Accent Group Limited (AX1) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. My name is David Gordon. And on behalf of the Board, it's my pleasure as Chairman to welcome you to the 2023 Annual General Meeting of Accent Group Limited. I'm advised that a quorum is present, and I now declare the meeting open. I'll begin today by acknowledging the traditional custodians and owners of country throughout Australia and their connections to land, sea and community. I pay my respects to the elders, past and present, and extend that respect to all Aboriginal and Torres Strait Islander people today. For our New Zealand attendees, [Foreign Language]. As we've done previously, today, we are holding a hybrid meeting, where we welcome our shareholders in person as well as online via the Computershare platform. Those attending joining us virtually can hear a live webcast of the meeting. In addition, shareholders and proxies attending virtually also have the ability to ask questions and submit their votes via the online platform. Virtual attendees can submit questions at any time. [Operator Instructions] Please note that while you can submit any questions from now on, I'll address the questions at the time when the relevant item of business is discussed. Please also note that your questions may be moderated or if we receive multiple questions on the same topic, amalgamated together. For those shareholders who wish to ask a question via the phone, please follow the instruction below the broadcast. For our shareholders attending in person today, those in possession of either an orange voting card or a blue nonvoting card are welcome to ask questions, while those with a white visitor card are kindly requested to only observe during the meeting. If you believe you've not received the correct card, please go to the registration desk, where a Computershare representative will assist you. I will give all shareholders who wish to speak a reasonable opportunity to do so. Please keep your questions to the matter at hand and as succinct as possible. Voting today will be conducted by way of poll on all items of business. In order to provide you with enough time to vote, I'll shortly open voting for the resolutions in items 2 to item 5. The resolution in item 1 carries no vote. For our shareholders attending virtually, if you're eligible to vote, once voting opens, select the vote icon, and all resolutions will be activated with voting options. To cast your vote, simply select one of these options. There's no need to press submit or enter button as the vote is automatically recorded. You'll receive a vote confirmation notification on your screen. And if you have the ability -- you'll have the ability to change your vote up until the time I declare voting closed at the end of the meeting. For those attending in person, if you're eligible to vote, you will have received an orange voting card at registration. If you believe -- sorry, if you believe you're entitled to vote and have not received the correct voting card, please see a Computershare staff at the registration table. To cast your vote, simply complete it and sign the back of the card. A Computershare representative will collect your orange voting card at the end of the meeting. So I really feel like the person at the front -- I will tell you where the exits are. There's a lot of them. There's a lot there. Anyway, I'll now declare voting open on the resolution item 2 to 5. For your online shareholders, the voting options will soon be activated. So please submit your votes at any time. I'll give you time and warning at the end of all our resolutions before I move to close the voting. Now joining me here today is Daniel Agostinelli, our Chief -- Group Chief Executive Officer; and my fellow nonexecutive directors, Michael Hapgood, Donna Player, Stephen Goddard. Due to prior -- commitments, Brett Blundy and Joshua Lowcock are unable to join us here today, and they send their apologies. You may be aware from ASX announcements recently made by Accent Group that both Joshua Lowcock and Stephen Goddard will be retiring from the Board at the end of this AGM. I wish to thank both of them for their outstanding contribution to the Board during a period of rapid growth at Accent Group. We've been the fortunate beneficiaries of their expertise, their good humor and their dedication to Accent Group. And they will be sorely missed. In accordance with the Board's quarterly renewal process, you may also be aware that we have appointed 2 new directors and are pleased to welcome them here today, Anne Loveridge and Lawrence Myers. I might ask them if they could stand. Their appointments will be effective for the conclusion of the AGM today. A brief description of their backgrounds and skills were contained in the ASX release we made to the market yesterday. And I'm delighted to welcome Anne and Lawrence to the Board of Accent Group, both of whom will come before shareholders for election at next year's AGM. We are also joined by our Chief Financial and Operating Officer and Joint Company Secretary, Matt Durbin; and our Group General Counsel and Joint Company Secretary, Alethea Lee. The company's auditor, PricewaterhouseCoopers, is represented by partner Alison Milner here today. A number of our group executive leadership team and other Accent team members are also in the room. At today's meeting, we will be considering a number of matters set out at the notice of the meeting dated 16 October 2023. Before we address the resolutions set out in that notice, I'll make some introductory remarks and provide an overview of our FY '23 results and how we are continuing to create value for our shareholders before passing over to our Group CEO, Daniel, to give his address. I'm delighted to say that the Accent Group team delivered a phenomenal result in their first uninterrupted financial year since FY '19. You can see the significant growth the company has experienced with Accent Group now operating almost double the number of stores, tripling the number of digital sites and quadrupling its -- their contactable customer base all within the last 5 years, and some of those were COVID years. This result was achieved in large part due to the continued investment the company has made in key areas as it maintained a keen interest on its growth strategy. The ongoing expansion of the store network, building up our digital capability, growing our distributed brands and improving on our vertical brands are all investments that have been targeted towards continuing the company's long-term growth trajectory that has delivered record profits and growing shareholder returns. I take this opportunity to acknowledge and commend the machine behind all of this, namely the entire Accent team for working with such dedication, focus and energy. These achievements build and reinforce the company's strong and defendable market position as well as increasing our relevance in target markets across Australia and New Zealand. The Accent business today is scalable with future growth opportunities through online and new store growth, our large and diverse brand portfolio and our new businesses. Our business is flexible with proven capability to leverage digital and online rich and to quickly respond to trends through our diversified portfolio of brands across footwear, accessories and youth and lifestyle apparel. And the market position of our business is also defensible. Our distribution relationships provide access to global product innovation and exclusive access to product. Our vertical owned brands add to product differentiation and support underlying gross margin growth. Turning now to the results. Our total owned sales for the FY '23 year, excluding The Athlete's Foot franchisees, was $1.39 billion, up 26.3% on the previous year. Our EBIT was $138.8 million, up 122.9% on the previous year with NPAT of $88.7 million, up 181.8% on the prior year. Our gross margin percentage improvement of 100 basis points to 55.2% was also achieved. Over the last 10 years, Accent Group has delivered a total shareholder return of 20.9% per annum compounding annually, outstripping that of the ASX 200 at 10.1% per annum compounding on an annualized return. I'm very proud to be able to say that we have delivered long-term shareholder growth over the last 3 years and double that of the ASX 200. This is something we will continue to drive and strive for. Accent Group continues on its sustainability journey. Our 2023 Sustainability Report includes the initiatives being undertaken to this area. We continue to refine our approach and initiatives across the core pillars of our people, our responsibilities and our environment. In relation to our people, we recognize that the performance of Accent Group is driven by the quality and dedication of our now 7,500-strong team members employed across Australia and New Zealand. We remain committed to providing a safe working environment for our team. We also remain invested in gaining insight into what matters to our team members through continuing our group-wide team engagement survey. This survey highlights areas in which our team considers we are doing well as well as the areas we can improve. This gives us an opportunity to execute and follow-up on action plans to address these opportunities for improvement. In relation to our responsibilities, we're proud to continue to drive charitable initiatives through Stamp your Feet. We continue our excellent relationships with headspace in Australia and Youthline in New South -- in New Zealand. These 2 organizations play an important role in providing mental health and other support to youth in the key demographics that represent Accent's team and customers. In relation to our environment, our association with the Australian Sporting Goods Association and their shoe recycling program is another highlight. In FY '23, Accent Group increased the number of recycling collection points to over 300 across our store network. We collected almost 70,000 pairs of shoes for recycling. We're just getting started on this journey with a range of ongoing initiatives underway and new initiatives implemented. I'm very pleased to say that's been a year of great achievements for Accent Group. And I'll now hand over to Daniel, our Group Chief Executive Officer, to tell you more about these achievements and our plans for the future.

Thank you, David, and good morning, everyone. Now turning to Slide 15. Total group sales, including The Athlete's Foot franchisees, are now approaching $1.6 billion. In FY '23, we opened 80 new stores across all formats in Australia and New Zealand to increase our total store numbers to 821 stores. Nude Lucy was the recipient of several new stores with 22 stores opened and trading well at the end 20 -- FY '23. Platypus and Skechers continue to grow and had 36 new stores opened just between the 2 banners. Our contactable customer database has grown by 500,000 to 9.8 million customers. For the year, online sales represented 19.1% of sales with a notable increase of 19.8% for the second half compared to the same period in FY '22. And overall profitability was significantly ahead of prior years. Pleasingly, our vertical brands and product sales grew in line with expectations to more than $100 million from a standing start in FY '19. Digital sales have increased by more than 3x in the last 4 years and underpinned FY '19 in its base. It was expected that online sales would fall back in FY '23 off the back of the school-disrupting experience in FY '22. But having said that, we do see digital sales grow in the second half. In FY '23, the mix of online sales at 19.1% nearly doubled from 10.2% in FY '19. The focus for online over the FY '23 period was on achieving profitable sales through improved gross margin and lower costs in digital marketing and distribution. We continue to invest in new and upgrading websites and underlying digital infrastructure with 11 websites opened or upgraded during the year. As Accent Group is fully integrated -- is a fully integrated omnichannel retailer, moving forward, we will move away from separate disclosures on digital performance, given that they are integrally linked to the overall retail sales. Slide 17. As mentioned throughout FY '23, we grew our contactable customer database by 500,000 customers to 9.8 million, which was the result of a strong drive to invite customers to provide e-mail details in our stores as well as the impact of our loyalty programs across The Athlete's Foot, Skechers, Hype DC, Platypus and Merrell. As mentioned, during the year, we owned 80 new stores across all formats. We transitioned 15 stores and closed 21 due to closed banners or where sustainable renewal terms could not be reached. The new stores are performing well, and we are on track with our new store rollout program for FY '24. Wholesale sales continued to grow in FY '23 driven by existing and new distributed brands. In particular, we are pleased with the performance of Hoka and UGG, both being new to us. And indeed, we have opened 8 stores across both these brands today. All are trading well. Sales of vertical owned brands and products grew by 40% to more than $100 million. We will continue to support the improvements in underlying gross margin. For FY '24, we will be focusing on continued rollout of new stores, improved underlying gross margin from our moat brands being our distributed and vertically owned brands, growth in Nude Lucy and operational improvement in Glue Store and Stylerunner, profit growth from The Athlete's Foot and continued growth in our digital sales drive. I hope this gives our shareholders a clear idea of the activity and growth the company is playing in the up-and-coming future. I am pleased with what we have achieved in FY '23 following several years of disruption. We continue to build a defensible business in Australia and New Zealand. Our portfolio of global distributed brands, owned vertical brands, integrated digital capability and large store network are the core assets of our group. And the position of the company is well set for the future. I look forward to working with our team and continue to deliver strong results as we move forward. I will now hand back over to David.

Thanks, Daniel.

Thanks, David.

Along with our AGM presentation, we released a trading update to the ASX for this meeting. For the first 19 weeks of FY '24, based on trade to date, total group owned sales year-to-date are up 2.1% compared to the prior year with like-for-like sales down 2%. FY '24 gross margin percentage is broadly in line with the comparable period last year. We continue to focus on cost of doing business efficiency. Due to inflationary pressures on costs and weaker like-for-like sales, our cost of doing business percentage to sales at the end of week 19 is higher than the prior year. Our trade to date for the first 19 weeks has been broadly in line with the negative 1.8% like-for-like sales experienced in the first 7 weeks. Softer demand for other retailers -- from other retailers is resulting in more challenging wholesale sales. Our new store opening program is on track. And we expect to open around 70 new stores in the first half of FY '24 with many of them opening in November and December. Our new store openings are targeted to our growth banners in particular. Heading into the 3 most important trading months in the year, our company's in-stock position, sales and operational plans are well set. That concludes the business update, ladies and gentlemen. And we'll now progress to the formal business of the meeting. As I mentioned at the start of the meeting, voting is being conducted today by way of poll, and voting is currently open for the resolutions in items 2 to 5. At the end of the discussion of these items of business, I'll give you a warning before I close the voting. The first item of business is to receive and consider the financial report, the directors' report and the independent auditor's report for the year ended 2 July 2023. These documents are contained in the 2023 Annual Report, which was sent to shareholders on 16 October. I note that there was a typographical error in Notes 28 and 29 of the financial statement, which stated the figures in full for key management, personnel disclosures and remuneration of auditors. Those figures should have been presented in thousands of dollars, and we've corrected these typographical errors and republished the 2023 Annual Report on our website. And thank you to the shareholder who pointed that out to us. There is no formal resolution required for item 1, but I invite any questions you may have about the financial statements or about any aspects of the company or the business generally. This is the time for any general questions as I'll restrict questions about specific resolutions to matters pertaining to those resolutions. I'll take questions from the floor as well as through the Computershare virtual platform and the phone. I'll take questions from the floor first before moving to questions from shareholders attending virtually. For shareholders holding an orange or blue voting card -- I'm sorry. For the shareholders holding an orange or blue card attending in person, if you wish to ask a question, please raise your hand. Once you're acknowledged, the microphone attendant will pass you the microphone. And I'd ask you to state your name clearly and show your shareholder registration card. So are there any questions or comments on the financial report or the reports of the directors and auditors on the floor? Please. They'll bring you a microphone.

Thanks, David. [ Peter Richardson ], I'm a shareholder.

Hi, [ Peter ]. Welcome back.

Thank you very much. Just a question on debt. I think last year, debt increased quite substantially. This year, it's around about the same, a little bit. Do you have any concerns about the amount of debt you're having or is there a program to reduce that?

We are and always have been a very conservatively geared organization as you know. But of course, in times of 0 or effectively 0 interest rates, you're not as concerned about debt as you are when interest rates start to rise. It's a subject that we speak to every Board meeting. In fact, we did so only yesterday, and we'll be looking to reduce the amount of our total debt. But I'm not concerned about it in the figure that it was as of 30 June and currently or indeed at any time that we've -- over the last 12 months. We've got more than enough cushion in our arrangements, our covenants we comply with, check those also on a regular basis, obviously. So I'm not concerned about it, but we've always run conservatively. And I think the prudent thing to do is for us to trim our debt a little bit, and we'll be looking to do that.

Thank you.

Thanks.

Congratulations on a good result.

Thank you very much. Please.

This is [ Jeff Burgess ].

Hi, [ Jeff ]. Welcome.

Thank you. Just starting on Page 11, it's for risk mitigation for competitor activity.

Yes?

I thought it was pretty bullish, I mean, aggressive. We will open stores with strong competitor presence.

Yes.

Does that have any impact on -- or any explanatory explanations [indiscernible]?

I'll do what I can.

But hey, I'll just ask anyway. Does that have any implications for either price, margin? Does it take margin away from that store or are you -- can you speak at all...

Yes, absolutely. Yes, absolutely. So I won't name any particular competitors, but we find that, indeed, trade is best where there's a group of similar source of stores because we can show the benefits and the differences in our product range, in the knowledge and quality of our team to our competitors. It doesn't affect pricing because pricing does not take place on a store-by-store basis. Obviously, we have 821 stores all over the country plus we've got all of our websites. So -- and that's a completely separate decision that's taken. But it has -- we think of it as being positive. Now it's not a policy we employ across the board. But most importantly, we're very proud of the way which we present, and we're more than comfortable to take on all comers. There's a question again.

My name is David [indiscernible]. I wanted to get a sense of what this business might look like in a 5- and 10-year horizon in terms of vertical sales, apparel, accessories, brands, international, number of stores. What's your gut feeling about what this looks like in 10 years' time? Thank you.

That's a very interesting question. We embarked some time ago on a growth strategy in which we examined what we might be able to do in other geographies as well as other things we might be able to do within the markets that we are most familiar with, Australia and New Zealand. And we formed a view -- after doing some research, we went over and looked at a few other markets, we formed a view that we are best building on our strength here in Australia and New Zealand. And so as a business that started out as in purely in footwear, we have, over time, expanded into some of the areas you mentioned, into accessories, so our sock program that our CEO is famous for in terms of pushing the team on a regular basis to be exceeding. And I think we are now the largest sock seller in the country, but don't quote me on that. We -- so things like our socks [indiscernible] in places like The Athlete's Foot. And then we started on a campaign to extend beyond accessories into apparel. And our acquisition of Stylerunner, our acquisition of Glue and our expansion by way of Nude Lucy and a number of other brands that we have within our stable is evidence of exactly that growth strategy. I can't talk too much about the things we've got planned obviously, but I will say that I can't predict what 5 and 10 years are going to look like. But I think -- and I won't say to you that we won't go overseas at any stage. I think there are some opportunities that we see we now have that we perhaps didn't have 5 years ago. And we will certainly look to those growth strategies in terms of things we might do over the coming 10 years. But we -- we're an organization that is built on building shareholder value, and so we think about our capital as if it was our own, and we treat it that way. And so whilst we may take small bets trying on -- trying new [indiscernible], which we have done over time, we experiment small. And if things work, we build. And if they don't, we redirect. And that's going to be a policy that I think we will continue for some time to come. Daniel, is there anything you want to add to that.

Well, following from what David said particularly in the apparel space, we now have Nude Lucy. And when we measure metrics of what's happening across Accent Group, that's obviously one that we will continue to focus on and grow. And while that's been very, very pleasing, it's also allowing our team overall to learn how to do apparel because, traditionally, we have been a footwear business. But so far, very happy what we're seeing in Nude Lucy, and that's opened up a whole new [ flow ] of, I guess, opportunities as we move forward.

Just a quick follow-up. With your international brands, do you have apparel licensing rights for those or just footwear?

Yes, with all the brands we distribute, we have the apparel license as well. As an example, Hoka has been very quite strongly in the market. They are only just getting started in apparel.

Just catching up on the trading update. Cost of doing business and inflationary pressures, can you expand what those are? I guess if we understand that, we can understand how permanent or [indiscernible] they've been.

Yes, absolutely. The inflationary pressures, I think I don't need to speak to too much. Everybody knows what's going on in the marketplace generally. And cost of doing business, we look at as a percentage of our sales. So we've got both fixed costs and variable costs in the business like any business will have. And if our sales are reduced in any way, then the percentage cost of doing business implicitly goes up as a matter of maths. And so we are focused on ensuring that the percentage cost of doing business within the business operates within a certain margin. And if it starts to move out, we have to look at ways in which we can address that just like any business. So it's something that we are very focused on as part of, I think, our competitive advantage to the point that was made earlier. So what we need to do is make sure that our costs, our revenues move in tandem just like any operating business that's concerned with the bottom line.

Is it mainly wage inflation? Or is it lease inflation?

Well, all of those things. I mean I don't need to tell you all what's happened in terms of inflation in the market generally, but yes, we employ 7,500 people. We employ -- in addition to that, we employ another 2,000 people around this time of the year. And so what happens with wages has a direct effect on the cost of the business as do rents. Rents are relatively fixed. We know what they're going to be over -- average on a 5-year period. So yes, it's essentially going to be the impact of those things on our bottom line. We're not unique. What we like to do -- what we like to think, though, is that we are both aware and active in dealing with these things. And so we're cognizant of the pressures. And of course, the percentage cost of doing business reduces if our sales line goes up. So as a highly sales-focused organization, I can assure you that Daniel and the entire team are focused on every additional dollar. So if anyone of you want to go buy a pair of shoes today, you know where to go. Anyway, having said that, are there any other questions? Sir?

Mr. Chairman, [ Chris Wellborn ] from the Australian Shareholders' Association. What am I representing this morning? 41 shareholders with about 940,000 shares [ but completing ] the value at last night's closing price at least to just over $2 million. What a difference [indiscernible] makes. So congratulations on the results you've achieved to everyone involved. It's an exciting achievement. In particular, I think the increase in the dividend would be very much appreciated by the shareholders.

I'm not trying to block you out. Go ahead.

My question this morning is actually from 2 people. The question this morning is, of many of our members, in relation to the '23 results. [indiscernible] now the benchmark from which the company performance should be assessed.

Yes, that's the benchmark. Probably we've had...

Pre-COVID obviously, which is really relevant these days, also just people [indiscernible] fail. So if you go back to prior years [indiscernible] FY '22, as we all know was terribly interrupted. So now with '23, it was a little bit premature to do that.

Well, as a performance-based organization, we roll up every year and we start again. And so we assess our performance based on what we did last match and how the next game is going to go. So that's a very granular approach to performance. It's hard to speak to sort of long term other than to say that we've always had the philosophy that our job is to build long-term shareholder value. And as I mentioned earlier, I think we're very proud of the fact that if you look back over the last 10 years, we've done a pretty fair job of doing that. We intend to continue on the same basis. I can assure you that things like incentives to the team are all based on continued growth beyond previous levels. And that's the way we've always run the organization. It's a bit difficult to look back over the last few years, as you say. If you look back to FY '19, many companies are using that as sort of a comparable because it's the last full year that wasn't affected by COVID. But for us, every year is the start of another opportunity to smash previous records, and that's what we go out to do. And it's clearly more challenging -- there are clearly more challenging times now than they have been previously. And so I would say to you, that's the time when the team really counts. And as I've said many times on this platform, the greatest asset of our business is our people, and it's demonstrated every single day that we open our stores and we have people engaging with customers. And I'm proud one of our sort of differentiators is the quality of the team here at Accent, and that's the -- that's the asset. That's the machine I mentioned earlier that's going to drive our continued growth in this business. So I think -- the long-term trend, I hope will continue. I can't make any promises about that. But certainly, we look at every year as being a new one just as we look at every day as being a new trading opportunity to exceed the sales of the previous day. Are there any other questions from the room that is. Yes, please go ahead.

I just had a follow-up on it too. Just on the sustainability front, some great initiatives there. Congratulations again. Just on the greenhouse gas metrics, in -- I know you're early days there in terms of capture. There's no data sort of captured at the moment in your sustainability report. So where is that at? And secondly, do you intend to set targets in terms of trying to reduce that level of emissions?

So as you would know, there are standards approaching for these sorts of things in disclosure for the years to come, and we are already making preparation to meet those requirements. As a business that essentially resells the product of others or, in some cases, our own, the single greatest contribution that is made by this business to greenhouse gases is going to be the use of electricity across over 800 stores and everywhere else. We can take steps to try and improve the greenhouse impact of the electricity and the power that we take, and we will go ahead and do that. But in terms of setting targets, it's probably a bit early for our business to be doing that, but we are -- fully intend to comply with all of the disclosure obligations that are coming in relation to greenhouse gas usage. Are there any other questions from the room? Please don't hold back. It's great opportunity to ask any questions about any part of the business. Yes?

[indiscernible] Did you do a Hoka pop-up store or something? I read something about [ it recently ].

Yes, we did.

Successful? Did it go well?

Very successful. We executed very well. So we're happy with that. But the magic behind that is the brand itself. It's fast growing across the world. If you follow some of those trends and if you look on the feet walking around the table or wherever you may exercise, you're seeing a lot of them on feet. But yes, we did have a pop-up, and that's really grassroots marketing for us that's just building in that run space. So we're very excited about having Hoka in the business obviously. And as I mentioned that we've opened a few stores, and they're all trading to expectations. So we're growing there a few more.

Please. Yes.

Could you just give us some background about how the business is structured into contract lengths [ through ] licensed brand, what extent you lose them to competitors over time and whether Internet -- you referenced this [indiscernible], where the brands [indiscernible] can be more courageous and try and do online from their own warehouse and will kind of bypass you and where the terms are getting better as you get bigger and stronger or where they're getting worse because you're taking on a couple of brands like Hoka where you've got to leave more of the upside to the owner's brand.

I can answer that for you. We have actually never really lost a brand over 26, 27 years that we've been going in this branded space. Indeed, our client is helping us, particularly because of the store base, to maintain those relationships. We have just renewed both Dr. Martens and Vans for a further period, and indeed with licenses like Skechers, Hoka, UGG, they're quite long term. We don't call out the numbers anymore because, obviously, there are competitors in the market that would like those brands. But we're very comfortable with where all of our license agreements are. And indeed, we have many because of the store base and our capability of digital and the might of Accent, we have offered brands all the time. But we only go with brands that we feel will absolutely feed into most of the Accent Group [ balance ] so that we get the level of the brand, principal ones, and indeed enjoy the margin upside and exclusivity that comes from that. Does that kind of answer?

In terms of getting better as you get bigger? Or in terms of the terms, there's not much to negotiate?

Not so much the terms. It's more about the volume. But the terms are healthy because we essentially [ being led across ] and we're able to do what we need to do in this market in terms of margins and where it's placed and so on.

I think the other point to make is, Michael, you can fill me in here, our relationship with, for instance, Skechers goes back to what date?

I think we started with Skechers back about 1993, so it's a long time.

So that's 30 years.

30-odd years.

Yes. So as David says, we have not lost arrangements. We have long-term arrangements and Skechers, I think, the oldest just be interested. But the value of those relationships is part of the core of our business. And those relationships are enjoyed on both sides. We are delighted and proud to represent the brand owners that we do. And we believe they're also very happy with the performance that we've given them over a long period of time. So [indiscernible].

Can I also add? You mentioned the online side. We have exclusive arrangements that the brands that we distribute do not sell into our borders and won't -- and that's part of the contract. Equally, we don't sell outside of our borders either.

Brand owners make a marketing contribution or marketing [indiscernible] for our account?

Some makes marketing contributions, yes, in terms of helping with store fit-outs and in terms of simply marketing in general. But by and large, [ attachment rate of that ] a certain percentage you spent on marketing, which we actually support because that's how you grow a brand and keep it fresh in the market.

Are there any other questions from the room? Anyone who hasn't asked a question burning that they'd like to ask? If not, I'll move to the online platform and the phone.

There are no questions, Chairman.

Okay. All right. Well, there appear to be no more questions from shareholders. And so in respect of the remaining items of business, I'll put the resolution to the meeting and then invite discussion and inform the meeting of the proxies received. Item 2 is the adoption of the 2023 remuneration report. I note that in accordance with the Corporations Act, the vote on this resolution is advisory only and the outcome will not be binding on the Board. The FY '23 remuneration report outlines the group's remuneration strategy and framework and decisions taken by the Board in relation to the remuneration of key management personnel. This report sets out how the Board has approached remuneration in the context of the significant business growth achieved over the last 5 years and the record financial results achieved in FY '23. Accent Group continues to invest in the strategic priorities of the business, both for future growth and to continue our journey as a regional leader in the retailing and distribution of performance and lifestyle footwear and apparel. Leveraging off the momentum of normalized trading conditions and through continued focus on our customers, new products and growth strategies, Accent Group experienced strong performance across all its large banners. The management team's continued focus on improving the efficiencies and capabilities of its digital operations has also resulted in an increase in the profitability of digital sales. Accent Group opened 80 new stores during the financial year, continuing to dominate the Australian and New Zealand retail scene. Having regard to the excellent results achieved in FY '23 and that Accent Group has, over the past 10 years, delivered compounding total shareholder returns of more than 20%, the Board determined the following remuneration outcomes. For their FY '23 short-term incentive, the Group CEO and CFOO received 98.25% of their maximum STI as all financial measures and the majority of strategic measures were achieved. The remaining 50% of performance rights issued under the Tranche 2 FY '18 to FY '22 performance rights plan were vested. Given the adjusted earnings per share achievement of $0.1562 per share exceeded the required performance condition of $0.1094 per share. In relation to the company's long-term incentive program, the Board still considers that a single metric program using EPS as a measure is the best approach for the delivery of a scheme that is easy for the group team to understand and thus, creates real incentive during the year and that aligns management performance with shareholder valuation -- shareholder value creation most closely. Your directors unanimously recommend that shareholders vote in favor of adopting the remuneration report for the financial year ended 2 July 2023, as set out in the directors' report. I'll now put the resolution to the meeting as an ordinary resolution as shown on the screen and open this item for discussion. So I'd now like to invite shareholders on the floor to ask any questions relating to the remuneration report. Does anyone have a question? Go ahead.

Very complex area these days. I think most people really struggle and I understand that a lot of disclosure are basically statutory and therefore, not much [indiscernible] [ saying sounds kind of opportunity ]. But in fact, we'd like you to increase the disclosure in a couple of areas. One of them, I think we raised last year, is in relation to disclosing the actual take home pay of KMP. So when all the shares, et cetera, vest, the value of those shares at a particular time, so that people can actually understand what the KMP has actually received. That is one thing we ask you consider. The other one is in relation to -- at the moment, in terms of reporting the STIs and the KPIs, it's all done historically and that as you -- if you look back on previous year, [indiscernible] other companies these days also [ prospectively ]. So obviously, when we set the new performance conditions into the New Year, would you consider also including those in your remuneration report so that shareholders can understand the direction your taking and any change that you put into place?

Sure. Okay. Let me deal with the first one first. So I mean, as you say, the disclosure of the required disclosure remuneration is complex to say the least. There's an enormous amount of time and money, frankly, that goes into the publishing of that report. The principle of trying to go back and indicate the value on total compensation is a little bit more difficult than it sounds because it's easy to count cash. But a large component of the remuneration that we provide to our executives, including the 2 KMP is share-based, and it's intended that way so that the management teams succeed and grow their value of what they have when shareholders get the benefit. Now when you look back, you take the share price at the time that the thing was first conceived, you take it during the period when it was earned, you take it when the year comes to an end, you take it the following year when the shares are released, I think the easiest thing to say is that we make full disclosure of the details of the number of performance rights, in our case, we've converted to shares, that the KMP received. And it's not a difficult exercise. We show the total -- dollar compensation, both salary and STI. And so I think it would be only making things more complicated if we try to summarize what seems like a simple question into an answer. So we'll take it onboard, and we'll see if there's a simple way to do it. But I'm very conscious that these reports don't get to -- they don't need to get more complicated. And I say with the greatest respect to our auditors, I don't think it's possible to make sense of accounting statements anymore with the application of accounting standards. I'd like to see -- I mean, maybe it's a case of what's the revenue, tell me the cost and what's the bottom line. So what I can say in relation to remuneration, which continues in this company on a very strong footing, is that our executives do well when shareholders do well. And in relation to the future setting of STI and LTI, a couple of things I'll comment. The first is we need to be careful about the level of disclosure that we make because we're in a competitive environment. And I don't just mean competitive in terms of the marketplace for people buying our product. I mean competitive in terms of the marketplace where people try to buy our people. And Accent Group has become a picking ground for competitors all over the country. The more information we give them, the more information they can use to try and pick off our people. We use our incentive programs as a means of both providing incentive and also providing retention of our executives. And you'll note that they have these programs where value is created alongside the value created for shareholders. That value is created over a long period of time, and the shares are held back until such time as the year passes. And so we have this ongoing program. The STI indicators, the targets that need to be met are heavily directed towards growth, growth in terms of the business that the executive is responsible for and growth in terms of the overall business. The LTI targets, frankly, we're a bit of an open book there. We only look at compound EPS growth. So if the earnings per share of the business are not increasing year-on-year and at the end of a 5-year period or 4-year period or 3-year period, depending on the program you're talking about, at the end of that period, if the compound annual return doesn't exceed a target, then the LTI doesn't vest. So again, our LTI program is specifically directed towards creating value and releasing performance rights to executives against the performance of increasing earnings per share to shareholders. Now I'm not going to tell you the percentages that we apply. I think, if you -- inherent in the fact that we've achieved growth over the last 10 years of more than twice the ASX 200, you'd have to accept that we don't put minor targets on the team to achieve. And that's not just a question of the Board trying to maximize growth. The team are the ones who want to continue to grow and beat last -- yesterday's and last week's and last month's and last year's results. So our LTI program is completely technical on that basis. And so again, I'm not going to disclose the details of the percentages, but rest assured that the performance of the business for shareholders is what drives performance of remuneration for the executives in this business. Are there any other questions on the room? Please.

Could you give us a sense of how far and deep into the organization share-based remuneration goes?

Yes. We operate the scheme through several levels of the senior team. Matt, just in round numbers?

Yes. So that's about 40 people, just about of it.

Thank you. That's in the LTI program we're talking about.

The LTI program.

And in terms of short-term incentives?

There's around 70 people we have in short-term incentives.

Right. Now, that's not to take into account other bonuses that may apply for salespeople based on particular targets. That could go down to a store level, to be honest. And so it's a highly performance-based organization. Anyone else? This is an important topic, remuneration. It's -- as someone mentioned earlier, a key cost in the business. No other questions from the floor? Okay. I'm relieved to see that no executives decided to ask the question. Is there anyone here -- anyone's from the phone or from the online?

The first from Mr. and Mrs. [ Cooper ]. A question for the managing director. Does Accent Group conduct staff surveys, and if so, what trends are emerging relating to staffing issues?

Do you want me to do it? Do you want to do it?

You're welcome to do it.

It was directed at you.

Yes, we do. In terms of surveys, not so much surveys, but we're very pleased. We interview a lot of people as you can imagine through the group. So we're very close to understanding what they would like to achieve by working for us and with us. And we do our best to ensure that there's some sort of a career path in terms of them joining us, particularly when you get to the mid-level and up to the senior team. But also it applies when we employ new people in our stores. We're an exciting place because of the very product we sell and it's what they're all [ weighing ]. So I guess without having a [ structured ] survey, we do look for, I guess, what would relate to them in terms of in having a sense of belonging and so on. I'm hoping I answered that.

Let me -- can I -- let me add to that a little bit. We conduct a regular staff engagement, team engagement survey as well as all of the informal things that Daniel mentioned. and I'm proud to say -- and many companies -- I would say most companies these days would do that. And the indicators that are used to determine whether there's a sort of healthy response or whether there's an issue are called participation rate and engagement rate. The participation rate is the percentage of people who actually respond to your survey. Now if you've got 5% of your team responding to your survey, when you ask them what their views are, you'd think there's something wrong with the organization. The other one is called the engagement rate. And the engagement rate is that percentage or what percentage of the people who responded who gave a positive response in relation to the questions asked. And the questions relates to things like, would you recommend to other people working at Accent Group? Do you believe that Accent Group is sufficiently rewarding to you and is it giving you career opportunities and those sorts of things? In my experience, the engagement rate and the participation rate that we are getting at Accent not only exceed the highest levels, but are pretty well unique. [ Adam ], you can fill me on the exact number, the participation rate was 87% and the engagement rate was 74 point something. So 87% of our team responded to our questionnaire. And of that, 70-something percent responded positively. So we do this analysis, and [ Adam ] and his team do a great job in ensuring that we are focused on the trends that are going on within the organization. And the most important thing to learn from those, and while we can laud the fact that we're getting great results from so many people, it's identifying the trends of where people are not happy about things where you really learn and where you can make improvements. That's what we're looking to do. And we do that every year. And so things like, what are the areas that concern us? Things like how people are feeling, their mental health. In these sorts of times all the way through COVID, the pressure that are on people -- we have staff that come and do their job every day, but they're also facing all of the day-to-day things that are going on for all of us in our lives. We provide assistance and support to people within the team. If anyone has a problem in any respect, we've got organizations that we refer them to who can give them that support and direction. So mental health and -- is one area, ensuring that we're providing people with good communication, that they've got good career paths, all of those things are important for us. And if you think about it, I'd say that the team is the most important asset that we have. We make sure that our shelves are clean, we make sure that our inventory is fresh, we make sure that we're opening and closing stores at the right time. But the most important asset that we need to protect and develop is our people. And so we focus a lot of time and energy and cost on doing just that, from the part-time person who might join Accent Group amongst that 2,000 people that I mentioned a moment ago who come in to man the stores during the Christmas, New Year period. You think about the idea of both identifying, interviewing, selecting, training, placing, bringing up to speed on product, doing that for 2,000 people in addition to the 7,500 that we already have, it's no small effort. And so we regard people that -- as of prime importance. And so the time and the energy that goes into understanding what their issues are, giving them career development and giving them the opportunity to grow and address any problems that they may have is fundamental to what we do. Every single Board meeting has a section that addresses, that identifies or that relates to those issues. And we're not perfect. We've always got ways we can improve. But the happiness index, I suppose, at Accent is very strong. We have a very strong culture. It's evident for those of you who are in the room who walked through the office to get here, you can see the culture's on the walls, the culture's in the people, the culture's in what they're wearing, how they're going about their business. It's one of the key differences we make. It's one of the reasons why we're a pecking ground for competitors who want to try and take our people. So we spend a lot of time. And the question is a very good one. The trends that we discern from the engagement survey that we do are fundamental to the way in which we can improve the quality of work life that our team has available to them here at Accent. And I'd like to think that in good times and in hard times, we stick by our people and we make sure they know that they're the #1 priority, the #1 asset of the business. So that was a bit of a long answer to a short question. Apologies for that. Are there any other questions from the phone?

Thank you, Chair. One from Mr. [ Howard Coleman ]. Teaminvest members are collectively the seventh largest shareholder or higher in Accent Group. We thank the Board for basing LTIs fully on earnings per share rather than partly on a non-motivating metric of TSR. Well done Again in standing firm against self-interested proxy advisers. Can you assure Teaminvest members that you intend continuing with EPS as the sole LTI metric in future years?

What was the gentleman's name?

Mr. Howard Coleman.

Mr. Coleman, thank you for your question. It's a bit of a personal battle that I've taken for the last 10 or so years. I'm not going to comment on the proxy advisers, but it is generally the accepted view in the market that incentive schemes should operate with 2 determinants, not 1. One of them is -- comes back to the underlying profitability of the business, the EPS growth rate that we use. And the other one is called total shareholder return. And total shareholder return is apparently determined by looking at the total return that your shareholders have received, including what's happened to the share price versus a comparable set of listed businesses. And the theory sounds great. but let me tell you -- and we did this some time ago. The reason why we have diverted from that path is because no one on the board -- and I would hasten to say no one in the management team could ever tell you on any particular day, whether the company's team members, total shareholder return was above or beyond that of the so-called comparator set. Why? Because in order to do that calculation, we have to pay some boffin somewhere to go back over the records over a 12-month period determining -- or will determine who the sort of so-called comparator set is, they'll look at what's happened to share price performance, they'll look at what's happened in terms of dividends. It's this highly complicated calculation. And we formed the view that an incentive scheme is only of real incentive if it can be understood by the people who you're intending to incentivize day by day, week by week. So we have, for now some time, only had 1 element in our LTI program, that is EPS growth, I mentioned earlier. And I get asked on a regular basis. It's refreshing to get a question which supports it. So I thank the questioner about that. But we stand in the face of many other companies who take a different view. And the proxy advisers generally prefer to see programs that have both of those indicators. But we have found over time, and I hope that our record reflects the success of our scheme that a long -term incentive program that relies on earnings growth enables our team members every single day to know whether or not they're above or below budget in relation to what they need to do to drive the earnings of the business. Each of our senior team members has an app, they can see on a minute-by-minute basis, what's going on in their stores. Our group executives can see on a minute-by-minute basis what's going on across the entire group in terms of sales, the underlying profit against all of those sales and how that compares to the targets that we set. That's what I call incentive. That enables our team members to make changes to what they're doing during the year, rather than get a number at the end of the year that then determines, by some sort of mystery box process, whether or not the TSR was above or below the required target. So I'm not going to make a promise to you about the future as a general bold statement. But I will say that having spent the last 10 years fighting against the trend and retaining the idea of a single concept, a single indicator in our long-term incentive scheme is certainly my intention. And I believe that if you ask any team members, they would say that they're more than happy with the scheme that we have in place, which provides a real incentive in has, in my opinion, been a large driver of the results that we've achieved for shareholders. There's 2 questions from the floor. I'm going to come back to you two, if you don't mind. Let me do the rest of the calls -- the questions on the line.

Mr. Coleman just says, "Well said with TSR. Thanks again."

Thank you, Mr. Coleman. Are there any others on the line? Okay. Great. So I've got 2 questions from the room. You might just bring the microphone there.

Just a [ two-part ] question observation. Isn't free cash flow a better metric than EPS because that's ultimately what we're more interested in and you can be more attentive to your CapEx and your working capital levels which may be perhaps tiny high at the moment. And secondly, if you want to grow EPS or pay less dividend and buying back more shares?

Okay. Well, the second is a question of philosophy. I'll leave that one for everybody to determine for themselves. Free cash flow doesn't really help because we want to provide an incentive to the people who can make changes to the things that they're dealing with. Free cash flow is affected by things like CapEx, for instance. They're decisions that the Board takes. The teams aren't responsible for doing that. So we ask the teams to be focused on the metrics that drive underlying retail profitability from each of our stores. And as you go up the organization, it might be banners or it might be brands. And so we focus on EPS. It's been a tried and tested approach that has worked for us. And it avoids the incursion of decisions which are outside the ambit of those executives like, for instance, big CapEx spend. If we went, for instance, to acquire a new business and we spent cash to do that, that would impact on cash, but no executive in the business has any control over that. That would be a Board decision. So there are a lot of indicators, you're right. We've selected EPS, and it works for us. So in my opinion, it ain't broke so we're probably not going to fix it. Please.

Thanks. Kevin Robinson, shareholder and member of Teaminvest.

Welcome back.

I just wanted to say something or answer to the TSR issue, something you've touched on but didn't go into in great depth is the fact that the shareholder or the share price, you, as executives will have no control over, whatsoever . As a shareholder, my shareholdings aren't big enough to affect the price one way or another. It would be nice if they were, but I'm not there yet. So from our point of view, we want the executive, as you said, to focus on what they can change, what they can improve, rather than be obsessed with the share price and be tempted for example -- and I'm not saying any of you would do this, but be tempted to run around, talking up the share price just before bonus calculations are [ processed ]. I'm sure this is something -- you would never do that. But this is the kind of thing that we like to see avoided.

Thank you. You're right. I omitted to mention that. And it comes down to the same principle, that the incentive scheme is directed towards the [ prongs ] that the team can impact. They can't impact share price. And so what they can impact is sales, costs, underlying profitability, which drives EPS. So that's what we're focused on. Thanks. I'm going to ask if there are any more questions from the floor, given if some came back. If there are no more questions here and there are no questions online with you, all right. As there are no more questions, I'll move on to the next item of business. This concerns the reelection of Mr. Michael Hapgood as a non-executive director of Accent Group. Michael is considered an independent director in accordance with the ASX Corporate Governance Council's principles and recommendation. In accordance with the ASX Listing Rules and Accent Group's Constitution, Michael retires from office at this meeting and, being eligible for reelection, offers himself for reelection as a nonexecutive director. I'd now like to invite Michael to address shareholders.

Thank you, David. Well, good morning, everyone. It's been a long time, in fact, it was last century that I became the founder of a shoe company, the one that we've all come to know and loved as Accent. I feel very fortunate. And I guess, looking around the room today at all your happy smiling faces, I think it's worked out pretty well for many of us. I'm also very pleased to remain a shareholder and to offer myself for reelection to the Accent Board. Although Accent's beginning was a long time ago, I remain as passionate about the business today as I did all those years ago. And what also seems to have worked out pretty well for everyone when I look around is that none of us have really changed that much which is [indiscernible]. A big part of the Accent culture that you witness and breathe today continues to inspire me, and I have great belief in our vision and the capability of our people, especially our CEO, Daniel Agostinelli, and the extremely talented management team as they continue to grow Accent from strength to strength. My extensive experience remains relevant when it comes to identifying, sourcing, launching and managing global brands in the Australasian marketplace as do my very positive relationships with our key brand principles. I also remain totally committed to serving as your director adding knowledge and industry experience to continue Accent's exciting journey in the ever evolving, ever challenging retail landscape. So thank you for your support.

Thanks, Michael. I should add, for any of the people in the room who wanted to take me up on it, Michael is a [ shoey ]. And by that I mean, he's been involved in the industry for such a long time. He knows everything there is to know about trends, what's happened in the past, which brands have gone up, which brands have gone down. If anyone has a particular interest in what's going on in the sneaker market, I couldn't recommend anybody more highly than Michael to speak to. So there's a long line of people with a cup of coffee after the meeting in front of Michael I'll know the reason why.

Thank you, David.

Your directors, with Mr. Hapgood abstaining, unanimously recommend that shareholders vote in favor of reelecting Michael as a director of the company. I put the resolution to the meeting as an ordinary resolution as shown on the screen and open this item for discussion. I now invite shareholders on the floor to ask any questions. Are there any questions from the floor? Shoe questions have to done afterwards. No? Okay. Olivia, are there any questions online?

No questions, Chairman.

Okay. Great. As it appears there are no questions, I'll now move on to the next item of business. Item 4 concerns the appointment of PricewaterhouseCoopers as the auditor of Accent Group. After a thorough review and tender process following the resignation of the former auditor, Deloitte Touche Tohmatsu, PricewaterhouseCoopers were appointed by the board as the auditor during the year. PwC now offers itself for reelection by shareholders. Matthew Durbin, a member of the company, has nominated PwC, who being eligible, have consented to act if elected. Your directors unanimously recommend that shareholders vote in favor of the appointment of PricewaterhouseCoopers as the company's auditors. And I'll now put the resolution to the meeting as an ordinary resolution, as shown on the screen, and open this item for discussion. I now invite shareholders from the floor with any questions. Are there any questions ? Our auditors will tell you, it's an exciting area and it should create a lot of questions. Go ahead.

Chairman, just a point of clarification. So you were saying the previous auditors resigned?

Yes.

Was there any particular reason why they resigned?

No. Look, if you go back to the time that Michael was talking about before, Accent Group and the [ RCG ], the previous listed business, grew from being very small organizations. And like all organizations, as they grow, it's time to change things. I mean quite apart from the benefits of changing auditors every once in a while, we grew large, and so it was a mutually agreed decision. And I'm required to announce it in this way for legal purposes. But it was time for us to review our arrangements, and we could not be happier with PwC. Are there any other questions from the floor? No? What about online, Olivia?

No questions, Chair.

Okay. All right. Well, if there are no questions, I'll move on to the final one. Item 5 is the grant of performance rights to Mr. Daniel Agostinelli, the company's CEO. The background to the company's performance rights plans and the various tranches that have been made to Mr. Agostinelli are set out in detail in the notice of meeting. And I've explained at some length the underlying LTI program that we operate. In line with the broader objectives of the company's remuneration framework outlined earlier, the performance rights provided or proposed to be provided provide a powerful incentive for Mr. Agostinelli to continue to drive long-term shareholder -- value creation for shareholders and deliver the targeted performance outcomes set by the Board. Your directors, with Mr. Agostinelli abstaining, unanimously recommend that shareholders vote in favor of granting 1,225,831, important last one, performing rights to Daniel Agostinelli. I put the resolution to the meeting as an ordinary resolution as shown on the screen and open this item for discussion. I now invite shareholders to ask any questions concerning this resolution. Any questions from the floor? No? What about online, Olivia?

No questions, Chairman.

All right. Well that is the sum total of all of the items for business. Shareholders and attendees now that the meeting -- we've concluded all of those items. I'll allow shareholders a few moments to complete their voting before I close the poll on resolutions in Items 2 to 5. So now is now the time to complete your voting online and to complete your orange voting cards, and a representative of Computershare will pass around the all-important purple box or carry it around and make sure that we record all of those votes. [Voting]

Anyone still completing a voting card in the room? You have to take the CFO's [indiscernible] cash. Thanks, Maria. Okay. Is there anyone in the room who's not yet completed their card and needs more time? It looks like everybody has. So I'll now declare the poll closed on the resolutions in Items 2 to 5. I think the responses have all been collected by Computershare. And that concludes the formal business for consideration at today's meeting, and I declare the meeting closed . On behalf of the Board, I'd like to thank you all for your attendance and for your ongoing support of Accent Group. The directors would like to invite all attendees to join them for refreshment. Thank you very much.