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DIRECTORs’ REPORT (CONT.)
impairment write-back of $0.4 million), representing an
increase in impairment of store assets.
Review of Financial Position
Specialty Fashion Group ended the year with net debt of
$27.8 million at 30 June 2015 (compared with net debt of
$12.0 million in the prior year). During the year the Group
has invested in new and refurbished stores to secure
future profitable growth. The Group had access to total
facilities of $85.7 million comprising working capital and
trade finance facilities. At the end of the year, the Group
had gross debt of $34.9 million.
The Group maintains a strong focus on working capital
management. There has been a reduction in average
supplier terms as the Group has increased its mix of
directly sourced product through both Rivers and the
Group’s other brands. Payment terms with direct suppliers
are typically shorter than with wholesale suppliers. Trade
and other payables included in operating cash flows at 30
June 2015 were $64.9 million, down from $69.6 million
a year earlier. In addition, the Group has reduced its
inventories from $90.3 million in the prior year to $89.1
million at 30 June 2015. The decrease in trade and other
payables of $4.7 million and the decrease in inventories
of $1.2 million have contributed to a decrease in working
capital of $3.8 million during the year.
The Board has determined to not declare a dividend in
respect of 2015. In 2014, a fully franked interim dividend
of 2.0 cents per fully paid ordinary share was paid during
the year, and a fully franked final dividend of 2.0 cents per actively manages the supply chain by developing long
fully paid ordinary share was paid subsequent to year end.
Outlook
The key focus areas for FY2016 are:
• Complete the integration of Rivers, and return the
brand to profitability;
• Continue the Millers’ brand and product rejuvenation
program; and
• Measured investment and expansion of the City Chic
brand in the USA and South Africa.
Material business risks
Specialty Fashion Group operates in an environment of
change and uncertainty. There are a range of factors,
both specific to the Group and general in nature which
may impact the operating and financial performance of
the Group. The impact of these risks is regularly reviewed
for their possible impact and the Group seeks to minimise
the impact through its risk management functions and its
approach to running the business.
Competition and consumer discretionary spending
The Group operates in a retail environment where quality,
price and value are critical to the customers it serves. The
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retail fashion market is also becoming an increasingly
global market through the impact of online shopping and
the entry of overseas retailers into Australia. The Group
is constantly monitoring these developments and is
adapting its business model to this changing landscape.
Property portfolio management
The Group currently operates 1,086 physical stores in
Australia, New Zealand, USA and South Africa. These
stores are leased and are subject to negotiations with each
landlord at the end of each lease term. The Group actively
manages its portfolio against established financial and
operational benchmarks which must be met for new stores
to be opened, or renewal of leases in existing stores.
Exchange rates
The Group relies significantly on imported products
(directly sourced or via local or overseas wholesalers)
and as a result the cost of the product may be subject to
movements in the exchange rate of the Australian dollar.
The Group mitigates against movements in exchange
rates through the use of forward cover.
Cotton and other product input prices
The Group sources product made either from cotton,
or cotton substitutes such as viscose or polyester, and
as such is affected by movements in fabric prices. As
cotton is a principal input, the Group mitigates against
significant adverse fluctuations in commodity prices
through the use of cotton call options. In addition, labour
costs have an impact on overall product cost. The Group
term relationships with our suppliers to ensure the best
possible outcome for all involved.
Occupational Health and Safety (OHS)
The Group has over 5,000 employees across Australia,
New Zealand, USA and South Africa as well as customers
who visit its stores. The Group has a high focus on OHS
with this function led by a senior executive of the Group.
The Group continues to invest in training and development
of our employees to ensure they have a high awareness of
workplace safety.
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
No matter or circumstance has arisen since 30 June 2015
that has significantly affected, or could significantly affect
the consolidated entity’s operations, the results of those
operations, or the consolidated entity’s state of affairs in
future financial years.