Annual Financial Report
for the year ended 26 June 2018
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 21 August 2018. The
Directors have the power to amend and reissue the financial report.
Message from the Chairman
Dear Security Holders
I am pleased to present my first Annual Report as Chairman of Ardent Leisure Group.
While FY18 has been another challenging year for Ardent, it has been a year of change and reset across the Group.
Prior to joining the Board, I outlined my plan to restore value at Ardent. For Dreamworld, it was to reinvest in the park to increase
attendance by introducing new rides and attractions and retail offerings, improve food and beverage outlets and deliver
outstanding guest service. For our US operations, Main Event Entertainment, it was to deliver value through operational
enhancements, improved guest offerings and expansion of the business through a disciplined and structured roll out of new
centres.
I am pleased to report that we are making progress. With a strengthened balance sheet, a refreshed Board and senior management
changes, we are committed to restoring value for security holders.
Safety
In June this year, the Coronial Inquest into the tragic incident at Dreamworld in October 2016 commenced.
On behalf of the Board and our team, I again say how sorry we are to the families and all those so deeply impacted by this tragedy.
Ardent continues to implement safety initiatives across its theme park operations, with ongoing support from external specialists
and a restructured executive team, and reiterates its public undertaking to implement all Coronial Inquest recommendations.
There is no greater priority for Ardent than striving for the highest level of global best practice safety standards throughout our
entire operations. Ardent is absolutely committed to the safety and welfare of our guests and employees.
As a measure of my personal commitment to this goal, I will assume the role of Chair of the Safety, Sustainability & Environment
Committee.
Further, to assist the Committee in ensuring global best practice in safety throughout our group, we have appointed Geoff Sartori
as an external independent Safety Advisor. Mr Sartori is a highly experienced executive who has extensive expertise in all aspects
of infrastructure, safety and operations. He was formerly Group General Manager – Group Safety and Principal Safety Advisor to
the Qantas Group and is currently Safety Advisor to the Board of Virgin Australia Group.
Business operations
As Australia’s largest theme park, Dreamworld is a critical component of the Gold Coast and wider Queensland economy. While
Dreamworld’s recovery is taking longer than expected, Ardent firmly believes in its future and is committed to significant
investment back into the park to restore its status as one of Australia’s premier entertainment destinations.
In February, we announced our intention to bring the iRide ‘Flying Theatre’ attraction to Dreamworld. This world-class leading
technology ride is currently under construction and scheduled to open in late December, just in time for the school holidays.
Guests will be able to experience a virtual flyover of some of Australia’s greatest and most scenic landmarks including Sydney
Harbour, Barossa Valley and Tully River.
The iRide will be the first of a number of new leading rides and attractions which we will be bringing to Dreamworld over the next
few years as we ramp up our investment across all areas of the park.
With Main Event Entertainment now being the dominant contributor to the overall performance of the Group, the appointment of
Chris Morris is an essential element to achieving our strategic objective of improved performance and growth for this business, in
what is a competitive operating environment. Chris brings over 20 years’ experience in multisite businesses, including six years in
the US family entertainment industry.
Pleasingly, FY18 saw a return to positive like-for-like constant centre sales growth, after nearly two years of negative performance.
Initiatives introduced to improve the guest experience in our centres included new technology for ordering and paying for food
and beverages, refreshed menu offerings such as shareables and healthy options, an improved CRM system to help us better
understand and stay connected with our guests and the remodelling of a number of existing centres.
During FY18, Main Event opened four new centres – Knoxville, Wilmington, Columbia and Avon. These centres are trading well and
in line with the historical performance of Main Event new openings (excluding the Latitude and Orlando centres impaired in the
FY18 results).
For Main Event, FY19 will be a year of consolidation as we prepare for growth in FY20 and beyond.
Message from the Chairman
Business operations (continued)
During FY18, Ardent finalised the sale of d’Albora Marinas and the Bowling & Entertainment division. Both businesses were sold
for a significant gain over book value and this has enabled Ardent to reduce its net debt to $11 million, an improvement on $222
million in the prior year. The Group now has a strengthened balance sheet that enables us, with confidence, to invest for the
future.
As a result of these divestments, a final distribution of 6.5 cents per stapled security was declared, bringing the total distribution
for security holders to 8.5 cents per stapled security across the year.
As previously reported to security holders, the Board is continuing to explore options regarding the structure of the Group to
ensure it is appropriate to meet the needs of our business going forward.
Financial reporting improvements
In February this year, security holders were presented with simplified financial reports with the abandonment of previously used
reporting metrics such as “core earnings”, “segment EBITDA” and “segment EBIT” which have been adjusted for “non-core” items.
The objective of this changed reporting is to more closely align the Group’s performance with statutory accounting and the
operating cash flows of our businesses. Furthermore, the Group has also adopted retail calendar reporting to enable improved
comparability and consistency of reporting periods.
Board changes
Board succession planning and renewal is an ongoing process at Ardent. The Board continues to review its composition, skills and
experience. Two directors retired during the year – Melanie Willis and George Venardos - and a third director, Roger Davis, retired
from the Board earlier this month. In addition to my appointment, three new directors have joined the Board – Randy Garfield,
Brad Richmond and Toni Korsanos. Each of these directors brings relevant experience, expertise and insight into Ardent and I look
forward to working with them in FY19.
The focus of management and the Board continues to be on restoring value to security holders over the medium term. With a
strengthened balance sheet, a security holder and guest focused culture and a very capable team throughout our Group, the Board
is confident that Ardent will deliver on its strategic objectives.
On behalf of the Board, I would like to take this opportunity to thank our security holders, guests and suppliers for their continued
support throughout the year.
I would also like to acknowledge and thank all members of our team for their dedication and hard work over the last 12 months
and look forward to their continuing contribution to the long-term success of Ardent.
The Group’s 2018 Annual General Meeting will be held on 20 November 2018 at The Mint, Macquarie Street, Sydney and I look
forward to seeing security holders at the meeting.
Dr Gary Weiss
Chairman
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
Notes to the Financial Statements
1. Basis of preparation
2. Segment information
Revenue from operating activities
Other expenses
Borrowing costs
Income tax benefit
Deferred tax assets and liabilities
Cash flow information
Receivables
Inventories
Property, plant and equipment
Intangible assets
Property classified as held for sale
Construction in progress
Other assets
Derivative financial instruments
Payables
Provisions
Distributions and dividends paid and payable
(Losses)/earnings per security/share
Contributed equity
Other equity
Reserves
(Accumulated losses)/retained profits
Interest bearing liabilities
Net tangible assets
Discontinued operations
Capital and financial risk management
Fair value measurement
Ardent Leisure Trust and Ardent Leisure Limited formation
Remuneration of auditor
Management fees
Security-based payments
Related party disclosures
Contingent liabilities
Capital and lease commitments
Summary of significant accounting policies
Parent entity financial information
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 2018 1
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 26 June 2018 (FY18).
Following the sale of the Goodlife Health Clubs and d’Albora Marinas businesses, the Group has moved to a retail calendar basis for
periodic reporting. This change enables improved comparability for management and investors by ensuring reporting periods comprise
the same number of days and, in particular, weekends.
With effect from the first half of FY18, Ardent’s businesses have operated on a “5-4-4 week” quarter with each week ending on Tuesday.
FY18 is a transitional period with the financial period being 1 July 2017 to 26 June 2018 i.e. 361 days. Pro-forma results for the period
from 1 July 2017 to 30 June 2018 have been provided in the Directors’ Report to enable comparison with the prior corresponding period.
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 8, 60 Miller Street, North Sydney, NSW 2060.
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 unless
otherwise stated:
Gary Weiss (appointed as a Director 3 September 2017 and as Chair 29 September 2017);
David Haslingden;
Don Morris AO;
Randy Garfield (appointed 14 August 2017);
Brad Richmond (appointed 3 September 2017);
Toni Korsanos (appointed 1 July 2018);
George Venardos (retired as Chair and Director 29 September 2017);
Roger Davis (resigned 17 August 2018);
Melanie Willis (resigned 8 September 2017);
Simon Kelly (resigned 8 November 2017); and
Deborah Thomas (resigned 1 July 2017).
2.
Principal activities
The Group’s principal activity is to invest in and operate leisure and entertainment businesses in Australia and the United States of
America.
Other than the completion of the sale of the d’Albora Marinas business in August 2017 and the completion of the sale of the Bowling
and Entertainment business in April 2018, there were no further significant changes in the nature of the activities of the Group.
3.
Distributions
The total distribution of income for the year ended 26 June 2018 will be 8.50 cents (30 June 2017: 3.00 cents) per stapled security. The
increase in distribution compared to the prior year is due to the distributions associated with the sales of the d’Albora Marinas business
and the Bowling and Entertainment business. An interim distribution of 2.00 cents (31 December 2016: 2.00 cents) per stapled security
was paid in February 2018. This comprised a distribution paid by the Trust of 2.00 cents (31 December 2016: 2.00 cents) and no dividend
paid by the Company (31 December 2016: nil) per stapled security. A final distribution for the year ended 26 June 2018 of 6.50 cents
(2017: 1.00 cent) per stapled security will be paid by the Trust in August 2018. A provision has not been recognised in the financial
statements at 26 June 2018 as this distribution had not been declared at the reporting date.
4.
Operating and financial review
Overview
The Group’s strategy is to focus primarily on leisure and entertainment segments within its geographical areas of operation with mass
market appeal. During the period, four businesses contributed to the overall result: Main Event, Theme Parks, Bowling and
Entertainment (until 30 April 2018) and the Marinas business (until 14 August 2017).
2 Ardent Leisure Group | Annual Report 2018
Directors’ report to stapled
security holders
4.
Operating and financial review (continued)
Overview (continued)
The results for the Bowling and Entertainment business for the period up until the effective sale date of 30 April 2018 have been included
within discontinued operations in the Income Statements. The sale resulted in a post-tax gain in the year of $20.3 million, net of selling
costs, which has also been included within discontinued operations in the Income Statements.
Similarly, the results for the Marinas business for the period up until the effective sale date of 14 August 2017 have been included within
discontinued operations in the Income Statements. The sale resulted in a post-tax gain in the period of $4.7 million, net of selling costs,
which has also been included within discontinued operations in the Income Statements.
Following the sale of the Bowling and Entertainment and Marinas businesses, the continuing businesses are:
US Entertainment Centres, trading as “Main Event”; and
Australian Theme Parks, including Dreamworld and SkyPoint.
Group results
The performance of the Consolidated Group, as represented by the aggregated results of its operations for the year, was as follows:
1 July 2017 to 26 June 2018
Segment revenue
Segment EBITDA
Depreciation and amortisation
Segment EBIT
Borrowing costs
Interest income
Net (loss)/profit before tax
Income tax benefit/(expense)
Net (loss)/profit after tax
The segment EBITDA above includes the
following specific items:
Valuation loss - property, plant and
equipment and investments held at fair value
Impairment of intangible assets including
goodwill
Impairment of property, plant and
equipment
Pre-opening expenses
Dreamworld incident costs, net of
insurance recoveries
Restructuring and other non-recurring items
Gain on sale of discontinued operations
Selling costs associated with discontinued
operation classified as held for sale
Loss on disposal of assets and sale and
leaseback of Main Event Centre
The income tax benefit/(expense) above
includes the following specific items:
Restatement of deferred tax balances to
reflect US tax reforms
Tax impact of specific items listed above
Main Event
$’000
Theme Parks
$’000
355,571
14,159
(33,210)
(19,051)
66,822
(93,795)
(8,679)
(102,474)
Corporate
$’000
-
(15,519)
(1,144)
(16,663)
Continuing
operations
$’000
Discontinued
operations
$’000
422,393
(95,155)
(43,033)
(138,188)
(10,339)
191
(148,336)
29,522
(118,814)
Total
$’000
547,454
(53,960)
(55,908)
(109,868)
(10,404)
191
(120,081)
29,391
(90,690)
(75,421)
(4,771)
(39,287)
(6,471)
(6,158)
(9,254)
24,987
125,061
41,195
(12,875)
28,320
(65)
-
28,255
(131)
28,124
-
-
-
(571)
-
-
24,987
-
-
(38,287)
(5,900)
-
(7,405)
-
(75,031)
(390)
(75,421)
(3,583)
(1,188)
(4,771)
(1,000)
-
(6,158)
-
-
-
-
(39,287)
(5,900)
-
(1,849)
-
(6,158)
(9,254)
-
-
-
-
-
(133)
(133)
(654)
(52,246)
(493)
(86,265)
(66)
(3,493)
(1,213)
(142,004)
(921)
23,362
(2,134)
(118,642)
12,230
14,629
26,859
-
1,865
1,865
-
1,048
1,048
12,230
17,542
29,772
-
499
499
12,230
18,041
30,271
Ardent Leisure Group | Annual Report 2018 3
Directors’ report to stapled
security holders
4.
Operating and financial review (continued)
Group results (continued)
The reporting period for FY18 is from 1 July 2017 to 26 June 2018 i.e. 361 days, compared with 365 days (1 July 2016 to 30 June 2017)
for the corresponding period. To enable a meaningful comparison of the performance compared to the prior period, pro-forma figures
for the period 1 July 2017 to 30 June 2018 are set out below:
Main Event
$’000
Theme Parks
$’000
360,152
15,108
(33,641)
(18,533)
69,913
(91,112)
(8,744)
(99,856)
Corporate
$’000
-
(15,592)
(1,160)
(16,752)
Continuing
operations
$’000
Discontinued
operations
$’000
430,065
(91,596)
(43,545)
(135,141)
(10,360)
191
(145,310)
28,607
(116,703)
Total
$’000
555,126
(50,401)
(56,420)
(106,821)
(10,425)
191
(117,055)
28,476
(88,579)
(75,421)
(4,771)
(39,287)
(6,471)
(6,158)
(9,254)
24,987
125,061
41,195
(12,875)
28,320
(65)
-
28,255
(131)
28,124
-
-
-
(571)
-
-
24,987
-
-
(38,287)
(5,900)
-
(7,405)
-
(75,031)
(390)
(75,421)
(3,583)
(1,188)
(4,771)
(1,000)
-
(6,158)
-
-
-
-
(39,287)
(5,900)
-
(1,849)
-
(6,158)
(9,254)
-
-
-
-
-
(133)
(133)
(654)
(52,246)
(493)
(86,265)
(66)
(3,493)
(1,213)
(142,004)
(921)
23,362
(2,134)
(118,642)
12,230
14,629
26,859
-
1,865
1,865
-
1,048
1,048
12,230
17,542
29,772
-
499
499
12,230
18,041
30,271
1 July 2017 to 30 June 2018
Segment revenue
Segment EBITDA
Depreciation and amortisation
Segment EBIT
Borrowing costs
Interest income
Net (loss)/profit before tax
Income tax benefit/(expense)
Net (loss)/profit after tax
The segment EBITDA above includes the
following specific items:
Valuation loss - property, plant and
equipment and investments held at fair value
Impairment of intangible assets including
goodwill
Impairment of property, plant and
equipment
Pre-opening expenses
Dreamworld incident costs, net of
insurance recoveries
Restructuring and other non-recurring items
Gain on sale of discontinued operations
Selling costs associated with discontinued
operation classified as held for sale
Loss on disposal of assets and sale and
leaseback of Main Event Centre
The income tax benefit/(expense) above
includes the following specific items:
Restatement of deferred tax balances to
reflect US tax reforms
Tax impact of specific items listed above
4 Ardent Leisure Group | Annual Report 2018
Directors’ report to stapled
security holders
4.
Operating and financial review (continued)
Group results (continued)
The performance of the Consolidated Group, as represented by the aggregated results of its operations for the period from 1 July 2016
to 30 June 2017 (365 days), was as follows:
1 July 2016 to 30 June 2017
Segment revenue
Segment EBITDA
Depreciation and amortisation
Segment EBIT
Borrowing costs
Interest income
Net (loss)/profit before tax
Income tax benefit/(expense)
Net (loss)/profit after tax
The segment EBITDA above includes the
following specific items:
Valuation loss - property, plant and
equipment
Impairment of intangible assets including
goodwill
Impairment of property, plant and
equipment
Pre-opening expenses
Dreamworld incident costs, net of
insurance recoveries
Restructuring and other non-recurring items
Gain on sale of discontinued operations
Selling costs associated with discontinued
operation classified as held for sale
Loss on disposal of assets
The income tax benefit/(expense) above
includes the following specific items:
Tax impact of specific items listed above
Main Event
$’000
Theme Parks
$’000
299,450
45,812
(24,559)
21,253
70,934
(98,432)
(8,915)
(107,347)
Corporate
$’000
-
(19,175)
(1,230)
(20,405)
-
-
(88,747)
(783)
-
(12,646)
-
(1,400)
-
-
(362)
(14,408)
-
-
(5,389)
-
-
-
(105)
(95,024)
-
-
-
-
-
(2,739)
-
-
17
(2,722)
Continuing
operations
$’000
Discontinued
operations
$’000
370,384
(71,795)
(34,704)
(106,499)
(12,049)
86
(118,462)
5,280
(113,182)
(88,747)
(783)
-
(12,646)
(5,389)
(4,139)
-
-
(450)
(112,154)
214,472
72,969
(20,254)
52,715
(142)
-
52,573
(1,948)
50,625
-
-
(145)
(1,242)
-
-
45,009
(796)
(3,348)
39,478
Total
$’000
584,856
1,174
(54,958)
(53,784)
(12,191)
86
(65,889)
3,332
(62,557)
(88,747)
(783)
(145)
(13,888)
(5,389)
(4,139)
45,009
(796)
(3,798)
(72,676)
4,899
1,542
731
7,172
360
7,532
Ardent Leisure Group | Annual Report 2018 5
Directors’ report to stapled
security holders
4.
Operating and financial review (continued)
Group results (continued)
The Group reported a loss of $88.6 million on a pro-forma basis up to 30 June 2018, an increase in losses of $26.0 million compared to a
net loss of $62.6 million in the prior year.
The current year was impacted by several events including the sale of two businesses, non-cash valuation losses on the Dreamworld
and SkyPoint properties, impairment of property, plant and equipment at five US Entertainment Centres, non-recurring restructuring
costs as well as the continued challenging post-incident trading conditions for the Theme Parks division.
Total pro-forma revenue declined by $29.7 million compared to the prior year due to reduced revenue of $89.4 million for the
discontinued businesses, partly offset by an increase in pro-forma revenue for continuing businesses of $59.7 million. Despite the
improved pro-forma revenue from continuing businesses, pro-forma EBITDA for continuing businesses declined by $19.8 million, with
EBITDA for discontinued operations also declining by $31.8 million, resulting in a total pro-forma EBITDA being $51.6 million lower than
the prior year.
Significant factors impacting the result for continuing businesses are as follows:
Impairments of property, plant and equipment at five US Entertainment Centres of $38.3 million (prior year: nil);
An increase in restructuring and other non-recurring items in both Main Event and Corporate, which amounted to $9.3 million
(2017: $4.1 million). The Group was impacted by several one-off expenses as a result of restructuring activity in the current year,
including consulting costs, legal costs, executive severance payments, as well as write-off of site exploration costs incurred;
An increase in costs relating to the Thunder River Rapids ride incident at Dreamworld, net of insurance recoveries, which amounted
to $6.2 million (2017: $5.4 million); and
Impairment of intangible assets in Corporate of $1.2 million (2017: nil);
Partly offset by:
Valuation loss and impairments of $79.6 million relating to Dreamworld and SkyPoint compared to the prior year valuation loss of
$89.5 million relating to Dreamworld and WhiteWater World;
Lower pre-opening costs of $6.5 million (2017: $13.9 million) due mainly to fewer US Entertainment Centre openings in the current
year;
Four new US Entertainment Centre openings during FY18 contributing additional revenue of US$14.8 million and EBRITDA of
US$7.0 million in the year;
Incremental revenue and EBRITDA due to full year contributions from ten new centres that opened during FY17;
Income tax benefit including a $12.2 million benefit relating to restatement of Main Event’s deferred tax balances in response to
US Tax Reforms that have lowered the US corporate income tax rate (2017: nil); and
Borrowing costs decreased by approximately $1.8 million to $10.4 million (2017: $12.4 million) due to repayment of debt from the
sales proceeds and reduction in debt facilities.
The results of the discontinued operations in the year include trading EBITDA for the periods to the date of disposal of the Bowling and
Entertainment business, being 30 April 2018, and the Marinas business, being 14 August 2017. The discontinued operations result also
includes a gain on the disposal of the Bowling and Entertainment business after tax of $20.3 million, and a gain on the disposal of the
Marinas business after tax of $4.7 million (refer to Notes 27(e) and 27(f)).
In the prior year, the discontinued operations result included a full year trading EBITDA for both the Bowling and Entertainment business
and the Marinas business, as well as trading EBITDA for the Health Clubs business up until the date of disposal, being 25 October 2016.
The prior year discontinued operations result also included a gain on the disposal of the Health Clubs business after tax of $44.8 million.
6 Ardent Leisure Group | Annual Report 2018
Directors’ report to stapled
security holders
4.
Operating and financial review (continued)
US Entertainment Centres
The pro-forma performance of the US Entertainment Centres, in US dollars, is summarised as follows:
Total revenue
EBRITDA
Property costs
EBITDA
Constant centres
Non-constant centres
New centres opened in FY18
Corporate and regional office
expenses/sales and marketing
Other specific items
Total
Revenue
2018
US$'000
154,710
109,315
14,829
-
-
278,854
Revenue
2017
US$'000
151,722
73,982
-
-
-
225,704
Change
%
2.0
47.8
23.5
2018
US$'000
278,854
49,845
(37,251)
12,594
EBRITDA
2018
US$'000
71,355
47,884
7,039
(37,422)
(39,011)
49,845
2017
Change
US$'000
225,704
64,179
(29,623)
34,556
EBRITDA
2017
US$'000
69,364
31,788
-
(27,252)
(9,721)
64,179
%
23.5
(22.3)
25.8
(63.6)
Change
%
2.9
50.6
37.3
301.3
(22.3)
During the year, total US dollar revenue grew by 23.5%, driven by 2.0% growth in constant centres, full year impact of centres opened
in FY17 as well as the contribution from new centres opened in FY18.
Constant centres revenue on a like-for-like basis increased 1.6% versus the prior corresponding period, driven by pricing optimisation
associated with walk-in business, partially offset by a decline in event business primarily associated with birthday call centre changes,
which have subsequently been addressed.
Four new centres were opened during the year, with three of the four centres commencing operations during the last four months of
FY18. This brings the number of centres to 41 across 16 states as of June 2018 (2017: 37 centres across 14 states).
EBITDA was impacted by a non-cash impairment charge of US$28.4 million associated with five underperforming locations. The
performance of these locations reflect difficult trading conditions as a result of real estate quality and ongoing brand challenges
associated with the former business that operated some of the locations. Furthermore, EBITDA was impacted by US$5.6 million of
restructuring and other non-recurring items, including one-time consulting costs, executive severance payments, and write-off of site
exploration costs incurred due to a change in real estate strategy. In addition, the division also recorded a US$0.6 million loss on sale
and leaseback of a Main Event family entertainment centre.
Margins were also unfavourably impacted by the underlying trading conditions at certain centres from the FY17 cohort. While the
performance of the FY17 cohort has improved year-over-year, it is a larger portion of the overall business in FY18 and thus causing more
pressure to overall margins. Additionally, the division received US$3.8 million of business interruption proceeds in FY18, reflecting the
recovery of estimated losses incurred during FY18 due to Hurricane Harvey in the Houston, TX market.
Ardent Leisure Group | Annual Report 2018 7
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security holders
4.
Operating and financial review (continued)
Australian Theme Parks
The division continued to be adversely impacted by the Thunder River Rapids ride tragedy incident in October 2016. The performance
of the Australian Theme Parks is summarised as follows:
Total revenue
EBRITDA
Property costs
EBITDA
Attendance
Per capita spend ($)
2018
$'000
69,913
(89,599)
(1,513)
(91,112)
2017
$'000
70,934
(97,405)
(1,027)
(98,432)
1,657,969
42.17
1,662,992
42.65
Change
%
(1.4)
(8.0)
47.3
(7.4)
(0.3)
(1.1)
Revenue declined by $1.0 million, or 1.4% to $69.9 million. The division recorded an EBITDA loss of $91.1 million, an improvement of
$7.3 million compared to the EBITDA loss of $98.4 million in the prior year. The improvement in EBITDA was largely driven by the
valuation loss and impairments of $79.6 million relating to Dreamworld and SkyPoint being lower than the prior year valuation loss of
$89.5 million relating to Dreamworld. This was partially offset by higher Dreamworld incident related expenses, which amounted to
$6.2 million in the current year compared to $5.4 million in the prior year.
Excluding these valuation loss, impairment and Dreamworld incident related expenses, EBITDA for the division was approximately $1.0
million lower than prior year. The Theme Parks were impacted by the continued slow recovery post the Thunder River Rapids ride
tragedy which occurred in October 2016, discounted ticket pricing post incident, as well as the relatively fixed cost nature of the
business.
Australian Bowling and Entertainment Centres
The performance of the Australian Bowling and Entertainment Centres is summarised as follows:
Total revenue
EBRITDA
Property costs
EBITDA
2018
$'000
122,408
61,479
(25,326)
36,153
2017
$'000
127,664
38,204
(27,474)
10,730
Change
%
(4.1)
60.9
(7.8)
236.9
Completion of the sale of this business occurred effective 30 April 2018.
Prior to the sale completion, the division achieved growth compared to the prior corresponding period, driven by a combination of
constant centre growth, new venue openings and year-on-year growth in renovated venues. Two new venues were opened during the
period, Kingpin Chermside and Playtime Eastland. The EBRITDA in the FY18 period included a gain on disposal of the business of $20.3
million.
Marinas
The performance of Marinas is summarised as follows:
Total revenue
EBRITDA
Property costs
EBITDA
2018
$'000
2,653
5,763
(588)
5,175
2017
$'000
24,131
11,883
(2,904)
8,979
Change
%
(89.0)
(51.5)
(79.8)
(42.4)
Completion of the sale occurred effective 14 August 2017. The EBRITDA during the FY18 period included a gain on disposal of the
business of $4.7 million.
8 Ardent Leisure Group | Annual Report 2018
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4.
Operating and financial review (continued)
Strategic focus
Following the sale of the Marinas business and the Bowling and Entertainment business, 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 are at different stages of evolution with discrete opportunities for growth and unlocking value.
(i)
US Entertainment Centres
The US Entertainment Centres’ strategic goal is to become a leading customer experience-driven leisure and entertainment brand in
the US. This business has expanded its number of centres rapidly over the last few years and management is focused on ensuring there
is the appropriate balance between operational performance and growth, as well as ensuring there is a disciplined real estate selection
process.
The availability of quality sites in trade areas that the business wants to expand into, along with the long development process to
construct a Main Event family entertainment centre, may cause variations in the number of centres opened in a given year.
Management will continue to look at strategic growth opportunities in existing markets as well as new trade areas. Furthermore, the
business will explore ground-up developments as well as second-generation retail opportunities, including mall locations.
(ii)
Australian Theme Parks
The key focus is on driving attendance back to historic levels through a combination of “smart” capital investment, an event pipeline,
developing new and unique attractions and food, retail and events products all of which provide opportunities to promote and target
revisitation. Investments will be targeted to drive visitation and will be economically responsible. This includes plans to install major
new attractions at Dreamworld and SkyPoint in FY19 to increase visitations to the Theme Parks and drive average spending.
The wellbeing of Dreamworld’s staff has also remained a key focus of management, with a number of wellness and support programs
in place to assist individual team members with resilience and coping with challenging environments.
As communicated in June 2018, the Group is committed to implementing all key recommendations arising from the Coronial Inquiry.
The excess land that sits around the Dreamworld site is potentially of value. The park occupies just over 50% of the land that is owned
and a process of determining the best use of this land is in progress. This may 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.
5.
Significant changes in the state of affairs
As noted above, on 14 August 2017, the Group completed the disposal of its Marinas business and, effective 30 April 2018, the Group
completed the disposal of its Bowling and Entertainment 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
2018
$’000
Consolidated
Group
2017
$’000
ALL Group
2018
$’000
621,128
444,118
974,213
531,722
518,370
169,790
ALL Group
2017
$’000
592,695
177,034
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:
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
Consolidated
Group
2018
Consolidated
Group
2017
469,153,284
1,510,100
681,149
463,039,616
4,812,776
1,300,892
471,344,533 469,153,284
Ardent Leisure Group | Annual Report 2018 9
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security holders
8. Information on Directors
Gary Weiss
Chair
Appointed:
Ardent Leisure Management Limited – 3 September 2017
Ardent Leisure Limited – 3 September 2017
Age: 65
Gary Weiss was appointed Chair and a Director of the Company in 2017. Dr Weiss is currently the Executive Director of Ariadne Australia
Limited. He is Chairman of Ridley Corporation Ltd and Estia Health Ltd and a Non-Executive Director of Thorney Opportunities Ltd and
The Straits Trading Company Limited.
Dr Weiss is also a Commissioner of the Australian Rugby League Commission.
He was formerly Chairman of Clearview Wealth Limited and Coats Plc, a former executive director of Whitlam, Turnbull & Co and
Guinness Peat Group plc and sat on the board of Westfield Holdings Limited, Premier Investments Ltd, Pro-Pac Packaging Ltd and a
number of other public companies. Dr Weiss has also been involved in managing large businesses with operations in many regions
including Europe, China and India and is familiar with investments across a wide range of industries, corporate finance and private equity
type deals.
Dr Weiss holds an LLB (Hons) and LLM from Victoria University of Wellington and a Doctor of the Science of Law (JSD) from Cornell
University. He was admitted as a Barrister and Solicitor of the Supreme Court of New Zealand, a Barrister and Solicitor of the Supreme
Court of Victoria and as a Solicitor of the Supreme Court of New South Wales.
Gary is also Chair of the Dreamworld Committee and a member of the Audit and Risk Committee and Main Event Committee.
Former listed directorships in the last three years:
Clearview Wealth Limited (resigned 17 May 2016)
Tag Pacific Limited (resigned 31 August 2017)
Pro-Pac Packaging Limited (resigned 27 November 2017)
Premier Investments Limited (resigned 28 July 2018)
Interest in stapled securities:
53,942,531
David Haslingden
Director
Appointed:
Ardent Leisure Management Limited – 6 July 2015
Ardent Leisure Limited – 6 July 2015
Age: 57
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 North America and Europe.
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. He is also Chairman of the Australian Geographic Society.
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 is a member of the Safety, Sustainability and Environment
Committee and the Dreamworld Committee. He is also Chair of the Dreamworld Wildlife Foundation. David was appointed Lead
Independent Director in May 2018.
Former listed directorships in the last three years:
Nine Entertainment Co. Holdings Limited (resigned 1 March 2016)
Interest in stapled securities:
160,000
10 Ardent Leisure Group | Annual Report 2018
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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: 73
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.
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 and Ausflag Limited. He is Chair of Tourism Think Tank, and non-
executive 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 a member of the Remuneration and Nomination Committee, Safety, Sustainability and Environment Committee and
Dreamworld Committee.
Former listed directorships in the last three years:
None
Interest in stapled securities:
13,950
Randy Garfield
Director
Appointed:
Ardent Leisure Management Limited – 14 August 2017
Ardent Leisure Limited – 14 August 2017
Age: 66
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
pre-opening 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.
Ardent Leisure Group | Annual Report 2018 11
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8.
Information on Directors (continued)
Randy Garfield (continued)
Director
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.
Randy is a member of the Remuneration and Nomination Committee, Safety, Sustainability and Environment Committee, Dreamworld
Committee and Main Event Committee.
Former listed directorships in last three years:
None
Interest in stapled securities:
Nil
Brad Richmond
Director
Appointed:
Ardent Leisure Management Limited – 3 September 2017
Ardent Leisure Limited – 3 September 2017
Age: 59
Brad Richmond was appointed a Director of both the Company and the Manager in 2017. Brad is a Certified Public Accountant with
36 years’ experience in finance, operations and strategic planning in the full-service restaurant industry in North America. Brad recently
held the position of Senior Vice-President and Chief Financial Officer of Darden Restaurants Inc., the world’s largest full-service restaurant
company operating multiple brands including Olive Garden, LongHorn Steakhouse, Season’s 52, The Capital Grille, Eddie V’s, Yard House
and Bahama Breeze. Prior to this position, Brad held a number of other roles at Darden including Senior Vice President and Corporate
Controller and Senior Vice President, Brand Financial Leader at various Darden brands.
Before joining Darden, Brad was a senior auditor with Price Waterhouse & Co.
Brad holds a Bachelor of Sciences/Bachelor of Arts degree from the University of Missouri.
Brad is Chair of the Main Event Committee and member of the Audit and Risk Committee (having formally been Chair of the Audit and
Risk Committee until 1 July 2018).
Former listed directorships in the last three years:
None
Interest in stapled securities:
48,450
12 Ardent Leisure Group | Annual Report 2018
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8.
Information on Directors (continued)
Toni Korsanos
Director
Appointed:
Ardent Leisure Management Limited – 1 July 2018
Ardent Leisure Limited – 1 July 2018
Age: 49
Toni Korsanos was appointed a Director of the Company and the Manager in July 2018. Toni has more than twenty years’ senior
executive experience in financial and general management, strategy, mergers and acquisitions, communications, technology and risk
management. Toni was the Chief Financial Officer (2009 to 2018) and Company Secretary (2011 to 2018) of Aristocrat Leisure Limited.
Prior to working at Aristocrat, Toni held a number of finance and business development positions at Kellogg’s Australia and New
Zealand, Goodman Fielder Limited and Coopers & Lybrand in Sydney.
Toni has a Bachelor of Economics (Accounting & Finance) from Macquarie University and is a Member of the Institute of Chartered
Accountants. Toni is also a Member of Chief Executive Women and a Non-Executive Director of Crown Resorts Limited and Webjet
Limited.
Toni is Chair of the Audit and Risk Committee.
Former listed directorships in the last three years:
Nil
Interest in stapled securities:
Nil
Roger Davis
Former Director
Appointed:
Ardent Leisure Management Limited – 1 September 2009 (resigned 17 August 2018)
Ardent Leisure Limited – 28 May 2008 (resigned 17 August 2018)
Age: 67
Roger Davis was appointed a Director of the Company in 2008. Roger brought to the Board over 37 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, AIG Australia Limited and Charter Hall
Retail Management Limited (the manager for Charter Hall Retail REIT). 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
Ardent Leisure Group | Annual Report 2018 13
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8.
Information on Directors (continued)
Former directors that held office within the year
George Venardos – former Chair; retired as Chair and Director 29 September 2017;
Melanie Willis – former Director; resigned 8 September 2017;
Simon Kelly – former Managing Director and Chief Executive Officer; resigned 8 November 2017; and
Deborah Thomas – former Director and Chief Executive Officer; retired 1 July 2017.
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:
Meetings of Committees
Full meetings
of Directors
Audit and
Risk
E1
10
16
16
12
10
7
16
6
8
A2
10
16
15
12
10
7
11
6
8
E1
3
-
-
-
3
1
4
1
-
A2
3
-
-
-
3
1
4
1
-
Remuneration
& Nomination
A2
-
4
4
3
-
2
-
-
-
E1
-
4
4
3
-
2
-
-
-
Safety, Sustainability
& Environment
E1
-
4
4
3
-
1
4
-
-
A2
-
3
3
3
-
1
4
-
-
Customer &
Digital
E1
-
-
1
-
-
-
-
1
-
A2
-
-
1
-
-
-
-
1
-
Dreamworld
A2
3
1
3
3
-
-
-
-
-
E1
3
3
3
3
-
-
-
-
-
Main Event
E1
1
-
-
1
1
-
-
-
-
A2
1
-
-
1
1
-
-
-
-
Gary Weiss
David Haslingden
Don Morris AO
Randy Garfield
Brad Richmond
George Venardos
Roger Davis
Melanie Willis
Simon Kelly
(1) Eligible to attend
(2) Attended
10.
Company Secretary
The Group’s Company Secretary is Bronwyn Weir. Bronwyn was appointed to the position of Company Secretary of the Manager and
Company on 10 April 2017. Prior to being appointed 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.
11.
Remuneration report
Introduction from the Chair of the Remuneration and Nomination Committee
The Directors of Ardent Leisure Group (the Group) are pleased to present security holders with the 2018 Remuneration Report. This
report outlines the Group’s approach to remuneration for its Directors and Executives.
The Remuneration and Nomination Committee (Committee), on behalf of the Board, oversees the Group’s remuneration framework
ensuring that it aligns with the interests of our security holders and reflects the Group’s commitment to deliver market competitive
remuneration to attract, retain and motivate high quality directors and executives.
Changes to the Group
There were significant changes in Directors and Executive Key Management Personnel (KMP) during FY18. Mr Simon Kelly left the
business on 16 November 2017 after having served as the Group’s Managing Director and Chief Executive Officer since April 2017. Mr
Geoff Richardson, the Group’s Interim Chief Financial Officer became Acting Chief Executive Officer until 15 June 2018.
On 26 February 2018, the Group announced the appointment of Mr Chris Morris as President and Chief Executive Officer of Main Event
Entertainment following the departure on Charlie Keegan in November 2017.
14 Ardent Leisure Group | Annual Report 2018
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11.
Remuneration report (continued)
Changes to the Group (continued)
Mr Morris has over 20 years of experience with multisite businesses including over six years in the family entertainment business. Mr
Morris brings to the Group strong leadership, extensive experience in brand revitalisation strategies and operational execution. Mr
Morris has previously held senior executive roles at California Pizza Kitchen, On the Border Mexican Grill & Cantina and CEC
Entertainment, a publicly traded company on the New York Stock Exchange.
Following the successful divestment of the Marinas and Bowling and Entertainment businesses during the year, the Board reviewed the
organisational structure of the Group and, on 1 June 2018, announced the appointment of Mr Darin Harper as Group Chief Financial
Officer. Mr Harper joined the Group in March 2017 as Chief Financial Officer for Main Event Entertainment. Mr Harper brings over 20
years of financial experience in the US customer retail and hospitality industry. Mr Harper will continue to act as Chief Financial Officer
for Main Event alongside Mr Morris.
Ms Nicole Noye was appointed Acting CEO of Australian Theme Parks in July 2018, having been appointed as Group Chief Experience
Officer in June 2018. Previously, she held the role of CEO, Bowling and Entertainment Division from 2014-2017. Ms Noye has over 30
years’ experience in the retail sector and more than 20 years as a senior and executive manager. She worked for BB Retail Capital as CEO
for Bras N Things and CEO for Diva. Ms Noye is a member of the Dreamworld Committee.
Changes to Board of Directors
During the year, the Group’s Board has continued to evolve to ensure an appropriate combination of experience, skills and diversity. To
reflect the geographic earnings of the Group, the Board committed to appointing US-based directors and, on 14 August 2017, appointed
Mr Randy Garfield as a Non-Executive Director. Mr Garfield has 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.
The Board appointed a second US-based Non-Executive Director, Mr Brad Richmond, on 3 September 2017. Mr Richmond has over 36
years’ experience in finance, operations and strategic planning in the restaurant and casual dining industry in North America.
On 29 September 2017, the Group’s then Chairman, Mr George Venardos, retired after serving as a Non-Executive Director since 2009.
Mr Venardos was succeeded by Dr Gary Weiss, who was appointed to the Board as a Non-Executive Director on 3 September 2017.
Additionally, Ms Melanie Willis resigned as Non-Executive Director on 8 September 2017. Ms Toni Korsanos was appointed as Non-
Executive Director on 1 July 2018. Ms Korsanos has more than 20 years’ senior executive experience in financial and general
management, strategy, mergers and acquisitions, communications, technology and risk management. Future appointments will allow
for additional diversity.
Changes to Committees
To ensure that the Group is actively focussed on its remaining divisions, Theme Parks and US Entertainment Centres, the Board
established two additional Committees, the Dreamworld Committee and Main Event Committee, effective from 23 February 2018.
The Main Event Committee is responsible for the management and performance of Main Event Entertainment. The Committee will
assist management to achieve its strategic objective of growth, superior brand positioning, quality site selection and delivering
outstanding customer service. The Dreamworld Committee has been established with the primary objective to oversee the recovery
and improved performance of Dreamworld. Specifically, this Committee will review development plans for rides and attractions and
provide guidance on developing stronger relationships with the community, local authorities, suppliers and other key stakeholders.
Remuneration Structure
KMP remuneration packages are structured to ensure that a significant proportion of an executive’s award is linked to achieving business
objectives and realising benefits for securityholders. The remuneration packages for the newly appointed CEO for Main Event
Entertainment and the Group CFO have been structured to reflect individual circumstances, duties and responsibilities, and local market
conditions. As advised in FY17, with the Group operating in both domestic and US markets, the LTI framework reflects the respective
practices. As such, the vesting of the LTI opportunity, for US-based executives is partially (1/3rd) subject to a continued service condition.
The rationale for this is to maintain competitiveness and retain talent, as well as reflecting US domestic market practices.
The remuneration levels and arrangements for each executive will be reviewed annually to ensure alignment to the relevant market
and the Group’s stated objectives.
Ardent Leisure Group | Annual Report 2018 15
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security holders
11.
Remuneration report (continued)
Remuneration outcomes in FY18
FY18 was another challenging year for the Group. While the financial performance of the Group was below expectations, there
continues to be steady improvement in revenue and attendance at Dreamworld and encouraging trends at Main Event.
At the end of the period the remaining KMP included Mr Chris Morris, Mr Darin Harper (by virtue of his role as Group CFO) and Mr Craig
Davidson. In relation to Mr Morris and Mr Harper, due to having only commenced in their roles as KMP in March 2018 and June 2018
respectively, no STI payments were received by them. In regard to Mr Harper’s role as CFO for Main Event Entertainment, a cash STI
payment has been awarded. Further details in relation to remuneration outcomes are provided in the report. In relation to Mr Craig
Davidson, no STI payments were made.
The performance rights granted under the FY14, FY15 and FY16 LTI plan were tested against the EPS and TSR at the end of the financial
year. The hurdles for EPS and TSR were not met and accordingly the rights subject to these performance hurdles have lapsed.
Non-Executive Director remuneration
Fees and payments made to Non-Executive Directors reflect the demands upon and responsibilities of those directors.
In line with Dr Weiss’ commitment on joining the Group in September 2017, Dr Weiss has not received any fees for being a Director,
Chairman or member of any Committee.
Non-Executive Director fees and the maximum aggregate fee pool limit are reviewed annually by the Committee.
Changes to the Group structure
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. The Committee welcomes feedback on our remuneration framework and I
look forward to your continued support at our Annual General Meeting in November 2018.
David Haslingden
Chair, Remuneration and Nomination Committee
16 Ardent Leisure Group | Annual Report 2018
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11.
Remuneration report (continued)
Contents
The remuneration report for the Group for the year ended 26 June 2018 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; and
(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 26 June 2018, the KMP for the Group comprise the
following:
Position
Name
Executive KMP
President and CEO - US Entertainment
Centres
Chris Morris (commenced 26 March 2018)
Group Chief Financial Officer
Darin Harper (commenced 4 June 2018)
Primary Location of
Employment
US-based
US-based
CEO – Australian Theme Parks
Craig Davidson (resigned 3 July 2018)
Australian-based
Former Group Chief Executive Officer and
Chief Financial Officer (interim)
Former Group Chief Executive Officer &
Managing Director
Former Group Chief Executive Officer &
Managing Director
Geoff Richardson (employed from 3 July 2017 to 15 June 2018)
Australian-based
Simon Kelly (terminated employment 16 November 2017)
Australian-based
Deborah Thomas (terminated employment 1 July 2017)
Australian-based
Former Chief Financial Officer
Richard Johnson (terminated employment 14 July 2017)
Australian-based
Former CEO – Australian Bowling and
Entertainment Centres
Nicole Noye (terminated employment 27 December 2017)
Australian-based
Former CEO – US Entertainment Centres
Charlie Keegan (terminated employment 24 November 2017)
US-based
Non-executive Directors
Chairman
Lead Independent director
Independent director
Independent director
Independent director
Independent director
Gary Weiss (effective 3 September 2017)
David Haslingden
Don Morris AO
Randy Garfield (effective 14 August 2017)
Brad Richmond (effective 3 September 2017)
Toni Korsanos (effective 1 July 2018)
Former Independent Chair
George Venardos (resigned 29 September 2017)
Independent director
Roger Davis (resigned 17 August 2018)
Former Independent director
Melanie Willis (resigned 8 September 2017)
Australian-based
Australian-based
Australian-based
US-based
US-based
Australian-based
Australian-based
Australian-based
Australian-based
Ardent Leisure Group | Annual Report 2018 17
Directors’ report to stapled
security holders
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:
Craig Davidson ceased employment with the Group in July 2018;
Ms Nicole Noye was appointed Acting CEO of Australian Theme Parks in July 2018; and
Roger Davis resigned as a Director effective 17 August 2018.
(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 KMP 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 security holding from vested LTIP awards equal to their annual
pre-tax salary.
The Committee has adopted a process of benchmarking the Executive KMPs’ remuneration 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 FY18, Ernst & Young provided the following remuneration-related services to the Group:
Provision of market remuneration data and market practice information;
Tax advice in relation to the incoming US CEO’s remuneration arrangements and equity awards; and
Immigration and tax advice in relation to the appointment and remuneration of US based Directors.
Ernst & Young was not requested to, and did not provide, a remuneration recommendation in relation to any of the above services.
(c)
Remuneration framework: structures, opportunities and performance outcomes
Ardent Leisure has recently downsized into a business comprised of two key operating divisions each with a separate regional focus. In
the interest of maintaining competitiveness in recruiting and retaining top executive talent, the remuneration strategy must reflect the
domestic remuneration practices of these markets. As such, the Remuneration and Nomination Committee must at times apply flexible
incentive structures that reflect what is most commonly observed in the United States market for those executives that work and reside
there. For example, the long term incentive structure differs for United States executives as one-third of the annual LTI grant includes a
service-based component that does not apply to Australian executives. Although this may not be common practice in Australia, having
a component of time vesting equity is readily observed in the United States (however securityholders should note that the majority of
the LTI grant to US-based executive remains subject to long term performance conditions). A breakdown of the LTI performance criteria
is further detailed in section 11(c)(iii).
18 Ardent Leisure Group | Annual Report 2018
Directors’ report to stapled
security holders
11.
Remuneration report (continued)
(c)
Remuneration framework: structures, opportunities and performance outcomes (continued)
External
Influences
Engagement with security
holders and consideration of
feedback received from
investors.
Competitive, fair and
reasonable remuneration
packages with regard to
relevant market practice.
Alignment with
Security holder
Interests
Short Term Incentives (STI)
Long Term Incentives (LTIP)
STIs are set to drive
divisional and Group
earnings and other key
strategic metrics.
The majority of LTIP vests
subject to both relative
and absolute performance
requirements.
(i)
Remuneration structure (Australian and US Based KMP)
The executive remuneration framework that was in place during the course of the year ended 26 June 2018 has three components:
FY18
FY19
FY20
FY21
Annual Base Salary
Australian based KMP receive a mix of cash salary,
employer superannuation contributions and non-
financial benefits.
US based KMP receive a mix of cash salary,
contributions and non-financial benefits.
Received during the
financial year
Short Term Incentive
The STI is an annual performance bonus set against
financial and personal key performance indicators.
One year performance
period paid in cash
Long Term Incentive
For Australian based KMP, performance rights as
granted subject to 50% TSR and 50% compound EPS.
For US based Executive KMP, 1/3rd is subject to
continued service, 1/3rd is subject to TSR and 1/3rd
subject to compound EPS.
Compound EPS
growth
performance
hurdle
1/3rd vesting after two years
1/3rd vesting after three years
1/3rd vesting after four years
1/3rd vesting after two years
TSR performance
hurdle
1/3rd vesting after three years
1/3rd vesting after four years
Service Condition: three year service period
Note: For the President and CEO of Main Event Entertainment, performance rights are granted a one-time LTI opportunity, subject
to appreciation in the Enterprise Value of Main Event over the threshold amount. Refer to section 11(c)(iii) for further details.
Ardent Leisure Group | Annual Report 2018 19
Directors’ report to stapled
security holders
11.
Remuneration report (continued)
(c)
(ii)
Remuneration framework: structures, opportunities and performance outcomes (continued)
Remuneration mix – FY18
The relative target proportions of annual base salary and performance incentives for Executive KMP at 26 June 2018 are set out below:
50%
50%
100%
24%
24%
52%
President and CEO ‐ US Entertainment
Centres
(1)
Group Chief Financial Officer
(2)
CEO – Australian Theme Parks
Annual base salary (cash)
Target STI
Target LTI (equity)
(1)
The President and CEO of the US Entertainment Centres has been granted a one-time LTI opportunity, subject to the achievement of appreciation in the
Enterprise Value of Main Event over the threshold amount with payment on occurrence of a future realisation event, being a change in control of Main Event or
an initial public offering of securities in Main Event. At 26 June 2018, the value and proportion of this component of Mr Morris’ remuneration mix cannot be
quantified and is therefore excluded from the above chart.
(2)
The Group Chief Financial Officer was appointed on 4 June 2018. As such, he was not eligible for participation in the STI and LTI plans.
(iii)
Remuneration elements
Annual base salary
The annual base salary includes cash salary, employer superannuation contributions and non-financial benefits. Base salaries for
Executive KMP are reviewed annually to ensure that pay is competitive with the external market. Executive KMP are not entitled to a
guaranteed pay increase. In instances where there is a change in role or responsibilities for an Executive KMP, this may trigger an annual
base salary review.
The external market against which executive remuneration is reviewed 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. For
roles that are primarily based in the US, consideration is given to US-listed companies with a similar revenue profile to Main Event
Entertainment within similar industries.
New Executive KMP remuneration
The new President and CEO of Main Event Entertainment, Mr Chris Morris, commenced employment on 26 March 2018 with no fixed
term. The total fixed remuneration he will receive is US$600,000 per annum. Mr Morris was provided with a sign-on payment of
US$450,000 to make whole for incentives foregone in his previous role. The payment is split into two tranches; the first tranche of
US$225,000 was paid on 30 June 2018 and the second tranche of US$225,000 will be paid on 30 June 2019.
The Board considered the appropriateness of settling Mr Morris’ LTI in Ardent securities as opposed to cash. The Board determined that
given Mr Morris is wholly responsible for leading the US Entertainment Centres, settlement of Mr Morris’ LTI in equity is considered
inappropriate due to the impact of the performance of the Australian Theme Parks, for which Mr Morris does not hold direct
responsibility.
Effective 4 June 2018, Mr Darin Harper was appointed Group Chief Financial Officer and will receive an additional payment of US$10,000
per month for performing this role. Mr Harper’s total fixed remuneration will be US$420,000 per annum.
20 Ardent Leisure Group | Annual Report 2018
Directors’ report to stapled
security holders
11.
Remuneration report (continued)
(c)
Remuneration framework: structures, opportunities and performance outcomes (continued)
(iii)
Remuneration elements (continued)
Short-term incentive
Who can participate?
Executive KMP are able to participate in the STI; however participation and payment of any STI
remains at the Board’s discretion.
When is the STI paid?
If performance is sufficient, STI awards are payable in cash.
What performance measures are
used?
Key performance indicators (KPI’s) are split into financial and personal measure categories:
Financial KPIs
Earnings and revenue targets representing 60% of an executive’s STI opportunity.
For those executives who act in Group-wide roles, the financial KPIs are based on Group
earnings and revenue related measures. For those executives that occupy divisional roles, the
KPIs are a mix of Group and Divisional KPIs.
Personal KPIs
Personal KPIs (representing the remaining 40% of an executive’s STI opportunity) are 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.
What are stretch STI awards?
Executive KMP are eligible to receive a stretch STI award for out-performance of financial KPIs.
Each individual typically has 5-7 personal KPIs which each represent 5% - 10% of the STI
opportunity.
Ardent Leisure Group | Annual Report 2018 21
Directors’ report to stapled
security holders
11.
Remuneration report (continued)
(c)
Remuneration framework: structures, opportunities and performance outcomes (continued)
(iii)
Remuneration elements (continued)
Long-term incentive Plan (LTIP)
Who can participate?
All executives are eligible for participation at the discretion of the Board.
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 when and if 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?
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.
For the FY18 LTI opportunity, one third of the Performance Rights can vest in August 2019, 2020
and 2021. Whether the FY18 Performance Rights that can vest in August 2019 in fact vest depends
on the company’s performance over the two-year period comprising FY18 and FY19. Whether the
FY18 Performance Rights that can vest in August 2020 in fact vest depends on the company’s
performance over the three-year period comprising FY18, FY19 and FY20. Whether the FY18
Performance Rights that can vest in August 2021 in fact vest depends on the company’s
performance over the four-year period comprising FY18, FY19, FY20 and FY21.
When can the performance rights
vest under the Australian Plan?
For the FY18 LTI opportunity, assuming the performance gateway is achieved, whether the
performance rights that can vest do in fact vest is determined as follows:
50% is subject to a relative TSR performance hurdle; and
50% is subject to a compound EPS performance hurdle.
When can the performance rights
vest under the US Plan?
For the FY18 LTI opportunity, assuming the performance gateway is achieved, whether the
performance rights that can vest do in fact vest is determined as follows:
1/3rd is subject to a relative TSR performance hurdle;
1/3rd is subject to a compound EPS performance hurdle; and
1/3rd vests automatically provided the executive has remained in continuous employment
since the date of grant.
What is Relative TSR and how is it
measured?
Relative 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, measured against the return of an external
benchmark. The relative TSR definition takes account of both capital growth and distributions.
Relative TSR is measured against the S&P/ASX 200 Industrials Index over the performance period.
Relative TSR performance is measured by an independent third party. The vesting schedule for the
portion of the grant subject to the relative TSR performance condition is as follows:
For FY18, the vesting scale is as follows:
Relative TSR Performance
Below 50th percentile
50th percentile
Between 50th 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 FY18 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%
22 Ardent Leisure Group | Annual Report 2018
Directors’ report to stapled
security holders
11.
Remuneration report (continued)
(d)
(i)
Remuneration outcomes for executives
STI outcomes in respect of FY18 performance
In respect of FY18 and 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. Actual payments are made to individuals
following the release of audited results.
Name
Chris Morris
Darin Harper
Craig Davidson
Geoff Richardson
Simon Kelly
Deborah Thomas
Richard Johnson
Nicole Noye(1)
Charlie Keegan
Financial
year
STI
Awarded
STI
Forfeited
STI
outcome
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
0%
n/a
0%
n/a
0%
0%
0%
n/a
0%
0%
n/a
100%
0%
40%
0%
40%
0%
0%
0%
n/a
0%
n/a
0%
100%
100%
n/a
100%
100%
n/a
0%
100%
60%
0%
60%
100%
100%
-
n/a
-
n/a
-
-
-
n/a
-
-
n/a
-
-
$147,826
$204,988
$75,600
-
-
(1)
STI amount includes a sale completion bonus of $204,988 and no STI performance bonus.
(ii)
Minimum security holdings
Ardent Leisure outlines that Executive KMP are required to hold securities with a value at least equal to their pre-tax fixed remuneration.
Non-Executive Directors are expected to hold the minimum value of security holdings within four years of appointment and thereafter
increase holdings over their tenure; specifically, the minimum values are equivalent to the Chairman base fee and Non-Executive
Director base fee.
Ardent Leisure Group | Annual Report 2018 23
Directors’ report to stapled
security holders
11.
(d)
(iii)
Remuneration report (continued)
Remuneration outcomes for executives (continued)
LTIP outcomes
Three LTIP tranches (issued in FY14, FY15 and FY16) are due to vest in August 2018, subject to performance achieved. Nil performance
rights out of a total of 383,663 that were subject to testing will vest and as such no stapled securities will be issued to employees under
the terms of the LTIP.
Details of the TSR and EPS performance are set out in the tables below:
Tranche
Performance period
TSR performance rights
EPS performance rights
Group TSR
performance
Percentile
Vesting
percentage
Group CAGR
EPS
Vesting
percentage
T3-2013
1 July 2014 – 30 June 2018
(13.86%)
30.25
Nil
n/a(1)
(4 years)
T2-2014
1 July 2015 – 30 June 2018
2.14% 40.91
Nil
(133.84%)
(3 years)
T1-2015
1 July 2016 – 30 June 2018
2.08% 32.00
Nil
n/a(1)
(2 years)
Nil
Nil
Nil
(1) Mathematically, CAGR cannot be computed when there is an positive EPS in the first year, a negative EPS in the last year and an even number of years over which it is
being measured. However, as EPS has declined over the CAGR measurement period, it has by definition failed to meet the minimum vesting hurdle of 5% CAGR EPS
growth.
(iv)
Severance Payments Executive KMPs
Payment
Simon Kelly
Former Group Chief Executive Officer
Deborah Thomas
Former Group Chief Executive Officer
Richard Johnson
Former Chief Financial Officer
Charlie Keegan
Former CEO – US Entertainment Centres
Mr Kelly received a payment of $300,000 in connection with his departure from the
Group. Mr Kelly also received 143,807 stapled securities as part of his sign-on grant to
reflect vesting on a pro-rata basis for his time served. 655,527 unvested securities have
been forfeited in accordance with the terms of the grant.
Ms Thomas received 12 months’ base salary in lieu of notice and will continue to
participate in the LTI Plan in respect of any unvested performance rights (which are not
subject to a tenure requirement) and therefore outstanding performance rights remain
‘on foot’ and will only vest subject to performance achievement against the
predetermined vesting conditions.
Mr Johnson’s DSTI performance rights were due to vest on 15 August 2017 and were
allotted on 24 July 2017 on termination of employment with the Group. In addition, the
performance rights due to vest on 31 August 2018 vested early and were allotted on the
same date. Mr Johnson will continue to participate in the LTI Plan in respect of any
unvested performance rights (which are not subject to a tenure requirement) and
therefore outstanding performance rights remain ‘on foot’ and will only vest subject to
performance achievement against the predetermined vesting conditions.
Mr Keegan’s remaining unvested DSTI performance rights granted on 23 August 2016
will vest on 31 August 2018. Mr Keegan will continue to participate in the LTI Plan in
respect of any unvested performance rights (which are not subject to a tenure
requirement) and therefore outstanding performance rights remain ‘on foot’ and will
only vest subject to performance achievement against the predetermined vesting
conditions.
24 Ardent Leisure Group | Annual Report 2018
Directors’ report to stapled
security holders
11.
Remuneration report (continued)
(d)
Remuneration outcomes for executives (continued)
This section sets out the actual remuneration outcomes realised by executives and the statutory remuneration disclosures for FY18 and
FY17 as well as a summary of the Group’s business performance over the last five years.
(v)
Actual remuneration outcomes
The table below sets out the total realised pay (take home pay) in respect of the years ended 26 June 2018 and 30 June 2017. The
deferred equity and LTIP vested elements of realised pay relate to both individual and the Group’s performance up to 26 June 2018. The
information below is different to the statutory information later in this section, which is audited and includes the accounting value of
equity expensed in the year, rather than the actual benefit received as shown in the table below:
Name
Financial
year
Base salary (incl
Super) paid
STI on an accrued basis
Cash
Deferred
equity vested
(1)
LTIP vested (1)
Termination
payment
Total realised
pay in respect
of the financial
year
Chris Morris (2)
Simon Kelly (6)
Darin Harper (3)
Craig Davidson (4)
Geoff Richardson (5)
Deborah Thomas (7)
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
US$161,538
-
n/a
n/a
US$121,917
-
n/a
n/a
$611,654
-
$483,467
-
$846,700
-
n/a
n/a
$880,075
-
$54,634
-
$731,291
-
$757,516
-
$337,273
-
$977,309
$147,826
$434,998
$204,988
$603,987
$75,600
US$818,640
-
US$673,388
-
(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 26 June
2018. Securities to be issued in respect of the financial year are valued at $1.97 per security, representing the closing price at 26 June 2018 (2016: $1.88 per security,
representing the closing price at 30 June 2017). Amounts expressed in US dollars are converted from Australian dollars at an exchange rate of 0.7416 representing the
closing rate at 26 June 2018 (2017: 0. 7552, representing the closing rate at 30 June 2017).
-
n/a
-
n/a
-
-
-
n/a
-
-
-
-
-
$67,657
-
-
US$191,958
US$13,577
US$161,538
n/a
US$20,961
n/a
$384,808
$384,376
$846,700
n/a
$332,727
$54,634
-
$757,516
$27,697
$666,305
$212,052
$420,026
US$270,048
US$512,500
-
n/a
US$100,956
n/a
$49,846
$99,091
-
n/a
$247,348
-
-
-
$62,578
$95,521
-
$108,361
US$62,259
US$147,311
-
n/a
-
n/a
$177,000
-
-
n/a
$300,000
-
$731,291
-
$246,998
-
$17,958
-
US$294,375
-
Richard Johnson (8)
Charlie Keegan (10)
Nicole Noye (9)
(2) Commenced employment and became KMP on 26 March 2018.
(3) Although an employee of the Group since March 2017, became KMP on appointment as Group Chief Financial Officer from 4 June 2018.
(4) Termination payment amount includes a retention bonus of $100,000 and payment on exit of the Group of $77,000.
(5) Commenced employment and became KMP on 3 July 2017. Ceased employment on 15 June 2018. Mr Richardson was paid a per diem rate of $2,500 for his time as
interim Group CFO and $4,200 per day for his time as Acting Group CEO. The Group also paid Watermark Interim Management a standard consultancy fee.
(6) Commenced employment and became KMP on 26 April 2017. Ceased employment on 16 November 2017.
(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. Ms
Thomas retained the right to previously granted but unvested entitlements under the Group’s LTI plan which remain subject to performance criteria. Vesting of those
entitlements remains 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 entered into a transitional consultancy arrangement, whereby Ms Thomas provided ongoing support to the CEO, senior
management and Board of Ardent in respect of the Coronial Inquiry into the Dreamworld tragedy. Ms Thomas was paid a consultancy fee of $3,000 per day, for each
day reasonably expended in relation to the Coronial Inquiry. The Board 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.
(8) Ceased employment 14 July 2017.
(9) Ceased employment as CEO – Bowling and Entertainment on 27 December 2017.
(10) Ceased employment on 24 November 2017.
Ardent Leisure Group | Annual Report 2018 25
Directors’ report to stapled
security holders
11.
Remuneration report (continued)
(d)
Remuneration outcomes for executives (continued)
This section sets out the actual remuneration outcomes realised by executives and the statutory remuneration disclosures for FY18 and
FY17.
(vi)
Details of remuneration – Executive Key Management Personnel
Details of the remuneration of Executive KMP of the Group for FY18 are set out in the table below. The table sets 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.
Short term benefits
Post-
employ
ment
benefits
Other long
term benefits
Salary
Cash
bonus
Annual
leave (1)
Super-
annuation
Termination
payment
$
$
$
$
$
Total
cash
payment
$
Security-
based
payments
$
Total
$
Security-
based
payment
% of
total
Chris Morris (2)
CEO – US Entertainment
Centres
FY18
FY17
208,394
n/a
-
n/a
-
n/a
-
-
-
n/a
-
-
-
-
11,378
n/a
1,128
n/a
-
n/a
-
n/a
-
n/a
-
n/a
82,887
(17,674)
20,049
19,616
177,000
-
-
n/a
-
n/a
-
n/a
219,772
n/a
28,169
n/a
644,695
366,702
846,700
n/a
-
n/a
219,772
n/a
-
n/a
167,304
n/a
30,157
180,480
-
n/a
195,473
n/a
674,852
547,182
846,700
n/a
85.59%
n/a
4.47%
32.98%
-
n/a
(4,038)
4,038
10,024
2,774
300,000
-
628,689
58,672
266,501
31,798
895,190
90,470
29.77%
35.15%
-
18,107
-
35,000
731,291
-
731,291
775,623
(240,976)
512,335
490,315
1,287,958
(49.15%)
39.78%
FY18
FY17
FY18
FY17
FY18
FY17
27,041
n/a
364,759
364,760
846,700
n/a
FY18
FY17
322,703
51,860
FY18
FY17
-
722,516
FY18
FY17
FY18
FY17
22,685
631,305
-
147,826
197,015
400,410
204,988
75,600
(35,431)
(27,884)
(22,823)
(6,197)
5,012
35,000
15,037
19,616
246,998
-
17,958
-
239,264
786,247
(257,880)
646,231
(18,616)
1,432,478
1385.29%
45.11%
412,175
489,429
(76,251)
182,706
335,924
672,135
(22.70%)
27.18%
FY18
FY17
348,378
681,481
-
-
(58,487)
14,216
-
-
379,761
-
669,652
695,697
(280,347)
438,891
389,305
1,134,588
(72.01%)
38.68%
Darin Harper (2)
Chief Financial Officer
Craig Davidson (3)
CEO – Australian Theme Parks
Geoff Richardson
Former Acting Chief Executive
and Financial Office
Simon Kelly
Former Chief Executive Officer
and Managing Director
Deborah Thomas
Former Chief Executive Officer
and Managing Director
Richard Johnson
Former Chief Financial Officer
Nicole Noye
Former CEO – Australian
Bowling and Entertainment
Centres
Charlie Keegan (2)
Former CEO – US
Entertainment Centres
FY18
FY17
2,337,675
2,852,332
204,988
223,426
(25,386)
(15,394)
50,122
112,006
1,853,008
-
4,420,407
3,172,370
(391,492)
1,992,441
4,028,915
5,164,811
(9.72%)
38.58%
(1) Annual leave amounts represent the increase/(decrease) in the liability for accumulated annual leave during the year.
(2) Remuneration is converted from US dollars to Australian dollars at the average exchange rate of 0.7752 (2017: 0.7542) and includes both cash settled and equity settled
awards.
(3) Termination payment amount includes a retention bonus of $100,000 and payment on exit of the Group of $77,000.
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 increased by
$673,084 to $281,592 (FY17: reduced by $423,418 to $1,854,240)
26 Ardent Leisure Group | Annual Report 2018
Directors’ report to stapled
security holders
11.
Remuneration report (continued)
(e)
Service agreements of Key Management Personnel
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
Chris Morris
President and CEO of
Main Event Entertainment
No fixed term
Employment shall continue with the Group unless the executive gives the Group
90 days’ notice in writing. The Group may terminate Mr Morris’ employment at any
time, subject to a requirement to provide 30 days’ notice where the Group intends
to terminate Mr Morris’ employment for certain ‘cause’ reasons.
In certain circumstances, on termination of employment, Mr Morris is entitled to
continued payment of total fixed remuneration for 12 months plus any owed but
unpaid incentive amounts.
Employment shall continue as Group Chief Financial Officer with the Group unless
either party provides notice in writing.
No fixed term.
Employment shall continue with the Group unless either party gives three
months’ notice in writing.
At will.
14 days’ notice.
No fixed term.
Employment continued 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 could also make a payment in lieu of notice, in which case Mr
Kelly was also entitled to receive an additional severance payment of $300,000
prorated commensurate with the notice period being paid out.
Darin Harper
Group Chief Financial Officer
Craig Davidson
Former CEO – Australian Theme
Parks
Geoff Richardson
Former Group Chief Executive
Officer and Chief Financial Officer
(interim)
Simon Kelly
Former Chief Executive Officer
and Managing Director
Deborah Thomas
Former Chief Executive Officer
No fixed term.
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.
Richard Johnson
Former Chief Financial Officer
No fixed term.
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.
Nicole Noye
Former CEO – Australian Bowling
and Entertainment Centres
Charlie Keegan
Former CEO – US Entertainment
Centres
No fixed term.
Employment shall continue with the Group unless either party gives three
months’ notice in writing.
No fixed term.
Automatic
renewal on a
year by year
basis.
During the contract term, employment continued with the Group unless the
executive gives three months’ notice in writing. An early termination payment
equal to 12 months’ salary was payable to the executive if the Group terminated
the executive during the contract, other than for gross misconduct.
Other than as set out above, there are no contracted termination benefits payable to any KMP.
Ardent Leisure Group | Annual Report 2018 27
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 FY19.
Board fees payable to Non-Executive Directors are as follows:
Position
Board Chair
Other Non-Executive Director
- Australian based
Audit and Risk Committee
Other Committee
- US based
- Chair
- Member
- Chair
- Member
Dreamworld Sub-Committee
- Chair
Main Event Sub-Committee
- Member
- Chair
- Member
Details of the actual fees delivered to Non-Executive Directors of the Group for FY18 and FY17 are set out below:
Salary
$
Superannuation
$
Independent Directors
Gary Weiss(1)
David Haslingden
Don Morris AO
Randy Garfield
Brad Richmond
George Venardos
Roger Davis
Melanie Willis
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
-
n/a
117,670
130,023
114,023
130,023
136,034
n/a
131,780
n/a
34,813
197,748
122,122
142,104
12,219
136,872
668,661
736,770
-
n/a
11,622
12,352
12,352
12,352
2,391
n/a
1,977
n/a
3,843
17,211
12,045
13,500
2,364
13,003
46,594
68,418
(1) After joining the Group in September 2017, Dr Weiss did not receive any fees for being a director, Chairman or member of any Committee.
28 Ardent Leisure Group | Annual Report 2018
Non Executive
Director Fees
$205,000
$120,000
$136,000
$20,000
$15,000
$12,500
$7,500
$12,500
$7,500
$12,500
$7,500
Total
$
-
n/a
129,292
142,375
126,375
142,375
138,425
n/a
133,757
n/a
38,656
214,959
134,167
155,604
14,583
149,875
715,255
805,188
Directors’ report to stapled
security holders
11.
Remuneration report (continued)
(g)
(i)
Additional Statutory disclosures
Directors’ interests in securities
Changes to Directors’ interests in stapled securities during the period are set out below:
Gary Weiss
David Haslingden
Don Morris AO
Randy Garfield
Brad Richmond
George Venardos
Roger Davis
Melanie Willis
Simon Kelly
Deborah Thomas
Opening
balance
-
160,000
13,950
-
-
215,839
200,658
9,674
280,409
42,269
922,799
On joining
the Group
51,116,531
-
-
-
-
-
-
-
-
-
51,116,531
Acquired
Disposed
3,146,000
-
-
-
48,450
-
-
-
143,807
-
3,338,257
(320,000)(1)
-
-
-
-
-
-
-
-
-
(320,000)
On leaving
the Group
-
-
-
-
-
(215,839)
-
(9,674)
(424,216)
(42,269)
(691,998)
Closing
balance
53,942,531
160,000
13,950
-
48,450
-
200,658
-
-
-
54,365,589
(1)
Investec Australia Limited ceased to be an associate of Ariadne and the Ariadne Associates on 20 September 2017 and as such ceased to have any
voting power in respect of Ardent Leisure Group securities for which Ariadne and the Ariadne Associates have a relevant interest.
(ii)
Other KMP interests in securities
Changes to the interests of other KMP in stapled securities during the period are set out below:
Craig Davidson
Richard Johnson
Nicole Noye
Charlie Keegan
(iii)
Valuation inputs
Opening
balance
50,000
264,566
5,786
126,801
447,153
Acquired
under the
Group's equity
plans
52,708
116,596
57,639
111,257
338,200
Disposed On leaving the
Group
Closing
balance
(30,000)
-
-
-
(30,000)
-
(381,162)
(63,425)
(238,058)
(682,645)
72,708
-
-
-
72,708
For performance rights outstanding at 26 June 2018, 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 26 June 2018:
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
2016
2017
23 August 2016 29 September 2017
31 August 2018
31 August 2017
31 August 2019
31 August 2018
2.00% per annum
1.40% per annum
42.0% per annum
40.0% per annum
1.6% per annum
5.0% per annum
$1.82
$2.50
$1.78
$2.26
Ardent Leisure Group | Annual Report 2018 29
Directors’ report to stapled
security holders
11.
(g)
(iii)
Remuneration report (continued)
Additional Statutory disclosures (continued)
Valuation inputs (continued)
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
US employees
Australian employees
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
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
2016
2017
23 August 2016 29 September 2017
31 August 2019
31 August 2018
31 August 2020
31 August 2019
31 August 2021
31 August 2020
2.00% per annum
1.40% per annum
42.0% per annum
40.0% per annum
1.6% per annum
5.0% per annum
$2.50
$2.50
$1.32
$1.32
$1.06
$1.06
$1.51
$1.51
$0.65
$0.19
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.
The tables below show the fair value of the performance rights in each grant as at 26 June 2018 as well as the factors used to value the
performance rights as at 26 June 2018. Under AASB 2, this valuation is used to value the cash settled performance rights granted to
employees at 26 June 2018:
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
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
US employees
Australian employees
2016
2017
23 August 2016 29 September 2017
31 August 2018
31 August 2017
31 August 2019
31 August 2018
2.00% per annum
2.00% per annum
33.0% per annum
33.0% per annum
4.3% per annum
4.3% per annum
$1.97
$1.97
$1.91
$1.95
2014
19 August 2014
31 August 2016
31 August 2017
31 August 2018
2.00% per annum
33.0% per annum
4.3% per annum
$1.97
2015
15 December 2015
31 August 2017
31 August 2018
31 August 2019
2.00% per annum
33.0% per annum
4.3% per annum
$1.97
2016
2017
23 August 2016 29 September 2017
31 August 2019
31 August 2018
31 August 2020
31 August 2019
31 August 2021
31 August 2020
2.00% per annum
2.00% per annum
33.0% per annum
33.0% per annum
4.3% per annum
4.3% per annum
$1.97
$1.97
-
-
$0.19
$0.19
$0.44
$0.44
$0.68
$0.12
30 Ardent Leisure Group | Annual Report 2018
Directors’ report to stapled
security holders
11.
(g)
(iv)
Remuneration report (continued)
Additional Statutory disclosures (continued)
Details of equity grant movements
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
Current Executives
Equity Settled
Darin Harper
LTI
DSTI
Total
LTI
Craig Davidson
DSTI
2017
2017
2014
2015
2016
2017
2015
2016
Simon Kelly
Total
Grant in lieu of
remuneration
LTI
2017
2017
Total
Richard Johnson LTI
DSTI
Total
2013
2014
2015
2016
2015
2016
Year
Number
2020
2021
2022
2019
2020
2018
2019
2018
2019
2020
2019
2020
2021
2020
2020
2021
2022
2018
2018
2019
2020
2020
2021
2022
2018
2018
2019
2018
2019
2020
2019
2020
2021
2020
2018
2018
2019
35,677
35,677
35,678
69,279
69,279
245,590
11,368
11,368
16,741
16,741
16,741
15,313
15,314
15,314
22,971
36,948
36,949
36,949
27,341
25,367
25,367
330,792
799,334
87,753
87,753
87,753
1,062,593
65,789
33,804
33,804
65,994
65,994
65,994
32,719
32,719
32,719
49,080
21,010
29,799
29,799
559,224
T1
T2
T3
T1
T2
T2
T3
T1
T2
T3
T1
T2
T3
T4
T1
T2
T3
T2
T1
T2
T1
T1
T2
T3
T3
T2
T3
T1
T2
T3
T1
T2
T3
T4
T2
T1
T2
20,925
26,458
30,308
124,065
121,896
323,652
17,740
14,973
20,904
18,738
16,776
23,141
21,178
15,798
49,374
-
9,163
15,701
53,028
60,259
57,319
394,092
1,658,059
-
21,762
37,289
1,717,110
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
-
-
-
-
-
-
11,368
-
16,741
-
-
-
-
-
-
-
-
-
-
-
-
28,109
655,527
87,753
87,753
87,753
918,786
29,801
33,804
-
65,994
-
-
-
-
-
-
-
-
-
129,599
-
-
-
-
-
-
21,656
-
31,892
-
-
-
-
-
-
-
-
-
-
-
-
53,548
1,127,506
150,935
150,935
150,935
1,580,311
56,771
64,397
-
125,719
-
-
-
-
-
-
-
-
-
246,887
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
27,341
25,367
-
52,708
143,807
-
-
-
143,807
35,988
-
-
-
-
-
-
-
-
-
21,010
29,799
29,799
116,596
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
52,085
48,324
-
100,409
247,348
-
-
-
247,348
68,557
-
-
-
-
-
-
-
-
-
44,121
62,578
62,578
237,834
20,925
26,458
30,308
124,065
121,896
323,652
-
14,973
-
18,738
16,776
23,141
21,178
15,798
49,374
-
9,163
15,701
-
-
57,319
242,161
-
-
-
-
-
-
-
44,523
-
73,867
66,133
49,445
45,247
33,753
105,493
-
-
-
418,461
Ardent Leisure Group | Annual Report 2018 31
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
Value of
Performance
Rights at
vesting
Maximum
value yet to
vest
Year Number
T1
T2
T3
T1
T2
T3
T4
T2
T1
T2
T3
T2
T3
T1
T2
T3
T1
T2
T3
T4
T2
T1
T2
Nicole Noye
LTI
2015
Charlie Keegan
2016
2015
2016
2013
2014
2015
2016
2015
2016
DSTI
Total
LTI
DSTI
Total
Total
(v)
LTI performance rights
2018
2019
2020
2019
2020
2021
2020
2018
2018
2019
2018
2018
2019
2018
2019
2020
2019
2020
2021
2020
2018
2018
2019
17,857
17,857
17,857
16,733
16,733
16,733
25,100
28,930
28,709
28,710
215,219
17,162
27,961
27,961
62,055
62,056
62,056
41,710
41,709
41,709
62,565
59,144
42,724
42,724
591,536
3,004,954
22,298
19,987
17,894
25,287
23,140
17,262
53,950
56,110
68,198
64,873
368,999
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
912,960
17,857
17,857
17,857
16,733
16,733
16,733
25,100
-
-
28,710
157,580
7,773
27,961
-
62,055
-
62,056
-
41,709
41,709
62,565
-
-
-
305,828
4,496,882 1,539,902
34,018
35,178
35,178
32,964
32,964
32,964
49,447
-
-
56,559
309,272
14,808
53,266
-
118,215
-
107,357
-
72,157
72,157
108,237
-
-
-
546,197
2,736,215
-
-
-
-
-
-
-
28,930
28,709
-
57,639
9,389
-
-
-
-
-
-
-
-
-
59,144
42,724
-
111,257
482,007
-
-
-
-
-
-
-
55,112
54,691
-
109,803
17,886
-
-
-
-
-
-
-
-
-
112,669
81,389
-
211,944
907,338
-
-
-
-
-
-
-
-
-
-
-
-
-
36,827
-
69,459
-
63,032
-
-
-
-
-
96,539
265,857
1,250,131
The number of performance rights on issue and granted to the Group’s executive KMP under the LTIP is set out below:
26 June 2018
Chris Morris
Darin Harper
Craig Davidson
Geoff Richardson
Simon Kelly
Richard Johnson
Nicole Noye
Charlie Keegan
Equity settled
Opening
balance
Granted as
compensation
Exercised
Lapsed
Closing
balance
Vested and
exercisable
Unvested
-
-
141,871
-
-
478,616
128,870
446,944
1,196,301
-
107,032
110,846
-
263,259
-
-
-
481,137
-
-
-
-
-
(35,988)
-
(9,389)
(45,377)
-
-
(28,109)
-
(263,259)
(129,599)
(128,870)
(305,828)
(855,665)
-
107,032
224,608
-
-
313,029
-
131,727
776,396
-
-
-
-
-
-
-
-
-
-
107,032
224,608
-
-
313,029
-
131,727
776,396
32 Ardent Leisure Group | Annual Report 2018
Directors’ report to stapled
security holders
11.
(g)
(vi)
Remuneration report (continued)
Additional Statutory disclosures (continued)
DSTI rights
The number of rights on issue and granted to the Group’s executive KMP under the DSTI is set out below:
26 June 2018
Chris Morris
Darin Harper(1)
Craig Davidson
Geoff Richardson
Simon Kelly
Richard Johnson
Nicole Noye
Charlie Keegan
Equity settled
Opening
balance
Granted as
compensation
Exercised
Forfeited
Closing
balance
Vested and
exercisable
-
-
78,075
-
-
80,608
86,349
144,592
389,624
-
138,558
-
-
-
-
-
-
138,558
-
-
(52,708)
-
-
(80,608)
(57,639)
(101,868)
(292,823)
-
-
-
-
-
-
(28,710)
-
(28,710)
-
138,558
25,367
-
-
-
-
42,724
206,649
-
-
-
-
-
-
-
-
-
Unvested
-
138,558
25,367
-
-
-
-
42,724
206,649
(1) DSTI rights were granted to Darin Harper prior to him becoming KMP on 4 June 2018.
(vii)
Rights delivered to Simon Kelly as part of fixed remuneration
26 June 2018
Opening
balance
Granted as
compensation
Exercised
Forfeited
Closing
balance
Vested and
exercisable
Unvested
Simon Kelly
799,334
-
(143,807)
(655,527)
-
-
-
(viii)
Loans and other transactions with KMP
There were no loans made to KMP during the financial year, as disclosed in Note 34(e) to the financial statements. Refer to Note 34(f) to
the financial statements for details of other transactions with KMP during the financial year.
Ardent Leisure Group | Annual Report 2018 33
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 (Ernst & Young) and former auditor (PricewaterhouseCoopers) for audit and non-audit
services provided during the year are disclosed in Note 31 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 31 to
the financial statements, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following
reasons:
All non-audit services have been reviewed by the Audit and Risk Committee to ensure that they do not impact the integrity and
objectivity of the auditor; and
None of the services undermines the general principles relating to auditor independence as set out in Accounting Professional and
Ethical Standards Board APES 110 Code of Ethics for Professional Accountants.
13. Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 38.
14.
Events occurring after reporting date
Subsequent to 26 June 2018, a distribution of 6.5 cents per stapled security has been declared by the Board of Directors. The total
distribution amount of $30.6 million will be paid on or before 31 August 2018 in respect of the half year ended 26 June 2018.
Roger Davis resigned as a Director of the Board on 17 August 2018.
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 26 June 2018.
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.
34 Ardent Leisure Group | Annual Report 2018
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 26 June 2018 and fees paid to its related entities during the
financial year are disclosed in Notes 32 and 34 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.
Ardent Leisure Group | Annual Report 2018 35
Directors’ report to stapled
security holders
18.
Environmental regulations (continued)
(b)
Marinas – Australia
During the prior 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.
On 23 March 2018 the NSW Land and Environment Court Environment handed down judgment against Ardent Leisure Limited relating
to the diesel spill that occurred at Rushcutters Bay marina in May 2016. Ardent Leisure Limited was fined a total of $155,950 (comprised
of $135,000 in relation to a pollution offence and $22,950 in relation to an offence under the UPSS Regulations and ordered to pay the
NSW Environment Protection Authority’s investigation and legal costs. All such amounts have been paid and the matter was finalised
during the current period.
(c)
Bowling and Entertainment Centres – Australia
During the period of ownership by the Group, Australian Bowling and Entertainment Centres were subject to environmental regulations
concerning their food facilities, primarily trade waste and grease traps. The Group had 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
was replaced and disposed of by external organisations at all locations.
All hazardous substances were disposed of according to manufacturers’ and EPA regulations. A register of all hazardous substances and
dangerous goods was 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 was disposed of in accordance with each State and Territory’s EPA requirements.
Noise was adequately monitored for both internal and external environmental breaches. Noise emissions fell 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 were 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)
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 2016/2017 emissions report under the Act in October 2017.
The Group is not subject to any other significant environmental regulations and there are adequate systems in place to manage its
environmental responsibilities.
36 Ardent Leisure Group | Annual Report 2018
Directors’ report to stapled
security holders
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.
Gary Weiss
Chairman
Sydney
21 August 2018
Toni Korsanos
Director
Ardent Leisure Group | Annual Report 2018 37
Ernst & Young
200 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Auditor’s Independence Declaration
As lead auditor for the audit of Ardent Leisure Group for the financial year ended 26 June 2018, I
declare 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 financial year.
Ernst & Young
John Robinson
Partner
21 August 2018
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Income Statements
for the year ended 26 June 2018
Income Statements
Income
Revenue from operating activities
Management fee income
Net gain from derivative financial instruments
Interest income
Distribution income
Other income
Total income
Expenses
Purchases of finished goods
Salary and employee benefits
Borrowing costs
Property expenses
Depreciation and amortisation
Loss on disposal of assets
Loss on sale and leaseback of Main Event Centre
Advertising and promotions
Repairs and maintenance
Pre-opening expenses
Impairment of goodwill
Impairment of other intangible assets
Impairment of property, plant and equipment
Valuation loss - property, plant and equipment
Valuation loss - investments held at fair value
Dreamworld incident costs
Net loss from derivative financial instruments
Loss on disposal of damaged assets
Other expenses
Total expenses
Loss before tax benefit
Income tax benefit
Loss from continuing operations
Profit from discontinued operations
(Loss)/profit for the year
Attributable to:
Stapled security holders
Note
3
32
5
4
6
27(b)
Consolidated
Group
2018
$’000
Consolidated
Group
2017
$’000
ALL Group
2018
$’000
ALL Group
2017
$’000
422,393
-
881
191
-
13,501
436,966
60,253
176,824
10,339
49,465
43,033
507
706
20,004
25,661
5,900
3,583
1,188
39,287
75,031
390
10,435
-
9,224
53,472
585,302
370,384
-
-
86
-
1,727
372,197
53,853
158,900
12,049
40,553
34,704
450
-
20,029
21,348
12,646
783
-
-
88,747
-
7,048
421
-
39,128
490,659
(148,336)
(29,522)
(118,814)
28,124
(118,462)
(5,280)
(113,182)
50,625
422,393
1,200
692
48
21
13,501
437,855
60,253
177,777
13,551
51,683
37,142
72
706
20,004
25,661
5,900
3,583
1,188
38,287
-
390
10,435
-
9,224
52,768
508,624
(70,769)
(29,897)
(40,872)
25,272
(90,690)
(62,557)
(15,600)
370,384
1,200
-
77
-
1,727
373,388
53,853
158,627
9,348
43,962
27,705
443
-
20,029
21,348
12,646
783
-
-
-
-
6,701
-
-
38,664
394,109
(20,721)
(5,416)
(15,305)
18,369
3,064
(90,690)
(62,557)
(15,600)
3,064
The above Income Statements should be read in conjunction with the accompanying notes.
Total basic (losses)/earnings per security/share (cents)
Basic losses per security/share (cents) from continuing
operations
Total diluted (losses)/earnings per security/share (cents)
Diluted losses per security/share (cents) from continuing
operations
20
20
20
20
(19.32)
(13.37)
(3.32)
(25.31)
(19.33)
(24.19)
(13.39)
(8.71)
(3.34)
(25.31)
(24.19)
(8.71)
0.65
(3.28)
0.64
(3.28)
Ardent Leisure Group | Annual Report 2018 39
Statements of Comprehensive Income
for the year ended 26 June 2018
Note
Consolidated
Group
2018
$’000
Consolidated
Group
2017
$’000
ALL Group
2018
$’000
ALL Group
2017
$’000
(Loss)/profit for the year
(90,690)
(62,557)
(15,600)
3,064
Other comprehensive income/(loss) for the year
Items that may be reclassified to profit and loss:
Cash flow hedges
Foreign exchange translation difference
Income tax benefit/(expense) relating to these items
Items that will not be reclassified to profit and loss:
Loss on revaluation of property, plant and equipment
Other comprehensive income/(loss) 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
23
23
23
23
835
13,520
68
3,154
(3,280)
(562)
(105)
6,711
68
(722)
13,701
(76,989)
(1,215)
(1,903)
(64,460)
-
6,674
(8,926)
1,549
(3,837)
(562)
-
(2,850)
214
(76,989)
(64,460)
(76,989)
(64,460)
(8,926)
(8,926)
214
214
27(b)
(105,113)
28,124
(115,085)
50,625
(76,989)
(64,460)
(34,198)
25,272
(8,926)
(18,155)
18,369
214
The above Statements of Comprehensive Income should be read in conjunction with the accompanying notes.
40 Ardent Leisure Group | Annual Report 2018
Balance Sheets
as at 26 June 2018
Current assets
Cash and cash equivalents
Receivables
Derivative financial instruments
Inventories
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
Note
Consolidated
Group
2018
$’000
Consolidated
Group
2017
$’000
ALL Group
2018
$’000
ALL Group
2017
$’000
9
16
10
27(d)
13
14
15
11
16
12
7
17
14
16
25
18(b)
27(d)
16
25
18(b)
7
16,548
12,032
748
8,180
-
-
24,239
9,625
71,372
455,668
2,811
-
236
70,275
20,766
549,756
621,128
101,717
22,397
-
-
318
1,695
-
3,264
129,391
28
27,849
2,651
17,091
47,619
177,010
444,118
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
21
22
23
24
666,731
(1,405)
(14,246)
(206,962)
444,118
662,450
(1,662)
(26,861)
(102,205)
531,722
14,175
14,645
748
8,180
-
-
24,239
6,611
68,598
355,684
2,811
-
236
70,275
20,766
449,772
518,370
101,993
22,397
-
-
318
1,695
-
3,264
129,667
-
199,171
2,651
17,091
218,913
348,580
169,790
172,124
(1,405)
12,859
(13,788)
169,790
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
The above Balance Sheets should be read in conjunction with the accompanying notes.
Ardent Leisure Group | Annual Report 2018 41
Statements of Changes in Equity
for the year ended 26 June 2018
Statements of Changes in Equity
Note
Contributed
equity
$’000
Other
equity
$’000
Consolidated Group
Total equity at 1 July 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
Loss for the year
Other comprehensive income for the year
Total comprehensive income/(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
Issuance of treasury shares
Distributions received from treasury shares
Distributions paid and payable
Total equity at 26 June 2018
ALL Group
Total equity at 1 July 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
Total equity at 30 June 2017
Loss for the year
Other comprehensive income for the year
Total comprehensive income/(loss) for the year
Transactions with owners in their capacity as owners:
Contributions of equity, net of issue costs
Security-based payments - shares issued
Issuance of treasury shares
23
21
21
22
24
23
21
21
22
24
24
21
21
22
21
21
22
(Accumulated
losses) /
retained profits
$’000
Total
equity
$’000
(4,799)
619,983
(62,557)
-
(62,557)
(62,557)
(1,903)
(64,460)
-
-
-
-
(34,849)
(102,205)
(90,690)
-
(90,690)
-
-
-
-
21
(14,088)
(20)
9,247
3,483
(1,662)
(34,849)
531,722
(90,690)
13,701
(76,989)
(1,086)
2,968
1,313
257
21
(14,088)
Reserves
$’000
(24,938)
-
(1,903)
(1,903)
(20)
-
-
-
-
(26,861)
-
13,701
13,701
(1,086)
-
-
-
-
-
649,720
-
-
-
-
-
-
-
-
9,247
3,483
-
-
662,450
-
-
-
(1,662)
-
(1,662)
-
-
-
-
2,968
1,313
-
-
-
-
-
-
-
-
-
257
-
-
666,731
(1,405)
(14,246)
(206,962)
444,118
167,100
-
-
-
-
-
-
-
9,035
-
(2,850)
(2,850)
2,608
991
-
170,699
-
-
(1,662)
(1,662)
-
-
-
-
-
-
988
437
-
-
-
257
-
-
-
6,185
-
6,674
6,674
-
-
-
(1,252)
3,064
-
3,064
174,883
3,064
(2,850)
214
-
-
-
1,812
2,608
991
(1,662)
177,034
(15,600)
-
(15,600)
(15,600)
6,674
(8,926)
-
-
-
988
437
257
Total equity at 26 June 2018
172,124
(1,405)
12,859
(13,788)
169,790
The above Statements of Changes in Equity should be read in conjunction with the accompanying notes.
42 Ardent Leisure Group | Annual Report 2018
Statements of Cash Flows
for the year ended 26 June 2018
Statements of Cash Flows
Note
Consolidated
Group
2018
$’000
Consolidated
Group
2017
$’000
ALL Group
2018
$’000
ALL Group
2017
$’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
Insurance recoveries
Income tax (paid)/received
Net cash flows from operating activities
8(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
Proceeds from the sale of Bowling & Entertainment, net of cash disposed
Proceeds from the sale of Marinas, net of cash disposed
Insurance recoveries relating to damaged assets
Payments for purchase of investments
Net cash flows from investing activities
589,706
(463,235)
(75,241)
(11,352)
-
191
-
16,251
-
(344)
2,107
(1,001)
57,082
(122,321)
-
-
429
12,583
-
152,325
123,080
9,171
-
175,267
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
Cash flows from financing activities
Proceeds from borrowings
Repayments of borrowings
Borrowing costs
Costs of issue of stapled securities
Distributions received from treasury shares
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
941,246
(1,146,209)
(10,376)
(19)
21
-
-
-
(11,101)
1,610,810
(1,687,010)
(11,439)
(38)
-
(1,662)
-
-
(25,564)
591,026
(464,041)
(76,647)
(11,352)
-
48
(40,282)
16,251
24,352
-
2,107
(1,001)
40,461
(115,221)
(7,018)
10,355
54
12,583
-
74,965
20,411
9,171
-
5,300
602,117
(737,221)
(13,963)
(6)
21
-
344,521
(236,229)
-
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)
-
Net cash flows from financing activities
(226,438)
(114,903)
(40,760)
(67,233)
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
5,911
10,846
(209)
1,621
9,072
153
5,001
9,356
(182)
16,548
10,846
14,175
1,079
8,393
(116)
9,356
The above Statements of Cash Flows should be read in conjunction with the accompanying notes.
Ardent Leisure Group | Annual Report 2018 43
Notes to the Financial Statements
for the year ended 26 June 2018
1.
Basis of preparation
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).
With effect from the first half of FY18, Ardent’s businesses (Theme Parks and Main Event) have operated on a “5-4-4 week” quarter with
each week ending on Tuesday.
FY18 is a transitional period with the financial period being 1 July 2017 to Tuesday 26 June 2018 i.e. 360 days. Pro-forma results for the
period from 1 July 2017 to 30 June 2018 have been provided in the Directors’ Report to enable comparison with the prior corresponding
period.
The significant policies which have been adopted in the preparation of these consolidated financial statements for the year ended 26
June 2018 are set out in Note 37. These policies have been consistently applied to the years presented, unless otherwise stated.
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.
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
2017:
AASB 2016-1 Amendments to Australian Accounting Standards – Recognition of Deferred Tax Assets for Unrealised Losses;
AASB 2016-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 107; and
AASB 2017-2 Amendments to Australian Accounting Standards – Further Annual Improvements 2014-2016 Cycle.
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.
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 37(f), 37(l), 37(o), 37(r), 37(aa), 37(ae) and 37(af) and assumptions related to deferred
tax assets and liabilities, impairment testing of goodwill, and Director valuations for some property, plant and equipment, 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.
44 Ardent Leisure Group | Annual Report 2018
Notes to the Financial Statements
for the year ended 26 June 2018
1.
Basis of preparation (continued)
Deficiency of current assets
At 26 June 2018 the Group had a deficiency of current assets of $58.0 million, and the ALL Group had a deficiency of current assets of
$61.1 million (30 June 2017: $50.9 million). Due to the nature of the business, the majority of sales are for cash whereas purchases are
on credit resulting in a negative working capital position. Surplus cash is used to repay external loans, resulting in deficiencies of current
assets. The Group has $141.6 million of unused capacity (30 June 2017: $149.7 million) in its bank loans and the ALL Group has $104.7
million (30 June 2017: $153.4 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 25(b).
2.
Segment information
Business segments
The Group is organised on a global basis into the following divisions by product and service type:
(i)
Main Event
This segment operates solely in the United States of America and comprises 41 Main Event sites in Texas, Arizona, Georgia, Illinois,
Kentucky, Missouri, New Mexico, Ohio, Oklahoma, Kansas, Florida, Indiana, Pennsylvania, Tennessee, Maryland and Delaware.
(ii)
Theme Parks
This segment comprises Dreamworld and WhiteWater World in Coomera, Queensland and the SkyPoint observation deck and climb in
Surfers Paradise, Queensland.
(iii)
Bowling and Entertainment
Up until the date of sale effective 30 April 2018, this segment comprised 43 bowling centres and seven amusement arcades located in
Australia and one bowling centre located in New Zealand.
(iv)
Marinas
Up until the date of sale effective 14 August 2017, this segment comprised seven d’Albora Marina properties, located in New South
Wales and Victoria.
(v)
Health Clubs
This segment was sold in the prior year on 25 October 2016.
Ardent Leisure Group | Annual Report 2018 45
Notes to the Financial Statements
for the year ended 26 June 2018
2.
Segment information (continued)
Business segment
Consolidated Group - 1 July 2017 to 26 June 2018
Segment revenue
Segment EBITDA
Depreciation and amortisation
Segment EBIT
Borrowing costs
Interest income
Net (loss)/profit before tax
Income tax benefit/(expense)
Net (loss)/profit after tax
Main Event
$’000
Theme Parks
$’000
Corporate
$’000
355,571
14,159
(33,210)
(19,051)
66,822
(93,795)
(8,679)
(102,474)
-
(15,519)
(1,144)
(16,663)
Continuing
operations
$’000
Bowling &
Entertainment
$’000
Marinas
$’000
Health Clubs
$’000
Discontinued
operations
$’000
122,408
36,153
(12,875)
23,278
2,653
5,175
-
5,175
-
(133)
-
(133)
422,393
(95,155)
(43,033)
(138,188)
(10,339)
191
(148,336)
29,522
(118,814)
The segment EBITDA above includes the following specific items:
Valuation loss - property, plant and equipment and investments
held at fair value
Impairment of intangible assets including goodwill
Impairment of property, plant and equipment
Pre-opening expenses
Dreamworld incident costs, net of insurance recoveries
Restructuring and other non-recurring items
Gain on sale of discontinued operations
Selling costs associated with discontinued operation classified as
held for sale
Loss on disposal of assets and sale and leaseback of Main Event Centre
The income tax benefit above includes the following specific item:
Restatement of deferred tax balances to reflect US tax reforms
Tax impact of specific items listed above
Total assets
Acquisitions of property, plant and equipment and intangible assets
46 Ardent Leisure Group | Annual Report 2018
-
-
(38,287)
(5,900)
-
(7,405)
-
-
(654)
(52,246)
12,230
14,629
26,859
462,120
83,990
(75,031)
(3,583)
(1,000)
-
(6,158)
-
-
-
(493)
(86,265)
-
1,865
1,865
124,722
12,776
(390)
(1,188)
-
-
-
(1,849)
-
(75,421)
(4,771)
(39,287)
(5,900)
(6,158)
(9,254)
-
-
(66)
(3,493)
-
(1,213)
(142,004)
-
1,048
1,048
34,248
1,128
12,230
17,542
29,772
621,090
97,894
-
-
-
(571)
-
-
20,319
-
(892)
18,856
-
410
410
38
19,922
-
-
-
-
-
-
4,668
-
(29)
4,639
-
89
89
-
-
Total
$’000
547,454
(53,960)
(55,908)
(109,868)
(10,404)
191
(120,081)
29,391
(90,690)
(75,421)
(4,771)
(39,287)
(6,471)
(6,158)
(9,254)
24,987
125,061
41,195
(12,875)
28,320
(65)
-
28,255
(131)
28,124
-
-
-
(571)
-
-
24,987
-
-
-
-
-
-
-
(133)
-
(133)
(133)
(921)
23,362
(133)
(2,134)
(118,642)
-
-
-
-
-
-
499
499
38
19,922
12,230
18,041
30,271
621,128
117,816
Notes to the Financial Statements
for the year ended 26 June 2018
2.
Segment information (continued)
Business segment
Consolidated Group - 1 July 2016 to 30 June 2017
Segment revenue
Segment EBITDA
Depreciation and amortisation
Segment EBIT
Borrowing costs
Interest income
Net (loss)/profit before tax
Income tax benefit/(expense)
Net (loss)/profit after tax
Main Event
$’000
Theme Parks
$’000
299,450
45,812
(24,559)
21,253
70,934
(98,432)
(8,915)
(107,347)
Corporate
$’000
-
(19,175)
(1,230)
(20,405)
The segment EBITDA above includes the following specific items:
Valuation loss - property, plant and equipment
Impairment of goodwill
Impairment of property, plant and equipment
Pre-opening expenses
Restructuring and other non-recurring items
Dreamworld incident costs, net of insurance recoveries
Gain on sale of discontinued operations
Selling costs associated with discontinued operation classified as
held for sale
Loss on disposal of assets
-
-
-
(12,646)
(1,400)
-
-
-
(362)
(14,408)
(88,747)
(783)
-
-
-
(5,389)
-
-
(105)
(95,024)
Continuing
operations
$’000
370,384
(71,795)
(34,704)
(106,499)
(12,049)
86
(118,462)
5,280
(113,182)
(88,747)
(783)
-
(12,646)
(4,139)
(5,389)
-
Bowling &
Entertainment
$’000
Marinas
$’000
Health Clubs
$’000
Discontinued
operations
$’000
127,664
10,730
(14,190)
(3,460)
24,131
8,979
-
8,979
62,677
53,260
(6,064)
47,196
-
-
(255)
(1,242)
-
-
-
-
(2,702)
(4,199)
-
-
-
-
-
-
-
(796)
(45)
(841)
-
-
110
-
-
-
45,009
-
(601)
44,518
214,472
72,969
(20,254)
52,715
(142)
-
52,573
(1,948)
50,625
-
-
(145)
(1,242)
-
-
45,009
(796)
(3,348)
39,478
Total
$’000
584,856
1,174
(54,958)
(53,784)
(12,191)
86
(65,889)
3,332
(62,557)
(88,747)
(783)
(145)
(13,888)
(4,139)
(5,389)
45,009
(796)
(3,798)
(72,676)
-
-
-
-
(2,739)
-
-
-
17
(2,722)
-
(450)
(112,154)
The income tax benefit above includes the following specific item:
Tax impact of specific items listed above
4,899
1,542
731
7,172
478
(2)
(116)
360
7,532
Total assets
Acquisitions of property, plant and equipment and intangible assets
473,695
158,892
203,349
17,360
19,168
604
696,212
176,856
156,725
121,276
-
278,001
33,946
8,033
3,039
45,018
974,213
221,874
Ardent Leisure Group | Annual Report 2018 47
Notes to the Financial Statements
for the year ended 26 June 2018
2.
Segment information (continued)
Business segment
ALL Group - 1 July 2017 to 26 June 2018
Segment revenue
Segment EBITDA
Depreciation and amortisation
Segment EBIT
Borrowing costs
Interest income
Net (loss)/profit before tax
Income tax benefit
Net (loss)/profit after tax
Main Event
$’000
Theme Parks
$’000
Corporate
$’000
355,571
13,467
(33,210)
(19,743)
66,822
(19,547)
(2,788)
(22,335)
-
(14,044)
(1,144)
(15,188)
The segment EBITDA above includes the following specific items:
Valuation loss - property, plant and equipment and investments
held at fair value
Impairment of intangible assets including goodwill
Impairment of property, plant and equipment
Pre-opening expenses
Dreamworld incident costs, net of insurance recoveries
Restructuring and other non-recurring items
Gain on sale of discontinued operations
Selling costs associated with discontinued operation classified as
held for sale
Loss on disposal of assets and sale and leaseback of Main Event Centre
The income tax benefit above includes the following specific items:
Restatement of deferred tax balances to reflect US tax reforms
Tax impact of specific items listed above
Total assets
Acquisitions of property, plant and equipment and intangible assets
48 Ardent Leisure Group | Annual Report 2018
-
-
(38,287)
(5,900)
-
(7,405)
-
-
(654)
(52,246)
12,230
14,629
28,859
462,032
83,990
-
(3,583)
-
-
(6,158)
-
-
-
(58)
(9,799)
-
1,865
1,865
27,724
6,537
(390)
(1,188)
-
-
-
(1,849)
-
-
(66)
(3,493)
-
1,048
1,048
28,538
1,128
422,393
(20,124)
(37,142)
(57,266)
(13,551)
48
(70,769)
29,897
(40,872)
(390)
(4,771)
(38,287)
(5,900)
(6,158)
(9,254)
-
-
(778)
(65,538)
12,230
17,542
29,772
518,294
91,655
Continuing
operations
$’000
Bowling &
Entertainment
$’000
Marinas
$’000
Health Clubs
$’000
Discontinued
operations
$’000
122,408
12,579
(7,359)
5,220
2,653
20,108
-
20,108
-
(119)
-
(119)
125,061
32,568
(7,359)
25,209
(138)
-
25,071
201
25,272
Total
$’000
547,454
12,444
(44,501)
(32,057)
(13,689)
48
(45,698)
30,098
(15,600)
(390)
(4,771)
(38,287)
(6,471)
(6,158)
(9,254)
26,799
-
-
-
(571)
-
-
6,772
-
(351)
5,850
-
410
410
76
18,734
-
-
-
-
-
-
20,027
-
-
20,027
-
89
89
-
-
-
-
-
-
-
-
-
-
-
-
(571)
-
-
26,799
(120)
-
(120)
(120)
(351)
25,757
(120)
(1,129)
(39,781)
-
-
-
-
-
-
499
499
76
18,734
12,230
18,041
30,271
518,370
110,389
Notes to the Financial Statements
for the year ended 26 June 2018
2.
Segment information (continued)
Business segment
ALL Group - 1 July 2016 to 30 June 2017
Segment revenue
Segment EBITDA
Depreciation and amortisation
Segment EBIT
Borrowing costs
Interest income
Net (loss)/profit before tax
Income tax benefit/(expense)
Net (loss)/profit after tax
The segment EBITDA above includes the following specific items:
Impairment of goodwill
Pre-opening expenses
Restructuring and other non-recurring items
Dreamworld incident costs, net of insurance recoveries
Gain on sale of discontinued operations
Selling costs associated with discontinued operation classified as
held for sale
Loss on disposal of assets
The income tax benefit/(expense) above includes the
following specific item:
Tax impact of specific items listed above
Main Event
$’000
Theme Parks
$’000
Corporate
$’000
Continuing
operations
$’000
Bowling &
Entertainment
$’000
Marinas Health Clubs
$’000
$’000
Discontinued
operations
$’000
299,450
45,812
(24,559)
21,253
70,934
(12,653)
(1,916)
(14,569)
-
(16,904)
(1,230)
(18,134)
-
(12,646)
(1,400)
-
-
-
(362)
(14,408)
(783)
-
-
(5,042)
-
-
(98)
(5,923)
-
-
(2,739)
-
-
-
17
(2,722)
370,384
16,255
(27,705)
(11,450)
(9,348)
77
(20,721)
5,416
(15,305)
(783)
(12,646)
(4,139)
(5,042)
-
-
(443)
(22,270)
127,664
4,930
(4,941)
(11)
24,131
3
-
3
62,677
25,183
(3,728)
21,455
-
(1,242)
-
-
-
-
(346)
(1,588)
-
-
-
-
-
(944)
7
(937)
-
-
117
-
18,340
-
-
18,457
214,472
30,116
(8,669)
21,447
(854)
-
20,593
(2,224)
18,369
-
(1,242)
117
-
18,340
(944)
(339)
15,932
Total
$’000
584,856
46,371
(36,374)
9,997
(10,202)
77
(128)
3,192
3,064
(783)
(13,888)
(4,022)
(5,042)
18,340
(944)
(782)
(6,338)
4,899
80
2,383
7,362
478
(2)
(116)
360
7,721
Total assets
Acquisition of property, plant and equipment and intangible assets
473,771
158,892
26,154
4,771
17,536
604
517,461
164,267
71,435
26,809
3,799
605
-
2,194
75,234
29,608
592,695
193,875
Ardent Leisure Group | Annual Report 2018 49
Notes to the Financial Statements
For the year ended 26 June 2018
Revenue from operating activities
Revenue from services
Revenue from sale of goods
Revenue from operating activities
Other expenses
Audit fees
Consulting fees
Consumables
Electricity
Insurance
Legal fees
Merchant fees
Printing, stationery and postage
Taxation fees
Telecommunications
Travel costs
Other administrative costs
Other
Borrowing costs
Borrowing costs paid or payable
Less: capitalised borrowing costs
Borrowing costs expensed
50 Ardent Leisure Group | Annual Report 2018
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2018
$’000
268,068
154,325
422,393
2017
$’000
231,577
138,807
370,384
2018
$’000
268,068
154,325
422,393
2017
$’000
231,577
138,807
370,384
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2018
$’000
708
6,834
2,093
11,177
5,771
1,064
6,431
1,877
626
3,373
3,564
4,204
5,750
53,472
2017
$’000
823
3,944
2,495
9,029
3,156
989
5,512
1,741
341
2,807
3,273
3,529
1,489
39,128
2018
$’000
526
6,834
2,093
11,177
5,771
1,064
6,431
1,877
547
3,373
3,564
4,096
5,415
52,768
2017
$’000
597
3,944
2,495
9,029
3,156
989
5,512
1,741
244
2,807
3,273
3,414
1,463
38,664
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2018
$’000
10,747
(408)
10,339
2017
$’000
12,787
(738)
12,049
2018
$’000
13,922
(371)
13,551
2017
$’000
9,839
(491)
9,348
Notes to the Financial Statements
for the year ended 26 June 2018
Income tax benefit
(a)
Income tax benefit
Current tax
Deferred tax
Under/(over) provided in prior year
Income tax benefit is attributable to:
Loss from continuing operations
Profit/(loss) from discontinued operations
Deferred income tax (benefit)/expense included in
income tax expense comprises:
Increase in deferred tax assets
(Decrease)/increase in deferred tax liabilities
Note
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2018
$’000
1,145
(31,228)
692
(29,391)
2017
$’000
802
(4,261)
127
(3,332)
2018
$’000
438
(31,228)
692
(30,098)
(29,522)
131
(29,391)
(5,280)
1,948
(3,332)
(29,897)
(201)
(30,098)
2017
$’000
666
(4,261)
403
(3,192)
(5,416)
2,224
(3,192)
7
7
(11,001)
(20,227)
(31,228)
(23,651)
19,390
(4,261)
(11,001)
(20,227)
(31,228)
(23,651)
19,390
(4,261)
(b)
Numerical reconciliation of income tax expense/(benefit) to prima facie tax (benefit)/expense
Loss from continuing operations before income tax benefit
Profit from discontinued operations before income tax
expense
Less: Loss/(profit) from the trusts(1)
Prima facie (loss)/profit
(148,336)
(118,462)
(70,769)
(20,721)
28,255
(120,081)
69,223
(50,858)
52,573
(65,889)
71,113
5,224
25,071
(45,698)
-
(45,698)
Tax at the Australian tax rate of 30% (2017: 30%)
(15,257)
1,567
(13,709)
Tax effects of amounts which are not deductible/(taxable) in
calculating taxable income:
Impairment of goodwill
Entertainment
Non-deductible depreciation and amortisation
Non-deductible interest due to thin capitalisation
Sundry items
Employee security-based payments
Business acquisition costs
Gain on disposal of businesses
Selling costs associated with discontinued operation
classified as held for sale
Deferred tax benefit arising from US tax reforms
Foreign exchange conversion differences
US State taxes
Withholding tax
Research and development and other credits
Difference in overseas tax rates
Under provided in prior year
Income tax benefit
1,075
236
2,008
719
959
(155)
(382)
(7,424)
-
(12,230)
265
(348)
375
(514)
590
692
(29,391)
235
134
2,731
-
(210)
270
-
(9,923)
240
-
45
878
136
(338)
776
127
(3,332)
1,075
236
-
719
801
131
(382)
(7,424)
-
(12,230)
265
(348)
-
(514)
590
692
(30,098)
20,593
(128)
-
(128)
(38)
235
134
-
-
(286)
270
-
(5,511)
240
-
45
878
-
(338)
776
403
(3,192)
(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.
Ardent Leisure Group | Annual Report 2018 51
Notes to the Financial Statements
for the year ended 26 June 2018
6.
(c)
Income tax benefit (continued)
Income tax (benefit)/expense relating to items of other comprehensive income
Unrealised gain/(loss) on derivative financial instruments
recognised in the cash flow hedge reserve
7, 23
Consolidated
Group
2018
$’000
Consolidated
Group
2017
$’000
ALL Group
2018
$’000
ALL Group
2017
$’000
(68)
(68)
562
562
(68)
(68)
562
562
(d)
Unrecognised temporary differences
There were no unrecognised temporary differences as at 26 June 2018 (2017: 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 37(s).
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.
52 Ardent Leisure Group | Annual Report 2018
Notes to the Financial Statements
for the year ended 26 June 2018
Deferred tax assets and liabilities
(a)
Deferred tax assets
The balance comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Doubtful debts
Employee benefits
Provisions and accruals
Inventory diminution
Deferred income
Unrealised foreign exchange losses
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
Foreign exchange differences
Credited to the Income Statement (refer to Note 6)
Reclassified as assets held for sale (refer to Note 27(d))
(Debited)/credited to cash flow hedge reserve (refer to Note 23)
Disposal of businesses
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2018
$’000
2017
$’000
2018
$’000
2017
$’000
14
4,014
2,045
93
963
-
7,130
30,048
22
42
5,415
1,613
100
124
15
8,718
18,231
17
14
4,014
2,045
93
963
-
7,130
30,048
22
42
5,415
1,613
100
124
15
8,718
18,231
17
44,329
34,275
44,329
34,275
(1,356)
(22,207)
20,766
(1,146)
(21,580)
11,549
(1,356)
(22,207)
20,766
(1,146)
(21,580)
11,549
34,275
802
11,001
-
-
(1,749)
16,224
(248)
23,651
-
(562)
(4,790)
34,275
802
11,001
-
-
(1,749)
16,224
(248)
23,651
-
(562)
(4,790)
Balance at the end of the year
44,329
34,275
44,329
34,275
Deferred tax assets to be recovered within 12 months
Deferred tax assets to be recovered after more than 12 months
6,635
37,694
6,733
27,542
6,635
37,694
44,329
34,275
44,329
6,733
27,542
34,275
(b)
Tax losses
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit at 30%
9,261
2,778
32,952
9,886
Consolidated
Group
2018
$’000
Consolidated
Group
2017
$’000
ALL Group
2018
$’000
9,261
2,778
ALL Group
2017
$’000
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. During the current year, these capital losses were partially utilised to offset capital gains occurring on
disposal of the Marinas and Bowling & Entertainment businesses. See Note 37(s) for information about recognised tax losses.
Ardent Leisure Group | Annual Report 2018 53
Notes to the Financial Statements
for the year ended 26 June 2018
7.
(c)
Deferred tax assets and liabilities (continued)
Deferred tax liabilities
The balance comprises temporary differences attributable to:
Amounts recognised in profit or loss:
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
Foreign exchange differences
Charged to the Income Statement (refer to Note 6)
Disposal of businesses
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
2018
$’000
Consolidated
Group
2017
$’000
ALL Group
2018
$’000
ALL Group
2017
$’000
458
2,093
38,103
40,654
530
143
58,849
59,522
458
2,093
38,103
40,654
530
143
58,849
59,522
(1,356)
(22,207)
17,091
(1,146)
(21,580)
36,796
(1,356)
(22,207)
17,091
(1,146)
(21,580)
36,796
59,522
2,175
(20,227)
(816)
40,654
2,550
38,104
40,654
43,765
(1,408)
19,390
(2,225)
59,522
633
58,889
59,522
59,522
2,175
(20,227)
(816)
40,654
2,550
38,104
40,654
43,765
(1,408)
19,390
(2,225)
59,522
633
58,889
59,522
54 Ardent Leisure Group | Annual Report 2018
Notes to the Financial Statements
for the year ended 26 June 2018
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
Impairment of goodwill
Impairment of other intangibles
Impairment/(reversal) of property, plant and equipment
Security-based payments
Write-off of doubtful debts
Inventory provision (decrease)/increase
Increase/(decrease) in onerous lease provisions
Loss on sale of property, plant and equipment
Loss on closure of Bowling and Entertainment Centres
Valuation losses on property, plant and equipment
Write-off of New Zealand tax losses
Valuation losses on investment held at fair value
Classified as financing activities
Borrowing costs
Classified as investing activities
Unrealised net (gain)/loss on derivative financial instruments
Gain on the sale of Bowling and Entertainment before selling costs
Gain on the sale of Marinas before selling costs
Gain on the sale of Health Clubs before selling costs
Loss on sale and leaseback of US Entertainment Centres
Dividend income
Changes in asset and liabilities:
(Increase)/decrease in assets:
Receivables
Inventories
Deferred tax assets
Construction in progress inventories
Other assets
Increase/(decrease) in liabilities:
Payables and other liabilities
Provisions
Payable to the Trust
Construction in progress deposits
Current tax liabilities
Deferred tax liabilities
Net cash flows from operating activities
(b)
Non-cash financing and investing activities
Consolidated
Group
2018
$’000
Consolidated
Group
2017
$’000
ALL Group
2018
$’000
ALL Group
2017
$’000
(90,690)
(62,557)
(15,600)
3,064
52,546
3,363
3,583
1,188
39,287
228
424
(2)
-
1,427
-
75,031
332
390
51,324
3,633
783
-
145
3,511
438
96
492
3,328
470
88,747
-
-
41,138
3,363
3,583
1,188
38,287
1,180
424
(2)
-
422
-
-
-
390
33,648
3,633
783
-
(117)
3,421
438
96
(206)
1,083
4
-
-
-
10,404
12,191
13,689
10,204
(881)
(25,268)
(6,434)
-
706
-
(10,931)
1,019
(10,929)
33,216
(2,413)
29,823
219
-
(28,317)
(528)
(19,711)
57,082
349
-
-
(51,230)
-
-
2,972
(1,905)
(8,068)
5,315
1,171
22,347
(702)
-
(5,862)
451
4,738
72,177
(692)
(11,563)
(20,440)
-
706
(21)
(13,544)
1,019
(10,929)
33,216
(2,460)
22,089
48
3,526
(28,317)
(528)
(19,711)
40,461
-
-
-
(23,776)
-
-
2,972
(1,905)
(8,068)
5,315
1,168
7,988
538
551
(5,862)
429
4,738
40,139
Consolidated
Group
2018
$’000
Consolidated
Group
2017
$’000
ALL Group
2018
$’000
ALL Group
2017
$’000
The following item is 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
18(a)
2,987
9,285
994
2,619
Ardent Leisure Group | Annual Report 2018 55
Notes to the Financial Statements
for the year ended 26 June 2018
Receivables
Trade receivables
Receivable from the Trust
Provision for doubtful debts
Consolidated
Group
2018
$’000
Consolidated
Group
2017
$’000
ALL Group
2018
$’000
ALL Group
2017
$’000
12,080
-
(48)
12,032
5,461
-
(94)
5,367
12,080
2,613
(48)
14,645
5,461
-
(94)
5,367
The Group has recognised an expense of $424,425 in respect of bad and doubtful trade receivables during the year ended 26 June 2018
(30 June 2017: $437,797). The expense has been included in other expenses in the Income Statement.
Refer to Note 28(e) for information on the Group’s management of, and exposure to, credit risk.
Inventories
Goods held for resale
Provision for diminution
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2018
$’000
8,294
(114)
8,180
2017
$’000
13,372
(116)
13,256
2018
$’000
8,294
(114)
8,180
2017
$’000
13,372
(116)
13,256
There was no expense relating to the write-downs of inventories during the year ended 26 June 2018 (30 June 2017: $0.1 million).
Property, plant and equipment
Segment
Note
Cost less
accumulated
depreciation &
impairments
2018
$’000
Cumulative
revaluation
(decrements)
/increments
2018
$’000
Consolidated
book
value
2018
$’000
Cost less
accumulated
depreciation
2017
$’000
(1) (2) (3)
Theme Parks
Bowling and Entertainment
Main Event
Other
Total
226,318
-
339,918
2,106
568,342
(112,674)
-
-
-
(112,674)
113,644
-
339,918
2,106
455,668
223,361
119,712
327,445
1,653
672,171
Cumulative
revaluation
(decrements)/
increments
2017
$’000
(36,922)
1,191
-
-
(35,731)
Consolidated
book value
2017
$’000
186,439
120,903
327,445
1,653
636,440
(1) The book value of Dreamworld and WhiteWater World land and buildings and major rides and attractions (including intangible assets of $0.8 million (30
June 2017: $1.2 million) and livestock of $0.2 million (30 June 2017: $0.3 million) is $78.5 million (30 June 2017: $151.8 million). Having regard to
independent advice at 26 June 2018 by Jones Lang LaSalle, the fair value of these assets was assessed to be $79.5 million (30 June 2017: $146.0 - $154.0
million). After applying a $1.0 million impairment, the Directors have assessed fair value of those assets to be $78.5 million. Refer to additional Theme Parks
valuation information below.
(2) The excess land adjacent to Dreamworld has been valued by the Directors at $3.6 million (30 June 2017: $3.6 million).
(3) The book value of SkyPoint (including intangible assets of $Nil (30 June 2017: $3.6 million) is $32.3 million (30 June 2017: $36.0 million). In an independent
valuation performed at 26 June 2018 by Jones Lang LaSalle, the fair value for SkyPoint was assessed to be $32.0 million. The Directors have assessed the fair
value of SkyPoint at 26 June 2018 to be $32.3 million.
56 Ardent Leisure Group | Annual Report 2018
Notes to the Financial Statements
for the year ended 26 June 2018
11. Property, plant and equipment (continued)
Refer to Note 29(b) 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:
Total
$’000
636,440
112,052
(127,171)
(11,033)
(52,519)
12,939
(75,753)
(39,287)
455,668
Total
$’000
683,759
191,111
(82,131)
-
(400)
(4,177)
(51,299)
(10,316)
(89,962)
(145)
Consolidated Group - 2018
Carrying amount at the beginning of the year
Additions
Disposal relating to the sale of Bowling and
Entertainment
Disposals
Depreciation
Foreign exchange movements
Revaluation decrements
Impairment
Land and
buildings
$’000
283,107
64,734
(51,908)
(2,851)
(10,059)
7,338
(75,753)
(31,364)
Major rides
and
attractions
$’000
Plant and
equipment
$’000
Furniture,
fittings and
equipment
$’000
Motor
vehicles
$’000
64,108
3,074
-
(551)
(1,019)
-
-
-
279,664
41,278
(69,447)
(7,489)
(39,342)
5,602
-
(7,923)
9,210
2,911
(5,816)
(132)
(2,044)
(1)
-
-
4,128
351
55
-
(10)
(55)
-
-
-
341
Carrying amount at the end of the year
183,244
65,612
202,343
Land and
buildings
$’000
Major rides
and
attractions
Plant and
equipment
Furniture,
fittings and
equipment
$’000
$’000
$’000
Motor
vehicles
$’000
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
290
150
(21)
-
-
(17)
(51)
-
-
-
351
636,440
ALL Group - 2018
Carrying amount at the beginning of the year
Additions
Disposal relating to the sale of Bowling and Entertainment
Disposals
Depreciation
Foreign exchange movements
Impairment
Carrying amount at the end of the year
Land and
buildings
$’000
Plant and
equipment
$’000
139,208
63,407
(12,326)
(2,784)
(3,279)
7,346
(30,364)
161,208
235,379
41,218
(35,098)
(6,886)
(37,832)
5,618
(7,923)
194,476
Total
$’000
374,587
104,625
(47,424)
(9,670)
(41,111)
12,964
(38,287)
355,684
Ardent Leisure Group | Annual Report 2018 57
Notes to the Financial Statements
for the year ended 26 June 2018
11. Property, plant and equipment (continued)
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
(a)
Theme Parks valuation
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)
-
Total
$’000
287,061
170,940
(38,070)
(400)
(1,183)
(33,623)
(10,255)
117
139,208
235,379
374,587
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.
The impact of the incident, subsequent closure of the parks and progressive reopening of rides, has negatively impacted attendance
and revenues in the current and prior years and recovery has been slower than expected. As a result, in the current year, the Group has
recognised a revaluation decrement to the property, plant and equipment of Dreamworld and WhiteWater World of $75.0 million and
a further impairment provision of $1.0 million.
At 26 June 2018, the valuation of Dreamworld and WhiteWater World has been determined in accordance with AASB 13 Fair Value
Measurement, which defines fair value as the price that would be received to sell an asset in an orderly transaction between market
participants. This Standard requires that the valuation take account of the benefits attainable under the highest and best use, provided
that any alternate uses are physically possible, legally permissible and financially feasible. Under the Standard, uses that are legally
permissible take into account any legal restrictions on the use of the asset that market participants would take into account when pricing
the asset (e.g. the zoning restrictions applicable to a property).
At 26 June 2018, the Group has engaged independent valuation specialists from Jones Lang LaSalle to undertake a valuation assessment
of the property. The valuer has considered the work undertaken in the prior year (as set out in the annual financial report for the year
ended 30 June 2017) and reviewed management’s updated forecasts in light of the park’s performance and market conditions.
The significant unobservable inputs associated with the valuation of the Dreamworld and WhiteWater World valuation are as follows:
Capitalisation rate
Discount rate
Terminal yield
Year 1-3 Average Annual EBITDA ($’000)
Year 1-3 Average Annual Capital Expenditure ($’000)
June
2018
11.50%
June
2017
12.25%
14.00% - 14.50% 14.75% - 15.25%
11.50% - 12.00% 12.25% - 12.75%
19,055
8,089
9,083
13,237
In addition, the valuer has assumed a gradual recovery of attendances to FY16 (pre-incident) levels over the next eight years, with FY19
attendances estimated to be approximately 74% of FY16 levels.
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.
58 Ardent Leisure Group | Annual Report 2018
Notes to the Financial Statements
for the year ended 26 June 2018
11.
(a)
Property, plant and equipment (continued)
Theme Parks valuation (continued)
Following the revaluation decrement and impairment write down noted above, the carrying value of the parks is $78.5 million.
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 (%)
- $4.1 million
Discount rate
(%)
- $3.8 million
Terminal Yield
(%)
- $2.1 million
Attendance
levels
N/A
Fair value measurement sensitivity to 0.5% decrease in rate
+ $4.5 million
+ $4.0 million
+ $2.3 million
N/A
Fair value measurement sensitivity to 10.0% increase in
assumed attendance levels
Fair value measurement sensitivity to 10.0% decrease in
assumed attendance levels
N/A
N/A
N/A
N/A
N/A
+ $41.9 million
N/A
- $18.5 million(1)
(1) A 10% decrease in attendance levels would result in the fair value declining to the stand alone land valuation of $60.0 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
Other intangible assets at cost
Accumulated amortisation and impairment
Goodwill at cost
Accumulated impairment
Total intangible assets
Consolidated
Group
2018
Consolidated
Group
2017
ALL Group
2018
$’000
$’000
$’000
ALL Group
2017
$’000
20,950
(7,116)
13,834
69,321
(12,880)
56,441
70,275
21,364
(7,748)
13,616
95,452
(12,481)
82,971
96,587
20,950
(7,116)
13,834
69,321
(12,880)
56,441
70,275
19,936
(6,320)
13,616
95,452
(12,481)
82,971
96,587
Ardent Leisure Group | Annual Report 2018 59
Notes to the Financial Statements
for the year ended 26 June 2018
12.
Intangible assets (continued)
Other intangible assets
Opening net book amount
Additions
Transfer from property, plant and equipment
Disposals
Impairment
Amortisation
Foreign exchange movements
Closing net book amount
Goodwill
Opening net book amount
Disposals
Impairment
Foreign exchange movements
Closing net book amount
Total intangible assets
(a)
Other intangible assets
Consolidated
Group
2018
$’000
Consolidated
Group
2017
$’000
ALL Group
2018
$’000
ALL Group
2017
$’000
13,616
5,764
-
(1,391)
(1,188)
(3,363)
396
13,834
82,971
(24,787)
(3,583)
1,840
56,441
70,275
10,179
8,530
400
(2,640)
-
(2,724)
(129)
13,616
228,033
(142,432)
(783)
(1,847)
82,971
96,587
13,616
5,764
-
(1,391)
(1,188)
(3,363)
396
13,834
82,971
(24,787)
(3,583)
1,840
56,441
70,275
10,179
8,530
400
(2,640)
-
(2,724)
(129)
13,616
228,033
(142,432)
(783)
(1,847)
82,971
96,587
Other intangible assets represent registered trademarks associated with Dreamworld operations, intellectual property associated with
liquor licences held by the bowling centres and software used by the Group.
(b)
Goodwill
Goodwill represents goodwill acquired by the Group as part of various acquisitions. The movement in goodwill at cost in the year is due
to the disposal of the Bowling and Entertainment business (refer to Note 27), an impairment of goodwill in the Theme Parks business
and the movement in the USD:AUD foreign exchange rate.
Goodwill is monitored by management at the operating segment level. Management reviews the business performance based on
geography and type of business as disclosed in Note 2.
A segment level summary of the goodwill allocation is presented below:
Consolidated Group and ALL Group
2018
Main Event
2017
Theme Parks
Bowling and Entertainment
Main Event
60 Ardent Leisure Group | Annual Report 2018
New Zealand
$’000
Australia
$’000
United States
$’000
-
-
-
-
56,441
56,441
New Zealand
$’000
Australia
$’000
United States
$’000
-
3,734
-
3,734
3,583
21,127
-
24,710
-
-
54,527
54,527
Total
$’000
56,441
56,441
Total
$’000
3,583
24,861
54,527
82,971
Notes to the Financial Statements
for the year ended 26 June 2018
12.
(b)
(i)
Intangible assets (continued)
Goodwill (continued)
Impairment tests for goodwill
Goodwill is allocated to the Group’s cash-generating units (CGUs) identified according to business segment and country of operation.
Key assumptions used for value in use calculations
The table below shows the key assumptions used in the value in use calculations to test for impairment in the business segments to
which a significant amount of goodwill was allocated:
Budget/forecast
EBITDA period growth rate
Long term EBITDA
growth rate(1)
Post-tax discount rate(2)
2018
2017
% per annum % per annum % per annum % per annum % per annum % per annum
2017
2017
2018
2018
Main Event
2.00
3.00
2.00
3.00
7.50
6.89
(1) Average growth rate used to extrapolate cash flows beyond the budget/forecast period.
(2) In performing the value in use calculation, the Group has applied a post-tax discount rate to discount the forecast future attributable post-tax cash flows. The
pre-tax discount rate is 7.68% (2017: 8.69%) for US Entertainment Centres.
The period over which management has projected the CGU cash flows is 5 years. 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
country in which it operates.
The recoverable amount of a CGU is determined based on value in use calculations. These calculations use cash flow projections based
on the 2019-2023 financial year budgets/forecasts. Cash flows beyond the budget period are extrapolated using the growth rates stated
above. The growth rate does not exceed the long-term average growth rate for the business in which the CGU operates.
Sensitivity to changes in assumptions
Management recognises that the calculation of recoverable amount can vary based on the assumptions used to project or discount
cash flows and those changes to key assumptions can result in recoverable amounts falling below carrying amounts.
In relation to the CGUs above, the recoverable amounts of US Entertainment Centres are 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 key assumptions would cause
the CGUs’ carrying amount to exceed their recoverable amount to be reasonably possible.
Property classified as held for sale
US Entertainment Centre
Opening balance
Additions
Foreign exchange movements
Disposals
Closing balance
Consolidated
Group
2018
$’000
Consolidated
Group
2017
$’000
ALL Group
2018
$’000
ALL Group
2017
$’000
-
-
13,840
13,840
-
-
13,840
13,840
Consolidated
Group
2018
$’000
Consolidated
Group
2017
$’000
13,840
-
(551)
(13,289)
-
-
14,200
(360)
-
13,840
ALL Group
2018
$’000
ALL Group
2017
$’000
13,840
-
(551)
(13,289)
-
14,200
(360)
-
-
13,840
The property classified as held for sale relates to a US Entertainment Centre at Pittsburgh, which was disposed in the year under a
sale and leaseback arrangement. Completion of the sale occurred on 26 July 2017.
Ardent Leisure Group | Annual Report 2018 61
Notes to the Financial Statements
for the year ended 26 June 2018
Construction in progress
Construction in progress inventories relate to Main Event 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 26 June 2018, the Group had agreements for construction of three Main Event Centres. 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 26 June 2018, construction on two of these
centres was complete, with the remaining centre 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
2018
$’000
2017
$’000
2018
$’000
2017
$’000
56,756
11,352
(44,568)
699
24,239
61,796
58,670
(63,985)
275
56,756
56,756
11,352
(44,568)
699
24,239
61,796
58,670
(63,985)
275
56,756
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:
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2018
$’000
2017
$’000
2018
$’000
50,050
16,251
(44,568)
664
22,397
55,494
58,123
(63,985)
418
50,050
50,050
16,251
(44,568)
664
22,397
2017
$’000
55,494
58,123
(63,985)
418
50,050
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2018
$’000
6,707
2,918
9,625
2017
$’000
4,404
685
5,089
2018
$’000
3,693
2,918
6,611
2017
$’000
3,782
685
4,467
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
62 Ardent Leisure Group | Annual Report 2018
Notes to the Financial Statements
for the year ended 26 June 2018
Derivative financial instruments
Current assets
Interest rate swaps
Non-current assets
Interest rate swaps
Current liabilities
Forward foreign exchange contracts
Interest rate swaps
Non-current liabilities
Interest rate swaps
Consolidated
Group
2018
$’000
Consolidated
Group
2017
$’000
ALL Group
2018
$’000
ALL Group
2017
$’000
748
748
-
-
-
-
-
28
28
-
-
272
272
41
964
1,005
316
316
748
748
-
-
-
-
-
-
-
-
-
196
196
-
-
-
29
29
(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$0.4
million (30 June 2017: A$1.4 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 $8.0 million (30 June 2017: $70.0 million) and US$48.0 million
(A$64.7 million) ((30 June 2017: US$55.0 million (A$70.0 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 interest rate swap agreements do not qualify for hedge accounting. Accordingly, changes in fair value of these swaps are recorded
in the Income Statement. Previous amounts accumulated in equity relating to contracts deemed to have been effective hedges in prior
periods have been recycled in the Income Statement in the current year. Notwithstanding the accounting outcome, the Manager
considers that these derivative contracts are appropriate and effective in offsetting the economic interest rate exposures of the Group
and the ALL Group.
The table below shows the maturity profile of the interest rate swaps:
Less than 1 year
1 - 2 years
2 - 3 years
Consolidated
Group
2018
$’000
Consolidated
Group
2017
$’000
ALL Group
2018
$’000
ALL Group
2017
$’000
64,725
-
8,000
70,000
141,503
-
72,725
211,503
64,725
-
-
64,725
-
71,503
-
71,503
Ardent Leisure Group | Annual Report 2018 63
Notes to the Financial Statements
for the year ended 26 June 2018
Payables
Consolidated
Group
2018
$’000
Consolidated
Group
2017
$’000
ALL Group
2018
$’000
ALL Group
2017
$’000
Interest 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
154
10,229
-
446
-
16,662
10,783
2,885
31,952
5,311
4,639
18,656
538
14,089
-
1,094
105
16,232
4,726
9,327
23,576
3,935
15,811
13,527
147
10,229
-
-
1,144
16,662
10,783
2,885
31,952
5,311
4,639
18,241
Total payables
101,717
102,960
101,993
369
14,089
602
-
1,542
16,232
4,726
2,154
23,576
3,935
15,811
13,335
96,371
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
2018
$’000
-
14,088
(11,101)
(2,987)
-
2017
$’000
-
34,849
(25,564)
(9,285)
-
2018
$’000
-
-
994
(994)
-
2017
$’000
-
-
2,619
(2,619)
-
A provision for the distribution relating to the half year to 26 June 2018 was not recognised as the distribution had not been declared at
the reporting date. Refer to Note 39.
64 Ardent Leisure Group | Annual Report 2018
Notes to the Financial Statements
for the year ended 26 June 2018
Provisions (continued)
(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
Amounts disposed
Carrying amount at the end of the year
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2018
$’000
2017
$’000
2018
$’000
1,527
168
1,695
731
-
1,920
2,651
4,346
342
408
(429)
(153)
168
2,631
342
2,973
1,009
580
6,006
7,595
10,568
158
483
(299)
-
342
1,527
168
1,695
731
-
1,920
2,651
4,346
342
408
(429)
(153)
168
2017
$’000
2,631
342
2,973
1,009
-
1,754
2,763
5,736
158
483
(299)
-
342
(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.
Ardent Leisure Group | Annual Report 2018 65
Notes to the Financial Statements
for the year ended 26 June 2018
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:
2018 dividends and distributions for the half year ended:
26 December 2017
26 June 2018(1)
2017 dividends and distributions for the half year ended:
31 December 2016
30 June 2017(2)
Dividend Distribution
cents per
cents per
stapled
stapled
security
security
Total
amount
$’000
Distribution
tax
deferred
%
Distribution
CGT
concession Distribution
Taxable
%
amount
%
-
-
-
-
-
-
2.00
6.50
8.50
2.00
1.00
3.00
9,397
30,637
40,034
9,382
4,691
14,073
-
-
46.68
53.32
46.29
53.71
(1) The distribution of 6.50 cents per stapled security for the half year ended 26 June 2018 was not declared prior to 26 June 2018. Refer to Note 39.
(2) The distribution of 1.00 cents per stapled security for the half year ended 30 June 2017 was not declared prior to 30 June 2017.
(b)
ALL Group
No dividends were paid by the ALL Group during the year (2017: nil).
(c)
Franking credits
The tax consolidated group has franking credits of $1,501,307 (30 June 2017: $1,501,307). It is the tax consolidated group’s intention to
distribute these franking credits to security holders where possible.
(Losses)/earnings per security/share
Consolidated
Group
2018
Consolidated
Group
2017
ALL Group
2018
ALL Group
2017
(25.31)
(24.19)
(8.71)
(3.28)
5.99
(19.32)
10.82
(13.37)
5.39
(3.32)
3.93
0.65
(25.31)
(24.19)
(8.71)
(3.28)
5.98
(19.33)
10.80
(13.39)
5.37
(3.34)
3.92
0.64
(90,690)
(62,557)
(15,600)
3,064
469,496
467,938
469,496
467,938
692
997
692
997
470,188
468,935
470,188
468,935
Basic losses per security/share (cents) from continuing operations
Basic earnings per security/share (cents) from discontinued
operations
Total basic (losses)/earnings per security/share (cents)
Diluted losses per security/share (cents) from continuing
operations
Diluted earnings per security/share (cents) from discontinued
operations
Total diluted (losses)/earnings per security/share (cents)
(Losses)/earnings used in the calculation of basic and diluted
earnings per security/share ($'000)
Weighted average number of stapled securities on issue used in
the calculation of earnings per security/share ('000)
Weighted average number of stapled securities held by ALL
employees under employee share plans (refer to Note 33) ('000)
Weighted average number of stapled securities on issue used in
the calculation of diluted earnings per security/share ('000)
66 Ardent Leisure Group | Annual Report 2018
Notes to the Financial Statements
for the year ended 26 June 2018
Contributed equity
No. of
securities/shares
Details
Date of
income
entitlement
Note
Consolidated
Group
2018
$’000
Consolidated
Group
2017
$’000
ALL Group
2018
$’000
ALL Group
2017
$’000
463,039,616
4,812,776
Securities/shares on issue
DRP issue
30 Jun 2016
1 Jul 2016
(a)
1,300,892
-
469,153,284
1,510,100
681,149
-
Security-based payments -
securities/shares issued
Issue costs paid
Securities/shares on issue
DRP issue
Security-based payments -
securities/shares issued
Issue costs paid
1 Jul 2016
(b)
30 Jun 2017
1 Jul 2017
(a)
1 Jul 2017
(b)
662,450
2,987
1,313
(19)
649,720
9,285
3,483
(38)
662,450
170,699
994
437
(6)
167,100
2,619
991
(11)
170,699
471,344,533
Securities/shares on issue 26 Jun 2018
666,731
662,450
172,124
170,699
(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 be in operation for the distribution for the half year ended 26 June 2018 and was in
operation for the distribution for the half year ended 26 December 2017.
(b)
Security-based payments
The Group has Deferred Short Term Incentive Plan (DSTI) and Long Term Incentive Plan (LTIP) 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 33. Upon vesting, the Group issues stapled
securities to these personnel.
Other equity
Treasury securities
Closing balance
Consolidated
Group
2018
Consolidated
Group
2017
ALL Group
2018
ALL Group
2017
$’000
1,405
1,405
$’000
1,662
1,662
$’000
1,405
1,405
$’000
1,662
1,662
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
Issuance of securities by the Ardent Leisure Employee Share Trust
Closing balance
799,334
-
(149,376)
649,958
-
799,334
-
799,334
1,662
-
(257)
1,405
No. of securities
2018
2017
$'000
2018
2017
-
1,662
-
1,662
Ardent Leisure Group | Annual Report 2018 67
Notes to the Financial Statements
for the year ended 26 June 2018
Reserves
Asset revaluation reserve
Opening balance
Revaluation - Australian Theme Parks
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
2018
$’000
2017
$’000
2018
$’000
2017
$’000
16,221
(722)
15,499
17,436
(1,215)
16,221
(903)
835
68
-
(3,495)
3,154
(562)
(903)
(36,376)
13,520
(22,856)
(33,096)
(3,280)
(36,376)
3,416
-
3,416
37
(105)
68
-
2,732
6,711
9,443
(5,803)
(1,086)
(6,889)
(14,246)
(5,783)
(20)
(5,803)
(26,861)
-
-
-
12,859
3,416
-
3,416
(950)
1,549
(562)
37
6,569
(3,837)
2,732
-
-
-
6,185
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 37(o) and 16.
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.
(Accumulated losses)/retained profits
Consolidated
Group
2018
Consolidated
Group
2017
ALL Group
2018
Note
$’000
$’000
$’000
Opening balance
(Loss)/profit for the year
Available for distribution
Distributions received from treasury shares
Distributions and dividends paid and payable
Closing balance
(102,205)
(90,690)
(192,895)
21
(14,088)
(206,962)
(4,799)
(62,557)
(67,356)
-
(34,849)
(102,205)
1,812
(15,600)
(13,788)
-
-
(13,788)
19(a)
ALL Group
2017
$’000
(1,252)
3,064
1,812
-
-
1,812
The distribution of 6.5 cents per stapled security for the half-year ended 26 June 2018 totalling $30.6 million had not been declared at
year end. This will be paid on or before 31 August 2018, as described in Note 39.
68 Ardent Leisure Group | Annual Report 2018
Notes to the Financial Statements
for the year ended 26 June 2018
Interest bearing liabilities
Current
Bank loan - term debt
Total current
Non-current
Bank loan - term debt
Less: amortised costs - bank loan
Loans from the Trust(1)
Total non-current
Total interest bearing liabilities
Consolidated
Group
2018
$’000
Consolidated
Group
2017
$’000
ALL Group
2018
$’000
ALL Group
2017
$’000
-
-
54,466
54,466
-
-
-
-
27,849
-
-
27,849
27,849
178,793
(632)
-
178,161
232,627
22,249
-
176,922
199,171
199,171
157,793
(290)
61,341
218,844
218,844
(1) Further information relating to these loans is included in Note 34(g).
The term debt is secured by mortgages over all freehold property, registered security interests over all present and after acquired
property of key Group companies, and pledged interests over all US property.
The terms of the debt also impose certain covenants on the Group as follows:
Debt serviceability ratio, being the ratio of debt to EBITDA adjusted for unrealised and one-off items (adjusted EBITDA);
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:
Current assets
Non-current assets
Total assets
(b)
Credit facilities
Consolidated
Group
2018
$’000
71,372
472,549
543,921
Consolidated
Group
2017
$’000
225,871
653,822
879,693
ALL Group
2018
$’000
68,598
372,565
441,163
ALL Group
2017
$’000
106,282
391,893
498,175
As at 26 June 2018, the Group had unrestricted access to the following credit facilities:
A$ syndicated facilities
Amount used
Amount unused
US$ syndicated facilities
Amount used
Amount unused
Trust facilities
Amount used
Amount unused
Total facilities
Total amount used
Total amount unused
Consolidated
Group
2018
$’000
Consolidated
Group
2017
$’000
ALL Group
2018
$’000
ALL Group
2017
$’000
66,667
(5,600)
61,067
102,769
(22,249)
80,520
-
-
-
133,334
(75,466)
57,868
249,610
(157,793)
91,817
-
-
-
169,436
(27,849)
141,587
382,944
(233,259)
149,685
-
-
-
102,769
(22,249)
80,520
201,150
(176,922)
24,228
303,919
(199,171)
104,748
-
-
-
230,574
(157,793)
72,781
141,958
(61,341)
80,617
372,532
(219,134)
153,398
Ardent Leisure Group | Annual Report 2018 69
Notes to the Financial Statements
for the year ended 26 June 2018
25.
(b)
(i)
Interest-bearing liabilities (continued)
Credit facilities (continued)
Consolidated Group
The Group has access to A$66.7 million syndicated facilities which will mature on 10 August 2019, and US$76.2 million (A$102.8 million)
syndicated facilities which will mature on 10 August 2019.
The reduction in available facilities from the available facilities at 30 June 2017 of A$133.3 million and US$192.0 million (A$249.6 million)
is due to the cancellation of A$66.7 million syndicated facilities following the sale of the Marinas business, and the cancellation of
US$115.8 million syndicated facilities following the sale of the Bowling and Entertainment business.
All of the facilities have a variable interest rate. As detailed in Note 16, the interest rates on the loans are partially fixed using interest
rate swaps. The weighted average interest rates payable on the loans at 26 June 2018, including the impact of the interest rate swaps,
is 4.64% per annum for AUD denominated debt (30 June 2017: 5.39% per annum) and 2.07% per annum for USD denominated debt (30
June 2017: 3.19% 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 $100.0 million (30 June 2017: $82.2 million) have a maturity date of 10 August 2019. In
addition, the ALL Group has US$75.0 million (A$101.1 million) (30 June 2017: US$45.9 million (A$59.7 million)) facilities with the Trust
maturing on 26 October 2019.
The ALL Group has access to US$76.2 million (A$102.8 million) (30 June 2017: US$177.4 million (A$230.6 million)) syndicated facilities
maturing on 10 August 2019.
Information about the Group’s exposure to foreign exchange risk and interest rates is provided in Note 28.
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
Discontinued operations
(a)
Overview
Consolidated
Group
2018
$’000
Consolidated
Group
2017
$’000
621,128
(70,275)
(177,010)
373,843
974,213
(96,587)
(442,491)
435,135
471,344,533
$0.79
469,153,284
$0.93
On 20 December 2017, the Group announced its decision to dispose of its entire interest in the Bowling and Entertainment business for
a sale price of $160.0 million. Completion occurred effective 30 April 2018, resulting in a gain in the period of $20.3 million net of selling
costs. The Bowling and Entertainment business, previously a reportable segment, comprised 43 bowling centres and seven amusement
arcades located in Australia and one bowling centre located in New Zealand.
On 12 December 2016, the Group announced its decision to dispose of its entire interest in the Marinas business for a sale price of $126.0
million. Completion occurred effective 14 August 2017, resulting in a gain in the period of $4.7 million net of selling costs. The Marinas
business, previously a reportable segment, comprised seven marinas across New South Wales and Victoria.
In the prior year, the Group completed the sale of the Health Clubs business on 25 October 2016, for gross consideration of $260.0
million resulting in a post-tax gain of $44.8 million, net of selling costs. 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.
70 Ardent Leisure Group | Annual Report 2018
Notes to the Financial Statements
for the year ended 26 June 2018
27.
(b)
Discontinued operations (continued)
Financial performance
The financial performance for the year ended 26 June 2018 was as follows:
Note
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
Revenue
Expenses
Profit/(loss) before income tax
Income tax expense
Profit/(loss) after income tax of discontinued operations
Gain on sale of the Marinas business after tax
Costs incurred relating to the sale of the Marinas business
Gain on sale of the Health Clubs business after tax
Costs incurred relating to the sale of the Health Clubs business
Gain on sale of the Bowling and Entertainment business after tax 27(e)
Profit from discontinued operations
27(g)
27(f)
2018
$’000
125,061
(121,660)
3,401
(131)
3,270
4,668
-
-
(133)
20,319
28,124
2017
$’000
214,472
(206,112)
8,360
(1,777)
6,583
-
(796)
44,838
-
-
50,625
2018
$’000
125,061
(126,669)
(1,608)
201
(1,407)
20,027
-
-
(120)
6,772
25,272
2017
$’000
214,472
(211,275)
3,197
(2,053)
1,144
-
(944)
18,169
-
-
18,369
In the above table, current year discontinued operations relate to Bowling and Entertainment and Marinas. Prior year comparatives
include these businesses and the Health Clubs business which was disposed in October 2016.
Cash flow information
(c)
The cash flows for the year ended 26 June 2018 were as follows:
Net cash inflow from operating activities
Net cash inflow/(outflow) from investing activities
Net cash inflow from financing activities
Net increase in cash and cash equivalents
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2018
$’000
16,877
260,819
12,406
290,102
2017
$’000
28,138
208,457
16,939
253,534
2018
$’000
13,571
(19,203)
12,333
6,701
2017
$’000
13,346
166,964
16,935
197,245
In the above table, current year discontinued operations relate to Bowling and Entertainment and Marinas. Prior year comparatives
include these businesses and the Health Clubs business which was disposed in October 2016.
The net cash inflow from investing activities for the Consolidated Group for the year ended 26 June 2018 includes an inflow net of selling
costs of $159.5 million from the disposal of the Bowling and Entertainment business and an inflow net of selling costs of $121.3 million
from the disposal of the Marinas business. The year ended 30 June 2017 included an inflow net of selling costs of $253.3 million from
the disposal of the Health Clubs business.
The net cash inflow from investing activities for the ALL Group for the year ended 26 June 2018 includes an inflow net of selling costs of
$79.4 million from the disposal of the Bowling and Entertainment business and an inflow net of selling costs of $20.0 million from the
disposal of the Marinas business. The year ended 30 June 2017 included an inflow net of selling costs of $197.3 million from the disposal
of the Health Clubs business.
Ardent Leisure Group | Annual Report 2018 71
Notes to the Financial Statements
for the year ended 26 June 2018
27.
(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 operations as at 26 June 2018:
Assets classified as held for sale
Cash and cash equivalents
Receivables
Inventories
Deferred tax assets
Property, plant and equipment & investment properties
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)
Details of the sale of the Bowling and Entertainment business
Gain on sale
Consideration received or receivable
Base consideration
Cash adjustment for working capital adjustments
Total disposal consideration
Selling costs
Carrying amount of net (assets)/liabilities sold
Gain on sale before income tax
Income tax expense on gain
Gain on sale after income tax
Consolidated
Group
Consolidated
Group
ALL Group
ALL Group
2018
$’000
2017
$’000
2018
$’000
-
-
-
-
-
-
-
-
-
-
-
4
618
181
32
118,967
919
120,721
(3,777)
(100)
(1,015)
(4,892)
-
-
-
-
-
-
-
-
-
-
-
2017
$’000
4
618
181
32
2,079
330
3,244
(3,443)
(100)
(1,015)
(4,558)
Consolidated
Group
2018
$’000
Consolidated
Group
2017
$’000
ALL Group
2018
$’000
ALL Group
2017
$’000
160,000
4,433
164,433
(4,949)
(139,165)
20,319
-
20,319
-
-
-
-
-
-
-
-
78,809
5,423
84,232
(4,791)
(72,669)
6,772
-
6,772
-
-
-
-
-
-
-
-
72 Ardent Leisure Group | Annual Report 2018
Notes to the Financial Statements
for the year ended 26 June 2018
27.
(e)
Discontinued operations (continued)
Details of the sale of the Bowling and Entertainment business (continued)
Carrying value of assets on sale
The carrying amount of assets and liabilities as at the 30 April 2018 date of sale were:
Cash and cash equivalents
Receivables
Inventories
Property, plant and equipment
Intangible assets
Deferred tax assests
Other assets
Total assets
Payables
Provisions
Deferred tax liabilities
Total liabilities
Net assets
(f)
Details of the sale of the Marinas business
Gain on sale
Consideration received or receivable
Base consideration
Cash adjustment for working capital adjustments
Total disposal consideration
Selling costs
Carrying amount of net (assets)/liabilities sold
Gain on sale before income tax
Income tax expense on gain
Gain on sale after income tax
Consolidated
Group
30 April 2018
$’000
ALL Group
30 April 2018
$’000
9,267
3,328
4,098
127,171
26,178
1,744
617
172,403
(25,457)
(6,965)
(816)
(33,238)
139,165
9,267
3,328
4,098
47,424
26,178
1,744
410
92,449
(17,020)
(1,944)
(816)
(19,780)
72,669
Consolidated
Group
2018
$’000
Consolidated
Group
2017
$’000
ALL Group
2018
$’000
ALL Group
2017
$’000
126,000
(2,917)
123,083
(1,766)
(116,649)
4,668
-
4,668
-
-
-
-
-
-
-
-
22,503
(2,089)
20,414
(413)
26
20,027
-
20,027
-
-
-
-
-
-
-
-
Ardent Leisure Group | Annual Report 2018 73
Notes to the Financial Statements
for the year ended 26 June 2018
27.
Discontinued operations (continued)
(f)
Details of the sale of the Marinas business (continued)
Carrying value of assets on sale
The carrying amount of assets and liabilities as at the 14 August 2017 date of sale were:
Cash and cash equivalents
Receivables
Inventories
Property, plant and equipment & investment properties
Other
Total assets
Payables
Provisions
Total liabilities
Net assets
(g)
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
14 August
2017
$’000
ALL Group
14 August
2017
$’000
3
1,132
143
118,613
693
120,584
(3,864)
(71)
(3,935)
116,649
3
1,132
143
2,077
235
3,590
(3,545)
(71)
(3,616)
(26)
Consolidated
Group
2018
$’000
Consolidated
Group
2017
$’000
ALL Group
2018
$’000
ALL Group
2017
$’000
-
-
-
(133)
-
(133)
-
(133)
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
74 Ardent Leisure Group | Annual Report 2018
Notes to the Financial Statements
for the year ended 26 June 2018
27.
(g)
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
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
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 26 June 2018, gearing was 3.18% (2017:
29.5%) 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.
Ardent Leisure Group | Annual Report 2018 75
Notes to the Financial Statements
for the year ended 26 June 2018
28.
(b)
Capital and financial risk management (continued)
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.
76 Ardent Leisure Group | Annual Report 2018
Notes to the Financial Statements
for the year ended 26 June 2018
28.
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
2018
$’000
1,636
13,890
-
-
-
-
2,811
102,438
16,956
21,002
158,733
28,299
-
28
-
5,600
784
34,711
2017
$’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
2018
$’000
1,658
9
-
-
-
-
-
-
-
-
1,667
27
-
-
-
-
-
27
2017
$’000
1,457
376
-
-
-
-
-
939
3,685
11
6,468
305
-
-
-
-
-
305
2018
$’000
13,254
15,938
748
-
-
24,239
-
353,230
53,319
-
460,728
78,668
22,397
-
-
22,249
18,958
142,272
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
Net assets
124,022
367,369
1,640
6,163
318,456
158,190
Notional value of derivatives
-
-
-
-
364
1,326
Net exposure to foreign exchange
movements
124,022
367,369
1,640
6,163
318,820
159,516
Ardent Leisure Group | Annual Report 2018 77
Notes to the Financial Statements
for the year ended 26 June 2018
28.
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
2018
$’000
1,572
13,549
-
-
-
-
2,811
2,454
16,956
21,002
58,344
28,612
-
-
-
92,615
784
122,011
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
Net assets
(63,667)
15,320
2018
$’000
28
47
-
-
-
-
-
-
-
-
75
(10)
-
-
-
-
-
(10)
85
2017
$’000
687
66
-
-
-
-
-
278
3,685
11
4,727
416
-
-
-
-
-
416
2018
$’000
12,575
15,840
748
-
-
24,239
-
353,230
53,319
-
459,951
78,668
22,397
-
-
106,556
18,958
226,579
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
4,311
233,372
157,403
Net exposure to foreign exchange
movements
(ii)
Foreign exchange rate sensitivity
(63,667)
15,320
85
4,311
233,372
157,403
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, or equity, while a positive
amount reflects a potential net increase.
Consolidated Group
Profit movement
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%
78 Ardent Leisure Group | Annual Report 2018
2018
$’000
(33)
40
-
-
Profit movement
2018
$’000
-
-
-
-
2017
$’000
(119)
146
-
-
2017
$’000
-
-
-
-
Total equity
movement
2018
$’000
2017
$’000
(28,984)
35,424
(148)
183
(14,501)
17,724
(560)
686
Total equity
movement
2018
$’000
2017
$’000
(21,216)
25,930
(7)
10
(14,309)
17,489
(390)
482
Notes to the Financial Statements
for the year ended 26 June 2018
28.
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
2018
$’000
2017
$’000
2018
$’000
-
-
-
-
-
-
2017
$’000
-
-
3,294
(5,600)
(2,306)
5,231
(75,466)
(70,235)
13,254
(22,249)
(8,995)
5,611
(157,793)
(152,182)
Interest rate swaps
8,000
70,000
64,725
71,503
Net interest rate exposure
5,694
(235)
55,730
(80,679)
Refer to Note 16 for further details on the interest rate swaps.
Ardent Leisure Group | Annual Report 2018 79
Notes to the Financial Statements
for the year ended 26 June 2018
28.
(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
2018
$’000
2017
$’000
2018
$’000
-
-
-
-
-
-
2017
$’000
-
-
1,600
(176,922)
(175,322)
4,450
(61,341)
(56,891)
12,575
(22,249)
(9,674)
4,902
(157,793)
(152,891)
Interest rate swaps
-
-
64,725
71,503
Net interest rate exposure
(175,322)
(56,891)
55,051
(81,388)
(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 or equity, while a positive amount reflects a potential
net increase.
Consolidated Group
1% increase in AUD rate
1% decrease in AUD rate
1% increase in USD rate
1% decrease in USD rate
Profit movement
Total equity
movement
2018
$’000
283
(283)
1,156
(1,156)
2017
$’000
6
(6)
(815)
815
2017
$’000
(569)
569
(814)
814
2018
$’000
283
(283)
1,156
(1,156)
Total equity
movement
2018
$’000
(1,753)
1,753
1,149
(1,149)
2017
$’000
1,337
(1,337)
535
(535)
2017
$’000
(569)
569
536
(536)
ALL Group
Profit movement
1% increase in AUD rate
1% decrease in AUD rate
1% increase in USD rate
1% decrease in USD rate
2018
$’000
(1,753)
1,753
1,149
(1,149)
At reporting date, the Group has fixed 261.1% (30 June 2017: 60.7%) of its floating interest exposure. The proceeds from the sale of the
Bowling and Entertainment business were used to repay interest bearing liabilities on 30 April 2018 (refer to Note 25(b)), resulting in the
value of interest rate swaps temporarily exceeding the value of interest bearing liabilities at 26 June 2018.
80 Ardent Leisure Group | Annual Report 2018
Notes to the Financial Statements
for the year ended 26 June 2018
28.
(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 26 June 2018. 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
2018
Payables
Term debt
Interest rate swaps of the term debt
Forward foreign exchange contracts
Total undiscounted financial liabilities
Consolidated Group
2017
Book
value
$’000
Less than
1 year
$’000
101,717 101,717
1,143
(570)
270
128,846 102,560
27,849
(720)
-
1 to 2
years
$’000
-
27,995
19
-
28,014
2 to 3
years
$’000
3 to 4
years
$’000
4 to 5
years
$’000
Over 5
years
$’000
-
-
18
-
18
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
ALL Group
2018
Payables
Term debt
Loan from the Trust
Interest rate swaps of the term debt
Total undiscounted financial liabilities
ALL Group
2017
Payables
Term debt
Loan from the Trust
Interest rate swaps designated as hedges
of the term debt
Total undiscounted financial liabilities
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
22,249
176,922
(748)
101,993 101,993
909
-
22,365
9,000 179,157
-
(589)
300,416 111,313 201,522
Book
value
$’000
Less than
1 year
$’000
96,371
157,793
61,341
96,371
4,156
2,649
1 to 2
years
$’000
-
70,628
61,638
(167)
53
315,338 103,233 132,319
57
-
-
-
-
-
2 to 3
years
$’000
-
90,074
-
-
90,074
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3 to 4
years
$’000
4 to 5
years
$’000
Over 5
years
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
110
- 325,626
Total
$’000
101,717
29,138
(533)
270
130,592
Total
$’000
102,960
242,062
1,753
1,020
347,795
Total
$’000
101,993
23,274
188,157
(589)
312,835
Total
$’000
96,371
164,858
64,287
Ardent Leisure Group | Annual Report 2018 81
Notes to the Financial Statements
for the year ended 26 June 2018
28.
(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 37(c). 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 - Australia
Receivables - US
Derivative financial instruments
Consolidated
Group
2018
$’000
Consolidated
Group
2017
$’000
ALL Group
2018
$’000
ALL Group
2017
$’000
16,548
2,939
9,093
748
29,328
10,842
3,463
1,904
272
16,481
14,175
5,552
9,093
748
29,568
9,352
3,463
1,904
196
14,915
82 Ardent Leisure Group | Annual Report 2018
Notes to the Financial Statements
for the year ended 26 June 2018
28.
(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
2018
Receivables - Australia
Receivables - US
Consolidated Group
2017
Receivables - Australia
Receivables - US
ALL Group
2018
Receivables - Australia
Receivables - US
ALL Group
2017
Receivables - Australia
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
185
239
424
555
75
630
185
239
424
555
75
630
9
428
437
230
520
750
9
428
437
230
520
750
7
28
35
116
24
140
7
28
35
116
24
140
48
5
53
1,066
13
1,079
48
5
53
1,066
13
1,079
48
-
48
221
-
221
48
-
48
221
-
221
297
700
997
2,188
632
2,820
297
700
997
2,188
632
2,820
Based on a review of receivables by management, a provision of $48,000 (30 June 2017: $94,000) has been made against receivables
with a gross balance of $48,000 (30 June 2017: $221,000).
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 2018 83
Notes to the Financial Statements
for the year ended 26 June 2018
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; and
Land and buildings.
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
2018
Assets measured at fair value:
Investments held at fair value
Property, plant and equipment(1)
Derivative financial instruments
Liabilities measured at fair value:
Derivative financial instruments
Liabilities for which fair values are disclosed:
Interest bearing liabilities (refer to Note 29(c))
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 29(c))
(1) Land and buildings of the Australian Theme Parks.
Level 1
$’000
Level 2
$’000
Level 3
$’000
-
-
-
-
-
-
-
748
28
27,849
Level 1
$’000
Level 2
$’000
-
-
-
-
-
-
-
-
-
272
1,321
233,259
2,811
113,644
-
-
-
Level 3
$’000
3,201
186,439
116,888
-
-
-
Total
$’000
2,811
113,644
748
28
27,849
Total
$’000
3,201
186,439
116,888
272
1,321
233,259
There has been no transfer between level 1 and level 2 during the year. The investment held at fair value was impaired by $0.4 million
during the year, reducing the fair value from $3.2 million at 30 June 2017 to $2.8 million at 26 June 2018. For changes in other level 3
items for the years ended 26 June 2018 and 30 June 2017, refer to Notes 11 and 27.
84 Ardent Leisure Group | Annual Report 2018
Notes to the Financial Statements
for the year ended 26 June 2018
29.
(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
2018
Assets measured at fair value:
Investments held at fair value
Derivative financial instruments
Liabilities for which fair values are disclosed:
Interest bearing liabilities (refer to Note 29(c))
2017
Assets measured at fair value:
Investments held at fair value
Derivative financial instruments
Liabilities measured at fair value:
Derivative financial instruments
Liabilities for which fair values are disclosed:
Interest bearing liabilities (refer to Note 29(c))
There has been no transfer between level 1 and level 2 during the year.
-
-
-
Level 1
$’000
Level 2
$’000
Level 3
$’000
-
748
2,811
-
Total
$’000
2,811
748
199,171
-
199,171
Level 1
$’000
Level 2
$’000
-
-
-
-
-
196
29
219,134
Level 3
$’000
3,201
-
-
-
Total
$’000
3,201
196
29
219,134
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 26 June 2018.
(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.
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 2018 85
Notes to the Financial Statements
for the year ended 26 June 2018
29.
(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 37(e)
and 37(f), 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 26 June 2018 and 30 June 2017, refer to Notes 11, 13 and 27.
(ii)
Valuation inputs and relationships to fair value
The significant unobservable inputs associated with the valuation of the Group’s property, plant and equipment are discussed in Note
11.
The fair value of land and buildings and major rides and attractions is determined in line with the policy set out in Note 37(f), with all
resulting fair value estimates included in level 3.
(c)
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 26 June 2018:
Consolidated Group
Interest bearing liabilities
ALL Group
Interest bearing liabilities
Carrying
amount
2018
$’000
Fair value
2018
Discount rate
2018
$’000
%
Carrying
amount
2017
$’000
Fair value
2017
Discount rate
2017
$’000
27,849
27,851
4.13
233,259
225,252
%
4.80
199,171
202,099
4.13
219,134
213,293
4.80
In determining the fair value of the interest bearing liabilities, the Group’s principal payable of $27.8 million (30 June 2017: $233.3 million)
has been discounted at a rate of 4.13% (30 June 2017: 4.80%) to best reflect the price that market participants would use when
transferring the non-current borrowings, assuming that market participants act in their economic best interest. They are classified as
level 3 fair values in the fair value hierarchy due to the use of unobservable inputs, including the Group’s own credit risk.
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.
Remuneration of auditor
The auditor of the Group in the current year, Ernst & Young (EY) and in the prior year, PricewaterhouseCoopers (PwC), earned the
following remuneration:
Audit and other assurance services - EY
Audit and other assurance services - related practices of EY
Taxation services - EY
Taxation services - related practices of EY
Other services - EY
86 Ardent Leisure Group | Annual Report 2018
Consolidated
Group
June
2018
$
Consolidated
Group
June
2017
$
448,200
259,939
169,427
135,180
64,044
1,076,790
-
-
-
-
-
-
ALL Group
June
2018
$
265,800
259,939
109,427
130,127
64,044
829,337
ALL Group
June
2017
$
-
-
-
-
-
-
Notes to the Financial Statements
for the year ended 26 June 2018
31.
Remuneration of auditor (continued)
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
Management fees
The Manager of the Trust is Ardent Leisure Management Limited.
Consolidated
Group
June
2018
$
Consolidated
Group
June
2017
$
ALL Group
June
2018
$
ALL Group
June
2017
$
-
260
114,477
238,880
76,760
430,377
683,686
257,788
222,764
264,441
103,618
1,532,297
-
260
67,636
239,643
76,760
384,299
418,401
257,788
118,828
212,152
103,618
1,110,787
The Manager’s registered office and principal place of business are Level 8, 60 Miller Street, North Sydney, NSW 2060.
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. The management fee earned by the Manager during the year was $1.2 million (30 June 2017:
$1.2 million).
Security-based payments
(a)
Deferred Short Term Incentive Plan (DSTI)
Plan name
Who can participate?
Types of securities issued
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.
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 556,006
performance rights vested on 29 September 2017 and a corresponding number of stapled securities were issued to employees under
the terms of the DSTI (2017: 697,239).
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.
Ardent Leisure Group | Annual Report 2018 87
Notes to the Financial Statements
for the year ended 26 June 2018
33.
(a)
Security-based payments (continued)
Deferred Short Term Incentive Plan (DSTI) (continued)
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.
(ii)
Cash settled security-based payments
All performance rights issued 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. At the end of each reporting period, the number of performance rights vesting is multiplied by
the Group stapled security volume weighted average price (VWAP) for the five trading days immediately following the vesting date.
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 26 June 2018, 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 26 June 2018:
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
2016
23 August 2016
31 August 2017
31 August 2018
1.40% per annum
40.0% per annum
5.0% per annum
$2.50
$2.26
2017
29 September 2017
31 August 2018
31 August 2019
2.00% per annum
42.0% per annum
1.6% per annum
$1.82
$1.78
The table below shows the fair value of the performance rights in each grant as at 26 June 2018 as well as the factors used to value the
performance rights as at 26 June 2018. Under AASB 2, this valuation is used to value the cash settled performance rights granted to
employees at 26 June 2018:
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
2016
23 August 2016
31 August 2017
31 August 2018
2.00% per annum
33.0% per annum
4.3% per annum
$1.97
$1.95
2017
29 September 2017
31 August 2018
31 August 2019
2.00% per annum
33.0% per annum
4.3% per annum
$1.97
$1.91
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.
88 Ardent Leisure Group | Annual Report 2018
Notes to the Financial Statements
for the year ended 26 June 2018
33.
(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 table below:
Grant date
Expiry date
Grant Date
Valuation
per right -
AAD
Balance at
the
beginning
of the year
Exercise
price
Granted
Exercised
18 Aug 2015 05 Sep 2017 nil
23 Aug 2016 31 Aug 2018 nil
29 Sep 2017 31 Aug 2019 nil
194.0 cents
231.8 cents
177.5 cents
-
-
241,441
481,525
- 494,970
722,966 494,970
(241,441)
(296,082)
-
(537,523)
Failed to
vest
-
-
-
-
Cancelled
(employee
left)
-
(75,764)
(68,826)
(144,590)
Balance at
the end of
the year
-
109,679
426,144
535,823
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 2018 89
Notes to the Financial Statements
for the year ended 26 June 2018
33.
(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
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 2013, 2014 and
2015 with the following results:
Tranche
T3-2013
T2-2014
T1-2015
TSR
48.31%
(13.93%)
2.05%
Percentile
53.26
37.30
43.89
Vesting percentage
54.70%
-
-
A total of 125,142 performance rights vested on 5 September 2017 and a corresponding number of stapled securities were issued to
employees under the terms of the LTIP (2017: 603,653).
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.
90 Ardent Leisure Group | Annual Report 2018
Notes to the Financial Statements
for the year ended 26 June 2018
33.
(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. No cash settled performance rights vested to US employees in the
year under the terms of the LTIP (2017: 16,443).
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. 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.
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 26 June 2018, 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 26 June 2018:
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
US employees
Australian employees
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
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
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
2017
29 September 2017
31 August 2019
31 August 2020
31 August 2021
2.00% per annum
42.0% per annum
1.6% per annum
$2.50
$1.32
$1.32
$1.06
$1.06
$1.51
$1.51
$0.65
$0.19
Ardent Leisure Group | Annual Report 2018 91
Notes to the Financial Statements
for the year ended 26 June 2018
33.
(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 26 June 2018 as well as the factors used to value the
performance rights at 26 June 2018. Under AASB 2, this valuation is used to value the cash settled performance rights granted to
employees at 26 June 2018:
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
US employees
Australian employees
2014
19 August 2014
31 August 2016
31 August 2017
31 August 2018
2.00% per annum
33.0% per annum
4.3% per annum
$1.97
2015
15 December 2015
31 August 2017
31 August 2018
31 August 2019
2.00% per annum
33.0% per annum
4.3% per annum
$1.97
2016
23 August 2016
31 August 2018
31 August 2019
31 August 2020
2.00% per annum
33.0% per annum
4.3% per annum
$1.97
2017
29 September 2017
31 August 2019
31 August 2020
31 August 2021
2.00% per annum
33.0% per annum
4.3% per annum
$1.97
-
-
$0.19
$0.19
$0.44
$0.44
$0.68
$0.12
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 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%
92 Ardent Leisure Group | Annual Report 2018
Notes to the Financial Statements
for the year ended 26 June 2018
33.
(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 table below:
Grant date
Expiry date
Exercise
price
Valuation
per right
Balance at
beginning of
the year
Granted
Exercised
Failed to
vest
Cancelled
nil
23 Aug 2013 5 Sep 2017
19 Aug 2014 31 Aug 2018 nil
15 Dec 2015 31 Aug 2019 nil
23 Aug 2016 31 Aug 2020 nil
29 Sep 2017 31 Aug 2021 nil
72.3 cents
143.9 cents
112.3 cents
151.9 cents
47.5 cents
228,769
284,848
787,050
595,336
-
(125,142)
-
-
-
-
-
-
-
-
2,002,983
1,896,003 2,002,983 (125,142)
(103,627)
(142,424)
(262,349)
-
-
(508,400)
-
(27,961)
(159,826)
(262,992)
(478,802)
(929,581)
Balance at
the end of
the year
-
114,463
364,875
332,344
1,524,181
2,335,863
The rights have an average maturity of one year and three months.
The expense recorded in the Group financial statements in the year in relation to the DSTI and LTIP performance rights was $227,775
(30 June 2017: $3,491,225). The expense recorded in the ALL Group financial statements in the year in relation to the DSTI and LTIP
performance rights was $1,180,492 (30 June 2017: $3,400,593).
Related party disclosures
(a)
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:
Gary Weiss (appointed as a Director 3 September 2017 and as Chair 29 September 2017);
David Haslingden;
Don Morris AO;
Randy Garfield (appointed 14 August 2017);
Brad Richmond (appointed 3 September 2017);
Toni Korsanos (appointed 1 July 2018);
George Venardos (retired as Chair and Director 29 September 2017);
Roger Davis; (resigned 17 August 2018);
Melanie Willis (resigned 8 September 2017);
Simon Kelly (resigned 8 November 2017); 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.
Ardent Leisure Group | Annual Report 2018 93
Notes to the Financial Statements
for the year ended 26 June 2018
34.
(c)
Related party disclosures (continued)
Key controlled entities
These financial statements incorporate the assets, liabilities and results of the following wholly-owned key subsidiaries in accordance
with the accounting policy disclosure as described in Note 37(a):
Entity
Activity
Controlled entities of Ardent Leisure Trust:
Ardent Leisure Trust
Ardent Leisure (NZ) Trust
Controlled entities of Ardent Leisure Limited:
Country of
establishment
Class of equity
securities
Australia
Ordinary
New Zealand
Ordinary
Ardent Leisure Limited
Main Event Holdings, Inc
Theme Parks
Family Entertainment Centres
Australia
USA
Ordinary
Ordinary
(d)
(i)
Transactions with related parties
Key management personnel
Short term employee benefits
Post-employment benefits
Termination benefits
Share-based payments
Consolidated
Group
2018
$
3,362,937
96,716
1,676,008
(391,492)
4,744,169
Consolidated
Group
2017
$
4,330,985
197,312
731,291
2,277,658
7,537,246
ALL Group
2018
$
3,362,937
96,716
1,676,008
(391,492)
4,744,169
ALL Group
2017
$
4,330,985
197,312
731,291
2,277,658
7,537,246
Remuneration of key management personnel (KMP) is shown in the Directors’ report from pages 14 to 33.
(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.
94 Ardent Leisure Group | Annual Report 2018
Notes to the Financial Statements
for the year ended 26 June 2018
34.
(g)
Related party disclosures (continued)
Transactions with controlled entities
All transactions with controlled entities were made on normal commercial terms and conditions and at market rates, except that there
are no fixed terms for the repayment of loans between the parties. Outstanding balances are unsecured and are repayable in cash. The
terms and conditions of the tax funding agreement are set out in Note 6(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
Contingent liabilities
Consolidated
Group
2018
$
Consolidated
Group
2017
$
ALL Group
2018
$
ALL Group
2017
$
(39,941)
(77,088)
(73,335)
(6,580)
(39,941)
(77,088)
(73,335)
(6,580)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
35
114,696
(61,341,068)
(345,397,269)
243,075,301
(6,412,605)
(6,845,886)
(176,921,527)
(128,221,273)
(204,550,323)
275,733,857
21,311
(4,324,640)
(61,341,068)
On 25 October 2016, an incident occurred on the Thunder River Rapids ride at Dreamworld resulting in four fatalities at the Theme Park.
The incident was investigated throughout 2017 by the Queensland Police Service and Workplace Health and Safety Queensland
(WHSQ). The first tranche of hearings in the coronial inquest took place in June 2018. The second and third tranches of the coronial
inquest have been set down for two weeks in each of October 2018 and November 2018 respectively.
Ardent Leisure Limited expects to be subjected to prosecution action by WHSQ, however formal proceedings have not been instigated
against the Company as at the date of release of these accounts. A number of civil claims by families and other affected persons have
been made against the Company and are being dealt with by the Company’s liability insurer.
Until such time as proceedings are commenced, it is too premature to provide any meaningful or reliable estimate of the quantum of
potential pecuniary penalties. Ardent Leisure Limited maintains appropriate insurances to respond to litigation and regulatory action
and a proportion of associated costs.
Unless otherwise disclosed in the financial statements, Ardent Leisure Trust and Ardent Leisure Limited have no other material
contingent liabilities.
Capital and lease commitments
(a)
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
2018
Consolidated
Group
2017
ALL Group
2018
$’000
$’000
$’000
ALL Group
2017
$’000
6,539
6,539
2,878
2,878
6,539
6,539
2,878
2,878
Ardent Leisure Group | Annual Report 2018 95
Notes to the Financial Statements
for the year ended 26 June 2018
36.
(b)
Capital and lease commitments (continued)
Lease commitments
Non-cancellable operating leases
(i)
Operating leases
Consolidated
Group
2018
$’000
Consolidated
Group
2017
$’000
ALL Group
2018
$’000
508,337
600,518
508,337
508,337
600,518
508,337
ALL Group
2017
$’000
482,718
482,718
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 lease for
Dreamworld. Further amounts are payable in respect of the property; 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:
Consolidated
Group
2018
$’000
Consolidated
Group
2017
$’000
ALL Group
2018
$’000
ALL Group
2017
$’000
43,600
180,391
284,346
508,337
61,536
229,795
309,187
600,518
43,600
180,391
284,346
508,337
40,097
163,624
278,997
482,718
Within one year
Later than one year but not later than five years
Later than five years
Summary of significant accounting policies
(a)
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 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.
96 Ardent Leisure Group | Annual Report 2018
Notes to the Financial Statements
for the year ended 26 June 2018
37.
(a)
Summary of significant accounting policies (continued)
Principles of consolidation (continued)
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.
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.
(b)
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.
(c)
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.
(d)
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.
(e)
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.
Ardent Leisure Group | Annual Report 2018 97
Notes to the Financial Statements
for the year ended 26 June 2018
37.
(e)
Summary of significant accounting policies (continued)
Investment properties (continued)
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.
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.
(f)
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.
98 Ardent Leisure Group | Annual Report 2018
Notes to the Financial Statements
for the year ended 26 June 2018
37.
(f)
Summary of significant accounting policies (continued)
Property, plant and equipment (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.
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
2018
2017
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 37(l)).
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.
(g)
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.
(h)
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.
(i)
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
14.
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 2018 99
Notes to the Financial Statements
for the year ended 26 June 2018
37.
Summary of significant accounting policies (continued)
(j)
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 2017: 5 to 50 years).
(k)
Intangible assets
Other intangible assets
Liquor licences are amortised over the length of the licences which are between 10 and 16 years (30 June 2017: 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 2017: 5 and 8 years).
Goodwill
Goodwill is measured as described in Note 37(aa). 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 37(l)). 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 2).
(l)
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.
(m)
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.
(n)
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.
(o)
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).
100 Ardent Leisure Group | Annual Report 2018
Notes to the Financial Statements
for the year ended 26 June 2018
37.
(o)
Summary of significant accounting policies (continued)
Derivatives (continued)
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 16. Movements in the cash
flow hedge reserve in equity are shown in Note 23. 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.
(p)
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 4.91% per annum (30 June
2017: 3.17% per annum) for Australian dollar debt and 4.82% per annum (30 June 2017: 2.16% per annum) for US dollar debt.
(q)
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.
(r)
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.
Ardent Leisure Group | Annual Report 2018 101
Notes to the Financial Statements
for the year ended 26 June 2018
37.
(r)
Summary of significant accounting policies (continued)
Employee benefits (continued)
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.
(s)
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.
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.
102 Ardent Leisure Group | Annual Report 2018
Notes to the Financial Statements
for the year ended 26 June 2018
37.
(s)
Summary of significant accounting policies (continued)
Tax (continued)
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.
(t)
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.
(u)
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.
(v)
Reserves
In accordance with the Trust Constitution, amounts may be transferred from reserves or contributed equity to fund distributions.
(w)
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 theme park and SkyPoint entry and bowling games is recognised when the outcome can
be reliably measured and the service has taken place. Revenue relating to theme park annual passes is recognised as the passes are
used.
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.
(x)
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.
Ardent Leisure Group | Annual Report 2018 103
Notes to the Financial Statements
for the year ended 26 June 2018
37.
(x)
Summary of significant accounting policies (continued)
Foreign currency translation (continued)
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 26 June 2018, the spot rate used was A$1.00 = NZ$1.0751 (2017: A$1.00
= NZ$1.0500) and A$1.00 = US$0.7416 (2017: A$1.00 = US$0.7692). The average spot rate during the year ended 26 June 2018 was
A$1.00 = NZ$1.0878 (2017: A$1.00 = NZ$1.0573) and A$1.00 = US$0.7752 (2017: A$1.00 = US$0.7542).
(y)
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, divisional EBITDA and
divisional EBIT.
(z)
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.
(aa)
Fair value estimation
The Group measures financial instruments, such as derivatives and investments held at fair value 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.
104 Ardent Leisure Group | Annual Report 2018
Notes to the Financial Statements
for the year ended 26 June 2018
37.
(aa)
Summary of significant accounting policies (continued)
Fair value estimation (continued)
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.
(ab)
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.
(ac)
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.
(ad)
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.
Ardent Leisure Group | Annual Report 2018 105
Notes to the Financial Statements
for the year ended 26 June 2018
37.
Summary of significant accounting policies (continued)
(ad)
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.
(ae)
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.
(af)
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.
106 Ardent Leisure Group | Annual Report 2018
Notes to the Financial Statements
for the year ended 26 June 2018
37.
(ag)
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 27 June 2018 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. No
material impact is expected 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 June 2019.
AASB 15 Revenue from Contracts with Customers (effective from 1 January 2018)
The AASB has issued a new Standard for the recognition of revenue, AASB 15 Revenue from Contracts with Customers, which replaces
AASB 118 Revenue, AASB 111 Construction Contracts and a number of revenue-related Interpretations.
The new Standard establishes a new revenue recognition model, changes the basis for deciding whether revenue is to be recognised
over time or at a point in time, provides new and more detailed guidance on specific topics, and expands and improves disclosures
about revenue.
The core principle of the new Standard is that revenue must be recognised when goods or services are transferred to the customer, at
the transaction price. A five-step model has been established in the Standard which allows for each of the Group’s revenue streams to
be recognised in line with this core principle.
The new Standard became effective for annual reporting periods beginning on or after 1 January 2018, therefore first becomes effective
for the Group for the financial year beginning 27 June 2018 (FY19).
Restatement approach
The Group will use the modified retrospective approach (cumulative effect method) at the date of initial application. Therefore, the
cumulative effect of initially applying the new Standard shall be recorded as an adjustment to the opening balance of retained earnings
at 27 June 2018. No restatement of comparative period balances are required under this approach.
Impact on Themeparks
The most significant impact of the new Standard on the Themeparks division is on the revenue recognised relating to entry to the park
under multi-day passes. Currently, revenue for all passes is recognised as passes are used.
Under the new Standard, revenue for all passes is required to be recognised on a straight-line basis over the period that the pass allows
access to the park. Some of the passes offered allow access to the park for a fixed period of time after the initial visit, in which case
payments made upfront shall be treated as deferred income until the initial visit and revenue recognised over a straight-line basis over
the remaining fixed period following the initial visit.
Other passes are for specific time periods only, such as the seasonal passes which provides access to the park from the time of purchase
to a specific expiry date, generally December or June. For these passes revenue shall be recognised on a straight-line basis over the
period that the pass relates to regardless of the timing of the customers initial visit, with any payment received upfront being treated as
deferred income until the first day that the seasonal pass allows access to the park.
Therefore, for all multi-day passes, revenue will be deferred under the new Standard and recognised on a straight-line basis over the
period of the pass rather than recognised on a usage basis per the current policy.
The deferred income balance at 26 June 2018 was $6.6 million, with revenue already being partly recognised for open passes that still
allow customers entry to the theme park. The amount of revenue relating to these open passes that would have been deferred at 26
June 2018 under the new Standard is $1.4 million, resulting in a required opening total deferred income balance of $8.0 million under
the new Standard. Therefore, under the modified retrospective approach, a reduction of $1.4 million shall be made as an adjustment to
the opening retained earnings with a corresponding increase in deferred income at 26 June 2018, with this revenue to be recognised
on a straight-line basis over the remaining period for which customers have access to the theme park.
Ardent Leisure Group | Annual Report 2018 107
Notes to the Financial Statements
for the year ended 26 June 2018
37.
(ag)
Summary of significant accounting policies (continued)
New accounting standards, amendments and interpretations (continued)
AASB 15 Revenue from Contracts with Customers (effective from 1 January 2018) (continued)
Impact on Main Event
For Main Event, the impact of the new Standard is expected to be minimal on the timing of revenue recognition due to the majority of
products/services being provided on the same day.
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 June 2020.
Early adoption of standards
The Group and the ALL Group have not elected to apply any pronouncements before their operative date.
(ah)
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.
Parent entity financial information
(a)
Summary financial information
Balance sheet
Current assets
Total assets
Current liabilities
Total liabilities
Equity
Contributed equity
Reserves
Accumulated losses
Total equity
Consolidated
Group
2018
$’000
Consolidated
Group
2017
$’000
ALL Group
2018
$’000
ALL Group
2017
$’000
4,588
283,131
4,458
10,057
124,555
456,784
70,106
96,002
14,797
252,060
27,318
120,955
494,607
-
(221,533)
273,074
491,751
(940)
(130,029)
360,782
172,123
-
(41,018)
131,105
27,490
244,884
22,860
80,969
170,698
-
(6,784)
163,914
(Loss)/profit for the year
(77,416)
(79,377)
(34,234)
1,880
Total comprehensive (loss)/income for the year
(77,416)
(79,377)
(34,234)
1,880
108 Ardent Leisure Group | Annual Report 2018
Notes to the Financial Statements
for the year ended 26 June 2018
Parent entity financial information (continued)
(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 25.
Excluding the above, there are no other material guarantees entered into by Ardent Leisure Limited and Ardent Leisure Trust in relation
to the debts of their subsidiaries.
(c)
Contingent liabilities
On 25 October 2016, an incident occurred on the Thunder River Rapids ride at Dreamworld resulting in four fatalities at the Theme Park.
The incident was investigated throughout 2017 by the Queensland Police Service and Workplace Health and Safety Queensland
(WHSQ). The first tranche of hearings in the coronial inquest took place in June 2018. The second and third tranches of the coronial
inquest have been set down for two weeks in each of October 2018 and November 2018 respectively.
Ardent Leisure Limited expects to be subjected to prosecution action by WHSQ, however formal proceedings have not been instigated
against the Company as at the date of release of these accounts. A number of civil claims by families and other affected persons have
been made against the Company and are being dealt with by the Company’s liability insurer.
Until such time as proceedings are commenced, it is too premature to provide any meaningful or reliable estimate of the quantum of
potential pecuniary penalties. Ardent Leisure Limited maintains appropriate insurances to respond to litigation and regulatory action
and a proportion of 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
2018
Consolidated
Group
2017
ALL Group
2018
$’000
$’000
$’000
ALL Group
2017
$’000
-
-
-
-
6,539
6,539
75
75
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 $nil (30 June 2017: $75,000). Any commitments relating to the Australian
and New Zealand geographic segments will therefore be subsequently reimbursed by the Trust the month following payment.
Events occurring after reporting date
Subsequent to 26 June 2018, a distribution of 6.5 cents per stapled security has been declared by the Board of Directors. The total
distribution amount of $30.6 million will be paid on or before 31 August 2018 in respect of the half year ended 26 June 2018.
Roger Davis resigned as a Director of the Board on 17 August 2018.
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 26 June
2018.
Ardent Leisure Group | Annual Report 2018 109
Directors’ declaration to stapled security
holders
Directors’ declaration to stapled security holders
In the opinion of the Directors of Ardent Leisure Management Limited and Ardent Leisure Limited:
(a) The financial statements and notes of Ardent Leisure Trust and its controlled entities, including Ardent Leisure Limited and its
controlled entities (Ardent Leisure Group) and Ardent Leisure Limited and its controlled entities (ALL Group) set out on pages 39 to
109 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 26 June 2018 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; and
(c) Note 1 confirms that the financial statements also comply with International Financial Reporting Standards as issued by International
Accounting Standards Board.
The Directors have been given the certifications required by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Boards of Directors.
Gary Weiss
Chairman
Sydney
21 August 2018
Toni Korsanos
Director
Independent auditor’s report to stapled security holders
110 Ardent Leisure Group | Annual Report 2018
Ernst & Young
200 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Independent Auditor's Report to Stapled Security Holders
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Ardent Leisure Group (collectively 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, which comprises:
► The Group and the ALL Group consolidated balance sheets as at 26 June 2018
► The Group and the ALL Group consolidated income statements, statements of comprehensive
income, statements of changes in equity and statements of cash flows for the year then ended
► Notes to the financial statements, including a summary of significant accounting policies; and the
directors' declaration
In our opinion, the accompanying financial report is in accordance with the Corporations Act 2001,
including:
a) giving a true and fair view of the Group's and the ALL Group’s financial position as at 26 June
2018 and of their financial performance for the year ended on that date; and
b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
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 are independent of the 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 report in Australia. We have also fulfilled our other ethical responsibilities
in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
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Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial report of the current year. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide
a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial report. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
Valuation of Theme Parks
Group: Note 11
ALL Group: KAM not applicable
Why significant
How our audit addressed the key audit matter
Theme Park assets are carried in the Group’s statement of
financial position at 26 June 2018 at a fair value of
$113,644,000.
The Group recognised a valuation decrement of
$75,753,000 in the fair value of Theme Park assets in the
year ended 26 June 2018.
The Group engaged an external valuation expert at both 31
December 2017 and 26 June 2018 to assist in the valuation
of the Theme Park assets. The valuations prepared by the
expert are based upon a number of assumptions which are
judgmental in nature, including cash flow forecasts, discount
rates and growth rates.
We considered this to be a key audit matter given the asset
value, magnitude of the revaluation decrement and the
significant unobservable inputs associated with the
valuations as described in Note 11.
Our audit procedures included the following:
► We considered the competence, capability and
objectivity of the external valuation experts and
evaluated the scope and methodology they used in their
valuations
► We involved our real estate valuation specialists to assist
us in evaluating the appropriateness of the methodology
and the reasonableness of certain key assumptions used
in the Group’s external valuation
► We tested the mathematical accuracy of cash flow
models and agreed relevant data used by the external
valuation expert to Board approved budgets for 2019
► We also considered the historical accuracy of both
management and the external valuation expert in
forecasting future cash flows and growth rates
► We assessed the adequacy of the Group’s disclosures in
respect of asset carrying values, key assumptions and
sensitivity analysis in Note 11 to the financial
statements
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Divestment of Marinas and Bowling & Entertainment Centres
Group: Note 27
ALL Group: Note 27
Why significant
How our audit addressed the key audit matter
The Group and ALL Group completed the following
divestments during the financial year:
Our audit procedures included the following:
► We read the sales documents and related contracts and
► On 14 August 2017, the Group and the ALL Group
agreed the sale proceeds to cash received
► We assessed whether the gains on sale had been
correctly calculated and presented in the financial
report
► We evaluated the adjustments to the comparative
balances in the financial report related to the sale of
Marinas and Bowling & Entertainment Centres and
confirmed the discontinued operations were disclosed in
accordance with Australian Accounting Standards
completed the sale of the Marinas operating segment for
cash proceeds of $126,000,000 and a post-tax gain of
$4,668,000 (Group) and $20,027,000 (ALL Group)
► On 30 April 2018, the Group and the ALL Group
completed the sale of the Bowling & Entertainment
Centres operating segment for cash proceeds of
$160,000,000 and a post-tax gain of $20,319,000
(Group) and $6,772,000 (ALL Group)
The results of both segments are presented as part of
discontinued operations as at 26 June 2018 and for the
period then ended.
This was considered a key audit matter given the significance
of the disposals and the extent of financial reporting
disclosures required and included in Note 27.
Dreamworld Contingencies
Group: Note 17 and Note 35
ALL Group: Note 17 and Note 35
Why significant
How our audit addressed the key audit matter
On 25 October 2016, an accident occurred on the Thunder
River Rapids ride at the Dreamworld which resulted in four
fatalities.
Following this incident, Ardent Leisure Limited and certain of
its group companies are party to legal proceedings, including
civil, regulatory investigation by Workplace Health and
Safety Queensland (WHSQ) and an ongoing coronial inquest
investigation.
Our audit procedures included the following:
► We discussed the status of each key legal and
regulatory matter with internal legal counsel
► We considered the responses we received to the
requests we made of the Group’s external lawyers
related to these matters and inspected relevant
regulatory, litigation, and insurance documents
► We considered whether any financial obligations exist,
and assessed the extent to which provisions and related
note disclosures may be required based on the facts and
circumstances available
► We considered events and information that arose
subsequent to balance date relating to these matters
► We considered whether the disclosures of the
application of judgement in estimating provisions and
disclosing contingent liabilities adequately reflected the
uncertainties associated with the legal and regulatory
matters
Although the Group expects a claim to be filed by the
regulator, WHSQ, there has been no formal action or
litigation initiated. The coronial inquest proceedings are
ongoing and timing of completion of this investigation and
subsequent issuance of any report by the coroner are
unknown.
Until such time that the Group has a present or clear
constructive obligation that can be estimated reliably, no
provisions have been recognised.
We have considered legal and regulatory matters to be a key
audit matter due to the significance of these ongoing matters
and the inherent risk that legal exposures are not identified,
recorded and/or disclosed in the financial report. The
recognition of provisions and the basis of measurement and
the disclosure of contingent liabilities requires significant
judgement.
Note 17 Payables and Note 35 Contingent Liabilities contains
disclosures and accounting policies related to provisions and
(contingent) liabilities related to this incident.
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Valuation of Property Plant and Equipment at Main Event
Group: Note 11
ALL Group: Note 11
Why significant
How our audit addressed the key audit matter
The Group and ALL Group has
$340,323,000 of property, plant and
equipment held at cost as at 26 June
2018 related to Main Event.
The Group and ALL Group performed
an impairment test at 26 June 2018
related to the recoverability of
property, plant and equipment at
each Main Event location. This
resulted in an impairment loss of
$38,416,000 being recognised at
five specific locations.
This was considered a key audit
matter due to the significance of
property, plant and equipment and
the judgmental nature of the
assumptions underlying the
discounted cash flows used in
determining the recoverable amount.
Note 11 and Note 37 of the financial
report discusses the accounting
policy related to these assets.
Our audit procedures included the following:
► We considered the reasonableness of the cash flows used in the model as
follows:
► We assessed the historical accuracy of cash flow forecasting
► We compared the cash flows used in the model to Board approved budgets
and forecasts, including projections of future growth and capital
expenditure
► We tested the mathematical accuracy of the discounted cash flow model
► We considered the assumptions in respect of the discount rate used in the
model, as follows:
► We agreed key inputs to externally-derived data where appropriate
► We conducted our own assessments with respect to other key inputs, such
as projected growth, gearing, and certain market and site-specific factors
that contribute to cash flow forecasting risk
► Our valuation specialists assisted in assessing the overall discount rate
used in the model with reference to internally developed benchmarks which
are based on market data and industry research
Valuation of Goodwill at Main Event
Group: Note 12
ALL Group: Note 12
Why significant
How our audit addressed the key audit matter
The Group and ALL Group has $56.4
million of goodwill recorded
predominantly in the Main Event cash
generating unit (CGU).
The Group and ALL Group performed
an impairment test as at 26 June
2018 which concluded that no
impairment was required.
This was considered a key audit
matter due to the relative size of the
goodwill balance and the judgemental
nature of the assumptions underlying
the discounted cash flows used in
determining the recoverable amount.
Note 12 of the financial report
discusses the accounting policy
related to these assets and discloses
the sensitivity of these valuations to
changes in key assumptions.
Our audit procedures included the following:
► We assessed the identification of CGUs with reference to the requirements of
Australian accounting standards.
► We considered the reasonableness of the cash flows used in the model as
follows:
► We assessed the historical accuracy of cash flow forecasting,
► We compared the cash flows used in the model to approved budgets and
forecasts, including projections of future growth and capital expenditure.
► We tested the mathematical accuracy of the discounted cash flow model.
► We considered the assumptions in respect of the discount rate used in the
model, as follows:
► We agreed key inputs to externally-derived data where appropriate.
► We conducted our own assessments with respect to other key inputs, such
as projected growth, gearing, and certain market and CGU-specific factors
that contribute to cash flow forecasting risk.
► Our valuation specialists assisted in assessing the overall discount rate
used in the model with reference to internally developed benchmarks which
are based on market data and industry research.
► We performed scenario-specific sensitivity tests including changes to the
discount rate, forecast cash flows and projected capital expenditure.
► We evaluated whether the disclosures concerning sensitivities to changes in
key assumptions reflected the risks inherent in the valuation of goodwill as well
as our knowledge of the business.
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Revenue Recognition
Group: Note 3 and Note 37(w)
ALL Group: Note 3 and Note 37(w)
Why significant
How our audit addressed the key audit matter
Our audit procedures included the following:
► For each significant source of revenue, we selected a sample of transactions to
assess whether the measurement and timing of revenue recognised was in
accordance with the terms of the arrangement with the customer and the
Group’s revenue recognition policies.
► We assessed whether the Group’s accounting policies met the requirements of
Australian Accounting Standards.
► We evaluated the appropriateness of accounting entries impacting revenue and
deferred revenue, as well as other adjustments made in the preparation of the
financial statements.
► We also considered the adequacy of the Group’s disclosures and the accounting
policies included in the financial report.
The Group earns revenue from a variety of
sources within the Theme Parks and Main
Event business segments, some of which is
unearned and required to be deferred at 26
June 2018.
The risks associated with accurate
recording of revenue vary based on the
nature of the transaction, method of
processing, and certain judgements made
by management.
We considered this to be a key audit matter
given the high volume of transactions, the
variety of systems used to record and
report revenue throughout the Group and
judgements made relating to deferred
revenue.
Note 37(w) of the financial report discusses
the accounting policies adopted by the
Group.
Information Other than the Financial Report and Auditor’s Report Thereon
The directors of Ardent Leisure Limited and Ardent Leisure Management Limited, the responsible
entity of the Ardent Leisure Trust, (the “directors”) are responsible for the other information. The
other information comprises the information included in the Company’s 2018 Annual Report, but does
not include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon, with the exception of the Remuneration Report
and our related assurance opinion.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, 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.
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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 relating 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.
Auditor's Responsibilities for the Audit of the Financial Report
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 this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgment and maintain professional scepticism throughout the audit. We also:
►
Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
► Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s or ALL Group’s internal control.
► Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
► Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s or ALL Group’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are required to
draw attention in our auditor’s report to the related disclosures in the financial report or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the Group or ALL Group to cease to continue as a going concern.
► Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events
in a manner that achieves fair presentation.
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► Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group and ALL Group to express an opinion on the financial report.
We are responsible for the direction, supervision and performance of the audit. We remain solely
responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on the Audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 14 to 33 of the directors' report for the
year ended 26 June 2018.
In our opinion, the Remuneration Report of Ardent Leisure Limited for the year ended 26 June 2018,
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
Ernst & Young
John Robinson
Partner
Sydney
21 August 2018
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Investor Analysis
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
CITICORP NOMINEES PTY LIMITED
KAYAAL PTY LTD
PORTFOLIO SERVICES PTY LTD
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMS PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
UBS NOMINEES PTY LTD
BNP PARIBAS NOMINEES PTY LTD
RAGUSA PTY LTD
RAGUSA PTY LTD
CITICORP NOMINEES PTY LIMITED
INVESTEC AUSTRALIA LIMITED
WARBONT NOMINEES PTY LTD
BALNAVES FOUNDATION PTY LTD
UBS NOMINEES PTY LTD
PORTFOLIO SERVICES PTY LTD
RAGUSA PTY LTD
RAGUSA PTY LIMITED
Top Investors as at 21 August 2018
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
102,017,676
99,541,852
31,572,070
21,941,959
20,591,959
19,119,627
16,077,586
12,531,973
12,022,761
9,219,339
4,673,395
2,953,011
2,058,619
1,901,458
1,830,236
1,795,243
1,766,794
1,250,000
1,219,206
1,168,880
365,253,644
106,090,889
471,344,533
Range Report as at 21 August 2018
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
388,872,228
59,087,581
12,645,267
9,749,465
989,992
471,344,533
%
82.50
12.54
2.68
2.07
0.21
100.00
No. of Holders
127
2,267
1,679
3,467
2,421
9,961
%
21.64
21.12
6.70
4.66
4.37
4.06
3.41
2.66
2.55
1.96
0.99
0.63
0.44
0.40
0.39
0.38
0.37
0.27
0.26
0.25
77.49
22.51
100.00
%
1.27
22.76
16.86
34.81
24.30
100.00
The total number of investors with an unmarketable parcel of 78,161 securities as at 21 August 2018 was 1,057.
Voting Rights
On a poll, each investor has, in relation to resolutions of the Trust, one vote for each dollar value of their total units held in the Trust and
in relation to resolutions of the Company, one vote for each share held in the Company.
On-Market Buy-back
There is no current on-market buy-back program in place.
Substantial Shareholder Notices Received as at 21 August 2018
Viburnum Funds Pty Ltd
The Ariadne Substantial Holder Group*
FIL Ltd
Sumitomo Mitsui Trust Holdings Inc
JCP Investment Partners Ltd
BT Investment Management Ltd
No. of Securities
53,942,531
51,116,531
40,478,296
41,956,240
28,973,033
22,815,453
%
11.48%
10.90%
9.15%
8.90%
6.17%
5.63%
*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
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 issued by the Company or Trust which are not
stapled to equivalent securities in the other entity.
118 Ardent Leisure Group | Annual Report 2018
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 2018 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 2017/18 annual taxation statement
online, please visit the Link Investor Service Centre at
www.linkmarketservices.com.au
Distribution Reinvestment Plan (DRP)
The DRP price for the half year ended 26 June 2018 was $1.9532
per stapled security. Please note that the terms and conditions
of the DRP may vary from time to time. Details of any changes
(and whether the DRP continues to operate or is suspended)
will be announced to the ASX.
Contact details
Security registry
To access information on your holding or to update/change
your details, contact:
Link Market Services Limited
Locked Bag A14
Sydney South NSW 1235
Telephone
1300 720 560 (within Australia)
+61 1300 720 560 (outside Australia)
Facsimile
+61 2 9287 0303
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 8, 60 Miller Street
North Sydney, NSW 2060
Telephone
+61 2 9168 4600
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 2018 119
ASX code
AAD
Custodian
Perpetual
Level 13, 123 Pitt Street
Sydney NSW 2000
Auditor of the Group
Ernst & Young
200 George Street
Sydney NSW 2000
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 8, 60 Miller Street
North Sydney NSW 2060
Directors
Gary Weiss (appointed as a Director 3 September 2017
and as Chair 29 September 2017)
David Haslingden
Don Morris AO
Randy Garfield (appointed 14 August 2017)
Brad Richmond (appointed 3 September 2017)
Toni Korsanos (appointed 1 July 2018)
George Venardos (retired as Chair
and Director 29 September 2017)
Roger Davis (resigned 17 August 2018)
Melanie Willis (resigned 8 September 2017)
Simon Kelly (resigned 8 November 2017)
Deborah Thomas (resigned 1 July 2017)
Group Chief Financial Officer
Darin Harper
Company Secretary
Bronwyn Weir
Telephone
+61 2 9168 4600
Email
investor.relations@ardentleisure.com
Website
www.ardentleisure.com
120 Ardent Leisure Group | Annual Report 2018