Country Road
ACC5605 Accounting Theory and Practice
Prepared for: Mr. Colin Dolley
Prepared by: Group #3
Xianning Sun
Yoko Ando
Date
10125802
10135783
Nonglak Assawinarrak
10109833
Meihuan Chen
10131104
24th October, 2010
1 / 22
Table of contents
1.1: Introduction ............................................................................................................. 3
1.2: Country Road’s Mission ......................................................................................... 3
1.3: Background summary of Country Road’s products and services ........................... 4
1.4: Key Competitors ..................................................................................................... 4
1.5: Competitive Strategy .............................................................................................. 6
1.6: Economic factors .................................................................................................... 7
2.1: Financial Statement Analysis .................................................................................. 9
2.1.1: Common Size Analysis .................................................................................... 9
2.1.2: Ratio Analysis ................................................................................................ 10
2.1.2 (a): Profitability ........................................................................................... 10
2.1.2 (b): Liquidity ............................................................................................... 11
2.1.2 (c): Capital Structure ................................................................................... 12
2.2: Book value per share to the market value per share ............................................. 14
2.3: Changes in the CEO .............................................................................................. 14
2.4: Auditor firm and the audit partner ........................................................................ 15
2.5: Non Audit Services by the Auditor ....................................................................... 15
2.6: Issues raised by the Auditing Firm ....................................................................... 16
Appendix ...................................................................................................................... 17
Reference ..................................................................................................................... 21
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1.1: Introduction
The company of Group #3 is Country Road Limited (CTY). Country Road is an upscale
retailer of branded products including quality apparel, homewares and related
accessories, with a great number of freestanding store and department store concessions
in Australia, New Zealand and South Africa. Country Road is on the list of the
Australian Stock Exchange and it is a subsidiary of a South African company
Woolworths Holdings which owns an 88% interest. The company’s home page
http://www.countryroad.com.au/ shows about its productions, activities and other
information. The URL of Country Road’s annual reports for the latest two years are
attached, in descending chronological order:
Country Road Annual Report for the year ending 2009:
http://www.countryroad.com.au/documents/2009_Annual_Report.pdf
Country Road Annual Report for the year ending 2008:
http://www.countryroad.com.au/documents/2008_Annual_Report.pdf
1.2: Country Road’s Mission
There is not a stated mission in Country Road’s annual report. It, however, has its aim or
maybe insistence as it is a company. This can be seen on its web site and also the annual
report:
“The journey to become a more simplified, focused and accessible retail business
enable us to continue to further strengthen our market position during the
difficult economic conditions that prevailed over the past 12 months” (Simon
Susman, p7).
“We are determined to increase our customer base in both our brands and
reward our valued existing customers by providing even better merchandise at
unrivalled value and fashionability without compromising quality.”( Ian Moir,
p8).
"Our aim is to reflect the Australian way of life through stylish, relaxed, quality
apparel, accessories and homeware. We strive to be the most respected and
desired modern Australian lifestyle brand" (CTY)
Country Road markets its products as reflecting an “Australian way of life”, which is
simplified, stylish and relaxed. In this case, they are keen to provide better
merchandise to customers and committed to high quality and value with sourcing the
finest materials from around the world, also the top design, fine tailoring and
attention to detail.
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1.3: Background summary of Country Road’s products and
services
Brief history of Country Road
Time
Event
1974
Country Road as a niche women’s shirting business was established
by Stephen Bennett
1981
Country Road was purchased by Myer Emporium
1984
Country Road’s business expanded into menswear and began
exporting overseas.
1986
Country Road began producing accessories
July 1987
Country Road was listed on Australian Stock Exchange
1987-1988
Myer Emporium sold Country Road
1988
Country Road expanded into homewear
1980s and
Country Road entered the US and Asian market
1990s
1998
Woolworths Holding owned 88% interest of Country Road
2003
Country Road exited the US and Asian market and began producing
childrenswear
2003
Country Road entered into an agreement with Myer department store
of selling exclusively to Myer but not its main rival – David Jones
July 2004
Country Road relaunched as a company and has higher volume sales
and lower product prices
2006-2007
Country Road had reduced its prices by 25%, resulting in a 70% rise
in sales volume. Prior to the re-launch, CTY was a retailer with a
premium price and a strong brand identity.
January 2007
Country Road became a concession store in David Jones and selected
Myer stores
June 2008
Country Road entered the South African market
Products and service
As mentioned above, Country Road’s products include diverse apparel, related
accessories and homewears. Designing, wholesaling and retailing of these merchandise
are Country Road’s main activities. It retails in standalone stores and also concession
stores in David Jones and Myer. The relevant services for these activities include but
not limited, tailoring, deliveries, gift wrapping and gift cards.
1.4: Key Competitors
The most important competitors are those that can pose the greatest threat, and those
that compete with similar products or services in a similar business scale. From our
research we find that there are three main competitors to Country Road.
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1. Specialty Fashion Group Ltd
Specialty Fashion Group Ltd is a specialty fashion multi-branded women's apparel
retailer owner, tailored mostly to women of various ages and sizes. Most stores are
located on the Eastern seaboard, with the rest throughout Australia and NZ. Its strategy
is to focus on the value end of the market.
Compared to Country Road, we could see that Specialty Fashion only focuses on
women’s apparel, whereas Country road includes menswear, kidswear and homewear.
Moreover, Country Road has markets in Asian and South Africa but not for Specialty
Fashion.
In terms of the profit, Specialty Fashion Group is potentially one of the most profitable
apparel retailers in Australia which is the same as Country Road.
2. Thomas Bryson International Ltd
The Company currently manufactures and distributes fabrics, apparel, garments, home
textiles and home decor domestically and around the world, primarily to Europe, USA,
South America and South Africa.
The below diagram shows Thomas Bryson products:
Compared to Country Road, we could see that two of main products which are apparel
and home textiles in Bryson are similar to Country Road’s, leading competition in
selling of those products. In addition, Thomas Bryson also has overseas markets in
USA, China and South Africa.
3. Noni B Limited
Noni B is a specialty apparel retailer and mainly located in shopping centers. Noni B
provides classic fashion styles for quality-conscious women. Noni B is one of
Australia's leading fashion retailers.
5 / 22
Like Country Road, Noni B has stores in Myer and David Jones and emphasizes on
quality. However, Noni B only focuses on women apparel, whereas Country Road
covers more than that.
In addition, Noni B does not engage in overseas markets so that there is no competition
in those markets.
1.5: Competitive Strategy
Differentiation
To be different is what organisations strive for. The differentiation strategy has helped
Country Road differentiate itself on its quality, design and brand.
Quality
Country Road has given top priority to providing customer oriented, high-quality
garments and services. The attention of Country Road to detail and dedication to the
finest raw materials, high performance fabrics, and woollen yarns is reflected across all
its ranges from Man, Woman and Home collections. Country Road is able to create
higher quality apparel than its competitors at the time.
Design
Country Road manages to differentiate its product range to meet market demand and it
also sets and keeps up with the latest trends in clothing wears. As a result, Country
Road has taken on a younger focus in recent years and delivered strong financial results
that have been stated in the 2008 annual report that total year sales was up 21.9% in
2008.
Country Road chief executive Ian Moir said, "we now hope to build on what makes
Country Road great, and that is commitment to value, design and great fabrics, with a
great brand that is aimed at the 40 plus market." (SilvaJelly, 2009). At the end of 2009,
the differentiation strategy also helped Country Road to launch a new brand Trenery
which aims to redefine fashion for 40-plus men and women in both South Africa and
Australia. Trenery will attract older customers, many of whom will have grown up with
Country Road. According to a study made by Country Road in 2007, men and women
aged 40 and older occupy 45 per cent of the total spending on clothes in Australia.
Those men and women spend a largely $8.3 billion on clothes per year, with men
spending $3.5billion and women $4.8billion. (Safe, 2009) It is a significant opportunity
for Trenery to provide strong growth in Australia and South Africa.
Brand
The brand differentiation has been also attained by Country Road because of its unique
6 / 22
quality and design which has been mentioned previously. Differentiation makes the
brand an imperfect substitute with other brands so buyers of the brand are more loyal,
and therefore its customer base is more secure. This makes the brand less susceptible to
the activity of competitor brands; when a competitor lowers price, brands that are more
differentiated are thought to lose fewer customers (Caves and Williamson, 1985).
Price strategy
Total sales of Country Road rose 21.9 per cent to $289.7 million based on 2008 annual
report. From the 2009 annual report, total sales at June 30 was up 18.4 per cent.
The success of the Country Road was attributed to the company sticking unswervingly
policy of delivering fashionable garments with exceptional value. The good example is
the knitwear for both men and women. The Country Road chief executive Ian Moir
said," Our knitwear for both men and women has also sold very well. We have sold
three times more knitwear today than three years ago. This is because our knitwear
offers great value, as it was previously priced at $129 and is now $89 for exactly the
same quality and yarn." (Ooi , 2008) The price strategy helped Country Road increase
its sales revenue gradually and steadily.
Strategic alliances
Strategic alliances have been established with Myer, Itochu Corporation, Inchcape
BHD, and wishlist.com by Country Road. The alliance seems like a cooperation or
collaboration, aiming for a synergy where each partner hopes that the greater benefits
coming from the alliance than those from individual efforts. The bilateral rights are
sought by both parties. The alliances helped Country Road create new distribution
channels, new markets, manufacturing capability, knowledge, technology and etc.
1.6: Economic factors
Changes in consumer’s income
As
Country
Road’s
products are normal goods,
Full-time adult total earnings, Quarterly %
the demand of their
change in trend estimates
products is elastic to
consumer’s income. Further,
its products are considered
as luxuries rather than
necessities, their demand
may highly response to
consumer’s income. This
means an increase in
consumer’s income can
raise demand for its goods
7 / 22
and services then ultimately increase its sales and vice versa. According to Australian
Bureau of Statistics, Australian average income has been upward since 2006. This fact
may have a favourable impact on Country Road’s performance. In fact, full-time adult
total earnings rose by 5.7% for males and 5.0% for female in the twelve months to May
2010. This may have contributed to Country Road’s sales increase of 18.4% in 2009
from previous year.
Oil price
As Country Road’s imports and exports its products, the change in oil price has impact
on its transport expenses. Furthermore, its domestic freight expenses are affected by
rise in fuel price. Like many other industries, an increase in oil price increases its
expenses resulting in decline in its profits.
Foreign currency exchange rate
As inventories are predominantly imported and denominated in United States dollars
(USD), Country Road’s financial results can be affected significantly by movements in
the AUD/USD exchange rate. Country Road also purchases inventory in Euro (EUR),
and is impacted by movements in the AUD/EUR exchange rates.
Environmental pressure
As people have been more aware of the environment, Country Road’s degree of care
about environment may affect its reputation. Country Road introduced re-usable bag
which is sold in its stores as an alternative to paper packaging. Also it has worked with
vendors to reduce the requirements for protective packaging where possible and use
environmentally friendly packaging wherever viable. Moreover, since mulesing has
been controversial, Country Road’s has taken an approach towards sourcing a
sustainable supply of non mulesed wool through ongoing consultation with wool
industry groups. It states that its key volume program wool tarns for winter 2010 will be
moving towards this sourcing strategy. These actions by Country Road will send good
signals to public and have favourable impact on its reputation.
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2.1: Financial Statement Analysis
The purpose of financial statement analysis is to evaluate Country Road’s financial
performance and financial position based on the financial statement. In this part, the
common size statements, profitability, liquidity and capital structure of Country Road
will be discussed.
Limitations of following ratio analysis:
Financial data used is last three years
Lack of industry benchmarks and meaningful data from its competitors
Lack of detailed information about long-term debt account and payments of borrowings
2.1.1: Common Size Analysis
Income Statement (see Appendix 3)
After reviewing the common size income statements of Country Road for last three
years, it shows that there are two interesting variations. The gross profit as a proportion
of total revenues decreased by 56.77% in year 2010 and 58.20% in year 2009,
compared with 59.19% in year 2008. It is interesting to see that the cost of sales is
showing an opposite trend. The cost of sales as a proportion of total revenues increased
to 43.23% in 2010 and 41.80% in 2009 as against 40.81% in 2008. Based on the above
data, the drop in gross profit can be explained by the increase in the cost of sales.
Profit for the year as proportion of total revenue has decreased in year 2010, on the
contrary, it increased in year 2009 due to the fluctuation in total expenses as well as the
increase in the cost of sales mentioned in the previous paragraph. The profit for the year
as a proportion of total revenue has been 3.23% and 4.5% in year 2010 and 2009
respectively, as compared to 3.33% in year 2008. Regardless of the finance expenses,
the other total expenses as proportion of total revenue has increased from 51.87% in
year 2009 to 52.04% in year 2010, as against 54.36% in year 2008. At the same time,
the finance expenses as a proportion of total revenues also had a dramatic increase from
0.03% in year 2009 to 0.16% in year 2010, compared with 0.05% in year 2008. As a
result, the fluctuation of profit resulted from the total expenses.
Balance Sheet
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2.1.2: Ratio Analysis
2.1.2 (a): Profitability
Return on assets
ROA =
𝑶𝒑𝒆𝒓𝒂𝒕𝒊𝒏𝒈 𝒑𝒓𝒐𝒇𝒊𝒕 𝒂𝒇𝒕𝒆𝒓 𝒕𝒂𝒙
𝑻𝒐𝒕𝒂𝒍 𝒂𝒔𝒔𝒆𝒕𝒔
Table 1
Operating profit after tax
Total Assets
ROA
2010
2009
2008
$'000
$'000
$'000
12,331
15,649
9,759
129,194
141,668
108,512
0.10
0.11
0.09
The table 1 shows that although there was a slight increase from 0.09 in year 2008 to
0.11 in year 2009, it dropped back to 0.10 in 2010 due to decline in net profit. By
closely looking at the movement between 2009 and 2010, the profit dropped more
largely (21.20%) than the total assets did (8.81%) resulting in a decline by 1% in ROA
in 2010. According to the former CEO John Cheston who was the position for the
period between 1 July 2010 and 13 September 2010, the decrease in the profit is due
to the discount led market conditions significantly impacting margins combined with
the start up costs of its Trenery brand.
Return on equity
ROE =
𝑶𝒑𝒆𝒓𝒂𝒕𝒊𝒏𝒈 𝒑𝒓𝒐𝒇𝒊𝒕 𝒂𝒇𝒕𝒆𝒓 𝒕𝒂𝒙
𝑺𝒉𝒂𝒓𝒆𝒉𝒐𝒍𝒅𝒆𝒓𝒔′𝒆𝒒𝒖𝒊𝒕𝒚
Table 2
2010
2009
2008
$'000
$'000
$'000
Operating profit after tax
12,331
15,649
9,759
Total equity
84,791
74,981
69,989
0.15
0.21
0.14
ROE
The table 2 shows that although there was an increase from 0.14 in year 2008 to 0.21 in
year 2009, it dropped back to 0.15 in 2010 in the same manner as the movement of
ROA. The decrease in 2010 was caused by drop of the net profit whereby an increase
in the total equity.
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2.1.2 (b): Liquidity
Current ratio
𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠
Current ratio =𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑦
Table 3
2010
2009
2008
$'000
$'000
$'000
Current Assets
53,315
70,140
55,220
Current Liabilities
40,223
63,242
34,609
1.33
1.11
1.60
Current ratio
Table 3 shows that the ratio dropped from 1.60 in year 2008 to 1.11 in year 2009 and
rose to 1.33 in 2010. The current liabilities in 2009 is outstanding of these three years
due to significant increase in trade payable and employee benefits (Note11 and 12).
The reason why there was an increase in employee benefits in 2009 may be because
Country road is committed to attracting, developing and retaining the best people as the
company believes that “success through people” is the foundation of Country Road
strategic Plan.
In addition, a high ratio may indicate an excessive investment in non-productive current
assets. In fact, many large companies regularly operate with a current ratio closer to 1
than 2 (Trotman and Gibbins, p.629). Since the current ratios fall within this range, it
can be said that the level of ratios for Country Road is reasonable. It means that the
Country Road has enough shot-term assets to cover its short-term debts
Quick ratio
Quick ratio =
𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑡𝑒𝑠−𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑖𝑒𝑠
Table 4
𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
2010
2009
2008
$'000
$'000
$'000
Current Assets
53,315
70,140
55,220
Inventories
39,113
38,758
28,553
Current Liabilities
40,223
63,242
34,609
0.35
0.50
0.77
Quick ratio
Quick ratio is an indicator of the company’s ability to pay its current liabilities without
having to sell the inventory. The ratio is particularly useful for companies that cannot
convert inventory into cash quickly if necessary. This is not normally the case for retail
companies. As a result, the quick ratio normally has little significance for retailers.
(Trotman and Gibbins, p.629)
However, companies with ratios of less than 1 cannot pay their current liabilities and
should be looked at with extreme care. Furthermore if the acid ratio (quick ratio) is
much lower than the working capital ratio (current ratio) it means that current assets are
11 / 22
highly dependent on inventory - retail stores like Country Road is an example of this
type of business. The quick ratio has been decreasing significantly and the difference
between the current ration and quick ration has become larger and larger.
2.1.2 (c): Capital Structure
Cash Flow Adequacy
The cash flow adequacy is the significant measure of cash sufficiency. It indicates how
well a company can cover the capital expense, debt repayment and dividend with the
cash flow generated from operational activities. Companies with strong cash flow
adequacy are able to meet maturity of their debts and usually have high credit quality.
Cash flow adequacy =
Cash flow from operations
Long−term debt paid+Fixed assets purchased+Cash dividends distributed
Cash flow from operations
Long-term debt paid
Fixed assets purchased
Cash dividends paid
Ratio
2010
$000's
1,246
3,000
18,396
9,197
0.04
2009
$000's
32,833
469
22,043
7,037
1.11
2008
$000's
21,662
688
11,764
7,282
1.10
The ratios show that, Country Road had sufficient cash to meet its necessary business
obligations in 2008 and2009, but had potential liquidity problems in 2010.
Country Road’s liquidity seems in good health except 2010, which ratio was below 1. It
means they are constantly using up their operational net cash flow into their debt
payments and other expenditures.
The items of fixed assets purchased and cash dividends paid seemed to have no problem
here, but the long-term debt paid mounted up to $3,000,000 and the cash flow from
operations fell to $1,246,000. That was a huge difference compare to the amount of
2009 and 2008.
The increased amount of long-term debt paid in 2010 resulted from the borrowing in
2009. More details will be discussed in debt to equity ratio.
Referring to the cash flow statement, it is noticed that the outgoing of payments to
supplier and employees and income taxes and withholding taxes paid of 2010 had a
significant rise.
12 / 22
Debt to Equity Ratio
The debt to equity ratio is used to illustrate what proportion of equity and debt the
company is used to finance its assets.
Total liabilities
Debt to equity ratio =Shareholder′ s equity
Total liability
Total shareholder's equity
Ratio
2010
$000's
44,042
84,792
0.52
2009
$000's
66,687
74,981
0.89
2008
$000's
38,523
69,989
0.55
As the figures shown above, the ratio increased from 0.55 in 2008 to 0.89 in 2009.
However, it dropped back to 0.52 in 2010.
The higher ratio of 2009 compared to that of 2008 indicated that Country Road was
aggressive in financing its growth with debt during 2009. Referring to the data in the
chart, the total shareholder’s equity of 2009 increased 7.1% from 2008, but the total
liability of 2009 rose 73.1% from 2008. At the same time, the profit increased 1.604
times of the one of year 2008. Nevertheless, this phenomenon can result in volatile
earnings as a result of the additional interest expense. In the worst situation, it can
lead to bankruptcy. The reduction of ratio in year 2010 means the strategy changed,
the management would like to reduce these risks to a proper level.
Interest Coverage Ratio
Through the interest coverage ratio, we could determine the company’s ability to pay
the interest.
Interest coverage ratio (earning basis) =
EBIT
Interest expense
Ratio
2010
$000's
18,056
597
30.24
EBIT
Interest expense
2009
$000's
22,006
118
186.49
2008
$000's
14,166
154
91.99
As can be seen, the ratio rose from 91.99 in 2008 to 186.49 in 2009 and declined to
30.24 in 2010.
The lower the ratio, the more the company is burdened by debt expense. The Country
Road‘s interest coverage ratios in past three years were comfortable. It means that
Country Road could easily afford the interest.
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2.2: Book value per share to the market value per share
Book to market ratio attempts to identify whether Country Road’s stocks are valued
fairly. As Deegan argues by providing series of studies, market prices seem to reflect
the current values of an entity’s assets implicitly, while, book value may not reflect true
asset value when assets are not revaluated fairly (p488). As shown in the below table,
Country Road’s market value have been constantly greater than its book value, hence,
book to market ratio have been less than one, that is to say, the stock is overvalued. This
means that market has been expecting Country Road would return benefit in the future
more than what is indicated solely by book value. The whole economy slumped due to
the financial crisis in 2008, however the figure was lower in 2008, this would be
explained that the investors still had enough confidence in general .
Table 9
2010
2009
2008
$84,792,000
$74,981,000
$69,989,000
69,056,822
69,056,822
69,056,822
Book value per share
$1.23
$1.09
$1.01
Market value per share
$3.72
$3.10
$3.35
0.33
0.35
0.30
Shareholders' equity-preferred shares
No. of common shares issued and outstanding
Book to market ratio
2.3: Changes in the CEO
There was a change in the CEO during financial year of 2010. The former CEO Ian
Moir was in the position for a decade until his resignation on 31 December, 2009. A
new CEO had not been appointed during 2010 financial year.

John Cheston (Executive Director & Chief Executive Officer). He was
appointed to the role of CEO on 1 July 2010. Prior to this appointment, he had
been CEO of Robinsons and Co Ltd (Singapore) for 5 years. However he
resigned on 13 September 2010.

Ian Moir (Non-Executive Director). He was a former CEO who appointed to
the Board on 23 October 1998 and resigned on 31 December 2009.

Susman (Non-Executive Director & Chairman). He was appointed to the
Board on 6 December 2000.
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
Norman Thomson (Non-Executive Director). He was appointed to the Board
on 5 February 2003.

Glenn Gilzean (Executive Director & GGM Retail Operations. He was
appointed to the Board on 8 December 2006.
Under positive accounting theory, ‘big bath’ accounting tends to occur when a new
CEO is appointed. Big bath is defined as “the practice of overstating one-time
charges associated with acquisitions and restructures” (Godfrey et al, p.345). For
example, companies write down the value of assets in order to lower future
depreciation expenses thus report greater profits. However it is not the case for
Country Road since no new CEO had been appointed until 30th June 2010.
2.4: Auditor firm and the audit partner
Auditor firm
Year of 2007-;
Ernst &Young
Country Road has not changed the auditor firm since 2008. As indicated in the
Corporate Governance Report in its annual reports, the annual appointment of the
external auditor is governed by the Audit Committee. As Ernst &Young is a globally
renowned auditor firm, it is a positive sign for its credibility of financial reporting.
Audit partner
Year of 2007-2008; Robert Perry
Year of 2009-2010; Glenn Carmody
As provided above, Country Road’s audit partner changed in 2009. As indicated in its
annual reports, the roles of lead audit partner and review audit partner are rotated every
five years. Frequent change in the audit partner is a positive sign for external users of
financial statements since this will help maintaining independence of audit partners
resulting in better quality of financial statements.
2.5: Non Audit Services by the Auditor
As shown in its financial reports, there are no non-audit services provided by Ernst &
Young (2007-2009) which had shown the good sign of independence of the audit team
engaging their work. However, non-audit service which was related to the audit of
sales certification was provided by Ernst & Young in 2010 (Note17, 2010 financial
report). The Directors have received an Independence Declaration from the external
auditor Ernst & Young showing that there have been no contraventions of the auditor
independence requirements of the Corporations Act 2001 or any applicable code of
professional conduct. The Directors are satisfied that the provision of non-audit
services is compatible with the general standard of independence for auditors imposed
15 / 22
by the Corporations Act 2001. The nature and scope of each type of non-audit service
provided means that auditor independence was not compromised.
2.6: Issues raised by the Auditing Firm
An audit involves performing procedures to obtain audit evidence about the amounts
and disclosures in the financial report. In the auditors’ opinion, in 2008 to 2010, a
qualified opinion for the annual reports has been given to examine that the reports are
truly and fairly presented and that they comply with the requirements of the Australian
Accounting Standards and the Australian Corporation Act 2001.
The annual reports reveal that there has been no financial significant issues raised by
the auditing firm of Country Road.
16 / 22
Appendix
Appendix 1 Income Statement
2010
$000's
381,219
2009
$000's
347,547
2008
$000's
293,198
Cost of Sales
Gross Profit
(164,789)
216,430
(145,275)
202,272
(119,655)
173,543
Employment expenses
Occupancy expenses
Depreciation expenses
Marketing expenses
Other expenses
(85,755)
(70,603)
(11,247)
(13,535)
(17,234)
(198,374)
(84,207)
(60,480)
(8,507)
(10,709)
(16,363)
(180,266)
(69,048)
(56,186)
(8,226)
(10,430)
(15,487)
(159,377)
Profit before finance expenses and income tax
expense
18,056
22,006
14,166
Finance expenses
Profit before income tax expense
(597)
17,459
(118)
21,888
(154)
14,012
Income tax(expense) or benefit
Net profit for the period
(5,128)
12,331
(6,239)
15,649
(4,253)
9,759
Appendix 2 Common Size – I.S.
2010
%
100.00
2009
%
100.00
2008
%
100.00
43.23
56.77
(41.80)
58.20
(40.81)
59.19
(22.49)
(18.52)
(2.95)
(3.55)
(4.52)
(52.04)
(24.23)
(17.40)
(2.45)
(3.08)
(4.71)
(51.87)
(23.55)
(19.16)
(2.81)
(3.56)
(5.28)
(54.36)
4.74
6.33
4.83
(0.16)
4.58
(0.03)
6.30
(0.05)
4.78
Revenue
Revenue
Cost of Sales
Gross Profit
Employment expenses
Occupancy expenses
Depreciation expenses
Marketing expenses
Other expenses
Profit before finance expenses and income tax
expense
Finance expenses
Profit before income tax expense
17 / 22
(1.35)
3.23
(1.80)
4.50
(1.45)
3.33
2010
2009
2008
$000's
$000's
$000's
Cash and cash equivalents
2,466
25,804
21,791
Trade and other receivables
7,438
3,371
3,849
39,113
38,758
28,553
Income tax(expense) or benefit
Net profit for the period
Appendix 3 Balance Sheet
CURRENT ASSETS
Inventories
Income tax receivable
941
Prepayments
1,063
1,383
1,018
Derivative financial instruments
2,294
824
9
53,315
70,140
55,220
15
35
39
Plant and equipment
56,072
47,163
33,224
Intangible assets
11,293
11,277
11,189
8,189
12,868
8,728
310
185
112
-
-
-
75,879
71,528
53,292
129,194
141,668
108,512
27,743
29,458
19,424
3,000
-
-
-
8,412
3,917
Provisions
7,569
15,709
7,931
Derivative financial instruments
1,911
9,663
3,337
40,223
63,242
34,609
Provisions
4,179
3,445
3,914
Total non-currnte liabilities
4,179
3,445
3,914
Total liabilities
44,402
66,687
38,523
Net Assets
84,792
74,981
69,989
74,087
74,087
74,087
Total current assets
NON-CURRENT ASSETS
Receivables
Deferred tax assets(net)
Prepayments
Other financial assets
Total non-current assets
Total assets
CURRENT LIABILITIES
Trade and other payable
Interest-bearing loans and borrowings
Current tax liabilities
Total current liabilities
NON-CURRENT LIABILITIES
EQUITY
Contributed equity
18 / 22
(196)
(6,874)
(3,254)
Retained profits(losses)
10,901
7,768
(844)
Total equity
84,792
74,981
69,989
2010
2009
2008
%
%
%
Cash and cash equivalents
1.91
18.21
20.08
Trade and other receivables
5.76
2.38
3.55
30.27
27.36
26.31
Income tax receivable
0.73
-
-
Prepayments
0.82
0.98
0.94
Derivative financial instruments
1.78
0.58
0.01
41.27
49.51
50.89
0.01
0.02
0.04
43.40
33.29
30.62
Intangible assets
8.74
7.96
10.31
Deferred tax assets(net)
6.34
9.08
8.04
Prepayments
0.24
0.13
0.10
-
-
-
58.73
50.49
49.11
100.00
100.00
100.00
21.47
20.79
17.90
2.32
-
-
5.94
3.61
Provisions
5.86
11.09
7.31
Derivative financial instruments
1.48
6.82
3.08
31.13
44.64
31.89
Provisions
3.23
2.43
3.61
Total non-current liabilities
3.23
2.43
3.61
Total liabilities
34.37
47.07
35.50
Net Assets
65.63
52.93
64.50
57.35
52.30
68.28
Reserves
Appendix 4 Common Size – B.S.
CURRENT ASSETS
Inventories
Total current assets
NON-CURRENT ASSETS
Receivables
Plant and equipment
Other financial assets
Total non-current assets
Total assets
CURRENT LIABILITIES
Trade and other payable
Interest-bearing loans and borrowings
Current tax liabilities
Total current liabilities
NON-CURRENT LIABILITIES
EQUITY
Contributed equity
19 / 22
Reserves
Retained profits (losses)
Total equity
(0.15)
(4.85)
(3.00)
8.44
5.48
(0.78)
65.63
52.93
64.50
20 / 22
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