is updated at the end of each reporting period for changes in circumstances. Historical data is used across product lines to estimate such returns at the time of sale based on an expected value methodology.

 

Employee benefits

 

Short-term employee benefits

Liabilities for wages and salaries and other employee benefits expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled.

 

Other long-term employee benefits

Employee benefits not expected to be settled within 12 months of the reporting date are measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on high quality corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

 

Long-term employee incentive plan

The Group operates an employee incentive plan to reward and retain key employees. The Group recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation.

 

Share-based payments

Equity-settled share-based compensation benefits are provided to employees. There are no cash-settled share-based compensation benefits.

 

Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the rendering of services.

 

The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the Group receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions.

 

The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods.

 

Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisfied.

 

If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share-based compensation benefit as at the date of modification.

 

If the non-vesting condition is within the control of the Group or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the Group or employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited.

 

If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modification.

 

Share capital

Financial instruments issued by the Group are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset. The Group's ordinary shares are classified as equity instruments.

 

Share capital represents the nominal value of shares that have been issued. Share premium includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax.

 

Own equity instruments that are reacquired (treasury shares) are recognised at cost and deducted from equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Group's own equity instruments. Any difference between the carrying amount and the consideration, if reissued, is recognised in the share premium.

 

Earnings per share

 

Basic earnings per share

Basic earnings per share is calculated by dividing the profit attributable to the owners of MySale Group Plc, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.

 

Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. Diluted earnings per share is not calculated if anti-dilutive.

 

Value Added Tax ('VAT'), Goods and Services Tax ('GST') and other similar taxes

Revenues, expenses and assets are recognised net of the amount of associated VAT/GST, unless the VAT/GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense.

 

Receivables and payables are stated inclusive of the amount of VAT/GST receivable or payable. The net amount of VAT/GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the balance sheet.

 

Cash flows are presented on a gross basis. The VAT/GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows.

 

Commitments and contingencies are disclosed net of the amount of VAT/GST recoverable from, or payable to, the tax authority.

 

Rounding of amounts

Amounts in this report have been rounded off to the nearest thousand dollars, or in certain cases, the nearest dollar.

 

Change in accounting policy - delivery costs

Certain comparatives in the statement of profit or loss and other comprehensive income have been reclassified, where necessary, to be consistent with current period presentation. In particular, delivery costs to customers for the year ended 30 June 2019 of A$33,831,000 have been reclassified from Cost of sale of goods to Selling and distribution expenses. This change in accounting policy is to ensure that the presentation of costs within the statement of profit or loss and other comprehensive income is in line with the online retail industry.

 

 

Note 3. Critical accounting judgements, estimates and assumptions

 

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below.

 

Judgements:

 

Income tax

The Group is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required in determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax audit issues based on the Group's current understanding of the tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made. The Group has adopted Interpretation IFRIC 23 (note 2) from 1 July 2019 which clarifies how to apply the recognition and measurement requirements of IAS 12 'Income Taxes' in circumstances where uncertain tax treatments exists and there was no impact of adoption on opening accumulated losses as at 1 July 2019."

 

 

Lease term
The lease term is a significant component in the measurement of both the right-of-use asset and lease liability. Judgement is exercised in determining whether there is reasonable certainty that an option to extend the lease or purchase the underlying asset will be exercised, or an option to terminate the lease will not be exercised, when ascertaining the periods to be included in the lease term. In determining the lease term, all facts and circumstances that create an economical incentive to exercise an extension option, or not to exercise a termination option, are considered at the lease commencement date. Factors considered may include the importance of the asset to the Group's operations; comparison of terms and conditions to prevailing market rates; incurrence of significant penalties; existence of significant leasehold improvements; and the costs and disruption to replace the asset. The Group reassesses whether it is reasonably certain to exercise an extension option, or not exercise a termination option, if there is a significant event or significant change in circumstances.

 

 

Estimates:

 

Incremental borrowing rate
Where the interest rate implicit in a lease cannot be readily determined, an incremental borrowing rate is estimated to discount future lease payments to measure the present value of the lease liability at the lease commencement date. Such a rate is based on what the Group estimates it would have to pay a third party to borrow the funds necessary to obtain an asset of a similar value to the right-of-use asset, with similar terms, security and economic environment.

 

Impairment of non-financial assets

The Group assesses impairment of non-financial assets at each reporting date by evaluating conditions specific to the Group and to the particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions.

 

Allowance for expected credit losses

The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based on the lifetime expected credit loss, grouped based on days overdue, and makes assumptions to allocate an overall expected credit loss rate for each group. These assumptions include recent sales experience and historical collection rates.

 

Provision for impairment of inventories

The provision for obsolete and slow-moving inventories assessment requires a degree of estimation and judgement. The level of the provision is assessed by taking into account the recent sales experience, the ageing of inventories and other factors that affect inventory obsolescence.

 

Estimation of useful lives of assets

The Group determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down.

 

Goodwill

The Group tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 2. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of assumptions, including estimated discount rates based on the current cost of capital and growth rates of the estimated future cash flows. An impairment charge was required during the financial year ended 30 June 2020 for A$nil (2019: A$2,832,000). Refer to note 16 for further details.

 

Recovery of deferred tax assets

Deferred tax assets are recognised for deductible temporary differences only if the Group considers it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Significant judgement is required to determine the amount of deferred tax assets that can be recognised based on the estimates and assumptions made in relation to the timing and level of future taxable amounts that will be available.

 

 

Note 4. Operating segments

 

Identification of reportable operating segments

The Group's operating segments are determined based on the internal reports that are reviewed and used by the Board of Directors (being the Chief Operating Decision Makers ('CODM')) in assessing performance and in determining the allocation of resources.

 

The CODM reviews revenue and gross profit by reportable segments, being geographical regions. The accounting policies adopted for internal reporting to the CODM are consistent with those adopted in these financial statements.

 

The Group operates separate websites in each country that it sells goods in. Revenue from external customers is attributed to each country based on the activity on that country's website. Similar types of goods are sold in all segments. The Group's operations are unaffected by seasonality.

 

Intersegment transactions

Intersegment transactions were made at market rates and are eliminated on consolidation.

 

Segment assets and liabilities

Assets and liabilities are managed on a Group basis. The CODM does not regularly review any asset or liability information by segment and, accordingly there is no separate segment information. Refer to the balance sheet for Group assets and liabilities.

 

Major customers

During the year ended 30 June 2020 there were no major customers (2019: none). A customer is considered major if its revenues are 10% or more of the Group's revenue.

 

Operating segment information

 

 

 

Australia and 

 

South-East

 

 

 

 

New Zealand

 

Asia

 

Total

Consolidated - 2020

 

A$'000

 

A$'000

 

A$'000

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

Sales to external customers transferred at a point in time

 

118,107

 

12,925

 

131,032

Total revenue

 

118,107

 

12,925

 

131,032

 

 

 

 

 

 

 

Gross profit

 

38,943

 

4,937

 

43,880

Other operating gain, net

 

 

 

 

 

8,626

Selling and distribution expenses

 

 

 

 

 

(37,015)

Administration expenses

 

 

 

 

 

(20,746)

Finance income

 

 

 

 

 

4

Finance costs

 

 

 

 

 

(400)

Recovery of receivables

 

 

 

 

 

2,262

Loss before income tax expense

 

 

 

 

 

(3,389)

Income tax expense

 

 

 

 

 

(171)

Loss after income tax expense

 

 

 

 

 

(3,560)

 

 

 

Australia and 

 

South-East

 

 Rest of the

 

 

 

 

New Zealand

 

Asia

 

world

 

Total

Consolidated - 2019

 

A$'000

 

A$'000

 

A$'000

 

A$'000

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

Sales to external customers transferred at a point in time

 

166,082

 

28,386

 

14,128

 

208,596

Total revenue

 

166,082

 

28,386

 

14,128

 

208,596

 

 

 

 

 

 

 

 

 

Gross profit - restated*

 

44,786

 

4,865

 

2,767

 

52,418

Other operating gain, net

 

 

 

 

 

 

 

1,591

Selling and distribution expenses

 

 

 

 

 

 

 

(71,795)

Administration expenses

 

 

 

 

 

 

 

(31,814)

Finance costs

 

 

 

 

 

 

 

(547)

Impairment of receivables

 

 

 

 

 

 

 

(5,261)

Impairment of assets

 

 

 

 

 

 

 

(2,832)

Loss before income tax expense

 

 

 

 

 

 

 

(58,240)

Income tax expense

 

 

 

 

 

 

 

(11,090)

Loss after income tax expense

 

 

 

 

 

 

 

(69,330)

 

No customers are located outside Australia, New Zealand, and South-East Asia in 2020, hence revenue for the Rest of the World is A$nill, with operations now closed. In 2019 revenue in the Rest of the World segment was A$14,128,000. In May 2019, the Group sold its Cocosa website, which served the Group's customers in the UK market. The closure of the US and UK warehouses, which sourced the rest of the world operating segment, commenced in 2019 and was completed in 2020. Following the reorganisation,and given the location of the Group's customers in 2020, there is no longer a Rest of the World segment to be reported.

 

*Delivery costs to customer for the year ended 30 June 2019 of A$33,831,000 have been reclassified from Cost of Goods to Selling and Distribution expenses to be in line with the online retail industry.

 

 

Note 5. Other operating gain, net

 

 

 

Consolidated

 

 

2020

 

2019

 

 

A$'000

 

A$'000

 

 

 

 

 

Net foreign exchange gain/(loss)

 

893

 

(692)

Net loss on disposal of property, plant and equipment

 

(23)

 

(487)

Net gain on disposal of asset *

 

 

2,655

Debt forgiveness **

 

7,723

 

Other income

 

33

 

115

 

 

 

 

 

Other operating gain, net

 

8,626

 

1,591

 

* In May 2019, the Group sold its Cocosa websites through an asset sale for a net gain on sale of A$2,655,000. 

**In September 2019, the Group finalised a share placement for A$23,329,000. Net proceeds after considering the share issue costs of A$721,000 was A$22,608,000. The total number of new shares issued under the placement was 640,376,083 bringing the total shares on issue to 794,707,735. At the same time as the share placement, the Group agreed with its financier Hong Kong and Shanghai Banking Corporation Plc ('HSBC') to extinguish all borrowing facilities, Corporate Guarantees and Indemnities with a repayment of A$10,914,000 in September 2019. As part of this repayment HSBC agreed to provide the Group with a debt forgiveness amount of A$7,723,000.

 

Note 6. EBITDA reconciliation (earnings before interest, taxation, depreciation and amortisation) and exceptional items

 

 

 

Consolidated

 

 

2020

 

2019

 

 

A$'000

 

A$'000

 

 

 

 

 

EBITDA reconciliation

 

 

 

 

Loss before income tax

 

(3,389)

 

(58,240)

Less: Interest income

 

(4)

 

Add: Interest expense

 

400

 

547

Add: Depreciation and amortisation

 

7,526

 

6,937

 

 

 

 

 

EBITDA

 

4,533

 

(50,756)

 

Underlying EBITDA represents EBITDA adjusted for certain items, as outlined below.

 

 

Consolidated

 

 

2020

 

2019

 

 

A$'000

 

A$'000

 

 

 

 

 

Underlying EBITDA reconciliation

 

 

 

 

EBITDA

 

4,533

 

(50,756)

Impairment of goodwill

 

 

2,832

(Recovery)/impairment of receivables

 

(1,505)

 

6,760

Net gain on disposal of Cocosa websites and trademarks (note 5)

 

 

(2,655)

Debt forgiveness (note 5)

 

(7,723)

 

Share-based payments

 

271

 

(1,036)

Reorganisation costs*

 

1,796

 

2,502

One-off costs of non-trading, non-recurring nature including acquisition expenses

 

(288)

 

3,096

Inventory write down

 

948 

 

18,941

Unrealised foreign exchange loss

 

(763)

 

1,468

 

 

 

 

 

Underlying EBITDA

 

(2,731)

 

(18,848)

 

*

 

Costs in relation to the closure of overseas operations.

 

Management has presented the EBITDA and underlying EBITDA because these are performance measures used to monitor and understand the Group's financial performance. EBITDA is calculated by adjusting loss before income tax from continuing operations to exclude the impact of taxation, interest income, interest expense, depreciation and amortisation. Underlying EBITDA is calculated as EBITDA adjusted for certain items including impairment losses/reversals related to goodwill and receivables, share-based payments and unrealised foreign exchange loss/gain. Underlying EBITDA and EBITDA are not defined performance measures in IFRS Standards. 

 

In 2019, the group disclosed certain costs as exceptional items in the Statement of profit or loss and comprehensive income. There were no such costs that occurred in 2020. A breakdown of the exceptional costs are shown below:

 

 

 

Consolidated

 

 

 

 

2019

 

 

 

 

A$'000

 

 

 

 

 

Exceptional items

 

 

 

 

 

 

 

 

 

Cost of sale of goods

 

 

 

19,611

 

 

 

 

 

Other operating (gain)/loss, net

 

 

 

(848)

Sales, distribution and administration expenses:

 

 

 

 

  Staff costs

 

 

 

(384)

  Merchant and other professional fees

 

 

 

307

  Other administration cost

 

 

 

3,630

  Impairment of receivable

 

 

 

6,760

  Impairment of assets

 

 

 

2,832

 

 

 

 

 

Total

 

 

 

31,908

 

The group considers items of income and expenses as exceptional where the nature of the item, or its magnitude, is material and likely to be non-recurring in nature so as to assist the user of the financial statements to better understand the results of the core operations of the Group. These costs have not been disclosed separately on the face of the statement of profit or loss and other comprehensive income within these financial statements. An explanation of the exceptional costs incurred in 2019 are set out below.

 

Staff costs

During the 2019 financial year, staff related exceptional costs related to the integrating previously acquired businesses onto the Group's online platform.

 

Cost of sale of goods

Cost of sale of goods adjustment relates to the write down of the Group's ownbuy and outlet stock at year end.

 

Merchant and other professional fees

This relates to the professional fees paid for potential acquisitions and business restructure initiatives.

 

Other administration cost

Other administration cost relates to non-recurring restructuring costs and provisions recognised by the business.

 

Impairment of receivables

An impairment of $6,760,000 has been recognised against the Group's wholesale business receivables.

 

Impairment of assets - goodwill

An impairment of $2,832,000 has been recognised against goodwill relating to the Online Retail CGU.

 

Note 7. Expenses

 

 

 

Consolidated

 

 

2020

 

2019

 

 

A$'000

 

A$'000

 

 

 

 

 

Loss before income tax includes the following specific expenses:

 

 

 

 

 

 

 

 

 

Sales, distribution and administration expenses:

 

 

 

 

Staff costs (note 8)

 

17,823

 

24,897

Marketing expenses

 

8,297

 

18,725

Delivery costs *

 

14,776

 

33,831 

Short term leases

 

1,577

 

6,442

Low value leases

 

26

 

-

Merchant and other professional fees

 

4,638

 

7,985

Depreciation and amortisation

 

7,526

 

6,937

Other administration costs

 

3,098

 

4,792

 

 

 

 

 

Total sales, distribution and administration expenses

 

57,761

 

103,609

 

 

 

 

 

Finance costs

 

 

 

 

Interest and finance charges paid/payable on borrowings

 

159

 

547

Interest and finance charges paid/payable on lease liabilities

 

241

 

 

 

 

 

 

Finance costs expensed

 

400

 

547

 

 

 

 

 

Leases

 

 

 

 

Minimum lease payments

 

 

4,907

 

* Delivery costs to customer for the year ended 30 June 2019 of A$33,831,000 have been reclassified from Cost of Goods to Selling and Distribution expenses to be in line with the online retail industry.

 

 

Note 8. Staff costs

 

 

 

Consolidated

 

 

2020

 

2019

 

 

A$'000

 

A$'000

 

 

 

 

 

Aggregate remuneration:

 

 

 

 

Wages and salaries *

 

14,922

 

21,473

Social security costs

 

1,344

 

1,876

Long term employee incentive plan (note 39)

 

271

 

(1,036)

Other staff costs and benefits

 

1,286

 

2,584

 

 

 

 

 

Total staff costs

 

17,823

 

24,897

 

* During the financial year and related to the COVID-19 pandemic, certain entities within the Group received JobKeeper support payments from the Australian government and wage subsidies from the New Zealand and Singapore governments. The relevant entities are eligible for JobKeeper support from the Australian government on the condition that employee benefits continue to be paid. The New Zealand wage subsidy, recognised during the financial year, commenced in March 2020 and covered a 12 week period. These subsidies were passed on to the eligible employees and have been recognised in the financial statements net of employment costs over the relevant periods. The net impact (gross amount less top up payments to casual employees) recognised in the statement of profit or loss during the financial year was A$947,000 (FY19: A$Nil) in respect of JobKeeper and A$91,000 (FY19: A$Nil) in respect of New Zealand and Singapore wage subsidies. 

 

 

 

Consolidated

 

 

2020

 

2019

 

 

 

 

 

The average monthly number of employees (including executive directors and those on a part-time basis) was:

 

 

 

 

Sales and distribution

 

81

 

131

Administration

 

89

 

176

 

 

 

 

 

 

 

170

 

307

 

Details of Directors' remuneration and interests are provided in the audited section of the Directors' remuneration report and should be regarded as part of these financial statements.

 

Note 9. Income tax (benefit)/expense

 

 

 

Consolidated

 

 

2020

 

2019

 

 

A$'000

 

A$'000

 

 

 

 

 

Income tax (benefit)/expense

 

 

 

 

Current tax

 

160

 

247

Deferred tax - origination and reversal of temporary differences

 

  -

 

10,594

Adjustment recognised for prior years

 

11 

 

249

 

 

 

 

 

Aggregate income tax (benefit)/expense

 

171

 

11,090

 

 

 

 

 

Deferred tax included in income tax (benefit)/expense comprises:

 

 

 

 

Decrease/(increase) in deferred tax assets (note 18)

 

-

 

10,594

 

 

 

 

 

Numerical reconciliation of income tax (benefit)/expense and tax at the statutory rate

 

 

 

 

Loss before income tax benefit/(expense)

 

(3,389)

 

(58,240)

 

 

 

 

 

Tax at the statutory tax rate of 30% (2019 - 30%)

 

(1,017)

 

(17,472)

 

 

 

 

 

Tax effect amounts which are not deductible/(taxable) in calculating taxable income:

 

 

 

 

Effect of overseas tax rates

 

65

 

(860)

(Non-taxable income/Non-deductible expenses

 

(2,456)

 

865

Tax-exempt income

 

(18)

 

(34)

 

 

 

 

 

 

 

(3,426)

 

(17,501)

Prior year tax losses not recognised now recognised

 

  34

 

(1,612)

Change in recognised deductible temporary differences

 

  3,552

 

29,954

Adjustment recognised for prior periods

 

11 

 

249

 

 

 

 

 

Income tax expense

 

171

 

11,090

 

The tax rates of the main jurisdictions are Australia 30% (2019: 30%), Singapore 17% (2019: 17%), New Zealand 28% (2019: 28%), United Kingdom 19% (2019: 19%) and United States 21% (2019: 21%).

 

Note 10. Current assets - cash and cash equivalents

 

 

 

Consolidated

 

 

2020

 

2019

 

 

A$'000

 

A$'000

 

 

 

 

 

Cash at bank

 

6,550

 

703

Bank deposits at call

 

110

 

111

 

 

 

 

 

 

 

6,660

 

814

 

 

 

 

 

Reconciliation to cash and cash equivalents at the end of the financial year

 

 

 

 

The above figures are reconciled to cash and cash equivalents at the end of the financial year as shown in the statement of cash flows as follows:

 

 

 

 

 

 

 

 

 

Balances as above

 

6,660

 

814

Bank overdraft (note 21)

 

 

(13,137)

 

 

 

 

 

Balance as per statement of cash flows

 

6,660

 

(12,323)

 

Note 11. Current assets - trade and other receivables

 

 

 

Consolidated

 

 

2020

 

2019

 

 

A$'000

 

A$'000

 

 

 

 

 

Trade receivables

 

2,479

 

11,307

Less: Allowance for expected credit losses

 

(183)

 

(5,389)

 

 

2,296

 

5,918

 

 

 

 

 

Other receivables

 

369

 

1,107

Sales tax receivable

 

1,442 

 

2,960

 

 

 

 

 

 

 

4,107

 

9,985

 

Trade receivables include uncleared cash receipts due from online customers which amounted to A$2,261,000(2019: A$5,303,000).

 

Allowance for expected credit losses

The Group has recognised a recovery of A$2,262,000 (2019: loss of A$5,261,000) in profit or loss in respect of impairment of receivables for the year ended 30 June 2020.

 

The ageing of the trade receivables and the merchant receivables (uncleared cash receipts due from online customers) and allowance for expected credit losses provided for above are as follows:

 

 

 

Expected credit loss rate

Carrying amount

Allowance for expected credit losses

 

 

2020

 

2019

 

2020

 

2019

 

2020

 

2019

Consolidated

 

%

 

%

 

A$'000

 

A$'000

 

A$'000

 

A$'000

 

 

 

 

 

 

 

 

 

 

 

 

 

Wholesale and other trade receivable:
Not overdue

 

-

 

11.00%

 

96

 

1,913

 

-

 

210

1-30 days overdue

 

-

 

-

 

109

 

-

 

-

 

-

Over 61 days

 

100.00%

 

93.00%

 

13

 

4,115

 

13

 

3,827

 

 

 

 

 

 

218

 

6,028

 

13

 

4,037


Merchant receivables:
1-30 days overdue

 

0.10%

 

4.90%

 

2,061

 

3,561

 

2

 

174

31-60 days overdue

 

56.44%

 

11.50%

 

74

 

477

 

42

 

55

Over 61 days

 

100.00%

 

90.50%

 

126

 

1,241

 

126

 

1,123

 

 

 

 

 

 

2,261

 

5,279

 

170

 

1,352

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,479

 

11,307

 

183

 

5,389

 

The Group has increased its monitoring of debt recovery as there is an increased probability of customers delaying payment or being unable to pay, due to the Coronavirus (COVID-19) pandemic. As a result, the calculation of expected credit losses has been revised as at 30 June 2020 and rates have increased in the category over 61 days overdue for wholesale and over 31 days overdue for merchant.

 

Movements in the allowance for expected credit losses are as follows:

 

 

 

Consolidated

 

 

2020

 

2019

 

 

A$'000

 

A$'000

 

 

 

 

 

Opening balance

 

5,389

 

311

Additional provisions recognised

 

 

5,078

Unused amounts reversed

 

(2,262)

 

Receivables written off during the year as uncollectable

 

(2,944)

 

 

 

 

 

 

Closing balance

 

183

 

5,389

 

Note 12. Current assets - inventories

 

 

 

Consolidated

 

 

2020

 

2019

 

 

A$'000

 

A$'000

 

 

 

 

 

Goods for resale

 

8,968

 

21,556

Obsolete and slow-moving inventory provision

 

(6,207)

 

(7,249)

 

 

2,761

 

14,307

 

 

 

 

 

Stock in transit

 

 

1,656

 

 

 

 

 

 

 

2,761

 

15,963

 

Write-downs of inventories to net realisable value recognised as an expense during the year ended 30 June 2020 amounted to A$947,592 (2019: A$18,941,000). This expense has been included in 'cost of sales' in profit or loss.

 

Note 13. Current assets - Other current assets

 

 

 

Consolidated

 

 

2020

 

2019

 

 

A$'000

 

A$'000

 

 

 

 

 

Prepayments

 

284

 

738

Prepaid inventory *

 

90

 

3,406

Other deposits

 

-

 

266

Right of return assets

 

260

 

292

Other current assets

 

 

64

 

 

 

 

 

 

 

634

 

4,766

 

*

 

Prepaid inventory relates to the costs of goods for resale that have been paid for by the Group but not delivered to its distribution centres for further dispatch to the customers who placed the orders as at the reporting date. The corresponding cash received in advance from customers are accounted for within the contract liabilities category in the balance sheet which includes the total amount of cash received for the goods not delivered to customers at the reporting date. This amount has reduced through a faster dispatch process and most product being shipped from the Australian warehouse.

 

 

 

 

Note 14. Non-current assets - property, plant and equipment

 

 

 

Consolidated

 

 

2020

 

2019

 

 

A$'000

 

A$'000

 

 

 

 

 

Leasehold improvements - at cost

 

1,949

 

1,367

Less: Accumulated depreciation

 

(1,185)

 

(1,058)

 

 

764

 

309

 

 

 

 

 

Plant and equipment - at cost

 

5,027

 

4,996

Less: Accumulated depreciation

 

(4,670)

 

(4,381)

 

 

357

 

615

 

 

 

 

 

Fixtures and fittings - at cost

 

940

 

1,169

Less: Accumulated depreciation

 

(845)

 

(926)

 

 

95

 

243

 

 

 

 

 

Motor vehicles - at cost

 

209

 

239

Less: Accumulated depreciation

 

(209)

 

(220)

 

 

 

19

 

 

 

 

 

 

 

1,216

 

1,186

 

Reconciliations

Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:

 

 

 

Leasehold

 

Plant and

 

Fixtures

 

Motor

 

 

 

 

improvements

 

equipment

 

and fittings

 

vehicles

 

Total

Consolidated

 

A$'000

 

A$'000

 

A$'000

 

A$'000

 

A$'000

 

 

 

 

 

 

 

 

 

 

 

Opening net book amount  at 1 July 2018

 

612

 

1,310

 

437

 

212

 

2,571

Additions

 

36

 

57

 

1

 

-

 

94

Disposals

 

(174)

 

(273)

 

(31)

 

(177)

 

(655)

Exchange differences

 

1

 

(10)

 

9

 

4

 

4

Depreciation expense

 

(166)

 

(469)

 

(173)

 

(20)

 

(828)

 

 

 

 

 

 

 

 

 

 

 

Closing net book amount  at 30 June 2019

 

309

 

615

 

243

 

19

 

1,186

Additions

 

622

 

48

 

1

 

-

 

671

Disposals

 

0

 

0

 

(65)

 

(16)

 

(81)

Depreciation expense

 

(167)

 

(306)

 

(84)

 

(3)

 

(560)

 

 

 

 

 

 

 

 

 

 

 

Closing net book amount at 30 June 2020

 

764

 

357

 

95

 

-

 

1,216

 

Assets pledged as security

Refer to note 21 for property, plant and equipment pledged as security.

 

Depreciation expense is included in the 'administration expenses' in profit or loss.

 

Note 15. Non-current assets - right-of-use assets

 

 

 

Consolidated

 

 

2020

 

2019

 

 

A$'000

 

A$'000

 

 

 

 

 

Opening cost on adoption of IFRS 16

 

  1,724

 

 

Additions

 

  4,781

 

 

 

 

 

 

 

Less: Accumulated depreciation

 

(1,143)

 

 

 

 

 

 

 

 

5,362

 

 

 

 

 

 

 

 

 

 

Property

 

Equipment

 

Total

Consolidated

 

 

 

 

 

A$'000

 

A$'000

 

A$'000

 

 

 

 

 

 

 

 

 

 

 

Opening cost on adoption of IFRS 16

 

 

 

 

 

1,673

 

51

 

1,724

Additions

 

 

 

 

 

4,781

 

 -

 

4,781

Cost at 30 June 2020

 

 

 

 

 

6,454

 

51

 

6,505

 

 

 

 

 

 

 

 

 

 

 

Depreciation on adoption of IFRS 16

 

 

 

 

 

-

 

-

 

-

Depreciation charge for year

 

 

 

 

 

(1,130)

 

(13)

 

(1,143)

Accumulated depreciation at 30 June 2020

 

 

 

 

 

(1,130)

 

(13)

 

(1,143)

 

 

 

 

 

 

 

 

 

 

 

NBV at 01 July 2020

 

 

 

 

 

1,673

 

51

 

1,724

NBV at 30 June 2020

 

 

 

 

 

5,324

 

38

 

5,362

 

 

 

The Group leases buildings for its offices, warehouses and retail outlets under agreements of between 1 to 5 years with, in some cases, options to extend. The leases have various escalation clauses. On renewal, the terms of the leases are renegotiated.

 

The Group leases office equipment under agreements of less than 1 year. These leases are either short-term or low value, so have been expensed as incurred and not capitalised as right-of-use assets. Details of the amounts recognised in the income statement are included in Note 7. The total cash outflow for leases for the year amounted to A$1,163,000.

 

 

Note 16. Non-current assets - intangibles

 

 

 

Consolidated

 

 

2020

 

2019

 

 

A$'000

 

A$'000

 

 

 

 

 

Goodwill - at cost

 

21,214

 

21,221

 

 

 

 

 

Customer relationships - at cost

 

3,850

 

1,846

Less: Accumulated amortisation

 

(3,718)

 

(1,702)

 

 

132

 

144

 

 

 

 

 

Software - at cost *

 

28,001

 

26,492

Less: Accumulated amortisation

 

(19,608)

 

(14,296)

 

 

8,393

 

12,196

 

 

 

 

 

ERP system

 

4,905

 

3,300

Less: Accumulated amortisation

 

(4,476)

 

(2,381)

 

 

429

 

919

 

 

 

 

 

 

 

30,168

 

34,480

 

*2019 cost base and accumulated amortisation was understated by A$3,032,000, however the net book value is correct. 

 

 

Reconciliations

Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:

 

 

 

 

 

Customer

 

 

 

ERP

 

 

 

 

 Goodwill

 

relationships

 

Software

 

system

 

Total

Consolidated

 

A$'000

 

A$'000

 

A$'000

 

A$'000

 

A$'000

 

 

 

 

 

 

 

 

 

 

 

Opening net book amount at 1 July 2018

 

24,043

 

605

 

12,048

 

1,846

 

38,542

Additions

 

-

 

-

 

4,852

 

13

 

4,865

Exchange differences

 

10

 

-

 

2

 

2

 

14

Impairment of assets

 

(2,832)

 

-

 

-

 

-

 

(2,832)

Amortisation expense

 

-

 

(461)

 

(4,706)

 

(942)

 

(6,109)

 

 

 

 

 

 

 

 

 

 

 

Closing net book amount at  30 June 2019

 

21,221

 

144

 

12,196

 

919

 

34,480

Additions

 

-

 

-

 

1,621

 

12

 

1,633

Disposals

 

-

 

-

 

(112)

 

(3)

 

(115)

Exchange differences

 

(7)

 

-

 

-

 

-

 

(7)

Amortisation expense

 

-

 

(12)

 

(5,312)

 

(499)

 

(5,823)

 

 

 

 

 

 

 

 

 

 

 

Closing net book amount at 30 June 2020

 

21,214

 

132

 

8,393

 

429

 

30,168

 

Amortisation expense is included in 'administration expenses' in profit or loss.

 

Goodwill is allocated to the Group's cash-generating units ('CGUs') identified according to business model as follows:

 

 

 

Consolidated

 

 

2020

 

2019

 

 

A$'000

 

A$'000

 

 

 

 

 

Online flash

 

19,458

 

19,683

Online retail

 

1,756

 

1,538

 

 

 

 

 

 

 

21,214

 

21,221

 

The Group's retail websites are "OO.com", Deals Direct, and Top Buy. All other websites owned by the Group are online flash websites. 

 

The recoverable amounts of the CGUs were determined based on value-in-use. Cash flow projections used in the value-in-use calculations were based on financial budgets approved by management covering a five year period. Cash flows beyond the five year period were extrapolated using the estimated growth rates stated below.

 

Management determined budgeted gross margin based on expectations of market developments. The growth rates used were conservative based on industry forecasts. The discount rates used were pre-tax and reflected specific risks relating to the CGUs.

 

Online flash

 

Key assumptions used for value-in-use calculations:

 

 

 

Consolidated

 

 

2020

 

2019

 

 

%

 

%

 

 

 

 

 

Budgeted gross margin

 

29.5%

 

22.0%

Five year compound growth rate

 

3.0%

 

(8.0%)

Long term growth rate

 

2.0%

 

2.0%

Pre-tax discount rate

 

9.0%

 

9.0%

 

Based on the assessment, no impairment charge is required. Management have performed a number of sensitivity tests on the above rates and note that there are no impairment indicators arising from this analysis. The recoverable amount exceeded the carrying amount by A$79,700,000.Recoverable amount in FY2019 is the remaining balance after impairment of A$2,832,000.

 

Online retail

 

Key assumptions used in value-in-use calculation

 

 

 

2020

 

2019

 

 

%

 

%

 

 

 

 

 

Budgeted gross margin

 

28.3%

 

23.0%

Five year compound growth rate

 

0.8%

 

(8.0%)

Long-term growth rate

 

2.0%

 

2.0%

Pre-tax discount rate

 

9.0%

 

9.0%

 

Based on the assessment, an impairment charge of A$nil (2019: A$2,832,000) is required. The recoverable amount exceeded the carrying amount by A$3,010,000 (2019: A$2,832,000).

 

Sensitivity

As disclosed in note 3, the Directors have made judgements and estimates in respect of impairment testing of goodwill. Should these judgements and estimates not occur the resulting goodwill carrying amount may decrease. Sensitivity analysis has been performed on the value-in-use calculations, holding all other variables constant, to: 

 

(i) apply a 1% increase in discount rate from 9% to 10%. No impairment would occur in the Online Flash CGU. The recoverable amount exceeded the carrying amount by A$68,529,000.

 

(ii) apply a 100 bps decrease in margin from 29.5% to 28.5%. No impairment would occur in the Online Flash CGU. The recoverable amount exceeded the carrying amount by A$60,678,000.

 

(iii) apply a 1% increase in discount rate from 9% to 10%. No impairment would occur in the Online Retail CGU. The recoverable amount exceeded the carrying amount by A$2,485,000. 

 

(iv) apply a 100 bps decrease in margin from 28.3% to 27.3%. No impairment would occur in the Online Retail CGU. The recoverable amount exceeded the carrying amount by A$1,799,000.

Note 17. Non-current assets - Other non-current assets

 

 

 

Consolidated

 

 

2020

 

2019

 

 

A$'000

 

A$'000

 

 

 

 

 

Other deposits*

 

1,629

 

-

 

*Deposit given for lease agreements

 

Note 18. Non-current assets - deferred tax

 

 

 

Consolidated

 

 

2020

 

2019

 

 

A$'000

 

A$'000

 

 

 

 

 

Deferred tax asset comprises temporary differences attributable to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax losses*

 

299

 

  -

Accrued expenses

 

258

 

735

Provisions

 

2,553

 

2,105

Sundry

 

  (285)

 

424

Property, plant and equipment

 

242

 

148

Leases

 

   380

 

  -

Intangibles

 

(40)

 

(43)

 

 

 

 

 

 

 

 

 

Deferred tax asset

 

3,407

 

3,369

 

 

 

 

 

Movements:

 

 

 

 

Opening balance

 

3,369

 

14,112

Credited/(charged) to profit or loss (note 9)

 

-

 

(10,594)

Exchange loss

 

38

 

(149)

 

 

 

 

 

Closing balance

 

3,407

 

3,369

 

 

*the breakdown of the prior year deferred tax asset has been amended to reflect the appropriate breakdown of the deferred tax asset.

 

Deferred income tax assets are recognised for tax losses, non-deductible accruals and provisions and capital allowances carried forward to the extent that realisation of the related tax benefits through future taxable profits is probable. Deferred tax assets have not been recognised for trading losses totaling A$103,548,000 (2019 - A$83,900,000), given the lack of visibility over the level of future profitability of the Group.

 

Note 19. Current liabilities - trade and other payables

 

 

 

Consolidated

 

 

2020

 

2019

 

 

A$'000

 

A$'000

 

 

 

 

 

Trade payables

 

13,053

 

28,359

Other payables and accruals

 

3,163

 

4,609

Sales tax payable

 

2,769

 

 

 

 

 

 

 

 

18,985

 

32,968

 

Refer to note 31 for further information on financial instruments.

 

Note 20. Current liabilities - contract liabilities

 

 

 

Consolidated

 

 

2020

 

2019

 

 

A$'000

 

A$'000

 

 

 

 

 

Contract liabilities

 

6,186

 

10,408

 

Unsatisfied performance obligations

The aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied at the end of the reporting period was A$6,186,000 as at 30 June 2020 (A$10,408,000 as at 30 June 2019) and is expected to be recognised as revenue in future periods as follows:

 

 

 

Consolidated

 

 

2020

 

2019

 

 

A$'000

 

A$'000

 

 

 

 

 

Within 1 month

 

6,186

 

10,408

 

Contract liabilities represent the Group's obligation to transfer goods or services to a customer and are recognised when a customer pays consideration, or when the Group recognises a receivable to reflect its unconditional right to consideration (whichever is earlier) before the Group has transferred the goods or services to the customer.

 

Note 21. Current liabilities - borrowings

 

 

 

Consolidated

 

 

2020

 

2019

 

 

A$'000

 

A$'000

 

 

 

 

 

Bank overdraft

 

 

13,137

Bank loans

 

 

5,200

Finance lease liability

 

 

20

 

 

 

 

 

 

 

 

18,357

 

Refer to note 31 for further information on financial instruments.

 

Assets pledged as security

The Group has no borrowing facilities as at 30 June 2020 (30 June 2019: A$21,685,000 with Hong Kong and Shanghai Banking Corporation Plc 'HSBC'). The borrowing facilities were secured by a Corporate Guarantee and Indemnity. There were no financial covenants in relation to these borrowing facilities. The average interest rate incurred on these bank borrowings is nil (30 June 2019: 2.96%).

 

The movement in borrowings for the year were as follows:

 

 

Bank overdraft

 

Bank loans

 

Finance lease liability

 

Total

Consolidated

 

A$'000

 

A$'000

 

A$'000

 

A$'000

 

 

 

 

 

 

 

 

 

Balance at 1 July 2019

 

13,137

 

5,200

 

20

 

18,357

Additions

 

280

 

-

 

-

 

280

Repayment

 

(5,694)

 

(5,200)

 

(20)

 

(10,914)

Debt forgiveness (refer to note 5)

 

(7,723)

 

-

 

-

 

(7,723)

 

 

 

 

 

 

 

 

 

Balance at 30 June 2020

 

-

 

-

 

-

 

-

 

Financing arrangements

Unrestricted access was available at the reporting date to the following lines of credit:

 

 

 

Consolidated

 

 

2020

 

2019

 

 

A$'000

 

A$'000

 

 

 

 

 

Total facilities

 

 

 

 

Bank overdraft

 

 

13,413

Bank loans

 

 

5,886

Bank guarantees

 

 

1,541

Bank loans under interchangeable facilities

 

 

845

 

 

 

21,685

 

 

 

 

 

Used at the reporting date

 

 

 

 

Bank overdraft

 

 

13,137

Bank loans

 

 

5,200

Bank guarantees

 

 

1,506

Bank loans under interchangeable facilities

 

 

116

 

 

 

19,959

 

 

 

 

 

Unused at the reporting date

 

 

 

 

Bank overdraft

 

 

276

Bank loans

 

 

686

Bank guarantees

 

 

35

Bank loans under interchangeable facilities

 

 

729

 

 

 

1,726

 

Note 22. Current liabilities - lease liabilities

 

 

 

Consolidated

 

 

2020

 

2019

 

 

A$'000

 

A$'000

 

 

 

 

 

Lease liability

 

1,581

 

  Refer to note 31 for information on the maturity analysis of lease liabilities .

 

Note 23. Current liabilities - provisions

 

 

 

Consolidated

 

 

2020

 

2019

 

 

A$'000

 

A$'000

 

 

 

 

 

Employee benefits provision

 

1,148

 

1,093

Lease make good provision

 

458

 

564

Gift voucher provision

 

309

 

444

Sales returns provision

 

513

 

2,314

 

 

 

 

 

 

 

2,428

 

4,415

 

Employee benefits provision

The provision represents employee annual leave along with employee parental leave.

 

Lease make good provision

The provision represents the present value of the estimated costs to make good the premises leased by the Group at the end of the respective lease terms.

 

Gift voucher provision

The provision represents the estimated costs to honour gift vouchers that are in circulation and not expired.

 

Sales return provision

The provision represents the costs for goods expected to be returned by customers.

 

Movements in provisions

Movements in each class of provision during the current financial year, other than employee benefits, are set out below:

 

 

 

 

 

 

Employee

 

Lease make good

 

Gift vouchers

 

Sales returns

 

 

 

 

provision

 

provision

 

provision

 

provision

Total

Consolidated - 2020

 

 

A$'000

 

A$'000

 

A$'000

 

A$'000

A$'000

 

 

 

 

 

 

 

 

 

 

 

Carrying amount at the start of the year

 

 

1,093

 

564

 

444

 

  2,314

  4,415

Additional provisions recognised

 

 

452

 

-

 

309

 

513

1,274

Reversal of recall provision

 

 

-

 

-

 

-

 

(1,717)

(1,717)

Amounts used

 

 

(397)

 

(106)

 

(444)

 

(597)

(1,544)

 

 

 

 

 

 

 

 

 

 

 

Carrying amount at the end of the year

 

 

1,148

 

458

 

309

 

513

2,428

 

 

 

 

Note 24. Non-current liabilities - lease liabilities

 

 

 

Consolidated

 

 

2020

 

2019

 

 

A$'000

 

A$'000

 

 

 

 

 

Lease liability

 

5,048

 

  Refer to note 31 for information on the maturity analysis of lease liabilities.

 

Note 25. Non-current liabilities - provisions

 

 

 

Consolidated

 

 

2020

 

2019

 

 

A$'000

 

A$'000

 

 

 

 

 

Employee benefits provision

 

450

 

231

 

 

Note 26. Equity - share capital

 

 

 

Consolidated

 

 

2020

 

2019

 

2020

 

2019

 

 

Shares

 

Shares

 

A$'000

 

A$'000

 

 

 

 

 

 

 

 

 

Ordinary shares £nil each - fully paid

 

817,240,853

 

154,331,652

 

 

Less: Treasury shares

 

(25,533,118)

 

(3,000,000)

 

 

 

 

 

 

 

 

 

 

 

 

 

791,707,735

 

151,331,652

 

 

 

Authorised share capital

874,178,509 (2019: 200,000,000) ordinary shares of £nil each.

Movements in ordinary share capital - fully paid

 

Details

 

Date

 

Shares

 

A$'000

 

 

 

 

 

 

 

Balance

 

1 July 2018

 

154,331,652

 

-

 

 

 

 

 

 

 

Balance

 

30 June 2019

 

154,331,652

 

-

Issue of shares

 

20 September 2019

 

640,376,083

 

-

Issue of shares

 

11 December 2019

 

22,533,118

 

-

 

 

 

 

 

 

 

Balance

 

30 June 2020

 

817,240,853

 

-

 

Movements in treasury shares

 

Details

 

Date

 

Shares

 

A$'000

 

 

 

 

 

 

 

Balance

 

1 July 2018

 

3,000,000

 

-

 

 

 

 

 

 

 

Balance

 

30 June 2019

 

3,000,000

 

-

Issue of shares under the management incentive scheme

 

5 December 2019

 

22,533,118

 

-

 

 

 

 

 

 

 

Balance

 

30 June 2020

 

25,533,118

 

-

 

Ordinary shares

Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in proportion to the number of and amounts paid on the shares held.

 

 

Treasury shares

The company has two employee share plans; (1) the Executive Incentive Plan ('EIP') and (2) the Loan Share Plan ('LSP'). In accordance with the terms of each plan 100% of the ordinary shares will vest three years from grant date subject either to the achievement of the Underlying Earnings Before Interest, Tax, Depreciation and Amortisation ('EBITDA') included in the company's internal forecasts set by the Board in the year of the grant or certain share price hurdles. Share options and loan shares have been granted over the ordinary share capital of the company and are accounted for as share-based payments. That is, the fair value of the accounting expense in relation to these options and loan shares are recognised over the vesting period.

 

Vested and unvested shares under the plans are recorded as treasury shares representing a deduction against issued capital. When the loans are settled or the options are exercised, the treasury shares are reclassified as ordinary shares and the equity will increase accordingly. Treasury shares have no dividend, or voting, rights.

 

Note 27. Equity - share premium account

 

 

 

Consolidated

 

 

2020

 

2019

 

 

A$'000

 

A$'000

 

 

 

 

 

Share premium account

 

328,971

 

306,363

 

The share premium account is used to recognise the difference between the issued share capital at nominal value and the capital received.

 

In September 2019, the Company finalised a share placement for A$23,329,000. Net proceeds after considering the share issue costs of A$721,000 was A$22,608,000. The total number of new shares issued under the placement was 640,376,083 bringing the total shares on issue to 794,707,735.

 

In December 2019, the Company issued 22,533,118 ordinary shares, 4,542,614 to MySale Group Trustee Limited, in its capacity as the trustee of the MySale Group Plc Employee Benefit Trust ('EBT'), and 17,990,504 directly to those Directors and management taking part in the Loan Share Plan as part of the Company's management incentive scheme for its Directors, Non-executive Directors, and senior management. These shares, in addition to the existing 3,000,000 ordinary shares already held in the EBT, will be used to satisfy the Share Awards, subject to the performance criteria being met. Following admission of these shares, the Company's total issued share capital was 817,240,853 Ordinary Shares. The total number of voting rights in the Company is 791,707,735 (25,533,118 with no voting rights)

 

Note 28. Equity - other reserves

 

 

 

Consolidated

 

 

2020

 

2019

 

 

A$'000

 

A$'000

 

 

 

 

 

Foreign currency reserve

 

2,265

 

4,390

Share-based payments reserve

 

5,512

 

5,241

Capital reorganisation reserve

 

(132,756)

 

(132,756)

 

 

 

 

 

 

 

(124,979)

 

(123,125)

 

Foreign currency reserve

The reserve is used to recognise exchange differences arising from translation of the financial statements of foreign operations to Australian dollars.

 

Hedging reserve - cash flow hedges

The reserve is used to recognise the effective portion of the gain or loss of cash flow hedge instruments that is determined to be an effective hedge.

 

Share-based payments reserve

The reserve is used to recognise the value of equity benefits provided to employees and Directors as part of their remuneration, and other parties as part of their compensation for services.

 

Capital reorganisation reserve

The reserve is used to recognise the difference between the purchase price of APAC Sale Group Pte. Ltd. and the net assets acquired following a Group reorganisation in 2014.

 

Movements in reserves

Movements in each class of reserve during the current and previous financial year are set out below:

 

 

 

Foreign

 

 

 

Share-based

 

Capital 

 

Total

 

 

currency

 

Hedging

 

payments

 

reorganisation

 

Consolidated

 

A$'000

 

A$'000

 

A$'000

 

A$'000

 

A$'000

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 July 2018

 

3,458

 

38

 

6,277

 

(132,756)

 

(122,983)

 

 

 

 

 

 

 

 

 

 

 

Loss after income tax expense for the year

 

-

 

-

 

-

 

-

 

-

Other comprehensive income for the year, net of tax

 

932

 

(38)

 

-

 

-

 

894