Adairs Limited
Appendix 4D
Half Year Report
For the 27 week period ended 31 December 2023
This information should be read in conjunction with the interim condensed financial report for the 27 weeks ended 31
December 2023 for Adairs Limited (the “Company”) and its subsidiaries (the “Group”).
1. Details of the reporting period and the prior corresponding period
Current period: 26 June 2023 to 31 December 2023 (27 weeks)
Prior corresponding period: 27 June 2022 to 25 December 2022 (26 weeks)
2. Results for announcement to the market
Statutory results
27 weeks
ended
31 Dec 2023
$’000
26 weeks
ended
25 Dec 2022
$’000
Reported
change
%
Revenue from continuing operations
302,410
324,230
-(6.7)
Profit after tax from continuing operations attributable to members
17,674
21,783
-(18.9)
Net profit attributable to members
17,674
21,783
-(18.9)
Underlying results
The table below present the Group’s underlying financial results for sales and earnings before interest and tax
(“EBIT”). Underlying EBIT has been calculated to exclude the impact of (i) AASB 16 Leases and (ii) National Distribution
Centre transition costs. The underlying results have been calculated on a comparable basis for the prior corresponding
period.
For better comparative purposes, the underlying results are also presented on a 26 week basis:
27 weeks
ended
31 Dec 2023
$’000
(Unreviewed)
26 weeks
ended
24 Dec 2023
$’000
Reported
change
%
26 week basis
change
%
Sales
302,410
291,409
-(6.7)
-(10.1)
Underlying EBIT
30,919
28,624
-(12.9)
-(19.4)
Refer to the Investor Presentation released to the ASX for a reconciliation between statutory and underlying results.
Dividends
Dividends
Amount per security
Franked amount per
security
2023 Final Dividend – Ordinary (paid)
-
-
2024 Interim Dividend – Ordinary (resolved, not yet
provided for at 31 December 2023)
5.0 cents
5.0 cents
Record date for determining entitlements to the
dividend
Ordinary Shares
12th March 2024
Payment date of interim dividend
Ordinary Shares
8th April 2024
Commentary of results and operations
Refer to the accompanying interim condensed financial report and Investor Presentation released to the ASX.
3. Net tangible assets backing per ordinary security
31 December 2023
25 December 2022
Net tangible assets backing per ordinary security
(1)
-30 cents
-34 cents
(1
)
The net tangible assets backing includes the Right-of-use assets as per AASB 16.
4. Entities over which control has been gained or lost during the period
There are no entities over which control has been gained or lost during the period.
5. Dividend
An interim dividend of 5.0 cents per share has been declared by the board. The record date for the interim dividend is
12 March 2024, with payment on 8 April 2024.
6. Dividend reinvestment plan
The Company’s dividend reinvestment plan (“DRP”) continues to be available to eligible shareholders. The last date for
receipt of election notices for participation in the interim dividend under the DRP is 13 March 2024. The Company
intends to issue new shares to satisfy its obligations under the DRP.
There is currently a 1.5% DRP discount applied to the dividend and no limit on the number of shares that can
participate in the DRP. Shares will be allocated based on the average of the daily volume weighted average market
price of ordinary shares of Adairs Limited traded over the period of 5 trading days commencing on 14 March 2024,
less the 1.5% discount.
7. Details of associate and joint ventures
There were no associates or joint ventures during the 27 weeks ended 31 December 2023, or during the prior
corresponding period.
8. Foreign entities
All entities comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board.
8. Independent review by auditor
This report is based on an interim condensed financial report that has been subject to auditor review. The review
opinion is unqualified.
ADAIRS LIMITED
ABN 50 147 375 451
INTERIM CONDENSED
FINANCIAL REPORT
FOR THE 27 WEEKS ENDED
31 DECEMBER 2023
ADAIRS LIMITED
Table of Contents
DIRECTORS’ REPORT .................................................................................................................................................................. 1
AUDITOR’S INDEPENDENCE DECLARATION……………………………………………………………………………………………………………………………4
INDEPENDENT AUDITOR’S REVIEW REPORT ……………………………………………………………………………………………………………………….5
DIRECTORS’ DECLARATION ........................................................................................................................................................ 7
INTERIM CONSOLIDATED STATEMENT OF PROFIT OR LOSS ...................................................................................................... 8
INTERIM CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME.......................................................................... 9
INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION ............................................................................................ 10
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ............................................................................................. 11
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS ......................................................................................................... 12
NOTES TO THE FINANCIAL STATEMENTS ................................................................................................................................. 13
NOTE 1. CORPORATE INFORMATION .................................................................................................................................. 13
NOTE 2. SUMMARY OF MATERIAL ACCOUNTING POLICIES ................................................................................................ 13
NOTE 3. SEGMENT REPORTING ........................................................................................................................................... 15
NOTE 4. REVENUES ............................................................................................................................................................. 16
NOTE 5. EXPENSES .............................................................................................................................................................. 16
NOTE 6. DIVIDENDS ............................................................................................................................................................ 17
NOTE 7. IMPAIRMENT ........................................................................................................................................................ 17
NOTE 8. CASH AND CASH EQUIVALENTS............................................................................................................................. 17
NOTE 9. INVENTORIES ......................................................................................................................................................... 18
NOTE 10. OTHER LIABILITIES ............................................................................................................................................... 18
NOTE 11. BORROWINGS ..................................................................................................................................................... 19
NOTE 12. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES ............................................................................... 20
NOTE 13. SHARE-BASED PAYMENTS ................................................................................................................................... 21
NOTE 14. EARNINGS PER SHARE ......................................................................................................................................... 22
NOTE 15. EVENTS AFTER THE BALANCE SHEET DATE ......................................................................................................... 22
CORPORATE INFORMATION………………………………………………………………………………………………………………………………………………..23
1
ADAIRS LIMITED
DIRECTORS’ REPORT
Your directors submit their report on the consolidated entity, being Adairs Limited (the “Company”) and its subsidiaries (the
“Group”), for the 27 weeks ended 31 December 2023.
DIRECTORS
The names of the Company's directors in office during the 27 weeks ended 31 December 2023 and until the date of this
report are set out below. Directors were in office for this entire period unless otherwise stated.
Brett Chenoweth
Michael Cherubino (resigned 18 August 2023)
Kiera Grant
David MacLean
Trent Peterson
Mark Ronan
Kate Spargo
PRINCIPAL ACTIVITIES
For the 27 weeks ended 31 December 2023, and in all referenced corresponding periods, the principal activities of the Group
consisted of the retailing of homewares, furniture and home furnishings in Australia and New Zealand, through both retail
stores and online channels.
DIVIDENDS
On 26 February 2024, the directors of Adairs Limited declared an interim dividend on ordinary shares in respect of the 27
weeks ended 31 December 2023. The total amount of the dividend is $8.7 million which represents a fully franked dividend
of $0.05 per share. The dividend has not been provided for in the 31 December 2023 interim condensed financial report.
OPERATING AND FINANCIAL REVIEW
The current reporting period is a 27 week period ended 31 December 2023. The prior corresponding period was a 26 week
period ended 25 December 2022. The results for the 27 week period ended 31 December 2023 are summarised below:
• Total sales of $302.4 million (26 weeks: $291.4 million), representing a decrease of -10.1%
1
. Sales were primarily
impacted by a fall in customer traffic, both in stores and online, which reflected the weaker macro trading environment.
• Gross profit of $143.6 million (26 weeks: $137.6 million) declined by -6.8%
1
, however gross profit margin % improved
by +170bps
1
. This margin improvement was achieved across all brands and reflects improved pricing strategy and an
easing of import container rates.
• Whilst strong cost management fully offset inflationary pressures from higher wage rates, rents and general costs of
doing business, this was not enough to offset the decline in sales. Underlying EBIT of $30.9 million (26 weeks: $28.6
million) was down -19.4%
1
. The Underlying EBIT impact of week 27 (which included Boxing Day store sales) was $2.3
million.
• Statutory basic earnings per share (“EPS”) of 10.2 cents was a decrease of -19.7%
2
.
• Net debt
3
of $58.6 million, was a reduction of -$15.5 million since 25 June 2023.
1
Measured on a comparable 26 weeks basis.
2
Measured on a statutory reporting period basis.
3
Net debt is Borrowings less Cash and cash equivalents.
2
ADAIRS LIMITED
DIRECTORS’ REPORT (continued)
OPERATING AND FINANCIAL REVIEW (continued)
Below is a reconciliation from statutory profit before tax to underlying earnings before interest and tax (“EBIT”), as well as a
comparison of both reporting periods on a 26 week basis.
Unreviewed
Reported
Underlying
Reported
Change
27 weeks
ended
31 Dec 2023
Week 27
impact
26 weeks
ended
24 Dec 2023
26 weeks
ended
25 Dec 2022
Reported
26 week
basis
$’000
$’000
$’000
$’000
Sales
302,410
(11,001)
291,409
324,230
(6.7%)
(10.1%)
Gross profit
143,557
(5,933)
137,624
147,639
(2.8%)
(6.8%)
Gross profit margin %
47.5%
47.2%
45.5%
+200bps
+170bps
Underlying EBIT (non-IFRS)
30,919
(2,295)
28,624
35,492
(12.9%)
(19.4%)
Significant items:
Impact of AASB 16 Leases
4
2,923
1,605
National Distribution Centre
transition costs
(1,607)
(154)
Statutory EBIT (IFRS)
32,235
36,943
(12.7%)
Finance expenses
(7,567)
(6,412)
Finance income
279
118
Profit before income tax
24,947
30,649
(18.6%)
Income tax expenses
(7,273)
(8,866)
Profit after income tax
17,674
21,783
(18.9%)
4
The impact of AASB 16 Leases results in an earnings shift in the interim consolidated statement of profit or loss from Occupancy expenses under AASB 117 to
Depreciation and amortisation expenses and Finance expenses under AASB 16.
3
ADAIRS LIMITED
DIRECTORS’ REPORT (continued)
AUDITORS INDEPENDENCE DECLARATION
A copy of the auditor's independence declaration as required under section 370C of the Corporations Act 2001 is set out on
page 4.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
There were no material changes in the state of affairs of the Group during the 27 weeks ended 31 December 2023.
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL PERIOD
On 26 February 2024, the directors of Adairs Limited declared an interim dividend on ordinary shares in respect of the 2024
financial year. The total amount of the dividend is $8.7 million which represents an interim franked dividend of 5.0 cents per
share. The dividend has not been provided for in the 31 December 2023 interim condensed financial report.
Other than the above, no matters or circumstances have arisen since reporting date which significantly affected or may
significantly affect the operations of the Company, the results of those operations, or the state of affairs of the Group.
INDEMNIFICATION OF AUDITORS
To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young Australia, as part of the
terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount).
No payment has been made to indemnify Ernst & Young during or since the financial period.
ROUNDING
The amounts contained in the Directors' report and in the interim condensed financial report have been rounded to the
nearest $1,000 (where rounding is applicable) under the option available to the Company under ASIC Corporations (Rounding
in Financial/Directors’ Reports) Instrument 2016/191. The Company is an entity to which the legislative instrument applies.
Signed in accordance with a resolution of the directors.
On behalf of the Board
Brett Chenoweth
Independent Chairman
Non-Executive Director
Mark Ronan
Managing Director and
Chief Executive Officer
Melbourne
26 February 2024
4
ADAIRS LIMITED
AUDITOR’S INDEPENDENCE DECLARATION
5
ADAIRS LIMITED
INDEPENDENT AUDITOR’S REVIEW REPORT
6
ADAIRS LIMITED
INDEPENDENT AUDITOR’S REVIEW REPORT (continued)
7
ADAIRS LIMITED
DIRECTORS’ DECLARATION
In accordance with a resolution of the directors of Adairs Limited, we state that:
In the opinion of the directors:
(a) the financial statements and notes of Adairs Limited for the 27 weeks ended 31 December 2023 are in accordance with
the Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2023 and of its
performance for the 27 weeks ended on that date; and
(ii) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations
2001;
(b) There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable.
On behalf of the Board
Brett Chenoweth
Independent Chairman
Non-Executive Director
Mark Ronan
Managing Director and
Chief Executive Officer
Melbourne
26 February 2024
8
ADAIRS LIMITED
INTERIM CONSOLIDATED STATEMENT OF PROFIT OR LOSS
FOR THE 27 WEEKS ENDED 31 DECEMBER 2023
27 weeks ended
31 December
2023
Restated
26 weeks ended
25 December
2022
Note
$’000
$’000
Revenue from contracts with customers
4
302,410
324,230
Cost of sales
(158,853)
(176,591)
Gross profit
143,557
147,639
Other income
175
857
Depreciation and amortisation expenses
5(b)
(27,385)
(26,194)
Salaries and employee benefits expenses
5(c)
(57,003)
(56,603)
Occupancy expenses
(7,385)
(5,130)
Advertising expenses
(7,872)
(10,454)
Other expenses
5(d)
(11,852)
(13,172)
Earnings before interest and tax
32,235
36,943
Finance expenses
5(a)
(7,567)
(6,412)
Finance income
279
118
Profit before income tax
24,947
30,649
Income tax expenses
(7,273)
(8,866)
Profit after income tax
17,674
21,783
Earnings per share attributable to ordinary equity
holders of the Parent
Basic earnings per share
14
10.2 cents
12.7 cents
Diluted earnings per share
14
10.1 cents
12.6 cents
This interim consolidated statement of profit or loss should be read in conjunction with the notes to the financial
statements.
9
ADAIRS LIMITED
INTERIM CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
FOR THE 27 WEEKS ENDED 31 DECEMBER 2023
27 weeks ended
31 December 2023
26 weeks ended
25 December 2022
Note
$’000
$’000
Profit after tax
17,674
21,783
Other comprehensive income
Items that may be reclassified subsequently to profit and loss
(net of tax):
Net movement on cash flow hedges
(5,591)
(5,361)
Income tax relating to the components of other
comprehensive income
1,676
1,608
Exchange differences on translation of foreign operations
(11)
383
Other comprehensive (loss) for the period, net of tax
(3,926)
(3,370)
Total comprehensive income for the period
13,748
18,413
This interim consolidated statement of other comprehensive income should be read in conjunction with the notes to the
financial statements.
10
ADAIRS LIMITED
INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2023
This interim consolidated statement of financial position should be read in conjunction with the notes to the financial statements.
As at
31 December 2023
As at
25 June 2023
Note
$’000
$’000
ASSETS
CURRENT ASSETS
Cash and cash equivalents
8
21,376
25,898
Trade and other receivables
3,836
4,176
Inventories
9
83,544
87,774
Current tax receivables
-
2,484
Other assets
7,876
8,314
Derivative financial instruments
-
5,326
TOTAL CURRENT ASSETS
116,632
133,972
NON-CURRENT ASSETS
Property, plant and equipment
36,974
22,950
Intangibles
285,097
282,269
Right-of-use assets
171,753
157,214
Derivative financial instruments
1
72
TOTAL NON-CURRENT ASSETS
493,825
462,505
TOTAL ASSETS
610,457
596,477
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
54,785
54,944
Other liabilities
10
25,555
18,819
Earn-out liabilities
261
200
Lease liabilities
53,088
48,677
Current tax liabilities
2,965
-
Provisions
11,006
11,572
Derivative financial instruments
189
-
TOTAL CURRENT LIABILITIES
147,849
134,212
NON-CURRENT LIABILITIES
Other liabilities
10
1,231
1,275
Earn-out liabilities
-
261
Deferred tax liabilities
17,446
20,770
Borrowings
11
80,000
100,000
Lease liabilities
142,106
131,718
Provisions
6,041
6,020
TOTAL NON-CURRENT LIABILITIES
246,824
260,044
TOTAL LIABILITIES
394,673
394,256
NET ASSETS
215,784
202,221
EQUITY
Contributed equity
84,737
84,737
Share-based payment reserve
3,527
3,712
Cash flow hedge reserve
(133)
3,782
Foreign currency translation reserve
(287)
(276)
Retained earnings
127,940
110,266
TOTAL EQUITY
215,784
202,221
11
ADAIRS LIMITED
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE 27 WEEKS ENDED 31 DECEMBER 2023
Ordinary
shares
Share-
based
payment
reserve
Cash
flow
hedge
reserve
Foreign
currency
translation
reserve
Retained
earnings
Total
Note
$’000
$’000
$’000
$’000
$’000
$’000
At 25 June 2023
84,737
3,712
3,782
(276)
110,266
202,221
Profit for the period
-
-
-
-
17,674
17,674
Other comprehensive loss
-
-
(3,915)
(11)
-
(3,926)
Total comprehensive income
/ (loss) for the period
-
-
(3,915)
(11)
17,674
13,748
Transactions with owners in
their capacity as owners:
Share-based payments
13
-
(185)
-
-
-
(185)
At 31 December 2023
84,737
3,527
(133)
(287)
127,940
215,784
Ordinary
shares
Share-
based
payment
reserve
Cash
flow
hedge
reserve
Foreign
currency
translation
reserve
Retained
earnings
Total
Note
$’000
$’000
$’000
$’000
$’000
$’000
At 26 June 2022
81,235
4,147
9,678
(503)
103,326
197,883
Profit for the period
-
-
-
-
21,783
21,783
Other comprehensive income /
(loss)
-
-
(3,753)
383
-
(3,370)
Total comprehensive income /
(loss) for the period
-
-
(3,753)
383
21,783
18,413
Transactions with owners in their
capacity as owners:
Dividends declared
6
-
-
-
-
(17,132)
(17,132)
Dividend reinvestment plan
1,710
-
-
-
-
1,710
Share-based payments
13
-
(17)
-
-
-
(17)
Tax effect of share-based payments
-
127
-
-
-
127
At 25 December 2022
82,945
4,257
5,925
(120)
107,977
200,984
This interim consolidated statement of changes in equity should be read in conjunction with the notes to the financial
statements.
12
ADAIRS LIMITED
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE 27 WEEKS ENDED 31 DECEMBER 2023
27 weeks ended
31 December 2023
26 weeks ended
25 December 2022
Note
$’000
$’000
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers (inclusive of GST)
339,343
348,132
Payments to suppliers and employees (inclusive of GST)
(265,623)
(277,004)
Interest received
279
118
Income tax paid
(3,473)
(6,367)
Interest paid
(7,809)
(6,454)
Net cash flows from operating activities
62,717
58,425
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, plant and equipment and intangibles
(22,196)
(6,722)
Net cash flows used in investing activities
(22,196)
(6,722)
CASH FLOWS FROM FINANCING ACTIVITIES
Drawings from borrowings
35,000
12,000
Repayment of borrowings
(55,000)
(22,000)
Payment of borrowing costs
(256)
(388)
Dividends paid
-
(15,422)
Payment of principal portion of lease liabilities
(24,776)
(24,149)
Net cash flows used in financing activities
(45,032)
(49,959)
Net (decrease) / increase in cash and cash equivalents
(4,511)
1,744
Net foreign exchange difference
(11)
382
Cash and cash equivalents at beginning of the period
25,898
26,075
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD
8
21,376
28,201
This interim consolidated statement of cash flows should be read in conjunction with the notes to the financial statements.
13
ADAIRS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 27 WEEKS ENDED 31 DECEMBER 2023
NOTE 1. CORPORATE INFORMATION
The interim condensed financial report of Adairs Limited (the “Company” or “Parent”) and its subsidiaries (the “Group”) for
the 27 weeks ended 31 December 2023 was authorised for issue in accordance with a resolution of the directors on 26
February 2024.
The Company is a for profit company limited by shares incorporated in Australia whose shares are publicly traded on the
Australian Securities Exchange.
The Group is an omni-channel specialty retailer of home furnishings, home furniture and home decoration products within
Australia and New Zealand. The Group’s principal place of business is 2 International Court, Scoresby, Victoria, Australia.
The Group operates on a retail accounting calendar which monitors performance on a weekly basis. The current interim
reporting period adopted is a 27 week reporting period which ended 31 December 2023. The prior corresponding interim
reporting period was 26 weeks ended 25 December 2022.
NOTE 2. SUMMARY OF MATERIAL ACCOUNTING POLICIES
(a) Basis of Preparation
The interim condensed financial report for the 27 weeks ended 31 December 2023 has been prepared in accordance with
AASB 134 Interim Financial Reporting and the Corporations Act 2001.
This interim condensed financial report does not include all notes of the type normally included within the annual financial
report and therefore cannot be expected to provide a full understanding of the financial performance, financial position and
financing and investing activities of the consolidated entity as the full financial report.
It is recommended that the interim condensed financial report be read in conjunction with the annual report for the 52
weeks ended 25 June 2023.
The interim condensed financial report has also been prepared on a historical cost basis, except for derivative financial
instruments and contingent consideration which have been measured at fair value.
Certain classifications have been made in the interim condensed financial report to ensure that prior year comparative
information conforms to the current year presentations.
The interim condensed financial report is presented in Australian dollars and all values are rounded to the nearest thousand
dollars ($’000) unless otherwise stated.
The financial report has been prepared on the basis of accounting practices applicable to a going concern. This basis
presumes that funds will be available to finance future operations and the realisation of assets and settlement of liabilities
will occur in the ordinary course of business. As at 31 December 2023, the Group has a net current asset deficiency of
$31,217,000, after the recognition of $53,088,000 in current lease liabilities (25 June 2023: net current asset deficiency of
$240,000, after the recognition of $48,677,000 in current lease liabilities). The Group expects to be able to meet its
obligations as and when they fall due over the next 12 months and beyond through the generation of operating cash flows
and available finance facilities. Unused revolving loan facilities as at 31 December 2023 was $55,000,000 (As at 25 June 2023:
$35,000,000).
(b) New standards, interpretations and amendments adopted by the Group
The accounting policies adopted in the preparation of the interim condensed financial report are consistent with those
followed in the preparation of the Group’s annual consolidated financial report for the 52 weeks ended 25 June 2023. The
Group adopted all relevant new and amended accounting standards and interpretations issued by the Australian Accounting
Standards Board that are effective for the annual reporting periods beginning on or after 26 June 2023. None of these new
standards or amendments have a material impact on the interim condensed consolidated financial statements of the Group.
The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet
effective.
14
ADAIRS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE 27 WEEKS ENDED 31 DECEMBER 2023
NOTE 2. SUMMARY OF MATERIAL ACCOUNTING POLICIES (continued)
(c) Reclassification of prior year financial information
The Group now comprises multiple brands operating across various omni-channel revenue streams. The operational
significance of the distribution and handling function of the Group is now greater and the nature of arrangements are diverse.
The Group has reclassified such costs in the Consolidated Statement of Profit or Loss to record the costs of distribution and
handling activities directly relating to the Group’s performance obligation to deliver goods to the customer, within Cost of
sales. Prior year comparatives have also been reclassified.
This change in classification has resulted in the below adjustments to the presentation in the Consolidated Statement of
Profit or Loss for the 26 weeks ended 25 December 2022:
26 weeks ended 25 December 2022
Reported
Adjustments
Restated
$’000
$’000
$’000
Revenues
324,230
-
324,230
Cost of sales
(152,565)
(24,026)
(176,591)
Gross profit
171,665
(24,026)
147,639
Other income
857
-
857
Depreciation and amortisation expenses
(28,802)
2,608
(26,194)
Salaries and employee benefits expenses
(60,846)
4,243
(56,603)
Occupancy expenses
(5,516)
386
(5,130)
Advertising expenses
(10,454)
-
(10,454)
Other expenses
(29,579)
16,407
(13,172)
Earnings before interest and tax
37,325
(382)
36,943
Finance expenses
(6,794)
382
(6,412)
Finance income
118
-
118
Profit before income tax
30,649
-
30,649
Income tax expense
(8,866)
-
(8,866)
Profit after income tax
21,783
-
21,783
These reclassifications have not resulted in a change to Net profit after tax, as well as no change to the Interim Consolidated
Statement of Other Comprehensive Income, Consolidated Statement of Financial Position, Consolidated Statement of Cash
Flows and Consolidated Statement of Changes in Equity.
15
ADAIRS LIMITED
NEY OTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE 27 WEEKS ENDED 31 DECEMBER 2023
NOTE 3. SEGMENT REPORTING
For management purposes, the Group is organised into business units which form three reportable segments, being Adairs,
Mocka and Focus.
Operating segments are identified on the basis of internal reports to senior management about components of the Group
that are regularly reviewed by senior management who have been identified as the chief operating decision maker, in order
to allocate resources to the segment and to assess its performance and for which discrete financial information is available.
Information reported to senior management for the purposes of resource allocation and assessment of performance is
specifically focused on core products and services, which when aggregated, forms three reportable operating segments.
The following tables present revenue and profit before tax information for the Group’s operating segments for the 27 weeks
ended 31 December 2023:
Adairs
$’000
Mocka
$’000
Focus
$’000
Consolidated
$’000
27 weeks ended 31 December 2023
Revenue from contracts with external customers
210,267
25,957
66,186
302,410
Underlying EBIT
16,341
3,564
11,014
30,919
Items not included in the segment result:
Non-underlying items*
1,316
Finance expenses
(7,567)
Finance income
279
Profit before income tax
24,947
Income tax expense
(7,273)
Profit after income tax
17,674
As at 31 December 2023
Total assets
349,200
100,010
161,247
610,457
Total liabilities
308,343
8,360
77,970
394,673
*Non-underlying items comprise of (i) management’s assessment of the EBIT impact of AASB16 Leases; and (ii) costs associated with the National
Distribution Centre (“NDC”) transition.
Adairs
$’000
Mocka
$’000
Focus
$’000
Consolidated
$’000
26 weeks ended 25 December 2022
Revenue from contracts with external customers
220,447
25,143
78,640
324,230
Underlying EBIT
18,669
269
16,554
35,492
Items not included in the segment result:
Non-underlying items*
1,451
Finance expenses
(6,412)
Finance income
118
Profit before income tax
30,649
Income tax expense
(8,866)
Profit after income tax
21,783
As at 25 December 2022
Total assets
355,909
107,980
169,117
633,006
Total liabilities
356,430
5,050
70,542
432,022
*Non-underlying items comprise of (i) management’s assessment of the EBIT impact of AASB16 Leases; and (ii) costs associated with the
National Distribution Centre (“NDC”) transition.
16
ADAIRS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE 27 WEEKS ENDED 31 DECEMBER 2023
NOTE 4. REVENUE
27 weeks ended
31 December 2023
26 weeks ended
25 December 2022
$’000
$’000
Set out below is the disaggregation of the Group’s revenue from
contracts with customers:
Types of goods and services
Sale of goods and services – stores
217,574
235,581
Sale of goods and services – online
84,836
88,649
Total revenue from contracts with customers
302,410
324,230
NOTE 5. EXPENSES
27 weeks ended
31 December 2023
26 weeks ended
25 December 2022
$’000
$’000
(a)
Finance expenses
Interest on borrowings and other finance costs
3,788
2,888
Interest on lease liabilities
4,021
3,566
Amortisation of borrowing costs
180
340
Total finance expenses
7,989
6,794
Included on the consolidated statement of Profit or Loss within:
Cost of sales
422
382
Finance expenses
7,567
6,412
(b)
Depreciation and amortisation expenses
Depreciation of property, plant and equipment
4,540
3,698
Depreciation of right-of-use assets
24,964
24,341
Amortisation of computer software
763
763
Total depreciation and amortisation expenses
30,267
28,802
Included on the consolidated statement of Profit or Loss within:
Cost of sales
2,882
2,608
Depreciation and amortisation expenses
27,385
26,194
(c)
Salaries and employee benefits expenses
Wages and salaries
61,720
56,019
Defined contribution superannuation expense
5,257
4,844
Share-based payment expense
(185)
(17)
Total salaries and employee benefits expenses
66,792
60,846
Included on the consolidated statement of Profit or Loss within:
Cost of sales
9,789
4,243
Salaries and employee benefits expenses
57,003
56,603
(d)
Other expenses
Credit card and merchant fees
2,921
2,935
Professional fees
1,503
954
Third party warehousing related charges
5,784
16,939
Packaging and consumables
706
463
IT related costs
2,121
2,093
Asset, property and maintenance expenses
1,355
1,223
Other
5,215
4,972
Total other expenses
19,605
29,579
Included on the consolidated statement of Profit or Loss within:
Cost of sales
7,753
16,407
Other expenses
11,852
13,172
17
ADAIRS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE 27 WEEKS ENDED 31 DECEMBER 2023
NOTE 6. DIVIDENDS
27 weeks
ended
31 December
2023
26 weeks ended
25 December
2022
Dividends on ordinary shares declared and paid:
Final dividend for 2023: Nil per share (2022: 10.0 cents)
-
17,132
Proposed dividends on ordinary shares:
Interim dividend for 2024: 5.0 cents per share (2023: 8.0 cents)
8,653
13,771
NOTE 7. IMPAIRMENT TESTING
Intangible assets – goodwill and brand names
Goodwill acquired through business combinations and brand names with indefinite lives have been allocated to
the cash generating units (“CGUs”) or group of CGUs for the purpose of impairment testing.
Carrying amounts of goodwill and brand names allocated to the CGUs as at 31 December 2023 and 25 June 2023 are as
follows:
Goodwill and brand names are not amortised but are subject to impairment testing on an annual basis or whenever there
is an indication of impairment. Goodwill and brand names were previously subject to a full annual impairment test at 25
June 2023.
A review of indicators of impairment relating to all CGUs to which goodwill and brand names are allocated was performed
at 31 December 2023. As a result of this review, no indicators of impairment were identified that would require a full
impairment test to be performed as at 31 December 2023. In particular, the performance of the Mocka CGU has improved
significantly during the 27 weeks ended 31 December 2023.
The annual financial report for the 52 weeks ended 25 June 2023 details the most recent annual impairment tests
undertaken for the brand names and goodwill.
Property, plant and equipment
A review of indicators of impairment relating to property, plant and equipment was performed as at 31 December 2023. As
a result of this review, no indicators of impairment were identified that would require a full impairment test to be
performed as at 31 December 2023.
NOTE 8. CASH AND CASH EQUIVALENTS
Adairs
Mocka
Focus
$’000
$’000
$’000
Goodwill
69,927
48,409
40,959
Brand names
42,711
33,115
36,984
As at
31 December 2023
As at
25 June 2023
$’000
$’000
Cash at bank
21,281
25,799
Cash on hand
95
99
Total cash and cash equivalents
21,376
25,898
18
ADAIRS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE 27 WEEKS ENDED 31 DECEMBER 2023
NOTE 9. INVENTORIES
Inventory is held at lower of cost and net realisable value.
NOTE 10. OTHER LIABILITIES
As at
31 December 2023
As at
25 June 2023
$’000
$’000
Current other liabilities
Undelivered customer orders and deposits
16,334
9,482
Other liabilities
9,221
9,337
Total current other liabilities
25,555
18,819
Non-current other liabilities
Other liabilities
1,231
1,275
Total non-current other liabilities
1,231
1,275
Current
25,555
18,819
Non-current
1,231
1,275
Total other liabilities
26,786
20,094
Undelivered customer orders and deposits represent amounts received from customers for orders not yet completed. Deposits
received from customers are recognised as revenue at the point of delivery of the goods to the customer.
Other liabilities include deferred revenue with respect to the Linen Lover membership program, unredeemed gift cards, as well
as other revenue from contracts with customers received in advance of recognition.
The remaining performance obligations expected to be recognised in more than one year (non-current other liabilities) relate
primarily to the Linen Lover membership program which will be satisfied over a two-year membership period from joining date.
The Group applies the practical expedient in AASB 15 and does not disclose information about the remaining performance
obligation on contracts that have an original expected duration of one year or less.
As at
31 December 2023
As at
25 June 2023
$’000
$’000
Stock on hand
66,966
74,686
Stock in transit
16,578
13,088
Total inventories
83,544
87,774
19
ADAIRS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE 27 WEEKS ENDED 31 DECEMBER 2023
NOTE 11. BORROWINGS
In October 2023, the Group renegotiated the maturity date of Facility D by two years which is now due to expire on 3 January
2027. The multi option facilities were increased from $6,500,000 to $9,500,000 and the maturity date was extended by one
year to 13 December 2024. Financial covenant measures were also amended. There were no further material changes to
the finance facilities.
The amount of borrowing costs capitalised for the 27 weeks ended 31 December 2023 was $608,000 (25 June 2023:
$532,000). The interest rate applicable to the debt facilities is variable and the Group does not hedge the interest rate. The
costs associated with the debt facilities are recorded in “Finance expenses” in the interim consolidated statement of profit
or loss.
Interest rate
Maturity
As at
31 December
2023
As at
25 June
2023
%
$'000
$'000
Non-current
Revolving loan – Facility A
BBSW + 2.15
2 Jan 2026
80,000
55,000
Revolving loan – Facility D
BBSW + 2.30
3 Jan 2027
-
45,000
Principal outstanding borrowings
80,000
100,000
Total non-current
80,000
100,000
Current
-
-
Non-current
80,000
100,000
Total borrowings
80,000
100,000
(a) Financing facilities available
At reporting date, the following non-shareholder financing
facilities had been in place with the bank and were available:
Revolving loan facilities available at the reporting date:
135,000
135,000
Revolving loan facilities used at the reporting date:
(80,000)
(100,000)
Other multi option facilities available at the reporting date:
9,500
6,500
Other multi option facilities used at the reporting date*:
(6,111)
(3,576)
Facilities unused at the reporting date:
58,389
37,924
*The amount of used multi option facilities of $6,111,000 (June 2023: $3,576,000) represents bank guarantees, letters of credit and
corporate card facilities.
20
ADAIRS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE 27 WEEKS ENDED 31 DECEMBER 2023
NOTE 12. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
Forward exchange contracts - cash flow hedges
The Group buys inventories that are purchased in US Dollars (“USD”). In order to protect against exchange rate movements
and to manage the inventory purchases process, the Group has entered into forward exchange contracts to purchase USD.
These contracts are hedging highly probable forecasted inventory purchases and the contract notional value is forecast to
total less than the expected level of total purchases of inventory in USD within 18 months.
Forward exchange contracts are timed to mature when payments are scheduled to be made. These derivatives have met the
requirements to qualify for hedge accounting with movements recorded in other comprehensive income accordingly.
Fair value of financial assets and liabilities
The Group uses various methods in estimating the fair value of a financial instrument. The methods comprise:
• Level 1
Quoted (unadjusted) market prices in active markets for identical assets or liabilities
• Level 2
Valuation techniques for which the lowest level input that is significant to the fair value
measurement directly or indirectly observable
• Level 3
Valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable
For assets and liabilities that are recognised at fair value on a recurring basis, the Group determines whether transfers have
occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to
the fair value measurement as a whole) at the end of each reporting period.
The fair value of forward exchange contracts is measured at fair value using the Level 2 method. Forward exchange contracts
are measured based on observable spot exchange rates, the yield curves of the USD as well as the currency basis spread
between the currencies.
Set out below is a comparison, by class, of the carrying amounts and fair value of the Group’s financial instruments:
As at 31 December 2023
As at 25 June 2023
Carrying Amount
$’000
Fair Value
$’000
Carrying Amount
$’000
Fair Value
$’000
Financial assets
Forward exchange contracts
1
1
5,398
5,398
1
1
5,398
5,398
Financial liabilities
Forward exchange contracts
(189)
(189)
-
-
Earn-out liabilities
(261)
(261)
(461)
(461)
Borrowings
(80,000)
(80,000)
(100,000)
(100,000)
(80,450)
(80,450)
(100,461)
(100,461)
21
ADAIRS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE 27 WEEKS ENDED 31 DECEMBER 2023
NOTE 13. SHARE-BASED PAYMENTS
In addition to those disclosed at 25 June 2023, the following performance rights were granted to senior executives (“the
participants”) under the Equity Incentive Plan (“EIP”) during the 27 weeks ended 31 December 2023.
2024 Tranche
In October 2023, 1,975,069 performance rights were granted to participants under the EIP for nil consideration. The
performance rights vest if the service and performance conditions are met. The service condition requires the participants to
be employed on a full-time basis by an entity of the Group from the grant date to 28 June 2026. The performance rights are
subject to an earnings per share (“EPS”) and earnings before interest and income tax (“EBIT”) performance conditions. The
EPS performance hurdle is expressed as the absolute EPS for the financial year 2026. The proportion of performance rights
that vest will be pro-rated from 0-100% based on achievement with a range for each performance condition.
The effective life of each performance right granted is 2.6 years which reflects the performance period. No dividends or voting
rights are attached to performance rights prior to vesting, however shares allocated following the vesting of performance
rights will rank equal in all respect with other ordinary shares.
The fair value per performance right granted was estimated at the grant date by taking into account the terms and conditions
upon which the performance rights were granted and applying the following assumptions:
2024 Tranche
- Performance Rights
Pricing model
Black-Scholes Model
Dividend yield
9.00%
Risk-free interest rate
4.19%
Expected life
2.6 years
Exercise share price
$Nil
Fair value of performance rights at grant date (per performance right)
$1.18
For the 27 weeks ended 31 December 2023, the Group has recognised a credit of $185,000 of share-based payment expense
in the interim consolidated statement of profit or loss due to certain service and performance conditions not being met in
relation to previously issued tranches of equity instruments (26 weeks ended 25 December 2022 credit: $17,000).
22
ADAIRS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE 27 WEEKS ENDED 31 DECEMBER 2023
NOTE 14. EARNINGS PER SHARE
Basic earnings per share amounts are calculated by dividing the net profit for the year attributable to ordinary equity holders
of the Parent by the weighted average number of ordinary shares outstanding during the period.
Diluted earnings per share is calculated by dividing the net profit for the year attributable to ordinary equity holders of the
Parent by weighted average number of ordinary shares outstanding during the period, adjusted for dilutive potential ordinary
shares.
The following reflects the income and share data used in the basic and diluted EPS computations:
27 weeks ended
31 December 2023
26 weeks ended
25 December 2022
$’000
$’000
Profit for the year attributable to ordinary equity holders of the Parent
17,674
21,783
Profit attributable to ordinary equity holders of the Parent for basic
earnings
17,674
21,783
Profit attributable to ordinary equity holders of the Parent adjusted for
the effect of dilution
17,674
21,783
As at
31 December 2023
As at
25 December 2022
’000
’000
Weighted average number of ordinary shares for basic EPS
173,051
171,531
Weighted average number of performance rights / share options
1,480
1,498
Weighted average number of ordinary shares adjusted for the effect of
dilution
174,531
173,029
NOTE 15. EVENTS AFTER THE BALANCE SHEET DATE
On 26 February 2024, the directors of Adairs Limited declared an interim dividend on ordinary shares in respect of the 2024
financial year. The total amount of the dividend is $8.7 million which represents an interim franked dividend of 5.0 cents per
share. The dividend has not been provided for in the 31 December 2023 interim condensed financial report.
Other than the above, no matters or circumstances have arisen since reporting date which significantly affected or may
significantly affect the operations of the company, the results of those operations, or the state of affairs of the Company.
23
ADAIRS LIMITED
CORPORATE INFORMATION
ABN 50 147 375 451
Directors
Brett Chenoweth
Michael Cherubino (resigned 18 August 2023)
Kiera Grant
David MacLean
Trent Peterson
Mark Ronan
Kate Spargo
Company secretary
Fay Hatzis (resigned 27 October 2023)
Ashley Gardner (appointed 25 October 2023)
Jamie Adamson (appointed 25 October 2023)
Registered office
2 International Court
Scoresby
Victoria, 3179
Australia
Principal place of business
2 International Court
Scoresby
Victoria, 3179
Australia
Phone: 1800 990 475
Share register
Link Market Services
Locked Bag A14
Sydney South NSW 1235
Phone: 1300 554 474
Auditors
Ernst & Young
Solicitors
Herbert Smith Freehills
24
ADAIRS LIMITED