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FOR IMMEDIATE RELEASE 12 October 2015 Myer Holdings Limited 2015 Annual Report and Notice of Annual General Meeting Myer Holdings Limited today released the following documents: Annual Report for the year ended 25 July 2015; Notice of Meeting (including Proxy Form) for the 2015 Annual General Meeting, which will be held at Mural Hall, located on Level 6 of the Myer Melbourne store, Bourke Street Mall, Melbourne, on Friday 20 November 2015 at 11.00am; Appendix 4G and Corporate Governance Statement. The Annual Report and Notice of Meeting will be dispatched today to shareholders who have elected to receive hard copies. The 2015 Annual Report is available for download from www.myer.com.au/investor For further information please contact: I n v e st o r s Davina Gunn, Investor Relations Manager, +61 (0) 400 896 809 Media Mel Ward, Corporate Affairs Manager, +61 (0) 438 101 078 Page 1 of 1 BRINGING THE LOVE OF SHOPPING TO LIFE ANNUAL REPORT 2015 CONTENT S Chairman and CEO Report 2 Company Review 4 Management Team 18 Board of Directors 20 Directors' Report 21 Auditor's Independence Declaration 37 Remuneration Report 38 Financial Statements 64 Independent Auditor's Report 117 Shareholder Information 119 Corporate Directory 121 The 2015 Myer Annual Report reflects Myer's financial and sustainability performance for the period 27 July 2014 to 25 July 2015. Content is based on ASX financial and governance reporting guidelines, stakeholder feedback, the Global Reporting Initiative (GRI) G4 sustainability reporting guidelines, and Myer's business strategy. The Myer Holdings Limited Annual Report is available online at myer.com.au/investor. Hard copies can be obtained by contacting our share registry. Myer is a company with a proud heritage and a bright future. As the retail world and our customers change, we are transforming Myer to deliver a reinvigorated offer and wonderful experiences for our customers who love us today, and for future generations. ANNUAL GENERAL MEETING The sixth Annual General Meeting of Myer Holdings Limited will be held on Friday 20 November 2015 at 11.00am (Melbourne time). Mural Hall Level 6, Myer Melbourne Store Bourke Street Mall, Melbourne VIC 3000 Myer Holdings Limited ABN 14 119 085 602 M Y ER Annual Report 2015 1 CH A I R M A N A ND CEO R EP O R T Q&A Myer Chairman Paul McClintock AO and CEO & Managing Director Richard Umbers provide a review of the past year and discuss future priorities. 2015 was a watershed year for Myer, which saw a strengthened management team chart a new strategy to aggressively tackle the evolving retail environment and return the business to sustainable, profitable growth. The FY2015 result supports the case for our comprehensive change agenda. In the second half of the year the team focused on delivering a thorough review of Myer's strategy under the leadership of new CEO Richard Umbers. The New Myer strategy that was announced in September is an energetic revitalisation of Australia's best-loved retailer. The strategy sets out a five year transformation program to bring the love of shopping to life with a renewed focus on Myer's primary customers, investment in stores and online retailing (known as omni-channel) and a step change in the productivity of our store network. In the coming 12 months and the years ahead we will work diligently across the business to deliver the strategy. What are the most significant achievements from the past year? Richard commenced as CEO in March 2015, replacing Bernie Brookes who stepped down after almost nine years in the position. The Board and the entire Myer team thank Bernie for his significant contribution. During the year, we also welcomed several new executives with a depth and breadth 2 M Y ER Annual Report 2015 of international retail expertise to further strengthen our Executive Management Group. (NPAT) of $77.5 million which was down 21.3 percent on the prior year (excluding Individually Significant Items). This year also marked one of the largest brand overhauls in Myer's history as we rolled out a number of wanted brands including French Connection, seed, Nine West, Jack & Jones, Calvin Klein White Label and Tiger Mist. This trend will continue into the new financial year with the launch of our exclusive department store partnership with iconic British brand, TOPSHOP TOPMAN, and many more to come. Why is Myer changing its strategy, and what is being done to address the Company's financial performance? In June 2015, we successfully refinanced our $600 million debt facility on improved terms, tenor and pricing, giving us a solid financial foundation to begin the new financial year. What were the main factors influencing the FY2015 result? During FY2015, sales increased by 1.7 percent. There was a continued strong performance in the Cosmetics, Childrenswear and Entertainment categories. This was offset by challenging conditions in Womenswear. There has been a positive customer response to the four major refurbishments and two new stores, and we have continued to deliver strong growth in online sales. Continued cost growth ahead of sales growth resulted in net profit after tax The store footprint and margin expansion model from our early years as a listed company led to a cost base that was outgrowing revenue, and our operational model became too inflexible to match the pace of change in retail. Our strategic review, which included a deep and detailed analysis of our customers and store catchments, convinced us that this model was no longer appropriate for the current environment and that broadly flat sales would continue without a significant change in strategic direction. In the context of the strategic review the Board also decided that it would be prudent to raise additional capital to retire debt and provide the necessary balance sheet flexibility to deliver the New Myer strategy. To achieve this, the Company made the decision to raise approximately $221 million of new capital through an accelerated, non-renounceable entitlement offer. In light of the entitlement offer, the Board elected to not declare a final dividend for FY2015. How can department stores thrive in the new retail environment? inspiring these customers to shop across the whole store as well as online. How will shareholders be able to measure progress against the strategy? In recent years, a number of international department store retailers have successfully grown sales and profit by investing to stay relevant, innovating in online commerce, localising product offerings, and implementing retail models that are truly customer led. This validates our view that Myer can generate improved returns for shareholders if we successfully deliver the New Myer strategy. It is also an appropriate time for the Board to embrace renewal. We recently amended our Board charter to recognise that, generally, the Board will not recommend a Director standing for re-election when that Director has served more than nine years on the Board. Deputy Chairman Rupert Myer AO, a director since 2006, has notified the Board that he does not intend to seek re-election at this year's Annual General Meeting. Rupert has made a valuable and significant contribution to the Board and Myer and we wish him the very best with his broad portfolio of roles in business, the arts and philanthropy. Management has established clear performance measures against which the delivery of the strategy will be measured. These metrics reflect the timeframes required to achieve a sustainable return to profitable growth. As we enter this period of transition, Myer's fundamentals remain strong. Each year, we receive 130 million customer visits, our omni-channel business is growing rapidly, our store network is a competitive advantage, and we are doing more than ever to engage our five million MYER one members. In addition, we have strong, long-term relationships with our partners and suppliers, and 12,500 dedicated team members who are focused on bringing the love of shopping to life for our customers. How is Myer going to change? The New Myer strategy is all about attracting our primary customers to our stores in greater numbers. Our deep customer analysis has allowed us to understand who our most valuable customers are. These customers already shop at Myer, making regular visits to our cosmetics halls. We are now focused on How does Myer give back to the local community? Myer has a proud heritage of community support, established originally by Sidney Myer, and we continue to give back to our local communities. Through the Myer Stores Community Fund, our customers, suppliers and team members support a large number of local charities and Myer national charity partners to make a real difference. As well as financial donations, Myer also supports these charities through donations of time and products. This year, we contributed more than $2.6 million to charity partners. New Myer target metrics include average annual sales growth greater than three percent between 2016 and 2020; greater than 20 percent improvement in sales per square metre; earnings before interest, tax, depreciation, amortisation (EBITDA) growth ahead of sales growth by 2017; and return on funds employed greater than 15 percent by 2020. The journey towards New Myer is an exciting one. There is a significant amount of work to do, and it won't happen overnight. However, we are confident that we have the management team in place with the expertise and commitment to deliver. We look forward to keeping you updated on our progress towards New Myer. Paul McClintock AO Chairman Richard Umbers Chief Executive Officer and Managing Director M Y ER Annual Report 2015 3 COMPA N Y R E V IE W COMPANY SNAPSHOT Myer is a modern Australian retailer, with more than 100 years of heritage and a dedicated focus to bring the love of shopping to life. Myer is Australia's largest full-line department store group, with more than 60 stores located across Australia. Our stores are visited by customers more than 130 million times each year, and our loyalty program, MYER one, has more than five million members. In addition to our physical Myer stores and our online store, we own womenswear designer brand, sass & bide. This range is available from stand-alone boutiques, Myer stores, overseas retailers, and online. We are a significant employer in Australia, with 12,500 Myer team members, and we have a strong background in philanthropy. One of our most widely recognised initiatives is the Spirit of Christmas CD, supporting The Salvation Army. This has showcased the very best of Australian musical talent and generated more than $7.4 million since it launched. Since 2004, our annual Precious Metal Ball has raised more than $6 million, with funds going to organisations such as Redkite, the Olivia Newton-John Cancer and Wellness Centre, and SMILE Foundation. Myer is committed to responsible business growth and integrating environmental, social, and ethical considerations into the way we operate. Our sustainability 4 M Y ER Annual Report 2015 strategy aims to maximise the positive outcomes and influences we can have on our stakeholders by integrating all aspects of sustainability into our 'every day' business operations. For more information, please see page 14. To enable the business to make sound decisions and maximise opportunities, Myer has a comprehensive risk management plan to identify and manage risks and uncertainties. Further details are available in the Directors' Report on page 31. Myer has a proud Australian history and an exciting future supported by our New Myer strategy, which delivers a fresh interpretation of our brand, a re-energised and relevant range, improved service and in-store experiences complemented by a strong omni-channel offer. While the customer sits at the heart of our strategy, it cannot succeed without our devoted team of employees, and our strong relationships with suppliers of high quality, wanted brands and products. Our strategy brings the best of Myer to the customers who love us today, and to future generations. M Y ER Annual Report 2015 5 COMPA N Y R E V IE W AT A G L A N C E TOTAL SALES ($B) OPERATING GROSS PROFIT MARGIN (%) 2015 2015 3.2 40.4 2014 3.1 2014 2013 3.1 2013 41.5 2012 3.1 2012 41.2 2011 2011 3.2 NET PROFIT AFTER TAX ($M) 2015 2015 2014 98.5 2013 39.5 EARNINGS PER SHARE (CENTS) 77.5* 2014 40.9 21.8 2012 139.3 2011 16.8 2013 127.2 2012 13.2* 23.9 2011 162.7 27.9 FINANCIAL SUMMARY ($M) FY2015 FY2014 Change Total Sales 3,195.6 3,143.0 +1.7% Operating Gross Profit 1,290.4 1,285.9 +0.3% Operating Gross Profit margin 40.4% 40.9% (53bps) Cost of doing business (CODB) (1,067.2) (1,033.3) +3.3% Earnings before interest, tax, depreciation, amortisation (EBITDA)* 223.2 252.6 (11.6%) Earnings before interest and tax (EBIT)* 133.5 160.3 (16.7%) 77.5 98.5 (21.3%) Net Profit After Tax (NPAT)* * \u0007 xcludes Individually Significant Items. See page 27 for further details. E SUSTAINABILITY TEAM MEMBER ENGAGEMENT TOTAL FEMALE EMPLOYEES LOST TIME INJURY FREQUENCY RATE (LTIFR) TOTAL CONTRIBUTION TO CHARITY PARTNERS REDUCTION IN GREENHOUSE GAS EMISSIONS WASTE RECYCLING RATE 84% $2.6m See page 14 for further details on sustainability. 6 M Y ER Annual Report 2015 79% 3% 7.7 58% COMPA N Y R E V IE W PERFORMANCE REVIEW SALES Total sales for the full year (ending 25 July 2015) increased by 1.7 percent to $3,195.6 million, driven by new stores and refurbishments as well as strong growth in the online business. There was continued strong growth in the Cosmetics business as well as in Childrenswear and Entertainment, offset by a poor performance in Womenswear. During Christmas 2014, the rollout of Giftorium, representing dedicated gifting space in all stores, was well received by customers. Customers also responded positively to the four major store refurbishments that were completed ahead of Christmas 2014. In addition, new stores at Mt Gravatt (QLD) and Joondalup (WA) generated additional growth. During the year, two stores were closed in NSW, at Hurstville in January 2015 and Top Ryde in July 2015. MARGINS AND CODB The operating gross profit margin declined by 53 basis points to 40.4 percent. This was largely due to the depreciation in the Australian dollar and increased inventory provisions. CODB increased by 3.3 percent to $1,067.2 million, driven by costs associated with refurbishments in four of our top 25 stores as well as two new stores, and costs associated with the growth in the omni-channel business. NET FINANCE COSTS AND NET DEBT INDIVIDUALLY SIGNIFICANT ITEMS Net debt increased by $40 million to $388 million, reflecting lower profitability and higher working capital. This was largely offset by lower capital expenditure, dividend and tax payments. The FY2015 results include a number of Individually Significant Items totalling $61.7 million (pre tax) which have primarily arisen as a result of the strategic review. Net interest costs increased by 3.7 percent to $22.7 million as a result of the higher net debt position. Offsetting this were savings achieved as a result of the re-financing in the second half. CASH FLOW AND BALANCE SHEET The reduction in operating cash flow by $96 million to $167 million reflected both the reduction in earnings for the year as well as a negative working capital movement of $56 million. The negative working capital movement was due to an increase in trading inventory to $22 million compared to FY2014 and lower trade creditors of $19 million. As part of our strategy to exit a large number of brands, the Spring Clean Clearance event launched in the first quarter of FY2016 has successfully reduced inventory by approximately $10 million, with net debt also improving by approximately $20 million since balance date. Capital expenditure during FY2015 decreased by $6 million to $62 million compared to FY2014 pending the outcomes of the strategic review. These significant items represent the commencement of the 're-setting' of the business as we implement the New Myer strategy. FY2016 OUTLOOK FY2016 will represent a transitional year for Myer in which significant investments are being made in our future growth, with the rewards from these investments to be realised in late FY2016 and thereafter. Following FY2016, Myer expects to return to sustainable profit growth. As a result (and including the impact of the entitlement offer), Myer expects NPAT for FY2016 to be in the range of $64 million to $72 million, excluding the impact of implementation costs associated with New Myer. Individually Significant Items in FY2016 are expected to be in the range of $35 million to $45 million (pre tax) and will predominantly comprise costs associated with the New Myer strategy and improving productivity. Capital expenditure is expected to be in the range of $100 million to $120 million in FY2016. Further discussion about Myer's performance is set out in the Directors' Report from page 21. M Y ER Annual Report 2015 7 COMPA N Y R E V IE W THE T R A N S FO R M AT I O N OF MYER Our New Myer strategy is a five-year journey, focused on the customers who represent the highest value to our business. We are investing in New Myer over the next five years to deliver a sharper and more focused offer to serve a more valuable customer, driving productivity and growth. Our stores will inspire and delight and become more relevant to our customers' daily lives. OUR FOUR STRATEGIC PRIORITIES The New Myer strategy is founded on advanced data analytics of Myer's customer base and store catchments. We're using this data to better understand our customers and identify the greatest opportunity to achieve higher sales and profit. Wonderful experiences Our strategy will come to life through the four priorities outlined below, and will be supported by our organisational capability. 8 M Y ER Annual Report 2015 Customer led offer Omni-channel >> Provide the brands that inspire our primary customers and create a halo effect that attracts and retains other customer groups. >> Embrace the new retail environment through a seamless omni-channel experience, a fusion between physical and digital retailing that starts on your device and ends in our store or on your doorstep. >> Create stores that surprise and delight, through retail experiences that combine wanted brands and services with the theatre of shopping that we know customers love. Productivity step change >> Deliver a more productive and profitable store network over a smaller and more efficient footprint as we work to better align our network with our primary customers. COMPA N Y R E V IE W O U R S T R AT EG Y Our strategy represents an energetic revitalisation of Australia's best-loved retailer. It is an investment of more than $600 million in capital and implementation costs over five years to deliver improved productivity, a re-energised range, an enhanced in-store experience, and market-leading omni-channel capability. CUSTOMER LED OFFER >> Re-allocate space to wanted categories and brands. >> Focus on a narrower and more powerful range of Myer Exclusive Brands (MEBs). >> Fine tune our merchandise offer to allow product and service localisation. WONDERFUL EXPERIENCES OMNI-CHANNEL PRODUCTIVITY STEP CHANGE >> Implement roster optimisation and staff training to improve customer Net Promoter Scores. >> Increase Click & Collect as a proportion of online sales. >> Reduce fulfilment cost per order. >> Optimise stores to improve sales per square metre. >> Elevate visual merchandising, upgrade fitting rooms and roll out digital hubs and Wi-Fi. >> Drive online infrastructure and supply chain efficiencies to improve delivery times. >> Manage store network to improve productivity and alignment with primary customer groups. >> Leverage store portfolio as a real asset. >> Introduce dwell spaces such as restaurants, cafs and events in priority stores. ORGANISATIONAL CAPABILITY Our strategy is underpinned by our organisational capability. This includes an overhaul of our operating model, the appointment of several key executives, and the establishment of a Transformation Office. M Y ER Annual Report 2015 9 COMPA N Y R E V IE W DELIVERING THE NEW MYER During FY2015, we embarked on our New Myer strategy by implementing a series of initiatives designed to provide our customers with the inspiring range and experiences they want, while ensuring they can shop with Myer across all retail platforms with ease and convenience. CUSTOMER LED OFFER WONDERFUL EXPERIENCES In developing our strategy, we conducted a detailed analysis of 50,000 consumer data sets to give us a clear understanding of our primary customers' lifestyles and values, how they shop with Myer and our competitors. Our focus is on delivering retail experiences that combine wanted brands and services with the theatre of shopping that we know customers love. The forefront of this strategy is a customer led offer which focuses on offering a re-energised range delivered through relevant categories, wanted brands, and locally tailored offers. GIFTORIUM Giftorium is a unique concept in Australian retailing, developed by Myer to bring fun and theatre to Christmas shopping. The heart of Giftorium is about providing a unique set of products, services and experiences to create a new level of engagement with Myer customers shopping for Christmas gifts, personalised products, decorations and festive food. During the year, we made a number of positive changes to our merchandise offer including introducing new brands (see the opposite page), improving store layouts and visual merchandising, and streamlining our online range. In particular, the introduction of French Connection, seed and Nine West represents one of the largest brand rollouts ever undertaken at Myer, with multiple brands deployed across a number of different categories in large footprints in more than 40 stores. We continue to reinvigorate our brand offer across concessions, national brands, and MEBs, as well as localise the range according to demographic attributes and geographic factors. 10 M Y ER Annual Report 2015 We know from our flagship store in Melbourne that when we get the in-store offer right, combined with enticing dwell spaces and cafs, we can generate great customer experiences. Our Giftorium concept, which launched in December 2014, is testament to the type of unique shopping environments we can create. Progress is already underway with changes to the mix of our in-store team members to create more flexible rosters and ensure we have team members in-store when our customers need them most. We have also implemented a number of new training initiatives to upskill our team members, including our Intimate Apparel Fitting School, where we are training team members in the unique skills required to fit and sell this complex product category. This is just one of many training programs we have planned under New Myer. GIVING OUR CUSTOMERS WANTED BRANDS 1 ... and increase space for wanted brands WANTED BRANDS ALREADY SECURED Wonderful experiences start with brands that customers know and love. Over the last year, we have launched a number of new brands including White Suede, by Johnny, Maison Scotch, Asilio, Jo Malone, M.J. Bale, Scotch & Soda, Jack & Jones and Pierre Balmain. ACTIONS In June 2015, we announced widely-recognised and renowned new - Reallocate space away from overspaced brands brands seed, and towards our and French Connection, strengthening our Nine West 40-50 most wanted brands fashion offer for prot in customers. - C. 3.4x greater gross Myer identied brands/space We are also thrilled that Myer is now the exclusive department store home for TOPSHOP TOPMAN in Australia. Our Bondi store will be the first to receive TOPSHOP TOPMAN in November 2015, followed by a progressive rollout to more than 20 Myer stores. 23 ENHANCING THE IN-STORE EXPERIENCE Our team members are critical to providing our customers with great experiences. We continue to invest in our people to ensure that we are delighting our customers at every opportunity. M Y ER Annual Report 2015 11 COMPA N Y R E V IE W THE MYER HUB The Myer Hub in Parramatta (NSW) is Myer's 'open kitchen' of e-commerce and brings together a wide range of current and new services in one convenient place in-store. The Myer Hub makes it easy for customers to access personal shopping and styling, cosmetics consultations, Gift Registry, phone charging and Click & Collect. Free Wi-Fi is available via an app that also provides customers with exclusive promotions and the ability to view current Myer catalogues and the Myer blog. Customers have unprecedented access to innovative digital installations including a digital media wall and an interactive digital touch table featuring information about Myer products and services. CLICK & COLLECT When customers come to collect their Click & Collect order, team members can personalise their experience by offering promotions to accompany the customer's purchase. 12 M Y ER Annual Report 2015 COMPA N Y R E V IE W OMNI-CHANNEL SHOPPING ORGANISATIONAL CAPABILITY Online shopping is revolutionising retail, empowering customers, and providing new channels to market. Our success is underpinned by our people and organisational capability. We already have one of the leading online offers in Australia, and our online sales continue to grow. We are strengthening our omni-channel proposition to create a seamless shopping experience that starts on any device and ends in any one of our stores, or at a customer's door or office. This can be seen in the Myer Hub, which was successfully trialled in our Parramatta (NSW) store (see the opposite page). Various elements of the Myer Hub concept will be rolled out to select stores in FY2016. In 2015, we closed our third party operated distribution centre to enable us to streamline our fulfilment model. Our focus is on store-based fulfilment which is more cost effective, enables us to better manage delivery times, and increases the use of our Click & Collect service. PRODUCTIVITY STEP CHANGE Myer's store network is one of our strongest assets and a real source of competitive advantage. Our store network has been thoroughly reviewed through detailed catchment analysis, store by store, and we understand the potential of each location. With these detailed insights and analytics, we will actively manage our store portfolio to improve store productivity and better align our footprint with our primary customers. During 2015 we have actively demonstrated change, with the closure of two NSW stores at Hurstville and Top Ryde, the decision to not proceed with a store at Greenhills (NSW), and the opening of two new stores in Mt Gravatt (QLD) and Joondalup (WA). We have already made progress in mobilising our business for this transformation, and in April 2015 we established a Transformation Office to promote and co-ordinate the progress we are making. To further strengthen our leadership team, we welcomed a number of senior executives in FY2015. These executives possess the right mix of expertise in retail and business transformation to help successfully deliver the New Myer strategy. MYER ONE Our MYER one loyalty program of more than five million members enables us to engage directly with our omni-channel customers. We plan to reinvigorate the offer available to our premium members in Platinum and Gold tiers. INTRODUCING THE FINDERS We are strengthening our omni-channel proposition to create a seamless shopping experience. Social media is a key channel for engagement with our primary customers. We have more than half a million Myer followers across a range of platforms including Facebook, Twitter, Instagram, YouTube, and Snapchat, which we use to talk about new brands, trends, events and product launches. Our new operating model puts the customer at the centre of our decision making and provides a framework as to how all departments are working together to achieve the New Myer strategy and improve our business performance. In addition, we have implemented a new governance framework to streamline the decisionmaking process, prioritise capital, and monitor the returns from investments. For the first time ever, we collaborated with leading Australian online style influencers, Amanda Shadforth (Oracle Fox), Carmen Hamilton (Chronicles of Her), Zanita Whittington (Zanita.com), and Jess Arifien and Trevor King (Oliver Grand) to bring our customers a new insight into trends for Spring 2015. The 'Myer Way of Working' is a critical component of our operating model, which will build the culture, articulate the desired behaviour and leadership styles, provide a compelling communication strategy, and implement the change capability. These changes will enable us to have a strong execution culture, with robust systems, efficient processes, and the organisational capability to drive Myer forward. These online influencers were featured in our blog, 'the find' and across the Myer website and social media channels, as well as in marketing materials, digital display advertising and pop-up shops. M Y ER Annual Report 2015 13 COMPA N Y R E V IE W S U S TA I N A B I L I T Y AT M Y E R Myer is committed to building a socially responsible business and integrating sustainability into everyday business practices. MYER SUSTAINABILITY FRAMEWORK AND MATERIAL ISSUES CUSTOMER COMMUNITY >> Attraction and engagement >> Myer Stores Community Fund >> Energy and emissions >> Ethical sourcing >> Reward and recognition >> Customer service and satisfaction PEOPLE >> Giving our time >> Packaging stewardship >> Shrinkage >> Workplace safety Our sustainability strategy has five focus areas: Customer, People, Community, Environment, and Business. Each of these is supported by relevant metrics to enable us to measure our performance. The following pages contain key highlights from this financial year. For more information on our sustainability strategy and performance, and to view our FY2015 Global Reporting Initiative Index, please visit myer.com.au. 14 M Y ER Annual Report 2015 >> Strategic community partnerships ENVIRONMENT >> Waste and recycling ATTRACTION AND ENGAGEMENT Myer provides our team members with a rewarding and supportive workplace. This is reflected in the results of our most recent employee survey, 'My Say', which found that 84 percent of our team members had a high level of engagement with Myer. Myer team members are offered a variety of workplace benefits including shopping discounts, flexible work arrangements, and additional leave options. We also provide capability development opportunities through 'on the job', online, and group instructor-led training. BUSINESS >> Code of Conduct >> Product responsibility DIVERSITY In FY2015 we achieved our gender diversity target, with a workforce comprised of 79 percent women. Our other measurable objectives - proportions of men and women on the Board and in the Executive Management Group, and the Gender Equality Indicators under the Workplace Gender Equality Act (WGEA) - are set out in our Corporate Governance Statement which is available at myer.com.au/investor. WORKPLACE SAFETY The importance of safety is embedded in our culture. We are committed to reducing hazards, raising team member awareness, and co-ordinating active safety committees at each site. During FY2015, we successfully maintained our self-insurance licence arrangements. The Myer Lost Time Injury Frequency Rate (LTIFR) was 7.7 in FY2015. COMPA N Y R E V IE W ENERGY AND EMISSIONS PRODUCT RESPONSIBILITY Energy, packaging and waste are our key environmental impact areas, and in FY2015 significant positive progress has been made in reducing these impacts. We take pride in the quality of our merchandise. We have extensive quality and compliance processes in place to ensure that our merchandise is safe, and compliant with labelling and safety requirements. Through continued investment and focus on energy efficiency, we have further reduced our energy intensity by 2 percent compared to FY2014. This has reduced by a total of 8 percent since FY2013. Our total energy use for the year decreased by 2 percent to 707,151 GJ, resulting in a 3 percent reduction in direct and indirect greenhouse gas emissions, to a total of 168,809 tonnes. WASTE AND RECYCLING Our commitment to reducing waste and increasing recycling of packaging enabled us to receive co-funding from the Australian Packaging Covenant and Sustainability Victoria for a recycling optimisation project in FY2015. This year we recycled 58 percent of our waste stream, and we expect to see continued reductions in the next year as the benefits of the project are realised. We also continue to develop our product responsibility programs. Myer supports the government-led 'SmarterChoice' program in NSW and VIC, which provides customers with energy efficiency information about electronic products. To encourage the recycling of clothing, we have partnered with Salvos Stores to deliver the Myer and Salvos Fashion Rescue program. This program rewards customers who donate clothing to Salvos Stores with a $10 Myer voucher. In addition to preventing clothing from going to landfill, the program benefits Salvos Stores by increasing the quality and quantity of donations, which assists in raising funds for the work of The Salvation Army in the community. HIGH PERFORMER AWARD AUSTRALIAN PACKAGING COVENANT 2015 In 2015, we were awarded Highest Score Retailer by the Australian Packaging Covenant. This is a sustainable packaging initiative which encourages businesses to design more sustainable packaging to increase recycling rates and reduce packaging litter. 1 MILLION STARS TO END VIOLENCE In 2015, more than 4,000 Myer team members and customers each wove a paper ribbon star to support the 1 Million Stars to End Violence campaign. Supported by Myer, the campaign was initiated by weaving artist Maryann Talia Pau 'to bring people together to do something good and beautiful', and to raise community awareness about violence against women. The aim of the project is to engage communities across Australia in cultural change against violence, with beautiful displays of personally woven stars installed in public spaces until 2018. M Y ER Annual Report 2015 15 COMPA N Y R E V IE W ETHICAL SOURCING OUR MYER VALUES In October 2014, we launched our new Company values which were updated to reflect our focus on bringing the love of shopping to life. Our values guide our behaviour, underpin our culture, and provide a framework for how we work at Myer. Everyone at Myer has a role to play, from the people who source and buy our products to the people who sell them and everyone in between. The values we share help bind us together, as these are the things that matter the most to our business and our people. Our values are: 1. Be passionate 2.\tDelight your customer 3.\tChallenge yourself 4.\tBe courageous 5.\tDo what's right 6.\tGive something back 7. We are family 16 M Y ER Annual Report 2015 Myer is committed to sourcing merchandise that is produced in safe and fair working conditions, where the human rights of workers are respected. This commitment is supported by our Ethical Sourcing Policy and a framework which measures supplier adherence, identifies breaches, and continuously improves the ethical performance of our supply chain. All new suppliers must adhere to our Ethical Sourcing Policy. The majority of our MEB merchandise is sourced from China through our dedicated global sourcing group, Myer Sourcing Asia Limited, with offices located in Hong Kong and Shanghai. Our external logistics provider, Cargo Services, operates four hubs in Asia to deliver merchandise to Myer's distribution centres in Australia. In FY2015, we significantly increased the number of ethical sourcing audits undertaken, to a total of 313, including 303 audits of MEB supplier factories, and a review of 10 national brand suppliers. These audits identified one zero tolerance issue and 14 high rated issues. These non-conformances have subsequently been addressed by the relevant suppliers. Myer continues to work with our suppliers to improve their ethical sourcing procedures and ensure compliance with our Ethical Sourcing Policy. Our ethical sourcing framework includes: >> monitoring the factory locations of all new MEB suppliers; >> rating suppliers against a supplier risk profile; >> determining which suppliers are to be audited under the Ethical Sourcing Policy and audit cycle; >> assessing the risk level of any issues identified during audits; and >> implementing remedial action plans or withdrawal of supply for noncompliant suppliers, depending on the severity of the breach. COMPA N Y R E V IE W GIVING BACK Myer has a proud history of community investment and, through our Myer Stores Community Fund, we encourage our team members, suppliers and customers to give back to the local community. Each year we also host the Myer Stores Community Fund Precious Metal Ball, to raise vital funds for our national and local store charity partners. This year, we were able to support Red Kite with $250,000 from funds raised at the Ball. This year, we also launched our first 'Round Up' campaigns for Mother's Day, allowing our customers to round up to the nearest dollar for the Myer Stores Community Fund. For the coming three years, Myer will align our community investment with 'empowering and supporting women, strengthening families', to work with key charities to help reduce family violence. We have announced new partnerships with White Ribbon Australia and Global Sisters to support their valuable work in improving outcomes for vulnerable women and children. We will also continue to support The Salvation Army, with a focus on its provision of crisis care to women and children affected by family violence. TOTAL CONTRIBUTION TO CHARITY PARTNERS MYER DIRECT TIME, CASH AND GOODS $2.6m $1.0m FACILITATED FUNDRAISING FROM CUSTOMERS, SUPPLIERS AND TEAM MEMBERS $1.6m SUSTAINABILITY PERFORMANCE AND TARGETS FY2013 Performance FY2014 Performance N/A Exceeded target Employee engagement (%) N/A Diversity (% female) Focus area Key measure Customer Net Promoter Score Team FY2015 Performance FY2016 Target Achieved target Improvement* 83 84 83 78.8 79.6 79.0 >75 Workplace safety (LTIFR) 8.6 7.0 7.7 6.5 Community Direct charity contribution (% EBIT) 0.4 0.6 0.8 0.5 Environment Greenhouse gas emissions reduction (%) 4.8 5.0 2.7 3.0 191.2 179.8 175.5 171.5 55 57 58 60 100 100 100 100 Energy intensity (kJ/M2/opening hour) Recycling rate (%) Business New suppliers agreed to Ethical Sourcing Policy (%) Code of Conduct training (% of staff every two years) Shrinkage reduction *On comparable stores basis\b 75.5 82 86.5 75 Reduction on previous year Reduction on previous year Minor increase Maintain Improved/met target Did not reach target M Y ER Annual Report 2015 17 MANAGEMENT TE AM From left to right: Richard Umbers, Louise Tebbutt, Timothy Clark, Tony Sutton, Daniel Bracken, Grant Devonport, Richard Amos and Gary Williams. 18 M Y ER Annual Report 2015 RICHARD UMBERS DANIEL BRACKEN GRANT DEVONPORT RICHARD AMOS Chief Executive Officer and Managing Director Chief Merchandise and Marketing Officer, Deputy CEO Chief Financial Officer Chief General Counsel and Company Secretary Richard was appointed CEO and Managing Director of Myer in March 2015. Daniel was appointed Chief Merchandise and Marketing Officer in September 2014 and was appointed Deputy CEO in March 2015. In this role, Daniel manages the merchandise areas of design, sourcing, buying, and manufacturing, as well as advertising, digital, marketing, events and execution of the Myer brand strategy. Daniel has extensive experience in retail including more than 15 years at Burberry London, and prior to joining Myer was the CEO of The Apparel Group, owner of Sportscraft, Saba, Willow, and Jag. Grant was appointed CFO of Myer in July 2015. As CFO, Grant's responsibilities cover all financial planning, accounting, treasury management, taxation, procurement, compliance, internal audit and financial services aspects of the business. Prior to joining Myer, Grant most recently served as CFO of Toll Holdings Limited. He has previously held senior finance, commercial, and executive roles with Toll in Australia and New Zealand, as well as senior positions with Village Roadshow and the National Australia Bank Group. Richard was appointed as Chief General Counsel and Company Secretary in July 2015 and manages the legal and company secretarial functions for the Myer Group. In his role, Richard is responsible for leading the organisation and delivering a significant program of change and reinvigoration to ensure that Myer continues to be an exciting destination for all of our customers. Richard joined Myer in September 2014 as Chief Information and Supply Chain Officer, with responsibility for online strategy, financial services and MYER one, as well as the logistics and IT functions. Richard has extensive retail, logistics and IT experience and has held senior roles at Aldi in Europe and Woolworths in Australia and New Zealand. He joined Myer from Australia Post, where he was the Executive General Manager for Parcel and Express Services and CEO of StarTrack. Before joining Myer, Richard worked with leading brewing and consumer dairy business, Lion, for 10 years in a range of executive roles including Corporate Development and Risk Director and General Counsel of Lion Beer, Spirits and Wine Australia and NZ. Richard also worked for international law firm Baker & McKenzie in Sydney, London, and Bangkok for 10 years. Grant is a Chartered Accountant (CA), Institute of Chartered Accountants in New Zealand. TIMOTHY CLARK TONY SUTTON LOUISE TEBBUTT GARY WILLIAMS Executive General Manager Property, Store Development and Services Executive General Manager Stores Executive General Manager Human Resources, Risk and Safety Chief Transformation Officer Tim was appointed as Group General Manager Property, Store Development and Services in January 2011 and is responsible for Myer's property network. This includes our store refurbishment program, in-store design developments, optimising the productivity returns of Company space, and the execution of all facilities management requirements. Tim was then appointed as Executive General Manager with the additional responsibilities of the Company Project Management Office. Tim has also held executive roles at Gazman Menswear and Crown Ltd. Tony was appointed to lead the stores team in September 2012, and in that role he oversees all of the operations of the Myer store network, including our customer service strategy and bringing wonderful experiences to life for our customers. Louise was appointed Executive General Manager Human Resources, Risk and Safety in August 2012 and is responsible for all aspects of Myer's human resources including organisational development, sourcing and talent strategies, industrial relations, and risk and safety. Louise also oversees the Operating Model and Way of Working initiatives aligned to the new strategy. Louise has over 20 years of industry experience, and prior to joining Myer from the Coles Group in 2006, she held senior roles in a number of businesses including Coles Supermarkets and Target. Louise is also a director of the Myer Stores Community Fund and Chair of the Myer Superannuation Policy Committee. Gary was appointed Chief Transformation Officer in May 2015, having joined Myer as the Executive General Manager Strategic Planning and Business Development in August 2014. In this new role, he plays a significant role in driving ownership of initiatives and facilitating efficient execution. In addition to this, he continues to be responsible for strategy and business development. Tony is a career retailer, joining Myer in 1992, and has worked cross-functionally in a number of senior roles including store and regional management, merchandise, and marketing. Gary began his career in retail and brings significant global experience to Myer from his work across leading brands including time as Managing Director at Coca-Cola Australia and South Africa, global roles at Puma and Reebok, and more than nine years at Westfield in Australia and the United States. M Y ER Annual Report 2015 19 BOARD OF DIRECTORS From left to right: Chris Froggatt, Ian Cornell, Richard Umbers, Bob Thorn, Paul McClintock AO, Rupert Myer AO and Anne Brennan. Bernie Brookes On 2 March 2015, Bernie Brookes stepped down from the role of CEO and Managing Director. From 2006 Bernie guided Myer through a turnaround under private ownership to a public listing, and through a period of sustained weakness in consumer sentiment, competitive disruption and structural change. The Board thanks Bernie for his dedication and hard work over the past eight years. 20 M Y ER Annual Report 2015 DIRECTORS' REPORT Your directors present their report on the consolidated entity consisting of Myer Holdings Limited ABN 14 119 085 602 (the Company or Myer) and the entities it controlled (collectively referred to as the Group) at the end of, or during the financial period ended 25 July 2015. 1.\tDIRECTORS The following persons were directors of the Company during the financial period and/or up to the date of this Directors' Report: Director Position Date appointed Paul McClintock AO Chairman from 10 October 2012 Independent non-executive director 8 August 2012 Rupert Myer AO Deputy Chairman from 8 August 2012 Independent non-executive director 12 July 2006 Bernie Brookes Chief Executive Officer (CEO) and Managing Director 12 July 2006 Richard Umbers CEO and Managing Director 2 March 2015 Anne Brennan Independent non-executive director 16 September 2009 Ian Cornell Independent non-executive director 6 February 2014 Chris Froggatt Independent non-executive director 9 December 2010 Bob Thorn Independent non-executive director 6 February 2014 Bernie Brookes retired as CEO and Managing Director and Richard Umbers was appointed as CEO and Managing Director on 2 March 2015. All other directors served as directors of the Company for the whole financial period and until the date of this Directors' Report. Rupert Myer AO has notified the Board that he does not intend to seek re-election for a fourth term as a director of the Board at the Company's 2015 Annual General Meeting. Details of the qualifications, experience, and special responsibilities of each current director are as follows: PAUL McCLINTOCK AO Chairman >> Independent non-executive director >> Member of the Board since 8 August 2012 >> Appointed Chairman 10 October 2012 >> Chairman - Nomination Committee Paul has held significant chairman and advisory positions across a broad range of industries, as well as government. He is highly regarded for his wide and varied experience, including his role as the Secretary to Cabinet and Head of the Cabinet Policy Unit. Paul's former positions include chairman of Thales Australia, Medibank Private Limited, the COAG Reform Council, the Expert Panel of the Low Emissions Technology Demonstration Fund, Intoll Management Limited, Symbion Health, Affinity Health, Ashton Mining, Plutonic Resources, and the Woolcock Institute of Medical Research. He was also a director of the Australian Strategic Policy Institute and Perpetual Limited, a Commissioner of the Health Insurance Commission, and a member of the Australia-Malaysia Institute Executive Committee. Paul graduated in Arts and Law from the University of Sydney and is an honorary fellow of the Faculty of Medicine of the University of Sydney and a Life Governor of the Woolcock Institute of Medical Research. Paul resides in New South Wales and is 66 years of age. Other current directorships Paul is chairman of NSW Ports, I-MED Australia and O'Connell Street Associates. He is also a director of St Vincent's Health Australia and The George Institute for Global Health. RUPERT MYER AO Deputy Chairman >> Independent non-executive director >> Member of the Board since 12 July 2006 >> Appointed Deputy Chairman 8 August 2012 >> Member - Audit, Finance and Risk Committee >> Member - Human Resources and Remuneration Committee >> Member - Nomination Committee Rupert serves as a non-executive chairman and director of a number of public, private, and government entities. His background includes roles in the retail and property sector, healthcare, e-commerce, investment, family office, wealth management, philanthropy services, and the community sector. Rupert serves as a Board member of The Myer Foundation, Creative Partnerships Australia, and Jawun - Indigenous M Y ER Annual Report 2015 21 DIREC TOR S' REPOR T Continued Corporate Partnerships. Rupert is a member of the Business and Economics Advisory Board of the University of Melbourne and The Felton Bequests' Committee and was formerly the chairman of the Myer Family Group. Rupert holds a Bachelor of Commerce (Honours) degree from the University of Melbourne, and a Master of Arts from the University of Cambridge, and is a Fellow of the Australian Institute of Company Directors. In June 2015, he was appointed an Officer of the Order of Australia for distinguished service to the visual and performing arts, through governance roles with leading cultural institutions, as a supporter and benefactor, to the promotion of philanthropy, and to the community. Rupert resides in Victoria and is 57 years of age. Other current directorships Rupert is chair of the Australia Council for the Arts and Nuco Pty Ltd. He is a director of AMCIL Limited, Healthscope Limited, and eCargo Holdings Limited (Hong Kong). RICHARD UMBERS Chief Executive Officer and Managing Director >> Member of the Board since 2 March 2015 Richard Umbers was appointed CEO and Managing Director of Myer in March 2015. In his role, Richard is responsible for leading the organisation, and delivering a significant program of change and reinvigoration to ensure that Myer continues to be an exciting destination for all of our customers. Richard joined Myer in September 2014 as Chief Information and Supply Chain Officer, with responsibility for online strategy, financial services and MYER one, as well as the logistics and IT functions. Prior to joining Myer, Richard was Executive General Manager for Parcel and Express Services at Australia Post, and also held the position of CEO for StarTrack. Richard also had responsibility for the enterprise-wide eCommerce program, a major change initiative designed to position Australia Post to take advantage of the boom in online shopping. Richard has previously held a range of senior and general management positions in fast moving consumer goods (FMCG) retailing with roles at Woolworths in Australia and New Zealand and Aldi in Europe. Richard has a Master of Science degree in Finance from the University of Leicester (UK), and a Bachelor of Science with honours in Geology and Geography from The University of Exeter (UK). He is also a graduate of the Australian Institute of Company Directors. Richard lives in Victoria and is 48 years of age. 22 M Y ER Annual Report 2015 ANNE BRENNAN Independent non-executive director >> Member of the Board since 16 September 2009 >> Chairman - Audit, Finance and Risk Committee >> Member - Human Resources and Remuneration Committee >> Member - Nomination Committee Anne brings strong financial credentials and business acumen to Myer, including her experience from senior management roles in both large corporate organisations and professional services firms. Anne has more than 20 years' experience in audit, corporate finance, and transaction services including executive roles as the Chief Financial Officer (CFO) at CSR, and Finance Director at the Coates Group. Prior to her executive roles, Anne was a partner in three professional services firms: KPMG, Arthur Andersen, and Ernst & Young. During her time at Ernst & Young, Anne was a member of the national executive team and a board member. Anne was formerly a director of Cuscal Limited. Anne holds a Bachelor of Commerce (Honours) degree from University College Galway. She is a Fellow of the Institute of Chartered Accountants in Australia and a Fellow of the Australian Institute of Company Directors. Anne resides in New South Wales and is 54 years of age. Other current directorships Anne is a Director of Argo Investments Limited, Charter Hall Group, Nufarm Limited, and Rabobank Limited (Australia and New Zealand). IAN CORNELL Independent non-executive director >> Member of the Board since 6 February 2014 >> Member - Human Resources and Remuneration Committee Ian has extensive experience in the retail industry across a number of senior retail roles including 11 years at Westfield. During his time at Westfield, Ian was Head of Human Resources for seven years and also responsible for retailing relationships in Australia and New Zealand. He also spent three years as the Head of Management and Marketing for Westfield's shopping centres in Australia and New Zealand and has extensive experience in large scale retail operations and responding to changing consumer trends. Prior to joining Westfield, Ian was chairman and CEO of supermarket chain, Franklins, and earlier spent 22 years at Woolworths, including his role as Chief General Manager Supermarkets. Ian has previously been a director of Goodman Fielder Limited. Ian is also a Fellow of the Institute of Management, a Fellow of the Human Resources Institute, a member of the Institute of Company Directors, and a graduate DIREC TOR S' REPOR T Continued of the Advanced Management Programme at Harvard. Ian resides in New South Wales and is 61 years of age. BOB THORN Independent non-executive director Other current directorships >> Member of the Board since 6 February 2014 Ian is a director of Baby Bunting Pty Ltd and Inglis Bloodstock, as well as of the PKD Foundation of Australia, a charitable foundation raising funds for medical research into kidney disease. CHRIS FROGGATT Independent non-executive director >> Member of the Board since 9 December 2010 >> Chairman - Human Resources and Remuneration Committee >> Member - Nomination Committee Chris has a broad industry background, including experience in consumer branded products, retailing, and hospitality across numerous industries such as beverages, food, and confectionery. She has more than 20 years' executive experience as a human resources specialist in leading international companies including Brambles Industries, Whitbread Group, Mars, Diageo, and Unilever NV. Chris has served on the boards of Britvic, Sports Direct International, and Goodman Fielder Limited; as well as being a director of the Australian Chamber Orchestra and the Australian Chamber Orchestra Instrument Fund, and as an independent trustee director of Berkeley Square Pension Trustee Company Limited. Chris holds a Bachelor of Arts (Honours) in English Literature from the University of Leeds (United Kingdom). Chris is a Fellow of the Chartered Institute of Personnel Development, and a member of the Australian Institute of Company Directors. Chris resides in New South Wales and is 56 years of age. >> Member - Audit, Finance and Risk Committee Bob brings considerable senior retail management experience to Myer from his nine years as Managing Director of Super Retail Group. During his time at the company, Bob drove Australia and New Zealand expansions and led the creation of the Boating Camping Fishing (BCF) business, the market leader in camping and leisure. Prior to Bob's 13 years with Super Retail Group, he was previously General Manager at Lincraft, and held senior roles at other major retailers including nine years with David Jones. Bob has also been the chairman of Cutting Edge, and a director at WOW Sight and Sound, Babies Galore, and Unity Water. Bob is a member of the Australian Institute of Company Directors and is currently an adviser to the Board of BMag Pty Ltd. Bob resides in Queensland and is 60 years of age. Other current directorships Bob is a director of Rotah Group Pty Ltd and is independent chairman of PWR Holdings Pty Ltd. 2. DIRECTORSHIPS OF OTHER LISTED COMPANIES The following table shows, for each person who served as a director during the financial period and/or up to the date of this Directors' Report, all directorships of companies that were listed on the ASX, other than the Company, since 31 July 2012, and the period during which each directorship has been held. Director Listed entity Period directorship held Paul McClintock AO Perpetual Limited April 2004 - November 2012 Rupert Myer AO AMCIL Limited Healthscope Limited January 2000 - present June 2014 - present Bernie Brookes - - Richard Umbers - - Anne Brennan Charter Hall Group October 2010 - present Nufarm Limited February 2011 - present Argo Investments Limited September 2011 - present Echo Entertainment Group Limited March 2012 - October 2014 Ian Cornell Goodman Fielder Limited February 2014 - March 2015 Chris Froggatt Goodman Fielder Limited August 2009 - March 2015 Bob Thorn - - M Y ER Annual Report 2015 23 DIREC TOR S' REPOR T Continued 3. MEETINGS OF DIRECTORS AND BOARD COMMITTEES The number of meetings of the Board and of each Board Committee held during the period ended 25 July 2015 are set out below. All directors are invited to attend Board Committee meetings. Most Board Committee meetings are attended by all directors; however, only attendance by directors who are members of the relevant Board Committee is shown in the table below. Director Meetings of directors Audit, Finance and Risk Committee Human Resources and Remuneration Committee Nomination Committee A B A B A B A B Paul McClintock AO 13 13 - - - - 3 3 Rupert Myer AO 13 13 4 4 5 5 3 3 Bernie Brookes* 6 6 - - - - - - Richard Umbers* 6 6 - - - - - - Anne Brennan 13 13 4 4 5 5 3 3 Ian Cornell 13 13 - - 5 5 - - Chris Froggatt 13 13 - - 5 5 3 3 Bob Thorn 13 13 4 4 - - - - Notes: A = Number of meetings attended. B = Number of meetings held during the time the director held office or was a member of the Committee during the year. * = Bernie Brookes retired, and Richard Umbers was appointed, on 2 March 2015. 4. DIRECTORS' RELEVANT INTERESTS IN SHARES The following table sets out the relevant interests that each director has in the Company's ordinary shares or other securities as at the date of this Directors' Report. No director has a relevant interest in a related body corporate of the Company. Director Ordinary shares Options Performance rights Paul McClintock AO 181,000 Nil Nil Rupert Myer AO 733,999 Nil Nil Richard Umbers Nil Nil 568,749 Anne Brennan 53,658 Nil Nil Ian Cornell 10,000 Nil Nil Chris Froggatt 10,040 Nil Nil 161,000 Nil Nil Bob Thorn Bernie Brookes retired as a director of the Company on, and with effect from, 2 March 2015. At the date of his retirement, Mr Brookes had a relevant interest of 10,042,399 ordinary shares in the Company. At the Company's 2014 Annual General Meeting, the relevant terms of Mr Brookes' employment contract were approved by shareholders, including that he would retain 83,249 performance rights. 5. COMPANY SECRETARY AND OTHER OFFICERS Marion Rodwell was the Company Secretary of the Company from 2008 until she departed on 6 July 2015. Ms Rodwell was also Chief General Counsel. Richard Amos was appointed as Company Secretary of the Company on 6 July 2015, as well as being appointed as Chief General Counsel of the Group. Before joining Myer, Richard Amos worked with leading brewing and consumer dairy business, Lion, for 10 years in a range of executive roles including Corporate Development and Risk Director and General Counsel of Lion Beer, Spirits and Wine Australia and NZ. Richard also worked for international law firm Baker and McKenzie in Sydney, London, and Bangkok for 10 years. Details of other officers of the Company are referred to in section 8 below. 24 M Y ER Annual Report 2015 DIREC TOR S' REPOR T Continued 6. PRINCIPAL ACTIVITIES During the financial period, the principal activity of the Group was the operation of the Myer department store business. 7. OPERATING AND FINANCIAL REVIEW FY2015 FINANCIAL RESULTS Summary >> Total sales up 1.7% to $3,195.6 million, up 1.1% on a comparable store sales basis >> 2H total sales up 1.9%, up 1.3% on a comparable store sales basis >> Operating gross profit (OGP) margin down 53 bps to 40.4% >> Cost of doing business (CODB) up 3.3% to $1,067.2 million >> Earnings before interest, tax, depreciation, and amortisation (EBITDA) (excluding Individually Significant Items*) down 11.6% to $223.2 million >> Earnings before interest and tax (EBIT) (excluding Individually Significant Items*) down 16.7% to $133.5 million >> Net profit after tax (NPAT) (excluding Individually Significant Items*) $77.5 million, down 21.3% Chief Executive Officer commentary \"Myer's FY2015 result supports the case for our comprehensive change agenda. The decisions we have taken to deliver New Myer will lead to changes to both our store network and operations, resulting in a more productive and efficient footprint,\" said Mr Umbers. \"During the past six months, management has been actively addressing the underlying issues in the business, implementing a series of initiatives that are consistent with the New Myer strategic direction including the introduction of a large number of wanted brands and initiatives to improve flexibility of our in-store labour to better align our workforce with customer demand. The New Myer strategy sets out a defined pathway to return the business to sustainable profit growth. We will achieve this by delivering a sharper and more focused retail offer that attracts more of the customers who represent the highest value to our business. This will be supported by investment in our stores and our omni-channel offer to make them more engaging and productive,\" said Mr Umbers. The New Myer strategy is discussed in further detail in section 9 below. >> Basic earnings per share (EPS) (excluding Individually Significant Items*) 13.2 cents (FY2014: 16.8 cents). Statutory basic EPS 5.1 cents (FY2014: 16.8 cents) >> Individually Significant Items* (post tax) totalling $47.7 million >> NPAT including Individually Significant Items $29.8 million, down 69.7% >> There was no final dividend determined by the Board for FY2015 *\u0007 ertain items have been separately identified and presented as C Individually Significant based on the nature and/or impact these items have on the Group's financial performance for the period. The above overview of the FY2015 financial results is discussed in detail below. M Y ER Annual Report 2015 25 DIREC TOR S' REPOR T Continued INCOME STATEMENT FOR THE 52 WEEKS TO 25 JULY 2015 FY2015 $m FY2014 $m Change vs. LY Total sales value 3,195.6 3,143.0 +1.7% Operating gross profit 1,290.4 1,285.9 +0.3% 40.4% 40.9% (53bps) Operating gross profit margin (1,067.2) (1,033.3) +3.3% Cost of doing business/sales Cost of doing business 33.4% 32.9% +53bps EBITDA* 223.2 252.6 (11.6%) 7.0% 8.0% (106bps) EBIT* 133.5 160.3 (16.7%) EBIT margin* 4.2% 5.1% (92bps) 77.5 98.5 (21.3%) EBITDA margin* Net profit after tax (NPAT)* *Excluding Individually Significant Items which represent Non-IFRS financial measures. See page 27. Sales In FY2015, the Group's total sales increased by 1.7% to $3,195.6 million, driven by new stores and refurbishments, as well as strong growth in the online business. Myer has now delivered comparable store sales growth in 12 of the last 13 quarters. There was continued strong growth in the Cosmetics business, as well as in Childrenswear and Entertainment, offset by a poor performance in Womenswear. During Christmas 2014, the rollout of Giftorium, representing dedicated gifting space in all stores, was well received by customers. Customers also responded positively to the four major store refurbishments that were completed ahead of Christmas 2014. In addition, new stores at Mt Gravatt (QLD) and Joondalup (WA) generated further growth. During the period, two stores were closed in NSW, at Hurstville in January 2015 and Top Ryde in July 2015. A large number of new brands were rolled out during the period, many of which performed particularly well, including Menswear brands M.J. Bale, Aquila, Herringbone, Scotch & Soda, and Cosmetics brand Jo Malone. Margins and CODB The operating gross profit margin declined by 53 basis points to 40.4%. This was mainly due to the depreciation in the Australian dollar and increased inventory provisions. Excluding the impact of these factors, operating gross profit margin increased by 32 basis points. CODB increased by 3.3% to $1,067.2 million, driven by costs associated with refurbishments in four of our top 25 stores as well as two new stores, and costs associated with growth in the omni-channel business. 26 M Y ER Annual Report 2015 DIREC TOR S' REPOR T Continued Net finance costs and net debt Individually Significant Items In June 2015, the syndicated debt facility, now totalling $600 million, was successfully refinanced, with more favourable pricing, increased tenor, and improved terms. In addition to a lower interest margin, the Fixed Charges Cover Ratio covenant was lowered from 1.65 times to 1.50 times across the facilit