ORL 2016 Annual Report
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160922 2016 Annual Report.indd 1 20/10/2016 2:59 PM 2 | OROTONGROUP ANNUAL REPORT 2016 3 | OROTONGROUP ANNUAL REPORT 2016 4 | OROTONGROUP ANNUAL REPORT 2016 5 | OROTONGROUP ANNUAL REPORT 2016 7 | OROTONGROUP ANNUAL REPORT 2016 88 || OROTONGROUPOROTONGROUP ANNUAL ANNUAL REPORT REPORT 2016 2016 160922 2016 Annual Report.indd 8 20/10/2016 2:59 PM 9 | OROTONGROUP ANNUAL REPORT 2016 OROTONGROUP ANNUAL REPORT 2016 | 9 160922 2016 Annual Report.indd 9 20/10/2016 2:59 PM 10 | OROTONGROUP ANNUAL REPORT 2016 11 | OROTONGROUP ANNUAL REPORT 2016 12 | OROTONGROUP ANNUAL REPORT 2016 CONTENTS 14 Corporate directory 15 Chairman’s Statement 16 Operating and financial review 21 Directors’ report 27 Remuneration report 38 Corporate Governance Statement 39 Auditor’s independence declaration 40 Statement of profit or loss and other comprehensive income 41 Statement of financial position 42 Statement of changes in equity 43 Statement of cash flows 44 Notes to the financial statements 87 Directors’ declaration 88 Independent auditor’s report to the members of OrotonGroup Limited 90 Shareholder information 92 Brand Retail Store Listings 13 | OROTONGROUP ANNUAL REPORT 2016 NOTESCORPORATE TO THE DIRECTORY FINANCIAL STATEMENTS 30 JULY 2016 Australian Business Number (ABN) 14 000 038 675 Directors General information Mr John P Schmoll (Non-Executive Chairman) The financial statements cover OrotonGroup Limited as a Mr Mark Newman (Managing Director and CEO) consolidated entity consisting of OrotonGroup Limited and Mr Ross B Lane (Non-Executive Director) the entities it controlled at the end of, or during, the year. Ms Maria Martin (Non-Executive Director) The financial statements are presented in Australian dollars, Mr J Will Vicars (Non-Executive Director) which is OrotonGroup Limited’s functional and presentation currency. Company secretary Ms Vanessa De Bono OrotonGroup Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered Notice of annual general meeting office and principal place of business is: The details of the annual general meeting of OrotonGroup Limited are: Level 2 409 George Street Hilton Sydney Waterloo NSW 2017 Level 1, Room 3, 488 George St Australia Sydney, NSW 2000 Australia 11:00am on Thursday 1 December 2016 A description of the nature of the consolidated entity’s operations and its principal activities are included in the Registered office directors’ report, which is not part of the financial statements. Level 2, 409 George Street, Waterloo NSW 2017, Australia The financial statements were authorised for issue, in Principal place of business accordance with a resolution of directors, on 21 September Level 2, 409 George Street, Waterloo NSW 2017, Australia 2016. The directors have the power to amend and reissue the financial statements. Share register Link Market Services Limited Through the use of the internet, we have ensured that our Level 12, 680 George Street, Sydney NSW 2000, Australia corporate reporting is timely and complete. All press releases, Phone: + 61 2 8280 7100 financial reports and other information are available on our website: www.orotongroup.com Auditor PricewaterhouseCoopers Chartered Accountants PO Box 2650 201 Sussex Street, Sydney NSW 1171, Australia Solicitors Watson Mangioni Level 23, 85 Castlereagh Street, Sydney NSW 2000, Australia Stock exchange listing OrotonGroup Limited shares are listed on the Australian Securities Exchange (ASX code: ORL) Website Corporate address: www.orotongroup.com Oroton online: www.oroton.com In line with OrotonGroup’s environmental initiatives this Annual Report has been printed on carbon neutral Environment FSC certified 100% recycled paper. We also selected ISO 14001 an ISO14001 environmently certified print company. 14 | OROTONGROUP ANNUAL REPORT 2016 CHAIRMAN’S STATEMENT Dear Shareholders, On behalf of the Board of Directors, it gives me great pleasure to present the 2016 Annual Report. As we concluded the second year of transformational change, it was pleasing to see the Group return to a period of stability and growth in earnings, with a 31% improvement in net profit after tax. We achieved a 15% growth in underlying earnings before interest and tax for the full year to reach $7.9m. Furthermore, supported by these strong earnings, a year end net cash balance and an improved return on capital, the Board was very pleased to increase the dividend for the year by 38% to 9.0 cents per share. Our focus on the continued repositioning and development of the core Oroton brand remains our priority, along with further improvement in the international channel and accelerating the trading performance of the Gap brand. We continue to roll out the updated Oroton store concept, launch new product categories and refocus our seasonal handbag ranges on a younger audience whilst updating our core classics ranges. In addition further enhancements to our customer experience at Oroton.com continue to support the success of our online channel. As we move into FY17 we are well positioned with a strong balance sheet of $36m in net assets, a year-end net cash position of $2.8m, and a $40m bank facility in place to support further measured investment. Importantly we also had and continue to have a conservative two year hedging policy covering 85% of our forecast USD purchases. Apart from our solid balance sheet, underpinning all of this we have an experienced and dedicated CEO and management team and staff to whom the Board is most grateful for their hard work during this period of transition. I would also like to sincerely thank my board colleagues, our business partners, customers and shareholders for their support and contribution to the success of our business. We trust that you will find this annual report informative and helpful. I also draw your attention to the included Operating and Financial Review which further discusses our operations, financial position and business strategies. We look forward to meeting our shareholders at the upcoming Annual General Meeting. John P Schmoll Non-Executive Chairman 15 | OROTONGROUP ANNUAL REPORT 2016 OPERATING AND FINANCIAL REVIEW 30 JULY 2016 The purpose of the operating and financial review is to enhance the periodic financial reporting and provide shareholders with additional information regarding the Group’s operations, financial position, business strategies and prospects. The review complements the Financial Report on pages 40 to 86; and the Full Year Results Announcement and Investor Presentation dated 22 September 2016. Company overview and principal activities The Group’s underlying strategy is to design, procure and distribute premium owned or licenced brands products through retail and wholesale channels with the objective of driving growth in sales and profit. In line with this strategy, the Group has: • An Oroton design and production team that develops men’s and women’s accessories from the Sydney Head Office; • Developed a strong presence as a multi channel retailer including online, first retail stores, concessions, factory outlets and wholesale for both owned brand and licenced partnerships; • Invested in international markets to drive growth; • Licensed the Oroton brand for the design, production and distribution of sunglasses / optical; • A strong shared service team and Group Leadership Team to support growth initiatives. During the year, the principal activities of the Group were the design, development, marketing and distribution of leather goods, and related accessories under the Oroton brand name in Australia, New Zealand and Asia. The Group commenced operating the GAP brand in Australia in November 2013 under a 10 year Franchise Agreement with a further 10 year option. The Group continued to provide shared service support and brand services to Brooks Brothers Australia for a service fee, following the sale of their joint venture interest in July 2015. Strategic Initiatives The Group continues to pursue a number of strategic growth initiatives in what has been the second year of transformational investment as the core Oroton brand is repositioned and strengthened, and we invest in the future growth of both brands. During the current year, the Group: • Continued the brand elevation strategy for the core brand Oroton with the internationally acclaimed Australian actress Rose Byrne as the celebrity face, continued to roll out the new store concept to cover almost half of the First Retail stores footprint, increased the average selling price through the introduction of higher average price points and limited edition products, exited non-core categories such as apparel, footwear and lingerie, and invested in technology and marketing focused on digital and social content creation and e-commerce user experience; • Rationalised the Oroton International portfolio of stores by closing 7 stores or concessions taking the International store portfolio to 8 at year end; • Continued to accelerate trading performance and build brand awareness in GAP in Australia, with the full year impact of 3 stores opened in the prior year, a new temporary outlet store opened in the current year, and investment in outdoor advertising and effective tactical promotions such as the GAP Casting Call. Group Operating Results 2016 2015 Year to 30 July 2016 - Reported $’000 $’000 % change Revenue 136,439 132,017 +3.3% EBITDA(1) 12,917 10,889 +18.6% EBIT(2) 6,214 5,625 +10.5% Net profit after taxation 3,443 2,620 +31.4% Earnings per share (EPS) (cents) 8.43 6.41 +31.5% Dividend per share (cents) 9.00 6.50 +38.5%