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ABN 85 108 096 251
APPENDIX 4E (Rule 4.2A) PRELIMINARY FINAL REPORT FOR THE YEAR ENDED 28 JUNE 2009
Results for announcement to the market(All comparisons to the year ended 29 June 2008)
28 June 2009 29 June 2008 Up/ Move‐$'000 $'000 Down ment %
Revenues from ordinary activities (a) 21,997 23,666 Down 7.1%Net profit after tax from continuing operations 5,258 4,891 Up 7.4%Net Profit/(Loss) after tax attributable to members 5,258 4,891 Up 7.4%
Dividend InformationAmount per share
(cents)Franked amount per share (cents)
Tax rate for franking
Interim dividend per share ‐ ‐ ‐ Final dividend per share 3.7 3.7 30%Total dividend per share for the year 3.7 3.7 30%
Dividend datesEx‐dividend dateRecord date for determining entitlements to dividendPayment date
28 June 2009 29 June 2008
28 July 2009
RCG CORPORATION LIMITED
4 August 200918 August 2009
28 June 2009 29 June 2008
Net tangible assets per share (cents) 11.0 13.3
(a) Revenue comprises sales through corporate stores, revenue from franchising (including royalties on franchise store sales), interest income and other revenue. During the financial year four corporate stores were franchised, as a result of which those stores sales figures are no longer included in revenue.
Additional Appendix 4E disclosure requirements can be found in the attached Financial Report and the notes thereto.
This report is based on the Consolidated Financial Report which has been audited.
RCG Corporation LimitedAnnual Report2009
RCG CORPORATION LIMITED ABN 85 108 096 251
Annual Report for the financial year ended 28 June 2009 Contents
Chairman’s Review 2
Corporate Governance Statement 6
Directors’ Report 17
Auditor’s Independence Declaration 26
Income Statement 27
Balance Sheet 28
Statement of Changes in Equity 29
Cash Flow Statement 31
Notes to the Financial Statements 32
Directors’ Declaration 68
Independent Audit Report 69
Additional Information 71
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Company Details RCG Corporation Limited ABN 85 108 096 251
Directors Ivan Hammerschlag (Chairman)
Michael Cooper
Michael Hirschowitz
David Gordon
Hilton Brett
Stephen Kulmar
Company Secretary Michael Hirschowitz Registered and Administration Office Unit 7
29 Bridge Road Stanmore NSW 2048 Telephone: 02 8594‐9292 Facsimile: 02 9550‐3573 Email: [email protected] Web: www.rcgcorp.com.au
Share Registry Computershare Investor Services Pty Limited
ACN 078 279 277 GPO Box 2975 Melbourne VIC 3001 Telephone: 1300 850 505
Auditors PKF Level 10, 1 Margaret Street Sydney NSW 2000 Bankers Westpac Banking Corporation Stock Exchange Listing Australian Stock Exchange (ASX Code: RCG)
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50.0
70.0
90.0
110.0
130.0
150.0
170.0
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
Group
sales in
$m
The Athlete's Foot ‐ historical network sales
Dear fellow shareholder I am extremely pleased to be able to report that RCG has not only had an excellent financial year 2009, but has in recent weeks also completed several transactions that will deliver substantial opportunity and significant shareholder value. Before explaining these transactions in more detail, I would first like to focus on the financial results and activity for the year just gone. Financial performance The group’s profitability for the year met all of our original forecasts and, given the uncertain economic climate, this is an outstanding result. The result is even more pleasing when one considers the substantial adverse impact that falling interest rates had on the group’s profitability. The exceptional result is in large part attributable to The Athlete's Foot’s remarkable resilience. As I commented on in my report last year, The Athlete's Foot has a unique and defendable market position based on selling fit and function, rather than price and fashion. It is now an instantly recognisable brand in the Australian marketplace and one that is synonymous with quality products and outstanding service. We believe that in times of uncertainty consumers are more inclined to gravitate towards brands that they know and trust and that this factor has stood us in good stead over the last financial year. Sales growth in The Athlete's Foot network seems to have been unaffected by the global financial crisis. Group sales grew by more than 15% for the year, whilst like‐for‐like sales grew by 11%. This is consistent with the pattern that has developed over an extended period of time. The chart to the right shows annual group turnover for the last eight years1. The growth in group sales, coupled with other revenue initiatives, has resulted in The Athlete's Foot’s profit before tax for the year increasing by 17% over the prior year. Despite rapidly falling interest rates, RCG earned $1.6 million of interest on its substantial cash balance, which stood at $31.9 million at the end of the financial year. As a result of these factors, RCG reported consolidated net profit before tax of $7.6 million, an increase of 27% on the previous financial year. Accumulated tax losses in the previous financial year resulted in an effective tax rate of only 18% in financial year 2008. Consequently, profit after tax rose by only 7.5%.
1 NZ$ are converted at a constant rate to make comparisons more meaningful.
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The following table summarises some of the key financial metrics. FY09
($000’s) FY08 ($000’s)
Percentage improvement
The Athlete's Foot group sales (1) : • Like‐for‐like sales
• Total sales
153,650 166,676
138,547 144,768
10.9% 15.1%
The Athlete's Foot net profit before tax 8,173 6,959
17.4%
RCG corporate costs (2,210) (2,284) 3.3% Net interest earned 1,643 1,292 27.2% Net profit before tax 7,606 5,967 27.5% Income tax expense (2,348) (1,076) (118%) Consolidated net profit after tax 5,258 4,891 7.5%
Dividends and exercise of options As a result of the continued excellent financial performance of the group and the Company’s strong and liquid balance sheet, the board reassessed the moratorium that had been placed on dividends whilst we were going through our restructuring. As a result, the Company declared an ordinary dividend of 1.5c per share and a special dividend of 2.2c per share for the financial year ended June 2009. These dividends were paid on 18 August 2009. At the same time as announcing the dividend payment, we also announced that directors (and related entities) intended to exercise approximately 41 million vested options over ordinary shares prior to the record date. In total, directors, employees and other option holders exercised 43.8 million options, which raised $5.4 million in cash. The exercise of these options by both directors and staff unequivocally demonstrates the commitment we all have to the group and our complete determination to successfully execute the Company’s strategy. As a result of the success of RCG’s employee option scheme in attracting, retaining and motivating quality senior management personnel, the board has approved the issue of up to 8,000,000 new employee options under the Employee Option Scheme for the 2010 financial year. Shareholder approval is not required for the further grant of options under this scheme unless the board intends to grant options to directors. Operational initiatives and trading update Over the past year we have provided several updates on the progress of our new, larger The Athlete's Foot store concept. I am delighted to be able to report that there are now four such stores up and running, all of which have been converted from the old format. Sales from these stores have exceeded all expectations, with all stores recording like‐for‐like sales increases in excess of 30%. The store design layout and offering has attracted universal praise from customers, landlords and franchisees alike and we are forging ahead with our rollout programme. We expect to have at least 10 of these large format stores operational by Christmas 2009, of which at least 5 will be brand new stores. Aside from rolling out this programme, the team at The Athlete's Foot is continuing to focus on the outstanding customer service delivery that sets it apart. During the 2010 financial year the business anticipates implementing a new business technology system which in part will aid in providing better information to both franchisees and support personnel in order to ensure that the business continues to lead the way in retail responsiveness.
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Sales trends for the first seven weeks of the new financial year have continued strongly with The Athlete's Foot recording like‐for‐like sales growth in that period of 6.5%. Acquisitions and significant transactions As I said at the beginning of this report, RCG has completed three significant transactions in the last few weeks, all of which will have a significant impact on shareholder value. A brief synopsis of these transactions is as follows: The Athlete's Foot Licence On 7 August 2009, we reported that RCG had signed new long term licence agreements for The Athlete’s Foot business in Australia and New Zealand under which it will pay no ongoing licence fees to the US licensor. This will result in substantial annual savings for RCG. Under the new agreements, which have an effective term of 249 years, RCG paid a lump sum of US$6.2 million and has no ongoing licence fees to pay for the term of the agreements. The new agreements also remove a number of other restrictions contained in the previous licence agreements. The new licence agreements have a material positive impact on the profitability of The Athlete's Foot. The increase in financial year 2010 EBIT for The Athlete's Foot as a result of the new agreements is expected to be approximately $1.2 million. This investment is an exceptionally sound deployment of our capital as it not only delivers long term certainty to the business, but secures a significant increase in The Athlete’s Foot’s annual earnings and with that delivers substantial shareholder value. Merrell Distribution Agreement On 24 August 2009 we announced that RCG has been awarded the Australian rights to distribute the Merrell brand of outdoor, comfort, active lifestyle, performance footwear and apparel under an agreement with Wolverine World Wide, Inc, the owner of Merrell. The agreement is effective from 1 January, 2010. We anticipate that the Merrell business will turnover in excess of $12 million in its first year of operation and, based on the profiles of similar distribution businesses, it is expected to deliver an EBIT contribution in excess of 20%. Given the January commencement date and the costs of establishing this business, RCG is not expecting the business to contribute to earnings until FY11. RCG will be setting up a wholesale division, operating independently of its retail division, to maximise distribution to the many department store, specialty retail and outdoor retailers already carrying the Merrell brand as well as to new prospective customers. We believe that there are significant expansion opportunities associated with Merrell, which will have a substantial impact on the future profitability of RCG. The Merrell business will be highly complementary to the growth strategy associated with the increased product range in the new large format TAF stores and the Shoe Superstore business. In addition, RCG also intends to rollout a number of Merrell flagship stores over the next 3 ‐ 4 years. This is a significant and exciting step for RCG. The Merrell brand is known worldwide as a quality performance and outdoor brand, making it highly complementary with our strategy of acquiring distribution and retail businesses in the sports, fitness, footwear and active lifestyle space and we are delighted to commence this relationship with Wolverine World Wide, Inc. Shoe Superstore RCG has also announced the creation of a complementary chain of footwear stores that will sit alongside and not compete with the 136 strong The Athlete's Foot chain. This genesis has come through RCG’s acquisition of Shoe Superstore Pty Ltd, a three‐store chain of branded, comfort and lifestyle footwear stores for an initial upfront investment of approximately $1 million, including working capital.
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The vendors, who are experienced and skilled in the footwear sector, have signed six‐year service agreements and will receive an earn‐out payment if certain performance conditions are met. The business, which commenced trading 4 years ago, is currently operating at breakeven point and will benefit from the expertise, resources and buying power of RCG. This business is not mall based, but rather is a destination style business in high traffic shopping precincts. RCG intends to employ its retail competencies and resources to improve and grow the existing business, before commencing a gradual but sustained expansion programme. It is anticipated that Shoe Superstore will not have a material impact on RCG’s consolidated profit for the next 2 – 3 years. Shoe Superstore presents an excellent opportunity for us to capitalise on the emerging branded comfort footwear market. We believe that this is a highly underserviced sector of the footwear market, with very few retailers providing a legitimate offering in this space. While The Athlete's Foot is capitalising on the growth in this market through its new larger format stores, we believe that Shoe Superstore will help drive the growth of this segment by servicing a different demographic. By offering range and value to destination shoppers, we believe that Shoe Superstore is a complementary and synergistic business to The Athlete's Foot. Conclusion RCG has had a very successful financial year. Not only has the business made a record profit on the back of the extraordinary performance of The Athlete's Foot but it has also paid a substantial dividend to shareholders, secured a new 249 year royalty free licence for The Athlete's Foot and acquired two new businesses, both highly synergistic with our existing business and our existing skill set and which will provide substantial growth platforms for the future. After the above transactions, we still have no debt and a significant amount of cash to assist us with the further growth and execution of our strategy. I would like to take this opportunity to sincerely thank my fellow board members as well as the teams at RCG and The Athlete's Foot without whom the achievements of the past year would not have been possible. Yours Faithfully Ivan Hammerschlag Chairman 24 August 2009
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This Corporate Governance Statement outlines the Company’s main corporate governance practices as at 24 August 2009.
This Corporate Governance Statement also indicates the Company’s conformance with the “Corporate Governance Principles and Recommendations” issued by the ASX Corporate Governance Council in August 2007.
The Company has posted copies of its corporate governance practices to its website in accordance with the ASX Corporate Governance Council’s recommendations. THE BOARD Responsibilities The Board is accountable to the Company’s shareholders. It has overall responsibility for the performance of the Company, the execution of the Company’s strategy, and the implementation of sound corporate governance policies and practices. The Company has adopted a Board Charter which formally sets out the functions and responsibilities of the Board. This enables the Board to perform its role more effectively and creates a system of checks and balances to provide a balance of authority. The Board has the following specific responsibilities:
Governance Oversight of the Company, including its control and accountability systems Reviewing, ratifying and monitoring systems of risk management, internal control, and legal
compliance Ensuring the Company’s Code of Conduct is implemented and observed by all employees,
contractors and professionals who have a business association with the Company Reviewing safety and environmental issues Reviewing industrial relations issues and quality assurance
Stakeholders
Driving corporate performance and delivering shareholder value Authorising the release to the ASX of interim and final results Authorising the release to the ASX of other significant information
Management
Appointing and removing the CEO (or equivalent)2 Approving remuneration of the CEO (or equivalent) including the setting of performance targets Approving the Company’s remuneration policy Ratifying the appointment and removal of senior executives Monitoring performance by executive management and the achievement of business objectives
and financial performance Ensuring that appropriate resources are available to management to discharge its duties
Strategy and financial management
Approving the strategic direction and related objectives of the Company Approving the annual business plan and budgets Approving and monitoring the progress of major capital expenditure Approving acquisitions or disposals of major assets or businesses Approving and monitoring capital management strategies including the payment of dividends
and issuing of any securities or options
2 RCG does not currently have a CEO. The business is managed by the three executive directors in conjunction with the Chairman. References to the CEO throughout this documentation should be taken to refer to each of the executive directors individually.
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Monitoring the financial operations and solvency of the Company ASX Best Practice Recommendation 1.1 Composition of the Board The names of the Directors of the Company in office at the date of this statement are set out in the Directors’ Report together with information regarding:
The Directors’ relevant skills and experience; The names of the Directors considered to be independent Directors; and The term of office held by each Director.
ASX Best Practice Recommendation 2.6 The number of Directors as specified in the Company’s constitution is a minimum of three. At no relevant time has the Company had less than this number. The current number of Directors is six. Independence Throughout the financial year and to the date of this report, the Board has been comprised of three executive and three non‐executive Directors. However, as at the date of this report, only one of the non‐executive Directors can technically be regarded as independent. Chairman Ivan Hammerschlag does not meet the definition of independence because he provides ongoing consulting services to management in order assist them with the execution of the Company’s strategies and is also a substantial shareholder (as defined in section 9 of the Corporations Act 2001). David Gordon, a non‐executive Director met the definition of an independent Director throughout the financial year. However, on 27 July 2009, Mr Gordon became a substantial shareholder and so no longer meets that definition. Therefore, Stephen Kulmar is the only Director that is currently an independent Director. Whilst the current structure does not comply with ASX Best Practice Recommendation 2.1, the composition of the Board has been determined having regard to the nature and size of the Company’s operations, the skill set of the Directors both individually and collectively, the independence of Directors and the best interests of Shareholders. The Board is comprised of members with strong retailing, financial and corporate experience and is considered to be appropriate given the size and nature of activities of the Company. In addition, in order to facilitate independent judgement in decision making, each Director has the right to seek independent professional advice at the Company’s expense. Using the information provided in the ASX Corporate Governance Principles and Recommendations as a guide, the Board regularly assesses whether or not each non‐executive Director is independent. If a Director’s independence status changes, this is disclosed to the market in a timely manner. ASX Best Practice Recommendation 2.1 Chairman The Board Charter requires the Chairman of the Board to be elected on his merits with reference to his experience, track record and the needs of the Company. The Charter does not require the Chairman to be an independent Director. As explained above, the Chairman of the Board is not an independent Director. Whilst this does not comply with ASX Best Practice Recommendation 2.2, the use of Mr Hammerschlag, who has considerable and relevant skills in retail and business strategy, as a consultant is considered to be in the best interests of the Company given the size of the Company and the nature of its activities. It is expected that the present arrangement will continue for the immediate future. ASX Best Practice Recommendation 2.2
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Day to day management The Company does not currently have a CEO. Rather, management of the business of the Company is conducted by three Executive Directors who, amongst fulfilling other roles within the business, jointly fulfil the role of CEO. The responsibilities delegated by the Board to the Executive Directors include managing day‐to‐day operations, developing and implementing corporate strategies and making recommendations on significant corporate strategic initiatives. These Executive Directors all report directly to the Chairman who is prohibited from fulfilling the role of CEO by the Board Charter. ASX Best Practice Recommendation 1.1 and 2.3 Appointment, removal and remuneration of Directors The rules governing the appointment, removal and remuneration of Directors are provided for in the Company’s Constitution and the Corporations Act. Notwithstanding these rules, the following principles have been adopted:
The Directors may agree between them to appoint a new Director. The appointment must be ratified by the shareholders at a general meeting.
The principal criterion for the appointment of a new Director is that such person is able to add significant value to the group and its business through having relevant skills and experience
The Board will comprise Directors with complementary and appropriate skills necessary to discharge the duties of the Board in accordance with this Charter
The maximum remuneration of non‐executive Directors is the subject of Shareholder resolution in accordance with the Company’s Constitution and the Corporations Act as applicable. The apportionment of non‐executive Director remuneration within that maximum will be made by the Board having regard to the inputs and value to the Group of the respective contributions by each non‐executive Director. The Board may award additional remuneration to non‐executive Directors called upon to perform extra services or make special exertions on behalf of the Company (e.g. perform the role Chairman of the Board or a Board Committee)
Having regard to the small number of Directors, the relative stability of the Board and the size of the Company, the Board has not established a Nominations Committee. The functions of the Nominations Committee are carried out by the Remuneration Committee or the Board, as is appropriate. ASX Best Practice Recommendation 2.4 Performance of the Board The members of the Board, actively led by the Chairman with the support of the Company Secretary, evaluate the performance and efficient functioning of the Board, its Committees and its members on an ongoing basis. The following protocols are in place to ensure that the Board is able to perform appropriately and discharge its duties efficiently:
New Directors are fully briefed on the business, its financial position, any material risks, the structure and functions of the Board and the structure of Management and are provided with a copy of the Company’s Corporate Governance documentation
Directors are given direct access to Management and the Company Secretary. These individuals are to provide Directors with any and all information reasonably requested of them in a timely and comprehensive fashion
Directors are given the opportunity to seek reasonable independent, external advice at the Company’s expense if circumstances warrant such advice
The Chairman and/or CEO (or equivalent) have regular contact with the Company’s major shareholders and takes on board feedback concerning the performance of the Board and its members
ASX Best Practice Recommendation 2.5
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Establishment of Committees The Board has established the following committees:
Audit Committee – to protect the integrity of financial reports (further details of which are discussed below)
Remuneration Committee ‐ to ensure that the Company remunerates fairly and responsibly (further details of which are discussed below)
ASX Best Practice Recommendation 4.1 and 8.1 SAFEGUARDING INTEGRITY IN FINANCIAL REPORTING Audit Committee Overview An independent Audit Committee has been established by the Board to protect the integrity of financial reports as well as to monitor and review the effectiveness of the Company’s structures in the areas of operational risk and legal and regulatory compliance. The importance of an Audit Committee is universally recognised in the practice of good corporate governance and plays a key role in focusing the Board on matters relevant to the integrity of financial reporting. ASX Best Practice Recommendation 4.1 Roles and responsibilities The Audit Committee has adopted an Audit Committee Charter which sets out the roles and responsibilities as well as the structure and composition of the Audit Committee. According to the Charter, which is available to view on the Company’s website, the role of the Audit Committee is to assist the Board in fulfilling its corporate governance responsibilities with regard to:
The reliability and integrity of information for inclusion in the Company’s financial statements Enterprise‐wide risk management Compliance with legal and regulatory obligations including audit, accounting, tax and financial
reporting obligations The integrity of the Company’s internal control framework Safeguarding the independence of the external auditors
ASX Best Practice Recommendation 4.3 and 4.4 Membership The Committee is appointed by the Board in accordance with the Company’s Constitution. Given the size and composition of the Board, it is not possible for all the members of the Audit Committee to be non‐executive Directors. For the same reason, it is not be possible for the majority of the members to be Independent Directors. However, this Charter requires all members to bring independent judgement to bear in respect of the discharge of their duties. The following rules apply to the membership of the Audit Committee:
There will be at least three members All members will be financially literate At least one member must be a qualified and experienced financial expert (such as a Chartered
Accountant) The Chairman of the Audit Committee must be a non‐executive Director who is not also Chairman of
the Board
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The table below shows the names of the members of the Audit Committee as at the date of this report and throughout the financial year, together with their qualifications and the number of meetings each member attended:
Name Qualifications No of meetings
Eligible to attend Attended David Gordon (Chairman) BCom, LLB 3 3
Michael Hirschowitz BCom, BAcc, GAICD 3 3
Hilton Brett BCom, PGDA 3 3 ASX Best Practice Recommendation 4.2 and 4.4 External Auditors The appointment of, and dealings with, the Company’s external auditors has been delegated to the Audit Committee by the Board. This includes:
Recommending to the Board the appointment, reappointment or replacement of the external auditor
Agreeing to the fees to be paid to the auditor Reviewing and approving the audit plans of the auditor Reviewing the overall scope of the audit, including identified risk areas and any additional agreed‐
upon procedures Considering the overall effectiveness and independence of the auditor Resolving any disagreements between Management and the auditor regarding financial reporting. Monitoring and noting compliance by the auditor of the independence requirements imposed by
the Corporations Act ASX Best Practice Recommendation 4.4
RECOGNISING AND MANAGING RISK Overview In order to recognise and manage risk the Company has established an internal compliance system allowing risks to be identified, assessed, monitored and managed. The Board and/or Audit Committee oversee the establishment and implementation of the risk management system.
All material risks affecting the Company, including both financial and non‐financial matters, are discussed at each Board meeting and each meeting of the senior executive of the business. All Directors and senior management are encouraged to review the business for risk on an ongoing basis and to raise at each Board meeting any risk issues of concern. These protocols form the basis for the risk management system. The Company has implemented controls at the Company and operating group levels that are designed to safeguard the Company’s interests and ensure the integrity of its reporting. These include accounting, financial reporting, safety, health and environment and other internal policies and procedures, which are directed at ensuring the Company fully complies with all regulatory requirements and community standards. Comprehensive practices are in place such that: Capital expenditure and revenue commitments above a certain size obtain the correct approval; Financial exposures are controlled; Safely, health and environment standards and management systems are monitored and reviewed to
achieve high standards of performance and compliance; and Business transactions are property authorised and executed.
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The effectiveness of the risk management system is reviewed by the Board on an ongoing basis. The Board and / or Audit Committee is responsible for ensuring that the appropriate senior managers have established and implemented a risk management system throughout the organisation ASX Best Practice Recommendation 7.1 Management of risk The Board requires that management design and implement the risk management and internal control systems of the Company. At each Board meeting, the Finance Director is required to give a full report on any material risk items identified since the last Board meeting and a comprehensive review of the steps taken to mitigate or remove material risk items identified in previous Board meetings. All risk items, including any identified weaknesses in internal controls, are thoroughly discussed at each Board meeting and the Board provides the necessary guidance and authority to the relevant personnel to attend to the risk item. In addition to the above, the Company’s external auditors provide the Audit Committee with a report detailing any identified risk items at the completion of each half‐year and full‐year review. The report is discussed by the Audit Committee together with the auditors and any material items are referred to the Board. Given the nature and size of the business and the relative frequency with which the non‐executive Directors interact with all levels of management, an internal audit function has not been established. For the same reasons a Risk Committee has also not been established. However, the Audit Committee carries out the functions normally reserved for a Risk Committee. ASX Best Practice Recommendation 7.2 and 7.4 CEO & CFO Assurances In order to create an environment for identifying and capitalising on opportunities, the Board has established a sound system of risk oversight and management. To encourage management accountability in this area both the CEO or equivalent (in this case the Finance Director) and CFO are required to provide written assurances to the Board, at each meeting of the Board, that the Company’s risk management and internal compliance and control system is operating efficiently and effectively in all material respects and that the integrity of the financial statements is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board.
ASX Best Practice Recommendations 7.3 and 7.4 REMUNERATION AND PERFORMANCE The Remuneration Committee Overview The Company has established a Remuneration Committee which is responsible for regularly evaluating the performance of the executive Directors and other senior managers. The evaluation is based on specific criteria including the Company’s business performance, short and long term strategic objectives and the achievement of personal objectives by the executive Directors and other senior managers. The Remuneration Committee has adopted a Remuneration Committee Charter. A copy of the Charter can be found on the Company’s website. ASX Best Practice Recommendation 8.1 Composition The Committee is appointed by the Board in accordance with the Company’s Constitution. All the members of the Remuneration Committee are non‐executive Directors. However, given the size and composition of
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the Board, it is not be possible for all the members of the Remuneration Committee to be independent Directors. However, the Charter requires all members to bring independent judgement to bear in respect of the discharge of their duties. The following rules apply to the membership of the Remuneration Committee:
All members must be non‐executive Directors Where possible, there must be at least three members The Chairman of the Remuneration Committee must be a non‐executive Director who is not also
Chairman of the Board The Chairman of the Remuneration Committee is David Gordon. Throughout the financial year, David was an independent, non‐executive Director. However, on 5 July 2009 Mr Gordon became a substantial shareholder and therefore no longer satisfies the independence test. However, given Mr Gordon’s experience and competence in this area, he is still considered to be the most appropriate Chair of the Remuneration Committee. The table below shows the names of the members of the Remuneration Committee as at the date of this report and throughout the financial year, together with their qualifications and the number of meeting each member attended:
Name No of meetings Eligible to attend Attended
David Gordon (Chairman) 5 5
Ivan Hammerschlag 5 5
Stephen Kulmar 5 5 ASX Best Practice Recommendation 8.1and 8.3 Responsibilities of the Remuneration Committee The role of the Remuneration Committee is to assist the Board in fulfilling its corporate governance responsibilities with regard to:
The Company’s remuneration, recruitment, retention and termination policies for senior executives including the CEO, CFO and other senior executives
Remuneration policies for Non‐Executive Directors Executive equity grants
ASX Best Practice Recommendation 8.1 Remuneration Policy The Company’s Remuneration Policy is designed to ensure that the level and composition of remuneration is both competitive and reasonable. Remuneration is intimately connected to performance and is intended to be appropriate for the results delivered. The Company’s policies are designed to attract and maintain talented and motivated employees as well as raising the level of performance of the Company. ASX Best Practice Recommendation 8.1 Remuneration of executives RCG’s remuneration policy is designed to attract, motivate and retain employees, including senior executives, and ensure that the interests of the employees are aligned with those of the shareholders. In discharging its duties, the Committee reviews and makes recommendations to the Board on the remuneration of the CEO, CFO, executive Directors and other senior managers, including:
Short and long‐term remuneration, including both fixed remuneration and performance‐based remuneration
Any termination payments
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Appropriate grants of securities under the Employee Option Plan (or any alternate or replacement plan)
In making its recommendations, the Committee ensures that:
Remuneration is set with reference to prevailing market rates for similar positions, adjusted to account for experience, productivity and ability
Remuneration packages are designed to motivate senior executives to pursue the long‐term growth and success of the Company
A clear relationship exists between performance and remuneration
ASX Best Practice Recommendation 8.1 and 8.2
Remuneration Policies for Non‐Executive Directors Non‐executive Directors are remunerated by way of fees which are set with reference to the prevailing market rates. They do not participate in the schemes designed for the remuneration of executives, nor do they receive bonus payments or any retirement benefits other than statutory superannuation. A Director Option Plan has been established in which non‐executive Directors are entitled to participate, but any issue of options under that Plan must first be approved by shareholders.
ASX Best Practice Recommendation 8.2 and 8.3 Performance measurement for the CEO, CFO, Executive Directors and senior managers The Remuneration Committee is responsible for setting the performance criteria for Executive Directors and senior managers, communicating those criteria to the executives and for assessing their performance against those criteria. In setting and measuring Executive performance, the Remuneration Committee:
Ensures that the interests of the employee and the shareholders are aligned Ensures that performance hurdles, targets and KPI’s are set so as to motivate the executives to
achieve measurable outcomes that progress the long term objectives of the Company. Conducts a performance review with each Executive at least once per annum during the course of
which at least the following topics are covered: The Executive’s performance relative to the KPI’s set at the previous review Any development objectives for the Executive flowing out of the review Revised or updated KPI’s for the next review period The amount of, and basis for, any increase in base remuneration The amount of, and basis for, any incentive or bonus awards
The aforementioned assessment was carried out for each of the executive Directors and each of the senior managers during the financial year. ASX Best Practice Recommendation 1.2 and 1.3 PROMOTING ETHICAL AND RESPONSIBLE DECISION‐MAKING Code of Conduct The RCG Code of Conduct (“Code”) is the RCG Group’s principal corporate governance policy. The Code governs the conduct of RCG and its subsidiaries and its directors, employees, consultants and all other people when they represent the Company. A copy of the Code has been posted on the Company’s website. A summary of the key provisions of the Code is as follows:
The Company, its employees and associates must comply, at all times, with all laws governing the Company’s operations. They must also conduct the Company’s operations in keeping with the highest legal, moral and ethical standards.
All Employees must conduct the business of the Group with the highest level of ethics and integrity.
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Any breach of applicable laws, prevailing business ethics or other aspects of this Code will result in disciplinary action.
All Employees must report immediately any circumstances which may involve deviation from this Code
Any Employee who deals with agents, contractors or consultants who represent the Group must make them aware of this Code and that RCG expects them to conduct their business in accordance with this Code.
Senior Management and all Directors will be required to personally certify compliance with this Code on an annual basis.
All Employees are to be provided with a safe work environment that complies with the relevant Occupational Health and Safety laws.
Employees should not be placed in unnecessary danger nor be asked to carry out potentially dangerous tasks for which they have not been properly trained.
Employees are not to be discriminated against on the basis of their race, beliefs or gender. Employees are not to be harassed, bullied or enticed in an inappropriate, unethical or unlawful
manner. All Employees are entitled to fair and reasonable treatment by their supervisors and all other
Employees. Bribes, kickbacks, inducements or similar payments must not be made Employees must not seek or accept any type of compensation, fee, commission or gratuity from a
third party in connection with the operations of the Group. Employees must not give, seek or accept any gift, entertainment or other personal favour or
assistance which goes beyond common courtesies associated with accepted ethical and general commercial practice.
Employees are responsible for taking all prudent steps to ensure the protection of Group assets and resources.
Employees must ensure that Group assets and resources are used only for the purposes of the Company and in accordance any appropriate authorisations.
Employees must not, without authority, directly or indirectly state that they are representing RCG or its public position in respect of any matter.
Employees must not directly or indirectly engage in any activity which could by association cause the Group public embarrassment or other damage.
Employees must not use their position for personal benefit independent from the business of the Company.
Employees must not take advantage of any property or information belonging to RCG No Employee, or any family member or companion over which the Employee has influence, may
directly or indirectly have any equity interest in, or have a significant beneficial connection with, any business or individual which competes with, is a supplier, customer or franchisee of the RCG Group without the prior written consent of the Chairman or his nominee. Passive shareholdings in listed companies of not more than 5% are excluded from this provision.
Employees must not engage directly or indirectly in any outside business activity involving commercial contact with, or work for the benefit of, Group customers, franchisees, suppliers or competitors without the prior written consent of the Chairman or his nominee.
Employees have a duty to notify the Company Secretary of any actual or potential conflicts of interest.
Employees must not disclose confidential RCG Group information to any third party without the prior consent of a Director.
Employees must maintain the confidentiality of all Company documents and must not disclose any information contained within the documents to any third party without the prior consent of a Director
Employees must not use Group information for the purpose of directly or indirectly obtaining personal gain.
Employees must abide by the “RCG Share Trading Policy” which forms part of these Corporate Governance Principles and Practices.
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ASX Best Practice Recommendation 3.1 and 3.3 Share Trading Policy The Company has established a Share Trading Policy, a copy of which is posted on its website. The Share Trading Policy must be adhered to under the Code of Conduct. The Share Trading Policy is designed to ensure that:
Directors or employees in possession of market sensitive information (Designated Officers) are aware of the legal restrictions on trading securities in the Company while in possession of unpublished Company price sensitive information
Minimise the risk of any Designated Officer contravening the laws against insider trading Assist the Company in complying with the ASX Listing Rules Ensure the Company complies with the principles of good corporate governance and best practice
recommendations set out by the ASX Corporate Governance Council Increase transparency with respect to trading in securities of the Company.
Designated Officers must not deal in securities of the Company:
Until the second trading day after any release of information to the ASX or after a shareholder meeting so that the market has had time to review the information except in the case when a prospectus has been issued
Within the period of 30 days prior to the release to the ASX of the Company's annual results or half yearly results
If they are in possession of any price‐sensitive information that is not generally available to the public.
Designated Officers must also not do the following: Communicate price‐sensitive information to any person who may deal in securities of the Company Recommend or otherwise suggest to any person (including a spouse, relative, friend, trustee of a
family trust, or directors of a family company) that they buy or sell securities in the Company
A Designated Officer may deal in securities of the Company if: Doing so would not contravene the provisions of any blackout as period described above They have given written advice to the Chairman (in the case of directors) or the Company Secretary
(in the case of all other Designated Officers) of their intention to do so The Chairman or the Company Secretary (as the case may be) has made appropriate enquiries with
the board; and The Chairman or the Company Secretary has indicated that there is no impediment to them doing so
ASX Best Practice Recommendation 3.2 and 3.3 MAKING TIMELY AND BALANCED DISCLOSURE Continuous Disclosure Policy The Company has established a Continuous Disclosure Policy, a copy of which is posted on its website. The objective of this policy is to ensure that the management and delivery of price sensitive information by RCG is done in a comprehensive and efficient manner that complies with the continuous disclosure obligations of the ASX Listing Rules and the Corporations Act The overarching principle of this Policy is governed by Listing Rule 7.1 which requires the Company to immediately notify ASX of any information that a reasonable person would expect to have a material effect on the price or value of RCG’s quoted securities, provided that the information does not fall within the exception to disclosure under the Listing Rules. The Policy provides for the exceptions to Listing Rule 7.1 as outlined in Listing Rule 3.1A.
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The Board is responsible for ensuring that RCG complies with its continuous disclosure obligations. To this end, the Board is responsible for implementing and overseeing compliance with the Continuous Disclosure Policy. In practice, the Board delegates responsibility for making “routine” continuous disclosure to a Disclosure Sub‐Committee. The Disclosure Sub‐Committee comprises the Chairman, the CEO (or relevant equivalent), the CFO and the Company Secretary. Where disclosure is not “routine”, the input from all relevant board members is sought before disclosure is made. The Disclosure Sub‐Committee can and does seek outside expert advice in relation to disclosure matters from time to time. The Company Secretary is responsible for:
Ensuring that RCG complies with the continuous disclosure obligations Communicating with ASX in relation to Listing Rule matters Overseeing and co‐ordinating disclosure of information to ASX Together with the chairman, co‐ordinating the disclosure of information to analysts, brokers,
shareholders, the media and the public Educating directors, officers and employees on RCG disclosure obligations, by reference to the listing
Rules and this Policy. ASX Best Practice Recommendation 5.1 and 5.2 RESPECTING THE RIGHTS OF SHAREHOLDERS Shareholder Communication Policy The Company has established a Shareholder Communication Policy, a copy of which is posted on its website. The purpose of the Shareholder Communication Policy is to promote effective communication with shareholders and encourage effective participation at General Meetings The Company is committed to maintaining direct, open and timely communications with all shareholders. The Board’s policy is that shareholders are informed of all material developments that impact on the Company. Information is communicated to shareholders by the Company through:
The publication of the annual and interim financial reports Disclosures to the ASX and ASIC Notices and explanatory memoranda of general meetings Updates and announcements to inform shareholders of key matters of interest issued on a needs
basis Presentations to analysts The Annual General Meeting
The Company posts all the announcements it makes to the ASX on its website and makes them available for viewing for at least three years from the date of the announcement.
ASX Best Practice Recommendations 6.1 and 6.2
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The Directors submit their report together with the financial report of RCG Corporation Limited (“the Company”) and the consolidated financial report of the consolidated entity, being the Company and its controlled entities, for the financial year ended 28 June 2009, together with the auditors’ report thereon. DIRECTORS The names of the Company’s Directors in office at the date of this report are as below: Ivan Hammerschlag BCom, CTA Chairman, Member of Remuneration Committee Ivan has had over 25 years of specialist retail experience, including as CEO and shareholder in Freedom Furniture prior to its IPO, growing the business from a small group of stores to a national chain. He has also chaired, managed and invested in a number of other successful retail and other businesses. David Gordon BCom, LLB Non‐Executive Director, Chairman of Audit Committee and Remuneration Committee David was formerly a partner at Freehills law firm and is now the principal of Lexicon Partners Pty Limited, a boutique advisory and investment business. David has had over 20 years experience advising companies, funds and high net worth individuals on complex corporate and commercial transactions. Stephen Kulmar Non‐Executive Director, Member of Remuneration Committee Steve is the former CEO and Chairman of IdeaWorks and is currently the CEO of Retail Oasis, a boutique retail marketing services companies. Steve has over 30 years experience in advertising and has extensive experience in retail strategy, brand strategy, channel to market strategy, business re‐engineering and new retail business development. Michael Cooper MBA, GAICD Executive Director, Managing Director of The Athlete’s Foot Michael has been with The Athlete’s Foot since 1988, fulfilling a number of operational roles including management of store operations and the merchandising function. Michael was appointed Managing Director of The Athlete’s Foot in March 2002. Michael Hirschowitz BCom, BAcc, GAICD Finance Director & Company Secretary, Member of Audit Committee Michael joined The Athlete’s Foot in 1996 and worked in various capacities becoming Commercial Director in 2002. On the formation of RCG Corporation he became Chief Financial Officer. After filling several roles within the group since that time, Michael was appointed Finance Director on 1 July 2006 and was appointed as the Company Secretary on 14 March 2008. Hilton Brett BCom, PGDA Executive Director, Member of Audit Committee Hilton has extensive retailing and franchising experience and proven skills in maximising opportunities in acquiring, growing, re‐engineering and selling businesses. Hilton was the former Chief Executive Officer of Vivien’s Jewellers and has managed and invested in a number of other successful businesses.
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COMPANY SECRETARY Michael Hirschowitz DIRECTORS’ MEETINGS The number of meetings of the Company’s board of directors and of each board committee held during the year, and the number of meetings attended by each Director were:
Name Full Board Audit Committee Rem. Committee
Eligible to attend
No. Attended
Eligible to attend
No. Attended
Eligible to attend
No. Attended
Ivan Hammerschlag 5 5 ‐ ‐ 5 5 David Gordon 5 5 3 3 5 5 Hilton Brett 5 5 3 3 ‐ ‐ Michael Cooper 5 5 ‐ ‐ ‐ ‐ Michael Hirschowitz 5 5 3 3 ‐ ‐ Stephen Kulmar 5 4 ‐ ‐ 5 5
PRINCIPAL ACTIVITIES RCG Corporation is an investment holding company. Throughout the financial year it owned The Athlete’s Foot Australia Pty Limited, Australia’s largest speciality retailer of athletic footwear. The Company is actively engaged in identifying potential acquisitions that are synergistic with its current business and its management skill set. To this end a number of transactions have taken place between the end of the financial year and the date of this report. These are explained under “Matters subsequent to the end of the financial year’ on page 19 of this report. OPERATING RESULTS The net profit for the financial year ended 28 June 2009 of the consolidated entity after providing for income tax was $5.26 million. This is a 7.5% increase over the previous financial year’s profit from continuing operations. DIVIDENDS On 9 June 2009, the Company declared an ordinary fully franked dividend of 1.5 cents per share and a special fully franked dividend of 2.2 cents amounting to $8.68 million. The dividend was paid on 18 August 2009. REVIEW OF OPERATIONS An overview of the operations of the group is provided in the Chairman’s Review on page 2 of this report.
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SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS There were no significant changes in the state of affairs of the consolidated entity during the financial year.
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR A number of significant events have taken place between the end of the financial year and the date of this report. These are as follows: Exercise of options On 27 July 2009 Directors (and related entities) together with other senior executives exercised 43,818,553 vested options over ordinary shares for an aggregate exercise price of $5.37 million. Payment of dividend On 9 June 2009 the Company declared a fully franked special dividend of 2.2 cents per share and a fully franked ordinary dividend of 1.5 cents per share. Both dividends were paid on 18 August 2009. The aggregate dividend payment was $8.59 million. New licence agreement for The Athlete's Foot On 7 August 2009, we reported that RCG had signed new long term licence agreements for The Athlete’s Foot business in Australia and New Zealand under which it will pay no ongoing licence fees to the US licensor. This will result in substantial annual savings for RCG. Under the new agreements, which have an effective term of 249 years, RCG paid a lump sum of US$6.2 million and has no ongoing licence fees to pay for the term of the agreements. The new agreements also remove a number of other restrictions contained in the previous licence agreements. The new licence agreements have a material positive impact on the profitability of The Athlete's Foot. The increase in financial year 2010 EBIT for The Athlete's Foot as a result of the new agreements is expected to be approximately $1.2 million. This investment is an exceptionally sound deployment of our capital as it not only delivers long term certainty to the business, but secures a significant increase in The Athlete’s Foot’s annual earnings and with that delivers substantial shareholder value. Merrell Distribution Agreement On 24 August 2009 we announced that RCG has been awarded the Australian rights to distribute the Merrell brand of outdoor, comfort, active lifestyle, performance footwear and apparel under an agreement with Wolverine World Wide, Inc, the owner of Merrell. The agreement is effective from 1 January, 2010. We anticipate that the Merrell business will turnover in excess of $12 million in its first year of operation and, based on the profiles of similar distribution businesses, it is expected to deliver an EBIT contribution in excess of 20%. Given the January commencement date and the costs of establishing this business, RCG is not expecting the business to contribute to earnings until FY11. RCG will be setting up a wholesale division, operating independently of its retail division, to maximise distribution to the many department store, specialty retail and outdoor retailers already carrying the Merrell brand as well as to new prospective customers. We believe that there are significant expansion opportunities associated with Merrell, which will have a substantial impact on the future profitability of RCG. The Merrell business will be highly complementary to the growth strategy associated with the increased product range in the new large format TAF stores and the Shoe Superstore business. In addition, RCG also intends to rollout a number of Merrell flagship stores over the next 3 ‐ 4 years. This is a significant and exciting step for RCG. The Merrell brand is known worldwide as a quality performance and outdoor brand, making it highly complementary with our strategy of acquiring distribution
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and retail businesses in the sports, fitness, footwear and active lifestyle space and we are delighted to commence this relationship with Wolverine World Wide, Inc. Shoe Superstore RCG has also announced the creation of a complementary chain of footwear stores that will sit alongside and not compete with the 136 strong The Athlete's Foot chain. This genesis has come through RCG’s acquisition of Shoe Superstore Pty Ltd, a three‐store chain of branded, comfort and lifestyle footwear stores for an initial upfront investment of approximately $1 million, including working capital. The vendors, who are experienced and skilled in the footwear sector, have signed six‐year service agreements and will receive an earn‐out payment if certain performance conditions are met. The business, which commenced trading 4 years ago, is currently operating at breakeven point and will benefit from the expertise, resources and buying power of RCG. This business is not mall based, but rather is a destination style business in high traffic shopping precincts. RCG intends to employ its retail competencies and resources to improve and grow the existing business, before commencing a gradual but sustained expansion programme. It is anticipated that Shoe Superstore will not have a material impact on RCG’s consolidated profit for the next 2 – 3 years. Shoe Superstore presents an excellent opportunity for us to capitalise on the emerging branded comfort footwear market. We believe that this is a highly underserviced sector of the footwear market, with very few retailers providing a legitimate offering in this space. While The Athlete's Foot is capitalising on the growth in this market through its new larger format stores, we believe that Shoe Superstore will help drive the growth of this segment by servicing a different demographic. By offering range and value to destination shoppers, we believe that Shoe Superstore is a complementary and synergistic business to The Athlete's Foot. ENVIRONMENTAL ISSUES The Company and its subsidiary operate primarily within the retail sector and conduct their business activities with respect for the environment while continuing to meet the expectations of shareholders, customers, employees and suppliers. During the year under review, the Directors are not aware of any particular or significant environmental issues which have been raised in relation to the consolidated entity’s operations. FUTURE DEVELOPMENTS Disclosure of information regarding likely developments in the operation of the consolidated entity in future financial years and the expected results of those operations is likely to result in unreasonable prejudice to the consolidated entity. Accordingly, this information has not been disclosed in this report. REMUNERATION REPORT Remuneration policy Remuneration policy is determined and executed on behalf of the board by the Remuneration Committee. The Remuneration Committee consists of David Gordon (Chairman), Ivan Hammerschlag and Stephen Kulmar, all non‐executive Directors. The Remuneration Committee makes recommendations to the Board on matters relating to remuneration for the entities within the consolidated group. The Remuneration Committee considers recruitment, retention and termination policies and procedures; non executive Director’s remuneration; executive Directors and senior management’s remuneration and incentive policy and awards; and contractual arrangements with senior managers and executives. More detail on the
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Company’s remuneration policy is provided in the Corporate Governance section on Page 8 of the Annual Report. The Group’s remuneration reviews take place at the end of the first quarter of each financial year. Prior to these reviews, the executive Directors make recommendations to the Remuneration Committee regarding the remuneration of each of their direct reports and the overall remuneration framework for all employees. The Remuneration Committee, while all executive Directors are absent, meets to discuss the remuneration of the executive Directors. RCG Corporation’s remuneration policy is designed to attract, motivate and retain employees, while ensuring that the interests of employees are in line with the interests of shareholders. The Board recognises that the success of the Company hinges on the performance and abilities of its employees. Therefore, as a matter of policy, employees of the Group are remunerated on the following basis: Base remuneration Base remuneration is set with reference to prevailing market rates for similar positions, adjusted to account for the experience, ability and productivity of the individual employee. Base remuneration provides fixed remuneration on a total cost‐to‐company basis, which includes any fringe benefits to the employee as well as superannuation at 9% of the base remuneration. Salary packaging options are available for some employees. Short Term Incentives (STI) All employees are eligible to earn STI’s if they attain or exceed predetermined key performance indicators specific to the roles they perform. The STI’s for non‐store employees are linked to base remuneration and the maximum amount that can be earned is a fixed percentage of that base remuneration. Employees that work in corporate stores may be entitled to earn commissions and other bonuses that are not linked to base remuneration. STI’s for each employee are reviewed annually during the performance review process and modified if necessary. STI’s earned are paid in cash, net of appropriate taxation. Long Term Incentives (LTI) The Company has implemented LTI’s under two different schemes: The Employee Option Plan (EOP) and The Executive Long Term Incentive Plan (ELTIP). The purpose of these plans is to encourage employees to share in the ownership of the Company in order to promote the long‐term success of the Company as a goal shared by the employees and to align employees’ interest to that of shareholders. The EOP, which was implemented during the 2007 financial year, operates under the rules approved by shareholders at the 19 December 2006 Extraordinary General Meeting. A list of the options together with the exercise price and the vesting dates is provided in “Options held by Key Management Personnel” section of this remuneration report. In each case, the only vesting condition is that the option holder continues to be employed on the vesting date. There are currently 13,600,000 outstanding options issued under the Employee Option Plan after 11,800,000 options under Employee Option Plan were exercised on 27 July 2009. The ELTIP was implemented during the 2006 financial year. Under the plan certain employees were invited to apply for shares at the market price on 1 July 2005. The Company provided financial assistance to the employee to purchase the shares. The shares were escrowed subject to a hurdle being met. The hurdle was that the RCG share price had to exceed the S&P/ASX Small Ordinaries Accumulation Index over a 3 year period from 1 July 2005. The hurdle was not met but, having regard to the internal changes in the Company since the plan was first introduced, the board modified the plan to extend the hurdle date for some employees to 30 June 2011. However, under the ASX Listing Rules the plan could not be altered for Directors without shareholder approval. As a result, 1,000,000 ELTIP shares issued to Directors (and 780,000 ELTIP shares issued to former employees) were cancelled in July 2008. At its Annual General Meeting in November 2008 the Company obtained shareholder approval to issue 1,500,000 new ELTIP shares to Directors. These shares were issued in January 2009 at the market price on the date of issue. These new ELTIP shares are subject to the same hurdle described above. There are 2,390,000 ELTIP shares on issue.
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Remuneration of non‐executive Directors On an annual basis the Remuneration Committee considers the fees payable to non‐executive Directors. When considering the level of fees, the Committee undertakes a survey of the market and accesses independent advice as well as drawing on the knowledge and experience of its members. The remuneration committee makes recommendations on non‐executive Director fees to the Board. Non‐executive Directors can choose, subject to certain restrictions, the amount of their fees allotted to Superannuation. The Board believes that the remuneration policies in place align the interests of all employees with those of the Company’s shareholders while at the same time enabling the group to retain a high quality team of executives. Remuneration of Key Management Personnel The following table sets out the details of the remuneration of Key Management Personnel of the Company: 2009
Share based paymentS
Cash, salary and fees
Cash BonusOther
Monetary Benefits
Super‐annuation
Retirement Benefits
Issue of Shares/ Options
$ $ $ $ $ $ $ $Ivan Hammerschlag 120,000 ‐ 65,400 ‐ ‐ 185,400 0.0%David Gordon 50,000 ‐ 4,500 ‐ ‐ 54,500 0.0%Stephen Kulmar 40,903 ‐ ‐ 1,523 ‐ ‐ 42,426 0.0%Michael Cooper 270,904 44,536 15,390 28,389 ‐ 82,550 441,769 18.7%Michael Hirschowitz 252,011 16,635 15,390 22,681 ‐ 82,550 389,267 21.2%Hilton Brett 275,496 22,936 10,384 26,859 ‐ 76,599 412,274 18.6%Total 1,009,314 84,107 41,164 149,352 ‐ 241,699 1,525,636
Names of Key Management Personnel
Short‐term benefitsPost‐employment
benefits Total Remun‐eration
% of total made as
share based payments
2008
Share based paymentS
Cash, salary and fees
Cash BonusOther
Monetary Benefits
Super‐annuation
Retirement Benefits
Issue of Shares/ Options
$ $ $ $ $ $ $ $Ivan Hammerschlag 50,000 ‐ ‐ 65,400 ‐ ‐ 115,400 0.0%David Gordon 50,000 ‐ ‐ 4,500 ‐ ‐ 54,500 0.0%
Stephen Kulmar (a) 39,667 ‐ ‐ ‐ ‐ 67,266 106,933 62.9%Michael Cooper 240,774 51,709 14,820 26,323 ‐ 147,264 480,890 30.6%Michael Hirschowitz 226,647 32,831 14,820 20,398 ‐ 147,264 441,960 33.3%Hilton Brett 153,706 50,000 3,692 13,833 ‐ 114,233 335,464 34.1%
Howard Knapp (b) 86,198 ‐ 7,499 6,989 ‐ 4,449 105,135 4.2%Total 846,992 134,540 40,831 137,443 ‐ 480,476 1,640,282
Total Remun‐eration
% of total made as
share based payments
Short‐term benefitsPost‐employment
benefitsNames of Key Management Personnel
(a) Stephen Kulmar was appointed on 14 August 2007 (b) Howard Knapp resigned on 14 March 2008
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Shares held by Key Management Personnel The number of shares (including ELTIP shares) in which the key management personnel of the Company hold a relevant interest is set out in the following table.
Key Management Personnel
Opening Balance
Net Change
Closing Balance on 28 June 2009
Net change since 28 June 2009
Closing balance on 24 August 2009
Ivan Hammerschlag 7,964,495 ‐ 7,964,495 11,561,900 19,526,395 David Gordon 7,295,752 ‐ 7,295,752 11,591,549 18,887,301 Stephen Kulmar 1,400,000 ‐ 1,400,000 1,000,000 2,400,000 Michael Cooper 5,895,981 ‐ 5,895,981 6,833,332 12,729,313 Michael Hirschowitz 5,495,981 (2,000,000) 3,495,981 6,833,332 10,329,313 Hilton Brett 4,268,226 500,000 4,768,226 4,198,440 8,966,666 Total 32,320,435 (1,500,000) 30,820,435 42,018,553 72,838,988
Options held by Key Management Personnel The number of options in RCG Corporation Limited, in which the key management personnel and other employees held a relevant interest on 28 June 2009, is set out in the following table.
Number of options
outstanding on 24 Aug
2009 2008 2009 2008Ivan Hammerschlag 12/01/07 12/01/07 5 years 0.120 9,444,445 9,444,445 9,444,445 9,444,445 9,444,445 ‐ Ivan Hammerschlag 19/12/06 19/12/06 5 years 0.154 2,117,455 2,117,455 2,117,455 2,117,455 2,117,455 ‐ David Gordon 12/01/07 12/01/07 5 years 0.120 9,444,445 9,444,445 9,444,445 9,444,445 9,444,445 ‐ David Gordon 19/12/06 19/12/06 5 years 0.154 2,147,104 2,147,104 2,147,104 2,147,104 2,147,104 ‐ Hilton Brett 30/04/07 30/04/07 5 years 0.154 2,198,440 2,198,440 2,198,440 2,198,440 2,198,440 ‐ Hilton Brett 30/04/07 31/01/08 5 years 0.169 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 ‐ Hilton Brett 14/03/08 1/02/09 5 years 0.345 1,000,000 1,000,000 1,000,000 ‐ ‐ 1,000,000 Hilton Brett 14/03/08 1/02/10 5 years 0.345 1,000,000 1,000,000 ‐ ‐ ‐ 1,000,000 Hilton Brett 14/03/08 1/02/11 5 years 0.345 1,000,000 1,000,000 ‐ ‐ ‐ 1,000,000 Michael Cooper 12/01/07 12/01/07 5 years 0.120 2,833,332 2,833,332 2,833,332 2,833,332 2,833,332 ‐ Michael Cooper 19/12/06 19/12/07 5 years 0.154 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 ‐ Michael Cooper 19/12/06 19/12/08 5 years 0.154 2,000,000 2,000,000 2,000,000 ‐ 2,000,000 ‐ Michael Cooper 19/12/06 19/12/09 5 years 0.154 2,000,000 2,000,000 ‐ ‐ ‐ 2,000,000 Michael Cooper 19/12/06 19/12/10 5 years 0.154 2,000,000 2,000,000 ‐ ‐ ‐ 2,000,000 Michael Hirschowitz 12/01/07 12/01/07 5 years 0.120 2,833,332 2,833,332 2,833,332 2,833,332 2,833,332 ‐ Michael Hirschowitz 19/12/06 19/12/07 5 years 0.154 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 ‐ Michael Hirschowitz 19/12/06 19/12/08 5 years 0.154 2,000,000 2,000,000 2,000,000 ‐ 2,000,000 ‐ Michael Hirschowitz 19/12/06 19/12/09 5 years 0.154 2,000,000 2,000,000 ‐ ‐ ‐ 2,000,000 Michael Hirschowitz 19/12/06 19/12/10 5 years 0.154 2,000,000 2,000,000 ‐ ‐ ‐ 2,000,000 Stephen Kulmar 1/11/07 1/11/07 5 years 0.260 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 ‐
53,018,553 53,018,553 43,018,553 38,018,553 42,018,553 11,000,000 Other employees Various Various 5 years 0.172 3,400,000 3,400,000 2,100,000 ‐ 1,800,000 1,600,000 Other employees Various Various 5 years 0.307 1,000,000 ‐ ‐ ‐ ‐ 1,000,000 Total 57,418,553 56,418,553 45,118,553 38,018,553 43,818,553 13,600,000
Issue dateName
Exercise Price and option fee $
Total held by key management personnel
Options exercised after 28
June 2009
Number of Options VestedNumber of Options
Outstanding
Exercise date No. of years from issue
Vesting date
On 27 July 2009 43,818,553 options were exercised for a total consideration of $5.37 million. The aggregate amount receivable by the Company should all remaining options be exercised and paid for is $3.58 million. Employment Contracts for Key Management Personnel Neither the Key Management Personnel nor the Company Secretary is employed under an employment contract.
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DDiirreeccttoorrss’’ rreeppoorrtt
Relationship between the remuneration policy and company performance The following table shows the gross revenue, profits and dividends for the last five years for the listed entity, as well as the share price and market capitalisation at the end of the respective financial years.
2005 2006 2007 2008 2009
Revenue (A$’000) 60,115 17,497 18,940 23,666 21,997
Net profit/(loss) from continuing operations (A$’000) 1,753 1,351 1,936 4,891 5,258Net profit/(loss) attributable to the parent entity (A$’000) 1,753 (20,063) (8,461) 4,891 5,258Dividends (A$’000) 1,008 ‐ ‐ ‐ 8,682Share price at year‐end (cents per share) 19.0 17.0 30.0 24.0 37.0Number of shares on issue ('000) 84,217 87,377 131,511 198,565 190,829Market capitalisation (A$'000) 16,001 14,854 39,453 47,656 70,607 The table above shows that with the exception of the 2006 financial year, there has been a general trend of increasing net profit from continuing operations. The major item that adversely impacted the 2006 and 2007 net profit result were the write‐down of poorly performing subsidiaries. These subsidiaries were subsequently sold. The share price is subject to share market volatility and is beyond the control of the Company. The board is of the opinion that these results can be attributed in part to the previously described remuneration policy and is satisfied that it has contributed in increasing shareholder wealth over the past five years. Share trading policy The share trading policy for key management personnel is listed in page 15 of this report. Other transactions with specified employees and personally related entities Transactions, if any, with specified employees and their personally related entities are conducted on arm’s length terms and conditions. There are also transactions which are deemed trivial or domestic in nature being in the nature of shopping in our company stores. INSURANCE OF OFFICERS During the financial year, the Company paid premiums of $48,813 in respect of directors’ and officers’ liability insurance. The policy covers all Directors of the Company named in this report, and other officers of the Company and its controlled entities. These policies insure persons who are directors or officers of the Company and its controlled entities against certain liabilities incurred as such by an officer or director, while acting in that capacity. The premiums have not been determined for an individual entity, officer or director. The Directors have not included details of the nature of the liabilities covered or the amount of the premium paid in respect of the directors’ and officers’ liability insurance contracts, as such disclosure is prohibited under the terms of the contracts. No other agreements to indemnify directors, officers or auditors have been entered into, nor have any payments in relation to indemnification been made, during or since the end of the financial year, by the Company.
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DDiirreeccttoorrss’’ rreeppoorrtt
PROCEEDINGS ON BEHALF OF THE COMPANY No person has applied to the Court under S237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. During the year no proceedings were brought or intervened in on behalf of the Company with leave of the Court under S237 of the Corporations Act 2001. NON‐AUDIT SERVICES The Company may employ its auditors to conduct assignments that are in addition to their statutory audit duties where the auditors’ expertise and knowledge of the Consolidated Entity is relevant. The board of directors, in accordance with advice from the audit committee, is satisfied that the provision of non‐audit services by PKF during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision of these services did not compromise the external auditor’s independence because the nature of the services provided do not compromise the general principles relating to auditor independence as set out in APES 110: Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board. Amounts paid or accrued for non‐audit services during the year were $75,132 (2008: $183,705). These amounts were in respect of tax and accounting advisory services.
AUDITOR’S INDEPENDENCE DECLARATION A copy of the auditor’s independence declaration as required under S307C of the Corporations Act 2001 is set out on page 26. CORPORATE GOVERNANCE In recognising the need for the highest standards of corporate behaviour and accountability, the Directors of RCG Corporation Limited support and have adhered to the principles of corporate governance. The Company’s Corporate Governance Statement is set out in page 6. ROUNDING OFF OF AMOUNTS The Company is a company of the kind referred to in Class Order 98/100 issued by the Australian Securities and Investments Commission, and in accordance with that Class Order amounts in the directors’ report and in the financial report are rounded off to the nearest thousand dollars, or in certain cases, to the nearest dollar. Signed in accordance with a resolution of the Board of Directors for and on behalf of the Directors by: Ivan Hammerschlag Michael Hirschowitz Chairman Finance Director 24 August 2009 24 August 2009
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AAuuddiittoorr’’ss iinnddeeppeennddeennccee ddeeccllaarraattiioonn
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IInnccoommee SSttaatteemmeenntt FF oo rr tt hh ee ff ii nn aa nn cc ii aa ll yy ee aa rr ee nn dd ee dd 22 88 JJ uu nn ee 22 00 00 99
2009 2008 2009 2008Note $'000 $'000 $'000 $'000
Continuing operations
Revenue 4 21,997 23,666 13,643 1,340 Cost of sales (4,997) (6,893) ‐ ‐ Employee benefits expense (4,941) (5,383) (936) (838) Rental expenses on operating leases (1,319) (2,120) (63) (261) Acquisition and development expenses (473) (114) (420) (103) Advertising and promotion expenses (351) (401) (10) ‐ Share based payment expense (292) (618) (292) (618) Depreciation and amortisation expense (174) (274) (17) (14) Provision for doubtful debts (118) (71) 10 (35) Finance costs ‐ (57) ‐ (48) Other expenses (1,726) (1,768) (482) (415)
Profit/(Loss) before income tax expense 5 7,606 5,967 11,433 (992)
Income tax (expense)/benefit 6 (2,348) (1,076) 96 1,047
Profit attributable to the members of the company 5,258 4,891 11,529 55
Earnings per share
From continuing operations:Basic earnings per share (cents per share) 23 2.66 2.71 Diluted earnings per share (cents per share) 23 2.39 2.23
Dividends (declared but not paid)
Dividends (cents per shares) 21 3.70 ‐
`
The Company
The accompanying notes form an integral part of these Financial Statements.
Consolidated
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BBaallaannccee SShheeeett AA ss aa tt 22 88 JJ uu nn ee 22 00 00 99
2009 2008 2009 2008Note $'000 $'000 $'000 $'000
Current AssetsCash and cash equivalents 7 31,854 22,097 29,838 20,297 Trade and other receivables 8 1,925 6,376 184 4,875 Inventories 9 822 1,526 ‐ ‐ Other current assets 10 183 134 75 63 Total current assets 34,784 30,133 30,097 25,235
Non‐current AssetsInvestments 11 ‐ ‐ 10,642 10,642 Property, plant and equipment 12 439 824 50 63 Intangible assets 13 9,696 9,661 ‐ ‐ Deferred tax assets 14 980 1,198 541 727 Total non‐current assets 11,115 11,683 11,233 11,432
TOTAL ASSETS 45,899 41,816 41,330 36,667
Current LiabilitiesTrade and other payables 15 12,745 4,300 15,105 12,416 Short‐term borrowings 16 ‐ ‐ ‐ ‐ Current tax liabilities 17 1,876 865 1,876 865 Short‐term provisions 18 264 217 182 138 Total current liabilities 14,885 5,382 17,163 13,419
Non‐current LiabilitiesLong‐term borrowings 16 ‐ ‐ ‐ ‐ Long‐term provisions 18 259 306 69 52 Total non‐current liabilities 259 306 69 52
TOTAL LIABILITIES 15,144 5,688 17,232 13,471
NET ASSETS 30,755 36,128 24,098 23,196
EquityIssued capital 19 56,050 58,287 56,050 58,287 Reserves 20 1,288 1,000 1,317 1,025 Accumulated losses (26,583) (23,159) (33,269) (36,116)
TOTAL EQUITY 30,755 36,128 24,098 23,196
The CompanyConsolidated
The accompanying notes form an integral part of these Financial Statements.
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SS ttaatteemmeenntt ooff cchhaannggeess iinn eeqquuii ttyy FF oo rr tt hh ee ff ii nn aa nn cc ii aa ll yy ee aa rr ee nn dd ee dd 22 88 JJ uu nn ee 22 00 00 99
Issued Foreign Accum‐Capital Issued Currency Share ulated TotalNo. in Capital Reserves Reserve Losses000 $'000 $'000 $'000 $'000 $'000
Balance at 1 July 2007 131,511 43,240 10 408 (28,050) 15,607 Shares issued during the year
Placement of shares 66,617 15,350 ‐ ‐ 15,350 Executive Long Term Share Incentive Plan ‐ ‐ ‐ 20 ‐ 20 Directors and Employees Options Plan 437 53 ‐ 597 ‐ 651 Transaction costs relating to issue of shares ‐ (357) ‐ ‐ ‐ (357)
‐ ‐ (35) ‐ ‐ (35) Profit for the year ‐ ‐ ‐ ‐ 4,891 4,891 Sub‐total 198,565 58,287 (25) 1,025 (23,159) 36,128 Dividends paid or provided for ‐ ‐ ‐ ‐ ‐ ‐ Balance at 29 June 2008 198,565 58,287 (25) 1,025 (23,159) 36,128
Balance at 29 June 2008 198,565 58,287 (25) 1,025 (23,159) 36,128 Shares issued during the year
Buyback of shares (a) (7,456) (2,237) ‐ ‐ ‐ (2,237)
Executive Long Term Share Incentive Plan (b) (280) ‐ ‐ 30 ‐ 30 Directors and Employees Options Plan ‐ ‐ ‐ 262 ‐ 262 Transaction costs relating to issue of shares ‐ ‐ ‐ ‐ ‐ ‐
‐ ‐ (4) ‐ ‐ (4) Profit for the year ‐ ‐ ‐ ‐ 5,258 5,258 Sub‐total 190,829 56,050 (29) 1,317 (17,901) 39,437
Dividends paid or provided for (c) ‐ ‐ ‐ ‐ (8,682) (8,682) Balance at 28 June 2009 190,829 56,050 (29) 1,317 (26,583) 30,755
Exchange differences on translation of foreign operations
Exchange differences on translation of foreign operations
Consolidated Entity
a) The Company completed a selective buy‐back of 7,456,006 shares at a price of $0.30 on 27 May 2009. This was to satisfy the unpaid portion of the sale price relating to the sale of King of Knives business.
b) Certain shares issued under the Executive Long Term Incentive Plan (ELTIP) in 2005 had a vesting hurdle calculable on 30 June 2008. The vesting hurdle was not met but, having regard to the internal changes in the company since the plan was first introduced, the board modified the plan to extend the hurdle date for some employees. However, under the ASX Listing Rules the plan could not be altered for directors without shareholder approval. As a result, 1,000,000 ELTIP shares issued to directors and 780,000 ELTIP shares issued to former employees were cancelled in July 2008. At its Annual General Meeting in November 2008 the Company obtained shareholder approval to issue 1,500,000 new ELTIP shares to directors resulting in a net decrease of 280,000 shares. These shares were issued in January 2009.
c) Prior to 28 June 2009, the Company declared an ordinary fully franked dividend of 1.5 cents per share and a special fully franked dividend of 2.2 cents payable to shareholders registered with the company on the record date of 4 August 2009.
The accompanying notes form an integral part of these Financial Statements.
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SS ttaatteemmeenntt ooff cchhaannggeess iinn eeqquuii ttyy FF oo rr tt hh ee ff ii nn aa nn cc ii aa ll yy ee aa rr ee nn dd ee dd 22 88 JJ uu nn ee 22 00 00 99
Issued Foreign Accum‐Capital Issued Currency Share ulated TotalNo. in Capital Reserves Reserve Losses000 $'000 $'000 $'000 $'000 $'000
Balance at 1 July 2007 131,511 43,240 ‐ 408 (36,171) 7,476 Shares issued during the year
Placement of shares 66,617 15,350 ‐ ‐ ‐ 15,350 Executive Long Term Share Incentive Plan ‐ ‐ ‐ ‐ ‐ ‐ Directors and Employees Options Plan 437 53 ‐ 617 ‐ 670 Transaction costs relating issue of shares ‐ (357) ‐ ‐ ‐ (357)
Profit for the year ‐ ‐ ‐ ‐ 55 55 Sub‐total 198,565 58,287 ‐ 1,025 (36,116) 23,196 Dividends paid or provided for ‐ ‐ ‐ ‐ ‐ ‐ Balance at 29 June 2008 198,565 58,287 ‐ 1,025 (36,116) 23,196
Balance at 29 June 2008 198,565 58,287 ‐ 1,025 (36,116) 23,196 Shares issued during the year
Buyback of shares (7,456) (2,237) ‐ ‐ (2,237) Executive Long Term Share Incentive Plan (280) ‐ ‐ 30 ‐ 30 Directors and Employees Options Plan ‐ ‐ ‐ 262 ‐ 262 Transaction costs relating issue of shares ‐ ‐ ‐ ‐ ‐ ‐
Profit for the year ‐ ‐ ‐ ‐ 11,529 11,529 Sub‐total 190,829 56,050 ‐ 1,317 (24,587) 32,780 Dividends paid or provided for ‐ ‐ ‐ ‐ (8,682) (8,682) Balance at 28 June 2009 190,829 56,050 ‐ 1,317 (33,269) 24,098
The accompanying notes form an integral part of these Financial Statements.
The Company
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CCaasshh ff llooww ss ttaatteemmeenntt FF oo rr tt hh ee ff ii nn aa nn cc ii aa ll yy ee aa rr ee nn dd ee dd 22 88 JJ uu nn ee 22 00 00 99
2009 2008 2009 2008Note $'000 $'000 $'000 $'000
CASH FLOWS FROM OPERATING ACTIVITIESReceipts from customers and franchisees 24,343 24,790 2,252 272 Interest received 1,833 897 1,833 897 Payments to suppliers and employees (14,095) (17,019) (1,851) (1,928) Payments for operating leases (1,451) (2,332) (69) (287) Income tax (paid)/refund (1,149) 306 (1,149) 306 Finance costs paid ‐ (48) ‐ (48) Net cash provided by operating activities 28 9,481 6,594 1,016 (788)
CASH FLOWS FROM INVESTING ACTIVITIESCash funds in discontinued operation ‐ (1,250) ‐ ‐Payments for intangible assets (35) ‐ ‐ ‐ Receipts/(payment) for property, plant and equipment 311 (316) (4) (47) Net cash provide by/(used in) investing activities 276 (1,566) (4) (47)
CASH FLOWS FROM FINANCING ACTIVITIESRepayment of Borrowings ‐ (1,400) ‐ (1,400) Lease payments ‐ (110) ‐ ‐ Capital raising ‐ 15,403 ‐ 15,403 Listing costs ‐ (509) ‐ (509) Intercompany loans ‐ ‐ 8,529 7,481 Net cash provided by financing activities ‐ 13,384 8,529 20,975
Net increase in cash held 9,758 18,412 9,541 20,140 Cash at beginning of the financial year 22,097 3,685 20,297 157 Cash at end of the financial year 31,854 22,097 29,838 20,297
The CompanyConsolidated
The accompanying notes form an integral part of these Financial Statements.
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NNootteess ttoo tthhee ff iinnaanncciiaall ss ttaatteemmeennttss FF oo rr mm ii nn gg pp aa rr tt oo ff tt hh ee ff ii nn aa nn cc ii aa ll ss tt aa tt ee mm ee nn tt ss ff oo rr tt hh ee ff ii nn aa nn cc ii aa ll yy ee aa rr ee nn dd ee dd 22 88 JJ uu nn ee 22 00 00 99
1. SIGNIFICANT ACCOUNTING POLICIES The financial report of RCG Corporation Limited covering the period from 30 June 2008 to 28 June 2009 was authorised for issue in accordance with a resolution of the Board of Directors on 24 August 2009. RCG Corporation is an investment holding company. It currently owns The Athlete’s Foot, a well established mid‐sized specialty retailer, which has a distinctive position and competitive advantage in its market. Basis of Preparation This general purpose financial report has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Australian Accounting Interpretations and the Corporations Act 2001. The financial report complies with Australian equivalents to International Financial Reporting Standards (AIFRS) in their entirety ensuring that the financial statements and notes also comply with the International Financial Reporting Standards. The financial report covers the consolidated entity of RCG Corporation Limited and its controlled entities, and RCG Corporation Limited as an individual parent entity (The “Company”). RCG Corporation Limited is a listed public company incorporated and domiciled in Australia.
The financial report has been prepared on an accrual basis and is based on historical costs modified by the revaluation of certain non‐current assets, financial assets and financial liabilities for which the fair value basis of accounting has been applied. Principles of Consolidation A controlled entity is any entity controlled by the Company. Control exists where the Company has the capacity to dominate the decision‐making in relation to the financial and operating policies of another entity so that the other entity operates with the Company to achieve the objectives of the Company. The consolidated entity comprises the Company and its controlled entities. A list of controlled entities is contained in Note 11 to the notes to the financial statements. Subsidiaries are included in the consolidated entity from the date that control commences until the date control ceases. In the Company’s financial statements, investments in subsidiaries are carried at cost. All intercompany balances and transactions between the entities in the consolidated entity, including any unrealised profits or losses have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistencies with those policies applied by the parent entity. Financial Assets and Financial Liabilities Financial assets and financial liabilities are initially recognised at cost on the balance sheet when the Company becomes party to the contractual provisions of the financial instrument. Subsequent to initial recognition these instruments are measured as set out below. A financial asset is de‐recognised when the contractual rights to the cash flows from the financial assets expire or are transferred and no longer controlled by the entity. A financial liability is removed from the balance sheet when the obligation specified in the contract is discharged or cancelled or expires. Loans and receivables are non‐derivative financial assets with fixed or determinable payments that are not quoted in an active market and are measured at amortised cost using the effective interest method.
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Available‐for‐sale financial assets include other financial assets, not included in the above categories. Available‐for‐sale financial assets are reflected at fair value. Unrealised gains and losses arising from changes in fair value are taken directly to equity. Financial liabilities comprise of trade and other payables and borrowings and are measured at amortised cost using the effective interest method. Trade accounts payable represent the principal amounts outstanding at balance date plus, where applicable, any accrued interest. The amortised cost of a financial asset or a financial liability is the amount initially recognised minus principal repayments, plus or minus cumulative amortisation of any difference between the initial amount and maturity amount and minus any write‐down for impairment or doubtful collections. Inventories Finished goods and raw materials are stated at lower of cost and net realisable value. Costs are calculated on “first‐in first‐out” basis and include duty and other inward charges. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling costs. Property, plant and equipment Property, plant and equipment is recorded at cost, less where applicable any accumulated depreciation or impairment loss. The profit and loss on disposal of all property, plant and equipment is determined as the difference between the carrying amount of the asset at the time of disposal and the proceeds thereof and is included in the profit before income tax in the Income Statement in the year of disposal. The carrying amount of property, plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from those assets. The recoverable amount is assessed on the basis of the expected net cash flows, which will be reviewed from the assets employed and subsequent disposal. The expected net cash flows have been discounted to present values in determining recoverable amounts. Depreciation Items of property, plant and equipment are depreciated at rates based upon their expected economic life using the straight line method. The depreciation or amortisation rates used for each class of assets are as follows: Plant and equipment 12.5%‐20%
Leases Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and benefits incidental to ownership. Where substantially all the risks and benefits incidental to the ownership of a leased fixed asset, but not the legal ownership, are transferred to the company, these leases are classified as finance leases. Finance leases are capitalised as an asset and a liability equal to the present value of the minimum lease payments, including any guaranteed residual value is brought to account. Leased assets are amortised on a straight line basis over their estimated useful lives where it is likely that the Company will obtain ownership of the asset, or over the term of the lease. Lease payments are allocated between the lease interest expense for the period and the reduction of the lease liability.
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Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses on straight line basis. Lease incentives under operating leases are recognised as a liability and amortised on a straight line basis over the life of the lease term. Foreign Currency Translation Functional and presentation currency Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Australian dollars, which is RCG Corporation Limited’s functional and presentation currency. Transaction and balances Foreign currency transactions are converted to Australian currency at the rates of exchange applicable at the dates of the transactions. Amounts receivable and payable in foreign currencies at balance date are converted at the rates of exchange ruling at that date. Exchange differences arising on the translation of non‐monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity; otherwise the exchange difference is recognised in the Income Statement.
Income Tax Deferred tax is accounted for using the comprehensive balance sheet liability method whereby: • the tax consequences of recovering (settling) all assets (liabilities) are reflected in the financial
statements; • current and deferred tax is recognised as income or expense except to the extent that the tax
relates to equity items or to a business combination; • a deferred tax asset is recognised to the extent that it is probable that future taxable profit will be
available to realise the asset; • deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the
period when the asset is realised or the liability settled. The charge for current income tax expenses is based on the profit for the year adjusted for any non assessable or disallowed items. It is calculated using tax rates that have been enacted or are substantively enacted by the balance sheet date. Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is credited in the Income Statement except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity. Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible temporary differences can be utilised. The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that
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the consolidated entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.
Tax Consolidation The Company and its wholly owned Australian subsidiaries are part of a tax consolidated group under Australian taxation law where RCG Corporation Limited is the head entity. The tax consolidated group has entered in a tax and funding agreement whereby each company in the group contributes to the income tax payable based on each company’s notional stand alone net income tax position for each year. The Company as a head entity is responsible for recognising only the current tax assets and liabilities and related franking credits of the tax consolidated group whilst deferred tax assets and liabilities are recognised by each company member.
Employee Entitlements Provision has been made for the consolidated entity’s liability for employee entitlements arising from services rendered by employees to balance date. Employee entitlements expected to be settled within one year together with entitlements arising from wages and salaries and annual leave which will be settled after one year, have been measured at amounts expected to be paid when the liability crystallises plus related on‐costs. Other employee entitlements including long service leave payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those entitlements. Contributions are made to an employee superannuation fund and are charged as expenses to profit or loss when incurred. Impairment of assets At each reporting date, the consolidated entity reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such indication exists, the recoverable amount of the asset, being the higher of asset’s fair value less cost to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable value is expensed to the Income Statement. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre‐tax discount rate. Intangibles Goodwill Goodwill and goodwill on consolidation, representing the excess of the cost of acquisition over the fair value of the identifiable net assets acquired, is recognised as an asset and not amortised, as it has an indefinite useful life, but tested for impairment annually and wherever there is an indication that the goodwill may be impaired any impairment is recognised immediately in the Income Statement. Trademarks Trademarks are recognised at cost of acquisition. Trademarks have an infinite life and are carried at cost less any accumulated amortisation and any impairment loss. Trademarks are tested for impairment annually and wherever there is an indication that it may be impaired, any impairment is recognised immediately in the income statement. Internally generated intangible assets Developmental expenses pertaining to the new concept stores have been treated as internally generated intangible assets and classified as other intangibles. These intangibles are tested for impairment annually and wherever there is an indication that it may be impaired, any impairment is recognised immediately in the income statement.
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Cash and Cash Equivalents Cash and cash equivalents includes cash on hand, cash in banks and market investments convertible readily to cash within two working days, net of outstanding bank overdrafts. Dividends A provision for dividend is recognised at the reporting date where the dividends are declared, determined or publicly recommended prior to the reporting date. Revenue Sale of Goods This comprises revenue earned from sale of goods to customers, net of actual returns, and is recognised at the point of sale when control of the goods passes to the customer. Lay‐by sales are recognised after the final payment is received from the customer.
Franchise Royalty Income Franchise royalty income is recognised as income in the period the sales are recorded by the franchisees.
Franchise Fees Franchise fees are recognised upon exchange of the franchise agreement as all services are considered to be substantially performed. Finance Income Interest earned on term deposits is accounted for on an accrual basis.
Settlement Discount Settlement discounts are accounted for as a reduction in inventory. All revenue is stated net of the amount of goods and service tax (GST).
Contributed Equity Issued and paid up capital is recognised at the fair value of consideration received by the Company and classified as equity. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received, net of any tax effects. Receivables Receivable amounts include sales/royalty receipts not yet collected from customers and purchase rebates due from suppliers, which remain unpaid at balance date, and are carried at the nominal amount. Amounts outstanding are generally recovered within sixty days of invoicing and the collectibility of unpaid amounts is assessed at balance date to determine whether a provision for doubtful debts is required. Bad debts are written off as incurred. Receivables from related parties are recognised and carried at the nominal amount due.
Payables Liabilities for trade creditors and other amounts are recognised at cost, which is the fair value of the consideration to be paid in the future for the inventories and other goods or services received, whether or not billed to the consolidated entity at balance date. Trade accounts payable are non‐interest bearing and are normally settled on due dates.
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Investments Investments in controlled entities are measured on the cost basis. The carrying amounts of investments are reviewed annually by directors to ensure they are not in excess of the recoverable amounts of these assets. Dividend revenue is recognised on a receipt basis. Earnings per share (EPS) Basic EPS is calculated as net profit attributable to members of the Company, adjusted to exclude costs of servicing equity (other than dividends), divided by the weighted average number of ordinary shares adjusted for any bonus element. Diluted EPS is calculated as net profit attributable to members of the Company, adjusted for: costs of servicing equity (other than dividends) the after tax effect of dividends and interest associated with dilutive potential ordinary shares that
have been recognised as expenses; and other non‐discretionary changes in revenues or expenses during the period that would result from
dilution of potential ordinary shares
divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. Share‐Based Payments Share‐based payments are provided to directors and employees through issue of shares and options. Issue of Shares Share‐based compensation benefits are provided to employees via the RCG Corporation Executive Long Term Incentive Plan. The fair value of shares granted under the RCG Corporation Executive Long Term Incentive Plan is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the shares. The fair value at grant date is independently determined using a Black‐Scholes Binomial convergence pricing model that takes into account the exercise price, the term of the share, the vesting and performance criteria, the impact of dilution, the share price at grant date and expected price volatility of the underlying share and the risk‐free interest rate for the term of the share.
Issue of options The fair value of options is recognised as a benefit to directors/employees. The fair value is measured at the grant date and recognised over the period during which the options vest to the directors/employees. The fair value at the grant date is independently determined using Monte Carlo simulation pricing model for the directors’ options and the Black‐Scholes binomial convergence model for the employee’s options. These models take into account the exercise price, the life of the option, the current price of the underlying share, the expected volatility of the share price, dividends expected on the share and the risk‐free interest rate for the life of the option. Goods and Services Tax Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from tax authorities. In these circumstances, the GST is recognised as part of the acquisition of the asset or as part of an item of expense.
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Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the tax authorities are included as a current asset or a liability in the Balance Sheet. Cash flows are included in the Cash Flow Statement on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, and or payable to, the tax authorities are classified as operating cash flows. Borrowing Costs Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such a time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in the income statement in the period in which they are incurred. Share Reserve The share reserve arises through the recognition of the expenses relating to share options. Rounding of amounts The Company is a company of the kind referred to in ASIC, class order 98/100, dated 10 July 1998, and in accordance with that class order amounts in the directors’ report and in the financial report are rounded off to the nearest thousand dollars, or in certain cases, to the nearest dollar. Comparative figures When required by accounting standards comparative figures have been adjusted to confirm to changes in presentation for the current financial year. Critical accounting estimates and judgements The directors evaluate estimates and judgements incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the consolidated entity. Key Estimates – Impairment The consolidated entity assesses impairment at each reporting date by evaluating conditions specific to the group that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value‐in‐use calculations performed in assessing recoverable amounts incorporate a number of key estimates.
2. FINANCIAL RISK MANAGEMENT
The consolidated entity’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The consolidated entity's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on its financial performance. The consolidated entity uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risk and aging analysis for credit risk.
Risk management is carried out by the finance department under undocumented guidelines set down by the Board. The Board provides overall direction for risk management, as well as guidance covering
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specific areas, such as foreign exchange risk, interest rate risk, and credit risk and investment of excess liquidity.
The consolidated entity and the parent entity hold the following financial assets and liabilities:
2009 2008 2009 2008Note $'000 $'000 $'000 $'000
Financial AssetsCash and cash equivalents 7 31,854 22,097 29,838 20,297 Trade and other receivables 8 1,925 6,376 162 4,875
33,779 28,473 30,000 25,172 Financial Liabilities
Trade and other payables 15 12,745 4,300 15,019 12,416 Borrowings 16 ‐ ‐ ‐ ‐
12,745 4,300 15,019 12,416
Consolidated The Company
Market risk Foreign exchange risk The Athlete’s Foot Australia Pty Limited, a subsidiary entity, operates in Australia and New Zealand and is exposed to foreign exchange risk arising from currency exposures, primarily with respect to the New Zealand dollar.
Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the entity’s functional currency and net investments in foreign operations. The finance department monitors the fluctuations on a monthly basis but given the relatively low value of the transactions, foreign exchange risk is not considered significant enough for the Company to enter into currency hedging transactions.
The consolidated entity’s exposure to foreign currency risk at the reporting date was as follows:
2009 2008
NZD NZD$'000 $'000
Cash and cash equivalents 125 92 Trade and other receivables 15 21 Inventories 271 391
Trade and other payables (212) (191)
The parent entity is not exposed to any foreign exchange risk.
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Sensitivity analysis Based on the trading results of the New Zealand operation for the period ended 28 June 2009, had the New Zealand dollar traded at an average rate of 5% higher or lower against the Australian dollar with all other variables held constant, the consolidated entity’s post‐tax profit for the year would have been $2,000 lower/$3,000 higher (2008: $8,000 lower/$9,000 higher).
Parent entity sensitivity The parent entity is not exposed to any foreign exchange risk.
Price risk Neither the consolidated entity nor the parent entity is exposed to any material equity securities or commodity price risk.
Cash flow and fair value interest rate risk The consolidated entity’s exposure to interest rate risk and the effective weighted average interest rate for classes of financial assets and financial liabilities is set out below:
Weighted Floating One One Non‐Average Interest Year or to Five InterestInterest Rate Less Years Bearing Total
Note Rate $'000 $'000 $'000 $'000 $'000As at 28 June 2009Financial Assets
Cash and cash equivalents 7 5.70% ‐ 31,854 ‐ ‐ 31,854 Receivables 8 0% ‐ ‐ ‐ 1,925 1,925
‐ 31,854 ‐ 1,925 33,779
As at 29 June 2008Financial Assets
Cash and cash equivalents 7 7.50% ‐ 22,097 ‐ ‐ 22,097 Receivables 8 0% ‐ ‐ ‐ 6,376 6,376
‐ 22,097 ‐ 6,376 28,473
Fixed Interest Maturing in
The Company invests surplus cash with AA rated banks in term deposits for periods ranging between 30‐180 days. This investment policy is adopted to mitigate risks and enhance returns.
Weighted Floating One One Non‐Average Interest Year or than one InterestInterest Rate Less Year Bearing Total
Note Rate $'000 $'000 $'000 $'000 $'000As at 28 June 2009Financial Liabilities
Payables 15 0% ‐ ‐ ‐ 12,746 12,746 ‐ ‐ ‐ 12,746 12,746
As at 29 June 2008Financial Liabilities
Payables 15 0% ‐ ‐ ‐ 4,300 4,300 ‐ ‐ ‐ 4,300 4,300
Fixed Interest Maturing in
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Sensitivity analysis As at 28 June 2009, if the interest rates on cash and other equivalents had changed by ‐/+ 0.50 basis points from the year end rates with all variables held constant, post‐tax profit for the year would have been $130,000 lower/higher (2008: $110,000 lower/higher). Credit risk Credit risk is managed on a group basis. Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as well as credit exposures to franchisees and suppliers, including outstanding receivables and committed transactions. For cash deposits, only independently rated banks with a minimum rating of 'A' are considered. Receivables from franchises and suppliers are based on the continuing relationship existing with them. The consolidated entity has a prudent policy of creating a provision for overdue trade receivables.
For some trade receivables the consolidated entity may also obtain security in the form of guarantees, deeds of undertaking or letters of credit which can be called upon if the counterparty is in default under the terms of the agreement. The analysis for trade receivables is as follows:
Less than 30 days
Between 30 and 90 days
Over 90 days
Less than 30 days
Between 30 and 90 days
Over 90 days
Note $'000 $'000 $'000 $'000 $'000 $'000
As at 28 June 2009Trade receivables (a) 8 1,687 135 304 184 ‐ ‐ Provision for doubtful debts 8 ‐ (42) (159) ‐ ‐ ‐
The CompanyConsolidated
As at 29 June 2008Trade receivables 8 6,166 209 148 4,867 16 2 Provision for doubtful debts 8 ‐ ‐ (147) ‐ ‐ (10)
(a) Ageing in the above table refers to the invoice date and not the due date. Included in the over 90 days column
is $145,000 being receivables from a customer which is not past due. Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities. The consolidated entity manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Surplus funds are generally invested bank deposits. Financing arrangements The consolidated entity and the parent entity had access to the following borrowing facilities at the reporting date:
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2009 2008 2009 2008
$'000 $'000 $'000 $'000Floating rateRenewable within one year (Bank overdraft) 3,640 3,900 3,640 3,900
Consolidated The Company
The bank overdraft facilities may be drawn at any time and may be terminated by the bank without notice. The facilities are reviewed by the bank on an annual basis. Maturities of financial liabilities The tables below analyse the Consolidated and the parent entity's financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows.
Consolidated Entity Less than 3 ‐ 12 OverTotal
contractual Carrying
As at 28 June 2009 3 months months 1 year cash flows amounts
Note $'000 $'000 $'000 $'000 $'000
Trade and other payables 15 637 ‐ 55 692 692 Other creditors and accruals 15 3,371 ‐ 0 3,371 3,371
Total financial liablities 4,008 ‐ 55 4,063 4,063
As at 29 June 2008Trade and other payables 15 944 53 ‐ 997 997 Other creditors and accruals 15 3,303 ‐ ‐ 3,303 3,303
Total financial liablities 4,247 53 ‐ 4,300 4,300
The Company Less than 3 ‐ 12 OverTotal
contractual Carrying
As at 28 June 2009 3 months months 1 year cash flows amounts
Note $'000 $'000 $'000 $'000 $'000
Trade and other payables 15 95 ‐ 55 150 150
Other creditors and accruals 15 926 ‐ ‐ 926 926 Borrowings 16 ‐ ‐ ‐ ‐ ‐
Total financial liablities (a) 1,021 ‐ 55 1,076 1,076
As at 29 June 2008Trade and other payables 15 118 29 ‐ 147 147 Other creditors and accruals 15 1,037 ‐ ‐ 1,037 1,037 Borrowings 16 ‐ ‐ ‐ ‐ ‐
Total financial liablities (a) 1,155 29 ‐ 1,184 1,184
(a) Excludes payable to a subsidiary entity of $6.70 million (2008: $11.23 million).
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Capital management The Company manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of cash and cash equivalents, trade and other receivables, inventories, intangibles and net working capital. The equity attributable to equity holders of the parent entity comprises of issued capital (disclosed in note 19), reserves (disclosed in note 20) and retained earnings. The company has no debt. Directors effectively manage the Group’s capital by assessing the Group’s financial risks and adjusting the Group’s capital structure in response to changes in these risks and in the market. These responses include the management of debt levels, distributions to shareholders and share issues. During the year, the Company completed a selective buy‐back of 7,456,006 shares at a price of $0.30 on 27 May 2009. This was to satisfy the unpaid portion of the sale price relating to the sale of King of Knives business. The Company also declared an ordinary fully franked dividend of 1.5 cents per share and a special fully franked dividend of 2.2 cents payable to shareholders registered with the company on the record date of 4 August 2009.
None of the Group entities are subject to externally‐imposed capital requirements. The capital management policy has not changed since the prior year. Net fair values of financial assets and liabilities The carrying amount of the consolidated entity’s identified financial assets and liabilities represents materially their net fair value.
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3. ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS
As at the date of this report there are a number of new accounting standards and Interpretations that have been issued but are not yet effective as detailed below: Australian Accounting Standards
AASB No. Title Issue Date
Operative Date (Annual reporting periods
beginning on or after)
8 Operating Segments Feb‐07 Jan‐09101 Presentation of Financial Statements (Revised) Sep‐07 Jan‐09123 Borrowing Costs (Revised) Jun‐07 Jan‐093 Business Combinations (Revised) Mar‐08 Jul‐09
127 Consolidated and Separate Financial Statements (Amended) Mar‐08 Jul‐09
2008 ‐ 1Amendments to Australian Accounting Standards: Share‐Base Payments: Vesting Conditions and Cancellations
Mar‐08 Jan‐09
2008 ‐ 2Amendments to Australian Accounting Standards: Puttable Financial Instruments and Obligations arising on Liquidation
Mar‐08 Jul‐09
2008 ‐ 5Amendments to Australian Accounting Standards arising from the Annual Improvements Project
Jul‐08 Jan‐09
2008 ‐ 6Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project
Jul‐08 Jul‐09
2008 ‐ 7Amendments to Australian Accounting Standards – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate
Jul‐08 Jan‐09
2008 ‐ 8Amendments to Australian Accounting Standards – Eligible Hedged Items
Aug‐08 Jul‐09
2008 ‐ 9 Amendments to AASB 1049 for Consistency with AASB 101 Sep‐08 Jan‐09
2008 ‐ 11Amendments to Australian Accounting Standard –Business Combinations Among Not‐for‐Profit Entities
Nov‐08 Jul‐09
2008 ‐ 13Amendments to Australian Accounting Standards arising from AASB Interpretation 17 – Distributions of Non‐cash Assets to Owners
Dec‐08 Jul‐09
2009 – 4Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 2 and AASB 138 and AASB Interpretations 9 & 16]
May‐09 Jul‐09
2009 – 5Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project
May‐09 Jan‐10
2009 – 5Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 5, 8, 101, 107, 117, 118, 136 & 139]
May‐09 Jan‐10
Australian Interpretations
Int No. Title Issue Date
Operative Date (Annual reporting periods
beginning on or after)
15 Agreements for the Construction of Real Estate Aug‐08 Jan‐0916 Hedges of a Net Investment in a Foreign Operation Aug‐08 Oct‐0817 Distributions of Non‐cash Assets to Owners Dec‐08 Jul‐09
18 Transfers of Assets from Customers Mar‐09Ending Jul‐09
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The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material financial impact on the financial statements of the consolidated entity. The application of AASB 8 and AASB 101 (revised) will not affect any of the amounts recognised in the financial statements, but will change the disclosure presently made in relation to the consolidated entity’s financial statements. These Standards and Interpretations will be first applied in the financial report of the consolidated entity that relates to the annual reporting period beginning after the effective date of each pronouncement.
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2009 2008 2009 2008$'000 $'000 $'000 $'000
4. REVENUESale of goods 7,934 11,998 ‐ ‐ Royalties and other franchise related income 11,656 10,032 ‐ ‐ Profit from sale of stores to franchisees 477 110 ‐ ‐ Interest received 1,657 1,323 1,643 1,312 Other revenue 273 202 ‐ 28 Dividend received from wholly owned subsidiary ‐ ‐ 12,000 ‐
Total Revenue 21,997 23,666 13,643 1,340
The CompanyConsolidated
5. EXPENSES
Employee benefits expenseSalaries, bonus and commission 3,850 4,346 659 663 Superannuation 355 363 59 59 Other 736 674 218 116
4,941 5,383 936 838
Depreciation and amortisation expenseProperty, plant and equipment 174 274 17 14
External Finance costsInterest on finance leases ‐ 8 ‐ ‐
Interest expense on financial liabilities measured at amortised cost ‐ 49 ‐ 48
‐ 57 ‐ 48
Rental expense relating to operating leasesMinimum lease payments 1,319 2,120 63 261
OthersObsolescence of inventory 93 113 ‐ ‐ Foreign exchange gain/(loss) 21 13 ‐ ‐ Doubtful debts ‐ trade receivables 118 71 (10) 35 Advertising and promotion expenses 351 401 10 ‐
Profit before income tax includes the following specific expenses
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2009 2008 2009 2008$'000 $'000 $'000 $'000
6. INCOME TAXMajor components of income tax benefit
Current income tax expense/(benefit) 2,254 1,769 (245) (455) Deferred income tax expense/(benefit) 129 (693) 184 (592) Overprovision in respect of prior years (35) ‐ (35) ‐
2,348 1,076 (96) (1,047)
2,282 1,790 3,429 (298) Add/ (less) income tax effect of:
Other members of the income tax consolidatedgroup net of intercompany transactions (18) (360) (360) Non‐allowable items 116 233 107 177 Dividend received from 100% subsidiary ‐ ‐ (3,600) ‐ Losses not previously recognised ‐ (326) ‐ (326)
3 (261) 3 (240) Over provision from previous year (35) ‐ (35) ‐
2,348 1,076 (96) (1,047)
30.9% (18.0%) 0.8% (105.4%)
The Company
before income tax at 30% (2007: 30%)
Income tax expense/ (benefit) attributable to entity
Prima facie income tax payable on profit/(loss)
Consolidated
Reconciliation between income tax expense/(benefit) and prima facie tax on accounting profit/(loss)
Deferred tax balances not previously brought to account
Applicable Tax rateThe applicable tax rate is the national tax rate inAustralia of 30%
Weighted Average Tax Rate (%)
Deferred tax asset comprises:Analysis of deferred tax assets:
Provision for doubtful accounts 79 62 ‐ 3 Provision for shrinkage & stock obsolescence 18 33 ‐ ‐ Provision for employee entitlements 192 173 175 152 Other Provisions 10 160 7 29 Accruals 349 265 103 124 Difference in accounting and tax depreciation (3) (12) (4) (3) Listing expenses 260 422 260 422 Landlord and Supplier contribution 75 95 ‐ ‐
980 1,198 541 727
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The movement in above analysis in deferred tax assets and liablities for each temporary difference during the year is debited / credited to the Income Statement.
Deferred tax assets not brought to account, the benefits of which will only be realised if the conditionsfor deductibility set out in Note 1 occur.
2009 2008 2009 2008$'000 $'000 $'000 $'000
Tax losses: operating losses ‐ ‐ ‐ ‐ capital losses 7,227 7,227 7,227 7,227
7,227 7,227 7,227 7,227
Consolidated The Company
7. CASH AND CASH EQUIVALENTS
Cash on hand 3 4 ‐ ‐ Cash in bank 31,851 22,093 29,838 20,297
31,854 22,097 29,838 20,297
Refer to note 28 for further details 8. CURRENT ASSETS ‐ TRADE AND OTHER RECEIVABLES
Trade receivables 2,126 6,523 184 4,885 Provision for doubtful debts (201) (147) ‐ (10)
1,925 6,376 184 4,875
9. CURRENT ASSETS ‐ INVENTORIES
Finished goods ‐ at cost 915 1,664 ‐ ‐ Less: Provision for obsolescence (93) (138) ‐ ‐
822 1,526 ‐ ‐
10. OTHER CURRENT ASSETS
Prepayments 101 99 75 63 Others 82 35 ‐ ‐
183 134 75 63
22000099 AAnnnnuuaall RReeppoorrtt PPaaggee 4499
NNootteess ttoo tthhee ff iinnaanncciiaall ss ttaatteemmeennttss FF oo rr mm ii nn gg pp aa rr tt oo ff tt hh ee ff ii nn aa nn cc ii aa ll ss tt aa tt ee mm ee nn tt ss ff oo rr tt hh ee ff ii nn aa nn cc ii aa ll yy ee aa rr ee nn dd ee dd 22 88 JJ uu nn ee 22 00 00 99
2009 2008 2009 2008$'000 $'000 $'000 $'000
11. INVESTMENTSUnlisted Investment ‐ at cost
Investment in The Athlete's Foot ‐ ‐ 10,642 10,642
Consolidated The Company
The Cash Generating Unit (CGU) of RCG Corporation Limited is The Athlete's Foot. Companies must perform an impairment test at each reporting date. The impairment test of the CGU at 28 June 2009 was carried out using the discounted cash flow method. The following assumptions were used in the calculation:
Annual growth rate 5% Discount rate 12%
The results of the impairment test provide no indication that the asset has been impaired.
The ultimate parent entity, RCG Corporation Limited, holds the following investments in subsidiaries:
2009 2008The Athlete's Foot
The Athlete's Foot Australia Pty Limited 100% 100%TAF Constructions Pty Limited 100% 100%
OtherHMC Imports Pty Limited 100% 100%
Ownership Interest
(a) All controlled entities at 28 June 2009 were incorporated in Australia. (b) On 5 August 2009, the name of HMC Imports Pty Limited was changed to RCG Brands Pty Limited.
22000099 AAnnnnuuaall RReeppoorrtt PPaaggee 5500
NNootteess ttoo tthhee ff iinnaanncciiaall ss ttaatteemmeennttss FF oo rr mm ii nn gg pp aa rr tt oo ff tt hh ee ff ii nn aa nn cc ii aa ll ss tt aa tt ee mm ee nn tt ss ff oo rr tt hh ee ff ii nn aa nn cc ii aa ll yy ee aa rr ee nn dd ee dd 22 88 JJ uu nn ee 22 00 00 99
2009 2008 2009 2008$'000 $'000 $'000 $'000
12. PROPERTY, PLANT AND EQUIPMENTPlant and equipment ‐ at cost 2,164 2,804 93 90 Less: Accumulated depreciation (1,736) (1,993) (43) (27)
428 811 50 63
Assets under construction 11 13 ‐ ‐
439 824 50 63
Consolidated The Company
Movements in carrying amountsProperty, plant and equipment ‐ at cost
At costBalance at beginning of period 2,804 2,452 90 42 Additions 54 464 3 48
Disposals (a) (694) (112) ‐ ‐ Balance at end of period 2,164 2,804 93 90
Accumulated depreciationBalance at beginning of period 1,993 1,791 27 12 Depreciation expense 174 274 17 14
Disposals (a) (431) (72) ‐ 1 Balance at end of period 1,736 1,993 43 27
Book value at the end of the period 428 811 50 63
(a) Relates to sale of corporate stores to franchisees and closure of a corporate store
Plant and equipment under finance leaseAt cost
Balance at beginning of period ‐ 157 ‐ ‐ Additions ‐ ‐ ‐ ‐ Disposals ‐ (157) ‐ ‐ Balance at end of period ‐ ‐ ‐ ‐
Accumulated depreciationBalance at beginning of period ‐ 47 ‐ ‐ Depreciation expense ‐ ‐ ‐ ‐ Disposals ‐ (47) ‐ ‐ Balance at end of period ‐ ‐ ‐ ‐
Assets under construction 11 13 ‐ ‐
Net book value 439 824 50 63
22000099 AAnnnnuuaall RReeppoorrtt PPaaggee 5511
NNootteess ttoo tthhee ff iinnaanncciiaall ss ttaatteemmeennttss FF oo rr mm ii nn gg pp aa rr tt oo ff tt hh ee ff ii nn aa nn cc ii aa ll ss tt aa tt ee mm ee nn tt ss ff oo rr tt hh ee ff ii nn aa nn cc ii aa ll yy ee aa rr ee nn dd ee dd 22 88 JJ uu nn ee 22 00 00 99
2009 2008 2009 2008$'000 $'000 $'000 $'000
13. INTANGIBLESa. TrademarkTrademark ‐ The Athlete's Foot 3,466 3,466 ‐ ‐ Accumulated impairment write‐down ‐ ‐ ‐ ‐
3,466 3,466 ‐ ‐
Total Trademark 3,466 3,466 ‐ ‐
b. GoodwillPurchased goodwill ‐ at cost 94 94 ‐ ‐
Goodwill ‐ The Athlete's Foot 6,101 6,101 ‐ ‐ Accumulated impairment write‐down ‐ ‐ ‐ ‐
6,101 6,101 ‐ ‐
Total Goodwill 6,195 6,195 ‐ ‐
c. Other intangible assetsOther intangible assets ‐ The Athlete's Foot (a) 35 ‐ ‐ ‐ Accumulated impairment write‐down ‐ ‐ ‐ ‐
35 ‐ ‐ ‐
Total other intangible assets 35 ‐ ‐ ‐
Total Intangibles 9,696 9,661 ‐ ‐
The CompanyConsolidated
(a) Costs associated with the development of a new store concept for The Athlete’s Foot
Movements in intangibles
Goodwill Trademarks
Other intangible
assets Goodwill Trademarks
Other intangible
assets$'000 $'000 $'000 $'000 $'000 $'000
Balance at the beginning of the year 6,195 3,466 ‐ 6,195 3,466 ‐ Additions ‐ ‐ 35 ‐ ‐ ‐ Disposals ‐ ‐ ‐ ‐ ‐ ‐ Impairment losses ‐ ‐ ‐ ‐ ‐ ‐
Balance at the end of the year 6,195 3,466 35 6,195 3,466 ‐
20082009
The Cash Generating Unit (CGU) of RCG Corporation Limited is The Athlete's Foot. Companies must perform an impairment test at each reporting date. The impairment test of the CGU at 28 June 2009 was carried out using the discounted cash flow method. The following assumptions were used in the calculation:
o Annual growth rate 5% o Discount rate 12%
22000099 AAnnnnuuaall RReeppoorrtt PPaaggee 5522
NNootteess ttoo tthhee ff iinnaanncciiaall ss ttaatteemmeennttss FF oo rr mm ii nn gg pp aa rr tt oo ff tt hh ee ff ii nn aa nn cc ii aa ll ss tt aa tt ee mm ee nn tt ss ff oo rr tt hh ee ff ii nn aa nn cc ii aa ll yy ee aa rr ee nn dd ee dd 22 88 JJ uu nn ee 22 00 00 99
AASB 136 states that an impairment test must be performed annually for goodwill and other indefinite life intangible assets. Further, companies must also assess at each reporting date whether there is any indication that the asset may be impaired and, if so, perform an impairment test. The impairment test carried out at 28 June 2009 does not indicate any reason for impairment of the intangible assets. The Company considers that its investment in The Athlete's Foot has an indefinite useful life because it foresees no impediment to its ability to continue to own and operate the business for the foreseeable future.
2009 2008 2009 2008$'000 $'000 $'000 $'000
14. DEFERRED TAX ASSETSFuture tax benefit (refer note 6) 980 1,198 541 727
The CompanyConsolidated
15. CURRENT LIABILITIES ‐ TRADE & OTHER PAYABLES
Trade creditors 692 997 150 147 Other creditors and accruals 3,371 3,303 1,012 1,037 Dividend payable 8,682 ‐ 8,682 ‐ Amounts payable to whollyowned subsidiaries ‐ ‐ 5,261 11,232
12,745 4,300 15,105 12,416
16. BORROWINGS
The consolidated entity and the company did not have any interest bearing borrowings on 29 June 2009 (2008: Nil) Undrawn facilities a) The entity has access to an undrawn bank overdraft facility of $3,550,000 in Australia and NZ$115,000 in
New Zealand. If drawn, this will be secured by a fixed and floating charge of the company's assets.
2009 2008 2009 2008$'000 $'000 $'000 $'000
17. TAX LIABILITIESCurrent
Income tax liability 1,876 865 1,876 865 1,876 865 1,876 865
The CompanyConsolidated
22000099 AAnnnnuuaall RReeppoorrtt PPaaggee 5533
NNootteess ttoo tthhee ff iinnaanncciiaall ss ttaatteemmeennttss FF oo rr mm ii nn gg pp aa rr tt oo ff tt hh ee ff ii nn aa nn cc ii aa ll ss tt aa tt ee mm ee nn tt ss ff oo rr tt hh ee ff ii nn aa nn cc ii aa ll yy ee aa rr ee nn dd ee dd 22 88 JJ uu nn ee 22 00 00 99
2009 2008 2009 2008$'000 $'000 $'000 $'000
18. PROVISIONSCurrent
Employee benefits (a) 196 149 182 138
Lease incentive (b) 68 68 ‐ ‐ 264 217 182 138
Non‐currentEmployee benefits (a) 78 57 69 52
Lease incentive (b) 181 249 ‐ ‐ 259 306 69 52
The CompanyConsolidated
a) A provision has been recognised for employee benefits relating to long service leave. The calculation of the
present value of future cash flows in respect of long service leave is based on historical data. The measurement and recognition criteria relating to employee benefits have been included in Note 1 to this report. There is uncertainty around the exact time of the cash outflows in relation to the above amounts.
b) Lease incentives pertain to incentives granted in respect of leases for premises. These incentives are taken to income over the life of the leases.
Long Service Leave MovementRepresented by
Employee Benefits (Current) 196 149 182 138 Employee Benefits (Non‐current) 78 57 69 52
274 206 251 190
Balance at the beginning of period 206 191 190 31 Additional provision 117 35 71 172 Amounts used (49) (20) (10) (13) Balance at end of period 274 206 251 190
22000099 AAnnnnuuaall RReeppoorrtt PPaaggee 5544
NNootteess ttoo tthhee ff iinnaanncciiaall ss ttaatteemmeennttss FF oo rr mm ii nn gg pp aa rr tt oo ff tt hh ee ff ii nn aa nn cc ii aa ll ss tt aa tt ee mm ee nn tt ss ff oo rr tt hh ee ff ii nn aa nn cc ii aa ll yy ee aa rr ee nn dd ee dd 22 88 JJ uu nn ee 22 00 00 99
2009 2008$'000 $'000
19. ISSUED CAPITALBalance at beginning of period 58,287 43,240 Issued during the year:
Buyback of shares (b) (2,237) ‐ Placement of shares ‐ 15,350 Directors and Employees Options Plan ‐ 53 Transaction costs relating to the issue of shares ‐ (357)
Balance at end of period 56,050 58,287
2009 2008('000) ('000)
Balance at beginning of period 198,565 131,511 Issued during the year:
Buyback of shares (b) (7,456) ‐ Placement of shares ‐ 66,617 Directors and Employees Options Plan ‐ 437
Executive Long Term Share Incentive Plan (c) (280) ‐ Balance at end of period 190,829 198,565
The Company
No. of Shares (Fully Paid)
a) Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion
to the number of shares held. At the shareholders meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands. The Company does not have authorised capital or par value in respect of its shares.
b) The Company completed a selective buy‐back of 7,456,006 shares at a price of $0.30 on 27 May 2009. This was to satisfy the unpaid portion of the sale price relating to the sale of King of Knives business.
c) Certain shares issued under the Executive Long Term Incentive Plan (ELTIP) in 2005 had a vesting hurdle calculable on 30 June 2008. The vesting hurdle was not met but, having regard to the internal changes in the company since the plan was first introduced, the board modified the plan to extend the hurdle date for some employees. However, under the ASX Listing Rules the plan could not be altered for directors without shareholder approval. As a result, 1,000,000 ELTIP shares issued to directors and 780,000 ELTIP shares issued to former employees were cancelled in July 2008. At its Annual General Meeting in November 2008 the Company obtained shareholder approval to issue 1,500,000 new ELTIP shares to directors. These shares were issued in January 2009. On 27 July 2009, 43,818,553 options granted under Investors options, the Directors option plan and Employees options plan were exercised for an aggregate price of $5,368,226. The balance of shares on the date of signing of this report is 234,648,207.
20. RESERVES
Foreign Currency Translation ReserveThe foreign currency translation reserve records exchange differences arising on translation of a foreign operation.
Share ReserveThe share reserve arises through the recognition of the expenses relating to share options.
22000099 AAnnnnuuaall RReeppoorrtt PPaaggee 5555
NNootteess ttoo tthhee ff iinnaanncciiaall ss ttaatteemmeennttss FF oo rr mm ii nn gg pp aa rr tt oo ff tt hh ee ff ii nn aa nn cc ii aa ll ss tt aa tt ee mm ee nn tt ss ff oo rr tt hh ee ff ii nn aa nn cc ii aa ll yy ee aa rr ee nn dd ee dd 22 88 JJ uu nn ee 22 00 00 99
2009 2008 2009 2008$'000 $'000 $'000 $'000
21. DIVIDENDSDividends paid or declared by the Company 8,682 ‐ 8,682 ‐
Dividend Franking Account
6,326 5,397 6,326 5,397
The Company
The amount of franking credits available for the subsequent financial year are:
Consolidated
Prior to 28 June 2009, the Company declared an ordinary fully franked dividend of 1.5 cents per share and a special fully franked dividend of 2.2 cents payable to shareholders registered with the company on the record date of 4 August 2009. On 27 July 2009, 43,818,553 options granted under Investors options, the Directors option plan and Employees options plan were exercised. The dividend of 3.7 cents has been calculated on 234,648,207 ordinary shares with the Company on 4 August 2009.
2009 2008 2009 2008$ $ $ $
22. AUDITORS' REMUNERATION
100,000 120,000 40,000 ‐ 48,485 129,869 48,485 49,676 26,647 53,836 26,647 ‐
175,132 303,705 115,132 49,676
Amount received or due and receivable by the auditors of the parent entity
Audit and review of the financial reports
Other professional servicesTax compliance services
PKF
The CompanyConsolidated
22000099 AAnnnnuuaall RReeppoorrtt PPaaggee 5566
NNootteess ttoo tthhee ff iinnaanncciiaall ss ttaatteemmeennttss FF oo rr mm ii nn gg pp aa rr tt oo ff tt hh ee ff ii nn aa nn cc ii aa ll ss tt aa tt ee mm ee nn tt ss ff oo rr tt hh ee ff ii nn aa nn cc ii aa ll yy ee aa rr ee nn dd ee dd 22 88 JJ uu nn ee 22 00 00 99
2009 2008$'000 $'000
23. EARNINGS PER SHAREEarnings used for calculation of basic and diluted earnings per share
Profit from operations 5,258 4,891
Earnings used for calculation of diluted earnings per shareProfit from operations 5,258 4,891 Interest earned on cash from options ‐ 354 Earnings used for calculation of diluted earnings per share 5,258 5,246
'000 '000Weighted average number of shares
197,516 180,658 22,082 54,269
219,598 234,927
Basic earnings per share from operations 2.66 2.71
Diluted earnings per share from operations 2.39 2.23
Cents per share
Weighted average number of options on issueWeighted average number of shares used in the calculation of diluted EPS
Consolidated
Number of shares
Weighted average number of shares used in the calculation of basic EPS
2009 2008 2009 2008$'000 $'000 $'000 $'000
24. EMPLOYEE BENEFITSProvision for employee benefits
‐ Current 196 149 14 14 ‐ Non‐current 78 57 17 17
526 427 498 378 800 633 529 409
No. No. No. No.71 109 36 30
The CompanyConsolidated
No of full‐time equivalent employees at year end
Accruals for wages, salaries and bonuses included in "other payables"
22000099 AAnnnnuuaall RReeppoorrtt PPaaggee 5577
NNootteess ttoo tthhee ff iinnaanncciiaall ss ttaatteemmeennttss FF oo rr mm ii nn gg pp aa rr tt oo ff tt hh ee ff ii nn aa nn cc ii aa ll ss tt aa tt ee mm ee nn tt ss ff oo rr tt hh ee ff ii nn aa nn cc ii aa ll yy ee aa rr ee nn dd ee dd 22 88 JJ uu nn ee 22 00 00 99
25. SHARE OPTIONS
Share‐based payments: Employee and Director Option plans The Company operates an ownership‐based compensation scheme for directors, executives and other senior employees of the Company. Share options have been issued to non‐executive directors under the Director Option Plan and to executives and senior employees under the Employee Option Plan (collectively the Option Plans), both of which were approved by the shareholders at the extraordinary general meeting of 19th December 2006. Shares have also been acquired by certain employees of the Company under the Executive Long Term Incentives Plan (ELTIP). The ELTIP was implemented during the 2006 financial year. Under the plan certain employees were invited to apply for shares at the market price on 1 July 2005. The Company provided financial assistance to the employee to purchase the shares. The shares were escrowed subject to a hurdle being met. The hurdle was that the RCG share price had to exceed the S&P/ASX Small Ordinaries Accumulation Index over a 3 year period from 1 July 2005. The hurdle was not met but, having regard to the internal changes in the company since the plan was first introduced, the board modified the plan to extend the hurdle date for some employees to 30 June 2011. However, under the ASX Listing Rules the plan could not be altered for directors without shareholder approval. As a result, 1,000,000 ELTIP shares issued to directors (and 780,000 ELTIP shares issued to former employees) were cancelled in July 2008. At its Annual General Meeting in November 2008 the Company obtained shareholder approval to issue 1,500,000 new ELTIP shares to directors. These shares were issued in January 2009 at the market price on the date of issue. These new ELTIP shares are subject to the same hurdle described above. There are 2,390,000 ELTIP shares on issue. Options issued under the Option Plans convert into one ordinary RCG share on exercise. In addition to the exercise price of each option, an option fee is payable for all options. The option fees vary depending on the date on which the options were issued, but have all been calculated with reference to the Volume Weighted Average Price of RCG’s shares on the ASX for the seven days leading up to the date on which the options were issued. Options issued under the Employee Option Plan are subject to a vesting condition being that the option holder continues to be employed on the vesting date. Options granted under the Option Plans together with movements are set out in the tables below: 2009
Option Series
Grant date
Expiry date
Exercise Price $
Option Fee $
Fair Value at grant date $
Balance at start of year
Granted during the
year
Exercised during the
year
Forfieted during the year
Balance at end of the
year
Vested at the end of
year
Series 1 19/12/06 19/12/11 0.120 0.034 0.016 4,264,559 ‐ ‐ ‐ 4,264,559 4,264,559 Series 2 19/12/06 19/12/11 0.120 0.034 0.048 16,000,000 ‐ ‐ ‐ 16,000,000 8,000,000 Series 3 30/04/07 30/04/12 0.120 0.034 0.016 2,198,440 ‐ ‐ ‐ 2,198,440 2,198,440 Series 4 30/04/07 30/04/12 0.120 0.049 0.055 2,000,000 ‐ ‐ ‐ 2,000,000 2,000,000 Series 5 17/04/07 17/04/12 0.120 0.052 0.064 3,600,000 ‐ ‐ (200,000) 3,400,000 850,000 Series 6 1/11/07 1/11/12 0.230 0.034 0.067 1,000,000 ‐ ‐ ‐ 1,000,000 1,000,000 Series 7 14/03/08 14/03/13 0.300 0.045 0.051 3,000,000 ‐ ‐ ‐ 3,000,000 1,000,000 Series 8 28/05/09 29/05/14 0.307 0.027 0.073 ‐ 1,000,000 ‐ ‐ 1,000,000 ‐ Total 32,062,999 1,000,000 ‐ (200,000) 32,862,999 19,312,999
22000099 AAnnnnuuaall RReeppoorrtt PPaaggee 5588
NNootteess ttoo tthhee ff iinnaanncciiaall ss ttaatteemmeennttss FF oo rr mm ii nn gg pp aa rr tt oo ff tt hh ee ff ii nn aa nn cc ii aa ll ss tt aa tt ee mm ee nn tt ss ff oo rr tt hh ee ff ii nn aa nn cc ii aa ll yy ee aa rr ee nn dd ee dd 22 88 JJ uu nn ee 22 00 00 99
2008
Option Series
Grant date
Expiry date
Exercise Price $
Option Fee $
Fair Value at grant date $
Balance at start of year
Granted during the
year
Exercised during the
year
Forfieted during the year
Balance at end of the
year
Vested at the end of
year
Series 1 19/12/06 19/12/11 0.120 0.034 0.016 4,600,000 ‐ (335,441) ‐ 4,264,559 4,264,559 Series 2 19/12/06 19/12/11 0.120 0.034 0.048 16,000,000 ‐ ‐ ‐ 16,000,000 4,000,000 Series 3 30/04/07 30/04/12 0.120 0.034 0.016 2,300,000 ‐ (101,560) ‐ 2,198,440 2,198,440 Series 4 30/04/07 30/04/12 0.120 0.049 0.055 2,000,000 ‐ ‐ ‐ 2,000,000 2,000,000 Series 5 17/04/07 17/04/12 0.120 0.052 0.064 3,600,000 ‐ ‐ ‐ 3,600,000 ‐ Series 6 1/11/07 1/11/12 0.230 0.034 0.067 ‐ 1,000,000 ‐ ‐ 1,000,000 1,000,000 Series 7 14/03/08 14/03/13 0.300 0.045 0.051 ‐ 3,000,000 ‐ ‐ 3,000,000 ‐ Total 28,500,000 4,000,000 (437,001) ‐ 32,062,999 13,462,999
(a) On 27 July 2009, 43,818,553 options granted under Directors option plan and Employees options plan
were exercised. (b) The weighted average remaining contractual period for options outstanding on 28 June 2009 is 2.68
years. The weighted average fair value of the share options granted during the financial year is $0.073 each. The weighted average fair value of ELTIP shares granted during the year is $0.099. Director Options were valued using a combination of Monte Carlo Simulation and the Binomial Option Pricing Model. Employee Options were valued using the Black‐Scholes Option Pricing Model. Where relevant, the expected life of the options was calculated as the midpoint between the vesting date of the options and the expiry of the options. The following variables were used to calculate the fair value of the Options and ELTIP shares:
Inputs into the Model Series 1 Series 2 Series 3 Series 4 Series 5 Series 6 Series 7 Series 8 ELTIPSpot price at grant date 0.14 0.14 0.14 0.18 0.175 0.26 0.26 0.29 0.22Exercise price 0.154 0.154 0.154 0.1688 0.172 0.2604 0.345 0.307 0.22Expected volatility 40% 40% 40% 30% 30% 30% 30% 30% 60%Option life Various Various Various 5 years Various 5 years Various Various VariousDividend yield ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐Risk free rate 6.17%. 6.09% 6.17%. 6.10% 6.10% 6.60% 6.50% 3.50% 3.50%
Placement Options As part of the recapitalisation plan of Company approved by the shareholders at the extraordinary general meeting of 19th December 2006, entities associated with four of the directors subscribed for 14,444,444 new shares in the Company. Each of the relevant subscribers received 1.7 Placement Options for each share subscribed, resulting in a total of 24,555,554 Placement Options being issued. Each Placement Option confers the right to acquire one share in the Company for $0.12c. There is no option fee payable for the Placement Options. Unexercised Placement Options will lapse five years after the grant date. The number of outstanding Placement Options on 28 June 2009 was 24,555,554 (2008: 24,555,554). On 27 July 2009 all placement options were exercised.
22000099 AAnnnnuuaall RReeppoorrtt PPaaggee 5599
NNootteess ttoo tthhee ff iinnaanncciiaall ss ttaatteemmeennttss FF oo rr mm ii nn gg pp aa rr tt oo ff tt hh ee ff ii nn aa nn cc ii aa ll ss tt aa tt ee mm ee nn tt ss ff oo rr tt hh ee ff ii nn aa nn cc ii aa ll yy ee aa rr ee nn dd ee dd 22 88 JJ uu nn ee 22 00 00 99
2009 2008 2009 2008$'000 $'000 $'000 $'000
26. COMMITMENTSa. Capital Expenditure Commitments
‐ not later than one year 400 650 ‐ ‐
b. Operating Lease Commitments
‐ not later than one year 993 2,007 67 68 ‐ later than one year but not later than five years 2,161 3,687 ‐ 142 ‐ later than five years 1,168 497 ‐ ‐
4,322 6,191 67 210
The Company
Estimated capital expenditure at reporting date, not provided for in the financial statements pertaining to plant and equipment
Future operating lease rentals (minimum lease payments) of premises, plant and equipment not provided for in the financial statements and payable under non‐cancellable operating leases.
Consolidated
(a) Operating lease commitments predominantly relate to stores being leased. Leases are generally over 5 years and include an annual increase linked to the CPI. (b) The consolidated entity does not have any outstanding finance lease commitments
27. RELATED PARTY DISCLOSURES
a. Parent entity The parent entity and ultimate parent entity of the group is RCG Corporation Limited.
b. Subsidiaries Subsidiaries are detailed in Note 11 to the financial statements.
c. Entities associated with key management personnel
Tidereef Pty Limited, a shareholder, is a company associated with Ivan Hammerschlag. Rivan Pty Limited, a shareholder, is a company associated with David Gordon. Vamico Pty Limited, a shareholder, is a company associated with Michael Cooper. Omniday Pty Limited, a shareholder, is a company associated with Michael Hirschowitz. Rastana Holdings Pty Limited, a shareholder, is a company associated with Hilton Brett. IdeaWorks and Retail Research Pty Limited are companies associated with Stephen Kulmar.
d. Key management personnel
Remuneration of Key Management Personnel
The following table sets out the details of the remuneration of Key Management Personnel of the Company:
22000099 AAnnnnuuaall RReeppoorrtt PPaaggee 6600
NNootteess ttoo tthhee ff iinnaanncciiaall ss ttaatteemmeennttss FF oo rr mm ii nn gg pp aa rr tt oo ff tt hh ee ff ii nn aa nn cc ii aa ll ss tt aa tt ee mm ee nn tt ss ff oo rr tt hh ee ff ii nn aa nn cc ii aa ll yy ee aa rr ee nn dd ee dd 22 88 JJ uu nn ee 22 00 00 99
2009
Share based paymentS
Cash, salary and fees
Cash BonusOther
Monetary Benefits
Super‐annuation
Retirement Benefits
Issue of Shares/ Options
$ $ $ $ $ $ $ $Ivan Hammerschlag 120,000 ‐ 65,400 ‐ ‐ 185,400 0.0%David Gordon 50,000 ‐ 4,500 ‐ ‐ 54,500 0.0%Stephen Kulmar 40,903 ‐ ‐ 1,523 ‐ ‐ 42,426 0.0%Michael Cooper 270,904 44,536 15,390 28,389 ‐ 82,550 441,769 18.7%Michael Hirschowitz 252,011 16,635 15,390 22,681 ‐ 82,550 389,267 21.2%Hilton Brett 275,496 22,936 10,384 26,859 ‐ 76,599 412,274 18.6%Total 1,009,314 84,107 41,164 149,352 ‐ 241,699 1,525,636
Names of Key Management Personnel
Short‐term benefitsPost‐employment
benefits Total Remun‐eration
% of total made as
share based payments
2008
Share based paymentS
Cash, salary and fees
Cash BonusOther
Monetary Benefits
Super‐annuation
Retirement Benefits
Issue of Shares/ Options
$ $ $ $ $ $ $ $Ivan Hammerschlag 50,000 ‐ ‐ 65,400 ‐ ‐ 115,400 0.0%David Gordon 50,000 ‐ ‐ 4,500 ‐ ‐ 54,500 0.0%
Stephen Kulmar (a) 39,667 ‐ ‐ ‐ ‐ 67,266 106,933 62.9%Michael Cooper 240,774 51,709 14,820 26,323 ‐ 147,264 480,890 30.6%Michael Hirschowitz 226,647 32,831 14,820 20,398 ‐ 147,264 441,960 33.3%Hilton Brett 153,706 50,000 3,692 13,833 ‐ 114,233 335,464 34.1%
Howard Knapp (b) 86,198 ‐ 7,499 6,989 ‐ 4,449 105,135 4.2%Total 846,992 134,540 40,831 137,443 ‐ 480,476 1,640,282
Total Remun‐eration
% of total made as
share based payments
Short‐term benefitsPost‐employment
benefitsNames of Key Management Personnel
(a) Stephen Kulmar was appointed on 14 August 2007 (b) Howard Knapp left the employment of the Company on 14 March 2008 Shares held by Key Management Personnel The number of shares in which the key management personnel of the Company held a relevant interest on 28 June 2009, are set out in the following table.
Key Management Personnel
Opening Balance
Net Change
Closing Balance on 28 June 2009
Net change since 28 June 2009
Closing balance on 24 August 2009
Ivan Hammerschlag 7,964,495 ‐ 7,964,495 11,561,900 19,526,395 David Gordon 7,295,752 ‐ 7,295,752 11,591,549 18,887,301 Stephen Kulmar 1,400,000 ‐ 1,400,000 1,000,000 2,400,000 Michael Cooper 5,895,981 ‐ 5,895,981 6,833,332 12,729,313 Michael Hirschowitz 5,495,981 (2,000,000) 3,495,981 6,833,332 10,329,313 Hilton Brett 4,268,226 500,000 4,768,226 4,198,440 8,966,666 Total 32,320,435 (1,500,000) 30,820,435 42,018,553 72,838,988
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Options held by Key Management Personnel The number of options in which the key management personnel of the Company held a relevant interest on 28 June 2009, are set out in the following table.
2009 2008 2009 2008
Ivan Hammerschlag 12/01/07 12/01/07 5 years 0.120 9,444,445 9,444,445 9,444,445 9,444,445 9,444,445 ‐ Ivan Hammerschlag 19/12/06 19/12/06 5 years 0.154 2,117,455 2,117,455 2,117,455 2,117,455 2,117,455 ‐ David Gordon 12/01/07 12/01/07 5 years 0.120 9,444,445 9,444,445 9,444,445 9,444,445 9,444,445 ‐ David Gordon 19/12/06 19/12/06 5 years 0.154 2,147,104 2,147,104 2,147,104 2,147,104 2,147,104 ‐ Hilton Brett 30/04/07 30/04/07 5 years 0.154 2,198,440 2,198,440 2,198,440 2,198,440 2,198,440 ‐ Hilton Brett 30/04/07 31/01/08 5 years 0.169 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 ‐ Hilton Brett 14/03/08 1/02/09 5 years 0.345 1,000,000 1,000,000 1,000,000 ‐ ‐ 1,000,000 Hilton Brett 14/03/08 1/02/10 5 years 0.345 1,000,000 1,000,000 ‐ ‐ ‐ 1,000,000 Hilton Brett 14/03/08 1/02/11 5 years 0.345 1,000,000 1,000,000 ‐ ‐ ‐ 1,000,000 Michael Cooper 12/01/07 12/01/07 5 years 0.120 2,833,332 2,833,332 2,833,332 2,833,332 2,833,332 ‐ Michael Cooper 19/12/06 19/12/07 5 years 0.154 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 ‐ Michael Cooper 19/12/06 19/12/08 5 years 0.154 2,000,000 2,000,000 2,000,000 ‐ 2,000,000 ‐ Michael Cooper 19/12/06 19/12/09 5 years 0.154 2,000,000 2,000,000 ‐ ‐ ‐ 2,000,000 Michael Cooper 19/12/06 19/12/10 5 years 0.154 2,000,000 2,000,000 ‐ ‐ ‐ 2,000,000 Michael Hirschowitz 12/01/07 12/01/07 5 years 0.120 2,833,332 2,833,332 2,833,332 2,833,332 2,833,332 ‐ Michael Hirschowitz 19/12/06 19/12/07 5 years 0.154 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 ‐ Michael Hirschowitz 19/12/06 19/12/08 5 years 0.154 2,000,000 2,000,000 2,000,000 ‐ 2,000,000 ‐ Michael Hirschowitz 19/12/06 19/12/09 5 years 0.154 2,000,000 2,000,000 ‐ ‐ ‐ 2,000,000 Michael Hirschowitz 19/12/06 19/12/10 5 years 0.154 2,000,000 2,000,000 ‐ ‐ ‐ 2,000,000 Stephen Kulmar 1/11/07 1/11/07 5 years 0.260 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 ‐
53,018,553 53,018,553 43,018,553 38,018,553 42,018,553 11,000,000 Other employees Various Various 5 years 0.172 3,400,000 3,400,000 2,100,000 ‐ 1,800,000 1,600,000 Other employees Various Various 5 years 0.307 1,000,000 ‐ ‐ ‐ ‐ 1,000,000 Total 57,418,553 56,418,553 45,118,553 38,018,553 43,818,553 13,600,000
Issue dateName
Exercise Price and option fee $
Total held by key management personnel
Number of options
outstanding on 24 Aug 2009
Options exercised after 28
June 2009
Number of Options VestedNumber of Options
Outstanding
Exercise date No. of years from issue
Vesting date
On 27 July 2009 43,818,553 options were exercised a total consideration of $5.37 million. The aggregate amount receivable by the company should all remaining options be exercised and paid for is $3.58 million. The weighted average remaining contractual period for options outstanding on 28 June 2009 is 2.68 years. Additional disclosures relating to key management personnel are set out in the remuneration report contained in the Director’s report. e. Transactions with related parties The following transactions occurred with related parties:
2009 2008 2009 2008$ $ $ $
Services supplied by related parties (a) 13,694 9,000 ‐ ‐ 13,694 9,000 ‐ ‐
Consolidated The Company
(a) IdeaWorks and Retail Research Pty Limited, companies associated with Stephen Kulmar, a Non‐Executive Director, provided consultancy services to the Company’s subsidiaries. These services were provided on arms length basis.
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f. Loans to related parties The following loan transactions occurred with related parties:
2008 2007 2008 2007$ $ $ $
Loans from subsidiariesBeginning of the year ‐ ‐ (11,231,834) (5,974,428) Dividend paid by subsidiaries ‐ ‐ 12,000,000 ‐
‐ ‐ (8,529,082) (7,481,352) Tax assumed by the head entity ‐ ‐ 2,499,493 2,223,946 Interest charged ‐ ‐ ‐ ‐ Interest received ‐ ‐ ‐ ‐ End of year ‐ ‐ (5,261,423) (11,231,834)
Loan received from subsidiaries
Consolidated The Company
Loans to/from subsidiaries are not on commercial terms and normally do not attract interest. Outstanding balances on this account are unsecured and repayable in cash.
28. CASH FLOW INFORMATIONReconciliation of cash at the end of the financial year
Cash and cash equivalents (refer note 7) 31,854 22,097 29,838 20,297
Reconciliation of cash flow from operations with
5,258 4,891 11,529 55 Non‐cash flows in profit/(loss)
Depreciation and amortisation 174 274 17 14 Dividend from subsidiary entity ‐ ‐ (12,000) ‐ Share based expense 292 618 292 618 Provision for doubtful debts 118 71 (10) 35 Profit from sale of stores to franchisees (477) ‐ ‐ ‐ Foriegn currency gain 21 (13) ‐ ‐ Provision for obsolescence of inventory 93 113 ‐ ‐
Changes in assets and liabilitiesReceivables and other assets 2,630 (652) 2,452 (216) Inventories 704 (257) ‐ ‐ Trade creditors and provisions (493) 961 (2,461) (1,132) Tax assets and liabilities 1,161 588 1,197 (162)
Cash provided by operating activities 9,481 6,594 1,016 (788)
Profit after income tax
Cash at the end of the financial year as shown in the Cash Flow Statement is reconciled to items in the balance sheet as follows:
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29. SEGMENT INFORMATION
a. Accounting policies
Segment revenues and expenses are those directly attributable to the segments and include any joint revenue and expenses where a reasonable basis of allocation exists. Segment assets include all assets used by a segment and consist principally of cash, receivables, inventories, intangibles and property, plant and equipment, net of allowances and accumulated depreciation and amortisation. While most assets can be directly attributed to individual segments, the carrying amount of certain assets used jointly by two or more segments is allocated to the segments on a reasonable basis. Segment liabilities consist principally of accounts payable, employee entitlements, accrued expenses, provisions and borrowings. Segment assets and liabilities do not include deferred income taxes.
b. Business Segments The consolidated entity is organised into the following business units:
The Athlete's Foot Retailers of general sports footwear RCG Corporate Provides company secretarial, legal, financial, human resources management, investor and public relations.
c. Geographical Segments
The consolidated entity operates in two identified geographical areas: Australia The home of the parent entity and its material subsidiaries. New Zealand The entity operates a branch in New Zealand.
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d. Primary Reporting – Business Segments
ConsolidatedYear ended 28 June 2009 TAF RCG Entity
$'000 $'000 $'000
Sales to external customers 7,934 ‐ 7,934 Other revenue 12,420 1,643 14,063 Total segment revenue 20,354 1,643 21,997 Direct costs and overheads (12,024) (2,193) (14,217)
8,330 (550) 7,780 Depreciation and amortisation (157) (17) (174) Segment result before interest expense and tax 8,173 (567) 7,606 Finance costs ‐ ‐ ‐ Profit/(Loss) before income tax expense 8,173 (567) 7,606
Income tax (expense)/benefit (2,444) 96 (2,348) 5,729 (471) 5,258
Segment assets 4,591 41,308 45,899
Segment liabilities 3,195 11,949 15,144
Segment profit before interest expense, tax, depreciation and amortisation
Profit after income tax expense (a)
(a) TAF declared a dividend of $12,000,000 to RCG during the year. This has not been reflected in the results above
as this has been eliminated on consolidation. Year ended 29 June 2008 Sales to external customers 11,998 ‐ 11,998 Other revenue 10,328 1,340 11,668 Total segment revenue 22,326 1,340 23,666 Direct costs and overheads (15,098) (2,270) (17,368)
7,228 (930) 6,298 Depreciation and amortisation (260) (14) (274) Segment result before interest expense and tax 6,968 (944) 6,024 Finance costs (9) (48) (57) Profit/(Loss) before income tax expense 6,959 (992) 5,967
Income tax (expense)/benefit (2,123) 1,047 (1,076) 4,836 55 4,891
Segment assets 5,149 36,667 41,816
Segment liabilities 3,449 2,239 5,688
Segment profit before interest expense, tax, depreciation and amortisation
Profit after income tax expense
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e. Secondary Reporting – Geographical Segments
New ConsolidatedYear ended 28 June 2009 Australia Zealand Entity
$'000 $'000 $'000
Sales to external customers 6,675 1,259 7,934 Other revenue 13,695 368 14,063 Total segment revenue 20,370 1,627 21,997 Direct costs and overheads (12,660) (1,557) (14,217)
7,710 70 7,780 Depreciation and amortisation (163) (11) (174) Segment result before interest expense and tax 7,547 59 7,606 Finance costs ‐ ‐ ‐ Profit/(Loss) before income tax expense 7,547 59 7,606 Income tax expense (2,348) ‐ (2,348)
5,199 59 5,258
Segment assets 45,323 576 45,899
Segment liabilities 14,976 168 15,144
Segment profit before interest expense, tax, depreciation and amortisation
Profit/(Loss) after income tax expense
Year ended 29 June 2008
Sales to external customers 10,029 1,969 11,998 Other revenue 11,405 263 11,668 Total segment revenue 21,434 2,232 23,666 Direct costs and overheads (15,024) (2,344) (17,368)
6,410 (112) 6,298 Depreciation and amortisation (211) (63) (274) Segment result before interest expense and tax 6,199 (175) 6,024 Finance costs (56) (1) (57) Profit/(Loss) before income tax expense 6,143 (176) 5,967 Income tax expense (1,076) ‐ (1,076)
5,067 (176) 4,891
Segment assets 41,196 620 41,816
Segment liabilities 5,538 150 5,688
Profit/(Loss) after income tax expense
Segment profit before interest expense, tax, depreciation and amortisation
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30. SUBSEQUENT EVENTS A number of significant events have taken place between the end of the financial year and the date of this report. These are as follows: Exercise of options On 27 July 2009 directors (and related entities) together with other senior executives exercised 43,818,553 vested options over ordinary shares for an aggregate exercise price of $5.37 million. Payment of dividend On 5 June 2008 the Company declared a fully franked special dividend of 2.2 cents per share and a fully franked ordinary dividend of 1.5 cents per share. Both dividends were paid on 18 August 2009. The aggregate dividend payment was $8.59 million. New licence agreement for The Athlete's Foot On 7 August 2009, we reported that RCG had signed new long term licence agreements for The Athlete’s Foot business in Australia and New Zealand under which it will pay no ongoing licence fees to the US licensor. This will result in substantial annual savings for RCG. Under the new agreements, which have an effective term of 249 years, RCG paid a lump sum of US$6.2 million and has no ongoing licence fees to pay for the term of the agreements. The new agreements also remove a number of other restrictions contained in the previous licence agreements. The new licence agreements have a material positive impact on the profitability of The Athlete's Foot. The increase in financial year 2010 EBIT for The Athlete's Foot as a result of the new agreements is expected to be approximately $1.2 million. This investment is an exceptionally sound deployment of our capital as it not only delivers long term certainty to the business, but secures a significant increase in The Athlete’s Foot’s annual earnings and with that delivers substantial shareholder value. Merrell Distribution Agreement On 24 August 2009 we announced that RCG has been awarded the Australian rights to distribute the Merrell brand of outdoor, comfort, active lifestyle, performance footwear and apparel under an agreement with Wolverine World Wide, Inc, the owner of Merrell. The agreement is effective from 1 January, 2010. We anticipate that the Merrell business will turnover in excess of $12 million in its first year of operation and, based on the profiles of similar distribution businesses, it is expected to deliver an EBIT contribution in excess of 20%. Given the January commencement date and the costs of establishing this business, RCG is not expecting the business to contribute to earnings until FY11. RCG will be setting up a wholesale division, operating independently of its retail division, to maximise distribution to the many department store, specialty retail and outdoor retailers already carrying the Merrell brand as well as to new prospective customers. We believe that there are significant expansion opportunities associated with Merrell, which will have a substantial impact on the future profitability of RCG. The Merrell business will be highly complementary to the growth strategy associated with the increased product range in the new large format TAF stores and the Shoe Superstore business. In addition, RCG also intends to rollout a number of Merrell flagship stores over the next 3 ‐ 4 years. This is a significant and exciting step for RCG. The Merrell brand is known worldwide as a quality performance and outdoor brand, making it highly complementary with our strategy of acquiring distribution and retail businesses in the sports, fitness, footwear and active lifestyle space and we are delighted to commence this relationship with Wolverine World Wide, Inc.
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Shoe Superstore RCG has also announced the creation of a complementary chain of footwear stores that will sit alongside and not compete with the 136 strong The Athlete's Foot chain. This genesis has come through RCG’s acquisition of Shoe Superstore Pty Ltd, a three‐store chain of branded, comfort and lifestyle footwear stores for an initial upfront investment of approximately $1 million, including working capital. The vendors, who are experienced and skilled in the footwear sector, have signed six‐year service agreements and will receive an earn‐out payment if certain performance conditions are met. The business, which commenced trading 4 years ago, is currently operating at breakeven point and will benefit from the expertise, resources and buying power of RCG. This business is not mall based, but rather is a destination style business in high traffic shopping precincts. RCG intends to employ its retail competencies and resources to improve and grow the existing business, before commencing a gradual but sustained expansion programme. It is not anticipated that Shoe Superstore will have a material impact on RCG’s consolidated profit for the next 2 – 3 years. Shoe Superstore presents an excellent opportunity for us to capitalise on the emerging branded comfort footwear market. We believe that this is a highly underserviced sector of the footwear market, with very few retailers providing a legitimate offering in this space. While The Athlete's Foot is capitalising on the growth in this market through its new larger format stores, we believe that Shoe Superstore will help drive the growth of this segment by servicing a different demographic. By offering range and value to destination shoppers, we believe that Shoe Superstore is a complementary and synergistic business to The Athlete's Foot.
31. CONTINGENT LIABILITY
a. The bank guarantees outstanding as of 28 June 2009 amounted to approximately $310,766 ($592,904
in 2008).
b. The subsidiaries of the Company have entered into operating lease commitments with landlords in their capacity as head lessors for stores operated by the franchisees. However, the franchisees have simultaneously undertaken to meet the rental commitments through back‐to‐back licence agreements. In addition, some franchisees have provided bank guarantees (generally for a maximum period of 3 months’ rent) and in some instances personal guarantees to the landlords of the properties. The Company and its subsidiaries would become liable in the event of a default by any franchisee. The maximum possible exposure would be $52.0 million, comprising of less than one year $14.3 million; between one and five years $35.3 million and more than 5 years $2.4 million (2008: $41.1 million). This would arise only in the event that all franchisees defaulted at the same time.
31. COMPANY DETAILS
The registered office and principal place of business is: RCG Corporation Limited 7/29, Bridge Road Stanmore NSW 2048 Australia
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DDii rreeccttoorr ’’ ss ddeeccllaarraatt iioonn
In accordance with a resolution of the board of directors of RCG Corporation Limited, we declare that:
In the opinion of the directors: a. the financial statements and notes of the Company and the consolidated entity are in accordance with the
Corporations Act 2001, including:
(i) giving a true and fair view of the Company’s and consolidated entity’s financial position as at 28 June 2009 and of their performance for the financial year ended on that date; and
(ii) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
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.
c. the audited remuneration disclosures set out on pages 20 to 24 of the Director’s report comply with Accounting Standard AASB 124 Related Party Disclosures and the Corporations Regulations 2001.
The Directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the directors.
Ivan Hammerschlag Michael Hirschowitz Chairman Finance Director Sydney, 24 August 2009
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Australian Stock Exchange Additional Information for RCG Corporation Limited Shareholder Information (As at 19 August 2009) Top 20 holders of ordinary shares
(a) Ivan Hammerschlag, a non‐executive director has a relevant interest. (b) David Gordon, a non‐executive director has a relevant interest. (c) Michael Cooper, an executive director has a relevant interest. (d) Michael Hirschowitz, an executive director has a relevant interest. (e) Hilton Brett, an executive director has a relevant interest.
Distribution schedule of ordinary shares
RangeTotal
holdersUnits
% of Issued Capital
1 ‐ 1,000 23 9,245 ‐ 1,001 ‐ 5,000 284 1,051,677 0.45 5,001 ‐ 10,000 193 1,338,577 0.57 10,001 ‐ 100,000 312 10,350,247 4.41 Greater than 100,000 139 221,898,461 94.57 Total 951 234,648,207 100.00
Rank Name Units % of Units
1. COGENT NOMINEES PTY LIMITED 41,076,212 17.51 2. TIDEREEF PTY LIMITED (a) 16,787,302 7.15 3. NATIONAL NOMINEES LIMITED 12,707,446 5.42 4. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 8,919,405 3.80 5. GRAHGER CAPITAL SECURITIES PTY LTD 8,400,000 3.58 6. RIVAN PTY LTD (b) 8,293,651 3.53 7. RIVAN PTY LTD <DAVID GORDON SUPER FUND A/C> (b) 8,293,650 3.53 8. VAMICO PTY LIMITED (c) 8,086,456 3.45 9. OMNIDAY PTY LIMITED (d) 5,686,456 2.42 10. RBC DEXIA INVESTOR SERVICES AUSTRALIA NOMINEES
PTY LIMITED 5,010,141 2.14 11. UBS NOMINEES PTY LTD 4,803,500 2.05 12. HILTON BRETT 4,800,000 2.05 13. MICHAEL COOPER 4,642,857 1.98 14. MICHAEL HIRSCHOWITZ 4,500,000 1.92 15. RASTANA HOLDINGS PTY LIMITED (e) 4,166,666 1.78 16. JASFORCE PTY LTD 4,102,115 1.75 17. ANZ NOMINEES LIMITED 3,772,770 1.61 18. DAVID GORDON 2,300,000 0.98 19. IVAN HAMMERSCHLAG 2,300,000 0.98 20. GRAHGER CAPITAL INVESTMENT PTY LTD 2,250,000 0.96
160,898,627 68.5701573,749,580 31.42985
Total of top 20 shareholders Total Remaining Holders Balance
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Unmarketable parcels The number of shareholders holding less than a marketable parcel of shares is 32 representing 20151 shares. Substantial shareholders The following substantial holder notices have been received by the Company:
Name
Number of shares in which the holder and its associates have relevant
interestHunter Hall Investment Management Ltd 37,674,275 Ivan Hammerschlag 19,326,395 David Gordon 18,887,301 Michael Cooper 12,729,313 Grahger Group 10,627,084
Voting Rights All ordinary shares carry one vote per share without restriction Restricted Securities 2,390,000 shares issued to employees under the company’s Employee Long Term Incentive Plan are subject to a vesting hurdle calculable on 30 June 2011. On‐market buy‐back The Company announced an on‐market buy‐back on 14 November 2008 in order to provide appropriate levels of capital management flexibility. No shares have been bought back under this announcement.