CONTACT DETAILS
REGISTRY
Level 16, 61 Lavender Street
Milsons Point NSW 2061
AUSTRALIA
Telephone +61 2 9409 3670
Investor Services 1800 ARDENT
Fax +61 2 9409 3670
www.ardentleisure.com.au
c/- Link Market Services Limited
Level 12, 680 George Street
Sydney NSW 2000
Locked Bag A14
Sydney South NSW 1235
Telephone 1300 720 560
registrars@linkmarketservices.com.au
Ardent Leisure Trust
ARSN 093 193 438
Ardent Leisure Limited
ABN 22 104 529 106
Ardent Leisure Management Limited
ABN 36 079 630 676
(AFS Licence No. 247010)
ASX RELEASE
28 September 2016
The Manager
Company Notices Section
ASX Limited
20 Bridge Street
SYDNEY NSW 2000
Dear Sir/Madam
2016 Annual Report, Corporate Governance Statement and Appendix 4G
In accordance with Listing Rule 4.7, please find attached, for release to the market, the Ardent Leisure
Group Annual Report 2016, the Corporate Governance Statement and Appendix 4G.
Yours faithfully
Alan Shedden
Company Secretary
Ardent Leisure Group is a specialist operator of leisure and entertainment assets across Australia, New Zealand and the United
States. The Group owns and operates Dreamworld, WhiteWater World, SkyPoint, SkyPoint Climb, d’Albora Marinas, Hypoxi Body
Contouring, Goodlife health clubs, AMF and Kingpin bowling centres across Australia and New Zealand. The Group also operates
Main Event Entertainment, the fastest growing family entertainment chain in the United States. For further information on the
Group’s activities please visit our website at www.ardentleisure.com.au
AMF Bowling | d’Albora Marinas | Dreamworld | Goodlife Health Clubs | Hypoxi
Kingpin Bowling | Main Event Entertainment | SkyPoint | SkyPoint Climb | WhiteWater World
For personal use only
Annual Financial Report
for the year ended 30 June 2016
The financial report was authorised for issue by the Directors of Ardent Leisure Management Limited
(ABN 36 079 630 676) and Ardent Leisure Limited (ABN 22 104 529 106) on 23 August 2016. The
Directors have the power to amend and reissue the financial report.
For personal use only
Financial Report
Directors’ report to stapled security holders
Income Statements
Statements of Comprehensive Income
Balance Sheets
Statements of Changes in Equity
Statements of Cash Flows
Notes to the Financial Statements
1. Summary of significant accounting policies
Ardent Leisure Trust and Ardent Leisure Limited formation
Revenue from operating activities
Borrowing costs
5. Property expenses
Net (loss)/gain from derivative financial instruments
Management fees
Other expenses
Remuneration of auditor
Income tax expense
Earnings per security/share
Distributions and dividends paid and payable
Receivables
Derivative financial instruments
Inventories
Discontinued operation
Construction in progress
Other assets
Investment properties
Property, plant and equipment
Intangible assets
22. Deferred tax assets
23. Payables
24. Interest bearing liabilities
25. Provisions
26. Other liabilities
27. Deferred tax liabilities
28. Contributed equity
29. Security-based payments
Reserves
(Accumulated losses)/retained profits
Business combinations
Cash and cash equivalents
Cash flow information
Net tangible assets
Related party disclosures
Segment information
Capital and financial risk management
39. Fair value measurement
40. Contingent liabilities
41. Capital and lease commitments
42. Deed of Cross Guarantee
43. Parent entity financial information
44. Events occurring after reporting date
Directors’ declaration to stapled security holders
Independent auditor’s report to stapled security holders
Investor Analysis
Investor Relations
Corporate Directory
2
39
40
41
42
43
44
44
59
59
59
60
60
60
61
61
62
63
65
65
66
67
67
69
70
70
71
73
76
77
77
80
81
81
82
83
90
91
92
93
93
94
94
96
101
109
112
112
114
116
117
118
119
121
122
123
Ardent Leisure Group | Annual Report 2016 1
For personal use only
Directors’ report to stapled
security holders
Directors’ report to stapled security holders
The Directors of Ardent Leisure Management Limited (Manager), (as responsible entity of Ardent Leisure Trust) and the Directors of
Ardent Leisure Limited present their report together with the consolidated financial report of Ardent Leisure Group (Group or
Consolidated Group) and the consolidated financial report of Ardent Leisure Limited Group (ALL Group) for the year ended 30 June
2016.
The financial report of the Group comprises of Ardent Leisure Trust (Trust) and its controlled entities including Ardent Leisure Limited
(ALL or Company) and its controlled entities. The financial report of the ALL Group comprises of Ardent Leisure Limited and its controlled
entities.
Ardent Leisure Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place
of business are Level 16, 61 Lavender Street, Milsons Point, NSW 2061.
The units of the Trust and the shares of ALL are combined and issued as stapled securities in the Group. The units of the Trust and shares
of ALL cannot be traded separately and can only be traded as stapled securities. Although there is no ownership interest between the
Trust and ALL, the Trust is deemed to be the parent entity of the Group under Australian Accounting Standards.
1. Directors
The following persons have held office as Directors of the Manager and ALL during the period and up to the date of this report:
Neil Balnaves AO (Chair);
Roger Davis;
David Haslingden (appointed 6 July 2015);
Don Morris AO;
Deborah Thomas;
George Venardos; and
Melanie Willis (appointed 17 July 2015).
2.
Principal activities
The Group’s principal activity is to invest in and operate leisure and entertainment businesses in Australia, New Zealand and the United
States. There were no significant changes in the nature of the activities of the Group during the year.
3.
Distributions
The total distribution of income for the year ended 30 June 2016 will be 12.5 cents (2015: 12.5 cents) per stapled security which will be
paid by the Group. An interim distribution of 7.0 cents (2015: 7.0 cents) per stapled security was paid in February 2016. This comprised
a distribution paid by the Trust of 7.0 cents (31 December 2014: 4.0 cents) and no dividend paid by the Company (31 December 2014:
3.0 cents) per stapled security. A final distribution for the year ended 30 June 2016 of 5.5 cents (2015: 5.5 cents) per stapled security will
be paid by the Trust in August 2016. A provision has not been recognised in the financial statements at 30 June 2016 as this distribution
had not been declared at the reporting date.
4. Operating and financial review
Overview
The Group’s strategy is to focus primarily on leisure and entertainment segments within its geographical areas of operation with mass
market appeal. During the year, the Group‘s operations comprised its five operating divisions, being family entertainment centres in
the US, bowling centres, marinas, theme parks and health clubs.
On 6 October 2015, the Group acquired an amusement arcade at Penrith, NSW for $1.3 million and a Hypoxi studio in Caroline Springs,
Victoria for $0.1 million. Refer to Note 32 to the financial statements.
On 22 March 2016, the Group announced its decision to sell the Marinas division as part of the Group’s refocus on family entertainment
and capital management plan, with plans to reinvest the majority of proceeds into Main Event, the family entertainment division in the
US. The sale process is well advanced and, at 30 June 2016, this business has been classified as a discontinued operation, with associated
assets and liabilities classified as held for sale.
On 19 August 2016, the Group announced that it had entered into a sale agreement to dispose of its entire interests in the health clubs
division for gross proceeds (excluding working capital adjustments and selling costs) of $260.0 million, comprising a cash payment of
$230.0 million and deferred consideration of $30.0 million in the form of vendor loan notes payable no later than two years from
completion. Completion is subject to landlord and other third party approvals and is expected to occur prior to 31 December 2016. The
financial information relating to the health clubs division is set out in Note 37 to the financial statements. The Group expects to recognise
a profit on disposal.
2 Ardent Leisure Group | Annual Report 2016
For personal use only
Directors’ report to stapled
security holders
4.
Operating and financial review (continued)
Group results
The performance of the Consolidated Group, as represented by the aggregated results of its operations for the year, was as follows:
Family entertainment centres
Bowling centres
Marinas
Theme parks
Health clubs
Other
Total
Depreciation and amortisation*
Divisional EBIT
Pre-opening expenses, straight lining of fixed rent increases, IFRS
depreciation, decrease in onerous lease provisions, health club brands
and customer relationship intangible asset amortisation, impairment of
property, plant and equipment and intangible assets and discontinued
operation selling costs not included in divisional EBIT
Valuation gain/(loss) - investment properties
Loss on closure of bowling centre
Loss on disposal of assets
Gain on sale and leaseback of family entertainment centres
Net (loss)/gain from derivative financial instruments
Interest income
Corporate costs
Business acquisition costs refunded/(paid)
Borrowing costs
Net tax expense
Profit for the year
Core earnings (Note 11 to the financial statements)
Segment
revenues
2016
$’000
238,974
130,494
23,000
107,582
187,555
9
687,614
Segment
revenues
2015
$’000
177,123
116,510
22,952
99,571
178,388
59
594,603
Segment
EBITDA*
2016
$’000
59,168
18,224
10,157
34,725
30,114
-
152,388
(47,166)
105,222
(27,383)
2,059
-
(514)
1,672
(170)
81
(15,144)
134
(14,874)
(8,696)
42,387
62,395
Segment
EBITDA*
2015
$’000
45,657
13,989
10,150
32,015
28,152
49
130,012
(36,998)
93,014
(32,122)
(501)
(104)
(523)
6,959
552
121
(15,056)
(1,938)
(11,333)
(6,947)
32,122
56,234
*
Segment earnings before interest, tax, depreciation and amortisation (EBITDA) excludes pre-opening expenses, straight lining of fixed rent increases, IFRS depreciation,
increase/decrease in onerous lease provisions, amortisation of health club brands and customer relationship intangible assets, impairment of property, plant and equipment and
intangible assets and selling costs associated with a discontinued operation. IFRS depreciation represents depreciation recorded under Australian Accounting Standards effective 1
July 2005 on property, plant and equipment which were previously classified as investment properties. Management believes that adjusting the segment result for these items allows
the Group to more effectively compare underlying performance against prior periods and between divisions. Segment EBRITDA, which represents segment EBITDA before property
costs, is another measure used by management to assess the trading performance of divisions excluding the impact of property costs.
Profit for the year increased by $10.3 million, or 32.0%, to $42.4 million, mainly due to the following factors:
Revenue from operating activities increased by $93.0 million, or 15.6% to $687.6 million and divisional EBITDA increased by $22.4
million, or 17.2%, to $152.4 million. Further commentary on divisional results is set out separately below;
There were $2.1 million of valuation gains on investment properties in the current year compared to a $0.5 million valuation loss on
investment properties in the prior year;
There was a $2.2 million reduction in onerous lease provisions in the current year compared to a $2.6 million increase in onerous
lease provisions in the prior year;
There was a $2.1 million reduction in business acquisition costs compared to the prior year.
Ardent Leisure Group | Annual Report 2016 3
For personal use only
Directors’ report to stapled
security holders
4.
Operating and financial review (continued)
Group results (continued)
However, this was partially offset by the following factors:
Depreciation (including IFRS depreciation) and amortisation of property, plant and equipment and software increased by $9.8
million to $64.7 million;
Pre-opening expenses increased by $2.1 million to $8.6 million;
There was a $1.7 million gain on the sale and leaseback on two Main Event family entertainment centres compared $7.0 million in
the prior year;
$1.0 million of selling costs associated with sale of d’Albora Marinas were incurred in the current year;
Borrowing costs increased by $3.5 million to $14.9 million; and
Net tax expenses increased by $1.7 million to $8.7 million.
The above factors also delivered an increase in core earnings of $6.2 million, or 11.0%, to $62.4 million. Core earnings (as defined in Note
11 to the financial statements) represents the earnings of the Group after adding back unrealised items (such as unrealised gains or
losses on derivatives and unrealised valuation gains and losses on investment properties and property, plant and equipment), straight
lining of fixed rent increases, IFRS depreciation, onerous lease costs, impairment of property, plant and equipment and intangible assets,
amortisation of intangible assets and one off realised items.
Family entertainment centres
The performance of Main Event’s family entertainment centres is summarised as follows:
Total revenue
EBRITDA (excluding pre-opening expenses)
Operating margin
Property costs
EBITDA
2016
US$'000
174,683
63,996
36.6%
(20,449)
43,547
2015
US$'000
143,612
52,043
36.2%
(15,352)
36,691
Change
%
21.6
23.0
33.2
18.7
During the year, total US dollar revenue grew by 21.6%, driving EBITDA growth of 18.7% underpinned by the success and strong
performance of new centres opened over the last 12 months as set out below:
Constant centres
New centres
Corporate and regional office
expenses/sales and marketing
Total
Revenue
Revenue
Change
EBRITDA
EBRITDA
Change
2016
2015
US$'000
US$'000
97,739
76,944
99,474
44,138
-
174,683
-
143,612
%
(1.7)
74.3
-
21.6
2016
2015
US$'000
US$'000
44,214
33,621
45,280
18,681
(13,839)
63,996
(11,918)
52,043
%
(2.4)
80.0
16.1
23.0
Seven new centres were opened during the year, bringing the total number of centres to 27 in 10 states. This contributed a $14.1 million
increase in EBRITDA. Over the last two years, the portfolio has more than doubled in size and the success of new centres outside of Texas
has confirmed the broader US roll out opportunity and created geographical diversification.
Operating margins for the division have improved to 36.6% due to economies of scale from an increased number of centres and
disciplined management of costs of sales and labour.
The division is currently focussed on growing its portfolio with the portfolio expected to grow at a rate of 30-40% per annum, mostly
concentrated outside of Texas. Construction is underway on four new locations, with plans for 11 new centres in the next 12 months.
4 Ardent Leisure Group | Annual Report 2016
For personal use only
Directors’ report to stapled
security holders
4.
Operating and financial review (continued)
Bowling centres
The performance of bowling centres is summarised as follows:
Total revenue
EBRITDA (excluding pre-opening expenses)
Operating margin
Property costs (excluding straight-line rent and onerous lease costs)
EBITDA
2016
$'000
130,494
45,291
34.7%
(27,067)
18,224
2015
$'000
116,510
40,279
34.6%
(26,290)
13,989
Change
%
12.0
12.4
3.0
30.3
The division recorded total revenues of $130.5 million, being an increase of 12.0% compared to the prior year. EBITDA grew by 30.3%
through a combination of constant centre growth and growth from new centres and acquisitions. Operating margins have increased
slightly from 34.6% to 34.7% in the year.
A further analysis of bowling centres’ performance is summarised as follows:
Constant centres
Centres closed
New centres /acquisitions
Corporate and regional office
expenses/sales and marketing
Total
Revenue
Revenue
Change
EBRITDA
EBRITDA
Change
2016
$'000
113,623
991
15,880
2015
$'000
109,086
2,497
4,874
%
4.2
(60.3)
225.8
2016
$'000
54,909
269
8,087
2015
$'000
53,061
856
2,652
-
130,494
53
116,510
(100.0)
12.0
(17,974)
45,291
(16,290)
40,279
%
3.5
(68.6)
204.9
10.3
12.4
The division experienced four consecutive quarters of constant centre and new centre revenue growth which, combined with a strong
focus on management of operational costs, delivered EBITDA growth of 30.3%. Solid revenue growth was driven by a multi-attraction
entertainment offering (including new food menus in all centres and new amusement games with an improved redemption product
offering), targeted multi-channel marketing, digital development and an energised customer service culture focussed on hospitality.
Three new sites were opened over the last 12 months which contributed positively to the division’s results: Kingpin Darwin, NT (August
2015), Playtime Penrith, NSW (October 2015) and Playtime Miranda, NSW (February 2016). During the year, the division also exited a
centre at Golden Grove, SA and will continue to evaluate divestment opportunities for any under-performing non-core centres.
The division will continue to focus on investing in the customer experience through digital transformation, an improved product
offering and better customer service. Key growth initiatives include identification of additional family entertainment and amusements
sites, refurbishment and conversion of existing traditional sites to multi-attraction family entertainment centres and the extensive
refurbishment of the flagship Kingpin Crown venue which will commence in July 2016 and reopen in December 2016.
Marinas
The performance of marinas is summarised as follows:
2016
$'000
2015
$'000
Change
%
Total revenue
EBRITDA
Operating margin
(7.8)
Property costs
EBITDA
0.1
Revenue from marinas increased by 0.2% to $23.0 million, and EBITDA increased by 0.1% to $10.2 million. Marina revenue principally
comprises the following:
22,952
12,765
55.6%
(2,615)
10,150
23,000
12,569
54.6%
(2,412)
10,157
0.2
(1.5)
Berthing
Land
Fuel and other
Total
2016
$'000
13,203
5,206
4,591
23,000
2015
$'000
12,865
5,220
4,867
22,952
Change
%
2.6
(0.3)
(5.7)
0.2
Ardent Leisure Group | Annual Report 2016 5
For personal use only
Directors’ report to stapled
security holders
4.
Operating and financial review (continued)
Marinas (continued)
EBITDA was broadly comparable with the prior year with berthing revenue recovering well through the year after the early adverse
impact of the Spit redevelopment. Occupancy was in line with the prior year at 86% and operating margins were strong despite being
impacted during the year by one off items such as the Spit redevelopment and Nelson Bay function centre start-up costs.
On 22 March 2016, the Group announced its decision to sell this division as part of the Group’s refocus on family entertainment and
capital management plan, with plans to reinvest the majority of proceeds into the Main Event family entertainment division in the US.
Theme parks
The performance of the theme parks is summarised as follows:
Total revenue
EBRITDA
Operating margin
Property costs
EBITDA
Attendance
Per capita spend ($)
2016
$'000
107,582
35,947
33.4%
(1,222)
34,725
2015
$'000
99,571
33,163
33.3%
(1,148)
32,015
2,413,937
44.57
2,132,927
46.68
Change
%
8.0
8.4
6.4
8.5
13.2
(4.5)
Total revenue has increased by $8.0 million, or 8.0% to $107.6 million driven by improvements across all major categories. Full year
EBITDA earnings increased by 8.5% to $34.7 million with operating margins improving slightly to 33.4%.
Food and beverage and retail sales performed strongly on new, themed outlets including the new gourmet burger bar and retro-style
ice cream parlour. Entry revenue growth has been driven by visitor growth across all key domestic and international markets, particularly
China (up 36% over prior year), outstripping the broader Gold Coast tourism growth.
The division continues to focus on delivering unique attractions and experiences to drive attendance and spend. This includes
partnerships with iconic brands, including Mattel Hot Wheels, DreamWorks, V8 Supercars and ABC Kids. During the year, the division
has benefited from the launch of a new motorsport precinct with state of the art race car simulators, extended summer trade including
Beatbox sound and light show and the arrival of new tiger cubs. It has also launched two multi lingual apps to improve the interpretation
experience at SkyPoint and Dreamworld Corroboree.
The SkyPoint business continues to perform well, with strong growth across all revenue segments, and surpassed $10.0 million in annual
revenue for the first time.
The division has received excellent customer feedback with customer satisfaction up on all measures. Customer research has helped
guide investment decisions around improving service levels and park development. This includes expanded shows and entertainment,
continued focus on park presentation, theming and atmosphere, investment in queue line entertainment and earlier opening during
peak periods.
The division will continue to focus on developing new and unique attractions and food, retail and events products. This includes plans
for new Asian themed food and retail outlets at Tiger Island, a 270 seat undercover event space, unique indigenous experiences at
Corroboree, extended summer opening hours and virtual reality experiences. The redeveloped, interactive Tiger Island is expected to
re-open in September 2016 and Australia’s largest LEGO retail store is expected to launch in November 2016.
Health clubs
The performance of health clubs is summarised as follows:
Total revenue
EBRITDA (excluding pre-opening expenses)
Operating margin
Property costs (excluding straight-line rent and onerous lease costs)
EBITDA
6 Ardent Leisure Group | Annual Report 2016
2016
$'000
187,555
77,511
41.3%
(47,397)
30,114
2015
$'000
178,388
72,543
40.7%
(44,391)
28,152
Change
%
5.1
6.8
6.8
7.0
For personal use only
Directors’ report to stapled
security holders
4.
Operating and financial review (continued)
Health clubs (continued)
Revenue from the health clubs division increased by 5.1% to $187.6 million for the year, underpinned by exceptional member sales and
growth in average revenue per member.
Constant clubs
Clubs closed
New clubs/acquisitions
Corporate and regional office
expenses/sales and marketing
Total
Revenue
Revenue
Change
EBRITDA
EBRITDA
Change
2016
$'000
160,392
30
24,568
2015
$'000
157,055
342
18,156
2,565
187,555
2,835
178,388
%
2.1
(91.2)
35.3
(9.5)
5.1
2016
$'000
81,421
10
13,133
2015
$'000
77,249
(18)
9,824
(17,053)
77,511
(14,512)
72,543
%
5.4
(155.6)
33.7
17.5
6.8
Constant clubs recorded significant improvement in EBRITDA performance, with a 5.4% increase on prior year driven by various
initiatives including conversion to 24/7 operations, a full service large format offering and an improved program and product offering.
As a result, constant centre members grew by over 14,000 members during the year.
45 clubs were converted to 24/7 operations in the year, with a further 19 clubs on schedule to be converted by the end of June 2017.
Sales in these converted clubs were up 36% and leavers down 18% on prior corresponding periods.
The divisional operating margin has improved from 40.7% to 41.3%, with continued focus on cost control including reduced staff in
24/7 clubs, rostering improvements, targeted marketing spend and utility efficiency programs.
New clubs at Docklands, VIC (March 2016) and Success, WA (April 2015) continue to perform ahead of expectations.
As noted above, on 19 August 2016, the Group announced that it had entered into a sale agreement to dispose of this division with
completion expected to occur prior to 31 December 2016.
Strategic focus
Overall, the Group benefits from the diversity of its operating divisions. Each of the divisions has a growth strategy for FY17 with a
common theme that offers customers quality affordable leisure experiences, innovative products and a consistently high level of
customer service, customer engagement and importantly, value for money.
Future earnings growth will be driven by four key operational strategies:
Customer
People
Volume
Efficiency
To be truly customer centric by using research, feedback and customer analytics to deliver more innovative and
relevant customer experiences that meet the ever-changing needs of our customers. To create awesome, highly valued
leisure experiences that encourage more people, to visit more often and spend more with us.
To deliver enhanced customer service and satisfaction through “noticeably better people and culture” by providing all
staff with superior training, development, reward and recognition.
To drive increased volume with competitive value propositions, effective marketing, better customer service and
loyalty rewards. Our aim is to maximise capacity without impacting margin.
To produce greater operational efficiencies by leveraging Group buying capacity and volume. To create better
outcomes and solutions for our customers and staff with investment in technology and effective IT systems.
5.
Significant changes in the state of affairs
As noted above, on 22 March 2016, the Group announced its decision to sell the Marinas division as part of the Group’s capital
management plan and to reinvest the majority of proceeds into the Group’s Family entertainment centres division in the US. In addition,
on 19 August 2016, the Group announced that it had entered into a sale agreement to dispose of the Health clubs division.
In the opinion of the Directors, there were no other significant changes in the state of affairs of the Consolidated Group or ALL Group
that occurred during the year not otherwise disclosed in this report or the financial statements.
Ardent Leisure Group | Annual Report 2016 7
For personal use only
Directors’ report to stapled
security holders
6. Value of assets
Value of total assets
Value of net assets
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2016
$’000
2015
$’000
2016
$’000
2015
$’000
1,157,632
619,983
996,507
579,482
649,324
174,883
499,065
151,007
The value of the Group’s and the ALL Group’s assets is derived using the basis set out in Note 1 to the financial statements.
7.
Interests in the Group
The movement in stapled securities of the Group during the year is set out below:
Consolidated
Group
Consolidated
Group
2016
2015
442,322,106
19,377,615
-
-
1,339,895
405,055,708
6,358,756
20,746,888
8,298,754
1,862,000
463,039,616 442,322,106
Stapled securities on issue at the beginning of the year
Stapled securities issued under Distribution Reinvestment Plan
Stapled securities issued for Fitness First WA placement
Stapled securities issued for Security Purchase Plan
Stapled securities issued as part of ALL's employee security-based payments plans
Stapled securities on issue at the end of the year
8. Information on current Directors
Neil Balnaves AO
Chair
Appointed:
Ardent Leisure Management Limited – 26 October 2001.
Ardent Leisure Limited – 28 April 2003.
Age: 72.
Neil Balnaves was appointed as Chair of the Group in 2001. Neil has worked in the entertainment and media industries for over 50 years,
previously holding the position of Executive Chairman of Southern Star Group Limited which he founded. Neil was appointed Chancellor
of Charles Darwin University on 21 April 2016 and is also a Trustee Member of Bond University and has an Honorary Degree of Doctor
of the University. Neil is a director of the Sydney Orthopaedic Research Institute and a member of the Advisory Council and Dean’s Circle
of The University of New South Wales (Faculty of Medicine) and in 2010 received an Honorary Doctorate of the University.
Neil is a Board member of the Art Gallery of South Australia, is a director of Technicolor Australia Limited and serves on the boards of
numerous advisory and community organisations and is a Foundation Fellow of the Australian Institute of Company Directors. Neil’s
former directorships include Hanna-Barbera Australia, Reed Consolidated Industries, Hamlyn Group, Taft Hardie and Southern Cross
Broadcasting.
In 2006, Neil established The Balnaves Foundation, a philanthropic fund that focuses on education, medicine and the arts. In 2010, Neil
was appointed an Officer of the Order of Australia for his services to business and philanthropy.
Neil is non-executive Chair of the Group and a member of both the Remuneration and Nomination Committee and the Audit and Risk
Committee.
Former listed directorships in last three years:
None.
Interest in stapled securities:
3,001,510.
8 Ardent Leisure Group | Annual Report 2016
For personal use only
Directors’ report to stapled
security holders
8.
Information on current Directors (continued)
Roger Davis
Director
Appointed:
Ardent Leisure Management Limited – 1 September 2009.
Ardent Leisure Limited – 28 May 2008.
Age: 64.
Roger Davis was appointed a Director of the Company in May 2008 and the Manager in September 2009. Roger brings to the Board over
35 years of experience in banking and investment banking in Australia, the US and Japan. Roger is presently Chairman of the Bank of
Queensland and a Consulting Director at Rothschild (Australia) Limited and holds non-executive directorships at Argo Investments
Limited, Aristocrat Leisure Limited and AIG Australia Limited. Previously, he was Managing Director at Citigroup where he worked for
over 20 years and more recently was a Group Managing Director at ANZ Banking Group.
Roger’s former directorships include the chairmanship of Esanda, along with directorships of ANZ (New Zealand) Limited, Charter Hall
Office Management Limited (the manager for Charter Hall Office REIT), The Trust Company Limited, TIO Limited and Citicorp Securities
Inc. in the United States.
Roger holds a BEc (Hons) from The University of Sydney and a Master of Philosophy from Oxford.
Roger is Chair of the Safety, Sustainability and Environment Committee and is a member of both the Remuneration and Nomination
Committee and the Audit and Risk Committee.
Former listed directorships in last three years:
The Trust Company Limited (resigned 30 November 2013).
Interest in stapled securities:
200,658.
David Haslingden
Director
Appointed:
Ardent Leisure Management Limited – 6 July 2015.
Ardent Leisure Limited – 6 July 2015.
Age: 55.
David Haslingden was appointed a Director of both the Manager and the Company in July 2015 and brings to the Board considerable
international business experience, particularly in the US and Australia.
David owns and operates the RACAT Group of television production companies in Australia and overseas, including Natural History New
Zealand, Northern Pictures and ZooMoo. He is also a Director of US charity WildAid, having been Chairman for the eight years prior to
2015.
Previously, David was Chairman and a non-executive director of Nine Entertainment Co. Holdings Limited, President and Chief
Operating Officer of Fox Networks Group and Chief Executive of Fox International Channels. David holds a BA and LLB from The
University of Sydney and a LLM from the University of Cambridge.
David is a member of the Remuneration and Nomination Committee and the Safety, Sustainability and Environment Committee.
Former listed directorships in the last three years:
Nine Entertainment Co. Holdings Limited (resigned 1 March 2016).
Interest in stapled securities:
160,000.
Ardent Leisure Group | Annual Report 2016 9
For personal use only
Directors’ report to stapled
security holders
8.
Information on current Directors (continued)
Don Morris AO
Director
Appointed:
Ardent Leisure Management Limited – 1 January 2012.
Ardent Leisure Limited – 1 January 2012.
Age: 71.
Don Morris was appointed a Director of both the Manager and the Company in January 2012 and brings to the Board significant
experience of advertising, marketing and promotion, particularly for tourism entities.
Don was a founding principal of Mojo Australia Advertising, creators of several iconic Australian advertising campaigns, including ‘I Still
Call Australia Home’ for Qantas, the Paul Hogan ‘Shrimp on the Barbie’ for Australian tourism and ‘C’mon Aussie C’mon’ for World Series
Cricket.
Don was the former Chair of both the Australian Tourist Commission and Tourism Queensland. He is a former director of Mojo MDA
Group Limited, R M Williams Limited, Harvey World Travel Limited, PMP Limited, the Tourism & Transport Forum, Tourism Asset Holdings
Limited, Hamilton Island Enterprises Limited and Port Douglas Reef Resorts Limited.
Don was appointed an Officer of the Order of Australia in 2002 for services to tourism and holds a Bachelor of Economics from Monash
University. Don’s current directorships include Fantasea Cruising Pty Limited, Riverside Marine NSW Pty Limited, Ausflag Limited and
The Sport and Tourism Youth Foundation.
He was appointed an Adjunct Professor in Tourism, Sport, and Hotel Management at Griffith University in 2012.
In 2013, he received an Honorary Degree of Doctor of the University, and was appointed Chair of the Advisory Board of the Griffith
Institute for Tourism (GIFT).
Don is a member of the Remuneration and Nomination Committee and the Safety, Sustainability & Environment Committee.
Former listed directorships in the last three years:
None.
Interest in stapled securities:
13,950.
10 Ardent Leisure Group | Annual Report 2016
For personal use only
Directors’ report to stapled
security holders
8.
Information on current Directors (continued)
Deborah Thomas
Managing Director and Chief Executive Officer
Appointed:
Ardent Leisure Management Limited – 1 December 2013.
Ardent Leisure Limited – 1 December 2013.
Age: 60.
Deborah Thomas was appointed a Director of both the Manager and the Company in December 2013. On 10 March 2015, Deborah was
appointed as the Managing Director and Chief Executive Officer of the Group and commenced in this role on 7 April 2015.
One of Australia’s most successful publishing executives, Deborah brings over 28 years of experience in media to the role of Chief
Executive Officer. A former Editor-in-Chief of The Australian Women’s Weekly, a position she held for almost a decade, Deborah has a
deep understanding of product innovation, marketing, retail sales, advertising, digital development and communications.
As Editorial Director across Bauer Media's portfolio of Women’s Lifestyle magazines and Custom Publishing Deborah was responsible
for editorial direction, customer relationships, corporate marketing, public affairs, events and new revenue streams. These initiatives
included licensed products for major brands in partnership with retail stores across Australia and New Zealand. Deborah was a Director
on the Board of Post ACP, the company's joint venture between Bauer Media and the Bangkok Post (Thailand), former Deputy Chair of
the National Library of Australia and a founding member of the Taronga Conservation Foundation.
Former listed directorships in the last three years:
None.
Interest in stapled securities:
31,358.
George Venardos
Director
Appointed:
Ardent Leisure Management Limited – 22 September 2009.
Ardent Leisure Limited – 22 September 2009.
Age: 58.
George Venardos was appointed a Director of both the Manager and the Company in September 2009. George is a Chartered
Accountant with more than 35 years’ experience in finance, accounting, insurance and funds management.
His former positions include Group Chief Financial Officer of Insurance Australia Group and, for 10 years, Chairman of the Finance and
Accounting Committee of the Insurance Council of Australia. George also held the position of Finance Director of Legal & General Group
in Australia and was named Insto Magazine’s CFO of the Year for 2003.
George holds a Bachelor of Commerce in Accounting, Finance and Systems from The University of New South Wales. He is also a Fellow
of Chartered Accountants Australia and New Zealand, the Australian Institute of Company Directors and the Taxation Institute of
Australia. He holds a Diploma in Corporate Management and is a Fellow of the Governance Institute of Australia.
George’s other ASX listed non-executive director positions include IOOF Holdings Limited and BluGlass Limited.
George is Chair of both the Audit and Risk Committee and the Remuneration and Nomination Committee and is also a member of the
Safety, Sustainability and Environment Committee.
Former listed directorships in the last three years:
None.
Interest in stapled securities:
209,857.
Ardent Leisure Group | Annual Report 2016 11
For personal use only
Directors’ report to stapled
security holders
8.
Information on current Directors (continued)
Melanie Willis
Director
Appointed:
Ardent Leisure Management Limited – 17 July 2015.
Ardent Leisure Limited – 17 July 2015.
Age: 51.
Melanie Willis was appointed a Director of both the Manager and the Company in July 2015 bringing significant experience in the global
financial, investment banking and professional services sectors. Melanie has had extensive exposure to leisure related businesses and is
currently a non-executive director of Mantra Group (an Australian hotel and resort marketer and operator with over 20,000 rooms) and
Pepper Group (a leading non-bank lender and third party servicer with operations in Australia, Europe and Asia). Melanie is also a Non-
Executive Director and Chair of the Audit & Risk Committee of Southern Cross Media Group Limited.
Previously, she was Chief Executive Officer of NRMA Investments where she was responsible for the tourism and leisure portfolio. She
holds a Bachelor of Economics from The University of Western Australia, a Masters of Law (Tax) from The University of Melbourne and a
Company Director Diploma from the Australian Institute of Company Directors.
Melanie is a member of both the Audit and Risk Committee and the Remuneration and Nomination Committee.
Former listed directorships in the last three years:
Crowe Horwath Limited (resigned 30 October 2014).
Interest in stapled securities:
9,674.
9. Meetings of Directors
The attendance at meetings of Directors of the Manager and ALL during the year is set out in the following table:
Full meetings
of Directors
Audit and Risk
Meetings of Committees
Remuneration and
Nomination
Safety, Sustainability and
Environment
Eligible to
attend
10
10
10
10
10
10
10
Attended
9
8
10
10
10
10
10
Eligible to
attend
4
4
N/A
N/A
N/A
4
3
Attended
3
4
N/A
N/A
N/A
4
3
Eligible to
attend
6
6
5
6
N/A
6
5
Attended
6
6
4
6
N/A
6
5
Eligible to
attend
N/A
4
4
4
4
4
N/A
Attended
N/A
4
3
4
4
4
N/A
Neil Balnaves AO
Roger Davis
David Haslingden
Don Morris AO
Deborah Thomas
George Venardos
Melanie Willis
10.
Company Secretary
The Group’s Company Secretary is Alan Shedden. Alan was appointed to the position of Company Secretary of the Manager and ALL on
9 September 2009.
Alan has over 18 years of experience as a Company Secretary and, prior to joining the Group, held positions at Brookfield Multiplex
Limited and Orange S.A., the mobile telecommunications subsidiary of France Telecom S.A. Alan also acts as Group General Manager
Corporate Services and provides guidance to the human resources, health and safety, insurance, compliance, risk and energy efficiency
functions. Alan holds a degree in business studies and is a Fellow of the Institute of Chartered Secretaries and Administrators.
12 Ardent Leisure Group | Annual Report 2016
For personal use only
Directors’ report to stapled
security holders
11.
Remuneration report
The Manager and the Directors of ALL present the remuneration report for the Group for the year ended 30 June 2016.
The remuneration report is set out under the following main headings:
(a) Remuneration framework and strategy;
(b) Details of remuneration – key management personnel;
(c)
Service agreements of key management personnel;
(d) Deferred Short Term Incentive Plan (DSTI);
(e) Long Term Incentive Plan (LTIP); and
(f) Additional information.
The information provided in the remuneration report has been audited as required by section 308 (3C) of the Corporations Act 2001.
(a)
Remuneration framework and strategy
The objective of the Group’s executive framework is to attract and retain high quality executives by ensuring that executive
remuneration is competitive with prevailing employment market conditions and also providing sufficient motivation by ensuring that
remuneration is aligned to the Group’s results.
Key management personnel (KMP) are defined in AASB 124 Related Party Disclosures as those having authority and responsibility for
planning, directing and controlling the activities of the Group. For the year ended 30 June 2016, the KMP for the Group comprise the
Independent Directors and the following:
Position
Chief Executive Officer
Chief Financial Officer
CEO – Bowling centres
CEO – Health clubs
CEO – Main Event
CEO – Theme parks
(i)
Package structure review
Name
Deborah Thomas
Richard Johnson
Nicole Noye
Greg Oliver
Charlie Keegan
Craig Davidson
Over the course of the past six years, an inconsistency of relative package mix between the Group’s KMP has arisen. This is largely
due to structural remuneration changes driven by senior appointments and the evolution of the Group towards a truly global
business with the significant growth of the Main Event Entertainment division. The current package mix for KMP is shown below:
Current package mix
Deborah Thomas
Richard Johnson
Nicole Noye
Greg Oliver(1)
Charlie Keegan(1)
Craig Davidson
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Fixed remuneration
STI
LTIP
Throughout the financial year, a program of work has been undertaken to review and recommend changes to KMP packages and
relative mix. The scope of the review was to identify opportunities to ensure that the overall framework reflects both market and current
best practice including the adoption of a face value methodology for calculating grant of equity awards to replace the previous fair
value LTIP grant calculation methodology. A number of alterations have been considered by the Directors and the following have been
adopted:
Ardent Leisure Group | Annual Report 2016 13
For personal use only
Directors’ report to stapled
security holders
11.
Remuneration report (continued)
(a)
(i)
Remuneration framework and strategy (continued)
Package structure review (continued)
LTIP valuation methodology
Effective for LTIP grants in the 2017 financial year and beyond, the Board has adopted a revised valuation methodology to calculate the
number of equity rights to grant to participants. The revised methodology will use the Group’s volume weighted average price (VWAP)
for the five preceding days up to and including the date of the Board meeting approving the grant.
A corresponding adjustment will be made to KMP entitlements under the LTIP whereby contractual entitlements were increased
by 33.3% (one third) to compensate for the change in grant valuation methodology from fair value to face value.
Gateway hurdle
In addition, for any equity rights to vest under the LTIP an initial Gateway Hurdle must be met or exceeded. The Gateway Hurdle adopted
by the Board will apply a minimum return on equity target equal to or greater than 2.5x the 10 year bond yield rate for Australian
Government bonds. Should the Gateway Hurdle be met, then the remaining performance hurdles must also be met.
TSR comparator group
Future grants under the LTIP will no longer be compared against the S&P/ASX Small Industrials Index in calculating total shareholder
return (TSR) and instead will be measured against the performance of the S&P/ASX 200 Industrials Index. The use of the S&P/ASX 200
Industrials Index as a comparative peer group better reflects the recent growth of the Group.
LTI performance hurdles
The existing cumulative average growth rate earnings per security (CAGR EPS) and TSR hurdles will remain in place for grants under the
LTIP; however, a 33.3% (one third) component of the LTIP will be tenure based with a three year tenure period. The incorporation of a
tenure hurdle replaces the existing two year retention tool previously provided by the Deferred STI plan and extends the required
retention period from two to three years.
Performance hurdle
CAGR EPS
TSR
Tenure (three years)
Total
Deferred Short Term Incentive Plan
% of total
33.3%
33.3%
33.3%
100.0%
The use of performance rights granted to KMP under the DSTI as deferral of Cash STI will cease with effect from the 2017 financial year.
The DSTI remains in place for other executives who do not form part of the Group’s KMP.
Options
The LTIP rules also allow for the use of options as the equity vehicle for grants. The Board has reviewed the use of options and determined
that options would only be considered for grants to KMP who meet the minimum qualifying holding instead of performance rights.
Grants of options under the LTIP will be calculated using a fair value approach.
Minimum qualifying holding
In considering the use of options under the LTIP, the Board has determined that the following minimum security holding requirement
would have to be implemented. As at 30 June each year, executives would be required to hold securities in value equal or exceeding
their pre-tax fixed remuneration. If an executive did not meet the minimum security holding requirement, then they would
automatically receive performance rights in their grant under the LTIP.
14 Ardent Leisure Group | Annual Report 2016
For personal use only
Directors’ report to stapled
security holders
11.
Remuneration report (continued)
(a)
(i)
Remuneration framework and strategy (continued)
Package structure review (continued)
Automatic vesting
The existing LTIP operates mandatory automatic vesting of performance rights into fully paid stapled securities. Recent changes to the
deferred taxing point relating to the exercise of equity rights means that the rights only become taxable when they are actually
exercised. As a result of this change, the requirement for automatic vesting of equity rights under the LTIP will be removed.
Stretch cash STI
The Board has extended the Stretch Cash STI target previously only offered to the CEO Health clubs and CEO Main Event, to all KMP. The
Stretch Cash STI operates purely in relation to the over-achievement of financial KPIs and allows participating executives the opportunity
to receive 160% of their target STI if they exceed their financial key performance indicators (KPIs) by 120%.
Delivery of the stretch payment for performance in the 2016 financial year will be made through the issue of performance rights under
the terms of the DSTI which vest into fully paid stapled securities over the following one and two years after grant. Thereafter, payment
of the Stretch Cash STI will be made in cash.
Package components
In order to equalise the relative package components of KMP the Board has approved a new incentive split whereby the contractual
LTIP (after being increased by one third), the target Cash STI and the DSTI have all been combined and then split into two.
This provides for a more equal package split between the Cash STI and LTIP incentive components. With effect from the 2017 financial
year, it is proposed that the package mix for KMP will reflect the following:
Proposed package mix
Deborah Thomas
Richard Johnson
Nicole Noye
Greg Oliver
Charlie Keegan
Craig Davidson
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Fixed remuneration
STI
LTIP
Throughout this process, the Remuneration and Nomination Committee has sought to maintain the alignment of the interests of key
executives with those of investors through the use of performance hurdles designed to drive sustainable growth and provide
meaningful security holdings for executive KMP and thus extend the Group’s long term approach to executive remuneration.
The advisory work carried out by Ernst & Young constituted a “remuneration recommendation” under the Corporations Act 2001 and
was both independently prepared and reported directly to the Chair of the Remuneration and Nomination Committee. As at the date
of this remuneration report, the fees that have been paid to Ernst & Young in respect of their engagement in the package structure
review are set out below:
Date
27 October 2015
22 February 2016
3 May 2016
10 June 2016
Total
Value (ex-GST)
$20,600
$23,690
$25,853
$9,991
$80,134
Ardent Leisure Group | Annual Report 2016 15
For personal use only
Directors’ report to stapled
security holders
11.
Remuneration report (continued)
(a)
(ii)
Remuneration framework and strategy (continued)
Benchmarking
The remuneration framework seeks to align executive reward with the achievement of strategic objectives and in particular, the creation
of sustainable value and earnings growth for investors. In addition, the Board seeks to have reference to market best practice to ensure
that executive remuneration remains competitive, fair and reasonable.
The Board has adopted a process of annual benchmarking of key management personnel (KMP) and accordingly the Remuneration and
Nomination Committee commissioned independent benchmarking from Ernst & Young of the packages of all KMP. This report was
dated 9 February 2016 and formed part of the Board’s program to review KMP package structures that had been commenced in 2015.
Any resulting changes to fixed remuneration will take effect in the 2017 financial year.
Although the benchmark report did not constitute a “remuneration recommendation” under the Corporations Act 2001, as a matter of
good governance it was prepared independently and presented directly to the Chair of the Remuneration and Nomination Committee.
As a result, the Directors are satisfied that the report was prepared in a manner free from undue influence by the Group’s KMP.
The components of the remuneration package of the Chief Executive Officer and other executive KMP for the 2016 financial year are set
out in the table below:
Position
Name
Chief Executive Officer
Chief Financial Officer
CEO – Bowling centres
CEO – Health clubs
CEO – Main Event
CEO – Theme parks
Deborah Thomas
Richard Johnson(2)
Nicole Noye
Greg Oliver(3)
Charlie Keegan(3)
Craig Davidson
Annual base
salary
$670,000
$591,304
$400,000
$490,000
US$500,000
$375,000
STI(1)
LTIP(1)
Deferred equity
25%
25%
35%
35%
35%
35%
50.00%
37.50%
15.00%
15.00%
30.00%
15.00%
Cash
25%
50%
35%
35%
35%
35%
Total annual
target
remuneration
$1,340,000
$1,256,521
$740,000
$906,500
US$1,000,000
$693,750
(1) Target STI and LTIP components are expressed as percentages of annual base salary.
(2) During the year, Mr Johnson was awarded a $75,000 deferred increase of fixed remuneration payable on 1 July 2016.
(3) Total target annual remuneration does not include stretch potential for over-achievement of financial KPIs.
It should be noted that the base salary is considered secure and the STI and LTIP figures set out above are considered “at risk” and will
only be paid if performance targets have been achieved.
(iii)
Non-Executive Directors
Fees paid to Non-Executive Directors reflect the demands which are made on, and the responsibilities of, the Directors. Non-Executive
Directors’ fees are reviewed annually by the Board and the Remuneration and Nomination Committee.
Non-Executive Directors are paid solely by the way of directors’ fees and do not participate in any equity or short term cash-based
incentives schemes. Non-Executive Directors bring a depth of experience and knowledge to their roles and are a key component in the
effective operation of the Board. The maximum aggregate of directors’ fees payable to Directors of the Group is set out in clause 16.1
of the Constitution of Ardent Leisure Limited. The maximum total aggregate level of directors’ fees payable by the Group is $1,200,000
per annum and was set by investors at the 30 October 2014 general meeting.
The Board last reviewed the fee structure in June 2015 and this structure, which remains within the constitutional cap of $1,200,000 per
annum (inclusive of superannuation), is as follows:
Position
Board Chair
Other Non-Executive Director
Audit and Risk Committee
Other Committee
- Chair
- Member
- Chair
- Member
16 Ardent Leisure Group | Annual Report 2016
Current annual fee
$205,000
$120,000
$20,000
$15,000
$12,500
$7,500
For personal use only
Directors’ report to stapled
security holders
11.
(a)
Remuneration report (continued)
Remuneration framework and strategy (continued)
(iv)
Executive pay
The executive pay and reward framework that was in place during the course of the financial year ended 30 June 2016 has three
components:
base pay and benefits;
performance incentives; and
other remuneration such as superannuation.
The combination of these comprises the executive’s total remuneration.
Base pay
Cash
Equity
STI
Performance incentives
LTIP
A total employment cost which can
be made up of a mix of cash salary,
employer superannuation
contributions and non-financial
benefits such as provision of a
motor vehicle.
The STI is a performance bonus set against pre-
determined financial and personal key performance
indicators. The STI paid is split into a cash bonus
payment and a deferred equity component. The equity
based deferral of a component of the STI awarded is
deferred over a period of one and two years.
Equity incentives that vest in three
tranches over a four year testing
period and aligned to both
targeted compound earnings per
share growth and total
shareholder return.
SECURE
AT RISK
AT RISK
Base pay
Base pay includes salary, employer superannuation contributions and non-cash benefits such as provision of a motor vehicle. Base pay
is reviewed annually to ensure that executive pay is competitive with the market. There are no guaranteed base pay increases in the
contracts. Base pay is also reviewed on promotion.
Performance incentives
Performance incentives may be granted under the terms of both the STI and LTIP plans.
The relative proportions of fixed remuneration and performance incentives for executive KMP are set out below:
Position
Chief Executive Officer
Chief Financial Officer
CEO – Bowling centres
CEO – Health clubs
CEO – Main Event
CEO – Theme parks
Name
Deborah Thomas
Richard Johnson
Nicole Noye
Greg Oliver(1)
Charlie Keegan(1)
Craig Davidson
Fixed
50.00%
47.06%
54.05%
54.05%
50.00%
54.05%
STI
25.00%
35.29%
37.84%
37.84%
35.00%
37.84%
LTIP
25.00%
17.65%
8.11%
8.11%
15.00%
8.11%
(1) Cash STI excludes stretch potential for over-achievement of financial KPIs.
It should be noted that none of the Non-Executive Directors participates in the Group’s performance incentive plans.
STI
Cash
The STI or bonus program is designed to reward executives for achievement of a number of KPIs. These KPIs are split into financial and
personal categories, with the financial measures based around earnings and revenue targets representing between 40% and 60% of an
executive’s STI entitlement and personal measures representing the remainder. The percentage split between financial and personal
measures varies between executives depending upon the outcomes and behaviours being driven.
For executives who act in Group-wide roles, the financial KPIs are based on Group earnings and revenue related measures. In contrast,
divisional earnings and revenue measures are used for those executives who occupy divisional roles.
Ardent Leisure Group | Annual Report 2016 17
For personal use only
Directors’ report to stapled
security holders
11.
Remuneration report (continued)
(a)
Remuneration framework and strategy (continued)
(iv)
Executive pay (continued)
STI (continued)
Cash (continued)
Personal KPIs for executives are not financial in nature and are set around execution of improvements and initiatives in such functions
as health and safety, risk management, compliance, relationship management, customer engagement, employee satisfaction and other
strategic initiatives. Hypothetical examples of personal KPIs which may be used are set out in the table below:
Strategy
Financial management
Sales and marketing
People and culture
Innovation
Health and safety
Customer
Drive organic revenue growth across the Group’s existing businesses and identify appropriate strategic
growth opportunities.
Monitor the Group’s balance sheet and cash flow capacity to meet the Group’s strategic plan whilst
optimising the cost of capital and funding flexibility.
Execute a digital sales and marketing strategy to deliver an increase in gross revenue across constant clubs
or centres.
Adopt a standardised approach to talent management, succession planning and leadership development
across all divisions.
Develop and implement a plan to increase the overall employee engagement score by 5% based upon the
2015 results.
Develop a culture of innovation and collaboration across the Group and implement suitable supporting
enterprise architecture.
Develop and implement a strategic plan for the sharing of business intelligence between each of the
operating divisions and the Head Office.
Drive the adoption of a Group-wide safety and return-to-work system and reporting framework to the
standards of a self-insured entity.
Implement an appropriate program of research into social and consumer views of the Group’s products
and experiences to assist in identifying organic growth opportunities and improving customer experience
and engagement.
Measure and evidence an improvement of 15% in customer Net Promoter Scores based upon customer
service and satisfaction in the prior financial year.
The extent to which an executive achieves their personal and financial KPIs is assessed by the Remuneration and Nomination Committee
based upon recommendations from the Chief Executive Officer. The resulting cash bonuses are traditionally payable in cash by 30
September each year. Using a combination of revenue and earnings targets ensures that STI payments are only available when
sustainable value has been created for investors and profit is consistent with the Group’s business plan.
Target awards to KMP under the STI range between 50% and 75% of an executive’s base salary (including superannuation) dependent
upon the executive’s position.
Maximum achievable awards to KMP under the STI, taking into account the stretch STI component made available to the CEO – Main
Event and CEO – Health clubs, range between 50% and 91% of an executive’s base salary (including superannuation).
Deferred equity
A percentage of the actual STI paid to an executive may be deferred and settled in performance rights to acquire fully paid Group stapled
securities for $nil exercise price. These performance rights are issued under the terms of the Group’s Deferred Short Term Incentive Plan
rules and vest in two equal tranches in 12 months and 24 months.
LTIP
The LTIP awards performance rights ranging between 15% and 50% of an executive’s base salary (including superannuation) dependent
upon the executive’s role. Further details of the LTIP are set out in section (e) below.
(v)
Alignment with investor interests
The Directors are committed to the alignment of executives’ remuneration with investors’ interests and seek to achieve this through the
most appropriate mix of base pay and short and long term incentives.
In the 2016 financial year, KMP KPIs were set to drive divisional and Group earnings, with targets set within the Group’s budgetary
framework. In this way, the KPIs used to determine performance under the STI are used to align KMP remuneration with sustainable
earnings growth and other operational long term goals. The deferral of a component of the STI into equity acts as a two year retention
tool to ensure that earnings targets are not achieved at the expense of long term profitability and growth.
18 Ardent Leisure Group | Annual Report 2016
For personal use only
Directors’ report to stapled
security holders
11.
(a)
(v)
Remuneration report (continued)
Remuneration framework and strategy (continued)
Alignment with investor interests (continued)
The LTIP further aligns executives’ remuneration with long term investor returns through the total shareholder return performance
hurdle. The LTIP is subject to the dual measures of total shareholder return and an internal EPS measure. In this way, the LTIP provides
a direct link between executive reward and investor return and offers no benefit to individual executives unless the Group’s performance
exceeds the 50th percentile of the benchmark Australian Securities Exchange (ASX) Small Industrials Index and a minimum compound
EPS growth in the performance period.
(b)
Details of remuneration – key management personnel
Details of the remuneration of KMP of the Group for 2016 and 2015 are set out in the tables below. The tables set out the total cash
benefits paid to the KMP in the relevant period and, under the heading “Security-based payments”, shows a component of the fair value
of the performance rights. The fair value of the performance rights is recognised over the vesting period as an employee benefit
expense. Further details of the fair value calculations are set out in sections (d) and (e) below.
Short term benefits
Post-employment
benefits
Other long term
benefits
Salary
$
Cash
bonus
$
Annual
leave
$
Super-
annuation Retirement Other Termination
$
$
$
$
Total cash
payment
$
Security-
based
payments
$
Security-
based
payment
$ % of total
Total
Independent Directors
Neil Balnaves AO
Chair
Roger Davis
David Haslingden(1)
Don Morris AO
George Venardos
Melanie Willis(2)
Executive Director
Deborah Thomas(3)
Chief Executive Officer
2016 208,192
2015 207,762
2016 141,553
2015 141,553
2016 120,528
2015
-
2016 123,288
2015 121,005
2016 146,119
2015 142,838
2016 122,738
-
2015
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19,308
18,783
13,447
13,447
11,450
-
11,712
11,495
13,881
13,570
11,660
-
2016 635,676
2015 244,002
40,000 15,016
-
-
19,308
13,173
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
227,500
226,545
155,000
155,000
131,978
-
135,000
132,500
160,000
156,408
134,398
-
-
-
-
-
-
-
-
-
-
-
-
-
227,500
226,545
155,000
155,000
131,978
-
135,000
132,500
160,000
156,408
134,398
-
-
-
-
-
-
-
-
-
-
-
-
-
710,000
257,175
101,845
-
811,845
257,175
12.54%
-
Ardent Leisure Group | Annual Report 2016 19
For personal use only
Directors’ report to stapled
security holders
11.
Remuneration report (continued)
(b)
Details of remuneration – key management personnel (continued)
Short term benefits
Post-employment
benefits
Other long term
benefits
Salary
Cash
bonus
Annual
leave
Super-
annuation Retirement Other Termination
Total cash
payment
Security-
based
payments
Security-
based
payment
Total
$
$
$
$
$
$
$
$
$
$ % of total
Other key management
personnel
Current
Craig Davidson
2016 327,811 109,185 27,881
CEO – Theme parks
2015 309,837
74,720 21,379
Richard Johnson
2016 472,147 167,800 24,849
Chief Financial Officer
2015 414,937 190,018
7,414
Charlie Keegan
2016 675,315
97,938 12,255
CEO – Main Event
2015 454,967 148,986 27,658
Nicole Noye
2016 367,515 115,530 13,177
CEO – Bowling centres
2015 325,469
- 15,748
Greg Oliver(4)
2016 459,830
70,921 89,311
2015 425,944 136,945 15,273
CEO – Health clubs
Past
Greg Shaw(5)
-
Ex Chief Executive Officer 2015 738,984 336,509 42,065
Anne Keating(6)
-
2016
-
Ex Independent Director 2015
15,023 400,000
-
43,916
2016
-
-
19,308
18,783
19,308
18,783
-
-
19,308
18,783
19,308
18,783
4,827
18,783
-
4,172
2016 3,815,735 1,001,374 182,489
182,825
2015 3,571,214 887,178 129,537
168,555
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
484,185
125,998 610,183
424,719
64,024 488,743
684,104
246,589 930,693
631,152
248,250 879,402
785,508
320,858 1,106,366
631,611
251,404 883,015
515,530
87,285 602,815
360,000
- 360,000
639,370
154,171 793,541
596,945
187,110 784,055
855,644 1,275,494
- 1,136,341
-
-
48,088
-
212,502 1,487,996
534,100 1,670,441
-
48,088
-
-
855,644 6,038,067 1,249,248 7,287,315
- 4,756,484 1,284,888 6,041,372
20.65%
13.10%
26.50%
28.23%
29.00%
28.47%
14.48%
-
19.43%
23.86%
14.28%
31.97%
-
-
17.1%
21.3%
(1) David Haslingden was appointed a Non-Executive Director of the Group effective 6 July 2015 and is considered KMP from this date.
(2) Melanie Willis was appointed a Non-Executive Director of the Group effective 17 July 2015 and is considered KMP from this date.
(3) Deborah Thomas was appointed a Non-Executive Director of the Group on 1 December 2013 and was appointed Chief Executive Officer effective 7 April 2015.
(4) During the year, Greg Oliver was paid $78,449 in lieu of unused annual leave from previous years.
(5) Greg Shaw ceased to be considered KMP on 7 April 2015.
(6) Anne Keating resigned from the Group effective 29 October 2014.
The table above shows termination payments made to past KMP during the year. No termination benefits were paid to current KMP
during the current financial year. There are no cash bonuses or options forfeited with respect to specified executives not previously
disclosed. No payments were made to KMP by the Group before they became employees.
Security-based payments included in the tables above reflect the amounts in the Income Statements of the Group. For performance
rights issued to all Australian KMP and US KMP post 1 July 2014, this amount is based on the fair value of the equity instruments at the
date of the grant rather than at vesting or reporting date for those instruments not yet vested. For performance rights issued to US KMP
prior to 1 July 2014, this amount is based on the fair value of the equity instruments at the reporting date. If the fair value recorded in
the Income Statement was based on the movement in the fair value of the instruments between reporting dates, the amount included
in KMP compensation would be reduced by $9,780 to $1,239,468 (2015: increased by $380,464 to $1,665,352).
20 Ardent Leisure Group | Annual Report 2016
For personal use only
Directors’ report to stapled
security holders
11.
(b)
Remuneration report (continued)
Details of remuneration – key management personnel (continued)
The table below sets out the total target remuneration and the total realised pay throughout the year ended 30 June 2016. It should be
noted that elements of realised pay relate to both individual and the Group’s performance in prior financial years.
Name
Deborah Thomas
Richard Johnson(2)
Nicole Noye
Greg Oliver
Charlie Keegan(3)
Craig Davidson
Annual base
salary
$670,000
$516,304
$400,000
$490,000
US$500,000
$375,000
STI(1)
Cash Deferred equity
-
$102,872
-
$139,045
US$102,670
$30,670
$40,000
$167,800
$115,530
$70,921
US$131,600
$109,185
LTIP(1)
-
$585,544
-
$190,167
US$95,905
-
Total
realised pay
$710,000
$1,372,520
$515,530
$890,133
US$830,175
$514,855
Total annual
target
remuneration
$1,340,000
$1,256,521
$740,000
$906,500
Variance
($630,000)
$115,999
($224,470)
($16,367)
US$1,000,000 (US$169,825)
($178,895)
$693,750
(1) STI cash payments and the vesting of DSTI and LTIP performance rights into fully paid stapled securities reflect previous performance of executives and of the Group over
a period of time. Securities issued are valued at $2.305 per security representing the five day VWAP up to and including the date of the full year results release.
(2) During the year, Richard Johnson was awarded a $75,000 deferred increase of fixed remuneration payable on 1 July 2016.
(3) Total realised is converted from Australian dollars into US dollars at the exchange rate of 0.7167 on 28 August 2015 and includes both cash settled and equity settled
awards.
The percentage of Cash STI (as listed in the table above) that was awarded to the Group’s KMP and the percentage that was forfeited
because the executive did not meet the performance criteria are set out below. No part of any Cash STI is payable in future years.
Name
Deborah Thomas(1)
Richard Johnson
Nicole Noye
Greg Oliver
Charlie Keegan(2)
Craig Davidson
STI Awarded
STI Forfeited
100.00%
65.00%
91.69%
44.05%
94.00%
89.13%
-
35.00%
8.31%
55.95%
6.00%
10.87%
(1) Deborah Thomas’ STI award reflects her service period from appointment as Group Chief Executive Officer effective 7 April 2015.
(2) Charlie Keegan was also awarded a Stretch STI payment of US$42,000 due to over-achievement of financial KPIs. The delivery of the Stretch STI payment was made in
the form of performance rights that vest in one and two years following grant.
Ardent Leisure Group | Annual Report 2016 21
For personal use only
Directors’ report to stapled
security holders
11.
Remuneration report (continued)
(c)
Service agreements of key management personnel
Remuneration and other terms of employment for KMP are formalised in service agreements. Each of these agreements provides for
the payment of performance related cash bonuses and participation in the Group’s long term incentive plans. Other major provisions
of the agreements relating to remuneration are set out below:
Executive
Deborah Thomas
Richard Johnson
Nicole Noye
Greg Oliver
Charlie Keegan
Craig Davidson
Position
Term
Chief Executive
Officer
Chief Financial
Officer
CEO – Bowling
centres
CEO – Health clubs
CEO – Main Event
CEO – Theme parks
No fixed term.
No fixed term.
No fixed term.
No fixed term.
No fixed term.
No fixed term.
Automatic renewal
on a year by year
basis.
Base annual
salary
$670,000 for the
year ended 30
June 2016.
$591,304 for the
year ended 30
June 2016 (Note 1).
$400,000 for the
year ended 30
June 2016.
$490,000 for the
year ended 30
June 2016.
US$500,000 for the
year ended 30
June 2016.
$375,000 for the
year ended 30
June 2016.
Termination
Employment shall
continue with the
Group unless the
executive gives the
Group six months’
notice in writing, or
the Group gives
the executive 12
months’ notice in
writing.
Employment shall
continue with the
Group unless the
executive gives the
Group six months’
notice in writing, or
the Group gives
the executive 12
months’ notice in
writing.
Employment shall
continue with the
Group unless the
executive gives the
Group three
months’ notice in
writing.
Employment shall
continue with the
Group unless the
executive gives the
Group six months’
notice in writing.
Employment shall
continue with the
Group unless
either party gives
three months’
notice in writing.
During the
contract term,
employment shall
continue with the
Group unless the
executive gives
three months’
notice in writing.
An early
termination
payment equal to
12 months’ salary is
payable to the
executive if the
Group terminates
the executive
during the
contract, other
than for gross
misconduct.
(1) Effective 1 July 2015, Richard Johnson received an increase in fixed remuneration of $75,000 with payment deferred until 1 July 2016.
All base annual salary amounts are inclusive of any superannuation payment and will be reviewed annually. With the exception of the
terms noted above, there are no contracted termination benefits payable to any KMP.
22 Ardent Leisure Group | Annual Report 2016
For personal use only
Directors’ report to stapled
security holders
11.
Remuneration report (continued)
(d)
Deferred Short Term Incentive Plan (DSTI)
Plan name
Who can participate?
Types of securities issued
Treatment of non-Australian residents
DSTI
All employees are eligible for participation at the discretion of the Board;
however, Non-Executive Directors do not participate in the DSTI.
Performance rights that can be converted into fully paid securities once vested.
The performance rights differ from options in that they do not carry an exercise
price. Performance rights do not represent physical securities and do not carry
any voting or distribution entitlements.
For employees who are not Australian residents, the DSTI historically granted
cash awards to those executives. Administrative arrangements have now been
made to issue equity awards and not cash awards to non-resident executives. All
awards, whether equity or cash, are subject to the same tenure hurdles.
What restrictions are there on the securities?
Performance rights are non-transferable.
When can the securities vest?
What are the vesting conditions?
The plan contemplates that the performance rights will vest equally one year
and two years following the grant date.
Plan performance rights will normally vest only if the participant remains
employed by the Group (and is not under notice terminating the contract of
employment from either party) as at the relevant vesting date.
Did any of the securities vest?
During the financial year, a total of 384,988 performance rights vested.
Australian employees
Since the DSTI was approved in July 2010, incentives have been provided to certain executives under the DSTI. Under the terms of the
DSTI, participants may be granted performance rights of which one half will vest one year after grant date and one half will vest two
years after grant date. The first set of performance rights were granted under the DSTI on 16 December 2010, with the first possible
vesting date being the day after the full year financial results announcement for the year ended 30 June 2011. A total of 286,776
performance rights vested on 20 August 2015 and a corresponding number of stapled securities were issued to Australian employees
under the terms of the DSTI (2015: 716,574).
The characteristics of the DSTI indicate that, at the Ardent Leisure Group level, it is an equity settled share-based payment under AASB
2 Share-based Payment as the holders are entitled to the securities as long as they meet the DSTI’s service criteria. However, as ALL is
considered to be a subsidiary of the Trust, in the financial statements of the ALL Group the DSTI is accounted for as a cash settled share-
based payment.
Fair value – Australian employees
The fair value of the performance rights granted under the DSTI is recognised in the Group financial statements as an employee benefit
expense with a corresponding increase in equity. The fair value of each grant of performance rights is determined at grant date using
a binomial tree valuation model and then is recognised over the vesting period during which employees become unconditionally
entitled to the underlying securities.
The fair value of the performance rights granted under the DSTI is recognised in the ALL Group financial statements as an employee
benefit expense with a corresponding increase in liabilities. The fair value of each grant of performance rights is determined at each
reporting date using a binomial tree valuation model with the movement in fair value of the liability being recognised in the Income
Statement.
At each reporting date, the estimate of the number of performance rights that are expected to vest is revised. The employee benefit
expense recognised each financial period takes into account the most recent estimate.
Ardent Leisure Group | Annual Report 2016 23
For personal use only
Directors’ report to stapled
security holders
11.
Remuneration report (continued)
(d)
Deferred Short Term Incentive Plan (DSTI) (continued)
US employees
Due to previous restrictions on the issue of securities to US residents, those US executives eligible for the DSTI were subject to a shadow
performance rights scheme whereby a cash payment was made instead of performance rights being granted. At the end of each vesting
period, the number of performance rights which would have vested was multiplied by the Group stapled security volume weighted
average price (VWAP) for the five trading days immediately following the vesting date and an equivalent cash payment was made. Due
to the nature of the scheme, this was considered to be a cash settled share-based payment under AASB 2.
All performance rights issued after 1 July 2014 to US employees are settled in equity upon vesting. As such, these performance rights
are considered to be equity settled share-based payments under AASB 2. A total of 98,212 equity settled performance rights vested
during the financial year (2015: 56,829). In the ALL financial statements, all performance rights issued to US employees are considered
cash settled.
Fair value – US employees
The fair value of cash settled performance rights is determined at grant date and each reporting date using a binomial tree valuation
model. This is recorded as a liability with the movement in the fair value of the financial liability being recognised in the Income
Statement.
The fair value of equity settled performance rights is determined at each grant date using a binomial tree valuation model. This is
recorded as an employee benefit expense with a corresponding increase in equity.
At each reporting date, the estimate of the number of performance rights that are expected to vest is revised. The employee benefit
expense recognised each period takes into account the most recent estimate.
Valuation inputs
For the performance rights outstanding at 30 June 2016, the table below shows the fair value of the performance rights on each grant
date as well as the factors used to value the performance rights at the grant date. Under AASB 2, this valuation is used to value the equity
settled performance rights granted to employees at 30 June 2016:
Grant
Grant date
Vesting date – year 1
Vesting date – year 2
Average risk free rate
Expected price volatility
Expected distribution yield
Stapled security price at grant date
Valuation per performance right on issue
2014
19 August 2014
20 August 2015
31 August 2016
2.50% per annum
27.0% per annum
4.3% per annum
$3.00
$2.81
2015
18 August 2015
31 August 2016
31 August 2017
1.90% per annum
34.5% per annum
5.7% per annum
$2.18
$2.00
The table below shows the fair value of the performance rights in each grant as at 30 June 2016 as well as the factors used to value the
performance rights as at 30 June 2016. Under AASB 2, this valuation is used to value the cash settled performance rights granted to
employees at 30 June 2016:
Grant
Grant date
Vesting date – year 1
Vesting date – year 2
Average risk free rate
Expected price volatility
Expected distribution yield
Stapled security price at year end
Valuation per performance right at year end
2014
19 August 2014
20 August 2015
31 August 2016
1.60% per annum
40.0% per annum
6.6% per annum
$1.88
$1.88
2015
18 August 2015
31 August 2016
31 August 2017
1.60% per annum
40.0% per annum
6.6% per annum
$1.88
$1.81
Grants of performance rights are made annually with the grant date being the date of the issue of the offer letters to employees.
Although the grant date may vary from year to year, the testing period (subject to any hurdles) remains constant with the vesting date
being 24 hours immediately following the announcement of the Group’s full year financial results.
24 Ardent Leisure Group | Annual Report 2016
For personal use only
Directors’ report to stapled
security holders
11.
Remuneration report (continued)
(d)
Deferred Short Term Incentive Plan (DSTI) (continued)
Tenure hurdle
The vesting of the performance rights is subject to a tenure hurdle and participants must remain employed by the Group (and not be
under notice terminating the contract of employment from either party) as at the relevant vesting date.
Performance rights
The number of performance rights on issue and granted to the Group’s KMP is set out below:
30 June 2016
Current executives
Craig Davidson
Richard Johnson
Charlie Keegan
Nicole Noye
Greg Oliver
Deborah Thomas
Total performance
rights
Opening
balance
Granted as
compensation
Exercised
Lapsed
Closing
balance
Vested and
exercisable
26,613
61,550
83,802
-
84,710
-
54,682
42,019
118,288
57,860
35,519
20,033
(13,306)
(44,630)
(62,149)
-
(60,323)
-
256,675
328,401
(180,408)
-
-
-
-
-
-
-
67,989
58,939
139,941
57,860
59,906
20,033
404,668
-
-
-
-
-
-
-
Unvested
67,989
58,939
139,941
57,860
59,906
20,033
404,668
Ardent Leisure Group | Annual Report 2016 25
For personal use only
Directors’ report to stapled
security holders
11.
Remuneration report (continued)
(e)
Long Term Incentive Plan (LTIP)
Plan name
Who can participate?
Types of securities issued
Treatment of non-Australian residents
LTIP
All employees are eligible for participation at the discretion of the Board;
however, Non-Executive Directors do not participate in the LTIP.
Performance rights that can be converted into fully paid securities once vested.
The performance rights differ from options in that they do not carry an exercise
price. Performance rights do not represent physical securities and do not carry
any voting or distribution entitlements.
For employees who are not Australian residents, the LTIP historically granted
cash awards to those executives. Administrative arrangements have now been
made to issue equity awards and not cash awards to non-resident executives. All
awards, whether equity or cash, are subject to the same performance and tenure
hurdles.
What restrictions are there on the securities?
Performance rights are non-transferable.
When can the securities vest?
What are the vesting conditions?
What does total shareholder return include?
What is the earnings per security hurdle?
The plan contemplates that the performance rights will vest equally two, three
and four years following the grant date, subject to meeting the total shareholder
return (TSR) and internal compound EPS performance hurdles. The weighting
between the two hurdles will be split as follows:
TSR – 50%; and
EPS – 50%.
For grants made after 1 July 2014, in order for any or all of the performance rights
to vest one or both of the following hurdles must be met:
TSR performance hurdle - the Group's TSR for the performance period must
exceed the 50th percentile of the TSRs of the benchmark group for the same
period. A sliding scale of vesting applies above the 50th percentile threshold
with maximum vesting achieved at the 75th percentile; and
EPS performance hurdle - the Group's compound EPS growth for the
performance period must exceed 5%. A sliding scale of vesting applies above
the 5% threshold with maximum vesting achieved at 10% compound EPS
growth.
TSR is the total return an investor would receive over a set period of time
assuming that all distributions were reinvested in the Group’s securities. The TSR
definition takes account of both capital growth and distributions.
The EPS hurdle refers to the annual growth of earnings per security over the total
vesting periods of two, three and four years from the grant date.
What is the benchmark group?
The benchmark group comprises the S&P/ASX Small Industrials Index.
Did any of the securities vest?
During the financial year, a total of 993,905 performance rights vested into fully
paid stapled securities following an independent third party assessment of the
Group’s TSR performance compared to the benchmark.
26 Ardent Leisure Group | Annual Report 2016
For personal use only
Directors’ report to stapled
security holders
11.
Remuneration report (continued)
(e)
Long Term Incentive Plan (LTIP) (continued)
Australian employees
Since 1 July 2009, long term incentives have been provided to certain executives under the LTIP. Under the terms of the LTIP and the
initial grant, employees may be granted performance rights of which one third will vest two years after grant date, one third will vest
three years after grant date and one third will vest four years after grant date. The percentage of performance rights which may vest
is subject to the TSR performance of the Group relative to its peer group, which is the S&P/ASX Small Industrials Index.
During the year, the relative TSR performance of the Group was tested in accordance with the LTIP for tranches issued in 2011, 2012
and 2013 with the following results:
Tranche
T3-2011
T2-2012
T1-2013
TSR
119.09%
103.94%
45.48%
Percentile
81.82
79.12
68.63
Vesting percentage
100.0%
100.0%
87.3%
A total of 939,923 performance rights vested on 20 August 2015 and a corresponding number of stapled securities were issued to
Australian employees under the terms of the LTIP (2015: 1,145,426).
The characteristics of the LTIP indicate that, at the Ardent Leisure Group level, it is an equity settled share-based payment under AASB
2 Share-based Payment as the holders are entitled to the securities as long as they meet the LTIP’s service and performance criteria.
However, as ALL is considered to be a subsidiary of the Trust, in the financial statements of the ALL Group the LTIP is accounted for as
cash settled share-based payments.
Fair value – Australian employees
The fair value of the performance rights granted under the LTIP is recognised in the Group financial statements as an employee benefit
expense with a corresponding increase in equity. The fair value of the performance rights is determined at grant date using a Monte
Carlo simulation valuation model and then is recognised over the vesting period during which employees become unconditionally
entitled to the underlying securities.
The fair value of the performance rights granted under the LTIP is recognised in the ALL Group financial statements as an employee
benefit expense with a corresponding increase in liabilities. The fair value of each grant of performance rights is determined at each
reporting date using a Monte Carlo simulation valuation model with the movement in fair value of the liability being recognised in the
Income Statement.
At each reporting date, the estimate of the number of performance rights that are expected to vest is revised. The employee benefit
expense recognised each financial period takes into account the most recent estimate.
US employees
Due to previous restrictions on the issue of securities to US residents, those US executives eligible for the DSTI were subject to a shadow
performance rights scheme whereby a cash payment was made instead of performance rights being granted. At the end of each
vesting period, the number of performance rights which would have vested is multiplied by the Group stapled security VWAP for the
five trading days immediately following the vesting date and an equivalent cash payment is made. Due to the nature of the scheme,
this is considered to be a cash settled share-based payment under AASB 2. A total of 38,998 cash settled performance rights vested on
20 August 2015 to US employees under the terms of the LTIP (2015: 57,452).
All performance rights issued after 1 July 2014 to US employees are settled in equity upon vesting. These performance rights are
considered to be equity settled share-based payments under AASB 2. A total of 14,984 equity settled performance rights vested on 20
August 2015 to US employees under the terms of the LTIP (2015: nil).
Fair value – US employees
The fair value of cash settled performance rights is determined at grant date and each reporting date using a Monte Carlo simulation
valuation model. This is recorded as a liability with the difference in the movement in the fair value of the financial liability recognised
in the Income Statement.
The fair value of equity settled performance rights is determined at grant date using a Monte Carlo simulation valuation model. This
is recorded as an employee benefit expense with a corresponding increase in equity.
At each reporting date, the estimate of the number of performance rights that are expected to vest is revised. The employee benefit
expense recognised each period takes into account the most recent estimate.
Ardent Leisure Group | Annual Report 2016 27
For personal use only
Directors’ report to stapled
security holders
11.
Remuneration report (continued)
(e)
Long Term Incentive Plan (LTIP) (continued)
Valuation inputs
For performance rights outstanding at 30 June 2016, the table below shows the fair value of the performance rights on each grant date
as well as the factors used to value the performance rights at the grant date. Under AASB 2, this valuation is used to value the equity
settled performance rights granted to employees at 30 June 2016:
Grant
Grant date
Vesting date – year 2
Vesting date – year 3
Vesting date – year 4
Average risk free rate
Expected price volatility
Expected distribution yield
Stapled security price at grant date
Valuation per performance right on issue
2012
24 August 2012
19 August 2014
20 August 2015
31 August 2016
2.73% per annum
35% per annum
9.1% per annum
$1.29
$0.61
2013
23 August 2013
20 August 2015
31 August 2016
31 August 2017
2.60% per annum
32% per annum
6.6% per annum
$1.82
$0.76
2014
19 August 2014
31 August 2016
31 August 2017
31 August 2018
2.57% per annum
27.0% per annum
4.3% per annum
$3.00
$1.54
2015
15 December 2015
31 August 2017
31 August 2018
31 August 2019
2.1% per annum
38.3% per annum
5.8% per annum
$2.17
$1.12
The table below shows the fair value of the performance rights for each grant as at 30 June 2016 as well as the factors used to value the
performance rights at 30 June 2016. Under AASB 2, this valuation is used to value the cash settled performance rights granted to
employees at 30 June 2016:
Grant
Grant date
Vesting date – year 2
Vesting date – year 3
Vesting date – year 4
Average risk free rate
Expected price volatility
Expected distribution yield
Stapled security price at year end
Valuation per performance right on issue
2012
24 August 2012
19 August 2014
20 August 2015
31 August 2016
1.60% per annum
40.0% per annum
6.6% per annum
$1.88
$1.21
2013
23 August 2013
20 August 2015
31 August 2016
31 August 2017
1.60% per annum
40.0% per annum
6.6% per annum
$1.88
$1.04
2014
19 August 2014
31 August 2016
31 August 2017
31 August 2018
1.60% per annum
40.0% per annum
6.6% per annum
$1.88
$0.28
2015
15 December 2015
31 August 2017
31 August 2018
31 August 2019
1.60% per annum
40.0% per annum
6.6% per annum
$1.88
$0.85
Grants of performance rights are made annually with the grant date being the date of the issue of the offer letters to employees.
Although the grant date may vary from year to year, the testing period (subject to any hurdles) remains constant with the vesting date
being 24 hours immediately following the announcement of the Group’s full year financial results.
Performance hurdles
In order for any or all of the performance rights to vest under the LTIP, the Group's TSR and/or (for grants made after 1 July 2014) the EPS
performance hurdle must be met.
TSR
The Group’s TSR for the performance period must exceed the 50th percentile of the TSRs of the benchmark for the same period. A sliding
scale of vesting applies above the 50th percentile threshold.
TSR of the Group relative to TSRs of comparators
Below 51st percentile
51st percentile
Between 51st percentile and 75th percentile
75th percentile or higher
Proportion of performance rights vesting
0%
50%
Straight-line vesting between 50% and 100%
100%
TSR over a performance period is measured against the benchmark group securities calculated at the average closing price of securities
on the ASX for the calendar month period up to and including each of the first and last dates of the performance period. Distributions
are assumed to be reinvested at the distribution date and any franking credits (or similar) are ignored.
28 Ardent Leisure Group | Annual Report 2016
For personal use only
Directors’ report to stapled
security holders
11.
Remuneration report (continued)
(e)
Long Term Incentive Plan (LTIP) (continued)
Performance hurdles (continued)
EPS
The Group’s compound EPS growth for the performance period must exceed 5%. A sliding scale of vesting applies above 5% threshold.
Compound EPS growth in the period
Below 5%
5%
Between 5% and 10%
10% or higher
Proportion of performance rights vesting
0%
50%
Straight-line vesting between 50% and 100%
100%
The weighting is split equally between the two performance measures.
Performance rights
The number of performance rights on issue and granted to the Group’s KMP is set out below:
Opening
balance
Granted as
compensation
Exercised
Lapsed
Closing
balance
Vested and
exercisable
Unvested
30 June 2016
Current executives
Craig Davidson
Richard Johnson
Charlie Keegan
Nicole Noye
Greg Oliver
Deborah Thomas
Equity settled
34,104
577,452
135,370
-
204,344
-
951,270
50,223
197,982
186,167
53,571
65,625
299,107
852,675
-
(254,032)
(14,984)
-
(82,502)
-
(351,518)
-
(8,355)
(2,179)
-
(2,924)
-
(13,458)
84,327
513,047
304,374
53,571
184,543
299,107
1,438,969
Current executive
Charlie Keegan
Cash settled
Total performance rights
56,037
56,037
1,007,307
-
-
852,675
(38,998)
(38,998)
(390,516)
-
-
(13,458)
17,039
17,039
1,456,008
-
-
-
-
-
-
-
-
-
-
84,327
513,047
304,374
53,571
184,543
299,107
1,438,969
17,039
17,039
1,456,008
Ardent Leisure Group | Annual Report 2016 29
For personal use only
Directors’ report to stapled
security holders
11.
Remuneration report (continued)
(f)
Additional information
Performance of the Group
Over the past five years, core earnings per security of the Group have increased by 10.05% and the market capitalisation of the
Group has increased by 114.60%. The table below compares the Group’s core earnings per security with total KMP remuneration
over the past five years.
Security price as at 30 June
First half year distribution per security
Distribution reinvestment price
Second half year distribution per security
Distribution reinvestment price
Number of securities on issue as at 30 June
Market capitalisation as at 30 June ($ million)
Core earnings per security (cents)
Total KMP remuneration
Investor value of a $5,000 investment as at 30 June 2011
(based upon an initial security price of $1.275)
Details of remuneration: cash bonuses and options
2016
$1.880
$0.070
$2.1067
$0.055
$1.9292
463,039,616
$870.5
13.80
$7,287,315
2015
$2.170
$0.070
$2.6389
$0.055
$2.1553
442,322,106
$959.8
12.92
$6,041,372
2014
$2.710
$0.068
N/A
$0.062
$2.6378
2013
$1.715
$0.066
N/A
$0.054
$1.6841
2012
$1.275
$0.065
$1.0073
$0.052
$1.2373
405,055,708 397,803,987 334,209,401
$426.1
12.91
$6,052,116
$682.2
13.14
$5,102,854
$1,097.7
14.40
$5,512,165
$9,655
$10,490
$12,752
$7,984
$5,545
All service and performance criteria were met by executives eligible for a bonus with respect to their performance in the 30 June 2015
financial year. These bonuses were paid during the current year and the percentages forfeited are set out below. No part of the bonuses
is payable in future years. Bonuses with respect to performance within the 30 June 2016 financial year have been accrued but are subject
to approval by the Group’s Remuneration and Nomination Committee before payment.
Plan securities and performance rights granted to executives automatically vest over varying periods of one, two, three and four years,
provided the vesting conditions are met. No plan securities or performance rights will vest if the conditions are not satisfied; hence, the
minimum value of the plan securities and performance rights yet to vest is $nil.
30 Ardent Leisure Group | Annual Report 2016
For personal use only
Directors’ report to stapled
security holders
11.
Remuneration report (continued)
(f)
Additional information (continued)
The table below sets out the number of performance rights that were granted, lapsed and vested during the financial year and that
are yet to vest:
Year
granted Tranche
Financial years in
which performance
rights may vest
Value of
performance
rights at
grant
Value of
performance
rights at
lapse
Number
lapsed
Value of
performance
rights at
vesting
Maximum
value yet
to vest
Number
vested
Cash STI
(%)
Year
Number
$
Current executives
Equity settled
Craig Davidson LTI
2014
2015
DSTI
2014
2015
2011
2012
2013
2014
2015
2013
2014
2015
Richard
Johnson
Total
LTI
DSTI
Total
Nicole Noye
LTI
2015
DSTI
2015
T1
T2
T3
T1
T2
T3
T1
T2
T1
T2
T3
T2
T3
T1
T2
T3
T1
T2
T3
T1
T2
T3
T2
T1
T2
T1
T2
T1
T2
T3
T1
T2
2017
2018
2019
2018
2019
2020
2016
2017
2017
2018
2016
2016
2017
2016
2017
2018
2017
2018
2019
2018
2019
2020
2016
2016
2017
2017
2018
2018
2019
2020
2017
2018
11,368
11,368
11,368
16,741
16,741
16,741
13,306
13,307
27,341
27,341
19,789
17,740
14,973
20,904
18,738
16,776
38,171
36,550
56,158
53,028
165,622
292,827
114,522
82,075
82,075
65,790
65,789
65,789
33,804
33,804
33,804
65,994
65,994
65,994
27,711
16,919
16,920
21,009
21,010
49,244
50,181
49,491
51,678
51,388
47,579
58,846
52,751
44,523
82,407
73,867
66,133
44,498
48,536
46,474
43,152
40,749
17,857
17,857
17,857
28,930
28,930
22,298
19,987
17,894
59,422
56,110
Total
111,431
175,711
$
-
-
-
-
-
-
-
-
-
-
-
$
$ Awarded Forfeited
89.13
10.87
-
-
-
-
-
-
-
-
-
-
-
-
19,789
17,740
14,973
20,904
18,738
16,776
13,306
33,531
-
-
-
-
-
-
-
36,550
56,158
53,028
13,306
33,531 254,656
- 114,522
-
-
82,075
-
288,595
206,829
-
-
-
49,491
65.00
35.00
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8,355
21,055
57,435
144,736
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
27,711
16,919
69,832
42,636
51,388
47,579
58,846
52,751
44,523
82,407
73,867
66,133
-
-
-
-
-
-
-
-
46,474
43,152
40,749
91.69
8.31
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
22,298
19,987
17,894
59,422
56,110
- 175,711
Ardent Leisure Group | Annual Report 2016 31
879,003
901,497
8,355
21,055 298,662
752,628 657,360
For personal use only
Directors’ report to stapled
security holders
11.
Remuneration report (continued)
(f)
Additional information (continued)
Year
granted Tranche
Financial years in
which performance
rights may vest
Value of
performance
rights at
grant
Value of
performance
rights at
lapse
Number
lapsed
Value of
performance
rights at
vesting
Maximum
value yet
to vest
Number
vested
Cash STI
(%)
Greg Oliver
LTI
2011
2012
2013
2014
2015
Deborah
Thomas
DSTI 2013
2014
2015
Total
LTI
2015
DSTI 2015
Total
Charlie Keegan LTI
2013
2014
2015
DSTI 2013
2014
2015
2011
2012
Cash settled
Charlie Keegan LTI
Year
2016
2016
2017
2016
2017
2018
2017
2018
2019
2018
2019
2020
2016
2016
2017
2017
2018
2018
2019
2020
2017
2018
2016
2017
2018
2017
2018
2019
2018
2019
2020
2016
2016
2017
2017
2018
2016
2016
2017
T3
T2
T3
T1
T2
T3
T1
T2
T3
T1
T2
T3
T2
T1
T2
T1
T2
T1
T2
T3
T1
T2
T1
T2
T3
T1
T2
T3
T1
T2
T3
T2
T1
T2
T1
T2
T3
T2
T3
Number
34,357
28,042
28,043
23,027
23,026
23,026
14,941
14,941
14,941
21,875
21,875
21,875
35,936
24,387
24,387
17,759
17,760
$
14,774
17,145
16,910
18,088
17,986
16,652
26,009
23,315
19,679
27,315
24,485
21,921
57,706
69,959
66,984
36,477
34,446
-
-
-
$
-
-
-
34,357
28,042
-
$
$ Awarded
Forfeited
44.05
55.95
86,580
70,666
-
-
-
16,910
2,924
7,368
20,103
50,660
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
35,936
24,387
90,559
61,455
17,986
16,652
26,009
23,315
19,679
27,315
24,485
21,921
-
-
-
-
-
-
-
-
66,984
36,477
34,446
390,198
509,851
2,924
7,368 142,825
359,920 332,179
99,702
99,702
99,703
10,016
10,017
124,498
111,596
99,912
20,573
19,428
319,140
376,007
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
124,498
100.00
-
111,596
99,912
20,573
19,428
- 376,007
17,163
17,162
17,162
27,961
27,961
27,961
62,055
62,056
62,056
36,496
25,653
21,653
59,144
59,144
21,960
17,038
17,039
13,482
13,405
12,412
48,675
43,633
36,827
77,488
69,459
62,186
58,605
73,591
59,474
121,482
114,710
9,443
10,417
10,275
2,179
5,491
14,984
37,760
-
94.00
6.00
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
36,496
25,653
91,970
64,646
13,405
12,412
48,675
43,633
36,827
77,488
69,459
62,186
-
-
-
-
-
-
-
-
59,474
121,482
114,710
21,960
17,038
-
55,339
42,936
-
-
-
10,275
Total
579,664
835,564
2,179
5,491 116,131
292,651 670,026
32 Ardent Leisure Group | Annual Report 2016
For personal use only
Directors’ report to stapled
security holders
11.
Remuneration report (continued)
(f)
Additional information (continued)
Directors’ interests in securities
Changes to Directors’ interests in stapled securities during the period are set out below:
Neil Balnaves AO
Roger Davis
David Haslingden
Don Morris AO
Deborah Thomas
George Venardos
Melanie Willis
Opening
balance
2,801,510
200,658
-
13,950
20,331
198,053
-
3,234,502
Acquired
200,000
-
160,000
-
11,027
11,804
9,674
392,505
Acquired under
the Group's
equity plans
Disposed
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Other KMP interests in securities
Changes to the interests of other KMP in stapled securities during the period are set out below:
Craig Davidson
Richard Johnson
Charlie Keegan
Nicole Noye
Greg Oliver
Opening
balance
-
100,000
36,497
2,500
478,522
617,519
Acquired under
the Group's
equity plans
Acquired
-
-
-
-
-
-
13,306
298,662
77,133
-
142,825
531,926
Disposed
-
(298,662)
(80,000)
-
(21,000)
(399,662)
Closing
balance
3,001,510
200,658
160,000
13,950
31,358
209,857
9,674
3,627,007
Closing
balance
13,306
100,000
33,630
2,500
600,347
749,783
Loans and other transactions with KMP
There were no loans made to KMP during the financial year, as disclosed in Note 36(e) to the financial statements. Refer to Note 36(f)
to the financial statements for details of other transactions with KMP during the financial year.
Corporations Amendment (Improving Accountability on Director and Executive Remuneration) Act 2011
On 1 July 2011, the Corporations Amendment (Improving Accountability on Director and Executive Remuneration) Act 2011 came
into force. The new legislative requirements under the Corporations Act 2001 in relation to remuneration votes and the “two strikes”
rule operate such that a company receiving a 25% or more “NO” vote against its remuneration report resolution at the Annual General
Meeting (AGM) in two consecutive years will be required to put a spill resolution to the meeting whereby investors can vote to hold a
further meeting where all board directors will be subject to re-election.
In addition, KMP and their closely related parties are prohibited from voting on the adoption of the remuneration report and any
other remuneration related resolutions at the AGM. In order to ensure that KMP and their closely related parties do not exercise
their votes, the Group issued an instruction to them prior to the AGM and instructed the security registrars to apply appropriate
voting exclusions.
The following table shows the votes that were cast on the adoption of the 2015 remuneration report at the AGM held on 5 November
2015:
Date of meeting
5 November 2015
30 October 2014
Votes for
98.50%
97.53%
Votes against
1.12%
1.78%
Votes abstain
0.38%
0.69%
Ardent Leisure Group | Annual Report 2016 33
For personal use only
Directors’ report to stapled
security holders
12. Non-audit services
The Group may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise
and experience with the Group are important.
Details of the amounts paid to the auditor (PricewaterhouseCoopers) for audit and non-audit services provided during the year are
disclosed in Note 9 to the financial statements.
The Directors have considered the position and, in accordance with the recommendation received from the Audit and Risk Committee,
are satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed
by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the auditor, as set out in Note 9 to
the financial statements, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following
reasons:
All non-audit services have been reviewed by the Audit and Risk Committee to ensure that they do not impact the integrity and
objectivity of the auditor; and
None of the services undermines the general principles relating to auditor independence as set out in Accounting Professional and
Ethical Standards Board APES 110 Code of Ethics for Professional Accountants.
13. Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 38.
14.
Events occurring after reporting date
Subsequent to 30 June 2016, a distribution of 5.5 cents per stapled security has been declared by the Board of Directors. The total
distribution amount of $25.5 million will be paid on or before 31 August 2016 in respect of the half year ended 30 June 2016.
As noted above, on 19 August 2016, the Group announced that it had entered into a sale agreement to dispose of its entire interests in
the health clubs division for gross proceeds (excluding working capital adjustments and selling costs) of $260.0 million, comprising a
cash payment of $230.0 million and deferred consideration of $30.0 million in the form of vendor loan notes payable no later than two
years from completion. Completion is subject to landlord and other third party approvals and is expected to occur prior to 31 December
2016. The financial information relating to the health clubs division is set out in Note 37 to the financial statements. The Group expects
to recognise a profit on disposal.
Since the end of the financial year, the Directors of the Manager and ALL are not aware of any other matters or circumstances not
otherwise dealt with in this report or the financial report that has significantly affected or may significantly affect the operations of the
Group, the results of those operations or the state of affairs of the Group in financial years subsequent to the year ended 30 June 2016.
15.
Likely developments and expected results of operations
The financial statements have been prepared on the basis of the current known market conditions. The extent to which any potential
deterioration in either the capital or physical property markets may have on the future results of the Group is unknown. Such results
could include the potential to influence property market valuations, the ability of borrowers, including the Group, to raise or refinance
debt, and the cost of such debt and the ability to raise equity.
As noted above, the Group is in the process of disposing of its Marinas and Health clubs divisions, with completion expected during the
next financial year. At the date of this report, and to the best of the Directors’ knowledge and belief, there are no other anticipated
changes in the operations of the Group which would have a material impact on the future results of the Group.
34 Ardent Leisure Group | Annual Report 2016
For personal use only
Directors’ report to stapled
security holders
16.
Indemnification and insurance of officers and auditor
Manager
No insurance premiums are paid for out of the assets of the Trust for insurance provided to either the officers of the Manager or the
auditor of the Trust. So long as the officers of the Manager act in accordance with the Trust Constitution and the Corporations Act
2001, the officers remain indemnified out of the assets of the Trust against losses incurred while acting on behalf of the Trust. The
auditor of the Trust is in no way indemnified out of the assets of the Trust.
ALL
Under ALL’s Constitution, ALL indemnifies:
All past and present officers of ALL, and persons concerned in or taking part in the management of ALL, against all liabilities incurred
by them in their respective capacities in successfully defending proceedings against them; and
All past and present officers of ALL against liabilities incurred by them, in their respective capacities as an officer of ALL, to other
persons (other than ALL or its related parties), unless the liability arises out of conduct involving a lack of good faith.
During the reporting period, ALL had in place a policy of insurance covering the Directors and officers against liabilities arising as a
result of work performed in their capacity as Directors and officers of ALL. Disclosure of the premiums paid for the insurance policy is
prohibited under the terms of the insurance policy.
17.
Fees paid to and interests held in the Trust by the Manager or its associates
The interests in the Trust held by the Manager or its related entities as at 30 June 2016 and fees paid to its related entities during the
financial year are disclosed in Notes 7 and 36 to the financial statements.
18.
Environmental regulations
During the financial year, the Group’s major businesses were subject to environmental legislation in respect of its operating activities
as set out below:
(a)
Dreamworld
Dreamworld and WhiteWater World theme parks are subject to various legislative requirements in respect of environmental impacts
of their operating activities. The Queensland Environmental Protection Act 1994 regulates all activities where a contaminant may be
released into the environment and/or there is a potential for environmental harm or nuisance. In accordance with Schedule 1 of the
Environmental Protection Regulation 1998, Dreamworld holds licences or approvals for the operation of a helipad, motor vehicle
workshop and train-shed and the storage and use of flammable/combustible goods. During the year, Dreamworld and WhiteWater
World complied with all requirements of the Act.
The environment committee meets on a bi-monthly basis to pursue environmental projects and improve environmental performance.
An energy conservation program was rolled out throughout the organisation. A mobile phone recycling program continued to
operate throughout the theme park with proceeds used to improve wildlife protection in parts of Africa where mobile phone
components are sourced from. A range of existing recycling programs continue to operate effectively, including glass, plastic, waste
metals, paper, waste oils and cardboard. A water efficiency management plan continues to operate effectively, with a net reduction of
consumption over the past nine years. Staff also carried out voluntary programs aimed at the humane treatment of pests, removal of
noxious weeds and other sustainability initiatives. These initiatives were additionally integrated into existing staff training programs
to further strengthen environmental culture within the organisation.
Dreamworld’s noise conservation program ensures that noise emissions emanating from park activities do not contravene State
regulations or adversely impact surrounding neighbours. Local government regulations for the staging of night time events and
functions were complied with at all times.
Dreamworld’s Life Sciences department is subject to the Quarantine Act 1908. In accordance with the Australian Quarantine
Regulations, Dreamworld holds an approved post-arrival facilities licence and an approved zoo permit. In accordance with the Nature
Conservation Act 1992 and the Nature Conservation Regulation 1994, Dreamworld holds a “Wildlife Exhibitors Licence” and in
accordance with Land Protection (Pest and Stock Route Management) Regulation 2003, Dreamworld holds a "Declared Pest Permit".
All licences and permits remain current and Dreamworld has complied fully with the requirements of each.
There are two water licences for the Dreamworld/WhiteWater World property. These relate to water conservation and irrigation. There
have been no issues or events of non-compliance recorded by management or the regulatory authorities regarding water use.
Ardent Leisure Group | Annual Report 2016 35
For personal use only
Directors’ report to stapled
security holders
18.
Environmental regulations (continued)
(b)
d’Albora Marinas
Schedule 1 Environment Protection Licences are held for all five NSW marinas in the portfolio in accordance with the Protection of the
Environment Operations Act 1997 (NSW). There are no specific environmental licence requirements in Victoria relating to the Pier 35 or
Victoria Harbour marinas.
In July 2002, the NSW Environmental Protection Authority (EPA) was notified of long term historic groundwater contamination at the
Rushcutters Bay marina, and the plan to manage the contamination. d’Albora Marinas has been working in consultation with the EPA
to rectify the site contamination. The costs to rectify the site are not considered material to the Group.
(c)
Bowling centres – Australia
Bowling centres are subject to environmental regulations concerning their food facilities. This is primarily trade waste and grease traps.
The Group has adequate management systems and the correct licence requirements in place concerning the disposal of such waste in
accordance with each State or Territory’s legislation. Cooking oil is replaced and disposed of by external organisations at all locations.
All hazardous substances are disposed of according to manufacturers’ and EPA regulations. A register of all hazardous substances and
dangerous goods is located at centre level.
Lane cleaning and maintenance products are largely water-based products, excluding approach cleaner, which is a solvent-based
product. This product is disposed of in accordance with each State and Territory’s EPA requirements.
Noise is adequately monitored for both internal and external environmental breaches. Noise emissions fall within acceptable levels for
both residential and industrial areas and all EPA requirements. No complaints have been received since acquisition of the business.
(d)
Bowling centres – New Zealand
There are no specific requirements relating to the New Zealand centres that are not reflected in the above statement.
(e)
Family entertainment centres – United States of America
Main Event is subject to various Federal, State and local environmental requirements with respect to development of new centres in the
United States of America. At a Federal level, the Environmental Protection Agency is responsible for setting national standards for a
variety of environmental programs, and delegates to States the responsibility for issuing permits and for monitoring and enforcing
compliance.
A prerequisite for any building permit for new centre construction is full compliance with all city and State planning and zoning
ordinances. A building permit, depending on locality, may require soils reports, site line studies, storm water and irrigation regulation
compliance, asbestos free reports, refuse and grease storage permits, health and food safety permits, and complete Occupational Safety
and Health Administration (OSHA) Material Safety Data Sheets (MSDS) documentation.
With respect to operating activities at Main Event, the OSHA requires that MSDS be available to all Main Event employees for explaining
potentially harmful chemical substances handled in the workplace under the hazard communication regulation. The MSDS is also
required to be made available to local fire departments and local and State emergency planning officials under section 311 of the
Emergency Planning and Community Right-to-Know Act.
At this time, there are no known issues of non-compliance with any environmental regulation at Main Event.
(f)
Goodlife Health Clubs
Goodlife is subject to environmental regulations across the business and has initiatives in place to meet all areas of environmental
compliance.
Water conservation is a high priority and management has implemented a range of strategies to meet current water regulations as per
each State’s regulations. A recycling program has been implemented across the business, assisting with reduction of waste products
and meeting environmental standards.
Hazardous substances and dangerous goods are strictly monitored in the business and, where possible, non-hazardous chemicals are
used. All hazardous chemicals and dangerous goods are disposed as per current regulations. All clubs hold site specific chemical
registers with safe work methods.
Noise emissions do not contravene State regulations or impact on surrounding business or neighbourhoods.
36 Ardent Leisure Group | Annual Report 2016
For personal use only
Directors’ report to stapled
security holders
18.
Environmental regulations (continued)
(g)
Greenhouse gas and energy data reporting requirements
The Group is subject to the reporting requirements of both the Energy Efficiency Opportunities Act 2006 and the National Greenhouse
and Energy Reporting Act 2007.
The Energy Efficiency Opportunities Act 2006 requires the Group to assess its energy usage, including the identification, investigation
and evaluation of energy saving opportunities, and to report publicly on the assessments undertaken, including what action the Group
intends to take as a result. The Group continues to meet its obligations under this Act.
The National Greenhouse and Energy Reporting Act 2007 requires the Group to report its annual greenhouse gas emissions and energy
use. The Group has implemented systems and processes for the collection and calculation of the data required. The Group submitted
its 2014/2015 emissions report under the Act in October 2015.
The Group is not subject to any other significant environmental regulations and there are adequate systems in place to manage its
environmental responsibilities.
19.
Rounding of amounts to the nearest thousand dollars
The Group is a registered scheme of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191 issued by the Australian Securities and Investments Commission relating to the “rounding off” of amounts in the Directors’
report and financial report. Amounts in the Directors’ report and financial report have been rounded to the nearest thousand dollars
in accordance with that Instrument, unless otherwise indicated.
This report is made in accordance with a resolution of the Boards of Directors of Ardent Leisure Management Limited and Ardent
Leisure Limited.
Neil Balnaves AO
Chairman
Sydney
23 August 2016
Deborah Thomas
Managing Director
Ardent Leisure Group | Annual Report 2016 37
For personal use only
Auditor’s Independence Declaration
As lead auditor for the audit of Ardent Leisure Group for the year ended 30 June 2016, I declare that to
the best of my knowledge and belief, there have been:
1.
2.
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Ardent Leisure Group, which includes Ardent Leisure Trust and
Ardent Leisure Limited and the entities it controlled during the period.
Timothy J Allman
Partner
PricewaterhouseCoopers
Brisbane
23 August 2016
PricewaterhouseCoopers, ABN 52 780 433 757
480 Queen Street, BRISBANE QLD 4000, GPO Box 150, BRISBANE QLD 4001
T: +61 7 3257 5000, F: +61 7 3257 5999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
For personal use only
Income Statements
for the year ended 30 June 2016
Income Statements
Income
Revenue from operating activities
Management fee income
Valuation gains - investment properties
Net gain from derivative financial instruments
Interest income
Business acquisition costs refunded
Gain on sale and leaseback of family entertainment centres
Note
3
7(b)
6
Consolidated
Group
2016
$’000
Consolidated
Group
2015
$’000
ALL Group
2016
$’000
ALL Group
2015
$’000
664,614
-
2,050
-
81
198
1,672
571,651
-
-
552
121
-
6,959
664,614
1,200
-
-
68
198
1,672
571,651
1,200
-
-
77
-
6,959
Total income
668,615
579,283
667,752
579,887
Expenses
Purchases of finished goods
Salary and employee benefits
Borrowing costs
Property expenses
Depreciation and amortisation
Loss on closure of bowling centres
Loss on disposal of assets
Advertising and promotions
Repairs and maintenance
Pre-opening expenses
Business acquisition costs
Impairment of property, plant and equipment
Impairment of goodwill
Net loss from derivative financial instruments
Valuation loss - investment properties
Other expenses
Total expenses
Profit before tax expense
Income tax expense
Profit from continuing operations
Profit from discontinued operation
Profit for the year
Attributable to:
Stapled security holders
Profit for the year
4
5
6
8
10
16
65,675
250,571
14,874
104,289
63,955
-
500
24,057
32,164
8,638
64
463
-
170
-
60,421
55,126
221,361
11,333
96,388
53,949
104
523
20,305
25,542
6,521
1,938
2,646
141
-
513
53,029
65,675
250,745
13,337
154,033
40,752
-
126
24,057
32,164
8,455
64
158
-
-
-
59,771
55,126
222,196
11,731
138,182
31,700
-
376
20,305
25,542
6,521
1,938
1,009
141
-
-
52,133
625,841
549,419
649,337
566,900
42,774
8,421
34,353
8,034
42,387
29,864
6,634
23,230
8,892
32,122
18,415
8,399
10,016
625
10,641
12,987
6,843
6,144
718
6,862
42,387
42,387
32,122
32,122
10,641
10,641
6,862
6,862
The above Income Statements should be read in conjunction with the accompanying notes.
Basic earnings per security/share (cents)
Basic earnings per security/share (cents) from continuing
operations
Diluted earnings per security/share (cents)
Diluted earnings per security/share (cents) from continuing
operations
11
11
11
11
9.37
7.59
9.35
7.58
7.38
5.34
7.35
5.32
2.35
2.21
2.35
2.21
1.58
1.42
1.57
1.41
Ardent Leisure Group | Annual Report 2016 39
For personal use only
Statements of Comprehensive Income
for the year ended 30 June 2016
Statements of Comprehensive Income
Note
Consolidated
Group
2016
Consolidated
Group
2015
ALL Group
2016
ALL Group
2015
$’000
$’000
$’000
$’000
Profit for the year
42,387
32,122
10,641
6,862
30
30
30
30
Other comprehensive income for the year
Items that may be reclassified to profit and loss
Cash flow hedges
Foreign exchange translation difference
Income tax relating to these items
Items that will not be reclassified to profit and loss
Gain on revaluation of property, plant and equipment
Other comprehensive income for the year, net of tax
Total comprehensive income for the year, net of tax
Attributable to:
Stapled security holders
Total comprehensive income for the year, net of tax
Total comprehensive income for the year attributable to
stapled security holders arises from:
Continuing operations
Discontinued operations
Total comprehensive income for the year, net of tax
(1,878)
2,049
441
10,534
11,146
53,533
(958)
3,623
24
7,541
10,230
42,352
(1,321)
2,277
441
-
1,397
12,038
(75)
6,916
24
-
6,865
13,727
53,533
53,533
42,352
42,352
12,038
12,038
13,727
13,727
45,499
8,034
53,533
33,460
8,892
42,352
11,413
625
12,038
13,009
718
13,727
The above Statements of Comprehensive Income should be read in conjunction with the accompanying notes.
40 Ardent Leisure Group | Annual Report 2016
For personal use only
Balance Sheets
as at 30 June 2016
Balance Sheets
Current assets
Cash and cash equivalents
Receivables
Derivative financial instruments
Inventories
Current tax receivables
Assets classified as held for sale
Construction in progress inventories
Other
Total current assets
Non-current assets
Investment properties
Property, plant and equipment
Derivative financial instruments
Livestock
Intangible assets
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Payables
Construction in progress deposits
Derivative financial instruments
Current tax liabilities
Provisions
Liabilities directly associated with assets classified as held
for sale
Other
Total current liabilities
Non-current liabilities
Derivative financial instruments
Interest bearing liabilities
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
(Accumulated losses)/retained profits
Total equity attributable to stapled security holders
Total equity
Note
33
13
14
15
16(c)
17
18
19
20
14
21
22
23
17
14
25
16(c)
26
14
24
25
27
28
30
31
Consolidated
Group
2016
$’000
Consolidated
Group
2015
$’000
ALL Group
2016
$’000
ALL Group
2015
$’000
9,070
13,286
131
13,002
3,275
112,940
61,796
7,913
221,413
-
683,759
113
221
246,129
5,997
936,219
1,157,632
106,407
55,494
1,202
63
4,029
4,104
1,985
173,284
2,937
312,903
14,987
33,538
364,365
537,649
619,983
649,720
(24,938)
(4,799)
619,983
619,983
4,986
10,856
263
11,372
1,740
-
-
10,736
39,953
99,326
609,682
114
245
242,944
4,243
956,554
996,507
91,323
-
98
1,291
3,236
-
2,694
98,642
2,133
278,618
15,769
21,863
318,383
417,025
579,482
605,181
(30,691)
4,992
579,482
579,482
8,391
13,286
-
13,002
3,275
2,782
61,796
7,384
109,916
-
287,061
-
221
246,129
5,997
539,408
649,324
93,699
55,494
132
63
4,029
3,716
1,985
159,118
1,283
276,088
4,414
33,538
315,323
474,441
174,883
167,100
9,035
(1,252)
174,883
174,883
4,685
13,210
-
11,372
1,740
-
-
7,026
38,033
-
213,600
-
245
242,944
4,243
461,032
499,065
76,287
-
-
1,291
3,236
-
2,694
83,508
129
237,006
5,552
21,863
264,550
348,058
151,007
155,262
7,638
(11,893)
151,007
151,007
The above Balance Sheets should be read in conjunction with the accompanying notes.
Ardent Leisure Group | Annual Report 2016 41
For personal use only
Statements of Changes in Equity
for the year ended 30 June 2016
Statements of Changes in Equity
Note
Contributed
equity
Reserves
Retained
profits/
(accumulated
losses)
Non-
controlling
interests
$’000
$’000
$’000
$’000
Consolidated Group
Total equity at 1 July 2014
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Security-based payments
Contributions of equity, net of issue costs
Security-based payments - securities/shares issued
Distributions paid and payable
Reserve transfers
Total equity at 30 June 2015
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Security-based payments
Contributions of equity, net of issue costs
Security-based payments - securities/shares issued
Distributions paid and payable
Reserve transfers
513,912
(45,918)
-
-
-
-
10,230
10,230
-
85,786
5,483
-
-
605,181
-
-
-
-
41,162
3,377
-
-
(3,821)
-
-
-
8,818
(30,691)
-
11,146
11,146
(1,866)
-
-
-
(3,527)
30
28
28
31
30, 31
30
28
28
31
30, 31
Total equity at 30 June 2016
649,720
(24,938)
37,508
32,122
-
32,122
-
-
-
(55,820)
(8,818)
4,992
42,387
-
42,387
-
-
-
(55,705)
3,527
(4,799)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
ALL Group
Total equity at 1 July 2014
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Contributions of equity, net of issue costs
Security-based payments - shares issued
Capital reallocation
Reserve transfers
Repayment of non-controlling interests
Dividends paid and payable
Total equity at 30 June 2015
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
28
28
28
30, 31
31
Transactions with owners in their capacity as owners:
Contributions of equity, net of issue costs
Security-based payments - shares issued
Total equity at 30 June 2016
28
28
16,309
(1,537)
(1,655)
71,359
-
-
-
15,189
937
122,827
-
-
-
155,262
-
-
-
10,958
880
167,100
-
6,865
6,865
-
-
-
2,310
-
-
7,638
-
1,397
1,397
-
-
9,035
6,862
-
6,862
-
-
-
(2,310)
-
(14,790)
(11,893)
10,641
-
10,641
-
-
(1,252)
-
-
-
-
-
-
-
(71,359)
-
-
-
-
-
-
-
-
The above Statements of Changes in Equity should be read in conjunction with the accompanying notes.
42 Ardent Leisure Group | Annual Report 2016
Total
equity
$’000
505,502
32,122
10,230
42,352
(3,821)
85,786
5,483
(55,820)
-
579,482
42,387
11,146
53,533
(1,866)
41,162
3,377
(55,705)
-
619,983
84,476
6,862
6,865
13,727
15,189
937
122,827
-
(71,359)
(14,790)
151,007
10,641
1,397
12,038
10,958
880
174,883
For personal use only
Statements of Cash Flows
for the year ended 30 June 2016
Statements of Cash Flows
Note
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2016
$’000
2015
$’000
2016
$’000
2015
$’000
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Property expenses paid
Payments for construction in progress inventories
Interest received
Rent payments to the Trust
Deposits received for construction in progress
Receipts of funds for property costs from the Trust
US withholding tax received/(paid)
Income tax paid
Net cash flows from operating activities
Cash flows from investing activities
Payments for property, plant and equipment and other
intangibles
Purchase of assets for the Trust
Receipt of funds for assets purchased on behalf of the Trust
Proceeds from sale of plant and equipment
Proceeds from sale of land and buildings
Payments for purchase of businesses, net of cash acquired
Net cash flows from investing activities
34(a)
Cash flows from financing activities
Proceeds from borrowings
Repayments of borrowings
Borrowing costs
Proceeds from issue of stapled securities
Costs of issue of stapled securities
Dividends paid to the Trust
Proceeds from loans from the Trust
Repayments of borrowings to the Trust
Repayments of principal on finance leases
Distributions paid to stapled security holders
Net cash flows from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of exchange rate changes on cash and cash equivalents
Cash at the end of the year
33
752,923
(503,891)
(109,140)
(70,832)
81
-
68,116
-
206
(2,042)
135,421
650,383
(436,132)
(96,189)
-
121
-
-
-
(140)
(2,691)
115,352
755,995
(495,286)
(105,169)
(70,832)
68
(122,453)
68,116
62,224
-
(2,039)
90,624
(154,444)
-
-
186
23,849
(3,789)
(134,198)
(133,965)
-
-
628
41,719
(33,322)
(124,940)
(132,132)
(20,210)
20,803
186
23,849
(1,488)
(108,992)
2,572,503
(2,539,083)
(15,960)
-
(78)
-
-
-
-
(14,465)
2,917
4,140
4,986
(54)
9,072
2,084,223
(2,095,274)
(10,937)
70,000
(993)
-
-
-
(61)
(39,041)
7,917
(1,671)
7,079
(422)
4,986
1,334,380
(1,296,954)
(14,077)
-
(21)
-
82,598
(83,800)
-
-
22,126
3,758
4,685
(50)
8,393
651,136
(433,864)
(92,330)
-
77
(115,766)
-
58,922
-
(2,691)
65,484
(115,862)
(19,108)
18,387
270
41,719
(31,195)
(105,789)
984,102
(978,076)
(11,797)
11,698
(167)
(1,630)
125,104
(76,839)
(61)
(13,160)
39,174
(1,131)
6,197
(381)
4,685
The above Statements of Cash Flows should be read in conjunction with the accompanying notes.
Ardent Leisure Group | Annual Report 2016 43
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
Notes to the Financial Statements
1.
Summary of significant accounting policies
Ardent Leisure Group (Group or Consolidated Group) is a ‘stapled’ entity comprising of Ardent Leisure Trust (Trust) and its controlled
entities, and Ardent Leisure Limited (ALL or Company) and its controlled entities. The units in the Trust are stapled to shares in the
Company. The stapled securities cannot be traded or dealt with separately. The stapled securities of the Group are listed on the
Australian Securities Exchange (ASX).
The significant policies which have been adopted in the preparation of these consolidated financial statements for the year ended 30
June 2016 are set out below. These policies have been consistently applied to the years presented, unless otherwise stated.
(a)
Basis of preparation
As permitted by Corporations (Stapled Group Reports) Instrument 2015/838, issued by the Australian Securities and Investments
Commission (ASIC), this financial report is a combined report that presents the consolidated financial statements and accompanying
notes of both the Ardent Leisure Group and the Ardent Leisure Limited Group (ALL Group).
The financial report of Ardent Leisure Group comprises the consolidated financial report of Ardent Leisure Trust and its controlled
entities, including Ardent Leisure Limited and its controlled entities.
The financial report of Ardent Leisure Limited Group comprises the consolidated financial report of Ardent Leisure Limited and its
controlled entities.
These general purpose financial statements have been prepared in accordance with the requirements of the Trust Constitution,
Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB), and the Corporations
Act 2001.
Ardent Leisure Group is a for-profit entity for the purposes of preparing financial statements.
These consolidated financial statements have been presented in accordance with ASIC Class Order 13/1050. These Class Orders allow
the presentation of consolidated financial statements covering all the entities in a stapled group. There are no non-controlling interests
that are attributable to the stapled security holders.
Compliance with IFRS as issued by the IASB
Compliance with Australian Accounting Standards ensures that the financial statements comply with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Consequently, these financial statements have also
been prepared in accordance with and comply with IFRS as issued by the IASB.
New and amended standards adopted by the Group
The Group has applied the following new and amended standards for first time for the annual reporting period commencing 1 July
2015:
AASB 2015-3 Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031 Materiality; and
AASB 2015-4 Amendments to Australian Accounting Standards – Financial Reporting Requirements for Australian Groups with a
Foreign Parent.
There has been no impact to the financial statements as a result of the new or amended accounting standards.
44 Ardent Leisure Group | Annual Report 2016
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
1.
(a)
Summary of significant accounting policies (continued)
Basis of preparation (continued)
Historical cost convention
The financial statements have been prepared under the historical cost convention, as modified by the revaluation of investment
properties, property, plant and equipment and derivative financial instruments held at fair value.
Critical accounting estimates
The preparation of financial statements in conformity with Australian Accounting Standards may require the use of certain critical
accounting estimates and management to exercise its judgement in the process of applying the Group’s accounting policies. Other
than the estimation of fair values described in Notes 1(f), 1(g), 1(m), 1(p), 1(s)(v), 1(s)(vi), 1(ab), 1(ac) and 1(ag) and assumptions related
to deferred tax assets and liabilities, impairment testing of goodwill and Director valuations for some property, plant and equipment
and investment properties, no key assumptions concerning the future, or other estimation of uncertainty at the reporting date, have a
significant risk of causing material adjustments to the financial statements in the next annual reporting period.
Deficiency of current assets
In the prior year, the Group had a deficiency of current assets of $58.7 million and, as at 30 June 2016, the ALL Group had a deficiency of
current assets of $48.4 million (2015: $45.5 million). Due to the nature of the business, the majority of sales are for cash whereas
purchases are on credit resulting in a negative working capital position. Surplus cash is used to repay external loans, resulting in
deficiencies of current assets. The Group has $262.1 million (2015: $128.6 million) of unused loan capacity at 30 June 2016 which can be
drawn on as required. The ALL Group has $300.0 million (2015: $171.0 million) of unused capacity in its bank loans and its loans with the
Trust which can be utilised to fund any deficiency in its net current assets. Refer to Note 24.
(b)
Principles of consolidation
As the Trust is deemed to be the parent entity under Australian Accounting Standards, a consolidated financial report has been prepared
for the Group as well as a consolidated financial report for the ALL Group. The consolidated financial report of the Group combines the
financial report for the Trust and ALL Group for the year. Transactions between the entities have been eliminated in the consolidated
financial reports of the Group and ALL Group. Accounting for the Group is carried out in accordance with Australian Accounting
Standards.
Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights
to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities
of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated
from the date that control ceases.
The acquisition method of accounting is used to account for business combinations by the Group (refer to Note 1(ac)).
The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of
the Group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-
controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-
controlling interests and any consideration paid or received is recognised in a separate reserve within equity attributable to owners of
Ardent Leisure Group.
When the Group ceases to have control, joint control or significant influence, any retained interest in the entity is remeasured to its fair
value with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of
subsequently accounting for the retained interest as an associate, jointly controlled entity or financial asset. In addition, any amounts
previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed
of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to
profit or loss.
If the ownership interest in an associate or a jointly controlled entity is reduced but joint control or significant influence is retained, only
a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to profit or loss where
appropriate.
Ardent Leisure Group | Annual Report 2016 45
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
1.
(b)
Summary of significant accounting policies (continued)
Principles of consolidation (continued)
The Group applies a policy of treating transactions with non-controlling interests as transactions with parties external to the Group.
Disposals to non-controlling interests result in gains and losses for the Group that are recorded in the Income Statement. Purchases
from non-controlling interests result in goodwill, being the difference between any consideration paid and the relevant share acquired
of the carrying value of identifiable net assets of the subsidiary.
Inter-entity transactions, balances and unrealised gains on transactions between Group entities are eliminated. Unrealised losses are
also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries
have been changed where necessary to ensure consistency with the policies adopted by the Group.
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns
that are different to those of other business segments.
(c)
Cash and cash equivalents
For Statement of Cash Flows presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial
institutions, other short term, highly liquid investments with original maturities of three months or less that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts.
(d)
Receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest rate
method less provision for doubtful debts. They are presented as current assets unless collection is not expected for more than 12 months
after the reporting date. The collectability of debts is reviewed on an ongoing basis. Debts which are known to be uncollectible are
written off in the period in which they are identified. A provision for doubtful debts is raised where there is objective evidence that the
Group will not collect all amounts due. The amount of the provision is the difference between the carrying amount and estimated future
cash flows. Cash flows relating to current receivables are not discounted.
The amount of any impairment loss is recognised in the Income Statement within other expenses. When a trade receivable for which a
provision has been recognised becomes uncollectible in a subsequent period, it is written off against the provision. Subsequent
recoveries of amounts previously written off are credited against other expenses in the Income Statement.
(e)
Inventories
Inventories are valued at the lower of cost and net realisable value. Cost of goods held for resale is determined by weighted average
cost. Cost of catering stores (which by nature are perishable) and other inventories is determined by purchase price.
(f)
Investment properties
Investment properties comprise investment interests in land and buildings (including integral plant and equipment) held for the
purposes of letting to produce rental income.
Initially, investment properties are measured at cost including transaction costs. Subsequent to initial recognition, the investment
properties are then stated at fair value. Gains and losses arising from changes in the fair values of investment properties are included in
the Income Statement in the period in which they arise.
At each reporting date, the fair values of the investment properties are assessed by the Manager by reference to independent valuation
reports or through appropriate valuation techniques adopted by the Manager. Fair value is determined assuming a long term property
investment. Specific circumstances of the owner are not taken into account.
The use of independent valuers is on a progressive basis over a three year period, or earlier, where the Manager believes there may be
a material change in the carrying value of the property.
Where an independent valuation is obtained, the valuer considers the valuation under both the discounted cash flow (DCF) method
and the income capitalisation method, with the adopted value generally being a mid-point of the valuations determined under these
methods.
Under the DCF method, a property’s fair value is estimated using the explicit assumptions regarding the benefits and liabilities of
ownership over the asset’s life. The DCF method involves the projection of a series of cash flows on the property. To this projected cash
flow series, an appropriate, market-derived discount rate is applied to establish the present value of the income stream associated with
the property.
Under the income capitalisation method, the total income receivable from the property is assessed and this is capitalised in perpetuity
to derive a capital value, with allowances for capital expenditure required.
46 Ardent Leisure Group | Annual Report 2016
For personal use only
DCF models;
Notes to the Financial Statements
for the year ended 30 June 2016
1.
(f)
Summary of significant accounting policies (continued)
Investment properties (continued)
Where an independent valuation is not obtained, factors taken into account where appropriate, by the Directors in determining fair
value may include:
assuming a willing buyer and a willing seller, without duress and an appropriate time to market the property to maximise price;
information obtained from valuers, sales and leasing agents, market research reports, vendors and potential purchasers;
capitalisation rates used to value the asset, market rental levels and lease expiries;
changes in interest rates;
asset replacement values;
available sales evidence; and
comparisons to valuation professionals performing valuation assignments across the market.
As the fair value method has been adopted for investment properties, the buildings and any component thereof are not depreciated.
Taxation allowances for the depreciation of buildings and plant and equipment are claimed by the Trust and contribute to the tax
deferred component of distributions.
(g)
Property, plant and equipment
Revaluation model
The revaluation model of accounting is used for land and buildings, and major rides and attractions. All other classes of property, plant
and equipment (PPE) are carried at historic cost. Initially, PPE are measured at cost. For assets carried under the revaluation model, PPE
is carried at a revalued amount, being its fair value at the date of revaluation less any subsequent accumulated depreciation and
subsequent accumulated impairment losses. Revaluations are made with sufficient regularity to ensure that the carrying amount does
not differ materially from that which would be determined using fair value at the reporting date.
Increases in the carrying amounts arising on revaluation of PPE are credited, net of tax, to other reserves in equity. To the extent that
the increase reverses a decrease previously recognised in profit or loss, the increase is first recognised in profit or loss. Decreases that
reverse previous increases of the same asset are first charged against the asset revaluation reserve directly in equity to the extent of the
remaining reserve attributable to the asset; all other decreases are charged to the Income Statement. Each year, the difference between
depreciation based on the revalued carrying amount of the asset is charged to the Income Statement and depreciation based on the
asset’s original cost, net of tax, is transferred from the asset revaluation reserve to retained profits.
At each reporting date, the fair values of PPE are assessed by the Manager by reference to independent valuation reports or through
appropriate valuation techniques adopted by the Manager. Fair value is determined assuming a long term property investment.
Specific circumstances of the owner are not taken into account.
The use of independent valuers is on a progressive basis over a three year period, or earlier, where the Manager believes there may be
a material change in the carrying value of the property.
Where an independent valuation is not obtained, factors taken into account where appropriate, by the Directors in determining fair
value may include:
assuming a willing buyer and a willing seller, without duress and an appropriate time to market the property to maximise price;
information obtained from valuers, sales and leasing agents, market research reports, vendors and potential purchasers;
capitalisation rates used to value the asset, market rental levels and lease expiries;
changes in interest rates;
asset replacement values;
available sales evidence; and
comparisons to valuation professionals performing valuation assignments across the market.
DCF models;
Ardent Leisure Group | Annual Report 2016 47
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
1.
(g)
Summary of significant accounting policies (continued)
Property, plant and equipment (continued)
Depreciation
Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost or revalued
amounts, net of their residual values, over their estimated useful lives as follows:
Buildings
Leasehold improvements
Major rides and attractions
Plant and equipment
Furniture, fittings and equipment
Motor vehicles
2016
2015
40 years
Over life of lease
20 - 40 years
4 - 25 years
3 - 13 years
8 years
40 years
Over life of lease
20 - 40 years
4 - 25 years
3 - 13 years
8 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. An asset’s carrying amount
is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount
(refer to Note 1(m)).
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the Income
Statement. When revalued assets are sold, it is Group policy to transfer the amounts included in reserves in respect of those assets to
retained profits.
(h)
Leases
Where the Group has substantially all the risks and rewards of ownership, leases of property, plant and equipment are classified as
finance leases. Finance leases are capitalised at inception at the lower of the fair value of the leased property and the present value of
the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in interest bearing liabilities.
Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the Income Statement over the
lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The PPE
acquired under finance leases are depreciated over the shorter of the asset’s useful life and the lease term.
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases.
Payments made under operating leases (net of any incentives received from the lessor) are charged to the Income Statement on a
straight-line basis over the period of the lease. Lease income from operating leases where the Group is a lessor is recognised in income
on a straight-line basis over the lease term.
(i)
Investments and other financial assets
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
They arise when the Group provides money, goods or services directly to a debtor with no intention of selling the receivable. They are
included in current assets, except for those with maturities greater than 12 months after the reporting date which are classified as
non-current assets. Loans and receivables are carried at amortised cost using the effective interest rate method. The Group assesses at
each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired.
(j)
Construction in progress inventories
During the year, the Group entered into agreements with a third party to construct family entertainment centres for resale. Refer to Note
17.
Construction in progress inventories are valued at the lower of cost and net realisable value. Cost of construction in progress comprises
the purchase price and other costs, including labour costs which are allocated in accordance with the terms of the agreements.
48 Ardent Leisure Group | Annual Report 2016
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
1.
(k)
Summary of significant accounting policies (continued)
Livestock
Livestock is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition
of the animals. The fair value of the livestock is not materially different to its carrying value.
Depreciation on livestock is calculated using the straight-line method to allocate their cost or revalued amounts, net of their residual
values, over the useful lives of the assets which range from 5 to 50 years (2015: 5 to 50 years).
(l)
Intangible assets
Customer relationships
Customer relationships acquired are amortised over the period during which the benefits are expected to be received, which is four
years (2015: four years). The amortisation charge is weighted towards the first year of ownership where the majority of economic
benefits arise.
Brands
Brands acquired are amortised on a straight-line basis over the period during which benefits are expected to be received, which is
between 10 and 13 years (2015: 10 and 13 years).
Other intangible assets
Liquor licences are amortised over the length of the licences which are between 10 and 16 years (2015: 10 and 16 years), depending on
the length of the licence. Software is amortised on a straight-line basis over the period during which the benefits are expected to be
received, which is between 5 and 8 years (2015: 5 and 8 years).
Goodwill
Goodwill is measured as described in Note 1(ac). Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on
acquisitions of associates is included in investments in associates. Goodwill is not amortised but it is tested for impairment annually, or
more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated
impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purposes of impairment testing (refer to Note 1(m)). The allocation is made to
those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which
the goodwill arose, identified according to operating segments (refer to Note 37).
(m)
Impairment of assets
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment
or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable
amount is the higher of an asset’s fair value less costs to sell, and its value in use. For the purposes of assessing impairment, assets are
grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows
from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered impairment are
reviewed for possible reversal of the impairment at each reporting date.
(n)
Payables
Liabilities are recognised for amounts to be paid in the future for goods or services received, whether or not billed to the Group. The
amounts are unsecured and are usually paid within 30 to 60 days of recognition. Trade payables are presented as current liabilities
unless payment is not due within 12 months from the reporting date. They are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest rate method.
Ardent Leisure Group | Annual Report 2016 49
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
1.
(o)
Summary of significant accounting policies (continued)
Interest bearing liabilities
Borrowings are initially recognised at fair value, net of transaction costs incurred and are subsequently measured at amortised cost. Any
difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the Income Statement over the
period of the borrowing using the effective interest rate method. Fees paid on the establishment of loan facilities, which are not an
incremental cost relating to the actual drawdown of the facility, are recognised as prepayments and amortised on a straight-line basis
over the term of the facility.
Finance leases are recognised as interest bearing liabilities to the extent that the Group retains substantially all the risks and rewards of
ownership.
Interest bearing liabilities are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability
for at least 12 months after the end of the reporting period.
(p)
Derivatives
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to
their fair value at each reporting date. The method of recognising the resulting gain or loss depends on whether the derivative is
designated as a hedging instrument if hedging criteria are met, and if so, the nature of the item being hedged. The Group may designate
certain derivatives as either hedges of exposures to variability in cash flows associated with future interest payments on variable rate
debt (cash flow hedges) or hedges of net investments in foreign operations (net investment hedges).
The Group documents at the inception of the hedging transaction the relationship between the hedging instruments and hedged
items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its
assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have
been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items.
The fair values of various derivative financial instruments used for hedging purposes are disclosed in Note 14. Movements in the cash
flow hedge reserve in equity are shown in Note 30. The full fair value of a hedging derivative is classified as a non-current asset or liability
when the remaining maturity is more than 12 months. They are classified as current assets or liabilities when the remaining maturity of
the hedged item is less than 12 months. Trading derivatives are classified as current assets or liabilities.
(i)
Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that does not
qualify for hedge accounting are recognised immediately in the Income Statement.
(ii)
Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other
comprehensive income and accumulated in reserves in equity. The gain or loss relating to the ineffective portion is recognised
immediately in the Income Statement. Amounts accumulated in equity are recycled in the Income Statement in the period when the
hedged item impacts the Income Statement.
When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any
cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately
recognised in the Income Statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was
reported in equity is immediately transferred to the Income Statement.
50 Ardent Leisure Group | Annual Report 2016
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
1.
(q)
Summary of significant accounting policies (continued)
Borrowing costs
Borrowing costs are recognised as expenses using the effective interest rate method, except where they are included in the costs of
qualifying assets.
Borrowing costs include interest on short term and long term borrowings, amortisation of ancillary costs incurred in connection with
the arrangement of borrowings and finance lease charges.
Borrowing costs associated with the acquisition or construction of a qualifying asset are capitalised as part of the cost of that asset.
Borrowing costs not associated with qualifying assets, are expensed in the Income Statement.
The capitalisation rate used to determine the amount of borrowing costs to be capitalised is the weighted average interest rate
applicable to the Group’s outstanding borrowings during the year. The average capitalisation rate used was 3.60% per annum (2015:
4.16% per annum) for Australian dollar debt and 1.61% per annum (2015: 1.54% per annum) for US dollar debt.
(r)
Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an
outflow of resources will be required to settle the obligation, and the amount can be reliably estimated.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by
considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one
item included in the same class of obligations may be small.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present
obligation at the reporting date. The discount rate used to determine the present value reflects current market assessments of the time
value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest
expense.
(s)
(i)
Employee benefits
Wages and salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled
within 12 months of the reporting date are recognised in other payables in respect of employees' services up to the reporting date and
are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are
recognised when the leave is taken and measured at the rates paid or payable.
(ii)
Long service leave
The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected
future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit
method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service.
Where amounts are not expected to be settled within 12 months, expected future payments are discounted to their net present value
using market yields at the reporting date on high quality corporate bonds.
The obligations are presented as current liabilities in the Balance Sheet if the Group does not have an unconditional right to defer
settlement for at least 12 months after the reporting date, regardless of when the actual settlement is expected to occur.
(iii)
Profit sharing and bonus plans
The Group recognises a provision where contractually obliged or where there is a past practice that has created a constructive
obligation.
(iv)
Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement date, or when an employee accepts
voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed
to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal or to
providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12
months after the end of the reporting period are discounted to present value.
Ardent Leisure Group | Annual Report 2016 51
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
1.
(s)
(v)
Summary of significant accounting policies (continued)
Employee benefits (continued)
Long Term Incentive Plan (LTIP)
Australian employees
Since 1 July 2009, long term incentives have been provided to certain executives under the LTIP. Under the terms of the LTIP and the
initial grant, employees may be granted performance rights, of which one third will vest two years after grant date, one third will vest
three years after grant date and one third will vest four years after grant date. The percentage of performance rights which will vest is
subject to the performance of the Group relative to its peer group, which is the ASX Small Industrials Index. The first set of performance
rights were granted under the scheme on 4 December 2009, with the first vesting date being the day after the full year results
announcement for the year ended 30 June 2011.
The characteristics of the LTIP indicate that, at the Ardent Leisure Group level, it is an equity settled share-based payment under AASB 2
Share-based Payment as the holders are entitled to the securities as long as they meet the LTIP’s service and performance criteria.
However, as ALL is considered to be a subsidiary of the Trust, in the financial statements of the ALL Group the LTIP is accounted for as a
cash settled share-based payment.
The fair value of the performance rights granted under the LTIP is recognised in the Group financial statements as an employee benefit
expense with a corresponding increase in equity. The fair value of the performance rights at grant date is determined using a Monte
Carlo simulation valuation model and then recognised over the vesting period during which employees become unconditionally
entitled to the underlying securities.
The fair value of the performance rights granted under the LTIP is recognised in the ALL Group financial statements as an employee
benefit expense with a corresponding increase in liabilities. The fair value of each grant of performance rights is determined at each
reporting date using a Monte Carlo simulation valuation model, with the movement in fair value of the liability being recognised in the
Income Statement.
At each reporting date, the estimate of the number of performance rights that are expected to vest is revised. The employee benefit
expense recognised each period takes into account the most recent estimate.
US employees
Due to previous restrictions on the issue of securities to US residents, those US executives eligible for the LTIP were subject to a shadow
performance rights scheme whereby a cash payment was made instead of performance rights being granted. At the end of the vesting
period for each grant of performance rights, a calculation is made of the number of performance rights which would have been granted
and payment is made based on the Group stapled security volume weighted average price (VWAP) for the five trading days immediately
following the vesting date. Due to the nature of the scheme, this scheme is considered to be a cash settled share-based payment under
AASB 2. Following steps taken to issue equity to US resident employees, all new performance rights issued after 1 July 2014 will be
settled in equity upon vesting in future periods. As such, these performance rights are considered to be equity settled shared-based
payments under AASB 2.
The fair value of cash settled performance rights is determined at grant date and each reporting date using a Monte Carlo simulation
valuation model. This is recorded as a liability, with the difference in the movement in the fair value of the financial liability being
recognised in the Income Statement.
The fair value of equity settled performance rights is determined at grant date using a Monte Carlo simulation valuation model. This is
recorded as an employee benefit expense with a corresponding increase in equity.
At each reporting date, the estimate of the number of performance rights that are expected to vest is revised. The employee benefit
expense recognised each period takes into account the most recent estimate.
(vi)
Deferred Short Term Incentive Plan (DSTI)
Australian employees
Since 1 July 2010, long term incentives have been provided to executives under the DSTI. Under the terms of the DSTI, employees may
be granted DSTI performance rights, of which one half will vest one year after grant date and one half will vest two years after grant
date. The first set of performance rights were granted under the DSTI on 16 December 2010, with the first vesting date being the day
after the full year results announcement for the year ended 30 June 2011.
The characteristics of the DSTI indicate that, at the Ardent Leisure Group level, it is an equity settled share-based payment under AASB
2 Shared-based Payment as the holders are entitled to the securities as long as they meet the DSTI’s service criteria. However, as ALL is
considered to be a subsidiary of the Trust, in the financial statements of the ALL Group the DSTI is accounted for as a cash settled share-
based payment.
52 Ardent Leisure Group | Annual Report 2016
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
1.
(s)
Summary of significant accounting policies (continued)
Employee benefits (continued)
(vi)
Deferred Short Term Incentive Plan (DSTI) (continued)
Australian employees (continued)
The fair value of the performance rights granted under the DSTI is recognised in the Group financial statements as an employee benefit
expense with a corresponding increase in equity. The fair value of each grant of performance rights is determined at grant date using a
binomial tree valuation model and then recognised over the vesting period during which employees become unconditionally entitled
to the underlying securities.
The fair value of the performance rights granted under the DSTI is recognised in the ALL Group financial statements as an employee
benefit expense with a corresponding increase in liabilities. The fair value of each grant of performance rights is determined at each
reporting date using a binomial tree valuation model with the movement in fair value of the liability being recognised in the Income
Statement.
At each reporting date, the estimate of the number of performance rights that are expected to vest is revised. The employee benefit
expense recognised each period takes into account the most recent estimate.
US employees
Due to previous restrictions on the issue of securities to US residents, those US executives eligible for the DSTI were subject to a shadow
performance rights scheme whereby a cash payment was made instead of performance rights being granted. At the end of the vesting
period, the number of performance rights which would have vested is multiplied by the Group VWAP for the five trading days
immediately following the vesting date and an equivalent cash payment is made. Due to the nature of the scheme, this is considered
to be a cash settled share-based payment under AASB 2. All new performance rights issued after 1 July 2014 will be settled in equity
upon vesting in future periods. As such, the performance rights are considered to be equity settled share-based payments under AASB
2. In the ALL financial statements, all performance rights issued to US employees are considered to be cash settled.
The fair value of each grant of cash settled performance rights is determined at grant date and each reporting date using a binomial
tree valuation model. This is recorded as a liability with the difference in the movement in the fair value of the financial liability being
recognised in the Income Statement.
The fair value of each grant of equity settled performance rights is determined at grant date using a binomial tree valuation model. This
is recorded as an employee benefit expense with a corresponding increase in equity.
At each reporting date, the estimate of the number of performance rights that are expected to vest is revised. The employee benefit
expense recognised each period takes into account the most recent estimate.
(t)
Tax
The Trust is not subject to income tax. However, both of its controlled entities, Ardent Leisure (NZ) Trust and ALL Group, are subject to
income tax.
Under current Australian income tax legislation, the Trust is not liable to pay income tax provided its income, as determined under the
Trust Constitution, is fully distributed to unit holders, by way of cash or reinvestment. The liability for capital gains tax that may otherwise
arise if the Australian properties were sold is not accounted for in these financial statements, as the Trust expects to distribute such
amounts to its unit holders.
The income tax expense or revenue for the period is the tax payable on the current period's taxable income based on the applicable
income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and
to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting
period in the countries where the Company's subsidiaries and associates operate and generate taxable income. Management
periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to
interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they
arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset
or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable
profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end
of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax
liability is settled.
Ardent Leisure Group | Annual Report 2016 53
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
1.
(t)
Summary of significant accounting policies (continued)
Tax (continued)
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable
amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of
investments in foreign operations where the Company is able to control the timing of the reversal of the temporary differences and it is
probable that the differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when
the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a
legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Ardent Leisure Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation as of 8
February 2005. As a consequence, these entities are taxed as a single entity and the deferred tax assets and liabilities of these entities
are set off in the consolidated financial statements.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive
income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity respectively.
Companies within the Group may be entitled to claim special tax deductions for investments in qualifying assets (investment
allowances). The Group accounts for such allowances as tax credits. This means that the allowance reduces income tax payable and
current tax expense. A deferred tax asset is recognised for unclaimed tax credits that are carried forward as deferred tax assets.
(u)
Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the
taxation authority. In this case, it is recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or
payable to, the taxation authority is included with other receivables or payables in the Balance Sheet.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are
recoverable from or payable to the taxation authority, are presented as operating cash flow.
(v)
Equity
Incremental costs directly attributable to the issue of new stapled securities or options are recognised directly in equity as a reduction
in the proceeds of stapled securities to which the costs relate. Incremental costs directly attributable to the issue of new stapled
securities or options for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration.
(w)
Reserves
In accordance with the Trust Constitution, amounts may be transferred from reserves or contributed equity to fund distributions.
(x)
Revenue
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade
allowances and amounts collected on behalf of third parties. The Group recognises revenue when the amount of revenue can be reliably
measured, it is probable that further economic benefits will flow to the entity and specific criteria have been met for each of the Group’s
activities as described below. Revenue is recognised for the major business activities as follows:
(i)
Rendering of services
Revenue from rendering of services including health club memberships, theme park and SkyPoint entry and bowling games is
recognised when the outcome can be reliably measured and the service has taken place. Where health club membership is for a fixed
period and paid in advance, the revenue is recognised on a straight-line basis over the membership period. Revenue relating to theme
park annual passes is recognised as the passes are used.
54 Ardent Leisure Group | Annual Report 2016
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
1.
(x)
(ii)
Summary of significant accounting policies (continued)
Revenue (continued)
Sale of goods
Revenue from sale of goods including merchandise and food and beverage items is recognised when the risks and rewards of ownership
have passed to the buyer.
(iii)
Rental revenue
Rental income represents income earned from the sub-lease of investment properties leased by the Group, and is brought to account
on a straight-line basis over the lease term.
(iv)
Interest income
Interest income is recognised on a time proportion basis using the effective interest rate method. When a receivable is impaired, the
Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective
interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans is
recognised using the original effective interest rate.
(y)
(i)
Foreign currency translation
Functional and presentation currencies
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (functional currency). The consolidated financial statements are presented in Australian
dollars, which is the Group’s functional and presentation currency.
(ii)
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end
exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Income Statement, except
when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges or they are attributable to part of the net
investment in a foreign operation.
(iii)
Foreign operations
Assets and liabilities of foreign controlled entities are translated at exchange rates ruling at reporting date while income and
expenses are translated at average exchange rates for the period. Exchange differences arising on translation of the interests in
foreign controlled entities are taken directly to the foreign currency translation reserve. On consolidation, exchange differences on
loans denominated in foreign currencies, where the loan is considered part of the net investment in that foreign operation, are
taken directly to the foreign currency translation reserve. At 30 June 2016, the spot rate used was A$1.00 = NZ$1.0489 (2015: A$1.00
= NZ$1.1294) and A$1.00 = US$0.7426 (2015: A$1.00 = US$0.7680). The average spot rate during the year ended 30 June 2016 was
A$1.00 = NZ$1.0874 (2015: A$1.00 = NZ$1.0801) and A$1.00 = US$0.7272 (2015: A$1.00 = US$0.8288).
(z)
Segment information
Segment income, expenditure, assets and liabilities are those that are directly attributable to a segment and the relevant portion that
can be allocated to the segment on a reasonable basis. Segment assets include all assets used by a segment and consist primarily of
cash, receivables (net of any related provisions) and investments. Any assets used jointly by segments are allocated based on reasonable
estimates of usage.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments,
has been identified as the Board of Directors.
The main income statement items used by management to assess each of the divisions are divisional revenue and divisional EBITDA
before property costs and after property costs. In addition, depreciation and amortisation are analysed by division. Each of these
income statement items is looked at after adjusting for pre-opening expenses, straight lining of fixed rent increases, IFRS depreciation,
onerous lease costs, amortisation of intangible assets and impairment of property, plant and equipment and intangible assets and other
non-recurring realised items. As shown in Note 11, these items are excluded from management’s definition of core earnings.
Ardent Leisure Group | Annual Report 2016 55
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
1.
Summary of significant accounting policies (continued)
(aa)
Earnings per stapled security
Basic earnings per stapled security are determined by dividing profit by the weighted average number of ordinary stapled securities on
issue during the period.
Diluted earnings per stapled security are determined by dividing the profit by the weighted average number of ordinary stapled
securities and dilutive potential ordinary stapled securities on issue during the period.
(ab)
Fair value estimation
The Group measures financial instruments, such as derivatives, and non-financial assets such as investment properties, at fair value at
each balance date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or
transfer the liability takes place either:
In the principal market for the asset or liability; or
In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Group.
The fair value of an asset or liability is measured using the assumptions that market participants would use when pricing the asset or
liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by
using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best
use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure fair
value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
The fair value of financial instruments traded in active markets is based on quoted market prices at the reporting date. The quoted
market price used for financial assets held by the Group is the current bid price; the appropriate quoted market price for financial
liabilities is the current ask price.
The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The Group uses
a variety of methods and makes assumptions that are based on market conditions existing at each reporting date. Quoted market prices
or dealer quotes for similar instruments are used for long term debt instruments held. Other techniques, such as estimated discounted
cash flows, are used to determine fair value for the remaining financial instruments. The fair value of interest rate swaps is calculated as
the present value of the estimated future cash flows. The fair value of forward exchange contracts is determined using forward exchange
market rates at the reporting date.
The nominal value less estimated credit adjustments of trade receivables and payables approximate their fair values. The fair value of
financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest
rate that is available to the Group for similar financial instruments.
(ac)
Business combinations
The acquisition method of accounting is used to account for all business combinations, including business combinations involving
entities or businesses under common control, regardless of whether equity instruments or other assets are acquired. The consideration
transferred for the acquisition of a business comprises the fair values of the assets transferred, the liabilities incurred and the equity
interests issued by the Group. The consideration transferred also includes the fair value of any contingent consideration arrangement
and the fair value of any pre-existing equity interest in the subsidiary.
Acquisition related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a
business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On an acquisition by
acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s
proportionate share of the acquiree’s net identifiable assets.
56 Ardent Leisure Group | Annual Report 2016
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
1.
(ac)
Summary of significant accounting policies (continued)
Business combinations (continued)
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair
value of any previous equity interest in the acquiree over the fair value of the Group’s share of the net identifiable assets acquired is
recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired and the
measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a gain on acquisition.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value
as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing
could be obtained from an independent financier under comparable terms and conditions. Contingent consideration is classified either
as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair
value recognised in profit or loss.
Goodwill acquired is not deductible for tax.
(ad)
Dividends/distributions
Provision is made for the amount of any dividend/distribution declared, being appropriately authorised and no longer at the discretion
of the entity, on or before the end of the financial year but not distributed at the reporting date.
(ae)
Convertible notes
A subsidiary of ALL, Ardent Leisure Note Issuer Pty Limited, previously issued convertible notes to the Trust. Due to the terms associated
with these notes, the notes were classified as equity in the financial statements of the ALL Group. Given that this equity was not payable
to the shareholders of ALL, the notes were included in equity attributable to non-controlling interests. The convertible notes have been
repaid as a result of the capital reallocation between the Trust and the Company during the prior year. Refer to Note 28 for more
information.
(af)
Parent entity financial information
The financial information for the parent entity of the Group (Ardent Leisure Trust) and ALL Group (Ardent Leisure Limited) has been
prepared on the same basis as the consolidated financial statements, except as set out below:
(i)
Investments in subsidiaries, associates and jointly controlled entities
Investments in subsidiaries, associates and jointly controlled entities are accounted for at cost in the financial statements of the parent
entities. Dividends received from associates and jointly controlled entities are recognised in the parent entity’s profit or loss, rather than
being deducted from the carrying amount of these investments.
(ii)
Tax consolidation legislation
Ardent Leisure Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation. The
head entity, Ardent Leisure Limited, and the controlled entities in the tax consolidated group account for their own current and deferred
tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a standalone taxpayer in
its own right.
In addition to its own current and deferred tax amounts, Ardent Leisure Limited also recognises the current tax liabilities (or assets) and
the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated
group.
The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate Ardent Leisure
Limited for any current tax payable assumed and are compensated by Ardent Leisure Limited for any current tax receivable and deferred
tax assets relating to unused tax losses or unused tax credits that are transferred to Ardent Leisure Limited under the tax consolidation
legislation. The funding amounts are determined by reference to the amounts recognised in the wholly-owned entities' financial
statements.
The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head entity,
which is issued as soon as practicable after the end of each financial year. The head entity may also require payment of interim funding
amounts to assist with its obligations to pay tax instalments.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as current amounts receivable
from or payable to other entities in the group. Any difference between the amounts assumed and amounts receivable or payable under
the tax funding agreement are recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities.
Ardent Leisure Group | Annual Report 2016 57
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
1.
(af)
(iii)
Summary of significant accounting policies (continued)
Parent entity financial information (continued)
Financial guarantees
Where the parent entity has provided financial guarantees in relation to loans and payables of subsidiaries for no compensation, the fair
values of these guarantees are accounted for as contributions and recognised as part of the cost of the investment.
(iv)
Share-based payments
The grant by the parent entity of options over its equity instruments to the employees of subsidiary undertakings in the Group is treated
as a capital contribution to that subsidiary undertaking. The fair value of employee services received, measured by reference to the grant
date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding
credit to equity.
(ag)
Non-current assets (or disposal groups) held for sale and discontinued operations
Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale
transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying
amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial
assets and investment property that are carried at fair value and contractual rights under insurance contracts, which are specifically
exempt from this requirement.
An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell.
A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any
cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current
asset (or disposal group) is recognised at the date of derecognition.
Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held
for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised.
Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from
the other assets in the Balance Sheet. The liabilities of a disposal group classified as held for sale are presented separately from other
liabilities in the Balance Sheet.
A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a
separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of
business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are
presented separately in the Income Statement.
(ah)
New accounting standards, amendments and interpretations
Certain new standards, amendments and interpretations to existing standards have been published that are mandatory for the Group
for accounting periods beginning on or after 1 July 2016 but which the Group has not yet adopted. Based on a review of these standards,
the majority of the standards yet to be adopted are not expected to have a significant impact on the financial statements of the Group.
The Group’s and the parent entity’s assessment of the impact of those new standards, amendments and interpretations which may have
an impact is set out below:
AASB 9 Financial Instruments, AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9 and AASB
2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (effective from 1 January 2018)
AASB 9 Financial Instruments addresses the classification and measurement of financial assets and may affect the Group’s and the ALL
Group’s accounting for its financial assets. The standard is not applicable until 1 January 2018 but is available for early adoption. The
Group is yet to assess its full impact. However, initial indications are that there should be no material impact on the Group’s or the ALL
Group’s financial statements. The Group and the ALL Group do not intend to adopt AASB 9 before its operative date, which means that
it would be first applied in the annual reporting period ending 30 June 2019.
AASB 15 Revenue from Contracts with Customers (effective from 1 January 2018)
The IASB has issued a new standard for the recognition of revenue. This will replace AASB 118 Revenue which covers contracts for goods
and services and AASB 111 Construction Contracts which covers construction contracts. The Group is in the process of considering the
impact of the new rules on its revenue recognition policies. The Group will assess whether to adopt AASB 15 before its operative date;
if not, it would be first applied in the annual reporting period ending 30 June 2019.
58 Ardent Leisure Group | Annual Report 2016
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
1.
Summary of significant accounting policies (continued)
(ah)
New accounting standards, amendments and interpretations (continued)
AASB 16 Leases (effective from 1 January 2019)
The AASB has issued a new standard for leases which applies to accounting periods commencing on or after 1 January 2019. Given the
number of properties the Group leases under operating leases, it is expected that the impact of this standard will be significant.
Specifically, new assets will be realised (the right to use the leased asset) as well as new liabilities, being the liability to pay rentals. The
consolidated Statement of Comprehensive Income will also be affected. The Group will conduct a detailed assessment of the new
standard and will assess whether to adopt AASB 16 before its operative date; if not, it would be first applied in the annual reporting
period ending 30 June 2020.
Early adoption of standards
The Group has not elected to apply any pronouncements before their operative date in the annual reporting period beginning 1 July
2016.
(ai)
Rounding
The Group has relied on the relief provided by ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument 2016/191 issued
by the Australian Securities and Investments Commission relating to the “rounding off” of amounts in the financial report. Amounts in
the financial report have been rounded to the nearest thousand dollars in accordance with that Instrument, unless otherwise indicated.
Ardent Leisure Trust and Ardent Leisure Limited formation
The Trust was established on 6 February 1998. On 23 December 2005, the Manager executed a supplemental deed poll to amend the
Trust Constitution. The amendments removed the 80 year life of the Trust, to enable the units on issue to be classified as equity under
Australian Accounting Standards. ALL was incorporated on 28 April 2003. The Manager and ALL entered into the stapling deed effective
1 July 2003.
Revenue from operating activities
Revenue from services
Revenue from sale of goods
Revenue from rentals
Other revenue
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2016
$’000
2015
$’000
2016
$’000
495,415
153,795
15,395
9
426,587
126,797
17,872
395
495,415
153,795
15,395
9
2015
$’000
426,587
126,797
17,872
395
Revenue from operating activities
664,614
571,651
664,614
571,651
Borrowing costs
Borrowing costs paid or payable
Less: capitalised borrowing costs
Provisions: unwinding of discount
Borrowing costs expensed
For details of the fair value of borrowings, refer to Note 39(c).
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2016
$’000
2015
$’000
2016
$’000
15,032
(446)
288
14,874
11,580
(573)
326
11,333
13,525
(223)
35
13,337
2015
$’000
12,049
(357)
39
11,731
Ardent Leisure Group | Annual Report 2016 59
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
5.
Property expenses
Landlord rent and outgoings
Insurance
Rates
Land tax
(Decrease)/increase in onerous lease provisions
Other
Net (loss)/gain from derivative financial instruments
Unrealised net (loss)/gain on derivative financial instruments
Management fees
The Manager of the Trust is Ardent Leisure Management Limited.
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2016
$’000
2015
$’000
2016
$’000
2015
$’000
102,952
88,544
154,033
138,182
549
2,127
819
(2,193)
35
589
3,456
485
2,598
716
-
-
-
-
-
-
-
-
-
-
104,289
96,388
154,033
138,182
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2016
$’000
(170)
(170)
2015
$’000
552
552
2016
$’000
-
-
2015
$’000
-
-
The Manager’s registered office and principal place of business are Level 16, 61 Lavender Street, Milsons Point, NSW 2061.
(a)
Base management fee
The management fee is based on an allocation of costs incurred by ALL and its controlled entities to manage the Trust but is eliminated
in the aggregated results of the Group.
(b)
Management fee calculation
The management fee earned by the Manager during the year is detailed as follows:
Base management fee
Consolidated
Group
Consolidated
Group
2016
$’000
2015
$’000
-
-
-
-
ALL Group
ALL Group
2016
$’000
1,200
1,200
2015
$’000
1,200
1,200
60 Ardent Leisure Group | Annual Report 2016
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
Other expenses
Audit fees
Consulting fees
Consumables
Custodian fees
Electricity
Fuel and oil
Insurance
Legal fees
Merchant fees
Motor vehicles
Permits and fees
Printing, stationery and postage
Registry fees
Stapled security holder communication costs
Stock exchange costs
Taxation fees
Telephone
Training
Travel costs
Valuation fees
Other
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2016
$’000
797
2,639
3,397
100
17,264
1,032
3,627
654
11,975
1,079
4,587
3,132
181
318
84
444
3,062
1,775
3,177
113
984
60,421
2015
$’000
653
1,776
3,075
101
15,434
1,187
3,422
725
10,214
1,007
4,844
2,727
184
171
165
239
2,147
1,407
2,677
43
831
53,029
2016
$’000
562
2,528
3,397
-
17,264
1,032
3,627
654
11,975
1,079
4,566
3,132
181
318
84
411
3,062
1,775
3,177
-
947
59,771
2015
$’000
437
1,776
3,075
-
15,434
1,187
3,422
724
10,214
1,007
4,822
2,727
184
171
165
212
2,147
1,407
2,677
-
345
52,133
Remuneration of auditor
During the financial year, the auditor of the Group, PricewaterhouseCoopers (PwC), earned the following remuneration:
Audit and other assurance services - PwC Australia
Audit and other assurance services - related practices of PwC Australia
Taxation services - PwC Australia
Taxation services - related practices of PwC Australia
Other services - PwC Australia
Consolidated
Group
2016
$
Consolidated
Group
2015
$
ALL Group
2016
$
ALL Group
2015
$
615,978
180,812
28,278
415,641
1,550
1,242,259
533,268
120,198
27,105
212,088
1,530
894,189
381,020
180,812
-
411,031
1,550
974,413
316,339
120,198
-
212,088
1,530
650,155
Ardent Leisure Group | Annual Report 2016 61
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
Income tax expense
(a)
Income tax expense
Current tax
Deferred tax
Over provided in prior year
Income tax expense is attributable to:
Profit from continuing operations
Deferred income tax expense included in
income tax expense comprises:
Increase in deferred tax assets
Increase in deferred tax liabilities
Note
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2016
$’000
(1,256)
10,258
(581)
8,421
2015
$’000
(1,613)
8,354
(107)
6,634
2016
$’000
(1,283)
10,258
(576)
8,399
2015
$’000
(1,444)
8,354
(67)
6,843
8,421
6,634
8,399
6,843
22
27
(878)
11,136
10,258
(6,732)
15,086
8,354
(878)
11,136
10,258
(6,732)
15,086
8,354
(b)
Numerical reconciliation of income tax expense to prima facie tax expense
Profit from continuing operations before income tax
expense
Less: Profit from the trusts(1)
Prima facie profit
42,774
(37,131)
5,643
29,864
(27,104)
2,760
18,415
-
18,415
12,987
-
12,987
Tax at the Australian tax rate of 30% (2015: 30%)
1,693
828
5,525
3,896
Tax effects of amounts which are not deductible/(taxable)
in calculating taxable income:
Entertainment
Non-deductible depreciation and amortisation
Sundry items
Employee security plans
Business acquisition costs
Foreign exchange conversion differences
US State taxes
Withholding tax
Research and Development and other credits
Difference in overseas tax rates
Over provided in prior year
Income tax expense
104
3,909
353
264
(40)
24
1,533
3
(515)
1,674
(581)
8,421
92
3,331
(118)
281
581
42
1,115
(182)
(275)
1,046
(107)
6,634
104
-
405
264
(40)
24
1,533
-
(515)
1,675
(576)
8,399
92
-
132
281
581
42
1,115
-
(275)
1,046
(67)
6,843
(1) Profits relating to the trusts are largely distributed to unit holders via distributions and are subject to tax upon receipt of this distribution
income by the unit holders.
(c)
Income tax benefit relating to items of other comprehensive income
Unrealised loss on derivative financial instruments
recognised in the cash flow hedge reserve
22, 30
(441)
(441)
(24)
(24)
(441)
(441)
(24)
(24)
62 Ardent Leisure Group | Annual Report 2016
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
10.
(d)
Income tax expense (continued)
Unrecognised temporary differences
There are no unrecognised temporary differences as at 30 June 2016 (2015: nil).
(e)
Tax consolidation legislation
ALL and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation as of 8 February 2005. The
accounting policy in relation to this legislation is set out in Note 1(t).
On adoption of the tax consolidation legislation, the entities in the tax consolidated group entered into a tax sharing agreement which,
in the opinion of the Directors, limits the joint and several liability of the wholly-owned entities in the case of a default by the head entity,
ALL.
The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate ALL for any
current tax payable assumed and are compensated by ALL for any current tax receivable and deferred tax assets relating to unused tax
losses or unused tax credits that are transferred to ALL under the tax consolidation legislation. The funding amounts are determined by
reference to the amounts recognised in the wholly-owned entities’ financial statements.
The amounts receivable/payable under the tax funding agreement are payable upon demand by the head entity. The head entity may
also require payment of interim funding amounts to assist with its obligations to pay tax instalments. The funding amounts are netted
off in the non-current intercompany payables.
Earnings per security/share
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2016
2015
2016
2015
Basic earnings per security/share (cents) from continuing
operations
Basic earnings per security/share (cents) from discontinued
operation
Total basic earnings per security/share (cents)
Diluted earnings per security/share (cents) from continuing
operations
Diluted earnings per security/share (cents) from discontinued
operation
Total diluted earnings per security/share (cents)
7.59
1.78
9.37
7.58
1.77
9.35
5.34
2.04
7.38
5.32
2.03
7.35
Core earnings per security (cents)
Diluted core earnings per security (cents)
13.79
13.76
12.92
12.86
2.21
0.14
2.35
2.21
0.14
2.35
N/A
N/A
1.42
0.16
1.58
1.41
0.16
1.57
N/A
N/A
Earnings used in the calculation of basic and diluted earnings per
security/share ($'000)
42,387
32,122
10,641
6,862
Earnings used in the calculation of core earnings per security
(refer to calculation in table below) ($'000)
Weighted average number of stapled securities on issue used in
the calculation of basic and core earnings per security/share
('000)
Weighted average number of stapled securities held by ALL
employees under employee share plans (refer to Note 29) ('000)
Weighted average number of stapled securities on issue used in
the calculation of diluted earnings per security/share ('000)
62,395
56,234
N/A
N/A
452,484
435,208
452,484
435,208
991
2,069
991
2,069
453,475
437,277
453,475
437,277
Ardent Leisure Group | Annual Report 2016 63
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
11.
Earnings per security/share (continued)
Calculation of core earnings
The table below outlines the Manager’s adjustments to profit under Australian Accounting Standards to determine the amount the
Manager believes should be available for distribution for the current year. The Manager uses this amount as guidance for distribution
determination.
Core earnings is a financial measure which is not prescribed by Australian Accounting Standards and represents the profit under
Australian Accounting Standards (statutory profit) adjusted for certain unrealised and non-cash items and one off realised items. Under
the Trust Constitution, the amount distributed to stapled security holders by the Trust is at the discretion of the Manager. Management
will use the core earnings calculated for assessing the performance of the Group and as a guide to assessing an appropriate distribution
to declare. This measure is considered more relevant than statutory profit as it represents an estimate of the underlying recurring cash
earnings of the Group and provides more meaningful comparison between financial years.
The adjustments between profit under Australian Accounting Standards and core earnings may change from time to time depending
on changes to accounting standards and the Manager’s assessment as to whether non-recurring or infrequent items (such as realised
gains on the sale of properties) will be distributed to stapled security holders.
Profit used in calculating earnings per stapled security
Unrealised items
- Unrealised net loss/(gain) on derivative financial instruments
- Valuation (gain)/loss - investment properties
- Impairment - property, plant and equipment
- Impairment - goodwill
Non-cash items
- Straight lining of fixed rent increases
- IFRS depreciation(1)
- Amortisation of health club brands and customer relationship intangible assets
One off realised items
- Pre-opening expenses
- Business acquisition costs (refunded)/paid
- (Decrease)/increase in onerous lease provisions
- Gain on sale and leaseback of family entertainment centres
- Loss on closure of bowling centres
- Selling costs associated with discontinued operation
Tax impact of above adjustments
Core earnings
Consolidated
Group
Consolidated
Group
2016
$’000
2015
$’000
42,387
32,122
170
(2,059)
463
-
1,909
13,029
4,490
8,638
(134)
(2,193)
(1,672)
-
1,047
(3,680)
62,395
(552)
501
2,646
141
2,336
11,102
6,778
6,521
1,938
2,598
(6,959)
104
-
(3,042)
56,234
(1) IFRS depreciation represents depreciation recorded under Australian Accounting Standards effective 1 July 2005 on property, plant and equipment which
were previously classified as investment properties.
64 Ardent Leisure Group | Annual Report 2016
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
Distributions and dividends paid and payable
(a)
Consolidated Group
The following dividends and distributions were paid and payable by the Group to stapled security holders:
2016 dividends and distributions for the
half year ended:
31 December 2015
30 June 2016(1)
2015 dividends and distributions for the
half year ended:
31 December 2014
30 June 2015(2)
Dividend
cents per
stapled
security
Distribution
cents per
stapled
security
Total
amount
$’000
Distribution
tax
deferred
%
Distribution
CGT
concession
amount
%
Distribution
Taxable
%
-
-
-
7.00
5.50
12.50
31,377
25,467
56,844
3.00
-
3.00
4.00
5.50
9.50
30,707
24,328
55,035
50.48
30.87
-
-
49.52
69.13
(1) The distribution of 5.50 cents per stapled security for the half year ended 30 June 2016 was not declared prior to 30 June 2016. Refer to Note 44.
(2) The distribution of 5.50 cents per stapled security for the half year ended 30 June 2015 was not declared prior to 30 June 2015.
(b)
ALL Group
No dividends were paid by the ALL Group during the year. During the prior year, a subsidiary of ALL paid to the Trust $1.6 million relating
to convertible notes which were classified as equity under Australian Accounting Standards. A fully franked dividend of 3.0 cents per
stapled security was paid from the ALL Group totalling $13.2 million during the prior financial year.
(c)
Franking credits
The tax consolidated group has franking credits of $2,468,214 (2015: $3,414,276). It is the tax consolidated group’s intention to distribute
these franking credits to security holders where possible.
Receivables
Trade receivables
Receivable from the Trust
Provision for doubtful debts
Consolidated
Group
2016
$’000
Consolidated
Group
2015
$’000
ALL Group
2016
$’000
ALL Group
2015
$’000
13,801
-
(515)
13,286
11,315
-
(459)
10,856
13,801
-
(515)
13,286
11,315
2,354
(459)
13,210
The Group has recognised an expense of $252,912 in respect of bad and doubtful trade receivables during the year ended 30 June 2016
(2015: $199,959). The expense has been included in other expenses in the Income Statement.
Refer to note 38(e) for information on the Group’s management of, and exposure to, credit risk.
Ardent Leisure Group | Annual Report 2016 65
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
Derivative financial instruments
Current assets
Forward foreign exchange contracts
Non-current assets
Forward foreign exchange contracts
Interest rate swaps
Current liabilities
Interest rate swaps
Non-current liabilities
Interest rate swaps
Consolidated
Group
2016
$’000
Consolidated
Group
2015
$’000
ALL Group
2016
$’000
ALL Group
2015
$’000
131
131
-
113
113
1,202
1,202
2,937
2,937
263
263
114
-
114
98
98
-
-
-
-
-
132
132
-
-
-
-
-
-
-
2,133
2,133
1,283
1,283
129
129
Forward foreign exchange contracts
The Group has entered into forward foreign exchange contracts to buy US dollars and sell Australian dollars. These contracts total A$0.6
million (2015: A$2.1 million).
The forward contracts do not qualify for hedge accounting and accordingly, changes in fair value of these contracts are recorded in the
Income Statement. Notwithstanding the accounting outcome, the Manager considers that these derivative contracts are appropriate
and effective in offsetting the economic foreign exchange exposures of the Group.
Interest rate swaps
The Group has entered into interest rate swap agreements totalling $80.0 million (2015: $70.0 million) and US$95.0 million (2015:
US$47.0 million) that entitle it to receive interest, at quarterly intervals, at a floating rate on a notional principal and obliges it to pay
interest at a fixed rate. The interest rate swap agreements allow the Group to raise long term borrowings at a floating rate and effectively
swap them into a fixed rate. The Group also has forward starting interest rate swaps totalling $120.0 million (2015: $90.0 million) and
US$7 million (2015: nil) with start dates from June 2017 and maturities up to June 2019.
All interest rate swap contracts qualify as cash flow hedges. Accordingly, the change in fair value of these swaps is recorded in the cash
flow hedge reserve. Amounts accumulated in equity are recycled in the Income Statement in the period when the hedged item impacts
the Income Statement. Notwithstanding the accounting outcome, the Manager considers that these derivative contracts are
appropriate and effective in offsetting the economic foreign exchange exposures of the Group and the ALL Group.
66 Ardent Leisure Group | Annual Report 2016
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
14.
Derivative financial instruments (continued)
Interest rate swaps (continued)
The table below shows the maturity profile of the interest rate swaps:
Less than 1 year
1 - 2 years
2 - 3 years
3 - 4 years
4 - 5 years
More than 5 years
Inventories
Goods held for resale
Provision for diminution
Consolidated
Group
2016
$’000
Consolidated
Group
2015
$’000
ALL Group
2016
$’000
ALL Group
2015
$’000
113,292
70,000
154,064
-
-
-
40,000
111,198
70,000
-
-
-
40,399
-
74,064
-
-
-
-
39,063
-
-
-
-
337,356
221,198
114,463
39,063
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2016
$’000
13,022
(20)
13,002
2015
$’000
11,392
(20)
11,372
2016
$’000
13,022
(20)
13,002
2015
$’000
11,392
(20)
11,372
There were no write-downs or reversals of write-downs of inventories during the year ended 30 June 2016 (2015: nil).
Discontinued operation
(a)
Description
On 22 March 2016, the Group announced its intention to sell d’Albora Marinas, the reportable segment comprising seven marinas
located in New South Wales and Victoria. The formal sales process commenced on 12 May 2016. The associated assets and liabilities
have been presented as held for sale and a discontinued operation in the annual financial report at 30 June 2016.
(b)
Financial performance and cash flow information
The financial performance for the year ended 30 June 2016 was as follows:
Revenue
Expenses
Profit before income tax
Income tax expense
Profit after income tax of discontinued operation
Costs incurred relating to the sale of the discontinued operation
Profit from discontinued operation
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2016
$’000
23,008
13,652
9,356
275
9,081
(1,047)
8,034
2015
$’000
22,965
13,759
9,206
314
8,892
-
8,892
2016
$’000
23,000
22,100
900
275
625
-
625
2015
$’000
22,952
21,920
1,032
314
718
-
718
The sale of the Marinas was not completed at 30 June 2016 and therefore no gain on sale of the Marinas has been included in the results
for the year. Costs incurred associated with the sale of the Marinas at 30 June 2016 were $1.0 million, which have been recognised as
expenses in the Income Statement.
Ardent Leisure Group | Annual Report 2016 67
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
16.
(c)
Discontinued operation (continued)
Cash flow information
The cash flows for the year ended 30 June 2016 were as follows:
Net cash inflow from operating activities
Net cash outflow from investing activities
Net cash outflow from financing activities
Net decrease in cash and cash equivalents
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2016
$’000
11,518
(8,039)
(3,530)
(51)
2015
$’000
13,787
(4,214)
(9,610)
(37)
2016
$’000
4,616
(1,137)
(3,530)
(51)
2015
$’000
9,831
(258)
(9,610)
(37)
(d)
Assets and liabilities of disposal group classified as held for sale
The following assets and liabilities were reclassified as held for sale in relation to the discontinued operation as at 30 June 2016:
Assets classified as held for sale
Cash and cash equivalents
Receivables
Inventories
Other
Investment properties
Property, plant and equipment
Deferred tax assets
Total assets of disposal group held for sale
Labilities directly associated with assets classified as held for sale
Payables
Other
Provisions
Total liabilities of disposal group held for sale
Consolidated
Group
2016
$’000
ALL Group
2016
$’000
2
652
201
1,047
102,838
8,096
104
112,940
3,114
950
40
4,104
2
652
201
349
-
1,474
104
2,782
2,726
950
40
3,716
68 Ardent Leisure Group | Annual Report 2016
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
Construction in progress
Construction in progress inventories relate to family entertainment centres being constructed by the Group but contractually held for
resale under an agreement that the Group has entered into with a third party. Once the Group has satisfied the requirements of the
agreement and acceptance of the centre by the third party has occurred, the risks and rewards pass to the third party and a sale is
recorded. The costs funded by the third party during the course of construction are recorded as a current liability, construction in
progress deposits, and upon acceptance of the centre by the third party, this liability and related construction in progress inventories
are settled. Any net realisable value adjustment is recorded in the Income Statement as a gain/loss on sale of the construction in progress
inventories.
At 30 June 2016, the Group had agreements for construction of six family entertainment centres at Louisville, West Chester, Olathe,
Hoffman Estates, Suwanee and Albuquerque. These agreements set out agreed construction timetables, estimated costs and other key
terms, including the right of the third party to exercise a put option and recover deposits advanced to the Group should construction
not be completed within agreed timeframes. At 30 June 2016, construction on these sites is well progressed and expected to be
completed within 12 months and agreed timeframes.
A reconciliation of the carrying amount of the construction in progress inventories at the beginning and end of the current period is set
out below:
Construction in progress inventories
Carrying amount at the beginning of the period
Additions
Disposals
Foreign exchange movements
Carrying amount at the end of the period
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2016
$’000
-
74,868
(12,176)
(896)
61,796
2015
$’000
-
-
-
-
-
2016
$’000
-
74,868
(12,176)
(896)
61,796
2015
$’000
-
-
-
-
-
A reconciliation of the carrying amount of the construction in progress deposits liability at the beginning and end of the current period
is set out below:
Construction in progress deposits
Carrying amount at the beginning of the period
Deposits advanced
Foreign exchange movements
Settlements of deposits advanced
Carrying amount at the end of the period
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2016
$’000
-
68,116
(446)
(12,176)
55,494
2015
$’000
-
-
-
-
-
2016
$’000
-
68,116
(446)
(12,176)
55,494
2015
$’000
-
-
-
-
-
Ardent Leisure Group | Annual Report 2016 69
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
Other assets
Prepayments
Accrued revenue
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2016
$’000
4,608
3,305
7,913
2015
$’000
6,779
3,957
10,736
2016
$’000
4,079
3,305
7,384
2015
$’000
3,069
3,957
7,026
Investment properties
Consolidated Group
Property
Note Valuer
Excess land at Dreamworld
Marinas
Total
(a)
(b)
(1)
(2)
Cumulative
revaluation
(decrements)/
increments
2016
$’000
-
-
-
Cost
2016
$’000
-
-
-
Consolidated
book
value
2016
$’000
-
-
-
Cumulative
revaluation
(decrements)/
increments
2015
$’000
(975)
19,832
18,857
Consolidated
book
value
2015
$’000
1,900
97,426
99,326
Cost
2015
$’000
2,875
77,594
80,469
(a) The excess land has been valued by Directors at $3.6 million (2015: $1.9 million). This property has been transferred to property, plant and equipment at 30
June 2016 (refer to Note 20).
(b) The Marinas are now classified as assets held for sale. Refer to Note 16 for further details. At 30 June 2016, the total carrying value of d’Albora Marinas (including
plant and equipment of $8.1 million (2015: $7.8 million) was $110.9 million (2015: $105.2 million).
(1) Stephen McDonald, CBRE Valuations Pty Limited, independently valued the excess land on Foxwell Road, Coomera at 31 December 2015 at $0.7 million. The
remaining excess land has been independently valued by John Muchall, Jones Lang LaSalle Advisory Services Pty Limited, at 30 June 2016 at $2.9 million.
(2) Adam Ellis, LandMark White (Sydney) Pty Limited, independently valued one of the seven properties at 30 June 2016 and a further three properties at 31
December 2015. Two of the remaining three properties were last independently valued at 16 September 2015 and one was last independently valued at 30
June 2015.
Refer to Note 39(b) for information on the valuation techniques used to derive the fair value of the investment properties.
A reconciliation of the carrying amount of investment properties at the beginning and end of the current year is set out below:
Carrying amount at the beginning of the year
Additions
Disposals
Revaluation increments/(decrements)
Transfer to property, plant and equipment
Reclassified as assets held for sale
Carrying amount at the end of the year
Consolidated
Group
Consolidated
Group
2016
$’000
99,326
5,403
(364)
2,059
(3,586)
(102,838)
2015
$’000
95,870
3,957
-
(501)
-
-
-
99,326
Amounts recognised in the Income Statement for investment properties:
Revenue from investment properties
Property expenses incurred on investment properties
18,409
(2,412)
18,085
(2,615)
ALL Group
ALL Group
2016
$’000
2015
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The revenue from investment properties and property expenses incurred on investment properties during the year relate to the Marinas.
At 30 June 2016, the investment properties relating to Marinas are classified as held for sale. Refer to Note 16 for further details.
At 30 June 2016, the Group had receivables from third parties totalling $652,110 (2015: $332,646) relating to leases on its investment
properties.
70 Ardent Leisure Group | Annual Report 2016
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
Property, plant and equipment
Consolidated Group
Segment
Note
Cost less
accumulated
depreciation
2016
$’000
Cumulative
revaluation
increments/
(decrements)
2016
$’000
Consolidated
book
value
Cost less
accumulated
depreciation
2016
$’000
2015
$’000
Cumulative
revaluation
increments/
(decrements)
2015
$’000
Theme parks
Marinas
Bowling centres
Family entertainment
centres
Health clubs
Other
Total
(1) (2)
(3)
(4)
(5)
(6)
(7)
219,927
-
104,131
223,732
84,711
2,347
634,848
47,806
-
1,191
(86)
-
-
48,911
267,733
-
105,322
223,646
84,711
2,347
683,759
213,490
7,777
104,350
157,322
83,092
2,822
568,853
39,015
-
1,900
(86)
-
-
40,829
Consolidated
book value
2015
$’000
252,505
7,777
106,250
157,236
83,092
2,822
609,682
(1) The book value of Dreamworld and WhiteWater World land and buildings and major rides and attractions (including intangible assets of $1.6 million (2015:
$0.8 million) and livestock of $0.2 million (2015: nil)) is $235.0 million (2015: $227.5 million). In an independent valuation performed at 30 June 2016 by
Jones Lang LaSalle Advisory Services Pty Limited, the fair value for these assets was assessed to be $235.0 million (2015: $227.0 million). The Directors have
valued other property, plant and equipment of Dreamworld and WhiteWater World at 30 June 2016 at $0.2 million (2015: $2.9 million).
(2) The book value of SkyPoint (including intangible assets of $3.6 million (2015: $3.6 million)) is $34.3 million (2015: $26.5 million). In an independent valuation
performed at 30 June 2016 by Jones Lang LaSalle Advisory Services Pty Limited, the fair value for SkyPoint was assessed to be $34.3 million (2015: $26.5
million).
(3) The property, plant and equipment relating to Marinas has been classified as assets held for sale – refer to Note 16 (2015: $7.8 million).
(4) The one remaining freehold building was independently valued at 30 June 2016 at $1.6 million. At 30 June 2016, the Directors assessed the fair value of the
freehold building to be $1.6 million (2015: $1.9 million) and the remaining property, plant and equipment to be $103.7 million (2015: $104.4 million).
(5) At 30 June 2016, the Directors assessed the fair value of the property, plant and equipment in the family entertainment centres to be $223.6 million (2015:
$157.2 million).
(6) The Directors have valued the property, plant and equipment of health clubs at 30 June 2016 at $84.7 million (2015: $83.1 million).
(7) The fair value of other property, plant and equipment was assessed by the Directors to be $2.3 million at 30 June 2016 (2015: $2.8 million).
Refer to Note 39(b) for information on the valuation techniques used to derive the fair value of the land and buildings and major rides
and attractions.
A reconciliation of the carrying amount of property, plant and equipment at the beginning and end of the current and previous years is
set out below:
Consolidated Group - 2016
Carrying amount at the beginning of the year
Additions
Acquired through business combinations
Transfer from investment properties
Reclassified as assets held for sale
Disposals
Depreciation
Foreign exchange movements
Revaluation increments
Impairment
Carrying amount at the end of the year
Land and
buildings
$’000
330,577
41,558
-
3,586
(1,632)
(22,616)
(16,310)
2,966
10,534
(463)
348,200
Major rides
and
attractions
$’000
Plant and
equipment
$’000
Furniture,
fittings and
equipment
$’000
Motor
vehicles
$’000
65,202
1,378
-
-
-
(1)
(1,513)
-
-
-
65,066
196,618
101,011
667
-
(4,679)
(1,483)
(35,877)
730
-
-
256,987
17,037
2,078
-
-
(1,759)
(21)
(4,128)
9
-
-
13,216
248
270
-
-
(26)
(109)
(93)
-
-
-
290
Total
$’000
609,682
146,295
667
3,586
(8,096)
(24,230)
(57,921)
3,705
10,534
(463)
683,759
Ardent Leisure Group | Annual Report 2016 71
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
20. Property, plant and equipment (continued)
Land and
buildings
$’000
Major rides
and
attractions
$’000
Plant and
equipment
$’000
Plant and
equipment
under finance
lease
$’000
Furniture,
fittings and
equipment
$’000
Motor
vehicles
$’000
283,047
42,834
63,579
3,389
4,080
-
(415)
(13,657)
9,793
7,541
(2,646)
-
-
-
(1,766)
-
-
-
144,908
66,474
971
492
(1,159)
(27,294)
12,226
-
-
492
-
-
(492)
-
-
-
-
-
17,862
3,228
469
-
(50)
(4,466)
(6)
-
-
274
50
-
-
(3)
(73)
-
-
-
Total
$’000
510,162
115,975
5,520
-
(1,627)
(47,256)
22,013
7,541
(2,646)
330,577
65,202
196,618
-
17,037
248
609,682
Consolidated Group - 2015
Carrying amount at the
beginning of the year
Additions
Acquired through business
combinations
Transfer to plant and equipment
Disposals
Depreciation
Foreign exchange movements
Revaluation increments
Impairment
Carrying amount at the end of
the year
Land and
buildings
$’000
Plant and
equipment
$’000
86,833
25,050
-
(2)
(22,612)
(3,071)
2,922
(158)
88,962
126,767
102,931
667
(1,472)
(352)
(31,080)
638
-
Total
$’000
213,600
127,981
667
(1,474)
(22,964)
(34,151)
3,560
(158)
198,099
287,061
Land and
buildings
$’000
Plant and
equipment
$’000
Plant and
equipment
under finance
lease
$’000
50,437
30,289
-
-
(399)
(2,305)
9,820
(1,009)
86,833
72,534
62,477
1,441
492
(619)
(21,848)
12,290
-
126,767
492
-
-
(492)
-
-
-
-
-
Total
$’000
123,463
92,766
1,441
-
(1,018)
(24,153)
22,110
(1,009)
213,600
ALL Group - 2016
Carrying amount at the beginning of the year
Additions
Acquired through business combinations
Transfer to assets held for sale
Disposals
Depreciation
Foreign exchange movements
Impairment
Carrying amount at the end of the year
ALL Group - 2015
Carrying amount at the beginning of the year
Additions
Acquired through business combinations
Transfer to plant and equipment
Disposals
Depreciation
Foreign exchange movements
Impairment
Carrying amount at the end of the year
72 Ardent Leisure Group | Annual Report 2016
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
Intangible assets
Customer relationships at cost
Accumulated amortisation
Brands at cost
Accumulated amortisation
Other intangible assets at cost
Accumulated amortisation
Goodwill at cost
Accumulated impairment charge
Total intangible assets
Customer relationships
Opening net book amount
Additions
Amortisation
Closing net book amount
Brands
Opening net book amount
Additions
Amortisation
Foreign exchange movements
Closing net book amount
Other intangible assets
Opening net book amount
Additions
Amortisation
Foreign exchange movements
Closing net book amount
Goodwill
Opening net book amount
Additions
Foreign exchange movements
Impairment
Closing net book amount
Total intangible assets
Consolidated
Group
2016
Consolidated
Group
2015
ALL Group
2016
$’000
$’000
$’000
35,948
(33,746)
2,202
12,392
(6,677)
5,715
15,203
(5,024)
10,179
239,731
(11,698)
228,033
246,129
35,935
(30,386)
5,549
12,312
(5,546)
6,766
8,251
(2,774)
5,477
236,850
(11,698)
225,152
242,944
35,948
(33,746)
2,202
12,392
(6,677)
5,715
13,775
(3,596)
10,179
239,731
(11,698)
228,033
246,129
ALL Group
2015
$’000
35,935
(30,386)
5,549
12,312
(5,546)
6,766
6,823
(1,346)
5,477
236,850
(11,698)
225,152
242,944
Consolidated
Group
2016
$’000
Consolidated
Group
2015
$’000
ALL Group
2016
$’000
ALL Group
2015
$’000
5,549
13
(3,360)
2,202
6,766
34
(1,131)
46
5,715
5,477
7,002
(2,250)
(50)
10,179
5,115
6,123
(5,689)
5,549
6,396
1,210
(1,089)
249
6,766
1,488
4,803
(814)
-
5,477
5,549
13
(3,360)
2,202
6,766
34
(1,131)
46
5,715
5,477
7,002
(2,250)
(50)
10,179
5,115
6,123
(5,689)
5,549
6,396
1,210
(1,089)
249
6,766
1,488
4,803
(814)
-
5,477
225,152
857
2,024
-
228,033
246,129
188,238
27,664
9,391
(141)
225,152
242,944
225,152
857
2,024
-
228,033
246,129
188,238
27,664
9,391
(141)
225,152
242,944
Ardent Leisure Group | Annual Report 2016 73
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
21.
Intangible assets (continued)
Customer relationships
Customer relationships relate to the relationships with health club members which were acquired as part of the various acquisitions of
health clubs.
Brands
The brands relate to the Goodlife brand acquired in September 2007 along with the distribution and franchise agreements for the use
of the Hypoxi brand in March 2014.
Other intangible assets
Other intangible assets represent registered trademarks associated with Dreamworld operations, intellectual property associated with
liquor licences held by the bowling centres and software built across all the business units in the Group.
Goodwill
Goodwill represents goodwill acquired by the Group as part of various acquisitions. The movement in goodwill at cost in the period is
due to the acquisition of an amusement arcade (refer to Note 32) and the movement in the USD:AUD foreign exchange rate.
Goodwill is monitored by management at the operating segment level. Management reviews the business performance based on
geography and type of business. The Group has six reportable segments as disclosed in Note 37.
A segment level summary of the goodwill allocation is presented below:
Consolidated Group and ALL Group
2016
Theme parks
Bowling centres
Family entertainment centres
Health clubs
2015
Theme parks
Bowling centres
Family entertainment centres
Health clubs
Australia United States New Zealand
$’000
$’000
$’000
Total
$’000
4,366
21,127
-
142,432
-
-
56,369
-
167,925
56,369
-
3,739
-
-
3,739
4,366
24,866
56,369
142,432
228,033
Australia United States New Zealand
$’000
$’000
$’000
Total
$’000
4,366
20,270
-
142,432
-
-
54,608
-
167,068
54,608
-
3,476
-
-
3,476
4,366
23,746
54,608
142,432
225,152
74 Ardent Leisure Group | Annual Report 2016
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
21.
Intangible assets (continued)
Impairment tests for goodwill
Goodwill is allocated to the Group’s cash-generating units (CGUs) identified according to business segment and country of operation.
Key assumptions used for value in use calculations
The table below shows the key assumptions used in the value in use calculations to test for impairment in the business segments to
which a significant amount of goodwill was allocated:
Budget/forecast
EBITDA period growth rate
Long term EBITDA
growth rate(1)
Post-tax discount rate(2)
2016
2015
2016
2015
2016
2015
% per annum % per annum % per annum % per annum % per annum % per annum
Theme parks(3)
Bowling centres
Health clubs
Family entertainment centres
N/A
2.00
0.00 - 2.00
3.00
N/A
2.00
0.00 - 2.00
3.00
N/A
2.00
2.00
3.00
N/A
2.00
2.00
3.00
N/A
7.65
7.65
6.89
N/A
8.26
8.26
7.16
(1) Average growth rate used to extrapolate cash flows beyond the budget/forecast period.
(2) In performing the value in use calculations for each CGU, the Group has applied post-tax discount rates to discount the forecast future attributable post-tax
cash flows. Pre-tax discount rates are 8.19% (2015: 9.51%) for bowling centres, 8.68% (2015: 9.75%) for health clubs and 8.30% (2015: 8.42%) for family
entertainment centres.
(3) All non-current assets in the theme parks division are already held at fair value at 30 June 2016 and were independently valued by Jones Lang LaSalle (refer to
Note 20). As a result, no impairment testing is required at 30 June 2016.
The period over which management has projected the CGU cash flows is based upon the individual CGU’s lease term available. These
assumptions have been used for the analysis of each CGU within the business segment. The weighted average growth rates used are
consistent with forecasts included in industry reports. The discount rates used are post-tax and reflect specific risks relating to the
relevant segments and the countries in which they operate.
The recoverable amount of a CGU is determined based on value in use calculations. These calculations use cash flow projections based
on the 2017-2020 financial year budgets/forecasts. Cash flows beyond the budget period are extrapolated using the growth rates stated
above. The growth rate does not exceed the long term average growth rate for the business in which the CGU operates.
Sensitivity to changes in assumptions
Management recognises that the calculation of recoverable amount can vary based on the assumptions used to project or discount
cash flows and those changes to key assumptions can result in recoverable amounts falling below carrying amounts.
In relation to the CGUs above, the recoverable amounts of bowling centres, family entertainment centres and health clubs are all well
in excess of their carrying amounts.
The Directors consider that the growth rates are reasonable, and do not consider a change in any of the other key assumptions that
would cause the CGUs’ carrying amount to exceed their recoverable amount to be reasonably possible.
Ardent Leisure Group | Annual Report 2016 75
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
22.
Deferred tax assets
The balance comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Doubtful debts
Employee benefits
Provisions and accruals
Depreciation of property, plant and equipment
Inventory diminution
Deferred income
Unrealised foreign exchange losses
Difference in overseas tax rates
Lease incentives
Other
Deferred tax assets
Set-off of deferred tax balances pursuant to set-off provisions
Australia
United States
Net deferred tax assets
Movements
Balance at the beginning of the year
Credited to the Income Statement (refer to Note 10)
Reclassified as assets held for sale (refer to Note 16)
Credited to cash flow hedge reserve (refer to Note 30)
Acquired through business combinations (refer to Note 32)
Balance at the end of the year
Deferred tax assets to be recovered within 12 months
Deferred tax assets to be recovered after more than 12 months
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2016
$’000
2015
$’000
2016
$’000
2015
$’000
154
6,032
3,284
1,398
50
119
8
26
4,701
452
142
5,471
4,287
831
24
96
-
-
4,117
98
154
6,032
3,284
1,398
50
119
8
26
4,701
452
142
5,471
4,287
831
24
96
-
-
4,117
98
16,224
15,066
16,224
15,066
(3,057)
(7,170)
5,997
15,066
878
(165)
441
4
(4,663)
(6,160)
4,243
8,121
6,732
-
24
189
(3,057)
(7,170)
5,997
15,066
878
(165)
441
4
(4,663)
(6,160)
4,243
8,121
6,732
-
24
189
16,224
15,066
16,224
15,066
8,587
7,637
8,736
6,330
8,587
7,637
8,736
6,330
16,224
15,066
16,224
15,066
76 Ardent Leisure Group | Annual Report 2016
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
23.
Payables
Current
Custodian fee
Interest payable
GST payable
Trade creditors
Payable to the Trust
Property expenses payable
Employee share plan
Employee benefits
Deferred income
Deferred settlement for acquisition of business
Stamp duty payable for acquisition of business
Straight-line rent liability
Lease incentive liabilities
Property tax payable
Other creditors and accruals
Total payables
24.
Interest bearing liabilities
Non-current
Bank loan - term debt
Less: amortised costs - bank loan
Loans from the Trust(1)
Total interest bearing liabilities
Consolidated
Group
2016
$’000
Consolidated
Group
2015
$’000
ALL Group
2016
$’000
ALL Group
2015
$’000
47
513
1,617
17,143
-
1,001
107
20,785
8,422
-
-
18,699
14,155
2,456
21,462
106,407
48
412
1,661
8,770
-
761
170
17,238
12,864
2,377
1,823
17,056
11,245
1,826
15,072
91,323
-
180
1,619
17,143
1,414
-
1,742
20,785
8,422
-
-
4,642
14,155
2,456
21,141
93,699
-
85
1,666
8,770
-
-
3,497
17,238
12,864
-
1,823
3,760
11,245
1,826
13,513
76,287
Consolidated
Group
2016
$’000
Consolidated
Group
2015
$’000
ALL Group
2016
$’000
ALL Group
2015
$’000
314,944
(2,041)
-
312,903
279,761
(1,143)
-
278,618
148,869
(1,002)
128,221
276,088
110,547
(442)
126,901
237,006
(1) Further information relating to these loans is included in Note 36(g).
On 11 August 2015, the Group completed refinancing of its syndicated loan facilities. This resulted in an increase in the available USD
facilities to US$280.0 million (2015: US$160.0 million) and an extended tenure maturing in equal tranches of three, four and five years
respectively. Australian dollar facilities remain at $200.0 million (2015: $200.0 million); however, they have been similarly extended to
mature in equal tranches of three, four and five years respectively.
The term debt is secured by mortgages over all freehold property, leasehold mortgages over key bowling centre, health club and marina
leases, registered security interests over all present and after acquired property of key Group companies, and pledged interests over all
US property. The terms of the debt also impose certain covenants on the Group as follows:
Debt serviceability ratio, being the ratio of debt to EBITDA adjusted for unrealised and one off items (adjusted EBITDA), must not
exceed 3.5 (2015: 3.75); and
Fixed charge cover ratio, being the ratio of adjusted EBITDA to fixed charges, must be no less than 1.75 (2015: 1.75).
Ardent Leisure Group | Annual Report 2016 77
For personal use only
Consolidated
Group
2016
$’000
Consolidated
Group
2015
$’000
ALL Group
2016
$’000
ALL Group
2015
$’000
102,838
102,838
9,070
13,286
131
13,002
3,275
10,102
61,796
7,913
118,575
221,413
-
348,200
348,200
335,559
113
221
18,096
353,989
702,189
923,602
-
-
4,986
10,856
263
11,372
1,740
-
-
10,736
39,953
39,953
99,326
330,577
429,903
279,105
114
245
17,792
297,256
727,159
767,112
-
-
8,391
13,286
-
13,002
3,275
2,782
61,796
7,384
109,916
109,916
-
88,962
88,962
198,099
-
221
18,096
216,416
305,378
415,294
-
-
4,685
13,210
-
11,372
1,740
-
-
7,026
38,033
38,033
-
86,833
86,833
126,767
-
245
17,792
144,804
231,637
269,670
Notes to the Financial Statements
for the year ended 30 June 2016
24.
Interest bearing liabilities (continued)
Total secured liabilities and assets pledged as security
The carrying amounts of assets pledged as security for borrowings are:
Current
Mortgage
Assets classified as held for sale
Floating charge
Cash and cash equivalents
Receivables
Derivative financial instruments
Inventories
Current tax receivables
Assets classified as held for sale
Construction in progress inventories
Other
Total current assets
Non-current
Mortgage
Investment properties
Land and buildings
Floating charge
Plant and equipment
Derivative financial instruments
Livestock
Intangible assets
Total non-current assets
Total assets
78 Ardent Leisure Group | Annual Report 2016
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
24.
Interest bearing liabilities (continued)
Credit facilities
As at 30 June 2016, the Group had unrestricted access to the following credit facilities:
A$ syndicated facilities
Amount used
Amount unused
US$ syndicated facilities
Amount used
Amount unused
Trust facilities
Amount used
Amount unused
Total facilities
Total amount used
Total amount unused
Consolidated Group
Consolidated
Group
2016
$’000
Consolidated
Group
2015
$’000
ALL Group
2016
$’000
ALL Group
2015
$’000
200,000
(142,433)
57,567
377,054
(172,511)
204,543
200,000
(144,400)
55,600
208,334
(135,361)
72,973
-
-
-
-
-
-
577,054
(314,944)
262,110
408,334
(279,761)
128,573
-
-
-
350,121
(148,869)
201,252
226,933
(128,221)
98,712
577,054
(277,090)
299,964
-
-
-
182,292
(110,547)
71,745
226,042
(126,901)
99,141
408,334
(237,448)
170,886
The Group has access to A$200.0 million (2015: A$200.0 million) syndicated facilities and US$280.0 million (2015: US$160.0 million)
syndicated facilities. A$66.7 million of the AUD facilities will mature on 10 August 2018, A$66.7 million will mature on 10 August 2019
and A$66.7 million will mature on 10 August 2020. US$93.3 million of the USD facilities will mature on 10 August 2018, US$93.3 million
will mature on 10 August 2019 and US$93.3 million will mature on 10 August 2020.
All of the facilities have a variable interest rate. As detailed in Note 14, the interest rates on the loans are partially fixed using interest
rate swaps. The weighted average interest rates payable on the loans at 30 June 2016, including the impact of the interest rate swaps,
is 4.32% per annum for AUD denominated debt (2015: 4.28% per annum) and 2.37% per annum for USD denominated debt (2015:
1.92% per annum).
ALL Group
Subject to the Trust loan facilities conditions being met, the facilities may be drawn down with two business days’ notice.
Australian dollar Trust loan facilities totalling $200.0 million (2015: $200.0 million) have a maturity date of 10 August 2018. In addition,
the ALL Group has US$20.0 million (2015: US$20.0 million) facilities with the Trust maturing on 10 August 2018.
The ALL Group has access to US$260.0 million (2015: US$140.0 million) syndicated facilities. US$73.3 million of the facilities will mature
on 10 August 2018, US$93.3 million will mature on 10 August 2019 and US$93.3 million will mature on 10 August 2020.
Information about the Group’s exposure to foreign exchange risk and interest rates is provided in Note 38.
Ardent Leisure Group | Annual Report 2016 79
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
25.
Provisions
(a)
Distributions to stapled security holders
Opening balance
Distributions/dividends declared
Distributions/dividends paid
Distributions reinvested
Closing balance
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2016
$’000
2015
$’000
2016
$’000
2015
$’000
-
55,705
(14,465)
(41,240)
-
-
55,820
(39,041)
(16,779)
-
-
-
10,979
(10,979)
-
-
14,790
(11,132)
(3,658)
-
A provision for the distribution relating to the half year to 30 June 2016 was not recognised as the distribution had not been declared at
the reporting date. Refer to Note 44.
(b)
Other provisions
Current
Employee benefits
Sundry(1)
Total current
Non-current
Employee benefits
Property onerous lease contracts
Property make good obligations
Total non-current
Total provisions
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2016
$’000
2015
$’000
2016
$’000
3,871
158
4,029
1,262
2,030
11,695
14,987
19,016
3,047
189
3,236
1,803
4,221
9,745
15,769
19,005
3,871
158
4,029
1,262
382
2,770
4,414
8,443
2015
$’000
3,047
189
3,236
1,803
1,569
2,180
5,552
8,788
Movements in sundry provisions
Carrying amount at the beginning of the year
Additional provisions recognised
Amounts utilised
Carrying amount at the end of the year
(1) Sundry provisions include insurance excess/deductible amounts for public liability insurance, fringe benefits tax provisions and other royalty provisions.
572
411
(794)
189
189
292
(323)
158
189
292
(323)
158
572
411
(794)
189
The current provision for employee benefits includes accrued long service leave which covers all unconditional entitlements where
employees have completed the required period of service and also those where employees are entitled to pro-rata payments in certain
circumstances. This is presented as current, since the Group does not have an unconditional right to defer settlement for any of these
obligations. These employee benefits are actively monitored by management and therefore, the Group expects all employees to take
the full amount of accrued leave or require payment within the next 12 months.
80 Ardent Leisure Group | Annual Report 2016
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
26.
Other liabilities
Security deposits
27.
Deferred tax liabilities
The balance comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Intangible assets
Prepayments
Accrued revenue
Depreciation of property, plant and equipment
Deferred tax liabilities
Set-off deferred tax balances pursuant to set-off provisions
Australia
United States
Net deferred tax liabilities
Movements
Balance at the beginning of the year
Charged to the Income Statement (refer to Note 10)
Reclassified as liabilities directly associated with assets held for sale
Acquired through business combinations
Balance at the end of the year
Deferred tax liabilities to be settled within 12 months
Deferred tax liabilities to be settled after more than 12 months
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2016
$’000
2015
$’000
2016
$’000
1,985
1,985
2,694
2,694
1,985
1,985
2015
$’000
2,694
2,694
Consolidated
Group
2016
$’000
Consolidated
Group
2015
$’000
ALL Group
2016
$’000
ALL Group
2015
$’000
2,355
385
81
40,944
3,682
837
122
28,045
2,355
385
81
40,944
43,765
32,686
43,765
(3,057)
(7,170)
33,538
(4,663)
(6,160)
21,863
(3,057)
(7,170)
33,538
32,686
11,136
(61)
4
15,420
15,086
-
2,180
32,686
11,136
(61)
4
43,765
32,686
43,765
383
43,382
43,765
845
31,841
32,686
383
43,382
43,765
3,682
837
122
28,045
32,686
(4,663)
(6,160)
21,863
15,420
15,086
-
2,180
32,686
845
31,841
32,686
Ardent Leisure Group | Annual Report 2016 81
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
28.
Contributed equity
No. of
securities/shares
Details
Date of
income
entitlement
Consolidated
Group
2016
$’000
Consolidated
Group
2015
$’000
ALL Group
2016
$’000
ALL Group
2015
$’000
405,055,708
6,358,756
Securities/shares on issue
DRP issue
30 Jun 2014
1 Jul 2014
1,751,698
110,302
20,746,888
8,298,754
-
-
442,322,106
19,377,615
1 Jul 2014
Security-based payments -
securities/shares issued
Security-based payments -
securities/shares issued
1 Jan 2015
Fitness First WA placement 1 Jul 2014
Security Purchase Plan
1 Jul 2014
Issue costs paid
Capital reallocation
Securities/shares on issue
DRP issue
30 Jun 2015
1 Jul 2015
1,339,895
-
463,039,616
Security-based payments -
securities/shares issued
1 Jul 2015
Issue costs paid
Securities/shares on issue 30 Jun 2016
(i)
Distribution Reinvestment Plan (DRP) issues
513,912
16,779
5,255
228
50,000
20,000
(993)
-
605,181
605,181
605,181
41,240
3,377
(78)
649,720
155,262
10,979
880
(21)
167,100
16,309
3,658
878
59
8,356
3,342
(167)
122,827
155,262
155,262
The Group has established a DRP under which stapled security holders may elect to have all or part of their distribution entitlements
satisfied by the issue of new stapled securities rather than being paid in cash. The discount available on stapled securities issued under
the DRP is 2.0% on the market price. The DRP will be in operation for the distribution for the half year ended 30 June 2016 and was in
operation and fully underwritten for the half year ended 31 December 2015.
(ii)
Security-based payments
The Group has Deferred Short Term Incentive Plan and Long Term Incentive Plan remuneration arrangements under which performance
rights are issued to certain management and other personnel within the Group as part of their remuneration arrangements. These
performance rights are subject to vesting conditions as set out in Note 29. Upon vesting, the Group issues stapled securities to these
personnel.
(iii)
Fitness First WA placement and Security Purchase Plan
On 7 August 2014 and 15 September 2014, the Group issued stapled securities under a placement and a Security Purchase Plan
respectively to fund the acquisition of eight Fitness First health clubs in Western Australia and future investment in Main Event.
(iv)
Capital reallocation
The Group and ALL Group implemented a capital reallocation during the prior period of 28 cents per stapled security. This resulted in
$122.8 million of capital being transferred from the Trust to the Company. There was no impact on the number of units and the number
of shares on issue as a result of the capital reallocation.
82 Ardent Leisure Group | Annual Report 2016
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
29.
(a)
Security-based payments
Deferred Short Term Incentive Plan (DSTI)
Plan name
Who can participate?
Types of securities issued
Treatment of non-Australian residents
DSTI
All employees are eligible for participation at the discretion of the Board;
however, Non-Executive Directors do not participate in the DSTI.
Performance rights that can be converted into fully paid securities once vested.
The performance rights differ from options in that they do not carry an exercise
price. Performance rights do not represent physical securities and do not carry
any voting or distribution entitlements.
For employees who are not Australian residents, the DSTI historically granted
cash awards to those executives. Administrative arrangements have now been
made to issue equity awards and not cash awards to non-resident executives. All
awards, whether equity or cash, are subject to the same tenure hurdles.
What restrictions are there on the securities?
Performance rights are non-transferable.
When can the securities vest?
What are the vesting conditions?
The plan contemplates that the performance rights will vest equally one year and
two years following the grant date.
Plan performance rights will normally vest only if the participant remains
employed by the Group (and is not under notice terminating the contract of
employment from either party) as at the relevant vesting date.
Did any of the securities vest?
During the financial year, a total of 384,988 performance rights vested.
Australian employees
Since the DSTI was approved in July 2010, incentives have been provided to certain executives under the DSTI. Under the terms of the
DSTI, participants may be granted performance rights of which one half will vest one year after grant date and one half will vest two
years after grant date. The first set of performance rights were granted under the DSTI on 16 December 2010, with the first possible
vesting date being the day after the full year financial results announcement for the year ended 30 June 2011. A total of 286,776
performance rights vested on 20 August 2015 and a corresponding number of stapled securities were issued to Australian employees
under the terms of the DSTI (2015: 716,574).
The characteristics of the DSTI indicate that, at the Ardent Leisure Group level, it is an equity settled share-based payment under AASB
2 Share-based Payment as the holders are entitled to the securities as long as they meet the DSTI’s service criteria. However, as ALL is
considered to be a subsidiary of the Trust, in the financial statements of the ALL Group the DSTI is accounted for as a cash settled share-
based payment.
Fair value – Australian employees
The fair value of the performance rights granted under the DSTI is recognised in the Group financial statements as an employee benefit
expense with a corresponding increase in equity. The fair value of each grant of performance rights is determined at grant date using a
binomial tree valuation model and then is recognised over the vesting period during which employees become unconditionally entitled
to the underlying securities.
The fair value of the performance rights granted under the DSTI is recognised in the ALL Group financial statements as an employee
benefit expense with a corresponding increase in liabilities. The fair value of each grant of performance rights is determined at each
reporting date using a binomial tree valuation model with the movement in fair value of the liability being recognised in the Income
Statement.
At each reporting date, the estimate of the number of performance rights that are expected to vest is revised. The employee benefit
expense recognised each financial period takes into account the most recent estimate.
Ardent Leisure Group | Annual Report 2016 83
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
29.
(a)
Security-based payments (continued)
Deferred Short Term Incentive Plan (DSTI) (continued)
US employees
Due to previous restrictions on the issue of securities to US residents, those US executives eligible for the DSTI were subject to a shadow
performance rights scheme whereby a cash payment was made instead of performance rights being granted. At the end of each vesting
period, the number of performance rights which would have vested was multiplied by the Group stapled security volume weighted
average price (VWAP) for the five trading days immediately following the vesting date and an equivalent cash payment was made. Due
to the nature of the scheme, this was considered to be a cash settled share-based payment under AASB 2.
All performance rights issued after 1 July 2014 to US employees are to be settled in equity upon vesting. As such, these performance
rights are considered to be equity settled share-based payments under AASB 2. A total of 98,212 equity settled performance rights
vested during the financial year (2015: 56,829). In the ALL financial statements, all performance rights issued to US employees are
considered cash settled.
Fair value – US employees
The fair value of cash settled performance rights is determined at grant date and each reporting date using a binomial tree valuation
model. This is recorded as a liability with the movement in the fair value of the financial liability being recognised in the Income
Statement.
The fair value of equity settled performance rights is determined at each grant date using a binomial tree valuation model. This is
recorded as an employee benefit expense with a corresponding increase in equity.
At each reporting date, the estimate of the number of performance rights that are expected to vest is revised. The employee benefit
expense recognised each period takes into account the most recent estimate.
Valuation inputs
For the performance rights outstanding at 30 June 2016, the table below shows the fair value of the performance rights on each grant
date as well as the factors used to value the performance rights at the grant date. Under AASB 2, this valuation is used to value the equity
settled performance rights granted to employees at 30 June 2016:
Grant
Grant date
Vesting date – year 1
Vesting date – year 2
Average risk free rate
Expected price volatility
Expected distribution yield
Stapled security price at grant date
Valuation per performance right on issue
2014
19 August 2014
20 August 2015
31 August 2016
2.50% per annum
27.0% per annum
4.3% per annum
$3.00
$2.81
2015
18 August 2015
31 August 2016
31 August 2017
1.90% per annum
34.5% per annum
5.7% per annum
$2.18
$2.00
The table below shows the fair value of the performance rights in each grant as at 30 June 2016 as well as the factors used to value the
performance rights as at 30 June 2016. Under AASB 2, this valuation is used to value the cash settled performance rights granted to
employees at 30 June 2016:
Grant
Grant date
Vesting date – year 1
Vesting date – year 2
Average risk free rate
Expected price volatility
Expected distribution yield
Stapled security price at year end
Valuation per performance right at year end
2014
19 August 2014
20 August 2015
31 August 2016
1.60% per annum
40.0% per annum
6.6% per annum
$1.88
$1.88
2015
18 August 2015
31 August 2016
31 August 2017
1.60% per annum
40.0% per annum
6.6% per annum
$1.88
$1.81
Grants of performance rights are made annually with the grant date being the date of the issue of the offer letters to employees.
Although the grant date may vary from year to year, the testing period (subject to any hurdles) remains constant with the vesting date
being 24 hours immediately following the announcement of the Group’s full year financial results.
84 Ardent Leisure Group | Annual Report 2016
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
29.
(a)
Security-based payments (continued)
Deferred Short Term Incentive Plan (DSTI) (continued)
Tenure hurdle
The vesting of the performance rights is subject to a tenure hurdle and participants must remain employed by the Group (and not be
under notice terminating the contract of employment from either party) as at the relevant vesting date.
The number of rights outstanding and the grant dates of the rights are shown in the tables below:
Consolidated
Group
2016
Consolidated
Group
2015
ALL Group
2016
ALL Group
2015
Performance rights issued to participating executives:
Performance rights
791,724
543,698
791,724
543,698
Grant date
Expiry date
Exercise
price
Valuation
per right
Balance at
beginning
of the year
Granted
Exercised
Failed to
vest
23 Aug 2013 20 Aug 2015 nil
166.1 cents
213,931
19 Aug 2014 31 Aug 2016 nil
280.8 cents
329,767
-
-
(213,931)
(171,057)
18 Aug 2015 31 Aug 2017 nil
199.7 cents
- 671,893
543,698 671,893
-
(384,988)
Cancelled
-
(11,269)
(27,610)
(38,879)
-
-
-
-
Balance at
the end of
the year
-
147,441
644,283
791,724
The rights have an average maturity of six months.
(b)
Long Term Incentive Plan (LTIP)
Plan name
Who can participate?
Types of securities issued
Treatment of non-Australian residents
LTIP
All employees are eligible for participation at the discretion of the Board;
however, Non-Executive Directors do not participate in the LTIP.
Performance rights that can be converted into fully paid securities once vested.
The performance rights differ from options in that they do not carry an exercise
price. Performance rights do not represent physical securities and do not carry
any voting or distribution entitlements.
For employees who are not Australian residents, the LTIP historically granted
cash awards to those executives. Administrative arrangements have now been
made to issue equity awards and not cash awards to non-resident executives. All
awards, whether equity or cash, are subject to the same performance and tenure
hurdles.
What restrictions are there on the securities?
Performance rights are non-transferable.
When can the securities vest?
The plan contemplates that the performance rights will vest equally two, three
and four years following the grant date, subject to meeting the total shareholder
return (TSR) and internal compound EPS performance hurdles. The weighting
between the two hurdles will be split as follows:
TSR – 50%; and
EPS – 50%.
Ardent Leisure Group | Annual Report 2016 85
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
29.
(b)
Security-based payments (continued)
Long Term Incentive Plan (LTIP) (continued)
Plan name
What are the vesting conditions?
What does total shareholder return include?
What is the earnings per security hurdle?
LTIP
For grants made after 1 July 2014, in order for any or all of the performance rights
to vest one or both of the following hurdles must be met:
TSR performance hurdle - the Group's TSR for the performance period must
exceed the 50th percentile of the TSRs of the benchmark group for the same
period. A sliding scale of vesting applies above the 50th percentile threshold
with maximum vesting achieved at the 75th percentile; and
EPS performance hurdle - the Group's compound EPS growth for the
performance period must exceed 5%. A sliding scale of vesting applies above
the 5% threshold with maximum vesting achieved at 10% compound EPS
growth.
TSR is the total return an investor would receive over a set period of time
assuming that all distributions were reinvested in the Group’s securities. The TSR
definition takes account of both capital growth and distributions.
The EPS hurdle refers to the annual growth of earnings per security over the total
vesting periods of two, three and four years from the grant date.
What is the benchmark group?
The benchmark group comprises the S&P/ASX Small Industrials Index.
Did any of the securities vest?
Australian employees
During the financial year, a total of 993,905 performance rights vested into fully
paid stapled securities following an independent third party assessment of the
Group’s TSR performance compared to the benchmark.
Since 1 July 2009, long term incentives have been provided to certain executives under the LTIP. Under the terms of the LTIP and the
initial grant, employees may be granted performance rights of which one third will vest two years after grant date, one third will vest
three years after grant date and one third will vest four years after grant date. The percentage of performance rights which may vest is
subject to the TSR performance of the Group relative to its peer group, which is the S&P/ASX Small Industrials Index.
During the year, the relative TSR performance of the Group was tested in accordance with the LTIP for tranches issued in 2011, 2012 and
2013 with the following results:
Tranche
T3-2011
T2-2012
T1-2013
TSR
119.09%
103.94%
45.48%
Percentile
81.82
79.12
68.63
Vesting percentage
100.0%
100.0%
87.3%
A total of 939,923 performance rights vested on 20 August 2015 and a corresponding number of stapled securities were issued to
Australian employees under the terms of the LTIP (2015: 1,145,426).
The characteristics of the LTIP indicate that, at the Ardent Leisure Group level, it is an equity settled share-based payment under AASB 2
Share-based Payment as the holders are entitled to the securities as long as they meet the LTIP’s service and performance criteria.
However, as ALL is considered to be a subsidiary of the Trust, in the financial statements of the ALL Group the LTIP is accounted for as a
cash settled share-based payment.
86 Ardent Leisure Group | Annual Report 2016
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
29.
(b)
Security-based payments (continued)
Long Term Incentive Plan (LTIP) (continued)
Fair value – Australian employees
The fair value of the performance rights granted under the LTIP is recognised in the Group financial statements as an employee benefit
expense with a corresponding increase in equity. The fair value of the performance rights is determined at grant date using a Monte
Carlo simulation valuation model and then is recognised over the vesting period during which employees become unconditionally
entitled to the underlying securities.
The fair value of the performance rights granted under the LTIP is recognised in the ALL Group financial statements as an employee
benefit expense with a corresponding increase in liabilities. The fair value of each grant of performance rights is determined at each
reporting date using a Monte Carlo simulation valuation model with the movement in fair value of the liability being recognised in the
Income Statement.
At each reporting date, the estimate of the number of performance rights that are expected to vest is revised. The employee benefit
expense recognised each financial period takes into account the most recent estimate.
US employees
Due to previous restrictions on the issue of securities to US residents, those US executives eligible for the LTIP were subject to a shadow
performance rights scheme whereby a cash payment was made instead of performance rights being granted. At the end of each vesting
period, the number of performance rights which would have vested is multiplied by the Group stapled security VWAP for the five trading
days immediately following the vesting date and an equivalent cash payment is made. Due to the nature of the scheme, this is
considered to be a cash settled share-based payment under AASB 2. A total of 38,998 cash settled performance rights vested on 20
August 2015 to US employees under the terms of the LTIP (2015: 57,452).
All performance rights issued after 1 July 2014 to US employees are settled in equity upon vesting. These performance rights are
considered to be equity settled share-based payments under AASB 2. A total of 14,984 equity settled performance rights vested on 20
August 2015 to US employees under the terms of the LTIP (2015: nil).
Fair value – US employees
The fair value of cash settled performance rights is determined at grant date and each reporting date using a Monte Carlo simulation
valuation model. This is recorded as a liability with the difference in the movement in the fair value of the financial liability recognised
in the Income Statement.
The fair value of equity settled performance rights is determined at grant date using a Monte Carlo simulation valuation model. This is
recorded as an employee benefit expense with a corresponding increase in equity.
At each reporting date, the estimate of the number of performance rights that are expected to vest is revised. The employee benefit
expense recognised each period takes into account the most recent estimate.
Valuation inputs
For performance rights outstanding at 30 June 2016, the table below shows the fair value of the performance rights on each grant date
as well as the factors used to value the performance rights at the grant date. Under AASB 2, this valuation is used to value the equity
settled performance rights granted to employees at 30 June 2016:
Grant
Grant date
Vesting date – year 2
Vesting date – year 3
Vesting date – year 4
Average risk free rate
Expected price volatility
Expected distribution yield
Stapled security price at grant date
Valuation per performance right on issue
2012
24 August 2012
19 August 2014
20 August 2015
31 August 2016
2.73% per annum
35.0% per annum
9.1% per annum
$1.29
$0.61
2013
23 August 2013
20 August 2015
31 August 2016
31 August 2017
2.60% per annum
32.0% per annum
6.6% per annum
$1.82
$0.76
2014
19 August 2014
31 August 2016
31 August 2017
31 August 2018
2.57% per annum
27.0% per annum
4.3% per annum
$3.00
$1.54
2015
15 December 2015
31 August 2017
31 August 2018
31 August 2019
2.10% per annum
38.3% per annum
5.8% per annum
$2.17
$1.12
Ardent Leisure Group | Annual Report 2016 87
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
29.
(b)
Security-based payments (continued)
Long Term Incentive Plan (LTIP) (continued)
Valuation inputs (continued)
The table below shows the fair value of the performance rights for each grant as at 30 June 2016 as well as the factors used to value the
performance rights at 30 June 2016. Under AASB 2, this valuation is used to value the cash settled performance rights granted to
employees at 30 June 2016:
Grant
Grant date
Vesting date – year 2
Vesting date – year 3
Vesting date – year 4
Average risk free rate
Expected price volatility
Expected distribution yield
Stapled security price at year end
Valuation per performance right on issue
2012
24 August 2012
19 August 2014
20 August 2015
31 August 2016
1.60% per annum
40.0% per annum
6.6% per annum
$1.88
$1.21
2013
23 August 2013
20 August 2015
31 August 2016
31 August 2017
1.60% per annum
40.0% per annum
6.6% per annum
$1.88
$1.04
2014
19 August 2014
31 August 2016
31 August 2017
31 August 2018
1.60% per annum
40.0% per annum
6.6% per annum
$1.88
$0.28
2015
15 December 2015
31 August 2017
31 August 2018
31 August 2019
1.60% per annum
40.0% per annum
6.6% per annum
$1.88
$0.85
Grants of performance rights are made annually with the grant date being the date of the issue of the offer letters to employees.
Although the grant date may vary from year to year, the testing period (subject to any hurdles) remains constant with the vesting date
being 24 hours immediately following the announcement of the Group’s full year financial results.
Performance hurdles
In order for any or all of the performance rights to vest under the LTIP, the Group's TSR and/or (for grants made after 1 July 2014) the EPS
performance hurdle must be met.
TSR
The Group’s TSR for the performance period must exceed the 50th percentile of the TSRs of the benchmark for the same period. A sliding
scale of vesting applies above the 50th percentile threshold.
TSR of the Group relative to TSRs of comparators
Below 51st percentile
51st percentile
Between 51st percentile and 75th percentile
75th percentile or higher
Proportion of performance rights vesting
0%
50%
Straight-line vesting between 50% and 100%
100%
TSR over a performance period is measured against the benchmark group securities calculated at the average closing price of securities
on the ASX for the calendar month period up to and including each of the first and last dates of the performance period. Distributions
are assumed to be reinvested at the distribution date and any franking credits (or similar) are ignored.
EPS
The Group’s compound EPS growth for the performance period must exceed 5%. A sliding scale of vesting applies above 5% threshold.
Compound EPS growth in the period
Below 5%
5%
Between 5% and 10%
10% or higher
The weighting is split equally between the two performance measures.
Proportion of performance rights vesting
0%
50%
Straight-line vesting between 50% and 100%
100%
88 Ardent Leisure Group | Annual Report 2016
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
29.
(b)
Security-based payments (continued)
Long Term Incentive Plan (LTIP) (continued)
The number of rights outstanding and the grant dates of the rights are shown in the tables below:
Consolidated
Group
2016
Consolidated
Group
2015
ALL Group
2016
ALL Group
2015
Performance rights issued to participating executives:
Performance rights
2,162,697
2,348,012
2,162,697
2,348,012
Grant date
Expiry date
Exercise
price
Valuation
per right
Balance at
beginning of
the year
Granted
Exercised
Failed to
vest
16 Dec 2010 19 Aug 2014 nil
12 Sep 2011 20 Aug 2015 nil
24 Aug 2012 31 Aug 2016 nil
23 Aug 2013 31 Aug 2017 nil
19 Aug 2014 31 Aug 2018 nil
15 Dec 2015 31 Aug 2019 nil
52.3 cents
43.7 cents
60.9 cents
76.3 cents
153.9 cents
112.3 cents
-
441,109
647,177
787,631
472,095
-
-
-
(441,109)
-
(323,587)
-
(229,209)
-
-
-
-
852,675
2,348,012 852,675 (993,905)
-
-
-
(33,341)
-
-
(33,341)
Balance at
the end of
the year
-
-
323,590
514,337
472,095
852,675
2,162,697
Cancelled
-
-
-
(10,746)
-
-
(10,746)
The rights have an average maturity of one year and three months.
The expense recorded in the Group financial statements in the year in relation to the performance rights was $1,529,237 (2015:
$1,761,441). The expense recorded in the ALL Group financial statements in the year in relation to the performance rights was
$1,703,232 (2015: $2,595,805).
Ardent Leisure Group | Annual Report 2016 89
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
Reserves
Asset revaluation reserve
Opening balance
Revaluation - Theme parks
Revaluation - Bowling centres
Transfer to retained profits - realised items
Closing balance
Capital reserve
Opening balance
Transfer from retained profits - pre-opening expenses
Transfer to retained profits
Closing balance
Cash flow hedge reserve
Opening balance
Movement in effective cash flow hedges
Tax on movement on US cash flow hedges
Closing balance
Foreign currency translation reserve
Opening balance
Translation of foreign operations
Closing balance
Stapled security-based payment reserve
Opening balance
Option expense
Closing balance
Performance fee reserve
Opening balance
Transfer to retained profits
Closing balance
Goodlife put and call option reserve
Opening balance
Transfer to retained profits
Closing balance
Total reserves
90 Ardent Leisure Group | Annual Report 2016
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2016
$’000
2015
$’000
2016
$’000
10,429
11,243
(709)
(3,527)
17,436
-
-
-
-
6,225
7,541
-
(3,337)
10,429
(11,018)
(4,677)
15,695
-
(2,058)
(1,878)
441
(1,124)
(958)
24
(3,495)
(2,058)
(35,145)
2,049
(38,768)
3,623
(33,096)
(35,145)
(3,917)
(1,866)
(5,783)
(96)
(3,821)
(3,917)
-
-
-
-
-
-
1,132
(1,132)
-
(2,269)
2,269
-
3,416
-
-
-
3,416
-
-
-
-
(70)
(1,321)
441
(950)
4,292
2,277
6,569
-
-
-
-
-
-
-
-
-
(24,938)
(30,691)
9,035
2015
$’000
3,416
-
-
-
3,416
-
-
-
-
(19)
(75)
24
(70)
(2,624)
6,916
4,292
-
-
-
-
-
-
(2,310)
2,310
-
7,638
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
30.
Reserves (continued)
The asset revaluation reserve is used to record increments and decrements on the revaluation of property, plant and equipment.
The capital reserve was previously used to record one off costs incurred in the identification of new acquisitions or development of new
sites which are not able to be capitalised by the Group as well as the difference between the amount paid and the net assets acquired
in the acquisition of non-controlling interests. This reserve was transferred to retained profits in the prior year.
The cash flow hedge reserve is used to record gains or losses on a hedging instrument in a cash flow hedge that are recognised directly
in equity as described in Notes 1(p)(ii) and 14.
Exchange differences arising on the translation of foreign controlled entities are taken to the foreign currency translation reserve. In
addition, on consolidation, exchange differences on loans denominated in foreign currencies are taken directly to the foreign
currency translation reserve where the loan is considered part of the net investment in that foreign operation.
The stapled security-based payment reserve is used to recognise the fair value of performance rights issued to employees but not yet
exercised under the Group’s DSTI and LTIP.
The performance fee reserve was previously used to recognise the fair value of stapled securities not yet issued to the Manager in
settlement for the performance fee earned in the relevant period. The performance fee of $1.1 million was earned in the period to 30
June 2009. On the internalisation of the Manager, the performance fee payment was waived by Macquarie Group Limited. The reserve
was transferred to retained profits in the prior year.
The Group had the option to acquire the non-controlling interests in Ardent Leisure Health Clubs 1 Pty Limited. In accordance with AASB
132 Financial Instruments: Presentation, on first recognition the Group recorded the potential obligation under the put option on the
Balance Sheet as a financial liability calculated as the present value of the redemption amount on the first exercise date. Under the
Group’s economic equity approach, the initial recognition of the redemption amount was recorded in the Goodlife put and call option
reserve. Movements in the financial liability due to changes in the expected redemption amount and unwinding of the present value
discount were taken to the Income Statement as finance costs in subsequent periods. In an earlier period, the Group acquired the
remaining interest in Ardent Leisure Health Clubs 1 Pty Limited. The reserve was transferred to retained profits in the prior year.
(Accumulated losses)/retained profits
Opening balance
Profit for the year
Available for distribution
Transfer from asset revaluation reserve
Transfer from capital reserve
Transfer from performance fee reserve
Transfer from Goodlife put and call option reserve
Distributions and dividends paid and payable
Closing balance
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2016
$’000
2015
$’000
2016
$’000
2015
$’000
4,992
42,387
47,379
3,527
-
-
-
(55,705)
(4,799)
37,508
32,122
69,630
3,337
(11,018)
1,132
(2,269)
(55,820)
4,992
(11,893)
10,641
(1,252)
-
-
-
-
-
(1,252)
(1,655)
6,862
5,207
-
-
-
(2,310)
(14,790)
(11,893)
The distribution of 5.5 cents per stapled security for the year ended 30 June 2016 totalling $25.5 million had not been declared at year
end. This will be paid on or before 31 August 2016, as described in Note 44.
Ardent Leisure Group | Annual Report 2016 91
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
Business combinations
Current period
KAOS Amusement Arcade
On 6 October 2015, the Group acquired an amusement arcade in Penrith, NSW for $1.3 million. Transaction costs totalling $63,782 were
incurred on this acquisition, expensed in the Income Statement and recognised within operating cash flows in the Statement of Cash
Flows.
The acquired business contributed revenues of $0.8 million and a profit before allocation of Group costs and tax of $0.3 million to the
Group for the period from 6 October 2015 to 30 June 2016. If the acquisition had occurred on 1 July 2015, it would have contributed
revenues of $1.1 million and a profit before allocation of Group costs and tax of $0.4 million for the year ended 30 June 2016.
Details of the fair value of the assets and liabilities acquired and goodwill are as follows:
Purchase consideration:
Cash paid
Total purchase consideration
Fair value of net identifiable assets acquired
Goodwill
Other current assets
Property, plant and equipment
Net deferred tax asset
Deferred income
Provision for property make good obligations
Employee benefits provision
Net identifiable assets acquired
Outflow of cash to acquire business:
Cash consideration
Outflow of cash
Hypoxi Caroline Springs
Consolidated
Group
Acquiree's
carrying
amount
$’000
10
460
4
-
-
(12)
462
Consolidated
Group
Fair value
$’000
10
584
4
(45)
(101)
(12)
440
Consolidated
Group
$’000
ALL Group
$’000
1,297
1,297
440
857
1,398
1,398
541
857
ALL Group
Acquiree's
carrying
amount
$’000
10
460
4
-
-
(12)
462
ALL Group
Fair value
$’000
10
584
4
(45)
-
(12)
541
Consolidated
Group
ALL Group
$’000
$’000
1,297
1,297
1,398
1,398
On 3 August 2015, the Group acquired a Hypoxi studio at Caroline Springs, Victoria for $0.1 million. No goodwill was recognised on
acquisition.
Prior period
During the period, the Group finalised its prior year acquisitions of the Fitness First WA health clubs, Hypoxi US and Canada distribution
and master franchise rights, the amusement arcade at Highpoint Victoria, the Hypoxi Studio at Ballantyne, North Carolina and the Hypoxi
Studio at Randwick, Sydney. The deferred payment of $2.4 million relating to the Fitness First WA acquisition was paid in September
2015. Purchase price and goodwill adjustments on finalisation were immaterial in nature.
92 Ardent Leisure Group | Annual Report 2016
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
Cash and cash equivalents
For the purposes of the Statements of Cash Flows, cash includes only cash at banks and on deposit. Cash as at 30 June 2016 as shown
in the Statements of Cash Flows is reconciled to the related items in the Balance Sheets as follows:
Cash at bank
Cash on deposit
Total cash and cash equivalents
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2016
$’000
9,009
61
9,070
2015
$’000
4,923
63
4,986
2016
$’000
8,330
61
8,391
2015
$’000
4,622
63
4,685
Cash on deposit at call in the Group bears an average floating interest rate of 1.66% per annum (2015: 1.89% per annum).
Cash on deposit at call in the ALL Group bears an average floating interest rate of 1.75% per annum (2015: 2.00% per annum).
Cash flow information
(a)
Reconciliation of profit to net cash flows from operating activities
Profit for the year
Non-cash items
Depreciation of property, plant and equipment
Amortisation
Depreciation of livestock
Impairment of goodwill
Security-based payments
Provision for doubtful debts
(Decrease)/increase in onerous lease provisions
Loss on sale of property, plant and equipment and livestock
Loss on closure of bowling centre
Impairment of property, plant and equipment
Valuation (gains)/loss on investment properties and property, plant
and equipment
Classified as financing activities
Borrowing costs
Classified as investing activities
Unrealised net loss/(gain) on derivative financial instruments
Gain on sale and leaseback of family entertainment centres
Changes in asset and liabilities:
(Increase)/decrease in assets:
Receivables
Inventories
Deferred tax assets
Construction in progress inventories
Other assets
Increase/(decrease) in liabilities:
Payables and other liabilities
Provisions
Payable to the Trust
Construction in progress deposits
Current tax liabilities
Deferred tax liabilities
Net cash flows from operating activities
Consolidated
Group
2016
$’000
Consolidated
Group
2015
$’000
ALL Group
2016
$’000
ALL Group
2015
$’000
42,387
32,122
10,641
6,862
57,921
6,741
24
-
1,539
253
(2,193)
513
-
463
47,256
7,592
30
141
1,396
200
2,598
919
104
2,646
34,151
6,741
24
-
1,713
253
(1,146)
139
-
158
24,153
7,592
30
141
2,231
200
1,465
772
-
1,009
(2,059)
501
-
-
14,874
11,333
13,337
11,731
170
(1,672)
(552)
(7,355)
-
(1,672)
-
(7,355)
(3,336)
(1,831)
(1,857)
(62,692)
1,533
18,917
174
-
55,940
(1,398)
11,010
135,421
(3,345)
(1,993)
(2,265)
-
(3,333)
19,040
(136)
-
-
363
8,090
115,352
(981)
(1,831)
(1,857)
(62,692)
(2,233)
33,960
217
(3,824)
55,940
(1,424)
11,010
90,624
(4,633)
(1,993)
(2,265)
-
(3,123)
17,422
764
2,033
-
358
8,090
65,484
Ardent Leisure Group | Annual Report 2016 93
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
34.
(b)
Cash flow information (continued)
Non-cash financing and investing activities
The following items are not reflected in the Statements of
Cash Flows:
Distributions by the Group satisfied during the year by the
issue of stapled securities under the DRP
Net tangible assets
Net tangible assets are calculated as follows:
Total assets
Less: intangible assets
Less: total liabilities
Net tangible assets
Total number of stapled securities on issue
Net tangible asset backing per stapled security
Related party disclosures
(a)
Directors
Consolidated
Group
2016
$’000
Consolidated
Group
2015
$’000
ALL Group
2016
$’000
ALL Group
2015
$’000
41,240
16,779
10,979
3,658
Consolidated
Group
Consolidated
Group
2016
$’000
2015
$’000
1,157,632
(246,129)
(537,649)
373,854
996,507
(242,944)
(417,025)
336,538
463,039,616
$0.81
442,322,106
$0.76
The following persons have held office as Directors of the Manager and ALL during the period and up to the date of this report:
Neil Balnaves AO (Chair);
Roger Davis;
David Haslingden;
Don Morris AO;
Deborah Thomas;
George Venardos; and
Melanie Willis.
(b)
Parent entity
The immediate and ultimate parent entity of the Group is Ardent Leisure Trust.
The immediate and ultimate parent entity of the ALL Group is Ardent Leisure Limited.
94 Ardent Leisure Group | Annual Report 2016
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
36.
(c)
Related party disclosures (continued)
Key controlled entities
These financial statements incorporate the assets, liabilities and results of the following wholly-owned key subsidiaries in accordance
with the accounting policy disclosure as described in Note 1(b):
Entity
Activity
Country of
establishment
Class of equity
securities
Controlled entities of Ardent Leisure Trust:
Ardent Leisure Trust
Ardent Leisure (NZ) Trust
Goodlife Sub Trust
Controlled entities of Ardent Leisure Limited:
Ardent Leisure Limited
Bowling Centres Australia Pty Limited
Ardent Leisure Operations (NZ) Limited
Main Event Holdings, Inc
Goodlife Operations Pty Limited
Hypoxi Australia Pty Limited
Hypoxi (US) LLC, Inc
(d)
Transactions with related parties
Key management personnel
Short term employee benefits
Post-employment benefits
Termination benefits
Share-based payments
Principal lessee: Marinas, bowling centres
Freehold owner: Theme parks
Principal lessee: Bowling centres
Principal lessee: Health clubs
Australia
New Zealand
Australia
Ordinary
Ordinary
Ordinary
Theme parks, Marinas
Bowling centres
Bowling centres
Family entertainment centres
Health clubs
Targeted weight loss solutions
Targeted weight loss solutions
Australia
Australia
New Zealand
USA
Australia
Australia
USA
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Consolidated
Group
2016
$
4,999,598
182,825
855,644
1,249,248
7,287,315
Consolidated
Group
2015
$
4,587,929
168,555
-
1,284,888
6,041,372
ALL Group
2016
$
4,999,598
182,825
855,644
1,239,468
7,277,535
ALL Group
2015
$
4,587,929
168,555
-
1,665,352
6,421,836
Remuneration of key management personnel (KMP) is shown in the Directors’ report from pages 13 to page 33.
(e)
Loans to KMP
There were no loans to KMP during the financial year or prior corresponding period.
(f)
Other transactions with KMP
During the year, the Group entered into commercial arm’s length agreements with companies of interest to David Haslingden and
Melanie Willis by virtue of their positions as non-executive directors of those companies or their subsidiaries. The Directors fully disclose
their interest in accordance with section 195(1) of the Corporations Act 2001.
All agreements have been entered into on normal commercial bases. The fees and transactions were all based on normal commercial
terms and conditions. Related party balances above are on interest free terms.
No Director has entered into a material contract with the Group and there were no material contracts involving Directors’ interests
existing at year end not previously disclosed.
Ardent Leisure Group | Annual Report 2016 95
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
36.
(g)
Related party disclosures (continued)
Transactions with controlled entities
All transactions with controlled entities were made on normal commercial terms and conditions and at market rates, except that there
are no fixed terms for the repayment of loans between the parties. Outstanding balances are unsecured and are repayable in cash. The
terms and conditions of the tax funding agreement are set out in Note 10(e). The transactions incurred in the year with controlled entities
were:
Consolidated
Group
2016
$
Consolidated
Group
2015
$
ALL Group
2016
$
ALL Group
2015
$
(856,133)
(37,226)
-
(15,312)
(856,133)
(37,226)
-
(15,312)
-
-
-
-
-
-
-
-
(4,538,444)
(4,828,281)
-
-
-
-
-
-
(126,900,500)
(85,096,033)
89,699,028
(25,183)
(5,898,585)
(128,221,273)
(125,365,392)
(129,802,645)
134,550,710
(39,692)
(6,243,481)
(126,900,500)
Purchases of goods
Purchase of services from related parties
Reimbursable expenses to related parties
Tax consolidation legislation
Current tax payable assumed from wholly-owned tax
consolidated entities
Loans from Ardent Leisure Trust
Balance at the beginning of the year
Loans advanced
Loan repayments made
Foreign exchange movements
Interest charged
Balance at the end of the year
Segment information
Business segments
The Group is organised on a global basis into the following divisions by product and service type:
Marinas
This segment comprises seven d’Albora Marina properties, located in New South Wales and Victoria.
Family entertainment centres
This segment comprises of 27 Main Event sites in Texas, Arizona, Georgia, Illinois, Kentucky, Missouri, New Mexico, Ohio, Oklahoma and
Tennessee, United States of America.
Bowling centres
This segment comprises 48 bowling centres and six amusement arcades located in Australia and New Zealand.
Theme parks
This segment comprises Dreamworld and WhiteWater World in Coomera, Queensland and the SkyPoint observation deck and climb in
Surfers Paradise, Queensland.
Health clubs
This comprises 76 clubs in Queensland, New South Wales, Victoria, South Australia and Western Australia, including 14 in-club Hypoxi
studios. The division also includes two independent Hypoxi studios in New South Wales and two independent Hypoxi studios in
Phoenix, Arizona.
The main income statement items used by management to assess each of the divisions are divisional revenue and divisional EBITDA
before property costs and after property costs. In addition, depreciation and amortisation are analysed by division. Each of these income
statement items is looked at after adjusting for pre-opening expenses, straight lining of fixed rent increases, IFRS depreciation,
increase/decrease in onerous lease provisions, amortisation of health club brands and customer relationship intangible assets,
impairment of property, plant and equipment and intangible assets and discontinued operation selling costs. As shown in Note 11,
these items are excluded from management’s definition of core earnings.
The Group’s principal activity is to invest in and operate leisure and entertainment businesses in Australia, New Zealand and the United
States of America.
96 Ardent Leisure Group | Annual Report 2016
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
37.
Segment information (continued)
Business segment 2016
Consolidated Group
Discontinued
operation
Family
entertainment
centres
$’000
Marinas
$’000
Continuing operations
Total
Bowling
centres
$’000
Theme
parks
$’000
Health
clubs
$’000
Other
$’000
$’000
Revenue from operating activities
23,000
238,974 130,494 107,582 187,555
9 687,614
Divisional EBITDA before property costs(1)
Divisional EBITDA(2)
Depreciation and amortisation(3)
12,569
10,157
(730)
87,260
59,168
(17,827)
45,291
18,224
(9,344)
35,947
34,725
(5,492)
77,511
30,114
(12,620)
-
-
(1,153)
258,578
152,388
(47,166)
Divisional EBIT(4)
9,427
41,341
8,880
29,233
17,494
(1,153) 105,222
Pre-opening expenses, straight lining of fixed rent increases, IFRS depreciation,
decrease in onerous lease provisions, health club brands and customer relationship
intangible asset amortisation, impairment of property, plant and equipment and
discontinued operation selling costs not included in divisional EBIT
Valuation gains - investment properties
Loss on disposal of assets
Gain on sale and leaseback of family entertainment centres
Net loss from derivative financial instruments
Interest income
Corporate costs
Business acquisition costs refunded
Borrowing costs
Net tax expense
Profit for the year
(27,383)
2,059
(514)
1,672
(170)
81
(15,144)
134
(14,874)
(8,696)
42,387
Total assets
Acquisitions of property, plant and equipment,
investment properties and intangible assets
113,093
357,836
137,986
283,774 251,144
13,799 1,157,632
6,448
106,013
16,968
9,638
20,612
592
160,271
(1) Excludes pre-opening expenses of $8,638,000.
(2) Excludes pre-opening expenses of $8,638,000, straight lining of fixed rent increases of $1,909,000 and a decrease in onerous lease provisions of $2,193,000.
(3) Excludes IFRS depreciation of $13,029,000, amortisation of health club brands and customer relationship intangible assets totalling $4,490,000 and
impairment of property, plant and equipment of $463,000.
(4) Excludes of pre-opening expenses of $8,638,000, straight lining of fixed rent increases of $1,909,000, a decrease in onerous lease provisions of $2,193,000, IFRS
depreciation of $13,029,000, amortisation of health club brands and customer relationship intangible assets of $4,490,000 and impairment of property, plant
and equipment of $463,000.
Ardent Leisure Group | Annual Report 2016 97
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
37.
Segment information (continued)
Business segment 2015
Consolidated Group
Family
Marinas
$’000
entertainment Bowling
centres
$’000
centres
$’000
Theme
parks
$’000
Health
clubs
$’000
Other
$’000
Total
$’000
Revenue from operating activities
22,952
177,123 116,510
99,571 178,388
59
594,603
Divisional EBITDA before property costs(1)
Divisional EBITDA(2)
Depreciation and amortisation(3)
12,765
10,150
(929)
64,439
45,657
(11,982)
40,279
13,989
(7,859)
33,163
32,015
(5,394)
72,543
28,152
(10,018)
49
49
(816)
223,238
130,012
(36,998)
Divisional EBIT(4)
9,221
33,675
6,130
26,621 18,134
(767)
93,014
Pre-opening expenses, straight lining of fixed rent increases, IFRS depreciation,
onerous lease costs, health club brands and customer relationship intangible asset
amortisation and impairment of property, plant and equipment and intangible assets
not included in divisional EBIT
Valuation loss - investment properties
Loss on closure of bowling centre
Loss on disposal of assets
Gain on sale and leaseback of family
entertainment centre
Net gain from derivative financial instruments
Interest income
Corporate costs
Business acquisition costs
Borrowing costs
Net tax expense
Profit for the year
(32,122)
(501)
(104)
(523)
6,959
552
121
(15,056)
(1,938)
(11,333)
(6,947)
32,122
Total assets
Acquisitions of property, plant and equipment,
investment properties and intangible assets
109,862
217,949 140,870 264,552
250,427 12,847
996,507
4,860
88,767
21,530
7,793
59,695
2,158
184,803
(1) Excludes pre-opening expenses of $6,521,000.
(2) Excludes pre-opening expenses of $6,521,000, straight lining of fixed rent increases of $2,336,000 and onerous lease costs of $2,598,000.
(3) Excludes IFRS depreciation of $11,102,000, amortisation of health club brands and customer relationship intangible assets totalling $6,778,000 and
impairment of property, plant and equipment and intangible assets of $2,787,000.
(4) Excludes of pre-opening expenses of $6,521,000, straight lining of fixed rent increases of $2,336,000, onerous lease costs of $2,598,000, IFRS depreciation of
$11,102,000, amortisation of health club brands and customer relationship intangible assets of $6,778,000 and impairment of property, plant and equipment
and intangible assets of $2,787,000.
98 Ardent Leisure Group | Annual Report 2016
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
37.
Segment information (continued)
Business segment 2016
ALL Group
Discontinued
operation
Continuing operations
Family
entertainment
centres
$’000
Marinas
$’000
Bowling
centres
$’000
Theme
parks
$’000
Health
clubs
$’000
Other
$’000
Total
$’000
Revenue from operating activities
23,000
238,974 130,494 107,582 187,555
9
687,614
Divisional EBITDA before rent to Trust(1)
Divisional EBITDA after rent to Trust(1)
Depreciation and amortisation(2)
Divisional EBIT(3)
12,569
1,077
(163)
914
59,168
59,168
(17,827)
41,341
45,271
7,329
(3,015)
4,314
35,947
2,839
(1,647)
1,192
-
64,531
-
23,393
(12,620)
(1,153)
10,773 (1,153)
217,486
93,806
(36,425)
57,381
Pre-opening expenses, straight lining of fixed rent increases, decrease in onerous lease
provisions, health club brands and customer relationship intangible asset amortisation
and impairment of property, plant and equipment not included in divisional EBIT
Loss on disposal of assets
Gain on sale and leaseback of family
entertainment centres
Interest income
Foreign exchange gain
Corporate costs
Business acquisition costs refunded
Borrowing costs
Net tax expense
Profit for the year
(13,063)
(140)
1,672
68
116
(13,516)
134
(13,337)
(8,674)
10,641
Total assets
Acquisitions of property, plant and equipment,
investment properties and intangible assets
2,972
357,907
47,735
21,679 206,187 12,844
649,324
706
106,022
12,256
2,789
14,189
592
136,554
(1) Excludes pre-opening expenses of $8,455,000, straight lining of fixed rent of $1,149,000 and decrease in onerous lease provisions of $1,190,000.
(2) Excludes amortisation of health club brands and customer relationship intangible assets of $4,490,000 and impairment of property, plant and equipment of
$159,000.
(3) Excludes pre-opening expenses of $8,455,000, straight lining of fixed rent of $1,149,000, decrease in onerous lease provisions of $1,190,000, amortisation of
health club brands and customer relationship intangible assets of $4,490,000 and impairment of property, plant and equipment of $159,000.
Ardent Leisure Group | Annual Report 2016 99
For personal use only
Notes to the Financial Statements
For the year ended 30 June 2016
37.
Segment information (continued)
Business segment 2015
ALL Group
Family
entertainment
centres
$’000
Marinas
$’000
Bowling
centres
$’000
Theme
parks
$’000
Health
clubs
$’000
Other
$’000
Total
$’000
Revenue from operating activities
22,952
177,123
116,510 99,571 178,388
59
594,603
Divisional EBITDA before rent to Trust(1)
Divisional EBITDA after rent to Trust(1)
Depreciation and amortisation(2)
Divisional EBIT(3)
12,765
1,107
(75)
1,032
45,657
45,657
(11,982)
33,675
40,279 33,163
2,621
(1,113)
1,508
6,261
(1,054)
5,207
60,186
21,317
(9,959)
11,358
49
49
(814)
(765)
192,099
77,012
(24,997)
52,015
Pre-opening expenses, straight lining of fixed rent increases, onerous lease costs, health
club brands and customer relationship intangible asset amortisation and impairment of
property, plant and equipment and intangible assets not included in divisional EBIT
Loss on disposal of assets
Gain on sale and leaseback of family
entertainment centre
Interest income
Foreign exchange gain
Corporate costs
Business acquisition costs
Borrowing costs
Net tax expense
Profit for the year
(17,220)
(376)
6,959
77
312
(14,079)
(1,938)
(11,731)
(7,157)
6,862
Total assets
Acquisitions of property, plant and equipment,
investment properties and intangible assets
3,429
217,842
39,383 16,963 207,054 14,394
499,065
883
88,767
6,898
5,195
49,657
2,158
153,558
(1) Excludes pre-opening expenses of $6,521,000, straight lining of fixed rent of $1,306,000 and onerous lease costs of $1,465,000.
(2) Excludes amortisation of health club brands and customer relationship intangible assets of $6,778,000 and impairment of property, plant and equipment and
intangible assets of $1,150,000.
(3) Excludes pre-opening expenses of $6,521,000, straight lining of fixed rent of $1,306,000, onerous lease costs of $1,465,000, amortisation of health club
brands and customer relationship intangible assets of $6,778,000 and impairment of property, plant and equipment and intangible assets of $1,150,000.
100 Ardent Leisure Group | Annual Report 2016
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
Capital and financial risk management
(a)
Capital risk management
The Group’s objectives when managing capital is to optimise stapled security holder value through the mix of available capital sources
while complying with statutory and constitutional capital and distribution requirements, maintaining gearing, interest cover and debt
serviceability ratios within approved limits and continuing to operate as a going concern.
The Group assesses its capital management approach as a key part of the Group’s overall strategy and it is continuously reviewed by
management and the Board.
The Group is able to alter its capital mix by issuing new stapled securities, activating the DRP, electing to have the DRP underwritten,
adjusting the amount of distributions paid, activating a stapled security buy-back program or selling assets to reduce borrowings.
The Group has a target gearing ratio of 30% to 35% of debt to debt plus equity. At 30 June 2016, gearing was 33.04% (2015: 32.6%) and
the Group has complied with the financial covenants of its borrowing facilities in the current and previous financial years.
Protection of the Group’s equity in foreign denominated assets was achieved through borrowing in the local functional currency to
provide a natural hedge supplemented by the use of foreign exchange forward contracts to provide additional hedge protection. The
Group has a target equity hedge of 50% to 100% of the asset value by foreign currency.
The Trust also protects its equity in assets by taking out insurance with creditworthy insurers.
(b)
Financial risk management
The Group’s principal financial instruments comprise cash, receivables, payables, interest bearing liabilities and derivative financial
instruments.
The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk and interest rate risk), liquidity
risk and credit risk.
The Group manages its exposure to these financial risks in accordance with the Group’s Financial Risk Management (FRM) policy as
approved by the Board.
The FRM policy sets out the Group’s approach to managing financial risks, the policies and controls utilised to minimise the potential
impact of these risks on its performance and the roles and responsibilities of those involved in the management of these financial risks.
The Group uses various measures to manage exposures to these types of risks. The main methods include foreign exchange and interest
rate sensitivity analysis, ageing analysis and counterparty credit assessment and the use of future rolling cash flow forecasts.
The Group uses derivative financial instruments such as forward foreign exchange contracts, interest rate swaps and cross currency
swaps to manage its financial risk as permitted under the FRM policy. Such instruments are used exclusively for hedging purposes i.e.
not for trading or speculative purposes.
(c)
Market risk
Foreign exchange risk
Foreign exchange risk is the risk that changes in foreign exchange rates will change the Australian dollar value of the Group’s net assets
or its Australian dollar earnings.
Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency
that is not the Group’s functional currency.
The Group is exposed to foreign exchange risk through investing in overseas businesses and deriving operating income from those
businesses. The Group manages this exposure on a consolidated basis.
The majority of derivatives utilised to manage this consolidated exposure are held by the Trust. Therefore, the information provided
below is only meaningful for the Group.
Ardent Leisure Group | Annual Report 2016 101
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
38.
(c)
Capital and financial risk management (continued)
Market risk (continued)
Foreign exchange risk (continued)
Foreign investment
The Group aims to minimise the impact of fluctuations in foreign currency exchange rates on its net investments overseas by funding
such investments by borrowing in the local overseas currency or by taking out forward foreign exchange contracts. The Group’s policy
is to hedge 50% to 100% of overseas investments in this way.
The table below sets out the Group’s overseas investments, by currency, and how, through the use of forward foreign exchange
contracts, this exposure is reduced. All figures in the table below are shown in Australian dollars with foreign currency balances
translated at the year-end spot rate:
Australian dollars
New Zealand dollars
US dollars
Consolidated Group
Assets
Cash and cash equivalents
Receivables and other current assets
Derivative financial instruments
Assets classified as held for sale
Construction in progress inventories
Investment properties
Property, plant and equipment
Intangible assets
Other non-current assets
Total assets
Liabilities
Payables and other current liabilities
Construction in progress deposits
Derivative financial instruments
Liabilities directly associated with assets
classified as held for sale
Interest bearing liabilities
Other non-current liabilities
Total liabilities
2016
$’000
2015
$’000
3,285
29,524
244
112,940
-
-
453,544
187,961
6,558
794,056
70,152
-
2,652
4,104
141,449
13,638
231,995
3,010
29,676
377
-
-
99,326
449,199
186,732
4,862
773,182
73,108
-
2,038
-
143,746
14,731
233,623
2016
$’000
1,031
238
-
-
-
-
2,018
3,689
19
6,995
658
-
-
-
-
-
658
2015
$’000
324
353
-
-
-
-
2,003
3,426
16
6,122
793
-
-
-
-
-
793
2016
$’000
2015
$’000
4,754
7,714
-
-
61,796
-
228,197
54,479
(359)
356,581
41,674
55,494
1,487
-
171,454
34,887
304,996
1,652
4,675
-
-
-
-
158,480
52,786
(390)
217,203
24,643
-
193
-
134,872
22,901
182,609
Net assets
562,061
539,559
6,337
5,329
51,585
34,594
Notional value of derivatives
-
-
-
-
774
2,441
Net exposure to foreign exchange
movements
562,061
539,559
6,337
5,329
52,359
37,035
102 Ardent Leisure Group | Annual Report 2016
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
38.
(c)
Capital and financial risk management (continued)
Market risk (continued)
Foreign exchange risk (continued)
Foreign investment (continued)
ALL Group
Assets
Cash and cash equivalents
Receivables and other current assets
Assets classified as held for sale
Construction in progress inventories
Property, plant and equipment
Intangible assets
Other non-current assets
Total assets
Liabilities
Payables and other current liabilities
Construction in progress deposits
Derivative financial instruments
Liabilities directly associated with assets
classified as held for sale
Interest bearing liabilities
Other non-current liabilities
Total liabilities
Australian dollars
2015
$’000
2016
$’000
New Zealand dollars
2015
2016
$’000
$’000
US dollars
2016
$’000
2015
$’000
3,167
29,188
2,782
-
58,851
187,961
6,558
288,507
57,815
-
-
3,716
128,569
3,065
193,165
2,866
28,834
-
-
55,120
186,732
4,862
278,414
58,464
-
-
-
125,613
4,514
188,591
566
172
-
-
13
3,689
19
4,459
317
-
-
-
-
-
317
275
152
-
-
-
3,426
16
3,869
426
-
-
-
-
-
426
4,658
7,587
-
61,796
228,197
54,479
(359)
356,358
41,644
55,494
1,415
-
147,519
34,887
280,959
1,544
4,362
-
-
158,480
52,786
(390)
216,782
24,618
-
129
-
111,393
22,901
159,041
Net assets
95,342
89,823
4,142
3,443
75,399
57,741
Net exposure to foreign exchange
movements
Foreign exchange rate sensitivity
95,342
89,823
4,142
3,443
75,399
57,741
The table below demonstrates the sensitivity of the above net exposures to reasonably possible changes in foreign exchange rates, with
all other variables held constant. A negative amount in the table reflects a potential net reduction in the profit, core earnings or equity,
while a positive amount reflects a potential net increase.
Consolidated Group
Profit movement
2016
$’000
(4,760)
5,818
(576)
704
2015
$’000
(3,367)
4,115
(484)
593
AUD:USD - increase 10%
AUD:USD - decrease 10%
AUD:NZD - increase 10%
AUD:NZD - decrease 10%
ALL Group
AUD:USD - increase 10%
AUD:USD - decrease 10%
AUD:NZD - increase 10%
AUD:NZD - decrease 10%
Core earnings
movement
2016
$’000
2015
$’000
-
-
-
-
-
-
-
-
Total equity
movement
2016
$’000
(4,760)
5,818
(576)
704
Profit movement
Total equity
movement
2016
$’000
(6,854)
8,378
(378)
459
2015
$’000
(5,249)
6,416
(312)
384
2016
$’000
(6,854)
8,378
(378)
459
2015
$’000
(3,367)
4,115
(484)
593
2015
$’000
(5,249)
6,416
(312)
384
Ardent Leisure Group | Annual Report 2016 103
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
38.
(c)
Capital and financial risk management (continued)
Market risk (continued)
Foreign exchange risk (continued)
Foreign income
Through investing in overseas assets, the Group earns foreign denominated income. Net operating income derived is naturally offset
by local currency denominated expenses including interest and tax.
From time to time, the Group uses forward foreign exchange contracts to convert this net foreign denominated currency exposure back
to Australian dollars at pre-determined rates out into the future. At reporting date, the Group has no hedging in place over USD or NZD
income.
Interest rate risk
Interest rate risk is the risk that changes in market interest rates will impact the earnings of the Group.
The Group is exposed to interest rate risk predominantly through borrowings. The Group manages this exposure on a consolidated
basis. The Group applies benchmark hedging bands across its differing interest rate exposures and utilises interest rate swaps, to
exchange floating interest rates to fixed interest rates, to manage its exposure between these bands. Compliance with the policy is
reviewed regularly by management and is reported to the Board each meeting.
The Group has exposures to interest rate risk on its net monetary liabilities, mitigated by the use of interest rate swaps, as shown in the
table below.
Consolidated Group
Australian interest rates
US interest rates
Fixed rates
Interest bearing liabilities
Floating rates
Cash and cash equivalents
Interest bearing liabilities
2016
$’000
2015
$’000
2016
$’000
-
-
-
-
-
-
2015
$’000
-
-
4,316
(142,433)
(138,117)
3,334
(144,400)
(141,066)
4,754
(172,511)
(167,757)
1,652
(135,361)
(133,709)
Interest rate swaps
80,000
70,000
127,929
61,198
Net interest rate exposure
(58,117)
(71,066)
(39,828)
(72,511)
Refer to Note 14 for further details on the interest rate swaps.
104 Ardent Leisure Group | Annual Report 2016
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
38.
(c)
Capital and financial risk management (continued)
Market risk (continued)
Interest rate risk (continued)
ALL Group
Fixed rates
Interest bearing liabilities
Floating rates
Cash and cash equivalents
Interest bearing liabilities
Interest rate swaps
Net interest rate exposure
Interest rate sensitivity
Australian interest rates
US interest rates
2016
$’000
2015
$’000
2016
$’000
-
-
-
-
-
-
2015
$’000
-
-
3,733
(128,569)
(124,836)
3,141
(125,613)
(122,472)
4,658
(148,521)
(143,863)
1,544
(111,835)
(110,291)
-
-
105,036
39,063
(124,836)
(122,472)
(38,827)
(71,228)
The table below demonstrates the sensitivity to reasonably possible changes in interest rates, with all other variables held constant.
A negative amount in the table reflects a potential net reduction in the profit, core earnings or equity, while a positive amount
reflects a potential net increase.
Consolidated Group
Profit movement
Core earnings
movement
Total equity
movement
1% increase in AUD rate
1% decrease in AUD rate
1% increase in USD rate
1% decrease in USD rate
ALL Group
1% increase in AUD rate
1% decrease in AUD rate
1% increase in USD rate
1% decrease in USD rate
2016
$’000
(573)
573
(408)
408
2015
$’000
(698)
698
(745)
745
2016
$’000
(581)
581
(398)
398
2015
$’000
(711)
711
(725)
725
2016
$’000
1,711
(1,711)
2,234
(2,234)
Profit movement
Total equity
movement
2016
$’000
(1,248)
1,248
(388)
388
2015
$’000
(1,225)
1,225
(712)
712
2016
$’000
(1,248)
1,248
2,040
(2,040)
2015
$’000
1,296
(1,296)
429
(429)
2015
$’000
(1,225)
1,225
36
(36)
At reporting date, the Group has fixed 66.0% (2015: 46.9%) of its floating interest exposure.
Ardent Leisure Group | Annual Report 2016 105
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
38.
(d)
Capital and financial risk management (continued)
Liquidity risk
Liquidity risk arises if the Group has insufficient liquid assets to meet its short term obligations. Liquidity risk is managed by maintaining
sufficient cash balances and adequate committed credit facilities. Prudent liquidity management implies maintaining sufficient cash
and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close
out market positions. The instruments entered into by the Group were selected to ensure sufficient funds would be available to meet
the ongoing cash requirements of the Group.
The following tables provide the contractual maturity of the Group’s and ALL Group’s fixed and floating rate financial liabilities and
derivatives as at 30 June 2016. The amounts presented represent the future contractual undiscounted principal and interest cash flows
and therefore do not equate to the values shown in the Balance Sheets. Repayments which are subject to notice are treated as if notice
were given immediately.
Consolidated Group
2016
Payables
Term debt
Interest rate swaps designated as hedges
of the term debt
Forward foreign exchange contracts
Total undiscounted financial liabilities
Consolidated Group
2015
Payables
Term debt
Interest rate swaps designated as hedges
of the term debt
Forward foreign exchange contracts
Total undiscounted financial liabilities
ALL Group
2016
Payables
Term debt
Loan from the Trust
Interest rate swaps designated as hedges
of the term debt
Total undiscounted financial liabilities
ALL Group
2015
Book
value
$’000
Less than
1 year
$’000
1 to 2
years
$’000
2 to 3
years
$’000
3 to 4
years
$’000
4 to 5
years
$’000
Over 5
years
$’000
Total
$’000
106,407 106,407
8,510
314,944
-
8,510
-
193,390
-
115,392
4,026
(131)
2,077
644
425,246 117,638
1,657
-
-
-
10,167 194,595 115,392
1,205
-
-
-
-
-
-
-
-
106,407
325,802
4,939
-
-
644
- 437,792
Book
value
$’000
Less than
1 year
$’000
1 to 2
years
$’000
2 to 3
years
$’000
3 to 4
years
$’000
4 to 5
years
$’000
Over 5
years
$’000
Total
$’000
91,323
279,761
91,323
7,826
-
196,279
-
85,936
2,231
(377)
1,472
644
372,938 102,022 198,395
1,440
1,433
769
-
86,705
-
-
-
-
-
-
-
-
-
-
-
-
91,323
290,041
3,681
-
2,077
-
- 387,122
2 to 3
years
$’000
3 to 4
years
$’000
4 to 5
years
$’000
Over 5
years
$’000
Total
$’000
Book
value
$’000
Less than
1 year
$’000
93,699
148,869
128,221
93,699
2,913
5,505
1 to 2
years
$’000
-
2,913
5,505
-
99,946
128,839
-
50,227
-
1,415
775
372,204 102,892
681
640
9,099 229,425
-
50,227
-
-
-
-
-
-
-
-
93,699
155,999
139,849
-
2,096
- 391,643
Book
value
$’000
Less than
1 year
$’000
1 to 2
years
$’000
2 to 3
years
$’000
3 to 4
years
$’000
4 to 5
years
$’000
Over 5
years
$’000
Total
$’000
Payables
Term debt
Loan from the Trust
Interest rate swaps designated as hedges
of the term debt
Total undiscounted financial liabilities
76,287
110,547
126,901
76,287
1,762
5,824
-
69,650
132,725
-
41,536
-
129
313,864
318
298
84,191 202,673
-
41,536
-
-
-
-
-
-
-
-
-
-
-
-
-
76,287
112,948
138,549
-
616
- 328,400
106 Ardent Leisure Group | Annual Report 2016
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
38.
(e)
Capital and financial risk management (continued)
Credit risk
Credit risk is the risk that a contracting entity will not complete its obligations under a financial instrument and will cause the Group to
make a financial loss. The Group has exposure to credit risk on all of its financial assets included in the Group’s Balance Sheet.
The Group manages credit risk on receivables by performing credit reviews of prospective debtors, obtaining collateral where
appropriate and performing detailed reviews on any debtor arrears. The Group has policies to review the aggregate exposures of
receivables and tenancies across its portfolio. The Group has no significant concentrations of credit risk on its trade receivables. The
Group holds collateral in the form of security deposits or bank guarantees, over some receivables.
For derivative financial instruments, there is only a credit risk where the contracting entity is liable to pay the Group in the event of a
close out. The Group has policies that limit the amount of credit exposure to any financial institution. Derivative counterparties and cash
transactions are limited to investment grade counterparties in accordance with the Group’s FRM policy. The Group monitors the public
credit rating of its counterparties.
No credit risk has been allocated to cash and cash equivalents. Credit risk adjustments relating to receivables have been applied in line
with the policy set out in Note 1(d). No fair value adjustment has been made to derivative financial assets, with the impact of credit risk
being minimal. The Group’s maximum exposure to credit risk is noted in the table below.
Details the concentration of credit exposure of the Group’s assets is as follows:
Cash and cash equivalents
Receivables - Australasia
Receivables - US
Derivative financial instruments
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2016
$’000
9,070
11,537
1,749
244
22,600
2015
$’000
4,986
9,539
1,317
377
16,219
2016
$’000
8,391
11,537
1,749
-
21,677
2015
$’000
4,685
11,893
1,317
-
17,895
Ardent Leisure Group | Annual Report 2016 107
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
38.
(e)
Capital and financial risk management (continued)
Credit risk (continued)
All cash, derivative financial instruments and interest bearing receivables are neither past due nor impaired.
The table below shows the ageing analysis of those receivables which are past due or impaired:
Consolidated Group
2016
Receivables - Australasia
Receivables - US
Consolidated Group
2015
Receivables - Australasia
Receivables - US
ALL Group
2016
Receivables - Australasia
Receivables - US
ALL Group
2015
Receivables - Australasia
Receivables - US
Less than 30
days
$’000
Past due but not impaired
61 to 90
days
$’000
31 to 60
days
$’000
More than 90
days
$’000
Impaired
Total
$’000
$’000
1,228
98
1,326
555
115
670
1,228
98
1,326
555
115
670
204
55
259
262
31
293
204
55
259
262
31
293
264
48
312
97
7
104
264
48
312
97
7
104
638
9
647
222
23
245
638
9
647
222
23
245
831
-
831
679
-
679
831
-
831
679
-
679
3,165
210
3,375
1,815
176
1,991
3,165
210
3,375
1,815
176
1,991
Based on a review of receivables by management, a provision of $515,000 (2015: $459,000) has been made against receivables with a
gross balance of $831,000 (2015: $679,000).
The Group holds collateral against the impaired receivables in the form of bank guarantees and security deposits; however, these are
not material.
There are no significant financial assets that have had renegotiated terms that would otherwise have been past due or impaired.
108 Ardent Leisure Group | Annual Report 2016
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
39.
(a)
Fair value measurement
Fair value hierarchy
The Group measures and recognises the following assets and liabilities at fair value on a recurring basis:
Derivative financial instruments;
Land and buildings; and
Investment properties.
AASB 13 Fair Value Measurement requires disclosure of fair value measurements by level of the following fair value measurement
hierarchy:
(a)
(b)
(c)
Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly
(level 2); and
Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).
The following table provides the fair value measurement hierarchy of the Group’s assets and liabilities:
Consolidated Group
2016
Assets measured at fair value:
Property, plant and equipment(1)
Assets classified as held for sale
Derivative financial instruments
Liabilities measured at fair value:
Derivative financial instruments
Liabilities for which fair values are disclosed:
Interest bearing liabilities (refer to Note 39(c))
2015
Assets measured at fair value:
Investment properties
Property, plant and equipment(1)
Derivative financial instruments
Liabilities measured at fair value:
Derivative financial instruments
Liabilities for which fair values are disclosed:
Interest bearing liabilities (refer to Note 39(c))
(1) Land and buildings and major rides and attractions.
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
-
-
-
-
-
-
-
244
4,139
314,944
413,266
109,459
-
413,266
109,459
244
-
-
4,139
314,944
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
-
-
-
-
-
-
-
377
2,231
279,761
99,326
395,779
-
99,326
395,779
377
-
-
2,231
279,761
There has been no transfer between level 1 and level 2 during the year. For changes in level 3 items for the periods ended 30 June 2016
and 30 June 2015, refer to Notes 16, 19 and 20.
Ardent Leisure Group | Annual Report 2016 109
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
39.
(a)
Fair value measurement (continued)
Fair value hierarchy (continued)
The following table provides the fair value measurement hierarchy of the ALL Group’s assets and liabilities:
ALL Group
2016
Assets measured at fair value:
Property, plant and equipment(1)
Liabilities measured at fair value:
Derivative financial instruments
Liabilities for which fair values are disclosed:
Interest bearing liabilities (refer to Note 39(c))
2015
Assets measured at fair value:
Property, plant and equipment(1)
Liabilities measured at fair value:
Derivative financial instruments
Liabilities for which fair values are disclosed:
Interest bearing liabilities (refer to Note 39(c))
(1) Land and buildings.
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
-
-
-
-
88,962
88,962
1,415
277,090
-
-
1,415
277,090
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
-
-
-
-
86,833
86,833
129
237,448
-
-
129
237,448
There has been no transfer between level 1 and level 2 during the year. For changes in level 3 items for the periods ended 30 June 2016
and 30 June 2015, refer to Note 20.
The Group’s policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the year.
The Group did not measure any financial assets or financial liabilities at fair value on a non-recurring basis as at 30 June 2016.
(b)
Valuation techniques used to derive level 2 and level 3 fair values
The fair value of financial instruments that are not traded in an active market (e.g. over–the–counter derivatives) is determined using
valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as
possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is
included in level 2. If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
This is the case for unlisted equity securities.
Specific valuation techniques used to value financial instruments include:
The use of quoted market prices or dealer quotes for similar instruments;
The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable
yield curves; and
The fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance date.
All of the resulting fair value estimates are included in level 2. There are no level 3 financial instruments in either the Group or the ALL
Group.
110 Ardent Leisure Group | Annual Report 2016
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
39.
(b)
Fair value measurement (continued)
Valuation techniques used to derive level 2 and level 3 fair values (continued)
The fair value of investment properties and property, plant and equipment is determined in line with the policy set out in Notes 1(f) and
1(g), with all resulting fair value estimates included in level 3. The current use is considered to be the highest and best use for all
investment properties in the Group.
Fair value measurements using significant unobservable inputs
For changes in level 3 items for the periods ended 30 June 2016 and 2015 refer to Notes 16, 19 and 20.
Valuation inputs and relationships to fair value
The significant unobservable inputs associated with the valuation of the Group’s investment properties are as follows:
Marinas
Capitalisation rate (%)
7.3 – 10.8
Discount rate (%)
8.5 - 11.7
Annual net property
income ($’000)
358 – 2,396
The fair value of land and buildings and major rides and attractions is determined in line with the policy set out in Note 1(g), with all
resulting fair value estimates included in level 3.
Dreamworld and WhiteWater World
SkyPoint
Capitalisation rate (%)
9.5
12.8
Discount rate (%)
13.5
15.5
Annual net property
income ($’000)
31,652
4,611
The sensitivity of the fair values of the investment properties and land and buildings in relation to the significant unobservable inputs is
set out in the table below:
Fair value measurement sensitivity to significant increase
in input
Fair value measurement sensitivity to significant decrease
in input
Decrease
Increase
Decrease
Increase
Increase
Decrease
Capitalisation rate (%)
Discount rate (%)
Annual net property
income ($’000)
When calculating the income capitalisation approach, the net market rent has a strong inter-relationship with the adopted capitalisation
rate given the methodology involves assessing the total income receivable from the property and capitalising this in perpetuity to derive
a capital value. In theory, an increase in the income and an increase (softening) in the adopted capitalisation rate could potentially offset
the impact to the fair value. The same can be said for a decrease in the income and a decrease (tightening) in the adopted capitalisation
rate. A directionally opposite change in the income and the adopted capitalisation rate could potentially magnify the impact to the fair
value.
There are no other significant inter-relationships between unobservable inputs that materially affect the fair value.
Ardent Leisure Group | Annual Report 2016 111
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
39.
(c)
Fair value measurement (continued)
Fair values of other financial instruments
The Group also has a number of financial instruments which are not measured at fair value in the Balance Sheet. For the majority of
these instruments, the fair values are not materially different to their carrying amounts, since the interest receivable/payable is either
close to the current market rates or the instruments are short term in nature. Differences were identified for the following instruments
at 30 June 2016:
Consolidated Group
Interest bearing liabilities
ALL Group
Interest bearing liabilities
Carrying
amount
2016
$’000
Fair value Discount rate
2016
$’000
2016
%
Carrying
amount
2015
$’000
314,944
314,345
2.82
279,761
279,796
Fair value
Discount rate
2015
$’000
2015
%
2.80
277,090
277,754
2.82
237,448
240,010
2.80
In determining the fair value of the interest bearing liabilities, the Group’s principal payable of $314.9 million (2015: $279.8 million) has
been discounted at a rate of 2.82% (2015: 2.80%) to best reflect the price that market participants would use when transferring the non-
current borrowings, assuming that market participants act in their economic best interest. They are classified as level 3 fair values in the
fair value hierarchy due to the use of unobservable inputs, including own credit risk. Own credit risk has been included for the first time
in the current financial year following the adoption of AASB 13 Fair Value Measurement.
40.
Contingent liabilities
Unless otherwise disclosed in the financial statements, there are no material contingent liabilities.
41.
(a)
Capital and lease commitments
Capital commitments
Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows:
Property, plant and equipment
Payable:
Within one year
Consolidated
Group
2016
Consolidated
Group
2015
ALL Group
2016
$’000
$’000
$’000
ALL Group
2015
$’000
770
770
3,331
3,331
770
770
3,331
3,331
112 Ardent Leisure Group | Annual Report 2016
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
41.
(b)
Capital and lease commitments (continued)
Lease commitments
Within one year
Later than one year but not later than five years
Later than five years
Representing:
Cancellable operating leases
Non-cancellable operating leases
Finance leases
Consolidated
Group
2016
$’000
Consolidated
Group
2015
$’000
ALL Group
2016
$’000
ALL Group
2015
$’000
92,203
298,377
287,901
678,481
-
678,481
-
678,481
83,368
272,461
259,110
614,939
415
614,524
-
614,939
41,493
150,020
231,981
423,494
-
423,494
-
423,494
33,798
124,577
188,130
346,505
415
346,090
-
346,505
Operating leases
The majority of non-cancellable operating leases in the Group relate to property leases.
Non-cancellable operating leases in the ALL Group include base rentals payable to the Trust in accordance with the leases for
Dreamworld, marina, bowling centre and health club properties. Further amounts are payable in respect of these properties; however,
the additional rental calculations are unable to be determined at reporting date as a result of the calculations being based upon future
profits of the businesses.
Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:
Within one year
Later than one year but not later than five years
Later than five years
Consolidated
Group
2016
$’000
Consolidated
Group
2015
$’000
ALL Group
2016
$’000
ALL Group
2015
$’000
92,203
298,377
287,901
678,481
82,956
272,457
259,111
614,524
41,493
150,020
231,981
423,494
33,386
124,573
188,131
346,090
Ardent Leisure Group | Annual Report 2016 113
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
42.
Deed of Cross Guarantee
In 2006, ALL, Bowling Centres Australia Pty Limited, Bowl Australia Holdings Pty Limited, Tidebelt Pty Limited and Bowling Centres
Australia Catering Services Pty Limited entered into a Deed of Cross Guarantee under which each company guarantees the debts of the
others. In 2010, Ardent Leisure Health Clubs 1 Pty Limited, Ardent Leisure Health Clubs 2 Pty Limited, Goodlife Health Clubs Holdings
Pty Limited, Goodlife Operations Pty Limited, Ardent Boat Share Pty Limited and Ardent Boat Share Finance Limited executed an
Assumption Deed and became parties to the Deed of Cross Guarantee. On 9 October 2012, Fenix Holdings Pty Limited and its controlled
entities executed an Assumption Deed and became parties to the Deed of Cross Guarantee. On 28 April 2014, Hypoxi Australia Pty Ltd
executed an Assumption Deed and became a party to the Deed of Cross Guarantee. On 25 November 2014, Hypoxi North America Pty
Limited executed an Assumption Deed and became a party to the Deed of Cross Guarantee.
On 1 July 2012, a Revocation Deed was executed whereby Ardent Boat Share Pty Limited, Ardent Boat Share Finance Limited, Bowl
Australia Holdings Pty Limited, Bowling Centres Australia Catering Services Pty Limited and Tidebelt Pty Limited were released from the
Deed of Cross Guarantee.
By entering into the deeds, Bowling Centres Australia Pty Limited, Goodlife Operations Pty Limited, Ardent Leisure Health Clubs 1 Pty
Limited, Fenix Holdings Pty Limited and Hypoxi Australia Pty Ltd have been relieved from the requirement to prepare a financial report
and Directors’ report under Class Order 98/1418 (as amended) issued by the Australian Securities and Investments Commission.
(a)
Consolidated Income Statement
ALL, Bowling Centres Australia Pty Limited, Ardent Leisure Health Clubs 1 Pty Limited, Ardent Leisure Health Clubs 2 Pty Limited,
Goodlife Health Clubs Holdings Pty Limited, Goodlife Operations Pty Limited, Hypoxi Australia Pty Ltd and Hypoxi North America Pty
Limited represent a ‘Closed Group’ for the purposes of the Class Order.
Set out below is a consolidated Income Statement for the year ended 30 June 2016 of the Closed Group:
Revenue from operating activities
Purchases of finished goods
Salary and employee benefits
Borrowing costs
Property expenses
Depreciation and amortisation
Advertising and promotions
Repairs and maintenance
Impairment of property, plant and equipment
Other expenses
Pre-opening expenses
Business acquisition costs
Loss before tax benefit
Income tax benefit
Loss from continuing operations
Profit from discontinued operation
Loss for the year
2016
$’000
2015
$’000
423,346
392,790
(31,607)
(171,028)
(5,803)
(124,046)
(22,729)
(15,114)
(20,528)
(158)
(38,878)
(641)
(64)
(7,250)
2,236
(5,014)
625
(4,389)
(28,949)
(161,554)
(8,356)
(117,746)
(18,881)
(15,034)
(17,967)
(1,822)
(36,830)
(916)
(1,938)
(17,203)
4,319
(12,884)
718
(12,166)
(b)
Consolidated Statement of Comprehensive Income
Set out below is a consolidated Statement of Comprehensive Income for the year ended 30 June 2016 of the Closed Group:
Loss for the year
Other comprehensive income for the year
Total comprehensive income for the year
114 Ardent Leisure Group | Annual Report 2016
2016
$’000
(4,389)
-
(4,389)
2015
$’000
(12,166)
-
(12,166)
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
42.
(c)
Deed of Cross Guarantee (continued)
Consolidated Balance Sheet
Set out below is a consolidated Balance Sheet as at 30 June 2016 of the Closed Group:
Current assets
Cash and cash equivalents
Receivables
Inventories
Current tax receivables
Assets classified as held for sale
Other
Total current assets
Non-current assets
Property, plant and equipment
Livestock
Intangible assets
Deferred tax assets
Investment in controlled entities
Total non-current assets
Total assets
Current liabilities
Payables
Provisions
Liabilities directly associated with assets classified as held for sale
Other
Total current liabilities
Non-current liabilities
Payables
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Accumulated losses
Total equity
2016
$’000
3,151
11,138
9,248
996
2,782
9,526
36,841
61,545
221
167,631
6,122
49,730
285,249
322,090
50,197
4,029
3,716
215
58,157
130,423
3,064
133,487
191,644
130,446
167,100
(4)
(36,650)
130,446
2015
$’000
2,844
11,219
8,766
8,279
-
2,084
33,192
55,168
245
169,149
4,298
49,804
278,664
311,856
52,651
3,237
-
1,222
57,110
127,231
4,514
131,745
188,855
123,001
155,262
-
(32,261)
123,001
Ardent Leisure Group | Annual Report 2016 115
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
42.
(d)
Deed of Cross Guarantee (continued)
Consolidated Statement of Changes in Equity
Set out below is a consolidated Statement of Changes in Equity for the year ended 30 June 2016 of the Closed Group:
Total equity at 30 June 2014
Total comprehensive income for the year
Reserve transfers
Dividends paid and payable
Contributions of equity, net of issue costs
Total equity at 30 June 2015
Total comprehensive income for the year
Reserves
Contributions of equity, net of issue costs
Total equity at 30 June 2016
43.
(a)
Parent entity financial information
Summary financial information
Balance Sheet
Current assets
Total assets
Current liabilities
Total liabilities
Equity
Contributed equity
Reserves
(Accumulated losses)/retained profits
Total Equity
Contributed
equity
Accumulated
losses
Reserves
$’000
$’000
$’000
16,309
-
-
-
138,953
155,262
-
-
11,838
167,100
(2,310)
-
2,310
-
-
-
-
(4)
-
(4)
(4,625)
(12,166)
(2,310)
(13,160)
-
(32,261)
(4,389)
-
-
(36,650)
Total
equity
$’000
9,374
(12,166)
-
(13,160)
138,953
123,001
(4,389)
(4)
11,838
130,446
Consolidated
Group
2016
$’000
Consolidated
Group
2015
$’000
ALL Group
2016
$’000
ALL Group
2015
$’000
118,811
617,113
15,728
187,690
10,447
606,122
21,117
195,965
18,206
249,978
21,391
91,542
482,620
(2,545)
(50,652)
449,919
(4,921)
(34,841)
167,100
-
(8,664)
15,152
223,167
27,360
67,538
155,262
-
367
429,423
410,157
158,436
155,629
Profit/(loss) for the year
42,826
34,507
(9,031)
12,487
Total comprehensive income/(loss) for the year
42,269
33,624
(9,031)
12,487
(b)
Guarantees
In June 2013, Ardent Leisure Trust and Ardent Leisure Limited entered into an agreement to guarantee the obligations of Ardent Leisure
US Holding Inc. (a wholly-owned subsidiary of Ardent Leisure Limited) under the terms of the Group’s extended syndicated facility
arrangements as disclosed in Note 24.
Excluding the above and the Deed of Cross Guarantee (refer to Note 42), there are no other material guarantees entered into by Ardent
Leisure Limited and Ardent Leisure Trust in relation to the debts of their subsidiaries.
116 Ardent Leisure Group | Annual Report 2016
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2016
43.
(c)
Parent entity financial information (continued)
Contingent liabilities
Ardent Leisure Trust and Ardent Leisure Limited did not have any contingent liabilities at 30 June 2016 or 30 June 2015.
(d)
Contractual commitments for the acquisition of property, plant and equipment
Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows:
Property, plant and equipment
Payable:
Within one year
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2016
$’000
2015
$’000
2016
$’000
2015
$’000
-
-
-
-
104
104
2,943
2,943
Commitments with respect to the above property, plant and equipment have been incurred by ALL on behalf of the Trust for the
Australian and New Zealand geographic segments totalling $104,000 (2015: $2,943,000). Any commitments relating to the Australian
and New Zealand geographic segments will therefore be subsequently reimbursed by the Trust the month following payment.
44.
Events occurring after reporting date
Subsequent to 30 June 2016, a distribution of 5.5 cents per stapled security has been declared by the Board of Directors. The total
distribution amount of $25.5 million will be paid on or before 31 August 2016 in respect of the half year ended 30 June 2016.
On 19 August 2016, the Group announced that it had entered into a sale agreement to dispose of its entire interests in the health clubs
division for gross proceeds (excluding working capital adjustments and selling costs) of $260.0 million, comprising a cash payment of
$230.0 million and deferred consideration of $30.0 million in the form of vendor loan notes payable no later than two years from
completion. Completion is subject to landlord and other third party approvals and is expected to occur prior to 31 December 2016. The
financial information relating to the health clubs division is set out in Note 37. The Group expects to recognise a profit on disposal.
Since the end of the financial year, the Directors of the Manager and ALL are not aware of any other matters or circumstances not
otherwise dealt with in financial report or the Directors’ report that have significantly affected or may significantly affect the operations
of the Group, the results of those operations or the state of affairs of the Group in financial years subsequent to the year ended 30 June
2015.
Ardent Leisure Group | Annual Report 2016 117
For personal use only
Directors’ declaration to stapled security
holders
Directors’ declaration to stapled security holders
In the opinion of the Directors of Ardent Leisure Management Limited and Ardent Leisure Limited:
(a) The financial statements and notes of Ardent Leisure Trust and its controlled entities, including Ardent Leisure Limited and its
controlled entities (Ardent Leisure Group) and Ardent Leisure Limited and its controlled entities (ALL Group) set out on pages 39
to 117 are in accordance with the Corporations Act 2001, including:
(i)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements; and
(ii) giving a true and fair view of the Ardent Leisure Group’s and ALL Group’s financial position as at 30 June 2016 and of their
performance, as represented by the results of their operations, their changes in equity and their cash flows, for the financial
year ended on that date;
(b) There are reasonable grounds to believe that both the Ardent Leisure Group and ALL Group will be able to pay their debts as and
when they become due and payable;
(c) Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by
International Accounting Standards Board; and
(d) At the date of this declaration, there are reasonable grounds to believe that the members of the Closed Group identified in Note
42 will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the Deed of Cross
Guarantee as described in Note 42.
The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A of the
Corporations Act 2001.
This declaration is made in accordance with a resolution of the Boards of Directors.
Neil Balnaves AO
Chairman
Sydney
23 August 2016
Deborah Thomas
Managing Director
118 Ardent Leisure Group | Annual Report 2016
For personal use only
Independent auditor’s report to the stapled security holders of
Ardent Leisure Group and Ardent Leisure Limited Group
Report on the financial report
We have audited the accompanying financial report which comprises:
• The balance sheet as at 30 June 2016, the statement of comprehensive income, statement of
changes in equity and statement of cash flows for the year ended on that date, a summary of
significant accounting policies, other explanatory notes and the directors’ declaration for
Ardent Leisure Group (the consolidated stapled entity). The consolidated stapled entity, as
described in Note 1 to the financial report, comprises Ardent Leisure Trust (the trust) and the
entities it controlled at year’s end or from time to time during the financial year.
• The balance sheet as at 30 June 2016, the statement of comprehensive income, statement of
changes in equity and statement of cash flows for the year ended on that date, a summary of
significant accounting policies, other explanatory notes and the directors’ declaration for
Ardent Leisure Limited Group (the ALL Group). The ALL Group, comprises Ardent Leisure
Limited (the company or ALL) and the entities it controlled at year’s end or from time to time
during the financial year.
Directors' responsibility for the financial report
The directors of Ardent Leisure Limited and Ardent Leisure Management Limited, the responsible
entity of the Ardent Leisure Trust, (collectively referred to as the “directors”) are responsible for the
preparation of the financial report that gives a true and fair view in accordance with Australian
Accounting Standards and the Corporations Act 2001 and for such internal control as the directors
determine is necessary to enable the preparation of the financial report that is free from material
misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with
Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements
comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the consolidated
entity’s preparation and fair presentation of the financial report in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by the directors, as well
as evaluating the overall presentation of the financial report.
PricewaterhouseCoopers, ABN 52 780 433 757
489 Queen Street, BRISBANE QLD 4000, GPO Box 150, BRISBANE QLD 4001
T: +61 7 3257 5000, F: +61 7 3257 5999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
For personal use only
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001.
Auditor’s opinion
In our opinion:
1.
the financial report of Ardent Leisure Group and Ardent Leisure Limited Group is in accordance
with the Corporations Act 2001, including:
2.
3.
giving a true and fair view of the consolidated stapled entity's and consolidated ALL
Group entity’s financial position as at 30 June 2016 and of its performance for the year
ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations
2001.
4.
the financial report and notes also comply with International Financial Reporting Standards as
disclosed in Note 1.
Report on the Remuneration Report
We have audited the remuneration report included in pages 13 to 33 of the directors’ report for the
year ended 30 June 2016. The directors of the company are responsible for the preparation and
presentation of the remuneration report in accordance with section 300A of the Corporations Act
2001. Our responsibility is to express an opinion on the remuneration report, based on our audit
conducted in accordance with Australian Auditing Standards.
Auditor’s opinion
In our opinion, the remuneration report of Ardent Leisure Group and Ardent Leisure Limited for the
year ended 30 June 2016 complies with section 300A of the Corporations Act 2001.
PricewaterhouseCoopers
Timothy J Allman
Partner
Brisbane
23 August 2016
For personal use only
Investor Analysis
nvestor Analysis
JP Morgan Nominees Australia Limited
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
Citicorp Nominees Pty Limited
RBC Investor Services Australia Pty Limited
BNP Paribas Noms Pty Ltd
BNP Paribas Nominees Pty Ltd
Ragusa Pty Ltd
Citicorp Nominees Pty Limited
Ragusa Pty Ltd
Sandhurst Trustees Ltd
Top 20 Investors as at 23 August 2016
1
2
3
4
5
6
7
8
9
10
11
12 Warbont Nominees Pty Ltd
13
14
15 Mirrabooka Investments Limited
16
17
18
19
20
Balnaves Foundation Pty Ltd
RBC Investor Services Australia Nominees Pty Limited
AMCIL Limited
Ragusa Pty Ltd
Ragusa Pty Ltd
HSBC Custody Nominees (Australia) Limited
Sevanlab Super Pty Ltd
No. of Securities
90,865,234
71,327,391
57,380,479
32,796,541
17,962,783
9,218,443
5,079,208
4,736,716
4,034,177
3,669,855
2,964,237
2,083,395
2,066,243
2,065,192
1,800,000
1,725,000
1,242,383
1,125,101
1,095,908
935,267
314,173,553
148,866,063
%
19.62
15.40
12.39
7.08
3.88
1.99
1.10
1.02
0.87
0.79
0.64
0.45
0.45
0.45
0.39
0.37
0.27
0.24
0.24
0.20
67.85
32.15
463,039,616
100.00
Total
Balance of Register
Grand Total
Range Report as at 23 August 2016
100,001 and Over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
No. of Securities
345,772,321
84,189,991
18,391,949
13,508,266
1,177,089
463,039,616
%
74.67
18.18
3.97
2.92
0.25
100.00
No of Holders
163
3,332
2,410
4,597
2,594
13,096
%
1.24
25.44
18.40
35.10
19.81
100.00
The total number of investors with an unmarketable parcel of 29,145 securities as at 23 August 2016 was 796.
Voting Rights
On a poll, each investor has, in relation to resolutions of the Trust, one vote for each dollar value of their total units held in the
Trust and in relation to resolutions of the Company, one vote for each share held in the Company.
On-Market Buy-back
There is no current on-market buy-back program in place.
Substantial Shareholder Notices Received as at 23 August 2016
JCP Investment Partners Ltd
FIL Ltd
Ausbil Investment Management Limited
BT Investment Management Limited
Stapling Disclosure
No. of Securities
34,248,959
40,478,296
37,280,709
22,815,453
%
7.40%
9.15%
8.05%
5.63%
The ASX reserves the right (but without limiting its absolute discretion) to remove the Company or the Trust or both from the
official list if any of the shares and the units cease to be “stapled” together or any equity securities issued by the Company or
Trust which are not stapled to equivalent securities in the other entity.
Ardent Leisure Group | Annual Report 2016 121
For personal use only
Website
www.linkmarketservices.com.au
Email
registrars@linkmarketservices.com.au
All other enquiries relating to your Ardent Leisure Group
investment or complaints can be directed to:
Ardent Leisure Group
Level 16, 61 Lavender Street
Milsons Point NSW 2061
Telephone
1800 ARDENT (within Australia)
+61 2 9409 3670 (outside Australia)
Facsimile
+61 2 9409 3679
Email
investor.relations@ardentleisure.com
External dispute resolution
In the event that a complaint cannot be resolved within a
reasonable period of time (usually 45 days) or you are not
satisfied with our response, you can seek assistance from
Financial Ombudsman Service Limited (FOS). FOS provides a
free and independent dispute resolution service to our
investors. FOS’s contact details are below:
Financial Ombudsman Service Limited
GPO Box 3
Melbourne VIC 3001
Email
info@fos.org.au
Telephone
1800 367 287 (within Australia)
Facsimile
+61 3 9613 6399
Investor Relations
Investor Relations
Corporate Governance Statement
In accordance with the ASX Listing Rules, the Group’s
Corporate Governance Statement dated 30 June 2016 is
published and located in the Corporate Governance page of
the Group’s website
(http://www.ardentleisure.com.au/Company/Corporate-
Governance.aspx). A copy has also been provided to the ASX.
Investor benefits program
The investor benefits program aims to provide investors with
an opportunity to experience and enjoy Ardent Leisure
assets. Investors with a minimum of 2,000 stapled securities
are entitled to discounts and incentives to allow investors
and their families to engage with and enjoy the various
leisure activities offered by the Group. For more details on the
current benefits offered under the program and how to
participate, please visit the
Investor Centre page at
www.ardentleisure.com. Note that the investor benefits
offerings are subject to change and the program terms and
conditions.
The investor benefits program does not have a material
impact on the income of the Group.
Distribution payments and annual taxation statement
Distributions are currently payable twice a year and received
by investors approximately seven to eight weeks after each
half year end. To view your 2015/16 annual taxation
statement online, please visit the Link Investor Service Centre
at www.linkmarketservices.com.au
Distribution Reinvestment Plan (DRP)
The DRP price for the half year ended 30 June 2016 was
$1.9292 per stapled security. Please note that the terms and
conditions of the DRP may vary from time to time. Details of
any changes (and whether the DRP continues to operate or is
suspended) will be announced to the ASX.
Contact details
Security registry
To access information on your holding or to update/change
your details, contact:
Link Market Services Limited
Locked Bag A14
Sydney South NSW 1235
Telephone
1300 720 560 (within Australia)
+61 1300 720 560 (outside Australia)
Facsimile
+61 2 9287 0303
122 Ardent Leisure Group | Annual Report 2016
For personal use only
ASX code
AAD
Custodian
Perpetual
Level 13, 123 Pitt Street
Sydney NSW 2000
Auditor of the Group
PricewaterhouseCoopers
Riverside Centre
123 Eagle Street
Brisbane QLD 4000
Corporate Directory
Manager
Ardent Leisure Management Limited
ABN 36 079 630 676
AFSL No. 247010
Company
Ardent Leisure Limited
ABN 22 104 529 106
Registered office
Level 16, 61 Lavender Street
Milsons Point NSW 2061
Directors
Neil Balnaves AO (Chairman)
Roger Davis
David Haslingden
Don Morris AO
Deborah Thomas
George Venardos
Melanie Willis
Managing Director and Chief Executive Officer
Deborah Thomas
Chief Financial Officer
Richard Johnson
Company Secretary
Alan Shedden
Telephone
1800 ARDENT (within Australia)
+61 2 9409 3670 (outside Australia)
Facsimile
(02) 9409 3679 (within Australia)
+61 2 9409 3679 (outside Australia)
Email
investor.relations@ardentleisure.com
Website
www.ardentleisure.com
Ardent Leisure Group | Annual Report 2016 123
For personal use only
For personal use only For personal use only For personal use only For personal use only For personal use only For personal use only For personal use only For personal use only For personal use only For personal use only For personal use only Corporate Governance Statement
This statement has been approved by the Boards of Directors of Ardent Leisure Management Limited and
Ardent Leisure Limited and prepared as at 30 June 2016.
Principle 1 – Lay solid foundations for management and oversight
Board Charter
The Directors of the Group have adopted a Board Charter that sets out the respective roles and
responsibilities of the Board and senior management. The primary role of the Board is to promote the
long term health and prosperity of the Group and to build sustainable value for investors.
Specifically, the Board is responsible for:
Setting objectives, goals and strategic direction;
Approving and monitoring progress of major capital expenditure, capital management,
acquisitions and divestments;
Monitoring financial performance and reporting;
Oversight and approval of accounting, risk management and compliance control systems;
Monitoring the performance of management;
Appointing and removing the Chief Executive Officer (and other Key Management Personnel as
decided from time to time);
Approving the remuneration framework for Directors and the Group’s Key Management
Personnel;
Monitoring compliance with legal obligations and ethical and responsible behaviour; and
Ensuring effective communications with investors and other stakeholders.
The Board Charter also sets out the responsibilities of the Chair and a comprehensive list of matters that
are reserved for the Board of Directors of both the Company and the Manager. In accordance with the
list of matters reserved for the Board, the Board is responsible for:
The strategic plan and annual operating and capital expenditure budgets;
Treasury policies and risk management strategy;
Establishment, acquisition, cessation or disposal of any division or business unit;
Approval of financial statements and any significant changes to accounting policies;
Approval of Dividend / distributions payments;
Appointment and removal of auditors;
Appointment and removal of any of the Chief Executive Officer, the Key Management Personnel
or the Company Secretary;
Committee charters and composition;
Amendments to discretions delegated by the Board;
Key policies including Workplace Health and Safety, Environmental and Sustainability policies;
Changes to the Group’s capital structure including the issue of shares, options, equity
instruments or other securities;
Key public statements which relate to significant issues concerning changes to key strategy or
Group policy; and
Page 1 of 19
For personal use only
Corporate Governance Statement
30 June 2016
Terms and conditions of the appointment of Directors and the Chief Executive Officer, and
employee equity plans and their allocation.
The Board Charter also sets out key delegations of authority in relation to equity investments, assets
acquisition and disposal, external credit limits, bonds, guarantees and other contingent liabilities.
Directors’ Information
Investors are provided with all material information which the Company has about the Director, in an
explanatory memorandum to the Notice of Meeting, at which the Director will stand for election or re‐
election, to enable them to make an informed decision on whether or not to elect or re‐elect the
candidate. Such information includes their relevant qualifications and experience, details of any offices
they currently hold and any other material former directorships they held, when the Director was first
appointed and, if any, details of the roles they hold in any of the Board’s standing committees.
Agreements with Directors and Key Management Personnel
Each Director enters into a number of agreements with the Company to provide them with a clear
understanding of their roles and responsibilities and of the entity’s expectations of them. These
comprise:
the Terms and Conditions of their appointment, the time commitment and any involvement with
committee work and any other special duties expected of their position, their remuneration
entitlements, the various corporate policies with which they are expected to comply, and the
conditions of termination;
a disclosure agreement which obligates them to disclose any relevant and material interests and
any matters which may affect their independence; and
a Deed of Access and Indemnity which sets out the indemnity and insurance arrangements, and
ongoing rights of access to corporate information.
Each of the Key Management Personnel enters into a Service Agreement which sets out their position
remuneration entitlements, ongoing
description, duties and
confidentiality, obligation to comply with all corporate policies, the circumstances in which their service
may be terminated (with or without notice) and any entitlements on termination.
responsibilities,
reporting
lines,
Details on the remuneration of Directors and Key Management Personnel are set out in the Directors’
Report contained within the Annual Financial Report for the year ended 30 June 2016.
Company Secretary
In accordance with the Board Charter, the Company Secretary is appointed and if necessary removed by
the Board and is therefore accountable directly to the board on all matters to do with the proper
functioning of the Board. Each Director also has direct access to the Company Secretary.
The Company Secretary’s role includes:
advising the Board and its committees on governance matters;
monitoring that board and committee policy and procedures are followed;
ensuring that the business at Board and committee meetings is accurately captured in the
coordinating the timely completion and despatch of Board and committee papers;
minutes; and
helping to organise and facilitate the induction and professional development of Directors.
For personal use only
Corporate Governance Statement
30 June 2016
Diversity Policy
On 16 December 2010, the Board adopted a Diversity Policy that aims to promote diversity across the
Group through a number of initiatives.
Any attempt to change the current status quo is unlikely to drive short term results or change and it was
proposed that the Group adopt a long term approach that focuses on increasing diversity at junior levels
and addressing the various reasons that hinder female promotion and involvement at executive levels.
Following the release of new reporting guidelines under the Workplace Gender Equity Act 2012, the
Group has adopted revised analytics and has segmented our leadership diversity reporting in line with
reporting standards and industry best practice. The definition of Managers used in the table below
includes Senior Executives, Senior Managers and Managers as recommended under the reporting
guidelines.
Board of Directors
All Managers
All Employees
2015
2016
Female
20%
43%
68%
Male
80%
57%
32%
Female
28%
36%
67%
Male
72%
64%
33%
The table above shows the female participation rates across the Group for the past two years.
The Group supports a number of initiatives aimed at increasing female participation and has adopted
policies on flexible working arrangements and paid maternity leave.
Gender Pay Comparison
Following the provision of data to the Workplace Gender Equality Agency and the release of the
Australian National Gender Pay Gap, the Group received a report that benchmarks it against other
relevant industry data. The statistics indicate that the Group, across all levels of business, has a gender
pay gap of 1.1% on base salary. The gender pay gap across comparable industries is 12.9% and the
national average is 17.9%
Director, Board and Committee Evaluation
The Board Charter requires that each Director will participate in an annual performance evaluation which
will be reviewed by the Chair. The process for conducting Board and Director evaluations is similar to
that adopted for the review of the Chief Executive Officer and is conducted in a confidential manner by
the Chair of the Board. The evaluations include areas such as role of the Board, composition, meeting
conduct, behaviours and competencies, governance and risk, ethics and stakeholder relations.
Each committee charter adopted by the Board includes a requirement for an annual self‐assessment by
the committee of its performance and charter. These evaluations are conducted against the existing
charter and prevailing developments in the corporate governance arena.
Key Management Personnel Performance Evaluation
In accordance with the Board Charter the Directors have undertaken to formally evaluate the
performance of the Chief Executive Officer and other Key Management Personnel on an annual basis.
The purpose of the evaluation of the Chief Executive Officer and other Key Management Personnel is to
provide the following key benefits:
Assist the Board in meeting its duty to stakeholders in effectively leading the Group;
For personal use only
Corporate Governance Statement
30 June 2016
Ensure the continued development of the Chief Executive Officer and other Key Management
Personnel to more effectively conduct their role;
Ensures a formal and documented evaluation process; and
Leaves a record of the Board's impression of the performance of the Chief Executive Officer and
other Key Management Personnel.
The process adopted by the Board to assess the performance of the Chief Executive Officer and other Key
Management Personnel is as follows:
Each Board member is requested to complete an evaluation table and provide numerical ranking
against the criteria for the Chief Executive Officer’s and other Key Management Personnel’s
performance during the evaluation period;
Participants are encouraged to provide commentary;
The evaluation tables are then provided directly to the Chair of the Board and upon review the
Chair may decide to provide an average ranking for each category; and
Once final rankings are collated the Chair of the Board sits to discuss the findings with the Chief
Executive Officer and agrees any specific action points to be addressed.
Principle 2 – Structure the board to add value
Nomination Committee
The Directors have established a combined Remuneration and Nomination Committee due to the
relatively infrequent need to call upon the services of the previous Nomination Committee. The charter
for the combined Remuneration & Nomination Committee remains broadly similar and includes the
review process for the Board and its committees and also the time commitment for non‐executive
directors.
The combined Remuneration and Nomination Committee consists of a minimum of three members with
the majority of members required to be independent directors. The Remuneration and Nomination
Committee is specifically responsible for making recommendations to the Board in relation to the
identification, assessment and enhancement of the competencies of Board members, Board and
management succession plans including the appointment of suitably qualified candidates to the Board
and the appointment of the Chief Executive Officer, the development of a process for the review of the
performance of the Board, Board Committees and individual directors and the assessment of the time
required to fulfil the obligations of a non‐executive director and whether directors are able to meet these
expectations.
Selection Process
In order to provide a formal and transparent procedure whereby new appointments to the Board are
selected the Remuneration and Nomination Committee has adopted a director selection process to be
used once the Board has decided to appoint or replace a Director.
Process
Identify the vacant position.
Identify the core competencies of the position.
Identify a preferred candidate background (taking into account the diversity of the Board).
Appoint a search firm if necessary to ensure an appropriate selection of candidates.
If a search firm is appointed, draft and deliver a brief to the search firm explaining the following:
o Vacant Position;
o Competencies Required;
For personal use only
Corporate Governance Statement
30 June 2016
o Preferred Background;
o Essential Qualifications (if any); and
o Countries in which to extend the search.
Candidates are to be interviewed and a shortlist prepared.
Select preferred candidates from the shortlist provided
management.
in consultation with executive
Agree a preferred candidate for recommendation to the Board of Directors.
Board Skills and Competencies
In conjunction with an independent advisor the Board has undertaken a review of core competencies
that should be present across the Board of Directors. Board members should have a working knowledge
of finance and accounting, corporate regulation and business strategic theory. The Board aims to gather
a breadth of different experience on the Board.
The Directors believe that diversity is critical to the effective functioning of the Board. To this end the
Board strives to ensure that Directors should not all be from one occupational group or even from the
same industrial sector the Group operates in.
The Board has undertaken a review of the key skills and competencies of the Board to ensure appropriate
oversight of the Group’s current operations and strategy for future growth.
The Board comprises a broad and diverse range of skills and understanding gained by Directors from their
decades of experience in the general commercial, leisure and entertainment sectors. This expertise is
supported by appropriate accounting, banking & finance, property and advertising skills.
Director Independence
The Board recognises that independent directors are important in assuring investors that the Board is
properly fulfilling its role and is diligent in holding management accountable for its performance.
A majority of the Board are independent Directors with the only executive Director appointed currently
the Chief Executive Officer. The independence of the Directors is assessed annually taking into account
such matters as tenure, contractual interests, significant security holdings, relationships with key
advisers, suppliers and customers and any prior executive employment within the Group.
The Board has assessed the independence of each Director and concluded that none of the Directors has
any material interest in securities, contracts or has relevant relationships with material advisers or
suppliers / customers. The Board acknowledges that materiality thresholds will differ for each Director
and for the Group as a whole. Accordingly, for the purposes of the independence assessment the Board
has adopted a materiality threshold of 1% of the Group’s last reported net assets.
Notwithstanding, that Neil Balnaves has served on the Board for periods in excess of 10 years, the Board
considers that this period of long tenure has not impacted on Mr Balnaves’ ability to remain objective in
his judgment and independent of management.
As at 30 June 2016, Directors deemed to be independent were: Neil Balnaves AO, Roger Davis, David
Haslingden, Don Morris AO George Venardos, and Melanie Willis.
Details of the tenure, current position and previous offices held by each Director which are relevant to
the assessment of their independence are disclosed in their respective profiles, along with their interests
in securities, and set out in the Annual Financial Report for the year ended 30 June 2016.
For personal use only
Corporate Governance Statement
30 June 2016
Board Composition
The Directors of the Group have set out in the Board Charter the required composition of the Board
subject to any requirements under the constitutions of the Company and the Manager:
Independent directors should comprise a majority of the Board;
Directors appointed to the Board should provide an appropriate range of qualifications and
expertise; and
In the event that the Chair ceases to be deemed independent then a lead independent Director
should be appointed by the Board.
The Chair of the Board is an independent director and does not occupy a joint position as Chief Executive
Officer.
Induction
Upon appointment each new Director participates in an induction programme. This includes
presentations from senior management and site visits to gain an understanding of the Group’s
operations. In addition to annual asset tours undertaken by the Board site visits are also arranged on an
ad‐hoc basis and as part of the programme of committee meetings.
Training
Directors are required to keep themselves adequately informed in respect of relevant industry and
regulatory issues and changes.
In order to assist Directors, each Director may participate in internal training sessions and conferences
organised from time to time in respect of relevant industry and regulatory issues and may attend asset
tours that are arranged from time to time.
Additional training requirements may be arranged by the Company Secretary with the Chair’s approval.
Principle 3 – Promote ethical and responsible decision‐making
Ethical Conduct
The Board has adopted a suite of policies designed to govern employee’s behaviour whilst employed by
the Group and ensure that ethical business practises are adopted in the procurement process. All
employees are required to acknowledge that they understand and will comply with the Employee Ethical
& Confidentiality Policy.
Media Relations
Employees are prohibited from communicating with or disclosing to any representative of the media any
information of any nature whatsoever relating to the Group, its clients or customers. Only the Chair,
Board of Directors, Chief Executive Officer and Chief Financial Officer are authorised to speak to the
media on Group issues. Exceptions to this rule must have the prior approval of the Chief Executive
Officer. Notwithstanding the general prohibition, the respective Chief Executives of each of the business
divisions are authorised to speak to the media on issues specific to their area of business.
Intellectual Property
All intellectual property created during an employee’s employment with the Group is and remains the
property of the Group.
For personal use only
Corporate Governance Statement
30 June 2016
Confidentiality
All Group related information acquired by Directors during their appointment is confidential to the Group
and should not be released, either during the term of the Directors’ appointment or following their
termination without prior approval of the Board.
Employees are required to keep secret during and after their employment all information obtained about
the business and affairs of the Group, its clients or customers, except as required by law. All documents
or written material provided to the employee or used in connection with the Group’s business is the
property of the Group and must not be removed, passed on, copied or disclosed to third parties except
with the Group's authority.
Conflicts of Interest
Directors should not have any business or other relationship that could materially influence or interfere
with the exercise of their independent judgement apart from those declared to the Board under the
Corporations Act 2001, ASX Listing Rules and other general law requirements.
Directors with a material personal interest in a matter must not be present at a Board meeting during the
consideration of the matter and subsequent vote unless the Board (excluding the relevant Board
member) resolves otherwise. Directors with a conflict not involving a material personal interest may be
required to absent themselves from the relevant deliberations of the Board.
Personal Gain
Employees must not misuse their position with the Group or any information received in the course of
their employment to produce a personal benefit for themselves, their family, friends or any other person,
or to cause a detriment to the Group. In the event of any conflict of interest this must be disclosed to the
Group.
Employees are prohibited from soliciting or accepting any gift or benefit which induces or influences the
Group to enter a transaction, business opportunity or business dealing, or which might reasonably be
perceived as such an inducement or influence.
Ethical Business Practices
All employees and Group suppliers must adopt the following standards:
Suppliers should adhere to applicable laws and regulations that govern them.
Employment should be freely chosen; there should be no forced, bonded or involuntary prison
labour, employees should not be required to lodge 'deposits' or identity papers with their
employer and should be free to leave their employer after reasonable notice.
Employees should have freedom of association and the right to collective bargaining within the
framework of applicable laws.
Working conditions should be safe and healthy; applicable Occupational, Health & Safety laws &
regulations must be complied with.
Child labour should be eliminated and suppliers should conform to provisions of International
Labour Organization Convention 138 and be consistent with United Nations Convention on
Rights of the Child.
Living wages should be paid and they must meet or exceed national standards. Wages must not
be paid in kind and employees should be provided with written and understandable information
about their employment conditions.
For personal use only
Corporate Governance Statement
30 June 2016
Working hours should not be excessive and should comply with national laws and national
benchmark industry standards.
Discrimination based on race, caste, national origin, religion, age, disability, gender, marital
status, sexual orientation, union membership or political affiliation is prohibited.
Regular employment should be provided and work performed must be on the basis of recognised
employment relationship established through national law and practice.
Harsh or inhumane treatment of employees is prohibited.
The Group seeks to collaborate with suppliers in pursuit of these standards and attempts to guide
relationships by the principle of continuous improvement. Similar ethical trading standards will be
considered acceptable as a reasonable alternative where suppliers are already working towards this
initiative.
The Group promotes a risk based approach to implement these standards by focusing attention on those
parts of the supply chain where risk of not meeting these standards is highest. This is supported by the
provision of appropriate training and guidelines to implement these standards. Suppliers are advised
that implementation of these standards may be assessed by the Group or through independent
verification.
Suppliers are required to use reasonable endeavours to provide workers covered by these standards with
a confidential means to report to the suppliers' failure to observe these standards. It is expected that all
suppliers will comply with the standards and the Group reserves the right not to do business with
suppliers where it can be demonstrated that significant violations exists. In particular, the Group and/or
its separate businesses will not bring suppliers onto its supplier list if there is evidence of under‐age
workers; forced, bonded or involuntary prison labour, or where the supplier's workers are found to be
subjected to potential life threatening working conditions or harsh or inhumane treatment.
Whistle‐Blowing
The purpose of the Whistle‐Blowing Policy is to establish an internal reporting system for the reporting of
disclosures of corrupt conduct, illegality or substantial waste of company assets by the Group or its
employees.
Protected Disclosures
The Whistle‐Blowing Policy clearly defines what disclosures are protected and these included such
disclosures that are made in accordance with the process outlined in the policy, that Identify or attempt
to identify corrupt conduct, illegality, or serious and substantial waste of company assets by the Group or
its employees and that are made voluntarily by an employee of the Group.
Frivolous disclosures or those made solely with the motive of avoiding dismissal or other disciplinary
action are not covered by the Whistle‐Blowing Policy. The making of a false or misleading statement
when making a disclosure under the Whistle‐Blowing Policy constitutes gross misconduct.
Making a Disclosure
Under the Whistle‐Blowing Policy, disclosures are made to a nominated officer. This can be done in
person, by email or via the Group’s third party independent ethics hotline. Disclosures can be made
either inside or outside normal working hours and locations.
Group employees are encouraged to report known or suspected incidences of corrupt conduct, illegality
or substantial waste in accordance with the Whistle‐Blowing Policy. All Group employees must abstain
from any activity that is or could be perceived to be victimisation or harassment of persons who make
For personal use only
Corporate Governance Statement
30 June 2016
disclosures. The confidentiality of persons they know or suspect to have made disclosures should be
maintained.
The nominated officer is responsible for receiving, forwarding and acting upon disclosures and must take
all necessary and reasonable steps to ensure that the identities of persons who make disclosures, and the
subjects of disclosures, are kept confidential. The nominated officer is also responsible for supporting
persons who make disclosures and protecting them from victimisation, harassment or any other form of
reprisal.
External Disclosures
Disclosures to persons or bodies external to the Group will only be protected under the Whistle‐Blowing
Policy if the person making the external disclosure has already made the same disclosure through the
internal reporting system, the employee has reasonable grounds for believing that the disclosure is
substantially true, the disclosure itself must be substantially true and the nominated officer has decided
not to investigate the matter, has not completed the investigation within six months of the original
disclosure or has not recommended any action in respect of the matter.
Liability on Disclosure
The Whistle‐Blowing Policy provides that a person is not subject to any liability for making a protected
disclosure and no action, claim or demand may be taken or made of or against the person for making the
disclosure. A person who has made a protected disclosure under the Whistle‐Blowing Policy is taken not
to have committed any offence against any legislation which imposes a duty to maintain confidentiality
with respect to any information disclosed.
Action Taken
A person who makes a disclosure under the Whistle‐Blowing Policy must be notified, within six months of
the disclosure being made, of the action taken or proposed to be taken in respect of the disclosure.
Fraud
The Group operates a Fraud Policy designed to prevent, deter, detect and investigate all forms of
fraud. For the purposes of the Fraud Policy, “fraud” is defined as the intentional distortion of financial
statements or other records by persons internal or external to the organisation which is carried out to
conceal the misappropriation of assets or otherwise for gain.
The Group has adopted a "zero tolerance" towards fraud and requires that all reported incidents,
including internal fraud, will be thoroughly investigated with utmost confidentiality. Necessary action will
be taken against any individual or group who have committed fraud and may involve disciplinary action
resulting in dismissal from employment, and civil and/or criminal legal proceedings. Critical business
procedures and controls are directed to maintain an effective fraud control environment to assist in fraud
prevention and detection.
Any employee who suspects a fraudulent activity must notify the business Chief Executive or alternatively
email details to a private email address set up exclusively for this purpose.
Securities Trading Policy
The purpose of the Securities Trading Policy is to regulate trading by all Directors and employees of the
Group in any securities issued or nominated by the Group. This also applies to financial products issued
or created over such securities (including but not limited to warrants, options and derivatives), entering
For personal use only
Corporate Governance Statement
30 June 2016
into financing arrangements over financial products including establishment of a margin loan over such
securities.
This Securities Trading Policy also applies to trading by Directors’ and employees’:
Spouses;
Children under the age of 18 years;
Dependent children living in the family home;
Companies which they or their family control.
Trusts under which they or a member of their family are a trustee or beneficiary; and
General Prohibition (Insider Trading)
At all times Directors and employees are prohibited from trading in securities while in possession of
unpublished price sensitive information. Price sensitive information is information which is not generally
available and which a reasonable person would expect that if the information were disclosed it would
have a material effect on the price of Group securities and it would therefore influence investors in
deciding whether or not to buy, hold or sell securities issued by the Group.
This prohibition applies even during periods when trading windows are permitted under this policy if a
person is in possession of price sensitive information. In addition to not being able to deal, the person in
possession of the price sensitive information has an obligation to keep that information confidential and
must not communicate it to another person unless it is information, which is required to be brought to
the attention of the Company Secretary.
Specific Prohibition
All Directors and Nominated Employees are bound as a condition of their employment to comply with
and observe the Securities Trading Policy.
Trading Windows
Provided Directors and Nominated Employees are not in possession of unpublished price sensitive
information and have received written consent from the Company Secretary, or in the case of Group
Directors and the Group’s Key Management Personnel, the Chair, are permitted to trade in securities in
defined trading windows.
In order to ensure all Nominated Employees are aware of their obligations the Company Secretary issues
an open reminder and a close reminder to all Nominated Employees. In addition, the Group publishes
key reporting dates on the Group’s website.
The Group may in its discretion vary trading windows by general announcement.
Black Out Periods
All periods outside of the trading windows are blackout periods in relation to security trading by Directors
and Nominated Employees.
The Group may in its discretion nominate additional blackout periods by general announcement. These
may be required where additional disclosure documents are released offering securities or as a result of
certain disclosures being lodged with a stock exchange, e.g. the Australian Stock Exchange.
For personal use only
Corporate Governance Statement
30 June 2016
Discretion is vested in the Company Secretary to allow exemptions to trading during blackout periods in
special circumstances only, where no price sensitive information is on hand and application of the Policy
would cause undue financial hardship.
No Short Term Trading
The Board encourages employees to invest in the Group and discourages short term trading. Under the
terms of the Securities Trading Policy Nominated Employees must not deal in securities for short term
gain. Speculating in short term fluctuations in such securities does not promote investor and market
confidence in the integrity of the Group. Accordingly, trading in securities issued by Group entities within
6 months of an acquisition is prohibited. The Group may in its discretion vary this rule in relation to a
particular period by general announcement.
The Securities Trading Policy does not prevent Directors and employees from passive trading such as
participating in a share plan or public offer made by the Group, provided that at the time the individual
elects to participate, he or she is not in possession of any price sensitive information. Further, the
individual may not subsequently vary that election until such time as they are again not in possession of
such information.
The Securities Trading Policy also prohibits any hedging of unvested security based incentives by
Directors and Nominated Employees.
Directors or Nominated Employees wishing to trade in securities must request prior approval to trade.
Directors and the Group’s Key Management Personnel must seek prior approval from the Chair while all
other employees must contact the Company Secretary.
Principle 4 – Safeguard integrity in financial reporting
Audit & Risk Committee
The Board has established an Audit & Risk Committee (the “Committee”) consisting of a minimum of
three members with the majority of members required to be independent directors. All members must
be able to read and understand financial statements, and at least one member must have financial
expertise, that is the person must be either a qualified accountant or other financial professional with
experience of financial accounting matters.
The Chief Executive Officer and the Chief Financial Officer are not members of the Audit and Risk
Committee. They may be invited to attend meetings of the Audit and Risk Committee for reasons of
efficiency but are not entitled to vote.
The Chair of the Committee will be a non‐executive independent director appointed by the Board who is
not the Chair of the Board.
Any Director may attend a meeting of the Committee at any time. The Committee will meet at least
twice per annum and more often if deemed necessary. Meetings may be held by electronic means as
allowed under the provisions of the Corporations Act 2001.
The Committee is established by the Board of Directors to review, evaluate and make recommendations
to the Board in relation to:
Risk and Internal Control Environment
Evaluating and monitoring the overall effectiveness of the Group’s risk management, internal
control and compliance systems;
For personal use only
Corporate Governance Statement
30 June 2016
Evaluating the current “control culture” of the Company and the underlying consistency,
direction and communication to employees of appropriate risk policies therein;
Reviewing existing disaster recovery plans;
Identifying key risks within the organisation and building appropriate risk management controls
and policies to minimize the impact and likelihood of same; and
Ensuring adequate resources are allocated to assist management and the Board in implementing
an appropriate internal risk culture and discipline;
Evaluating and monitoring the Group’s fraud management policies and exposures; and
Reviewing the entity’s insurance program, having regard to the entity’s business and the
insurable risks associated with its business.
Financial Reporting
Approving and monitoring policies, procedures and content of the Group’s statutory and
management reporting;
Considering the appropriateness of the Group’s accounting policies and principles and how those
principles are applied;
Reviewing and assessing existing management processes so as to ensure compliance with
applicable laws, regulations and accounting standards;
Ensuring that significant adjustments, unadjusted differences, disagreements with management
and critical accounting policies are discussed in advance with the external auditor;
Reviewing the underlying quality and accuracy of the financial reports from the internal and
external auditors and making recommendation to the Board on their approval or amendment;
Evaluating the adequacy and effectiveness of the Company’s administrative, operating and
accounting policies through communication with management, internal auditors and external
auditors;
Ensuring the effective facilitation of the audit process;
Evaluating and monitoring the adequacy of the Group’s management and operational reporting;
Reviewing and evaluating appropriate disclosures from management, the internal auditors and
external auditors on any significant proposed regulatory, accounting or reporting issue, to assess
the potential impact upon the Group’s financial reporting process; and
Serving as an independent and objective party to review the financial information presented by
management to shareholders, analysts and the general public.
Internal Audit
Making recommendations to the Board on the appointment, and where necessary the removal
of the internal auditor;
Reviewing the role, function and performance of the internal auditor, and management’s
response to the internal auditor’s recommendations;
Appraising the scope and quality of the audits conducted by the Group’s internal auditor to
ensure the widest coverage possible;
Reviewing the findings of the internal audit program and management’s response to the internal
auditor’s recommendations; and
Reviewing the resources of the internal audit function and ensuring no unjustified restrictions or
limitations are imposed.
External Audit
Making recommendations to the Board on the appointment and where necessary the removal of
the external auditor;
Reviewing annually the external auditor’s procedures for independence together with any
relationships or services, which may impair the external auditor’s independence, and the
rotation of the audit partner;
Reviewing the fees and terms of engagement of the external auditor, including the scope and
For personal use only
Corporate Governance Statement
30 June 2016
adequacy of the proposed audit program;
Appraising the scope and quality of the audits conducted by the external auditor to ensure the
widest coverage possible;
Ensuring there is appropriate communication and co‐ordination between the internal and
external auditors on risks, risks policies and audit results;
Reviewing all financial reports and management representation letters and recommending them
to the Board as complete and appropriate; and
Reviewing annually the performance of the external auditor and based on the results of the
annual assessment of the external audit services, determine whether the external audit services
should be re‐tendered.
Compliance
Monitoring the Company’s various disclosure obligations;
Approving of the Group’s compliance framework and assessing the effectiveness of the
framework; and
Based on the information provided by Management in relation to the Group’s compliance
framework, ensuring that a proper process is in place for continuous reporting to the ASX.
Right to Obtain Information
The Committee is entitled to consult with expert advisers and seek expert advice where it considers it
necessary to carry out its duties at the expense of the Group.
The Committee will have a right of access to internal and external auditors and senior management. The
Committee will also meet separately with the internal and external auditors at least annually or as
otherwise required.
Chief Executive Officer and Chief Financial Officer Declarations
The Board has received confirmation from both the Chief Executive Officer and Chief Financial Officer
that their declarations for both the interim and full year financial reporting periods made in accordance
with section 295A of the Corporations Act 2001, were based upon sound system of risk management and
internal control and further that the system is operating effectively in all material respects in relation to
financial reporting risk.
External Auditors
The external auditor is requested by the Board to attend each AGM to answer questions about the
conduct of the audit and the preparation and contents of the Auditors Report.
Principle 5 – Make timely and balanced disclosure
Continuous Disclosure Policy
In order to regulate the continuous disclosure regime across the Group in relation to any securities issued
by the Group the Board has adopted a Continuous Disclosure Policy.
The Continuous Disclosure Policy aims to ensure that the Group complies with the continuous disclosure
requirements contained in the Corporations Act 2001 (the Act) and the Australian Stock Exchange (ASX)
Listing Rules (the Rules). The successful operation of the Group’s continuous disclosure regime promotes
investor confidence by providing full and timely information to the market about the activities of the
Group and serves to educate all relevant Group personnel on what continuous disclosure is, and how
they can ensure they meet their individual responsibilities.
For personal use only
Corporate Governance Statement
30 June 2016
Commitment to Continuous Disclosure
Subject to the exceptions contained in the Listing Rules, the Group will immediately notify the market of
any information or matter related to the businesses or financial condition of the Group which a
reasonable person would expect to have a material effect on the price or value of those securities. Such
notifications will be made by way of an announcement to the ASX.
Reporting of Disclosable Information
Directors and employees must ensure that any information which may require disclosure is reported to
the Company Secretary or his/her nominee as soon as it is known. The Company Secretary will then
determine whether any item of information is to be disclosed to ASX. Where the Company Secretary
decides that information reported does not warrant an ASX release and the Director or employee who
reported the information disagrees with that decision, they may choose to refer the matter to the Chief
Executive Officer.
ASX Announcement Approval
If the Company Secretary determines that an item of information is to be disclosed to the ASX then the
draft of the ASX announcement must be approved either verbally or in writing, by the Chief Executive
Officer prior to release. ASX announcements deemed to contain price sensitive information must be
circulated to the Board of Directors for comment prior to release.
Release of Information
Price sensitive information must not be released externally until it has first been lodged with the ASX and
the ASX has acknowledged that the information has been released to the market. That is, selective
disclosure of such information cannot be made to brokers, analysts, the media, professional bodies or
any other person until the information has been given to (and released by) the ASX. This includes
information that is subject to embargo as the ASX does not accept embargoed information.
In the event that at an analyst or media briefing an inadvertent disclosure is made which is price sensitive
then that information must be immediately made available to the market through the ASX.
Analyst and Media Briefings
All material to be presented at an analyst briefing must be approved by or referred through the Company
Secretary prior to the briefing.
Trading Halts
The Company Secretary may, with the approval of the Chair and the Chief Executive Officer, or failing
whom, the Chief Executive Officer and any other Non‐Executive Director, or failing whom any two Non‐
Executive Directors, request the ASX to halt trading in the securities.
Training and Development
The Continuous Disclosure Policy requires that relevant employees undergo training with respect to
disclosure requirements.
For personal use only
Corporate Governance Statement
30 June 2016
Board Procedures
The Board of Directors must consider and minute at each full Board meeting whether there are any
matters requiring disclosure. If no matters require disclosure this must also be explicitly included in the
minutes.
Media Releases
Releases, interviews and other communications to the media may be undertaken so long as they do not
contain or refer to price sensitive transactions and do not fall within the Group’s materiality thresholds.
Any discussions or presentation to third parties should only be undertaken post release to the ASX of the
subject matter if they include material information.
Website
All releases whether material or not are required to be posted to the Group website for access by
investors and other interested parties.
Principle 6 – Respect the rights of shareholders
Corporate Governance
The Group’s website at www.ardentleisure.com has a corporate governance section on its website from
where all relevant corporate governance information can be accessed, including the details on the Board
of Directors, Management Team, the Company and Trust Constitutions, Board and Committee Charters
and various corporate governance policies.
Investor Communications
The Group has adopted a specific investor communications policy for investors and believes that a
flexible approach to investor communications and early adoption of emerging technology is the most
effective manner of increasing investor participation in the business of the Group.
Throughout the year, the Group follows a calendar of regular disclosures to the market on its financial
and operational results. An indicative calendar of events is made available to investors on the Group’s
website.
In accordance with the Group’s Continuous Disclosure Policy, the Group must ensure it does not
communicate inside information to an external party except where that information has previously been
disclosed to the market generally.
As soon as is practicable all Group announcements and copies of analyst and media briefing are posted to
the Group’s website. Other information of relevance to investors is also made available on our website,
including, annual and half yearly financial reports, key dates, distribution history, cost base allocations,
management fee breakdowns and the management investment trust notices.
The website also contains a link to the Group’s security registrars and a live feed from the ASX for the
Group’s security price information.
Investors Reports
The Group prepares annual reports for investors for each financial year ending 30 June and half year for
the period ending 31 December. These reports are posted on the website on their day of release to the
ASX. Investors may elect to receive a hard‐copy of these reports or an email notification once they
For personal use only
Corporate Governance Statement
30 June 2016
become available on the website. The default option for receiving the annual report is via the Group’s
website at www.ardentleisure.com.
General Meetings
The Group holds an annual general meeting (AGM) in October or November each year. The date, time
and venue of the AGM are notified to the ASX when the annual report is lodged with the ASX, generally in
September each year. The Board of Directors aims to choose a date, venue and time considered
convenient to the greatest number of our investors.
All notices of meetings will be accompanied by clear explanatory notes on the items of business. A copy
of any such Notice of Meeting will be placed on the Group’s website. Should an investor not be able to
attend a general meeting they are able to vote on the resolutions by appointing a proxy. The proxy form
included with the notice of meeting will clearly explain how the proxy form is to be completed and
submitted.
As previously stated, the external auditor attends each AGM to answer questions about the conduct of
the audit and the preparation and contents of the Auditors Report.
Investor benefit program
Investors with 2,000 or more securities are entitled to participate in an Investor Benefits Program. The
program aims to provide qualifying investors with an opportunity to experience some of the assets
owned by the Group at discounted rates.
Principle 7 – Recognise and manage risk
Safety, Sustainability & Environment Committee
In addition to the Audit & Risk Committee detailed in Principle 4 the Board has established a Safety,
Sustainability & Environment Committee (SSE Committee). The SSE Committee was established to
monitor, review, evaluate and make recommendations to the Board in relation to occupational health &
safety (OH&S), sustainability and the environment.
The Committee was established by the Board of directors to monitor, review, evaluate and make
recommendations to the Board in relation to the following matters:
Safety
The effectiveness of OH&S policies and the safety related aspects of the operational risk
management framework necessary to maintain a safe environment for both guests and
employees across
recommending
improvements;
Setting appropriate goals to maintain the Group’s lost time injury frequency rate (LTIFR) below
industry benchmarks;
implementing and
including drafting,
the Group
The adequacy of existing OH&S resources as well as their ongoing training and supervision;
The scope and results of periodic internal and external reviews of OH&S and operational risks
including the process of identifying and assessing OH&S risks and the adequacy of existing OH&S
risk management systems; and
The compliance of the Company with regard to existing and possible future OH&S regulations
and determining what changes, if any, need to be made to existing work practices in order to
ensure compliance.
For personal use only
Corporate Governance Statement
30 June 2016
Sustainability
Reviewing the Group’s policies and procedures in relation to sustainability;
Monitoring the adequacy of resources applied to sustainability as well as their ongoing training
and supervision;
Reviewing any report on sustainability, which is prepared pursuant to any Listing Rule or
legislative requirement or which is proposed for inclusion in the annual report; and
The compliance of the Company with regard to current laws and regulations and determining
what changes, if any, need to be made to existing work practices in order to ensure compliance.
Environment
Evaluating and monitoring the effectiveness of the Group’s environmental policies and
environmental management plans;
Evaluating and monitoring the adequacy of environmental resources as well as their ongoing
training and supervision;
Reviewing the scope and results of periodic internal and external reviews of environmental risks
including the process of identifying and assessing environmental risks and the adequacy of
existing environmental risk management systems; and
The compliance of the Company with regard to current environmental laws and regulations and
determining what changes, if any, need to be made to existing work practices in order to ensure
compliance.
The Committee will not address matters associated with financial or monetary risk associated with
internal financial controls.
Risk Management Framework
The Risk Management framework for the Group requires a periodic review by management and the
Board. These reviews ensure that the risk management framework continues to be a pro‐active tool
across the Group.
Scope of Risks considered
The risk management review covers five key business risks:
Key Business Risk
Risk Categories
Enterprise
Fraud / Error
Business Management
Continuity, Control, Cost, Culture, Efficiency, Insurance, Knowledge, Legal &
Regulatory, Performance, Privacy, Resourcing, Strategic Planning, Strategic
Execution, Succession.
Cash, Brand / Trademark, Consumables & Trading Stock, Procurement,
Defamatory, Financial Statements, Furniture & Fittings, Hardware,
Information Systems, Information & Knowledge, Job, Management Reporting,
Payroll, Personal Property, Software, Office Supplies, Company Income Tax,
GST, FBT, PAYG, Payroll Tax, Web.
Framework Awareness, Change, Confidentiality, Contract, Culture, Detection,
Resourcing,
Documentation,
Responsibility.
Interpretation,
Escalation,
Reporting,
Board Secretarial
Admission, Conflict, Documentation, Duties, Governance, Legal, Regulatory,
Resolution.
Environmental & Safety
Management
Contamination, Media / Publicity, Employee Safety, Guest & Contractor
Safety.
For personal use only
Corporate Governance Statement
30 June 2016
Risk Assessment Methodology
The risk assessment methodology adopted for these reviews includes a three step process. Firstly, the
inherent risk for each risk category is determined by evaluating likelihood & consequence of the risk
based on the current and existing processes. Risks are evaluated and ultimately allocated to one of 4
distinct categories of Extreme, High, and Moderate and Low. Next the effectiveness of existing risk
controls is reviewed and a ranking determined on a scale of Good, Fair or Poor. Finally, after the controls
have been assessed the residual risk factors are derived into three categories of High, Medium and Low
by merging the inherent risk rating and the effectiveness of the controls rating.
Risk Gap Analysis
The Group’s senior executive reviewed the risk management register and undertook a third party gap
analysis designed to identify any material risks that had not otherwise been included in the risk review
process and to independently assess the Group’s internal residual risk ratings.
Internal Audit
The Group has an Internal Audit function which is responsible for assisting with the accomplishment of
the Group’s objectives by bringing a systematic, disciplined approach to evaluating and continually
improving the effectiveness of its risk management and internal control processes. The Group Chief
Audit Officer has a direct reporting line to the board via the Audit and Risk Committee.
Principle 8 – Remunerate fairly and responsibly
Remuneration & Nomination Committee
The Directors have established a combined Remuneration and Nomination Committee due to the
relatively infrequent need to call upon the services of the previous Nomination Committee. The
combined Remuneration and Nomination Committee consists of a minimum of three members with the
majority of members required to be independent directors.
The Remuneration and Nomination Committee is specifically responsible for making recommendations to
the Board in relation to setting policies for remuneration programs appropriate to the Group,
remuneration and incentive schemes of senior management, reviewing the performance of the Chief
Executive Officer on an annual basis, setting the Group’s recruitment, retention and termination policies
and procedures for senior management, superannuation, the remuneration framework for directors and
the approval of any report on executive remuneration, which is required pursuant to any Listing Rule or
legislative requirement or which is proposed for inclusion in the Annual Report.
Further details of the Group’s remuneration policies are set out in the Directors’ Report contained in the
Annual Financial Report for the year ended 30 June 2016.
The Board has adopted a specific clawback clause to be included in grant letters for deferred equity
whereby any unvested Performance Rights shall be subject to potential lapse, cancellation, rescission or
other action in the event that the Group becomes aware of any misstatement in its financial statements
for any of the immediately preceding 3 financial years due to:
(a)
(b)
(c)
a material non‐compliance with any financial reporting requirement;
the misconduct of any Key Management Personnel; or
the misconduct of any of its other employees, contractors or advisers as a result of the
direction (or lack of direction) by any member of the Key Management Personnel.
For personal use only
Corporate Governance Statement
30 June 2016
To the extent that the Performance Rights granted exceed the number, metrics or outcome that would
have been applied had the misstatement not been made, then the Group may cause the deferred vesting
or lapse of unvested Performance Rights representing all or part of the grant.
For personal use only