Annual Financial Report
for the year ended 30 June 2017
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 31 August 2017. The
Directors have the power to amend and reissue the financial report.
For personal use only
For personal use only
Annual 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
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 from derivative financial instruments
Management fees
Other expenses
Remuneration of auditor
Income tax (benefit)/expense
(Losses)/earnings per security/share
Distributions and dividends paid and payable
Receivables
Derivative financial instruments
Inventories
Discontinued operations
Property classified as held for sale
Construction in progress
Other assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Payables
Interest bearing liabilities
Provisions
Other liabilities
Deferred tax liabilities
Contributed equity
Security-based payments
Other equity
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
Fair value measurement
41. Contingent liabilities
42. Capital and lease commitments
43. Deed of Cross Guarantee
44. Parent entity financial information
45. 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
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Ardent Leisure Group | Annual Report 2017 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 2017 (FY17).
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:
George Venardos (appointed as Chair 6 November 2016);
Roger Davis;
Randy Garfield (appointed 14 August 2017);
David Haslingden;
Simon Kelly (appointed 9 June 2017);
Don Morris AO;
Melanie Willis;
Neil Balnaves AO (retired as Chair and as a Director 6 November 2016); and
Deborah Thomas (retired 1 July 2017).
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 of America. Other than the completion of the sale of the Health Clubs business in October and the completion of the sale of
Marinas in August, there were no significant changes in the nature of the activities of the Group.
3.
Distributions
The total distribution of income for the year ended 30 June 2017 will be 3.00 cents (30 June 2016: 12.50 cents) per stapled security paid
by the Group. The reduction in distribution compared to the prior year reflects the adverse impact of the Dreamworld incident on
Group’s results as well as retention of earnings from US Entertainment Centres to fund the roll out of new centres. An interim distribution
of 2.00 cents (31 December 2015: 7.00 cents) per stapled security was paid in February 2017. This comprised a distribution paid by the
Trust of 2.00 cents (31 December 2015: 7.00 cents) and no dividend paid by the Company (31 December 2015: nil) per stapled security.
A final distribution for the year ended 30 June 2017 of 1.00 cent (2016: 5.50 cents) per stapled security will be paid by the Trust in August
2017. A provision has not been recognised in the financial statements at 30 June 2017 as this distribution had not been declared at the
reporting date.
4.
Operating and financial review
Overview
During the year, the Group‘s operations comprised five operating divisions, being entertainment centres in the US and bowling and
entertainment centres, theme parks, marinas and, until 25 October 2016, health clubs in Australia.
On 19 August 2016, the Group announced its decision to sell the health clubs business, with completion occurring on 25 October 2016.
The consideration of $260.0 million was received on 13 December 2016 and a gain of $45.0 million before tax was recognised on
disposal. The results of this business have been presented as a discontinued operation at 30 June 2017.
On 12 December 2016, the Group announced that it had entered into an agreement to dispose of its interest in the Marinas division.
Completion, which was subject to landlord consents for the transfer of the head leases, occurred effective 14 August 2017. The
associated assets and liabilities have been presented as held for sale and the results included as a discontinued operation at 30 June
2017.
Following the sale of the health clubs and marinas businesses, the strategic transition to a customer experience driven leisure and
entertainment portfolio of assets is complete. The continuing businesses are:
US Entertainment Centres, trading as “Main Event”
Australian Bowling and Entertainment Centres, and
Australian Theme Parks, including Dreamworld.
2 Ardent Leisure Group | Annual Report 2017
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4.
Operating and financial review (continued)
Group results
On 25 October 2016, an incident on the Thunder River Rapids ride at Dreamworld resulted in four fatalities at the theme park. The park
and adjoining WhiteWater World were subsequently closed for 45 days. The parks were re-opened on 10 December 2016 following
successful completion of a multi-tiered mechanical and operational safety review.
The impact of the incident, subsequent closure of the parks and progressive re-opening of rides has negatively impacted attendance
and revenues at the theme parks. As a result, the Group has recognised an impairment of goodwill of $0.8 million and a revaluation
decrement to associated property, plant and equipment of $91.7 million of which $88.7 million has been recognised in the Income
Statement and $3.0 million has been recognised in reserves. Refer to Note 20 of the financial statements.
The performance of the Consolidated Group, as represented by the aggregated results of its operations for the year, was as follows:
Segment
revenues
2017
$’000
300,147
127,655
70,934
9
498,745
24,131
62,677
86,808
585,553
US Entertainment Centres
Australian Bowling and Entertainment Centres
Australian Theme Parks
Other
Continuing operations
Marinas
Health Clubs (disposed 25 October 2016)
Discontinued operations
Total
Corporate costs
Core EBITDA
Depreciation and amortisation*
Core EBIT
Pre-opening expenses, straight lining of fixed rent increases, IFRS depreciation, movements in
onerous lease provisions, intangible asset amortisation, impairment of goodwill and property,
plant and equipment, Marina selling costs and other one-off and restructuring expenses not
included in divisional EBIT
Valuation gain - investment properties
Valuation loss - property, plant and equipment (relating to Dreamworld)
Loss on closure of Australian Bowling and Entertainment Centres
Loss on disposal of assets
Gain on sale and leaseback of US Entertainment Centres
Gain on disposal of health clubs
Net loss from derivative financial instruments
Dreamworld incident costs, net of insurance recoveries
Interest income
Business acquisition costs refunded
Borrowing costs
Net tax benefit/(expense)
(Loss)/profit for the year
Core earnings (Note 11 to the financial statements)
Segment
revenues
2016
$’000
238,974
130,494
107,582
9
477,059
23,000
187,555
210,555
687,614
Segment
EBITDA*
2017
$’000
61,041
15,204
(3,408)
-
72,837
9,820
9,772
19,592
92,429
(16,338)
76,091
(44,949)
31,142
(31,580)
-
(88,747)
(470)
(3,328)
-
45,009
(421)
(5,389)
86
-
(12,191)
3,332
(62,557)
11,287
Segment
EBITDA*
2016
$’000
59,168
18,224
34,725
-
112,117
10,157
30,114
40,271
152,388
(15,144)
137,244
(47,166)
90,078
(27,383)
2,059
-
-
(514)
1,672
-
(170)
-
81
134
(14,874)
(8,696)
42,387
62,395
*
Segment earnings before interest, tax, depreciation and amortisation (EBITDA) excludes pre-opening expenses, straight lining of fixed rent increases, IFRS depreciation, movements
in onerous lease provisions, amortisation of health club brands and customer relationship intangible assets, impairment of property, plant and equipment and intangible assets, gain
on sale of discontinued operations and associated selling costs, valuation gains/losses of investment property and property, plant and equipment, costs associated with the
Dreamworld incident, loss on closure of Australian Bowling and Entertainment Centres and other one-off and restructuring expenses. 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.
Ardent Leisure Group | Annual Report 2017 3
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4.
Operating and financial review (continued)
Group results (continued)
The Group reported a loss of $62.6 million for the year, down from a profit of $42.4 million in the prior year, mainly because of the $88.7
million valuation loss on the Dreamworld and WhiteWater World property noted above and the challenging post incident trading
conditions at Dreamworld.
Other significant factors impacting the result are as follows:
The Group incurred $5.4 million costs relating to the Thunder River Rapids ride incident at Dreamworld, net of insurance recoveries
during the year (2016: nil);
There were $4.0 million restructuring and one-off costs in the current year (2016: nil);
Pre-opening expenses increased by $5.3 million to $13.9 million reflecting the roll out of new US Entertainment Centres during the
year;
The Group incurred a loss on disposal of assets of $3.3 million (2016: $0.5 million);
There was a $2.1 million valuation gain in investment properties and $1.7 million gain on sale and leaseback of US Entertainment
Centres in the prior year (current year: nil); and
There was a $0.5 million increase in onerous lease provisions in the current year compared to a $2.2 million reduction in onerous
lease provisions in the prior year.
However, this was partially offset by the following factors:
The Group recognised a $45.0 million gain on sale of the health clubs’ business;
Depreciation (including IFRS depreciation) and amortisation of property, plant and equipment and software decreased by $9.7
million to $55.0 million;
Borrowing costs decreased by $2.7 million to $12.2 million; and
There was a tax benefit of $3.3 million in the current year compared to tax expense of $8.7 million in the prior year.
The above factors also delivered a decrease in core earnings of $51.1 million, to $11.3 million. Core earnings (as defined in Note 11 to
the financial statements) represents the earnings of the Group after adding back impairment of property, plant and equipment and
intangible assets, amortisation of intangible assets, one-off realised items and unrealised items (such as unrealised gains or losses on
derivatives and unrealised valuation gains and losses on investment properties and property, plant and equipment), straight lining of
fixed rent increases, IFRS depreciation and onerous lease costs.
US Entertainment Centres
The performance of the US Entertainment Centres, in US dollars, is summarised as follows:
Total revenue
EBRITDA (excluding pre-opening expenses)
Operating margin
Property costs
EBITDA
2017
US$'000
226,240
74,977
33.1%
(29,005)
45,972
2016
US$'000
174,683
63,996
36.6%
(20,449)
43,547
Change
%
29.5
17.2
41.8
5.6
During the year, total US dollar revenue grew by 29.5%, driven by full year impact of centres opened in FY16 and contribution from new
centres opened in FY17, partially offset by a decline in constant centre revenue. EBITDA grew 5.6%, with margin declining by 460 basis
points. Margins were impacted by the combination of the loss of “honeymoon” effect on FY16 non-constant centres, slower ramp up in
the FY17 new centre openings, and the flow through effect of a decline in constant centre revenues, given the relatively fixed cost nature
of the business. Initiatives are in place to improve constant centre revenue growth and lift the returns from the new centres opened in
FY17.
4 Ardent Leisure Group | Annual Report 2017
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4.
Operating and financial review (continued)
US Entertainment Centres (continued)
Constant centres
Non-constant centres
New centres opened in FY17
Corporate and regional office expenses/sales and marketing
Total
Revenue
2017
US$'000
Revenue
2016
US$'000
141,561
60,492
24,183
4
145,732
28,951
-
-
226,240 174,683
Change
%
(2.9)
108.9
29.5
EBRITDA
2017
US$'000
60,615
24,902
7,525
(18,065)
74,977
EBRITDA
2016
US$'000
64,525
13,310
-
(13,839)
63,996
Change
%
(6.1)
87.1
30.5
17.2
Constant centres were impacted by several factors including intensified competition over the past few years with a significant increase
in supply that put older centres (which have been underinvested) under pressure, strategic cannibalisation of existing centres as the
business build-out clusters (which is positive for the long-term strategic strength of the business but negative to short-term reported
performance). Constant centres revenue trends improved in the second half of FY17 with trends towards the end of the year being
positive driven by the refocus of management, revitalisation of menus, refurbishment of older centres and marketing initiatives.
Overall, centres that were opened from FY12 to FY16 continue to deliver above the Group’s target return of investment of 30%.
Ten new centres were opened during the year, bringing the total number of centres to 37 in 14 states. These new centres experienced
slower ramp up due to limited or no prior presence, which were driven by several factors including the need to build brand awareness
especially for centres without prominent highway visibility and accessibility. Nevertheless, the FY17 cohort performance is expected to
improve over time underpinned by initiatives to drive higher market awareness in non-traditional locations.
Australian Bowling and Entertainment Centres
This business is transitioning from its traditional bowling heritage into multi-attraction entertainment destinations. The performance
of the Australian Bowling and Entertainment 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
2017
$'000
127,655
42,402
33.2%
(27,198)
15,204
2016
$'000
130,494
45,291
34.7%
(27,067)
18,224
Change
%
(2.2)
(6.4)
0.5
(16.6)
Revenue declined marginally due to the impact of the closure of Kingpin Crown for five months for refurbishment and closure of four
AMF centres, offset by positive constant centre growth. The overall revenue decline dropped through to the bottom line, impacting
EBITDA and the percentage margin which reduced from 34.7% to 33.2% in the year.
A further analysis of the Bowling and Entertainment Centres’ performance is summarised as follows:
Constant centres
Centres closed
New centres /acquisitions/renovations
Corporate and regional office
expenses/sales and marketing
Total
Revenue
2017
$'000
101,183
3,056
23,400
Revenue
2016
$'000
97,905
5,766
26,823
16
127,655
-
130,494
Change
%
3.3
(47.0)
(12.8)
-
(2.2)
EBRITDA
2017
$'000
49,152
998
10,935
(18,683)
42,402
EBRITDA
2016
$'000
47,561
2,098
13,606
(17,974)
45,291
Change
%
3.3
(52.4)
(19.6)
3.9
(6.4)
The division recorded its eighth consecutive quarter of constant centre growth, which was achieved through a blend of volume, sales
mix and price, with AMF, Kingpin and Playtime brands all contributing to growth. Despite the constant centre revenue growth, the
overall performance continues to be weighed down by the lower returning AMF sites. The division continued its transition through the
year with one new Playtime, two refurbishments and four non-core AMF centres closed.
Ardent Leisure Group | Annual Report 2017 5
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4.
Operating and financial review (continued)
Australian Bowling and Entertainment Centres (continued)
The investments made in rebranding legacy centres and opening new Kingpin and Playtime concepts is starting to improve returns.
The returns on these new concepts are attractive. This business will start to see the financial returns improve from the FY17 trough over
FY18 and beyond.
Australian Theme Parks
The division was adversely impacted by the Thunder River Rapids ride incident in October 2016 noted above. The performance of the
Australian Theme Parks is summarised as follows:
Total revenue
EBRITDA
Operating margin
Property costs
EBITDA
Attendance
Per capita spend ($)
2017
$'000
70,934
(2,381)
(3.4%)
(1,027)
(3,408)
2016
$'000
107,582
35,947
33.4%
(1,222)
34,725
1,662,992
42.65
2,413,937
44.57
Change
%
(34.1)
(106.6)
(16.0)
(109.8)
(31.1)
(4.3)
Revenue declined by $36.6 million, or 34.1% to $70.9 million, with an EBITDA loss of $3.4 million, down from a profit of $34.7 million in
the prior year.
In order to assist the recovery process, Dreamworld established a Community Advisory Committee consisting of various internal and
external stakeholders such as Yugambeh, PCYC, Red Cross, government, business and local representatives. This committee
continues to operate and provides advice to Dreamworld on all matters relating to the incident and the connection with the
community. During the recovery period, the wellbeing of Dreamworld’s staff has remained a key focus of management. A number of
wellness and support programs were established to assist individual team members with resilience and coping with challenging
environments.
Recovery of the theme parks is expected to take two years and is largely on track. Notwithstanding the extremely challenging post
incident trading conditions, the LEGO store launched in January 2017 has been very successful, meeting its full year sales forecasts
within its first six months. The store is accessible by both park visitors and the general public and has demonstrated the potential to
develop more unique concepts using the land and facilities adjoining the park that do not necessarily require park entry.
The tiger island precinct is a world class exhibit and has received very positive feedback from visitors. Despite the challenging year,
guest satisfaction and feedback remained positive and has continued to improve over the past three years. An events program has
been implemented which has been well supported and is a key driver of the recovery through encouraging increased visitation.
Marinas
The performance of Marinas is summarised as follows:
Total revenue
EBRITDA
Operating margin
Property costs
EBITDA
2017
$'000
24,131
12,724
52.7%
(2,904)
9,820
2016
$'000
23,000
12,569
54.6%
(2,412)
10,157
Change
%
4.9
1.2
20.4
(3.3)
Revenue from marinas increased by 4.9% to $24.1 million, and EBITDA decreased by 3.3% to $9.8 million. Marina revenue principally
comprises the following:
Berthing
Land
Fuel and other
Total
2017
$'000
14,203
5,134
4,794
24,131
2016
$'000
13,203
5,206
4,591
23,000
Change
%
7.6
(1.4)
4.4
4.9
On 22 March 2016, the Group announced its decision to sell this division as part of the Group’s refocus on entertainment. Completion
of the sale occurred effective 14 August 2017.
6 Ardent Leisure Group | Annual Report 2017
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4.
Operating and financial review (continued)
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
(1) Current year results are for the period up to 25 October 2016.
2017(1)
$'000
62,677
25,612
40.9%
(15,840)
9,772
2016
$'000
187,555
77,511
41.3%
(47,397)
30,114
Change
%
(66.6)
(67.0)
(66.6)
(67.5)
On 19 August 2016, the Group announced its decision to sell the Health Clubs business, with completion occurring on 25 October 2016.
Refer to Note 16 to the financial statements for further information.
Strategic focus
Following the sale of Health Clubs and Marinas the common theme across the Group’s assets is the provision of leisure and
entertainment experiences. However, each business has its own unique strategic position and objectives and all are at different stage
of evolution with discrete opportunities for growth and unlocking value.
The US Entertainment Centres’ strategic goal is to become a leading customer experience-driven leisure and entertainment
franchise in the US;
The Australian Bowling and Entertainment Centres business will continue to evolve beyond its heritage as a bowling business into
a multi-attraction entertainment experience; and
The strategic goal for the Australian Theme Parks is to cement their position as “must visit” Gold Coast attractions and in the case of
Dreamworld, to evolve the concept of a leisure and entertainment precinct centred around the current site.
(i)
US Entertainment Centres
This business has expanded its number of centres rapidly over the last few years. It’s now time to ensure there is the appropriate balance
between operational performance and growth and that each new centre meets strict selection criteria. Going forward, management’s
target is for 5 to 10 new centre openings per annum. However, the constraint will be the strict application of selection criteria, so in any
year there could be greater or fewer new centres than this range.
A quality index has been developed that, when applied back against prior centres, is a good predictor of success and this measurement
has been built into the decision-making process. New beachhead centres will be considered in a very measured way, ensuring that the
bulk of the rollout beyond FY18 will be directed towards building out clusters.
(ii)
Australian Bowling and Entertainment Centres
The objective is to create a multi-attraction entertainment experience. The initial strategic threshold is to improve returns to in excess
of benchmarks, and clear pathway to achieve that outcome over the next 3-4 years has been established. The focus is on transitioning
legacy under-performing centres and investing in the new higher returning concepts, whilst building scale and operational efficiency.
This outcome is constrained by pre-existing leases on legacy centres and the availability of new sites for new concept centres. Like the
US Entertainment Centres, site location is paramount to success and site selection will not be compromised to expedite a centre number
target.
(iii)
Australian Theme Parks
The key focus is on driving attendance back to historic levels through a combination of “smart” capital investment and an event pipeline
both of which provide opportunities to promote and target revisitation. Investments will be targeted to drive visitation and will be
economically responsible, such as repurposing infrastructure that already exists. This will enable new experiences to be delivered
without the need for large capital outlays.
The excess land that sits around the Dreamworld site is potentially of great value. The park occupies just over 50% of the land that is
owned and a process of determining the best use of this land has commenced. This is likely to include a build out of tourist related
adjacencies around the park itself. The plan may also involve an element of other commercial and residential uses.
Ardent Leisure Group | Annual Report 2017 7
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5.
Significant changes in the state of affairs
As noted above, on 25 October 2016, the Group completed the disposal of its Health Clubs business and, effective 14 August 2017, the
Group completed the disposal of its Marinas business.
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.
6. Value of assets
Value of total assets
Value of net assets
Consolidated
Group
2017
$’000
Consolidated
Group
2016
$’000
ALL Group
2017
$’000
974,213
531,722
1,157,632
619,983
592,695
177,034
ALL Group
2016
$’000
649,324
174,883
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
2017
Consolidated
Group
2016
463,039,616
4,812,776
1,300,892
442,322,106
19,377,615
1,339,895
469,153,284 463,039,616
Stapled securities on issue at the beginning of the year
Stapled securities issued under Distribution Reinvestment 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 Directors
George Venardos
Chair
Appointed:
Ardent Leisure Management Limited – 22 September 2009
Ardent Leisure Limited – 22 September 2009
Age: 59
George Venardos was appointed Chairman of both the Company and the Manager in November 2016, having served as a Director
since September 2009. George is a Chartered Accountant with more than 36 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.
George is the Non-Executive Chair of the Group and a member of the Audit and Risk Committee (Char until 16 December 2016),
Remuneration and Nomination Committee and Safety, Sustainability and Environment Committee.
Former listed directorships in the last three years:
BluGlass Limited (resigned 23 November 2016)
Interest in stapled securities:
215,839
8 Ardent Leisure Group | Annual Report 2017
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8.
Information on Directors (continued)
Roger Davis
Director
Appointed:
Ardent Leisure Management Limited – 1 September 2009
Ardent Leisure Limited – 28 May 2008
Age: 65
Roger Davis was appointed a Director of the Company in 2008. Roger brings to the Board over 36 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 and AIG Australia Limited. Previously,
he was Managing Director at Citigroup where he worked for over 20 years and more recently was Group Managing Director at ANZ
Banking Group.
Roger’s former directorships include the Chairmanship of Esanda, along with directorships of Aristocrat Leisure Limited, 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 Bachelor of Economics (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 the Audit and Risk Committee.
Former listed directorships in last three years:
Aristocrat Leisure Limited (resigned 27 February 2017)
Interest in stapled securities:
200,658
Randy Garfield
Director
Appointed:
Ardent Leisure Management Limited – 14 August 2017
Ardent Leisure Limited – 14 August 2017
Age: 65
Randy Garfield was appointed a Director of both the Manager and the Company in August 2017. During his 43 year travel industry career
Mr Garfield spent over 30 years working in senior executive roles specialising in global marketing and sales, sponsorship development
and sales operations.
As Executive Vice President of Worldwide Sales & Travel Operations at Walt Disney Parks & Resorts, he led the worldwide sales,
convention services, resort contact centres and distribution marketing efforts for the Disneyland Resort, Walt Disney World Resort,
Disneyland Paris, Hong Kong Disneyland Resort, Shanghai Disney Resort, Disney Cruise Line, Disney Vacation Club, Adventures by
Disney, Aulani-a Disney Resort & Spa in Hawaii and Golden Oak. Throughout his 20+ year Disney career he also served as President of
Walt Disney Travel Company, one of the largest tour operators in the USA.
Prior to joining Disney Randy also served as Vice President of Sales for Universal Studios Hollywood starting in 1986 where he helped
generate record attendance and trail blazed the launch of Universal Studios Florida by crafting their pre-opening sales plan. He moved
to Orlando in summer 1989 as Executive Vice President of Marketing and Sales/Chief Marketing Officer and led the business through its
preopening and launch, and also served in a leadership role on the team which formulated the expansion plan including a second
theme park as well as hotels and a massive retail, dining and entertainment complex.
Randy’s current directorships include Deep Blue Communications, Rocky Mountaineer, US Travel Association and Destination Canada.
Previous Board roles include the US Travel Association (Chairman) and Brand USA. Randy is an inductee into the US Travel Hall of Leaders,
and has been recognised three times as one of the most extraordinary sales and marketing minds by Hospitality Sales & Marketing
Association International.
Former listed directorships in last three years:
None
Interest in stapled securities:
Nil
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8.
Information on Directors (continued)
David Haslingden
Director
Appointed:
Ardent Leisure Management Limited – 6 July 2015
Ardent Leisure Limited – 6 July 2015
Age: 56
David Haslingden was appointed a Director of both the Company and the Manager in July 2015 and brings to the Board considerable
international business experience, particularly in the US and Australia.
David is a director and major shareholder of Blue Ant Media Inc, a Canadian company that owns and operates production companies
and cable networks in Canada and around the world.
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 Bachelor of Arts and Bachelor
of Laws from The University of Sydney and a Master of Law from the University of Cambridge.
David is Chair of the Remuneration and Nomination Committee and a member of 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
Simon Kelly
Managing Director and Chief Executive Officer
Appointed:
Ardent Leisure Management Limited – 9 June 2017
Ardent Leisure Limited – 9 June 2017
Age: 53
Simon Kelly was appointed the Managing Director and Chief Executive Officer of both the Manager and Company in June 2017. Simon
brings over 30 years’ experience in strategic, financial and general management in the entertainment, media, technology, FMCG and
manufacturing sectors.
Simon’s previous roles include Chief Operating Officer and Chief Financial Officer of Nine Entertainment Co. Holdings Limited, Chief
Financial Officer and Director of Aristocrat Leisure Limited and a number of senior executive roles at Goodman Fielder Limited. More
recently, he led the re-capitalisation of Virgin Australia Holdings Limited.
Prior directorships include ASX listed technology company, Intecq Limited, subscription video on demand start up “Stan”, Sky News,
ASX listed Clarius Group and literacy e-learning business Intrepica.
Simon holds a Bachelor of Arts (First Class, Honours) in Economics and Accounting from the University of Reading, is a Fellow of The
Institute of Chartered Accountants in England and Wales, a member of Chartered Accountants Australia and New Zealand and a
member of the Australian Institute of Company Directors.
Former listed directorships in the last three years:
Intecq Limited (resigned 16 December 2016)
Interest in stapled securities:
280,409
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8.
Information on Directors (continued)
Don Morris AO
Director
Appointed:
Ardent Leisure Management Limited – 1 January 2012
Ardent Leisure Limited – 1 January 2012
Age: 72
Don Morris was appointed a Director of both the Company and the Manager 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 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, Ausflag Limited and The Sport and Tourism Youth Foundation. He
is Chair of Tourism Think Tank, and Chair of Pure Projects, the largest wholly Australian international project management group.
He was appointed an Adjunct Professor in Tourism by 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 Chair of the Customer & Digital Committee and a member of the Remuneration and Nomination Committee.
Former listed directorships in the last three years:
None
Interest in stapled securities:
13,950
Melanie Willis
Director
Appointed:
Ardent Leisure Management Limited – 17 July 2015
Ardent Leisure Limited – 17 July 2015
Age: 52
Melanie Willis was appointed a Director of both the Company and the Manager in July 2015, bringing significant experience in finance,
investment banking and professional services sectors. Melanie has had extensive exposure to leisure-related businesses and is currently
a non-executive director and Chair of the Audit & Risk Committee at Mantra Group (an Australian hotel and resort marketer and operator
with over 20,000 rooms) and a non-executive director of 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 also a member of Chief Executive Women.
Melanie is Chair of the Audit and Risk Committee (appointed Chair 16 December 2016).
Former listed directorships in the last three years:
Crowe Horwath Limited (resigned 30 October 2014)
Interest in stapled securities:
9,674
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8.
Information on Directors (continued)
Neil Balnaves AO
Former Chair
Appointed:
Ardent Leisure Management Limited – 26 October 2001 (retired 6 November 2016)
Ardent Leisure Limited – 28 April 2003 (retired 6 November 2016)
Age: 73
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 was a 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
Deborah Thomas
Former Chief Executive Officer
Appointed:
Ardent Leisure Management Limited – 1 December 2013 (retired 1 July 2017)
Ardent Leisure Limited – 1 December 2013 (retired 1 July 2017)
Age: 61
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 brought 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:
42,269
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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
Eligible
to attend
13
13
13
1
13
13
4
13
Attended
13
11
11
1
13
13
4
12
Eligible
to attend
5
5
N/A
N/A
N/A
5
1
N/A
Attended
5
4
N/A
N/A
N/A
5
1
N/A
Eligible
to attend
3
1
3
N/A
3
1
1
N/A
Attended
3
-
3
N/A
3
1
1
N/A
Safety, Sustainability
and Environment
Eligible
to attend Attended
7
6
7
N/A
7
N/A
N/A
7
7
7
7
N/A
7
N/A
N/A
7
Customer & Digital
Eligible
to attend
N/A
N/A
N/A
N/A
1
1
N/A
N/A
Attended
N/A
N/A
N/A
N/A
1
1
N/A
N/A
George Venardos
Roger Davis
David Haslingden
Simon Kelly
Don Morris AO
Melanie Willis
Neil Balnaves AO
Deborah Thomas
In addition to the above scheduled Board meetings, the Directors attended numerous additional meetings during the weeks
immediately following the Dreamworld incident.
10.
Company Secretary
The Group’s Company Secretary is Bronwyn Weir. Bronwyn was appointed to the position of interim Company Secretary of the Manager
and Company on 10 April 2017. Prior to being appointed interim Company Secretary, Bronwyn was the Assistant Company Secretary
for the Group since 21 November 2014. Before joining the Group, Bronwyn was Assistant Company Secretary at the Royal Australasian
College of Physicians.
Bronwyn holds a Bachelor of Commerce and Graduate Certificate in Commercial Law from Deakin University and a Certificate in
Governance Practice and a Graduate Diploma of Applied Corporate Governance from the Governance Institute of Australia.
Alan Shedden resigned from the position of Company Secretary effective from 10 April 2017.
11.
Remuneration report
Introduction from the Chair of the Remuneration and Nomination Committee
The Directors of Ardent Leisure Group (the Company) are pleased to present security holders with the 2017 Remuneration Report. This
report outlines the Company’s approach to remuneration for its Directors and Executives.
The Remuneration and Nomination Committee (Committee), on behalf of the Board, oversees the Company’s remuneration framework
ensuring that it aligns the interests of our security holders and reflects the Company’s commitment to deliver market competitive
remuneration to attract, retain and motivate high quality directors and executives.
Changes to Key Management Personnel
There were significant changes in Directors and Executive Key Management Personnel (KMPs) during the year, including the the
appointment of Simon Kelly as Chief Executive Officer and Managing Director in place of Deborah Thomas who left the business on 1
July 2017 and the retirement of the CFO, Mr Richard Johnson, who returned to the UK. Mr Kelly has also joined the Board.
Mr Kelly brings extensive experience in senior executive roles across a number of leading major Australian listed businesses, including
global business strategy and development, entertainment and gaming, business optimisation and shareholder value creation. Mr Kelly
was previously Chief Operating Officer and Chief Financial Officer of Nine Entertainment Co. and has also held senior executive roles at
Goodman Fielder, Aristocrat Leisure and Virgin Australia.
Mr Kelly’s remuneration package was determined following a market review. Mr Kelly agreed to take an upfront grant of restricted
equity which vests over time in lieu of a portion of his cash remuneration for the first three years of his tenure. In doing so, Mr Kelly’s
interests are immediately aligned with Security holders. The restricted equity begins to vest 6 months from appointment. Securities are
held in trust and restricted from sale for three years. Mr Kelly’s base salary is also fixed for three years, with no review until 2020.
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11.
Remuneration report (continued)
Changes to Key Management Personnel (continued)
Ms Thomas was paid a termination benefit lower than the prima facie contractual entitlement in alignment with the Corporations
Amendment (Improving Accountability on Termination Payments) Act. Though paid in FY18, the payment is included in this year’s
Remuneration Report for completeness and transparency as it was contractually committed during FY17. Entitlements under the
Group’s equity based, deferred short-term incentive (DSTI), which had not vested by 1 July 2017, were forfeited. Ms Thomas however,
will retain the right to previously granted, but unvested entitlements, under the Group’s equity based long-term incentive plan (LTIP),
which remain subject to performance criteria. Unvested LTIP entitlements that are subject to tenure only will be forfeited. Full details of
Ms Thomas’ termination arrangements including a transitional consultancy arrangement in respect of the impending Coronial Inquiry
into the Dreamworld tragedy, are included in Section (d).
The FY16 cash based short-term incentive (STI) payment of $167,500 to Ms Thomas, was subsequently donated by her in full to the Red
Cross after the Dreamworld tragedy.
Changes to Board of Directors
During the year, there were further changes to the Company’s Board including the retirement of former Chairman, Neil Balnaves AO,
who was succeeded by George Venardos and the appointment of Simon Kelly as Managing Director. When coupled with the addition
of Mr Haslingden and Ms Willis to the Board in 2015, almost 50% of the Board has now changed in the last 3 years, including a change
in Chairman. In line with the increasing importance of the US Entertainment Centres business in the United States the Committee also
resolved to seek the appointment of two US-based American Non-Executive Directors to the Board. To this end, in the first quarter of
this year, the Committee enlisted the assistance of Heidrick & Struggles, a leading global recruitment firm, to undertake an extensive
search process. To date our search has resulted in the appointment of Randy Garfield to the Board effective 14 August 2017. Mr Garfield
has had over 20 years’ experience working in senior executive roles across the Walt Disney Company and in total more than four decades
in the travel and tourism industries. A second uniquely qualified US based individual who has multi-site, broad leisure and entertainment
experience, has also been identified and the Ardent Board is in advanced discussions with the proposed candidate to join the Board.
Remuneration structure
The Committee has overseen a number of changes to remuneration structures and reporting during the year:
In prior years, we have reported STI and LTI awards in the year the award was paid / vested (typically in August following the end of
the financial year in which the performance being rewarded occurred). With effect from FY17, we have reported STI and LTI awards
in the year based on the amount accrued / earned in respect of the financial year in which the performance being rewarded occurred.
From FY18, no grants of LTI will be made where vesting is subject only to completion of a specific period of tenure, expect for grants
made to the CEO and Executives of the US Entertainment Centres business based in the USA. These officers will continue to receive
grants subject to service, consistent with prevailing market practice in the USA; and
Since inception, the LTI plan has used an accounting (fair value) calculation to determine the number of performance rights to grant
to executives. The Committee has since adopted a revised valuation methodology for LTI grants that uses the 5-day volume
weighted average price (VWAP) valuation (market value) methodology. The change in approach aligns with market practice and
expectations.
The Committee continues to review and amend executive remuneration arrangements as appropriate in line with good corporate
governance. Any changes to executive remuneration arrangements for FY18 will be advised as part of the Notice of Meeting for the
2017 Annual General Meeting.
Remuneration outcomes in FY17
FY17 was a challenging year. However, the Group finished on a positive trajectory, with both Australian Theme Parks and US
Entertainment Centres showing improving outcomes towards the end of FY17. Focus is now firmly on the execution of opportunities
to deliver further value upside for security holders and optimising our allocation of scarce capital resources to secure returns above our
cost of capital. During FY17 the Group completed the transition to becoming a global customer experience driven, leisure and
entertainment business, following the profitable sale of Health Clubs and, post-reporting period, our Marina business and relocating
the released capital, into the US Entertainment Centres business. Financial performance unfortunately, was impacted by the closure of
Dreamworld / Whitewater World for 45 days and significantly reduced attendance on re-opening, the completion of the Health Clubs
sale in October 2016 and the closure of Crown Kingpin for five months for refurbishment.
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11.
Remuneration report (continued)
Remuneration outcomes in FY17 (continued)
As a result of the disappointing overall financial performance for the year, no short-term incentive payments were made to the retiring
Managing Director, the CEO of the Australian Theme Parks or the CEO of the US Entertainment Centres business. Further, because every
KMP’s short-term incentive award is linked to specific financial metrics (equal to at least 60% of the total potential annual award), as
none of these metrics were met in FY17, none of the current KMP received any portion of their short-term incentive award linked to
financial metrics except for the ex-CEO – Health Clubs, who received his full short-term incentive award in recognition of his key
contribution to the successful sale of the Health Clubs division in October 2016.
As regards vesting rights under the Company’s current Long Term Incentive Plan, 45,377 performance rights vested this month in
respect of grants made in FY14, FY15 and FY16. This represents 10.8% of the total number of performance rights that would have vested
had all Total Shareholder Return (TSR) and Earnings Per Security (EPS) targets been hit.
Further information regarding the STI and LTI outcomes in respect of FY17 is set out in Section (c).
Other People initiatives
The Dreamworld tragedy has had a significant effect on many of our team members at the park. Immediately after the incident,
significant resources were deployed to provide trauma counselling to those directly involved as well as focused employee assistance
programmes to staff generally. The People and Culture team also designed a specific training programme around dealing with our
guests once the park had reopened.
Since that time, a number of team members continue to be heavily involved in assisting with the pending Coronial Inquiry and recovery
projects. To further assist them in this respect, the Company has also introduced an extensive ‘Wellness Programme’ specifically
designed around trauma and resilience. This includes individual treatment plans, individualised intervention sessions where required
and structured support group sessions more broadly. The Board remains committed to continuing this program for as long as required.
The Committee remains committed to refining and evolving the Group’s remuneration arrangements to drive performance and align
with security holder interests and general market practice and I look forward to updating you on our progress as we do so.
We trust that this simplified report provides security holders with clarity regarding our remuneration structures and outcomes.
David Haslingden
Chair, Remuneration and Nomination Committee
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11.
Remuneration report (continued)
Contents
The remuneration report for the Group for the year ended 30 June 2017 is set out as follows:
(a) Who is covered by this report
(b) Remuneration Governance
(c) Remuneration framework; structures, opportunities and performance outcomes
(d) Remuneration outcomes for executives
(e) Service agreements of Key Management Personnel
(f) Non-Executive Director Fees
(g) Additional Statutory Disclosures
The information provided in the Remuneration Report has been audited as required by Section 308 (3C) of the Corporations Act 2001.
(a)
Who is covered by this report
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 2017, the KMP for the Group comprise the
following:
Position
Executives
Group Chief Executive Officer & Managing Director
Chief Financial Officer
CEO – Australian Bowling and Entertainment Centres
CEO – Health Clubs
CEO – US Entertainment Centres
CEO – Australian Theme Parks
Former Group Chief Executive Officer
Name
Simon Kelly (commenced employment 9 June 2017)
Richard Johnson
Nicole Noye
Greg Oliver (ceased employment 25 October 2016)
Charlie Keegan
Craig Davidson
Deborah Thomas
Independent Directors
Independent Chair (effective 6 November 2016)
Independent director
Independent director
Independent director
Independent director
Independent Chair (retired 6 November 2016)
George Venardos
Roger Davis
David Haslingden
Don Morris AO
Melanie Willis
Neil Balnaves AO
Mr Kelly was appointed Group Chief Executive Officer and Managing Director commencing 9 June 2017.
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11.
Remuneration report (continued)
(a)
(i)
Who is covered by this report (continued)
Changes to KMP effective after the end of the reporting period
The following changes occurred after the end of the reporting period:
Deborah Thomas ceased employment on 1 July 2017;
Richard Johnson ceased employment on 14 July 2017;
Geoff Richardson was appointed interim Chief Financial Officer commencing 3 July 2017; and
Randy Garfield was appointed to the Board on 14 August 2017.
(b)
Remuneration Governance
The Remuneration and Nomination Committee’s purpose is to review, evaluate and make recommendations to the Board in
relation to the following key remuneration areas:
Remuneration policies for remuneration programs appropriate to the Group;
The remuneration framework for directors and executives;
Reviewing the performance of the Chief Executive Officer to pre determined criteria on an annual basis;
Recruitment, retention and termination policies and procedures for executives;
The appointment of any remuneration consultants providing advice to the Group on the scale and components of remuneration
packages of KMP; and
Reporting on executive remuneration.
The Committee seeks to align the interests of the executives with those of security holders through the use of performance hurdles to
drive sustainable growth and by requiring executives to hold a minimum shareholding from vested LTIP awards equal to their annual
pre-tax salary.
The Committee has adopted a process of benchmarking the executive KMP remuneration’s using independently provided market data.
The reports are provided directly to the Chair of the Committee to ensure they are prepared in a manner free from undue influence by
the Group’s executives.
During FY17, Ernst and Young provided the following remuneration-related services to the Group:
Assistance with changes to the Group’s executive reward framework, associated changes to plan documents and tax advice;
Provision of market remuneration data and market practice information;
Legal services regarding the implementation of an employee share trust;
Legal and tax advice in relation to the incoming CEO’s remuneration arrangements and equity awards; and
Assistance with the Remuneration Report.
Ernst and Young was not requested to, and did not provide, a remuneration recommendation in relation to any of the above
services
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11.
Remuneration report (continued)
(c)
Remuneration framework: structures, opportunities and performance outcomes
The remuneration framework seeks to align executive reward with the achievement of the Group’s strategic objectives:
The minimum shareholding requirement was introduced from the FY17 long-term incentive grant onwards. Further details of
executive security holdings are included in Section (g).
(i)
Remuneration structure
The executive remuneration framework that was in place during the course of the year ended 30 June 2017 has three components:
From FY18 the LTIP tranche subject to tenure will not be used for grants to executives based in Australia (LTIP grants made to the CEO
and Executive of the US Entertainment Centres business based in the USA will continue to have a tranche subject to service in line with
prevalent market practice in the USA). Instead, the LTIP issuance as at the commencement of FY18 will be granted to executives based
in Australia with 50% subject to a relative TSR measure and 50% subject to an EPS growth measure.
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11.
Remuneration report (continued)
(c)
(ii)
Remuneration framework: structures, opportunities and performance outcomes (continued)
Remuneration mix – FY17
The relative target proportions of annual base salary and performance incentives for executive KMP are set out below.
Note that Mr Kelly’s annual base salary is delivered approximately 55% in cash and 45% in equity (determined based on a notional equity
value as agreed at grant). The final value of the equity grant will vary with fluctuations in the security price and cannot be accessed until
2020. Mr Kelly’s remuneration quantum opportunity will not be reviewed until 2020. Mr Kelly did not receive STI or LTIP awards in
respect of FY17. However, Mr Kelly’s on-target remuneration mix for FY18 is included below for completeness.
Simon Kelly ‐ Chief Executive Officer & Managing
Director
29%
24%
23%
23%
Richard Johnson ‐ Chief Financial Officer
44%
28%
28%
Nicole Noye ‐ CEO – Australian Bowling Centres
Greg Oliver ‐ CEO – Health Clubs
Charlie Keegan ‐ CEO – US Entertainment Centres
Craig Davidson ‐ CEO – Australian Theme Parks
Deborah Thomas ‐ Former Chief Executive Officer
53%
53%
44%
53%
46%
24%
24%
24%
24%
24%
31%
24%
27%
24%
27%
Annual base salary (cash)
Annual base salary (equity)
Target STI
LTIP
(iii)
Remuneration elements
Annual base salary
Annual base salary includes cash salary, employer superannuation contributions and non-financial benefits and for Mr Kelly, a portion
is delivered in equity. Annual base salary may be reviewed annually to ensure executive pay is competitive with the market. There are
no guaranteed base pay increases in any of the executive KMP contracts. Annual base salary is also reviewed on promotion.
The market for remuneration reviews typically considers companies of similar size, by market capitalisation and revenue for corporate
roles, and ASX 200 Consumer Discretionary companies for Australian business unit roles. Consideration is given to US-listed
companies with similar revenue as US Entertainment Centres within similar industries for the CEO – US Entertainment Centres.
Remuneration packages for current KMP
The remuneration packages of current KMP was as follows for the year ended 30 June 2017:
Fixed
Annual base
salary (cash)
$600,000
$420,000
US$512,500
$384,375
Annual base salary
(equity)
$500,000(2)
-
-
-
At risk
Target STI(1)
$475,000
$189,000
US$281,875
$172,969
Target LTIP
grant value
$475,000
$189,000
US$358,750
$172,969
Total target
remuneration
$2,050,000
$798,000
US$1,153,125
$730,313
Simon Kelly
Nicole Noye
Charlie Keegan
Craig Davidson
(1) Excludes Stretch STI
(2) Mr Kelly agreed to take an upfront grant of restricted equity which vests over time in lieu of a portion of his cash remuneration for the first three years of his tenure. The
restricted equity begins to vest 6 months from appointment. Securities are held in trust and restricted from sale for three years. Mr Kelly’s base salary is also fixed for three
years, with no review until 2020. The number of rights was determined using the 5-day VWAP to 7 April 2017 of $1.876562, as agreed per the terms of Mr Kelly’s
appointment. Refer Section (g)(vi) of this report for further details.
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11.
Remuneration report (continued)
(c)
Remuneration framework: structures, opportunities and performance outcomes (continued)
(iii)
Remuneration elements (continued)
Short-term incentive
Who can participate?
All executives are able to participate in the STI; however participation and payment of any STI
remains at the Company’s absolute discretion
When is the STI paid?
If performance is sufficient, STI awards are payable in cash by 30 September each year.
What are the individual
opportunities?
Target awards for executives range between 43% and 63% of an executive’s annual base salary
(including superannuation) dependent upon the executive’s position.
What performance measures
are used?
Maximum awards range between 69% and 100% of an executive’s annual base salary (including
superannuation).
Key performance indicators (KPI’s) are split into financial and personal measure categories:
Financial KPIs
Earnings and revenue targets representing between 40% and 60% of an executive’s STI
opportunity.
For executives who act in Group-wide roles, the financial KPIs are based on Group earnings and
revenue related measures. Divisional earnings and revenue measures also apply to those
executives who occupy divisional roles.
Personal KPIs
Personal KPIs (representing the remaining 40% to 60% of an executive’s STI opportunity) are
[typically] not financial in nature and are set to support execution of improvements and initiatives
in such functions as:
relationship management;
risk and insurance management;
health, safety and engineering operations;
compliance;
customer and community engagement;
employee engagement;
business development; and
other strategic initiatives.
Each individual typically has 5-7 personal KPIs which each represent 5% - 10% of the STI
opportunity.
What are stretch STI awards?
KMP are eligible to receive a stretch STI award for out-performance of financial KPIs.
The stretch STI opportunity allows KMP to receive up to 160% of their target STI if they exceed
financial key performance indicators by 120%.
Deferred Short Term Incentive Plan (DSTI)
Historically, a percentage of the STI outcome an executive earned was deferred and settled in rights to acquire fully paid Group stapled
securities for nil exercise price. These rights were issued under the terms of the Group’s Deferred Short Term Incentive Plan rules and
vested in two equal tranches at 12 months and 24 months after the grant date.
As part of a change in overall remuneration mix, from FY17 onwards executives were no longer eligible to participate in the DSTI. Two
outstanding tranches (tranche 2 of the 2015 grant and tranche 1 of the 2016 grant) vested in FY17.
The delivery of the stretch STI payment was previously made under the DSTI plan. The second tranche of the final DSTI grant made to
KMP (in FY16) will vest in FY18. From FY17 onwards stretch STI payments will be made in cash.
Details of the outstanding grants and the number of rights that vested are set out in Section (g). Additional details regarding the terms
of the DSTI can be found in the FY16 Remuneration Report.
20 Ardent Leisure Group | Annual Report 2017
For personal use only
Directors’ report to stapled
security holders
11.
Remuneration report (continued)
(c)
(iv)
Remuneration framework: structures, opportunities and performance outcomes (continued)
STI outcomes in respect of FY17 performance
The percentage of STI that was awarded to the executives and the percentage that was forfeited because the executive did not meet
the performance criteria are set out below, in respect of FY17 and FY16 performance. These are presented on an accruals basis. FY16
outcomes have been re-stated for the change from a cash to an accruals basis. Actual payments are made to individuals following the
release of audited results.
Name
Simon Kelly
Richard Johnson
Nicole Noye
Greg Oliver
Charlie Keegan
Craig Davidson
Deborah Thomas
Financial year
FY17
FY16
FY17
FY16
FY17
FY16
FY17
FY16
FY17
FY16
FY17
FY16
FY17
FY16
STI Awarded
-
N/A
40%
93%
40%
95%
100%
98%
0%
86%
0%
89%
0%
100%
STI Forfeited
-
N/A
60%
7%
60%
5%
0%
2%
100%
14%
100%
11%
100%
0%
STI outcome
-
N/A
$147,826
$275,341
$75,600
$132,636
$291,181
$189,508
-
US$150,308
-
$117,193
-
$167,500(1)
(1) The FY16 cash-based Short-Term Incentive (STI) payment of $167,500 to Ms Thomas was subsequently donated by her in full to the Red Cross after the Dreamworld
tragedy.
Ardent Leisure Group | Annual Report 2017 21
For personal use only
Directors’ report to stapled
security holders
11.
Remuneration report (continued)
(c)
(v)
Remuneration framework: structures, opportunities and performance outcomes (continued)
Long-term incentive Plan (LTIP)
Who can participate?
All executives are eligible for participation at the discretion of the Board.
What are the individual
opportunities?
The LTIP awards range between 45% and 79% of an executive’s annual base salary
(including superannuation) dependent upon the executive’s role.
What types of securities are issued?
The LTIP is typically granted in the form of performance rights that can be converted into
fully paid securities once vested. Performance rights do not carry any voting or distribution
entitlements.
What restrictions are there on the
securities?
Performance rights are non-transferable. Executives may not hedge any portion of their
unvested awards.
Is there a performance gateway?
When can the performance rights
vest?
How are non-Australian residents
treated?
From FY17, for any rights to vest under the LTIP an initial gateway performance hurdle
must be met or exceeded. The gateway hurdle is a minimum return on equity target equal
to or greater than 2.5X the 10 year bond yield rate for Australian Government bonds.
Once the performance gateway is achieved the performance rights can vest as follows:
1/3rd are subject to a service condition of three years (note that from FY18, the tenure
component will no longer apply to Australian executives);
1/3rd are subject to a TSR performance hurdle tested equally two, three and four years
following the grant date; and
1/3rd are subject to a compound EPS performance hurdle tested equally two, three and
four years following the grant date.
For employees who are not Australian residents, the LTIP has previously granted
equivalent awards in cash. Administrative arrangements have now been made to issue
equity awards and not cash awards to non-Australian resident executives. All awards,
whether equity or cash, are subject to the same performance and tenure hurdles.
What is TSR and how is TSR
measured?
TSR is the total return an investor would receive over a set period of time assuming that all
distributions were reinvested in the entities securities. The TSR definition takes account of
both capital growth and distributions.
TSR is measured against the S&P/ASX 200 Industrials Index over the performance period.
TSR performance is measured by an independent third party. The vesting schedule for the
portion of the grant subject to TSR performance is as follows:
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%
What is EPS and how is EPS
measured?
The EPS hurdle refers to the compound annual growth of earnings per security over the
vesting period.
The vesting schedule for the portion of the grant subject to EPS performance is as follows:
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%
(vi)
LTIP outcomes
Three LTIP tranches (issued in FY14, FY15 and FY16) are due to vest in August 2017, subject to performance. 45,377 performance rights
out of a total of 418,435 that were subject to vesting will vest and a corresponding number of stapled securities will be issued to
Australian employees under the terms of the LTIP.
22 Ardent Leisure Group | Annual Report 2017
For personal use only
Directors’ report to stapled
security holders
11.
Remuneration report (continued)
(c)
(vi)
Remuneration framework: structures, opportunities and performance outcomes (continued)
LTIP outcomes (continued)
Details of the TSR and EPS performance are set out in the tables below:
Tranche
Performance period
T3-2013
T2-2014
T1-2015
1 July 2013 – 30 June 2017
(4 years)
1 July 2014 – 30 June 2017
(3 years)
1 July 2015 – 30 June 2017
(2 years)
TSR performance rights
EPS performance rights
Group TSR
performance
Percentile
Vesting
percentage
Group
CAGR EPS
Vesting
percentage
48.31%
53.26
54.70%
N/A
N/A
(13.93%)
37.30
Nil
(44.88%)
2.05%
43.89
Nil
(56.79%)
Nil
Nil
Ardent previously disclosed details of vested awards in the year they were paid (for example in the FY16 Remuneration Report, LTIP
awards that were measured on performance up to 30 June 2015 and vested in August 2015 were reported as remuneration in FY16).
From this year, LTIP outcomes reported are aligned to the performance period ending in the current financial year to more closely align
reporting of LTIP outcomes with the Group’s financial performance for the relevant year. For awards that were due to vest in August
2016 and have not yet been disclosed, the performance outcomes were as follows:
Tranche
T3 2012
T2 2013
T1 2014
Performance Period
Group TSR performance
Quartile Ranking
Vesting Percentage
1 July 2012 to 30 June 2016
1 July 2013 to 30 June 2016
1 July 2014 to 30 June 2016
105.30%
46.45%
(15.01%)
73.26
61.05
38.93
96.5%
72.1%
Nil
The CAGR EPS for the testing period (1 July 2014 to 30 June 2016) was approximately 2.39% and as such none of the EPS tested
rights vested under the 2014 grant.
Details of these awards are included in Section (g)
Ardent Leisure Group | Annual Report 2017 23
For personal use only
Directors’ report to stapled
security holders
11.
Remuneration report (continued)
(d)
Remuneration outcomes for executives
This section sets out the actual remuneration outcomes realised by executives and the statutory remuneration disclosures for FY17 and
FY16 as well as a summary of the Group’s business performance over the last five years.
(i)
Actual remuneration outcomes
The table below sets out the total realised pay in respect of the years ended 30 June 2017 and 30 June 2016. The deferred equity and
LTIP vested elements of realised pay relate to both individual and the Group’s performance up to 30 June 2017. The information below
is different to the statutory required information later in this section, which includes the accounting value of equity expensed in the
year, rather than the vested value shown in this table.
Name
Simon Kelly(3)
Richard Johnson(4)
Nicole Noye
Greg Oliver(5)
Charlie Keegan
Craig Davidson
Deborah Thomas(2)
STI on an accrued basis
Financial
year
Base salary
(incl Super)
paid
Cash
Deferred
equity vested(1)
LTIP
vested(1)
Termination
payment
Total realised pay in
respect of the
financial year
FY17
FY16
FY17
FY16
FY17
FY16
FY17
FY16
FY17
FY16
FY17
FY16
FY17
FY16
-
$54,634
N/A
N/A
$147,826
$666,305
$275,341
$516,305
$75,600
$420,026
$132,636
$400,000
$291,181(6)
$166,603
$189,508
$568,449
US$512,500
-
US$500,000 US$150,308
-
$117,193
-
$167,500(7)
$384,376
$375,000
$757,516
$670,000
-
N/A
$95,521
$71,307
$108,361
$54,388
$170,174
$79,236
US$147,311
US$112,799
$99,091
$76,418
$86,989
$18,830
-
N/A
$67,657
$238,078
-
-
$222,842
$82,088
US$13,577
US$40,231
-
-
-
-
-
N/A
-
-
-
-
-
-
-
-
-
-
$731,291
-
$54,634
N/A
$977,309
$1,101,031
$603,987
$587,024
$850,800
$919,281
US$673,388
US$803,338
$483,467
$568,611
$1,575,796
$856,330
(1) The vesting of Deferred equity and LTIP performance rights into fully paid stapled securities reflect previous performance of executives and of the Group up to 30 June
2017. Securities to be issued in respect of the financial year are valued at $1.88 per security, representing the closing price at 30 June 2017 (2016: $1.88 per security,
representing the closing price at 30 June 2016). Amounts expressed in US dollars are converted from Australian dollars at an exchange rate of 0.7692, representing the
closing rate at 30 June 2017 (2016: 0.7426, representing the closing rate at 30 June 2016)
(2) Ceased employment 1 July 2017. Ms Thomas was paid a termination benefit of $731,291 equal to 12 months average base remuneration on 1 July 2017. This amount
was lower than the prima facie contractual entitlement in alignment with the Corporations Amendment (Improving Accountability on Termination Payments) Act.
Though paid in FY18, the payment is included in this remuneration outcomes table for completeness and transparency as it was contractually committed during FY17.
Entitlements under the Group’s DSTI which had not vested by 1 July 2017 were forfeited. Ms Thomas will retain the right to previously granted but unvested entitlements
under the Group’s LTI plan which remain subject to performance criteria. Vesting of those entitlements will remain subject to Ardent achieving TSR and EPS growth
targets as specified in the LTI plan. Unvested LTIP entitlements that are subject to tenure were forfeited. Ms Thomas and Ardent have entered into a transitional
consultancy arrangement, whereby Ms Thomas will provide ongoing support to the CEO, senior management and Board of Ardent in respect of the pending Coronial
Inquiry into the Dreamworld tragedy. Ms Thomas will be paid a consultancy fee of $3,000 per day, for each day reasonably expended in relation to the Coronial Inquiry.
The Board has determined this arrangement is appropriate based on external professional advice and market benchmarking. The consultancy agreement can be
terminated by either party with one month’s notice following the conclusion of the Coronial Inquiry.
(3) Commenced employment 9 June 2017. Mr Simon Kelly’s annual base salary relates to the period employed from 9 June 2017 and an additional 5 days for work product
provided to the Group prior to commencement of employment calculated based on Mr Kelly’s notional annual base salary
(4) Ceased employment 14 July 2017.
(5) Ceased employment on the sale of Health Clubs on 25 October 2016. During the prior year, Greg Oliver was paid $78,449 in lieu of unused annual leave from previous
years.
(6) Sale completion bonus. STI paid on completion of the sale of Health Clubs in October 2016 of $220,500 plus prorated STI paid for 117 days of $70,681.
(7) The FY16 cash-based Short-Term Incentive (STI) payment of $167,500 to Ms Thomas was subsequently donated by her in full to the Red Cross after the Dreamworld
tragedy.
24 Ardent Leisure Group | Annual Report 2017
For personal use only
Directors’ report to stapled
security holders
11.
Remuneration report (continued)
(d)
(ii)
Remuneration outcomes for executives (continued)
Details of remuneration – Executive Key Management Personnel
Details of the remuneration of Executive KMP of the Group for FY17 and FY16 are set out in the tables below. The tables set out the total
cash benefits paid to the executives 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. Due to a change in reporting methodology, FY16 disclosures are restated on an accruals basis and therefore some
figures may differ from amounts disclosed in the FY16 Remuneration Report.
Short term benefits
Post-
employment
benefits
Other long
term
benefits
Salary Cash bonus
$
FY17
51,860
$
-
Annual
leave(1)
$
4,038
FY16
FY17
FY16
FY17
N/A
N/A
N/A
631,305
147,826
(27,884)
496,996
275,341
400,410
75,600
23,389
(6,197)
FY16
380,692
132,636
17,446
Simon Kelly(2)
Chief Executive Officer and
Managing Director
Richard Johnson(3)
Chief Financial Officer
Nicole Noye
CEO – Australian Bowling and
Entertainment Centres
Greg Oliver(5)
CEO – Health Clubs
Charlie Keegan(4)
FY17
FY16
FY17
156,795
291,181
8,523
549,141
189,508
(44,800)
681,481
-
CEO – US Entertainment Centres FY16
687,570
206,694
Craig Davidson
CEO – Australian Theme Parks
Deborah Thomas
Former Chief Executive Officer
FY17
FY16
FY17
FY16
355,692
117,193
722,516
-
650,692
167,500(6)
364,760
-
(17,674)
14,216
9,520
297
18,107
35,085
(6,871)
40,937
Super-
annuation Termination
Total cash
payment
Security-
based
payments
Total
Security-
based
payment
% of
total
$
2,774
N/A
35,000
19,308
19,616
19,308
9,808
19,308
-
-
19,616
19,308
35,000
19,308
$
-
$
$
$
58,672
31,798
90,470
35.15%
N/A
N/A
N/A
N/A
N/A
-
-
-
-
-
-
-
-
-
-
786,247
646,231 1,432,478
45.11%
815,034
246,589 1,061,623
23.23%
489,429
182,706
672,135
27.18%
550,082
87,285
637,367
13.69%
466,307
285,217
751,524
37.95%
713,157
154,171
867,328
17.78%
695,697
438,891 1,134,588
38.68%
903,784
320,858 1,224,642
26.20%
366,702
180,480
547,182
32.98%
492,490
125,998
618,488
20.37%
731,291(7)
1,506,914
512,335 2,019,249
25.37%
-
872,585
101,845
974,430
10.45%
FY17
3,009,127
514,607
FY16
3,120,783 1,088,872
121,814
731,291
4,369,968 2,277,658 6,647,626
34.26%
96,540
-
4,347,132 1,036,746 5,383,878
19.26%
(1) Annual leave amounts represent the increase/(decrease) in the liability for accumulated annual leave during the year.
(2) Commenced employment 9 June 2017. Mr Simon Kelly’s annual base salary relates to the period employed from 9 June 2017 and an additional 5 days for work product
provided to the Group prior to commencement of employment.
(3) Ceased employment 14 July 2017. During FY16, Richard Johnson was awarded a $75,000 increase of annual base salary which was deferred to 1 July 2016, as disclosed
in the FY16 Remuneration Report. This amount has been included in the annual base salary disclosed above.
(4) Remuneration is converted from US dollars to Australian dollars at the average exchange rate of 0.7542 (2016: 0.7272) and includes both cash settled and equity settled
awards.
(5) Ceased employment on the sale of Health Clubs on 25 October 2016. During the prior year, Greg Oliver was paid $78,449 in lieu of unused annual leave from previous
years.
(6) The FY16 cash-based Short-Term Incentive (STI) payment of $167,500 to Ms Thomas was subsequently donated by her in full to the Red Cross after the Dreamworld
tragedy.
(7) Ceased employment 1 July 2017. Ms Thomas was paid a termination benefit of $731,291 equal to 12 months average base remuneration on 1 July 2017. This amount
was lower than the prima facie contractual entitlement in alignment with the Corporations Amendment (Improving Accountability on Termination Payments) Act.
Though paid in FY18, the payment is included in this table for completeness and transparency as it was contractually committed during FY17. Entitlements under the
Group’s DSTI which had not vested by 1 July 2017 were forfeited. Ms Thomas will retain the right to previously granted but unvested entitlements under the Group’s LTI
plan which remain subject to performance criteria. Vesting of those entitlements will remain subject to Ardent achieving TSR and EPS growth targets as specified in the
LTI plan. Unvested LTIP entitlements that are subject to tenure will be forfeited. Ms Thomas and Ardent have entered into a transitional consultancy arrangement,
whereby Ms Thomas will provide ongoing support to the CEO, senior management and Board of Ardent in respect of the pending Coronial Inquiry into the Dreamworld
tragedy. Ms Thomas will be paid a consultancy fee of $3,000 per day, for each day reasonably expended in relation to the Coronial Inquiry. The Board has determined this
arrangement is appropriate based on external professional advice and market benchmarking. The consultancy agreement can be terminated by either party with one
month’s notice following the conclusion of the Coronial Inquiry.
Ardent Leisure Group | Annual Report 2017 25
For personal use only
Directors’ report to stapled
security holders
11.
Remuneration report (continued)
(d)
(ii)
Remuneration outcomes for executives (continued)
Details of remuneration – Executive Key Management Personnel (continued)
Note that the Income Statement expense includes accelerated expensing of LTIP and DSTI for Ms Deborah Thomas and Mr Richard
Johnson which is due to vest in future periods as no future service obligations remain and these entitlements were contracted prior to
30 June 2017.
Security-based payments included in the tables above reflect the amounts in the Income Statements of the Group. For performance
rights issued to executives, the 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. 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 executive compensation would be reduced by
$423,418 to $1,854,240 (FY16: reduced by $9,780 to $1,239,468)
(iii)
Summary of performance
Between 30 June 2013 and 30 June 2016 (prior to the Dreamworld incident), core earnings per security of the Group had increased by
5.0%. Over the last five years, the market capitalisation of the Group has increased by 29.3%. The table below compares the Group’s
security price (as at 30 June each year), core earnings per security, distribution/dividend per security and market capitalisation over the
past five years. Further details of TSR and EPS performance over the relevant vesting periods for the LTIP are included later in this section.
Security price as at 30 June
Core earnings per security (cents)
Distribution/dividend per security (cents)
Market capitalisation as at 30 June ($ million)
(e)
Service agreements of Key Management Personnel
2017
$1.880
2.41
3.00
$882.0
2016
$1.880
13.80
12.50
$870.5
2015
$2.170
12.92
12.50
$959.8
2014
$2.710
14.40
13.00
$1097.7
2013
$1.715
13.14
12.00
$682.2
Remuneration and other terms of employment for KMP are formalised in service agreements. The major provisions of the agreements
relating to remuneration are set out below:
Executive
Term
Termination
Simon Kelly
Chief Executive Officer and
Managing Director
Richard Johnson
Chief Financial Officer
Nicole Noye
CEO – Australian Bowling and
Entertainment Centres
Greg Oliver
CEO – Health Clubs
Charlie Keegan
CEO – US Entertainment Centres
Craig Davidson
CEO – Australian Theme Parks
No fixed term.
No fixed term.
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. The Group may also make a payment in lieu of notice, in which case
Mr Kelly will also be entitled to receive an additional severance payment of
$350,000 prorated commensurate with the notice period being paid out.
Employment continued with the Group unless the executive gave the Group six
months’ notice in writing, or the Group gave the executive 12 months’ notice in
writing.
No fixed term.
Employment shall continue with the Group unless either party gives three
months’ notice in writing.
No fixed term.
No fixed term.
Automatic
renewal on a
year by year
basis.
No fixed term.
Employment shall continue with the Group unless the executive gives the Group
three months’ notice in writing, or the Group gives the executive six 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.
Employment shall continue with the Group unless either party gives three
months’ notice in writing.
Employment continued with the Group unless the executive gave the Group six
months’ notice in writing, or the Group gave the executive 12 months’ notice in
writing.
Deborah Thomas
Former Chief Executive Officer
No fixed term.
Other than as set out above, there are no contracted termination benefits payable to any KMP.
26 Ardent Leisure Group | Annual Report 2017
For personal use only
Directors’ report to stapled
security holders
11.
Remuneration report (continued)
(f)
Non-Executive Director Fees
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 Non-Executive Directors do not participate in equity nor 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 total aggregate level of directors’ fees payable by the Group is $1,200,000 per
annum as set by investors at the 30 October 2014 general meeting. There is no proposal to increase the aggregate fee cap in FY18.
The Board has determined that Board fees for FY17 be the same as Board fees for the prior year. They are as follows:
Position
Board Chair
Other Non-Executive Director
Audit and Risk Committee
Other Committee
- Chair
- Member
- Chair
- Member
Non Executive
Director Fees
$205,000
$120,000
$20,000
$15,000
$12,500
$7,500
There are no further changes to directors’ fees proposed for FY18, other than the introduction of a A$136,000 per annum fee for any US-
based Non-Executive Directors.
Details of the actual fees delivered to Non-Executive Directors of the Group for FY17 and FY16 are set out below:
Independent Directors
George Venardos
Roger Davis
David Haslingden
Don Morris AO
Melanie Willis
Neil Balnaves AO
Salary
$
Superannuation
$
FY17
FY16
FY17
FY16
FY17
FY16
FY17
FY16
FY17
FY16
FY17
FY16
FY17
FY16
197,748
146,119
142,104
141,553
130,023
120,528
130,023
123,288
136,872
122,738
77,352
208,192
814,122
862,418
17,211
13,881
13,500
13,447
12,352
11,450
12,352
11,712
13,003
11,660
7,080
19,308
75,498
81,458
Total
$
214,959
160,000
155,604
155,000
142,375
131,978
142,375
135,000
149,875
134,398
84,432
227,500
889,620
943,876
(1) Retired 6 November 2016.
(g)
(i)
Additional Statutory disclosures
Directors’ interests in securities
Changes to Directors’ interests in stapled securities during the period are set out below:
George Venardos
Roger Davis
David Haslingden
Simon Kelly
Don Morris AO
Melanie Willis
Neil Balnaves AO
Deborah Thomas
(1) Securities held on joining/leaving the Group
Opening
balance
209,857
200,658
160,000
-
13,950
9,674
3,001,510
31,358
3,627,007
Acquired
5,982
-
-
-
-
-
10,911
16,893
Disposed
-
-
-
-
-
-
-
-
-
Other
Changes(1)
-
-
-
280,409
-
-
(3,001,510)
-
(2,721,101)
Closing balance
215,839
200,658
160,000
280,409
13,950
9,674
-
42,269
922,799
Ardent Leisure Group | Annual Report 2017 27
For personal use only
Directors’ report to stapled
security holders
11.
Remuneration report (continued)
(g)
(ii)
Additional Statutory disclosures (continued)
Other KMP intersts in securities
Changes to the interests of other KMP in stapled securities during the period are set out below:
Opening
balance
100,000
2,500
600,347
33,630
13,306
749,783
Acquired under
the Group's
equity plans
164,566
28,930
294,862
93,171
40,648
622,177
Disposed
Other Changes(1)
Closing balance
-
(25,644)
(600,347)
-
(3,954)
(629,945)
-
-
(294,862)
-
-
(294,862)
264,566
5,786
-
126,801
50,000
447,153
Richard Johnson
Nicole Noye
Greg Oliver
Charlie Keegan
Craig Davidson
(1) Securities held on joining/leaving the Group
(iii)
Valuation inputs
For performance rights outstanding at 30 June 2017, the tables below show 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
performance rights granted to employees at 30 June 2017:
DSTI 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
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
LTIP 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
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
$0.72
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
$1.44
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
2016
23 August 2016
31 August 2017
31 August 2018
1.40% per annum
40.0% per annum
5.0% per annum
$2.50
$2.32
2016
23 August 2016
31 August 2018
31 August 2019
31 August 2020
1.40% per annum
40.0% per annum
5.0% per annum
$2.50
$1.52
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.
28 Ardent Leisure Group | Annual Report 2017
For personal use only
Directors’ report to stapled
security holders
11.
(g)
(iii)
Remuneration report (continued)
Additional Statutory disclosures (continued)
Valuation inputs (continued)
The tables below show the fair value of the performance rights in each grant as at 30 June 2017 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 2017:
DSTI 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
2015
18 August 2015
31 August 2016
31 August 2017
1.80% per annum
45.0% per annum
1.6% per annum
$1.88
$1.87
LTIP 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 at year end
2013
23 August 2013
20 August 2015
31 August 2016
31 August 2017
1.80% per annum
45.0% per annum
1.6% per annum
$1.88
$0.02
2014
19 August 2014
31 August 2016
31 August 2017
31 August 2018
1.80% per annum
45.0% per annum
1.6% per annum
$1.88
$0.08
2015
15 December 2015
31 August 2017
31 August 2018
31 August 2019
1.80% per annum
45.0% per annum
1.6% per annum
$1.88
$0.31
(iv)
Details of equity grant movements
2016
23 August 2016
31 August 2017
31 August 2018
1.80% per annum
45.0% per annum
1.6% per annum
$1.88
$1.86
2016
23 August 2016
31 August 2018
31 August 2019
31 August 2020
1.80% per annum
45.0% per annum
1.6% per annum
$1.88
$0.80
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
Number
lapsed
Value of
performance
rights at lapse
Number
vested
Value of
performance
rights at
vesting
Maximum
value yet to
vest
Year
Number
$
$
$
$
Simon
Kelly
Richard Johnson
Grant in lieu
of
remuneration 2017
Total
LTIP
2012
2013
2014
2015
2016
2014
2015
2016
DSTI
Total
T1
T3
T2
T3
T1
T2
T3
T1
T2
T3
T1
T2
T3
T4
T2
T1
T2
T1
T2
2020
2017
2017
2018
2017
2018
2019
2018
2019
2020
2019
2020
2021
2020
2017
2017
2018
2018
2019
799,334
799,334
82,075
65,789
65,789
33,804
33,804
33,804
65,994
65,994
65,994
32,719
32,719
32,719
49,080
16,920
21,009
21,010
29,799
29,799
778,821
1,658,059
1,658,059
49,491
51,388
47,579
58,846
52,751
44,523
82,407
73,867
66,133
49,445
45,247
33,753
105,493
46,474
43,152
40,749
70,788
67,334
-
-
2,872
18,355
-
33,804
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,029,420 55,031
-
-
-
-
79,203
8,070
47,434
51,578
-
-
-
94,989
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
16,920
-
21,009
-
-
-
-
-
-
-
154,637 164,566
1,658,059
-
- 1,658,059
-
-
47,579
-
52,751
44,523
82,407
73,867
66,133
49,445
45,247
33,753
105,493
-
-
40,749
70,788
67,334
780,069
222,560
133,290
-
-
-
-
-
-
-
-
-
-
-
47,545
59,035
-
-
-
462,430
Ardent Leisure Group | Annual Report 2017 29
For personal use only
Directors’ report to stapled
security holders
11.
(g)
(iv)
Remuneration report (continued)
Additional Statutory disclosures (continued)
Details of equity grant movements (continued)
Year
granted Tranche
Financial years in
which
performance
rights may vest
Year
Number
Nicole Noye
LTIP
2015
2016
DSTI
2015
Greg Oliver
Total
LTIP
DSTI
2016
2012
2013
2014
2015
2014
2015
2016
T1
T2
T3
T1
T2
T3
T4
T1
T2
T1
T2
T3
T2
T3
T1
T2
T3
T1
T2
T3
T2
T1
T2
T1
T2
2018
2019
2020
2019
2020
2021
2020
2017
2018
2018
2019
2017
2017
2018
2017
2018
2019
2018
2019
2020
2017
2017
2018
2018
2019
Value of
performance
rights at grant
Number
lapsed
Value of
performance
rights at lapse
Number
vested
17,857
17,857
17,857
16,733
16,733
16,733
25,100
28,930
28,930
28,709
28,710
$
22,298
19,987
17,894
25,287
23,140
17,262
53,950
59,422
56,110
68,198
64,873
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
Value of
performance
rights at
vesting
Maximum
value yet to
vest
$
$
-
-
-
-
-
-
-
81,293
-
-
-
22,298
19,987
17,894
25,287
23,140
17,262
53,950
-
56,110
68,198
64,873
-
-
-
-
-
-
-
28,930
-
-
-
244,149
428,421
28,930
81,293
368,999
28,043
23,026
23,026
14,941
14,941
14,941
21,875
21,875
21,875
24,388
17,759
17,760
36,379
36,379
16,910
17,986
16,652
26,009
23,315
19,679
27,315
24,485
21,921
66,987
36,477
34,446
86,418
82,202
981
6,424
-
14,941
-
-
-
-
-
-
-
-
-
-
2,757
18,051
-
41,984
-
-
-
-
-
-
-
-
-
-
27,062
16,602
23,026
-
14,941
14,941
21,875
21,875
21,875
24,388
17,759
17,760
36,379
36,379
76,044
46,652
54,111
-
35,111
35,111
51,406
51,406
51,406
68,530
49,903
41,736
85,491
85,491
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
317,208
500,802
22,346
62,792 294,862
732,398
30 Ardent Leisure Group | Annual Report 2017
For personal use only
Directors’ report to stapled
security holders
11.
(g)
(iv)
Remuneration report (continued)
Additional Statutory disclosures (continued)
Details of equity grant movements (continued)
Year
granted Tranche
Financial years in
which performance
rights may vest
Value of
performance
rights at grant
Number
lapsed
Value of
performance
rights at lapse
Number
vested
Charlie Keegan
LTIP
2013
2014
2015
2016
2014
2015
2016
2012
2014
2015
2016
2014
2015
2016
2015
2016
DSTI
LTIP
Total
LTIP
DSTI
Total
LTIP
Cash Settled
Charlie Keegan
Craig Davidson
Deborah Thomas
DSTI
2015
2016
T2
T3
T1
T2
T3
T1
T2
T3
T1
T2
T3
T4
T2
T1
T2
T1
T2
T3
T1
T2
T3
T1
T2
T3
T1
T2
T3
T4
T2
T1
T2
T1
T2
T1
T2
T3
T1
T2
T3
T4
T1
T2
T1
T2
Year
Number
2017
2018
2017
2018
2019
2018
2019
2020
2019
2020
2021
2020
2017
2017
2018
2018
2019
17,162
17,162
27,961
27,961
27,961
62,055
62,056
62,056
41,710
41,709
41,709
62,565
21,653
59,144
59,144
42,724
42,724
$
13,405
12,412
48,675
43,633
36,827
77,488
69,459
62,186
63,032
57,679
43,027
134,477
59,474
121,482
114,710
101,491
96,539
4,788
-
27,961
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
13,454
-
78,570
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,374
-
-
-
-
-
-
-
-
-
-
-
21,653
59,144
-
-
-
Value of
performance
rights at
vesting
Maximum
value yet to
vest
$
$
34,771
-
-
-
-
-
-
-
-
-
-
-
60,845
166,195
-
-
-
-
12,412
-
43,633
36,827
77,488
69,459
62,186
63,032
57,679
43,027
134,477
-
-
114,710
101,491
96,539
2017
17,039
10,275
596
1,675
16,443
46,205
-
734,495
1,166,271 33,345
93,699 109,614
308,016
912,960
2017
2018
2019
2018
2019
2020
2019
2020
2021
2020
2017
2017
2018
2018
2019
2018
2019
2020
2019
2020
2021
2020
2017
2018
2018
2019
11,368
11,368
11,368
16,741
16,741
16,741
15,313
15,314
15,314
22,971
13,307
27,341
27,341
25,367
25,367
19,789
17,740
14,973
20,904
18,738
16,776
23,141
21,178
15,798
49,374
36,550
56,158
53,028
60,259
57,319
11,368
-
-
-
-
-
-
-
-
-
-
-
-
-
-
31,944
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13,307
27,341
-
-
-
-
-
-
-
-
-
-
-
-
-
37,393
76,828
-
-
-
-
17,740
14,973
20,904
18,738
16,776
23,141
21,178
15,798
49,374
-
-
53,028
60,259
57,319
271,962
481,725 11,368
31,944 40,648
114,221
369,228
99,702
99,702
99,703
38,731
38,732
38,732
58,098
10,016
10,017
36,255
36,256
124,498
111,596
99,912
58,530
53,562
39,956
124,876
20,573
19,428
86,124
81,924
-
-
-
-
-
-
58,098
-
-
-
36,256
-
-
-
-
-
-
109,224
-
-
-
68.161
-
-
-
-
-
-
-
10,016
-
-
-
-
-
-
-
-
-
-
28,145
-
-
-
124,498
111,596
99,912
58,530
53,562
39,956
-
-
19,428
86,124
-
Total
565,944
820,979 94,354
177,385 10,016
28,145
593,606
Ardent Leisure Group | Annual Report 2017 31
For personal use only
Directors’ report to stapled
security holders
11.
Remuneration report (continued)
(g)
(v)
Additional Statutory disclosures (continued)
LTI performance rights
The number of performance rights on issue and granted to the Group’s executive KMP under the LTIP is set out below:
30 June 2017
Current executives
Richard Johnson
Nicole Noye
Charlie Keegan
Craig Davidson
Deborah Thomas
Equity settled
Current executive
Charlie Keegan
Cash settled
Total performance rights
(vi)
DSTI rights
Opening
balance
Granted as
compensation
Vested
Lapsed
Closing
balance
Vested and
exercisable
Unvested
513,047
53,571
304,374
84,327
299,107
1,438,969
147,237
75,299
187,693
68,912
174,293
653,434
(126,637)
-
(12,374)
-
-
(301,208)
(55,031)
-
(32,749)
(11,368)
(58,098)
(179,592)
478,616
128,870
446,944
141,871
415,302
1,611,603
17,039
17,039
1,456,008
-
-
653,434
(16,443)
(16,443)
(317,651)
(596)
(596)
(180,188)
-
-
1,611,603
-
-
-
-
-
-
-
-
-
478,616
128,870
446,944
141,871
415,302
1,611,603
-
-
1,611,603
The number of rights on issue and granted to the Group’s executive KMP under the DSTI is set out below:
Opening
balance
Granted as
compensation
Vested
Lapsed
Closing
balance
Vested and
exercisable
30 June 2017
Current executives
Richard Johnson
Nicole Noye
Greg Oliver
Charlie Keegan
Craig Davidson
Deborah Thomas
58,939
57,860
59,907
139,941
67,989
20,033
59,598
57,419
72,758
85,448
50,734
72,511
(37,929)
(28,930)
(132,665)
(80,797)
(40,648)
(10,016)
-
-
-
-
-
(36,256)
80,608
86,349
-
144,592
78,075
46,272
Unvested
80,608
86,349
-
144,592
78,075
46,272
435,896
-
-
-
-
-
-
-
Total performance rights
404,669
398,468
(330,985)
(36,256)
435,896
(vi)
Rights delivered to Simon Kelly as part of fixed remuneration
30 June 2017
Current executives
Simon Kelly
Total performance rights
Opening
balance
Granted as
compensation
Vested
Lapsed
Closing
balance
Vested and
exercisable
Unvested
-
-
799,334
799,334
-
-
-
-
799,334
799,334
-
-
799,334
799,334
(vii)
Loans and other transactions with KMP
There were no loans made to KMP during the financial year, as disclosed in Note 37(e) to the financial statements. Refer to Note 37(f) to
the financial statements for details of other transactions with KMP during the financial year.
32 Ardent Leisure Group | Annual Report 2017
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 37.
14.
Events occurring after reporting date
Subsequent to 30 June 2017, a distribution of 1.0 cent per stapled security has been declared by the Board of Directors. The total
distribution amount of $4.7 million will be paid on or before 31 August 2017 in respect of the half year ended 30 June 2017.
As noted above, effective 14 August 2017, the Group completed the disposal of its Marinas business for gross sale proceeds (excluding
working capital adjustments) of $126.0 million.
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 2017.
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.
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.
Ardent Leisure Group | Annual Report 2017 33
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 2017 and fees paid to its related entities during the
financial year are disclosed in Notes 7 and 37 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)
Theme Parks – Australia
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 10 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.
34 Ardent Leisure Group | Annual Report 2017
For personal use only
Directors’ report to stapled
security holders
18.
Environmental regulations (continued)
(b)
Marinas – Australia
During the period of ownership by the Group, Schedule 1 Environment Protection Licences were held for all five NSW marinas in the
portfolio in accordance with the Protection of the Environment Operations Act 1997 (NSW). There were no specific environmental
licence requirements in Victoria relating to the Pier 35 or Victoria Harbour marinas.
During the period, the NSW Environment Protection Authority (EPA) commenced proceedings against Ardent Leisure Limited in relation
to the diesel spill that occurred at Rushcutters Bay marina in May 2016. Ardent Leisure Limited pleaded guilty to those proceedings on
30 June 2017, however the outcome will not be determined until later in 2017. To the extent that statutory fines or penalties may be
imposed, they are not expected to be material to the Group and, in any event, will be met by insurance cover.
(c)
Bowling and Entertainment Centres – Australia
Australian Bowling and Entertainment 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 and Entertainment Centres – New Zealand
There are no specific requirements relating to the New Zealand centres that are not reflected in the above statement.
(e)
US Entertainment Centres – United States of America
The US Entertainment Centres are 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 the US Entertainment Centres, the OSHA requires that MSDS be available to all 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 the US Entertainment Centres.
(f)
Goodlife Health Clubs – Australia
During the period of ownership by the Group, Goodlife was subject to environmental regulations across the business and had initiatives
in place to meet all areas of environmental compliance.
Water conservation was a high priority and management implemented a range of strategies to meet current water regulations as per
each State’s regulations. A recycling program was implemented across the business, assisting with reduction of waste products and
meeting environmental standards.
Hazardous substances and dangerous goods were strictly monitored in the business and, where possible, non-hazardous chemicals
were used. All hazardous chemicals and dangerous goods were disposed as per current regulations. All clubs held site specific chemical
registers with safe work methods.
Noise emissions did not contravene State regulations or impact on surrounding business or neighbourhoods.
Ardent Leisure Group | Annual Report 2017 35
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 2015/2016 emissions report under the Act in September 2016.
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.
George Venardos
Chairman
Sydney
31 August 2017
Simon Kelly
Managing Director
36 Ardent Leisure Group | Annual Report 2017
For personal use only
Auditor’s Independence Declaration
As lead auditor for the audit of Ardent Leisure Group for the year ended 30 June 2017, I declare that to
the best of my knowledge and belief, there have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b)
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 they controlled during the period.
Timothy J Allman
Partner
PricewaterhouseCoopers
Brisbane
31 August 2017
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 2017
Income Statements
Income
Revenue from operating activities
Management fee income
Valuation gains - investment properties
Interest income
Gain on sale and leaseback of US Entertainment Centres
Other income
Note
3
7(b)
Consolidated
Group
2017
$’000
Consolidated
Group
2016
$’000
ALL Group
2017
$’000
ALL Group
2016
$’000
498,048
-
-
86
-
1,727
477,059
-
2,050
81
1,672
-
498,048
1,200
-
77
-
1,727
477,059
1,200
-
68
1,672
-
Total income
499,861
480,862
501,052
479,999
Expenses
Purchases of finished goods
Salary and employee benefits
Borrowing costs
Property expenses
Depreciation and amortisation
Loss on closure of Australian Bowling and Entertainment
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
Valuation loss - property, plant and equipment
Dreamworld incident costs
Net loss from derivative financial instruments
Other expenses
4
5
6
8
69,860
206,925
12,160
68,421
48,894
470
2,681
24,082
28,730
13,888
-
255
783
88,747
7,048
421
48,543
62,772
178,688
14,737
57,531
42,214
-
397
18,131
22,335
7,525
64
301
-
-
-
170
40,965
69,860
206,652
9,571
80,233
32,646
4
789
24,082
28,730
13,888
-
-
783
-
6,701
-
48,062
62,772
178,862
10,146
100,370
23,642
-
23
18,131
22,335
7,525
64
-
-
-
-
-
40,314
Total expenses
621,908
445,830
522,001
464,184
(Loss)/profit before tax (benefit)/expense
Income tax (benefit)/expense
(Loss)/profit from continuing operations
Profit from discontinued operations
(Loss)/profit for the year
10
16(b)
(122,047)
(5,561)
(116,486)
53,929
(62,557)
35,032
7,448
27,584
14,803
42,387
(20,949)
(5,421)
(15,528)
18,592
3,064
15,815
7,426
8,389
2,252
10,641
Attributable to:
Stapled security holders
(Loss)/profit for the year
(62,557)
(62,557)
42,387
42,387
3,064
3,064
10,641
10,641
The above Income Statements should be read in conjunction with the accompanying notes.
Total basic (losses)/earnings per security/share (cents)
Basic (losses)/earnings per security/share (cents) from
continuing operations
Total diluted (losses)/earnings per security/share (cents)
Diluted (losses)/earnings per security/share (cents) from
continuing operations
11
11
11
11
(13.37)
(24.89)
(13.34)
(24.84)
9.37
6.10
9.35
6.09
0.65
(3.32)
0.65
(3.31)
2.35
1.85
2.35
1.85
38 Ardent Leisure Group | Annual Report 2017
For personal use only
Statements of Comprehensive Income
for the year ended 30 June 2017
Statements of Comprehensive Income
(Loss)/profit for the year
Other comprehensive income for the year
Items that may be reclassified to profit and loss:
Cash flow hedges
Foreign exchange translation difference
Income tax (expense)/benefit relating to these items
Items that will not be reclassified to profit and loss:
(Loss)/gain on revaluation of property, plant and equipment
Other comprehensive (loss)/income for the year, net of tax
Total comprehensive (loss)/income for the year, net of tax
Attributable to:
Stapled security holders
Total comprehensive (loss)/income for the year, net of tax
Total comprehensive (loss)/income for the year attributable to
stapled security holders arises from:
Continuing operations
Discontinued operations
Total comprehensive (loss)/income for the year, net of tax
Note
31
31
31
31
Consolidated
Group
2017
Consolidated
Group
2016
$’000
$’000
(62,557)
42,387
ALL Group
2017
$’000
3,064
ALL Group
2016
$’000
10,641
3,154
(3,280)
(562)
(1,215)
(1,903)
(64,460)
(1,878)
2,049
441
10,534
11,146
53,533
1,549
(3,837)
(562)
-
(2,850)
214
(1,321)
2,277
441
-
1,397
12,038
(64,460)
(64,460)
53,533
53,533
214
214
12,038
12,038
16(b)
(118,389)
53,929
(64,460)
38,730
14,803
53,533
(18,378)
18,592
9,786
2,252
214
12,038
The above Statements of Comprehensive Income should be read in conjunction with the accompanying notes.
Ardent Leisure Group | Annual Report 2017 39
For personal use only
Balance Sheets
as at 30 June 2017
Current assets
Cash and cash equivalents
Receivables
Derivative financial instruments
Inventories
Current tax receivables
Assets classified as held for sale
Property classified as held for sale
Construction in progress inventories
Other
Total current assets
Non-current assets
Property, plant and equipment
Investments held at fair value
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
Interest bearing liabilities
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
Other equity
Reserves
(Accumulated losses)/retained profits
Total equity attributable to stapled security holders
Total equity
Note
34
13
14
15
16(d)
17
18
19
20
40
14
21
22
23
18
14
24
25
16(d)
26
14
24
25
27
28
30
31
32
Consolidated
Group
2017
$’000
Consolidated
Group
2016
$’000
ALL Group
2017
$’000
ALL Group
2016
$’000
10,842
5,367
-
13,256
-
120,721
13,840
56,756
5,089
225,871
636,440
3,201
272
293
96,587
11,549
748,342
974,213
102,960
50,050
1,005
54,466
602
2,973
4,892
2,675
219,623
316
178,161
7,595
36,796
222,868
442,491
531,722
662,450
(1,662)
(26,861)
(102,205)
531,722
531,722
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
9,352
5,367
-
13,256
-
3,244
13,840
56,756
4,467
106,282
374,587
3,201
196
293
96,587
11,549
486,413
592,695
96,371
50,050
-
-
602
2,973
4,558
2,675
157,229
29
218,844
2,763
36,796
258,432
415,661
177,034
170,699
(1,662)
6,185
1,812
177,034
177,034
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
The above Balance Sheets should be read in conjunction with the accompanying notes.
40 Ardent Leisure Group | Annual Report 2017
For personal use only
Statements of Changes in Equity
for the year ended 30 June 2017
Statements of Changes in Equity
Consolidated Group
Total equity at 1 July 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
Total equity at 30 June 2016
Loss for the year
Other comprehensive loss for the year
Total comprehensive loss 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
Acquisition of treasury shares
Distributions paid and payable
Total equity at 30 June 2017
ALL Group
Total equity at 1 July 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:
Contributions of equity, net of issue costs
Security-based payments - shares issued
Total equity at 30 June 2016
Profit for the year
Other comprehensive loss for the year
Total comprehensive (loss)/income for the year
Transactions with owners in their capacity as owners:
Contributions of equity, net of issue costs
Security-based payments - shares issued
Acquisition of treasury shares
Note
Contributed
equity
$’000
Other
equity
$’000
Reserves
$’000
Retained
profits/
(accumulated
losses)
$’000
Total
equity
$’000
605,181
-
-
-
-
41,162
3,377
-
-
649,720
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9,247
3,483
-
-
-
-
-
(1,662)
-
(30,691)
4,992
579,482
-
11,146
11,146
(1,866)
-
-
-
(3,527)
(24,938)
-
(1,903)
(1,903)
(20)
-
-
-
-
42,387
-
42,387
42,387
11,146
53,533
-
-
-
(55,705)
3,527
(4,799)
(62,557)
-
(62,557)
-
-
-
-
(34,849)
(1,866)
41,162
3,377
(55,705)
-
619,983
(62,557)
(1903)
(64,460)
(20)
9,247
3,483
(1,662)
(34,849)
662,450
(1,662)
(26,861)
(102,205)
531,722
155,262
-
-
-
10,958
880
167,100
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,638
-
1,397
1,397
-
-
9,035
-
(2,850)
(2,850)
2,608
991
-
-
-
(1,662)
-
-
-
(11,893)
151,007
10,641
-
10,641
10,641
1,397
12,038
-
-
(1,252)
10,958
880
174,883
3,064
-
3,064
-
-
-
3,064
(2,850)
214
2,608
991
(1,662)
31
28
28
32
31, 32
31
28
28
30
32
28
28
28
28
30
Total equity at 30 June 2017
170,699
(1,662)
6,185
1,812
177,034
The above Statements of Changes in Equity should be read in conjunction with the accompanying notes.
Ardent Leisure Group | Annual Report 2017 41
For personal use only
Statements of Cash Flows
for the year ended 30 June 2017
Statements of Cash Flows
Note
Consolidated
Group
2017
$’000
Consolidated
Group
2016
$’000
ALL Group
2017
$’000
ALL Group
2016
$’000
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Property expenses paid
Payments for construction in progress inventories
Early termination of interest rate swap
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 (paid)/received
Insurance recoveries
Income tax received/(paid)
Net cash flows from operating activities
35(a)
Cash flows from investing activities
Payments for property, plant and equipment and other intangible assets
Purchase of assets on behalf of 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
Proceeds from the sale of health clubs, net of cash disposed
Payments for purchase of investments
Payments for purchase of businesses, net of cash acquired
Net cash flows from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayments of borrowings
Borrowing costs
Costs of issue of stapled securities
Payments for securities acquired by Ardent Leisure Employee Share Trust
Proceeds from borrowings from the Trust
Repayments of borrowings to the Trust
Distributions paid to stapled security holders
Net cash flows from financing activities
Net increase 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
34
647,442
(491,335)
(87,289)
(58,670)
(72)
86
-
58,123
-
(137)
1,052
2,977
72,177
(212,164)
-
-
384
-
259,328
(3,201)
-
44,347
1,610,810
(1,687,010)
(11,439)
(38)
(1,662)
-
-
(25,564)
(114,903)
1,621
9,072
153
10,846
752,923
(503,891)
(109,140)
(70,832)
-
81
-
68,116
-
206
-
(2,042)
135,421
(154,444)
-
-
186
23,849
-
-
(3,789)
(134,198)
2,572,503
(2,539,083)
(15,960)
(78)
-
-
-
(14,465)
2,917
4,140
4,986
(54)
9,072
648,762
(500,817)
(83,013)
(58,670)
-
77
(66,641)
58,123
38,291
-
1,052
2,975
40,139
(171,266)
(40,668)
40,579
199
-
202,530
(3,201)
-
28,173
878,285
(864,464)
(10,030)
(11)
(1,662)
202,058
(271,409)
-
(67,233)
1,079
8,393
(116)
9,356
755,995
(495,286)
(105,169)
(70,832)
-
68
(122,453)
68,116
62,224
-
-
(2,039)
90,624
(132,132)
(20,210)
20,803
186
23,849
-
-
(1,488)
(108,992)
1,334,380
(1,296,954)
(14,077)
(21)
-
82,598
(83,800)
-
22,126
3,758
4,685
(50)
8,393
The above Statements of Cash Flows should be read in conjunction with the accompanying notes.
42 Ardent Leisure Group | Annual Report 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
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 2017 are set out below. These policies have been consistently applied to the years presented, unless otherwise stated.
(a)
Basis of preparation
As permitted by ASIC 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 as amended by ASIC Class
Order 13/1644. 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
2016:
AASB 2015-1 Amendments to Australian Accounting Standards – Annual Improvements to Australian Accounting Standards 2012-2014
Cycle;
AASB 2015-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 101;
AASB 2015-9 Amendments to Australian Accounting Standards – Scope and Application Paragraphs; and
AASB 2015-10 Amendments to Australian Accounting Standards – Effective Date of Amendments to AASB 10 and AASB 128.
There has been no impact to the financial statements as a result of the new or amended accounting standards.
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.
Ardent Leisure Group | Annual Report 2017 43
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
1.
(a)
Summary of significant accounting policies (continued)
Basis of preparation (continued)
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), 1(ab), 1(ac), 1(ag) and 1(ah) and assumptions related to
deferred tax assets and liabilities, impairment testing of goodwill, operating lease make good obligations 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
At 30 June 2017, the ALL Group had a deficiency of current assets of $50.9 million (30 June 2016: $49.2 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 ALL Group has $153.4 million (30 June 2016: $300.0 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).
(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.
44 Ardent Leisure Group | Annual Report 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
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.
Ardent Leisure Group | Annual Report 2017 45
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
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;
DCF models;
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 Australian Theme Parks land, 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;
DCF models;
Available sales evidence; and
Comparisons to valuation professionals performing valuation assignments across the market.
46 Ardent Leisure Group | Annual Report 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
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
2017
2016
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 US Entertainment Centres for resale. Refer to Note
18.
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.
Ardent Leisure Group | Annual Report 2017 47
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
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 (30 June 2016: 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 (30 June 2016: 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 (30 June 2016: 10 and 13 years).
Other intangible assets
Liquor licences are amortised over the length of the licences which are between 10 and 16 years (30 June 2016: 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 (30 June 2016: 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 38).
(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.
48 Ardent Leisure Group | Annual Report 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
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 31. 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.
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.
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.
Ardent Leisure Group | Annual Report 2017 49
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
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 3.17% per annum (30 June
2016: 3.60% per annum) for Australian dollar debt and 2.16% per annum (30 June 2016: 1.61% 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)
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.
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.
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.
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.
50 Ardent Leisure Group | Annual Report 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
1.
(s)
Summary of significant accounting policies (continued)
Employee benefits (continued)
Long Term Incentive Plan (LTIP)
Australian employees
Long term incentives are provided to certain executives under the LTIP. 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.
Deferred Short Term Incentive Plan (DSTI)
Long term incentives are also provided to certain executives under the DSTI. 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.
Ardent Leisure Group | Annual Report 2017 51
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
1.
(s)
Summary of significant accounting policies (continued)
Employee benefits (continued)
Deferred Short Term Incentive Plan (DSTI) (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.
(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.
52 Ardent Leisure Group | Annual Report 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
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 investment 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:
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 has been recognised on a straight-line basis over the membership period. Revenue relating to
theme park annual passes is recognised as the passes are used.
Ardent Leisure Group | Annual Report 2017 53
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
1.
(x)
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.
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.
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)
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.
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.
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 2017, the spot rate used was A$1.00 = NZ$1.0500 (2016: A$1.00
= NZ$1.0489) and A$1.00 = US$0.7692 (2016: A$1.00 = US$0.7426). The average spot rate during the year ended 30 June 2017 was
A$1.00 = NZ$1.0573 (2016: A$1.00 = NZ$1.0874) and A$1.00 = US$0.7542 (2016: A$1.00 = US$0.7272).
(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.
54 Ardent Leisure Group | Annual Report 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
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.
Ardent Leisure Group | Annual Report 2017 55
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
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)
Treasury securities
Own equity instruments that are reacquired (treasury securities) are recognised at cost and deducted from equity. No gain or loss is
recognised in profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments. Any difference between
the carrying amount and the consideration, if reissued to employees under the Group’s LTIP and DSTI, is recognised in the share-based
payments reserve. Performance rights vesting during the reporting period may be satisfied with treasury securities.
(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:
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.
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.
56 Ardent Leisure Group | Annual Report 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
1.
(af)
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.
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)
Financial assets
Investments held at fair value
The investments held at fair value are classified as available-for-sale (AFS) financial assets. The AFS financial assets include investments
in unlisted equity shares. Equity investments classified as AFS are those that are neither classified as held for trading nor designated at
fair value through profit or loss.
After initial measurement, AFS financial assets are subsequently measured at fair value with unrealised gains or losses recognised in
other comprehensive income and credited to the AFS reserve until the investment is derecognised, at which time, the cumulative gain
or loss is recognised in other operating income, or the investment is determined to be impaired, when the cumulative loss is reclassified
from the AFS reserve to the Income Statement.
The Group assesses at each reporting date whether there is objective evidence that the investment is impaired. In the case of equity
investments classified as AFS, objective evidence would include a significant or prolonged decline in the fair value of the investment
below its cost. ‘Significant’ is evaluated against the original cost of the investment and ‘prolonged’ against the period in which the fair
value has been below its original cost. When there is evidence of impairment, the cumulative loss – measured as the difference between
the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the Income
Statement – is removed from other comprehensive income and recognised in the Income Statement. Impairment losses on equity
investments are not reversed through profit or loss; increases in their fair value after impairment are recognised in other comprehensive
income.
The determination of what is ‘significant’ or ‘prolonged’ requires judgement. In making this judgement, the Group evaluates, among
other factors, the duration or extent to which the fair value of an investment is less than its cost.
Ardent Leisure Group | Annual Report 2017 57
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
1.
(ai)
Summary of significant accounting policies (continued)
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 2017 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 and the ALL Group do not intend to adopt AASB 15 before its
operative date, which means that it would be first applied in the annual reporting period ending 30 June 2019.
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 and the ALL Group have not elected to apply any pronouncements before their operative date.
(aj)
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.
58 Ardent Leisure Group | Annual Report 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
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
Other revenue
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2017
$’000
331,938
166,101
9
2016
$’000
326,916
150,134
9
2017
$’000
331,938
166,101
9
2016
$’000
326,916
150,134
9
Revenue from operating activities
498,048
477,059
498,048
477,059
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 40(c).
5.
Property expenses
Landlord rent and outgoings
Insurance
Rates
Land tax
Increase in onerous lease provisions
Other
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2017
$’000
12,788
(738)
110
12,160
2016
$’000
14,987
(404)
154
14,737
2017
$’000
10,062
(491)
-
9,571
2016
$’000
10,369
(223)
-
10,146
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2017
$’000
65,977
327
1,191
682
218
26
2016
$’000
55,083
371
1,260
616
169
32
2017
$’000
80,233
-
-
-
-
-
2016
$’000
100,370
-
-
-
-
-
68,421
57,531
80,233
100,370
Ardent Leisure Group | Annual Report 2017 59
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
Net loss from derivative financial instruments
Unrealised net loss on derivative financial instruments
Early termination of interest rate swap
Management fees
The Manager of the Trust is Ardent Leisure Management Limited.
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2017
$’000
349
72
421
2016
$’000
170
-
170
2017
$’000
-
-
-
2016
$’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
ALL Group
ALL Group
2017
$’000
-
-
2016
$’000
-
-
2017
$’000
1,200
1,200
2016
$’000
1,200
1,200
60 Ardent Leisure Group | Annual Report 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
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
Remuneration of auditor
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2017
$’000
823
4,058
2,964
80
12,983
366
3,540
989
6,553
541
3,262
2,651
190
169
130
341
3,157
1,144
3,727
85
790
2016
$’000
797
2,468
2,147
100
11,752
517
3,267
654
5,446
538
2,786
2,326
181
318
84
444
2,245
1,353
2,732
113
697
2017
$’000
597
4,058
2,964
-
12,983
366
3,540
989
6,553
541
3,227
2,651
190
169
130
244
3,157
1,144
3,727
-
832
2016
$’000
562
2,357
2,147
-
11,752
517
3,267
654
5,446
538
2,765
2,326
181
318
84
411
2,245
1,353
2,732
-
659
48,543
40,965
48,062
40,314
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
2017
$
Consolidated
Group
2016
$
ALL Group
2017
$
ALL Group
2016
$
683,686
257,788
222,764
264,441
103,618
1,532,297
615,978
180,812
28,278
415,641
1,550
1,242,259
418,401
257,788
118,828
212,152
103,618
1,110,787
381,020
180,812
-
411,031
1,550
974,413
Ardent Leisure Group | Annual Report 2017 61
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
Income tax (benefit)/expense
(a)
Income tax (benefit)/expense
Current tax
Deferred tax
Under/(over) provided in prior year
Income tax (benefit)/expense is attributable to:
(Loss)/profit from continuing operations
Profit from discontinued operations
Deferred income tax (benefit)/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
2017
$’000
1,962
(5,421)
127
(3,332)
(5,561)
2,229
(3,332)
2016
$’000
(981)
10,258
(581)
8,696
7,448
1,248
8,696
2017
$’000
1,826
(5,421)
403
(3,192)
(5,421)
2,229
(3,192)
2016
$’000
(1,008)
10,258
(576)
8,674
7,426
1,248
8,674
22
27
(23,403)
17,982
(5,421)
(878)
11,136
10,258
(23,403)
17,982
(5,421)
(878)
11,136
10,258
(b)
Numerical reconciliation of income tax (benefit)/expense to prima facie tax expense
(Loss)/profit from continuing operations before income tax
(benefit)/expense
Profit from discontinued operations before income tax
expense
Less: Loss/(profit) from the trusts(1)
Prima facie profit/(loss)
Tax at the Australian tax rate of 30% (2016: 30%)
Tax effects of amounts which are not deductible/(taxable) in
calculating taxable income:
Impairment of goodwill
Entertainment
Non-deductible depreciation and amortisation
Sundry items
Employee security-based payments
Business acquisition costs
Gain on disposal of health clubs
Selling costs associated with discontinued operation
classified as held for sale
Foreign exchange conversion differences
US State taxes
Withholding tax
Research and development and other credits
Difference in overseas tax rates
Under/(over) provided in prior year
Income tax (benefit)/expense
(122,047)
35,032
(20,949)
15,815
56,158
(65,889)
71,113
5,224
16,051
51,083
(44,540)
6,543
1,567
1,963
20,821
(128)
-
(128)
(38)
3,500
19,315
-
19,315
5,795
235
134
2,731
(210)
270
-
(9,923)
240
45
878
136
(338)
776
127
(3,332)
-
104
3,909
358
264
(40)
-
-
24
1,533
3
(515)
1,674
(581)
8,696
235
134
-
(286)
270
-
(5,511)
240
45
878
-
(338)
776
403
(3,192)
-
104
-
410
264
(40)
-
-
24
1,533
-
(515)
1,675
(576)
8,674
(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.
62 Ardent Leisure Group | Annual Report 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
10.
(c)
Income tax (benefit)/expense (continued)
Income tax expense/(benefit) relating to items of other comprehensive income
Unrealised gain/(loss) on derivative financial instruments
recognised in the cash flow hedge reserve
22, 31
Consolidated
Group
2017
$’000
Consolidated
Group
2016
$’000
ALL Group
2017
$’000
ALL Group
2016
$’000
562
562
(441)
(441)
562
562
(441)
(441)
(d)
Unrecognised temporary differences
There were no unrecognised temporary differences as at 30 June 2017 (2016: 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.
(Losses)/earnings per security/share
Basic (losses)/earnings per security/share (cents) from continuing
operations
Basic earnings per security/share (cents) from discontinued
operations
Total basic (losses)/earnings per security/share (cents)
Diluted (losses)/earnings per security/share (cents) from continuing
operations
Diluted earnings per security/share (cents) from discontinued
operation
Total diluted (losses)/earnings per security/share (cents)
Core earnings per security (cents)
Diluted core earnings per security (cents)
(Losses)/earnings used in the calculation of basic and diluted
earnings per security/share ($'000)
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)
Consolidated
Group
2017
Consolidated
Group
2016
ALL Group
2017
ALL Group
2016
(24.89)
11.52
(13.37)
(24.84)
11.50
(13.34)
2.41
2.41
6.10
3.27
9.37
6.09
3.26
9.35
13.79
13.76
(3.32)
3.97
0.65
(3.31)
3.96
0.65
N/A
N/A
1.85
0.50
2.35
1.85
0.50
2.35
N/A
N/A
(62,557)
42,387
3,064
10,641
11,287
62,395
N/A
N/A
467,938
452,484
467,938
452,484
997
991
997
991
468,935
453,475
468,935
453,475
Ardent Leisure Group | Annual Report 2017 63
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
11.
(a)
(Losses)/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, reserve transfers 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.
(Loss)/profit used in calculating earnings per stapled security
Unrealised items
- Unrealised net loss on derivative financial instruments
- Valuation gain - investment properties
- Valuation loss - property, plant and equipment
- 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
- Increase/(decrease) in onerous lease provisions
- Gain on sale and leaseback of US Entertainment Centres
- Loss on closure of Australian Bowling and Entertainment Centres
- Dreamworld incident costs, net of insurance recoveries
- Gain on sale of discontinued operation
- Selling costs associated with discontinued operation classified as held for sale
- Early termination of interest rate swap
- Other restructuring and one-off expenses
Tax impact of above adjustments
Core earnings
Consolidated
Group
Consolidated
Group
2017
$’000
2016
$’000
(62,557)
42,387
349
-
88,747
145
783
1,328
9,102
907
13,888
-
492
-
470
5,389
(45,009)
796
72
4,139
(7,754)
11,287
170
(2,059)
-
463
-
1,909
13,029
4,490
8,638
(134)
(2,193)
(1,672)
-
-
-
1,047
-
-
(3,680)
62,395
(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 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
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:
Dividend
cents per
stapled
security
Distribution
cents per
stapled
security
2017 dividends and distributions for the half year ended:
31 December 2016
30 June 2017(1)
-
-
-
2016 dividends and distributions for the half year ended:
31 December 2015
30 June 2016(2)
-
-
-
2.00
1.00
3.00
7.00
5.50
12.50
Total
amount
$’000
9,382
4,691
14,073
31,377
25,467
56,844
Distribution
tax
deferred
%
Distribution
CGT
concession
amount
%
Distribution
Taxable
%
-
46.29
53.71
50.48
-
49.52
(1) The distribution of 1.00 cent per stapled security for the half year ended 30 June 2017 was not declared prior to 30 June 2017. Refer to Note 45.
(2) 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.
(b)
ALL Group
No dividends were paid by the ALL Group during the year (2016: nil).
(c)
Franking credits
The tax consolidated group has franking credits of $1,501,307 (30 June 2016: $2,468,214). It is the tax consolidated group’s intention to
distribute these franking credits to security holders where possible.
Receivables
Trade receivables
Provision for doubtful debts
Consolidated
Group
2017
$’000
Consolidated
Group
2016
$’000
ALL Group
2017
$’000
ALL Group
2016
$’000
5,461
(94)
5,367
13,801
(515)
13,286
5,461
(94)
5,367
13,801
(515)
13,286
The Group has recognised an expense of $437,797 in respect of bad and doubtful trade receivables during the year ended 30 June 2017
(30 June 2016: $252,912). The expense has been included in other expenses in the Income Statement.
Refer to Note 39(e) for information on the Group’s management of, and exposure to, credit risk.
Ardent Leisure Group | Annual Report 2017 65
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
Derivative financial instruments
Current assets
Forward foreign exchange contracts
Non-current assets
Interest rate swaps
Current liabilities
Forward foreign exchange contracts
Interest rate swaps
Non-current liabilities
Interest rate swaps
Consolidated
Group
2017
$’000
Consolidated
Group
2016
$’000
ALL Group
2017
$’000
ALL Group
2016
$’000
-
-
272
272
41
964
1,005
316
316
131
131
113
113
-
1,202
1,202
2,937
2,937
-
-
196
196
-
-
-
29
29
-
-
-
-
-
132
132
1,283
1,283
(a)
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$1.4
million (30 June 2016: A$0.6 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.
(b)
Interest rate swaps
The Group has entered into interest rate swap agreements totalling $70.0 million (30 June 2016: $80.0 million) and US$55.0 million (30
June 2016: US$95.0 million) that entitle it to receive interest, at quarterly intervals, at a floating rate on a notional principal and oblige 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 $70.0 million (30 June 2016:
$120.0 million) with start dates from June 2018 and maturities up to June 2019.
All interest rate swap agreements 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 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
14.
(b)
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
2017
$’000
Consolidated
Group
2016
$’000
ALL Group
2017
$’000
ALL Group
2016
$’000
70,000
141,503
-
-
-
-
113,292
70,000
154,064
-
-
-
-
71,503
-
-
-
-
40,399
-
74,064
-
-
-
211,503
337,356
71,503
114,463
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2017
$’000
13,372
(116)
13,256
2016
$’000
13,022
(20)
13,002
2017
$’000
13,372
(116)
13,256
2016
$’000
13,022
(20)
13,002
There was $0.1 million of write-downs of inventories during the year ended 30 June 2017 (30 June 2016: nil).
Discontinued operations
(a)
Overview
On 19 August 2016, the Group announced its decision to sell the Health Clubs business, with completion occurring on 25 October 2016.
The gross consideration of $260.0 million comprised a cash component of $230.0 million and deferred consideration of $30.0 million in
the form of vendor loan notes for which payment was received on 13 December 2016. The Health Clubs business, previously a reportable
segment, comprised 76 Goodlife health clubs in Queensland, New South Wales, Victoria, South Australia and Western Australia,
including 14 in-club Hypoxi studios. The division also included two independent Hypoxi studios in New South Wales and two
independent Hypoxi studios in Phoenix, Arizona. Following the sale, the business has been classified as a discontinued operation at 30
June 2017.
On 12 December 2016, the Group announced that it had entered into a put and call option agreement to dispose of its entire interest
in the Marinas division for gross proceeds (excluding working capital adjustments) of $126.0 million. Completion, which was subject to
landlord consents for the transfer of the head leases, occurred effective 14 August 2017. The Marinas, previously a reportable segment,
comprised seven marinas in New South Wales and Victoria. The sale process incurred transaction costs of approximately $0.8 million in
the period. The associated assets and liabilities have been presented as held for sale and a discontinued operation at 30 June 2017.
Ardent Leisure Group | Annual Report 2017 67
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
16.
(b)
Discontinued operations (continued)
Financial performance
The financial performance for the year ended 30 June 2017 was as follows:
Revenue
Expenses
Profit before income tax
Income tax expense
Profit after income tax of discontinued operation
Gain on sale of discontinued operation after tax
Costs incurred relating to the sale of discontinued operation
currently classified as held for sale
Profit from discontinued operations
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2017
$’000
86,808
(74,863)
11,945
(2,058)
9,887
44,838
(796)
53,929
2016
$’000
210,761
(193,663)
17,098
(1,248)
15,850
-
(1,047)
14,803
2017
$’000
86,808
(83,383)
3,425
(2,058)
1,367
18,169
(944)
18,592
2016
$’000
210,753
(207,253)
3,500
(1,248)
2,252
-
-
2,252
The sale of the Marinas business was completed subsequent to 30 June 2017 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 2017 were $0.8 million, which have
been recognised as expenses in the Income Statement.
Cash flow information
(c)
The cash flows for the year ended 30 June 2017 were as follows:
Net cash inflow from operating activities
Net cash inflow/(outflow) from investing activities
Net cash outflow from financing activities
Net increase in cash and cash equivalents
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2017
$’000
12,059
241,702
(740)
253,021
2016
$’000
36,333
(32,824)
(3,232)
277
2017
$’000
3,806
193,862
(632)
197,036
2016
$’000
23,976
(20,508)
(3,191)
277
The net cash inflow from investing activities in the Consolidated Group for the year ended 30 June 2017 includes an inflow of $259.3
million and an outflow of related selling costs of $6.2 million from the disposal of the Health Clubs business.
The net cash inflow from investing activities in the ALL Group for the year ended 30 June 2017 includes an inflow of $202.5 million and
an outflow of related selling costs of $5.4 million from the disposal of the Health Clubs business.
68 Ardent Leisure Group | Annual Report 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
16.
(d)
Discontinued operations (continued)
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 2017:
Assets classified as held for sale
Cash and cash equivalents
Receivables
Inventories
Deferred tax assets
Investment properties
Property, plant and equipment
Other
Total assets of disposal group held for sale
Labilities directly associated with assets classified as held for sale
Payables
Provisions
Other
Total liabilities of disposal group held for sale
(e)
(i)
Details of the sale of Health Clubs
Gain on sale
Consideration received or receivable:
Cash consideration
Cash payment for working capital adjustments
Total disposal consideration
Selling costs
Carrying amount of net assets sold
Gain on sale before income tax
Income tax expense on gain
Gain on sale after income tax
Consolidated
Group
Consolidated
Group
2017
$’000
2016
$’000
4
618
181
32
108,494
10,473
919
120,721
(3,777)
(100)
(1,015)
(4,892)
2
652
201
104
102,838
8,096
1,047
112,940
(3,114)
(40)
(950)
(4,104)
ALL Group
ALL Group
2017
$’000
4
618
181
32
-
2,079
330
3,244
2016
$’000
2
652
201
104
-
1,474
349
2,782
(3,443)
(100)
(1,015)
(4,558)
(2,726)
(40)
(950)
(3,716)
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2017
$’000
2016
$’000
2017
$’000
2016
$’000
260,000
(416)
259,584
(6,221)
(208,354)
45,009
(171)
44,838
-
-
-
-
-
-
-
-
203,200
(416)
202,784
(5,436)
(179,008)
18,340
(171)
18,169
-
-
-
-
-
-
-
-
Ardent Leisure Group | Annual Report 2017 69
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
16.
(e)
(ii)
Discontinued operations (continued)
Details of the sale of Health Clubs (continued)
Carrying value of assets on sale
The carrying amount of assets and liabilities as at the 25 October 2016 date of sale were as follows:
Cash and cash equivalents
Receivables
Inventories
Property, plant and equipment
Intangible assets
Deferred tax assets
Other
Total assets
Payables
Provisions
Total liabilities
Net assets
Property classified as held for sale
US Entertainment Centre
Opening balance
Additions
Foreign exchange movements
Closing balance
Consolidated
Group
25 October 2016
$’000
ALL Group
25 October 2016
$’000
256
4,324
1,574
82,131
151,950
2,565
5,051
247,851
(30,523)
(8,974)
(39,497)
208,354
254
4,324
1,574
38,070
151,950
2,565
5,044
203,781
(21,346)
(3,427)
(24,773)
179,008
Consolidated
Group
2017
$’000
Consolidated
Group
2016
$’000
ALL Group
2017
$’000
ALL Group
2016
$’000
13,840
13,840
-
-
13,840
13,840
-
-
Consolidated
Group
2017
$’000
Consolidated
Group
2016
$’000
ALL Group
2017
$’000
ALL Group
2016
$’000
-
14,200
(360)
13,840
-
-
-
-
-
14,200
(360)
13,840
-
-
-
-
The property classified as held for sale relates to a US Entertainment Centre at Pittsburgh, which is under a sale and leaseback
arrangement. Completion of the sale occurred on 26 July 2017.
70 Ardent Leisure Group | Annual Report 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
Construction in progress
Construction in progress inventories relate to US 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 2017, the Group had agreements for construction of five US Entertainment Centres at North Kansas City, Humble, Knoxville,
Suwanee and Gilbert. 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 2017, 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
2017
$’000
2016
$’000
2017
$’000
2016
$’000
61,796
58,670
(63,985)
275
56,756
-
74,868
(12,176)
(896)
61,796
61,796
58,670
(63,985)
275
56,756
-
74,868
(12,176)
(896)
61,796
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 received
Settlements of deposits received
Foreign exchange movements
Carrying amount at the end of the period
Other assets
Prepayments
Accrued revenue
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2017
$’000
2016
$’000
2017
$’000
55,494
58,123
(63,985)
418
50,050
-
68,116
(12,176)
(446)
55,494
55,494
58,123
(63,985)
418
50,050
2016
$’000
-
68,116
(12,176)
(446)
55,494
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2017
$’000
4,404
685
5,089
2016
$’000
4,608
3,305
7,913
2017
$’000
3,782
685
4,467
2016
$’000
4,079
3,305
7,384
Ardent Leisure Group | Annual Report 2017 71
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
Property, plant and equipment
Consolidated Group
Note
Segment
Australian Theme Parks
Australian Bowling and
Entertainment Centres
US Entertainment Centres
Health Clubs
Other
Total
Cost less
accumulated
depreciation
2017
$’000
Cumulative
revaluation
(decrements)
/increments
2017
$’000
Consolidated
book
value
2017
$’000
Cost less
accumulated
depreciation
2016
$’000
Cumulative
revaluation
increments/
(decrements)
2016
$’000
Consolidated
book value
2016
$’000
(1) (2) (3)
223,361
(36,922)
186,439
219,927
47,806
267,733
(4)
(5)
119,712
327,445
-
1,653
672,171
1,191
-
-
-
(35,731)
120,903
327,445
-
1,653
636,440
104,131
223,732
84,711
2,347
634,848
1,191
(86)
-
-
48,911
105,322
223,646
84,711
2,347
683,759
(1) The book value of Dreamworld and WhiteWater World land and buildings and major rides and attractions (including intangible assets of $1.2 million (30
June 2016: $1.6 million) and livestock of $0.3 million (30 June 2016: $0.2 million) is $151.8 million (30 June 2016: $235.0 million)). In an independent
valuation performed at 30 June 2017 by Jones Lang LaSalle Advisory Services Pty Limited, the fair value for these assets was assessed to be in the range of
$146.0 - $154.0 million (30 June 2016: $235.0 million). Having regard to independent advice, the Directors have assessed the fair value of those assets to be
$151.8 million and have valued other property, plant and equipment of Dreamworld and WhiteWater World at 30 June 2017 at $0.1 million (30 June 2016:
$0.2 million). Refer to additional Australian Theme Parks valuation information below.
(2) The excess land adjacent to Dreamworld has been valued by the Directors at $3.6 million (2016: $3.6 million).
(3) The book value of SkyPoint (including intangible assets of $3.6 million (30 June 2016: $3.6 million)) is $36.0 million (30 June 2016: $34.3 million). In an
independent valuation performed at 30 June 2017 by Jones Lang LaSalle Advisory Services Pty Limited, the fair value for SkyPoint was assessed to be $36.0
million.
(4) At 30 June 2017, the Directors assessed the fair value of the one remaining freehold building to be $1.6 million (30 June 2016: $1.6 million). The freehold
building was last independently valued at 30 June 2016 at $1.6 million.
(5) The property, plant and equipment relating to health clubs was sold during the year – refer to Note 16.
Refer to Note 40b) for information on the valuation techniques used to derive the fair value of the Australian Theme Parks.
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:
Land and
buildings
$’000
Major rides
and
attractions
$’000
Plant and
equipment
$’000
Furniture,
fittings and
equipment
$’000
Motor
vehicles
$’000
Total
$’000
683,759
191,111
(82,131)
-
(400)
(4,177)
(51,299)
(10,316)
(89,962)
(145)
290
150
(21)
-
-
(17)
(51)
-
-
-
351
636,440
Consolidated Group - 2017
Carrying amount at the beginning of the year
Additions
Disposal relating to the sale of health clubs
Reclassification of asset categories
Transfer to intangible assets
Disposals
Depreciation
Foreign exchange movements
Revaluation decrements
Impairment
348,200
96,858
(54,268)
(491)
(400)
(1,470)
(11,753)
(3,462)
(89,962)
(145)
65,066
1,400
-
(79)
-
(890)
(1,389)
-
-
-
256,987
90,216
(24,052)
570
-
(1,670)
(35,535)
(6,852)
-
-
Carrying amount at the end of the year
283,107
64,108
279,664
13,216
2,487
(3,790)
-
-
(130)
(2,571)
(2)
-
-
9,210
72 Ardent Leisure Group | Annual Report 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
20. Property, plant and equipment (continued)
Land and
buildings
$’000
Major rides
and
attractions
Plant and
equipment
Furniture,
fittings and
equipment
$’000
$’000
$’000
Motor
vehicles
$’000
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
330,577
41,558
-
3,586
(1,632)
(22,616)
(16,310)
2,966
10,534
(463)
65,202
1,378
-
-
-
(1)
(1,513)
-
-
-
196,618
101,011
667
-
(4,679)
(1,483)
(35,877)
730
-
-
17,037
2,078
-
-
(1,759)
(21)
(4,128)
9
-
-
Carrying amount at the end of the year
348,200
65,066
256,987
13,216
248
270
-
-
(26)
(109)
(93)
-
-
-
290
ALL Group - 2017
Carrying amount at the beginning of the year
Additions
Disposal relating to the sale of health clubs
Transfer to intangible assets
Disposals
Depreciation
Foreign exchange movements
Reversal of impairment
Carrying amount at the end of the year
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
Total
$’000
609,682
146,295
667
3,586
(8,096)
(24,230)
(57,921)
3,705
10,534
(463)
683,759
Total
$’000
287,061
170,940
(38,070)
(400)
(1,183)
(33,623)
(10,255)
117
Land and
buildings
$’000
Plant and
equipment
$’000
88,962
67,342
(10,526)
(400)
(251)
(2,600)
(3,436)
117
198,099
103,598
(27,544)
-
(932)
(31,023)
(6,819)
-
139,208
235,379
374,587
Land and
buildings
$’000
Plant and
equipment
$’000
86,833
25,050
-
(2)
(22,612)
(3,071)
2,922
(158)
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)
88,962
198,099
287,061
Ardent Leisure Group | Annual Report 2017 73
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
20.
(a)
Property, plant and equipment (continued)
Australian Theme Parks valuation
On 25 October 2016, an incident on the Thunder River Rapids ride at Dreamworld resulted in four fatalities at the theme park. The park
and adjoining WhiteWater World were subsequently closed for 45 days. On 10 December 2016, the parks were reopened following
successful completion of a multi-tiered mechanical and operational safety review with all WhiteWater World slides, pools and cabanas
and several of Dreamworld’s rides and attractions operational at that date. Dreamworld’s other rides were progressively reopened as
they were signed off as part of the safety review process.
The impact of the incident, subsequent closure of the parks and progressive re-opening of rides, negatively impacted attendance and
revenues. As a result, the Group has recognised a revaluation decrement to the property, plant and equipment of Dreamworld and
WhiteWater World of $91.7 million, of which $88.7 million has been recognised in the Income Statement and $3.0 million has been
recognised in reserves.
At 30 June 2017, the valuation of Dreamworld and WhiteWater World has been determined in accordance with AASB 13 Fair Value
Measurement which defines fair value as the price that would be received to sell an asset in an orderly transaction between market
participants. This Standard requires that the valuation take account of the benefits attainable under the highest and best use, provided
that any alternate uses are physically possible, legally permissible and financially feasible. Under the Standard, uses that are legally
permissible take into account any legal restrictions on the use of the asset that market participants would take into account when pricing
the asset (eg the zoning regulations applicable to a property).
As noted in the financial statements for the half year ended 31 December 2016, in determining fair value at 31 December 2016 (the first
reporting date after the incident), the Group undertook an extensive process including engagement of a number of independent
external specialists including:
A Gold Coast town planning consultant to evaluate possible alternate uses of the land under the current and recently superseded
Gold Coast Town Plans. This confirmed that highest and best use under the Plans to be its current use;
A land valuation specialist to determine the base valuation of the land considering the findings of the town planning consultant;
Jones Lang LaSalle valuation specialists to undertake a valuation assessment of the property. In determining the valuation, the valuer
considered:
Management forecasts for the parks for FY17 and FY18, including the necessary estimation of the financial impact created by
the Thunder River Rapids ride incident;
Work undertaken by the town planning analysis and land valuation specialist; and
Impact of the incident on investment parameters, including capitalisation rates and discount rates; and
A leading international accounting firm to review the process, key assumptions and sensitivities underlying management forecasts
provided to the JLL valuer and the key valuation assumptions and conclusions of the JLL valuation specialist.
At 30 June 2017, the Group has again engaged independent valuation specialists from Jones Lang LaSalle to undertake a valuation
assessment of the property. In determining the valuation, the valuer has considered the work undertaken at 31 December 2016 and
reviewed management’s updated forecasts in light of the parks’ actual performance in the second half of the year.
The significant unobservable inputs associated with the valuation of the Dreamworld and WhiteWater World valuation at 30 June 2017
are as follows:
Capitalisation rate
Discount rate
Terminal yield
FY18 (year one) EBITDA ($’000)
June
2017
12.25%
June
2016
9.50%
14.75% - 15.25% 13.25% - 13.50%
12.25% - 12.75% 10.50% - 10.75%
31,652
9,170
In addition, the valuer has assumed a gradual recovery of attendances to FY16 (pre-incident) levels over the next four years, with FY18
attendances estimated to be approximately 84% of FY16 levels.
In preparing the valuation assessment, the independent valuer has noted the material valuation uncertainty which exists both in terms
of market disruption (e.g. liquidity) and availability of inputs (e.g. cash flows, discount rates and capitalisation rates) which could impact
the valuation of these assets.
As noted above, in accordance with AASB 13, the valuation reflects current zoning restrictions on the main Dreamworld and WhiteWater
World site. As noted in footnote (2) on page 69, the excess land adjacent to this site has been valued by the Directors at $3.6 million
(2016: $3.6 million). The Group is currently reviewing optimal uses and zoning of the excess land and other unused surplus land on the
main Dreamworld and WhiteWater World site, which have the potential to deliver upside to this valuation.
74 Ardent Leisure Group | Annual Report 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
20.
(a)
Property, plant and equipment (continued)
Australian Theme Parks valuation (continued)
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 0.5% increase in rate
Capitalisation
rate (%)
- $6.0 million
Discount rate
(%)
- $5.1 million
Terminal Yield
(%)
- $2.5 million
FY18 (year one)
EBITDA
N/A
Fair value measurement sensitivity to 0.5% decrease in rate
+ $6.5 million
+ $5.3 million
+ $2.7 million
N/A
Fair value measurement sensitivity to 10.0% increase in
assumed FY18 attendance levels
Fair value measurement sensitivity to 10.0% decrease in
assumed FY18 attendance levels
N/A
N/A
N/A
N/A
N/A
+ $2.6 million
N/A
- $2.6 million
When calculating the income capitalisation approach, EBITDA 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.
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
Total intangible assets
Consolidated
Group
2017
Consolidated
Group
2016
ALL Group
2017
$’000
$’000
$’000
-
-
-
-
-
-
21,364
(7,748)
13,616
95,452
(12,481)
82,971
96,587
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
-
-
-
-
-
-
19,936
(6,320)
13,616
95,452
(12,481)
82,971
96,587
ALL Group
2016
$’000
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
Ardent Leisure Group | Annual Report 2017 75
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
21.
Intangible assets (continued)
Customer relationships
Opening net book amount
Additions
Disposals
Amortisation
Closing net book amount
Brands
Opening net book amount
Additions
Disposals
Amortisation
Foreign exchange movements
Closing net book amount
Other intangible assets
Opening net book amount
Additions
Transfer from property, plant and equipment
Disposals
Amortisation
Foreign exchange movements
Closing net book amount
Goodwill
Opening net book amount
Additions
Disposals
Impairment
Foreign exchange movements
Closing net book amount
Total intangible assets
(a)
Customer relationships
Consolidated
Group
2017
$’000
Consolidated
Group
2016
$’000
ALL Group
2017
$’000
ALL Group
2016
$’000
2,202
-
(1,652)
(550)
-
5,715
-
(5,328)
(359)
(28)
-
10,179
8,530
400
(2,640)
(2,724)
(129)
5,549
13
-
(3,360)
2,202
6,766
34
-
(1,131)
46
5,715
5,477
7,002
-
-
(2,250)
(50)
2,202
-
(1,652)
(550)
-
5,715
-
(5,328)
(359)
(28)
-
10,179
8,530
400
(2,640)
(2,724)
(129)
5,549
13
-
(3,360)
2,202
6,766
34
-
(1,131)
46
5,715
5,477
7,002
-
-
(2,250)
(50)
13,616
10,179
13,616
10,179
228,033
-
(142,432)
(783)
(1,847)
82,971
96,587
225,152
857
-
-
2,024
228,033
246,129
228,033
-
(142,432)
(783)
(1,847)
82,971
96,587
225,152
857
-
-
2,024
228,033
246,129
Customer relationships relate to the relationships with health club members which were acquired as part of the various acquisitions of
health clubs, and have been disposed as part of the disposal of the Health Clubs business (refer to Note 16).
(b)
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, and have been disposed as part of the disposal of the Health Clubs business (refer to Note 16).
(c)
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.
(d)
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 disposal of the Health Clubs business (refer to Note 16), an impairment write-off to goodwill at Dreamworld and WhiteWater
World subsequent to the Thunder River Rapids ride incident on 25 October 2016, and the movement in the USD:AUD foreign exchange
rate.
76 Ardent Leisure Group | Annual Report 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
21.
(d)
Intangible assets (continued)
Goodwill (continued)
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 five reportable segments as disclosed in Note 38.
A segment level summary of the goodwill allocation is presented below:
Consolidated Group and ALL Group
2017
Australian Theme Parks
Marinas
Australian Bowling and Entertainment Centres
US Entertainment Centres
2016
Australian Theme Parks
Australian Bowling and Entertainment Centres
US Entertainment Centres
Health Clubs
(i)
Impairment tests for goodwill
Australia United States New Zealand
$’000
$’000
$’000
3,583
-
21,127
-
24,710
-
-
-
54,527
54,527
-
-
3,734
-
3,734
Australia United States New Zealand
$’000
$’000
$’000
4,366
21,127
-
142,432
-
-
56,369
-
-
3,739
-
-
Total
$’000
3,583
-
24,861
54,527
82,971
Total
$’000
4,366
24,866
56,369
142,432
167,925
56,369
3,739
228,033
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)
2017
2016
2017
2016
2017
2016
% per annum % per annum % per annum % per annum % per annum % per annum
Australian Theme Parks(3)
Australian Bowling and Entertainment
Centres
US Entertainment Centres
N/A
2.00
2.00
N/A
2.00
3.00
N/A
2.00
2.00
N/A
2.00
3.00
N/A
7.68
7.30
N/A
7.65
6.89
(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 7.87% (2016: 8.19%) for Australian Bowling and Entertainment Centres and 8.69% (2016: 8.30%) for US Entertainment
Centres.
(3) All non-current assets in the Australian Theme Parks division are already held at fair value at 30 June 2017 and were independently valued by Jones Lang
LaSalle (refer to Note 20). As a result, no impairment testing is required at 30 June 2017.
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 2018-2021 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.
Ardent Leisure Group | Annual Report 2017 77
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
21.
(d)
(i)
Intangible assets (continued)
Goodwill (continued)
Impairment tests for goodwill (continued)
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 Australian Bowling and Entertainment Centres and US Entertainment Centres
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 would
cause the CGUs’ carrying amount to exceed their recoverable amount to be reasonably possible.
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
Tax losses
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(d))
(Debited)/credited to cash flow hedge reserve (refer to Note 31)
Disposal of Health Clubs business
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2017
$’000
2016
$’000
2017
$’000
2016
$’000
42
5,415
1,613
-
100
124
15
-
8,718
18,231
17
154
6,032
3,284
1,398
50
119
8
26
4,701
-
452
42
5,415
1,613
-
100
124
15
-
8,718
18,231
17
154
6,032
3,284
1,398
50
119
8
26
4,701
-
452
34,275
16,224
34,275
16,224
(1,146)
(21,580)
11,549
16,224
23,403
-
(562)
(4,790)
(3,057)
(7,170)
5,997
15,066
878
(165)
441
4
(1,146)
(21,580)
11,549
16,224
23,403
-
(562)
(4,790)
(3,057)
(7,170)
5,997
15,066
878
(165)
441
4
Balance at the end of the year
34,275
16,224
34,275
16,224
Deferred tax assets to be recovered within 12 months
Deferred tax assets to be recovered after more than 12 months
6,733
27,542
8,587
7,637
6,733
27,542
8,587
7,637
34,275
16,224
34,275
16,224
78 Ardent Leisure Group | Annual Report 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
22.
(a)
Deferred tax assets (continued)
Tax losses
Consolidated
Group
2017
$’000
Consolidated
Group ALL Group
2017
$’000
2016
$’000
ALL Group
2016
$’000
Unused capital tax losses for which no deferred tax asset has been recognised
Potential tax benefit at 30%
32,952
9,886
-
-
32,952
9,886
-
-
The unused capital tax losses were realised on sale of the Health Clubs business in October 2016 and can only be used to offset capital
gains occurring in the future. See Note 1(t) for information about recognised tax losses.
Payables
Consolidated
Group
2017
$’000
Consolidated
Group
2016
$’000
ALL Group
2017
$’000
ALL Group
2016
$’000
Current
Custodian fee
Interest payable
GST payable
Trade creditors
Payable to the Trust
Property expenses payable
Employee equity plans
Employee benefits
Deferred income
Straight-line rent liability
Lease incentive liabilities
Property tax payable
Capital expenditure including construction in progress inventories payable
Other creditors and accruals
34
538
98
14,089
-
1,094
105
16,232
4,726
9,327
23,576
3,935
15,811
13,395
47
513
1,617
17,143
-
1,001
107
20,785
8,422
18,699
14,155
2,456
6,833
14,629
-
369
34
14,089
602
-
1,542
16,232
4,726
2,154
23,576
3,935
15,811
13,301
-
180
1,619
17,143
1,414
-
1,742
20,785
8,422
4,642
14,155
2,456
7,014
14,127
Total payables
102,960
106,407
96,371
93,699
Interest bearing liabilities
Current
Bank loan - term debt(1)
Total current
Non-current
Bank loan - term debt
Less: amortised costs - bank loan
Loans from the Trust(2)
Total interest bearing liabilities
Consolidated
Group
2017
$’000
Consolidated
Group
2016
$’000
ALL Group
2017
$’000
ALL Group
2016
$’000
54,466
54,466
178,793
(632)
-
232,627
-
-
-
-
-
-
314,944
(2,041)
-
312,903
157,793
(290)
61,341
218,844
148,869
(1,002)
128,221
276,088
(1) Further information relating to the term debt classified as current is included in Note 24(b)(i).
(2) Further information relating to these loans is included in Note 37(g).
The term debt is secured by mortgages over all freehold property, leasehold mortgages over key bowling centre and marina leases,
registered security interests over all present and after acquired property of key Group companies, and pledged interests over all US
property.
Ardent Leisure Group | Annual Report 2017 79
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
24.
Interest bearing liabilities (continued)
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);
Fixed charge cover ratio, being the ratio of adjusted EBITDA to fixed rent and interest charges; and
Capital expenditure.
(a)
Total secured liabilities and assets pledged as security
The carrying amounts of assets pledged as security for borrowings are as follows::
Consolidated
Group
2017
$’000
Consolidated
Group
2016
$’000
ALL Group
2017
$’000
ALL Group
2016
$’000
108,494
108,494
102,838
102,838
10,842
5,586
-
13,256
-
12,227
56,756
13,840
5,089
117,596
226,090
9,070
13,286
131
13,002
3,275
10,102
61,796
-
7,913
118,575
221,413
-
-
9,352
5,586
-
13,256
-
3,244
56,756
13,840
4,467
106,501
106,501
282,888
282,888
348,200
348,200
138,989
138,989
353,333
3,201
272
293
13,616
370,715
653,603
879,693
335,559
-
113
221
18,096
353,989
702,189
923,602
235,379
3,201
196
293
13,616
252,685
391,674
498,175
-
-
8,391
13,286
-
13,002
3,275
2,782
61,796
-
7,384
109,916
109,916
88,962
88,962
198,099
-
-
221
18,096
216,416
305,378
415,294
Current
Mortgage
Assets classified as held for sale
Floating charge
Cash and cash equivalents
Receivables
Derivative financial instruments
Inventories
Current tax receivables
Assets classified as held for sale
Construction in progress inventories
US Entertainment Centres classified as held for sale
Other
Total current assets
Non-current
Mortgage
Land and buildings
Floating charge
Plant and equipment
Investments held at fair value
Derivative financial instruments
Livestock
Intangible assets
Total non-current assets
Total assets
80 Ardent Leisure Group | Annual Report 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
24.
(b)
Interest bearing liabilities (continued)
Credit facilities
As at 30 June 2017, the Group had unrestricted access to the following credit facilities:
A$ 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
(i)
Consolidated Group
Consolidated
Group
2017
$’000
Consolidated
Group
2016
$’000
ALL Group
2017
$’000
ALL Group
2016
$’000
133,334
(75,466)
57,868
249,610
(157,793)
91,817
200,000
(142,433)
57,567
377,054
(172,511)
204,543
-
-
-
-
-
-
-
-
-
230,574
(157,793)
72,781
141,958
(61,341)
80,617
382,944
(233,259)
149,685
577,054
(314,944)
262,110
372,532
(219,134)
153,398
-
-
-
350,121
(148,869)
201,252
226,933
(128,221)
98,712
577,054
(277,090)
299,964
The Group has access to A$133.3 million (30 June 2016: A$200.0 million) syndicated facilities and US$192.0 million (A$249.6 million) (30
June 2016: US$280.0 million (A$377.1 million)) syndicated facilities. A$66.7 million (2016: A$66.7 million) will mature on 10 August 2019
and A$66.7 million has been cancelled following the sale of Marinas in August 2017. US$68.3 million (2016: US$93.3 million) of the USD
facilities will mature on 10 August 2018, US$93.3 million (2016: US$93.3 million) will mature on 10 August 2019 and US$30.3 million
(2016: 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 2017, including the impact of the interest rate swaps,
are 5.39% per annum for AUD denominated debt (30 June 2016: 4.32% per annum) and 3.19% per annum for USD denominated debt
(30 June 2016: 2.37% per annum).
(ii)
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 $82.2 million (30 June 2016: $200.0 million) have a maturity date of 10 August 2018. In
addition, the ALL Group has US$45.9 million (A$59.7 million) (30 June 2016: US$20.0 million (A$26.9 million)) facilities with the Trust
maturing on 26 October 2019.
The ALL Group has access to US$177.4 million (A$230.6 million) (30 June 2016: US$260.0 million (A$350.1 million)) syndicated facilities.
US$53.7 million (2016: US$73.3 million) of the facilities will mature on 10 August 2018, US$93.3 million (2016: US$93.3 million) will
mature on 10 August 2019 and US$30.3 million (2016: 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 39.
Ardent Leisure Group | Annual Report 2017 81
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
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
2017
$’000
-
34,849
(25,564)
(9,285)
-
2016
$’000
-
55,705
(14,465)
(41,240)
-
2017
$’000
-
-
2,619
(2,619)
-
2016
$’000
-
-
10,979
(10,979)
-
A provision for the distribution relating to the half year to 30 June 2017 was not recognised as the distribution had not been declared at
the reporting date. Refer to Note 45.
(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
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
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2017
$’000
2016
$’000
2017
$’000
2,631
342
2,973
1,009
580
6,006
7,595
10,568
158
483
(299)
342
3,871
158
4,029
1,262
2,030
11,695
14,987
19,016
189
292
(323)
158
2,631
342
2,973
1,009
-
1,754
2,763
5,736
158
483
(299)
342
2016
$’000
3,871
158
4,029
1,262
382
2,770
4,414
8,443
189
292
(323)
158
(1) Sundry provisions include insurance excess/deductible amounts for public liability insurance, fringe benefits tax provisions and other royalty provisions.
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.
82 Ardent Leisure Group | Annual Report 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
Other liabilities
Security deposits
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
Disposal of Health Clubs business
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
2017
$’000
2,675
2,675
2016
$’000
1,985
1,985
2017
$’000
2,675
2,675
2016
$’000
1,985
1,985
Consolidated
Group
2017
$’000
Consolidated
Group
2016
$’000
ALL Group
2017
$’000
ALL Group
2016
$’000
-
530
143
58,849
2,355
385
81
40,944
-
530
143
58,849
59,522
43,765
59,522
(1,146)
(21,580)
36,796
(3,057)
(7,170)
33,538
(1,146)
(21,580)
36,796
43,765
17,982
-
(2,225)
59,522
633
58,889
59,522
32,686
11,136
(61)
4
43,765
383
43,382
43,765
43,765
17,982
-
(2,225)
59,522
633
58,889
59,522
2,355
385
81
40,944
43,765
(3,057)
(7,170)
33,538
32,686
11,136
(61)
4
43,765
383
43,382
43,765
Ardent Leisure Group | Annual Report 2017 83
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
Contributed equity
No. of
securities/shares
Details
Date of
income
entitlement
Note
Consolidated
Group
2017
$’000
Consolidated
Group
2016
$’000
ALL Group
2017
$’000
ALL Group
2016
$’000
442,322,106
19,377,615
1,339,895
-
463,039,616
4,812,776
1,300,892
-
469,153,284
1 Jul 2015
30 Jun 2015
1 Jul 2015
Securities/shares on issue
DRP issue
Security-based payments -
securities/shares issued
Issue costs paid
Securities/shares on issue
DRP issue
Security-based payments -
securities/shares issued
Issue costs paid
Securities/shares on issue 30 Jun 2017
30 Jun 2016
1 Jul 2016
1 Jul 2016
605,181
41,240
3,377
(78)
649,720
(a)
(b)
(a)
(b)
649,720
9,285
3,483
(38)
167,100
2,619
991
(11)
155,262
10,979
880
(21)
167,100
662,450
649,720
170,699
167,100
(a)
Distribution Reinvestment Plan (DRP) issues
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 not be in operation for the distribution for the half year ended 30 June 2017 and was
not in operation for the distribution for the half year ended 31 December 2016.
(b)
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.
84 Ardent Leisure Group | Annual Report 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
Security-based payments
(a)
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.
(i)
Equity settled security-based payments
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 697,239
performance rights vested on 25 August 2016 and a corresponding number of stapled securities were issued to employees under the
terms of the DSTI (2016: 384,988).
The characteristics of the DSTI indicate that, at the Ardent Leisure Group level, it is an equity settled security-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.
Fair value
The fair value of equity settled 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.
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 2017 85
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
29.
Security-based payments (continued)
(a)
(ii)
Deferred Short Term Incentive Plan (DSTI) (continued)
Cash settled security-based payments
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.
ALL is considered to be a subsidiary of the Trust, therefore in the financial statements of the ALL Group the DSTI is accounted for as a
cash settled security-based payment.
Fair value
The fair value of cash settled performance rights granted under the DSTI 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.
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.
(iii)
Valuation inputs
For the performance rights outstanding at 30 June 2017, 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 2017:
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
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
2016
23 August 2016
31 August 2017
31 August 2018
1.40% per annum
40.0% per annum
5.0% per annum
$2.50
$2.32
The table below shows the fair value of the performance rights in each grant as at 30 June 2017 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 2017:
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
2015
18 August 2015
31 August 2016
31 August 2017
1.80% per annum
45.0% per annum
1.6% per annum
$1.88
$1.87
2016
23 August 2016
31 August 2017
31 August 2018
1.80% per annum
45.0% per annum
1.6% per annum
$1.88
$1.86
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.
86 Ardent Leisure Group | Annual Report 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
29.
(a)
(iv)
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:
Performance rights issued to participating executives:
Performance rights
722,966
791,724
722,966
791,724
Consolidated
Group
2017
Consolidated
Group
2016
ALL Group
2017
ALL Group
2016
Grant date
Expiry date
Exercise
price
Valuation
per right
Balance at
beginning
of the year
Granted
Exercised
Failed to
vest
19 Aug 2014 25 Aug 2016 nil
280.8 cents
147,441
18 Aug 2015 31 Aug 2017 nil
199.7 cents
644,283
-
-
(147,441)
(393,306)
23 Aug 2016 31 Aug 2018 nil
231.8 cents
- 693,535
791,724 693,535
(154,381)
(695,128)
-
-
-
-
Balance at
the end of
the year
-
241,441
481,525
722,966
Cancelled
-
(9,536)
(57,629)
(67,165)
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 earnings per security (EPS) performance
hurdles. The weighting between the two hurdles will be split as follows:
TSR – 50%; and
EPS – 50%.
Ardent Leisure Group | Annual Report 2017 87
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
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.
(i)
Equity settled security-based payments
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 2012, 2013 and
2014 with the following results:
Tranche
T3-2012
T2-2013
T1-2014
TSR
105.30
46.45
(15.01)
Percentile
73.26
61.05
38.93
Vesting percentage
96.50%
72.10%
-
A total of 603,653 performance rights vested on 25 August 2016 and a corresponding number of stapled securities were issued to
employees under the terms of the LTIP (2016: 954,907).
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.
88 Ardent Leisure Group | Annual Report 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
29.
(b)
(i)
Security-based payments (continued)
Long Term Incentive Plan (LTIP) (continued)
Equity settled security-based payments (continued)
Fair value
The fair value of the equity settled 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.
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.
(ii)
Cash settled security-based payments
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.
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 16,443 cash settled performance rights vested on 25
August 2016 to US employees under the terms of the LTIP (2016: 38,998).
ALL is considered to be a subsidiary of the Trust, therefore in the financial statements of the ALL Group the LTIP is accounted for as
a cash settled security-based payment.
Fair value
The fair value of cash settled performance rights granted under the LTIP 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.
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.
(iii)
Valuation inputs
For performance rights outstanding at 30 June 2017, 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 2017:
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
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
$0.72
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
$1.44
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
2016
23 August 2016
31 August 2018
31 August 2019
31 August 2020
1.40% per annum
40.0% per annum
5.0% per annum
$2.50
$1.52
Ardent Leisure Group | Annual Report 2017 89
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
29.
(b)
(iii)
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 2017 as well as the factors used to value the
performance rights at 30 June 2017. Under AASB 2, this valuation is used to value the cash settled performance rights granted to
employees at 30 June 2017:
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 at year end
2013
23 August 2013
20 August 2015
31 August 2016
31 August 2017
1.80% per annum
45.0% per annum
1.6% per annum
$1.88
$0.02
2014
19 August 2014
31 August 2016
31 August 2017
31 August 2018
1.80% per annum
45.0% per annum
1.6% per annum
$1.88
$0.08
2015
15 December 2015
31 August 2017
31 August 2018
31 August 2019
1.80% per annum
45.0% per annum
1.6% per annum
$1.88
$0.31
2016
23 August 2016
31 August 2018
31 August 2019
31 August 2020
1.80% per annum
45.0% per annum
1.6% per annum
$1.88
$0.80
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.
(iv)
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%
90 Ardent Leisure Group | Annual Report 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
29.
(b)
(iv)
Security-based payments (continued)
Long Term Incentive Plan (LTIP) (continued)
Performance hurdles (continued)
The number of rights outstanding and the grant dates of the rights are shown in the tables below:
Performance rights issued to participating executives:
Performance rights
1,896,003
2,162,697
1,896,003
2,162,697
Consolidated
Group
2017
Consolidated
Group
2016
ALL Group
2017
ALL Group
2016
Grant date
Expiry date
Exercise
price
Valuation
per right
24 Aug 2012 25 Aug 2016 nil
23 Aug 2013 31 Aug 2017 nil
19 Aug 2014 31 Aug 2018 nil
15 Dec 2015 31 Aug 2019 nil
23 Aug 2016 31 Aug 2020 nil
60.9 cents
72.3 cents
143.9 cents
112.3 cents
151.9 cents
Balance at
beginning of
the year
Granted
Exercised
323,590
514,337
472,095
852,675
-
-
-
-
- 653,434
(312,268)
(212,321)
(29,882)
(65,625)
-
2,162,697 653,434 (620,096)
Failed to
vest
(11,322)
(73,247)
(157,365)
-
-
(241,934)
Balance at
the end of
the year
-
228,769
284,848
787,050
595,336
1,896,003
Cancelled
-
-
-
-
(58,098)
(58,098)
The rights have an average maturity of one year and four months.
The expense recorded in the Group financial statements in the year in relation to the DSTI and LTIP performance rights was $3,491,225
(30 June 2016: $1,529,237). The expense recorded in the ALL Group financial statements in the year in relation to the DSTI and LTIP
performance rights was $3,400,593 (30 June 2016: $1,703,232).
Other equity
Treasury securities
Closing balance
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2017
$’000
1,662
1,662
2016
$’000
-
-
2017
$’000
1,662
1,662
2016
$’000
-
-
Treasury securities are securities in Ardent Leisure Limited that are held by the Ardent Leisure Employee Share Trust for the purpose of
issuing securities under the Group’s DSTI and LTIP. Securities issued to employees are recognised on a first-in-first-out basis.
Opening balance
Acquisition of securities by the Ardent Leisure Employee Share Trust
Closing balance
No. of
securities
-
799,334
799,334
$’000
-
1,662
1,662
Ardent Leisure Group | Annual Report 2017 91
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
Reserves
Asset revaluation reserve
Opening balance
Revaluation - Australian Theme Parks
Revaluation - Australian Bowling and Entertainment Centres
Transfer to retained profits - realised items
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
Total reserves
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2017
$’000
2016
$’000
2017
$’000
2016
$’000
17,436
(1,215)
-
-
16,221
(3,495)
3,154
(562)
(903)
10,429
11,243
(709)
(3,527)
17,436
(2,058)
(1,878)
441
(3,495)
(33,096)
(3,280)
(36,376)
(35,145)
2,049
(33,096)
(5,783)
(20)
(5,803)
(26,861)
(3,917)
(1,866)
(5,783)
(24,938)
3,416
-
-
-
3,416
(950)
1,549
(562)
37
6,569
(3,837)
2,732
-
-
-
6,185
3,416
-
-
-
3,416
(70)
(1,321)
441
(950)
4,292
2,277
6,569
-
-
-
9,035
The asset revaluation reserve is used to record increments and decrements on the revaluation of property, plant and equipment.
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) 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.
92 Ardent Leisure Group | Annual Report 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
(Accumulated losses)/retained profits
Opening balance
(Loss)/profit for the year
Available for distribution
Transfer from asset revaluation reserve
Distributions and dividends paid and payable
Closing balance
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2017
$’000
2016
$’000
2017
$’000
2016
$’000
(4,799)
(62,557)
(67,356)
-
(34,849)
(102,205)
4,992
42,387
47,379
3,527
(55,705)
(4,799)
(1,252)
3,064
1,812
-
-
1,812
(11,893)
10,641
(1,252)
-
-
(1,252)
Note
25(a)
The distribution of 1.0 cent per stapled security for the year ended 30 June 2017 totalling $4.7 million had not been declared at year
end. This will be paid on or before 31 August 2017, as described in Note 45.
Business combinations
Prior period
During the prior period, the Group finalised its acquisition of the KAOS Amusement Arcade and Hypoxi Caroline Springs. Purchase price
and goodwill adjustments on finalisation were immaterial in nature.
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 2017 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
2017
$’000
10,781
61
10,842
2016
$’000
9,009
61
9,070
2017
$’000
9,291
61
9,352
2016
$’000
8,330
61
8,391
Cash on deposit at call in the Group bears an average floating interest rate of 1.50% per annum (30 June 2016: 1.66% per annum).
Cash on deposit at call in the ALL Group bears an average floating interest rate of 1.38% per annum (30 June 2016: 1.75% per annum).
Ardent Leisure Group | Annual Report 2017 93
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
Cash flow information
(a)
Reconciliation of (loss)/profit to net cash flows from operating activities
(Loss)/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
Inventory provision
Increase/(decrease) in onerous lease provisions
Loss on sale of property, plant and equipment and livestock
Loss on closure of Australian Bowling and Entertainment Centres
Impairment of property, plant and equipment
Valuation losses/(gains) on investment properties and property,
plant and equipment
Classified as financing activities
Borrowing costs
Classified as investing activities
Unrealised net loss on derivative financial instruments
Gain on the sale of health clubs before selling costs
Gain on sale and leaseback of US Entertainment Centres
Changes in asset and liabilities:
Decrease/(increase) 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
(b)
Non-cash financing and investing activities
Consolidated
Group
2017
$’000
Consolidated
Group
2016
$’000
ALL Group
2017
$’000
ALL Group
2016
$’000
(62,557)
42,387
3,064
10,641
51,299
3,633
25
783
3,511
438
96
492
3,328
470
145
57,921
6,741
24
-
1,539
253
-
(2,193)
513
-
463
33,623
3,633
25
783
3,421
438
96
(206)
1,083
4
(117)
34,151
6,741
24
-
1,713
253
-
(1,146)
139
-
158
88,747
(2,059)
-
-
12,191
14,874
10,204
13,337
349
(51,230)
-
170
-
(1,672)
-
(23,776)
-
-
-
(1,672)
2,972
(1,905)
(8,068)
5,315
1,171
22,347
(702)
-
(5,862)
451
4,738
72,177
(3,336)
(1,831)
(1,857)
(62,692)
1,533
18,917
174
-
55,940
(1,398)
11,010
135,421
2,972
(1,905)
(8,068)
5,315
1,168
7,988
538
551
(5,862)
429
4,738
40,139
(981)
(1,831)
(1,857)
(62,692)
(2,233)
33,960
217
(3,824)
55,940
(1,424)
11,010
90,624
Consolidated
Group
2017
$’000
Consolidated
Group
2016
$’000
ALL Group
2017
$’000
ALL Group
2016
$’000
Note
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
25(a)
9,285
41,240
2,619
10,979
94 Ardent Leisure Group | Annual Report 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
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
Consolidated
Group
2017
$’000
2016
$’000
974,213
(96,587)
(442,491)
435,135
1,157,632
(246,129)
(537,649)
373,854
469,153,284
$0.93
463,039,616
$0.81
The following persons have held office as Directors of the Manager and ALL during the period and up to the date of this report:
George Venardos (appointed as Chair 6 November 2016);
Roger Davis;
Randy Garfield (appointed 14 August 2017);
David Haslingden;
Simon Kelly (appointed 9 June 2017);
Don Morris AO;
Melanie Willis;
Neil Balnaves AO (retired as Chair and as a Director 6 November 2016); and
Deborah Thomas (retired 1 July 2017).
(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.
(c)
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
Controlled entities of Ardent Leisure Trust:
Ardent Leisure Trust
Ardent Leisure (NZ) Trust
Principal lessee: Marinas, Bowling and
Entertainment Centres
Principal lessee: Bowling and Entertainment
Centres
Country of
establishment
Class of equity
securities
Australia
Ordinary
New Zealand
Ordinary
Controlled entities of Ardent Leisure Limited:
Ardent Leisure Limited
Theme Parks, Marinas
Bowling Centres Australia Pty Limited
Bowling and Entertainment Centres
Australia
Australia
Ardent Leisure Operations (NZ) Limited
Bowling and Entertainment Centres
New Zealand
Main Event Holdings, Inc
Family Entertainment Centres
USA
Ordinary
Ordinary
Ordinary
Ordinary
Ardent Leisure Group | Annual Report 2017 95
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
37.
(d)
(i)
Related party disclosures (continued)
Transactions with related parties
Key management personnel
Short term employee benefits
Post-employment benefits
Termination benefits
Share-based payments
Consolidated
Group
2017
$
4,330,985
197,312
731,291
2,277,658
7,537,246
Consolidated
Group
2016
$
5,113,010
177,998
-
1,036,746
6,327,754
ALL Group
2017
$
4,330,985
197,312
731,291
2,277,658
7,537,246
ALL Group
2016
$
5,113,010
177,998
-
1,036,746
6,327,754
Remuneration of key management personnel (KMP) is shown in the Directors’ report from pages 12 to 28.
(e)
Loans to KMP
There were no loans to KMP during the financial year or prior corresponding period.
(f)
Other transactions with KMP
Any agreements entered have been on normal commercial bases and fees and transactions have been based on normal commercial
terms and conditions.
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.
(g)
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 as follows:
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
Consolidated
Group
2017
$
Consolidated
Group
2016
$
ALL Group
2017
$
ALL Group
2016
$
(73,335)
(6,580)
(856,133)
(37,226)
(73,335)
(6,580)
(856,133)
(37,226)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
114,696
(4,538,444)
(128,221,273)
(204,550,323)
275,733,857
21,311
(4,324,640)
(61,341,068)
(126,900,500)
(85,096,033)
89,699,028
(25,183)
(5,898,585)
(128,221,273)
96 Ardent Leisure Group | Annual Report 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
Segment information
(a)
Business segments
The Group is organised on a global basis into the following divisions by product and service type:
(i)
Marinas
This segment comprises seven d’Albora Marina properties, located in New South Wales and Victoria. This business was sold on 14 August
2017.
(ii)
US Entertainment Centres
This segment comprises 37 entertainment centres in Texas, Arizona, Georgia, Illinois, Kentucky, Missouri, New Mexico, Ohio, Oklahoma,
Kansas, Florida, Indiana, Pennsylvania and Tennessee, United States of America.
(iii)
Australian Bowling and Entertainment Centres
This segment comprises 43 bowling centres and five amusement arcades located in Australia and one bowling centre located in New
Zealand.
(iv)
Australian Theme Parks
This segment comprises Dreamworld and WhiteWater World in Coomera, Queensland and the SkyPoint observation deck and climb in
Surfers Paradise, Queensland.
(v)
Health Clubs
Up to the date of sale on 25 October 2016, the segment comprised 76 clubs in Queensland, New South Wales, Victoria, South Australia
and Western Australia, including 14 in-club Hypoxi studios. The division also included 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,
movements in onerous lease provisions, amortisation of health club brands and customer relationship intangible assets, impairment of
property, plant and equipment and intangible assets, gain on sale of discontinued operation and associated selling costs, valuation
gains/losses on investment property and property, plant and equipment, costs associated with the Dreamworld incident and loss on
closure of Australian Bowling and Entertainment Centres. 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.
Ardent Leisure Group | Annual Report 2017 97
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
38.
Segment information (continued)
(a) Business segments (continued)
Consolidated Group - 2017
Discontinued
operations
Continuing operations
Total
Health
Clubs
$’000
US
Entertainment
Centres
$’000
Bowling and Australian
Theme
Parks
$’000
Entertainment
Centres
$’000
Marinas
$’000
Australian
Other
$’000
$’000
Revenue from operating activities
One-off deferred revenue adjustment
24,131 62,677
-
-
Core revenue from operating activities
24,131 62,677
Divisional EBITDA before property costs(1)
Property costs
Divisional EBITDA(2)
Corporate costs
Core EBITDA
Depreciation and amortisation(3)
12,724
(2,904)
9,820
-
9,820
-
25,612
(15,840)
9,772
-
9,772
(3,728)
299,450
697
300,147
99,493
(38,452)
61,041
-
61,041
(24,559)
127,655
-
70,934
-
127,655
70,934
9 584,856
697
-
9 585,553
42,402
(27,198)
15,204
-
15,204
(10,210)
(2,381)
(1,027)
(3,408)
-
(3,408)
(5,222)
-
-
-
(16,338)
(16,338)
(1,230)
177,850
(85,421)
92,429
(16,338)
76,091
(44,949)
Core EBIT(4)
9,820
6,044
36,482
4,994
(8,630)
(17,568)
31,142
Pre-opening expenses, straight lining of fixed rent increases, IFRS depreciation, increase in
onerous lease provisions, intangible asset amortisation, impairment of goodwill and
property, plant and equipment, Marina selling costs and other one-off and restructuring
expenses not included in divisional EBIT
Valuation losses - property, plant and equipment
Loss on closure of Australian Bowling and Entertainment Centres
Loss on disposal of assets
Gain on disposal of health clubs
Net loss from derivative financial instruments
Dreamworld incident costs, net of insurance recoveries
Interest income
Borrowing costs
Net tax benefit
Loss for the year
(31,580)
(88,747)
(470)
(3,328)
45,009
(421)
(5,389)
86
(12,191)
3,332
(62,557)
Total assets
Acquisitions of property, plant and
equipment, investment properties and
intangible assets
121,276
-
473,695
156,725
203,349
19,168
974,213
8,033
3,039
158,892
33,946
17,360
604
221,874
(1) Excludes pre-opening expenses of $13,888,000.
(2) Excludes straight lining of fixed rent increases of $1,328,000, pre-opening expenses of $13,888,000, increase in onerous lease provisions of $492,000.
(3) Excludes IFRS depreciation of $9,102,000, amortisation of health club brands and customer relationship intangible assets totalling $907,000, impairment of
property, plant and equipment of $145,000 and impairment of goodwill of $783,000.
(4) Excludes of pre-opening expenses of $13,888,000, straight lining of fixed rent increases of $1,328,000, increase in onerous lease provisions of $492,000, IFRS
depreciation of $9,102,000, amortisation of health club brands and customer relationship intangible assets of $907,000, Marina selling costs of $796,000,
impairment of property, plant and equipment of $145,000, impairment of goodwill of $783,000 and other one-off and restructuring expenses of $4,033,000.
98 Ardent Leisure Group | Annual Report 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
38.
Segment information (continued)
(a) Business segments (continued)
Consolidated Group - 2016
Discontinued
operations
Continuing operations
Total
Health
Clubs
$’000
US
Entertainment
Centres
$’000
Bowling and Australian
Theme
Parks
$’000
Entertainment
Centres
$’000
Marinas
$’000
Australian
Other
$’000
$’000
Revenue from operating activities
23,000 187,555
238,974
130,494 107,582
9
687,614
Divisional EBITDA before property costs(1)
Property costs
Divisional EBITDA(2)
Corporate costs
Core EBITDA
Depreciation and amortisation(3)
12,569
(2,412)
10,157
-
77,511
(47,397)
30,114
-
10,157
(730)
30,114
(12,620)
87,260
(28,092)
59,168
-
59,168
(17,827)
45,291
(27,067)
18,224
-
18,224
(9,344)
35,947
(1,222)
34,725
-
-
(15,144)
34,725
(5,492)
(15,144)
(1,153)
-
-
258,578
(106,190)
152,388
(15,144)
137,244
(47,166)
Core EBIT(4)
9,427
17,494
41,341
8,880
29,233
(16,297)
90,078
Pre-opening expenses, straight lining of fixed rent increases, IFRS
depreciation, decrease in onerous lease provisions, intangible asset
amortisation, impairment of property, plant and equipment and Marina
selling costs not included in divisional EBIT
Valuation gains - investment properties
Loss on disposal of assets
Gain on sale and leaseback of US Entertainment Centres
Net loss from derivative financial instruments
Interest income
Business acquisition costs refunded
Borrowing costs
Net tax expense
Profit for the year
(27,383)
2,059
(514)
1,672
(170)
81
134
(14,874)
(8,696)
42,387
Total assets
Acquisitions of property, plant and
equipment, investment properties and
intangible assets
113,093
251,144
357,836
137,986 283,774
13,799 1,157,632
6,448
20,612
106,013
16,968
9,638
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 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 pre-opening expenses of $8,638,000, straight lining of fixed rent increases of $1,909,000, 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 2017 99
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
38.
Segment information (continued)
(a) Business segments (continued)
ALL Group - 2017
Discontinued
operations
Continuing operations
Total
US
Health Entertainment
Centres
Clubs
$’000
$’000
Bowling and Australian
Theme
Parks
$’000
Entertainment
Centres
$’000
Marinas
$’000
Australian
Revenue from operating activities
One-off deferred revenue adjustment
24,131
-
62,677
-
Core revenue from operating activities
24,131
62,677
Divisional EBITDA before rent to Trust(1)
Rent to the Trust
Divisional EBITDA after rent to Trust(1)
Corporate costs
Core EBITDA
Depreciation and amortisation(2)
12,724
(11,784)
940
-
940
-
21,417
(13,299)
8,118
-
8,118
(3,728)
299,450
697
300,147
61,041
-
61,041
-
61,041
(24,559)
127,655
-
70,934
-
127,655
70,934
Other
$’000
$’000
9 584,856
697
-
9 585,553
42,217
(35,638)
6,579
-
6,579
(4,941)
(2,381)
(4,349)
(6,730)
-
(6,730)
(1,916)
-
-
-
(14,316)
(14,316)
(1,230)
135,018
(65,070)
69,948
(14,316)
55,632
(36,374)
Core EBIT(3)
940
4,390
36,482
1,638
(8,646)
(15,546)
19,258
(21,388)
18,340
(1,083)
(5,042)
77
(87)
(10,203)
3,192
3,064
Pre-opening expenses, straight lining of fixed rent increases, decrease in onerous lease
provisions, intangible asset amortisation, impairment of goodwill, reversal of impairment on
property, plant and equipment, selling costs associated with the sale of Marinas, other one-off
and restructuring expenses not included in divisional EBIT
Gain on disposal of health clubs
Loss on disposal of assets
Dreamworld incident costs, net of insurance recoveries
Interest income
Foreign exchange losses
Borrowing costs
Net tax expense
Profit for the year
Total assets
Acquisitions of property, plant and
equipment, investment properties and
intangible assets
3,799
-
473,771
71,435
26,154
17,536
592,695
605
2,194
158,892
26,809
4,771
604
193,875
(1) Excludes pre-opening expenses of $13,888,000, straight lining of fixed rent of $1,030,000, decrease in onerous lease provisions of $167,000.
(2) Excludes amortisation of health club brands and customer relationship intangible assets totalling $907,000, reversal of impairment of property, plant and
equipment of $117,000, impairment of goodwill of $783,000.
(3) Excludes pre-opening expenses of $13,888,000, straight lining of fixed rent of $1,030,000, decrease in onerous lease provisions of $167,000, amortisation of
health club brands and customer relationship intangible assets of $907,000, reversal of impairment of property, plant and equipment of $117,000,
impairment of goodwill of $783,000, Marina selling costs of $944,000 and other one-off and restructuring expenses of $4,033,000.
100 Ardent Leisure Group | Annual Report 2017
For personal use only
Notes to the Financial Statements
For the year ended 30 June 2017
38.
Segment information (continued)
(a) Business segments (continued)
ALL Group - 2016
Discontinued
operations
Continuing operations
Total
US
Health Entertainment
Centres
Clubs
$’000
$’000
Bowling and Australian
Theme
Parks
$’000
Entertainment
Centres
$’000
Marinas
$’000
Other
$’000
$’000
Australian
Revenue from operating activities
23,000 187,555
238,974
130,494 107,582
9 687,614
Divisional EBITDA before rent to Trust(1)
Rent to the Trust
Divisional EBITDA after rent to Trust(1)
Corporate costs
Core EBITDA
Depreciation and amortisation(2)
12,569
(11,492)
1,077
-
1,077
(163)
64,531
(41,138)
23,393
-
23,393
(12,620)
59,168
-
59,168
-
59,168
(17,827)
45,271
(37,942)
7,329
-
7,329
(3,015)
35,947
(33,108)
2,839
-
-
-
-
(13,516)
2,839 (13,516)
(1,153)
(1,647)
217,486
(123,680)
93,806
(13,516)
80,290
(36,425)
Core EBIT(3)
914
10,773
41,341
4,314
1,192 (14,669)
43,865
Pre-opening expenses, straight lining of fixed rent increases,
decrease in onerous lease provisions, 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 US Entertainment Centres
Interest income
Foreign exchange gain
Business acquisition costs refunded
Borrowing costs
Net tax expense
Profit for the year
(13,063)
(140)
1,672
68
116
134
(13,337)
(8,674)
10,641
Total assets
Acquisitions of property, plant and
equipment, investment properties and
intangible assets
2,972
206,187
357,907
47,735
21,679
12,844
649,324
706
14,189
106,022
12,256
2,789
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 totalling $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 2017 101
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
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 net debt to net debt plus equity. At 30 June 2017, gearing was 29.5% (2016:
33.0%) 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)
(i)
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.
102 Ardent Leisure Group | Annual Report 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
39.
Capital and financial risk management (continued)
(c)
(i)
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
US Entertainment Centre classified as held
for sale
Construction in progress inventories
Investments held at fair value
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
2017
$’000
2016
$’000
3,774
15,474
105
120,721
-
-
3,201
299,678
41,496
11,831
496,280
41,647
-
1,321
4,892
75,126
5,925
128,911
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
2017
$’000
1,457
376
-
-
-
-
-
939
3,685
11
6,468
305
-
-
-
-
-
305
2016
$’000
1,031
238
-
-
-
-
-
2,018
3,689
19
6,995
658
-
-
-
-
-
658
2017
$’000
5,611
7,862
167
-
13,840
56,756
-
335,823
51,406
-
471,465
67,258
50,050
-
-
157,501
38,466
313,275
2016
$’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
Net assets
367,369
562,061
6,163
6,337
158,190
51,585
Notional value of derivatives
-
-
-
-
1,326
774
Net exposure to foreign exchange
movements
367,369
562,061
6,163
6,337
159,516
52,359
Ardent Leisure Group | Annual Report 2017 103
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
39.
Capital and financial risk management (continued)
(c)
(i)
Market risk (continued)
Foreign exchange risk (continued)
Foreign investment (continued)
Australian dollars
New Zealand dollars
US dollars
ALL Group
Assets
Cash and cash equivalents
Receivables and other current assets
Derivative financial instruments
Assets classified as held for sale
US Entertainment Centre classified as held
for sale
Construction in progress inventories
Investments held at fair value
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
2017
$’000
3,763
15,284
-
3,244
-
-
3,201
38,486
41,496
11,831
117,305
34,947
-
-
4,558
61,387
1,093
101,985
2016
$’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
2017
$’000
687
66
-
-
-
-
-
278
3,685
11
4,727
416
-
-
-
-
-
416
2016
$’000
566
172
-
-
-
-
-
13
3,689
19
4,459
317
-
-
-
-
-
317
2017
$’000
4,902
7,740
196
-
13,840
56,756
-
335,823
51,406
-
470,663
67,258
50,050
29
-
157,457
38,466
313,260
2016
$’000
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
Net assets
15,320
95,342
4,311
4,142
157,403
75,399
Net exposure to foreign exchange
movements
(ii)
Foreign exchange rate sensitivity
15,320
95,342
4,311
4,142
157,403
75,399
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
2017
$’000
(119)
146
-
-
2016
$’000
(79)
96
-
-
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%
104 Ardent Leisure Group | Annual Report 2017
Core earnings
movement
2017
$’000
2016
$’000
-
-
-
-
-
-
-
-
Profit movement
2017
$’000
2016
$’000
-
-
-
-
-
-
-
-
Total equity
movement
2017
$’000
(14,501)
17,724
(560)
686
2016
$’000
(4,760)
5,818
(576)
704
Total equity
movement
2017
$’000
(14,309)
17,489
(390)
482
2016
$’000
(6,854)
8,378
(378)
459
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
39.
Capital and financial risk management (continued)
(c)
(ii)
Market risk (continued)
Foreign exchange rate sensitivity (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.
(iii)
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
Fixed rates
Interest bearing liabilities
Floating rates
Cash and cash equivalents
Interest bearing liabilities
Australian interest
US interest
2017
$’000
2016
$’000
2017
$’000
2016
$’000
-
-
-
-
-
-
-
-
5,231
(75,466)
(70,235)
4,316
(142,433)
(138,117)
5,611
(157,793)
(152,182)
4,754
(172,511)
(167,757)
Interest rate swaps
70,000
80,000
71,503
127,929
Net interest rate exposure
(235)
(58,117)
(80,679)
(39,828)
Refer to Note 14 for further details on the interest rate swaps.
Ardent Leisure Group | Annual Report 2017 105
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
39.
(c)
(iii)
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
Australian interest
US interest
2017
$’000
2016
$’000
2017
$’000
-
-
-
-
-
-
2016
$’000
-
-
4,450
(61,341)
(56,891)
3,733
(128,569)
(124,836)
4,902
(157,793)
(152,891)
4,658
(148,521)
(143,863)
Interest rate swaps
-
-
71,503
105,036
Net interest rate exposure
(56,891)
(124,836)
(81,388)
(38,827)
(iv)
Interest rate sensitivity
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
2017
$’000
6
(6)
(815)
815
2016
$’000
(573)
573
(408)
408
2017
$’000
(2)
2
(807)
807
2016
$’000
(581)
581
(398)
398
2017
$’000
1,337
(1,337)
535
(535)
2016
$’000
1,711
(1,711)
2,234
(2,234)
Profit movement
Total equity movement
2017
$’000
(569)
569
(814)
814
2016
$’000
(1,248)
1,248
(388)
388
2017
$’000
(569)
569
536
(536)
2016
$’000
(1,248)
1,248
2,040
(2,040)
At reporting date, the Group has fixed 60.7% (30 June 2016: 66.0%) of its floating interest exposure.
106 Ardent Leisure Group | Annual Report 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
39.
(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 2017. 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
2017
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
Payables
Term debt
Interest rate swaps designated as hedges
of the term debt
Forward foreign exchange contracts
Total undiscounted financial liabilities
102,960 102,960
59,559
233,259
-
-
71,347 111,156
1,008
41
1,085
1,020
337,268 164,624
668
-
-
-
72,015 111,156
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Consolidated Group
2016
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
Payables
Term debt
Interest rate swaps designated as hedges
of the term debt
Forward foreign exchange contracts
Total undiscounted financial liabilities
106,407 106,407
8,510
314,944
4,026
(131)
2,077
644
425,246 117,638
-
-
8,510 193,390 115,392
-
1,657
-
-
-
10,167 194,595 115,392
1,205
-
-
-
-
-
-
-
-
-
-
-
ALL Group
2017
Payables
Term debt
Loan from the Trust
Interest rate swaps designated as hedges
of the term debt
Total undiscounted financial liabilities
ALL Group
2016
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
96,371
157,793
61,341
96,371
4,156
2,649
-
70,628
61,638
-
90,074
-
(167)
53
315,338 103,233 132,319
57
-
90,074
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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
93,699
148,869
128,221
93,699
2,913
5,505
-
-
2,913
99,946
5,505 128,839
-
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
Ardent Leisure Group | Annual Report 2017 107
Total
$’000
102,960
242,062
1,753
1,020
347,795
Total
$’000
106,407
325,802
4,939
644
437,792
Total
$’000
96,371
164,858
64,287
110
325,626
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
39.
(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 of the concentration of credit exposure of the Group’s assets are as follows:
Cash and cash equivalents
Receivables - Australasia
Receivables - US
Derivative financial instruments
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2017
$’000
10,842
3,463
1,904
272
16,481
2016
$’000
9,070
11,537
1,749
244
22,600
2017
$’000
9,352
3,463
1,904
196
14,915
2016
$’000
8,391
11,537
1,749
-
21,677
108 Ardent Leisure Group | Annual Report 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
39.
(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
2017
Receivables - Australasia
Receivables - US
Consolidated Group
2016
Receivables - Australasia
Receivables - US
ALL Group
2017
Receivables - Australasia
Receivables - US
ALL Group
2016
Receivables - Australasia
Receivables - US
Past due but not impaired
Impaired
Total
Less than 30
days
$’000
31 to 60
days
$’000
61 to 90
days
$’000
More than 90
days
$’000
$’000
$’000
555
75
630
1,228
98
1,326
555
75
630
1,228
98
1,326
230
520
750
204
55
259
230
520
750
204
55
259
116
24
140
264
48
312
116
24
140
264
48
312
1,066
13
1,079
638
9
647
1,066
13
1,079
638
9
647
221
-
221
831
-
831
221
-
221
831
-
831
2,188
632
2,820
3,165
210
3,375
2,188
632
2,820
3,165
210
3,375
Based on a review of receivables by management, a provision of $94,000 (30 June 2016: $515,000) has been made against receivables
with a gross balance of $221,000 (30 June 2016: $831,000).
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.
Ardent Leisure Group | Annual Report 2017 109
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
Fair value measurement
(a)
Fair value hierarchy
The Group measures and recognises the following assets and liabilities at fair value on a recurring basis:
Derivative financial instruments;
Investments held at fair value;
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
2017
Assets measured at fair value:
Investments held 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 40(c))
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 40(c))
(1) Land and buildings of the Australian Theme Parks.
Level 1
$’000
Level 2
$’000
Level 3
$’000
-
-
-
-
-
-
-
-
-
272
1,321
233,259
3,201
186,439
116,888
-
-
-
Level 1
$’000
Level 2
$’000
Level 3
$’000
-
-
-
-
-
-
-
244
4,139
314,944
267,733
109,459
-
-
-
Total
$’000
3,201
186,439
116,888
272
1,321
233,259
Total
$’000
267,733
109,459
244
4,139
314,944
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 2017
and 30 June 2016, refer to Notes 16, 17 and 20.
110 Ardent Leisure Group | Annual Report 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
40.
(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
2017
Assets measured at fair value:
Investments held at fair value(1)
Derivative financial assets
Liabilities measured at fair value:
Derivative financial instruments
Liabilities for which fair values are disclosed:
Interest bearing liabilities (refer to Note 40(c))
ALL Group
2016
Liabilities measured at fair value:
Derivative financial instruments
Liabilities for which fair values are disclosed:
Interest bearing liabilities (refer to Note 40(c))
Level 1
$’000
Level 2
$’000
-
-
-
-
-
196
29
219,134
Level 3
$’000
3,201
-
-
-
Level 1
$’000
Level 2
$’000
Level 3
$’000
-
-
1,415
277,090
-
-
Total
$’000
3,201
196
29
219,134
Total
$’000
1,415
277,090
(1) On 20 December 2016, the Group acquired a non-controlling equity interest of $3.2 million in Online Media Holdings Limited, an unlisted entity which develops
and markets online location-based social media and customer data collection services.
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 2017
and 30 June 2016, refer to Notes 17 and 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 2017.
(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 except for unlisted equity securities, where the fair values have been
determined based on present values and the discount rates used were adjusted for counterparty or own credit risk.
Ardent Leisure Group | Annual Report 2017 111
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
40.
(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.
(i)
Fair value measurements using significant unobservable inputs
For changes in level 3 items for the periods ended 30 June 2017 and 2016, refer to Notes 16, 17, 19 and 20.
(ii)
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 (%)
7.00 – 10.50
Discount rate (%)
8.00 - 12.00
Annual net property
income ($’000)
340 – 2,413
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 (%)
12.25
11.50
Discount rate (%)
14.75 – 15.25
14.25 – 14.50
Annual net property
income ($’000)
9,170
4,777
The sensitivity of the fair values of the investment properties and land and buildings in relation to the significant unobservable inputs is
set out in the table below:
Fair value measurement sensitivity to significant increase
in input
Fair value measurement sensitivity to significant decrease
in input
Decrease
Increase
Decrease
Increase
Increase
Decrease
Capitalisation rate (%)
Discount rate (%)
Annual net property
income ($’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.
112 Ardent Leisure Group | Annual Report 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
40.
(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 2017:
Consolidated Group
Interest bearing liabilities
ALL Group
Interest bearing liabilities
Carrying
amount
2017
$’000
Fair value
Discount rate
2017
$’000
2017
%
Carrying
amount
2016
$’000
233,259
225,252
4.80
314,944
314,345
Fair value
Discount rate
2016
$’000
2016
%
2.82
219,134
213,293
4.80
277,090
277,754
2.82
In determining the fair value of the interest bearing liabilities, the Group’s principal payable of $233.3 million (30 June 2016: $314.9
million) has been discounted at a rate of 4.80% (30 June 2016: 2.82%) 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 the Group’s own credit risk. The Group’s
own credit risk has been included for the first time in the current financial year following the adoption of AASB 13 Fair Value
Measurement.
41.
Contingent liabilities
On 25 October 2016, an incident on the Thunder River Rapids ride at Dreamworld resulted in four fatalities at the theme park. The park
and adjoining WhiteWater World were subsequently closed for 45 days and re-opened on 10 December 2016. Rides in Dreamworld
were progressively re-opened as independent safety reviews were completed.
The incident is the subject of ongoing investigations by the Queensland Police Service (QPS) and Workplace Health and Safety
Queensland (WHSQ). The timing of the conclusion, and the findings, of both investigations are not yet known. The incident will be
subject to a coronial inquest, the timing of which is also not yet known.
The Group expects to be subjected to prosecution proceedings by WHSQ and civil claims from families and other affected persons,
however the nature, timing and likely outcome of such actions are not yet known.
As at 30 June 2017, it is too premature to provide any meaningful or reliable estimate of the quantum of potential pecuniary penalties
or damages to civil claimants. The Group maintains appropriate insurances to respond to all such litigation and regulatory action and
associated costs. To date, the Group has taken a conservative approach in recognising insurance recoveries.
Unless otherwise disclosed in the financial statements, there are no other material contingent liabilities.
42.
(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
2017
Consolidated
Group
2016
ALL Group
2017
$’000
$’000
$’000
ALL Group
2016
$’000
2,878
2,878
770
770
2,878
2,878
770
770
Ardent Leisure Group | Annual Report 2017 113
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
42.
(b)
Capital and lease commitments (continued)
Lease commitments
Cancellable operating leases
Non-cancellable operating leases
Finance leases
(i)
Operating leases
Consolidated
Group
2017
$’000
Consolidated
Group
2016
$’000
-
600,518
-
600,518
-
678,481
-
678,481
ALL Group
2017
$’000
-
482,718
-
482,718
ALL Group
2016
$’000
-
423,494
-
423,494
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, Marinas, Bowling and Entertainment Centres and Health Clubs properties in Australia. 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
2017
$’000
Consolidated
Group
2016
$’000
ALL Group
2017
$’000
ALL Group
2016
$’000
61,536
229,795
309,187
600,518
92,203
298,377
287,901
678,481
40,097
163,624
278,997
482,718
41,493
150,020
231,981
423,494
114 Ardent Leisure Group | Annual Report 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
43.
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 guaranteed 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
Limited 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.
On 25 October 2016, a Notice of Disposal was executed whereby Ardent Leisure Health Clubs 1 Pty Limited, Ardent Leisure Health Clubs
2 Pty Limited, Goodlife Health Clubs Holdings Pty Limited, Goodlife Operations Pty Limited, Fenix Holdings Pty Limited, Hypoxi Australia
Pty Limited and Hypoxi North America Pty Limited were released from the Deed of Cross Guarantee.
By entering into the deeds, Bowling Centres Australia Pty Limited, has been relieved from the requirement to prepare a financial report
and Directors’ report under ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 which has replaced ASIC Instrument
2016/785.
(a)
Consolidated Income Statement
ALL and Bowling Centres Australia 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 2017 of the Closed Group:
Income
Revenue from operating activities
Other income
Expenses
Purchases of finished goods
Salary and employee benefits
Borrowing costs
Property expenses
Depreciation and amortisation
Loss on closure of Australian Bowling and Entertainment Centres
Advertising and promotions
Repairs and maintenance
Impairment of property, plant and equipment
Dreamworld incident costs
Other expenses
Pre-opening expenses
Business acquisition costs
Loss before tax benefit
Income tax benefit
Loss from continuing operations
Profit from discontinued operations
Loss for the year
2017
$’000
2016
$’000
196,668
1,727
235,594
-
(26,530)
(102,888)
(2,026)
(39,794)
(7,965)
(4)
(10,814)
(12,071)
(783)
(6,534)
(20,060)
(1,242)
-
(32,316)
10,389
(21,927)
17,002
(4,925)
(28,704)
(99,144)
(2,612)
(70,383)
(5,619)
-
(9,188)
(10,699)
-
-
(19,320)
289
(64)
(9,850)
3,209
(6,641)
2,252
(4,389)
Ardent Leisure Group | Annual Report 2017 115
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
43.
(b)
Deed of Cross Guarantee (continued)
Consolidated Statement of Comprehensive Income
Set out below is a consolidated Statement of Comprehensive Income for the year ended 30 June 2017 of the Closed Group:
2017
$’000
(4,925)
-
(4,925)
2017
$’000
3,761
3,458
8,986
-
4,442
3,244
23,891
45,915
293
24,165
11,542
111,761
193,676
217,567
24,646
4,400
4,558
5
33,609
53,780
1,009
54,789
88,398
129,169
170,699
45
(41,575)
129,169
2016
$’000
(4,389)
-
(4,389)
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
Loss for the year
Other comprehensive income for the year
Total comprehensive loss for the year
(c)
Consolidated Balance Sheet
Set out below is a consolidated Balance Sheet as at 30 June 2017 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
116 Ardent Leisure Group | Annual Report 2017
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
43.
(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 2017 of the Closed Group:
Total equity at 30 June 2015
Total comprehensive loss for the year
Reserve transfers
Contributions of equity, net of issue costs
Total equity at 30 June 2016
Total comprehensive loss for the year
Reserves
Contributions of equity, net of issue costs
Total equity at 30 June 2017
44.
(a)
Parent entity financial information
Summary financial information
Balance sheet
Current assets
Total assets
Current liabilities
Total liabilities
Equity
Contributed equity
Reserves
Accumulated losses
Total equity
Contributed
equity
$’000
Reserves
$’000
Accumulated
losses
$’000
155,262
-
-
11,838
167,100
-
-
3,599
170,699
-
-
(4)
-
(4)
-
49
-
45
(32,261)
(4,389)
-
-
(36,650)
(4,925)
-
-
(41,575)
Total
equity
$’000
123,001
(4,389)
(4)
11,838
130,446
(4,925)
49
3,599
129,169
Consolidated
Group
2017
$’000
Consolidated
Group
2016
$’000
ALL Group
2017
$’000
ALL Group
2016
$’000
124,555
456,784
70,106
96,002
118,811
617,113
15,728
187,690
27,490
244,884
22,860
80,969
491,751
(940)
(130,029)
360,782
482,620
(2,545)
(50,652)
170,698
-
(6,784)
429,423
163,914
158,436
18,206
249,978
21,391
91,542
167,100
-
(8,664)
(Loss)/profit for the year
(79,377)
42,826
1,880
(9,031)
Total comprehensive (loss)/income for the year
(78,377)
42,269
1,880
(9,031)
(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 43), there are no other material guarantees entered into by Ardent
Leisure Limited and Ardent Leisure Trust in relation to the debts of their subsidiaries.
Ardent Leisure Group | Annual Report 2017 117
For personal use only
Notes to the Financial Statements
for the year ended 30 June 2017
44.
(c)
Parent entity financial information (continued)
Contingent liabilities
On 25 October 2016, an incident on the Thunder River Rapids ride at Dreamworld resulted in four fatalities at the theme park. The park
and adjoining WhiteWater World were subsequently closed for 45 days and re-opened on 10 December 2016. Rides in Dreamworld
were progressively re-opened as independent safety reviews were completed.
The incident is the subject of ongoing investigations by the Queensland Police Service (QPS) and Workplace Health and Safety
Queensland (WHSQ). The timing of the conclusion, and the findings, of both investigations are not yet known. The incident will be
subject to a coronial inquest, the timing of which is also not yet known.
Ardent Leisure Trust and Ardent Leisure Limited expect to be subjected to prosecution proceedings by WHSQ and civil claims from
families and other affected persons, however the nature, timing and likely outcome of such actions are not yet known.
As at 30 June 2017, it is too premature to provide any meaningful or reliable estimate of the quantum of potential pecuniary penalties
or damages to civil claimants. Ardent Leisure Trust and Ardent Leisure Limited maintain appropriate insurances to respond to all such
litigation and regulatory action and associated costs.
Unless otherwise disclosed in the financial statements, Ardent Leisure Trust and Ardent Leisure Limited have no other material
contingent liabilities.
(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
2017
$’000
2016
$’000
2017
$’000
-
-
-
-
75
75
2016
$’000
104
104
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 $75,000 (30 June 2016: $104,000). Any commitments relating to the
Australian and New Zealand geographic segments will therefore be subsequently reimbursed by the Trust the month following
payment.
45.
Events occurring after reporting date
Subsequent to 30 June 2017, a distribution of 1.0 cent per stapled security has been declared by the Board of Directors. The total
distribution amount of $4.7 million will be paid on or before 31 August 2017 in respect of the half year ended 30 June 2017.
As noted above, effective 14 August 2017, the Group completed the disposal of its Marinas business for gross sale proceeds (excluding
working capital adjustments) of $126.0 million.
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
2017.
118 Ardent Leisure Group | Annual Report 2017
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 34 to
114 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 2017 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 43
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 43.
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.
George Venardos
Chairman
Sydney
31 August 2017
Simon Kelly
Managing Director
Ardent Leisure Group | Annual Report 2017 119
For personal use only
Independent auditor’s report
To the stapled security holders of Ardent Leisure Trust and Ardent Leisure Limited
Report on the audit of the financial reports
Our opinion
In our opinion:
The accompanying financial reports of Ardent Leisure Group (the Group), which comprises Ardent
Leisure Trust (the Trust) and its controlled entities, and Ardent Leisure Limited Group (the ALL
Group), which comprises Ardent Leisure Limited (the Company or ALL) and its controlled entities, are
in accordance with the Corporations Act 2001, including:
a) giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its
financial performance for the year then ended;
b) giving a true and fair view of the ALL Group’s financial position as at 30 June 2017 and of its
financial performance for the year then ended; and
c)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The consolidated financial reports of the Group and the ALL Group comprise:
●
●
●
●
●
●
●
the balance sheets as at 30 June 2017;
the income statements for the year ended 30 June 2017;
the statements of comprehensive income for the year ended 30 June 2017;
the statements of changes in equity for the year ended 30 June 2017;
the statements of cash flows for the year ended 30 June 2017;
the notes to the financial statements, which include a summary of significant accounting
policies; and
the directors’ declaration to stapled security holders.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group and the ALL Group in accordance with the auditor independence
requirements of the Corporations Act 2001 and the ethical requirements of the Accounting
Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the
Code) that are relevant to our audit of the financial reports in Australia. We have also fulfilled our
other ethical responsibilities in accordance with the Code.
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial reports are free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
For personal use only
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report of the Group as a whole and on the financial report of the ALL Group as
a whole, taking into account the geographic and management structure of the Group and the ALL
Group, their accounting processes and controls and the industry in which they operate.
The Group and the ALL Group have three main operating segments being US Entertainment Centres,
Australia Bowling and Entertainment Centres and Australian Theme Parks. Two operating segments,
Marinas and Health Clubs were classified as discontinued operations during the year.
Materiality of the Group
• For the purpose of our audit of the Group, we used overall group materiality of $1.6 million, which represents
approximately 5% of the Group’s profit before tax from continuing operations, adjusted for selected unusual or
unfrequently occurring items.
• We applied this threshold, together with qualitative considerations, to determine the scope of our audit and
the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the
financial reports as a whole.
• We chose the Group’s profit before tax from continuing operations because, in our view, it is the metric against
which the performance of the Group is most commonly measured and is a generally accepted benchmark.
• We selected 5% based on our professional judgement, noting it is within the range of commonly acceptable
thresholds.
Audit scope of the Group
• Our audit focused on where subjective judgements were made; for example, significant accounting estimates
involving assumptions and inherently uncertain future events.
• We structured our audit as follows:
● Audit procedures were performed over financially significant segments and discontinued operations,
assisted by local component auditors in the USA for US Entertainment Centres.
● Further audit procedures were performed at a Group level, including audit procedures over the
consolidation of the Group and the preparation of the financial report.
● As part of our audit, PwC valuation experts and tax specialists assisted with the audit procedures on
impairment models, property valuations and tax calculations.
To be satisfied that sufficient audit evidence had been obtained as a basis for our opinion on the financial report as
a whole, there was regular communication with the component auditors throughout the audit with phone calls,
discussions and written instructions, where appropriate. The group engagement team also visited the head office
of US Entertainment Centres and met with management and the component auditors.
We also visited the following head offices- AMF Bowling (Sydney, Australia), Dreamworld (Gold Coast,
Australia), Goodlife (Brisbane, Australia), D’Albora Marinas (Sydney, Australia) and Group/Head office (Sydney,
Australia).
Key audit matters
• Amongst other relevant topics, we communicated the following key audit matters to the Audit and Risk
Committee:
– Carrying value of assets
For personal use only
– Divestment of Health Clubs and Marinas
– Construction of US Entertainment Centre assets
– Revenue recognition
– Dreamworld contingencies
• These are further described in the Key audit matters section of our report.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial reports for the current period and were determined separately for the Group
and ALL Group. Relevant amounts listed for the Group and ALL Group represent balances as they are
presented in the financial reports and should not be aggregated. The key audit matters were addressed
in the context of our audit of the financial report of the Group as a whole and the financial report of the
ALL Group as a whole, and in forming our opinion thereon, and we do not provide a separate opinion
on these matters. Further, any commentary on the outcomes of a particular audit procedure is made in
that context.
Carrying value of assets
Goodwill
ALL Group – Note 21
Goodwill: $83.0m
Group – Note 21
Goodwill: $83.0m
Key audit matter
The Group and ALL Group recognised goodwill of
$83.0 million as at 30 June 2017, allocated
predominately to two cash generating units (CGUs),
being Australian Bowling and Entertainment
Centres and US Entertainment Centres.
As required by Australian Accounting Standards, at
30 June 2017 the Group and ALL Group performed
an assessment of whether there was any
impairment of the goodwill balance by calculating
the ‘value in use’ (VIU) for each CGUs’ goodwill,
using discounted cash flow models (models). Refer
to page 73, note 21, for details of the impairment
test and assumptions.
This was a key audit matter due to the financial size
of the goodwill balance and because the Group and
ALL Group’s assessment of the models involved
significant judgements and estimates about the
future results of the CGUs, and the discount rates
and long-term growth rates applied to future cash
flows.
How our audit addressed the key audit matter
We performed a number of audit procedures in relation
to goodwill, including the following:
•
•
•
•
•
Evaluating the CGUs’ cash flow forecasts used
in the models and the process by which they
were developed, including testing the
mathematical accuracy of the underlying
calculations.
Comparing the cash flow forecasts for FY2018
in the models to the Board approved budgets
for FY2018. We found that the cash flow
forecast used in the models was consistent with
the Board approved budgets and that the key
assumptions were subject to oversight by the
Directors.
Comparing the FY2017 actual results with prior
year forecasts to assess the historical accuracy
of the Group’s forecasting processes. With
assistance from PwC valuations experts, we
also assessed:
key assumptions for long-term growth rates
used in the models by comparing them to
historical results and economic and industry
forecasts; and
the discount rates used in the models by
assessing the cost of capital for the Group by
comparing it to market data and industry
research.
We found that the long-term growth rates and the
For personal use only Carrying value of assets
discount rates used were consistent with our internally
developed benchmarks, which were based on market
data and industry research.
We then performed a sensitivity analysis on the models
by adopting other assumptions which we viewed as
reasonably possible for the FY2018 cash flow forecasts,
the long term growth rates and the discount rates.
As a final test we also compared the Group’s net assets
as at 30 June 2017 of $531.7 million to its market
capitalisation of $882.0 million as at 30 June 2017.
Australian Theme Parks (carried at fair value)
Group – Note 20, Note 40
ALL Group
Theme Parks (carried at fair value): $186.4m
KAM not applicable
Key audit matter
How our audit addressed the key audit matter
The Group carries Australian Theme Parks assets
(including associated land and buildings and major
rides and attractions) at fair value. External valuers
are utilised by the Group to assist in the valuation of
the Australian Theme Park assets held at fair value.
This was a key audit matter due to the financial size
of the balance and the inherent judgement involved
in determining the fair value of Australian Theme
Park assets, particularly because of the material
valuation uncertainty as explained in note 20.
As at 30 June 2017 the Australian Theme Park
assets measured at fair value were recognised at
$186.4 million. A valuation loss of $88.7 million
was recorded in the Group 30 June 2017 financial
statements.
We performed a number of audit procedures in relation
to the valuations, including the following:
•
Assessing and considering the independence
and qualifications of the Group’s external
valuers at 30 June 2017.
• With assistance from PwC valuation experts,
considering the reasonableness of the key
assumptions and variables used in the Group’s
external valuations, including growth and
discount rates in light of our understanding of
the business and the current market.
•
•
•
•
Comparing the cash flow forecasts for FY2018
in the valuations to the Board approved
budgets for FY2018.
Comparing the FY2017 actual results with prior
year forecasts to assess the historical accuracy
of the Group’s forecasting processes.
Reconciling the underlying Management
forecasts to the information used in the
Group’s external valuations.
Reconciling the movement in fair value to the
financial statements.
Group –Note 16
ALL Group – Note 16
Divestment of Health Clubs and Marinas
Profit from discontinued operations: $53.9m
Profit from discontinued operations: $18.6m
Key audit matter
How our audit addressed the key audit matter
During the year, the Group and ALL Group sold the
operating segment Health Clubs for total proceeds
of $260 million. A gain on disposal of this business
of $44.8 million was recognised in the 30 June 2017
We performed a number of audit procedures in relation
to the discontinued operations, including the following
•
Obtaining the sale agreements for Health
Clubs and Marinas to assess whether the sale
For personal use only Divestment of Health Clubs and Marinas
financial statements by the Group and a gain on
disposal of $18.2 million was recognised by the ALL
Group.
transactions were recorded and disclosed in
accordance with the terms of the respective
sale agreements.
Marinas remains a discontinued operation as at 30
June 2017, with a Put and Call Option Deed signed
on 9 December 2016 to sell the d’Albora Marinas
business. Total consideration for the sale was
$126m. The Businesss Purchase Deed was
executed on 14 August 2017.
This was a key audit matter because of the
significant impact of the gain on disposal on the
profit and the importance to readers of the
disclosure of the discontinued operations in the
financial reports.
•
•
•
•
•
Performing audit procedures on the Health
Club’s balance sheet on the date the sale
transaction was completed.
Reperforming the calculations of the gain on
disposal by comparing the consideration
received to the carrying value of the identified
assets and liabilities disposed.
Agreeing the consideration received from the
sale to the respective contracts and to bank
records.
Assessing the Group and ALL Group’s
calculation that the current carrying value of
Marinas is less than the fair value less costs to
sell of the disposal group.
Examining the discontinued operations
disclosures included in the financial report in
line with the requirements of the Australian
Accounting Standards.
Construction of US Entertainment Centre assets
Group –Note 18, Note 20, Note 38
ALL Group – Note 18, Note 20, Note 38
US Entertainment Centre Acquisitions: $158.9m
US Entertainment Centre Acquisitions: $158.9m
Key audit matter
How our audit addressed the key audit matter
During the year, the Group and ALL Group
constructed several centres in the US
Entertainment Centres segment, which resulted in
asset additions recognised of $158.9 million, which
predominately relate to property, plant and
equipment. These assets were funded through the
Group’s debt facility and third party funding. Third
party advances of $50.1 million have been
recognised in the 30 June 2017 financial statements
by the Group and ALL Group.
This was a key audit matter because of the material
impact of the asset additions and third party
advances on the financial report.
We performed detailed testing of a sample of asset
additions, which included the following:
•
•
•
Agreeing the amount of the asset addition to
an invoice or contract.
Checking the approval of the asset addition
was within the delegations of authority and
the board approved budget.
Testing whether the asset addition was capital
in nature by inspecting the description of the
asset on the invoice or contract.
We performed detailed testing of the third party funding
arrangements, which included the following:
•
•
•
Obtaining third party funding contracts.
Agreeing the advanced deposits recorded to
the contract and bank records.
Testing whether the assets and advances were
appropriately disposed and settled upon
completion of the construction of the centre
by comparing the completion date to the
certificate of completion and considering the
For personal use only Construction of US Entertainment Centre assets
final invoice and payment to indicate the
transfer of risk.
Group –Note 3
ALL Group – Note 3
Revenue from continuing operations: $498.0m
Revenue from continuing operations: $498.0m
Revenue recognition
Key audit matter
How our audit addressed the key audit matter
The Group’s and ALL Group’s revenue is based on a
very high volume of transactions across several
businesses, which each have several streams of
revenue, such as entry revenue, games revenue and
food and beverage revenue. Each of these revenue
streams is underpinned by different POS systems
and detailed processes and controls.
Whilst there is little estimation or judgement
involved in the recognition of the Group’s and ALL
Group’s revenue, our focus was whether revenue
was being correctly recorded (accuracy) and also
recognised in the appropriate period (cut-off). Due
to the opportunity for manual intervention and the
high volume of transactions, and the interfaces of
the multiple POS systems with the general ledger
system, there is potential for these transactions to
be recorded incorrectly.
This was a key audit matter due to the quantum of
the Group’s revenue, and the number of different
revenue streams and associated systems and
processes.
We developed an understanding of the revenue
processes and performed detailed testing of a sample of
revenue transactions, which included the following:
• Assessing the consistency of the application of
the revenue recognition policy by considering
the accounting policy for the different sources
of the Group and ALL Group’s revenue.
Developing an understanding of and evaluated
the key controls in place for each revenue
stream, including both automated and manual
controls.
•
Performing tests of the key manual internal
controls over revenue recognised in the
financial statements.
• Using Computer Assisted Audit Techniques to
perform testing of the occurrence of a sample
of recorded revenue transactions, and testing
a sample of journal entries posted to revenue
and other general ledger accounts.
•
For all major revenue streams, agreeing a
sample of transactions from the general ledger
listing to supporting documentation,
including bank statements. This included
checking a sample of transactions either side
of the Group year end date were recorded in
the appropriate period.
Dreamworld contingencies
ALL Group – Note 41
Group –Note 41
Key audit matter
We focused on this area because of the incident that
occurred at Dreamworld on 25 October 2016. The
incident is the subject of ongoing investigations by
the Queensland Police Service and Workplace
Health and Safety Queensland. The incident will be
subject to a coronial inquest, the timing of which is
not yet known.
This was a key audit matter because in assessing
and measuring potential liabilities and
contingencies, the Group and ALL Group are
required to make judgements based on available
How our audit addressed the key audit matter
Our procedures included, amongst others:
• Discussing legal and regulatory matters with
Group Legal Counsel. We sought and
obtained access to relevant documents in
order to develop our understanding of these
matters.
• Evaluating accounting policies relating to the
treatment of potential legal obligations
attributable to the incident.
•
For outstanding legal and regulatory matters,
For personal use only
information of the probability and estimation of
potential financial outcomes, which may be
dependent on legal and regulatory processes.
considering the Group's judgement as to
whether there is potential material financial
exposure for the Group.
Dreamworld contingencies
• Where the Group determined that they were
unable to reliably estimate the possible
financial impact of a legal or regulatory action,
we assessed the appropriateness of their
conclusion.
• Assessing the adequacy of the related
disclosures in light of the requirements of
Australian Accounting Standards.
Other information
The directors of the 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
other information. The other information included in the Group’s and the ALL Group’s annual report
comprises the Director’s report for the year ended 30 June 2017 (but does not include the financial
report and our auditor’s report thereon), which we obtained prior to the date of this auditor’s report.
We also expect other information to be made available to us after the date of this auditor’s report,
including the Investor Analysis, Investor Relations and the Corporate Directory.
Our opinion on the financial reports does not cover the other information and we do not and will not
express an opinion or any form of assurance conclusion thereon.
In connection with our audit of the financial reports, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent
with the financial reports or our knowledge obtained in the audit, or otherwise appears to be
materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
When we read the other information not yet received as identified above, if we conclude that there is a
material misstatement therein, we are required to communicate the matter to the directors and use
our professional judgement to determine the appropriate action to take.
Responsibilities of the directors for the financial report
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 gives a true and fair view and is free from material misstatement, whether due to fraud or
error.
In preparing the financial reports, the directors are responsible for assessing the ability of the Group
and the ALL Group to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the directors either intend to liquidate
the Group or the ALL Group or to cease operations, or have no realistic alternative but to do so.
For personal use only
Auditor’s responsibilities for the audit of the financial reports
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial reports.
A further description of our responsibilities for the audit of the financial reports is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf This description forms part of our
auditor’s report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 16 to 32 of the directors’ report for the
year ended 30 June 2017.
In our opinion, the remuneration report of Ardent Leisure Limited for the year ended 30 June 2017
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of Ardent Leisure Limited 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.
PricewaterhouseCoopers
Timothy J Allman
Partner
Brisbane
31 August 2017
For personal use only
Investor Analysis
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
National Nominees Limited
Portfolio Services Pty Ltd
Kayaal Pty Ltd
BNP Paribas Noms Pty Ltd
UBS Nominees Pty Ltd
CS Third Nominees Pty Limited
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited - A/C 2
BNP Paribas Nominees Pty Ltd
RBC Investor Services Australia Nominees Pty Ltd
National Nominees Limited
UBS Nominees Pty Ltd
Ragusa Pty Ltd
Ragusa Pty Ltd
Citicorp Nominees Pty Limited
Merrill Lynch (Australia) Nominees Pty Limited
Balnaves Foundation Pty Ltd
Portfolio Services Pty Ltd
Top 20 Investors as at 31 August 2017
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Total
Balance of Register
Grand Total
No. of Securities
84,481,947
71,984,761
29,537,098
21,965,804
18,470,782
15,897,069
14,609,718
13,628,729
13,258,037
12,585,204
10,743,022
8,233,333
5,959,947
4,785,893
4,626,603
3,071,942
3,056,020
1,810,539
1,795,243
1,250,000
341,751,691
127,482,201
469,233,892
Range Report as at 31 August 2017
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
367,957,031
70,940,531
16,314,707
12,759,546
1,262,077
469,233,892
%
78.42
15.12
3.48
2.72
0.27
100.00
No of Holders
139
2,812
2,142
4,444
2,813
12,350
The total number of investors with an unmarketable parcel of 78,530 securities as at 31 August 2017 was 1,046.
Voting Rights
%
18.00
15.34
6.29
4.68
3.94
3.39
3.11
2.90
2.83
2.68
2.29
1.75
1.27
1.02
0.99
0.65
0.65
0.39
0.38
0.27
72.83
27.17
100.00
%
1.13
22.27
17.34
35.98
22.78
100.00
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 31 August 2017
The Ariadne Substantial Holder Group*
Viburnum Funds Pty Ltd
FIL Ltd
Ausbil Investment Management Ltd
Investec Australia Limited
BT Investment Management Ltd
JCP Investment Partners Ltd
Sumitomo Mitsui Trust Holdings Inc
*The Ariadne Substantial Holder Group includes the following companies and partnerships – Portfolio Services Pty Limited, Ariadne Holdings Pty Limited, Ariadne
Australia Limited, Bivaru Pty Limited and Kayaal Pty Ltd
No. of Securities
51,116,531
45,951,509
40,478,296
37,280,709
37,261,564
22,815,453
24,117,135
23,494,066
%
10.90%
9.79%
9.15%
8.05%
7.94%
5.63%
5.14%
5.01%
Stapling Disclosure
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 are issued by the Company or Trust which are
not stapled to equivalent securities in the other entity.
128 Ardent Leisure Group | Annual Report 2017
For personal use only
Investor Relations
The website is a useful source of information about the Group and its business and property portfolio. The site contains a variety of
investor information, including presentations, webcasts, newsletters, half year updates, annual reports, distribution history and
timetable, security price information and announcements to the ASX.
Corporate Governance Statement
In accordance with the ASX Listing Rules, the Group’s
Corporate Governance Statement dated 30 June 2017 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 2016/17 annual taxation statement
online, please visit the Link Investor Service Centre at
www.linkmarketservices.com.au
Distribution Reinvestment Plan (DRP)
The DRP did not apply for the half year ended 30 June 2017.
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
1300 720 560 (within Australia)
+61 1300 720 560 (outside Australia)
Telephone
1300 720 560 (within Australia)
+61 1300 720 560 (outside Australia)
Facsimile
+61 2 9287 0303
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
Ardent Leisure Group | Annual Report 2017 129
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
Roger Davis
David Haslingden
Randy Garfield (appointed 14 August 2017)
Simon Kelly (appointed 9 June 2017)
Don Morris AO
Brad Richmond (appointed 3 September 2017)
George Venardos (Chairman)
Gary Weiss (appointed 3 September 2017)
Melanie Willis (resigned 8 September 2017)
Managing Director and Chief Executive Officer
Simon Kelly
Chief Financial Officer
Geoff Richardson
Company Secretary
Bronwyn Weir
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
130 Ardent Leisure Group | Annual Report 2017
For personal use only